Final Results - Part 3 of 8

RNS Number : 6691S

Standard Life Aberdeen plc

13 March 2019

Standard Life Aberdeen plc

Full Year Results 2018

Part 3 of 8

2. Board of Directors

Our business is overseen by our Board of Directors. Biographical details (and shareholdings) of the Directors as at
12 March 2019 are listed below.

Key to Board committees

A Audit committee

NG Nomination and governance committee

R Remuneration committee

RC Risk and capital committee

Chair

Sir Douglas Flint CBE - Chairman

Keith Skeoch - Co-Chief Executive

Appointed to the Board: November 2018

Appointed to the Board: May 2006

Nationality: British

Age: 63

Shares: 50,374

Nationality: British

Age: 62

Shares: 2,472,605*

Sir Douglas was appointed Chairman on 1 January 2019, having been a Director since 1 November 2018. He is also chairman of IP Group plc, non-executive director of the Centre for Policy Studies and member of the Global Advisory Council of Motive Partners. Additionally, he is chairman of the Just Finance Foundation, the Corporate board of Cancer Research UK and trustee of the Royal Marsden Cancer Charity. In December 2017 he was appointed by the Chancellor of the Exchequer as special envoy to China's Belt and Road Initiative. Previously, he served as chairman of HSBC Holdings plc from 2010 to 2017. For 15 years prior to this he was HSBC's group finance director, joining from KPMG where he was a partner. Between 2005 and 2011 he also served as a non-executive director of BP plc.

Keith was appointed Co-Chief Executive on 14 August 2017. He was formerly Chief Executive of Standard Life plc, having been a Director since 2006 and Chief Executive of Standard Life Investments since 2004. He joined Standard Life Investments Limited in 1999 as Chief Investment Officer after nearly 20 years' investment experience at James Capel in a number of roles, including chief economist and managing director international equities. He is also a non-executive director of the Financial Reporting Council and a member of the Asset Management Taskforce led by HM Treasury.

As announced, from 13 March Keith will be the sole Chief Executive.

Simon Troughton - Deputy Chairman and Senior Independent Director

Martin Gilbert - Co-Chief Executive

Appointed to the Board: August 2017

Nationality: British

Age: 65

Shares: 64,054

Nationality: British

Age: 63

Shares: 1,354,623*

Simon was appointed Senior Independent Director on 1 January 2019, and has been Deputy Chairman since August 2017. Previously, he was a non-executive director of Aberdeen Asset Management PLC from July 2009 and chairman from October 2016. Simon is also chairman of Redburn (Europe) Limited. Previously, he was a partner at Cazenove and Company Limited before moving to Fauchier Partners in 2003 where he became chief operating officer.

As announced, Simon intends to retire from the Board at the conclusion of the 2019 AGM.

Martin was appointed Director and Co-Chief Executive on 14 August 2017. He is co-founder (and former chief executive) of Aberdeen Asset Management PLC, having been a director since 1983. He is a non-executive director of Glencore plc, chairman of the Prudential Regulation Authority's Practitioner Panel and a board member of the Institute of International Finance, as well as a member of the International Advisory Panel of the Monetary Authority of Singapore and the International Advisory Board of British American Business.

As announced, from 13 March Martin will be Vice Chairman of Standard Life Aberdeen and Chairman of Aberdeen Standard Investments.

Bill Rattray - Chief Financial Officer

Jutta af Rosenborg - Non-executive Director

Appointed to the Board: August 2017

Nationality: British

Age: 60

Shares: 1,851,706*

Nationality: Danish

Age: 60

Shares: 8,750

Bill was appointed Director and Chief Financial Officer on 14 August 2017, having been finance director of Aberdeen Asset Management PLC since January 1991. He is also a non-executive director of Curtis Banks Group PLC. Prior to joining the Aberdeen Group, Bill trained as a chartered accountant with Ernst & Whinney, qualifying in 1982.

As announced, Bill intends to retire from the Board on 31 May 2019.

Jutta was appointed Director on 14 August 2017, having been a non-executive director of Aberdeen Asset Management PLC since January 2013. She is also a non-executive director of JPMorgan European Investment Trust plc, NKT A/S, Nilfisk Holding A/S and BBGI SICAV S.A. Previously, she was the executive vice president, chief financial officer of ALK-Abellό A/S.

Rod Paris - Chief Investment Officer

Martin Pike - Non-executive Director

Appointed to the Board: August 2017

Appointed to the Board: September 2013

Nationality: British

Age: 59

Shares: 671,881

Nationality: British

Age: 57

Shares: 69,476

Appointed Director on 14 August 2017, Rod joined Standard Life Investments in 2002 as Head of Global Fixed Income and was appointed as Head of Investments in 2007 and latterly as Chief Investment Officer in 2013. Previously, he was a managing director at Merrill Lynch Investment Managers, and before that a director at Mercury Asset Management which he joined in 1984.

Martin was appointed Director on 27 September 2013. He is also chairman and non-executive director of Faraday Underwriting Limited. He joined R Watson & Sons in 1983, and progressed his career with the firm to partner level. His senior roles included head of European insurance and financial services practice, Watson Wyatt from 2006 to 2009, vice-president and global practice director, insurance and financial services, Watson Wyatt during 2009 and, latterly, managing director, risk consulting & software, EMEA, Towers Watson from 2010 to 2013.

Cathleen Raffaeli - Non-executive Director

Melanie Gee - Non-executive Director

Appointed to the Board: August 2018

Appointed to the Board: November 2015

Nationality: American

Age: 62

Shares: Nil

Nationality: British

Age: 57

Shares: 67,500

Cathleen was appointed Director on 1 August 2018. She is also a non-executive director of Federal Home Loan Bank of New York and managing partner of Hamilton White Group, LLC and Soho Venture Partners Inc. Previously, Cathleen was lead director of E*Trade Financial Corporation, non-executive director of Kapitall Holdings, LLC and president and chief executive officer of ProAct Technologies Corporation.

Appointed Director on 1 November 2015, Melanie is also a senior adviser at Lazard and Co. Limited, having been a managing director between 2008 and 2012. Previously, she held various roles with UBS, and was appointed a managing director in 1999. Melanie was a non-executive director of The Weir Group PLC between 2011 and 2017 and the Drax Group plc between 2013 and 2016. She is also chairman of Ridgeway Partners Holdings Limited.

John Devine - Non-executive Director

Richard Mully - Non-executive Director

Appointed to the Board: July 2016

Appointed to the Board: August 2017

Nationality: British

Age: 60

Shares: 28,399

Nationality: British

Age: 57

Shares: 90,116

Appointed Director on 4 July 2016, John is also a non-executive director of Credit Suisse International, Credit Suisse Securities (Europe) Limited, Citco Custody Limited and Citco Custody (UK) Limited. From 2008-2010, John was chief operating officer of Threadneedle Asset Management Limited. Prior to joining Threadneedle, John held a number of senior positions at Merrill Lynch in London and New York.

Richard was appointed Director on 14 August 2017, having been a non-executive director of Aberdeen Asset Management PLC since April 2012. Richard is also deputy chairman of alstria office REIT-AG, chairman of Great Portland Estates plc, senior adviser to TPG Real Estate (Europe) and director of Starr Street Limited. Previously, Richard spent much of his career in financial services as an investment banker and was the co-founder and managing partner of Grove International Partners LLP.

As announced, Richard intends to retire from the Board at the conclusion of the 2019 AGM.

* Shares include qualifying awards as described on page 94 of the Directors' remuneration report 2018.

3. Corporate governance statement

3.1 Nomination and Governance Committee report

The Nomination and Governance Committee oversees the governance framework so the report on its activities is presented both in summary here and integrated in more detail into the relevant parts of the corporate governance statement.

Dear Shareholder

One of my core responsibilities is to ensure effective corporate governance throughout the Group and so I am pleased to introduce the 2018 Corporate governance statement and Nomination and Governance Committee report. Recognising that I only took up my role as Chair of the Group and the Committee on 1 January 2019, I want, up front, to recognise the strength of the extant governance framework overseen by my predecessor, Sir Gerry, and confirm my commitment to continuing his robust work in this area.

During 2018, the two main points of focus of the Committee were to ensure that the leadership and governance processes remained strong and effective, both in the run up to completion of the sale of Standard Life's UK and European insurance business to the Phoenix Group (the Sale) and thereafter, and to conclude the Chair succession process successfully. Throughout the year in conducting these significant transitions, the members of your Board continued to adhere to the highest standards of corporate governance and ethical behaviour in directing the Group's affairs, reflecting their accountability to you as shareholders. Fulfilling this accountability responsibly is recognised by all your Directors as key to understanding and managing our business effectively, providing engaged leadership, and delivering shareholder value over the longer term. Your Board takes the quality of its own performance seriously and strives to improve performance through annual reviews and continuing self-assessment, as well as learning from and implementing feedback from external reviews. The key governance activities during the year included:

· Maintaining high quality membership of the Board and its Committees, including appropriate diversity

· Reviewing the governance content of the Sale Circular

· Reviewing the executive governance structures, including the balance between the individual roles and responsibilities of the Co-Chief Executives and the duties of the key management committees

· Reviewing and conducting oversight of the new operating models within the Group

· Oversight of our transition and transformation programmes, including assessment of the evolution of the firm's culture to align with our purpose, values and strategy

· Reviewing employee feedback on our purpose, values and culture and executive management's response thereto

· Supporting the externally facilitated Board effectiveness review and ensuring feedback was fully considered

· Leading the Chair succession process

Your Board continues to emphasise the importance of robust governance arrangements in carrying through its responsibilities and I look forward to updating you on the work of the Committee in future reports.

Sir Douglas Flint

Chair, Nomination and Governance Committee

Membership

The members of the Committee are the Chair and a number of the independent non-executive Directors. On 1 January 2019, Sir Douglas Flint succeeded Sir Gerry Grimstone as Chair of the Committee. The table below reflects the composition of the Committee and the members' attendance during 2018:

Member	Attendance
Sir Gerry Grimstone, Chair until 31/12/2018	5/5
Melanie Gee	5/5
Richard Mully	5/5
Simon Troughton	5/5

Former member
Lynne Peacock	2/3
Julie Chakraverty	2/3
Kevin Parry	5/5

Keith Skeoch and Martin Gilbert, in their Co-Chief Executive roles, were invited to Committee meetings to discuss relevant topics, such as the role and membership of key executive management committees, talent development and management succession.

The Committee supports the composition and effectiveness of the Board, and oversees the Group's activities to strengthen its talent pipeline at all levels. It also oversees the development and implementation of the Group's governance framework.

In this statement you can read about the Committee's role, both in the context of business as usual activities including integration, separation and transformation, and in the Sale discussions, in relation to:

· Identifying and recommending Directors to be appointed to the Board

· Reviewing and commenting on the new operating model

· Reviewing and assisting in the implementation of the Company's culture, diversity and inclusion activities, including recommending that a designated non-executive director should be responsible for representing the views of the workforce to the Board

· Reviewing Board diversity, skills and experience

· Considering employee feedback on the purpose, values and culture of the Group

· Supporting the review of the Board's effectiveness

· Overseeing succession planning, leadership and talent development and diversity levels throughout the Group

Ultimate responsibility for these important topics rests with the Board and the Committee reports regularly to the Board so that all Directors can be involved as appropriate.

The Committee's work in 2018

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

Jan-Mar

· Reviewed compliance with the Corporate Governance Code

· Reviewed the corporate governance statement

· Reviewed the Board Committees' terms of reference

· Appointment of subsidiary Board members

Apr-Jun

· Board and Committee composition

· Review of the target operating model for the Group

· Diversity and Inclusion review

· Review of the Corporate Culture

· Appointment of subsidiary Board members

· Supporting the externally facilitated Board Effectiveness Review

· Reviewing Chair succession arrangements (via the Appointments Committee)

Oct-Dec

· Appointment of subsidiary Board members

· Considered the Diversity and Inclusion action plan

· Discussed the revised UK Corporate Governance Code

· Reviewed Chair transition arrangements

The Committee's work in 2018

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.

Committee effectiveness

The Committee reviews its remit and effectiveness each year. The 2018 review was carried out via an external review and Independent Board Evaluation (IBE) was appointed as the external facilitator. The review concluded that the Committee members had debated issues well and had dealt with several complex matters appropriately. While the Committee's main activities during 2018 related to Board non-executive membership, going forward, the Committee should find time to discuss fully senior succession planning, talent management, and gender, diversity and inclusion activities as well as the skills and experience needed by the Board in the future to support its strategy. The Committee's workplan for 2019 increases its coverage of these matters. The Committee will also report fully to the Board on the progress of its discussions.

Roles and responsibilities

The roles and responsibilities of the Board, Chair and Co-Chief Executives are outlined below. The role of the Deputy Chair is to stand in for the Chair in his absence.

The Board

The Board's role is to organise and direct the affairs of the Company and the Group in accordance with the Company's constitution, all relevant laws, regulations, corporate governance and stewardship standards. The Board's role and responsibilities, collectively and for individual Directors, are set out in the Board Charter. The Board Charter also identifies matters that are specifically reserved for decision by the Board. These include approving, overseeing and challenging:

· The development and implementation of strategy, objectives and business plans

· Capital and management structures including capital allocation strategy and how it supports the Group's long-term sustainable growth

· Oversight of culture, our standards and ethical behaviours

· Dividend policy

· Appointment of the External auditor

· Financial reporting which, during 2018 included the impact of the Sale and the agreement of the level of provision in respect of past annuity sales practices

· How risks are managed, including the Enterprise Risk Management (ERM) framework, risk strategy, risk appetite limits and internal controls

· Significant corporate and other transactions during 2018 which, as well as the Sale, included the initial public offering (IPO) process for our Indian asset management associate HDFC Asset Management Company Limited, preparation for the sale of our Hong Kong subsidiary, Standard Life (Asia) Limited to our Chinese joint venture business, Heng An Standard Life Insurance Company Limited and the proposed joint venture with Virgin Money

· Remuneration policy

· Succession planning

· The sustainability of the Group's business and our own sustainability responsibilities to stakeholders, including wider society and the environment

· Significant external communications

· Terms of reference of Board Committees

· Appointments to the Board and to Board Committees

· Matters escalated from subsidiary boards to the Board for approval

The Board regularly reviews reports from the Co-Chief Executives and from the Chief Financial Officer on progress against approved strategies, plans and budgets, as well as updates on stock market and global economic conditions. There are also regular presentations from key business functional leaders and regional heads including from the Chief Risk Officer. The Chair reports at each Board meeting on the activities he has undertaken on behalf of the Board and the Group since the previous meeting.

The Chair

· Leads the Board and ensures that its principles and processes are maintained

· Promotes high standards of corporate governance

· Together with the Co-Chief Executives and the Company Secretary, sets agendas for meetings of the Board

· Ensures Board members receive accurate, timely and clear information on the Group and its activities

· Encourages open debate and constructive discussion and decision making

· Leads the performance assessments and identification of training needs for the Board and individual Directors

· Speaks on behalf of the Board and represents the Board to shareholders and other stakeholders

The Co-Chief Executives

During 2018, the Co-Chief Executives, within authorities delegated by the Board:

· Develop strategic plans and structures for presentation to the Board

· Make and implement operational decisions

· Lead the other executive Directors and the executive team in the day-to-day running of the Group

· Report to the Board with relevant and timely information

· Develop appropriate capital, corporate, management and succession structures to support the Group's objectives

· Together with the Chair, represent the Group to external stakeholders, including shareholders, customers, suppliers, regulatory and governmental authorities, and the local and wider communities

· Keith Skeoch has individual accountability for the day-to-day running of the fabric of the business including responsibility for Investments, the Indian associates and the China Insurance Joint Venture, Operations, Finance, HR, Risk and Regulatory Culture, as well as the Legal and Secretariat functions

· Martin Gilbert has individual accountability for external matters including responsibility for International Activities, Distribution including client engagement and business development, Marketing and Corporate Development

As announced, from 13 March 2019, Keith Skeoch will be sole Chief Executive and Martin Gilbert will be Vice Chairman of Standard Life Aberdeen and Chairman of Aberdeen Standard Investments. In this role, Martin will focus on managing relationships with clients, winning new business and realising the potential from our global network and product capabilities. Both Martin and Keith will continue to report directly to the Chairman.

Code compliance

As well as covering the formal disclosure requirements of the UK Corporate Governance Code (the Code) issued by the Financial Reporting Council (FRC), this statement describes how the Board meets its governance responsibilities.

Throughout 2018, the Company complied with all of the provisions set out in the Code issued by the FRC in April 2016 other than the following:

Provision B.3.3. states that 'The Board should not agree to a full time executive director taking on more than one non-executive directorship in a FTSE100 company, nor the chairmanship of such a company'. For the period 1 January to 16 May 2018 Martin Gilbert held non-executive directorships with Sky plc and Glencore plc.

The Code is available at www.frc.org.uk

Together with the Directors' remuneration report, this statement explains how our governance framework supports the way we apply the Code's principles of good governance.

During 2018, the Committee has closely followed the development of the revised Code to ensure that the Group is well placed to implement and comply with its requirements for 2019.

Governance framework

The Group's governance framework is approved by the Board and documented in the Board Charter.

You can read the Board Charter on our website at www.standardlifeaberdeen.com/annualreport

The Group's Code of Conduct guides our people to do the right thing and complements the Board Charter. It sets out our standards of conduct and culture, and shows the governing principles for operational excellence, compliance responsibilities, customer service, and how we should treat our people, and other stakeholders.

The Board expects the Group to be a leader in corporate governance activities through its own actions and through its stewardship activities. The Nomination and Governance Committee regularly reviews the Group's corporate governance framework against relevant directors' duties, generally accepted standards, guidance and best practice, and, as appropriate, recommends to the Board changes to the Board Charter.

The Committee previously oversaw the implementation of the governance map and processes to support the Senior Insurance Managers Regime (SIMR). During 2018, we began the process to implement the Senior Managers and Certification Regime (SMCR) across the relevant parts of the business, which will conclude in late 2019 when SMCR comes into force for all UK financial services firms.

The governance framework sets out the Board's relationship with the boards of the principal subsidiaries in the Group. In particular, it specifies the matters which these subsidiaries are required to refer to the Board or to a Committee of the Board for approval. It also ensures that all decisions which require or would benefit from it, receive the independent input of the non-executive Directors.

The roles of the Chair and the Co-Chief Executives are separate. Each has clearly defined responsibilities, which are described in the Board Charter.

The heads of each business function and each region manage their teams within authorities set out in the Board Charter and within an approved scheme of delegation. This includes reporting to the Co-Chief Executives on how they are complying with Group policies and performing against approved plans and budgets.

The Company Secretary is responsible for advising the Board on governance matters.

Board composition, balance and diversity

The Board's policy is to appoint and retain non-executive Directors who bring relevant expertise as well as a wide perspective to the Group and its decision-making framework. The Directors believe that at least half of the Board should be made up of independent non-executive Directors. As at 13 March 2019, the Board comprises the Chair, 7 independent non-executive Directors and 4 executive Directors. The Board is made up of 9 men (75%) and 3 women (25%) (2017: men 75%, women 25%). The Board continues to support its Board Diversity statement which states that the Board:

· Believes in equal opportunities and supports the principle that due regard should be had for the benefits of diversity, including gender, ethnicity, age, and educational and professional background when undertaking a search for candidates, both executive and non-executive

· Recognises that diversity can bring insights and behaviours that may make a valuable contribution to its effectiveness

· Believes that it should have a blend of skills, experience, independence, knowledge, ethnicity and gender amongst its individual members that is appropriate to its needs

· Believes that it should be able to demonstrate with conviction that any new appointee can make a meaningful contribution to its deliberations

· Is committed to maintaining its diverse composition

· Supports the Co-Chief Executives' commitment to achieve and maintain a diverse workforce and an inclusive workplace, both throughout the Group, and within the executive team

· Has a zero tolerance approach to unfair treatment or discrimination of any kind, both throughout the Group and in relation to clients, customers and individuals associated with the Group

You can read more about our Directors in their biographies in Section 2.

The Nomination and Governance Committee supports the Group's commitment to diversity and inclusion in the broadest sense and receives updates on progress towards achieving and maintaining diversity targets throughout the Group. This includes reviewing statistics on gender representation and approving gender diversity targets and oversees progress against these on a regular basis. The Group also promotes initiatives and programmes to raise awareness of why diversity and inclusion matter. You can read more about our diversity activities and current targets in the People and Culture section of the Strategic report and in our stand alone Corporate sustainability report. We are committed to working to make the Group as inclusive a place to work as possible. Our activities and targets are in pursuit of 'our vision for an inclusive future' which is published on our website www.standardlifeaberdeen.com. You can find our gender pay gap disclosure statement on page 29. The Committee continues to follow the development of, and the Group's participation in, significant diversity reviews, including the Hampton Alexander review, and we are one of the initial signatories to the Women in Finance Charter. In October 2018 we became one of the founding members of the UK Government Race at Work Charter. The Committee supports our commitments under these charters and continues to oversee our progress against these, which we report publically on an annual basis. The Committee also supports the goal of strong engagement with the wider workforce, and Melanie Gee has taken the role as the designated non-executive director responsible for representing the views of the workforce at the Board.

Board changes during the period

Appointments

There were no executive Director appointments over the year. Cathleen Raffaeli was appointed as non-executive Director on 1 August 2018, and Sir Douglas Flint was appointed as a non-executive Director on 1 November 2018. Sir Douglas was subsequently appointed Chair on 1 January 2019. Heidrick and Struggles were engaged to support the appointment of Cathleen Raffaeli. Heidrick and Struggles have no other commercial relationships with the Group. MWM were engaged to support the Chair's appointment. The Group has additionally used the services of MWM to support a recent senior management search for the Chief People Officer role.

Retirements

Julie Chakraverty, Akira Suzuki and Lynne Peacock retired from the Board on 29 May 2018. Gerhard Fusenig, Kevin Parry and Sir Gerry Grimstone retired from the Board on 31 December 2018. It is intended that Simon Troughton and Richard Mully will retire from the Board at the conclusion of the 2019 AGM and Bill Rattray will retire from the Board on 31 May 2019.

Board appointment process, terms of service and role

During 2018, the Board composition was reviewed. In order to assist with determining the right balance of skills, diversity, knowledge and expertise for the Board going forward, IBE were engaged to support and facilitate this. IBE conducted individual interviews with each of the Directors and prepared a report for the Chair to discuss with the Board. The Board is not aware of any other connection between the Group and IBE.

When seeking to make appointments from outside the Group, and having already identified the capabilities needed for Board roles and the succession timeframe, the Committee considers the related role profile submitted to external search consultants along with the request to prepare a list of suitable candidates. The Committee then considers the potential suitable candidates and agrees a shortlist. Following interviews with potential candidates, the Committee then makes recommendations to the Board on any proposed appointment, subject always to the satisfactory completion of all background checks and regulatory notifications or approvals. The other Board members are also offered the opportunity to meet the recommended candidates. The Committee considers the external commitments of candidates to assess their ability to meet the necessary time commitment and whether there are any conflict of interest matters to address. This process was followed for the appointment of Cathleen Raffaeli.

Each non-executive Director is appointed for a three-year fixed term and shareholders vote on whether to elect/re-elect him or her at every AGM. Once a three-year term has ended, a non-executive Director can continue for further terms if the Board is satisfied with the non-executive Director's performance, independence and ongoing time commitment. There is no specified limit to the number of terms that a non-executive Director can serve. The Board recognises the Code provisions regarding length of service when considering whether or not Directors' appointments should be continued. Taking account of their appointment dates to the predecessor boards, the current average length of service of the non-executive Directors (excluding the Chair) is five years. The Nomination and Governance Committee oversees the process to recommend continued appointments, but members of the Committee do not take part in discussions when their own performance - or continued appointment - is being considered.

The role of our non-executive Directors is to participate fully in the Board's decision-making work - advising, supporting and challenging management as appropriate.

The letter of appointment confirms that the amount of time we expect each non-executive Director to commit to each year which, once they have met all of the approval and induction requirements, is around 35 days. 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 (which can be found in the Shareholder information section) and at the 2019 AGM. Non-executive Directors are required to confirm that they can allocate sufficient time to carry out their duties and responsibilities effectively. You can read more about the induction and development programme later in this section.

Director election and re-election

One of the Committee's duties is to make recommendations regarding the election or re-election by members of any Director. In making its recommendations, the Committee reviews, as applicable, the appropriateness of continued service beyond a term of six years.

Therefore, at the 2019 AGM, all of the current Directors will retire. Sir Douglas Flint and Cathleen Raffaeli, having been appointed since the previous AGM, will retire and stand for election. All the others with the exception of Simon Troughton will stand for re-election.

You can read more background information about the Directors, including the reasons why the Chair believes you should support their election or re-election, in our AGM guide 2019, which will be published online at www.standardlifeaberdeen.com in advance of this year's AGM, and in Section 2.

Director independence, external activities and conflicts of interest

The Board carries out a formal review of the independence of non-executive Directors annually. The review considers relevant issues including the number and nature of their other appointments, any other positions they hold within the Group, any potential conflicts of interest they have identified and their length of service. Their individual circumstances are also assessed against independence criteria, including those in the Code. Following this review, the Board has concluded that all the current non-executive Directors are independent and consequently, the Board continues to comprise a majority of independent non-executive Directors. The Board recognised that Simon Troughton's cumulative term of service as a Director on the Standard Life Aberdeen and Aberdeen Asset Management Boards reached nine years in July 2018 and after consideration, agreed that this did not compromise his independence. Before his retiral on 29 May 2018, the Board determined that Akira Suzuki, as a representative of a shareholder, was not independent.

Sir Gerry Grimstone was Chair of the Board throughout 2018. He retained his non-executive positions with Barclays PLC. He also retained his non-executive positions with Deloitte North West Europe and the UK Government's Ministry of Defence where he is the lead non-executive. He is also an adviser to the board of the Abu Dhabi Commercial Bank.

Kevin Parry was Senior Independent Director (SID) throughout 2018. In this role, Kevin supported the Chair, and often met with him one-to-one. He was also available to talk with our shareholders about any concerns that they may not have been able to resolve through the channels of Chair, the Co-Chief Executives or Chief Financial Officer, or where a shareholder considered these channels as inappropriate.

Following Kevin's retirement from the Board, Simon Troughton took on the additional responsibilities of the SID on 1 January 2019. It is intended that Simon will serve as SID until the close of the 2019 Annual General Meeting when he will retire from the Board.

The Directors continued to review and authorise Board members' actual and potential conflicts of interest on a regular and ad hoc basis in line with the authority granted to them in the Company's Articles. As part of the process to approve the appointment of a new Director, the Board considers and, where appropriate, authorises his or her potential or actual conflicts. The Board also considers whether any new outside appointment of any current Director creates a potential or actual conflict before, where appropriate, authorising it. All appointments are approved in accordance with the Group's Outside Appointments and Conflicts of Interest policies.

In January 2019, the Board reviewed all previously authorised potential and actual conflicts of interest of the Directors and their connected persons, and concluded that the authorisations should remain in place until January 2020. Under the terms of the approval, conflicted Directors can be excluded from receiving information, taking part in discussions and making decisions that relate to the potential or actual conflict. The Board and relevant Committees follow this process when appropriate.

The Board's policy encourages executive Directors to take up one external non-executive director role. Keith Skeoch continued as a non-executive director of the Financial Reporting Council. Martin Gilbert is a non-executive director at Glencore plc, a position from which he took a leave of absence during the period from 16 May to 9 October. He was previously a non-executive director at Sky plc having resigned on 9 October 2018. Bill Rattray is a non-executive director at Curtis Banks Group PLC.

You can read more about the Directors' outside appointments in their biographies in Section 2

Advice

Directors may sometimes need external professional advice to carry out their responsibilities. The Board's policy is to allow them to seek this where appropriate and at the Group's expense. Directors also have access to the advice and services of the Company Secretary, whose appointment and removal is a matter for the Board. No Directors sought external advice in 2018.

Board effectiveness

Review process

The Board has, with the help of the Nomination and Governance Committee, developed a formal review process to assess how well the Board, its Committees, the Chair and the Directors are performing collectively and individually and how performance could be improved.

In accordance with the Code, the Board commissions externally facilitated reviews regularly. As announced in the 2017 ARA, the externally facilitated review which was due in 2017 was rescheduled to 2018 to allow some time for the post merger Board to come together. Also as announced at that time, IBE was appointed as the external facilitator and carried out the 2018 review. IBE does not have any other connection with the Group.

To carry out the review, senior representatives of IBE were in attendance and observed a Board meeting and a meeting of each Board Committee. They also had access to the papers for each of these meetings. In addition to this observation and analysis, they held individual meetings with each Board member and the key members of the Board and Committee support team. Following this, IBE prepared a draft report for review and discussion. The Board then met specifically to review and discuss the report, and representatives of IBE attended to present the report and recommendations.

Outcome

Overall the report recognised that this has been a time of significant change and challenge for the Board. The necessary focus on the major structural transactions in the past two years has minimised the opportunities for consolidation and relationship-forming and has not yet allowed the Board members as much time as they would like, ideally, to focus on other key matters. As a consequence, the Board's most valuable contribution over the short to medium term would be to support the executive team in:

· Identifying and delivering priorities

· Attracting and retaining key talent

· Establishing the appropriate culture for the transformed business

· Continuing to develop strategy

The key conclusions and recommendations from the review included:

· Strategy: create more space in the Board calendar to define and understand the strategic direction by using the Board Committees as efficiently as possible

· People: refresh the Board's own line-up over time and oversee senior leadership, succession, diversity and inclusion and talent and development programmes

· Tone from the top: make sure the Board embodies the behaviours it wishes to see throughout the organisation and is visible enough to set such an example

· Board Information: continue to challenge the quality and context of Board and Committee papers so that they fully support effective decision-making

Progress to implement the recommendations is monitored by the Company Secretary and reported to the Nomination and Governance Committee.

Chair

The review of Sir Gerry's performance as Chair was led by the previous SID, Kevin Parry and supported by IBE. It was based on feedback given in individual interviews between the external facilitator and each Director as well as regular discussions between the SID and other NEDs.

The feedback was summarised into a report which was reviewed by the SID and distributed to all Board members, except Sir Gerry. The Directors, led by Kevin Parry and without Sir Gerry being present, met to consider the report. They concluded that during 2018, Sir Gerry had performed his role effectively, shown strong leadership of the Board, continued to devote significant time to the Group and continued to have sufficient time to carry out his duties. Kevin Parry met with Sir Gerry to pass feedback from the review directly to him.

Directors

As part of their review, IBE prepared an individual evaluation of the performance of the members of the Board. The purpose was two-fold: to support the Chair's annual round of feedback to Directors and to assist the Nomination and Governance Committee in its ongoing succession planning activities. Sir Gerry discussed the individual results with each Director. These discussions also considered individual training, development and engagement opportunities.

Director induction and development

The Chair, supported by the Company Secretary, is responsible for arranging a comprehensive preparation and induction programme for all new Directors. The programme is tailored to their individual requirements and takes their background knowledge and experience into account. All Directors are required to complete the FCA's approval process and, if relevant, the PRA's and FCA's SMCR notification or approval process before they are appointed and to self-certify annually that they remain competent to carry out this aspect of their role. These processes continue to adapt to meet evolving best practice in respect of SMCR.

The formal preparation and induction programme includes:

· Meetings with the executive Directors, key members of senior management, the heads of the operating businesses and our corporate centre functions

· Focused technical meetings with internal and external experts on specific areas including investments, CRD IV, conduct risk, risk and capital management, and financial reporting

· Visits to business areas to meet our people and gain a better insight into the operation of the business and its culture

· Meetings with the External auditors and the FCA/PRA supervisory teams

· Meetings with the Company Secretary on the Group's corporate governance framework and the role of the Board and its Committees, and with the Chief Risk Officer on the risk management framework as well as meetings on their individual responsibilities both as Directors and as holders of a Controlled Function/Senior Management Function role

Background information is also provided including:

· Key Board materials and information, shareholder communications and financial reports

· The Group's organisational structure, strategy, business activities and operational plans

· The Group's key performance indicators, financial and operational measures and industry terminology

The induction programme provides the background knowledge new Directors need to perform to a high level as soon as possible after joining the Board and to support them as they build their knowledge and strengthen their performance further.

When a non-executive Director is appointed to one of the Board's Committees, they receive relevant induction training on the Committee's role and duties.

When Directors are appointed to the Board, they make a commitment to broaden their understanding of the Group's business. Our corporate centre monitors relevant external governance and financial and regulatory developments and keeps the ongoing Board training and information programme up to date. During 2018, while the Board spent a significant amount of its time discussing the Sale and integration and transformation activities, specific Board awareness sessions took place on cyber risks and security, the UK withdrawal from the EU, the Group's strategy regarding joint venture operations, staff interaction surveys and corporate culture. Similarly, the relevant Board Committees received updates on developments in financial reporting, remuneration and corporate governance. Non-executive Directors are actively invited to all parts of the Group's business in order to familiarise themselves with how our business is conducted and to meet with our people.

Succession and talent management activities

The Nomination and Governance Committee regularly reviews the results of succession planning activities, including key person and retention risk, and talent development programmes at all levels across the Group.

At its meetings, the Committee discussed the future leadership and talent needs of the Group and how the current programmes would be revised to take account of the skills and expertise required by the Board and senior management. The programmes recognise the changing shape of the Group, and also identify both the talent available within the Group and the need for external recruitment. The programmes are led by the Chief People Officer, with input from the Co-Chief Executives and supported by the Group Talent and Organisation Development team.

Also during 2018, the non-executive Directors held specific discussions on Board and executive succession, the results of which fed into the overall plan.

The Board members are keen to interact with the members of the development schemes and have met with, and had presentations from, key talent across the Group.

Chair's Succession

As disclosed in the ARA 2017, Sir Gerry Grimstone indicated his intention to step down from his role by the end of 2019. In February 2018, the Nomination and Governance Committee considered and agreed the appropriate arrangements to oversee the governance of the succession process. As a result an Appointments Committee was established, chaired jointly by Simon Troughton and Melanie Gee and comprising all of the non-executive Directors other than those who indicated they wished to be considered as internal candidates. Sir Gerry was not a member. The key tasks of the Appointments Committee were:

· To agree the candidate and role profile for the Chair

· To receive presentations from potential external search consultants, and following these presentations, to appoint MWM to support the search

· To review the long-list of potential candidates against the agreed criteria

· To work with MWM to revise the long-list

· To assess the revised list against agreed criteria

· To meet with the candidates on the revised list

· To reach agreement on candidates to recommend to the Board

· To discuss the potential Chair's fee with the Remuneration Committee

Following the completion of the process, the Board accepted the Appointments Committee's recommendation that Sir Douglas Flint should be appointed as a NED and Chair designate on 1 November 2018, and should then succeed Sir Gerry as Chair on 1 January 2019. MWM's other services provided to the Group in 2018 were to support the senior management search for the Chief People Officer role.

Annual review of internal control

The Directors have overall responsibility for the governance structures and systems of the Group, which includes the Enterprise Risk Management (ERM) framework and system of internal control, and for the ongoing review of their effectiveness. The framework is designed to manage, rather than eliminate, risk and can only provide reasonable, not absolute, assurance against material misstatement or loss. The framework covers all of the risks as set out in the risk management section of the Strategic report.

In line with the requirements of the Code, the Board has reviewed the effectiveness of the system of internal control. The system was in place throughout the year and up to the date of approval of the Annual report and accounts 2018.

To support the review, the Risk and Compliance function undertook an assessment of the effectiveness of risk management and internal controls in line with the FRC's guidance on the requirements of the annual review. In carrying out the review, the Risk and Compliance function considered reports presented to the Board, the Group Audit Committee and Risk and Capital Committee during the period. The review also assessed the top control issues escalated to the Board during the period.

Following this review the Board concluded that the system of internal control was effective, and that there had been no significant failings or weaknesses during the period.

With regard to regular financial reporting and preparing consolidated accounts, the Finance function participates in the risk and control self-assessment and policy compliance elements of the ERM framework. The Finance function sets formal requirements for financial reporting, defines the process and detailed controls for the IFRS consolidation, reviews and challenges submissions and receives formal sign-off on financial reporting from business unit finance heads. In addition, the Finance function runs the Technical Review Committee and the Financial Reporting Executive Review Group which review external technical developments and detailed reporting disclosure and accounting policy issues.

Communicating with investors

The Company continues to maintain and further develop a dialogue with its shareholders. As part of this, our investor relations and Group secretariat teams support communication with investors. During 2018, the Group continued its programme of domestic and international presentations and meetings between Directors and institutional investors, fund managers and analysts. As well as the Sale, the wide range of relevant issues discussed, in compliance with regulations, at investor presentations and meetings, included integration, separation and transformation, business strategy, financial performance, operational activities and corporate governance. The Chair has his own investor contact programme and brings relevant issues to the attention of the Board. The Remuneration Committee also consulted with major institutional investors regarding executive remuneration plans during the year. More information on this consultation can be found in the Directors' remuneration report.

The Board is equally committed to the interests of the Company's 1.1 million individual shareholders who hold approximately one third of the Company's issued shares. Given this large shareholder base, it is impractical to communicate with all shareholders using the same direct engagement model we follow for our institutional investors. The Company has continued to gather and respond to shareholders' views on the services and means of communication available to them, mainly through shareholders contacting the shareholder helpline. Around 430,000 shareholders receive all communications electronically helping to reduce our environmental impact. We encourage shareholders to use our share portal to access information relating to their personal shareholding over 400,000 have signed up to this service. Share portal participants can also change their personal details online and view and download their tax documents and statements. Most of our shareholders hold their shares in the Standard Life Aberdeen Share Account where shares are held electronically. 90% of individual shareholders hold their shares in this way.

To give all shareholders access to the Company's announcements, all material information reported via the London Stock Exchange's regulatory news service is published on the Company's website. We have continued to host formal presentations to support the release of both the full year and half year financial results. These results-related events are also made available live on the Group's website and have a permanent replay facility. We also undertook a comprehensive programme of investor engagement following the announcement of the Sale including investor presentations and meetings.

We publish Company profiles to provide a high level introduction to the Group and its divisions. We also distribute a quarterly newsletter featuring articles designed to give investors deeper insight into particular areas of our business including our sustainability strategy. Copies of our Company profiles and newsletters are available on the Investors section of the Group's website.

The Chair's statement and the Strategic report in the Annual report and accounts aim to provide a balanced overall assessment of the Group's activities, performance and prospects. This information will be supported by a presentation at the 2019 AGM. Shareholders will be invited to ask questions during the meeting and have an opportunity to talk with the Directors after the formal part of the meeting. The voting results will be published on our website at www.standardlifeaberdeen.com after the meeting. These will include the number of votes withheld.

The 2018 AGM was held in London on 29 May 2018 when Directors were available to answer shareholders' questions. In accordance with best practice, all resolutions were considered on a poll which was conducted by our registrars and monitored by independent scrutineers. The results, including proxy votes lodged prior to the meeting, were made available on our website the same day. 40% of the shares in issue were voted and all resolutions were passed.

In addition, a General Meeting was held on 25 June 2018 at which shareholders were asked to consider the resolutions recommended by the Board, to approve the Sale, the issue and allotment of new shares and an amended remuneration policy 50% of the shares in issue were voted and the resolutions were passed.

Our 2019 AGM will be held in Edinburgh in line with our plan to hold the AGM in Edinburgh and London in alternate years in order to give more shareholders the opportunity to attend.

Our role as an institutional investor

Standard Life Investments and Aberdeen Asset Management (together Aberdeen Standard Investments) are signatories to and supporters of 23 stewardship codes around the globe including the UK Stewardship Code and the United Nations Principles for Responsible Investment. Both companies promote the importance of good governance and stewardship including the management of broader aspects of risk relating to the environment, society and governance (ESG).

In addition to holding to account the boards of the companies in which we invest, through our ongoing engagement and voting at general meetings, we will work to encourage the high levels of governance and management of environmental and societal risks in the markets around the world in which we invest on behalf of our clients. We believe that it is important for us to transparently report on our activities so that our clients can, in turn, hold us to account for the delivery of the very highest standards.

Aberdeen Standard Investments' role, as an institutional investor that invests its clients' savings in a responsible manner, is key to Standard Life Aberdeen behaving as a responsible business. Its influence over the companies in which it invests, provides the Group with the ability to encourage others to act similarly.

When assessing the Company's compliance with the principles and provisions of the Code, the Nomination and Governance Committee also reviewed the Company's compliance with the Standard Life Investments ESG investment principles and policy guidelines, and with the Aberdeen Asset Management holistic risk and assessment criteria. The Committee concluded that the Company complied with the guidelines and fulfilled the criteria during the year.

You can read more about this at www.aberdeenstandard.com/annualreport

Other information

You can find details of the following, as required by Disclosure and Transparency Rule 7.2.6, in the Directors' report and in the Directors' remuneration report:

Share capital

· Significant direct or indirect holdings of the Company's securities

· Confirmation that there are no securities carrying special rights with regard to control of the Company

· Confirmation that there are no restrictions on voting rights in normal circumstances

· How the Articles can be amended

· The powers of the Directors, including when they can issue or buy back shares

Directors

· How the Company appoints and replaces Directors

· Directors' interests in shares

Board meetings and meeting attendance

The Board and its Committees meet regularly, operating to an agreed timetable. Meetings are usually held in Edinburgh or London and, on occasion, at the offices of one of our international businesses. In September 2018, the Board held its meeting in New York. As well as meeting with clients in New York, this allowed the Board to spend time with colleagues in New York, Boston and Philadelphia. During the year, the Board held specific sessions to consider the Group's strategy and business planning. The Chair and the non-executive Directors also met during the year, formally and informally, without the executive Directors present. At these meetings, matters including executive performance and succession and Board effectiveness were discussed. During 2018 these meetings also covered discussions in relation to the Sale.

Directors are required to attend all meetings of the Board and the Committees they serve on, and to devote enough time to the Company to perform their duties. Board and Committee papers are distributed before meetings other than, by exception, urgent papers which may need to be tabled at the meeting. The Board sometimes needs to call or rearrange meetings at short notice and it may be difficult for all Directors to attend these meetings. If Directors are not able to attend a meeting because of conflicts in their schedules, they receive all the relevant papers and have the opportunity to submit their comments in advance to the Chair or to the Company Secretary. If necessary, they can follow up with the Chair of the meeting. The Board has established the Standing Committee as a formal procedure for holding unscheduled meetings. The Standing Committee meets when, exceptionally, decisions on matters specifically reserved for the Board need to be taken urgently. All Directors are invited to attend Standing Committee meetings. The Standing Committee did not meet during 2018.

The Chair is not a member of the Audit, Risk and Capital, or Remuneration Committees. He may, however, attend meetings of all Committees, by invitation, in order to keep abreast of their discussions. The table below reflects the composition of the Board during 2018 and the members' attendance. The Board met 10 times during the year.

Number of meetings	Board
Chair
Sir Douglas Flint (attended as Non-executive Director)	1/1
Sir Gerry Grimstone (Chair until 31/12/2018)	10/10

Executive Directors
Keith Skeoch	10/10
Martin Gilbert	10/10
Bill Rattray	10/10
Rod Paris	10/10

Non-executive Directors
John Devine	10/10
Melanie Gee	10/10
Richard Mully	10/10
Martin Pike	10/10
Cathleen Raffaeli	4/4
Jutta af Rosenborg	10/10
Simon Troughton	9/10

Former members
Julie Chakraverty	3/5
Gerhard Fusenig	10/10
Kevin Parry	10/10
Lynne Peacock	5/5
Akira Suzuki	4/5

Board Committees

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

The Board has established Committees that oversee, consider and make recommendations to the Board on important issues of policy and governance. At each Board meeting, the Committee Chairs provide reports of the key issues considered at recent Committee meetings, and minutes of Committee meetings are circulated to the appropriate Board members. The Committees operate within specific terms of reference approved by the Board and kept under review by the Nomination and Governance Committee.

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

All Board Committees are authorised to engage the services of external advisers at the Company's expense, whenever they consider this necessary.

The Chair of each Committee and of the Nomination and Governance Committee review Committee membership at regular intervals. The Nomination and Governance Committee considers all proposed appointments before they are recommended to the Board.

Investment Performance Committee

In October 2017, following the Merger and further consideration of its oversight responsibilities at that time, the Board established the Investment Performance Committee. This Committee provided insight into investment performance results by asset class, the market and economic environment influencing investment results, supported the review and oversight of performance issues and supported the ongoing innovation and evolution of the investment process and capabilities of the Group.

Following on from the Sale, during the latter part of 2018, the Board revisited what it should be considering collectively and what it should be delegating to Board Committees. This discussion recognised the revised shape of the business after the Sale and its ongoing transformation into an investment management company.

As a result of this review it was determined that the duties of the Investment Performance Committee should more properly be performed by the full Board, so the Committee was discontinued and its reporting information was built into the Board's programme. During 2018, the IPC met five times and its members were Gerhard Fusenig (Chair), Melanie Gee, Richard Mully and Kevin Parry. At its meetings, it received and discussed reports on:

· Quarterly investment performance

· Asset class deep-dives

· Market context

· Investment governance and oversight

· Investment process enhancements

Committee reports

This statement includes reports from the Chairs of the Audit Committee and the Risk and Capital Committee. The report on the responsibilities and activities of the Remuneration Committee can be found in the Directors' remuneration report following this statement.

The Committee Chairmen are happy to engage with you on their reports. Please contact them via questions@standardlifeaberdeenshares.com

3.2 Audit Committee report

The Audit Committee assists the Board in discharging its responsibilities for financial reporting, internal control and the relationship with the External auditors.

Dear Shareholder

I am pleased to present my report as Audit Committee Chair.

A major role of the Audit Committee in 2018 related to the Sale. In advance of this, the Audit Committee's specific focus was on the work to support the relevant financial disclosures in the Sale Circular. Post Sale, this focus switched to the impact on the group financial reporting of the Sale including the carrying value of the group's strategic holding in the Phoenix Group, along with the treatment of separation costs. During the year the Committee also:

· Considered the carrying value of intangible assets, in particular customer relationship intangibles relating to the Aberdeen merger and goodwill

· Oversaw the succession process for the Chief Internal Auditor

· Reviewed the Solvency and financial condition report as part of the Company's annual Solvency II reporting, and then reviewed CRD IV reporting following the change in the prudential supervision of the Group

· Received reports on compliance with the FCA Client Assets Sourcebook (CASS) rules in the Group's CASS permissioned regulated legal entities

The Committee continued to focus on the quality of financial reporting. In November 2018 we received a letter from the FRC informing us that they had carried out a review of our Annual report and accounts 2017. I am pleased to report that the FRC letter noted that there were no questions or queries they wished to raise with us at this stage, and did not require a substantive response to their letter. The FRC asked us to make clear the inherent limitations of their review, which we have set out in the financial reporting section of this report.

Our report to you is structured in four parts:

1. Governance

2. Report on the year

3. Internal audit

4. External audit

I look forward to engaging with you on the work of the Committee.

John Devine

Chair, Audit Committee

3.2.1 Governance

Membership

All members of the Audit Committee are independent non-executive Directors. The table below reflects the composition of the Committee and the members' attendance:

Member	Attendance
John Devine, Chair	10/10
Melanie Gee	10/10
Martin Pike	9/10
Jutta af Rosenborg	9/10

Former member
Julie Chakraverty	1/5

The Board believes members have the necessary range of financial, risk, control and commercial expertise required to provide effective challenge to management. John Devine is a member of the Chartered Institute of Public Finance and Accountancy. For the business of the Committee, he is considered by the Board to have competence in accounting and auditing as well as recent and relevant financial experience.

The Committee schedules six meetings per annum, four of which are co-ordinated with external reporting timetables. In 2018, there were four additional meetings, which were focused on the Sale and related financial reporting matters.

Invitations to attend Committee meetings are extended on a regular basis to the Chair, the Co-Chief Executives, the Chief Financial Officer, the Group Financial Controller, the Chief Internal Auditor and the Group Chief Risk Officer.

The Committee meets privately for part of its meetings and also has regular private meetings separately with the External auditors, Chief Internal Auditor and Chief Financial Officer. These meetings address the level of co-operation and information exchange and provide an opportunity for participants to raise any concerns directly with the Committee.

Key responsibilities

The Committee's responsibilities are to oversee and report to the Board on:

· The appropriateness of the Group's accounting and accounting policies, including the going concern presumption and viability

· The findings of its reviews of the financial information in the Group's annual and half year financial reports

· The clarity of the disclosures relating to accounting judgements and estimates

· Its view of the 'fair, balanced and understandable' reporting obligation

· The findings of its review of key Group prudential returns and disclosures

· Internal controls over financial reporting and procedures to prevent money laundering, financial crime, bribery and corruption

· Outcomes of investigations resulting from whistleblowing

· The appointment or dismissal of the Chief Internal Auditor, the approved internal audit work programme, key audit findings and the quality of internal audit work

· The independence of the External auditors, the appropriateness of the skills of the audit team, the approved audit plan, the quality of the firm's execution of the audit, and the agreed audit and non-audit fees

In carrying out its duties, the Committee is authorised by the Board to obtain any information it needs from any Director or employee of the Group. It is also authorised to seek, at the expense of the Group, appropriate external professional advice whenever it considers this necessary. The Committee did not need to take any independent advice during the year.

In accordance with the Senior Insurance Manager's Regime, and its replacement the Senior Managers and Certification Regime which came into effect for insurance firms on 10 December 2018, the Audit Committee Chair is responsible for the oversight of the independence, autonomy and effectiveness of our policies and procedures on whistleblowing including the procedures for the protection of staff that raise concerns from detrimental treatment. Throughout the year the Audit Committee Chair met regularly with the Chief Internal Auditor and the Head of Financial Crime to discuss their work, findings and current developments.

Committee effectiveness

The Committee reviews its remit and effectiveness annually. The 2018 review was carried out by external consultants IBE. The key points arising from the review were:

· Meetings of the Committee were characterised by good debate and mature discussion

· While the Committee's work has been very thorough, it may now benefit from a better sense of proportionality, with more being delegated to the management team, in the interests of allowing the Committee to reflect for longer on the key issues

· The Committee's agenda has been dominated by the merger, the Sale, and year end complexity, and it would be of benefit to now focus more on the ongoing retained business as it completes the transformation. Going forward, the intention is also to spend more time on core control areas so that the Committee covers as much ground as possible in future.

The Board's review similarly confirmed its satisfaction with the performance of the Committee.

3.2.2 Report on the year

Audit agenda

The Audit Committee has a rolling agenda comprising recurring business, seasonal business and other business.

As recurring business, at every meeting the Committee reviews and discusses:

· Updates from the Group Finance function on significant financial accounting, reporting and disclosure matters

· Findings from Internal audit reports and how high priority findings are being followed up by management

· Regular refreshes and updates to the Internal audit plan

· Results of the monitoring of financial crime, fraud risk assessments and whistleblowing including calls to our dedicated Speak Up helpline

· Reports from the chairs of the subsidiary audit committees

· Updates on work completed by the External auditors

· Details of non-audit services requested of the External auditors by business units

· Other agenda items

Other agenda items were aligned to the annual financial cycle as set out below.

Jan-Mar	· Annual report and accounts 2017 · Strategic report and financial highlights 2017 · Financial reporting judgements · External auditors' review of full year results · Integration cost and synergies update · Liaison with the Remuneration Committee on targets and measures
Apr-Jun	· Circular relating to the Sale, including working capital and Financial Position and Prospects Procedures reporting · Solvency II Solvency and financial condition report · Two special meetings on the Sale Circular
Jul-Sep	· Half year results 2018 · External auditors' review of half year results · Impact on reporting of the Sale · CASS update
Oct-Dec	· Initial findings from the 2018 year end work · The Internal audit plan · Effectiveness of the External auditors · Group non-audit services provided by External auditors

The indicative proportion of time spent on the business of the Committee is illustrated below:

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

Detail of work

The focus of work in respect of 2018 is described below.

Financial reporting

Our accounts are prepared in accordance with International Financial Reporting Standards (IFRS). The Committee believes that some Alternative Performance Measures (APMs) which are also called non-GAAP measures can add insight to the IFRS reporting and help to give shareholders a fuller understanding of the performance of the business. The Committee considered the presentation of APMs and related guidance as discussed further in the 'Fair, balanced and understandable' section below.

The Committee reviewed the Group accounting policies and confirmed they were appropriate to be used for the 2018 Group financial statements. The Committee noted, in particular, that there was no significant impact on the timing of revenue recognition from the adoption of IFRS 15 Revenue from Contracts with Customers. This new standard did, however, introduce a number of new disclosure requirements.

The Committee also considered future changes to accounting standards (in particular IFRS 9 Financial Instruments and IFRS 16 Leases) and ensured that the impact of these future changes was appropriately disclosed in the financial statements. The Committee noted that the Group was eligible to defer IFRS 9 until 2020, and had opted to defer the adoption for the Group in 2018 and intends to adopt this new financial instruments standard in 2019.

The Committee reviewed the basis of accounting and in particular the appropriateness of adopting the going concern basis of preparation of the financial statements. In doing so, it considered the Group's cash flows resulting from its business activities and factors likely to affect its future development, performance and position together with related risks, as set out in more detail in the Strategic report. The Committee recommended the going concern statement to the Board.

In addition, the Committee considered the form of the viability statement and in particular whether the three-year period remained appropriate and concluded that it did. This reflects both our internal planning cycle and the timescale over which changes to major regulations and the external landscape affecting our business typically take place. In formulating the statement, the Committee used the same information it uses when considering the risks that are taken into account to determine regulatory capital. The Committee recommended the viability statement to the Board.

The Committee reviewed the Annual report and accounts 2017 and the Half year results 2018. For the half year it received written and/or oral reports from the Chief Financial Officer, subsidiary audit committee chairs or boards, the Company Secretary, the Chief Internal Auditor and the External auditors. In addition, for the 2017 year end it received a report from the Head of Group Actuarial. The Committee used these reports to aid its understanding of the composition of the financial statements, to confirm verification and compliance with reporting standards and to justify accounting judgements and estimates. Following its reviews, the Committee was able to recommend the approval of each of the reports to the Board, being satisfied that the annual and half year financial statements complied with laws and regulations and had been appropriately compiled.

We received a letter from the FRC in November 2018 informing us that they had carried out a review of our Annual report and accounts 2017 and that there were no questions or queries they wished to raise with us at this stage. The FRC asked us to note that their letter provides no assurance that our report and accounts are correct in all material respects, and that the FRC's role is not to verify the information provided but to consider compliance with reporting requirements. The FRC noted that their review is based on our report and accounts and does not benefit from detailed knowledge of our business or an understanding of the underlying transactions entered into.

Accounting estimates and judgements

The Audit Committee considered all estimates and judgements that Directors understood could be material to the 2018 financial statements. The Committee also focused on disclosure of these key accounting estimates and judgements.

In compiling a set of Group financial statements, it is necessary to make judgements and estimates about outcomes that are typically dependent on future events. This is particularly relevant to the defined benefit pension plan surplus which is inherently dependent on how long people live and future economic outcomes. Estimates also impact the value of contingent consideration (indemnities) and our assessment of the carrying value of intangible assets as discussed further below.

We considered key assumptions determining the pension fund surplus: inflation (including the gap between the retail price index and the consumer price index), mortality and the discount rate. The assumptions were compared with market data and expert opinions. Further details are set out in Note 35 of the Group financial statements.

The Aberdeen merger in 2017 was accounted for under IFRS as an acquisition by Standard Life plc of Aberdeen Asset Management PLC. This resulted in the recognition of significant intangible assets. The year end impairment review of the Aberdeen Standard Investments goodwill resulted in the recognition of an impairment of £880m. The Committee spent time at two meetings reviewing and challenging assumptions relating to future cash flow projections, the discount rate and long term growth rates. The Committee agreed it was appropriate to base the cash flow projections on the lower market levels at 31 December 2018. The Committee considered, in particular, the margin for forecasting risk in the discount rate and concluded that this was appropriate. See Note 14 for further details. The Committee also considered the Aberdeen customer relationship intangibles and concluded that for one of these intangibles an impairment of £35m was appropriate.

The Committee spent significant time discussing financial reporting issues arising from the Sale. Estimation was required in relation to the valuation of certain indemnities relating to the sale. This particularly included indemnities relating to the SLAL review of past sales practices of annuities, where the main financial risks (both positive and negative) continue to be with the Group. The Committee considered key assumptions and sensitivities to these assumptions and was satisfied that the fair value of the indemnity was appropriate at this time. Further details are disclosed in Note 41.

Also in relation to the Sale, the Group considered accounting for the 19.98% stake acquired in Phoenix. The Committee concluded that Phoenix should be considered an associate and be subject to equity accounting, notwithstanding that the holding was less than 20%. See Note 16. Acquisition accounting for this stake in Phoenix requires significant judgement and was an area of focus for the Committee in the second half of 2018. The key judgements related to the recognition and valuation of intangibles, in particular the Acquired Value of In-force business (AVIF). The Committee reviewed and challenged the assumptions, including useful lives, and concluded that these assumptions were reasonable. See Note 16. Further, the carrying value of the investment in Phoenix at 31 December 2018 was higher than the market value. Accordingly, the Committee considered whether an impairment in the investment should be recognised and concluded that, in accordance with International Accounting Standard IAS 28, this investment should be stated at its market value at
31 December 2018. The Committee noted that under IAS 28 the additional strategic value of our relationship with Phoenix is not taken into account in the impairment assessment. See Note 16.

The Sale will result in the Group incurring separation costs of c£200m in future periods. The Committee considered whether it was appropriate to provide for these costs under IAS 37 and concluded that management's judgement that a provision should only be recognised for costs for which the Group will not derive ongoing benefits, such as those relating to de-coupling and decommissioning of systems and data, was appropriate. See Note 38 for further details.

Principal risks are disclosed in the Strategic report and recommended to the Board by the Risk and Capital Committee. The Committee was satisfied that the estimates and quantified risk disclosures in the financial statements were consistent with the Strategic report. The Committee concluded that appropriate judgements had been applied in determining the estimates and that sufficient disclosure had been made to allow readers to understand the uncertainties surrounding outcomes.

Fair, balanced and understandable

The Committee supported the financial reporting team's continued review of the Annual report and accounts. A focus in 2018 was ensuring that the Strategic report appropriately explained financial performance and the implications of the Sale.

Standard Life Aberdeen's principles

To create clarity around what Standard Life Aberdeen means when it talks of being fair, balanced and understandable, a set of principles were developed, which can also act as an organisational definition for each aspect:

Fair

'We are being open and honest in the way we present our discussions and analysis, and are providing what we believe to be an accurate assessment of business and economic realities'

· The narrative contained in the report is honest and accurate

· The key messages in the narrative in the 'front half' of the report reflect the financial reporting contained in the financial statements

· The Key Performance Indicators (KPIs) results for the period are consistent with the key messages outlined in the Strategic report

Balanced

'We are fully disclosing our successes, the challenges we have faced in the period, and the challenges and opportunities we anticipate in the future - all with equal importance and at a level of detail that's appropriate for our stakeholders'

· The report presents the 'whole' story where both successes and challenges experienced during the year and expected in the future are covered

· The level of prominence we give to successes in the year versus challenges faced is appropriate

· The narrative and analysis contained in the report effectively balances the information needs and interests of each of our key stakeholder groups

Understandable

'The language we use and the way we structure our report is helping us present our business and its performance clearly - in a way that someone with a reasonably informed knowledge of financial statements and our industry would understand'

· There is a clear and easy to understand framework to the report which is effective in addressing Standard Life Aberdeen's objectives, vision, mission and values

· The layout is clear and consistent and the language used is simple and easy to understand (industry specific terms are defined where appropriate)

· There is a consistent tone across and good linkage between all sections in a manner that reflects a complete story and clear signposting to where additional information can be found

Prepare, Review and Challenge

The above principles and supporting statements are considered in each stage of the Annual report and accounts production process.

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

Activities

· An Internal Review Group (IRG) is in place which reviews the Annual report and accounts specifically from a fair, balanced and understandable perspective and provides feedback to our financial reporting team on whether it conforms to our standards. The members of the IRG are independent of the financial reporting team.

· We provided fair, balanced and understandable guidance to all key stakeholders involved in the Annual report and accounts production process

· We, as an Audit Committee, reviewed the messaging in the Annual report and accounts, taking into account material received and Board discussions during the year

· Three drafts of the Annual report and accounts 2018 were reviewed by the Audit Committee at three meetings. The Committee complemented its knowledge with that of executive management and the Internal and External auditors. An interactive process allowed each draft to embrace contributions.

· Our Annual report and accounts goes through an extensive internal verification process of all content to verify accuracy

The Committee also reviewed the use and presentation of APMs which complement the statutory IFRS results in order to give a more complete view of the performance of the business. This review considered guidelines issued by the European Securities and Markets Authority in 2016 and the thematic reviews by the FRC during 2017 and 2018. A Supplementary information section is included in the Annual report and accounts to explain why we use these metrics and to provide reconciliations of these metrics to IFRS measures where relevant. This section also provides increased transparency over the calculation of reported financial ratios.

Adjusted profit before tax is a key profit APM. The Committee considered whether the allocation of items to adjusted profit was in line with the defined accounting policies, was consistent with previous practice and was appropriately disclosed. Where there were judgemental areas, such as in relation to the merger of Aberdeen and Standard Life Investments variable remuneration schemes, the Committee specifically reviewed the proposed treatments and ensured that the Supplementary Information section provided appropriate disclosures.

We agreed to recommend to the Board that the Annual report and accounts 2018, taken as a whole, is fair, balanced and can be understood by someone with a reasonably informed knowledge of financial statements and our industry.

We are interested in feedback from stakeholders and will carefully consider any feedback received.

Prudential reporting

During 2018 the Group published its second Solvency and financial condition report (for the year ended 31 December 2017) in April, and submitted full annual Solvency II reporting to the PRA. The Committee continued to adopt a compliance approach to Solvency II reporting, drawing on work undertaken by management, Group Risk, Internal audit and the External auditors. The procedures are designed to give the Audit Committee a high degree of comfort that returns have been properly prepared. The Committee also reviewed a final draft of the Solvency and financial condition report, and following due consideration agreed to recommend the Solvency and financial condition report to the Board for approval.

In relation to actuarial assumptions used for year end 2017 Solvency II reporting, including mortality, persistency and expenses assumptions, the Committee received a report from the Chair of the Standard Life Assurance Limited (SLAL) Audit Committee which noted the consideration of these assumptions by the SLAL Audit Committee and External auditors. After due consideration of this reporting the Committee was satisfied that these assumptions were appropriate for year end Solvency II reporting.

Following the Sale, the Group is classified as an investment group for prudential supervision and is subject to CRD IV and the Capital Requirements Regulation. The Committee considered the results of CRD IV group reporting at a number of meetings and reviewed disclosures relating to CRD IV results included in the Strategic report section of the Annual report and accounts 2018, together with related assurance over these disclosures.

Internal controls

As noted earlier, the Directors have overall responsibility for the Group's internal controls and for ensuring their ongoing effectiveness. Together with the Risk and Capital Committee, the Committee provides comfort to the Board of their ongoing effectiveness.

Internal audit regularly reviews the effectiveness of internal controls and reports to the Committee and the Risk and Capital Committee.

The Group Finance function sets formal requirements for financial reporting which apply to the Group as a whole, defines the processes and detailed controls for the consolidation process and reviews and challenges reporting segment submissions. Further, the Group Finance function runs a technical review committee and is responsible for monitoring external technical developments.

The control environment around financial reporting will continue to be monitored closely.

Financial crime and whistleblowing

Staff are trained to detect the signs of possible fraudulent or improper activity and how to report concerns either directly or via our independent whistleblowing hotline. The Committee receives regular updates from the Head of Financial Crime who reports on compliance with the Group's Anti-Financial Crime and Anti-Bribery policy, and any other activities associated with financial crime, including fraud risk.

The Committee Chair is the designated whistleblower's champion and the Committee receives regular updates on the operation of the whistleblowing procedures from the Global Head of Conduct and Compliance. The anonymised reports include a summary of the incidents raised as whistleblowing, and information on developments of the arrangements in place, to ensure concerns can be raised in confidence about possible malpractice, wrongdoing and other matters.

The Committee oversees the findings of investigations and required follow-up action. If there is any allegation against the Risk or Internal audit functions, the Committee directs the investigation. The Committee is satisfied that the Group's procedures are currently operating effectively.

3.2.3 Internal audit

The Group has an Internal audit function comprising of approximately 60 people, spread across Standard Life Aberdeen's global footprint, supported by PwC as primary co-source provider. The Chief Internal Auditor reports to the Committee Chair. During the year, regular dialogue takes place, at least monthly, between the Committee Chair and the Chief Internal Auditor.

Internal audit operates in accordance with a publicly available global charter which is reviewed by the Committee every year. The overall remit of the function is to protect Standard Life Aberdeen and influence positive change by delivering independent strategic insight and confidence. Their workplan covers all areas of the Group, and is informed by risk based discussions with management, regulators, the External auditors and the Committee, as well as data analytics and testing of business processes and controls.

The Committee approves the scope and content of the annual Internal audit plan, which is updated on a rolling basis to allow Internal audit to address any emerging issues and reflect changes in the Group's activity.

The Committee receives regular reports from the Chief Internal Auditor on:

· The implementation of the approved plan and proposed changes
to it

· Key findings from completed reviews, including the impact on financial reporting processes and related applications

· The status of management's implementation of agreed improvement actions

· The assessment of the internal control environment across functions and regions, where SLA Internal Audit has responsibility. The internal control environment of material Joint Ventures and associates is not within the scope of this work.

During 2018, approximately 100 internal audit engagements were completed. The Committee considered the following reports to be particularly insightful and contributed to the strengthening of Standard Life Aberdeen's control environment:

· Key regulatory change projects such as the Markets in Financial Instruments Directive II (MiFID II), the General Data Protection Regulation (GDPR) and the Senior Manager and Certification Regime (SMCR)

· Separation audit work in relation to the Sale, specifically around data segregation

· On-boarding and integration of acquisitions in the Americas

· CASS

The Committee considers the effectiveness of Internal audit as a function annually, monitoring its independence, objectivity and resourcing in the context of the Chartered Institute of Internal Auditors' professional standards. During the year, Internal audit carried out its own internal effectiveness review as well as a comprehensive quality assurance programme that included an element of independent external challenge. These processes reported satisfactory results back to the Committee. Based on its annual effectiveness review, the Committee concluded that the function continued to be highly effective.

During the year, a managed transition was completed where the incumbent Chief Internal Auditor took on a new role within the Group. An internal candidate was appointed as Chief Internal Auditor, ensuring continuity.

In accordance with the relevant independence standards, the External auditors do not place reliance on the work of Internal audit.

3.2.4 External auditors

The appointment

The Committee has responsibility for making recommendations to the Board on the reappointment of the External auditors, determining their independence from the Group and its management and agreeing the scope and fee for the audit. Following its review of KPMG's performance, the Committee concluded that there should be a resolution to shareholders to recommend the reappointment of KPMG at the 2019 AGM.

The Committee complies with the UK Corporate Governance Code, the FRC Guidance on Audit Committees with regard to the external audit tendering timetable, the provisions of the EU Regulation on Audit Reform and the Competition and Markets Authority Statutory Audit Services Order with regard to mandatory auditor rotation and tendering. The Committee will continue to follow the annual appointment process but does not currently anticipate re-tendering the audit before 2026.

Auditor independence

The Board has an established policy (the Policy) setting out what non-audit services can be purchased from the firm appointed as External auditors. The Committee monitors the implementation of the Policy on behalf of the Board. The aim of the Policy, which is reviewed annually, is to support and safeguard the objectivity and independence of the External auditors and to comply with the FRC Ethical standards for auditors (Ethical Standards). It does this by prohibiting the auditors from carrying out certain types of non-audit services to ensure that the audit services provided are not impaired. It also ensures that where fees for approved non-audit services are significant, they are subject to the Committee's prior approval. KPMG has implemented its own policy preventing the provision by KPMG of non-audit services to FTSE 350 companies which are audit clients.

The services prohibited by the Policy are in line with the Ethical Standards and include:

· Tax services, other than in exceptional circumstances and subject to specific Audit Committee approval in line with ethical standards

· Services that involve playing any part in the management of decision-making of the audited entity

· Book-keeping and preparing accounting records and financial statements

· Payroll services

· Designing and implementing internal control or risk management procedures related to the preparation and/or control of financial information or designing and implementing financial information technology systems

· Valuation services, including valuations performed in connection with actuarial services or litigation support services

· The majority of legal services

· Services related to the audited entity's Internal audit function

· Services linked to the financing, capital structure and allocation and investment strategy of the audited entity, except providing assurance services in relation to the financial statements, such as the issuing of comfort letters in connection with prospectuses

· Promoting, dealing in, or underwriting shares in the audited entity

· The majority of human resources services

The Policy permits non-audit services to be purchased, following approval, when they are closely aligned to the external audit function and when the external audit firm's skills and experience make it the most suitable supplier.

These include:

· Audit related services, such as regulatory reporting

· Accounting consultations and audits in connection with proposed transactions

· Investment circular reporting accountant engagements

· Due diligence related to mergers and acquisitions

· Employee benefit plan audits

· Attesting to services not required by statute or regulation (e.g. controls reports)

· Consultations concerning financial accounting and reporting standards not relating to the audit of the Group's financial statements

· Other reports required by a regulator or assurance services relating to regulatory developments

· Sustainability audits/reviews

· Auditing IT security where this does not extend to designing and implementing internal control or risk management procedures

KPMG has reviewed its own independence in line with these criteria and its own ethical guideline standards. KPMG has confirmed to the Committee that following its review it is satisfied that it has acted in accordance with relevant regulatory and professional requirements and that its objectivity is not impaired.

Having considered compliance with our policy and the fees paid to KPMG, the Committee is satisfied that KPMG has remained independent.

Audit and non-audit fees

The Group audit fee payable to KPMG in respect of 2018 was £4.7m (2017: KPMG £5.7m), with the reduction reflecting the impact of the Sale. In addition £1.7m (2017: £1.9m) was incurred on audit related assurance services. Fees for audit related assurance services are primarily in respect of client money reporting and the half year review. The Committee is satisfied that the audit fee is commensurate with permitting KPMG to provide a quality audit and monitors regularly the level of audit and non-audit fees. Non-audit work can only be undertaken if the fees have been approved in advance in accordance with the Policy for non-audit fees. Unless fees are clearly small (which we have defined as less than £75,000), the approval of the whole Committee is now required.

Non-audit fees amounted to £1.8m (2017: £0.4m) of which £1.6m (2017: £0.3m) related to other assurance services. Other assurance services in 2018 primarily relate to control assurance reports (£0.7m), in particular those provided to Aberdeen Standard Investments' clients, which are closely associated with audit work, reporting accountant fees relating to the Sale (£0.5m), and assurance reporting relating to fund mergers where KPMG are the auditors of the relevant funds (£0.3m). The External auditors were considered the most suitable supplier for these services taking into account the alignment of these services to the work undertaken by external audit and the firm's skill sets. The Committee also monitors audit and non-audit services provided to non-consolidated funds and were satisfied fees for those services did not impact auditor independence.

Further details of the fees paid to the External auditors for audit and non-audit work carried out during the year are set out in Note 7 of the Group financial statements.

The ratio of non-audit fees to audit and audit related assurance fees is 28% (2017: 5%). The total of audit related assurance fees (£1.7m) and non-audit fees (£1.8m) is £3.5m, and the ratio of these audit related assurance fees and non-audit fees to audit fees is 75% (2017: 40%). As noted above the audit related assurance fees are primarily fees in relation to required regulatory reporting, where it is normal practice for the work to be performed by the external auditor.

The Committee is satisfied that the non-audit fees do not impair KPMG's independence.

Audit quality and materiality

The Committee places great importance on the quality and effectiveness of the External audit. The Senior Statutory Auditor is Jonathan Mills, who is our lead audit partner. The Committee looks to the audit team's objectivity, professional scepticism, continuing professional education and its relationship with management, all in the context of regulatory requirements and professional standards. Specifically:

· The Committee discussed the scope of the audit prior to its commencement

· The Committee reviewed the annual findings of the Audit Quality Review (AQR) team of the FRC in respect of KPMG's audits. We requested a formal report from KPMG of the applicability of the findings to Standard Life Aberdeen both in respect of generally identified failings and failings specific to individual audits. The Chair of KPMG presented to the Committee in person. The AQR team also provided a report following its inspection of KPMG's audit of Standard Life Aberdeen for the year ended 31 December 2017. The Committee Chair discussed the specific findings of the AQR team with KPMG. We were satisfied that the KPMG audit was effective overall and that any identified areas for further improvement had been addressed or had appropriate action plans in place.

· The Committee approved a formal engagement with the auditor and agreed its audit fee

· The Committee Chair had at least monthly meetings with our lead audit partner to discuss Group developments

· The Committee received an update of KPMG's work, compliance with independence and its findings at nearly every meeting

· There was a detailed interview by the Committee Chair with our lead audit partner on the subject of the work undertaken to support their opinion on the financial statements and the consistency of the remainder of the Annual report and accounts with their work

· The Committee reviewed and discussed the audit findings including audit differences prior to the approval of the financial statements. See the discussion on materiality in the paragraph below for more detail

· Additional work was again undertaken on Solvency II reporting and the Committee also reviewed separate papers from KPMG covering this specific work

We have discussed the accuracy of financial reporting (known as materiality) with KPMG both as regards accounting errors that will be brought to the Committee's attention and as regards amounts that would need to be adjusted so that the financial statements give a true and fair view. Differences can arise for many reasons ranging from deliberate errors (fraud etc.) to good estimates that were made at a point in time that, with the benefit of more time, could have been more accurately measured. Overall audit materiality has been set at £32m (2017: £38m). This equates to approximately 4.8% of normalised profit before tax. This is within the range in which audit opinions are conventionally thought to be reliable. To manage the risk that aggregate uncorrected differences become material, we supported that audit testing would be performed to a lower materiality threshold for individual reporting units. Further, KPMG agreed to draw the Committee's attention to all identified uncorrected misstatements greater than £1.6 million (2017: £2m). The aggregated net uncorrected misstatements were approximately £20m which was less than audit materiality. The gross differences were attributable to various individual components of the consolidated income statement and balance sheet. No audit difference was material to any line item in either the income statement or the balance sheet. Accordingly, the Committee did not require any adjustment to be made to the financial statements as a result of the audit differences reported by the External auditors.

KPMG has confirmed to us that the audit complies with their independent review procedures.

3.3 Risk and Capital Committee report

The Risk and Capital Committee supports the Board in providing effective oversight and challenge of risk management and the use of capital across the Group.

Dear Shareholder

I am pleased to present my report as Chair of the Risk and Capital Committee.

Activities related to the Sale formed a significant part of the Committee's work this year. In overall terms, this transaction has significantly reduced the risk profile and therefore the capital requirements of the Group, but the transaction itself was also risky in terms of the amount of work required to separate the business and the transitional arrangements. The Committee therefore assessed the transaction from a risk and capital perspective to advise the Board on the impact of the transaction. This involved the Committee providing regular review and challenge of the key risks and capital implications associated with the transaction and included reviewing assessments:

· In advance of announcing externally the intention to sell the UK and European insurance business

· To support disclosure of the Risk Factors in the Circular

· On the anticipated operational readiness of the business on 'Day One' following completion of the transaction

During 2018 the overall risk environment for the Group has been at an elevated level given the combination of the integration activity following the 2017 merger of Standard Life plc and Aberdeen Asset Management PLC, and the additional risks arising from the Sale, together with the ongoing level of regulatory change. The Committee kept a close eye on the most significant risks and ensured that these were given good visibility at the Board.

In addition to this, the Committee has continued to provide oversight and challenge in respect of the principal risks faced by the business during 2018. This included:

· The risks involved in the delivery of significant regulatory change in response to the second Markets in Financial Instruments Directive (MiFID II) and the General Data Protection Regulation (GDPR)

· The management of operational pressures arising from the delivery of integration and strategic change following the 2017 merger of Standard Life plc and Aberdeen Asset Management PLC

· The documentation of the first Internal Capital Adequacy Assessment Process (ICAAP) for the combined asset management business which operates under the brand Aberdeen Standard Investments

· The political change risk arising from uncertainty regarding the nature and form of the UK's exit from the European Union

· Process execution risks within the asset management business given the potential for periods of heightened market volatility to result in operational errors

Further details on these and other activities carried out by the Committee during the year can be found in the report that follows.

Martin Pike

Chair, Risk and Capital Committee

Membership

All members of the Risk and Capital Committee are independent non-executive Directors. The table below reflects the composition of the Committee and the members' attendance both pre and post the merger:

Member	Attendance
Martin Pike, Chair	10/10
John Devine	8/10
Melanie Gee	10/10
Former member
Julie Chakraverty	3/5
Gerhard Fusenig	9/10

Cathleen Raffaeli was appointed to the Committee on 1 January 2019. The Committee meetings are attended by the Chief Risk Officer. Others invited to attend on a regular basis include the Chair, the Co-Chief Executives, the Chief Financial Officer, the Chief Investment Officer and the Chief Internal Auditor as well as the External auditors.

Regular private meetings of the Committee's members have been held during the year providing an opportunity to raise any issues or concerns with the Chair of the Committee. The Committee's members have also held regular private meetings with the Chief Risk Officer and the Chief Internal Auditor and have been given additional access to management and subject matter experts outside of the Committee meetings in order to support them in gaining an in-depth understanding of specific topics.

Key responsibilities

Our vision to build a world-class investment company results in exposure to a range of risks and uncertainties. Understanding and actively managing the sources and scale of these risks and uncertainties are key to fulfilling this vision.

The Risk and Capital Committee helps support this by advising the Board and providing oversight and challenge on:

· The Group's risk appetite, material risk exposures and the impact of these on the levels and allocation of capital

· The structure and implementation of the Group's Enterprise Risk Management (ERM) framework and its suitability to react to forward-looking issues and the changing nature of risks

· Changes to the risk appetite framework and quantitative risk limits

· Risk aspects of major investments, major product developments and other corporate transactions

· Regulatory compliance across the Group

Further detail on the work performed in each of these areas is set out in the report below.

The Committee's work in 2018

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.

The Committee operates a rolling agenda and uses each meeting to consider a range of recurring items as well as other items that are more ad hoc and/or more forward-looking in nature.

One of the recurring items that is reviewed and discussed at each meeting is the Views on Risk report which provides a holistic assessment from the Chief Risk Officer of the key risks and uncertainties faced by the Group's businesses and the actions being taken to manage these. In 2018 this report provided the Committee with a comprehensive view of the key risks and uncertainties and allowed the Committee to review and challenge risks including those relating to flows and performance, the delivery of change, liquidity and capital, operational risk, conduct risk and regulatory compliance.

The Committee's agenda also includes the regular review of minutes from the Standard Life Aberdeen plc Enterprise Risk Management Committee and minutes from those risk committees comprising non-executives that operate in Standard Life Aberdeen plc's directly-held subsidiaries.

During 2018 the risk committee minutes reviewed by the Committee included minutes from meetings of the Aberdeen Asset Management Life and Pensions Limited risk committee and the Standard Life (Asia) Limited risk committee. Prior to the Sale in August the Committee reviewed the minutes of the SLAL risk and capital committee. On completion of the sale, Standard Life Savings Limited became a directly held subsidiary of Standard Life Aberdeen plc and, since then, the Committee has reviewed the minutes from the Standard Life Savings Limited and Elevate Portfolio Services Limited risk committees.

Regular reporting was also presented to the Committee during the year regarding the Group's internal risk and capital assessment. This covered the ICAAP performed in connection with the requirements of the Capital Requirements Directive following the Sale and, prior to this, the Group's Own Risk and Solvency Assessment (ORSA) performed in connection with Solvency II requirements. This supported the Committee in understanding changes to the Group's risk profile and capital position over the course of the year and allowed the Committee to challenge management's assessment of risks and to oversee key actions being taken to manage these risks.

In addition to reviewing these recurring items and undertaking work in connection with the Sale, the Committee provided oversight of a broad range of topics in 2018. This included consideration of:

Jan-Mar

· Status of compliance with MiFID II

· Plans to deliver GDPR compliance

· Advice to be provided to the Remuneration Committee regarding the delivery of performance in 2017 relative to risk appetites

· Findings included in the 2017 Internal Controls Report issued for Standard Life Investments Limited and Aberdeen Asset Management PLC

· Plans for testing, assurance reviews, business risk reviews and validation activity to be performed in 2018

Apr-Jun

· The due diligence and key risks associated with the planned acquisition of ETF Securities (US) LLC and its US affiliates

· The risk profile of suppliers and the approach adopted in managing supplier risk

· The state of compliance on implementation of GDPR

· The semi-annual update on cyber risk and security

· Currency risks and the strategy followed in managing and monitoring these risks

· The operation of activities related to the investment process and performance

· Planned enhancements to the framework for escalating risk items to the Remuneration Committee

· Actions taken to enhance the conduct risk framework

Jul-Sep

· Risk assessment of the Sale, the Transitional Services Agreement and the proposed ongoing relationship with Phoenix

· Resources to support the management of supplier risk

· Ongoing activity to support GDPR compliance

· The remit and resources of the cyber risk management function

· Proposals to ensure effective regulatory compliance for the Advice and Platforms business following sale of the UK and European insurance business

· Plans for the transformation of risk and compliance processes

Oct-Dec

· The Group's current and projected capital position following the transition to reporting under Capital Requirements Directive IV (CRD IV)

· The Aberdeen Standard Investments ICAAP report

· Results from the 2018 stress and scenario testing programme

· The remit and resources of the investment risk oversight function

· The potential impacts of a disorderly Brexit and plans to mitigate the risks arising from this

· Progress in the management of IT obsolescence risk

· The management of conflicts of interest in Aberdeen Standard Investments

· The semi-annual update on cyber risk and security

· An update on data privacy and the management of this in 2018

· Actions taken to enhance the conduct risk framework

· Proposed changes to the risk appetite framework

· Risks associated with the 2019 - 2021 business plan

After each meeting, the Committee Chair reports to the Board, summarising the key points from the Committee's discussions and any specific recommendations.

Risk appetites, exposures and capital

The risk appetite framework provides a common framework to enable stakeholders to communicate, understand and control the types and levels of risk that the Board is willing to accept in pursuing its strategy and business plan objectives and the capital that is required in this regard.

The Committee has continued to support the Board through monitoring exposures against tolerances and appetites throughout the year. This included, prior to announcing the decision to sell the UK and European insurance business, reviewing the likely impact on the Group's risk profile and capital requirements of the proposed transaction.

In May the Committee reviewed proposals from management to revise the tolerance for operational risk in light of the increased level of change being undertaken by the business in view of the ongoing integration of the asset management business and taking into account the preparation for the Sale. Following completion of the transaction, proposals to rescale this tolerance in line with the refocused business model were presented by management for consideration by the Committee. In both cases the Committee supported management's proposals and advised the Board accordingly.

At its December meeting the Committee reviewed and challenged proposals presented as part of the annual review of the risk appetite framework. This included reviewing proposed updates to ensure that the Group's risk appetites and risk limits appropriately reflected changes to the risk profile in view of the ongoing transformation of the business. The Committee recommended and the Board subsequently approved the changes that were presented.

The Committee has continued to receive regular reporting through the Views on Risk report on financial exposures, conduct and operational risks, and the Group's capital position. Through reviewing the relevant dashboards, commentaries and associated management information, the Committee has monitored risks relative to applicable quantitative and qualitative appetites and views on the resilience of the capital position under current and stressed conditions.

The Views on Risk report also includes dashboards covering financial crime and regulatory risk. These provide the Committee with status updates on the financial crime framework, addressing risks related to money laundering, terrorist financing, market abuse, fraud and bribery and corruption, and the regulatory outlook. Environmental, social and governance risks are actively managed within the business and updates on this are also included within the report. Using this material, the Committee is able to oversee, challenge and advise the Board on the Group's risk appetite, material risk exposures and the impact of these on the levels and allocation of capital.

Key items that the Committee discussed during the year in this context included:

· The Sale and the change in the Group's capital requirements moving from the Solvency II to CRD IV regime

· Risks associated with outflows and investment performance

· Risks relating to the status of the Group's Brexit preparations and the possibility of a disorderly exit from the EU

· The ICAAP report produced for the combined ASI business

· Enhancements to the Risk and Compliance function through the transformation programme

As highlighted in the table on page 71, we received a number of one-off reports during the year which directly supported the Committee in our oversight of risk appetites, exposures and capital.

Stress testing and scenario analysis performed in 2018 also supported the Committee in understanding, monitoring and managing the risk and capital profile of the business under stressed conditions. This provided a forward-looking assessment of resilience to potentially significant adverse events affecting key risk exposures and comprised:

· Univariate stresses - looking at stresses to financial and demographic risks in isolation

· Combined stresses - looking at simultaneous stresses to a combination of financial and demographic risks

· Reverse stress testing - considering circumstances or severe events, including as a result of operational, conduct or reputational risks, that have the potential to cause the business to become unviable

· Tail risk analysis - exploring the possible sequential development of a low likelihood but high impact scenario

The Committee reviewed the results of the stress testing and scenario analysis that was performed. This included reviewing the results of three scenarios which were explored as part of the reverse stress testing exercise: the breakdown of strategic partnerships and client relationships; the failure of multiple key projects; and the rise of populism and protectionism. The latter scenario was globally focused but included consideration of both a 'hard' Brexit and a 'no-deal' Brexit. At the time of the exercise, although a 'no-deal' Brexit was considered an unlikely outcome, the work performed prompted an increased focus on understanding the risks to the business of such a scenario and the options available to mitigate these risks.

The Committee also reviewed the results of the tail risk analysis performed for two scenarios. The scenarios considered were a successful cyber-attack on a critical third party supplier and the failure of IT software which meant the business was unable to operate within normal timeframes and resulted in reputational damage as the business was unable to provide the usual functions expected by clients and customers.

Based on the results of the stress testing and scenario analysis, the Committee concluded there was no requirement for the business to reduce its risk exposures and that the business was resilient to extreme events as a result of the robust controls, monitoring and triggers in place to identify events quickly and the range of management actions available to help mitigate their effects.

The Committee also provided oversight of risk exposures and projected capital requirements in the context of the business planning and reforecasting process. This included reviewing reporting produced as part of the mid-year reforecasting exercise and reporting produced in December as part of the annual business planning process.

Enterprise Risk Management (ERM) framework

During the year the business took the opportunity to refresh the ERM framework used to identify, assess, control and manage the Group's risks. Details of the proposed changes were presented to the Committee to allow the Committee to consider the structure of the framework and its suitability for identifying, assessing and managing current and new risk types and for reacting to forward-looking risk issues and the changing nature of risks. The Committee supported the proposed changes and considered they would help drive greater risk awareness and accountability across the business.

The changes that were introduced aligned risk and compliance practices to the broader corporate transformation being undertaken, including the introduction of the new operating model, and reflected the impact of the Group moving to the CRD IV capital regime and regulatory developments regarding senior management accountability.

The Committee has continued to obtain assurance regarding the operation of the ERM framework through its review of regular content within the Views on Risk report. In particular we have used our review of the various risk and capital dashboards, including the consolidated dashboard on key conduct risk indicators, to understand the Group's risk profile and the effectiveness of the framework in supporting the management of these risks.

Following the refresh of the ERM framework the Committee now receives reporting from the Risk and Compliance function on the results of the quarterly risk management survey of regional and functional executives which is used to identify the key risks facing the business. The completion of this survey along with subsequent discussion of the results at ERMC meetings is noted as helping to drive greater risk awareness and accountability. Furthermore, through reviewing the results of the survey, the Committee has been able to ensure there is appropriate focus on these key risks facing the business.

The Committee specifically monitors risk control processes through reviewing the results of quarterly policy compliance reporting and updates regarding action plans raised in response to risk events which are included within the Views on Risk report.

Exceptions-based reporting is provided to the Committee through the Views on Risk report setting out any matters of significance in respect of the results of quarterly policy compliance reporting and actions being taken in response to risk events. These two items also support the Committee in performing its oversight of the ERM framework.

The Committee also receives regular reporting from the Chief Internal Auditor which provides an independent assessment of the internal control environment relating to the operation of the framework.

Regulatory compliance and reporting

The Committee reviews and assesses regulatory compliance plans detailing the planned schedule of monitoring activities to be performed by the Risk and Compliance function to ensure there is appropriate coverage. Regular updates on key findings from regulatory compliance activity and progress against the plan were reported to the Committee through the Views on Risk report.

The business has once again faced a busy regulatory agenda in 2018 which included responding to the introduction of new regulations as a result of MiFID II and GDPR. In light of the significance of these regulations, the Committee received regular updates on the state of business readiness in advance of these regulations being implemented.

As a Committee we have closely monitored regulatory developments to understand and anticipate potential implications for the Group and the wider financial services sector. This included monitoring regulatory developments regarding statements from the European Securities and Markets Authority, the FCA and other European regulators in advance of Brexit. In particular the Committee paid close attention to statements regarding plans for the FCA and European regulators to put in place Memorandums of Understanding that would mitigate the risk of the Group's EU subsidiaries being unable to delegate asset management services to the UK in the event of a 'no-deal' Brexit.

The Committee's monitoring of regulatory developments also included monitoring the FCA's announcements in connection with their Asset Management Market Study, in particular the potential impacts this could have on fund charging across the industry.

Corporate and strategic risk reporting

The Committee has continued to support the Board in considering the risk aspects of proposed material corporate transactions.

In 2018 the Committee's activities included reviewing risk assessments produced in advance of the announcement of the Sale. Based on the assessments presented, the Committee was satisfied that the degree of risk presented by the proposed transaction was acceptable and that the transaction was expected to result in de-risking the Group. As part of the advice provided to the Board, the Committee highlighted the key risks associated with the transaction and the possible impacts of Brexit on the transaction.

The Committee subsequently considered the proposed content to be included in the Risk Factors that were disclosed in the Circular produced to support the Sale and related reporting provided to the PRA on risks arising from the transformation programme.

Prior to the final decision being taken to conclude the Sale, the Committee considered the anticipated operational readiness of the business for 'Day One' following completion of the transaction. The Committee noted the risks associated with operational readiness and the associated mitigants that were in place. Key items discussed by the Committee in this context included data segregation, cyber risk, conduct risk and regulatory matters. Based on these discussions and the material presented the Committee was able to confirm its support for the proposed deal completion date.

During the year the Committee also reviewed assessments relating to the proposed acquisition of ETF Securities (US) LLC and its US affiliates. This included considering the due diligence that had been performed and the key risks associated with the transaction.

The Committee also received reports (previously called Business Risk Reviews) on other aspects of corporate and strategic risk. These reports provided the Committee with an independent assessment from the Risk and Compliance function of aspects of the business that could have a material impact on long-term profitability or delivery of strategy, or that could introduce a material new risk. One such report presented to the Committee in 2018 concerned the product development process in the asset management business, recognising the importance of this process in delivering long-term value for clients. In particular this supported the Committee in understanding the process around prioritising activity, the management of seed capital and resourcing in the context of the implementation of strategic innovation.

Governance arrangements

The Committee has continued to rely on the work of those risk committees comprising non-executives operating in subsidiary companies to provide oversight and challenge of risks within those subsidiaries. The Committee receives updates and minutes from these committees in order to maintain awareness and oversight of risks across the Group. The Committee also reviews the terms of reference for these committees in order to ensure their remit is suitably aligned.

As previously noted in this report, prior to the Sale in August the Committee received minutes from the SLAL risk and capital committee. On completion of the Sale, Standard Life Savings Limited became a directly held subsidiary of Standard Life Aberdeen plc and, since then, the Committee has received minutes from the Standard Life Savings Limited and Elevate Portfolio Services Limited risk committees.

The Committee has also received reporting during the year from the risk committees in place for Aberdeen Asset Management Life and Pensions Limited and Standard Life (Asia) Limited, the latter committee having been established in 2018.

In addition to the Committee reviewing reporting from the subsidiary risk committees, arrangements also exist for the Committee's Chair to attend those subsidiary risk committees.

During the year the Committee once again provided advice to the Remuneration Committee regarding the delivery of performance in the context of incentive packages. In particular, the Committee considered whether performance had been delivered in a manner that was consistent with the Group's strategy, risk appetite and tolerances, and capital position. The provision of this advice helps ensure the Group's overall remuneration practices are aligned to the business strategy, objectives, culture, values and long-term interests of the Group and that individual remuneration is consistent with and promotes effective risk management.

Committee effectiveness

The Committee reviews its remit and effectiveness annually. In 2018 this was carried out by external consultants IBE who produced an independent report on the operation and effectiveness of the Committee.

The report on the operation and effectiveness noted the role of the Committee in supporting the Board and recognised that risk was high on the agenda. The review confirmed that the Committee's agenda and composition was fit for purpose, highlighting the need for this to be kept under review as business transformation progressed following the Sale.

For 2019, the review highlighted an expectation that to continue to operate effectively the Committee would need to remain focused on key items including MiFID and GDPR compliance as well as cyber and data risk. Plans are already underway to enhance the Committee's coverage of these items in 2019.

4. Directors' report

The Directors present their annual report on the affairs of the Standard Life Aberdeen group of companies (the Group), together with the audited International Financial Reporting Standards (IFRS) consolidated financial statements for the Group, financial information for the Group and financial statements for Standard Life Aberdeen plc (the Company) for the year ended 31 December 2018.

Reporting for the year ended 31 December 2018

The Company is the holding company of the Group. You can find out about the relevant activities of the Company's principal subsidiary undertakings and their overseas branches in the Strategic report. During 2018, the Company's principal undertakings operated branches in Europe, together with Hong Kong and India.

The main trends and factors likely to affect the future development, performance and position of the Group are outlined in the Co-Chief Executives' overview section of the Strategic report. Reviews of the operating and financial performance of the Group for the year ended 31 December 2018 are given in the Strategic report.

The Chairman's statement, the Directors' responsibility statement and the Corporate governance statement form part of the Directors' report. The Corporate governance statement is submitted by the Board.

Using the IFRS basis, the results of the Group are presented in the Group financial statements. A detailed description of the basis of preparation of the IFRS results (including adjusted profit) is set out in the Group financial statements section. More information about the Group's use of derivative financial instruments and related financial risk management matters can be found in Note 21 and Note 39 to the Group financial statements.

This report was prepared by the executive team together with the Board and forms part of the management report.

Dividends

The Board recommends paying a final dividend for 2018 of 14.30p per ordinary share. This will be paid on 21 May 2019 to shareholders whose names are on the Register of members (the Register) at the close of business on 12 April 2019.

The total payment is estimated at £345m for the final dividend and together with the interim dividend of 7.30p per share totalling £214m paid on 25 September 2018, the total dividend for 2018 will be 21.60p per share (2017: 21.30p) totalling £559m (2017: £627m).

Share capital

You can find full details of the Company's share capital, including movements in the Company's issued ordinary share capital during the year, in Note 26 to the Group financial statements. You can also find an analysis of registered shareholdings by size, as at 31 December 2018, in the Shareholder information section.

In May 2018 a Circular was published, giving details of the proposed sale of Standard Life Assurance Limited to Phoenix Group. The Circular also gave details of a proposed return of capital to shareholders via a B Share Scheme, and a share buyback programme. Following completion, approval was given to return up to £1.75 billion in aggregate to shareholders, with the first £1.0 billion to be returned by way of the B Share Scheme and the remaining up to £750 million to be returned by way of the share buyback programme. Authority for the Company to purchase its own shares had previously been granted at the Annual General Meeting (AGM) but was superseded by the authority granted at the general meeting.

On 25 June 2018, shareholders voted at a general meeting to approve a return of capital of 33.99 pence per share via a B Share Scheme, along with an associated share capital consolidation. Shareholders received 7 new ordinary shares of 13 61/63 pence for every 8 existing ordinary shares of 12 2/9 pence held at 5pm on 19 October 2018. The total number of shares in issue at 6pm on Friday 19 October 2018 was 2,941,738,848 ordinary shares of 12 2/9 pence each. The total number of shares in issue at the opening of markets on Monday 22 October 2018 was 2,574,021,492 (new) ordinary shares of 13 61/63 pence each.

As a result, 2,941,738,848 B shares of 33.99 pence each were allotted and issued on 22 October 2018. No application was made to the UK Listing Authority or to the London Stock Exchange respectively, for any of the B Shares to be admitted to the Official List or to trading on the London Stock Exchange's main market for listed securities, nor were the B Shares listed or admitted to trading on any other recognised investment exchange. The B Shares were redeemed on 24 October 2018 for 33.99 pence per B Share. All B Shares were redeemed and cancelled.

On 9 August 2018 the Company announced the commencement of an initial share repurchase programme of the Company's ordinary shares up to a maximum aggregate consideration of £175m. This was followed by an announcement on 20 November 2018 of a further share repurchase programme up to a maximum aggregate consideration of £200m. The purpose of this programme is to reduce the share capital of the Company. All shares purchased have been cancelled.

As at 31 December 2018, there were 2,529,412,224 ordinary shares in issue held by 101,181 registered members. The Standard Life Aberdeen Share Account (the Company-sponsored nominee) held 648,081,141 of those shares on behalf of 1,022,001 participants. No person has any special rights of control over the Company's share capital and all issued shares are fully paid.

During the year, and until the date this report was signed, the Company received the following notifications in respect of major shareholdings and major proportions of voting rights in accordance with the Disclosure Guidance and Transparency Rules of the Financial Conduct Authority (FCA). The companies detailed below notified their positions.

Shareholder	Date of transaction	Type of transaction	Number of voting rights following the transaction	Percentage of voting rights following the transaction
Lloyds Banking Group plc	8 June 2018 (pre share consolidation)	Disposal	-	Below 3%
Mitsubishi UFJ Trust and Banking Corporation	8 February 2019	Decrease of common shares outstanding by the issuer	150,500,406	6.002%
Mitsubishi UFJ Trust and Banking Corporation	15 February 2019	Disposal	-	Below 3%

In accordance with the terms of the Standard Life Employee Trust Deed, the trustees waived all entitlements to current or future dividend payments for shares they hold.

Similarly, in accordance with the terms of The Aberdeen Asset Management Employee Benefit Trust 2003, the trustees waived all entitlements to current or future dividend payments for shares they hold other than dividends payable on any shares held by the trustee as nominee for any other person.

The trustees of the Standard Life Aberdeen (Employee) Share Plan voted the appropriate shares in accordance with any instructions received from participants in the plan.

Restrictions on the transfer of shares and securities

Except where listed below, there are no specific restrictions on the size of a holding or on the transfer of shares. Both are governed by the general provisions of the Company's articles of association (the Articles) and current legislation and regulation.

You can also obtain a copy from Companies House or by writing to the Company Secretary at our registered address (details of which can be found in the Contact us section). The Articles may only be amended by a special resolution passed by the shareholders.

You can read the Articles on our website www.standardlifeaberdeen.com/annualreport

The Board may decline to register the transfer of:

· A share that is not fully paid

· A certificated share, unless the instrument of transfer is duly stamped or duly certified and accompanied by the relevant share certificate or other evidence of the right to transfer, is in respect of only one class of share and is in favour of a sole transferee or no more than four joint transferees

· An uncertificated share, in the circumstances set out in the uncertificated securities rules (as defined in the Articles) and, in the case of a transfer to joint holders, where the number of joint holders to whom the share is to be transferred does not exceed four

· A certificated share by a person with a 0.25 per cent interest (as defined in the Articles) in the Company, if that person has been served with a restriction notice under the Articles, after failing to provide the Company with information about interests in those shares as set out in the Companies Act 2006 (unless the transfer is shown to the Board to be pursuant to an arm's length sale under the Articles)

These restrictions are in line with the standards set out in the FCA's Listing Rules and are considered to be standard for a listed company.

The Directors are not aware of any other agreements between holders of the Company's shares that may result in restrictions on the transfer of securities or on voting rights.

Rights attached to shares

Subject to applicable statutes, any resolution passed by the Company under the Companies Act 2006 and other shareholders' rights, shares may be issued with such rights and restrictions as the Company may decide by ordinary resolution, or (if there is no such resolution or if it does not make specific provision) as the Board may decide. Subject to the Articles, the Companies Act 2006 and other shareholders' rights, unissued shares are at the disposal of the Board.

Every member and duly appointed proxy present at a general meeting or class meeting has one vote on a show of hands, provided that where a proxy is appointed by more than one shareholder entitled to vote on a resolution and is instructed by one shareholder to vote 'for' the resolution and by another shareholder to vote 'against' the resolution, then the proxy will be allowed two votes on a show of hands - one vote 'for' and one vote 'against'. On a poll, every member present in person or by proxy has one vote for every share they hold. For joint shareholders, the vote of the senior joint shareholder who tenders a vote, in person or by proxy, will be accepted and will exclude the votes of the other joint shareholders. For this purpose, seniority is determined by the order that the names appear on the Register for joint shareholders.

A member will not be entitled to vote at any general meeting or class meeting in respect of any share they hold if any call or other sum then payable by them for that share remains unpaid or if they have been served with a restriction notice (as defined in the Articles) after failing to provide the Company with information about interests in those shares required to be provided under the Companies Act 2006.

The Company may, by ordinary resolution, declare dividends up to the amount recommended by the Board. Subject to the Companies Act 2006, the Board may also pay an interim dividend, and any fixed rate dividend, whenever the financial position of the Company, in the opinion of the Board, justifies its payment. If the Board acts in good faith, it is not liable to holders of shares with preferred or 'pari passu' rights for losses that arise from paying interim or fixed dividends on other shares.

The Board may withhold payment of all or part of any dividends or other monies payable in respect of the Company's shares from a person with a 0.25 per cent interest (as defined in the Articles) if that person has been served with a restriction notice (as defined in the Articles) after failure to provide the Company with information about interests in those shares, which is required under the Companies Act 2006.

Subject to the Companies Act 2006, rights attached to any class of shares may be varied with the written consent of the holders of not less than three-quarters in nominal value of the issued shares of that class (excluding any shares held as treasury shares). These rights can also be varied with the sanction of a special resolution passed at a separate general meeting of the holders of those shares. At every separate general meeting (except an adjourned meeting) the quorum shall be two persons holding, or representing by proxy, not less than one-third in nominal value of the issued shares of the class (calculated excluding any shares held as treasury shares).

A shareholder's rights will not change if additional shares ranking 'pari passu' with their shares are created or issued - unless this is expressly provided in the rights attaching to their shares.

Power to purchase the Company's own shares

At the 2018 Annual General Meeting (AGM), shareholders granted the Directors limited powers to:

· Allot ordinary shares in the Company up to a maximum aggregate amount of £121,370,072

· Disapply, up to a maximum total nominal amount of £18,205,510 of its issued ordinary share capital, shareholders' pre-emption rights in respect of new ordinary shares issued for cash

· Make market purchases of the Company's ordinary shares up to a maximum of 297,908,360 of its issued ordinary shares

As noted earlier in this share capital section, this authority was subsequently superseded by the authority granted at the general meeting held on 25 June 2018. Under the buyback programme, the Company purchased 37,983,529 of its ordinary shares of 12 2/9 pence each, paying an aggregate amount of £119,860,054. As at the time of the share capital consolidation in October, the percentage of share capital represented by the purchased shares was approximately 1.29%. Following the share consolidation, the Company purchased 44,609,556 of its ordinary shares of 13 61/63 pence, paying an aggregate amount of £115,040,275. As at 31 December 2018, the percentage of share capital represented by the purchased shares was approximately 1.8%.

Significant agreements

Certain significant agreements to which the Company, or one of its subsidiaries, is party entitle the counterparties to exercise termination or other rights in the event of a change of control of the Company. These agreements are noted in the paragraphs below.

Credit Facility - under a £400m revolving credit facility between the Company and the banks and financial institutions named therein as lenders (Lender) dated 22 May 2015 (the Facility), in the event that (i) any persons or group of persons acting in concert, gain control of the Company, then any Lender may elect within a prescribed time frame to cancel its outstanding commitment under the Facility and declare its participation in all outstanding loans, together with accrued interest and all amounts accrued immediately due and payable, whereupon the commitment of that Lender under the Facility will be cancelled and all such outstanding amounts will become immediately due and payable.

China - under a joint venture agreement dated 12 October 2009 (as amended) between the Company and Tianjin TEDA International Holding (Group) Co. Limited (TEDA), pursuant to which the Company holds its interest in Heng An Standard Life Insurance Company Limited (Heng An Standard Life), upon a change of control of the Company, TEDA has the right to terminate the venture and to purchase, or nominate a third party to purchase, the Company's shares in Heng An Standard Life for a price determined in accordance with the agreement.

A number of other agreements contain provisions that entitle the counterparties to exercise termination or other rights in the event of a change of control of the Company. However, these agreements are not considered to be significant in terms of their likely impact on the business of the Group as a whole.

The Directors are not aware of any agreements with any employee that would provide compensation for loss of office or employment resulting from a takeover. The Company also has no agreement with any Director to provide compensation for loss of office or employment resulting from a takeover.

Appointment and retirement of Directors

The appointment and retirement of Directors is governed by the Articles, the Companies Act 2006, the UK Corporate Governance Code and related legislation.

The UK Corporate Governance Code recommends that directors of FTSE 350 companies should stand for election every year. During the year, Julie Chakraverty, Akira Suzuki and Lynne Peacock retired as Directors on 29 May 2018, and on 31 December 2018 Gerhard Fusenig and Kevin Parry resigned as Directors and Sir Gerry Grimstone resigned as Chairman and Director. Simon Troughton and Richard Mully will stand down as Directors at the conclusion of the 2019 AGM and Bill Rattray will stand down on 31 May 2019.

Cathleen Raffaeli was appointed to the Board on 1 August 2018. Sir Douglas Flint was appointed to the Board on 1 November 2018 and was appointed Chairman with effect from 1 January 2019. Having been appointed since the last AGM, Cathleen Raffaeli and Sir Douglas will stand for election at the 2019 AGM. It is intended that Stephanie Bruce will succeed Bill Rattray as CFO on 1 June 2019. Whilst Stephanie would not take up her role until then, the Board felt it was important that shareholders were given the opportunity to vote on her election at this year's AGM.

All remaining Directors as at the date of the AGM will retire at the 2019 AGM and, if they wish to continue in office, will stand for re-election.

The powers of the Directors can also be found in the Articles.

Directors and their interests

The Directors who served during the year were:

Sir Douglas Flint¹ (Chairman)		Gerhard Fusenig²
Sir Gerry Grimstone²		Melanie Gee
Keith Skeoch		Richard Mully
Martin Gilbert		Lynne Peacock³
Bill Rattray		Martin Pike
Rod Paris		Cathleen Raffaeli⁴
Kevin Parry²		Jutta af Rosenborg
Julie Chakraverty³		Akira Suzuki³
John Devine		Simon Troughton

¹ Appointed 1 November 2018.

² Resigned 31 December 2018.

³ Retired 29 May 2018.

⁴ Appointed 1 August 2018.

Biographies of the current Directors can be found on pages 52 to 53.

Details of the Directors' interests in the Company's ordinary shares, the Standard Life (Employee) Share Plan, the Standard Life Sharesave Plan and the share-based discretionary plans are set out in the Directors' remuneration report together with details of the executive Directors' service contracts and non-executive Directors' appointment letters.

No Director has any interest in the Company's listed debt securities or in any shares, debentures or loan stock of the Company's subsidiaries. No Director has any material interest in any contract with the Company or a subsidiary undertaking which was significant in relation to the Company's business, except for the following:

· The benefit of a continuing third party indemnity provided by the Company (in accordance with company law and the Articles)

· Service contracts between each executive Director and subsidiary undertakings (Standard Life Employee Services Limited and Aberdeen Asset Management PLC)

Copies of the following documents can be viewed at the Company's registered office (details of which can be found in the Contact us section) during normal business hours (9am to 5pm Monday to Friday) and will be available for inspection at the Company's AGM:

· The Directors' service contracts or letters of appointment

· The Directors' deeds of indemnity, entered into in connection with the indemnification of Directors provisions in the Articles

· The rules of the Standard Life plc Executive Long-Term Incentive Plan

· The rules of the Standard Life Aberdeen plc Deferred Share Plan

· The Company's Articles

Directors' liability insurance

During 2018, the Company maintained directors' and officers' liability insurance on behalf of its directors and officers to provide cover should any legal action be brought against them. The Company also maintained pension trustee liability indemnity policies (which includes third party indemnity) for the boards of trustees of the UK and Irish staff pension schemes where required to do so.

Our people

Our people have always been central to delivering our strategy, and we remain focused on bringing out the best in them.

You can read more on our people strategy, including diversity and inclusion, in the Strategic report section of this report.

Diversity and Inclusion

At Standard Life Aberdeen our Vision for an Inclusive Future aims to create a workplace where everyone feels they can be themselves and are valued for what they bring. We believe that inclusion is core to delivering our company values and developing an environment which enables everyone to perform and progress. By building and sustaining a diverse talent pipeline and enabling people to reach their potential, we will provide our global customers with the diversity of thought and creativity required to bring long-term value.

We have a published inclusion strategy, which was co-created with our people, and which defines our priorities over the next three to five years. Progress against this is reviewed by the Nomination and Governance Committee at every meeting. The strategy aims to embed inclusion in everything we do, and this year we have worked with our Executive team to make sure there are actions in place relevant to their business areas, which build more inclusive workplaces. Our strategy is also about improving transparency in how we talk about and report on diversity in our business. Our transparency was recognised this year by Equileap who ranked us in their Top 200 Global companies for gender equality and also by Bloomberg who included us for the first time in their Gender Equality Index.

We empower people to take an active and collective approach as we all have a role to play in creating an inclusive environment. For example our seven employee network groups support members of the diverse groups and communities they represent, and raise awareness of issues that affect them. With over 1,200 members, our networks continue to expand their global reach, and focus on gender, LGBT+, ethnicity, mental health, young people, carers and armed forces.

We consider diversity in the broadest sense - in our backgrounds, experiences, strengths and thinking. To begin extending our areas of focus, we have recently run focus groups to understand how we can better support our ageing workforce and disabled employees. We treat those with disabilities fairly in relation to job applications, training, promotion and career development. Reasonable adjustments are made to train and enable employees who become disabled while working at Standard Life Aberdeen to allow them to continue and progress in their career.

Achieving a better gender balance at all levels is a priority for us. Last year we published our year one gender pay gap figures, refreshed our Women in Finance Charter targets following the merger, and published our first gender action plan. Following this, our Co-Chief Executives undertook a series of conversations to better understand the experiences of our people across all levels, locations and divisions of our business. This included focus groups on gender diversity to partner on creating our refreshed gender action plan, which was published in October.

We know we have more to do to improve representation of women at our Board and Executive levels. At Board level, we remain committed to our 33% target by June 2020, in line with our pledge to the 30% Club. We welcome the progress reported against our targets, with an improvement at our CEO-1 and CEO-2 levels from 27% at the same point last year to 34% as at 31 December 2018. The actions we have in place to improve representation of women at all levels in our organisation are stretching, benchmarked and sponsored by our Co-Chief Executives. Increasing women in our senior roles will also improve our gender pay gap, which is heavily influenced by the significant number of men in senior and most highly remunerated roles, and by the larger number of women in more junior roles. Our actions are making a difference and our strong gender pool balanced pipeline continues to grow, particularly at CEO-2 level; however we know that we have more to do at Board and Executive team level.

This year we were delighted to be one of the inaugural signatories to the Race at Work Charter launched by Business in the Community in partnership with the government. This commits organisations to tackling barriers that ethnic minority people face in recruitment and progression. As part of delivering on our commitments, we published our first ethnicity action plan and provided diverse employment opportunities to ethnic minority and socially mobile young people through the Taylor Bennett Foundation, The Prince's Trust and our inclusive employment strategy.

You can read our gender pay gap report and our gender and ethnicity action plans on our website www.standardlifeaberdeen.com/annualreport

Talent

Attracting, retaining and developing talent is a key strategic objective for the organisation. We remain committed to investing in the recruitment and development of early careers talent. Over the past
12 months, we have hired a total of 146 individuals on to early careers programmes across Standard Life Aberdeen. This consists of our Graduate, Intern programme, and Edinburgh Guarantee populations across the UK, Europe, Asia and America.

We continued our strategic partnership with Career Ready throughout 2018, aligning 34 students with internal mentors as well as providing a four week internship in Edinburgh, London or Aberdeen, paid at the Living Wage. Standard Life Aberdeen is also one of six Scottish-based Financial Services firms piloting an approach to increase school students' awareness, and understanding, of the diversity of careers in our industry.

We are proud to be recognised for our commitment to early career talent. Feedback from our 2018 intern cohort saw us feature in the Top 100 Undergraduate Employers for 2018. (Our 2019 ranking will be confirmed in Q1.) In May, our early careers and employer brand team won Bronze at the Employer Brand Management Awards for Best Employer Brand Management Programme following a merger or acquisition.

We are committed to talent progressing at every career stage. We promote a philosophy of individual-driven development linked to business need: learning in real-life and real-time backed by a range of open-access learning opportunities available to all colleagues. Our Board and Executive Committee are highly engaged in our talent and succession agenda and in mentoring future talent. Succession Bench-strength Reviews, including Talent Reviews and profiling of individual talent, are executed regularly within the organisation to ensure that a strong pipeline of 'expertise talent' as well as leadership talent is being developed both to fuel our growth agenda and to assure our clients of seamless transitions in the event of natural individual movement. Where gaps in our pipeline are identified, we are proactive in identifying external talent who are additive to our organisation and culture.

Engagement

In our mood and sentiment survey carried out post-merger in 2017, our employee insights partner Karian and Box believed our results showed a high level of positivity towards the merger in comparison to others in a merger/acquisition situation. In Q4 2018 we ran a global deep dive engagement survey 'Viewpoints' based on a number of key organisational themes. This has given us further organisational insight and has created a baseline to build on. In addition, there are employee representation arrangements across the organisation aimed at providing ongoing insights from our people to help the Company understand the employee perspective.

The main themes that emerged from the most recent survey included the need to build, through better communication with our employees, a clearer and more consistent understanding of our strategic direction, and how we can speed elimination of factors that can prevent people from doing their jobs as effectively as possible. Positive feedback centred on how our managers lead through change, colleagues feeling able to be themselves at work and our continued focus on all aspects of inclusion.

Over the year ahead we plan actions based on the themes that emerged, and we will continue to measure engagement, mood and culture across the Group.

Results:

· Participation: 69% (4,274 colleagues)

· Engagement score: 56%

Workforce Engagement

Recognising the 2018 Corporate Governance Code provision on workforce engagement, the Nomination and Governance Committee discussed the three possible options and agreed that it would be appropriate to propose a designated non-executive director to support this. After discussion with the Committee, Melanie Gee has accepted this proposal and the following parameters have been identified for her engagement role:

· Meet regularly with the employee representative forums

· Meet collectively with the representatives of the employee networks

· Meet with the Regional Heads to discuss local initiatives on employee engagement in the regions

· Meet with the Transformation team to discuss how workforce engagement is built into the various work streams

· Meet with the Talent and Leadership team to discuss how they are taking forward employee engagement matters, including those arising from the Viewpoint survey

· Consider how "employee engagement" can be built into the regular Board reporting templates

· Attend an innovation Panel meeting

· Attend several senior talent NED engagement dinners

· Report back to the Board on a regular basis on the output from her workforce engagement activities

· Prepare a report for the 2019 Annual Report and Accounts on the impact of her workforce engagement activities

Information about stakeholder engagement, together with the section 172 (1) statement, is on pages 22 to 23 of the Strategic report.

Developing our People

Throughout 2018 we have continued to strengthen our approach to supporting the development of our people.

Recognising the vital contribution that our people managers make, we recently launched the People Management Academy, an exciting new global framework and learning curriculum designed to enhance the skills and capabilities of line managers. Over 300 line managers enrolled within days for in-person development sessions and the offering will continue to develop throughout 2019, with the addition of new digital and workshop solutions.

Our drive to be effective is reflected in the launch of a range of personal effectiveness and business skills courses, to support personal career growth. We make full use of digital learning channels to promote regular and ongoing learning and development in the workplace to all employees. During our recent digital learning campaign, The Leading Edge Challenge Series, over 50,000 learning resources were accessed by employees and the campaign has been shortlisted for two industry awards.

As outlined above, developing world-class early careers talent is a priority. Our new Graduate Development framework enables graduates to develop key skills and capabilities that we have identified as critical to their personal and professional development, ranging from resilience to commercial awareness.

In 2018, 59 students participated in our Intern Development Programme supporting their transition into the workplace. In addition to developing a range of skills, the programme also showcased our support for social causes, raising money in aid of a high profile charity (Chest, Heart and Stroke Scotland).

We are enthusiastic in deploying a broader range of Apprenticeships to support individuals to combine work and study. This year, we enrolled our first graduate apprentices in study for in-demand industry skills such as cyber security and software development, as well as continuing the focus on working towards qualifications in subjects including Providing Financial Services and Management.

In 2018 we have ensured that employees have been able to continue using intranet services throughout the period of organisational change. As part of the separation programme we created an additional version of the intranet in order that both Standard Life Aberdeen employees, and employees transferring to Phoenix group, were able to access the intranet without disruption. Additionally, we have created a new global communications hub to support Standard Life Aberdeen employees through the transition period. Work is now underway to initiate a digital workplace programme which will see delivery of a new global internet for our transformed Group.

Reward

We believe that when our employees own shares in the Company they understand better the interests of the Company's shareholders.

The Company invited over 99% of UK and Ireland based employees to participate in the Standard Life Aberdeen Sharesave plan in 2018 and 1,799 employees accepted the invitation. These employees will have the opportunity to acquire Standard Life Aberdeen plc shares for £2.571 (UK) and €2.857 (Ireland) with their accumulated savings when their savings contracts end in three or five years' time. At 31 December 2018, 2,522 UK employees in UK and Ireland were saving towards the purchase of Standard Life Aberdeen plc shares through this plan.

As at 31 December 2018, 2,197 of the Group's employees were shareholders through participation in the Standard Life Aberdeen (Employee) Share Plan (the Plan). As part of the integration programme in 2019 participation in this Plan will be extended so that over 99% of employees in the UK and Ireland will be eligible to participate. Participation allows employees to buy ordinary shares in the Company directly from their earnings up to a market value of £150 per month (UK) or €175 (Ireland) per month. The Company matches the shares purchased by the employees, matching up to £50 per month in the UK and €70 per month in Ireland.

Sustainability

The commercial aims of our business are linked to our environmental, social and governance responsibilities. You can find out more about how we run our business sustainably throughout the Strategic report. Our non-financial information statement on page 49 summarises where you can find key information on our approach. For details of our greenhouse gas emissions, please see page 48.

Political donations

We have a long-standing policy of not making political donations. The Company has limited authorisation from shareholders to make political donations and incur political expenditure (Resolution 10, 2018 AGM). We request this as a precaution against any inadvertent breach of political donations legislation. While Standard Life Aberdeen has regular interaction with government and elected politicians in the UK and other jurisdictions in which we operate, we are strictly apolitical.

Auditors

The Audit Committee is responsible for considering the Group's external audit arrangements. Resolutions proposing the re-appointment of KPMG LLP as auditors of the Company and giving authority to the Audit Committee to determine their remuneration will be submitted at the 2019 AGM.

Disclosure of information to the auditors

Each Director confirms that he or she has taken all reasonable steps necessary, in his or her role as a Director, to be made aware of any relevant audit information and to establish that KPMG LLP is made aware of that information.

As far as each Director is aware, there is no relevant audit information that KPMG LLP is not aware of as at the date this report was approved.

Annual General Meeting

Details of the meeting content can be found in our AGM guide 2019. Currently, AGMs are held in Edinburgh and London in alternate years. The AGM will be held in Edinburgh in 2019. The AGM guide and other materials will be published online at www.standardlifeaberdeen.com in advance of this year's AGM.

Post balance sheet events

On 11 March 2019, Standard Life (Mauritius Holdings) 2006 Limited informed the National Stock Exchange of India Limited and BSE Limited that it intends to Offer for Sale ('OFS') up to 70,000,000 shares in HDFC Life, with an option to additionally sell up to 29,500,000 shares through the OFS, at a floor price of Rs 357.5 per share. Collectively this represents 4.93% of the total paid up equity share capital of HDFC Life.

Should the full 4.93% be sold through the OFS and at the floor price, it is estimated that the Group would receive a total consideration net of taxes and expenses of approximately Rs.35.3bn (c£380m). Assuming full subscription in the OFS at the floor price, the gain on sale is estimated to be approximately £325m after tax.

Following the sale (assuming full subscription), HDFC Life would remain an associate of the Group and the Group's shareholding subsequent to the OFS would be 490,126,265 equity shares or 24.30% of the issued share capital of HDFC Life.

Other information

Under Listing Rule 9.8.4.CR, a listed company must include all information required by LR 9.8.4R in a single identifiable location or cross-reference table. For the purposes of LR 9.8.4CR, the information required to be disclosed can be found in the following locations. All the relevant information cross-referenced below is hereby incorporated by reference into this Directors' report.

	Location
Topic	Directors' report	Directors' remuneration report	None/ Not applicable
Interest capitalised			x
Publication of unaudited financial information in a class 1 circular or in a prospectus, other than in accordance with Annexes 1 and 2 of the FCA's Prospectus Rules			x
Details of long-term incentive schemes		x
Waiver of emoluments by a director			x
Waiver of future emoluments by a director			x
Non pre-emptive issues of equity for cash			x
Non pre-emptive issues of equity for cash in relation to major subsidiary undertakings			x
Parent participation in a placing by a listed subsidiary			x
Contracts of significance			x
Provision of services by a controlling shareholder			x
Shareholder waivers of dividends	x
Shareholder waivers of future dividends	x
Agreements with controlling shareholders			x

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

Kenneth A Gilmour

Company Secretary

13 March 2019

This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact rns@lseg.com or visit www.rns.com.

END

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