The Power
of Investment
Annual report and accounts 2021
abrdn.com
When our clients invest with
abrdn, they invest in more than
you think.
Our focus on the future helps to
create more progress, insights
and opportunities to change
things for the better.
This is the power of investing
with abrdn.
This annual report and accounts 2021 for abrdn plc , and the strategic report and financial highlights 2021 are
published on our website at www.abrdn.com/annualreport
Access to the website is available outside the UK, where comparable information may be different.
Standard Life Aberdeen plc was renamed abrdn plc on 2 July 2021.
Certain measures such as fee based revenue, cost/income ratio, adjusted operating profit, adjusted
profit before tax and adjusted capital generation are not defined under International Financial
Reporting Standards (IFRS) and are therefore termed alternative performance measures (APMs).
APMs should be read together with the Group’s IFRS consolidated income statement, IFRS consolidated
statement of financial position and IFRS consolidated statement of cash flows, which are presented in the
Group financial statements section of this report. Further details on APMs are included in Supplementary
information.
See Supplementary information for details on AUMA, net flows and the investment performance calculation.
Net flows in the Highlights page excludes liquidity flows as they are volatile and lower margin. It also excludes
Lloyds Banking Group (LBG) tranche withdrawals relating to the settlement of arbitration with LBG.
All figures are shown on a continuing operations basis unless otherwise stated.
APM
Highlights
Adjusted operating
profit
£323m
2020: £219m
IFRS profit before tax
£1,115m
2020: £838m
Full year dividend per share
14.6p
2020: 14.6p
Investment performance
(% of AUM above benchmark
over three years)
67%
2020: 66%
Net flows
(Excl. liquidity and LBG )
£3.2bn
outflow
2020: £12.3bn
outflow
Dow Jones Sustainability
Indices (DJSI) ranking
Top 3%
of companies in our sector
2020: Top 2%
Contents
1. Strategic report
About our business 2
Chairman’s statement 10
Chief Executive Officer’s review 13
Our strategic priorities 16
Our business model 18
Our growth vectors 20
Corporate investments 29
Sustainability 30
Key performance indicators 46
Chief Financial Officer’s overview 48
Risk management 61
Governance
2. Board of Directors 68
3. Corporate governance statement 72
3.1 Audit Committee report 84
3.2 Risk and Capital Committee report 93
3.3 Nomination and Governance
Committee report
97
3.4 Directors’ remuneration report 100
4. Directors’ report 117
5. Statement of Directors’ responsibilities 123
Financial information
6. Independent audit report 126
7. Group financial statements 136
8. Company financial statements 252
9. Supplementary information 264
Other information
10. Glossary 280
11. Shareholder information 283
12. Forward-looking statements 284
13. Contact us IBC
This symbol indicates further information
is available within this document or on our corporate
website.
Download this report from:
www.abrdn.com/annualreport
APM
1abrdn.comAnnual report 2021
STRATEGIC REPORT
About our business
`
Our purpose
Enabling our clients
to be better investors
Technology and
insight help empower
clients to make better
decisions
Powerful partnerships
help to enhance
the expertise that
we offer
Enabling clients to
invest responsibly helps
us to build a better
world
Our connected global team
Clients worldwide trust us to find future-fit
investment opportunities globally to deliver
the outcomes they want.
We manage and
administer £542 billion
of assets for clients
We have around
5,000 employees
globally
We have 800
investment
professionals in over
30 locations
2 abrdn.com Annual report 2021
Our business
Our business is structured around three vectors,
focused on the constantly changing needs of our
clients.
Investments
Adviser
Personal
Across markets
globally, we build
investment solutions to
enable clients to create
more opportunities for
their futures.
Our platform
technology and tools
help UK wealth
managers and financial
advisers create more
opportunities for their
clients and their
businesses.
Our personal wealth
business offers tailored
services to help
individuals in the UK
create financially
secure futures in a way
that works for them.
Our investments solutions are built
on the strength of our insight,
generated from wide-ranging
research, worldwide investment
expertise and local market
knowledge. Our teams collaborate
across regions, asset classes and
specialisms, connecting diverse
perspectives, working with clients to
identify investment opportunities
that suit their needs.
We provide technology, expertise
and support to make it easy for our
clients to run their business and
deliver the outcomes their clients
want. We offer content and
experiences that can be
personalised to suit every type of
business and client, giving advisers
powerful data and insight to make
better decisions.
We integrate a full range of services
from high-quality financial planning
and discretionary investment
management capabilities, through
to hybrid advice and digital investing
tools. Our proposed acquisition of
interactive investor transforms and
broadens these capabilities.
Fee based revenue
£1,231m
Fee based revenue
£178m
Fee based revenue
£92m
£464bn AUM
£76bn AUA
£14bn AUMA
Read more on page 20
Read more on page 25
Read more on page 27
3abrdn.comAnnual report 2021
STRATEGIC REPORT
Invest in this
Across our business we
connect our clients with
wide-ranging investment
solutions, giving clients more
confidence to achieve
their goals.
Investments
52
investment strategies are
positively rated by
investment consultants,
who are used by 93% of
institutional investors in
the UK and 88% in the US
to advise on their diverse
investment needs
(2020: 52 strategies).
131
funds independently
rated 4/5 stars by
Morningstar, based on
the investment
performance of the
funds we offer our
wholesale clients
(2020: 117 funds).
4 abrdn.com Annual report 2021
And you invest in that
Adviser
‘A’ ratings
The first and only UK
adviser platform to
receive the highest rating
for financial strength
from AKG, one of the top
factors advisers consider
when selecting their
primary platform.
Gold
award
from Defaqto for
platform service, based
on survey findings from
across the financial
adviser community.
Personal
4.9 out of 5
average rating from
clients for our hybrid
retirement advice
service.
94%
of AUM for discretionary
investment
management business
aligned to strategies
which outperformed
the benchmark over
three years
(2020: 72%).
5abrdn.comAnnual report 2021
STRATEGIC REPORT
Invest in this
The insight,
expertise and
innovation of
our team help
clients create
more ways for
their investments
to make an
impact.
Connecting expertise and perspectives
Wide-ranging
research
Insight through tools, such as climate
scenario analysis, helps our clients to better
identify investment risks and opportunities.
Global expertise with
local knowledge
Our investment specialists collaborate
across regions and specialisms to
create
investment solutions.
Our transformed
investment platform
By integrating our portfolios on a single
global investment platform, we are
consolidating our data, applications and
reporting process to improve the
experience for clients.
Empowering better
investment decisions
Finimize helps us bring further insights and
information to a highly engaged
community of digital investors.
6 abrdn.com Annual report 2021
And you invest in that
Strength in our real
estate capabilities
Our acquisition of a majority interest in Tritax supports
our ambitions in the high-growth logistics and
e-commerce real estate market.
Harnessing technology
Our digital capabilities enhance the flexibility and choice
we offer individuals to create portfolios around their
individual goals, risk profiles and preferences, as well as
making our services easier to access.
Improving the adviser experience
Continuously striving for excellence, our vision is to
enhance our capabilities and technology to create an
effortless experience for advisers and their clients.
Making individual savings easy
Our Stocks & Shares ISA takes minutes to set up, can be
managed online at any time, and can be tailored to
individual needs.
7abrdn.comAnnual report 2021
STRATEGIC REPORT
Invest in this
Creating
solutions that
can be measured
beyond money
alone. With our
clients, we are
helping to build a
better future for
all of our
stakeholders.
Responsible business
Net zero
1
target in our
operations by 2040
with an interim target
of a 50% reduction by
2025.
Board and senior
leadership level
targets of 40%
women, 40% men,
20% any gender by
2025.
AA score in MSCI ESG
Ratings Index
achieved,
demonstrating our
resilience to long-
term ESG risks.
Reduced our
operational emissions
by 62% since 2018
including pandemic
related reductions.
Supporting the
bridging of the digital
divide through our
£1m Hello World
partnership.
Top 3% in the Dow
Jones Sustainability
Index for our sector.
1. See the Glossary for definitions of key climate related terms including net zero.
8 abrdn.com Annual report 2021
And you invest in that
Responsible investing
ESG embedded across all of
our actively managed
portfolios.
Driving opportunities in
Asian markets through our
APAC Sustainability
Institute.
Joined the Net Zero Asset
Managers initiative to work
collaboratively in support of
decarbonisation towards
net zero.
Majority of our SICAV funds
will be converted to promote
increased ‘E’ or ‘S’
characteristics or have
specific goals (Article 8 & 9
funds) in next 12 months.
Target to reduce the carbon
intensity
1
of the assets we
invest in by 50% by 2030 vs
a 2019 baseline.
Supporting client
transparency and
understanding via
improved sustainability
reporting.
9abrdn.comAnnual report 2021
STRATEGIC REPORT
Chairman’s statement
Creating a
better future
As we close out another year, our first as abrdn,
resilience and agility have once again been important
aspects of our company’s development. In what has
been another challenging year, it is worth reflecting
positively on how much has been achieved to
reshape our business to meet both society’s
expectations of us and our own statement of
purpose. That statement of purpose – to enable our
clients to become better investors – is a constant in all
that we do, and is far reaching in its influence.
Investing effectively, recognising the powerful impact
that the allocation of capital can have on facilitating
positive outcomes, not only for people and their
families, but also for the communities around us, the
environment in which we live and the industries that
play an important role in shaping our futures, is what
we stand for.
Our global brand
Symbolic of the renewed sense of purpose within our
business was the launch of the abrdn brand. Like all
brand changes, particularly one involving a change
from such well-established names, we attracted
considerable media attention and comment, and
feedback from individual shareholders covered the
entire range from dismay to scepticism to
excitement.
While not without its challenges, developing a single
brand represented an important milestone in
positioning ourselves for the future. We needed to
have a brand name that was unique to us, one that
we could protect and that worked well in the
increasingly important digital world.
Having licensed the Standard Life brand when we
sold the UK and European insurance business to
Phoenix, continuing to use that brand was not an
option, and the name Aberdeen could never be
unique to us. The sale of the Standard Life brand,
which we announced as part of a simplification and
extension of our strategic partnership with Phoenix
early last year, brought urgency to this rebranding
opportunity.
What is important is that, as we have rolled out the
brand formally during the second half of 2021 and
tied it to our purpose, both internal and external
reaction has grown positively. Stephen Bird covers our
brand in more detail in his report, as well as
highlighting how his organisational redesign into three
distinct client-focused areas, our ‘vectors’ of growth, is
driving performance.
Positivity towards our brand is growing at the same
time as our colleagues are returning to the office in
ever greater numbers, a trend we are encouraging.
As we transition to a blended model of working, both
colleagues and clients are seeing the value of
combining more flexible working arrangements with
face-to-face collaboration and team building.
Strategic steps for building growth
The commitment our colleagues have evidenced,
delivering for our clients, while adapting to an
operating environment that continues to evolve, has
been impressive, and is reflected in our results. We
have seen a marked improvement in investment
flows (excluding liquidity) in our Investments vector
during 2021, augmenting continuing positive flows in
our Adviser and Personal vectors. Combined with
improved operational leverage and higher markets,
this drove an increase in adjusted operating profit to
£323m (2020: £219m), an increase of 47% over the
prior year. Our IFRS pre-tax profit amounted to £1.1bn
(2020: £0.8bn), boosted by further disposal gains from
our listed Indian stakes and an accounting gain from
reclassifying our investment in HDFC Asset
Management from associate to investment status,
consequent upon selling a portion of our stake in
September 2021.
In line with the guidance we gave with our 2020 results
the Board is recommending a final dividend of 7.3p
per share, making a total of 14.6p for the full year, both
amounts the same as delivered last year.
Our capital and liquidity positions are strong, with the
proceeds of sale from our Indian stakes during the
year creating capacity to invest in reshaping the
company. This has enabled us to take the strategic
steps needed to build further growth.
In late October, we announced the acquisition of
Finimize, a global leader in providing digital content
designed to equip investors with the information and
10 abrdn.com Annual report 2021
insights they need to make their own informed
investment decisions. The unique technology and
content capabilities that Finimize offers means we
are also able to extend the reach of our own insight
and expertise, further supporting our transformation
into a truly client-led organisation and driving a step
change in our capabilities.
We have also expanded the reach we have across
the Personal vector, supporting our ambition to
enable our clients to be better investors. In early
December we announced our plans to acquire the
UK's leading subscription-based investment platform,
interactive investor, for £1.49bn in cash, subject to
certain adjustments. This acquisition constitutes a
major step forward in realising our ambitions for our
Personal business, and provides us with a leading
position in the fast-growing direct investing segment
of the consumer market. Subject to shareholder and
regulatory approvals we expect to bring interactive
investor formally into abrdn by the mid-year.
This redeployment of capital, from third party stakes
to our own business, offers additional growth
opportunities, adds diversification to our revenue
streams and is accretive to earnings based on
adjusted diluted earnings per share. We recognise
the responsibility we have as a Board to manage our
capital resources in the best interests of all
stakeholders and, looking to the disruptive transition
taking place within our industry, we believe these
acquisitions are vital to reposition abrdn for a future
where individuals will have greater responsibility for
building their own savings resources. These
acquisitions will also generate additional insights to
help us better understand different customer needs
and preferences.
Alongside the disposals of non-core assets, we
acquired a 60% interest in one of Europe’s leading
logistics real estate fund managers, Tritax. In his
report, Stephen Bird illustrates in more detail the
opportunities these businesses will bring.
Harnessing the power of investment
The insights we gather from our customer-facing
activities and research are increasingly important as
these make clear that individual investors, both direct
and intermediated, increasingly want to feel that their
investments are having a positive impact on the world
around them, and the society they will leave for future
generations. At abrdn, we believe our clients are right
to expect more from their investment activity, no
matter how modest, than simply financial returns.
Together with our clients we can make a difference –
we call this the ‘power of investment’.
Nowhere was this more evident during 2021 than at
COP26 in Glasgow. The landmark conference saw
political leaders, policy makers, non-governmental
organisations (NGOs), scientists, corporate leaders
and individual citizens from all corners of the world,
with a vast range of economic circumstances and
climate vulnerabilities, come together with the goal of
keeping alive the Paris Agreement’s objective to keep
warming below 2°C, and ideally 1.5 °C.
Even as a leading global asset manager, we should
not exaggerate the contribution we can make on our
own to meeting the commitments needed to put our
planet more firmly on a course to achieving net zero.
However, neither should we underestimate the
aggregate impact our industry can make. The
announcement in January this year, for instance, of
the partnership that abrdn and Tritax will form with
electric-vehicle battery pioneer Britishvolt, to fund and
deliver the UK’s first full-scale Gigaplant in
Northumberland, will help support the UK’s energy
transition to a greener future.
We must use all of our combined efforts to advocate
for the policy and legal frameworks needed to deliver
the desired outcomes. Additionally, we must hold
companies in which we invest to account for the
rigour and timely delivery of their transition plans and
be held to account ourselves for the effectiveness of
that engagement. Finally, we need to help our clients
understand, simply and transparently, how they can
invest responsibly to meet both their financial and
societal objectives.
Maintaining the strength of our Board
The long-term success of our business relies heavily
on the way the Board fulfils its responsibilities to its
stakeholders. This means operating in the interests
not only of clients and shareholders, but also in a way
that acknowledges the role we must play in wider
society. This includes matters concerning those in our
employment and many groups and individuals more
widely, from the need to foster the company’s
business relationships with suppliers, to the impact of
our operations on our local communities. The Board
discusses these obligations throughout the year, and
you can read more about how stakeholder
engagement is incorporated into our long-term
decision-making on pages 74 to 75.
In September we were pleased to welcome Hannah
Grove to the Board. Hannah brings more than 20
years of experience in leadership positions in
marketing and communications within the global
financial services industry, in particular from her time
at State Street. Hannah has also succeeded Melanie
Gee as the Board’s Non-Executive Director with
specific responsibility for employee engagement. We
bade farewell to Melanie at the end of October as she
completed her second three-year term. She has
been an outstanding colleague, serving at various
times on all of our committees and taking the lead as
our first designated Board member responsible for
employee engagement, a role she accomplished
with great success, leaving a very sound framework
for her successor. On behalf of her colleagues and
shareholders I want to express our sincere thanks for
her dedication and commitment throughout a
transformational period in the company’s history.
11abrdn.comAnnual report 2021
STRATEGIC REPORT
Chairman’s statement continued
At the start of 2022 I was pleased also to welcome
Catherine Bradley, CBE as a Non-Executive Director.
Catherine has more than 30 years of executive
experience advising global financial institutions and
industrial companies on their most complex
transactions and strategic opportunities. Her
knowledge and experience gained from working
across Europe and Asia, in serving on the Boards of
leading consumer facing companies and her
experience gained working with regulators and
standard setters will bring considerable and
incremental value to our discussions.
As we have now announced, Jutta af Rosenborg and
Martin Pike will be retiring at the end of the AGM in
May. I would like to thank Jutta and Martin for their
dedicated service to abrdn during a period of great
change and transformation. As our two longest-
serving directors, they were instrumental in the vision
that brought Standard Life and Aberdeen Asset
Management together and the transformation of the
Company to a capital-light business. They both
brought technical skills and expertise to the
Committees they served on and Martin has chaired
our Risk and Capital Committee very effectively
during a period when the workload of the Committee
has been demanding. The Board has greatly
benefited from their experience and knowledge of
abrdn’s business and we wish them well in the next
chapters of their careers.
We have also announced that, subject to shareholder
approval at the upcoming AGM, Mike O’Brien and
Pam Kaur will join the Board on 1 June 2022. Together
they bring extensive asset management and audit,
risk and compliance knowledge which compIements
the Board’s current skills in these areas. I, and the rest
of the Board, are looking forward to working with
them.
Looking ahead
As I write this the world is once again facing the horror
of brutal military aggression in Europe with no current
line of sight as to the objectives of or the limits to that
aggression; we are facing circumstances beyond our
control or understanding which make it infeasible to
predict how the coming year will play out.
This aggression represents a major setback for the
world as there had been growing optimism across a
number of major economies in early 2022 that
restrictive measures to protect citizens and national
health systems from the pandemic’s threat could be
relaxed. The resulting boost to economic recovery
could be seen primarily within the developed world
which continues to benefit from the success of mass
vaccination and booster programmes. However, the
very low vaccination rates in low-income countries
continue to pose risks of new variants emerging while
at the same time undermining global economic
activity and widening economic imbalances. Many of
these economic imbalances have been exacerbated
during the pandemic, contributing to a complex
investment environment.
Supply chains remain under strain as they are
restructured for security of supply and as recovering
demand exposes shortages of critical components,
such as microchips. Inflationary pressures abound in
freight, logistics, energy and food processing to name
but a few industries.
Confidence that such inflationary pressures are
transitory has receded in most countries, with
expectations around the timing and number of
interest rate rises brought forward. Following COP26,
the urgency of climate change mitigation policies is
ever more apparent, but a clear line of sight as to how
the cost of these policies can be made politically
acceptable, including justifying transfers to support
lower-income countries in their transition planning,
has yet to emerge.
The outlook is not universally bleak. Until the recent
escalation in geopolitical turmoil, there were many
encouraging signs. Much was learned during the
pandemic around working practices, both for
companies and individuals, that can drive the
productivity needed to build the higher-wage
economies that we desire. The transition to the lower-
carbon future needed to mitigate the impact of
climate change and to protect global biodiversity will
involve huge investment in skills, training, technology
and in fundamental science and its application. The
trillions of dollars of investment needed will create a
multitude of attractive investment opportunities
globally for those prepared to undertake the
thorough sector-specific and company-specific
research needed to identify long-term winners.
Success will come through multilateral international
co-operation and public-private collaboration. We
should be emboldened by the incredible success of
the vaccine development programmes that
illustrated public-private co-operation at its best.
But difficult times certainly lie ahead and it is
undoubtedly a time to be grateful for our capital
strength. We enter this period with a refreshed
leadership team aligned to our revitalised strategic
focus and considerable human talent committed to
supporting our clients, as they navigate through a
new and unwelcome geopolitical landscape.
At Board level we remain committed to supporting
the investment in the insight, innovation and talent
needed to protect stakeholder interests and underpin
the future growth that will deliver sustainable value
over the long term. I look forward to updating you on
progress in due course.
Sir Douglas Flint
Chairman
12 abrdn.com Annual report 2021
Chief Executive Officer’s review
Delivering on
our strategy for
growth
2021 was a significant year for abrdn. We set out our
clear strategic vision and the financial benefits that
we expect the strategy to deliver; firstly, by arresting
the decline in revenue in the near term and then by
establishing a healthy pattern of growing revenue
and improving efficiency and returns thereafter. We
have made good progress towards achieving these
objectives in the first year of our plan.
We have delivered fee based revenue growth of 6%,
reduced adjusted operating expenses by 1%,
increased adjusted operating profit by 47% and
delivered an improvement in our cost/income ratio to
79%. IFRS profit before tax was £1,115m (2020:
£838m) benefiting from an accounting gain resulting
from the HDFC Asset Management stake sale in 2021.
The second half of 2021 saw greater momentum in
the financials as the new strategy built traction in
delivery. I am pleased to announce that our dividend
will be 14.6p. Stephanie Bruce talks more about our
performance in her Chief Financial Officer’s review.
In our new strategy, launched in March, we outlined
how we will deliver value for our shareholders based
on our purpose of enabling our clients to be better
investors. Our business exists to meet and exceed our
clients’ expectations and that is why we have
reorganised around our clients. Each vector is built to
understand clients’ needs, wants and aspirations and
has the accountability and the tools to deliver on
them. Our Investments vector is a leading active asset
manager in over 30 locations globally with deep
expertise across asset classes and a successful track
record of investing in emerging markets. The Adviser
vector is the UK’s leading platform for financial
advisers offering solutions that enable advisers to
serve their clients efficiently and to run their
businesses at scale. Our Personal vector is focused on
digital investing, financial advice and discretionary
investment management.
By building these three businesses we are diversifying
our revenue streams, accessing new growth
opportunities and serving new clients.
Our execution priorities
Effective delivery of strategy must be backed up by
the right structure, clear priorities, and empowered
decision makers. During 2021 we took several
immediate actions to reduce complexity and
connect our businesses more closely to our clients. In
the first half we simplified our business through the
sale of Parmenion and also the Nordic real estate
operation. We made significant progress on our
technology transformation enabling us to further
simplify operations and free up resources for the
growth agenda. We simplified our management
operating model by localising decision-making closer
to client needs, removing unnecessary layers and
costs and improving efficiency and our speed of
action. We moved the business from five brands to
one, uniting our entire operations and culture under
the exciting and differentiated abrdn brand. Our new
brand is unique, builds upon our global name
recognition and is distinctive and attractive across all
digital and physical domains.
Phoenix Group Holdings is both our largest client and
a strategic shareholding because together we can
develop better client offerings and drive more
sustainable growth. It was particularly exciting to
announce a simplification and extension of this
relationship in early 2021. The strategic asset
management partnership where abrdn manages
c£176bn of assets has been extended to at least 2031
to the mutual benefit of both companies.
In January 2022, we announced the sale of
approximately 4% of Phoenix’s share capital. Our
strategic partnership remains important to us and
following completion of the sale, abrdn's holding will
represent approximately 10.4% of Phoenix's issued
For the first time since the merger we
have reported increased revenue and
reduced costs for the full year. We are
diversifying our revenue streams and
broadening our growth opportunities.
13abrdn.comAnnual report 2021
STRATEGIC REPORT
Chief Executive Officer’s review continued
share capital and abrdn will continue to appoint a
director to Phoenix's Board. I’m pleased that through
our disciplined management of capital, we are well
positioned to return the proceeds of this sale to
shareholders.
Our Investments business accounts for over 80% of
our revenue and has been the subject of high
historical outflows caused principally by the cyclical
decline in the ‘super funds’ GARS and GEMS and the
decision by LBG to withdraw assets from abrdn. Our
objectives here have been clear: stabilise, focus and
position for growth across our geographies with a
particular focus on emerging markets. I am pleased
to say that in 2021, and under new leadership, we
significantly improved net outflows (excluding LBG
and liquidity), and achieved positive overall Group net
flows (excluding LBG and liquidity) for the first time in
the year during the fourth quarter. Of course,
performance drives flows and across a number of our
funds we have seen strong performance and stand-
out ratings in small cap, emerging markets and real
estate assets. Investment performance improved
slightly over the key three-year period to 67%
(2020: 66%).
Leadership, accountability and a winning
culture
Sustained improvements in operating performance
requires focused, accountable and effective
leadership. Alongside simplifying our operating model
we made several new senior leader appointments,
drawing on existing and external talent. These
included René Buehlmann as our new CEO of the
Investments business in Asia Pacific, Caroline
Connellan as our new CEO, Personal Wealth, Tracey
Hahn as our new Chief People Officer and a range of
new hires across the businesses. In addition the
acquisition of Finimize brings its CEO Max Rofagha to
the Executive team and, subject to completion of our
proposed acquisition of interactive investor, I am
delighted that its CEO Richard Wilson will also join the
team.
I want abrdn to be a magnet for talent and we have
introduced a performance-based reward model to
better connect individual reward with client-based
returns and group success. I have been impressed by
the way colleagues have responded and continued
to deliver performance.
Enabling our clients to become better investors has to
start with enabling our people. I have communicated
a very clear strategy, aligned with our purpose and
underpinned by strong behaviours, and we have
reshaped the business around our three vectors. All of
this has been done at pace, in the context of a global
pandemic. I want to say thank you to our people for all
they have done through 2021. We took a
temperature check last May on employee
engagement, and our most recent employee survey
shows an increase in engagement of 8% to 51%.
Whilst more to do, this is encouraging a year into our
transformation. We have a huge opportunity here
and clear actions in place that will ensure we are
building an environment at abrdn where colleagues
can thrive.
We are breaking down legacy cultural silos across the
business and building a client and results-focused,
accountable and digitally enabled culture under one
brand. We demonstrated our cultural and
operational resilience throughout the COVID
pandemic and have now moved to a hybrid working
model based around redesigned offices with creative
collaboration spaces. Without doubt during the
pandemic abrdn colleagues missed real-time
connections and are embracing the flexible return to
the office. Within the same context we have been
able to reduce our estate footprint, reduce costs,
improve office space and in London we have
announced our planned move to modern new offices
in the City.
abrdn must fully reflect the vibrant societies in which
we operate across the world. We are a recognised
leader in diversity and inclusion. This is also reflected in
how colleagues feel about our inclusive culture as well
as in our actions to achieve increasingly diverse
representation and in our investment approach.
Capital strength and strategic optionality
Our strong capital position provides both resilience in
uncertain times and enables selective investment to
accelerate the growth of the group. As at 31
December 2021, our surplus regulatory capital was
£1.8bn on an IFPR basis. We will take a disciplined
approach to capital allocation as we drive sustainable
growth, relevance and scale for our business, in a way
that also generates value for our shareholders.
The acquisition of a 60% interest in Tritax gives the
Investments vector exposure to the rapidly growing
warehouse distribution sector. Tritax is the specialist
logistics real estate fund manager that manages two
of Europe’s leading industrial logistics funds.
Data and digitalisation are driving rapid change in our
sector. Towards the end of 2021 we announced our
acquisition of the insights platform, Finimize. Our
ambition here is to build the number one information
platform for investors and to utilise this content and
digital community-building capability for our clients.
Information and informed opinion is at the heart of
client decision-making and our intent here is clear; we
We are now a focused team, united
under a powerful brand – abrdn. Great
brands start a conversation, abrdn is
doing exactly that.
14 abrdn.com Annual report 2021
are part of the data revolution that is driving industry
change and enabling clients to be better investors.
We announced our agreement to purchase
interactive investor, the UK’s leading subscription-
based investment platform, at the end of 2021. This is
fully aligned with our purpose and client-led
diversification strategy and an important step for
abrdn. The acquisition of interactive investor will
significantly increase our growth and revenue
opportunities for our Personal vector and extend our
digital capabilities. This is a growth-driven acquisition.
Interactive investor will remain under Richard Wilson’s
leadership and the certainty of abrdn’s ownership
and further investment will provide stability and
underpin growth ambitions. This acquisition goes to
shareholder vote in March 2022 and remains subject
to regulatory approval.
Given our focus on digital capability and opportunities
through acquisition, we have streamlined and
strategically stepped back from our piloted in-house
open banking application, Choices. Our team is now
focused on harnessing the capabilities our new
acquisitions bring to grow our Personal Wealth
offering. We have the right strategy and leadership in
place to address the challenges head on and
continue to make the decisions that provide clients
with trust, confidence and compelling value at various
stages of their financial journeys.
There is no Planet B
Climate change is the biggest challenge confronting
us all. There is no Planet B. At abrdn we view this in two
ways: firstly by demonstrating leadership in our
operations; and secondly by reducing the carbon
intensity in our own portfolios through active ESG
stewardship.
In our own operations we are targeting net zero by
2040, with an interim target of reducing carbon
emissions by 50% by 2025 against a 2018 baseline.
We have adopted app-based technology to enable
our colleagues to keep track of their own carbon
footprint which is more important than ever in the
context of home working. We are also driving
efficiency measures in our estate, focusing on
reducing emissions from our sites with the highest
natural gas usage.
The biggest positive climate impact that we can have
is, of course, through the portfolios that we manage
on behalf of our clients. We expect that our AUM
supporting client goals in ESG will double in 2022,
based on our net zero commitment, funds
conversions and expected new flows from existing
clients and product launches, and in line with the
climate commitments we shared in 2021 we
anticipate that this will increase further. In 2021 we
also launched the abrdn Sustainability Institute out of
Singapore to further our leadership position in
emerging markets. At abrdn we want to be
measured by our actions and not just our words. You
can read more about our activities in this important
area on pages 30 to 37.
Our new brand is based around optimism for the
future and the power of investment to unlock a better
world for us all including the communities in which we
operate. This ethos is driving our refreshed approach
to our community partnerships. It was incredibly
exciting to announce our £1m partnership with Hello
World that will bring digital connectivity to remote
communities.
Focusing on the future
Over the course of 2021 we have spent considerable
time with investors, media and policy makers as we
seek to communicate the changes underway at
abrdn and our ambitions for the future. Sentiment is
starting to shift in a positive direction and we are all
committed to taking our stakeholders with us on this
exciting journey.
As Douglas has highlighted, the unfolding conflict in
Europe is extremely concerning and our thoughts are
with those directly affected. Given the heightened
levels of market uncertainty that now seem likely to
exist during 2022, our team is taking the appropriate
steps to ensure we remain on track to deliver our plan.
While events continue to move at speed, our
procedures ensure that the interests of our clients are
protected. We will continue to follow developments
very closely and take any necessary steps in the
interests of our clients, shareholders and other
stakeholders in the business.
2021 has been a year of great change at abrdn. We
have outlined our new strategy and we are delivering
on it. While the economic and political environment
outlooks remain uncertain we are both resiliently
positioned and primed for further growth.
Stephen Bird
Chief Executive Officer
15abrdn.comAnnual report 2021
STRATEGIC REPORT
Our strategic priorities
Global
opportunities
Enabling our clients to be better
investors drives everything we do.
By focusing our resources on our
strategic priorities, we are building
a long-term, sustainable global
investments business. The clarity
of focus within our three vectors
enables us to identify and move
forward on significant
opportunities for growth within
key markets globally.
Growth in Asia
The economic centre of gravity
continues to move towards Asia and,
building on our long and successful
experience in the region, we are
reinvigorating our Asia business for
faster growth. With our deep
knowledge of the Asia Pacific markets and with
sustainable investing long-embedded in our
investment practices, abrdn is well positioned to drive
growth across the region. We aim to be a leading
provider of sustainable investment solutions in a
region which is facing both challenges from the
impact of climate change but also significant
opportunities for wealth creation through financing
the transition to more sustainable economic
infrastructure.
Progress in 2021
–
Appointment of René Buehlmann as CEO Asia
Pacific in March 2021.
–
Launched abrdn Sustainability Institute in
Singapore.
–
Strengthened the leadership team focused on
wholesale markets.
–
Wealth Tech Hub launched to export our award
winning UK digital platform technology to the
region.
–
14% increase in client domiciled AUM to £19bn.
UK adviser and consumer markets
The world population is ageing.
Providing for longer retirements is
essential as people are living longer,
healthier lives. The pandemic has
also reinforced the importance of
personal financial resilience to provide a
buffer against unexpected events. Individuals need to
save more and start earlier whenever possible. We
want to be the easiest firm to do business with across
our Adviser and Personal vectors, helping individuals
to invest their savings to deliver the future they desire
in both financial and lifestyle terms.
Progress in 2021
–
Appointment of Caroline Connellan as CEO
Personal Wealth in October 2021.
–
Maintained no.1 position for AUA and gross flows in
UK adviser market.
–
Achieved record level of discretionary investment
management AUM at £8.9bn.
–
Proposed acquisition of interactive investor, the
leading UK subscription-based investing platform,
announced in December 2021.
Technology
We have completed the integration
of our investment platforms which
will deliver the operational and cost
benefits of a simplified technology
infrastructure. We are committed to
continuous improvement as agile
technology development, advanced data analytics,
machine learning and cloud computing provide
essential capabilities for a modern, cost-efficient,
client-driven investment and wealth company.
Progress in 2021
–
Completed migration of over £460bn of AUM onto
single global investment trading platform.
–
Launched Adviser Experience Programme, a
series of technology-based improvements to client
experience and engagement.
–
Extended our strategic partnership with FNZ to
provide platform custody and administration
services.
16 abrdn.com Annual report 2021
Solutions
We understand that clients
increasingly have needs that go
beyond just financial returns. From
pension funds needing to match
income streams to liabilities, to
insurance companies navigating
regulatory capital constraints, to wealth managers
wanting to digitise their client offerings, many
organisations seek our expertise to deliver robust and
multi-faceted outcomes. The abrdn Solutions group
seeks to deliver tailored outcomes by drawing on the
full range of capabilities across our business.
Progress in 2021
–
New Head of Solutions group appointed.
–
Developed a pipeline of Wealth Tech opportunities
in APAC centred on the provision of model
portfolios, engaging digital journeys and the
underlying technology.
–
Won over £1bn in assets across 13 pensions and
insurance mandates.
Ecosystems
Our technology ecosystem consists
of strong, trusted partners, operates
as a seamless extension of our own
capabilities and is a key source of
competitive advantage and
customer trust. In today’s well-
designed
ecosystems, it is no longer necessary to own all parts
of the value chain and our strong partnerships
provide increased capabilities and controls cost
effectively. Building connections within our
ecosystems allows us to access new and growing
client segments efficiently.
Progress in 2021
–
Acquisition of Finimize, bringing innovation, digital
and content skills.
–
Partnered with Citibank to provide funds on their
Citi Plus digital wealth platform in Hong Kong.
–
Launched abrdn connect, enabling shorter client
response times and more targeted information.
–
Built on relationships with technology providers
TCS and Cognizant to leverage global expertise.
Investing responsibly
In a rapidly changing world on a
path to net zero, we believe that the
consideration of ESG factors is
essential to more constructive
engagement and better informed
investment decisions which help our
clients to achieve their financial objectives. Thinking
about the future desired by our customers is a priority
and we are relentlessly curious, seeking to identify
those technologies, companies and sectors that will
thrive in the economy, environment and society of
tomorrow. Our investment decision-making
incorporates ESG factors to improve client outcomes
and drive positive change.
Our products and solutions integrate sustainability
factors to improve long-term returns and through
clear communication of our processes we empower
our clients to make better informed investment
decisions to help them navigate this era of rapid
change.
Progress in 2021
–
Climate change fund range launched.
–
Converted 23 SICAV funds to Article 8 & 9.
–
New Head of Sustainability position created, with
the appointment announced in January 2022.
Private markets
Opportunities in private markets are
playing an increasingly important
part in making our clients better
investors as access to public
markets is no longer required in
many important sectors. We focus on
the growth themes, such as real assets, logistics and
infrastructure, which are better accessed by our
clients via private market investments and we are
strengthening and leveraging our business in this
strategically important area.
Progress in 2021
–
Acquisition of majority interest in leading European
logistics real estate investor, Tritax.
–
Divestment of non-core assets Hark and
Bonaccord generated funds for reinvestment.
17abrdn.comAnnual report 2021
STRATEGIC REPORT
O
u
r
a
r
e
a
s
o
f
s
t
r
e
n
g
t
h
H
o
w
w
e
o
p
e
r
a
t
e
H
o
w
w
e
o
p
e
r
a
t
e
Our business model
How we run our business to
deliver value for our stakeholders
Our business model is designed to support the successful delivery of
our growth strategy harnessing the combination of strengths in our
business. We structure our business model to deliver growth in our
vectors, efficient operations, control in our processes, and a positive
environment for talent.
Global investment
capabilities with
expertise in a broad
range of asset classes
No.1 adviser platform in
the UK powered by
leading technology
A broad ecosystem of
capabilities in the UK
wealth market
Sustainable investment
considerations integral to
our investment process
Enduring client
relationships built on trust
and experience
Strong capital resources
to invest in growth
opportunities to drive
shareholder value
Growth vectors
We focus on our three
vectors of growth to deliver
our strategic ambitions
profitably, simply and
efficiently. We earn revenue
primarily from fees charged
based on AUMA.
Efficient operations
We are building our
operating model for agility,
speed and efficiency
enabled by technology
which aims to deliver the
best possible experience.
Controlled processes
Our control environment
helps us manage risk
effectively, ensure business
security and maintain
operational resilience.
Talent
Our talent model constantly
strives for excellence, with
diversity and inclusion at its
core. We aim to attract and
develop the best people for
leadership roles, and to
offer clear pathways for
career advancement.
18 abrdn.com Annual report 2021
Read more
Our strategic priorities and
what we have achieved
in 2021 are explained on
pages 16 to 17.
Our Investments, Adviser and
Personal growth vectors are
explained on pages 20 to 28.
Information on our listed
investments are included on
page 29.
How we have engaged
with our stakeholders in
2021 is explained on
pages 42 to 43.
For clients
- Broad range of solutions
designed to meet clients’ current and
future needs
– Long-term investment performance
– Sustainable investment considerations integral to
our investment processes
Three-year investment
performance 67%
For our people
- Performance-driven culture
where we listen to, and act on,
our people’s views
– Technology to develop talent and
improve collaboration
– A framework to guide our diversity and
inclusion priorities
Overall employee engagement
score 51%
For society
- Fair and inclusive employment,
removing barriers to realising potential
– A response to the interlinked crises of
climate change and biodiversity loss
– Sustainability/ESG focus running through our
operations and our investments
DJSI World index top 3%
for our sector
For shareholders
- Sustainable long-term shareholder value
– Financial resilience in uncertain and
challenging market conditions
– Continued investment in our business to
further diversify our sources of revenue
Full year dividend
of 14.6p
The value we deliver for our stakeholders
19abrdn.comAnnual report 2021
STRATEGIC REPORT
Our growth vectors
Investments
Collaborating across multiple capabilities creates forward-
thinking investment solutions to meet our clients’ needs and deliver the
outcomes they expect.
Our investment solutions are generated from wide-ranging research,
worldwide investment expertise and local market knowledge. We offer
expertise across products, regions and markets so that our clients can
capture the investment opportunities that suit their needs.
Our clients include:
–
Pension funds
–
Governments
–
Banks
–
Insurers
–
Companies
–
Charities
–
IFAs/DFMs
Institutional
c2,000 clients, with average
tenure of 10 years
Wholesale
Broad offering of
mutual/pooled funds sold
through direct sales and
distribution partnerships
Insurance
Providing insurance clients,
largely our strategic partner
Phoenix, with solutions to
meet their complex needs
1 year
performance
impacted by
headwinds for
quality/income
funds
(2020: 71%)
Key 3 year
investment
performance
metric broadly
stable
(2020: 66%)
Broadly stable 5
year performance
(2020: 68%)
Read more about investment
performance on page 52
“2021 was about defining the five core investment strengths of our business. With a new management
structure, we are delivering a more focused organisation around these core strengths. While the Americas
and EMEA delivered encouraging performances in 2021, we have more work to do in our largest region, the
UK, where we have strong existing franchises. We will drive our client-led growth by investing in what we do
well, extending our offering, and continuing to rationalise the business by exiting non-core activities.”
Chris Demetriou - CEO, UK, EMEA and Americas
“In 2021 we have reset our APAC strategy, building on our already strong expertise and heritage in the region.
We have strengthened our local teams to ensure we deliver sustainable client outcomes in some of the fastest
growing markets globally. We are uniquely positioned to guide both global and local investors to navigate
these markets."
René Buehlmann - CEO, Asia Pacific
52
Strategies positively
rated by
consultants
131
Morningstar
4/5 star
rated wholesale
funds
£176bn
AUM of largest
insurance
client
1 year
57%
3 years
67%
5 years
67%
20 abrdn.com Annual report 2021
How we enable our clients to be
better investors
Institutional
Our institutional clients are typically professional investors
who are responsible for large pools of assets. Many have
long-term financial promises to keep, such as paying
pensioners in retirement. They invest their assets in a way
that allows them to keep those future promises and are
often advised by actuaries and investment consultants.
We can manage a specific part of their investment
portfolio or provide them with a solution that matches all
their investments against their liabilities.
Wholesale
Our wholesale clients use our investment funds to help
their end retail investors. They can be small advisers
helping individuals meet their financial goals directly, or
parts of larger banks or wealth managers who may be
creating their own solutions for their customers. It is critical
that we offer products that are attractive to end retail
investors and that our wholesale clients are confident to
use. Our strategic relationships help us to bring our
products closer to wholesale clients across the world.
Insurance
Our insurance clients have unique investment needs. They
have to generate sufficient returns to meet future liabilities
while meeting regulatory requirements to stay financially
strong. We help our insurance clients by providing solutions
and a range of strategies and asset classes that help meet
these commitments.
Delivering forward-thinking
investment outcomes for institutional
and wealth clients
Under the new vector leadership team appointed at the
start of 2021, we have sharpened our focus on our core
areas of strength where we have established strong
credentials and which are closely aligned with the major
market trends. These are:
– Asia and emerging markets.
– Real assets.
– Sustainable investing.
– Solutions and customised outcomes.
– UK wealth.
Accelerating growth in Asia
With René Buehlmann’s arrival, our Asia strategy is focused
on three broad themes:
– Accelerating distribution in the region with a strong
wholesale focus.
– Strengthening our leading Asian investment expertise, in
particular around sustainability.
– Focusing on improving distribution of global products to
regional clients.
Market trends
Democratising financial services
through technology
The transfer of financial responsibility
toward the individual, changing which
products are needed and how they are
sold, increasingly through the deployment
of technology.
Shifting economic power towards
Asia and emerging markets
The higher rate of economic growth will
continue to attract investment from the
rest of the world. Likewise, the region will
experience increasing demand for global
investment capabilities as local investors
and institutions expand their investment
horizons.
Sustainable investing
Clients increasingly look to align their
investments with the social and
environmental issues that matter to them,
and to protect their investments from the
risks associated with these issues.
Urbanisation and infrastructure
development
‘Build Back Better’ economic recovery
and renewable energy policies will drive
investment into sustainable real asset and
infrastructure projects globally.
We have a strong global reputation for our Asian asset
management capabilities with £44bn under management
in long-standing strategies such as China A shares and
Asia Pacific Equity.
Our focus on developing wholesale activity is yielding
results. We have taken a big step forward through a new
partnership with Citibank where our products are now
available on Citibank’s digital banking and investment
platform in Hong Kong and will shortly become available in
Singapore and the US.
We are one of the first asset managers in Asia Pacific to
fully integrate ESG considerations into investments across
all asset classes. In July, we launched our Sustainability
Institute in the region which brings together expertise and
insight from ESG experts across our business in Asia Pacific,
including in regulation, product development, distribution
and corporate sustainability.
3
4
1
2
21abrdn.comAnnual report 2021
STRATEGIC REPORT
Our growth vectors continued
Real assets
Following a strategic review of our capabilities in private
markets and alternatives, we modernised our focus in this
high-growth asset class.
We have brought together our real estate and
infrastructure capabilities under a real assets franchise,
with £48bn of assets under management. 2021 has seen
the highest level of capital deployment since the merger
with £3.2bn of direct real estate investments completed or
confirmed. The acquisition of a majority interest in Tritax
supports our ambitions in the fast-growing logistics and e-
commerce real estate market. Its AUM has grown strongly
by 12% since acquisition to £6.5bn. In a landmark deal
announced in January 2022, Tritax and abrdn are
partnering on the £1.7bn Britishvolt project to build the UK’s
first Gigaplant for the manufacture of electric vehicle
batteries using sustainable processes.
Within alternatives, our US commodities ETF franchise
continues to see strong growth, with AUM reaching c$7bn
in 2021. We are expanding our suite of products in the US
and recently launched a new industrial metals fund
aligned to the global ‘electrification’ theme.
Sustainable investing
Our primary goal is to generate better long-term
outcomes for our clients and we have a long heritage of
managing sustainable funds. We continue to develop new
funds to support clients’ ESG goals, including four climate
funds across credit, equities and multi-asset. Following our
compliance with level one of the EU’s Sustainable Finance
Disclosures Regulation (SFDR), we have been converting
our range of SICAV funds to comply with SFDR Article 8 & 9
as this meets our clients’ demands for ESG investing. In
2021 we converted 23 of our funds to Article 8 & 9 and plan
to convert a further 27 funds in 2022.
We are a member of the Net Zero Asset Managers
initiative group supporting the goal of net zero greenhouse
gas emissions by 2050 or sooner, and we have ambitious
targets to reduce the carbon intensity of the assets we
invest in. In support we have developed a climate change
strategy focused on Net Zero Directed Investing to achieve
this. We are also working with our largest client Phoenix on
transitioning their investments to net zero by 2050.
Solutions to clients’ complex needs
Our solutions business combines investment,
technological, operational and client expertise to deliver
bespoke solutions for clients in pensions, insurance and
wealth. We are committed to building a deep
understanding of client-specific regulatory, industry and
sustainability challenges. We partner with clients to deliver
tailored solutions, providing the responsive, proactive
partnership needed to ensure their evolving needs are
met. Across pensions and insurance solutions, in 2021 we
won over £1bn in assets across 13 mandate wins with
end clients ranging from UK defined pension schemes to
mid-sized life insurers.
UK wealth
We are a leading UK domestic asset manager with
Institutional and Wholesale AUM of £120bn and a broad
offering of mutual/pooled funds.
We have good insight into the retail market through our
connectivity to our Adviser and Personal vectors and
partnerships with Skipton and Virgin Money. Our MyFolio
solutions, with AUM of £17.7bn, offer advisers and clients
packaged, cost-effective, risk-targeted solutions to help
meet long-term investment needs.
Through the wholesale channel, we have over 100 highly
rated funds across five themes:
– Asia, Emerging Markets and China.
– Small & Mid cap.
– Sustainability.
– Europe & UK.
– Outcome oriented.
Driving efficiency by optimising our investment
platform
The integration of our global investment platform is now
complete, with the successful migration of over 1,300
portfolios representing over £460bn of AUM onto a single
global investment platform. The integration included
migrating middle office, performance and client reporting
services to a single supplier and consolidating our business
applications. These actions will bring substantial benefits
for our investment teams and their clients, as well as
optimising our cost base.
Our strategic focus for 2022
By investing in our core strengths, and building on what we
do well, as well as streamlining our client offering and cost
base, we will be able to sharpen our focus on driving
growth.
Our business depends on market levels and we have plans
in place to be able to address counter-cyclical trends and
efficiencies if market levels reduce significantly.
In 2022 we will:
– Continue to deliver our growth strategy for Asia.
– Further strengthen our real asset franchise by
broadening, building out and evolving our capabilities.
– Build on our strong global sustainable investment
capabilities by expanding our fund offering and
innovating in the thematics space.
– Build on our established expertise in providing innovative
solutions to clients’ complex needs, including pensions
and insurance, in particular supporting Phoenix to
enhance its open book proposition.
– Reposition our product offering and capability mix to
better align with the wholesale market demands.
– Seek to invest in areas of the market with attractive
growth characteristics and modern asset classes.
– Continue to simplify the business through product
rationalisation and exiting non-core activities.
22 abrdn.com Annual report 2021
Broad and growing range of investment capabilities
We offer investment expertise across all key asset classes, regions and markets so that our clients can capture investment
potential wherever it arises.
Assets under management by asset class
Our broad global reach and expertise
With 800 investment professionals in over 30 locations worldwide, we provide clients with local expertise combined with the
power of a global perspective.
AUM in the diagram above is based on client domicile and revenue is allocated based on where the revenue is earned. Revenue for our overseas businesses
were impacted by adverse foreign exchange movements. See Note 2(c) of the Group financial statements for a breakdown of revenue by geographical
location.
Real assets: £48bn
£464bn
AUM at 31 Dec 2021
Liquidity: £45bn
Quantitative: £56bn
Alternatives: £21bn
Private equity: £14bn
Equities: £122bn
Fixed income: £113bn
Multi-asset: £45bn
UK
AUM
£331bn
Revenue growth
3%
Americas
AUM
£51bn
Revenue growth
12%
EMEA
AUM
£63bn
Revenue reduction
(4%)
APAC
AUM
£19bn
Revenue growth
13%
23abrdn.comAnnual report 2021
STRATEGIC REPORT
Our growth vectors continued
Introducing
Finimize
In October 2021, we announced our acquisition of
investing insights platform Finimize. Finimize empowers
retail investors by equipping them with information to
make their own informed investment decisions. The
acquisition of Finimize is aligned with abrdn’s strategy to
invest in technology to accelerate the pace and focus on
innovation to meet changing investor needs.
Finimize has over 1 million subscribers to its daily newsletter
and the business has built a global community of modern
investors, passionate about making investing accessible. In
2021 more than 70,000 people signed up for Finimize’s
member-organised events. By the end of the year over
45,000 were paying for the premium subscription. The
Finimize app was listed as a top 10 finance app by the
Apple App Store.
Finimize now benefits from access to abrdn’s global
network of partners, our established research team and
our operational infrastructure. The team at Finimize will
collaborate with abrdn’s Research Institute and investment
teams to provide an enhanced experience for Finimize
users and new editorial content for abrdn clients. Finimize
will bring new talent into the business, as abrdn is able to
utilise Finimize’s unique content delivery technology,
editorial and content skills. Insights into its highly engaged
retail investor community will support abrdn’s product and
service development. In this way, Finimize represents both
enhanced capabilities for abrdn, as well as a potential high
growth business in its own right.
Finimize continues to operate as an independent brand
and Finimize CEO, Max Rofagha, sits on abrdn’s leadership
team.
Finimize offers:
– A free daily newsletter.
– A more in-depth subscription service, at a flat fee.
– The opportunity to connect and interact with fellow
investors through online chat forums and in-person
events.
“There is a huge demand for accessible
high-quality investing information for retail
investors. To meet this need, we need to be
bite-size, mobile and social to fit modern
investors’ busy lives. We envisage Finimize
will become the most convenient way for
people to discover, research and discuss
investing and we’re excited to be doing this
with the backing of a major financial
institution that shares our vision.”
Max Rofagha
CEO of Finimize
Top 10 finance app
— Apple App Store
24 abrdn.com Annual report 2021
Adviser
Through a relentless focus on the quality of our content and experience, we aim
to be the easiest business for advisers to partner with, for every firm and for
every type of client. We are the leading platform for advisers in the UK,
continuously improving solutions to create an effortless experience that
empowers them to work efficiently and at scale.
Our clients
–
Regional and national
financial advisers
–
Discretionary fund
managers
A primary partner for
advisers
3 percentage-point
increase in the number of
adviser firms using us as
their primary partner
Adviser Experience
Programme
Brings a series of new
features, advice solutions
and technology
developments
AUA
“Advisers build their business on the goals of their clients. Our business is
built on their ambition. Our vision for the partnerships we develop with
advisers is about helping them to become the business they want to be
and to deliver more to the clients they want to serve. This vision is based
on three things: doing business their way, making things easy and putting
our strength to work for them.”
Noel Butwell
CEO Adviser
No. 1
for AUA
and gross flows
50%
of UK advice
businesses use our
platforms
96%
client retention
for our primary
partners
426,000
customers served by
IFA firms who are on
our platforms
(2020: 419,000)
‘21‘20‘19
£76bn£67bn£63bn
25abrdn.comAnnual report 2021
STRATEGIC REPORT
Our growth vectors continued
How we enable our clients
to be better investors
We provide support, expertise and technology for UK
wealth managers and financial advisers to create value for
their businesses and their clients. We offer a combination
of tools and features personalised to their needs, including
access to the full range of investment solutions that abrdn
offers.
We partner with over 2,600 UK adviser firms and 11,000
individual advisers with 426,000 customers in total. We
deliver the outcomes their clients need by:
Doing business their way
By building technology and investment solutions around
advisers’ and their clients’ needs, we deliver a personalised
service to suit every type of business and client.
Making things easy
We offer fast, self-serve solutions, along with live support
that enables advisers to simplify the way they operate,
giving them more time to focus on their clients.
Putting our strength to work for advisers
We enable advisers to look after their clients’ data
securely, while providing insight to make better decisions in
areas ranging from regulation to taxation.
Progress in 2021
In March 2021 we launched our Adviser Experience
Programme, a series of improved technology solutions for
advisers to offer an increasingly personalised and efficient
service to clients. We have already implemented a
number of developments in the first phase of the
programme, including enhancing our capabilities to
become a true engagement hub for clients, combining
service excellence with world-class technology:
– Through our new client service technology platforms,
Amazon Connect and Salesforce Service Cloud,
advisers connect to our experts faster and our team
delivers an even more responsive service.
– We are one of the only UK platform businesses to have
a fully integrated online e-signature solution. Advisers
capture their clients’ signatures electronically on
documents, quickly and securely, which are then sent to
the client document library on the platform
automatically.
– With COVID-19 restrictions forcing people to become
more digital, cybercriminals are increasingly targeting
vulnerabilities in email communication. We reacted
quickly by implementing Unipass Mailock encryption
technology, enabling advisers to communicate
sensitive information securely and efficiently.
We have simplified our relationship with Phoenix,
announcing in early 2021 that we will acquire the Wrap
SIPP and Onshore Bond tax wrappers. Alongside further
technical separation activity in 2021, this simplification has
driven substantial benefits to profit in the year.
We also announced further extensions to our strategic
partnership with FNZ. In addition to our new long-term
arrangement for platform custody services, around 300 of
our back office administration colleagues will transfer to
FNZ. Around 100 colleagues transferred in 2021. As we
strengthen our investment knowledge and insight, we are
backed up by access to the broader scale, capabilities and
technology expertise that FNZ offers.
Industry measurement can make an important difference
when advisers choose who to partner with. We are
‘platinum’ rated by AdviserAsset, ‘gold’ rated by Defaqto
and the only platform business ‘A’ rated by AKG for
financial strength, which is one of the top reasons for
advisers selecting their primary platform.
When advisers use our solutions as their primary platform
we see substantial increases in new business. Our research
tells us that more than 70% of all new business from a firm
goes on the primary platform, as our processes and
capabilities become more embedded in their business. As
a result, client retention also improves.
Market trends
Advice business consolidation
Over the next 5-10 years the number of
advice firms could reduce by up to 50%.
Democratisation of wealth
Around 70% of people choose to change
their financial adviser when they inherit
money.
Advisers and platforms remain key
84% of individual assets expected to be
advised by 2023.
Complexity of needs drives demand for
advice.
Platform M&A activity is forecast
to continue
20+ adviser platforms in the UK, with the
top 10 accounting for c75% of the inflows
received by all of these platforms.
Our strategic focus for 2022
– We will deliver the next phase of our Adviser Experience
Programme, with a range of enhancements to make
our operating system more flexible and faster to use,
including improved client reporting and better design.
– We will develop enhanced and more efficient digital
journeys for income drawdown, as well as new tax
wrappers for our Junior ISA and Junior SIPP products.
– We will transfer the Wrap SIPP product from Phoenix
into abrdn.
1
2
3
4
26 abrdn.com Annual report 2021
Personal
Connecting capabilities from across abrdn, we aim to deliver a seamless
experience to provide trust, confidence and compelling value for our clients.
Through our existing financial planning and discretionary offerings, we help
clients with larger, more complex financial needs. With the proposed acquisition
of interactive investor, this broadens our range of services to support clients at
all stages of their financial journey.
Our clients
–
Individual clients
–
Charities and trustees
–
Intermediaries
Building scale
The proposed acquisition
of interactive investor
builds scale, accelerates
growth and enables us to
access new customer
segments
Award-winning
offering
Winner of the Sustainable
Investment Solution
category at the
PAM Awards 2021, the
most prestigious awards in
the UK wealth
management sector
AUMA
“We have real strength in our higher-touch offerings, particularly our
financial planning and discretionary investment management
businesses. We know many clients are also seeking to invest directly and
the proposed acquisition of interactive investor offers our clients the
flexibility to manage their own investments. We want our clients to have
the best possible experience, while showing them the full value that
abrdn can offer throughout their life.”
Caroline Connellan
CEO Personal Wealth
94%
of discretionary
AUM outperformed
benchmark over
three years
1
95%
client retention for
our financial
planning clients
£350m
of flows from our
financial planning
business to abrdn
Wrap
28,000
clients
2
(2020: 24,500)
1. Relates to AUM for discretionary investment
management business aligned to strategies which
outperformed the benchmark over three years.
2. Client numbers may include some double count
between discretionary investment management and
financial planning businesses.
‘21‘20‘19
£14bn£13bn£13bn
27abrdn.comAnnual report 2021
STRATEGIC REPORT
Our growth vectors continued
How we enable our clients
to be better investors
For individuals in the UK, we offer products and services
that can be tailored to match different needs, budgets and
complexities, along with easily digestible advice and
support. Bringing our capabilities together seamlessly
under the abrdn brand we integrate the full range of
services, from high-quality financial planning and
discretionary investment management through to
digitally-enabled direct investing.
Financial planning
Our financial planning offering ranges from retirement
advice and support with investing, to wealth management
for private clients. Our experts provide tailored financial
plans to make the right savings and investment choices.
We offer tax, trust and estate planning to help clients
protect and manage their wealth. Through our specialist
advice services, clients benefit from ongoing support from
a dedicated adviser.
Discretionary
To make investing as straightforward as possible for
clients, we align solutions to their time horizon and attitude
to risk. Clients can choose from model portfolio solutions, or
work with a dedicated client portfolio manager.
Digital capabilities to enhance our offering
Our Stocks & Shares Individual Savings Account (ISA)
provides a simple and tax-efficient way to invest, with a
range of investment options. It takes minutes to set up and
can be managed online at any time. Our hybrid retirement
advice solution helps customers manage their retirement
income in a way that works for them.
Through our easy range of MyFolio Index funds, our
investment experts work to achieve the best returns for
the level of risk clients choose. For clients more
comfortable choosing their own investments, we offer an
open-architecture range covering different asset classes,
regions and investment styles. By connecting capabilities
across our business, individuals also have access to the
technology solutions operated by our Adviser vector.
Progress in 2021
The proposed acquisition of interactive investor is another
important step in driving our strategy in the UK. Its high-
tech approach sits alongside the personalised financial
advice we offer, bringing access to new customer
segments and capabilities in the high-growth direct
investing market. It also drives strong customer
engagement through data analytics, customer
personalisation and easy-to-use technology, giving clients
the flexibility to manage their own investments.
Our combined offering will aim to provide trust, confidence
and compelling value for clients at all stages of their
financial journeys. We will run interactive investor as a
discrete business, with its own management team and
Market trends
Changing client behaviours
and needs
Accumulation vs decumulation.
Confidence to make own decisions vs
need for expert advice.
Democratisation of wealth
Increased personal responsibility for
financial futures.
Digitalisation
Increased adoption of digital channels by
retail investors.
Better technology and services improving
accessibility.
Around half of all investments are
managed by advisers, with digital acting
as a complementary service and an
enabler for strong face-to-face
relationships.
Value for money
Increased price sensitivity among retail
investors.
Newer pricing models gaining share in
direct investing.
Wealth transfers
Shifts of capital from DB to DC retirement
schemes.
Intergenerational wealth transfers.
operational platform, to ensure continued high-quality
service for both existing and future customers.
Our strategic focus for 2022
We are targeting growth in the UK wealth market, seeking
to help individuals create financially secure futures in a way
that works for them:
– Leveraging our strengths including our heritage, unified
brand and investment expertise
– Building momentum in financial planning and
discretionary offerings, and growing the reach of digital
solutions such as our hybrid retirement advice solution
– Developing cohesive client journeys and experiences,
embracing digital as an enabler for this.
We expect to complete our acquisition of interactive
investor in the second quarter of 2022 (subject to
regulatory approvals), bringing the opportunity to enable
clients to self-select their preferred journey and then
engage with us on more complex financial decisions.
1
2
3
5
4
28 abrdn.com Annual report 2021
Corporate investments
Valuable financial
investments
We also have significant and valuable financial investments in leading companies in the UK, India and China. As well as
representing substantial potential capital to support future growth and giving insight into important markets, these
investments are a source of dividends and further strengthen our balance sheet.
Phoenix HDFC Asset Management
–
We are asset manager of choice for Phoenix with a
10 year contract from 2021 (£176bn of AUM as at
31 Dec 2021).
–
Potential for new asset management mandates from
Phoenix growth profile.
–
Sold 4% for net proceeds of £0.3bn in January 2022.
–
A leading asset manager in India, one of the world’s
fastest growing markets.
–
Sold 5% for net proceeds of £0.3bn in 2021.
–
Intention to monetise holding over time.
HDFC Life HASL
–
Consistently ranked in top two private life insurers in
India.
–
Sold 4.99% for net proceeds of £0.7bn in 2021.
–
Intention to monetise holding over time.
1. As at 25 February 2022.
–
Long-term strategic opportunity through exposure to
the pensions market in China which is expected to grow
significantly.
–
Potential collaboration opportunity to use our
investment expertise with HASL.
Realising the value of our listed investments
Over the last three years we have generated total cash
proceeds of £3.5bn through disposals of non-core listed
investments which we have used to invest in our business
to support future growth and to deliver returns to
shareholders.
Holding
1
10.4%
Listing value
of holding
1
£0.6bn
Holding
1
16.2%
Listing value
of holding
1
£0.7bn
Listing value
of holding
1
£0.4bn
Unlisted
Holding
1
3.7%
Holding
1
50%
’21
’20
’19
HDFC Life net sale proceeds
HDFC Asset Management net sale proceeds
£195m
£265m
£271m
£1,698m
£881m
£924m
£653m
£616m
£1,503m
29abrdn.comAnnual report 2021
STRATEGIC REPORT
Sustainability overview – our approach
1. Compared to 2019 baseline.
2025
Operational emissions
reduced by 50%
Top 50% of suppliers have
set net zero targets
40% men, 40% women
and 20% any gender in Board
and senior leadership
One additional Board
member who identifies
as ethnic minority
2018
Operational
emissions
baseline
2019
Investment
assets emissions
baseline
2030
Carbon intensity
of the assets we
invest in reduced
by 50%
1
2040
Net zero in
our operations
Key milestones
Creating sustainable impact
across our operations
and investments
We want to create impact, building a
future that is more sustainable, just,
inclusive, and diverse.
Environment
Tackling the
interlinked climate
and biodiversity crises
Our focus
–
Reducing the carbon intensity
of our portfolios.
–
Improving biodiversity in our local
greenspaces and investment real
estate.
Our targets
–
Reduction of the carbon intensity of
the assets we invest in by 50% by 2030
from the 2019 baseline.
–
Net zero in our operations by 2040,
with an interim target to reduce our
emissions by 50% by 2025 from the
2018 baseline.
–
We are working with our top 50%
of suppliers by spend, requesting they
put net zero targets in place
by 2025.
Our progress
–
Reduced our operational emissions by
62% since 2018. This includes material
reductions, influenced by the
pandemic, to business travel and
energy use in our offices, which
helped us to exceed our 50%
reduction target by 2025. We expect
emission from these sources to
increase again in 2022 as travel
restrictions ease.
Definitions of key climate related terms including net zero
and carbon intensity are included in the Glossary.
Our TCFD summary report is on pages 32 to 37 and our full
TCFD report is available at www.abrdn.com/annualreport
In 2021 we continued to focus our resource and activity
on the ESG areas where we add the most value and
make positive change. These are:
–
Tackling the interlinked climate and biodiversity crises.
–
Championing a fair and inclusive society.
–
Integrity and transparency in how we, and our investee
companies, operate.
The biggest impact we have is through our investments.
Working with our clients, we expect that our AUM which
supports client goals in ESG will double in 2022 (based on
net zero commitment, funds conversions and expected
new flows from existing clients and product launches). In
line with the climate commitments we shared in 2021, we
anticipate that this will increase further as we enable our
clients to achieve their objectives in this space.
Our people are passionate about driving ESG activity and
engaged in developing the tools and driving the activity
needed to achieve our ambitions. We also recognise that
we need collective solutions and work with peers, clients,
policymakers and charities to develop approaches and
call for a drive towards more consistent global reporting.
30 abrdn.com Annual report 2021
Social
Championing
a fair and inclusive
society
Our focus
–
Championing, supporting and driving
inclusion.
–
Commitment to, and raising
awareness of, a fair wage and stable
working hours.
Our targets
–
Board and senior leadership targets of
40% women, 40% men and 20% any
gender by 2025.
–
One additional board member who
identifies as ethnic minority by 2025.
Our progress
–
Board comprised of 45% women, 55%
men at 31 December 2021.
–
Senior leadership comprised of 36%
women, 64% men.
–
Top 75 UK Social Mobility Employer
2021.
–
Winner of the European Thought
Leadership of the Year Award - A
Woman’s Place: equality in the 21st
Century.
–
Diversity and inclusion is a standing
governance agenda item and we use
our clients’ votes (as an escalation
measure) to push for greater diversity
by taking action on resolutions,
aligned to our established regional
expectations.
–
New charity partnerships established
with Hello World and the Sarabande
Foundation.
You can find out more about our people strategy,
including more detail on our targets, on pages 38 to 39.
You can find out more about our society and
community impact, on pages 40 to 41.
Governance
Building trust
and enhanced
transparency
Our focus
–
Integrity and transparency in how we,
and our investee companies, operate.
Our progress
–
Top 3% in our sector for DJSI World
and Europe.
–
AA score from MSCI.
–
‘Low risk’ rating by Sustainalytics.
–
A+ for strategy and governance
by PRI.
–
We voted on resolutions relevant to
our clients’ shares at 7,304
shareholder meetings, and voted on
75,398 resolutions.
–
£447m total tax contribution.
–
98% of colleagues completed global
code of conduct.
Read about our stakeholder engagement and
Section 172 statement on pages 42 to 43.
Our non-financial information statement is
presented on page 44.
31abrdn.comAnnual report 2021
STRATEGIC REPORT
Sustainability – Environment
TCFD report
overview
We are committed to tackling climate change in two
ways, firstly by demonstrating leadership in our operations
and secondly by reducing the carbon intensity in our own
portfolios with a focus on real world decarbonisation
towards net zero.
In our own operations we have set a target to be net zero
by 2040 with an interim target of reducing carbon
emissions by 50% by 2025. We have adopted app-based
technology to enable our colleagues to keep track of their
own carbon footprint, which is more important than ever in
the context of home working.
The biggest positive climate impact that we can have is
through the portfolios that we manage on behalf of our
clients. As members of the Net Zero Asset Managers
(NZAM) initiative, we are committed to partnering with
clients to help them achieve their climate goals and,
together, play our part in tackling climate change.
In 2021, we set an ambitious target to reduce the carbon
intensity of the assets we invest in by 50% by 2030. We will
achieve our target through three pillars of action – asset
decarbonisation, providing net zero investment solutions,
and active ownership.
Our climate strategy is focused on Net Zero Directed
Investing (NZDI). This means moving towards the goal of
net zero in the real world – not just in portfolios. We are
active investors and believe that sustainable change will be
driven by transition leaders and innovative climate
solutions, alongside bolder collective action by
government and effective incentives in the form of
appropriate carbon pricing.
Some of our 2021 highlights
We are currently engaging with our highest financed
emitters across equity and credit holdings to seek
transparency on their decarbonisation plans and track
progress assessed against relevant standards such as the
Climate Action 100+ (CA100+) net zero benchmark. The
change we need will come from backing credible
transition firms on their path from high to low carbon
intensity. However, if company progress against
milestones is insufficient despite active engagement then
we will look to divest.
Aligning our operations and investments to a net zero
future, and being transparent on our progress, is essential
for long-term performance. We are fully supportive of the
recommendations of the Task Force on Climate-related
Financial Disclosures (TCFD) – both as an investor and as a
discloser - and welcome the updated 2021
recommendations particularly the increased focus on
transition plans. We have made disclosures we believe are
consistent with the TCFD Recommended Disclosures and
these are summarised within the following section. We
have set out our full disclosure in our separate TCFD report
and have adopted this approach to ensure we publish a
sufficient level of detail for investors. We will continue to
evolve and enhance our TCFD reporting, in line with data
and industry developments. For example, in our next
report we aim to incorporate further information on
portfolio alignment and follow the PCAF guidelines on
calculating financed emissions. Our full 2021 TCFD report is
available at www.abrdn.com/annualreport
See the Glossary for definitions of key climate related terms.
We are committed to being a positive
catalyst for net zero and enabling our
clients to achieve their climate goals
with a focus on real world impacts.
Stephen Bird
Chief Executive Officer
70% of our Equity funds
have a carbon intensity
below their benchmarks
We joined the Net Zero
Asset Managers initiative
We committed to
reduce the carbon
intensity of the assets we
invest in by 50% by 2030
vs a 2019 baseline
We targeted net zero in
our operations by 2040,
with an interim target to
reduce our emissions by
50% by 2025 vs a 2018
baseline
32 abrdn.com Annual report 2021
Governance
We have an established governance and risk framework
enabling us to identify and review climate related risks and
opportunities, with clear accountabilities. Our governance
structure and diagrams showing how accountability is
delegated to various individuals and groups is outlined in
our full TCFD report.
The Board’s role in oversight
The Board and Board committees oversee a number of
climate related issues and reports to provide challenge
and ensure we are ambitious in our plans. Our Chief
Executive Officer has overall responsibility of how we
ensure that climate related issues are integrated into our
strategy.
During 2021 Board agenda items on climate included
setting and approving our operational net zero targets,
and our strategy and targets to reduce the carbon
intensity of our investments.
Management’s role in assessment
Our two Climate Change Working Groups - covering our
operations and investments consist of senior
management members across asset classes and business
teams. They are key to escalating to the Board material
risks and opportunities and ensuring that the implications
of these are considered within abrdn’s strategy and risk
management policies and that the budgets and business
plans are in place to achieve this. These groups feed into
our executive leadership team and from there to our
Board. Our Head of Climate Change Strategy also
updates the Board directly on climate related matters.
Strategy
Climate related risks and opportunities
We identify and manage our most material transition and
physical risks and opportunities through our climate risk
assessment. One of the most material transition risks for
abrdn relates to the enhanced reporting regulations and
the cost of analysing and gathering climate related data
across all our asset classes which is complex and resource
intensive. Climate related market impacts on asset values
is another important risk which we carefully analyse
through our climate scenario analysis. Thirdly, there is a risk
related to changes in client preferences and demand for
climate related products and reduced revenue if we are
not prepared for this shift – this also provides the greatest
opportunity for us and is a key driver for the development
of our net zero directed solutions. Our material risks and
opportunities are linked to our growth strategy, such as the
opportunity for increased revenue through increased
demand for lower emissions products and services.
You can see our key climate risks and opportunities and
mitigation strategies in our full TCFD report.
Impact of climate related risks and opportunities
We assess the likelihood of climate risks and opportunities
as well as their financial impacts on a scale of 1 to 4. All
material risks have a 61-100% chance of occurrence in
next 12 months (i.e. are a 1 in 1 year event). Then we
consider the impact on our business after any mitigating
actions to manage climate risks are taken. We also
quantify the impact of different climate scenarios and
related risks and opportunities on the assets we invest in.
The financial impact of the energy transition is most
material for certain sectors and dispersion of impacts on
assets within sectors can be considerable. This is critical
insight for identifying risks and opportunities.
Resilience of our strategy against climate
scenarios
We conducted our unique, industry leading climate related
scenario analysis exercise in 2020 and updated this in 2021
to assess the financial impact of climate change on asset
values. This deepened our understanding of the potential
implications of climate related transition and physical risks
and opportunities for investments and the resilience of our
portfolios and investment strategies.
We use scenario analysis to understand how resilient our
portfolios are to different, uncertain future pathways and
how this compares to the benchmark. Around three
quarters of our Equity funds outcompete the benchmark
in our mean scenario, but the outcome differs by fund. Our
Multi-Asset Climate Solutions fund, for example, comprises
of companies that derive over 40% of their revenues from
climate solutions. For this fund we saw that for most
scenarios and in our scenario mean, the valuation
implication was strongly positive.
33abrdn.comAnnual report 2021
STRATEGIC REPORT
Sustainability – Environment continued
Our approach in our investments – Net Zero Directed Investing
We are members of the Net Zero Asset Managers initiative and we have developed a climate change strategy focused on
NZDI. That means moving towards the goal of net zero in the real world. We seek to achieve this goal through a holistic set
of actions, including rigorous research into net zero trajectories, developing NZDI solutions and active ownership to
influence corporates and policy makers.
Net Zero Directed Investing – Our six areas of focus
Investment integration
We develop tools and processes
to integrate climate change into
every investment decision.
Research and data
We undertake rigorous, forward-
looking research related to climate
change impacts, including net
zero 2050.
Investment solutions
We develop climate solutions
across all asset classes to enable
our clients to achieve their goals,
including net zero 2050.
Transparency
We are committed to providing
transparency via regular TCFD
reporting and enhanced ESG
client reports.
Active ownership
We actively engage with
corporates on their climate goals
and actions and reflect our views
in voting decisions.
Collaboration and advocacy
We collaborate with industry
initiatives to drive best practice
related to net zero and advocate
for ambitious climate policy.
Climate Scenario Analysis – taking a forward
looking view
The transition and physical risks of climate change are
wide reaching and impact every country, sector and
company. Through climate scenario analysis, we have
developed a robust, forward-looking, quantitative
assessment of the possible implications of these risks and
opportunities on our investments. We have developed a
bespoke approach to climate scenario analysis, that
integrates and quantifies the macro and micro drivers of
climate impacts on asset prices within a probabilistic
framework.
Our latest analysis includes 17 scenarios in total with
projected 2100 temperature rises ranging from 1.4 to
3.1˚C. Our approach brings together eight industry
standard off-the-shelf scenarios built by the Network for
the Greening of the Financial System (NGFS) alongside
seven more nuanced and plausible bespoke scenarios.
We also include two probability-weighted scenarios, one
of which captures the mean across the full range and
another that captures the mean across only the Paris-
aligned scenarios.
Our mean scenario now sees greater emissions
reductions than in our 2020 exercise. And though we do
not yet think that the outlook for global climate policies and
technology pathways is consistent with the objectives of
the Paris Agreement, we have increased the probability
attached to stronger action and Paris-aligned scenarios.
Our 2021 exercise affirms one of our key findings from
2020 that climate risk and opportunity is mostly a micro, or
security-level phenomenon. That is because there is much
greater dispersion across securities within a sector or
region, than there is across the sectors or aggregate
regional indices themselves. Many companies have seen
increased impacts in our Year 2 analysis with securities in
the energy, utilities and auto sectors showing the greatest
changes.
Read more about our climate scenario analysis in the full
TCFD report at www.abrdn.com/annualreport
.
1
2
3
4
5
6
34 abrdn.com Annual report 2021
Climate change is impacting how investors allocate capital
We are developing frameworks and solution for clients with net zero ambitions. For example, Phoenix Group, our largest
client, has set a net zero 2050 goal and we are developing solutions across different asset classes to help them achieve
these goals, including an Equities Active Climate Transition (ACT) fund. In 2021, we launched four climate focused funds
across Equities, Credit and Multi-asset to enable our clients to achieve their climate goals and are committed to supporting
client goals in this space. To support the transition to net zero and climate resilience, we invest in assets across the following
pillars:
Journey to net zero
Driving the carbon transition Building climate resilience
Accelerating change
Focusing on ‘Leaders’
Investing in companies that are
either driving operational change
or those transitioning and can
demonstrate ambitious and
credible plans
‘Adapting’ to physical effects
Helping society to adapt to the
physical effects of climate change
by investing in climate resilience
projects
Identifying ‘solution’
opportunities
Investing capital in companies that
are innovating to accelerate
change and adopting green
solutions
Investing in nature-based solutions
On behalf of one of our abrdn strategies, our
Natural Capital team has acquired a substantial
nature-based project situated in the
Cairngorms National Park. The land acquired
extends to an area of over 1,400 ha and
represents one of the largest reforestation and
peatland restoration projects in the UK.
–
The aim is to restore over 900 ha of woodland,
planting over 1.5 million trees and to restore over
150 ha of degraded peatland.
–
It is estimated the project will deliver up to 195,000
tonnes of claimable carbon to 2060 at a cost of
£22 per tonne on a discounted cash flow basis.
The fund will have valuable flexibility to hold the
asset beyond 2060, with further carbon offsetting
benefit if required.
–
Biodiversity net gain will be monitored and
independently reported to investors over time.
This will be done using a leading science-based
approach, carried out by a team of ecologists.
–
Focusing on native broadleaf and Scots pine, the
woodland creation element of the project will
improve amenity, enhance biodiversity, mitigate
flooding and improve air quality, while restoring
the drained peatlands. This wider environmental
net gain will also be measured.
–
Local contractors and forestry consultants will be
employed to deliver the project. Benefits for the
local community will be promoted where
possible, such as bird-watching huts and the
restoration of bothies for hillwalkers.
–
On areas of open land and unplanted land,
nature will be left where possible to recover in a
natural way with minimal intervention
management practices to promote further
biodiversity net gain benefit.
Far Ralia Estate represents one of the largest native
woodland and peatland restoration projects in the
UK. We are committed to providing innovative
solutions on the pathway to net zero and helping to
address biodiversity decline. It is crucial to note that
investing in nature-based solutions plays an
important role in achieving net zero but this has to be
alongside emission reduction targets.
Our approach in our operations
In 2021 we set an ambitious interim target to achieve a 50% reduction in operational emissions by 2025, against our 2018
baseline and to be net zero by 2040. We have outlined a strategy to reduce our Scope 1 emissions by 50% by 2025. We will
achieve this by efficiency measures in our estate (focusing on sites with the highest natural gas use), changes to our fleet,
and improvements in refrigerant gas usage. Our strategy to reduce our Scope 2 emissions by 60% by 2025 is through
efficiency measures in our estate (focusing on sites with the highest use of energy).
For Scope 3 emissions reductions we are focused on reducing our business travel by 72% by 2025 and influencing a
reduction in emissions associated with colleagues working from home. We first reduce as much as we can and then we
offset 110% of our residual emissions with accredited projects. This includes our working from home emissions. We are
further looking at our supply chain and will expect our top tier suppliers to have net zero targets in place for 2025.
35abrdn.comAnnual report 2021
STRATEGIC REPORT
Sustainability – Environment continued
Risk management
Process for identifying, managing and
integrating climate risks and opportunities
For over ten years we have identified operational climate-
related risks through our climate risk and opportunity
radar. In the last three years we have added investment
risks to this as well. In 2018 we aligned our radar to the
TCFD recommendations. The radar is based on our risk
and control self-assessment process which assesses the
inherent risk (that is the risk before the consideration of
controls) against:
– Likelihood – the % chance of an occurrence in the next
12 months.
– Impacts – financial, customer, regulatory, reputational
and process.
The inherent risk is then scored after the consideration of
the effectiveness of controls (both in terms of design and
performance) currently in place. We have a climate risk
oversight group that evaluates material climate risks within
our radar of climate related risks and opportunities. Where
we identify material risks to the business within the radar
we escalate this through our governance structure. The
management process determines whether we mitigate,
transfer, accept or control risks.
Our approach in our investments
Climate change risks and opportunities are managed by
incorporating them into our investment process via tools
and corporate engagements.
Research is the foundation of our approach to
understanding climate change impacts. Our climate
related research and scenario analysis provides insights on
regulatory and industry trends across regions. It also helps
us understand the physical and transition risks and
opportunities, enabling us to take informed decisions about
how and where to invest. Climate related research is
carried out by our Research Institute and ESG Investment
Team as well as investment desks across all asset classes.
The ESG Research Forum meets monthly to discuss
research priorities and review content.
We have developed a range of tools to help integrate
climate change into our decision-making including carbon
footprinting, transition assessment and an ESG House
Score. These tools enable teams right across the business
to access and analyse the climate change-related data at
asset, sector, region and portfolio level.
Active ownership
We engage with companies about aligning their strategies
with the Paris Agreement and setting appropriate
greenhouse gas (GHG) emissions targets. Our net zero
engagement strategy is focused on the largest financed
emitters and their commitment to decarbonisation
towards net zero with credible actions supporting this. We
use the Climate Action 100+ net zero benchmark as a
useful guide for measuring progress as well as our own
climate scenario analysis results. We do this independently
and collaborate with other investors as an active member
of Climate Action 100+ (CA100+), Microfiber pollution and
Farm Animal Investment Risk and Return (FAIRR).
Independently we carried out engagement across the
auto sector engaging with different companies across
geographies to discuss preparedness for the low carbon
transition.
We believe that voting at company meetings is an
important part of our role as active owners when investing
on behalf of our clients. We have a strong record of using
our proxy voting to influence investee companies towards
the transition to a low-carbon world. In 2021, we voted on a
total of 99 climate resolutions (2020: 60) and in favour of
the majority of resolutions related to climate change
(55%). We also implemented a policy to vote against the
annual reports of transition laggards with a Transition
Pathway Initiative (TPI) Management Quality Score of 0 or
1.
Collaboration and influence
We work with industry associations, regulators and
policymakers globally to drive change, including through
improving standards, driving best practice, influencing
regulation and developing capital allocation strategies. We
share our time, expertise and research to do this. For
example, we actively participated in the Institutional
Investors Group on Climate Change (IIGCC) working
groups and the PRA Climate Financial Risk Forum. We also
signed the 2021 Global Investor Statement to
Governments on the climate crisis to highlight the need for
more stringent climate policies.
36 abrdn.com Annual report 2021
1. 2021 data has been independently assured by Bureau Veritas. Bureau Veritas assurance can be found at www.abrdn.com/annualreport
Metrics and targets
In our operations
In our operations we use a number of metrics to assess our
strategy. We report Scope 1, Scope 2, and Scope 3 GHG
emissions, where possible. We obtain third-party
verification for our Scope 1 and 2 emissions, as well as for
some Scope 3 categories - business travel, transmission
and distribution, and working from home (we detail our
methodology in our KPI document at
www.abrdn.com/annualreport).
We have reduced our total greenhouse gas emissions by
62% compared to our 2018 baseline. Our emissions per
full-time equivalent (FTE) employee have fallen by 55%
from 1.57 to 0.70 tonnes of CO2e per FTE (Scopes 1 and 2).
We have also reduced our energy use globally by 58%
from 35,109 MWh to 14,910 MWh, and in the UK by 53%,
from 26,658 MWh to 12,410 MWh.
Our emissions reductions are primarily due to a pandemic
related reduction in business travel as well as a reduction in
electricity and gas emissions due to our office
consolidation process and focus on efficiency.
We have targeted net zero in our operations by 2040, with
an interim target to achieve a 50% reduction in our
operational emissions by 2025.
Our targets directly relate to our identified climate-risks
and opportunities as we aim to exceed stakeholder
expectations on reporting, transparency, and action. We
are also targeting opportunities, such as reduced
operational costs, through increased energy efficiency
measures and long-term travel reduction strategies,
which represent the most material aspects of our global
operational footprint.
In our investments
We provide a carbon footprint for our portfolios across
different asset classes including equities, fixed income,
quantitative investments, real estate and sovereign bonds.
We use the Weighted Average Carbon Intensity (WACI)
as a core metric to show a portfolio’s exposure to carbon-
intensive companies.
To complement the backward looking carbon emission
analysis, it is important to take a forward looking view when
constructing our portfolios and assess where we believe
company or asset carbon emissions will be in the future–
and whether this matches the desired decarbonisation
trajectory.
We consider a range of climate change metrics in our
investment processes including greenhouse gas emissions
and forward looking emission trajectories.
In 2021, we set a target to reduce the carbon intensity of
the assets we invest in by 50% by 2030 vs a 2019 baseline
to support our net zero ambitions. We set out what this
means and how we will achieve it in our full TCFD report.
’21
’20
Baseline
’18
Scope 1: Refrigerant gases, natural gas, oil and
company-owned vehicles
Scope 2: Electricity and district heating
Scope 3: Working from home, business travel and
transmission and distribution
UK 4,181
Offshore 2,888
UK 2,110
Offshore 1,067
UK 1,609
Offshore 787
22,482
10,044
8,838
UK 2,629
Offshore 38
UK 1,118
Offshore 94
UK 1,008
Offshore 53
32,218
14,433
12,295
T
otal C0
2
emissions (tonnes)
1
12,295
’21
’20
’18
8,451
3,495
2,500
26,658
14,238
12,410
35,109
17,733
14,910
Baseline
T
otal energy consumption (kWh ‘000s)
1
14,910
UK
Offshore
37abrdn.comAnnual report 2021
STRATEGIC REPORT
Sustainability – Social
Our people
We create opportunities for our
people to thrive, giving them the
environment, tools and support to
feed their curiosity, achieve their
ambitions and take ownership of their
ideas.
New ways of working
Like many other businesses in 2021, we embraced
‘blended working’ as the default way in which our
colleagues will now work globally. This combines the
benefits of face-to-face collaboration, coaching and
connecting in our offices with the flexibility of working from
home. This improves productivity, innovation and
engagement among our colleagues.
We have listened to feedback from colleagues and
developed a programme of improvements. We have
stronger wi-fi and other technologies that make it easier to
work in the office. We continue to adapt our buildings, with
a larger proportion of our space dedicated to
teamworking and collaboration.
Through our networks, we have developed ways to help
our colleagues, managers and leaders understand how to
work effectively in a blended way. This includes learning
solutions, team workshops, and guidance on how to watch
for unintended bias.
Colleagues have also highlighted the challenges that
combining home working and busy workloads can create.
We have supported colleagues and leaders with guidance
on managing outcomes, how teams can successfully work
in a blended way and how to thrive in a high-performance
environment.
Helping colleagues to grow and develop
Developing our leadership
Effective leadership is critical to unlock the full potential of
our talent. Our People Leadership Academy is our online
learning framework, available for people leaders at all
levels, to develop and enhance the behaviours and skills
we expect.
Our Future Leaders programme is our individualised
development resource, to support colleagues to identify
and achieve their future leadership potential. We
encourage as many colleagues as possible to consider
future leadership roles and we help bridge gaps in their
knowledge and expertise. Following a successful pilot last
summer, we expanded the programme in the fourth
quarter of 2021 to mid-career colleagues across the
business. By the end of 2021, 900 had completed the
diagnostic questionnaire, receiving access to their
individual results and personalised development
resources.
Tools for self-development
We provide our colleagues with the tools and resources
they need to take control of their development and to
make the right contribution to our strategy. In 2021, we
expanded our digital learning resources with the launch of
our Data Academy and Digital Academy. These are
designed to help colleagues develop the skills and mind-
set to harness data to make better decisions, helping
ensure that we are equipped to support our clients in a
digital world.
We presented live learning sessions to over 3,000 people in
abrdn in 2021. As a result, over 4,000 colleagues have
engaged in some form of personal or professional
development, either through our virtual classrooms, digital
content or external learning opportunities.
Mentoring
Our global mentoring programme offers all colleagues an
opportunity to find a mentor inside the business, or to share
their skills and experience as a mentor themselves. We use
algorithms based on development interests and
preferences to match mentees with appropriate mentors.
At the end of 2021 we had established over 300 internal
mentoring relationships, which represents a 96% increase
since 2020.
Identifying, attracting and retaining talent
A diverse and inclusive workplace
We are focused on creating inclusive environments in
which all types of diversity can thrive. Our leaders, our
Global Inclusion Committee, our colleague-led networks
and regional groups work collaboratively to turn discussion
into action, and to influence others to do the same.
To bring diverse perspectives to selection and minimise
potential bias, we have increased our pool of interviewers
for our roles. Nearly 80 colleagues are being trained as
interviewers, representing all of our regions and business
areas. All of our executive search partners also have a
contractual obligation to provide gender-diverse shortlists.
Read more in our diversity and inclusion report available at
www.abrdn.com/annualreport
Around
900
colleagues using our
Future Leaders
programme
19%
more colleagues
engaging in personal or
professional development
compared to 2020
38 abrdn.com Annual report 2021
Young talent
Our traineeship programme has gone from strength to
strength in recent years. In 2021 we welcomed 36 new
university graduates into our global graduate
programmes and 22 new trainees. We were also rated the
number one Apprenticeship employer in Scotland by Rate
My Placement and top 15 in the UK, based solely on
reviews by young people.
We now work with more early careers partners to
increase the diversity of our participants. In 2021 we
welcomed a colleague from the Kickstart scheme, which
aims to create new jobs for young people aged 16-24 on
Universal Credit who are at risk of long-term
unemployment.
Our targets
We refreshed our corporate diversity targets in 2020, after
reaching earlier targets for women in roles at Board and
senior leadership ahead of schedule. These took effect
from 1 January 2021.
Our approach aligns with best practice as an active
member of 40:40 Vision, an investor-led initiative to
achieve gender balance in executive leadership. In 2019,
we met the recommendation from the Sir John Parker
Review for FTSE 100 companies to have at least one Board
member who identifies as ethnic minority, and we set our
target to have an additional qualifying Board member by
2025. This reflects our ongoing commitment to improving
ethnic diversity and we are building our data to enable us
to increase our progress.
Our pay philosophy
Following colleague feedback, we have created
a clear approach to pay that supports and
rewards performance at a company, team and
individual level. Individual performance is
assessed against agreed goals and behaviours.
Our global pay philosophy will reflect our
performance compared to peers with the
following core principles:
– Our aim is to pay fair and competitive base
salary and benefits.
– The individual base salary range will vary
based on skills and experience.
– Company profitability will determine the
affordability of the bonus compensation pool.
Improving and sustaining financial performance
will drive our ability to pay both market level
salary and bonus, and reward will reflect the
success created for our clients.
Targets are reviewed regularly by our Board and
executive leadership team and are included in the
Executive Director scorecard. All colleagues have diversity
and inclusion as part of their performance management
goals.
Current position at 31 December 2021 Target by 31 December 2025
Gender diversity
1
Women at plc Board 45% (5 of 11) 40% women; 40% men; 20% any gender
Women in senior leadership
2
36% (62 of 171) 40% women; 40% men; 20% any gender
Women in subsidiary director roles
3
35% (7 of 20) N/A
Women in global workforce 46% (2,297 of 5,033) 50% (+/- 3% tolerance)
Ethnic diversity
4
Ethnic minority representation at plc Board 9% (1 of 11) 18% (or +1 director)
1. Relates to percentage of women in roles within the different groups.
2. Relates to leaders one and two levels below CEO, minus administration roles.
3. Relates to Directors of the Company’s direct subsidiaries as listed in Note 47 (a) of the Group financial statements and not classified above as Board Directors
or senior leadership.
4. Relates to percentage of Board members who identify as ethnic minority.
Data measuring progress against gender targets for 31 December 2021 has been independently assured by Bureau
Veritas. Bureau Veritas assurance can be found at www.abrdn.com/annualreport
39abrdn.comAnnual report 2021
STRATEGIC REPORT
Sustainability – Social continued
Society and
communities
We can make a positive impact through how
we operate, making a difference for our
clients, society and the wider world.
Building connection to support inclusion
An important focus of our social impact strategy is helping
people around the world to feel more connected to
society. We aim to help them overcome social barriers so
they can realise their potential and build a better future for
themselves and their families. We build partnerships with
projects and organisations that are intent on creating
more for communities, with a focus on financial or digital
education and inclusion.
When we became abrdn in July 2021, we announced a
new partnership with Hello World, whose mission is to
bridge the digital divide and improve connectivity and
inclusion among disconnected communities. The
partnership is aligned to the attributes of our brand and is a
tangible example of how investing in a charity like Hello
World, also means investing in people.
Over the course of our two-year partnership, we are
funding the build of 64 new ‘Hello Hubs’ across Uganda,
which will provide access to internet and education for up
to 80,000 children and adults. Hello Hubs are solar-
powered internet kiosks, fitted with eight screens loaded
with leading educational software so that people can
learn, access digital educational resources and improve
their future by connecting globally.
In November we announced a one-year partnership with
the Sarabande Foundation. Sarabande was established to
support people with great talent and artistic ability, through
scholarships for those in financial need and subsidised
studio space. Our support will extend Sarabande’s ability to
make education accessible for the arts industry globally.
abrdn will be Sarabande’s financial advice partner for its
programme of educational talks, helping creative talent to
prepare and build financial security.
Building connection through volunteering
All of our colleagues have the opportunity to take three
paid volunteering days annually. During the pandemic, the
nature of the volunteering that our colleagues provided to
charities and beneficiaries shifted. For example, mentoring
programmes were run online. Now we are creating more
opportunities for our people to engage with their local
greenspaces and give back to the areas that have
supported everyone during lockdown.
We support projects to enable people to engage with and
protect nature, as well as projects that support habitat and
wildlife restoration. This supports wellbeing, builds
community cohesion, and helps biodiversity and
ecosystems to thrive for generations to come.
The community greenspaces project is an example.
Following a pilot programme delivered in partnership with
the City of Edinburgh Council, we are now providing
further funding to support greenspaces outside of
Edinburgh. This has contributed to a wide range of
improvements, from restoring outdoor play structures,
orchards, ponds and wild flower meadows, to creating
habitats for bees, bats and birds.
Fair work
We have a responsibility to drive action on fair work issues
across society. We have been a UK Living Wage employer
since 2014 and we are one of the first employers
accredited as a Living Hours employer. We commit to fair
notice periods for hours worked, as well as the right to a
guaranteed minimum number of hours each week. This
commitment covers our employees, interns and suppliers
on our premises.
We are also a member of the Living Wage Scotland and
Living Hours leadership groups, through which we offer
expert advice and help shape a wider landscape of fair
pay across the UK. As a member of the Living Wage Places
Edinburgh group, we collaborate to achieve and maintain
accreditation for Edinburgh as a Living Wage City.
As active investors that fully integrate sustainability into our
investment process, employment and labour practices
form part of our assessment of any company we invest in.
We draw on political and social research to understand
the environment in a given country or region, and how that
affects our investments. Different companies also face
different human rights issues, depending on their activities.
For instance, land rights and community consent are more
relevant for a mining firm, while the right to privacy would
be more relevant for a technology software company.
40 abrdn.com Annual report 2021
We engage with businesses we invest in to encourage
them to be proactive in disclosing information on areas
such as pay transparency, pay parity, and whether
collective bargaining agreements have been put in place.
In 2021 we engaged with supermarket businesses to
understand more about their latest sustainability
strategies, including how they look after their employees.
This followed the ruling of the Supreme Court in March
2021 that the jobs worked by the shop-floor workforce at
Asda, who are mostly women, are comparable to those
done by higher-paid warehouse workers, most of whom
are men. The ruling could leave other companies in the
sector liable to pay back hundreds of millions of pounds if
work is determined to be of equal value, as well as potential
financial impacts for wider stakeholders. We will continue
to engage with labour-intensive businesses on proactively
disclosing workforce issues as this area of focus develops.
Through our support for ShareAction’s Workforce
Disclosure Initiative, we aim to help improve corporate
transparency and accountability on workforce issues, and
help increase the provision of good jobs worldwide. The
initiative generates new data on workforce practices to
integrate into investment analysis. We responded for the
first time in 2021 and will continue to engage with the
initiative over the years ahead.
Promoting social mobility
We believe that different social issues are often interlinked.
We focus on creating positive outcomes within abrdn, our
industry and our communities, for people whose career
progress has been limited by their gender, ethnicity or
social background.
We are a signatory to the Social Mobility Pledge, and in
2021 we were recognised as a Top 75 company for social
mobility in the Social Mobility Employer Index. This reflects
the actions of colleagues across abrdn which are
underpinned by our social inclusion action plan. The action
plan outlines our priorities for helping groups and
individuals who face barriers within society. The actions are
shaped by input from our colleague-led networks and best
practice recommendations from the Social Mobility
Employer Index and the Social Mobility Commission.
Our research series ‘A Woman’s Place; equality in the 21st
Century’ explored factors that affect women’s
opportunities to progress in the world of work. The series
provides recommendations for businesses, policymakers
and society to help address barriers to progress and
economic participation, as well as highlighting why
companies’ equality policies are important considerations
for investors. In 2021 this research series won the award for
European Thought Leadership at the Funds Europe
Awards.
Read the research series at
www.abrdn.com/annualreport
We are a supporter of collaborative initiatives that enable
further progress. We have joined the Social Mobility
Taskforce – commissioned by HM Treasury and BEIS, and
led by the City of London Corporation – to improve socio-
economic diversity at senior levels in UK financial and
professional services. The group’s mission is to challenge
the lack of career progression for those coming from non-
professional backgrounds and to explore the intersections
with other protected characteristics, including gender and
race. Noel Butwell, CEO of our Adviser business, is a
member of the Taskforce.
In 2021 we donated around £800,000 to charitable
programmes that drive social mobility globally, benefiting
young people, veterans, refugees and ex-offenders. A
number of collaborations with external initiatives also help
us to measure the impact we are having on social inclusion
in the communities in which we operate, helping people
develop skills and opportunities for employment. We have
partnered with external organisations who help us access
diverse talent and who share our view of gender, race and
social inclusion being interconnected, including Girls are
INvestors (GAIN), Diversity Project, upReach and
Investment 20/20.
Top 75
employer in the
Social Mobility
Employer Index
41abrdn.comAnnual report 2021
STRATEGIC REPORT
Sustainability – Governance
Stakeholder
engagement
We want to help build a better future for our
clients and our people, the communities
around us and the environment we live in. Our
responsibility to engage with all of our
stakeholders plays a crucial role in the long-
term decisions we make.
Clients
Our strategy is rooted in understanding how we can
deliver the outcomes that clients expect, driven by their
needs, wants and aspirations. We organise our business to
reflect the diverse needs of our clients in different markets
and the different ways in which our clients interact with us.
The launch of our single global brand also helps to remove
confusion from previously having five client-facing brands.
How we engage
In our Investments business, local investment teams, aided
by global ESG expertise, help clients anticipate, and plan
and invest for future scenarios. In our Adviser business, we
provide support, expertise and technology for UK wealth
managers and financial advisers to create value for their
businesses and their clients. In our Personal business, we
integrate financial planning and discretionary investment
management with digitally-enabled direct investing to
enhance our offering.
We collaborate across our Investments, Adviser and
Personal businesses to connect our clients with wide-
ranging expertise and diverse perspectives.
As individuals take greater responsibility for their own
savings needs, interactive investor and Finimize will help us
respond to this trend. These acquisitions will generate
additional insights to help us better understand customers’
diverse requirements.
In 2021 we launched abrdn’s first advertising campaign in
the UK across TV, radio, press and digital channels. It is part
of our programme to build up awareness of our single
brand, as well as highlight the positive impact that
investment can have on society.
Our people
To deliver on our strategy, we need to nurture talent, giving
our colleagues every opportunity to grow, be heard and
perform. We need to enable collaboration, encourage
innovation, and help our people feel engaged and
empowered to be at their best.
How we engage
Our Board has a designated non-executive director to
support workforce engagement, responsible for leading
the Board Employee Engagement plan designed to
access views from all colleagues across the business.
Hannah Grove succeeded Melanie Gee in this role during
2021. See page 73 for more details.
Since our 2020 employee engagement survey, we have
continued to run mood surveys among our colleagues to
track how they have been dealing with the demands of
the pandemic.
Employee engagement was at 72% in 2020 as we worked
through the challenges of the pandemic and supported
our people. Through the first year of our new strategy we
reset performance management and restructured the
business. A snapshot of employee engagement, taken in
May 2021 showed this figure had declined to 43%. Our full
employee engagement survey, completed in January
2022 shows an increase of 8% to 51% which is a marked
improvement, and gives us clear areas of focus.
75% of colleagues took the time to share their feedback
which has enabled us to identify clear themes. Our
executive leadership team has explored these collectively
to better understand and address a number of areas.
These will be shared with colleagues and tracked
throughout the year to demonstrate both action and
progress.
42 abrdn.com Annual report 2021
Society and communities
We all have a responsibility to work to make a positive
impact on society, so that we can pass something
worthwhile to the next generation. We do this by
combining the power of responsible investment with the
positive impact we have through our operations. We
believe that engagement across the assets we manage is
critical to lasting positive change.
How we engage
We partner with organisations that aim to create more
opportunities for communities around the world, through
which we also offer volunteering opportunities for our
colleagues.
We constructively use our influence as an investor to
engage with companies and use our voting rights. We
work to ensure that they have credible strategies to deal
with material ESG issues and retain the standards of
corporate behaviour we expect.
In 2021 we discussed ESG at 2,593 meetings, which
included 298 engagements with shareholders focused
specifically on ESG. We voted on resolutions relevant to our
clients’ shares at 7,304 shareholder meetings, and voted
on 75,398 resolutions.
In 2021 we also took part in a programme of events during
COP26. Our aim was to highlight actions investors can take
to help achieve real-world decarbonisation and to
underline the urgent need for stronger climate policies.
Shareholders
The support of our shareholders is crucial to growing our
business, and we engage with shareholders to ensure that
we have the support to pursue our strategic objectives. As
we deliver on our growth strategy, we also know that
generating value for our shareholders remains hugely
important.
How we engage
Our annual general meetings give shareholders the
opportunity to share their views and to hear directly from
our Chairman and Board. Through regular mailings we
keep shareholders informed about dividend payments,
financial results and shareholder meetings. We also have a
regular programme of meetings with institutional investors
and analysts.
We held our AGM in 2021 by way of an enhanced
webcast, enabling shareholders to join online and submit
their questions during the event or beforehand. Through
our mailings we updated shareholders on the change to
our company name and our change of share registrar.
Section 172 statement
The Board recognises that the long-term
success of our business is dependent on the way
it works with a large number of important
stakeholders.
Our Board has responsibility to consider matters
that include the:
– likely consequences of any decisions in the
long term.
– interests of the company’s employees.
– need to foster the company’s business
relationships with suppliers, customers and
others.
– impact of the company’s operations on the
community and environment.
– desirability of the company maintaining a
reputation for high standards of business
conduct.
– need to act fairly as between members of the
company.
The Board has discussed these obligations
throughout the year, including how stakeholder
engagement is incorporated into our long-term
decision-making. You can read further details on
pages 74 to 75.
The Board’s decision-making considers both risk
and reward as our business aims to deliver long-
term value for all of our stakeholders, and
protect their interests. Awareness and
understanding of current and the potential risks,
including both financial and non-financial risks,
are fundamental to how we manage the
business.
Further information on how risks are
appropriately assessed, monitored, controlled
and governed is provided in the Risk
management section.
During 2021, some of the Board’s stakeholder
engagement plans had to be altered to comply
with COVID-19 restrictions. The Board Employee
Engagement programme, for example,
continued to engage with employees through
online channels – both directly and as part of
regular meetings with employee representative
groups.
You can read more about how the Board engages
with and considers the interests of stakeholders
on pages 74 to 75.
43abrdn.comAnnual report 2021
STRATEGIC REPORT
Sustainability – Governance continued
Non-financial information statement
We aim to comply with the Non-Financial Reporting requirements contained in sections 414CA and 414CB of the Companies Act 2006.
This information is intended to help stakeholders better understand how we address key non-financial matters. Details of our principal risks
and how we manage those risks are included in the Risk management section.
Reporting requirement Relevant policies and publications Where to find more information
Environment Our sustainability overview and TCFD report
overview
Sustainability overview (pages 30 to 31)
Sustainability – Environment (pages 32 to 37)
Employees Global code of conduct
1
Sustainability – Governance (page 44)
Employee policies Sustainability – Social (pages 38 to 39)
Human rights Human rights policy
1
Sustainability – Governance (page 44)
Modern slavery statement
1
Sustainability – Governance (page 44)
Social matters Social policies Sustainability – Social (pages 40 to 41)
Global third party code of conduct
1
Sustainability – Governance (page 44)
Other matters Anti-bribery and corruption Sustainability – Governance (page 44)
Business model Our business model (pages 18 to 19)
Non-financial KPIs Our key performance indicators (page 47)
Sustainability – Environment (pages 32 to 37)
1. Group policy published on our website at www.abrdn.com/annualreport
Non-financial
information
Our vision for a better future starts with
asking more of ourselves, and we set high
standards to hold ourselves to.
Our global code of conduct describes the standards of
behaviour we expect in our business. We review it annually,
and all our colleagues are expected to read, agree and
adhere to its principles. The code focuses on doing the
right thing and putting our clients at the heart of our
business. This includes what colleagues should do if they
have concerns about issues such as bribery and
corruption, environmental or human rights.
The code details a number of our policies that we expect
them to read and adhere to, including our modern slavery
statement and our human rights policy. We also have a
legal and regulatory duty to prevent, detect and deter
financial crime, including bribery and corruption, to protect
our business and our clients’ information and assets.
We strive to build effective and supportive relationships
with our third parties, and we expect them to follow the
same standards and principles that our teams and
colleagues do. Our global third party code of conduct sets
out these expectations, and we expect them to demand
the same from their own supply chains. It also details the
whistleblowing procedures that we make available to
them as well as to our colleagues. On a regular and risk-
proportionate basis, we carry out due diligence of our third
parties, covering key social issues.
Measuring our progress
Global code of conduct
As at the end of January this year, 98% of colleagues had
completed the 2021 online training module to confirm they
had understood and would comply with our global code of
conduct. This module also included training on modern
slavery issues. Where employees fail to complete
mandatory training, we have taken steps to ensure that
managers and HR are made aware.
Modern slavery
Our modern slavery statement sets out our approach to
tackling all forms of modern slavery. This ranges from
human trafficking and forced labour, to bonded labour
and child slavery. We found no instances of modern
slavery in our supply chain during 2021 and we have robust
processes which would allow any future issues to be
escalated and remedied.
Human rights policy
Our policy summarises our approach to identifying and
upholding the human rights of our people, clients,
communities and everyone impacted by our suppliers,
partners and the companies we invest in. As an investor,
we use our internally developed Human Rights Index to
help identify high-risk geographies, and we have published
position statements on integrating human rights into our
investment approach. We also publish the outcomes of
our ESG engagements with investee companies, including
engagements on human rights matters, in a quarterly
summary available on our website.
Financial crime prevention
We have an effective approach to managing financial
crime risks, both within our business and among suppliers
and partners. Following an independent assessment of our
anti-money laundering framework, we launched a
transformation programme in 2021 focused on continuing
to improve the framework, and carried out extensive work
to define and implement consistent anti-money
laundering standards across the company.
44 abrdn.com Annual report 2021
Sustainability Accounting Standards Board (SASB) –
disclosure topics and accounting metrics
To enhance our sustainability reporting, we choose to provide information that aligns to the Sustainability Accounting
Standards Board (SASB) framework. SASB sets out standards for companies to report on their material ESG risks and
encourages better transparency in company reporting.
Topic Accounting metric Disclosure against the framework
Transparent
Information & Fair
Advice for
Customers
(1) Number and (2) percentage of covered
employees with a record of investment-related
investigations, consumer-initiated complaints,
private civil litigations, or other regulatory
proceedings
1
.
abrdn is aware of no employees subject to the
proceedings described.
Total amount of monetary losses as a result of
legal proceedings associated with marketing and
communication of financial product related
information to new and returning customers
2
.
abrdn sustained no monetary losses of this nature in the
reporting period (based on the population of covered
employees, as defined by SASB, on 31 December 2021).
Description of approach to informing customers
about products and services.
For all products we provide comprehensive product
literature including the fund offering documents
(Prospectus and Key Investor Information Document)
as well as marketing materials such as fund factsheets.
Employee Diversity
& Inclusion
Percentage of gender and racial/ethnic group
representation for (1) executive management,
(2) non-executive management, (3) professionals,
and (4) all other employees
3
.
The percentage of gender/ethnic representation at
Board and Executive level is disclosed on page 39. We
publish diversity data in our Diversity & Inclusion, and
Sustainability reports, which also detail what we do to
ensure diverse perspectives are represented among all
employees.
Incorporation of
Environmental,
Social, and
Governance Factors
in Investment
Management &
Advisory
Amount of assets under management, by asset class, that employ (1) integration of ESG issues,
(2) sustainability themed investing, and (3) screening.
Description of approach to incorporation of
ESG factors in investment and/or wealth
management processes and strategies.
We integrate ESG factors across all asset classes
(apart from our Quantitative funds that track a market
index).
In addition, we run a number of sustainability funds, where we apply sustainability
themes and screens to meet client sustainability demands.
Find out more at www.abrdn.com/annualreport
AUM in sustainability funds (including thematics and screening)
Measure
2021
(£bn)
2020
(£bn)
4
Equity 8.7 8.1
Fixed income 16.6 20.1
Multi-asset
0.3 0.1
Quantitative equity
- 0.1
Alternatives
4.4 3.3
Total AUM
30.0 31.7
Description of proxy voting and investee
engagement policies and procedures.
A detailed description of these policies and procedures,
and definition of our approach to materiality is in our
Stewardship report available at
www.abrdn.com/annualreport
Business Ethics
Total amount of monetary losses as a result of
legal proceedings associated with fraud, insider
trading, anti-trust, anti-competitive behaviour,
market manipulation, malpractice, or other related
financial industry laws or regulations.
5
abrdn sustained no monetary losses in the reporting
period as a result of legal proceedings associated with
financial industry laws or regulations.
Description of whistleblower policies and
procedures.
We offer colleagues an independently managed
reporting process, including our Speak Up hotline, if they
want to raise any concerns anonymously. Our suppliers
can also use the service.
1. Note to FN-AC-270a.1– The entity shall describe how it ensures that covered employees file and update FINRA and SEC forms in a timely manner.
2. Note to FN-AC-270a.2– The entity shall briefly describe the nature, context, and any corrective actions taken as a result of the monetary losses.
3. Note to FN-AC-330a.1– The entity shall describe its policies and programmes for fostering equitable employee representation across its global operations.
4. 2020 figures restated due to a revised methodology primarily related to SFDR classification of funds.
5. Note to FN-AC-510a.1– The entity shall briefly describe the nature, context, and any corrective actions taken as a result of the monetary losses.
45abrdn.comAnnual report 2021
STRATEGIC REPORT
Key performance indicators
Our key performance indicators
Fee based revenue
£1,515m
We generate revenue mainly from asset management,
platform and advice fees.
Cost/income ratio
79%
This ratio measures our efficiency and we are focused on
improving our cost/income ratio by increasing revenue
and continued cost discipline.
Adjusted operating profit
£323m
Adjusted operating profit has replaced adjusted profit
before tax as our key alternative performance measure
and is how our results are measured and reported
internally.
Adjusted diluted earnings per share
13.7p
This measure highlights on a per share basis our
profitability and capital efficiency, calculated using
adjusted profit after tax.
IFRS profit before tax
£1,115m
IFRS profit before tax is the measure of profitability set out
in our financial statements. As well as adjusted profit, it
includes items such as restructuring costs, profit on
disposal of interests in associates and goodwill impairment.
Full year dividend per share
14.6p
The total annual dividend (interim and final) is an important
part of the returns that we deliver to shareholders.
Adjusted capital generation
£366m
This measure aims to show how adjusted profit contributes
to regulatory capital. Our dividend policy is set with
reference to adjusted capital generation.
‘21
£1,515m
‘20
£1,425m
‘19 £1,634m
‘21
79%
‘20
85%
‘19 82%
‘21
£323m
‘20
£219m
‘19
£301m
‘21
13.7p
‘20
‘19
8.8p
11.0p
‘21
£1,115m
‘20
£838m
‘19 £243m
‘21
14.6p
‘20
14.6p
‘19
21.6p
KPIKPI
KPI KPI
KPIKPI
APMAPM
APMAPM
‘21
£366m
‘20
£262m
‘19
£333m
KPI APM
46 abrdn.com Annual report 2021
Investment performance
(Percentage of AUM above benchmark over three years)
67%
This measures our performance in generating investment
return against benchmark. Calculations for investment
performance are made gross of fees except where the
stated comparator is net of fees
Employee engagement survey
51%
This measure is important in gauging the company-wide
satisfaction and motivation of our people in their roles.
Other indicators
AUMA
£542bn
Gross inflows
£72.3bn
Net flows — Total
(£6.2bn)
Net flows — Excl liquidity and LBG tranche
withdrawals
(£3.2bn)
IFRS diluted earnings per share
46.0p
Alternative performance measures
We assess our performance using a variety of
performance measures including APMs such
as fee based revenue, cost/income ratio,
adjusted operating profit, adjusted profit
before tax and adjusted capital generation.
APMs should be read together with the
Group’s IFRS financial statements. Further
details of all our APMs are included in
Supplementary information.
APM
‘21
67%
‘20
66%
‘19 60%
‘21
51%
‘20
72%
‘19
N/A
‘21
46.0p
‘20
37.9p
‘19
8.8p
‘21
£72.3bn
‘20
£74.3bn
‘19
£86.2bn
‘21
(£6.2bn)
‘20
(£29.0bn)
‘19
(£58.4bn)
‘21 (£3.2bn)
‘20
(£12.3bn)
‘19 (£19.8bn)
‘21
£542bn
‘20
£535bn
‘19
£545bn
KPI KPI
47abrdn.comAnnual report 2021
STRATEGIC REPORT
Chief Financial Officer’s overview
Financial
progress and
capital discipline
Stephanie Bruce, Chief Financial Officer
Financial strength underpins delivery of our
strategy
Our financial strength, strategic focus and operational
resilience have enabled us to successfully navigate the
impacts and uncertainties caused by the global pandemic.
I am pleased to report the strong progress towards our
financial aims, while recognising that we have more to do.
By arresting the decline in revenue, and improving our
operating leverage and cost/income ratio, adjusted
operating profit increased by 47% to £323m
(2020: £219m) and adjusted capital generation by 40% to
£366m (2020: £262m). As a result dividend cover, on an
adjusted capital generation basis, improved to 1.18 times
(2020: 0.84 times) and adjusted diluted earnings per share
increased by 56% to 13.7p (2020: 8.8p).
Our IFRS profit before tax was £1,115m (2020: £838m)
benefiting primarily from the gain on sale of part of our
investment in HDFC Asset Management and the
recognition of the full market value of our residual stake
following its reclassification as an investment during the
second half of the year.
Our disciplined approach to capital management
generated £1.6bn of capital during the year and we
deployed £0.8bn, including returning £0.3bn to
shareholders through dividends and investing £0.3bn in
market opportunities that will help build long term
sustainable growth.
Arresting the decline in revenue
With stronger markets than those experienced in 2020
persisting for the majority of 2021, fee based revenue was
6% higher. Encouragingly, strong growth in fee based
revenue was delivered in all vectors - Investments (+5%),
Adviser (+30%) and Personal (+15%). Revenue from
acquisitions, primarily through Tritax was broadly offset by
revenue foregone through disposals, of which the largest
were Parmenion and our Nordics real assets business. Asia
and the Americas grew strongly, despite adverse foreign
exchange movements, with revenue growth of over 10%
following the restructuring of these businesses. EMEA was
impacted by the Nordics sale and the UK remained
constrained due to the decline in insurance revenue.
An important factor for our future revenue growth is the
diminishing drag on revenue arising from outflows in prior
years. In addition, the revenue impact of current year net
outflows reduced to less than 0.5% (2020: c2%). Also
importantly, current year gross inflows are into higher
margin assets, with gross inflows into equities and real
assets increasing by 7% and 43%, respectively.
Continuing higher levels of revenue growth in the Adviser
and Personal vectors are delivering the diversification
benefits we are seeking in our business; together these
vectors represent 18% of total revenue compared with
15% in 2020. In Adviser, growth benefited from
restructuring of the Phoenix arrangements and, albeit
from a lower base during the pandemic, we delivered
strong growth of 12% (excluding the £25m Phoenix
benefit). Within Personal, our discretionary investment
management business reported its best ever year.
Total fee revenue yield improved slightly to 27.3bps
(2020: 26.9bps).
Improving momentum in flows
The positive trend of H1 2021 in net outflows (excluding
liquidity flows which are lower margin and volatile and LBG
tranche withdrawals) continued in H2 2021
On a full year basis, net outflows (excluding LBG tranche
withdrawals and liquidity) of (£3.2bn) improved compared
with (£12.3bn) in 2020. Adviser and Personal vectors more
than doubled net inflows. While the Investments vector
remained in net outflows, the improvement in 2021 has
created a stronger position entering 2022.
Reshaping the cost base to improve margins
Our cost/income ratio improved in 2021 but we have
more work to do as we progress to our 2023 exit target of
around 70%. We achieved the £400m synergy targets set
in the context of the two historic transactions at a cost of
£550m. With our large integration migration programme
complete in Investments and the separation programme
from Phoenix completing in 2022, the reshaping of our cost
base can move further and faster. In 2021, overall
operating costs reduced by 1%. Lower Phoenix
outsourcing costs and a 14% reduction in overall staff
48 abrdn.com Annual report 2021
1. Cash and liquid resources is an APM. See Supplementary information for details.
2. As at 25 February 2022.
numbers generated the capacity to reward performance
through variable compensation for colleagues
contributing most to our improved performance and
delivering on our strategic non-financial priorities.
All vectors became more efficient in 2021, notably Adviser
with a cost/income ratio of 58%. Personal succeeded in
delivering its planned turnaround, achieving an £8m profit
versus a £5m loss in 2020, largely due to a strong
performance in our discretionary investment
management business. Investments, our largest vector,
improved its cost/income ratio to 79%, not yet where it
needs to be, but showing progress in Asia, the Americas
and EMEA.
The new vector leadership team in Investments are now in
place, focused on delivering revenue growth combined
with rationalisation, simplification and increased
automation, where possible, to accelerate efficiency gains
and create the operational leverage needed to mitigate
against the risk of lower markets.
Restructuring and corporate transaction costs of £259m
were lower than planned for 2021 due to timing of
severance and platform transformation costs. We expect
these severance, platform transformation, and specific
costs to effect savings in Investments, to be c£150m in
2022 (excluding corporate transaction costs), before
reducing considerably in 2023.
Deploying our capital to deliver shareholder
value
We continued to strengthen our balance sheet in terms of
capital and liquidity, with surplus regulatory capital on an
IFPR basis of £1.8bn and cash and liquid resources of
£3.1bn
1
at 31 December 2021.
We generated £0.9bn in proceeds from the sale of stakes
in HDFC Life and HDFC Asset Management and £0.1bn
from disposals of non-core assets. We issued Additional
Tier 1 debt of £0.2bn, making us the first asset manager to
offer this capital efficient instrument. Capital was deployed
to support key growth priorities within private markets and
digital content, through the acquisitions of Tritax and
Finimize. In December, we were delighted to announce the
proposed acquisition of interactive investor for £1.49bn in
cash, subject to certain adjustments, which we will fund
from our existing strong capital resources.
Supplementing our regulatory capital resources, we have
significant further capital resources through our stakes in
our listed financial investments. In January 2022, we
successfully monetised a 4% holding in Phoenix, raising
£0.3bn and intend to return this capital to shareholders. We
have no plans to dispose of the remaining 10.4% holding in
Phoenix, which remains our strategic partner. Over time,
we plan, subject to market conditions, to monetise our
Indian stakes which have a current value of approximately
c£1.1bn
2
. Our capital allocation framework will continue to
prioritise deployment of capital generated into business
areas offering the best long-term sustainable value, with
each opportunity being benchmarked against return of
capital to shareholders. This will include strengthening our
wholesale offering, ESG product suite and digital skills and
capabilities. Over the period to 2023, we plan, subject to
regulatory changes, to maintain a surplus of at least £0.5bn
over our regulatory capital requirement.
Our dividend policy remains, as previously communicated,
set at the level of 14.6p per annum until it is covered at least
1.5 times by adjusted capital generation, with the objective
of growing the dividend in line with our assessment of the
medium term growth in profitability.
Shaping the business for the future
Our strategic priorities, including expanding distribution in
Asia and building direct to consumer services, are
designed to diversify our revenue streams by geography
and client segment and lower the impact of market
volatility on revenue.
Based on our economists’ forecasts at the end of 2021 of
positive market improvements in a post COVID-19
environment over the next 24 months across all key
indices, combined with our targeted improvement in net
flows, we maintain our outlook for high single digit three
year revenue CAGR 2020-2023 and exiting 2023 at a
cost/income ratio of around 70%. The cost base will be
further reshaped as a proportion of revenue by efficient
use of outsourcing, greater use of technology, lower staff
numbers and incentivisation highly geared to
performance.
The proposed acquisition of interactive investor, if
approved by shareholders and regulators, will provide
incremental support to our targets, immediately improving
the growth in revenue and adjusted operating profit. The
acquisition further diversifies our business from ad valorem
revenue streams and transforms the cost/income ratio of
the Personal vector. We will report interactive investor’s
results within our Personal vector and provide separate
disclosures to give transparency on the benefits of the
acquisition and its performance. We intend to provide an
update on our forward looking targets at the half year.
49abrdn.comAnnual report 2021
STRATEGIC REPORT
Chief Financial Officer’s overview
1. Capital management has been renamed Adjusted net financing costs and investment return.
2. Adjusted profit before tax now excludes the share of profit from associates and joint ventures. Comparatives have been restated. See Supplementary
information for more information.
3. Reflects the estimated impact on fee based revenue as a result of net outflows in both the current and prior year, as a percentage of prior year revenue.
4. See Supplementary information for a reconciliation to IFRS staff and other employee related costs.
Analysis of profit
2021
£m
2020
£m
Fee based revenue 1,515 1,425
Adjusted operating expenses (1,192) (1,206)
Adjusted operating profit 323 219
Adjusted net financing costs and investment return
1
- 21
Adjusted profit before tax
2
323 240
Adjusting items including results of associates and joint ventures
2
792 598
IFRS profit before tax 1,115 838
Tax (expense)/credit (120) 15
IFRS profit for the year 995 853
Adjusted diluted earnings per share 13.7p 8.8p
Diluted earnings per share 46.0p 37.9p
Our IFRS profit before tax increased by 33% to £1,115m. This improvement included the benefit of 47% higher adjusted
operating profit and the impact in the prior year of impairments of goodwill and intangibles.
Adjusting items of £792m includes £1,236m profit on disposal of interests in associates (2020: £1,858m), £298m loss from
change in the fair value of significant listed investments (2020: profit £65m) and restructuring and corporate transaction
expenses of £259m (2020: £316m). 2020 also included impairments of goodwill and intangibles of £1,049m. See page 56
for more information.
Improved operating leverage from revenue growth and management of costs
Fee based revenue
Fee based revenue increased by 6% reflecting:
– Positive impact from favourable markets.
– Performance fees 53% higher at £46m (2020: £30m).
– Diminishing impact from net outflows excluding LBG
to 4% compared to 11% in 2020
3
. The revenue impact
of current year net outflows reduced to less than 0.5%
(2020: c2%).
Our continued focus on managing our costs is reflected in
the £14m reduction in adjusted operating expenses:
– Overall staff and other related costs are flat at £643m,
reflecting lower staff numbers, offset by increased
accruals for variable compensation and pay inflation.
– Reductions in non-staff costs of £14m to £549m
includes benefit from lower Phoenix outsourcing costs
as we near completion of separation activity and
savings following the rationalisation of premises.
Adjusted operating expenses
2021
£m
2020
£m
Staff costs excluding variable
compensation 517 531
Variable compensation 126 112
Staff and other related costs
4
643 643
Non-staff costs 549 563
Adjusted operating expenses 1,192 1,206
Acquisitions/disposals had a net neutral impact in 2021
with higher costs following the acquisitions of Tritax and
Finimize broadly offset by reductions following disposals
including Parmenion and our Nordic real estate operation.
The cost/income ratio improved to 79% (2020: 85%).
Actions have now been taken which fully deliver against
the commitment of achieving £400m of annualised
synergies by the end of 2021:
– Synergies benefited 2021 operating expenses by
£320m (2020: £287m) with further benefits expected in
2022. Additionally there are cost synergies which avoid
cost increases not included in the £320m above.
– In line with our commitment, total costs incurred to
deliver these annualised synergies were £550m, of
which £35m were incurred in 2021 (2020: £79m) and
are included within restructuring expenses.
Yield 2021Net flows
Markets
2020
£1,425m
£1,515m
2020: (c£72m)
£5m
£138m
LBG
(c£14m)
Performance
£23m
fees and other
2021: (c£4m)
(£76m)
50 abrdn.com Annual report 2021
1. Includes performance fees of £46m (2020: £30m).
2. Institutional and Wholesale liquidity net flows excluded.
3. Flows excluding Lloyds Banking Group (LBG) do not include the tranche withdrawals of £nil (2020: £25.9bn) relating to the settlement of arbitration with LBG.
Investments
Total Institutional and Wholesale Insurance
2021 2020 2021 2020 2021 2020
Fee based revenue
1
£1,231m £1,176m
Adjusted operating expenses (£978m) (£990m)
Adjusted operating profit £253m £186m
Cost/income ratio 79% 84%
Fee revenue yield 25.9bps 25.8bps 38.8bps 38.8bps 10.0bps 10.9bps
AUM
£464bn £457bn £253bn £252bn £211bn £205bn
Gross flows
£63.4bn £67.4bn £41.9bn £49.8bn £21.5bn £17.6bn
Redemptions
(£74.0bn) (£99.9bn) (£47.0bn) (£49.5bn) (£27.0bn) (£50.4bn)
Net flows
(£10.6bn) (£32.5bn) (£5.1bn) £0.3bn (£5.5bn) (£32.8bn)
Net flows excluding liquidity
2
(£7.6bn) (£41.7bn) (£2.1bn) (£8.9bn) (£5.5bn) (£32.8bn)
Net flows excluding liquidity and LBG
2,3
(£7.6bn) (£15.8bn) (£2.1bn) (£8.9bn) (£5.5bn) (£6.9bn)
Investments highlights – Achieved our commitment to arrest revenue decline with growth of 5%
Adjusted operating profit
–
£67m (36%) higher than 2020, reflecting 5% higher revenue and 1% lower costs.
Fee based revenue
–
5% higher than 2020 due to favourable market levels, a diminishing impact on revenue from net outflows, and a £16m
increase in performance fees. The performance fees of £46m were primarily generated from key funds in Asia, real
assets and insurance.
Institutional and Wholesale highlights
Fee based revenue
–
8% higher (2021: £1,012m, 2020: £941m) reflecting
growth in Wholesale including the benefit from net
inflows into higher margin funds, and favourable
market levels.
–
Diminishing revenue impact from net outflows in 2021.
Revenue yield
–
Remained stable at 38.8bps, supported by favourable
market movements in equities.
Gross flows
–
Increased by 2% excluding liquidity (2021: £35.3bn,
2020: £34.6bn) due to higher equities and real assets
gross flows.
–
Liquidity reduced from £15.2bn to £6.6bn after the
exceptional inflows in 2020.
–
Our pipeline of mandates awarded not yet funded is
£3.7bn (2020: £4.6bn).
Net flows
–
Improved by £6.8bn to (£2.1bn) excluding liquidity. In
particular there was £3.7bn lower net outflows in
equities, and £3.1bn (2020: £2.1bn) of net inflows into
private markets.
–
The volatility in liquidity reflects Institutional clients using
their cash balances through the pandemic period.
Adjusted
operating profit
£253m
Fee based
revenue
£1,231m
Fee revenue
yield
25.9bps
Net flows
(£10.6bn)
51abrdn.comAnnual report 2021
STRATEGIC REPORT
Chief Financial Officer’s overview continued
1. Calculations for investment performance are made gross of fees except where the stated comparator is net of fees. Further details about the calculation of
investment performance are included in the Supplementary information section.
Insurance highlights
Fee based revenue
–
7% lower than prior year at £219m (2020: £235m),
mainly reflecting the impact of the LBG exits in 2020.
–
Remaining withdrawals of c£34bn of LBG assets are
expected to complete in H1 2022. These assets
contributed c£14m to revenue in 2021.
Revenue yield
–
Reduced this year reflecting the LBG exits from fixed
income and multi-asset.
AUM
–
The primary client, Phoenix, represents 83%
(2021: £176bn, 2020: £172bn) of the Insurance AUM.
Gross flows
–
Higher than 2020 reflecting improved bulk purchase
annuity inflows of £5.2bn (2020: £2.0bn).
–
Our pipeline of mandates awarded not yet funded is
£7.6bn (2020: £4.8bn).
Net flows
–
Net outflows of £5.5bn mainly reflect redemptions from
the closed book of business which is in long term
run-off, including £1.9bn relating to LBG.
Investment performance (% of AUM ahead of benchmark)
Investment performance over the key three-year time period is stable, with 67% of AUM covered by this metric ahead of
benchmark (2020: 66%). This reflects ongoing strength in fixed income, alternatives, and liquidity. Benchmarks differ by
fund and are defined in the investment management agreement or prospectus, as appropriate. These benchmarks are
primarily based on indices or peer groups.
Three-year performance
– Our key franchises in Asia and Emerging Markets continue to outperform with overall equity performance broadly in
line with 2020.
– Fixed income performance was in line with 2020 reflecting outperformance in credit and government rates.
– Multi-asset performance has been disappointing and includes the impact of restrictive traditional balanced mandates
which, despite positive returns from asset allocation, have underperformed peer group benchmarks. Unrestricted funds
have generally outperformed.
– Real assets performance has improved, with real estate in particular demonstrating strong outcomes based on active
fund positioning away from retail and further into logistics and accommodation sectors.
One-year performance
– Performance weakened reflecting the headwinds for quality and income orientated funds in equities, as well as the
underperformance in multi-asset mentioned above.
– 2021 was a volatile year for bond markets and this backdrop proved challenging for the relative performance of our
government rates funds, resulting in overall fixed income results weakening.
% of AUM ahead of benchmark
1
1 year 3 years 5 years
2021 2020 2021 2020 2021 2020
Equities 36 73 72 74 61 62
Fixed income 59 78 82 81 87 85
Multi-asset
41 61 39 33 44 36
Real assets
83 41 52 37 50 44
Alternatives
87 95 98 95 98 93
Quantitative
98 32 44 17 68 24
Liquidity
88 94 87 89 84 87
Total
57 71 67 66 67 68
1 year
57%
(2020: 71%)
3 years
67%
(2020: 66%)
5 years
67%
(2020: 68%)
52 abrdn.com Annual report 2021
1. Source: Adviser platform gross flows, Fundscape Q3 2021.
Adviser
2021 2020
Fee based revenue £178m £137m
Adjusted operating expenses (£104m) (£89m)
Adjusted operating profit
£74m £48m
Cost/income ratio 58% 65%
Fee revenue yield
24.9bps 22.3bps
AUA
£76bn £67bn
Gross flows
£9.1bn £6.3bn
Redemptions
(£5.2bn) (£4.4bn)
Net flows
£3.9bn £1.9bn
Adviser highlights – Strong growth in earnings, AUA and net flows which increased by 105%
Adjusted operating profit
–
54% increase driven by positive growth in revenue and
management of costs. The simplification of the
arrangements with Phoenix with effect from 1 January
2021 resulted in a benefit to fee based revenue and
adjusted operating profit of £25m and £19m
respectively.
–
Cost/income ratio improved to 58% (7ppts).
Fee based revenue
–
30% increase on 2020 reflecting higher net flows and
AUA, together with the £25m Phoenix benefit.
Revenue yield
–
2.6bps increase reflects the Phoenix benefit, partly
offset by repricing in prior years.
–
Average assets are £72bn, 16% higher than prior year.
AUA
–
14% increase in the year due to positive flows and
higher markets, benefiting both the Wrap and Elevate
platforms.
–
Our platforms are used by over 2,600 adviser firms
(c1% higher than 2020), with a total of 426,000
customers (c2% higher than 2020).
Gross flows
–
Retained our number one position on gross flows
1
as
sales activity increased by 44% on prior year
.
Net flows
–
Flows remain strong and 105% higher than 2020 at
£3.9bn driven by an increase in the number of primary
positions held with advisers and our strong client
retention.
Adjusted
operating profit
£74m
Fee based
revenue
£178m
Fee revenue
yield
24.9bps
Net flows
£3.9bn
53abrdn.comAnnual report 2021
STRATEGIC REPORT
Chief Financial Officer’s overview continued
Personal
2021 2020
Fee based revenue £92m £80m
Adjusted operating expenses (£84m) (£85m)
Adjusted operating profit/(loss)
£8m (£5m)
Cost/income ratio 91% 106%
Fee revenue yield
61.0bps 58.5bps
AUMA
£14bn £13bn
Gross flows
£1.7bn £1.1bn
Redemptions
(£1.1bn) (£1.1bn)
Net flows
£0.6bn –
Personal highlights – Earnings contribution and record AUMA and net flows
Adjusted operating profit
–
Improved from a £5m loss in 2020 to an £8m profit in
2021, which includes a one-off benefit of c£3m
reported in H1 2021.
–
Cost/income ratio improved by 15ppts to 91%.
Fee based revenue
–
15% higher than 2020 including the benefit of
increased customer activity across the market.
–
Strong performance in our discretionary investment
management business in 2021.
Revenue yield
–
Increased to 61bps with average assets of £14bn,
11% higher than 2020.
AUMA
–
8% higher than prior year, reflecting the higher net
flows into the business and higher market values.
–
Discretionary AUM reached a record level of £8.9bn
(2020: £7.8bn).
–
10% increase in discretionary client numbers to
c16,000 (2020: c14,500).
Gross and net flows
–
Gross flows 55% higher than 2020.
–
Net flows at record levels.
Corporate/strategic
2021 2020
Fee based revenue £14m £32m
Adjusted operating expenses (£26m) (£42m)
Adjusted operating loss
(£12m) (£10m)
This segment comprises certain corporate costs (c£12m in 2021) and the Parmenion and SL Asia businesses which were
held for sale. The sale of Parmenion completed in June 2021 and the sale of SL Asia completed in June 2020.
Following the completion of the sale of Parmenion this segment comprised only corporate costs in H2 2021.
Adjusted
operating profit
£8m
Fee based
revenue
£92m
Fee revenue
yield
61.0bps
Net flows
£0.6bn
54 abrdn.com Annual report 2021
1. Segmental performance in this report reflects revised segments and 2020 comparatives have been restated on this basis. See further details in Note 2 in the
Group financial statements and in Supplementary information.
Overall performance
Adjusted operating profit
1
AUMA Net flows
Segmental summary
2021
£m
2020
£m
2021
£bn
2020
£bn
2021
£bn
2020
£bn
Investments 253 186 464 457 (10.6) (32.5)
Adviser 74 48 76 67 3.9 1.9
Personal
8 (5) 14 13 0.6 –
Corporate/strategic
(12) (10) - 8 0.3 1.0
Eliminations
- – (12) (10) (0.4) 0.6
Total 323 219 542 535 (6.2) (29.0)
Net flows excluding liquidity (3.2) (38.2)
Net flows excluding liquidity and LBG (3.2) (12.3)
Analysis of profit
2021
£m
2020
£m
Fee based revenue 1,515 1,425
Adjusted operating expenses (1,192) (1,206)
Adjusted operating profit
323 219
Adjusted net financing costs and investment return - 21
Adjusted profit before tax
323 240
Adjusting items including results of associates and joint ventures 792 598
IFRS profit before tax
1,115 838
Tax (expense)/credit (120) 15
IFRS profit for the year 995 853
Adjusted net financing costs and investment return
Adjusted net financing costs and investment return generated £nil (2020: £21m):
– Investment gains including from seed capital and co-investment fund holdings were £4m (2020: £18m). 2020 benefited
from significant market related gains which were not repeated.
– Increased net finance costs of £21m (2020: £17m) reflecting a lower rate of return on cash and liquid assets.
– Lower net interest credit relating to the staff pension schemes of £17m (2020: £20m).
Adjusted
operating profit
£323m
IFRS profit
before tax
£1,115m
Adjusted
capital generation
£366m
55abrdn.comAnnual report 2021
STRATEGIC REPORT
Chief Financial Officer’s overview continued
Adjusting items including results of associates and joint ventures
2021
£m
2020
£m
Profit on disposal of interests in associates 1,236 1,858
Profit on disposal of subsidiaries and other operations 127 8
Restructuring and corporate transaction expenses
(259) (316)
Amortisation and impairment of intangible assets acquired in business combinations and through the
purchase of customer contracts
(99) (1,180)
Change in fair value of significant listed investments
(298) 65
Dividends from significant listed investments
71 –
Share of profit or loss from associates and joint ventures
(22) 194
Loss on impairment of interests in associates and joint ventures
- (45)
Other
36 14
Total adjusting items including results of associates and joint ventures
792 598
Profit on disposal of interests in associates of £1,236m
comprises one-off accounting gains of £965m following
the reclassification of our shareholdings in HDFC Asset
Management (£897m) and Phoenix (£68m) from
associates to investments measured at fair value during
2021, and a £271m gain from the sale of a 5% stake in
HDFC Asset Management in September 2021. The HDFC
Asset Management reclassification resulted from the
reduction of our shareholding to 16% following the
September sale, and the Phoenix reclassification reflected
changes to the commercial agreements announced in
February 2021. The 2020 profit of £1,858m primarily
related to a one-off accounting gain for HDFC Life, and
profits from the sale of shares in HDFC Life and HDFC Asset
Management during the year. See Note 15 in the Group
financial statements for further details.
Profit on disposal of subsidiaries and other operations of
£127m primarily relates to the sales of Parmenion (£73m)
and Bonaccord (£39m) which completed on 30 June 2021
and 30 September 2021 respectively. See Note 1 in the
Group financial statements.
Restructuring and corporate transaction expenses were
£259m, primarily reflecting ongoing transformation costs
and include £27m relating to the separation from Phoenix.
The total Phoenix separation costs accounted for to date
amounted to £309m. We expect a small amount of
separation costs to be accounted for in 2022 and that the
total cost will remain within our estimate of c£310m.
Amortisation and impairment of intangible assets acquired
in business combinations and through the purchase of
customer contracts reduced to £99m as there were no
impairments in 2021 compared to impairments of goodwill
and customer relationship intangibles of £1,049m in 2020.
Change in fair value of significant listed investments was
(£298m) and represents the impact of market
movements on our holdings in HDFC Life (£52m reduction
in value including impact of stake sale in June 2021), in
Phoenix (£82m reduction) from February 2021 and in
HDFC Asset Management (£164m reduction) from
September 2021.
Dividends from significant listed investments relates to our
shareholdings in HDFC Life, Phoenix and HDFC Asset
Management that were previously associates and were
reclassified on 3 December 2020, 23 February 2021 and
29 September 2021, respectively. Following the
reclassification, dividends received are now recognised as
income within our financial statements. The £71m in 2021
relates to dividends received from Phoenix (£69m) and
HDFC Life (£2m).
Share of profit or loss from associates and joint ventures
reduced to a loss of £22m (2020: profit £194m). Following
the reclassifications noted above, only HASL and Virgin
Money UTM are now classified as associates and joint
ventures.
2021
£m
2020
£m
HASL 19 23
Virgin Money UTM (6) (6)
Phoenix
(56) 110
HDFC Life
- 19
HDFC Asset Management
21 48
Share of profit or loss from
associates and joint ventures
(22) 194
The reduction in HASL was due mainly to lower profits on
group business and lower investment returns in 2021.
The Phoenix loss to 22 February 2021 resulted from
investment return variances from equity market and
interest rate rises and is more than offset by the £68m gain
on reclassification discussed above.
The HDFC Asset Management profit to 29 September
2021 was lower mainly due to 2020 including a one-off tax
benefit of £18m and a full 12 months profit.
Other adjusting items of £36m include a £25m net release
of deferred income. See Note 34 in the Group financial
statements.
See pages 156 and 170 for further details on adjusted
operating profit and reconciliation of adjusted operating
profit to IFRS profit. Further details on adjusting items are
included in the Supplementary information section.
56 abrdn.com Annual report 2021
Tax policy
We have important responsibilities in paying and collecting
taxes in the countries in which we operate. Our tax
strategy is therefore guided by a commitment to high
ethical, legal and professional standards and being open
and transparent about what we are doing to meet those
standards.
Tax expense
The total IFRS tax expense attributable to the profit for the
year was £120m (2020: credit £15m), including a tax
expense attributable to adjusting items of £94m
(2020: credit £53m), resulting in an effective tax rate of
11% on the total IFRS profit (2020: negative 2%). The
difference to the UK Corporation Tax rate of 19% is mainly
driven by:
– Revaluation of elements of abrdn’s deferred tax
balances due to future UK tax rises.
– Realised and unrealised gains in the shares in HDFC
Asset Management being charged to tax at the Indian
long-term capital gains tax rate which is lower than the
UK Corporation Tax rate.
– Fair value movements relating to Phoenix and HDFC
Life not being subject to tax.
The tax expense attributable to adjusted profit is £26m
(2020: £38m), an effective tax rate of 8% (2020: 16%). This
is lower than the 19% UK rate primarily due to the future
rise in UK Corporation Tax to 25%. This has a beneficial
effect in increasing the value of our deferred tax assets.
Total tax contribution
Total tax contribution is a measure of all the taxes abrdn
pays to and collects on behalf of governments in the
territories in which we operate. Our total tax contribution
was £447m (2020: £484m). Of the total, £190m
(2020: £203m) was borne by abrdn whilst £257m
(2020: £281m) represents tax collected by us on behalf of
the tax authorities. Taxes borne mainly consist of
corporation tax, employer’s national insurance
contributions and irrecoverable VAT. The taxes collected
figure is mainly comprised of pay-as-you-earn deductions
from employee payroll payments, employees’ national
insurance contributions, VAT collected and income tax
collected on behalf of HMRC on platform pensions
business.
You can read our tax report on our website
www.abrdn.com/annualreport
Earnings per share
– Adjusted diluted earnings per share increased by
56% to 13.7p (2020: 8.8p) due to the 47% increase in
adjusted profit after tax and the 9% benefit from 2020
share buybacks.
– Diluted earnings per share increased to 46.0p
(2020: 37.9p) reflecting the factors above and the
impact in the prior year of losses on impairments of
goodwill and intangibles.
Dividends
As disclosed in the Annual report and accounts in March
2021, it is the Board’s current intention to maintain the total
annual dividend at 14.6p (with the interim and final both at
7.3p per share), until it is covered at least 1.5 times by
adjusted capital generation, at which point the Board will
seek to grow the dividend in line with its assessment of the
underlying medium-term growth in profitability.
The Board has accordingly recommended a final dividend
for 2021 of 7.3p (2020: 7.3p) per share. This is subject to
shareholder approval and will be paid on 24 May 2022 to
shareholders on the register at close of business on 8 April
2022. The dividend payment is expected to be £155m.
External dividends are funded from the cumulative
dividend income that abrdn plc receives from its
subsidiaries and associates (see below for details of cash
and distributable reserves). The need to hold appropriate
regulatory capital is the primary restriction on the Group’s
ability to pay dividends. Further information on the principal
risks and uncertainties that may affect the business and
therefore dividends is provided in the Risk management
section.
Adjusted capital generation in 2021 of £366m, 40% higher
than 2020 and was 1.18 times the full year dividend.
The adjusted capital generation trend and related
dividend coverage is shown below:
‘21
‘20
‘19
£366m
£262m
£333m
1.18x
0.84x
0.68x
‘21
‘20
‘19
£447m
£484m
£526m
57abrdn.comAnnual report 2021
STRATEGIC REPORT
Chief Financial Officer’s overview continued
Capital and liquidity
Adjusted capital generation
Adjusted capital generation of £366m increased by 40%
and remains closely aligned with adjusted profit after tax
as shown below.
2021
£m
2020
£m
Adjusted profit after tax
1
297 202
Less net interest credit relating to
the staff pension schemes
(17) (20)
Add dividends received from
associates, joint ventures and
significant listed investments
86 80
Adjusted capital generation
366 262
1. Adjusted profit after tax now excludes the share of profit or loss from
associates and joint ventures. Comparatives have been restated. See
Supplementary information for more information.
Net movement in surplus regulatory capital
Indicative surplus regulatory capital, on an IFPR basis,
increased by £0.6bn to £1.8bn at 31 December 2021
largely due to the sale of stakes in HDFC Life and HDFC
Asset Management.
Key movements in surplus regulatory capital in 2021 are
shown in the table below.
Analysis of movements in surplus regulatory
capital (IFPR basis)
2021
£bn
Opening surplus regulatory capital (indicative)
2
1.2
Sources of capital
Adjusted capital generation
0.4
HDFC Life and HDFC Asset Management
sale proceeds
0.9
Parmenion and Bonaccord sale proceeds
0.1
Issuance of AT1 debt
0.2
Uses of capital
Restructuring and corporate transaction
expenses (net of tax)
(0.2)
Dividends
(0.3)
Acquisitions of Tritax and Finimize
(0.3)
Other
(0.2)
Closing surplus regulatory capital
1.8
2. The Group reported capital under CRD IV until 31 December 2021. The
opening surplus regulatory capital on an IFPR basis is therefore indicative.
The full value of the Group’s listed investments is excluded
from the capital position under IFPR.
Note 45 of the Group financial statements includes
a reconciliation between IFRS equity and surplus
regulatory capital and also details of our capital
management policies.
Cash and liquid resources and distributable
reserves
Cash and liquid resources remained robust at £3.1bn at
31 December 2021 (2020: £2.5bn). These resources are
high quality and mainly invested in cash, money market
instruments and short-term debt securities. Further
information on cash and liquid resources, and a
reconciliation to IFRS cash and cash equivalents, is
provided in Supplementary information.
At 31 December 2021 abrdn plc had £2.8bn (2020: £2.1bn)
of distributable reserves.
IFRS net cash inflows
– Net cash inflows from operating activities were £14m
(2020: £56m) which includes outflows from
restructuring costs, net of tax, of £190m (2020: £232m).
Inflows were lower in 2021 due to working capital
movements.
– Net cash inflows from investing activities were £755m
(2020: £1,014m) and included £0.9bn (2020: £0.9bn)
from HDFC Life and HDFC Asset Management stake
sales. Inflows were lower than 2020 due to cash being
invested in money market instruments, which are not
classified as cash equivalents and the net impact of
2021 acquisitions and disposals.
– Net cash outflows from financing activities were
£243m (2020: £1,064m) with the reduction mainly due
to the £0.2bn proceeds from the Additional Tier 1 debt
issue in 2021 (2020: £0.1bn repayment of preference
shares), lower dividends paid in 2021 (£171m lower)
and the 2020 share buyback (share buyback outflow
£320m lower).
The cash inflows and outflows described above resulted
in closing cash and cash equivalents of £1,875m as at
31 December 2021 (2020: £1,358m).
IFRS net assets
IFRS net assets attributable to equity holders increased to
£7.6bn (2020: £6.8bn) with profits offset by dividends paid
in the year:
– Intangible assets increased to £0.7bn (2020: £0.5bn) as
a result of the Tritax and Finimize acquisitions. Further
details are provided in Note 14.
– The principal defined benefit staff pension scheme,
which is closed to future accrual, continues to have a
significant surplus of £1.6bn (2020: £1.5bn). Further
details are provided in Note 33.
– Financial investments increased to £4.3bn
(2020: £3.1bn) primarily due to the reclassification of
HDFC Asset Management from an associate during
2021. At 31 December 2021 financial investments
included £2.3bn (2020: £1.2bn) in relation to significant
listed investments (Phoenix £941m, HDFC Asset
Management £840m and HDFC Life £508m). Financial
investments also include corporate holdings in money
market instruments and debt securities of £1.1bn
(2020: £1.0bn), holdings in newly established
investment vehicles which the Group has seeded of
£0.3bn (2020: £0.3bn) and co-investments of £0.1bn
(2020: £0.1bn). Further details are provided in Note 37.
– To optimise our capital structure abrdn issued
Additional Tier 1 debt of £210m in December 2021
which is included in other equity.
58 abrdn.com Annual report 2021
Viability
statement
Longer-term prospects
The Directors have determined that three years is an
appropriate period over which to assess the Group’s
prospects. In addition to aligning with our business planning
horizon, this reflects the timescale over which changes to
major regulations and the external landscape affecting
our business typically take place.
The Group’s prospects are primarily assessed through the
strategic and business planning process which considers
our business model and how this is designed to deliver
efficient, sustainable growth.
The assessment reflects the Group’s focus on its strategic
priorities as set out on pages 16 to 17 and how this is
expected to drive longer-term prospects across abrdn’s
three vectors, including through responding to clients’
climate-related needs.
The Group’s longer-term prospects were enhanced
during the year as a result of extending the strategic
partnership with Phoenix to February 2031. The proposed
acquisition of interactive investor is expected to further
enhance these prospects.
In forming their assessment of the longer-term prospects
of the Group, the Directors have also taken into account:
– The Group’s capital position as set out on page 58.
– The substantial holdings of Group cash and liquid
resources as set out on page 58 as well as holdings in
listed equity investments as set out on page 29.
– The Group’s principal and emerging risks as set out on
pages 61 to 64.
Assessment of prospects
The Directors consider the Group’s focus on its
strategic priorities will deliver growth while
maintaining the Group’s strong regulatory capital
position and the dividend policy described on page
57.
Viability
The Directors consider that three years is an appropriate
period for assessing viability as this is in line with the horizon
used for our business planning and stress testing and
scenario analysis processes. In considering the viability
statement, the Board performed a robust assessment of
the Group’s principal risks and took account of these
processes, the results of reverse stress testing and the
ongoing impact of COVID-19 as set out below.
The business planning process includes the projection of
profitability, regulatory capital and liquidity over a three
year period, based on a number of assumptions. This
includes assumptions regarding the economic outlook in
light of various factors including the COVID-19 pandemic.
The Group has no debt maturing over the next three years
and, based on business planning projections, there is no
expectation that the Group will need to draw down on its
£400m revolving credit facility described on page 219.
The Group’s stress testing and scenario analysis
programme applies severe stresses to the business plan to
understand the Group’s financial resilience. This includes
exploring the impacts of market-wide stresses, stresses
that are specific to abrdn, and stresses that combine both
these elements. Whilst all of the Group’s principal risks
could potentially impact on the Group’s financial resilience,
our stress testing focused on those risks expected to have
the most significant impact.
– Financial risk was explored through applying a range of
stresses to market levels, flows, and margins. The
scenarios that were explored included equity markets
falling around 30% from year end levels, net outflows
over the planning horizon reducing the year end AUMA
by up to 15%, and the basis point fees charged to
clients being 10% lower than in the business plan.
– Operational risk was explored through considering the
impact of the Group incurring £100m of operational
losses. This was considered to represent the potential
impact of severe losses that might arise from one or
more of the following principal risks crystallising:
process execution and trade errors, technology risk,
security and resilience risk, or fraud and financial crime
risks.
The scenarios explored all resulted in the Group
experiencing reduced profitability and, in some cases,
losses over the planning horizon. Projections of capital and
liquid resources fell as a result of these losses with the
largest falls occurring in the scenario where the flow and
market stress was accompanied by the basis point fees
charged to clients being 10% lower than in the business
plan.
The Group had sufficient capital and liquid resources to
withstand all of the stresses and did not need to take any
management actions other than those assumed within
the business plan. This reflects the strength and quality of
the Group’s financial position.
59abrdn.comAnnual report 2021
STRATEGIC REPORT
Chief Financial Officer’s overview continued
In the event that the Group was to experience more
severe stresses than those explored under the Group’s
stress testing and scenario analysis programme, the
Group has a diverse range of management actions
including a number of sizeable management actions
wholly within the Group’s control.
During the year, additional stress testing and scenario
analysis was performed to support the decision to
proceed with the proposed acquisition of interactive
investor. This was also taken into consideration in the
Directors’ assessment of viability.
Reverse stress testing involves exploring the quantitative
and/or qualitative impacts of extreme scenarios which
could threaten the viability of our business model. In 2021
we explored a scenario in which abrdn was unable to
trade and service clients within its investments vector as a
consequence of the failure of our main third party provider
of administration services that support the Group’s trading,
middle-office and back-office functions.
The reverse stress testing exercise highlighted the
existence of controls, oversight arrangements, service
level agreements, monitored triggers and defined
escalation processes that the Group has in place which
would assist the Group in taking effective and timely
management actions where needed in response to
instances of failure within the third party provider. The
exercise also highlighted that, as a designated Global
Systemically Important Bank, our third party provider
would be expected to be subject to additional regulatory
oversight in the event of any instances of significant failure.
Although the scenario explored represented a reverse
stress test, the scenario was considered to have a very low
likelihood of occurrence. This, and the Group’s range of
mitigants in place to respond to the scenario, supports the
assessment of viability and no qualification is considered
necessary.
Impact of COVID-19
The Directors have explicitly considered the impact of
COVID-19 on the Group’s viability recognising the further
measures taken in 2021 in response to the COVID-19
pandemic. The Group has not required government
support as a result of the pandemic and has
demonstrated the ability to operate successfully whether
staff were mostly working from home or working on a
blended basis combining both home and office-working.
Operational resilience
Operational resilience reflects the ability of firms and the
financial sector as a whole to prevent, adapt, respond to,
recover and learn from operational disruptions. In addition
to causing potential harm to customers and threatening
market integrity, such operational disruptions and the
unavailability of important business services have the
potential to threaten viability. The FCA is introducing new
rules on operational resilience on 31 March 2022 and the
Board noted the preliminary work performed in response
to these rules when forming their assessment of viability.
Assessment of viability
The Directors confirm that they have a reasonable
expectation that abrdn plc will be able to continue
in operation and meet its liabilities as they fall due
over the next three years.
60 abrdn.com Annual report 2021
Risk management
1. See Note 37 for disclosure relating to the financial impact of climate related risk on the 2021 financial statements.
Managing
risk for better
outcomes
Our approach to risk management
A strong risk and compliance culture underpins excellent
service to clients and the effective management of our
business. Our Board has ultimate responsibility for risk
management and oversees the effectiveness of our
Enterprise Risk Management (ERM) framework. Across all
principal risk categories – conduct risk, strategic risk,
financial risk and regulatory and operational risk – the
impact on clients sits at the heart of our decision-making.
Three lines of defence
We operate ‘three lines of defence’ in the management of
risk with clearly defined roles and responsibilities:
– First line: Day-to-day risk management, including
identification and mitigation of risks and maintaining
appropriate controls.
– Second line: Oversight from our Risk and Compliance
function, which reports to the Chief Risk Officer.
– Third line: Our Internal Audit function, reporting to the
Chief Internal Auditor, independently verifies our
systems of control.
ERM framework
This underpins risk management throughout our business.
We continually evolve our framework to meet the
changing needs of the company and to make sure it
keeps pace with industry best practice and the risk profile
of the business. In 2021, improvements to the framework
included:
– Strengthening our risk appetite framework by
introducing new risk tolerances to support governance
and risk management.
– Extending and refining our risk taxonomy so we can
describe risk more accurately.
– Updating our process for formal risk acceptance, linked
to our group-wide risk management system.
– Reviewing our policy framework and policy register.
Business risk environment
The major impact of COVID-19 on our operating
environment has continued during 2021. We have shown
resilience in dealing with the effects of the pandemic and
we continue to manage its market, operational and
financial impacts as we deliver our business plan and
continue to enhance our client focus.
The further lifting of restrictions in the UK meant that we
could take the next step towards ‘blended working’ as the
default arrangement for our people, with colleagues
gradually returning to the office in greater numbers.
Outside the UK, we continue to follow government
guidance across our global regions regarding the return to
office approach.
The commercial environment remained challenging
during 2021, exacerbated by the impact of the pandemic.
However, after setting out our new strategy in March, we
made good progress towards achieving our objectives to
arrest the decline in revenue, then establish a pattern of
revenue growth, improved efficiency and improved
returns. The roll-out of our new brand means we are now
better positioned to have impact at scale and as a global
business.
The proposed acquisition of interactive investor will
significantly enhance our presence within a fast-growing
and attractive market. Execution risks for this acquisition
will be limited by interactive investor continuing to operate
as a discrete business within our Personal vector.
In the near term, there is still operational stretch as work
continues on the transformation of the business. Phoenix
separation activity is complex and has to be managed and
coordinated with other transformation work, so that the
impact on business as usual is managed.
We are actively working to retain talent within a dynamic
and competitive labour market and to promote colleague
wellbeing and engagement, which you can read more
about on pages 38 to 39 of this report. There is clear
executive ownership and accountability for our talent and
development programmes.
We maintain heightened vigilance over risks to our
operations from financial crime and cyber intrusion. Our
dedicated, expert internal teams monitor and manage
these risks as they evolve, with the support of external
specialists.
Our conduct risk framework is strengthened continuously
and client interests are at the heart of this work. In 2021, we
improved our processes in relation to vulnerable
customers.
ESG risks
We have a responsibility to shareholders, clients and all
stakeholders to assess, report on, manage and mitigate
our ESG risks. For ‘Environment’, risks are primarily related
to climate change and these are an important aspect of
integrating ESG considerations in our portfolio
management activities. In addition, we continue to review
climate-related risks and manage our own business
impact on climate change
1
, which you can read about on
pages 32 to 37. For ‘Social’, our risks primarily relate to
colleague engagement, wellbeing, development and
diversity and inclusion. For ‘Governance’, our risks primarily
relate to corporate governance, conduct, ethics and
cyber-crime. These ESG risks are discussed further under
‘Principal risks and uncertainties’ and throughout this
report.
We have a materiality review every two to three years to
ensure we are focusing on the right ESG risks and issues.
Our most recent review is included in our 2019 corporate
sustainability report. We will carry out our next review later
in 2022.
61abrdn.comAnnual report 2021
STRATEGIC REPORT
Risk management continued
We are following a three-year work plan on ESG and
defining our longer-term strategic ambition. During 2021
we continued to deliver against a number of key
milestones, including regulatory compliance on
sustainable finance disclosure, client reporting, creation of
ESG analytical tools (carbon footprinting and carbon
scenario analysis) and decisions for an ESG data platform
and exclusion screening tool.
Emerging risks
We are vigilant to emerging risks that could impact our
strategy and operations, with a particular focus on our
three vectors of growth. The nature of these risks could be
geopolitical, economic, societal, technological, legal,
regulatory or environmental. We distil internal and external
research to model how risks could emerge and potentially
evolve and to inform how we address them through our
ERM framework and our principal risk framework in
particular.
The current conflict between Russia and Ukraine is already
impacting markets and operations and is likely to have
substantial economic consequences. Other notable
emerging risks to our business include the availability of
talent in our future workplace, new cyber threats,
disruptive technologies, unprecedented market shifts,
climate change, emerging variants of COVID-19 and
indirect impacts resulting from the pandemic.
Principal risks and uncertainties
The risks we face as a business have as much to do with
our actions and approaches internally, as they do with the
external environment. These risks fall into 12 areas that
form the basis of our ERM framework. This framework
gives us the structure to assess, monitor, control and
govern the risks in our business. Principal and emerging
risks are subject to active oversight and robust assessment
by the Board, and the principal risks are described in the
following table.
Risk to our business and how this evolved in 2021 How we manage this risk
Strategic risk
–
These are risks that could prevent us from achieving our
strategic aims and successfully delivering our business plans.
–
These could include failing to meet client expectations, poor
strategic decision-making, poor implementation or failure to
adapt.
The launch of our single global brand was an important
step to clear up confusion that existed across our multiple
brands previously. Our brand strategy review has been
thorough and we developed stakeholder engagement
plans to guide the transition to the new brand. Market
and competitor intelligence has aided decision-making.
Each of our vectors has a clear organic growth strategy.
Any inorganic growth, such as through acquisitions, is
rigorously assessed for its contribution to our core
strategy and the opportunities it presents to help us
better understand different client needs.
Financial risk
–
This is the risk of having insufficient financial resources,
suffering losses from adverse markets or the failure or
default of counterparties. It is impacted by our flows
experience, global market conditions and the fees we
charge on investment mandates, platforms and wealth
management services.
–
Our strong capital and liquidity position has made possible
the proposed acquisition of interactive investor.
–
The impact of COVID-19 and securing transformation
milestones have enabled us to lower non-staff costs.
Business planning and stress testing is used to project our
financial resources under a range of scenarios. This
allows us to identify possible issues and take action to
manage our financial position. This is supported by the
risk limits on capital and liquidity monitored under our risk
appetite framework.
Our Treasury Policy includes minimum standards for
managing liquidity, market and counterparty risks,
including the credit quality of our counterparties.
During 2021 we undertook detailed preparations for the
introduction of the UK’s new Investment Firms Prudential
Regime which determines our regulatory capital and
liquidity requirements.
Conduct risk
–
Our business relies on our ability to deliver fair client
outcomes, and there is a risk that we fail to achieve this in our
strategies, decisions and actions.
–
This could lead to customer and client harm, reputational
damage and loss of income.
Our ERM framework supports the management of
conduct risk with clear expectations around conduct
goals and responsibilities. In 2021 we refreshed our
Global Code of Conduct for all employees.
In response to COVID-19 we prioritised running our
business with minimal client impact while maintaining an
effective control environment for remote working.
Drawing on the UK Senior Managers and Certification
Regime, we train our teams to understand how to apply
our conduct rules in their roles.
1
2
3
62 abrdn.com Annual report 2021
Risk to our business and how this evolved in 2021 How we manage this risk
Regulatory and legal risk
–
High volumes of regulatory change can create risk by
presenting implementation and interpretation challenges.
–
Failing to comply with, or meet changes in, legislation,
contractual requirements or regulations, can lead to
sanctions, reputation damage and income loss.
–
During 2021 the company managed a heavy programme of
regulatory implementation, including in relation to ESG
investment, operational resilience, LIBOR reform and the
new UK and EU prudential frameworks.
We monitor the regulatory landscape globally so that we
can engage in potential areas of change early. We also
invest in compliance and monitoring activity across the
business. Our relationships with key regulators are based
on trust and transparency while our Legal team supports
senior managers across our business.
Operational risks (5-12)
Process execution and trade errors
–
This is the risk that processes, systems or external events
could produce operational errors.
–
During 2021 there was close management focus on this, and
a reduction in events requiring investigation and remedy.
We monitor underlying causes of error to identify areas
for action, promoting a culture of accountability and
continuously improving how we address issues. We also
continue to enhance the ERM framework. In addition, we
have set up a taskforce to fast track issues that have the
potential to impact clients.
We dealt with potentially important systems outages
using established incident management processes, and
senior risk committees have been reviewing the impact
of COVID-19 on these processes.
People
–
In line with the wider economy, employee turnover has
increased in all regions as a consequence of disruption
arising from the pandemic.
–
Engaging with our people, and supporting their wellbeing, is
critical to our strategy and the success of our business.
–
However, there is a risk of resources and employment
practices failing to align with strategic objectives.
Since the onset of the pandemic we have successfully
adapted, providing online tools to support collaboration
and moving our learning and development offering
online. We have responded to increased competition for
talent using targeted approaches to support retention
and recruitment for our key business functions.
We monitored and took steps to mitigate new risks that
have continued to emerge over the course of pandemic,
which have included impacts on people’s physical and
emotional wellbeing and impacts on the operation of
teams. We have offered counselling, and asked
colleagues to use their full leave allocation.
Technology
–
There is a risk that our technology may fail to adapt to
business needs, as well as of unauthorised users accessing
our systems and carrying out cyber attacks.
–
This risk is relevant to a wide range of potential threats to the
business including weather events, internal failure, external
intrusion and supplier failure.
–
Our current IT estate is complex, and dependence on third
party suppliers needs to be managed in a dedicated way.
We have an ongoing programme to invest in, and
enhance, our IT infrastructure controls. We benchmark
our IT systems environment to identify areas for
improvement. IT resilience is monitored at senior
executive committees. 2021 saw only minor disruptions
to service and improvement plans are in place.
We maintain heightened vigilance for cyber intrusion,
with dedicated teams monitoring and managing cyber
security risks. We carry out regular testing on penetration
and crisis management.
Business resilience and continuity
–
Incidents that can impact business resilience and continuity
include environmental issues, terrorism, economic
instabilities, cyber attacks and operational incidents.
–
The risk of disruption from inside the organisation is broadly
stable. However, tools for exploiting IT vulnerabilities are
becoming more widely available globally and are frequently
used by criminal groups to enable ransomware attacks.
–
As COVID-19 has continued to test business resilience, the
business has adapted effectively to blended working.
We continue to enhance our operational resilience
framework and strengthen our response to disruption.
Crisis management and contingency planning
processes are regularly reviewed and tested, enabling us
to minimise disruption as the balance between home
and hybrid working has shifted over the year. We have
also done extensive work to meet the requirements of
the FCA/PRA Operational Resilience regulations that
come into force on 31 March 2022.
4
5
6
7
8
63abrdn.comAnnual report 2021
STRATEGIC REPORT
Risk management continued
Risk to our business and how this evolved in 2021 How we manage this risk
Fraud and financial crime
–
As a business that handles clients’ money, we are exposed to
the risk of fraudulent and dishonest activity.
–
As we engage with a wide number of external parties, we
have to be vigilant to the risk that these parties are
connected with criminal behaviour, or subject to sanctions
by national or global authorities.
Sound processes are in place to identify client activity
linked with financial crime, globally. These include
controls for anti-money laundering (AML), anti-bribery,
fraud and other areas of financial crime. We have a
company-wide programme to invest in controls and
processes to improve our monitoring of these risks.
During 2021 we did extensive work to define and
implement consistent AML standards across the
company globally and in each of our growth vectors.
We continue to work with the financial authorities and
industry peers to assist those targeted by scams.
Change management
–
This is the risk of failing to manage strategic and operational
change initiatives effectively.
–
We implemented major regulatory change during 2021
including embedding ESG principles and the discontinuation
of LIBOR.
–
We delivered major milestones on the transformation of our
investment platform, while maintaining
a focus on managing
the impact of our transformation activity and the associated
costs.
We manage major change projects centrally, with clear
governance processes and consolidation of our change
workload. Second and third lines have clear roles in
overseeing progress and we deliver projects in ways that
help us to protect client outcomes.
Third party management
–
We outsource activities to suppliers with specialist
capabilities which means we are exposed to the risk of third
parties failing to deliver in line with contractual obligations.
–
It is our responsibility to make sure these firms deliver, so we
continue to streamline delivery and reduce complexity.
Our aim is to maintain strong relationships with suppliers.
During 2021 we completed our programme to
rationalise our supplier base and strengthen our
oversight of our suppliers. Our Third Party Code of
Conduct requires third parties to acknowledge their best
practice responsibilities.
In 2021 we undertook extensive preparations to adopt
the European Banking Authority’s guidelines on
outsourcing across our supplier base.
Financial management process
–
Sound financial reporting influences abrdn’s performance,
planning and disclosures to external stakeholders.
–
Failures in these processes would expose our business and
shareholders to the risk of making poorly informed decisions.
Our financial reporting activities align to external
reporting standards and industry best practice. Our Audit
Committee reviews, and where necessary challenges,
our reporting. Our Chief Risk Officer also provides an
independent review of our business plan to support
decision-making.
In 2021 we concluded our programme to transform our
Finance operations, which was delivered to plan while
contending with disruption resulting from the pandemic.
9
10
11
12
64 abrdn.com Annual report 2021
The cover to page 65 constitute the Strategic report which was approved by the Board and signed on its
behalf by:
Stephen Bird
Chief Executive Officer
abrdn plc
(SC286832)
28 February 2022
65abrdn.comAnnual report 2021
STRATEGIC REPORT
Governance
66 abrdn.com Annual report 2021
Contents
2
Board of Directors
68
3
Corporate governance statement
72
3.1
Audit Committee report
84
3.2
Risk and Capital Committee report
93
3.3
Nomination and Governance Committee report
97
3.4
Directors’ remuneration report
100
4
Directors’ report
117
5
Statement of Directors’ responsibilities
123
67abrdn.comAnnual report 2021
GOVERNANCE
2. Board of Directors
Our business is overseen by our Board of Directors. Biographical details (and shareholdings)
of the Directors as at 28 February 2022 are listed below.
Sir Douglas Flint CBE –
Chairman
Stephen Bird –
Chief Executive Officer
Stephanie Bruce –
Chief Financial Officer
Appointed to the Board
November 2018
Age
66
Nationality
British
Shares
179,617
Board committees:
NC
Appointed to the Board
July 2020
Age
55
Nationality
British
Shares
700,000
Appointed to the Board
June 2019
Age
53
Nationality
British
Shares
360,000
Sir Douglas’ extensive experience of board
leadership in global financial services helps to
focus Board discussion and challenge on the
design and delivery of our strategy. His wide-
ranging expertise in international, financial
and governance matters is an important
asset to abrdn, while his collaborative
approach helps to facilitate open and
constructive boardroom discussion.
Previously, Sir Douglas 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. From 2005 to 2011 he also
served as a non-executive director of bp plc.
In other current roles, Sir Douglas is chairman
of IP Group plc and serves as HM Treasury's
Special Envoy for Financial and Professional
Services to China's Belt and Road Initiative. He
is also a member of the Monetary Authority of
Singapore's international advisory panel, and
a board member of both the International
Chamber of Commerce UK and the Institute
of International Finance.
Additionally, he is chairman of the Just
Finance Foundation, non-executive director
of the Centre for Policy Studies, a member of
the Global Advisory Council of Motive
Partners and a member of the Hakluyt
International Advisory Board. He also chairs
the corporate board of Cancer Research UK
and is a trustee of the Royal Marsden Cancer
Charity.
He holds a BAcc (Hons) from the University of
Glasgow, a PMD from Harvard Business
School and is a Member of the Institute of
Chartered Accountants of Scotland.
Stephen brings a track record of delivering
exceptional value to clients, creating high-
quality revenue and earnings growth in
complex financial markets, as well as deep
experience of business transformation during
periods of technological disruption and
competitive change.
Stephen joined the Board in July 2020 as
Chief Executive-Designate, and was formally
appointed Chief Executive Officer in
September 2020. During 2021 he was
appointed as an abrdn representative
director to the US closed-end fund boards
and the SICAV fund boards where abrdn is
the appointed investment manager.
Previously, Stephen served as chief executive
officer of global consumer banking at
Citigroup from 2015, retiring from the role in
November 2019. His responsibilities
encompassed all consumer and commercial
banking businesses in 19 countries, including
retail banking and wealth management,
credit cards, mortgages, and operations and
technology supporting these businesses. Prior
to this, Stephen was chief executive for all of
Citigroup’s Asia Pacific business lines across
17 markets, including India and China.
Stephen joined Citigroup in 1998. In 21 years
with the company he held leadership roles in
banking, operations and technology across
its Asian and Latin American businesses.
Before this, he held management positions in
the UK at GE Capital, where he was director
of UK operations from 1996 to 1998, and at
British Steel.
In other current roles, he is a member of the
Financial Services Growth and Development
Board in Scotland. He holds an MBA in
Economics and Finance from University
College Cardiff, where he is also an Honorary
Fellow.
Stephanie was appointed Chief Financial
Officer on joining the Board in June 2019. She
is a highly experienced financial services
practitioner with significant sector
knowledge, both technical and commercial.
She brings experience of working with boards
and management teams of financial
institutions in respect of financial and
commercial management, reporting, risk
and control frameworks and regulatory
requirements. She is also a representative
director on the board of VUMTM, our joint
venture with Virgin Money.
Before joining abrdn, Stephanie was a
partner at PwC, leading the financial services
assurance practice and a member of the
Assurance Executive. Her responsibilities
included client growth and services, product
development, operations and quality
assurance across the UK business.
During her career, she has specialised in the
financial services sector working with
organisations across asset management,
insurance and banking, with national and
international operations.
Stephanie is a member of the Institute of
Chartered Accountants of Scotland and
served as the Chair of the Audit Committee.
She is an associate of the Association of
Corporate Treasurers. She holds a Bachelor
of Laws (LLB) from the University of
Edinburgh.
68 abrdn.com Annual report 2021
Key to Board committees
Remuneration Committee
Risk and Capital Committee
Audit Committee
Nomination and Governance Committee
Committee Chair
R
RC
A
NC
Jonathan Asquith –
Non-executive Director and Senior
Inde
p
endent Director
Catherine Bradley CBE –
Non-executive Director
John Devine –
Non-executive Director
Appointed to the Board
September 2019
Age
65
Nationality
British
Shares
102,849
Board committees:
R NC
Appointed to the Board
January 2022
Age
62
Nationality
British and French
Shares
12,181
Board committees:
A
Appointed to the Board
July 2016
Age
63
Nationality
British
Shares
28,399
Board committees:
A NC RC
Jonathan has considerable experience as a
non-executive director within the investment
management and wealth industry. This
brings important insight to his roles as Senior
Independent Director and Chair of our
Remuneration Committee.
Jonathan is a non-executive director of
CiCap Limited and its regulated subsidiary
Coller Capital Limited. He is also a non-
executive director of Northill Capital Services
Limited and a number of its subsidiaries –
Vantage Infrastructure Holdings, Securis
Investment Partners and Capital Four Holding
A/S – as well as its holding company B-
Flexion. At the end of 2020 he stepped down
as deputy chairman of 3i Group plc after
nearly 10 years as a board member.
Previously, he has been chairman of
Citigroup Global Markets Limited, Citibank
International Limited, Dexion Capital PLC and
AXA Investment Managers. He has also been
a director of Tilney, Ashmore Group plc and
AXA UK PLC.
In his executive career Jonathan worked at
Morgan Grenfell for 18 years, rising to
become group finance director of Morgan
Grenfell Group, before going on to take the
roles of chief financial officer and chief
operating officer at Deutsche Morgan
Grenfell. From 2002 to 2008 he was a director
of Schroders plc, during which time he was
chief financial officer and later executive vice
chairman.
He holds an MA from the University of
Cambridge.
Catherine has more than 30 years of
executive experience advising global
financial institutions and industrial companies
on complex transactions and strategic
opportunities. She brings knowledge from
working across Europe and Asia, serving on
the boards of leading consumer-facing
companies and working with regulators and
standard setters.
Catherine is a non-executive director of
Johnson Electric Holdings Limited and of
easyJet plc, where she chairs the finance
committee. She is senior independent
director of Kingfisher plc and a board
member of the Value Reporting Foundation,
where she co-chairs the audit committee.
She also chairs the investment committee of
the Athenaeum Club.
Previously, Catherine has served on the
boards of leading industrial and consumer-
facing companies in the UK, France and Hong
Kong. She was appointed by HM Treasury to
the Board of the Financial Conduct Authority
in 2014 and played an important role in
establishing the FICC Markets Standards
Board in 2015. Catherine stepped down from
these boards in 2020.
In her executive career, Catherine held a
number of senior finance roles in investment
banking and risk management: in the US with
Merrill Lynch, in the UK and Asia with Credit
Suisse, and finally in Asia with Société
Générale. She returned to Europe in 2014 to
start her non-executive career.
Catherine graduated from the HEC Paris
School of Management with a major in
Finance and International Economics. She
was awarded a CBE in 2019.
John’s previous roles in asset management,
his experience in the US and Asia and his
background in finance, operations and
technology, are all areas of importance to
our strategy. John’s experience is important
to the Board’s discussions of financial
reporting and risk management, and in his
role as Chair of our Audit Committee.
John was appointed a Director of our
business in July 2016, at that time Standard
Life plc. From April 2015 until August 2016, he
was non-executive Chairman of Standard
Life Investments (Holdings) Limited.
He is non-executive chairman of Credit
Suisse International and of Credit Suisse
Securities (Europe) Limited, and a non-
executive director of Citco Custody Limited
and Citco Custody (UK) Limited.
From 2008 to 2010, John was chief operating
officer of Threadneedle Asset Management
Limited. Prior to this, he held a number of
senior executive positions at Merrill Lynch in
London, New York, Tokyo and Hong Kong.
He holds a BA (Hons) from Preston
Polytechnic and is a Fellow of the Chartered
Institute of Public Finance and Accounting.
69abrdn.comAnnual report 2021
GOVERNANCE
2. Board of Directors continued
Hannah Grove –
Non-executive Director
Brian McBride –
Non-executive Director
Martin Pike –
Non-executive Director
Appointed to the Board
September 2021
Age
58
Nationality
British and American
Shares
33,000
Board committees:
NC
Appointed to the Board
May 2020
Age
66
Nationality
British
Shares
Nil
Board committees:
R
Appointed to the Board
September 2013
Age
60
Nationality
British
Shares
69,476
Board committees:
RC NC A
Hannah brings more than 20 years of
leadership experience in the global financial
services industry. Her expertise includes
leading brand, client and digital marketing
and communications strategies, including
those for major acquisitions, which she
combines with deep knowledge of regulatory
and governance matters. She is also our
designated non-executive Director for
employee engagement.
Before joining our Board, Hannah enjoyed a
22-year career at State Street. This included
12 years as Chief Marketing Officer, retiring
from the role in November 2020. She was a
member of the company’s management
committee, its business conduct & risk and
conduct standards committees, and a board
member for its China legal entity.
Before joining State Street, Hannah was
marketing director for the Money Matters
Institute, supported by the United Nations, the
World Bank and private sector companies to
foster sustainable development in emerging
economies.
Hannah has also received significant industry
recognition as a champion of diversity and
inclusion and is a member of the board of
advisors for reboot, an organisation that aims
to enhance dialogue around race both at
work and across society.
Brian brings a wealth of digital experience
and global leadership experience in both
executive and non-executive directorship
roles. His direct experience of developing
digital strategies and solutions in consumer-
facing businesses, in rapidly evolving markets,
is of great benefit to the Board's discussions.
He sits as a non-executive director on the
boards of Standard Life Savings Limited and
Elevate Portfolio Services Limited.
Brian is currently chair of Trainline PLC, non-
executive director of Kinnevik AB, and the
lead non-executive director on the board of
the UK Ministry of Defence. He is also a senior
adviser to Scottish Equity Partners. In
February 2022 it was announced that he will
become the next president of the
Confederation of British Industry (CBI), and
has been appointed to the role of vice
president until the CBI’s AGM in June 2022.
In his executive career, Brian worked for IBM,
Crosfield Electronics and Dell before serving
as chief executive officer of T-Mobile UK and
then managing director of Amazon.co.uk. As
a non-executive director, Brian has served on
the boards of AO.com, the BBC, Celtic
Football Club PLC, Computacenter PLC and
S3 PLC, and as chair of ASOS PLC.
He holds an MA (Hons) in Economic History
and Politics from the University of Glasgow.
Martin provides broad commercial insight
into strategy and risk to the Board, and to his
role as Chair of our Risk and Capital
Committee. He has particular knowledge of
enterprise-wide risk management. His
actuarial and strategic consultancy
background brings a strong understanding of
what drives success in the markets in which
we operate.
Martin was appointed as a Director of our
business in September 2013, at that time
Standard Life plc. He is also chairman and
non-executive director of Faraday
Underwriting Limited – where he sits on the
audit and risk committee, and chairs the
nomination and remuneration committee. In
2021 he was appointed chairman and non-
executive director of AIG Life Limited, as well
as becoming a member of its audit
committee and chair of its remuneration
committee.
He joined R Watson and Sons, consulting
actuaries, 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 of insurance and financial
services, Watson Wyatt during 2009, and
managing director of risk consulting &
software for EMEA, Towers Watson from
2010 to 2013.
Martin holds an MA in Mathematics from the
University of Oxford. He is a Fellow of the
Institute and Faculty of Actuaries and a Fellow
of the Institute of Directors.
70 abrdn.com Annual report 2021
Key to Board committees
Remuneration Committee
Risk and Capital Committee
Audit Committee
Nomination and Governance Committee
Committee Chair
R
RC
A
NC
Cathleen Raffaeli –
Non-executive Director
Cecilia Reyes –
Non-executive Director
Jutta af Rosenborg –
Non-executive Director
Appointed to the Board
Au
g
ust 2018
Age
65
Nationality
American
Shares
9,315
Board committees:
R RC
Appointed to the Board
October 2019
Age
63
Nationality
Swiss and Philippine
Shares
Nil
Board committees:
R RC
Appointed to the Board
Au
g
ust 2017
Age
63
Nationality
Danish
Shares
8,981
Board committees:
R A
Cathi has strong experience in the financial
technology sector and background in the
platforms sector, as well as international
board experience. She brings these insights
as non-executive chairman of the boards of
Standard Life Savings Limited and Elevate
Portfolio Services Limited. Her role provides a
direct link between the Board and the
platform businesses that help us connect with
clients and their advisers.
Cathi is managing partner of Hamilton White
Group, LLC which offers advisory services,
including business development, to
companies in financial services growth
markets. In addition, she is managing partner
of Soho Venture Partners Inc, which offers
third-party business advisory services.
Previously, Cathi 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. She was
also a non-executive director of Federal
Home Loan Bank of New York – where she
was a member of the executive committee,
and vice chair of both the technology
committee and the compensation and
human resources committee.
She holds an MBA from New York University
and a BS from the University of Baltimore.
Cecilia brings great insight from operating in
leadership positions in international financial
markets. Her knowledge and many years of
direct experience of risk management and
insurance investment management are of
great benefit to the work of the Board.
Before joining, Cecilia was with Zurich
Insurance Group Ltd for 17 years, latterly as
its group chief risk officer, leading the global
function comprising risk management and
responsible for its enterprise risk
management framework. Prior to that, she
was its group chief investment officer,
responsible for execution of the investment
management value chain – including
analysis, development and global
implementation of the group's strategy for
investments. In both positions, she sat on the
group’s executive committee.
Cecilia started her career at Credit Suisse,
following which she held senior positions at
ING Barings, latterly as head of risk analysis,
asset management. In other current roles,
she is a member of the supervisory board of
NN Group N.V. and the founder of Pioneer
Management Services GmbH, which seeks
to develop a non-profit social enterprise.
Cecilia holds a BSc from Ateneo de Manila
University, an MBA from University of Hawaii
and a PhD (Finance) from the London
Business School, University of London.
Jutta has extensive knowledge of
international management and strategy,
from sector operational roles in a number of
listed companies. Her previous experience,
which includes group finance and auditing,
risk management and mergers and
acquisitions, allows her to offer valuable
perspectives to strategic discussions.
Jutta was appointed a non-executive
director of Aberdeen Asset Management
PLC in January 2013. She is a non-executive
director of JPMorgan European Investment
Trust plc and chair of its audit committee. In
addition, she is a non-executive director of
NKT A/S and Nilfisk Holding A/S, and chairs
the audit and remuneration committees of
both organisations. She is also a member of
the supervisory board of BBGI SICAV S.A,
where she chairs the audit committee.
Previously, she was the executive vice
president, chief financial officer, of ALK Abelló
A/S and was chairman of Det Danske
Klasselotteri A/S.
A qualified accountant, she holds a Master’s
degree in Business Economics and Auditing
from Copenhagen Business School.
71abrdn.comAnnual report 2021
GOVERNANCE
3. Corporate governance statement
The Corporate governance statement and the Directors’
remuneration report, together with the cross references to
the relevant other sections of the Annual report and
accounts, explain the main aspects of the Company’s
corporate governance framework and seek to give a
greater understanding as to how the Company has
applied the principles and reported against the provisions
of the UK Corporate Governance Code 2018 (‘the Code’).
Statement of application of and compliance
with the Code
For the year ended 31 December 2021, the Board has
carefully considered the principles and provisions of the
Code (available at www.frc.org.uk) and has concluded
that its activities during the year and the disclosures made
within the Annual report and accounts comply with the
requirements of the Code. The statement also explains the
relevant compliance with the FCA’s Disclosure Guidance
and Transparency Rules Sourcebook. The table on page
122 sets out where to find each of the disclosures required
in the Directors’ report in respect of all of the information
required by Listing Rule 9.8.4 R.
1. Board leadership and company purpose
Purpose and Business model
The Board supports the Company’s purpose set out on
page 2 of the Strategic report, and oversees
implementation of the Group’s business model, which it
has approved and which is set out on page 18. Pages 2 to
65 show how the evolution of the business model in 2021
supports the protection and generation of shareholder
value over the long term, as well as underpinning our
strategy for growth. The Board’s consideration of current
and future risks to the success of the Group is set out on
pages 61 to 65, complemented by the report of the Risk
and Capital Committee on pages 93 to 96.
Oversight of culture
The Board and the Nomination and Governance
Committee play a key role in overseeing how the
management of the Group assesses and monitors the
culture evident within the businesses of the Group and how
the desired abrdn behaviours are embedded across the
Group so as to contribute to its success.
While the evolution of our culture takes time and
commitment, the Board and the Executive Leadership
Team (ELT) look for empowerment, curiosity and
performance to sit at the heart of our culture. Our abrdn
desired behaviours will help to drive this important cultural
shift:
– Think and act like an owner - Thinking commercially
about where we focus our time, effort and money to
get the return on investment for our stakeholders.
– Focus on client and customer needs - Continually
learning their needs so that they are at the heart of our
decisions.
– Get it done together - Executing at pace and working
across teams to deliver better outcomes, faster.
– Build the future now - Being bold in building today the
solutions that our stakeholders will need for tomorrow,
challenging the status quo and adapting quickly.
The principles to deliver this include:
– A performance culture enabled by a clear and effective
Performance Management framework.
– A learning culture that is creative, progressive, and
talent-oriented.
– Staying connected with each other.
Stakeholder engagement
Recognising their obligations under the Companies
(Miscellaneous Reporting) Regulations 2018, the Annual
report and accounts explains how the Directors have
complied with their duty to have regard to the matters set
out in section 172 (1) (a)-(f) of the Companies Act 2006.
These matters include responsibilities with regard to the
interests of employees, suppliers, customers, the
community and the environment, all within the context of
promoting the success of the Company. The table on
pages 74 to 75 sets out the Board’s focus on its key
relationships and shows how the relevant stakeholder
engagement is reported up to the Board or Board
Committees. During 2021, the means to deliver effective
engagement were adjusted to reflect the impact of
COVID
-19.
Engaging with investors
The Investor Relations and Secretariat teams support the
direct investor engagement activities of the Chairman,
CEO, CFO and, as relevant, Board Committee chairs.
During 2021, and within COVID-19 restrictions, we carried
out a programme of meetings with domestic and
international investors. The wide range of relevant issues
discussed included the rationale for the introduction of the
client-led growth strategy, together with progress on the
delivery of transformation, business strategy, financial
performance and share price, capital allocation and
returns to shareholders, and corporate governance,
including diversity and inclusion. The Chairman, CEO and
CFO bring relevant feedback from this engagement to the
attention of the Board.
The Board ensures its outreach activities encompass the
interests of the Company’s one million individual
shareholders. Given the nature of this large retail
shareholder base, it is impractical to communicate with all
shareholders using the same direct engagement model
followed for institutional investors. Shareholders are
encouraged to receive their communications
electronically and around 405,000 shareholders receive all
communications this way. The Company actively
promotes self-service via the share portal, and since
moving our registrar services to Equiniti in July 2021, more
than 150,000 shareholders have signed up to this service.
Shareholders have the option to hold their shares in the
abrdn Share Account where shares are held electronically
and around 90% of individual shareholders hold their
shares in this way.
To give all shareholders easy access to the Company’s
announcements, all information reported via the London
Stock Exchange’s regulatory news service is published on
the Company’s website. The CEO and CFO continue to
host formal presentations to support both the full year and
half year financial results with the related transcript and
webcast available on the Company’s Investor Relations
website www.abrdn.com/annualreport
72 abrdn.com Annual report 2021
The 2021 Annual General Meeting (AGM) was held in
Edinburgh on 18 May 2021. COVID-19 restrictions meant
that, at the time the Notice of Meeting was published, it
was envisaged that shareholders would not be able to
attend the meeting in person. Shareholders were invited to
submit questions in advance via the Company’s website
and arrangements were made for an ‘enhanced
webcast’. This allowed shareholders to view the meeting
live, and to submit questions during the meeting via a ‘chat
box’, many of which were then posed to the Chairman by
a moderator. The attendance restrictions were in fact
lifted the day before the Meeting and the Company made
arrangements for shareholders to attend in person should
they wish to do so. The Chairman and CEO presentations
addressed the main themes of the questions which had
been submitted prior to the meeting. 46% of the shares in
issue were voted and all resolutions were passed by at
least 94% of votes cast. Resolution 15, which included
measures regarding electronic participation at physical
meetings, was also passed (over 99% in favour) following
clarification from the Company, recognising that this had
previously failed to reach the necessary threshold to pass
as a special resolution at the 2020 AGM. Investor feedback
had made it clear that the lack of support was in relation to
an interpretation that the proposed changes to the
Company’s Articles of Association would allow the
Company to hold virtual-only meetings. The Company
confirmed that the proposed Articles would not allow the
Company to hold a virtual-only AGM and added wording
to clarify this in the updated Articles.
Our 2022 AGM will be held on 18 May in Edinburgh. The
AGM guide 2022 will be published online at
www.abrdn.com in advance of this year’s meeting. The
voting results, including the number of votes withheld, will
be published on the website at www.abrdn.com after the
meeting.
Engaging with employees
Melanie Gee continued as our designated non-executive
Director to support workforce engagement up to her
retirement from the Board on 31 October. She was
succeeded in this role by Hannah Grove from 1 November.
The Board Employee Engagement (BEE) annual plan is
designed to ensure that views from employees across the
business globally are heard and understood by the
directors. During 2021, our direct engagement plans
continued to be disrupted by the need to comply with
COVID-19 restrictions so the Board used virtual means to
engage with groups of employees through regular
meetings and one on one interactions. A summary of the
various BEE initiatives is covered below.
All employee surveys
Because the Company implemented a comprehensive
Group-wide Viewpoints survey during the year - which
featured many employee experience-related questions,
and which followed on from several COVID 19 related
employee surveys in 2020 - no additional BEE specific
surveys were undertaken. The Board continued to monitor
how the actions to address the Viewpoints survey
responses were being taken forward.
Meet the NEDs events
To enable employees to engage with the Directors directly
and learn more about how the Board operates, Melanie
chaired three virtual Meet the NEDs sessions during the
year for team members in the UK/EMEA, Americas and
APAC regions. More than 130 colleagues attended and
topics covered in the sessions included:
– Strategic direction, Growth and the Future shape of the
Group.
– Remuneration policy including variable compensation
philosophy and practice.
– Diversity and culture.
– Brand change and roll out.
– NED understanding of employee sentiment and key
issues.
NED Engagement event
In addition to the more formal Meet the NEDs events,
Melanie chaired an informal virtual social session attended
by 10 colleagues who had previously attended the
physical 2019/2020 engagement dinners. The discussion
covered:
– Thoughts on future ways of working and capturing
lessons learned though the pandemic.
– Addressing technology challenges from hybrid working.
– How the use of Microsoft Teams was improving cross-
border communication and collaboration.
The BEE Group
Melanie chaired a session of the BEE Group attended by
representatives from the employee Networks, the D&I
team, the UK employee forum, Regional HR
representatives, the CEO office, and the Communications,
and Sustainability reporting teams. The topics discussed
included:
– Employee engagement in the new Brand rollout.
– Employee input to the New Ways of Working rollout.
– Results from the Viewpoints survey and initial response
action plans.
– Regional initiatives to support employees during the
pandemic.
At each Board meeting, Melanie gave a report on BEE
activities, including the issues that had been raised through
the discussions, and the Board considered how the ELT, in
particular the Chief People Officer, the Chief Brand,
Marketing and Corporate Affairs Officer and the COO, are
taking forward the points raised.
After a transition with Melanie, and considering the lessons
learned from the first two years of the BEE programme, as
well as a scan of external best practices, Hannah Grove
took time to reflect on how she would take forward her
designated NED role, bearing in mind the key objectives
around ensuring the Board hears employee viewpoints,
and that employees understand the role of the board. Her
plan was approved by the Board in December 2021 and
next year’s annual report and accounts will report on
how she has developed and implemented the
programme in 2022.
73abrdn.comAnnual report 2021
GOVERNANCE
3. Corporate governance statement continued
Summary of Stakeholder engagement activities
In line with their obligations under s.172 of the Companies Act 2006, the Directors consider their responsibilities to
stakeholders in their discussions and decision-making.
Key stakeholders Direct Board engagement Indirect Board engagement Outcomes
Clients
Read more on
pages 20 to 28.
– The CEO meets regularly with key
clients (virtually and/or in
compliance with all applicable
pandemic restrictions) and reports
to the Board on such meetings.
– The CEO has regular calls with his
opposite number at Phoenix
Group, our largest client, and
reports back to the Board.
– The CEO, sometimes supported by
the Chairman, takes part in key
client pitches to hear directly from
clients on their requirements
(again virtually when pandemic
restrictions were in place).
– The Chairman meets with key
clients at conferences and industry
membership boards where he
represents the Group.
– The Board members feed into
Board discussions any feedback
received directly from clients.
– The heads of the Growth
Vectors report at Board
meetings on key client
engagement, support
programmes and client
strategies.
– Market share data and
competitor activity are
reported to the Board.
– Analysis of the outcome of
client proposals (successful or
otherwise) is reported to the
Board. Results of client
perceptions survey/customer
sentiment index are reported.
– Engagement supported
the development of the
key client management
process, and our client
solutions and ESG
approaches.
– The creation of the
Growth Vectors was
designed to position the
business around client
needs with
performance
accountability
measured on that basis.
– Investment processes
are driven by
understanding client
needs and designing
appropriate solutions
taking into account
client risk appetite and
sophistication.
Our people
Read more on
pages 38 to 39.
– Meet the NEDs BEE engagement
sessions for a diverse mix of staff at
all levels allow direct feedback in
informal settings.
– Employee engagement NED in
place and active with the
employee diversity networks as
well as with employees through
their representatives. The BEE NED
reports regularly to the CEO and
the Board.
– Each year, the Chairman and
NEDs all mentor one or two CEO-1
or -2 level emerging talent.
– The CEO and CFO run ‘Town Hall’
sessions.
– The Chief People Officer(CPO)
reports to the Nomination and
Governance Committee
meeting on key hires and
employee issues including
development needs to support
succession planning.
– The CPO produces a regular
report for the Board drawing
out key factors influencing staff
turnover, morale and
engagement.
– Viewpoints and employee
surveys collect aggregate,
regional, functional and
business group trend data
which is reported to the Board.
– Engagement feedback
recognised in Board
discussions on new
ways of working.
– Engagement feedback
is a key input to talent
and development
programmes and the
design of reward
philosophy.
74 abrdn.com Annual report 2021
Key stakeholders Direct Board engagement Indirect Board engagement Outcomes
Society
Business partners/ supply
chain
Read more on
pages 40 to 43.
– The CEO leads on relationships
with key business partners and
reports back to the Board.
– The Risk and Capital
Committee reviews the
dependency on critical
suppliers and how they are
managed.
– The Audit Committee leads an
assessment of external audit
performance and service
provision.
– The Board received detailed
papers supporting the
outsourcing of a number of
technology services, including
the renegotiation of the Group’s
contracts with FNZ in relation to
the Adviser business and the
revisions made to the Group’s
relationship with Phoenix.
– COO attends Board meetings
regularly and reports on first line
key supplier relationships and
their role in transition and
transformation activities.
– Supplier surveys undertaken.
– Tendering process includes
smaller level firms.
– Access and audit rights in place
with key suppliers.
– Modern slavery compliance
process in place.
– Procurement/payment
principles in place.
– Certain key suppliers regularly
discussed at Audit Committee,
Risk and Capital Committee and
Board.
– Transformation
discussions have
included a focus on the
quality, service provision,
availability and costs of
relevant suppliers.
– The overriding
guidelines for business
partnerships have been
established as working
for both parties and
creating efficient
operations.
– The Board sought
assurance on the ability
of key suppliers to
continue to operate
during the pandemic
and the transition to
working from home
(WFH.)
Communities
Read more on
pages 40 to 43.
– Board members present at
relevant events and
conferences.
– Chairman/CEO/CFO
represent the Group on public
policy and community
organisations.
– Board is kept up to date with the
activities of the abrdn Financial
Fairness Trust.
– Stewardship/sustainability teams
report regularly to the Board.
– Feedback on annual
Stewardship and TCFD reports.
– Review of charitable giving
strategy.
– ESG commercialisation
presentations to the Board.
– Considered as input to
the Group’s culture and
strategic drivers and
charitable giving
programmes.
– Engagement drives the
expression of our
purpose.
Regulators/
policymakers/
governments
Read more on
pages 40 to 43.
– Regular engagement by CEO,
Chairman and Committee
Chairs.
– FCA has access to the Board.
– ‘Dear Board/CEO’ letters issued
from regulators.
– Relevant engagement with
regulators in overseas
territories.
– Chief Risk Officer (CRO) updates
at every Board meeting.
– Board hears reports on the
results of active participation
through industry groups.
– Relevant Board
decisions recognise
regulatory impact and
environment.
Shareholders
Strategic partners
Read more on
pages 48 to 58.
– CEO has taken on detailed
handling of the Phoenix and
Citigroup relationships with
regular meetings with his
opposite numbers.
– CFO representation on the
VMUTM board.
– ED direct meetings with core
suppliers.
– Specific updates in CEO report to
the Board.
– As appropriate, reports to Board/
Committees from representative
Directors.
– ELT members serve on the
Phoenix and HDFC AMC Boards.
– The development of our
business through our
relationships with
Strategic partners is a
critical element of the
Board’s strategy.
Shareholders
Read more on
pages 48 to 58.
– Results, AGM presentations and
Q&A.
– Chairman, CEO and CFO
meetings with investors.
– Chairman, Committee Chairs,
Senior Independent Director
and BEE NED round table with
governance commentators.
– Remuneration Committee
Chair meetings with institutional
investors.
– Chairman/CEO/CFO direct
shareholder correspondence.
– Regular updates from the EDs/
Investor Relations Director/
Chairman/Chairman of
Remuneration Committee
summarising the output from
their programmes of
engagement.
– Analyst/Investor reports
distributed to the Board.
– As relevant, feedback from
corporate brokers.
– Publication of Shareholder News.
– Dedicated mailbox and
shareholder call centre team.
– Engagement supported
the clarification at the
2021 AGM that the
Board was not
recommending that we
move to virtual AGMs,
but was increasing the
possibilities for remote
participation.
75abrdn.comAnnual report 2021
GOVERNANCE
3. Corporate governance statement continued
Speaking up
The workforce has the means to raise concerns in
confidence and anonymously, and these means are well
communicated. The Audit Committee’s oversight of the
whistleblowing policy and the Audit Committee Chairman’s
role to report to the Board on whistleblowing matters is
covered in the Audit Committee report on page 90.
Outside appointments and conflicts of interest
The Board’s policy encourages executive Directors to take
up one external non-executive director role, as the
Directors consider this can bring an additional perspective
to the Director’s contribution. At the moment, Stephen Bird
and Stephanie Bruce have representative director roles,
either on the board of one of our joint ventures or on fund
boards where abrdn is the appointed investment manager,
but they do not have any external NED roles and they
continue to explore opportunities.
Any proposed additional appointments of the NEDs are
firstly discussed with the Chairman and then reported to
the Nomination and Governance Committee prior to being
considered for approval. The register of the Board’s
collective outside appointments is reviewed annually by the
Board. Directors’ principal outside appointments are
included in their biographies on pages 68 to 71.
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 their
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 relevant group policies. At the start
of every Board and Committee meeting, Directors are
requested to declare any actual or potential conflicts of
interests.
In January 2022, 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 February
2024. 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.
76 abrdn.com Annual report 2021
2. Division of responsibilities
The Group operates the following governance framework.
Governance framework
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. During 2021, the
Board’s key activities included approving, overseeing and challenging:
– The updated strategy and the 2022 to 2024 business plan to
implement the strategy.
– Capital adequacy and allocation decisions including the decision to
sell stakes in HDFC Life and HDFC AMC, our Nordic real assets
business and Parmenion.
– Oversight of culture, our standards and ethical behaviours.
– Dividend policy including the decision framework governing when to
return the dividend to growth.
– Financial reporting, including the impact of moving Phoenix and HDFC
AMC from associate to investment status.
– Risk management, including the Enterprise Risk Management (ERM)
framework, risk strategy, risk appetite limits and internal controls and
in particular how this was adapted for COVID-19.
– Significant corporate transactions including the acquisition of Finimize,
and the proposed acquisition of interactive investor.
– The company rename and rebrand, alongside the sale of the Standard
Life brand to Phoenix.
– Succession planning, in particular in the Investments vector.
– The quarterly performance of the Investments vector.
– The ESG approach, both as an issuer and as an asset manager.
– Significant external communications.
– The work of the 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 Chief Executive Officer and from the Chief Financial Officer on progress against approved strategies
and the business plan, as well as updates on stock market and global economic conditions. There are also regular presentations from the vector
CEOs and business functional leaders.
Chairman
– Leads the Board and ensures that its
principles and processes are maintained.
– Promotes high standards of corporate
governance.
– Together with the Company Secretary, sets
agendas for meetings of the Board.
– Ensures Board members receive accurate,
timely and quality 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.
Chief Executive Officer (CEO)
The CEO operates within authorities delegated by
the Board to:
– Develop strategic plans and structures for
presentation to the Board.
– Make and implement operational decisions.
– Lead the other executive Director and the ELT 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 Chairman, represent the
Group to external stakeholders, including
shareholders, customers, suppliers, regulatory
and governmental authorities, and the local and
wider communities.
Senior Independent Director (SID)
The SID is available to talk with our
shareholders about any concerns
that they may not have been able to
resolve through the channels of the
Chairman, the CEO or Chief
Financial Officer, or where a
shareholder considered these
channels as inappropriate.
The SID leads the annual review of
the performance of the Chairman.
Non-executive Directors (NED)
The role of our NEDs is to participate
fully in the Board’s decision-making
work including advising, supporting
and challenging management as
appropriate.
Nomination and Governance
Committee (N&G)
– Board and Committee
composition and appointments.
– Succession planning.
– Governance framework.
– Culture, Diversity & Inclusion.
Audit Committee (AC)
– Financial Reporting.
– Internal audit.
– External audit.
– Whistleblowing.
– Anti-Financial crime.
– Regulatory financial reporting.
Remuneration Committee (RC)
– Development and
Implementation of
remuneration philosophy and
policy.
– Incentive design and setting of
executive director targets.
– Employee benefit structures.
Risk and Capital Committee (RCC)
– Risk management framework.
– Compliance reporting.
– Risk appetites and tolerances.
– Transactional risk assessments.
– Capital adequacy.
Executive leadership team (ELT)
The ELT supports the CEO by providing clear leadership, line of sight and accountability throughout the business. The ELT is responsible to the CEO
for the development and delivery of strategy and for leading the organisation through challenges and opportunities.
Growth Vectors
Vector CEOs support the CEO to
deliver Growth across the business:
– Investments.
– Adviser.
– Personal.
Talent
The Chief People Officer (CPO)
supports the CEO in developing
talent management and
succession planning and
culture initiatives.
Efficient Operations
Strategy, Operations, Legal and
Finance ELT members support
the CEO by overseeing global
functions and the delivery of
functional priorities.
Control
The Chief Risk Officer (CRO)
supports the ELT and the CEO in
their first line management of risk.
77abrdn.comAnnual report 2021
GOVERNANCE
3. Corporate governance statement continued
The framework is formally documented in the Board
Charter which also sets out the Board’s relationship with the
boards of the key subsidiaries in the Group. In particular, it
specifies the matters which these subsidiaries refer to the
Board or to a Committee of the Board for approval or
consultation.
You can read the Board Charter on our website
www.abrdn.com
Board balance and director independence
The Directors believe that at least half of the Board should
be made up of independent non-executive Directors. As at
28 February 2022, the Board comprises the Chairman, nine
independent non-executive Directors and two executive
Directors. The Board is made up of six men (50%) and six
women (50%) (2020: men 55%, women 45%).
As announced, Jutta af Rosenborg and Martin Pike will
retire at the conclusion of the 2022 AGM and will not offer
themselves for re-election.
The Chairman was independent on his appointment in
December 2018. 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. Jutta af Rosenborg
served on the Aberdeen Asset Management PLC (AAM
PLC) board, which she joined in January 2013 prior to the
transaction with Standard Life plc (2017). The Board does
not consider that Jutta’s length of service has had any
negative impact on her independence. Following this
review, the Board has concluded that all the non-executive
Directors are independent and consequently, the Board
continues to comprise a majority of independent non-
executive Directors.
Jonathan Asquith served as Senior Independent Director
throughout 2021. In this role, he is available to provide a
sounding board to the Chairman and serve as an
intermediary for the other Directors and the shareholders.
He also led the process to review the Chairman’s
performance.
The roles of the Chairman and the CEO are separate and
are summarised on page 77. Each has clearly defined
responsibilities, which are described in the Board Charter.
The Directors have access to the governance advice of the
Company Secretary whose appointment and removal is a
matter reserved to the Board.
You can read more about our Directors in their
biographies in Section 2.
3. Board composition, succession, diversity and
evaluation
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 Board continues to support its Board
Diversity statement which states that the Board:
– Believes in equity and supports the principle that the best
person should always be appointed to the role with due
regard given to 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 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 CEO’s commitment to achieve and
maintain a diverse workforce and an inclusive
workplace, both throughout the Group, and within the
ELT.
– Has a zero tolerance approach to unfair treatment or
discrimination of any kind, both throughout the Group
and in relation to clients and individuals associated with
the Group.
Board Diversity
Gender
Nationality
Diversity activities and progress to meet our targets are
covered in the Our people section of the Strategic report on
page 38. The ELT’s diversity policy is covered in the Inclusion
and Diversity section of the Directors’ report on page 120.
Male: 6
Female: 6
Danish: 1
French and British: 1
British: 7
American: 1
British and American: 1
Swiss and Philippine: 1
78 abrdn.com Annual report 2021
Board changes during the period are covered above and in
the Directors’ report on page 119.
Ethnicity
Board appointment process, terms of service and role
Board appointments are overseen by the Nomination and
Governance Committee and you can read more about
this on page 98.
Each non-executive Director is appointed for a three-year
fixed term and shareholders vote on whether to elect/re-
elect them 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. Taking
account of their appointment dates to the predecessor
boards where relevant, the current average length of
service of the non-executive Directors is three years. For
any NEDs who have already served two three-year terms,
the Nomination and Governance Committee considers
any factors which might reflect on their independence or
time commitment prior to making any recommendation to
the Board. During 2021, the Committee reviewed and
supported the recommendation that the Chairman and
Cathi Raffaeli’s appointments be continued for a second
term.
The letter of appointment confirms that the amount of time
each non-executive Director is expected to commit to
each year, once they have met all of the approval and
induction requirements, is a minimum of 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 will be accessible for the 2022 AGM. Non-
executive Directors are required to confirm that they can
allocate sufficient time to carry out their duties and
responsibilities effectively. Their letters of appointment
confirm that their primary roles include challenging and
holding to account the executive directors as well as
appointing and removing executive directors.
External search consultants may be used to support Board
appointments. MWM Consulting was engaged to support
the appointments of Hannah Grove, Catherine Bradley as
well as Mike O’Brien and Pam Kaur. The Group has
additionally used the services of MWM Consulting to
support other senior management searches.
Director election and re-election
At the 2022 AGM, all of the current Directors will retire.
Hannah Grove and Catherine Bradley, having been
appointed since the previous AGM, will retire and stand for
election. All the other Directors, who wish to continue in
office, will stand for re-election. As announced, Mike O’Brien
and Pam Kaur will be proposed for election with effect from
1 June 2022 and Jutta af Rosenborg and Martin Pike will
retire at the conclusion of the 2022 AGM.
As well as in Section 2, the AGM guide 2022 includes more
background information about the Directors, including the
reasons why the Chairman, following their annual reviews,
believes that their individual skills and contribution support
their election or re-election.
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.
Board effectiveness
Review process
The Board commissions externally facilitated reviews
regularly. The last external review was held in 2019 with the
2020 and 2021 reviews having been conducted internally.
The 2022 review will be facilitated externally.
To carry out the review, the Company Secretary met with
each Director individually and gathered their views on the
Board’s performance over the period and their
recommendations on how its effectiveness could be
strengthened. Progress on implementing the
recommendations from the 2020 review was also
discussed. Following this, the Company Secretary prepared
a draft report for initial review and discussion with the
Chairman. The Board then reviewed and discussed the
report.
Outcome
As part of the process, the Board recognised the relevant
internal and external factors which it had needed to take
account of during the year. These included living with and
planning to move beyond COVID-19 and the impact of
introducing new ways of working, continuing regulatory
uncertainty arising from the outcome of the Brexit
negotiations, increasing external expectations on the
quality of external reporting, with a particular focus on
enhancing ESG, culture and diversity reporting, and the
continuing challenges of managing virtual Board meetings,
recognising that the Directors had been able to gather in
person as a complete board on only a couple of occasions
since March 2020. Internally, the main factor was the
leadership of the CEO in his first full year in the role.
Taking all of this into account, the Board believes that it
performed effectively during 2021. Arising from the review
White: 11
Asian: 1
79abrdn.comAnnual report 2021
GOVERNANCE
3. Corporate governance statement continued
the Board looks to see continued developments in these
areas:
– Increased informal Board interaction, likely to be a mix of
virtual and in person, to allow Board members to get to
know each other better and learn from each other.
– Creating more agenda time to discuss and measure
ESG and culture, making sure these matters have a clear
link to corporate strategy and its execution.
– Specifically within the restrictions of not being able to be
together physically, using the Board’s time together in
virtual meetings as effectively as possible so that all
agenda items have full discussion time, while Board
members remain aware of the challenges brought by
continuing virtual interaction.
Progress to implement the recommendations is monitored
by the Company Secretary and the CEO’s office and
reported to the Nomination and Governance Committee.
Chairman
The review of Sir Douglas’s performance as Chairman was
led by the SID, Jonathan Asquith. It was based on feedback
given in the Company Secretary’s individual interviews with
each Director as well as focused discussions between the
SID and the other Directors.
Through these meetings, Jonathan Asquith sought
feedback on: the Chairman’s overall leadership role; his
relationships with the EDs and the NEDs; Boardroom
behaviours; and any development areas to take
forward in 2022.
The Company Secretary summarised the feedback into a
draft report which was reviewed and agreed by the SID
and distributed to all Board members, except Sir Douglas.
The Directors, led by Jonathan Asquith and without Sir
Douglas being present, met to consider the report. They
concluded that in his third year as Chairman, Sir Douglas
had performed his role very effectively and shown strong
leadership of the Board. He continued to bring his inclusive
yet suitably challenging style to the Boardroom,
encouraging, and allowing time for all Board members to
participate fully, and he continued to build strong
relationships with the EDs while supporting the NEDs in
challenging and holding the ELT to account. All the
Directors were looking forward to continuing to work with
him, individually and collectively, to deliver continued
progress in 2022. Jonathan Asquith met with Sir Douglas to
pass feedback from the review directly to him.
Directors
The Chairman met each Director individually to discuss
their performance during 2021. These discussions
considered individual training, development and
engagement opportunities and any agreed development
actions are taken forward by the individual Director
together with the Company Secretary and the Chairman.
Director induction and development
The Chairman, supported by the Company Secretary, is
responsible for arranging a comprehensive preparation
and induction programme for all new Directors. The
programme takes their background knowledge and
experience into account. If relevant, Directors are required
to complete the FCA’s approval process before they are
appointed and Directors 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 the Senior Managers and
Certification Regime.
The formal preparation and induction programme
includes:
– Meetings with the executive Directors and the members
of the ELT.
– Focused technical meetings with internal experts on
specific areas including the three growth vectors,
regulatory reporting, ESG, conduct risk, risk and capital
management, and financial reporting.
– Visits to business areas (when permitted by COVID-19
restrictions) to meet our people and gain a better insight
into the operation of the business and its culture.
– Meetings with the external auditors and contact with the
FCA 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 as holders of
a Senior Management Function role.
Background information is also provided including:
– Key Board materials and information, stakeholder and
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 its Committees
and to support them as they build their knowledge and
strengthen their performance further.
When Directors are appointed to the Board, they make a
commitment to broaden their understanding of the
Group’s business. The Secretariat, Finance, Risk and
Reward teams monitor relevant external governance and
risk management, financial and regulatory developments
and keep the ongoing Board training and information
programme up to date. Specific Board and Committee
awareness and deep
-dive sessions took place on:
– The activity of the ESG investment team and the
broader Enabling ESG programme.
– The Group’s pension schemes.
– The pending Investment Firms Prudential Regime.
– Governance and oversight of investment risk.
– Cyber and operational resilience.
– External audit reform.
4. Audit, risk and internal control
The Directors retain the responsibility to state that they
consider the Annual report and accounts, taken as a whole,
is fair, balanced and understandable and presents an
assessment of the Company’s position and prospects. They
also recognise their responsibility to establish procedures to
manage risk and oversee the internal control framework.
You can read their responsibilities statement on page 123.
The reports from the Audit Committee and the Risk and
80 abrdn.com Annual report 2021
Capital Committee Chairmen show how they have
supported the Board in meeting these responsibilities.
The Board’s view of its principal and emerging risks and
how they are being managed is contained in the risk
management section of the Strategic report on pages 61
to 65.
Annual review of internal control
The Directors have overall responsibility for the governance
structures and systems of the group, which includes the
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 Audit Committee undertook the review on behalf of
the Board and reported the results of its review to the
Board. The system was in place throughout the year and
up to the date of approval of the Annual report and
accounts 2021.
The review of abrdn’s risk management and internal
control systems was carried out drawing on inputs across
the three lines of defence. The first line management
conducted risk and control self-assessments (RCSAs)
throughout 2021; Risk & Compliance undertook a review of
the effectiveness of the ERM framework (including RCSAs)
and how internal controls were operating within the first
line; and, Internal Audit produced a Control Environment
Assessment using abrdn’s risk taxonomy. Collectively these
provide a view of the firm’s control environment from each
of the three lines of defence. The review did not identify any
weaknesses that are deemed significant to the overall view
that the system of controls was effective in 2021 and there
are plans to improve the controls as required.
2021 has seen the business continue to embed and mature
the abrdn risk and control practices within each business
vector to promote management of risk and control across
the organisation. Technology advances and regulatory
developments such as UK SoX, IFPR and the Operational
Resilience regulation are driving further change in the
design of operational processes and internal controls.
The Finance function operates a set of defined processes
which operate over all aspects of financial reporting, which
includes the senior review and approval of financial results
from business unit finance heads, controlled processes for
the preparation of the IFRS consolidation, and the
monitoring of external policy developments to ensure these
are adequately addressed. These processes include the
operation of a Technical Review Committee and the
Financial Reporting Executive Review Group to provide
senior review, challenge and approval of relevant
disclosures, accounting policies, and changes required to
comply with external developments.
The Board’s going concern statement is on page 122 and
the Board’s viability statement is on page 59.
5. Remuneration
The Directors’ remuneration report (DRR) on pages 100 to
116 sets out the work of the Remuneration Committee and
its activities during the year, the levels of Directors’
remuneration and the shareholder approved
remuneration policy. The Company’s approach to investing
in and rewarding its workforce is set out on page 111 of the
DRR and in the Reward section of the Directors’ report on
page 120. The Board believes that its remuneration policies
and practices are designed to support strategy and long-
term sustainable success. You can read about the policies
and practices in the DRR.
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.
81abrdn.comAnnual report 2021
GOVERNANCE
3. Corporate governance statement continued
Board meetings and meeting attendance
The Board and its Committees meet regularly, operating to an agreed timetable. Meetings are usually held in Edinburgh or
London and, sometimes, in past years unaffected by COVID-19 restrictions, at the offices of one of our overseas locations.
During the year, the Board held specific sessions to consider the Group’s strategy and business planning. The Chairman
and the non-executive Directors also met during the year, formally at each Board meeting, and informally, without the
executive Directors present and where matters including executive performance and succession and Board effectiveness
were discussed. The Board scheduled eight formal meetings and a focused strategy meeting in 2021. Additional Board
meetings were called in 2021 in relation to Board decisions regarding the changes to the Phoenix relationship and the
recommendation to acquire the interactive investor business.
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. 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 Chairman or to the Company Secretary. If necessary, they can follow up with the Chairman
of the meeting. Recognising that some Directors may have existing commitments they cannot change at very short notice,
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 met once during 2021
with regard to the recommendation to acquire the Finimize business.
The Chairman is not a member of the Audit, Risk and Capital, or Remuneration Committees. He may attend meetings of all
Committees, by invitation, in order to keep abreast of their discussions. The table below reflects the composition of the
Board and Board Committees during 2021 and records the number of meetings and members’ attendance.
Board
Group Audit
Committee
Nomination and
Governance
Committee
Remuneration
Committee
Risk and Capital
Committee
Chairman
Sir Douglas Flint 12/12 – 4/4 – –
Executive Directors
Stephanie Bruce 12/12 – – – –
Stephen Bird
12/12 – – – –
Non-executive Directors
Jonathan Asquith 12/12 – 4/4 9/9 –
Brian McBride 12/12 – – 9/9 –
John Devine
11/12 6/6 3/4 - 10/10
Hannah Grove
1
4/4 - 1/1 – -
Martin Pike 12/12 6/6 4/4 – 10/10
Cathleen Raffaeli
12/12 – – 9/9 10/10
Cecilia Reyes 12/12 – – 9/9 10/10
Jutta af Rosenborg
12/12 6/6 – 9/9 –
Former members
Melanie Gee (stood down on 31 October
2021)
10/10 4/5 3/3 – –
1. Hannah Grove was appointed to the Board and the Nomination and Governance Committee on 1 September 2021
Tenure as at February 2022 Executive and Non-executive mix
0-3 years: 7
3-5 years: 2
5+ years: 3
Executive: 2
Non-executive: 10
82 abrdn.com Annual report 2021
Board Committees
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 chairmen provide reports of the
key issues considered at recent Committee meetings, and
minutes of Committee meetings are circulated to the
appropriate Board members. This includes reporting from
the Chairman of the Audit Committee on any
whistleblowing incidents which have been escalated to
him. The Committees operate within specific terms of
reference approved by the Board and kept under review
by each Committee.
These terms of reference are published within the
Board Charter on our website at www.abrdn.com
All Board Committees are authorised to engage the
services of external advisers at the Company’s expense,
whenever they consider this necessary.
Committee reports
This statement includes reports from the chairmen of the
Audit Committee, the Risk and Capital Committee and the
Nomination and Governance Committee. The report on
the responsibilities and activities of the Remuneration
Committee can be found in the Directors’ remuneration
report in Section 3.4.
The Committee Chairmen are happy to engage with
you on their reports. Please contact them via
questions@abrdnshares.com
Audit
Committee
Nomination
and
Governance
Committee
Risk and
Capital
Committee
Remuneration
Committee
abrdn plc Board
83abrdn.comAnnual report 2021
GOVERNANCE
3. Corporate governance statement continued
3.1 Audit Committee report
The Audit Committee assists the Board in discharging its
responsibilities for external financial reporting, internal
controls over financial reporting and the relationship with
the External auditors.
I am pleased to present my report as Audit Committee
Chairman.
During the year and up to the date of issuing the annual
report, the Committee:
– Discussed and reviewed the impact on financial
reporting of the Tritax and Finimize acquisitions.
– Discussed the financial information required to be
included in the Class 1 Circular in relation to the
proposed acquisition of interactive investor.
– Considered the impact on the internal audit function of
Chief Internal Auditor changes.
– Reviewed reporting on financial crime and anti-money
laundering controls.
– Received reports on compliance with the FCA Client
Assets Sourcebook (CASS) rules in the Company’s CASS
permissioned regulated legal entities.
The Committee also continued to focus on the quality of
financial reporting.
The report is structured in four parts:
1. Governance
2. Report on the year
3. Internal audit
4. External audit
John Devine
Chairman, Audit Committee
3.1.1 Governance
Membership
All members of the Audit Committee are independent non-
executive Directors. For their names, the number of
meetings and committee member attendance during
2021, please see the table on page 82.
The Board believes Committee members have the
necessary range of financial, risk, control and commercial
expertise required to provide effective challenge to
management, and have competence in accounting and
auditing as well as recent and relevant financial experience.
John Devine is a member of the Chartered Institute of
Public Finance and Accounting. Jutta af Rosenborg is also a
qualified accountant. Martin Pike is a fellow of the Institute
and Faculty of Actuaries. The Committee members are
also members of audit committees related to their other
NED roles.
Invitations to attend Committee meetings are extended on
a regular basis to the Chairman, the Chief Executive
Officer, the Chief Financial Officer, the Group Financial
Controller, the Chief Internal Auditor and the Group Chief
Risk Officer.
The Audit Committee meets privately for part of its
meetings and also has regular private meetings separately
with the External auditors and the Chief Internal Auditor.
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 Audit 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 statement.
– 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 skills of the External audit team and their
compliance with auditor independence requirements,
the approved audit plan, the quality of the firm’s
execution of the audit, and the agreed audit and non-
audit fees.
84 abrdn.com Annual report 2021
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 Managers and Certification
Regime the Audit Committee Chairman 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 employees who raise concerns related to detrimental
treatment. Throughout the year the Audit Committee
Chairman met regularly with the Chief Internal Auditor and
the Head of Anti-Financial Crime to discuss their work,
findings and current developments.
Committee effectiveness
The Committee reviews its remit and effectiveness each
year. The 2021 review was conducted internally by the
Company Secretary meeting each of the Committee
members. As well as general observations, the key
performance areas considered were:
– The comprehensiveness of the Committee’s agendas
against members’ expectations.
– How effectively agenda items were presented,
discussed and time managed.
– The quality and level of detail in the papers.
– How well the Committee met its objectives and reported
to the Board.
– How effectively the Chairman discharged their
responsibilities.
The Committee members did not raise any material issues
or concerns regarding the above areas or the overall
effectiveness of the Committee during 2021. They were
very supportive of the Chairman’s effective role in leading
the Committee through the volume of papers. The
Committee members aimed to find the right balance in
their discussion time to make sure that while they covered
technical financial and regulatory reporting to the
appropriate level, they were also able to spend enough
time considering all of the other matters under their
financial reporting control remit, including supporting the
relationships between the finance, risk and internal audit
teams. The Committee also spent time reviewing the
details of the BEIS consultation paper on the future of audit,
and were supportive of the final submission acknowledging
that this was likely to bring future changes to their role and
operations.
3.1.2 Report on the year
Audit agenda
As well as regular reporting, agenda items were aligned to
the annual financial cycle as set out below:
–
Annual report and accounts 2020.
–
Strategic report and financial highlights 2020.
–
Financial reporting judgements.
–
Liaison with the Remuneration Committee on
any financial reporting matters related to the
achievement of targets and measures.
–
External auditors’ review of Full year results.
–
Financial crime and Whistleblowing.
–
Internal audit findings.
–
CASS reporting update.
–
Regulatory reporting including Pillar 3.
–
Initial financial reporting matters for Half year
2021.
–
Financial crime and Whistleblowing.
–
External auditors’ management letter, and audit
strategy including fees.
–
BEIS White Paper on audit reform.
–
Half year results 2021.
–
External auditors’ review of Half year results.
–
External auditors’ independence.
–
Internal audit findings.
–
Financial crime and Whistleblowing.
–
Initial financial reporting matters for Full year
2021.
–
Non-audit services policy.
–
The Internal audit plan and charter.
–
Internal audit findings.
–
Effectiveness of the External auditors and
related non-audit services.
–
Effectiveness of the Internal Audit function.
–
Financial crime and Whistleblowing.
–
Risk management and internal control system
annual review and future plans.
–
CASS reporting update.
Jan-Mar
Apr-Jun
Jul-Sep
Oct-Dec
85abrdn.comAnnual report 2021
GOVERNANCE
3. Corporate governance statement continued
The indicative proportion of time spent on the business of
the Committee is illustrated below:
Detail of work
The focus of work in respect of 2021 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
2021 Group financial statements. This year there were no
new accounting standards which had a significant impact
on the Group accounting policies. The Committee
considered changes to the Group’s segments to be used
for 2021 reporting and agreed that these changes were
appropriate. In 2021, the Committee also considered
proposed changes to the presentation of the IFRS
consolidated income statement and agreed that these
changes made the financial statements more relevant to
users as the presentation was more consistent with peers.
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
considered the result of stress testing and reverse stress
testing presented to the Risk and Capital Committee. The
Committee recommended the viability statement to the
Board.
During 2021, the Committee reviewed the Annual report
and accounts 2020 and the Half year results 2021. For both
periods it received written and/or oral reports from the
Chief Financial Officer, the Company Secretary, the Chief
Internal Auditor and the External auditors. The Committee
used these reports to aid its understanding of the
composition of the financial statements, to confirm that the
specific reporting standards and compliance requirements
had been met and to support the 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 full and half year financial
statements complied with laws and regulations and had
been appropriately compiled.
The Committee discussed the continued impact of COVID-
19 on the Half year results 2021 production process, and
supported the steps put in place by management to ensure
that controls were maintained and that the timetables
remained appropriate for a remote working environment.
For year end 2021 results, we were able to move to
blended working, assisting the production process.
Financial reporting
External audit
Internal audit
Other controls (including CASS, fraud and anti-financial crime reporting)
86 abrdn.com Annual report 2021
Accounting estimates and judgements
The Audit Committee considered all estimates and judgements that Directors understood could be material to the 2021
financial statements. The Committee also focused on disclosure of these key accounting estimates and judgements.
Significant accounting estimates, judgements and assumptions for the year
ended 31 December 2021
How the Audit Committee addressed
these significant accounting estimates and assumptions
Acquisition of Tritax
On 1 April 2021 abrdn completed the acquisition of
Tritax Management LLP, a specialist logistics real
estate fund manager.
abrdn purchased, through its subsidiary AAM PLC, 60%
of the membership interests in Tritax. Subject to
certain conditions, an additional contingent deferred
earn-out is expected to be payable to acquire the
remaining 40% of membership interests in Tritax
should the selling partners choose to exercise put
options in each of the years ended 31 March 2024, 31
March 2025 and 31 March 2026. The amount payable
is linked to the EBITDA of the Tritax business in the
relevant period. abrdn has the right to purchase any
outstanding interests at the end of the five-year period
through exercising a call option. Analysis was required
to determine the appropriate accounting in relation to
the 40% of membership interests in Tritax subject to
put and call options.
In addition there were a number of estimates relating
to the acquisition including:
–
The fair value of contingent consideration.
–
The determination and valuation of separately
identifiable intangibles.
The Committee spent time discussing the acquisition at three meetings.
Following significant analysis the Committee agreed with management
that Tritax should be accounted for as a 100% acquisition on 1 April 2021
with contingent consideration recognised in relation to the fair value of the
earn out payments (under the put and call options) and the fair value of
the expected non-discretionary allocation of profit payments to the
holders of the 40% membership interests up to the expected date of the
exercise of the options.
The Committee also discussed judgements relating to the recognition and
valuation of intangibles and agreed with management that the material
intangibles recognised should be in relation to Tritax’s investment
management contracts with Tritax Big Box REIT plc and Tritax Euro Box
plc which are listed closed-end real estate funds. The Committee agreed
that a useful life of 13 years was reasonable and that other assumptions
were within a reasonable range. See Note 14 for further details.
The Committee challenged management’s assumptions underlying the
fair value of contingent consideration both at the date of acquisition and
at 31 December 2021. The Committee noted and supported that
disclosures of sensitivities to key assumptions would be provided given the
inherent uncertainties in the valuation. See Note 39 for further details.
UK defined benefit pension plan
In compiling a set of financial statements, it is
necessary to make some judgements and estimates
about outcomes that are 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.
For the UK defined benefit pension plan, the
Committee reviewed the assumptions for mortality,
discount rate and inflation.
The Committee considered the proposed assumptions taking into
account market data and information from pension scheme advisors. In
relation to inflation the Committee considered the long-term gap
between the Retail Price Index (RPI) and the Consumer Price Index (CPI),
as pensions in payment are generally linked to CPI, taking into account the
2020 announcements relating to the future of RPI. The Committee
concurred with management and their actuarial advisors that mortality
assumptions should not be updated for COVID-19 at this point as the
impact on long term mortality rates for pension scheme members was
not clear.
The Committee also considered reporting from the External auditors and
related benchmarking of the pension scheme assumptions.
Note 33 of the Group financial statements provides further details on the
actuarial assumptions used, and sets out the impact of mortality, discount
rate and inflation sensitivities. Note 33 also provides details on the
accounting policy applied and accounting policy judgements relating to
the Group’s assessment that it has an unconditional right to a refund of a
surplus, and the treatment of tax relating to this surplus.
87abrdn.comAnnual report 2021
GOVERNANCE
3. Corporate governance statement continued
Significant accounting estimates, judgements and assumptions for the year
ended 31 December 2021
How the Audit Committee addressed
these significant accounting estimates and assumptions
Investments in associates
During 2020 the Group’s holding in Phoenix reduced to
14.4%. As detailed in the 2020 Audit Committee report,
during 2020 Phoenix was considered to be an
associate notwithstanding that the holding was
significantly less than 20%. The classification as an
associate was based on significant influence from the
contractual relationships with Phoenix, including the
licencing to Phoenix of the Standard Life brand, and
the Group’s Board representation on the Phoenix
board.
In February 2021, abrdn announced a simplification
and extension of the strategic partnership with
Phoenix. Determining whether Phoenix should
continue to be classified as an associate following this
announcement was a critical accounting policy
j
udgement in relation to 2021.
In September 2021 abrdn announced the sale of
shares in HDFC AMC reducing abrdn’s shareholding
from 21.2% to 16.2%. Judgement was required to
consider whether HDFC AMC should continue to be
classified as an associate or should be accounted for
as an investment at fair value.
The Committee discussed the implications of the announcement on
23 February 2021 relating to the simplification and extension of the
strategic partnership with Phoenix. The Committee agreed that following
the changes to the commercial agreements, in particular in relation to the
licensing of the ‘Standard Life’ brand, Phoenix should no longer be
accounted for as an associate with effect from 23 February 2021, and
should instead be accounted for as an investment at fair value. Note 15
provides further details.
The Committee noted that following the sale, abrdn’s rights to Board
representation were reduced from two Directors to one and that
accounting standards had a rebuttable assumption that a shareholding of
less than 20% does not give rise to significant influence. The Committee
concurred with management’s judgement that HDFC AMC should no
longer be considered an associate and that therefore accounting as an
investment was appropriate, giving rise to a significant increase in the
carrying value (to fair value) and a significant gain in the 2021 income
statement.
Investments in subsidiaries
In relation to the abrdn plc Company only accounts,
an assessment is made at each reporting date as to
whether there are any indicators of impairment in
relation to investments in subsidiaries. At year end 2021
management noted that the Company’s net assets
attributable to shareholders of £5.9bn were higher
than the Company’s market capitalisation of
£5.3bn. This was considered an indicator of
impairment in relation to the Company’s largest
investment in its subsidiary AAM PLC, which had a
carrying value of £2.1bn at 31 December 2021, and
therefore a value in use was determined for this
investment.
Management also noted indicators of impairment in
relation to the Company’s investment in abrdn
Financial Planning Limited (aFPL).
The Committee discussed the investments in subsidiaries impairment
assessment with management and the External auditors and agreed that
there was an indicator of impairment in relation to the investment in AAM
PLC, noting that all other investments in subsidiaries (with the exception of
aFPL) were supported by financial assets, or other relevant analysis. The
Committee agreed that no impairment was required based on the AAM
PLC value in use, and supported that disclosure was made in the
Company accounts to set out that appropriate consideration had been
given to the Company net assets being higher than the market
capitalisation.
The Committee also reviewed and challenged the assumptions relating to
the recoverable amount of aFPL and agreed with management that an
impairment of £45m was appropriate. See Note A of the Company
financial statements in Section 8 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.
88 abrdn.com Annual report 2021
Fair, balanced and understandable
The Committee supported the financial reporting team’s
continued aim to draft the Annual report and accounts to
be ‘fair, balanced and understandable’.
abrdn’s principles
To create clarity around what abrdn means when it talks
of being fair, balanced and understandable, a set of
principles was 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
Annual report and accounts is
honest and accurate.
–
The key messages in the
narrative in the Strategic report
and Governance sections of the
Annual report and accounts
reflect the financial reporting
contained in the financial
statements.
–
The Key Performance Indicators
(KPIs) 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 is
appropriate for our
stakeholders.’
–
The Annual report and accounts
presents both successes and
challenges experienced during
the year and, as appropriate,
reflects those expected in the
future.
–
The level of prominence we give
to successes in the year versus
challenges faced is appropriate.
–
The narrative and analysis
contained in the Annual report
and accounts 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
Annual report and accounts.
–
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.
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 and include
colleagues from Investor Relations, ESG reporting,
Risk, Communications and Strategy.
The key points discussed by the IRG covered:
– The clarity of sustainability/climate change reporting.
– The impact of markets on profitability.
– The balance of reporting on investment performance
and net flows.
– How previously reported matters had been updated.
Fair, balanced and understandable guidance was
provided 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 2021 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. This
review considered guidelines issued by the European
Securities and Markets Authority in 2016 and the thematic
reviews by the Financial Reporting Council (FRC). 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 operating profit and adjusted profit before tax
are key profit APMs. In early 2021 the Committee
discussed proposed changes to the definition of adjusted
profit before tax which changed the treatment of
associates and joint ventures. The Committee agreed that
the changes made the results more understandable
following the reclassification of HDFC Life and Phoenix
from associates to equity investments, and supported the
publication of a press release in Q1 2021 which set out the
revised definition together with the new segments. The
Committee also agreed that adjusted operating profit,
which is reported at segment level, should be the primary
profit APM going forwards. The Committee considered
whether the allocation of items to adjusted operating profit
was in line with the defined accounting policies, consistent
with previous practice and appropriately disclosed. Where
there were judgemental areas, such as in relation to
certain costs relating to rebranding, the Committee
specifically reviewed the proposed treatments and
ensured that the Annual report and accounts provided
appropriate disclosures.
We agreed to recommend to the Board that the Annual
report and accounts 2021, taken as a whole, is fair,
balanced and can be understood by someone with a
reasonably informed knowledge of financial statements
and our industry.
89abrdn.comAnnual report 2021
GOVERNANCE
3. Corporate governance statement continued
Prudential reporting
In H1 2021 the Group published Pillar 3 reporting under
CRD IV. The Committee reviewed the Pillar 3 report and
papers which set out the control and verification processes
followed in the compilation of the report.
The Committee also considered disclosures relating to
CRD IV results included in the Strategic report section of
the Annual report and accounts and half year reporting,
together with related assurance over these disclosures.
The Committee supported also presenting regulatory
results on the basis that now applies under the Investment
Firm Prudential Regime.
Internal controls
As noted earlier, the Directors have overall responsibility for
the Group’s internal controls and for ensuring their ongoing
effectiveness. This does not extend to associates and joint
ventures. 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 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 submissions. Further, the 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
The Committee receives regular updates from the Head
of Anti-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. During 2021, the Committee spent
time considering the implementation of the Anti-Money
Laundering (AML) Transformation programme, the
objectives of which are to standardise, strengthen and
embed sustainable and effective controls to mitigate AML
risks across the Group. For each vector, the programme is
focusing on the global standards over customer due
diligence, customer risk assessment, Politically Exposed
Persons and sanction screening and transaction
monitoring.
Our people are trained via mandatory training modules 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
Chairman is the designated whistleblower’s champion and
the Committee receives regular updates on the operation
of the whistleblowing procedures (Speak Up) from the
Conduct and Conflicts Oversight Manager. 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.
The Committee Chairman reports to the Board on the
updates the Committee receives.
3.1.3 Internal audit
The role and mandate of the Internal audit function is set
out in its Charter, which is reviewed and approved by the
Committee annually. Whilst Internal audit maintains a
relationship with the External auditors, in accordance with
relevant independence standards, the External auditors do
not place reliance on the work of Internal audit.
The Internal Audit plan is reviewed and approved by the
Committee annually, but is flexed during the year to
respond to internal and external developments. The
function’s coverage aligns to the Group’s activities and
footprint, taking account of local Internal Audit
requirements.
The Committee formally assess the effectiveness of the
function via a scorecard, which is aligned to the Group’s
objectives, along with assessing its independence and
quality assurance practices. Independent external reviews
are also undertaken at regular intervals. The most recent
one was completed in H2 2021 by Deloitte who assessed
the abrdn Internal Audit function as having the highest
overall rating with conformance against all aspects of the
Institute of Internal Auditors’ International Professional
Practices Framework (IPPF) and the Internal Audit
Financial Services Code of Practice (the Standards).
Two
areas for improvement were identified against the
Standards (skillset and resourcing and scope of quality
assurance) and actions are underway to address them.
The Committee met specifically to review the results of the
external report and to agree the proposed actions of the
Internal Audit team to take forward the recommendations.
Regular reporting is provided to the Committee to illustrate
plan progress, and the status of implementation of
recommendations. The Committee’s own review of the
function in 2021 was positive and supports the continuous
evolution and enhancement of the function.
The Chief Internal Auditor reports to the Committee
Chairman. During the year, regular dialogue takes place
between the Committee Chairman and the Chief Internal
Auditor. During 2021, the Committee oversaw the
succession process to the Chief Internal Auditor, initially
through an interim appointment, and subsequently, by
approving the appointment of a permanent successor.
90 abrdn.com Annual report 2021
3.1.4 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 2022 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. The audit was last subject to a tender for the financial
year ended 31 December 2017.
The Senior Statutory Auditor is Jonathan Mills, who, having
been appointed since 1 January 2017, is completing his
fifth audit as the lead audit partner. Recognising the
rotational requirements to appoint a new lead audit
partner for financial year 2022, during 2021 the
Committee met and evaluated the experience and
credentials of the potential candidates to succeed
Jonathan Mills, and agreed a plan with KPMG on how to
evolve the audit team to ensure a smooth handover. The
Committee supported the appointment of Richard
Faulkner as Senior Statutory Auditor for FY 2022.
Auditor independence
The Board has an established policy (the Policy) setting out
which 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 revised FRC
Ethical standards for auditors (Ethical Standards). It does
this by prohibiting the auditors from carrying out certain
types of non-audit services, and by setting out which non-
audit services are permitted. 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 most non-audit services to FTSE 350 companies
which are audit clients. A 70% fee cap on non-audit
services to audit clients is in place.
The services prohibited by the Policy are as set out in the
FRC Revised Ethical Standard 2019.
The Policy permits non-audit services to be purchased,
following approval, when they are closely aligned to the
External audit service 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.
– Investment circular reporting accountant
engagements.
– Attesting to services not required by statute or
regulation (e.g. controls reports).
– Other reports required by a regulator or assurance
services relating to regulatory returns.
– Sustainability reports audits/reviews.
– Fund merger assurance engagements, where the
engagement is with the manager and the external
auditor is also the auditor of the fund.
During 2021 the Committee discussed the appointment of
KPMG as Reporting Accountants in relation to the
proposed interactive investor acquisition Class 1 Circular.
The Committee considered that the appointment of
KPMG was appropriate and were satisfied that the
appointment did not impact auditor independence. The
Committee noted that the proposed appointment
required KPMG to seek a waiver from the FRC for
exemption from the 70% cap on non-audit fees in relation
to a subsidiary of the group that is also a public interest
entity, albeit that the Reporting Accountant services were
not provided to this subsidiary. A waiver was not required in
relation to the abrdn group. KPMG applied for the waiver
and it was granted.
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 2021
was £5.1m (2020: KPMG £5.2m). In addition £2.0m (2020:
£2.3m) 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 small (which
we have defined as less than £75,000), the approval of the
whole Committee is required.
Non-audit fees amounted to £2.1m (2020: £0.8m). This
primarily comprised £1.1m relating to the Reporting
Accountant work on the Class 1 Circular discussed above,
and £0.8m (2020: £0.8m) relating to control assurance
reports, which are closely associated with audit work. 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
specifically assessed whether KPMG should be appointed
as the Reporting Accountant with regard to the Class 1
91abrdn.comAnnual report 2021
GOVERNANCE
3. Corporate governance statement continued
transaction, and were comfortable that this appointment
was appropriate. A further £0.3m of non-audit fees were
incurred in 2022 relating to these Reporting Accountant
services. 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 30% (2020: 11%). The total of audit
related assurance fees (£2m) and non-audit fees (£2.1m)
is £4.1m, and the ratio of these audit related assurance
fees and non-audit fees to audit fees is 80% (2020:
59%). 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 of
the External audit and carries out a formal annual review
of its effectiveness.
The Committee looks to the audit team’s objectivity,
professional scepticism, continuing professional education
and its relationship with management, all in the context of
regulatory requirements and professional standards.
Specifically:
– The Committee discussed the scope of the audit prior
to its commencement.
– The Committee reviewed the annual findings of the
Audit Quality Review team of the FRC in respect of
KPMG’s audits and requested a formal report from
KPMG of the applicability of the findings to abrdn both in
respect of generally identified failings and failings
specific to individual audits. The Committee was
satisfied insofar as the issues might be applicable to
abrdn’s audit, that KPMG had proper and adequate
procedures in place for our audit.
– The Committee approved a formal engagement with
the auditor and agreed its audit fee.
– The Committee Chairman had regular meetings with
the lead audit partner to discuss Group developments.
– The Committee receives updates on KPMG’s work and
its findings and compliance with auditor independence
requirements.
– 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 following paragraphs for more detail.
– The Committee also continued to monitor and discuss
relevant external matters in relation to KPMG as a firm.
KPMG adopted a blended working approach during most
of the audit period. The Committee discussed this with
KPMG and were satisfied that it had not impacted audit
quality.
The Committee discussed the accuracy of financial
reporting with KPMG both as regards accounting errors
that would 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. KPMG have
set overall audit materiality at £19m (2020: £25m). This
equates to approximately 3.5% of normalised profit before
tax (as set out in the KPMG independent auditors’ report)
and 6% of adjusted 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, the
Committee supported that audit testing would be
performed to a lower materiality threshold for individual
reporting units. Furthermore, KPMG agreed to draw the
Committee’s attention to all identified uncorrected
misstatements greater than £0.95m (2020: £1.25m). The
aggregated net difference between the reported pre-tax
profit and the auditor’s judgement of pre-tax profit was
less than £6m 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 the Committee that the audit
complies with their independent review procedures.
92 abrdn.com Annual report 2021
3.2 Risk and Capital Committee report
I am pleased to present my report as Chairman of the Risk
and Capital Committee.
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 so
as to ensure that we meet the expectations of our
shareholders, regulators and clients.
While the risk environment remains at an elevated level as
a result of ongoing business transformation activity and a
challenging market environment, the Committee
accepted management’s assessment that the risk outlook
for the Group had reduced materially from prior years.
A key area of focus for the Committee during 2021 was
our response to managing the impacts of the global
COVID-19 pandemic on our clients, people and business.
We successfully established new ways of working to
support our customers and the delivery of our business
plan and we managed the impacts of the difficult
economic environment.
Throughout 2021 the Committee continued to review and
challenge key activities undertaken by the business and
advise the Board on these, including:
– Evolution of the Enterprise Risk Management (ERM)
framework.
– Key components of the Group’s ICAAP and the Group’s
capital and liquidity.
– Management of the risks arising from the firm’s third
party relationships.
– Key project updates from the transformation activity
across the Group.
– Conduct risks across our three growth vectors and the
Group’s approach to vulnerable customers.
– The Group’s activity to complete the transition from
LIBOR-based reference rates.
– Implementation of the UK’s Investment Firms Prudential
Regime (IFPR) for the Group and its key entities.
– Work to develop our approach to managing cyber
resilience in line with the US National Institute of
Standards and Technology (NIST) framework.
– The Group’s exposure to emerging risks including
climate change.
Furthermore the Committee has closely monitored
developments from our regulators across the world as
they have responded to the challenges brought about by
the COVID-19 pandemic and progressed the regulatory
agenda including in the areas of operational resilience,
liquidity and third party risk management.
Further details on this and other activities carried out by the
Committee during the year can be found in the report that
follows.
Martin Pike
Chairman, Risk and Capital Committee
Membership
All members of the Risk and Capital Committee are
independent non-executive Directors. For their names, the
number of meetings and committee member attendance
during 2021, please see the table on page 82.
The Committee meetings are attended by the Chief Risk
Officer. Others invited to attend on a regular basis include
the Chief Executive Officer, the Chief Financial Officer,
Chief Operating Officer, Group General Counsel 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 Chairman of the
Committee. The Committee’s members have also held
regular private meetings with the Chief Risk Officer 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
The Company’s purpose results in opportunities and
exposure to a range of risks and uncertainties.
Understanding and actively managing the sources and
scale of these opportunities and risks are key to fulfilling
this purpose.
The role of the Committee is to provide oversight and
advice to the Board, and where appropriate, the board of
each relevant Group company on:
– The Group’s current risk strategy, material risk
exposures and their impact on the levels and allocations
of capital.
– The structure and implementation of the Group’s 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.
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GOVERNANCE
3. Corporate governance statement continued
– 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.
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.
The Committee’s work in 2021
Overview
The Committee operates a dynamic 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. An indicative breakdown as to
how the Committee spent its time is shown below:
The key recurring items which were considered by the
Committee are:
– 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.
– Ongoing activity to enhance and develop abrdn’s ERM
framework, for example the Risk Appetite and Policy
frameworks.
– Performance of the Group’s ICAAP processes in
accordance with the Capital Requirements Directive
including the firm’s stress and scenario testing
programme. The ICAAP has supported the Committee
in understanding changes to the risk profile of the Group
and the capital position over the course of the year.
– Evolution of regulatory responsibilities under IFPR.
Through these recurring activities the Committee was
able to challenge management’s assessment of risks
and to oversee the key actions being taken to manage
these risks.
In addition to reviewing these recurring items the
Committee provided oversight of a broad range of topics
in 2021. This included consideration of:
–
Advice provided to the Remuneration Committee
regarding the delivery of performance in 2020
relative to risk appetites.
–
Findings included in the 2020 Internal controls
report issued for Aberdeen Standard Investments
.
–
Monitoring of risks related to overall
transformation and integration activities.
–
Emerging risks to the Group.
–
Conduct risks for the Personal vector.
–
abrdn’s approach to vulnerable customers.
–
abrdn’s approach to fund governance.
–
Managing and monitoring conflicts of interest.
–
Review of abrdn’s principal risks and risk
disclosures for the Annual report and accounts.
–
Proposed changes to the risk appetite framework.
–
Conduct risks for the Adviser vector.
–
Conduct risks related to cannabis investments.
–
abrdn’s securities lending programme.
–
Thematic review of pensions transfer-related
activity.
–
Cyber risks including the Group’s resilience
maturity against the NIST framework.
–
Assessment of political and reputational risks.
–
Review of the remit of the Risk & Compliance
function.
–
The liquidity risk management framework.
–
Reviewing abrdn’s approach and activity in
relation to the FCA's Conduct Questions.
–
abrdn’s product strategy including in relation to
seed capital and co-investment.
–
Procurement transformation programme.
–
LIBOR transition programme.
–
The Senior Managers and Certification Regime.
–
Conduct risks for the Investments vector.
–
Completion of the LIBOR transition programme.
–
The management of IT obsolescence.
–
Operational resilience programme activity.
–
Review of abrdn wind-down plan and triggers.
–
Data privacy management.
–
Implementation of the Investment Firms
Prudential Regulation.
–
2021 combined second and third line assurance
plan.
After each meeting, the Committee Chairman reports to
the Board, summarising the key points from the
Committee’s discussions and any specific
recommendations.
ERM framework including risk policies and appetites
Operational risks (including cyber risk)
Conduct and compliance risks
Capital adequacy
Other controls
Jan-Mar
Apr-Jun
Jul-Sep
Oct-Dec
94 abrdn.com Annual report 2021
Risk exposures and risk strategy
abrdn’s risk appetite framework provides a common
framework to enable the communication, understanding
and control of the types and levels of risk that the Board is
willing to accept in its pursuit of the strategy of the Group,
including the business plan objectives and the capital and
liquidity it requires.
The Committee has received regular reporting through
the Views on Risk report on each of the Group’s 12
principal risks including risk dashboards, commentary and
management information.
The Committee reviewed and proposed updates to the
risk appetite framework to ensure that the risk appetites
and risk limits reflected changes to the risk profile in view of
the external environment and ongoing transformation of
the business. In particular additional metrics for
Operational Risk and Third Party Management were
created to strengthen our management of impacts
caused by the COVID-19 pandemic.
Through reviewing this reporting the Committee supports
the Board by monitoring risks relative to applicable risk
appetites and the resilience of the capital position under
current and stressed conditions. Key items that the
Committee discussed during the year in this context
included:
– Risks that have emerged as a result of the global
COVID-19 pandemic.
– Risks associated with the delivery of the business plan.
– Enhancements to components of the Group’s risk
appetite framework.
– The abrdn ICAAP report.
– Steps taken to strengthen the conduct risk framework.
– The management of cyber risk across the Group.
– The approach to management of the Group’s liquidity
risk framework.
Stress testing and scenario analysis performed in 2021 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:
– Individual stresses – looking at stresses to a range of
financial variables in isolation.
– Combined stress scenarios – looking at simultaneous
stresses impacting on economic conditions, flows and
idiosyncratic factors specific to the Group.
– Reverse stress testing – considering extreme but
plausible events, including as a result of operational,
conduct or reputational risks, that have the potential to
cause the business to become unviable.
The Committee reviewed the results of the stress testing
and scenario analysis that was performed. This included
reviewing the results of one scenario which was explored
as part of the reverse stress testing exercise: the failure of
our main third party provider of administration services
that support the Group’s trading. 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.
Enterprise Risk Management (ERM) framework
During the year the business continued to evolve the ERM
framework used to identify, assess, control and monitor
the Group’s risks.
The Committee has obtained 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 and board risk appetite metrics to
understand the Group’s risk profile and the effectiveness
of the framework in supporting the management of
these risks.
The Committee 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 support identification of key risks facing
the business. The completion of this survey along with
subsequent discussion of the results by the Executive
Leadership Team helps 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 the key risks facing
the business.
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 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 developments and compliance
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.
As a Committee we have closely monitored global
regulatory developments to understand and anticipate
potential implications for the Group and the wider financial
services sector. In particular the Committee paid close
attention to developments in connection to COVID-19,
Operational Resilience, LIBOR transition, the Investment
Firms Prudential Regulatory Regime and new sustainability
regulations including the EU Sustainable Finance Disclosure
Regulation.
95abrdn.comAnnual report 2021
GOVERNANCE
3. Corporate governance statement continued
Governance arrangements
The Committee has continued to refer to the work of those
non-executive risk committees operating in subsidiary
companies to provide oversight and challenge of risks
within those subsidiaries. This has included the risk
committees in place for abrdn Life and Pensions Limited,
Standard Life Savings Limited and Elevate Portfolio
Services Limited.
The Committee receives updates from and reviews the
minutes of 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. In addition to the Committee reviewing reporting
from the subsidiary risk committees, arrangements also
exist for the Committee’s Chairman to attend those
subsidiary risk committees on request.
During the year the Committee 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 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. The 2021 review was conducted internally by the
Company Secretary meeting with each of the Committee
members. As well as general observations, the key
performance areas considered were:
– The comprehensiveness of the Committee’s agendas
against members’ expectations.
– How effectively agenda items were presented,
discussed and time managed.
– The quality and level of detail in the papers.
– The Committee’s thoughts on the role of the 2nd line of
defence and how it might continue to develop.
– How well the Committee met its objectives and
reported to the Board.
– How effectively the Chairman discharged their
responsibilities.
The Committee members did not raise any material issues
or concerns regarding the above areas or the overall
effectiveness of the Committee during 2021. The
Committee was encouraged by the move of the
investment risk team to come under the CRO’s remit and
were keen to learn more about the work of the investment
risk team. Acknowledging the amount of time the
Committee spends on regulatory risk, going forward, the
Committee aims to spend more time on the inter-
connectedness of the holistic business risks the Company
runs and manages, as the agendas allow. The Committee
also encouraged the Risk Team to make more use of two-
way secondment opportunities with business colleagues,
so that both the risk team and the business learn from
each other, and this business-partnering approach could
further strengthen the quality of the information presented
to the Committee. The Committee members were
supportive of the Chairman’s role in managing the
challenging number of matters which fall in the
Committee’s remit.
96 abrdn.com Annual report 2021
3.3 Nomination and Governance Committee
report
The Committee’s key priorities this year were to support
the Board‘s succession planning, maintain effective board
governance processes during the pandemic and continue
to oversee the development of talent and leadership
initiatives.
Governance Framework
We have continued to review our governance framework
against the Code principles and provisions. The
Committee did not make any fundamental changes to our
governance framework in 2021 but we did approve some
detailed changes to reflect the Board’s reporting
responsibilities arising from the change from CRD IV
to IFPR. Hannah Grove succeeded Melanie Gee on
1 November 2021 as our designated Board Employee
Engagement NED and you can read more about this
programme on page 73.
Board evaluation
Having commissioned externally facilitated reviews in 2018
and 2019, as we did in 2020 we carried out our Board
review internally in 2021 and you can read about the
process and its outcomes on page 79.
Culture, Diversity and Inclusion
Continuing to build on the transformation activity across
the business, the Committee has received updates on the
work to oversee the Group’s culture, diversity and inclusion
programmes and considered the ELT’s initiatives to
implement these throughout the organisation. You can
read more about this below and on pages 38 and 39.
Talent and Leadership
The Committee spent time hearing from the Talent and
Organisation Effectiveness team supporting and
challenging its plans to deliver effective leadership, talent
and performance management across the Group.
Board composition
The Committee supported our Director succession and
appointment processes. As I have covered already in my
Chairman’s statement, I am pleased to have welcomed
Hannah Grove and Catherine Bradley to the Board and
following on from the upcoming retirement of Jutta af
Rosenborg and Martin Pike in May, I look forward to
welcoming Mike O’Brien and Pam Kaur in due course.
The Board continues to emphasise the importance of
strong governance and I look forward to updating you on
this in future reports.
Sir Douglas Flint
Chairman and Chairman of the Nomination and
Governance Committee
Membership
The members of the Committee are the Chairman and a
number of the independent non-executive Directors. For
their names, the number of meetings and committee
member attendance during 2021, please see the table on
page 82.
Stephen Bird, in his CEO role, was invited to Committee
meetings to discuss relevant topics, such as the roles within
and membership of the ELT, talent development and
management succession.
The Committee’s role is to support the composition and
effectiveness of the Board, and oversee the Group’s
activities to strengthen its talent pipeline. It also oversees
the ongoing development and implementation of the
Group’s governance framework.
In this report and other parts of the corporate governance
statement you can read about the Committee’s role in
relation to its key responsibilities.
Key responsibilities:
– Identifying and recommending Directors to be
appointed to the Board and the Board Committees.
– Reviewing and assisting in the development and
implementation of the Company’s culture, diversity and
inclusion activities.
– Reviewing Board diversity, skills and experience.
– Supporting the process and output of the Board’s
effectiveness review.
– Overseeing succession planning, and leadership and
talent management development throughout the
Group.
– Considering how the Group should comply with current
and upcoming corporate governance requirements,
guidance and best practice and relevant directors’
duties.
The Committee reports regularly to the Board so that all
Directors can be involved in discussing these topics as
appropriate.
97abrdn.comAnnual report 2021
GOVERNANCE
3. Corporate governance statement continued
The Committee’s work in 2021
An indicative breakdown as to how the Committee spent
its time is shown below:
–
Reviewed compliance with the UK Corporate
Governance Code for the 2020 ARA.
–
Considered the diversity and inclusion 2021
priorities.
–
Reviewed the Board Charter and Committees’
terms of reference.
–
Agreed the NED mentoring programme and
pairings for 2021.
–
Reviewed the recommendations to shareholders
to re/elect Directors at the AGM.
–
Reviewed the continued appointment of Cathi
Raffaelli and Sir Douglas Flint at the end of their first
three-year term.
–
Received the half year update on the Culture,
Diversity and Inclusion action plans.
–
Reviewed ELT succession planning.
–
Recommended the appointment of Hannah
Grove.
–
Reviewed progress on the recommendations
from the 2020 Board effectiveness review.
–
Reviewed the revised approach to 2022 ESG
external reporting, including the Stewardship
Code.
–
Received the full-year update on the Culture,
Diversity and Inclusion action plans.
–
Approved the process for the 2021 Board
Effectiveness Review.
–
Reviewed ELT and senior leadership succession
planning.
–
Recommended the appointment of Catherine
Bradley.
–
Agreed the revisions to the Board Charter.
–
Reviewed progress on Talent and Leadership
development activities.
–
Received the regular update on the activities of the
abrdn Financial Fairness Trust.
An indicative breakdown as to how the Committee spent
its time is shown below:
Board appointments
The Committee discusses the skills, experience and
capabilities needed for particular Board roles. This
recognises the need to secure a pipeline of potential
successors to be able to chair the Board Committees, and
also the need to plan ahead to take account of the length
of time served on the Board by the current independent
NEDs. In addition, it also recognises the skills which the
Board will need as it moves forward to oversee the
implementation of its approved strategy and takes
account of the Group’s commitments to achieve and
maintain its published Board diversity targets.
An external search consultant is then requested to
prepare a list of suitable candidates. From that, the
Committee agrees a shortlist. Following interviews with
potential candidates, the Committee makes
recommendations to the Board on any proposed
appointment, subject always to the satisfactory
completion of all background checks and regulatory
notifications or approvals. Part of this includes considering
the external commitments of candidates to assess their
ability to meet the necessary time commitment and
whether there are any conflict of interests to address.
The Committee also 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. Cathi Raffaeli’s and Sir Douglas Flint’s
continued appointments were reviewed during the year
and the Committee agreed that they continued to meet
all independence and time commitment expectations and
recommended to the Board that they should continue
their appointments for a second term.
Succession planning and talent management
activities
The Committee regularly reviews the results of succession
planning activities, including key person and retention risk,
and talent development programmes across the Group.
In particular, 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 the ELT.
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 Talent
and Change agenda is led by the CPO, with input from
the CEO.
The Committee spent time looking at the strategic
priorities of the talent team to:
– Bring the best possible people into the organisation.
– Enable people to be the best they can.
– Create the best possible environment for our people to
thrive.
and discussed the team’s progress to deliver initiatives to
support early careers, talent acquisition, future talent, core
capabilities and behaviours and effective performance
management.
Jan-Mar
Apr-Jun
Oct-Dec
Corporate governance
Board and committee appointments and composition
Culture, diversity and inclusion
Succession planning and talent development
98 abrdn.com Annual report 2021
The Committee continued its NED mentoring programme
which allows each NED to get to know two or three
members of the next generation of talent through
individual meetings which take place over the course of
the year and evolve based on the needs of each individual
being mentored. Having received positive feedback from
both mentors and mentees, this will continue in 2022.
Board evaluation
The Committee has a key role in supporting the Board
evaluation process. You can read about the 2021 review
on page 79. During the year, the Committee reviewed the
progress to implement the recommendations of the 2020
review.
Culture, Diversity and inclusion
The Committee and the Board have spent time with the
CEO and the Chief People Officer understanding their
plans to strengthen and develop the measurement and
reporting of culture across the Group. The key elements of
a future-ready culture have been agreed as including:
– Authentic leaders who feel connected to strategy.
– Accountability, with swift and effective decision-
making.
– Client-centricity.
– Shared ownership of talent.
– Reward that links pay to performance.
– Career opportunity, development and coaching.
Initiatives to support delivery of this include a new
technology enabled culture engagement tracking tool
and a measurement dashboard for internal and external
use. The Committee will look to see progress against these
initiatives during 2022 and will report on the progress it has
seen in next year’s annual report and accounts.
The Committee also received the annual update from the
Chairman and the CEO of the abrdn Financial Fairness
Trust and was pleased to hear of the grants made and
contributions to positive policy changes during 2021.
The Board’s diversity statement is on page 78. The
Committee has a key role in supporting it through its
oversight of culture, diversity and inclusion activities. The
Diversity and Inclusion Team attends the Committee at
least twice a year to report on progress to deliver against
action plans and initiatives. The Committee reviewed and
supported the 2021 diversity and inclusion priorities which
provide the focus for the team’s work throughout the year.
These are:
– Making diversity and inclusion part of our purpose.
– Maintaining inclusive ways of working.
– Attracting and developing diverse talent.
– Ensuring colleagues feel included and valued every day.
The Committee received advance sight of UK and US
government-led diversity and inclusion reporting including:
– HM Treasury Women in Finance Charter.
– UK Government’s Hampton Alexander Review.
– US Federal Government’s EEO-1 diversity data.
As well as supporting external indices and partnership
reporting, the Committee was keen to understand how
the findings arising from contributing our data to these
reports were being taken forward by the executive
leadership team.
The Committee also reviewed and supported abrdn’s
response to the joint FCA, PRA, and Bank of England
Discussion Paper ‘Diversity and Inclusion in the financial
sector – working together to drive change’ and will
continue to review outcomes arising from this.
Progress against diversity targets for the Board and senior
management are included on pages 38 and 39.
ESG Reporting
During the year, the Committee supported abrdn’s ESG
external reporting by reviewing the various reports in
advance of their publication. The ESG reports issued were:
– UK Stewardship Report - this was the first report on how
abrdn had applied the UK Stewardship Code as an
investor. The FRC confirmed abrdn as a signatory to the
Stewardship Code.
– Sustainability Report - this was an annual report with
ESG data, activity and achievements across abrdn’s
operations and vectors, to bring to life our brand values
and our ESG priorities.
– Diversity and Inclusion Report - this standalone report
supported the requests from stakeholders for more in
depth information on diversity and inclusion.
The Committee members considered these reports in
terms of their quality, consistency and alignment with
other relevant information, and their comments
strengthened the final reports.
Committee effectiveness
The effectiveness review was conducted internally by the
Company Secretary meeting each of the Committee
members. As well as general observations, the key
performance areas considered were:
– The comprehensiveness of the Committee’s agendas
against members’ expectations.
– How effectively agenda items were presented,
discussed and time managed.
– The quality and level of detail in the papers.
– How well the Committee met its objectives and
reported to the Board.
– How effectively the Chairman discharged their
responsibilities.
The Committee members did not raise any material issues
or concerns regarding the above areas or the overall
effectiveness of the Committee during 2021. Looking at
the Committee’s work to oversee talent and leadership,
the Committee was supportive of the progress made and
the refreshed framework which had been put in place and
agreed that in 2022 it will review evidence that the
programmes were starting to deliver the next generation
of talent. The Committee also recognised the increasing
external focus on, and challenges brought by, collecting
and disclosing diversity data. The Committee noted that,
as the Chief People Officer rolls out her plans, it will spend
time in 2022 discussing how effectively culture was being
measured and reported across the Group.
99abrdn.comAnnual report 2021
GOVERNANCE
3. Corporate governance statement continued
3.4 Directors’ remuneration report
Remuneration Committee Chairman’s
statement
This report sets out what the Directors of abrdn were paid
in 2021 and how we will pay them in 2022, together with an
explanation of how the Remuneration Committee
reached its recommendations. Where tables and charts in
this report have been audited by KPMG LLP we have
marked them as ‘audited’ for clarity.
The report is structured in the following sections:
– The annual statement from the Chairman of the
Remuneration Committee.
– An overview of the 2021 remuneration outcomes and
how we propose to implement the remuneration policy
in 2022.
– The annual remuneration report, which sets out in
detail how the remuneration policy was implemented
in 2021.
Approval
The Directors’ remuneration report was approved by the
Board and signed on its behalf by:
Jonathan Asquith
Chairman, Remuneration Committee
28 February 2022
Report contents
Page
At a glance – 2021 remuneration outcomes 103
2022 Remuneration policy implementation 104
2021 annual remuneration report 105
Shareholdings and outstanding share awards
107
Executive Directors’ remuneration in context
110
Remuneration for non-executive Directors and the
Chairman
113
The Remuneration Committee
115
Dear Shareholder
On behalf of the Board I am pleased to present the
Directors’ Remuneration Report for the year ended
31 December 2021.
Introduction
Our Directors’ Remuneration Report for 2020 received a
96% vote in favour from shareholders at the 2021 AGM. I
would like to thank our shareholders for their continued
strong support of our approach to remuneration matters
and their continued dialogue on these issues. Our current
Directors’ Remuneration Policy (‘Policy’) was designed to
drive the delivery of our strategy through a simple and
transparent structure for executive remuneration with a
focus on sustainable long-term performance. It is now in its
final year of operation before being submitted to
shareholders at the 2023 AGM. During 2022 the
Committee will take time to review the policy with a view to
identifying any areas where change would be desirable to
ensure it remains fit for purpose for the next phase of our
strategy.
2021 was a significant year for abrdn. Most visibly, we
launched our abrdn brand, pulling together our expertise
under a common external facing identity. This was a
significant milestone on our journey and involved much
collaborative work across the organisation. Alongside
good progress on key financial metrics, steps were taken
to remove complexity from the business, as set out in the
Chief Executive Officer’s review. There has also been a
clear focus on sustainability issues, and we have reflected
this by incorporating environmental targets in the
executive Directors’ bonus scorecards from 2022 to make
sure this is an area where we hold ourselves to account.
In this year of ongoing challenge we have continued to
drive forward our reward agenda. Our end-of-year
processes incorporated careful consideration of
remuneration outcomes to reflect the achievements and
progress made during 2021 against our financial and non-
financial KPIs. Consideration was also given to broader
stakeholder interests and the complex regulatory and
social landscape in which abrdn operates as we start to
move to a post-pandemic world. Our pay decisions have
focused on encouraging and rewarding contributions to
the long term success and sustainability of our business.
100 abrdn.com Annual report 2021
Our performance in 2021 and alignment with
remuneration
Against a mixed market background in 2021, financial
performance has been strong:
– Fee based revenue growth of 6%.
– A reduction in our cost/income ratio to 79% (from 85%
in 2020).
– An increase in adjusted operating profit of 47%.
– An increase in adjusted diluted earnings per share to
13.7p (from 8.8p in 2020).
Good customer performance was sustained across all
three of our distinct client facing vectors, reflected in
positive customer feedback in Investments, awards for our
abrdn Wrap and Elevate Platforms and strong customer
service ratings for our Personal and Discretionary
propositions.
How our remuneration policy was applied in
2021
Annual bonus
The 2021 executive Director bonus plan was designed and
operated in line with our Directors’ Remuneration Policy to
reward management for the efficient and timely
execution of a stretching 12 month plan agreed with the
Board with a majority focus (75%) on financial
performance targets. General non-financial performance
objectives (20%) made up most of the balance,
concentrating on the achievement of desired outcomes in
our relationships with our customers and our people. The
remaining 5% was reserved to reward the achievement of
specific personal targets set for each of the executive
Directors. Full details on our bonus outcomes against
targets can be found on pages 105 and 106.
Financial performance (75%)
Financial targets were set with reference to the Board-
approved plan. The 2021 scorecard was streamlined to
focus on four key financial metrics to ensure the alignment
of performance with achievement against strategic
priorities. Within these measures, adjusted profit before tax
was weighted at 35% of the total scorecard, investment
performance was weighted at 20% and the remaining
portion was equally split between net flows (10%) and
transformation synergies (10%).
The outcomes against these financial targets can be
summarised as follows:
– Adjusted profit before tax was above our stretch
target.
– Investment performance was strong, with the
outcome between target and stretch.
– Net flows were between threshold and target.
– Transformation synergies were fully realised, just
above the stretch target.
This resulted in an overall assessment of 62.5% out of a
maximum of 75% on financial measures.
Non-financial performance (25%)
The general non-financial measures focused on our
Customers (12%) and our People (8%) both of which are
important to the sustainability of our business.
– Customer: performance was assessed for each of our
three distinct vectors: Investments, Adviser and
Personal. The Committee took into account more than
20 performance indicators in determining that overall
performance had been strong, with the outcome
being agreed as 11.5% out of 12%.
– People: our performance against diversity targets
improved compared to 2020 with a 1% increase in
percentage female representation in our global
workforce while maintaining target achievement for
our female representation in CEO-1 and CEO-2 levels.
Our employee engagement score fell short of
threshold performance, reducing the overall People
score to 1.5% out of 8%.
This yielded an overall assessment of 13% out of a
maximum of 20% achievement on non-financial
measures (excluding the personal performance outcome
for each executive Director).
Details on the Committee’s assessment of individual
performance against personal objectives, which make up
the final 5% of the bonus opportunity, are provided on
page 106. Stephen Bird was assessed to have met or
exceeded his objectives across a range of deliverables
with a maximum 5% vesting and Stephanie Bruce was
judged to have met her objectives with a 4% outcome for
this element.
Remuneration Committee assessment
To assess whether the awards generated by the
scorecard were fair in the broader performance and risk
context, the Committee reviewed the individual
components which contributed to the delivery of this
performance and the alignment of scorecard outcomes
with the experience of a range of stakeholders. The
Committee considered, amongst other things:
– Input from the Risk and Capital Committee and the
Audit Committee. There were no items raised by these
committees which warranted Remuneration
Committee intervention in executive Director
outcomes for 2021.
– The wider workforce context, including a material
increase to the 2021 distributable bonus pool
compared to 2020.
– The shareholder experience during 2021, noting that
the disappointing performance of the share price
during 2021 was already reflected in the significant
proportion of executive Director remuneration
dependent on three year Total Shareholder Return
(TSR) via the Long Term Incentive Plan (LTIP).
– As in 2020, no application was made for government
support to mitigate the effects of COVID-19 and
dividend payments to shareholders were maintained.
Taking these and other considerations into account, the
Committee concluded that the outcomes of the
scorecard were fair and balanced and no adjustment to
them was needed or made.
101abrdn.comAnnual report 2021
GOVERNANCE
3. Corporate governance statement continued
Summarising these results, the Remuneration Committee
approved the following outcomes based on performance
against targets:
Executive Director
Final outcome
(% of max)
2021 total bonus
(£000s)
Stephen Bird
80.5% 1,761
Stephanie Bruce
79.5% 642
Vesting of long term incentives
Stephanie Bruce –One-Off Deferred Award
As already disclosed in an RNS announcement on
11 August 2021, the Remuneration Committee assessed
the performance condition around the vesting of the
second tranche of the one-off deferred award made to
Stephanie Bruce. The Committee approved the vesting
level at 100% of maximum. Further detail is included on
page 107.
No other long term incentive plans were due to vest for the
current executive Directors as a result of performance in
periods ending on 31 December 2021.
The EIP awards granted in 2019 to former executive
Directors were measured against their underpin hurdles
for the period ending 31 December 2021, with final vesting
being assessed at 25% of the maximum award. Full details
of the vesting outcome can be found on page 108.
2021 LTIP Award
LTIP awards were made to Stephen Bird and Stephanie
Bruce on 9 April 2021. Details of these awards are set out
on page 108.
Policy implementation in 2022
For the second year running the Committee decided not
to increase the salaries for the executive Directors or the
base fees for the non-executive Directors or the
Chairman. As set out on page 114, the supplementary fees
for membership of the Audit, Remuneration and Risk and
Capital Committees set in 2017 have been updated to
take account of increases in workload.
In line with previous practice, we will continue to set
stretching targets for the annual bonus and the LTIP to
ensure that the maximum opportunity will only be earned
for exceptional performance.
The scorecard for the 2022 annual bonus is detailed on
page 104 and the targets, which are commercially
sensitive, will be disclosed at the end of this performance
year in the Annual report and accounts 2022. The
scorecard retains the structure of focusing 75% of
opportunity on the achievement of financial targets as set
out in our Policy. As management has fully delivered
against our commitment of achieving £400m of
annualised synergies by the end of 2021, this target has
been removed from the 2022 scorecard and the
remaining metrics rebalanced.
We also decided to increase the weighting available to
target ESG measures in the non-financial element of the
bonus scorecard by eliminating the 5% allocation
previously allocated to executive Directors’ personal
performance objectives. It is the Committee’s view that the
overall scorecard provides an appropriate basis for the
assessment of the executive Directors’ performance
without the need for a formalised personal performance
component.
Accordingly, the 25% of the 2022 bonus scorecard
attributable to non-financial performance will be allocated
between customer measures (12%) and ESG measures
(13%).
ESG measures will include people engagement, diversity
and environmental targets linked to both our impact as an
investor (via reducing the carbon intensity of our portfolios)
and the reduction of the environmental impact of our own
operations towards net zero. The Committee has agreed
a basket of key indicators in each of these areas which will
allow a rounded assessment of performance to be made.
The threshold and maximum performance targets for the
proposed grants under the 2022 Executive LTIP are
detailed on page 104. The three year Adjusted Diluted
Capital Generation per share growth target range
employed for the last reporting period was set at 8%-20%
Compound Average Growth Rate (CAGR), somewhat
above normal levels in the market, reflecting a low baseline
in the previous year and the levels of surplus capital
available in the Group. Strong financial performance in
2021 has lifted the baseline for this measure by 45%, while
the capital actions undertaken over the last twelve months
are expected to reduce considerably any surplus capital
overhang. In light of the above, the Committee has revised
the threshold and maximum levels for this measure to a
three year CAGR range of 5%-15%, which is aligned with
the updated business plan agreed with the Board.
The Committee also reviewed and decided to revise the
TSR peer group for the Relative TSR metric, removing both
T Rowe Price and Ameriprise on the basis of their different
geographical focus and relatively much larger size
compared to abrdn. They are replaced by Hargreaves
Lansdown (given our strategic focus on Platforms) and
Ninety One (reflecting our Investments vector activities),
both of which are considered to be competitors for our
business and talent.
To help you navigate the report effectively, I would like to
draw your attention to the sections on pages 103-104
which summarise both the outcomes for 2021 and also
how the remuneration policy will be implemented in 2022.
Further detailed information is then set out in the rear
section of the report for your reference as required.
On behalf of the Board, I invite you to read our
remuneration report. As always, the Committee and I
remain open to hearing your views on this year’s report
and our remuneration policy in general.
102 abrdn.com Annual report 2021
At a glance – 2021 remuneration outcomes
2021 Outcome of the financial and non-financial performance metrics
The following charts show performance against the target range for each of the financial and non-financial metrics
which govern the annual bonus. Further detail on the assessment of the performance conditions can be found on
pages 105-106.
1. %AUM>average of 3 and 5 year benchmark for all asset classes
2. Excl. LBG tranche withdrawals and cash/liquidity
3. Annualised savings
Personal performance measures
The outcome of individual personal performance measures (5% weighting) is set out on page 106.
2021 annual bonus scorecard outcome
The following table sets out the final outcome for the 2021 annual bonus, including the personal performance assessment.
A detailed breakdown of performance can be found on pages 105-106.
Bonus Scorecard Outcome Total Bonus Outcome
Financial metrics
(maximum 75%)
Non-financial
metrics (maximum
20%)
Personal
performance
(maximum 5%)
Board approved
outcome
(% of maximum)
Annual salary
(£000s)
Maximum
opportunity
(% of salary)
Total award
(% of salary)
Total award
(£000s)
Stephen Bird
62.5% 13 %
5% 80.5% 875 250% 201% 1,761
Stephanie Bruce
4% 79.5% 538 150% 119% 642
Total remuneration outcomes in 2021
The chart below shows the remuneration outcomes for each executive Director in 2021 based on performance
compared to the maximum opportunity.
Performance vs Maximum (%) – Financial measures
0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
Investment performance (20%)
1
Net flows £bn (10%)
2
Adjusted profit before tax £m (35%)
Transformation £m (10%)
3
100%
35%
0%
70%
100%
Performance vs Maximum (%) – Non-financial measures
People (8%)
Customer (12%)
Performance against target
0%
10% 20% 30% 40% 50% 60% 70% 80% 90% 100%
19%
96%
Salary, pension and benefits
Annual Bonus - Cash
Annual Bonus - Deferred
Stephen
Bird
Stephanie
Bruce
Max
Actual
2021
Max
Actual
2021
All figures in £000s
£1,034
£1,034
£636 £321 £321
£880.5 £880.5
£636 £404 £404
£1,094 £1,094
£3,222
£2,795
£1,444
£1,278
103abrdn.comAnnual report 2021
GOVERNANCE
At a glance – 2022 remuneration policy implementation
This section sets out how we propose to implement our remuneration policy in 2022. The full remuneration policy can be
found in the 2019 Annual Report and Accounts on pages 96-104.
Element of remuneration Key features of operation 2022 implementation
Salary
Core reward for
undertaking the
role
Normally reviewed annually, taking into account a range of internal and
external factors.
No change to quantum
Stephen Bird: £875,000
Stephanie Bruce: £538,125
Pension
Competitive
retirement benefit
Aligned to the current maximum employer contribution available to the UK
wider workforce (18% of salary).
No change to quantum
Stephen Bird: 18% of salary
Stephanie Bruce: 18% of salary
Benefits
Competitive
benefits
Includes (i) private healthcare; (ii) death in service protection (iii) income
protection (iv) reimbursement of membership fees of professional bodies;
and (v) eligibility for the all employee share plan.
No change
Annual bonus
To reward the
delivery of the
Company’s
business plan
Annual performance assessed against a range of key financial and non-
financial measures. At least 75% will be based on financial measures. At
least 50% deferred into shares vesting in equal tranches over a three-year
period.
Awards are subject to malus and clawback terms.
No change to quantum
Stephen Bird: 250% of salary
Stephanie Bruce: 150% of salary
See below for 2022 performance
conditions
Performance conditions for 2022 annual bonus
Financial (75% weighting)
Investment performance, Adjusted operating profit, Net flows excluding LBG
tranche withdrawals and liquidity
Non-financial (25% weighting)
Performance against Customer and ESG objectives (incorporating people
engagement and diversity metrics and environmental measures)
Due to commercial sensitivity, actual targets and ranges will be disclosed at the end of the performance period. The Remuneration
Committee retains an appropriate level of flexibility to apply discretion to ensure that remuneration outcomes reflect a holistic
view of overall performance, including conduct and culture.
Element of remuneration Key features of operation 2022 implementation
Long-term
incentive plan
To align with our
shareholders and
reward the delivery
of long-term
growth
Awards are subject to a three-year performance period, with a
subsequent two-year holding period. Dividend equivalents accrue
over the performance and holding period.
Awards are subject to two equally weighted performance metrics
linked to long-term strategic priorities and the creation of long-term
shareholder value.
Awards are subject to malus and clawback terms.
No change
Stephen Bird: 350% of salary
Stephanie Bruce: 200% of salary
2022 performance metrics are
set out below
Performance conditions for 2022 Lon
g
term incentive
p
lan
Target range
1
Adjusted Diluted Capital Generation per share (50% weighting) 5% - 15% CAGR
Relative TSR
2
(50% weighting)
Equal to median – equal to
upper quartile
1. Straight line vesting occurs between threshold and maximum. 25% vesting for threshold performance.
2. The peer group is made up of the following global asset management peers: Affiliated Managers, Alliance Bernstein, Amundi, Ashmore Group, DWS Group,
Franklin Resources, Hargreaves Lansdown, Invesco, Janus Henderson Group, Jupiter Fund Management, Man Group, Ninety One, St James’s Place,
Schroders, M&G, Quilter, SEI Investments.
Element of remuneration Key features of operation 2022 implementation
Shareholding
requirements
Executive Directors are required to build up a substantial interest in
Company shares. The share ownership policy for executive Directors
requires shares up to the value of the shareholding requirement to be held
for a period of two years following departure from the Board.
No change
Stephen Bird: 350% of salary
Stephanie Bruce: 300% of salary
104 abrdn.com Annual report 2021
Directors’ Remuneration in 2021
This section reports remuneration awarded and paid at the end of 2021 in further detail, including payments to past
Directors.
Single total figure of remuneration – executive Directors (audited)
The following table sets out the single total figure of remuneration for each of the individuals who served as an executive
Director at any time during the financial year ending 31 December 2021:
Executive
Directors
Basic salary
for year
£000s
Taxable
benefits in
year
£000s
1
Bonus paid in
cash
£000s
Bonus
deferred
£000s
Long-term incentives
with performance
period ending
during the year
£000s
Pension
allowance paid
in year
£000s
Fixed pay
sub-total
£000s
Variable
sub-total
£000s
Total remuneration
for the year
£000s
Stephen
Bird
2
2021 875 1 880.5 880.5 - 158 1,034 1,761 2,795
2020 438 – 263.5 263.5 – 79 517 527 1,044
Stephanie
Bruce
2021 538 1 321 321 - 97 636 642 1,278
2020 535 1 189.5 189.5 – 101 637 379 1,016
1. This includes the taxable value of all benefits paid in respect of the relevant year. Included for 2021 are medical premiums at a cost to the group of £606 for
executive Directors.
2. Stephen Bird was appointed on 1 July 2020 – all figures reflect amounts paid/awarded since the date of appointment.
Base salary (audited)
There was no change to the base salaries of executive Directors in 2021.
Pension (audited)
Under the Directors’ Remuneration Policy approved at the 2020 AGM, with effect from 1 June 2020 the executive Directors
received a cash allowance in lieu of pension contributions of 18% of base salary.
Annual Bonus Plan
The following section contains details on the targets and the Remuneration Committee’s assessment of outcomes for the
period 1 January 2021 to 31 December 2021 against each of the elements of the executive Director bonus scorecard.
Financial performance metrics – 75% of total scorecard outcome
Weighting
(% of max
opportunity)
Threshold
(25% of
maximum)
Target
(50% of
maximum)
Stretch
(100% of
maximum)
Actual Result
Investment performance – % AUM > benchmark
average of 3 year and 5 year for all asset classes
20% 55% 65% 70% 67% 14%/20%
Net flows
1
(£bn) 10% (6) 1 16 (3.2) 3.5%/10%
Adjusted profit before tax (£m)
35% 240 262 306 323 35%/35%
Delivery of transformation synergies (£m)
10% 355 375 400 404 10%/10%
1. Excluding LBG tranche exits and cash/liquidity £bn.
Non-financial performance metrics – 20% of total scorecard outcome
Weighting
(% of max
opportunity)
Threshold
(25% of
maximum)
Target
(50% of
maximum)
Stretch
(100% of
maximum)
Actual Result
Investing in our people (8%)
Diversity of leadership and the wider workforce
(measured at 31 December 2021)
1
% female representation in CEO-1 and CEO-2
2% 36% 38% 40% 38% 1%/2%
% female representation in Global workforce
2% 46% 47% 48% 46% 0.5%/2%
People engagement: outcome of the Viewpoints
full company survey
4% 58%
62%
66%
51% 0%/4%
1. The Committee agreed to remove the acquisition of Finimize when determining the outcome of this metric. The timing of the acquisition (announced in
October 2021) meant that the executive Directors had no opportunity to influence the gender representation before the end of the performance period. This
adjustment impacted the outcome of the CEO -1 and CEO-2 metric by 2% and had no material impact on the Global workforce metric.
105abrdn.comAnnual report 2021
GOVERNANCE
3. Corporate governance statement continued
Investing in our customers (12%) Highlights from assessment
Customer Advocacy: improvement from
baseline across the Adviser, Personal and
Investments vectors
The Committee considered more than 20 quantitative and qualitative
measures, from internal and external sources. Key factors in the
determination were:
–
Positive, in-depth feedback from our largest client in the
Investments vector citing a pivotal year in our strategic
partnership.
–
External award recognition for abrdn Wrap and Elevate
platforms, assessed across core areas including user experience
and client service quality.
–
Year on year increase in Net Promoter Score for the
Discretionary and Adviser vectors.
–
Strong overall customer satisfaction rating for the Personal
vector.
–
Personal vector’s Digital Retirement Advice service rated 4.9/5 by
our customers.
11.5% / 12%
Personal performance metrics – 5% of total scorecard outcome
Highlights from assessment Result
Stephen
Bird
– Successful delivery of rebranding exercise to create a unified brand experience, on schedule and on
budget. Measurable success points were reviewed, including metrics on client communications and
brand campaign results achieving strongly against targeted performance.
– Development of strategic acquisition opportunities in line with the Board’s ambitions, including Finimize
and ii as well as significant divestments with capital proceeds reinvested in growth areas.
– Achievement of key milestones in the People agenda, including roll out of an enhanced remuneration
and reward framework across the group, strengthening the link between corporate objectives and
individual performance.
5%/5%
Stephanie
Bruce
– Key milestones met in the finance transformation project, yielding improved and consistent
management information to enhance decision making.
– Partnerships with the vectors and functions developed, further improving support to all business areas
in line with objectives.
– Development of the finance team progressed
– Regulatory relationships successfully maintained.
4%/5%
Before approving the overall assessment of performance in 2021, the Remuneration Committee sought the views of the
Audit Committee on material accounting, reporting and disclosure matters that it considered during the year and of the
Risk and Capital Committee on the management of risk within the business. In considering whether the bonus outcomes
derived from the scorecards were fair in the context of the overall results, the Remuneration Committee took into account
the feedback received as well as factors including the impact of the COVID-19 pandemic, shareholder experience and
pay for the wider workforce. In light of these, and noting the material increase in the distributable bonus pool for the wider
workforce, the lack of recourse to Government support and the maintenance of our dividend pay out policy, a final
determination was made that no adjustment should be made to the bonus outcomes set out above as a result of this
review.
Payments to past Directors and payments for loss of office (audited)
Payments made to former executive Directors that have not been previously reported elsewhere are reported if they are
in excess of £20,000.
No payments to past directors or payments for loss of office were made during the year.
Executive Directors’ external appointments
Subject to the Board’s approval, executive Directors are able to accept a limited number of external appointments to the
boards of other organisations and can retain any fees paid for these services. Both Stephen Bird and Stephanie Bruce held
representative directorships on behalf of the Group during the year for which they received no fees.
106 abrdn.com Annual report 2021
Shareholdings and outstanding share awards
This section reports our executive Directors’ interests in shares.
Directors’ interests in shares (audited)
Our shareholding requirements for executive Directors are detailed on page 104. The Directors’ Remuneration Policy
requires executive Directors to accumulate and maintain a material long-term investment in abrdn plc shares. The
Remuneration Committee reviews progress against the requirements annually. Personal investment strategies (such as
hedging arrangements) are not permitted for the purposes of reducing the economic exposure arising from the
shareholding requirements.
The following table shows the total number of abrdn plc shares held by the executive Directors and their connected
persons:
Unvested shares
Total number of
shares owned at
1 January 2021
Shares acquired
during the period
1 January 2021
and 31
December 2021
Total shares
owned as at 31
December 2021
1
Options
exercised during
the period 1
January 2021
and 31
December 2021
Vested but
unexercised
share options
Subject to
performance
conditions
2
Not subject to
performance
conditions
3
Shares lapsed
Stephen
Bird
500,000
200,000 700,000 - - 1,979,415 89,008 -
Stephanie
Bruce
4
133,741
226,259 360,000 109,729 - 1,048,172 63,969 -
1. There were no changes to the number of shares held by executive Directors between 31 December 2021 and 28 February 2022.
2. Includes: the 2020 LTIP awards and the 2021 LTIP awards granted in 2021 disclosed below (awards subject to performance targets over the three-year
period ending 31 December 2023), excluding, in each case, shares to be awarded in lieu of dividend equivalents.
3. This comprises deferred bonus awards. It does not include shares to be awarded in lieu of dividend equivalents.
4. On 10 August Stephanie Bruce exercised the second tranche of her one-off award. The share price used for exercise was 289.40 pence. This resulted in a
gain of £317,556.
The following table shows the number of qualifying awards included in assessing achievement towards the shareholding
requirement, as at 31 December 2021. Qualifying awards include 50% of the value of awards held by the executive
Directors that have vested but not been exercised (as a proxy for the payment of tax due on the exercise of the awards).
Qualifying awards
Number
of shares
available as
unrestricted
vested deferred
awards
Number of shares under
option under long-term
incentive plans which are
no longer subject to
performance conditions
Total qualifying
holding (shares held
from table above
and 50% of
qualifying awards)
Value
1
of holding
Shareholding
requirement
(as % salary)
Basic
salary
Total of the value of
shares owned and
50% of the value of
qualifying awards at
31 December 2021
as a % of salary
Shareholding
requirement met?
Stephen Bird
– – 700,000 £1,686,300 350%
£875,000 193% In progress
Stephanie
Bruce
– – 360,000 £867,240 300% £538,125 161% In progress
1. The closing market price at 31 December 2021 used to determine the value of each holding was 240.90 pence.
Executive Directors who have not yet satisfied the shareholding requirement are expected to accumulate shares until they
have fully met their shareholding requirement. They are required to hold 100% of vested shares (post-tax) granted under
the Company’s share plans (including any dividend equivalents) until they have met their shareholding requirement. All
other shares acquired and held by the executive Director or owned indirectly by a partner or family trust also count
towards the shareholding requirement.
Stephen Bird and Stephanie Bruce, who were appointed during 2020 and 2019 respectively, have not yet met the
shareholding requirement, however the Committee is satisfied with the progress they have made towards their respective
requirements given their tenure.
Vesting of the CFO Deferred Award
The second anniversary of the award was 3 June 2021 and vesting of the second tranche was determined based on
performance up to that date. The award had a maximum value at grant of £750,000, and the first tranche of the award
vested at 100% on 22 June 2020.
The Award is considered for vesting in three tranches on the first, second and third anniversary of the grant of the Award.
The vesting level for the first anniversary and second anniversary tranches is based on an assessment made by the
Remuneration Committee of the progress made towards the achievement of the efficiency targets. The vesting level of
the third anniversary tranche will be adjusted by the Remuneration Committee to ensure that the overall vesting of the
award is commensurate with the final achievement against the efficiency targets.
107abrdn.comAnnual report 2021
GOVERNANCE
3. Corporate governance statement continued
The Remuneration Committee reviewed progress made towards the £175m (baseline target) and £230m (maximum
target) in June 2021, prior to approving the vesting level of the second tranche of the award. As at 31 December 2020,
actions had been taken which delivered £351m of annualised synergies, benefiting 2020 operating expenses by £287m
(2019: £234m) (as published in our 2020 ARA). When the Remuneration Committee undertook its assessment of whether
the second tranche of the award should vest in June 2021, this level of efficiency achievement was reported and agreed by
the Remuneration Committee to be ‘on track’ for the purposes of assessing vesting of the second tranche of the award.
Performance was assessed by the Committee taking into account the CFO’s personal performance and conduct, and
following checks with the Audit and Risk and Capital Committees to ensure there were no other matters which the
Committee should take into account when determining this outcome.
The Remuneration Committee, having satisfied itself regarding progress made towards the efficiency targets, approved
the vesting level of the second tranche of the Award at 100% and this tranche vested on 21 June 2021. Both the first and
second tranches of the award remain subject to malus and clawback provisions in line with the Remuneration Policy.
Executive Incentive Plan (EIP) outcome (audited)
Awards granted under the 2018 EIP to former executive Directors, set out in full on page 91 of the 2018 Annual Report and
Accounts and summarised below, completed their performance period on 31 December 2021. The Remuneration
Committee reviewed the outcomes and concluded that three of the four elements had failed the performance hurdle and
therefore lapsed.
Measure Performance underpin hurdle Actual performance
Outcome (as % of maximum
opportunity)
Investment performance
At least 55% AUM by value to be outperforming the
benchmark
66% 25%
Flows
Gross new business flows underpin of £251.5bn
1
Net new business flows underpin of £40.6bn
2
183.7
(19.1)
0%
Return on adjusted equity
At least 17% 12% 0%
Cost/Income ratio
68.9%
3
74% 0%
1. Flows exclude investment in cash & liquidity funds and total Lloyds.
2. Flows exclude investment in cash & liquidity funds and strategic insurance partners.
3. The Cost/Income ratio was restated from 66.0% to 68.9% to remove the impact of JVs & Associates from the 2021 target and outcome following the change
to how these are accounted for in 2021.
The following amounts had been previously disclosed in respect of each director and an adjustment is set out below for
each in light of the performance assessment.
Participant
Total EIP value deferred
(£000s)
EIP value following
performance outcome (£000s)
Original single total
figure disclosure for 2018 (£000s)
Adjusted single total
figure disclosure for 2018 (£000s)
Martin Gilbert 367 92 1,089 814
Keith Skeoch 367 92 1,089 814
Rod Paris 454 113.5 1,188 847.5
Bill Rattray 229 57 847 675
Awards granted in 2021 (audited)
The table below shows the key details of the LTIP and deferred awards granted in 2021:
Participant
Type of
award
Basis of
award
% of
salary
Face value
at grant
1
Number of
shares
awarded
% payable
for threshold
performance
Details on performance conditions
Stephen Bird Nil-cost option LTIP 350% £3,062,500 1,033,650
25%
Awards are subject to
performance against targets
measured over three years as set
out on page 78 of the Annual report
and accounts 2020
Stephanie Bruce Nil-cost option LTIP 200% £1,076,250 363,254
Stephen Bird
Nil-cost option
Deferred
Bonus
Not
applicable
£263,730 89,008
Not
applicable
Not applicable
Stephanie Bruce Nil-cost option £189,540 63,969
1. The share price used for the awards was 296.28 pence (the five day average price from 31 March 2021)
108 abrdn.com Annual report 2021
Share dilution limits
All share plans operated by the Company which permit awards to be satisfied by issuing new shares contain dilution limits
that comply with the guidelines produced by The Investment Association (IA). On 31 December 2021, the Company’s
standing against these dilution limits was 0.6% where the guideline is no more than 5% in any 10 years under all
discretionary share plans in which the executive Directors participate and 1.07% where the guideline is no more than 10%
in any 10 years under all share plans.
As is normal practice, there are employee trusts that operate in conjunction with the Executive LTIP, Standard Life
Investments LTIP, the Restricted Stock Plan, the deferred elements of the abrdn plc annual bonus plan and the Aberdeen
Asset Management deferred plans. On 31 December 2021 the trusts held 64,966,706 shares acquired to satisfy these
awards. Of these shares, 8,076,074 are committed to satisfying vested but unexercised awards. The percentage of share
capital held by the employee trusts is 2.98% of the issued share capital of the Company – within the 5% best practice limit
endorsed by the IA.
Promoting all-employee share ownership
The Company promotes employee share ownership with a range of initiatives, including:
– The abrdn plc (Employee) Share Plan which allows eligible employees to buy abrdn plc shares directly from earnings.
A similar tax-approved plan is used in Ireland. At 31 December 2021, 1,680 individuals in the UK and Ireland were actively
making monthly contributions averaging £71. At 31 December 2021, 2,060 individuals were abrdn plc shareholders
through participation in the Plan.
– The Sharesave Plan which was offered in 2021 to eligible employees in the UK. This plan allows UK tax resident
employees to save towards the exercise of options over abrdn plc shares with the option price set at the beginning of
the savings period at a discount of up to 20% of the market price. At 31 December 2021, 1,925 individuals were saving
towards one or more of the Sharesave offers.
109abrdn.comAnnual report 2021
GOVERNANCE
3. Corporate governance statement continued
Executive Directors’ remuneration in context
Pay compared to
performance
The graph shows the
difference in the total
shareholder return at
31 December 2021 if, on
1 January 2011, £100 had been
invested in abrdn plc and in the
FTSE 100 respectively. It is
assumed dividends are
reinvested in both. The FTSE
100 has been chosen as abrdn
plc is a member of this FTSE
grouping.
Total shareholder return of abrdn plc compared to
the FTSE 100 index
The following table shows the single figure of total remuneration for the Director in the role of Chief Executive Officer for the
same 10 financial years as shown in the graph above. Also shown are the annual incentive awards and LTIP awards which
vested based on performance in those years.
Year ended
31 December Chief Executive Officer
Chief Executive Officer single total figure
of remuneration (£000s)
Bonus outcome/ Annual incentive rates against
maximum opportunity (%)
Long-term incentive plan vesting rates against
maximum opportunity (%)
2021 Stephen Bird 2,795 80.5 -
2020
Stephen Bird 1,044 48 –
Keith Skeoch 1,075 48 –
2019 Keith Skeoch 1,472 21 –
2018
1
Keith Skeoch 814 10 –
Martin Gilbert 814 10 –
2017
1
Keith Skeoch 3,028 82 70
Martin Gilbert 1,317 56 –
2016 Keith Skeoch 2,746 81 31.02
2015 Keith Skeoch 1,411 87 40.77
2015 David Nish 2,143 90 40.77
2014 David Nish 6,083 95 100
2013 David Nish 4,206 75 64
2012 David Nish 5,564 88 100
1. Co-CEO. The outcome for 2018 has been updated to reflect the EIP vesting.
Relative importance of spend on pay
The following table compares what the Company spent on employee remuneration to what is paid in the form of
dividends to the Company’s shareholders. Also shown is the Company’s adjusted profit before tax which is provided for
context as it is one of our key performance measures:
2021 % change 2020
Remuneration payable to all Group employees (£m)
1
604 -3% 625
Dividends paid in respect of financial year (£m) 309 -1% 313
Share buybacks and return of capital (£m)
2
41 -89% 359
Adjusted profit before tax (£m)
3
323 35%
240
1. In addition, staff costs and other employee related costs of £97m (2020: £91m) and £53m (2020: £nil) are included in restructuring and corporate transaction
expenses and in cost of sales respectively. See Note 6 of the Group financial statements for further information.
2. The 2020 amount excludes unsettled purchases of shares, expenses and the irrevocable contractual obligation with a third party to purchase the Company's
own shares. See Note 25 of the Group financial statements for further information on the buybacks.
3. The Group has changed the definition of adjusted profit before tax in 2021. See Note 12 of the Group financial statements for further information. The
comparative amount for the year ended 31 December 2020 has been prepared on the same basis as the year ended 31 December 2021 to allow for a more
meaningful comparison.
100
150
200
250
300
350
Dec-21Dec-20Dec-19Dec-18Dec-17Dec-16Dec-15Dec-14Dec-13Dec-12Dec-11
abrdn FTSE 100
Source: Datastream
Val
u
e
(
£
)
110 abrdn.com Annual report 2021
Annual percentage change in remuneration of Directors compared to UK based employees
The table below shows the percentage year-on-year change in salary, benefits and annual bonus earned between the
year ended 31 December 2020 and the year ended 31 December 2021 for the executive Directors, along with any
percentage change in fees for the non-executive Directors, compared to the average UK-based Group employee. The
Remuneration Committee considers this the most appropriate comparison given the location of the executive Directors
and that the Group does not operate a harmonised salary and benefits structure across its global operations. The 2020
disclosure is also shown alongside this data. Year on year movement on base salaries or Director fees is attributable to
part-year appointment changes.
% Base salary/fee Annual bonus outcome % Benefits
1
2021 2020 2021 2020 2021 2020
Executive
Directors
Stephen Bird
2
100% –
234%
–
-
–
Stephanie Bruce
-
74%
69%
54%
-
100%
Non-
executive
Directors
3,4
Sir Douglas Flint
-
-
–
–
-
-
Jonathan Asquith
-
202%
–
–
–
–
John Devine
-3%
-2%
–
–
–
-100%
Melanie Gee
-20%
-3%
–
–
–
-100%
Hannah Grove
-
-
-
-
-
-
Brian McBride
59%
–
–
–
–
–
Martin Pike
-
-3%
–
–
–
-100%
Cathleen Raffaeli
-
-
–
–
–
-100%
Jutta af Rosenborg
-
–
–
–
–
–
Cecilia Reyes
-
292%
–
–
–
–
UK-based employees
-
2.5%
50%
-52.5%
-
17%
1. The change in benefits figures for employees (including executive Directors) are based on the change in medical premium paid by the Group on their behalf.
Benefits do not include pension contributions for these purposes.
2. Stephen Bird was appointed 1 July 2020.
3. Remuneration for non-executive Directors and the Chairman is disclosed on page 113.
4. Melanie Gee stepped down from the Board on 31 October 2021. Hannah Grove was appointed to the Board on 1 September 2021, and is the Board
Employee Engagement designated NED as well as a member of the Nomination and Governance Committee. Brian McBride was appointed to the Board
with effect from 1 May 2020.
How pay was set across the wider workforce in 2021
Our principles for setting pay across the wider workforce are consistent with those for our executive Directors, in that the
proportion of the remuneration package which is linked to performance increases for more senior roles within the
Company as responsibility and accountability increases.
Base salaries are targeted at an appropriate level in the relevant markets in which the Group competes for talent. The
Remuneration Committee considers the base salary percentage increases for the Group's broader UK and international
employee populations when determining any annual salary increases for the executive Directors. A Group-wide decision
was made not to carry out a salary review and the same approach was applied to executive Directors.
As part of the transformation of our performance culture, and incorporating colleague feedback, a new reward
philosophy was adopted in 2021 (see page 39 for detail). As a result, the eligibility criteria for participation in variable pay
plans was reviewed. It was determined that bonus eligibility for some UK roles should be removed, and instead their
packages rebalanced to include a higher base salary. This adjustment meant that the colleagues concerned also
benefitted from increases in salary linked benefits, such as pension.
For roles where variable remuneration eligibility is retained, our clear approach is designed to support and reward
performance at a company, team and individual level. Performance related variable remuneration includes deferred
variable compensation at a suitable level for the employee’s role, ensuring a performance link over a longer time horizon
than a single year. Variable remuneration for employees, including executive Directors, is determined as a total pool which
is distributed across the business based on the performance of each vector and function. Individuals are then considered
for a bonus payment on the basis of their individual performance objectives and goals, taking into account conduct.
The Group engaged with its employees in 2021 through the annual Viewpoints full company survey. The survey included
an opportunity for employees to provide feedback to the Board on pay and benefit matters. Additionally, the Board
Employee Engagement programme continued, with meet the NED sessions and virtual get togethers enabling direct
communication for employees and the NEDs on a range of topics, including remuneration. The Board Employee
Engagement representative NED has a designated slot at each Board meeting to feedback views and insights to ensure
that employee views can be taken into account. The representative NED also shares updates with all employees via
regular email communication.
111abrdn.comAnnual report 2021
GOVERNANCE
3. Corporate governance statement continued
The Group operates a Compensation Committee comprising the Chief People Officer (Chair), Chief Financial Officer and
Chief Risk Officer, the role of which is to consider the implementation of the remuneration policy across the Group. The
terms of reference of the Compensation Committee are set by the Remuneration Committee and the Chair of the
Compensation Committee formally reports to the Remuneration Committee on all matters which fall within the
Compensation Committee’s remit.
Pay ratio
The table below sets out the ratio of CEO pay to the median, 25
th
and 75
th
percentile total remuneration of full-time
equivalent UK employees in accordance with legislation published by the Government in 2018. We have identified the
relevant employees for comparison using methodology B, our gender pay gap data set (snapshot data from 5 April 2021).
This was chosen by the Remuneration Committee as it utilised a data set which had already been processed and
thoroughly reviewed, and this enabled timely reporting for disclosure purposes. Some employing entities are excluded
from the gender pay gap calculation in line with the regulations due to the number of individuals employed by these entities
being less than 250. The Committee considered this would not have a material impact on the outcome of the pay ratio
calculation given the limited number of individuals this excludes, relative to the total population being captured, and the
range of the remuneration for those excluded individuals, which was spread across quartiles.
The remuneration paid to each of the individuals identified under methodology B was reviewed against other individuals
within the quartile both above and below. The individual identified at the 25
th
percentile was replaced by the next identified
in that quartile as they were not considered representative due to the structure of their package not being consistent with
their peers’. The individual identified at the 50
th
percentile had a full time equivalent outcome which was considered
representative of the quartile. The individual identified at the 75
th
percentile had since left the business and was not bonus
eligible, therefore the next identified individual was selected. Benefits figures were based on the medical premium paid by
the Company on behalf of employees.
The ratio has increased from 2020, which reflects the fact that the CEO has a greater level of remuneration at risk which is
dependent on Company performance; based on performance in 2020, the bonus for the CEO paid out at 48% of
maximum, compared to 80.5% of maximum in 2021. Additionally, there has been a material change in the number of staff
employed by the Group during the year which makes a year on year comparison more challenging. It is noted that in
future years the ratio may be impacted by the vesting of long-term incentive awards (the performance period of the first
LTIP award granted to the CEO will end in 2022).The Committee is comfortable that the pay ratio reflects the pay and
progression policies across the Company set out above. Further detail on workforce pay is set out below.
Year Method 25th percentile 50th percentile 75th percentile
Stephen Bird 2021 Option B 62 45 25
Stephen Bird/Keith Skeoch 2020 Option B 49 30 18
Keith Skeoch 2019 Option B 34 23 13
Keith Skeoch 2018 Option B 30 19 12
Base salary
(£000s)
Total pay
(£000s)
CEO remuneration 875 2,795
25
th
percentile employee 38 45
50
th
percentile employee 53 62
75
th
percentile employee 75 113
112 abrdn.com Annual report 2021
Remuneration for non-executive Directors and the Chairman
Single total figure of remuneration – non-executive Directors (audited)
The following table sets out the single total figure of remuneration for each of the non-executive Directors who served as a
Director at any time during the financial year ending 31 December 2021. Non-executive Directors do not participate in
bonus or long-term incentive plans and do not receive pension funding:
Non-executive Directors
Fees for year ended
31 December
£000s
Taxable benefits in
year ended
31 December
£000s
Total remuneration
for the year ended
31 December
£000s
Sir Douglas Flint
1
2021 475 - 475
2020 475 - 475
Jonathan Asquith 2021 139 - 139
2020 139 – 139
John Devine
2021 124 2 126
2020 128 – 128
Melanie Gee
2
2021 90 - 90
2020 113 – 113
Hannah Grove
3
2021 29 - 29
2020 - - -
Brian McBride
4
2021 121 - 121
2020 76 – 76
Martin Pike
2021 124 - 124
2020 124 – 124
Cathleen Raffaeli
5
2021 149 - 149
2020 149 – 149
Jutta af Rosenborg
2021 94 - 94
2020 94 – 94
Cecilia Reyes
2021 94 9 103
2020 94 – 94
1. Sir Douglas Flint is eligible for life assurance of 4x his annual fee. This is a non-taxable benefit.
2. Stepped down from the Board with effect from 31 October 2021.
3. Appointed to the Board with effect from 1 September 2021.
4. Appointed to the Board with effect from 1 May 2020. Total fees include subsidiary Board fees of £30,000 per annum as a member of the Standard Life Savings
Limited and Elevate Portfolio Services Limited Boards.
5. Total fees include subsidiary Board fees of £55,000 per annum as Chair of the Standard Life Savings Limited and Elevate Portfolio Services Limited Boards.
The non-executive Directors, including the Chairman, have letters of appointment that set out their duties and
responsibilities. The key terms are set out in the remuneration policy, and can be found on pages 96-104 of the Annual
report and accounts 2019.
The service agreements/letters of appointment for Directors are available to shareholders to view on request from the
Company Secretary at the Company’s registered address (details of which can be found on page 283) and at the 2022
AGM. Details of the date of appointment to the Board and date of election by shareholders are set out below:
Chairman/ non-executive Director Initial appointment to the Board Initial election by shareholders
Chairman
Sir Douglas Flint 1 November 2018 AGM 2019
Senior Independent Director
Jonathan Asquith 1 September 2019 AGM 2020
Non-executive Directors
John Devine 4 July 2016 AGM 2017
Melanie Gee 1 November 2015 AGM 2016
Hannah Grove 1 September 2021 -
Brian McBride 1 May 2020 AGM 2020
Martin Pike 27 September 2013 AGM 2014
Cathleen Raffaeli 1 August 2018 AGM 2019
Jutta af Rosenborg 14 August 2017 AGM 2018
Cecilia Reyes 1 October 2019 AGM 2020
113abrdn.comAnnual report 2021
GOVERNANCE
3. Corporate governance statement continued
Implementation of policy for non-executive Directors in 2022
The following table sets out abrdn non-executive Director fees to be paid in 2022. Fees for 2022 remain at the current level,
with the exception of the Committee membership fees paid to members of the Audit, Risk and Capital and Remuneration
Committees, which have been increased to £17,500 following a review of market data; these membership fees had
previously remained unchanged since being set in 2017.
Role 2022 fees
1
2021 fees
Chairman’s fees
2
£475,000 £475,000
Non-executive Director fee
3
£73,500 £73,500
Additional fees:
Senior Independent Director
£25,000 £25,000
Chairman of the Audit Committee £30,000 £30,000
Chairman of the Risk and Capital Committee
£30,000 £30,000
Chairman of the Remuneration Committee
£30,000 £30,000
Committee membership (Audit, Risk and Capital and Remuneration Committees) £17,500 £10,000
Committee membership (Nomination Committee)
£10,000 £10,000
Employee engagement
£15,000 £15,000
1. The core fee of £73,500 paid to each non-executive Director (including the Chairman) is expected to total £735k for 2022 (2021: £662k). This is within the
maximum £1,500,000 permitted under Article 87 of abrdn’s articles of association. Total fees including additional duties are expected to amount to £1,407k for
2022 (2021: £1,407k).
2. The Chairman’s fees are inclusive of the non-executive Directors’ core fees and no additional fees are paid to the Chairman where he chairs, or is a member
of, other committees/boards. The Chairman is eligible to receive life assurance, which is a non-taxable benefit.
3. For non-executive Directors, individual fees are constructed by taking the core fee and adding extra fees for being the Senior Independent Director, chairman
or member of committees and/or subsidiary boards where a greater responsibility and time commitment is required.
Non-executive Directors’ interests in shares (audited)
The following table shows the total number of abrdn plc shares held by each of the non-executive Directors and their
connected persons:
Total number of shares owned
at 1 January 2021 or date of appointment if
later
Shares acquired during the period
1 January 2021 to
31 December 2021
Total number of shares owned at
31 December 2021 or date of cessation
if earlier
3
Sir Douglas Flint 89,369 90,248 179,617
Jonathan Asquith 70,000 32,849 102,849
John Devine
28,399 - 28,399
Melanie Gee
1
67,500 - 67,500
Hannah Grove
2
- 33,000 33,000
Brian McBride
– - -
Martin Pike
69,476 - 69,476
Cathleen Raffaeli 9,315 - 9,315
Jutta af Rosenborg
8,750 231 8,981
Cecilia Reyes
– - -
1. Stepped down from the Board with effect from 31 October 2021.
2. Appointed to the Board with effect from 1 September 2021.
3. There were no changes to the number of shares held by the reportable Directors noted above between 31 December 2021 and 28 February 2022. On 4
January 2022, Catherine Bradley was appointed to the Board. As at 28 February 2022 she holds 12,181 shares.
Sir Douglas Flint, as Chairman, is subject to a shareholding guideline of 100% of the value of his annual fee in abrdn plc
shares to be reached within four years of appointment. As set out in the above table, during 2021 he purchased 90,248
abrdn plc shares. The total investment cost of Sir Douglas Flint’s shareholding was £453k, equivalent to 95% of his annual
fee. Based on the share price at 31 December 2021 (240.90p), his shareholding is valued at 91% of his annual fee.
114 abrdn.com Annual report 2021
The Remuneration Committee
Membership
During 2021 the Remuneration Committee was made up of independent non-executive Directors. For their names, the
number of meetings and committee member attendance during 2021, please see the table on page 82.
The role of the Remuneration Committee
To consider and make recommendations to the Board in respect of the total remuneration policy across the Company,
including:
– Rewards for the executive Directors, senior employees and the Chairman.
– The design and targets for any employee share plan.
– The design and targets for annual cash bonus plans throughout the Company.
– Changes to employee benefit structures (including pensions) throughout the Company.
The Remuneration Committee’s work in 2021
– 2020 Directors’ remuneration report.
– 2020 bonus payments and 2018 LTIP outcomes.
– 2021 annual bonus scorecard targets and 2021 LTIP targets.
– Updates from the Risk and Audit Committees on relevant matters for the Committee’s consideration when
determining pay outcomes.
– Review remuneration outcomes for executive Directors and the Material Risk Taker population.
– Update on the external environment and feedback from AGM.
– Review the Group Remuneration Philosophy and Policy.
– Remuneration decisions for the Executive Leadership Team and other senior employees within Remuneration
Committee’s remit.
– Agree outcome of the second tranche of the CFO’s one-off award.
– Consider anticipated impact of regulatory changes on remuneration.
– Review eligibility criteria for the Group-wide Variable Pay Plan.
– Mid-year review of performance against target for annual bonus and LTIP awards for the executive Directors.
– Finalise Group Remuneration Policy and bonus pool allocation principles.
– Review gender pay gap data.
– Updates on regulatory changes and external environment.
– Update the Remuneration Committee’s Terms of Reference.
– Review 2022 remuneration proposals.
External advisers
During the year, the Remuneration Committee took advice from Deloitte LLP (a member of the Remuneration Consultants
Group) who were appointed by the Remuneration Committee in 2017. The Remuneration Committee is satisfied that the
advice given is objective and independent.
A representative from Deloitte LLP attends, by invitation, all Remuneration Committee meetings to provide information and
updates on external developments affecting remuneration as well as specific matters raised by the Remuneration
Committee. Outside the meetings, the Remuneration Committee’s Chairman seeks advice on remuneration matters on
an ongoing basis. As well as advising the Remuneration Committee, Deloitte LLP also provided tax, accounting support, risk
management and consultancy services to the Company during the year. Deloitte Total Rewards and Benefits is an
investment adviser to the trustees of the Standard Life Staff Pension Scheme.
Fees paid to Deloitte LLP during 2021 for professional advice to the Remuneration Committee were £183,750.
Deloitte LLP have now been Remuneration Committee advisers for five years. To ensure the Committee is receiving the
best quality advice and value for money, a retender process has been started, with a view to appointing a new adviser or
retaining Deloitte LLP in summer 2022. The outcome of this process will be published to shareholders in next year’s
Directors’ Remuneration Report.
Where appropriate, the Remuneration Committee receives input from the Chairman, Chief Executive Officer, Chief
Financial Officer, Chief People Officer, Global Head of Reward and the Chief Risk Officer. This input never relates to their
own remuneration. The Remuneration Committee also receives input from the Risk and Capital Committee and the Audit
Committee.
Jan-Mar
Apr-Jun
Jul-Sep
Oct-Dec
115abrdn.comAnnual report 2021
GOVERNANCE
3. Corporate governance statement continued
Remuneration Committee effectiveness
The Committee reviews its remit and effectiveness each year. The 2021 review was conducted internally by the Company
Secretary, who met with each of the Committee members. As well as general observations, the key performance areas
considered were:
– The comprehensiveness of the Committee’s agendas against members’ expectations.
– How effectively agenda items were presented, discussed and time managed.
– The quality and level of detail in the papers.
– How well the Committee met its objectives in terms of making decisions and reporting to the Board.
– How effectively the Chair discharged their responsibilities.
The Committee members did not raise any material issues or concerns regarding the above areas or the overall
effectiveness of the Committee during 2021. They were very supportive of the Chair’s effective role in leading the
Committee through its discussions. The main area where the Committee looked to see continued improvement in 2022
was in relation to the clarity of the presentation of some of the more technical and regulatory remuneration matters. The
Committee was pleased that during 2021 it had found time to move beyond overseeing the annual cycle of remuneration
matters to review and agree the revised and updated Group Remuneration Policy and Principles.
Shareholder voting
We remain committed to ongoing shareholder dialogue and take an active interest in voting outcomes.
The remuneration policy was subject to a vote at the 2020 AGM on 12 May 2020 and the following table sets out the
outcome.
Policy 2020 AGM For Against Withheld
% of total votes 91.66% 8.34%
No. of votes cast 1,003,905,073 91,323,405 10,346,991
The Directors’ remuneration report was subject to a vote at the 2021 AGM on 18 May 2021 and the following table sets out
the outcome.
2020 Directors’ remuneration report For Against Withheld
% of total votes 96.90% 3.10%
No. of votes cast 969,169,906 30,957,556 2,113,755
116 abrdn.com Annual report 2021
4. Directors’ report
The Directors present their annual report on the affairs of
the abrdn 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 abrdn plc (the Company) for the year
ended 31 December 2021. Standard Life Aberdeen plc
For clarity, some of the matters that would otherwise have
been included in the Directors’ report have been included
in the Strategic report on pages 2 to 65, as the Board
considers they fit better within that report. Specifically,
these are:
– Future business developments.
– Risk management.
– Total global greenhouse gas emissions.
– Information on how the Directors have had regard for
the Company’s stakeholders (also covered in the
Corporate governance statement on pages 74 and 75).
– Information on our people including employee
engagement, diversity and inclusion, and talent and
reward (details of the Board’s diversity statement can
be found in the Corporate governance statement on
page 78).
Reporting for the year ended 31 December 2021
During 2021, the Group operated primarily in the UK, rest of
Europe, Asia and the Americas. You can find out about the
relevant activities of the Company’s principal subsidiary
undertakings in the Strategic report on pages 1 to 65.
In his overview section of the Strategic report, Stephen Bird
our Chief Executive Officer outlines the main trends and
factors likely to affect the future development,
performance and position of the Group. Reviews of the
operating and financial performance of the Group for the
year ended 31 December 2021 are also given in the
Strategic report.
The Chairman’s statement, the Directors’ responsibility
statement and the Corporate governance statement
form part of this Directors’ report. The Corporate
governance statement on pages 72 to 116 is submitted by
the Board.
The results of the Group are presented in the Group
financial statements on pages 136 to 251. A detailed
description of the basis of preparation of the IFRS results
(including adjusted profit) is set out in the Group financial
statements section. The Group uses derivative financial
instruments in the normal course of its business and
information covering these instruments and related
financial risk management matters can be found in Note
19 and Note 37 to the Group financial statements. These
notes are incorporated into this report by reference.
This report was prepared by the executive leadership
team together with the Board and forms part of the
management report for the purposes of the Disclosure
Guidance and Transparency Rules (DTR 4.1.8R) of the
Financial Conduct Authority (FCA).
Dividends
The Board recommends paying a final dividend for 2021 of
7.3p per ordinary share. This will be paid on 24 May 2022 to
shareholders whose names are on the register of
members at the close of business on 8 April 2022.
The total payment is estimated at £155m for the final
dividend and together with the interim dividend of 7.30p
per share totalling £154m paid on 28 September 2021, the
total dividend for 2021 will be 14.6p per share (2020: 14.6p)
totalling £309m (2020: £313m).
Share capital
The Company’s issued share capital as at 31 December
2021 comprised a single class of ordinary share. 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 25 to the Group financial
statements, which is incorporated into this report by
reference. You can also find an analysis of registered
shareholdings by size, as at 31 December 2021, in the
Shareholder information section on page 283.
On 7 February 2020, the Company announced the
commencement of a share buyback programme of the
Company’s ordinary shares up to a maximum aggregate
consideration of £400m. This programme completed on
12 February 2021. The purpose of this programme was to
return value to shareholders and reduce the share capital
of the Company. All shares purchased have been
cancelled. In total 158,003,158 shares were cancelled
through this programme, of which 13,392,862 were
purchased and cancelled in 2021.
As at 31 December 2021, there were 2,180,724,786
ordinary shares in issue held by 92,507 r
egistered
members. The abrdn Share Account (the Company-
sponsored nominee) held 642,153,852 of those shares on
behalf of 942,539 participants. No person has any special
rights of control over the Company’s share capital and all
issued shares are fully paid.
Between 1 January 2021 and the date this report was
signed, the Company received the following notification in
respect of major shareholdings and major proportions of
voting rights in accordance with the Disclosure Guidance
and Transparency Rules of the FCA:
Shareholder
Date of
transaction
Type of
transaction
Number of
voting rights
following the
transaction
Percentage of
voting rights
following the
transaction
Silchester
International
Investors
LLP
19
January
2022
Acquisition
of voting
rights
109,500,722 5.02%
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.
117abrdn.comAnnual report 2021
GOVERNANCE
4. Directors’ report continued
Similarly, in accordance with the terms of The Aberdeen
Asset Management Employee Benefit Trust 2003 and The
Standard Life Aberdeen Employee Benefit Trust 2019, 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 abrdn plc (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 as 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 obtain a copy of the Articles 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.abrdn.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 of members 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 approval 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 –
118 abrdn.com Annual report 2021
unless this is expressly provided in the rights attaching to
their shares.
Power to purchase the Company’s own shares
At the 2021 Annual General Meeting (AGM), shareholders
granted the Directors limited powers to:
– Allot ordinary shares in the Company up to a maximum
aggregate amount of £101,535,919.
– Disapply, up to a maximum total nominal amount of
£15,230,387 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 218,072,305 of its issued
ordinary shares.
During 2021, under the authorities granted at the 2020 and
2021 AGMs, the Company purchased 13,392,862 of its
ordinary shares of 13 61/63 pence each, paying an
aggregate amount of £40,971,363. As at 31 December
2021, the percentage of share capital represented by
these purchased shares was approximately 6.1%.
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 12 February 2021 (the
Facility), in the event that 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.
Other agreements
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.
Hannah Grove was appointed as a non-executive Director
on 1 September 2021 and succeeded Melanie Gee as
Board Employee Engagement designated non-executive
Director on 1 November 2021 after Melanie Gee stepped
down from the Board on 31 October 2021.
Catherine Bradley was appointed as a non-executive
Director on 4 January 2022.
As announced, it is intended that Mike O’Brien and Pam
Kaur will be appointed as non-executive Directors on 1
June 2022, subject to shareholder approval.
Having been appointed since the 2021 AGM, Hannah
Grove and Catherine Bradley will retire and stand for
election at the 2022 AGM.
All remaining Directors as at the date of the 2022 AGM,
other than Jutta af Rosenborg and Martin Pike, will retire
and stand for re-election. Jutta af Rosenborg and Martin
Pike will retire from the Board at the conclusion of the AGM.
The powers of the Directors can also be found in the
Articles.
Directors and their interests
The Directors who served during the year, and up to the
date the report was signed were:
Sir Douglas Flint(Chairman) Melanie Gee
2
Stephen Bird Hannah Grove
1
Stephanie Bruce Martin Pike
Jonathan Asquith Cathleen Raffaeli
Catherine Bradley
3
Brian McBride
Cecilia Reyes
John Devine Jutta af Rosenborg
1. Appointed 1 September 2021.
2. Retired 31 October 2021.
3. Appointed 4 January 2022.
Biographies of the current Directors can be found on
pages 68 to 71.
Details of the Directors’ interests in the Company’s ordinary
shares, the abrdn plc (Employee) Share Plan, the abrdn
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
119abrdn.comAnnual report 2021
GOVERNANCE
4. Directors’ report continued
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 (Aberdeen Corporate 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 are 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 abrdn plc Executive Long-Term
Incentive Plan.
– The rules of the abrdn plc Deferred Share Plan.
– The Company’s Articles.
Directors’ liability insurance
During 2021, 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 are central to delivering our strategy, and we
are focused on helping them thrive.
You can read more on our people strategy in the
Strategic report section of this report.
Communicating with and engaging employees
We have a comprehensive approach to informing and
involving our colleagues in our business across elements
that affect them directly - such as terms and conditions,
benefits and organisational change - through to broader
strategic information that helps them to understand our
company’s ambitions and how they contribute to our
success.
Frequent, two-way discussions and engagement takes
many forms globally including leader-led town hall and
team sessions with question and answer segments, coffee
sessions with leaders to promote open discussion, focus
groups to gather feedback on specific ideas, and
engagement groups that result in co-created internal
communications plans - such as for blended working,
workload management and engaging colleagues on our
new brand during this year.
Engaging and involving colleagues in organisational
change continues to be a priority and our regular
colleague forums provide defined structure for these
processes, including formal consultation on changes to
colleague roles and team structures. In the UK we engage
with our established Employee Forum on such matters
and engage with colleague D&I networks for special
interest topics.
Our performance management approach – clarified this
year as per ‘Our pay philosophy’ on page 39 - is based on
empowering colleagues to align their own goals and
behaviours to our strategy and we provide extensive
internal communications to colleagues when we make
our twice-yearly financial results announcements that
outline our progress and achievements.
Board papers include a specific consideration of how
matters presented to the Board have taken account of
employee interests. Further information on Board
engagement with employees can be found in the
Corporate goverence statement on page 73.
Inclusion and diversity
Disability statement
We have specific policies to ensure that colleagues with
disabilities face no discrimination or obstacles in relation to
job applications, training, promotion and career
development. Reasonable adjustments are also made to
train and enable employees who become disabled to
allow them to continue and progress in their career.
D&I policy, how it is implemented, progress made against it
To complement the Board’s formal diversity statement
www.abrdn.com/annualreport, the Executive leadership
team put in place a Global Diversity and Inclusion policy
www.abrdn.com/annualreport in 2019. It affirms that
diversity and inclusion remain as fundamental pillars
supporting all our decisions. We have always considered
diversity in the broadest sense – in backgrounds,
experience, strengths and thinking as well as visible and
not visible characteristics. By valuing diverse talent and
enabling people to reach their potential in an inclusive
culture, we provide global clients with the diversity of
thought and creativity required to bring long-term value.
Our 2021 Diversity and Inclusion report describes our
progress and how the objectives of our policy are
implemented. You can read more here
www.abrdn.com/annualreport. Progress against our
diversity and inclusion framework is reviewed by the
Nomination and Governance Committee.
Gender representation
Gender Diversity 31 December 2021 Target by 2025
Women at plc
Board
45%
(5 of 11)
40% women | 40%
men | 20% any
gender
Women in senior
leadership
1
36%
(62 of 171)
40% women | 40%
men | 20% any
gender
Women in global
workforce
46%
(2,297 of
5,033)
50% (+/- 3%
tolerance)
1. Relates to leaders one and two levels below CEO, minus administration
roles
120 abrdn.com Annual report 2021
Parker recommendations
As evidence of our commitment to ethnic diversity, we
introduced an ethnicity target for the first time which took
effect on 1 January 2021, following the recommendations
of the Sir John Parker review. Since 2019 we have met the
Parker recommendation to have at least one Board
member who identifies as ethnic minority, and our target is
to have one additional qualifying Board member by 2025.
The Board Charter mandates appointments to be based
on merit, with due consideration given to the Board’s
gender and ethnicity balance.
Sustainability
The commercial aims of our business are linked to its
environmental, social and governance responsibilities. You
can find out more about how the business is run
sustainably throughout the Strategic report. The non-
financial information statement on page 44 summarises
where you can find key information on the approach. For
details of greenhouse gas emissions, please see page 37.
Political donations
The Company has 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 8, 2021 AGM). This is
requested as a precaution against any inadvertent breach
of political donations legislation. While abrdn 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
2022 AGM.
Disclosure of information to the auditors
The Directors who held office at the date of the approval of
this Directors’ report confirm that, so far as they are each
aware, there is no relevant audit information of which the
Company’s auditor is unaware; and each Director has
taken all the steps that he or she ought to have taken as a
Director to make himself or herself aware of any relevant
audit information and to establish that the Company’s
auditor is aware of that information.
Annual General Meeting
The 2022 AGM is scheduled to take place on 18 May 2022
in Edinburgh. Details of the meeting content can be found
in our AGM guide 2022. The AGM guide and other
materials will be published online at www.abrdn.com in
advance of this year’s AGM.
Post balance sheet events
On 28 January 2022, the Group announced that it had sold
an aggregate of 39,981,442 ordinary shares of its
shareholding in Phoenix, representing approximately 4% of
Phoenix's issued share capital, at a price of 660 pence per
share, raising aggregate gross sale proceeds of c£264
million. As a result of the sale, the Company’s shareholding
has reduced to 10.4% and it continues to be classified as
equity securities and interests in pooled investment funds,
measured at fair value.
On 2 December 2021 the Group announced the proposed
acquisition of 100% of the issued share capital of Antler
Holdco Limited, the holding company of interactive
investor Limited (interactive investor) for cash
consideration of £1.49bn, subject to certain adjustments.
interactive investor is the leading subscription-based,
digitally enabled, direct investing platform in the UK and, as
the acquisition constitutes a Class 1 transaction under the
Listing Rules, a Class 1 Circular was published on
9 February 2022. Completion is subject to the satisfaction
of certain conditions, including relevant regulatory
approvals and the approval of the acquisition by the
Group’s shareholders at a General Meeting on 15 March
2022.
121abrdn.comAnnual report 2021
GOVERNANCE
4. Directors’ report continued
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
Going concern
The Group’s business activities, together with the factors likely to affect its future development, performance and financial
position, are set out in the Strategic report. This includes details on our liquidity and capital management and our viability
statement in the Chief Financial Officer’s overview section and our principal risks in the Risk management section including
the impact of COVID-19 on these principal risks. The Group financial statements include additional information relating to
going concern in the basis of preparation section.
The Group continues to meet group and individual entity capital requirements and day-to-day liquidity needs. The
Company has a revolving credit facility of £400m as part of our contingency funding plans and this is due to mature in 2025.
The Group has considerable financial resources together with a diversified business model, with a spread of business and
geographical reach. As a consequence, the Directors believe that the Group is well placed to manage its business risks
successfully.
After making enquiries and having assessed the principal risks and all other available information, the Directors are satisfied
that the Group and Company have and will maintain sufficient resources to enable them to continue operating for at least
12 months from the date of approval of the financial statements and therefore consider it appropriate to adopt the going
concern basis of accounting in preparing the financial statements. There are no material uncertainties relating to this going
concern conclusion. In addition, the Directors have assessed the Group’s viability over a period of three years.
The Directors’ report was approved by the Board and signed on its behalf by:
Kenneth A Gilmour
Company Secretary
28 February 2022
122 abrdn.com Annual report 2021
5. Statement of Directors’ responsibilities in respect of
the Annual report and the financial statements
The Directors are responsible for preparing the Annual
report and accounts and the Group and Company
financial statements in accordance with applicable law
and regulations.
Company law requires the Directors to prepare Group
and Company financial statements for each financial
year. Under that law they are required to prepare the
Group financial statements in accordance with
international accounting standards in conformity with the
requirements of the Companies Act 2006 and applicable
law and have elected to prepare the Company financial
statements in accordance with UK accounting standards
and applicable law, including FRS 101 Reduced Disclosure
Framework. In addition the Group financial statements are
required under the UK Disclosure Guidance and
Transparency Rules to be prepared in accordance with
UK-adopted international accounting standards.
Under company law the Directors must not approve the
financial statements unless they are satisfied that they give
a true and fair view of the state of affairs of the Group and
Company and of the Group’s profit or loss for that period.
In preparing each of the Group and Company financial
statements, the Directors are required to:
– Select suitable accounting policies and then apply them
consistently.
– Make judgements and estimates that are reasonable,
relevant, reliable and prudent.
– For the Group financial statements, state whether they
have been prepared in accordance with international
accounting standards in conformity with the
requirements of the Companies Act 2006 and UK-
adopted international accounting standards.
– For the Company financial statements, state whether
applicable UK accounting standards have been
followed, subject to any material departures disclosed
and explained in the Company financial statements.
– For the Group and Company’s ability to continue as a
going concern, disclosing, as applicable, matters related
to going concern.
– Use the going concern basis of accounting unless they
either intend to liquidate the Group or the Company or
to cease operations, or have no realistic alternative but
to do so.
The Directors are responsible for keeping adequate
accounting records that are sufficient to show and explain
the Company’s transactions and disclose with reasonable
accuracy at any time the financial position of the
Company and enable them to ensure that its financial
statements comply with the Companies Act 2006. They
are responsible for such internal control as they determine
is necessary to enable the preparation of financial
statements that are free from material misstatement,
whether due to fraud or error, and have general
responsibility for taking such steps as are reasonably open
to them to safeguard the assets of the Group and to
prevent and detect fraud and other irregularities.
Under applicable law and regulations, the Directors are
also responsible for preparing a Strategic report, Directors’
report, Directors’ remuneration report and Corporate
governance statement that complies with that law and
those regulations.
The Directors are responsible for the maintenance and
integrity of the corporate and financial information
included on the Company’s website. Legislation in the UK
governing the preparation and dissemination of financial
statements may differ from legislation in other jurisdictions.
Responsibility statement of the Directors in
respect of the annual financial report
We confirm that to the best of our knowledge:
– The financial statements, prepared in accordance with
the applicable set of accounting standards, give a true
and fair view of the assets, liabilities, financial position
and profit or loss of the Company and the undertakings
included in the consolidation taken as a whole.
– The Strategic report and Directors’ report include a fair
review of the development and performance of the
business and the position of the Company and the
undertakings included in the consolidation taken as a
whole, together with a description of the principal risks
and uncertainties that they face.
We consider the Annual report and accounts, taken as a
whole, is fair, balanced and understandable and provides
the information necessary for shareholders to assess the
Group’s position and performance, business model and
strategy.
By order of the Board
Sir Douglas Flint
Chairman
28 February 2022
Stephanie Bruce
Chief Financial Officer
28 February 2022
123abrdn.comAnnual report 2021
GOVERNANCE
Financial Information
124 abrdn.com Annual report 2021
N
Contents
6 Independent auditors’ report 126
7 Group financial statements 136
8 Company financial statements 252
9 Supplementary information 264
Contents
Group primary statements 136
Presentation of consolidated financial statements 143
Note Page Note Page
1 Group structure 149 25 Issued share capital and share premium 197
2 Segmental analysis
155 26 Shares held by trusts 198
3 Net operating revenue
159
27 Retained earnings
198
4 Net gains on financial instruments and other 28 Movements in other reserves 199
income 162 29 Other equity and non-controlling interests 202
5 Administrative and other expenses
163
30 Insurance contracts, investment contracts
6 Staff costs and other employee –related and reinsurance contracts 203
costs
163
31 Financial liabilities
204
7 Auditors’ remuneration 164 32 Subordinated liabilities 205
8 Restructuring and corporate transaction
33 Pension and other post-retirement benefit
expenses 164 provisions 206
9 Taxation 165 34 Deferred income 212
10 Discontinued operations
168
35 Other financial liabilities
213
11 Earnings per share 169 36 Provisions and other liabilities 213
12 Adjusted profit and adjusting items
170
37 Financial instruments risk management
214
13 Dividends on ordinary shares 171 38 Structured entities 221
14 Intangible assets 172 39 Fair value of assets and liabilities 222
15 Investments in associates and joint ventures
177
40 Statement of cash flows
226
16 Property, plant and equipment 184 41 Contingent liabilities and contingent assets 229
17 Leases
186
42 Commitments
229
18 Financial assets 189 43 Employee share-based payments and
19 Derivative financial instruments
190
deferred fund awards
230
20 Receivables and other financial assets 192 44 Related party transactions 234
21 Other assets 192 45 Capital management 235
22 Assets and liabilities held for sale
193
46 Events after the reporting date
237
23 Cash and cash equivalents 194 47 Related undertakings 238
24 Unit linked liabilities and assets backing unit
linked liabilities 195
How to navigate our Group financial statements
The Group’s significant accounting policies are included at the beginning
of the relevant notes to the Group financial statements with this
background colour. Critical judgements in applying accounting policies
are summarised in the Presentation of consolidated financial
statements section which follows the primary financial statements.
Accounting policies that are relevant to the financial statements as a
whole are also set out in that section.
The Group’s critical accounting estimates and assumptions are
summarised in the Presentation of consolidated financial statements
section which follows the primary financial statements. Further detail on
these critical accounting estimates and assumptions is provided in the
relevant note with this background colour.
125abrdn.comAnnual report 2021
FINANCIAL INFORMATION
6. Independent auditors’ report to the members
of abrdn plc
1. Our opinion is unmodified
We have audited the financial statements of abrdn plc
(“the Company”) for the year ended 31 December
2021 which comprise the Consolidated income
statement, Consolidated statement of comprehensive
income, Consolidated statement of financial position,
Consolidated statement of changes in equity,
Consolidated statement of cash flows, Company
statement of financial position, Company statement of
changes in equity, and the related notes, including the
accounting policies in the Basis of preparation. In our
opinion:
– the financial statements give a true and fair view of the
state of the Group’s and of the parent Company’s
affairs as at 31 December 2021 and of the Group’s
profit for the year then ended;
– the Group financial statements have been properly
prepared in accordance with UK-adopted
international accounting standards;
– the parent Company financial statements have been
properly prepared in accordance with UK accounting
standards, including FRS 101 Reduced Disclosure
Framework; and
– the financial statements have been prepared in
accordance with the requirements of the Companies
Act 2006.
Basis for opinion
We conducted our audit in accordance with International
Standards on Auditing (UK) (“ISAs (UK)”) and applicable
law. Our responsibilities are described below. We believe
that the audit evidence we have obtained is a sufficient
and appropriate basis for our opinion. Our audit opinion is
consistent with our report to the audit committee.
We were first appointed as auditor by the shareholders on
16 May 2017. The period of total uninterrupted
engagement is for the five financial years ended 31
December 2021. We have fulfilled our ethical
responsibilities under, and we remain independent of the
Group in accordance with, UK ethical requirements
including the FRC Ethical Standard as applied to listed
public interest entities. No non-audit services prohibited by
that standard were provided.
Overview
Materiality:
Group
financial
statements
as a whole
£19m (2020: £25m)
3.5% (2020: 2.7%) of normalised
profit before tax
Coverage
89% (2020: 90%) of profits and
losses that made up Group
profit before tax
Key audit
matters
vs
2020
Recurring
risks
Valuation of UK defined
benefit pension scheme
obligation
Recoverability of certain
of the parent’s
investment in subsidiaries
Event driven
risk
New: Fair value of the
contingent consideration
liability and intangible
assets recognised on the
acquisition of Tritax
Management LLP
ۊ
ۀ
ۊ
ۀ
126 abrdn.com Annual report 2021
2. Key audit matters: our assessment of risks of material misstatement
Key audit matters are those matters that, in our professional judgement, were of most significance in the audit of the
financial statements and include the most significant assessed risks of material misstatement (whether or not due to fraud)
identified by us, including those which had the greatest effect on: the overall audit strategy; the allocation of resources in
the audit; and directing the efforts of the engagement team. We summarise below the key audit matters , in decreasing
order of audit significance, in arriving at our audit opinion above, together with our key audit procedures to address those
matters and our findings from those procedures in order that the Company's members, as a body, may better understand
the process by which we arrived at our audit opinion. These matters were addressed, and our findings are based on
procedures undertaken, in the context of, and solely for the purpose of, our audit of the financial statements as a whole,
and in forming our opinion thereon, and consequently are incidental to that opinion, and we do not provide a separate
opinion on these matters.
The risk Our response
Valuation of the
UK defined
benefit pension
scheme present
value of funded
obligation
(£2,899m, 2020:
£3,015m)
Refer to page 87
(Audit Committee
Report), page 206
(accounting
policy) and page
207 (financial
disclosures).
Subjective Valuation
The present value of the Group’s funded
obligation for the UK defined benefit (‘DB’)
pension scheme is an area that involves
significant judgement over the uncertain
future settlement value. The Group is
required to use judgment in the selection
of key assumptions covering both
operating assumptions and economic
assumptions.
The key operating assumptions are base
mortality and mortality improvement. The
key economic assumptions are the
discount rate and inflation. The risk is that
inappropriate assumptions are used in
determining the present value of the
funded obligation.
The effect of these matters is that, as part
of our risk assessment, we determine that
the valuation of the pension scheme
obligation has a high degree of estimation
uncertainty, with a potential range of
reasonable outcomes greater than our
materiality for the financial statements as
a whole and possibly many times that
amount.
The financial statements (Note 33)
disclose the sensitivity estimated by the
Group.
We performed the tests below rather than seeking to rely on any
of the Group's controls because the nature of the balance is such
that we would expect to obtain audit evidence primarily through
the detailed procedures described.
Our procedures included:
Test of detail and our sector experience: We evaluated the
competency and objectivity of the Group’s experts who assisted
them in determining the actuarial assumptions used to calculate
the defined benefit obligation.
We considered, with the support of internal actuarial specialists,
the appropriateness of the base mortality assumption by
reference to scheme and industry data on historical mortality
experience and the outcome of the latest triennial report.
We considered, with the support of internal actuarial specialists,
the appropriateness of the mortality improvement assumptions
by reference to industry-based expectations of future mortality
improvements and the appropriateness of the discount rate and
inflation assumptions by reference to industry practice.
Assessing transparency: In conjunction with internal actuarial
specialists, we considered whether the Group’s disclosures in
relation to the assumptions used in the calculation of present
value of the funded obligation appropriately represent the
sensitivities of the obligation to the use of alternative assumptions.
Our findings
We found the estimated valuation of the UK defined benefit
pension scheme obligation to be balanced (2020: balanced) with
proportionate (2020: proportionate) disclosures of the related
assumptions and sensitivities.
127abrdn.comAnnual report 2021
FINANCIAL INFORMATION
6. Independent auditors’ report to the members of abrdn plc continued
The risk Our response
Fair value of the
contingent
consideration
liability and
intangible assets
recognised on the
acquisition of
Tritax
Management LLP
(Contingent
consideration
liability on
acquisition:
£155m, 2020: £nil;
Intangible assets
recognised on
acquisition: £71m,
2020: £nil)
Refer to page 87
(Audit Committee
Report), page 148
(accounting
policy) and page
149 (financial
disclosures).
Subjective Estimate
In April 2021, abrdn completed the
acquisition of 60% of the membership
interests of Tritax Management LLP
(“Tritax”); there are a number of
accounting estimates associated with
the acquisition accounting for this
transaction.
The contingent consideration liabilities
recognised on acquisition must be
recognised at fair value; the valuation of
these liabilities contains estimation
uncertainty (including through the
determination of the cash flow forecasts
and the discount rate used in the
valuation).
On acquisition, separate intangible assets
must be identified and valued. Both the
identification of each category of
intangible asset to be recognised and the
valuation of these assets are subjective,
and involve judgement (e.g. determination
of the useful economic life) and estimation
uncertainty (e.g. the determination of the
discount rate or cash flow forecasts to be
used in the valuation).
The effect of these matters is that, as part of
our risk assessment, we determined that
the fair value of contingent consideration
payable and the fair value of identified
intangibles have a high degree of
estimation uncertainty, with a potential
range of reasonable outcomes greater
than our materiality for the financial
statements as a whole.
The financial statements (note 39) disclose
the sensitivities estimated by the Group in
respect of the contingent consideration
liability.
We performed the tests below rather than seeking to rely on any
of the Group's controls because the nature of the balance is such
that we would expect to obtain audit evidence primarily through
the detailed procedures described.
Our procedures included:
Our business combination and sector expertise: We considered the
rationale for the acquisition, reviewed the terms of the acquisition,
board minutes and other available information in order to
challenge the identification of intangible assets.
Assessing principles: We assessed management’s analysis of
accounting principles against the provisions of the LLP agreement
in respect of the treatment of payments made to former owners
as either remuneration or consideration, and whether these
should be reflected within the fair value of the contingent
consideration liability.
Our valuation expertise: Using our valuation specialists we
challenged the identification and valuation analysis prepared by
management (and the third party valuations experts who
assisted management), including the assessment of the useful
economic life of identified intangibles and the allocation of the
purchase price between goodwill and separately identifiable
intangible assets. We assessed the appropriateness of input
assumptions to the valuation analysis. This included performing a
critical assessment of the reliability of management’s forecasts
and comparing the discount rate assumption with our own
expected range.
We assessed the appropriateness of the valuation model
proposed by management with respect to the valuation of the
contingent consideration and assessed the input assumptions into
the valuation, assisted by our valuation specialists. This included
performing a critical assessment of the reliability of
management’s forecasts (including their determination of the
forecast period) and an assessment of the applicable scenario
probability weightings against our own sector experience.
Sensitivity analysis: We have performed our own sensitivity
analysis, which included assessing the effect of reasonably
possible changes in input assumptions to evaluate the impact on
the valuation of both the contingent consideration and the
separately identifiable intangible assets (and corresponding
allocation of the purchase price to goodwill).
Assessing transparency: We have assessed the transparency of
the Group’s disclosures in respect of the acquisitions, including in
respect of applicable estimation uncertainty.
Our findings
We found the estimated valuation of the fair value of the
contingent consideration liability and intangible assets recognised
on the acquisition of Tritax Management LLP to be balanced
(2020: n/a) with proportionate (2020: n/a) disclosures of the
related assumptions and sensitivities.
128 abrdn.com Annual report 2021
The risk Our response
Recoverability of
certain of the
parent’s
investments in
subsidiaries:
(Parent
Company:
Certain
investments in
subsidiaries:
included within
the total
investments in
subsidiaries
balance of
£5,065m (2020:
£4,013m);
Impairment of
investment in
subsidiaries:
£45m (2020:
£1,873m))
Refer to page 88
(Audit Committee
Report), page 255
(accounting
policy) and page
257 (financial
disclosures).
Subjective Judgement
As disclosed in note A of the parent
Company financial statements, the net
assets attributable to equity holders of the
parent Company exceeded the Group’s
market capitalisation at the balance sheet
date and the Company applied judgement
to identify which subsidiaries were at risk of
impairment. As a result, the Company
subjected the investment in Aberdeen
Asset Management plc to a full impairment
review. The identification of the at-risk
investments is inherently subjective.
The Company also subjected abrdn
Financial Planning Limited to a full
impairment review, given, in their
j
udgement, performance in the business in
the period indicated impairment.
In addition, given the historic impairments
recognised in respect of the asset
management subsidiaries in previous
periods, there is a risk of impairment
reversals not recognised, driven by
improvements in underlying business
performance.
Considering indications of impairment or
impairment reversal requires subjective
j
udgement.
Subjective Estimate
Where an impairment review is required
the estimated recoverable amount of these
balances is subjective due to the inherent
uncertainty involved in assessing the
recoverable amount of the subsidiaries,
either using a value in use or fair value less
cost of disposal analysis.
As part of our risk assessment, we
determined that the recoverable amount
of certain investments in subsidiaries has a
high degree of estimation uncertainty, with
a potential range of reasonable outcomes
greater than our materiality for the financial
statements as a whole.
The parent Company financial statements
(note A) disclose the sensitivity estimated
by the parent company.
We performed the tests below rather than seeking to rely on any
of the Group’s controls because the nature of the balance is such
that we would expect to obtain audit evidence primarily through
the detailed procedures described.
Our procedures included:
Our valuation expertise and sector expertise: Having considered
the application of the impairment trigger in respect of market
capitalisation, we identified that it existed for certain subsidiaries. In
evaluating which subsidiaries required further analysis, we
performed a critical assessment of the business performance,
such as flows of assets under management and changes in
revenue and other financial performance during the period.
Where impairment reviews were completed, we assessed the
appropriateness of the fair value less costs of disposal (“FVLCD”)
or value in use (“VIU) valuation basis proposed by management.
We engaged our own valuation specialists to assist us in assessing
the appropriateness of the applied valuation model and
assumptions applied.
Sensitivity analysis: We performed our own sensitivity analysis
which included assessing the effect of reasonable alternative
assumptions in respect of applicable price to earnings multiples,
discount rates and cash flow forecasts (as applicable) to evaluate
the impact on the carrying value of the investment in subsidiaries.
Assessing transparency: We assessed whether the parent
Company’s disclosures in respect of investment in subsidiaries
reflect the risks inherent in the impairment assessment
performed.
Our findings
We found the parent Company’s carrying value of certain of the
investments in subsidiaries and the related impairment charge to
be balanced (2020: cautious) with proportionate (2020:
proportionate) disclosures of the related assumptions and
sensitivities.
129abrdn.comAnnual report 2021
FINANCIAL INFORMATION
6. Independent auditors’ report to the members of abrdn plc continued
We have summarised below the changes to our key audit matters from the 31 December 2020 year end audit.
We continue to perform procedures over the carrying value of the investment in Phoenix Group Holdings plc and the
share of profit received during the period in which it was an equity accounted associate (financial disclosure page
152). However, following reclassification of the equity accounted investment to fair value investment in February
2021, we do not consider there to be a significant risk associated with the carrying value at 31 December 2021 or the
share of profit received in the year to 31 December 2021.
We previously reported a key audit matter in respect of the impairment of intangible assets. Given improved
performance in the applicable books of business, and the effect of amortisation on the carrying value of the assets,
there were no impairment triggers identified during the year to 31 December 2021 and therefore we no longer
consider this a key audit matter.
In the prior year, we considered the risk associated with the recoverability of certain of the parent’s investments in
subsidiaries in conjunction with the goodwill recognised on consolidation at the group level. We continue to perform
procedures over goodwill recognised on consolidation. However, following the full impairment of the asset
management goodwill at 30 June 2020, we have not assessed this as one of the most significant risks in our current
year audit and, therefore, it is not separately identified in our report this year.
130 abrdn.com Annual report 2021
3. Our application of materiality and an
overview of the scope of our audit
Materiality for the Group financial statements as a
whole was set at £19m (2020: £25m), determined with
reference to a benchmark of our estimate of Group
profit before tax made at the planning stage,
normalised for our expectation of the level of adjusting
items including impairment, restructuring costs and the
profits arising on disposal of associate or past associate
shareholdings (of which it represents 5% (2020: 5%)).
This equates to 3.5% (2020: 2.7%) of reported Group
profit normalised on a consistent basis and to 1.7%
(2020: 2.9%) of Group IFRS profit before tax from
continuing operations of £1,115m (2020: £853m).
Materiality for the parent Company financial
statements as a whole was set at £7.6m (2020: £8.8m),
which is the component materiality for the parent
Company determined by the group audit engagement
team. This is lower than the materiality we would
otherwise have determined with reference to parent
Company total assets, of which it represents 0.1%
(2020: 0.1%).
In line with our audit methodology, our procedures on
individual account balances and disclosures were
performed to a lower threshold, performance
materiality, so as to reduce to an acceptable level the
risk that individually immaterial misstatements in
individual account balances add up to a material
amount across the financial statements as a whole.
Performance materiality was set at 75% (2020: 75%) of
materiality for the financial statements as a whole,
which equates to £14.25m (2020: £18.75m) for the
Group and £5.7m (2020: £6.6m) for the parent
Company. We applied this percentage in our
determination of performance materiality because we
did not identify any factors indicating an elevated level
of risk.
We agreed to report to the Audit Committee any
corrected or uncorrected identified misstatements
exceeding £0.95m (2020: £1.25m), in addition to other
identified misstatements that warranted reporting on
qualitative grounds.
Of the Group’s 301 (2020: 295) reporting components,
we subjected 17 (2020: 15) to full scope audits for
Group purposes and 4 (2020: none) to specified risk-
focused audit procedures. The latter were not
financially significant enough to require an audit for
group reporting purposes, but did present specific
individual risks that needed to be addressed.
For those items excluded from normalised group profit
before tax, the component teams performed
procedures on items relating to their components. The
group team performed procedures on the remaining
excluded items.
The components within the scope of our work
accounted for the percentages illustrated opposite. The
remaining 21% (2020: 27%) of total Group fee income,
11% (2020: 10%) of the total profits and
losses that
made up Group profit before tax and 10% (2020: 23%)
of net Group assets is represented by 280 (2020: 280)
reporting components, none of which individually
represented more than 5% of any of total Group fee
income, Group profit before tax or of net
Group assets.
For these residual components, we performed analysis
at an aggregated Group level to re-examine our
assessment that there were no significant risks of
material misstatement within these.
For those items excluded from group fee income, the
component teams performed procedures on items
relating to their components. The group team
performed procedures on the remaining excluded
items.
The Group team instructed component auditors as to
the significant areas to be covered, including the
relevant risks detailed above and the information to be
reported back. The Group team approved the
component materialities, which ranged from £1m to
£8.55m (2020: £1.25m to £18.2m), having regard to the
mix of size and risk profile of the Group across the
components. The work on 8 of the 17 components
(2020: 5 of the 15 components) was performed by
component auditors and the rest, including the audit of
the parent Company, was performed by the Group
team
.
Group materiality
£19m (2020: £25m)
£19m
Whole financial
statements materiality
(2020: £25m)
£14.25m
Range of materiality at 17
components £1m-£8.55m
(2020: £1.25m-£18.75m)
£0.95m
Misstatements reported to
the audit committee
(2020: £1.25m)
Group fee income
Full scope for group audit purposes 2021
Residual components
79%
(2020: 73%)
Total profits and losses
that made up group profit
before tax
89%
(2020: 90%)
Group total assets
90%
(2020: 77%)
131abrdn.comAnnual report 2021
FINANCIAL INFORMATION
6. Independent auditors’ report to the members of abrdn plc continued
The Group team had planned to visit component
locations in the United States, Luxembourg, and
Singapore. However, these visits were prevented by
movement restrictions relating to the COVID-19
pandemic. Instead, video conferences were held to
discuss the audit risk and strategy and the component
audit findings reported to the Group team. Any further
work required by the Group team was then performed
by the component auditor.
The scope of the audit work performed was
predominately substantive as we placed limited
reliance upon the Group's internal control over financial
reporting.
4. The impact of climate change on our audit
In planning our audit we have considered the potential
impacts of climate change on the Group’s business and
its financial statements. Climate change impacts the
Group in a number of ways: through its own operations
(including potential reputational risk associated with the
Group’s delivery of its climate related initiatives),
through its portfolio of investments and its stewardship
role, and the greater emphasis on climate related
narrative and disclosure in the annual report.
As disclosed in Note 37, the Group’s direct exposure to
climate change in the financial statements is primarily
through its level 3 investment holdings, as the key
valuation assumptions and estimates may be impacted
by climate risks. As part of our audit we have made
enquiries of Directors and the Group’s Corporate
Sustainability team to understand the extent of the
potential impact of climate change risk on the Group’s
financial statements and the Group’s preparedness for
this.
We have performed a risk assessment of how the
impact of climate change may affect the financial
statements and our audit, in particular with respect to
investment holdings, in particular level 3 investments.
We consider that the impact of climate risk on level 1
and level 2 investments is already reflected in the
market prices used to value these holdings at year end;
taking into account the relative size of the level 3
investments balance , we assessed that the impact of
climate change was not a significant risk for our audit
nor does it constitute a key audit matter. We held
discussions with our own climate change professionals
to challenge our risk assessment. We have also read the
Group’s disclosure of climate related information in the
front half of the annual report as set out on pages 32 to
37, and considered consistency with the financial
statements and our audit knowledge.
We have not been engaged to provide assurance over
the accuracy of these disclosures.
5. Going concern
The Directors have prepared the financial statements
on the going concern basis as they do not intend to
liquidate the Group or the Company or to cease their
operations, and as they have concluded that the
Group’s and the Company’s financial position means
that this is realistic. They have also concluded that there
are no material uncertainties that could have cast
significant doubt over their ability to continue as a going
concern for at least a year from the date of approval of
the financial statements (“the going concern period”).
We used our knowledge of the Group, its industry and
operating model, and the general economic
environment to identify the inherent risks to its business
model and analysed how those risks might affect the
Group’ and Company’s financial resources or ability to
continue operations over the going concern period. The
risk that we considered most likely to adversely affect
the Group’s and Company’s available financial
resources over this period was market volatility,
including any associated with COVID-19.
We considered whether these risks could plausibly
affect the liquidity in the going concern period by
assessing the degree of downside assumption that,
individually and collectively, could result in a liquidity
issue, taking into account the Group’s and Company’s
current and projected cash and facilities (a reverse
stress test).
We also assessed the completeness of the going
concern disclosure.
Our conclusions based on this work:
–
we consider that the directors’ use of the going
concern basis of accounting in the preparation of
the financial statements is appropriate;
–
we have not identified, and concur with the
directors’ assessment that there is not, a material
uncertainty related to events or conditions that,
individually or collectively, may cast significant doubt
on the Group’s or Company's ability to continue as a
going concern for the going concern period;
–
we have nothing material to add or draw attention
to in relation to the directors’ statement
in Note
(a)(vi) to the financial statements on the use of the
going concern basis of accounting with no material
uncertainties that may cast significant doubt over
the Group and Company’s use of that basis for the
going concern period, and we found the going
concern disclosure in note (a)(vi) to be acceptable;
and
–
the related statement
under the Listing Rules set out
on page 122 is materially consistent with the
financial statements and our audit knowledge.
However, as we cannot predict all future events or
conditions and as subsequent events may result in
outcomes that are inconsistent with judgements that
were reasonable at the time they were made, the
above conclusions are not a guarantee that the Group
or the Company will continue in operation.
132 abrdn.com Annual report 2021
6. Fraud and breaches of laws and regulations
– ability to detect
Identifying and responding to risks of material
misstatement due to fraud
To identify risks of material misstatement due to fraud
(“fraud risks”) we assessed events or conditions that
could indicate an incentive or pressure to commit fraud
or provide an opportunity to commit fraud. Our risk
assessment procedures included:
–
Enquiring of directors, the Group Audit Committee,
Group Internal Audit and the Group’s Legal team
and inspection of policy documentation as to the
Group’s high-level policies and procedures to
prevent and detect fraud, including the internal audit
function, and the Group’s channel for
‘whistleblowing’, as well as whether they have
knowledge of any actual, suspected or alleged
fraud.
–
Reading Board minutes and attending Group Audit
Committee and Risk and Compliance Committee
meetings.
–
Considering the findings of Group Internal Audit’s
reviews in the period.
–
Considering remuneration incentive schemes and
performance targets for management and
directors.
We communicated identified fraud risks throughout the
audit team and remained alert to any indications of
fraud throughout the audit. This included
communication from the group to full scope
component audit teams of relevant fraud risks identified
at the Group level and request to full scope component
audit teams to report to the Group audit team any
instances of fraud that could give rise to a material
misstatement at the Group level.
As required by auditing standards, and taking into
account possible pressures to meet profit targets and
our overall knowledge of the control environment, we
perform procedures to address the risk of
management override of controls, in particular the risk
that Group and component management may be in a
position to make inappropriate accounting entries and
the risk of bias in accounting estimates and judgements
such as impairment and pension assumptions.
On this audit we do not believe there is a fraud risk
related to revenue recognition, given the relative
simplicity of the most significant revenue streams and
the separation of duties between management and
third party service providers.
We did not identify any additional fraud risks.
We performed procedures including:
– Identifying journal entries and other adjustments to test
for all full scope components based on risk criteria and
comparing the identified entries to supporting
documentation. These included those posted by senior
finance management and those posted to unusual
accounts, as well as those which comprised
unexpected posting combinations.
– Evaluated the business purpose of significant unusual
transactions.
– Assessing significant accounting estimates for bias,
including whether the judgements made in making
accounting estimates are indicative of a potential bias.
Identifying and responding to risks of material
misstatement related to compliance with laws
and regulations
We identified areas of laws and regulations that could
reasonably be expected to have a material effect on
the financial statements from our general commercial
and sector experience, through discussion with the
directors and other management (as required by
auditing standards), and from inspection of the Group’s
regulatory and legal correspondence and discussed
with the directors and other management the policies
and procedures regarding compliance with laws and
regulations.
As the Group is regulated, our assessment of risks
involved gaining an understanding of the control
environment including the entity’s procedures for
complying with regulatory requirements, how they
analyse identified breaches and assessing whether
there were any implications of identified breaches on
our audit.
We communicated identified laws and regulations
throughout our team and remained alert to any
indications of non-compliance throughout the audit.
This included communication from the group to full
scope component audit teams of relevant laws and
regulations identified at the Group level, and a request
for full scope component auditors to report to the
Group audit team any instances of non-compliance
with laws and regulations that could give rise to a
material misstatement at the Group level.
The potential effect of these laws and regulations on
the financial statements varies considerably.
Firstly, the Group is subject to laws and regulations that
directly affect the financial statements including
financial reporting legislation (including related
companies legislation), distributable profits legislation,
taxation legislation and pensions regulations and we
assessed the extent of compliance with these laws and
regulations as part of our procedures on the related
financial statement items.
Secondly, the Group is subject to many other laws and
regulations where the consequences of non-
compliance could have a material effect on amounts or
disclosures in the financial statements, for instance
through the imposition of fines or litigation. We identified
the following areas as those most likely to have such an
effect: specific areas of regulatory capital and liquidity,
conduct including Client Assets, anti-money laundering,
and market abuse regulations and certain aspects of
company legislation recognising the financial and
regulated nature of the Group’s activities and its legal
133abrdn.comAnnual report 2021
FINANCIAL INFORMATION
6. Independent auditors’ report to the members of abrdn plc continued
form. Auditing standards limit the required audit
procedures to identify non-compliance with these laws
and regulations to enquiry of the directors and other
management and inspection of regulatory and legal
correspondence, if any. Therefore if a breach of
operational regulations is not disclosed to us or evident
from relevant correspondence, an audit will not detect
that breach.
We discussed with the audit committee matters related
to actual or suspected breaches of laws or regulations,
for which disclosure is not necessary, and considered
any implications for our audit.
We assessed the disclosure of provisions in Note 36 and
contingent liabilities in Note 41 in light of our
understanding gained through the procedures above.
Context of the ability of the audit to detect fraud
or breaches of law or regulation
Owing to the inherent limitations of an audit, there is an
unavoidable risk that we may not have detected some
material misstatements in the financial statements,
even though we have properly planned and performed
our audit in accordance with auditing standards. For
example, the further removed non-compliance with
laws and regulations is from the events and
transactions reflected in the financial statements, the
less likely the inherently limited procedures required by
auditing standards would identify it.
In addition, as with any audit, there remained a higher
risk of non-detection of fraud, as these may involve
collusion, forgery, intentional omissions,
misrepresentations, or the override of internal controls.
Our audit procedures are designed to detect material
misstatement. We are not responsible for preventing
non-compliance or fraud and cannot be expected to
detect non-compliance with all laws and regulations.
7. We have nothing to report on the other
information in the Annual Report and Accounts
The directors are responsible for the other information
presented in the Annual Report together with the
financial statements. Our opinion on the financial
statements does not cover the other information and,
accordingly, we do not express an audit opinion or,
except as explicitly stated below, any form of assurance
conclusion thereon.
Our responsibility is to read the other information and, in
doing so, consider whether, based on our financial
statements audit work, the information therein is
materially misstated or inconsistent with the financial
statements or our audit knowledge. Based solely on that
work we have not identified material misstatements in
the other information.
Strategic report and directors’ report
Based solely on our work on the other information:
–
we have not identified material misstatements in the
Strategic report and the Directors’ report;
–
in our opinion the information given in those reports
for the financial year is consistent with the financial
statements; and
–
in our opinion those reports have been prepared in
accordance with the Companies Act 2006.
Directors’ remuneration report
In our opinion the part of the Directors’ Remuneration
Report to be audited has been properly prepared in
accordance with the Companies Act 2006.
Disclosures of emerging and principal risks and
longer-term viability
We are required to perform procedures to identify
whether there is a material inconsistency between the
directors’ disclosures in respect of emerging and
principal risks and the viability statement, and the
financial statements and our audit knowledge.
Based on those procedures, we have nothing material
to add or draw attention to in relation to:
–
the directors’ confirmation within the Viability
Statement and Risk Management report that they
have carried out a robust assessment of the
emerging and principal risks facing the Group,
including those that would threaten its business
model, future performance, solvency and liquidity;
–
the Emerging and Principal Risks disclosures
describing these risks and how emerging risks are
identified, and explaining how they are being
managed and mitigated; and
–
the directors’ explanation in the Viability Statement
of how they have assessed the prospects of the
Group, over what period they have done so and why
they considered that period to be appropriate, and
their statement as to whether they have a
reasonable expectation that the Group will be able
to continue in operation and meet its liabilities as
they fall due over the period of their assessment,
including any related disclosures drawing attention
to any necessary qualifications or assumptions.
We are also required to review the Viability Statement,
set out on page 59 under the Listing Rules. Based on the
above procedures, we have concluded that the above
disclosures are materially consistent with the financial
statements and our audit knowledge.
Our work is limited to assessing these matters in the
context of only the knowledge acquired during our
financial statements audit. As we cannot predict all
future events or conditions and as subsequent events
may result in outcomes that are inconsistent with
judgements that were reasonable at the time they
were made, the absence of anything to report on these
st
atements is not a guarantee as to the Group’s and
Company’s longer-term viability.
134 abrdn.com Annual report 2021
Corporate governance disclosures
We are required to perform procedures to identify
whether there is a material inconsistency between the
directors’ corporate governance disclosures and the
financial statements and our audit knowledge.
Based on those procedures, we have concluded that
each of the following is materially consistent with the
financial statements and our audit knowledge:
–
the directors’ statement that they consider that the
annual report and financial statements taken as a
whole is fair, balanced and understandable, and
provides the information necessary for shareholders
to assess the Group’s position and performance,
business model and strategy;
–
the section of the annual report describing the work
of the Audit Committee, including the significant
issues that the audit committee considered in
relation to the financial statements, and how these
issues were addressed; and
–
the section of the annual report that describes the
review of the effectiveness of the Group’s risk
management and internal control systems.
We are required to review the part of Corporate
Governance Statement relating to the Group’s
compliance with the provisions of the UK Corporate
Governance Code specified by the Listing Rules for our
review. We have nothing to report in this respect.
8. We have nothing to report on the other
matters on which we are required to report by
exception
Under the Companies Act 2006, we are required to
report to you if, in our opinion:
– Adequate accounting records have not been kept by
the parent Company, or returns adequate for our audit
have not been received from branches not visited by
us.
– The parent Company financial statements and the
part of the Directors’ Remuneration Report to be
audited are not in agreement with the accounting
records and returns.
– Certain disclosures of directors’ remuneration specified
by law are not made.
– We have not received all the information and
explanations we require for our audit.
We have nothing to report in these respects.
9. Respective responsibilities
Directors’ responsibilities
As explained more fully in their statement set out on page
123, the directors are responsible for: the preparation of
the financial statements including being satisfied that they
give a true and fair view; such internal control as they
determine is necessary to enable the preparation of
financial statements that are free from material
misstatement, whether due to fraud or error; assessing the
Group and parent Company’s ability to continue as a
going concern, disclosing, as applicable, matters related to
going concern; and using the going concern basis of
accounting unless they either intend to liquidate the Group
or the parent Company or to cease operations, or have no
realistic alternative but to do so.
Auditor’s responsibilities
Our objectives are to obtain reasonable assurance
about whether the financial statements as a whole are
free from material misstatement, whether due to fraud
or error, and to issue our opinion in an auditor’s report.
Reasonable assurance is a high level of assurance, but
does not guarantee that an audit conducted in
accordance with ISAs (UK) will always detect a material
misstatement when it exists. Misstatements can arise
from fraud or error and are considered material if,
individually or in aggregate, they could reasonably be
expected to influence the economic decisions of users
taken on the basis of the financial statements.
A fuller description of our responsibilities is provided on
the FRC’s website at
www.frc.org.uk/auditorsresponsibilities
10. The purpose of our audit work and to
whom we owe our responsibilities
This report is made solely to the Company's members,
as a body, in accordance with Chapter 3 of Part 16 of
the Companies Act 2006 and the terms of our
engagement by the company. Our audit work has been
undertaken so that we might state to the Company's
members those matters we are required to state to
them in an auditor's report, and the further matters we
are required to state to them in accordance with the
terms agreed with the company, and for no other
purpose. To the fullest extent permitted by law, we do
not accept or assume responsibility to anyone other
than the Company and the Company's members, as a
body, for our audit work, for this report, or for the
opinions we have formed.
Jonathan Mills (Senior Statutory Auditor)
for and on behalf of KPMG LLP, Statutory Auditor
Chartered Accountants
Saltire Court
20 Castle Terrace
Edinburgh
EH1 2EG
28 February 2022
135abrdn.comAnnual report 2021
FINANCIAL INFORMATION
7. Group financial statements
Consolidated income statement
For the year ended 31 December 2021
2021 2020
1
Notes £m £m
Revenue from contracts with customers 3 1,685 1,527
Cost of sales 3 (142 ) (104 )
Net operating revenue 1,543 1,423
Restructuring and corporate transaction expenses 5 (259 ) (316 )
Impairment of goodwill – asset management 5
Amortisation and impairment of other intangibles acquired in business combinations
and through the purchase of customer contracts
5 (99 ) (265 )
Staff costs and other employee-related costs 5
(604 ) (625 )
Other administrative expenses 5
(594 ) (595 )
Total administrative and other expenses
(1,556 ) (2,716 )
Net gains on financial instruments and other income
Fair value movements and dividend income on significant listed investments 4 (227 ) 65
Other net gains on financial instruments and other income 4 44 81
Total net gains on financial instruments and other income (183 ) 146
Finance costs (30 ) (30 )
Profit on disposal of subsidiaries and other operations 1 127 8
Profit on disposal of interests in associates 1 1,236 1,858
Loss on impairment of interests in joint ventures 15 – (45 )
Share of profit or loss from associates and joint ventures 15 (22 ) 194
Profit before tax from continuing operations 1,115 838
Tax (expense)/credit attributable to continuing operations 9 (12 0 ) 15
Profit for the year from continuing operations 995 853
Loss for the year from discontinued operations 10 – (15 )
Profit for the year 995 838
Attributable to:
Equity shareholders of abrdn plc
From continuing operations 994 848
From discontinued operations – (15 )
Equity shareholders of abrdn plc 994 833
Non-controlling interests
From continuing operations – ordinary shares
29
From continuing operations – preference shares
29
Earnings per share from continuing operations
Basic (pence per share) 11 46.8 38.5
Diluted (pence per share) 11 46.0 37.9
Earnings per share
Basic (pence per share) 11 46.8 37.8
Diluted (pence per share) 11 46.0 37.2
1. The Group has made changes to the presentation of the consolidated income statement in 2021. Refer Section (a)(iii) of the Basis of Preparation for
further details.
The Notes on pages 143 to 251 are an integral part of these consolidated financial statements.
136 abrdn.com Annual report 2021
N
Consolidated statement of comprehensive income
For the year ended 31 December 2021
2021 2020
Notes £m £m
Profit for the year 995 838
Less: loss from discontinued operations 10 – 15
Profit from continuing operations
Items that will not be reclassified subsequently to profit or loss:
Remeasurement gains on defined benefit pension plans 33 117 280
Share of other comprehensive income of associates and joint ventures 15
Equity holder tax effect of items that will not be reclassified subsequently to profit or loss 9 3 2
Total items that will not be reclassified subsequently to profit or loss
Items that may be reclassified subsequently to profit or loss:
Fair value gains/(losses) on cash flow hedges 19
Exchange differences on translating foreign operations
(2 ) (8 )
Share of other comprehensive income of associates and joint ventures 15 (4 ) 13
Items transferred to the consolidated income statement
Fair value (gains)/losses on cash flow hedges 19
(10 ) 13
Realised foreign exchange losses 1 18 6
Share of other comprehensive income of associates and joint ventures 1
(9 ) –
Equity holder tax effect of items that may be reclassified subsequently to profit or loss 9
(3 ) (2 )
Total items that may be reclassified subsequently to profit or loss
Other comprehensive income for the year from continuing operations 141 288
Total comprehensive income for the year from continuing operations 1,136 1,141
Loss from discontinued operations 10 – (15 )
Total comprehensive income for the year from discontinued operations – (15 )
Total comprehensive income for the year 1,136 1,126
Attributable to:
Equity shareholders of abrdn plc
From continuing operations 1,135 1,136
From discontinued operations
Non-controlling interests
From continuing operations – ordinary shares 1 –
From continuing operations – preference shares
The Notes on pages 143 to 251 are an integral part of these consolidated financial statements.
137abrdn.comAnnual report 2021
FINANCIAL INFORMATION
7. Group financial statements continued
Consolidated statement of financial position
As at 31 December 2021
2021 2020
Notes £m £m
Assets
Intan
g
ible assets 14 704 501
Pension and other
p
ost-retirement benefit assets 33 1,607 1,474
Investments in associates and
j
oint ventures accounted for usin
g
the e
q
uit
y
method 15 274 1,371
Pro
p
ert
y
,
p
lant and e
q
ui
p
ment 16 187 236
Deferred tax assets 9
Financial investments 18
Receivables and other financial assets 18
Current tax recoverable 9
Other assets 21
Assets held for sale 22
Cash and cash e
q
uivalents 18 1,904 1,519
Assets backin
g
unit linked liabilities 24
Fi
nancial investments
Receivables and other unit linked assets
Cash and cash e
q
uivalents 33 38
Total assets 11,418 10,478
The Notes on pages 143 to 251 are an integral part of these consolidated financial statements.
138 abrdn.com Annual report 2021
N
2021 2020
Notes £m £m
Liabilities
Third
p
art
y
interest in consolidated funds 31 104 77
Subordinated liabilities 31
Pension and other
p
ost-retirement benefit
p
rovisions 33 38 55
Deferred income 34
Deferred tax liabilities 9
Current tax liabilities 9
Derivative financial liabilities 31
Other financial liabilities 31
Provisions 36
Other liabilities 36
Liabilities of o
p
erations held for sale 22 – 11
Unit linked liabilities 24
Inv
estment contract liabilities
Third
p
art
y
interest in consolidated funds 378 388
Other unit linked liabilities
Total liabilities
E
q
uit
y
Share ca
p
ital 25 305 306
Shares held b
y
trusts 26
(
)
(
)
Share
p
remium reserve 25 640 640
Retained earnin
g
s 27 5,775 4,970
Other reserves 28
E
q
uit
y
attributable to e
q
uit
y
shareholders of abrdn
p
lc 7,643 6,810
Other e
q
uit
y
29 207 –
Non-controllin
g
interests
Ord
inar
y
shares 29 6 3
Total e
q
uit
y
Total e
q
uit
y
and liabilities
The Notes on pages 143 to 251 are an integral part of these consolidated financial statements.
The consolidated financial statements on pages 136 to 251 were approved by the Board and signed on its behalf by the
following Directors:
Sir Dou
g
las Flint Stephanie Bruce
Chairman
28 February 2022
Chief Financial Officer
28 February 2022
139abrdn.comAnnual report 2021
FINANCIAL INFORMATION
7. Group financial statements continued
Consolidated statement of changes in equity
For the year ended 31 December 2021
Share
capital
Shares held
by trusts
Share
premium
reserve
Retained
earnings
Other
reserves
Total equity
attributable
to equity
shareholders
of abrdn plc
Other
equity
Non-
controlling
interests -
ordinary
shares Total equity
Notes £m £m £m £m £m £m £m £m £m
1 January 2021 306 (170 ) 640 4,970 1,064 6,810 – 3 6,813
Profit for the year from
continuing operations
Other comprehensive income
for the year from continuing
operations
Total comprehensive income for
the year 27,28
Issue of share capital 25 – – – – – – – – –
Issue of other equity 29
Dividends paid on ordinary
shares
1
3
Share buyback 25,28
(1 ) – – – 1 – – – –
Other movements in non-
controlling interests in the year 29
Reserves credit for employee
share-based payments
28
Transfer to retained earnings for
vested employee share-based
payments
27,28
Shares acquired by employee
trusts
Shares distributed by employee
and other trusts and related
dividend equivalents
27
Aggregate tax effect of items
recognised directly in equity
9
31 December 2021
140 abrdn.com Annual report 2021
N
Non-controlling interests
Share
capital
Shares
held by
trusts
Share
premium
reserve
Retained
earnings
Other
reserves
Total equity
attributable
to equity
shareholders of
abrdn plc
Ordinary
shares
Preference
shares
Total
equity
Notes £m £m £m £m £m £m £m £m £m
1 January 2020 327 (134 ) 640 2,886 2,845 6,564 3 99 6,666
Profit for the year from
continuing operations – – – 848 –
Loss for the year from
discontinued operations
(15 ) – (15 ) – – (15 )
Other comprehensive income
for the year from continuing
operations
O
ther comprehensive income
for the year from discontinued
operations – –
Total comprehensive income for
the year
27,28 – – – 1,115 6 1,121 – 5
Issue of share capital 25 – – – – – – – – –
Dividends paid on ordinary
shares
13 – – – (479 ) – (479 ) – – (479 )
Dividends paid on preference
shares
29,32 – – – – – – –
(3 ) (3 )
Reclassification of preference
shares to liability 29,32 – – – (1 ) – (1 ) – (101 ) (102 )
Share buyback 25,28 (21 ) – – (402 ) 21 (402 ) – – (402 )
Reserves credit for employee
share-based payments
28 – – – – 64 64 – – 64
Transfer to retained earnings for
vested employee share-based
payments 27,28 – – – 38 (38 ) – – – –
Transfer between reserves on
impairment of subsidiaries
27,28 – – – 1,834 (1,834 ) – – – –
Shares acquired by employee
trusts
Shares distributed by employee
and other trusts and related
dividend equivalents
27 – 18 – (21 ) – (3 ) – – (3 )
31 December 2020 306 (170 ) 640 4,970 1,064 6,810 3 – 6,813
The Notes on pages 143 to 251 are an integral part of these consolidated financial statements.
141abrdn.comAnnual report 2021
FINANCIAL INFORMATION
7. Group financial statements continued
Consolidated statement of cash flows
For the year ended 31 December 2021
2021 2020
Notes £m £m
Cash flows from operating activities
Profit before tax from continuing operations 1,115 838
Loss before tax from discontinued operations 10
Change in operating assets 40 214 817
Change in operating liabilities 40 (209 ) (991 )
Adjustment for non-cash movements in investment income – 6
Other non-cash and non-operating items 40
(1,099 ) (646 )
Dividends received from associates and joint ventures 15
Taxation paid
1
(22 ) (33 )
Net cash flows from operating activities
Cash flows from investing activities
Purchase of property, plant and equipment 16
(12 ) (13 )
Acquisition of subsidiaries and unincorporated businesses net of cash acquired 1(b) (145 ) –
Disposal of subsidiaries net of cash disposed of 40
Acquisition of investments in associates and joint ventures 15
(11 ) (5 )
Proceeds in relation to contingent consideration 39 54 3
Payments in relation to contingent consideration 39
(28 ) (48 )
Disposal of investments in associates and joint ventures 1
Taxation paid on disposal of investments in associates and joint ventures
1
(33 ) (33 )
Purchase of financial investments
(368 ) (521 )
Proceeds from sale or redemption of financial investments
Prepayment in respect of potential acquisition of customer contracts 1(c)(iii) (56 ) –
Acquisition of intangible assets
Net cash flows from investing activities
Cash flows from financing activities
Proceeds from issue of perpetual subordinated notes 208 –
Repayment of preference shares
Payment of lease liabilities – principal (27 ) (29 )
Payment of lease liabilities - interest
(6 ) (6 )
Shares acquired by trusts
(41 ) (54 )
Interest paid (28 ) (30 )
Share buyback 25
(41 ) (361 )
Preference dividends paid – (5 )
Ordinary dividends paid 13
(308 ) (479 )
Net cash flows from financing activities
(243 ) (1,064 )
Net increase in cash and cash equivalents 526 6
Cash and cash equivalents at the beginning of the year 1,358 1,347
Effects of exchange rate changes on cash and cash equivalents (9 ) 5
Cash and cash equivalents at the end of the year 23
Supplemental disclosures on cash flows from operating activities
Interest paid 1 2
Interest received
Dividends received 122 122
Rental income received on investment property
1. Total taxation paid was £5 5 m in 2021 (2020: £66 m).
The Notes on pages 143 to 251 are an integral part of these consolidated financial statements.
142 abrdn.com Annual report 2021
N
Presentation of consolidated financial statements
The Group’s significant accounting policies are included at the beginning of the relevant notes to the consolidated
financial statements. This section sets out the basis of preparation, a summary of the Group’s critical accounting
estimates and judgements in applying accounting policies, and other significant accounting policies which have been
applied to the financial statements as a whole.
(a) Basis of preparation
These consolidated financial statements have been prepared in accordance with UK-adopted international accounting
standards. The consolidated financial statements have been prepared on a going concern basis and under the historical
cost convention, as modified by the revaluation of owner occupied property, derivative instruments and other financial
assets and financial liabilities at fair value through profit or loss (FVTPL).
The principal accounting policies set out in these consolidated financial statements have been consistently applied to all
financial reporting periods presented except as described below.
(a)(i) New standards, interpretations and amendments to existing standards that have been adopted by
the Group
The Group has adopted the following new International Financial Reporting Standards (IFRSs), interpretations and
amendments to existing standards, which are effective by EU endorsement for annual periods beginning on or after 1 June
2020 and 1 January 2021.
Amendments to existing standards
– Amendments to IFRS 16 COVID-19-related rent concessions.
– Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16 Interest rate benchmark reform – phase 2.
The Group’s accounting policies have been updated to reflect these amendments. Management considers the
implementation of the above amendments to existing standards has had no significant impact on the Group’s financial
statements.
(a)(ii) Standards, interpretations and amendments to existing standards that are not yet effective and have
not been early adopted by the Group
Certain new standards, interpretations and amendments to existing standards have been published that are mandatory
for the Group’s annual accounting periods beginning after 1 January 2021. The Group has not early adopted the
standards, amendments and interpretations described below:
IFRS 17 Insurance Contracts (effective for annual periods beginning on or after 1 January 2023)
IFRS 17 was issued in May 2017 and will replace IFRS 4 Insurance Contracts. IFRS 4 is an interim standard which permits the
continued application of accounting policies, for insurance contracts and contracts with discretionary participation
features, which were being used at transition to IFRS except where a change satisfies criteria set out in IFRS 4. IFRS 17
introduces new required measurement and presentation accounting policies for such contracts which reflect the view
that these contracts combine features of a financial instrument and a service contract.
IFRS 17’s measurement model, which applies to groups of contracts, combines a risk-adjusted present value of future cash
flows and an amount representing unearned profit. On transition retrospective application is required unless impracticable,
in which case either a modified retrospective approach or a fair value approach is required. IFRS 17 introduces a new
approach to presentation in the income statement and statement of comprehensive income.
The Group has no direct exposure to insurance contracts and contracts with discretionary participating features which will
be impacted by the adoption of IFRS 17. However, the results of the Group’s joint venture, Heng An Standard Life Insurance
Company Limited (HASL), are expected to be impacted by IFRS 17. The standard has not yet been endorsed by the UK
Endorsement Board.
Other
There are no other new standards, interpretations and amendments to existing standards that have been published that
are expected to have a significant impact on the consolidated financial statements of the Group.
(a)(iii) Income statement presentational change
The presentation of the Group’s consolidated income statement has been revised in 2021 following a review of the
financial statements. The reason for the change is to make the financial statements more relevant to users as the
consolidated income statement is now more consistent with asset management peers. The change includes a revised
presentation relating to unit linked business returns which we consider makes the results easier to understand.
143abrdn.comAnnual report 2021
FINANCIAL INFORMATION
7. Group financial statements continued
The table below sets out the impact of adopting the revised income statement format:
2020 as
previously
presented
Presentation
changes
2020 revised
format
£m £m £m Notes
Income
Investment return 163 (163) – b
Revenue from contracts with customers 1,527 – 1,527
Cost of sales – (104) (104) a
Net operating revenue 1,423 a
Insurance contract premium income 31 (31) – b
Profit on disposal of interests in associates 1,858 (1,858) – e
Other income 30 (30) – b
Total income from continuing operations 3,609 –
Expenses
Insurance contracts claims and change in liabilities (17) 17 – b
Change in non-participating investment contract liabilities (56) 56 – b
Administrative and other expenses
Restructuring and corporate transaction expenses (297) (19) (316) d
Impairment of goodwill – asset management (915) – (915)
Amortisation and impairment of other intangibles acquired in business
combinations and through the purchase of customer contracts – (265) (265) c
Staff costs and other employee-related costs – (625) (625) c
Other administrative expenses (1,608) 1,013 (595) c
Total administrative and other expenses (2,820) (2,716)
Net gains on financial instruments and other income
Fair value movements and dividend income on significant listed investments – 65 65 b
Other net gains on financial instruments and other income – 81 81 b
Total net gains on financial instruments and other income – 146 146 b
Change in liability for third party interest in consolidated funds 3 (3) – b
Finance costs (30) – (30)
Total expenses from continuing operations (2,920)
Profit on disposal of subsidiaries and other operations – 8 8 f
Profit on disposal of interests in associates – 1,858 1,858 e
Loss on impairment of interests in joint ventures (45) – (45)
Share of profit or loss from associates and joint ventures 194 – 194
Profit before tax from continuing operations 838 838
Note a: A new income statement line Net operating revenue has been presented (2020: £1,423m). Net operating revenue
is the net of revenue from contracts with customers and cost of sales. Cost of sales includes commission expenses and
other cost of sales which were previously presented within other administrative expenses.
Note b: A new income statement line of Net gains on financial instruments and other income has also been presented
(2020: £146m). This combines a number of line items previously shown separately on the face of the income statement
with a more detailed breakdown disclosed in Note 4 of the financial statements.
Given the significance of the Fair value movements and dividend income on significant listed investments, these have been
disclosed separately from Other net gains on financial instruments and other income on the face of the consolidated
income statement.
144 abrdn.com Annual report 2021
N
The table below reconciles Net gains on financial instruments and other income to previous line items:
31 December 2020 £m
Income items previously disclosed on the face of the consolidated income statement
Investment return 163
Insurance contract premium income 31
Other income 30
Total income items previously disclosed on the face of the consolidated income statement 224
Expense items previously disclosed on the face of the consolidated income statement
Insurance contract claims and change in liabilities (17)
Change in non-participating investment contract liabilities (56)
Change in liability for third party interest in consolidated funds 3
Total expense items previously disclosed on the face of the consolidated income statement (70)
Total net gains on financial instruments and other income before reclassifications 154
Less: Other income now separately disclosed as Profit on disposal of subsidiaries and other operations (8)
Total net gains on financial instruments and other income after reclassifications 146
Split as:
Fair value movements and dividend income on significant listed investments 65
Net gains on financial instruments and other income from continuing operations – non-unit linked
business – excluding significant listed investments
72
Net gains on financial instruments and other income from continuing operations – unit linked business 9
Total other net gains on financial instruments and other income 81
Total net gains on financial instruments and other income 146
The expense items included in the table above relate to unit linked business. We consider that offsetting the net
gains/losses on unit linked financial assets (included in investment return in the table above) and the net gains/losses on
unit linked financial liabilities (included in change in non-participating investment contract liabilities in the table above) on
the face of the consolidated income statement reflects the substance of the transactions, as changes in the value of the
unit linked assets results in corresponding changes in the value of unit linked liabilities with no net impact on profit after tax
(refer Note 24(a)).
Profit on disposal of subsidiaries and other operations has been shown separately in 2021 due to materiality and therefore
the 2020 balance has been reclassified from other income.
Note c: Presentational changes have also been made to administrative and other expenses. The following table reconciles
other administrative expenses as previously presented at 31 December 2020 to the re-presented 2020 other
administrative expenses.
31 December 2020 £m
Other administrative expenses as previously presented 1,608
Less:
Cost of sales now included in net operating revenue (see Note a above) (104)
Staff costs and other employee-related costs now presented separately in the consolidated income
statement
(625)
Amortisation and impairment of other intangibles acquired in business combinations and through the
purchase of customer contracts now presented separately in the consolidated income statement (265)
Other administrative expenses reclassified to restructuring and corporate transaction expenses (see Note
d below)
(19)
Re-presented other administrative expenses 595
Note d: Restructuring and corporate transaction expenses was already separately presented but, as shown above, we
have reclassified £19m of 2020 other administrative expenses to restructuring and corporate transaction expenses:
31 December 2020 £m
Restructuring and corporate transaction expenses as previously presented 297
Add: Impairment of internally developed software and right-of-use assets as a result of restructuring 19
Re-presented restructuring and corporate transaction expenses 316
This additional element of restructuring costs was disclosed in the Note 9 of the prior year Group financial statements, but
has now been included on the face of the consolidated income statement.
145abrdn.comAnnual report 2021
FINANCIAL INFORMATION
7. Group financial statements continued
Note e: The Profit on disposal of interests in associates line item(2020: £1,858m) is unchanged, but is now presented with
the Profit on disposal of subsidiaries and other operations and the other income statement items relating to associates
and joints ventures, namely Loss on impairment of joint ventures and Share of profit or loss from associates and joint
ventures.
Note f: As described in Note b above, Profit on disposal of subsidiaries and other operations (2020: £8m) which was
previously included in other income is now separately disclosed on the face of the consolidated income statement.
(a)(iv) Critical accounting estimates and judgements in applying accounting policies
The preparation of financial statements requires management to exercise judgements in applying accounting policies and
make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial
statements and the reported amounts of revenue and expenses arising during the year. Judgements and sources of
estimation uncertainty are continually evaluated and based on historical experience and other factors, including
expectations of future events that are believed to be reasonable under the circumstances.
The areas where judgements have the most significant effect on the amounts recognised in the consolidated financial
statements are as follows:
Financial statement area Critical judgements in applying accounting policies Related note
Defined benefit pension plans
Assessment of whether the Group has an unconditional right to a refund of
the surplus.
Treatment of tax relating to the surplus.
Note 33
Investments in associates
Determining whether the investments in Phoenix and HDFC Asset
Management should continue to be classified as associates.
Identification, valuation and determination of useful lives for equity
accounting purposes, of the Group’s share of its associate’s intangible assets
at the date of acquisition of an investment in the associate.
Note 15
Intangible assets
Identification and valuation of intangible assets arising from business
combinations and the determination of useful lives.
Note 14
Provisions Determining whether a provision is required for separation costs. Note 36
The following change has been made to the Group’s critical judgements:
– As a result of the partial sale of HDFC Asset Management (refer Note 1(c)(iii) for further details), determining whether
the investment in HDFC Asset Management should continue to be classified as an associate is a critical judgement in
the year ended 31 December 2021. Determining whether the investment in HDFC Life should be classified as an
associate is no longer considered a critical judgement following its reclassification in the year ended 31 December 2020
(refer Note 1(c)(iv) for further details).
There are no other changes to critical judgements in applying accounting policies from the prior year.
The areas where assumptions and other sources of estimation uncertainty at the end of the reporting period have a
significant risk of resulting in a material adjustment to the carrying amounts of assets and liabilities within the next financial
year are as follows:
Financial statement area Critical accounting estimates and assumptions Related note
Financial instruments at fair value
through profit or loss
Determination of the fair value of contingent consideration
liabilities relating to the acquisition of Tritax
Notes 35 and 39
Defined benefit pension plans
Determination of principal UK pension plan assumptions for mortality,
discount rate and inflation
Note 33
The following changes have been made to the Group’s critical estimates and assumptions:
– As a result of the acquisition of Tritax in 2021 (refer Note 1(b)(i) for further details), the determination of the fair value of
related contingent consideration liabilities is considered a critical area of estimation uncertainty.
– The determination of the recoverable amount in relation to the impairment assessment of investments in associates
is no longer considered to be a critical area of estimation uncertainty following the reclassification of Phoenix
(refer Note 1(c)(iii) for further details).
– The determination of the recoverable amount in relation to the impairment assessment of the segregated and similar
customer relationship intangible asset is no longer considered a source of estimation uncertainty at the end of the
reporting period as a result of amortisation and market movements.
All other critical accounting estimates and assumptions are the same as the prior year.
Further detail on critical accountin
g
estimates and assumptions is provided in the relevant note.
146 abrdn.com Annual report 2021
N
(a)(v) Foreign currency translation
The consolidated financial statements are presented in million pounds Sterling.
The statements of financial position of Group entities, including associates and joint ventures accounted for using the
equity method, that have a different functional currency than the Group’s presentation currency are translated into the
presentation currency at the year end exchange rate and their income statements and cash flows are translated at
average exchange rates for the year. All resulting exchange differences arising are recognised in other comprehensive
income and the foreign currency translation reserve in equity. On disposal of a Group entity the cumulative amount of
any such exchange differences recognised in other comprehensive income is reclassified to profit or loss.
Foreign currency transactions are translated into the functional currency at the exchange rate prevailing at the date of
the transaction. Gains and losses arising from such transactions and from the translation at year end exchange rates of
monetary assets and liabilities denominated in foreign currencies are recognised in the relevant line in the consolidated
income statement.
Translation differences on non-monetary items, such as equity securities held at fair value through profit or loss, are
reported as part of the fair value gain or loss within Net gains on financial instruments and other income in the
consolidated income statement. Translation differences on financial assets and liabilities held at amortised cost are
included in the relevant line in the consolidated income statement.
The income statements and cash flows, and statements of financial position of Group entities that have a different
functional currency from the Group’s presentation currency have been translated using the following principal exchange
rates:
2021 2020
Income statement and cash flows
(average rate)
Statement of financial position
(closing rate)
Income statement and cash
flows (average rate)
Statement of financial position
(closing rate)
Euro 1.166 1.191 1.127 1.117
US Dollar 1.375 1.355 1.292 1.367
Indian Rupee
101.471 100.685 95.602 99.880
Chinese Renminbi 8.858 8.632 8.905 8.940
Hong Kong Dollar
10.690 10.560 10.024 10.599
Singapore Dollar
1.847 1.826 1.778 1.807
(a)(vi) Going concern
The Group’s business activities, together with the factors likely to affect its future development, performance and financial
position, are set out in the Strategic report. This includes details on our liquidity and capital management and our viability
statement in the Chief Financial Officer’s overview section and our principal risks in the Risk management section including
the impact of COVID-19 on these principal risks. In addition, these financial statements include notes on the Group’s
subordinated liabilities (Note 32), management of its risks including market, credit and liquidity risk (Note 37), its contingent
liabilities and commitments (Notes 41 and 42), and its capital structure and position (Note 45).
In preparing these financial statements on a going concern basis, the Directors have considered the following matters and
have taken into account the uncertainty created by COVID-19.
– The fundamental basis of our business has not been impacted by COVID-19. We consider that COVID-19 will
accelerate the key global trends already underway in our industry and already factored into our strategy which are
discussed further in the Strategic report on pages 16 and 17, and that the Group is well placed to manage its business
risks successfully.
– The Group has robust cash and liquid resources of £3.1bn at 31 December 2021. In addition the Company has a
revolving credit facility of £400m as part of our contingency funding plans which is due to mature in 2025 and remains
undrawn.
– The Group’s indicative regulatory capital surplus on an IFPR basis was £1.8bn in excess of capital requirements at
31 December 2021. The regulatory capital surplus does not include the value of the Group’s significant listed investments
HDFC Asset Management, HDFC Life and Phoenix.
– The Group performs regular stress and scenario analysis as described in the Annual report and accounts 2021 Viability
statement. The market stresses considered in these analyses are considerably more severe than experienced as a
result of COVID-19, and the diverse range of management actions available meant the Group was able to withstand
these extreme stresses.
– The Group’s operational resilience processes have operated effectively during the period including the provision of
services by key outsource providers. We have put in place additional processes to monitor key outsource providers
during this remote working environment.
Based on a review of the above factors the Directors are satisfied that the Group and Company have and will maintain
sufficient resources to enable them to continue operating for at least 12 months from the date of approval of the financial
147abrdn.comAnnual report 2021
FINANCIAL INFORMATION
7. Group financial statements continued
statements. Accordingly, the financial statements have been prepared on a going concern basis. There were no material
uncertainties relating to this going concern conclusion.
(b) Basis of consolidation
The Group’s financial statements consolidate the financial statements of the Company and its subsidiaries.
Subsidiaries are all entities (including investment vehicles) over which the Group has control. Control arises when the
Group is exposed, or has rights, to variable returns from its involvement with the entity and has the ability to affect those
returns through its power over the entity. For operating entities this generally accompanies a shareholding of 50% or
more in the entity. For investment vehicles, including structured entities, the control assessment also considers the
removal rights of other investors and whether the Group acts as principal or agent in assessing the link between power
and variable returns. In determining whether the Group acts as principal, and therefore controls the entity, the removal
rights of other investors and the magnitude of the variability associated with the returns are also taken into account. As a
result, the Group often is considered to control investment vehicles in which its shareholding is less than 50%.
Where the Group is considered to control an investment vehicle, such as an open-ended investment company, a unit
trust or a limited partnership, and it is therefore consolidated, the interests of parties other than the Group are assessed
to determine whether they should be classified as liabilities or as non-controlling interests. The liabilities are recognised in
the third party interest in consolidated funds line in the consolidated statement of financial position and any movements
are recognised in the consolidated income statement. The financial liability is designated at fair value through profit or
loss (FVTPL) as it is implicitly managed on a fair value basis as its value is directly linked to the market value of the
underlying portfolio of assets. The interests of parties other than the Group in all other types of entities are recorded as
non-controlling interests.
All intra-group transactions, balances, income and expenses are eliminated in full.
The Group uses the acquisition method to account for acquisitions of businesses. At the acquisition date the assets and
liabilities of the business acquired and any non-controlling interests are identified and initially measured at fair value on
the consolidated statement of financial position.
When the Group acquires or disposes of a subsidiary, the profits and losses of the subsidiary are included from the date
on which control was transferred to the Group until the date on which it ceases, with consistent accounting policies
applied across all entities throughout.
When the Group sells a subsidiary to an associate, the gain on sale of the subsidiary is recognised in full, with no
elimination being made for the continuing interest in the subsidiary.
148 abrdn.com Annual report 2021
Notes to the Group financial statements
1. Group structure
(a) Composition
The following diagram is an extract of the Group structure at 31 December 2021 and gives an overview of the composition
of the Group.
A full list of the Company’s subsidiaries is provided in Note 47.
(b) Acquisitions
(b)(i) Current year acquisitions of subsidiaries
Tritax Management LLP (Tritax)
On 1 April 2021, Aberdeen Asset Management PLC (AAM PLC) purchased 60% of the membership interests in Tritax, a
specialist logistics real estate fund manager (the acquisition of Tritax). The initial cash consideration payable at the
completion of the acquisition was £64m. Subject to the satisfaction of certain conditions, an additional contingent deferred
earn-out is expected to be payable to acquire the remaining 40% of membership interests in Tritax should the selling Tritax
partners choose to exercise three put options in each of years ended 31 March 2024, 2025 and 2026. The amount payable
is linked to the EBITDA of the Tritax business in the relevant period. The Group will also have the right to purchase any
outstanding membership interests at the end of the five-year period through exercising a call option.
Based on the transaction terms, Tritax has been fully consolidated from 1 April 2021 and no non-controlling interest has
been recognised in the Group’s total equity in relation to the 40% of the membership interests in Tritax subject to the put
and call options. A contingent consideration financial liability has been recognised at fair value in relation to the earn-out
payments (under the put and call options) and the expected non-discretionary allocation of profit payments to the holders
of the 40% membership interests up to the date of the exercise of the options. This contingent consideration financial
liability is included in the table below as part of the consideration paid. The acquisition of Tritax strengthens the Group’s
combined offering in the growing logistics real estate market and fulfils the Group’s strategy of providing deep sector
specialism for our clients in this key growth area. The assets under management of Tritax were £6bn at the completion
date.
Elevate Portfolio
Savings Limited
(Holdings) Limited
Standard Life
Savings Limited
(Mauritius Holdings)
2006 Limited
Ignis Asset
Management
Limited
Ignis Investment
Services Limited
Aberdeen Asset
Managers Limited
Aberdeen Standard
Fund Managers
Limited
Aberdeen Standard
Investments
Luxembourg SA
Aberdeen Asset
Investment Group
Limited
Aberdeen Standard
Investments Ireland
Limited
Trust Managers
Alternative Funds
Heng An
abrdn plc
Aberdeen Corporate
Services Limited
Focus Business
Solutions Limited
abrdn Financial
Planning Limited
abrdn Client
Management Limited
abrdn Capital
Aberdeen Asset
Limited
Aberdeen Standard
Limited
SLTM
Limited
Management PLC
Standard Life Insurance
Company Limited
(China JV - 50%)
Virgin Money Unit
Limited
(UK JV - 50%)
Tritax
Management LLP
Finimize
Limited
abrdn
Asia Limited
abrdn
abrdn
Investments
Management
Limited
abrdn Investment
abrdn
Private Equity
(Europe) Limited
abrdn Life
and Pensions Limited
abrdn
Hong Kong
Limited
abrdn Inc
149abrdn.comAnnual report 2021
FINANCIAL INFORMATION
7. Group financial statements continued
At the acquisition date the consideration, net assets acquired and resulting goodwill from the Tritax acquisition were as
follows:
1 April 2021 £m
Cash consideration
64
Fair value of contingent consideration
1
155
Consideration
2
219
Fair value of net assets acquired
Customer relationships and investment management contracts 71
Property, plant and equipment
2
Receivables and other financial assets
6
Cash and cash equivalents
3
Other assets
1
Total assets 83
Other financial liabilities (11)
Deferred tax liabilities (17)
Total liabilities
(28)
Goodwill 164
1. The fair value of contingent consideration includes £113m relating to the fair value of the earn-out payments (under the put and call options) and £42m
relating to the fair value of the expected non-discretionary allocation of profit payments to the holders of the 40% membership interests up to the date of the
exercise of the options. These are calculated by reference to earnings before interest, taxes, depreciation, and amortisation (EBITDA). The earn-out
payments could range from £nil to £140m. The expected distribution of profit payments to the holders of the 40% membership interests up to the date of the
exercise of the options could range from £nil and have no maximum value.
2. Not included in the consideration is an additional payment in 2023 of up to £25m for an earn-up linked to EBITDA for the years ended 31 March 2022 and 2023.
The expected payment is being accrued over two years as remuneration and is included in Staff costs and other employee-related costs in the IFRS
consolidated income statement.
Intangible assets acquired in the business combination consist of customer relationships and investment management
contracts. Refer Note 14 for details of the key assumptions used in measuring the fair value of these intangibles at the
acquisition date.
The key assumptions used to value the contingent consideration at the date of acquisition are the same as the inputs used
to value this contingent consideration liability at 31 December 2021 and set out in Note 39(a)(iv). The valuation assumes
that the timing of the exercise of the earn out put options between 2024, 2025 and 2026 would be that which is most
beneficial to the holders of the put options.
The goodwill arising on acquisition is mainly attributable to expected cash flows from future fund raisings for existing and
new funds and products, which are not included in the valuation of the investment management contract intangibles,
revenue synergies from the Group’s distribution capabilities and existing real estate investment management expertise,
and the quality and experience of the Tritax executive team and employees. The goodwill has been allocated to the asset
management group of cash-generating units which comprises the Investments segment (excluding Finimize). The
goodwill is not expected to be deductible for tax purposes.
The amounts of revenue from contracts with customers and profit after tax contributed to the Group’s consolidated
income statement for the year ended 31 December 2021 from the acquired Tritax business were £23m and £2m
respectively. The profit contributed excludes amortisation of intangible assets acquired through business combinations. If
the acquisition had occurred on 1 January 2021, the Group’s total revenue from contracts with customers for the year
would have increased by £7m to £1,692m and the profit after tax would have been unchanged.
Transaction costs were not material and were accounted for as part of restructuring and corporate transaction expenses
in the year ended 31 December 2020.
Finimize Limited (Finimize)
On 29 October 2021, AAM PLC purchased 100% of the issued share capital of Finimize, a modern investing insights
platform (the acquisition of Finimize). The cash outflow at the completion of the acquisition was £87m, which comprised
consideration of £75m and payments made to settle debt and other liabilities on behalf of Finimize as part of the
transaction of £12m. Finimize empowers retail investors by equipping them with information to make their own informed
investment decisions, without any jargon, in less than fifteen minutes a day. The acquisition of Finimize is aligned with
abrdn’s strategy to invest in technology to accelerate the pace and focus on innovation to meet changing investor needs.
150 abrdn.com Annual report 2021
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At the acquisition date the consideration, net assets acquired and resulting goodwill from the Finimize acquisition were as
follows:
29 October 2021 £m
Cash consideration
1, 2
75
Fair value of net assets acquired
Technology and other intangible assets 7
Receivables and other financial assets
2
Cash and cash equivalents
3
Total assets
12
Other financial liabilities
1
(17)
Deferred tax liabilities (2)
Total liabilities
(19)
Goodwill 82
1. Not included in the consideration is £12m of payments made to settle debt and other liabilities on behalf of Finimize as part of the transaction. These amounts
were included within other financial liabilities at the acquisition date. This cash outflow is included in Acquisition of subsidiaries and unincorporated businesses
net of cash acquired in the consolidated statement of cash flows.
2. Not included in the consideration are three additional payments of £1.8m in 2022, 2023 and 2024. The expected payments are being accrued over one, two
and three years respectively as remuneration and are included in Staff costs and other employee-related costs in the IFRS consolidated income statement.
The goodwill arising on acquisition of Finimize is mainly attributable to expected future cash flows from new retail and
corporate customers, the quality and experience of the Finimize executive team and employees, and revenue synergies
including those arising from partnering with abrdn wholesale customers in the Group’s investment business and from the
deployment of Finimize content in the Group’s Personal business. The goodwill has been primarily allocated to the Finimize
cash-generating unit in the Investments segment (£72m) with £3m and £7m allocated to the asset management group of
cash-generating units and a new cash-generating unit in the Personal segment respectively. The goodwill is not expected
to be deductible for tax purposes.
The amounts of revenue from contracts with customers and profit after tax contributed to the Group’s consolidated
income statement for the year ended 31 December 2021 from the acquired Finimize business were £1m and £nil
respectively. The profit contributed excludes amortisation of intangible assets acquired through business combinations. If
the acquisition had occurred on 1 January 2021, the Group’s total revenue from contracts with customers for the year
would have increased by £3m to £1,688m and the profit after tax would have decreased by £2m to £993m.
Transaction costs of £2m were accounted for as part of restructuring and corporate transaction expenses in the year
ended 31 December 2021.
(c) Disposals
(c)(i) Current year disposal of subsidiaries and other operations
Profit on disposals of subsidiaries and other operations for the year ended 31 December 2021 of £127m includes a gain of
£73m on the disposal of Parmenion Capital Partners LLP (Parmenion), £39m for the disposal of the Bonaccord Capital
Partners (Bonaccord ) US private market business and £15m from other disposals.
On disposal, a loss of £1m was recycled from the translation reserve and was included in determining the profit on
disposals of subsidiaries.
Parmenion
On 9 March 2021, the Group announced the sale of Parmenion to Preservation Capital Partners. Parmenion is reported in
the Corporate/strategic segment (previously Asset management, platforms and wealth segment). The sale was
completed on 30 June 2021.
The gain on sale, which is included in profit on disposals of subsidiaries and other operations in the consolidated income
statement for the year ended 31 December 2021 was calculated as follows:
30 June 2021 £m
Total assets of operations disposed of (36)
Total liabilities of operations disposed of 13
Net assets of operations disposed of
(23)
Cash consideration (less transaction costs) and outstanding loan
1
75
Fair value of earn-out payments 21
Gain on sale before tax
73
1. Following the completion of the sale, the intercompany loan from abrdn plc to Parmenion of £9m which previously eliminated on consolidation is now
recognised as an asset of the Group.
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FINANCIAL INFORMATION
7. Group financial statements continued
The taxable gain which arose on the sale has been computed in accordance with the tax rules applicable to UK
partnerships.
Parmenion was classified as an operation held for sale at 31 December 2020.
Bonaccord
On 30 September 2021, the Group completed the sale of its Bonaccord US private market business to P10 Holdings Inc.
(P10) through a number of asset sale agreements.
The gain on sale, which is included in profit on disposal of subsidiaries and other operations in the consolidated income
statement for the year ended 31 December 2021 was calculated as follows:
30 September 2021 £m
Total assets of operations disposed of (2)
Total liabilities of operations disposed of 2
Net assets of operations disposed of
–
Cash consideration (less transaction costs) 30
Fair value of earn-out payments and retained interest
1
9
Gain on sale before tax
39
1. Following the completion of the sale, the Group has retained a reduced interest in future carried interest entitlement which has been recognised in the
consolidated statement of financial position at fair value.
The taxable gain which arose on the sale has been computed in accordance with the tax rules applicable to US
companies.
Nordics real estate business
On 31 May 2021, the Group completed the sale of its Nordics real estate business to DEAS Asset Management A/S through
a number of share and asset sale agreements. The disposal is not considered material to the Group.
Hark
On 30 September 2021, in addition to the Bonaccord sale, the Group also completed the sale of its Hark Capital US private
market business to P10 through a number of asset sale agreements. The disposal is not considered material to the Group.
(c)(ii) Prior year disposal of subsidiaries
Standard Life (Asia) Limited (SL Asia)
On 30 June 2020, the Group completed the sale of the entire issued share capital of its wholly owned Hong Kong insurance
business, SL Asia, to the Group’s Chinese joint venture business, HASL. SL Asia was reported in the Corporate/Strategic
segment (previously the Asset management, platforms and wealth segment) and HASL is not included in the Group’s
reportable segments (previously reported within the Insurance associates and joint ventures segment). Refer Note 2 for
further details.
Total consideration received comprised cash of £19m and the Group recognised a gain on disposal of £8m in respect of
the sale within other income from continuing operations in the consolidated income statement for the year ended
31 December 2020. On disposal a gain of £8m was recycled from the translation reserve and was included in determining
the gain on sale.
Prior to the completion of the sale, SL Asia was classified as an operation held for sale.
The accounting for the acquisition of SL Asia by HASL at 30 June 2020 was based on provisional amounts as allowed under
IFRS 3 Business combinations.
(c)(iii) Current year reclassification of associates and other related transactions
Profit on disposal of interests in associates for the year ended 31 December 2021 of £1,236m includes a gain of £68m on
the reclassification of Phoenix and £1,168m of gains in relation to the sale of equity shares in HDFC Asset Management and
its reclassification from an investment in associate.
On disposal and reclassification, a loss of £17m was recycled from the translation reserve and other comprehensive
income gains of £9m were recycled from retained earnings and were included in determining the profit on disposals of
associates.
Phoenix Group Holdings plc (Phoenix)
On 23 February 2021, the Group announced details of the simplification and extension of the strategic partnership
between the Group and Phoenix. The key details were:
– The Group announced the purchase of certain products in the Phoenix Group’s savings business offered through
abrdn’s Wrap platform, comprising a self-invested pension plan (SIPP) and an onshore bond product; together with the
152 abrdn.com Annual report 2021
N
Phoenix Group’s trustee investment plan (TIP) business for UK pension scheme clients. The assets relating to these
products at 31 December 2020 were £38bn and are included in the Group’s AUMA. The transaction is targeted to
complete in 2023 and is subject to regulatory and court approvals. The upfront consideration paid by the Group in
February 2021 was £62.5m, which will be offset in part by payments from Phoenix to the Group relating to profits of the
products prior to completion of the legal transfer. The net amount of consideration paid up to 31 December 2021 is
included in prepayments in the consolidated statement of financial position and in prepayment in respect of potential
acquisition of customer contracts in the consolidated statement of cash flows.
– The sale of the ‘Standard Life’ brand to Phoenix, replacing the existing agreement to licence the brand for no fee to
Phoenix, the transfer of related brand employees to Phoenix, and the transfer of workplace pensions marketing staff to
Phoenix who were employed by the Group but provided services to Phoenix. The sale of the brand, the staff transfers,
and a related £32m payment from the Group to Phoenix took place in May 2021. Refer Note 34 for details of the release
of related deferred revenue.
– The strategic asset management partnership with Phoenix has been extended and will now operate for at least 10
years up to February 2031.
– The resolution of legacy issues with Phoenix relating to the operation of certain aspects of the agreements that were
entered into at the time of the sale of SLAL to Phoenix and which impacted the value of certain indemnities and other
payments under the transaction terms. The impact of the resolution of these legacy matters was included in the 2020
results and resulted in the Group receiving a cash inflow of £34m in February 2021. Refer Note 39(a)(iv).
Following the changes to the commercial agreements set out above, in particular in relation to the licencing of the
‘Standard Life’ brand, our judgement is that Phoenix should no longer be accounted for as an associate with effect from
23 February 2021. The Group’s shareholding in Phoenix, which remained at 14.4%, was therefore reclassified from an
investment in associates accounted for using the equity method to equity securities and interests in pooled investment
funds measured at fair value. A reclassification gain of £68m is included in the profit on disposal of interests in associates for
the year ended 31 December 2021 as the fair value on 22 February 2021 of £1,023m was higher than the previous carrying
value as an associate of £964m. On disposal, other comprehensive income gains of £9m were recycled from retained
earnings and included in determining the gain on sale.
HDFC Asset Management
During 2021, the Group completed a sale of equity shares in HDFC Asset Management on the National Stock Exchange of
India Limited and BSE Limited. The gains on sales and the gain on reclassification from an associate to an equity investment
can be summarised as follows:
2021
£m
Gain on sale of 10,650,000 equity shares in HDFC Asset Management sold through a Bulk Sale on
29 September 2021
271
Gain on reclassification of remaining 34,578,305 equity shares in HDFC Asset Management from an
associate to equity investment on 29 September 2021
897
Ga
ins on disposal and reclassification of HDFC Asset Management for the year ended 31 December 2021
1,168
Through the sale, 5% of the issued equity share capital of HDFC Asset Management was sold for a total consideration net of
taxes and expenses of Rs 27,071m (£271m). The gain on sale of £271m before tax was calculated using the weighted-
average cost method. On disposal a loss of £4m was recycled from the translation reserve and was included in
determining the gain on sale.
Following the sale, the Group’s shareholding in HDFC Asset Management was 34,578,305 equity shares or 16.22% and
HDFC Asset Management is no longer considered to be an associate of the Group. The Group’s investment in HDFC Asset
Management was reclassified from an investment in associates accounted for using the equity method to equity securities
and interests in pooled investment funds measured at fair value. A reclassification gain of £897m was included in the profit
on disposal of interests in associates for the year ended 31 December 2021 as the fair value on 29 September 2021 of
£1,003m was higher than the previous carrying value as an associate of £93m. On reclassification a loss of £13m was
recycled from the translation reserve and was included in determining the gain.
The Group’s shareholdings in Phoenix and HDFC Asset Management are now considered, along with HDFC Life (refer Note
1(c)(iv)), as significant listed investments for the purpose of determining the Group’s adjusted profit. Refer Note 12(b) for
other changes in the Group’s significant listed investments in the year ended 31 December 2021.
(c)(iv) Prior year disposal and reclassification of associates
Profit on disposals of associates for the year ended 31 December 2020 of £1,858m includes £1,591m of gains in relation to
the sale of equity shares in HDFC Life and its reclassification from an investment in associate, £263m of gains in relation to
the sale of equity shares in HDFC Asset Management and a £4m dilution gain in Phoenix.
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FINANCIAL INFORMATION
7. Group financial statements continued
HDFC Life
During 2020, the Group completed sales of equity shares in HDFC Life on the National Stock Exchange of India Limited and
BSE Limited. The gains on sales and the gain on reclassification from an associate to an equity investment can be
summarised as follows:
2020
£m
Gain on sale of 50,000,000 equity shares in HDFC Life sold through a Bulk Sale on 27 March 2020
206
Gain on sale of 40,000,000 equity shares in HDFC Life sold through a Bulk Sale on 4 June 2020 182
Gain on sale of 27,772,684 equity shares in HDFC Life sold through a Bulk Sale on 3 December 2020 152
Gain on reclassification of remaining 179,539,209 equity shares in HDFC Life from an associate to equity
investment on 3 December 2020
1,051
Gains on disposals and reclassification of HDFC Life for the year ended 31 December 2020
1,591
During 2020, in total, 5.83% of the issued equity share capital of HDFC Life was sold for a combined total consideration net of
taxes and expenses of Rs 58,561m (£616m). The combined gain on sale of £540m was calculated using the weighted-
average cost method. On disposal a loss of £5m was recycled from the translation reserve and was included in
determining the gain on sale.
Following the 3 December 2020 sale, the Group’s shareholding in HDFC Life was 179,539,209 equity shares or 8.89% and
HDFC Life is no longer considered to be an associate of the Group. The Group’s investment in HDFC Life was reclassified
from an investment in associates accounted for using the equity method to equity securities and interests in pooled
investment funds measured at fair value. A reclassification gain of £1,051m was included in the profit on disposal of
interests in associates for the year ended 31 December 2020 as the fair value on 3 December 2020 of £1,168m was higher
than the previous carrying value as an associate of £111m. On reclassification a loss of £6m was recycled from the
translation reserve and was included in determining the gain.
HDFC Asset Management
During 2020, the Group completed the following sale of equity shares in HDFC Asset Management on the National Stock
Exchange of India Limited and BSE Limited:
– 12,000,000 equity shares in HDFC Asset Management sold through an Offer for Sale on 17 and 18 June 2020.
Through the sale, 5.64% of the issued equity share capital of HDFC Asset Management was sold for a total consideration
net of taxes and expenses of Rs 25,404m (£265m). The gain on sale of £263m before tax was calculated using the
weighted-average cost method. On disposal a loss of £3m was recycled from the translation reserve and was included in
determining the gain on sale.
Phoenix
On 22 July 2020, Phoenix, announced the completion of its acquisition of ReAssure Group plc. Under the terms of the
transaction, Phoenix issued 277,277,138 new ordinary shares as part consideration for the acquisition. Completion of the
transaction resulted in the Group’s holding in Phoenix becoming 14.43% of the enlarged Phoenix Group. A dilution gain of
£4m was recognised within the Profit on disposal of interests in associates in the consolidated income statement as a result
of the transaction.
154 abrdn.com Annual report 2021
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2. Segmental analysis
The Group’s reportable segments have been identified in accordance with the way in which the Group is structured and
managed. IFRS 8 Operating Segments requires that the information presented in the financial statements is based on
information provided to the ‘Chief Operating Decision Maker’ which for the Group is the executive leadership team.
(a) Basis of segmentation
(a)(i) Current reportable segments
Investments
Our global asset management business which provides investment solutions for Institutional, Wholesale and Insurance
clients. The Investment segment includes the Tritax and Finimize businesses following their acquisitions during the year.
Adviser
Our market-leading UK financial adviser business which provides services through the Wrap and Elevate platforms to
wealth managers and advisers.
Personal
Our Personal business which combines our financial planning business abrdn Financial Planning, our digital direct-to-
consumer services and discretionary fund management services provided by abrdn Capital.
In addition to the Group reportable segments above, the analysis of adjusted profit in Section b(i) below also reports the
following:
Corporate/strategic
Corporate/strategic mainly comprises certain corporate costs and businesses held for sale (Parmenion, the sale of which
was completed on 30 June 2021, and SL Asia which was sold in June 2020).
The segments are reported to the level of adjusted operating profit and therefore, as described in Section a(ii) below, no
longer include the results relating to the Group’s associates and joint ventures.
(a)(ii) Changes to reportable segments
Previously, we reported our results under two reportable segments.
– Asset management, platforms and wealth which comprised all wholly owned business, the Virgin Money joint venture
and HDFC Asset Management our Indian asset management associate.
– Insurance associates and joint ventures which comprised our life assurance associates and joint ventures – HDFC Life,
Phoenix and HASL.
The business is now operating under three growth vectors of Investments, Adviser and Personal as set out in Section (a)(i)
above and accordingly, in 2021, the Group changed the way we report the performance of the business to the executive
leadership team.
Reportable segments are now reported to the level of adjusted operating profit in line with the updated management
reporting, and therefore our share of the results of associates and joint ventures are no longer part of the Group’s
reportable segments.
Comparative amounts for the year ended 31 December 2020 have been prepared on the same basis as the year ended
31 December 2021 to allow more meaningful comparison.
155abrdn.comAnnual report 2021
FINANCIAL INFORMATION
7. Group financial statements continued
(b) Reportable segments – adjusted profit and revenue information
(b)(i) Analysis of adjusted profit
Adjusted operating profit is presented by reportable segment in the table below.
Investments Adviser Personal
Corporate/
strategic
Total
31 December 2021 Notes £m £m £m £m £m
Fee based revenue 1,231 178 92 14 1,515
Adjusted operating expenses (978) (104) (84) (26) (1,192)
Adjusted operating profit
253 74 8 (12) 323
Adjusted net financing costs and investment
return
1
–
Adjusted profit before tax
323
Tax on adjusted profit (26)
Adjusted profit after tax
297
Adjusted for the following items
Restructuring and corporate transaction
expenses
8
(259)
Amortisation and impairment of intangible
assets acquired in business combinations
and through the purchase of customer
contracts
(99)
Profit on disposal of subsidiaries and other
operations 1
127
Profit on disposal of interests in associates 1
1,236
Change in fair value of significant listed
investments
(298)
Dividends from significant listed
investments
71
Share of profit or loss from associates and
joint ventures
2
(22)
Other 12
36
Total adjusting items including results of
associates and joint ventures
792
Tax on adjusting items (94)
Profit attributable to non-controlling interests
(ordinary shares)
(1)
Profit for the year attributable to equity
shareholders of abrdn plc
994
Profit attributable to non-controlling interests
(ordinary shares)
1
Profit for the year 995
1. Capital management has been renamed Adjusted net financing costs and investment return.
2. Share of associates’ and joint ventures’ profit or loss comprises the Group’s share of results of HASL, Virgin Money Unit Trust Managers (Virgin Money UTM),
Phoenix (until 22 February 2021) and HDFC Asset Management (until 29 September 2021).
Fee based revenue is reported as the measure of revenue in the analysis of adjusted operating profit and relates to
revenues generated from external customers.
In the year ended 31 December 2021, transactions with one external customer amounted to more than 10% of fee based
revenue (2020: one). This fee based revenue of £195m (2020: £195m) is included in the Investments segment (previously
part of the Asset management, platforms and wealth segment).
Adjusted operating expenses includes depreciation and amortisation of £47m (2020: £67m): £37m (2020: £51m) for the
Investments segment; £4m (2020: £4m) for the Adviser segment; £4m (2020: £3m) for the Personal segment; and £2m
(2020: £9m) for the Corporate/strategic segment. Interest income, interest expense and income tax expense are not
analysed by segment in the information provided to the Chief Operating Decision Maker.
Assets and liabilities by segment is not required to be presented as such information is not presented on a regular basis to
the Chief Operating Decision Maker.
156 abrdn.com Annual report 2021
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Investments Adviser Personal
Corporate/
strategic
Total
Full year 2020 Notes £m £m £m £m £m
Fee based revenue 1,176 137 80 32 1,425
Adjusted operating expenses (990) (89) (85) (42) (1,206)
Adjusted operating profit
186 48 (5) (10) 219
Adjusted net financing costs and investment
return
1
21
Adjusted profit before tax
240
Tax on adjusted profit (38)
Adjusted profit after tax 202
Adjusted for the following items
Restructuring and corporate transaction
expenses
8
(316)
Amortisation and impairment of intangible
assets acquired in business combinations
and through the purchase of customer
contracts
(1,180)
Profit on disposal of subsidiaries and other
operations
1 8
Profit on disposal of interests in associates 1 1,858
Change in fair value of significant listed
investments
65
Share of profit or loss from associates and
joint ventures
2
194
Impairment of interests in joint ventures 15 (45)
Other 12 14
Total adjusting items including results of
associates and joint ventures
598
Tax on adjusting items 53
Profit attributable to non-controlling interests
(preference shares)
(5)
Profit for the year attributable to equity
shareholders of abrdn plc from continuing
operations
848
Loss for the year from discontinued
operations
10 (15)
Profit for the year attributable to equity
shareholders of abrdn plc
833
Profit attributable to non-controlling interests
Preference shares 5
Profit for the year
838
1. Capital management has been renamed Adjusted net financing costs and investment return.
2. Share of associates’ and joint ventures’ profit or loss comprises the Group’s share of results of HDFC Asset Management, Phoenix, HASL, Virgin Money UTM and
HDFC Life (until 3 December 2020).
(b)(ii) Reconciliation to the IFRS consolidated income statement
Fee based revenue
The reconciliation of fee based revenue, as presented in the analysis of Group adjusted profit by segment to revenue from
contracts with customers, as presented in the IFRS consolidated income statement, is included in Note 3.
Adjusted operating expenses
The following table provides a reconciliation of adjusted operating expenses, as presented in the analysis of Group
adjusted profit by segment, to total administrative and other expenses, as presented in the IFRS consolidated income
statement.
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FINANCIAL INFORMATION
7. Group financial statements continued
2021 2020
£m £m
Total administrative and other expenses as presented in the IFRS consolidated income statement
from continuing operations
(1,556) (2,716)
Restructuring and corporate transaction expenses included in adjusting items 259 316
Amortisation and impairment of intangible assets acquired in business combinations and
through the purchase of customer contracts included in adjusting items
99 1,180
Administrative and other expenses relating to the unit linked business
3 5
Other differences 3 9
Adjusted operating expenses as presented in the analysis of Group adjusted profit by segment
from continuing operations
(1,192) (1,206)
Adjusted net financing costs and investment return
The following table provides a reconciliation of adjusted net financing costs and investment return, as presented in the
analysis of Group adjusted profit by segment, to Net gains on financial instruments and other income, as presented in the
IFRS consolidated income statement.
2021 2020
£m £m
Net gains on financial instruments and other income as presented in the IFRS consolidated
income statement from continuing operations
(183) 146
Finance costs separately disclosed in the IFRS consolidated income statement (30)
(30)
Change in fair value of significant listed investments included in adjusting items 298
(65)
Dividends from significant listed investments included in adjusting items
(71) –
Net gains on financial instruments and other income relating to the unit linked business
(7)
(9)
Other differences
(7)
(21)
Adjusted net financing costs and investment return as presented in the analysis of Group
adjusted profit by segment from continuing operations
– 21
Other differences primarily relate to amounts presented in a different line item of the consolidated income statement and
other items classified as adjusting items.
(c) Total fee based revenue by geographical location
Total fee based revenue
1
split by geographical location is as follows:
2021 2020
1
£m £m
UK 1,015 954
Europe, Middle East and Africa 132 137
Asia Pacific
209 192
Americas
159 142
Total
1,515 1,425
1. Previously a geographical split of total income from continuing operations as presented in the consolidated income statement was provided. In line with the
changes to income statement presentation in the current year (refer Section (a)(iii) of the Basis of Preparation for further details), a geographical split of total
fee based revenue which, as noted above, relates to revenues generated from external customers is now provided.
Fee based revenue is allocated based on where the revenue is earned.
(d) Non-current non-financial assets by geographical location
2021 2020
£m £m
UK 808 629
Europe, Middle East and Africa 9 15
Asia Pacific
13 17
Americas
61 76
Total
891 737
Non-current non-financial assets for this purpose consist of property, plant and equipment and intangible assets.
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3. Net operating revenue
Net operating revenue represents revenue from contracts with customers after deduction of cost of sales.
Revenue from contracts with customers is recognised as services are provided i.e. as the performance obligation is
satisfied. Performance fees and carried interest are only recognised once it is highly probable that a significant reversal
will not occur in future periods. Where revenue is received in advance (front-end fees), this income is deferred and
recognised as a deferred income liability until the services have been provided (refer Note 34). Revenue from contracts
with customers excludes premium written and earned on insurance and participating investment contracts
(Refer Note 30).
Commission and other fee expenses which relate directly to revenue are presented as cost of sales. These expenses
include ongoing commission expenses payable to financial institutions, investment platform providers and financial
advisers that distribute the Group’s products which are generally based on an agreed percentage of AUM and are
recognised in the income statement as the service is received. Other cost of sales also includes amounts payable to
employees and others relating to carried interest and performance fee revenue.
(a) Revenue from contracts with customers
The following table provides a breakdown of total revenue from contracts with customers.
2021
2020
restated
1
£m £m
Investments
Management fee income – Institutional and Wholesale
2
1,043 971
Management fee income – Insurance
2
200 216
Performance fees and carried interest
99 30
Other revenue from contracts with customers
54 24
Revenue from contracts with customers for the investments segment
1,396 1,241
Adviser 180 169
Personal 92 80
Corporate/strategic – Parmenion fund platform fee income
17 37
Total revenue from contracts with customers
1,685 1,527
1. The breakdown of revenue from contracts with customers for the year ended 31 December 2020 has been restated in line with the changes to the Group’s
reportable segments. Refer Note 2 for further details.
2. In addition to revenues earned as a percentage of AUM, management fee income includes certain other revenues such as registration fees.
Investments
Through a number of its subsidiaries, the Group provides asset management services to its customers. This performance
obligation is performed over time with the revenue recognised as the obligation is performed. The Group generally
receives asset management fees based on the percentage of the assets under management. The percentage varies
depending on the level and nature of assets under management. Asset management fees are either deducted from
assets or invoiced. Deducted fees are generally calculated, recognised and collected on a daily basis. Other asset
management fees are invoiced to the customer either monthly or quarterly with receivables recognised for unpaid
invoices. The payment terms for invoiced revenue vary but are typically 30 days from receipt of invoice. Accrued income is
recognised to account for income earned but not yet invoiced which is not dependent on any future performance. There is
also some use of performance fees and carried interest arrangements. Performance fees and carried interest are earned
from some investment mandates when contractually agreed performance levels are exceeded within specified
performance measurement periods. Performance fees and carried interest are only recognised once it is highly probable
that a significant reversal will not occur in future periods. Given the unpredictability of future performance, the risk of a
significant reversal occurring will typically only be considered low enough to make recognition appropriate upon the
crystallisation event occurring.
Adviser
Through a number of its subsidiaries, the Group offers customers access to fund platforms. The platforms give customers
the ongoing functionality to manage and administer their investments. This performance obligation is performed over time
with the revenue recognised as the obligation is performed. Customers pay a platform charge which is generally
calculated as a percentage of their assets. The percentage varies depending on the level of assets on the specific platform.
The main platform charges are calculated either daily or monthly and are collected and recognised monthly. The charges
are collected directly from assets on the platform. There are no significant payment terms.
Adviser revenue from contracts with customers includes revenue passed to the product provider and included below in
other cost of sales.
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7. Group financial statements continued
Personal
Through a number of its subsidiaries, the Group offers financial planning and discretionary fund management services.
Financial planning is either provided on a one-off basis or on an ongoing basis. The performance obligation for one-off
advice is performed at a point in time with the revenue recognised when the advice is provided. The performance
obligation for ongoing financial planning is performed over time with the revenue recognised as the obligation is
performed. The Group generally receives ongoing financial planning fees based on the percentage of the assets under
advice. One-off financial planning fees are invoiced to the customer following delivery of the advice to the customer.
Ongoing financial planning fees are invoiced to the customer or a designated financial provider either monthly or quarterly.
Receivables are recognised for unpaid invoices. The payment terms for invoiced revenue vary but are typically 30 days
from receipt of invoice. Accrued income is recognised to account for income earned but not yet invoiced which is not
dependent on any future performance. The performance obligation for discretionary fund management services is also
performed over time with the revenue recognised as the obligation is performed. The Group generally receives
discretionary fund management services fees based on the percentage of the assets under management. The
percentage varies depending on the level and nature of assets under management. Discretionary fund management
services fees are deducted from assets. Deducted fees are generally calculated, recognised and collected on a daily basis.
(b) Cost of sales
The following table provides a breakdown of total cost of sales.
2021 2020
£m £m
Cost of sales
Commission expenses 87 77
Other cost of sales
55 27
Total cost of sales
142 104
Other cost of sales includes amounts payable to employees and others relating to carried interest and performance fee
revenue.
(c) Reconciliation of revenue from contracts with customers to fee based revenue
The following table provides a reconciliation of revenue from contracts with customers as presented in the consolidated
income statement to fee based revenue, as presented in the analysis of adjusted operating profit (see Note 2(b) for each
of the Group’s reportable segments).
Investments Adviser Personal Corporate/strategic Total
2021 2020 2021 2020 2021 2020 2021 2020 2021 2020
£m £m £m £m £m £m £m £m £m £m
Revenue from contracts with customers 1,396 1,241 180 169 92 80 17 37 1,685 1,527
Cost of sales (137) (71) (2) (27) – – (3) (6) (142) (104)
Net operating revenue
1,259 1,170 178 142 92 80 14 31 1,543 1,423
Other differences (28) 6 – (5) – – – 1 (28) 2
Fee based revenue
1,231 1,176 178 137 92 80 14 32 1,515 1,425
Other differences primarily relate to amounts presented in a different line item of the consolidated income statement and
items classified as adjusting items and for the year ended 31 December 2021 primarily relate to the net release of deferred
income of £25m (refer Note 34).
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(d) Contract receivables, assets and liabilities
The Group has recognised the following receivables, assets and liabilities in relation to contracts with customers.
31 December
2021
31 December
2020
1 January
2020
Notes £m £m £m
Amount receivable from contracts with customers 20 135 115 130
Accrued income from contracts with customers 20 260 221 227
Cost of obtaining customer contracts 14
37 49 60
Deferred acquisition costs 21
3 4 6
Total contract receivables and assets 435 389 423
31 December
2021
31 December
2020
1 January
2020
Notes £m £m £m
Deferred Income 34 5 73 67
Accruals 35 – – 3
Total contract liabilities
5 73 70
Refer Note 34 for details of the release of £57m of deferred income in May 2021.
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FINANCIAL INFORMATION
7. Group financial statements continued
4. Net gains on financial instruments and other income
Gains and losses resulting from changes in both market value and foreign exchange on investments classified as fair
value through profit or loss are recognised in the consolidated income statement in the period in which they occur. The
gains and losses include investment income received such as interest payments and dividend income. Dividend income
is recognised when the right to receive payment is established.
Interest income on financial instruments measured at amortised cost is separately recognised in the consolidated
income statement using the effective interest rate method. The effective interest rate method allocates interest and
other finance costs at a constant rate over the expected life of the financial instrument, or where appropriate a shorter
period, by using as the interest rate the rate that exactly discounts the future cash receipts over the expected life to the
net carrying value of the instrument.
Other income includes income related to vacant property.
2021 2020
1
Notes £m £m
Fair value movements and dividend income on significant listed investments
Fair value movements on significant listed investments (other than
dividend income)
(298) 65
Dividend income from significant listed investments
71 –
Total fair value movements and dividend income on significant listed
investments
(227) 65
Non-unit linked business – excluding significant listed investments
Net gains on financial instruments at fair value through profit or loss 20 40
Interest and similar income from financial instruments at amortised cost 10 19
Foreign exchange losses on financial instruments at amortised cost
(1) (10)
Other income
8 20
Insurance contract premium income 30 – 3
Net gains on financial instruments and other income from continuing operations
– non-unit linked business – excluding significant listed investments
37 72
Unit linked business
Net gains on financial instruments at fair value through profit or loss
Net gains on financial assets at fair value through profit or loss
174
48
Change in non-participating investment contract financial liabilities
(124) (56)
Change in liability for third party interests in consolidated funds
(43) 3
Total net gains on financial instruments at fair value through profit or loss
7
(5)
Foreign exchange losses on financial instruments at amortised cost – 1
Other income – 2
Insurance contract premium income 30
– 28
Insurance contract claims and change in liabilities
– (17)
Net gains on financial instruments and other income from continuing operations
– unit linked business
2
24
7 9
Total other net gains on financial instruments and other income from continuing
operations
44 81
Total net gains on financial instruments and other income from continuing
operations
(183) 146
1. The Group has made changes to the presentation of the consolidated income statement in 2021. Refer Section (a)(iii) of the Basis of Preparation for further
details.
2. In addition to the Net gains on financial instruments and other income from continuing operations – unit linked business of £7m (2020: £9m), there are
administrative expenses and policyholder tax of £3m (2020: £5m) and £4m (2020: £4m) respectively relating to unit linked business for the account of
policyholders so the result attributable to unit linked business for the year is £nil (2020: £nil). Refer Note 24 for further details.
Fair value movements on significant listed investments (other than dividend income) of losses of £298m (2020: gains of
£65m) comprises losses of £52m relating to HDFC Life (2020: gains of £65m), losses of £164m relating to HDFC Asset
Management (2020: £nil) and losses of £82m relating to Phoenix (2020: £nil).
Dividend income from significant listed investments of £71m (2020: £nil) comprises £69m (2020: £nil) relating to Phoenix
and £2m (2020: £nil) relating to HDFC Life.
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5. Administrative and other expenses
2021 2020
1
Notes £m £m
Restructuring and corporate transaction expenses
2
8 259 316
Impairment of goodwill – asset management 14 – 915
Amortisation and impairment of other intangibles acquired in business
combinations and through the purchase of customer contracts
Impairment of other intangibles acquired in business combinations 14
– 135
Amortisation of intangibles acquired in business combinations 14
87 111
Amortisation of intangibles acquired through the purchase of customer
contracts
14
12 19
Total Amortisation and impairment of other intangibles acquired in business
combinations and through the purchase of customer contracts
99 265
Staff costs and other employee-related costs 6 604 625
Other administrative expenses
2,3
594 595
Total administrative and other expenses from continuing operations
4
1,556 2,716
1. The Group has made changes to the presentation of the consolidated income statement in 2021. Refer Section (a)(iii) of the Basis of Preparation for further
details.
2. For the year ended 31 December 2020, £19m of expenses previously presented in other administrative expenses have been reclassified as restructuring and
corporate transaction expenses. Refer Section (a)(iii) of the Basis of Preparation for further details.
3. Other administrative expenses includes interest expense of £1m (2020: £2m). In addition, interest expense of £24m (2020: £24m) was incurred in respect of
subordinated liabilities and the related cash flow hedge (refer Note 19) and interest expense of £6m (2020: £6m) in respect of lease liabilities (refer Note 17)
which are included in Finance costs in the consolidated income statement.
4. Total administrative and other expenses includes £3m (2020: £5m) relating to unit linked business. Refer Note 24 for further details.
6. Staff costs and other employee-related costs
The following table shows the staff costs and other employee-related costs aggregated for both continuing and
discontinued operations.
2021 2020
Notes £m £m
The aggregate remuneration payable in respect of employees:
Wages and salaries 469 465
Social security costs 56 55
Pension costs
Defined benefit plans
(17) (19)
Defined contribution plans 53 58
Employee share-based payments and deferred fund awards 43
43 66
Total staff costs and other employee-related costs
604 625
In addition, wages and salaries of £27m (2020: £28m), social security costs of £3m (2020: £4m), pension costs – defined
benefit plans of less than £1m (2020: less than £1m), pension costs – defined contribution plans of £1m (2020: £1m),
employee share-based payments and deferred fund awards relating to transformation and leavers of £16m (2020:
£27m) and termination benefits of £50m (2020: £31m) have been included in restructuring and corporate transaction
expenses. Refer Note 8. A further £53m (2020: £nil) of expenses are included in other cost of sales in relation to amounts
payable to employees and former employees relating to carried interest and performance fee revenue. Refer Note 3.
The following table provides an analysis of the average number of staff employed by the Group during the year.
2021 2020
Investments 1,683 1,809
Adviser 136 118
Personal
626 576
Operations, IT and support functions
3,018 3,526
Total employees
5,463 6,029
Information in respect of Directors’ remuneration is provided in the Directors’ remuneration report on pages 100 to 116.
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FINANCIAL INFORMATION
7. Group financial statements continued
7. Auditors’ remuneration
The following table shows the auditors’ remuneration aggregated for both continuing and discontinued operations.
2021 2020
£m £m
Fees payable to the Company’s auditors for the audit of the Company’s individual and
consolidated financial statements
1.0 1.1
Fees payable to the Company’s auditors for other services
The audit of the Company’s consolidated subsidiaries pursuant to legislation
4.1 4.1
Audit related assurance services 2.0 2.3
Total audit and audit related assurance fees
7.1 7.5
Other assurance services 1.2 0.8
Other non-audit fee services 0.9 –
Total non-audit fees
2.1 0.8
Total auditors’ remuneration 9.2 8.3
Auditors’ remuneration disclosed above excludes audit and non-audit fees payable to the Group’s principal auditor by
Group managed funds which are not controlled by the Group, and therefore not consolidated in the Group’s financial
statements.
During the year ended 31 December 2021 no audit fees were payable in respect of defined benefit plans to the Group’s
principal auditor (2020: £nil).
For more information on non-audit services, refer to the Audit Committee report in Section 3 – Corporate governance
statement.
8. Restructuring and corporate transaction expenses
Total restructuring and corporate transaction expenses incurred from continuing operations during the year were £259m
(2020: £316m). The expenses mainly relate to transformation costs including severance, asset management integration,
separation from Phoenix, and finance and platform transformation. Deal costs relating to acquisitions included in
restructuring and corporate transaction expenses for the year ended 31 December 2021 were £16m (2020: £1m).
The restructuring and corporate transaction expenses of £316m for the year ended 31 December 2020 includes £19m of
expenses previously presented in other administrative expenses. Refer Section (a)(iii) of the Basis of Preparation for further
details.
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9. Taxation
The Group’s tax expense comprises both current tax and deferred tax expense.
Current tax is the expected tax payable on taxable profit for the year and is calculated using tax rates and laws
substantively enacted at the balance sheet date.
A deferred tax asset represents a tax deduction that is expected to arise in a future period. It is only recognised to the
extent that there is expected to be future taxable profit or investment return to offset the tax deduction. A deferred tax
liability represents taxes which will become payable in a future period as a result of a current or prior year transaction.
Where local tax law allows, deferred tax assets and liabilities are netted off on the statement of financial position. The tax
rates used to determine deferred tax are those enacted or substantively enacted at the balance sheet date that are
expected to apply when the deferred tax asset or liability are realised.
Deferred tax is recognised on temporary differences arising from investments in subsidiaries and associates unless the
timing of the reversal is in our control and it is expected that the temporary difference will not reverse in the foreseeable
future.
Current tax and deferred tax is recognised in the consolidated income statement except when it relates to items
recognised in other comprehensive income or directly in equity, in which case it is credited or charged to other
comprehensive income or directly to equity respectively.
The Group operates in a large number of territories and during the normal course of business will be subject to audit or
enquiry by local tax authorities. At any point in time the Group will also be engaged in commercial transactions the tax
outcome of which may be uncertain due to their complexity or uncertain application of tax law. Tax provisions,
therefore, are subjective by their nature and require management judgement based on the interpretation of legislation,
management experience and professional advice. As such, this may result in the Group recognising provisions for
uncertain tax positions. Management will provide for uncertain tax positions where they judge that it is probable there
will be a future outflow of economic benefits from the Group to settle the obligation. In assessing uncertain tax positions
management considers each issue on its own merits using their judgement as to the estimate of the most likely
outcome. When making estimates, management considers all available evidence. This may include forecasts of future
profitability, the frequency and severity of any losses, and statutory carry forward and carry back provisions as well as
management experience of tax attributes expiring without use. Where the final outcome differs from the amount
provided this difference will impact the tax charge in future periods. Management re-assesses provisions at each
reporting date based upon latest available information.
(a) Tax charge in the consolidated income statement
(a)(i) Current year tax expense
2021 2020
£m £m
Current tax:
UK 5 (1)
Overseas
60 55
Adjustment to tax expense in respect of prior years 11 9
Total current tax attributable to continuing operations 76 63
Deferred tax:
Deferred tax expense/(credit) arising from the current year 36 (76)
Adjustment to deferred tax in respect of prior years
8 (2)
Total deferred tax attributable to continuing operations
44 (78)
Total tax expense/(credit) attributable to continuing operations
1
120 (15)
1. The tax expense of £120m (2020: tax credit of £15m) includes a tax expense of £4m (2020: £4m) relating to unit linked business. Refer Note 24 for further
details.
The share of associates’ and joint ventures’ tax credit for the year is £5m (2020: £17m expense) and is included in profit
before tax in the consolidated income statement in Share of profit or loss from associates and joint ventures.
In 2021 unrecognised tax losses from previous years were used to reduce the current tax expense by £15m (2020: £1m).
Unrecognised tax losses and timing differences were used to reduce the deferred tax expense by £nil (2020: £1m).
Current tax recoverable and current tax liabilities at 31 December 2021 were £2m (2020: £9m) and £27m (2020: £15m)
respectively. In addition current tax recoverable and current tax liabilities in relation to unit linked business were £1m (2020:
£1m) and £1m (2020: £1m) respectively. Current tax assets and liabilities at 31 December 2021 and 31 December 2020
are expected to be recoverable or payable in less than 12 months.
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FINANCIAL INFORMATION
7. Group financial statements continued
(a)(ii) Reconciliation of tax expense
2021 2020
£m £m
Profit before tax from continuing operations 1,115 838
Tax at 19% (2020: 19%) 212 159
Remeasurement of deferred tax due to rate changes (24) 9
Permanent differences
(13) (20)
Non-taxable fair value movements on significant listed investments 7 –
Tax effect of accounting for Share of profit or loss from associates and joint
ventures
4 (37)
Impairment losses on intangible assets
– 174
Impairment/(reversal of impairment) of investment in associates and joint
ventures
– 9
Differences in overseas tax rates
(70) (21)
Adjustment to current tax expense in respect of prior years
11 9
Recognition of previously unrecognised tax credit (15) (2)
Deferred tax not recognised
2 7
Adjustment to deferred tax expense in respect of prior years 8 (2)
Non-taxable profit or loss on sale of subsidiaries, associates and significant
listed investments
(5) (303)
Other
3 3
Total tax expense/(credit) from continuing operations for the year
120 (15)
The standard UK Corporation Tax rate for the accounting period is 19%. On 3 March 2021, the UK Government announced
its intention to increase the rate of UK Corporation Tax from 19% to 25% with effect from 1 April 2023. This change was
substantively enacted on 24 May 2021. The effect of this change in the rate of UK Corporation Tax at this date was to
increase the deferred tax assets and deferred tax liabilities in the statement of financial position by £34m and £10m
respectively and reduce the tax expense in the consolidated income statement by £24m.
The accounting for certain items in the consolidated income statement results in certain reconciling items in the table
above, the values of which vary from year to year depending upon the underlying accounting values.
Details of significant reconciling items are as follows:
– Permanent differences in 2021 include non-taxable dividends from significant listed investments and other accounting
items that are not subject to Corporation Tax. Permanent differences also include the difference between the tax basis
and accounting value for employee share-based awards.
– Fair value movements in our investments in HDFC Life and Phoenix are not subject to tax.
– The share of profit or loss from associates and joint ventures is presented net of tax in the consolidated income
statement and therefore gives a reconciling item.
– Certain profits are taxed at rates which differ from the UK Corporation Tax rate. In 2021 the effect of different overseas
tax rates is driven mainly by a non-recurring reconciling item associated with the gain arising on both the sale and
reclassification of shares in our associate HDFC Asset Management. This arose because the Indian rate of tax on long-
term capital gains is less than the UK corporate tax rate.
– The ability to value tax losses and other tax assets also affects the tax charge. We have not recognised a deferred tax
asset of £2m on tax losses arising in the year due to uncertainty as to when these losses will be utilised. In addition, we
have utilised £15m of previously unrecognised deferred tax assets to offset against taxable profits arising in the year.
– Non-taxable profit or loss on disposal of subsidiaries, associates and significant listed investments includes the impact of
the taxable gains arising on the disposals of our Nordic and Parmenion businesses being less than the accounting gains.
Furthermore, the partial disposal of the Group’s significant listed investment in HDFC Life is not subject to tax.
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(b) Tax relating to components of other comprehensive income
Tax relating to components of other comprehensive income is as follows:
2021 2020
£m £m
Tax relating to defined benefit pension plan deficits (3) (2)
Equity holder tax effect relating to items that will not be reclassified subsequently to profit
or loss
(3) (2)
Tax relating to fair value gains and losses recognised on cash flow hedges
6
(1)
Tax relating to cash flow hedge gains and losses transferred to consolidated income
statement
(3) 3
Equity holder tax effect relating to items that may be reclassified subsequently to profit or
loss
3 2
Tax relating to other comprehensive income from continuing operations – –
All of the amounts presented above are in respect of equity holders of abrdn plc.
(c) Deferred tax assets and liabilities
(c)(i) Movements in net deferred tax asset/(liability)
2021 2020
£m £m
Net deferred tax asset/(liability) at 1 January 65 (13)
Acquired through business combinations (19) –
Amounts (expensed)/credited to the consolidated income statement (44) 78
Tax on defined benefit pension plan deficits
3 2
Tax on cash flow hedge
(3) (2)
Other 1 –
Net deferred tax asset at 31 December
3 65
(c)(ii) Analysis of recognised deferred tax
2021 2020
£m £m
Deferred tax assets comprise:
Losses carried forward 129 89
Depreciable assets 25 12
Employee benefits
30 28
Provisions and other temporary timing differences
4 2
Gross deferred tax assets
188 131
Less: Offset against deferred tax liabilities (20) –
Deferred tax assets 168 131
Deferred tax liabilities comprise:
Unrealised gains on investments 104 4
Deferred tax on intangible assets acquired through business combinations 72 52
Other
9 10
Gross deferred tax liabilities
185 66
Less: Offset against deferred tax assets (20) –
Deferred tax liabilities 165 66
Net deferred tax asset at 31 December 3 65
A deferred tax asset of £129m (2020: £89m) for the Group has been recognised in respect of losses of various subsidiaries.
Deferred tax assets are recognised to the extent that it is probable that the losses will be capable of being offset against
taxable profits and gains in future periods. The value attributed to them takes into account the certainty or otherwise of
their recoverability. Their recoverability is measured against the reversal of deferred tax liabilities and anticipated taxable
profits and gains based on business plans. The deferred tax asset recognised on losses relates to UK entities where there is
currently no restriction on the period of time over which losses can be utilised. Recognition of this deferred tax asset
requires that management must consider if it is more likely than not that this asset will be recoverable in future periods
against future profits arising in the UK. In making this assessment management have considered future operating plans
and forecast taxable profits and are satisfied that, following completion of transformation activities, forecast taxable profits
will be sufficient to enable recovery of the UK tax losses. Based upon the level of forecast taxable profits management do
not consider there is significant risk of a material adjustment to the carrying amount of the deferred tax asset on UK tax
losses within the next financial year. Management expect the deferred tax asset to be utilised over a period of between 4
167abrdn.comAnnual report 2021
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7. Group financial statements continued
and 6 years. No reasonably possible change in any of the key assumptions would result in a significant reduction in
projected taxable profits such that the recognised tax asset would not be recognised. The increase in this deferred tax
asset in 2021 primarily reflects the enacted increase in the future UK tax rate from 19% to 25%.
Deferred tax liabilities relating to unrealised gains on investments of £104m include £92m (2020: £nil) relating to our
investment in HDFC Asset Management following the reclassification of this holding from an associate during 2021.
Deferred tax assets and liabilities are expected to be recovered or settled after more than 12 months.
(d) Unrecognised deferred tax
Due to uncertainty regarding recoverability, deferred tax assets have not been recognised in respect of the following:
– Cumulative losses carried forward of £78m in the UK and cumulative losses and other temporary differences of £361m
overseas (2020: £80m, £287m respectively).
Of these unrecognised deferred tax assets, certain losses have expiry dates as follows:
– US losses of £104m with expiry dates between 2027-2037 (2020: £164m).
– Other overseas losses of £43m with expiry dates between 2022-2036 (2020: £48m).
10. Discontinued operations
The Group classifies as discontinued operations areas of business which have been disposed of or are classified as held
for sale at the year end and which either, represent a separate major line of business or geographical area, or are part
of a plan to dispose of one. The results of discontinued operations are shown separately on the face of the consolidated
income statement from the results of the remaining (continuing) parts of the Group’s business.
The consolidated income statement profit or loss, other comprehensive income and cash flows from discontinued
operations relate solely to the UK and European insurance business which was sold in 2018 to Phoenix. For the year ended
31 December 2021, the profit from discontinued operations was £nil. For the year ended 31 December 2020, the loss from
discontinued operations was £15m which reflected changes in the value of contingent consideration relating to the sale
including the impact of the resolution of certain legacy issues with Phoenix, refer Note 1(c)(iii). For the year ended
31 December 2021, net cash flows from discontinued operations of £34m (2020: (£42m)) are included in net cash flows
from investing activities. There was no other comprehensive income from discontinued operations for the year ended
31 December 2021 (2020: £nil).
168 abrdn.com Annual report 2021
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11. Earnings per share
Basic earnings per share is calculated by dividing profit attributable to ordinary equity holders by the weighted average
number of ordinary shares in issue during the year excluding shares owned by the employee trusts that have not vested
unconditionally to employees.
Diluted earnings per share is calculated by adjusting the weighted average number of ordinary shares in issue during the
year to assume the conversion of all dilutive potential ordinary shares, such as share options granted to employees.
Adjusted earnings per share is calculated on adjusted profit after tax attributable to ordinary equity holders of the
Company i.e. adjusted profit net of dividends paid on preference shares.
Basic earnings per share was 46.8p (2020: 37.8p) and diluted earnings per share was 46.0p (2020: 37.2p) for the year
ended 31 December 2021. The following table shows details of basic, diluted and adjusted earnings per share.
2021
2020
restated
1
£m £m
Adjusted profit before tax 323 240
Tax on adjusted profit (26) (38)
Adjusted profit after tax
297 202
Adjusted profit after tax attributable to non-controlling interests (ordinary shares) (1) –
Dividend paid on preference shares – (5)
Adjusted profit after tax attributable to equity shareholders of abrdn plc
296 197
Total adjusting items including results of associates and joint ventures 792 598
Tax on adjusting items (94) 53
Profit attributable to equity shareholders of abrdn plc from continuing operations
994 848
Loss for the year from discontinued operations – (15)
Profit attributable to equity shareholders of abrdn plc 994 833
1. Comparatives for the year ended 31 December 2020 have been restated in relation to changes to the Group’s reportable segments and the change to the
Group’s key alternative performance measure. Refer Notes 2 and 12 for further details.
2021 2020
Millions Millions
Weighted average number of ordinary shares outstanding 2,123 2,202
Dilutive effect of share options and awards 36 37
Weighted average number of diluted ordinary shares outstanding
2,159 2,239
‘
2021
2020
Restated
2
Continuing
operations
Discontinued
operations
Total
Continuing
operations
Discontinued
operations
Total
Pence Pence Pence Pence Pence Pence
Basic earnings per share 46.8 – 46.8 38.5 (0.7) 37.8
Diluted earnings per share 46.0 – 46.0 37.9 (0.7) 37.2
Adjusted earnings per share 13.9 – 13.9 8.9 – 8.9
Adjusted diluted earnings per share 13.7 – 13.7 8.8 – 8.8
2. Comparatives for adjusted earnings per share and adjusted diluted earnings per share for the year ended 31 December 2020 have been restated in relation
to the change to the Group’s key alternative performance measure. Refer Note 12 for further details.
169abrdn.comAnnual report 2021
FINANCIAL INFORMATION
7. Group financial statements continued
12. Adjusted profit and adjusting items
Adjusted profit excludes the impact of the following items:
– Restructuring costs and corporate transaction expenses. Restructuring includes the impact of major regulatory
change.
– Amortisation and impairment of intangible assets acquired in business combinations and through the purchase of
customer contracts.
– Profit or loss arising on the disposal of a subsidiary, joint venture or equity accounted associate.
– Change in fair value of/dividends from significant listed investments (see (b) below).
– Share of profit or loss from associates and joint ventures.
– Impairment loss/reversal of impairment loss recognised on investments in associates and joint ventures accounted
for using the equity method.
– Fair value movements in contingent consideration.
– Items which are one-off and, due to their size or nature, are not indicative of the long-term operating performance of
the Group.
The tax charge or credit allocated to adjusting items is based on the tax treatment of each adjusting item.
The operating, investing and financing cash flows presented in the consolidated statement of cash flows are for both
adjusting and non-adjusting items.
(a) Changes to the Group’s adjusted profit
The Group has changed the definition of adjusted profit in 2021.
Previously adjusted profit included the pre-tax adjusted results from the Group’s associates and joint ventures accounted
for using the equity method. Adjusting items previously also included adjusting items such as restructuring costs in relation
to the results from the Group’s associates and joint ventures.
The reason for the change is to make the results more understandable, following the reclassification of HDFC Life and
Phoenix from associates to equity investments.
Comparative information on adjusted profit for the year ended 31 December 2020 has been prepared on the same basis
as the year ended 31 December 2021 to allow more meaningful comparison.
A reconciliation to previously reported information is included in Section 9, Supplementary information.
(b) Significant listed investments
Following the reclassification of HDFC Life, Phoenix and HDFC Asset Management from associates to equity securities, fair
value movements on these investments are included as adjusting items. Excluding fair value movements on significant
listed investments for the purpose of adjusted profit is aligned with our treatment of gains on disposal for these holdings
when they were classified as associates.
Dividends from significant listed investments are also included as adjusting items, as such dividends result in fair value
movements.
In addition to fair value movements, the other changes to the Group’s significant listed investments in the year ended
31 December 2021 were as follows:
– The reclassification of Phoenix and HDFC Asset Management (refer Note 1(c)(iii) for further details).
– The Group’s holding in HDFC Life reduced by 4.99% to 3.89% following the sale of 100,845,104 equity shares in HDFC Life
through a Bulk Sale on 29 June 2021. The total consideration net of taxes and expenses was £653m.
(c) Other
Other adjusting items for the year ended 31 December 2021 includes a net release of deferred income of £25m, refer Note
34. Other adjusting items for the year ended 31 December 2021 also included £8m for initial gains on derecognition of
right-of-use assets relating to subleases classified as finance leases (2020: £2m) and a loss of £3m (2020: gain of £5m) for
net fair value movements in contingent consideration relating to continuing operations.
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13. Dividends on ordinary shares
Dividends are distributions of profit to holders of abrdn plc’s share capital and as a result are recognised as a deduction in
equity. Final dividends are announced with the Annual report and accounts and are recognised when they have been
approved by shareholders. Interim dividends are announced with the Half year results and are recognised when they
are paid.
2021 2020
Pence per share £m
1
Pence per share £m
Prior year’s final dividend paid 7.30 154 14.30 320
Interim dividend paid 7.30 154 7.30 159
Total dividends paid on ordinary shares
308 479
Current year final recommended dividend 7.30 155 7.30 154
1. Estimated for current year final recommended dividend.
The final recommended dividend will be paid on 24 May 2022 to shareholders on the Company’s register as at 8 April 2022,
subject to approval at the 2022 Annual General Meeting. After the current year final recommended dividend, the total
dividend in respect of the year ended 31 December 2021 is 14.60p (2020: 14.60p).
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FINANCIAL INFORMATION
7. Group financial statements continued
14. Intangible assets
Goodwill is created when the Group acquires a business and the consideration exceeds the fair value of the net assets
acquired. In determining the net assets acquired in business combinations, intangible assets are recognised where they
are separable or arise from contractual or legal rights. Intangible assets acquired by the Group through business
combinations consist mainly of customer relationships and investment management contracts, technology and brands.
Any remaining value that cannot be identified as a separate intangible asset on acquisition forms part of goodwill.
In addition to intangible assets acquired through business combinations, the Group recognises as intangible assets
software which has been developed internally and other purchased technology which is used in managing and
executing our business. Costs to develop software internally are capitalised after the research phase and when it has
been established that the project is technically feasible and the Group has both the intention and ability to use the
completed asset.
Intangible assets are recognised at cost and amortisation is charged to the income statement over the length of time
the Group expects to derive benefits from the asset. The allocation of the income statement charge to each reporting
period is dependent on the expected pattern over which future benefits are expected to be derived. Where this pattern
cannot be determined reliably the charge is allocated on a straight-line basis.
Goodwill is not charged to the income statement unless it becomes impaired.
The Group also recognises the cost of obtaining customer contracts (refer Note 3) as an intangible asset. These costs
primarily relate to the cost of acquiring existing investment management contracts from other asset managers and
commission costs for initial investors into new closed end funds where these are borne by the Group. For the cost of
obtaining customer contracts, the intangible asset is amortised on the same basis as the transfer to the customer of the
services to which the intangible asset relates.
Acquired through business combinations
Goodwill Brand
Customer
relationships
and
investment
management
contracts Technology
Internally
developed
software
1
Purchased
software
and other
Cost of
obtaining
customer
contracts Total
£m £m £m £m £m £m £m £m
Gross amount
At 1 January 2020 3,475 93 1,031 67 131 3 96 4,896
Reclassified as held for sale during the year – – – (3) (2) – – (5)
Additions
– – – – 2 2 8 12
At 31 December 2020
3,475 93 1,031 64 131 5 104 4,903
Disposals and adjustments – – (15) – – – – (15)
Additions 246 1 72 5 – – – 324
At 31 December 2021
3,721 94 1,088 69 131 5 104 5,212
Accumulated amortisation and impairment
At 1 January 2020 (2,475) (45) (497) (55) (80) (1) (36) (3,189)
Reclassified as held for sale during the year
– – – 2 1 – – 3
Amortisation charge for the year
2
– (18) (86) (7) (21) (1) (19) (152)
Impairment losses recognised
3
(915) – (134) (1) (14) – – (1,064)
At 31 December 2020 (3,390) (63) (717) (61) (114) (2) (55) (4,402)
Disposals and adjustments – – 10 (2) 2
–
– 10
Amortisation charge for the year
2
– (19) (67) (1) (7) (2) (12) (108)
Impairment losses recognised
3
– – – – (8) – – (8)
At 31 December 2021
(3,390) (82) (774) (64) (127) (4) (67) (4,508)
Carrying amount
At 1 January 2020 1,000 48 534 12 51 2 60 1,707
At 31 December 2020 85 30 314 3 17 3 49 501
At 31 December 2021
331 12 314 5 4 1 37 704
1. Included in the internally developed software of £4m (2020: £17m) is £nil (2020: £8m) relating to intangible assets not yet ready for use.
2. For the year ended 31 December 2021, £99m (2020: £130m) of the amortisation charge is recognised in Amortisation and impairment of other intangibles
acquired in business combinations and through the purchase of customer contracts with £9m (2020: £22m) recognised in Other administrative expenses.
3. For the year ended 31 December 2021, £nil (2020: £135m) of impairment is recognised in Amortisation and impairment of other intangibles acquired in
business combinations and through the purchase of customer contracts with £8m (2020: £14m) recognised in Restructuring and corporate transaction
expenses. For the year ended 31 December 2020, the impairment losses of £915m relating to asset management goodwill were presented separately in the
consolidated income statement.
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At 31 December 2021, there was £167m (2020: £nil) of goodwill attributable to the asset management group of cash-
generating units and £72m (2020: £nil) of goodwill attributable to the Finimize cash-generating unit, both in the Investments
segment. Refer Note 1(b)(i) for further details on the acquisitions of Tritax and Finimize. The remaining goodwill of £92m
(2020: £85m) is attributable to a number of smaller cash-generating units in the Personal segment.
Both the Investments and Personal segments were formerly part of the Asset management, platforms and wealth
segment.
Tritax investment management contract intangible assets
On acquisition of Tritax, £71m of customer relationships and investment management contracts intangibles were
recognised. These assets primarily relate to Tritax’s investment management contracts with Tritax Big Box REIT plc and
Tritax Euro Box plc which are listed closed-end real estate funds. The description of the individually material intangible asset
including the estimated useful life at the acquisition date of 1 April 2021 was as follows:
Investment management
contract intangible asset
Description
Useful life at
acquisition date
Fair value on
acquisition date
Carrying
value
2021
Carrying
value
2020
£m £m £m
Tritax Big Box REIT plc
Investment management contract with Tritax
Big Box REIT plc
13 years 50 47 N/A
The key assumptions, other than the useful life, in measuring the fair value of the investment contract intangible assets at
acquisition date were as follows:
– Revenue growth – this assumption was based on the fund growth (from markets and investment performance)
included in the Tritax business plan as adjusted for the impact of fund raisings which commenced prior to the acquisition
date. Management fee rates are assumed to stay in line with current rates.
– Operating margin – this assumption was based on the current operating margins adjusted for expected cost synergies.
– Discount rate – this assumption was based on a market participant weighted average cost of capital.
As the investment management contracts relate to closed-end funds, the straight-line method of amortisation is
considered appropriate for these intangibles. There has been no change to the useful lives and therefore the residual useful
life of these investment management contract intangible assets is 12.25 years.
Aberdeen Asset Management PLC (AAM PLC) intangibles
On the acquisition of AAM PLC in 2017, we identified intangible assets in relation to customer relationships, brand and
technology as being separable from goodwill. Identification and valuation of intangible assets acquired in business
combinations is a key judgement.
The customer relationships acquired through AAM PLC were grouped where the customer groups have similar economic
characteristics and similar useful economic lives. This gave rise to three separate intangible assets which we termed Lloyds
Banking Group, Open ended funds, and Segregated and similar.
In relation to the Open ended funds we considered that it was most appropriate to recognise an intangible asset relating to
customer relationships between AAM PLC and open ended fund customers, rather than an intangible asset relating to
investment management agreements between AAM PLC and AAM PLC’s open ended funds. Our judgement was that the
value associated with the open ended fund assets under management was predominantly derived from the underlying
customer relationships, taking into account that a significant proportion of these assets under management are from
institutional clients.
The intangible asset for Lloyds Banking Group had a carrying value of £nil at the end of 2019. The description of the
remaining two separate intangible assets including their estimated useful life at the acquisition date of 14 August 2017 was
as follows:
Customer relationship
intangible asset Description
Useful life at
acquisition date
Fair value on
acquisition date
Carrying
value
2021
Carrying
value
2020
£m £m £m
Open ended funds
Separate vehicle group – open ended
investment vehicles
11 years 223 62 87
Segregated and
similar
All other vehicle groups dominated by
segregated mandates which represent 75% of
this group
12 years 427
83 107
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7. Group financial statements continued
Measuring the fair value of intangible assets acquired in business combinations required further assumptions and
judgements. Customer relationships were valued using discounted cash flow projections. The key assumptions in
measuring the fair value of the customer relationships at the acquisition date were as follows:
– Net attrition – net attrition represents the expected rate of outflows of assets under management net of inflows from
existing customers. This assumption was primarily based on recent experience.
– Market growth – a market growth adjustment was applied based on the asset class.
– Operating margin – this assumption was consistent with forecast margins and included the impact of synergies that
would be expected by any market participant and impacted the Aberdeen customer relationship cash flows.
– Discount rate – this assumption was based on the internal rate of return (IRR) of the transaction and is consistent with a
market participant discount rate.
The above assumptions, and in particular the net attrition assumption, were also used to determine the useful economic life
at the acquisition date of each asset used for amortisation. The reducing balance method of amortisation is considered
appropriate for these intangibles, consistent with the attrition pattern on customer relationships which means that the
economic benefits delivered from the existing customer base will reduce disproportionately over time.
There has been no change to the useful lives of the Open ended funds and Segregated and similar customer relationship
intangible assets. Therefore the residual useful life of the Open ended funds customer relationship intangible asset is 6.6
years and the residual life of the Segregated and similar customer relationship intangible asset is 7.6 years.
174 abrdn.com Annual report 2021
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Estimates and assumptions
The key estimates and assumptions in relation to intangible assets are:
– Determination of the recoverable amount of goodwill and customer intangibles.
– Determination of useful lives.
The determination of the recoverable amount of asset management goodwill was a significant judgement in relation to
the 2020 accounts. However, as the Group’s asset management goodwill was fully impaired at 30 June 2020, this is no
longer a source of estimation uncertainty at the end of the reporting period.
Similarly, the determination of the recoverable amount of the segregated and similar customer relationship intangible
was an area of estimation uncertainty at 30 June 2020 (at which point it was impaired) and 31 December 2020.
However as a result of amortisation and market movements this was not considered a source of estimation uncertainty
at 31 December 2021 with a significant risk of resulting in material adjustment to the carrying amount in the next
financial year.
Determination of the recoverable amount of goodwill and customer intangibles
For all intangible assets including goodwill, an assessment is made at each reporting date as to whether there is an
indication that the goodwill or intangible asset has become impaired. If any indication of impairment exists then the
recoverable amount of the asset is determined. In addition, the recoverable amount for goodwill must be assessed
annually.
The recoverable amounts are defined as the higher of fair value less costs of disposal (FVLCD) and the value in use (VIU)
where the value in use is based on the present value of future cash flows. Where the carrying value exceeds the
recoverable amount then the carrying value is written down to the recoverable amount.
In assessing value in use, expected future cash flows are discounted to their present value using a pre-tax discount rate.
Judgement is required in assessing both the expected cash flows and an appropriate discount rate which is based on
current market assessments of the time value of money and the risks associated with the asset.
Goodwill
No impairments of goodwill were recognised in 2021.
Goodwill of £167m (2020: £nil) is allocated to the asset management group of cash-generating units which comprises
the Investments segment (excluding Finimize). The recoverable amount of this group of cash-generating units was
determined based on value in use. Cash flows were based on the three year financial budgets approved by
management. The key assumptions used by management in setting the three-year profit forecasts are:
– Revenue in the management forecasts reflects past experience and modelling based on assets under management
and fee revenue yields by asset class.
– Assets under management is modelled from future net flow assumptions and market movements. Net flow
assumptions take into account past experience, the withdrawal of residual LBG assets, and assume institutional and
wholesale flows move to a net inflow position. Market assumptions assume equity market growth over the plan
period.
– Expenses in the management forecasts were based on past experience. Where expense savings relating to staff and
property require provisions to be made in future years, these expense savings (and the related implementation costs)
have, for the purposes of the VIU calculation, been added back to management’s expectation of the future operating
expenses.
The value in use used a pre-tax discount rate of 14.3%. This is based on the Group/peer companies cost of equity
adjusted for forecasting risk. A terminal growth rate of 2% was used based on long-term inflation. No reasonably
possible change in a key assumption would cause the carrying amount to exceed the value in use.
In 2020, an impairment of £915m was recognised at 30 June 2020 relating to an impairment of asset management
goodwill, the group of cash-generating units for which was our asset management business excluding HDFC Asset
Management and Virgin Money UTM. The recoverable amount of this group of cash-generating units at 30 June 2020
was £1,654m, which is based on FVLCD. The impairment resulted from the impact on reported revenue and future
revenue projections of global equity market falls and a shift in asset mix towards lower margin assets. Both the fall in
equity markets and the shift in asset mix were global market impacts primarily resulting from COVID-19. Additional
projections were prepared to take into account these COVID-19 impacts, and uncertainties over future financial
markets, and these projections were a key input to the impairment review process. This asset management goodwill
was fully impaired at 30 June 2020 and 31 December 2020.
Goodwill of £72m (2020: £nil) is allocated to the Finimize cash-generating unit in the Investments segment. The
recoverable amount of this cash-generating unit was determined based on fair value less costs of disposal (FVLCD). The
FVLCD considered a number of valuation approaches, with the primary approach being a revenue multiple approach.
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7. Group financial statements continued
This is a level 3 measurement as it is measured using inputs which are not based on observable market data. The
assumptions used in determining the revenue multiple valuation were future revenue projections which were based on
the model used in the acquisition process and assumed a continued level of future revenue growth, and market
multiples for precedent private transactions. The recoverable amount exceeds the carrying amount of the cash-
generating unit by £10m. The key assumption relates to future revenue growth. The acquisition model assumes revenue
growth of CAGR (compound annual growth rate) of c90% over the period to 2025. A revenue CAGR of c85%, which we
consider a reasonably possible change in this key assumption, would reduce the recoverable amount to the carrying
amount.
Goodwill of £92m is attributable to a number of smaller cash-generating units in the Personal segment (which was
formerly part of the Asset management, platforms and wealth segment). No goodwill amounts are significant in
comparison to the total carrying amount of goodwill and the recoverable amounts are not based on the same key
assumptions.
Customer relationship and investment management contract intangibles
No impairments of customer intangibles were recognised in 2021. At 31 December 2021, there was no indication that
any of the Group’s customer relationship and investment management contract intangibles were impaired.
In 2020, an impairment of £134m was recognised at 30 June 2020 relating to the Segregated and similar customer
relationship intangible asset which was recognised on the acquisition of AAM PLC. The Segregated and similar customer
relationship intangible asset is included in the Investments segment. The recoverable amount of this asset at 30 June
2020 was £119m which was its VIU calculated using a pre-tax discount rate of 14.8%. The impairment resulted from the
impact of markets, net outflows and a fall in revenue yield on future earnings expectations. At 31 December 2021, there
is no indication that the Segregated and similar customer relationship intangible asset has become further impaired.
There was also no indication of further impairment at 31 December 2020.
Determination of useful lives
The determination of useful lives requires judgement in respect of the length of time that the Group expects to derive
benefits from the asset and considers for example expected duration of customer relationships and when technology is
expected to become obsolete for technology based assets. The amortisation period and method for each of the
Group’s intangible asset categories is as follows:
– Customer relationships acquired through business combinations – generally between 7 and 12 years, generally
reducing balance method.
– Investment management contracts acquired through business combinations – between 10 and 17 years,
straight-line.
– Brand acquired through business combinations – between 2 and 5 years, straight-line.
– Technology acquired through business combinations – between 3 and 6 years, straight-line.
– Internally developed software – between 2 and 6 years. Amortisation is on a straight-line basis and commences once
the asset is available for use.
– Purchased software – between 2 and 6 years, straight-line.
– Costs of obtaining customer contracts – between 3 and 12 years, generally reducing balance method.
Internally developed software
In 2021, an impairment of internally developed software of £8m (2020: £14m) was recognised. The impairment in 2021
primarily related to an impairment of a digital advice application in the Personal segment as a result of a reduction in
expected future cash flows. The impairment in 2020 related to software made obsolete as a result of the development
of the new investment platform in the Investments segment.
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15. Investments in associates and joint ventures
Associates are entities where the Group can significantly influence decisions made relating to the financial and
operating policies of the entity but does not control the entity. For entities where voting rights exist, significant influence is
presumed where the Group holds between 20% and 50% of the voting rights. Where the Group holds less than 20% of
voting rights, consideration is given to other indicators and entities are classified as associates where it is judged that
these other indicators result in significant influence.
Joint ventures are strategic investments where the Group has agreed to share control of an entity’s financial and
operating policies through a shareholders’ agreement and decisions can only be taken with unanimous consent.
Associates, other than those accounted for at fair value through profit or loss, and joint ventures are accounted for using
the equity method from the date that significant influence or shared control, respectively, commences until the date this
ceases with consistent accounting policies applied throughout.
Under the equity method, investments in associates and joint ventures are initially recognised at cost. When an interest is
acquired at fair value from a third party, the value of the Group’s share of the investee’s identifiable assets and liabilities is
determined applying the same valuation criteria as for a business combination at the acquisition date. This is compared
to the cost of the investment in the investee. Where cost is higher the difference is identified as goodwill and the investee
is initially recognised at cost which includes this component of goodwill. Where cost is lower a bargain purchase has
arisen and the investee is initially recognised at the Group’s share of the investee’s identifiable assets and liabilities unless
the recoverable amount for the purpose of assessing impairment is lower, in which case the investee is initially
recognised at the recoverable amount.
Subsequently the carrying value is adjusted for the Group’s share of post-acquisition profit or loss and other
comprehensive income of the associate or joint venture, which are recognised in the consolidated income statement
and other comprehensive income respectively. The Group’s share of post-acquisition profit or loss includes amortisation
charges based on the valuation exercise at acquisition. The carrying value is also adjusted for any impairment losses.
On partial disposal of an associate, a gain or loss is recognised based on the difference between the proceeds received
and the equity accounted value of the portion disposed of. Indicators of significant influence are reassessed based on
the remaining voting rights. Where significant influence is judged to have been lost, the investment in associate is
reclassified to interests in equity securities and pooled investment funds measured at fair value. If an entity is reclassified,
the difference between the fair value and the remaining equity accounted value is accounted for as a reclassification
gain or loss on disposal.
Where the Group has an investment in an associate, a portion of which is held by, or is held indirectly through, a mutual
fund, unit trust or similar entity, including investment-linked insurance funds, that portion of the investment is measured at
FVTPL. In general, investment vehicles which are not subsidiaries are considered to be associates where the Group holds
more than 20% of the voting rights.
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FINANCIAL INFORMATION
7. Group financial statements continued
The level of future dividend payments and other transfers of funds to the Group from associates and joint ventures
accounted for using the equity method could be restricted by the regulatory solvency and capital requirements of the
associate or joint venture, certain local laws or foreign currency transaction restrictions.
(a) Investments in associates and joint ventures accounted for using the equity method
2021 2020
Associates Joint ventures Total Associates Joint ventures Total
£m £m £m £m £m £m
At 1 January 1,134 237 1,371 1,257 252 1,509
Exchange translation adjustments – 7 7 (11) 8 (3)
Additions
– 11 11 – 5 5
Disposals
(29) – (29) (102) – (102)
Profit/(loss) after tax
(35) 13 (22) 177 17 194
Other comprehensive income 12 (4) 8 – – –
Dilution gains
– – – 4 – 4
Impairment
– – – – (45) (45)
Distributions of profit
(15) – (15) (80) – (80)
Reclassified to equity securities and interests in pooled
investments funds
(1,057) – (1,057) (111) – (111)
At 31 December
10 264 274 1,134 237 1,371
The following joint venture is considered to be material to the Group as at 31 December 2021.
Name Nature of relationship
Principal place of
business Measurement method
Interest held by
the Group at 31
December 2021
Interest held by
the Group at 31
December 2020
Heng An Standard Life Insurance
Company Limited (HASL)
Joint venture China
Equity
accounted
50.00% 50.00%
The country of incorporation or registration is the same as the principal place of business. The interest held by the Group is
the same as the proportion of voting rights held. HASL is not listed.
The Group’s investment in the following companies were considered to be material associates at 31 December 2020 but
were reclassified to equity securities and interest in pooled investment funds during 2021. Refer Section (b) below for
further details.
Name Nature of relationship
Principal place of
business
Measurement method
Interest held by
the Group at 31
December 2020
Fair value of interest
held by the Group at
31 December 2020
HDFC Asset Management Company
Limited (HDFC Asset Management)
Associate India
Equity
accounted
21.24% 1,321
Phoenix Group Holdings plc (Phoenix) Associate United Kingdom
Equity
accounted
14.42% 1,010
The country of incorporation or registration is the same as their principal place of business. The interest held by the Group
was the same as the proportion of voting rights held. These companies are both listed.
(b) Investments in associates accounted for using the equity method
The Group has no material associates at 31 December 2021. The table below provides summarised financial information
for those associates which were considered to be material to the Group at 31 December 2020. The summarised financial
information reflects the amounts presented in the financial statements or management accounts of the relevant
associates amended to reflect adjustments made when using the equity method, including fair value adjustments on
acquisition and not the Group’s share of those amounts.
178 abrdn.com Annual report 2021
N
2020
Phoenix
1
HDFC Asset Management
1
£m £m
Summarised financial information of associate:
Revenue
4,704 220
Profit after tax (all from continuing operations)
690 132
Other comprehensive income 25 –
Total comprehensive income 715 132
Total assets
2
334,193 474
Total liabilities
2
326,441 28
Net assets
7,752 446
Attributable to NCI and other equity holders 835 –
Attributable to investee’s shareholder 6,917 446
Interest held 14.42% 21.24%
Share of net assets 998 95
2021 2020
Phoenix
1
HDFC Asset
Management
1
Other
4
Total Phoenix
HDFC Asset
Management
Other
3,4
Total
£m £m £m £m £m £m £m £m
Carrying value of associates
accounted for using the equity
method
–
–
10 10 1,008 116 10 1,134
Dividends received
3
– 15 – 15 67 13 – 80
Share of profit/(loss) after tax
3
(56)
21 –
(35) 110 48 19 177
1. As noted above, the Group’s investment in Phoenix and HDFC Asset Management were reclassified to equity securities and interests in pooled investment
funds in 2021 so were not material associates at 31 December 2021 (refer below for further details of the reclassification).
2. As a liquidity presentation is used by insurance companies when presenting their statement of financial position, an analysis of total assets and total liabilities
between current and non-current was not provided for Phoenix. The majority of HDFC Asset Management’s assets and liabilities were current.
3. For the year ended 31 December 2020 the share of profit/(loss) after tax of £19m for Other relates to HDFC Life for the period from 1 January 2020 to
3 December 2020 prior to its reclassification to equity securities and interests in pooled funds (refer below for further details of the reclassification).
4. For the years ended 31 December 2021 and 2020, the carrying value of associates accounted for using the equity method for Other primarily relates to the
Group’s interest in Tenet Group Limited.
HDFC Asset Management
HDFC Asset Management manages a range of mutual funds and provides portfolio management and advisory services.
The investment in HDFC Asset Management allows the Group to benefit from an investment in a leading asset manager in
India, one of the world’s fastest growing markets.
On 29 September 2021 the Group reduced its interest in HDFC Asset Management to 16.22% (2020: 21.24%). Refer Note
1(c)(iii) for further details of the sale.
Following the sale, HDFC Asset Management is no longer considered to be an associate of the Group and the Group’s
interest in HDFC Asset Management was reclassified from an investment in associates accounted for using the equity
method to equity securities and interests in pooled investment funds measured at fair value on 29 September 2021. The
sale reduced the Group’s interest in HDFC Asset Management below 20%, which is the threshold where significant
influence is presumed. While the Group does retain board representation, there are no significant decisions that require
unanimous board approval under the articles of association and the Group has no significant contractual relationships with
HDFC Asset Management. We consider that the Group no longer has significant influence over HDFC Asset Management
after the sale, and therefore should no longer be classified as an associate.
On 29 September 2021, the equity accounted value of HDFC Asset Management was £93m and the fair value of the
Group’s investment in HDFC Asset Management was £1,003m based on the share price on this date. A reclassification gain
of £897m has been recognised in the consolidated income statement. On reclassification a loss of £13m was recycled
from the translation reserve and was included in determining the gain.
Prior to reclassification, the difference between the carrying value of this associate and the Group’s share of net assets was
due primarily to goodwill arising on the buyback of shares by HDFC Asset Management from employees.
The year end date of HDFC Asset Management is 31 March which is different from the Group’s year end date of
31 December. For the purposes of the preparation of the Group’s consolidated financial statements, financial information
for the period from 1 January 2021 to 29 September 2021 was used for HDFC Asset Management for equity accounting
purposes (2020: 1 January 2020 to 31 December 2020).
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FINANCIAL INFORMATION
7. Group financial statements continued
Phoenix
Phoenix is the largest life and pensions consolidator in Europe. Our investment in Phoenix supports our strategic
partnership.
Following the completion of the Sale of the Group’s UK and European insurance business in August 2018, as part of the total
consideration, the Group was issued with new Phoenix shares representing 19.98% of the issued share capital of Phoenix.
During the year ended 31 December 2020, the Group’s interest in Phoenix was reduced to 14.4%. On 22 July Phoenix
announced the completion of its acquisition of ReAssure Group plc. Under the terms of the transaction, Phoenix issued
277,277,138 new ordinary shares as part consideration for the acquisition. Phoenix have recognised a gain on acquisition of
£372m reflecting the excess of the fair value of the net assets acquired over the consideration paid and the Group’s share
of this gain is recognised in our share of profit from Phoenix. Completion of the transaction resulted in the Group’s holding in
Phoenix becoming 14.4% of the enlarged Phoenix Group. A dilution gain of £4m was recognised within the Profit on
disposal of interests in associates in the 2020 consolidated income statement as a result of the transaction. Refer Note
1(c)(iv) for further details. Although our interest in Phoenix had reduced to 14.4%, taking into account our continued
representation on Phoenix’s board and, in particular, the contractual relationships with Phoenix, including the licensing to
Phoenix of the Standard Life brand, our judgement was that Phoenix should continue to be classified as an associate.
On 23 February 2021, the Group announced a simplification and extension of the strategic partnership between the Group
and Phoenix. Refer Note1(c)(iii). The announcement included the sale of the ‘Standard Life’ brand to Phoenix, replacing the
existing agreement to licence the brand for no fee to Phoenix. Following the changes to the commercial agreements, in
particular in relation to the licensing of the ‘Standard Life’ brand, our judgement is that Phoenix should no longer be
accounted for as an associate with effect from 23 February 2021. The changes simplified the agreements between abrdn
and Phoenix such that the Group was no longer able to control Phoenix’s use of the Standard Life brand. The Group’s
shareholding in Phoenix, which remained at 14.4%, was therefore reclassified from an investment in associates accounted
for using the equity method to equity securities and interests in pooled investment funds measured at fair value. A
reclassification gain of £68m is included in the profit on disposal of interests in associates for the year ended 31 December
2021 as the fair value on 22 February 2021 of £1,023m was higher than the previous carrying value as an associate of
£964m. On disposal, other comprehensive income gains of £9m were recycled from retained earnings and included in
determining the gain on sale.
Determination of fair value and useful lives of intangible assets on acquisition of the 19.98% interest in Phoenix in August 2018
The identification, valuation and determination of useful lives for equity accounting purposes, of the Group’s share of
Phoenix’s intangible assets was a key judgement in the determination of Phoenix profits up to the date of reclassification in
2021 and therefore the Group’s carrying value of Phoenix at the date of the reclassification (and therefore gain on
reclassification) and share of profits for the period from 1 January 2021 to 22 February 2021.
At acquisition the value of the Group’s share of Phoenix’s identifiable assets and liabilities was determined. This value was
determined using the same valuation bases as required for a business combination under which most of the identifiable
assets and liabilities of the enlarged Phoenix group (including Standard Life Assurance Limited (SLAL)) were measured at
fair value. The most significant assets that were not measured at fair value were Phoenix’s defined benefit pension
schemes which were measured at their IAS 19 value.
As noted above, a key judgement was the identification, valuation and determination of useful lives, of the Group’s share of
Phoenix’s intangible assets at the date of acquisition. The main intangible assets identified were the acquired present value
of in-force business (AVIF) for both SLAL and other Phoenix entities. AVIF comprised the difference between the fair value
and IFRS carrying value of insurance contracts together with the fair value of future profits expected to arise on investment
contracts. The valuation of the AVIF was determined using the application of present value techniques to the best estimate
cash flows expected to arise from policies that were in-force at the acquisition date, adjusted to reflect the price of bearing
the uncertainty inherent in those cash flows. This approach incorporated a number of judgements and assumptions which
impacted the resultant valuation, the most significant of which were mortality rates, expected policy lapses, the expenses
associated with servicing the policies, future investment returns, the discount rate and the risk adjustment for uncertainty,
determined using a cost of capital approach. The Group’s share of profit after acquisition until the date of reclassification
under the equity method reflects the amortisation of these intangible assets. This differs from the amortisation recognised
in Phoenix’s own IFRS financial statements due to the revaluation of the existing Phoenix intangible assets at August 2018 for
equity method purposes. The amortisation method reflects the expected emergence of economic benefits which results
in higher amortisation in earlier periods.
Following the completion of the ReAssure transaction, the Group’s share of Phoenix’s intangible assets recognised at the
date of acquisition reduced from 19.98% to 14.4%. The notional partial disposal of these intangible assets results in a
reduction in the corresponding amortisation recognised in the Group’s share of profit under the equity method.
180 abrdn.com Annual report 2021
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Intangible Asset
Useful life at
acquisition date
Years
Fair value at
acquisition date
£m
Group’s share at
acquisition date
1
£m
SLAL AVIF 24 2,931 586
Existing Phoenix AVIF 15 1,503 300
1. Based on Group’s share at the date of acquisition (19.98%).
There had been no change to the useful lives of the SLAL AVIF and Existing Phoenix AVIF.
Phoenix has taken advantage of the temporary exemption granted to insurers in IFRS 4 Insurance Contracts from applying
IFRS 9 as a result of meeting the exemption criteria as at 31 December 2015. As the Group’s investment in Phoenix is now
measured at fair value, we are no longer applying the temporary exemption from IFRS 9 in relation to Phoenix at
31 December 2021.
The financial assets with contractual cash flows that were solely payments of principal and interest (excluding those held
for trading or managed on a fair value basis) that remained under IAS 39 for equity accounting purposes at 31 December
2020 are set out below together with all other financial assets, measured at fair value through profit and loss:
Fair value as at
31 December 2020
£m
Financial assets with contractual cash flows that are solely payments of principal and interest
(SPPI) excluding those held for trading or managed on a fair value basis 13,436
Financial assets other than those above
1
298,176
Total 311,612
1. The change in fair value in the year to 31 December 2020 of all other financial assets that are FVTPL was a gain of £11,087m.
An analysis of credit ratings of financial assets with contractual cash flows that are SPPI, excluding those held for trading or
managed on a fair value basis at 31 December 2020, is also provided below:
AAA AA A BBB BB and below Non-rated Unit linked Total
2020 2020 2020 2020 2020 2020 2020 2020
Carrying value £m £m £m £m £m £m £m £m
Loans and
deposits
– 6 195 – – 368 78 647
Cash and cash
equivalents
30 1,728 7,035 193 – 4 2,008 10,998
Accrued income – – – – – 251 – 251
Other
receivables
– – – – – 1,540 – 1,540
30 1,734 7,230 193 – 2,163 2,086 13,436
HDFC Life
HDFC Life is one of India’s leading life insurance companies. The investment in HDFC Life allows the Group to benefit from
the life insurance market in one of the world’s fastest growing economies.
During the year ended 31 December 2020, the Group’s interest in HDFC Life was reclassified from an investment in
associates accounted for using the equity method to equity securities and interests in pooled investment funds measured
at fair value.
During 2020 the Group further reduced its interest in HDFC Life to 8.89%. Refer Note 1(c)(iv) for further details of the sales
during 2020. While the Group’s remaining interest at 31 December 2019 of 14.73% was less than 20%, being the threshold
where significant influence is presumed, our judgement was that HDFC Life should continue to be classified as an associate.
This judgement took into account other key indicators of significant influence including the Group’s representation on the
board of HDFC Life and the Group’s ability to participate in policy-making processes including decisions about dividends or
other distributions that require unanimous board approval under the articles of association. The sale on 3 December 2020
reduced the Group’s interest from 10.27% to 8.89% and the Group was no longer entitled to representation on the board of
HDFC Life and, from this date, HDFC Life was no longer considered to be an associate of the Group.
On 3 December 2020, the equity accounted value of HDFC Life was £111m and the fair value of the Group’s investment in
HDFC Life was £1,168m based on the share price on this date. A reclassification gain of £1,051m was recognised in the
consolidated income statement for the year ended 31 December 2020. On reclassification a loss of £6m was recycled
from the translation reserve and was included in determining the gain.
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FINANCIAL INFORMATION
7. Group financial statements continued
The year end date for HDFC Life is 31 March which is different from the Group’s year end date of 31 December. For the
purposes of the preparation of the Group’s 2020 consolidated financial statements, financial information for the period
from 1 January 2020 to 3 December 2020 was used for HDFC Life for equity accounting purposes.
(c) Investments in joint ventures
HASL Other Total
2021 2020 2021 2020 2021 2020
£m £m £m £m £m £m
Carrying value of joint ventures accounted for using the
equity method
258 236 6 1 264 237
Dividends received
– – – – – –
Share of profit/(loss) after tax 19 23 (6) (6) 13 17
HASL
The Group has a 50% share in HASL, one of China’s leading life insurance companies offering life and health insurance
products. The investment in HASL is a strategic investment giving the Group access to one of the world’s largest markets.
On 30 June 2020, HASL completed the acquisition of SL Asia. Refer Note 1(c)(ii) for further details.
The table below provides summarised financial information for HASL, the joint venture which is considered to be material to
the Group. The summarised financial information reflects the amounts presented in the financial statements of HASL
amended to reflect adjustments made when using the equity method.
HASL
2021 2020
£m £m
Summarised financial information of joint venture:
Revenue
612 481
Depreciation and amortisation 4 3
Interest income
68 57
Interest expense
2 2
Income tax (expense)/income (3) (3)
Profit after tax (all from continuing operations)
39 46
Other comprehensive income
(11) 1
Total comprehensive income 28 47
Total assets
1
3,787 3,156
Total liabilities
1
3,271 2,685
Cash and cash equivalents 102 122
Net assets
516 471
Attributable to investee’s shareholder
516 471
Interest held
50% 50%
Share of net assets
258 236
1. As a liquidity presentation is used by insurance companies when presenting their statement of financial position, an analysis of total assets and total liabilities
between current and non-current has not been provided for HASL.
At 31 December 2015 HASL had significant insurance liabilities and its liabilities arising from contracts within the scope of
IFRS 4 and liabilities connected with insurance were over 90% of its total liabilities. Therefore HASL was eligible to defer the
implementation of IFRS 9 for equity accounting purposes.
The fair value of HASL’s financial assets at 31 December 2021 that remain under IAS 39 for equity accounting purposes and
the change in fair value during the year ended 31 December 2021 are as follows:
Fair value as at
31 December 2021
Fair value as at
31 December 2020
£m £m
Financial assets with contractual cash flows that are solely payments of principal and interest
(SPPI) excluding those held for trading or managed on a fair value basis
1,2
2,384 1,862
Financial assets other than those above
2
562 431
Total
2,946 2,293
1. Financial assets that are SPPI (excluding those held for trading or managed on a fair value basis) are predominantly AAA debt instruments. Their carrying
value at 31 December 2021 is £2,320m (2020: £1,378m). No securities are rated below BBB (2020: none).
2. The change in fair value in the year to 31 December 2021 for financial assets that are SPPI (excluding those held for trading or managed on a fair value basis)
is a gain of £136m (2020: £129m). The change in fair value for all other financial assets is a gain of £45m (2020: gain of £23m).
182 abrdn.com Annual report 2021
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Virgin Money UTM
Other joint ventures carrying value of £6m (2020: £1m) includes £6m (2020: £1m) for Virgin Money UTM.
No impairment of the Group’s interest in Virgin Money UTM was recognised in 2021. In 2020, an impairment loss of £45m
was recognised at 30 June 2020 in the Asset management, platforms and wealth segment and was included in loss on
impairment of interests in joint ventures in the consolidated income statement. Virgin Money UTM’s recoverable amount at
30 June 2020 was £nil which was its VIU and which was calculated using a pre-tax discount rate of 14.9%.The impairment
resulted from a reduction in projected future revenues as a result of a business plan reassessment by the joint venture
which took into account the fall in UK equity markets due to COVID-19, and an increase in projected costs to develop a new
retail customer proposition.
(d) Investments in associates measured at FVTPL
The aggregate fair value of associates accounted for at FVTPL included in equity securities and interests in pooled
investment funds (refer Note 18) at 31 December 2021 is £63m (2020: £54m) none of which are considered individually
material to the Group.
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FINANCIAL INFORMATION
7. Group financial statements continued
16. Property, plant and equipment
Property, plant and equipment consists primarily of property owned and occupied by the Group and the computer
equipment used to carry out the Group’s business along with right-of-use assets for leased property and equipment.
Owner occupied property: Owner occupied property is initially recognised at cost and subsequently revalued to fair
value at each reporting date. Depreciation, being the difference between the carrying amount and the residual value of
each significant part of a building, is charged to the consolidated income statement over its useful life. The useful life of
each significant part of a building is estimated as being between 30 and 50 years. A revaluation surplus is recognised in
other comprehensive income unless it reverses a revaluation deficit which has been recognised in the consolidated
income statement.
Equipment: Equipment is initially recognised at cost and subsequently measured at cost less depreciation. Depreciation is
charged to the income statement over 2 to 15 years depending on the length of time the Group expects to derive
benefit from the asset.
Right-of-use asset: Refer Note 17 below for the accounting policies for right-of-use assets.
Owner occupied
property Equipment
Right-of-use
assets – property
Right-of-use
assets –
equipment Total
£m £m £m £m £m
Cost or valuation
At 1 January 2020 2 125 404 2 533
Reclassified as held for sale during the year – (4) (7) – (11)
Additions – 13 16 1 30
Disposals and adjustments
1
– (26) (38) – (64)
Derecognition of right-of-use assets relating to
subleases classified as finance leases
– – (5) – (5)
At 31 December 2020 2 108 370 3 483
Additions – 12 4 – 16
Disposals and adjustments
1
– (16) (44) – (60)
Derecognition of right-of-use assets relating to
subleases classified as finance leases
– – (6) – (6)
Foreign exchange adjustment – – (2) – (2)
At 31 December 2021
2 104 322 3 431
Accumulated depreciation and impairment
At 1 January 2020 – (59) (207) (1) (267)
Reclassified as held for sale during the year – 2 2 – 4
Depreciation charge for the year
2
– (19) (26) (1) (46)
Disposals and adjustments
1
(1) 27 36 – 62
Derecognition of right-of-use assets relating to
subleases classified as finance leases
– – 3 – 3
Impairment
3
– – (2) – (2)
Foreign exchange adjustment – – (1) – (1)
At 31 December 2020 (1) (49) (195) (2) (247)
Depreciation charge for the year
2
– (18) (21) – (39)
Disposals and adjustments
1
– 13 42 – 55
Derecognition of right-of-use assets relating to
subleases classified as finance leases
– – 1 – 1
Impairment
3
– – (15) – (15)
Foreign exchange adjustment
– – 1 – 1
At 31 December 2021
(1) (54) (187) (2) (244)
Carrying amount
At 1 January 2020 2 66 197 1 266
At 31 December 2020 1 59 175 1 236
At 31 December 2021
1 50 135 1 187
1. For the year ended 31 December 2021 £8m (2020: £26m) of disposals and adjustments relates to equipment with net book value of £nil which is no longer in
use.
2. Included in other administrative expenses.
3. Included in restructuring and corporate transaction expenses.
184 abrdn.com Annual report 2021
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Included in property right-of-use assets, are right-of-use assets that meet the definition of investment property. Their
carrying amount at 31 December 2021 is £21m (2020: £25m). This is made up a gross carrying value of £81m (2020: £47m)
and accumulated depreciation and impairment of £60m (2020: £22m). During the year to 31 December 2021 there were
transfers to investment property of £19m (2020: £5m), depreciation of (£2m) (2020: (£2m)), derecognition related to new
subleases classified as finance leases of (£6m) (2020: (£2m)), impairments of (£15m) (2020: (£2m)) related to these
assets. There were no disposals and adjustments (2020: (£2m)) related to these assets. Rental income received and direct
operating expenses incurred to generate that rental income in the year to 31 December 2021 were £2m (2020: £3m) and
£3m (2020: £2m) respectively. In addition, there were direct expenses of £1m (2020: £1m) in relation to investment
properties not currently generating income.
The transfers to investment property in 2021 of £19m relate to right-of-use assets that are no longer being used
operationally by the Group. The right-of-use assets were assessed for impairment at the point of transfer. The recoverable
amount which was based on value in use was £4m using a pre-tax discount rate of 3%. The right-of-use assets related to
the Investment segment (£6m impairment) and Corporate/strategic (£9m impairment).
The fair value of these right-of-use assets at 31 December 2021 is £21m (2020: £25m). The valuation technique used to
determine the fair value considers the rental income expected to be received under subleases during the term of the lease
and the direct expenses expected to be incurred in managing the leased property, discounted using a discount rate that
reflects the risks inherent in the cash flow estimates. It is not based on valuations by an independent valuer. This is a Level 3
valuation technique as defined in Note 39.
If owner occupied property was measured using the cost model, the historical cost before impairment would be £1m
(2020: £1m). As the expected residual value of owner occupied property is in line with the current fair value, no depreciation
is currently charged.
Further details on the leases under which the Group’s right-of-use assets are recognised are provided in Note 17 below.
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FINANCIAL INFORMATION
7. Group financial statements continued
17. Leases
A contract is, or contains, a lease if the contract conveys the right to control the use of an identified asset for a period of
time in exchange for consideration. At inception of a contract, the Group assesses whether a contract is, or contains, a
lease. In 2019, on adoption of IFRS 16 the Group used the practical expedient permitted to apply the new standard at
transition solely to leases previously identified in accordance with IAS 17 and IFRIC 4 Determining whether an
Arrangement Contains a Lease.
Right-of-use assets are measured at cost less accumulated depreciation and impairment losses and are presented in
property, plant and equipment (refer Note 16). The Group does not revalue its right-of-use assets. This applies to all
right-of-use assets, including those that are assessed as meeting the definition of investment property. The cost
comprises the amount of the initial measurement of the lease liability plus any initial direct costs and expected
restoration costs not relating to wear and tear. Costs relating to wear and tear are expensed over the term of the lease.
Depreciation is charged on right-of-use assets on a straight -line basis from the lease commencement date to the
earlier of the end of the useful life of the right-of-use asset or the end of the lease term. The Group assesses right-of-use
assets for impairment when such indicators exist, and where required, reduces the value of the right-of-use asset
accordingly.
The related lease liability (included in other financial liabilities – refer Note 35) is calculated as the present value of the
future lease payments. The lease payments are discounted using the rate implicit within the lease where readily
available or the Group’s incremental borrowing rate where the implicit rate is not readily available. Interest is calculated
on the liability using the discount rate and is charged to the consolidated income statement under finance costs.
In determining the value of the right-of-use assets and lease liabilities, the Group considers whether any leases contain
lease extensions or termination options that the Group is reasonably certain to exercise.
Where a leased property has been sublet, the Group assesses whether the sublease has transferred substantially all the
risk and rewards of the right-of-use asset to the lessee under the sublease. Where this is the case, the right-of-use asset
is derecognised and a net investment in finance leases (included in Receivables and other financial assets – refer Note
20) is recognised, calculated as the present value of the future lease payments receivable under the sublease. Where a
property is only partially sublet, only the portion of the right-of-use asset relating to the sublet part of the property is
derecognised and recognised as a net investment in finance leases.
Any difference between the initial value of the net investment in finance leases and the right-of-use asset derecognised
is recognised in the consolidated income statement (within other income or expenses). Interest is calculated on the net
investment in finance lease using the discount rate and is recognised in the consolidated income statement as interest
income.
Where the sublease does not transfer substantially all the risk and rewards of the right-of-use assets to the lessee under
the sublease, the Group continues to recognise the right-of-use asset. The sublease is accounted for as an operating
lease with the lease payments received recognised as property rental income in other income in the consolidated
income statement. Lease incentives granted are recognised as an integral part of the property rental income and are
spread over the term of the lease.
The Group does not recognise right-of-use assets and lease liabilities for short-term leases (less than one year from
inception
)
and leases where the underlyin
g
asset is of low value.
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(a) Leases where the Group is lessee
The Group leases various offices and equipment used to carry out its business. Leases are generally for fixed periods but
may be subject to extensions or early termination clauses. The remaining periods for current leases range from less than 1
year to 17 years (2020: less than 1 year to 18 years). A number of leases which are due to end in 2031 contain options that
would allow the Group to extend the lease term. The Group reviews its property use on an ongoing basis and these
extensions have not been included in the right-of-use asset or lease liability calculations.
The Group has recognised the following assets and liabilities in relation to these leases where the Group is a lessee:
2021 2020
£m £m
Right-of-use assets:
Property 135 175
Equipment
1 1
Total right-of-use assets
136 176
Lease liabilities (225) (249)
The following table provides a maturity analysis of the contractual undiscounted cash flows for the lease liabilities.
2021 2020
£m £m
Less than 1 year 28 30
Greater than or equal to 1 year and less than 2 years 28 30
Greater than or equal to 2 years and less than 3 years 24 28
Greater than or equal to 3 years and less than 4 years
23 24
Greater than or equal to 4 years and less than 5 years 21 22
Greater than or equal to 5 years and less than 10 years
93 98
Greater than or equal to 10 years and less than 15 years
33 44
Greater than or equal to 15 years 7 10
Total undiscounted lease liabilities
257 286
Details of the movements in the Group’s right-of-use assets including additions and depreciation are included in Note 16.
The interest on lease liabilities for the year ended 31 December 2021 was £6m (2020: £6m).
The Group does not recognise right-of-use assets and lease liabilities for short-term leases and leases where the
underlying asset is of low value. The expenses for these leases for the year ended 31 December 2021 were £2m
(2020: £3m).The Group lease commitment for short-term leases was £nil at 31 December 2021 (2020: £nil).
The total cash outflow for lease liabilities recognised in the consolidated statement of cash flows for the year ended
31 December 2021 was £33m (2020: £35m).
(b) Leases where the Group is lessor (subleases)
Where the Group no longer requires a leased property, the property may be sublet to a third party. The sublease may be
for the full remaining term of the Group’s lease or only part of the remaining term.
At 31 December 2021, the Group had a net investment in finance leases asset of £30m (2020: £18m) for subleases which
had transferred substantially all the risk and rewards of the right-of-use assets to the lessee under the sublease. All other
subleases are accounted for as operating leases. The increase during the year ended 31 December 2021 was mainly due
to four new subleases entered into during the year.
(b)(i) Finance leases
During the year ended 31 December 2021, the Group received finance income on the net investment in finance leases
asset of less than £1m (2020: less than £1m). The Group recorded an initial gain of £8m in relation to new subleases
entered into during the year ended 31 December 2021 (2020: £2m).
187abrdn.comAnnual report 2021
FINANCIAL INFORMATION
7. Group financial statements continued
The following table provides a maturity analysis of the future contractual undiscounted cash flows for the net investment in
finance leases and a reconciliation to the net investment in finance leases asset.
2021 2020
£m £m
Less than 1 year 3 3
Greater than or equal to 1 year and less than 2 years 3 2
Greater than or equal to 2 years and less than 3 years
3 2
Greater than or equal to 3 years and less than 4 years
3 2
Greater than or equal to 4 years and less than 5 years 3 2
Greater than or equal to 5 years and less than 10 years
14 9
Greater than or equal to 10 years and less than 15 years
3 –
Total contractual undiscounted cash flows under finance leases
32 20
Unearned finance income (2) (2)
Total net investment in finance leases
30 18
(b)(ii) Operating leases
During the year ended 31 December 2021, the Group received property rental income from operating leases of £2m
(2020: £3m).
The following table provides a maturity analysis of the future contractual undiscounted cash flows for subleases classified
as operating leases.
2021 2020
£m £m
Less than 1 year 3 2
Greater than or equal to 1 year and less than 2 years 1 2
Greater than or equal to 2 years and less than 3 years
1 1
Greater than or equal to 3 years and less than 4 years 1 –
Total contractual undiscounted cash flows under operating leases
6 5
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18. Financial assets
Financial assets are initially recognised at their fair value. Subsequently all equity securities and interests in pooled
investment funds and derivative instruments are measured at fair value. All equity securities and interests in pooled
investment funds are classified as FVTPL on a mandatory basis. Changes in their fair value are recognised in Net gains
on financial instruments and other income in the consolidated income statement. The classification of derivatives and
the accounting treatment of derivatives designated as a hedging instrument are set out in Note 19.
The subsequent measurement of debt instruments depends on whether their cash flows are solely payments of
principal and interest and the nature of the business model they are held in as follows:
SPPI
1
test satisfied? Business model Classification
Yes A: Objective is to hold to collect contractual cash flows Amortised cost
2
Yes
B: Objective is achieved by both collecting contractual cash
flows and selling
Fair value through other comprehensive
income (FVOCI)
2
Yes C: Objective is neither A nor B FVTPL
No N/A FVTPL
1. Solely payments of principal and interest.
2. May be classified as FVTPL if doing so eliminates or significantly reduces a measurement or recognition inconsistency (sometimes referred to as an
‘accounting mismatch’) that would otherwise arise from measuring assets or liabilities or recognising the gains and losses on them on different bases.
The Group has no debt instruments that are managed within a business model whose objective is achieved both by
collecting contractual cash flows and selling and therefore there are no debt instruments classified as FVOCI. Debt
instruments classified as FVTPL are classified as such due to the business model they are managed under,
predominantly being held in consolidated investment vehicles.
The methods and assumptions used to determine fair value of financial assets at FVTPL are discussed in Note 39.
Amortised cost is calculated, and related interest is credited to the consolidated income statement, using the effective
interest method. Impairment is determined using an expected credit loss impairment model which is applied to all
financial assets measured at amortised cost. Financial assets measured at amortised cost attract a loss allowance
equal to either:
– 12 month expected credit losses (losses resulting from possible default within the next 12 months).
– Lifetime expected credit losses (losses resulting from possible defaults over the remaining life of the financial asset).
Financial assets attract a 12 month ECL allowance unless the asset has suffered a significant deterioration in credit
quality or the simplified approach for calculation of ECL has been applied. As permitted under IFRS 9 Financial
Instruments, the Group has applied the simplified approach to calculate the ECL allowance for trade receivables and
contract assets recognised under IFRS 15 Revenue from Contracts with Customers and lease receivables recognised
under IFRS 16 Leases. Under the simplified approach the ECL is calculated over the remaining life of the asset.
The table below sets out an analysis of financial assets excluding those assets backing unit linked liabilities which are set out
in Note 24.
At fair value through profit
or loss
1
Cash flow
hedge
At amortised cost Total
2021 2020 2021 2020 2021 2020 2021 2020
Notes £m £m £m £m £m £m £m £m
Derivative financial assets 19 6 18 8 – – – 14 18
Equity securities and interests in
pooled investment funds 39
3,115 1,980 – – – – 3,115 1,980
Debt securities 39 961 787 – – 226 325 1,187 1,112
Financial investments 4,082 2,785 8 – 226 325 4,316 3,110
Receivables and other financial
assets
20
31 28 – – 649 593 680 621
Cash and cash equivalents 23
– – – – 1,904 1,519 1,904 1,519
Total
4,113 2,813 8 – 2,779 2,437 6,900 5,250
1. All financial assets measured at fair value through profit or loss have been classified at FVTPL on a mandatory basis. The Group has not designated any
financial assets as FVTPL.
The amount of debt securities expected to be recovered or settled after more than 12 months is £63m (2020: £231m). Due
to the nature of equity securities and interests in pooled investment funds, there is no fixed term associated with these
securities. The amount of equity securities and interests in pooled investment funds expected to be recovered or settled
after more than 12 months is £1,947m (2020: £1,297m).
189abrdn.comAnnual report 2021
FINANCIAL INFORMATION
7. Group financial statements continued
19. Derivative financial instruments
A derivative is a financial instrument that is typically used to manage risk and whose value moves in response to an
underlying variable such as interest or foreign exchange rates. The Group uses derivative financial instruments in order
to match subordinated debt liabilities and to reduce the risk from potential movements in foreign exchange rates on
seed capital and co-investments and potential movements in market rates on seed capital. Certain consolidated
investment vehicles may also use derivatives to take and alter market exposure, with the objective of enhancing
performance and controlling risk.
Management determines the classification of derivatives at initial recognition. All derivative instruments are classified as
at FVTPL except those designated as part of a cash flow hedge or net investment hedge. Derivatives at FVTPL are
measured at fair value with changes in fair value recognised in the consolidated income statement.
On adoption of IFRS 9 Financial instruments in 2019, the Group has elected to continue applying the hedge accounting
requirements of IAS 39. The accounting treatment below applies to derivatives designated as part of a hedging
relationship.
Using derivatives to manage a particular exposure is referred to as hedging. For a derivative to be considered as part of
a hedging relationship its purpose must be formally documented at inception. In addition, the effectiveness of the hedge
must be initially high and be able to be reliably measured on a regular basis. Derivatives used to hedge variability in future
cash flows such as coupons payable on subordinated liabilities or revenue receivable in a foreign currency are
designated as cash flow hedges, while derivatives used to hedge currency risk on investments in foreign operations are
designated as net investment hedges.
Where a derivative qualifies as a cash flow or net investment hedge, hedge accounting is applied. The effective part of
any gain or loss resulting from the change in fair value is recognised in other comprehensive income, and in the cash
flow or net investment hedge reserve in equity, while any ineffective part is recognised immediately in the consolidated
income statement. If a derivative ceases to meet the relevant hedging criteria, hedge accounting is discontinued.
For cash flow hedges, the amount recognised in the cash flow hedge reserve is transferred to the consolidated income
statement (recycled) in the same period or periods during which the hedged item affects profit or loss and is transferred
immediately if the cash flow is no longer expected to occur. For net investment hedges, the amount recognised in the
net investment hed
g
e reserve is transferred to the consolidated income statement on disposal of the investment.
2021 2020
Contract amount Fair value assets Fair value liabilities Contract amount Fair value assets Fair value liabilities
Notes £m £m £m £m £m £m
Cash flow hedges 18,31 554 8 – 549 – 6
FVTPL 18,31 889 6 5 687 18 7
Derivative financial
instruments 39
1,443 14 5 1,236 18 13
Derivative financial
instruments backing unit
linked liabilities
24
399 7 3 463 6 9
Total derivative financial
instruments
1,842 21 8 1,699 24 22
Derivative assets of £8m (2020: £nil) are expected to be recovered after more than 12 months. Derivative liabilities of £nil
(2020: £5m) are expected to be settled after more than 12 months.
(a) Hedging strategy
The Group generally does not hedge the currency exposure relating to revenue and expenditure, nor does it hedge
translation of overseas profits in the income statement. Where appropriate, the Group may use derivative contracts to
reduce or eliminate currency risk arising from individual transactions or seed capital and co-investment activity.
(a)(i) Cash flow hedges
On 18 October 2017, the Group issued subordinated notes with a principal amount of US$750m. In order to manage its
foreign exchange risk relating to the principal and coupons payable on these notes the Group entered into a cross-
currency swap which is designated as a cash flow hedge. The cash flow hedge was fully effective during the year. The
cross-currency swap has the effect of swapping the 4.25% US Dollar fixed rate subordinated notes into 3.2% Sterling fixed
rate subordinated notes with a principal amount of £569m. The cross-currency swap has a fair value asset position of £8m
(2020: £6m liability). During the year ended 31 December 2021 fair value gains of £19m (2020: losses of £3m) were
recognised in other comprehensive income in relation to the cross-currency swap. Gains of £5m (2020: losses of £19m)
were transferred from other comprehensive income to Net gains on financial instruments and other income in the
consolidated income statement in relation to the cross-currency swap during the year. In addition, forward points of £6m
190 abrdn.com Annual report 2021
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(2020: £6m) and losses of £1m (2020: less than £1m) were transferred from other comprehensive income to Finance costs
in the consolidated income statement.
(a)(ii) FVTPL
Derivative financial instruments classified as FVTPL include those that the Group holds as economic hedges of financial
instruments that are measured at fair value. FVTPL derivative financial instruments are also held by the Group to match
contractual liabilities that are measured at fair value or to achieve efficient portfolio management in respect of instruments
measured at fair value.
2021 2020
Contract amount Fair value assets Fair value liabilities
Contract
amount Fair value assets Fair value liabilities
£m £m £m £m £m £m
Equity derivatives:
Futures 336 3 4 100 1 9
Variance swaps
6 6 – 6 6 –
Interest rate derivatives:
Swaps
11 – – 52 – 4
Futures
40 – – 34 – –
Foreign exchange derivatives:
Forwards
806 4 3 859 15 2
Other derivatives:
Inflation rate swaps – – – 18 2 –
Credit default swaps
89 – 1 81 – 1
Derivative financial instruments at FVTPL
1,288 13 8 1,150 24 16
(b) Maturity profile
The maturity profile of the contractual undiscounted cash flows in relation to derivative financial instruments is as follows:
Within 1
year
1-5
years
5-10
years
10-15
years
15-20
years
Greater than 20
years
Total
2021 2020 2021 2020 2021 2020 2021 2020 2021 2020 2021 2020 2021 2020
£m £m £m £m £m £m £m £m £m £m £m £m £m £m
Cash inflows
Derivative
financial assets
66 367 94 – 589 – – – – – – – 749 367
Derivative
financial
liabilities
13 183 – 93 – 607 – – – – – – 13 883
Total 79 550 94 93 589 607 – – – – – – 762 1,250
Cash outflows
Derivative
financial assets
(60) (360) (73) – (596) – – – – – – – (729) (360)
Derivative
financial
liabilities
(13) (187) – (73) – (614) – – – – – – (13) (874)
Total
(73) (547) (73) (73) (596) (614) – – – – – – (742) (1,234)
Net derivative
financial
instruments
cash inflows
6 3 21 20 (7) (7) – – – – – – 20 16
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FINANCIAL INFORMATION
7. Group financial statements continued
Included in the above maturity profile are the following cash flows in relation to cash flow hedge assets:
Within 1
year
1-5
years
5-10
years
10-15
years
15-20
years
Greater than 20
years
Total
2021 2020 2021 2020 2021 2020 2021 2020 2021 2020 2021 2020 2021 2020
£m £m £m £m £m £m £m £m £m £m £m £m £m £m
Cash inflows 24 23 94 93 589 607 – – – – – – 707 723
Cash outflows (18) (18) (73) (73) (596) (614) – – – – – – (687) (705)
Net cash flow
hedge cash
inflows
6 5 21 20 (7) (7) – – – – – – 20 18
Cash inflows and outflows are presented on a net basis where the Group is required to settle cash flows net.
20. Receivables and other financial assets
2021 2020
Notes £m £m
Amounts receivable from contracts with customers 3(d) 135 115
Accrued income 263 227
Cancellations of units awaiting settlement
113 126
Net investment in finance leases 30 18
Collateral pledged in respect of derivative contracts 37
26 28
Contingent consideration asset 39
31 28
Other 82 79
Receivables and other financial assets 680 621
The carrying amounts disclosed above reasonably approximate the fair values as at the year end.
The amount of receivables and other financial assets expected to be recovered after more than 12 months is £35m
(2020: £33m).
Accrued income includes £260m (2020: £221m) of accrued income from contracts with customers (refer Note 3(d)).
21. Other assets
2021 2020
£m £m
Prepayments 100 40
Deferred acquisition costs 3 4
Other 2 2
Other assets
105 46
The amount of other assets expected to be recovered after more than 12 months is £48m (2020: £4m).
Prepayments includes £56m (2020: £nil) relating to the Group’s future purchase of certain products in the Phoenix Group’s
savings business offered through abrdn’s Wrap platform together with the Phoenix Group’s trustee investment plan
business for UK pension scheme clients. Refer Note 1(c)(iii) for further details.
All deferred acquisition costs above are costs deferred on investment contracts (deferred origination costs) which relate to
contracts with customers (refer Note 3(d)). The amortisation charge for deferred origination costs relating to contracts
with customers from continuing operations for the year was £1m (2020: £2m).
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22. Assets and liabilities held for sale
Assets and liabilities held for sale are presented separately in the consolidated statement of financial position and consist
of operations and individual non-current assets whose carrying amount will be recovered principally through a sale
transaction (expected within one year) and not through continuing use.
Operations held for sale, being disposal groups, and investments in associates accounted for using the equity method
are measured at the lower of their carrying amount and their fair value less disposal costs. No depreciation or
amortisation is charged on assets in a disposal group once it has been classified as held for sale.
Operations held for sale include newly established investment vehicles which the Group has seeded but is actively
seeking to divest from. For these investment funds, which do not have significant liabilities or non-financial assets,
financial assets continue to be measured based on the accounting policies that applied before they were classified as
held for sale. The Group classifies seeded operations as held for sale where the intention is to dispose of the investment
vehicle in a single transaction. Where disposal of a seeded investment vehicle will be in more than one tranche the
operations are not classified as held for sale in the consolidated statement of financial position.
Certain amounts seeded into funds are classified as interests in pooled investment funds. Investment property and
owner occupied property held for sale relates to property for which contracts have been exchanged but the sale had
not completed during the current financial year. Interests in pooled investment funds and investment property held for
sale continue to be measured based on the accountin
g
policies that applied before they were classified as held for sale.
2021 2020
£m £m
Assets of operations held for sale
Parmenion Capital Partners LLP – 18
Investment vehicles
– 1
Assets held for sale
– 19
Liabilities of operations held for sale
Parmenion Capital Partners LLP – 11
Investment vehicles
– –
Liabilities of operations held for sale
– 11
(a)(i) Parmenion Capital Partners LLP (Parmenion)
On 30 June 2021, the Group completed the sale of Parmenion. Refer Note 1(c)(i) for further details. Parmenion is reported
in the Corporate/strategic segment (formerly part of the Asset management, platforms and wealth segment).
At 31 December 2020, this disposal group was measured at its carrying amount and comprised the following assets and
liabilities:
2020
£m
Assets of operations held for sale
Intangible assets 2
Property, plant and equipment 7
Receivables and other financial assets 5
Other assets 1
Cash and cash equivalents 3
Total assets of operations held for sale 18
Liabilities of operations held for sale
Other financial liabilities 11
Total liabilities of operations held for sale 11
Net assets of operations held for sale 7
Net assets of operations held for sale were net of intercompany balances between Parmenion and other group entities,
the net assets of Parmenion on a gross basis as at 31 December 2020 were £12m.
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FINANCIAL INFORMATION
7. Group financial statements continued
23. Cash and cash equivalents
Cash and cash equivalents include cash at bank, money at call and short notice with banks, money market funds and
any highly liquid investments with less than three months to maturity from the date of acquisition. For the purposes of the
consolidated statement of cash flows, cash and cash equivalents also include bank overdrafts which are included in
other financial liabilities on the consolidated statement of financial position.
Where the Group has a legally enforceable right of set off and intention to settle on a net basis, cash and overdrafts are
offset in the consolidated statement of financial position.
2021 2020
£m £m
Cash at bank and in hand 638 788
Money at call, term deposits, reverse repurchase agreements and debt instruments with less
than three months to maturity from acquisition
1,122 615
Money market funds
144 116
Cash and cash equivalents
1,904 1,519
2021 2020
Notes £m £m
Cash and cash equivalents 1,904 1,519
Cash and cash equivalents backing unit linked liabilities 24 33 38
Cash and cash equivalents classified as held for sale 22
– 3
Bank overdrafts 35
(62) (202)
Total cash and cash equivalents for consolidated statement of cash flows
1,875 1,358
Cash at bank, money at call and short notice and deposits are subject to variable interest rates.
Included in cash and cash equivalents and bank overdrafts are £82m (2020: £230m) and £62m (2020: £202m) respectively
relating to balances within a cash pooling facility in support of which cross guarantees are provided by certain subsidiary
undertakings and interest is paid or received on the net balance.
Cash and cash equivalents in respect of unit linked funds (including third party interests in consolidated funds) are held in
separate bank accounts and are not available for general use by the Group.
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24. Unit linked liabilities and assets backing unit linked liabilities
The Group operates unit linked life assurance businesses through a number of subsidiaries. These subsidiaries provide
investment products through a life assurance wrapper. These products do not contain any features which transfer
significant insurance risk and therefore are classified as investment contracts. Unit linked non-participating investment
contracts are separated into two components being an investment management services component and a financial
liability. All fees and related administrative expenses are deemed to be associated with the investment management
services component (refer Note 3). The financial liability component is designated at FVTPL as it is implicitly managed on
a fair value basis as its value is directly linked to the market value of the underlying portfolio of assets.
Where the Group is deemed to control an investment vehicle as a result of holdings in that vehicle by subsidiaries to back
unit linked non-participating investment contract liabilities, the assets and liabilities of the vehicle are consolidated within
the Group’s statement of financial position. The liability for third party interest in such consolidated funds is presented as
a unit linked liability.
Unit linked liabilities and assets backing unit linked liabilities are presented separately in the consolidated statement of
financial position except for those held in operations held for sale, which are presented in assets and liabilities held for
sale in the consolidated statement of financial position.
Contributions received on non-participating investment contracts and from third party interest in consolidated funds
are treated as deposits and not reported as revenue in the consolidated income statement.
Withdrawals paid out to policyholders on non-participating investment contracts and to third party interest in
consolidated funds are treated as a reduction to deposits and not recognised as expenses in the consolidated income
statement.
Investment return and related benefits credited in respect of non-participating investment contracts and third party
interest in consolidated funds are recognised in the consolidated income statement as changes in investment contract
liabilities and changes in liability for third party interest in consolidated funds respectively. Investment returns relating to
unit linked business are for the account of policyholders and have an equal and opposite effect on income and expenses
in the consolidated income statement with no impact on profit after tax.
Assets backing unit linked liabilities comprise financial investments, which are all classified as FVTPL on a mandatory
basis, and receivables and other financial assets and cash and cash equivalents which are measured at amortised cost.
(a) Result for the year attributable to unit linked business
2021 2020
Notes £m £m
Net gains on financial instruments and other income 4 7 9
Other administrative expense 5 (3) (5)
Profit before tax
4 4
Tax expense attributable to unit linked business 9 (4) (4)
Profit after tax – –
(b) Financial instrument risk management
The shareholder is not directly exposed to market risk or credit risk in relation to the financial assets backing unit linked
liabilities. The shareholder’s exposure to market risk on these assets is limited to variations in the value of future fee based
revenue as fees are based on a percentage of fund value.
The shareholder is exposed to liquidity risk relating to unit linked funds. For the unit linked business, liquidity risk is primarily
managed by holding a range of diversified instruments which are assessed against cash flow and funding requirements. A
core portfolio of assets is maintained and invested in accordance with the mandates of the relevant unit linked funds. Given
that unit linked policyholders can usually choose to surrender, in part or in full, their unit linked contracts at any time, the
non-participating investment contract unit linked liabilities are designated as payable within one year. Such surrenders
would be matched in practice, if necessary, by sales of underlying assets. Policyholder behaviour and the trading position of
asset classes are actively monitored. The Group can delay settling liabilities to unit linked policyholders to ensure fairness
between those remaining in the fund and those leaving the fund. The length of any such delay is dependent on the
underlying financial assets.
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FINANCIAL INFORMATION
7. Group financial statements continued
(c) Fair value measurement of unit linked financial liabilities and financial assets backing unit linked
liabilities
Each of the unit linked financial liabilities and the financial assets backing unit linked liabilities has been categorised below
using the fair value hierarchy as defined in Note 39. Refer Note 39 for details of valuation techniques used.
Level 1 Level 2 Level 3 Not at fair value
Classified as held for
sale
Total
2021 2020 2021 2020 2021 2020 2021 2020 2021 2020 2021 2020
£m £m £m £m £m £m £m £m £m £m £m £m
Financial investments 974 832 455 545 1 18 – – – – 1,430 1,395
Receivables and other
financial assets
– – – – – – 7 7 – – 7 7
Cash and cash equivalents
– – – – – – 33 38 – – 33 38
Total financial assets
backing unit linked liabilities
974 832 455 545 1 18 40 45 – – 1,470 1,440
Investment contract
liabilities
– – 1,087 1,024 1 18 – – – – 1,088 1,042
Third party interest in
consolidated funds
– – 378 388 – – – – – – 378 388
Other unit linked financial
liabilities
1 7 2 2 – – 1 1 – – 4 10
Total unit linked financial
liabilities
1 7 1,467 1,414 1 18 1 1 – – 1,470 1,440
In addition to financial assets backing unit linked liabilities and unit linked financial liabilities shown above there is a current
tax asset of £1m (2020: £1m) included in unit linked assets and a current tax liability of £1m (2020: £1m) included in unit
linked liabilities.
The financial investments backing unit linked liabilities comprise equity securities and interests in pooled investment funds of
£1,232m (2020: £1,244m), debt securities of £191m (2020: £145m) and derivative financial assets of £7m (2020: £6m).
The fair value of financial instruments not held at fair value approximates to their carrying value at 31 December 2021 and
31 December 2020.
There were no significant transfers from level 1 to level 2 during the year ended 31 December 2021 (2020: £309m). There
were also no significant transfers from level 2 to level 1 during the year ended 31 December 2021 (2020: £nil). Transfers
from level 1 to level 2 for the year ended 31 December 2020 primarily related to interests in pooled investment vehicles
which are priced daily but where the daily price is only offered by the fund manager. As disclosed in the prior year, the
Group now considers these investments to be level 2. All other transfers relate to assets where changes in the frequency of
observable market transactions resulted in a change in whether the market was considered active. Transfers are deemed
to have occurred at the end of the calendar quarter in which they arose.
The movements during the period of level 3 unit linked assets and liabilities held at fair value are analysed below.
Equity securities and interests in pooled
investment funds
Investment contract
liabilities
31 Dec
2021
31 Dec
2020
31 Dec
2021
31 Dec
2020
£m £m £m £m
At start of period 18 – (18) –
Total gains/(losses) recognised in the consolidated income
statement
– (2) – 2
Purchases
1 – (1) –
Sales (18) (1) 18 1
Transfers in to level 3
1
– 21 – (21)
At end of period
1 18 (1) (18)
1. Transfers are deemed to have occurred at the end of the calendar quarter in which they arose.
Unit linked level 3 assets relate to holdings in real estate funds. No individual unobservable input is considered significant.
Changing unobservable inputs in the measurement of the fair value of these unit linked level 3 financial assets and liabilities
to reasonably possible alternative assumptions would have no impact on profit attributable to equity holders or on total
assets.
Transfers of unit linked assets and liabilities to level 3 generally arise when external pricing providers stop providing prices
for the underlying assets and liabilities in the funds or where the price provided is considered stale.
196 abrdn.com Annual report 2021
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(d) Change in non-participating investment contract liabilities
The change in non-participating investment contract liabilities was as follows:
2021 2020
£m £m
At 1 January 1,042 1,152
Contributions 119 83
Account balances paid on surrender and other terminations in the year
(195) (249)
Change in non-participating investment contract liabilities recognised in the consolidated income
statement
1
124 58
Recurring management charges
(2) (2)
At 31 December
1,088 1,042
1. Change in non-participating investment contract liabilities recognised in the consolidated income statement in the table above excludes £nil (2020: (£2m)) in
relation to non-participating investment contract liabilities classified as held for sale.
(e) Derivatives
The treatment of collateral accepted and pledged in respect of financial instruments and the Group’s approach to
offsetting financial assets and liabilities is described in Note 37. The following table presents the impact of master netting
agreements and similar arrangements for derivatives backing unit linked liabilities.
Related amounts not offset on the consolidated
statement of financial position
Gross amounts of financial
instruments as presented on the
consolidated statement of financial
position
Financial
instruments
Financial collateral
pledged/(received)
Net position
2021 2020 2021 2020 2021 2020 2021 2020
£m £m £m £m £m £m £m £m
Financial assets
Derivatives
1
4 5 (1) – – – 3 5
Total financial
assets
4 5 (1) – – – 3 5
Financial liabilities
Derivatives
1
(2) (2) 1 – – – (1) (2)
Total financial
liabilities
(2) (2) 1 – – – (1) (2)
1. Only OTC derivatives subject to master netting agreements have been included above.
25. Issued share capital and share premium
Shares are classified as equity instruments when there is no contractual obligation to deliver cash or other assets to
another entity on terms that may be unfavourable. The Company’s share capital consists of the number of ordinary
shares in issue multiplied by their nominal value. The difference between the proceeds received on issue of the shares
and the nominal value of the shares issued is recorded in share premium.
The movement in the issued ordinary share capital and share premium of the Company was:
2021 2020
Ordinary share capital Share premium Ordinary share capital Share premium
Issued shares fully paid 13 61/63p each £m £m 13 61/63p each £m £m
At 1 January 2,194,115,616 306 640 2,338,723,724 327 640
Shares issued in respect of share incentive
plans
2,032 – – 2,188 – –
Share buyback
(13,392,862) (1) – (144,610,296) (21) –
At 31 December
2,180,724,786 305 640 2,194,115,616 306 640
All ordinary shares in issue in the Company rank pari passu and carry the same voting rights and entitlement to receive
dividends and other distributions declared or paid by the Company.
On 7 February 2020, the Company announced a share buyback of up to £400m through on-market purchases which
commenced on 10 February 2020 and was completed on 12 February 2021. During the year ended 31 December 2021,
the Company bought back and cancelled 13,392,862 shares (2020: 144,610,296 shares). The total consideration was
£41m (2020: £362m) which includes transaction costs and any unsettled purchases of shares already transacted.
At 31 December 2021, there were no unsettled purchases of shares (2020: 507,757 shares).
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7. Group financial statements continued
The share buyback has resulted in a reduction in retained earnings of £nil (2020: £402m). At 31 December 2020, there was
an irrevocable contractual obligation with a third party to purchase the Company’s own shares of £40m. This obligation
was recognised as a part of the share buyback reduction to retained earnings of £402m for the year ended 31 December
2020, with a corresponding liability of £40m included within other financial liabilities at 31 December 2020. At 31 December
2021, there were no irrevocable contractual obligations with a third party to purchase the Company’s own shares.
An amount of £1m (2020: £21m) has been credited to the capital redemption reserve relating to the nominal value of the
shares cancelled.
The Company can issue shares to satisfy awards granted under employee incentive plans which have been approved by
shareholders. Details of the Group’s employee plans are provided in Note 43.
26. Shares held by trusts
Shares held by trusts relates to shares in abrdn plc that are held by the Standard Life Aberdeen Employee Benefit Trust
(SLA EBT), Standard Life Employee Trust (ET) and the Aberdeen Asset Management Employee Benefit Trust 2003
(AAM EBT).
The SLA EBT, ET and AAM EBT purchase shares in the Company for delivery to employees under employee incentive
plans. Purchased shares are recognised as a deduction from equity at the price paid for them. Where new shares are
issued to the SLA EBT, ET or AAM EBT the price paid is the nominal value of the shares. When shares are distributed from
the trust their corresponding value is released to retained earnings.
The number of shares held by trusts was as follows:
2021 2020
Number of shares held by trusts
Standard Life Aberdeen Employee Benefit Trust 39,630,532 37,667,681
Standard Life Employee Trust
22,688,815 23,773,359
Aberdeen Asset Management Employee Benefit Trust 2003
2,647,359 6,294,765
27. Retained earnings
The following table shows movements in retained earnings during the year. The 2020 movements are aggregated for both
continuing and discontinued operations.
2021 2020
Notes £m £m
At 1 January 4,970 2,886
Recognised in comprehensive income
Recognised in profit for the year attributable to equity holders
994 833
Recognised in other comprehensive income
Remeasurement gains on defined benefit pension plans 33
117 280
Share of other comprehensive income of associates and joint ventures
(1) –
Equity holder tax effect of items that will not be reclassified subsequently
to profit or loss
9
3 2
Total items recognised in comprehensive income
1,113 1,115
Recognised directly in equity
Dividends paid on ordinary shares
(308) (479)
Other movements in non-controlling interests in the year 29
6 –
Reclassification of preference shares to liability 29,32 – (1)
Shares buyback 25
– (402)
Transfer between reserves on impairment of subsidiaries 28
– 1,834
Transfer for vested employee share-based payments 36 38
Shares distributed by employee and other trusts
(42) (21)
Total items recognised directly in equity
(308) 969
At 31 December 5,775 4,970
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28. Movements in other reserves
In July 2006 Standard Life Group demutualised and during this process the merger reserve, the reserve arising on Group
reconstruction and the special reserve were created.
Merger reserve: the merger reserve consists of two components. Firstly at demutualisation in July 2006 the Company
issued shares to former members of the mutual company. The difference between the nominal value of these shares
and their issue value was recognised in the merger reserve. The reserve includes components attaching to each
subsidiary that was transferred to the Company at demutualisation based on their fair value at that date. Secondly
following the completion of the merger of Standard Life plc and AAM PLC on 14 August 2017, an additional amount was
recognised in the merger reserve representing the difference between the nominal value of shares issued to
shareholders of AAM PLC and their fair value at that date. On disposal or impairment of a subsidiary any related
component of the merger reserve is released to retained earnings.
Reserve arising on Group reconstruction: The value of the shares issued at demutualisation was equal to the fair value of
the business at that date. The business’s assets and liabilities were recognised at their book value at the time of
demutualisation. The difference between the book value of the business’s net assets and its fair value was recognised in
the reserve arising on Group reconstruction. The reserve comprises components attaching to each subsidiary that was
transferred to the Company at demutualisation. On disposal of such a subsidiary any related component of the reserve
arising on Group reconstruction is released to retained earnings.
Special reserve: Immediately following demutualisation and the related initial public offering, the Company reduced its
share premium reserve by court order giving rise to the special reserve. Dividends can be paid out of this reserve.
Capital redemption reserve: In August 2018, as part of the return of capital and share buyback (refer Note 25) the capital
redemption reserve was created.
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7. Group financial statements continued
The following tables show the movements in other reserves during the year.
Cash flow
hedges
Foreign
currency
translation
Merger
reserve
Equity
compensation
reserve
Special
reserve
Reserve arising on
Group reconstruction
Capital
redemption
reserve
Total
Notes £m £m £m £m £m £m £m £m
1 January 2021 12 1 483 80 115 (685) 1,058 1,064
Recognised in other
comprehensive income
Fair
value gains on cash
flow hedges
19 – – – – – – 19
Exchange differences on
translating foreign
operations
– (2) – – – – – (2)
Items transferred to profit
or loss from continuing
operations
(10) 18 – – – – – 8
Aggregate tax effect of
items recognised in other
comprehensive income
(3) – – – – – – (3)
Total items recognised in
other comprehensive
income
6 16 – – – – – 22
Recognised directly in
equity
Share buyback 25 – – – – – – 1 1
Reserves credit for
employee share-based
payments
– – – 43 – – – 43
Transfer to retained
earnings for vested
employee share-based
payments
– – – (36) – – – (36)
Total items recognised
directly within equity
– – – 7 – – 1 8
At 31 December 2021 18 17 483 87 115 (685) 1,059 1,094
The merger reserve includes £470m (2020: £470m) in relation to the Group’s asset management businesses. There were
no movements in the merger reserve in the year ended 31 December 2021. During the year ended 31 December 2020,
£1,834m was transferred from the merger reserve to retained earnings following an impairment of the Company’s
investments in its asset management subsidiaries (refer Section 8).
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Cash flow
hedges
Foreign
currency
translation
Merger
reserve
Equity
compensation
reserve
Special
reserve
Reserve arising on
Group
reconstruction
Capital
redemption
reserve
Total
Notes £m £m £m £m £m £m £m £m
1 January 2020 4 3 2,317 54 115 (685) 1,037 2,845
Recognised in other
comprehensive income
Fair value losses on cash
flow hedges
(3) – – – – – – (3)
Exchange differences on
translating foreign
operations
–
(8) – – – – – (8)
Items transferred to profit
or loss from continuing
operations
13 6 – – – – – 19
Aggregate tax effect of
items recognised in other
comprehensive income (2) – – – – – – (2)
Total items recognised in
other comprehensive
income
8
(2) – – – – – 6
Recognised directly in
equity
Share buyback 25 – – – – – – 21 21
Reserves credit for
employee share-based
payments
– – – 64 – – – 64
Transfer to retained
earnings for vested
employee share-based
payments
– – –
(38) – – – (38)
Transfer between
reserves on impairment of
subsidiaries
– – (1,834) – – – – (1,834)
Total items recognised
directly within equity
– – (1,834) 26 – – 21 (1,787)
At 31 December 2020 12 1 483 80 115 (685) 1,058 1,064
201abrdn.comAnnual report 2021
FINANCIAL INFORMATION
7. Group financial statements continued
29. Other equity and non-controlling interests
Perpetual subordinated notes issued by abrdn plc are classified as other equity where no contractual obligation to
deliver cash exists. Non-controlling interests included preference shares issued by AAM PLC.
(a) Other equity – perpetual subordinated notes
5.25% Fixed Rate Reset Perpetual Subordinated Contingent Convertible Notes
On 13 December 2021, the Company issued £210m of 5.25% Fixed Rate Reset Perpetual Subordinated Contingent
Convertible Notes (the "Notes"). The Notes are classified as other equity and have been initially recognised at £207m (the
proceeds received less issuance costs of £3m).
The Notes initially bear interest on their principal amount at 5.25% per annum payable semi-annually in arrears on 13 June
and 13 December in each year. The interest rate is subject to reset on 13 June 2027 and then every 5 years thereafter. The
payments of interest are discretionary and non-cumulative. The interest paid is recognised as profit attributable to other
equity when paid.
The Notes have no fixed redemption date. The Company has the option to redeem the Notes (in full) between
13 December 2026 and 13 June 2027 and on each interest reset date thereafter. The Notes are convertible to ordinary
shares in abrdn plc at a conversion price of £1.6275 (subject to adjustment in accordance with the terms and conditions of
the Notes) if the Group IFPR CET1 Ratio falls below 70%. The IFPR CET1 ratio at 31 December 2021 was 774%.
(b) Non-controlling interests – ordinary shares
Non-controlling interests – ordinary shares of £6m were held at 31 December 2021 (2020: £3m). The profit for the year
attributable to non-controlling interests – ordinary shares was £1m (2020: less than £1m).
(c) Non-controlling interests – preference shares
Until 4 June 2020, the Group recognised preference shares issued by AAM PLC as non-controlling interests. On 4 June 2020,
AAM PLC notified the holders of the redeemable preference shares of its irrevocable intention to redeem the preference
shares. Following notification the preference shares were reclassified as subordinated liabilities as an obligation to deliver
cash was created. Refer Note 32.
The profit attributable to these non-controlling interests from continuing operations for the year ended 31 December 2020
was £5m. Preference share dividends were discretionary and where declared, were paid in arrears in two tranches at a
rate of 5% per annum and were non-cumulative. No interest accrued on any cancelled or unpaid dividends. During the
year ended 31 December 2020 preference share dividends of £5m were paid including £2m paid as part of the
redemption of the preference shares on 8 July 2020. Refer Note 32.
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30. Insurance contracts, investment contracts and reinsurance contracts
Insurance contracts, participating investment contracts and reinsurance contracts related to SL Asia which was sold on
30 June 2020 (refer Note 1(c)(ii)).
SL Asia held non-participating insurance and investment contracts. A contract is classified as an insurance contract only if it
transfers significant insurance risk. Insurance risk is significant if an insured event could cause an insurer to pay significant
additional benefits to those payable if no insured event occurred, excluding scenarios that lack commercial substance. Life
and pensions business contracts that are not classified as insurance contracts are classified as investment contracts.
SL Asia’s insurance and investment contracts did not contain any discretionary participating features so were classified as
non-participating.
SL Asia’s non-participating investment contracts were unit linked and details of the accounting policies for these contracts
are given in Note 24. The accounting policies for SL Asia’s non-participating insurance contracts are given below.
(a)(i) Premiums, claims and change in insurance contract liabilities
Premiums received on insurance contracts are recognised as revenue in the consolidated income statement when due
for payment except for unit linked premiums which are accounted for when the corresponding liabilities are recognised.
For single premium business, this is the date from which the policy is effective. For regular (and recurring) premium
contracts, receivables are established at the date when payments are due.
Claims paid on insurance contracts are recognised as expenses in the consolidated income statement. Maturity claims
and annuities are accounted for when due for payment. Surrenders are accounted for when paid or, if earlier, on the date
when the policy ceases to be included within the calculation of the insurance liability. Death claims and all other claims are
accounted for when notified. Claims payable include the direct costs of settlement. Reinsurance recoveries are accounted
for in the same period as the related claim.
The change in insurance and participating investment contract liabilities, comprising the full movement in the
corresponding liabilities during the period, is recognised in the consolidated income statement.
(a)(ii) Measurement – non-participating insurance contract liabilities
The Group’s policy for measuring liabilities for non-participating insurance contracts issued by overseas subsidiaries is to
apply the valuation technique used in the issuing entity’s local statutory or regulatory reporting.
The Group applies a liability adequacy test at each reporting date to ensure that the insurance contract liabilities (less
related deferred acquisition costs) are adequate in the light of the estimated future cash flows. This test is performed by
comparing the carrying value of the liability and the discounted projections of future cash flows. If a deficiency is found in
the liability (i.e. the carrying value amount of its insurance liabilities is less than the future expected cash flows), that
deficiency is provided for in full. The deficiency is recognised in the consolidated income statement.
(a)(iii) Measurement – reinsurance contracts
Reinsurance contracts are measured using valuation techniques and assumptions that are consistent with the valuation
techniques and assumptions used in measuring the underlying policy benefits and taking into account the terms of the
reinsurance contract.
(a) Insurance contract premium income
2021 2020
£m £m
Gross earned premium – 32
Premium ceded to reinsurers – (1)
Insurance contract premium income from continuing operations
– 31
(b) Insurance contract claims and change in liabilities
2021 2020
£m £m
Claims and benefits paid – 28
Claim recoveries from reinsurers – –
Net insurance claims
– 28
Change in reinsurance assets and liabilities – (3)
Change in insurance contract liabilities
– (8)
Insurance contract claims and change in liabilities from continuing operations
– 17
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FINANCIAL INFORMATION
7. Group financial statements continued
31. Financial liabilities
Management determines the classification of financial liabilities at initial recognition. Financial liabilities which are
managed and whose performance is evaluated on a fair value basis are designated as at fair value through profit or
loss. Changes in the fair value of these financial liabilities are recognised in the consolidated income statement.
Derivatives are also measured at fair value. Changes in the fair value of derivatives are recognised in Net gains on
financial instruments and other income in the consolidated income statement except for derivative instruments that are
designated as a cash flow hedge or net investment hedge. The classification of derivatives and the accounting
treatment of derivatives designated as a hedging instrument are set out in Note 19.
Except for contingent consideration liabilities which are measured at fair value, other financial liabilities are classified as
being subsequently measured at amortised cost. Amortised cost is calculated, and the related interest expense is
recognised in the consolidated income statement, using the effective interest method.
All financial liabilities are initially recognised at fair value less, in the case of financial liabilities subsequently measured at
amortised cost, transaction costs that are directly attributable to the issue of the liability.
Where the terms of a financial liability measured at amortised cost are modified and the modification does not result in
the derecognition of the liability, the liability is adjusted to the net present value of the future cash flows less transaction
costs with a modification gain or loss recognised in the income statement.
The methods and assumptions used to determine fair value of financial liabilities measured at fair value through profit or
loss and derivatives are discussed in Note 39.
The table below sets out an analysis of financial liabilities excluding unit linked financial liabilities which are set out in Note 24.
At fair value through profit or
loss
1
Cash flow hedge At amortised cost Total
2021 2020 2021 2020 2021 2020 2021 2020
Notes £m £m £m £m £m £m £m £m
Third party interest in
consolidated funds
104 77 – – – – 104 77
Subordinated liabilities 32 – – – – 644 638 644 638
Derivative financial liabilities 19
5 7 – 6 – – 5 13
Other financial liabilities 35
165 6 – – 881 1,171 1,046 1,177
Total
274 90 – 6 1,525 1,809 1,799 1,905
1. All financial liabilities measured at fair value through profit or loss have been classified at FVTPL on a mandatory basis except for third party interest in
consolidated funds which the Group has designated as at FVTPL.
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32. Subordinated liabilities
Subordinated liabilities are debt instruments issued by the Company which rank below its other obligations in the event
of liquidation but above the share capital. Subordinated liabilities are initially recognised at the value of proceeds
received after deduction of issue expenses. Subsequent measurement is at amortised cost using the effective interest
rate method.
2021 2020
Notes
Principal
amount
Carrying
value
Principal
amount
Carrying
value
Subordinated notes
4.25% US Dollar fixed rate due 30 June 2028 $750m £552m $750m £546m
5.5% Sterling fixed rate due 4 December 2042
£92m £92m £92m £92m
Total subordinated liabilities 39
£644m £638m
A description of the key features of the Group’s subordinated liabilities as at 31 December 2021 is as follows:
4.25% US Dollar fixed rate
1
5.5% Sterling fixed rate
Principal amount $750m £92m
Issue date 18 October 2017 4 December 2012
Maturity date 30 June 2028 4 December 2042
Callable at par at option of the Company from
Not applicable
4 December 2022 and on every interest
payment date (semi-annually) thereafter
If not called by the Company interest will reset to
Not applicable
4.85% over the five-year gilt rate
(and at each fifth anniversary)
1. The cash flows arising from the US dollar subordinated notes give rise to foreign exchange exposure which the Group manages with a cross-currency swap
designated as a cash flow hedge. Refer Note 19 for further details.
The difference between the fair value and carrying value of the subordinated liabilities is presented in Note 39. A
reconciliation of movements in subordinated liabilities in the year is provided in Note 40.
The principal amount of all the subordinated liabilities is expected to be settled after more than 12 months. The accrued
interest on the subordinated liabilities of less than £1m (2020: less than £1m) is expected to be settled within 12 months.
During the year to 31 December 2020, the 5% 2015 Non-voting perpetual non-cumulative redeemable preference shares
issued by AAM PLC were reclassified as subordinated liabilities. Refer Note 29 for further details. The liabilities were
recognised at fair value of £102m with fair value movements since acquisition of £1m being transferred to retained
earnings. The fair value included the final dividend paid of £2m as part of the redemption. The preference shares were
redeemed on 8 July 2020 for a total consideration of £102m which included the dividend.
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FINANCIAL INFORMATION
7. Group financial statements continued
33. Pension and other post-retirement benefit provisions
The Group operates two types of pension plans:
– Defined benefit plans which provide pension payments upon retirement to members as defined by the plan rules. All
of the Group’s defined benefit plans, with the exception of a small plan in Ireland, are closed to future service accrual.
– Defined contribution plans where the Group makes contributions to a member’s pension plan but has no further
payment obligations once the contributions have been paid.
The Group’s liabilities in relation to its defined benefit plans are valued by at least annual actuarial calculations. The
Group has funded these liabilities in relation to its UK and Ireland defined benefit plans by ring-fencing assets in trustee-
administered funds. The Group has further smaller defined benefit plans some of which are unfunded.
The statement of financial position reflects a net asset or net liability for each defined benefit pension plan. The liability
recognised is the present value of the defined benefit obligation (estimated future cash flows are discounted using the
yields on high quality corporate bonds) less the fair value of plan assets, if any. If the fair value of the plan assets exceeds
the defined benefit obligation, a pension surplus is only recognised if the Group considers that it has an unconditional
right to a refund of the surplus from the plan. The amount of surplus recognised will be limited by tax and expenses. Our
judgement is that, in the UK, an authorised surplus tax charge is not an income tax. Consequently, the surplus is
recognised net of this tax charge rather than the tax charge being included within deferred taxation.
For the principal defined benefit plan (UK Standard Life Group plan), the Group considers that it has an unconditional
right to a refund of a surplus, assuming the gradual settlement of the plan liabilities over time until all members have left
the plan. The plan trustees can purchase annuities to insure member benefits and can, for the majority of benefits,
transfer these annuities to members. The trustees cannot unconditionally wind up the plan or use the surplus to enhance
member benefits without employer consent. Our judgement is that these trustee rights do not prevent us from
recognising an unconditional right to a refund and therefore a surplus.
Net interest income (if a plan is in surplus) or interest expense (if a plan is in deficit) is calculated using yields on high
quality corporate bonds and recognised in the consolidated income statement. A current service cost is also recognised
which represents the expected present value of the defined benefit pension entitlement earned by members in the
period. A past service cost is also recognised which represents the change in the present value of the defined benefit
obligation for service in prior periods, resulting from an amendment or curtailment to a plan.
Remeasurements, which include gains and losses as a result of changes in actuarial assumptions, the effect of the limit
on the plan surplus and returns on plan assets (other than amounts included in net interest) are recognised in other
comprehensive income in the period in which they occur. Remeasurements are not reclassified to profit or loss in
subsequent periods.
For defined contribution plans, the Group pays contributions to separately administered pension plans. The Group has
no further payment obligations once the contributions have been paid. The contributions are recognised in current
service cost in the consolidated income statement as staff costs and other employee-related costs when they are due.
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Defined contribution plans
The defined contribution plans comprise a mixture of arrangements depending on the employing entity and other factors. Some
of these plans are located within the same legal vehicles as defined benefit plans. The Group contributes a percentage of
pensionable salary to each employee’s plan. The contribution levels vary by employing entity and other factors.
Defined benefit plans
UK plans
These plans are governed by trustee boards, which comprise employer and employee nominated trustees and an independent
trustee. The plans are subject to the statutory funding objective requirements of the Pensions Act 2004, which require that plans
be funded to at least the level of their technical provisions (an actuarial estimate of the assets needed to provide for benefits
already built-up under the plan). The trustees perform regular valuations to check that the plans meet the statutory funding
objective.
While the IAS 19 valuation reflects a best estimate of the financial position of the plan, the funding valuation reflects a prudent
estimate. There is no material difference in how assets are measured. The funding measure of liabilities (technical provisions) and
the IAS 19 measure are materially different. The key differences are the discount rate and inflation assumptions. While IAS 19
requires that the discount rate reflect corporate bond yields, the funding measure discount rate reflects a prudent estimate of
future investment returns based on the actual investment strategy. The funding valuation adopts a market consistent measure of
inflation without any adjustment. The IAS 19 assumption incorporates an adjustment to remove the inflation risk premium believed
to exist within market prices.
The trustees set the plan investment strategy to protect the ratio of plan assets to the trustees’ measure of technical provisions.
This investment strategy does not aim to protect the IAS 19 surplus or the ratio of plan assets to the IAS 19 measure of liabilities.
After consulting the relevant employers, the trustees prepare statements of funding and investment principles and set a schedule
of contributions. If necessary, this schedule includes a recovery plan that aims to restore the funding level to the level of the
technical provisions.
UK Standard
Life Group
plan
(principal
plan)
This is the Group’s principal defined benefit plan. The plan closed to new membership in 2004 and changed from a
final salary basis to a revalued career average salary basis in 2008. Accrual ceased in April 2016.
Following a High Court ruling against a third party’s pension scheme in 2018, that required pension schemes to
address inequalities for the effect of unequal GMPs accrued between May 1990 and April 1997, an allowance for
assumed equalisation was recognised as a past service cost for our principal defined benefit plan in 2018 and this
adjustment has been carried forward to 2021. There was a further judgement in 2020 requiring pension schemes to
address inequalities for the effect of unequal GMPs for those beneficiaries that transferred out of the scheme
between May 1990 and October 2018. The estimated impact is immaterial and was recognised as a past service
cost in 2020 and this adjustment has been carried forward to 2021.
The funding of the plan depends on the statutory valuation performed by the trustees, and the relevant employers,
with the assistance of the scheme actuary – i.e. not the IAS 19 valuation. The funding valuation was last completed
as at 31 December 2019, and measured plan assets and liabilities to be £4.6bn and £3.3bn respectively. This
corresponds to a surplus of £1.3bn and funding level of 140%. As there is currently no deficit, no recovery
plan is required.
Other UK
plans
The Group also operates two UK defined benefit plans as a result of the acquisition of AAM PLC in 2017. These plans
are final salary based, with benefits depending on members’ length of service and salary prior to retirement. At the
last statutory valuation date (30 June 2019), both plans were in deficit and the Group agreed funding plans with the
plans’ trustees which aimed to eliminate the deficits. At 31 December 2021, one of the two schemes is in surplus on
an IAS 19 basis.
Other plans
Ireland
Standard
Life plan
In December 2009, this plan closed to new membership and changed from a final salary basis to a career average
revalued earnings (CARE) basis. Following the sale of the UK and European insurance business in 2018, there remain
fewer than 10 employees who continue to accrue benefits under this plan.
At the last funding valuation, effective 1 January 2019, the plan was 72% funded on an ongoing basis.
Other The Group operates smaller funded and unfunded defined benefit plans in other countries.
Plan regulations
The plans are administered according to local laws and regulations in each country. Responsibility for the governance of
the plans rests with the relevant trustee boards (or equivalent). The UK pensions market is regulated by the Pensions
Regulator whose statutory objectives and regulatory powers are described on its website,
www.thepensionsregulator.gov.uk.
(a) Analysis of amounts recognised in the consolidated income statement
The amounts recognised in the consolidated income statement for defined contribution and defined benefit plans are as
follows:
2021 2020
£m £m
Current service cost 53 59
Net interest income (21) (23)
Administrative expenses
4 3
Expense from continuing operations recognised in the consolidated income statement
36 39
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FINANCIAL INFORMATION
7. Group financial statements continued
Contributions made to defined contribution plans are included within current service cost, with the balance attributed to
the Group’s defined benefit plans.
Contributions to defined benefit plans in the year ended 31 December 2021 comprised £14m (2020: £14m) to the Other
UK plans and the Ireland Standard Life plan. Contributions are not expected to change materially over 2022 and the
subsequent two years. These contributions include a mixture of deficit funding and funding to achieve a targeted level of
overall financial strength.
(b) Analysis of amounts recognised in the consolidated statement of financial position
2021 2020
Principal
plan
Other Total
Principal
plan
Other Total
£m £m £m £m £m £m
Present value of funded obligation (2,899) (350) (3,249) (3,015) (375) (3,390)
Present value of unfunded
obligation
– (3) (3) – (4) (4)
Fair value of plan assets 5,337 349 5,686 5,253 343 5,596
Effect of limit on plan surplus
(853) (12) (865) (783) – (783)
Net asset/(liability)
1,585 (16) 1,569 1,455 (36) 1,419
A pension plan surplus is considered to be recoverable as a right to a refund exists. The recoverable surplus is reduced to
reflect an authorised surplus payments charge that would arise on a refund. This applies to both the principal plan surplus
and a defined benefit plan within Other which has a surplus of £22m at 31 December 2021 (2020: £19m).
(c) Movement in the net defined benefit asset
Present value
of obligation
Fair value of
plan assets
Total
Effect of limit on plan
surpluses
Total
2021 2020 2021 2020 2021 2020 2021 2020 2021 2020
£m £m £m £m £m £m £m £m £m £m
At 1 January (3,394) (3,194) 5,596 4,917 2,202 1,723 (783) (615) 1,419 1,108
Total expense
Current service cost – (1) – – – (1) – – – (1)
Interest (expense)/income
(48) (63) 80 99 32 36 (11) (13) 21 23
Administrative expenses
(4) (3) – – (4) (3) – – (4) (3)
Total (expense)/income
recognised in consolidated income
statement
(52) (67) 80 99 28 32 (11) (13) 17 19
Remeasurements
Return on plan assets, excluding
amounts included in interest
income
– – 120 712 120 712 – – 120 712
Gain from change in
demographic assumptions
– 286 – – – 286 – – – 286
Loss from change in financial
assumptions
144 (607) – – 144 (607) – – 144 (607)
Experience gains
(78) 44 – – (78) 44 – – (78) 44
Change in effect of limit on plan
surplus
– – – – – – (69) (155) (69) (155)
Remeasurement (losses)/gains
recognised in other comprehensive
income
66 (277) 120 712 186 435 (69) (155) 117 280
Exchange differences 10 (7) (7) 5 3 (2) – – 3 (2)
Employer contributions – – 14 14 14 14 (2) – 12 14
Benefit payments
118 151 (117) (151) 1 – – – 1 –
At 31 December
(3,252) (3,394) 5,686 5,596 2,434 2,202 (865) (783) 1,569 1,419
(d) Defined benefit plan assets
Investment strategy is directed by the trustee boards (where relevant) who pursue different strategies according to the
characteristics and maturity profile of each plan’s liabilities. Assets and liabilities are managed holistically to create a
portfolio with the dual objectives of return generation and liability management. In the principal plan this is achieved
through a diversified multi-asset absolute return strategy seeking consistent positive returns, and hedging techniques
which protect liabilities against movements arising from changes in interest rates and inflation expectations. Derivative
financial instruments support both of these objectives and may lead to increased or decreased exposures to the physical
asset categories disclosed below.
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To provide more information on the approach used to determine and measure the fair value of the plan assets, the fair
value hierarchy has been used as defined in Note 39. Those assets which cannot be classified as level 1 have been
presented together as level 2 or 3.
The distribution of the fair value of the assets of the Group’s funded defined benefit plans is as follows:
Principal plan Other Total
2021 2020 2021 2020 2021 2020
£m £m £m £m £m £m
Assets measured at fair value based on level 1 inputs
Derivatives 8 2 – – 8 2
Equity securities – 183 – – – 183
Interests in pooled investment funds
Debt – – – – – –
Equity
– – – – – –
Property
– – – – – –
Absolute return
– – – – – –
Cash – – – – – –
Debt securities
4.557 4,431 – – 4,557 4,431
Total assets measured at fair value based on level 1 inputs
4,565 4,616 – – 4,565 4,616
Assets measured at fair value based on level 2 or 3 inputs
Derivatives 43 95 18 – 61 95
Equity securities
100 101 – – 100 101
Interests in pooled investment funds
Debt
440 434 12 13 452 447
Equity
– 37 18 32 18 69
Multi-asset private markets 194 164 – – 194 164
Property
139 119 12 12 151 131
Absolute return
77 74 92 100 169 174
Cash 15 43 37 16 52 59
Debt securities
415 139 99 78 514 217
Qualifying insurance policies
3 3 76 80 79 83
Total assets measured at fair value based on level 2 or 3 inputs
1,426 1,209 364 331 1,790 1,540
Cash and cash equivalents 138 175 2 12 140 187
Liability in respect of collateral held (792) (743) (17) – (809) (743)
Other – (4) – – – (4)
Total
5,337 5,253 349 343 5,686 5,596
Further information on risks is provided in Section (g) of this note. The £5,071m (2020: £4,648m) of debt securities includes
£4,884m (2020: £4,487m) government bonds (including conventional and index-linked). Of the remaining £187m (2020:
£161m) debt securities, £108m (2020: £101m) are investment grade corporate bonds or certificates of deposit.
Included in the qualifying insurance policy asset of £79m (2020: £83m) is an insurance policy purchased by the trustees of
one of the Other UK defined benefit plans to protect the plan against future investment and actuarial risks.
The £809m liability in respect of collateral held (2020: £743m) consists of repurchase agreements of £786m (2020: £647m),
margins on derivatives of (£10m) (2020: £51m) and collateral of £33m (2020: £45m).
One Other UK plan has a contract in place to hedge longevity risk for pensioners. The fair value of this derivative is £nil at 31
December 2021 (2020: £nil).
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7. Group financial statements continued
(e) Estimates and assumptions
Determination of the valuation of principal plan liabilities is a key estimate as a result of the assumptions made relating to
both economic and non-economic factors.
The key economic assumptions for the principal plan, which are based in part on current market conditions, are shown
below:
2021 2020
% %
Discount rate 2.05 1.45
Rates of inflation
Consumer Price Index (CPI) 2.85 2.40
Retail Price Index (RPI) 3.25 2.90
The changes in economic assumptions over the period reflect changes in both corporate bond prices and market
implied inflation. The population of corporate bond prices excludes bonds issued by UK universities. The inflation
assumption reflects the future reform of RPI effective from 2030 as described in Section (g)(i) below.
The most significant non-economic assumption for the principal plan is post-retirement longevity which is inherently
uncertain. The assumptions (along with sample expectations of life) are illustrated below:
Normal Retirement Age
(NRA)
Expectation of life from NRA
Male age today Female age today
2021 Table Improvements NRA 40 NRA 40
Plan specific basis
(calibrated by Club
Vita) reflecting
membership
demographics
Core parameterisation of the CMI
2019 mortality improvements model
(SK parameter of 7.0), with an initial
improvement (or ‘A’) parameter of
+0.5% for males and females, and a
long-term rate of improvement of
1.5%.
60 27 29 29 31
Normal Retirement
Age (NRA)
Expectation of life from NRA
Male age today Female age today
2020 Table Improvements NRA 40 NRA 40
Plan specific basis
(calibrated by Club
Vita) reflecting
membership
demographics
Core parameterisation of the CMI
2019 mortality improvements model
(SK parameter of 7.0), with an initial
improvement (or ‘A’) parameter of
+0.5% for males and females, and a
long-term rate of improvement of
1.5%.
60 27 28 29 31
These assumptions reflect a cautious allowance for the recently observed slowdown in longevity improvements. The
mortality assumptions have not been updated for COVID-19 at this point as the impact on long-term mortality rates for
pension scheme members is not clear.
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(f) Duration of defined benefit obligation
The graph below provides an illustration of the undiscounted expected benefit payments included in the valuation of the
principal plan obligations.
Undiscounted benefit payments (£m)
2021 2020
Weighted average duration years years
Current pensioner 14 14
Non-current pensioner 27 27
(g) Risk
(g)(i) Risks and mitigating actions
The Group’s consolidated statement of financial position is exposed to movements in the defined benefit plans’ net asset. In
particular, the consolidated statement of financial position could be materially sensitive to reasonably likely movements in
the principal assumptions for the principal plan. By offering post-retirement defined benefit pension plans the Group
is exposed to a number of risks. An explanation of the key risks and mitigating actions in place for the principal plan
is given below.
Asset volatility
Investment strategy risks include underperformance of the absolute return strategy and underperformance of the liability
hedging strategy. As the trustees set investment strategy to protect their own view of plan strength (not the IAS 19 position),
changes in the IAS 19 liabilities (e.g. due to movements in corporate bond prices) may not always result in a similar
movement in plan assets.
Failure of the asset strategy to keep pace with changes in plan liabilities would expose the plan to the risk of a deficit
developing, which could increase funding requirements for the Group.
Yields/discount rate
Falls in yields would in isolation be expected to increase the defined benefit plan liabilities.
The principal plan uses both bonds and derivatives to hedge out yield risks on the plan’s funding basis, rather than the IAS 19
basis, which is expected to minimise the plan’s need to rely on support from the Group.
Inflation
Increases in inflation expectations would in isolation be expected to increase the defined benefit plan liabilities.
0
20
40
60
80
100
120
140
Non-current pensioner
Current pensioner
2022 2030 2040 2090 2110
2100
2070 2120208020602050
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FINANCIAL INFORMATION
7. Group financial statements continued
The principal plan uses both bonds and derivatives to hedge out inflation risks on the plan’s funding basis, rather than the
IAS 19 basis, which is expected to minimise the plan’s need to rely on support from the Group.
In the principal plan pensions in payment are generally linked to CPI, however inflationary risks are hedged using RPI
instruments due to lack of availability of CPI linked instruments. Therefore, the plan is exposed to movements in the actual
and expected long-term gap between RPI and CPI.
A House of Lords report in 2019 raised the potential for changes to the RPI measure of inflation, which was followed by
recommendations from the UK Statistics Authority. The results of the consultation on the reform of RPI (announced on
25 November 2020) confirmed that RPI will be aligned to CPIH (CPI excluding owner occupiers’ housing costs) as proposed,
but not before 2030. While uncertainty remains, there is a risk that future cash flows from, and thus the value of, the plan’s
RPI-linked assets fall without a corresponding reduction in the plan’s CPI-linked liabilities. While not directly observable
from market data, the plan’s RPI-linked asset values may already reflect an element of the expected changes and
risk of such changes.
Life expectancy
Increases in life expectancy beyond those currently assumed will lead to an increase in plan liabilities. Regular reviews of
longevity assumptions are performed to ensure assumptions remain appropriate.
(g)(ii) Sensitivity to key assumptions
The sensitivity of the principal plan’s obligation and assets to the key assumptions is disclosed below.
2021 2020
Change in assumption
(Increase)/decrease in
present value
of obligation
Increase/(decrease) in fair
value of
plan assets
(Increase)/decrease
in present value
of obligation
Increase/(decrease)
in fair value of
plan assets
£m £m £m £m
Yield/discount rate
Decrease by 1% (e.g. from
2.05% to 1.05%)
(735) 1,584 (776) 1,666
Increase by 1% 586 (1,185) 617 (1,232)
Rates of inflation Decrease by 1%
498 (1,029) 555 (1,036)
Increase by 1% (670) 1,402 (698) 1,430
Life expectancy Decrease by 1 year 99 N/A 103 N/A
Increase by 1 year (99) N/A (103) N/A
34. Deferred income
Where the Group receives fees in advance (front-end fees) for services it is providing, including investment
management services, these fees are initially recognised as a deferred income liability and released to the consolidated
income statement over the period services are provided.
2021 2020
£m £m
At 1 January 73 67
Additions during the year 2 25
Released to the consolidated income statement as revenue from contracts with
customers
(70) (19)
At 31 December 5 73
The amount of deferred income expected to be settled after more than 12 months is £nil (2020: £3m).
As detailed in Note 1(c)(iii), in May 2021 the Group transferred workplace pensions marketing staff to Phoenix, who were
employed by the Group but provided services to Phoenix, and made an associated payment of £32m to Phoenix. As a
result, the Group released related deferred income of £57m in May 2021. The release of deferred income has been
recognised in revenue from contracts with customers in the consolidated income statement net of the £32m payment.
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35. Other financial liabilities
2021 2020
Notes £m £m
Outstanding purchases of investment securities 5 6
Accruals 377 408
Creation of units awaiting settlement
107 121
Lease liabilities 17
225 249
Cash collateral held in respect of derivative contracts 37
15 14
Bank overdrafts 23 62 202
Contingent consideration liabilities 39
165 6
Outstanding contractual obligation for share buyback 25
– 40
Other
90 131
Other financial liabilities 1,046 1,177
The amount of other financial liabilities expected to be settled after more than 12 months is £303m (2020: £217m).
Accruals includes £nil (2020: £nil) relating to contracts with customers (refer Note 3(d)).
36. Provisions and other liabilities
Provisions are obligations of the Group which are of uncertain timing or amount. They are recognised when the Group
has a present obligation as a result of a past event, it is probable that a loss will be incurred in settling the obligation and a
reliable estimate of the amount can be made.
(a) Provisions
The movement in provisions during the year is as follows:
Separation costs Other provisions Total provisions
2021 2020 2021 2020 2021 2020
£m £m £m £m £m £m
At 1 January 68 77 25 25 93 102
Charged/(credited) to the consolidated income
statement
Additional provisions – – 7 16 7 16
Release of unused provision
(25) – (1) (7) (26) (7)
Used during the year
(8) (9) (17) (9) (25) (18)
At 31 December
35 68 14 25 49 93
The provision for separation costs of £35m (2020: £68m) is for costs expected to be incurred following the sale of the UK
and European insurance business to Phoenix. Our judgement is that a provision should be recognised for costs for which
the Group will not derive ongoing benefits such as those relating to the de-coupling and decommissioning of systems and
data but that a provision should not be recognised for costs related to the development of replacement systems and
services as these will give future benefits. Our estimate of the total separation costs, including those relating to the
development of replacement systems and services, remains unchanged at £310m of which £309m has been accounted
for as at 31 December 2021. The £309m includes the £80m provision recognised in 2018 for separation costs of which
£35m remains unused at 31 December 2021. The main uncertainty relating to the provision relates to the costs required to
complete the de-coupling of systems including amounts payable to Phoenix. Following a reassessment of these de-
coupling costs during the year, £25m (2020: £nil) was released from the provision. The remaining costs covered by the
provision are expected to be incurred in the next year.
Other provisions primarily relate to dilapidations. Dilapidations are generally expected to be settled after more than
12 months.
The amount of provisions expected to be settled after more than 12 months is £10m (2020: £12m).
(b) Other liabilities
As at 31 December 2021, other liabilities totalled £8m (2020: £6m). The amount of other liabilities expected to be settled
after more than 12 months is £3m (2020: £2m).
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FINANCIAL INFORMATION
7. Group financial statements continued
37. Financial instruments risk management
(a) Overview
The principal risks and uncertainties that affect the Group’s business model and the Group’s approach to risk
management are set out in the Risk management section of the Strategic report.
The Group’s exposure to financial instrument risk is derived from the financial instruments that it holds directly, the assets
and liabilities of the unit linked funds of the life operations of the Group and the Group’s defined benefit pension plans. In
addition due to the nature of the business, the Group’s secondary exposure extends to the impact on investment
management and other fees that are determined on the basis of a percentage of AUM and are therefore impacted by
financial risks borne by third party investors. In this note, exposures and sensitivities provided relate to the financial
instrument assets and liabilities, in scope of IFRS 7, to which the shareholder is directly exposed.
For the purposes of this note:
– Shareholder business refers to the assets and liabilities to which the shareholder is directly exposed. The shareholder
refers to the equity holders of the Company and the preference shareholders.
– Unit linked funds refers to the assets and liabilities of the unit linked funds of the life operations of the Group. It does not
include the cash flows (such as asset management charges or investment expenses) arising from the unit linked fund
contracts. These cash flows are included in shareholder business.
– Third party interest in consolidated funds and non-controlling interests refers to the assets and liabilities recorded on the
Group’s consolidated statement of financial position which belong to third parties. The Group controls the entities which
own the assets and liabilities but the Group does not own 100% of the equity or units of the relevant entities.
Unit linked funds are excluded from the analysis in this note. Details regarding the financial risks of instruments relating to
the Group’s unit linked funds can be found in Note 24 and the risks relating to the Group’s principal defined benefit pension
plan are explained in Note 33.
Third party interests in consolidated funds do not expose the shareholder to market, credit or liquidity risk since the financial
risks from the assets and obligations are borne by third parties. As a result equity risk, interest rate risk and credit risk
quantitative disclosures in this note exclude these assets.
Under IFRS 7 the following financial instruments are excluded from scope:
– Interests in subsidiaries, associates and joint ventures.
– Rights and obligations arising from employee benefit plans.
– Insurance contracts as defined by IFRS 4.
– Share-based payment transactions.
For the purposes of managing risks to the Group’s financial instrument assets and liabilities, the Group considers the
following categories:
Risk Definition and exposure
Market
The risk of financial loss as a result of adverse financial market movements. The shareholder is directly
exposed to the impact of movements in equity prices, interest rates and foreign exchange rates on the value
of assets held by the shareholder business.
Credit
The risk of financial loss as a result of the failure of a counterparty, issuer or borrower to meet their obligations
or perform them in a timely manner. The shareholder is directly exposed to credit risk from holding cash, debt
securities, loans and derivative financial instruments.
Liquidity
The risk of financial loss as a result of being unable to settle financial obligations when they fall due, as a result
of having insufficient liquid resources or being unable to realise investments and other assets other than at
excessive costs. The shareholder is directly exposed to the liquidity risk from the shareholder business if it is
unable to realise investments and other assets in order to settle its financial obligations when they fall due, or
can do so only at excessive cost.
As set out in the Risk management section of the Strategic report, the Group reviews and manages climate related risks.
We have considered the implications of climate related risk for the 2021 financial statements and have concluded that
there are no impacts on the valuation of the Group’s assets and liabilities including the valuation of financial instruments
held at fair value through profit or loss (in particular in relation to level 3 investments) or at amortised cost (in particular in
relation to expected credit losses).
(b) Market risk
The Group’s largest exposure to market risk relates to our investments in Phoenix, HDFC Life and HDFC Asset Management.
Refer Sections (b)(i)(i) and (b)(i)(iii) below for further details of the equity and foreign currency risks on these investments.
Other market risk exposures primarily arise as a result of holdings in newly established investment vehicles which the Group
has seeded and co-investments in property and infrastructure funds in the Investments segment (previously part of the
Asset management, platforms and wealth segment). Seed capital is classified as held for sale when it is the intention to
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Annual report 2021
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dispose of the vehicle in a single transaction and within one year. Co-investments are typically held for a longer term and
align the Group’s economic interests with those of property, private equity and infrastructure fund co-investors. The
consolidated statement of financial position includes the following amounts in respect of seed capital and co-investments.
2021 2020
Notes £m £m
Equity securities and interests in pooled investment funds at FVTPL
239 222
Debt securities
76 54
Assets held for sale 22
– 1
Total seed capital
315 277
Equity securities and interests in pooled investment funds at FVTPL
96 86
Total co-investments
96 86
The Group sets limits for investing in seed capital and co-investment activity and regularly monitors exposures arising from
these investments. The Group will consider hedging its exposure to market risk in respect of seed capital investments
where it is appropriate and efficient to do so. The Group will also consider hedging its exposure to currency risk in respect of
co-investments where it is appropriate and efficient to do so. Other market risks associated with co-investments are not
hedged given the need for the Group’s economic interests to be aligned with those of the co-investors.
(b)(i) Elements of market risk
The main elements of market risk to which the Group is exposed are equity risk, interest rate risk and foreign currency risk,
which are discussed on the following pages.
Information on the methods used to determine fair values for each major category of financial instrument measured at fair
value is presented in Note 39.
(b)(i)(i) Exposure to equity risk
The Group is exposed to the risk of adverse equity market movements which could result in losses. This applies to daily
changes in the market values and returns on the holdings in equity securities.
At 31 December 2021 the shareholder exposure to equity markets was £2,584m (2020: £1,411m) in relation to equity
securities. This primarily relates to the Group’s investments in Phoenix of £941m (2020: £nil), HDFC Life of £508m (2020:
£1,216m) and HDFC Asset Management of £840m (2020: £nil), seed capital investments of £188m (2020: £109m),
and equity securities held by the abrdn Financial Fairness Trust (formerly named the Standard Life Foundation)
of £69m (2020: £53m).
The Group is also exposed to adverse market price movements on its interests in pooled investment funds. The
shareholder exposure of £456m (2020: £523m) to pooled investment funds primarily relates to £147m (2020: £199m) of
seed capital and co-investments, corporate funds held in absolute return funds of £218m (2020: £223m), investments in
certain managed funds to hedge against liabilities from variable pay awards that are deferred and settled in cash by
reference to the price of those funds of £56m (2020: £58m) and pooled investment funds held by the abrdn Financial
Fairness Trust of £31m (2020: £36m).
The Equities and interests in pooled investment funds at FVTPL included in the consolidated statement of financial position
includes £75m (2020: £46m) relating to third party interest in consolidated funds and non-controlling interests – ordinary
shares to which the shareholder is not exposed.
Exposures to equity risk are primarily managed though the hedging of market risk in respect of seed capital investments
where it is appropriate and efficient to do so. Additionally limits are imposed on the amount of seed capital and co-
investment activity that may be undertaken. The Group does not hedge equity risk in relation to its investments in Phoenix,
HDFC Life and HDFC Asset Management.
(b)(i)(ii) Exposure to interest rate risk
Interest rate risk is the risk that arises from exposures to changes in the shape and level of yield curves which could result in
losses due to the value of financial assets and liabilities, or the cash flows relating to these, fluctuating by different amounts.
The main financial assets held by the Group which give rise to interest rate risk are debt securities and cash and cash
equivalents. The Group is also exposed to interest rate risk on its investments in pooled investment funds where the
underlying instruments are exposed to interest rate risk.
Interest rate exposures are managed in line with the Group’s risk appetite.
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7. Group financial statements continued
(b)(i)(iii) Exposure to foreign currency risk
Foreign currency risk arises where adverse movements in currency exchange rates impact the value of revenues received
from, and the value of assets and liabilities held in, currencies other than UK Sterling. The Group’s financial assets are
generally held in the local currency of its operational geographic locations. The Group generally does not hedge the
currency exposure relating to revenue and expenditure, nor does it hedge translation of overseas profits in the income
statement. Where appropriate, the Group may use derivative contracts to reduce or eliminate currency risk arising from
individual transactions or seed capital and co-investment activity. The Group does not hedge foreign exchange risk in
relation to its investments in HDFC Life and HDFC Asset Management.
The table below summarises the financial instrument exposure to foreign currency risks in UK Sterling.
UK
Sterling Indian Rupee Euro
US
Dollar
Singapore
Dollar
Other
currencies Total
2021 2020 2021 2020 2021 2020 2021 2020 2021 2020 2021 2020 2021 2020
Notes £m £m £m £m £m £m £m £m £m £m £m £m £m £m
Financial assets 18 4,606 3,170 1,348 1,233 212 258 552 373 56 37 126 179 6,900 5,250
Financial
liabilities
31
(1,044) (1,025) – – (25) (60) (692) (750) (15) (23) (23) (47) (1,799) (1,905)
Cash flow
hedges
(554) (549) – – – – 554 549 – – – – – –
Non-
designated
derivatives
330 297 (1) – (79) (80) (203) (156) (1) (1) (46) (60) – –
3,338 1,893 1,347 1,233 108 118 211 16 40 13 57 72 5,101 3,345
The Indian Rupee exposure primarily relates to the Group’s investments in HDFC Life and HDFC Asset Management. Other
currencies include assets of £8m (2020: £10m) and liabilities of £1m (2020: liabilities of £6m) in relation to the fair value of
derivatives used to manage currency risk.
On 18 October 2017, the Group issued US dollar subordinated notes with a principal amount of US$750m. The related cash
flows expose the Group to foreign currency risk on the principal and coupons payable. The Group manages the foreign
exchange risk with a cross-currency swap which is designated as a cash flow hedge.
Non-designated derivatives relate to foreign exchange forward contracts that are not designated as cash flow hedges
or net investment hedges and primarily relate to the management of currency risk arising from seed capital and
co-investment activity.
In addition to financial instruments analysed above, the principal source of foreign currency risk for shareholders arises
from the Group's investments in overseas subsidiaries and associates and joint ventures accounted for using the equity
method. The carrying value of the Group’s Chinese joint venture is disclosed in Note 15. The Group does not hedge foreign
currency risk in relation to these investments.
(b)(ii) Sensitivity of financial instruments to market risk analysis
The Group’s profit after tax and equity are sensitive to variations in respect of the Group’s market risk exposures and a
sensitivity analysis is presented below. The analysis has been performed by calculating the sensitivity of profit after tax and
equity to changes in equity security prices (equity risk), changes in interest rates (interest rate risk) and changes in foreign
exchange rate (foreign currency risk) as at the reporting date applied to assets and liabilities other than those classified as
held for sale, and after allowing for the Group’s hedging strategy.
The variables used in the sensitivity analysis are considered reasonable assumptions and are consistent with market peers.
Changes to variables are provided by internal specialists who determine what are reasonable assumptions.
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Profit after tax and equity sensitivity to market risk
31 December 2021 31 December 2020
A reasonable change in
the variable within the
next calendar year
Increase/(decrease) in
post-tax profit
A reasonable change
in the variable within
the next calendar
year
Increase/(decrease)
in
post-tax profit
% £m % £m
Equity prices Increase 10 246 10 146
Decrease 10 (246) 10 (146)
Indian Rupee against US Dollar Strengthen
10 139 10 136
Weaken 10 (114) 10 (110)
US Dollar against Sterling Strengthen
10 22 10 11
Weaken 10 (18) 10 (9)
Euro against Sterling Strengthen
10 12 10 12
Weaken 10 (10) 10 (9)
The equity prices and Indian Rupee sensitivities primarily relate to the Group’s investments in HDFC Life and HDFC Asset
Management. The Group’s investment in HDFC Life is held by an intermediate subsidiary which has a US Dollar functional
currency.
The reasonable change in variables have no impact on any other components of equity. These sensitivities concern only
the impact on financial instruments and exclude indirect impacts of the variable on fee income and certain costs which
may be affected by the changes in market conditions.
Interest rate sensitivity to a reasonable change in the variable within the next calendar year is not material in both 2021
and 2020.
Limitations
The sensitivity of the Group’s profit after tax and equity may be non-linear and larger or smaller impacts should not be
derived from these results. The sensitivities provided illustrate the impact of a reasonably possible change in a single
sensitivity factor, while the other sensitivity factors remain unchanged. Correlations between the different risks and/or
other factors may mean that experience would differ from that expected if more than one risk event occurred
simultaneously.
(c) Credit risk
Exposures to credit risk and concentrations of credit risk are managed by setting exposure limits for different types of
financial instruments and counterparties. The limits are established using the following controls:
Financial instrument with credit risk exposure Control
Cash and cash equivalents
Maximum counterparty exposure limits are set with reference to internal credit
assessments.
Derivative financial instruments
Maximum counterparty exposure limits, net of collateral, are set with reference to internal
credit assessments. The forms of collateral that may be accepted are also specified and
minimum transfer amounts in respect of collateral transfers are documented.
Debt securities The Group’s policy is to set exposure limits by name of issuer, sector and credit rating.
Other financial instruments
Appropriate limits are set for other financial instruments to which the Group may have
exposure at certain times.
Group Treasury perform central monitoring of exposures against limits and are responsible for the escalation of any limit
breaches to the Chief Risk Officer.
Expected credit losses (ECL) are calculated on financial assets which are measured at amortised cost.
Financial assets attract an ECL allowance equal to either:
12 month ECL (losses resulting from possible
default within the next 12 months)
No significant increase in credit risk since initial recognition.
Trade receivables or contract assets with significant financing component, or
lease receivables if lifetime ECL measurement has not been elected.
Lifetime ECL (losses resulting from possible
defaults over the remaining life of the financial
asset)
Significant increase in credit risk since initial recognition.
Trade receivables or contract assets with no significant financing component.
Trade receivables or contract assets with significant financing component, or
lease receivables for which lifetime ECL measurement has been elected.
Changes in Lifetime ECL
Credit-impaired at initial recognition.
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FINANCIAL INFORMATION
7. Group financial statements continued
In determining whether a default has taken place, or where there is an increased risk of a default, a number of factors are
taken into account including a deterioration in the credit quality of a counterparty, the number of days that a payment is
past due, and specific events which could impact a counterparty’s ability to pay.
The Group assumes that a significant increase in credit risk has arisen when contractual payments are more than 30 days
past due. The Group assumes that credit risk on a financial instrument has not increased significantly since initial
recognition if the financial instrument is determined to have low credit risk at the reporting date. Financial instruments with
an external rating of ‘investment grade’ are presumed to have low credit risk in the absence of evidence to the contrary.
Investment grade financial instruments are financial assets with credit ratings assigned by external rating agencies
with classification within the range of AAA to BBB. If a financial asset is not rated by an external agency it is classified
as ‘not rated’.
The Group applies the simplified approach, as permitted under IFRS 9, to calculate the ECL allowance for trade receivables
and contract assets including accrued income from contracts with customers and lease receivables. Under the simplified
approach, the ECL allowance is calculated over the remaining life of the asset, using a provision matrix approach based on
historic observed default rates adjusted for knowledge of specific events which could influence loss rates. Historically,
default levels have been insignificant. Trade debtors past due but not in default as at 31 December 2021 were £77m (2020:
£44m) the majority of which were less than 90 days past due (2020: less than 90 days). Of amounts greater than 90 days at
31 December 2021, less than £16m had not been received at the date of this report of which no single counterparty
represented more than £3m.
At 31 December 2021 the Group does not hold financial assets at amortised cost that it regards as credit-impaired or for
which it considers the probability of default would result in material expected credit losses. The expected credit losses
recognised were less than £1m (2020: less than £1m). In making this assessment the Group has considered if any evidence
is available to indicate the occurrence of an event which would result in a detrimental impact on the estimated future cash
flows of these assets.
(c)(i) Credit exposure
The following table presents an analysis of the credit quality of shareholder financial assets and the maximum exposure to
credit risk without taking into account any collateral held.
Amortised cost
Fair value through profit
or loss Cash flow hedge
12 month
ECL
Lifetime ECL – not
credit impaired Total
2021 2020 2021 2020 2021 2020 2021 2020 2021 2020
£m £m £m £m £m £m £m £m £m £m
AAA – – – – 134 151 – – 134 151
AA+ to AA- 241 88 – – 396 467 – – 637 555
A+ to A-
618 631 8 – 1,446 1,088 – – 2,072 1,719
BBB
82 61 – – 131 117 – – 213 178
BB
– – – – – – 6 6 6 6
Not rated
32 31 – – 241 255 418 352 691 638
Gross carrying amount
973 811 8 – 2,348 2,078 424 358 3,753 3,247
Loss allowance – – – – – – – – – –
Carrying amount
973 811 8 – 2,348 2,078 424 358 3,753 3,247
De
rivative financial assets
6 18 8 – – – – – 14 18
Debt securities
936 763 – – 221 320 5 5 1,162 1,088
Receivables and other financial assets
31 30 – – 231 244 418 352 680 626
Cash and cash equivalents
– – – – 1,896 1,514 1 1 1,897 1,515
Carrying amount
973 811 8 – 2,348 2,078 424 358 3,753 3,247
In the table above debt securities exclude debt securities relating to third party interests in consolidated funds of £25m
(2020: £24m). Cash and cash equivalents exclude cash and cash equivalents relating to third party interests in
consolidated funds of £7m (2020: £7m). Derivative financial assets exclude derivative financial assets relating to third party
interests in consolidated funds of £nil (2020: £nil). Receivables and other financial assets exclude receivables and other
financial assets relating to third party interests in consolidated funds of £nil (2020: £nil). The shareholder is not exposed to
the credit risk in respect of third party interests in consolidated funds since the financial risk of the assets are borne by third
parties.
(c)(ii) Collateral accepted and pledged in respect of financial instruments
Collateral in respect of bilateral over-the-counter (OTC) derivative financial instruments and bilateral repurchase
agreements is accepted from and provided to certain market counterparties to mitigate counterparty risk in the event of
default. The use of collateral in respect of these instruments is governed by formal bilateral agreements between the
218 abrdn.com
Annual report 2021
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parties. For OTC derivatives the amount of collateral required by either party is determined by the daily bilateral OTC
exposure calculations in accordance with these agreements and collateral is moved on a daily basis to ensure there is full
collateralisation. Under the terms of these agreements, collateral is posted with the ownership captured under title transfer
of the contract. With regard to either collateral pledged or accepted, the Group may request the return of, or be required
to return, collateral to the extent it differs from that required under the daily bilateral OTC exposure calculations.
Where there is an event of default under the terms of the agreements, any collateral balances will be included in the close-
out calculation of net counterparty exposure. At 31 December 2021, the Group had pledged £26m (2020: £28m) of cash
and £nil (2020: £nil) of securities as collateral for derivative financial liabilities. At 31 December 2021, the Group had
accepted £15m (2020: £14m) of cash and £50m (2020: £120m) of securities as collateral for derivatives financial assets
and reverse repurchase agreements. None of the securities were sold or repledged at the year end.
(c)(iii) Offsetting financial assets and liabilities
Financial assets and liabilities are offset and the net amount reported on the consolidated statement of financial position
only when there is a legally enforceable right to offset the recognised amounts and there is an intention to settle on a net
basis, or to realise the asset and settle the liability simultaneously.
Other than cash and cash equivalents disclosed in Note 23, the Group does not offset financial assets and liabilities on the
consolidated statement of financial position, as there are no unconditional rights to set off. Consequently, the gross amount
of other financial instruments presented on the consolidated statement of financial position is the net amount. The Group’s
bilateral OTC derivatives are all subject to an International Swaps and Derivative Association (ISDA) master agreement.
ISDA master agreements and reverse repurchase agreements entered into by the Group are considered master netting
agreements as they provide a right of set off that is enforceable only in the event of default, insolvency, or bankruptcy.
The Group does not hold any other financial instruments which are subject to master netting agreements or similar
arrangements.
The following table presents the effect of master netting agreements and similar arrangements.
Related amounts not offset on the
consolidated
statement of financial position
Gross amounts of financial
instruments as presented on the
consolidated statement of
financial position
Financial
instruments
Financial collateral
pledged/(received)
Net position
2021 2020 2021 2020 2021 2020 2021 2020
£m £m £m £m £m £m £m £m
Financial assets
Derivatives
1
8 11 – (3) (8) (1) – 7
Reverse repurchase
agreements
50 120 – – (50) (120) – –
Total financial assets
58 131 – (3) (58) (121) – 7
Financial liabilities
Derivatives
1
(2) (11) – 3 – 1 (2) (7)
Total financial liabilities
(2) (11) – 3 – 1 (2) (7)
1. Only OTC derivatives subject to master netting agreements have been included above.
(d) Liquidity risk
The shareholder is exposed to liquidity risk if the Group is unable to realise investments and other assets in order to settle its
financial obligations when they fall due, or can do so only at excessive cost. The following quantitative liquidity risk
disclosures are provided in respect of these financial liabilities.
The Group has a liquidity risk framework and processes in place for monitoring, assessing, and controlling liquidity risk.
This framework ensures that liquidity risks are identified for each entity in the Group. Stress testing of these risks is
performed to understand the quantum of risk under stress conditions. This then informs the level of liquid resources that
need to be maintained. Where appropriate, this is enhanced with external credit facilities and the Group has a syndicated
revolving credit facility of £400m which was undrawn at 31 December 2021.
The level of liquid resources in the Group is also projected under a number of adverse scenarios. These are described more
fully in the Viability Statement.
Contingency funding plans are also maintained to ensure that if liquidity risk did materialise, processes and procedures are
already in place to assist with resolving the issue. Regular monitoring of liquid assets is performed and projections
undertaken (under both base and stressed conditions) to understand the outlook.
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FINANCIAL INFORMATION
7. Group financial statements continued
As a result of the policies and processes established to manage risk, the Group expects to be able to manage liquidity risk
on an ongoing basis. We recognise there are a number of scenarios that can impact the liquid resources of a business as
discussed in the Risk management section of the Strategic report.
(d)(i) Maturity analysis
The analysis that follows presents the undiscounted cash flows payable by remaining contractual maturity at the reporting
date for all financial liabilities, other than those related to unit linked funds which are discussed in Note 24.
Refer Note 19 for the maturity profile of undiscounted cash flows of derivative financial instruments.
The Group also had unrecognised commitments in respect of financial instruments as at 31 December 2021 with a
contractual maturity of within one year, between one and five years and over five years of £35m, £7m and £63m
respectively (2020: £7m, £22m and £7m). The commitments may generally be requested anytime up to the
contractual maturity.
Within
1 year
1-5
years
5-10
years
10-15
years
15-20
years
Greater than
20 years Total
2021 2020 2021 2020 2021 2020 2021 2020 2021 2020 2021 2020 2021 2020
£m £m £m £m £m £m £m £m £m £m £m £m £m £m
Subordinated
liabilities
29 28 114 113 627 629 26 22 26 22 97 101 919 915
Other financial
liabilities
701 963 244 108 93 101 40 44 – 10 – – 1,078 1,226
Total 730 991 358 221 720 730 66 66 26 32 97 101 1,997 2,141
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38. Structured entities
A structured entity is an entity that is structured in such a way that voting or similar rights are not the dominant factor in
deciding who controls the entity. The Group has interests in structured entities through investments in a range of
investment vehicles including:
– Pooled investment funds managed internally and externally, including OEICs, SICAVs, unit trusts and limited
partnerships.
– Debt securitisation vehicles which issue asset-backed securities.
The Group consolidates structured entities which it controls. Where the Group has an investment in, but not control over
these types of entities, the investment is classified as an investment in associate when the Group has significant
influence. Investments in associates at FVTPL are included in equity securities and pooled investment funds in the
analysis of financial investments.
The Group also has interests in structured entities through asset management fees and other fees received from these
entities.
(a) Consolidated structured entities
As at 31 December 2021 and 31 December 2020, the Group has not provided any non-contractual financial or other
support to any consolidated structured entity and there are no current intentions to do so.
(b) Unconsolidated structured entities
As at 31 December 2021 and 31 December 2020, the Group has not provided any non-contractual financial or other
support to any unconsolidated structured entities and there are no current intentions to do so.
The following table shows the carrying value of the Group’s interests in unconsolidated structured entities by line item in the
consolidated statement of financial position.
2021 2020
£m £m
Financial investments
Equity securities and interests in pooled investment funds 851 1,003
Debt securities
36 40
Total financial investments
887 1,043
Receivables and other financial assets 244 234
Other financial liabilities 121 128
The Group’s exposure to loss in respect of unconsolidated structured entities is limited to the carrying value of the Group’s
investment in these entities and the loss of future asset management and other fees received by the Group for the
management of these entities. Exposure to loss arising from market and credit risk in relation to investments held in the unit
linked funds and relating to third party interest in consolidated funds and non-controlling interests – ordinary shares is not
borne by the shareholder.
Additional information on the Group’s exposure to financial risk and the management of these risks can be found in Note 24
and Note 37.
The total assets under management of unconsolidated structured entities are £135,007m at 31 December 2021 (2020:
£136,609m). The fees recognised in respect of these assets under management during the year to 31 December 2021
were £670m (2020: £625m).
The total issuance balance relating to unconsolidated structured debt securitisation vehicles in which the Group is invested
is £1,741m (2020: £2,857m).
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FINANCIAL INFORMATION
7. Group financial statements continued
39. Fair value of assets and liabilities
The Group uses fair value to measure many of its assets and liabilities. Fair value is the amount for which an asset could
be exchanged, or a liability settled, between knowledgeable willing parties in an arm’s length transaction.
An analysis of the Group’s financial assets and financial liabilities in accordance with the categories of financial instrument
set out in IFRS 9 Financial Instruments is presented in Notes 18, 24 and 31 and includes those financial assets and liabilities
held at fair value.
(a) Fair value hierarchy
In determining fair value, the following fair value hierarchy categorisation has been used:
– Level 1: Fair values measured using quoted prices (unadjusted) in active markets for identical assets or liabilities. An
active market exists where transactions take place with sufficient frequency and volume to provide pricing information
on an ongoing basis.
– Level 2: Fair values measured using inputs other than quoted prices included within level 1 that are observable for the
asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices).
– Level 3: Fair values measured using inputs that are not based on observable market data (unobservable inputs).
Information on the methods and assumptions used to determine fair values for equity securities and interests in pooled
investment funds, debt securities and derivatives measured at fair value is given below:
Equities and interests in pooled investment funds
1,2
Debt securities Derivatives
3
Level 1
Equity instruments listed on a recognised exchange valued using prices
sourced from their primary exchange.
Debt securities listed
on a recognised
exchange valued using
prices sourced from
their primary
exchange.
Exchange traded
derivatives
valued using
prices sourced
from the relevant
exchange.
Level 2
Pooled investment funds where daily unit prices are available and reference
is made to observable market data.
Debt securities valued
using prices received
from external pricing
providers based on
quotes received from
a number of market
participants.
Debt securities valued
using models and
standard valuation
formulas based on
observable market
data
4
.
Over-the-
counter
derivatives
measured using
a range of
valuation models
including
discounting
future cash flows
and option
valuation
techniques.
Level 3
These relate primarily to interests in private equity, real estate and
infrastructure funds which are valued at net asset value. Underlying real
estate and private equity investments are generally valued in accordance
with independent professional valuation reports or International Private
Equity and Venture Capital Valuation Guidelines where relevant. The
underlying investments in infrastructure funds are generally valued based
on the phase of individual projects forming the overall investment and
discounted cash flow techniques based on project earnings.
Where net asset values are not available at the same date as the reporting
date, these valuations are reviewed and, where appropriate, adjustments
are made to reflect the impact of changes in market conditions between
the date of the valuation and the end of the reporting period.
Other unlisted equity securities are generally valued at indicative share
prices from off market transactions.
Debt securities valued
using prices received
from external pricing
providers based on a
single broker indicative
quote.
Debt securities valued
using models and
standard valuation
formulas based on
unobservable market
data
4
.
N/A
1. Investments in associates at FVTPL are valued in the same manner as the Group’s equity securities and interests in pooled investment funds.
2. Where pooled investment funds have been seeded and the investment in the funds have been classified as held for sale, the costs to sell are assumed to be
negligible. The fair value of pooled investment funds held for sale is calculated as equal to the observable unit price.
3. Non-performance risk arising from the credit risk of each counterparty is also considered on a net exposure basis in line with the Group’s risk management
policies. At 31 December 2021 and 31 December 2020, the residual credit risk is considered immaterial and no credit risk adjustment has been made.
4. If prices are not available from the external pricing providers or are considered to be stale, the Group has established procedures to arrive at an internal
assessment of the fair value.
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The fair value of liabilities in respect of third party interest in consolidated funds and non-participating investment contracts
are calculated equal to the fair value of the underlying assets and liabilities.
Thus, the value of these liabilities is dependent on the methods and assumptions set out above in relation to the underlying
assets and liabilities:
– For third party interest in consolidated funds, when the underlying assets and liabilities are valued using readily available
market information the liabilities in respect of third party interest in consolidated funds are treated as level 2. Where the
underlying assets and liabilities are not valued using readily available market information the liabilities in respect of third
party interest in consolidated funds are treated as level 3.
– For non-participating investment contracts, the underlying assets and liabilities are predominately categorised as level 1
or 2 and as such, the inputs into the valuation of the liabilities are observable and these liabilities are predominately
categorised within level 2 of the fair value hierarchy. Where the underlying assets are categorised as level 3, the liabilities
are also categorised as level 3.
In addition, contingent consideration assets and contingent consideration liabilities are also categorised as level 3 in the fair
value hierarchy. Contingent consideration assets and liabilities have been recognised in respect of acquisitions and
disposals. Generally valuations are based on unobservable assumptions regarding the probability weighted cash flows
and, where relevant, discount rate.
(a)(i) Fair value hierarchy for assets measured at fair value in the statement of financial position
The table below presents the Group's non-unit linked assets measured at fair value by level of the fair value hierarchy (refer
Note 24 for fair value analysis in relation to assets backing unit linked liabilities).
Fair value hierarchy
Total Level 1 Level 2 Level 3
2021 2020 2021 2020 2021 2020 2021 2020
£m £m £m £m £m £m £m £m
Owner occupied property 1 1 – – – – 1 1
Derivative financial assets 14 18 – – 14 18 – –
Equity securities and interests in
pooled investment vehicles
1
3,115 1,981 2,600 1,422 409 458 106 101
Debt securities
961 787 1 2 959 784 1 1
Contingent consideration asset 31 28 – – – – 31 28
Total assets at fair value 4,122 2,815 2,601 1,424 1,382 1,260 139 131
1. Includes £941m (2020: £nil), £840m (2020: £nil) and £508m (2020: £1,216m) for the Group’s listed equity investments in Phoenix, HDFC Asset Management
and HDFC Life respectively, which are classified as significant listed investments (refer Note 12) and £nil (2020: £1m) for equity securities and interests in
pooled investment vehicles classified as held for sale.
There were no significant transfers from level 1 to level 2 during the year ended 31 December 2021 (2020: £355m). There
were also no significant transfers from level 2 to level 1 during the year ended 31 December 2021 (2020: £7m). Transfers
from level 1 to level 2 for the year ended 31 December 2020 primarily related to interests in pooled investment vehicles
which are priced daily but where the daily price is only offered by the fund manager. As disclosed in the prior year, the
Group now considers these investments to be level 2. All other transfers relate to assets where changes in the frequency of
observable market transactions resulted in a change in whether the market was considered active. Transfers are deemed
to have occurred at the end of the calendar quarter in which they arose.
Refer Section 39(a)(iii) below for details of movements in level 3.
(a)(ii) Fair value hierarchy for liabilities measured at fair value in the statement of financial position
The table below presents the Group's non-unit linked liabilities measured at fair value by level of the fair value hierarchy.
Fair value hierarchy
Total Level 1 Level 2 Level 3
2021 2020 2021 2020 2021 2020 2021 2020
£m £m £m £m £m £m £m £m
Liabilities in respect of third party
interest in consolidated funds
104 77 – – 104 77 – –
Derivative financial liabilities 5 13 3 2 2 11 – –
Contingent consideration
liabilities
165 6 – – – – 165 6
Total liabilities at fair value
274 96 3 2 106 88 165 6
There were no significant transfers between levels 1 and 2 during the year (2020: none). Refer Section (a)(iii) below for
details of movements in level 3.
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FINANCIAL INFORMATION
7. Group financial statements continued
(a)(iii) Reconciliation of movements in level 3 instruments
The movements during the year of level 3 assets and liabilities held at fair value, excluding unit linked assets and liabilities
and assets and liabilities held for sale, are analysed below.
Owner occupied property
Equity securities
and interests in
pooled investment
funds Debt securities
2021 2020 2021 2020 2021 2020
£m £m £m £m £m £m
At 1 January 1 2 101 82 1 1
Total gains recognised in the consolidated income statement – – 8 2 – –
Purchases
– – 24 29 – –
Sales and other adjustments
– (1) (27) (13) – –
Transfers in to level 3
1
– – – 1 – –
At 31 December
1 1 106 101 1 1
1. Transfers are deemed to have occurred at the end of the calendar quarter in which they arose.
Contingent
consideration asset
Contingent
consideration liabilities
2021 2020 2021 2020
£m £m £m £m
At 1 January 28 1 (6) (14)
Total amounts recognised in the income statement – (12) (3) 2
Additions
31 – (155) –
Settlements
(34) 39 8 6
Other movements (3) – – –
Transfer to contingent consideration liability
9 – (9) –
At 31 December
31 28 (165) (6)
The additions in the year ended 31 December 2021 primarily relate to the disposals of Parmenion and Bonaccord and the
acquisition of Tritax. Refer Note 1 for further details.
For the year ended 31 December 2021, gains of £5m (2020: losses of £13m) were recognised in the IFRS consolidated
income statement in respect of non-unit linked assets and liabilities held at fair value classified as level 3 at the year end,
excluding assets and liabilities held for sale. Of this amount, gains of £5m (2020: gains of £2m) were recognised in net gains
on financial instruments and other income. No gains or losses were recognised in respect of discontinued operations (2020:
losses of £15m).
Transfers of equity securities and interests in pooled investment funds and debt securities into level 3 generally arise when
external pricing providers stop providing a price or where the price provided is considered stale. Transfers of equity
securities and interests in pooled investment funds and debt securities out of level 3 arise when acceptable prices become
available from external pricing providers.
(a)(iv) Significant unobservable inputs in level 3 instrument valuations
The table below identifies the significant unobservable inputs in relation to equity securities and interests in pooled
investment funds categorised as level 3 instruments at 31 December 2021 with a fair value of £106m (2020: £101m).
Fair value
2021
£m
2020
£m Valuation technique Unobservable input Range (weighted average)
Private equity, real estate and
infrastructure funds
91 85 Net asset value
Net asset value
statements provided for
five significant funds (fair
value >£5m) and a large
number of smaller funds.
A range of unobservable
inputs is not applicable as
we have determined that
the reported NAV
represents fair value at
the end of the reporting
period.
Other unlisted equity
securities
15 16 Indicative share price
Recent off market capital
raising transactions.
A range of unobservable
inputs is not applicable as
we have determined that
the indicative share price
from off market
transactions represents
fair value at the end of the
reporting period.
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The table below identifies the significant unobservable inputs in relation to contingent consideration assets and liabilities
categorised as level 3 instruments at 31 December 2021 with a fair value of (£134m) (2020: £22m).
Fair value
£m Valuation technique Unobservable input Input used
2021
Contingent
consideration
assets and liabilities
(134)
Probability
weighted cash
flow and where
applicable
discount rates
Unobservable inputs relate to probability
weighted cash flows and, where relevant,
discount rates.
The most significant unobservable inputs
relate to assumptions used to value the
contingent consideration related to the
acquisition of Tritax. For Tritax a number of
scenarios were prepared, around a base
case, with probabilities assigned to each
scenario (based on an assessment of the
likelihood of each scenario). The value of the
contingent consideration was determined for
each scenario, and these were then
probability weighted, with this probability
weighted valuation then discounted from the
payment date to the balance sheet date. It
was assumed that the timing of the exercise
of the earn out put options (refer Note 1(b)(i))
between 2024, 2025 and 2026 would be that
which is most beneficial to the holders of the
put options.
The base scenario for Tritax
contingent consideration used a
revenue compound annual
growth rate (CAGR) from 2021
to 2026 of 21%, with other
scenarios using a range of
revenue growth rates around
this base. The base scenario
used a cost/income ratio of
c50% with other scenarios using
a range of cost/income ratios
around this base.
The risk adjusted contingent
consideration cash flows have
been discounted using a
primary discount rate of 1.9%.
2020
Contingent
consideration
assets and liabilities
22
Probability
weighted cash
flows
Unobservable inputs relate to probability
weighted cash flows; and where relevant,
discount rates. The most significant
unobservable inputs relate to assumptions
used to value the contingent consideration
related to the sale of SLAL to Phoenix.
Amount expected to be
received from Phoenix at
31 December 2020. This was in
line with the £34m received in
February 2021, refer Note
1(c)(iii). The residual fair value
relates to a number of smaller
contingent consideration
liabilities for which the input used
is expected payments based on
earn-out terms and indemnity
assessments.
(a)(v) Sensitivity of the fair value of level 3 instruments to changes in key assumptions
At 31 December 2021 the shareholder is directly exposed to movements in the value of all non-unit linked level 3
instruments. No level 3 instruments are held in in consolidated structured entities. See Note 24 for unit linked level 3
instruments.
Sensitivities for material level 3 assets and liabilities are provided below. Changing unobservable inputs in the measurement
of the fair value of the other level 3 financial assets and financial liabilities to reasonably possible alternative assumptions
would not have a significant impact on profit attributable to equity holders or on total assets.
(a)(v)(i) Equity securities and interests in pooled investment funds
As noted above, of the level 3 equity securities and interests in pooled investment funds, £91m relates to private equity, real
estate and infrastructure funds (2020: £85m) which are valued using net asset value statements. A 10% increase or
decrease in the net asset value of these investments would increase or decrease the fair value of the investments by
£9m (2020: £9m).
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FINANCIAL INFORMATION
7. Group financial statements continued
(a)(v) (ii) Contingent consideration assets and liabilities
As noted above, the most significant unobservable inputs for level 3 instruments relate to assumptions used to value the
contingent consideration related to the purchase of Tritax. Sensitivities for reasonably possible changes to key assumptions
are provided in the table below.
Assumption Change in assumption
Consequential increase/(decrease) in contingent
consideration liability
Revenue compound annual growth rate
(CAGR) from 2021 to 2026 Decreased by 5%
(£26m)
Increased by 5% £19m
Cost/income ratio Decreased by 5%
£10m
Increased by 5%
(£12m)
Discount rate Increased by 1% (£6m)
(b) Assets and liabilities not carried at fair value
The table below presents estimated fair values by level of the fair value hierarchy of non-unit linked financial assets and
liabilities whose carrying value does not approximate fair value. Fair values of assets and liabilities are based on observable
market inputs where available, or are estimated using other valuation techniques.
As recognised in the
consolidated statement
of financial position line
item Fair value Level 1 Level 2 Level 3
2021 2020 2021 2020 2021 2020 2021 2020 2021 2020
Notes £m £m £m £m £m £m £m £m £m £m
Assets
Debt securities 226 325 230 335 12 – 218 335 – –
Liabilities
Subordinated liabilities 32
644 638 683 688 – – 683 688 – –
The estimated fair values for subordinated liabilities are based on the quoted market offer price.
The carrying value of all other financial assets and liabilities measured at amortised cost approximates their fair value.
40. Statement of cash flows
The Group classifies cash flows in the consolidated statement of cash flows as arising from operating, investing or
financing activities.
Cash flows are classified based on the nature of the activity to which they relate and with consideration to generally
accepted presentation adopted by peers. For activities related to asset management business, cash flows arising from
the sale and purchase of debt securities and equity securities and interests in pooled investment funds, with the
exception of those related to unit linked funds, are classified as cash flows arising from investing activities. For activities
related to insurance business, including those related to unit linked funds, cash flows arising from the sale and purchase
of debt securities and equity securities and interests in pooled investment funds are classified as cash flows arising from
operating activities.
For activities related to the acquisition and disposal of subsidiaries, associates and joint ventures, cash flows are classified
as investing activities. The settlement of contingent and deferred amounts recognised on acquisitions and disposals are
classified as investing activities where there is not considered to be a significant financing component of the related
inflows or outflows.
Purchases and sales of financial investments are presented on a gross basis except for purchases and sales of short-
term instruments held in consolidated liquidity funds which are presented on a net basis.
Dividends received from associates and joint ventures are presented as cash flows arising from operating activities.
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The tables below provide further analysis of the balances in the statement of cash flows.
(a) Change in operating assets
2021 2020
£m £m
Equity securities and interests in pooled investment funds 137 23
Debt securities 23 9
Derivative financial instruments
9 (12)
Receivables and other financial assets and other assets 26 46
Assets held for sale
19 751
Change in operating assets
214 817
Change in operating assets includes related non-cash items.
(b) Change in operating liabilities
2021 2020
£m £m
Other financial liabilities, provisions and other liabilities (128) (122)
Pension and other post-retirement benefit provisions (31) (30)
Deferred income
(68) 6
Investment contract liabilities
46 (110)
Change in liability for third party interest in consolidated funds (17) 1
Liabilities held for sale
(11) (736)
Change in operating liabilities
(209) (991)
Change in operating liabilities includes related non-cash items.
(c) Other non-cash and non-operating items
2021 2020
£m £m
Gain on sale of subsidiaries and other operations (127) (8)
Profit on disposal of interests in associates (1,236) (1,858)
Loss on disposal of property, plant and equipment
(4) –
Depreciation of property, plant and equipment
39 46
Amortisation of intangible assets 108 152
Impairment losses on intangible assets
8 1,064
Loss on impairment of associates
– 45
Impairment losses recognised on property, plant and equipment 15 2
Impairment losses on disposal group held for sale
– 1
Movement in contingent consideration asset/liability
3 10
Equity settled share-based payments
43 64
Finance costs
30 30
Share of profit or loss from associates and joint ventures accounted for using the equity method 22 (194)
Other non-cash and non-operating items
(1,099) (646)
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7. Group financial statements continued
(d) Disposal of subsidiaries and other operations
2021
1
2020
2
Notes £m £m
Equity securities and interests in pooled investment funds 15 711
Other assets of operations disposed of 34 74
Non-participating insurance contract liabilities
– (689)
Non-participating investment contract liabilities – (52)
Other liabilities of operations disposed of
(18) (25)
Net assets disposed of
31 19
Items transferred to profit or loss on disposal of subsidiaries 1 (1) (8)
Fair value of earn-out payments and retained interest (32) –
Other non-cash consideration
(9) –
Gain on sale
1 127 8
Transaction costs
7 –
Total cash consideration
123 19
Cash and cash equivalents disposed of (11) (27)
Cash inflow/(outflow) from disposal of subsidiary 112 (8)
1. Relates to the a number of 2021 disposals. Refer Note 1(c)(i) for further details.
2. Relates to the disposal of SL Asia. Refer Note 1(c)(ii) for further details.
(e) Movement in subordinated liabilities
The following table reconciles the movement in subordinated liabilities in the year, split between cash and non-cash items.
2021 2020
£m £m
At 1 January 638 655
Cash flows from financing activities
Repayment of subordinated liabilities
– (100)
Dividend paid
1
– (2)
Interest paid
(28) (30)
Cash flows from financing activities
(28) (132)
Non-cash items
Amounts reclassified from equity
– 102
Interest expense
28 30
Foreign exchange adjustment
6 (17)
At 31 December
644 638
1. Dividends of £2m were paid as part of the redemption of the preference shares on 8 July 2020 subsequent to the reclassification of the preference shares as
subordinated liabilities (Refer Note 29).
(f) Movement in lease liabilities
The following table reconciles the movement in lease liabilities in the year, split between cash and non-cash items.
2021 2020
£m £m
At 1 January 249 268
Cash flows from financing activities
Payment of lease liabilities – principal
(27) (29)
Payment of lease liabilities – interest
(6) (6)
Cash flows from financing activities
(33) (35)
Non-cash items
Reclassified as held for sale during the year – (7)
Additions
6 19
Disposals and adjustments
(3) (2)
Interest capitalised
6 6
At 31 December
225 249
228 abrdn.com Annual report 2021
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41. Contingent liabilities and contingent assets
Contingent liabilities are possible obligations of the Group of which timing and amount are subject to significant
uncertainty. Contingent liabilities are not recognised on the consolidated statement of financial position but are
disclosed, unless they are considered remote. If such an obligation becomes probable and the amount can be
measured reliably it is no longer considered contingent and is recognised as a liability.
Conversely, contingent assets are possible benefits to the Group. Contingent assets are only disclosed if it is probable
that the Group will receive the benefit. If such a benefit becomes virtually certain it is no longer considered contingent
and is recognised as an asset.
Legal proceedings, complaints and regulations
The Group is subject to regulation in all of the territories in which it operates investment management and insurance
businesses. In the UK, where the Group primarily operates, the FCA has broad powers, including powers to investigate
marketing and sales practices.
The Group, like other financial organisations, is subject to legal proceedings, complaints and regulatory discussions, reviews
and challenges in the normal course of its business. All such material matters are periodically reassessed, with the
assistance of external professional advisers where appropriate, to determine the likelihood of the Group incurring a liability.
Where it is concluded that it is more likely than not that a material outflow will be made a provision is established based on
management’s best estimate of the amount that will be payable. At 31 December 2021, there are no identified contingent
liabilities expected to lead to a material exposure.
42. Commitments
The Group has contractual commitments in respect of expenditure on investment property, funding arrangements and
leases which will be payable in future periods. These commitments are not recognised on the Group’s statement of
financial position at the year end but are disclosed to
g
ive an indication of the Group’s future committed cash flows.
(a) Unrecognised financial instruments
As at 31 December 2021, the Group has committed to investing an additional £105m (2020: £35m) into funds in which it
holds a co-investment interest.
(b) Capital commitments
As at 31 December 2021, the Group has capital commitments other than in relation to financial instruments of £2m (2020:
£7m). In addition, commitments relating to future acquisitions are disclosed in Note 1(c)(iii).
229abrdn.comAnnual report 2021
FINANCIAL INFORMATION
7. Group financial statements continued
43. Employee share-based payments and deferred fund awards
The Group operates share incentive plans for its employees. These generally take the form of an award of options,
conditional awards or restricted shares in abrdn plc (equity-settled share-based payments) but can also take the form
of a cash award based on the share price of abrdn plc (cash-settled share-based payments). The Group also
incentivises certain employees through the award of units in Group managed funds (deferred fund awards) which are
cash-settled. All the Group’s incentive plans have conditions attached before the employee becomes entitled to the
award. These can be performance and/or service conditions (vesting conditions) or the requirement of employees to
save in the save-as-you-earn scheme (non-vesting condition). The period over which all vesting conditions are satisfied
is the vesting period and the awards vest at the end of this period.
For all share-based payments services received for the incentive granted are measured at fair value.
For equity-settled share-based payment transactions, the fair value of services received is measured by reference to
the fair value of the equity instruments at the grant date. The fair value of the number of instruments expected to vest is
charged to the income statement over the vesting period with a corresponding credit to the equity compensation
reserve in equity.
At each period end the Group reassesses the number of equity instruments expected to vest and recognises any
difference between the revised and original estimate in the consolidated income statement with a corresponding
adjustment to the equity compensation reserve.
At the time the equity instruments vest, the amount recognised in the equity compensation reserve in respect of those
equity instruments is transferred to retained earnings.
For cash-settled share-based payment and deferred fund awards transactions, services received are measured at the
fair value of the liability. The fair value of the liability is remeasured at each reporting date and any changes in fair value
are reco
g
nised in the consolidated income statement.
The following plans made awards during the year ended 31 December 2021:
Plan Options
Conditional
awards
Restricted
shares
Typical vesting
period (years)
Contractual life
for options
Recipients
Conditions which must be met prior to
vesting
Standard Life
Aberdeen plc
Deferred Share
Plan/
Discretionary
Share
Plan/Executive
LTIP Plan
1
Yes Yes No
1-3 years
(3 years for
Executive
LTIP and 3-5
years for EIP
awards)
Up to 10
years from
date of
grant
Executives
and senior
management
Service, or service and
performance conditions.
These can be tailored to the
individual award.
Sharesave (Save-
as-you-earn)
Yes No No 3 or 5
Up to six
months
after vesting
UK and Irish
employees
Service only
Share incentive
plan
No No Yes
3 (2 for
Ireland)
Not
applicable
UK and Irish
employees
Service only
1. Included in Deferred and discretionary share plans in Section (b)(i) below.
All of the awards made under these plans are equity-settled except for a small number of cash-settled awards for the
deferred and discretionary share plans (see Section (d)(ii) below).
The fair value of awards granted under the Group’s incentive schemes is determined using a relevant valuation technique,
such as the Black Scholes option pricing model.
The awards made under the deferred and discretionary share plans include awards for deferred bonuses of the prior year.
With the exception of the Executive Incentive Plan (EIP) awards, the deferred bonus awards have service conditions of one,
two and three years after the date of the award and no outstanding performance conditions. The awards for deferred
bonus for executive Directors in 2020 were made under the conditions of the EIP including a performance underpin.
The awards made include the awards for executive Directors under the Executive LTIP plan and certain awards under the
deferred and discretionary share plans to senior management with specific performance conditions.
Further details of the EIP and the Executive LTIP are set out in the Directors’ remuneration report.
The deferred and discretionary share plans also made a number of deferred fund awards in the year end 31 December
2021 (see Section (d)(i) below).
230 abrdn.com Annual report 2021
N
Options and conditional awards are all at nil cost with the exception of Sharesave where eligible employees in the UK and
Ireland save a monthly amount from their salaries, over either a three or five year period, which can be used to purchase
shares in the Company at a predetermined price.
The share incentive plan allows employees the opportunity to buy up to £1,800 of shares from their salary each year with
the Group matching up to £600 per year. The matching shares awarded are granted each month but are restricted for
three years (two years for Ireland).
In addition, the Group operates the following plans for which there are outstanding awards but for which no awards were
made during the year ended 31 December 2021:
Plan Options
Conditional
awards
Restricted
shares
Typical vesting
period (years)
Contractual life
for options
Recipients
Conditions which must be met prior to
vesting
Aberdeen Asset
Management
Deferred Share
Plan 2009
1
Yes No No
1-3 (3-5 for
executive
management)
Up to 10
years from
date of grant
Executives and
senior
management
Service only. There are no
outstanding performance
conditions at date of grant.
Aberdeen Asset
Management
USA Deferred
Share Award
Plan
No Yes No
1-3 (3-5 for
executive
management)
Not
applicable
US based
executives and
senior
management
Service only. There are no
outstanding performance
conditions at date of grant.
Standard Life
Restricted stock
plan (RSP)
Yes No No 1-3
Up to six
months after
vesting
Executives (other
than executive
Directors) and
senior
management
Service, or service and
performance conditions.
These are tailored to the
individual award.
1. Included in Annual bonus deferred share options Section (b)(i) below.
The Group also operated the following plans for which no awards were made during the year ended 31 December 2021
and for which all outstanding awards were exercised by 31 December 2021:
Plan Options
Conditional
awards
Restricted
shares
Typical vesting
period (years)
Contractual life
for options
Recipients
Conditions which must be met prior to
vesting
Standard Life
Long-Term
Incentive Plan
Yes No No
3 (5 for
executive
Directors)
Up to six
months after
vesting
Executives and
senior
management
Service and performance
conditions as set out in the
prior years’ Directors’
remuneration reports
Standard Life
Investments
Long-Term
Incentive Plan
Yes No No 3
Up to six
months after
vesting
Executives and
senior
management
Service and performance
conditions
Standard Life
Group Short-
term incentive
plan
1
Yes No No 3
Up to six
months after
vesting
Executives and
senior
management
Service only. There are no
outstanding performance
conditions at date of grant.
1. Included in Annual bonus deferred share options Section (b)(i) below.
(a) Employee share-based payments and deferred fund awards expense
The amounts recognised as an expense for equity-settled share-based payment transactions and deferred fund awards
with employees are as follows:
2021 2020
£m £m
Share options and share awards granted under deferred and discretionary share plans
1
41 61
Share options granted under long-term incentive plans – –
Share options granted under Sharesave
1 2
Matching shares granted under share incentive plans
1 1
Equity-settled share-based payments
43 64
Cash-settled deferred fund awards
2
16 29
Total expense
59 93
1. Includes expense for annual bonus deferred share options and conditional awards.
2. The expense for cash-settled deferred fund awards includes £4m (2020: £5m) for awards related to funds which are consolidated.
Included in the expense above is £16m (2020: £27m) which is included in Restructuring and corporate transaction
expenses in the consolidated income statement.
231abrdn.comAnnual report 2021
FINANCIAL INFORMATION
7. Group financial statements continued
(b) Options and conditional awards granted
(b)(i) Deferred and discretionary share plans
The number and remaining contractual life for options outstanding and the share price at exercise of options exercised
during the year are as follows:
2021 2020
Deferred and
discretionary share
plans
Annual bonus
deferred share
options
Deferred and
discretionary share
plans
Annual bonus deferred
share options
Outstanding at 1 January 46,077,386 10,670,331 22,956,158 15,469,459
Granted 4,582,659 – 27,486,468 –
Forfeited
(4,028,599) (47,887) (3,134,233) (113,150)
Exercised
(9,497,634) (4,017,940) (1,231,007) (4,685,978)
Outstanding at 31 December
37,133,812 6,604,504 46,077,386 10,670,331
Exercisable at 31 December
1,591,628 5,920,543 973,894 8,109,711
Remaining contractual life of options outstanding (years)
1
7.97 4.59 8.85 5.28
Options exercised during the year
Share price at time of exercise
1
291p 287p 232p 268p
1. Weighted average.
The options granted under the deferred and discretionary share plans were made throughout the year ended 31
December 2021 with a main grant date of 9 April 2021 and had a £nil exercise price. The weighted average option term
was 3.00 years. The weighted average share price at grant date was 291p which was also the weighted average fair value
at grant date. The options include an entitlement to the receipt of dividends in respect of awards that ultimately vest
between the date of grant and the vesting date.
In addition to nil costs options, 556,569 nil cost conditional awards were also granted under the deferred and discretionary
share plans (2020: 3,858,367) with a weighted average share price at grant date was 302p which was also the weighted
average fair value at grant date.
(b)(ii) Standard Life/Standard Life Investments Long-term incentive plans
The number and remaining contractual life for options outstanding and the share price at exercise of options exercised
during the year are as follows:
2021 2020
Long-term
incentive plans
(excluding RSP)
RSP
Long-term
incentive plans
(excluding RSP)
RSP
Outstanding at 1 January 16,202,527 268,897 36,411,803 1,997,896
Granted – – – –
Forfeited
(16,178,183) (153,176) (19,454,369) (827,383)
Exercised
(24,344) (112,349) (754,907) (901,616)
Outstanding at 31 December
– 3,372 16,202,527 268,897
Exercisable at 31 December
– – – –
Remaining contractual life of options outstanding (years)
1
– 0.57 0.92 0.75
Options exercised during the year
Share price at time of exercise
1
286p 288p 237p 265p
1. Weighted average.
232 abrdn.com Annual report 2021
N
(b)(iii) Sharesave
The number, exercise price and remaining contractual life for options outstanding and the share price at exercise of
options exercised during the year are as follows:
2021 2020
Sharesave
Weighted average
exercise price for
Sharesave
Sharesave
Weighted average
exercise price for
Sharesave
Outstanding at 1 January 8,734,919 210p 7,870,064 227p
Granted 1,081,098 206p 3,449,144 189p
Forfeited
(500,343) 216p (159,189) 234p
Exercised
(272,103) 210p (149,911) 273p
Expired
(531,108) 274p (333,555) 272p
Cancelled (650,432) 225p (1,941,634) 225p
Outstanding at 31 December
7,862,031 203p 8,734,919 210p
Exercisable at 31 December
563,903 249p 225,676 341p
Remaining contractual life of options outstanding (years)
1
2.36 2.98
Options exercised during the year
Share price at time of exercise
1
265p 296p
1. Weighted average.
The Sharesave options were granted on 6 December 2021 with an exercise price of 206p. The weighted average option
term was 3.31years. The weighted average share price at grant date was 237p and the weighted average fair value at
grant date was 32p. Sharesave options have no dividend entitlement. In determining the fair value of options granted under
the Sharesave scheme the historic volatility of the share price over a period of up to five years and a risk free rate
determined by reference to swap rates was also considered.
The following table shows the range of exercise prices of Sharesave options outstanding.
2021 2020
Number of options
outstanding
Number of options
outstanding
189p-199p 6,060,069 7,346,548
200p-327p 1,685,559 873,002
328p-345p 116,403 515,369
Outstanding at 31 December
7,862,031 8,734,919
(c) Matching shares granted under share incentive plans
During the year ended 31 December 2021, 345,476 matching shares were granted under the share incentive plan (2020:
371,274). The weighted average share price at grant date was 277p which was also the weighted average fair value at
grant date. The plans include the entitlement to the receipt of dividends in respect of awards that ultimately vest between
the date of grant and the vesting date.
(d) Deferred fund awards and cash settled share based payments
(d)(i) Deferred fund awards
At 31 December 2021, the liability recognised for cash-settled deferred fund awards was £58m (2020: £61m). The liability
includes £10m (2020: £11m) for deferred fund awards related to funds which are consolidated. The intrinsic value for
vested deferred fund awards related to funds which are consolidated was £6m (2020: £5m).
(d)(ii) Cash settled share based payments
At 31 December 2021, the liability recognised for cash-settled share based payments was £nil (2020: £nil).
233abrdn.comAnnual report 2021
FINANCIAL INFORMATION
7. Group financial statements continued
44. Related party transactions
(a) Transactions and balances with related parties
In the normal course of business, the Group enters into transactions with related parties that relate to investment
management and insurance businesses.
During the year, the Group recognised management fees of £4m (2020: £4m) from the Group’s defined benefit pension
plans.
In the year ended 31 December 2021, for associates accounted for using the equity method, the Group recognised sales
primarily in relation to management fees of £36m (2020: £195m) and purchases in relation to services received of £2m
(2020: £79m). Management fees include sales where the selection of the Group as the asset manager is made by the
underlying policyholder.
In the year ended 31 December 2021 there were sales to joint ventures of £4m (2020: £10m) and purchases from joint
ventures of £nil (2020: £nil).
In addition to these transactions between the Group and related parties during the year, in the normal course of business
the Group made a number of investments into/divestments from investment vehicles managed by the Group including
investment vehicles which are classified as investments in associates measured at FVTPL. Group entities paid amounts for
the issue of shares or units and received amounts for the cancellation of shares or units.
The Group had balances due from associates accounted for using the equity method of £nil (2020: £65m), balances due to
associates accounted for using the equity method of £nil (2020: £43m), £1m due from joint ventures (2020: £1m) and no
amounts due to joint ventures (2020: £nil) as at 31 December 2021. The Group’s defined benefit pension plans have assets
of £1,138m (2020: £965m) invested in investment vehicles managed by the Group.
Details of the simplification and extension of the strategic partnership between the Group and Phoenix during the year
ended 31 December 2021 are included in Note 1(c)(iii). With effect from 23 February 2021, Phoenix is no longer accounted
for as an associate.
Details of the sale of a subsidiary to a joint venture business during the year ended 31 December 2020 are included in
Note 1(c)(ii).
During the year ended 31 December 2021, the Group committed to providing £6m of additional funding to a joint venture
subject to the fulfilment of specified conditions (2020: £12m). The capital contributions to this joint venture during the year
ended 31 December 2021 were £11m (2020: £5m) with an outstanding commitment of £2m at 31 December 2021
(2020: £7m).
(b) Compensation of key management personnel
Key management personnel includes Directors of abrdn plc (since appointment) and the members of the executive
leadership team (since appointment).
The summary of compensation of key management personnel is as follows:
2021 2020
£m £m
Salaries and other short-term employee benefits 12 9
Post-employment benefits – –
Share-based payments and deferred fund awards
7 12
Termination benefits 1 1
Total compensation of key management personnel
20 22
(c) Transactions with key management personnel and their close family members
Certain members of key management personnel hold investments in investments products which are managed by the
Group. None of the amounts concerned are material in the context of funds managed by the Group. All transactions
between key management and their close family members and the Group during the year are on terms which are
equivalent to those available to all employees of the Group.
234 abrdn.com Annual report 2021
N
45. Capital management
(a) Capital and risk management policies and objectives
Managing capital is the ongoing process of determining and maintaining the quantity and quality of capital appropriate for
the Group and ensuring capital is deployed in a manner consistent with the expectations of our stakeholders. For these
purposes, the Board considers our key stakeholders to be our clients, the providers of capital (our equity holders and
holders of our subordinated liabilities) and the Financial Conduct Authority (FCA) as the lead prudential supervisor
for the Group.
There are two primary objectives of capital management within the Group. The first objective is to ensure that capital is,
and will continue to be, adequate to maintain the required level of financial stability of the Group and hence to provide an
appropriate degree of security to our stakeholders. The second objective is to create equity holder value by driving profit
attributable to equity holders.
The liquidity and capital management policy forms one element of the Group’s overall management framework. Most
notably, it operates alongside and complements the strategic investment policy and the Group risk policies. Integrating
policies in this way enables the Group to have a capital management framework that robustly links the process of capital
allocation, value creation and risk management.
Capital requirements are forecast on a periodic basis and assessed against the forecast available capital resources. In
addition, rates of return achieved on capital invested are assessed against hurdle rates, which are intended to represent
the minimum acceptable return given the risks associated with each investment. The capital planning process is the
responsibility of the Chief Financial Officer. Capital plans are ultimately subject to approval by the Board.
The formal procedures for identifying and assessing risks that could affect the capital position of the Group are described
in the Risk management section of the Strategic report on pages 61 to 64. Information on financial instruments risk is also
provided in Note 37.
(b) Regulatory capital
(b)(i) Regulatory capital framework
The Group was supervised under the CRD IV regulatory regime for group prudential supervisory purposes up to
31 December 2021 and therefore measured and monitored its capital on that basis. From 1 January 2022, the Group is
supervised under the Investment Firms Prudential Regime (see Section (b)(iii) below). The Group’s regulatory capital
position under CRD IV is determined by consolidating the eligible capital and reserves of the Group (subject to a number of
deductions) to derive regulatory capital resources, and comparing this to the Group’s regulatory capital requirements.
Stress testing is completed to inform the appropriate level of regulatory capital and liquidity that the Group must hold, with
results shared with the FCA at least annually. In addition, the Group monitors a range of capital and liquidity statistics on a
daily, monthly or less frequent basis as required. Surplus capital levels are forecast, taking account of projected dividends
and investment requirements, to ensure that appropriate levels of capital resources are maintained.
The Group is required to hold capital resources to cover both Pillar 1 and Pillar 2 capital requirements, described below.
Pillar 1 – minimum requirement for capital
Pillar 1 focuses on fixed overhead requirements and the Group’s exposure to credit and market risks in respect of risk-
weighted assets, and sets a minimum requirement for capital based on these measures. At 31 December 2021, the
Group’s draft Pillar 1 minimum requirement for capital was £0.5bn (2020: £0.5bn).
Pillar 2 – ICAAP and supervisory review and evaluation process
Pillar 2 supplements the Pillar 1 minimum requirement via the ICAAP, which is the means by which the Group assesses the
level of capital that adequately supports all of the relevant current and future risks in its business. The ICAAP focuses on the
principal risks to the consolidated financial position and examines each risk category to identify exposures that could put
the Group’s capital at risk. The results of the Group’s ICAAP process will be subject to periodic review by the FCA under the
Supervisory Review and Evaluation Process (SREP).
235abrdn.comAnnual report 2021
FINANCIAL INFORMATION
7. Group financial statements continued
(b)(ii) Regulatory capital position under CRD IV (unaudited)
2021
1
2020
1
£bn £bn
IFRS equity attributable to equity holders of abrdn plc 7.6 6.8
Deductions for intangibles and defined benefit pension assets, net of related deferred tax liabilities (2.2) (2.0)
Deductions for significant investments in financial sector entities
(0.8) (0.9)
Deductions for non-significant investments in financial sector entities
(0.1) (0.8)
Other deductions and adjustments, including provision for foreseeable dividend
(1.0) (0.2)
Common Equity Tier 1 capital resources
3.5 2.9
Additional Tier 1 capital resources 0.2 –
Total Tier 1 capital resources
3.7 2.9
Tier 2 capital resources 0.6 0.5
Total regulatory capital resources 4.3 3.4
Total regulatory capital requirements (1.1) (1.1)
Surplus regulatory capital
3.2 2.3
1. 2021 draft position on 28 February 2022 following finalisation of the Annual report and accounts, 2020 based on Pillar 3 reporting.
The Group has complied with all externally imposed capital requirements during the year. The Group’s Pillar 3 disclosures
will be published on the Group’s website at www.abrdn.com/annualreport.
(b)(iii) Investment Firms Prudential Regime (IFPR)
As noted above, from 1 January 2022, the Group is supervised under the IFPR.
Under IFPR the Group fully excludes the value of its holding in significant listed investments.
The Investment Firms Prudential Regime is introducing constraints on the proportion of the minimum capital requirement
that can be met by each tier of capital. As a result, it is estimated that approximately £0.3bn of existing Tier 2 capital, whilst
continuing to be reported within the Group’s capital resources, is not available to meet the minimum capital requirement
from 1 January 2022.
The draft regulatory capital position under IFPR at 31 December 2021 (unaudited) would have been as follows:
2021
1
£bn
IFRS equity attributable to equity holders of abrdn plc 7.6
Deductions for intangibles and defined benefit pension assets, net of related deferred tax liabilities (2.2)
Deductions for significant investments in financial sector entities
(2.0)
Deductions for non-significant investments in financial sector entities
(0.5)
Other deductions and adjustments, including provision for foreseeable dividend (0.5)
Common Equity Tier 1 capital resources
2.4
Additional Tier 1 capital resources 0.2
Total Tier 1 capital resources
2.6
Tier 2 capital resources 0.6
Total regulatory capital resources
3.2
Subordinated debt restriction (0.3)
Total regulatory capital resources available to meet total regulatory capital requirements
2.9
Total regulatory capital requirements (1.1)
Surplus regulatory capital
1.8
CET1 ratio 774%
1. 2021 draft position on 28 February 2022 following finalisation of the Annual report and accounts.
236 abrdn.com Annual report 2021
N
46. Events after the reporting date
On 28 January 2022, the Group announced that it had sold an aggregate of 39,981,442 ordinary shares of its shareholding
in Phoenix, representing approximately 4% of Phoenix's issued share capital, at a price of 660 pence per share, raising
aggregate gross sale proceeds of c£264 million. As a result of the sale, the Group’s shareholding has reduced to 10.4% and
it continues to be classified as equity securities and interests in pooled investment funds, measured at fair value.
On 2 December 2021 the Group announced the proposed acquisition of 100% of the issued share capital of Antler Holdco
Limited, the holding company of interactive investor Limited (“interactive investor”) for cash consideration of £1.49bn,
subject to certain adjustments. interactive investor is the leading subscription-based, digitally-enabled, direct investing
platform in the UK and, as the acquisition constitutes a Class 1 transaction under the Listing Rules, a Class 1 Circular was
published on 9 February 2022. Completion is subject to the satisfaction of certain conditions, including relevant regulatory
approvals and the approval of the acquisition by the Group’s shareholders at a General Meeting on 15 March 2022.
237abrdn.comAnnual report 2021
FINANCIAL INFORMATION
7. Group financial statements continued
47. Related undertakings
The Companies Act 2006 requires disclosure of certain information about the Group’s related undertakings which is set
out in this note. Related undertakings are subsidiaries, joint ventures, associates and other significant holdings. In this
context significant means either a shareholding greater than or equal to 20% of the nominal value of any class of shares,
or a book value
g
reater than 20% of the Group’s assets.
The particulars of the Company’s related undertakings at 31 December 2021 are listed below. For details of the Group’s
consolidation policy refer to (b) Basis of consolidation in the Presentation of consolidated financial statements section.
Under that policy limited partnerships in which the Group has no interest but whose general partner is controlled by the
Group are not consolidated. However such limited partnerships are considered to be related undertakings under
Companies Act 2006 and therefore are listed below. Where the Group has no interest in a limited partnership that is
considered a related entity, the interest held is disclosed as 0%.
The ability of subsidiaries to transfer cash or other assets within the Group for example through payment of cash dividends
is generally restricted only by local laws and regulations, and solvency requirements. Included in equity attributable to
equity holders of abrdn plc at 31 December 2021 is £104m (2020: £93m) related to the abrdn Financial Fairness Trust, a
subsidiary undertaking of the Group. The assets of the abrdn Financial Fairness Trust are restricted to be used for
charitable purposes.
The registered head office of all related undertakings is 1 George Street, Edinburgh, EH2 2LL unless otherwise stated.
(a) Direct subsidiaries
Name of related undertaking Share class
1
% interest held
2
30 STMA 1 Limited
3
Ordinary Shares 100%
30 STMA 2 Limited
3
Ordinary Shares 100%
30 STMA 3 Limited
3
Ordinary Shares 100%
30 STMA 4 Limited
3
Ordinary Shares 100%
30 STMA 5 Limited
3
Ordinary Shares 100%
6 SAS 3 Limited
3
Ordinary Shares 100%
Aberdeen Asset Management PLC
4
Ordinary shares 100%
Aberdeen Corporate Services Limited Ordinary Shares 100%
abrdn Charitable Foundation
4
N/A 100%
abrdn Client Management Limited Ordinary Shares 100%
abrdn Finance Limited Ordinary Shares 100%
abrdn Financial Fairness Trust N/A 100%
abrdn Financial Planning Limited
3
Ordinary Shares 100%
abrdn Investments (Holdings) Limited Ordinary Shares 100%
abrdn (Mauritius Holdings) 2006 Limited
5
Ordinary Shares 100%
Focus Business Solutions Limited
6
Ordinary Shares 100%
Focus Solutions Group Limited
7
Ordinary Shares 100%
Standard Life Aberdeen Trustee Company Limited Ordinary shares 100%
Standard Life Oversea Holdings Limited
8
Ordinary Shares 100%
Standard Life Savings Limited Ordinary Shares 100%
The Standard Life Assurance Company 2006 N/A 100%
Threesixty Services LLP
9
Limited Liability Partnership 100%
Threesixty Support LLP
9
Limited Liability Partnership 100%
(b) Other subsidiaries, joint ventures, associates and other significant holdings
Name of related undertaking Share class
1
% interest held
2
21ASI Long Term Fund I SCSp
10
Limited Partnership 0%
6 SAS 1 Limited Ordinary Shares 100%
6 SAS 2 Limited Ordinary Shares 100%
Aberdeen ACM Team LP
4
Limited Partnership 0%
Aberdeen ACP LLP
4
Limited Liability
Partnership
100%
Aberdeen Alternatives (Holdings) Limited
4
Ordinary shares 100%
Aberdeen Asia IV (General Partner) S.a.r.l.
11
Ordinary shares 100%
238 abrdn.com Annual report 2021
N
Name of related undertaking Share class
1
% interest held
2
Aberdeen Asia Pacific II (Offshore), LP
12
Limited Partnership 0%
Aberdeen Asia Pacific Fund, LP
12
Limited Partnership 0%
Aberdeen Asia Pacific Fund II, LP
12
Limited Partnership 0%
Aberdeen Asia Pacific III Ex-Co-Investment (Offshore), LP
12
Limited Partnership 0%
Aberdeen Asia Pacific III Ex-Co-Investment, LP
12
Limited Partnership 0%
Aberdeen Asia Pacific III, LP
12
Limited Partnership 0%
Aberdeen Asia Partners III, LP
13
Limited Partnership 0%
Aberdeen ASIF Carry LP
4
Limited Partnership 25%
Aberdeen Asset Investment Group Limited
3
Ordinary shares 100%
Aberdeen Asset Investments Limited
3
Ordinary shares 100%
Aberdeen Asset Management Cayman Limited
12
Ordinary shares 100%
Aberdeen Asset Management Denmark A/S
14
Ordinary shares 100%
Aberdeen Asset Management Finland Oy
15
Ordinary shares 100%
Aberdeen Asset Management (Thailand) Ltd
16
Ordinary shares 100%
Aberdeen Asset Management US GP Control LLC
17
Limited Liability
Company
100%
Aberdeen Asset Managers Limited
4
Ordinary shares 100%
Aberdeen Asset Middle East Limited
18
Ordinary shares 100%
Aberdeen Capital Management LLC
17
Limited Liability
Company
100%
Aberdeen Capital Managers GP LLC
13
Limited Liability
Company
100%
Aberdeen Claims Administration, Inc.
19
Ordinary shares 100%
Aberdeen Co-Investment Mandate LP
4
Limited Partnership 0%
Aberdeen Direct Property (Holding) Limited
3
Ordinary shares 100%
Aberdeen Emerging Asia Fund, LP
12
Limited Partnership 0%
Aberdeen Emerging Asia Pacific II (Offshore), LP
12
Limited Partnership 0%
Aberdeen Emerging Asia Pacific III Ex-Co-Investments, LP
12
Limited Partnership 0%
Aberdeen Energy & Resource Company IV, LLC
17
Limited Liability
Company
73%
Aberdeen Energy & Resources Company V, LLC
17
Limited liability company 100%
Aberdeen Energy & Resources Partners II, LP
17
Limited Partnership 0%
Aberdeen Energy & Resources Partners III, LP
17
Limited Partnership 0%
Aberdeen Energy & Resources Partners IV, LP
17
Limited Partnership 1%
Aberdeen Energy & Resources Partners V, LP
17
Limited Partnership 2%
Aberdeen European Infrastructure Carry GP Limited
4
Ordinary shares 100%
Aberdeen European Infrastructure Carry Limited
4
Ordinary shares 100%
Aberdeen European Infrastructure Co-Invest II LP
3
Limited Partnership 0%
Aberdeen European Infrastructure III A Limited
3
Ordinary shares 100%
Aberdeen European Infrastructure III B Limited
3
Ordinary shares 100%
Aberdeen European Infrastructure IV Ltd
3
Ordinary shares 100%
Aberdeen European Infrastructure GP Limited
3
Ordinary shares 100%
Aberdeen European Infrastructure GP II Limited
3
Ordinary shares 100%
Aberdeen European Infrastructure GP III Limited
3
Ordinary shares 100%
Aberdeen European Infrastructure Partners Carry LP
4
Limited Partnership 25%
Aberdeen European Infrastructure Partners Carry II LP
4
Limited Partnership 25%
Aberdeen European Infrastructure Partners Carry III LP
4
Limited Partnership 25%
Aberdeen European Infrastructure Partners LP
3
Limited Partnership 3%
Aberdeen European Infrastructure Partners II LP
3
Limited Partnership 3%
Aberdeen European Infrastructure Partners III LP
3
Limited Partnership 5%
Aberdeen European Residential Opportunities Fund SCSp
20
Limited Partnership 0%
Aberdeen France S.A.
21
Ordinary shares 100%
Aberdeen Fund Distributors LLC
19
Limited Liability
Company
100%
Aberdeen Fund Management II Oy
22
Ordinary shares 100%
Aberdeen Fund Management Ireland Limited
23
Ordinary shares 100%
Aberdeen General Partner 1 Limited
4
Ordinary shares 100%
Aberdeen General Partner 2 Limited
4
Ordinary shares 100%
239abrdn.comAnnual report 2021
FINANCIAL INFORMATION
7. Group financial statements continued
Name of related undertaking Share class
1
% interest held
2
Aberdeen General Partner CAPELP Limited
12
Ordinary shares 100%
Aberdeen General Partner CGPLP Limited
12
Ordinary shares 100%
Aberdeen General Partner CMENAPELP Limited
12
Ordinary shares 100%
Aberdeen General Partner CPELP Limited
12
Ordinary shares 100%
Aberdeen General Partner CPELP II Limited
12
Ordinary shares 100%
Aberdeen Global ex-Japan FoF's LP
12
Limited Partnership 5%
Aberdeen Global ex-Japan GP Limited
12
Ordinary shares 100%
Aberdeen Global Infrastructure Carry GP Limited
4
Ordinary shares 100%
Aberdeen Global Infrastructure GP Limited
24
Ordinary shares 100%
Aberdeen Global Infrastructure GP II Limited
24
Ordinary shares 100%
Aberdeen Global Infrastructure Partners Carry LP
4
Limited Partnership 25%
Aberdeen Global Infrastructure Partners II Carry LP
4
Limited Partnership 25%
Aberdeen Global Infrastructure Partners LP
25
Limited Partnership 0%
Aberdeen Global Infrastructure Partners II LP
25
Limited Partnership 0%
Aberdeen Global Infrastructure Partners III Carry LP Limited Partnership 25%
Aberdeen Global Partners, LP
17
Limited Partnership 0%
Aberdeen GP 1 LLP
4
Limited Liability
Partnership
100%
Aberdeen GP 2 LLP
4
Limited Liability
Partnership
100%
Aberdeen GP 3 LLP
4
Limited Liability
Partnership
100%
Aberdeen Infrastructure Feeder GP Limited
4
Ordinary shares 100%
Aberdeen Infrastructure Finance GP Limited
24
Ordinary shares 100%
Aberdeen Infrastructure GP II Limited
3
Ordinary shares 100%
Aberdeen Infrastructure Partners II Carry LP
4
Limited Partnership 25%
Aberdeen Infrastructure Partners II LP
4
Limited Partnership 0%
Aberdeen Infrastructure Partners LP Inc
24
Limited Partnership 0%
Aberdeen Institutional Commingled Funds LLC - Long Duration Corporate Bond
Fund
26
Unit Trust 100%
Aberdeen International Partners II, LP
13
Limited Partnership 0%
Aberdeen International Partners II (Offshore), LP
13
Limited Partnership 0%
Aberdeen International Partners III, LP
13
Limited Partnership 0%
Aberdeen International Partners III (Offshore), LP
13
Limited Partnership 0%
Aberdeen Investment Company Limited
4
Ordinary shares 100%
Aberdeen Investment Solutions Limited
4
Ordinary shares 100%
Aberdeen Investments Jersey Limited
27
Ordinary shares 100%
Aberdeen Investments Limited
3
Ordinary shares 100%
Aberdeen Keva Asia IV Property Partners SCSp
11
Limited Partnership 0%
Aberdeen Liquidity Fund (Lux)
Aberdeen Standard Liquidity Fund (Lux) - Seabury Sterling Liquidity 1 Fund
20
SICAV 100%
Aberdeen Next Generation Partners V, LP
13
Limited Partnership 0%
Aberdeen Pension Trustees Limited
4
Ordinary shares 100%
Aberdeen Pooling II GP AB
28
Ordinary shares 100%
Aberdeen Private Equity Company VII, LLC
17
Limited Liability
Company
62%
Aberdeen Private Equity Company VIII, LLC
17
Limited liability company 77%
Aberdeen Property Fund Finland I Feeder Ky
22
Limited Partnership 0%
Aberdeen Property Fund Finland LP
22
Limited Partnership 0%
Aberdeen Property Fund Management Estonia Ou
29
Ordinary shares 100%
Aberdeen Property Fund Management (Jersey) Limited
30
Ordinary shares 100%
Aberdeen Property Investors Estonia Ou
29
Ordinary shares 100%
Aberdeen Property Investors France SAS
21
Ordinary shares 100%
Aberdeen Property Investors (General Partner) S.a.r.l.
31
Ordinary shares 100%
Aberdeen Property Investors Limited Partner Oy
22
Ordinary shares 100%
Aberdeen Property Investors The Netherlands BV
32
Ordinary shares 100%
Aberdeen Property Secondaries Partners II
20
Limited Partnership 2%
Aberdeen Real Estate Fund Finland LP
33
Limited Partnership 10%
240 abrdn.com Annual report 2021
N
Name of related undertaking Share class
1
% interest held
2
Aberdeen Real Estate Operations Limited
4
Ordinary shares 100%
Aberdeen Real Estate Partners II, LP
13
Limited Partnership 0%
Aberdeen Real Estate Partners III, LP
13
Limited Partnership 0%
Aberdeen Residential JV Feeder Limited Partner Oy
22
Ordinary shares 100%
Aberdeen Secondaries II GP S.a.r.l.
20
Ordinary shares 100%
Aberdeen Sidecar LP Inc
24
Limited Partnership 0%
Aberdeen SP 2013 A/S
14
Ordinary shares 100%
Aberdeen Standard 2019 European PE A Carry LP Limited Partnership 40%
Aberdeen Standard 2019 European PE B Carry LP Limited Partnership 40%
Aberdeen Standard ACS I
ASI Sustainable Index UK Equity Fund
3
OEIC 58%
Aberdeen Standard Alternative Funds Limited Ordinary Shares 100%
Aberdeen Standard Asset Management Limited Ordinary Shares 100%
Aberdeen Standard Carlsbad Carry LP
4
Limited Partnership 25%
Aberdeen Standard Carlsbad GP Limited
24
Ordinary shares 100%
Aberdeen Standard Carlsbad LP
4
Limited Partnership 0%
Aberdeen Standard Core Infrastructure III LTP LP Limited Partnership 100%
Aberdeen Standard ECF II GP LP Limited Partnership 0%
Aberdeen Standard European Infrastructure GP IV Limited
3
Ordinary Shares 100%
Aberdeen Standard European Infrastructure Partners IV LP
3
Limited Partnership 4%
Aberdeen Standard European Infrastructure Partners Carry IV LP Limited Partnership 25%
Aberdeen Standard European Infrastructure Partners Co-invest IV LP
3
Limited Partnership 0%
Aberdeen Standard European Property Growth Fund LP
3
Limited Partnership 0%
Aberdeen Standard Fund Managers Limited
3
Ordinary shares 100%
Aberdeen Standard Global Infrastructure GP III Ltd
24
Ordinary shares 100%
Aberdeen Standard Global Infrastructure Partners I (2021) Carry LP Limited Partnership 25%
Aberdeen Standard Global Infrastructure Partners III (2021) Carry LP
25
Limited Partnership 25%
Aberdeen Standard Global Risk Mitigation Fund (Australia)
34
Unit Trust 97%
Aberdeen Standard Greater China Value Fund
35
Investment Trust 71%
Aberdeen Standard Group Limited Ordinary Shares 100%
Aberdeen Standard Gulf Carry GP Limited
4
Ordinary shares 100%
Aberdeen Standard Investment Management Limited Ordinary Shares 100%
Aberdeen Standard Investments (Holdings) Limited Ordinary shares 100%
Aberdeen Standard Investments (Switzerland) AG
36
Ordinary shares 100%
Aberdeen Standard Investments Beteiligungs GmbH
37
Limited Liability
Company
94%
Aberdeen Standard Investments Colombia SAS
38
Ordinary shares 100%
Aberdeen Standard Investments Deutschland AG
37
Ordinary shares 90%
Aberdeen Standard Investments ETFs
abrdn Bloomberg Industrial Metals Strategy K-1 Free ETF
39
ETF 95%
Aberdeen Standard Investments ETFs (US) LLC
39
Limited liability company 100%
Aberdeen Standard Investments ETFs Advisors LLC
39
Limited liability company 100%
Aberdeen Standard Investments ETFs Sponsor LLC
39
Limited liability company 100%
Aberdeen Standard Investments Ireland Limited
40
Ordinary shares 100%
Aberdeen Standard Investments Limited Ordinary Shares 100%
Aberdeen Standard Investments Luxembourg Corporate Manager S.a.r.l.
11
Ordinary shares 100%
Aberdeen Standard Investments Luxembourg S.A.
41
Ordinary shares 100%
Aberdeen Standard Investments Sweden AB
28
Ordinary shares 100%
Aberdeen Standard (Jersey) Limited
42
Ordinary Shares 100%
Aberdeen Standard Life Asset Management Limited Ordinary Shares 100%
Aberdeen Standard Life Group Limited Ordinary Shares 100%
Aberdeen Standard Life Investments Limited Ordinary Shares 100%
Aberdeen Standard Life Limited Ordinary Shares 100%
Aberdeen Standard Limited Ordinary Shares 100%
Aberdeen Standard MSPC General Partner S.a.r.l.
20
Limited Liability
Company
100%
Aberdeen Standard Multi-Sector Private Credit Fund SCSp
20
Limited Partnership 3%
241abrdn.comAnnual report 2021
FINANCIAL INFORMATION
7. Group financial statements continued
Name of related undertaking Share class
1
% interest held
2
Aberdeen Standard OEIC I
ASI China A Share Equity Fund
3
OEIC 45%
ASI Sterling Bond Fund
3
OEIC 22%
ASI Sterling Long Dated Government Bond Fund
3
OEIC 49%
Aberdeen Standard OEIC III
ASI MyFolio Sustainable I Fund
3
OEIC 48%
ASI MyFolio Sustainable II Fund
3
OEIC 32%
ASI MyFolio Sustainable V Fund
3
OEIC 38%
Aberdeen Standard OEIC V
ASI Multi-Asset Climate Solutions Fund
3
OEIC 77%
Aberdeen Standard Pan European Residential Property Fund SICAV-RAIF
20
Limited Partnership 0%
Aberdeen Standard Private Equity Company IX, LLC
17
Limited liability company 80%
Aberdeen Standard Private Real Assets Co-Investment Fund I GP, LLC
17
Limited liability company 80%
Aberdeen Standard Private Real Assets Co-investment Fund I GP, LP
26
Limited partnership 0%
Aberdeen Standard Private Real Assets Co-Investment Fund I, LP
17
Limited Partnership 1%
Aberdeen Standard Secure Credit LP Limited Partnership 0%
Aberdeen Standard SICAV I
Aberdeen Standard SICAV I - Artificial Intelligence Global Equity Fund
20
SICAV 50%
Aberdeen Standard SICAV I - ASI-CCBI Belt & Road Bond Fund
20
SICAV 31%
Aberdeen Standard SICAV I - Asian Credit Bond Fund
20
SICAV 47%
Aberdeen Standard SICAV I - Asian Sustainable Development Equity Fund
20
SICAV 98%
Aberdeen Standard SICAV I - Climate Transition Bond Fund
20
SICAV 96%
Aberdeen Standard SICAV I - Emerging Markets Local Currency Corporate
Bond Fund
20
SICAV 90%
Aberdeen Standard SICAV I - Emerging Markets Sustainable Development
Corporate Bond Fund
20
SICAV 98%
Aberdeen Standard SICAV I - Europe ex UK Sustainable and Responsible
Investment Equity Fund
20
SICAV 24%
Aberdeen Standard SICAV I - German Equity Fund
20
SICAV 34%
Aberdeen Standard SICAV I - Global Climate & Environment Equity Fund
20
SICAV 100%
Aberdeen Standard SICAV II
Aberdeen Standard SICAV II - Dynamic Multi Asset Income Fund
43
SICAV 100%
Aberdeen Standard SICAV II - Global Focused Equity Fund
43
SICAV 94%
Aberdeen Standard SICAV II - Multi Asset Climate Opportunities
43
SICAV 100%
Aberdeen Standard SICAV III
Aberdeen Standard SICAV III - Emerging Market Debt Sustainable and
Responsible Investment Fund
43
SICAV 100%
Aberdeen Standard SOF IV Feeder LP Limited Partnership 0%
Aberdeen Standard SOF IV GP LP Limited Partnership 25%
Aberdeen Standard SOF IV LP Limited Partnership 0%
Aberdeen Standard SOF Evergreen GP LP Limited Partnership 40%
Aberdeen Standard SOF Evergreen LP Limited Partnership 0%
Aberdeen Standard UK Shopping Centre Feeder Fund Limited Partnership
3
Limited Partnership 0%
Aberdeen Standard Unit Trust 1
ASI Diversified Growth Fund
3
Unit trust 47%
Aberdeen Standard U.S. Private Equity IX, LP
26
Limited Partnership 0%
Aberdeen Standard Venture Company XII, LLC
17
Limited liability company 91%
Aberdeen Trust Limited
4
Ordinary shares 100%
Aberdeen UK Infrastructure Carry GP Limited
4
Ordinary shares 100%
Aberdeen UK Infrastructure Carry Limited
4
Ordinary shares 100%
Aberdeen Unit Trust Managers Limited
4
Ordinary shares 100%
Aberdeen U.S. Private Equity III (Offshore), LP
17
Limited Partnership 0%
Aberdeen U.S. Private Equity IV, LP
17
Limited Partnership 0%
Aberdeen U.S. Private Equity IV (Offshore), LP
17
Limited Partnership 0%
Aberdeen U.S. Private Equity IV SPV-A, LP
17
Limited Partnership 0%
Aberdeen U.S. Private Equity V, LP
17
Limited Partnership 0%
Aberdeen U.S. Private Equity V (Offshore), LP
17
Limited Partnership 0%
Aberdeen U.S. Private Equity V SPV-A, LP
17
Limited Partnership 0%
242 abrdn.com Annual report 2021
N
Name of related undertaking Share class
1
% interest held
2
Aberdeen U.S. Private Equity VI, LP
17
Limited Partnership 0%
Aberdeen U.S. Private Equity VI (Offshore), LP
17
Limited Partnership 0%
Aberdeen U.S. Private Equity VI SPV-A, LP
17
Limited Partnership 0%
Aberdeen U.S. Private Equity VII, LP
17
Limited Partnership 0%
Aberdeen U.S. Private Equity VII (Offshore), LP
17
Limited Partnership 0%
Aberdeen U.S. Private Equity VIII, LP
17
Limited Partnership 0%
Aberdeen U.S. Private Equity VIII (Offshore), LP
17
Limited Partnership 0%
Aberdeen Venture Partners VII, LP
17
Limited Partnership 0%
Aberdeen Venture Partners VII (Offshore), LP
17
Limited Partnership 0%
Aberdeen Venture Partners VII SPV-A, LP
17
Limited Partnership 0%
Aberdeen Venture Partners VIII, LP
17
Limited Partnership 0%
Aberdeen Venture Partners VIII (Offshore), LP
17
Limited Partnership 0%
Aberdeen Venture Partners VIII SPV-A, LP
17
Limited Partnership 0%
Aberdeen Venture Partners VIII SPV-B, LP
17
Limited Partnership 0%
Aberdeen Venture Partners VIII SPV-C, LP
17
Limited Partnership 0%
Aberdeen Venture Partners IX, LP
17
Limited Partnership 0%
Aberdeen Venture Partners IX (Offshore), LP
17
Limited Partnership 0%
Aberdeen Venture Company X, LLC
17
Limited Liability
Company
63%
Aberdeen Venture Company XI, LLC
17
Limited liability company 87%
Aberdeen Venture Partners X, LP
17
Limited Partnership 1%
Aberdeen Venture Partners X (Offshore) LP
17
Limited Partnership 0%
Aberdeen Venture Partners X SPV-A, LP
17
Limited Partnership 0%
Aberdeen Venture Partners X SPV-B, LP
17
Limited Partnership 0%
Aberdeen Venture Partners XI, LP
17
Limited Partnership 1%
Aberdeen Venture Partners XI (Offshore), LP
17
Limited Partnership 0%
Aberdeen Venture Partners XI SPV-A, LP
17
Limited Partnership 0%
Aberdeen Venture Partners XI SPV-B, LP
17
Limited Partnership 0%
Aberdeen Venture Partners XII, LP
17
Limited Partnership 1%
Aberdeen Venture Partners XIII LP
17
Limited Partnership 100%
abrdn Asia Limited
44
Ordinary shares 100%
abrdn Australia Ltd
34
Ordinary shares 100%
abrdn Brasil Investimentos Ltda
45
Limited Liability
Company
100%
abrdn Canada Limited
46
Ordinary shares 100%
abrdn Capital (CI) Limited
27
Ordinary Shares 100%
abrdn Capital International Limited
27
Ordinary Shares 100%
abrdn Capital Limited Ordinary Shares 100%
abrdn Capital Partners LLP
Limited Liability
Partnership
100%
abrdn Corporate Secretary Limited Ordinary shares 100%
abrdn CP (Holdings) Limited Ordinary Shares 100%
abrdn (CRED II) GP Limited Ordinary shares 100%
abrdn Digital Solutions Limited Ordinary Shares 100%
abrdn Financial Planning & Advice Limited
3
Ordinary A Shares
Ordinary B Shares
100%
abrdn Founder Co Limited Ordinary shares 100%
abrdn Hong Kong Limited
47
Ordinary shares 100%
abrdn Inc.
17
Ordinary shares 100%
abrdn Investment Management Limited Ordinary Shares 100%
abrdn Islamic Malaysia Sdn. Bhd.
48
Ordinary shares 100%
abrdn Japan Limited
49
Ordinary shares 100%
abrdn Korea Co. Limited
50
Ordinary shares 100%
abrdn Korea GP 2 Pte. Ltd
51
Ordinary shares 100%
abrdn Korea Separate Account 2 LP
51
Limited Partnership 1%
abrdn Life and Pensions Limited
3
Ordinary shares 100%
243abrdn.comAnnual report 2021
FINANCIAL INFORMATION
7. Group financial statements continued
Name of related undertaking Share class
1
% interest held
2
abrdn Malaysia Sdn. Bhd.
48
Ordinary shares,
Irredeemable non-
convertible preference
shares
100%
abrdn Nominees Services HK Limited
47
Ordinary shares 100%
abrdn Portfolio Investments Limited Ordinary Shares 100%
abrdn Portfolio Investments US Inc.
17
Ordinary Shares 100%
abrdn Premises Services Limited Ordinary Shares 100%
abrdn Private Equity (Europe) Limited Ordinary Shares 100%
abrdn Private Fund Management (Shanghai) Company Limited
52
Ordinary shares 100%
abrdn Si Yuan Private Fund Management (Shanghai) Company Limited
52
Ordinary shares 100%
abrdn (SLSPS) Pension Trustee Company Ltd Ordinary shares 100%
abrdn SPV 2021 A GP, LLC
17
Limited liability company 79%
abrdn Taiwan Limited
35
Ordinary shares 100%
abrdn (USA) Limited Ordinary Shares 100%
abrdn Venture Company XIII, LLC
17
Limited liability company 91%
ACM Carry LP
4
Limited Partnership 40%
AEROF (Luxembourg) GP S.a.r.l.
20
Ordinary shares 100%
AERP V-A Master, LP
17
Limited Partnership 0%
AIA Series T Holdings LLC
26
Limited liability company 0%
AIPP Folksam Europe II Kommanditbolag
53
Limited Partnership 0%
AIPP Pooling I SA
20
Ordinary shares 100%
Airport Industrial GP Limited
3
Ordinary shares 100%
Airport Industrial Limited Partnership
3
Limited Partnership 0%
Aldwych Capital Partners, LP Limited Partnership 0%
Andean Social Infrastructure Fund I LP
12
Limited Partnership 1%
Andean Social Infrastructure GP Limited
12
Ordinary shares 100%
Andean Social Infrastructure (No. 1) limited
3
Ordinary shares 100%
Arden Garden State NJ Fund, LP
26
Limited Partnership 1%
Arden Institutional Advisers, LP
26
Limited Partnership 0%
Arden Institutional Fund LP
26
Limited Partnership 0%
Arthur House (No.6) Limited
3
Ordinary shares 100%
Artio Global Investors Inc.
19
Ordinary shares 100%
ASI Core Private Equity Fund GP, LLC
17
Limited liability company 94%
ASI Direct RE GP LLP
Limited Liability
Partnership
100%
ASI European Long Income RE Fund SCSp
20
Limited Partnership 9%
ASI European Private Equity 2019 B LP Limited Partnership 0%
ASI (General Partner 2019 European PE A Carry) Limited Ordinary shares 100%
ASI (General Partner 2019 European PE A) S.a.r.l.
20
Ordinary shares 100%
ASI (General Partner 2019 European PE B) Limited Ordinary Shares 100%
ASI (General Partner ECF II) Limited Ordinary shares 100%
ASI (General Partner PE2) Limited Ordinary Shares 100%
ASI (General Partner PFF 2018) S.a.r.l.
20
Ordinary Shares 100%
ASI (General Partner SOF IV) Limited Ordinary Shares 100%
ASI (Gold) Limited
7
Ordinary Shares 100%
ASI Han Co-Investment LP Limited Partnership 90%
ASI (KFAS) RE GP LLP
Limited Liability
Partnership
100%
ASI Little Mill Carry LP
4
Limited Partnership 0%
ASI Little Mill LP
4
Limited Partnership 0%
ASI Mid-Market 1 LP
4
Limited Partnership 0%
ASI MM Executive Co Investment LP
4
Limited Partnership 0%
ASI (NWPE 2021) Carry LP Limited Partnership 0%
ASI PE 1 Carry LP
4
Limited Partnership 40%
ASI (PGPE III) GP LP Limited Partnership 40%
ASI Phoenix Fund Financing SCSp
20
Limited Partnership 0%
ASI Phoenix Global Private Equity III LP Limited Partnership 0%
244 abrdn.com Annual report 2021
N
Name of related undertaking Share class
1
% interest held
2
ASI Phoenix Venture Capital Partners LP Limited Partnership 0%
ASI Private Equity 1 LP
4
Limited Partnership 0%
ASI Private Equity 2 GP LP Limited Partnership 40%
ASI Private Equity 2 LP Limited Partnership 0%
ASI (PVCP) GP LP Limited Partnership 0%
ASI REMM GP LLP
4
Limited Liability
Partnership
100%
ASI Shin Co-Investment LP
4
Limited Partnership 100%
ASI Shin Global Investment GP Limited
12
Ordinary shares 100%
ASI (SOF E GP) Limited Ordinary Shares 100%
ASI000 GP I S.àr.l.
20
SICAV 100%
ASII – Emerging Markets Equity ADR Fund
17
Ordinary Shares 100%
ASII – International Equity ADR Fund
17
Ordinary shares 100%
ASII - US Equity Impact Fund
17
Ordinary shares 100%
ASII – US Multi-Cap Equity Fund
17
Ordinary shares 100%
ASII - US SMID Cap Equity Fund
17
Ordinary shares 100%
ASPER (Luxembourg) GP S.a.r.l.
20
Ordinary shares 100%
Baigrie Davies & Company Limited
3
Ordinary shares 100%
Baigrie Davies Holdings Limited
3
Ordinary shares 100%
Ballentine Core Private Equity Fund, LP
17
Limited Partnership 25%
BoS Mezzanine Partners Fund LP
54
Limited Partnership 0%
BOSEMP Feeder LP
4
Limited Partnership 0%
C.C. U.S. Private Equity Fund, LP
26
Limited Partnership 1%
C.C. U.S. Private Equity Fund II, LP
17
Limited Partnership 0%
C.C. U.S. Private Equity Fund GP, LLC
17
Limited Liability
Company
81%
C.C. U.S. Private Equity Fund GP II, LLC
17
Limited liability company 84%
Castlepoint General Partner Limited
55
Ordinary Shares 100%
Castlepoint LP
55
Limited Partnership 0%
Castlepoint Nominee Limited
55
Ordinary shares 100%
Concession Infrastructure Investments Manager Limited
56
Ordinary shares 50%
Coutts Asian Private Equity Limited Partnership
12
Limited Partnership 0%
Coutts Global Property Limited Partnership
12
Limited Partnership 0%
Coutts Middle East and North Africa Private Equity Limited Partnership
12
Limited Partnership 0%
Coutts Private Equity Limited Partnership
12
Limited Partnership 0%
Coutts Private Equity Limited Partnership II
12
Limited Partnership 0%
CPP General Partner Limited Partnership Limited Partnership 20%
Criterion Tec Holdings Ltd
57
Ordinary shares 21%
Cumberland Place Financial Management Limited
3
Ordinary Shares 100%
Edinburgh Fund Managers Group Limited
4
Ordinary shares 100%
Edinburgh Fund Managers Plc Ordinary shares 100%
Edinburgh Unit Trust Managers Limited
4
Ordinary shares,
Deferred shares
100%
Elevate Portfolio Services Limited
3
Ordinary Shares 100%
ESF I Executive Co Investment Limited Partnership Limited Partnership 0%
ESP II Co Investment Limited Partnership Limited Partnership 0%
ESP II Conduit LP Limited Partnership 0%
ESP II General Partner Limited Partnership Limited Partnership 0%
ESP 2004 Co Investment Limited Partnership Limited Partnership 0%
ESP 2004 Conduit LP Limited Partnership 0%
ESP 2004 General Partner Limited Partnership Limited Partnership 0%
ESP 2006 Co Investment Limited Partnership Limited Partnership 0%
ESP 2006 Conduit LP Limited Partnership 0%
ESP 2006 General Partner Limited Partnership Limited Partnership 20%
ESP 2008 Coinvestment Fund LP Limited Partnership 0%
ESP 2008 Coinvestment General Partner Limited partnership Limited Partnership 0%
ESP 2008 Conduit LP Limited Partnership 0%
ESP 2008 Executive Co Investment Limited Partnership Limited Partnership 0%
245abrdn.comAnnual report 2021
FINANCIAL INFORMATION
7. Group financial statements continued
Name of related undertaking Share class
1
% interest held
2
ESP 2008 General Partner Limited Partnership Limited Partnership 0%
ESP CPPIB European Mid Market Fund Limited Partnership 1%
ESP General Partner Limited Partnership Limited Partnership 0%
ESP Golden Bear Europe Fund Limited Partnership 3%
ESP Golden Bear General Partner Limited Partnership Limited Partnership 0%
ESP Tidal Reach General Partner Limited Partnership Limited Partnership 20%
ESP Tidal Reach LP Limited Partnership 1%
European Strategic Partners Limited Partnership 0%
European Strategic Partners - I LP Limited Partnership 0%
European Strategic Partners II 'A' Limited Partnership 0%
European Strategic Partners II 'B' Limited Partnership 0%
European Strategic Partners II 'C' Limited Partnership 0%
European Strategic Partners II 'D' Limited Partnership 0%
European Strategic Partners II 'E' Limited Partnership 0%
European Strategic Partners 2004 'A' Limited Partnership 0%
European Strategic Partners 2004 'B' Limited Partnership 0%
European Strategic Partners 2006 'A' Limited Partnership 0%
European Strategic Partners 2006 'B' Limited Partnership 0%
European Strategic Partners 2008 'A' Limited Partnership 0%
European Strategic Partners 2008 'B' Limited Partnership 0%
European Strategic Partners Scottish 'B' Limited Partnership 0%
European Strategic Partners Scottish 'C' Limited Partnership 0%
Finimize Limited
3
Ordinary shares 100%
Flag Asia Company III, LLC
17
Limited liability company 100%
Flag Asia Company III, LP
17
Limited Partnership 0%
Flag Energy & Resource Company II, LLC
17
Limited liability company 100%
Flag Energy & Resource Company III, LLC
17
Limited liability company 100%
Flag GG Opportunity Company, LLC
17
Limited liability company 100%
Flag Global Company, LLC
17
Limited liability company 100%
Flag International Company, LLC
17
Limited liability company 100%
Flag International Company II, LLC
17
Limited liability company 100%
Flag International Company III, LLC
17
Limited liability company 100%
Flag International Company, LP
17
Limited Partnership 0%
Flag International Company II, LP
17
Limited Partnership 0%
Flag International Company III, LP
17
Limited Partnership 0%
Flag Offshore GP, Ltd
58
Ordinary shares 100%
Flag Private Equity Company, LLC
17
Limited liability company 100%
Flag Private Equity Company II, LLC
17
Limited liability company 100%
Flag Private Equity Company III, LLC
17
Limited liability company 100%
Flag Private Equity Company IV, LLC
17
Limited liability company 100%
Flag Private Equity Company V, LLC
17
Limited liability company 100%
Flag Private Equity Company VI, LLC
17
Limited liability company 100%
Flag Private Equity Company III, LP
17
Limited Partnership 0%
Flag Private Equity Company IV, LP
17
Limited Partnership 0%
Flag Private Equity Company V, LP
17
Limited Partnership 0%
Flag Real Assets Company LLC
17
Limited liability company 100%
Flag Real Estate Company II, LLC
17
Limited liability company 100%
Flag Real Estate Company III, LLC
17
Limited liability company 100%
Flag Squadron Asia Pacific III GP LP
12
Limited Partnership 0%
Flag Venture Company II, LLC
17
Limited liability company 100%
Flag Venture Company III, LLC
17
Limited liability company 100%
Flag Venture Company IV, LLC
17
Limited liability company 100%
Flag Venture Company V, LLC
17
Limited liability company 100%
Flag Venture Company VI, LLC
17
Limited liability company 100%
Flag Venture Company VII, LLC
17
Limited liability company 100%
Flag Venture Company VIII, LLC
17
Limited liability company 100%
Flag Venture Company IX, LLC
17
Limited liability company 100%
246 abrdn.com Annual report 2021
N
Name of related undertaking Share class
1
% interest held
2
Flag Venture Company VI, LP
17
Limited Partnership 0%
Flag Venture Company VII, LP
17
Limited Partnership 0%
Flag Venture Company VIII, LP
17
Limited Partnership 0%
Focus Software Limited
7
Ordinary Shares 100%
FOF III Venture Company, LLC
17
Limited liability company 100%
FOF IV Venture Company, LLC
17
Limited liability company 100%
FOF V Venture Company, LLC
17
Limited liability company 100%
Fraser Heath Financial Management Limited
3
Ordinary Shares 100%
FSA III EA SPV, LP
12
Limited Partnership 0%
FSA III Pacific SPV, LP
12
Limited Partnership 0%
Griffin Nominees Limited
3
Ordinary shares 100%
Heng An Standard Life Insurance Company Limited
59
Ordinary Shares 50%
Ignis Asset Management Limited Ordinary Shares 100%
Ignis Cayman GP2 Limited
12
Ordinary Shares 100%
Ignis Cayman GP3 Limited
12
Ordinary Shares 100%
Ignis Fund Managers Limited
8
Ordinary Shares 100%
Ignis Investment Services Limited Ordinary Shares 100%
Jones Sheridan Financial Consulting Limited
3
Ordinary shares 100%
Jones Sheridan Holdings Limited
3
Ordinary shares 100%
KFAS Real Estate Limited Partnership Limited Partnership 0%
Murray Johnstone Holdings Limited
8
Ordinary shares 100%
Murray Johnstone Limited
4
Ordinary shares 100%
NASP 2006 General Partner Limited Partnership Limited Partnership 5%
NASP 2006 Special Limited Partnership Limited Partnership 0%
NASP 2008 General Partner Limited Partnership Limited Partnership 0%
NASP 2008 Special Limited Partnership Limited Partnership 0%
Next Generation Associates III, LLC
17
Limited liability company 100%
Next Generation Associates IV, LLC
17
Limited liability company 100%
Next Generation Associates V, LLC
17
Limited liability company 100%
Next Generation Associates V, LP
17
Limited Partnership 0%
North American Strategic Partners, LP
60
Limited Partnership 0%
North American Strategic Partners 2006 LP
12
Limited Partnership 0%
North American Strategic Partners 2008 LP
12
Limited Partnership 0%
North American Strategic Partners Companion Fund LP
60
Limited Partnership 0%
North American Strategic Partners (Feeder) 2006 Limited Partnership 0%
North American Strategic Partners (Feeder) 2008 Limited Partnership Limited Partnership 0%
North East Trustees Limited
3
Ordinary A Shares
Ordinary B Shares
100%
Origo Services Limited
57
Ordinary shares 19%
Orion Partners CLP Inc.
61
Ordinary shares 100%
Orion Partners Services Inc.
61
Ordinary shares 100%
Ostara China Real Estate Fund LP
61
Limited Partnership 0%
Ostara Japan Fund 3 LP
61
Limited Partnership 1%
Ostara Korea GP 2 Pte. Ltd
51
Ordinary shares 100%
Ostara Korea Separate Account LP
51
Limited Partnership 0%
Ostara Partners Inc. China
61
Ordinary shares 100%
Ostara Partners Inc. Japan 3
61
Ordinary shares 100%
Pace Financial Solutions Limited
3
Ordinary A Shares
Ordinary B Shares
Ordinary C Shares
100%
Pace Mortgage Solutions Limited
3
Ordinary A Shares
Ordinary B Shares
100%
Parnell Fisher Child & Co. Limited
3
Ordinary Shares 100%
Parnell Fisher Child Holdings Limited
3
Ordinary A Shares
Ordinary B Shares
100%
PE1 LP
4
Limited Partnership 0%
PE1A LP
4
Limited Partnership 0%
PE2 Carry LP
4
Limited Partnership 40%
247abrdn.comAnnual report 2021
FINANCIAL INFORMATION
7. Group financial statements continued
Name of related undertaking Share class
1
% interest held
2
PE2 LP
4
Limited Partnership 0%
Pearl Private Equity LP Limited Partnership 0%
Pearl Strategic Credit LP Limited Partnership 0%
Pearson Jones & Company (Trustees) Limited
3
Ordinary Shares 100%
Pearson Jones Nominees Limited
3
Ordinary Shares 100%
PGB European Buy-out Fund I SCSp
20
Limited Partnership 0%
PT Aberdeen Standard Investments Indonesia
62
Limited Liability
Company
99%
PURetail Luxembourg Management Company S.a.r.l.
41
Class A shares 50%
Regent Property Partners (Retail Parks) Limited
3
Ordinary shares 100%
Serin Wealth Limited
7
Ordinary shares 100%
SG Commercial LLP
63
Limited Liability
Partnership
60%
Shin Global Investment Partners LP
12
Limited Partnership 50%
SL Capital 2016 Co-Investment GP LP Limited Partnership 5%
SL Capital 2016 Co-Investment LP Limited Partnership 5%
SL Capital ECF GP LP Limited Partnership 4%
SL Capital ESF I GP LP Limited Partnership 0%
SL Capital ESF I LP Limited Partnership 1%
SL Capital European Co-Investment B LP Limited Partnership 0%
SL Capital European Co-Investment LP Limited Partnership 0%
SL Capital Ignis Private Equity Founder LP Limited Partnership 65%
SL Capital Ignis Strategic Credit Founder LP Limited Partnership 0%
SL Capital Infrastructure Fund II Top-Up Co-Investment Fund SCSp
20
Limited Partnership 0%
SL Capital Infrastructure I GP LP Limited Partnership 0%
SL Capital Infrastructure I LP Limited Partnership 0%
SL Capital Infrastructure II LTP LP Limited Partnership 100%
SL Capital Infrastructure II SCSp
64
Limited Partnership 0%
SL Capital Infrastructure Secondary I GP LP Limited Partnership 0%
SL Capital Infrastructure Secondary I LP Limited Partnership 0%
SL Capital Infrastructure Secondary II LP Limited Partnership 25%
SL Capital NASF I A LP Limited Partnership 2%
SL Capital NASF I Carry LP Limited Partnership 0%
SL Capital NASF I GP LP Limited Partnership 0%
SL Capital NASF I LP Limited Partnership 0%
SL Capital Partners (US) Limited
8
Ordinary Shares 100%
SL Capital Pearl Private Equity GP LP Limited Partnership 0%
SL Capital Pearl Strategic Credit GP LP Limited Partnership 1%
SL Capital SOF I Feeder LP Limited Partnership 0%
SL Capital SOF II Feeder LP Limited Partnership 1%
SL Capital SOF III Feeder LP Limited Partnership 0%
SL Capital SOF I GP LP Limited Partnership 0%
SL Capital SOF II GP LP Limited Partnership 0%
SL Capital SOF III GP LP Limited Partnership 0%
SL Capital SOF I LP Limited Partnership 0%
SL Capital SOF II LP Limited Partnership 0%
SL Capital SOF III LP Limited Partnership 0%
SLC EC I Executive Co Investment Limited Partnership Limited Partnership 0%
SLCI I Executive Co Investment Limited Partnership Limited Partnership 0%
SLCI II Executive Co-Investment LP Limited Partnership 0%
SLCI Rail Co-Invest LP Limited Partnership 0%
SLCP (Founder Partner Ignis Private Equity) Limited Ordinary Shares 100%
SLCP (Founder Partner Ignis Strategic Credit) Limited Ordinary Shares 100%
SLCP (General Partner) Limited Ordinary Shares 100%
SLCP (General Partner II) Limited Ordinary Shares 100%
SLCP (General Partner 2016 Co-investment) Limited Ordinary Shares 100%
SLCP (General Partner CPP) Limited Ordinary Shares 100%
248 abrdn.com Annual report 2021
N
Name of related undertaking Share class
1
% interest held
2
SLCP (General Partner EC) Limited Ordinary Shares 100%
SLCP (General Partner Edcastle) Limited Ordinary Shares 100%
SLCP (General Partner ESF I) Limited Ordinary Shares 100%
SLCP (General Partner ESF II) Limited Ordinary Shares 100%
SLCP (General Partner ESP 2004) Limited Ordinary Shares 100%
SLCP (General Partner ESP 2006) Limited Ordinary Shares 100%
SLCP (General Partner ESP 2008 Coinvestment) Limited Ordinary Shares 100%
SLCP (General Partner ESP 2008) Limited Ordinary Shares 100%
SLCP (General Partner ESP CAL) Limited Ordinary Shares 100%
SLCP (General Partner Europe VI) Limited Ordinary Shares 100%
SLCP (General Partner Infrastructure I) Limited Ordinary Shares 100%
SLCP (General Partner Infrastructure Secondary I) Limited Ordinary Shares 100%
SLCP (General Partner NASF I) Limited Ordinary Shares 100%
SLCP (General Partner NASP 2006) Limited Ordinary Shares 100%
SLCP (General Partner NASP 2008) Limited Ordinary Shares 100%
SLCP (General Partner Pearl Private Equity) Limited Ordinary Shares 100%
SLCP (General Partner Pearl Strategic Credit) Limited Ordinary Shares 100%
SLCP (General Partner SOF I) Limited Ordinary Shares 100%
SLCP (General Partner SOF II) Limited Ordinary Shares 100%
SLCP (General Partner SOF III) Limited Ordinary Shares 100%
SLCP (General Partner Tidal Reach) Limited Ordinary Shares 100%
SLCP (General Partner USA) Limited Ordinary Shares 100%
SLIF Property Investment LP Limited Partnership 0%
SLIPC (General Partner Infrastructure II LTP 2017) Limited Ordinary Shares 100%
SLIPC (General Partner Infrastructure II) S.a.r.l.
64
Ordinary Shares 100%
SLIPC (General Partner Infrastructure III) S.à r.l.
20
Ordinary shares 100%
SLIPC (General Partner PMD Co-Invest 2017) Limited Ordinary Shares 100%
SLIPC (General Partner SCF 1) Limited Ordinary Shares 100%
SLTM Limited Ordinary Shares 100%
SOF I Executive Co Investment Limited Partnership Limited Partnership 0%
SOF II Executive Co Investment Limited Partnership Limited Partnership 0%
SOF III Executive Co Investment Limited Partnership Limited Partnership 0%
SOF IV Executive Co Investment Limited Partnership Limited Partnership 0%
SOF IV Carry LP Limited Partnership 25%
Squadron Asia Pacific Fund, LP
12
Limited Partnership 0%
Squadron Asia Pacific Fund II, LP
12
Limited Partnership 0%
Squadron Capital Asia Pacific GP, LP
12
Limited Partnership 100%
Squadron Capital Asia Pacific II GP LP
12
Limited Partnership 100%
Squadron Capital Partners Limited
12
Ordinary shares 100%
Squadron GP Participation, LP
12
Limited Partnership 0%
Squadron GP Participation II, LP
12
Limited Partnership 0%
Standard Aberdeen Asset Management Limited Ordinary Shares 100%
Standard Aberdeen Group Limited Ordinary Shares 100%
Standard Aberdeen Investment Management Limited Ordinary Shares 100%
Standard Aberdeen Investments Limited Ordinary Shares 100%
Standard Aberdeen Limited Ordinary Shares 100%
Standard Life Investments Brent Cross General Partner Limited Ordinary Shares 100%
Standard Life investments Brent Cross LP Limited Partnership 0%
Standard Life Investments Commercial Real Estate Debt LP
3
Limited Partnership 0%
Standard Life Investments European RE Club (Offshore Feeder) Ltd
12
Ordinary shares 100%
Standard Life Investments European RE Club II (Offshore Feeder) Ltd
12
Ordinary shares 100%
Standard Life investments European Real Estate Club LP
3
Limited Partnership 2%
Standard Life Investments European Real Estate Club II LP
3
Limited Partnership 1%
Standard Life Investments European Real Estate Club III LP
3
Limited Partnership 2%
Standard Life Investments European Real Estate Club LP Feeder Fund
12
Limited Partnership 0%
Standard Life Investments European Real Estate Club II LP Feeder Fund
12
Limited Partnership 0%
Standard Life Investments (General Partner CRED) Limited
3
Ordinary Shares 100%
249abrdn.comAnnual report 2021
FINANCIAL INFORMATION
7. Group financial statements continued
Name of related undertaking Share class
1
% interest held
2
Standard Life Investments (General Partner ELIREF) S.a.r.l.
20
Ordinary shares 100%
Standard Life Investments (General Partner EPGF) Limited Ordinary Shares 100%
Standard Life Investments (General Partner European Real Estate Club) Limited
3
Ordinary Shares 100%
Standard Life Investments (General Partner European Real Estate Club II) Limited
3
Ordinary Shares 100%
Standard Life Investments (General Partner European Real Estate Club III)
Limited
3
Ordinary Shares 100%
Standard Life Investments (General Partner GARS) Limited Ordinary Shares 100%
Standard Life Investments (General Partner GFS) Limited Ordinary Shares 100%
Standard Life Investments (General Partner Global Tactical Asset Allocation)
Limited
Ordinary Shares 100%
Standard Life Investments (General Partner MAC) Limited Ordinary Shares 100%
Standard Life Investments (General Partner UK Shopping Centre Feeder Fund LP)
Limited
3
Ordinary Shares 100%
Standard Life Investments Global Absolute Return Strategies Master Fund
Limited
12
Ordinary Shares 100%
Standard Life Investments Global Absolute Return Strategies Offshore Feeder
Fund Limited
12
Ordinary shares 100%
Standard Life Investments Global Absolute Return Strategies Onshore Feeder
Fund, LP
17
Limited Partnership 0%
Standard Life Investments (Mutual Funds) Limited Ordinary Shares 100%
Standard Life Investments UK Shopping Centre Feeder Fund Company Limited
65
Ordinary shares 100%
Standard Life Savings Nominees Limited Ordinary Shares 100%
Tenet Group Limited
66
Ordinary B Shares 25%
Tenon Nominees Limited
4
Ordinary shares 100%
The Munro Partnership Ltd Ordinary Shares 100%
Threesixty Partnerships Limited
9
Ordinary Shares 100%
Touchstone Insurance Company Limited
67
Ordinary Shares 100%
TPIF (No. 1) GP LLP
68
Limited Liability
Partnership
60%
Limited Partnership 0%
Limited Liability
Partnership
60%
Limited Partnership 0%
Ordinary Shares 60%
Ordinary Shares 60%
Limited Partnership 0%
Limited Liability
Partnership
60%
Ordinary Shares 60%
Limited Liability
Partnership
60%
Limited Partnership 7%
Limited Liability
Partnership
60%
Limited Liability
Partnership
60%
Ordinary Shares 100%
Ordinary Shares 100%
Ordinary shares 100%
Limited Partnership 0%
Ordinary shares 50%
Limited Partnership 0%
TPIF (No. 1) LP
68
TPIF (Portfolio No. 1) GP LLP
63
TPIF (Portfolio No. 1) LP
63
TPIF (Portfolio No. 1) NomineF Limited
63
Tritax Aberdeen HQ Office (General Partner) Limited
63
Tritax Aberdeen HQ Office Limited Partnership
69
Tritax Assets LLP
63
Tritax Delivery Systems Limited
63
Tritax LMR Carry GP LLP
68
Tritax LMR Carry Limited Partnership
68
Tritax Management LLP
3
Tritax Securities LLP
63
Two Rivers One Limited
30
Two Rivers Two Limited
30
UK PRS Opportunities General Partner Limited
3
UK PRS Opportunities LP
3
Virgin Money Unit Trust Managers Limited
70
VZWL Private Equity GmbH & Co geschlossene Investment KG
37
Waverley Healthcare Private Equity Limited
4
Ordinary shares 100%
1. OEIC = Open-ended investment company
SICAV = Société d’investissement à capital variable
ETF = Exchange traded fund
2. Limited partnerships in which the Group has no interest but whose general partner is controlled by the Group are considered related undertakings under
Companies Act 2006. Where the Group has no interest in a limited partnership that is considered a related undertaking, the interest held is disclosed as 0%.
250 abrdn.com Annual report 2021
N
Registered Offices
3. Bow Bells House, 1 Bread Street, London, EC4M 9HH
4. 10 Queens Terrace, Aberdeen, AB10 1XL
5. c/o IQ EQ Fund Services (Mauritius) Ltd, 33 Edith Cavell Street, Port
Louis, 11324, Mauritius
6. Cranford House, Kenilworth Road, Blackdown, Leamington Spa, CV32
6RQ
7. 30 Finsbury Square , London, EC2A 1AG
8. 7 Exchange Crescent, Conference Square, Edinburgh, EH3 8AN
9. 2nd Floor, The Royals, Altrincham Road, Sharston, Manchester M22 4BJ
10. 6, rue Gabriel Lippmann L - 5365 Munsbach, Luxembourg
11. 2-8 avenue Charles De Gaulle, L-1653 Luxembourg, Luxembourg
12. c/o Maples Corporate Services Limited ,Ugland House, P.O. Box 309,
Grand Cayman, KY1-1104, Cayman Islands
13. c/o The Corporation Trust Company, Corporation Trust Center, 1209
Orange Street, Wilmington, DE, 19801, USA
14. Tuborg Havnevej 15, DK-2900 Hellerup, Denmark
15. c/o Asianajotoimisto DLA Piper Finland Oy, Fabianinkatu 23, FI-00130
Helsinki, Finland
16. Bangkok City Tower, 28th Floor, 179 South Sathorn Road,
Thungmahamek, Sathorn, Bangkok, 10120, Thailand
17. c/o Corporation Service Company, 251 Little Falls Drive, Wilmington,
DE, 19808, USA
18. Office Unit 8, 6th Floor, Al Khatem Tower, Abu Dhabi Global Market
Square, Al Marya Island, PO Box 764605, Abu Dhabi, United Arab
Emirates
19. c/o Corporation Service Company, 2711 Centerville Road, Suite 400,
Wilmington, DE, 19808, USA
20. 35a Avenue John F. Kennedy, L-1855 Luxembourg, Luxembourg
21. 29 Rue De Berri, Paris, 75008, France
22. Kaivokatu 6, FI-00100, Helsinki, Finland
23. 40 Upper Mount Street, Dublin 2, Ireland
24. Western Suite, Ground Floor Mill Court, La Charroterie, St Peter Port,
Guernsey, GY1 1EJ
25. P.O. Box 406, Mill Court, La Charroterie, St Peter Port, Guernsey, GY1
3GG
26. 1900 Market St, Suite 200, Philadelphia, PA 19103, USA
27. 1st Floor, Sir Walter Raleigh House, Esplanade, St Helier, JE2 3QB,
Jersey
28. Box 3039, Stockholm, 103 63, Sweden
29. Harju maakond, Tallinn, Kesklinna linnaosa, Ahtri tn 6a, 10151, Estonia
30. Level 1, 1FC1, Esplanade, St Helier, JE2 3BX, Jersey
31. 2B rue Albert Borschette, L-1246 Luxembourg , Luxembourg
32. WTC, H-Tower, 20th Floor, Zuidplein 166, 1077 XV Amsterdam,
Netherlands
33. Mikonkatu 9 Fin 00100, Helsinki, Finland
34. Level 10, 255 George Street, Sydney, NSW 2000, Australia
35. 8F-1, No. 101, Songren Road, Taipei City, 110, Taiwan, Republic of
China
36. Schweizergasse 14, Zurich, 8001, Switzerland
37. Bockenheimer Landstrasse 25, 60325 Frankfurt am Main, Germany
38. AC 82 NO. 10 60 P 5 Bogota DC, Columbia
39. 712 5th Ave, New York, NY 10019, USA
40. 24 Merrion Row, Dublin 2, Ireland
41. 80, route d'Esch, L-1470 Luxembourg, Luxembourg
42. 44 Esplanade, St Helier, Jersey, JE4 9WG
43. 2-4, Rue Eugène Ruppert, L-2453 Luxembourg, Luxembourg
44. 21 Church Street, #01-01, Capital Square Two, 049480, Singapore
45. Rua Joaquim Floriano, 913 – 7th floor – Cj. 71, Itaim Bibi, São Paulo,
04534-013, Brasil
46. 1 First Canadian Place, 100 King Street West, Toronto, Ontario,
Canada
47. 6th Floor, Alexandra House, 18 Chater Road, Central, Hong Kong
48. Suite 1005, 10th Floor, Wisma Hamzah-Kwong Hing No.1, Leboh
Ampang 50100 Kuala Lumpur, Malaysia
49. Otemachi Financial City Grand Cube 9F, 1-9-2 Otemachi, Chiyoda-
ku, Tokyo, 100-0004, Japan
50. 13th Fl., B Tower (Seocho-dong, Kyobo Tower Building), 465,
Gangnam-daero, Seocho-gu, Seoul, Korea
51. 80 Robinson Road, #02-00, 068898, Singapore
52. West Area, 2F, No.707 Zhangyang Road, China (Shanghai) Pilot Free
Trade Zone
53. Sveavägen 24, 111 57 Stockholm, Sweden
54. Fourth Floor, 7 Castle Street, Edinburgh, EH2 3AH
55. 11th Floor, Two Snow Hill, Birmingham, B4 6WR
56. c/o Paget-Brown Trust Company Ltd, Boundary Hall, Cricket Square,
P.O. Box 1111, Grand Cayman, KY1-1102, Cayman Islands
57. 7 Lochside View, Edinburgh, EH12 9DH
58. Codan Trust Company (Cayman) Limited, Cricket Square, Hutchins
Drive, P.O. Box 2681, Grand Cayman, KY1-1111, Cayman Islands
59. 18F, Tower II, The Exchange, 189 Nanjing Road, Heping District, Tianjin,
People’s Republic of China, 300051
60. 1 Rodney Square 10th Fl, 10 & King St, Wilmington, DE, 19801, USA
61. Campbells Corporate Services Limited, 4th Floor, Willow House,
Cricket Square, Grand Cayman, KY1-9010, Cayman Islands
62. 16th Floor, Menara DEA Tower 2, 16th Floor, Kawasan Mega
Kuningan, Jl Mega Kuningan Barat Kav. E4.3 No. 1-2, 12950 Jakarta,
Indonesia
63. 3rd Floor, 6 Duke Street St James's, London, SW1Y 6BN
64. 2 Boulevard de la Foire, L-1528 Luxembourg, Luxembourg
65. Ogier House, Esplanade, St Helier, JE4 9WG, Jersey
66. 5 Lister Hill, Horsforth, Leeds LS18 5AZ
67. c/o Aon, PO Box 33, Maison Trinity, Trinity Square, St Peter Port,
Guernsey GY1 4AT
68. 50 Lothian Road, Festival Square, Edinburgh, EH3 9WJ
69. DWF LLP, 110 Queen Street, Glasgow, G1 3HD
70. Jubilee House, Gosforth, Newcastle-Upon-Tyne, NE3 4PL
251abrdn.comAnnual report 2021
FINANCIAL INFORMATION
8. Company financial statements
Company statement of financial position
As at 31 December 2021
2021 2020
Notes £m £m
Assets
Investments in subsidiaries A 5,065 4,013
Investments in associates and joint ventures B
206 1,216
Deferred tax assets N
113 77
Loans to subsidiaries C
70 109
Derivative financial assets C
8 1
Equity securities and interests in pooled investment funds C 1,187 249
Debt securities C
227 326
Receivables and other financial assets C 30 50
Other assets F
83 –
Cash and cash equivalents C
20 47
Total assets
7,009 6,088
Equity
Share capital G 305 306
Shares held by trusts H (167) (161)
Share premium reserve G
640 640
Retained earnings I
Brought forward retained earnings 2,631 2,933
Profit/(loss) for the year attributable to equity shareholders of abrdn plc
990 (1,266)
Other movements in retained earnings
(320) 964
Total retained earnings
3,301 2,631
Other reserves J 1,856 1,842
Equity attributable to equity shareholders of abrdn plc
5,935 5,258
Other equity K 207 -
Total equity 6,142 5,258
Liabilities
Subordinated liabilities L 644 638
Derivative financial liabilities D
– 6
Other financial liabilities L
177 110
Provisions P
35 68
Other liabilities P
11 8
Total liabilities
867 830
Total equity and liabilities 7,009 6,088
The financial statements on pages 252 to 263 were approved by the Board and signed on its behalf by the following
Directors:
Sir Douglas Flint Stephanie Bruce
Chairman Chief Financial Officer
28 February 2022 28 February 2022
Company registered number: SC286832
The Notes on pages 255 to 263 are an integral part of these financial statements.
252 abrdn.com Annual report 2021
N
Company statement of changes in equity
For the year ended 31 December 2021
Share capital
Shares held by
trusts
Share
premium
reserve
Retained
earnings
Other
reserves
Total equity
attributable to
equity
shareholders
of abrdn plc
Other equity Total equity
2021 Notes £m £m £m £m £m £m £m £m
1 January 306 (161) 640 2,631 1,842 5,258 – 5,258
Profit for the year – – – 990 – 990 – 990
Other comprehensive
income for the year
– – – – 6 6 – 6
Total comprehensive income
for the year
– – – 990 6 996 – 996
Issue of other equity K – – – – – – 207 207
Dividends paid on ordinary
shares
– – – (308) – (308) – (308)
Share buyback G
(1) – – – 1 – – –
Reserves credit for employee
share-based payment
J
– – – – 43 43 – 43
Transfer to retained earnings
for vested employee share-
based payment
J
– – – 36 (36) – – –
Shares acquired by
employee trusts
– (52) – – – (52) – (52)
Shares distributed by
employee and other trusts
and related dividend
equivalents
– 46 – (48) – (2) – (2)
31 December
305 (167) 640 3,301 1,856 5,935 207 6,142
The Notes on pages 255 to 263 are an integral part of these financial statements.
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8. Company financial statements continued
Share
capital
Shares
held by
trusts
Share
premium
reserve
Retained
earnings
Other
reserves
Total
equity
2020 Notes £m £m £m £m £m £m
1 January 327 (119) 640 2,933 3,621 7,402
Loss for the year – – – (1,266) – (1,266)
Other comprehensive
income for the year
– – – – 8 8
Total comprehensive
income for the year
– – – (1,266) 8 (1,258)
Dividends paid on ordinary
shares – – – (479) – (479)
Share buyback G (21) – – (402) 21 (402)
Reserves credit for
employee share-based
payment
J – – – – 64 64
Transfer to retained
earnings for vested
employee share-based
payment J – – – 38 (38) –
Transfer between
reserves on impairment of
investment in subsidiaries
J – – – 1,834 (1,834)
–
Shares acquired by
employee trusts – (66) – – – (66)
Shares distributed by
employee and other trusts
and related dividend
equivalents
– 24 – (27) – (3)
31 December 306 (161) 640 2,631 1,842 5,258
The Notes on pages 255 to 263 are an integral part of these financial statements.
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Company accounting policies
(a) Basis of preparation
These separate financial statements are presented as required by the Companies Act 2006. The Company meets the
definition of a qualifying entity under Application of Financial Reporting Requirements 100 as issued by the Financial
Reporting Council. Accordingly, the financial statements for period ended 31 December 2021 have been prepared in
accordance with Financial Reporting Standard 101 Reduced Disclosure Framework (FRS 101) as issued by the Financial
Reporting Council.
The financial statements have been prepared on a going concern basis and under the historical cost convention, as
modified by the revaluation of financial assets and financial liabilities (including derivative instruments) at fair value through
profit or loss (FVTPL).
As permitted by FRS 101, the Company has taken advantage of the following disclosure exemptions available under that
standard:
– A cash flow statement and related notes.
– Capital management.
– Effect of IFRSs issued but not effective.
– Related party transactions with wholly owned subsidiaries.
As equivalent disclosures are given in the consolidated financial statements, we have also applied the disclosure
exemptions for share based payments and financial instruments.
The principal accounting policies adopted are the same as those given in the consolidated financial statements, together
with the Company specific policies set out below. These accounting policies have been consistently applied to all financial
reporting periods presented in these financial statements.
The Company has taken advantage of the exemption in section 408 of the Companies Act 2006 not to present its own
income statement in these financial statements. The auditors’ remuneration for audit and other services is disclosed in
Note 7 to the consolidated financial statements. The Company has no employees.
(i) Investment in subsidiaries, associates and joint ventures
The Company has certain subsidiaries which are investment vehicles such as open-ended investment companies, unit
trusts and limited partnerships whose primary function is to generate capital or income growth through holding
investments. This category of subsidiary is held at FVTPL since they are managed on a fair value basis.
Investments in subsidiaries (other than those measured at FVTPL), associates (other than those measured at FVTPL) and
joint ventures are initially recognised at cost and subsequently held at cost less any impairment charge. An impairment
charge is recognised when the carrying amount of the investment exceeds its recoverable amount. Any gain or loss on
disposal of a subsidiary, associate or joint venture is recognised in profit for the year.
Distributions received of non-cash assets, including investments in subsidiaries, are recognised at fair value in the balance
sheet and as dividends in specie in the income statement.
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8. Company financial statements continued
(ii) Critical accounting estimates and judgements in applying accounting policies
The preparation of financial statements requires management to make estimates and assumptions and exercise
judgements in applying the accounting policies that affect the reported amounts of assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses arising during the year. Estimates and
judgements are continually evaluated and based on historical experience and other factors, including expectations of
future events that are believed to be reasonable under the circumstances.
The areas where judgements have the most significant effect on the amounts recognised in the Company financial
statements are as follows:
Financial statement area Critical judgements in applying accounting policies Related notes
Investments in subsidiaries held at cost
Given that the net assets attributable to
shareholders of abrdn plc at 31 December
2021 were higher than the market
capitalisation of the Company judgement was
required to determine for which subsidiaries
this was considered an indicator of impairment
Note A
The areas where assumptions and other sources of estimation uncertainty at the end of the reporting period have a
significant risk of resulting in a material adjustment to the carrying amount of assets and liabilities within the next financial
year are as follows:
Financial statement area Critical accounting estimates and assumptions Related notes
Investments in subsidiaries held at cost Determination of the recoverable amount Note A
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Notes to the Company financial statements
A. Investments in subsidiaries
2021 2020
Notes
£m £m
Investments in subsidiaries measured at cost 3,737 3,568
Investments in subsidiaries measured at FVTPL C 1,328 445
Investments in subsidiaries
5,065 4,013
2021 2020
£m £m
At 1 January 4,013 6,027
Investment into existing subsidiaries measured at cost 210 26
Acquisition of subsidiaries via in specie dividend 4 -
Disposal of subsidiaries measured at cost
– (50)
Impairment of subsidiaries measured at cost
(45) (1,873)
Acquisition of subsidiaries at FVTPL
884 8
Disposal of subsidiaries at FVTPL
(2) (126)
Gains on subsidiaries at FVTPL
1 1
At 31 December
5,065 4,013
Details of the Company’s subsidiaries are given in Note 47 of the Group financial statements.
(a) Acquisitions
During 2021, the Company made the following acquisitions of subsidiaries measured at cost:
– The Company increased its investment in abrdn Financial Planning Ltd (aFPL) through the purchase of 40,000,000
ordinary shares for a cash consideration of £40m.
– The Company increased its investment in Aberdeen Asset Management PLC (AAM PLC) by £165.3m through the
purchase of 1,031,250 ordinary shares for a cash consideration of £3.3m, the purchase of 21,350,600 ordinary shares
for a cash consideration of £68.3m, the purchase of 1,718,750 ordinary shares for a cash consideration of £5.5m and
the purchase of 27,562,500 ordinary shares for a cash consideration of £88.2m.
– The Company increased its investment in Aberdeen Corporate Services Limited (ACSL) through the purchase of 3,385
ordinary shares for a cash consideration of £3.4m.
– The Company acquired Focus Business Solutions (FBS) via a dividend in specie from Focus Solutions Group Limited and
recognised this subsidiary at an amount of £3.8m. The Company further increased its investment in FBS through the
purchase of 150,000,000 ordinary shares for a cash consideration of £1.5m.
During 2020, the Company made the following acquisitions of subsidiaries measured at cost:
– The Company increased its investment in aFPL through the purchase of 17,000,000 ordinary shares for a cash
consideration of £17m.
– The Company increased its investment in AAM PLC through the purchase of 1,171,875 ordinary shares for a cash
consideration of £3.8m and through the purchase of 500,000 ordinary shares for a cash consideration of £1.6m.
– The Company increased its investment in ACSL through the purchase of 3,584 ordinary shares for a cash consideration
of £3.6m.
See Section (d) below for details on investments in subsidiaries at FVTPL.
(b) Disposals
During 2020, the Company made the following disposals of subsidiaries measured at cost:
– The Company redeemed £44.4m of equity capital in abrdn (Mauritius Holdings) 2006 Limited through the cancellation
of 553,336.19 Participating shares.
– The Company received £5.2m by way of distribution of the unallocated divisible surplus from the Standard Life
Assurance Company 2006 (SLAC 06) following its deauthorisation. The Company was the sole member of SLAC 06
and this amount was previously held as a subsidiary measured at cost.
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8. Company financial statements continued
(c) Impairment
The Company’s net assets attributable to shareholders of abrdn plc at 31 December 2021 of £5.9bn are higher than the
Company’s market capitalisation of £5.3bn. This was considered to be an indicator of impairment of the Company’s
largest investment in subsidiary AAM PLC (carrying value £2.1bn). All other investments in subsidiaries (with the exception
of abrdn Financial Planning Limited discussed below) were supported by financial assets, or other relevant analysis. The
recoverable amount of AAM PLC was therefore determined based on value in use and based on this assessment no
impairment of AAM PLC was required at 31 December 2021. The assumptions used in the value in use were the same as
those used for the value in use of the asset management group of cash generating units as described in Note 14 of the
Group financial statements, with the cash flows being restricted to those related to the AAM PLC group. Management do
not consider that there is a significant risk of a material adjustment to the carrying amount of the AAM PLC investment in
subsidiary asset within the next financial year.
In the year ended 31 December 2020, the Company impaired its investment in AAM PLC by £1,834m. Following the
impairment, £1,834m was transferred from the merger reserve to retained earnings (refer Note J). There was no transfer
from the merger reserve in the year ended 31 December 2021.
The impairment of £1,834m was recognised at 30 June 2020, at the same time as a further impairment of the asset
management goodwill was recognised in the Group financial statements. Refer Note 14 of the Group financial statements.
The Company’s investment in its subsidiary abrdn Financial Planning Limited (aFPL) was impaired during 2021 by £45m
(2020: £39m). As detailed in Note A, the Company had increased its investment in aFPL by £40m during the year ended
31 December 2021.
The recoverable amount of aFPL which is its fair value less costs of disposal (FVLCD) at 31 December 2021 was £110m. The
FVLCD considered a number of valuation approaches, with the primary approach being a multiples approach based on
price to revenue and price to assets under advice (AUAdv). Multiples were based on recent transactions, adjusted to take
into account profitability where appropriate, and were benchmarked against trading multiples for aFPL’s peer companies.
Revenue was based on actuals for the year ended 31 December 2021 and AUAdv was based on actuals at 31 December
2021. The expected cost of disposal was based on past experience of previous transactions. This is a level 3 measurement
as it is measured using inputs which are not based on observable market data. The impairment resulted from losses
incurred by the business during the year, the impact of the level of profitability on valuation expectations for certain parts of
the business, and an impairment of internally developed software (refer Note 14 of the Group financial statements). As the
year end carrying value is the recoverable amount any downside sensitivity will lead to a further future impairment loss.
A 20% reduction in recurring revenue and AUAdv would result in a further impairment of £22m.
The recoverable amount at 31 December 2020 of £115m was also based on the FVLCD which similarly considered a
number of valuation approaches, with the primary approach being a multiples approach based on price to revenue and
price to AUAdv.
(d) Investments in subsidiaries at FVTPL
Investments in subsidiaries at FVTPL, valued at £1,328m (2020: £445m), relate to holdings in funds over which the Company
has control.
B. Investments in associates and joint ventures
2021 2020
£m £m
Investment in associates measured at cost 10 1,020
Investment in joint venture measured at cost 196 196
Investments in associates and joint ventures
206 1,216
(a) Investment in associates
The Company has an interest of 25.3% (2020: 25.3%) in Tenet Group Limited, a company incorporated in England and
Wales which is measured at cost less impairment.
With effect from 23 February 2021 the Company judged its investment in Phoenix Group Holdings plc (Phoenix) was no
longer classified as an associate. Further details are provided in Note 15 of the Group Financial Statements. The Company’s
shareholding in Phoenix, which remained at 14.4%, was therefore reclassified from an investment in associate measured at
cost less impairment to equity securities and interests in pooled investment funds measured at fair value. A reclassification
gain of £13m was recognised for the year ended 31 December 2021 as the fair value on 22 February 2021 of £1,023m was
higher than the previous carrying value as an associate of £1,010m.
(b) Investment in joint venture
The Company has a 50% (2020: 50%) interest in Heng An Standard Life Insurance Company Limited (HASL), a company
incorporated in China. Further details on this joint venture are provided in Note 15 of the Group financial statements.
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C. Financial investments
Fair value through
profit or loss
Derivative financial
instruments used for hedging Amortised cost Total
2021 2020 2021 2020 2021 2020 2021 2020
Notes £m £m £m £m £m £m £m £m
Investments in subsidiaries
measured at FVTPL
A
1,328 445 – – – – 1,328 445
Loan to subsidiaries – – – – 70 109 70 109
Derivative financial assets D – – 8 1 – – 8 1
Equity securities and interests
in pooled investment funds
1,187 249 – – – – 1,187 249
Debt securities
1 – – – 226 326 227 326
Receivables and other
financial assets E
– 28 – – 30 22 30 50
Cash and cash equivalents
– – – – 20 47 20 47
Total
2,516 722 8 1 346 504 2,870 1,227
The amount of debt securities expected to be recovered or settled after more than 12 months is £62m (2020: £231m). The
amount of loans to subsidiaries expected to be recovered or settled after more than 12 months is £70m (2020: £100m).
The amount of equity securities and interests in pooled investment funds expected to be recovered or settled after more
than 12 months is £708m (2020: £249m).
Under IFRS 9 the Company calculates expected credit losses (ECL) on financial assets which are measured at amortised
cost (refer to Note 37 (c) of the Group financial statements), including loans to subsidiaries (which are unrated). At
31 December 2021 the Company does not hold financial assets at amortised cost that it regards as credit-impaired or for
which it considers the probability of default would result in material expected credit losses. The expected credit losses
recognised were less than £1m (2020: less than £1m). In making this assessment the Company has considered if any
evidence is available to indicate the occurrence of an event which would result in a detrimental impact on the estimated
future cash flows of these assets.
D. Derivative financial instruments
The Company uses derivative financial instruments in order to reduce the risk from potential movements in foreign
exchange rates.
2021 2020
Contract
amount
Fair value
assets
Fair value
liabilities
Contract
amount
Fair value
assets
Fair value
liabilities
£m £m £m £m £m £m
Cash flow hedges 554 8 – 549 – 6
Foreign exchange forwards 64 – – 79 1 –
Derivative financial instruments 618 8 – 628 1 6
The derivative asset of £8m (2020: derivative liability of £6m) is expected to be settled after more than 12 months.
On 18 October 2017, the Company issued subordinated notes with a principal amount of US $750m. In order to manage
the foreign exchange risk relating to the principal and coupons payable on these notes the Company entered into
a cross-currency swap which is designated as a hedge of future cash flows.
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8. Company financial statements continued
The maturity profile of the contractual undiscounted cash flows in relation to derivative financial instruments is as follows:
Within
1 year
2-5
years
6-10
years
11-15
years
Total
2021 2020 2021 2020 2021 2020 2021 2020 2021 2020
£m £m £m £m £m £m £m £m £m £m
Cash inflows
Cash flow hedges 24 23 94 93 589 607 – – 707 723
Foreign exchange forwards
55 62 – – – – – – 55 62
Total
79 85 94 93 589 607 – – 762 785
Cash outflows
Cash flow hedges
(18) (18) (73) (73) (596) (614) – – (687) (705)
Foreign exchange forwards (55) (61) – – – – – – (55) (61)
Total
(73) (79) (73) (73) (596) (614) – – (742) (766)
Net derivative financial
instruments cash flows
6 6 21 20 (7) (7) – – 20 19
E. Receivables and other financial assets
2021 2020
£m £m
Amounts due from related parties 14 16
Contingent consideration asset – 28
Other financial assets
16 6
Total receivables and other financial assets
30 50
The carrying amounts disclosed above reasonably approximate the fair values at the year end.
Receivables and other financial assets of £30m (2020: £43m) are expected to be recovered within 12 months.
F. Other assets
2021 2020
£m £m
Prepayments 56 -
Other 27 -
Other assets
83 -
The amount of Other assets which are expected to be recovered within 12 months is £35m (2020: £nil).
Prepayments of £56m (2020: £nil) relate to the Group’s future purchase of certain products in the Phoenix Group’s savings
business offered through abrdn’s Wrap platform together with the Phoenix Group’s trustee investment plan business for UK
pension scheme clients (refer Note 1(c)(iii) of the Group financial statements). Other includes £27m (2020: £nil) in respect
of amounts due from related parties.
G. Share capital and share premium
Details of the Company’s share capital and share premium are given in Note 25 of the Group financial statements including
details of the share buyback.
H. Shares held by trusts
Shares held by trusts relates to shares in abrdn plc that are held by the Standard Life Aberdeen Employee Benefit Trust
(SLA EBT) and Standard Life Employee Trust (ET). Further details of these trusts are provided in Note 26 of the Group
financial statements.
I. Retained earnings
Details of the dividends paid on the ordinary shares by the Company are provided in Note 13 of the Group financial
statements. Note 13 also includes information regarding the final dividend proposed by the Directors for the year ended
31 December 2021.
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J. Movements in other reserves
The following tables show the movements in other reserves during the year:
Merger reserve
Equity compensation
reserve
Special reserve
Capital
redemption
reserve
Cash flow
hedges
Total
2021 £m £m £m £m £m £m
At 1 January 578 79 115 1,058 12 1,842
Fair value gains on cash flow hedges – – – – 19 19
Realised gains on cash flow hedges
transferred to income statement
– – – – (10) (10)
Share buyback
– – – 1 – 1
Reserves credit for employee share-based
payments
– 43 – – – 43
Transfer to retained earnings for vested
employee share-based payments
– (36) – – – (36)
Tax effect of items that may be reclassified
subsequently to profit or loss
– – – – (3) (3)
At 31 December
578 86 115 1,059 18 1,856
Merger reserve
Equity compensation
reserve
Special reserve
Capital
redemption
reserve
Cash flow
hedges
Total
2020 £m £m £m £m £m £m
At 1 January 2,412 53 115 1,037 4 3,621
Fair value losses on cash flow hedges – – – – (3) (3)
Realised losses on cash flow hedges
transferred to income statement
– – – – 13 13
Share buyback – – – 21 – 21
Reserves credit for employee share-based
payments
– 64 – – – 64
Transfer to retained earnings for vested
employee share-based payments – (38) – – – (38)
Transfer between reserves on impairment of
investment in subsidiaries
(1,834) – – – – (1,834)
Tax effect of items that may be reclassified
subsequently to profit or loss
– – – – (2) (2)
At 31 December 578 79 115 1,058 12 1,842
During 2021, £1m (2020: £21m) was recognised in the capital redemption reserve for the share buyback (refer Note 25 of
the Group financial statements).
During 2020, following the impairment loss recognised in that period on the Company’s investment in AAM PLC (refer Note
A) £1,834m was transferred from the merger reserve to retained earnings.
K. Other Equity
5.25 % Fixed Rate Reset Perpetual Subordinated Contingent Convertible Notes
On 13 December 2021, the Company issued £210m of 5.25% Fixed Rate Reset Perpetual Subordinated Contingent
Convertible Notes (the Notes). The Notes are classified as other equity and have been initially recognised at £207m (the
proceeds received less issuance costs of £3m, refer Note 29 (a) of the Group financial statements).
L. Financial liabilities
Designated as at fair value through
profit or loss Amortised cost Total
2021 2020 2021 2020 2021 2020
Notes £m £m £m £m £m £m
Subordinated liabilities M – – 644 638 644 638
Other financial liabilities O 9 – 168 110 177 110
Total
9 – 812 748 821 748
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8. Company financial statements continued
M. Subordinated liabilities
2021 2020
Principal
amount
Carrying
value
Principal
amount
Carrying
value
Subordinated notes:
4.25% US Dollar fixed rate due 30 June 2028 $750m £552m $750m £546m
5.5% Sterling fixed rate due 4 December 2042
£92m £92m £92m £92m
Total subordinated liabilities
£644m £638m
Subordinated liabilities are considered current if the contractual re-pricing or maturity dates are within one year. The
principal amount of all the subordinated liabilities is expected to be settled after more than 12 months. The accrued interest
on the subordinated liabilities of less than £1m (2020: less than £1m) is expected to be settled within 12 months.
Further information including the terms and conditions of all subordinated liabilities is given in Note 32 of the Group financial
statements.
N. Deferred tax assets and liabilities
2021 2020
£m £m
Deferred tax assets 113 77
The amount of deferred tax assets expected to be recovered or settled after more than 12 months are £113m
(2020: £77m).
Recognised deferred tax
2021 2020
£m £m
Deferred tax assets comprise:
Unused tax losses 120 80
Unrealised losses on cash flow hedges
- (2)
Gross deferred tax assets
120 78
Less: Offset against deferred tax liabilities (7) (1)
Deferred tax assets 113 77
Deferred tax liabilities comprise:
Unrealised gains on cash flow hedges 6 -
Unrealised gains on investments
1 1
Gross deferred tax liabilities
7 1
Less: Offset against deferred tax assets (7) (1)
Deferred tax liabilities – –
Net deferred tax asset at 31 December 113 77
Movements in net deferred tax assets comprise:
At 1 January 77 35
Amounts credited to profit or loss
39 44
Amounts charged to other comprehensive income (3) (2)
At 31 December
113 77
The deferred tax assets recognised are in respect of unrealised losses on cash flow hedges and on unused tax losses
including the impact of the revaluation of these losses due to the future impact of the increase in the UK Corporation Tax
rate to 25% from 1 April 2023. The deferred tax assets are recognised to the extent that it is probable that the losses will be
capable of being offset against future taxable profits (refer Note 9 (c) (ii) of the Group financial statements).
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O. Other financial liabilities
2021 2020
£m £m
Outstanding purchase of investment securities 5 6
Amounts due to related parties 137 47
Collateral held in respect of derivative contracts
15 7
Contingent consideration liability 9 -
Outstanding contractual obligation for share buyback
– 40
Other
11 10
Other financial liabilities 177 110
Other financial liabilities of £172m (2020: £110m) are expected to be settled within 12 months.
P. Provisions and other liabilities
Of Provisions of £35m (2020: £68m), £35m are expected to be settled within 12 months (2020: £58m). The provisions in
2021 and 2020 relate to separation costs. Refer Note 36 of the Group financial statements for further information and
details of the provisions.
Of Other liabilities of £11m (2020: £8m), £11m are expected to be settled within 12 months (2020: £8m) and include £11m
(2020: £8m) in respect of amounts due to related parties.
Q. Contingent liabilities, contingent assets, indemnities and guarantees
(a) Legal proceedings and regulations
The Company, like other financial organisations, is subject to legal proceedings and complaints in the normal course of its
business. All such material matters are periodically reassessed, with the assistance of external professional advisers where
appropriate, to determine the likelihood of the Company incurring a liability. Where it is concluded that it is more likely than
not that a material outflow will be made a provision is established based on management’s best estimate of the amount
that will be payable. At 31 December 2021, there are no identified contingent liabilities expected to lead to a material
exposure.
(b) Indemnities and guarantees
Under the trust deed in respect of the UK Standard Life defined benefit pension plan, ACSL, the principal employer, must
pay contributions to the pension plan as the trustees’ actuary may certify necessary. The Company has guaranteed the
obligations of ACSL in relation to this plan. In addition the Company has guaranteed similar obligations in respect of certain
other subsidiaries’ UK and Ireland defined benefit pension plans.
None of these guarantees give rise to any liabilities at 31 December 2021 (2020: none).
R. Related party transactions
(a) Key management personnel
The Directors and key management personnel of theġCompany are considered to be the same as for the Group.
See Note 44 of the Group financial statements for further information.
S. Events after the reporting date
On 28 January 2022, the Group announced that it had sold an aggregate of 39,981,442 ordinary shares of its shareholding
in Phoenix, representing approximately 4% of Phoenix's issued share capital, at a price of 660 pence per share, raising
aggregate gross sale proceeds of c£264 million. As a result of the sale, the Company’s shareholding has reduced to 10.4%
and it continues to be classified as equity securities and interests in pooled investment funds, measured at fair value.
On 2 December 2021 the Group announced the proposed acquisition of 100% of the issued share capital of Antler Holdco
Limited, the holding company of interactive investor Limited (interactive investor) for cash consideration of £1.49bn, subject
to certain adjustments. interactive investor is the leading subscription-based, digitally enabled, direct investing platform in
the UK and, as the acquisition constitutes a Class 1 transaction under the Listing Rules, a Class 1 Circular was published on 9
February 2022. Completion is subject to the satisfaction of certain conditions, including relevant regulatory approvals and
the approval of the acquisition by the Group’s shareholders at a General Meeting on 15 March 2022.
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FINANCIAL INFORMATION
9. Supplementary information
9.1 Alternative performance measures
We assess our performance using a variety of measures that are not defined under IFRS and are therefore termed
alternative performance measures (APMs). The APMs that we use may not be directly comparable with similarly named
measures used by other companies. We have presented below reconciliations from these APMs to the most appropriate
measure prepared in accordance with IFRS. All APMs should be read together with the IFRS consolidated income
statement, IFRS consolidated statement of financial position and IFRS consolidated statement of cash flows, which are
presented in the Group financial statements section of this report and related metrics. Adjusted operating profit excludes
certain items which are likely to be recurring such as restructuring costs, amortisation of certain intangibles, dividends from
significant listed investments and the share of profit or loss from joint ventures.
Metric used for executive remuneration in 2022. See page 104 for more information.
Definition Purpose
Adjusted operating profit
Adjusted operating profit before tax is the Group’s key APM. Adjusted operating profit
includes the results of the Group’s three growth vectors: Investments, Adviser and
Personal, along with Corporate/Strategic.
It excludes the Group’s adjusted net financing costs and investment return, and
discontinued operations.
Adjusted operating profit also excludes the impact of the following items:
– Restructuring costs and corporate transaction expenses. Restructuring
includes the impact of major regulatory change.
– Amortisation and impairment of intangible assets acquired in business
combinations and through the purchase of customer contracts.
– Profit or loss arising on the disposal of a subsidiary, joint venture or equity
accounted associate.
– Change in fair value of/dividends from significant listed investments.
– Share of profit or loss from associates and joint ventures.
– Impairment loss/reversal of impairment loss recognised on investments in
associates and joint ventures accounted for using the equity method.
– Fair value movements in contingent consideration.
– Items which are one-off and, due to their size or nature, are not indicative of the
long-term operating performance of the Group.
Further details are included in Note 12 of the Group financial statements.
Adjusted operating profit has
replaced adjusted profit before
tax as the Group’s key APM.
Adjusted operating profit reporting
provides further analysis of the
results reported under IFRS and
the Directors believe it helps to
give shareholders a fuller
understanding of the
performance of the business by
identifying and analysing adjusting
items.
Segment reporting used in
management information is
reported to the level of adjusted
operating profit, following the
changes to adjusted profit before
tax discussed below.
Fee based revenue
Fee based revenue includes revenue we generate from asset management charges
(AMCs), platform charges and other transactional charges. AMCs are earned on
products such as mutual funds, and are calculated as a percentage fee based on the
assets held. Investment risk on these products rests principally with the client, with our
major indirect exposure to rising or falling markets coming from higher or lower AMCs.
Fee based revenue is shown net of costs of sale, such as commissions and similar
charges.
Fee based revenue is a
component of adjusted operating
profit and provides the basis for
reporting of the fee revenue yield
financial ratio. Fee based revenue
is also used to calculate the
cost/income ratio.
Adjusted operating expenses
Adjusted operating expenses is a component of adjusted operating profit and relates
to the day-to-day expenses of managing our business. Adjusted operating expenses
excludes restructuring and corporate transaction expenses. Adjusted operating
expenses also excludes amortisation and impairment of intangible assets acquired in
business combinations and through the purchase of customer contracts.
Adjusted operating expenses is a
component of adjusted operating
profit and is used to calculate the
cost/income ratio.
Adjusted profit before tax
In addition to the results included in adjusted operating profit above, adjusted profit before
tax includes adjusted net financing costs and investment return. Previously adjusted profit
included the pre-tax adjusted results from the Group’s associates and joint ventures
accounted for using the equity method. The reason for the change is to make the results
more understandable, following the reclassification of HDFC Life and Phoenix from
associates to equity investments.
Adjusted profit before tax is a key
input to the adjusted earnings per
share measure.
R
APM
APM R
APM
APM
APM
264 abrdn.com Annual report 2021
N
Definition Purpose
Adjusted net financing costs and investment return
Adjusted net financing costs and investment return (previously named Capital
management) relates to the return from the net assets of the shareholder business, net
of costs of financing. This includes the net assets in defined benefit staff pension plans
and net assets relating to the financing of subordinated liabilities.
Adjusted net financing costs and
investment return is a component
of adjusted profit before tax.
Cost/income ratio
This is an efficiency measure that is calculated as adjusted operating expenses divided
by fee based revenue in the period.
This ratio is used by management
to assess efficiency and reported
to the Board and executive
leadership team.
Fee revenue yield (bps)
The fee revenue yield is calculated as annualised fee based revenue (excluding
performance fees and revenue for which there are no attributable assets) divided by
monthly average fee based assets.
The average revenue yield on fee
based business is a measure that
illustrates the average margin
being earned on the assets that
we manage, administer or advise
our clients on.
Adjusted diluted earnings per share
Adjusted diluted earnings per share is calculated on adjusted profit after tax. The
weighted average number of ordinary shares in issue is adjusted during the period to
assume the conversion of all dilutive potential ordinary shares, such as share options
granted to employees.
Details on the calculation of adjusted diluted earnings per share are set out in Note 11 of
the Group financial statements.
Earnings per share is a commonly
used financial metric which can be
used to measure the profitability
and capital efficiency of a
company over time. We also
calculate adjusted diluted
earnings per share to illustrate the
impact of adjusting items on the
metric.
This ratio is used by management
to assess performance and
reported to the Board and
executive leadership team.
Adjusted capital generation
Adjusted capital generation is part of the analysis of movements in IFPR regulatory
capital. Adjusted capital generation is calculated as adjusted profit after tax less returns
relating to pension schemes in surplus, which do not benefit regulatory capital. It also
includes dividends from associates, joint ventures and significant listed investments.
This measure aims to show how
adjusted profit contributes to
regulatory capital, and therefore
provides insight into our ability to
generate capital that is deployed
to support value for shareholders.
Adjusted diluted capital generation per share
Adjusted diluted capital generation per share is calculated as adjusted capital
generation divided by the weighted average number of diluted ordinary shares
outstanding.
This ratio is a measure used to
assess performance for
remuneration purposes.
Cash and liquid resources
Cash and liquid resources are IFRS cash and cash equivalents (netted down for
overdrafts), money market instruments and holdings in money market funds. It also
includes surplus cash that has been invested in liquid assets such as high quality
corporate bonds, gilts and pooled investment funds. Seed capital and co-investments
are excluded.
The purpose of this measure is to
demonstrate how much cash and
invested assets we hold and can
be readily accessed.
APM R
APM
APM
APM
APM
APM
APM
265abrdn.comAnnual report 2021
FINANCIAL INFORMATION
9. Supplementary information continued
9.1.1 Adjusted operating profit and adjusted profit
Reconciliation of adjusted operating profit and adjusted profit to IFRS profit by component
The key components of adjusted operating profit are fee based revenue and adjusted operating expenses. These
components provide a meaningful analysis of our adjusted results. The table below provides a reconciliation of movements
between adjusted operating profit component measures and relevant IFRS terms.
A reconciliation of Adjusted operating expenses to the IFRS item Total administrative and other expenses, and a
reconciliation of Adjusted net financing costs and investment return to the IFRS item Net gains on financial instruments and
other income are provided in Note 2b(ii) of the Group financial statements. A reconciliation of Fee based revenue to the
IFRS item Revenue from contracts with customers is provided in Note 3 of the Group financial statements.
IFRS term IFRS
Presentation
differences
Adjusting
items
Adjusted
profit
Adjusted profit term
2021 £m £m £m £m
Net operating revenue 1,543 - (28) 1,515 Fee based revenue
Total administrative and other
expenses
(1,556) (9) 373 (1,192) Adjusted operating expenses
1
(13) (9) 345 323 Adjusted operating profit
Net gains on financial instruments
and other income
(183) (20) 203 -
Adjusted net financing costs and
investment return
Finance costs (30) 29 1 - N/A
Profit on disposal of subsidiaries
and other operations
127 - (127) - N/A
Profit on disposal of interests in
associates
1,236 - (1,236) - N/A
Share of profit or loss from
associates and joint ventures
(22) - 22 - N/A
Profit before tax from
continuing operations
1,115 - (792) 323
Adjusted profit before tax from
continuing operations
Total tax expense (120) - 94 (26) Tax on adjusted profit
Profit for the year from
continuing operations
995 - (698) 297
Adjusted profit after tax from
continuing operations
Profit for the year from
discontinued operations
- - - -
Adjusted profit after tax from
discontinued operations
Profit for the year 995 - (698) 297 Adjusted profit after tax
1. Adjusted operating expenses includes staff and other related costs of £643m compared with IFRS staff costs and other employee-related costs of £604m.
The difference primarily relates to the inclusion of contractor, temporary agency staff and recruitment and training costs of £27m (IFRS basis: Reported within
other administrative expenses) and gains on funds to hedge deferred bonus awards (£5m) (IFRS basis: Reported within other net gains on financial
instruments and other income) within staff and other related costs. IFRS staff costs and other employee-related costs includes the benefit from the net
interest credit relating to the staff pension schemes of £17m (Adjusted profit basis: Reported within adjusted net financing costs and investment return).
266 abrdn.com Annual report 2021
N
IFRS term
IFRS
Presentation
differences
Adjusting
items
Adjusted
profit
Adjusted profit term
2020 £m £m £m £m
Net operating revenue 1,423 2 – 1,425 Fee based revenue
Total administrative and other
expenses
(2,716) 9 1,501 (1,206) Adjusted operating expenses
(1,293) 11 1,501 219 Adjusted operating profit
Net gains on financial instruments
and other income
146 (41)
(84) 21
Adjusted net financing costs and
investment return
Finance costs (30) 30 – – N/A
Profit on disposal of subsidiaries
and other operations
8 – (8) – N/A
Profit on disposal of interests in
associates 1,858 – (1,858) – N/A
Share of profit or loss from
associates and joint ventures
194 – (194)
– N/A
Impairment of associates and joint
ventures
(45) – 45 – N/A
Profit before tax from
continuing operations
838 - (598)
240
Adjusted profit before tax from
continuing operations
Total tax expense 15 - (53) (38) Tax on adjusted profit
Profit for the year from
continuing operations
853 – (651) 202
Adjusted profit after tax from
continuing operations
Profit for the year from
discontinued operations
(15)
– 15 –
Adjusted profit after tax from
discontinued operations
Profit for the year 838 – (636) 202 Adjusted profit after tax
Presentation differences primarily relate to amounts presented in a different line item of the consolidated income
statement.
267abrdn.comAnnual report 2021
FINANCIAL INFORMATION
9. Supplementary information continued
Analysis of adjusting items
The table below provides detail of the adjusting items made in the calculation of adjusted profit before tax:
Continuing operations Discontinued operations Total
2021 2020 2021 2020 2021 2020
£m £m £m £m £m £m
Restructuring and corporate
transaction expenses
(259) (316) - – (259) (316)
Amortisation and impairment of
intangible assets acquired in business
combinations and through the
purchase of customer contracts
(99) (1,180) - – (99) (1,180)
Profit on disposal of subsidiaries and
other operations
127 8 - – 127 8
Profit on disposal of interests in
associates
1,236 1,858 - – 1,236 1,858
Change in fair value of significant
listed investments
(298) 65 - – (298) 65
Dividends from significant listed
investments
71 - - - 71 -
Share of profit or loss from associates
and joint ventures
(22) 194 - - (22) 194
Impairment of interests in joint
ventures
- (45) - - - (45)
Other 36 14 - (15) 36 (1)
Total adjusting items including results
of associates and joint ventures
792 598 - (15) 792 583
An explanation for why individual items are excluded from adjusted profit is set out below:
– Restructuring and corporate transaction expenses are excluded from adjusted profit. Restructuring includes the
impact of major regulatory change. By highlighting and excluding these costs we aim to give shareholders a fuller
understanding of the performance of the business. Restructuring and corporate transaction expenses include costs
relating to the integration of businesses acquired and our transformation programme. Other restructuring costs
excluded from adjusted profit relate to projects which have a significant impact on the way the Group operates. Costs
are only excluded from adjusted profit where they are out with business as usual activities and the costs would not have
been incurred had the restructuring project not taken place. For headcount related costs, where duplicate posts are
identified as a result of an integration or transformation plan, the duplicated cost will be treated as a restructuring cost
from the beginning of the process which eliminates the duplicate cost. Branding costs which relate to future benefits
such as sponsorship, media and marketing are included in adjusted operating expenses, with operational elements
such as system changes and fund renaming included in restructuring costs. The 2021 expenses mainly comprised of
costs of £35m (2020: £79m) in respect of integration and related synergies, £27m (2020: £112m) in respect of Phoenix
separation costs, £65m (2020: £30m) of other headcount reduction related costs and property restructuring, £64m
(2020: £69m) of other transformation costs such as finance and platform transformation, and £35m (2020: £4m) of
corporate transaction related costs including the proposed acquisition of interactive investor and the purchase of
certain products from Phoenix announced in February 2021.
– Amortisation and impairment of intangible assets acquired in business combinations and through the purchase of
customer contracts is included as an adjusting item. This is consistent with peers and therefore excluding these items
aids comparability. Highlighting this as an adjusting item aims to give a fuller understanding of these accounting impacts
which arise where businesses have been acquired but do not arise where businesses have grown organically. Further
details are provided in Note 14 of the Group financial statements.
– Profit on disposal of subsidiaries and other operations of £127m (2020: £8m), primarily relates to the sales of Parmenion
and Bonaccord which completed on 30 June 2021 and 30 September 2021 respectively. These items are excluded
from adjusted profit as they are non-recurring in nature.
– Profit on disposal of interests in associates of £1,236m (2020: £1,858m), includes one-off accounting gains following the
reclassification of HDFC Asset Management (£897m) and Phoenix (£68m) from investment in associates accounted
for using the equity method to equity securities measured at fair value and £271m from the sale of 5% of shares in HDFC
Asset Management. Details are provided in Note 15 of the Group financial statements. These items are excluded from
adjusted profit as they are volatile and the accounting gains are non-recurring in nature.
– The change in fair value of significant listed investments was negative £298m (2020: positive £65m) and represents the
impact of market movements on our holdings in HDFC Life (£52m reduction in value including impact of stake sale in
June 2021), in Phoenix (£82m reduction) from February 2021 and in HDFC Asset Management (£164m reduction) from
September 2021. Excluding fair value movements on significant listed investments for the purposes of adjusted profit is
aligned with our treatment of gains on disposal for these holdings when they were classified as an associate, and
reflects that the fair value movements are not indicative of the long-term operating performance of the Group.
268 abrdn.com Annual report 2021
N
– Dividends from significant listed investments relates to our shareholdings in HDFC Life, Phoenix and HDFC Asset
Management that were previously associates and were reclassified on 3 December 2020, 23 February 2021 and
29 September 2021 respectively. Following the reclassification, dividends received are now recognised as income
within our financial statements. The £71m in 2021 relates to dividends received from Phoenix (£69m) and HDFC Life
(£2m). Dividends from significant listed investments are included in adjusting items, as such dividends result in fair value
movements.
– Share of profit or loss from associates and joint ventures reduced to a loss of £22m (2020: profit £194m). Following the
reclassifications noted above, only HASL and Virgin Money UTM are now classified as associates and joint ventures.
Associate and joint venture results are excluded from adjusted profit to help in understanding the performance of our
core business separately from our strategic holdings.
– The impairment of associates and joint ventures in 2020 of £45m relates to our joint venture with Virgin Money. More
details are provided in Note 15 of the Group financial statements.
– Details on items classified as ‘Other’ in the table above are provided in Note 12 of the Group financial statements. In
2021 this includes a £25m net release of deferred income, related to the 23 February 2021 announcement of the
simplification and extension of the strategic partnership with Phoenix.
269abrdn.comAnnual report 2021
FINANCIAL INFORMATION
9. Supplementary information continued
Reconciliation to previously disclosed information
FY 2020 as previously disclosed
Asset
management
associates and
joint ventures
Insurance
associates and
joint ventures
FY 2020 on revised basis
£m £m £m £m
Fee based revenue 1,425 – – 1,425 Fee based revenue
Adjusted operating expenses (1,206) – – (1,206) Adjusted operating expenses
Adjusted operating profit 219 – – 219 Adjusted operating profit
Capital management 21 – – 21
Adjusted net financing costs and
investment return
Share of associates’ and joint
ventures’ profit before tax
247
(44) (203) – N/A
Adjusted profit before tax 487 (44) (203) 240 Adjusted profit before tax
Tax on adjusted profit (38) – – (38) Tax on adjusted profit
Share of associates’ and joint
ventures’ tax expense
(38)
12 26 – N/A
Adjusted profit after tax 411 (32) (177) 202 Adjusted profit after tax
Adjusted for the following items
Adjusted for the following items
Restructuring and corporate
transaction expenses
(355)
10 29 (316)
Restructuring and corporate
transaction expenses
Amortisation and impairment of
intangible assets acquired in
business combinations and
through the purchase of
customer contracts
(1,287) – 107 (1,180)
Amortisation and impairment of
intangible assets acquired in
business combinations and
through the purchase of
customer contracts
Profit on disposal of subsidiaries
and other operations
8 – – 8
Profit on disposal of subsidiaries
and other operations
Profit on disposal of interests in
associates 1,858 – – 1,858
Profit on disposal of interests in
associates
Impairment of associates and
joint ventures
(45) 45 – – N/A
Change in fair value of
significant listed investments
65 – – 65
Change in fair value of
significant listed investments
Investment return variances
and economic assumption
changes
46
– (46) – N/A
N/A – – – –
Dividends from significant listed
investments
N/A – 42 152 194
Share of profit or loss from
associates and joint ventures
N/A – (45) – (45) Impairment of joint ventures
Other 78 – (64) 14 Other
N/A 368 52 178 598
Total adjusting items including
results of associates and joint
ventures
Tax on adjusting items 53 – – 53 Tax on adjusting items
Share of associates’ and joint
ventures’ tax expense on adjusting
items 21 (20) (1) – N/A
Profit attributable to non-
controlling interests (preference
shares)
(5) – – (5)
Profit attributable to non-
controlling interests (preference
shares)
Profit for the year attributable to
equity shareholders of abrdn plc
848 – – 848
Profit for the year attributable to
equity shareholders of abrdn plc
Profit attributable to non-
controlling interests
Profit attributable to non-
controlling interests
Preference shares 5 – – 5 Preference shares
Profit for the year 853 – – 853 Profit for the year
270 abrdn.com Annual report 2021
N
9.1.2 Cost/income ratio
2021 2020
Adjusted operating expenses (£m) (1,192) (1,206)
Fee based revenue (£m) 1,515 1,425
Cost/income ratio (%)
79 85
9.1.3 Fee revenue yield (bps)
Average AUMA (£bn)
Fee based revenue (£m)
Fee revenue yield (bps)
2021 2020
2021 2020
2021 2020
Institutional and Wholesale
1
250.1 235.1
979 922
38.8 38.8
Insurance 205.0 204.7 206 224
10.0 10.9
Investments
1
455.1 439.8
1,185 1,146
25.9 25.8
Adviser 71.5 61.5
178 137
24.9 22.3
Personal
1
14.0 12.6
92 80
61.0 58.5
Parmenion
2
3.9 7.3
14 25
38.1 34.2
Eliminations
(11.3) (10.2)
N/A N/A
N/A N/A
Fee revenue yield
1
533.2 511.0
1,469 1,388
27.3 26.9
SL Asia
– 7
Performance fees
46 30
Fee based revenue
1,515 1,425
Analysis of Institutional and Wholesale by asset class
1,3
Average AUM (£bn)
Fee based revenue (£m)
Fee revenue yield (bps)
2021 2020
2021 2020
2021 2020
Equities 69.5 61.9
449 403
64.5 65.1
Fixed income 46.6 47.4
132 139
28.3 29.3
Multi-asset
35.1 33.6
118 125
33.7 37.3
Private equity
11.2 11.7
58 57
51.8 48.8
Real assets
36.1 31.5
170 149
47.2 47.6
Alternatives
20.4 19.0
25 20
12.3 10.4
Quantitative
5.8 6.6
4 4
6.8 5.6
Liquidity 25.4 23.4
15 16
6.0 6.8
Institutional and Wholesale
250.1 235.1
971 913
38.8 38.8
1. Institutional and Wholesale fee revenue yield excludes revenue of £8m (2020: £9m) and Personal fee revenue yield excludes revenue of £7m (2020: £7m) for
which there are no attributable assets.
2. Parmenion is included in the Corporate/Strategic vector. The sale of Parmenion completed on 30 June 2021 and the fee revenue yield reflects the position as
at the date of disposal.
3. Analysis by asset class has been revised following a strategic review of our private markets capabilities. The changes reflect the creation of a real assets
franchise, which brings together our real estate and infrastructure businesses, and consolidation of our private credit capabilities within fixed income.
Comparatives have been restated on this basis.
Analysis of Adviser revenue yield
Fee based revenue (gross basis) includes revenue passed to Phoenix as shown below in other cost of sales. The cost of
sales are netted against fee based revenue as presented in 9.1.3 above. The fee revenue yield presented on a gross basis in
the table below represents the average bps charge payable by clients.
Average AUMA (£bn)
Fee based revenue (£m)
Fee revenue yield (bps)
2021 2020
2021 2020
2021 2020
Fee based revenue (net of cost of sales) 71.5 61.5
178 137
24.9 22.3
Add: Other cost of sales – Note 3 (c) N/A N/A
2 27
N/A N/A
Fee based revenue (gross of cost of sales)
71.5 61.5
180 164
25.1 26.7
271abrdn.comAnnual report 2021
FINANCIAL INFORMATION
9. Supplementary information continued
9.1.4 Adjusted capital generation
The table below provides a reconciliation of movements between adjusted profit after tax and adjusted capital generation.
A reconciliation of adjusted profit after tax to IFRS profit for the year is included earlier in this section.
2021 2020
£m £m
Adjusted profit after tax
1
297 202
Less net interest credit relating to the staff pension schemes (17) (20)
Add dividends received from associates, joint ventures and significant listed investments
86 80
Adjusted capital generation
366 262
1. FY 2020 restated to exclude the share of associates and joint ventures adjusted profit after tax.
Net interest credit relating to the staff pension schemes
The net interest credit relating to the staff pension schemes is the contribution to adjusted profit before tax from defined
benefit pension schemes which are in surplus and reconciled below:
2021 2020
£m £m
Total income recognised in the consolidated income statement per Note 33 (c) of the Group
financial statements
17 19
Remove IFRS charge relating to schemes in deficit – 1
Net interest credit relating to the staff pension schemes
17 20
Dividends received from associates, joint ventures and significant listed investments
An analysis is provided below:
2021 2020
£m £m
Phoenix 69 67
HDFC Life 2 –
HDFC Asset Management
15 13
Dividends received from associates, joint ventures and significant listed investments
86 80
The table below provides detail of dividend coverage on an adjusted capital generation basis.
2021 2020
Adjusted capital generation (£m) 366 262
Full year dividend (£m) 309 313
Dividend cover on an adjusted capital generation basis (times) 1.18 0.84
9.1.5 Adjusted diluted capital generation per share
A reconciliation of adjusted capital generation to adjusted profit after tax is included in 9.1.4 above.
2021 2020
Adjusted capital generation (£m) 366 262
Weighted average number of diluted ordinary shares outstanding (millions) – Note 11 2,159 2,239
Adjusted diluted capital generation per share (pence) 17.0 11.7
272 abrdn.com Annual report 2021
N
9.1.6 Cash and liquid resources
The table below provides a reconciliation between IFRS cash and cash equivalents and cash and liquid resources. Seed
capital and co-investments are excluded. Details of seed capital and co-investments are provided in Note 37 (b) in the
Group financial statements.
2021 2020
£bn £bn
Cash and cash equivalents per Note 23 of the Group financial statements 1.9 1.5
Bank overdrafts – Note 23 (0.1) (0.2)
Debt securities excluding third party interests
1
– Note 37 (c)(i) 1.1 1.0
Corporate funds held in absolute return funds – Note 37 (b)(i)(i)
0.2 0.2
Cash and liquid resources
3.1 2.5
1. Excludes £76m (2020: £54m) relating to seeding, see Note 37(b).
9.2 Investment performance
Definition Purpose
Investment performance
Investment performance has been aggregated using a money weighted average of
our assets under management which are outperforming their respective benchmark.
Calculations for investment performance are made gross of fees with the exception of
those for which the stated comparator is net of fees. Benchmarks differ by fund and are
defined in the investment management agreement or prospectus, as appropriate. The
investment performance calculation covers all funds that aim to outperform a
benchmark, with certain assets excluded where this measure of performance is not
appropriate or expected, such as private markets and execution only mandates, as well
as replication tracker funds which aim to perform in line with a given index.
As an asset managing business this
measure demonstrates our ability to
generate investment returns for our
clients.
1 year
3 years
5 years
% of AUM ahead of benchmark 2021 2020
2021 2020
2021 2020
Equities 36 73
72 74
61 62
Fixed income 59 78
82 81
87 85
Multi-asset 41 61
39 33
44 36
Real assets
83 41
52 37
50 44
Alternatives
87 95
98 95
98 93
Quantitative
98 32
44 17
68 24
Liquidity
88 94
87 89
84 87
Total
57 71
67 66
67 68
R
273abrdn.comAnnual report 2021
FINANCIAL INFORMATION
9. Supplementary information continued
9.3 Assets under management and administration and flows
Definition Purpose
AUMA
AUMA is a measure of the total assets we manage, administer or advise on behalf of
our clients. It includes assets under management (AUM), assets under administration
(AUA) and assets under advice (AUAdv).
AUM is a measure of the total assets that we manage on behalf of individual and
institutional clients. AUM also includes captive assets managed on behalf of the Group
including assets managed for corporate purposes.
AUA is a measure of the total assets we administer for clients through platform
products such as ISAs and SIPPs.
AUAdv is a measure of the total assets we advise our clients on, for which there is an
ongoing charge.
The amount of funds that we manage,
administer or advise directly impacts
the level of fee based revenue that we
receive.
Net flows
Net flows represent gross flows less redemptions. Gross flows are new funds from
clients. Redemptions are the money withdrawn by clients during the period.
The level of net flows that we generate
directly impacts the level of fee based
revenue that we receive.
9.3.1 Analysis of AUMA
Opening
AUMA at
1 Jan 2021
Gross inflows Redemptions Net flows
Market
and other
movements
Corporate
actions
2
Closing
AUMA at
31 Dec 2021
12 months ended 31 December 2021 £bn £bn £bn £bn £bn £bn £bn
Institutional 171.7 22.5 (25.4) (2.9) 5.4 (0.2) 174.0
Wholesale 80.0 19.4 (21.6) (2.2) 1.3 – 79.1
Insurance 205.2 21.5 (27.0) (5.5) 10.8 – 210.5
Investments
456.9 63.4 (74.0) (10.6) 17.5 (0.2) 463.6
Adviser 67.0 9.1 (5.2) 3.9 5.3 – 76.2
Personal
1
13.3 1.7 (1.1) 0.6 0.5 – 14.4
Parmenion
8.1 0.7 (0.4) 0.3 0.3 (8.7) –
Eliminations
1
(10.7) (2.6) 2.2 (0.4) (1.0) – (12.1)
Total AUMA
534.6 72.3 (78.5) (6.2) 22.6 (8.9) 542.1
Opening
AUMA at
1 Jan 2020
Gross inflows Redemptions Net flows
Market
and other
movements
Corporate
actions
Closing
AUMA at
31 Dec 2020
12 months ended 31 December 2020 £bn £bn £bn £bn £bn £bn £bn
Institutional 160.6 26.6 (23.4) 3.2 7.9 – 171.7
Wholesale 76.1 23.2 (26.1) (2.9) 6.8 – 80.0
Insurance 235.8 17.6 (50.4) (32.8) 2.2 – 205.2
Investments 472.5 67.4 (99.9) (32.5) 16.9 – 456.9
Adviser 62.6 6.3 (4.4) 1.9 2.5 – 67.0
Personal
1
12.8 1.1 (1.1) – 0.5 – 13.3
Parmenion 6.9 1.5 (0.5) 1.0 0.2 – 8.1
Eliminations
1
(10.2) (2.0) 2.6 0.6 (1.1) – (10.7)
Total AUMA 544.6 74.3 (103.3) (29.0) 19.0 – 534.6
1. Eliminations remove the double count reflected in Investments, Adviser and Personal. The Personal vector includes assets that are reflected in both the
discretionary investment management and financial planning businesses. This double count is also removed within Eliminations.
2. Corporate actions relate to the acquisition of a majority interest in Tritax on 1 April 2021 (£5.8bn) and the disposals of our domestic real estate business in the
Nordics region on 31 May 2021 (£3.3bn) and Bonaccord/Hark on 30 September 2021 (£1.5bn). Corporate actions also include the impact of the decision to
exit the Total Return Bond strategy of £1.2bn. The sale of Parmenion completed on 30 June 2021.
R
274 abrdn.com Annual report 2021
N
9.3.2 Quarterly net flows
3 months to
31 Dec 21
3 months to
30 Sep 21
3 months to
30 Jun 21
3 months to
31 Mar 21
3 months to
31 Dec 20
15 months ended 31 December 2021 £bn £bn £bn £bn £bn
Institutional 2.5 (2.0) (0.7) (2.7) 1.4
Wholesale (0.8) (0.3) (0.5) (0.6) (0.4)
Insurance
(0.4) (1.3) (1.5) (2.3) (2.6)
Investments
1.3 (3.6) (2.7) (5.6) (1.6)
Adviser 1.1 0.8 0.9 1.1 0.5
Personal
– 0.1 0.3 0.2 (0.1)
Parmenion
– – 0.2 0.1 0.2
Eliminations (0.2) (0.1) – (0.1) 0.2
Total net flows
2.2 (2.8) (1.3) (4.3) (0.8)
9.4 Institutional and Wholesale AUM
1
Detailed asset class split
Opening
AUM at
1 Jan 2021
Gross inflows Redemptions Net flows
Market
and other
movements
Corporate
actions
Closing
AUM at
31 Dec 2021
12 months ended 31 December 2021 £bn £bn £bn £bn £bn £bn £bn
Developed markets equities 14.7 3.0 (3.6) (0.6) 2.9 – 17.0
Emerging markets equities 19.0 2.0 (3.7) (1.7) (0.9) – 16.4
Asia Pacific equities
26.6 4.8 (5.7) (0.9) (0.4) – 25.3
Global equities
8.9 1.8 (1.6) 0.2 1.2 – 10.3
Total equities
69.2 11.6 (14.6) (3.0) 2.8 – 69.0
Developed markets credit 32.2 5.9 (6.6) (0.7) (2.0) (1.2) 28.3
Developed markets rates 2.8 0.6 (0.6) – 0.1 – 2.9
Emerging markets fixed income
12.2 3.5 (3.1) 0.4 (0.4) – 12.2
Private credit
1.0 1.5 – 1.5 0.8 (0.9) 2.4
Total fixed income
48.2 11.5 (10.3) 1.2 (1.5) (2.1) 45.8
Absolute return 11.5 0.8 (2.0) (1.2) (0.3) – 10.0
Diversified growth/income 0.6 0.1 (0.2) (0.1) – – 0.5
MyFolio
15.6 2.1 (2.5) (0.4) 2.5 – 17.7
Other multi-asset 10.0 1.2 (1.4) (0.2) (2.0) – 7.8
Total multi-asset
37.7 4.2 (6.1) (1.9) 0.2 – 36.0
Total private equity 10.9 1.5 (1.2) 0.3 1.7 (0.6) 12.3
UK real estate 9.2 0.9 (0.8) 0.1 4.8 5.8 19.9
European real estate 12.1 1.0 (0.4) 0.6 0.9 (3.3) 10.3
Global real estate
1.8 0.3 (0.4) (0.1) 0.1 – 1.8
Real estate multi-manager
1.6 0.1 (0.1) – (0.4) – 1.2
Infrastructure equity
5.3 1.0 (0.4) 0.6 0.3 – 6.2
Total real assets
30.0 3.3 (2.1) 1.2 5.7 2.5 39.4
Total alternatives 19.5 2.0 (1.9) 0.1 1.2 – 20.8
Total quantitative 6.4 1.2 (1.2) – (0.9) – 5.5
Total liquidity 29.8 6.6 (9.6) (3.0) (2.5) – 24.3
Total 251.7 41.9 (47.0) (5.1) 6.7 (0.2) 253.1
1. Analysis by asset class has been revised following a strategic review of our private markets capabilities. The changes reflect the creation of a real assets
franchise, which brings together our real estate and infrastructure businesses, and consolidation of our private credit capabilities within fixed income.
Comparatives have been restated on this basis.
275abrdn.comAnnual report 2021
FINANCIAL INFORMATION
9. Supplementary information continued
Opening
AUM at
1 Jan 2020
Gross inflows Redemptions Net flows
Market
and other
movements
Corporate
actions
Closing
AUM at
31 Dec 2020
12 months ended 31 December 2020 £bn £bn £bn £bn £bn £bn £bn
Developed markets equities 14.7 3.6 (3.8) (0.2) 0.2 – 14.7
Emerging markets equities 21.6 1.6 (6.2) (4.6) 2.0 – 19.0
Asia Pacific equities 23.3 4.2 (4.8) (0.6) 3.9 – 26.6
Global equities 9.4 1.4 (2.7) (1.3) 0.8 – 8.9
Total equities 69.0 10.8 (17.5) (6.7) 6.9 – 69.2
Developed markets credit 32.2 6.8 (9.3) (2.5) 2.5 – 32.2
Developed markets rates 3.3 0.7 (0.9) (0.2) (0.3) – 2.8
Emerging markets fixed income 10.9 3.8 (2.5) 1.3 – – 12.2
Private credit – 0.6 – 0.6 0.4 – 1.0
Total fixed income 46.4 11.9 (12.7) (0.8) 2.6 – 48.2
Absolute return 12.7 0.7 (2.6) (1.9) 0.7 – 11.5
Diversified growth/income 1.9 0.2 (0.4) (0.2) (1.1) – 0.6
MyFolio 15.7 2.4 (2.9) (0.5) 0.4 – 15.6
Other multi-asset 4.2 1.0 (1.0) – 5.8 – 10.0
Total multi-asset 34.5 4.3 (6.9) (2.6) 5.8 – 37.7
Total private equity 11.8 1.6 (1.0) 0.6 (1.5) – 10.9
UK real estate 13.4 0.5 (1.3) (0.8) (3.4) – 9.2
European real estate 12.1 1.0 (1.0) – – – 12.1
Global real estate 1.0 0.3 (0.3) – 0.8 – 1.8
Real estate multi-manager 1.4 0.3 (0.1) 0.2 – – 1.6
Infrastructure equity 4.2 0.2 – 0.2 0.9 – 5.3
Total real assets 32.1 2.3 (2.7) (0.4) (1.7) – 30.0
Total alternatives 17.7 2.4 (1.1) 1.3 0.5 – 19.5
Total quantitative 7.8 1.3 (1.6) (0.3) (1.1) – 6.4
Total liquidity 17.4 15.2 (6.0) 9.2 3.2 – 29.8
Total 236.7 49.8 (49.5) 0.3 14.7 – 251.7
276 abrdn.com Annual report 2021
N
9.5 Analysis of Insurance
Opening
AUM at
1 Jan 2021 Gross inflows Redemptions
Net
flows
Market
and other
movements
Corporate
actions
Closing
AUM at
31 Dec 2021
12 months ended 31 December 2021 £bn £bn £bn £bn £bn £bn £bn
Phoenix 171.5 17.1 (20.3) (3.2) 7.2 – 175.5
Lloyds 31.8 4.4 (6.3) (1.9) 3.7 – 33.6
Other
1.9 – (0.4) (0.4) (0.1) – 1.4
Total
205.2 21.5 (27.0) (5.5) 10.8 – 210.5
Opening
AUM at
1 Jan 2020
Gross inflows Redemptions
Net
flows
Market
and other
movements
Corporate
actions
Closing
AUM at
31 Dec 2020
12 months ended 31 December 2020 £bn £bn £bn £bn £bn £bn £bn
Phoenix 169.7 13.0 (18.7) (5.7) 7.5 – 171.5
Lloyds 64.5 4.2 (31.5) (27.3) (5.4) – 31.8
Other 1.6 0.4 (0.2) 0.2 0.1 – 1.9
Total 235.8 17.6 (50.4) (32.8) 2.2 – 205.2
9.6 Analysis of total AUM (excluding Parmenion)
9.6.1 AUM by geography
31 Dec 2021 31 Dec 2020
Institutional
and Wholesale
Insurance Personal
1
Total
Institutional
and Wholesale
Insurance Personal
1
Total
£bn £bn £bn £bn £bn £bn £bn £bn
UK 120.3 210.5 8.9 339.7 116.5 205.2 7.8 329.5
Europe, Middle East and Africa
(EMEA)
62.5 – – 62.5 65.9 – – 65.9
Asia Pacific (APAC) 19.2 – – 19.2 16.8 – – 16.8
Americas
51.1 – – 51.1 52.5 – – 52.5
Total AUM
253.1 210.5 8.9 472.5 251.7 205.2 7.8 464.7
9.6.2 AUM by asset class
2
31 Dec 2021 31 Dec 2020
Institutional
and Wholesale Insurance Personal
1
Total
Institutional and
Wholesale Insurance Personal
1
Total
£bn £bn £bn £bn £bn £bn £bn £bn
Equities 69.0 53.4 – 122.4 69.2 48.8 – 118.0
Fixed income 45.8 67.4 – 113.2 48.2 69.0 – 117.2
Multi-asset
36.0 8.8 8.9 53.7 37.7 7.0 7.8 52.5
Private equity
12.3 1.6 – 13.9 10.9 1.8 – 12.7
Real assets
39.4 8.3 – 47.7 30.0 8.3 – 38.3
Alternatives
20.8 – – 20.8 19.5 – – 19.5
Quantitative
5.5 50.8 – 56.3 6.4 45.0 – 51.4
Liquidity
24.3 20.2 – 44.5 29.8 25.3 – 55.1
Total AUM
253.1 210.5 8.9 472.5 251.7 205.2 7.8 464.7
1. Excludes assets under advice of £5.5bn at 31 December 2021 (2020: £5.5bn).
2. Analysis by asset class has been revised following a strategic review of our private markets capabilities. The changes reflect the creation of a real assets
franchise, which brings together our real estate and infrastructure businesses, and consolidation of our private credit capabilities within fixed income.
Comparatives have been restated on this basis.
277abrdn.comAnnual report 2021
FINANCIAL INFORMATION
278 abrdn.com Annual report 2021
Other Information
279abrdn.comAnnual report 2021
OTHER INFORMATION
Contents
10
Glossary
280
11 Shareholder information 283
12 Forward looking statements 284
13 Contact us IBC
280 abrdn.com Annual report 2021
10. Glossary
Adjusted net financing costs and investment
return
Adjusted net financing costs and investment return
(previously named Capital management) is a component
of adjusted profit and relates to the return from the net
assets of the shareholder business, net of costs of
financing. This includes the net assets in defined benefit
staff pension plans and net assets relating to the financing
of subordinated liabilities.
Adjusted operating expenses
Adjusted operating expenses is a component of adjusted
operating profit and relates to the day-to-day expenses of
managing our business.
Adjusted operating profit
Adjusted operating profit before tax is the Group’s key APM.
Adjusted operating profit includes the results of the Group
three growth vectors: Investments, Adviser and Personal,
along with Corporate/Strategic .
It excludes the Group’s adjusted net financing costs and
investment return, and discontinued operations.
Adjusted operating profit also excludes the impact of the
following items:
– Restructuring costs and corporate transaction
expenses. Restructuring includes the impact of major
regulatory change.
– Amortisation and impairment of intangible assets
acquired in business combinations and through the
purchase of customer contracts.
– Profit or loss arising on the disposal of a subsidiary, joint
venture or equity accounted associate.
– Change in fair value of/dividends from significant listed
investments.
– Share of profit or loss from associates and joint
ventures.
– Impairment loss/reversal of impairment loss
recognised on investments in associates and joint
ventures accounted for using the equity method.
– Fair value movements in contingent consideration.
– Items which are one-off and, due to their size or nature,
are not indicative of the long-term operating
performance of the Group.
Adjusted profit before tax
In addition to the results included in adjusted operating
profit above, adjusted profit before tax includes adjusted
net financing costs and investment return.
Assets under management and administration
(AUMA)
AUMA is a measure of the total assets we manage,
administer or advise on behalf of our clients. It includes
assets under management (AUM), assets under
administration (AUA) and assets under advice (AUAdv).
AUMA does not include assets for associates and joint
ventures.
AUM is a measure of the total assets that we manage on
behalf of individual and institutional clients. AUM also
includes assets managed for corporate purposes.
AUA is a measure of the total assets we administer for
clients through our Platforms. AUAdv is a measure of the
total assets we advise our clients on, for which there is an
ongoing charge.
Board
The Board of Directors of the Company.
Carbon intensity
Weighted-Average Carbon Intensity (WACI) is calculated
by summing the product of each company's weight in the
portfolio or loan book with that company's carbon-to-
revenue intensity. Carbon-to-revenue intensity is
calculated by dividing the sum of all apportioned
emissions, with the sum of all apportioned revenues across
an investment portfolio or loan book. This metric gives an
indication of how efficient companies in a portfolio or loan
book are at generating revenues per tonne of carbon
emitted.
Carbon neutral
Being carbon neutral means that carbon released through
our operational emissions is balanced by an equivalent
amount being removed through carbon offsetting. For the
purposes of offsetting, we include Scope 1, 2 and 3
emissions within our operational emissions.
Carbon offsetting
Carbon offsetting is an internationally recognised way to
take responsibility for unavoidable carbon emissions.
Carbon offsetting means that for every one tonne of
offsets there will be one less tonne of carbon dioxide in the
atmosphere than there would otherwise have been. To
offset emissions we purchase the equivalent volume of
carbon credits (independently verified emissions
reductions) equal to our carbon emissions to compensate
for them. The payments we make to purchase these
carbon credits (carbon finance) is what makes the
emissions reductions projects which created them,
financially viable and sustainable. We work with
ClimateCare to offset our operational greenhouse gas
emissions. We offset via two verified voluntary projects:
The first is a Gold Standard wind turbine project in India.
The second project is a Verified Carbon Standard Climate,
Carbon and Community rainforest protection project in
Gola. We chose offsets that we knew were verifiable and
correctly accounted for and have a low risk of non-
additionality, reversal, and creating negative unintended
consequences for people and the environment.
ClimateCare helped create the voluntary carbon market
and pioneered carbon finance for community
development projects.
Chief Operating Decision Maker
The executive leadership team.
Company
abrdn plc. Standard Life Aberdeen plc was renamed
abrdn plc on 2 July 2021.
Cost/income ratio
This is an efficiency measure that is calculated as adjusted
operating expenses divided by fee based revenue.
281abrdn.comAnnual report 2021
OTHER INFORMATION
CRD IV
CRD IV is the European regulatory capital regime
(comprising the Capital Requirements Directive and
Capital Requirements Regulation) that applied to
investment firms up to and including 31 December 2021.
The new IFPR regime came into force on 1 January 2022.
Director
A director of the Company.
Earnings per share (EPS)
EPS is a commonly used financial metric which can be
used to measure the profitability and strength of a
company over time. EPS is calculated by dividing profit by
the number of ordinary shares. Basic EPS uses the
weighted average number of ordinary shares outstanding
during the year. Diluted EPS adjusts the weighted average
number of ordinary shares outstanding to assume
conversion of all dilutive potential ordinary shares, such as
share options awarded to employees.
Effective tax rate
Tax expense/(credit) attributable to equity holders’ profit
divided by profit before tax attributable to equity holders’
profits expressed as a percentage.
Executive leadership team
Our executive leadership team (ELT) leads the business
across our growth vectors and supporting functions
globally and is responsible for executing and monitoring
progress on the delivery of our business plans. The ELT also
ensures we meet our obligations to our clients, people,
shareholders, regulators and partners.
Fair value through profit or loss (FVTPL)
FVTPL is an IFRS measurement basis permitted for assets
and liabilities which meet certain criteria. Gains or losses on
assets or liabilities measured at FVTPL are recognised
directly in the income statement.
FCA
Financial Conduct Authority of the United Kingdom.
Fee based revenue
Fee based revenue is a component of adjusted operating
profit and includes revenue we generate from asset
management charges (AMCs), platform charges and
other transactional charges. AMCs are earned on
products such as mutual funds, and are calculated as a
percentage fee based on the assets held. Investment risk
on these products rests principally with the client, with our
major indirect exposure to rising or falling markets coming
from higher or lower AMCs. Fee based revenue is shown
net of fees, costs of sale, commissions and similar charges.
Costs of sale include revenue from fund platforms which is
passed to the product provider.
Fee revenue yield (bps)
The average revenue yield on fee based business is a
measure that illustrates the average margin being earned
on the assets under management, administration or
advice. It is calculated as annualised fee based revenue
(excluding performance fees and revenue for which there
are no attributable assets) divided by monthly average fee
based assets.
Greenhouse gases
Greenhouse gases are those gaseous constituents of the
atmosphere, both natural and anthropogenic, that absorb
and emit radiation at specific wavelengths within the
spectrum of thermal infrared radiation emitted by the
earth’s surface, the atmosphere itself, and by clouds. This
property causes the greenhouse effect. Water vapour
(H2O), carbon dioxide (CO2), nitrous oxide (N2O),
methane (CH4) and ozone (O3) are the primary
greenhouse gases in the earth’s atmosphere. Moreover,
there are a number of entirely human-made greenhouse
gases in the atmosphere, such as halocarbons and other
chlorine- and bromine-containing substances, dealt with
under the Montreal Protocol. Beside CO2, N2O and CH4,
the Kyoto Protocol deals with the greenhouse gases
sulphur hexafluoride (SF6), hydrofluorocarbons (HFCs)
and perfluorocarbons (PFCs).
Group or abrdn
Relates to the Company and its subsidiaries.
Growth vectors
We provide services across three growth vectors:
– Investments: Asset management investment solutions
for institutional, wholesale and insurance clients.
– Adviser: Our Wrap and Elevate adviser platforms.
– Personal: Comprises our financial planning business
and our direct-to-consumer services.
ICAAP
Internal Capital Adequacy Assessment Process. The
ICAAP is the means by which the Group assesses the level
of capital that adequately supports all of the relevant
current and future risks in its business.
International Financial Reporting Standards
(IFRS)
International Financial Reporting Standards are
accounting standards issued by the International
Accounting Standards Board (IASB).
Investment Firms Prudential Regime (IFPR)
The Investment Firms Prudential Regime is the FCA’s new
prudential regime for MiFID investment firms. The regime
came into force on 1 January 2022.
282 abrdn.com Annual report 2021
Investment performance
Investment performance has been aggregated using a
money weighted average of our assets under
management which are outperforming their respective
benchmark. Calculations for investment performance are
made gross of fees with the exception of those for which
the stated comparator is net of fees. Benchmarks differ by
fund and are defined in the investment management
agreement or prospectus, as appropriate. The investment
performance calculation covers all funds that aim to
outperform a benchmark, with certain assets excluded
where this measure of performance is not appropriate or
expected, such as private equity and execution only
mandates, as well as replication tracker funds which aim
to perform in line with a given index.
LBG tranche withdrawals
On 24 July 2019, the Group announced that it had agreed
a final settlement in relation to the arbitration proceedings
between the parties concerning LBG’s attempt to
terminate investment management arrangements under
which assets were managed by members of the Group
for LBG entities. In its decision of March 2019, the arbitral
tribunal found that LBG was not entitled to terminate these
investment management contracts. The Group had
continued to manage approximately £104bn (as at
30 June 2019) of assets under management (AUM) for
LBG entities during the period of the dispute.
Approximately two thirds of the total AUM (the transferring
AUM) will be transferred to third party managers
appointed by LBG through a series of planned tranches
from 24 July 2019. During this period, the Group will
continue to be remunerated for its services in relation to
the transferring AUM.
Net flows
Net flows represent gross inflows less gross outflows or
redemptions. Gross inflows are new funds from clients.
Gross outflows or redemptions is the money withdrawn by
clients during the period.
Net zero
Net zero is the target of completely negating the amount
of greenhouse gases produced by human activity, to be
achieved by reducing emissions to the lowest possible
amount and offsetting (see carbon offsetting) only the
remainder as a last resort.
Net Zero Direct Investing
Net Zero Directed Investing means moving towards the
goal of net zero in the real world - not just in specific
investment portfolios. At abrdn we seek to achieve this
goal through a holistic set of actions, including rigorous
research into net-zero trajectories, developing net-zero-
directed investment solutions and active ownership to
influence corporates and policy makers.
Operational emissions
Operational emissions are the greenhouse gas emissions
related to the operations of our business. They are
categorised into three groups or 'scopes'. Scope 1 covers
direct emissions from owned or controlled sources. Scope
2 covers indirect emissions from the generation of
purchased electricity, steam, heating and cooling
consumed by the reporting company. Scope 3 includes all
other indirect emissions that occur in a company’s value
chain. At abrdn we report Scope 1, Scope 2, and Scope 3
emissions, which includes our working from home
emissions.
Paris alignment
‘Paris alignment’ refers to the alignment of public and
private financial flows with the objectives of the Paris
Agreement on climate change. Article 2.1c of the Paris
Agreement defines this alignment as making finance flows
consistent with a pathway towards low greenhouse gas
emissions and climate-resilient development. Alignment in
this way will help to scale up the financial flows needed to
strengthen the global response to the threat of climate
change.
Phoenix or Phoenix Group
Phoenix Group Holdings plc or Phoenix Group Holdings plc
and its subsidiaries.
Pillar 1
Under CRD IV, Pillar 1 focuses on fixed overhead
requirements and the Group’s exposure to credit and
market risks in respect of risk-weighted assets, and sets a
minimum requirement for capital based on these
measures.
Pillar 2
The requirement for companies to assess the level of
additional capital held against risks not covered in Pillar 1.
Pillar 3
This complements Pillar 1 and Pillar 2 with the aim of
improving market discipline by requiring companies to
publish certain details of their risks, capital and risk
management. The latest available Group’s Pillar 3
disclosures are published at www.abrdn.com/annualreport
Significant listed investments
Relates to our investments in HDFC Asset Management,
HDFC Life and Phoenix. Fair value movements and
dividend income relating to these investments are treated
as adjusting items for the purpose of determining the
Group’s adjusted profit.
Subordinated liabilities
Subordinated liabilities are debts of a company which, in
the event of liquidation, rank below its other debts but
above share capital.
283abrdn.comAnnual report 2021
OTHER INFORMATION
11. Shareholder information
Registered office
Company registration number: SC286832
For shareholder services call: 0371 384 2464*
* Calls are monitored/recorded to meet regulatory obligations and for
training and quality purposes. Call charges will vary.
Secretary: Kenneth A Gilmour
Registrar: Equiniti
Auditors: KPMG LLP
Solicitors: Slaughter and May
Brokers: JP Morgan Cazenove, Goldman Sachs
Shareholder services
We offer a wide range of shareholder services. For more
information, please:
– Contact our registrar, Equiniti, who manage this service
for us. Their details can be found on the inside back
cover.
– Visit our share portal at www.abrdnshares.com
Sign up for Ecommunications
Signing up means:
– You’ll receive an email when documents like the annual
report and accounts, Half year results and AGM guide
are available on our website.
– Voting instructions for the Annual General Meeting will
be sent to you electronically.
Set up a share portal account
Having a share portal account means you can:
– Manage your account at a time that suits you.
– Download your documents when you need them.
To find out how to sign up, visit www.abrdnshares.com
Preventing unsolicited mail
By law, the Company has to make certain details from its
share register publicly available. As a result it is possible that
some registered shareholders could receive unsolicited
mail, emails or phone calls. You could also be targeted by
fraudulent ‘investment specialists’, clone firms or
scammers posing as government bodies e.g. HMRC, FCA.
Frauds are becoming much more sophisticated and may
use real company branding, the names of real employees
or email addresses that appear to come from the
company. If you get a social or email message and you're
unsure if it is from us, you can send it to
emailscams@abrdn.com and we'll let you know.
You can also check the FCA warning list and warning from
overseas regulators, however, please note that this is not
an exhaustive list and do not assume that a firm is
legitimate just because it does not appear on the list as
fraudsters frequently change their name and it may not
have been reported yet.
www.fca.org.uk/consumers/unauthorised-firms-individuals
www.iosco.org/investor_protection/?subsection=investor_
alerts_portal
You can find more information about share scams at the
Financial Conduct Authority website
www.fca.org.uk/consumers/scams
If you are a certificated shareholder, your name and
address may appear on a public register. Using a nominee
company to hold your shares can help protect your
privacy. You can transfer your shares into the Company-
sponsored nominee – the abrdn Share Account – by
contacting Equiniti, or you could get in touch with your
broker to find out about their nominee services.
If you want to limit the amount of unsolicited mail you
receive generally, please visit www.mpsonline.org.uk
Financial calendar
Full year results 2021 1 March
General Meeting - London 15 March
Ex-dividend date for 2021 final dividend
7 April
Record date for 2021 final dividend
8 April
Last date for DRIP elections for 2021 final dividend
4 May
Annual General Meeting – Edinburgh
18 May
Dividend payment date for 2021 final dividend
24 May
Half year results 2022
9 August
Ex-dividend date for 2022 interim dividend
18 August
Record date for 2022 interim dividend
19 August
Last date for DRIP elections for 2022
interim dividend
7 September
Dividend payment date for 2022 interim dividend
27 September
Analysis of registered shareholdings at
31 December 2021
Range of shares
Number of
holders
% of total
holders Number of shares
% of total
shares
1-1,000 60,076 64.94 24,459,705 1.12
1,001-5,000 27,550 29.78 56,631,157 2.60
5,001-10,000 2,769 2.99 18,497,090 0.85
10,001-100,000 1,574 1.70 38,775,420 1.78
#
100,001+ 538 0.59 2,042,361,414 93.65
Total
92,507 100.00 2,180,724,786 100.00
These figures include the Company-sponsored nominee – the abrdn
Share Account – which had 942,539 participants holding 642,153,852
shares.
284 abrdn.com Annual report 2021
12. Forward-looking statements
This document may contain certain ‘forward-looking statements’ with respect to the financial condition, performance,
results, strategy, targets, objectives, plans, goals and expectations of the Company and its affiliates. These forward-looking
statements can be identified by the fact that they do not relate only to historical or current facts.
Forward-looking statements are prospective in nature and are not based on historical or current facts, but rather on
current expectations, assumptions and projections of management of the abrdn Group about future events, and are
therefore subject to risks and uncertainties which could cause actual results to differ materially from the future results
expressed or implied by the forward-looking statements.
For example but without limitation, statements containing words such as ‘may’, ‘will’, ‘should’, ‘could’, ‘continue’, ‘aims’,
‘estimates’, ‘projects’, ‘believes’, ‘intends’, ‘expects’, ‘hopes’, ‘plans’, ‘pursues’, ‘ensure’, ‘seeks’, ‘targets’ and ‘anticipates’, and
words of similar meaning (including the negative of these terms), may be forward-looking. These statements are based on
assumptions and assessments made by the Company in light of its experience and its perception of historical trends,
current conditions, future developments and other factors it believes appropriate. Each forward-looking statement speaks
only as of the date of particular statement and the events discussed herein may not occur.
By their nature, all forward-looking statements involve risk and uncertainty because they are based on information
available at the time they are made, including current expectations and assumptions, and relate to future events and/or
depend on circumstances which may be or are beyond the Group’s control, including among other things: the direct and
indirect impacts and implications of the COVID-19 (coronavirus) outbreak on the economy, nationally and internationally,
and on the Group, its operations and prospects; UK domestic and global political, economic and business conditions,
competitive, market and regulatory forces (such as the UK’s exit from the EU); market related risks such as fluctuations in
interest rates and exchange rates, and the performance of financial markets generally; the impact of inflation and
deflation; the impact of competition; the timing, impact and other uncertainties associated with future acquisitions,
disposals or combinations undertaken by the Company or its affiliates and/or within relevant industries; experience in
particular with regard to mortality and morbidity trends, lapse rates and policy renewal rates; the value of and earnings
from the Group’s strategic investments and ongoing commercial relationships; default by counterparties; information
technology or data security breaches (including the Group being subject to cyberattacks); operational information
technology risks, including the Group’s operations being highly dependent on its information technology systems (both
internal and outsourced); natural or man-made catastrophic events; the impact of pandemics, including the COVID-19
(coronavirus) outbreak; climate change and a transition to a low-carbon economy (including the risk that the Group may
not achieve its targets); exposure to third party risks including as a result of outsourcing; the failure to attract or retain
necessary key personnel; the policies and actions of regulatory authorities (including changes in response to the COVID-19
(coronavirus) outbreak and its impact on the economy); and the impact of changes in capital, solvency or accounting
standards, and tax and other legislation and regulations (including changes to the regulatory capital requirements that the
Group is subject to or changes in connection with the COVID-19 (coronavirus) outbreak) in the jurisdictions in which the
Company and its affiliates operate. As a result, the Group’s actual future financial condition, performance and results may
differ materially from the plans, goals, objectives and expectations set forth in the forward looking statements.
The Company, nor any of its associates, directors, officers or advisers, provides any representation, assurance or
guarantee that the occurrence of the events expressed or implied in any forward-looking statements in this document will
actually occur. Persons receiving this document should not place reliance on forward-looking statements. All forward-
looking statements contained in this document are expressly qualified in their entirety by the cautionary statements
contained or referred to in this section. Each forward-looking statement speaks only as at the date of the particular
statement. Neither the Company nor its affiliates assume any obligation to update or correct any of the forward-looking
statements contained in this document or any other forward-looking statements it or they may make (whether as a result
of new information, future events or otherwise), except as required by law. Past performance is not an indicator of future
results and the results of the Company and its affiliates in this document may not be indicative of, and are not an estimate,
forecast or projection of, the Company’s or its affiliates’ future results.
Got a shareholder question? Contact our shareholder services team.
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BN99 6DA, United Kingdom
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phone +44 (0)371 384 2493*
email fragen@abrdnshares.com
visit www.abrdnshares.com
mail abrdn Shareholder Services
Aspect House
Spencer Road
Lancing, West Sussex
BN99 6DA, United Kingdom
Contact us
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