abrdn plc

Full Year Results 2021

Part 4 of 8

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.

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 76 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 registered 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:

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

Similarly, in accordance with the terms of The Aberdeen Asset Management Employee Benefit Trust 2003 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.

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 - 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:

1.  Appointed 1 September 2021.

2.  Retired 31 October 2021.

3.  Appointed 4 January 2022.

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 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.

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 governance 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

1.      Relates to leaders one and two levels below CEO, minus administration roles

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.

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.

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

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