Final Results - Part 2 of 8

RNS Number : 4177F

Standard Life plc

20 February 2015

Standard Life plc

Full Year Results 2014

Part 2 of 8

Chairman's statement

Transforming Standard Life

In recent years, Standard Life has undergone a dramatic transformation. We have changed from being Europe's largest mutual insurance company to one focused on providing investment solutions to customers and clients around the world. 2014 marked a major step in this transformation and is one of the most significant years in our company's 190-year history. We bought Ignis Asset Management in the UK, agreed the sale of our long-standing Canadian business to Manulife, and we are in the process of returning around £1.75 billion to our shareholders. It's been a busy year.

I'm pleased to confirm another year of increased dividends, with our final dividend of 11.43p per share (up 8.0% on 2013) giving a total dividend for 2014 of 17.03p per share (up 7.8% on 2013). If approved at our AGM in May this year, this is due to be paid to shareholders on 19 May 2015.

When Standard Life was floated on the Stock Market in 2006, our market value was around £4.6 billion. By the time the return of value is completed and this year's dividend is paid, we will have distributed £4.6 billion to shareholders and yet our market value should still far exceed where we started. Our financial position is strong and will remain so once Solvency 2 is introduced. The world is an uncertain and increasingly fragmented place and our financial strength is a source of considerable competitive advantage for us. We intend to keep on growing the value of your company.

2014 wasn't just a year of corporate activity because it also witnessed some very dramatic changes in the UK savings and pensions market. Years of complex regulations were swept away by the Government and people will shortly have far greater freedom over what they can do with the pension savings they build up over their lives. Auto enrolment is encouraging people to save, and the changes make it even more attractive to do so. This is all great news. Giving people the ability to have more control and choice in planning their finances for retirement is a very positive thing. We have developed competitive pension propositions that offer customers alternatives to annuities and this makes us well placed to make the most of these opportunities. We also believe strongly in advice and guidance for customers to help them make their choices.

The sale of our Canadian business reduces the volatility of our earnings by greatly increasing the proportion of our earnings coming from asset management and fee based business. This change lies at the core of our strategy. Standard Life Investments started life as the investment department of an insurance company. It is now firmly at the heart of our strategy providing investment solutions to clients globally, and this is coupled with our powerful UK distribution business, which is a market leader in corporate pensions and a very important participant in the UK savings market.

2014 was also the year in which the Scottish people voted to stay part of the United Kingdom. Our role was not to tell people how to vote, but we did feel that it was right for us to spell out what we would have to do to protect our customers' and shareholders' interests, if the areas of concern we highlighted about constitutional change were not addressed. Our comments were noticed, broadly remarked upon, and respected. We continue to monitor very closely the impact of the further powers that will be transferred to Scotland. We support practical changes which benefit Scotland and Scottish companies provided that the unity of the UK Single Market is retained. Almost 90% of our UK customers live in England, Wales and Northern Ireland whilst the majority of our people are based in Scotland, so this is very important to us.

Standard Life Investments continues to expand globally and had another very successful year. Our German and Irish businesses have continued to grow. Our joint venture business in China operates in 74 cities and reported a profit for the first time, which is a major milestone. Our two very fine businesses in India, life assurance and asset management, both in partnership with HDFC, had a fabulous year helped by the confident way in which the new Indian government has got down to work. Our relationships with all our partners are in very good shape around the world and we pay great attention to this.

A longstanding belief of mine is that effective, robust corporate governance helps create value in companies. To achieve this, boards need to be supportive, with independently-minded board members, able to constructively challenge and who avoid group-think. We appointed three new board members during the year, as part of our aim to maintain a diverse team of people with relevant experience and fresh perspectives. Luke Savage joined as our Chief Financial Officer and is a highly experienced finance professional. We also welcomed two new non-executive Directors - Isabel Hudson and Kevin Parry - who each bring a wealth of relevant skills and experience to our Board. Malcolm Wood, who was our Company Secretary and General Counsel for a number of years, left with our best wishes to take up a new role with Lloyds Group. David Grigson, our excellent Chairman of the Group Audit Committee, will be retiring from the Board after the AGM and Kevin Parry will become Chairman of that Committee. We try always to have a strong succession framework in place.

It's your Board's responsibility to make sure that Standard Life is a sustainable business that looks after its customers, enhances shareholder value, and is rooted in the communities it serves. The pace of activity in 2014 placed a great burden on our people, all of whom responded magnificently and I'm very grateful to everybody. 2015 will no doubt, as always, continue to bring uncertainties and opportunities in equal measure. We will do our best to end the year in even better shape than we start it.

Sir Gerry Grimstone, Chairman

1. Strategic report

1.1 Chief Executive's overview

Standard Life has continued to perform well driven by a focus on delivering value for money for our customers and clients. We have increased revenues, profits and cash generation and now have assets under administration of almost £300bn.

We have made good strategic progress during the year with the acquisition of Ignis Asset Management and the sale of our Canadian business, increasing focus on fee business and enabling a £1.75bn return to shareholders. We are also well positioned to deal with the far-reaching reforms to the savings and retirement income rules in the UK and to support customers through these changes. Standard Life Investments has continued to perform strongly and expand internationally.

Although investment markets are unsettled and may affect the near-term pace of asset and revenue growth, we are very well placed for the future. We have an excellent track record of succeeding in evolving markets and have the products, experience and proven investment performance to help our customers and clients in all of our markets to save and invest, so that they can look forward to their financial futures with confidence.

Our purpose

At Standard Life we're in the business of helping build a more prosperous world. We're dedicated to making sure that everything we do helps our customers to save and invest for their future, our industry to improve and our society to progress. These things have been important to us since we were established in Edinburgh in 1825.

In the past 12 months we've worked with our people to help shape our purpose and the core beliefs which underpin it:

Advancing ambition by listening and responding to our customers, clients and our people and continually examining, evaluating and, where possible, anticipating their needs and concerns

Leading industry innovation and improvementis a desire to lead the increased transparency, flexibility, responsiveness and integrity in our industry

Contributing to society's progress by creating opportunities, providing support and offering our expertise for the benefit of both individuals and the diverse communities that we touch across the world.

Our purpose sets the overarching context for our strategy.

Our strategy

Standard Life is a long-term investment savings business, with a growing presence in the global institutional investment and wholesale markets, and strong distribution position in the workplace and retail markets in the UK, Europe and Asia.

Around 4.5 million customers worldwide trust us with their financial future and we're responsible for the administration of £296.6bn of their assets. As well as our wholly owned operations, in India and China we also have joint venture businesses supporting a further 20 million customers.

Our strategy is to drive sustainable shareholder value by leveraging the capabilities and scale of the Group. We do this by focusing on fee based asset management and administration in markets with strong growth potential. We engage our customers and clients through innovative propositions which provide them with the solutions they need and help to grow our assets, maximise our revenues and lower our unit costs.

Our business priorities for our strategy are to:

· Increase Standard Life Investments' global scale and strengthen our capabilities in creating diversified investment performance

· Rapidly expand our institutional and wholesale investment distribution in the US and wider North American market, including through Manulife and John Hancock

· Broaden and deepen our distribution presences in the workplace and retail markets of the UK, mainland Europe and Asia

· Seek to increase our stake in HDFC Life in India and grow our Asian presence.

To accelerate delivery of these strategic priorities, we have also significantly transformed the Group in the past year. In July 2014 we completed the acquisition of Ignis Asset Management which further accelerates our scale and capabilities in institutional investment management, and brings a new partnership with Phoenix Group. The sale of our Canadian business completed on 30 January 2015. While this saw the corporate and retail businesses in Canada exit the Group, it also brought a new global collaboration agreement with Manulife focused particularly on the institutional and wholesale markets of Canada, the US and Asia. We recently announced the closure of our Dubai business as we no longer feel that we can offer our customers or shareholders long-term sustainable value in this region. Our financial results within the Strategic report therefore focus on a continuing operations basis which excludes the businesses in Canada and Dubai.

1.1 Chief Executive's overview continued

Our business model and delivery in 2014

Our strategy is underpinned by a simple business model which enables us to generate profit, both to support dividend payments to our shareholders, and to create the funds to reinvest in growing our business.

Strong market positions and a sustainable business

During 2014 we continued to make good progress with growth in fee revenue reflecting customer demand for our propositions and this combined with continued work on controlling costs has enabled us to deliver an ongoing improvement in financial performance.

· Further growth in assets managed by Standard Life Investments including the acquisition of Ignis in the second half of 2014 and supported by strong investment performance, high levels of client service and expanding global distribution capability

· Continuing strong growth from the UK business, where we have now attracted over half a million auto enrolment customers (net of opt-outs), offsetting a fall in the average revenue yield

· Increased fee based AUA in Germany where we launched our new 50+ ParkAllee product making us one of the first savings providers to offer a flexible commission model fitting into the post Life Insurance Reform Law market

· In India, HDFC Life continues to perform well and is currently ranked 2^nd for overall new business sales in the private market

· Maintained our positions in DJSI World, DJSI Europe and FTSE4Good sustainability indices, reflecting our continued performance in delivering on our sustainability strategy

· Used our award-winning customer insight to drive propositions that help our customers achieve their ambitions

· Built on our reputation as a responsible investor with enhanced reporting and thought leadership.

Market overview

Financial market conditions can affect the way and the amount that our customers save and invest for their futures. Global financial market conditions continued to expand at a moderate pace in 2014 despite weak activity in Europe, falling oil prices and a slowdown in emerging markets, particularly in China.

UK economy improving but remains fragile

· Economic growth remains fragile despite the UK having one of the fastest growing economies in the developed world in 2014

· Fuel and food prices contributed to inflation falling to 0.5% in 2014, below the Bank of England's stated target of 2% and increasing investors' desire for a source of sustainable earnings and growth opportunities

· The average daily FTSE All-Share Index rose by 4% between 2013 and 2014 with volatility in H2 2014 caused by falling oil prices, political developments in Greece and currency uncertainty in Russia

· UK unemployment rates decreased to 6% in 2014, however wage inflation remained subdued.

Uncertainty in global markets

· Under deflationary pressures in the Eurozone and with limited options to reduce interest rates further, the European Central Bank introduced their own quantitative easing measures

· The Asian market was impacted by stalling growth in China as fears over property market bubbles, erratic foreign demand and overcapacity have weighed on its manufacturing industry and broader economy

· US economic outlook remains unclear with the final quantitative easing programme ending in October 2014, which may threaten short-term growth rates.

Legislation and public policy

The regulatory environment in the UK long-term savings market continues to evolve and we remain well placed to benefit from these changes:

· Auto enrolment has continued to influence the UK savings market in 2014, giving millions of people access to a pension for the first time. By 2018, all UK employers will need to provide a qualifying workplace pension for their eligible employees.

· In March 2014, the Department for Work and Pensions announced a cap on charges for the default funds of workplace pension schemes

· Changes announced in the 2014 UK Budget introduced new flexibility for customers accessing their savings and removed the requirement to purchase an annuity

· The next phase of the Retail Distribution Review (RDR) brings new regulations mainly affecting platform service providers. Customers will pay for platform services through transparent charges deducted from their investments and platform providers cannot receive payment for these services from fund managers.

Changes in the regulatory landscape have impacted on our businesses in Asia and Emerging Markets. We announced the closure of our business in Dubai in November 2014 and in Hong Kong we are actively developing propositions to ensure compliance with new regulations.

In addition, Solvency 2 will come into force on 1 January 2016 and is a major European regulatory change initiative which will bring consistency to the way in which EU insurers manage capital and risk, with the aim of enhancing protection for consumers. We continue to work with the regulators and have enhanced our controls, risk models, technology and processes to ensure that our business is well placed to implement the necessary changes.

Find out more about these regulatory changes and how we are responding in Section 1.4 - Business segment performance.

Market opportunities

We believe there are a wide range of market opportunities we can benefit from, including:

· Further expansion of Standard Life Investments global reach including a global collaboration agreement with Manulife, which builds on the existing, highly successful relationship with John Hancock, the US unit of Manulife

· Capitalising on regulatory and market changes to position ourselves as customers' first choice for their life savings

· Building on our leading position in UK workplace and auto enrolment to attract and retain customers

· Investing in online presence with support, tools and guidance for all UK customers

· Offering specialised advice to those customers who seek this in the UK

· Maximising asset flows into MyFolio and Standard Life Investments

· Seeking to increase our stake in HDFC Life - full details of changes to relevant Indian laws are still being confirmed and we are monitoring developments closely.

Outlook

Standard Life Investments remains focused on delivering excellent investment performance, expanding its investment capabilities, strengthening its distribution and increasing geographic reach. The integration of Ignis is progressing well and we remain on track to achieve £50m of planned annual cost savings and our EBITDA margin target of 45% by 2017.

Following changes announced in the Budget in March 2014, we have seen a significant reduction in demand for individual annuities and consequently expect a step down in the profitability of our spread/risk business in the coming years.

The investments we have made in our UK business in recent years leave us well positioned to benefit from evolving customer needs and regulatory changes. This, combined with our investment expertise and focus on providing value for our customers, continues to drive demand for our propositions across the retail, workplace, institutional and wholesale channels. Our fee business, including our leading income drawdown proposition, is well placed for future growth. As our business in Germany continues to accelerate its transition away from with profits to unit linked products, we expect the combined profit from our German and Irish savings businesses to remain stable over the medium term.

In Hong Kong and Singapore, our wholly owned operations are seeing more challenging conditions due to regulatory changes. Our JV in China is continuing to focus on profitable growth and in India, HDFC Life and HDFC AMC continue to perform strongly. We continue to monitor developments in respect of foreign direct investment rules in India.

Although investment markets are unsettled and may affect the near-term pace of asset and revenue growth, we are very well placed for the future. We have the products, experience and proven investment performance to help our customers and clients in all of our markets to save and invest, so that they can look forward to their financial futures with confidence.

1.2 Group key financial performance indicators

Group operating profit before tax from continuing operations¹

Group operating profit is a key measure which provides an indication of our ability to deliver returns for our shareholders and of our dividend paying capability.

· Group operating profit before tax from continuing operations increased by 19% to £604m due to continued growth in Standard Life Investments and in the UK business. The result also included the H2 2014 operating profit from Ignis. Operating assumption changes had a £43m positive impact in 2014 (2013: positive £44m).

· Group underlying performance from continuing operations increased by 21% to £561m (2013: £462m) and included the benefit of a 14% increase in fee based revenue.

Assets under administration and net flows from continuing operations¹

As a long-term investment savings business, assets under administration (AUA) and net flows are key drivers of shareholder value. We aim to grow AUA by developing propositions that help our customers achieve their financial ambition.

· Group AUA from continuing operations increased by 38% or £81.9bn to £296.6bn, primarily due to the acquisition of Ignis (£60.5bn) and favourable market movements

· Total net inflows from continuing operations were £1.0bn. Strong net inflows of £5.2bn in Standard Life Investments wholesale business and £2.1bn in the UK and Europe business were offset by £2.6bn net outflows from the Ignis Absolute Return Government Bond Fund (ARGBF) and £2.3bn of outflows from two low revenue margin mandates. There was also £1.6bn of expected net outflows in assets managed for Phoenix Group which is in natural run-off.

Group underlying cash generation from continuing operations¹

Group underlying cash generation is a new performance measure, replacing EEV operating capital and cash generation. It reflects our ability to generate cash that supports the payment of dividends to our shareholders and further investment in the business.

· Group underlying cash generation increased by 21% or £72m to £408m, mainly due to an increase of £37m in Standard Life Investments and £30m in Asia and Emerging Markets, reflecting strong growth in cash profits

· This increase has been partially offset by a £31m increase in current tax, mainly arising in the UK and Europe business and Standard Life Investments

· The growth in Group underlying cash generation and Group underlying performance are closely correlated.

The Group's key financial performance indicators and supplementary information have been reviewed following the sale of our Canadian business, the acquisition of Ignis and our increasing focus on fee based business. As a result, a new cash generation key performance indicator has been introduced that aligns more closely with how the business is managed and provides a clear linkage between cash generation and Group underlying performance. A description of this metric is included in Section 1.3 - Chief Financial Officer's overview. As a further consequence of the changed shape of the Group, EEV operating profit after tax and EEV operating capital and cash generation are no longer key financial performance indicators. EEV supplementary information will not be reported after the 2014 results.

Find out more about these measures in Section 1.3 - Chief Financial Officer's overview and Section 1.7 - Basis of preparation.

¹ Continuing operations excludes our Canadian business which was sold on 30 January 2015 and our Dubai business, the closure of which was announced in November 2014.

1.3 Chief Financial Officer's overview

Our financial results demonstrate our ability to deliver sustainable returns for our shareholders. Continuing operations excludes our Canadian business which was sold on 30 January 2015 and our Dubai business, the closure of which was announced in November 2014.

IFRS and Group operating profit
	2014	2013	Movement
Group operating profit before tax from continuing operations¹	£604m	£506m	19%
IFRS profit after tax attributable to equity holders of Standard Life plc (including discontinued operations)	£503m	£466m	8%
Group operating return on equity (including discontinued operations)	14.9%	14.7%	0.2% points

Group operating profit before tax from continuing operations

Movements in Group operating profit before tax from continuing operations of £604m include:

· Fee based revenue increased by 14% to £1,433m driven by a strong demand for our fee based products and from the acquisitions of Ignis and the private client division of Newton

· Spread/risk margin, which mainly relates to UK annuities, increased by 13% to £183m and was largely driven by an increase in asset and liability management, partially offset by the impact of reduced UK annuity sales following the recent Budget changes

· Acquisition expenses decreased to £232m primarily due to lower commission payments in Hong Kong

· Maintenance expensesincreased to £767m reflecting continued product development, investment in expanding the global reach of Standard Life Investments and the acquisitions of Ignis and Newton

· Group corporate centre costsincreased slightly to £54m

· Capital management generated a gain of £2m due to investment in higher yielding assets

· Our share of profit of associates and JVsincreased to £39m, benefiting from growth in premium income and investment performance gains in our JV businesses.

Group operating profit before tax
	2014	2013
	£m	£m
Fee based revenue	1,433	1,256
Spread/risk margin	183	162
Total income	1,616	1,418
Acquisition expenses	(232)	(243)
Maintenance expenses	(767)	(633)
Group corporate centre costs	(54)	(53)
Capital management	2	(10)
Share of associates' and JVs' PBT	39	27
Group operating profit before tax from continuing operations	604	506
Group operating profit before tax from discontinuing operations	131	245
Total Group operating profit before tax	735	751
Analysis of Group operating profit before tax
	2014	2013
	£m	£m
Group underlying performance from continuing operations	561	462
Operating assumption and actuarial reserving changes (Spread/risk margin)	43	44
Group operating profit before tax from continuing operations	604	506

Group non-operating loss before tax from continuing operations

Group non-operating loss before tax
	2014	2013
	£m	£m
Short-term fluctuations in investment return and economic assumption changes	15	(22)
Restructuring and corporate transaction expenses	(109)	(71)
Impairment of intangible assets	(43)	-
Other operating profit adjustments	(22)	(7)
Group non-operating loss before tax from continuing operations	(159)	(100)
Group non-operating profit/(loss) before tax from discontinued operations	35	(87)
Total Group non-operating loss before tax	(124)	(187)

The Group non-operating loss from continuing operations in 2014 was £159m (2013: loss £100m). Restructuring and corporate transaction expenses of £109m included £50m relating to the acquisition, restructuring and integration of Ignis and £15m for staff pension scheme restructuring¹ and other business unit restructuring programmes. The non-operating loss also includes an impairment charge of £43m on the Ignis intangible assets acquired following outflows from the Ignis Absolute Return Government Bond Fund.

IFRS profit

IFRS profit after tax attributable to equity holders, which also includes the results of the discontinued operations, increased by 8% to £503m (2013: £466m). Excluding the discontinued Canadian business, IFRS profit after tax attributable to equity holders increased by 12% to £376m (2013: £335m).

The tax expense attributable to equity holders' profits in 2014 was £42m (2013: £58m). IFRS profit for the year of £507m (2013: £496m) also includes profit attributable to non-controlling interests of £4m (2013: £30m).

Page 112 of the Annual report and accounts 2014 includes a reconciliation of Group operating profit to IFRS profit for the year.

¹ Operating profit is IFRS profit before tax adjusted to remove the impact of short-term market driven fluctuations in investment return and economic assumptions, restructuring costs, impairment of intangible assets, amortisation of intangible assets acquired in business combinations, profit or loss on the sale of a subsidiary, associate or joint venture and other significant one-off items outside the control of management and not indicative of the long-term operating performance of the Group. The impact of the restructuring of the UK staff pension scheme has been adjusted for so that 2014 operating profit is based on the expected long-term pension expense, which results in a £15m increase to 2014 operating profit before tax and a corresponding increase to 2014 non-operating restructuring and corporate transaction expenses - Refer to Note 10 of the Group financial statements for further information.

1.3 Chief Financial Officer's overview continued

Group profitability including discontinued operations

Group operating profit before tax including discontinued operations, which comprises our Canadian business and our operations in Dubai, reduced to £735m (2013: £751m). Operating profit before tax from the discontinued operations in Canada reduced to £136m (2013: £251m) as a result of lower management actions. The operating loss before tax for Dubai was £5m (2013: loss £6m). Find out more in Section 1.4.4 - Discontinued operations.

The Group non-operating loss including discontinued operations in 2014 was £124m (2013: loss £187m). The non-operating gain from discontinued operations of £35m (2013: loss £87m) included favourable short-term fluctuations on investment return in Canada of £73m offset by £38m restructuring and other non-operating expenses in relation to the sale of our Canadian business and the closure of Dubai.

Group tax expense and total tax contribution from continuing operations

The tax expense attributable to equity holders' profits in 2014 was £42m (2013: £58m) of which £82m (2013: £77m) related to operating items and a credit of £40m (2013: credit £19m) to non-operating items. The decrease in the total tax expense reflects items in the UK business that are credited to shareholders arising from the mechanism of taxation of the life business and the recognition of deferred tax assets in our Europe business. The effective tax rate decreased from 14% in 2013 to 10% in 2014.

In 2014, our total tax contribution from continuing operations to tax authorities in all the jurisdictions in which we operated was £791m (2013: £608m) of which £565m (2013: £492m) related to the UK. Of the total, £331m (2013: £262m) was taxes borne by the Group whilst £460m (2013: £346m) represents tax collected by us on behalf of tax authorities. Taxes borne and tax collected are higher than 2013 mainly due to increased corporation tax borne on investments and increased VAT collected.

Of the non-corporation tax items, the largest is PAYE deducted from both pension annuity payments made to customers and from employee payroll payments, demonstrating the Group's wider economic contribution.

Group operating return on equity

Return on equity measures our success in generating profit relative to our shareholder capital. Group operating return on equity (including discontinued operations) increased to 14.9% (2013: 14.7%) reflecting increased operating profit before tax from continuing operations offset by lower profitability from discontinued operations. We will continue to manage our capital position to ensure that we generate sustainable returns for our shareholders.

Assets under administration and net flows from continuing operations
	2014	2013	Movement
Assets under administration	£296.6bn	£214.7bn	38%
Net flows	£1.0bn	£8.8bn	(89%)

Assets under administration and net flows from continuing operations

Assets under administration (AUA) from continuing operations increased by 38% to £296.6bn benefiting from the acquisition of Ignis (£60.5bn) and favourable market movements:

· Fee business AUA increased to £268.6bn (2013: £190.7bn) representing 91% of total AUA

· Spread/risk business AUA of £16.1bn (2013: £15.1bn) increased due to favourable market movements, offsetting scheduled annuity outflows and lower annuity sales in the UK business following the recent Budget announcements

· Total net inflows from continuing operations were £1.0bn. Strong net inflows of £5.2bn in Standard Life Investments wholesale and £2.1bn in the UK and Europe business were offset by £2.6bn net outflows from the Ignis Absolute Return Government Bond Fund (ARGBF) and £2.3bn of outflows from two low revenue margin mandates. There was also £1.6bn of expected net outflows in assets managed for Phoenix Group which is in natural run-off.

Group underlying cash generation from continuing operations
	2014	2013	Movement
Group underlying cash generation	£408m	£336m	21%

Group underlying cash generation from continuing operations

Group underlying cash generation is a key financial performance indicator, replacing EEV operating capital and cash generation. It demonstrates our ability to generate cash that supports further investment in the business and the payment of dividends to our shareholders. Group underlying cash is chosen as a non-GAAP key financial performance measure because it presents a shareholder view of underlying cash generation. The IFRS Consolidated statement of cash flows includes policyholder cashflows, and does not exclude non-recurring and non-operating items.

Total Group underlying cash generation from continuing operations of £408m is £72m (21%) higher than 2013, reflecting strong Group underlying performance partially offset by a higher current tax expense in the UK and Europe. A segmental analysis of Group underlying cash generation is included in the Supplementary information.

Reconciliation of Group underlying performance to Group underlying cash generation from continuing operations

Reconciliation of Group underlying cash generation	2014	2013
	£m	£m
Group underlying performance from continuing operations	561	462
Exclude share of associates and JVs' PBT	(39)	(27)
Exclude current tax on underlying performance	(73)	(42)
DAC/DIR adjustment	(21)	(32)
Fixed and intangible assets adjustment	(20)	(25)
Group underlying cash generation from continuing operations	408	336

Underlying cash generation adjusts Group underlying performance for the following non-cash items and current tax:

· Results of our associates and joint ventures are excluded

· Current tax on underlying performance is deducted, this excludes any movements in deferred tax assets or liabilities

· Deferred acquisition costs/deferred income reserve (DAC/DIR) are adjusted - replacing the accounting charge/credit for amortisation of DAC/DIR with the actual cash paid/received in year

· Fixed and intangible assets are adjusted - replacing the accounting charge for depreciation and amortisation in operating profit with additions (capital expenditure) in the year.

Capital management
	2014	2013	Movement
IFRS equity attributable to equity holders of Standard Life plc	£4,672m	£4,227m	11%
EEV	£9,163m	£8,423m	9%
Group capital surplus¹	£2.9bn	£3.8bn	(24%)

¹ 2014 based on draft regulatory returns. 2013 based on final regulatory returns.

Group capital surplus

Group capital surplus and solvency cover²	2014	2013
	£bn	£bn
Shareholders' capital resources	2.5	2.9
Capital resources arising from subordinated debt	1.5	1.9
SLAL long-term business funds	3.4	3.6
Group capital resources³	7.4	8.4
Group capital resources requirement	(4.5)	(4.6)
Group capital surplus	2.9	3.8
Group solvency cover	165%	183%

² 2014 based on draft regulatory returns. 2013 based on final regulatory returns.

³Net of restricted assets of £1.2bn (2013: £1.2bn).

The Group capital surplus decreased to £2.9bn (2013: £3.8bn) reflecting the acquisition of Ignis and the redemption of the €360m Euro Tier 1 sub debt in January 2015 which ceased to count as capital in 2014.

The Group capital surplus remains largely insensitive to significant market volatility impacting equities or yields. The estimated impact on the Group capital surplus compared to the 31 December 2014 position due to significant market movements and based on certain assumed management actions appropriate to these stresses is as follows:

· 30% fall in equities: Reduction of £0.2bn (2013: £0.2bn)

· 100bps rise in yields: Reduction of £0.1bn (2013: £0.1bn)

· 100bps fall in yields (minimum yields of zero): Increase of £0.1bn

(2013: £0.1bn reduction).

The Group capital surplus is expected to reduce by an estimated £0.2bn following the sale of our Canadian business and the subsequent return of value to shareholders in April 2015. This movement consists of:

· removal of £0.6bn Canada contribution to the £2.9bn Group capital surplus

· reduction of approximately £1.75bn following return of value to shareholders

· partially offset by £2.2bn Canada disposal proceeds.

We welcome the positive steps in the development of the Solvency 2 regime and expect our capital position to remain strong following implementation.

1.3 Chief Financial Officer's overview continued

Movement in shareholder capital requirements

Capital requirements that are backed by shareholder assets are relatively stable, as illustrated opposite. As a result, the majority of shareholder cash generation is not needed to support increases in capital requirements.

Canada capital requirement is excluded to illustrate the continuing business.

Capital resources requirement¹	2014	2013	2012
	£bn	£bn	£bn
Group capital resources requirement	4.5	4.6	3.9
Canada capital resource requirement	(0.7)	(0.7)	(0.7)
SLAL With Profits Fund requirement	(3.4)	(3.6)	(2.8)
Shareholder capital resource requirement from continuing operations	0.4	0.3	0.4
¹2014 based on draft regulatory returns. 2013 and 2012 based on final regulatory returns.

Reconciliation of key capital measures

The following diagram illustrates the key differences between regulatory, IFRS and EEV capital measures at 31 December 2014. Diagram removed for the purposes of this announcement. However it can be viewed in full in the PDF document.

Liquidity management and dividends
	2014	2013	Movement
Standard Life plc cash and liquid resources	£657m	£907m	(28%)
Full year dividend (Interim and Final)	£358m	£376m	(5%)

Liquidity management

Standard Life plc cash and liquid resources	2014	2013
Standard Life plc cash and liquid resources	£m	£m
Opening 1 January	907	1,064
Dividends received from subsidiaries	613	629
Cash dividends paid to shareholders¹	(386)	(656)
Additional cash investments in subsidiaries	(431)	(97)
Additional cash investments in associates and joint ventures	(14)	(19)
Other	(32)	(14)
Closing 31 December	657	907

¹ 2014 reflects the payment of the 2013 final dividend of £252m and the 2014 interim dividend of £134m. 2013 reflects the payment of the 2012 final dividend of £230m, the 2012 special dividend of £302m and the 2013 interim dividend of £124m.

Standard Life plc holds substantial cash and liquid resources. At 31 December 2014, Standard Life plc held £300m (2013: £574m) of cash and short-term debt securities and £357m (2013: £333m) of bonds. The reduction in total Standard Life plc cash and liquid resources at 31 December 2014 was due to the transfer of funds to Standard Life Investments (Holdings) Limited for the acquisition of Ignis, which completed on 1 July 2014.

We continue to focus on efficient capital management and cash generation. During 2014, subsidiaries remitted £613m to Standard Life plc. This more than covers the payment of both the 2013 final dividend of £252m that was paid in May 2014 and the 2014 interim dividend of £134m that was paid in November 2014.

The Group maintains a strong liquidity position and this was shown in stress testing undertaken during 2014. This liquidity stress testing ensures that we can withstand a scenario of significant falls in asset values combined with unprecedented levels of surrenders and claims.

We also maintain contingency funding plans across the Group to ensure that each business unit is prepared for a liquidity issue.

As part of this contingency planning, Standard Life plc, the Group's ultimate holding company, maintains a £500m revolving credit facility with a syndicate of banks which will mature in March 2018. The Group's revolving credit facility remained unutilised during 2014.

Dividends

We propose a final dividend of 11.43p per share, which represents an increase of 8.0% per share. This dividend will be paid on the adjusted number of ordinary shares following the share consolidation. We intend to continue to apply our existing 'pence per share' progressive dividend policy taking account of market conditions and our financial performance.

Return of value

Following the completion of the sale of our Canadian business on 30 January 2015, we intend to return 73p per share (approximately £1.75bn) to shareholders. This is subject to shareholder approval and will have a payment date of 1 April 2015. The residual net sale proceeds will be used for general corporate purposes. In conjunction with the return of value, we will be seeking shareholder approval to carry out a share consolidation with 9 new ordinary shares being issued in exchange for every 11 existing ordinary shares held. This will reduce the number of shares in issue by approximately the same ratio as the return of value (73p) to the share price as at 4 February 2015. On 1 January 2015, Standard Life plc had 2015 opening distributable reserves of £1.0bn. In order to ensure sufficient distributable reserves for the return of value, the company prepared a set of interim accounts

(to 4 February 2015) incorporating the impacts of the Canada disposal. This increased distributable reserves to £2.9bn.

Further financial information
	2014	2013	Movement
EEV per share (including discontinued operations)	381p	353p	8%
EEV operating profit after tax from continuing operations¹	£669m	£414m	62%
EEV profit after tax from continuing operations	£542m	£784m	(31%)

¹ EEV operating profit is now disclosed on an after tax basis, comparatives have been restated.

Group embedded value

Group embedded value increased to £9,163m (2013: £8,423m) representing an EEV per share of 381p. EEV per share increased by 44p before dividend distributions of 16p per share. This included EEV operating profit after tax from continuing operations of £669m (28p per share) and EEV non-operating loss after tax from continuing operations of £127m (5p per share), including a decrease of £160m (7p per share) from the impact of UK regulations that put a cap on charges for the default funds of workplace pension schemes. Discontinued operations contributed an operating profit after tax of £218m and a non-operating profit after tax of £174m, a total EEV profit after tax of £392m (16p per share). Other and non-trading adjustments contributed 5p per share, of which the largest items were £272m from remeasurement gains on staff pension schemes and negative £78m from exchange differences on translating foreign operations.

EEV operating profit after tax from continuing operations

EEV operating profit after tax from continuing operations
	2014	2013
	£m	£m
Contribution from new business	206	231
Contribution from in-force business	242	189
Development costs and non-covered business	52	(13)
Operating experience variances and assumption changes	169	7
EEV operating profit after tax from continuing operations	669	414

EEV operating profit after tax from continuing operations of £669m increased by 62%.

EEV operating profit after tax from experience variances and assumption changes from continuing operations of £169m (2013: £7m) included £46m of favourable experience variances in the UK and Europe and £116m of positive expenses assumption changes in the UK and Europe. A reduction in new business contribution was offset by increased in-force contribution and higher profits from non-covered business.

EEV non-operating profit after tax from continuing operations

Total EEV non-operating loss after tax from continuing operations of £127m (2013: profit £370m) included a £160m loss from the impact of UK regulations that restrict future charges on qualifying workplace pension schemes. The remaining non-operating profit of £33m included favourable investment return and tax variances of £182m (2013: profit £212m), profit from economic assumption changes of £nil (2013: profit £229m), restructuring and corporate transaction expenses of £94m (2013: £57m) and other losses of £55m (2013: loss £14m).

Further financial information - analysis of Group operating profit from continuing operations

	Standard Life Investments¹		UK and Europe¹		Asia and Emerging Markets		Other		Eliminations		Total continuing operations
	2014	2013	2014	2013	2014	2013	2014	2013	2014	2013	2014	2013
	£m	£m	£m	£m	£m	£m	£m	£m	£m	£m	£m	£m
Fee based revenue²	686	514	802	795	53	54	-	-	(108)	(107)	1,433	1,256
Spread/risk margin	-	-	183	162	-	-	-	-	-	-	183	162
Total income²	686	514	985	957	53	54	-	-	(108)	(107)	1,616	1,418
Acquisition expenses	-	-	(229)	(227)	(3)	(16)	-	-	-	-	(232)	(243)
Maintenance expenses²	(450)	(339)	(376)	(358)	(49)	(43)	-	-	108	107	(767)	(633)
Group corporate centre costs	-	-	-	-	-	-	(54)	(53)	-	-	(54)	(53)
Capital management	-	-	10	3	-	-	(8)	(13)	-	-	2	(10)
Share of associates' and JVs' PBT	21	22	-	-	18	5	-	-	-	-	39	27
Group operating profit before tax from continuing operations	257	197	390	375	19	-	(62)	(66)	-	-	604	506
Exclude: Operating assumption and actuarial reserving changes	-	-	(43)	(44)	-	-	-	-	-	-	(43)	(44)
Group underlying performance from continuing operations	257	197	347	331	19	-	(62)	(66)	-	-	561	462
Exclude: Group centre costs/capital management	-	-	-	-	-	-	62	66	-	-	62	66
Business unit underlying performance from continuing operations	257	197	347	331	19	-	-	-	-	-	623	528

¹From 1 January 2014, Standard Life Wealth is reported as part of Standard Life Investments, previously it was reported in UK and Europe. Comparatives have been restated.

² Institutional pension business previously included in both UK and Europe and Standard Life Investments has now been excluded from UK and Europe and is only included in the Standard Life Investments segment. UK and Europe and eliminations have been adjusted and there is a nil impact on UK and Europe and Group operating profit. Comparatives have been restated.

Continuing operations excludes our Canadian business which was sold on 30 January 2015 and our Dubai business, the closure of which was announced in November 2014. Further details on our businesses, including discontinued operations are included in Section 1.4 - Business segment performance.

1.4 Business segment performance

1.4.1 Standard Life Investments

Financial highlights from continuing operations^1,2

	2014	2013	Movement
Operating profit before tax	£257m	£197m	30%
Operating return on equity	36.7%	61.1%	(24.4% points)
Earnings before interest, tax, depreciation and amortisation (EBITDA)³	£266m	£202m	32%
EBITDA margin³	39%	39%	-
Third party assets under management⁴ (AUM)	£117.5bn	£89.8bn	31%
Total assets under management	£245.9bn	£170.1bn	45%
Third party net inflows⁴	£1.7bn	£9.6bn	(82%)

¹ From 1 January 2014, Standard Life Wealth is reported as part of Standard Life Investments, previously it was reported in UK and Europe. Comparatives have been restated. Ignis Asset Management Limited (Ignis) was acquired on 1 July 2014 and is reported in the results for 2014 for the first time.

² Figures exclude Standard Life Investments Inc (SLI Canada) which was sold on 30 January 2015. Comparatives have been restated. Results of discontinued operations are included in Section 1.4.4.

³ EBITDA and EBITDA margin are key performance metrics for the investment management industry. These have replaced EBIT and EBIT margin metrics as management believes they are more reflective of the day to day performance of the business.

⁴ Excludes strategic partner life business.

Strategic overview

Standard Life Investments is a leading active asset manager with an expanding global reach. Our culture of investment excellence is fundamental to helping our clients to look forward to their future with confidence. Our wide range of investment funds and solutions is backed by our distinctive 'Focus on Change' investment philosophy, disciplined risk management and shared commitment to a culture of investment excellence. Our 'Focus on Change' investment philosophy lies at the heart of our investment performance. It seeks to identify the most important factors that drive the market price of an investment and understand the dynamics behind them. It is not inherently growth, value or momentum driven and provides the opportunity to outperform throughout the investment cycle. This, coupled with our exceptional client service has led us to manage £245.9bn of assets for clients all over the world, as we continue to capitalise on our global reach through organic growth, acquisitions and by developing strategic partnerships and relationships.

Market update

The global economy continued to expand at a moderate pace in 2014 despite weak activity in Europe and a slowdown in emerging markets, particularly in China. Investors are increasingly taking a more selective approach to investment opportunities. The advantages of our strategic positioning have been reflected in our ability to attract flows across a range of higher margin products through a broad suite of funds, continuing product innovation and expanding geographic reach. We further expanded our range of funds, including developments in multi-asset portfolios and fixed income markets. We also continue to broaden the diversity of our AUM with £4.1bn of third party⁵ net inflows coming from outside the UK, including £1.3bn from the US.

We continue to play a leading role in governance and stewardship. Strong corporate governance along with responsible stewardship of a business' capital, employees, customers and environment has a fundamental impact on long-term investment returns. During 2014, we voted at 1,633 shareholder meetings and undertook 647 Environmental, Social and Governance engagements, promoting high standards of governance and stewardship.

Standard Life Investments continued to leverage its investment expertise and work closely with the rest of the Standard Life Group. The inclusion of Standard Life Investments product capability within Group products has been successful. We continued to explore and capitalise on further global distribution opportunities with our strategic partners including HDFC in India, Sumitomo Mitsui Trust Bank in Japan, John Hancock in the US, and Phoenix Group in the UK. This has allowed us to extend our geographical footprint with ten new international offices opening or shortly opening in New York, Los Angeles, Toronto, Munich, Tokyo, Zurich, Stockholm, Brussels, Milan and Madrid, providing closer support to our clients.

On 1 July 2014 we successfully completed the acquisition of Ignis. This transaction deepens our investment capabilities, broadens our client base, and reinforces foundations for building a business in the rapidly developing liability aware market. As a result of the transaction we also entered into a strategic alliance with Phoenix Group through which we provide asset management services to Phoenix's life company subsidiaries, including the potential to manage books of assets that Phoenix Group may acquire in the future.

⁵ Excludes strategic partner life business.

1.4 Business segment performance continued

1.4.1 Standard Life Investments continued

A stronger operational and investment link between Standard Life Wealth and Standard Life Investments was created following the acquisition of the private client division of Newton Management Limited (Newton) in September 2013. We believe that there are substantial opportunities to accelerate the growth of Standard Life Wealth by utilising Standard Life Investments' infrastructure, expertise, distribution and global footprint.

As part of the Group's announced sale of its Canadian business to Manulife, we entered into a collaboration agreement with Manulife which improves our access to global markets and North American markets in particular. Manulife will seek to distribute our funds in Canada, the United States and Asia, an agreement which further extends our global capabilities. This is expected to more than treble total assets under management distributed by the Manulife group within three years from approximately £4bn to £12bn, building on our existing, highly successful relationship with John Hancock, the US unit of Manulife.

The recent UK regulatory change regarding pension decumulation, where pensioners will no longer be required to convert their defined contribution pension into an annuity, presents opportunities in the multi-asset and absolute return space, which we are well placed to capitalise on. It is a market in which we already lead and have positioned ourselves to be ready for when our clients need us.

Profitability from continuing operations¹

Operating profit before tax	2014	2013
	£m	£m
Fee based revenue	686	514
Maintenance expenses	(450)	(339)
Share of associates' and JVs' profit before tax	21	22
Standard Life Investments operating profit before tax	257	197
Interest, depreciation, amortisation and exchange rate movements²	9	5
EBITDA	266	202

¹Figures exclude Standard Life Investments Inc (SLI Canada) which was sold on 30 January 2015. Comparatives have been restated. Results of discontinued operations are included in Section 1.4.4.

²Excludes amortisation and impairment of intangibles acquired in business combinations which is excluded from operating profit before tax.

Operating profit before tax increased by 30% to £257m. EBITDA, our key internal measure of profitability, increased by 32% to £266m with an EBITDA margin of 39% (2013: 39%).

Ignis contributed £37m to the EBITDA and £36m to the operating profit before tax figures, including £14m of performance fees. This result excludes costs associated with the integration of Ignis into the Standard Life Investments sub-group and the impairment of intangible assets which are classified as non-operating items.

Standard Life Wealth revenue increased from £21m in 2013 to £39m, at a revenue yield of 68bps (2013: 68bps) while costs increased from £16m to £38m, reflecting the acquisition of Newton.

The key highlights were:

· Fee based revenue increased by 33% to £686m. The result reflects strong organic growth including the shift in mix towards higher margin products such as UK mutual funds and multi-asset investment solutions as well as the acquisition of Ignis and Newton. The changing mix helped to increase the revenue yield on third party AUM to 53bps (2013: 50bps). Our strategic partner life business AUM revenue yield rose to 16bps (2013: 15bps) and included performance fees of £23m.

· Maintenance expensesincreased to £450m, with a significant factor being the increased scale of our business following the acquisitions of Ignis and Newton. The increase in expenses also reflects the investment in growing the business and diversifying our sources of revenue both geographically and by product category. We have expanded our global footprint and invested in our operational and technology infrastructure while maintaining control of our cost base. This is reflected in the number of employees based in our overseas offices, which increased by 13% compared to 2013.

· HDFC Asset Management, our associate business, remains the largest mutual fund provider in India and contributed £21m (2013: £22m) to operating profit before tax. This reduction is due to adverse foreign exchange movements.

Operating return on equity from continuing operations

Operating return on equity fell to 36.7% (2013: 61.1%), reflecting a capital injection from the Standard Life Group to fund the acquisitions of Ignis and Newton. The result continues to reflect the profitability of our business and an efficient capital base.

Investment performance

Strong growth in 2014 was underpinned by excellent money weighted average investment performance across Standard Life Investments funds. 69% of third party (excluding strategic partner life business and Ignis) AUM funds were ahead of benchmark in the year with 98% ahead over 3 years and 88% over 5 years. Fixed income funds continued to perform strongly, with 99% of funds ahead of benchmark at 3 years. Our suite of multi-asset funds have outperformed their cash benchmark over all longer term time periods since inception. For Ignis, 58% of funds were ahead of benchmark or peer group over 1 year with 84% ahead over 3 years and 77% over 5 years.

Assets under management and net flows from continuing operations

Assets under management and net flows from continuing operations
	Net flows		AUM
	2014	2013	2014	2013
	£bn	£bn	£bn	£bn
Wholesale	5.2	5.2	35.5	28.9
Institutional	0.8	3.9	61.4	55.1
Wealth	-	0.5	6.1	5.8
Ignis	(4.3)	-	14.5	-
Total third party¹	1.7	9.6	117.5	89.8
Standard Life Group	(2.4)	(3.2)	84.6	80.3
Phoenix Group	(1.6)	-	43.8	-
Total strategic partner life business	(4.0)	(3.2)	128.4	80.3
Total	(2.3)	6.4	245.9	170.1

We remain focused on meeting the needs of existing clients and securing new business backed by consistently strong investment performance, product innovation, high levels of client service and an expanding global distribution capability.

We have revised the way we report assets under management and net flows following changes to the composition of Standard Life Investments during 2014. Our focus remains on continuing to drive growth by expanding our third party business globally. However, we are also disclosing separately strategic partner life business, which following the acquisition of Ignis includes life books managed on behalf of the Phoenix Group. This business is in natural run-off and attracts a lower revenue yield than our third party book.

Third party¹ AUM increased to a record £117.5bn (2013: £89.8bn) representing 48% of total AUM (2013: 53%). Strategic partner life business AUM increased to £128.4bn (2013: £80.3bn). As a result, total AUM reached a record £245.9bn (2013: £170.1bn).

Inflows during 2014 reflected the diverse nature of our product offering, our expanding global distribution capability and the increasingly international nature of our client base. Assets under management globally generated from sales in our Boston office reached US$9bn (£6.0bn), with continued strong net inflows in 2014 of £1.3bn (2013: £2.1bn). At an asset class level, we saw a broad mix of net inflows into multi-asset, real estate and private equity. In the UK and Europe we increased the institutional client base by 12%.

Third party¹

Third party¹ net inflows continued to be good at £1.7bn (2013: £9.6bn). This continued our unbroken record of positive annual third party net flows since our inception in 1998. Ignis business, which is included for the first time, saw net outflows of £4.3bn, including £2.6bn from ARGBF following the restructure of the absolute returns team.

Excluding the Ignis outflows and two low revenue margin mandates (c. 4bps) that disinvested in H2 2014, third party (excluding strategic partner life business) net inflows were £8.3bn.

Wholesale

Our Wholesale business, where we sell our retail products through wholesale distributors, continued to perform well with net inflows in 2014 at £5.2bn (2013: £5.2bn). Flows have been strong in MyFolio, equities, real estate and multi-asset strategies. Demand for our mutual funds in the UK and for our SICAV funds in continental Europe and Asia Pacific remains strong.

Institutional

Our institutional business, where we sell to institutions either directly or through intermediaries, has seen net inflows of £0.8bn in 2014 (2013: £3.9bn), despite £2.3bn of outflow from two low revenue margin mandates.Our pipeline of institutional business continues to see fixed income, real estate and multi-asset propositions attract considerable interest, increasingly from outside the UK.

Wealth

Standard Life Wealth continues to develop and we expect it to gain momentum in the market place. The reduction in net inflows to £0.0bn in 2014 (2013: £0.5bn) was an initial consequence of the acquisition of Newton.

Ignis

Ignis third party¹ business saw net outflows of £4.3bn, including £2.6bn from ARGBF, £1.0bn from volatile liquidity funds and £0.7bn from fixed income mandates. The ARGBF outflows followed the restructure of the absolute returns team within Ignis and these outflows impacted the valuation of the intangible asset recognised on acquisition of Ignis. As a result, an impairment charge of £43m has been recognised.

Strategic partner life business

Overall strategic partner life business net outflows increased to £4.0bn (2013: £3.2bn). Phoenix Group, the acquired Ignis life business had net outflows of £1.6bn. This business is in natural run-off and the outflow was in line with our expectations. Net outflows from Standard Life Group reduced to £2.4bn (2013: £3.2bn).

¹ Excludes strategic partner life business.

1.4 Business segment performance continued

1.4.1 Standard Life Investments continued

Our business model

Increasing assets with record third party¹ AUM

· Ignis contributed third party¹ AUM of £14.5bn (2013: £nil) and strategic partner life business of £43.8bn (2013: £nil)

· Assets managed by investment teams in our Boston office now exceed US$25bn across equities, fixed income and real estate

· Our position in the wholesale market in the UK remains strong, with a share of gross sales of 4.5% (2013: 5.0%). UK mutual funds AUM increased by 16% to £21.8bn and represents 19% of third party¹ assets. We are now the fifth largest manager, by AUM, in the UK wholesale market.

· Launched the Global Focused Strategies Fund, further developing our multi-asset portfolio of products which comprises our suite of global absolute return strategies and balanced funds

· AUM in our Global Equity Unconstrained Fund broke through the £100m mark. The Fund has produced top quartile performance in its sector over a one year period and top decile over three and five years.

· Strong pipeline of new investment initiatives positions us well to continue to meet the changing demands of our clients through new and innovative investment solutions.

Maximising revenue with continued shift in product mix towards higher margin propositions

· Sales of higher margin products enabled us to increase the revenue yield on our third party (excluding strategic partner life business and Ignis)gross sales to 59bps (2013: 58bps)

· Continued to collaborate across the Group to maximise the Group's share of the value chain, for example our market-leading range of MyFolio risk based funds, used extensively within the long-term savings and investments businesses, remain very popular with AUM of £5.9bn

· Short Duration Credit Fund was launched in 2014 to take advantage of investment demand for funds with less vulnerability to a rise in interest rates

· Standard Life Capital Partners, our private equity business, completed first closures on the Infrastructure Equity Fund and Secondary Opportunities Fund during 2014.

Managing unit costs while investing to extend geographical footprint and support future growth

· Operating expenses expressed as a proportion of average total AUM were 22bps (2013: 21bps). This reflects the ongoing development of our investment capability and expanding distribution and geographic reach. This metric will continue to be closely managed as we move to deliver 45% EBITDA margin by 2017.

· Continued investment to extend our geographical footprint with ten new international offices opened or shortly opening in New York, Los Angeles, Toronto, Munich, Tokyo, Zurich, Stockholm, Brussels, Milan and Madrid, providing closer support to our clients

· Investment in core operational and technology infrastructure to support future growth

· Sponsorship of the Ryder Cup extended the global reach and familiarity of our brand

· Ongoing management of costs, combined with expansion in revenue margins, has resulted in a 20% compound annual growth in EBITDA over the last seven years.

Awards and recognitions

· Standard Life Investments won the principal Large Investment Group award at the Investment Adviser 100 Club Awards for the second consecutive year. Also for the second year running, we completed a hat-trick of wins at the awards, having won the top awards in the UK equity income category, for our Standard Life Investments UK Equity Income Unconstrained Fund, and the Property category for the Standard Life Investments Property Income Trust Limited.

· Won the Multi-Asset Manager of the Year category at the Financial News 2014 Awards for Excellence

· Standard Life Equity Income Trust won Best Investment Trust for Income at the What Investment Trust Awards

· Multi-Asset Manager of the Year and Fixed Income Manager of the Year at the Professional Pensions awards 2014

· Global Absolute Return Strategies Fund won the award for the 2013 best Multi-Strategy UCITS absolute return fund at the 2013 UCITS Alternative Index (UAI) Awards. The award was based on the Fund's three-year performance to 31 December 2013.

· Celebrated success at the Moneywise Fund Awards 2014 winning the UK All Companies sector award for the second consecutive year for the consistently strong performance of our UK Equity Unconstrained Fund

· Won the UK Equity Manager of the Year category at the Professional Pensions Investment Awards

· Harry Nimmo, Head of the smaller companies' investment team was named Fund Manager of the Decade at the Quoted Company 10th anniversary awards. The shortlist was chosen from those who have achieved the highest ten-year total returns from investing in smaller UK companies. Consistency of performance, risk-adjusted returns and the success of each Investment Trust in beating its peer group and the market were all considered.

¹ Excludes strategic partner life business.

1.4.2 UK and Europe

Financial highlights¹

	2014	2013	Movement
Operating profit before tax²	£390m	£375m	4%
Operating return on equity²	21.8%	20.2%	1.6% points
Assets under administration²	£145.9bn	£135.1bn	8%
Net flows²	£2.1bn	£1.1bn	91%
EEV operating profit after tax³	£569m	£381m	49%

¹From 1 January 2014, Standard Life Wealth is reported as part of Standard Life Investments, previously it was reported in UK and Europe. Comparatives have been restated.

² Institutional pensions managed by Standard Life Investments are now excluded from UK and Europe results. Comparatives have been restated.

³ EEV operating profit is now disclosed on an after tax basis, comparatives have been restated.

Strategic overview

Our UK and Europe business is a leading provider of long-term saving and investment propositions including self-invested and workplace pensions, individual savings accounts, investment bonds and mutual funds. We have the clear objective of being our customers' first choice for their life savings and we will achieve this by providing engaging, digital-led savings with the flexibility to adapt to customers' needs over their lifetimes. We remain focused on offering our customers, advisers, employers and employee benefit consultants the support and choice to help them advance their ambitions and help build a more prosperous world. Our multi-channel approach, including our world-class investment products in collaboration with Standard Life Investments, allows us to engage with our customers across the value chain, benefiting our customers, our business and Standard Life Group as a whole.

Market update

2014 has seen hugely significant developments in the UK savings market, with large scale changes proposed for the retirement market, new regulations for workplace pensions and millions of people gaining access to a pension through auto enrolment. We are excited about the opportunities these developments present for our UK customers and business and are focused on enhancing our distribution capabilities and customer numbers to capitalise on this.

The 2014 UK Budget announced new flexibility for customers accessing their savings and removed the requirement to purchase an annuity. Annuity sales have subsequently fallen across the industry with our own annuity new business sales falling by 57%. We anticipate however that the changes will increase demand for financial guidance and flexible decumulation propositions which allow customers to access income from their savings in a tax-efficient manner. With our industry-leading drawdown proposition and award-winning Wrap platform we have the scale and operational capability to meet the anticipated drawdown demand from April 2015. Our online informed choice and guidance will help our customers approaching retirement understand their options.

These new pension flexibilities, along with the continued rise of defined contribution arrangements, will create a generation of individuals that will see advice as an essential service. We anticipate that demand for advice will outstrip supply. To help fill this gap we are building our own UK-wide advice service and will accelerate the growth of this business through the acquisition of progressive financial advice firms which align well with our operating model. We have entered into an agreement to acquire the established advice firm Pearson Jones plc, and expect to complete the acquisition in the second quarter of 2015.

Auto enrolment has continued to impact the UK savings market in 2014, giving millions of people access to a pension for the first time. The ability to meet this demand has been a focus of the industry, proving a real challenge for some and an opportunity for us. Our investment in solutions with the capacity and scale to meet this demand has enabled us to implement 3,058 corporate schemes and gain access to over half a million new customers since auto enrolment launched in 2012. The market has seen some employers miss their staging dates in 2014, with The Pensions Regulator beginning to levy fines on these firms. In 2015 we anticipate that small and medium employers will be increasingly focused on the speed of staging and we believe we have the most efficient process in the market, with employers being able to receive a quote and apply for a Good to Go workplace pension scheme in just six minutes.

In March 2014 the Department for Work and Pensions announced a cap on charges for the default funds of workplace pension schemes, as well as a ban on active member discounts. We will be ready to support employers and advisers to implement these changes by April 2015.

Adviser platforms continue to drive growth in the UK advised savings market with platform assets forecast to grow to £600bn by 2018. Our continuous investment and close working relationship with advisers ensures our Wrap platform remains a market leader. Recent enhancements include improved access to discretionary investment managers, which has attracted AUA of £300m since launch in April 2014. We also became the first major platform to remove all fund rebates and commissions, well ahead of the 2016 regulatory deadline, increasing pricing transparency for customers and removing work for advisers. This allows the 1,340 advisers that use our Wrap platform to focus on meeting their clients' needs rather than incurring the time and expense of moving clients into modern unbundled funds.

A life insurance reform law was issued by the German Ministry of Finance in July 2014 which reduces the maximum level of guarantees and is expected to reduce the commission payable by German insurers. The new regulation supports our long term prospect in Germany as we aim to increase our proportion of unit linked business. Our Irish domestic business continues to grow its market share with strong sales of Standard Life Investments' Global Absolute Return Strategies and MyFolio funds.

1.4 Business segment performance continued

1.4.2 UK and Europe continued

Profitability

Operating profit before tax

	UK		Europe		UK and Europe
	2014	2013	2014	2013	2014	2013
	£m	£m	£m	£m	£m	£m
Fee based revenue	619	603	183	192	802	795
Spread/risk margin	176	154	7	8	183	162
Total income	795	757	190	200	985	957
Acquisition expenses	(178)	(181)	(51)	(46)	(229)	(227)
Maintenance expenses	(278)	(249)	(98)	(109)	(376)	(358)
Capital management	11	3	(1)	-	10	3
Operating profit before tax	350	330	40	45	390	375

Analysis of UK and Europe operating profit before tax
	2014	2013
	£m	£m
UK and Europe underlying performance	347	331
Operating assumption and actuarial reserving changes (Spread/risk margin)	43	44
UK and Europe operating profit before tax	390	375

UK and Europe operating profit before tax increased by £15m to £390m with underlying performance increasing by £16m to £347m.

Movements in the UK operating profit from 2013 include:

· Fee based revenue increased by 3% to £619m driven by higher AUA as a result of net inflows into our new style retail propositions while our old style retail propositions continue to benefit from ongoing increments, market movements and our retention activity. This has offset a fall in the average revenue yield on fee based business to 62bps (2013: 66bps) which reflects changes in business mix including the growing proportion of newer style propositions.

· Spread/risk margin, which mainly relates to our annuity business increased by 14% to £176m due to ongoing asset and liability management. This was offset by a 57% reduction in annuity sales as a result of the significant changes announced in the recent Budget, with new business margin falling by £38m to £20m.

· Acquisition expenses reduced by £3m to £178m and maintenance expenses increased by £29m to £278m. A provision of £17m was included in maintenance expenses relating to the refund of historical payments from the Heritage With Profits Fund. Expressed as a proportion of average AUA, operating expenses decreased to 42bps

(2013: 43bps) as we continue to benefit from the scalability of our business.

· Capital management increased to £11m (2013: £3m) including an improvement in the net cost of financing subordinated liabilities due to investment in higher yielding assets.

Europe operating profit reduced by 11% to £40m (2013: £45m). Adverse foreign exchange movements in 2014 impacted operating profit by £2m, reducing fee revenue and expenses by £9m and £7m respectively. Operating profit reduced in our German business as the 2013 result benefited from a reduction in actuarial reserves due to modelling improvements. Operating profit increased in Ireland as a result of higher AUA which boosted fee based revenue.

UK profit contribution¹

UK profit contribution¹	2014	2013
	£m	£m
Fee	370	353
Spread/risk	167	142
UK profit contribution	537	495
Indirect expenses and capital management	(187)	(165)
UK operating profit before tax	350	330

¹ Profit contribution reflects the income and expenses directly attributable to each of the UK lines of business. It differs from operating profit due to the exclusion of indirect expenses, such as overheads, and capital management.

Overall UK profit contribution increased by 8% to £537m (2013: £495m).

Fee based profit contribution increased by 5% to £370m (2013: £353m) with a continued benefit from scalability in our newer style retail propositions and a steady contribution from older style retail propositions and corporate.

Spread/risk contribution increased by 18% to £167m (2013: £142m) with the impact of decreased annuity new business sales as a result of the Budget announcements offset by ongoing asset and liability management and cost efficiencies.

EEV operating profit

UK and Europe EEV operating profit after tax increased 49% to £569m (2013: £381m) due to improved non-economic assumption changes driven by lower renewal expense assumptions, offset by lower new business contribution from annuities and of Standard Life Investments' institutional pensions. There was an EEV non-operating profit impact in the period arising from the £160m provision to reflect the future charge cap on qualifying workplace pension schemes announced by the Department for Work and Pensions.

Operating return on equity

UK and Europe operating return on equity increased to 21.8% (2013: 20.2%) reflecting a £19m increase in operating profit after tax to £347m (2013: £328m).

Assets under administration and net flows

	Net flows		AUA
	2014	2013	2014	2013
	£bn	£bn	£bn	£bn
UK retail new fee business	2.9	2.8	37.3	33.8
UK retail old fee business	(2.2)	(2.6)	33.5	33.5
UK retail fee business	0.7	0.2	70.8	67.3
Corporate pensions	2.2	2.0	32.0	29.2
UK retail and corporate fee business	2.9	2.2	102.8	96.5
Conventional with profits	(1.0)	(1.5)	2.1	2.9
Europe fee	1.1	1.1	17.2	14.9
Total fee business	3.0	1.8	122.1	114.3
UK spread/risk	(0.9)	(0.7)	15.5	14.6
Europe spread/risk	-	-	0.6	0.5
Assets not backing products	-	-	7.7	5.7
Total UK and Europe	2.1	1.1	145.9	135.1

UK and Europe AUA increased by 8% to £145.9bn. Fee based AUA, which accounts for 84% of total AUA, increased by 7% to £122.1bn due to a combination of net inflows and favourable market movements.

Net flows into our newer style UK retail propositions which includes SIPP and Wrap increased by 4% to £2.9bn

(2013: £2.8bn) with an increase of 7% in gross inflows to £5.9bn (2013: £5.5bn) offset by higher redemptions of £3.0bn (2013: £2.7bn) as more of our SIPP customers reach retirement and enter drawdown.

Our older-style UK retail business achieved a 15% reduction in net outflows due to an increase in retirement deferrals. We continue to benefit from ongoing increments, customers transferring from corporate schemes and positive market movements. We engage with our customers who are approaching retirement or have maturing policies to ensure they are equipped to make informed decisions. This is valued by our customers with many choosing to continue saving with us.

UK corporate pension AUA increased 10% to £32.0bn (2013: £29.2bn). Net inflows increased to £2.2bn (2013: £2.0bn) with growing contributions into our existing schemes and our success in attracting new flows through auto enrolment resulting in a 16% increase in regular premiums. We continue to work closely with employers with upcoming staging dates to ensure their schemes are compliant with the new requirements.

UK spread/risk AUA increased to £15.5bn (2013: £14.6bn), with positive market movements offset by an increase in net outflows to £0.9bn (2013: £0.7bn) as our new annuity sales were impacted by the changes to annuities regulations in the 2014 Budget. Many customers are choosing to defer their retirement decisions, while others have taken advantage of enhanced triviality limits. It will take some time for the long-term market trend to become clear, however we anticipate some customers will continue to value the certainty of retirement income provided by annuities which will remain a key component of our retirement proposition.

In our Europe business fee based AUA increased by 15% to £17.2bn (2013: £14.9bn) due to favourable market movements and steady net inflows of £1.1bn as a result of our strong relationships with Irish and German brokers.

Delivering on our business model

Increasing assets with continued growth in fee business assets

· Increased Wrap platform assets by 26% to £20.9bn (2013: £16.6bn) with the highest net sales in the advised platform market over the first three quarters of 2014

· Named Best SIPP Provider for the second year running at the Shares Awards 2014 and have achieved SIPP AUA of £26.2bn (2013: £23.2bn) with £11.5bn (2013: £10.2bn) of assets invested in our market-leading drawdown proposition

· Our corporate business continues to add new customers through auto enrolment and we have enrolled over 340,000

(2013: 220,000) new customers in 2014. Inflows from these customers are anticipated to increase when total auto enrolment contribution rates increase from the current minimum of 2% to 5% in October 2017, and 8% in October 2018.

· Our distribution agreement with RBS continues to attract assets to our Wrap products with AUA reaching £368m (2013: £203m)

· Grew our fee based AUA in Germany to £8.8bn (2013: £7.4bn) and launched our new 50+ ParkAllee product making us one of the first savings providers to offer a flexible commission model fitting into the post Life Insurance Reform Law market.

1.4 Business segment performance continued

1.4.2 UK and Europe continued

Maximising revenue - ready for new retirement flexibilities and well positioned across the value chain

· We will be ready to deliver the flexibility and choice our customers expect when the 2014 Budget pension reforms come into effect in April 2015. We have contacted 450,000 customers aged over 50 to reassure them that, as the biggest drawdown provider in the UK, we are well placed to help when they need us.

· Continue to lead the way in customer engagement with our retirement communications and roadshows starting some 10 years before retirement. Our wide retirement proposition range, including SIPP, drawdown and annuities provide customers with the options required to meet their individual needs and lifestyles.

· Our MyFolio fund range, managed by Standard Life Investments, continues to secure additional revenue for the Group. This popular investment solution simplifies investment choices for customers and has attracted £5.9bn of AUA (2013: £4.0bn) since it was launched in October 2010.

· Our International Portfolio Bond continues to strengthen with a 5% growth in sales to £721m (2013: £688m), demonstrating the confidence of advisers and customers in our proposition.

Lowering unit costs through automation and greater operational efficiency

Through leveraging the use of technology and focusing on our customer operations, we have been able to deliver economies of scale along with improvements in customer experience. Examples of this include:

· Our Good to Go service for auto enrolment secured over 1,100 schemes in 2014. Our ability to process schemes on the same day as application demonstrates the scalability of our business at a time when the industry is facing capacity constraints.

· Direct to customer ISA launched this year which offers customers a simple online investment journey. 70% of cases are now written online using straight through processing compared to 28% of ISA cases in 2013.

· New online customer journey which enables customers to consolidate and engage more with their savings.

· Launched our new UK customer website to provide customers with a simple, helpful and engaging experience

· Grew our customer email address database by 60% to over 1 million (2013: 610,000). Increased digital communication is enhancing our customer communications, generating process efficiencies and also benefiting the environment through reduced use of paper.

Awards and recognition

· Platform of the Year 2014 at the Aberdeen Platform of the Year Awards

· Best Large Platform Provider at the Aberdeen Platform of the Year Awards

· Best SIPP Provider at the Shares Awards 2014

· Awarded the 'Best Customer Insight and Feedback - A Different Perspective' award for the cross-industry UK Customer Experience Awards 2014

· Named as one of the 'brands to watch' and highest movers by highly regarded customer experience expert Nunwood, entering the top 100 for the first time at number 67 out of the top 260 customer experience brands in the UK

· Insurance Company of the Year at the City A.M. Awards 2014

· Auto Enrolment Innovation of the Year Award at the UK Pensions Awards for our Good to Go proposition

· 5 star Defaqto rating for our Wrap Platform in 2014.

1.4.3 Asia and Emerging Markets

Financial highlights from continuing operations¹

	2014	2013	Movement
Operating profit before tax	£19m	-	-
Operating return on equity	9.2%	0.6%	8.6% points
Assets under administration	£2.5bn	£1.9bn	32%
Net flows	£280m	£307m	(9%)
EEV operating profit after tax²	£34m	£18m	89%

¹ Excludes our Dubai business, the closure of which was announced in November 2014. Comparatives have been restated. Results of discontinued operations are included in Section 1.4.4.

² EEV operating profit is now disclosed on an after tax basis, comparatives have been restated.

Strategic overview

Our Asia and Emerging Markets business consists of our life joint ventures in India and China and our wholly owned operations in Hong Kong and Singapore. Our wholly owned operation in Dubai, the closure of which was announced in November 2014, is included in Section 1.4.4 - Discontinued operations.

Our life joint venture business in India, HDFC Life, continues to focus on meeting the needs of the customer and providing a unique customer experience. In distribution, we continue to strengthen existing relationships, whilst building on our market-leading offering in alternative channels such as online. HDFC Life paid its second dividend to shareholders in December 2014 from which we received £4m, a 40% increase in constant currency on the 2013 dividend. We expect this business to continue to perform strongly in 2015.

In October 2014, we signed a Memorandum of Understanding with the Industrial and Commercial Bank of China Limited (ICBC), agreeing to work together to identify opportunities of mutual benefit in the UK, China (including our joint venture, Heng An Standard Life) and Hong Kong. We will work with ICBC, one of the world's largest banks and a key player in the Chinese savings market, to focus on developing broader co-operation in the areas of savings and investments solutions. The Asia Advisory Board, which we established in 2013, continues to provide guidance and support for all our business across Asia and will follow the developments of this agreement.

Changes in the regulatory landscape have impacted our operations in Hong Kong and Singapore. A key area of focus in Hong Kong is to develop new propositions to meet the needs of our wide range of customers, including those in mainland China, and ensure compliance with new regulations. This requires a refinement of our operational model beyond the current regulatory and market practice and is expected to promote further transparency and create a more sustainable business.

Market update

In India, following the results of elections in May 2014 there is optimism that a stable central government will be able to pursue an economic agenda to address India's macroeconomic challenges. This, coupled with a growing working population, increasing income levels and the currently low life insurance penetration rates should continue to drive demand for insurance and savings in India. At the end of 2014, the Indian government passed the Insurance Laws (Amendment) Ordinance which, in principle, allows foreign companies to increase their holdings in life insurance joint ventures up to 49%. The full details of this are still being confirmed and we are monitoring developments closely.

In China, the economy is showing signs of stabilising over recent months, however concerns of a slowdown continue. The life assurance sector has seen stable growth in premium sales in 2014. The local regulator issued guidelines in 2014 covering investment and bancassurance which aim to enhance customer protection and company risk management. Also, details on new solvency regulations for Chinese insurance companies were released during the second half of 2014, with the implementation date currently anticipated to be 1 January 2016. We believe that Heng An Standard Life is well placed to meet the challenges posed by the ongoing regulatory changes.

In Hong Kong, the Office of the Commissioner of Insurance issued a guidance note in relation to the underwriting of investment linked business comes into effect from 1 January 2015. In response to these changes, we have reviewed our propositions and have been successful in gaining regulatory approval for two new single premium investment products, Aspiration and Fortuity. Both products will be launched in Q1 2015. We continue to reassess our propositions to ensure they continue to meet the needs of the growing affluent and wealth segments in Hong Kong and cross-border from China.

The first phase of revised regulations in Singapore began in January 2015, with a second phase due mid-2015. Both phases will impact how we do business with Independent Financial Advisors (IFAs) and the propositions we can offer. We continue to review our response to these developments.

1.4 Business segment performance continued

1.4.3 Asia and Emerging Markets continued

Profitability

Operating profit before tax from continuing operations¹

Operating profit before tax from continuing operations¹	2014	2013
	£m	£m
Fee based revenue	53	54
Acquisition expenses	(3)	(16)
Maintenance expenses	(49)	(43)
Total wholly owned	1	(5)
India and China JV businesses	18	5
Asia and Emerging Markets operating profit before tax	19	-

¹Excludes our Dubai business, the closure of which was announced in November 2014. Comparatives have been restated. Results of discontinued operations are included in Section 1.4.4.

Operating profit before tax increased to £19m (2013: £nil):

· Fee based revenue increased by 5% in constant currency to £53m as a result of higher AUA in Hong Kong

· Total expenses decreased by 3% in constant currency to £52m, primarily due to cost efficiencies and a reduction in commission payments in Hong Kong amid the changing regulatory environment

· The joint venture businesses' operating profit increased to £18m (2013: £5m) with both businesses benefiting from growth in premium income and investment performance gains. Our China JV recorded a profit for the first time.

EEV operating profit after tax

Total EEV operating profit after tax increased by £16m to £34m. This comprises £35m (2013: £21m) from our joint venture businesses, due to positive impact of modelling and assumption changes, and a loss of £1m (2013: loss £3m) from our wholly owned operations.

Operating return on equity

Operating return on equity for our total Asia and Emerging Markets operations was 9.2% (2013: 0.6%) due to improved operating profit before tax.

Assets under administration and net flows

Total AUA increased by 32% to £2.5bn, comprising a 31% increase for our joint venture businesses to £2.1bn (2013: £1.6bn) and £0.4bn (2013: £0.3bn) for our wholly owned operations. This was driven by continued good net inflows of £193m (2013: £231m) in India and China and net inflows of £87m (2013: £76m) in Hong Kong and Singapore.

Our business model

Increasing assets with enhanced propositions

· HDFC Life had record gross inflows in 2014, which combined with positive market movements has resulted in a 42% increase in AUA

· In Hong Kong, the new Aspiration and Fortuity single premium products have been developed which we expect will help continue the growth in AUA.

Maximising revenue with continued diversification of revenue

· HDFC Life is ranked 2^nd by overall new business sales in the private market with a market share of 16% at December 2014

· In China, the average productivity rate of the Heng An Standard Lifesalesforce in the individual business channel increased by approximately 30% compared to prior year.

Lowering unit costs with focus on cost efficiencies

· HDFC Life's operating expense ratios continue to decline and compare very favourably among its peer group.

Awards and recognitions

· HDFC Life was awarded Best Product Innovation and Best Technology Innovation in the Life Insurance sector at the Indian Insurance Awards 2014

· Our wholly owned business in Hong Kong was awarded Best for adviser support/customer service and Best online proposition in the Asia category of the International Adviser Life Awards 2014.

1.4.4 Discontinued operations

Discontinued operations for segmental reporting comprise our Canadian business which was sold on 30 January 2015 and our Dubai business, the closure of which was announced in November 2014.

Canada

On 30 January 2015, we successfully concluded the sale of our Canadian business, comprising our Canadian long-term savings and retirement, individual and group insurance business (Canada) and Canadian investment management business (SLI Canada) to Manulife, for a fixed consideration of C$4.0bn (£2.2bn including related hedging derivative contracts). We expect the gain on the sale to be approximately £1.1bn and this will be reflected in our IFRS results in 2015.

We have been present in Canada for over 180 years and our Canadian long-term savings business is one of the oldest and most successful in the country. We have successfully maintained our market-leading position in retail segregated funds net flows. In recent years, management has been pursuing a strategy to re-orientate the Canadian business towards a less capital intensive, fee-based revenue business, which has been consistent with our overall Group strategy. Whilst we recognise good progress had been made against this strategy, we believe that the corporate pensions and retail savings businesses in Canada are attractive but highly competitive. We believe that our sale to Manulife is more likely to maximise value for our shareholders than retaining the business and pursuing an independent strategy in Canada. The sale is consistent with our Group strategy and continued focus on growing fee based business and it reduces our exposure to spread/risk business. The expanded relationship with Manulife deepens Standard Life Investments' ongoing access to Canadian, and wider global, distribution.

Profitability

Operating profit before tax

Canada - operating profit before tax	2014	2013
	£m	£m
Fee based revenue	215	203
Spread/risk margin	191	351
Total income	406	554
Acquisition expenses	(66)	(76)
Maintenance expenses	(219)	(243)
Capital management	15	16
Operating profit before tax	136	251

Following the announced sale of the Canadian business, planned regular management actions were no longer pursued and a significant reduction in operating profit was expected for 2014¹. Operating profit before tax decreased by 46% (39% in constant currency) to £136m (2013: £251m) and consisted of Canada £132m (2013: £251m) and SLI Canada of £4m (2013: £nil).

The key movements in operating profit were:

· Fee based revenue increased by 6% (19% in constant currency) to £215m mainly from higher average AUA

· Spread/risk margin decreased by 46% (39% in constant currency) to £191m as specific management actions were not pursued following the sale announcement (2013: £42m) and regular management actions, including investment yield enhancements, reduced to £25m (2013: £49m). In addition, one-off actuarial reserving changes generated a loss of £1m (2013: gain £24m) and overall adverse experience also impacted spread/risk margin.

· Total expenses decreased 11%, however were stable in constant currency due to higher asset based commissions offset by efficiency improvement initiatives

· Capital management increased by 4% in constant currency due to higher returns on surplus assets.

Non-operating gain/(loss)

The non-operating gain from our Canadian business of £52m (2013: loss £87m) included favourable short term fluctuations on investment return of £73m (2013: loss £70m) offset by £21m restructuring and other corporate expenses (2013: £2m), primarily relating to the sale. There was also a £15m loss in 2013 in relation to changes in Canada insurance contract liabilities due to resolution of prior years' tax matters which did not recur in 2014.

¹ In the Q3 2014 Interim management statement, we indicated that the previous operating profit forecast for Canada of £155m for the year ended 31 December 2014 (as disclosed in the Class 1 Circular published in relation to the disposal of Standard Life's Canadian business) would be impacted by management actions no longer pursued. The impact of this is detailed above.

Assets under administration and net flows

Canada - AUA	2014 £bn	2013 £bn
Canada fee	19.2	17.3
Canada spread/risk	8.7	8.4
SLI Canada third party - fee	13.5	12.6
Canada other	1.7	1.7
Consolidation/Elimination - fee	(11.3)	(10.5)
Assets under administration	31.8	29.5

Total AUA for the Canadian business increased by 11% in constant currency to £31.8bn, largely as a result of strong net flows into retail segregated funds and favourable market movements.

EEV operating profit after tax

EEV operating profit after tax for the Canadian business decreased to £225m (2013: £273m) primarily due to the benefit of non-recurring actuarial modelling gains in the prior year.

Dubai

Recent developments in the UAE regulatory landscape, and resulting business environment, have impacted our business in Dubai and we no longer feel that we can offer our customers or shareholders long-term sustainable value in this region. As a result, we announced the closure of this business in November 2014. The Dubai business made an operating loss before tax of £5m (2013: loss £6m) and non-operating loss before tax of £17m (2013: £nil) in relation to the closure of this business. The closure does not impact our wider plans in Asia and Emerging Markets.

1.5 Principal risks and uncertainties

Our strategic objectives and our performance against them are subject to a number of financial and non-financial risks, including conduct risk. The table below sets out the principal risks and uncertainties that affect our business model. Further detail on our risks and our management of these risks is included in Note 42 - Risk management. The framework that we use to manage our risks is set out in the Corporate governance section.

Find out more about some of the terms used in this report in the glossary.

Principal risks and uncertainties

Adverse fluctuations in financial markets impact our fee and spread based business and our optimisation of the balance sheet

Counterparty failure impacts our fee and spread based business and our optimisation of the balance sheet

Impact

Market risk can have the following impacts:

Fee based business - A core part of our strategy is to increase AUA. Adverse fluctuations in financial markets which cause AUA to fall will potentially result in lower fee based revenue.

Spread business - Fluctuations in financial markets could cause the value of financial assets and financial liabilities in the spread business, or the value of cash flows relating to these, to fluctuate by different amounts potentially leading to losses. For this type of business we aim to 'cash flow match' the assets and liabilities to reduce this risk.

Optimisation of the balance sheet -Fluctuations in financial markets could cause a fall in the value of assets held to back shareholders' equity and subordinated debt that has been issued.

Some types of asset, for example debt securities, expose us to the credit risk that the counterparty to those assets defaults.

Fee based business - Losses arising from counterparty failure will cause AUA to fall, potentially resulting in lower fee based revenue.

Spread business - Cash and cash equivalents, debt securities and commercial mortgages are held to back liabilities in respect of spread business. The business also uses derivative and reinsurance transactions. This exposes the business to the risk of loss from these counterparties.

Optimisation of the balance sheet -Cash is held for liquidity purposes, debt securities are held to back subordinated debt and derivatives are used for hedging purposes leading to exposure to losses from counterparty failure.

Risk mitigation and management

· We set risk appetites to control our exposure to different sources of market risk

· For all investment portfolios benchmarks are set appropriate to the liabilities. This includes consideration of appropriate diversification and quality of assets held.

· Under our stress and scenario testing programme we consider a wide range of financial scenarios

· We use a combination of cash flow and duration matching techniques when determining the investment portfolios for spread business

· We use cash flow matching to manage the mismatch in cash flows between our subordinated debt liabilities and the assets backing them

· Hedging is used to reduce our sensitivity to fluctuations in financial markets. This includes managing the level of risk within the UK and German with profits funds, in line with the Principles and Practices of Financial Management and the need to treat policyholders fairly.

· A strong credit risk management framework is in place with risk appetites set and pro-active management of positions

· Internal credit assessments are used to determine the credit-worthiness of money market and derivative counterparties

· The business uses limits by issuer, sector and credit rating in order to manage the risk of loss from the failure of debt security issuers and commercial mortgage borrowers

· Internal credit assessments are used to assess reinsurance counterparties that give rise to material credit exposures. Counterparty exposures are collateralised where appropriate.

· Where considered appropriate, the Group will put in place additional restrictions, for example on exposures arising from specific countries that give rise to credit concerns. Such restrictions were implemented in advance of and during the recent global financial crisis.

Principal risks and uncertainties

Customer demand for our fee based propositions declines or fails to materialise

Adverse experience regarding our longevity assumptions impacts our spread based business

Impact

Increasing AUA is a key part of our business model in order to maximise revenue and drive IFRS profits.

To achieve this we need to attract new retail, workplace and institutional customers to Standard Life and encourage existing customers to stay and place more assets with us. We are therefore exposed to demand failing to materialise or more customers leaving than expected (persistency risk).

There are a number of risks that could result in a fall in demand including reputational and conduct risks, products that don't meet customer needs, poor investment performance or the loss of key personnel.

The main impact of lower customer demand would be that AUA in our fee based business falls or fails to increase by as much as planned, resulting in lower fee based revenue than expected.

Annuities are a major component of our spread business. As a result of the changes in the 2014 UK Budget we currently expect to sell fewer annuities in future but they remain a core part of our existing liabilities.

Risk from annuities arises due to the inherent uncertainties regarding the occurrence, amount and timing of cash flows to customers. Longevity risk, a type of demographic risk is the risk that mortality experience differs from that previously expected, there is more volatility in mortality experience than previously expected or the rate of mortality improvements is greater than expected. The impact of this risk could be positive or negative.

Adverse experience in these areas could result in our spread business having larger cash outflows or cash outflows that were not anticipated.

Risk mitigation and management

· We manage the risk that customer demand for our propositions declines or fails to materialise by being a customer focused business providing propositions that build trust and relationships with customers, using fair and transparent pricing and innovative communication

· Standard Life Investments focuses on delivering excellent investment performance across a broad investment spectrum operating through a variety of distribution channels and geographic locations. This helps ensure strong customer demand for our propositions.

· The acquisition of Ignis enhances this by deepening the investment capabilities of Standard Life Investments

· We carefully monitor customer exits and complaints to understand and address potential drivers for poor persistency.

· A risk appetite is set for exposure to longevity risk

· We have reinsurance arrangements in place which reduce the risk and uncertainty in this area by transferring longevity risk to third party reinsurers

· The business actively monitors opportunities to implement further reinsurance or capital market transactions to reduce the risk arising in the back book

· We monitor emerging research and guidance on longevity, for example from the UK-based Office for National Statistics and the industry-wide Continuous Mortality Investigation. This activity allows the business to anticipate developing trends and allows consideration to be given to further back book management or pricing changes where new business is being written.

1.5 Principal risks and uncertainties continued

Principal risks and uncertainties

Regulatory and legislative changes adversely impact our risk profile and delivery of our strategy

Failure of a material outsourcing partner increases our cost base and adversely impacts delivery of our strategy

Impact

The Group's businesses are subject to conduct and prudential regulation and legislation applicable to the countries in which they operate.

Changes in regulations and legislation may result in the introduction of additional requirements that add to the complexity of our business, increase the cost of meeting additional regulatory demands and require additional capital to be held.

Regulatory and legislative changes also have the capacity to impact on our business model through impacting customer demand and preferences for specific propositions, imposing requirements related to our ability to offer certain propositions, the attractiveness of our propositions and the fees we charge our customers for our propositions.

These impacts can be both positive and negative.

We are also exposed to the risk that our processes and practices are not compliant with existing regulations and legislation.

The Group's business model involves reliance on a number of outsourcing partners for the provision of key services including the outsourcing by Standard Life Investments of certain back office functions related to investment management.

The Group is therefore exposed to the operational risk that the failure of one or more outsourcing partner results in possible customer or processing disruptions, increased costs from having to perform the activity in-house or in seeking an alternative outsourcing partner to perform the activity.

The Group may also suffer delays in establishing the necessary processes to perform the activity in-house or in finding a replacement partner which leads to an inability to conduct business for a period of time.

Risk mitigation and management

· As part of our emerging risk process, we actively scan the external environment to identify potential sources of regulatory and legislative change

· We work to mitigate the impact of legislative and regulatory changes and to ensure that change is positive for both the industry and our customers by engaging early and constructively in consultations and field testing

· Where we identify potential sources of change we assess the situation and seek to manage any risks and maximise opportunities that arise

· This meant that when the charge cap for workplace schemes in the UK was introduced in March 2014, we were well placed to help employers respond as we have been developing our pricing for workplace schemes over a number of years

· An example of legislative change expected to have a positive impact for us are the changes announced in the 2014 UK Budget. Whilst these changes have adversely impacted annuity sales, this is mitigated by our strategic focus on long-term savings and investments and our existing strength in drawdown propositions which are designed to meet the needs of customers in decumulation.

· The Group outsourcing policy defines the standards that the business must comply with to mitigate the risk of entering into inappropriate outsourced contracts and to implement sufficient controls to ensure risk is managed throughout the lifecycle of the arrangement. As part of the Group policy framework, the business is required to confirm and evidence compliance with the standards contained in this policy on a regular basis.

· The policy requires that appropriate risk committee approval is obtained prior to entering into new outsourcing arrangements

· The policy requires that control procedures are in place to identify and monitor any material risk that the Group is exposed to through the outsource service provider, to take into account failure in the provision of the outsourced services and to establish and maintain an exit plan to facilitate transition of the outsourced services back into the business unit or to another provider.

Principal risks and uncertainties

IT security issues, including the results of cyber-attacks, adversely impacts our operational capability and customer confidence

Failure to execute change adversely impacts our risk profile and delivery of our strategy

Political uncertainty, including the extent of further devolution within the UK and the potential for an in/out referendum on the UK's position in the EU

Impact

The systems and processes on which the Group is dependent to serve customers are designed to ensure that the operational risks associated with the Group's activities are identified and addressed.

IT security issues, including the results of cyber-attacks, could still arise and result in the failure of systems and processes.

This may lead to the Group incurring increased costs in implementing responses to the IT security issues. In extreme circumstances it is possible that our ability to conduct business may be impacted for a period of time and customer confidence may be damaged.

The Group runs a significant change programme that seeks to ensure we create shareholder value through being a leading, customer centric business focused on long-term savings and investments.

It includes change initiatives that are driven by external factors such as customer demand, market conditions, competitor activity and regulatory and legislative changes.

Failure to successfully execute change may adversely impact our risk profile, for example through increased costs where changes have been ineffective or inefficient, and may mean we are unable to deliver our strategy.

The result of the Scottish independence referendum on 18 September 2014 in which the Scottish electorate voted to remain within the UK has reduced the level of political risk in relation to our business.

Other sources of political risk remain, for example the recommendations of the Smith Commission on further devolution of powers to the Scottish Parliament and the possibility of an in/out referendum on the UK's position within the EU following the 2015 UK general election.

Risk mitigation and management

· The threat landscape continues to evolve with regard to the tools, techniques, procedures and focus of threat 'actors' (including organised crime, hactivists and hackers). The threat across industries was well documented in the media during 2014-15.

· We monitor changes to this threat, working with specialist third parties and information sharing partnerships to help us better understand how it affects Standard Life given an increased awareness of the group's brand, pension reforms and the changing nature of our digital offering.

· We have developed our defence in depth approach to cyber security throughout 2014 and into 2015. We have invested in technology, enhancing key business processes and have improved our staff education programme to reflect the evolving nature of the risk.

· Our change process is mature with a culture of continual improvement. Given the volume of change experienced in recent years, we have greater experience of making changes to the portfolio based on business priority and regulatory focus.

· We carry out change risk management as part of our operational risk management framework and change process. This provides a robust and established framework under which the business is required to identify, assess, control and monitor risks associated with change.

· Major change initiatives within the business receive full project support from an aligned change risk consultant, working alongside regulatory and technical specialists to successfully deliver change. For smaller initiatives, the change risk team champions the importance of effective risk management within business areas and has introduced guidelines to be used when implementing non-portfolio change.

In 2014 significant changes to the pensions market were announced which provide additional flexibility to customers. Change risk input has been provided from initial launch of the proposition to the Group's board and key governance forums and throughout the project lifecycle to date. Operational and conduct risks are being considered to ensure that changes to the risk profile are fully understood and mitigated prior to launch.

· We continue to closely monitor and constructively engage with the process of constitutional change across the UK in the best interests of our customers and other stakeholders

· As part of our stress and scenario testing programme we consider a wide range of scenarios including potential legislative changes.

We maintain up-to-date contingency plans and these are regularly reviewed to ensure that they reflect emerging themes and changes to the business and political environment.

1.6 Our sustainable business overview

Our Group's purpose is to help build a more prosperous world. A big part of this is providing people from different backgrounds with ways to achieve their long-term ambitions - whether it's through our products and services, the work we do in our communities, or the way we support our employees. It's also about setting an example for our industry, such as through investing and managing money responsibly. Our commitment to being a sustainable business plays its part in each of these areas, and is a key driver in shaping our Group's strategy. Our progress across our sustainability strategy's five areas of focus can help us to create a positive outlook for our different stakeholder groups - and to continue growing responsibly as a long-term investment savings business.

Reviewing our sustainability strategy

We take the time to regularly listen to our stakeholders to ensure that our sustainability approach continues to focus on the right things. In 2014, we carried out a review of our main sustainability priorities, talking to many different internal and external stakeholder groups about what's important to them. These stakeholders included our customers, our people, shareholders, industry analysts, regulators and the media.

We grouped the feedback into themes and ranked these themes in the order of what our stakeholders found most important. We then assessed this against our business objectives to help us understand the most important sustainability issues for us. Through this review, we found that our five areas of focus remain material to our business, and continue to give us a clear picture of what's important to our stakeholders:

· Our customers and clients

· Operating responsibly

· Our community

· Our people

· Our environment.

The review also helped us gain a deeper understanding of the priorities within these areas and this has shaped our work in 2014. More information about this review is included in our full sustainability report.

All of our sustainability work in 2014 was overseen by our Board's Corporate Responsibility Committee. To strengthen the focus we have on sustainability at Board level, we now intend to make it a key part of our plc Board agenda, with time dedicated to discussions on the topic and regular reporting. Because of this stronger sustainability focus for the plc Board, we plan to no longer have this separate committee to deal with corporate responsibility matters.

1. Our customers and clients

Being a sustainable business means offering products and services built around our customers' and clients' needs. We aim to do this by putting customers at the centre of our decision making, with pricing that is fair and transparent, while building meaningful relationships for the long term.

Getting closer to our customers and clients

Across our Group we look to capture rich insight that can inform how we develop products and services, so we can help customers and clients realise their financial ambitions. This includes things such as who our customers feel they're responsible for, what they worry about, and what the important things are in their lives. The insight helps us understand more about the behaviour of our customers in the different countries we operate in, and can develop our services to be more relevant and engaging.

Insight and innovation to support clients worldwide

In 2014, Standard Life Investments' annual client survey provided insight from around 750 clients globally on how they feel about the services we provide. We also use studies by academics and research institutions we have established relationships with. The insight we gather helps us make sure we have the right products and capabilities to meet our clients' diverse needs - at the same time as supporting our global growth ambitions. By the end of 2014, this kind of insight had played a big part in Standard Life Investments launching 14 new products and opening new international offices - helping to serve clients in 41 countries across five continents. Standard Life Investments now operates out of 17 countries worldwide, and we plan to open more offices in 2015.

Creating a meaningful customer experience

The rich insight we gather helps us to make improvements to our service - particularly what we provide online. We saw a number of examples of improvements during 2014:

· We completely redeveloped our UK retail website - www.standardlife.co.uk - with each stage of development based on customer feedback

· Customers can access some of our services via apps on mobile devices - and we launched new apps to help customers in Hong Kong manage their money on the go

· UK customers can apply for an ISA in less than five minutes, buy a pension or consolidate existing pension plans.

Supporting business to help people save for their future

To help make it easier for companies to set up pension schemes for their employees, we've been working to make sure we can keep up with demand more quickly and efficiently. Our Good to Go proposition, for example, aims to help take the burden from smaller companies by letting them set up fully compliant workplace pension schemes online in just six minutes. Our work on Good to Go led to us winning Auto Enrolment Innovation of the Year at the 2014 UK Pensions Awards, for the second year in a row. Read more about the other awards we have won in Section 1.4 - Business segment performance.

Innovation and transparency in pricing

From the feedback our stakeholders give us, an important area for our Group to focus on is making sure that we are transparent about our approach to pricing. We believe that this is an area where we can still do better, and we continue to work towards innovating and improving. We also look to build relationships with regulators in the places where we operate, working together to build a more prosperous world for our customers.

In April 2014, our Wrap platform became the UK's first fully unbundled major adviser platform for both existing and new business. This means that all new platform business is done using clean (or unbundled) funds - where no commission or cash rebates are paid to fund groups or advisers, and charges are clearly disclosed. It's also helped drive down the cost of investing. By doing this now, we are two years early in meeting the new platform regulations that the Financial Conduct Authority (FCA) has put in place. Our aim in working to this early deadline has been to help IFAs so they can get on with running successful, sustainable and profitable advice businesses.

Building relationships with our customers

We launched a new programme in 2014 to pull together the data we hold on our UK and Ireland customers into a single, complete picture. This has helped us improve our data quality, governance and analytic capability to ensure we can talk to customers at the right time, and about the right things. Consequently, our communication capability has shifted significantly, with access to our customers by email increasing from 4% in 2013 to 30% in 2014. This resulted in an increase in the number of communications we have with our customers on topics that matter to them.

We believe we can strengthen our customer relationships by supporting positive change in our industry. One way we have done this recently is by sharing our knowledge on pension legislation. In September 2014, the UK Chancellor of the Exchequer announced the immediate scrapping of a 55% tax on inherited pensions - something that we had been actively lobbying for. We sent letters and emails with details of the changes to customers who were still within the period of time that they could choose to cancel the product they'd applied for with us. We wanted to help them make sure they had all the information they needed to make a decision that was right for them.

Our relationships with our customers extend to more than simply helping with financial matters. In Ireland we launched The New You, a guide to help customers approaching retirement plan for the next phase of their lives. It includes hints and tips on staying healthy, happy and financing life after retirement.

2. Operating responsibly

Risks and opportunities

To run our business responsibly we need to stay alert to opportunities to grow our business sustainably, and to improve the outlook for our customers and shareholders. When Standard Life Investments acquired Ignis Asset Management in 2014, it provided an opportunity to improve the value we offer our customers and shareholders, and our capabilities for managing their assets. The sale of our Canadian business to Manulife has also further strengthened the value we provide for shareholders.

Recent developments in the regulatory landscape in the United Arab Emirates, and the resulting business environment, have impacted our business in Dubai. As a result, we feel that we can no longer offer our customers or shareholders long-term sustainable value in this region. We therefore announced the closure of this business in November 2014.

You can read more about each of these in Section 1.4 - Business segment performance.

Running a business responsibly also means staying alert to risks that could lie ahead in our markets, and what this could mean for everyone involved. An example of this was our monitoring of the constitutional debate around the Scottish independence referendum. Our main consideration was the interests of our customers, clients and shareholders, and whether these and the sustainability of our business would be put at risk by constitutional change. We made it clear that if we felt this would be the case, we would do whatever we considered necessary to protect their interests and our competitive position.

To help grow our business in a sustainable way, it's important that we continually consider our overall competitiveness, which includes the prices we offer our customers and our operating costs. One area of focus in 2014 was making sure that the rewards and benefits we offer our people remain competitive and consistent. We proposed changes to the way we will provide employee pensions, one of our biggest costs - so that we can offer an attractive but more sustainable way of helping our people achieve their retirement ambitions. We understand that this could mean big changes for many of our people. As a result, we've worked to provide our people with all the information they need to understand what the changes would mean for them, and to answer the questions they have.

1.6 Our sustainable business overview continued

Our influence and leadership

Wherever we operate around the world, we believe we have an important role to play in using our influence to encourage positive change in society. For our customers, it's about giving them the means to fulfil their ambitions through a positive financial future. We've seen some great examples of how we can give them the support they need in an engaging way, such as online:

· Our portal for UK customers, offers expert perspectives and articles on saving for the future - and we've used its MoneyPlus blog, for example, to educate customers about the new rules on taking flexible pension withdrawals instead of annuities

· Our Head of Customer Affairs became a guest author for external publications in the UK, offering tips for new parents on family finance

· Through blogs and educational events we supported Good Money Week, a national campaign to raise awareness of sustainable, responsible and ethical finance.

With our own people, we've used our expertise to make sure that they have the knowledge and confidence to take control of their financial future. We offer products and services at preferential prices for employees and their families, including pensions, savings, and investments and protection products. We've also offered information sessions to educate our people on other important elements of planning for their future.

To help shape public policy in a way that benefits our customers and contributes to wider society's progress, we've kept up a programme of public affairs and policy engagement. We initiate meetings and events with policy makers and wider opinion formers on long-term savings and investments issues, and we have a presence at the major UK party conferences to make our views on this known.

We believe we have a responsibility to help the communities around us too. We've continued to play a leading role in our industry around our approach to employability, particularly in creating opportunities for young people. There's more on this in the Our community section below.

We also believe this responsibility extends to our suppliers and the companies we invest in, and encouraging good business practice among them. We feel it's important that we use a diverse range of suppliers across our Group, and that we share our knowledge to help them be more sustainable in how they do business. We ran four events in 2014 focused on making our business more accessible for small-to-medium enterprises and sharing sustainability best practice, and the feedback we've received has been very positive.

We keep up active engagement with the companies in which we are, or may become, a shareholder in. Through the responsible investment team at Standard Life Investments, we carry out research and analysis on how investee companies address their environmental, social and governance issues, which lets us identify any risks or opportunities we want to discuss with them. We follow this process with investee companies across the world, and we use guidelines such as the United Nations (UN) Global Compact to inform how we evaluate the approaches that they take. This includes reviewing and encouraging best practice in areas such as the environment, employee relations, human rights and business ethics. In 2014, in collaboration with almost 350 investors, we lent our support to a statement calling on governments worldwide to provide more economically meaningful charges for carbon emissions. The statement was released ahead of the UN Climate Summit, convened by the UN Secretary-General.

3. Our community

Our focus on employability

Employability remains the main focus for how we contribute to the communities in which we operate across the world - and a strong presence in each of our sustainability themes. For us it's about helping to improve the opportunities that people, particularly young people, are afforded in society. It's our responsibility as a large employer to maintain a diverse, sustainable workforce and help the people in the communities around us make real progress.

We continued and expanded our work to offer young people opportunities to begin their working or academic lives. Across Standard Life Investments, we placed eight young people in a programme that offers a 12-month paid internship. We've also maintained our support of Edinburgh City Council's Edinburgh Guarantee programme, offering 39 young people paid work experience for six months across our Edinburgh offices during 2014. With support from The Prince's Trust, we've been piloting a similar programme across the UK, offering a further two placements in our London offices and one in our Glasgow office. We placed three young people through our 12 month paid modern apprenticeship scheme, giving them a broad insight into our IT operations. We also supported Leonard Cheshire Disability's Change 100 scheme, giving a paid internship to a graduate with a disability. Each of these initiatives has improved the number of employees we have in the UK who are under the age of 25 - from 0.5% of our employees in 2010 to 5.4% in 2014 - helping us to also widen the diversity and perspectives we have among our people.

We've also been supporting charitable initiatives that link schools and colleges with employers to help prepare young people for working life. Our support has involved offering a number of school pupils mentoring opportunities with some of our senior people.

Our employability focus includes giving people a start in their careers outside of our company as well. Our involvement with The Prince's Trust has extended to the Standard Life Charitable Trust supporting a programme in London, helping young people into jobs with small-to-medium sized businesses. It allowed 27 young people to take part in placements across 27 businesses during 2014. They are all given 12-month contracts and the Standard Life Charitable Trust funds the first six months of each placement.

Supporting the Living Wage

Since 2012 it's been a principle of ours to pay at least a Living Wage to all of our people, including the young people on placements with us. In 2014 we furthered this commitment by formally becoming accredited as a UK Living Wage employer. We hope that this commitment will give more people, particularly young people, the ability to save and have a future they can look forward to. It reflects our belief that, by having employment that pays enough and allows people to save for the future, we can make a big contribution to building a more prosperous society.

We also supported Living Wage Week, a UK-wide initiative to raise awareness of the topic. For us this involved hosting a breakfast for business leaders, politicians and charities to raise awareness and promote thought leadership in this area. Our work to support the Living Wage resulted in us being shortlisted for the Living Wage Champion award, which recognises the contributions of accredited employers to communities and industries by implementing and celebrating the Living Wage.

Charities and fundraising

Several charities are benefiting from our employability work, and our people take part in a vote to tell us which charities we should support. For the charity partners we chose for 2014-2015, we kept our focus on helping people achieve their potential and on improving prospects in our communities. In 2014, our people raised £156,080 for our charity partners (continuing operations only).

We offer our people lots of encouragement to get involved in supporting good causes. In 2014 we launched our new Raise and Match initiative across our Group, which offers our people additional support in raising money for causes that are important to them. It means that when an employee raises money for charity, we match their fundraising up to the value of £250 a year.

4. Our people

Career and talent development

It's our responsibility to listen and respond to our people, their aspirations and development needs, and make clear how their role fits with the wider contribution we make to society's progress. It's also important that all of our people have goals that continually motivate and challenge them to improve. This year we introduced our career partnership, which is a clearly defined agreement between the company and our people: we support our people in achieving their development goals and aspirations and we ask them to take responsibility for their career.

We continue to invest in talent programmes as part of our Group Development Framework, and we ensure that our senior leadership group have meaningful and stretching development goals. This year we have had a particular focus on external board appointment or directorships as a great way to gain experience and help talented senior leaders become 'board ready' for their career. We've also expanded our programme of individual coaching and mentoring for women in our leadership and talent pipeline.

Supporting graduate development continues to play a key part in our future growth. Through our group-wide graduate programme for 2014, we hired candidates in the UK, Hong Kong and Canada. We took on our largest number of summer interns too, and we have continued to see a strong trend for interns progressing onto the full graduate programme. Our interns programme made the prestigious Top 100 list of best intern employers by Rate My Placement, a leading UK undergraduate work experience website.

We believe great performance should be rewarded and we aim to make the process to do that clear to everyone. We want all our people to plan and save for the future. Our approach continues to support our reward principles by linking pay to performance and ensuring our remuneration remains competitive in the markets in which we operate.

Engaging our people

In 2014, 87% of our employees completed our employee engagement survey, InterAction. We've seen a definite and positive shift in the results and the positive themes that have been emerging - such as growing trust and confidence, and increasingly positive views about our products. Our areas of development include continuing to work on how to get things done, managing employee underperformance and career development. One of the immediate actions was our decision to focus on career development (see section above).

To promote a healthy work environment, we signed up for the Global Corporate Challenge healthy living initiative. For the third year running, we achieved a top ten finish out of the 1,200 organisations that took part - including the top position in our sector. This year we reviewed our policies to ensure we offer our people the best possible support when it comes to looking after their families. We extended the help we give to employees who are carers, in recognition of the particular challenges they and their families can face. This includes flexible working, unpaid leave arrangements and a new option of taking carers' leave.

Diversity and inclusion in the workplace

We have always promoted a culture that embraces diversity, fairness and equality. Our approach remains consistent with both United Nations and International Labour Organisation standards.

By fostering a culture like this - where our people can be themselves - it helps us deliver a customer experience that can be more meaningful and long lasting. Through our InterAction survey, we measured for the first time what our employees think about diversity and inclusion in our business. 80% of employees responded favourably - higher than both the financial services sector and high-performing company norm.

Throughout the year, we continued our focus on actively improving diversity in the workplace. We took part in a number of discussion forums and events, including co-founding a leadership diversity network of senior HR and diversity professionals. We've agreed to work only with executive search partners who follow similar values as us in the approach they take to attracting talented people. At our company Inspiration Awards, we presented two additional awards for inspiring initiatives that support diversity and inclusion in our business. One award was for a programme focused on helping young people into work and the other was for the creation of a Lesbian, Gay, Bisexual and Transgender Network at Standard Life.

We also launched a facility where our people could, voluntarily, give additional personal details about marital status, sexual orientation, ethnicity, religion or belief and disability on their secure online personal record. This initiative is still in its early days and our aim is to use the data - which we will keep anonymous - to identify improvements to processes, policies and help shape a more inclusive environment where our people can progress.

Our gender balance

Talent pipeline - gender balance	Males	Females
% joining our graduate programme in 2014	55%	45%
% joining our Emerging Leaders Development Support (ELDS) programme in 2014	42%	58%
% joining our Accelerated Development Support (ADS) programme at Senior Leader level in 2014	58%	42%
% of all people on ELDS and ADS programmes as at 31 December 2014	67%	33%

From the 8,697 people our Group employs (as at 31 December 2014), 50% (4,389) are female and 50% (4,308) are male - and our talent pipeline continues to reflect a balanced male/female mix as well.

While gender diversity is improving within our talent programmes, we still have some work to do to improve female representation at senior levels. Helping more females progress from our talent programmes to senior roles remains a strong focus for us.

Among the total of 107 senior managers in our Group (this includes the directors of our consolidated subsidiaries, members of our Executive job family and members of our Senior Leadership Group) as at 31 December 2014, 87 are male (81%) and 20 are female (19%) (2013: males 82%, females 18%).

Our Board also benefits from diversity in its widest sense by ensuring an overall balance of skills, independence, knowledge and experience. The Board continues to follow the principles of our Diversity statement, which you can read in the Corporate governance section. As at 31 December 2014 the Board consisted of 13 Directors, made up of 10 males (77%) and 3 females (23%) (2013: males 82%, females 18%).

5. Our environment

Doing the best we can for the world around us also means managing our impact on the environment, which falls into four main areas. Two of these make up our biggest impact: the greenhouse gas emissions from the energy we consume in our buildings, and from the business travel we do (air and rail). The waste we produce and the paper we use are the two other main areas we focus on. This is because they are our most visible areas of impact, making them more meaningful to our people and our customers. We've continued an educational programme to help bring all of these aspects to life for our people, and to show them ways in which they can help us achieve our ambitious targets.

You can read details of our greenhouse gas emissions for our own business operations in the table below. This does not include our greenhouse gas emissions for our global real estate investment portfolio, however these emissions are disclosed in the Standard Life Investments' annual Sustainable Real Estate Investments report.

Environment			Including discontinued operations				Continuing operations only
		Unit	2014	2013	2014 target	Actual change	2014	2013	2014 target	Actual change
Greenhouse gas emissions Carbon dioxide equivalent (CO2e)	Scope 1¹	Tonnes CO2e	2,989	3,157	(2%)	(5%)	1,948	2,134	(2%)	(9%)
	Scope 2²	Tonnes CO2e	15,634	14,462	(2%)	8%	13,462	12,034	(2%)	12%
	Scope 3³	Tonnes CO2e	11,269	15,249	(6%)	(26%)	9,827	12,070	(6%)	(19%)
Total greenhouse gas emissions		Tonnes CO2e	29,892	32,868	(4%)	(9%)	25,237	26,238	(4%)	(4%)
FTE / Tonnes CO2e ratio⁴		Ratio	3.28	3.68	(2%)	(11%)	3.50	3.75	(2%)	(7%)
Paper used		Tonnes	807	914	(5%)	(12%)	489	598	(5%)	(18%)
Waste - landfill		Tonnes	208	446	N/A	(53%)	31	276	N/A	(89%)
Waste - recycling		Tonnes	1,110	948	N/A	17%	874	608	N/A	44%
Total Waste		Tonnes	1,318	1,394	(2%)	(5%)	905	884	(2%)	2%

¹ Scope 1 emissions include gas and fuel oil.

²Scope 2 emissions include electricity.

³Scope 3 emissions include business travel and transmission and distribution losses for electricity.

⁴New ratio based on a full-time equivalent (FTE) employee figure which includes contingent FTE.

Where possible we aim to report on emissions from any office building containing over 1% of our FTE. In some cases, for example where we are renting space in a multi-tenanted office, this is not always feasible. Our reporting covers 95% of our FTE. For Scope 3 we've used the records provided by our third party travel providers for the source of data on business travel (air or rail) and kWh of electricity use for transmission and distribution. For accuracy we calculate our emissions from air travel based on travel class, rather than using average passenger. All emissions are calculated in CO2e using the DEFRA/DECC (2014) emission factors.

For waste, we surpassed our group diversion from landfill target of 80% achieving an overall figure of 97% recovery for our waste. This is due to very high waste recovery rates in both the UK and Ireland where we are sending less than 5% of our waste to landfill.

As a global business, emissions from business travel are an increasing challenge for us. Awareness and education have again played a big part here. We launched our Environmental Champions programme, educating influencers from around the business and engaging them in developing environmental communications around our Group. In November 2014, we also ran our second group-wide Green Travel Week, spotlighting the ways everyone can find greener ways to travel. This included a dedicated 'no-fly' week, where we allowed no air travel except where it was critical to our business. We know that air travel is unavoidable for a business like ours, but through education - in particular a focus on using digital and virtual meeting technologies - we can help foster more use of online collaboration and less use of traditional business travel.

We aimed to reduce our emissions from travel by 6% this year and exceeded this with a 22% reduction. We also met our overall target of reducing our CO2 emissions by 4% for continuing operations.

Measurement and targets

In 2013 we began to develop a long-term set of high-level targets, which we would then work towards reaching by 2016. We now have plans in place to achieve them. For each of our material themes we are developing a number of commitments, and implementing measures to find out how we're performing against these. We track our performance by looking at our direct and indirect impact on each topic area, as well as how we are influencing more widely on that topic. This plays an important part in being a leader in sustainability. This is something that we displayed in 2014 by maintaining a strong position in the FTSE4Good and the Dow Jones Sustainability Indices. These are external benchmarks that assess our sustainability each year, and performing well in these helps us to lead by example in our industry.

Through sustainability key performance indicators (KPIs), assured by independent experts PricewaterhouseCoopers LLP, we have begun to introduce these measures into our external sustainability reporting during 2014. We will continue to build on these KPIs during 2015:

· Net Promoter Score

· Customer complaints

· Environment, social and governance engagements

· Voting at shareholder meetings of investee companies

· Total direct employed through employability programmes

· Total funds raised by our people

· Carbon footprint

· Group capital surplus (IGD surplus)

· Diversity in the talent pipeline

· InterAction employee survey results.

You can visit www.standardlife.com/sustainability to find out how we measure up against our KPIs, and to read our full sustainability report. This tells you more about the progress we've been making in each area of our sustainability strategy.

1.7 Basis of preparation

Overview

Our Strategic report for the year to 31 December 2014 has been prepared in line with the Companies Act 2006 and the Disclosure and Transparency Rules (DTR) issued by the FCA. Under section 414 of the Companies Act 2006, DTR 4.1.8 and DTR 4.1.9, the Group is required to provide a fair, balanced and understandable review of the business and a description of the principal risks and uncertainties facing the Group. Principal risks and uncertainties are detailed in Section 1.5 - Principal risks and uncertainties and further information on these is contained in Note 42 - Risk management of the IFRS consolidated financial statements. To provide clear and helpful information, we have also considered the voluntary best practice principles of the Reporting statement: Operating and Financial Review issued by the Accounting Standards Board in 2006 and Guidance on the Strategic report issue by the Financial Reporting Council in 2014.

The Group's financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS), as endorsed by the European Union (EU). However, our Board believes that non-Generally Accepted Accounting Principles (non-GAAP) measures, which have been used in the Strategic report, are useful for both management and investors and make it easier to understand our Group's performance.

The most important non-GAAP measures in the Strategic report include operating profit, assets under administration and Group underlying cash generation. All non-GAAP measures should be read together with the Group's IFRS consolidated income statement, consolidated statement of financial position and consolidated statement of cash flows, which are presented in the Group financial statements section of this report.

Going concern

After making appropriate enquiries, the Directors have a reasonable expectation that the Company and the Group as a whole have adequate resources to continue in operational existence for the foreseeable future. For this reason, they continue to adopt the going concern basis in preparing the financial statements. For more detail, see the Corporate governance section.

IFRS and EEV reporting

The financial results are prepared on both an IFRS basis and an EEV basis. All EU-listed companies are required to prepare consolidated financial statements using IFRS issued by the International Accounting Standards Board as endorsed by the EU. EEV measures the net assets of the business plus the present value of future profits expected to arise from in-force long-term life assurance and pensions policies. The IFRS financial results in the Strategic report and in the Group financial statements section of this report have been prepared on the basis of the IFRS accounting policies, as amended for new standards effective from 1 January 2014, as described in the Group financial statements section of this report. The EEV basis has been determined in accordance with the EEV Principles and Guidance issued by the Chief Financial Officers Forum. The EEV financial results in the Strategic report and in the EEV financial information section have been prepared in accordance with the EEV methodology in the EEV financial information section of this report.

Group operating profit and EEV operating profit

The 2014 reconciliation of consolidated operating profit to IFRS profit for the year, presented on page 112 of this report, presents profit before tax expense attributable to equity holders adjusted for non-operating items. Further details on the calculation of Group operating profit is presented in the Group accounting policies (jj). Group operating profit has not been audited by our independent auditors. The 2014 EEV consolidated income statement on page 240, presents EEV profit showing both operating and non-operating items. By presenting our results in this way, the Directors believe they are presenting a more meaningful indication of the underlying business performance of the Group.

Forward-looking statements

This document may contain 'forward-looking statements' about certain of the Standard Life Group's current plans, goals and expectations relating to future financial conditions, performance, results, strategy and objectives. Statements containing the words: 'believes', 'intends', 'targets', 'estimates', 'expects', 'plans', 'seeks' and 'anticipates' and any other words of similar meaning are forward-looking. By their nature, all forward-looking statements involve risk and uncertainty because they relate to future events and circumstances which may be beyond the Group's control. As a result, the Group's actual financial condition, performance and results may differ materially from the plans, goals and expectations set out in the forward-looking statements, and persons receiving this document should not place undue reliance on forward-looking statements. The Standard Life Group undertakes no obligation to update any of the forward-looking statements in this document or any other forward-looking statements it may make.

Approved by the Board and signed on its behalf by

Kenneth A Gilmour, Group Company Secretary

Standard Life plc (SC286832)

20 February 2015

Board of Directors as at 20 February 2015

Board of Directors

Our business is managed by our Board of Directors. Biographical details of the Directors as at 20 February 2015 are listed below.

Sir Gerry Grimstone

Chairman

Age: 65

Tenure: 9 years

Nationality: British

Qualifications: MA and MSc, University of Oxford.

Appointed Chairman in May 2007, having been deputy chairman since March 2006. He became a director of The Standard Life Assurance Company in July 2003. Sir Gerry is chairman of TheCityUK, the representative body for financial and related professional services in the UK, an independent, public interest, non-executive board member of Deloitte LLP and the lead non-executive at the Ministry of Defence. Other appointments include being a member of the shareholder executive board of the Department for Business, Innovation and Skills (BIS) and senior adviser to the board of the Abu Dhabi Commercial Bank. Previously, he held senior positions within the Department of Health and Social Security and HM Treasury. From 1986, he spent 13 years with Schroders plc in London, Hong Kong and New York. He was vice chairman of Schroders' worldwide investment banking activities from 1998 to 1999.

In the Queen's Birthday Honours List, announced in June last year, Sir Gerry received a knighthood in recognition for his contribution to public service, particularly to defence and business.

Sir Gerry is chairman of both the Nomination and Governance Committee and the Corporate Responsibility Committee.

David Nish

Chief Executive

Age: 54

Tenure: 8 years

Nationality: British

Qualifications: BAcc, University of Glasgow. Member of the Institute of Chartered Accountants of Scotland.

Appointed Chief Executive in January 2010, having been group finance director since November 2006 when he was appointed to the Board. He is also deputy chairman of the board of the Association of British Insurers, a non-executive director of the UK Green Investment Bank plc, where he also chairs the audit committee, a member of the advisory council of TheCityUK and a member of the Financial Services Advisory Board of the Scottish Government.

David was previously a partner with Price Waterhouse, and subsequently group finance director and executive director, infrastructure division at Scottish Power plc.

David is a member of the Corporate Responsibility Committee.

Luke Savage

Chief Financial Officer

Age: 53

Tenure: appointed August 2014

Nationality: British

Qualifications: Electrical and Electronic Engineering degree (BEng), Imperial College, London. Member of the Institute of Chartered Accountants in England and Wales.

Appointed Director and Chief Financial Officer in August 2014. Luke was previously director of finance and operations at Lloyd's of London. In addition, he held senior finance roles at Deutsche Bank (UK), Morgan Stanley & Company (UK) and Lloyds Bank plc. He is a member of the governing body of Queen Mary University of London.

Luke was awarded Chief Financial Officer of the Year at the Insurance Insider Honours 2013

Keith Skeoch

Executive Director

Age: 58

Tenure: 9 years

Nationality: British

Qualifications: BA, University of Sussex and MA, University of Warwick. Fellow of the Chartered Institute for Securities & Investment and Fellow of the Society of Business Economists.

Appointed Director in May 2006, having been a director of The Standard Life Assurance Company since March 2006. He is chief executive of Standard Life Investments Limited. Keith joined Standard Life Investments Limited in 1999 as chief investment officer after nearly 20 years' investment experience at James Capel & Company Limited in a number of roles, including chief economist and managingdirector international equities.

He is a director of the Investment Association and a non-executive director of the Financial Reporting Council, where he is a member of the audit committee. He has been awarded honorary doctorates from the University of Sussex and Teesside University for services to the financial services industry.

In 2013, he was awarded European Personality of the Year by Funds Europe.

John Paynter

Senior Independent Director

Age: 60

Tenure: 3 years

Nationality: British

Qualifications: Law Degree, University of Oxford.

Appointed Director in January 2012. He is the Company's senior independent director and the non-executive chairman of Standard Life Investments (Holdings) Limited. John is also a senior adviser to Greenhill & Co. International. From 2008 to 2014, John was a non-executive director of Standard Chartered plc, where he also sat on the audit and remuneration committees. From 2001 to 2005, John wasdeputy chairman of Cazenove Group plc and then vice chairman of JP Morgan Cazenove from 2005 to 2008. He served as a non-executive director of Jardine Lloyd Thompson Group plc from October 2008 until June 2012, including three years as chairman of its remuneration committee.

John is a member of the Audit Committee, the Remuneration Committee and the Nomination and Governance Committee.

Pierre Danon

Non-executive Director

Age: 58

Tenure: 3.5 years

Nationality: French

Qualifications: Degree in Civil Engineering, Ecole Nationale des Ponts et Chaussées, Paris, Law Degree Faculté de droit, Paris, and MBA, HEC Paris.

Appointed Director in October 2011. Pierre is vice chairman of TDC, executive chairman of Volia, independent director of CIEL Investment Limited, a director of Cordial Consulting Limited and vice chairman of AgroGeneration. From 2000 to 2005, Pierre was chief executive officer of BT Retail and, subsequently, chief operating officer of Capgemini Group and chairman of Eircom. Until June 2012, he served as chief executive officer and then non-executive chairman of Numericable Completel in Paris.

Pierre is a member of the Remuneration Committee and the Risk and Capital Committee.

Crawford Gillies

Non-executive Director

Age: 58

Tenure: 8 years

Nationality: British

Qualifications: Law Degree, University of Edinburgh and MBA, Harvard Business School. Member of the Institute of Chartered Accountants in England and Wales.

Appointed Director in January 2007. Crawford is chairman of Scottish Enterprise and chairman of Control Risks Group Holdings Ltd. In July 2012, he was appointed as a non- executive director of MITIE Group PLC, and in May 2014, he was appointed as a non-executive director of Barclays PLC and is a member of its remuneration committee. He is also a member of the advisory board for the School for CEOs. Crawford spent 22 years with Bain & Company, Inc, the international management consultants, where he was managing director Europe. He was an independent member of the Department of Trade and Industry (DTI) management and strategy boards from 2002 to 2007, and chaired the DTI's audit and risk committee from 2003 to 2007.

Crawford is a member of the Risk and Capital Committee, the Nomination and Governance Committee and the Corporate Responsibility Committee.

David Grigson

Non-executive Director

Age: 60

Tenure: 5.5 years

Nationality: British

Qualifications: BA, University of Manchester. Member of the

Institute of Chartered Accountants in England and Wales.

Appointed Director in November 2009. David is chairman of Trinity Mirror plc and he is the senior independent director of Ocado Group plc. He also sits on the audit, remuneration and nomination committees of these companies. David is also chairman of Investis Limited. David spent much of his career in senior financial executive positions, first with Emap PLC, where he served as group finance director from 1989 to 2000, and more recently with Reuters Group PLC, where he was chief financial officer from 2000 to 2008, when Reuters Group became Thomson Reuters Limited.

David is chairman of the Audit Committee and a member of the Risk and Capital Committee and the Nomination and Governance Committee. As announced, David will retire from the Board following the 2015 AGM.

Noel Harwerth

Non-executive Director

Age: 67

Tenure: 3 years

Nationality: British and American

Qualifications: Law Degree, University of Texas.

Appointed Director in July 2012. Noel is chairman of Sumitomo Mitsui Banking Corporation Europe Limited and chairman of GE Capital Bank Limited. She also holds non-executive director appointments with Alent plc, the London Metal Exchange and the British Horseracing Authority. Last year, Noel was appointed as a director of London First. Noel was previously with Citicorp for 15 years, latterly as the chief operating officer of Citibank International and she previously held non-executive director appointments at Logica PLC, LME Holdings Limited, Avocet Mining PLC, RSA Insurance Group plc and Dominion Diamond Corporation.

Noel is a member of the Audit Committee and will stand down as chairman of the Risk and Capital Committee following the 2015 AGM.

Isabel Hudson

Non-executive Director

Age: 55

Tenure: appointed October 2014

Nationality: British

Qualifications: MA in French and German, University of Oxford.

Appointed Director in October 2014. Isabel holds non- executive directorships at BT Group plc, where she is also a member of its pension committee, and at Phoenix Group Holdings, where she is also a member of its remuneration and audit committees. She is chairman of the National House Building Council. Isabel previously held the positions of chief executive officer at Synesis Life Ltd, executive director at Prudential UK, and chief financial officer of Eureko. She held non-executive director appointments at QBE Insurance Group Ltd, where she chaired the remuneration committee, the Pensions Regulator and MGM Advantage, where she chaired the audit committee. She was previously a member of the With Profits Committee of Standard Life Assurance Limited.

Isabel is a member of the Audit Committee and the Risk and Capital Committee.

Kevin Parry

Non-executive Director

Age: 53

Tenure: appointed October 2014

Nationality: British

Qualifications: MA (Hons) in Management Studies, University of Cambridge. Fellow of the Institute of Chartered Accountants in England and Wales.

Appointed Director in October 2014. Kevin is a non-executive director of Daily Mail and General Trust plc, where he is chairman of the audit committee and a member of the risk committee. He is senior independent director of Intermediate Capital Group plc, where he is chairman of both the audit committee and the risk committee, and is a member of the remuneration and nomination committees. He is also a non-executive director of the Homes and Communities Agency and deputy chairman of the board of trustees and chairman of the finance and investment committee at the Royal National Children's Foundation.

From 2009 to 2013, Kevin was chief financial officer of Schroders plc where he also chaired, from 2002 to 2008, the audit and risk committee. He was also group chief executive of Management Consulting Group PLC from 2000 to 2008.

Kevin is a member of the Risk and Capital Committee and will be appointed chairman of the Audit Committee following the 2015 AGM.

Lynne Peacock

Non-executive Director

Age: 61

Tenure: 3 years

Nationality: British

Qualifications: BA, North East London Polytechnic.

Appointed Director in April 2012. Lynne is a non-executive director of Scottish Water, where she chairs its audit committee. She is a non-executive director of Nationwide Building Society and chairs its remuneration committee. She is also a member of its audit, risk and nomination committees. Lynne joined National Australia Bank Limited in 2003 and, from 2004 to 2011, she was chief executive officer, UK (Clydesdale Bank plc and Yorkshire Bank). Before that, Lynne was with Woolwich plc from 1983 to 2003, finishing her career there as chief executive officer.

Lynne is chairman of the Remuneration Committee and is a member of the Corporate Responsibility Committee and the Audit Committee.

Martin Pike

Non-executive Director

Age: 53

Tenure: 1.5 years

Nationality: British

Qualifications: BA and MA, University of Oxford. Fellow of the Institute and Faculty of Actuaries.

Appointed Director in September 2013. Martin joined R Watson &Sons in 1983 and progressed his career with the firm to partner level, carrying out a wide range of strategic consulting projects and M&A assignments. His senior roles included head of European insurance and financial services practice, Watson Wyatt from 2006 to 2009, vice president and global practice director, insurance and financial services, Watson Wyatt during 2009 and, latterly, managing director, risk consulting & software, EMEA, Towers Watson from 2010 to 2013.

Martin is a member of the Remuneration Committee and will be appointed chairman of the Risk and Capital Committee following the 2015 AGM.

Directors' report

The Directors present their annual report on the affairs of the Standard Life group of companies (the Group), together with the audited International Financial Reporting Standards (IFRS) consolidated financial statements for the Group, European Embedded Value (EEV) financial information for the Group and financial statements for Standard Life plc (the Company) for the year ended 31 December 2014.

Reporting for the year ended 31 December 2014

The Company is the holding company of the Group. You can find out about the relevant activities of the Company's principal subsidiary undertakings and their overseas branches in the Chief Financial Officer's overview and Business segment performance sections of the Strategic report. During 2014, the Company's principal undertakings operated branches in Bermuda, Canada, Dubai, Germany, Hong Kong, India, Ireland and Singapore.

The main trends and factors likely to affect the future development, performance and position of the Group are outlined in the Chief Executive's overview section of the Strategic report. Reviews of the operating and financial performance of the Group for the year ended 31 December 2014 are given in the Strategic report.

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

The results of the Group on IFRS and EEV bases are presented in the Group financial statements and EEV financial information respectively. A detailed description of the basis of preparation of the IFRS (including operating profit) and EEV results are set out in the Group accounting policies section of the Group financial statements and in Note 1 to the EEV financial information respectively. More information about the Group's use of financial instruments and related financial risk management matters can be found in Note 24 and Note 42 of the Group financial statements.

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

Dividends

The Board recommends paying a final dividend for 2014 of 11.43p per new ordinary share following the share consolidation. This will be paid on 19 May 2015 to shareholders whose names are on the register of members (the Register) at the close of business on 10 April 2015.

The total payment is estimated at £224m for the final dividend and together with the interim dividend of 5.60p per share totalling £134m paid on 21 October 2014, the total dividend for 2014 will be 17.03p per share (2013: 15.80p) totalling £358m

(2013: £376m).

Share capital

You can find full details of the Company's share capital, including movements in the Company's issued ordinary share capital during the year, in Note 29 to the Group financial statements. You can also find an analysis of registered shareholdings by size, as at 31 December 2014, in the Shareholder information section.

As at 31 December 2014, there were 2,394,373,744 ordinary shares in issue held by 106,666 registered members. The Standard Life Share Account (the Company-sponsored nominee) held 925,969,894 of those shares on behalf of 1,097,356 participants. No person has any special rights of control over the Company's share capital and all issued shares are fully paid.

During the year, and until the date this report was signed, the Company received the following notification in respect of major shareholdings and major proportions of voting rights in accordance with the Disclosure and Transparency Rules of the Financial Conduct Authority (FCA).

Shareholder	Date of Transaction	Type of Transaction	Number of Voting Rights Following the Transaction	Percentage of Voting Rights (%)
BlackRock, Inc.	8 December 2014	Acquisition of voting rights	119,737,536	5%

In 2014, in accordance with the terms of the Standard Life Employee Trust Deed, the Trustees of the Standard Life Employee Trust waived all entitlements to current or future dividend payments for shares they hold under option on behalf of participants in the Company's discretionary share plans between the grant and vest dates. Details of ordinary shares under option in respect of the Company's discretionary share plans are shown in Note 48 to the Group financial statements.

The Trustees of the Standard Life (Employee) Share Plan voted the appropriate shares in accordance with any instructions received from participants in the plan. Details of the Company's employee share plan can be found in Note 48 to the Group financial statements.

Restrictions on the transfer of shares and securities

Except where listed below, there are no specific restrictions on the size of a holding or on the transfer of shares. Both are governed by the general provisions of the Company's articles of association (the Articles) and current legislation and regulation. The Articles can be found on our website at www.standardlife.com/about/governance You can also obtain a copy from Companies House or by writing to the Group Company Secretary at our registered address (details of which can be found in the Contact details 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 transfer is in favour of no more than four joint transferees

· 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. On a poll, every member present in person or by proxy has one vote for every share they hold. For joint shareholders, the vote of the senior joint shareholder who tenders a vote, in person or by proxy, will be accepted and will exclude the votes of the other joint shareholders. For this purpose, seniority is determined by the order that the names appear on the Register for joint shareholders.

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

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

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

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

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

Power to purchase the Company's own shares

At the 2014 Annual General Meeting (AGM), shareholders granted the Directors limited powers to:

· Allot ordinary shares in the Company up to a maximum aggregate amount of £79,222,684

· Disapply, up to a maximum total nominal amount of £11,883,402 or 5% 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 237,668,053 or 10% of its issued ordinary shares.

The Company did not make any market purchases of its ordinary shares during the year ended 31 December 2014, and has not done so since then and up to the date of this report.

Significant agreements

There are a number of agreements to which the Company is party that entitle the counterparties to exercise termination or other rights in the event of a change of control of the Company. These agreements include:

· Under a £500m revolving credit facility between the Company and the banks and financial institutions named therein as lenders (Lender) dated 5 March 2013 (the Facility), in the event that (i) any persons or group of persons acting in concert, gain control of the Company or (ii) Standard Life Assurance Limited ceases to be a member of the Group, 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.

· Under a shareholders' agreement dated 15 January 2002 between The Standard Life Assurance Company (re-named The Standard Life Assurance Company 2006) and Housing Development Finance Corporation Limited (HDFC), pursuant to which the relevant Group company holds its interest in HDFC Standard Life Insurance Company Limited (HDFC Standard Life), upon a change of control of the Company, HDFC potentially has the right to terminate the joint venture and to purchase, or nominate a third party to purchase, the relevant Group company's shares in HDFC Standard Life for a price determined in accordance with the agreement.

· Under a shareholders' agreement dated 10 June 2003 (as amended) between Standard Life Investments Limited (SLI) and HDFC, pursuant to which the relevant Group company holds its interest in HDFC Asset Management Company Limited (HDFC AMC), upon a change in the ownership structure of SLI that results in the acquisition by a third party, either directly or indirectly, of more than 20% of the issued, subscribed and paid-up capital of SLI, HDFC will have 90 days from the date upon which SLI notifies it in writing of the occurrence of such a change to purchase the relevant Group company's shares in HDFC AMC at a mutually agreed price.

· 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 joint venture and to purchase, or nominate a third party to purchase, the Company's shares in Heng An Standard Life for a price determined in accordance with the agreement.

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

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

Directors and their interests

The Directors who served throughout the year were:

· Sir Gerry Grimstone (Chairman)

· Colin Buchan (retired on 13 May 2014)

· Pierre Danon

· Crawford Gillies

· David Grigson

· Noel Harwerth

· Isabel Hudson (appointed 15 October 2014)

· David Nish (Chief Executive)

· Kevin Parry (appointed 27 October 2014)

· John Paynter

· Lynne Peacock

· Martin Pike

· Luke Savage (Chief Financial Officer appointed 18 August 2014)

· Keith Skeoch

Biographies of the Directors can be found on pages 37 to 39.

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

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

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

· Service contracts between each executive Director and subsidiary undertakings (Standard Life Employee Services Limited and Standard Life Investments Limited).

Copies of the following documents can be viewed at the Company's registered office (details of which can be found in the Contact details section) during normal business hours (9am to 5pm Monday to Friday) and will be available for inspection at the Company's AGM on 12 May 2015:

· The Directors' service contracts or letters of appointment

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

· The rules of the Standard Life plc Executive Long Term Incentive Plan together with a copy incorporating the changes proposed in resolution 7, and

· The Company's Articles, together with a copy incorporating the changes proposed in resolution 15. Further information on these changes can be found in our AGM guide 2015 which will be available online at www.standardlife.com from 24 March 2015.

Appointment and retirement of Directors

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

The UK Corporate Governance Code recommends that directors of FTSE 350 companies should stand for election every year. In line with this, all our Directors will retire at the AGM on 12 May 2015. Isabel Hudson, Kevin Parry and Luke Savage will stand for election and all remaining Directors who wish to continue in office will stand for re-election. As announced, David Grigson will retire from the Board at the conclusion of the 2015 AGM and, therefore, will not stand for re-election.

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

Directors' liability insurance

During 2014, 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 a third-party indemnity policy for the boards of trustees of the UK, Irish and Canadian staff pension schemes. The trustees include individuals who are directors of subsidiaries within the Group.

Our people

We know that our people are central to delivering our strategy. You can read about our commitment to bring out the best in them in Section 1.6 of the Strategic report - Our sustainable business overview.

The Group remains committed to creating a high-performing, diverse and healthy working environment where everyone is respected, valued and included as an individual. We treat people with disabilities fairly in relation to job applications, training, promotion and career development. Adjustments are made to train and support employees who become disabled during their employment to enable them to continue and develop in their role. As part of our performance culture, each employee takes part in regular discussions with their manager. They agree performance goals and how their aspirations, strengths and limitations can be developed and addressed at work. We believe great performance should be rewarded, and we think the process we follow to do that should be clear to everyone. Our approach continues to support our reward principles by linking pay to performance and ensuring our remuneration remains competitive to the market.

We know that positive employee relations are vital in engaging our people and achieving business goals. Constructive staff representation provides an essential means of informing the Group's strategy through the views and insights of our people. There are separate staff representation arrangements across different jurisdictions in the Group. In the UK, most employees are represented through partnership agreements with the Group's staff associations, VIVO and Bridge. In Ireland, there is an established agreement with Unite, and a works council was established in Germany in 2008.

Despite a challenging year, we have maintained open and constructive relationships with the different staff representative bodies and a productive employee relations environment. In September 2014, we announced proposed changes to how our future employee pension would be provided. The consultation on these proposals, which involved many open and constructive conversations with our staff associations, concluded at the end of November 2014. The level of engagement was significant with all the feedback received listened to very carefully.

The Board approved the final changes to the future UK employee pension in December 2014 and these changes were announced to employees on 19 December 2014.

The key part of the final package of changes is that from 16 April 2016, pension scheme members will build up future pension in the scheme on a defined contribution basis rather than the current career average defined benefit basis.

We believe what is offered provides a consistent and competitive level of support for our people's retirement savings, as well as being sustainable for our business.

We also use our internal intranet to communicate with our staff on matters which may concern them as employees and to ensure that our employees are fully aware of any financial and economic factors which may affect the performance of the Group.

As at 31 December 2014, approximately 65% of the Group's employees were shareholders through participation in the Standard Life (Employee) Share Plan (the Plan). The Plan allows employees to buy ordinary shares in the Company directly from their earnings up to a market value of £125 per month, or an equivalent sum in a relevant currency. These are called partnership shares. For each partnership share that an employee buys under the Plan, the Company matches the purchase by allocating them ordinary shares up to a maximum total value of £25 per month, or an equivalent sum in the relevant currency. As at 31 December 2014, 3,772 (63%) of eligible employees in the UK were making a monthly average contribution of £40. A similar tax approved plan is used in Ireland and has a 60% take up. Even though the Plan cannot be structured on a tax favourable basis in Germany or Austria, at the end of the year, more than 120 employees in these countries were buying shares on a monthly basis.

The Group also encourages share ownership in the Company in the UK and Ireland through the Standard Life Sharesave Plan which was launched in August 2011. In September 2014, we launched a fourth invitation to UK employees and at the same time made a third invitation to Irish employees. On 1 November 2014, the first of the Sharesave invitations matured and participating employees have the opportunity, until 1 May 2015, to buy Standard Life plc shares at a price of £1.57 per share with their accumulated savings.

There are now over 3,100 employees in the UK and Ireland participating in Sharesave plans. The exercise price is £1.57 under the 2011 invitation; £2.21 (€2.81) under the 2012 invitations; £2.72 (€3.22) under the 2013 invitations and £2.96 (€3.70) under the 2014 invitations.

Sustainability

Our sustainability strategy is mapped to our Group's business strategy, so that the commercial aims of our business are linked to our environmental, social and governance responsibilities. You can find out more in Section 1.6 of the Strategic report - Our sustainable business overview and in the Environmental, social and governance risks paragraph of the Corporate governance section.

Greenhouse gas emissions

Details of our greenhouse gas emissions can be found in Section 1.6 of the Strategic report - Our sustainable business overview.

Political donations

We did not make any political donations in the year ended 31 December 2014. The Company has limited authorisation from shareholders to make political donations and incur political expenditure (Resolution 13, 2014 AGM). We request this as a precaution against any inadvertent breach of political donations legislation, as defined in the Companies Act 2006. While Standard Life has regular interaction with government and elected politicians in the UK and other jurisdictions in which we operate, we are strictly apolitical. We have a long-standing policy of not making political donations and we have no plans to do so.

Auditors

The Audit Committee is responsible for considering the Group's external audit arrangements. Resolutions proposing the re-appointment of PricewaterhouseCoopers LLP as auditors to the Company and giving authority to the Directors to determine their remuneration will be submitted at the AGM to be held on 12 May 2015.

Disclosure of information to the auditors

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

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

Events after the reporting period

On 3 September 2014, the Group announced its intention to sell its Canadian business to The Manufacturers Life Insurance Company (MLC), a subsidiary of Manulife Financial Corporation (Manulife). The sale of the Group's Canadian long-term savings and retirement, individual and group insurance business (Standard Life Financial Inc.) and Canadian investment management business (Standard Life Investments Inc.) completed on 30 January 2015 for a fixed consideration of CA$4bn (£2.1bn). A further £0.1bn was received from the settlement of related hedging derivative contracts.

The Group expects to recognise a gain on sale of approximately £1.1bn which has been estimated based on book values as at 31 December 2014 (the actual gain on sale will be based on book values as at 30 January 2015 when the sale completed). The gain on sale is expected to be exempt from tax under UK and Canadian tax legislation and therefore no tax charge is expected to arise.

Following the sale, the Group proposes to return to shareholders 73 pence per Ordinary Share (approximately £1.75bn). This will be through an issue of B Shares and/or C Shares which is intended to enable the majority of shareholders to receive their cash proceeds as capital, income or a combination of the two. This is subject to shareholder approval (such approval being sought at a general meeting of the company being held in Edinburgh on 13 March 2015) and, if approved, will be paid on 1 April 2015.

In conjunction with the return of value, we will be seeking shareholder approval to carry out a share consolidation with 9 New Ordinary Shares being issued in exchange for every 11 Existing Ordinary Shares held. This will reduce the number of shares in issue by approximately the same ratio as the return of value (73 pence per Ordinary Share) to the share price as at 4 February 2015, being the last practicable date prior to printing of the circular.

Further information can be found in the circular relating to the B/C share scheme and the share consolidation which can be found on our website at www.standardlife.com

On 6 January 2015, the Company redeemed in full the Euro denominated 5.314% fixed/floating rate perpetual Mutual Assurance Capital Securities at their outstanding principal amount of €360,000,000.

Other information

For the purposes of LR 9.8.4C R, the information required to be disclosed by LR 9.8.4 R can be found in the following locations:

Section	Topic	Location
1.	Interest capitalised	Not applicable
2.	Publication of unaudited financial information	Strategic report - Section 1.4.4
4.	Details of long-term incentive schemes	Directors' remuneration report
5.	Waiver of emoluments by a director	Not applicable
6.	Waiver of future emoluments by a director	Not applicable
7.	Non pre-emptive issues of equity for cash	Not applicable
8.	Item (7) in relation to major subsidiary undertakings	Not applicable
9.	Parent participation in a placing by a listed subsidiary	Not applicable
10.	Contracts of significance	Not applicable
11.	Provision of services by a controlling shareholder	Not applicable
12.	Shareholder waivers of dividends	Directors' report
13.	Shareholder waivers of future dividends	Directors' report
14.	Agreements with controlling shareholders	Not applicable

All the information cross-referenced above is hereby incorporated by reference into this Directors' report.

Annual General Meeting

This will be held at 2pm (UK time) on Tuesday, 12 May 2015 at the Edinburgh International Conference Centre, The Exchange, 150 Morrison Street, Edinburgh EH3 8EE, Scotland. Details of the meeting content can be found in our AGM guide 2015 which will be available online at www.standardlife.com from 24 March 2015.

On behalf of the Board

Kenneth A Gilmour, Group Company Secretary
Standard Life plc (SC286832)
20 February 2015

Directors' responsibilities for preparing the financial statements

The following statements should be read with the statement of auditors' responsibilities included in the independent auditors' reports. They are made to help shareholders distinguish between the responsibilities of the Directors and those of the auditors in relation to the financial statements for 2014.

The Directors are responsible for preparing the Annual report and accounts 2014. It is also their responsibility to state that they consider that the Annual report and accounts 2014, taken as a whole, is fair, balanced and understandable and provides the information necessary for shareholders to assess the Company's performance, business model and strategy. Under the Companies Act 2006, the Directors are required to prepare and approve financial statements for each financial year. The Directors must only approve the financial statements when they are satisfied that they give a true and fair view of how the Group and the Company have performed at the end of the financial year, and that they give a true and fair view of the profit of the Group and the Company for that year. The financial statements of the Group and, where relevant, the Company have been prepared in accordance with:

· International Financial Reporting Standards (IFRS) as adopted by the European Union (EU)

· The Companies Act 2006

· The Disclosure and Transparency Rules (DTR) issued by the Financial Conduct Authority (FCA)

· Article 4 of the International Accounting Standards (IAS) Regulation.

In preparing these financial statements, the Directors are required to:

· Select suitable accounting policies and then apply them consistently

· Make judgements and accounting estimates that are reasonable and prudent

· State whether applicable IFRS as adopted by the EU have been followed, subject to any material departures disclosed and explained in the financial statements

· Prepare the financial statements on the basis that the Group is a going concern, unless it is inappropriate to presume that the Group will continue in business.

The Directors are responsible for ensuring that proper accounting records are maintained. These must disclose, with reasonable accuracy at any time, the financial position of the Group and the Company and enable the Directors to ensure that the financial statements and the Directors' remuneration report comply with the Companies Act 2006 and the DTR. The Directors should also make sure that the Group financial statements comply with Article 4 of the IAS Regulation.

The Directors are also responsible for:

· Safeguarding the assets of the Company and the Group

· Taking reasonable steps to prevent and detect fraud and other irregularities

· The maintenance and integrity of the Group's website.

UK legislation governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

Directors' responsibility statement

Each of the Directors, whose names and functions are listed in the Board of Directors section on pages 37 to 39, confirms that to the best of their knowledge and belief:

1. The Group and the Company financial statements, which have been prepared in accordance with IFRS as adopted by the EU, give a true and fair view of the assets, liabilities, financial position and profit of the Group and of the Company and taken as a whole, are fair, balanced and understandable and provide the information necessary for shareholders to assess the Group's performance, business model and strategy.

2. The Strategic report includes the information required by DTR 4.1.8 and DTR 4.1.9 - a fair review of the development and performance of the business and the position of the Group, together with a description of the principal risks and uncertainties it faces.

By order of the Board

Sir Gerry Grimstone, Chairman Luke Savage, Chief Financial Officer

20 February 2015 20 February 2015

This information is provided by RNS

The company news service from the London Stock Exchange

END

FR LFFELFSIALIE

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