Return of Capital

At our general meeting on 25 June, our shareholders voted overwhelmingly to support the three resolutions we put to them. These were to agree the sale of our UK and European insurance business to Phoenix, to approve the return of £1 billion to shareholders by way of a B share scheme (accompanied by a share consolidation) and a capital return of up to £750 million by way of an on-market share buy back.

The transaction with Phoenix completed on 31 August, and we have commenced the process of the share buy back. The Circular below outlines the B share scheme in detail and should be consulted in the first instance.

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Return of capital video transcript.

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Key Questions and Answers

What is the B share scheme?

We intend to return up to £1 billion in aggregate to shareholders via a B share scheme. Shareholders will receive one B share for each existing ordinary share held at 5pm on 19 October 2018 (the “Record Time”). The B share scheme will also include a consolidation of the existing ordinary shares (referred to as the “Share Capital Consolidation”).  Shareholders will receive 33.99 pence per existing ordinary share as part of the B share scheme. Additionally, as a result of the Share Capital Consolidation, in exchange for each 8 existing ordinary shares of 12 2/9 pence each that a shareholder holds at the Record Time he or she will receive 7 new ordinary shares of 13 61/63 pence each.

Shareholders should receive the associated payments and, where relevant, new share certificates, from 2 November 2018. The payment will be made automatically by cheque, bank mandate or CREST assured payment, depending upon the details held for each shareholder.

What is the purpose of the Share Capital Consolidation?

The purpose of the Share Capital Consolidation is to try to ensure that (subject to market fluctuations) the market price of each new ordinary share immediately following the completion of the B share scheme is approximately the same as the market price of each Standard Life Aberdeen share immediately beforehand.

Shareholders will receive new ordinary shares in lieu of their existing ordinary shares held at the Record Time. The Share Capital Consolidation has been calculated by dividing Standard Life Aberdeen’s market capitalisation less the value of the return of capital (£1 billion) at the Record Time, by Standard Life Aberdeen’s market capitalisation at the Record Time.

Following the Share Capital Consolidation, you will own the same proportion of Standard Life Aberdeen as you did before the Share Capital Consolidation, subject to fractional entitlements.

You don’t need to take any action in relation to this. We’ll send you a notification of the number of new ordinary shares you hold once we complete the Share Capital Consolidation.

What will happen to the value of my shareholding?

The total amount returned to you by way of the B share scheme plus the total value of your holding of new ordinary shares should, subject to market fluctuations, approximately equal the total value of your current holding of existing ordinary shares.

By way of example, this effect is illustrated below using data from the Record Date of the transaction.

Number of existing Ordinary Shares held at Record Date Value of existing shareholding (at a share price of 258.5p) Number of new shares you would receive (based on ratio of 7 for 8) Value of new shareholding (at a share price of 256.6p) Proceeds under the B share scheme Fractional entitlement Total value post B share return of capital and share consolidation
100 £258.5087 £223.23 £33.99 £1.28 £258.50
500 £1,292.50 437 £1,121.27 £169.95 £1.28 £1,292.50

The numbers used in this example are approximate, rounded for ease of presentation and illustrative only. While the number of shares that you hold will be reduced, you will continue to own broadly the same proportion of Standard Life Aberdeen.

If you hold your existing ordinary shares in certificated form, you will be issued with a new share certificate in respect of your new ordinary shares following the issue of new ordinary shares. Your existing share certificate should then be destroyed.

If you hold your existing ordinary shares through the Standard Life Aberdeen Share Account, your account will be credited with new ordinary shares. We’ll send you a statement showing the number of new ordinary shares you have been credited with.

If you hold your existing ordinary shares in uncertificated form, your CREST account will be credited with your new ordinary shares.

How will I receive my B share scheme payment?

The payment will be made automatically by cheque, bank mandate or CREST assured payment, depending upon how you have previously elected to receive your dividend payments. If you participate in the dividend reinvestment plan (the 'DRIP'), you will receive a cheque. There is no re-investment option for this payment.

Can I transfer my B share entitlement to someone else?

There will be no formal market for the B shares and the ability to trade these shares is likely to be limited. If you wish to transfer your B share entitlement you should contact Link, our share registrar, as soon as possible for further details. They must receive the relevant transfer documentation by 4.30pm on 18 October 2018.

What is my tax position if I live in the UK or Ireland?

If you are a UK or Irish tax resident shareholder then the issue of the B shares and the Share Capital Consolidation should be tax-neutral for ordinary investors. Depending on your circumstances, it is expected that the proceeds of the redemption of the B shares should generally be treated as a capital receipt for tax purposes.

Please refer to sections 1 and 2 of Part VIII (Taxation) of the Circular for further information. In relaying the information it has received, Standard Life Aberdeen cannot take responsibility for the accuracy of such information and cannot itself advise shareholders to take a particular course of action.

What is my tax position if I live in Germany?

We have been advised that the issue of B shares may be subject to withholding tax in Germany if shares are held with certain custodian banks or institutions, and the Share Capital Consolidation should be a tax neutral event for German tax purposes to the extent it qualifies as a reverse share split. If you are resident for tax purposes in Germany you should therefore take advice on the Share Capital Consolidation and the issue of B shares, in particular what obligations they may have with regard to such withholding tax. Please refer to section 3 of Part VIII (Taxation) of the Circular for further information.

In relaying the information it has received, we cannot take responsibility for the accuracy of such information and cannot advise you to take a particular course of action.

What is my tax position if I live in Austria?

We have been advised that there is material uncertainty as to the tax treatment in Austria of the B share scheme. We have also been advised that the issue of the B shares (as well as their redemption) may be subject to withholding tax in Austria.

If you are resident for tax purposes in Austria we strongly recommended you seek professional tax advice as to what taxable events the B share scheme will result in, the impact of these taxable events on your tax position and what obligations you may have with regard to withholding tax or any other obligations under Austrian tax rules (in particular where no withholding tax applies).

Please refer to section 4 of Part VIII (Taxation) of the Circular for further information. In relaying the information it has received, we cannot take responsibility for the accuracy of such information and cannot advise you to take a particular course of action.

What is my tax position if I live in Canada?

We have been advised that in the case of certain registered plans (namely a trust governed by a registered retirement savings plan, a registered retirement income fund, a registered education savings plan, a registered disability savings plan, a tax-free savings account or a deferred profit savings plan) the B share scheme may have material adverse tax consequences for such registered plans unless you dispose of your existing ordinary shares before the B share scheme takes effect.

Please refer to section 5 of Part VIII (Taxation) of the Circular for further information. In relaying the information it has received, we cannot take responsibility for the accuracy of such information and cannot advise you to take a particular course of action.

What is my tax position if I live in the US?

You should generally not recognise any gain as a result of the Share Capital Consolidation (other than gain that may be recognised on any payments received for fractional entitlements to new ordinary shares) and should recognise dividend income on the B share scheme.

In addition, Standard Life Aberdeen may have been in a prior year or may presently be a passive foreign investment company (a 'PFIC') for US federal income tax purposes due to the composition of our assets and the nature of our income. If Standard Life Aberdeen is or was a PFIC, you may be subject to significant adverse US federal income tax consequences including additional taxes and interest charges as a result of the Share Capital Consolidation and B share scheme.

Please refer to section 6 of Part VIII (Taxation) of the Circular for further information. In relaying the information it has received, we cannot take responsibility for the accuracy of such information and cannot itself advise you to take a particular course of action.

What is my tax position if I live in a different country from those listed above?

If you are subject to taxation in a jurisdiction other than the UK, Ireland, Germany, Austria, Canada or the U.S., or you are in any doubt as to your tax position, you should consult your own independent professional adviser since the tax consequences of the B share scheme and the Share Capital Consolidation may vary.

Please note that for legal reasons we are unable to give individual advice on the return of capital and cannot provide legal, financial, investment or taxation advice. If you are in any doubt, please consult an independent professional adviser.

Further information

If you have any questions regarding the Return of Capital, please get in touch.