M
a
n
G
r
o
u
p
p
l
c
A
n
n
u
a
l
R
e
p
o
r
t
f
o
r
t
h
e
y
e
a
r
e
n
d
e
d
3
1
D
e
c
e
m
b
e
r
2
0
1
8
Man Group plc
Annual Report for the year ended 31 December 2018
WELCOME TO THE 2018 REPORT
Man Group is an active investment management
firm, seeking to generate outperformance for our
clients, including millions of pensioners and savers
globally, who invest with us through their pension
funds and investment plans.
We aim to achieve this through our diverse range
of specialist investment strategies, empowered
by the latest technology.
Highlights
Funds under management (FUM)
$108.5bn
Adjusted earnings per share
13.5¢
Statutory earnings per share
17.0¢
Dividend per share
11.8¢
2017
2018
2017
2018
2017
2018
2017
2018
$109.1bn
$108.5bn
20.3¢
13.5¢
15.3¢
17.0¢
10.8¢
11.8¢
Funds under management
By geography
By asset class
EMEA
Americas
Asia
55%
26%
19%
2018
2018
Equity
Credit
Multi-asset
Real estate
42%
12%
44%
2%
EMEA = Europe, the
Middle East and Africa
By client
By product
Institutional
Retail
82%
18%
Alternative
Long only
60%
40%
2018
2018
Contents
Strategic report
Group at a glance
Chairman’s statement
Our business model
What makes us different?
Market environment and
industry trends
Chief Executive Officer’s review
Progress against our strategy
Key performance indicators
Chief Financial Officer’s review
Risk management
People and culture
Corporate responsibility
2
4
6
8
10
12
16
18
20
27
34
38
Corporate governance
44
Corporate governance report
Board of Directors
45
Audit and Risk Committee report 58
Nomination Committee report
Directors’ Remuneration report
Directors’ report
Directors’ responsibility
statement
64
67
90
92
Financial statements
Independent auditors’ report
94
Group income statement
100
Group statement of
comprehensive income
Group balance sheet
Group cash flow statement
Group statement of changes
in equity
Notes to the Group financial
statements
Parent Company financial
statements
Notes to the Parent Company
financial statements
Five year record
Alternative performance
measures
Shareholder
information
Shareholder information
Glossary
100
101
102
103
105
138
139
141
142
146
148
Alternative performance measures – we assess the performance of the Group using a
variety of alternative performance measures, which are explained on pages 142–145
The strategic report was approved by
the Board and signed on its behalf by:
Luke Ellis
Chief Executive Officer
MAN GROUP PLC ANNUAL REPORT 2018
1
STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSSHAREHOLDER INFORMATION
Group at a glance
Man Group is an active investment
manager with a broad range of
strategies across investment styles,
asset classes and geographies.
Our five investment engines
house numerous investment teams
who benefit from the strength of Man
Group’s single operating platform.
FUM by product category ($bn)
Investment engines
28.9
Man AHL
Man AHL is a diversified quantitative investment
manager that has been a pioneer in the application
of systematic trading since 1987. Man AHL applies
scientific rigour and cutting-edge technology and
execution to a diverse range of data in order to
build systematic investment strategies, trading
over hundreds of global markets.
22.5
24.7
18.8
Absolute return
Total return
Multi-manager solutions
13.5
Systematic long only
Discretionary long only
Structured products
0.1
Man AHL
Man Numeric
Man GLG
Man GPM
Man FRM
FUM by manager ($bn)
Man AHL
Man Numeric
Man GLG
Man GPM
2.5
Man FRM
13.5
Man Numeric
Man Numeric is a quantitative manager invested
in almost every equity market in the world. The
investment engine employs disciplined and
systematic investment processes, underpinned
by a robust bottom-up, fundamental approach,
offering both long only and alternative strategies.
Man GLG
Man GLG is a discretionary investment engine,
offering a diverse range of alternative and long
only investment strategies across equity, credit,
fixed income and multi-asset approaches. It
increasingly leverages Man Group’s broader
quantitative techniques and technology as part of
its fundamental investment and efficient execution
processes. Man GLG’s experienced investment
teams are encouraged to think independently,
while sharing and debating ideas, unconstrained
by a house view.
Man GPM
Man GPM focuses on investments in private
markets, broadening Man Group’s offering into
less liquid assets such as real estate, private credit
and infrastructure. Launched with the acquisition
of Aalto Invest in 2017, Man GPM is focused on
sourcing investment opportunities offering
attractive risk-adjusted returns.
Man FRM
Man FRM is an alternatives investment specialist,
deploying investment and advisory services within
institutional portfolios. Man FRM provides a full
service offering to clients, ranging from advisory
work to customised and commingled portfolio
solutions, as well as a leading, technologically
innovative managed account platform.
26.2
32.1
34.2
2
MAN GROUP PLC ANNUAL REPORT 2018
STRATEGIC REPORT Our global sales team
provides clients with one point
of contact across Man Group.
This one key contact
understands the client’s
investment objectives and
engages in close dialogue
with our investors to
understand their particular
needs and constraints.
Offices around the world
Global headcount
16
1,435
at 31 December 2018
York
Oxford
London
Boston
Stamford
New York
Charlotte
Dublin
Liechtenstein
Tokyo
Pfäffikon
Shanghai
Guernsey
Hong Kong
Montevideo
Sydney
Our investment engines and
sales are supported by Man
Group’s robust infrastructure
and technological capabilities,
enabling us to maintain our
position at the forefront of the
asset management industry
and allowing us to evolve and
adapt with our clients’ needs.
The Group’s strong finances
and capital base gives us
flexibility to grow the business.
Regulatory capital surplus
$265m
at 31 December 2018
Net tangible assets
$629m
at 31 December 2018
MAN GROUP PLC ANNUAL REPORT 2018
3
STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSSHAREHOLDER INFORMATION Chairman’s statement
Funds under management
$108.5bn
at 31 December 2018
Statutory profit before tax
$278m
up from $272m in 2017
Proposed dividend per share
12.2%
increase from 2017 in £
Refer to pages 142–145 for details of the
Group’s alternative performance measures
Overview of the year
2018, and the last quarter in particular, was
a period of increased volatility across asset
classes, heavily influenced by political and
economic uncertainty. This created more
challenging trading and performance
conditions, with many asset classes and
investment strategies globally losing money
over the year. Despite this backdrop our
range of strategies performed creditably
delivering 1.0% of asset weighted
outperformance1 for clients for the year.
Funds under management grew in the first
three quarters of the year, driven by strong
net inflows, but the market moves
concentrated in the last quarter more than
offset our net inflows leading to a small
decline for the year as a whole. The market
environment also had an impact on
performance fee generation and hence
profitability, with adjusted profit before tax
of $251 million for the year compared to
$384 million in 2017. Within this management
fee profits grew by 7% driven by higher
average FUM during the year but
performance fee profits were down from
$181 million in 2017 to $34 million in 2018.
Our statutory profit before tax was
$278 million (2017: $272 million), which
includes a $113 million gain from the sale
of our stake in Nephila.
Our capital policy is to pay dividends
equivalent to management fee profit and
return to shareholders capital not required
in the business. In line with that policy, in
2018 we repurchased $211 million of shares
and the Board has recommended a final
dividend of 4.06 pence per share, subject to
approval by shareholders at the 2019 AGM.
As a result of the growth in management fee
profitability and also the impact of a reduced
share count due to our ongoing share
buyback programme, our total proposed
dividend per share for the year is up 12.2%
in sterling.
Our role as an asset manager
As an asset manager we play an important
role in helping a broad range of investors
meet their financial goals. Our objective is to
create and preserve value for our institutional
clients and the millions of individual savers
and pensioners they represent. The Board
spends a significant amount of time
reviewing the performance of our strategies,
monitoring the progress and development
of business partnerships with the Group’s
major clients and the creation of customised
product solutions to meet investor needs.
Man Group also recognises that responsible
investment is part of our fiduciary duty to our
clients and beneficiaries. We understand the
importance of sound stewardship in
managing investors’ capital, and our
approach to responsible investing closely
aligns us with the values of our clients,
shareholders and other stakeholders. In
2018 we introduced a formalised structure
that quantifies the degree of responsible
1
Performance figures shown net of representative
management and performance fees. Past performance
is not indicative of future performance.
Lord Livingston of Parkhead
Chairman
4
MAN GROUP PLC ANNUAL REPORT 2018
STRATEGIC REPORT investment focus for all Man Group funds,
as well as a proprietary list of sectors and
companies ineligible for our portfolios.
These developments will seek to ensure
a clear and consistent approach to
responsible investment across the Group’s
range of strategies, and inform the way we
deliver our approach to Environmental,
Social and Governance (ESG) investing to
meet the multitude of client preferences.
People and culture
The right culture and values allied with the
development of a deep and diverse talent
pool are vital to our continued success.
The promotion of management ambition
has been a key area of focus for the Board
during the year and we have spent time
discussing with management their ongoing
work to promote career development and
mobility of talent within the business.
In addition the Board has spent time
discussing people and the culture of the
business, encouraging management in
its promotion of diversity at all levels of
the organisation and monitoring the
implementation and impact of Man Group’s
core set of values. We consider it very
important that Man Group is an employer of
choice and, as part of our efforts to continually
improve our firm, an employee survey was
undertaken during the year. The Board
reviewed the results of this survey, which
identified what is working well, the areas for
improvement, and management’s subsequent
plan of action on where they should focus
their initiatives in the coming year.
Shareholders
At Man Group, we have an open and
constructive dialogue with shareholders.
In addition to the regular series of meetings
with shareholders in 2018 we held a teach-in
on technology in asset management, which
was aimed at improving shareholders’
understanding of the way we use technology
both in the investment process and more
broadly across the firm.
As our business evolves, it is important to
ensure that it has a corporate structure that
provides flexibility. Accordingly, we announced
in October our intention to adjust the Group’s
corporate structure and international
governance such that it is better aligned with
the global footprint of the business today
and to provide future flexibility in the capital
structure of the Group. Further detail on this
is included opposite. The proposal will be
subject to shareholder approval.
Community
We are conscious of the impact our
organisation has on the broader community,
and we aim to give back and contribute
positively to those around us. We achieve
this primarily through our work with the Man
Charitable Trust in the UK and our US based
Charitable Trust. Our charitable focus is on
promoting literacy and numeracy, and our
employees are actively involved in charitable
initiatives and volunteering opportunities local
to the firm’s offices through our ManKind
Programme. ManKind gives employees the
opportunity to take two additional days paid
leave per annum to volunteer with charities
supported by the two trusts or with a charity
of their choice. The Company will continue
to develop its work to promote diversity
and social mobility in education and STEM
subjects (science, technology, engineering
and mathematics) particularly.
Board changes
In June 2018, we were pleased to welcome
Zoe Cruz to the Board and as a member
of the Remuneration Committee. During her
25 year career at Morgan Stanley, Zoe held
various senior roles and her experience
within global financial institutions, extensive
knowledge of investment management and
financial markets, and her strong US
perspective makes her a valuable adviser
and contributor to the development of Man
Group’s business. In October, Nina Shapiro,
who had served as an independent
non-executive director since 2011, retired
from the Board. We would like to thank
Nina for her contribution over the years and
wish her all the very best for the future.
Outlook
Whilst 2018 was a more challenging year
in terms of financial results, a significant
amount of progress was made in building
for the long-term future growth and success
of the business. I would like to pay tribute to
the management team led by Luke Ellis and
all our people for what has been achieved.
We will continue to build on this good base
by investing in our people, our technology
and developing innovative investment
strategies to deliver value to both our clients
and shareholders.
Lord Livingston of Parkhead
Chairman
Proposed change to corporate
structure
The Group has seen significant
growth in the size of its US business
over the past five years alongside
growth in other international markets
and the UK. As a result Man Group
is proposing to adjust its corporate
structure and international
governance such that it is better
aligned with the global footprint of the
business. The proposed structure
should provide greater flexibility for the
Group and support the effective and
efficient governance of the business.
The Board believes a structure that
is consistent with market practice
for other global institutional asset
management businesses would assist
the Group in competing in those
markets over the long-term. At
present, the Group’s businesses in
the US and Asia are prudentially
regulated by the UK authorities as
well as local regulators. The proposed
structure would result in the Group
no longer being subject to global
consolidated capital requirements
and would therefore provide the
Group with greater flexibility going
forward comparable to other such
global groups.
The proposal is expected to enhance
the Group’s flexibility in financing,
including for example the seed capital
programme that supports product
innovation in our international
businesses. Following the proposed
change the Board will continue to
judge the Group’s capital needs
against its operational and strategic
requirements.
In order to implement this change
Man Group plc is proposing to
incorporate a new Group holding
company in Jersey. The proposed
change will have no impact on our
presence or the business operations in
London and the Group will remain UK
tax resident with no expected change
in our effective tax rate. The Group’s
shares would also remain UK listed.
MAN GROUP PLC ANNUAL REPORT 2018
5
STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSSHAREHOLDER INFORMATION Our business model
The long-term success of an asset management business
is centred around the ability to generate outperformance for
clients and to attract and retain client assets while controlling
costs. This will generate regular cash flows which can over
time be returned to shareholders.
What we do
We are a client-centric organisation, with the aim of delivering
high-quality active management portfolio solutions. Each client
has one point of contact at Man Group, whose role is to be an
expert in that client’s needs and work with them to meet their
investment objectives.
Our investment engines offer a broad range of products and
services to address clients’ investment needs covering
quantitative, discretionary and multi-manager. We are active
across equity, multi-asset, real estate, commodities, currency,
credit and volatility markets. We offer long only, alternative and
private markets strategies, and our ability to leverage diverse
expertise from across the firm is a key differentiator for us.
Under Man Solutions, we bring together the breadth of skills
found across our investment engines, providing innovative
portfolio solutions for clients.
ATIVE
N
R
E
LT
A
O R K I N
B
W
D I S C RETIONARY
G T O G ETHER TO D
T E R SOLUTIO
T
E
N
S
E
L
I
V
E
R
1 POINT
OF CONTACT
FOR CLIENT
P
R
I
V
A
T
E
M
A
R
K
E
T
S
E
TIV
U A NTITA
Q
M
U
L
T
I
-
M
A
N
A
G
E
R
R
A
A
N
G
C
R
E OF OPTIO N S W E O F FER
OSS THE D I V
S E
E
R
LONG- O N L Y
Strategic priorities
More on page 16
Innovative investment
strategies
Generating outperformance for
clients through high quality
research, developing our
people, and the strength of our
technology.
Strong client
relationships
Building long-term
partnerships with clients,
through a single point of
contact, to understand their
needs and offer solutions
across our range of
strategies.
Efficient and effective
operations
Building institutional quality
technology and
infrastructure, providing
scalable options for growth,
whilst operating the
business efficiently.
Returns to
shareholders
Generate excess capital to
either return or re-invest to
maximise long-term returns
to shareholders.
Our business model is underpinned by
Our
people
We hire and retain the
best people whilst
creating a meritocratic
and collaborative
environment for staff to
reach their full potential.
A single operating
platform
One operating platform,
with back and
middle-office functions
that work across the
whole group to optimise
the efficiency of our
operating model.
Risk
management
Accountability is
embedded throughout
the business both for the
management of
investment funds and
Man Group’s business.
Our governance
framework
Our robust corporate
governance practices
are of upmost
importance to ensure
effective oversight and
strong accountability.
Strong finances
and capital base
We have a strong
financial base and
actively manage our
capital to benefit
shareholders.
More on page 34
More on page 14
More on page 27
More on page 44
More on page 20
6
MAN GROUP PLC ANNUAL REPORT 2018
STRATEGIC REPORTREAL ESTATEMULTI-ASSETEQUITYCREDITVOLATILITYCURRENCYCOMMODITIES
What we do
How we generate
cash flows
We deliver value for
our stakeholders
Strategic priorities
Our business model is underpinned by
Revenue generation
Investment performance and fund flows drive
the economics of our business.
Management fees are typically charged for
providing investment management services
at a percentage of each fund’s gross investment
exposure or net asset value (NAV).
Performance fees are typically charged as a
percentage of investment performance above
benchmark return or previous higher valuation
‘high water mark’.
The costs associated with our business model
Man Group is fundamentally a people business
and the majority of our costs comprise payments
to individuals whether they are third-party
intermediaries or internal sales staff who distribute
our products, our investment managers who
manage investor assets or the teams that manage
our operations and infrastructure.
Returns to shareholders
We split the Group’s profits between management
fee earnings and performance fee earnings.
Management fee earnings are considered the
most appropriate basis on which to pay ordinary
dividends to shareholders as this represents the
most stable earnings base and underlying cash
generation of the business. Performance fee
earnings, which are a more variable but valuable
earnings stream for the Group, generate surplus
capital over time which is returned to shareholders
if it cannot be more profitably reinvested.
Clients
Superior, risk-adjusted
returns
1.0%
Net outperformance relative
to peers in 2018
More on page 13
Servicing clients’ needs
71%
Of FUM from clients invested
in two products or more
We play a vital role in helping a broad range of investors meet their
financial goals. Our objective is to create and preserve value for our
institutional clients and the thousands of individual savers they represent.
Shareholders
More on page 26
Shareholder returns
Dividend
$1.5bn
Over the last five years
in dividends and share
repurchases
11.8¢
For the year ended
31 December 2018
We aim to maximise shareholder returns by focusing on delivering
outperformance for clients and by operating and allocating capital
efficiently.
Employees
Engagement
7.8/10
Employee engagement score
More on page 34
Employee turnover
10.8%
We operate a workplace focused on meritocracy, fairness and equal
opportunities, while developing and retaining talent through continuing
education and constructive feedback.
Community
More on page 42
Charitable trust
Volunteering
67
Charities supported by
employees during 2018
52%
Increase in employees involved
in volunteering projects
We recognise that our long-term future is shaped by the contribution
to the communities in which we operate and our employees are
actively involved in local charitable initiatives through our ManKind
community volunteering programme. The Man Charitable Trust creates
opportunities for positive change, giving grants to charitable
organisations focused on literacy and numeracy.
Refer to pages 142–145 for details of the Group’s alternative performance measures
MAN GROUP PLC ANNUAL REPORT 2018
7
STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSSHAREHOLDER INFORMATION What makes us different?
Technology
At Man Group we use innovative technology
and quantitative techniques across our
business and believe this enables us to
deliver results for clients.
We believe that technology will
play a key role in the future of
active management and, today,
it is a key driver of innovation and
returns for our business.
We seek to develop our own
technologies, including both
software and hardware, as well
as creating our own code and
algorithms. We are also heavily
engaged with the technology
community, through our
contributions to the open-source
and Python ecosystem, and
hosting of technology forums.
Our Alpha Tech team is unified
across the investment engines,
developing code in a single
environment for maximum
flexibility and portability across
the business.
We believe that our capabilities
today represent a small fraction
of what we will be able to do in
five or ten years’ time. We are
committed to being a leader
in this area, and are continually
investing in talent, technology
and research as we strive to be
at the forefront of the industry.
Strength through
diversification
Man Group’s investment managers
have expertise across a diverse range
of strategies to ensure the firm can offer
products to meet differing investor appetite
for risk and reward.
Our business has five specialist
investment units, or engines,
which represent our capabilities.
These engines house numerous
investment teams, working
both independently and
collaboratively within the
framework of Man Group. Each
team benefits from the strength
and resources of the firm’s single
operating platform, enabling
their focus to be on delivering
outperformance to clients.
Our teams invest across a
diverse range of strategies with
highly specialised approaches,
from quantitative to discretionary
and alternative to long only,
accessing a broad spectrum
of asset classes across both
liquid and private markets.
Deep client
relationships
The breadth of our investment strategies
and the strength of our structuring
capabilities mean that we have the
resources and experience necessary
to support a wide range of clients.
We aim to develop long-term
partnerships with our clients,
through one key point of contact,
who has a deep understanding
of their individual needs and can
deliver bespoke solutions from
the broad range of strategies we
offer across the firm.
Investor requirements vary
significantly across investor
types, geography and regulatory
jurisdiction. With a well
established network of offices
in key locations and developed
regulatory relationships in all
of the markets in which we
operate, Man Group has a
powerful level of insight into
investor preferences as well as
regulatory requirements. We
are a global firm and we want
our clients and distributors to
interact with specialists who
speak their language and
understand their needs.
8
MAN GROUP PLC ANNUAL REPORT 2018
STRATEGIC REPORT We go out of our way
to create an excellent
environment for
the very best
technologists.”
Luke Ellis
Chief Executive Officer
Quantitative investment
management
experience
30+ years
Quants and
technologists
524
at Man Group as at
31 December 2018
One of the strengths
of Man Group is the
breadth of investment
teams, and the ability
of the firm to bring
them together to help
clients.”
Sandy Rattray
Chief Investment Officer
Building relationships
with our clients is key
to our long-term
growth, particularly
as an institutionally
focused business.”
Jonathan Sorrell
President
Worldwide markets
650+
different markets that
Man Group operates in at
31 December 2018
Investment strategies
72
different investment
strategies and solutions
run across the Group at
31 December 2018
Breadth of our
investment strategies
71%
of FUM from clients
invested in two products
or more
Global sales and
marketing employees
193
at Man Group as at
31 December 2018
MAN GROUP PLC ANNUAL REPORT 2018
9
STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSSHAREHOLDER INFORMATION
Market environment
and industry trends
A number of key trends are driving changes in the asset
management industry. Our commercial differentiators and
client focused business model mean we are well positioned
to address these trends.
Global and macro themes
Global indices 2018 (%)
0
-5
-10
-8.7
-9.5
-10.6
-15
-20
-14.6
-16.0
MSCI
World
NR USD
MSCI
EM NR
USD
MSCI
Europe
NR EUR
Topix
TR
JPY
FTSE
All Share
TR GBP
Brexit
The two-year period to determine the terms
of the UK’s exit from the European Union
ends in March 2019. As a result of the
ongoing political processes, UK investment
managers face continued uncertainty as to
the future regulations post-Brexit which may
impact their ability to access markets, make
investments or enter into legal agreements
within the EU.
Continued macro uncertainty
Risk assets started 2018 in a strong position,
particularly in the US following tax reforms
and strong growth forecasts but most major
indexes ended the year down significantly,
driven by a particularly volatile last quarter of
the year as shown in the chart opposite. The
Federal Reserve continued increasing rates
in the first quarter of 2018 following concerns
over inflation and raised rates four times in
total during the year. This coincided with the
start of what would be a year-long theme of
uncertainty surrounding trade sanctions and
negotiations between the US and China.
Higher US interest rates and a strong US
dollar weighed heavily on Emerging Markets,
especially Turkey and Argentina. In Europe
the main themes were Brexit, weak earnings
and weak growth forecasts, all culminating
in reduced investor risk appetite.
Looking forward to 2019 there is much to be
resolved on the political landscape. Markets
will be shaped by the outcome of the US
and China trade negotiations and Brexit.
It is also clear that markets are attempting
to anticipate the end of the cycle, and the
ensuing market turbulence.
Our response
We are not focused on the value or timing
of the exact peak or trough of any economic
cycle; that is the way to miss opportunities
in the present. Instead we ensure that our
risk management maintains high standards
so that if markets do deteriorate sharply we
are able to react swiftly. Man Group exists
to deliver alpha through sophisticated, active
management and we believe that 2019
offers us the opportunity to demonstrate this
core skill.
Our response
Man Group has planned for plausible Brexit
scenarios that may impact its business or its
clients, including a “no-deal” Brexit. As of the
beginning of 2019, Man Group has received
regulatory approval to upgrade the
regulatory permissions of its long standing
Irish entity and has opened a physical office
in Dublin, with seven employees initially
which we have been able to resource with
existing Man Group staff. Sitting alongside
Man Group’s existing regulated entity in
Liechtenstein, this enhancement to Man
Group’s European footprint is likely to be
further developed in 2019, with EU branches
of Man Group’s Irish entity established in
certain EU Member States. This ensures that
Man Group will remain able to service its
existing European clients and to access new
business in the EU.
We are also committed to ensuring that we
provide every support to those members of
our workforce who are EU nationals working
in the UK. During 2018, we ran advisory
sessions at both individual and group levels
for EU citizens, and will continue with our
ongoing programme of assistance to our EU
national employees and their families. We are
active participants in various industry forums,
liaising closely with the UK Government and
closely monitoring immigration updates in
relation to their potential impact on our
workforce. We support the UK
Government’s stated goals of allowing EU
citizens and their families to remain in the UK
when the UK leaves the EU, and ensuring
that it is straightforward for them to apply for
settled status in the UK.
Man Group will continue to monitor the
political and regulatory developments closely
in 2019, and will take all necessary steps to
ensure that the impact of Brexit on its
business, clients and employees is
minimised, whatever its form.
10
MAN GROUP PLC ANNUAL REPORT 2018
STRATEGIC REPORT Industry trends
Active versus passive
There are two major trends impacting flows
in our industry. At one end of the spectrum
there is a move to ‘passive’ investments
such as index trackers for investors wanting
to just follow the market at low cost. At the
other is a move to highly active products that
provide genuine alpha and manage portfolio
risk by seeking returns uncorrelated with
general market movements.
Our response
Although passive investments have a lower
headline cost, they are charging only for beta
and not alpha. At Man Group we are focused
on high alpha strategies with higher than
average active share (long only) or target
returns (alternatives). We have successfully
delivered alpha for our clients by more active
management than most competitors and
expect continued growth as a result. With a
tougher market backdrop as we enter 2019,
firms targeting superior risk adjusted returns
should prevail. In addition, we do not just offer
a limited menu of funds in which to invest,
instead we work closely with our clients who
value alpha generation to develop the products
they feel are missing from their portfolios.
Margin compression
The average margin across the industry has
been reducing over time as clients allocate
towards cheaper products or seek to
renegotiate fees.
Our response
Most of the reduction in fee margin at the
Group level over recent years has been due
to a change in business mix from retail
focused guaranteed products to diversified
alternative and long only strategies sold to
institutions. Fee pressure has impacted
certain areas of our business where price
competition is more intense but our clients
continue to pay full fees for innovative
products with a strong track record and Man
Group has a solid history of product
development. We also believe there are a
number of opportunities to work profitably
for our clients on larger scale business, at a
lower basis point fee, which is still attractive
to shareholders such as the infrastructure
mandates and client solutions within Man
FRM or collateralised loan obligations (CLOs)
within Man GLG.
Global AUM split by product (%)1
Global revenue split by product (%)1
$31tn
$39tn
$71tn
$79tn
9
57
6
19
9
11
46
9
19
15
18
35
14
19
15
20
33
14
19
15
$108bn
3
$168bn
4
$262bn
5
$275bn
6
28
5
23
40
22
9
21
42
21
10
20
43
39
4
25
29
2003
2008
2016
2017
2003
2008
2016
2017
Alternatives
Active specialities
Solutions/LDI/balanced
Active core
Passive
Technology
The use of technology, in particular the use
of artificial intelligence, has been a key theme
and industry discussion point over the past
few years. This theme is one that will
continue into 2019 and for years to come.
The rate of improvement in both software
and hardware shows little sign of slowing
and staying at the forefront of this evolution
will continue to differentiate asset managers.
Our response
At Man Group, we use innovative financial
technology and quantitative techniques
across our business, and believe this
enables us to deliver better results for clients.
Our quant assets have grown 18% on a
compound basis over the last three years
with around half of the Group’s FUM
managed by our systematic managers; Man
AHL and Man Numeric. We are committed
to being a leader in this area, and have
hundreds of researchers and technologists
and decades of experience.
It is, however, not just our systematic
managers that use machine learning.
In 2018, Man GLG hired a number of
quantitative researchers as part of our
ongoing effort to provide our discretionary
portfolio managers with better tools and
techniques to support their analysis and
trade execution processes. Machine
Learning techniques have been researched
at Man Group for a number of years and it
is a natural part of what we do. We do not
generally view it as a replacement for talented
human researchers, but as a tool to enable
people to tackle problems where the amount
or structure of data or nature of patterns are
hard to address by other techniques.
1 Some column totals may not total 100% due to rounding
Source: Boston Consulting Group (BCG), Global Asset Management 2018: The Digital Metamorphosis report
MAN GROUP PLC ANNUAL REPORT 2018
11
STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSSHAREHOLDER INFORMATION
Chief Executive Officer’s review
Whilst 2018 was a more difficult year in terms of financial
results, a significant amount of progress was made in
continuing to build the long-term value of the business.
Overview
After two steady years of growth in asset
prices, 2018 was characterised by an
increase in stock market volatility, crises in
Turkey and Argentina and slowing growth in
China and Europe. Most major asset classes
ended the year in negative territory and the
bouts of volatility affected investment
performance across many investment styles.
Against this backdrop we did a good job of
delivering results in the areas we can control,
namely generating outperformance for
clients, developing client relationships and
controlling costs while investing for growth.
We outperformed peers by 1.0% on average
across our strategies and we are pleased
with the result given the tougher alpha
environment. The client led growth in our
business remained strong in 2018 and
combined with the firm foundations laid
across the organisation in 2017, translated
into net inflows of $10.8 billion. The flows
were broad based demonstrating the
increasingly diversified nature of our
business. Fixed costs were delivered below
target and only slightly up on the prior year
despite continuing to invest in new talent and
technology and successfully managing the
implementation of two major pieces of
regulation, MiFID II and GDPR, aided by
a more favourable FX hedge rate.
However, our absolute performance for 2018
was impacted by the market backdrop.
Market moves, particularly for our long only
strategies, combined with an FX headwind
and a lack of basic momentum, broadly
offset the strong net inflows resulting in a
small reduction in FUM to $108.5 billion at
31 December 2018 as shown in the chart
opposite. The lower closing FUM also means
that run rate management fees as we enter
2019 are lower than for 2018.
Adjusted management fee profit before tax
was up 7% driven by higher net management
fees reflecting the strong FUM growth in
2017 and in the first three quarters of 2018,
before declines in the fourth quarter. The
more difficult performance environment
resulted in a disappointing level of
performance fee generation and adjusted
profit before tax decreased to $251 million,
compared to $384 million in 2017. Statutory
profit before tax was $278 million, up slightly
compared to 2017 with the gain on sale of
our stake in Nephila offsetting the reduction
in performance fee profits. Our business
continues to be strongly cash generative
with adjusted profit after tax (a good proxy
for underlying operating cash flow) of
$216 million in 2018.
FUM movements during 2018 ($bn)
10.8
1.0
-8.7
-3.7
108.5
109.1
31 Dec
17
Net
flows
Alpha
Market
moves
31 Dec
18
FX
and
other
Refer to pages 142–145 for details of the
Group’s alternative performance measures
12
Luke Ellis
Chief Executive Officer
MAN GROUP PLC ANNUAL REPORT 2018
STRATEGIC REPORT Performance2,3
Absolute performance in 2018 was heavily
influenced by the increased volatility across
asset classes with the larger impact being
in our long only equity strategies as can be
seen in the chart opposite. Performance in
the absolute return category was down 0.8%
with our discretionary alternative strategies
having mixed returns but our quant alternative
strategies holding up well despite it being a
weaker environment for momentum. In the
total return category the alternative risk
premia strategy suffered negative returns
but the emerging market debt strategy
ended the year slightly positive. Systematic
long only strategies were down on average
15.6% across the product category with
returns ranging from -11.8% to -17.9%. Given
it is the largest strategy in the Group, returns
in the discretionary long only category were
heavily affected by the performance of
Japan CoreAlpha.
Relative performance across the Group was
positive, with asset weighted outperformance
versus peers1 across our strategies of 1.0%
for the year. The strong outperformance in
the absolute return category was driven by
our quant alternative strategies (outperforming
the Barclay BTOP 50 Index by between 1.2%
and 7.6%). Across our total return strategies
Alternative risk premia continued its strong
relative performance since launch and the
emerging market debt strategy significantly
outperformed competitors due to its
bearish positioning. Systematic long only
relative performance was weaker with
underperformance of 2.8% in the year due
to their value bias. Relative performance in
the Group’s discretionary long only strategies
was slightly positive with Japan CoreAlpha
performing ahead of peers and the UK and
European long only strategies performing
broadly in line with peers.
Absolute and relative performance in 2018 (%)
Absolute
Relative
-0.8
-2.1
-1.8
Absolute return
Total return
Multi-manager solutions
Systematic long only
-15.6
Discretionary long only
-11.5
Group
-7.3
4.0
5.2
0.0
-2.8
0.3
1.0
Progress against strategic
priorities
Strong client relationships
In 2018 we saw continuing interest in our
alternative risk premia, emerging market
debt and UK and European discretionary
long only strategies. Alternative risk premia
was the biggest contributor to the net flows
and is a good demonstration of our product
innovation generating value to both clients
and shareholders.
During the year, we built upon the
engagement with our existing and target
clients during 2017, making further progress
in building long-term relationships with
clients and adding new relationships with
strategically important asset allocators and
distributors globally. In line with this focus,
we continue to see the trend of clients
investing across the firm, with 71% of FUM
at 31 December 2018 relating to clients
invested in two or more products, and 48%
relating to clients invested in four or more
products. Our 50 largest clients are invested
in three of our strategies on average which
also demonstrates the breadth of
engagement across the firm.
We repeatedly see that our clients value both
the strength and breadth of our offering, and
our ability to provide them with a single point
of contact who understands them and their
individual requirements. In addition, the
combination of our centralised infrastructure
and technology and the breadth of our
investment strategies means that we are
well-positioned to develop bespoke solutions
to suit specific client requirements, drawing
upon the varied investment expertise
available across the business. We find that
clients increasingly want strategies tailored
to their unique needs. In response to this,
we work closely with our clients to
understand their circumstances and to
create individualised solutions for them.
Innovative investment strategies
We actively manage risk across a wide array
of asset classes and geographies on behalf
of clients every day. The quality of our
execution and risk management allows us
to invest across markets in a size that is
meaningful for clients. Our ability to manage
that risk, and to rapidly adjust course as
needed, gives our clients confidence in
entrusting us with their assets. It also gives
us the ability to identify and capitalise on
new markets as they develop.
1 Refer to pages 142–145 for details of the Group’s alternative performance measures
2 Performance figures shown net of representative management and performance fees. Past performance is not indicative of future performance.
3 Where a strategy has a formal benchmark, performance is compared to this. Where no formal benchmark has been set, “benchmark” should be taken to refer to a relative index.
Relative performance is provided for illustrative purposes to provide market information and is not meant to be an accurate comparison. The strategy is managed significantly
differently than the benchmark or index.
MAN GROUP PLC ANNUAL REPORT 2018
13
STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSSHAREHOLDER INFORMATION
Chief Executive Officer’s review continued
We added some
exciting new
capabilities during
2018.”
Asset weighted outperformance
versus peers
1.0%
in 2018
Net inflows
$10.8bn
in 2018
Adjusted profit before tax
$251m
down from $384m in 2017
Refer to pages 142–145 for details of the
Group’s alternative performance measures
Efficient and effective operations
Our central infrastructure is the foundation
on which the firm operates. This includes
our proprietary central operational platform,
which enables us to evolve and adapt as
markets and our clients’ needs do, as well
as our infrastructure teams more broadly,
which include enterprise technology,
compliance, legal, human resources
and operations functions.
As well as its ongoing benefits, our
infrastructure positions us to integrate
acquisitions or new teams rapidly, with
the potential for significant operational cost
synergies while preserving the investment
process. We continue to review a large
number of acquisition opportunities and
while we haven’t seen any that meet our
criteria in 2018, we think this capability will
prove valuable to shareholders in the longer
term, as it has in the past.
We regularly assess our cost base across
the firm in comparison to our revenue
earning capabilities to ensure we are running
the business as efficiently as possible while
investing for growth. In 2018, we committed
an additional $15 million of spend into our
investment management and technology
capabilities which will further support our
ability to serve our clients globally.
A higher FX hedge rate and the impact of
the new lease accounting standard means
that our fixed costs will be higher in 2019,
although both of these impacts will normalise
in the longer term.
People and culture
We are fundamentally a people business.
To best serve our clients and shareholders,
attracting and retaining the best people and
creating an environment in which they can
achieve their potential remain top priorities
for us. We place great importance on being
an employer of choice and a good place to
work for all employees. We are committed to
conducting our business in accordance with
the principles outlined opposite, which are
embedded within all areas of the firm.
Across our quantitative business, ongoing
focus on research continued to drive the
development of our strategies. As an
example, in 2018 we actively marketed the
AHL TargetRisk strategy which currently
trades $1.7 billion.
Within our discretionary business, we are
embedding quantitative techniques to
support and enhance the alpha from each
team. Developments include the deployment
of quantitative techniques to reduce systemic
risk, as well as a quantitative trading portfolio
within our long short equity programme,
which complements discretionary decision
making with a systematic overlay.
At a Group level, we made further progress
in centralising our trading and execution
function, including making a number of
internal appointments, as we seek to build
our own firm-wide centre of execution
excellence in trading, trading technology
and trading research. A globally coordinated
central execution team allows us to adapt
to today’s more complex market structures
with the goal of delivering better execution
results for all of our investment engines. We
expect this ongoing effort to further reduce
trading costs and slippage, translating into
improved performance for clients. In 2018
this lowered run rate execution costs by
$140 million.
We remain committed to keeping technology
at the heart of the firm in a rapidly evolving
world and have appointed an Alpha Chief
Technology Officer to manage the
development of the technology used across
the firm to generate and deliver alpha. He will
be supported by a team drawn from across
the investment engines. This new structure
supports our vision of creating a central
technology team, environment and platform
which promotes the highest level of
innovation and agility, whilst minimising
any unnecessary duplication of technology,
tools and processes across Man Group.
In 2018, we made great strides when it
came to Responsible Investing (RI) as
we explain on pages 38–40. While we
will keep pushing for improvement, there
are challenges in RI, the most important
of which, in my view, is data. There is no
consensus on how to measure environmental,
social and governance (ESG) criteria for
companies, for example, or quantify which
investments are the most responsible. This
is an area in which we are applying Man
Numeric’s unique skillset, to improve the
collection and analysis of ESG data.
14
MAN GROUP PLC ANNUAL REPORT 2018
STRATEGIC REPORT
Business principles that
guide our actions
Man Group’s business principles
are designed to distil and define the
firm’s key priorities, focus and culture.
The principles are displayed in
Man Group’s offices internationally
to promote a common understanding
of the firm’s values.
Performance
First, foremost and always we
focus on achieving superior
risk-adjusted performance
Clients
Our clients are at the heart of
everything we do
Responsibility
We expect our people to do the
right thing and conduct our
business with the highest
standards of integrity
Excellence
Good is not enough, we strive to
be excellent in all we do
Differentiation
We seek to be differentiated and
original in our thinking
Meritocracy
We succeed through talent,
commitment, diligence and
teamwork
We are a true meritocracy where we
succeed through talent, commitment,
diligence and teamwork. We are committed
to supporting our employees so that
everyone at Man Group has the opportunity
to be the best they can be. Over the past
18 months we have developed a dedicated
talent function which focuses on helping
our people achieve their potential, both
individually and within their teams.
We also know that by celebrating diversity
and building an inclusive working
environment, we will attract the best talent to
our business. We believe that by embracing
diversity in all forms we encourage original
and collaborative thinking with multiple and
differing perspectives which positions us to
deliver the best results for our clients. We are
committed to increasing diversity in all forms,
at all levels, because we think it makes Man
Group a better, stronger firm. Drive, our
employee-led diversity and inclusion
network, seeks to inform, support and inspire
our people. During 2018, we saw the launch
of three new employee networks within
Drive – Families at Man, Pride (LGBT+)
and BEAM (black employees at Man).
Early in 2018, we issued our first annual
Diversity & Inclusion report, which included
an overview of our initiatives to attract and
develop diverse talent as well as our gender
pay statistics. In the report, we introduced
Paving the Way, our dedicated campaign
to enhance diversity and inclusion at Man
Group and across the financial services and
technology industries more broadly. When it
comes to achieving real change in diversity
in our industry, there is no doubt that a less
diverse pool of potential candidates is a
challenge. We believe that we can, and
must, take steps to address this ‘pipeline’
challenge proactively. We have introduced
a number of initiatives to support this in
recent years, including our efforts focused
on school age to university students, and
our Paving the Way campaign seeks to build
our efforts in this area. Through reporting
annually on our progress and commitment
to diversity and inclusion, we will assess
and monitor the success of this campaign
and our strategy over time.
Regarding gender diversity specifically,
in 2018 Man Group became a signatory to
the Women in Finance Charter, a pledge for
gender balance across financial services.
As part of this, we have introduced a target
of at least 25% female representation in
senior management roles by December
2020. We are pleased to report a positive
trajectory in relation to gender diversity
across the firm, having seen an increase
in the proportion of women in senior
management roles from 16% in 2016 to 22%
in 2018, and we are committed to further
improvement in this area in the years ahead.
In 2018 we introduced our Enhanced
Parental Leave Policy, which entitles every
new parent, regardless of gender, to 18
weeks of parental leave at full pay. This is not
dependent on location, and applies to both
biological and non-biological new parents,
as well as to employees providing foster
care. We believe that this allows our people
to take leave at one of the most significant
times in their lives, underscoring our
commitment to enabling our employees
to have a true work-life balance.
I believe that we do our best work for our
clients when we support our employees,
and value their different perspectives and
experience. I would like to thank everyone
at Man Group for their contribution to the
progress we made during 2018, particularly
given the tougher market environment.
Outlook
Looking ahead, we have had a healthy
number of new mandate wins but as clients
respond to changes in the market and adjust
their portfolios we have also seen a pick-up
in redemptions. I remain confident that
Man Group is structurally well positioned
for the future with compelling investment
propositions, deep client relationships and
a competitive advantage in our experience
of using financial technology to drive
investment returns.
Luke Ellis
Chief Executive Officer
MAN GROUP PLC ANNUAL REPORT 2018
15
STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSSHAREHOLDER INFORMATION Progress against our strategy
In 2018, we made good progress against our strategic priorities.
We continue to focus on research and innovation and build
on new and existing client relationships, whilst running the
business efficiently and investing for growth.
Innovative investment
strategies
Generating outperformance for
clients through high quality research,
developing our people, and the
strength of our technology.
How we performed in 2018
– Appointed a Chief Investment
Officer for Credit at Man GLG
to help develop our offering
in this asset class
– Deployment of quantitative
techniques at Man GLG to
reduce systematic risk
– Further progress made in
creating a centre of execution
excellence in trading, trading
technology and trading
research
– Started marketing the AHL
TargetRisk strategy developed
which raised $1.3 billion in 2018
Strong client
relationships
Building long-term partnerships with
clients, through a single point of
contact, to understand their needs
and offer solutions across our range
of strategies.
How we performed in 2018
– Hired additional talent in sales,
further enhanced the sales
training programme and
created a new sales graduate
programme
– Effort to increase the delivery
of content from around the
firm to clients to broaden and
strengthen client relationships
– Successfully aligned
resources to targeted
opportunities adding
a significant number
of new relationships with
strategically important asset
owners during the year
Efficient and
effective operations
Building institutional quality technology
and infrastructure, providing scalable
options for growth, whilst operating
the business efficiently.
How we performed in 2018
– Fixed cash costs were
broadly in line with 2017 with
investment in technology and
investment management
capabilities offset by
efficiencies and an FX benefit
– Implemented two key pieces
of regulation, MiFID II and
GDPR
– Implemented a new finance
and HR system which went
live in 2019
– Implemented several Drive
initiatives, including the launch
of the BEAM (Black
Employees at Man), FAM
(Families at Man) and PRIDE
(LGBT+) networks and signed
up to the Women in Finance
Charter
Returns to
shareholders
Generate excess capital to either
return or re-invest to maximise
long-term returns to shareholders.
How we performed in 2018
– Repurchased $211 million
– Announced proposed
shares during 2018 across
three buyback programmes
– Sale of Nephila which
generated net proceeds
of $140 million
corporate restructure which
should provide greater
flexibility for the Group going
forward
– Identified and reviewed
around 100 potential
acquisition opportunities
during the year
16
MAN GROUP PLC ANNUAL REPORT 2018
STRATEGIC REPORT For more information on how KPIs relate to our strategy
Go to page 18
For more information on how Risk relates to our strategy
Go to page 31
Raised in AHL TargetRisk strategies in 2018
$1.3bn
Lower run rate execution costs in 2018
$140m
Objectives for 2019
– Improve the consistency of
– Develop new strategies,
performance within Man GLG
– Continue with the deployment
of machine learning techniques
to aid investment decision making
across the Group
– Generate incremental high value
add capacity in Man AHL
particularly through collaboration
between the capabilities of
Man AHL, Man FRM, Man GLG
and Man Numeric
– Continue the work on reducing
execution and trading costs
Cumulative net inflows since 2014 ($bn)
Objectives for 2019
– Attract and develop talent in
– Broaden and deepen existing
29.1
18.3
3.3
3.6
5.5
2014
2015
2016
2017
2018
Fixed costs
$325m
Nationalities working at Man Group
64
sales, focusing on hiring required
additional people and providing
relevant training and development
across all levels
– Target resources effectively,
balancing near term sales and
asset retention, with the need
to build the business longer term
from a product and client
perspective
Objectives for 2019
– Continued focus on our cost base
to ensure we run the business
efficiently whilst addressing all
risks and opportunities
– Selective investment in certain
areas of the Group, particularly
in quant and technology to ensure
we remain at the forefront of
our industry
client relationships and continue
to develop relationships with key
target clients
– Continue to actively foster a
diverse and inclusive culture
across the business through our
Drive network and Paving the Way
campaign
Returns to shareholders ($m)
Objectives for 2019
– Deliver the proposed corporate
– Assess capital returns alongside
345
175
289
115
174
170
250
100
150
382
200
Dividend
Buybacks
275
100
175
182
2014
2015
2016
2017
2018
MAN GROUP PLC ANNUAL REPORT 2018
any potential acquisition
opportunities to ensure the best
risk-adjusted investment of capital
restructure subject to shareholder
approval
– Maintain focus on balance sheet
efficiency and active management
of capital
– Generate additional surplus
capital through performance
fee profits
17
STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSSHAREHOLDER INFORMATION Key performance indicators
Our financial KPIs illustrate and measure the relationship between
the investment experience of our clients, our financial performance
and the creation of shareholder value over time.
Financial
Investment performance
Net Flows
Adjusted core profit
before tax
Adjusted management
fee EPS growth
Target: 0%–2%
Target: 1%–6%
Target: $272m – $473m
Target: 5%–12%
met
2017
2018
1.0%
met
not met
met
1.9%
15.8%
$359m
20.0%
2017
2018
9.9%
2017
2018
$237m
2017
2018
9.3%
What we measure
The asset weighted outperformance1
of Man Group’s strategies compared
to peers gives an indication of the
competitiveness of our investment
performance against similar
alternative investment styles offered
by other investment managers.
Net flows1 are the measure of our
ability to attract and retain investor
capital. FUM drives our financial
performance in terms of our ability
to earn management fees.
How we performed
We achieved asset weighted
outperformance versus peers of
1.0% in 2018, and therefore achieved
the KPI target. Further investment
performance information is provided
on page 13.
Net inflows of 9.9% in 2018 are above
the target range, and indicative of the
strong net inflows into our total return
strategies, and smaller inflows into
absolute return, discretionary long only
and systematic long only strategies,
partially offset by small net outflows
from multi-manager solutions. Net
flows of 15.8% in 2017 were at record
levels. Further flows information is
provided on page 21.
Adjusted core profit before tax1 is a
measure of overall profitability and cash
generation. This measure excludes
legacy income streams in relation to
guaranteed products and commission
income and profits from Nephila, so
better represents the core business of
Man Group today. As this incorporates
both management and performance
fee profits it reflects that performance
fees, although volatile in nature, are a
key earnings stream for Man Group and
a significant component of value
creation for shareholders over time.
Adjusted core profit before tax of
$237 million for the year ended
31 December 2018 fell outside of
the target range, largely reflecting low
levels of performance fee generation.
For further information see page 23.
The net flows target range has been
updated to 1%-6% from 0%-10% in
prior year in order to better reflect
industry trends and the market
environment to provide a more
appropriate target.
Adjusted core profit before tax
replaces the 2017 adjusted
management fee EBITDA margin KPI.
Profit margin and overall profitability
remain key priorities for the Board, and
continue to be reflected in adjusted
core profit before tax.
Changes to our KPIs
Asset weighted outperformance
versus peers replaces the 2017
investment performance KPI of
performance versus key strategies,
in order to ensure the relative
investment performance KPI reflects
the continued diversification of our
business. This provides a more
complete and balanced view across
Man Group’s product base as it
includes all strategies against which
relevant peer benchmarks are
available weighted by FUM, as
opposed to certain identified key
strategies. This measure is more
dynamic and will change as the
business continues to evolve, in line
with Man Group’s strategic priorities.
Adjusted management fee EPS1
growth in the year measures the
overall effectiveness of our
business model, and drives both
our dividend policy (outlined on
page 26) and the value generated
for shareholders.
The adjusted management fee EPS
growth of 9.3%, from 10.8 cents to
11.8 cents, was within the target
range for 2018. Adjusted
management fee EPS growth is
largely driven by the higher net
management fee revenues and
higher profits per share due to the
impact of share repurchases which
reduce the number of shares. For
further information on EPS, see
page 144.
The target range for adjusted
management fee EPS growth has
been updated from 0%-20% plus
RPI in 2017 to 5%-12%, which
reflects attractive shareholder
returns and better represents
a stretch target for the markets
in which Man Group operates.
This target may be not met or
may be exceeded in a particular
year depending on wider market
movements.
1 Details of the calculation of our alternative performance measures are provided on pages 142–145.
18
MAN GROUP PLC ANNUAL REPORT 2018
STRATEGIC REPORT Measure against our
strategy
Innovative investment
strategies
Strong client relationships
Efficient and effective
operations
Returns to shareholders
Further reading
£
!
Linked to Remuneration –
see page 67
Linked to Risk – see page 27
Why we are
changing our KPIs
We have made some changes to
our KPIs for the 2018 financial year,
as outlined opposite. These changes
have been made in order to ensure
our KPIs continue to reflect best
practice in alignment with the Group’s
business strategy and delivery of
shareholder value, which also aligns
with changes to the Directors’
Remuneration policy (see page 67).
Remuneration
Executive director remuneration is directly linked
to strategy and performance, with particular
emphasis on matching rewards to results over
the long-term.
Linked to strategy
A substantial portion of executive director
remuneration is linked to success in implementing
the Group’s strategy. Progress against the
Group’s strategic priorities and KPIs provide key
metrics for determining the short and long-term
variable pay.
See page 70 of the Directors’ Remuneration report
for how the proposed new policy links to our KPIs
Performance related
The variable components of total remuneration
are linked to performance and deliveries for our
clients and shareholders. High pay requires
high performance. Achieving the maximum pay
requires sustained high performance across all
businesses over several years.
More on pages 68–73
Long-term shareholder alignment
The structure of pay is designed to reflect the
long-term nature of the Group’s business.
Alignment with shareholders has been further
enhanced in the new Directors’ Remuneration
policy which was approved by shareholders at
the 2018 Annual General Meeting (AGM) with a
new Long-Term Incentive Plan with a three year
performance and subsequent two year post-
vesting holding period and increased shareholding
requirements to be retained after departure.
More on page 74
Shareholder engagement
The Remuneration Committee actively seeks
to understand shareholder preferences and be
transparent in explaining its policy and practice.
During 2018 the Remuneration Committee
Chairman spoke to a majority of our shareholders
and their representative bodies to discuss the
application of the policy that was approved by
shareholders at the AGM in May 2018.
More on page 73
MAN GROUP PLC ANNUAL REPORT 2018
19
STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSSHAREHOLDER INFORMATION Chief Financial Officer’s review
We were able to generate net inflows and outperformance across
our strategies despite a more difficult performance backdrop for
asset managers. Our diversified business helped us to grow our
management fee profitability despite the environment.
Overview
In what has been a tougher environment for alternatives and long
only equities, our funds under management are down slightly to
$108.5 billion, despite another strong year of net inflows of $10.8 billion
and relative outperformance in our strategies. The decrease was
driven by negative absolute investment performance of $7.7 billion,
largely from our long only strategies, as well as negative FX
movements of $2.7 billion primarily as a result of the US dollar
strengthening against most major currencies. The sale of our minority
stake in Nephila in late 2018 generated a gain on sale of $113 million
and cash inflows of $140 million. Nephila has been a profitable
long-term investment, returning cash of over five times invested
capital over the ten year life of our investment, reflecting our
approach to capital management.
Net management fee revenue¹ was $791 million for the year, an
increase of 7% from prior year as a result of higher average FUM
during the year despite the fall during the fourth quarter, partially
offset by margin compression. Our average management fee margin
declined during the year, albeit at a slower rate than in 2017, which
is primarily driven by mix effects across our diversified product range.
Performance fee revenues decreased to $127 million, from $289 million
in 2017, with over half of these generated by Man AHL’s Evolution
and Dimension strategies. We made a small loss on our seed book
of $5 million, compared to a gain of $44 million in 2017. The risk
management of our seeding positions protected us from larger
losses given the market backdrop.
Total costs were $657 million, down from $676 million in 2017 largely
as a result of lower performance fee related variable compensation,
partially offset by higher asset servicing costs in relation to research
costs incurred by Man Group as a result of the MiFID II
implementation from January 2018. Our fixed costs remained
broadly stable despite increased investment in our technology and
investment management capabilities, largely as a result of cost
efficiencies from centralisation of our London office space in late
2017 and the more favourable US dollar to sterling hedged costs rate
in 2018. We have absorbed the administration related cost increases
as a result of MiFID II.
Statutory profit before tax
Statutory earnings per share
Adjusted profit before tax¹
Adjusted earnings per share¹
Adjusted management fee profit
before tax¹
Adjusted performance fee profit
before tax¹
Year ended
31 December
2018
Year ended
31 December
2017
$278m
17.0¢
$272m
15.3¢
$251m
$384m
13.5¢
20.3¢
$217m
$203m
$34m
$181m
1 Refer to pages 142–145 for details of the Group’s alternative performance
measures.
Statutory profit before tax has increased from 2017 due to the gain
on sale of Nephila and a reduction in the fair value of our future
earn-outs for previous acquisitions, partially offset by lower
performance fee generation. The decrease in adjusted profit before
tax¹ and adjusted earnings per share¹ was driven by the decrease
in adjusted performance fee profit before tax¹. Adjusted management
fee profit before tax¹ increased in 2018 largely as a result of higher
net management fees.
Our balance sheet remains strong and liquid, with net tangible assets
of $629 million or 39 cents per share at 31 December 2018. We have
a net cash position of $194 million and continue to be strongly cash
generative, with operating cash flows of $319 million (2017: $245 million).
We have returned over $1.5 billion to shareholders via dividends and
share repurchases over the past five years (see page 26) and
continue to focus on ensuring the business generates strong cash
flows, either to return to shareholders or to reinvest to generate
improved returns in the future. In line with this approach, during 2018
we announced a further $200 million of share repurchases.
20
Mark Jones
Chief Financial Officer
MAN GROUP PLC ANNUAL REPORT 2018
STRATEGIC REPORT Our regulatory surplus capital¹ is $265 million at 31 December 2018. Our proforma surplus capital¹ is $340 million, including the impact
of the new lease accounting standard applicable from 1 January 2019 which reduces our surplus capital by approximately $100 million.
This accounting change has no impact on our cash flows, however it is expected to increase the total premises costs recognised in our
income statement by up to $5 million each year over the next five years. It may also result in significant unrealised foreign exchange
gains or losses as a result of the revaluation of our sterling lease commitments, which we expect to classify as an adjusting item
from 2019 onwards (see further discussion on pages 24 and 107).
Funds under management (FUM)
$bn
Alternative
Long only
Total excluding Guaranteed
Guaranteed
Total
Absolute return
Total return
Multi-manager solutions
Total
Systematic
Discretionary
Total
FUM at
31 December
2017
Net inflows/
(outflows)
Investment
movements
Foreign
currency
movements
Other
movements
FUM at
31 December
2018
29.2
16.5
16.0
61.7
26.8
20.4
47.2
108.9
0.2
109.1
1.4
8.1
(1.8)
7.7
2.0
1.1
3.1
10.8
0.0
10.8
(0.5)
(0.4)
(0.2)
(1.1)
(4.2)
(2.4)
(6.6)
(7.7)
0.0
(7.7)
(0.8)
(0.6)
(0.4)
(1.8)
(0.1)
(0.8)
(0.9)
(2.7)
0.0
(2.7)
(0.4)
(1.1)
(0.1)
(1.6)
0.2
0.5
0.7
(0.9)
(0.1)
(1.0)
28.9
22.5
13.5
64.9
24.7
18.8
43.5
108.4
0.1
108.5
Absolute return
Absolute return FUM remained broadly flat during the year, with
net inflows into discretionary long short strategies being offset by
negative investment performance and FX movements. The negative
investment movement was a result of negative absolute performance
in Man GLG and Man Numeric alternatives, partially offset by positive
performance in Man AHL’s Alpha and Dimension strategies. Other
movements primarily relate to leverage changes in quant strategies.
Total return
Total return FUM increased by 36%, driven by net inflows of $8.1 billion
primarily due to allocations to alternative risk premia, European CLOs
and AHL’s TargetRisk strategy. The negative investment movement
was largely due to the absolute performance of diversified risk premia
and muted absolute performance of EM debt total return, although
both strategies have outperformed peers during the year. Other
movements relate to CLO and global private markets maturities
during the year.
Multi-manager solutions
Multi-manager solutions net outflows of $1.8 billion included the
redemption of a large single investor infrastructure mandate for
$2.2 billion, and net inflows of $1.2 billion from segregated mandates.
The negative investment movement was largely driven by infrastructure
mandates, where investment decisions are made by the investors.
Systematic long only
Systematic long only FUM decreased during the year as a result
of negative investment performance, partially offset by net inflows
into emerging markets core, international small cap and global low
volatility. Negative investment performance was broad based with
overall absolute performance down by 15.6% on average.
Discretionary long only
Discretionary long only FUM decreased by 8% due to negative absolute
performance and foreign exchange movements, partially offset by net
inflows. Net inflows were into UK undervalued assets, EM fixed income
and continental Europe strategies. The negative investment movement,
largely occurring in the fourth quarter, was driven by performance
from Japan CoreAlpha. Other movements relate to the on-boarding
of additional FUM into our strategic bond strategies.
Guaranteed products
Guaranteed product FUM reduced from $200 million to $100 million
during the year as a result of maturities and de-gearing.
1 Refer to pages 142–145 for details of the Group’s alternative performance measures.
MAN GROUP PLC ANNUAL REPORT 2018
21
STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSSHAREHOLDER INFORMATION Chief Financial Officer’s review continued
Net management fee margins and revenue
$m
Absolute return
Total return
Multi-manager solutions
Systematic long only
Discretionary long only
Core net management fee revenue1
Guaranteed
Other income2
Net management fee revenue before
share of after tax profit of associates
Share of post-tax profit of associates
Net management fee revenue3,4
Year ended
31 December
2018
Year ended
31 December
2017
370
111
54
97
145
777
7
–
784
7
791
370
68
65
89
119
711
12
5
728
8
736
1 Details of these alternative performance measures are included on
pages 142–145.
2 Other income in 2017 primarily relates to a distribution agreement for Nephila
products, which ceased in April 2017.
3 Net management fee revenue also includes $1 million (2017: $3 million) of
management fee revenue relating to line-by-line consolidated fund entities for
the third-party share.
4 Includes $51 million (2017: $56 million) of distribution costs which have been
deducted from gross management and other fees of $835 million (2017: $784 million).
The Group’s total net management fee margin1 decreased by 6 basis
points during the year to 70 basis points, with the reduction continuing
to be driven by mix effects. The roll off of our guaranteed products
contributed a one basis point decrease.
Within their categories, management fee margins stayed broadly
in line with the prior year, with the exception of absolute return and
multi-manager solutions. The absolute return net management fee
margin decreased by 11 basis points as a result of the continued
mix shift towards institutional assets which are at a lower margin.
Net management fee margin (bps)
147
138
127
123
Run rate net management fee revenue ($m)
59
13
-62
781
-40
751
31 Dec
17
Flows
Relative
performance
Market
moves
FX and
other
31 Dec
18
We expect the absolute return margin will continue to gradually
decline as this shift continues. The multi-manager solutions net
management fee margin decreased to 36 basis points in 2018, from
45 basis points in 2017, as a result of Man FRM’s continued shift
towards a solutions provider from traditional fund of funds manager.
The multi-manager solutions margin is expected to decline further
as the shift towards lower margin services continues.
Net management fee revenue grew by 7% in 2018 and core net
management fee revenue¹ increased by 9% to $777 million in 2018,
driven by growth in average FUM during the year, partially offset by
the continued decline in our average margin as previously outlined.
The Group’s run rate net management fee margin¹ at 31 December
2018 was 69 basis points, and the run rate net management fee
revenue¹ (which applies internal analysis of run rate margins to 31
December 2018 FUM) was $751 million. As can be seen from the
chart above, this is lower than our 2018 opening position as the
strong growth we generated from flows has been more than offset
by market moves, concentrated in the fourth quarter.
56
57
57
47
63
45
67
67
69
68
83
75
70
69
e
t
a
r
n
u
R
6
1
0
2
7
1
0
2
8
1
0
2
Absolute
return
6
1
0
2
7
1
0
2
8
1
0
2
Total
return
36
35
36
36
36
37
e
t
a
r
n
u
R
6
1
0
2
7
1
0
2
8
1
0
2
e
t
a
r
n
u
R
6
1
0
2
7
1
0
2
8
1
0
2
e
t
a
r
n
u
R
6
1
0
2
7
1
0
2
8
1
0
2
e
t
a
r
n
u
R
6
1
0
2
7
1
0
2
8
1
0
2
e
t
a
r
n
u
R
Multi-
manager
solutions
Systematic
Discretionary
Group
(excl.
Guaranteed)
Alternatives
Long only
22
MAN GROUP PLC ANNUAL REPORT 2018
STRATEGIC REPORT
Summary income statement
$m
Gross management and other fees1
Share of post-tax profit of associates
Distribution costs
Net management fee revenue
Performance fees1
(Losses)/gains on investments2
Net revenue
Asset servicing
Fixed compensation3
Variable compensation
Other costs – cash costs1,3
Other costs – depreciation and
amortisation
Total costs
Net finance expense3
Adjusted profit before tax3
Adjusting items3 (see page 24)
Statutory profit before tax
Adjusted management fee profit
before tax3
Adjusted performance fee profit
before tax3
Adjusted core profit before tax3
Year ended
31 December
2018
Year ended
31 December
2017
835
7
(51)
791
127
(5)
913
(51)
(179)
(257)
(146)
(24)
(657)
(5)
251
27
278
217
34
237
784
8
(56)
736
289
44
1,069
(37)
(174)
(300)
(147)
(18)
(676)
(9)
384
(112)
272
203
181
359
Statutory diluted EPS
17.0 cents
15.3 cents
Adjusted management fee EPS3
11.8 cents
10.8 cents
Adjusted EPS3
13.5 cents
20.3 cents
1 Management and other fees also includes $1 million (2017: $3 million) of management
fee revenue, performance fees include $1 million (2017: $2 million) of performance fee
revenue, and other costs includes a nil (2017: $1 million) deduction of costs relating
to line-by-line consolidated fund entities for the third-party share (per Group financial
statements Note 13.2 on page 119.
(Losses)/gains on investments includes losses on investments and other financial
instruments of $10 million (2017: gains of $64 million) less the reclassification of
management fee revenue of $1 million (2017: $3 million), $7 million of third party
share of losses relating to line-by-line consolidated fund entities (2017: $14 million
of gains), performance fee revenue of $1 million (2017: $2 million) and other costs
of nil (2017: $1 million), as above.
2
3 Alternative performance measures are outlined on pages 142–145.
Performance fees and investment gains and losses
Gross performance fees for the year were $127 million compared to
$289 million in 2017, which included $92 million from Man AHL (2017:
$145 million), $31 million from Man GLG (2017: $85 million), $2 million
from Man Numeric (2017: $52 million), $2 million from Man FRM
(2017: $2 million) and nil from Man GPM (2017: $5 million).
Investment losses of $5 million (2017: gains of $44 million) primarily
relate to losses on seed investments on a year end seeding book
of $662 million (2017: $480 million), reflecting the more difficult
market backdrop.
Asset servicing
Asset servicing costs vary depending on transaction volumes,
the number of funds, and fund NAVs. Asset servicing costs were
$51 million (2017: $37 million), which equates to around 6.5 basis
points of average FUM, excluding systematic long only and Man
GPM strategies. The one basis point increase, from around 5.5 basis
points in 2017, is due to the inclusion of MiFID II related research
costs from 2018.
Compensation costs
Total compensation costs, excluding adjusting items3, were
$436 million for the year, down by 8% compared to $474 million
in 2017. Overall compensation costs decreased as a result of lower
performance fee revenues, partially offset by higher management
fee revenues. Fixed compensation increased by 3% as a result
of a 5% increase in average headcount, driven by increased spend
on our investment management and technology capabilities as
announced in early 2018, partially offset by the more favourable
hedged US dollar to sterling rate in 2018. With effect from 1 January
2020, fixed compensation costs will no longer be hedged into
US dollars. The overall compensation ratio3 increased to 48%
in 2018 from 44% in 2017, which reflects the significant decrease
in performance fee revenue generated in 2018. The Group’s
compensation ratio is generally between 40% and 50% of net
revenues, depending on the mix and level of revenue. We expect
to be at the higher end of the range in years when performance fees
are low and the proportion from Man Numeric and Man GLG is
higher, and conversely we expect to be at the lower end of the range
when performance fees are high and the proportion from Man AHL
and Man FRM is higher.
Other costs
Other costs, excluding adjusting items as outlined on page 143, were
$170 million for the year (2017: $165 million). Similar levels of cash
costs were incurred in 2018, which is largely as a result of real estate
efficiencies from the centralisation of our London office space in late
2017 as well as a more favourable hedged rate in 2018, partially offset
by higher temporary staff costs due to the implementation of MiFID II.
The Sterling hedged rate for 2019 is less favourable (1.36 compared
to 1.29 in 2018) and will therefore increase the Group’s 2019 US Dollar
costs comparatively. With effect from 1 January 2020, other costs
will no longer be hedged into US dollars. Depreciation and
amortisation has increased by $6 million in 2018, driven by increasing
levels of investment in our operating platforms year on year, which we
expect to continue.
We also incurred $3 million of other costs in 2018 in relation to the
proposed change to the corporate structure announced in October
2018, with up to a further $10 million expected to be incurred in 2019
as we complete the project, which are included as adjusting items
per page 143.
MAN GROUP PLC ANNUAL REPORT 2018
23
STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSSHAREHOLDER INFORMATION Chief Financial Officer’s review continued
Net finance expense
Net finance expense, excluding the unwind of discount on contingent
consideration which is classified as an adjusting item1, reduced to
$5 million from $9 million in 2017 largely due to increased finance
income as a result of higher interest rates as well as a slight increase
in the average cash balance for the year.
Lease accounting change from 2019 – changes to other
costs, depreciation and net finance expense
From 1 January 2019, the change in accounting for leases will bring
our lease commitments onto the Group’s balance sheet and also
change the classification and recognition profile of costs associated
with our leased premises going forwards.
Although this accounting change does not impact the Group’s cash
flows, the timing of recognition of our lease costs will be different
under the new framework and will increase net expenses by up to
$5 million annually in the five years following initial application,
decreasing the Group’s reported profits. Rental charges for leased
premises, which are currently included within other costs, will instead
be recognised through depreciation and interest expense. We expect
this initial increase in net costs recognised will shift to a net decrease
in the longer term.
The recognition of the lease liability on the Group’s balance sheet
will also increase the accounting foreign exchange exposure of the
Group, largely driven by our Riverbank House premises which is
payable in Sterling and expires in 2035. The revaluation of long-term
lease liabilities into US Dollars, the Group’s reporting currency, may
therefore result in significant unrealised foreign exchange gains or
losses being recognised in the Group’s income statement. Given
this is an unrealised, non-cash impact, we expect to classify any
unrealised foreign exchange movements arising from the revaluation
of these lease liabilities, and the associated deferred tax, as adjusting
items from 2019 onwards.
The adoption of the new leases standard is expected to decrease our
regulatory capital surplus by around $100 million from 1 January 20191.
Additional detail on the new leases accounting standard is provided
in Note 1 to the Group financial statements (page 107).
Adjusted profit before tax and adjusted core profit before tax
Adjusted profit before tax¹ is $251 million compared to $384 million
in 2017. Adjusted core profit before tax¹ is $237 million, down from
$359 million in 2017 (further detail is provided in the KPIs section on
page 18). Adjusting items1 in the year are a net credit of $27 million
(pre-tax), as summarised below. The directors consider that the
Group’s profit is most meaningful when considered on a basis which
reflects the revenues and costs that drive the Group’s cash flows
and inform the base on which the Group’s variable compensation
is assessed, and therefore excludes acquisition and disposal related
items (including non-cash items such as amortisation of purchased
intangible assets and deferred tax movements relating to the
recognition of tax assets in the US), impairment of assets, costs
relating to substantial restructuring plans, and certain significant
event driven gains or losses.
Adjusting items
$m
Revaluation of contingent consideration creditors
Unwind of contingent consideration discount
Gain on sale of Nephila
Compensation restructuring costs
Other restructuring costs
Amortisation of acquired intangible assets
Total adjusting items (excluding tax)
Recognition of deferred tax asset (refer below)
Year ended
31 December
2018
31
(28)
113
(1)
(5)
(83)
27
20
Taxation
The majority of Man Group’s profits are earned in the UK, with
significant profits also arising in the US, where our tax rate is
effectively nil as a result of available tax assets, and in Switzerland,
which has a lower rate than the UK.
The underlying rate on adjusted profit of 14% (2017: 14%) represents
the statutory tax rates in each jurisdiction in which we operate,
including nil for the US, applied to our geographical mix of profits.
The effective tax rate on adjusted profit¹ was 14% (2017: 12%), which
is the same as the underlying rate.
Tax on statutory profit for the year was $5 million (2017: $17 million),
which equates to an effective tax rate of 2% (2017: 6%). The
reduction in the effective tax rate is largely due to the gain on sale
of Nephila not being subject to tax under UK tax legislation.
In the US, we have accumulated federal tax losses as well as tax
deductible goodwill and intangibles which can be offset against
future US profits and will therefore reduce taxable profits. The Group
has recognised a deferred tax asset on the balance sheet of $62
million (2017: $42 million) in relation to these US tax assets, which
has resulted in a $20 million credit to the tax expense in the year
(2017: $17 million) and is included as an adjusting item1. Taking into
consideration the remaining unrecognised available US deferred tax
assets of $46 million (2017: $82 million), we expect the Group may
begin to pay federal cash taxes on profits earned in the US in the
next three to four years. The statutory effective tax rate on US profits
is expected to be materially in line with the prevailing US federal tax
rate as soon as 2020 as a result of the earlier recognition of these
US deferred tax assets. The effective tax rate on adjusted profit will
remain at nil until cash taxes are payable, as movements in the
deferred tax asset are classified as an adjusting item1.
The principal factors that we expect to influence our future underlying
tax rate are the mix of profits by tax jurisdiction, changes to applicable
statutory tax rates, including in the UK, and the consumption of US
tax assets. Should the earnings profile of the Group in the US
increase significantly this could result in the earlier recognition of the
US deferred tax asset in full and as a result the tax rate for the Group
would then be affected by the prevailing corporation tax rate in the
US and the proportion of the Group’s profits generated in the US. The
underlying tax rate in 2019 is currently expected to remain consistent
with 2018, dependent on the factors outlined above.
24
1 Refer to pages 142–145 for details of the Group’s alternative performance
measures.
MAN GROUP PLC ANNUAL REPORT 2018
STRATEGIC REPORT Cash earnings and liquidity
Given the strong cash conversion of our business we believe our
adjusted profit after tax is a good measure of our underlying cash
flow generation, although the timing of cash conversion is impacted
by the seasonal movements in our working capital position through
the year and the size of our seeding book over time. Operating cash
flows, excluding working capital movements, were $311 million
during the year and cash balances at year end were $344 million,
excluding cash relating to consolidated fund entities.
Balance sheet
The Group’s balance sheet remains strong and liquid. Fees and
other receivables have decreased as a result of the lower level of
performance fees earned in December compared to the prior year,
along with a decrease in payables for associated compensation
accruals. The increase in investments in funds is driven by an
increase in seeding investments, as outlined below, and the
reduction of investments in associates is due to the sale of our
stake in Nephila during 2018.
$m
Opening cash¹
Operating cash flows before working
capital movements
Working capital movements
(including seeding)¹
Payment of dividends
Share repurchase (including costs)
Payment of acquisition related
contingent consideration,
net of cash acquired
Proceeds from sale of investments
in associates
Other movements
Cash at year end¹
Year ended
31 December
2018
Year ended
31 December
2017
$m
31 December
2018
31 December
2017
356
311
8
(189)
(211)
(25)
140
(46)
344
389
431
(186)
(158)
(92)
(9)
2
(21)
356
Cash and cash equivalents2
Fee and other receivables2
Payables2
Net investments in fund products and
other investments2
Pension asset
Investments in associates
Leasehold improvements
and equipment
Total tangible assets
Borrowings
Net deferred tax asset/(liability)
Net tangible assets3
Goodwill and other intangibles
344
286
(733)
752
24
–
46
719
(150)
60
629
964
Shareholders’ equity
1,593
356
614
(848)
559
32
29
44
786
(150)
33
669
1,047
1,716
1 Excludes cash relating to consolidated fund entities (Note 13.2 to the Group financial
statements).
Working capital movements in 2018 principally relate to the year on
year decrease in performance fee receivables and the early 2018
receipt of cash relating to a late 2017 large seeding position
redemption, as well as an increase in the Group’s seeding portfolio.
The sale of our stake in Nephila in 2018 also generated significant
cash receipts.
As at 31 December 2018, the Group’s cash, less those balances
ring-fenced for regulatory purposes, amounted to $308 million and
the undrawn committed revolving credit facility, which matures in
2022, was $500 million. The management of liquidity is explained
in Note 12 to the Group financial statements.
2 Cash and cash equivalents, fees and other receivables and payables balances
excludes amounts relating to line-by-line consolidated fund entities. These are
presented net within net investments in fund products and other investments, together
with third-party interest in consolidated funds and non-current assets and liabilities
held-for-sale (see Group financial statements Note 13.2 on page 119).
3 Equates to net tangible assets per share of 39 cents (2017: 41 cents).
Seeding investments
Man Group uses capital to invest in new products to assist in the
growth of the business. At 31 December 2018, the Group’s seeding
investments were $662 million (refer to Note 13 to the Group financial
statements), which have increased from $480 million at 31 December
2017 as a result of increased investment in new strategies as well as
additional risk retention requirements on certain CLO products.
MAN GROUP PLC ANNUAL REPORT 2018
25
STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSSHAREHOLDER INFORMATION Chief Financial Officer’s review continued
Capital management, including dividends and share
repurchases
Our business has a strong record of cash generation. Adjusted
management fee EPS1 is considered the most appropriate basis on
which to routinely pay ordinary dividends as this represents the most
stable earnings base and underlying cash generation of the business,
and as such Man Group’s dividend policy is to pay out at least 100%
of adjusted management fee EPS in each financial year by way of
ordinary dividend. In addition, Man Group expects to generate
significant surplus capital over time, primarily from net performance
fee earnings. We then actively manage Man Group’s surplus capital
to seek to maximise value to shareholders and support the Group’s
strategy by either investing that capital to improve shareholder returns
in the future, or to return it to shareholders through higher dividends
or share buybacks, after taking into account required capital
(including liabilities for future earn-out payments) and potential
strategic opportunities to ensure we maintain a prudent balance
sheet. Over the past five years we have returned $851 million through
dividends and $690 million of share buybacks for shareholders (see
opposite). There will be no change in the Group’s capital management
policy as a result of the intended corporate reorganisation in 2019,
which was announced in October 2018 and is explained in more
detail on page 5.
We have a capital and liquidity framework which allows us to invest
in the growth of our business. We utilise capital to support the
operation of the investment management process and the launch
of new fund products. We monitor our capital requirements through
continuous review of our regulatory and economic capital, including
monthly reporting to the Risk and Finance Committee and the Board.
We have maintained prudent surplus capital, in compliance with the
FCA’s capital standards, and available liquidity throughout the year.
Details of the Group’s syndicated revolving loan facility, which
provides additional liquidity, are provided in Note 12 to the Group
financial statements on page 116. At 31 December 2018, surplus
capital1 (over the regulatory capital requirements) was $265 million,
an increase from $256 million in 2017. The Group’s proforma surplus
capital1, which adjusts for H2 2018 profits as well as the proposed
final 2018 dividend and the new leases accounting standard, is
around $340 million. Details and reconciliation of movements in
the Group’s surplus capital are outlined on page 145.
Man Group plc’s distributable reserves were $2.0 billion before
payment of the proposed final dividend (outlined opposite), which
are sufficient to pay dividends for a number of years. Furthermore,
as profits are earned in the future the Company can receive dividends
from its subsidiaries to further increase distributable reserves.
Returns to shareholders2 ($m)
289
115
174
345
175
170
250
100
150
275
100
175
382
200
182
2014
2015
2016
2017
2018
Buybacks
Dividend
2 Dividends are shown for the related financial year and buybacks are shown in the year
of announcement.
The Board is proposing a final dividend for 2018 of 5.4 cents per
share, in line with our dividend policy, which together with the interim
dividend of 6.4 cents per share equates to a total dividend for 2018
of 11.8 cents per share, growth of 9% from 2017. The proposed final
dividend equates to around $83 million, which is more than covered
by the Group’s available liquidity and regulatory capital resources.
Key dates relating to the proposed final dividend are provided in the
Shareholder information section on page 146.
Mark Jones
Chief Financial Officer
26
1 Refer to pages 142–145 for details of the Group’s alternative
performance measures.
MAN GROUP PLC ANNUAL REPORT 2018
STRATEGIC REPORT Risk management –
a unified approach
Risk management is fully embedded into our approach,
both to the management of funds on behalf of our investors,
and the management of Man Group’s business on behalf
of our shareholders.
Our operating model is reliant on technology
therefore the evolving threat from cybercrime
requires ongoing focus for the Group.
In March, we completed the $100 million
share repurchase programme announced
in 2017. In April, we announced a $100 million
share repurchase programme which we
completed in October. Later in October, we
began a new share repurchase programme
which will return $100 million of capital to
shareholders. As at 31 December 2018,
the programme was 38% complete.
Man Group’s risk appetite
statements
The risk appetite statements are set by
the Board and cover all significant risk
categories. They apply to both the
investment management functions and Man
Group itself. The statements express the
Board’s appetite for risk, promote a risk
aware culture and set out objectives and
boundaries for Man Group’s business.
The primary goal of risk management is
to support the achievement of the Group’s
objectives by encouraging an appropriate
balance between risk and benefit, in a
controlled and regulatory compliant context.
The governance framework and control
environment within the Group have been
designed to manage risks in accordance
with risk appetite. The Board and Audit and
Risk Committee (ARCom) receive regular
reporting on the Group’s risk profile and
adherence with risk appetite. In the event
that breaches to risk appetite occur, these
would be resolved in line with the Group’s
procedures and processes. The statements
are reviewed periodically by the Board.
The risk appetite statements were reviewed
during 2018 and there were no material
changes to the risk tolerances of the
business. A summary of the risk appetite
statements is available on our website.
Brexit
The UK’s decision to invoke Article 50
of the Treaty on European Union in
March 2017 triggered a withdraw
process of the UK from the European
Union (EU) by 29 March 2019. This
process has political, legal and tax
implications for the UK and may
impact general economic conditions in
the UK and other European countries.
As a result of the ongoing political
processes, UK investment managers
face continued uncertainty as to the
future regulations, and to their
post-Brexit ability to access markets,
make investments or enter into legal
agreements within the EU.
Man Group has planned for a range
of Brexit scenarios that may impact
its employees, business or its clients,
including a “no-deal” Brexit. As of the
beginning of 2019, Man has received
regulatory approval to upgrade the
regulatory permissions of its existing
Irish entity and has opened a physical
office in Dublin, with locally-based
staff. This sits alongside Man Group’s
existing regulated entity in
Liechtenstein. This allows Man Group
to remain able to service its existing
European clients and to access new
business in the EU.
Man Group will continue to monitor
the political and regulatory
developments closely throughout
2019, and will take necessary steps to
ensure that the impact of Brexit on its
employees, business and its clients is
minimised, whatever its form.
Ultimate responsibility for risk management
rests with Man Group’s Board, however,
accountability is embedded throughout the
business. Our risk management framework
requires that the business operates within
acceptable risk tolerances, as defined by
the Board’s risk appetite. Our governance
structure provides a foundation for ongoing
oversight in a changing environment.
Independent fund boards are responsible
for protecting the interests of fund investors.
Developments in 2018
Investment underperformance continues to
be the biggest risk facing the Group. 2018
has been a challenging year for the Group’s
fund performance on an absolute basis, but
saw average outperformance against peers.
The risk is mitigated by diversification of
product offerings. Performance fees fell by
56% compared to 2017, as described on
page 20. Funds under management fell by
$0.6 billion in 2018, as described on page 21.
The expansion of our product offering is
supported by our balance sheet, which we
have utilised to continue the Group’s seeding
programme. 2018 saw the launch of several
new quantitative and discretionary funds.
Whilst the Group is exposed to a decline in
the value of seed investments, supporting the
development of new products is an important
way to increase and diversify revenues.
Senior management assess whether seeding
positions continue to support the business.
Markets in 2018 were challenging for
investors. We saw a February volatility spike
which was challenging for all trend following
strategies, and declines in equity markets
which affected our long only strategies.
Our counterparty and clearing house credit
risk exposures at corporate and fund level
are closely monitored. The risk to the
Group’s balance sheet from counterparty
defaults remains low. We are conscious,
however, of the continued risk of individual
events or downturns in market sentiment
and continue to take a conservative
approach to counterparty selection.
Man Group is regulated globally; the Group
focuses on ensuring our operational and risk
management frameworks are appropriate
for our evolving global business. Regulation
evolved at different paces across the world.
MAN GROUP PLC ANNUAL REPORT 2018
27
STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSSHAREHOLDER INFORMATION Risk management continued
Viability statement
The directors believe that there continues
to be robust global demand for asset
management firms, such as Man Group,
to provide fund management services and
make active investment decisions on behalf
of their clients in order to manage their capital.
Man Group’s value-adding services form the
basis of a sustainable business model.
A failure to deliver superior performance
is the main risk to the Group’s ability to
maintain a capital and liquidity surplus, but
is mitigated through its diversified offerings.
The directors confirm that they have a
reasonable expectation that the Group will
continue to operate and meet its liabilities, as
they fall due, for the next three years. A three
year period is consistent with the Group’s
business planning horizon.
The directors’ assessment has been made
with reference to the Group’s current
position and prospects, the Group’s strategy,
the Board’s risk appetite and the Group’s
principal and emerging risks and how these
are managed, as described later on in this
section of the Annual Report. The principal
risks are linked to each of the Group’s
strategic priorities.
The plan is also stress tested in a number
of downside scenarios as part of the
Group’s Internal Adequacy Assessment
Process (ICAAP) which was reviewed and
approved by the Board in July. The Board
receives regular updates throughout the year
of the internally assessed level of economic
capital requirement, relative to available
capital supply.
The strategy and associated principal risks
form the basis of the Group’s Medium-Term
Plan. This covers a three year period, and
includes downside scenario testing.
The Group’s Medium-Term Plan is built
by aggregating the expected business
performance across the Group, and
then stressing key business assumptions
(particularly investment performance
and fund flows).
The Medium-Term Plan and ICAAP
assessments are augmented throughout
the year by regular briefings at the ARCom
on strategy, risk and controls, as well as
dashboards across risk, compliance,
finance and internal audit. The principal
and emerging risks are considered within
the Board’s risk appetite framework.
Three lines of defence
First
Second
Third
Business
management
Compliance
Internal Audit
External Audit
‘In Business’
risk
management
Operational
management1
Risk
The overall risk management framework
at Man Group is based on the three lines
of defence model, and is overseen by
the ARCom as delegated by the Board.
The framework instils the principles
of direct responsibility for risk
management in each business unit.
Embedding accountability with each
employee at the business level is the
‘first line of defence’.
The business units are monitored by the
Risk and Compliance control functions
which form the ‘second line of defence’.
The independent review and oversight
provided by Internal Audit is the
‘third line of defence’, which independently
evaluates the adequacy and effectiveness
of the Group’s risk management, control
and governance processes against
best practice.
Although Man Group and the investors in
its products are susceptible to losses, we
believe our risk management framework
supports long-term value through the
process of risk-aware decision making.
1
Includes the Group’s financial controls framework.
28
MAN GROUP PLC ANNUAL REPORT 2018
STRATEGIC REPORT Specific annual review of risk
management and internal
controls
In addition to its ongoing monitoring of the
Group’s risk management and internal
controls, the Board has conducted a specific
annual review of their effectiveness in respect
of 2018 and up to the date of this Annual
Report. This review included a robust
assessment of the Group’s principal and
emerging risks (see details on pages 31–33)
and all significant operational risk events
and Internal Audit findings raised during the
period. The Board also considered the
potential impact of certain risks identified
by the business, the outcome of the Risk and
Control Self Assessment (RCSA) process
performed by business management and the
quality of the controls in place to mitigate
these risks. Following this review, the Board
concluded that the Group’s risk management
processes were effective and that there were
no significant weaknesses or failings in the
system of internal controls.
Financial reporting controls
The Group’s financial controls framework
is designed to provide assurance that
proper accounting records are adequately
maintained and that financial information
used within the business and for external
publication is reliable and free from material
misstatement, thereby safeguarding the
Group’s assets. This framework is managed
through a process whereby control owners
certify that key preventative and detective
controls have been performed and are
operating effectively. These include balance
sheet reconciliations and the financial
statements preparation process. During
the year senior management monitored
the results of the certification process
and a sample of the certifications was
independently spot checked each month
to provide assurance that the certifications
were correct.
Ongoing risk reporting
The Board receives regular reports from
the Chairman of the ARCom, business
management and Group Risk on the risks to
the achievement of the Group’s operational
and financial objectives, together with
assurance that the level of risk taken is
consistent with and being managed in
accordance with the Board’s risk appetite
and with business planning. These reports
include a summary ‘risk dashboard’ and
current and forward looking assessments
of capital and liquidity adequacy. The Board
also reviewed an update on the commercial
risks relating to Man Group’s current
business mix and model, along with relative
revenue impacts, that could have a material
impact at Group level. The Board reviewed
and discussed the Group’s emerging risks
and Man Group’s response to these.
Board oversight of risk
management and internal
controls
The Board oversees and monitors the
Group’s risk management and internal
control systems on an ongoing basis and,
at least annually, carries out a review of their
effectiveness. A summary of the Group’s risk
management and internal control systems,
including those relating to the financial
reporting process is given below.
Objectives and governance
framework
The Group’s risk management framework
and internal control systems aim to
safeguard assets, maintain proper
accounting records and provide assurance
that the financial information used in the
business and published externally is robust
and reliable. The framework is designed to
manage key risks, but cannot eliminate the
risk of failure to achieve business objectives,
and can only provide reasonable and not
absolute assurance against material
misstatement or loss. The risk management
framework and internal control systems,
which have been in place throughout the
year and up to the date of this Annual
Report, comply with the FRC’s Guidance
on Risk Management, Internal Control and
Related Financial and Business Reporting.
During the year, the Board reviewed and
approved the output from the annual refresh
of Man Group’s Risk Governance and
Appetite Framework. This included a change
to a quantitative risk metric and associated
loss tolerance, and refinements to the
qualitative statements. There was no material
change to the Board risk appetite.
Whilst the Board retains overall responsibility
for the Group’s risk management and
internal control systems, it has delegated
oversight to the ARCom. The report from the
Chairman of the ARCom on pages 58–63
provides further information on how the
ARCom has discharged its risk oversight
responsibilities during the year.
MAN GROUP PLC ANNUAL REPORT 2018
29
STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSSHAREHOLDER INFORMATION Risk management continued
Assessment of principal and
emerging risks
Our comprehensive risk framework includes
business, credit, liquidity, market, operational
and reputational risks to both Man Group
and our funds.
The Group’s risk profile has not changed
materially in 2018, however risks linked
to a no-deal Brexit have been a focus
and the Group does not currently have any
integration risk. Business risks continue to
represent the biggest risks to the Group,
of these investment underperformance
is the single biggest risk facing the Group.
Given its increasingly wide range of
investment products and strategies the
Group has to manage a wide array of
operational risks.
The breadth and complexity of the
regulations that Man Group and its funds
are subject to across multiple jurisdictions
represent significant operational risks
should the Group fail to comply with
these regulations. Man Group supports
proportionate and thoughtful regulation
and initiatives that develop the regulatory
environment. However, regulatory change
can also result in increased operational
complexity and costs.
The directors confirm that they have carried
out a robust assessment of the principal
and emerging risks facing the Company,
including those that would threaten its
business model, future performance,
solvency or liquidity.
The directors have described and assessed
these principal and emerging risks on pages
31–33 and explained how they are being
managed or mitigated.
Man Group’s governance
The committees below have been given a mandate by the Board and the CEO to oversee the risk management framework. These committees provide
assurance to the Board that risk has been managed according to the risk appetite statements.
Board
CEO
Audit and Risk Committee
Senior Management Executive Committee
The Senior Management Executive Committee is accountable for all risks
assumed in the business and is responsible for the execution of
appropriate risk management discipline.
The Audit and Risk Committee (ARCom) is a committee of the Board
which has oversight of the assurance functions (see page 58 for
further detail).
The Risk and Finance Committee (RAF) oversees the operational, regulatory and reputational risks faced by the Group and the internal control
environment. It also monitors balance sheet financial risks and the adequacy of economic capital and liquidity buffers. The RAF is chaired by the
Chief Financial Officer.
Risk and Finance Committee
30
MAN GROUP PLC ANNUAL REPORT 2018
STRATEGIC REPORT Principal and emerging risks
Our strategic priorities
Change in status and trend
Innovative investment
strategies
Increased
Strong client relationships
Unchanged
Efficient and effective
operations
Returns to shareholders
Decreased
Business risks
Risks
Mitigants
Link to strategy
Status and trend
Investment underperformance
Fund underperformance on an absolute basis,
relative to a benchmark or relative to peer groups
could reduce FUM and may result in lower
subscriptions and higher redemptions. This risk
is exacerbated at times of volatile markets. This
may also result in dissatisfied clients, negative
press and reputational damage.
Lower FUM results in lower management fees
and underperformance results in lower
performance fees, if any.
Key person risk
A key person to the business leaves or is unable
to perform their role.
Retention risk increases in years of poor
performance.
Credit risks
Risks
A counterparty with which the funds or Man
Group have financial transactions, directly or
indirectly, becomes distressed or defaults.
Shareholders and investors in Man Group funds
and products are exposed to credit risk of prime
brokers, custodians, sub-custodians, clearing
houses, depository banks and guarantee
providers.
Man Group also provides loans to guaranteed
products, and so is subject to counterparty risk
to certain investor funds.
Liquidity risks
Man Group’s investment businesses each have
clearly defined investment processes designed to
target and deliver on the investment mandate of
each product. We focus on hiring and retaining
highly skilled professionals who are incentivised to
perform within the parameters of their mandate.
Man Group’s diversified range of products and
strategies across the alternatives marketplace
limits the risk to the business from
underperformance of any particular strategy.
2018 was a challenging year for many of
Man Group’s funds in absolute terms. However
asset-weighted relative performance to peers
has been positive. Net flows have not been
materially impacted by absolute performance
but the risk has increased. Diversification
across Man Group’s product offerings reduces
the overall risk.
The discussion of Man Group’s performance
is on pages 12–15.
Business and investment processes are
designed with a view to minimise the impact of
losing any key individuals. Diversification of
strategies reduces the overall risk to Man Group.
Succession plans and deferred compensation
schemes are in place to support the retention
of senior investment professionals and key
management.
Man Group has continued to be able to attract
and retain an array of talented individuals
across the Group. Voluntary staff turnover has
been higher than prior years. Departures of
portfolio managers were managed through a
succession plan of internal promotion and new
hires and resulted in low voluntary redemptions
from strategies they were managing.
Mitigants
Man Group diversifies its deposits across a
number of strong financial counterparties, each
of which is approved and regularly reviewed for
creditworthiness by the Counterparty Monitoring
Committee (CMC). The CMC also oversees
contingency planning ahead of significant market
or political events.
The Group Risk function monitors credit metrics,
such as CDS spreads and ratings, of the
approved counterparties on a daily basis.
Guaranteed products are closely monitored, and
leverage is actively adjusted such that the risk of
default on balance sheet loans to funds is small.
Link to strategy
Status and trend
Increased regulatory scrutiny, stress testing and
capital requirements for investment banks and
central clearing houses supports the overall
stability of Man Group’s core counterparties.
2018 saw credit spreads widen for most
names, particularly European banks. However
there were no periods of heightened concern
any individual names which resulted in a
change in Man’s risk appetite to them.
Link to strategy
Status and trend
A reduced guaranteed products portfolio
and illiquid funds/assets within portfolios has
reduced potential demands for liquidity.
The asset liquidity distribution across funds
has remained broadly unchanged.
Risks
Mitigants
Volatile markets can place additional,
often short term, demands on the balance sheet.
Man Group is exposed to having insufficient
liquidity resources to meet its obligations.
Man Group has access to a revolving credit
facility, and maintains a liquidity surplus. Liquidity
forecasting, including downside cases, facilitates
planning and informs decision making.
Adverse market moves and high volatility may
sharply increase the demands on the liquid
resources in Man Group’s funds. Market stress
and increased redemptions could result in the
deterioration of fund liquidity and in the severest
cases this could lead to the gating of funds.
Man Group conducts regular liquidity tests on its
funds and endeavours to manage resources in
such a way as to meet all demands for fund
redemptions according to contractual terms.
MAN GROUP PLC ANNUAL REPORT 2018
31
STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSSHAREHOLDER INFORMATION
Principal and emerging risks continued
Market risks
Risks
Investment book
Man Group uses capital to seed new funds
to build our fund offering and expand product
distribution. Man Group is therefore exposed
to a decline in value of the seeding book.
Mitigants
A disciplined framework ensures that each
request for seed capital is assessed on its risk
and return on capital.
Approvals are granted by the Seed Investment
Committee (SIC), which is comprised of senior
management, Risk and Treasury. Investments
are subject to risk limits, an exit strategy and are
hedged to a benchmark where appropriate. The
positions and hedges are monitored regularly by
Group Risk and reviewed by the SIC.
Link to strategy
Status and trend
The seeding book grew in size in 2018, but its
downside risks were reasonably constant over
the period due to our hedging processes.
Overall seeding book returns for 2018 were
moderately negative; a strong H1 followed by
more challenging markets in H2. Nevertheless,
the hedges performed as expected and helped
protect capital in a more difficult market.
Pension
Man Group underwrites the risks related to the
UK defined benefit pension plan which closed to
new members in 1999 and future accrual in
2011. The plan is well funded, but is exposed to
changes in net asset versus liability values.
The UK pension plan has a low net exposure to
UK interest rates. The return seeking assets are
low volatility and have a low correlation to equity
markets. Longevity is the largest remaining risk,
but is uncorrelated to Man Group’s other risks.
Following the completion of triennial valuation the
fund received the asset value from the Reservoir
Trust such that it was fully funded as of 2017 year
end, with the surplus returned to Man Group.
During 2018 a small deficit, on an actuarial basis,
has appeared due to underperformance of the
return seeking funds.
Operational risks
Risks
Mitigants
Link to strategy
Status and trend
Internal process failures
Risk of losses resulting from inadequate or failed
processes within Man Group.
External process failures
Man Group continues to outsource a number of
functions that were previously performed
internally as well as managing outsourcing
arrangements on behalf of its funds. The risk is
that the outsourced service providers do not
perform as required, resulting in knock-on
implications for our business as a whole.
Information and cybercrime security
The risk of loss resulting from cybercrime,
malicious disruption to our networks or from
the theft, misplacing, interception, corruption
or deletion of information.
The Group’s risk management framework and
internal control systems are based on a three
lines of defence model.
Internal Audit evaluates the effectiveness of
the Group’s risk management, control and
governance processes.
The Group remains focused on enhancing its
systems and control processes where required
and ensuring internal process failures are kept
to a minimum.
Man Group’s operations team has implemented
a robust methodology (including ongoing third
party due diligence and KPI monitoring) to
confirm that outsourced service providers are
delivering as required.
The Group continues to concentrate its
outsourcing into a smaller number of carefully
selected and proven outsource providers with
which it has established working relationships
allowing for greater process consolidation and
rationalisation.
In 2018 cyber-crime groups have used the
tactics, techniques, and processes more
commonly associated with state sponsored
espionage campaigns. Such techniques
include whaling, spear phishing, and extensive
reconnaissance and lateral movement within
a victim network. The attacks have been
effective because they circumvent traditional
endpoint defence technologies. These groups
are frequently looking for data to sell on or
request a ransom for its safe return. This trend
is expected to continue through 2019.
Man Group has a mature information security
management programme which governs current
and future strategy.
The Group has deployed cyber controls and
counter-measures which are continuously
reviewed, maintained and adjusted in line with our
assessments and those of trusted advisors. These
security mechanisms are deployed in a layered
defence involving preventative, detective, reactive
and recovery controls. If one control fails, other
controls are in place to detect, prevent or counter
an attack. To keep pace with emerging risks,
some of the technology solutions are utilising
machine learning and behavioural analysis.
The Group has a cyber-risk training programme
and has commissioned independent threat and
security assessments, including simulated
staged attacks on our network to test our
detection and response capability.
32
MAN GROUP PLC ANNUAL REPORT 2018
STRATEGIC REPORT
Our strategic priorities
Change in status and trend
Innovative investment
strategies
Increased
Strong client relationships
Unchanged
Efficient and effective
operations
Returns to shareholders
Decreased
Operational risks continued
Risks
Mitigants
Link to strategy
Status and trend
Information technology
Risk of losses incurred by IT software and
hardware failures resulting in system downtime,
severely degraded performance or limited
system functionality.
The Group recognises the fundamental role of
technology in delivering the Group’s objectives.
Alpha and Enterprise Technology are focused on
delivering five key themes: improving data
management, improving the digital experience
across the Group, improving the operating model
by consolidating technology, investing in the
control and security framework and innovating in
the right technology at the right time.
The Group continued to improve its technology
capability through 2018 with the implementation
of a cloud based Finance and HR platform and
further enhancements to the trading and support
systems.
A strategic roadmap for further advances in
technology to support the business needs has
also been developed.
Legal and regulatory
The global nature of Man Group’s business, the
expansion of its investment businesses and the
acquisition of new investment businesses, with
corporate and fund entities located in multiple
jurisdictions and a diverse investor base makes
it subject to a wide range of laws and regulations.
Failure to comply with these laws and regulations
may put Man Group at risk of fines, lawsuits or
reputational damage.
Changes in laws and regulations can materially
impact Man Group or the sectors or the market
within which it operates.
The FCA in the UK is Man Group’s lead regulator.
Man Group operates a global legal and
compliance framework which underpins all
aspects of its business and is resourced by
experienced teams. These teams are physically
located in Man Group’s key jurisdictions helping
them to understand the context and impact of
any requirements.
Emphasis is placed on proactively analysing new
legal and regulatory developments to assess
likely impacts and mitigate risks.
Man Group continues to liaise directly and
indirectly with competent authorities e.g. FCA,
SEC, FINMA, CBI.
Man continues to experience new regulatory
requirements. In 2018 this included the Markets
in Financial Instruments Directive (MiFID II) and
the General Data Protection Regulation (GDPR)
both of which were successfully implemented.
Work is already underway on the Senior
Managers Certification Regime (SMCR) due
in December 2019.
These new regulations may result in an increase
in regulatory risk in the short term as the
regulator starts to review implementation and
understand their effect on investment markets.
Brexit
The Group faces legal and regulatory uncertainty
which could impact the ability of funds to access
markets or cause investors to redeem.
Fund performance may be adversely impacted
by market volatility or reduced liquidity.
Operational events may result from an elevated
volume of legal or operational tasks.
Reputational risks
Man Group has upgraded the regulatory
permissions
of its Irish entity to serve European clients.
The fund risk toolkit, including limits and stress
testing, ensures that funds are managed within
their mandate and downside risks are
understood.
The prospect of a no-deal Brexit has increased.
The group is monitoring the political and
regulatory developments closely and will take the
necessary steps to ensure that the impact on the
business, investors and employees is minimised.
Link to strategy
Status and trend
Man Group continues to enjoy a good reputation
and this risk is assessed as stable.
Risks
Mitigants
The risk that an incident or negative publicity
undermines our reputation as a leading
investment manager. Reputational damage
could result in significant redemptions from our
funds, and could lead to issues with external
financing, credit ratings and relations with core
counterparties and outsourcing providers.
Our reputation is dependent on both our
operational and fund performance. Our
governance and control structure mitigates
operational concerns, and our attention to
people and investment processes are designed
to comply with accepted standards of
investment management practice.
Emerging risks
Risks
Mitigants
Link to strategy
Status and trend
Primarily external in nature and complementary
to the principal risks which are focused on
current internal risk. The emerging risk
categories include disruption to financial markets
and business infrastructure, political risk and
changes in the competitive landscape.
The Board and Group Risk monitor emerging
risks, trends and changes in the likelihood of
impact. This assessment informs the universe
of principal risks faced by the firm.
The emerging risks have been reviewed by
the Board. No changes were made to the
firm’s principal risks.
MAN GROUP PLC ANNUAL REPORT 2018
33
STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSSHAREHOLDER INFORMATION
People and culture
At Man Group we believe in the importance of a meritocratic
and collaborative environment, where success is based on
talent, commitment, diligence and teamwork. By celebrating
diversity, we seek to challenge consensus and foster healthy
debate, which we believe makes us a better and more
innovative business for our clients.
Recruitment, retention and
development
The acquisition, development and retention
of talent at all levels and across all functions
and regions continues to be a long-term
business goal, and therefore will always
be a key focus area for our executive team.
We continue to source high quality
entry-level talent via a number of graduate
and intern programmes within investment
management, sales and finance/operations.
A successful hiring campaign during 2018
will see us on-board our highest number of
investment management trainee analysts to
date in 2019.
Our experienced hires are sourced through
a range of channels. We have a strong
presence in the recruitment marketplace and
our recruitment teams in London and New
York seek to maximise direct hiring across
a range of roles. We also have an internal
search team based in London but with a
global remit – this enables a proactive and
targeted approach to talent acquisition
for senior and key front office positions.
The retention and development of our
workforce is of paramount importance and
we strive to make internal appointments
wherever possible to maximise career
progression and in turn maintain good
retention levels. Our global presence creates
opportunities for our people to gain
international experience via short-term
placements and permanent relocations.
During 2018 we also built out a dedicated
Talent function with presence in the UK and
US, offering a range of global programmes
and initiatives which develop skills and
support enhanced performance – these
include internal coaching capabilities and
people strategy consulting.
Voluntary turnover remains low across the
firm, supported by our ongoing retention-
focused activities, including regular
performance evaluations, active succession
planning processes, and a commitment to
promoting career development and internal
transfers and promotions.
Feedback is actively provided and sought
throughout the firm, on an ongoing basis as
well as via structured year-end processes.
The senior Executive Committee have
regular discussions about our workforce,
its development and our succession plans,
supported by the HR and Talent teams. This
facilitates a rigorous approach to identifying
and nurturing key talent in order to mitigate
any key person and/or continuity risk.
We continue to offer development to our
workforce via training programmes (online
and classroom based), seminars, workshops
and professional qualifications. Where
appropriate we also offer external coaching,
as an alternative to our internal coaching
capability, as well as structured mentoring.
We seek to attract
and retain the best
people, and to
ensure everyone
at Man Group has
the opportunity
to reach their full
potential; nothing
should get in the
way of that.”
Robyn Grew
Chief Administrative Officer
Employees
1,435
at 31 December 2018
Internal transfers
150
during 2018
Nationalities working at Man Group
64
at 31 December 2018
Employee turnover
10.8%
in 2018
34
MAN GROUP PLC ANNUAL REPORT 2018
STRATEGIC REPORT
Employees are empowered to take
ownership of their own development,
including selecting appropriate training
opportunities, as well as taking up
opportunities to gain broader experience
outside of their Man Group roles. For
example, we actively encourage staff
members to speak at relevant industry
conferences and seminars, or accept
invitations to participate in panels, in order
to expand their expertise and engage as
experts in their fields.
The decision to invest $15 million in our
investment management and technology
capabilities means that Man Group’s total
headcount, including contractors and
consultants, has increased from 1,325 at
31 December 2017 to 1,435 at 31 December
2018. The ratio of support function
employees to front office employees remains
approximately one to one, which we believe
is in line with industry best practice.
Our remuneration policies and practices are
designed to enable us to remain competitive
in the increasingly global markets in which
we operate and are benchmarked annually.
Remuneration includes combinations of
salary, annual performance bonus and
deferred share or fund awards, alongside
non-cash benefits. The bonus deferral
arrangement is a key mechanism for aligning
our employees with Man Group’s long-term
performance, and so aligning their interests
with those of our clients and shareholders.
During 2018, we once again offered our
UK-based employees the opportunity to
participate in the Man Group Sharesave
Scheme at the maximum limit and discount
allowed by HMRC and saw a good uptake
from staff.
See pages 67–89 for the Directors’
Remuneration report.
Employee engagement
To ensure that Man Group’s employees are
aware of business priorities and the latest
developments across the firm, they receive
a range of communications and information.
We share a daily internal newsletter with
all employees, run a programme of
presentations from executives across the
firm (the Business Education Series) and
host regular town-halls. In addition, when
travelling across our international office
network, Executive Committee members
regularly host employee update events,
maximising the opportunity to engage
with staff members with whom they may
not have regular in-person contact.
In accordance with our business principles,
we are dedicated to ensuring that Man
Group is a great place to work, where
people know that success and
achievements are based solely on merit.
Our Employee Recognition Awards for those
individuals who go above and beyond their
day-to-day responsibilities in service of the
business, continue to be well-received.
The award winners are recognised in a
firm-wide announcement from Luke Ellis
and are invited to a meeting so he can
personally recognise their contribution.
In 2018, we placed a particular focus on
employee well-being activities, running
a number of events and implementing
changes in order to enhance our offering
in this area. Across the firm, we recognise
the pressures of juggling work and personal
commitments so have introduced various
supporting initiatives including mindfulness
sessions, healthy eating seminars, onsite
cancer checks, a children’s wellbeing
workshop and benefits roadshows as well
as access to a range of webinars on topics
such as managing stress, sleep & wellbeing
and building resilience. In the US, we
undertook a large-scale review of our
benefits broking arrangements which
resulted in a change of broker and a marked
improvement in the wellness offering for
staff. We also offer flexible working
arrangements, and take steps to enable
this through technology.
People by function (%)
50
2018
37
13
29
18
53
2013
Investment management
Sales and marketing
Infrastructure and support
People by geography (%)
6
6
20
2018
11
2013
14
8
68
67
United Kingdom
United States
Switzerland
Other
MAN GROUP PLC ANNUAL REPORT 2018
35
STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSSHAREHOLDER INFORMATION
People and culture continued
2018 also saw us introduce a new global
enhanced gender neutral parental leave
policy, which offers all new parents 18 weeks
fully paid leave. Alongside this policy, we
have made specific provision for those who
have premature babies and those who are
foster parents, recognising the importance of
family responsibilities and work-life balance
for staff engagement and motivation.
We are pleased to report that our 2018
employee survey recorded an improved
engagement score of 7.8 out of 10 with an
encouraging 83% response rate. We sought
feedback from across the firm and use
this information to inform the initiatives
we undertake to continually enhance
Man Group as a place to work. Our senior
management team were able to access
the feedback directly on a real time basis,
enabling them to see detailed comments
and drill down for deeper analysis of the
results, and Group level results have been
presented to the Board and Executive
Committee. Following completion of the
survey in October, we have already seen
significant engagement from business
leaders with respect to action planning
and communication of results, with further
activity planned for 2019.
Diversity and Inclusion
Man Group’s culture is based on mutual
respect for others, a commitment to
prioritising diversity and inclusion, and a zero
tolerance approach to discrimination of any
kind. By celebrating diversity in all its forms,
and building a consciously inclusive working
environment, we believe that we encourage
original and collaborative thinking, and so
position ourselves to deliver the best
possible results for our clients.
Alongside our existing senior Diversity and
Inclusion (D&I) steering group, we have now
introduced a larger D&I working group in the
UK along with smaller regional working
groups in our other offices, with the intention
of further driving the implementation of D&I
initiatives. Both groups are focused across
the diversity spectrum, and we have also
united our activity in this area under the
umbrella of “Drive”, which is the global
internal D&I network, run by our employees
and sponsored by the senior management
team. Drive is designed to inform, support
and inspire our people. The network’s
During 2018, Marina Ebrubah and Cliodhna Murphy were recognised as finalists for the Unsung
Hero Award at the Investment Week’s Women in Investment Awards which celebrates women
in infrastructure who have gone above and beyond to encourage diversity in the workplace.
They were joined by Deborah Kester, Global Head of Human Resources.
Successful Drive events this year have
included a neuro-diversity workshop,
paediatric first aid training and celebrations
for both International Women’s Day and
International Men’s Day. We have been
fortunate to host a number of inspiring
speakers who are passionate about
inclusion, and who work across the
worlds of elite sport, law, government and
education. We run regular lunch & learn
sessions covering a range of topics from
career progression to the challenges
associated with being a working parent/
carer. We marked Black History Month
with an awareness campaign, and delivered
various D&I focused sessions including a
seminar to mark Autism Awareness Day as
well as regular lunches to celebrate cultural
diversity with themes including Diwali,
Chinese New Year, Cinco de Mayo and Eid.
mission is to advance Man Group’s efforts in
promoting inclusion and valuing diversity in
all forms including gender, sexual orientation,
ethnicity and disability. Its activities include
events, training, resources and peer
engagement across the firm. We also
conduct diversity training at the senior
management level. We connect regularly
with peer organisations to host joint events
and share knowledge. Robyn Grew, Man
Group’s Chief Administrative Officer and
General Counsel also chairs Alternative
Investment Management Association’s
(AIMA) diversity group, giving us external
presence in this space.
2018 has seen the successful launch of a
number of staff networks under the Drive
banner, each sponsored by a senior leader
within the business. We are delighted to
have the following networks, which consist
of both members and allies, actively running
events and supporting our workforce:
– BEAM Network (Black Employees at Man)
– FAM Network (Families at Man)
– PRIDE Network (LGBT+)
36
MAN GROUP PLC ANNUAL REPORT 2018
STRATEGIC REPORT Staff by gender
Total workforce
2017
2018
2017
2018
2017
2018
Senior managers
Board of Directors
952
371
1,019
416
152
39
147
41
9
9
2
2
Male
Female
We have a number of other partnerships
in place which feed into our broader D&I
agenda. In the UK, to increase our access
to candidates from under-represented
backgrounds, we work with SEO London,
an organisation which provides educational
support and career access, and Bright
Network, a career network of bright students
from a range of backgrounds. We continue
to see increased diversity in our graduate
and internship applications as a result of
these collaborative efforts. In the US, we
partner with the Young Women’s Leadership
Network in New York and Girls Who Invest.
Apprenticeship programmes continue to
be a way for us to show our commitment
to tackling youth unemployment in London
and broadening our access to young people
who may not otherwise have considered a
career in financial services. Through offering
apprenticeships, we provide young people
with an opportunity to complete a qualification
whilst gaining valuable work experience.
Our partnership with City Gateway in this
area has flourished since 2013 and we
currently have our fifth cohort of apprentices
on board working within our technology,
investment marketing and talent teams.
Man Group is committed to providing
equal employment opportunities, and
discrimination on the grounds of age,
disability, gender, race, religion, sexual
orientation or educational background is
not tolerated. Full and fair consideration
is given by Man Group to all employment
applications, including from disabled people,
considering their aptitudes and abilities.
The Company ensures that disabled persons
are fairly treated in respect of training and
career development. For those who become
disabled during their employment,
reasonable adjustments are made and
ongoing support is provided as required,
to enable the individual to continue working.
See page 66 for the Board’s diversity policy.
As part of our commitment to D&I, we are
focused on achieving a better balance
between male and female employees across
the business, and particularly at senior
levels. Overall gender balance across the
business and at all levels of seniority remains
a challenge for us, as it does for many other
organisations within our sector.
Man Group is supportive of the requirement
for employers in the UK to calculate and
publish their gender pay gap, and we have
again published our figures within our annual
D&I report. The data still demonstrates the
lower representation of females in investment
management and senior roles, but we are
committed to addressing this, and continue
to make significant efforts to do so. Initiatives
range from hosting events to encourage the
pipeline of female talent at the firm and in the
broader industry, to mentoring for women
within the firm and our partnership with
Women Returners to support those returning
to work following a career break. While we
do not see a gender pay gap across similar
roles, we recognise that this isn’t enough
to attract and retain talent and we must
take further action, through the initiatives
articulated in this section, to foster better
gender diversity particularly in senior and
front office roles.
We have seen ongoing progress in terms
of gender balance within our graduate
recruitment during 2018 and consequently
our 2019 investment management intake is
evenly split. We continue to work proactively
with schools and education providers to
promote our industry to those studying
courses from which financial services firms
do not traditionally hire. For a number of
years, Man Group has also sponsored the
UK team at the European Girls’ Mathematical
Olympiad and activities such as the
NSPCC’s Number Day, the largest
nationwide numeracy event for children
and young people in the UK.
During 2018, we were proud to sign up to
the Women in Finance Charter and have
set ourselves a target of 25% female
representation in senior management roles
by the end of 2020. Additionally both our
Chairman and CEO are now members of the
30% Club, a cross-business initiative aimed
at achieving better gender balanced boards
through voluntary, business-led change.
MAN GROUP PLC ANNUAL REPORT 2018
37
STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSSHAREHOLDER INFORMATION Our responsibility
is to pursue the
highest standards
of behaviour, both
corporate and
individual, which
underpin our
reputation and
maintain the trust
and loyalty of
our clients and
stakeholders.”
Robyn Grew
Chief Administrative Officer and
General Counsel, Man Group
Corporate responsibility
Corporate responsibility is an essential
element of our business proposition. It sets
out the standards we believe are appropriate
and necessary in meeting the needs of our
stakeholders. In practice, this covers the way
we conduct our business and interact with our
people, investors, clients, suppliers and the
wider communities in which we operate as
well as mitigating our environmental impact.
Responsibilities to our industry
At Man Group, we recognise that
responsible investment (RI) is fundamental
to our fiduciary duty to our clients and
beneficiaries. We understand the importance
of sound stewardship in managing investors’
capital, and our approach to RI closely
aligns us with the values of our clients,
shareholders and other stakeholders.
Accordingly, 2018 marked a pivotal year
for Man Group’s approach to RI. Having
developed frameworks for policy, organisation
and education the last several years, Man
Group formalised RI as a core function in 2018.
Man Group appointed Jason Mitchell as
Co-Head of Responsible Investment
alongside Steven Desmyter. Reporting to
Man Group CIO Sandy Rattray, Jason works
across the firm’s investment engines to
ensure that investment processes and
policies identify and integrate operational,
governance and strategic risks. He is also
responsible for directing the development
of impact, thematic and norms-based
investment strategies, as well as the broader
integration of environmental, social and
governance (ESG) criteria across asset
classes and multi-asset solutions.
We also formalised our funds within the
Man Group RI Fund Framework. Designed
to establish a baseline requirement of ESG
standards, we believe this framework will
help ensure credibility and consistency in our
approach to RI, while also accommodating
for the diversity of strategies across our
different investment engines.
At the same time, we introduced a firm-wide
RI exclusion list, a list of designated sectors
that will be excluded from the Company’s
RI-integrated or RI-dedicated funds. The
proprietary list of excluded sectors is in line
with international standards and global
consensus, and includes:
1) Controversial weapons – companies
involved in the production of anti-personnel
mines, cluster munitions, chemical,
biological weapons, depleted uranium
weapons and/or nuclear weapons;
2) Tobacco – companies that are involved
in the production of tobacco or are suppliers
of significant components of cigarettes;
3) Production of coal and coal-based energy
– companies where the production of coal
or provision of coal-based energy represents
more than 30% of revenues.
As part of our commitment to stewardship
and corporate governance, Man Group
is in the process of moving proxy voting
providers, as well as moving into an
ESG-focused policy. This new policy will
mean we are more active when it comes
to sustainability issues and we will look
to impress standards upon the companies
we invest in. The Man Group Stewardship
and Active Ownership team will also maintain
a list where Man Group is engaging with
the companies, issues and process of
engagement.
ESG data has matured over the last decade,
and we believe that we are entering a phase
where the data has both a long-enough
history and broad-enough coverage to make
it potentially useful to quantitative investment
firms. However, ESG data is qualitative,
discretionary and unregulated. Indeed, the
ESG data we obtained from vendors typically
has a short history and is often retroactively
collected. This is an area in which Man
Numeric is applying its unique skillset – to
improve the collection and analysis of ESG
data. We believe that by spending the time
to understand the nuances of each vendor’s
methodology and properly handling their
data quirks can lead to a unique, alpha-
generating dataset. Man Group is firmly
committed to promoting integrity and
transparency within the investment
management sector, and ensuring that
we hold ourselves accountable to the
highest standards of ethical conduct
and responsible investment.
38
MAN GROUP PLC ANNUAL REPORT 2018
STRATEGIC REPORT
Man Group’s commitment to responsible investment earned recognition
this year. Man Group was awarded ‘Best ESG/SRI management company’
in the Hedge Fund Review European Performance Awards 2018.
Awards
Signatories
United Nations-supported Principles for
Responsible Investment (PRI) is the world’s
leading proponent of responsible investment,
aiming to support the integration of ESG
factors into the investment and ownership
decisions of investors.
As a founding signatory of the Standards Board for
Alternative Investments, of which Luke Ellis, CEO of
Man Group, is a Trustee. The SBAI provides a powerful
mechanism for creating a framework of transparency,
integrity and good governance which improves how
the alternative investment industry operates.
The UK Stewardship Code, published by the Financial Reporting
Council, seeks to strengthen the quality of engagement between
investors and investee companies by providing a framework of best
practices for asset managers to be active and engage in corporate
governance in the interests of their shareholders.
The Local Government Pension Scheme (LGPS)
Code of Transparency, requires investment managers
to provide transparent and consistent investment cost
and fee information.
Joint signatories
The “Open Letter to Global Index Providers” sponsored by Swiss
Sustainable Finance calls for global index providers to exclude
controversial weapons from their mainstream indices in order to
align their produces with what has become standard practice or
expectation among institutional and individual investors.
The “New Plastics Economy Global Commitment” sponsored
by the Ellen MacArthur Foundation builds on and reinforces
the G7 Plastics Charter the EU strategy for plastics in a circular
economy, the Commonwealth Blue Charter and the UN-established
Community of Ocean Action.
The “Letter to IOSCO (International Organization of Securities Commissions) highlights investors’ growing need for consistent and comparable
disclosure of corporate ESG information.”
MAN GROUP PLC ANNUAL REPORT 2018
39
STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSSHAREHOLDER INFORMATION Corporate responsibility continued
We believe our
systematic
investment
approaches give
us an advantage
in understanding
ESG data.”
Jason Mitchell
Co-Head of Responsible Investment
Most recently, Man Group hosted the PRI’s
London Climate Forum. Man Group CIO
Sandy Rattray opened the forum with a
keynote, where he said: “At Man Group,
we – like many of our peers – recognise the
fact that we are undergoing a necessary,
structural expansion in our understanding
of risk. Where the investment industry has
traditionally defined risk by its political,
economic and financial characteristics,
we now know that climate change
represents an altogether greater risk.
For our part, we are making significant
efforts to embed more sophisticated
competencies both across our investment
strategies as well as for Man Group, a listed
FTSE-250 company. We believe the
incorporation of ESG factors reinforces
our role as a fiduciary and as a responsible
steward of our clients’ assets.”
1 A multilateral organisation is one which is organised by,
and receives its funding from, multiple nations to work
on issues. For example, the UN, EU and the WTO are
multilateral organisations.
MAN GROUP PLC ANNUAL REPORT 2018
Perspectives towards a sustainable
future
In 2018, Man Group launched Perspectives
Towards a Sustainable Future, a podcast
about what we’re doing today to build a more
sustainable world tomorrow. We are excited
to launch the 2019 programme schedule
which will examine themes including: climate
security, climate risk in a monetary dimension,
impact investing, Australasian approaches to
responsible investment and many other topics.
The podcast profiles organisations, leaders
and academics who are examining all facets
of sustainability, from climate change and
migration to governance and global norms.
The idea is to provide an open, educational
resource to anyone — particularly students
— interested in exploring approaches to
sustainable, responsible investment. The
audience includes global institutional
investors, Non-Governmental Organisations,
multilateral organisations1, policymakers,
academics and, of course, students.
PRI reporting framework
2018 marked the first year that Man Group
reported and was scored at the Group level
on its Principles for Responsible Investment
(PRI) Transparency report. Man GLG and
Man Numeric have been PRI signatories
since 2012 and 2014, respectively.
Man Group is proud to have earned strong
scores at the firm strategy and governance
level, as well as demonstrating consistent
improvement over the last several years
within the Listed Equity, Active Ownership
and Fixed Income modules.
That said, Man Group sees significant
opportunities in future improvement within
these categories, as we organise the firm
within the Man Group RI Fund Framework
as well as enhance our ESG integration
and stewardship activities.
Responsible investment involvement
Man Group is proud to have played host to
several events in 2018, including the PRI and
CAIA-sponsored ‘Quant at the Intersection
of Responsible Investment Symposium’,
which examined the diversity of approaches
and challenges that systematic strategies are
providing in the RI/ESG space.
40
STRATEGIC REPORT
Our policies and practices
Anti-bribery and corruption
Man Group operates in multiple jurisdictions globally and as such
is either subject to or is required to comply with various anti-bribery
and corruption laws and regulations. Man Group takes its anti-
bribery and corruption obligations very seriously and has a Group-
wide anti-bribery and corruption programme designed to comply
with all applicable anti-bribery and corruption laws and regulations
including the US Foreign Corruption Practices Act 1977 and the
UK Bribery Act 2010. The programme includes policies, procedures
and controls designed to prevent and detect bribery and corruption,
including: ‘know your customer’; due diligence and enhanced
due diligence checks; procedures to prevent, detect and report
suspicious activity; training employees and issuing red flags; and
undertaking politically exposed persons (PEPs) screening.
Risk factors that are considered include country, business activity,
adverse information, adverse media and sanctions. Man Group is
committed to conducting its business with honesty and integrity and
complying with all applicable anti-bribery and corruption laws. Man
Group accordingly also expects those who provide services to us
or who work on our behalf to have the same commitment, wherever
in the world they are doing business.
Slavery and human trafficking
Man Group is committed to ensuring that modern slavery does not
exist within our supply chains or any part of our business. Man Group
has a zero tolerance approach to slavery and human trafficking and
we expect all those in our supply chain to comply with those values.
Man Group will not support or deal with any business knowingly
involved in slavery or human trafficking. Please refer to our website
for our full Modern Slavery Transparency Statement.
Protecting our environment
As a firm, Man Group seeks to take all practical measures to
conserve and reduce energy consumption at our offices around the
world. We strive to deliver clear and transparent reporting that makes
sense of the measurable elements within our control and respond
to external risk and expectations. We monitor our impacts using
Carbon2018, an energy services consultancy, which helps us
minimise cost, mitigate risk and reduce carbon. We are also
taking steps to protect the environment through the impact of our
investments. We are members of Climate Action 100+, a five-year
initiative led by investors to engage with the world’s largest corporate
greenhouse gas emitters to improve governance on climate change,
curb emissions and strengthen climate-related financial disclosures;
and the World Bank-supported Carbon Pricing Leadership Coalition,
which aims to expand the use of carbon pricing.
Carbon emissions reporting
The information below details our mandatory reporting of
greenhouse gas emissions for the year pursuant to the Companies
Act 2006 (Strategic Report and Directors’ Report) Regulations 2013.
Around 63% (2017: 69%) of our overall emissions relate to purchased
electricity and gas usage across our various geographical locations,
with the remaining 37% (2017: 31%) relating to air travel. All emissions
are reported in tonnes of carbon dioxide equivalents (CO2e).
Man Group’s emissions by scope
Scope
Scope 1
Scope 2
Scope 3
Total
Source
Natural gas
Electricity
Air travel
Tonnes of CO2e emissions
Year ended
31 December
2018
Year ended
31 December
2017
223
6,144
3,678
265
7,105
3,308
10,045
10,678
The emissions we are reporting have been calculated using an
intensity metric which will enable us to monitor emissions independent
of activity. As Man Group is a people-related business, we expect that
any changes to headcount will impact the property space we occupy
and the amount of business travel we use. Therefore, emissions per
employee are the most appropriate metric for our business, as shown
in the table below. The average number of employees in 2018 was
1,376 (2017: 1,313), as disclosed in Note 4 to the financial statements.
Emissions per employee
Scope
Scope 1
Scope 2
Scope 3
Emissions per employee
Tonnes of CO2e emissions
Year ended
31 December
2018
Year ended
31 December
2017
0.2
4.5
2.7
7.4
0.2
5.4
2.5
8.1
Decreases in electricity emissions (Scope 2) are largely due to the
centralisation of our London resources into one location in late 2017.
Air travel emissions (Scope 3) have increased in 2018 due to an
increase in air mileage.
Methodology
For practical reasons, most of the emissions data was gathered for
the first nine months of each year and, as appropriate, extrapolated
in order to calculate the full year emissions. Based on the nature
of our emissions and the consistency month on month, we believe
this is an appropriate representation of the annual emissions.
In order to compile the reportable emissions data from our offices,
electricity and gas meter readings have been obtained from our
energy suppliers. For some of our smaller offices we are not charged
for energy usage separately as these costs are incorporated into
the service fees for our premises. These emissions have not been
included in the reported total above, due to the data being unavailable,
and relate to offices for the use of 32 employees (2017: 23 employees).
Where Man Group is the landlord of a property, and electricity costs
are incurred on behalf of sub-tenants, these costs are on-charged
to the sub-tenants as the users of the electricity. Accordingly, no
emissions data for energy usage incurred on behalf of sub-tenants
is included in Man Group’s reportable emissions above.
Disclosures of emissions related to business travel are restricted to
flight costs as a result of the CO2e emission convertible data relating
to other means of transport (e.g. taxis) not being available.
MAN GROUP PLC ANNUAL REPORT 2018
41
STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSSHAREHOLDER INFORMATION Corporate responsibility continued
Contributing to our
communities
We are conscious of the impact our
organisation has on the community, and
aim to give back and contribute positively
to those around us. Our charitable efforts
globally are focused on promoting literacy
and education, underscored through the
Man Charitable Trust established in 1978 and
our sponsorship of the Man Booker Prizes
and the charitable activities of the Booker
Prize Foundation. Man Group is also involved
in charitable initiatives and volunteering
opportunities local to the firm’s offices
globally, through its ManKind Programme.
Charitable Trust
The focus of the Man Charitable Trust (Trust)
continued to evolve in 2018. We focus on
how we can support charities to make the
most impact in the communities in which
they, and we, operate, while also enhancing
employee engagement.
In 2018, the Trust recognised the value
its relationships can have on the charities
it supports. The value of the Trustees’
and employees’ time, experience and
involvement has increased the impact
that the financial contributions have on the
charities, as well as enhancing employee
engagement with charitable activities.
Through these relationships, pro bono
experience has been provided and
computers and software have also been
donated to some of the supported charities.
The Trust is led by a group of seven
Trustees, comprised of: Teun Johnston,
Chairman of the Trust and CEO of Man GLG;
Steven Desmyter, Global Co-Head of Sales
and Marketing and Co-Head of Responsible
Investment at Man Group; Antoine Forterre,
co-CEO of Man AHL; Keith Haydon,
Chairman of Man FRM and CIO of Man
Solutions; Carol Ward, COO of Man GLG;
Lydia Bosworth, Regulatory and Technical
Manager at Man Group and Chris Pyper,
Chief of Staff, Infrastructure.
Employee volunteering and engagement
continued to increase in 2018, through the
firm’s ManKind community volunteering
programme, which enables UK employees
to take two additional days paid leave per
annum to volunteer with charities supported
by the Man Charitable Trust or a charity of
their choice. Participation again rose with
24% of full time employees utilising this
benefit. Volunteering campaigns over
summer, in the lead up to Christmas and
in conjunction with City Giving Day in
September were successful in promoting
additional use of this allowance. As evident
through the growth of our relationships with
the charities we support, the positive social
benefits that stem from employees’ skills,
experience and knowledge can make a
real difference to our local communities.
Volunteering also provides a highly valuable
method of achieving positive learning and
development benefits for our employees.
As Man Group’s business and footprint
continues to grow, there has been a
significant effort to reflect this in the firm’s
charitable activities. This year, we launched
the Man US Charitable Foundation under the
stewardship of previous UK Trustee, Colin
Bettison, Head of Operations, Man Group
Americas. In 2019, we hope to include
literacy and numeracy grants in New York
and a similar ManKind programme in 2019
for all US based staff.
The Trust provided $377,602 in charitable
donations and employee engagement
programmes over 2018. In the UK, the
projects supported by the Trust benefitted
thousands of vulnerable children, young
people and adults living in disadvantaged
neighbourhoods, providing them with the
essential skills they need to succeed in life
and make a positive contribution to society.
On 29 November 2018, Steven
Desmyter hosted a group of
students from the Refugee
Support Network, where they
enjoyed presentations from
various areas of the business and
enthusiastically engaged in an
open Q&A session with many
of the Sales team across a lunch.
Copyright Refugee Support
Network, used with permission.
Registered charity no: 275386
Featured grant
The Man Charitable Trust awards
grants to charities that work towards
raising the levels of literacy and
numeracy in the UK. Examples of the
charities awarded a grant in 2018
included:
Discover Children’s Story Centre
Discover Children’s Story Centre is an
interactive literature venue for children
aged 0-11, families and teachers
based in Stratford. The Centre
promotes literacy through an
extensive community education
programme targeting vulnerable and
disadvantaged children. This work
focuses on developing literacy, oracy
and listening through stories and
children’s literature.
The Trust’s donation will support the
Catching Words project, a literacy-
focused intervention programme
delivered in a range of schools.
Catching Words focuses on reading,
writing, speaking and listening to
raise children’s aspirations,
confidence, attitude and attainment
in literacy. The programme engages
professional writers, storytellers and
poets, who work with children over
a nine week period.
Vision for literacy business pledge
Man Group is also a signatory of the
Vision for Literacy Business Pledge
2017, having also signed the 2016
Pledge. The Vision for Literacy
Business Pledge galvanises the
business sector behind the literacy
challenge, with signatories committing
to taking practical action that will
deliver tangible benefits in helping
to raise UK literacy levels. Signing the
Pledge once again demonstrates our
commitment to tackling the literacy
challenge by taking action within the
workforce, the local community and
at national level.
42
MAN GROUP PLC ANNUAL REPORT 2018
STRATEGIC REPORT Finally, we would like to thank all the
employees at Man Group who supported
our charitable programmes during the year
and to those who donated via their Give As
You Earn accounts. We would also like to
congratulate all those who independently
fundraised for charities of their choosing
and whose donations were proudly matched
by the Trust, up to the value of £1,000.
We look forward to building on the
successes of 2018 throughout 2019, as
the Trust’s footprint continues to grow, both
internally and in the many communities we
are a part of. In the coming year, the Man
Charitable Trust intends to continue to
provide support to charities that are able to
evidence their ability to improve literacy and
numeracy education and focus on increasing
employee engagement in volunteering and
charitable activities.
Man Group’s literary
sponsorships
Man Group sponsors two major literary
prizes – the Man Booker Prize and the Man
Booker International Prize, both of which
play an important role in recognising literary
excellence and creativity.
The Man Booker Prize celebrated its 50th
anniversary in 2018, making this year a
particularly significant one. Over the past
five decades, the prize has changed the face
of literary fiction – it has brought some of
the leading names in world literature to the
attention of the reading public, uncovered
extraordinary new voices, and championed
novels that have explored the great
challenges of our time.
At Man Group, we understand that to be
well-informed investors, we need to be
well-informed human beings. This is why, as
devoted readers and as a global investment
business, we have sponsored the Man
Booker Prize. Following a careful review
of our funding initiatives, we announced in
January 2019 that Man Group will end its
sponsorship of the Prizes and refocus these
resources to develop our ‘Paving the Way’
campaign, which focuses on enhancing
diversity and inclusion in the industry, and
on expanding the firm’s global charitable
initiatives, including those supported by
the Man Charitable Trust.
The Man Booker Prize 2018
The Man Booker Prize for Fiction, awarded
annually to a novel written in English and
published in the UK or Ireland that year, is
considered the leading literary award in the
English-speaking world. Anna Burns won
the 2018 prize for her third full-length novel,
Milkman, becoming the first Northern Irish
author and the 17th woman to claim the
prize since it began in 1969. In the week
following the winner announcement, sales
of Milkman increased by 983%, the highest
volume sales for any winner in the Nielsen
BookScan era, selling nearly 19,000 copies.
The novel has gone on to sell 350,000
copies in the UK since.
Set in an unnamed city during the Troubles
in Northern Ireland, Milkman focuses on an
unnamed protagonist as she navigates her
way through rumour, social pressures and
politics in a tight-knit community. Drawing on
her own experiences, Burns portrays a world
that allows individuals to abuse the power
granted by a community to those who resist
the state on their behalf. Milkman is a tale of
gossip and hearsay, silence and deliberate
deafness. It is a story of inaction with
enormous consequences, through which
Burns shows the dangerous and complex
outcomes of what can happen to a woman
coming of age in a city at war.
The Man Booker International Prize 2018
Man Group has sponsored the Man Booker
International Prize since its inception in 2005.
Awarded each year on the basis of a single
book translated into English, the Man Booker
International Prize aims to encourage the
publishing and reading of quality fiction in
translation, and the £50,000 prize is divided
equally between the author and the translator.
The 2018 Man Booker International Prize
was awarded to the novel Flights, written
by Polish author Olga Tokarczuk and
translated by Jennifer Croft. In the month
following the winner announcement, sales
of Flights increased by 692%. The novel
Is now in its tenth printing and is, by far,
publisher Fitzcarraldo Editions’ bestselling
title of all time.
Flights is a novel of linked fragments,
from the 17th century to the present day,
connected by themes of travel and human
anatomy. Through these narratives,
interspersed with short bursts of analysis
and digressions on topics ranging from
travel-sized cosmetics to the Maori, Flights
guides the reader beyond the surface layer
of modernity and towards the core of the
very nature of humankind.
MAN GROUP PLC ANNUAL REPORT 2018
43
STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSSHAREHOLDER INFORMATION
Chairman’s Q&A
Ian Livingston talks about what
Man Group’s Board brings to the business
Lord Livingston of Parkhead
Chairman
Q What are the strengths of the
Board?
Man Group’s Board is a committed group
of individuals who are proud to serve the
business and willing to invest substantial time
in preparing for meetings and engaging with
management between Board meetings. Our
directors have diverse backgrounds, outlook
and skills. They all bring strong financial
services and other sector experience, many
having occupied leading positions in other
corporate, Government and policy making
roles. Our non-executive directors are
independent and willing to probe and
challenge business strategy and
performance where necessary.
Q How does the Board keep abreast
of the business context and Man
Group’s stakeholder needs?
The Board recognises the importance of
being responsive to the rapidly changing
investment management industry and
wider macroeconomic, social, political and
technology background. It invites leading
industry experts to share and discuss their
views on longer term industry trends and
the implications for the development of
Man Group’s business. As part of this focus,
the Board has discussed with Man Group’s
Responsible Investment (RI) team our
development of an RI framework to meet
our own and our clients’ increasing
appetite for RI.
Man Group’s role in the communities in which
it operates is very important. The Board
receives updates on a range of issues from
diversity through to the impact of grants made
and employee volunteering activities organised
by Man Group’s UK Charitable Trust. In 2018
the Board approved a further increase in its
commitment to Man Group’s UK and US
Charitable Trusts and supported greater
employee involvement in charitable initiatives.
44
Q What did the Board do to engage
with Man Group’s people and
culture?
The Board continued its discussions on the
embedding of Man Group’s business values
and culture. In addition, an in depth
presentation on the 2018 staff engagement
survey gave us a clear picture of employee
sentiment, highlighting many strengths and
some areas for improvement. We have
discussed with management the most
effective ways in which the Board can develop
its future engagement with staff in line with
the 2018 Corporate Governance Code
requirements and will be implementing our
plans for this in 2019.
We continue to engage with Man Group’s
management, including those at Executive
Committee level and below, both when
they are presenting to the Board and in
subsequent follow up discussions. We also
meet with Executive Committee members
collectively on an annual basis as part
of the Board strategy review. All these
interactions help our knowledge of Man
Group’s people and our focus on promoting
the development of a talent pool of
appropriate breadth and depth.
Q What has the Board done to
promote diversity?
We recognise that Man Group operates in a
sector in which diversity, particularly gender
and ethnic diversity, is poor. We, therefore,
welcome and encourage the considerable and
broad ranging initiatives which management
are taking to promote and support diversity
of all kinds. These are detailed in the people
and culture section of this Annual Report
and Board members have supported and
participated in a number of diversity events.
There is the same need for diversity at Board
level. As noted in the Nomination Committee
report, we continued to seek new non-
executive Board members who could bring
additional skills and capabilities to the Board.
The appointment of Zoe Cruz, with her
extensive career in global financial
institutions, in depth knowledge of
investment management and a strong
US perspective, has brought us significant
value. We have amended our diversity policy
to include a target of at least 25% for women
representation on the Board over the next
12 months and a target of 33% in the
medium term.
Q Against the challenging market
backdrop, how did the Board help
strengthen the business in 2018?
The Board’s key role is helping to create a
sustainable business for the long-term.
Optimising revenue growth, ensuring efficient
product development and delivery aligned
with client needs, and overseeing business
risk are also crucial to long-term success.
As part of this we explored a range of topics,
from the further use of technology, including
artificial intelligence, in both Man Group’s
quant and discretionary strategies, to the
development of top client relationships and
distribution channels. With the broad financial
services experience of its non-executives, the
Board provided challenge in discussion of
market and operational risk. We maintained
a focus on the identification of emerging risks
which could disrupt the business.
Q What are the Board’s priorities
for 2019?
Our priority will be to continue to ensure the
business is well positioned in the face of a
particularly uncertain political environment.
We will oversee the implementation of our
proposed corporate restructure to provide
more flexibility and aid growth. We will continue
to support management to respond to the
long-term challenges of the industry and keep
the business aligned with the values of our
shareholders, clients and other stakeholders.
We will strengthen our oversight of
Man Group’s culture and people, testing
consistency and alignment with business
purpose across the firm, and drive forward
the talent and diversity agenda.
MAN GROUP PLC ANNUAL REPORT 2018
CORPORATE GOVERNANCE Board of Directors
Committee memberships
R Remuneration
N Nomination
AR Audit and Risk
Committee Chair
Chairman
Chief Executive Officer (CEO)
Chief Financial Officer (CFO)
President
Luke Ellis
Date of appointment
September 2016
Committee memberships
None
Background and career
Prior to his appointment to
the Board, Luke served as
President of Man Group from
2012 with responsibility for the
management of Man Group’s
investment businesses. Before
this, he was Head and CIO of
Man’s Multi-Manager Business
and Non-Executive Chairman
of Man GLG Multi-Manager
activities. Luke previously
served as Managing Director
of Man FRM from 1998 to
2008, prior to which he was
a Managing Director at
J.P. Morgan in London.
Areas of expertise and
contribution
Luke has a strong and varied
investment management
background and extensive
knowledge of Man Group from
his role as President. Since his
appointment as CEO, Luke has
led the Group in diversifying its
product range and increasing
its international presence.
He has also continued to
strengthen the Group’s control
focus through the creation of
the Chief Administrative Officer
role and the appointment of
a Chief Investment Officer for
the Group.
Lord Livingston
of Parkhead
Date of appointment
January 2016
Chairman: May 2016
Committee memberships
N R
Background and career
Ian has been a serving member
of the House of Lords since 2013
and served as Minister of State
for Trade and Investment from
2013 to 2015. Prior to this he
was Group Chief Executive
Officer of BT Group Plc, having
previously served as Chief
Executive Officer of BT Retail
and as Group Chief Financial
Officer. Before joining BT, he
was Chief Financial Officer of
Dixons Group plc. Ian is currently
Chairman of Dixons Carphone
plc and a non-executive director
of Belmond Ltd.
Areas of expertise and
contribution
With over two decades of board
level FTSE 100 experience, Ian
brings extensive knowledge and
understanding of successfully
growing a complex international
business and navigating
regulatory environments around
the world. He has a strong track
record of innovative leadership
that is invaluable to the Board
and executive team. Since being
appointed as Chairman of Man
Group, Ian has steered the
Board through significant
change and streamlined certain
Board Committee memberships
and delegations. He has also
brought a greater focus on
strategic topics and different
stakeholder groups into regular
Board meetings.
Mark Jones
Date of appointment
January 2017
Jonathan Sorrell
Date of appointment
June 2012
Committee memberships
None
CFO: June 2012 – December
2016
Background and career
Before joining the Board, Mark
served as Co-CEO of Man GLG
from 2013 and COO from 2010.
Mark joined Man GLG in 2005
from strategy consulting firm
McKinsey where he worked
across a range of industries.
Areas of expertise and
contribution
Mark has significant
management, financial and
operational experience gained
through his previous roles at
Man Group. This experience,
together with his extensive
industry knowledge, has
supported the development
of the Group’s strategy and
offering to clients. Since his
appointment as CFO, Mark
has brought a clear focus on
cost through the delivery of
challenging cost saving
initiatives, led the work on our
proposed corporate restructure
and successfully overseen
a number of changes to the
structure of the Group’s
Risk function.
Co-President: June 2016
President: September 2016
Committee memberships
None
Background and career
Jonathan joined Man in August
2011 as Head of Strategy and
Corporate Finance. He was
CFO from June 2012 to
December 2016 and was
appointed Co-President in
June 2016 and President in
September 2016. Prior to joining
Man Group, Jonathan spent 13
years at Goldman Sachs where
he worked in the Investment
Management, Securities and
Investment Banking Divisions,
latterly leading investments in a
broad range of alternative asset
management firms.
Areas of expertise and
contribution
Jonathan’s experience of
financial markets, particularly
his extensive knowledge of the
alternative fund management
industry and strong background
in strategy and execution, has
supported the development
of Man Group’s business,
including the M&A activity
which has strengthened the
Group’s footprint in the US
and established a business
in private markets. Since his
appointment as President,
Jonathan has designed and
executed a new strategy for
Sales & Marketing, successfully
established Man Global Private
Markets (including the
integration of Aalto), and has
continued to reposition, develop
and grow Man FRM as an
alternative asset management
solutions provider.
MAN GROUP PLC ANNUAL REPORT 2018
45
STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSSHAREHOLDERINFORMATION
Board of Directors continued
Senior Independent Director
(SID)
Independent Non-Executive Directors
Richard Berliand
Date of appointment
January 2016
Chairman of the Remuneration
Committee: May 2016
SID: May 2017
Committee memberships
R N AR
Background and career
Richard held a number of senior
roles at J.P. Morgan over a 23
year career at the firm, including
Global Head of Prime Services,
Global Head of Cash Equities and
Chairman of J.P. Morgan’s Market
Structure practice. Richard is
currently a member of the
Supervisory Board of Deutsche
Börse AG.
Areas of expertise and
contribution
Richard has a wealth of
experience in the financial
services sector gained through a
number of senior executive roles.
He also brings extensive
experience from a diverse range
of international non-executive
positions which gives him a deep
understanding of areas such as
the current regulatory
environment, risk management
and technology. Richard’s focus
on investor engagement through
his role as Chairman of the
Remuneration Committee and
SID has provided valuable
context to Board decisions,
specifically in relation to
remuneration policy and practice.
Dame Katharine
(Kate) Barker
Date of appointment
April 2017
Zoe Cruz
Date of appointment
June 2018
John Cryan
Date of appointment
January 2015
Committee memberships
Committee memberships
Committee memberships
R
AR
R
Background and career
Kate is a business economist
and was a member of the Bank
of England’s Monetary Policy
Committee from 2001 to 2010.
Prior to that, she was Chief
Economic Adviser to the
Confederation of British
Industry. Her previous roles
include Senior Adviser to Credit
Suisse from 2010 to 2016 and
non-executive director of the
Yorkshire Building Society. Kate
was awarded a CBE in 2005 for
services to social housing and a
DBE in 2014 for services to the
British economy. Kate is
currently Senior Independent
Director of Taylor Wimpey plc
where she is also Chair of its
Remuneration Committee.
Areas of expertise and
contribution
Kate has over 30 years’
experience as a senior
business economist with
broad-ranging knowledge of
monetary and public policy and
the financial services sector.
Kate brings to Man Group
strategic thinking and economic
insight coupled with a strong
knowledge of financial markets
and is a valuable advisor and
contributor to the Board.
Background and career
Zoe held various senior roles
during a 25 year career at
Morgan Stanley, including
serving as Co-President of the
firm between 2005 and 2007
and Global Head of Fixed
Income, Foreign Exchange and
Commodities from 2001 until
2005. Following her time at
Morgan Stanley, Zoe founded
Voras Capital Management in
2009 and ran the firm as CEO
until 2013. Zoe is currently a
non-executive director of Ripple
Labs Inc. She was also a
non-executive director of Old
Mutual plc from 2014 until its
managed separation
completed in 2018.
Areas of expertise and
contribution
With her senior level experience
within global financial
institutions, broad
understanding of the macro
context for investment
management and strong US
perspective, Zoe is a valuable
contributor to the development
of Man Group’s business
strategy and risk management.
Background and career
John is Chairman of XCyber
Group Limited, a cyber
intelligence company based
in the UK. John was CEO of
Deutsche Bank AG from July
2016 to April 2018, having
previously served as co-CEO
from July 2015. Prior to his
appointment as CEO, John
served on the Supervisory
Board of Deutsche Bank AG,
chairing its Audit Committee
and as a member of its Risk
Committee. Prior to his time at
Deutsche Bank AG, he held a
number of senior roles at UBS
AG over a career spanning
more than 25 years with the
banking group, during which
he served as Group CFO as
well as Chairman and CEO of
UBS AG EMEA. After serving
at UBS, John was President of
Temasek, based in Singapore.
Areas of expertise and
contribution
John has extensive knowledge
of international financial markets
gained from experience at
leading global financial
institutions and brings significant
knowledge of the regulatory
environment in which Man
Group operates.
Board composition
Board tenure
Chairman
9.1%
Executive directors 27.3%
Non-executive
directors
63.6%
0–3 years
3–6 years
6+ years
36.3%
45.5%
18.2%
46
MAN GROUP PLC ANNUAL REPORT 2018
CORPORATE GOVERNANCE Committee memberships
R Remuneration
N Nomination
AR Audit and Risk
Committee Chair
Independent Non-Executive Directors
Andrew Horton
Date of appointment
August 2013
Chairman of the Audit and
Risk Committee: July 2018
Committee memberships
AR N
Background and career
Andrew has served on the
Board of Beazley plc since
2003, first as Group Finance
Director and since 2008 as
CEO. Prior to his time at
Beazley, Andrew held a number
of financial positions within ING,
NatWest and Lloyds Bank.
Areas of expertise and
contribution
Andrew has over 25 years of
broad financial services
experience with extensive
exposure to operating at Board
level. With his banking, financial
markets, insurance and broad
international experience,
Andrew has made a significant
contribution to Man Group’s
strategic development, risk
management, financial
reporting and increased
international presence.
Matthew Lester
Date of appointment
May 2011
Dev Sanyal
Date of appointment
December 2013
Committee memberships
Committee memberships
AR
AR
Background and career
Dev has held a number of senior
financial and line management
positions with BP in a global
career spanning more than 25
years. Dev is CEO, Alternative
Energy and Executive Vice
President, Europe & Asia
Regions at BP plc.
Areas of expertise and
contribution
Dev has extensive knowledge
of capital markets, asset and
risk management, trading and
foreign exchange gained from
his role as BP Group Treasurer
and Chairman of BP Investment
Management Ltd. With broad
international experience and
wide ranging operational
expertise, he is able to
contribute to the development
and execution of Man Group’s
business strategy and global
relationships.
Background and career
Matthew was CFO of Royal Mail
plc during the period of
preparation for privatisation and
for its first four years as a listed
entity. Prior to that, he was
Group Finance Director of ICAP
plc from 2006 to 2010 and held
a range of senior finance roles
at Diageo, including Group
Financial Controller and Group
Treasurer. Matthew is currently
a non-executive director of
Capita plc where he is Chair of
the Audit and Risk Committee.
He is also a non-executive
director of Barclays PLC where
he is a member of the Board
Audit and Board Risk
Committees.
Areas of expertise and
contribution
Matthew has extensive
financial, risk management and
regulatory expertise. He also
has significant listed company
experience acquired through
his role at ICAP plc and through
the flotation of Royal Mail plc on
the London Stock Exchange.
Matthew’s experience enables
him to provide substantial
insight into the Group’s financial
reporting and risk management
processes.
Board
experience
Percentage of Board
members with
experience of:
100%
Finance and investment
100%
International business
82%
Risk management
82%
Operations
Board gender diversity
Board age range
Male
Female
81.8%
18.2%
35–44
45–54
55+
18.2%
18.2%
63.6%
MAN GROUP PLC ANNUAL REPORT 2018
47
STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSSHAREHOLDERINFORMATION
Corporate governance continued
Board structure
Roles and responsibilities
Chairman
– Leads the Board, sets its agenda and
ensures it discharges its role effectively
– Supports and constructively challenges
the CEO, promotes effective relationships
between executive and non-executive
Board members, and creates a culture
of open debate
– Leads, with the support of the Nomination
Committee, effective Board succession
planning and the search for and
appointment of new directors, taking
account of the need for the development
of Board skills, experience and diversity
– Ensures that the Board maintains effective
engagement with shareholders and takes
account of the interests of all stakeholders
in its decision making
Chief Executive Officer
– Leads the development, for Board approval,
of business strategy and management’s
delivery against it
– Runs the business with appropriate
delegated authorities, risk management
and internal controls
– Communicates and embeds a shared
purpose and set of business values and
builds management talent
– Develops an effective relationship with
the Chairman and leverages the knowledge
of non-executive Board members
– Maintains an effective dialogue with
shareholders on the Company’s strategy
and performance
Chief Financial Officer
– Manages the allocation and maintenance
of the Group’s capital, funding and liquidity
in accordance with regulatory requirements
– Has responsibility for the preparation and
integrity of the Group’s financial information
and its regulatory reporting
– Leads the development of annual budgets
and Medium Term Plans for Board approval
– Has responsibility for the Group’s risk
management within the Board’s risk
appetite statements
– Maintains an effective dialogue with
shareholders and stakeholders on the
performance and financial structure of
the Company
President
– Leads and oversees the Group’s Sales
and Marketing capability globally
– Leads and oversees two investment
engines, Man Global Private Markets and
Man FRM
– Has responsibility for and leads the
development of the Group’s corporate
strategy, including merger and acquisition
activity
Senior Independent Director
– Maintains a broad overview of the work
of the Board and its Committees
– Provides a sounding board for and advice
to the Chairman on any Board matters
including development and succession
– Acts as a focal point for communications
with the non-executive directors if required
– Leads the annual performance evaluation
of the Chairman
– Leads the search for the appointment
of a new Chairman
– Engages with shareholders as required
Non-Executive Directors
– Contribute and provide constructive
challenge to the development of business
strategy
– Contribute to the identification of principal
business risks and the determination of risk
appetite
– Monitor and challenge management
performance in delivering business strategy
and objectives
– Monitor and challenge the effectiveness of
the internal control and risk management
framework
– Monitor the Company’s compliance with
the Regulatory principles and requirements
impacting asset management and
distribution
– Review and challenge, prior to publication,
the Company’s financial statements and
announcements
– Keep Board composition and succession
planning under review in light of changing
business needs and recommend any
changes considered appropriate
– Determine executive director remuneration
policy and pay
Role of the Board
The Board’s core role is to
promote the long-term success
of the Company for the benefit
of its shareholders.
This requires us to:
– Determine and review business
strategy and Man Group’s
appetite for risk
– Monitor management
performance in delivering
that strategy
– Ensure that risk management
measures and internal controls
are appropriate and effective
– Oversee and monitor the
embedding of and adherence to
the Company’s business values
– Ensure that the Company’s
financial structure, resources,
talent and culture will support
long-term growth
In discharging this role, the Board
must also have regard to and
engage with the interests of a wide
range of stakeholders, including
employees, customers, suppliers
and broader communities, in order
to build mutual trust and support
the long-term sustainability of the
business.
Role of the Board Committees
The Board delegates its formal
governance responsibilities
to three Board Committees
comprised exclusively of non-
executive directors. The main
responsibilities of each Board
Committee are detailed on the
page opposite.
48
MAN GROUP PLC ANNUAL REPORT 2018
CORPORATE GOVERNANCE Board Committees
Board operation and delegation
Audit and Risk Committee
– Reviews the integrity of the Company’s financial reports and
statements, and recommends their approval to the Board
– Reviews and reports to the Board on the effectiveness of
Man Group’s risk management and internal controls framework
– Recommends to the Board the appointment of the external
auditor and reviews their effectiveness and independence
– Approves the Internal Audit plan and reviews the effectiveness
of the Internal Audit function and management’s response
to their findings
See pages 58–63 for the Audit and Risk Committee report
Remuneration Committee
– Determines and recommends to the Board the principles
and structure of the Directors’ Remuneration policy
– Approves the total annual compensation for individual
executive directors including salary, variable cash and deferred
bonus, and LTIP awards
– Approves the quantum of the Company’s annual variable
compensation pool and deferral policies
– Approves the total annual compensation for Executive
Committee members and Remuneration Code staff
– Reviews feedback from shareholders and oversees the
Company’s engagement on directors’ remuneration and
reporting
See pages 67–89 for the Remuneration Committee report
Nomination Committee
– Keeps the Board’s size, structure, composition and diversity
under review in response to business needs and opportunities
– Considers the skills, experience and knowledge required for
a particular Board appointment
– Conducts the search and selection process for new directors
taking advice from independent search consultants
– Recommends to the Board preferred candidates for Board
appointment
– Reviews Board and senior executive development and
succession planning to ensure continuity of resource
See pages 64–66 for the Nomination Committee report
Full Committee terms of reference, which are reviewed and approved
by the Board on a regular basis, can be found on our website. Details
of the work of the Committees during the year are given in the
separate Committee reports.
Matters reserved for the Board
To discharge its role, the Board has reserved for itself certain key areas
of decision including business strategy, risk appetite, major acquisitions
and disposals, capital structure and funding, financial reporting and
dividend policy. A full list of the Board’s reserved matters is available
on our website.
Board activity during 2018
Details of the Board’s main activities and areas of focus during the
year are provided on pages 50–51. These align with the Board’s
role and reserved matters detailed above and demonstrate the part
played by the Board in supporting and progressing the Company’s
strategic priorities. An account of the Board’s engagement with key
stakeholder groups and consideration of their interests is given on
pages 52–53.
Board delegation to the CEO
All business decisions and activities which are not reserved for
the Board and its Committees are delegated to Luke Ellis as CEO.
Luke has appointed and runs the business through the Senior
Management Executive Committee whose members have the
particular areas of responsibility shown below.
Senior Management Executive Committee
Member
Areas of responsibility
Robyn Grew
Chief Administrative Officer
and General Counsel
Man Group’s Infrastructure – Operations,
Technology, Compliance, Legal, HR and
Facilities
Mark Jones
Chief Financial Officer
and Executive Director
Capital, Financial reporting, Risk management
and relationships with Shareholders,
Regulators, Banks and Auditors.
Full biography on page 45
Sandy Rattray
Chief Investment Officer
Man AHL, Man Numeric, Man GLG and
Man Solutions
Jonathan Sorrell
President and Executive
Director
Global Sales and Marketing, corporate
strategy and M&A, Man Global Private
Markets and Man FRM.
Full biography on page 45
The Committee meets weekly to maintain its broad operational
oversight of the business, discuss top level strategic and risk issues
and develop proposals for Board review. These meetings are
supplemented by regular informal interaction and discussion to share
and test views.
CEO’s operating authorities and procedures
In addition, to help manage and control the business on a day to day
basis, the CEO has implemented a framework of delegated authorities
and procedures which applies throughout the firm. This framework sets
out authority levels and controls in respect of material business change,
the development of Man Group’s product range, non-budgeted
expenditure, recruitment and compensation, legal agreements,
financial guarantees and use of the Company’s balance sheet.
MAN GROUP PLC ANNUAL REPORT 2018
49
STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSSHAREHOLDERINFORMATION Corporate governance continued
How the Board promotes
the success of the business
Key activities
Developing and
reviewing strategy
Reviewing risk appetite
and risk management
Monitoring and challenging
business performance
Overseeing culture and
people engagement
Annual strategy review
– Reviewed progress against prior
year’s areas of focus: Sales,
Technology, GPM growth,
Numeric, FRM and Man Solutions
– Reviewed management proposals
for a change to Man Group’s
corporate structure
– Discussed with industry experts
the further leveraging of
technology, data and artificial
intelligence in asset management
– Reviewed peer case studies,
transferable learning and future
market opportunities
– Reviewed industry approach to
third party distribution and future
development for Man Group
Outcomes
– Approved in principle, for further
review, the corporate restructure
described on page 5
– Agreed further development and
sharing of innovative quant
technologies across the firm
‘Deep dive’ reviews of
investment managers
– Half yearly reviews of Man AHL
strategies and operations
– Reviewed progress on Man GLG
strategies and operations
including a specific focus on ELS
(Equity Long/Short)
Outcomes
– Discussed changing income
attribution and areas of over/under
exposure
– Supported management’s
exploration of new strategies and
markets
– Supported continuing investment
in machine learning and shared
platform architecture
– Reviewed and challenged
progress on talent development,
management and retention
Brexit
– Reviewed and agreed
contingency plans to allow Man
Group to maintain its EU business
after Brexit, subject to further
review when the political
outcomes were clearer
– Discussed with the CEO at every
meeting the likely impact of
current macroeconomic and
market trends on Man Group’s
investment strategies, potential
investor appetite and the retention
of client assets
– Regularly reviewed internal profit
forecasts against market
consensus estimates to identify
and assess any variance
– Reviewed the assumptions
underlying the 2019 Budget and
2019/21 Medium Term Plan (MTP)
proposals
Outcomes
– Challenged management on
future prospects for Man Group’s
strategies and the broader asset
management industry. Requested
a refreshed overview and
discussion with an external
industry expert in early 2019
– Discussed concentration risk and
requested a further review of
concentration points at the 2019
Board strategy review
– Challenged 2019 budget
assumptions on performance
and costs
– Requested further sensitivity
analysis in respect of flows,
diversification benefit and the
impact of a negative Brexit
– Approved 2019 Budget and MTP
subject to ongoing review in the
course of the year in the light of
changing market conditions
– Reviewed risk governance and
appetite framework including
business risk tolerance
– Reviewed Man’s principal risks
and updates to its risk dashboard
– Conducted a full year review
of the effectiveness of its risk
management and internal
controls
– Discussed with expert advisers
the current cyber threat to asset
management and the areas on
which the Board should focus to
oversee resiliency
– Reviewed and challenged the
annual update of Man Group’s
Internal Capital Adequacy
Assessment Process (ICAAP)
document. This included oversight
of the embedding of management
processes for monitoring changes
in risk profile which might impact
Man Group’s regulatory and
economic capital requirements
Outcomes
– Agreed changes in the measure
and quantification of business risk
and endorsed the development of
an enhanced forecasting model to
explore downside scenarios
– After full discussion of dashboard
changes, particularly in market
and key person risk, approved the
Board’s principal risk and risk
management disclosures in the
Annual and Interim Report (see
pages 31–33)
– Requested the creation of a cyber
risk dashboard to evidence and
monitor the management of cyber
risk for regular report to the Audit
and Risk Committee and Board
– Approved the 2017 ICAAP
process and document which it
considered to be thorough and
robust
– Discussed with the CEO the 2018
employee survey scores, the
analysis of feedback and the
management actions planned in
response
– Discussed with management and
sought external advice on
emerging market practice in
respect of mechanisms being
selected for Board engagement
with staff in response to new UK
Corporate Governance Code
requirements
– Discussed with the CEO and
business unit heads progress on
the embedding of business values
in employee behaviours, the
cultural impacts of staff changes
and the positive outcomes of the
re-engineering of business teams
– Received regular updates on
management’s wide ranging
diversity initiatives to create an
inclusive working environment
across the business
– Sought further direct exposure
to members of the Executive
Committee and senior
management through Board
presentations and in subsequent
follow up discussions
Outcomes
– Commended the overall positive
outcome of the 2018 employee
survey. Requested further data on
the scores for individual business
teams and regular updates on
management actions taken in
response
– Agreed with the CEO the need
for further regular discussion
of people and business culture
– Sponsored and participated
in certain diversity events led
by staff
– Agreed on the need for further
review of management talent
in Board meetings and
non-executive director meetings
(see Nomination Committee
priorities for 2019 on page 65)
50
MAN GROUP PLC ANNUAL REPORT 2018
CORPORATE GOVERNANCE Key areas of strategic focus
Innovation and
technology
Strong client
relationships
Returns to
shareholders
Dividends
– Recommended and approved
final and interim dividends in line
with the Company’s published
dividend policy
Capital return
– Kept under review and tested
throughout the year Man Group’s
forecast surplus capital and
liquidity positions under various
scenarios
– Regularly assessed the merits of
the use of any projected surplus
capital for further capital return to
shareholders as opposed to its
retention for potential value adding
acquisitions
– Approved the launch of two share
buybacks of $100 million each
during the year
– Reviewed and discussed with the
Sales team the analysis of Man
Group’s client universe, the
focusing of resource on key target
relationships, the strategy to
increase the value of assets held
by clients in more than one Man
Group product and the actions in
place to protect assets perceived
to be most at risk
– Reviewed and discussed with
Man Group’s Consultant Relations
team the opportunities and
strategy for expanding investment
consultant coverage of Man
Group’s products, achieving
positive ratings and increasing
consultant influenced assets
Responsible Investment (RI)
– Discussed with Man Group’s RI
team the increasing importance
of RI to institutional and other
investors, the development of
Man Group’s RI strategy and fund
framework and the raising of its
RI profile within the investment
community
Quant strategies
– Review of and support for the
build out of a quant equity
business offering new products
with sizeable and scalable
potential
– Discussion of investment in new
markets to create additional
capacity in existing quant
strategies
– Expansion of Man AHL’s machine
learning to generate innovative
value-adding ideas from new
areas of research
Technology
– Board review of the re-engineering
of Man Group’s Technology
resource to create separate
Corporate and Alpha/Quant
development teams
– Discussed Man Group’s
Corporate Technology strategy
and the core programmes
planned for 2018
– Discussed Man Group’s Alpha/
Quant Technology strategy which
includes the firm wide sharing of
platform infrastructure, the use of
a common modelling language
and the identification of
opportunities for external
partnering in the Fintech space
Proportion of Board time spent on key activities
2018 Board meetings
2018
Developing and reviewing strategy
Reviewing risk appetite and risk management
Monitoring and challenging business performance
Overseeing culture, people and stakeholder relationships
46%
12%
29%
13%
Board member
Ian Livingston, Chairman
Kate Barker
Richard Berliand
Zoe Cruz
John Cryan
Luke Ellis
Andrew Horton
Mark Jones
Matthew Lester
Dev Sanyal
Nina Shapiro
Jonathan Sorrell
Attendance
8/8
8/8
8/8
5/61&2
8/8
8/8
7/82
8/8
8/8
8/8
5/53
8/8
MAN GROUP PLC ANNUAL REPORT 2018
51
1 Zoe Cruz joined the Board on 1 June 2018.
2 Owing to conflicting business commitments, Zoe Cruz and Andrew Horton were each
unable to attend one meeting which had to be convened at short notice. However, they
received and reviewed the papers to be considered in advance and directed questions
to the Chairman which were addressed in the meeting.
3 Nina Shapiro retired from the Board on 9 October 2018.
STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSSHAREHOLDERINFORMATION
Corporate governance continued
Stakeholder engagement
Shareholders
Technology driven asset management
teach-in
The Board is committed to proactive and ongoing engagement
with the Company’s investors and is keen to understand the views
of major shareholders. The Head of Investor Relations regularly
attends Board meetings to report on changes in the share register
and current areas of interest. Copies of investment research
published on the Company are regularly circulated.
Richard Berliand, as Chairman of the Remuneration Committee,
provides regular reports on shareholder views on Man Group’s
Directors’ Remuneration policy and award decisions from his
engagement with top shareholders and shareholder
representative bodies.
Institutional investors
The Company has developed a comprehensive investor
relations programme through which the Head of Investor
Relations, CEO and CFO maintain a continuous dialogue with
investors on performance, plans and strategic objectives. This is
achieved through one to one meetings throughout the year and
participation in investor roadshows and investor conferences.
The 2018 investor events calendar is set out opposite.
Key areas which the CEO and CFO have discussed with
investors during the year have included:
– Investment performance across our range of strategies
– Flows, interaction with clients, client concentration, product
innovation and margin trends
– Progress in the areas of Machine Learning and Artificial
Intelligence
– Proposed corporate restructure
– Potential new acquisitions and capital management
– Brexit and its potential impact on the Group’s operations
Private investors
Our private investors are encouraged to access the Company’s
Interim and Annual Reports, half-year and final results presentations
and quarterly trading statements on our website. Other useful
information such as historic dividend records and shareholder
communications is also available. Our website gives access to
our Registrar’s Shareview website (www.shareview.co.uk)
through which shareholders can manage their individual account
online. Printed copies of our Annual and Interim Reports and
other shareholder communications continue to be available on
request for shareholders who prefer this method of delivery.
We are always keen to understand the views of and answer
questions from private investors and offer a dedicated
shareholder mailbox (shareholder@man.com) for this purpose.
A separate mailbox is available for any AGM queries
(agm@man.com).
Shareholder meetings
We welcome shareholders to our AGM in May each year.
At every AGM our shareholders are given an overview by the
CEO of the progress of the business and our future plans and
outlook. This is followed by the opportunity for shareholders
to ask questions about the resolutions before the meeting and
about the business more generally. The CEO’s presentation
is made available on our website after the meeting.
We look forward to meeting shareholders and providing a
further business update at our 2019 AGM in May this year.
On 23 April 2018 we held a Technology driven asset
management teach-in for investors and sell-side analysts.
The aim of the session was to get people to understand the
way we think about technology in an asset management
business and the way we use it at Man Group. There were a
range of speakers from across the firm presenting throughout
the morning, covering how the Group uses technology in
alpha generation, trade execution, portfolio construction,
interactions with clients, back-office processes and in risk
management. The Chief Scientist at Man AHL also explained
how we are using machine learning and artificial intelligence
across the Group.
The session received very positive feedback from the
attendees including the following comments: “From a
technology standpoint, they are at the cutting edge in the
industry – true pioneers” and “In terms of investor events,
it was definitely top quartile.”
Calendar of investor events
Q1 2018
Q2 2018
Q3 2018
– 2017 year end results released
– 2017 Annual Report published
– UK investor roadshow (London)
– US investor roadshow
– Morgan Stanley Annual European Financials
conference (London)
– Q1 2018 Trading Statement released
– Technology driven asset management teach-in
– Shareholder engagement on 2017 Directors’
Remuneration report and AGM voting
– Annual General Meeting
– Goldman Sachs European Financial Services
conference (Frankfurt)
– 2018 interim results released
– 2018 Interim Report published
– UK investor roadshow (London)
– US investor roadshow
– Barclays Global Financial Services Conference
(New York)
– Bank of America Merrill Lynch Annual Banking
and Insurance Conference (London)
Q4 2018
– Q3 2018 Trading Statement released
– UBS European Conference (London)
– J.P. Morgan ‘Best of British’ conference (London)
– UK investor roadshow (Edinburgh)
52
MAN GROUP PLC ANNUAL REPORT 2018
CORPORATE GOVERNANCE Staff
Business partners/supply chain
– Discussed with management the nature of Man Group’s
culture and the embedding of its business values and
their impacts
– Sought feedback from business unit heads on staff
sentiment and the impacts of team and business change
– Explored in depth the outputs from the 2018 staff survey
and discussed the consistency of staff attitude and culture
across different parts of the Group
– Focused attention on ensuring staff awareness of the
Company’s whistleblowing procedures and their
effectiveness
– Consistently introduced the diversity challenge into the
discussion of business strategy, resourcing and talent
development, and pay
– Received regular updates on progress on Man Group’s
diversity initiatives and participated in a number of
employee led Drive network events
– Engaged directly with management, at Executive
Committee level and below, within formal Board
presentations and in follow up discussions
Read more on pages 34–37
– Regular interaction between Man Group’s executive
directors and key elements of its supply chain which largely
comprise business and professional services organisations
– Reviewed Man Group’s engagement with its broader supply
chain as part of the Board’s annual approval of Man
Group’s Modern Slavery Transparency Statement
– Considered, as part of the review of Man Group’s proposed
corporate restructure, any potential impacts on business
partner relationships, including Man Group’s lenders under
its Revolving Credit Facility
– Discussed with management ways in which the Board
might further develop its understanding of the interests of
its service providers in line with 2018 Corporate Governance
Code requirements
Clients
Communities
– Kept under review and sought expert external update on
trends in investor appetite and long-term market direction
– Maintained a focus on investors’ increasing interest in
Responsible Investment (RI) and reviewed the development
of Man Group’s RI fund framework and industry profile
– Kept updated by the Sales team on the development and
analysis of Man Group’s client universe, the identification
of top clients and target groups and progress on strategies
to respond to their needs
– Requested and received regular deep dive reviews of
individual top clients and the development of their
relationships with Man Group
– Maintained a keen awareness of the broad communities
of people within which Man Group operates and the needs
of the pension funds and underlying individual beneficiaries
which they serve
– Received updates on the activities of and impacts of
grants made by Man Group‘s UK Charitable Trust which
is focused on improving standards of literacy and
numeracy in local communities and more broadly
– Approved a further increase in Man Group’s ongoing
commitment to the UK and US Trusts to support and
encourage further employee volunteering and involvement
in charitable initiatives
Read more on pages 13, 38–40
Read more on pages 42–43
MAN GROUP PLC ANNUAL REPORT 2018
53
STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSSHAREHOLDERINFORMATION Corporate governance continued
Board strength and effectiveness
Board profile
Man Group’s Board is a highly skilled, committed and diverse
group of individuals who are keen to further their knowledge of Man
Group’s business and its challenges and contribute to its success.
The biographies set out on pages 45–47 evidence the broad ranging
financial services and other experience which non-executive Board
members bring to Man Group’s business from leading positions in
other organisations. The pie charts on pages 46–47 provide an
analysis of the Board’s diversity in terms of skills base, length of
tenure, age group and gender.
Board meetings
The Board met formally eight times during the year, including for
one full strategy day. Meetings are normally attended by the Chief
Investment Officer and the Chief Administrative Officer. They provide
further detail and management perspective on business matters but
do not take part in any decision making. Non-executives seek every
opportunity for direct engagement with management both within
formal meetings and follow up discussions. They ensure that regular
review of individual businesses, top client relationships, people
and technology are built into the Board programme. Time is made
available for private discussion by non-executive directors at the end
of regular Board meetings. In addition, twice yearly non-executive
sessions are scheduled to discuss, with input from the CEO, people
issues, talent and executive succession.
Board meetings are conducted on the basis that all written materials
submitted are thoroughly reviewed in advance so as to minimise
presentation and maximise discussion time. Non-executives use
their diverse experience to question and challenge proposals and
suggest an alternative perspective or approach. Board debate and
decision making are structured in such a way as to allow all views
to be heard.
Board independence
Our non-executive directors are fully independent and do not have
any external appointments or interests which could conflict with
those of the Company. Board members are required to keep me
updated on any changes in their external roles which might conflict
with their responsibilities as directors of Man Group so that any
potential conflicts can be assessed by the Board. An ongoing
schedule of directors’ external interests is maintained and formally
reviewed by the Board at the end of each year.
Board induction
Our non-executive directors receive a comprehensive and tailored
induction to the business and, to the extent required, the asset
management industry as soon as they are appointed. The
programme is structured around one to one briefings with the
executive directors, Executive Committee members, the Heads
of Group businesses and functions and the Company Secretary,
covering their respective business objectives and challenges.
An outline of the programme, which is regularly updated in response
to business change and director feedback, is given below with
further detail available on our website. We also arrange for new
non-executives to meet their non-executive colleagues outside
formal Board meetings to help build their understanding of the
business and Board dynamics.
Zoe Cruz worked through the induction following her appointment
to the Board in June 2018. To support her role as a Remuneration
Committee member, Zoe also received briefings from Richard
Berliand as Remuneration Committee Chairman, our Senior Reward
Executive and our Remuneration Consultants, PwC, covering in
particular the development of Man Group’s Directors’ Remuneration
policy and practice in response to industry developments and
investor sentiment.
Non-executive induction programme
Business
review
– Strategic direction and priorities
– Business strategy and market context
– Risk appetite, principal risks, risk
governance framework and ICAAP
– Overview of Man AHL, Man GLG, Man
FRM, Man Numeric and Man GPM
– Global Sales and Marketing
– Budget and Medium Term Plan
– Operations and Technology
Performance
and market
positioning
– Review of financial and market
performance
– Recent analyst and media coverage
– Analysis of shareholder base and investor
perceptions
– Shareholder engagement
Regulatory
environment
– Overview of the Group’s key compliance
and regulatory policies
– Recent changes in regulatory landscape
and impact of upcoming regulatory
developments
– Hot topics and key priorities for regulators
including relevant thematic reviews
– Discussion of business principles
– Key people and succession plans
– People and Talent priorities including
diversity and inclusion, engagement,
staff development and performance
– HR structure and outsourcing
arrangements
– Board structure, processes and
dynamics
– Board interaction with the business
– Listed company obligations, reporting
and corporate governance framework
– Directors’ duties and responsibilities
People,
culture and
values
Regulatory
and Board
governance
framework
54
MAN GROUP PLC ANNUAL REPORT 2018
CORPORATE GOVERNANCE Board education and training
A number of sessions, led by internal subject experts and external
advisers, were organised within Board meetings to provide updates
on upcoming regulatory and political change. The main topics
addressed and discussed were:
2018 UK Corporate Governance Code
– Gap analysis of requirements against Man Group’s current practice
– Review and discussion of proposed Board response
– Specific review of the alternative mechanisms available for further
development of Board/employee engagement
Senior Managers and Certification Regime (SMCR)
– Impact of SMCR requirements and individuals identified as
Senior Managers
– Gap analysis against Man Group’s current processes and
structures
– Timeline and ownership within the business
– Agreed timetable for further updates in 2019
Brexit
– Further update on the most significant impacts of Brexit on
Man Group, including the need to maintain access to highly
skilled EU talent
– In response to ongoing political uncertainty, review of plans
to safeguard the continuation of Man Group’s investment
management services for European clients and its distribution
services in Europe
Corporate restructure
– Regulatory process, requirements and timeline including
Board approvals
– Directors’ particular responsibilities for the restructure under
the UKLA Listing and Prospectus rules
– Differences between Jersey and UK company law, including
directors’ duties
Non-executive director briefings
In addition to the above in house sessions, opportunities continued
to be made available to non-executive directors to attend external
seminars and workshops on topical business and regulatory issues
offered by professional services firms.
Perspectives on Man Group
from a new non-executive
director
Zoe Cruz
Independent Non-Executive
Director
Q What have been your impressions of Man Group’s
business and Board?
I’ve been impressed by the calibre, capability and breadth
of knowledge of the Board. They are a very strong team of
individuals and, as I’ve seen from this year’s Board evaluation
process, are willing to embrace and respond to developmental
ideas which will help them grow stronger. I’m also impressed
by the quality of people I’ve met in Man Group more generally;
it has a high concentration of talent in a small population.
Q Looking ahead, what do you see as the major
challenges for the business and Board?
First, without a doubt, it is to prepare for the likelihood of a
period of industry upheaval and prolonged market volatility
which I believe may lie ahead. No one knows exactly what it
will look like and when it will come. Given this challenge, the
Board needs to continue its stress testing of a whole range of
downturn scenarios and find a business model which will work
and flourish in such a period.
Second, the Board needs to remain focused on succession
planning. It currently has very strong and capable leadership
under Luke and his executive team, but we must continue to
develop potential successors for him and the other top roles.
Q What do you think of Man Group’s progress
on diversity?
I am impressed by the energy and resource which
management have been investing in developing a culture
which recognises and promotes the value of diversity and
inclusion in its people. Significant progress is being made
by Man Group against the backdrop of an industry which
has historically been very poor in this area.
As regards gender diversity, my previous experience was on
a Board which had a much higher percentage of women than
Man Group does, and I have noticed the difference. Board
dynamics, behaviours and the expression of views change
as the number of women on a Board increases. I welcome
Man Group’s firm focus on bringing further diversity, including
gender diversity, into the Boardroom when new appointments
are considered. It will help create a different perspective,
promote the articulation of different views and broaden our
decision making.
MAN GROUP PLC ANNUAL REPORT 2018
55
STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSSHAREHOLDERINFORMATION Corporate governance continued
2018 Board evaluation
Evaluation cycle
Following two internal evaluations in 2016 and 2017, a full external evaluation was carried out in 2018. Clare Chalmers (CC), who has no other
connection with the Company, was selected to carry out this work and her findings and recommendations were reported to and discussed
by the Board and its Committees in December. The key stages of the evaluation process undertaken are set out below.
2018 Board evaluation process
Phase 1 – Engagement
Phase 2 – Briefing
CC selected to undertake the
work.
Chairman and Company
Secretary briefed CC on the
objectives of the review and
suggested areas of focus.
Phase 3 – Board paper
review
CC reviewed a set of Man
Group’s Board papers to provide
insight into the quality of
materials provided.
Phase 5 – Interviews
CC conducted 1:1 interviews with
Board members and Senior
Management Executive Committee
attendees covering both standard
topics and others aligned to
individual roles and experience.
Phase 4 – Board meeting
observation
CC attended the October Board
meeting to observe Board
dynamics and individual director
contributions.
Phase 6 – Feedback
meeting with Chairman
Phase 7 – Presentation
to the Board
CC discussed overall findings
with the Chairman and provided
confidential feedback on
individual Board members.
CC attended the December
Board meeting to present and
discuss her written report on the
main findings and
recommendations.
Phase 8 – Board review
of findings
Board discussed the evaluation
findings and agreed its priority
areas for focus in 2019.
Summary evaluation findings
Board strengths:
– Calibre and depth of experience
– Commitment to explore and challenge business issues and
– High quality information provided to support the Board to
discharge its role
Areas for development and focus:
– Enhancing Board dynamics
– Further oversight and discussion of Man Group’s culture
and people strategy
– Further focus on talent management and succession
planning
Further detail on the evaluation findings, including an
assessment of progress made on areas of focus in last year’s
evaluation and priorities for focus in 2019, is provided in the
table on page 57.
Board Committee evaluations
The findings and recommended areas of focus arising from the
evaluation of the Audit and Risk, Remuneration and Nomination
Committees are discussed in the separate Committee reports.
Review of individual director contributions
I discussed with each of my Board colleagues individually the
evaluation feedback on their personal contributions to the Board
during the year. These conversations identified areas where they
might bring additional benefit to the Board and explored
opportunities for further development in the role.
Richard Berliand, as Senior Independent Director, shared with me
feedback from my colleagues on the evaluation of my leadership
and management of the Board.
56
MAN GROUP PLC ANNUAL REPORT 2018
CORPORATE GOVERNANCE Board evaluation assessment
Areas of focus in 2018
Progress made
Agreed 2019 actions
Quality of Board papers and
presentations
Board dynamics – non-executive/
executive engagement
Consideration of people and culture
Consideration of stakeholder
interests
Board education and training
Clear, succinct, high quality papers helped the
Board fulfil its role. Strategy papers proposing
the corporate restructure were particularly
effective, outlining options and risks and
including follow up Q&A sections on issues
previously raised.
Consider prioritisation of papers on the Agenda
and provide further clarity on which are for
information and which for decision. Management
to adopt a clear structure for all papers, setting
out upfront their purpose and the action
required from the Board, and ensure that
detailed information is provided in an easy
to understand manner.
High degree of commitment on the Board and
mutual respect between non-executive and
executive teams. Non-executives are keen to
engage deeply in the business and executives
follow up on issues raised by non-executives.
Robust exchange of views in Board discussions
with all opinions invited and expressed.
Further development of the understanding of
mutual roles, needs and contributions between
executives and non-executives to strengthen
their interaction and collective effectiveness.
Further clarity to be given in requests made by
non-executive directors for additional business
information.
Substantial time devoted to Board discussion
of the output from the 2018 employee survey.
Feedback on staff behaviours and sentiment
given by the CEO and Senior Management
Executive Committee (SMExCo). Better
knowledge of management below SMExCo
through Board presentations and the annual
strategy meeting.
Broader focus and more extensive Board
conversations, led by the CEO, on Man’s people
and culture. Improve people oversight through
the development of Board/employee engagement
mechanisms in line with Governance Code
requirements. Drive forward the talent and
succession agenda (see Nomination Committee
evaluation priorities on page 65).
Excellent progress made on Board insight into the
development of top Client relationships and fund
investor needs and sentiment. Board knowledge
of key elements of Man Group’s supply chain
improved. Good reporting on the work done by
Man Group in local communities and the activities
of Man Group’s charitable trusts.
Continue annual Board review of Man Group’s
client universe and its regular deep dive reviews
of individual Clients. Introduce regular reporting on
Man Group’s engagement with and feedback from
key service providers. Continue Board reporting
on the activities and focus of Man Group’s role in
the community and its employee volunteering.
Presentations by internal and external advisers
scheduled within Board meetings on regulatory and
other business issues (see page 55). Regular updates
from business unit heads on business progress and
challenges (see page 50). External expert overview
of industry trends and long-term prospects.
Continue to keep the Board updated on industry
trends, regulatory impacts and business
developments through engagement with external
advisers and internal experts.
Quality of company secretarial
and administrative support
Continued to be highly rated and effective.
Very responsible and conscientious team.
Maintain proactive and reliable level of service.
Lord Livingston of Parkhead
Chairman
Statement of compliance
The Company has, throughout the year ended 31 December 2018, applied the principles of and complied with the provisions of the
2016 UK Corporate Governance Code (the ‘Code’) except in relation to the following:
Setting the Chairman’s remuneration
Provision D.2.2 of the Code requires that the Remuneration Committee (the ‘Committee’) should have delegated responsibility for
setting the remuneration of the Chairman. The terms of reference of the Committee provide that the Committee has authority to
recommend to the Board but not to approve the remuneration of the Chairman. This is because the Board believes that, in order to
provide transparency and allow the views of all the directors, executive and non-executive, to be taken into account, it is appropriate
for all Board members to provide input into the determining of the Chairman’s remuneration.
Other information
Certain additional information in relation to the Company’s share capital, the powers of the directors and amendments to the Articles
of Association that is required to be disclosed in the Corporate Governance report pursuant to DTR 7.2.6 may be found in the Directors’
report on pages 90–91.
MAN GROUP PLC ANNUAL REPORT 2018
57
STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSSHAREHOLDERINFORMATION
Audit and Risk Committee report
I am pleased to present my first report as Chair of the Audit and
Risk Committee (the “ARCom”). I would like to thank my predecessor,
Matthew Lester, for his excellent chairmanship and for his support
in ensuring a smooth transition.
Andrew Horton
Chairman, Audit and Risk Committee
The ARCom has continued to support the Board in its assessment
of the integrity of the Group’s financial reporting, monitoring the
effectiveness of the Group’s systems of risk management and
internal controls, and overseeing the activities of the Group’s Internal
Audit function and its external auditor.
The ARCom has also dedicated significant time to considering
regulatory developments impacting the Group, the effectiveness of
the channels available to Man Group’s workforce to raise concerns
and the Group’s cyber security arrangements. In addition, the
ARCom has continued to focus on the oversight and governance
arrangements that exist in Man Group’s overseas offices and has
developed its understanding of the risk and control environment
within Man GPM.
Andrew Horton
Chairman, Audit and Risk Committee
Membership and meeting attendance
There have been a number of changes to the composition of the
ARCom during the year. In addition to my appointment as Chair,
we welcomed Richard Berliand and John Cryan to the ARCom
in May and August respectively. The members of the ARCom and
their meeting attendance during 2018 are set out below.
The ARCom as a whole has competence relevant to the sector
in which the Group operates and I am considered to have recent
and relevant financial experience for the purposes of the 2016 UK
Corporate Governance Code (the “Code”). Further details of the
ARCom members’ experience and areas of expertise are provided
on pages 46–47.
Committee member
Andrew Horton
Richard Berliand1
John Cryan2
Matthew Lester3
Dev Sanyal
Meeting
attendance
6/6
5/5
2/2
6/6
6/6
1 Appointed 1 May 2018
2 Appointed 1 August 2018
3 Stepped down as Chair on 30 June 2018 but continued to remain as an ARCom member
The Board Chairman, CEO and CFO are invited to attend Committee
meetings along with the Head of Internal Audit and representatives
from Deloitte LLP (‘Deloitte’), the Group’s external auditor. Other
members of the senior management team attend for those items that
are relevant to them. At the end of each meeting, the ARCom meet
with the Head of Internal Audit and representatives from Deloitte in
the absence of management.
How the ARCom operates
Forward agenda
– Covers key events in the financial
Agenda setting
meeting
reporting cycle, specific risk matters
and standing items set out in the
terms of reference
– Reviewed and updated in response
to changing business risks and
priorities
– Held in advance of each ARCom
meeting to identify key issues
impacting the business that may
require consideration by the ARCom
– Attended by ARCom Chair, CFO,
CAO, Head of Internal Audit and
representatives from Deloitte
Committee meetings
– At each meeting, the ARCom
considers:
– Standing governance items
– Dashboards which highlight and
monitor changes in the key risks
impacting the business, compliance
matters, the financial controls
framework, internal controls and
cyber security arrangements
– Reports and presentations on key
financial reporting, risk, compliance
and audit matters from
management
Board reporting
– Board updated on the key areas of
discussion with recommendations
made as appropriate
Roles and responsibilities
The ARCom is integral to Man Group’s governance framework
through its oversight of the Group’s financial reporting, risk
management and internal controls, and internal and external audit.
The ARCom’s roles and responsibilities are outlined on page 59,
together with an explanation of how it has discharged its
responsibilities during the year. Full terms of reference for the
ARCom, which are reviewed on an annual basis and referred to
the Board for approval, are available on the Company’s website.
58
MAN GROUP PLC ANNUAL REPORT 2018
CORPORATE GOVERNANCE How the ARCom has discharged its roles and
responsibilities
Financial reporting
Key accounting judgements and estimates
As part of the process for monitoring the integrity of the financial
information contained in the interim and annual financial statements,
the ARCom reviewed the key accounting policies, judgements and
estimates adopted by management and confirmed that these were
appropriate. The significant areas of judgement and estimation
identified by the ARCom, in conjunction with management and the
external auditor, are set out in the table on page 60.
Viability and going concern
The ARCom reviewed the viability statement (as set out on page 28)
and the processes supporting the viability assessment. After
significant discussion and having considered the Group’s prospects,
emerging and principal risks, forecast regulatory capital surplus and
liquidity resources and requirements, the ARCom concluded that
the three-year assessment period, in line with the Group’s business
planning horizon, continued to be appropriate and recommended
the draft viability statement to the Board for approval.
The ARCom also reviewed the going concern disclosure (as set out
on page 105) and concluded that the Group and the Company had
adequate resources to continue in operational existence for the
foreseeable future and confirmed to the Board that it was appropriate
for the Group’s financial statements to be prepared on a going
concern basis.
Fair, balanced and understandable assessment
At the request of the Board, the ARCom reviewed the interim
and annual financial statements in conjunction with the narrative
sections of the interim and annual reports to ensure that there
was consistency in the information reported, that sufficient weight
had been given to both positive and negative aspects of business
performance, that there was an appropriate balance between
statutory and adjusted performance measures, and that key
messages had been presented coherently. The ARCom concluded
that, taken as a whole, the Interim and Annual Reports were fair,
balanced and understandable and provided the information
necessary for shareholders to assess the Group’s performance,
business model and strategy.
Roles and responsibilities of the ARCom
Financial
Reporting
Risk
Management,
ICAAP,
Internal
Controls &
Compliance
Internal
Audit
External
Audit
– Monitor the integrity of the financial information
contained in the interim and annual financial
statements with particular focus on key accounting
policies, judgements and estimates and the financial
controls framework
– Review the viability and going concern statements
and recommend their approval to the Board
– Advise the Board on whether the ARCom believes
the Interim and Annual Reports to be fair, balanced
and understandable
– Monitor and review the effectiveness of the Group’s
systems of risk management, capital adequacy and
internal controls (please refer to page 29 for further
details)
– Ensure that a robust assessment of the emerging
and principal risks facing the Group has been
undertaken and advise the Board on the
management and mitigation of these risks
– Review the Group’s Internal Capital Adequacy
Assessment Process (ICAAP) including regulatory
and economic capital, downside forecasts, and the
wind down cost
– Review the effectiveness of the Group’s regulatory
reporting activities, Compliance function and
arrangements for Man Group’s workforce to raise
concerns in confidence and – if they wish –
anonymously, with any such concerns and resulting
follow-up actions being reported to the Board
– Report to the Remuneration Committee any findings
in relation to risk matters which may impact its
decision on discretionary remuneration payments
– Approve the annual Internal Audit Plan and Charter
and monitor Internal Audit activities
– Review the effectiveness of the Internal Audit function
– Review all significant Internal Audit
recommendations and oversee progress in
addressing these
– Recommend to the Board the appointment, and
determine the remuneration, of the external auditor,
including reviewing the external auditor’s
effectiveness and independence
– Review and approve the external audit plan and
the external auditor’s control procedures
– Review the findings of the external audit and the
external auditor’s management letter and oversee
management action to address the findings where
necessary
– Approve and monitor the policies relating to the
provision of non-audit services by the external
auditor and the hiring of personnel from the external
auditor
– Ensure that the tendering, selection and rotation
of the external audit services contract are carried
out in accordance with applicable law, regulation
and best practice
MAN GROUP PLC ANNUAL REPORT 2018
59
STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSSHAREHOLDERINFORMATION Audit and Risk Committee report continued
Key accounting judgements and estimates
Matter considered
Action
Outcome
The ARCom considered reports from management
outlining the methodology for the impairment
assessment and challenged the assumptions
underpinning the goodwill valuation model including
discount rates, the cost allocation methodology,
flow projections and headroom availability.
After debate and challenge, the ARCom
concluded that no impairment expense was
required to be recorded for the year ended
31 December 2018.
Impairment assessment of goodwill and
acquired intangibles
Goodwill and acquired intangibles for each
of the Group’s cash generating units (Man AHL,
Man GLG, Man FRM, Man Numeric and Man
GPM) are tested for impairment at least annually
through the application of a ‘value in use’ model.
This requires estimates concerning future cash
flows, growth rates and associated discount
rates to be taken into account.
Please refer to Note 10 in the Group financial
statements for further details.
Fair value of contingent consideration
The valuation of the contingent consideration is
dependent on estimates concerning the projected
future growth rates and cash flows based upon
management’s view of future business prospects
and associated discount rates.
Please refer to Notes 15 and 25 in the Group
financial statements for further details.
The ARCom considered management’s fair value
assessment of the contingent consideration
creditors of the Numeric, Aalto, Pine Grove, BAML,
FRM, Silvermine and NewSmith earn-outs. The
$31 milllion credit to the income statement
represented a decrease in the fair value of the
contingent consideration creditors, largely driven
by a decrease in the Numeric and Aalto earn-outs.
After a full discussion, the ARCom confirmed
that it was comfortable with the proposed
accounting treatment and that the decrease
in the fair value of the contingent consideration
was appropriate. A fair value adjustment of
$31 milllion has been recognised in the income
statement.
Consolidation of investment in funds
The Group holds seeding investments in a
number of funds which it manages. Judgement
is required to be exercised in terms of assessing
whether these investments are controlled by the
Group and therefore need to be consolidated
into the Group’s financial statements.
Please refer to Note 13 in the Group financial
statements for further details.
Deferred tax assets (DTA)
The Group has unrecognised deferred tax
assets in the US which largely represent
historical tax losses and future deductions for
amortisation of goodwill and other intangible
assets that will reduce the tax payable in the
US. The value of the DTA recognised requires
judgement regarding the assessment of
probable future profits.
Please refer to Note 7 in the Group financial
statements for further details.
Alternative performance measures (APMs)
Man Group assesses the performance of
the Group using a variety of APMs, most
significantly adjusted profit before tax. The
directors focus on adjusted profit as this
reflects the underlying trends in the business
and the revenue and costs that drive the
Group’s cash flow.
Please refer to pages 142–145 for
further details.
The ARCom reviewed management’s assessment
of the investments which the Group is deemed to
control in accordance with IFRS 10.
The ARCom concluded that it was satisfied with
management’s assessment of the entities which
are deemed to be controlled by the Group and
the associated accounting treatment. Three
funds have been classified as ‘held for sale’
and ten investments have been consolidated
on a line by line basis with a grossing up impact
on the balance sheet of $100 million.
The ARCom discussed the methodology
underpinning the valuation of the DTA and
challenged management’s assessment that this
methodology continues to remain appropriate and
represents their best estimate of probable future
taxable profits.
The ARCom confirmed that it was satisfied
that the existing methodology continued
to be appropriate. A movement in the DTA
of $20 million has been recognised in the
income statement.
The ARCom reviewed and discussed the APMs
contained in the Interim and Annual Reports having
considered a paper prepared by management
which compared adjusted profit to operating cash
flows for the last five years in aggregate.
The ARCom noted that adjusted profit over the
last five years was broadly consistent with cash
inflows from operating activities and therefore
concluded that the APMs were appropriate,
provided a fair assessment of the underlying
profitability of the business and were appropriately
defined and reconciled to statutory measures as
disclosed on pages 142–145.
60
MAN GROUP PLC ANNUAL REPORT 2018
CORPORATE GOVERNANCE Risk management, internal controls and
compliance
Oversight of risk and control environment – key business areas
The ARCom continued to develop its understanding of the
governance arrangements that exist within Man Group’s overseas
offices, as well as the risk and control environment within the Man
GPM business. Senior representatives from the Chinese, Guernsey
and Man GPM businesses were invited to present on the risk and
control profile of their respective areas. These presentations provided
the ARCom with real insight into the significant risks perceived by
each business and the controls that exist to manage and mitigate
these risks as appropriate. Key areas of discussion are set out below.
Compliance
During the year, the Head of Compliance & Regulatory presented
the 2018 Compliance overview. Particular focus was given to
developments in financial regulation and their impact on the business
and the industry in general. Consideration was also given to
resourcing levels across the Compliance function, global themes
around regulatory risk, current priorities of key regulators and
Compliance initiatives. The ARCom also dedicated significant time
to understanding the extent to which the steps taken by the
management team to improve awareness of the channels available
to Man Group’s workforce to raise concerns had been embedded
across the organisation and received supporting data on any matters
reported via these channels.
China
The ARCom was provided with an overview of the structure
and activities of the Chinese business. Particular focus was
given to the interaction with Man Group’s global functions, the
control environment and future plans for the Chinese business.
Guernsey
The ARCom considered the principal activities undertaken by
the Guernsey office, reporting lines and the level of oversight
exercised at a Group level. Discussion focused on the key
risks facing the Guernsey business and the controls in place
to mitigate these risks with particular focus on the role of the
Board of Man Group Japan Limited (based in Guernsey) in
overseeing the activities of its Japanese branch.
Man GPM
The ARCom considered the extent to which Man GPM’s
infrastructure and governance framework had been
embedded, the development of client relationships and
resourcing plans to support the growth of the business.
Consideration was also given to the challenges and risks
associated with operating from multiple locations and the
mitigation of such risks through the centralisation of controls.
Oversight of risk and control environment – key functional areas
The ARCom also considered presentations from each of the Group’s
key functional areas.
Risk
The ARCom received an update on the Group Risk function and
discussed its role in supporting the Group’s governance processes,
primarily through the maintenance of the Group’s Authorities
Summary (please see page 49 for further details) and the operation
of the Risk Governance and Appetite Framework (the ‘Framework’).
During the year, the ARCom discussed and challenged a number
of proposed amendments to the Framework including a change to
one of the quantitative risk metrics and the associated loss tolerance.
The ARCom endorsed the revised Framework and recommended
it to the Board for approval. The ARCom also received an update
on the Group’s pension arrangements.
In addition, the Money Laundering and Reporting Officer (MLRO)
presented his 2017 annual report in the first half of 2018 and
confirmed that Man had established and maintained an effective
AML/CTF programme with proportionate systems and controls.
Finance
The ARCom received a presentation from the Group Financial
Controller on the Finance function’s governance arrangements and
the key areas of focus during 2018. The ARCom discussed
upcoming personnel changes in the Finance team, resourcing levels
and priorities for 2019. During the year, the Committee also received
several updates on the implementation of Man Group’s new general
ledger, consolidation and HR system which came into effect on
1 January 2019. At the December meeting, the Head of Tax was
invited to present on the Group’s tax position and highlight the key
projects undertaken by the tax team during 2018.
Technology
The Group’s Chief Operating Officer updated the ARCom on the
key technology initiatives for 2018, together with the associated risks
and mitigants. Regular updates were provided throughout the year
on the implementation of a new order management platform and
management’s plans to upgrade existing technology systems.
The Director of Trading was also invited to update the ARCom
on the implementation of Man Group’s Central Trading programme.
Particular focus was given to the benefits that this initiative would
bring and the resulting impact on resourcing levels and technology.
Cyber security
Cyber security continued to be a key area of focus for the ARCom
during the year. One of the key developments in 2018 was the
introduction of enhanced metrics around the Group’s cyber security
arrangements via a new dashboard which had been developed in
response to feedback from the Board and ARCom. The ARCom
also reviewed the output of a cyber security maturity assessment
undertaken by an external security consultancy and considered
Man Group’s positioning compared with peers.
MAN GROUP PLC ANNUAL REPORT 2018
61
STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSSHAREHOLDERINFORMATION Audit and Risk Committee report continued
External Audit
2018 external audit plan
At the October meeting, Deloitte’s 2018 external audit plan was
presented by David Barnes, who has been the lead engagement
partner since 2017. The plan, which was discussed and approved
by the ARCom, set out the proposed materiality threshold, the scope
of the audit and the significant audit risks that had been identified.
Auditor independence and the provision of non-audit services
In order to safeguard the independence and objectivity of the
external auditor, the ARCom is responsible for the development,
implementation and monitoring of the Group’s policies on the
provision of non-audit services and the hiring of personnel from the
external auditor. The ARCom reviewed and approved these policies
during the year.
Summary of non-audit policy
In accordance with the non-audit services policy, any potential
services to be provided by the external auditor, which are not
excluded under the non-audit services policy but which have
an expected value of $75,000 or more, must be approved by
the ARCom in advance. The non-audit services fees in
aggregate must not exceed 70% of the statutory audit fee,
currently set at $1.4 million. Further details can be found on
the Company’s website.
The table below shows the remuneration paid to Deloitte in 2017
and 2018.
Fees payable to the external auditor for the
audit of the Company and the consolidated
financial statements
Other services:
The audit of the Company’s subsidiaries
pursuant to legislation
Audit-related assurance services
All other services
Total auditor’s remuneration
2018
$’000
2017
$’000
458
456
1,608
1,572
345
59
341
54
2,470
2,423
Following a formal assessment of the external auditor’s independence
and objectivity at its meeting in February 2019, the ARCom concluded
that Deloitte continued to be independent and objective.
Ongoing monitoring of the Group’s systems of risk
management and internal control
The ARCom is satisfied that, through its regular review of
dashboards, its in-depth assessment of key business areas and
functions, its consideration of changes to the Risk Governance
and Appetite Framework and its ongoing review of progress against
the Internal Audit Plan (as described below), it is monitoring the
effectiveness of the Group’s systems of risk management and
internal control on an ongoing basis. Further details can be found
in the Risk Management section on page 29.
During the year, a number of operational and regulatory matters that
had occurred were reported to the ARCom. A paper summarising
these matters was considered by the ARCom at its December 2018
and February 2019 meetings. Whilst Man Group sought to improve
its processes in response to the matters identified, they were not
considered sufficiently material in number or nature either to require
separate disclosure in the financial statements or to indicate that the
control environment had not been operating effectively.
Internal Audit
2018 Internal Audit Plan
The Group’s Internal Audit function continues to be performed by
KPMG. During the year, the ARCom reviewed and approved the
2019 Internal Audit Plan (the ‘Plan’) which included details of the
planned audit reviews for 2019 and the team responsible for
delivering the Plan.
The ARCom received and discussed Internal Audit reports presented
by the Head of Internal Audit at each meeting and monitored
progress against the 2018 Plan. The ARCom was particularly
keen to understand the root causes of overdue items and the
actions taken by management to close these. Whilst no significant
weaknesses were identified in any of the Internal Audit reports, a
number of improvements to certain processes and controls were
implemented in response to the recommendations put forward.
Towards the end of the year, the Internal Audit function undertook
an assessment of the maturity of Man Group’s control environment
across a number of thematic areas using the experience of the
internal audit work performed and knowledge obtained across other
organisations, the output of which was discussed by the ARCom.
In response to feedback from the ARCom, the Head of Internal Audit
also set out specific observations on the US control environment with
discussion focusing on how this would evolve in light of the proposed
changes to the corporate structure.
Effectiveness of Internal Audit function
During the year, an external review of the Internal Audit function was
undertaken in order to assess its effectiveness. The review, which
involved interviews with key stakeholders and auditee surveys, focused
on the Internal Audit function’s conformance with various internal
auditing standards and its positioning compared to peers in the asset
management industry. The output of the review indicated that, overall,
the Internal Audit function continued to be effective and provided an
independent perspective on Man Group’s control environment. The
ARCom noted the findings and discussed the suggested areas for
improvements which had been identified in the review, together with
the Head of Internal Audit’s response to these points.
62
MAN GROUP PLC ANNUAL REPORT 2018
CORPORATE GOVERNANCE Effectiveness of external audit process
At the May 2018 meeting, the ARCom considered responses to a
questionnaire which had been completed by ARCom members and
various members of the management team in order to facilitate the
ARCom’s formal assessment of the effectiveness of the external
audit process. The questionnaire focused on several components
of the external audit process including the quality of the audit partner
and team, planning and execution of the audit, communication with
the ARCom and the external auditor’s independence and objectivity.
The responses indicated that, overall, Deloitte was performing in
line with expectations with the audit team demonstrating appropriate
challenge and a strong understanding of Man Group’s business.
The output of the review also highlighted that certain areas that
had been identified as requiring improvement in the previous year’s
assessment, particularly around the use of specialists and the
communication and escalation of potential issues, had been
addressed in the 2017 audit. A number of areas, primarily around
transitional issues that may arise following the key audit partner’s
rotation off the Man Group audit and the coordination of the work
undertaken by the internal and external auditors, were identified as
requiring further consideration and Deloitte’s plans to address these
issues were set out in the 2018 audit plan. After extensive discussion,
the ARCom concluded that the external audit process
in respect of the 2017 financial statements had been effective.
Reappointment of Deloitte as external auditor
Deloitte was appointed as the Group’s external auditor in 2014,
following a tender process led by the ARCom in 2013. In accordance
with the Code and the Competition and Markets Authority’s Order
2014 (the ‘Order’), the Company will be required to put its external
audit out to tender again in 2023 at the latest. The ARCom will
continue to assess the external audit process annually and, on
the basis that it remains effective and the audit fee represents good
value to shareholders, it is expected that the next tender process
will be undertaken at that time with mandatory rotation of the external
auditors required by 2033 pursuant to the EU Audit Regulation.
The ARCom confirms that the Company has complied with the
provisions of the Order for the financial year under review.
Following the ARCom’s review of the effectiveness of the external audit
process and its assessment of the external auditor’s independence
and objectivity, it has recommended the reappointment of Deloitte
as the Group’s external auditor to the Board for recommendation
and approval by shareholders at the 2019 Annual General Meeting.
How the ARCom has assessed its effectiveness
Outlined in the table below are the three key areas that were
identified in the ARCom’s 2017 evaluation as requiring further
consideration and development during 2018, together with progress
that has been achieved in 2018.
2018 progress on 2017 actions
2017 evaluation
2018 progress
Introduction
of thematic
risk-focused
reviews
Thematic risk-focused reviews around
technology and regulatory risks and
resourcing levels across the organisation
were undertaken during 2018 with further
reviews scheduled for 2019.
Streamline the
agenda for
certain meetings
Organise further
targeted training
Given that ARCom meetings were held in
three consecutive months in May, June and
July, a decision was taken to dispense with
the June meeting and increase the length
of time allocated to remaining meetings to
ensure there was sufficient time to discuss
all agenda items.
Board training sessions took place during
2018 covering the 2018 UK Corporate
Governance Code, the Senior Managers
and Certification Regime, Brexit and the
proposed corporate restructure. Further
details are set out on page 55.
During the year, the effectiveness of the ARCom was reviewed by
an external consultant as part of the wider Board evaluation process.
Interviews were conducted with all ARCom members and regular
attendees, the results of which confirmed that ARCom was operating
effectively. Responses indicated that there had been a smooth
transition between the ARCom Chairs and that the ARCom meetings
continued to be well structured with agendas covering a wider range
of topics. Areas identified for focus in 2019 included continuing to
review meeting attendance, increasing the length of meetings to
allow time for freeform risk discussions and reviewing the structure
and format of certain ARCom papers.
Andrew Horton
Chairman, Audit and Risk Committee
MAN GROUP PLC ANNUAL REPORT 2018
63
STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSSHAREHOLDERINFORMATION Nomination Committee report
The Committee’s main focus during 2018 was to seek further
non-executive experience and expertise to bring additional
skills and diversity to the Board.
Lord Livingston of Parkhead
Chairman
Committee activity during the year
With a streamlined membership, the Committee was able to expedite
discussions and decision making on non-executive director search
and selection without always requiring formal meetings. It maintained
its focus on executive management development and succession
through twice yearly discussions, with input from the CEO, in which
all the non-executive directors participated. One formal scheduled
meeting, attended by all members, reviewed the current composition
of the Board, confirmed its continuing push to increase Board
diversity, reviewed the feedback from the 2018 evaluation and agreed
its priorities for 2019. More detail on all the Committee’s activities
during the year are provided below.
Role of the Committee
– Keep the Board’s composition in terms of size, structure,
skills, experience and diversity under regular review in
response to changing business needs and opportunities
– Identify the particular skills, knowledge and experience
required for a specific Board appointment and conduct the
search and selection process
– Recommend the appointment of new candidates to the Board
and the renewal, where appropriate, of existing non-executive
director appointments
– Review plans for executive director and senior management
development and succession
The Committee’s full terms of reference, which are reviewed by the
Committee and submitted to the Board for approval on an annual
basis, are available on the Company’s website.
Membership and meeting attendance
Committee member
Ian Livingston (Chairman)
Richard Berliand
Andrew Horton
Formal meetings
1/1
1/1
1/1
Q2 2018
Matthew Lester was a member of the Committee from 1 January until
30 June 2018 but no formal meetings were held during this period.
Luke Ellis attends meetings by invitation of the Chairman.
Appointment of Zoe Cruz
The Committee’s main focus in the early part of the year was
progressing the search for a new non-executive director which had
been started in 2017. This was successfully completed in June 2018
with the appointment of Zoe Cruz to the Board. Zoe brings extensive
expertise in asset allocation, a broad understanding of the global
macro context for investment management and a strong US
perspective to the development of Man Group’s strategy and risk
management. The governance, search and selection processes
followed for her appointment are outlined below.
Q2 2017
Q3 2017
Q4 2017
Q1 2018
Committee agrees the skills to be targeted:
direct fund management expertise, regulatory
experience and international, particularly US,
exposure.
Independent search firm, The Zygos Partnership
(now Russell Reynolds which has no other
connection with the Company), briefed on
candidate specification, including an emphasis
on diversity of background and outlook.
Committee reviews search firm’s long list of
names and agrees a short list. Possible
candidates interviewed by the Chairman and
CEO.
Zoe Cruz considered to be the preferred
candidate and is interviewed by other Committee
members. Following formal Committee
recommendation, the Board considers and
approves Zoe’s appointment subject to
regulatory approval.
Zoe’s appointment confirmed with effect from
1 June. Zoe commences her induction
programme and participates in the Board’s
full day strategy review in early June.
64
MAN GROUP PLC ANNUAL REPORT 2018
CORPORATE GOVERNANCE Review of Board composition
At the end of the year the Committee formally reviewed the current
composition of the Board, including skills and experience, length of
tenure and gender, and discussed the tension between its relatively
large size and the value of additional appointments to bring new skills
and diversity. Further deep exposure to asset management or related
businesses, technology or international experience were identified as
some of the priorities for strengthening the Board’s existing skill set.
Review of diversity
Board diversity
The Committee reviewed progress on the implementation of the
Board’s diversity policy and the specific gender diversity of its
membership. It was noted that the two most recently appointed
non-executive directors had been female. The Committee agreed that,
in line with the 2018 Hampton-Alexander review recommendations
and its drive to improve diversity, it should recommend to the Board
the amendment of its diversity policy to include a target of at least
25% for women representation on the Board over the next
12 months and a target of 33% in the medium term. The updated
policy incorporating this target, which has been approved by the
Board, is set out on page 66.
Diversity and Inclusion (D&I) in the business
The Committee reviewed and welcomed the considerable progress
made by the management team in promoting and celebrating
diversity within the business and creating a consciously inclusive
working environment. A full account of the activities and
achievements of Man Group’s D&I global networks and the firm’s
engagement with external organisations on shared objectives is
given in People and Culture on pages 36–37. This also provides
detail on the progress of gender balance within Man as a whole
and the Company’s support for the Women in Finance Charter.
Renewal of existing NED appointments
The Committee reviewed the profile of Board tenure of Man Group’s
non-executive directors in the light of its future needs. As part of this
it considered the renewal of my appointment as Chairman and of
Richard Berliand and Andrew Horton whose current three year terms
were due to expire in the first half of 2019*. It agreed, taking account
of the current cycle of Board development and succession and the
feedback on our contributions in the 2018 Board evaluation, to
recommend the renewal of each appointment for approval by the
Board for a further three years.
Committee evaluation and priorities for 2019
The Committee reviewed progress on the actions agreed by the
Committee for 2018 and the feedback on the 2018 Committee
evaluation as summarised below.
2018 action:
Bring further direct fund management,
regulatory experience and US exposure to
the Board.
Progress
achieved
Zoe Cruz appointed mid year bringing her
experience of a 25 year career at Morgan
Stanley.
2018 action
Increase Board diversity.
Progress
achieved
Zoe’s appointment has increased the cultural
and gender diversity of the Board.
2018 action
Create more opportunity to discuss senior
management talent and executive succession.
Progress
achieved
Twice yearly private discussions held outside
formal meetings with all non-executive Board
members and the CEO.
The following areas were agreed as priority areas of focus for the
Committee in 2019:
Additional
non-executive
skills
Conduct a search for a non-executive director
with deep exposure to asset management or
related businesses, technology or international
experience.
Diversity
Focus on diversity, including gender diversity,
as part of the above search by seeking totally
or largely diverse shortlists.
Board
engagement
Enable full Board engagement in the
discussion of possible non-executive
appointments.
Succession
planning
Strengthen focus on succession planning for
the top executive roles supported by more
formal review of the available talent pool.
*None of the Committee members took any part in the consideration
of the renewal of their own appointment.
Lord Livingston of Parkhead
Chairman
MAN GROUP PLC ANNUAL REPORT 2018
65
STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSSHAREHOLDERINFORMATION Nomination Committee report continued
Board diversity policy
Overview
The Board embraces and seeks to promote diversity in its broadest
sense, both in terms of its own composition and within Man Group’s
senior management and employee base as a whole. It sees diversity
as the combination and interaction of people with different
knowledge, skills, experience, backgrounds and outlooks and
believes that this creates greater value and leads to better decision
making and performance at all levels of the organisation. The Board
is aware of the recommendations for the adoption of voluntary targets
for building gender and ethnic diversity into FTSE company boards
and senior management and is conscious of the long standing
gender diversity challenge within the financial services sector. It has,
therefore, adopted a target of at least 25% for women representation
on the Board over the next 12 months and a target of 33% in the
medium term. Set out below are three main areas on which we
are focusing in pursuing our policy objectives.
Board appointments
When seeking to make a new appointment, the Board will focus
first on identifying an individual with the capability, expertise and
experience which are required to discharge the specific role and
will select the best candidate on that basis. Within this remit, it
recognises and will pursue the added value to be derived from
diversity, including diversity of gender, social and ethnic backgrounds
and cognitive and personal strengths. To support this objective, we
adopt a formal approach to Board search which includes insisting on
strong representation of under-represented groups on search firms’
long and short lists and remaining conscious of any potential for bias
in the interview and selection process. We will also consider and
explore alternative routes to the supply of appropriate candidates.
Oversight of recruitment, development and inclusion
The Board continues to encourage and oversee the output from
a wide range of recruitment and people development policies and
initiatives led by the executive management which aim to grow
the diversity of Man Group’s talent pool, provide development
opportunities for all and embed an inclusive culture. While we cannot
lead such initiatives directly, our role is to monitor and challenge
the impact they are having on the firm. As part of this oversight we
review the level of gender diversity introduced through our summer
internship and graduate programmes and women’s progression over
time through mentoring, retention and Returner initiatives. We also
keep updated on Man Group’s relationships with partners who can
help source talent from more diverse backgrounds and under-
represented groups and Man Group’s sponsorship of events which
encourage more diverse talent into financial careers.
In addition, a key role of the Nomination Committee is to monitor
and discuss with the CEO the career development and succession
plans for senior management across the firm, including the progress
of any under-represented groups. This enables us to promote the
development of a strong and diverse pipeline of talent for future
executive leadership and Board positions.
Review and reporting
The Board is committed to the development of diversity on the Board
and among Man Group’s employees. It will seek feedback on Board
balance and any missing skills and experience in its annual Board
evaluation and will keep the review and challenge of Man Group’s
people development, inclusion and diversity programmes firmly on
the Board agenda. An account of the Board’s activities and progress
against its objectives in these areas will be given in the Annual Report
each year.
66
MAN GROUP PLC ANNUAL REPORT 2018
CORPORATE GOVERNANCE Directors’ Remuneration Report
Richard Berliand
Chairman of the Remuneration Committee
1
2
Chairman’s annual statement
Remuneration at a glance
2.1 Directors’ Remuneration Policy summary table
2.2
Illustrative pay for performance scenarios
2.3 Single figure disclosure
2.4 Executive director pay in the context of Man Group’s
shareholders
2.5 Executive directors’ shareholdings
2.6 Executive director pay in the context of Man’s employees
3
Remuneration outcomes in 2018
3.1 Single total figure of remuneration for executive directors
3.2 Annual bonus in respect of 2018 performance
3.3 Percentage change in CEO remuneration
3.4 Relative importance of spend on pay
3.5 Review of past performance
3.6 Retirement benefits
3.7 Single total figure of remuneration for non-executive directors
3.8 Payments for loss of office and payments to past directors
3.9 Directors’ interests
68–73
74–77
74
75
76
76
77
77
78–84
78
78–79
80
80
80–81
81
81
82
82
3.10 Directors’ interests in shares and options under Man Group
83–84
long-term incentive plans
3.11 Shareholder voting and engagement
4
Implementation of directors’ remuneration policy for 2019
4.1 Base salary
4.2 Annual bonus for 2019
4.3
Long-Term Incentive Plan for 2019
4.4 Non-executive director remuneration policy for 2019
5
Remuneration Committee
5.1 Membership and attendance
5.2 Independent advisers
84
85
85
85
85
85
86–89
86
87
5.3 Committee activities during 2018 and the early part of 2019
87–88
5.4
2018 Committee evaluation
5.5 Benchmarking and peer groups
88
88–89
MAN GROUP PLC ANNUAL REPORT 2018
67
STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSSHAREHOLDER INFORMATION Directors’ Remuneration Report continued
1. Chairman’s annual statement
Dear Shareholder,
On behalf of the Board, I am pleased to present the Directors’
Remuneration Report (DRR) for the year to 31 December 2018.
For ease of reference this report contains the following sections:
– a detailed index to help you find the sections you need (page 67)
– this Annual Statement (pages 68–73)
– the remuneration ‘at a glance’ section, summarising how the
Remuneration Policy has been implemented in 2018 (pages 74–77)
– the Annual Report on remuneration (pages 78–89)
1.1 Introduction
I would like to begin by expressing my gratitude for the way
in which shareholders engaged with me and freely shared their views
during the extensive consultations last year on our new Remuneration
Policy. I am pleased to report that the resolution which proposed it,
together with those proposing the 2017 DRR and the new Man Group
plc share plans, all received shareholder support in excess of 95%
at the AGM in May 2018.
In implementing the new Remuneration Policy, the Committee spent
considerable time setting the relevant targets for the new variable
pay structure that was introduced by it. The sections below and
the Annual Report on remuneration provide more detail on how
we have ensured that stretching and motivating targets were
established for the short-term annual bonus for 2018 and for the
new Man Group plc Long-Term Incentive Plan (LTIP), under which
the first award will be made in March 2019.
We have also been able to complete one of our key priorities
for this year which was to review the compensation models below
Board level. This is something which had previously been deferred to
enable the Committee to concentrate on the development of the new
Remuneration Policy. I believe this has been a timely and valuable
process, especially in light of the new UK Corporate Governance Code
requirement to explain how executive remuneration aligns with wider
company pay policy. More details of our review can be found below.
1.2 The link between pay and performance at
Man Group
As set out in detail in the 2017 DRR, the Committee used the renewal
of the Remuneration Policy to re-visit and refresh the variable pay
metrics and was mindful of ensuring that overall, across the variable
pay programmes, management is appropriately incentivised to focus
on those measures that they can influence to drive performance
and deliver shareholder value.
The performance metrics selected for use in the short- and long-
term incentive arrangements in the Remuneration Policy have been
chosen to reflect Man Group’s strategic priorities so that the link
between strategy, performance and reward is clear.
The link between strategic priorities and incentive metrics
Strategic
priority
Performance
measure
Bonus
weighting
LTIP
weighting
Aggregate
weighting1
Innovative
investment
strategies
Relative
Investment
Performance
–
25%
15%
Strong client
relationships
Net Inflows
30%
Cumulative Net
Inflows
Efficient and
effective
operations
Core Management
Fee PBT $m
20%
Core Total PBT,
$m
20%
–
–
–
Returns to
shareholders
Relative TSR
3-year cumulative
core management
fee EPS
3-year cumulative
Core total EPS
Strategic and
Personal
Objectives
Total
10%
18%
–
–
25%
20%
20%
17%
38%
30%
–
12%
100%
1 Aggregate weighting shows the overall weighting when consolidated across both
the bonus and LTIP opportunities; maximum bonus opportunity is 250% salary;
maximum LTIP opportunity is 350% salary.
1.3 Establishing stretching performance targets
In establishing the targets for the short-term annual bonus for 2018,
the Committee wanted to build on 2017’s exceptional performance
and ensure management is incentivised to deliver each year in the
context of our long-term strategic goals. Consequently the targets
were set by reference to internal and external forecasts, including
consensus estimates available at the time, and long-run historical
performance of both Man Group and our peers.
68
MAN GROUP PLC ANNUAL REPORT 2018
CORPORATE GOVERNANCE
5.5% 3.1% 7.6% 3.3% 2.0% -3.4%
Numeric
2012
2013
2014
2015
2016
2017
Industry
performance1
HFR Global
Hedge Fund
Industry Report
– Quant
HFR Global
Hedge Fund
Industry Report
– ex Quant
HFR Global
Hedge Fund
Industry Report
– FoHF
eVestment
– Active Quant
eVestment
– Active ex
Quant
Preqin Real
Estate
Annual bonus targets
Net Inflows
The targets for Net Inflows were set in the context of an industry
sector which has been experiencing low or negative growth
whilst Man Group has enjoyed strong growth, ahead of most of
our peers. The table below sets out recent annual movement in
Net Inflows across a range of market segments, broken down
by investment strategy, in the asset management industry.
2012
2013
2014
2015
2016
2017
Related
Man business
5.2% 0.1% -4.6% 0.2% 3.9% 5.2%
AHL
1.3% 3.1% 3.7% 1.7% -3.1% -0.3%
GLG
(Alternatives)
-3.5% -3.2% -0.6% -2.2% -4.0% -3.4%
FRM
0.2% 2.5% 2.6% -6.3% -6.1% -6.8%
GLG
(Long only)
N/A 19.3% 5.5% 6.8% -3.0% 3.8%
GPM
1 Definitions of the terms used in this table are in the Glossary.
The targets for Net Inflows have been maintained at the same
percentage growth levels as for the 2017 bonus but, given the
considerably higher starting point for funds under management
(FUM) as a result of 2017’s performance, those percentage growths
translate into much higher absolute targets than was demanded
in 2017. Further, threshold growth has been set at the average
achieved over the last six years (see table below) and at both target
and maximum the growth required considerably exceeds that
historical performance and represents significant outperformance
versus the industry.
Net Inflows (% growth)
16%
6%
2%
0%
1%
Maximum
Target
Threshold
20
15
10
5
0
-5
-10
-6%
-12%
-15
2012
2013
2014
2015
2016
2017
Average
MAN GROUP PLC ANNUAL REPORT 2018
Core Management Fee PBT
The targets for Core Management Fee PBT again build on the strong
performance delivered in 2017; the threshold $million target implies
growth of 11% on prior year, rising to growth of 25% at maximum.
Core Management Fee PBT ($m)
178
132
103
99
Maximum
Target
Threshold
250
200
150
100
50
0
-50
-100
-150
-102
-35
Core Total PBT
The third financial metric for the bonus, Core Total PBT starts with
Core Management Fee PBT and then adds Adjusted Performance Fee
PBT which is the more volatile component of Man Group’s profits
but represents a valuable earnings stream for our shareholders over
time. The historical trend data for Adjusted Performance Fee PBT
again provides a useful reference for the Committee so as to account
appropriately for the recent relative high and low point of 2017 and
2016 respectively.
Adjusted Performance Fee PBT ($m)
300
250
200
150
100
50
0
256
Maximum
186
181
119
53
27
137
Target
Threshold
2012
2013
2014
2015
2016
2017
Average
Over the last six years, average annual Adjusted Performance Fee
PBT has been $137 million, with a range from $27 million (in 2016) to
$256 million (in 2014). The Committee considered it appropriate to set
a threshold target well above the bottom of the range and, at $75 million,
it is considerably higher than actual performance in two out of the last
six years. At a target of $150 million, an achievement slightly ahead of
the six year average was considered stretching whilst the maximum, of
$250 million, is in line with the performance fees achieved in only one out
of the last six years. The Core Total PBT targets are the sum of the Core
Management Fee PBT and Adjusted Performance Fee PBT components.
69
STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSSHAREHOLDER INFORMATION
Directors’ Remuneration Report continued
1. Chairman’s annual statement continued
Relative Investment Performance
Relative investment performance measures outperformance
against our peers. The establishment of the threshold at 0% means
that Man Group must outperform peers for management to receive
any pay-out on this measure. At Man Group’s current scale, the
maximum of 6% cumulative outperformance would imply in excess
of $2 billion of annual outperformance, relative to peers, which the
Committee considered a demanding target and one which would
represent an excellent outcome for clients and shareholders.
Relative TSR vs FTSE 2501
In line with widespread practice for a Total Shareholder Return (TSR)
measure, threshold performance requires TSR growth in line with the
median constituent of the FTSE 250 Index. The maximum outcome
will only be achieved if Man Group’s TSR is in the upper quartile over
the three-year performance period which would again represent
good alignment with the experience of Man Group’s shareholders.
There will be straight-line vesting between threshold and target and
target and maximum performance.
3-year Cumulative Core Management Fee EPS2
The targets for Cumulative Core Management Fee EPS have been
established in absolute terms at 33 cents at threshold, 36 cents
at target and 39 cents at maximum. The Committee reviewed the
Cumulative Core Management Fee EPS delivered in the three-year
periods ending in each of the last four years and noted that the
maximum ever achieved, for the three years ending 31 December
2018, was 27.2 cents. In this context, the targets represent
cumulative growth rates of 21%, 32% and 43% at threshold, target
and maximum respectively over the three years which it considered
to be stretching. The Committee decided the targets should be
expressed in absolute terms, rather than as a growth percentage as
initially proposed. This creates good alignment with shareholders
through the clear link to our dividend policy which is to pay out 100%
of adjusted net management fee EPS in each financial year. It also
aligns with the basis for 3-year Cumulative Core Total EPS, as
discussed in more detail opposite.
Strategic and Personal Objectives
The strategic and personal objectives of each executive director,
which account for 30% of their overall bonus outcome, were selected
to ensure delivery of sustained performance over time. These
non-financial deliverables ensure that there is ongoing focus and
discretionary effort applied to activities, the benefit of which will only
fully be seen over the medium to longer-term, including objectives
around innovation, reputation, clients and people. The objectives link
to our strategic priorities and pay-out against them requires clear
performance impact.
Man Group plc Long-Term Incentive Plan (LTIP)
The first award under the new LTIP will be made in March 2019
using the metrics and targets shown in the table below to measure
performance over a three-year period (from 1 January 2019 to
31 December 2021); any vested shares will be required to be
held for a further two-year period.
Metric ranges for LTIP (from 1 January 2019 – 31 December 2021)
Metric
Weighting Threshold
Target
Maximum
Relative
Investment
Performance
25%
0%
3%
6%
Based on the aggregate of the asset-
weighted relative investment performance
across Man Group’s funds for each year
over the three year performance period.
Relative TSR
vs FTSE250
25%
Median
Upper
Quartile
Mid-point
between
Median and
Upper
Quartile
TSR versus the FTSE 250 based on the
three-month average share price (taking
account of share price movement and
re-invested dividends over the performance
period).
3-year
Cumulative
Core
Management
Fee EPS, cents
3-year
Cumulative
Core Total
EPS, cents
20%
33¢
36¢
39¢
Measures Cumulative Core Management
Fee EPS performance over the three year
period.
20%
45¢
59¢
78¢
This measure includes the impact of
performance fee delivery over the long-term
and is based on cumulative EPS
performance over the three year period.
Cumulative Net
Inflows
10%
3%
10.5%
18%
The percentage growth target represents
cumulative Net Inflows over the three year
performance period as a percentage
of starting FUM.
Total
100%
1 Relative TSR vs FTSE 250: represents the total return to Man Group’s shareholders
relative to the FTSE 250 Index, using data sourced from an independent provider.
Total Shareholder Return takes into account the movement in the Man Group plc
share price and any dividends paid to shareholders.
2 3-year Cumulative Core Management Fee EPS: calculated as the post-tax core
management fee profits over the three year measurement period divided by the
weighted average diluted number of shares for the three year measurement period.
Core management fee profits are derived from Core Management Fee PBT, as defined
above, less a deduction for associated taxes.
70
MAN GROUP PLC ANNUAL REPORT 2018
CORPORATE GOVERNANCE 3-year Cumulative Core Management Fee EPS (cents)
3-year Cumulative Core Total EPS (cents)
Maximum
Target
Threshold
27.2
45
40
35
30
25
20
15
10
5
0
21.4
17.2
8.7
2015
2016
2017
2018
The targets have been set based on reported figures, which include
the impact of foreign exchange (FX) movements. Given that such
movements are outside the control of management, the Committee
will carefully review the outcome of this measure and adjust it, if
appropriate, in the event that management has benefitted from a
windfall gain or been disadvantaged by exceptional material FX
headwinds. Man Group plc has a track record of careful capital
management and a policy of returning excess capital to shareholders
via dividends and/or share buybacks. In establishing the three-year
target for Cumulative Core Management Fee EPS, the Committee
has assumed a continuation of that policy so, in the event of a
material change from it, will again review the targets and consider
whether any adjustment is required to continue to ensure an
appropriate outcome.
3-year Cumulative Core Total EPS3
Core Total EPS starts with Core Management Fee EPS, as described
above, and additionally includes performance fee profits; the target,
therefore, represents the Core Management Fee EPS target, from
above, together with performance fee EPS. The performance fee
EPS targets have been set in line with the three year equivalent of
the 2018 bonus range for threshold, target and maximum.
3 3-year Cumulative Core Total EPS: calculated as the sum of 3 year cumulative core
management fee EPS plus 3 year cumulative performance fee EPS. It equates to
Core Total PBT, as defined above, less a deduction for associated taxes, divided by
the weighted average diluted number of shares for the three year measurement period.
Maximum
Target
Threshold
41.3
42.1
39.8
37.5
80
70
60
50
40
30
20
10
0
2015
2016
2017
2018
3-year Cumulative Core Management Fee EPS
3-year Cumulative Performance Fee EPS
The threshold for Cumulative Core Total EPS of 45 cents is equivalent
to 33 cents of Cumulative Core Management Fee EPS and delivery
of $225 million of Adjusted Performance Fee PBT over three years.
The target for Cumulative Core Total EPS at 59 cents is equivalent
to 36 cents of Cumulative Core Management Fee EPS and delivery
of $450 million of Adjusted Performance Fee PBT over three years.
The maximum for Cumulative Core Total EPS of 78 cents represents
39 cents of Cumulative Core Management Fee EPS and $750 million
of Adjusted Performance Fee PBT over the three years.
As indicated above, performance fee income is the more volatile
part of Man Group’s profits but represents a valuable earnings
stream over time. At the levels of performance required to achieve
the threshold, this will represent sustained delivery of performance
fees over a three year period and be a positive outcome for our
shareholders which will be significantly improved if target or
maximum performance is delivered.
Net Inflows
The cumulative LTIP targets for Net Inflows are aligned with the annual
bonus targets and require 3% cumulative growth over the period at
threshold against an industry background of minimal inflows. Annual
growth of 3.5% is required at target which represents 10.5%
cumulative growth whilst at maximum of 18% cumulative growth,
the business would have to outperform significantly both expectations
for the industry and our own average historical performance.
Finally, I wanted to reiterate that, for all metrics under the new LTIP,
the level of vesting at threshold will be 0% meaning that directors
will only start to receive any awards under it when threshold
performance has been exceeded, representing a much tougher
hurdle than in the majority of listed businesses.
MAN GROUP PLC ANNUAL REPORT 2018
71
STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSSHAREHOLDER INFORMATION Directors’ Remuneration Report continued
1. Chairman’s annual statement continued
1.4 Review of performance in 2018
2018 has been a year of continued growth, building on the
exceptional performance delivered in 2017. Industry-leading growth
in Net Inflows was again delivered and good relative investment
performance. However, the investment environment, for most asset
classes, was challenging and this has negatively impacted on
absolute performance.
1.5 Remuneration outcomes for 2018
Net Inflows
Another year of excellent growth in Net Inflows is reflected in a
maximum pay-out under this component of the short-term bonus
representing 30% of total bonus opportunity; the Committee
considered this result appropriately reflected the performance
with Man Group significantly out-performing the overall asset
management industry.
Net Inflows bonus targets for 2018
Actual 2017
2018 Bonus
Actual 2018
Metric
Threshold Target
Maximum
Net
Inflows, %
growth
Net Inflows,
$bn growth
15.8%
1.0%
3.5%
6.0%
9.9%
$12.8bn
+$1.1bn
+$3.8bn
+$6.5bn
+$10.8bn
Core Management Fee PBT
The Committee considered the growth delivered of 14% represented
good performance in a much more challenging year for markets and
resulted in a pay-out of 7.3% out of a maximum of 20% for this metric.
Core Management Fee PBT bonus targets for 2018
Actual 2017
2018 Bonus
Actual 2018
Metric
Threshold Target
Maximum
$178m
$197m
$210m
$223m
$203m
35%
11%
18%
25%
14%
Core mgt
fee PBT,
$m
Core mgt
fee PBT,
growth %
Core Total PBT
Despite investment performance that out-performed our peers,
the bonus threshold for Core Total PBT was not achieved reflecting
the more difficult environment for absolute performance in 2018.
This resulted in no pay-out under this element of the bonus.
Core Total PBT bonus targets for 2018
Actual 2017
2018 Bonus
Actual 2018
Metric
Threshold Target
Maximum
$178m
$197m
$210m
$223m
$203m
$181m
$75m
$150m
$250m
$34m
$359m
$272m
$360m
$473m
$237m
126%
-24%
0%
32%
-34%
Core Mgt Fee
PBT, $m
Performance
Fee PBT, $m
Core Total
PBT, $m
Core Total
PBT, growth
%
In the context of a difficult year for asset managers, the Committee
was pleased with the performance during 2018. The Company
outperformed the market in both Net Inflows and investment
performance whilst investing in future growth. Whilst management
delivered many of the key objectives under their control in declining
markets and this might argue for an upward adjustment to the
formulaic outcome, the Committee felt this had to be balanced
against the outcome for shareholders and so did not operate any
upward discretion to the bonus outcome of 37.3% out of 70%
on the financial metrics.
All three executive directors performed well on their personal
and strategic objectives and received a range of awards from
21% to 23.5% (out of a maximum of 30%) on this element of the
bonus. Details of the individual pay-outs under the bonus and the
achievements on the qualitative objectives are shown in table R2
(pages 78–79).
I also wanted to share with you our plans for the salaries of the
executive directors in 2019. As indicated last year, as Mark Jones
was brought in on a salary more than 20% below his predecessor,
it was our intention to keep this under review and, if appropriate
and always subject to continued strong performance, increase it
progressively. Following the small increase applied with effect from
1 January 2018, Mark Jones has been awarded a further increase of
2.1%, with effect from 1 January 2019, to take his salary to $612,500.
This is in recognition of his increased experience in the role and
another excellent year. We intend to keep Mark’s salary under review;
subject to his continued strong performance, we may consider a
similarly modest increase next year. No other salary increases will
be applied to the executive directors for 2019.
Finally, I would also like to take the opportunity to highlight here the
impact on the reported “Single Figure” (see table R1, page 78) of
introducing the new forward-looking LTIP. As required by the DRR
regulations, the LTIP will be included in the single figure table only on
vesting in three years’ time. This partly accounts for the reduction in
remuneration for all the executive directors versus last year, as well as
the lower pay-out on the bonus this year. A table has been included
in the following “Remuneration at a glance” section (page 76) to
illustrate this impact in more detail.
72
MAN GROUP PLC ANNUAL REPORT 2018
CORPORATE GOVERNANCE 1.7 Shareholder engagement in 2018
Following the extensive consultation that took place with
shareholders in 2017 and early 2018, ahead of the submission of
the new policy for approval, we have continued our engagement
programme. This has included meetings with some of the leading
proxy voting agencies in Autumn 2018. The discussions provided
detail, also included in this statement, on our approach to setting
and measuring stretching performance conditions in the variable
incentive plans, in response to feedback raised during our
consultation last year.
The Committee continues to monitor closely developments in
corporate governance and shareholder guidelines and has already
taken the following action:
– lowered the pension provision available to executive directors
to 14%, in line with the maximum available to employees;
– introduced a two year post-employment shareholding requirement
and a shareholding policy that allows the inclusion of unvested
shares no longer subject to a performance condition on a net
of tax basis; and
– from this year, updated our illustrative “pay for performance”
scenario charts to include the impact of a 50% increase in the
share price (page 75).
1.8 Conclusion
I hope that you find the information in this letter, and the sections
of the DRR that follow, to be clear and useful and I would welcome
any feedback you may have.
We look forward to welcoming you at our AGM and receiving your
support for our 2018 DRR at that meeting.
Richard Berliand
Chairman of the Remuneration Committee
1.6 The link between the pay of executive
directors and the workforce
The key principles that underpin our approach to remuneration,
which apply throughout the Company are:
– remuneration is structured to support corporate strategy
and sound risk management;
– employees’ interests are aligned with shareholders and the
bonus pool is drawn from profit;
– incentives are designed to encourage behaviour focused
on longer-term strategic and sustainable performance; and
– our total remuneration is competitive in the talent markets
from which we hire.
During 2018, the Committee, supported by management, undertook
a detailed review of the compensation approaches used across
the firm to ensure adherence to these principles and that they were
appropriately contributing to the culture. The Committee noted that
the approach to variable compensation depended on the type of skill
set required and market dynamics over time which resulted in both
formulaic and discretionary approaches being used, as well as a
combination of the two. In common with most asset management
businesses, bonuses below the Board are uncapped but, in most
cases, there is a significant level of deferral, usually into a
combination of both shares and funds, which increases in line with
compensation levels. There is also wide-ranging oversight of the
proposed bonuses and careful consideration of risk factors. A
Compliance, Risk and HR review is undertaken and the results,
including any recommendations for downward compensation
adjustments, are made directly to the Committee. The plan rules
include appropriate malus provisions. The Committee felt the
compensation structures in use played an important role in driving
business performance without encouraging or rewarding
inappropriate risk-taking and were an important element of
supporting the desired culture.
We also think it is important to understand the relationship between
the pay of the CEO and that of the wider workforce so have
published a pay ratio in each of the last two year’s remuneration
reports. Now that the Government has legislated on this matter,
we have again published the ratio, on the basis of the forthcoming
requirement, which comes into effect for financial reporting periods
starting from 1 January 2019. Whilst we recognise that the ratio
number in isolation does not provide much insight, we believe that
trend data over time, as well as an understanding of how Man
Group’s ratio compares to that in similar businesses, can provide
useful context for executive remuneration decision-making.
MAN GROUP PLC ANNUAL REPORT 2018
73
STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSSHAREHOLDER INFORMATION Directors’ Remuneration Report continued
2. Remuneration at a glance
2.1 Directors’ Remuneration Policy summary table
Key elements
2018 2019 2020 2021 2022 2023 2024
Remuneration Policy
Implementation in 2018/19
Fixed pay
Salary
– Overall policy maximum of
Salaries effective from 01/01/18:
$1.1m will apply to all
executive directors meaning
no increase for the CEO over
the life of the policy
– CEO $1.1m
– President $750k
– CFO $600k
Pension
allowance
Benefits
– Policy Maximum 14% salary1
– Actual 14% salary
– Includes family private
medical insurance, life
assurance and permanent
health insurance
Salaries effective from 01/01/19:
– CEO $1.1m
– President $750k
– CFO $612.5k
Cash
bonus
Deferred
bonus
Long-term
incentive
Share
ownership
requirements
Maximum
opportunity
Operation
Maximum
opportunity
Operation
– 250% of salary
KPIs
– Awarded as a combination
of cash (50%) and deferral
(50%) into shares vesting
in equal tranches in each
of the following three years.
– Opportunity to defer up to
half the deferred amount
into funds, once the share
ownership requirements are
met
– Malus and clawback apply
Net Inflows
Core Management
Fee PBT ($m)
Core Total PBT ($m)
Strategic and personal
objectives
30%
20%
20%
30%
– 350% of salary
KPIs
– Man Group Long-Term
Incentive Plan (LTIP)
– Forward-looking three-year
performance conditions with
share grant at year 0, vesting
year 3 with subsequent
two-year holding period
– Malus and clawback apply
– First grant will be made in
March 2019
Relative investment
performance
25%
Relative TSR vs FTSE 250 25%
Three year cumulative core
management fee EPS
3-year cumulative
core total EPS
Cumulative Net Inflows
20%
10%
20%
Share
ownership
requirements
– CEO 300% of salary
– Other executive directors
200% of salary
– 100% of the requirement to
be retained for one year after
leaving and at least 50%
for the second year
The full detail of the executive directors’ remuneration
policy, approved in May 2018, can be viewed at
www.man.com
1 The directors’ maximum pension contribution is aligned to the maximum available to all employees,
currently 14% of salary.
74
MAN GROUP PLC ANNUAL REPORT 2018
CORPORATE GOVERNANCE
2.2 Illustrative pay for performance scenarios
The chart below provides an illustration of the potential reward opportunities for executive directors in respect of the Directors’ Remuneration
Policy showing the potential split between the different elements of remuneration under four different performance scenarios: ‘minimum’,
‘mid-point’, ‘maximum’ and ‘maximum with 50% share price appreciation’.
Illustrative pay for performance scenarios ($’000)
Luke
Ellis
CEO
Mark
Jones
CFO
Minimum
Mid-point
Maximum
Maximum with 50%
share price appreciation
Minimum
Mid-point
Maximum
Maximum with 50%
share price appreciation
$1,273
100%
28%
30%
42%
$4,573
16%
13%
$712
35%
28%
100%
28% 30%
42%
$2,550
16%
35%
49%
$4,387
$5,459
13%
28%
39%
20%
$7,873
49%
39%
$9,798
20%
Minimum
Mid-point
Maximum
Jonathan
Sorrell
President
$860
100%
28%
30%
42%
$3,110
Maximum with 50%
share price appreciation
16%
13%
35%
28%
$5,360
49%
$6,673
39%
20%
Salary, pension and benefits
Annual bonus
LTIP
50% share price appreciation on LTIP
Assumptions used:
– The minimum scenario reflects base salary, pension (of 14% of salary) and benefits as disclosed in the
single figure of total remuneration (i.e. fixed remuneration) which are the only elements of the executive
directors’ remuneration packages not linked to performance during the year under review.
– The ‘mid-point’ scenario reflects fixed remuneration as above, plus a target pay-out of 50% of the
maximum annual bonus and 50% vesting for the LTIP.
– The ‘maximum’ scenario reflects fixed remuneration as above, plus full pay-out of both the annual bonus
and LTIP.
– The minimum, mid-point and maximum illustrations are based on initial award value and do not,
therefore, reflect potential share price appreciation or any dividend equivalent received over the
vesting/deferral periods.
– The ‘maximum with 50% share price appreciation’ shows the impact of a 50% increase in the value of the
LTIP share award from grant; it does not reflect any potential dividends received over the vesting period.
– Annual bonus includes both the cash bonus and the amount of the bonus deferred.
MAN GROUP PLC ANNUAL REPORT 2018
75
STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSSHAREHOLDER INFORMATION Directors’ Remuneration Report continued
2. Remuneration at a glance continued
2.3 Single figure disclosure
The impact of switching from the former Deferred Executive Incentive Plan (DEIP) to the new forward-looking LTIP, as a result of the
implementation of the new remuneration policy, is that no long-term variable pay will be included in the Single Figure table until the first
award vests at the end of 2021. In the interests of clarity and transparency, the “2018 illustrative” data in the table below shows the potential
single figure outcome. In order to attribute an illustrative value to the LTIP an expected value of 50% of the face value of the award to be made
in March 2019 has been used. Achievement at this level would require target performance to be delivered on all five measures. The actual
outcome for the March 2019 award will be reported in the DRR for 2021.
Single figure disclosure illustration ($’000)
2,856
4,781
6,215
1,601
2,673
3,130
1,968
3,280
4,002
Luke
Ellis
CEO
Mark
Jones
CFO
Jonathan
Sorrell
President
2018
actual
2018
illustrative
2017
actual
2018
actual
2018
illustrative
2017
actual
2018
actual
2018
illustrative
2017
actual
Salary
Pension & benefits
Short-term variable – Annual bonus
Long-term variable – LTIP
2.4 Executive director pay in the context of Man Group’s shareholders
The chart below shows the total shareholder return (TSR) generated since Luke Ellis’s appointment as CEO, compared to both the FTSE 250
(the peer group for the new Relative TSR measure in the LTIP) and the FTSE 350 Financial services Index.
Total shareholder return (TSR) (Sep 16 – Dec 18)
200
170
140
110
80
50
Sep
16
Dec
16
Apr
17
Aug
17
Dec
17
Apr
18
Aug
18
Dec
18
Man Group TSR
FTSE 250 TSR
FTSE 350 Financial Services TSR
Source: Datastream
76
MAN GROUP PLC ANNUAL REPORT 2018
CORPORATE GOVERNANCE
2.5 Executive directors’ shareholdings
The CEO has a shareholding requirement of 300% of salary and other executive directors must hold shares equivalent to 200% of salary;
these higher requirements were introduced with the new Remuneration Policy, approved in May 2018. The chart below shows the
shareholdings of each executive director compared to their requirement. Under the Remuneration Policy shares owned outright and those
deferred shares that no longer have performance conditions attached count towards the shareholding requirement. In the future, LTIP shares
retained during the two-year post-vesting holding period will also count towards the requirements. Shares which are not owned outright are
shown net of tax (i.e excluding that proportion of those shares expected to be sold on vesting to settle the associated tax liability). All three
executive directors meet their new requirement, representing good alignment with shareholder interests.
Executive directors’ shareholdings (%)
Luke
Ellis
Mark
Jones
Jonathan
Sorrell
Shareholding requirement
Shareholding requirement
0
100
200
300
400
500
600
Shares held outright
Deferred shares not subject to performance conditions
700
% salary
2.6 Executive director pay in the context of Man Group’s employees
In determining the appropriate remuneration for the executive directors, the Committee carefully considered conditions for employees
across the Group. A high calibre, motivated workforce, appropriately rewarded for their contributions, is a critical component of our
success and the table below illustrates remuneration paid to the executive directors in the context of the wider workforce.
It also includes the CEO ratio, adopted early and calculated according to Option A of the new legislation which comes into effect for reporting
periods commencing from 1 January 2019. The ratio of CEO pay to all three employee data points is significantly lower than in 2017, partially
explained by the switch to the new LTIP plan which means no long-term variable pay is included in the single figure for the CEO, as laid out
elsewhere in the report. Bonuses are below last year for both the CEO and the wider UK employee population.
CEO – Single total remuneration figure (SFT) ($’000)
Ratio of SFT to UK employees1
lower quartile
median
upper quartile
Compensation – all employees ($m)2
Compensation ratio3
Number of bonus-eligible employees
Mean annual bonus award per bonus-eligible employee ($’000)
Median annual bonus award per bonus-eligible employee ($’000)
CEO SFT as % of total compensation of all employees
Aggregate total SFT of all executive directors as % of total compensation of all employees
Year ended
31 December
2018
Year ended
31 December
2018
– illustrative 4
Year ended
31 December
2017
2,856
4,781
6,215
30:1
20:1
11:1
425
48%
1,273
185
30
0.7%
1.5%
51:1
33:1
19:1
425
48%
1,273
185
30
1.1%
2.5%
65:1
42:1
22:1
470
44%
1,183
250
40
1.3%
2.8%
1 CEO ratio calculated by comparing the Single Figure Table (SFT) disclosure for the CEO to the lower quartile, median and upper quartile remuneration for all UK employees for 2018
on the same basis (i.e salary, benefits, pension and variable remuneration). Total pay and benefits for the lower quartile paid, median paid and upper quartile paid UK-based employee
in 2018 were $94,000 ($95,000 in 2017), $144,000 ($147,000 in 2017) and $254,000 ($280,000 in 2017) respectively. The salary component of pay for the lower quartile paid, median
paid and upper quartile paid employee in 2018 was $78,000 ($67,000 in 2017), $114,000 ($86,000 in 2017) and $140,000 ($195,000 in 2017) respectively.
2 Compensation for all employees represents total fixed pay (salary, pension and benefits) and variable pay in respect of 2018.
3 Compensation ratio represents total compensation costs for all employees (fixed base salaries, benefits, variable bonus compensation and associated social security costs) as a
proportion of net revenue (gross management and other fees, performance fees, income or gains on investments and other financial instruments, and share of post-tax profits of
associates, less distribution costs).
4 The column headed “Year ended 31 December 2018 – Illustrative” is included to aid understanding of the impact of the switch to the new LTIP award which means that no long-term
variable pay is included in the directors single figure disclosure (table R1, page 78). For illustrative purposes an Expected Value of 50% of the face value of the LTIP award to be made
in March 2019 has been assumed.
MAN GROUP PLC ANNUAL REPORT 2018
77
STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSSHAREHOLDER INFORMATION
Directors’ Remuneration Report continued
3. Remuneration outcomes in 2018
3.1 Single total figure of remuneration for executive directors
The table below sets out a single figure for the total remuneration received by each executive director for the year ended 31 December 2018
and the prior year.
Single total figure of remuneration for executive directors (audited) – Table R1
All figures in USD
Salary
Taxable benefits2
Short term variable3
Long-term variable4
Pension benefits5
Other6
Total
Luke Ellis1
Executive Directors
Mark Jones
Jonathan Sorrell
2018
2017
2018
2017
2018
2017
1,100,000
3,691
1,603,250
–
134,250
14,888
1,100,000
3,256
2,601,500
2,371,600
134,626
4,223
600,000
3,292
912,000
–
74,891
10,865
575,000
2,869
1,338,313
1,139,075
72,425
2,765
750,000
3,691
1,121,250
–
91,534
1,445
750,000
3,256
1,858,125
1,296,750
91,791
1,706
2,856,079
6,215,205
1,601,048
3,130,447
1,967,920
4,001,628
3.2 Annual bonus in respect of 2018 performance
The annual bonus is based on the Committee’s assessment of executive directors’ performance against objectives agreed by the Board at
the beginning of the year, split 70% based on quantitative metrics and 30% on qualitative performance. The threshold, target and maximum
ranges are considered to represent appropriately stretching levels of performance, as explained in detail in the Chairman’s statement, and are
set by reference to internal budgets and strategic plans, industry backdrop and external expectations. The targets for Core Management Fee
PBT and Core Total PBT (including adjusted Performance Fee PBT) have been adjusted to exclude “non-core management fees” relating to
discontinued business, in order to ensure the directors are incentivised only using stretching targets for metrics over which they have direct
control. 2018 has been a year of continued growth building on the exceptional performance delivered in 2017. Industry-leading growth in net
inflows was again delivered and good relative investment performance. However, the investment environment, for most asset classes, was
challenging and this has negatively impacted on absolute performance.
Table R2 shows the results of the Committee’s assessment of the performance delivered in 2018.
Annual bonus in respect of 2018 (audited) – Table R2
Financial Metric
Weighting
2017 actual
Threshold
(25% of max)
Target
(50% of max)
Maximum
(100% of max)
Outcome
Increase in Net Inflows
Core Management Fee PBT
Core Total PBT
TOTAL FINANCIAL METRICS
30%
20%
20%
70%
15.8%
$178m
$359m
1.0%
$197m
$272m
3.5%
$210m
$360m
6.0%
$223m
$473m
NON-FINANCIAL METRICS
30%
See qualitative assessment (below)
PERCENTAGE OF MAXIMUM ANNUAL BONUS AWARDED
QUANTUM OF AWARD – TOTAL7
QUANTUM OF AWARD – PAID IN CASH
QUANTUM OF AWARD – DEFERRED
%
achieved
100%
36.5%
0.0%
CFO
23.5%
Bonus outcome,
after weighting
(% of maximum)
30.0%
7.3%
0.0%
37.3%
President
22.5%
9.9%
$203m
$237m
CEO
21.0%
58.3%
$1,603,250
60.8%
$912,000
59.8%
$1,121,250
$801,625
$456,000
$560,625
$801,625
$456,000
$560,625
1 Luke Ellis is a director of Ferox Master Fund, Ferox Fund Limited and Ferox Bear Fund. For 2017 and 2018, he received fees of $7,500 per annum in respect of these directorships.
The figures in table R1 do not include these fees.
2 Taxable benefits include private medical insurance and gym membership subsidy.
3 See table R2 for details of the short term variable compensation award.
4 The first award under the new Man Group plc LTIP will be made in March 2019 for the three year performance period ending on 31 December 2021. To the extent the performance
conditions have been achieved, any vested shares will be reported in this table in the report for 2021. Vested shares are subject to a further two year holding period. In 2017, the
long-term variable remuneration was awarded under the Deferred Executive Incentive Plan which has been replaced by the LTIP.
5 Pension benefits are paid into the Man Group Self-Invested Personal Pension with any contributions exceeding the annual or lifetime allowance paid as cash on a cost neutral basis
6
to the Company.
“Other” includes non-taxable benefits (e.g. life insurance, Group income protection and fund fee rebate. The fee rebates were higher in 2018 as the scheme only came into force in
January 2017 and, therefore, the calculation period was longer in 2018).
7 50% of the bonus is paid in cash with the remaining 50% deferred into Man Group plc shares; when a director achieves their shareholding requirement, up to half the deferral may
be into Man Group plc funds and the balance into shares. No further performance conditions apply to the deferral which vests in three equal tranches on the first, second and third
anniversary of grant.
78
MAN GROUP PLC ANNUAL REPORT 2018
CORPORATE GOVERNANCE Key
Criteria fully met or exceeded
Criteria partially met
Criteria not met
Assessment of performance against qualitative objectives
Executive Director Objective
Outcome
CEO
Overall performance of
the Group particularly
in setting conditions
for long-term
sustainable growth
Retain and develop
talent and ensure
strong succession
plan and processes
Against a difficult environment for asset managers, the Group performed well on a relative
basis with strong Net Inflows and average fund outperformance versus peers of 1.0%. Strong
culture of risk management and compliance, with smooth introduction of MiFID II requirements.
Due to negative backdrop in almost all markets, overall performance fee profitability was low.
Continued focus on talent, with the creation of a dedicated talent team, both in London and
the US. New Elite programme for high-performing individuals, to support future succession
planning. Engagement levels improved again in the annual Employee Survey, now at 7.8/10,
up from an already healthy 7.5/10. Succession planning processes and identification and
development of future talent at more junior levels in the organisation need more development.
Continue to strengthen
client relationships
Strong personal focus on client relationships, meeting with hundreds of Man Group’s key
current and prospective clients and contributing to another year of industry-leading Net Inflows.
Focus on innovation in
product, people and
technology
Innovative products have been a key driver of FUM growth during the year, particularly
Alternative Risk Premia and Diversified Risk Premia. Expansion of seeding programme to
support pipeline of new ideas. Significant investment in research and technology teams to
support innovation in product pipeline and alpha generation.
Build reputation of
Man Group with key
external stakeholders
Good relationships with shareholders. Positioning Man Group as a leader in responsible
investment. Strong leadership in CSR on volunteering and supporting diversity in STEM and
education. More work to be done to raise Man Group’s profile and importance with other
stakeholders.
Drive improved
diversity
CFO
Accurate, appropriate,
clear, proactive and
timely reporting
Substantial work and leadership both internally and externally in supporting diversity initiatives.
Provided all employees with enhanced parental leave and introduced work returner scheme post-
maternity. Created new internal groups promoting diversity and assigned each senior executive
leadership responsibility for a particular area of diversity. Signed up to Women in Finance
initiative. Industry and Man still rank poorly on many diversity outcomes reflecting the starting
position in these areas, hence the amber rating, despite excellent initiatives.
Enhanced monthly financial reporting, focused on underlying cash flow, fund performance,
sales pipeline and performance fee income.
Enhance role of
finance as a driver of
change in business
Created new business partnering team to support financial decision-making across the
business. Implemented automation to provide daily management information at Group and
investment engine level.
Diversity and
development of people
Led programme of business education for Finance. Scope to contribute more broadly in this
area across the firm.
Manage Group capital Negotiated triennial valuation update with DB pension trustees, resulting in the return of
£14.2 million of surplus funding to Man Group. Supported a range of new launches with the
seed book (with benchmark hedges where appropriate) whilst remaining well within VaR
limit. Effective hedging of seed book protected the balance sheet in more difficult macro
environment. Led work on potential corporate restructure with the Chief Administrative Officer.
Oversee a strong risk
and control function
Led the project to implement a new finance and HR system from Workday to improve
automation and control environment which went live at the start of 2019.
President
Grow global client
relationships
Diversity and
development of team
Led the successful execution of a strategy in Sales which aligns resources to targeted
opportunities and seeks to develop strong client relationships. Met personally with over 100
accounts globally, representing current and prospective clients of the firm, as part of efforts to
strengthen existing relationships and prospect new ones. Strong net inflows delivered in 2018.
Personally sponsored the newly launched BEAM Network (Black Employees at Man) which
is part of the firm’s Drive programme. Further enhanced the Sales training programme
with a focus on product and skills-based training, together with encouraging professional
qualifications where appropriate.
Source and review
potential acquisitions
Significant effort to source new investment capabilities, with a focus on Man GPM, with over
100 new managers assessed. No acquisitions were made given terms were not sufficiently
attractive for Man Group shareholders.
Continue growth of
FRM solutions
Develop our private
assets business
FRM continued its transition to a solutions-focused business, with continued client
engagement on the managed account offering and Alternative Risk Premia product.
Infrastructure outflow in Q3 driven by client allocation decision, not FRM’s service.
Developed and launched a new commingled US real estate equity fund. Two key hires made
for the European business. Growth was satisfactory given the market environment, although
further progress needed to scale the business.
MAN GROUP PLC ANNUAL REPORT 2018
79
STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSSHAREHOLDER INFORMATION Directors’ Remuneration Report continued
3. Remuneration outcomes in 2018 continued
3.3 Percentage change in CEO remuneration
The table below sets out the percentage change in remuneration for the CEO and staff.
Percentage change in CEO remuneration – Table R3
Salary
Taxable benefits2
Short term variable
CEO
All figures in $’000s
All Staff
2018
1,100
4
1,603
2017
% change
% change1
1,100
3
2,602
0
13
-38
33
13
-264
3.4 Relative importance of spend on pay
The table below shows the year-on-year change in total employee expenditure compared to the change in shareholder distributions.
Relative importance of spend on pay – Table R4
Total employee expenditure5
Shareholder distributions6
2018
$m
436
400
2017
$m
474
250
%
change
-8%
60%
3.5 Review of past performance
The performance graph below compares the Company’s total shareholder return performance against the FTSE 350 Financial Services
Index. Man Group operates in the alternative investment management sector and is listed on the FTSE 250 Index on the London Stock
Exchange. The FTSE 350 Financial Services Index has been chosen as it is the most appropriate comparator to cover a period when Man
has been in both the FTSE 100 and FTSE 250. The majority of Man Group’s direct competitors are unlisted and equivalent information for
these firms is not available. As set out elsewhere in the report, the first performance period for the new LTIP commences on 1 January 2019
and 25% of the outcome will be determined by Man’s TSR performance compared to the FTSE 250 Index. Consequently, from 2019, this
TSR chart will switch to the FTSE 250 Index as the principal comparator.
Relative TSR Performance (Mar 09 – Dec 18)
400
350
300
250
200
150
100
50
0
Mar
09
Dec
09
Dec
10
Dec
11
Dec
12
Dec
13
Dec
14
Dec
15
Dec
16
Dec
17
Dec
18
Man Group TSR
FTSE 350 Financial Services TSR
Source: Datastream
1 Figures are calculated on a per capita basis.
2 Taxable benefits include private medical insurance and gym membership subsidy.
3 Represents the average increase in salary and taxable benefits in underlying currency in which each employee is paid.
4 For staff, short term variable remuneration includes both variable cash compensation and deferred awards relating to the current year.
5 Remuneration paid to or receivable by all employees (i.e. accounting cost). Refer to Note 4 to the financial statements for further details. Total employee expenditure excludes
restructuring costs.
6 Distributions to shareholders (dividends paid of $158 million and repurchase of shares of $92 million in 2017; dividends paid of $189 million and repurchase of shares of $211 million in 2018).
80
MAN GROUP PLC ANNUAL REPORT 2018
CORPORATE GOVERNANCE
Historical CEO remuneration – Table R5
Accounting period ended
CEO single figure ($’000)
Short term variable award
(as a percentage of maximum
opportunity)4
Long-term variable award
(as a percentage of maximum
opportunity)4
L Ellis3
E Roman3
P Clarke3
L Ellis3
E Roman3
P Clarke3
L Ellis3
E Roman3
P Clarke3
31 Mar
2010
n/a
n/a
6,299
n/a
n/a
n/a
n/a
n/a
n/a
31 Mar
20111
n/a
n/a
8,173
n/a
n/a
n/a
n/a
n/a
n/a
31 Dec
20112
n/a
n/a
6,437
n/a
n/a
n/a
n/a
n/a
n/a
31 Dec
2012
n/a
n/a
1,048
n/a
n/a
n/a
n/a
n/a
n/a
31 Dec
2013
31 Dec
2014
31 Dec
2015
31 Dec
2016
31 Dec
2017
31 Dec
2018
n/a
3,397
978
n/a
1,347
910
n/a
6,215
n/a
n/a
n/a
5,068
n/a
n/a
n/a
n/a
70% 100% 83.3%
n/a
n/a
n/a
n/a
n/a 28.6% 46.2%
n/a
n/a
n/a
n/a
n/a
2,856
n/a
n/a
5,367
n/a
n/a
n/a 40.2% 78.8% 58.3%
n/a
n/a
n/a5
n/a
n/a
40% 40.7%
n/a
0%
n/a
17%
0%
n/a
3.6 Retirement benefits
Luke Ellis, Mark Jones and Jonathan Sorrell are not eligible for any defined benefits under the Man Group plc Pension Plan.
3.7 Single total figure of remuneration for non-executive directors
The table below sets out a single figure for the total remuneration received by each non-executive director for the year ended 31 December 2018
and the prior year.
Single total figure of remuneration for non-executive directors (audited) – Table R6
All figures in GBP
Lord Livingston of Parkhead
Dame Katharine Barker6
Richard Berliand7
John Cryan
Zoe Cruz8
Andrew Horton9
Matthew Lester9
Dev Sanyal
Nina Shapiro10
Fees
Taxable Benefits11
Total
2018
2017
450,000
80,000
120,000
70,000
46,667
92,500
92,500
85,000
62,153
450,000
56,250
99,769
65,000
–
80,000
95,000
80,000
75,000
2018
1,631
–
–
1,310
5,467
–
–
1,392
5,535
2017
341
–
–
–
–
–
–
1,279
18,248
2018
2017
451,631
80,000
120,000
71,310
52,134
92,500
92,500
86,392
67,688
450,341
56,250
99,769
65,000
–
80,000
95,000
81,279
93,248
1 Salary and benefits are for 12 months and bonus for nine months.
2 Salary and benefits are for nine months and bonus for 12 months.
3 Peter Clarke stepped down as CEO with effect from 28 February 2013 and was on garden leave until his retirement on 10 December 2013. Emmanuel Roman became CEO on
28 February 2013 and stepped down on 31 August 2016. Luke Ellis was appointed CEO on 1 September 2016. Remuneration for 2016, therefore, reflects four months’ service only.
4 For the accounting periods ended up to and including 31 December 2012, as there was no cap on the overall maximum bonus awards, the percentage of maximum opportunity
is not shown.
5 The first award under the new LTIP will be made in March 2019 for the performance period from 1 January 2019 to 31 December 2021 and vest in March 2022, with a subsequent
two-year holding period. The percentage of the award vesting, based on performance against the plan metrics over the three-year period, will be included in this table for the
year-ended 31 December 2021.
6 Dame Katharine Barker was appointed to the Board on 1 April 2017. Her remuneration for 2017 has been pro-rated accordingly.
7 Richard Berliand was appointed as Senior Independent Director following the 2017 AGM. His remuneration for 2017 has been pro-rated accordingly.
8 Zoe Cruz was appointed to the Board on 1 June 2018. Her remuneration for 2018 has been pro-rated accordingly.
9 Andrew Horton took over as chair of the Audit and Risk Committee from Matthew Lester on 1 July 2018. Their remuneration for 2018 has been pro-rated accordingly.
10 Nina Shapiro retired from the Board on 9 October 2018. Her remuneration for 2018 has been pro-rated accordingly.
11 Taxable benefits comprise travel and staff entertainment expenses.
MAN GROUP PLC ANNUAL REPORT 2018
81
STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSSHAREHOLDER INFORMATION Directors’ Remuneration Report continued
3. Remuneration outcomes in 2018 continued
3.8 Payments for loss of office and payments to past directors (audited)
There were no payments made for loss of office or remuneration payments made to former executive directors during the year.
3.9 Directors’ interests
Directors’ interests in shares of Man Group plc (audited) – Table R7
Executive directors
Luke Ellis
Mark Jones
Jonathan Sorrell
Non-executive directors
Lord Livingston of Parkhead
Dame Katharine Barker
Richard Berliand
John Cryan
Zoe Cruz3
Andrew Horton
Matthew Lester
Dev Sanyal
Nina Shapiro4
Number of
ordinary
shares1
31 December
20182
Number of
ordinary
shares1
31 December
2017
3,073,703
252,408
775,952
2,419,391
142,602
666,917
62,789
42,948
50,000
–
–
100,000
22,692
77,993
28,258
33,138
40,910
50,000
–
–
50,000
22,692
74,292
28,258
Executive directors’ shareholdings measured against their respective shareholding requirement as at 31 December 2018 – Table R8
Executive directors
Luke Ellis
Mark Jones
Jonathan Sorrell
Shares
owned
outright
Shares no
longer subject
to performance
conditions7
3,073,703
252,408
775,952
1,242,035
728,062
1,190,045
Total
Shareholding6
4,315,738
980,470
1,965,997
Value of
shareholding8
(USD)
7,324,152
1,663,936
3,336,453
Annual
Salary (USD)
1,100,000
600,000
750,000
Shareholding
requirement
as a %
of salary5
Current
shareholding
as a %
of salary
300%
200%
200%
666%
277%
445%
Requirement
met?
Yes
Yes
Yes
1 All of the above interests are beneficial.
2 There has been no change in the directors’ interests in the ordinary shares of Man Group plc from 31 December 2018 up to 1 March 2019, being the latest practicable date prior to the
publication of this report.
3 Zoe Cruz was appointed to the Board on 1 June 2018.
4 Shareholding as at 9 October 2018, the date at which Nina Shapiro retired from the Board.
5 The new Directors Remuneration Policy, approved in May 2018, increased the shareholding requirements to 300% and 200% of salary, for the CEO and other Executive Directors,
from 200% and 100% of salary respectively.
6 Shares that count towards achievement of the policy are limited to: shares owned outright and deferred shares, granted under the Deferred Executive Incentive Plan (DEIP), Deferred
7
Share Plan (DSP) and Partner Deferred Share Plan (PDSP), which are no longer subject to performance conditions.
In future, LTIP shares retained during the two-year post-vesting retention period will also count towards achievement of the requirement. Unvested shares no longer subject to
performance conditions are shown on a net of tax basis. Details of unvested awards can be found in Tables R10 and R12.
8 Shareholdings valued at 31 December 2018 share price of £1.33 and a GBP/USD exchange rate of £1 = $1.2760
82
MAN GROUP PLC ANNUAL REPORT 2018
CORPORATE GOVERNANCE 3.10 Directors’ interests in shares and options under Man Group long-term incentive plans
Scheme interests to be awarded under the Man Group plc Long-Term Incentive Plan (LTIP) (audited)1 – Table R9
Executive director
Luke Ellis
Mark Jones
Jonathan Sorrell
Award
(% of maximum
opportunity)
Award
value2
(USD)
100% $3,850,000
100% $2,143,750
100% $2,625,000
Vesting Date
Mar-22
Mar-22
Mar-22
End of
retention
period date
Mar-24
Mar-24
Mar-24
Conditional share awards under the Deferred Executive Incentive Plan (DEIP) – subject only to service conditions (audited) –
Table R10
Executive director
Luke Ellis
Mark Jones
Jonathan Sorrell
Date of grant
1 January 2018
Granted
during year3
–
991,520
Dividends
accruing4
14,208
49,536
284,382
–
–
476,225
23,790
178,341
350,883
612,201
661,090
–
–
–
–
–
542,146
4,454
11,686
30,585
33,027
27,084
Mar-178
Mar-189
Mar-189
Mar-145
Mar-156
Mar-167
Mar-178
Mar-189
Vested
during
the period
–
–
–
89,169
116,961
–
–
–
31 December
2018
298,590
1,041,056
500,015
93,626
245,608
642,786
694,117
569,230
Date vested
–
–
–
Mar-18
Mar-18
–
–
–
Options granted under the Man Group Deferred Share Plans – not subject to service conditions (audited) – Table R11
Executive director
Date of grant
Luke Ellis10
Deferred Share Plan (KEOP)
Nov-10
Mar-11
Mark Jones11
Partner Deferred Share Plan (POP)
Mar-11
1 January
2018
Exercised
during period
31 December
2018
Option
exercise price
Latest
exercise date
744,327
407,463
356,110
_
_
_
744,327
407,463
319.88p
267.08p
Nov-20
Mar-21
356,110
308.55p
Mar-21
1 The first awards under the LTIP will be made in March 2019 for the three year performance period commencing on 1 January 2019 and ending on 31 December 2021; the proportion
of the award which vests will be determined based on the measures, weightings and target ranges set out in table R17 on page 85.
2 The monetary value of these awards will be converted into a number of shares using the USD/GBP exchange rates and the market value on the immediately preceding dealing day to
grant. The awards will be granted as conditional awards of shares and will vest, to the extent the performance conditions have been achieved, three years later and will then be subject
to a further two year retention period, under the LTIP rules. These awards attract dividend accruals from grant date to the end of the two year retention period for vested shares.
3 The award values of $2,371,600, $1,139,075 and $1,296,750 for Luke Ellis, Mark Jones and Jonathan Sorrell respectively included in table R6 in the DRR for the financial year ended
31 December 2017 were converted into the number of shares shown above using the USD/GBP exchange rate of $1=£0.7210 and a share price of £1.7245, being the market value on
the immediately preceding dealing day to grant. These awards attract dividend accruals.
4 On 18 May 2018 dividend accruals of 27,240, 10,167 and 45,657 shares were added to Luke Ellis, Mark Jones and Jonathan Sorrell’s awards respectively based on a Sterling dividend
of 4.18 pence. On 5 September 2018, dividend accruals of 36,504, 13,623 and 61,179 shares were added to Luke Ellis, Mark Jones and Jonathan Sorrell’s awards respectively based
on a Sterling dividend of 4.88 pence.
5 Remaining award vests in March 2019.
6 Remaining award vests in two equal instalments in March 2019 and March 2020.
7 Award vests in three equal instalments in March 2019, March 2020 and March 2021.
8 Award vests in three equal instalments in March 2020, March 2021 and March 2022.
9 Award vests in three equal instalments in March 2021, March 2022 and March 2023.
10 Luke Ellis was granted KEOP options under the Deferred Share Plan prior to his appointment as a director. All options are vested.
11 Mark Jones was granted a POP option under the Partner Deferred Share Plan prior to this appointment as a director. All options are vested.
MAN GROUP PLC ANNUAL REPORT 2018
83
STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSSHAREHOLDER INFORMATION Directors’ Remuneration Report continued
3. Remuneration outcomes in 2018 continued
Options granted under the Man Group Deferred Share Plans – subject only to service conditions (audited) – Table R12
Executive director
Luke Ellis1
Mark Jones5
Date of grant
Deferred Share Plan (DSP)
Mar-15
Mar-152
Mar-163
Mar-174
Partner Deferred Share Plan
(PDSP)
Mar-15
Mar-156
Mar-167
Deferred Share Plan (DSP)
Mar-178
Mar-179
1 January
2018
Dividends
accruing10
Exercised/
vested
during period
31 December
2018
Exercise/
vesting date
148,708
401,016
328,748
585,992
14,973
401,016
98,754
290,812
136,368
—
20,035
8,212
19,516
—
20,035
2,466
14,529
4,540
148,708
—
164,373
195,330
—
421,051
172,587
410,178
14,973
—
49,377
—
421,051
51,843
—
45,456
305,341
95,452
Mar-18
Mar-18
Mar-18
Mar-18
Mar-18
Mar-18
Options granted under the Man Group Sharesave Scheme (audited) – Table R13
Executive
director
Luke Ellis
Date of grant
Sep-14
Sep-17
Jonathan Sorrell Sep-14
Sep-17
1 January
2018
16,833
11,363
16,833
11,363
Mark Jones
Sep-17
13,636
Granted
during year
Exercised
during period
Lapsed
during year
31 December
2018
Number of options
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
Option price
90.0p
132.0p
90.0p
132.0p
Earliest
exercise date
Latest
exercise date
Oct-19
Oct-22
Oct-19
Oct-22
Mar-20
Mar-23
Mar-20
Mar-23
16,833
11,363
16,833
11,363
13,636
132.0p
Oct-20
Mar-21
3.11 Shareholder voting and engagement
At the AGM held on 11 May 2018, votes cast by proxy and at the meetings in respect of directors’ remuneration were as follows:
Table R14
Resolution
Votes for
% for
Votes against
% against
Total votes cast
Votes withheld
(abstentions)
Approve the annual report on remuneration
Approve the directors’ remuneration policy
1,116,399,486
1,132,967,350
95.8% 48,822,107
97.2% 32,266,653
4.2% 1,165,221,593
2.8% 1,165,234,003
577,813
565,403
1 Luke Ellis was granted nil-cost options under the Deferred Share Plan prior to his appointment as a director.
2 Award vests in a single instalment in March 2020 and will be exercisable until March 2025.
3 One half of the remaining Award vested and was exercised in March 2018; the second half of the remaining Award will vest in March 2019 and will be exercisable until March 2026.
4 One third of the Award vested and was exercised in March 2018; the remainder of the Award will vest in equal tranches in March 2019 and March 2020 and will be exercisable until
March 2027.
5 Mark Jones was granted nil-cost options under the Deferred Share Plan as well as conditional awards under the Partner Deferred Share Plan prior to his appointment as a director.
6 Award vests in a single instalment in March 2020. Shares are delivered upon vesting.
7 One half of the remaining Award vested in March 2018; the second half of the remaining Award will vest in March 2019. Shares are delivered upon vesting.
8 Award vests in a single instalment in March 2022 and will be exercisable until March 2027.
9 One third of the Award vested and was exercised in March 2018; the remainder of the Award will vest in equal tranches in March 2019 and March 2020 and will be exercisable until
March 2027.
10 On 18 May 2018 dividend accruals of 20,411 and 17,765 were added to Luke Ellis and Mark Jones awards respectively based on a Sterling dividend of 4.18 pence. On 5 September
2018, dividend accruals of 27,352 and 23,805 were added to Luke Ellis and Mark Jones awards respectively based on a Sterling dividend of 4.88 pence.
84
MAN GROUP PLC ANNUAL REPORT 2018
CORPORATE GOVERNANCE 4. Implementation of directors’ remuneration
policy for 2019
4.1 Base salary
Salaries are reviewed annually taking into account market benchmarks for executives of comparable status, responsibility and skill.
Base salary of executive directors– Table R15
Base salary at
1 January 2018
1 January 2019
Luke Ellis Jonathan Sorrell
Mark Jones
$1,100,000
$1,100,000
$750,000
$750,000
$600,000
$612,500
4.2 Annual bonus for 2019
The following table shows the performance metrics and weightings for the annual bonus in 2019. The Remuneration Committee considers
that the disclosure of detailed performance targets in advance for 2019 would be commercially sensitive and they are not, therefore, disclosed
here. It is the intention of the Committee to disclose them in the DRR for the year ended 31 December 2019.
Table R16
Metrics
Net Inflows
Core Management Fee PBT, $m
Core Total PBT, $m
Strategic and Personal
Total
Weighting %
30%
20%
20%
30%
100%
4.3 Long-term incentive plan for 2019
The first award under the new Man Group plc LTIP will be made in March 2019 and the threshold to maximum ranges are set out in the
table below. Awards vest at 0% at threshold, 50% at target and 100% at maximum with straight line vesting between these points.
Table R17
Metrics
Relative Investment Performance
Relative TSR vs FTSE 250
3-year Cumulative Core Management Fee EPS, cents
3-year Cumulative Core Total EPS, cents
Cumulative Net Inflows
Total
Threshold
0%
Median
33¢
45¢
3%
Target
Maximum
Weighting %
3%
Mid-point
between
Median and
Upper
Quartile
36¢
59¢
10.5%
6%
Upper Quartile
25%
25%
39¢
78¢
18%
20%
20%
10%
100%
4.4 Non-executive director remuneration policy for 2019
There has been no increase in fees for the Chairman since his appointment in 2016, nor any increase for the role since 2007. There has been
no increase in non-executive directors’ Board fees since January 2018 when the fees were increased, for the first time since 2009, to
recognise the increased demands associated with the role.
Non-executive directors’ fees for 2019 – Table R18
Position (All figures in GBP)
Chairman of the Board
Board fee1
Senior Independent Director
Audit and Risk Committee chair
Other Audit and Risk Committee members
Remuneration Committee chair
Other Remuneration Committee members
1
Includes Nomination Committee membership where appropriate.
MAN GROUP PLC ANNUAL REPORT 2018
2019
2018
% increase
450,000
70,000
15,000
30,000
15,000
25,000
10,000
450,000
70,000
15,000
30,000
15,000
25,000
10,000
–
–
–
–
–
–
–
85
STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSSHAREHOLDER INFORMATION Directors’ Remuneration Report continued
5. Remuneration Committee
5.1 Membership and attendance
The Committee met six times during 2018 with attendance by members as indicated below. All members held office throughout the year
subject to the exceptions shown. In addition, certain urgent proposals relating to the retention of awards by good leavers were circulated
and agreed by email in between meetings.
Table R19
Committee member
Richard Berliand (Chairman)
Dame Katharine Barker
Lord Livingston of Parkhead
Zoe Cruz (appointed 1 June 2018)
Nina Shapiro (retired 9 October 2018)
Meetings
attended
6/6
6/6
6/6
3/31
5/52
Committee meetings are regularly attended by the CEO and, where appropriate, by the CFO at the invitation of the Chairman. The Committee
is supported by the Senior Reward Executive, who routinely attends, as does the Global Head of HR. Other members of the Legal,
Compliance and Executive Incentive Plans teams attend meetings when required to provide information and advice on remuneration,
regulatory and executive incentive plan matters. The Company Secretary acts as Secretary to the Committee.
At the end of each meeting there is an opportunity for private discussion between Committee members without the presence of
executive directors and management. No Committee member or attendee is present when matters relating to his or her own remuneration
are discussed.
Roles and responsibilities
The Committee’s principal responsibilities are to:
– Determine the Company’s remuneration philosophy and the principles and structure of its remuneration policy, ensuring that these
are aligned with the Company’s business strategy, objectives, risk appetite and values, comply with all regulatory requirements and
promote long-term shareholder and other stakeholder interests;
– Propose the specific remuneration policy for the executive directors, for approval by shareholders, and make remuneration decisions within
that approved policy;
– Approve the total annual compensation for individual executive directors based on their achievement against objectives set by the
Committee and Board at the start of the year for the short term annual bonus and at the start of the relevant performance period for
the LTIP;
– Recommend to the Board the remuneration of the Chairman;
– Approve the total annual compensation for Executive Committee members and Remuneration Code staff;
– Review and consider shareholder feedback and agree the approach to ongoing shareholder engagement.
Full terms of reference for the Committee, which are reviewed on an annual basis and submitted to the Board for approval, are available
on the Company’s website.
www.man.com/corporate-governance
1 Appointed to the Board on 1 June 2018 and attended all meetings thereafter.
2 Retired from the Board on 9 October 2018 and attended all meetings prior to that date.
86
MAN GROUP PLC ANNUAL REPORT 2018
CORPORATE GOVERNANCE 5.2 Independent advisers
Following a formal tender process in July 2017, the Committee appointed PriceWaterhouseCoopers (PwC) to provide it with advice on a range
of remuneration matters including the benchmarking of directors’ compensation in the asset management sector, trends in market practice
and regulatory disclosures. PwC also provide professional services in the ordinary course of business including tax and related advisory work
to parts of the Group. There are processes in place to ensure the advice received by the Committee is independent of any support provided
to management. The Committee is satisfied on this basis that PwC are able to serve as an objective and independent remuneration adviser.
The total fees paid to PwC in 2018 were £77,500 (2017: £78,250) on the basis of agreed fixed fees. The Committee also received legal advice
from Herbert Smith Freehills LLP on compliance with legislation and regulations relating to remuneration matters.
5.3 Committee activities during 2018 and the early part of 2019
The summary below sets out the main issues considered and decisions made by the Committee in the period following the publication
of the 2017 Directors’ Remuneration report up to the current date.
Executive director compensation
– Established the threshold, target and maximum ranges to be achieved for the financial metrics and approved the objectives to be delivered
under the non-financial component of the annual bonus.
– Assessed the 2018 performance of the CEO, CFO and President against the financial and non-financial metrics of the annual bonus,
considered whether any discretionary intervention was required to adjust the formulaic outcome and approved the total cash sum payable
and the amount to be deferred.
– Reviewed the level of achievement of each executive director in respect of their shareholding requirement and consequently determined
whether the option to defer up to 50% of the bonus deferral amount into funds could be offered.
– Established threshold, target and maximum ranges to be achieved for the metrics for the first three year performance period, from
1 January 2019 to 31 December 2021, of the Man Group plc LTIP and approved the awards to be made under it.
– Approved a salary increase for the CFO for 2019.
– To provide the business context for all the above reward decisions, reviewed the available benchmarking for the CEO, CFO and President
roles within UK and US listed asset managers (please see section 5.5 for information on peer groups).
Shareholder engagement and reporting
– Reviewed shareholder voting and feedback on the 2018 AGM resolutions for the new Remuneration Policy, the DRR and the new LTIP,
noting the substantial level of support.
– Continued to undertake shareholder engagement, including meetings in Autumn 2019 with some of the proxy voting bodies, to explain
the approach to establishing stretch targets for the bonus and LTIP.
– Reviewed the 2018 DRR taking account of best practice recommendations and institutional shareholder guidelines. A detailed review
was also undertaken of the requirements of the new UK Corporate Governance Code and The Companies (Miscellaneous Reporting)
Regulations 2018. It was noted that Man Group had already adopted some of the new requirements in earlier reports, including CEO ratio
reporting and explaining the exercise of discretion, if any. Approved the additional early adoption of the requirement to show the impact
of share price appreciation on remuneration in the illustrative pay-for-performance scenarios (page 75).
Compensation below Board level
– Supported by management, undertook a detailed review of the approach to compensation below Board level.
– Reviewed, challenged and approved the 2018 bonus pool proposed by management in relation to the Company’s performance
for the year.
– Approved bonus deferral policies for different groups of staff.
– Approved total compensation proposals for Executive Committee members, taking account of the CEO’s appraisal of their individual
performance for 2018 and their adherence to the Company’s business values.
– Approved the total compensation for BIPRU, AIFMD and UCITS V Remuneration Code staff.
– Retained oversight of the total compensation for staff earning over $1 million, taking account of the CEO’s appraisal of their performance
for 2018 and reports from the Risk and Compliance functions on any related risk issues arising during the year.
– Reviewed the ratio of CEO pay to the lower quartile, median and upper quartile remuneration paid to UK employees and considered the
reasons for the movement since 2017 (see page 77).
MAN GROUP PLC ANNUAL REPORT 2018
87
STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSSHAREHOLDER INFORMATION Directors’ Remuneration Report continued
5. Remuneration Committee continued
Financial regulation and governance
– Reviewed ongoing regulatory developments on remuneration and their implications for the Company’s business.
– Reviewed the Company’s FCA Remuneration Policy Statement and the Company’s BIPRU, AIFMD, UCITS V and MiFID II Remuneration Policy.
– Approved the list of BIPRU, AIFMD and UCITS V Remuneration Code staff and MiFID staff for 2018.
5.4 2018 Committee evaluation
Following a mid-year review, by the Chairman, of the 2018 priority actions identified in the Committee’s 2017 evaluation, an independent
external consultant undertook a full year evaluation of the operation and effectiveness of the Committee during 2018. The topics covered
included progress on the priorities for 2018 and the conduct and outcomes of specific areas of Committee activity and focus during the year,
including the support and advice available to the Committee.
In the evaluation feedback, the Committee again acknowledged the quality of the advice provided by its advisers and the thorough and
professional papers delivered to the Committee to support its decision-making. The following specific areas of focus were agreed for 2019:
– deliver the 2018 DRR
– continue the Committee’s engagement with shareholders as appropriate to ensure the Committee retains an excellent understanding
of any areas of particular concern or focus and responds accordingly
– implement and embed the approach to oversight of workforce remuneration for the purposes of taking this into account in determining
executive remuneration
– ensure a robust process exists for explaining to the workforce how executive remuneration aligns with wider company pay policy
– keep the compensation models below Board level under review
– keep the remuneration advice and industry knowledge available to the Committee under review as a matter of ongoing good governance
5.5 Benchmarking and peer groups
Benchmarking is one of a number of factors considered by the Committee in its deliberations on remuneration as it is important that
the Committee understands the level of remuneration paid by Man Group’s competitors for similar positions and which they may be offering
in the market place.
Man Group variously uses three separate peer groups as detailed in the tables below. These are:
1. A group of asset managers and related businesses listed on the London Stock Exchange;
2. A group of similar businesses listed on the New York Stock Exchange or Nasdaq; and
3. Businesses within the privately owned hedge fund industry.
All three of these sources are relevant.
UK LISTED PEER GROUP
– 3i
– Standard Life Aberdeen
– Ashmore
– Close Brothers
– TP ICAP
– Intermediate Capital Group
– Investec Asset Management
– Jupiter
– M&G (Prudential)
– Schroders
US LISTED PEER GROUP
– Affiliated Managers
– Apollo Investment
– Ares
– Artisan Partners
– Blackrock
– Blackstone
– Carlyle
– Eaton Vance
– Federated Investors
– Janus Henderson
– KKR
– Legg Mason
– Oaktree Capital
– Waddell & Reed
PRIVATE MANAGER PEER GROUP
– AKO
– AQR
– Arrowgrass
– Brevan Howard
– Bridgewater
– Capula
– Citadel
– Lansdowne Partners
– Marshall Wace
– Millennium
– Two Sigma
– Winton
88
MAN GROUP PLC ANNUAL REPORT 2018
CORPORATE GOVERNANCE
Many of Man Group’s senior staff are geographically mobile, particularly between London and New York, and an explicit consideration of
remuneration levels in both of these geographies is relevant. Man Group is one of the few listed companies anywhere in the world that operates
in the hedge fund industry. The majority of businesses in this industry are privately owned and systematic remuneration data is not publicly
available. Nevertheless, Man competes for talent against these businesses and staff move between Man Group and these private companies.
Man Group operates globally – witnessed in the geographic footprint of its operations, the spread of its client base and in the breadth of assets
it manages. It also creates and distributes a wide range of products: hedge funds, long only funds and quantitative funds. None of the companies
referred to above have these same characteristics and, although some of them are larger than Man Group, the Committee believes that, while
they are broadly comparable, Man Group tends to be more diverse geographically and have a wider range of fund strategies. However, these
groups share some of Man Group’s characteristics and, in some cases, information regarding the remuneration of directors is publicly available.
The privately owned hedge fund market is made up of a large number of participants, some of them small and single product and others
very large. As noted earlier, little information is available publicly on the compensation quantum and structures in these businesses. The senior
management of those few hedge fund companies which are publicly listed are generally the founders of the original private company who
retained very significant shareholdings at the time of listing. Man Group endeavours to make up this gap in publicly available data by reviewing
available information on privately owned peers, some of whom are listed in the table above. Man Group has also obtained direct information
about remuneration in those privately held companies that Man Group has acquired.
Interpreting peer group data and benchmarking involves a number of complexities and the Committee looks at this data to provide important
market context for its decisions.
Unless otherwise stated, all information in the Directors’ Remuneration report is unaudited.
For and on behalf of the Board
Richard Berliand
Chairman of the Remuneration Committee
1 March 2019
MAN GROUP PLC ANNUAL REPORT 2018
89
STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSSHAREHOLDER INFORMATION Directors’ report
The Directors present their report, together with
the audited consolidated financial statements,
for the year ended 31 December 2018.
Man Group plc is incorporated as a public limited company and
is registered in England with the registered number 08172396
(the Company). The Company’s registered office is Riverbank House,
2 Swan Lane, London EC4R 3AD.
Directors
Details of the current directors, together with their biographies,
can be found on pages 45–47. The following Board changes have
occurred during the year:
Zoe Cruz
Nina Shapiro
Appointed 1 June 2018
Retired 9 October 2018
Details of the directors’ interests in the Company’s shares are given
on page 82 of the Annual Report.
Powers of directors
The Board is responsible for the management of the business of the
Company and may exercise all the powers of the Company subject
to the provisions of relevant statutes and the Company’s Articles of
Association (the “Articles”). A copy of the Articles is available on the
Company’s website and by request from the registered office of the
Company. The Articles may be amended by a special resolution of
the shareholders.
Appointment, retirement and replacement of
directors
The appointment, retirement and replacement of directors are
governed by the Articles, the UK Corporate Governance Code and
the Companies Act 2006. Under the Articles, the Board has the
power to appoint further directors during the year, but any director
so appointed must stand for reappointment at the next Annual
General Meeting (AGM). In accordance with the Articles, one-third
of the Board must retire by rotation at each AGM and may stand for
reappointment. In practice, and in accordance with the UK Corporate
Governance Code, all Board members retire and offer themselves for
reappointment at each AGM.
The Articles give each director the power to appoint any person
to be his/her alternate, such appointment being subject to Board
approval where the proposed alternate is not an existing director
of the Company.
Directors’ indemnities and insurance cover
The Company has maintained qualifying third-party indemnity
provisions for the benefit of its directors during the year and these
remain in force at the date of this report. The indemnity is granted
by the Company to new directors on their appointment and covers,
to the extent permitted by law, any third-party liabilities which they
may incur as a result of their service on the Board. The Company
arranges directors’ and officers’ liability insurance to cover certain
liabilities and defence costs which the Company indemnity does
not meet. Neither the indemnity nor the insurance provides any
protection in the event of a director being found to have acted
fraudulently or dishonestly in respect of the Company.
Shares
Share capital
Details of movements in issued share capital, together with the rights
and obligations attaching to the Company’s shares, are set out in
Note 20 to the financial statements. This Note also provides
information on the Company’s unexpired authority to purchase its
own shares and details of the shares purchased by the Company
during the year.
Substantial voting interests
As at 31 December 2018, the Company had been notified of the
following voting interests in the ordinary share capital of the Company
in accordance with DTR 5 of the FCA’s Disclosure Guidance and
Transparency Rules. Percentages are shown as notified, calculated
with reference to the Company’s latest total voting rights
announcement prior to the date of the movement triggering the
notification.
It should be noted that these holdings are likely to have changed
since the Company was notified. However, notification of any change
is not required until the next notifiable threshold is crossed.
Shareholder
Number of shares
notified to the
Company
Percentage of
issued share
capital
Date of
notification
BlackRock, Inc.
83,046,394
5.06% 05/02/2018
Silchester International
Investors LLP
85,232,803
5.00% 13/04/2016
No changes to the above were disclosed to the Company in
accordance with DTR 5 during the period 1 January to 28 February
2019 inclusive, being the latest practicable date prior to the
publication of this report.
90
MAN GROUP PLC ANNUAL REPORT 2018
CORPORATE GOVERNANCE Restriction on voting rights
Where shares are held in employee benefit trusts for the satisfaction
of awards made under the Company’s share schemes, under the
trust deeds the trustees have discretion to vote or abstain from voting.
Share transfer restrictions
On 1 January 2017, 5,650,862 ordinary shares in the Company,
which were issued as partial upfront consideration for the acquisition
of Aalto Invest Holding AG (Aalto), became subject to share lock-up
agreements. Under the terms of such agreements, and with limited
exceptions, the shares could not be disposed of until 1 January 2019
(second anniversary of the acquisition).
On 28 August 2018, 3,140,953 ordinary shares in the Company,
which were issued in part settlement of an earn out payment made
in connection with the acquisition of Aalto, became subject to share
lock-up agreements. Subject to a number of limited exceptions,
the shares must not be disposed of until 1 January 2020 (third
anniversary of the acquisition).
The Board may decline to register a transfer of any share which
is not a fully paid share. In addition, registration of a transfer of an
uncertificated share may be refused in the circumstances set out
in the Uncertificated Securities Regulations and where the number
of joint holders exceeds four.
Change of control
The Company’s employee share and fund product incentive
schemes contain provisions whereby, upon a change of control of
the Company, outstanding options and awards will vest and become
exercisable, subject to any prorating that may be applicable.
In the event that the change of control of the Company relates to an
internal reorganisation, the Board may determine, with the consent
of the new controlling company, that in the case of share awards
the outstanding options and awards will not vest and will be
automatically surrendered in consideration for the grant of new
equivalent awards or options in the new controlling company and
that fund product awards will not vest but will continue to subsist.
Independent auditor
The Company’s auditor, Deloitte LLP, has indicated its willingness
to continue in office and a resolution to reappoint Deloitte LLP
as auditor of the Company will be proposed at the 2019 AGM.
Further disclosures
Information fulfilling the further disclosure requirements contained
in the Companies Act 2006, Schedule 7 of the Large and Medium-
sized Companies and Groups (Accounts and Reports) Regulations
2008, and the FCA’s Listing Rules and Disclosure Guidance and
Transparency Rules, where applicable to the Company, can be found
in the following sections of the Annual Report for the year ended
31 December 2018 which are incorporated into the Directors’ report
by reference:
Future developments in the business
Research and development activities
Dividend
Dividend waiver
Employment policy and employee
involvement
Financial risk management and financial
instruments
Pages
8–17
12–17
26, 112, 146–147
123
34–37, 41
117, 131–133
Corporate governance report
44–57
Internal control and risk management
statements
Directors’ responsibility statement
Including disclosure of information
to the auditors
Carbon emissions reporting
For and on behalf of the Board
Rachel Rowson
Company Secretary
1 March 2019
29
92
41
MAN GROUP PLC ANNUAL REPORT 2018
91
STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSSHAREHOLDERINFORMATION Directors’ responsibility
statement
The directors are responsible for preparing the Annual Report and
the financial statements in accordance with applicable law and
regulations.
Company law requires the directors to prepare financial statements
for each financial year. Under that law the directors are required
to prepare the Group financial statements in accordance with
International Financial Reporting Standards (IFRSs) as adopted by
the European Union and Article 4 of the IAS Regulation, and have
also elected to prepare the Parent Company financial statements
in accordance with United Kingdom Generally Accepted Accounting
Practice (United Kingdom Accounting Standards and applicable law),
including FRS 101 ‘Financial Reporting Standard 101 Reduced
Disclosure Framework’. Under company law the directors must not
approve the accounts unless they are satisfied that they give a true
and fair view of the state of affairs and of the profit or loss of the
Company and Group for that period.
In preparing the Parent Company financial statements, the directors
are required to:
– select suitable accounting policies and then apply them
consistently
The directors are responsible for keeping adequate accounting
records that are sufficient to show and explain the Company’s and
Group’s transactions and disclose with reasonable accuracy at any
time the financial position of the Company and Group and enable
them to ensure that the financial statements comply with the
Companies Act 2006. They are also responsible for safeguarding the
assets of the Company and Group, and hence for taking reasonable
steps for the prevention and detection of fraud and other irregularities.
The directors are responsible for the maintenance and integrity of
the corporate and financial information included on the Company’s
website. Legislation in the United Kingdom governing the preparation
and dissemination of financial statements may differ from legislation
in other jurisdictions.
Each of the directors, whose names and functions are on pages 45–47
confirm that, to the best of each person’s knowledge and belief:
– the financial statements, prepared in accordance with the relevant
financial reporting framework, give a true and fair view of the
assets, liabilities, financial position and profit or loss of the
Company and the undertakings included in the consolidation
taken as a whole
– make judgements and accounting estimates that are reasonable
– the Strategic report includes a fair review of the development and
and prudent
– state whether applicable UK Accounting Standards and ‘Financial
Reporting Standard 101 Reduced Disclosure Framework’ have
been followed
– prepare the financial statements on the going concern basis
unless it is inappropriate to presume that the company will
continue in business
In preparing the Group financial statements, International Accounting
Standard 1 requires that directors:
– properly select and apply accounting policies
– present information, including accounting policies, in a manner
that provides relevant, reliable, comparable and understandable
information
– provide additional disclosures when compliance with the
specific requirements in IFRSs are insufficient to enable users
to understand the impact of particular transactions, other events
and conditions on the entity’s financial position and financial
performance
– make an assessment of the Group’s ability to continue as a
going concern
performance of the business and the position of the Company and
the undertakings included in the consolidation taken as a whole,
together with a description of the principal risks and uncertainties
that they face
– the Annual Report and financial statements, taken as a whole,
are fair, balanced and understandable and provide the information
necessary for shareholders to assess the Company’s and Group’s
performance, business model and strategy
– there is no relevant audit information of which the Group’s auditor
is unaware, and that they have taken all steps that they ought to
have taken as a director in order to make themselves aware of any
relevant audit information and to establish that Man Group’s
auditor is aware of that information
92
MAN GROUP PLC ANNUAL REPORT 2018
CORPORATE GOVERNANCE STRATEGIC
REPORT
CORPORATE
GOVERNANCE
FINANCIAL
STATEMENTS
SHAREHOLDER
INFORMATION
Financial statements contents
Audited information
Independent auditor’s report
Group income statement
Group statement of comprehensive income
Group balance sheet
Group cash flow statement
Group statement of changes in equity
Notes to the Group financial statements
Basis of preparation
Significant accounting policies schedule
Revenue
Distribution costs and asset servicing
Compensation
Other costs
Finance expense and finance income
Taxation
Earnings per ordinary share
Dividends
Goodwill and acquired intangibles
Other intangibles
Cash, liquidity and borrowings
Investments in fund products and other investments
Fee and other receivables
Trade and other payables
Provisions
Investments in associates
Leasehold improvements and equipment
Deferred compensation arrangements
Capital management
Pension
Segmental analysis
Geographical disclosure
Foreign currencies
Fair value of financial assets/liabilities
Related party transactions
Financial guarantees and commitments
Other matters
Group investments
Parent Company financial statements
Unaudited information
Five year record
Alternative performance measures
Note
1
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
94
100
100
101
102
103
105
105
106
107
108
108
109
109
110
112
112
113
116
116
118
121
121
122
122
123
123
125
126
131
131
131
131
133
133
134
134
138
141
142
MAN GROUP PLC ANNUAL REPORT 2018
MAN GROUP PLC ANNUAL REPORT 2018
93
93
STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSSHAREHOLDER INFORMATION
FINANCIAL
STATEMENTS
Independent auditor’s report to the members of Man Group plc
Report on the audit of the financial statements
In our opinion:
–
the financial statements of Man Group plc (the ‘Parent
Company’) and its subsidiaries (the ‘Group’) give a true
and fair view of the state of the Group’s and of the Parent
Company’s affairs as at 31 December 2018 and of the
Group’s profit for the year then ended;
the Group financial statements have been properly prepared
in accordance with International Financial Reporting Standards
(IFRSs) as adopted by the European Union;
the Parent Company financial statements have been properly
prepared in accordance with United Kingdom Generally
Accepted Accounting Practice, including Financial Reporting
Standard 101 "Reduced Disclosure Framework"; and
the financial statements have been prepared in accordance with
the requirements of the Companies Act 2006 and, as regards
the Group financial statements, Article 4 of the IAS Regulation.
–
–
–
We have audited the financial statements of the Parent Company
and the Group which comprise:
–
–
–
–
–
–
–
the Group income statement;
the Group statement of comprehensive income;
the Group and Parent Company Balance sheets;
the Group and Parent Company Statements of changes
in equity;
the Group cash flow statement;
the Group and Parent Company statement of accounting
policies; and
the related notes 1 to 29 for the Group and 1 to 7 for the
Parent Company.
The financial reporting framework that has been applied in the
preparation of the Group financial statements is applicable law
and IFRSs as adopted by the European Union. The financial
reporting framework that has been applied in the preparation
of the Parent Company financial statements is applicable law
and United Kingdom Accounting Standards, including FRS 101
“Reduced Disclosure Framework” (United Kingdom Generally
Accepted Accounting Practice).
Basis for opinion
We conducted our audit in accordance with International Standards
on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities
under those standards are further described in the auditor’s
responsibilities for the audit of the financial statements section
of our report.
We are independent of the Group and the Parent Company in
accordance with the ethical requirements that are relevant to our
audit of the financial statements in the UK, including the Financial
Reporting Council’s (the ‘FRC’s’) Ethical Standard as applied to
listed public interest entities, and we have fulfilled our other ethical
responsibilities in accordance with these requirements. We confirm
that the non-audit services prohibited by the FRC’s Ethical Standard
were not provided to the Group or the Parent Company.
We believe that the audit evidence we have obtained is sufficient
and appropriate to provide a basis for our opinion.
Summary of our audit approach
Key audit
matters
The key audit matters that we identified in the
current year were:
Materiality
Scoping
– Valuation of Numeric and Aalto contingent
consideration; and
– Accuracy of performance fees
Within this report, any new key audit matters are
identified with ^ and any key audit matters which
are the same as the prior year identified with >.
The materiality that we used for the Group financial
statements was $15.8m (2017: $15m) which was
determined on the basis of 5% of the two-year
average of the adjusted profit before tax.
We performed a full scope audit of 23 (2017:18)
subsidiaries and audits of specified account
balances within a further 10 (2017:14) subsidiaries
across eight (2017: seven) geographic locations.
Together, this accounts for 99% (2017:99%) of
the Group’s revenue and 99% (2017:98%) of the
Group’s profit before tax.
Significant
changes
in our
approach
The impairment assessment of GLG and FRM in
respect of acquired intangibles and Aalto acquisition
accounting matters are no longer considered key
audit matters in the current year. Refer below in
the “Key Audit Matter” section for the rationale.
There are no other significant changes in our
approach apart from these key audit matters.
Conclusions relating to going concern, principal risks and
viability statement
Going concern
We have reviewed the directors’ statement in Note 1 to the financial
statements about whether they considered it appropriate to adopt
the going concern basis of accounting in preparing them and their
identification of any material uncertainties to the Group’s and
Company’s ability to continue to do so over a period of at least
twelve months from the date of approval of the financial statements.
We considered as part of our risk assessment the nature of the
Group, its business model and related risks including where relevant
the impact of Brexit, the requirements of the applicable financial
reporting framework and the system of internal control. We
evaluated the directors’ assessment of the Group’s ability to
continue as a going concern, including challenging the underlying
data and key assumptions used to make the assessment, and
evaluated the directors’ plans for future actions in relation to their
going concern assessment.
We are required to state whether we have anything material to add
or draw attention to in relation to that statement required by Listing
Rule 9.8.6R(3) and report if the statement is materially inconsistent
with our knowledge obtained in the audit.
94
94
MAN GROUP PLC ANNUAL REPORT 2018
MAN GROUP PLC ANNUAL REPORT 2018
FINANCIAL STATEMENTS
STRATEGIC
REPORT
CORPORATE
GOVERNANCE
FINANCIAL
STATEMENTS
SHAREHOLDER
INFORMATION
We confirm that we have nothing material to report,
add or draw attention to in respect of these matters.
We confirm that we have nothing material to report,
add or draw attention to in respect of these matters.
Principal risks and viability statement
Based solely on reading the directors’ statements and considering
whether they were consistent with the knowledge we obtained in
the course of the audit, including the knowledge obtained in the
evaluation of the directors’ assessment of the Group’s and the
Company’s ability to continue as a going concern, we are required
to state whether we have anything material to add or draw attention
to in relation to:
Key audit matters
Key audit matters are those matters that, in our professional
judgement, were of most significance in our audit of the financial
statements of the current period and include the most significant
assessed risks of material misstatement (whether or not due
to fraud) that we identified. These matters included those which
had the greatest effect on: the overall audit strategy, the allocation of
resources in the audit; and directing the efforts of the engagement team.
–
–
–
the disclosures on pages 31-33 that describe the principal
risks and explain how they are being managed or mitigated;
the directors’ confirmation on page 30 that they have carried
out a robust assessment of the principal risks facing the Group,
including those that would threaten its business model, future
performance, solvency or liquidity; or
the directors’ explanation on page 28 as to how they have
assessed the prospects of the Group, over what period they
have done so and why they consider that period to be
appropriate, and their statement as to whether they have a
reasonable expectation that the Group will be able to continue
in operation and meet its liabilities as they fall due over the period
of their assessment, including any related disclosures drawing
attention to any necessary qualifications or assumptions.
We are also required to report whether the directors’ statement
relating to the prospects of the Group required by Listing Rule
9.8.6R(3) is materially inconsistent with our knowledge obtained
in the audit.
These matters were addressed in the context of our audit of the
financial statements as a whole, and in forming our opinion thereon,
and we do not provide a separate opinion on these matters.
In the prior year, we included two key matters that we have not
included in the current year:
– The audit matter around impairment of the acquired intangibles
is no longer considered a key matter as there is significant
headroom in GLG; and the carrying value of the FRM intangible
assets at 31 December 2018 is below materiality after
amortisation for the period. The headroom between the fair
value and carrying value of GLG acquired intangible assets is
sufficiently large that the estimates used do not have a significant
risk of resulting in material adjustment to the carrying value; and
– Acquisition accounting of Aalto is not a key audit matter in the
current year as the nature of this matter is such that it will only
arise in the year of acquisition.
All of the key audit matters identified below should be read in
conjunction with the significant issues considered by the Audit
& Risk Committee discussed on page 60.
Valuation of Numeric and Aalto contingent consideration payable
Key audit matter
description
The contingent consideration payable to the former owners of Numeric and Aalto of $172m (Dec 2017: $175m)
and $37m (Dec 2017: $60m) respectively is stated at fair value, a key estimate as disclosed in Note 1. The value
is thus dependent on the estimated future run rate revenues as determined by management, detailed in Note
25. Changes in the valuation of the contingent consideration are recognised in the Group income statement.
How the scope of our
audit responded to
the key audit matter
Given the level of judgement involved in deriving necessary assumptions and the sensitivity of the fair value,
the use of reasonable assumptions is deemed to be a key audit matter.
Our procedures included:
Assessing related controls: We performed detailed walkthroughs of the contingent consideration valuation
processes, assessing the design and implementation of key controls. We tested the operating effectiveness
of governance controls over valuation models.
Working with specialists: We engaged internal valuation specialists to assist in challenging management’s
assumptions used to calculate the fair value. Our specialists assisted challenging the forecast Funds Under
Management (“FUM”) flows and performance against recent industry flows and performance, challenging the
discount rate and future growth rate applied through discussions with management based on the results of
our reviews.
Tests of detail: We compared the key terms of the acquisition agreements to the valuation models. We
performed a retrospective review of the accuracy of previous forecasts where applicable. We held a series
of discussions with key management across each of the CGUs and the Group who are outside of the finance
function, as well as certain Board members of Man Group, comparing these discussions with the modelling
for consistency. We performed a comparison of key assumptions to those applied by peers. We performed
an independent sensitivity analysis to determine the impact of reasonably foreseeable changes to the key
assumptions used in the fair value models, to determine whether such changes would result in material
revaluation.
Key observations
Based on our work, we found the assumptions used in calculating the fair value of the Numeric and Aalto
contingent consideration are within appropriate ranges.
MAN GROUP PLC ANNUAL REPORT 2018
MAN GROUP PLC ANNUAL REPORT 2018
95
95
STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSSHAREHOLDER INFORMATION
FINANCIAL
STATEMENTS
Independent auditor’s report to the members of Man Group plc continued
Accuracy of performance fees
Key audit matter
description
Performance fees are manually calculated as they are performed less frequently and are more complicated
than management fee calculations, increasing the relative risk of misstatement.
How the scope of our
audit responded to the
key audit matter
The performance fees require the accurate implementation of methodologies as set out in the governing
documents which are bespoke for each client or fund. The value of performance fees recorded in the year
is $126m (2017: $287m).
The performance fee calculation require judgmental interpretations such as the treatment of client flows
around the crystallisation dates or in-period flows within the calculations, and the use of estimated
valuations as reported fee bases, which can change after the period end.
The accounting policy for performance fee revenues is detailed in Note 2.
Our procedures included:
Assessing related controls: We performed detailed walkthroughs of the performance fee processes,
assessing the design and operating effectiveness of key controls.
Tests of detail: We independently agreed a sample of calculations to governing documents and source
documentation, verifying the calculation methodology and the accuracy of the inputs used in the calculation
(for example, fee rates, crystallisation dates, fund product profit and relevant benchmarks), challenging any
judgements made when interpreting governing documents. For all estimates subsequently finalised and
invoiced after the year end, we assessed the amounts invoiced against the accrued estimate at the year-
end in mid-February.
Key observations
Based on our work, performance fee revenues are not materially misstated.
Our application of materiality
We define materiality as the magnitude of misstatement in the financial statements that makes it probable that the economic decisions of a
reasonably knowledgeable person would be changed or influenced. We use materiality both in planning the scope of our audit work and in
evaluating the results of our work.
Based on our professional judgement, we determined materiality for the financial statements as a whole as follows:
Materiality
Group financial statements
$15.8m (2017: $15m)
Parent Company financial statements
$6m (2017: $6m)
Basis for determining
materiality
5% of the two-year average adjusted profit before
tax (“PBT”)
3% of Total shareholders’ funds, capped at 40%
of the Group financial statements materiality.
Rationale for the
benchmark applied
Group financial statements:
Adjusted PBT is a key alternative performance measure reconciled to statutory profit on page 143
of this annual report. Adjusted PBT is a relevant benchmark as it is a key figure used by analysts in
assessing the performance of the business. It is closely correlated with the Group’s cash earnings.
We have determined that a profit-based benchmark is most appropriate for listed investment
management companies and this is consistent with benchmarks used by Man’s peers.
Performance fees are variable and can fluctuate significantly year on year. For the year ended 31
December 2018, performance fees of $126m have been recorded in comparison to $287m in 2017.
As a result, we have taken an average of the current year and prior year adjusted profit before tax
($251m and $384m respectively) in order to create a more stable basis.
Parent Company financial statements:
Total shareholders’ funds is generally considered as an appropriate benchmark for holding companies.
The Parent Company does not generate external income and its main purpose is to hold investments in
the underlying subsidiaries of the Group. We have also considered the year on year movement on this
balance and deem it to be a constant base, therefore this is a suitable benchmark to use.
As this yielded a materiality in excess of the component materiality, we applied the component
materiality. We perform a full scope audit of the Parent Company as part of the Group audit. The
materialities of components of the Group are determined with reference to each component’s
contribution to Group PBT on an absolute basis.
96
96
MAN GROUP PLC ANNUAL REPORT 2018
MAN GROUP PLC ANNUAL REPORT 2018
FINANCIAL STATEMENTS
STRATEGIC
REPORT
CORPORATE
GOVERNANCE
FINANCIAL
STATEMENTS
SHAREHOLDER
INFORMATION
Materiality ($m)
Revenue
Full audit scope
Specified audit procedure
Review at group level
94%
5%
1%
Full audit scope
Specified audit procedure
Review at group level
94%
5%
1%
Full audit scope
Specified audit procedure
Review at group level
92%
7%
1%
99%
Profit before tax
99%
Total assets
99%
The Group audit team has developed a programme of planned
visits that has been designed so that the Senior Statutory Auditor
or a senior member of the Group audit team visits each of the
locations where the Group audit scope is focused on a rotational
basis. During the current year visits were made to New York, in
addition to the UK. Regular communications were also maintained
with the remaining geographical locations. Books and records for
subsidiaries located within Ireland, the Cayman Islands, Australia
and the Channel Islands are maintained within the UK and are
audited by the Group audit team.
Group materiality $15.8m
Component materiality
range to $0.2m to $10.2m
Audit Committee reporting
threshold $0.79m
Adjusted average PBT
Group materiality
We agreed with the Audit & Risk Committee that we would report
to the Committee all audit differences in excess of $790k (2017:
$750k), as well as differences below that threshold that, in our view,
warranted reporting on qualitative grounds. We also report to the
Audit & Risk committee on disclosure matters that we identified
when assessing the overall presentation of the financial statements.
An overview of the scope of our audit
We perform our global scoping assessment on an individual entity
by entity basis to determine the ‘significant components’ or
specified balances which should be subject to testing. In doing
so, we perform both a quantitative and qualitative assessment of all
entities within the consolidated Group. Our quantitative assessment
is primarily based on each entity’s PBT and revenue, however a
further assessment is performed to determine whether sufficient
coverage has been obtained. Our qualitative assessment is based
on our understanding of the entities obtained from prior years’ and
current year’s events and any significant risks or management
interest associated with each entity. Specific to our considerations is
management’s strategy for the Group and we continue to re-assess
where we focus our efforts as the business continues to evolve.
Based on that assessment, which is consistent with the prior year,
we focused our Group audit scope primarily on the audit work at
eight geographical locations. This included the full audit of 23 (2017:
18) subsidiaries across the UK, the US, Switzerland, Ireland, the
Cayman Islands and the Channel Islands. A further 10 (2017: 14)
subsidiaries across Hong Kong, the US, the Channel Islands and
Australia were subject to an audit of specified account balances
where the extent of our testing was based on our assessment of the
risks of material misstatement and of the materiality of Man Group’s
operations at those locations. All other subsidiaries were subject to
analytical review procedures.
These eight (2017: seven) geographical locations represent the
principal business units and account for 99% (2017: 98%) of Man
Group’s total assets, 99% (2017: 99%) of Man Group’s revenue
and 99% (2017: 98%) of the Group’s profit before tax on an
absolute basis. They were also selected to provide an appropriate
basis for undertaking audit work to address the risks of material
misstatement identified above. Our audit work at the 33 (2017: 32)
subsidiaries was executed at levels of materiality applicable to each
individual entity which were lower than Group materiality and ranged
from $0.2m to $10.2m (2017: $0.2m to $9.75m). There has been
no change in our approach to the testing at the Parent Company level.
MAN GROUP PLC ANNUAL REPORT 2018
MAN GROUP PLC ANNUAL REPORT 2018
97
97
STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSSHAREHOLDER INFORMATION
FINANCIAL
STATEMENTS
Independent auditor’s report to the members of Man Group plc continued
Other information
The directors are responsible for the other information. The other
information comprises the information included in the annual report,
other than the financial statements and our auditor’s report thereon.
Our opinion on the financial statements does not cover the other
information and, except to the extent otherwise explicitly stated in our
report, we do not express any form of assurance conclusion thereon.
In connection with our audit of the financial statements, our
responsibility is to read the other information and, in doing so,
consider whether the other information is materially inconsistent
with the financial statements or our knowledge obtained in the
audit or otherwise appears to be materially misstated.
If we identify such material inconsistencies or apparent material
misstatements, we are required to determine whether there is a
material misstatement in the financial statements or a material
misstatement of the other information. If, based on the work we
have performed, we conclude that there is a material misstatement
of this other information, we are required to report that fact.
In this context, matters that we are specifically required to report to
you as uncorrected material misstatements of the other information
include where we conclude that:
– Fair, balanced and understandable – the statement
given by the directors that they consider the annual report
and financial statements taken as a whole is fair, balanced
and understandable and provides the information necessary for
shareholders to assess the Group’s position and performance,
business model and strategy, is materially inconsistent with our
knowledge obtained in the audit; or
– Audit & Risk committee reporting – the section describing the
work of the Audit & Risk committee does not appropriately
address matters communicated by us to the Audit & Risk
committee; or
– Directors’ statement of compliance with the UK Corporate
Governance Code – the parts of the directors’ statement
required under the Listing Rules relating to the company’s
compliance with the UK Corporate Governance Code containing
provisions specified for review by the auditor in accordance with
Listing Rule 9.8.10R(2) do not properly disclose a departure from
a relevant provision of the UK Corporate Governance Code.
We have nothing to report in respect of these matters.
Responsibilities of directors
As explained more fully in the directors’ responsibilities statement,
the directors are responsible for the preparation of the financial
statements and for being satisfied that they give a true and fair view,
and for such internal control as the directors determine is necessary
to enable the preparation of financial statements that are free from
material misstatement, whether due to fraud or error.
In preparing the financial statements, the directors are responsible
for assessing the Group’s and the Parent Company’s ability to
continue as a going concern, disclosing as applicable, matters
related to going concern and using the going concern basis of
accounting unless the directors either intend to liquidate the Group
or the Parent Company or to cease operations, or have no realistic
alternative but to do so.
Auditor’s responsibilities for the audit of the
financial statements
Our objectives are to obtain reasonable assurance about
whether the financial statements as a whole are free from material
misstatement, whether due to fraud or error, and to issue an
auditor’s report that includes our opinion. Reasonable assurance
is a high level of assurance, but is not a guarantee that an audit
conducted in accordance with ISAs (UK) will always detect a
material misstatement when it exists. Misstatements can arise
from fraud or error and are considered material if, individually or
in the aggregate, they could reasonably be expected to influence
the economic decisions of users taken on the basis of these
financial statements.
Details of the extent to which the audit was considered capable
of detecting irregularities, including fraud are set out below.
A further description of our responsibilities for the audit of
the financial statements is located on the FRC’s website at:
www.frc.org.uk/auditorsresponsibilities. This description
forms part of our auditor’s report.
Extent to which the audit was considered capable
of detecting irregularities, including fraud
We identify and assess the risks of material misstatement of the
financial statements, whether due to fraud or error, and then design
and perform audit procedures responsive to those risks, including
obtaining audit evidence that is sufficient and appropriate to
provide a basis for our opinion.
Identifying and assessing potential risks related to
irregularities
In identifying and assessing risks of material misstatement in
respect of irregularities, including fraud and non-compliance
with laws and regulations, our procedures included the following:
– enquiring of management, internal audit, and the Audit & Risk
committee, including obtaining and reviewing supporting
documentation, concerning the Group’s policies and procedures
relating to:
–
identifying, evaluating and complying with laws and
regulations and whether they were aware of any instances
of non-compliance;
– detecting and responding to the risks of fraud and whether
they have knowledge of any actual, suspected or alleged
fraud; and
the internal controls established to mitigate risks related
to fraud or non-compliance with laws and regulations;
–
– discussing among the engagement team including significant
component audit teams and involving relevant internal
specialists, including tax, valuations, pensions and IT specialists
regarding how and where fraud might occur in the financial
statements and any potential indicators of fraud; and
– obtaining an understanding of the legal and regulatory
frameworks that the Group operates in, focusing on those
laws and regulations that have a direct effect on the financial
statements or that could have a fundamental effect on the
operations of the Group. The key laws and regulations we
considered in this context include the UK Companies Act,
Listing Rules and Disclosure Guidance and Transparency Rules,
pensions legislation, tax legislation and matters regulated by
the Financial Conduct Authority (the Group’s lead regulator).
In addition, compliance with terms of the Group’s regulatory
capital requirements were fundamental to the Group’s ability
to continue as a going concern.
98
98
MAN GROUP PLC ANNUAL REPORT 2018
MAN GROUP PLC ANNUAL REPORT 2018
FINANCIAL STATEMENTS
STRATEGIC
REPORT
CORPORATE
GOVERNANCE
FINANCIAL
STATEMENTS
SHAREHOLDER
INFORMATION
Audit response to risks identified
As a result of performing the procedures above, we identified
key audit matters regarding the accounting estimates made by
management for the valuation of the Numeric and Aalto contingent
consideration payable; and the accuracy of performance fees.
Judgments and decisions made by management regarding these
accounting estimates have the potential for bias which represents
a risk of material misstatement due to fraud.
In addition to the above, our procedures to respond to risks
identified included the following:
–
reviewing the financial statement disclosures and testing to
supporting documentation to assess compliance with relevant
laws and regulations discussed above;
– enquiring of management, the Audit & Risk Committee and
in-house legal counsel concerning actual and potential litigation
and claims;
–
– performing analytical procedures to identify any unusual or
unexpected relationships that may indicate risks of material
misstatement due to fraud;
reading minutes of meetings of those charged with governance,
reviewing internal audit reports and reviewing correspondence
with HMRC and the Financial Conduct Authority; and
in addressing the risk of fraud through management override of
controls, testing the appropriateness of journal entries and other
adjustments; assessing whether the judgements made in making
accounting estimates are indicative of a potential bias; and
evaluating the business rationale of any significant transactions
that are unusual or outside the normal course of business.
–
We communicated relevant identified laws and regulations and
potential fraud risks to all engagement team members including
internal specialist and significant component audit teams, and
remained alert to any indications of fraud or non-compliance
with laws and regulations throughout the audit.
Report on other legal and regulatory requirements
Opinions on other matters prescribed by the Companies
Act 2006
In our opinion the part of the directors’ remuneration report to
be audited has been properly prepared in accordance with the
Companies Act 2006.
In our opinion, based on the work undertaken in the course of
the audit:
–
–
the information given in the strategic report and the directors’
report for the financial year for which the financial statements
are prepared is consistent with the financial statements; and
the strategic report and the directors’ report have been prepared
in accordance with applicable legal requirements.
In the light of the knowledge and understanding of the Group
and of the Parent Company and their environment obtained
in the course of the audit, we have not identified any material
misstatements in the strategic report or the directors’ report.
Matters on which we are required to report by exception
Adequacy of explanations received and accounting records
Under the Companies Act 2006 we are required to report to you if,
in our opinion:
– we have not received all the information and explanations we
require for our audit; or
– adequate accounting records have not been kept by the Parent
Company, or returns adequate for our audit have not been
received from branches not visited by us; or
the Parent Company financial statements are not in agreement
with the accounting records and returns.
–
We have nothing to report in respect of these matters.
Directors’ remuneration
Under the Companies Act 2006 we are also required to report if
in our opinion certain disclosures of directors’ remuneration have
not been made or the part of the directors’ remuneration report
to be audited is not in agreement with the accounting records
and returns.
We have nothing to report in respect of these matters.
Other matters
Auditor tenure
Following the recommendation of the Audit & Risk committee,
we were appointed by the Board of Directors on 19 March 2014
to audit the financial statements for the year ending 31 December
2014 and subsequent financial periods. The period of total
uninterrupted engagement including previous renewals and
reappointments of the firm is five years, covering the years
ending 31 December 2014 to 31 December 2018.
Consistency of the audit report with the additional report
to the audit & risk committee
Our audit opinion is consistent with the additional report to the
audit & risk committee we are required to provide in accordance
with ISAs (UK).
Use of our report
This report is made solely to the company’s members, as a body,
in accordance with Chapter 3 of Part 16 of the Companies Act
2006. Our audit work has been undertaken so that we might state
to the company’s members those matters we are required to state
to them in an auditor’s report and for no other purpose. To the
fullest extent permitted by law, we do not accept or assume
responsibility to anyone other than the company and the company’s
members as a body, for our audit work, for this report, or for the
opinions we have formed.
David Barnes
(Senior statutory auditor)
For and on behalf of Deloitte LLP
Statutory Auditor
London, United Kingdom
1 March 2019
MAN GROUP PLC ANNUAL REPORT 2018
MAN GROUP PLC ANNUAL REPORT 2018
99
99
STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSSHAREHOLDER INFORMATION
FINANCIAL
STATEMENTS
Group income statement
$m
Revenue:
Gross management and other fees
Performance fees
Income or (losses)/gains on investments and other financial instruments
Gain on sale of investment in Nephila
Third-party share of losses/(gains) relating to interests in consolidated funds
Revaluation of contingent consideration
Reassessment of litigation provision
Distribution costs
Asset servicing
Compensation
Other costs
Amortisation of acquired intangible assets
Share of post-tax profit of associates
Finance expense
Finance income
Profit before tax
Tax expense
Statutory profit attributable to owners of the Parent Company
Earnings per share:
Basic (cents)
Diluted (cents)
Group statement of comprehensive income
$m
Statutory profit attributable to owners of the Parent Company
Other comprehensive income/(expense):
Remeasurements of post-employment benefit obligations
Current tax credited/(debited) on pension scheme
Deferred tax (debited)/credited on pension scheme
Items that will not be reclassified to profit or loss
Cash flow hedges:
Valuation (losses)/gains taken to equity
Transfer to Group income statement
Deferred tax credited/(debited) on cash flow hedge movements
Net investment hedge
Foreign currency translation
Recycling of FX revaluation to the Group income statement on liquidation of subsidiaries
Items that may be reclassified subsequently to profit or loss
Other comprehensive (expense)/income (net of tax)
Total comprehensive income attributable to owners of the Parent Company
Year ended
31 December
2018
Year ended
31 December
2017
Note
2
2
13.1
17
13.2
25
16
3
3
4
5
10
17
6
6
7
8
834
126
960
(10)
113
7
31
–
(51)
(51)
(437)
(175)
(83)
7
(40)
7
278
(5)
273
17.3
17.0
781
287
1,068
64
–
(14)
(15)
24
(56)
(37)
(478)
(173)
(84)
8
(38)
3
272
(17)
255
15.5
15.3
Year ended
31 December
2018
Year ended
31 December
2017
273
255
15
4
(6)
13
(16)
(5)
4
4
(11)
–
(24)
(11)
262
3
(5)
1
(1)
18
9
(5)
(4)
12
1
31
30
285
100
100
MAN GROUP PLC ANNUAL REPORT 2018
MAN GROUP PLC ANNUAL REPORT 2018
FINANCIAL STATEMENTS
STRATEGIC
REPORT
CORPORATE
GOVERNANCE
FINANCIAL
STATEMENTS
SHAREHOLDER
INFORMATION
Group balance sheet
$m
Assets
Cash and cash equivalents
Fee and other receivables
Investments in fund products and other investments
Pension asset
Investments in associates
Leasehold improvements and equipment
Goodwill and acquired intangibles
Other intangibles
Deferred tax assets
Non-current assets held for sale
Total assets
Liabilities
Trade and other payables
Provisions
Current tax liabilities
Third-party interest in consolidated funds
Borrowings
Deferred tax liabilities
Non-current liabilities held for sale
Total liabilities
Net assets
Equity
Capital and reserves attributable to owners of the Parent Company
At
31 December
2018
At
31 December
2017
Note
12
14
13
21
17
18
10
11
7
13
15
16
7
13
12
7
13
370
307
770
24
–
46
938
26
93
2,574
39
2,613
701
26
10
100
150
33
1,020
–
1,020
379
491
729
32
29
44
1,024
23
81
2,832
145
2,977
843
34
21
99
150
48
1,195
66
1,261
1,593
1,716
1,593
1,716
The financial statements were approved by the Board of Directors and authorised for issue on 1 March 2019 and signed on its behalf by:
Luke Ellis
Chief Executive Officer
Mark Jones
Chief Financial Officer
MAN GROUP PLC ANNUAL REPORT 2018
MAN GROUP PLC ANNUAL REPORT 2018
101
101
STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSSHAREHOLDER INFORMATION
FINANCIAL
STATEMENTS
Group cash flow statement
$m
Cash flows from operating activities
Statutory profit
Adjustments for non-cash items:
Income tax expense
Net finance expense
Share of post-tax profit of associates
Gain on sale of investment in Nephila
Revaluation of contingent consideration
Depreciation of leasehold improvements and equipment
Amortisation of acquired intangible assets
Amortisation of other intangibles
Share-based payment charge
Fund product based payment charge
Other non-cash movements
Return of Reservoir Trust plan assets on wind-up1
Changes in working capital:
Decrease/(increase) in receivables
Increase in other financial assets2
(Decrease)/increase in payables
Cash generated from operations
Interest paid
Income tax paid
Cash flows from operating activities
Cash flows from investing activities
Purchase of leasehold improvements and equipment
Purchase of other intangibles
Payment of contingent consideration in relation to acquisitions
Acquisition of business and other acquired intangibles3
Interest received
Proceeds from sale of associates
Dividends received from associates
Cash flows from investing activities
Cash flows from financing activities
Proceeds from issue of ordinary shares
Purchase of own shares by the Employee Trust and Partnerships
Share repurchase programme (including costs)
Dividends paid to Company shareholders
Cash flows from financing activities
Net decrease in cash
Cash at the beginning of the year
Effect of foreign exchange movements
Cash at year end4
Year ended
31 December
2018
Year ended
31 December
2017
Note
273
5
33
(7)
(113)
(31)
14
83
10
25
41
5
19
357
354
(203)
(140)
368
(11)
(35)
322
(16)
(15)
(22)
(3)
5
140
8
97
6
(32)
(211)
(189)
(426)
(7)
379
(2)
370
255
17
35
(8)
–
15
12
84
6
19
40
(5)
–
470
(241)
–
41
270
(10)
(29)
231
(12)
(12)
(11)
2
3
2
8
(20)
7
(19)
(92)
(158)
(262)
(51)
426
4
379
12
Note:
1 Refer to details of the UK defined benefit scheme in Note 21 for details.
2
3 The 2017 cash received relates to the cash acquired as part of the Aalto acquisition in 2017.
4
Includes $26 million (2017: $23 million) of restricted cash relating to consolidated fund entities (Note 13.2).
Includes $3 million of restricted net cash inflows (2017: $14 million restricted net cash outflows) relating to consolidated fund entities (Note 13.2).
102
102
MAN GROUP PLC ANNUAL REPORT 2018
MAN GROUP PLC ANNUAL REPORT 2018
FINANCIAL STATEMENTS
STRATEGIC
REPORT
CORPORATE
GOVERNANCE
FINANCIAL
STATEMENTS
SHAREHOLDER
INFORMATION
Group statement of changes in equity
$m
Share capital and capital reserves
Revaluation reserves and retained earnings
Capital and reserves attributable to owners of the Parent Company
At
31 December
2018
At
31 December
2017
1,226
367
1,593
1,220
496
1,716
Share capital and capital reserves
$m
At 1 January 2018
Purchase and cancellation of own shares
Issue of ordinary shares: Partnership Plans and Sharesave
At 31 December 2018
Revaluation reserves and retained earnings
Share
capital
Share
premium
account
Capital
redemption
reserve
Merger
reserve
Reorganisation
reserve
56
(1)
–
55
26
–
6
32
7
1
–
8
499
–
–
499
632
–
–
632
Total
1,220
–
6
1,226
$m
At 1 January 2018
Adjustment for adoption of IFRS 9 (Note 1)
At 1 January 2018
Statutory profit
Other comprehensive expense:
Revaluation of defined benefit pension scheme
Current tax credited on pension scheme
Deferred tax debited on pension scheme
Fair value losses on cash flow hedges1
Transfer cash flow hedge to Group income
statement
Deferred tax credited on cash flow hedge
movements
Currency translation difference
Share-based payments charge
Deferred tax debited on share-based payments
Purchase of own shares by the Employee Trust
Disposal of own shares by the Employee Trust
Share repurchases
Transfer to Treasury shares
Settlement of Aalto year one contingent
consideration2
Dividends
At 31 December 2018
Profit
and loss
account
Own shares
held by
Employee
Trust
Treasury
Shares
Cumulative
translation
adjustment
Cash flow
hedge
reserve1
Available-for-
sale reserve
476
2
478
273
15
4
(6)
–
–
–
–
19
(1)
–
(14)
(201)
121
–
(189)
499
(50)
–
(50)
–
–
–
–
–
–
–
–
–
–
(26)
14
–
–
–
–
(62)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(121)
7
–
(114)
61
–
61
–
–
–
–
–
–
–
(7)
–
–
–
–
–
–
–
–
54
7
–
7
–
–
–
–
(16)
(5)
4
–
–
–
–
–
–
–
–
–
(10)
2
(2)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
Total
496
–
496
273
15
4
(6)
(16)
(5)
4
(7)
19
(1)
(26)
–
(201)
–
7
(189)
367
Note:
1 Details of the Group’s hedging arrangements are provided in Note 12.
2 A portion of the Aalto year one contingent consideration payment was settled in Treasury Shares (Note 25).
The proposed final dividend would reduce shareholders’ equity by $83 million (2017: $94 million) subsequent to the balance sheet date
(Note 9). Further details of the Group’s share capital and reserves are included in Note 20.
MAN GROUP PLC ANNUAL REPORT 2018
MAN GROUP PLC ANNUAL REPORT 2018
103
103
STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSSHAREHOLDER INFORMATION
FINANCIAL
STATEMENTS
Group statement of changes in equity continued
Share capital and capital reserves
$m
At 1 January 2017
Purchase and cancellation of own shares
Issue of ordinary shares: Aalto acquisition
Issue of ordinary shares: Partnership Plans and Sharesave
At 31 December 2017
Revaluation reserves and retained earnings
$m
At 1 January 2017 (as previously presented)
Prior period adjustment1
At 1 January 2017 (as restated)1
Statutory profit
Other comprehensive income:
Revaluation of defined benefit pension scheme
Current tax debited on pension scheme
Deferred tax credited on pension scheme
Fair value gains on cash flow hedges2
Transfer cash flow hedge to Group income statement
Deferred tax credited on cash flow hedge movements
Currency translation difference (as restated)1
Share-based payments charge
Deferred tax credited on share-based payments
Purchase of own shares by the Employee Trust
Disposal of own shares by the Employee Trust
Share repurchases
Dividends
At 31 December 2017 (as restated)1
Share
capital
Share
premium
account
Capital
redemption
reserve
Merger
reserve
Reorganisation
reserve
58
(2)
–
–
56
19
–
–
7
26
5
2
–
–
7
491
–
8
–
499
632
–
–
–
632
Profit
and loss
account
Own shares
held by
Employee
Trust
Cumulative
translation
adjustment
Cash flow
hedge
reserve
Available-
for-sale
reserve
564
(83)
481
255
3
(5)
1
–
–
–
–
13
2
–
(15)
(101)
(158)
476
(43)
(8)
(51)
–
–
–
–
–
–
–
–
–
–
(14)
15
–
–
(50)
(39)
91
52
–
–
–
–
–
–
–
9
–
–
–
–
–
–
61
(15)
–
(15)
–
–
–
–
18
9
(5)
–
–
–
–
–
–
–
7
2
–
2
–
–
–
–
–
–
–
–
–
–
–
–
–
–
2
Total
1,205
–
8
7
1,220
Total
469
–
469
255
3
(5)
1
18
9
(5)
9
13
2
(14)
–
(101)
(158)
496
Note:
1 As a result of reassessing our application of the guidance for IAS 21 ‘The Effects of Changes in Foreign Exchange Rates’ with regards to the functional currency of the Group’s
Employee Trust (Note 19.1), we consider that the Employee Trust functional currency has been USD since inception. Given the Employee Trust’s functional currency was previously
assessed as Sterling, and thus retranslation of the Balance Sheet into the Group’s presentation currency (USD) was through the cumulative translation adjustment reserve, we have
restated this retrospectively from 1 January 2017. As a result there is a reclassification restatement within brought forward reserves at 1 January 2017, and also a $4 million currency
translation difference reclassification between the Own shares held by Employee Trust and Cumulative translation adjustment reserves in 2017, compared to that previously reported.
This restatement has no impact on the Group’s income statement, earnings per share, net assets, total capital and reserves attributable to owners of the Parent Company or
distributable reserves. The Group has not presented an additional restatement balance sheet for 1 January 2017 as there is no change to that previously reported.
2 Details of the Group’s hedging arrangements are provided in Note 12.
104
104
MAN GROUP PLC ANNUAL REPORT 2018
MAN GROUP PLC ANNUAL REPORT 2018
FINANCIAL STATEMENTS
STRATEGIC
REPORT
CORPORATE
GOVERNANCE
FINANCIAL
STATEMENTS
SHAREHOLDER
INFORMATION
Notes to the Group financial statements
1. Basis of preparation
Accounting policies
The audited consolidated financial information has been prepared in accordance with International Financial Reporting Standards (IFRSs)
and interpretations (IFRICs) as adopted by the EU and with those parts of the Companies Act 2006 applicable to companies reporting
under IFRS. Man’s principal accounting policies have been consistently applied across the Group in the preparation of the financial
statements. Accounting policies are included in the relevant sections, and significant policies are outlined on page 106. The impact, if any,
of new accounting standards and amendments applicable to the year ended 31 December 2018 and accounting standards that are not
yet effective are detailed on pages 106 to 107.
Consolidated group and presentation currency
The consolidated group is Man Group plc (the Company) and its subsidiaries (together the Group or Man). The stand-alone Parent
Company financial statements of Man Group plc have been included as separate financial statements on pages 138 to 140. Man’s
presentation currency is United States Dollars (USD).
The consolidated financial information contained within these financial statements incorporates the results, cash flows and financial position
of the Company and its subsidiaries (Note 29) for the year to 31 December 2018. Subsidiaries are entities (including structured entities)
controlled by Man and are consolidated from the date on which control is transferred to Man until the date that control ceases. Control
exists when Man has the power to direct the relevant activities, exposure to significant variable returns and the ability to utilise power to
affect those returns. All intercompany transactions, balances, income and expenses between Group entities are eliminated on consolidation.
Business combinations (acquisitions) are accounted for using the acquisition method. The acquisition date is the date on which Man
effectively obtains control of the acquiree. The cost of an acquisition is measured as the fair value at the acquisition date of assets
transferred, liabilities incurred and equity instruments issued by the Group. The fair value of an acquisition is calculated at the acquisition
date by recognising the acquiree’s identifiable assets and liabilities at their fair values at that date, and costs relating to acquisitions are
recognised in the Group income statement as incurred. Any contingent consideration will be recognised at fair value at the acquisition
date, with any subsequent changes to the fair value of the contingent consideration recognised in the Group income statement.
Man’s relationship with independent fund entities
Man acts as the investment manager/advisor to fund entities. Man assesses such relationships on an ongoing basis to determine whether
each fund entity is controlled by the Group and therefore consolidated into the Group’s results. Having considered all significant aspects of
Man’s relationships with fund entities, the directors are of the opinion that, although Man manages the assets of certain fund entities, where
Man does not hold an investment in the fund entity the characteristics of control are not met, and that for most fund entities: the existence
of independent boards of directors at the fund entities; rights which allow for the removal of the investment manager/advisor; the influence
of investors; limited exposure to variable returns; and the arm’s length nature of Man’s contracts with the fund entities, indicate that Man
does not control the fund entities and their associated assets, liabilities and results should not be consolidated into the Group financial
statements. Assessment of the control characteristics for all relationships with fund entities led to the consolidation of 13 funds for the year
ended 31 December 2018 (2017: nine), as detailed in Note 13. An understanding of the aggregate funds under management (FUM) and the
fees earned from fund entities is relevant to an understanding of Man’s results and earnings sustainability, and this information is provided
in the Chief Financial Officer’s review on pages 20 to 23.
Judgemental areas and accounting estimates
The most significant area of judgement is whether the Group controls certain funds through its investments in fund products and is required
to consolidate them (Note 13.2). Our key judgements on this are outlined above within ‘Man’s relationship with independent fund entities’.
Furthermore, the key assumptions concerning the future, and other key sources of estimation uncertainty at the reporting date that may
have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year, include
the determination of fair values for contingent consideration in relation to the Numeric and Aalto acquisitions (Note 25), the valuation of
goodwill and acquired intangibles for CGUs with lower levels of headroom (Note 10) and recognition of deferred tax assets in relation to
US tax assets (Note 7). The key assumptions and range of possible outcomes are discussed in the relevant notes.
These judgements and estimates have been an area of focus for the Group Board, and in particular the Audit and Risk Committee, during
the year. The report of the Chairman of the Audit and Risk Committee discusses the involvement of the Committee in this evaluation on
page 60.
Going concern
Man’s business activity is discussed on pages 1 to 43, together with the significant risk factors (pages 31 to 33). Man’s liquidity and capital
positions are set out in Note 12 and 20 respectively. The directors monitor Man’s capital and liquidity positions and forecasts throughout the
year, and in addition they have approved a budget, medium-term financial plan, and a capital and liquidity plan, which cover the foreseeable
future and include rigorous analysis of stressed capital and liquidity scenarios. Man’s business typically has a good conversion of profits into
cash flows which helps protect the business in stressed scenarios. The directors have concluded that there is a reasonable expectation that
Man has adequate resources to continue in operational existence for the foreseeable future. Accordingly, the Group and Parent Company
financial statements have been prepared on a going concern basis using the historical cost convention, except for the measurement at fair
value of certain financial instruments that are held at fair value through profit or loss. The directors have also made a longer-term viability
statement, as set out on page 28.
105
MAN GROUP PLC ANNUAL REPORT 2018
MAN GROUP PLC ANNUAL REPORT 2018
105
STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSSHAREHOLDER INFORMATION
FINANCIAL
STATEMENTS
Notes to the Group financial statements continued
1. Basis of preparation continued
Financial reporting controls
Details of the Group’s systems of internal control are included on page 29.
Significant accounting policies schedule
Policy
Revenue and rebates
Distribution costs and asset servicing
Taxation
Goodwill and acquired intangibles
Investments in fund products
Deferred compensation arrangements
Pension
Note
Page
2
3
7
10
13
19
21
107
108
110-111
113-115
118-120
123-125
126-130
Impact of new accounting standards
A number of new or amendments to existing standards and interpretations have been issued by the International Accounting Standards
Board (IASB).
The following accounting standards relevant to the Group’s operations were effective for the first time in the year to 31 December 2018:
–
IFRS 9 – Financial Instruments: IFRS 9 is effective for annual periods beginning on or after 1 January 2018. IFRS 9 replaces the
classification and measurement models for financial instruments in IAS 39 (Financial Instruments: recognition and measurement)
with three classification categories: amortised cost, fair value through profit or loss and fair value through other comprehensive income.
Under IFRS 9, the Group’s business model and the contractual cash flows arising from its investments in financial instruments determine
the appropriate classification. The Group has assessed its balance sheet assets in accordance with the new classification requirements.
The Group has elected not to restate comparatives on initial application of IFRS 9, and accordingly the $3 million of investments held as
available-for-sale (AFS) at 31 December 2017 have been classified on transition at 1 January 2018 as fair value through profit or loss as
the AFS category no longer exists (Note 13). The accumulated gain in the AFS reserve of $2 million at 31 December 2017 has also been
reclassified to retained earnings on transition, and any future revaluations will be recognised directly in the income statement (previously
recorded in the AFS reserve in equity). There have been no other changes in the classification and measurement of any of the Group’s
financial assets or liabilities.
In addition, IFRS 9 introduces an expected loss model for the assessment of impairment of financial assets. The incurred loss model
under IAS 39 required the Group to recognise impairment losses when there was objective evidence that an asset was impaired.
Under the expected loss model, impairment losses are recorded if there is an expectation of credit losses, even in the absence of a
default event. This model is not applicable for investments held at fair value through profit or loss. Therefore the assets on the Group’s
balance sheet to which the expected loss model applies are loans to funds (Note 13.3) and fee receivables (Note 14), which do not
have a history of credit risk or expected future recoverability issues. We have assessed the lifetime expected credit losses for impairment
of these assets, which are short-term in nature, by applying the Group’s internal risk modelling weightings for both likelihood of loss
and exposure to loss. Under the expected loss model there is no change to the carrying values of the Group’s assets.
We have elected to apply the new hedging requirements under IFRS 9 prospectively from 1 January 2018. These new requirements
are designed to provide some increased flexibility in relation to hedge effectiveness in order to better align hedge accounting with a
company’s risk management policies. IFRS 9 also requires increased disclosures in relation to the Group’s risk management strategy
and the impact of hedge accounting on the financial statements, as provided in Note 12. The Group’s IAS 39 hedge relationships in
place at 31 December 2017 qualify as continuing hedging relationships under IFRS 9, and there is no material change to existing hedge
effectiveness assessments as a result (Note 12). No additional hedge relationships have been designated due to the adoption of IFRS 9.
The adoption of IFRS 9 from 1 January 2018 does not have a material impact on the Group’s reported results.
–
IFRS 15 – Revenue from Contracts with Customers: IFRS 15 is effective for annual periods beginning on or after 1 January 2018 and
replaces IAS 18 Revenue and IAS 11 Construction Contracts and related interpretations. IFRS 15 establishes a single, principles-based
revenue recognition model to be applied to all contracts with customers. The core principle of IFRS 15 is that an entity should recognise
revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the
entity expects to be entitled to in exchange for those goods or services. Specifically, IFRS 15 introduces a five-step approach to
revenue recognition: (1) identify the contract with the customer; (2) identify the performance obligations in the contract; (3) determine
the transaction price; (4) allocate the transaction price to the performance obligations in the contract; and (5) recognise revenue when
or as the entity satisfies a performance obligation. IFRS 15 is more prescriptive in terms of its recognition criteria, with certain specific
requirements in respect of variable fee income such that it is only recognised where the amount of revenue would not be subject to
significant future reversals. Enhanced disclosure requirements are also introduced, as provided in Note 2.
The Group has considered these changes in light of the terms of our existing investment management agreements, and assessed
the timing of management and performance fee recognition. The Group has not identified any material changes to current revenue
recognition principles, and therefore no adjustments have been made on transition.
The adoption of IFRS 15 from 1 January 2018 does not have a material impact on the Group’s reported results.
106
106
MAN GROUP PLC ANNUAL REPORT 2018
MAN GROUP PLC ANNUAL REPORT 2018
FINANCIAL STATEMENTS
STRATEGIC
REPORT
CORPORATE
GOVERNANCE
FINANCIAL
STATEMENTS
SHAREHOLDER
INFORMATION
1. Basis of preparation continued
– The Annual Improvements to IFRS Standards 2014-2016 Cycle and Amendments to IFRS 2: Classification and Measurement of
Share-based Payment Transactions were adopted by Man in the current year, which have not had a significant impact.
The following standard is relevant to the Group’s operations and has been issued by the IASB but is not yet mandatory:
–
IFRS 16 – Leases: IFRS 16 is effective for annual periods beginning on or after 1 January 2019 and replaces IAS 17 Leases and related
interpretations. This introduces a comprehensive model for the identification of lease arrangements and accounting treatment for both
lessors and lessees, which distinguishes leases and service contracts on the basis of whether an identified asset is controlled by a
customer. There is substantially no change to the accounting requirements for lessors. IFRS 16 requires operating leases, where the
Group is the lessee, to be included on the Group’s balance sheet, recognising a right-of-use (ROU) asset and a related lease liability
representing the present value obligation to make lease payments. Certain optional exemptions are available under IFRS 16 for short-
term (less than 12 months) and low-value leases. The ROU asset will be assessed for impairment annually (incorporating any onerous
lease assessments) and depreciated on a straight-line basis, adjusted for any remeasurements of the lease liability. The lease liability
will subsequently be adjusted for lease payments and interest, as well as the impact of any lease modifications. IFRS 16 also requires
extensive disclosures detailing the impact of leases on the Group’s financial position and results.
The adoption of IFRS 16 will result in a significant gross-up of the Group’s reported assets and liabilities on the balance sheet, primarily due to our
property lease at Riverbank House and in particular as our sub-lease arrangements (Note 27.3) are not eligible for offset against the ROU asset
and related lease liability. The rental expense which is currently recognised within occupancy costs in the Group’s income statement (Note 5) will
no longer be incurred and instead depreciation expense (of the ROU asset) and interest expense (unwind of the discounted lease liability) will be
recognised. This will also result in a different total annual expense profile under the new standard (with the expense being front-loaded in the
earlier years of the lease term as the discount unwind on the lease liability reduces over time). The Group has considered the available transition
options, and has decided to apply the modified retrospective approach where the ROU asset is measured as if IFRS 16 had been applied from
lease commencement, applying a discount rate assessed at the date of transition, and currently estimates that the impact will be a gross-up of
around $250 million for ROU lease assets and associated deferred tax balances and around $315 million (around £250 million) in relation to lease
liabilities, with around $65 million therefore deducted from brought-forward reserves.
The majority of the Group’s lease liabilities relate to Sterling denominated long-term lease arrangements, which creates an ongoing
exposure to fluctuations in the USD to Sterling exchange rate for amounts which are not payable for many years in the future. The
Group has elected not to hedge these long-term foreign exchange accounting exposures and therefore there may be large unrealised
FX gains or losses in future years as a result of the revaluation of these liabilities.
The Group also expects to elect to apply the practical expedient on transition to reclassify onerous lease balances at 31 December 2018
of around $20 million (Note 16) against the ROU asset as an alternative to performing an impairment review, and to exclude short-term
leases and leases with a remaining term of less than one year at transition date. Furthermore, we expect that the derecognition of
deferred rent and lease incentive balances at 31 December 2018 under the current IAS 17 requirements will partially offset the reduction
in brought-forward reserves by around $40 million. The total brought forward reserves impact on transition date at 1 January 2019 is
therefore expected to be around $25 million. This reduction in reserves will be offset in future years by a lower Group income statement
charge over the remaining life of the leases (the total charge over the life of each lease is the same as under the current IAS 17
requirements), although in the five years following initial application of IFRS16 we expect there to be an increased Group income
statement charge of up to $5 million each year which will subsequently shift to a decrease in the comparable charge over time.
No other standards or interpretations issued and not yet effective are expected to have an impact on the Group’s financial statements.
2. Revenue
Fee income is Man’s primary source of revenue, which is derived from the investment management agreements that are in place with the fund
entities. Fees are generally based on an agreed percentage of net asset value (NAV) or FUM and are typically charged in arrears and receivable
within one month. Management fees net of rebates, which include all non-performance related fees, are recognised in the year in which the
services are provided and do not include any other performance obligations.
Performance fees net of rebates relate to the performance of the funds managed during the year and are recognised when the fee can be
reliably estimated and has crystallised. This is generally at the end of the performance period or upon early redemption by a fund investor. Until
the performance period ends, market movements could significantly move the NAV of the fund products. For AHL, GLG, FRM and GPM strategies,
Man will typically only earn performance fee income on any positive investment returns in excess of the high water mark, meaning we will not be
able to earn performance fee income with respect to positive investment performance in any year following negative performance until that loss is
recouped, at which point a fund investor’s investment surpasses the high water mark. Numeric performance fees are earned only when performance
is in excess of a predetermined strategy benchmark (positive alpha), with performance fees being generated for each strategy either based on
achieving positive alpha (which resets at a predetermined interval, i.e. every one to three years) or, in the case of alternatives strategies, exceeding
high water mark. Once crystallised, performance fees typically cannot be clawed-back. There are no other performance obligations or services
provided which suggest these have been earned either before or after crystallisation date.
Rebates relate to repayments of management and performance fees charged, typically to institutional investors, and are presented net
within gross management and other fees and performance fees in the Group income statement.
At 31 December 2018, Man has contractual performance obligations that are not yet satisfied due to the notice periods required to
terminate investment management agreements. Fee income for the performance of these obligations after the year end can fluctuate due
to factors outside of the Group’s control, and therefore management cannot estimate the future fees allocated to these. Fees relating to
these investment management agreements will be recognised as the performance obligations are satisfied.
Analysis of FUM, margins and performance is provided in the Chief Financial Officer’s review on pages 20 to 22.
MAN GROUP PLC ANNUAL REPORT 2018
MAN GROUP PLC ANNUAL REPORT 2018
107
107
STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSSHAREHOLDER INFORMATION
FINANCIAL
STATEMENTS
Notes to the Group financial statements continued
3. Distribution costs and asset servicing
Distribution costs are paid to external intermediaries for marketing and investor servicing, largely in relation to retail investors. Distribution
costs are variable with FUM and the associated management fee revenue. Distribution costs are expensed over the period in which the
service is provided. Distribution costs have decreased despite growth in average FUM largely as a result of the continued mix shift towards
institutional assets.
Asset servicing includes custodial, valuation, fund accounting, registrar, research and administration functions performed by third-parties
under contract to Man, on behalf of the funds, and is recognised in the period in which the service is provided. The costs of these services
vary based on transaction volumes, the number of funds, and fund NAVs. The increase in asset servicing costs compared to 2017 is due
to the inclusion of MiFID II related research and administration costs in 2018.
4. Compensation
$m
Salaries
Variable cash compensation
Share-based payment charge
Fund product based payment charge
Social security costs
Pension costs
Restructuring costs (adjusting item per page 143)
Total compensation costs
Year ended
31 December
2018
Year ended
31 December
2017
153
175
25
41
32
10
1
437
148
220
19
40
38
9
4
478
Compensation is the Group’s largest cost and an important component of Man’s ability to retain and attract talent. In the short term, the
variable component of compensation adjusts with revenues and profitability.
Total compensation costs, excluding restructuring, have decreased by 8% compared to 2017, largely due to the decrease in performance
fee revenues year on year, as reflected in decreased variable cash compensation and associated social security costs.
The compensation ratio, as outlined on page 145, has increased to 48% from 44% in 2017 primarily as a result of the lower level of
performance fee revenue.
Salaries have increased from prior year largely as a result of the 5% increase in average headcount due to investment in our investment
management and client services capabilities, partially offset by a more favourable hedged Sterling to USD rate in 2018 (1.29) compared
to the hedged rate in 2017 (1.36), which had a $6 million impact compared to prior year.
Salaries, variable cash compensation and social security costs are charged to the Group income statement in the period in which the
service is provided, and include partner drawings. The accounting for share-based and fund product based compensation arrangements
is detailed in Note 19.
Pension costs relate to Man’s defined contribution and defined benefit plans (Note 21).
The $1 million of restructuring costs in 2018 relate to our Swiss pension obligation (Note 21) as a result of the restructuring plan
implemented in late 2016, for which the Group also incurred $4 million of termination expenses in 2017. Compensation costs incurred
as part of restructuring are accounted for in full at the time the obligation arises, and include payments in lieu of notice, enhanced
termination costs, and accelerated share-based and fund product based charges.
Average headcount
The table below provides average headcount by function, including directors, employees, partners and contractors:
Investment management
Sales and marketing
Support functions
Average headcount
Year ended
31 December
2018
Year ended
31 December
2017
490
186
700
1,376
450
183
680
1,313
108
108
MAN GROUP PLC ANNUAL REPORT 2018
MAN GROUP PLC ANNUAL REPORT 2018
FINANCIAL STATEMENTS
STRATEGIC
REPORT
CORPORATE
GOVERNANCE
FINANCIAL
STATEMENTS
SHAREHOLDER
INFORMATION
5. Other costs
$m
Occupancy
Technology and communications
Temporary staff, recruitment, consultancy and managed services
Legal fees and other professional fees
Benefits
Travel and entertainment
Audit, accountancy, actuarial and tax fees
Insurance
Marketing and sponsorship
Other cash costs, including irrecoverable VAT
Restructuring (adjusting item per page 143)
Total other costs before depreciation and amortisation
Depreciation and amortisation
Total other costs
Year ended
31 December
2018
Year ended
31 December
2017
27
26
24
13
14
13
8
4
6
11
5
151
24
175
33
28
20
17
13
11
7
4
5
10
7
155
18
173
Other costs, before depreciation and amortisation, have decreased to $151 million from $155 million in 2017, which largely reflects lower
occupancy costs following the centralisation of our London resources into one location and a $4 million impact due to the more favourable
hedged Sterling to USD rate in 2018, partially offset by an increase in temporary staff driven by the MiFID II implementation.
Other restructuring costs of $5 million in 2018 largely relate to $3 million of professional fees incurred in relation to the Group’s proposed
2019 corporate reorganisation, as well as $2 million in respect of reassessment of our onerous property lease provision. Other restructuring
costs of $7 million in 2017 largely related to onerous property leases arising as a result of finalisation of the 2016 restructuring plan following
the centralisation of our London offices.
Depreciation and amortisation have increased by $6 million in 2018 compared to 2017 largely as a result of higher levels of capital
expenditure on software development projects across our operating platforms in both 2017 and 2018.
Auditors’ remuneration, including advisory and professional services, is disclosed in the Corporate Governance section on page 62.
6. Finance expense and finance income
$m
Finance expense:
Interest payable on borrowings (Note 12)
Revolving credit facility costs and other (Note 12)
Unwind of contingent consideration discount (adjusting item per page 143)
Total finance expense
Finance income:
Interest on cash deposits and US Treasury bills
Total finance income
Year ended
31 December
2018
Year ended
31 December
2017
(9)
(3)
(28)
(40)
7
7
(9)
(3)
(26)
(38)
3
3
The increase in finance income is due to higher interest rates as well as a slight increase in the average cash balance in 2018 compared to 2017.
MAN GROUP PLC ANNUAL REPORT 2018
MAN GROUP PLC ANNUAL REPORT 2018
109
109
STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSSHAREHOLDER INFORMATION
FINANCIAL
STATEMENTS
Notes to the Group financial statements continued
7. Taxation
$m
Analysis of tax expense/(credit):
Current tax:
UK corporation tax on profits/(losses)
Foreign tax
Adjustments to tax charge in respect of previous years
Total current tax
Deferred tax:
Origination and reversal of temporary differences
Recognition of US deferred tax asset (adjusting item per page 143)
Total deferred tax
Total tax expense/(credit)
Year ended
31 December
2018
Year ended
31 December
2017
29
5
1
35
(10)
(20)
(30)
5
39
5
(6)
38
(4)
(17)
(21)
17
Man is a global business and therefore operates across many different tax jurisdictions. Income and expenses are allocated to these
different jurisdictions based on transfer pricing methodologies set in accordance with the laws of the jurisdictions in which Man operates and
international guidelines as laid out by the OECD. The effective tax rate results from the combination of taxes paid on earnings attributable to
the tax jurisdictions in which they arise. The majority of the Group’s income in the period was earned in the UK, Switzerland and the US.
The Group’s US tax rate is effectively nil as a result of accumulated US tax assets, as detailed on page 111.
The current effective tax rate of 2% (2017: 6%) differs from the applicable underlying statutory tax rates principally as a result of the gain on
disposal of the Group’s equity investment in Nephila (Note 17) of $113 million, which is not subject to tax under UK tax legislation, and the
incremental recognition of the US deferred tax assets of $20 million (2017: $17 million). The effective tax rate is otherwise consistent with
this earnings profile.
Accounting for tax involves a level of estimation uncertainty given the application of tax law requires a degree of judgement, which tax authorities
may dispute. Tax liabilities are recognised based on the best estimates of probable outcomes, with regard to external advice where appropriate.
The principal factors which may influence our future tax rate are changes in tax regulation in the territories in which we operate, the mix of income
and expenses earned and incurred by jurisdiction and the timing of the recognition of available deferred tax assets.
The current tax liabilities of $10 million (2017: $21 million) on the Group balance sheet, comprise a gross current tax liability of $15 million
(2017: $24 million) net of a current tax asset of $5 million (2017: $3 million). The tax on Man’s profit before tax is lower than the amount that
would arise using the theoretical effective tax rate applicable to the profits/(losses) of the consolidated companies as follows:
$m
Profit before tax
Theoretical tax expense at UK rate: 19% (2017: 19.25%)
Effect of:
Overseas tax rates compared to UK
Adjustments to tax charge in respect of previous periods
Disposal of investment in Nephila (Note 17)
Recognition of US deferred tax asset
Other
Tax expense
Year ended
31 December
2018
278
53
(8)
1
(22)
(20)
1
5
Year ended
31 December
2017
272
52
(10)
(9)
–
(17)
1
17
The effect of overseas tax rates compared to the UK includes the impact of the 0% effective tax rate of our US business.
In 2017, adjustments in respect of previous periods primarily related to a $7 million credit mainly due to reassessment of tax exposures globally.
110
110
MAN GROUP PLC ANNUAL REPORT 2018
MAN GROUP PLC ANNUAL REPORT 2018
FINANCIAL STATEMENTS
STRATEGIC
REPORT
CORPORATE
GOVERNANCE
FINANCIAL
STATEMENTS
SHAREHOLDER
INFORMATION
7. Taxation continued
Movements in deferred tax are as follows:
$m
Deferred tax liability
At 1 January
Acquisition of Aalto balance sheet
Credit to the Group income statement
Deferred tax liability at 31 December
Deferred tax asset
At 1 January
Credit to the Group income statement
Charge to other comprehensive income and equity
Deferred tax asset at 31 December
Year ended
31 December
2018
Year ended
31 December
2017
(48)
–
15
(33)
81
15
(3)
93
(47)
(2)
1
(48)
63
20
(2)
81
The deferred tax liability of $33 million (2017: $48 million) largely relates to deferred tax arising on acquired intangible assets.
The deferred tax asset comprises:
$m
US tax assets
Defined benefit pension schemes
Employee share schemes
Tax allowances over depreciation
Other
Deferred tax asset
31 December
2018
31 December
2017
62
6
11
8
6
93
42
12
14
9
4
81
The deferred tax asset income statement credit of $15 million (2017: $20 million) predominantly relates to the recognition of US deferred
tax assets of $20 million (2017: $17 million). The debit to other comprehensive income and equity of $3 million (2017: $2 million) relates
to movements in the pension accrual, unrealised cash flow hedge balances and employee share scheme balances.
The Group has accumulated deferred tax assets in the US of $108 million (2017: $124 million). These deferred tax assets principally
comprise accumulated operating losses from existing operations of $53 million (2017: $61 million) and future amortisation of goodwill
and intangibles assets generated from acquisitions of $45 million (2017: $48 million) that will be available to offset future taxable profits
in the US. From the maximum available deferred tax assets of $108 million (2017: $124 million), a deferred tax asset of $62 million has
been recognised on the Group balance sheet (2017: $42 million), representing amounts which can be offset against probable future
taxable profits. Probable future taxable profits are considered to be forecast profits for the next three years only, consistent with the
Group’s business planning horizon. The increase of $20 million from that recognised at 31 December 2017 represents projected year on
year growth in our US business. As a result of the recognised US deferred tax assets and the remaining unrecognised available US deferred
tax assets of $46 million (2017: $82 million), Man does not expect to pay federal tax on any profits it may earn in the US for several years.
The gross amount of losses for which a deferred tax asset has not been recognised is nil (2017: $48 million). For US tax purposes, the
losses will expire over a period of 13 to 18 years.
MAN GROUP PLC ANNUAL REPORT 2018
MAN GROUP PLC ANNUAL REPORT 2018
111
111
STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSSHAREHOLDER INFORMATION
FINANCIAL
STATEMENTS
Notes to the Group financial statements continued
8. Earnings per ordinary share (EPS)
The calculation of basic EPS is based on post-tax profit of $273 million (2017: $255 million), and ordinary shares of 1,578,826,775
(2017: 1,640,137,392), being the weighted average number of ordinary shares in issue during the period after excluding the shares owned
by the Man Employee Trust and Treasury Shares. For diluted EPS, the weighted average number of ordinary shares in issue is adjusted
to assume conversion of all dilutive potential ordinary shares, being ordinary shares of 1,602,842,248 (2017: 1,659,830,089).
The details of movements in the number of shares used in the basic and dilutive EPS calculation are provided below.
Number of shares at beginning of year
Issues of shares
Repurchase of own shares
Number of shares at period end
Shares held in Treasury reserve
Shares owned by Employee Trust
Basic number of shares
Share awards under incentive schemes
Employee share options
Diluted number of shares
The basic and diluted earnings per share figures are provided below.
Year ended 31 December 2018
Year ended 31 December 2017
Total
number
(million)
1,643.6
2.4
(35.9)
1,610.1
(54.2)
(25.2)
1,530.7
Weighted
average
(million)
1,643.6
1.9
(28.6)
1,616.9
(14.3)
(23.8)
1,578.8
22.5
1.5
1,602.8
Total
number
(million)
1,679.9
10.1
(46.4)
1,643.6
–
(20.3)
1,623.3
Weighted
average
(million)
1,679.9
8.4
(28.3)
1,660.0
–
(19.9)
1,640.1
17.8
1.9
1,659.8
Basic and diluted post-tax earnings ($m)
Basic earnings per share (cents)
Diluted earnings per share (cents)
9. Dividends
$m
Ordinary shares
Final dividend paid for the year to 31 December 2017 – 5.8 cents (2016: 4.5 cents)
Interim dividend paid for the six months to 30 June 2018 – 6.4 cents (2017: 5.0 cents)
Dividends paid
Proposed final dividend for the year to 31 December 2018 – 5.4 cents (2017: 5.8 cents)
Year ended
31 December
2018
Year ended
31 December
2017
273
17.3
17.0
255
15.5
15.3
Year ended
31 December
2018
Year ended
31 December
2017
90
99
189
83
77
81
158
94
Details of dividends waived in the period are included in Note 19. Dividend distribution to the Company’s shareholders is recognised directly
in equity in Man’s financial statements in the period in which the dividend is paid or, if required, approved by the Company’s shareholders.
Details of the Group’s dividend policy are included in the Chief Financial Officer’s review on page 26.
112
112
MAN GROUP PLC ANNUAL REPORT 2018
MAN GROUP PLC ANNUAL REPORT 2018
FINANCIAL STATEMENTS
STRATEGIC
REPORT
CORPORATE
GOVERNANCE
FINANCIAL
STATEMENTS
SHAREHOLDER
INFORMATION
10. Goodwill and acquired intangibles
$m
Net book value at beginning
of the year
Purchases/acquisitions1
Amortisation
Currency translation
Net book value at year end
Allocated to cash generating
units as follows:
AHL
GLG
FRM
Numeric
GPM
Year ended 31 December 2018
Investment
management
agreements
Distribution
channels
Brand
names
Goodwill
Year ended 31 December 2017
Investment
management
agreements
Distribution
channels
Brand
names
Total
Goodwill
648
–
–
(6)
642
453
–
–
134
55
340
3
(75)
–
268
1
141
14
104
8
24
–
(5)
–
19
–
9
–
–
10
12
–
(3)
–
9
1,024
3
(83)
(6)
938
–
6
–
3
–
454
156
14
241
73
588
55
–
5
648
459
–
–
134
55
405
10
(75)
–
340
–
188
22
121
9
16
14
(6)
–
24
–
12
–
–
12
15
–
(3)
–
12
–
8
1
3
–
Total
1,024
79
(84)
5
1,024
459
208
23
258
76
Notes:
1 Purchases/acquisitions in 2018 relate to the purchase of investment management agreements in relation to strategic bond strategies. The 2017 purchases/acquisitions relates to the
acquisition of the Aalto business in 2017.
Goodwill
Goodwill represents the excess of consideration transferred over the fair value of identifiable net assets of the acquired business at the
date of acquisition. Goodwill is carried on the Group balance sheet at cost less accumulated impairment, has an indefinite useful life, is not
subject to amortisation and is tested for impairment annually, or whenever events or circumstances indicate that the carrying amount may
not be recoverable.
Investment management agreements (IMAs), distribution channels and brand names
IMAs, distribution channels and brand names are recognised at the present value of the expected future cash flows and are amortised
on a straight-line basis over their expected useful lives, which are between three and 13 years (IMAs and brands), and eight and 12 years
(distribution channels).
Amortisation of acquired intangible assets of $83 million (2017: $84 million) primarily relates to the investment management agreements
recognised on the acquisition of GLG and Numeric.
Allocation of goodwill to cash generating units
For impairment review purposes, the Group has identified five cash generating units (CGUs): AHL, GLG, FRM, Numeric and GPM.
Calculation of recoverable amounts for cash generating units
An impairment expense is recognised for the amount by which the asset’s carrying value exceeds its recoverable amount. The recoverable
amount is the higher of an asset’s fair value less costs to sell and value in use. For the purposes of assessing impairment, assets are
grouped at the lowest levels for which there are separately identifiable cash flows (CGUs). The recoverable amounts of the Group’s CGUs
are assessed each year using a value in use calculation. The value in use calculation gives a higher valuation compared to the fair value less
cost to sell approach, as this would exclude some of the revenue synergies available to Man through its ability to distribute products using
its well established distribution channels, which may not be fully available to other market participants.
The value in use calculations at 31 December 2018 use cash flow projections based on the Board approved financial plan for the year to
31 December 2019 and a further two years of projections (2020 and 2021), plus a terminal value. The valuation analysis is based on best
practice guidance whereby a terminal value is calculated at the end of a short discrete budget period and assumes, after this three year
budget period, no growth in asset flows above the long-term growth rate. In order to determine the value in use of each CGU, it is
necessary to notionally allocate the majority of the Group’s cost base relating to operations, product structuring, distribution and support
functions, which are managed on a centralised basis.
The value in use calculations for AHL, GLG, FRM, Numeric and GPM are presented on a post-tax basis, consistent with the prior year,
given most comparable market data is available on a post-tax basis. The value in use calculations presented on a post-tax basis are not
significantly different to their pre-tax equivalent.
MAN GROUP PLC ANNUAL REPORT 2018
MAN GROUP PLC ANNUAL REPORT 2018
113
113
STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSSHAREHOLDER INFORMATION
FINANCIAL
STATEMENTS
Notes to the Group financial statements continued
10. Goodwill and acquired intangibles continued
The assumptions applied in the value in use calculation are derived from past experience and assessment of current market inputs.
A bifurcated discount rate has been applied to the modelled cash flows to reflect the different risk profile of net management fee income
and net performance fee income. The discount rates are based on the Group’s weighted average cost of capital using a risk free interest
rate, together with an equity risk premium and an appropriate market beta derived from consideration of Man’s beta, similar alternative
asset managers, and the asset management sector as a whole. The terminal value is calculated based on the projected closing FUM at
31 December 2021 and applying a mid-point of a range of historical multiples to the forecast cash flows associated with management
and performance fees.
The recoverable amount of each CGU has been assessed at 31 December 2018. The key assumptions applied to the value in use
calculations for each of the CGUs are provided below.
Key assumptions:
Compound average annualised growth in FUM (over three years)
Discount rate
– Management fees1
– Performance fees2
Terminal value (mid-point of range of historical multiples)3
– Management fees
– Performance fees
AHL
11%
11%
17%
13.0x
5.5x
GLG
4%
11%
17%
13.0x
5.5x
FRM
7%
11%
17%
5.9x
3.9x
Numeric
8%
11%
17%
13.0x
5.5x
GPM
34%
15%
21%
13.0x
5.5x
Notes:
1 The pre-tax equivalent of the net management fees discount rate is 13%, 13%, 13%, 14% and 18% for each of the AHL, GLG, FRM, Numeric and GPM CGUs, respectively.
2 The pre-tax equivalent of the net performance fees discount rate is 20%, 20%, 20%, 22% and 26% for each of the AHL, GLG, FRM, Numeric and GPM CGUs, respectively.
3 The implied terminal growth rates are 2%, 3%, -10%, 3% and 7% for each of the AHL, GLG, FRM, Numeric and GPM CGUs, respectively.
The Group has considered the impact of the potential exit of the United Kingdom from the European Union, including various reasonably
possible Brexit scenarios, and currently does not expect this to have a material impact on the value in use calculations of the Group at
31 December 2018. Further discussion on Brexit is provided in the Market environment (page 10) and Risk management (page 27) sections
of the Strategic report.
The results of the valuations are further explained in the following sections, including sensitivity tables which show scenarios whereby
the key assumptions are changed to stressed assumptions, indicating the modelled headroom or impairment that would result. Each
assumption, or set of assumptions, is stressed in isolation. The results of these sensitivities make no allowance for actions that management
would take if such market conditions persisted.
AHL cash generating unit
The AHL value in use calculation at 31 December 2018 indicates a value of $2.7 billion, with around $2.2 billion of headroom over the
carrying value of the AHL business. Therefore, no impairment charge is deemed necessary at 31 December 2018 (2017: nil). The valuation
at 31 December 2018 is around $0.3 billion lower than the value in use calculation at 31 December 2017, primarily due to lower than
forecast performance in 2018.
Sensitivity analysis:
Key assumption stressed to:
Modelled headroom/(impairment) ($m)
Compound average
annualised growth in FUM
Management fee/
performance fee
Discount rates (post-tax)
Multiples (post-tax)
Management fee/
performance fee
13%
2,550
(12%)1
–
10%/16%
2,2862
12%/18%
2,1622
14.0x/6.5x
2,4803
12.0x/4.5x
1,9663
Notes:
1 The compound average annualised growth in FUM has been stressed in a downside scenario to determine the point at which headroom would be reduced to nil, after which
impairment would arise.
2 An increase/decrease in the value in use calculation of $62 million.
3 An increase/decrease in the value in use calculation of $257 million.
GLG cash generating unit
The GLG value in use calculation at 31 December 2018 indicates a value of $320 million, with around $130 million of headroom over
the carrying value of the GLG business. Therefore, no impairment charge is deemed necessary at 31 December 2018. The valuation at
31 December 2018 is around $70 million lower than the value in use calculation at 31 December 2017 largely due to lower than forecast
performance in 2018. Amortisation of acquired intangibles lowered the carrying value by $56 million during the year.
114
114
MAN GROUP PLC ANNUAL REPORT 2018
MAN GROUP PLC ANNUAL REPORT 2018
FINANCIAL STATEMENTS
STRATEGIC
REPORT
CORPORATE
GOVERNANCE
FINANCIAL
STATEMENTS
SHAREHOLDER
INFORMATION
10. Goodwill and acquired intangibles continued
Sensitivity analysis:
Key assumption stressed to:
Modelled headroom/(impairment) ($m)
Compound average
annualised growth in FUM
Management fee/
performance fee
Discount rates (post-tax)
Multiples (post-tax)
Management fee/
performance fee
6%
188
(1%)1
–
10%/16%
1342
12%/18%
1182
14.0x/6.5x
1543
12.0x/4.5x
973
Notes:
1 The compound average annualised growth in FUM has been stressed in a downside scenario to determine the point at which headroom would be reduced to nil, after which
impairment would arise.
2 An increase/decrease in the value in use calculation of $8 million.
3 An increase/decrease in the value in use calculation of $28 million.
FRM cash generating unit
The FRM value in use calculation at 31 December 2018 indicates a value of $33 million, with $12 million of headroom over the carrying value
of the FRM business. Therefore, no impairment charge is deemed necessary at 31 December 2018. The valuation at 31 December 2018 is
similar to the value in use calculation at 31 December 2017. Headroom has increased slightly due to amortisation of acquired intangibles of
$6 million during the year.
Sensitivity analysis:
Key assumption stressed to:
Modelled headroom/(impairment) ($m)
Compound average
annualised growth in FUM
Management fee/
performance fee
Discount rates (post-tax)
Multiples (post-tax)
Management fee/
performance fee
9%
17
4%1
–
10%/16%
132
12%/18%
112
6.9x/4.9x
153
4.9x/2.9x
83
Notes:
1 The compound average annualised growth in FUM has been stressed in a downside scenario to determine the point at which headroom would be reduced to nil, after which
impairment would arise.
2 An increase/decrease in the value in use calculation of $1 million.
3 An increase/decrease in the value in use calculation of $4 million.
Numeric cash generating unit
The Numeric value in use calculation at 31 December 2018 indicates a value of around $700 million, with around $450 million of headroom
over the carrying value of the Numeric business. Therefore, no impairment charge is deemed necessary at 31 December 2018 (2017: nil).
The valuation at 31 December 2018 is around $100 million higher than the value in use calculation at 31 December 2017, primarily as a
result of a reduction in forecast operating costs, partially offset by lower than forecast performance in 2018.
Sensitivity analysis:
Key assumption stressed to:
Modelled headroom/(impairment) ($m)
Compound average
annualised growth in FUM
Management fee/
performance fee
Discount rates (post-tax)
Multiples (post-tax)
Management fee/
performance fee
10%
509
(22%)1
–
10%/16%
4692
12%/18%
4352
14.0x/6.5x
4993
12.0x/4.5x
4033
Notes:
1 The compound average annualised growth in FUM has been stressed in a downside scenario to determine the point at which headroom would be reduced to nil, after which
impairment would arise.
2 An increase/decrease in the value in use calculation of $17 million.
3 An increase/decrease in the value in use calculation of $48 million.
GPM cash generating unit
The GPM value in use calculation at 31 December 2018 indicates a value of around $90 million, with around $15 million of headroom over
the carrying value of the GPM business. Therefore, no impairment charge is deemed necessary at 31 December 2018. The valuation at
31 December 2018 is around $20 million lower than the value in use calculation at 31 December 2017, primarily as a result of timing
differences in forecast fund launches.
Sensitivity analysis:
Key assumption stressed to:
Modelled headroom/(impairment) ($m)
Compound average
annualised growth in FUM
Management fee/
performance fee
Discount rates (post-tax)
Multiples (post-tax)
Management fee/
performance fee
36%
20
30%1
–
14%/20%
162
16%/22%
122
14.0x/6.5x
193
12.0x/4.5x
93
Notes:
1 The compound average annualised growth in FUM has been stressed in a downside scenario to determine the point at which headroom would be reduced to nil, after which
impairment would arise.
2 An increase/decrease in the value in use calculation of $2 million.
3 An increase/decrease in the value in use calculation of $5 million.
MAN GROUP PLC ANNUAL REPORT 2018
MAN GROUP PLC ANNUAL REPORT 2018
115
115
STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSSHAREHOLDER INFORMATION
FINANCIAL
STATEMENTS
Notes to the Group financial statements continued
11. Other intangibles
$m
Net book value beginning of the year
Additions
Disposals
Amortisation
Net book value at year end
Year ended
31 December
2018
Year ended
31 December
2017
23
16
(3)
(10)
26
17
14
(2)
(6)
23
Other intangibles relate to capitalised computer software. Capitalised computer software includes costs that are directly associated with
the procurement or development of identifiable and unique software products, which will generate economic benefits exceeding costs
beyond one year and are subject to regular impairment reviews. Capitalised computer software is amortised on a straight-line basis over
its estimated useful life (three years), with amortisation expense included within Other costs in the Group income statement. Additions relate
to the continued investment in software across Man’s operating platforms.
12. Cash, liquidity and borrowings
$m
Cash and cash equivalents1
Undrawn committed revolving loan facility
Total liquidity
Borrowings: 2024 fixed rate reset callable guaranteed
subordinated notes
31 December 2018
31 December 2017
Total
344
500
844
150
Less than
1 year
Greater than
2 years
344
–
344
–
–
500
500
150
Total
356
500
856
150
Less than
1 year
Greater than
3 years
356
–
356
–
–
500
500
150
Note:
1 Excludes $26 million (2017: $23 million) of restricted cash held by consolidated fund entities (Note 13.2).
Liquidity resources support ongoing operations and potential liquidity requirements under stressed scenarios. The amount of potential
liquidity requirements is modelled based on scenarios that assume stressed market and economic conditions. The funding requirements
for Man relating to the investment management process are discretionary. The liquidity profile of Man is monitored on a daily basis and the
stressed scenarios are updated regularly. The Board reviews Man’s funding resources at each Board meeting and on an annual basis as
part of the strategic planning process. Man’s available liquidity is considered sufficient to cover current requirements and potential
requirements under stressed scenarios.
In September 2014, Man issued $150 million ten-year fixed rate reset callable guaranteed subordinated notes (Tier 2 notes), with associated
issuance costs of $1 million. The Tier 2 notes were issued with a fixed coupon of 5.875% until 15 September 2019. The notes may be
redeemed in whole at Man’s option on 16 September 2019 at their principal amount, subject to FCA approval. If the notes are not
redeemed at this time then the coupon will reset to the five-year mid-swap rate plus 4.076% and the notes will be redeemed on
16 September 2024 at their principal amount.
Borrowings are initially recorded at fair value net of transaction costs incurred, and are subsequently measured at amortised cost. The
difference between the amount repayable at maturity on the borrowings and the carrying value is amortised over the period up to the
expected maturity of the associated debt in accordance with the effective interest rate method.
Cash and cash equivalents at year end comprises cash at bank on hand of $175 million (2017: $175 million), short-term deposits of $169
million (2017: $181 million) and nil US Treasury bills (2017: nil). Cash ring-fenced for regulated entities totalled $36 million (2017: $37 million).
Cash is invested in accordance with strict limits consistent with the Board’s risk appetite, which consider both the security and availability of
liquidity. Accordingly, cash is held in on-demand deposit bank accounts and short-term bank deposits, and at times invested in short-term
US Treasury bills. At 31 December 2018, the $344 million cash balance (excluding US Treasury bills and cash held by consolidated fund
entities) is held with 19 banks (2017: $356 million with 20 banks). The single largest counterparty bank exposure of $91 million is held with
an A+ rated bank (2017: $84 million with an A+ rated bank). At 31 December 2018, balances with banks in the AA ratings band aggregate
to $85 million (2017: $97 million) and balances with banks in the A ratings band aggregate to $259 million (2017: $239 million).
The $500 million syndicated revolving loan facility was undrawn at 31 December 2018 (undrawn at 31 December 2017). The facility was
put in place as a five-year facility and included the option for Man to request the banks to extend the maturity date by one year on each
of the first and second anniversaries. The participant banks have the option to accept or decline Man’s request. On the first and second
anniversaries in 2016 and 2017, the banks were asked to extend the maturity date of the facility by one year and banks with participations
totalling 98% of the facility accepted the request on both anniversaries. As a result of the maturity extension, $10 million is scheduled to
mature in June 2020 and the remaining $490 million matures in June 2022. To maintain maximum flexibility, the facility does not include
financial covenants.
Disclosures in relation to financial guarantees and commitments are included in Note 27.
116
116
MAN GROUP PLC ANNUAL REPORT 2018
MAN GROUP PLC ANNUAL REPORT 2018
FINANCIAL STATEMENTS
STRATEGIC
REPORT
CORPORATE
GOVERNANCE
FINANCIAL
STATEMENTS
SHAREHOLDER
INFORMATION
12. Cash, liquidity and borrowings continued
Foreign exchange and interest rate risk
Man is subject to risk from changes in interest rates and foreign exchange rates on monetary assets and liabilities.
In respect of Man’s monetary assets and liabilities which earn/incur interest indexed to floating rates, as at 31 December 2018 a 50bp
increase/decrease in these rates, with all other variables held constant, would have resulted in a $1 million increase/decrease
(2017: $1 million increase/decrease) in net interest income.
A 10% strengthening/weakening of the USD against all other currencies, with all other variables held constant, would have resulted in a
foreign exchange loss/gain of $1 million (2017: $1 million loss/gain), with a corresponding impact on equity. This exposure is based on USD
balances held by non-USD functional currency entities and non-USD balances held by USD functional currency entities within the Group.
In certain circumstances, the Group uses derivative financial instruments to hedge its risk associated with foreign exchange movements.
Where fixed foreign currency denominated costs are hedged, the associated derivatives may be designated as cash flow hedges. The
Group’s current risk management objective is to determine a foreign exchange rate at which future foreign currency costs are ultimately
realised, thereby providing increased certainty around the future USD costs recognised in the Group Income Statement. Effective unrealised
gains or losses on these instruments are recognised within the cash flow hedge reserve in equity and, when realised, these are reclassified
to the Group income statement in the same line as the hedged item, within compensation and other costs (as outlined in Note 4 and Note
5). The realisation of foreign currency operating cash flows and the associated forward foreign currency derivative contracts generally arise
on a monthly basis. The fair value of derivatives held in relation to the Group’s cash flow hedges at 31 December 2018 is a liability of
$13 million (2017: asset of $9 million).
MAN GROUP PLC ANNUAL REPORT 2018
MAN GROUP PLC ANNUAL REPORT 2018
117
117
STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSSHAREHOLDER INFORMATION
FINANCIAL
STATEMENTS
Notes to the Group financial statements continued
13. Investments in fund products and other investments
$m
Loans to fund products
Investments in fund products
Other investments
Investments in line-by-line consolidated funds
$m
Loans to fund products
Investments in fund products
Other investments
Investments in line-by-line consolidated funds
Financial
assets at fair
value through
profit or loss1
Loans and
receivables
31 December 2018
Total investments
in fund products
and other
investments
–
401
3
357
761
9
–
–
–
9
9
401
3
357
770
Net non-
current assets
held for sale
Total
investments
–
39
–
–
39
9
440
3
357
809
Financial
assets at fair
value through
profit or loss
Loans and
receivables
31 December 2017
Available-for-
sale financial
assets1
Total investments
in fund products
and other
investments
–
249
–
452
701
25
–
–
–
25
–
–
3
–
3
25
249
3
452
729
Net non-
current assets
held for sale
Total
investments
–
79
–
–
79
25
328
3
452
808
Note:
1 Available-for-sale financial assets of $3 million have been reclassified to financial assets at fair value through profit or loss due to the adoption of IFRS 9 from 1 January 2018,
as detailed in Note 1.
Man’s seeding investments are included in various Group balance sheet line items. In summary, the total seeding investments portfolio
is made up as follows:
$m
Investments in fund products
Less fund investments for deferred compensation arrangements
Consolidated net investments in funds – held for sale
Consolidated net investments in funds – line-by-line consolidation
Loans to funds
Seeding investments portfolio
Note
13.1
13.1
13.2
13.2
13.3
31 December
2018
31 December
2017
401
(87)
39
300
9
662
249
(76)
79
203
25
480
13.1. Investments in fund products
Man uses capital to invest in our fund products as part of our ongoing business to build our product breadth and to trial investment research
developments before we market the products broadly to investors. These seeding investments are generally held for less than one year.
Where Man is deemed not to control the fund, these are classified as investments in fund products. Investments in fund products are
classified at fair value through profit or loss, with net losses due to movements in fair value of $11 million for the year ended 31 December
2018 (2017: $58 million gain) recognised through income or (losses)/gains on investments and other financial instruments. Purchases and
sales of investments are recognised on trade date.
The fair values of investments in fund products are derived from the reported NAVs of each of the fund products, which in turn are based
upon the value of the underlying assets held within each of the fund products and the anticipated redemption horizon of the fund product.
The valuation of the underlying assets within each fund product is determined by external valuation service providers based on an agreed
valuation policy and methodology. Whilst these valuations are performed independently of Man, Man has established oversight procedures
and due diligence processes to ensure that the NAVs reported by the external valuation service providers are reliable and appropriate. Man
makes adjustments to these NAVs if the anticipated redemption horizon, events or circumstances indicate that the NAVs are not reflective
of fair value. The fair value hierarchy of financial assets is disclosed in Note 25.
Investments in fund products expose Man to market risk and therefore this process is subject to limits consistent with the Board’s risk
appetite. The largest single investment in fund products is $105 million (2017: $79 million). The market risk from seeding investments is
modelled using a value at risk methodology using a 95% confidence interval and one-year time horizon. The value at risk is estimated to
be $25 million at 31 December 2018 (2017: $29 million).
Fund investments for deferred compensation arrangements
At 31 December 2018, investments in fund products included $87 million (2017: $76 million) of fund products related to deferred
compensation arrangements (as detailed in Note 19). The associated fund product investments are held to offset any change in deferred
compensation over the vesting period, and at vesting the value of the fund investment is delivered to the employee. The fund product
investments are recorded at fair value with any gains or losses during the vesting period recognised as income or (losses)/gains on
investments and other financial instruments in the Group income statement.
118
118
MAN GROUP PLC ANNUAL REPORT 2018
MAN GROUP PLC ANNUAL REPORT 2018
FINANCIAL STATEMENTS
STRATEGIC
REPORT
CORPORATE
GOVERNANCE
FINANCIAL
STATEMENTS
SHAREHOLDER
INFORMATION
13. Investments in fund products and other investments continued
13.2. Consolidation of investments in funds
Seed capital invested into funds may be deemed to be controlled by the Group (Note 1). The fund is consolidated into the Group’s results
from the date control commences until it ceases. In 2018, 13 (2017: nine) investments in funds have met the control criteria and have
therefore been consolidated (Note 29), either classified as held for sale or consolidated on a line-by-line basis as detailed below.
Held for sale
Where the Group acquires the controlling stake and actively markets the products to third-party investors, allowing the Group to redeem
their share, and it is considered highly probable that it will relinquish control within one year from the date of initial investment, the investment
in the controlled fund is classified as held for sale. The seeded fund is recognised on the Group balance sheet as non-current assets and
liabilities held for sale, with the interests of any other parties included within non-current liabilities held for sale. Amounts recognised are
measured at the lower of the carrying amount and fair value less costs to sell.
The non-current assets and liabilities held for sale are as follows:
$m
Non-current assets held for sale
Non-current liabilities held for sale
Investments in fund products held for sale
31 December
2018
31 December
2017
39
–
39
145
(66)
79
All seed investments held at 31 December 2018 are 100% owned and therefore there is no third-party interest included within non-current
liabilities held for sale.
Investments cease to be classified as held for sale when the fund is no longer controlled by the Group, at which time they are classified as
financial assets at fair value through profit or loss (Note 13.1). Loss of control may eventuate through sale of the investment or a dilution in
the Group’s holding. If a held for sale fund remains under the control of the Group for more than one year, and it is unlikely that the Group
will reduce or no longer control its investment in the short-term, it will cease to be classified as held for sale and will be consolidated on a
line-by-line basis. Three investments in funds which were classified as held for sale at 31 December 2017 have been consolidated on a
line-by-line basis for the year ended 31 December 2018 (2017: three held for sale funds at 31 December 2016).
Line-by-line consolidation
The investments relating to the ten (2017: five) funds which are controlled and are consolidated on a line-by-line basis are included within
the Group balance sheet and income statement as follows:
$m
Balance sheet
Cash and cash equivalents
Transferable securities1
Fees and other receivables
Trade and other payables
Net assets of line-by-line consolidated fund entities
Third-party interest in consolidated funds
Net investment held by Man
Income statement
Net (losses)/gains on investments2
Management fee expenses3
Performance fee expenses3
Other costs4
Net (losses)/gains of line-by-line consolidated fund entities
Third-party share of losses/(gains) relating to interests in consolidated funds
(Losses)/gains attributable to net investment held by Man
31 December
2018
31 December
2017
26
357
21
(4)
400
(100)
300
(18)
(2)
(1)
(2)
(23)
7
(16)
23
452
1
(174)
302
(99)
203
57
(9)
(5)
(2)
41
(14)
27
Notes:
1
2
3 Relates to management and performance fees paid by the funds to Man during the year, and are eliminated within gross management and other fees and performance fees,
Included within Investments in fund products and other investments.
Included within Income or gains on investments and other financial instruments.
respectively, in the Group income statement. The management fees elimination includes $1 million (2017: $3 million) in relation to the third-party share of these investments and
therefore represents externally generated management fees. The performance fee elimination includes $1 million (2017: $2 million) in relation to third-party share which represents
performance fees generated externally.
Includes nil (2017: $1 million) in relation to the third-party share of these investments and therefore represents costs incurred externally.
4
MAN GROUP PLC ANNUAL REPORT 2018
MAN GROUP PLC ANNUAL REPORT 2018
119
119
STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSSHAREHOLDER INFORMATION
FINANCIAL
STATEMENTS
Notes to the Group financial statements continued
13. Investments in fund products and other investments continued
13.3. Loans to fund products
Loans to fund products are short-term advances primarily to Man guaranteed products, which are made to assist with the financing of the
leverage associated with the structured products. The loans are repayable on demand and are carried at amortised cost using the effective
interest rate method. The average balance during the year is $13 million (2017: $28 million). The liquidity requirements of guaranteed
products together with commitments to provide financial support (Note 27) which give rise to loans to funds are subject to our routine
liquidity stress testing and any liquidity requirements are met by available cash resources, or the syndicated revolving credit facility.
Loans to fund products expose Man to credit risk and therefore the credit decision making process is subject to limits consistent with the Board’s
risk appetite. The carrying value represents Man’s maximum exposure to this credit risk. Loans are closely monitored against the assets held in
the funds. The largest single loan to a fund product at 31 December 2018 is $4 million (2017: $12 million). Fund entities are not externally rated,
however our internal modelling suggests that fund products have a probability of default that is equivalent to a credit rating of A.
13.4. Structured entities
Man has evaluated all exposures and concluded that where Man holds an investment, loan, fees receivable and accrued income, guarantee
or commitment with an investment fund or a collateralised loan obligation, this represents an interest in a structured entity as defined by
IFRS 12 ‘Disclosure of Interests in Other Entities’.
As with structured entities, investment funds are designed so that their activities are not governed by way of voting rights and contractual
arrangements are the dominant factor in affecting an investor’s returns. The activities of these entities are governed by investment
management agreements or, in the case of a collateralised loan obligation, the indenture.
The key considerations in assessing whether the Group controls a structured entity, and therefore should be consolidated into the Group’s
financial statements, are outlined in Note 1. Consolidated structured entities are detailed in Note 13.2.
Man’s maximum exposure to loss from unconsolidated structured entities is the sum total of any investment held, fee receivables, accrued
income, and loans to the fund entities, and is $574 million for the year ended 31 December 2018 (2017: $578 million). Man’s interest in and
exposure to unconsolidated structured entities is as follows:
31 December 2018
Alternative
Absolute return
Total return
Multi-manager
solutions
Long only
Systematic
Discretionary
Guaranteed
Total
31 December 2017
Alternative
Absolute return
Total return
Multi-manager
solutions
Long only
Systematic
Discretionary
Guaranteed
Total
Total
FUM
($bn)
28.9
22.5
13.5
24.7
18.8
0.1
108.5
Total
FUM
($bn)
29.2
16.5
16.0
26.8
20.4
0.2
109.1
Less
infrastructure
mandates and
consolidated
fund entities1
($bn)
Total FUM
unconsolidated
structured
entities
($bn)
Net
management
fee margin2
(%)
Fair value of
investment
held
($m)
Number
of funds
Fee
receivables
and accrued
income
($m)
Loans
to funds
($m)
Maximum
exposure
to loss
($m)
0.1
–
5.2
0.2
0.1
–
5.6
28.8
22.5
135
58
8.3
87
24.5
18.7
0.1
102.9
116
50
7
453
1.27
0.57
0.36
0.36
0.69
5.52
153
156
2
1
77
–
389
87
24
12
31
21
1
176
–
–
–
–
–
9
9
240
180
14
32
98
10
574
Less infrastructure
mandates and
consolidated
fund entities1
($bn)
Total FUM
unconsolidated
structured
entities
($bn)
Net
management
fee margin2
(%)
Fair value of
investment
held
($m)
Number
of funds
Fee
receivables
and accrued
income
($m)
Loans
to funds
($m)
Maximum
exposure
to loss
($m)
0.2
–
7.7
0.1
0.1
–
8.1
29.0
16.5
8.3
26.7
20.3
0.2
101.0
129
45
80
104
49
14
421
1.38
0.56
0.45
0.36
0.67
5.04
64
105
2
1
61
–
233
181
21
15
75
26
2
320
–
–
–
–
–
25
25
245
126
17
76
87
27
578
Notes:
1 For infrastructure mandates where we do not act as investment manager or advisor Man’s role in directing investment activities is diminished and therefore these are not considered
to be structured entities.
2 Net management fee margins are the category weighted average (see page 22). Performance fees can only be earned after a high water mark is achieved. For performance fee eligible
funds, performance fees are within the range of 10% to 20%.
Support by way of loans provided to unconsolidated structured entities is detailed in Note 13.3, and is included within the maximum
exposure to loss above. Furthermore, on occasion Man agrees to purchase illiquid investments from the funds at market rates in order
to facilitate investor withdrawals. Man has not provided any other non-contractual support to unconsolidated structured entities. Further
information about risks relating to investment funds can be found in Principal and emerging risks on pages 31 to 33.
120
120
MAN GROUP PLC ANNUAL REPORT 2018
MAN GROUP PLC ANNUAL REPORT 2018
FINANCIAL STATEMENTS
STRATEGIC
REPORT
CORPORATE
GOVERNANCE
FINANCIAL
STATEMENTS
SHAREHOLDER
INFORMATION
14. Fee and other receivables
$m
Fee receivables
Accrued income
Prepayments
Derivative financial instruments
Other receivables
31 December
2018
31 December
2017
36
144
13
16
98
307
53
267
16
9
146
491
Fee and other receivables are initially recorded at fair value and subsequently measured at amortised cost using the effective interest
rate method. Fee receivables and accrued income represent management and performance fees from fund products and are received
in cash when the funds’ net asset values are determined. The majority of fees are deducted from the NAV of the respective funds by the
independent administrators and therefore the credit risk of fee receivables is minimal. No balances are overdue, and under the expected
loss model of IFRS 9 (Note 1) there is no impairment at 31 December 2018 (2017: nil). The decrease in accrued income in 2018 primarily
relates to the decrease in performance fee income which crystallised at 31 December 2018. Performance fees receivable at year end are
$43 million (2017: $196 million).
Details of derivatives used to cash flow hedge foreign exchange risk are included in Note 12. Derivative financial instruments, which consist
primarily of market risk hedges on some of our seeding positions and foreign exchange contracts, are measured at fair value through profit
or loss. All derivatives are held with external banks with ratings of BBB+ (2017: BBB+) or higher and mature within one year. During the year,
there were $3 million net realised and unrealised gains arising from foreign exchange hedges (2017: $1 million losses), and the notional value
of foreign exchange derivative financial assets held at 31 December 2018 is $84 million (2017: $262 million). During the year, there were
$22 million net realised and unrealised gains arising from our market risk hedges (2017: $25 million losses), and the notional value of
market risk derivative financial assets held at 31 December 2018 is $220 million (2017: $15 million).
Other receivables principally include balances relating to the Open Ended Investment Collective (OEIC) funds business and other
deposits. For the OEIC funds businesses, Man acts as the intermediary for the collection of subscriptions due from customers and
payable to the funds, and for redemptions receivable from funds and payable to customers. At 31 December 2018, the amount included
in other receivables is $37 million (2017: $38 million). The unsettled fund payable is recorded in trade and other payables (Note 15).
At 31 December 2018, $7 million (2017: $8 million) of other receivables are expected to be settled after 12 months.
15. Trade and other payables
$m
Accruals
Trade payables
Contingent consideration
Derivative financial instruments
Other payables
31 December
2018
31 December
2017
302
2
212
15
170
701
334
3
243
10
253
843
Accruals primarily relate to compensation accruals. Contingent consideration relates to the amounts payable in respect of acquisitions
(Note 25). Other payables include the remaining October 2018 announced share repurchase liability of $63 million (2017: $74 million), as
detailed in Note 20, payables relating to the OEIC funds business of $35 million (2017: $35 million) and servicing fees payable to distributors.
Details of derivatives used to cash flow hedge foreign exchange risk are included in Note 12. The notional value of foreign exchange
derivative financial liabilities at 31 December 2018 is $508 million (2017: $388 million), and the notional value of market risk derivative
financial assets is $82 million (2017: $160 million). All derivative contracts mature within one year.
The other payables balance in 2017 includes $52 million relating to the third-party share of payables for line-by-line consolidated funds,
largely as a result of a December 2017 compulsory redemption of a large seeding position for all investors (Note 13.2).
Trade and other payables are initially recorded at fair value and subsequently measured at amortised cost. Included in trade and other
payables at 31 December 2018 are balances of $40 million (2017: $213 million) which are expected to be settled after more than
12 months, which largely relate to contingent consideration. Man’s policy is to meet its contractual commitments and pay suppliers
according to agreed terms.
MAN GROUP PLC ANNUAL REPORT 2018
MAN GROUP PLC ANNUAL REPORT 2018
121
121
STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSSHAREHOLDER INFORMATION
FINANCIAL
STATEMENTS
Notes to the Group financial statements continued
16. Provisions
$m
At 1 January 2018
Charged/(credited) to the income statement:
Charge in the year
Unused amounts reversed
Exchange difference
Used during the year/settlements
At 31 December 2018
Onerous
property
lease
contracts
30
2
–
(1)
(9)
22
Other
4
–
–
–
–
4
Total
34
2
–
(1)
(9)
26
Provisions are recognised when the Group has a present obligation (legal or constructive) as a result of a past event, it is probable that the
Group will be required to settle the obligation, and a reliable estimate can be made of the amount of the obligation. All provisions are current,
other than onerous property lease contracts as outlined below, given the Group does not have the unconditional right to defer settlement.
Provisions for restructuring are recognised when the obligation arises, following communication of the formal plan.
Provisions for onerous property lease contracts represent the present value of the future lease payments that the Group is presently obliged
to make under non-cancellable onerous operating lease contracts, less the future benefit expected to be generated from these, including
sub-lease revenue where applicable. The unexpired terms of the onerous leases range from three to 17 years, with all onerous property
lease contracts therefore non-current.
17. Investments in associates
Associates are entities in which Man holds an interest and over which it has significant influence but not control, and are accounted for
using the equity method. In assessing significant influence Man considers the investment held and its power to participate in the financial
and operating policy decisions of the investee through its voting or other rights. Further details of Man’s equity investment holdings are
included in Note 29.
Man’s investments in associates are as follows:
$m
At beginning of the year
Share of post-tax profit/(loss)
Dividends received
Sale of investment in associate
At year end
Year ended 31
December 2018
Nephila Holdings
Year ended 31 December 2017
Ltd Nephila Holdings Ltd
Other
Total
29
7
(8)
(28)
–
30
7
(8)
–
29
1
1
–
(2)
–
31
8
(8)
(2)
29
In November 2018 the Group sold its investment in Nephila, recognising a gain on sale of $113 million. Man has not provided any financial
support to associates during the year to 31 December 2018 (2017: nil).
Commission income relating to sales of Nephila Holdings Limited products totalled $4 million for the year ended 31 December 2017, an
arrangement which ceased during 2017.
122
122
MAN GROUP PLC ANNUAL REPORT 2018
MAN GROUP PLC ANNUAL REPORT 2018
FINANCIAL STATEMENTS
STRATEGIC
REPORT
CORPORATE
GOVERNANCE
FINANCIAL
STATEMENTS
SHAREHOLDER
INFORMATION
18. Leasehold improvements and equipment
$m
Net book value at beginning of the year
Additions
Disposals
Depreciation expense
Net book value at year end
Year ended 31 December 2018
Year ended 31 December 2017
Leasehold
improvements
Equipment
Total
Leasehold
improvements
Equipment
Total
28
8
–
(7)
29
16
9
(1)
(7)
17
44
17
(1)
(14)
46
29
5
–
(6)
28
15
7
–
(6)
16
44
12
–
(12)
44
All leasehold improvements and equipment are recorded at cost less depreciation and impairment. Cost includes the original purchase
price of the asset and costs directly attributable to bringing the asset to its working condition for its intended use. Depreciation is calculated
using the straight-line method over the asset’s estimated useful life, which for leasehold improvements is over the shorter of the life of the
lease and the improvement (up to 24 years) and for equipment is between three and ten years.
19. Deferred compensation arrangements
Man operates equity-settled share-based payment schemes as well as fund product based compensation arrangements.
For compensation plans whereby deferred compensation is invested in fund products managed by Man, the fair value of the employee
services received in exchange for the fund units is recognised as an expense over the vesting period, with a corresponding liability. The total
amount to be expensed is determined by reference to the fair value of the awards, which is remeasured at each reporting date, and equates
to the fair value of the underlying fund products at settlement date.
During the year, $66 million (2017: $59 million) relating to share-based payment and deferred fund product plans is included within
compensation costs (Note 4), consisting of share-based payments of $25 million (2017: $19 million) and deferred fund product plans of
$41 million (2017: $40 million). The unamortised deferred compensation at year end is $64 million (2017: $51 million) and has a weighted
average remaining vesting period of 2.0 years (2017: 2.2 years).
19.1 Employee Trust
The Employee Trust has the obligation to deliver shares, options and fund product based payments which have been granted to employees.
Man contributed funds of $42 million in 2018 (2017: $22 million) in order for the Trust to meet its current period obligations.
The Employee Trust is fully consolidated into Man and shares held are treated as treasury shares for EPS purposes (Note 8). The Employee
Trust is controlled by independent trustees and their assets are held separately from those of Man. At 31 December 2018, the net assets of
the Employee Trust amounted to $99 million (2017: $73 million). These assets include 25,154,953 (2017: 20,272,423) ordinary shares in the
Company, $10 million notional value options over Man shares (2017: $10 million), and $36 million of fund units (2017: $25 million) to deliver
against the future obligations. The shares are recorded at cost and shown as a deduction from shareholders’ funds. During the year the
trustees of the Employee Trust waived all of the interim dividend for the year ended 31 December 2018 on each of the 24,431,128 ordinary
shares registered in its name at the relevant date for eligibility for the interim dividend (2017 interim dividend: waived on all 19,455,899
shares) and all of the final dividend for the year ended 31 December 2017 on each of 23,224,517 of the ordinary shares registered in its
name at the relevant date for eligibility for the final dividend (2016 final dividend: waived on all 19,278,617 shares).
19.2 Share-based payments
Share-based payments are remuneration payments to selected employees that take the form of an award of shares in Man Group plc.
Awards typically vest over three years, although conditions vary between different types of award. In respect of equity-settled share-based
payment schemes, the fair value of the employee services received in exchange for the share awards and options granted is recognised
as an expense, with the corresponding credit being recognised in equity. The total amount to be expensed over the vesting period is
determined by reference to the fair value of the share awards and options at grant date. The fair value of the share awards and options
granted in exchange for employee services is calculated using the Black-Scholes valuation model that takes into account the effect of both
financial and demographic assumptions. Forfeiture and early vesting assumptions are based on historical observable data. Changes to the
original estimates, if any, are included in the Group income statement, with a corresponding adjustment to equity.
MAN GROUP PLC ANNUAL REPORT 2018
MAN GROUP PLC ANNUAL REPORT 2018
123
123
STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSSHAREHOLDER INFORMATION
FINANCIAL
STATEMENTS
Notes to the Group financial statements continued
19. Deferred compensation arrangements continued
19.2 Share-based payments continued
Share options
The fair values of share options granted in the year under the Sharesave share option scheme, and the assumptions used in the
calculations, are as follows:
Grant date
Weighted average share price at grant date ($)1
Weighted average exercise price at grant date ($)2
Share options granted in the period
Vesting period (years)
Expected share price volatility (%)
Dividend yield (%)
Risk-free rate (%)
Expected option life (years)
Number of options assumed to vest
Average fair value per option granted ($)
Notes:
1 Sterling share price each year of £1.69 and £1.67, respectively.
2 Sterling exercise price each year of £1.37 and £1.32, respectively.
11/09/2018 12/09/2017
2.2
1.7
1,899,586
3–5
45
6
0.3
3.3
1,447,617
0.5
2.2
1.8
1,401,989
3–5
45
6
0.9
3.2
1,067,819
0.6
The expected share price volatility is based on historical volatility over the past ten years. The expected option life is the average expected
period to exercise. The risk-free rate of return is the yield on zero-coupon UK government bonds of a term consistent with the assumed
option life.
Movements in the number of share options outstanding are as follows:
Share options outstanding at beginning of the year
Granted
Forfeited
Expired
Exercised
Share options outstanding at year end
Share options exercisable at year end
Notes:
1 Calculated at 31 December exchange rates each year.
Year ended 31 December 2018
Year ended 31 December 2017
Weighted
average
exercise
price1
($ per share)
Weighted
average
exercise price1
($ per share)
Number
3.5 44,997,029
1,899,586
1.7
(780,814)
1.4
1.1
(9,678)
1.5
(1,647,342)
3.5 44,458,781
3.8 38,924,702
3.6
1.8
1.3
2.8
1.1
3.7
4.0
Number
44,458,781
1,401,989
(941,436)
(30,000)
(398,946)
44,490,388
38,885,437
The share options outstanding at year end have a weighted average exercise price and expected remaining life as follows:
Range of exercise prices ($ per share)
0.00–3.00
3.01–5.00
31 December 2018
31 December 2017
Weighted
average
exercise
price
($ per share)
Weighted
average
expected
remaining life
Number of
share options
Weighted
average
exercise price
($ per share)
Weighted
average
expected
remaining life
1.4
3.8
3.5
2.2
5,669,155
2.0 38,789,626
2.0 44,458,781
1.4
4.0
3.7
2.6
3.0
2.9
Number of
share options
5,700,762
38,789,626
44,490,388
124
124
MAN GROUP PLC ANNUAL REPORT 2018
MAN GROUP PLC ANNUAL REPORT 2018
FINANCIAL STATEMENTS
STRATEGIC
REPORT
CORPORATE
GOVERNANCE
FINANCIAL
STATEMENTS
SHAREHOLDER
INFORMATION
19. Deferred compensation arrangements continued
19.2 Share-based payments continued
Share awards
The fair values of share awards granted in the year and the assumptions used in the calculations are as follows:
Deferred share plan
Grant dates
Share awards granted in the year
Weighted average fair value per share award granted ($)
Deferred Executive Incentive Plan
Grant dates
Share awards granted in the year
Weighted average fair value per share award granted ($)
Movements in the number of share awards outstanding are as follows:
1/3/2018 – 23/10/2018
12,325,515
2.4
1/3/2017 – 20/12/2017
14,115,446
1.8
12/3/2018
2,009,891
2.4
13/3/2017
904,273
1.8
Share awards outstanding at beginning of the year
Granted
Forfeited
Exercised
Share awards outstanding at year end
Share awards exercisable at year end
20. Capital management
Year ended
31 December
2018
Number
Year ended
31 December
2017
Number
28,637,911 22,523,365
14,335,406 15,019,719
(677,853)
(1,262,014)
(8,227,320)
(7,522,780)
34,188,523 28,637,911
447,775
107,999
Details of the Group’s capital management and dividend policy are provided within the Chief Financial Officer’s review on page 26.
Share capital and capital reserves
Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of new shares or options are shown in equity
as a deduction from the proceeds, net of tax.
Own shares held through the Employee Trust (Note 19) and Treasury Shares are recorded at cost, including any directly attributable
incremental costs (net of tax), and are deducted from equity attributable to the Company’s equity holders until the shares are transferred
to employees or sold. Where such shares are subsequently sold, any consideration received, net of any directly attributable incremental
transaction costs and the related tax effects, is included in equity attributable to the Company’s equity holders.
Ordinary shares
Ordinary shares have a par value of 33/7 US cents per share (2017: 33/7 US cents per share) and represent 99.9% of issued share capital.
All issued shares are fully paid. The shares have attached to them full voting, dividend and capital distribution (including on wind up) rights.
They do not confer any rights of redemption. Ordinary shareholders have the right to receive notice of, attend, vote and speak at general
meetings. A holder of ordinary shares is entitled to one vote per ordinary share held when a vote is taken on a poll and one vote only when
a vote is taken on a show of hands.
During the year ended 31 December 2018 $211 million (2017: $92 million) of shares were repurchased at an average price of 169.5 pence
(2017: 154.6 pence), buying back 93.5 million shares (2017: 46.4 million shares), which had an accretive impact on EPS (Note 8) of 2.8%
(2017: 1.7%). This relates to the completion of the remaining $74 million of the share repurchase announced in October 2017, the $100
million announced in April 2018, and the partial completion of $37 million of the anticipated $100 million share repurchase announced in
October 2018. As at 28 February 2019, Man Group had an unexpired authority to repurchase up to 93,699,317 of its ordinary shares.
A special resolution will be proposed at the forthcoming Annual General Meeting (AGM), pursuant to which the Company will seek authority
to repurchase up to 154,747,655 of its ordinary shares, representing 10% of the issued ordinary share capital, excluding treasury shares,
at 28 February 2019.
Deferred sterling shares
50,000 unlisted deferred sterling shares, representing 0.1% of the Company’s issued share capital with a par value of £1 per share, were
issued due to the redenomination of the ordinary share capital into USD. These shares are necessary for the Company to continue to
comply with Section 763 of the Companies Act 2006. The deferred sterling shares are freely transferable and have no rights to participate
in the profits of the Company, to attend, speak or vote at any general meeting and no right to participate in any distribution in a winding up
except for a return of the nominal value in certain limited circumstances.
MAN GROUP PLC ANNUAL REPORT 2018
MAN GROUP PLC ANNUAL REPORT 2018
125
125
STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSSHAREHOLDER INFORMATION
FINANCIAL
STATEMENTS
Notes to the Group financial statements continued
20. Capital management continued
Issued and fully paid share capital
Year ended 31 December 2018
Year ended 31 December 2017
Ordinary
shares
Number
Unlisted
deferred sterling
shares
Number
Nominal
value
$m
Ordinary
shares
Number
Unlisted
deferred
sterling shares
Number
Nominal
value
$m
1,643,593,289
(35,892,738)
50,000
–
56 1,679,920,894
(46,427,274)
(1)
50,000
–
2,441,762
–
–
4,448,807
–
–
1,610,142,313
–
50,000
–
5,650,862
55 1,643,593,289
–
50,000
58
(2)
–
–
56
At 1 January
Purchase and cancellation of own shares
Issue of ordinary shares: Partnership
Plans and Sharesave
Issue of shares relating to acquisition of
Aalto (Note 10)
At 31 December
21. Pension
Man operates 12 (2017: 12) defined contribution plans and two (2017: two) funded defined benefit plans.
Defined contribution plans
Man pays contributions to publicly or privately administered pension insurance plans on a mandatory, contractual or voluntary basis.
Man has no further payment obligation once the contributions have been paid. Defined contribution pension costs totalled $9 million for
the year to 31 December 2018 (2017: $8 million) and are recognised as pension costs within compensation in the Group income statement
when they are due.
Defined benefit plans
A defined benefit plan creates a financial obligation to provide funding to the pension plan to provide a retired employee with pension
benefits usually dependent on one or more factors such as age, years of service and compensation. As with the vast majority of similar
arrangements, Man ultimately underwrites the risks related to the defined benefit plans. The risks that this exposes Man to include:
– Uncertainty in benefit payments: The value of Man’s liabilities for post-retirement benefits will ultimately depend on the amount of benefits
paid out. This in turn will depend on the level of inflation (for those benefits that are subject to some form of inflation protection) and how
long individuals live.
– Volatility in asset values: Man is exposed to future movements in the values of assets held in the plans to meet future benefit payments.
– Uncertainty in cash funding: Movements in the values of the obligations or assets may result in Man being required to provide higher
levels of cash.
The two defined benefit plans operated are the Man Group plc Pension Fund in the UK (the UK Plan) and the Man Group Pension Plan in
Switzerland (the Swiss Plan). At 31 December 2018, the UK Plan comprised 94% (31 December 2017: 93%) of the Group’s total defined
benefit pension obligations.
The UK Plan is operated separately from Man and managed by independent trustees. The trustees are responsible for payment of the
benefits and management of the UK Plan’s assets. Under UK regulations, Man and the trustees of the UK Plan are required to agree a
funding strategy and contribution schedule for the UK Plan.
In order to maintain flexibility with regards to the funding of the UK Plan, Man set up the Man Group Reservoir Trust (the Reservoir Trust) in
2010. Man contributed $76 million (£50 million) of assets to the Reservoir Trust on 31 March 2010 and committed to ensure the Reservoir
Trust value remains at least £69 million from 1 April 2013 or at the level of the funding deficit in the UK Plan, if lower. The Reservoir Trust
gave the Pension Trustees comfort that Man could fund a deficit at 31 December 2017 and in the event that the UK Plan was fully funded,
allowed Man to recover the assets so that the UK Plan was not over funded.
The Reservoir Trust was treated as an asset of the UK Plan, until its wind-up in 2018, as: (1) the Reservoir Trust was legally separate from
Man and existed solely to fund employee benefits; (2) the assets of the Reservoir Trust were passed to the UK Plan in the event of any
default or insolvency situation, such that they were not available to Man’s creditors; and (3) the funding position of the UK Plan was in deficit.
As part of the latest funding valuation process, a £52.5 million payment from the Reservoir Trust was paid into the UK Plan in March 2018.
A smaller £3.6 million balancing payment was also paid into the UK Plan in early July 2018. The Reservoir Trust has now been wound up
with $19 million of remaining assets refunded to the Group during 2018.
No other cash contributions were made to the UK Plan in the year to 31 December 2018. The next actuarial valuation has an effective date
of 31 December 2020. As part of this valuation, a new recovery plan may be agreed.
For the UK Plan, the Group has concluded that it has no requirement to adjust the balance sheet to recognise either a current surplus or a
minimum funding requirement on the basis that the Group has an unconditional right to a refund of a current or projected future surplus at
some point in the future.
126
126
MAN GROUP PLC ANNUAL REPORT 2018
MAN GROUP PLC ANNUAL REPORT 2018
FINANCIAL STATEMENTS
STRATEGIC
REPORT
CORPORATE
GOVERNANCE
FINANCIAL
STATEMENTS
SHAREHOLDER
INFORMATION
21. Pension continued
For the Swiss Plan, the Swiss Plan holds some of its assets in an “employer contribution reserve”, which can be used to reduce the Group’s
future contributions into the Plan. Since the employer contribution reserve is greater than the measured surplus in the Swiss Plan as at
31 December 2018, the surplus has not been restricted. As the employer contribution reserve at 31 December 2017 was less than the
measured surplus, the surplus was restricted to the value of the employer contribution reserve.
The UK Plan was closed to new members in May 1999 and to future accrual in May 2011. Employed members of the UK Plan retain enhanced
benefits, including a link to salary, on their accrued benefits in the Plan. Future benefits are provided via a defined contribution plan.
In Switzerland, the Group operates a retirement foundation with assets which are held separately from the Group. This foundation covers
the majority of employees in Switzerland and provides benefits on a cash balance basis.
Each employee has a retirement account to which the employee and the Group make contributions at rates set out in the plan rules based
on a percentage of salary. Every year the pension fund commission (composed of employer and employee representatives) decides the level
of interest, if any, to apply to retirement accounts based on their agreed policy. At retirement an employee can take their retirement account
as a lump sum or have this paid as a pension.
The amounts recognised in the Group balance sheet are determined as follows:
$m
Present value of funded obligations
Fair value of plan assets
Surplus
Amount not recognised due to asset ceiling
Net pension asset
31 December
2018
31 December
2017
(376)
400
24
–
24
(464)
499
35
(3)
32
The decrease in the net pension asset from 31 December 2017 to 31 December 2018 is driven by the UK Plan, largely as a result of asset
returns being lower than the discount rate assumption, and the net repayment due to the remaining Reservoir Trust assets being returned
to the Group.
Our economic capital model includes capital in respect of a possible deficit in the pension plans.
Pensions: actuarial information
Changes in the present value of the defined benefit obligations are as follows:
$m
Present value of funded obligations at beginning of the year
Currency translation difference
Current service cost (employer portion)
Interest cost
Employee contributions
Remeasurements due to:
– changes in financial assumptions
– changes in demographic assumptions
– experience adjustments
Actual benefit payments
Curtailments and settlements
Present value of funded obligations at year end
Changes in the fair value of plan assets are as follows:
$m
Fair value of plan assets at beginning of the year
Currency translation difference
Interest income on plan assets
Actual return on plan assets less interest on plan assets
Employer repayments
Employee contributions
Benefits paid
Assets distributed on curtailments and settlements
Fair value of plan assets at year end
The plan assets primarily relate to investments in bonds, liability-driven investments (LDIs) and diversified growth funds.
MAN GROUP PLC ANNUAL REPORT 2018
MAN GROUP PLC ANNUAL REPORT 2018
Year ended
31 December
2018
Year ended
31 December
2017
464
(22)
1
10
1
(33)
(3)
(2)
(29)
(11)
376
426
38
2
11
1
15
(8)
–
(18)
(3)
464
Year ended
31 December
2018
Year ended
31 December
2017
499
(24)
10
(26)
(19)
1
(29)
(12)
400
455
40
12
11
–
1
(18)
(2)
499
127
127
STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSSHAREHOLDER INFORMATION
FINANCIAL
STATEMENTS
Notes to the Group financial statements continued
21. Pension continued
The change in the net pension asset recognised on the Group balance sheet is as follows:
$m
Net pension asset at start of the year
Total pension expense
Amount recognised outside profit and loss
Employer repayments
Currency translation difference
Net pension asset at end of the year
The amounts recognised in the Group income statement are as follows:
$m
Current service cost (employer portion)
Interest on net pension asset
Past service cost
Losses/(gains) on settlement/curtailment/transfers (adjusting item per page 143)
Total expense
Year ended
31 December
2018
Year ended
31 December
2017
32
(2)
15
(19)
(2)
24
27
–
3
–
2
32
Year ended
31 December
2018
Year ended
31 December
2017
1
–
–
1
2
2
(1)
–
(1)
–
Estimated costs of $1 million have been included relating to removing Guaranteed Minimum Pension (GMP) inequalities in the UK Plan,
which is offset within past service costs due to a $1 million credit as a result of review of the revised rates to convert Swiss Plan member
account balances into annual pension amounts at retirement.
There are no contributions expected to be paid during the year ending 31 December 2019.
The amounts recognised in other comprehensive income are as follows:
$m
Net actuarial (losses)/gains in the year due to:
– changes in financial assumptions
– changes in demographic assumptions
– experience adjustments on benefit obligations
Actual return on plan assets less interest on plan assets
Adjustment to recognise the effect of the asset ceiling
Amount recognised in other comprehensive income
The most significant actuarial assumptions used in the valuations of the two plans are:
Year ended
31 December
2018
Year ended
31 December
2017
33
3
2
(26)
3
15
(15)
8
–
11
(1)
3
Discount rate
Price inflation
Future salary increases
Interest crediting rate
Social security increases
Pension in payment increases
Deferred pensions increases
UK Plan
Swiss Plan
31 December
2018
% p.a.
31 December
2017
% p.a.
31 December
2018
% p.a.
31 December
2017
% p.a.
2.9
3.3
3.3
–
–
3.7
5.0
2.4
3.3
3.3
–
–
3.7
5.0
1.0
1.2
1.2
1.0
1.0
–
–
0.8
1.3
1.3
0.8
1.0
–
–
At 31 December 2018, mortality rates in the UK Plan are assumed to be in line with 100% of the S2NA Light tables for all members with
pensions of more than £50,000 pa at 31 December 2017 and S2NA tables for all other members (2017: same as at 31 December 2018).
These mortality tables are assumed to be projected by year of birth with allowance for future improvements in longevity in line with the
2017 CMI projections with a long-term rate of improvement of 1.25% pa for males and females (2016: projected by year of birth with
allowance for future improvements in longevity in line with the 2016 CMI projections with a long-term rate of improvement of 1.25% pa
for males and females).
At 31 December 2018 and 31 December 2017 the mortality rates in the Swiss Plan are assumed to be in line with the Swiss BVG 2015
generational tables.
128
128
MAN GROUP PLC ANNUAL REPORT 2018
MAN GROUP PLC ANNUAL REPORT 2018
FINANCIAL STATEMENTS
STRATEGIC
REPORT
CORPORATE
GOVERNANCE
FINANCIAL
STATEMENTS
SHAREHOLDER
INFORMATION
21. Pension continued
Illustrative life expectancies are set out in the table below (the UK Plan life expectancies are based on the S2NA tables).
Years
Life expectancy of male aged 60 at accounting date
Life expectancy of male aged 60 in 20 years
Life expectancy of female aged 60 at accounting date
Life expectancy of female aged 60 in 20 years
UK Plan
Swiss Plan
31 December
2018
26.8
28.4
29.0
30.5
31 December
2017
27.0
28.5
29.0
30.6
31 December
2018
31 December
2017
27.3
29.2
29.6
31.4
27.2
29.1
29.4
31.3
The table below illustrates the impact on the assessed value of the benefit obligations from changing the actuarial assumptions (in isolation).
The calculations to produce the below figures have been carried out using the same method and data as Man’s pension figures. Each
assumption has been varied individually and a combination of changes in assumptions could produce a different result.
As at 31 December 2018:
$m
Discount rate decreased by 0.1% p.a.
Inflation rate increased by 0.1% p.a.
One year increase in assumed life expectancy
UK Plan
Swiss Plan
Increase in obligation
6
2
13
1
–
–
The duration of a pension plan is the average term over which the plan’s benefits are expected to fall due, weighted by the present value of
each expected benefit payment. The duration of the UK Plan is approximately 16 years, and the duration of the Swiss Plan is approximately
22 years.
MAN GROUP PLC ANNUAL REPORT 2018
MAN GROUP PLC ANNUAL REPORT 2018
129
129
STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSSHAREHOLDER INFORMATION
FINANCIAL
STATEMENTS
Notes to the Group financial statements continued
21. Pension continued
The assets held by the two plans as at 31 December 2018 are as follows:
Swiss equities
Non-Swiss equities
Index-linked government bonds
Absolute return bonds
Swiss bonds
Non-Swiss bonds
Property
Hedge funds
LDI
Diversified growth funds
Man alternative risk premia fund
Cash
Other
Total assets
UK Plan
Swiss Plan
$m
–
–
42
97
–
–
–
–
104
50
48
35
–
376
%
–
–
11%
26%
–
–
–
–
28%
13%
13%
9%
–
100%
$m
3
4
–
–
4
6
3
1
–
–
–
2
1
24
%
12%
17%
–
–
17%
25%
13%
4%
–
–
–
8%
4%
100%
The investment strategy is set by the trustees of the Fund. The current strategy is broadly split into “growth” and “matching” portfolios.
The growth portfolio is invested in diversified growth funds and Man alternative risk premia. The matching portfolio is invested primarily
in government and corporate bonds (the latter through the “Absolute return bonds” holdings), and liability driven investment (“LDI”) funds.
The government bond assets and diversified growth funds have prices quoted in active markets and the absolute return bonds, LDI and
Man alternative risk premia are primarily unquoted. At 31 December 2018, around 25% of the Fund assets relate to those with quoted
prices and 75% with unquoted prices (2017: around 65% quoted and 35% unquoted). The Fund does not invest directly in property
occupied by Man or in Man’s own transferable financial securities. Part of the investment objective of the Fund is to minimise fluctuations in
the Fund’s funding levels due to changes in the value of the liabilities. This is primarily achieved using the LDI funds, whose main goal is to
hedge movements in the liabilities due to changes in interest rate and inflation expectations. The current investment strategy aims to hedge
around 100% of the movement in the “technical provisions” funding measure, as opposed to the IAS 19 accounting measure, due to both
interest rate and inflation expectation changes.
LDI primarily involves the use of government bonds (including re-purchase agreements) and derivatives such as interest rate and inflation
swaps. There are no annuities or longevity swaps. These instruments are typically priced and collateralised daily by the Fund’s LDI manager
and / or central clearing houses. Given that the purpose of LDI is to hedge corresponding liability exposures, the main risk is that the
investments held move differently to the liability exposures. This risk is managed by the Trustees, their advisers and the Fund’s LDI manager,
who regularly assess the position.
As the Swiss Plan is essentially a defined contribution plan with guarantees, the assets held aim to be at least as much as the total of
the member account balances at any point in time. Member account balances cannot reduce, but interest is only applied to the account
balances when sufficient surplus assets are available. As such there is no specific asset/liability matching strategy in place, but if the liabilities
(the sum of the member account balances) ever exceed the value of the assets, the Company will consider how to remove a deficit as
quickly as possible.
130
130
MAN GROUP PLC ANNUAL REPORT 2018
MAN GROUP PLC ANNUAL REPORT 2018
FINANCIAL STATEMENTS
STRATEGIC
REPORT
CORPORATE
GOVERNANCE
FINANCIAL
STATEMENTS
SHAREHOLDER
INFORMATION
22. Segmental analysis
The criteria for identifying an operating segment is that it is a component of Man whose results are regularly reviewed by the Board
and the Senior Management Executive Committee to make decisions about resources to be allocated to the segment and to assess its
performance. Management information regarding revenues, gross management fee margins, investment performance and distribution
costs relevant to the operation of the investment managers, products and the investor base are reviewed by the Board and the Senior
Management Executive Committee. A centralised shared infrastructure for operations, product structuring, distribution and support
functions for each of the five investment managers which Man incorporates (AHL, GLG, FRM, Numeric and GPM) means that operating
costs are not allocated to constituent parts of the investment management business. As a result, performance is assessed, resources are
allocated and other strategic and financial management decisions are determined by the Board and the Senior Management Executive
Committee on the basis of the investment management business of Man as a whole. Accordingly, we operate and report as a single
segment investment management business, together with relevant information regarding FUM flows, gross margins and distribution
costs, to allow for analysis of the direct contribution of products and the respective investor base.
23. Geographical disclosure
$m
Cayman Islands
Ireland
United Kingdom and the Channel Islands
United States of America
Other countries
Year ended 31 December 2018
Year ended 31 December 2017
Revenues by
fund location
380
202
124
107
147
960
Non-current
assets
–
–
83
795
132
1,010
Revenues by
fund location
Non-current
assets
428
198
110
127
205
1,068
–
–
153
865
102
1,120
Disclosure of revenue by geographic location is based on the registered domicile of the fund entity paying Man fees. Revenue from any
single fund during the year did not exceed 10% of total revenues. Non-current assets are allocated based on where the assets are located,
and include goodwill and other acquired intangible assets, other intangibles, leasehold improvements and equipment, and investments
in associates.
24. Foreign currencies
The majority of revenues, assets, liabilities and financing are denominated in USD and therefore Man’s presentation currency is USD.
For consolidated entities with a USD functional currency, monetary assets and liabilities denominated in foreign currencies are translated at each
balance sheet date rate. Non-monetary items carried at fair value that are denominated in foreign currencies are translated at the rates prevailing
at the date when the fair value was determined. Non-monetary items that are measured at historical cost in a foreign currency are not retranslated.
Transactions denominated in foreign currencies are converted at the spot rate at the date of the transaction or, if appropriate, the average rate for
the month in which the transaction occurs. Resulting exchange differences are recognised in the Group income statement.
For consolidated entities that have a functional currency other than USD, the assets and liabilities are translated into USD at the balance
sheet date rate. Income and expenses are translated at the average rate for the period in which the transactions occur. Resulting exchange
differences are recorded in other comprehensive income.
25. Fair value of financial assets/liabilities
Man discloses the fair value measurement of financial assets and liabilities using three levels, as follows:
– Level 1: quoted prices (unadjusted) in active markets for identical assets or liabilities.
– Level 2: inputs, other than quoted prices included within Level 1, that are observable for the asset or liability, either directly (i.e. as prices)
or indirectly (i.e. derived from prices).
– Level 3: inputs for the asset or liability that are not based on observable market data (unobservable inputs).
The fair value of financial assets and liabilities can be analysed as follows:
$m
Level 1
Level 2
Level 3
Total
Level 1
Level 2
Level 3
Total
31 December 2018
31 December 2017
Financial assets held at fair value:
Investments in fund products and other
investments (Note 13)
Investments in line-by-line consolidated
funds (Note 13)
Derivative financial instruments (Note 14)
Financial liabilities held at fair value:
Derivative financial instruments (Note 15)
Contingent consideration (Note 15)
MAN GROUP PLC ANNUAL REPORT 2018
MAN GROUP PLC ANNUAL REPORT 2018
3
–
–
3
–
–
–
246
316
16
578
15
–
15
155
41
–
196
–
212
212
404
357
16
777
15
212
227
3
–
–
3
–
–
–
137
452
9
598
10
–
10
112
–
–
112
–
243
243
252
452
9
713
10
243
253
131
131
STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSSHAREHOLDER INFORMATION
FINANCIAL
STATEMENTS
Notes to the Group financial statements continued
25. Fair value of financial assets/liabilities continued
During the year, there were no significant changes in the business or economic circumstances that affected the fair value of Man’s financial
assets and no significant transfers of financial assets or liabilities held at fair value between categories. For investments in fund products,
Level 2 investments comprise holdings primarily in unlisted, open-ended, active and liquid funds, such as seeding investments, which
have daily or weekly pricing derived from third-party information.
A transfer into Level 3 would be deemed to occur where the level of prolonged activity, as evidenced by subscriptions and redemptions,
is deemed insufficient to support a Level 2 classification. This, as well as other factors such as a deterioration of liquidity in the underlying
investments, would result in a Level 3 classification. The material holdings within this category are priced on a recurring basis based on
information supplied by third-parties, with a liquidity premium adjustment applied based on the expected timeframe for exit. Reasonable
changes in the liquidity premium assumptions would not have a significant impact on the fair value.
The fair values of non-current assets and liabilities held for sale (Note 13.2) are equal to the carrying values of $39 million (2017: $145 million)
and nil respectively (2017: $66 million), and would be classified within Level 2. The fair value of borrowings (Note 12) is $150 million
(2017: $156 million) and would have been classified as Level 1.
The basis of measuring the fair value of Level 3 investments is outlined in Note 13.1. The movements in Level 3 financial assets and financial
liabilities measured at fair value are as follows:
$m
Level 3 financial assets/(liabilities) held at fair value
At beginning of the year
Transferred into Level 3
Purchases
Total (losses)/gains in the Group statement of comprehensive income
(Loss)/profit included in income statement
Included in other comprehensive income
Sales or settlements
At year end
Total gains/(losses) for the year included in the Group statement
of comprehensive income for assets/(liabilities) held at year end
Year ended 31 December 2018
Year ended 31 December 2017
Financial
assets at fair
value
through
profit or loss
Financial
liabilities at
fair value
through
profit or loss
Financial
assets at fair
value through
profit or loss
Financial
liabilities at fair
value through
profit or loss
112
22
88
(9)
(9)
–
(17)
196
(9)
(243)
–
(1)
3
3
–
29
(212)
68
–
47
5
5
–
(8)
112
(161)
–
(52)
(41)
(41)
–
11
(243)
3
5
(41)
The financial liabilities in Level 3 relate to the contingent consideration payable.
$m
Numeric
Aalto
Other
Total
Numeric
Aalto
Other
Total
Year ended 31 December 2018
Year ended 31 December 2017
Contingent consideration payable
At beginning of the year
Purchases
Revaluation of contingent consideration
Unwind of contingent consideration
discount (Note 6)
Sales or settlements
At year end
175
–
(17)
20
(6)
172
60
–
(10)
8
(21)
37
8
1
(4)
–
(2)
3
243
1
(31)
28
(29)
212
150
–
15
18
(8)
175
–
52
1
7
–
60
11
–
(1)
1
(3)
8
161
52
15
26
(11)
243
The revaluation of contingent consideration in the Group income statement is an adjustment to the fair value of expected acquisition earn-
out payments. The $17 million decrease in the fair value of the Numeric contingent consideration is largely as a result of lower than expected
Numeric performance during 2018. The $15 million increase in the fair value of the Numeric contingent consideration in 2017 was driven
by higher than expected Numeric performance during 2017.
The Numeric contingent consideration relates to an ongoing 18.3% equity interest of Numeric management in the business and profit interests
of 16.5%, pursuant to a call and put option arrangement. The call and put option structure means that it is virtually certain that Man will elect
to, or be obliged to, purchase the interests held by Numeric management at five (call option) or five and a half (put option) years post-closing
(5 September 2014). The maximum aggregate amount payable by Man in respect of the option consideration is capped at $275 million.
The Aalto contingent consideration is dependent on levels of run rate management fees measured following one, four, six and eight
years from completion on 1 January 2017. The maximum aggregate amount payable by Man is capped at $207 million.
The fair values are based on discounted cash flow calculations, which represent the expected future profits of each business as per
the earn-out arrangements. The fair values are determined using a combination of inputs, such as weighted average cost of capital, net
management fee margins, performance, operating margins and the growth in FUM, as applicable. The post-tax discount rates applied
are 11% for management fees and 17% for performance fees for Numeric and Other, and 15% for Aalto.
132
132
MAN GROUP PLC ANNUAL REPORT 2018
MAN GROUP PLC ANNUAL REPORT 2018
FINANCIAL STATEMENTS
STRATEGIC
REPORT
CORPORATE
GOVERNANCE
FINANCIAL
STATEMENTS
SHAREHOLDER
INFORMATION
25. Fair value of financial assets/liabilities continued
The most significant inputs into the valuations at 31 December 2018 are as follows:
Weighted average net management fee margin (over the remaining earn-out period)
Compound growth in average FUM (over the remaining earn-out period)
Numeric
0.4%
12%
Aalto
0.7%
21%
Changes in inputs would result in the following increase/(decrease) in the fair value of the contingent consideration creditor at 31 December 2018,
with a corresponding (expense)/gain in the Group income statement:
Weighted average net management fee margin
0.1% increase
0.1% decrease
Compound growth in average FUM
5% increase
5% decrease
26. Related party transactions
Numeric
Aalto
50
(50)
7
(7)
11
(13)
15
(11)
Related parties comprise key management personnel, associates and fund entities which Man is deemed to control. All transactions with
related parties were carried out on an arm’s length basis.
Refer to Note 17 for details of income earned from associates. Management fees earned from fund entities in which Man holds a
controlling interest are detailed in Note 13. Contingent consideration payable to Numeric and Aalto management is detailed in Note 25.
The Executive Committee, together with the non-executive directors, are considered to be the Group’s key management, being those
directors, partners and employees having authority and responsibility for planning, directing and controlling the activities at Man. The
average key management headcount for the year ended 31 December 2018 has increased by around 6% from 2017.
Key management compensation
Salaries and other short-term employee benefits1
Share-based payments
Fund product based payment charge
Pension costs (defined contribution)
Total
Note:
1
Includes salary, benefits and cash bonus.
Year ended
31 December
2018
$’000
Year ended
31 December
2017
$’000
30,641
11,884
8,224
643
51,392
42,456
8,636
7,743
577
59,412
Man made a charitable donation of £25,500 to Greenhouse Sports Ltd during the year (2017: £25,500) and, £7,200 (2017: £3,700) was
paid to VWA Search Ltd, a recruitment firm, which are considered related parties.
27. Financial guarantees and commitments
27.1 Daylight settlement facilities
From time to time Man provides a guarantee over certain bank accounts of structured product entities to secure daylight settlement facilities
which allow for the efficient movement of cash during the trading day. In aggregate these guarantees had a notional amount of $50 million
(2017: $50 million). Ordinarily no net exposure exists at the end of any given day and the fair value of these commitments has been
determined to be nil (2017: nil).
27.2 Intra-day and overnight credit facilities
Man guarantees the obligations under a $100 million intra-day (2017: $500 million) and $25 million overnight credit facilities (2017: $25 million),
used to settle the majority of the Group’s banking arrangements. As at 31 December 2018, the exposure under the intra-day facility is
nil (2017: nil) and the overnight facility exposure is nil (2017: nil). The fair value of these commitments has been determined to be nil
(2017: nil).
MAN GROUP PLC ANNUAL REPORT 2018
MAN GROUP PLC ANNUAL REPORT 2018
133
133
STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSSHAREHOLDER INFORMATION
FINANCIAL
STATEMENTS
Notes to the Group financial statements continued
27. Financial guarantees and commitments continued
27.3 Operating lease commitments
$m
Operating lease commitments
Offsetting non-cancellable sublease
arrangements (included net above)
31 December 2018
Within
1 year
18
17
1–5
years
64
57
After
5 years
275
Total
357
11
85
Within
1 year
27
20
31 December 2017
1–5
years
56
After
5 years
292
73
15
Total
375
108
Rent and associated expenses for all leases are recognised on a straight-line basis over the life of the respective lease. The operating
lease commitments primarily include the agreements for lease contracts for our Riverbank House premises in London (expiring in 2035)
and our main New York office (expiring in 2022), which aggregate to $304 million (2017: $332 million).
28. Other matters
Man is subject to various other claims, assessments, regulatory enquiries and investigations in the normal course of its business. The directors
do not expect such matters to have a material adverse effect on the financial position of the Group.
29. Group investments
Details of the Group’s subsidiaries and consolidated structured entities, which have been consolidated into the Group’s results, and
details of investments in associates are provided below. The country of operation is the same as the country of incorporation, the year
end is 31 December, and effective Group interest represents both the percentage held and voting rights, unless otherwise stated.
Subsidiaries
Principal operating subsidiaries
Registered address
Direct or
indirect
Country of
incorporation
Effective Group
interest %
Asset management
AHL Partners LLP1
GLG Partners LP
Man Investments (CH) AG
Numeric Investors LLC2
Group services company
E D & F Man Limited
Man Investments AG
Man Investments Holdings Inc.
Group treasury and holding company
Man Investments Finance Limited
Group holding and other subsidiaries
Man Group plc
Man Strategic Holdings Limited
Man Group UK Limited
Man Group Holdings Limited
Aalto Invest Cayman Limited
Riverbank House, 2 Swan Lane, London, EC4R 3AD
Riverbank House, 2 Swan Lane, London, EC4R 3AD
Huobstrasse 3, 8808 Pfäffikon SZ
4001 Kennett Pike, Suite 302, Wilmington DE, 19807
UK
Indirect
Indirect
UK
Indirect Switzerland
US
Indirect
Riverbank House, 2 Swan Lane, London, EC4R 3AD
Huobstrasse 3, 8808 Pfäffikon SZ
4001 Kennett Pike, Suite 302, Wilmington DE 19807
Indirect
UK
Indirect Switzerland
US
Indirect
Riverbank House, 2 Swan Lane, London, EC4R 3AD
Indirect
UK
Riverbank House, 2 Swan Lane, London, EC4R 3AD
Riverbank House, 2 Swan Lane, London, EC4R 3AD
Riverbank House, 2 Swan Lane, London, EC4R 3AD
Riverbank House, 2 Swan Lane, London, EC4R 3AD
PO Box MP10085, 3rd Floor Zephyr House,
122 Mary Street, George Town, Grand Cayman,
KY1-1001, Cayman Islands
Direct
Indirect
Indirect
Indirect
UK
UK
UK
UK
Cayman
Man Global Private Markets (UK) Limited
Riverbank House, 2 Swan Lane, London, EC4R 3AD
Indirect
UK
(Previously Aalto Invest UK Ltd)
E. D. & F. Man Investments B.V.
Beurs – World Trade Center, Beursplein 37,
Indirect Netherlands
3011 AA, Rotterdam
E D & F Man Investments Limited
FA Sub 2 Limited
15 Esplanade, St Helier, JE1 1RB
Ritter House, Wickhams Cay II, Road Town, Tortola,
Indirect
Indirect
Jersey
BVI
VG1110
FA Sub 3 Limited
Ritter House, Wickhams Cay II, Road Town, Tortola,
Indirect
BVI
VG1110
Riverbank House, 2 Swan Lane, London, EC4R 3AD
Financial Risk Management Limited
FRM Holdings Limited
Gaspé House, 66-72 Esplanade, St Helier, JE2 3QT
FRM Investment Management GP (USA) LLC 4001 Kennett Pike, Suite 302, Wilmington DE 19807
P.O. Box 186, Royal Chambers, St Julian’s Avenue,
FRM Investment Management Limited
UK
Indirect
Jersey
Indirect
Indirect
US
Indirect Guernsey
St Peter Port, GY1 4HP
FRM Investment Management (USA) LLC
FRM Thames Fund General Partner 1 Limited 89 Nexus Way, Camana Bay, P.O. BOX 31106,
4001 Kennett Pike, Suite 302, Wilmington DE 19807
Indirect
Indirect
US
Cayman
Grand Cayman, KY1-1205
GLG Capital Management LLC
4001 Kennett Pike, Suite 302, Wilmington DE 19807
Indirect
US
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
134
134
MAN GROUP PLC ANNUAL REPORT 2018
MAN GROUP PLC ANNUAL REPORT 2018
FINANCIAL STATEMENTS
STRATEGIC
REPORT
CORPORATE
GOVERNANCE
FINANCIAL
STATEMENTS
SHAREHOLDER
INFORMATION
29. Group investments continued
Subsidiaries continued
Group holding and other subsidiaries
Registered address
Direct or
indirect
Country of
incorporation
Effective Group
interest %
GLG Holdings Limited
GLG LLC
GLG Partners GP LLC
GLG Partners Hong Kong Limited
Wickhams Cay, PO Box 662, Road Town, Tortola
4001 Kennett Pike, Suite 302, Wilmington DE 19807
4001 Kennett Pike, Suite 302, Wilmington DE 19807
Unit 2206-2207, 22/F Man Yee Building,
No. 68 Des Voeux Road, Central
BVI
Indirect
US
Indirect
Indirect
US
Indirect Hong Kong
GLG Partners Limited
GLG Partners UK Group Ltd
GLG Partners UK Holdings Ltd
Man Group Investments Limited (previously
Riverbank House, 2 Swan Lane, London, EC4R 3AD
Riverbank House, 2 Swan Lane, London, EC4R 3AD
Riverbank House, 2 Swan Lane, London, EC4R 3AD
Riverbank House, 2 Swan Lane, London, EC4R 3AD
Indirect
Indirect
Indirect
Indirect
UK
UK
UK
UK
GLG Partners UK Ltd)
Knox Pines Limited
Man Asset Management (Cayman) Limited
Wickhams Cay, PO Box 662, Road Town, Tortola
89 Nexus Way, Camana Bay, P.O. BOX 31106,
Indirect
Indirect
BVI
Cayman
Grand Cayman, KY1-1205
Man Asset Management (Ireland) Limited
Man Australia GP Limited
Man Australia LP
70 Sir John Rogerson’s Quay, Dublin 2
Riverbank House, 2 Swan Lane, London, EC4R 3AD
Level 27, Chifley Tower, 2 Chifley Square, Sydney,
Indirect
Indirect
Indirect
Ireland
UK
Australia
NSW 2000
Man (Europe) AG
Man Fund Management (Guernsey) Limited
Austrasse 56, 9490, Vaduz, Liechtenstein
P.O. Box 186, Royal Chambers, St Julian’s Avenue,
Indirect Liechtenstein
Indirect Guernsey
St Peter Port, GY1 4HP
Man Fund Management Limited
Man Fund Management Netherlands BV
70 Sir John Rogerson’s Quay, Dublin 2
Beurs – World Trade Center, Beursplein 37,
Ireland
Indirect
Indirect Netherlands
3011 AA, Rotterdam
Man Fund Management UK Limited
Man GLG Partners LLP1
Man Global Private Markets (USA) Inc.
Man Global Private Markets SLP LLC
Man Group Japan Limited
Riverbank House, 2 Swan Lane, London, EC4R 3AD
Riverbank House, 2 Swan Lane, London, EC4R 3AD
4001 Kennett Pike, Suite 302, Wilmington DE 19807
4001 Kennett Pike, Suite 302, Wilmington DE 19807
P.O. Box 186, Royal Chambers, St Julian’s Avenue,
UK
Indirect
UK
Indirect
US
Indirect
Indirect
US
Indirect Guernsey
St Peter Port, GY1 4HP
Man Group Services Limited
Man Investments Australia Limited
Riverbank House, 2 Swan Lane, London, EC4R 3AD
Level 27, Chifley Tower, 2 Chifley Square, Sydney,
Indirect
Indirect
UK
Australia
NSW 2000
Man Investments Finance Inc.
Man Investments Holdings Limited
Man Investments (Hong Kong) Limited
4001 Kennett Pike, Suite 302, Wilmington DE 19807
Riverbank House, 2 Swan Lane, London, EC4R 3AD
Unit 2206-2207, 22/F Man Yee Building,
US
Indirect
Indirect
UK
Indirect Hong Kong
No.68 Des Voeux Road, Central
Man Investments Inc.
Man Investments Limited
Man Investment Management (Shanghai)
15 North Mill Street, Nyack, NY 10960, United States
Riverbank House, 2 Swan Lane, London, EC4R 3AD
Room 1857, No. 222 Yan An East Road, Huangpu
Indirect
Indirect
Indirect
US
UK
China
Co., Ltd
District, Shanghai, 200002
Man Investments (Shanghai) Limited
Room 1818, Bund Centre, No. 222 Yan An East Road,
Indirect
China
Man Investments (USA) Corp.
Man Investments USA Holdings Inc.
Man Mash Limited
Man Principal Strategies Corp
Man Solutions Limited
Man Solutions (USA) LLC
Man Solutions SLP LLC
Man UK Strategies Limited
Man Valuation Services Limited
Mount Garnet Limited
Mount Granite Limited
Shanghai, 200002
4001 Kennett Pike, Suite 302, Wilmington DE 19807
4001 Kennett Pike, Suite 302, Wilmington DE 19807
Riverbank House, 2 Swan Lane, London, EC4R 3AD
4001 Kennett Pike, Suite 302, Wilmington DE 19807
Riverbank House, 2 Swan Lane, London, EC4R 3AD
4001 Kennett Pike, Suite 302, Wilmington DE 19807
4001 Kennett Pike, Suite 302, Wilmington DE 19807
Riverbank House, 2 Swan Lane, London, EC4R 3AD
Riverbank House, 2 Swan Lane, London, EC4R 3AD
Wickhams Cay, PO Box 662, Road Town, Tortola
Wickhams Cay, PO Box 662, Road Town, Tortola
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
US
US
UK
US
UK
US
US
UK
UK
BVI
BVI
MAN GROUP PLC ANNUAL REPORT 2018
MAN GROUP PLC ANNUAL REPORT 2018
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
135
135
STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSSHAREHOLDER INFORMATION
FINANCIAL
STATEMENTS
Notes to the Group financial statements continued
29. Group investments continued
Subsidiaries continued
Group holding and other subsidiaries
Numeric Holdings LLC2
Numeric Midco LLC2
RBH Holdings (Jersey) Limited
RMF Co-Investment Limited
Silvermine Capital Management LLC
GLG Holdings Inc. (in dissolution)
GLG Inc. (in dissolution)
GLG Partners Inc. (in dissolution)
GLG Partners Intermediate GP Ltd (in
liquidation)
Registered address
4001 Kennett Pike, Suite 302, Wilmington DE 19807
4001 Kennett Pike, Suite 302, Wilmington DE 19807
IFC 5 , St Helier , JE1 1ST, Jersey
PO Box 309, Ugland House, South Church Street,
George Town, Grand Cayman, KY1-1104
4001 Kennett Pike, Suite 302, Wilmington DE 19807
4001 Kennett Pike, Suite 302, Wilmington DE 19807
4001 Kennett Pike, Suite 302, Wilmington DE 19807
4001 Kennett Pike, Suite 302, Wilmington DE 19807
PO Box 309, Ugland House, South Church Street,
George Town, Grand Cayman, KY1-1104
Direct or
indirect
Country of
incorporation
Effective Group
interest %
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
Indirect
US
US
Jersey
Cayman
US
US
US
US
Cayman
GLG Partners Services Limited (in liquidation) Po Box 309, Ugland House, South Church Street,
Indirect
Cayman
George Town, Grand Cayman, KY1-1104
GLG Partners Services LP (in liquidation)
Po Box 309, Ugland House, South Church Street,
Indirect
Cayman
George Town, Grand Cayman, KY1-1104
Man Financial Australia Pty Limited
Level 27, Chifley Tower, 2 Chifley Square, Sydney,
Indirect
Australia
(in liquidation)
NSW 2000
Man Litchfield Inc. (in dissolution)
Man Washington Inc. (in dissolution)
Seabrook Holding Inc (in dissolution)
4001 Kennett Pike, Suite 302, Wilmington DE 19807
4001 Kennett Pike, Suite 302, Wilmington DE 19807
4001 Kennett Pike, Suite 302, Wilmington DE 19807
Indirect
Indirect
Indirect
US
US
US
Notes:
1 The financial year end is 31 March.
2 Numeric Management hold an 18.3% equity interest in the business as part of the acquisition contingent consideration, which is deemed to be a financial liability (Note 25).
Consolidated structured entities
The following investment funds, which the Group is deemed to control, have been consolidated (Note 13):
Strategy
AHL Insight2
Registered address
Country of
incorporation/
principal
place of
operation
% of net asset
value held
C/O Citi Hedge Fund Services Ltd, Hemisphere House, Hamilton
Bermuda
HM 11, Bermuda
American Beacon AHL Target Risk Fund2
Man GLG Equity Long Shore Enhanced1
Kansas City, MO 64121-9643
c/o Maples Corporate Services Limited, PO Box 309,
Ugland House, Grand Cayman KY 1-11-4,Cayman Islands
Man GLG European Income Opportunities2
Man GLG Global Emerging Markets Bond2
Man GLG Iberian Opportunities Fund2
Man GLG Select Opportunities2
70 Sir John Rogerson’s Quay, Dublin 2, Ireland
70 Sir John Rogerson’s Quay, Dublin 2, Ireland
70 Sir John Rogerson’s Quay, Dublin 2, Ireland
c/o Maples Corporate Services Limited, PO Box 309,
Ugland House, Grand Cayman KY 1-11-4,Cayman Islands
Man GPM US Residential Real Estate Fund2 Suite 400, Wilmington, New Castle County, Delaware 19808
Man Numeric China A Core1
c/o Maples Corporate Services Limited, PO Box 309,
Man Numeric European Equity2
Man Numeric Global Equity2
Man Numeric US High Yield Bond2
Ugland House, Grand Cayman KY 1-11-4,Cayman Islands
70 Sir John Rogerson’s Quay, Dublin 2, Ireland
70 Sir John Rogerson’s Quay, Dublin 2, Ireland
c/o Maples Corporate Services Limited, PO Box 309,
Ugland House, Grand Cayman KY 1-11-4,Cayman Islands
Man Numeric US Liquid Private Equity
Alternative1
c/o Maples Corporate Services Limited, PO Box 309,
Ugland House, Grand Cayman KY 1-11-4,Cayman Islands
USA
Cayman
Ireland
Ireland
Ireland
Cayman
USA
Cayman
Ireland
Ireland
Cayman
Cayman
Notes:
1 Classified as non-current assets and liabilities held for sale (Note 13.2).
2 Consolidated on a line-by-line basis (Note 13.2).
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
100
80
100
49
59
60
70
100
100
98
49
100
100
136
136
MAN GROUP PLC ANNUAL REPORT 2018
MAN GROUP PLC ANNUAL REPORT 2018
FINANCIAL STATEMENTS
STRATEGIC
REPORT
CORPORATE
GOVERNANCE
FINANCIAL
STATEMENTS
SHAREHOLDER
INFORMATION
29. Group investments continued
Investments in associates
Nephila Holdings Limited
Victoria Place, 3rd Floor, West, 31 Victoria Street, Hamilton, HM10
Bermuda
Registered address
Country of
incorporation/
principal
place of
operation
% of net asset
value held
181
Note:
1 18% represents Man’s ownership of class B common shares which were held until November 2018, with no interest remaining at 31 December 2018. Man’s participation in the
profits of Nephila is governed by the share class rights and therefore does not relate proportionately to the ownership interest held. Man considers that this equity interest, Man’s
ability to veto Nephila’s annual business plan, and the presence of a Man member on the Nephila board of directors provides Man with the power to participate in the financial and
operating policy decisions, and equates to significant influence.
Man sold its 18% investment in Nephila in November 2018 (Note 17).
MAN GROUP PLC ANNUAL REPORT 2018
MAN GROUP PLC ANNUAL REPORT 2018
137
137
STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSSHAREHOLDER INFORMATION
FINANCIAL
STATEMENTS
Parent Company financial statements
Balance sheet
$m
Fixed assets
Investment in subsidiaries
Current assets
Debtors
Creditors – amounts falling due within one year
Other creditors and accruals
Net current assets
Creditors – amounts falling after more than one year
Borrowings
Total assets less current liabilities
Capital and reserves
Called up share capital
Share premium account
Capital reserve
Merger reserve
Treasury reserve
Profit and loss account
Total shareholders’ funds
At 31
December
2018
At 31
December
2017
Note
2
3
4
5
2,439
2,439
217
(70)
147
275
(85)
190
(150)
2,436
(150)
2,479
55
32
8
499
(114)
1,956
2,436
56
26
7
499
–
1,891
2,479
The profit after tax for the year was $334 million (2017: $356 million). During the year the Company received dividend income of $358 million
from subsidiaries (2017: $372 million). In accordance with Section 408 of the Act, a separate profit and loss account has not been
presented for the Company. Details of audit fees are included on page 62.
The financial statements of the Company (registered number 08172396) were approved by the Board of directors and authorised for issue
on 1 March 2019 and were signed on its behalf by:
Luke Ellis
Chief Executive Officer
Mark Jones
Chief Financial Officer
Statement of changes in equity
$m
At 1 January 2017
Issue of ordinary share capital
Repurchase of shares
Profit for the financial
year/total comprehensive
income
Dividends
At 31 December 2017
Issue of ordinary share capital
Repurchase of shares
Profit for the financial
year/total comprehensive
income
Transfer to Treasury shares
Settlement of Aalto year one
contingent consideration
Dividends
At 31 December 2018
Called up share
capital
Share premium
account
Capital
reserve
Merger
reserve
Treasury
reserve
Profit and loss
account
58
–
(2)
–
–
56
–
(1)
–
–
–
–
55
19
7
–
–
–
26
6
–
–
–
–
–
32
5
–
2
–
–
7
–
1
–
–
–
–
8
491
8
–
–
–
499
–
–
–
–
–
–
499
–
–
–
–
–
–
–
–
–
(121)
7
–
(114)
1,794
–
(101)
356
(158)
1,891
–
(201)
334
121
–
(189)
1,956
Total
2,367
15
(101)
356
(158)
2,479
6
(201)
334
–
7
(189)
2,436
The allotted and fully paid share capital of the Company is detailed in Note 20 of the Group financial statements. The Company has
distributable reserves of $2.0 billion at 31 December 2018 (31 December 2017: $1.9 billion).
138
138
MAN GROUP PLC ANNUAL REPORT 2018
MAN GROUP PLC ANNUAL REPORT 2018
FINANCIAL STATEMENTS
STRATEGIC
REPORT
CORPORATE
GOVERNANCE
FINANCIAL
STATEMENTS
SHAREHOLDER
INFORMATION
Notes to the Parent Company financial statements
1. Basis of preparation
The separate financial statements of the Company are presented as required by the Companies Act 2006.
The Company meets the definition of a qualifying entity under Financial Reporting Standard 100 as issued by the Financial Reporting
Council, and accordingly chooses to apply the Financial Reporting Standard 101 (FRS 101) ‘Reduced Disclosure Framework’ as issued
by the Financial Reporting Council to these financial statements. In doing so, the Company applies the requirements of IFRS 1.6-33 and
related appendices.
As permitted by FRS 101, the Company has taken advantage of the disclosure exemptions available under that standard in relation to
share-based payments, financial instruments, capital management, presentation of comparative information in respect of certain assets,
presentation of a cash-flow statement and certain related party transactions. Where required, equivalent disclosures are given in the
Group financial statements.
The financial statements have been prepared on the historical cost basis. The principal accounting policies adopted are the same as those
set out in Note 1 to the Group financial statements, except as noted below.
The Company’s financial statements are prepared on a going concern basis. For further details, refer to Note 1 to the Group financial statements.
Foreign currency transactions
Foreign currency transactions are translated into the functional currency using the spot rate at the date of the transaction. Foreign exchange
gains and losses resulting from the settlement of such transactions, and from the translation of monetary assets and liabilities denominated
in foreign currencies at period end exchange rates, are recognised in the profit and loss account.
Dividends
Dividend distributions to the Company’s shareholders are recognised directly in equity in the period in which the dividend is paid or
approved by the Company’s shareholders, if required. Dividends received from subsidiary undertakings are recognised as income in
the period in which they are received. Refer to Note 9 to the Group financial statements for details of dividends paid during the year.
2. Investments in subsidiaries
$m
Shares in Group undertakings
At 1 January and 31 December
2018
2017
2,439
2,439
The Company’s shares in subsidiary undertakings are stated in the balance sheet of the Company at cost less accumulated impairment
of nil (2017: nil). A complete list of the Company’s direct and indirect subsidiaries are provided in Note 29 to the Group financial statements.
3. Debtors – amounts falling due within one year
$m
Current tax asset
Amounts owed by Group undertakings
4. Creditors – amounts falling due within one year
$m
Amounts owed to Group undertakings
Other creditors
31 December
2018
31 December
2017
6
211
217
4
271
275
31 December
2018
31 December
2017
4
66
70
9
76
85
Other creditors includes $63 million (2017: $74 million) relating to the share repurchase which was partially completed during the year
(see Note 20 to the Group financial statements).
MAN GROUP PLC ANNUAL REPORT 2018
MAN GROUP PLC ANNUAL REPORT 2018
139
139
STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSSHAREHOLDER INFORMATION
FINANCIAL
STATEMENTS
Notes to the Parent Company financial statements continued
5. Creditors – amounts falling due after more than one year
Borrowings relate to the 2024 fixed rate reset callable guaranteed subordinated notes issued by the Company, as detailed in Note 12
to the Group financial statements.
6. Directors’ remuneration
Details of the individual directors’ emoluments and interests are disclosed in the Directors’ Remuneration report on pages 67 to 89.
The directors of the Company were paid by another Group company in the year.
7. Statutory and other information
Shares in the Company are awarded to directors and employees through the Group’s share schemes. Details relating to these share grants
are provided in Note 19 to the Group financial statements.
140
140
MAN GROUP PLC ANNUAL REPORT 2018
MAN GROUP PLC ANNUAL REPORT 2018
FINANCIAL STATEMENTS
STRATEGIC
REPORT
CORPORATE
GOVERNANCE
FINANCIAL
STATEMENTS
SHAREHOLDER
INFORMATION
Five year record
Unaudited
$m
Income statement
Gross management and other fees
Performance fees
Profit before adjusting items
Adjusting items1
Pre-tax profit/(loss)
Tax (expense)/credit
Profit/(loss) for the year
Adjusted net management fee profit before tax
Adjusted net performance fee profit before tax
Year to
31 December
2018
Year to
31 December
2017
Year to
31 December
2016
Year to
31 December
2015
Year to
31 December
2014
834
126
251
27
278
(5)
273
217
34
781
287
384
(112)
272
(17)
255
203
181
746
81
205
(477)
(272)
6
(266)
178
27
833
302
400
(216)
184
(13)
171
194
206
810
340
481
(97)
384
(19)
365
198
283
Earnings per share (diluted)
17.0
15.3
(15.8)
10.0
20.5
Balance sheet ($m)
Net cash
Net assets
Other statistics
Post-tax return on equity (%)
220
1,593
229
1,716
277
1,674
458
2,215
589
2,434
16.9
15.2
(12.5)
7.5
15.8
Cash flow from operating activities (before working capital movements) ($m)
311
431
245
402
463
Ordinary dividends per share (cents)
11.8
10.8
9.0
10.2
10.1
Funds under management ($bn)
108.5
109.1
80.9
78.7
72.9
Average headcount2
Sterling/USD exchange rates
Average
Year end
1,376
1,313
1,250
1,183
1,078
0.7489
0.7837
0.7759
0.7396
0.7384
0.8093
0.6544
0.6786
0.6072
0.6419
Notes:
1 Statutory profit/(loss) before tax is adjusted to give a fuller understanding of the underlying profitability of the business. See page 142 to 145 for details of alternative performance measures.
2 The average headcount includes directors, employees, partners and contractors.
MAN GROUP PLC ANNUAL REPORT 2018
MAN GROUP PLC ANNUAL REPORT 2018
141
141
STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSSHAREHOLDER INFORMATION
FINANCIAL
STATEMENTS
Alternative performance measures
We assess the performance of the Group using a variety
of alternative performance measures (APMs). We discuss
the Group’s results on an ‘adjusted’ basis as well as a
statutory basis. The rationale for using adjusted measures
is explained below.
We also explain financial performance using measures that are
not defined under IFRS and are therefore termed ‘non-GAAP’
measures. These non-GAAP measures are explained below.
The alternative performance measures we use may not be directly
comparable with similarly titled measures by other companies.
Funds under management (FUM)
FUM is the assets that the Group manages for investors in fund
entities. FUM is a key indicator of our performance as an investment
manager and our ability to remain competitive and build a
sustainable business. FUM is measured based on management fee
earning capacity. Average FUM multiplied by our net management
fee margin (see below) equates to our management fee earning
capacity. FUM is shown by product groupings that have similar
characteristics (as shown on page 21). Management focus on
the movements in FUM split between the following categories:
Net inflows/outflows
Net inflows/outflows are a measure of our ability to attract and
retain investor capital. Net flows are calculated as sales less
redemptions. Further details are included on page 21.
Investment movement
Investment movement is a measure of the performance of the
funds we manage for our investors. It is calculated as the fund
performance of each strategy multiplied by the FUM in that
strategy. Further details are included on page 21.
FX and other movements
Some of the Group’s FUM is denominated in currencies other
than USD. FX movements represent the impact of translating
non-USD denominated FUM into USD. Other movements principally
relate to maturities and leverage movements.
Asset weighted outperformance versus peers
The asset weighted outperformance relative to peers for the
period stated is calculated using the daily asset weighted average
performance relative to peers for all strategies where we have
identified and can access an appropriate peer composite. The
performance of our strategies is measured net of management
fees charged and, as applicable, performance fees charged. As
at 31 December 2018 it covers 89% of the FUM of the Group
and excludes infrastructure mandates, Global Private Markets and
collateralised loan obligations. Asset weighted outperformance
versus peers is a KPI (page 18).
Net management fee revenue and margins
Margins are an indication of the revenue margins negotiated with
our institutional and retail investors net of any distribution costs
paid to intermediaries and are a primary indicator of future revenues.
Net management fee revenue is defined as gross management fee
revenue and share of post-tax profits of associates less distribution
costs, plus the third-party share of management fees relating
to consolidated fund entities (Note 13.2 to the Group financial
statements) which are therefore externally generated. Net
management fee margin is calculated as net management fee
revenue, excluding share of post-tax profits of associates, divided
by FUM. Net management fee revenue and margins are shown
on page 22.
Core net management fee revenue
Core net management fee revenue excludes net management fee
revenue relating to guaranteed products, sales commission income
from Nephila and share of post-tax profits of associates. These
items have been excluded in order to better present the core
business given the roll-off of the legacy guaranteed product FUM,
income from the Nephila sales commission agreement which ended
during 2017 (Note 17), and share of post-tax profits of associates
which is generated externally and for which our remaining equity
interest was sold during 2018 (Note 17). The detailed calculation
of core net management fee revenue is shown on page 22.
Run rate net management fee revenue and margins
In addition to the net management fee revenue and margins for
the year, as detailed above, we also use run rate net management
fee revenue and run rate margins as at the end of the year. These
measures give the most up to date indication of our revenue
streams at the period end date. The run rate net management fee
margin is calculated as net management fee revenue for the last
quarter divided by the average FUM for the last quarter on a fund
by fund basis. Run rate net management fee revenue is calculated
as the run rate net management fee margin applied to the closing
FUM as at the period end, plus our share of post-tax profits of
associates for the previous 12 months.
Adjusted profit before tax and adjusted earnings per share
Adjusted profit before tax is a measure of the Group’s underlying
profitability. The directors consider that in order to assess underlying
operating performance, the Group’s profit period on period is most
meaningful when considered on a basis which reflects the revenues
and costs that drive the Group’s cash flows and inform the base
on which the Group’s variable compensation is assessed, and
therefore excludes acquisition and disposal related items (including
non-cash items such as amortisation of acquired intangible assets
and deferred tax movements relating to the recognition of tax
assets in the US), impairment of assets, costs relating to substantial
restructuring plans, and certain significant event driven gains
or losses. The directors are consistent in their approach to the
classification of adjusting items period to period, maintaining an
appropriate symmetry between losses and gains and the reversal
of any accruals previously classified as adjusting items.
142
142
MAN GROUP PLC ANNUAL REPORT 2018
MAN GROUP PLC ANNUAL REPORT 2018
FINANCIAL STATEMENTS
STRATEGIC
REPORT
CORPORATE
GOVERNANCE
FINANCIAL
STATEMENTS
SHAREHOLDER
INFORMATION
Adjusted earnings per share (EPS) is calculated as adjusted profit after tax divided by the weighted average diluted number of shares.
The reconciliation of statutory profit before tax to adjusted profit before tax, and the reconciliation of statutory diluted EPS to the adjusted
EPS measures are shown below.
$m
Statutory profit before tax
Adjusting items:
Acquisition and disposal related
Amortisation of acquired intangible assets
Revaluation of contingent consideration
Unwind of contingent consideration discount
Gain on sale of associate
Reassessment of litigation provision
Compensation – restructuring
Other costs – restructuring
Adjusted profit before tax
Tax on adjusted profit
Adjusted profit after tax
Note to the
Group financial
statements
Year ended
31 December
2018
Year ended
1 December
2017
278
272
10
25
6
16
4
5
83
(31)
28
(113)
–
1
5
251
(35)
216
84
15
26
–
(24)
4
7
384
(47)
337
Further details on adjusting items are included within the related notes to the Group financial statements.
The impact of adjusting items on the Group’s tax expense is outlined below:
$m
Statutory tax expense
Less tax credit on adjusting items:
Amortisation of acquired intangible assets
Compensation – restructuring
Other costs – restructuring
Tax adjusting item
Tax expense on adjusted profit before tax
Made up of:
Tax expense on adjusted management fee profit before tax
Tax expense on adjusted performance fee profit before tax
Note to the
Group financial
statements
Year ended
31 December
2018
Year ended
31 December
2017
7
5
10
–
–
20
35
28
7
17
10
1
2
17
47
24
23
Effective tax rate on adjusted profit before tax
The effective tax rate on adjusted profit before tax is equal to the tax on adjusted profit divided by adjusted profit before tax. As outlined on page 142
adjusted profit before tax is a measure of the Group’s underlying profitability. The tax expense on adjusted profit before tax is calculated by excluding
the tax benefit/expense related to adjusting items from the statutory tax expense, except for any tax relief recognised as a result of available US tax
assets (see page 111). Therefore the tax on adjusted profit best reflects the cash taxes payable by the Group.
Certain adjusting items are included within the notes to the Group financial statements, which can be reconciled to their adjusted
equivalents as outlined below:
$m
Total compensation costs
Adjusting items (as above)
Total compensation costs excluding adjusting items
Made up of:
Fixed compensation (includes salaries and associated social security costs, and pension costs)
Variable compensation (includes variable cash compensation, share-based payment charge,
fund product payment charge and associated social security costs)
Total other costs
Adjusting items (as above)
Total other costs excluding adjusting items
Total finance expense
Total finance income
Net finance expense, including adjusting items
Adjusting items (as above)
Net finance expense excluding adjusting items
MAN GROUP PLC ANNUAL REPORT 2018
MAN GROUP PLC ANNUAL REPORT 2018
Note to the
Group financial
statements
Year ended
31 December
2018
Year ended
31 December
2017
4
5
6
6
437
(1)
436
179
257
175
(5)
170
40
(7)
33
(28)
5
478
(4)
474
174
300
173
(7)
166
38
(3)
35
(26)
9
143
143
STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSSHAREHOLDER INFORMATION
FINANCIAL
STATEMENTS
Alternative performance measures continued
Adjusted management fee EPS
Man’s dividend policy is disclosed on page 26. Dividends paid to shareholders (or adjusted management fee EPS) are determined based on
the adjusted management fee profit before tax. Adjusted management fee EPS is calculated using post-tax profits excluding performance
fees and adjusting items, divided by the weighted average diluted number of shares.
The reconciliation from EPS (Note 8 to the Group financial statements) to adjusted EPS is provided below:
Statutory profit after tax
Adjusting items
Tax adjusting items
Adjusted profit after tax
Less adjusted performance fee profit
Adjusted management fee profit after tax
Year ended 31 December 2018
Year ended 31 December 2017
Basic and
diluted post-
tax earnings
$m
Basic
earnings per
share cents
Diluted
earnings per
share cents
Basic and diluted
post- tax
earnings
$m
Basic
earnings per
share cents
Diluted
earnings per
share cents
273
(27)
(30)
216
(27)
189
17.3
(1.7)
(1.9)
13.7
(1.7)
12.0
17.0
(1.7)
(1.8)
13.5
(1.7)
11.8
255
112
(30)
337
(158)
179
15.5
6.8
(1.8)
20.5
(9.6)
10.9
15.3
6.8
(1.8)
20.3
(9.5)
10.8
Adjusted management fee and performance fee profit before tax
Adjusted profit before tax is split between adjusted management fee profit before tax and adjusted performance fee profit before tax to
separate out the variable performance fee related earnings of the business from the underlying management fee earnings of the business,
as follows:
$m
Gross management and other fees1
Share of post-tax profit of associates
Less:
Distribution costs
Asset servicing
Compensation
Other costs1
Net finance expense
Adjusted management fee profit before tax
Exclude: Net management fees from guaranteed products, commission income and share of post-tax
profits of associates
Core management fee profit before tax
Performance fees
(Losses)/gains on investments and other financial instruments2
Less:
Compensation
Finance expense
Adjusted performance fee profit before tax
Year ended
31 December
2018
Year ended
31 December
2017
835
7
(51)
(51)
(357)
(170)
4
217
(14)
203
127
(5)
(79)
(9)
34
784
8
(56)
(37)
(331)
(165)
–
203
(25)
178
289
44
(143)
(9)
181
Adjusted core profit before tax
237
359
Notes:
1 Gross management and other fees also includes $1 million (2017: $3 million) of management fee revenue, performance fees include $1 million (2017: $2 million) of performance fee
revenue and other costs includes a deduction of nil of costs (2017: $1 million) relating to line-by-line consolidated fund entities for the third-party share (per Group financial statements
Note 13.2 on page 119).
2 Losses/gains on investments includes income or losses/gains on investments and other financial instruments of $10 million loss (2017: $64 million gain), offset by $7 million (2017: $14 million)
third party share of gains relating to line-by-line consolidated fund entities, less the reclassification of management fee revenue of $1 million, performance fee revenue of $1 million and
other costs of nil as above (2017: $3 million, $2 million and $1 million respectively).
Adjusted core profit before tax and core management fee profit before tax
Core management fee profit before tax is adjusted management fee profit before tax, excluding net management fees relating to guaranteed
products, sales commission income from Nephila (Note 17) and share of post-tax profits of associates, as detailed on page 122 for core
net management fee revenue. Adjusted core profit before tax is core management fee profit before tax plus adjusted performance fee profit
before tax, equivalent to adjusted profit before tax excluding net management fees relating to guaranteed products, sales commission
income from Nephila and share of post-tax profits of associates. Adjusted core profit before tax is a KPI (page 22).
144
144
MAN GROUP PLC ANNUAL REPORT 2018
MAN GROUP PLC ANNUAL REPORT 2018
FINANCIAL STATEMENTS
STRATEGIC
REPORT
CORPORATE
GOVERNANCE
FINANCIAL
STATEMENTS
SHAREHOLDER
INFORMATION
Compensation ratio
The compensation ratio measures our compensation costs relative to our revenue. The Group’s compensation ratio is generally between
40% to 50% of net revenue, depending on the mix and level of revenue. It is calculated as total compensation divided by net revenue.
Details of the current year compensation ratio are included on page 23.
Proforma surplus capital
The Group’s surplus capital is calculated as follows:
$m
Permitted share capital reserves and subordinated debt
Less deductions (primarily goodwill and other intangibles)
Group financial resources
Less financial resources requirement
Surplus capital
Movements in the Group’s surplus capital from 31 December 2017 to 31 December 2018 are outlined below.
$m
Surplus capital at 31 December 2017
2017 profit after tax, adding back intangibles amortisation
Dividends and share repurchases
Decrease in financial resources requirement on receivables and other assets
Other movements
Surplus capital at 31 December 2018
31 December
2018
31 December
2017
1,490
(987)
503
(238)
265
1,584
(1,052)
532
(276)
256
256
341
(390)
38
20
265
We adjust the reportable surplus capital for items relating to the financial year results which will be incorporated into our surplus capital
once these results have been audited, as well as other significant changes where deemed appropriate. The reconciliation of surplus capital
to proforma surplus capital is provided below.
$m
Surplus capital at 31 December 2018
H2 2018 profit after tax, adding back intangibles amortisation
2018 proposed final dividend
New leases accounting standard – 1 January 2019 impact (Note 1 to the Group financial statements)
Other movements (primarily H2 2018 other reserve movements)
Proforma surplus capital
265
235
(83)
(100)
23
340
MAN GROUP PLC ANNUAL REPORT 2018
MAN GROUP PLC ANNUAL REPORT 2018
145
145
STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSSHAREHOLDER INFORMATION
Shareholder information
In this section we have provided some key information
to assist you in managing your shareholding in Man Group.
If you have a question that is not answered below, you can
contact us by email: shareholder@man.com
Useful websites
References are made throughout this section to two websites which
you will find useful for managing your shareholding in Man Group and
for finding out more about the Company:
Dividend payment methods
You can choose to receive your dividend in a number of ways.
Dividends will automatically be paid to you by cheque and sent to your
registered address unless you have chosen one of the options below:
Man Group (www.man.com)
The Man Group website contains a wealth of information about the
Company including details of the industry in which we operate, our
strategy and business performance, recent news from Man Group
and corporate responsibility initiatives. The Investor Relations section
is a key tool for shareholders with information on share price and
financial results, reports and presentations. This section of the
website also contains information on dividends and shareholder
meeting details as well as useful Frequently Asked Questions.
Equiniti Shareview (www.shareview.co.uk/shareholders)
Man Group’s register of shareholders is maintained by Equiniti,
the Company’s Registrars. Many aspects of managing your shares
such as checking your current shareholding, managing dividend
payments, and updating your contact details can be carried out
by registering on the Equiniti Shareview website. To do this you
will need your Shareholder Reference which can be found on your
share certificate or dividend confirmation.
Dividends
Final dividend for the year ended 31 December 2018
4.06 pence per share
The directors have recommended a final dividend of 4.06 pence
per share in respect of the year ended 31 December 2018. Payment
of this dividend is subject to approval at the 2019 Annual General
Meeting (AGM). Key dates relating to this dividend are given below:
Ex-dividend date
Record date
DRIP election date
AGM (to approve final dividend)
Payment date
4 April 2019
5 April 2019
25 April 2019
10 May 2019
17 May 2019
CREST accounts credited with DRIP shares
22 May 2019
DRIP share certificates received
23 May 2019
Dividend policy
Man Group’s dividend policy is to pay out at least 100% of adjusted
management fee earnings per share in each financial year by way
of ordinary dividend. In addition, the Group expects to generate
significant surplus capital over time, primarily from net performance
fee earnings. Available surpluses, after taking into account our
required capital (including accruals for future earn-out payments),
potential strategic opportunities and a prudent buffer, will be
distributed to shareholders over time by way of higher dividend
payments and/or share repurchases. The Company is currently
undertaking a share repurchase programme pursuant to which up
to a maximum of $100 million of surplus capital is being returned to
shareholders. Details of the number of shares repurchased during
2018 can be found in Note 20 of the financial statements.
146
1. Direct payment to your bank: We recommend that you apply
for cash dividends to be paid directly into your UK bank or
building society account to speed up the payment process and
to avoid the risk of cheques becoming lost or delayed in the post.
The associated dividend confirmation will be sent direct to your
registered address. To switch to this method of payment simply
download a dividend mandate form from the Dividends section
of our website. Alternatively, dividend mandate forms are available
from the Equiniti Shareview website. If you have any queries
please contact Equiniti on 0371 384 21121 (+44 121 415 7592
if calling from outside the UK), who will be able to assist.
2. Overseas payment service2: If you live overseas, Equiniti offers
an overseas payment service which is available in certain
countries. This may make it possible to receive dividends directly
into your bank account in your local currency. Further information
can be found on the Equiniti Shareview website or via the Equiniti
helpline 0371 384 21121 (+44 121 415 7592 if calling from outside
the UK).
3. Dividend Reinvestment Plan (DRIP): The Company is pleased
to offer a DRIP which gives shareholders the opportunity to build
their shareholding in the Company in a convenient and cost-
effective way. Instead of receiving your dividend in cash, you
receive as many whole shares as can be bought with your
dividend, taking into account related purchase costs; any residual
cash is then carried forward and added to your next dividend.
If you wish to join the DRIP, you can download copies of the
DRIP terms and conditions and the DRIP mandate form from
the Dividends section of the Man Group website. Simply
complete the DRIP mandate form and return it to Equiniti.
Should you have any questions regarding the DRIP, or to request
a paper mandate form, please contact Equiniti on 0371 384 21121
(+44 121 415 7592 if calling from outside the UK). Please note
that if you wish to join the DRIP in time for the payment of the
forthcoming final dividend for the year ended 31 December 2018,
Equiniti must have received your instruction by 5.00pm on
25 April 2019. Instructions received after this date will be applied
to the next dividend payment.
Dividend history
To help shareholders with their tax affairs, details of dividends paid in
the 2018/19 tax year can be found above. Please note that the dividend
amounts are declared in US Dollars but paid in Sterling. For ease of
reference the Sterling dividend amounts have been detailed in the
table. For details of historical payments, please refer to the Dividends
section of our website which can be found under Investor Relations.
Changes to tax on dividend income
HM Revenue and Customs previously announced that the tax-free
dividend allowance reduced from £5,000 to £2,000 per annum
with effect from 6 April 2018. Please refer to the HMRC website
for further details.
Notes:
1 Lines are open from 8.30am to 5.30pm, each business day.
2 Please note that a payment charge will be deducted from each individual payment
before conversion to your local currency.
MAN GROUP PLC ANNUAL REPORT 2018
SHAREHOLDER INFORMATION Dividends paid in the 2018/19 tax year
Dividend
no
Payment
date
Amount per
share (p)
Ex-dividend
date
Record
date
DRIP share
price (p)
DRIP purchase
date
Interim dividend for the year ended 31 Dec 2018
O/23 05/09/2018
4.88 09/08/2018 10/08/2018
173.0900 05/09/2018
Final dividend for the year ended 31 Dec 2017
O/22 18/05/2018
4.18 26/04/2018 27/04/2018
194.0856 18/05/2018
Shareholder communications
Annual and Interim Reports
Man Group publishes an Annual and Interim Report every year. The
Annual Report is published on the website and is sent to shareholders
through the post if they have requested to receive a copy. The Interim
Report is published on the website in early August and printed copies
are available on request from the Company Secretary.
E-communications
You can help Man Group to reduce its printing and postage costs as
well as its carbon footprint by signing up to receive communications
electronically rather than receiving printed documents such as
annual reports and notices of AGMs in the post. To sign up for
e-communications, simply register on the Equiniti Shareview website.
You will need your Shareholder Reference, which can be found on
your share certificate or dividend confirmation or proxy card, in order
to register. Once registered, you will need to change your mailing
preference to e-communications and provide your email address.
You will then receive an email each time a shareholder communication
or document becomes available on the Man Group website.
Managing your shareholding
Online, by post, or by phone
Many aspects of your shareholding can be managed by registering
on the Equiniti Shareview website. For enquiries about your
shareholding you can also contact Equiniti in writing at Equiniti,
Aspect House, Spencer Road, Lancing, West Sussex BN99 6DA,
or by telephone on 0371 384 21121 (+44 121 415 7592 if calling from
outside the UK), quoting Ref No 874. Please quote your Shareholder
Reference when contacting Equiniti.
Share dealing service
Equiniti provides a share dealing facility through which you can buy
or sell Man Group plc shares in the UK. The service is provided by
Equiniti Financial Services Limited and can be accessed via the
dealing section of the Equiniti Shareview website (www.shareview.
co.uk/dealing). To use Equiniti’s telephone dealing service, please call
03456 037 037 between 8.00am and 4.30pm Monday to Friday. You
can also buy and sell shares through any authorised stockbroker or
bank that offers a share dealing service in the UK, or in your country
of residence if outside the UK.
Be a ScamSmart investor – avoid investment
and pension scams
Even seasoned investors have been caught out by sophisticated
share or investment scams where smooth-talking fraudsters cold
call from ‘boiler rooms’ to offer them worthless, overpriced or even
non-existent shares, or to buy shares they currently hold at a price
higher than the market value. All shareholders are advised to be
extremely wary of any unsolicited advice, offers to buy shares at a
discount, or offers of free reports about the Company. It is estimated
that £197 million is lost in this way in the UK each year, with an
average loss of £29,000 per investor. The Financial Conduct
Authority (FCA) provides helpful information about such scams on
its website, including practical tips on how to protect your savings
and how to report a suspected investment scam. Man encourages
its shareholders to read the information on the site which can be
accessed at www.fca.org.uk/scamsmart. You can also call the
FCA Consumer Helpline on 0800 111 6768.
How your details are protected from cybercrime
Man Group takes the protection of its shareholders’ personal
data from the ever-increasing threat of cybercrime very seriously.
Shareholder details are maintained by Equiniti, our Registrars,
who safeguard this information to the highest standards. Equiniti’s
security measures include multiple levels of firewall, no wireless
access to the corporate network, and regular external vulnerability
scans and system penetration tests.
Company contact details
Registered office
Man Group plc
Riverbank House
2 Swan Lane
London
EC4R 3AD
Telephone: 020 7144 1000
Website: www.man.com
Registered in England and Wales with registered no: 08172396
Investor Relations
investor@man.com
Head of Investor Relations – Fiona Smart
Company Secretariat
shareholder@man.com
Company Secretary – Rachel Rowson
Company advisers
Independent auditor
Deloitte LLP
Corporate brokers
Credit Suisse
J.P. Morgan Cazenove
Corporate Communications
Finsbury
Registrars
Equiniti
MAN GROUP PLC ANNUAL REPORT 2018
147
STRATEGIC REPORTCORPORATE GOVERNANCEFINANCIAL STATEMENTSSHAREHOLDERINFORMATION Glossary
Absolute return
Alternative strategies where clients expect the strategy may have
net long, short or neutral exposure to asset classes, and that may
make use of leverage to achieve those exposures. This includes
trend following and discretionary long-short strategies
Actively Managed
The management of assets based on active decision-making
as opposed to aiming to replicate an index
AGM
Annual General Meeting
Alpha
Excess return over beta relative to a market benchmark,
or a measure of the ‘value add’ by an investment manager
Alternative
An alternative investment is an asset that is not one of the
conventional investment types, such as stocks, bonds and cash
ARCom
Audit and Risk Committee
Defined contribution (DC) pension scheme
A pension benefit where the employer’s contribution to an
employee’s pension is measured as, and limited to, a specified
amount, usually a percentage of salary
Discretionary
Discretionary investment management is a form of investment
management in which buy and sell decisions are made by a portfolio
manager. The term ‘discretionary’ refers to the fact that investment
decisions are made at the portfolio manager’s discretion
Drive
Drive is our global internal diversity and inclusion network which is
designed to inform, support and inspire our people. The network’s
mission is to advance Man Group’s efforts in promoting and valuing
diversity and inclusion throughout the firm
Employee benefit trust
An employee benefit trust is a type of discretionary trust established
to hold cash or other assets for the benefit of employees, such as
satisfying share awards, with a view to facilitating the attraction,
retention and motivation of employees
Basis point (bps)
One one-hundredth of a percentage point (0.01%)
ESG
Environmental, Social and Governance
Benchmark
A standard against which the performance of a security, mutual fund
or investment manager can be measured, generally broad market and
market-segment stock and bond indexes are used for this purpose
External Audit
An external auditor performs an audit, in accordance with specific
laws or rules, of the financial statements of an organisation and is
independent of the entity being audited
Beta
Market returns.
Brexit
A blend of the words ‘British’ and ‘exit’ which refers to the United
Kingdom’s potential withdrawal from the European Union
Carbon dioxide equivalent (CO2e)
A standard unit for measuring carbon footprints. It enables the
impact of our different greenhouse gas emissions on global warming
to be expressed using an equivalent amount of carbon dioxide (CO2)
as reference
Cash costs
Costs excluding depreciation and amortisation
CLO
Collateralised loan obligations are a security backed by a pool
of debt, often low-rated corporate loans
Compensation cost
Total employee benefits expense
D&I
Diversity and Inclusion
Defined benefit (DB) pension scheme
A pension benefit where the employer has an obligation to provide
participating employees with pension payments that represent
a specified percentage of their salary for each year of service
FCA
Financial Conduct Authority
GDPR
The General Data Protection Regulation
HMRC
Her Majesty’s Revenue and Customs
ICAAP
International Capital Adequacy and Assessment Process
IFRS
International Financial Reporting Standards
Internal Audit
Provide independent assurance that an organisation’s risk
management, governance and internal control processes are
operating effectively
Investment returns
The increase in FUM attributable to investment performance,
market movements and foreign exchange
KPI
Key Performance Indicators
Long Only
Long only refers to a policy of only holding ‘long’ positions in assets
and securities
Machine Learning
A process in which a range of applied algorithms recognize
repeatable patterns and relationships within observed data
148
MAN GROUP PLC ANNUAL REPORT 2018
SHAREHOLDER INFORMATION MiFID II
The second iteration of the Markets in Financial Instruments Directive
Multi-manager solutions
Multi-manager solutions FUM includes traditional fund of fund and
infrastructure and segregated mandates
Passive Products
Products which are intended to replicate an index
Pillar 1
The minimum regulatory capital requirements in relation to credit risk,
operational risk and market risk taken by the Group as principal
Definition of Terms used to Measure Industry
Performance in Net Flows (page 69)
Hedge Fund Research (HFR) Global Hedge Fund Industry Report
reports flows by strategy and risk/return statistics for the hedge fund
industry. Strategy terms used have the following meanings:
– Quant: Quantitative Directional and Systematic Diversified product
categories.
– Ex Quant: Total Hedge Fund Industry excluding Quantitative
Directional and Systematic Diversified for GLG.
– FoHF: Fund of Hedge Fund product category.
Pillar 2
The requirement for companies to assess the level of additional
regulatory capital held against risk not covered in Pillar 1
eVestment is a global assets under management, performance and
flow database for long-only asset managers. Strategy terms used
have the following meanings:
– Active Quant: Active Quantitative, excluding Active Discretionary
and Passive categories.
– Active ex Quant: Active Discretionary, excluding Active Quantitative
and Passive categories.
Preqin Real Estate reports global assets under management and
flow data for real estate asset managers.
Pillar 3
This complements Pillar 1 and Pillar 2 with the aim of improving
market discipline by requiring companies to publish certain details
of their risks, capital and risk management. Man Group’s Pillar 3
disclosures are available at www.man.com/investor-relations
Quantitative or Quant
Quantitative strategies use computer models to make
trading decisions
A Quant is a person who specialises in the application of
mathematical and statistical methods to financial and risk
management problems
Regulatory Capital
Regulatory Capital is the amount of risk capital set by legislation or
local regulators, which companies must hold against any difficulties
such as market or credit risks
Senior Management Executive Committee
Committee of Executives within Man Group that work together to
advise the CEO and are in charge of specific aspects of the Group
Systematic
Systematic investment managers attempt to remove the behavioural
component of investing by using computer algorithms to make
investment decisions
Total Return
Alternative strategies where clients expect the strategy to have
some positive exposure to particular risk factors over the course of a
market cycle although the level of exposure may vary over time. This
includes EM debt total return, GPM, risk premia, and CLO strategies
UN PRI
The United Nations-supported Principles for Responsible Investment
Initiative is an international network of investors working together
to implement the six Principles for Responsible Investment. Its goal
is to understand the implications of sustainability for investors and
support signatories to incorporate these issues into their investment
decision-making and ownership practices
Designed by
M
a
n
G
r
o
u
p
p
l
c
A
n
n
u
a
l
R
e
p
o
r
t
f
o
r
t
h
e
y
e
a
r
e
n
d
e
d
3
1
D
e
c
e
m
b
e
r
2
0
1
8
Man Group plc
Riverbank House, 2 Swan Lane, London, EC4R 3AD
man.com