Press Release

1 March 2019

RESULTS FOR THE FINANCIAL YEAR ENDED 31 DECEMBER 2018

Key points

· Funds under Management (FUM)¹ of $108.5 billion (31 December 2017: $109.1 billion)

o Net inflows of $10.8 billion (2017: net inflows $12.8 billion)

o Negative investment movement of $7.7 billion (2017: positive $10.7 billion)

o FX translation and other movements of negative $3.7 billion (2017: positive $2.9 billion)

· Asset weighted outperformance versus peers¹ across our strategies of 1.0% for the year ended 31 December 2018 (1.9% for the year ended 31 December 2017)

· Group run rate net management fee margin¹ of 69 basis points at 31 December 2018

· Adjusted profit before tax (PBT)¹ of $251 million in 2018 (2017: $384 million),

o Adjusted management fee PBT of $217 million (2017: $203 million)

o Adjusted performance fee PBT of $34 million (2017: $181 million)

· Statutory PBT for the year ended 31 December 2018 of $278 million (2017: $272 million)

· Recommended final dividend of 5.4 cents per share bringing total dividend for the year to 11.8 cents per share, up 9% (2017: 10.8 cents). The final dividend is equal to 4.06 pence per share (2017: 4.18 pence), and the total dividend for the year is equal to 8.94 pence per share (2017: 7.97 pence)

· Pro-forma surplus regulatory capital of around $340 million adjusted for second half earnings, our final dividend and the IFRS16 lease accounting impact

· Completed around $53 million of the $100 million share repurchase programme announced in October 2018 equating to 29 million shares

Luke Ellis, Chief Executive Officer of Man, said:

"2018 was a more difficult year for the asset management industry, characterised by periods of higher volatility which impacted performance across asset classes and investment styles. Against this backdrop we reported a decrease in performance fee profits but are pleased to have once again outperformed peers and made continued progress in areas we can influence. We have managed costs while investing for growth, further diversified to capture new opportunities and strengthened client relationships, helping us to achieve broad based net inflows of $10.8 billion.

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."

¹For definitions and explanations of our alternative performance measures, please refer to page 51.

Summary financials	Page ref.	Year ended 31 Dec 2018	Year ended 31 Dec 2017
		$	$
Funds under management (end of period)¹	5-7	108.5bn	109.1bn
Net management fee revenue²	18,31	791m	736m
Performance fees³	19,31	122m	333m
Net revenues		913m	1,069m
Compensation	19,32	(436m)	(474m)
Other costs (including asset servicing)	20,33	(221m)	(202m)
Net finance expense	20,33	(5m)	(9m)
Adjusted profit before tax¹	21,52	251m	384m
Adjusting items⁴	21,52	27m	(112m)
Statutory profit before tax	16,24	278m	272m
Statutory diluted EPS⁵	36,53	17.0c	15.3c
Adjusted EPS^1,5	53	13.5c	20.3c
Adjusted management fee EPS^1,5	53	11.8c	10.8c
Dividend per share⁶	23	8.94p	7.97p

¹For definitions and explanations of our alternative performance measures, please refer to page 51.
² Includes gross management and other fees, distribution costs, and share of post-tax profit of associates.
³ Includes income or gains on investments and other instruments and third party share of gains/losses relating to interests in consolidated funds.

⁴ The adjusting items in the year are shown on page 52 and relate to certain non-recurring items or those resulting from acquisition or disposal related activities.

⁵ The reconciliation of statutory diluted EPS to the adjusted EPS measures is included in the alternative performance measures (page 53).

⁶ Our dividend policy and availability of dividend resources is discussed further on page 23.

Dividend and share repurchase

The Board confirms that it will recommend a final dividend of 5.4 cents per share for the financial year to 31 December 2018, giving a total dividend of 11.8 cents per share for the year. The final dividend will be paid at the rate of 4.06 pence per share.

Man's dividend policy is to pay out at least 100% of adjusted management fee earnings per share (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. Man's policy is to distribute available capital surpluses to shareholders over time, by way of higher dividend payments and/or share repurchases, while maintaining a prudent balance sheet, after taking into account required capital (including liabilities for future earn-out payments) and potential strategic opportunities. Whilst the Board continues to consider dividends as the primary method of returning capital to shareholders, it will continue to execute share repurchases when advantageous.

Dates for the 2018 final dividend

Ex-dividend date	4 April 2019
Record date	5 April 2019
Payment date	17 May 2019

Proposed change to corporate structure

As announced on 12 October 2018, Man Group is proposing to adjust its international governance and corporate structure. In order to implement this change Man Group plc is proposing to incorporate a new Group holding company in Jersey ("New Holdco"). The proposed holding company structure, which is subject to shareholder approvals, will be implemented by means of a Court approved scheme of arrangement (the "Scheme") under the Companies Act 2006. Pursuant to the Scheme, shareholders will exchange their existing ordinary shares in Man Group plc for shares in New Holdco on a one-for-one basis. The shares in New Holdco will be listed in the UK and Man Group plc would remain the head of the FCA-supervised regulatory group (a sub-group of New Holdco). Other current subsidiaries of Man Group plc that operate in the US and Asia would be reorganised under New Holdco and will continue to be regulated by their local regulators. Approvals have been received from the majority of our regulators, including the FCA. Copies of the shareholder circular setting out details of the Scheme, together with Notices convening the Court Meeting and General Meeting are currently expected to be made available to shareholders in mid-April. The Meetings are currently expected to take place immediately following the AGM on 10 May 2019.

Results presentation, audio webcast and dial in details

There will be a presentation by the management team at 10.45am (UK time) on 1 March 2019 at our city office: Riverbank House, 2 Swan Lane, London, EC4R 3AD. A copy of the presentation will be made available on the Group's website at www.man.com. There will also be a live audio webcast available on https://webcast.merchantcantoscdn.com/webcaster/dyn/4000/7464/16531/110982/Lobby/default.htm which will also be available on demand from later in the day. The dial-in and replay telephone numbers are as follows:

Live Conference Call Dial in Numbers:

International: +44 (0) 203 003 2666

UK Toll-Free Number: 0808 109 0700

US Toll-Free Number: + 1 866 966 5335

30 Day Replay Dial in Numbers:

International: +44 (0) 20 8196 1998

UK Toll Free Number: 0800 633 8453

US Toll Free Number: +1 866 583 1039

Access Code: 0533804#

Enquiries

Fiona Smart

Head of Investor Relations

+44 20 7144 2030

[email protected]

Georgiana Brunner

Communications Director

+44 20 7144 1000

[email protected]

Michael Turner

Finsbury

+44 20 7251 3801

[email protected]

About Man Group

Man Group is a global active investment management firm, which runs $108.5bn¹ of client capital in liquid and private markets, managed by investment specialists based around the world. Headquartered in London, the firm has 16 international offices and operates across multiple jurisdictions. Our business has five specialist investment engines, which represent the range of our capabilities: Man AHL, Man Numeric, Man GLG, Man FRM and Man GPM.

These engines house numerous investment teams, working collaboratively within the framework of Man Group, with a high degree of investment autonomy. Each team benefits from the strength and resources of the firm's single operating platform, enabling their primary focus to be seeking to generate alpha for clients. The teams invest across a diverse range of strategies and asset classes with highly specialised approaches, with long only and alternative strategies run on a discretionary and quantitative basis in single and multi-manager formats. Our clients are at the heart of everything we do and we engage in close dialogue with our investors as strategic partners, to understand their particular needs and constraints. Man Group's investment teams are empowered and supported by our institutional infrastructure and technology, which aims to facilitate the efficient exposure to markets and effective collaboration across the organisation.

Through the Man Charitable Trust, Man Group is committed to promoting literacy and numeracy on a global scale, and to supporting charitable causes more broadly.

Man Group plc is listed on the London Stock Exchange under the ticker EMG.LN and is a constituent of the FTSE 250 Index. Further information can be found at www.man.com

For more information about Man Group's commitment to diversity and inclusion, please visit www.man.com/diversity

Forward looking statements and other important information

This document contains forward-looking statements with respect to the financial condition, results and business of Man Group plc. By their nature, forward-looking statements involve risk and uncertainty and there may be subsequent variations to estimates. Man Group plc's actual future results may differ materially from the results expressed or implied in these forward-looking statements.

The content of the websites referred to in this announcement is not incorporated into and does not form part of this announcement. Nothing in this announcement should be construed as or is intended to be a solicitation for or an offer to provide investment advisory services or to invest in any investment products mentioned herein.

¹As at 31 December 2018. All investment management and advisory services are offered through the investment "engines" of Man AHL, Man Numeric, Man GLG, Man FRM and Man Global Private Markets (GPM).

FUNDS UNDER MANAGEMENT ANALYSIS

FUM movements for the three months to 31 December 2018

$bn	FUM at 30 September 2018	Sales	Redemptions	Net inflows / (outflows)	Investment movement	FX	Other	FUM at 31 December 2018
Alternative	64.6	4.9	(3.1)	1.8	(0.3)	(0.5)	(0.7)	64.9
Absolute return	29.9	0.9	(1.8)	(0.9)	0.0	(0.2)	0.1	28.9
Total return	20.7	3.3	(1.0)	2.3	(0.1)	(0.2)	(0.2)	22.5
Multi-manager solutions	14.0	0.7	(0.3)	0.4	(0.2)	(0.1)	(0.6)	13.5
Long only	49.4	3.0	(2.7)	0.3	(6.6)	(0.2)	0.6	43.5
Systematic	27.9	1.7	(0.9)	0.8	(4.1)	0.0	0.1	24.7
Discretionary	21.5	1.3	(1.8)	(0.5)	(2.5)	(0.2)	0.5	18.8
Guaranteed	0.1	0.0	0.0	0.0	0.0	0.0	0.0	0.1
Total	114.1	7.9	(5.8)	2.1	(6.9)	(0.7)	(0.1)	108.5

FUM movements for the year to 31 December 2018

$bn	FUM at 31 December 2017	Sales	Redemptions	Net inflows / (outflows)	Investment movement	FX	Other	FUM at 31 December 2018
Alternative	61.7	20.2	(12.5)	7.7	(1.1)	(1.8)	(1.6)	64.9
Absolute return	29.2	7.4	(6.0)	1.4	(0.5)	(0.8)	(0.4)	28.9
Total return	16.5	10.6	(2.5)	8.1	(0.4)	(0.6)	(1.1)	22.5
Multi-manager solutions	16.0	2.2	(4.0)	(1.8)	(0.2)	(0.4)	(0.1)	13.5
Long only	47.2	14.8	(11.7)	3.1	(6.6)	(0.9)	0.7	43.5
Systematic	26.8	6.0	(4.0)	2.0	(4.2)	(0.1)	0.2	24.7
Discretionary	20.4	8.8	(7.7)	1.1	(2.4)	(0.8)	0.5	18.8
Guaranteed	0.2	0.0	0.0	0.0	0.0	0.0	(0.1)	0.1
Total	109.1	35.0	(24.2)	10.8	(7.7)	(2.7)	(1.0)	108.5

FUM by product category

$bn	31-Dec-17	31-Mar-18	30-Jun-18	30-Sep-18	31-Dec-18
Absolute return	29.2	29.3	29.7	29.9	28.9
GLG Equity absolute return	3.8	5.5	6.2	6.3	5.9
AHL Dimension	5.9	5.3	5.3	5.5	5.7
AHL Alpha¹	5.2	5.0	4.9	4.8	4.9
AHL Evolution	3.7	3.4	3.4	3.5	3.4
Man Institutional Solutions²	3.2	3.3	3.1	3.4	3.4
AHL other	1.8	1.6	1.8	1.8	1.8
AHL Diversified¹	2.1	2.0	1.8	1.7	1.7
Numeric absolute return	1.9	1.9	1.9	1.8	1.3
GLG Credit absolute return	1.6	1.3	1.3	1.1	0.8
Total return	16.5	18.5	20.1	20.7	22.5
Diversified risk premia	5.7	7.5	9.0	9.7	11.7
EM total return	4.4	4.5	4.4	4.6	4.4
CLO	4.2	4.4	4.4	4.1	3.9
GPM	2.2	2.1	2.3	2.3	2.5
Multi-manager solutions	16.0	16.2	15.9	14.0	13.5
Segregated	6.0	6.3	6.6	7.3	6.6
Infrastructure & direct access	7.7	7.7	7.2	4.8	5.2
Diversified and thematic FoHF	2.3	2.2	2.1	1.9	1.7
Systematic long only	26.8	26.9	26.3	27.9	24.7
Global	9.6	8.7	8.4	9.0	7.7
International	6.4	6.7	6.9	7.6	6.8
Emerging markets	6.7	7.6	7.0	7.0	6.7
US	4.1	3.9	4.0	4.3	3.5
Discretionary long only	20.4	21.6	21.6	21.5	18.8
Japan equity	9.7	9.5	9.0	9.1	7.6
Europe equity	3.5	4.2	4.8	4.9	4.3
Credit & convertibles	2.9	2.7	2.3	2.1	2.2
Other equity	2.2	2.2	2.6	2.6	2.0
EM Fixed income	1.1	1.9	1.8	1.9	1.9
Multi Asset	1.0	1.1	1.1	0.9	0.8
Guaranteed	0.2	0.2	0.1	0.1	0.1
Total	109.1	112.7	113.7	114.1	108.5

¹ AHL Alpha UCITS and AHL Momentum UCITS have been reclassified from AHL Diversified to AHL Alpha

² Man Institutional Solutions includes AHL Institutional Solutions and Multi-strategy. AHL Institutional Solutions invests into a range of AHL strategies including AHL Dimension, AHL Alpha and AHL Evolution and now includes GLG Multi-strategy

FUM by investment engine

$bn	31-Dec-17	31-Mar-18	30-Jun-18	30-Sep-18	31-Dec-18
AHL	24.0	23.8	24.5	25.1	26.2
Dimension	5.9	5.3	5.3	5.5	5.7
Diversified risk premia	2.5	3.6	4.6	4.7	5.6
Alpha¹	5.2	5.0	4.9	4.8	4.9
Evolution	3.7	3.4	3.4	3.5	3.4
Institutional Solutions²	2.6	2.7	2.6	3.0	3.0
Diversified (inc. Guaranteed)¹	2.3	2.2	1.9	1.8	1.8
Other	1.8	1.6	1.8	1.8	1.8
Numeric	31.9	32.7	32.6	34.7	32.1
Alternatives	5.1	5.8	6.3	6.8	7.4
Diversified risk premia	3.2	3.9	4.4	5.0	6.1
Numeric absolute return	1.9	1.9	1.9	1.8	1.3
Long only	26.8	26.9	26.3	27.9	24.7
Global	9.6	8.7	8.4	9.0	7.7
International	6.4	6.7	6.9	7.6	6.8
Emerging markets	6.7	7.6	7.0	7.0	6.7
US	4.1	3.9	4.0	4.3	3.5
GLG	35.0	37.9	38.4	38.0	34.2
Alternatives	14.6	16.3	16.8	16.5	15.4
Equity absolute return³	4.2	5.9	6.5	6.6	6.2
EM total return	4.4	4.5	4.4	4.6	4.4
CLOs	4.2	4.4	4.4	4.1	3.9
Credit absolute return³	1.8	1.5	1.5	1.2	0.9
Long only	20.4	21.6	21.6	21.5	18.8
Japan equity	9.7	9.5	9.0	9.1	7.6
Europe equity	3.5	4.2	4.8	4.9	4.3
Credit & convertibles	2.9	2.7	2.3	2.1	2.2
Other equity	2.2	2.2	2.6	2.6	2.0
EM Fixed income	1.1	1.9	1.8	1.9	1.9
Multi Asset	1.0	1.1	1.1	0.9	0.8
FRM	16.0	16.2	15.9	14.0	13.5
Segregated	6.0	6.3	6.6	7.3	6.6
Infrastructure & direct access	7.7	7.7	7.2	4.8	5.2
Diversified and thematic FoHF	2.3	2.2	2.1	1.9	1.7
GPM	2.2	2.1	2.3	2.3	2.5
Total	109.1	112.7	113.7	114.1	108.5

¹ AHL Alpha UCITS and AHL Momentum UCITS have been reclassified from AHL Diversified to AHL Alpha

² Institutional Solutions invests into a range of AHL strategies including AHL Dimension, AHL Alpha and AHL Evolution

³ GLG Equity absolute return and GLG Credit absolute return include allocations from Multi-strategy included in Man Institutional solutions in the FUM by product category table

Investment Performance

		Total Return (net of fees)		Annualised Return (net of fees)
		3 months to 31 Dec 2018	12 months to 31 Dec 2018	3 years to 31 Dec 2018	5 years to 31 Dec 2018	Since Inception to 31 Dec 2018
Absolute return
AHL Dimension	¹	1.7%	2.9%	1.7%	5.6%	5.3%
AHL Alpha	²	3.0%	0.7%	0.9%	5.1%	10.9%
AHL Evolution	³	-1.4%	-1.3%	7.3%	8.9%	13.0%
AHL Diversified	⁴	3.5%	-3.5%	-2.2%	4.1%	11.0%
Man Numeric Market Neutral Alternative	⁵	-7.0%	-11.1%	-3.0%	-0.4%	3.0%
GLG European Long Short Fund	⁶	-3.7%	-5.1%	-0.1%	0.3%	6.9%
Man GLG Global Credit Multi Strategy	⁷	-2.9%	1.9%	9.7%	4.0%	12.3%
Total return
Man Alternative Risk Premia SP	⁸	-3.8%	-3.5%	4.3%	n/a	4.8%
Man GLG Global EM Debt Total Return	⁹	0.3%	0.7%	n/a	n/a	3.3%
Multi-manager solutions
FRM Diversified II	¹⁰	-4.4%	-3.4%	-0.4%	0.5%	3.9%
Indices
HFRX Global Hedge Fund Index	¹¹	-5.6%	-6.7%	0.4%	-0.6%
HFRI Fund of Funds Conservative Index	¹¹	-3.4%	-1.1%	1.6%	1.7%
Barclay BTOP 50 Index	¹²	-2.1%	-4.7%	-3.3%	0.1%
HFRI Equity Hedge (Total) Index	¹¹	-8.3%	-7.0%	3.6%	2.3%
HFRX EH: Equity Market Neutral Index	¹¹	2.7%	-3.2%	-2.2%	0.4%
Systematic long only
Numeric Global Core	¹³	-15.6%	-14.7%	5.0%	5.1%	8.5%
Relative Return		-2.2%	-6.0%	-1.3%	0.6%	1.5%
Numeric Europe Core (EUR)	¹⁴	-13.5%	-11.8%	2.1%	5.6%	8.2%
Relative Return		-2.1%	-1.2%	1.8%	2.4%	2.7%
Numeric Emerging Markets Core	¹⁵	-10.1%	-17.9%	11.6%	4.4%	4.1%
Relative Return		-2.6%	-3.4%	2.4%	2.8%	2.5%
Discretionary long only
Man GLG Japan Core Alpha Equity Fund	¹⁶	-16.4%	-16.9%	0.8%	4.5%	3.3%
Relative Return		1.2%	-1.0%	-0.2%	-0.5%	2.4%
Man GLG Continental European Growth Fund	¹⁷	-17.3%	-11.1%	7.1%	11.6%	8.6%
Relative Return		-6.4%	-1.6%	-1.3%	5.5%	3.5%
Man GLG Undervalued Assets Fund	¹⁸	-12.0%	-11.5%	6.7%	6.7%	7.6%
Relative Return		-1.7%	-2.0%	0.5%	2.6%	3.3%

Investment performance (Cont'd)

1. Represented by AHL Strategies PCC Limited: Class B AHL Dimension USD Shares from 3 July 2006 to 31 May 2014, and by AHL Dimension (Cayman) Ltd - F USD Shares Class from 1 June 2014 until 28 February 2015 when AHL Dimension (Cayman) Ltd - A USD Shares Class is used. Representative fees of 1.5% Management Fee and 20% Performance Fee have been applied.

2. Represented by AHL Alpha plc from 17 October 1995 to 30 September 2012, and by AHL Strategies PCC Limited: Class Y AHL Alpha USD Shares from 1 October 2012 to 30 September 2013. The representative product was changed at the end of September 2012 due to the provisioning of fund liquidation costs in October 2012 for AHL Alpha plc, which resulted in tracking error compared with other Alpha Programme funds. Both funds are valued weekly; however, for comparative purposes, statistics have been calculated using the best quality price that is available at each calendar month end, using estimates where a final price is unavailable. Where a price, either estimate or final is unavailable on a calendar month end, the price on the closest date prior to the calendar month end has been used. Both of the track records have been adjusted to reflect the fee structure of AHL Alpha (Cayman) Limited - USD Shares. From 30 September 2013, the actual performance of AHL Alpha (Cayman) Limited - USD Shares is displayed.

3. Represented by AHL Evolution Limited adjusted for the fee structure (2% p.a. management fee and 20% performance fee) from September 2005 to 31 October 2006; and by AHL Strategies PCC: Class G AHL Evolution USD from 1 November 2006 to 30 November 2011; and by the performance track record of AHL Investment Strategies SPC: Class E AHL Evolution USD Notes from 1 December 2011 to 30 November 2012. From 1 December 2012, the track record of AHL (Cayman) SPC: Class A1 Evolution USD Shares has been shown. All returns shown are net of fees.

4. Represented by Man AHL Diversified plc from 26 March 1996 to 29 October 2012, and by Man AHL Diversified (Guernsey) USD Shares - Class A from 30 October 2012 to date. The representative product was changed at the end of October 2012 due to legal and/or regulatory restrictions on Man AHL Diversified plc preventing the product from accessing the Programme's revised target allocations. Both funds are valued weekly; however, for comparative purposes, statistics have been calculated using the best quality price that is available at each calendar month end, using estimates where a final price is unavailable. Where a price, either estimate or final is unavailable on a calendar month end, the price on the closest date prior to the calendar month end has been used.

5. Represented by Man Numeric Market Neutral Alternative Class IN USD.

6. Represented by GLG European Long Short Fund - Class D Restricted - EUR until 29 June 2007. From 1 July 2007 to 31 July 2018 the performance of GLG European Long Short Fund - Class D Unrestricted is displayed. After this date, the performance of Class GLG European Long Short Fund - Class I Unrestricted is displayed

7. The inception date of the fund was 16 January 1998. Performance data is shown using Restricted IL XX USD (previously Z) share class up until the inception of Unrestricted IL XX USD (previously Z) share class on 31 August 2007, from which point performance is shown using this share class. Returns are shown net of 0.5% management fee and, where applicable, 20% performance fee, with income reinvested and do not take into account sales and redemption charges where such costs are applicable.

8. Represented by Man Alternative Risk Premia SP - Class A USD

9. Represented by Man GLG Global Emerging Markets Debt Total Return Class I USD.

10. Represented by FRM Diversified II Fund SPC - Class A USD ('the fund') until April 2018 then Class A JPY hedged to USD there after. However, prior to Jan 2004, FRM has created the FRM Diversified II pro forma using the following methodology: i) for the period Jan 1998 to Dec 2003, by using the returns of Absolute Alpha Fund PCC Limited - Diversified Series Share Cell ('AA Diversified - USD') adjusted for fees and/or currency, where applicable. For the period Jan 2004 to Feb 2004, the returns of the fund's master portfolio have been used, adjusted for fees and/or currency, where applicable. Post Feb 2004, the fund's actual performance has been used, which may differ from the calculated performance of the track record. There have been occasions where the 12-months' performance to date of FRM Diversified II has differed materially from that of AA Diversified. Strategy and holdings data relates to the composition of the master portfolio.

11. HFRI and HFRX index performance over the past 4 months is subject to change.

12. The historic Barclay BTOP 50 Index data is subject to change

13. Performance relative to the MSCI World. This reference index is intended to best represent the strategy's universe. Investors may choose to compare returns for their accounts to different reference indices, resulting in differences in relative return information. Comparison to an index is for informational purposes only, as the holdings of an account managed by Numeric will differ from the securities which comprise the index and may have greater volatility than the holdings of an index.

14. Performance relative to the MSCI Europe (EUR). This reference index is intended to best represent the strategy's universe. Investors may choose to compare returns for their accounts to different reference indices, resulting in differences in relative return information. Comparison to an index is for informational purposes only, as the holdings of an account managed by Numeric will differ from the securities which comprise the index and may have greater volatility than the holdings of an index.

15. Performance relative to MSCI Emerging Markets. This reference index is intended to best represent the strategy's universe. Investors may choose to compare returns for their accounts to different reference indices, resulting in differences in relative return information. Comparison to an index is for informational purposes only, as the holdings of an account managed by Numeric will differ from the securities which comprise the index and may have greater volatility than the holdings of an index.

16. Represented by Man GLG Japan CoreAlpha Fund - Class C converted to JPY until 28 January 2010. From 1 February 2010 Man GLG Japan CoreAlpha Equity Fund - Class I JPY is displayed. Relative return shown vs TOPIX (JPY, GDTR)

17. Represented by Man GLG Continental European Growth Fund Class C Accumulation Shares. Relative return shown vs FTSE World Europe Ex UK (GBP, GDTR)

18. Represented by Man GLG Undervalued Assets Fund - C Accumulation Shares. Relative return shown vs FTSE All Share (GBP, NDTR)

Past or projected performance is no indication of future results. Financial indices are used for illustrative purposes only and are provided for the purpose of making a comparison to general market data as a point of reference and should not be construed as a true comparison to the strategy.

The information herein is being provided solely in connection with this press release and is not intended to be, nor should it be construed or used as, investment, tax or legal advice, any recommendation or opinion regarding the appropriateness or suitability of any investment or strategy, or an offer to sell, or a solicitation of an offer to buy, an interest in any security, including an interest in any fund or pool described herein.

CHIEF EXECUTIVE OFFICER'S REVIEW

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%¹ 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. 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.

Performance^2,3

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. 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.

¹ Refer to pages 51 to 55 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.

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.

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 and 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). 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.

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.

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.

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. We have made some changes to our KPIs for the 2018 financial year, as outlined below. 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. Executive director remuneration is directly linked to strategy and performance, with particular emphasis on matching rewards to results over the long term.

Investment performance

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.

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 pages 8 and10.

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.

Net Flows

What we measure

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

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 17.

Changes to our KPIs

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

What we measure

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.

¹ Refer to pages 51 to 55 for details of the Group's alternative performance measures

How we performed

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 21.

Changes to our KPIs

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.

Adjusted management fee EPS growth

What we measure

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 2) and the value generated for shareholders.

How we performed

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 35.

Changes to our KPIs

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 Refer to pages 51 to 55 for details of the Group's alternative performance measures

CHIEF FINANCIAL OFFICER'S REVIEW

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.

	Year ended 31 December 2018	Year ended 31 December 2017
Statutory profit before tax	$278m	$272m
Statutory earnings per share	17.0¢	15.3¢
Adjusted profit before tax¹	$251m	$384m
Adjusted earnings per share¹	13.5¢	20.3¢
Adjusted management fee profit before tax¹	$217m	$203m
Adjusted performance fee profit before tax¹	$34m	$181m

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 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.

1 Refer to pages 51 to 55 for details of the Group's alternative performance measures

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 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 20 and 30).

Funds under management (FUM)

$bn		FUM at 31 December 2017	Net inflows/ (outflows)	Investment movements	Foreign currency movements	Other movements	FUM at 31 December 2018
Alternative	Absolute return	29.2	1.4	(0.5)	(0.8)	(0.4)	28.9
	Total return	16.5	8.1	(0.4)	(0.6)	(1.1)	22.5
	Multi-manager solutions	16.0	(1.8)	(0.2)	(0.4)	(0.1)	13.5
	Total	61.7	7.7	(1.1)	(1.8)	(1.6)	64.9
Long only	Systematic	26.8	2.0	(4.2)	(0.1)	0.2	24.7
	Discretionary	20.4	1.1	(2.4)	(0.8)	0.5	18.8
	Total	47.2	3.1	(6.6)	(0.9)	0.7	43.5
Total excluding Guaranteed		108.9	10.8	(7.7)	(2.7)	(0.9)	108.4
Guaranteed		0.2	0.0	0.0	0.0	(0.1)	0.1
Total		109.1	10.8	(7.7)	(2.7)	(1.0)	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 51 to 55 for details of the Group's alternative performance measures

Net management fee margins and revenue

	Run rate At 31 December 2018		Year ended 31 December 2018		Year ended 31 December 2017
	$m	Net margin	$m	Net margin	$m	Net margin
Absolute return	354	1.23%	370	1.27%	370	1.38%
Total return	127	0.57%	111	0.57%	68	0.56%
Multi-manager solutions	48	0.35%	54	0.36%	65	0.45%
Systematic long only	90	0.37%	97	0.36%	89	0.36%
Discretionary long only	127	0.68%	145	0.69%	119	0.67%
Core net management fee revenue¹	746	0.69%	777	0.70%	711	0.75%
Guaranteed	5	5.24%	7	5.52%	12	5.04%
Other income²	-		-		5
Net management fee revenue before share of after tax profit of associates	751	0.69%	784	0.70%	728	0.76%
Share of post-tax profit of associates	-		7		8
Net management fee revenue^3,4	751		791		736

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. 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. 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.

¹ Details of these alternative performance measures are included on page 51 to 55.

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).

Summary income statement

$m	Year ended 31 December 2018	Year ended 31 December 2017
Gross management and other fees¹	835	784
Share of post-tax profit of associates	7	8
Distribution costs	(51)	(56)
Net management fee revenue	791	736
Performance fees¹	127	289
(Losses)/gains on investments²	(5)	44
Net revenue	913	1,069
Asset servicing	(51)	(37)
Fixed compensation³	(179)	(174)
Variable compensation	(257)	(300)
Other costs - cash costs^1,3	(146)	(147)
Other costs - depreciation and amortisation	(24)	(18)
Total costs	(657)	(676)
Net finance expense³	(5)	(9)
Adjusted profit before tax³	251	384
Adjusting items³ (see page 52)	27	(112)
Statutory profit before tax	278	272
Adjusted management fee profit before tax³	217	203
Adjusted performance fee profit before tax³	34	181
Adjusted core profit before tax³	237	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

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. The overall compensation ratio³ increased to 48% in 2018 from 44% in 2017,

¹Management 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 42.

² (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.

³ Alternative performance measures are outlined on pages 51-55.

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 absolute 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 52, 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. 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 52.

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 from1 January 2019.

Additional detail on the new leases accounting standard is provided in Note 1 to the Group financial statements (page 30).

¹ Refer to pages 51-55 for details of the Group's alternative performance measures.

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 14). 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	Year ended 31 December 2018
Revaluation of contingent consideration creditors	31
Unwind of contingent consideration discount	(28)
Gain on sale of Nephila	113
Compensation restructuring costs	(1)
Other restructuring costs	(5)
Amortisation of acquired intangible assets	(83)
Total adjusting items (excluding tax)	27
Recognition of deferred tax asset (refer below)	20

Taxation

The majority of Man'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.

¹ Refer to pages 51-55 for details of the Group's alternative performance measures.

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.

$m	Year ended 31 December 2018	Year ended 31 December 2017
Opening cash¹	356	389
Operating cash flows before working capital movements	311	431
Working capital movements (including seeding)¹	8	(186)
Payment of dividends	(189)	(158)
Share repurchase (including costs)	(211)	(92)
Payment of acquisition related contingent consideration net of cash acquired	(25)	(9)
Proceeds from sale of investments in associates	140	2
Other movements	(46)	(21)
Cash at year end¹	344	356

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.

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	31 December 2018	31 December 2017
Cash and cash equivalents²	344	356
Fee and other receivables²	286	614
Payables²	(733)	(848)
Net investments in fund products and other investments²	752	559
Pension asset	24	32
Investments in associates	-	29
Leasehold improvements and equipment	46	44
Total tangible assets	719	786
Borrowings	(150)	(150)
Net deferred tax asset/(liability)	60	33
Net tangible assets³	629	669
Goodwill and other intangibles	964	1,047
Shareholders' equity	1,593	1,716

¹ Excludes cash relating to consolidated fund entities (Note 13.2 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 42).

³ Equates to net tangible assets per share of 39 cents (2017: 41 cents).

Seeding investments

Man 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.

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.

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 39. 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 55.

Man Group plc's distributable reserves were $2.0 billion before payment of the proposed final dividend, 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.

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 on page 2.

¹ Refer to pages 51-55 for details of the Group's alternative performance measures.

GROUP INCOME STATEMENT

$m	Note	Year ended 31 December 2018	Year ended 31 December 2017
Revenue:
Gross management and other fees	2	834	781
Performance fees	2	126	287
		960	1,068
Income or (losses)/gains on investments and other financial instruments	13.1	(10)	64
Gain on sale of investment in Nephila	17	113	-
Third-party share of losses/(gains) relating to interests in consolidated funds	13.2	7	(14)
Revaluation of contingent consideration	25	31	(15)
Reassessment of litigation provision	16	-	24
Distribution costs	3	(51)	(56)
Asset servicing	3	(51)	(37)
Compensation	4	(437)	(478)
Other costs	5	(175)	(173)
Amortisation of acquired intangible assets	10	(83)	(84)
Share of post-tax profit of associates	17	7	8
Finance expense	6	(40)	(38)
Finance income	6	7	3
Profit before tax		278	272
Tax expense	7	(5)	(17)
Statutory profit attributable to owners of the Parent Company		273	255
Earnings per share:	8
Basic (cents)		17.3	15.5
Diluted (cents)		17.0	15.3

GROUP STATEMENT OF COMPREHENSIVE INCOME

$m	Year ended 31 December 2018	Year ended 31 December 2017
Statutory profit attributable to owners of the Parent Company	273	255
Other comprehensive income/(expense):
Remeasurements of post-employment benefit obligations	15	3
Current tax credited/(debited) on pension scheme	4	(5)
Deferred tax (debited)/credited on pension scheme	(6)	1
Items that will not be reclassified to profit or loss	13	(1)
Cash flow hedges:
Valuation (losses)/gains taken to equity	(16)	18
Transfer to Group income statement	(5)	9
Deferred tax credited/(debited) on cash flow hedge movements	4	(5)
Net investment hedge	4	(4)
Foreign currency translation	(11)	12
Recycling of FX revaluation to the Group income statement on liquidation of subsidiaries	-	1
Items that may be reclassified subsequently to profit or loss	(24)	31
Other comprehensive (expense)/income (net of tax)	(11)	30
Total comprehensive income attributable to owners of the Parent Company	262	285

GROUP BALANCE SHEET

$m	Note	At 31 December 2018	At 31 December 2017
Assets
Cash and cash equivalents	12	370	379
Fee and other receivables	14	307	491
Investments in fund products and other investments	13	770	729
Pension asset	21	24	32
Investments in associates	17	-	29
Leasehold improvements and equipment	18	46	44
Goodwill and acquired intangibles	10	938	1,024
Other intangibles	11	26	23
Deferred tax assets	7	93	81
		2,574	2,832
Non-current assets held for sale	13	39	145
Total assets		2,613	2,977
Liabilities
Trade and other payables	15	701	843
Provisions	16	26	34
Current tax liabilities	7	10	21
Third-party interest in consolidated funds	13	100	99
Borrowings	12	150	150
Deferred tax liabilities	7	33	48
		1,020	1,195
Non-current liabilities held for sale	13	-	66
Total liabilities		1,020	1,261
Net assets		1,593	1,716
Equity
Capital and reserves attributable to owners of the Parent Company		1,593	1,716

GROUP CASH FLOW STATEMENT

$m	Note	Year ended 31 December 2018	Year ended 31 December 2017
Cash flows from operating activities
Statutory profit		273	255
Adjustments for non-cash items:
Income tax expense		5	17
Net finance expense		33	35
Share of post-tax profit of associates		(7)	(8)
Gain on sale of investment in Nephila		(113)	-
Revaluation of contingent consideration		(31)	15
Depreciation of leasehold improvements and equipment		14	12
Amortisation of acquired intangible assets		83	84
Amortisation of other intangibles		10	6
Share-based payment charge		25	19
Fund product based payment charge		41	40
Other non-cash movements		5	(5)
Return of Reservoir Trust plan assets on wind-up		19	-
		357	470
Changes in working capital:
Decrease/(increase) in receivables		354	(241)
Increase in other financial assets1		(203)	-
(Decrease)/increase in payables		(140)	41
Cash generated from operations		368	270
Interest paid		(11)	(10)
Income tax paid		(35)	(29)
Cash flows from operating activities		322	231

Cash flows from investing activities
Purchase of leasehold improvements and equipment		(16)	(12)
Purchase of other intangibles		(15)	(12)
Payment of contingent consideration in relation to acquisitions		(22)	(11)
Acquisition of business and other acquired intangibles2		(3)	2
Interest received		5	3
Proceeds from sale of associates		140	2
Dividends received from associates		8	8
Cash flows from investing activities		97	(20)

Cash flows from financing activities
Proceeds from issue of ordinary shares		6	7
Purchase of own shares by the Employee Trust and Partnerships		(32)	(19)
Share repurchase programme (including costs)		(211)	(92)
Dividends paid to Company shareholders		(189)	(158)
Cash flows from financing activities		(426)	(262)

Net decrease in cash		(7)	(51)
Cash at the beginning of the year		379	426
Effect of foreign exchange movements		(2)	4
Cash at year end3	12	370	379

Note:

1 Includes $3 million of restricted net cash inflows (2017: $14 million restricted net cash outflows) relating to consolidated fund entities (Note 13.2).

2 The 2017 cash received relates to the cash acquired as part of the Aalto acquisition in 2017.

3 Includes $26 million (2017: $23 million) of restricted cash relating to consolidated fund entities (Note 13.2).

GROUP STATEMENT OF CHANGES IN EQUITY

$m	Year ended 31 December 2018	Year ended 31 December 2017
Share capital and capital reserves	1,226	1,220
Revaluation reserves and retained earnings	367	496
Capital and reserves attributable to owners of the Parent Company	1,593	1,716

Share capital and capital reserves

$m	Share capital	Share premium account	Capital redemption reserve	Merger reserve	Reorganisation reserve	Total
At 1 January 2018	56	26	7	499	632	1,220
Purchase and cancellation of own shares	(1)	-	1	-	-	-
Issue of ordinary shares: Partnership Plans and Sharesave	-	6	-	-	-	6
At 31 December 2018	55	32	8	499	632	1,226

Revaluation reserves and retained earnings

$m	Profit and loss account	Own shares held by Employee Trust	Treasury Shares	Cumulative translation adjustment	Cash flow hedge reserve¹	Available-for-sale reserve	Total
At 1 January 2018	476	(50)	-	61	7	2	496
Adjustment for adoption of IFRS 9 (Note 1)	2	-	-	-	-	(2)	-
At 1 January 2018	478	(50)	-	61	7	-	496
Statutory profit	273	-	-	-	-	-	273
Other comprehensive expense:
Revaluation of defined benefit pension scheme	15	-	-	-	-	-	15
Current tax credited on pension scheme	4	-	-	-	-	-	4
Deferred tax debited on pension scheme	(6)	-	-	-	-	-	(6)
Fair value losses on cash flow hedges¹	-	-	-	-	(16)	-	(16)
Transfer cash flow hedge to Group income statement	-	-	-	-	(5)	-	(5)
Deferred tax credited on cash flow hedge movements	-	-	-	-	4	-	4
Currency translation difference	-	-	-	(7)	-	-	(7)
Share-based payments charge	19	-	-	-	-	-	19
Deferred tax debited on share-based payments	(1)	-	-	-	-	-	(1)
Purchase of own shares by the Employee Trust	-	(26)	-	-	-	-	(26)
Disposal of own shares by the Employee Trust	(14)	14	-	-	-	-	-
Share repurchases	(201)	-	-	-	-	-	(201)
Transfer to Treasury shares	121	-	(121)	-	-	-	-
Settlement of Aalto year one contingent consideration²	-	-	7	-	-	-	7
Dividends	(189)	-	-	-	-	-	(189)
At 31 December 2018	499	(62)	(114)	54	(10)	-	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.

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.

Share capital and capital reserves

$m	Share capital	Share premium account	Capital redemption reserve	Merger reserve	Reorganisation reserve	Total
At 1 January 2017	58	19	5	491	632	1,205
Purchase and cancellation of own shares	(2)	-	2	-	-	-
Issue of ordinary shares: Aalto acquisition	-	-	-	8	-	8
Issue of ordinary shares: Partnership Plans and Sharesave	-	7	-	-	-	7
At 31 December 2017	56	26	7	499	632	1,220

Revaluation reserves and retained earnings

$m	Profit and loss account	Own shares held by Employee Trust	Cumulative translation adjustment	Cash flow hedge reserve	Available-for-sale reserve	Total
At 1 January 2017 (as previously presented)	564	(43)	(39)	(15)	2	469
Prior period adjustment1	(83)	(8)	91	-	-	-
At 1 January 2017 (as restated)1	481	(51)	52	(15)	2	469
Statutory profit	255	-	-	-	-	255
Other comprehensive income:
Revaluation of defined benefit pension scheme	3	-	-	-	-	3
Current tax debited on pension scheme	(5)	-	-	-	-	(5)
Deferred tax credited on pension scheme	1	-	-	-	-	1
Fair value gains on cash flow hedges2	-	-	-	18	-	18
Transfer cash flow hedge to Group income statement	-	-	-	9	-	9
Deferred tax credited on cash flow hedge movements	-	-	-	(5)	-	(5)
Currency translation difference (as restated)1	-	-	9	-	-	9
Share-based payments charge	13	-	-	-	-	13
Deferred tax credited on share-based payments	2	-	-	-	-	2
Purchase of own shares by the Employee Trust	-	(14)	-	-	-	(14)
Disposal of own shares by the Employee Trust	(15)	15	-	-	-	-
Share repurchases	(101)	-	-	-	-	(101)
Dividends	(158)	-	-	-	-	(158)
At 31 December 2017 (as restated)1	476	(50)	61	7	2	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, 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.

NOTES TO THE GROUP FINANCIAL STATEMENTS

1.Basis of preparation

While the financial information included in this preliminary announcement has been prepared in accordance with the recognition and measurement criteria of International Financial Reporting Standards (IFRSs) as adopted by the European Union, this announcement does not itself contain sufficient information to comply with IFRSs. Details of the Group's accounting policies can be found in the Group's Annual Report for the year ended 31 December 2017. The financial information included in this statement does not constitute the Group's statutory accounts within the meaning of Section 434 of the Companies Act 2006. Statutory accounts for the year ended 31 December 2018, upon which the auditors have issued an unqualified report, will shortly be delivered to the Registrar of Companies.

The Annual Report and the Notice of the Company's 2019 Annual General Meeting (AGM) will be posted to shareholders and will be available to download from the Company's website on 11 March 2019. The Annual General Meeting will be held on Friday 10 May 2019 at 10am at Man Group's offices at Riverbank House, 2 Swan Lane, London EC4R 3AD.

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 16 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 21), 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.

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.

- 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 22) 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 16 to 18.

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	Year ended 31 December 2018	Year ended 31 December 2017
Salaries	153	148
Variable cash compensation	175	220
Share-based payment charge	25	19
Fund product based payment charge	41	40
Social security costs	32	38
Pension costs	10	9
Restructuring costs (adjusting item per page 52)	1	4
Total compensation costs	437	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 54, 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.

Pension costs relate to Man's defined contribution and defined benefit plans.

The $1 million of restructuring costs in 2018 relate to our Swiss pension obligation 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:

	Year ended 31 December 2018	Year ended 31 December 2017
Investment management	490	450
Sales and marketing	186	183
Support functions	700	680
Average headcount	1,376	1,313

5. Other costs

$m	Year ended 31 December 2018	Year ended 31 December 2017
Occupancy	27	33
Technology and communications	26	28
Temporary staff, recruitment, consultancy and managed services	24	20
Legal fees and other professional fees	13	17
Benefits	14	13
Travel and entertainment	13	11
Audit, accountancy, actuarial and tax fees	8	7
Insurance	4	4
Marketing and sponsorship	6	5
Other cash costs, including irrecoverable VAT	11	10
Restructuring (adjusting item per page 52)	5	7
Total other costs before depreciation and amortisation	151	155
Depreciation and amortisation	24	18
Total other costs	175	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.

6. Finance expense and finance income

$m	Year ended 31 December 2018	Year ended 31 December 2017
Finance expense:
Interest payable on borrowings (Note 12)	(9)	(9)
Revolving credit facility costs and other (Note 12)	(3)	(3)
Unwind of contingent consideration discount (adjusting item per page 52)	(28)	(26)
Total finance expense	(40)	(38)
Finance income:
Interest on cash deposits and US Treasury bills	7	3
Total finance income	7	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.

7. Taxation

$m	Year ended 31 December 2018	Year ended 31 December 2017
Analysis of tax expense/(credit):
Current tax:
UK corporation tax on profits/(losses)	29	39
Foreign tax	5	5
Adjustments to tax charge in respect of previous years	1	(6)
Total current tax	35	38
Deferred tax:
Origination and reversal of temporary differences	(10)	(4)
Recognition of US deferred tax asset (adjusting item per page 51)	(20)	(17)
Total deferred tax	(30)	(21)
Total tax expense/(credit)	5	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 35.

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		Year ended 31 December 2018		Year ended 31 December 2017
Profit before tax	278		272
Theoretical tax expense at UK rate: 19% (2017: 19.25%)	53		52
Effect of:
Overseas tax rates compared to UK	(8)		(10)
Adjustments to tax charge in respect of previous periods	1		(9)
Disposal of investment in Nephila (Note 17)	(22)		-
Recognition of US deferred tax asset	(20)		(17)
Other	1		1

Tax expense		5		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.

Movements in deferred tax are as follows:

$m	Year ended 31 December 2018	Year ended 31 December 2017
Deferred tax liability
At 1 January	(48)	(47)
Acquisition of Aalto balance sheet	-	(2)
Credit to the Group income statement	15	1
Deferred tax liability at 31 December	(33)	(48)

Deferred tax asset
At 1 January	81	63
Credit to the Group income statement	15	20
Charge to other comprehensive income and equity	(3)	(2)
Deferred tax asset at 31 December	93	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	31 December 2018	31 December 2017
US tax assets	62	42
Defined benefit pension schemes	6	12
Employee share schemes	11	14
Tax allowances over depreciation	8	9
Other	6	4
Deferred tax asset	93	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.

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.

	Year ended 31 December 2018		Year ended 31 December 2017
	Total number (million)	Weighted average (million)		Total number (million)	Weighted average (million)
Number of shares at beginning of year	1,643.6	1,643.6		1,679.9	1,679.9
Issues of shares	2.4	1.9		10.1	8.4
Repurchase of own shares	(35.9)	(28.6)		(46.4)	(28.3)
Number of shares at period end	1,610.1	1,616.9		1,643.6	1,660.0
Shares held in Treasury reserve	(54.2)	(14.3)		-	-
Shares owned by Employee Trust	(25.2)	(23.8)		(20.3)	(19.9)
Basic number of shares	1,530.7	1,578.8		1,623.3	1,640.1
Share awards under incentive schemes		22.5			17.8
Employee share options		1.5			1.9
Diluted number of shares		1,602.8			1,659.8

The basic and diluted earnings per share figures are provided below.

	Year ended 31 December 2018	Year ended 31 December 2017
Basic and diluted post-tax earnings ($m)	273	255
Basic earnings per share (cents)	17.3	15.5
Diluted earnings per share (cents)	17.0	15.3

9. Dividends

$m	Year ended 31 December 2018	Year ended 31 December 2017
Ordinary shares
Final dividend paid for the year to 31 December 2017 - 5.8 cents (2016: 4.5 cents)	90	77
Interim dividend paid for the six months to 30 June 2018 - 6.4 cents (2017: 5.0 cents)	99	81
Dividends paid	189	158
Proposed final dividend for the year to 31 December 2018 - 5.4 cents (2017: 5.8 cents)	83	94

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 23.

10. Goodwill and acquired intangibles

	Year ended 31 December 2018					Year ended 31 December 2017
$m	Goodwill	Investment management agreements	Distribution channels	Brand names	Total		Goodwill	Investment management agreements	Distribution channels	Brand names	Total
Net book value at beginning of the year	648	340	24	12	1,024		588	405	16	15	1,024
Purchases/acquisitions¹	-	3	-	-	3		55	10	14	-	79
Amortisation	-	(75)	(5)	(3)	(83)		-	(75)	(6)	(3)	(84)
Currency translation	(6)	-	-	-	(6)		5	-	-	-	5
Net book value at year end	642	268	19	9	938		648	340	24	12	1,024
Allocated to cash generating units as follows:
AHL	453	1	-	-	454		459	-	-	-	459
GLG	-	141	9	6	156		-	188	12	8	208
FRM	-	14	-	-	14		-	22	-	1	23
Numeric	134	104	-	3	241		134	121	-	3	258
GPM	55	8	10	-	73		55	9	12	-	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.

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:	AHL	GLG	FRM	Numeric	GPM
Compound average annualised growth in FUM (over three years)	11%	4%	7%	8%	34%
Discount rate
Management fees¹	11%	11%	11%	11%	15%
Performance fees²	17%	17%	17%	17%	21%
Terminal value (mid-point of range of historical multiples)³
Management fees	13.0x	13.0x	5.9x	13.0x	13.0x
Performance fees	5.5x	5.5x	3.9x	5.5x	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.

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.

			Discount rates (post-tax)		Multiples (post-tax)
Sensitivity analysis:	Compound average annualised growth in FUM		Management fee/ performance fee		Management fee/ performance fee
Key assumption stressed to:	13%	(12%)¹	10%/16%	12%/18%	14.0x/6.5x	12.0x/4.5x
Modelled headroom/(impairment) ($m)	2,550	-	2,286²	2,162²	2,480³	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.

			Discount rates (post-tax)		Multiples (post-tax)
Sensitivity analysis:	Compound average annualised growth in FUM		Management fee/ performance fee		Management fee/ performance fee
Key assumption stressed to:	6%	(1%)¹	10%/16%	12%/18%	14.0x/6.5x	12.0x/4.5x
Modelled headroom/(impairment) ($m)	188	-	134²	118²	154³	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.

			Discount rates (post-tax)		Multiples (post-tax)
Sensitivity analysis:	Compound average annualised growth in FUM		Management fee/ performance fee		Management fee/ performance fee
Key assumption stressed to:	9%	4%¹	10%/16%	12%/18%	6.9x/4.9x	4.9x/2.9x
Modelled headroom/(impairment) ($m)	17	-	13²	11²	15³	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.

			Discount rates (post-tax)		Multiples (post-tax)
Sensitivity analysis:	Compound average annualised growth in FUM		Management fee/ performance fee		Management fee/ performance fee
Key assumption stressed to:	10%	(22%)¹	10%/16%	12%/18%	14.0x/6.5x	12.0x/4.5x
Modelled headroom/(impairment) ($m)	509	-	469²	435²	499³	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.

			Discount rates (post-tax)		Multiples (post-tax)
Sensitivity analysis:	Compound average annualised growth in FUM		Management fee/ performance fee		Management fee/ performance fee
Key assumption stressed to:	36%	30%¹	14%/20%	16%/22%	14.0x/6.5x	12.0x/4.5x
Modelled headroom/(impairment) ($m)	20	-	16²	12²	19³	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.

11. Other intangibles

$m	Year ended 31 December 2018	Year ended 31 December 2017
Net book value beginning of the year	23	17
Additions	16	14
Disposals	(3)	(2)
Amortisation	(10)	(6)
Net book value at year end	26	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

	31 December 2018			31 December 2017
$m	Total	Less than 1 year	Greater than 2 years	Total	Less than 1 year	Greater than 3 years
Cash and cash equivalents¹	344	344	-	356	356	-
Undrawn committed revolving loan facility	500	-	500	500	-	500
Total liquidity	844	344	500	856	356	500
Borrowings: 2024 fixed rate reset callable guaranteed subordinated notes	150	-	150	150	-	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.

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).

13. Investments in fund products and other investments

	31 December 2018
$m	Financial assets at fair value through profit or loss¹	Loans and receivables	Total investments in fund products and other investments	Net non- current assets held for sale	Total investments
Loans to fund products	-	9	9	-	9
Investments in fund products	401	-	401	39	440
Other investments	3	-	3	-	3
Investments in line-by-line consolidated funds	357	-	357	-	357
	761	9	770	39	809

	31 December 2017
$m	Financial assets at fair value through profit or loss	Loans and receivables	Available-for- sale financial assets¹	Total investments in fund products and other investments	Net non- current assets held for sale	Total investments
Loans to fund products	-	25	-	25	-	25
Investments in fund products	249	-	-	249	79	328
Other investments	-	-	3	3	-	3
Investments in line-by-line consolidated funds	452	-	-	452	-	452
	701	25	3	729	79	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	Note	31 December 2018	31 December 2017
Investments in fund products	13.1	401	249
Less fund investments for deferred compensation arrangements	13.1	(87)	(76)
Consolidated net investments in funds - held for sale	13.2	39	79
Consolidated net investments in funds - line-by-line consolidation	13.2	300	203
Loans to funds	13.3	9	25
Seeding investments portfolio		662	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 21.

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 (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.

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, 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	31 December 2018	31 December 2017
Non-current assets held for sale	39	145
Non-current liabilities held for sale	-	(66)
Investments in fund products held for sale	39	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 in 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	31 December 2018	31 December 2017
Balance sheet
Cash and cash equivalents	26	23
Transferable securities¹	357	452
Fees and other receivables	21	1
Trade and other payables	(4)	(174)
Net assets of line-by-line consolidated fund entities	400	302
Third-party interest in consolidated funds	(100)	(99)
Net investment held by Man	300	203

Income statement
Net (losses)/gains on investments²	(18)	57
Management fee expenses³	(2)	(9)
Performance fee expenses³	(1)	(5)
Other costs⁴	(2)	(2)
Net (losses)/gains of line-by-line consolidated fund entities	(23)	41
Third-party share of losses/(gains) relating to interests in consolidated funds	7	(14)
(Losses)/gains attributable to net investment held by Man	(16)	27

Notes:

1 Included within Investments in fund products and other investments.

2 Included within Income or gains on investments and other financial instruments.

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, 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.

4 Includes nil (2017: $1 million) in relation to the third-party share of these investments and therefore represents costs incurred externally.

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 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	Total FUM ($bn)	Less infrastructure mandates and consolidated fund entities¹ ($bn)	Total FUM unconsolidated structured entities ($bn)	Number of funds	Net management fee margin² (%)	Fair value of investment held ($m)	Fee receivables and accrued income ($m)	Loans to funds ($m)	Maximum exposure to loss ($m)
Alternative
Absolute return	28.9	0.1	28.8	135	1.27	153	87	-	240
Total return	22.5	-	22.5	58	0.57	156	24	-	180
Multi-manager solutions	13.5	5.2	8.3	87	0.36	2	12	-	14
Long only
Systematic	24.7	0.2	24.5	116	0.36	1	31	-	32
Discretionary	18.8	0.1	18.7	50	0.69	77	21	-	98
Guaranteed	0.1	-	0.1	7	5.52	-	1	9	10
Total	108.5	5.6	102.9	453		389	176	9	574

31 December 2017	Total FUM ($bn)	Less infrastructure mandates and consolidated fund entities¹ ($bn)	Total FUM unconsolidated structured entities ($bn)	Number of funds	Net management fee margin² (%)	Fair value of investment held ($m)	Fee receivables and accrued income ($m)	Loans to funds ($m)	Maximum exposure to loss ($m)
Alternative
Absolute return	29.2	0.2	29.0	129	1.38	64	181	-	245
Total return	16.5	-	16.5	45	0.56	105	21	-	126
Multi-manager solutions	16.0	7.7	8.3	80	0.45	2	15	-	17
Long only
Systematic	26.8	0.1	26.7	104	0.36	1	75	-	76
Discretionary	20.4	0.1	20.3	49	0.67	61	26	-	87
Guaranteed	0.2	-	0.2	14	5.04	-	2	25	27
Total	109.1	8.1	101.0	421		233	320	25	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 18). 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.

14. Fee and other receivables

$m	31 December 2018	31 December 2017
Fee receivables	36	53
Accrued income	144	267
Prepayments	13	16
Derivative financial instruments	16	9
Other receivables	98	146
	307	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	31 December 2018	31 December 2017
Accruals	302	334
Trade payables	2	3
Contingent consideration	212	243
Derivative financial instruments	15	10
Other payables	170	253
	701	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.

16. Provisions

$m	Onerous property lease contracts	Other	Total
At 1 January 2018	30	4	34
Charged/(credited) to the income statement:
Charge in the year	2	-	2
Unused amounts reversed	-	-	-
Exchange difference	(1)	-	(1)
Used during the year/settlements	(9)	-	(9)
At 31 December 2018	22	4	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.

Man's investments in associates are as follows:

	Year ended 31 December 2018		Year ended 31 December 2017
$m	Nephila Holdings Ltd	Nephila Holdings Ltd		Other	Total
At beginning of the year	29	30		1	31
Share of post-tax profit/(loss)	7		7	1	8
Dividends received	(8)		(8)	-	(8)
Sale of investment in associate	(28)		-	(2)	(2)
At year end	-		29	-	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.

18. Leasehold improvements and equipment

$m	Year ended 31 December 2018			Year ended 31 December 2017
$m	Leasehold improvements	Equipment	Total		Leasehold improvements	Equipment	Total
Net book value at beginning of the year	28	16	44		29	15	44
Additions	8	9	17		5	7	12
Disposals	-	(1)	(1)		-	-	-
Depreciation expense	(7)	(7)	(14)		(6)	(6)	(12)
Net book value at year end	29	17	46		28	16	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).

20. Capital management

Details of the Group's capital management and dividend policy are provided within the Chief Financial Officer's review on page 23.

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 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 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.

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
At 1 January	1,643,593,289	50,000	56	1,679,920,894	50,000	58
Purchase and cancellation of own shares	(35,892,738)	-	(1)	(46,427,274)	-	(2)
Issue of ordinary shares: Partnership Plans and Sharesave	2,441,762	-	-	4,448,807	-	-
Issue of shares relating to acquisition of Aalto (Note 10)	-	-	-	5,650,862	-	-
At 31 December	1,610,142,313	50,000	55	1,643,593,289	50,000	56

21. 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:

	31 December 2018				31 December 2017
$m	Level 1	Level 2	Level 3	Total	Level 1	Level 2	Level 3	Total
Financial assets held at fair value:
Investments in fund products and other investments (Note 13)	3	246	155	404	3	137	112	252
Investments in line-by-line consolidated funds (Note 13)	-	316	41	357	-	452	-	452
Derivative financial instruments (Note 14)	-	16	-	16	-	9	-	9
	3	578	196	777	3	598	112	713
Financial liabilities held at fair value:
Derivative financial instruments (Note 15)	-	15	-	15	-	10	-	10
Contingent consideration (Note 15)	-	-	212	212	-	-	243	243
	-	15	212	227	-	10	243	253

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:

	Year ended 31 December 2018		Year ended 31 December 2017
$m	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
Level 3 financial assets/(liabilities) held at fair value
At beginning of the year	112	(243)	68	(161)
Transferred into Level 3	22	-	-	-
Purchases	88	(1)	47	(52)
Total (losses)/gains in the Group statement of comprehensive income	(9)	3	5	(41)
(Loss)/profit included in income statement	(9)	3	5	(41)
Included in other comprehensive income	-	-	-	-
Sales or settlements	(17)	29	(8)	11
At year end	196	(212)	112	(243)
Total gains/(losses) for the year included in the Group statement of comprehensive income for assets/(liabilities) held at year end	(9)	3	5	(41)

The financial liabilities in Level 3 relate to the contingent consideration payable.

	Year ended 31 December 2018				Year ended 31 December 2017
$m	Numeric	Aalto	Other	Total	Numeric	Aalto	Other	Total
Contingent consideration payable
At beginning of the year	175	60	8	243	150	-	11	161
Purchases	-	-	1	1	-	52	-	52
Revaluation of contingent consideration	(17)	(10)	(4)	(31)	15	1	(1)	15
Unwind of contingent consideration discount (Note 6)	20	8	-	28	18	7	1	26
Sales or settlements	(6)	(21)	(2)	(29)	(8)	-	(3)	(11)
At year end	172	37	3	212	175	60	8	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.

The most significant inputs into the valuations at 31 December 2018 are as follows:

	Numeric	Aalto
Weighted average net management fee margin (over the remaining earn-out period)	0.4%	0.7%
Compound growth in average FUM (over the remaining earn-out period)	12%	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:

	Numeric	Aalto
Weighted average net management fee margin
0.1% increase	50	11
0.1% decrease	(50)	(13)
Compound growth in average FUM
5% increase	7	15
5% decrease	(7)	(11)

22. Operating lease commitments

	31 December 2018				31 December 2017
$m	Within 1 year	1-5 years	After 5 years	Total	Within 1 year	1-5 years	After 5 years	Total
Operating lease commitments	18	64	275	357	27	56	292	375
Offsetting non-cancellable sublease arrangements (included net above)	17	57	11	85	20	73	15	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).

23. 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.

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 17). 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 17.

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 17.

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 14).

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 18.

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 18.

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.

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	Note to the Group financial statements	Year ended 31 December 2018	Year ended 31 December 2017
Statutory profit before tax		278	272
Adjusting items:
Acquisition and disposal related
Amortisation of acquired intangible assets	10	83	84
Revaluation of contingent consideration	25	(31)	15
Unwind of contingent consideration discount	6	28	26
Gain on sale of associate		(113)	-
Reassessment of litigation provision	16	-	(24)
Compensation - restructuring	4	1	4
Other costs - restructuring	5	5	7
Adjusted profit before tax		251	384
Tax on adjusted profit		(35)	(47)
Adjusted profit after tax		216	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	Year ended 31 December 2018	Year ended 31 December 2017
Statutory tax expense	5	17
Less tax credit on adjusting items:
Amortisation of acquired intangible assets	10	10
Compensation - restructuring	-	1
Other costs - restructuring	-	2
Tax adjusting item (Note 7 to the Group financial statements)	20	17
Tax expense on adjusted profit before tax	35	47
Made up of:
Tax expense on adjusted management fee profit before tax	28	24
Tax expense on adjusted performance fee profit before tax	7	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 above 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 34). 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	Year ended 31 December 2018	Year ended 31 December 2017
Total compensation costs (Note 4)	437	478
Adjusting items (as above)	(1)	(4)
Total compensation costs excluding adjusting items	436	474
Made up of:
Fixed compensation (includes salaries and associated social security costs, and pension costs)	179	174
Variable compensation (includes variable cash compensation, share-based payment charge, fund product payment charge and associated social security costs)	257	300
Total other costs (Note 5)	175	173
Adjusting items (as above)	(5)	(7)
Total other costs excluding adjusting items	170	166
Total finance expense (Note 6)	40	38
Total finance income (Note 6)	(7)	(3)
Net finance expense, including adjusting items	33	35
Adjusting items (as above)	(28)	(26)
Net finance expense excluding adjusting items	5	9

Adjusted management fee EPS

Man's dividend policy is disclosed on page 2. 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:

	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
Statutory profit after tax	273	17.3	17.0	255	15.5	15.3
Adjusting items	(27)	(1.7)	(1.7)	112	6.8	6.8
Tax adjusting items	(30)	(1.9)	(1.8)	(30)	(1.8)	(1.8)
Adjusted profit after tax	216	13.7	13.5	337	20.5	20.3
Less adjusted performance fee profit	(27)	(1.7)	(1.7)	(158)	(9.6)	(9.5)
Adjusted management fee profit after tax	189	12.0	11.8	179	10.9	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	Year ended 31 December 2018	Year ended 31 December 2017
Gross management and other fees¹	835	784
Share of post-tax profit of associates	7	8
Less:
Distribution costs	(51)	(56)
Asset servicing	(51)	(37)
Compensation	(357)	(331)
Other costs¹	(170)	(165)
Net finance expense	4	-
Adjusted management fee profit before tax	217	203
Exclude: Net management fees from guaranteed products, commission income and share of post-tax profits of associates	(14)	(25)
Core management fee profit before tax	203	178

Performance fees	127	289
(Losses)/gains on investments and other financial instruments²	(5)	44
Less:
Compensation	(79)	(143)
Finance expense	(9)	(9)
Adjusted performance fee profit before tax	34	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 42).

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 46 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 14).

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 19.

Proforma surplus capital

The Group's surplus capital is calculated as follows:

$m	31 December 2018	31 December 2017
Permitted share capital reserves and subordinated debt	1,490	1,584
Less deductions (primarily goodwill and other intangibles)	(987)	(1,052)
Group financial resources	503	532
Less financial resources requirement	(238)	(276)
Surplus capital	265	256

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	256
2017 profit after tax, adding back intangibles amortisation	341
Dividends and share repurchases	(390)
Decrease in financial resources requirement on receivables and other assets	38
Other movements	20
Surplus capital at 31 December 2018	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	265
H2 2018 profit after tax, adding back intangibles amortisation	235
2018 proposed final dividend	(83)
New leases accounting standard - 1 January 2019 impact (Note 1 to the Group financial statements)	(100)
Other movements (primarily H2 2018 other reserve movements)	23
Proforma surplus capital	340