Company Announcements

CYBG PLC

(Company)

LEI: 213800ZK9VGCYYR6O495

26 July 2019

2019 ANNUAL GENERAL MEETING RESULTS - UPDATE STATEMENT

The Company notes that at the Company's Annual General Meeting (AGM) held on 30 January 2019, 20 per cent or more of votes were cast against the Board recommendation for Resolution 2, Resolution 22 and Resolution 23.

The Company explained in its AGM Results announcement the action it intended to take to understand and address shareholder concerns and an update is provided below. The Company will continue to engage with shareholders and will provide a final update in the Company's 2019 Annual Report and Accounts.

Resolution 2 - To approve the Directors' Annual Report on Remuneration for the year ended 30 September 2018

While shareholders approved the Directors' Remuneration Report by a clear majority, with 65.79% of votes cast in favour, the Company recognises the large number of votes opposing the resolution. This was a disappointing result when considered in the context of 99.23% votes cast in favour of approving the Directors' Remuneration policy at the 2017 AGM indicating that the Company's approach to remuneration was supported by shareholders.

The Company committed to further engaging with shareholders on the implementation of its Remuneration policy in the months following the 2019 AGM to ensure shareholder views are fully understood and considered. The Company recognises that shareholders have an essential role to play in guiding responsible remuneration practices and the Board, Remuneration Committee and management team remain committed to engaging in an open and frank dialogue with all our key stakeholders, on all elements of our policy.

Since the AGM members of the Board and the executive management team have engaged in consultation with the Company's largest shareholders in the UK and in Australia (between them representing c.60% of CYBG voting rights) on several matters, including our approach to remuneration.

It became clear throughout this consultation that our largest shareholders support our approach to remuneration. Reflecting upon the discussions (and on the proxy agency report recommendations, that we believe many of our shareholders relied upon) the Board has concluded that, while we have majority support for our approach and our disclosure levels were generally good, some shareholders would like to see greater transparency.  This will therefore be a focus for us moving forward and in particular we will seek to be clearer over our processes such as those for determining awards for Executive Directors, calculating annual awards and where judgement and discretion is applied by the Remuneration Committee. All of these will be considerations as we continue to evaluate the most appropriate remuneration structure for Executive Directors, how these align with internal CYBG pay structures and external market competitiveness.

We understand that when we engage with shareholders it helps to create better understanding of our decisions and we will continue to broaden our shareholder dialogue on remuneration matters throughout the rest of this year and we will be exploring ways in which we can achieve this, including seeking views to inform the Company's Remuneration policy which will be subject to shareholder approval at the Company's 2020 AGM.

Resolution 22 - To authorise the Directors to allot equity securities in connection with AT1 Securities and issue further AT1 Securities

Resolution 23 - To authorise the Directors to disapply statutory pre-emption rights in respect of the allotment of equity securities in connection with AT1 Securities and issue further AT1 Securities

While shareholders approved Resolutions 22 and 23 by a substantial majority, with 79.97% of votes cast in favour of Resolution 22 and 79.66% of votes cast in favour of Resolution 23, the Company noted the number of votes opposing these Resolutions.

Resolution 22 grants the Directors authority to allot ordinary shares up to an aggregate nominal amount equal to £15,000,000 in connection with the conversion of additional tier 1 securities issued by Virgin Money Holdings (UK) plc, a subsidiary of the Company, in the event that the common equity tier 1 ratio of the Issuer Group (as defined in the terms and conditions of those Virgin Money AT1 Securities) falls below a threshold specified in those terms and conditions. Separately Resolution 22 grants authority for the Directors to allot ordinary shares up to an aggregate nominal amount of £35,000,000 in connection with the issue of further additional tier 1 securities where the Directors consider it necessary or desirable including in connection with, or for the purposes of complying with or maintaining compliance with regulatory requirements, including capital requirements or targets (as applicable), for a period of 5 years.

In the time since the 2019 AGM, the Company has continued to engage with shareholders to fully understand their views in relation to the specific authorities granted under Resolutions 22 and 23. 

Feedback from shareholders is that either a) they do not consider the use of AT1 securities appropriate as they put investors at significant risk of dilution or b) their expectations are that such authorisations should be renewed on an annual basis.

To maintain compliance with, regulatory capital requirements or targets, and achieve balance sheet efficiency, the Directors believe it is in the best interests of the Company and shareholders to have the continued flexibility to issue AT1 securities. Shareholder dilution would only occur, i.e. the AT1 securities would only be converted into equity, in the unlikely event the CYBG Group's CET1 ratio falls below 7%. As at 31 March 2019, the Group has a CET1 ratio of 14.5%.

Following feedback from shareholders it is the Company's intention to seek to renew the Directors' authority to allot equity securities in connection with AT1 Securities, issue further AT1 Securities and to disapply statutory pre-emption rights in respect of those AT1 Securities on an annual rolling basis rather than for a period of 5 years, commencing at the AGM of the Company to be held in 2020.

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CYBG PLC is registered in England and Wales (company number: 09595911) and as a foreign company in Australia (ARBN 609 948 281) and has its registered office at 20 Merrion Way, Leeds, West Yorkshire LS2 8NZ