Schroder & Co Bank AG
Annual Report 2003
2004
200 years of forward thinking
Head Office
Schroder & Co Bank AG
Central 2, 8001 Zürich
Postfach 1820, 8021 Zürich
Phone +41 (0)1 250 11 11
Fax
+41 (0)1 250 13 12
www.schroders.ch
E-Mail: contact@schroders.ch
Branch Office
Schroder & Co Banque SA
8, rue d’Italie, 1204 Genève
Case postale 3655, 1211 Genève 3
Phone +41 (0)22 310 26 26
Fax
+41 (0)22 311 70 44
Subsidiary companies
Schroder Cayman Bank and Trust Company Limited
PO Box 1040, Harbour Centre
Grand Cayman, B.W.I.
Phone +1 (345) 949 28 49
Fax
+1 (345) 949 54 09
Schroder Trust AG
Central 2, 8001 Zürich
Phone +41 (0)1 250 11 11
Fax
+41 (0)1 250 13 12
Content
Board and Senior Staff
1
Chairman’s Statement
2
Management Statement
4
Balance Sheet
8
Off-Balance-Sheet Transactions
9
Profit and Loss Account
10
Comments on Business Activities
12
Principal Accounting Policies and Valuation Principles
13
Information on the Balance Sheet
16
Information on Off-Balance-Sheet Transactions
26
Information on the Profit and Loss Account
28
Report of the Statutory Auditors
29
Main Schroder Branches
30
Schroders Milestones
32
Board and Senior Staff
Board of Directors
Jonathan Asquith, President (as of 18 December 2003)
Sally Tennant, Vice President
Dr. François R. Bochud
Dr. Martin K. Eckert
Peter P. Hügle
George W. Mallinckrodt, KBE, Honorary President
Board of Management
Luc Denis, Chairman, Head of Private Banking
Heinz Scheiwiller, Deputy Chairman, Head of Finance & Administration
Rudolf Stäger, Member, Head of Private Banking Zurich (as of 1 October 2003)
Stephen J. Mills, Member, Head of SIM Switzerland
Bruno Schmidt, Secretary
Senior Management
Otto J. Amberg
Richard M. Lang
Norbert Brestel
Bernhard H. Leibkutsch
Pierre Antoine Carron
Gerhard Mailänder
Jehan-Christophe de La Haye Saint Hilaire
Gordon F. Matthew
Geoffroy de Saint Périer (until 30 November 2003)
Samuel Moulin
Reto Dietrich
Werner Niedermann
Markus Engeler
Stephan Ochsner
Slavica J. Barovic Esnault-Pelterie
Christian Schmid
Pierre-Louis Favre
Dino Teitler
Rolf Fischer
Eric C. Thelwell
Stefan Frischknecht
Ulysse-Oliver Traub
Roland Heule (as of 1 June 2004)
Christian Trixl
Jean-Jacques Hunziker
Marcel Wäspi
Jürg Klingler
Urs Winiger
Brigitte Kunz (as of 1 March 2004)
Antonio Winspeare Guiccardi
Compliance
Jean-Jacques Hunziker
External Auditors
PricewaterhouseCoopers AG, Zürich
Schroder & Co Bank AG
1
Chairman’s Statement
Jonathan Asquith
Chairman of the Board
For the financial markets, 2003
We will need to continue to adapt our activities in future
was a year of two parts. The
to compete effectively while coping with changing legal
first quarter was weak, over-
requirements and accommodating the planned agree-
shadowed by the approaching
ment with the European Union on the taxation of interest.
Iraq war and associated inter-
We are confident that the Bank will be equal to these
national tensions. From the sec-
challenges, supported by our flexible staff and good
ond quarter onwards, however,
strategic planning, delivering strong investment perform-
markets
ance and superior service to our clients.
recovered
strongly.
While geopolitical uncertainties lingered on throughout
the year, fiscal incentives and a generous monetary
In 2003, net profit rose approximately 10% to CHF 11
policy, particularly in the United States, provided sig-
million. The Board of Directors proposes to the General
nificant stimulus to the world economy.
Meeting an unchanged dividend of CHF 9 million. After
this dividend payment, the reported equity of the Bank
In this improved environment, our Bank increased its net
as at the end of 2003 amounted to CHF 72.8 million
profit compared to the previous year with all business
plus CHF 18 million retained as a reserve for general
units making a positive contribution. In private banking,
banking risks.
the business environment required a particularly agile
asset allocation policy and overall returns were additionally boosted by the excellent performance of many of
the Schroder mutual funds. Our institutional investment
management and fund distribution businesses also
consolidated and strengthened their market position.
On the technology side, our new core operating system
went live in the spring. This enabled us to further improve
both client reporting and internal processes.
2
Schroder & Co Bank AG
On behalf of the Board of Directors, I would like to thank
Board changes
all our clients for their continued trust and support.
At the extraordinary General Meeting of 18 December
My thanks also go to all our employees for their valuable
2003, Andrew Sykes, an Executive Director of Schroders
contribution in 2003.
plc, stepped down as Member and Chairman of the
Board of Directors. The Board wishes to convey its
sincere thanks for his valuable contribution and dedicated service to the Bank’s success.
Jonathan Asquith
Chairman of the Board
Jonathan Asquith was newly elected as Member and
Chairman of the Board of Directors. Jonathan Asquith is
Chief Financial Officer and an Executive Director of
Schroders plc as well as Chairman of Schroder & Co. Ltd.
London. The Board would like to thank him for taking
over this responsibility and wishes him every success in
his endeavours.
As of 1 October 2003, Rudolf Stäger, 46, became Head
of Private Banking at our head office in Zurich and Member of the Bank’s Executive Board. His experience and
profile in private banking will be invaluable and the Board
wishes him much success in his future tasks.
Schroder & Co Bank AG
3
Management Statement
The recovery in the financial
These developments were ac-
markets in 2003 and improved
companied by significant rises in
efficiency within the Bank had
equity markets and they closed
a positive impact on our profits.
the year on a positive note every-
Net profit rose from CHF 10
where despite the difficult start.
million to CHF 11 million, due to
Luc Denis
Chairman
a combination of rigorous cost
In local currency the global stock
Heinz Scheiwiller
Deputy Chairman
market index rose 22.8%.
control and marginally higher
income from commission activities.
The recovery in equity markets, however, went hand in
hand with a significant depreciation of the US dollar
The Economic Environment in 2003
against all other major currencies. During the year, the
As highlighted in the Chairman’s statement, 2003 was
US dollar lost 10% against the Swiss franc.
characterized by distinct contrasts: The first three
months were influenced adversely by the approaching
Iraq war, the Sars epidemic in Asia and continued fears
of terrorist attacks. Worldwide, forecasts for corporate
profits remained subdued and consumer confidence
kept falling. However, with the outbreak of the war in Iraq
and its rapid completion, the United States led a recovery
in the global economy supported by tax cuts and low
interest rates. Economic growth also gathered pace in
Asia, particularly in China. Due to rigorous cost-cutting
measures, corporate profits also recovered better than
initially expected.
4
Schroder & Co Bank AG
Private Banking
activity is portfolio management which includes advising
Overall, the positive effects of ris-
clients with regard to strategic asset allocation as well as
ing equity markets and the nega-
managing tailored, complex mandates.
tive effect of the US dollar’s de-
Rudolf Stäger
Head of Private
Banking Zurich
preciation broadly offset each
Clients who prefer to make their own investment deci-
other with regard to existing as-
sions are supported by our specialists in the Advisory
sets under management. A net
Division who provide guidance on analysing stock
inflow of new money, however,
markets. They not only offer their own ideas but also
led to a rise in total assets. Com-
serve as skilled advisers to our clients in shaping their
mission income over the year was slightly above the
investment structures.
previous year’s level and improved significantly in the
second half of 2003. Initiatives to reduce costs and the
Our locations in Geneva and Zurich are complemented
completion of our infrastructure programme contributed
by our international network. This forms an ideal platform
to the increase in our net profit.
to achieve appropriate solutions for even the most complex wealth structures. We also work in cooperation with
The improved stock market environment contributed to a
external consultants in the management of the finances
pick up in our active wealth management activities. Our
of wealthy family groups.
clients also benefited from the strong performance of the
Schroder range of mutual funds and the regular use of
alternative investments in our managed portfolios.
We pay special attention to refining our range of products
and services in asset management and consulting, tailoring them to our clients’ diverging needs. Seasoned specialists with a broad range of analytical tools at their disposal are responsible for asset management. Their main
Schroder & Co Bank AG
5
Management Statement
Institutional Investment
awarded first place out of 40 funds over five years in
Management & Fund Sales –
Standard & Poors’ Swiss equity sector analysis.
SIM Switzerland
Stephen J. Mills
Head of
SIM Switzerland
Strong growth in business vol-
Institutional Marketing
umes in 2003 led to our Insti-
During the past year, we won a wide range of new
tutional Investment Management
mandates from Swiss pension funds, corporations and
and Fund Sales division record-
financial institutions. The strong performance of our Swiss
ing improved results for the
equity product not only supported our marketing efforts
eighth consecutive year.
but also generated significant performance fees. We
manage country-specific, regional, global and balanced
The activities of the division can be divided into three parts
mandates on a segregated, unitized or sub-advisory
or functions: asset management, institutional marketing
(white label) basis.
and client servicing, and the distribution of Schroders’
range of Luxembourg-domiciled SICAV funds.
Distribution of mutual funds (Retail)
Our mutual fund sales business saw robust net inflows
Fund Management
underpinned by our broad client base (Swiss-based
Our Swiss-based team of fund managers and analysts is
banks, insurance companies and fund distributors), high
responsible for the management of Swiss equity and
level of client service as well as the strong investment
balanced pension fund mandates. The team draws on the
performance of key funds for the Swiss market. Sales
extensive global research of the Schroder Group as well
were particularly buoyant in the second half of the year on
as its own local research efforts: more than 300 company
the back of the recovery in stock markets.
visits are undertaken in Switzerland every year. Both our
Swiss Equity and Swiss Small & Mid Cap SICAV funds
performed significantly ahead of their respective benchmark indices in the year: the Swiss Equity Fund was
6
Schroder & Co Bank AG
Banking
ployees now have attractive and up-to-date business
Despite an overall increase in loan volumes, lower inter-
premises at their disposal.
est rates led to a decrease in interest income. Commission income from guarantees, documentary credits and
The above projects involved substantial infrastructure
fiduciary loans was close to the previous year’s levels.
investments in past years. We are confident that these
investments form an excellent foundation for the Bank’s
Income from trading was down overall with higher in-
continued growth in the future.
come from foreign exchange trading set against lower
revenues from securities trading. There was increased
Subsidiaries
client demand for our broad range of services in the field
Our wholly owned subsidiary Schroder Cayman Bank &
of foreign exchange following the growing fluctuations
Trust Company Ltd offers our clients services in the
among the major currencies.
formation and management of trusts and foreign domiciled corporations. Schroder Trust AG, Zurich, mainly
Finance and Administration
acts as a trustee for trusts formed under foreign law.
In spring 2003, after extensive preliminary work, we
It also acts as a corporate member of foundation boards
successfully introduced our new core EDP system in the
in the establishment and management of foundations.
Bank. The new system, called Globus T24 and distrib-
Both companies produced satisfactory results in 2003.
uted and serviced by the Swiss software company
Temenos SA, is an up-to-date and efficient banking
On behalf of all our employees, we would like to thank our
software package. The new platform will allow us to
clients for the trust they repose in our institution.
expand further our services to our clients, significantly
improve client reporting and tighten internal operational
procedures.
We also completed renovations at our head office
Luc Denis
Heinz Scheiwiller
Central 2 in Zurich during 2003. Our clients and em-
Chairman
Deputy Chairman
Schroder & Co Bank AG
7
Balance Sheet
as of 31 December 2003
CHF
Notes
31.12.2003
31.12.2002
17,541,128
18,883,981
179,310,161
99,833,290
373,307,132
336,223,885
Assets
Liquid assets
Due from banks
Due from clients
3.1
Mortgages
3.1
629,557
586,280
Securities and precious metals trading portfolios
3.2
28,057,100
25,893,580
Financial investments
3.3
—
346,875
Participations
3.4
1,100,000
1,100,000
Fixed assets
3.6
581,209
946,353
7,183,119
4,609,381
3.5
8,923,460
5,490,466
616,632,866
493,914,091
—
—
Due to banks
244,118,014
177,537,265
Due to clients
231,140,535
172,020,384
Accrued income and prepaid expenses
Other assets
Total assets
Total due from Group entities and significant shareholders
Liabilities and shareholders’ equity
Accrued expenses and deferred income
17,855,374
21,081,376
Other liabilities
3.5
10,307,853
6,446,966
Valuation adjustments and provisions
3.9
13,369,313
18,987,520
Reserves for general banking risks
3.9
18,000,000
18,000,000
Share capital
3.10, 3.11
20,000,000
20,000,000
General legal reserve
3.11
16,700,000
15,900,000
Other reserves
3.11
34,000,000
33,800,000
140,580
101,904
11,001,197
10,038,676
616,632,866
493,914,091
14,871,701
19,218,658
Retained earnings carried forward
Net income
Total liabilities and shareholders’ equity
Total due to Group entities and significant shareholders
8
Schroder & Co Bank AG
Off-Balance-Sheet Transactions
as of 31 December 2003
CHF
Notes
31.12.2003
31.12.2002
Contingent liabilities
3.1, 4.1
55,850,143
73,437,301
Confirmed credits
3.1, 4.2
62,000
534,394
Commitments
3.1
—
867,188
Derivative instruments
4.3
– positive replacement values
8,614,358
5,043,072
– negative replacement values
8,385,042
4,911,325
575,628,189
318,139,846
1,508,118,154
1,688,816,709
57,184,808
75,126,717
– contract volume
Fiduciary transactions
– Fiduciary placements with third party banks
– Fiduciary credits
4.4
Schroder & Co Bank AG
9
Profit and Loss Account
for the period from 1 January to 31 December 2003
CHF
Notes
2003
2002
Interest and discount income
10,715,972
13,310,422
Interest expenses
(3,973,560)
(5,239,149)
6,742,412
8,071,273
1,091,204
1,101,211
50,013,560
49,007,169
551,150
519,505
Commission expenses
(5,384,594)
(5,242,091)
Total
46,271,320
45,385,794
4,579,485
4,853,181
a) Revenues and expenses from ordinary banking activities
Net result from interest activities
Total
Results from commissions and service fees activities
Commission income on lending activities
Commission income on securities and investment transactions
Commission income on other services
Result from trading operations
5.1
Other ordinary results
Result from the sale of financial investments
(458,750)
—
Participation income
—
1,000,000
Other ordinary expenses
—
(79,346)
(458,750)
920,654
Total
Operating expenses
Personnel expenses
5.2
(28,699,065)
(28,345,919)
Other operating expenses
5.3
(12,438,563)
(16,794,390)
(41,137,628)
(45,140,309)
15,996,839
14,090,593
Total
Gross profit
10
Schroder & Co Bank AG
CHF
Notes
2003
2002
15,996,839
14,090,593
(436,854)
(490,042)
Valuation adjustments, provisions and losses
(5,410,330)
(5,036,567)
Result before extraordinary items and taxes
10,149,655
8,563,984
4,870,591
3,830,000
Taxes
(4,019,049)
(2,355,308)
Net income
11,001,197
10,038,676
11,001,197
10,038,676
140,580
101,904
11,141,777
10,140,580
(9,000,000)
(9,000,000)
(800,000)
(800,000)
(1,300,000)
(200,000)
41,777
140,580
b) Net income
Gross profit
Depreciation and write-offs of non-current assets
Extraordinary income
3.6
5.4
c) Allocation of retained earnings
Net income
Retained earnings carried forward
Retained earnings at the end of the period
Allocation of retained earnings
Ordinary dividend
Allocation to general legal reserve
Allocation to other reserves
Retained earnings carried forward
Schroder & Co Bank AG
11
1. Comments on Business Activities
General
Other risks
Schroder & Co Bank AG is a wholly owned subsidiary of
The Bank’s liquidity is monitored and ensured in accor-
Schroders plc, London. The Bank has a branch office in
dance with Swiss banking legislation and Group regula-
Geneva.
tions.
The business activities of the Bank are described below.
Credit risk is monitored separately by the banking divi-
There are no further business activities that would signifi-
sion. The securities underlying the loans are valued at
cantly impact the Bank’s risk and income situation.
market prices. The lending values are established based
on predefined directives.
Fees and commissions business
The Bank’s principal line of business is investment man-
The operational risks are limited through internal guide-
agement for both national and international clients.
lines regarding organisation and controls. Internal audit
periodically reviews the internal controls and reports to
Asset management, trustee, custodian and credit opera-
the Board of Directors.
tions are the main contributors to commissions and service fees revenues.
Outsourcing
The Bank has an outsourcing agreement with the com-
Banking activities
pany Biveroni Batschelet Partners AG (BBP) for running
The Bank’s main balance sheet activities are the client
the interbank applications SIC, EuroSIC, Swift and Sec-
lending business and interbank operations.
om. BBP’s role is limited to providing electronic access
to the above mentioned interbank services.
Loans to clients are mainly granted on the basis of Lombard coverage.
Staff
In 2003, there were 107 full- and 13 part-time employ-
Trading activities
ees, equalling a total of 120 (114.9 full-time positions,
Trading comprises mainly trading for the accounts of
accounting for part-time positions).
clients in interest rate products, securities and foreign exchange and proprietary trading.
Risk management
Interest rate variation risk
On- and off-balance-sheet interest rate variation risk is
monitored and managed centrally by the market risk
committee. Management is based on the computation of
the impact of potential interest rate changes on the discounted net value of the shareholders’ equity and on the
projected net income effect.
12
Schroder & Co Bank AG
2. Principal Accounting Policies and Valuation Principles
Basis of preparation
If an outstanding loan is classified as entirely or partially
The accounts are prepared in accordance with the Swiss
irrecoverable or if a renunciation of outstandings is grant-
Code of Obligations, the Swiss Federal Law Governing
ed, the outstanding loan is written off by debiting the
Banks and Savings Banks, including its directives, and the
respective adjustment for loss.
Swiss Banking Commission’s regulations and directives.
Troubled loans are reclassified as of full value when outAll transactions are recorded in the Bank’s books at the
standing amounts of capital and interest are met again on
trade date and valued from that date for the profit and
time according to the conditions fixed by contract.
loss account. Money market and foreign exchange transactions are reported as off-balance-sheet business until
Securities and precious metals trading portfolio
settlement date. As from the settlement date, these
Actively traded positions which are either traded on a
transactions are included in the balance sheet.
recognised stock exchange or for which a representative
market exists are valued at market value. Refinancing
Business risks are covered by adequate value adjust-
costs are charged against trading income. All other
ments and provisions.
trading positions are valued at the lower of cost or net
realisable value.
Detailed principles
The most important accounting policies and valuation
Financial Investments
principles are shown below.
Securities held to generate income in the medium term
are valued at the lower of cost or net realisable value. Re-
Liquid assets, receivables from and liabilities to banks
alised profits or losses from sales of these securities are
Items are stated in the balance sheet at their nominal
included within “Results from the sale of financial invest-
value or, respectively, at cost less any individual valuation
ments”. Unrealised profits or losses are included within
adjustments required for impaired assets.
“Other ordinary income” or “Other ordinary expenses”.
Debt securities held for investment are stated at cost ad-
Loans
justed for possible premiums or discounts. Precious met-
Impaired loans, i.e. loans that are unlikely to be repaid by
als are valued at market value.
the debtor, are valued individually. A specific provision is
made for the estimated shortfall against nominal value in
Participations
capital and interest. Off-balance-sheet exposure, such
Participations are stated at cost less any accumulated
as commitments, guarantees or derivative instruments,
depreciation.
are also taken into consideration for this valuation. Loans
are considered as impaired at the latest when the con-
Tangible fixed assets
tractual payments for capital and/or interest are overdue
Tangible fixed assets are valued at cost less accumulat-
for more than 90 days. Interest accrual is suspended if
ed depreciation. Depreciation is calculated according
recovering interest is so unlikely that an accrual does no
to plan using the straight-line method based on the
longer make sense.
useful life.
Schroder & Co Bank AG
13
Principal Accounting Policies and Valuation Principles
The recoverability is checked each year. Should the use-
Taxes
ful life change or the value decrease upon checking the
Current tax is generally tax on profit recurrent on an annu-
recoverability, the remaining book value will be offset
al basis. One-off or transaction taxes are not considered
according to plan or an extraordinary depreciation can be
as current tax.
made. In accordance with tax regulations smaller items
may be charged directly to the profit and loss account.
Current tax on earnings is included as expense of the
period in which the earnings are recognized. Tax liabilities
Useful life of the various fixed assets:
are shown under “Accrued expenses and deferred in-
EDP equipment (hardware):
3 Jahre
come”.
Cars:
4 Jahre
Derivative financial instruments
Foreign currencies
Derivative financial instruments are used by the Bank for
Foreign currency transactions are translated at the aver-
asset and liability management and for securities and
age exchange rates ruling at the balance sheet date. For-
foreign exchange dealing. They are used both for propri-
eign exchange positions in the balance sheet are trans-
etary trading and for trading for the accounts of clients.
lated at the average exchange rates at the balance sheet
Valuation is in accordance with the purposes for which
date and taken to the profit and loss account. Forward
they were originally acquired.
foreign exchange transactions are valued at the forward
market rates ruling at the balance sheet date. The valua-
1) Derivative trading positions
tion result is taken to the profit and loss account.
These derivatives are marked to market. Positive and
negative replacement values are included within “Other
The main conversion rates applied are listed below:
assets” or “Other liabilities”. Profits and losses are includ-
2003
Previous year
EUR
1.5590
1.4525
GBP
2.2120
2.2350
2) Derivative financial investments
USD
1.2400
1.3875
These derivatives are acquired by the Bank instead of
JPY
1.1550
1.1700
direct investments. In accordance with the accounting
ed within “Result from trading operations”.
policy for financial investments, these positions are
14
Valuation adjustments and provisions
valued at the lower of cost or net realisable value.
Based on the principle of prudence, the Bank establishes
Any interest income components are included within
valuation adjustments and provisions within liabilities for
“Interest and dividend income from financial invest-
contingent risks. The valuation adjustments and provi-
ments”. Realised profits or losses are included within
sions may contain undisclosed reserves.
“Result from the sale of financial investments”.
Schroder & Co Bank AG
3) Derivatives for hedging purposes
Derivative transactions concluded for hedging purposes
are valued and booked on a basis consistent with the
underlying transactions.
Liabilities to own pension plans
The employees of Schroder & Co Bank AG benefit from
an insurance coverage by two defined contribution pension plans. The “BVG Stiftung” grants at least the benefits
mandatory by law. The “Vorsorgestiftung” of Schroder &
Co Bank AG grants benefits for that part of the salary
above the limit of the BVG law. The employer’s contributions according to the defined contribution pension plans
are included within “Personnel expenses”.
Schroder & Co Bank AG
15
3. Information on the Balance Sheet
3.1
Schedule of collateral for loans and off-balance-sheet transactions
CHF 1,000
Type of collateral
Mortgage
collateral
Other
collateral
Without
collateral
Total
—
370,543
2,764
373,307
Loans
Due from clients
Mortgages
– Residential real estate
Total
630
630
31.12.2003
630
370,543
2,764
373,937
31.12.2002
586
323,207
13,017
336,810
Contingent liabilities
—
53,270
2,580
55,850
Confirmed credits
—
—
62
62
Commitments
—
—
—
—
31.12.2003
—
53,270
2,642
55,912
31.12.2002
—
70,405
4,433
74,838
Gross
amount
Estimated
proceed from
collateral
realisation
Net
amount
Individual
valuation
adjustment
31.12.2003
944
—
944
944
31.12.2002
712
—
712
712
Off-balance-sheet transactions
Total
Impaired loans
Total
3.2
Securities and precious metals trading portfolios
CHF 1,000
31.12.2003
31.12.2002
Interest bearing securities and rights
– Exchange listed
28,057
25,894
– Unlisted
—
—
Shares and similar securities and rights
—
—
Total
28,057
25,894
of which securities acceptable to central banks
28,057
25,894
(trading positions in derivatives are included under 4.3)
16
Schroder & Co Bank AG
3.3
Financial investments
CHF 1,000
Book Value
Fair Value
31.12.2003
31.12.2002
31.12.2003
31.12.2002
Shares, similar securities and rights
—
347
—
347
Total
—
347
—
347
of which securities acceptable to central banks
—
—
—
—
31.12.2003
31.12.2002
1,100
1,100
31.12.2003
31.12.2002
Share capital
Ownership
proportion
Ownership
proportion
100
100%
100%
1,000
100%
100%
3.4
Participations
CHF 1,000
Without market value
Notes to significant participations
CHF 1,000
Name of the company
Business activity
Schroder Trust AG, Zürich
Trust, foundation and offshore company
establishment and administration
Schroder Cayman Bank
and Trust Company Ltd,
Cayman Islands
3.5
Banking services as well as
trust and offshore company
establishment and administration
Other assets and other liabilities
CHF 1,000
31.12.2003
31.12.2002
Other
Assets
Other
Liabilities
Other
Assets
Other
Liabilities
8,614
8,385
5,043
4,911
276
1,708
441
1,331
33
215
6
205
8,923
10,308
5,490
6,447
Replacement value of derivative instruments
Trading operations
Indirect taxes and stock exchange fees
Other assets and liabilities
Total
Schroder & Co Bank AG
17
Information on the Balance Sheet
3.6
Assets and participations
CHF 1,000
31.12.2002
31.12.2003
Historical
costs
Write-offs/
accumulated
depreciation
Book
value
Additions
Disposals
Write-offs/
depreciation
Book
value
Total majority participations
1,100
—
1,100
—
—
—
1,100
Other fixed assets
5,418
(4,472)
946
79
( 7)
( 437)
581
Total
6,518
(4,472)
2,046
79
(7)
(437)
1,681
Fire insurance value of other fixed assets
3.7
10,633
Assets pledged or ceded to secure own liabilities
and assets subject to ownership reservation
CHF 1,000
31.12.2003
Due amount
(book value)
whereof
claimed
Due amount
( book value)
whereof
claimed
28,057
16,980
22,765
3,233
Own securities
There are no loans nor pension transactions with securities.
18
Schroder & Co Bank AG
31.12.2002
3.8
Liabilities to own pension plans
CHF 1,000
31.12.2003
31.12.2002
3,456
26,650
The liablities due to own pension plans amounted to
According to the pension funds’ regulation, the employer pays a contribution total of 15% of the relevant salary whereas the employees pay 5%.
The employer’s reserve in both pension schemes amounts to CHF 4.2m
as at 31 December 2003 (previous year CHF 5.5m).
3.9
Valuation adjustments and provisions / reserves for general banking risks
CHF 1,000
Balance
31.12.2002
Specific usage
and reversals
Change in
definition
of purpose
(reclassifications)
Recoveries
of doubtful
interests,
differences
New creation
charged to
profit & loss
account
Reversals
credited to
profit & loss
account
Balance
31.12.2003
Provision for taxes
and latent taxes *)
118
(118)
Loan losses
(credit and country risk)
712
—
—
—
232
—
944
Other provisions
18,157
(5,832)
—
—
4,950
(4,850)
12,425
Valuation adjustments and provisions
18,987
(5,950)
—
—
5,182
(4,850)
13,369
—
—
—
18,000
*) Based on a change in the RRV-EBK: transfer to accrued expenses and deferred income.
Reserves for general
banking risks (fully taxed) 18,000
—
—
Schroder & Co Bank AG
19
Information on the Balance Sheet
3.10
Capital structure
The whole share capital amounts to CHF 20,000,000 and is split into
20,000 shares of CHF 1,000 nominal value.
At 31 December 2003 all shares are held directly by Schroder Nederland
Finance BV, Amsterdam. This company is ultimately wholly owned by
Schroders plc, London.
On 20th February 2003, Schroders plc had been notified pursuant to
section 198 of the Companies Act 1985 of the following interests of 3%
or more in the ordinary shares:
Shares Schroders plc
Stake
Vincitas Limited
46,272,073
20.47%
Veritas Limited
29,777,101
13.17%
One-Forty-Five Limited
13,754,311
6.08%
Englehall Limited
10,375,504
4.59%
The above-named held their interests as trustees of certain settlements
made by members of the Schroder family.
20
Schroder & Co Bank AG
3.11
Statement of changes in shareholders’ equity (before profit distribution)
CHF 1,000
Shareholders’ equity at the beginning of 2003
– Share capital
20,000
– General legal reserve
15,900
– Other reserves
33,800
– Reserves for general banking risks
18,000
– Retained earnings carried forward
10,141
Total shareholders’ equity at the beginning of 2003
97,841
Allocations
– Allocation to reserves for general banking risks
—
– Allocation to general legal reserve
800
– Allocation to other reserves
200
– Allocation from profit
(1,000)
– Dividend 2002
(9,000)
– Net income
11,001
Total shareholders’ equity at the end of 2003
99,842
– Share capital
20,000
– General legal reserve
16,700
– Other reserves
34,000
– Reserves for general banking risks
18,000
– Retained earnings carried forward
11,142
Schroder & Co Bank AG
21
Information on the Balance Sheet
3.12
Maturity structure of current assets, financial investments and borrowed funds
CHF 1,000
At sight
Redeemable
by notice
Maturities
Total
Within
3 months
Within
3 to 12
months
Within
12 months
to 5 years
After
5 years
—
Current Assets
Liquid assets
17,541
—
—
—
—
Due from banks
54,396
—
97,965 26,949
—
— 179,310
Due from clients
386
136,782
135,251 97,900
2,988
— 373,307
—
630
—
—
—
—
630
28,057
—
—
—
—
—
28,057
—
—
—
—
—
—
—
31.12.2003
100,380
137,412
233,216 124,849
2,988
— 598,845
31.12.2002
72,081
113,859
183,553 107,677
4,598
— 481,768
Due to banks
35,109
—
131,997 77,012
—
— 244,118
Due to clients
213,142
3,307
4,215
—
— 231,141
31.12.2003
248,251
3,307
142,474 81,227
—
— 475,259
31.12.2002
160,428
390
116,916 71,606
218
— 349,558
Mortgages
Securities and precious
metals trading portfolios
Financial investments
Total
17,541
Borrowed funds
Total
3.13
Amounts due from and due to affiliated companies as well as loans
and exposures to members of the Bank’s governing bodies
CHF 1,000
Due from affiliated companies
31.12.2003
31.12.2002
1,057
1,120
Due to affiliated companies
47
264
Loans and exposures to members of the Bank’s governing bodies
—
250
The transactions with affiliated companies included money market
transactions and were concluded at market conditions.
22
10,477
Schroder & Co Bank AG
3.14
Assets and liabilities by domestic and foreign origin
CHF 1,000
31.12.2003
31.12.2002
Domestic
Foreign
Domestic
Foreign
Liquid assets
17,541
—
18,884
—
Due from banks
39,449
139,861
24,404
75,429
Due from clients
109,224
264,084
89,283
246,942
—
630
—
586
28,057
—
25,894
—
—
—
—
347
1,100
—
100
1,000
581
—
946
—
Accrued income and prepaid expenses
5,933
1,250
4,609
—
Other assets
5,795
3,128
4,317
1,173
207,680
408,953
168,437
325,477
Due to banks
32,115
212,003
36,659
140,878
Due to clients
96,168
134,972
85,693
86,327
Accrued expenses and deferred income
16,946
910
21,081
—
4,162
6,146
3,646
2,801
Valuation adjustments and provisions
13,369
—
18,988
—
Reserves for general banking risks
18,000
—
18,000
—
Share capital
20,000
—
20,000
—
General legal reserve
16,700
—
15,900
—
Other reserves
34,000
—
33,800
—
141
—
102
—
11,001
—
10,039
—
262,602
354,031
263,908
230,006
Assets
Mortgages
Securities and precious metals trading portfolios
Financial investments
Participations
Fixed assets
Total
Liabilities and shareholders’ equity
Other liabilities
Retained earnings carried forward
Net income
Total
Schroder & Co Bank AG
23
Information on the Balance Sheet
3.15
Assets by countries / country groups
CHF 1,000
31.12.2003
31.12.2002
Total
in %
Total
in %
Germany
44,566
7.2%
30,524
6.2%
Great Britain
28,208
4.6%
17,036
3.4%
Switzerland
207,680
33.7%
168,437
34.1%
Rest of Europe
133,356
21.6%
124,401
25.2%
413,810
67.1%
340,398
68.9%
North America
36,266
5.9%
43,450
8.8%
Asia
30,180
4.9%
5,959
1.2%
Other countries
136,377
22.1%
104,107
21.1%
Total
616,633
100.0%
493,914
100.0%
Assets
Europe
Total Europe
24
Schroder & Co Bank AG
3.16
Assets by currencies
CHF 1,000
Currencies
31.12.2003
CHF
EUR
USD
Precious
metals
Other
Total
16,469
940
61
—
71
17,541
Assets
Liquid assets
Due from banks
106,926
52,323
5,141
470
14,450
179,310
Due from clients
81,317
106,320
118,737
—
66,934
373,308
—
630
—
—
—
630
28,057
—
—
—
—
28,057
Mortgages
Securities and precious
metals trading portfolios
Financial investments
—
—
—
—
—
—
1,100
—
—
—
—
1,100
581
—
—
—
—
581
Accrued income and prepaid expenses
5,697
833
568
—
85
7,183
Other assets
8,856
4
1
—
62
8,923
249,003
161,050
124,508
470
81,602
616,633
76,541
196,556
229,409
—
23,123
525,629
325,544
357,606
353,917
470
Due to banks
30,378
116,392
67,262
—
30,086
244,118
Due to clients
86,529
52,749
68,014
470
23,379
231,141
Accrued expenses and deferred income
16,790
628
385
—
52
17,855
Other liabilities
10,062
91
78
—
77
10,308
Valuation adjustments and provisions
13,369
—
—
—
—
13,369
Reserves for general banking risks
18,000
—
—
—
—
18,000
Share capital
20,000
—
—
—
—
20,000
General legal reserve
16,700
—
—
—
—
16,700
Other reserves
34,000
—
—
—
—
34,000
141
—
—
—
—
141
11,001
—
—
—
—
11,001
256,970
169,860
135,739
470
53,594
616,633
68,537
187,550
218,218
—
51,091
525,396
325,507
357,410
353,957
470
37
196
(40)
—
Participations
Fixed assets
Total balance sheet assets
Assets deriving from FX spot,
FX forward and FX options transactions
Total assets
104,725 1,142,262
Liabilities and shareholders’ equity
Retained earnings carried forward
Net income
Total balance sheet liabilities
Liabilities deriving from FX spot,
FX forward and FX options transactions
Total liabilities
Net position per currency
104,685 1,142,029
40
233
Schroder & Co Bank AG
25
4. Information on Off-Balance-Sheet Transactions
4.1
Contingent liabilities
CHF 1,000
31.12.2003
31.12.2002
Credit guarantees
44,695
61,251
Irrevocable commitments from documentary credits
11,155
12,186
Total
55,850
73,437
31.12.2003
31.12.2002
62
534
Positive
replacement values
Negative
replacement values
Contract
volume
3
3
50,000
8,550
8,321
523,270
61
61
2,358
31.12.2003
8,614
8,385
575,628
31.12.2002
5,043
4,911
318,140
4.2
Confirmed credits
CHF 1,000
Obligations under deferred payments
4.3
Outstanding derivative instruments
CHF 1,000
Interest rate instruments
Options (OTC)
Foreign exchange
Forward contracts
Options (OTC)
Total
The above outstanding derivative instruments are held for trading purposes.
There are no netting agreements in existence.
26
Schroder & Co Bank AG
Outstanding derivative instruments by counterparties
CHF 1,000
31.12.2003
31.12.2002
Positive
replacement
value
Negative
replacement
value
Contract
volume
Positive
replacement
value
Negative
replacement
value
Contract
volume
Banks
5,716
1,664
268,188
3,956
1,173
175,202
Non banks
2,898
6,721
307,440
1,087
3,738
142,938
Total
8,614
8,385
575,628
5,043
4,911
318,140
4.4
Fiduciary transactions
CHF 1,000
31.12.2003
31.12.2002
43,908
88,773
Fiduciary deposits in European currencies
665,355
731,912
Fiduciary deposits in USD
795,921
862,956
2,934
5,176
1,508,118
1,688,817
—
600
6,553
11,967
50,632
62,560
—
—
57,185
75,127
Fiduciary deposits
Fiduciary deposits in CHF
Fiduciary deposits in other currencies
Total
Fiduciary credits
Fiduciary credits in CHF
Fiduciary credits in European currencies
Fiduciary credits in USD
Fiduciary credits in other currencies
Total
All fiduciary deposits at year-end were concluded with banks
outside of the Schroder Group.
4.5
Clients’ assets
CHF 1,000
Assets of investment funds managed
31.12.2003
853,657
Assets under discretionary management
2,434,496
Other assets
3,777,711
Total (incl. double counting)
7,065,864
of which double counting
114,295
Schroder & Co Bank AG
27
5. Information on the Profit and Loss Account
5.1
Result from trading operations
CHF 1,000
2003
2002
228
1,382
4,351
3,471
—
—
4,579
4,853
2003
2002
129
129
23,786
21,343
Social security contributions
1,394
1,630
Pension plan contributions
2,591
3,262
Other personnel expenses
799
1,982
28,699
28,346
CHF 1,000
2003
2002
Occupancy expenses
2,502
4,266
Expenses for EDP, machinery, fixtures and fittings,
vehicles and other equipment
2,941
4,479
Other operating expenses including:
Telephone, telex, postage, electronic information systems,
legal and other consulting fees, stationery and printing,
courier services, property insurance, travel and entertainment,
publication and advertising, audit, other costs
6,996
8,049
12,439
16,794
Securities
Foreign exchange
Financial instruments
Total
5.2
Personnel expenses
CHF 1,000
Authorities, meeting compensations and fixed compensations
Salaries and extras
Total
5.3
Operating expenses
Total
5.4
Extraordinary income
Extraordinary income comprises the release of value
adjustments and provisions which are not needed of
CHF 4.85 m and a profit of sale of fixed assets.
28
Schroder & Co Bank AG
Report of the Statutory Auditors
Report of the statutory auditors
to the general meeting of Schroder & Co Bank AG, Zurich
As statutory auditors, we have audited the accounting records and
the financial statements (balance sheet, income statement and notes,
pages 8 – 28) of Schroder & Co Bank AG for the year ended 31 December 2003.
These financial statements are the responsibility of the Board of Directors.
Our responsibility is to express an opinion on these financial statements
based on our audit. We confirm that we meet the legal requirements concerning professional qualification and independence.
Our audit was conducted in accordance with auditing standards promulgated by the Swiss profession, which require that an audit be planned
and performed to obtain reasonable assurance about whether the
financial statements are free from material misstatement. We have
examined on a test basis evidence supporting the amounts and disclosures in the financial statements. We have also assessed the accounting
principles used, significant estimates made and the overall financial
statement presentation. We believe that our audit provides a reasonable
basis for our opinion.
In our opinion, the accounting records and financial statements and
the proposed appropriation of available earnings comply with Swiss law
and the company’s articles of incorporation.
We recommend that the financial statements submitted to you be
approved.
Zurich, 10 February 2004
PricewaterhouseCoopers AG
Rolf Birrer
Jean-Marc Nicollier
Schroder & Co Bank AG
29
Main Schroder Branches
Head Office
Denmark
Netherlands
Schroders plc
Schroder Investment Management
Schroder Investment Management
31 Gresham Street, London EC2V 7QA
Fondsmæglerselskabet A/S
Benelux N.V.
Phone: +44 207 658 6000
Store Strandstræde 21
Aert van Nesstraat 25R, 3012 CA Rotterdam
www.schroders.com
1255 Copenhagen K
Phone: +31 10 275 71 11
Phone: +45 33 15 18 22
Austria
Germany
Schroder Investment Management GmbH
Schroder Investment Management GmbH
Representative Office
Mainzer Landstrasse 16
P.O.Box 622, 1011 Wien
United Kingdom
60325 Frankfurt am Main
Phone: +43 1 990 63 84
Schroder Investment Management Limited
Phone: +49 (0)69 975717-0
Europe
Portugal
31 Gresham Street, London EC2V 7QA
Schroder & Co Limited
Schroder Investment Management Limited
Mainzer Landstrasse 16
Avenida da Liberdade 180 E
Schroder & Co. Limited
60325 Frankfurt am Main
Edificio Tivoli Forum, 1250–146 Lisboa
100 Wood Street, London EC2V 7ER
Phone: +49 (0)69 975717-5
Phone: +351 21 330 8900
France
Spain
Schroder Investments Limited
Schroder Investment Management Limited
Schroder Investment Management Limited
33 Gutter Lane, London EC2V 8AS
27, Quai Anatole, France, 75007 Paris
Calle Pinar 7, 28006 Madrid
Phone: +44 207 658 6000
Phone: +33 (0)1 53 85 85 85
Phone: +34 91 590 9541
Channel Islands
Italy
Switzerland
Schroder Investment Management
Schroder Investment Management
Schroder & Co Bank AG
(Guernsey) Limited
(Italy) SIM S.p.A.
Central 2, 8001 Zurich
Trafalgar Court, Les Banques, St. Peter Port
Via della Spiga 30, 20121 Milano
Phone: +41 (0)1 250 11 11
Guernsey, GY1 3QL
Phone: +39 02 763771
Phone: +44 207 658 6000
Phone: +44 207 658 6000
Schroder & Co Banque SA
Phone: +44 1481 710651
Schroder Investment Management
8, rue d’ltalie, 1211 Geneva
Schroders (C.I.) Limited
(Italy) SIM S.p.A.
Phone: +41 (0)22 310 26 26
Sarnia House, Le Truchot, St. Peter Port
Piazzetta Bettiol 15, 35137 Padova
Guernsey, GY1 3UF
Phone: +39 049 876 5776
Schroder Investment Management
Phone: +44 1481 703700
Schroder Investment Management
Fondsmæglersgelskab A/S
Schroders (C.I.) Limited
(Italy) SIM S.p.A.
Birger Jarlsgatan 12, 114 34 Stockholm
2–6 Church Street, St. Helier
Via del Babuino 169, 00187 Roma
Phone: +46 8 678 4010
Jersey, JE4 9WB
Phone: +39 06 321 8368
Phone: +44 1534 756600
Luxembourg
Schroder Investment Management
(Luxembourg) S.A.
5 rue Höhenhof, 1736 Senningerberg
Phone: +352 341 342 202
30
Sweden
Schroder & Co Bank AG
Asia / Pacific
Korea
Argentina
Schroders Korea Limited
Schroder Investment Management S.A.
Australia
Seoul Finance Centre, 84 Taepyoungro 1ga
Representative Office
Schroder Investment Management
Chung-gu, Seoul 100-768
Ing. Enrique Butty 220
Australia Limited
Phone: +82 23783 0500
C1001AFB Buenos Aires
Phone: +54 11 4317 1300
123 Pitt Street, Sydney, NSW 2000
Phone: +61 (0)2 9210 9200
Singapore
Schroder Investment Management
Bermuda
China
(Singapore) Limited
Schroders (Bermuda) Limited
Schroders plc
65 Chulia Street, #47–01, OCBC Centre
22 Church Street, Hamilton HM 11
Landmark Building
Singapore 049513
Phone: +1 441 292 4995
8 Nth Dongsanhuan Road
Phone: +65 6535 3411
Brazil
Beijing 100004
Taiwan
Schroder Investment Management
Schroders Taiwan Limited
Brasil DTVM S.A.
Schroders plc
Bank Tower, 205 Tun Hwa North Road,
Rua Joaquim Floriano, 72
Shui On Plaza, Huai Hai Zhong Road
Taipei, 10592, ROC
São Paulo, SP, Brazil 04534-000
Shanghai 200021
Phone: +866 2 2719 6061
Phone: +55 11 3054 5155
Phone: +86 10 6590 7792
Phone: +86 21 5383 5858
Cayman Islands
Schroder Investment Management
(Hong Kong) Ltd
Schroder Cayman Bank and Trust
Americas
Company Limited
PO Box 1040, Harbour Centre
Two Exchange Square
8 Connaught Place, Central
USA
Grand Cayman, British West Indies
Hong Kong SAR
Schroder Investment Management
Phone: +1 345 949 2849
Phone: +852 2521 1633
North America Inc.
875 Third Avenue
Mexico
Indonesia
New York, NY 10022–6225
Schroder Investment Management
PT Schroder Investment Management
Phone: +1 212 641 3830
North America Inc.
Monte Pelvoux 111 – despacho 404
Indonesia
Lippo Plaza Building
Schroder Investment Management
Lomas de Chapultepec
Jl. Jend. Sudirman Kav. 25, Jakarta 12920
The Curtis Centre
México, D.F., 11000
Phone: +62 21 520 4550
Independence Square West
Phone: +52 55 2623 0202
Philadelphia, PA 19106
Japan
Phone: +1 215 861 0997
Schroder Investment Management
(Japan) Limited
Schroder Investment Management
Pacific Century Place Marunouchi
North America Inc.
1–11–1 Marunouchi, Chiyoda-ku,
One Post Office Square, Boston, MA 02109
Tokyo 100–6224
Phone: +1 617 292 6080
Phone: +81 (0)3 5293 1500
Canada
Schroder Investment Management
North America Limited
Canada Trust Tower, BCE Place
Toronto M5J 2S1
Phone: +1 416 360 1200
Schroder & Co Bank AG
31
Schroders 200th anniversary
Founded in London in 1804, Schroders has grown from
This year, Schroders celebrates its 200th anniversary.
a small merchant bank into one of the largest quoted
Since its origin, the company has focussed primarily on
independent asset managers in the world. Today,
clients’ interests. It has consistently taken the long-
Schroders plc is amongst the 100 largest companies
term view in developing business to meet both clients’
listed on the London Stock Exchange and has Euro
and markets’ changing needs.
139,2 billion of assets under management.
Schroders Milestones
1804
Johann Heinrich Schröder from Hamburg became a partner in his brother’s
London based merchant company.
1850’s – 1860’s
J. Henry Schröder & Co. evolved from an anglo-german merchant company
to a renowned merchant bank.
1870
Schroders introduced the Japanese Government’s first foreign loan to the
London Market.
1923
J. Henry Schröder Banking Corporation, known as Schrobanco, was launched
and traded on Wall Street.
1957
The name of J. Henry Schröder & Co. was anglicised and the partnership was
converted into a private company.
1959
Schroders became a quoted public company and was listed on the London
Stock Exchange. Helmut Schroder was Chairman until 1965.
1960’s – 1970’s
Schroders developed a presence in each of the major financial markets of the world.
Subsidiary and associated companies were established to undertake investment
banking activities in Hong Kong, Japan, Singapore, Switzerland and other Continental
European countries.
1962
Schroders merged with Helbert, Wagg & Co., a stock broking firm founded in 1823,
which specialised in issues for domestic clients and contributed greatly to the
development of the investment advisory side.
1986
Schroders acquired a 50% interest in Wertheim & Co. Inc., a leading New York investment bank and securities firm and Schrobanco was sold to the Industrial Bank of Japan.
1994
Schroders acquired the remaining 50% of Wertheim which it later renamed
Schroder & Co. Inc.
2000
Schroders sold its investment banking business to Salomon Smith Barney.
Asset management and related businesses now comprise the whole of
Schroders plc’s business.
2001
Schroders acquired Beaumont, an absolute return asset management business,
focussing on high net worth individuals, family offices and professional investors.
2004
Schroders plc celebrates 200 years history.
Schroders has always shown a distinct sense of social responsibility.
As an example, it was ranked top of FTSE 100 Companies in
The Guardian 2003 Giving List in the field of charitable donations.
32
Schroder & Co Bank AG
This annual report is also published in German.
The German version is prevailing.
www.schroders.ch