Pres
ss Re
elease
Schrroderrs plc
c
Annual R
Results to
t 31 Dec
cember 2
2011 (aud
dited)

Profit be
efore tax £407
7.3 million (20
010: £406.9 m
million)

Earningss per share 115.9 pence (2
2010: 111.8 p
pence)

Full-yea
ar dividend 39.0 pence per share (2010: 37.0 pence)

Net inflo
ows £3.2 billio
on (2010: £27.1 billion)

Assets u
under management £187.3
3 billion (2010
0: £196.7 billio
on)
8 March
M
2012
22011
£m
2010
2
£m
3389.4
3
381.0
23.8
10.1
4413.2
3
391.1
Profit
Assset Manageme
ent
Priivate Banking
Grroup segment
(5.9)
15.8
Total profit before tax
4407.3
4
406.9
Earnings pe
er share (penc
ce)
1115.9
111.8
39.0
37.0
Total divide
end (pence perr share)
Contacts
s:
Schroders
s
Emma Holde
en
Head of
o Corporate Communicati
C
ions
+44 (0)
( 207 658 2329
em
mma.holden@
@schroders.co
om
+44 (0) 207 379 5151
5
wcclutterbuck@m
maitland.co.u
uk
Maitland
William Cluttterbuck
1
Management Sta
atement
Concerns ovver the level of
o governmen
nt debt in devveloped economies, the im
mpact of delevveraging on economic
e
gro
owth
and the insta
ability of the Eurozone
E
weiighed heavilyy on equity ma
arkets throughout 2011. Innterest rates were negativve in
real terms and yields on government bonds,
b
other than those directly impactted by the soovereign debt crisis in Euro
ope,
were at reco
ord lows. As a result 2011 was a particu
ularly challeng
ging year for in
nvestors.
Against that background Schroders pe
erformed welll, achieving a profit before tax of £407.33 million, sligh
htly ahead off the
record year of 2010. Nett new busines
ss, whilst mucch reduced frrom the excep
ptionally stronng result of th
he previous ye
ear,
remained po
ositive at £3.2
2 billion (2010
0: £27.1 billio
on) and assetts under man
nagement endded the year at £187.3 billlion
(2010: £196.7 billion).
Asset Mana
agement
Asset Management net revenue
r
incre
eased to £1,0
041.5 million (2010:
(
£996.2
2 million) desspite a decline
e in performance
fees to £36.6
6 million (2010: £72.6 millio
on). As expeccted, net reve
enue margins excluding peerformance fe
ees were lowe
er at
56 basis points (2010: 59
9 basis pointts) reflecting tthe high leve
els of new business won i n Institutional in the past two
years. Asse
et Management profit beforre tax was a re
ecord £389.4
4 million (2010
0: £381.0 millioon).
While market volatility has
h
impacted
d short-term investment performance
e in some aasset classes
s, our long-te
erm
performance
e remains stro
ong with 70 per
p cent. of funds outperforrming benchm
mark or peer group over th
he three yearrs to
the end of 2
2011. Togethe
er with our brroad product range and distribution cap
pability, this re
resulted in an
nother successsful
year in Institutional with £6.8
£
billion of net inflows (2
2010: £16.8 billion).
b
We saw high levelss of net new business
b
in multim
asset strateg
gies, and in equities
e
despiite the marke
et environmen
nt. Assets und
der managem
ment in Institu
utional ended the
year at £108
8.4 billion (201
10: £106.4 billion).
Retail investtor demand was
w affected by growing cconcerns ove
er the macro-economic ennvironment an
nd equity market
volatility. As a result, grosss sales in ourr Intermediaryy business de
eclined as the
e environmentt deteriorated
d and for the year
y
as a whole w
we had net ou
utflows of £3.8
8 billion (2010
0: net inflows £7.9 billion). Assets
A
underr managemen
nt in Intermediary
ended the ye
ear at £62.9 billion
b
(2010: £74.1
£
billion).
Private Ban
nking
Private Bankking profit reb
bounded sha
arply on the b
back of record
d levels of ne
ew business in the previo
ous year and the
absence of d
doubtful debtt charges. Ne
et revenue inccreased to £114.3 million (2010:
(
£103.33 million) and profit before tax
million). Net new business
more than d
doubled to £2
23.8 million (2
2010: £10.1 m
s was £0.2 bbillion (2010: £2.4 billion) and
a
assets under managemen
nt ended the year at £16.0
0 billion (2010: £16.2 billion).
Group
The Group ssegment incu
urred a loss before
b
tax of £
£5.9 million (2
2010: profit £15.8
£
million) as mark to market
m
lossess on
seed capita
al investmentss, principally in the fourtth quarter, outweighed
o
th
he modest rreturns we achieved
a
on our
investment ccapital portfoliio during the year
y
in what w
was a very lo
ow return environment. Aftfter the purcha
ase of 3.4 milllion
ordinary sha
ares and 5.2 million
m
non-vo
oting ordinary shares at a cost
c of £126.1
1 million, sharreholders’ equity at the end
d of
2011 was £1
1.9 billion (201
10: £1.8 billion).
Dividend
The Board is recommen
nding an unc
changed final dividend off 26.0 pence per share ppayable on 11
1 May 2012
2 to
shareholderss on the Reg
gister at 30 March
M
2012. T
This brings th
he total divide
end for the yyear to 39.0 pence
p
per sh
hare
(2010: 37.0 p
pence).
Board chan
nges
After more tthan nine yea
ars as Chairm
man, Michael Miles will retire from the Board at thee Annual Gen
neral Meeting
g on
3 May 2012
2 and will be succeeded by
b Andrew Be
eeson, the Senior Indepen
ndent Directoor. Alan Brow
wn will also step
s
down from th
he Board at the
t Annual Ge
eneral Meetin
ng. Alan has served as Ch
hief Investmennt Officer sinc
ce 2005 and has
made an imp
portant contrib
bution to our success durin
ng that time. He will contin
nue to work w
with some of our
o largest clie
ents
as a Senior A
Adviser to the
e firm. During the year we w
welcomed As
shley Almanza
a as a membeer of the Boarrd.
2
Outlook
ear end, the tone in mark
kets has imprroved as inve
estors have seen signs off progress in the resolution
n of
Since the ye
some of the
e problems of
o the Eurozo
one. Retail invvestor deman
nd has recov
vered somew
what and we have genera
ated
positive net flows in both Institutional and
a Intermed
diary. Howev
ver, financial markets
m
are l ikely to rema
ain volatile as the
process of re
educing government debt will
w be a long one and econ
nomic growth
h will remain ssubdued.
We will conttinue to invesst in talent, developing ne
ew products and
a markets and strengthhening our inffrastructure. We
believe that tthe higher short-term costs
s of this organ
nic investmen
nt are fully justified by the loong-term grow
wth opportuniities
for our busin
ness in the UK
K and internattionally.
Copies of th
his announcement are ava
ailable on the
e Schroders website:
w
www
w.schroders.ccom. Michae
el Dobson, Chief
C
Executive, a
and Kevin Parrry, Chief Fina
ancial Officer,, will host a presentation and webcast fo
for the investm
ment commun
nity,
to discuss th
he Group’s re
esults at 9 a.m
m. GMT on T
Thursday, 8 March
M
2012 att 31 Gresham
m Street, Lond
don, EC2V 7Q
QA.
The webcasst can be view
wed live at ww
ww.schroders..com/ir and www.StreetEv
w
ents.com. Foor individuals unable to atte
end
the presenta
ation or participate in the liv
ve webcast, a replay will be
b available frrom midday oon Thursday, 8 March 2012
2 at
www.schrod
ders.com/ir.
The Annual Report and Accounts
A
will be
b available o
on the Schrod
ders website: www.schrode
w
ers.com on 23
3 March 2012
2.
ooking state
ements
Forward-lo
This announ
ncement, the Annual Repo
ort and Accou
unts for 2011
1 from which it is extractedd and the Sc
chroders web
bsite
may contain
n forward-looking stateme
ents with resp
pect to the financial
f
cond
dition, resultss of operation
ns, strategy and
a
businesses of the Group
p. Such state
ements and fforecasts inv
volve risk and
d uncertainty because the
ey are based
d on
current expe
ectations and assumptions
s but they rela
ate to events and depend upon circum
mstances in the future and you
should not p
place undue re
eliance on the
em. Without llimitation, any
y statements preceded or ffollowed by or that include the
words ‘targe
ets’, ‘plans’, ‘believes’, ‘expects’, ‘aims’ o
or ‘anticipates
s’ or the negative of these terms and other similar terms
are intended
d to identify su
uch forward-lo
ooking statem
ments. There are a numbe
er of factors thhat could cau
use actual ressults
or developm
ments to diiffer materially from tho
ose expresse
ed or implie
ed by forwaard-looking statements
s
a
and
forecasts. F
Forward-lookin
ng statements
s and forecassts are based on the Directtors’ current vview and inforrmation known to
them at the date of this announcemen
a
nt. The Direcctors do not make
m
any und
dertaking to uupdate or rev
vise any forwa
ardements, wheth
her as a result of new inforrmation, future
e events or ottherwise. Not
othing in this announcemen
a
nt or
looking state
in the Annu
ual Report and
a
Accounts
s or on the S
Schroders we
ebsite should be construeed as a forec
cast, estimate
e or
projection off future financial performance.
3
e statem
ment
Consolidated income
for the yea
ar ended 31 December 2011
Revenue
Cost of saless
Net gains on
n financial instru
uments and oth
her income
Net revenue
e1
2011
£m
2010
£m
1,501.9
1,43
39.3
(363.3))
(35
52.7)
14.0
6
69.2
1,152.6
1,15
55.8
Operating exxpenses
(761.8))
(77
74.0)
Operating p
profit
390.8
38
81.8
14.5
9.6
2.0
1
15.5
Profit before
re tax
407.3
40
06.9
Tax
(91.5))
(9
95.7)
Profit after ttax
315.8
31
11.2
Basic
115.9p
111
1.8p
Diluted
111.9p
108
8.3p
39.0p
32
2.0p
Net finance iincome
Share of pro
ofit of associatess and joint venttures
Earnings pe
er share
Dividends p
per share2
1
2
Non-GAAP measure of performance.
p
Interim and final dividends declared during the year.
4
Consolidated statement of ccomprehensive
e incom
me
for the yea
ar ended 31 December 2011
2011
£m
315.8
20
010
£
£m
311.2
Net exchange
e differences on
o translation off foreign operattions after hedg
ging
2.1
27
7.9
Actuarial (losses)/gains on defined
d
benefit pension schem
mes
(0.5)
8
8.0
(16.3)
0
0.8
Net fair value
e movement arising from available-for-sale fin
nancial assets held by joint ve
entures
(3.5)
(1.0)
Tax on items taken directly to
t other compre
ehensive incom
me
(1.7)
(12
2.4)
sses)/gains for the year net of tax
Other comprehensive (los
(19.9)
23
3.3
Total comprrehensive inco
ome for the ye
ear net of tax
295.9
334
4.5
Profit for the
e year
Net fair value
e movement arising from available-for-sale fin
nancial assets
5
Consolidated statement of fiinancial positio
on
31 Decemb
ber 2011
2011
£m
Assets
Cash and cassh equivalents
Trade and oth
her receivabless
Financial asssets
Associates an
nd joint venture
es
Property, plan
nt and equipme
ent
Goodwill and
d intangible assets
Deferred tax
Retirement benefit scheme surplus
20
010
£
£m
2,338.7
411.2
2,165.2
58.4
16.2
144.1
50.1
55.7
5,239.6
2,00
04.0
39
90.5
2,38
88.8
6
67.0
19.3
42.5
14
5
54.0
3
34.4
5,10
00.5
673.6
7,971.6
8,645.2
70
07.7
7,56
65.7
8,27
73.4
13,884.8
13,37
73.9
580.9
2,642.1
51.8
52.7
2.6
7.9
3,338.0
57
77.0
2,63
31.5
3
38.0
4
44.4
2.7
7.2
3,30
00.8
8,645.2
8,27
73.4
11,983.2
11,57
74.2
Net assets
1,901.6
1,79
99.7
Equity
1,901.6
1,79
99.7
Assets back
king unit-linked
d liabilities
Cash and cassh equivalents
Financial asssets
Total assets
s
Liabilities
her payables
Trade and oth
Financial liab
bilities
Current tax
Provisions
Deferred tax
Retirement benefit scheme deficits
Unit-linked liabilities
Total liabilities
6
Consolidated statement of changes in equity
for the year ended 31 December 2011
Associates
and joint
ventures
reserve
£m
35.5
Fair
value
reserve
£m
50.8
Profit and
loss
reserve
£m
1,415.3
Total
£m
1,799.7
Share
capital
£m
290.4
Share
premium
£m
84.7
Profit for the year
-
-
-
-
2.0
-
313.8
315.8
Net exchange differences on translation of foreign operations
Net exchange differences on hedging of foreign operations
Transfer to the income statement of cumulative foreign exchange on
derecognition of foreign operations
Actuarial losses on defined benefit pension schemes
Net fair value movements on available-for-sale financial assets taken
to other comprehensive income
Transfer to income statement on derecognition or impairment of
available-for-sale financial assets
Net exchange differences on available-for-sale financial assets
Tax on items taken directly to other comprehensive income
Other comprehensive income/(loss)
-
-
-
1.1
1.0
-
-
0.1
-
1.2
1.0
-
-
-
(0.1)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
3.1
3.1
(101.4)
(101.4)
-
128.0
-
Year ended 31 December 2011
At 1 January 2011
Shares issued
Shares cancelled
Share-based payments
Tax in respect of share schemes
Dividends attributable to owners of the parent
Dividends attributable to non-controlling interests
Own shares purchased net of disposals
Transactions with owners
Transfers
At 31 December 2011
0.5
(8.4)
(7.9)
-
-
282.5
87.8
Own
shares
£m
(199.1)
Net
exchange
differences
£m
122.1
(172.5)
(0.3)
1.7
123.8
(3.5)
(3.5)
(8.2)
25.8
(0.5)
(10.6)
-
(5.4)
-
0.1
(15.9)
(0.1)
(0.5)
(14.1)
(5.4)
(1.8)
(2.2)
(0.3)
(1.7)
(19.9)
-
(16.0)
42.7
(6.1)
(104.8)
(3.3)
(0.3)
(87.8)
3.6
(24.4)
42.7
(6.1)
(104.8)
(3.3)
(101.7)
(194.0)
-
(119.8)
34.9
1,519.3
1,901.6
7
Year ended 31 December 2010
At 1 January 2010
Share
capital
£m
288.8
Share
premium
£m
72.5
Own
shares
£m
(89.7)
Net Associates and
exchange
joint ventures Fair value
differences
reserve
reserve
£m
£m
£m
96.0
30.7
57.9
-
Profit for the year
-
-
-
Net exchange differences on translation of foreign operations
Net exchange differences on hedging of foreign operations
Transfer to the income statement of cumulative foreign exchange on
derecognition of foreign operations
Actuarial gains on defined benefit pension schemes
Net fair value movements on available-for-sale financial assets taken to
other comprehensive income
Transfer to income statement on derecognition or impairment of availablefor-sale financial assets
Transfer of cumulative foreign exchange on derecognition or impairment of
available-for-sale financial assets
Net exchange differences on available-for-sale financial assets
Tax on items taken directly to other comprehensive income
Other comprehensive income/(loss)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
0.9
-
-
-
-
(3.0)
26.1
1.6
1.6
12.2
12.2
-
-
290.4
84.7
Shares issued
Share-based payments
Tax in respect of share schemes
Dividends attributable to owners of the parent
Dividends attributable to non-controlling interests
Own shares purchased net of disposals
Transactions with owners
Transfers
At 31 December 2010
Profit and
loss reserve
£m
1,192.8
Total
£m
1,649.0
295.7
311.2
15.5
-
50.5
(21.2)
-
-
(1.1)
-
-
-
-
-
8.0
8.0
14.0
-
13.0
(11.1)
-
(11.1)
-
0.9
(1.0)
(1.0)
(10.0)
(7.1)
(0.3)
-
50.2
(21.2)
(1.1)
(2.4)
5.3
(3.0)
(12.4)
23.3
13.8
31.1
11.2
(87.6)
(0.4)
(151.9)
(183.8)
(151.9)
(151.9)
-
-
-
31.1
11.2
(87.6)
(0.4)
(45.7)
42.5
-
(9.7)
-
(32.8)
-
50.8
1,415.3
1,799.7
(199.1)
122.1
35.5
8
Consolidated cash flo
ow state
ement
for the yea
ar ended 31 December 2011
2011
£m
426.8
2010
0
£m
m
1,066.8
8
Aggregate ca
ash flows arising from the disp
posal of subsidiiaries
-
10.4
4
Acquisition off joint ventures and associates
s
-
(14.3
3)
Net cash from
m operating acttivities
Cash flows ffrom investing
g activities
Net purchase
e of property, pllant and equipm
ment and intang
gible assets
(12.7)
(10.0
0)
Net disposal//(acquisition) off financial assetts
114.6
(15.8
8)
15.0
7.3
3
9.0
9.7
7
Non-banking interest received
Distributions received from associates
a
and
d joint ventures
Other flows
Net cash fro
om/(used in) in
nvesting activities
-
(2.1
1)
125.9
(14.8
8)
3.6
(24.4)
(101.7)
13.8
8
(151.9
9)
Cash flows ffrom financing
g activities
Proceeds from
m issue of non-voting ordinary
y shares
Purchase of n
non-voting ordinary shares forr cancellation
Net acquisitio
on of own share
es
Net (repayme
ents)/proceeds of borrowings
(18.6)
18.6
6
(104.8)
(87.6
6)
(4.8)
(2.8
8)
Net cash use
ed in financing
g activities
(250.7)
(209.9
9)
Net increase
e in cash and cash
c
equivalents
302.0
842.1
1
2,711.7
1,769.3
3
302.0
842.1
1
Dividends pa
aid
Other flows
Opening cash
h and cash equ
uivalents
Net increase in cash and ca
ash equivalents
s
hange rate changes
Effect of exch
Closing cash
h and cash eq
quivalents
(1.4)
100.3
3
3,012.3
2,711.7
7
673.6
707.7
7
1,396.9
941.8
1,446.2
2
2,338.7
2,004.0
0
3,012.3
2,711.7
7
Closing cash
h and cash eq
quivalents con
nsists of:
Cash backing
g unit-linked liabilities
Other cash and cash equiva
alents held by the Group:
Cash
Cash equivallents
557.8
8
The cash ba
acking unit-linkked liabilities cannot
c
be use
ed by the Gro
oup as it is no
ot legally entitleed to draw on
n the assets of
o
the life comp
pany for its ow
wn corporate purposes.
p
9
Basis o
of prepa
aration
The financia
al information included in this statement d
does not cons
stitute the Gro
oup's statutorry accounts within
w
the
meaning of S
Section 434 of
o the Compan
nies Act 2006
6. The statuto
ory accounts for
f 2010 havee been deliverred to the
Registrar of Companies and
a the audito
ors’ opinion on
n those accou
unts was unqu
ualified and ddid not contain
n a statement
made underr Section 498((2) or Section 498(3) of the
e Companies Act 2006. An
n unqualified aauditors’ opin
nion has also
been issued on the statuttory accounts for the year e
ended 31 Dec
cember 2011 which will be delivered to the
t Registrar of
Companies in due course
e.
The presenta
ation of the fin
nancial statem
ments has bee
en reformatte
ed in 2011 to enable
e
greateer understand
ding of the
financial resu
ults and position of the Gro
oup. Where a
appropriate, th
he comparativ
ve informationn has also been reformatte
ed
for better com
mparison.
The consolid
dated financia
al statements are prepared
d in accordanc
ce with Interna
ational Financcial Reporting
g Standards
(IFRS), whicch comprise Standards
S
and
d Interpretatio
ons approved by either the International Accounting Standards
S
Boa
ard
or the IFRS Interpretation
ns Committee or their prede
ecessors, as adopted by th
he European Union (EU), and
a with those
e
parts of the C
panies reportting under IFR
Companies Act
A 2006 applicable to comp
RS.
10
Segme
ental reporting
Operating segments
The Group h
has three business segmen
nts: Asset Ma
anagement, Private
P
Bankin
ng, and Groupp. Asset Man
nagement
principally co
omprises inve
estment mana
agement inclu
uding advisory
y services, eq
quity productss, fixed income
e securities,
multi-asset a
and alternative
e asset classe
es such as prroperty, comm
modities, priva
ate equity andd funds of hed
dge funds.
Private Bankking principally comprises investment
i
m
management and
a banking services
s
providded to high net worth
individuals a
and charities. Group princip
pally comprise
es the Group’s investmentt capital and trreasury mana
agement
activities and
d the manage
ement of costs
s associated w
with governan
nce and corpo
orate manageement.
Segment info
formation is prresented on the same basis as that prov
vided for interrnal reporting purposes to the
t Group’s
chief operating decision maker.
m
The chief operating
g decision ma
aker is the Chiief Executive.. One of the key
k measuress
used in resp
pect of perform
mance measu
urement is nett revenue. Th
he allocation of
o costs to indiividual busine
ess segmentss
en in order to provide
p
mana
agement inforrmation on the
e business pe
erformance annd to provide managers with
is undertake
a tool to man
nage and con
ntrol expenditu
ure. Costs are
e allocated on
n a basis that aligns the chaarge with the resources
employed in a particular area
a
of the business.
Year ended 31 December 2011
Fee income
Banking interrest receivable
Revenue
e
Fee expense
Banking interrest payable
Cost of sales
s
Net gains/(lossses) on financcial instruments
s and other inco
ome
Net revenue
e
Operating exxpenses
Operating prrofit/(loss)
Net finance (ccharge)/income
e
ociates and join
nt ventures
Share of proffit/(loss) of asso
Profit/(loss) before tax
Asset
A
Manage
ement
£m
Private
Banking
£m
Group
£m
Tota
al
£m
m
1,359.3
1,,359.3
106.3
35.9
142.2
0.4
0.4
1,466.0
0
35.9
9
1,501.9
9
(335.4)
(
(335.4)
(
17.6
1,,041.5
(658.5)
(
383.0
(0.3)
6.7
389.4
(6.4)
(21.5)
(27.9)
-
(341.8
8)
(21.5
5)
(363.3
3)
114.3
(3.6)
(3.2)
(90.5)
23.8
(12.8)
(16.0)
(761.8
8)
390.8
8
14.8
14.5
5
(4.7)
(5.9)
2.0
0
407.3
3
23.8
14.0
0
1,152.6
6
11
Segme
ental reporting continu
ued
Year ended 31 December 2010
Inter-segmen
nt
elimination
ns
an
nd
adjustmentts
£m
m
Asset
Management
£m
Private
Banking
£m
Group
£m
1,298.6
1,298.6
93.7
44.5
138.2
2.5
2.5
-
-
0.2
0.2
(323.5)
(29.2)
(352.7)
Fee income
Banking interrest receivable
Revenue
e
Fee expense
Banking interrest payable
Cost of sales
s
Net gains on financial instruments and othe
er income
(318.0))
(318.0))
(5.5)
(29.4)
(34.9)
otal
To
£
£m
1,394
4.8
44
4.5
1,439.3
15.6
-
49.3
4.3
69.2
Net revenue
e
996.2
103.3
51.8
4.5
1,155.8
Operating exxpenses
Operating prrofit
(629.8))
366.4
(93.2)
10.1
(46.7)
5.1
(4
4.3)
0.2
(0
0.2)
Net finance in
ncome/(charge
e)
Share of proffit of associatess and joint ventu
ures
Profit before
e tax
(774.0)
381.8
3.4
-
6.4
9.6
11.2
-
4.3
-
15.5
381.0
10.1
15.8
-
406.9
Revenue
Managemen
nt fees
Performance
e fees
Other fees
Interest incom
me receivable by
b Private Banking subsidiarie
es
2011
£m
1,267.0
37.8
161.2
35.9
2010
2
£m
1,16
61.9
7
73.4
15
59.5
4
44.5
1,501.9
1,43
39.3
2011
£m
455.3
39.4
5.1
499.8
2010
2
£m
44
44.4
4
48.0
13.1
50
05.5
Operatting exp
penses
Operating exxpenses include
e:
Salaries and other remunerration
Social securiity costs
Pension costts
Employee b
benefits expen
nse
12
Tax exxpense
Analysis of ccharge in the year:
y
UK corporatio
on tax on profitss for the year
Adjustments in respect of prrior years
Foreign tax – current
Foreign tax – adjustments in
n respect of prio
or years
2011
£m
31.6
67.1
20
010
£
£m
23.1
(
(5.3)
59.9
0.8
(
(1.6)
Total curren
nt tax
99.5
76.1
Origination an
nd reversal of temporary
t
differences
(7.9)
9.4
Adjustments in respect of prrior years
(1.7)
9.2
Effect of chan
nges in corpora
ation tax rates
1.6
1.0
Total deferre
ed tax
(8.0)
19.6
Total tax cha
arge for the ye
ear
91.5
95.7
The UK stan
ndard rate of corporation
c
ta
ax reduced fro
om 28 per cen
nt. to 26 per cent. on 1 Aprril 2011 resultiing in a UK
effective tax rate for the ye
ear of 26.5 pe
er cent. (2010
0: standard an
nd effective ra
ate of 28 per ccent.). The tax
x charge is low
wer
(2010: lowerr) than a charg
ge based on the
t UK effecttive rate. The reconciliation of the incom
me statement tax
t charge to the
UK rate on p
profits before tax
t including the impact off taxes incurre
ed in overseas
s operations aand difference
es in accounting
versus tax profit is set outt below:
Profit before ttax
Less post-taxx profits of joint ventures and associates
a
2011
£m
407.3
(2.0)
2010
2
£m
40
06.9
(1
15.5)
Profit before
e tax of consolidated Group
p entities
405.3
39
91.4
Profit before ttax of consolida
ated Group enttities multiplied by corporation tax at the UK
effective rate of 26.5 per cen
nt. (2010: 28 pe
er cent.)
107.4
10
09.6
Effects of:
utory tax rates of overseas jurrisdictions
Different statu
(1.9)
(5.5)
(10.5)
(3.0)
Net utilisation
n of tax losses for
f which no de
eferred tax asse
et was recognis
sed
(3.8)
(7.8)
Foreign exch
hange moveme
ents on tax bala
ances
(0.9)
(0.9)
Deferred tax adjustments in respect of cha
anges in corporration tax rates
1.6
1.0
Permanent differences inclu
uding non-taxab
ble income and
d non-deductiblle expenses
Adjustments to prior year esstimates
(0.4)
2.3
arge for the ye
ear
Total tax cha
91.5
9
95.7
13
Earning
gs per share
s
Basic earnin
ngs per share is calculated by dividing th
he profit for the financial year attributablee to owners of the parent by
b
the weighted
d average num
mber of share
es in issue during the year, less the weig
ghted averagee number of own
o shares.
Diluted earnings per sharre is calculated
d as for basicc earnings perr share with a further adjusstment to the weighted
w
average num
mber of share
es to reflect the
e effects of alll dilutive pote
ential shares.
Reconciliatio
on of the figurres used in ca
alculating basiic and diluted earnings perr share:
2011
Millions
2010
Millions
272.3
2
275.4
Effect of diluttive potential sh
hares – share options
o
9.2
8.8
Effect of diluttive potential sh
hares – conting
gently issuable shares
0.5
0.2
282.0
2
284.4
Weighted avverage numberr of shares used
d in calculation of basic earnin
ngs per share
Weighted av
verage numbe
er of shares us
sed in calcula
ation of diluted
d earnings perr share
There have b
been no mate
erial transactio
ons involving shares or potential shares
s since the repporting date and
a before the
e
completion o
of these resultts.
Dividen
nds
2012
2
2011
2
2010
£m
Pence per
share
£m
m
per
Pence pe
shar
are
£m
Pencce per
s
share
69.3
26.0
70.1
266.0
-
-
34.7
7
133.0
29.8
2
11.0
-
-
57.8
5
21.0
104.8
8
399.0
87.6
8
32.0
Declared and paid in year:
Final dividen
nd
Interim divide
end
Second interrim dividend
(
£4.4 million)
m
on sha
ares held by th
he employee trusts have bbeen waived; dividends
d
ma
ay
Dividends off £6.2 million (2010:
not be paid o
on treasury sh
hares. The 20
011 final divide
end is payablle on 11 May 2012 and willl be accounte
ed for in 2012.
14
Share capital and share pre
emium
At 1 Januaryy 2011
Shares issue
ed
Shares canccelled
At 31 Decem
mber 2011
At 1 Januaryy 2010
Shares issue
ed
At 31 Decem
mber 2010
Number of
shares
Millions
290.4
Ordin
nary
sha
ares
£m
22
26.0
0.5
-
(8.4)
282.5
Number of
shares
Millions
288.8
22
26.0
Ordinary
shares
£m
22
26.0
Non
n-voting ordinaary
sharres
££m
644.4
00.5
(88.4)
566.5
on-voting ordinnary
No
shaares
££m
622.8
To
otal
shares
£m
290
0.4
Sh
hare
prem
mium
£m
8
84.7
0.5
0
3.1
(8
8.4)
-
282
2.5
otal
To
sha
ares
£m
288
8.8
8
87.8
S
Share
prem
mium
£m
7
72.5
1.6
-
11.6
1.6
1
1
12.2
290.4
22
26.0
644.4
290
0.4
8
84.7
2011
Millions
2
2010
Milliions
226
6.0
22
26.0
56
6.5
6
64.4
282
2.5
90.4
29
Issued and ffully paid:
Ordinary sharres of £1 each
Non-voting orrdinary shares of
o £1 each
The non-votiing ordinary shares
s
carry th
he same rightts as ordinary
y shares exce
ept that they ddo not confer the
t right to
attend and vvote at any ge
eneral meeting
g of the Comp
pany, and tha
at on a capitalisation issue tthey carry the
e right to
receive non--voting ordina
ary shares rath
her than ordin
nary shares.
Shares acqu
uired and held
d in treasury are
a included in
n own shares
s.
During the ye
ear, 8.4 millio
on non-voting ordinary sharres were canc
celled. 6.4 million of these sshares were first acquired
into treasuryy and a furtherr 2.0 million were
w
acquired and immedia
ately cancelled.
15
Own sh
hares
Own shares include the Group’s
G
share
es (both ordina
ary and non-v
voting ordinarry) that are heeld by employ
yee trusts or in
n
treasury.
Movements during the ye
ear were as fo
ollows:
2011
£m
20
010
£m
At 1 January
(199.1)
(89
9.7)
Own shares p
purchased
(101.4)
(161
1.2)
-
9.3
Cancellation of own shares held in treasury
y
75.3
-
Awards veste
ed
52.7
42.5
(172.5)
(199
9.1)
Own shares d
disposed
At 31 Decem
mber
2011
Ordinary sha
ares held within
n trusts
Non-voting o
ordinary sharess held within
trusts
ordinary sharess held as treasu
ury
Non-voting o
shares*
201
10
Ves
sted
sha
ares
Number
Millio
ons
2.4
sted
Unves
sha
ares
Num
mber
Millio
ons
12.3
1
Total
Num
mber
Millions
14.7
1
Veested
shhares
Nuumber
Miillions
1.3
nvested
Un
shares
Number
N
Millions
M
12.9
Total
Number
N
M
Millions
14.2
0.6
0.1
0.7
0.8
0.1
0.9
-
0.6
0.6
-
3.8
3.8
3.0
13.0
1
16.0
1
16.8
18.9
2.1
* Non-voting o
ordinary sharess held as treasu
ury shares do n
not vest but are included in unv
vested shares ffor presentational purposes only.
o
During the ye
ear 6.4 million
n non-voting ordinary
o
share
es held within
n treasury werre cancelled.
16
Reconciliation
n of net cash frrom ope
erating activitie
a
es
2011
£m
20
010
£m
390.8
381.8
Adjustments
s for income statement
s
non
n-cash movem
ments:
Depreciation of property, pla
ant and equipm
ment and amorttisation and imp
pairment of
intangible asssets
Net losses/(g
gains) and impa
airments taken through the inccome statemen
nt on
financial instrruments
14.1
17.5
3.2
(4
42.5)
Share-based payments
42.7
34.2
Net charge fo
or provisions
11.3
27.2
Other non-ca
ash movementss
(7.6)
(13.7)
63.7
22.7
(3.1)
(6
62.2)
Operating prrofit
Adjustments
s for other inc
come statemen
nt cash movem
ments:
Payments ma
ade to the defin
ned benefit sec
ction of the UK p
me
pension schem
Cash paid on
n settlement of share-based payments
Tax paid
Interest paid
(78.5)
(
(3.1)
(4
48.2)
(0.2)
(
(0.5)
(81.8)
(114.0)
Decrease in ttrade and otherr receivables
61.9
121.9
Increase in trrade and other payables and provisions
p
26.3
213.4
88.2
335.3
Adjustments
s for statemen
nt of financial position move
ements:
Adjustments
s for life comp
pany movements:
Net purchase
e of assets backing unit-linked
d liabilities
(405.9)
(2,124.4)
Net increase in unit-linked lia
abilities
371.8
2,565.4
(34.1)
Net cash fro
om operating activities
a
426.8
441.0
1,066.8
17
Retirem
ment be
enefit ob
bligation
ns
The disclosu
ures are provided mainly in
n respect of th
he principal de
efined benefit scheme in thhe UK, the deffined benefit
section of the
e Schroders Retirement
R
Be
enefits Schem
me (the Scheme).
The income statement ch
harge for retire
ement benefitt costs is as fo
ollows:
Pension costts – defined contribution plans
s
2011
£m
(22.2)
20
010
£m
(1
16.5)
Pension costts – defined benefit plans
17.3
3.7
Other post-employment ben
nefits
(0.2)
(
(0.3)
(5.1)
(1
13.1)
(2.8)
(
(8.0)
The income sstatement cred
dit in respect of defined benefitt plans consists
s of:
Current serviice cost
-
3.5
e assets
Expected retturn on scheme
44.7
4
42.8
Curtailment
10.2
-
Interest on sccheme liabilitiess
(33.4)
(3
33.3)
Total incom
me statement credit
c
in respec
ct of the Sche
eme
18.7
5.0
Income state
ement charges in respect of otther defined be
enefit schemes
(1.4)
(
(1.3)
Total define
ed benefit sche
emes income statement cre
edit
17.3
3.7
2011
£m
42.6
2010
£m
3
37.1
Past service credit
The amountss recognised in the statem
ment of compre
ehensive inco
ome are set out
o below:
Other comp
prehensive (loss)/income co
onsists of:
Actual return
n less expected
d return on Scheme assets
Experience llosses arising on
o Scheme liab
bilities
Changes in a
assumptions underlying the present
p
value off the Scheme liiabilities
Total other comprehensiv
ve (loss)/incom
me in respect of the Schem
me
Other comprrehensive loss in respect of otther defined be
enefit schemes
Total other comprehensiv
ve (loss)/incom
me in respect of defined benefit schemes
s
(4.1)
(1.4)
(39.0)
(2
27.4)
(0.5)
8.3
(0.5)
(0.3)
8.0
The Scheme
e is non-contrributory and administered
a
b
by the Schem
me’s trustee. The
T Scheme w
was closed to
o new entrantss
and future acccrual on 30 April
A 2011. Att 31 Decembe
er 2011 there were no activ
ve members iin the Schem
me and 1,238
active memb
bers in the defined contribu
ution section o
of the Schroders Retirement Benefits Sccheme (2010: 284 and 849
9
respectively)). The last com
mpleted trienn
nial valuation of the Schem
me was carried
d out as at 311 December 2008.
2
It
disclosed tha
at the market value of the assets
a
of the Scheme reprresented 92 per
p cent. of thee liabilities at that
t date,
calculated on
n the funding basis applica
able to the Sccheme, for the
e benefits thatt had accruedd to members at that date
allowing for ffuture increasses in earning
gs and pensio
ons. The trienn
nial valuation as at 31 Dece
cember 2011 is
i currently
in progress.
In the year, tthe contributio
ons to the Sch
heme totalled
d £3.1 million (2010:
(
£62.2 million). The G
Group paid effective
contributionss to 30 April 2011
2
of 37.5 per
p cent. of pe
ensionable sa
alaries to cove
er the accrual of ongoing be
enefits.
For joiners o
on or after 1 Ju
une 1989, pensionable sallaries for this purpose were
e subject to thhe statutory ea
arnings
cap which w
was in force un
ntil April 2006, after which tthis cap was replaced
r
by a notional earnnings cap.
The income statement cre
edit for the Sc
cheme has be
een determine
ed by indepen
ndent qualified
ed actuaries, Aon
A Hewitt
Limited, and is based on an
a assessme
ent of the Sche
eme as at 31 December 2011.
18
The amountss recognised in the statem
ment of financia
al position in respect of the
e Scheme aree:
2011
£m
692.9
2010
2
£m
5
573.0
Expected retturn
44.7
42.8
Actuarial gains
42.6
37.1
Fair value o
of plan assets
At 1 Januaryy
3.1
62.2
Benefits paid
d
(19.5)
(
(22.2)
At 31 Decem
mber
763.8
6
692.9
(658.5)
(6
614.1)
(2.8)
(8.0)
Contributionss by employer
Present valu
ue of funded obligations
o
At 1 Januaryy
Current servvice cost
Past service credit
-
Interest cost
3.5
(33.4)
-
Curtailment
10.2
Actuarial lossses
(43.1)
Benefits paid
d
At 31 Decem
mber
Net asset in
n respect of the Scheme
(
(33.3)
(
(28.8)
19.5
22.2
(708.1)
(6
658.5)
55.7
34.4
The history o
of the Group’ss defined benefit schemes,, including the
e Scheme, is as follows:
2011
£m
763.8
2010
£m
692.9
20009
£m
m
573..0
008
20
£m
£
547.6
2007
2
£m
5
555.3
(708.1)
(658.5)
(614..1)
(525.2)
(5
512.8)
Surplus/(defficit) in the Sc
cheme
55.7
34.4
(41..1)
22
2.4
42.5
er defined bene
efit schemes
Deficit of othe
(7.9)
(7.2)
(5..4)
(7.4)
(4.5)
Total surplu
us/(deficit) of defined
d
benefitt schemes
47.8
27.2
(46..5)
15
5.0
38.0
Experience a
adjustments on
n Scheme liabiliities
(4.1)
(1.4)
16..6
2.0
2
(0.6)
Experience a
adjustments on
n Scheme asse
ets
42.6
37.1
0..1
(40.0)
(1.4)
Net experien
nce adjustmen
nts
38.5
35.7
16..7
(38.0)
(2.0)
Fair value of Scheme assetts
Present value of defined be
enefit obligation
n
me
of the Schem
19
The sensitiviity of the Sche
eme pension liabilities to cchanges in ass
sumptions is as follows:
2011
201
10
Estimate
ed
reduction in
pensio
on
liabilitie
es
£m
Estimated
ction in
reduc
pe
ension
liab
bilities
%
Estimated
reduction in
pensiion liabilities
£m
Estima
ated
reductio
on in
penssion
liabilities
%
Assumption
n
Assumption change
Discount rate
e
Increase by 0.5%
per annum
m
68
8.1
9.6
61.8
9.4
Expected ratte of salary
increases
Reduce by
y 0.5%
per annum
m
N//A
N/A
2.2
0.3
Expected ratte of pension
increases in payment
Reduce by
y 0.5%
per annum
m
45
5.4
6.4
42.4
6.4
Life expectan
ncy
Reduce by
y one year
18
8.9
2.7
18.2
2.8
20
Key rissks and mitigattions
This section
n provides a summary of our control o
of risk. It sets
s out how we
e manage thee risks in ourr business an
nd
how we havve developed
d risk management during
g 2011, inclu
uding a summ
mary of the w
work of the Group
G
Risk
Committee. It then provides a summ
mary of the ke
ey continuing
g risks, how we
w mitigate tthem and ou
ur assessmen
nt
of their pote
ential impact on our busin
ness in the co
ontext of the
e current economic and ggeopolitical environment.
Finally, it prrovides an ovverview of the impact and
d indicative timescales off emerging riisks.
Managing rrisk
It is the resp
ponsibility of all employee
es to mainta in the contro
ol culture of Schroders
S
annd, conseque
ently, we
embed risk managemen
nt within the business.
untability for risk manage
ement. It regularly consid
ders the mostt significant risks
r
facing the
t
The Board rretains accou
Group, and uses quantittative exposu
ure measure
es, such as stress
s
tests, where
w
approppriate. The non-executive
n
e
oversight off the risk man
nagement prrocess lies w
with the Auditt and Risk Co
ommittee.
The Chief E
Executive and
d Group Man
nagement Co
ommittee rev
view the key corporate rissks facing the Group.
Individual risks are managed in diffe
erent ways de
epending on the nature of
o the risks a nd their pote
ential impactss
nces. We gro
oup the risks
s we face into
o market, invvestment perrformance an
nd
so as to mittigate adversse consequen
liquidity riskks; credit riskks; operationa
al risks; and emerging ris
sks. We conttinually upgraade our risk control
processes a
and technolo
ogical supporrt tools to inccrease their effectiveness
e
s.
The Chief E
Executive hass delegated the
t executive
e oversight of
o risk to the Chief Financcial Officer. The
T
Chief Financial Officer has
h responsibility for the risk and control framewo
ork of the Grooup and the
independen
nt monitoring and reportin
ng of risks an
nd controls.
The Chief F
Financial Officer is supported by the G
Group Head of Risk and chairs
c
the Grroup Risk Co
ommittee,
which includ
des, as well as
a the contro
ol functions, senior representatives from each bussiness segment and
division, inccluding the Chief
C
Investment Officer, C
Chief Operatting Officer and
a the Grouup Head of Private Bankin
ng.
As the princcipal manage
ement comm
mittee for the monitoring and
a reporting
g of risks andd controls, the
e Group Riskk
Committee reviews and monitors the
e adequacy a
and effective
eness of the Group’s risk managemen
nt frameworkk,
including relevant policie
es and limits
s. It also revie
ews trends and
a exception
ns in the mosst significantt risk
exposures.
Three lines of defence
The first line
e of defence against unexpected outccomes lies with
w line mana
agers whetheer they are in
n Investmentt,
Distribution, Private Ban
nking or Infra
astructure. M
Members of th
he Group Ma
anagement C
Committee ha
ave risk
managemen
nt responsibility within their respectivve business areas.
a
The se
enior managgement team takes the
lead role witth respect to
o appropriate
e controls acrross the busiiness to main
ntain the quaality standard
ds expected
by clients an
nd regulatorss.
Line manag
gement is sup
pplemented by oversightt functions that provide a second line of defence.
Group Intern
nal Audit provides retrospective indepen
ndent assuran
nce over the operation
o
of coontrols and is
s the third line
of defence a
against unexpected outcom
mes. The interrnal audit prog
gramme includes reviews oof the risk ma
anagement
process and
d advice and recommendat
r
tions to impro
ove the contro
ol environment.
opments
2011 develo
During the yyear, we worrked to increa
ase the awarreness of ind
dividuals’ res
sponsibility foor the control of risk. For
example, we prepared a bespoke film for the 20 11 global ma
anagement meeting
m
focussing on external risks facced
up. We drew not only on internal
i
view
ws but include
ed perspectiv
ves from otheer leading fin
nancial
by the Grou
institutions a
and regulato
ors.
We have alsso worked to
o increase the sophisticattion of our ris
sk controls. There
T
have bbeen three notable
automationss: the installa
ation of a glo
obal treasury system; the developmen
nt of transparrent look-through reportin
ng
of Group ca
apital holding
gs providing detailed
d
anallyses of com
mbined expos
sures; and a consolidated
d daily reportt of
counterpartyy exposures.
The Group R
Risk Committe
ee’s work in 2011
2
included
d emerging ris
sk identificatio
on; complex pproduct develo
opment review
ws;
preparationss for the imple
ementation of the UK Bribe
ery Act; the ap
pproval of client take-on proocedures; pre
eparations forr
regulatory de
evelopments such as Dodd
d-Frank, FAT
TCA, UCITS IV
V and RDR; the Japanesee earthquake business
b
continuity pla
an; and policyy reviews such as brand prrotection, information assurance, procurrement and co
orporate
residence.
21
We devoted
d resources to
t the manag
gement of rissks associate
ed with Euroz
zone instabillity and the weak
w
econom
mic
environmen
nt, establishin
ng a team to monitor, pre
e-empt and re
eact to developments. Itss work contin
nues.
We have inccreased the sophisticatio
on of statisticcal modelling of risk outco
omes which hhas resulted in improved
d
quantificatio
on of Pillar 2 regulatory capital. The F
Financial reviiew in the An
nnual Reportt covers this in more deta
ail.
We have exxtended the Group
G
Risk Committee’s
C
attendees to
o include all members of the Group Management
M
Committee on a quarterrly basis.
Key risks
The followin
ng tables sum
mmarise key business rissks. The list is
i not exhaus
stive but aim
ms to provide information on
the risks tha
at are currently considere
ed to be mosst relevant to our business.
Market, inv
vestment pe
erformance
e and liquidity risks
We face risk
ks from mov
vements in th
he financial m
markets in which
w
we operate, arising from holding investmen
nts
as both prin
ncipal and ag
gent. We hav
ve principal e
exposure in the
t life comp
pany in Asseet Manageme
ent where we
e
hold investm
ments in fun
nds; in our Prrivate Bankin
ng business,, where we hold
h
bank pap
per and gove
ernment
securities; a
and through the Group’s
s Investmentt capital, whe
ere we hold bank
b
paper, g
government and corpora
ate
bonds, equities, funds of
o hedge funds, property
y, and private
e equity. There is agencyy exposure in
n Asset
Managemen
nt and Privatte Banking in
n respect of tthe assets we
w manage on behalf of o
our clients.
Description of key risk
Market risk
arises from ma
arket
Market risk a
movements, which can cau
use a fall
in the value o
of principal invvestments
and a decline
e in the value of assets
under manag
gement.
Shareholderss’ funds, net fe
ee income
and expense
es of the Group
p’s overseas
subsidiaries a
are denomina
ated in local
currencies an
nd are therefo
ore subject to
exchange ratte risk.
performance risk
Investment p
The management of investtment risk is
T
is the risk
a core skill off the Group. This
that portfolioss will not meett their
investment objectives. Thiss can
n new
adversely afffect levels of net
business.
How we ma
anage this ris
sk
Our geogra
aphically divers
sified, broad product
p
range enables us to
o provide clients
with solutio ns tailored to a variety of market conditioons and serves
s to diversify
individual m
market depend
dencies.
Group man agement regu
ularly reviews all holdings w
within Group ca
apital. All
principal invvestments are
e managed witthin approved limits. The Grroup’s seed
capital inve
estments may be hedged in respect of maarket risk and currency
c
risk.
en by the Grou
up Capital Com
mmittee, chairred by the Chief
These decissions are take
Financial O
Officer.
Income and
d expenses arre, where poss
sible, matchedd in the curren
ncy of individua
al
subsidiariess. We also use
e forward foreign exchangee contracts to mitigate
m
transactiona
al and investm
ment exposure
e to currency m
movements. In
n Private
Banking, m arket risk is monitored
m
and managed at a local level an
nd by the Priva
ate
Banking Rissk Committee.
The Schrod
der Investment Risk Framew
work provides review and ch
hallenge of
investment risks across each
e
of the asset classes m
managed by the Group. A tea
am
G
Head off Risk providess further indep
pendent
reporting di rectly to the Group
oversight an
nd challenge to
t this process
s.
We adhere to a clearly de
efined investm
ment process w
which seeks to
o meet
n stated risk pa
arameters.
investment targets within
Individual p
portfolio perforrmance, valuations and risk profiles are monitored
m
by
fund manag
gers and mana
agement on a regular basiss, allowing issu
ues to be
identified an
nd mitigated.
g that not all products
p
will outperform
o
all tthe time, we offer
o
a diversified
Recognising
product set which reduce
es the concenttration of risk oon the perform
mance of any
one fund orr asset class.
a part of our investment pe
erformance rissk
Investment performance is monitored as
manageme
ent process.
22
Liquidity risk
Liquidity risk is the risk tha
at cash flows
enerated to me
eet
cannot be ge
redemptions or other obligations as
they arise. Liquidity issuess can arise as
arket condition
ns or through
a result of ma
inherently illiq
quid investme
ents.
To mitigate this risk within client portfolios, we seek tto match, whe
ere possible, the
nderlying inves
stments with itts anticipated liquidity
liquidity of a portfolio’s un
requiremen
nts. We activelly monitor marrkets for indicaators of declin
nes in liquidity..
We also revview products and portfolios
s to identify caapacity constra
aints.
d the Group ass a whole mee
et regulatory
Each of ourr regulated subsidiaries and
capital requ
uirements. In addition,
a
we maintain
m
suffici ent liquidity in
n our assets fo
or
our anticipa
ated needs, taking account of
o the risks wee face.
king liquidity ag
gainst the reg ulatory require
ements in the
We monitorr Private Bank
jurisdictionss concerned. In the UK, this
s includes the maintenance of an Individual
Liquidity Ad
dequacy Assessment that monitors
m
liquidiity against a ra
ange of stresss
scenarios.
Credit risk
k
We face risk
ks from the default
d
of counterparties
s to our princ
cipal financia
al transaction
ns. Our clients also face
counterpartty risk in rela
ation to the fiinancial trans
sactions in their
t
portfolio
os and fundss. Private Ba
anking
additionally
y faces principal credit ris
sk on its lend
ding activitie
es.
Description of key risk
Credit risk
We face cred
dit risk as a ressult of
counterparty exposure.
How we ma
anage this ris
sk
In order to m
manage this risk we actively
y monitor counnterparty cred
ditworthiness
with limits e
expressed in te
erms of value and term to m
maturity. The Group
G
sets
overall limitts in respect of both principa
al and agencyy counterparty risk.
k to diversify our
o exposure aacross differen
nt
Where posssible, we seek
counterpartties.
All counterp
parties are rev
viewed on a re
egular basis annd limits are amended
a
following ch
hanges to their financial metrics. We activvely monitor market
m
data an
nd
rating agen cy outputs in assessing cou
unterparties. C
Collateral is taken in some
cases.
e credit risk thrrough lending
We also face
by Private Ba
anking.
Banking, we mitigate
m
credit risk
r where posssible through collateralisatiion
In Private B
in the form of cash, portfo
olio investmen
nts or propertyy. Credit risk is
s monitored an
nd
against the perrformance of the collateral.
managed a
Operationa
al risk
Operationall risk arises in
i our investtment manag
gement activ
vities, distribu
ution channeels, product developmen
nt
and the ope
eration of our infrastructu
ure and as a consequenc
ce of our diversified busiiness model. Local
managemen
nt is respons
sible for operational risk controls.
Description of key risk
How we ma
anage this ris
sk
Operational risk
Operational rrisk could arise
e from the
ses are subjec
ct to review in order to identtify a suitable
All new bussiness process
failure of sign
nificant busine
ess processes suite of ope
erational contrrols to mitigate
e potential riskks.
undertaken b
by Schroders.
We have a number of outssourced
supplier relattionships that are an
important parrt of our business model,
particularly in
n respect of fund
administration services.
Prior to ente
ering outsourc
cing arrangem
ments, the Grooup undertakes
s due diligencce
and, prior to
o engagementts, maintains a programme of assessmen
nt against
agreed servvice levels.
23
Distribution risk
Distribution risk arises from
m relationship
managementt and concentration across
different distrribution chann
nels and
products. We
e access clients through
three channe
els: institutiona
al clients,
often advised
d by consultan
nts; retail
clients, interm
mediated throu
ugh banks,
brokers and iindependent advisers;
a
and
private clientss.
k
Product risk
Product risk a
arises from co
omplexity and
the developm
ment of new prroducts to
meet change
es in client dem
mand.
e from
Product risk ccan also arise
capacity consstraints where
e the size of
assets underr managementt in a
particular assset class make
es it more
difficult to trade efficiently in
i the market.
Technology risk
echnology and
d qualified
We rely on te
professionalss to maintain our
o
infrastructure
e.
The broad rrange of distribution channe
els mitigates aagainst a key dependency
d
o
on
any sales cchannel.
s for more than
n one per centt. of total reve
enue.
No single c lient accounts
We have a dedicated pro
oduct developm
ment team an d a product ap
pproval and
review proccedure.
We activelyy monitor potential capacity constraints annd may mitiga
ate them by
closing prod
ducts to new investment in certain circum
mstances.
o
an
nd our platform
m utilises well established,
Our techno logy is partly outsourced
tested techn
nology from outsource partn
ners assessedd to be financially stable and
d
able to provvide the requirred level of service.
partners are an
a important part of our busiiness model and
a we work with
w
Outsource p
them to ma
aintain the qua
ality and contin
nuity of servicee. Due diligenc
ce is undertakken
ering into new arrangements
s, and perform
mance is review
wed on an
before ente
ongoing bassis. Continuity
y and business
s resumption pplanning is in place across
the businesss.
24
People risk
Our businesss depends on people. We
ensure we em
mploy people with skill sets
o our changing business
appropriate to
needs.
and develop specialist
s
skills
s as the rangee of our produc
ct offerings
We recruit a
deepens an
nd our investm
ment and distribution strateggies develop in
nto new areas.
s, with
To mitigate people risks, we have competitive remunneration plans
e deferred ben
nefits, targeted
d at key emplooyees.
appropriate
We also op
perate from ma
any internation
nal centres, wh
which reduces reliance on
single poolss of talent and
d individual country stability..
Clear objecctives are set for
f employees
s and we meassure success in the annual
review proccess. This allows us to identtify employee development initiatives which
can be mot ivational and increase
i
the retention of tal ented people..
We expect ou
ur employees to behave
with integrity,, which is a co
ore value.
Geographica
al diversity riisk
Our businesss is broadly divversified by
region which, whilst mitigating
aggregate rissk, introduces local risks as
a result of loccal laws, regulations,
business cusstoms and trad
ditions.
We activelyy promote ethical standards and train our employees ac
ccordingly.
We employy local people with
w local expertise and alsoo move emplo
oyees
internationa
ally around the
e Group.
eports from linne manageme
ent regarding
The Group Risk Committtee receives re
r
ions for appro
opriate remedia
al
matters giviing cause for concern and recommendati
action.
We keep ou
ur employees up to date on international regulation rele
evant to them,,
particularly extra-territoria
al legislation which
w
typicallyy emanates fro
om the UK,
Europe and
d the US.
An indepen
ndent team, reporting to the Group Head oof Risk, is responsible for
assessing tthe impact of material
m
issues and implemeenting approp
priate and time
ely
risk mitigati on.
Legal risk
The risk that Schroders or
counterpartie
es fail to meet their legal
obligations and the risk of legal
proceedings.
Regulatory a
and complian
nce risk
The risk of lo
oss arising from
m failure to
meet regulato
ory requireme
ents in those
jurisdictions iin which the Group
G
operates.
We rely on our employee
es, with support from our leggal team, to co
onsider carefu
ully
the obligatio
ons we assum
me and our com
mpliance with them.
Semi-annua
al confirmation
ns are obtaine
ed from repressentatives around the Group
p
that any disspute or poten
ntial claim has been broughtt promptly to th
he attention off
the Genera
al Counsel.
We maintai n compliance arrangements
s across our gglobal offices, through which
h
ance function supports business manageement in meeting its
our Complia
obligations.. Compliance with
w relevant regulatory
r
reqquirements is monitored.
m
25
Current as
ssessment of
o key continuing risks
s
The key con
ntinuing risk
ks outlined ab
bove have be
een assesse
ed in the lightt of the curreent economic and
geopoliticall environmen
nt as summa
arised in the diagram below.
The horizonttal axis consid
ders if the pro
obability of eacch key risk is heightened due
d to currentt market cond
ditions. The
vertical axis considers wh
hether the potential cost of the key risk has
h increased due to currennt market con
nditions. The
Group underrtakes additio
onal work to address those risks that it considers to be
e potentially hheightened an
nd/or more
costly.
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
People
e risk: Employm
ment
practicces and workpla
ace safety
Geogrraphical diversitty:
Disaste
ers and public safety
Regula
atory and comp
pliance risk
Operattional risk: Distribution risk
Operattional risk: Clients, products
and bu
usiness practice
es
Legal rrisk
Operattional risk: Technology and
infrastrructure failures
Operattional risk: Execution,
deliverry and process
manag
gement
Counte
erparty credit risk
Credit lending risk
Liquidiity risk
Investm
ment performance risk
Markett risk
Emerging risks
Emerging riisks are thos
se with uncertain impact,, probability and timefram
me that could
d cause risk
k to the
Group. Thes
se are the ha
ardest to deffine and chan
nge regularly
y. We analys
se each risk aand, if neede
ed, develop
and apply m
mitigation an
nd manageme
ent plans. Th
he external emerging
e
risk
ks and key reegulatory ch
hanges that
are currentlly our focus of attention are set out b
below. The diiagram indic
cates our asssessment of the
likelihood, ttimeframe an
nd impact on
n our busines
ss. The estim
mated impact and likeliho
ood may cha
ange as
circumstances change and mitigatio
on plans are
e developed.
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
15.
Double dip recession
Eurozon
ne crisis
Major bank failure
Market liquidity crisis
Investm
ment performance
Financia
al Services Com
mpensation
Scheme
e review
Vickers report impact
Capital controls in the Eurozone
AIFMD impact
Financia
al transaction ta
ax
Basel III impact
MiFID III/PRIPS/UCITS
S V impact
RDR im
mpact
Dodd-F
Frank, EMIR (OTC market refo
orm)
Terrorissm
26
Directo
ors’ resp
ponsibillity state
ement
To the best o
of their knowle
edge and belief, each of th
he Directors lis
sted below co
onfirms that:
–
The con
nsolidated fina
ancial stateme
ents of Schrod
ders plc, prep
pared in accorrdance with IF
FRS as adopted by the EU
U,
give a trrue and fair vie
ew of the ass
sets, liabilities,, financial pos
sition and proffit of Schrodeers plc and the
e undertakings
included
d in the conso
olidation taken
n as a whole;
–
The ann
nouncement in
ncludes a fairr summary of the developm
ment and perfformance of thhe business and
a the positio
on
of Schro
oders plc and the undertakings included
d in the consolidation taken as a whole aand a descripttion of the
principal risks and un
ncertainties tha
at they face;
–
evant audit in
So far as each Directtor is aware, there is no rele
nformation of which
w
the Com
mpany’s auditors are
unaware
e; and
–
They ha
ave each take
en all the steps
s that ought to
o have been taken
t
by them
m as Directorss in order to make
m
themselves aware off any relevant audit informa
ation and to es
stablish that the Company’
y’s auditors are
e aware of
that info
ormation.
Directors:
Michael Mile
es
Chairma
an
Michael Dob
bson
Chief Ex
xecutive
Alan Brown
Chief Investment Offficer
Philip Mallincckrodt
Head off Private Bankking
Kevin Parry
Chief Financial Office
er
osato
Massimo To
Executiv
ve Vice Chairrman and Glo
obal Head of Distribution
D
Andrew Bee
eson
Senior Independent D
Director
Ashley Alma
anza
ndent non-exe
ecutive Directtor
Indepen
Luc Bertrand
d
Indepen
ndent non-exe
ecutive Directtor
Robin Bucha
anan
Indepen
ndent non-exe
ecutive Directtor
Lord Howard
d of Penrith
Indepen
ndent non-exe
ecutive Directtor
Merlyn Lowtther
Indepen
ndent non-exe
ecutive Directtor
Bruno Schro
oder
Non-exe
ecutive Directtor
7 March 201
12
27
Five-ye
ear consolidate
ed finan
ncial summary
Profit before ttax
2011
£m
407.3
2010
0
£m
m
406.9
9
20009
£m
m
137..5
08
200
£m
£
123
3.1
007
20
£
£m
392.5
Tax
(91.5))
(95.7
7)
(41..8)
(51
1.8)
(8
88.8)
Profit after ta
ax
315.8
311.2
2
95..7
71
1.3
303.7
2011
Pence
2010
0
Pence
e
20009
Pencce
08
200
Pence
007
20
Pen
nce
Basic earning
gs per share
115.9
111.8
8
34..3
27
7.5
104.8
Diluted earnin
ngs per share
111.9
108.3
3
34..2
27
7.3
103.2
Dividends (IFRS):
2011
2010
0
20009
200
08
20
007
Cost (£m)
104.8
87.6
6
84..9
86
6.7
74.9
Pence per sh
hare*
39.0
32.0
0
31..0
31
1.0
26.5
Total equity (£m)
1,901.6
1,799.7
7
1,649..0
1,632
2.2
1,696.2
Earnings pe
er share:
per share (pen
nce)**
673
Net assets p
620
0
5771
56
69
*Dividends pe
er share are tho
ose amounts ap
pproved by the shareholders to
t be paid within the year on a per share bas
sis to the
shareholders o
on the register at the specified
d dates.
**Net assets p
per share are ca
alculated by us
sing the actual n
number of sharres at the year--end date.
5
576
gement – 2011 flows
Assetss under manag
19
96.7
106.4
74.1
ate
Priva
Bankiing
16.2
Gross inflowss
59.3
5
23.9
31.1
4.3
Gross outflow
ws
(5
56.1)
(17.1)
(34.9)
(
(4.1)
3.2
6.8
(3.8)
0.2
Investment re
eturns
(1
12.6)
(4.8)
(7.4)
(
(0.4)
31 Decembe
er 2011
18
87.3
62.9
16.0
£ billion
To
otal
Institutional
I ntermediary
er 2010
31 Decembe
Net flows
108.4
28
Income
e and cost
c
mettrics forr the Grroup
enue ratio
Cost: net reve
2011
66%
20
010
67
7%
Compensatio
on cost: operating revenue rattio
44%
45
5%
Bonus: pre-bonus operating
g profit
39%
40
0%
Return on avverage capital (p
pre-tax)
22%
24
4%
Return on avverage capital (p
post-tax)
17%
18
8%
Exchan
nge rate
es - closing
2011
2010
0
20009
200
08
20
007
Euro
1.20
1.17
7
1.1 3
1.0
03
1.36
US dollar
1.55
1.57
7
1.661
1.4
44
1.99
Swiss franc
1.45
1.46
6
1.667
1.5
53
2.25
Australian do
ollar
1.52
1.53
3
1.880
2.0
06
2.27
Sterling:
Hong Kong d
dollar
Japanese yen
Singaporean dollar
12.07
12.17
7
12.552
11.14
15.52
119.57
126.98
8
150.333
130.3
33
222.38
2.02
2.01
1
2.227
2.0
07
2.87
29