Schroder & Co Bank AG Annual Report 2003 - … schroders...Case postale 3655, 1211 Genève 3 Phone...
Transcript of Schroder & Co Bank AG Annual Report 2003 - … schroders...Case postale 3655, 1211 Genève 3 Phone...
Head Office Schroder & Co Bank AGCentral 2, 8001 ZürichPostfach 1820, 8021 ZürichPhone +41 (0)1 250 11 11Fax +41 (0)1 250 13 12www.schroders.chE-Mail: [email protected]
Branch Office Schroder & Co Banque SA8, rue d’Italie, 1204 GenèveCase postale 3655, 1211 Genève 3Phone +41 (0)22 310 26 26Fax +41 (0)22 311 70 44
Subsidiary companies Schroder Cayman Bank and Trust Company LimitedPO Box 1040, Harbour CentreGrand Cayman, B.W.I.Phone +1 (345) 949 28 49Fax +1 (345) 949 54 09
Schroder Trust AG Central 2, 8001 ZürichPhone +41 (0)1 250 11 11Fax +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
Schroder & Co Bank AG 1
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
Board and Senior Staff
2 Schroder & Co Bank AG
Chairman’s Statement
For the financial markets, 2003
was a year of two parts. The
first quarter was weak, over-
shadowed by the approaching
Iraq war and associated inter-
national tensions. From the sec-
ond quarter onwards, however,
markets recovered strongly.
While geopolitical uncertainties lingered on throughout
the year, fiscal incentives and a generous monetary
policy, particularly in the United States, provided sig-
nificant stimulus to the world economy.
In this improved environment, our Bank increased its net
profit compared to the previous year with all business
units making a positive contribution. In private banking,
the business environment required a particularly agile
asset allocation policy and overall returns were addition-
ally 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.
We will need to continue to adapt our activities in future
to compete effectively while coping with changing legal
requirements and accommodating the planned agree-
ment with the European Union on the taxation of interest.
We are confident that the Bank will be equal to these
challenges, supported by our flexible staff and good
strategic planning, delivering strong investment perform-
ance and superior service to our clients.
In 2003, net profit rose approximately 10% to CHF 11
million. The Board of Directors proposes to the General
Meeting an unchanged dividend of CHF 9 million. After
this dividend payment, the reported equity of the Bank
as at the end of 2003 amounted to CHF 72.8 million
plus CHF 18 million retained as a reserve for general
banking risks.
Jonathan Asquith
Chairman of the Board
3Schroder & Co Bank AG
On behalf of the Board of Directors, I would like to thank
all our clients for their continued trust and support.
My thanks also go to all our employees for their valuable
contribution in 2003.
Jonathan Asquith
Chairman of the Board
Board changes
At the extraordinary General Meeting of 18 December
2003, Andrew Sykes, an Executive Director of Schroders
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 dedi-
cated service to the Bank’s success.
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 Mem-
ber 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
The recovery in the financial
markets in 2003 and improved
efficiency within the Bank had
a positive impact on our profits.
Net profit rose from CHF 10
million to CHF 11 million, due to
a combination of rigorous cost
control and marginally higher
income from commission activities.
The Economic Environment in 2003
As highlighted in the Chairman’s statement, 2003 was
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.
These developments were ac-
companied by significant rises in
equity markets and they closed
the year on a positive note every-
where despite the difficult start.
In local currency the global stock
market index rose 22.8%.
The recovery in equity markets, however, went hand in
hand with a significant depreciation of the US dollar
against all other major currencies. During the year, the
US dollar lost 10% against the Swiss franc.
4
Management Statement
Luc Denis
Chairman
Heinz Scheiwiller
Deputy Chairman
Schroder & Co Bank AG 5
Private Banking
Overall, the positive effects of ris-
ing equity markets and the nega-
tive effect of the US dollar’s de-
preciation broadly offset each
other with regard to existing as-
sets under management. A net
inflow of new money, however,
led to a rise in total assets. Com-
mission income over the year was slightly above the
previous year’s level and improved significantly in the
second half of 2003. Initiatives to reduce costs and the
completion of our infrastructure programme contributed
to the increase in our net profit.
The improved stock market environment contributed to a
pick up in our active wealth management activities. Our
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, tailor-
ing them to our clients’ diverging needs. Seasoned spe-
cialists with a broad range of analytical tools at their dis-
posal are responsible for asset management. Their main
activity is portfolio management which includes advising
clients with regard to strategic asset allocation as well as
managing tailored, complex mandates.
Clients who prefer to make their own investment deci-
sions are supported by our specialists in the Advisory
Division who provide guidance on analysing stock
markets. They not only offer their own ideas but also
serve as skilled advisers to our clients in shaping their
investment structures.
Our locations in Geneva and Zurich are complemented
by our international network. This forms an ideal platform
to achieve appropriate solutions for even the most com-
plex wealth structures. We also work in cooperation with
external consultants in the management of the finances
of wealthy family groups.
Rudolf Stäger
Head of Private
Banking Zurich
Schroder & Co Bank AG6
Management Statement
Institutional Investment
Management & Fund Sales –
SIM Switzerland
Strong growth in business vol-
umes in 2003 led to our Insti-
tutional Investment Management
and Fund Sales division record-
ing improved results for the
eighth consecutive year.
The activities of the division can be divided into three parts
or functions: asset management, institutional marketing
and client servicing, and the distribution of Schroders’
range of Luxembourg-domiciled SICAV funds.
Fund Management
Our Swiss-based team of fund managers and analysts is
responsible for the management of Swiss equity and
balanced pension fund mandates. The team draws on the
extensive global research of the Schroder Group as well
as its own local research efforts: more than 300 company
visits are undertaken in Switzerland every year. Both our
Swiss Equity and Swiss Small & Mid Cap SICAV funds
performed significantly ahead of their respective bench-
mark indices in the year: the Swiss Equity Fund was
awarded first place out of 40 funds over five years in
Standard & Poors’ Swiss equity sector analysis.
Institutional Marketing
During the past year, we won a wide range of new
mandates from Swiss pension funds, corporations and
financial institutions. The strong performance of our Swiss
equity product not only supported our marketing efforts
but also generated significant performance fees. We
manage country-specific, regional, global and balanced
mandates on a segregated, unitized or sub-advisory
(white label) basis.
Distribution of mutual funds (Retail)
Our mutual fund sales business saw robust net inflows
underpinned by our broad client base (Swiss-based
banks, insurance companies and fund distributors), high
level of client service as well as the strong investment
performance of key funds for the Swiss market. Sales
were particularly buoyant in the second half of the year on
the back of the recovery in stock markets.
Stephen J. Mills
Head of
SIM Switzerland
Schroder & Co Bank AG 7
Banking
Despite an overall increase in loan volumes, lower inter-
est rates led to a decrease in interest income. Commis-
sion income from guarantees, documentary credits and
fiduciary loans was close to the previous year’s levels.
Income from trading was down overall with higher in-
come from foreign exchange trading set against lower
revenues from securities trading. There was increased
client demand for our broad range of services in the field
of foreign exchange following the growing fluctuations
among the major currencies.
Finance and Administration
In spring 2003, after extensive preliminary work, we
successfully introduced our new core EDP system in the
Bank. The new system, called Globus T24 and distrib-
uted and serviced by the Swiss software company
Temenos SA, is an up-to-date and efficient banking
software package. The new platform will allow us to
expand further our services to our clients, significantly
improve client reporting and tighten internal operational
procedures.
We also completed renovations at our head office
Central 2 in Zurich during 2003. Our clients and em-
ployees now have attractive and up-to-date business
premises at their disposal.
The above projects involved substantial infrastructure
investments in past years. We are confident that these
investments form an excellent foundation for the Bank’s
continued growth in the future.
Subsidiaries
Our wholly owned subsidiary Schroder Cayman Bank &
Trust Company Ltd offers our clients services in the
formation and management of trusts and foreign domi-
ciled corporations. Schroder Trust AG, Zurich, mainly
acts as a trustee for trusts formed under foreign law.
It also acts as a corporate member of foundation boards
in the establishment and management of foundations.
Both companies produced satisfactory results in 2003.
On behalf of all our employees, we would like to thank our
clients for the trust they repose in our institution.
Luc Denis Heinz Scheiwiller
Chairman Deputy Chairman
Schroder & Co Bank AG8
Balance Sheet
as of 31 December 2003
CHF Notes 31.12.2003 31.12.2002
Assets
Liquid assets 17,541,128 18,883,981
Due from banks 179,310,161 99,833,290
Due from clients 3.1 373,307,132 336,223,885
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
Accrued income and prepaid expenses 7,183,119 4,609,381
Other assets 3.5 8,923,460 5,490,466
Total assets 616,632,866 493,914,091
Total due from Group entities and significant shareholders — —
Liabilities and shareholders’ equity
Due to banks 244,118,014 177,537,265
Due to clients 231,140,535 172,020,384
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
Retained earnings carried forward 140,580 101,904
Net income 11,001,197 10,038,676
Total liabilities and shareholders’ equity 616,632,866 493,914,091
Total due to Group entities and significant shareholders 14,871,701 19,218,658
Schroder & Co Bank AG 9
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
– contract volume 575,628,189 318,139,846
Fiduciary transactions 4.4
– Fiduciary placements with third party banks 1,508,118,154 1,688,816,709
– Fiduciary credits 57,184,808 75,126,717
Schroder & Co Bank AG10
Profit and Loss Account
for the period from 1 January to 31 December 2003
CHF Notes 2003 2002
a) Revenues and expenses from ordinary banking activities
Net result from interest activities
Interest and discount income 10,715,972 13,310,422
Interest expenses (3,973,560) (5,239,149)
Total 6,742,412 8,071,273
Results from commissions and service fees activities
Commission income on lending activities 1,091,204 1,101,211
Commission income on securities and investment transactions 50,013,560 49,007,169
Commission income on other services 551,150 519,505
Commission expenses (5,384,594) (5,242,091)
Total 46,271,320 45,385,794
Result from trading operations 5.1 4,579,485 4,853,181
Other ordinary results
Result from the sale of financial investments (458,750) —
Participation income — 1,000,000
Other ordinary expenses — (79,346)
Total (458,750) 920,654
Operating expenses
Personnel expenses 5.2 (28,699,065) (28,345,919)
Other operating expenses 5.3 (12,438,563) (16,794,390)
Total (41,137,628) (45,140,309)
Gross profit 15,996,839 14,090,593
Schroder & Co Bank AG 11
CHF Notes 2003 2002
b) Net income
Gross profit 15,996,839 14,090,593
Depreciation and write-offs of non-current assets 3.6 (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
Extraordinary income 5.4 4,870,591 3,830,000
Taxes (4,019,049) (2,355,308)
Net income 11,001,197 10,038,676
c) Allocation of retained earnings
Net income 11,001,197 10,038,676
Retained earnings carried forward 140,580 101,904
Retained earnings at the end of the period 11,141,777 10,140,580
Allocation of retained earnings
Ordinary dividend (9,000,000) (9,000,000)
Allocation to general legal reserve (800,000) (800,000)
Allocation to other reserves (1,300,000) (200,000)
Retained earnings carried forward 41,777 140,580
Schroder & Co Bank AG12
General
Schroder & Co Bank AG is a wholly owned subsidiary of
Schroders plc, London. The Bank has a branch office in
Geneva.
The business activities of the Bank are described below.
There are no further business activities that would signifi-
cantly impact the Bank’s risk and income situation.
Fees and commissions business
The Bank’s principal line of business is investment man-
agement for both national and international clients.
Asset management, trustee, custodian and credit opera-
tions are the main contributors to commissions and serv-
ice fees revenues.
Banking activities
The Bank’s main balance sheet activities are the client
lending business and interbank operations.
Loans to clients are mainly granted on the basis of Lom-
bard coverage.
Trading activities
Trading comprises mainly trading for the accounts of
clients in interest rate products, securities and foreign ex-
change 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 dis-
counted net value of the shareholders’ equity and on the
projected net income effect.
Other risks
The Bank’s liquidity is monitored and ensured in accor-
dance with Swiss banking legislation and Group regula-
tions.
Credit risk is monitored separately by the banking divi-
sion. The securities underlying the loans are valued at
market prices. The lending values are established based
on predefined directives.
The operational risks are limited through internal guide-
lines regarding organisation and controls. Internal audit
periodically reviews the internal controls and reports to
the Board of Directors.
Outsourcing
The Bank has an outsourcing agreement with the com-
pany Biveroni Batschelet Partners AG (BBP) for running
the interbank applications SIC, EuroSIC, Swift and Sec-
om. BBP’s role is limited to providing electronic access
to the above mentioned interbank services.
Staff
In 2003, there were 107 full- and 13 part-time employ-
ees, equalling a total of 120 (114.9 full-time positions,
accounting for part-time positions).
1. Comments on Business Activities
Schroder & Co Bank AG 13
2. Principal Accounting Policies and Valuation Principles
Basis of preparation
The accounts are prepared in accordance with the Swiss
Code of Obligations, the Swiss Federal Law Governing
Banks and Savings Banks, including its directives, and the
Swiss Banking Commission’s regulations and directives.
All transactions are recorded in the Bank’s books at the
trade date and valued from that date for the profit and
loss account. Money market and foreign exchange trans-
actions are reported as off-balance-sheet business until
settlement date. As from the settlement date, these
transactions are included in the balance sheet.
Business risks are covered by adequate value adjust-
ments and provisions.
Detailed principles
The most important accounting policies and valuation
principles are shown below.
Liquid assets, receivables from and liabilities to banks
Items are stated in the balance sheet at their nominal
value or, respectively, at cost less any individual valuation
adjustments required for impaired assets.
Loans
Impaired loans, i.e. loans that are unlikely to be repaid by
the debtor, are valued individually. A specific provision is
made for the estimated shortfall against nominal value in
capital and interest. Off-balance-sheet exposure, such
as commitments, guarantees or derivative instruments,
are also taken into consideration for this valuation. Loans
are considered as impaired at the latest when the con-
tractual payments for capital and/or interest are overdue
for more than 90 days. Interest accrual is suspended if
recovering interest is so unlikely that an accrual does no
longer make sense.
If an outstanding loan is classified as entirely or partially
irrecoverable or if a renunciation of outstandings is grant-
ed, the outstanding loan is written off by debiting the
respective adjustment for loss.
Troubled loans are reclassified as of full value when out-
standing amounts of capital and interest are met again on
time according to the conditions fixed by contract.
Securities and precious metals trading portfolio
Actively traded positions which are either traded on a
recognised stock exchange or for which a representative
market exists are valued at market value. Refinancing
costs are charged against trading income. All other
trading positions are valued at the lower of cost or net
realisable value.
Financial Investments
Securities held to generate income in the medium term
are valued at the lower of cost or net realisable value. Re-
alised profits or losses from sales of these securities are
included within “Results from the sale of financial invest-
ments”. Unrealised profits or losses are included within
“Other ordinary income” or “Other ordinary expenses”.
Debt securities held for investment are stated at cost ad-
justed for possible premiums or discounts. Precious met-
als are valued at market value.
Participations
Participations are stated at cost less any accumulated
depreciation.
Tangible fixed assets
Tangible fixed assets are valued at cost less accumulat-
ed depreciation. Depreciation is calculated according
to plan using the straight-line method based on the
useful life.
The recoverability is checked each year. Should the use-
ful life change or the value decrease upon checking the
recoverability, the remaining book value will be offset
according to plan or an extraordinary depreciation can be
made. In accordance with tax regulations smaller items
may be charged directly to the profit and loss account.
Useful life of the various fixed assets:
EDP equipment (hardware): 3 Jahre
Cars: 4 Jahre
Foreign currencies
Foreign currency transactions are translated at the aver-
age exchange rates ruling at the balance sheet date. For-
eign exchange positions in the balance sheet are trans-
lated at the average exchange rates at the balance sheet
date and taken to the profit and loss account. Forward
foreign exchange transactions are valued at the forward
market rates ruling at the balance sheet date. The valua-
tion result is taken to the profit and loss account.
The main conversion rates applied are listed below:
2003 Previous year
EUR 1.5590 1.4525
GBP 2.2120 2.2350
USD 1.2400 1.3875
JPY 1.1550 1.1700
Valuation adjustments and provisions
Based on the principle of prudence, the Bank establishes
valuation adjustments and provisions within liabilities for
contingent risks. The valuation adjustments and provi-
sions may contain undisclosed reserves.
14 Schroder & Co Bank AG
Principal Accounting Policies and Valuation Principles
Taxes
Current tax is generally tax on profit recurrent on an annu-
al basis. One-off or transaction taxes are not considered
as current tax.
Current tax on earnings is included as expense of the
period in which the earnings are recognized. Tax liabilities
are shown under “Accrued expenses and deferred in-
come”.
Derivative financial instruments
Derivative financial instruments are used by the Bank for
asset and liability management and for securities and
foreign exchange dealing. They are used both for propri-
etary trading and for trading for the accounts of clients.
Valuation is in accordance with the purposes for which
they were originally acquired.
1) Derivative trading positions
These derivatives are marked to market. Positive and
negative replacement values are included within “Other
assets” or “Other liabilities”. Profits and losses are includ-
ed within “Result from trading operations”.
2) Derivative financial investments
These derivatives are acquired by the Bank instead of
direct investments. In accordance with the accounting
policy for financial investments, these positions are
valued at the lower of cost or net realisable value.
Any interest income components are included within
“Interest and dividend income from financial invest-
ments”. Realised profits or losses are included within
“Result from the sale of financial investments”.
15Schroder & 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 pen-
sion 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 contribu-
tions according to the defined contribution pension plans
are included within “Personnel expenses”.
Schroder & Co Bank AG16
3.1 Schedule of collateral for loans and off-balance-sheet transactions
CHF 1,000 Type of collateral
Mortgage Other Without Totalcollateral collateral collateral
Loans
Due from clients — 370,543 2,764 373,307
Mortgages
– Residential real estate 630 630
Total 31.12.2003 630 370,543 2,764 373,937
31.12.2002 586 323,207 13,017 336,810
Off-balance-sheet transactions
Contingent liabilities — 53,270 2,580 55,850
Confirmed credits — — 62 62
Commitments — — — —
Total 31.12.2003 — 53,270 2,642 55,912
31.12.2002 — 70,405 4,433 74,838
Estimated proceed from Individual
Gross collateral Net valuationamount realisation amount adjustment
Impaired loans
Total 31.12.2003 944 — 944 944
31.12.2002 712 — 712 712
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)
3. Information on the Balance Sheet
Schroder & Co Bank AG 17
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 — — — —
3.4 Participations
CHF 1,000 31.12.2003 31.12.2002
Without market value 1,100 1,100
Notes to significant participations
CHF 1,000 31.12.2003 31.12.2002
Name of the company Business activity Share capital Ownership Ownershipproportion proportion
Schroder Trust AG, Zürich Trust, foundation and offshore company establishment and administration 100 100% 100%
Schroder Cayman Bank Banking services as well asand Trust Company Ltd, trust and offshore companyCayman Islands establishment and administration 1,000 100% 100%
3.5 Other assets and other liabilities
CHF 1,000 31.12.2003 31.12.2002
Other Other Other OtherAssets Liabilities Assets Liabilities
Replacement value of derivative instruments
Trading operations 8,614 8,385 5,043 4,911
Indirect taxes and stock exchange fees 276 1,708 441 1,331
Other assets and liabilities 33 215 6 205
Total 8,923 10,308 5,490 6,447
Schroder & Co Bank AG18
3.6 Assets and participations
CHF 1,000 31.12.2002 31.12.2003
Historical Write-offs/ Book Additions Disposals Write-offs/ Bookcosts accumulated value depreciation value
depreciation
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 10,633
3.7 Assets pledged or ceded to secure own liabilities and assets subject to ownership reservation
CHF 1,000 31.12.2003 31.12.2002
Due amount whereof Due amount whereof(book value) claimed ( book value) claimed
Own securities 28,057 16,980 22,765 3,233
There are no loans nor pension transactions with securities.
Information on the Balance Sheet
Schroder & Co Bank AG 19
3.8 Liabilities to own pension plans
CHF 1,000 31.12.2003 31.12.2002
The liablities due to own pension plans amounted to 3,456 26,650
According to the pension funds’ regulation, the employer pays a contri-bution total of 15% of the relevant salary whereas the employees pay 5%.The employer’s reserve in both pension schemes amounts to CHF 4.2mas at 31 December 2003 (previous year CHF 5.5m).
3.9 Valuation adjustments and provisions / reserves for general banking risks
CHF 1,000
Balance Specific usage Change in Recoveries New creation Reversals Balance31.12.2002 and reversals definition of doubtful charged to credited to 31.12.2003
of purpose interests, profit & loss profit & loss(reclassifications) differences account account
Provision for taxesand 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 adjust-ments and provisions 18,987 (5,950) — — 5,182 (4,850) 13,369
*) Based on a change in the RRV-EBK: transfer to accrued expenses and deferred income.
Reserves for generalbanking risks (fully taxed) 18,000 — — — — — 18,000
Schroder & Co Bank AG20
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.
Information on the Balance Sheet
Schroder & Co Bank AG 21
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 AG22
3.12 Maturity structure of current assets, financial investments and borrowed funds
CHF 1,000 At sight Redeemable Maturities Totalby notice
Within Within Within After3 months 3 to 12 12 months 5 years
months to 5 years
Current Assets
Liquid assets 17,541 — — — — — 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
Mortgages — 630 — — — — 630
Securities and preciousmetals trading portfolios 28,057 — — — — — 28,057
Financial investments — — — — — — —
Total 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
Borrowed funds
Due to banks 35,109 — 131,997 77,012 — — 244,118
Due to clients 213,142 3,307 10,477 4,215 — — 231,141
Total 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
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 31.12.2003 31.12.2002
Due from affiliated companies 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.
Information on the Balance Sheet
Schroder & Co Bank AG 23
3.14 Assets and liabilities by domestic and foreign origin
CHF 1,000 31.12.2003 31.12.2002
Domestic Foreign Domestic Foreign
Assets
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
Mortgages — 630 — 586
Securities and precious metals trading portfolios 28,057 — 25,894 —
Financial investments — — — 347
Participations 1,100 — 100 1,000
Fixed assets 581 — 946 —
Accrued income and prepaid expenses 5,933 1,250 4,609 —
Other assets 5,795 3,128 4,317 1,173
Total 207,680 408,953 168,437 325,477
Liabilities and shareholders’ equity
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 —
Other liabilities 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 —
Retained earnings carried forward 141 — 102 —
Net income 11,001 — 10,039 —
Total 262,602 354,031 263,908 230,006
24 Schroder & Co Bank AG
3.15 Assets by countries /country groups
CHF 1,000 31.12.2003 31.12.2002
Total in % Total in %
Assets
Europe
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%
Total Europe 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%
Information on the Balance Sheet
25Schroder & Co Bank AG
3.16 Assets by currencies
CHF 1,000 Currencies 31.12.2003
CHF EUR USD Precious Other Totalmetals
Assets
Liquid assets 16,469 940 61 — 71 17,541
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
Mortgages — 630 — — — 630
Securities and precious metals trading portfolios 28,057 — — — — 28,057
Financial investments — — — — — —
Participations 1,100 — — — — 1,100
Fixed assets 581 — — — — 581
Accrued income and prepaid expenses 5,697 833 568 — 85 7,183
Other assets 8,856 4 1 — 62 8,923
Total balance sheet assets 249,003 161,050 124,508 470 81,602 616,633
Assets deriving from FX spot,FX forward and FX options transactions 76,541 196,556 229,409 — 23,123 525,629
Total assets 325,544 357,606 353,917 470 104,725 1,142,262
Liabilities and shareholders’ equity
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
Retained earnings carried forward 141 — — — — 141
Net income 11,001 — — — — 11,001
Total balance sheet liabilities 256,970 169,860 135,739 470 53,594 616,633
Liabilities deriving from FX spot,FX forward and FX options transactions 68,537 187,550 218,218 — 51,091 525,396
Total liabilities 325,507 357,410 353,957 470 104,685 1,142,029
Net position per currency 37 196 (40) — 40 233
26 Schroder & Co Bank AG
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
4.2 Confirmed credits
CHF 1,000 31.12.2003 31.12.2002
Obligations under deferred payments 62 534
4.3 Outstanding derivative instruments
Positive Negative ContractCHF 1,000 replacement values replacement values volume
Interest rate instruments
Options (OTC) 3 3 50,000
Foreign exchange
Forward contracts 8,550 8,321 523,270
Options (OTC) 61 61 2,358
Total 31.12.2003 8,614 8,385 575,628
31.12.2002 5,043 4,911 318,140
The above outstanding derivative instruments are held for trading purposes.There are no netting agreements in existence.
4. Information on Off-Balance-Sheet Transactions
27Schroder & Co Bank AG
Outstanding derivative instruments by counterparties
CHF 1,000 31.12.2003 31.12.2002
Positive Negative Contract Positive Negative Contractreplacement replacement volume replacement replacement volume
value value value value
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
Fiduciary deposits
Fiduciary deposits in CHF 43,908 88,773
Fiduciary deposits in European currencies 665,355 731,912
Fiduciary deposits in USD 795,921 862,956
Fiduciary deposits in other currencies 2,934 5,176
Total 1,508,118 1,688,817
Fiduciary credits
Fiduciary credits in CHF — 600
Fiduciary credits in European currencies 6,553 11,967
Fiduciary credits in USD 50,632 62,560
Fiduciary credits in other currencies — —
Total 57,185 75,127
All fiduciary deposits at year-end were concluded with banksoutside of the Schroder Group.
4.5 Clients’ assets
CHF 1,000 31.12.2003
Assets of investment funds managed 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
28 Schroder & Co Bank AG
5. Information on the Profit and Loss Account
5.1 Result from trading operations
CHF 1,000 2003 2002
Securities 228 1,382
Foreign exchange 4,351 3,471
Financial instruments — —
Total 4,579 4,853
5.2 Personnel expenses
CHF 1,000 2003 2002
Authorities, meeting compensations and fixed compensations 129 129
Salaries and extras 23,786 21,343
Social security contributions 1,394 1,630
Pension plan contributions 2,591 3,262
Other personnel expenses 799 1,982
Total 28,699 28,346
5.3 Operating expenses
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
Total 12,439 16,794
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.
29Schroder & Co Bank AG
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 Decem-
ber 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 con-
cerning professional qualification and independence.
Our audit was conducted in accordance with auditing standards promul-
gated 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 disclo-
sures 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
Report of the Statutory Auditors
Schroder & Co Bank AG
Head Office Schroders plc
31 Gresham Street, London EC2V 7QA
Phone: +44 207 658 6000
www.schroders.com
Europe
United Kingdom
Schroder Investment Management Limited
31 Gresham Street, London EC2V 7QA
Phone: +44 207 658 6000
Schroder & Co. Limited
100 Wood Street, London EC2V 7ER
Phone: +44 207 658 6000
Schroder Investments Limited
33 Gutter Lane, London EC2V 8AS
Phone: +44 207 658 6000
Channel Islands
Schroder Investment Management
(Guernsey) Limited
Trafalgar Court, Les Banques, St. Peter Port
Guernsey, GY1 3QL
Phone: +44 1481 710651
Schroders (C.I.) Limited
Sarnia House, Le Truchot, St. Peter Port
Guernsey, GY1 3UF
Phone: +44 1481 703700
Schroders (C.I.) Limited
2–6 Church Street, St. Helier
Jersey, JE4 9WB
Phone: +44 1534 756600
Denmark
Schroder Investment Management
Fondsmæglerselskabet A/S
Store Strandstræde 21
1255 Copenhagen K
Phone: +45 33 15 18 22
Germany
Schroder Investment Management GmbH
Mainzer Landstrasse 16
60325 Frankfurt am Main
Phone: +49 (0)69 975717-0
Schroder & Co Limited
Mainzer Landstrasse 16
60325 Frankfurt am Main
Phone: +49 (0)69 975717-5
France
Schroder Investment Management Limited
27, Quai Anatole, France, 75007 Paris
Phone: +33 (0)1 53 85 85 85
Italy
Schroder Investment Management
(Italy) SIM S.p.A.
Via della Spiga 30, 20121 Milano
Phone: +39 02 763771
Schroder Investment Management
(Italy) SIM S.p.A.
Piazzetta Bettiol 15, 35137 Padova
Phone: +39 049 876 5776
Schroder Investment Management
(Italy) SIM S.p.A.
Via del Babuino 169, 00187 Roma
Phone: +39 06 321 8368
Luxembourg
Schroder Investment Management
(Luxembourg) S.A.
5 rue Höhenhof, 1736 Senningerberg
Phone: +352 341 342 202
Main Schroder Branches
30
Netherlands
Schroder Investment Management
Benelux N.V.
Aert van Nesstraat 25R, 3012 CA Rotterdam
Phone: +31 10 275 71 11
Austria
Schroder Investment Management GmbH
Representative Office
P.O.Box 622, 1011 Wien
Phone: +43 1 990 63 84
Portugal
Schroder Investment Management Limited
Avenida da Liberdade 180 E
Edificio Tivoli Forum, 1250–146 Lisboa
Phone: +351 21 330 8900
Spain
Schroder Investment Management Limited
Calle Pinar 7, 28006 Madrid
Phone: +34 91 590 9541
Switzerland
Schroder & Co Bank AG
Central 2, 8001 Zurich
Phone: +41 (0)1 250 11 11
Schroder & Co Banque SA
8, rue d’ltalie, 1211 Geneva
Phone: +41 (0)22 310 26 26
Sweden
Schroder Investment Management
Fondsmæglersgelskab A/S
Birger Jarlsgatan 12, 114 34 Stockholm
Phone: +46 8 678 4010
31Schroder & Co Bank AG
Asia /Pacific
Australia
Schroder Investment Management
Australia Limited
123 Pitt Street, Sydney, NSW 2000
Phone: +61 (0)2 9210 9200
China
Schroders plc
Landmark Building
8 Nth Dongsanhuan Road
Beijing 100004
Phone: +86 10 6590 7792
Schroders plc
Shui On Plaza, Huai Hai Zhong Road
Shanghai 200021
Phone: +86 21 5383 5858
Schroder Investment Management
(Hong Kong) Ltd
Two Exchange Square
8 Connaught Place, Central
Hong Kong SAR
Phone: +852 2521 1633
Indonesia
PT Schroder Investment Management
Indonesia
Lippo Plaza Building
Jl. Jend. Sudirman Kav. 25, Jakarta 12920
Phone: +62 21 520 4550
Japan
Schroder Investment Management
(Japan) Limited
Pacific Century Place Marunouchi
1–11–1 Marunouchi, Chiyoda-ku,
Tokyo 100–6224
Phone: +81 (0)3 5293 1500
Korea
Schroders Korea Limited
Seoul Finance Centre, 84 Taepyoungro 1ga
Chung-gu, Seoul 100-768
Phone: +82 23783 0500
Singapore
Schroder Investment Management
(Singapore) Limited
65 Chulia Street, #47–01, OCBC Centre
Singapore 049513
Phone: +65 6535 3411
Taiwan
Schroders Taiwan Limited
Bank Tower, 205 Tun Hwa North Road,
Taipei, 10592, ROC
Phone: +866 2 2719 6061
Americas
USA
Schroder Investment Management
North America Inc.
875 Third Avenue
New York, NY 10022–6225
Phone: +1 212 641 3830
Schroder Investment Management
The Curtis Centre
Independence Square West
Philadelphia, PA 19106
Phone: +1 215 861 0997
Schroder Investment Management
North America Inc.
One Post Office Square, Boston, MA 02109
Phone: +1 617 292 6080
Canada
Schroder Investment Management
North America Limited
Canada Trust Tower, BCE Place
Toronto M5J 2S1
Phone: +1 416 360 1200
Argentina
Schroder Investment Management S.A.
Representative Office
Ing. Enrique Butty 220
C1001AFB Buenos Aires
Phone: +54 11 4317 1300
Bermuda
Schroders (Bermuda) Limited
22 Church Street, Hamilton HM 11
Phone: +1 441 292 4995
Brazil
Schroder Investment Management
Brasil DTVM S.A.
Rua Joaquim Floriano, 72
São Paulo, SP, Brazil 04534-000
Phone: +55 11 3054 5155
Cayman Islands
Schroder Cayman Bank and Trust
Company Limited
PO Box 1040, Harbour Centre
Grand Cayman, British West Indies
Phone: +1 345 949 2849
Mexico
Schroder Investment Management
North America Inc.
Monte Pelvoux 111 – despacho 404
Lomas de Chapultepec
México, D.F., 11000
Phone: +52 55 2623 0202
32 Schroder & Co Bank AG
Schroders 200th anniversaryFounded in London in 1804, Schroders has grown from
a small merchant bank into one of the largest quoted
independent asset managers in the world. Today,
Schroders plc is amongst the 100 largest companies
listed on the London Stock Exchange and has Euro
139,2 billion of assets under management.
This year, Schroders celebrates its 200th anniversary.
Since its origin, the company has focussed primarily on
clients’ interests. It has consistently taken the long-
term view in developing business to meet both clients’
and markets’ changing needs.
Schroders Milestones1804 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 invest-ment 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.