Schroder & Co Bank AG Annual Report 2003 - … schroders...Case postale 3655, 1211 Genève 3 Phone...

Schroder & Co Bank AG

Annual Report 2003

2004200 years of forward thinking

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.


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


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


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


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


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


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


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 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)



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


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.


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”.


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”.


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


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


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


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


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.



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


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.



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


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


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%



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


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


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


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


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.


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


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


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


27, Quai Anatole, France, 75007 Paris

Phone: +33 (0)1 53 85 85 85

Italy


(Italy) SIM S.p.A.

Via della Spiga 30, 20121 Milano

Phone: +39 02 763771


(Italy) SIM S.p.A.

Piazzetta Bettiol 15, 35137 Padova

Phone: +39 049 876 5776


(Italy) SIM S.p.A.

Via del Babuino 169, 00187 Roma

Phone: +39 06 321 8368

Luxembourg


(Luxembourg) S.A.

5 rue Höhenhof, 1736 Senningerberg

Phone: +352 341 342 202

Main Schroder Branches

30

Netherlands


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


Avenida da Liberdade 180 E

Edificio Tivoli Forum, 1250–146 Lisboa

Phone: +351 21 330 8900

Spain


Calle Pinar 7, 28006 Madrid

Phone: +34 91 590 9541

Switzerland


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


Fondsmæglersgelskab A/S

Birger Jarlsgatan 12, 114 34 Stockholm

Phone: +46 8 678 4010


Asia /Pacific

Australia


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


(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


(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


(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


North America Inc.

875 Third Avenue

New York, NY 10022–6225

Phone: +1 212 641 3830


The Curtis Centre

Independence Square West

Philadelphia, PA 19106

Phone: +1 215 861 0997


North America Inc.

One Post Office Square, Boston, MA 02109

Phone: +1 617 292 6080

Canada


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


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


North America Inc.

Monte Pelvoux 111 – despacho 404

Lomas de Chapultepec

México, D.F., 11000

Phone: +52 55 2623 0202


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.

This annual report is also published in German. The German version is prevailing.

www.schroders.ch

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