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Schroders Annual Results 2006

Schroders Annual Results 2006 Forward-Looking Statements These presentation slides contain forward-looking statements and forecasts with respect to the financial condition and results of the businesses of Schroders plc and its subsidiaries

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Schroders Annual Results 2006

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  1. Schroders Annual Results 2006 29220

  2. Forward-Looking Statements • These presentation slides contain forward-looking statements and forecasts with respect to the financial condition and results of the businesses of Schroders plc and its subsidiaries • These statements and forecasts involve risk and uncertainty because they relate to events and depend upon circumstances that may occur in the future • There are a number of factors that could cause actual results or developments to differ materially from those expressed or implied by those forward-looking statements and forecasts. Nothing in this announcement should be construed as a profit forecast 29220

  3. 2006 Results Michael DobsonChief Executive 29220

  4. Financial Results Jonathan AsquithChief Financial Officer 29220

  5. Overview • Profit before tax £290.0 million(2005: £250.7 million) • Asset Management profit before tax £219.0 million(2005: £193.9 million) • Private Banking profit before tax £26.9 million(2005: £6.3 million) • Private Equity profit before tax £34.6 million(2005: £40.3 million) • Funds under management £128.5 billion(31 December 2005: £122.5 billion) • Total dividend for the year of 25.0 pence per share (2005: 21.5 pence per share) 29220

  6. Profit Before Tax £mn Figures 2001-2003 based on UK GAAP, figures to 2004 onwards based on IFRS 29220

  7. Profit Before Tax Asset Management £mn 193.9 Figures 2001-2003 based on UK GAAP, figures to 2004 onwards based on IFRS Figures 2001-2003 include Private Banking 29220

  8. Profit Before Tax Private Banking £mn Figures 2001-2003 based on UK GAAP, figures to 2004 onwards based on IFRS 29220

  9. Profit Before Tax Private Equity and Group £mn IFP Figures 2001-2003 based on UK GAAP, figures to 2004 onwards based on IFRS 29220

  10. 290.0 Gain on discontinued Underlying 2005 pre tax outsourcing project profit Profit Before Tax Reconciliation – 2005 to 2006 £mn 350 300 (20.4) 250 200 150 250.7 230.3 100 50 0 2005 pre tax profit 2006 pre tax profit 29220

  11. 290.0 Underlying Asset Management net income Profit Before Tax Reconciliation – 2005 to 2006 £mn £mn 350 300 107.8 250 200 150 230.3 100 50 0 2005 pre tax profit 2006 pre tax profit Underlying Asset Management net income (£mn) 2005 2006 Difference Revenue External cost of sales Asset Management gross profit Net interest and other income Underlying net income • 667.8 • (128.8) • 539.0 • 8.8 • 547.8 811.1 (166.2) 644.9 10.7 655.6 143.3 (37.4) 105.9 1.9 107.8 29220

  12. 290.0 Underlying Asset Asset Management costs Management net income Profit Before Tax Reconciliation – 2005 to 2006 £mn £mn £mn 350 300 (62.6) 107.8 250 200 150 230.3 100 50 0 2005 pre tax profit 2006 pre tax profit Asset Management costs (£mn) 2005 2006 Difference Asset Management staff costs Asset Management other costs Asset Management total costs (264.5) (109.5) (374.0) (297.6) (139.0) (436.6) (33.1) (29.5) (62.6) 29220

  13. 290.0 Asset Management costs Profit Before Tax Reconciliation – 2005 to 2006 £mn £mn £mn £mn 350 45.2 300 (62.6) 107.8 250 200 150 230.3 100 50 0 Underlying Asset 2005 pre tax profit 2006 pre tax profit Management net income Underlying Asset Management profit (£mn) 2005 2006 Difference Underlying profit before tax 173.8 219.0 45.2 29220

  14. 290.0 Underlying Asset Underlying Private Management profit Banking profit Profit Before Tax Reconciliation – 2005 to 2006 £mn £mn £mn £mn £mn 350 20.9 300 250 45.2 200 150 230.3 100 50 0 2005 pre tax profit 2006 pre tax profit Underlying Private Banking profit(£mn) 2005 2006 Difference Revenue External cost of sales Gross profit Costs Underlying profit before tax 74.1 (2.0) 72.1 (66.1) 6.0 98.5 (2.8) 95.7 (68.8) 26.9 24.4 (0.8) 23.6 (2.7) 20.9 29220

  15. 290.0 Underlying Asset Underlying Private Management profit Banking profit Profit Before Tax Reconciliation – 2005 to 2006 £mn £mn £mn £mn £mn £mn 350 (5.7) 20.9 300 250 45.2 200 150 230.3 100 50 0 2005 pre tax profit Private Equity profit 2006 pre tax profit Private Equity (£mn) 2005 2006 Difference Profit before tax 40.3 34.6 (5.7) 29220

  16. 290.0 Underlying Asset Underlying Private Management profit Banking profit Group Profit Before Tax Reconciliation – 2005 to 2006 £mn £mn £mn £mn £mn £mn £mn 350 (5.7) (0.7) 20.9 300 250 45.2 200 150 230.3 100 50 0 2005 pre tax profit Private Equity profit 2006 pre tax profit Group (£mn) 2005 2006 Difference Gross profit Surplus space Administrative expenses Net interest and other income Profit before tax 30.8 (9.2) (32.0) 20.6 10.2 31.0 (4.5) (29.2) 12.2 9.5 0.2 4.7 2.8 (8.4) (0.7) 29220

  17. 290.0 Underlying Asset Underlying Private Management profit Banking profit Group Profit Before Tax Reconciliation – 2005 to 2006 £mn £mn £mn £mn £mn £mn £mn 350 (5.7) (0.7) 20.9 300 250 45.2 200 150 230.3 100 50 0 2005 pre tax profit Private Equity profit 2006 pre tax profit 29220

  18. Costs Total Group £mn 2005 2006 309.8 154.4 9.2 10.9 484.3 345.2 185.1 4.5 7.5 542.3 Staff costs Other costs Surplus space provisions Depreciation and amortisation Total administrative expenses 29220

  19. Costs Total Group £mn 700 542.3 600 520.0 484.3 470.1 500 408.6 406.2 400 300 200 100 0 2001 2002 2003 2004 2005 2006 Staff Costs Non-staff Costs Figures 2001-2003 based on UK GAAP, figures to 2004 onwards based on IFRS 29220

  20. Compensation Costs: Operating Revenues 70% 57% 56% 56% 60% 51% 51% 47% 50% 40% 30% 20% 10% 0% 2001 2002 2003 2004 2005 2006 Figures 2001-2003 based on UK GAAP, figures to 2004 onwards based on IFRS 29220

  21. Cost: Income Ratio 120% 102% 96% 100% 86% 80% 66% 66% 65% 60% 40% 20% 0% 2001 2002 2003 2004 2005 2006 Figures 2001-2003 based on UK GAAP, figures to 2004 onwards based on IFRS 29220

  22. Capital Allocation 31 December 2006 £mn 31 December 2005 Regulatory Other operating Goodwill & Intangibles Liquid funds Third party hedge funds Other Schroders funds Private Equity Leasing Total 230.0 208.2 24.6 411.9 134.3 165.9 160.9 7.0 1,342.8 258.6 322.3 73.5 311.8 138.4 163.7 168.2 6.9 1,443.4 29220

  23. Funds Under Management 31 Dec 2006 (31 Dec 2005) By client type By client domicile 29220

  24. Funds Under Management 31 Dec 2006 (31 Dec 2005) By asset type Equities Fixed Income 29220

  25. Movements in Funds Under Management £bn Institutional Retail PrivateBanking Total 31 December 2005 Purchase of NFC Net asset (losses)/gains Market movement 31 December 2006 78.7 1.4 (8.0) 5.3 77.4 36.0 0.0 3.8 2.7 42.5 7.8 0.0 0.4 0.4 8.6 122.5 1.4 (3.8) 8.4 128.5 29220

  26. Gross Profits and Margin 2005 2006 Gross Profit Margin (bps) Gross Profit Margin (bps) £mn Institutional Retail Total Asset Management Private Banking 254.1 284.9 539.0 72.1 35 85 51 105 295.6 349.3 644.9 95.7 38 89 55 117 29220

  27. Pence per share £mn Pence per share £mn Penceper share £mn Dividends and Earnings Per Share 2005 2006 2004 Interim Final Basic earnings per share Diluted earnings per share 6.5 13.5 20.0 18.8 39.2 58.0 53.5p 53.1p 7.0 14.5 21.5 20.3 42.0 62.3 65.7p 65.1p 7.517.525.0 21.449.7 71.1 76.9p 75.7p 29220

  28. Distribution Massimo TosatoGlobal Head of Distribution 29220

  29. The Market Long Term Trends Defined Contribution Schemes Personal Savings Demographics: Defined Benefit Schemes Channels • Growth of individual and “instividual” savings Products • Outcome oriented products • Strategic solutions 29220

  30. Schroders’ Positioning within these Trends • Channel • Product • Geography 29220

  31. 1996 2006 1.2 12 19 48 5 39 179 107 789 37 An International Example The Luxembourg mutual fund platform FUM (€bn) Headcount Subfunds Share Classes Countries Outsourced: treasury, fund accounting, fund custody, stock lending 29220

  32. Gross Sales £bn 35.3 CAGR = +35.6% 28.6 23.7 20.3 10.7 7.7 29220

  33. Investment Alan BrownGlobal Head of Investment 29220

  34. Investment Performance % of Institutional and Retail assets above and below benchmark 3 years to 31 December 2006 Retail Institutional Above benchmark Below benchmark 29220

  35. Opportunities: • Pacific ex-Japan • European Equities • Property – SEPUT & FoFs • Performance & Capacity • Institutional • Asset Allocation & Diversification Our Traditional Business • Challenges: • UK Multi-Asset • Japan Equities • Continued Restructuring • Performance 29220

  36. Harnessing Change • Catalysts • Accounting Rules and Regulation • Defined Benefit Defined Contribution • Two Themes • Diversification • Outcome Oriented Strategies 29220

  37. Diversification • Multi-Asset team • Schroder Property • Alternative Investments Group • NewFinance Capital • DGF Equity return at lower volatility • Property SecuritiesGlobal diversification and liquidity • Commodities Diversification and real asset • Hedge Fund of FundsBest of breed diversification 29220

  38. Outcome Oriented Strategies • LDI Liability matching portfolios • Structured Products Capital guarantees, income products • Absolute and Total Return Credit notes, strategic bond • Benchmark Unaware Global active value, improved Sharpe ratios • Multi-Asset team • Multi-Asset team • Fixed Income • Quantitative Equity 29220

  39. Private Banking Philip MallinckrodtGlobal Head of Private Banking 29220

  40. Private Banking Summary • Considerable progress in 2006 • Positioning for growth over next five years • Integrated business model for our banks in UK, Guernsey and Switzerland 29220

  41. Management Priorities in 2006/7 • Integrate back office in Zurich • Sharpen our client proposition 29220

  42. 2006 Results Michael DobsonChief Executive 29220

  43. Appendices 29220

  44. Income Statement Progression Profit before tax £mn Q3 2005 Q42005 Q12006 Q22006 Q32006 Q42006 Asset Management income Asset Management cost Asset Management profit Private Banking profit Private Equity Group Profit before tax 141.2 (95.1) 46.1 1.5 5.5 10.5 63.6 152.9 (104.9) 48.0 2.6 16.8 (3.8) 63.6 152.8 (102.9) 49.9 3.7 7.2 10.6 71.4 152.4 (105.5) 46.9 7.5 10.5 (4.0) 60.9 157.2 (108.9) 48.3 6.9 6.2 2.6 64.0 193.2 (119.3) 73.9 8.8 10.7 0.3 93.7 29220

  45. 2006 Business Segment Profits £mn 9.5 290.0 34.6 26.9 219.0 29220

  46. Gross Profit Margins Asset Management gross profit £644.9 million(2005: £539.0 million) Asset Management 2005 2006 Gross profit on average AM FUM Of which: performance fees Costs on average AM FUM Net Average AM FUM 51bps 2bps 35bps 16bps £106.5bn 55bps 4bps 37bps 18bps £116.6bn 29220

  47. Gross Profit Margins Asset Management gross profit £644.9 million(2005: £539.0 million) Private Bank gross profit £95.7 million(2005: £72.1 million) Asset Management & Private Bank 2005 2006 Gross profit on average AM FUM Gross profit on average PB FUM Gross profit on average AM & PB FUM Average combined FUM 51bps 104bps 54bps £113.4bn 55bps 117bps 59bps £124.8bn 29220

  48. Comparison of Costs Asset Management £mn 2005 2006 Staff costs Other costs Depreciation and amortisation Total administrative expenses 264.5 102.8 6.7 374.0 297.6 134.0 5.0 436.6 29220

  49. Comparison of Costs Private Banking £mn 2005 2006 Staff costs Other costs Depreciation and amortisation Total administrative expenses 34.0 27.9 4.2 66.1 35.8 30.5 2.5 68.8 29220

  50. Headcount No. employees 29220

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