Directors' report
The Directors are pleased to present their report for the year ended 31 December 2007. The information contained in the statement from the Chairman and the Chief Executive, the business review, the Directors' profiles, the corporate governance and the Nominations and Audit Committees' reports, risk management and internal control report and the Directors' responsibility statement, forms part of this Directors' report.
Principal activities and business review
Schroders plc is the parent company of an international asset management and private banking group. A review of the Group's business during 2007 and likely future developments is contained in the statement from the Chairman and the Chief Executive and in the business review.
Results and dividends
The profit for the year attributable to equity holders of the parent company was £299.7 million, compared to £221.3 million for 2006. Dividends payable in respect of the year and their total value are set out below:
| Ordinary shares and non-voting ordinary shares |
2007 £mn |
2006 £mn |
|---|---|---|
| Interim dividend 9.0p per share (2006: 7.5p) |
25.4 | 21.4 |
| Recommended final dividend 21.0p per share (2006: 17.5p) |
59.4 | 49.5 |
| Total dividend 30.0p per share (2006: 25.0p) |
84.8 | 70.9 |
The Schroders plc Employee Benefits Trust and the Schroder US Holdings Inc. Grantor Trust have both waived their rights to the dividends paid on both the ordinary and non-voting ordinary shares in 2007. The Schroders plc Employee Benefits Trust has waived dividends due at any time in the future in respect of all the Trust's shares.
The final dividend, if approved by shareholders at the Annual General Meeting, will be paid on 30 April 2008 to shareholders on the register of members at the close of business on 14 March 2008.
Investments and disposals
On 28 February 2007 we announced that we had completed the acquisition of Aareal Asset Management GmbH, a pan-European property asset manager based in Germany. The acquisition represented interests of 99.75 per cent. of the share capital of Aareal Asset Management GmbH and its related companies. The total cost of the acquisition was £27.7 million in cash.
On 2 October 2007 we reached agreement to acquire the Singapore-based private client advisory unit of Commonwealth Bank of Australia. This transaction completed on 29 February 2008. We paid US$10 million (£5 million) in cash for the business, which at completion had more than US$660 million of assets under administration and employed 12 staff.
Directors
The names and biographical details of the Directors of the Company are given in Directors' profile. The Articles of Association require each Director to retire from office not later than the third Annual General Meeting following his or her last election or re-election to the Board.
Jonathan Asquith, Andrew Beeson, Michael Dobson, Sir Peter Job and Massimo Tosato are retiring from office in accordance with the Articles and will offer themselves for re-election at the Annual General Meeting. In accordance with the Company's Corporate Governance Guidelines, which reflect the provisions of the Combined Code on Corporate Governance, George Mallinckrodt and Bruno Schroder, who have both served as Directors for more than nine years, will retire from office at the forthcoming Annual General Meeting and will also offer themselves for re-election.
Details of the service contracts or terms of appointment, together with interests in the Company's shares, for those Directors in office during the year, are shown in the remuneration report. None of the Directors had an interest in any contract with the Company or any of its subsidiaries either during or at the end of the year.
Capital structure and voting rights
The Company's share capital is comprised of ordinary shares and non-voting ordinary shares of £1 each. As at 31 December 2007, 226,022,400 ordinary and 68,476,443 non-voting ordinary shares were in issue, representing 76.7 per cent. and 23.3 per cent. respectively of the total issued share capital.
The non-voting ordinary share class was introduced in 1986 to permit the operation of an employee share option plan without diluting the voting rights of ordinary shareholders. Since then, non-voting ordinary shares have been used in connection with subsequent employee share and share option plans. The non-voting ordinary shares carry the same rights as ordinary shares except that they do not confer the right to attend and vote at any general meeting of the Company, and that on a capitalisation issue they carry the right to receive non-voting ordinary shares rather than ordinary shares. During 2007, the Company issued 3,866,560 non-voting ordinary shares as a result of awards under share and share options plans.
Since the end of the year a further 14,039 non-voting ordinary shares have been issued.
The Company does not intend that the issued share capital should increase over the medium term as a result of the awards under the share and share option plans described in the remuneration report. The Company therefore plans to repurchase an equivalent number of non-voting ordinary shares to neutralise any dilutive effect of issues of non-voting ordinary shares made as a result of those plans, as described in the notice of Annual General Meeting.
At its Annual General Meeting on 24 April 2007, shareholders gave approval for the Company to purchase up to 14,700,000 non-voting ordinary shares. During the financial year 3,243,590 non-voting ordinary shares were repurchased at an average price excluding costs of £10.49 per share, representing 4.7 per cent. of the issued non-voting ordinary share capital. Since the year end, a further 1,414,561 shares have been repurchased at an average price of £9.53. All shares repurchased were cancelled. As at the date of this report there were 67,075,921 non-voting ordinary shares in issue.
Under the terms of the Schroders Share Incentive Plan ('SIP'), participants acquire shares in the Company - called Partnership Shares - and in return receive awards of shares - called Matching Shares. To qualify for maximum tax benefits, Partnership Shares and Matching Shares must be left in the SIP for five years. Participants are free to withdraw their Partnership Shares at any time but, if they do so within three years of the acquisition of the Partnership Shares, they forfeit the corresponding Matching Shares, save in certain circumstances set out in the rules of the SIP. Participants are not normally entitled to withdraw the Matching Shares from the SIP within three years of the shares being awarded to them.
Under the terms of the Schroder plc Employee Benefits Trust the Trustee may vote or abstain from voting, or accept any offer relating to shares, in any way that it thinks fit. In so doing, it may take into account both financial and non-financial interests of the beneficiaries or their dependants.
Directors' share interests
The interests of the Directors in the securities of the Company can be found in the remuneration report.
Employees
Details of the Company's employment practices (including the employment of disabled persons) can be found in the corporate responsibility section of the business review.
Substantial shareholdings
As at the date of this report, the Company has received notifications in accordance with the FSA's Disclosure and Transparency Rule 5.1.2 R of the following interests in three per cent. or more of the voting rights attaching to the Company's issued share capital.
Voting rights attached to shares
| Notifier | Class of |
No. of shares |
No. of voting rights | % of voting rights | ||
|---|---|---|---|---|---|---|
| shares | Direct | Direct | Indirect | Direct | Indirect | |
| Vincitas Limited* | Ordinary | – | – | 62,861,892 | – | 27.81 |
| Veritas Limited* | Ordinary | – | – | 37,308,464 | – | 16.51 |
| Flavida Limited # | Ordinary | – | – | 62,861,892 | – | 27.81 |
| Fervida Limited # | Ordinary | – | – | 38,278,700 | – | 16.94 |
| Harris Associates L.P. | Ordinary | 12,919,102 | 12,919,102 | – | 5.72 | – |
| Legal & General Group Plc | Ordinary | 6,873,379 | 6,873,379 | – | 3.04 | – |
- * Vincitas Limited and Veritas Limited act as trustees of certain settlements made by members of the Schroder Family.
- # The interests of Flavida Limited and Fervida Limited include interests in voting rights in respect of all the shares in which Vincitas Limited and Veritas Limited are interested as trustees.
Change of control
The provisions of the Company's share schemes and plans may cause options and awards granted to employees under such schemes and plans to vest on a takeover.
Charitable donations
The amount paid by Group companies to charitable organisations during 2007 was £1,252,090 (2006: £616,000). Further information on the Group's charitable activities can be found in the corporate responsibility section of the business review. No political donations or contributions were made or expenditure incurred by the Company or its subsidiaries during the year (2006: nil).
Creditor payment policy
The Group's policy and practice in the UK is to agree the terms of payment with suppliers at the time of contract and to make payment in accordance with those terms subject to satisfactory performance. The Group does not follow any code or standard on payment practice. At 31 December 2007 the amount owed to the Group's trade creditors in the UK represented approximately 15 days' average purchases from suppliers (2006: 13 days).
Provision of information to auditors
To the best of the Directors' knowledge, there is no relevant audit information of which the Company's auditors are unaware. Each of the Directors has taken all steps that ought to have been taken by him or her as a Director in order to make himself or herself aware of any relevant audit information and to establish that the Company's auditors are aware of such information.
2008 Annual General Meeting
The Annual General Meeting will be held at 31 Gresham Street, London EC2V 7QA at 11.30 am on Thursday, 24 April 2008. Resolutions will be proposed at the Annual General Meeting to reappoint PricewaterhouseCoopers LLP as auditors and to authorise the Directors to fix their remuneration.
The notice of meeting also contains business in relation to the general authority for the Directors to allot non-voting ordinary shares or to grant rights to subscribe for, or convert securities into, non-voting ordinary shares; a general authority for the Company to purchase its own non-voting ordinary shares; authority to make political donations and expenditure; amendments to the rules of the Equity Compensation Plan and amendments to the Company's Articles of Association. The Board believes that each of the items of business are in the interests of shareholders and recommends them to shareholders for approval.
Details of the items of business to be dealt with at the Annual General Meeting can be found in the Notice of Annual General Meeting.
By Order of the Board
Graham Staples
Company Secretary
31 Gresham Street
London EC2V 7QA
10 March 2008