schroder & co bank ag | annual report 2011

Schroder & Co Bank AG | Annual Report 2011

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Schroder & Co Bank AG — Annua l Repor t 2011

A Bank with a view

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ContentChairman’s Statement 5

Executive Board’s Statement 7

Balance Sheet 13

Off-Balance Sheet Transactions 14

Profit and Loss Account 15

1. Comments on Business Activities 21

2. Principal Accounting Policies and Valuation Principles 23

3. Information on the Balance Sheet 29

4. Information on Off-Balance Sheet Transactions 41

5. Information on the Profit and Loss Account 45

Report of the Statutory Auditor 47

Board and Senior Staff 49

Main Schroder Branches 51

Previous Page: Central, Zurich

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Chairman’s Statement

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The past year posed some major challenges. Even though

2011 started by showing signs of solid global economic

growth, it was gradually overshadowed by the negative influ-

ence of the European government debt crisis. This made

the global financial markets more volatile in the second half

of the year. In particular, the stock markets were impacted.

Private clients’ investments, in turn, were affected by the

strong franc and the stock exchange volatility.

In spite of this environment, Schroder & Co Bank AG’s net

income increased during the reporting year. The Board

of Directors regards this as a consequence of the Bank’s

focussing on serving clients in strategic core markets.

Schroder & Co Bank AG’s net income rose from CHF 8.9

million in 2010 to CHF 12.4 million in 2011. The Bank’s

revenues suffered from the ongoing negative currency

effects and the results from trading operations also de-

clined due to the difficult situation on the foreign exchange

markets. However, the results from commission and service

fee activities, as well as the results from interest activities,

rose slightly year-on-year. Earnings from administrative

services provided by the Private Banking Service Centre

also increased. The consequence was a general improve-

ment in earnings over the previous year. The Bank’s

longstanding commitment to greater efficiency and cost

optimisation also contributed significantly to this successful

result.

The Board of Directors is proposing to the General Meeting

the distribution of an ordinary dividend of CHF 10 million

(previous year: CHF 8 million). It is also proposing that

CHF 0.7 million (previous year: CHF 0.5 million) be allo-

cated to the general statutory reserve and CHF 1.7 million

(previous year: CHF 0.5 million) to other reserves. As a

result, the Bank’s reported equity capital after payment of

the dividend will rise to CHF 133.5 million (previous year:

CHF 131.1 million).

On behalf of the entire Board of Directors, I would like to

thank our clients who once again placed their trust in us

during a challenging year. We would also like to thank our

employees whose commitment and professionalism make

the Bank a reliable institution in these unstable times.

Philip MallinckrodtChairman of the Board of Directors

6


Executive Board’s Statement

7


Private Banking

Following the reorganisation of its business areas in 2010,

Schroder & Co Bank AG successfully implemented the

improved operational capabilities during 2011. Against the

background of the year’s challenging market conditions,

the results achieved by the Bank are even more noteworthy.

The Bank succeeded in acquiring new clients in an environ-

ment of extremely volatile markets and continued investor

uncertainty. This achievement underscores Schroder & Co

Bank AG’s position in the Swiss market.

However, along with its market peers, Schroder & Co Bank

AG was also confronted with negative currency effects,

poor stock market returns at nearly all the relevant financial

centres and historically low interest rates.

The commission income was flat during the year under

review and only posted a slight improvement year-on-year.

Faced with high market volatility, investors again, and to a

high degree, opted for liquidity. This development resulted

in commission income of CHF 38.6 million, which remained

practically unchanged from the CHF 38.1 million in 2010.

Interest income was again affected by historically low inter-

est rates on the international financial markets. The Bank’s

interest income at CHF 9.5 million was thus only slightly

higher than in the previous year at CHF 9.3 million. The

trading income had the ongoing difficulties on the foreign

exchange markets to contend with. This was reflected in the

result of CHF 6.8 million which was considerably lower than

the CHF 9.1 million achieved in 2010.

8


As in previous years, clients in 2011 again preferred the

security offered by cash. Consequently the total assets of

Schroder & Co Bank AG were practically unchanged, albeit

marginally higher, at CHF 1.53 billion versus CHF 1.51 billion

in 2010. Amounts due to clients in particular remained high:

they rose again over the previous year from CHF 1.2 billion

to CHF 1.25 billion.

Thanks to a prudent risk policy, Schroders Private Banking

enjoys a high level of confidence among its current and

potential clients in Switzerland. It was therefore no surprise

to see a pleasing inflow of CHF 353 million in net new money

in the reporting year. However, this was still insufficient to

fully compensate for the negative currency & performance

effects. As a result, assets under management remained

unchanged at CHF 6.5 billion in comparison with 2010.

The company’s expenses fell again during the year under

review. Thanks to a broad range of cost-optimisation mea-

sures, total operating expenses fell from CHF 57.5 million

in 2010 to CHF 56.1 million in 2011. Including dividends

from subsidiary undertakings, this results in net income of

CHF 12.4 million, compared to CHF 8.9 million in 2010. The

headcount at Schroder & Co Bank AG remained practically

unchanged from the previous year. The company knows

that low employee turnover and continuity in all areas of

competence is an important asset for the ongoing success-

ful development of all business lines.

9


service Centre Private Banking

The location of the in-house Service Centre Private Banking

in Switzerland is evidence of the Schroder Group’s strong

identification with the Swiss banking centre. This paid off

again during the reporting year. It provides custody, report-

ing, IT, operations and finance services to the Schroders

Private Banking business units in Switzerland, London,

Guernsey and Singapore. By providing these services, the

Service Centre Private Banking increased its revenues from

CHF 17.3 million in 2010 to CHF 18 million in 2011, despite

not being immune to negative currency effects.

The changes in the regulatory environment will bring about

a major increase in the administrative workload of all

market participants. This means intelligent solutions will

be required so that the Bank can manage its continuously

growing administrative duties efficiently. The Schroders

Service Centre Private Banking in Switzerland will play a big

part in these solutions. By ensuring quality and bundling

together standardised processes, this business area is in a

position to meet future demands in a cost-efficient way, thus

giving Schroder & Co Bank AG a competitive advantage.

From leFt to right:

Luc Denis, Chairman

Heinz Scheiwiller, Deputy Chairman, Head

of Service Centre Private Banking

Martin Liebi, Head of Client Relationship

Management

Michael Kiepert, Head of Investment

Management and Banking

Jean-Jacques Hunziker, Head of Legal and

Compliance

Central Zurich

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Balance Sheet & Profit and Loss Account

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CHF Notes 31.12.11 31.12.10

Assets

Liquid assets 231 060 989 219 060 332

Due from banks 920 517 166 872 114 097

Due from clients 3.1 230 658 885 254 406 356

Mortgages 3.1 300 000 300 000

Financial investments 3.2, 3.6 113 484 609 123 184 754

Participations 3.3 1 100 000 1 100 000

Fixed assets 3.4 373 274 280 542

Accrued income and prepaid expenses 12 990 847 13 607 418

Other assets 3.5 16 216 046 30 396 724

Total assets 1 526 701 816 1 514 450 223

Total due from group entities and

significant shareholders 507 227 960 487

Liabilitiesandshareholders’equity

Due to banks 61 651 648 95 241 052

Due to clients 1 251 357 626 1 199 456 320

Accrued expenses and deferred income 21 889 492 24 476 209

Other liabilities 3.5 17 409 525 26 534 623

Valuation adjustments and provisions 3.8 30 875 263 29 618 947

Reserves for general banking risks 3.8 18 000 000 18 000 000

Share capital 3.9, 3.10 60 000 000 60 000 000

General legal reserve 3.10 27 400 000 26 900 000

Other reserves 3.10 25 700 000 25 200 000

Retained earnings brought forward 23 072 141 266

Net income 12 395 190 8 881 806

Total liabilities and shareholders’ equity 1 526 701 816 1 514 450 223

Total due to Group entities and

significant shareholders 24 615 610 15 667 486

Balance Sheet as of 31 December 2011

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CHF Notes 31.12.11 31.12.10

Contingent liabilities 3.1, 4.1 31 827 484 43 837 559

Irrevocable commitments 3.1 3 858 000 18 035 000

Derivative instruments 4.2

– positive replacement values 15 733 437 29 360 070

– negative replacement values 14 920 672 23 392 808

– notional amounts 927 398 352 1 492 648 114

Fiduciary transactions 4.3

– Fiduciary placements with third parties 1 922 405 642 1 128 052 627

– Fiduciary placements with group entities 21 026 267 18 898 158

– Fiduciary credits 15 861 943 17 797 654

Off-Balance Sheet Transactions as of 31 December 2011

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CHF Notes 2011 2010

a)Revenuesandexpensesfromordinarybankingactivities

Results from interest activities

– Interest and discount income 7 978 570 7 771 307

– Interest and discount income from financial investments 2 918 900 2 857 181

– Interest expenses (1 364 571) (1 287 614)

Total 9 532 899 9 340 874

Results from commission and service fee activities

– Commission income on lending activities 650 699 927 002

– Commission income on securities and investment transactions 49 320 112 49 823 061

– Commission income on other services 1 184 738 1 151 622

– Commission expenses (12 546 769) (13 831 001)

Total 38 608 780 38 070 684

Results from trading operations 5.1 6 765 174 9 147 220

Other ordinary results

– Participation income 1 878 000 —

– Income from administrative services provided by the Service Centre 18 020 677 17 312 706

– Other ordinary income — 175 682

– Other ordinary expenses (1 878 777) (1 956 735)

Total 18 019 900 15 531 653

Operating expenses

– Personnel expenses 5.2 (39 834 439) (41 721 118)

– Other operating expenses 5.3 (16 278 193) (15 827 032)

Total (56 112 632) (57 548 150)

Gross profit 16 814 121 14 542 281

Profit and Loss Account for the period from 1 January to 31 December 2011

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CHF Notes 2011 2010

b)Netincome

Gross profit 16 814 121 14 542 281

Depreciation and write-offs of non-current assets 3.4 (180 539) (119 354)

Valuation adjustments, provisions and losses (743 192) (2 753 004)

Results before extraordinary items and taxes 15 890 390 11 669 923

Extraordinary income — 129 301

Taxes (3 495 200) (2 917 418)

Net income 12 395 190 8 881 806

c)Allocationofretainedearnings

Net income 12 395 190 8 881 806

Retained earnings brought forward 23 072 141 266

Total 12 418 262 9 023 072

Retained earnings at the end of the period 12 418 262 9 023 072

Allocation of retained earnings

Ordinary dividend (10 000 000) (8 000 000)

Allocation to general legal reserve (700 000) (500 000)

Allocation to other reserves (1 700 000) (500 000)

Retained earnings carried forward 18 262 23 072

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Notes

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general

Schroder & Co Bank AG is a wholly-owned subsidiary of

Schroders plc, London. In addition to the head office in

Zurich 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.

Fee and commission business

The Bank’s principal line of business is investment manage-

ment for both domestic and foreign clients.

Asset management, trustee, custodian and credit operations

are the main contributors to commission and service fee

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 Lombard

coverage.

trading activities

Trading comprises mainly trading for the accounts of clients

in interest rate products, securities and foreign exchange,

and to a limited extent proprietary trading.

service Centre – insourcing business

The Service Centre Private Banking renders securities

administration, funds transfer, accounting and IT services

centrally. These services are being offered to other

Schroder Group companies (currently Schroder & Co.

Limited, London, Schroders (C.I.) Limited, Guernsey and

Schroder Investment Management (Switzerland) AG, Zurich).

These services are charged at market rates.

risk management

Risk assessment

The Board of Directors re-assesses the Bank’s risks each

year (in particular with respect to credit, market, liquidity and

operational risks). The effectiveness of the limit system and

the controls are also evaluated. The Organisation and Man-

agement Regulations ensure that the Board of Directors is

always adequately informed of the risk situation and that the

authority for decisions in this area remains in the Board of

Directors’ responsibility.

Details on risk management

The risk management procedures and the ongoing monitor-

ing is delegated to committees. The Asset & Liability Man-

agement Committee is responsible for monitoring market

risk, interest rate risk and liquidity. This includes the selec-

tion and monitoring of banks, brokers and custodians. In

addition it monitors the adherence to the capital and large

exposure regulations.

The interest rate risks arising out of the balance sheet and

off-balance sheet positions are monitored and managed

centrally. They are managed using calculations of the net

present value effect on shareholders equity and the net

income effect under various interest rate assumptions. The

ability to meet obligations is monitored and ensured within

the framework defined in the bank law and by the Group.

Operational risks are managed through internal organisation

and control procedures. Internal audit regularly audits the in-

ternal controls and issues reports to the Board of Directors.

The credit risks are subject to specific monitoring by the

Credit Committee and the Credit Department. Loan col-

lateral is valued at market value. The collateral rates are set

forth in predefined procedures.

1. Comments on Business Activities

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outsourcing

The Bank has an outsourcing agreement with the company

Biveroni Batschelet Partners AG (BBP) for running the inter-

bank applications SIC, EuroSIC, Swift and Secom. BBP’s

role is limited to providing electronic access to the above

mentioned interbank services.

staff

At the end of the business year the Bank had 138 full- and

30 part-time employees, for a total of 168 (or 157.6 full-time

equivalent positions; previous year: 166.3).

Capital adequacy

CHF 1000 2011 2010

Eligible adjusted capital 130 023 129 141

Total minimum capital requirement 50 177 56 588

– thereof for credit risk 38 440 41 001

– thereof for non-counterparty related risks 187 140

– thereof for market risks 326 610

– thereof for operational risks 12 094 15 707

– thereof for deductions from minimum capital requirements (870) (870)

Capital requirement coverage ratio 259 % 228 %

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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 the implementing

ordinances, directives, and the Swiss Financial Market

Supervisory Authority’s (FINMA) 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 transactions

are reported off balance sheet until the settlement date.

From the settlement date, these transactions are included in

the balance sheet.

Business risks are covered by adequate value adjustments

and provisions.

Detailed principles

The most important accounting policies and valuation princi-

ples are shown below.

Liquid assets, receivables from banks and liabilities

These items are stated in the balance sheet respectively at

their nominal value or 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 commit-

ments, guarantees or derivative instruments, are also taken

into consideration for this valuation. Loans are considered

as impaired at the latest when the contractual payments for

capital and/or interest are overdue for more than 90 days.

Interest accrual is suspended if recovering interest is so un-

likely that an accrual no longer makes sense.

If an outstanding loan is classified as entirely or partially

irrecoverable or if a renunciation of outstandings is granted,

the outstanding loan is written off by debiting the respective

loss provision.

Troubled loans are reclassified as being of full value when

outstanding amounts of capital and interest are again paid

on time according to the conditions fixed by contract.

Securities and precious metals trading portfolio

Actively-traded positions which are either traded on a recog-

nised 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. Realised

profits or losses from sales of these securities are included

within “Results from the sale of financial investments”.

Unrealised profits or losses are included within “Other ordi-

nary income” or “Other ordinary expenses”. Debt securities

to be held until maturity are valued at cost. Any premium or

discount is amortized over the life of the security. Precious

metals are valued at market value.

Participations

Participations are stated at cost, less any impairment.

Tangible fixed assets

Tangible fixed assets are valued at cost, less accumulated

depreciation. Depreciation is calculated using the straight-

line method based on useful life.

2. Principal Accounting Policies and Valuation Principles

24


The recoverability is reconsidered each year. Should the

useful life change or the value decrease upon reconsidering

the recoverability, the remaining book value will be depreci-

ated according to the revised plan, or an extraordinary de-

preciation 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:

Information technology (hardware and software): 3 years

Cars: 4 years

Foreign currencies

Foreign currency transactions are translated at the average

exchange rates ruling at the balance sheet date. Foreign

exchange positions in the balance sheet are translated 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 valuation result is taken to the

profit and loss account.

The main conversion rates applied are listed below:

2011 2010

EUR 1.2137 1.2508

GBP 1.4531 1.4602

USD 0.9348 0.9324

JPY 1.2154 1.1495

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 provisions

may contain undisclosed reserves.

Taxes

Current tax is generally tax on profit and recurs on an annual

basis. One-off or transaction taxes are not considered as

current tax.

Current tax on earnings is included as expense of the pe-

riod in which the earnings are recognized. Tax liabilities are

shown under “Accrued expenses and deferred income”.

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 proprietary trad-

ing 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

included 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 val-

ued at the lower of cost or net realisable value. Any inter-

est income components are included within “Interest and

dividend income from financial investments”. 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.

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Liabilities to own pension plans

The employees of Schroder & Co Bank AG benefit from

two defined contribution pension plans. The “BVG Stiftung”

grants a minimum of the benefits mandatory by law. The

“Vor sorgestiftung” of Schroder & Co Bank AG grants ben-

efits for that part of the salary above the limit of the BVG

law. The employer’s contributions according to the defined

contribution pension plans are included within “Personnel

expenses”.

Westpark Zurich

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28


Information on the Balance Sheet

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3.1 Schedule of collateral for loans and off-balance sheet transactions

CHF 1000 Type of collateral

Mortgage Other Without Total

collateral collateral collateral

Loans

Due from clients — 215 639 15 020 230 659

Mortgages

– Residential real estate 300 — — 300

Total 31.12.11 300 215 639 15 020 230 959

31.12.10 300 244 604 9 802 254 706

Off-balancesheettransactions

Contingent liabilities 5 812 25 710 305 31 827

Irrevocable commitments:

– Irrevocable commitment to the Swiss

Bankers’ and Securities Dealers’

Deposit Guarantee Association, Basel — — 3 858 3 858

Total 31.12.11 5 812 25 710 4 163 35 685

31.12.10 5 841 46 223 9 809 61 873

Gross Estimated Net Specific

amount collateral amount provision

proceeds

Impaired loans 31.12.11 33 794 17 665 16 129 16 129

31.12.10 34 283 19 715 14 568 14 568

3.2 Financial investments

CHF 1000 Book value Book value Fair value Fair value

31.12.11 31.12.10 31.12.11 31.12.10

Debt securities and rights

– with the intention to hold to maturity 80 929 83 302 80 929 83 302

Precious metals 32 556 39 883 32 556 39 883

Total 113 485 123 185 113 485 123 185

of which qualify as repos as defined in the liquidity rules 80 929 83 302

3. Information on the Balance Sheet

30


3.3 Participations

CHF 1000 31.12.11 31.12.10

Without market value 1 100 1 100

Total 1 100 1 100

Additionalinformationonsignificantparticipations

Share Ownership Ownership

Company Name Business activities capital proportion proportion

Schroder Trust AG, Geneva Trust and offshore

company administration CHF 100 000 100 % 100 %

Schroder Cayman Bank Banking services and

and Trust Company Ltd., trust and offshore

Cayman Islands company administration USD 633 714 100 % 100 %

3.4 Assets and participations

CHF 1000 31.12.10 31.12.11

Historical Accumulated Book value Additions Disposals Depreciation Book value

cost depreciation

Total majority participations 1 100 — 1 100 — — — 1 100

Other fixed assets 4 018 (3 737) 281 309 (36) (181) 373

Total 5 118 (3 737) 1 381 309 (36) (181) 1 473

Fire insurance value of other fixed assets 23 500

Liabilities: future operational lease commitments 14 595

31


3.5 Other assets and other liabilities

CHF 1000 31.12.11 31.12.10

Other assets Other liabilities Other assets Other liabilities

Replacement costs of derivative instruments 15 733 14 921 29 360 23 393

Indirect taxes and stock exchange fees 378 2 288 359 2 980

Other assets and liabilities 105 200 678 161

Total 16 216 17 409 30 397 26 534

3.6 Assets pledged or ceded to secure own liabilities and assets subject

to ownership reservation

CHF 1000 31.12.11 31.12.10

Assets pledged Effective liability Assets pledged Effective liability

(Book value) (Book value)

Own securities 56 780 2 076 56 780 70

There are no loans or pension transactions with securities.

32


3.7 Pension plans

CHF 1000 31.12.11 31.12.10

The liabilities due to own pension plans at the balance

sheet date amounted to: 9 359 6 846

According to the pension fund regulations, the employer pays total contributions and benefits equivalent to 15% of the relevant salary whereas the employees contribute

5% of that salary.

As per the most recent audited financial statements of the BVG-Stiftung

(mandatory pension plan) and the Vorsorgestiftung (non-mandatory pension plan)

of Schroder & Co Bank AG at 31.12.2010, the employer contribution

reserves at period end were: —

Pensionplanfreefundsatthebalancesheetdate

CHF 1000 31.12.10 31.12.09

Schroder & Co Bank AG BVG Stiftung (mandatory pension plan) 51 53

Schroder & Co Bank AG Vorsorgestiftung (non-mandatory pension plan) 2 5

In 2010 the level of the accounts of the individual plan members was TCH 22 755.

Contributionstopensionfunds / pensionandrelatedbenefitsexpense

CHF 1000 2011 2010

The Bank’s total contributions to both pension plans for the year amounted to: 3 921 3 830

The Bank’s total pension and related benefit expenses (including old age and

survivors’ insurance, disability insurance, unemployment insurance and other

mandatory contributions) for the year amounted to: 5 673 5 443

33


3.8 Valuation adjustments, provisions and reserves for general banking risks

CHF 1000

Balance Specific Change in Recoveries, New provisions Reversals Balance

31.12.10 usage and definition of overdue interest, charged to credited to 31.12.11

reversals purpose (re- exchange rate Profit & Loss Profit & Loss

classifications) differences statement statement

Loan losses (credit

and country risk) 14 568 — 1 561 16 129

Other provisions 15 050 (496) — — 192 14 746

Valuation adjustments

and provisions 29 618 (496) — 1 561 192 — 30 875

31.12.10 29 618 (2 134) — 300 3 227 (34) 29 618

Reserves for general

banking risks (fully taxed) 18 000 — — — — — 18 000

31.12.10 18 000 — — — — — 18 000

3.9 Capital structure and shareholders

The share capital amounts to CHF 60 million and is split into 60 000 shares of CHF 1000 nominal value each.

At 31 December 2011 all shares are held directly by Schroder Nederland Finance BV, Amsterdam. That company is

ultimately wholly-owned by Schroders plc, London.

On 9 March 2011, respectively 3 March 2010 Schroders plc was notified pursuant to “FSA’s Disclosure and

Transparency Rule 5.1.2 R” of the following interests of 3 % or more in the ordinary shares:

09.03.2011 03.03.2010

Shares Schroders plc Stake Shares Schroders plc Stake

Vincitas Limited 60 951 886 26.97% 60 951 886 26.97%

Veritas Limited 39 218 470 17.35% 39 218 470 17.35%

Flavida Limited 60 951 886 26.97% 60 951 886 26.97%

Fervida Limited 40 188 706 17.78 % 40 188 706 17.78 %

Harris Associates L.P. 8 603 500 3.81%

Vincitas Limited and Veritas Limited held their interests 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.

34


3.10 Statement of changes in shareholders’ equity (before profit distribution)

CHF 1000

Totalshareholders’equityatthebeginningof2011

Paid-in share capital 60 000

General legal reserve 26 900

Other reserves 25 200

Reserves for general banking risks 18 000

Retained earnings brought forward 9 023

Total shareholders’ equity at the beginning of 2011 139 123

Movements

Dividend 2010 (8 000)

Deduction from available earnings for allocation to reserves (1 000)

Allocation to legal reserve 500

Allocation to other reserves 500

Net income 2011 12 395

Total shareholders’ equity at the end of 2011 143 518

Paid-in share capital 60 000

General legal reserve 27 400

Other reserves 25 700

Reserves for general banking risks 18 000

Retained earnings carried forward 12 418

35


3.11 Maturity structure of working capital and liabilities

CHF 1000 At sight Redeemable Maturities Total

upon notice

Up to From From Beyond

3 months 3 to 12 12 months 5 years

months to 5 years

Assets

Cash 231 061 — — — — — 231 061

Due from banks 96 178 — 824 339 — — — 920 517

Due from clients 300 93 214 83 649 45 380 8 116 — 230 659

Mortgages — 300 — — — — 300

Financial investments 32 556 — — 21 262 59 667 — 113 485

Total 31.12.11 360 095 93 514 907 988 66 642 67 783 — 1 496 022

31.12.10 350 389 109 475 844 215 89 679 75 308 — 1 469 066

Liabilities

Due to banks 12 677 — 41 052 7 923 — — 61 652

Due to clients 1 250 265 1 093 — — — — 1 251 358

Total 31.12.11 1 262 942 1 093 41 052 7 923 — — 1 313 010

31.12.10 1 192 149 31 376 50 219 20 953 — — 1 294 697

3.12 Amounts due from and due to affiliated companies as well as loans and exposures

to members of the Bank’s governing bodies

CHF 1000 31.12.11 31.12.10

Due from affiliated companies — 223

Due to affiliated companies 7 527 1 819

Loans and exposures to members of the Bank’s governing bodies 1 683 1 362

With related parties the Bank engages in securities and money market transactions and applies interest rates at conditions applicable to third parties. Members of the Board

of Management and of the Board of Directors are granted the conditions and tariffs applicable to staff members of the Bank.

36


3.13 Assets and liabilities by domestic and foreign origin

CHF 1000 31.12.11 31.12.10

Domestic Foreign Domestic Foreign

Assets

Cash 231 061 — 219 060 —

Due from banks 259 320 661 197 237 279 634 835

Due from clients 41 139 189 520 52 229 202 178

Mortgages 300 — 300 —

Financial investments 113 485 — 123 185 —

Participations 1 100 — 100 1 000

Fixed assets 373 — 281 —

Accrued income and prepaid expenses 9 829 3 162 13 120 487

Other assets 7 503 8 713 12 896 17 500

Total 664 110 862 592 658 450 856 000


Due to banks 3 259 58 393 366 94 875

Due to clients 283 080 968 278 311 464 887 992

Accrued expenses and deferred income 21 732 157 24 349 127

Other liabilities 5 934 11 476 13 095 13 440

Valuation adjustments and provisions 30 875 — 29 619 —

Reserves for general banking risks 18 000 — 18 000 —

Share capital 60 000 — 60 000 —

General legal reserve 27 400 — 26 900 —

Other reserves 25 700 — 25 200 —

Retained earnings brought forward 23 — 141 —

Net income 12 395 — 8 882 —

Total 488 398 1 038 304 518 016 996 434

37


3.14 Assets by countries / country groups

CHF 1000 31.12.11 31.12.10

Total in % Total in %

Assets

Europe

– Germany 37 167 2.4% 33 159 2.2%

– United Kingdom 155 215 10.2% 172 412 11.4%

– Switzerland 664 110 43.5% 658 450 43.4%

– Rest of Europe 514 872 33.7% 491 255 32.4%

Total Europe 1 371 364 89.8 % 1 355 276 89.4%

North America 8 442 0.6 % 24 997 1.7%

Asia 13 501 0.9 % 5 437 0.4%

Other countries 133 395 8.7% 128 740 8.5%

Total 1 526 702 100.0 % 1 514 450 100.0 %

38


3.15 Assets by currencies

CHF 1000 31.12.2011

Currencies CHF EUR USD Precious Other Total

metals

Assets

Cash 230 190 666 109 — 96 231 061

Due from banks 7 912 250 728 505 203 46 729 109 945 920 517

Due from clients 27 735 98 552 74 640 — 29 732 230 659

Mortgages 300 — — — — 300

Financial investments 80 929 — — 32 556 — 113 485

Participations 1 100 — — — — 1 100

Fixed assets 373 — — — — 373

Accrued income and prepaid expenses 12 257 316 277 — 141 12 991

Other assets 15 693 6 517 — — 16 216

Total balance sheet assets 376 489 350 268 580 746 79 285 139 914 1 526 702

Assets deriving from FX spot,

FX forward and FX option transactions 200 865 290 901 336 577 — 84 287 912 630

Total assets 577 354 641 169 917 323 79 285 224 201 2 439 332


Due to banks 153 11 367 36 137 — 13 995 61 652

Due to clients 198 745 316 242 545 876 79 284 111 211 1 251 358

Accrued expenses and deferred income 20 877 57 93 — 862 21 889

Other liabilities 16 894 7 505 — 4 17 410

Valuation adjustments and provisions 15 227 15 503 — — 145 30 875

Reserves for general banking risks 18 000 — — — — 18 000

Share capital 60 000 — — — — 60 000

General legal reserve 27 400 — — — — 27 400

Other reserves 25 700 — — — — 25 700

Retained earnings brought forward 23 — — — — 23

Net income 12 395 — — — — 12 395

Total balance sheet liabilities 395 414 343 176 582 611 79 284 126 217 1 526 702

Liabilities deriving from FX spot,

FX forward and FX option transactions 181 178 298 500 334 716 — 97 579 911 973

Total liabilities 576 592 641 676 917 327 79 284 223 796 2 438 675

Net position by currency 762 (507) (4) 1 405 657

Following Page: Westpark, Zurich

40


Information on Off-Balance Sheet Transactions

41


4.1 Contingent liabilities

CHF 1000 31.12.11 31.12.10

Credit guarantees 27 901 39 877

Irrevocable commitments 3 926 3 961

Total 31 827 43 838

4.2 Outstanding derivative instruments

CHF 1000

Positive Negative Contract

replacement replacement volume

values values

Foreignexchange/metalinstruments

Forward contracts 15 171 14 359 896 827

Options (OTC) 562 562 30 571

Total 31.12.11 15 733 14 921 927 398

31.12.10 29 360 23 393 1 492 648

The above outstanding derivative instruments are held for trading purposes. There are no netting agreements in place.

Outstanding derivative instruments by counterparties

CHF 1000 31.12.11 31.12.10

Positive Negative Contract Positive Negative Contract

replacement replacement volume replacement replacement volume

values values values values

Banks 6 706 3 232 373 736 20 209 6 904 677 697

Non banks 9 027 11 689 553 662 9 151 16 489 814 951

Total 15 733 14 921 927 398 29 360 23 393 1 492 648

4. Information on Off-Balance Sheet Transactions

42


4.3 Fiduciary transactions

CHF 1000 31.12.11 31.12.10

Fiduciarydeposits

Fiduciary deposits in CHF 4 903 7 171

Fiduciary deposits in European currencies 1 408 989 861 098

Fiduciary deposits in USD 504 940 270 744

Fiduciary deposits in other currencies 24 600 7 938

Total 1 943 432 1 146 951

Fiduciarycredits

Fiduciary credits in CHF — —

Fiduciary credits in European currencies 2 402 2 758

Fiduciary credits in USD 13 460 15 040

Total 15 862 17 798

Effected fiduciary deposits placed with banks within the Schroder Group at the end of the year amounted to TCHF 21 026.

43


4.4 Funds under management

CHF 1000 31.12.11 31.12.10

PrivateBanking

Assets in own managed investment funds 8 720 9 411

Assets under discretionary management 1 724 674 1 826 640

Assets subject to other management 4 762 389 4 718 593

Total funds under management Private Banking (incl. double counting) 6 495 783 6 554 644

of which double counting 8 720 9 411

Total funds under management Private Banking (excl. double counting) 6 487 063 6 545 233

Total net inflow/outflow of assets 353 031 (217 894)

The Bank does not hold any custody-only assets. Debit interest on current account overdrafts is treated as negative performance, while interest charged on Lombard loans

is a cash outflow. The Bank calculates performance according to the direct method.

4.5 Funds administered by the Service Centre Private Banking

CHF 1000 31.12.11 31.12.10

Assets administered Private Banking (cf 4.4.) 6 487 063 6 545 233

Assets administered in connection with the

insourcing for Schroder Group companies 21 066 321 24 314 414

Total assets administered by the Service Centre Private Banking 27 553 384 30 859 647

The Bank’s Service Centre Private Banking renders administrative services to other Schroder Group companies in the areas of custody, operations and finance.

For this insourcing business the Service Centre charges fees which are reflected in the profit and loss account under the position other ordinary income (see explanation about

the Service Centre – insourcing business).

44


Information on the Profit and Loss Account

45


5.1 Results from trading operations

CHF 1000 2011 2010

Securities — —

Foreign exchange 6 765 9 147

Total 6 765 9 147

5.2 Personnel expenses

CHF 1000 2011 2010

Authorities, meeting compensations and fixed compensations 216 216

Salaries and extras 33 039 35 158

Social security contributions 1 752 1 613

Pension plan contributions 3 921 3 830

Other personnel expenses 906 904

Total 39 834 41 721

5.3 Operating expenses

CHF 1000 2011 2010

Occupancy expenses 3 758 3 317

Expenses for EDP, machinery, fixtures and fittings,

vehicles and other equipment 3 963 3 872

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 8 557 8 638

Total 16 278 15 827

5. Information on the Profit and Loss Account

46


Report of the Statutory Auditor

47


as statutory auditor, we have audited the financial

statements of schroder & Co Bank ag, which

comprise the balance sheet, income statement and

notes, for the year ended 31 December 2011.

Board of Directors’ responsibility

The Board of Directors is responsible for the preparation

of the financial statements in accordance with the require-

ments of Swiss law and the company’s articles of incorpora-

tion. This responsibility includes designing, implementing

and maintaining an internal control system relevant to the

preparation of financial statements that are free from mate-

rial misstatement, whether due to fraud or error. The Board

of Directors is further responsible for selecting and applying

appropriate accounting policies and making accounting

estimates that are reasonable in the circumstances.

Auditor’s responsibility

Our responsibility is to express an opinion on these financial

statements based on our audit. We conducted our audit in

accordance with Swiss law and Swiss Auditing Standards.

Those standards require that we plan and perform the audit

to obtain reasonable assurance whether the financial state-

ments are free from material misstatement.

An audit involves performing procedures to obtain audit

evidence about the amounts and disclosures in the financial

statements. The procedures selected depend on the audi-

tor’s judgement, including the assessment of the risks of

material misstatement of the financial statements, whether

due to fraud or error. In making those risk assessments, the

auditor considers the internal control system relevant to the

entity’s preparation of the financial statements in order to

design audit procedures that are appropriate in the circum-

stances, but not for the purpose of expressing an opinion on

the effectiveness of the entity’s internal control system.

An audit also includes evaluating the appropriateness of the

accounting policies used and the reasonableness of

accounting estimates made, as well as evaluating the overall

presentation of the financial statements. We believe that the

audit evidence we have obtained is sufficient and appropri-

ate to provide a basis for our audit opinion.

Opinion

In our opinion, the financial statements for the year ended

31 December 2011 comply with Swiss law and the com-

pany’s articles of incorporation.

Report on other legal requirements

We confirm that we meet the legal requirements on licensing

according to the Auditor Oversight Act (AOA) and independ-

ence (article 728 CO) and that there are no circumstances

incompatible with our independence.

In accordance with article 728a paragraph 1 item 3 CO and

Swiss Auditing Standard 890, we confirm that an internal

control system exists which has been designed for the

preparation of financial statements according to the instruc-

tions of the Board of Directors.

We further confirm that the proposed appropriation of avail-

able earnings complies with Swiss law and the company’s

articles of incorporation. We recommend that the financial

statements submitted to you be approved.

PricewaterhouseCoopers Ltd

Roman Berlinger, Audit expert, Auditor In Charge

Markus Bucheli

Zurich, 9 March 2012

Report of the Statutory Auditor

48


Board and Senior Staff

49


Board and Senior Staff (as of 1 March 2012)

Board of Directors

Philip Mallinckrodt

Chairman

Dr. François Bochud

Deputy Chairman

Dr. Martin Eckert

Jean-Claude Marchand

Jean-Charles Roguet

Markus Rütimann

executive Board

Luc Denis

Chairman

Heinz Scheiwiller Deputy Chairman,

Head of Service Centre Private Banking

Jean-Jacques Hunziker Member, Head of Legal and Compliance

Michael Kiepert Member, Head of Investment Management and Banking

Martin Liebi

Member, Head of Client Relationship Management

senior management

Alexis André

Beat Bochsler

Andreas Borsari

Isabelle Brechbühl

Norbert Brestel

Pierre-Antoine Carron

Reto Dietrich

Markus Engeler

Slavica Barovic Esnault-Pelterie

Pierre-Louis Favre

Rolf Fischer

Claudia Giger

Enrique Gil

Roland Heule

Jürg Klingler

Bernhard Leibkutsch

Samuel Moulin

Denis Purmann

Michel Rossi

Stefano Scanzoni

Christian Schmid

Michael Spörndli

Urs Winiger

Antonio Winspeare Guiccardi

Paolo Zaglia

external auditors

PricewaterhouseCoopers Ltd, Zurich

50


Main Schroder Branches

51


Group’s Head Office

United Kingdom

Schroders plc31 Gresham Street, London EC2V 7QATel + 44 207 658 60 00www.schroders.com

Schroder Investment Management Limited31 Gresham Street, London EC2V 7QATel + 44 207 658 60 00

Schroder & Co. Limited100 Wood Street, London EC2V 7ERTel + 44 207 658 60 00

Schroder Investments Limited 33 Gutter Lane, London EC2V 8ASTel + 44 207 658 60 00

Europe

Channel Islands

Schroder Investment Management (Guernsey) Limitedc/o Northern Trust InternationalTrafalgar Court, Les Banques, St. Peter Port, Guernsey, GY1 3QLTel + 44 (0)1481 74 50 01

Schroders (C.I.) LimitedRegency Court Glategny EsplanadeSt. Peter Port, Guernsey, GY1 3UFTel + 44 (0)1481 70 37 00

Schroders (C.I.) Limited29 Esplanade, St. HelierJersey, JE4 9WBTel + 44 (0)1534 75 66 00

Denmark

Schroder Investment Management A/SStore Strandstræde 211255 KøbenhavnTel + 45 33 15 18 22

France

Schroder Investment Management Limited8–10 rue Lamennais, 75008 ParisTel + 33 (0)1 53 85 85 85

Germany

Schroder Investment Management GmbHTaunustor 260311 Frankfurt am MainTel + 49 (0)69 97 57 17 0

Schroder & Co LimitedTaunustor 260311 Frankfurt am MainTel + 49 (0)69 97 57 17 5

Schroder Property Investment Management GmbH (SPrIM)Taunustor 2 (Japan Center)60311 Frankfurt am MainTel +49 (0)69 97 57 17 800

Italy

Schroders Italy SIM S.p.A.Via della Spiga 30, 20121 MilanoTel + 39 02 76 37 71

Agenzia di Padova Private Banking Piazzetta Bettiol 15, 35137 PadovaTel + 39 049 876 57 76

Agenzia di Roma Private BankingPiazza della Maddalena 6, 00186 RomaTel + 39 06 321 83 68

Luxembourg

Schroder Investment Management (Luxembourg) S.A.5, rue Höhenhof, 1736 SenningerbergTel + 352 341 34 22 02

Netherlands

Schroder Investment Management (SIM) Benelux N.V.De entree 26018th floor1101 EE Amsterdam ZuidoostTel + 31 (0)20 301 28 40

Schroder Property Investment Management GmbHDe entree 26018th floor1101 EE Amsterdam ZuidoostTel + 31 (0)20 301 65 60

Sweden

Schroder Investment Management A/S DanmarkSveavägen 9, 11157 StockholmTel + 46 (0)8 678 40 10

Switzerland

Schroder & Co Bank AG Central 2, 8001 ZürichTel + 41 (0)44 250 11 11

Schroder & Co Bank AGService Centre Private BankingPfingstweidstrasse 608005 ZürichTel +41 (0)44 250 11 11

Schroder & Co Banque SA8, rue d’ltalie, 1204 GenèveTel + 41 (0)22 818 41 11

Schroder Investment Management (Switzerland) AGCentral 2, 8021 ZürichTel +41 (0)800 84 44 48

Spain

Schroder Investment Management LimitedCalle Pinar 7, 28006 MadridTel + 34 91 590 95 41

Oficina de representación en España de Schroder & Co Bank AGCalle Pedro de Valdivia 1428006 MadridTel +34 91 590 05 05

52


Americas

Argentina

Schroder Investment Management S.A.Ing. Enrique Butty 220C1001AFB - Buenos AiresTel +54 11 43 17 13 00

Bermuda

Schroder (Bermuda) Limited131 Front Street, Hamilton HM 12Tel +1 441 292 49 95

Brazil

Schroder Investment ManagementBrasil DTVM S.A.Rua Joaquim Floriano, 100São Paulo, SP, Brasil 04534-000Tel +55 11 30 54 51 55

Cayman Islands

Schroder Cayman Bank and Trust Company LimitedPO Box 1040GT, Harbour Centre,Grand Cayman, British West IndiesTel +1 345 949 28 49

Mexico

Schroders S.A. de C.V.Montes Urales 760Col. Lomas de ChapultepecMéxico, D.F. 11000Tel +52 55 11 00 10 30

USA

Schroder Investment ManagementNorth America Inc.875 Third AvenueNew York, NY 10022-6225Tel +1 212 641 38 30

Schroder Investment Management North America Inc.Penn Mutual Towers520 Walnut StreetSuite 1150Philadelphia, PA 19106Tel +1 215 861 09 97

Asia / Pacific

Australia

Schroder Investment ManagementAustralia Limited123 Pitt Street, Sydney, NSW 2000Tel +61 (0)2 92 10 92 00

China

Schroders plc 7 Finance StreetXicheng District, Beijing 100033Tel +86 10 66 55 53 88

Schroders plc Shanghai IFC Phase INo. 8 Century AvenuePudong, Shanghai 200120Tel +86 21 50 12 05 80

Schroder Investment Management (Hong Kong) LtdTwo Pacific Place, 88 QueenswayHong Kong SARTel +852 25 21 16 33

Indonesia

PT Schroder Investment Management IndonesiaJakarta Stock Exchange BuildingJl. Jend. Sudirman Kav. 52–53,Jakarta 12190Tel +62 21 515 01 01

Japan

Schroder Investment Management (Japan) Limited21st Floor Marunouchi Trust Tower Main1-8-3 MarunouchiChiyoda-Ku, Tokyo 100-0005

Singapore

Schroder Investment Management (Singapore) Limited65 Chulia Street, #46-00, OCBC CentreSingapore 049513Tel +65 65 35 34 11

Schroder & Co. (Asia) Limited11 Beach Road #06-01Singapore 189675Tel +65 65 07 01 23

South Korea

Schroders Korea LimitedSeoul Finance Centre, 84 Taepyungro 1ga, Chung-gu, Seoul 100-768Tel +82 2 37 83 05 00

Taiwan

Schroder Investment Management (Taiwan) Limited 9F, Suite B1, 108, Sec.5, Hsin-Yi Road,Hsin-Yi District, Taipei 11047, Taiwan, R.O.CTel +886 2 27 22 18 68

Middle East

Dubai

Schroder Investment Management LimitedDubai International Financial CentreP.O. Box 506612DubaiTel +971 4 704 9100

53


© 2012Schroder & Co Bank AG Annual Report 2011

Project management:Schroder & Co Bank AG

Concept:markenart, ZurichPeter Bütikofer & Company, ZurichSchroder & Co Bank AG

Design, production:markenart, Zurich

Fotografie:Stefan Baumgartner, Zurich

Printed by:Neidhart + Schön Group, Zurich

The Annual Report 2011 is also published in German. The German version takes precedence.

The web version of the Annual Report 2011 is available at www.schroders.ch

Head Office

Schroder & Co Bank AG

Central 2, 8001 Zürich

Postfach 1820, 8021 Zürich

Service Centre Private Banking

Pfingstweidstrasse 60, 8005 Zürich

Postfach 2222, 8031 Zürich

Tel +41 (0)44 250 11 11

Fax +41 (0)44 250 13 12

www.schroders.ch

[email protected]

Branch Office

Schroder & Co Banque SA

8, rue d’Italie, 1204 Genève

Case postale 3655, 1211 Genève 3

Tel +41 (0)22 818 41 11

Fax +41 (0)22 818 41 12

Schroder Trust SA

8, rue d’Italie, 1204 Genève

Case postale 3655, 1211 Genève 3

Tel +41 (0)22 818 41 22

Fax +41 (0)22 818 41 28

Subsidiary Companies

Schroder Cayman Bank and

Trust Company Limited

P.O. Box 1040GT, Harbour Centre

Grand Cayman, B.W.I.

Tel +1 345 949 28 49

Fax +1 345 949 54 09

Following Page: rue d’Italie, Geneva

www.schroders.ch

schroder & co bank ag | annual report 2011

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