Annual Report and Accounts 2008

Directors' report

Directors' report

The information contained in the statement from the Chairman and the Chief Executive, the business review, the Directors' profiles, the corporate governance report and the Nominations and Audit Committees' reports, the risk management and internal control report and the Directors' responsibility statement, forms part of the 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 2008 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 £76.7 million, compared to £299.7 million for 2007. The Directors are recommending a final dividend of 21.0p per share which, if approved by shareholders at the Annual General Meeting, will be paid on 30 April 2009 to shareholders on the register of members at the close of business on 20 February 2009. Dividends payable in respect of the year and their total value are set out below:

The Schroders plc Employee Benefits Trust and the Schroder US Holdings Inc. Grantor Trust have waived their rights to the dividends paid on both the ordinary and non-voting ordinary shares in respect of 2008. The Schroders plc Employee Benefits Trust has waived dividends due at any time in the future in respect of all the Trust’s shares.

Investments and disposals

On 29 February 2008 we completed the acquisition of the Singapore-based private client advisory unit of The Commonwealth Bank of Australia for £5.2 million in cash. At completion the business had more than US$0.7 billion of assets under administration and employed 12 staff.

On 18 March 2008 we announced that we had reached agreement to acquire Swiss Re Asset Management Funds (Switzerland) AG, the Swiss third party fund management business of Swiss Re, for £28.3 million in cash. The business had assets under management as at 31 March 2008 of approximately £0.9 billion split between capital protected and balanced funds, European equities and Swiss property. The acquisition broadened our offering to Swiss institutional clients. The transaction was completed on 30 May 2008.

On 17 July 2008 we announced we had reached agreement to acquire E.Sun Securities Investment Trust Co. Ltd. (ESun SITE) from E.Sun Financial Holding Co. Ltd in Taiwan for £9.1 million in cash. The acquisition enabled the Group to establish an onshore investment capability in Taiwan to distribute both domestic and international onshore funds. As at 15 July 2008, E.Sun SITE managed seven funds and had assets under management of approximately £170 million. The transaction was completed on 30 September 2008.

Directors

The names and biographical details of the current Directors of the Company are given on Directors' profiles. Jonathan Asquith stood down from the Board on 19 May 2008. Lord Howard of Penrith was appointed as a non-executive Director on 20 November 2008. Philip Mallinckrodt was appointed as an executive Director with effect from 1 January 2009. Kevin Parry, who was already a non-executive Director, was appointed Chief Financial Officer and became an executive Director with effect from 1 January 2009. George W. Mallinckrodt retired from the Board with effect from 31 December 2008.

Under the Company’s Articles of Association any Director appointed by the Board may only hold office until the next Annual General Meeting, when shareholders have the opportunity to vote on his election. Accordingly, Lord Howard and Philip Mallinckrodt will seek election in accordance with the Articles. The Articles of Association also 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, and so Luc Betrand, Alan Brown and Kevin Parry will retire from office in accordance with the Articles and 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, Bruno Schroder and Sir Peter Job, 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 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 2008, 226,022,400 ordinary and 60,690,960 non-voting ordinary shares were in issue, representing 78.83 per cent. and 21.17 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 2008, the Company issued 752,747 non-voting ordinary shares as a result of awards under share and share options plans. Since the end of the year a further 10,000 non-voting ordinary shares have been issued.

The Directors have the authority to issue non- voting ordinary shares in relation to awards made under the Group’s share and share option plans (as described in the remuneration report).

The Company does not intend that the issued share capital should increase over the medium term as a result of awards under the share and share option plans. The Company intends 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 the last Annual General Meeting on 24 April 2008, shareholders renewed the Directors’ general authority to issue non-voting ordinary shares up to an aggregate nominal amount of £5,000,000. Renewal of this authority will be sought at the 2009 Annual General Meeting.

Also at the last Annual General Meeting, shareholders gave approval for the Company to purchase up to 14,650,000 non-voting ordinary shares. During the financial year 8,538,230 non- voting ordinary shares were repurchased at an average price excluding costs of £8.41 per share, representing 14.1 per cent. of the issued non- voting ordinary share capital. There have been no further repurchases since the year end. All shares repurchased were cancelled. As at the date of this report there were 60,700,960 non-voting ordinary shares in issue. Renewal of this general authority will be sought at the 2009 Annual General Meeting.

Under the terms of the Schroders Share Incentive Plan (‘SIP’), participating employees use their own funds to 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 who were on the Board in 2008 in the securities of the Company at the year end, 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.

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 and political donations

The amount paid by Group companies to charitable organisations during 2008 was £1,127,539 (2007: £1,252,090). 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 (2007: nil).

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, as set out in the table below.

Voting rights attached to shares

^*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.

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 2008 the amount owed to the Group’s trade creditors in the UK represented approximately 10.2 days’ average purchases from suppliers (2007: 15 days).

Contractual arrangements

Contractual and other arrangements that are essential to the business are referred to in the business review.

Going concern

The Group’s business activities, together with the factors likely to affect its future development, performance and position are set out in the business review which also describes its financial and capital position. In addition, notes 26 and 27 to the financial statements include information on the Group’s approach to managing its capital; its financial risk management objectives; details of its financial instruments and hedging activities; and its exposures to credit risk and liquidity risk.

The Group has considerable financial resources, a broad range of products and a geographically diversified business. As a consequence, the Directors believe that the Group is well placed to manage its business risks despite the current uncertain economic outlook.

Accordingly, the Directors have a reasonable expectation that the Company and the Group have adequate resources to continue in operational existence for the foreseeable future. They therefore continue to adopt the going concern basis in preparing the Annual Report and Accounts.

2009 Annual General Meeting

The Annual General Meeting will be held at 31 Gresham Street, London EC2V 7QA at 11.30 a.m. on Thursday, 23 April 2009. 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 and an authority for the Company to give 14 days’ notice of general meetings (other than annual general meetings). 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 meeting on Notice of Annual General Meeting, which is also available on our website, www.schroders.com.

By Order of the Board

Graham Staples
Company Secretary

31 Gresham Street
London EC2V 7QA
9 March 2009