Final Results

RNS Number : 2950Y

Schroders PLC

02 March 2017

 



Schroders plc 2 March 2017 •    Profit before tax and exceptional items* up 6% to £644.7 million (2015: £609.7 million) •    Earnings per share before exceptional items* up 5% to 186.3 pence (2015: 176.9 pence) •    74% of assets outperforming benchmark or peer group over three years (2015: 72%), 85% outperforming over five years (2015: 76%) •    Assets under management and administration up 27% to £397.1 billion (2015: £313.5 billion)   •    Net inflows £1.1 billion •    Full-year dividend up 7% to 93.0 pence per share (2015: 87.0 pence) 2016 £m 2015 £m Profit before tax Asset Management 553.9 528.4 Wealth Management 56.3 60.5 610.2 588.9 Group segment 7.9 0.1 Profit before tax 618.1 589.0 Profit before tax and exceptional items 644.7 609.7 Basic earnings per share (pence) 178.3 171.1 Basic earnings per share before exceptional items (pence)* 186.3 176.9 Total dividend (pence per share) 93.0 87.0 Peter Harrison, Group Chief Executive, commented: "We delivered good results in 2016, with profit before tax and exceptional items increasing 6% to £644.7 million.  Strong investment performance, positive net inflows and strategic acquisitions led to assets under management and administration increasing 27% to £397.1 billion.  We have made good progress against our strategic objectives and see a number of future growth opportunities. Our diversified business model, a strong financial position and willingness to invest behind the business means we are well placed to take advantage of these opportunities, despite the challenges faced by the industry. Consistent with these good results, the Board is recommending a final dividend of 64 pence per share, bringing the total dividend for the year to 93 pence per share, an increase of 7%". * Defined and explained in the glossary. Contacts For further information please contact: Investors Alex James Investor Relations [phone] [e-mail] Press Beth Saint Head of Communications [phone] [e-mail] Anita Scott Brunswick [phone] [e-mail] Management Statement Schroders had a good year in 2016, despite the headwinds facing the Asset Management industry.  Our results are testament to the strength of our diversified business model and our client-centric approach across the business. Net income, profit and assets under management and administration reached record levels. Net operating revenue increased 7% to £1,712.8 million (2015: £1,600.7 million) and net income increased by 8% to £1,789.7 million (2015: £1,656.3 million).  Profit before tax and exceptional items rose by 6% to £644.7 million (2015: £609.7 million) and profit before tax grew 5% to £618.1 million (2015: £589.0 million). We generated £1.1 billion of net new business during the year, with continued demand from institutional clients offsetting outflows from Intermediary and Wealth Management clients. We also continued to invest in the future growth of the business and we entered into a number of strategic relationships and completed three acquisitions. Acquisitions increased our assets under management by £6.7 billion, and resulted in a new category of client assets with £11.1 billion of assets under administration introduced through the acquisition of Benchmark Capital. Benchmark Capital is a technology-led, high-quality adviser support business based in the UK, which has the potential to significantly enhance the service we provide to UK intermediary and wealth management clients. To reflect this change to the business, we have updated the relevant key performance indicator to assets under management and administration. The weakness of sterling increased assets under management and administration by approximately £42 billion. Assets under management and administration at the end of the year reached £397.1 billion (31 December 2015: £313.5 billion). Asset Management Asset Management net operating revenue was up 7% to £1,489.5 million (2015: £1,393.4 million), including performance fees of £38.8 million (2015: £35.7 million).  Profit before tax and exceptional items rose 6% to £572.4 million (2015: £540.5 million) and profit before tax increased 5% to £553.9 million (2015: £528.4 million). Investment performance remained strong with 74% (2015: 72%) of assets outperforming their benchmark or peer group over 3 years.  Over a 5 year period, the outperformance figure was 85% (2015: 76%). The net operating revenue margin, excluding performance fees, was 46 basis points (2015: 49 basis points).  The reduction in margin was due to both changes in business mix and some fee pressure. The net operating revenue margin in the Institutional channel was 32 basis points (2015: 34 basis points) and in the Intermediary sales channel was 73 basis points (2015: 74 basis points). We generated net new business of £1.4 billion in 2016.  Net inflows of £4.3 billion were generated in the Institutional sales channel, predominantly in multi-asset and fixed income products and from clients in North America and the UK.  Assets under management in the Institutional sales channel at the end of December were £226.3 billion (31 December 2015: £181.0 billion). Macro uncertainty and volatile markets impacted demand in the Intermediary sales channel and we saw net redemptions of £2.9 billion, predominantly from Equity products.  Assets under management in the Intermediary sales channel at the end of December were £120.1 billion (31 December 2015: £100.9 billion). We have entered into a number of strategic relationships this year.  These are aligned with our strategic priorities and will deepen our investment expertise or expand the scope of our distribution. In North America, a key area of strategic growth, we entered into a relationship with Hartford Funds to manage and distribute a 'Hartford Schroders' branded fund range to intermediary clients in the US. The fund range launched in late October and we have already seen positive client momentum. We also strengthened our investment presence in the region with the acquisition in September of a securitised credit team in New York. As many of our clients have begun to seek higher returns away from traditional asset classes and towards private markets, we have expanded our capabilities in this area.  In March, we made an investment in NEOS Finance Group (NEOS), acquiring a 25% stake in the specialist Dutch direct lending firm.  NEOS provides institutional investors with access to a debt financing platform for small and medium sized enterprises. Wealth Management Wealth Management net operating revenue increased 8% to £223.3 million (2015: £207.3 million), including performance fees of £2.4 million (2015: £0.6 million).  Profit before tax and exceptional items was up 8% to £66.4 million (2015: £61.3 million) and profit before tax was £56.3 million (2015: £60.5 million).  Net flows in early 2016 were impacted by clients' preference for private assets after limited market returns in previous years and also for property in the UK. There were total net outflows of £0.3 billion. Benchmark Capital is now included as a separate division within Wealth Management and increased assets under management and assets under administration by £3.4 billion and £11.1 billion respectively. Wealth Management assets under management and administration at the end of the year were £50.7 billion (31 December 2015: £31.6 billion). In October, we announced that we had reached an agreement to acquire the discretionary assets under management of C. Hoare & Co.  This deal completed on 17 February 2017 and around 1,800 clients representing approximately £2.3 billion of assets migrated to the Schroders platform. Group The Group segment comprises returns on investment capital, including seed capital deployed in building a track record in new investment strategies, and central costs. Profit before tax and exceptional items for the year was £5.9 million (2015: £7.9 million) and profit before tax was £7.9 million (2015: £0.1 million). Shareholders' equity at 31 December 2016 was £3.2 billion (31 December 2015: £2.8 billion). Dividend Consistent with our policy, the Board will recommend to shareholders at the Annual General Meeting an increase in the final dividend of 10%, taking the final dividend to 64.0 pence (2015: 58.0 pence). This will bring the total dividend for the year to 93.0 pence (2015: 87.0 pence), an increase of 7%. The final dividend will be paid on 4 May 2017 to shareholders on the register at 31 March 2017. Quarterly reporting As a company that remains focused on building sustainable growth for the long term, we have chosen to amend our reporting timetable. We will no longer publish full financial results in the first and third quarter, but will now provide the market with an update on assets under management and administration. We will continue to provide financial results for the full year and half year. We plan on holding an investor day in early October. Outlook The year has started well, but we are mindful of industry headwinds and that market returns remain difficult to predict. This is likely to weigh on client demand, particularly within the Intermediary sales channel, and create volatility in flows in the medium term.  Conversely, amongst institutional clients, we see a pipeline of business which is focused on long-term asset allocation to meet their specific investment needs.   Despite the challenges faced by the industry, we remain well placed to continue to build future growth with a highly diversified business model, a strong financial position and the willingness to invest behind the business. Additional information Assets under management and administration Twelve months to 31 December 2016 AUM £bn Institutional Intermediary Asset Management Wealth Management1 Total AUA AUMA2 1 January 2016 181.0 100.9 281.9 31.6 313.5 Gross inflows 33.1 43.4 76.5 4.3 80.8 Gross outflows (28.8) (46.3) (75.1) (4.6) (79.7) Net flows 4.3 (2.9) 1.4 (0.3) 1.1 Acquisitions 1.9 1.4 3.3 3.4 6.7 Investment returns 40.0 20.7 60.7 4.0 64.7 Transfers (0.9) - (0.9) 0.9 - 31 December 2016 226.3 120.1 346.4 39.6 386.0 11.1 397.1 Three months to 31 December 2016 AUM £bn Institutional Intermediary Asset Management Wealth Management1 Total AUA AUMA2 1 October 2016 221.9 117.5 339.4 35.6 375.0 Net flows (1.1) (0.7) (1.8) (0.2) (2.0) Investment returns 5.5 3.3 8.8 0.8 9.6 Acquisitions - - - 3.4 3.4 31 December 2016 226.3 120.1 346.4 39.6 386.0 11.1 397.1 1 Wealth Management flows exclude income drawdowns which are now included within investment returns. 2 Assets under management and administration comprise assets managed on behalf of clients (assets under management) and assets advised by the Best Practice and Evolution Wealth Independent Financial Adviser (IFA) networks, part of Benchmark Capital, where Schroders provides administrative support but where the IFAs are independent from the Schroders Group (assets under administration). Income and cost metrics for the Group 2016 2015 Total cost ratio†* 64% 63% Total compensation ratio†* 44% 44% Profit share ratio†* 36% 37% Return on average capital before exceptional items (pre-tax)* 22% 23% Return on average capital before exceptional items (post-tax)* 17% 18% † Before exceptional items. * Defined and explained in the glossary. Copies of this announcement are available on the Schroders website: www.schroders.com. Peter Harrison, Group Chief Executive, and Richard Keers, Chief Financial Officer, will host a presentation and webcast for the investment community, to discuss the Group's results at 9.00 a.m. GMT on Thursday, 2 March 2017 at 31 Gresham Street, London, EC2V 7QA. The webcast can be viewed live at www.schroders.com/ir. For individuals unable to attend the presentation or participate in the live webcast, a replay will be available from midday on Thursday, 2 March 2017 at www.schroders.com/ir. The Annual Report and Accounts will be available on the Schroders website: www.schroders.com on 17 March 2017. This announcement contains inside information. Legal Entity Identifier: 2138001YYBULX5SZ2H24. Forward-looking statements This announcement, the Annual Report and Accounts for 2016 from which it is extracted, and the Schroders website may contain forward-looking statements with respect to the financial condition, performance and position, strategy, results of operations and businesses of the Schroders Group. Such statements and forecasts involve risk and uncertainty because they are based on current expectations and assumptions but relate to events and depend upon circumstances in the future and you should not place reliance on them. Without limitation, any statements preceded or followed by or that include the words 'targets', 'plans', 'sees', 'believes', 'expects', 'aims', 'confident', 'will have', 'will be', 'will ensure', 'estimates', 'likely' or 'anticipates' or the negative of these terms or other similar terms are intended to identify such forward-looking statements. There are a number of factors that could cause actual results or developments to differ materially from those expressed or implied by forward-looking statements and forecasts. Forward-looking statements and forecasts are based on the Directors' current view and information known to them at the date of this statement. The Directors do not make any undertaking to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.  Nothing in this announcement or in the Annual Report and Accounts or on the Schroders website should be construed as a forecast, estimate or projection of future financial performance. Investment performance Investment performance as referred to in this management statement is calculated by Schroders, using published benchmarks for products, where available, for Asset Management only. It excludes private equity, LDI and externally managed GAIA funds, and funds which do not have the required track record. If no benchmark is published or agreed with the client but the fund is listed in competitor rankings, the relative position of the fund to its peer group is used. Funds with no benchmark but an absolute return target over the one or three-year period are measured against that absolute target. Funds with no benchmark but an absolute return target over the one, three or five-year period are measured against that absolute target. Funds with no benchmark and no target may be measured against a cash return, if appropriate. As at 31 December 2016, such comparator data existed for 87% of Asset Management assets under management over one year, for 74% over three years and for 63% over five years. More information can be found in the 2016 Annual Report and Accounts. Consolidated income statement for the year ended 31 December 2016 2016 2015 Notes Before exceptional items £m Exceptional items4 £m Total £m Before exceptional items £m Exceptional items4 £m Total £m Revenue 3 2,144.9 - 2,144.9 2,043.2 - 2,043.2 Cost of sales (432.1) - (432.1) (442.5) - (442.5) Net operating revenue 1,712.8 - 1,712.8 1,600.7 - 1,600.7 Net gains on financial instruments and other income 4 58.8 (1.4) 57.4 36.3 - 36.3 Share of profit of associates and joint ventures 21.5 (2.0) 19.5 21.5 (2.2) 19.3 Net income1 1,793.1 (3.4) 1,789.7 1,658.5 (2.2) 1,656.3 Operating expenses 5 (1,148.4) (23.2) (1,171.6) (1,048.8) (18.5) (1,067.3) Profit before tax 644.7 (26.6) 618.1 609.7 (20.7) 589.0 Tax 6 (132.4) 4.5 (127.9) (126.3) 4.7 (121.6) Profit after tax2 512.3 (22.1) 490.2 483.4 (16.0) 467.4 Earnings per share Basic 7 186.3p (8.0p) 178.3p 176.9p (5.8p) 171.1p Diluted 7 182.4p (7.9p) 174.5p 172.2p (5.7p) 166.5p Dividends per share3 8 87.0p 83.0p 1 Previously referred to as Net revenue. 2 Non-controlling interest is presented in the Consolidated statement of changes in equity. 3 Prior year final dividend and current year interim dividend paid during the year. 4 Please refer to notes 1 and 2 for a definition and further details of exceptional items. Consolidated statement of comprehensive income for the year ended 31 December 2016 Note 2016 £m 2015 £m Profit for the year 490.2 467.4 Items that may be reclassified to the income statement on fulfilment of specific conditions: Net exchange differences on translation of foreign operations after hedging 101.3 5.4 Net fair value movement arising from available-for-sale financial assets 4 19.3 (5.9) Net fair value movement arising from available-for-sale financial assets held by associates (4.8) 5.2 Tax on items taken directly to other comprehensive income (2.9) 3.8 112.9 8.5 Items reclassified to the income statement: Net realised gains on disposal of available-for-sale financial assets 4 (5.2) (16.8) Net realised gains on disposal of available-for-sale financial assets held by associates (1.4) - (6.6) (16.8) Items that will not be reclassified to the income statement: Actuarial (losses)/gains on defined benefit pension schemes (2.0) 7.3 Tax on items taken directly to other comprehensive income (0.1) (2.3) (2.1) 5.0 Other comprehensive income/(losses) for the year net of tax1 104.2 (3.3) Total comprehensive income for the year net of tax1 594.4 464.1 1 Non-controlling interest is presented in the Consolidated statement of changes in equity. Consolidated statement of financial position at 31 December 2016 Notes 2016 £m 2015 £m Assets Cash and cash equivalents 3,318.9 3,019.0 Trade and other receivables 9 648.2 526.8 Financial assets 9 3,105.0 2,446.7 Associates and joint ventures 125.0 109.2 Property, plant and equipment 66.4 41.8 Goodwill and intangible assets 10 607.1 467.4 Deferred tax 66.0 53.7 Retirement benefit scheme surplus 118.2 115.4 8,054.8 6,780.0 Asset backing unit-linked liabilities Cash and cash equivalents 466.7 603.1 Financial assets 12,460.9 10,716.8 9 12,927.6 11,319.9 Total assets 20,982.4 18,099.9 Liabilities Trade and other payables 9 883.3 761.2 Financial liabilities 9 3,902.0 3,126.5 Current tax 71.8 61.8 Provisions 33.1 26.3 Deferred tax 0.2 0.4 Retirement benefit scheme deficits 11.6 8.2 4,902.0 3,984.4 Unit-linked liabilities 9 12,927.6 11,319.9 Total liabilities 17,829.6 15,304.3 Net assets 3,152.8 2,795.6 Equity1 3,152.8 2,795.6 1 Non-controlling interest is presented in the Consolidated statement of changes in equity. Consolidated statement of changes in equity for the year ended 31 December 2016 Attributable to owners of the parent Notes Share capital £m Share premium £m Own shares £m Net exchange differences reserve £m Associates and joint ventures reserve £m Fair value reserve £m Profit and loss reserve £m Total £m Non- controlling interest £m1 Total £m At 1 January 2016 282.5 119.4 (175.5) 86.8 45.7 8.1 2,428.6 2,795.6 - 2,795.6 Profit for the year - - - - 19.5 - 470.2 489.7 0.5 490.2 Other comprehensive income/(losses)2 - - - 100.9 (6.2) 11.2 (2.1) 103.8 0.4 104.2 Total comprehensive income for the year - - - 100.9 13.3 11.2 468.1 593.5 0.9 594.4 Shares issued 11 0.2 4.8 - - - - - 5.0 - 5.0 Own shares purchased 12 - - (59.1) - - - - (59.1) - (59.1) Share-based payments - - - - - - 51.5 51.5 - 51.5 Tax in respect of share schemes - - - - - - 0.9 0.9 - 0.9 Other movements - - - - (0.9) - (11.5) (12.4) 13.5 1.1 Dividends - - - - - - (236.6) (236.6) - (236.6) Transactions with shareholders 0.2 4.8 (59.1) - (0.9) - (195.7) (250.7) 13.5 (237.2) Transfers - - 71.0 - (8.0) - (63.0) - - - At 31 December 2016 282.7 124.2 (163.6) 187.7 50.1 19.3 2,638.0 3,138.4 14.4 3,152.8 1 A separate presentation of non-controlling interest is included following the acquisition of Benchmark Capital and an increase in the Group's interest in Secquaero during 2016. 2 Other comprehensive income reported in the net exchange differences reserve represent foreign exchange gains and losses on the translation of foreign operations net of hedging. Other comprehensive (losses)/income reported in the associates and joint ventures reserve and the fair value reserve represent post-tax fair value movements on available-for-sale assets held. Other comprehensive (losses)/income reported in the profit and loss reserve represent post-tax actuarial losses. Consolidated statement of changes in equity for the year ended 31 December 2015 Note Share capital £m Share premium £m Own shares £m Net exchange differences reserve £m Associates and joint ventures reserve £m Fair value reserve £m Profit and loss reserve £m Total £m At 1 January 2015 282.5 119.4 (200.1) 81.4 29.6 27.0 2,198.0 2,537.8 Profit for the year - - - - 19.3 - 448.1 467.4 Other comprehensive income/(losses)1 - - - 5.4 5.2 (18.9) 5.0 (3.3) Total comprehensive income/(losses) for the year - - - 5.4 24.5 (18.9) 453.1 464.1 Own shares purchased 12 - - (51.1) - - - - (51.1) Share-based payments - - - - - - 63.3 63.3 Tax in respect of share schemes - - - - - - 7.4 7.4 Other movements in associates and joint ventures - - - - 0.5 - - 0.5 Dividends attributable to shareholders - - - - - - (226.3) (226.3) Dividends attributable to non-controlling interest - - - - - - (0.1) (0.1) Transactions with shareholders - - (51.1) - 0.5 - (155.7) (206.3) Transfers - - 75.7 - (8.9) - (66.8) - At 31 December 2015 282.5 119.4 (175.5) 86.8 45.7 8.1 2,428.6 2,795.6 1 Other comprehensive income reported in the net exchange differences reserve represent foreign exchange gains and losses on the translation of foreign operations net of hedging. Other comprehensive income/(losses) reported in the associates and joint ventures reserve and the fair value reserve represent post-tax fair value movements on available-for-sale assets held. Other comprehensive income reported in the profit and loss reserve represent post-tax actuarial gains. Consolidated cash flow statement for the year ended 31 December 2016 Notes 2016 £m 2015 £m Net cash from operating activities 13 563.7 47.9 Cash flows from investing activities Net acquisition of businesses and associate (84.8) - Net acquisition of property, plant and equipment and intangible assets (65.2) (38.8) Acquisition of financial assets (1,398.6) (1,556.3) Disposal of financial assets 1,215.6 1,138.5 Non-banking interest received 29.4 16.9 Distributions and capital redemptions received from associates and joint ventures 8.7 9.1 Net cash used in investing activities (294.9) (430.6) Cash flows from financing activities Acquisition of own shares 12 (59.1) (51.1) Dividends paid 8 (236.6) (226.3) Other flows (0.3) (0.7) Net cash used in financing activities (296.0) (278.1) Net decrease in cash and cash equivalents (27.2) (660.8) Opening cash and cash equivalents 3,622.1 4,231.6 Net decrease in cash and cash equivalents (27.2) (660.8) Effect of exchange rate changes 190.7 51.3 Closing cash and cash equivalents 3,785.6 3,622.1 Closing cash and cash equivalents consists of: Cash backing unit-linked liabilities 466.7 603.1 Cash held in consolidated funds 32.0 46.0 Cash that the Group cannot use for its own corporate purposes 498.7 649.1 Cash 2,131.1 1,842.1 Cash equivalents 1,155.8 1,130.9 Cash and cash equivalents available for use by the Group 3,286.9 2,973.0 Closing cash and cash equivalents 3,785.6 3,622.1 Comprising: Cash and cash equivalents presented within Assets 3,318.9 3,019.0 Cash and cash equivalents presented within Assets backing unit-linked liabilities 466.7 603.1 Basis of preparation The financial information included in this statement does not constitute the Group's statutory accounts within the meaning of Section 434 of the Companies Act 2006 (the Act). The statutory accounts for 2015 have been delivered to the Registrar of Companies and the auditors' opinion on those accounts was unqualified and did not contain a statement made under Section 498(2) or Section 498(3) of the Act. An unqualified auditors' opinion has also been issued on the statutory accounts for the year ended 31 December 2016, which will be delivered to the Registrar of Companies in due course. The consolidated financial statements are prepared in accordance with International Financial Reporting Standards (IFRS), which comprise Standards and Interpretations approved by either the International Accounting Standards Board or the IFRS Interpretations Committee or their predecessors, as adopted by the European Union (EU), and with those parts of the Act applicable to companies reporting under IFRS. The financial statements and related notes have been reformatted to reflect the way in which employee benefits expenses are managed internally. Operating expenses are now presented net of gains and losses on financial instruments held to hedge deferred fund awards. 2016 operating expenses includes £25.6 million of gains related to these financial instruments. The new presentation provides a more relevant basis on which to measure the Group employee benefits expense. The 2015 comparative amount (loss of £1.1 million) has not been re-presented. The reconciliation of net cash from operating activities within the Consolidated cash flow statement and note 13 has been reformatted.  This reformatting provides greater transparency of the movements in the loans and deposits balances within Wealth Management.  Comparative information has also been reformatted. The presentation of the income statement includes separate disclosure of exceptional items. The policy for exceptional items is set out in note 2. 1.  Segmental reporting Operating segments The Group has three business segments: Asset Management, Wealth Management and the Group segment. Asset Management principally comprises investment management including advisory services, equity products, fixed income securities, multi-asset investments, real estate and other alternative asset classes such as commodities. Wealth Management principally comprises investment management, wealth planning and banking services provided to high net worth individuals and charities. Benchmark Capital Limited (Benchmark Capital) was acquired on 15 December 2016 (see note 14) and now also forms part of the Wealth Management segment. The Group segment principally comprises the Group's investment capital and treasury management activities, business strategy and corporate development activities and the management costs associated with governance and corporate management. Segment information is presented on the same basis as that provided for internal reporting purposes to the Group's chief operating decision maker, the Group Chief Executive. Operating expenses include an allocation of costs between the individual business segments on a basis that aligns the charge with the resources employed by the Group in particular business areas. This allocation provides management information on the business performance to manage and control expenditure. Year ended 31 December 2016 Asset Management £m Wealth Management £m Group £m Total £m Fee income 1,902.7 210.6 - 2,113.3 Wealth Management interest receivable - 31.6 - 31.6 Revenue 1,902.7 242.2 - 2,144.9 Fee expense (413.2) (7.9) - (421.1) Wealth Management interest payable - (11.0) - (11.0) Cost of sales (413.2) (18.9) - (432.1) Net operating revenue 1,489.5 223.3 - 1,712.8 Net gains on financial instruments and other income 28.2 0.7 29.9 58.8 Share of profit of associates and joint ventures 16.7 - 4.8 21.5 Net income1 1,534.4 224.0 34.7 1,793.1 Operating expenses (962.0) (157.6) (28.8) (1,148.4) Profit before tax and exceptional items 572.4 66.4 5.9 644.7 Exceptional items within net income: Net gains on financial instruments and other income (1.4) - - (1.4) Amortisation of acquired intangible assets relating to associates and joint ventures (2.0) - - (2.0) (3.4) - - (3.4) Exceptional items within operating expenses: Amortisation of acquired intangible assets (11.5) (8.1) - (19.6) Deferred compensation arising directly from acquisitions - - 2.0 2.0 Other expenses (3.6) (2.0) - (5.6) (15.1) (10.1) 2.0 (23.2) Profit before tax and after exceptional items 553.9 56.3 7.9 618.1 1 Previously referred to as Net revenue. Year ended 31 December 2015 Asset Management £m Wealth Management £m Group £m Total £m Fee income 1,817.7 198.2 - 2,015.9 Wealth Management interest receivable - 27.3 - 27.3 Revenue 1,817.7 225.5 - 2,043.2 Fee expense (424.3) (6.4) - (430.7) Wealth Management interest payable - (11.8) - (11.8) Cost of sales (424.3) (18.2) - (442.5) Net operating revenue 1,393.4 207.3 - 1,600.7 Net gains/(losses) on financial instruments and other income 6.3 (0.1) 30.1 36.3 Share of profit of associates and joint ventures 12.8 - 8.7 21.5 Net income1 1,412.5 207.2 38.8 1,658.5 Operating expenses (872.0) (145.9) (30.9) (1,048.8) Profit before tax and exceptional items 540.5 61.3 7.9 609.7 Exceptional items within net income: Amortisation of acquired intangible assets relating to associates and joint ventures (2.2) - - (2.2) (2.2) - - (2.2) Exceptional items within operating expenses: Amortisation of acquired intangible assets (9.9) (8.0) - (17.9) Deferred compensation arising directly from acquisitions - - (7.8) (7.8) Provisions and related costs - 7.2 - 7.2 (9.9) (0.8) (7.8) (18.5) Profit before tax and after exceptional items 528.4 60.5 0.1 589.0 1 Previously referred to as Net revenue. 2.  Exceptional items Exceptional items are significant items of income and expenditure that have been separately presented by virtue of their nature to enable a better understanding of the Group's financial performance. Exceptional items relate principally to acquisitions made by the Group, including amortisation of acquired intangible assets and one-off costs relating to the Group's strategic relationship with Hartford Funds. 3.  Revenue Revenue comprises: 2016 £m 2015 £m Management fees 1,848.3 1,763.0 Performance fees 41.2 36.3 Other income 223.8 216.6 Interest income earned by Wealth Management 31.6 27.3 2,144.9 2,043.2 4.  Net gains on financial instruments and other income 2016 2015 Income statement £m Other comprehensive income £m Total £m Income statement £m Other comprehensive income £m Total £m Net gains/(losses) on financial instruments held at fair value through profit or loss 14.2 - 14.2 (4.2) - (4.2) Net fair value movements on available-for-sale financial assets - 18.5 18.5 - (5.9) (5.9) Net exchange differences on available-for-sale financial assets - 0.8 0.8 - - - Net transfer on disposal of available-for-sale financial assets - equities 5.2 (5.2) - 16.8 (16.8) - Net gains/(losses) on available-for-sale financial assets 5.2 14.1 19.3 16.8 (22.7) (5.9) Net finance income 18.8 - 18.8 12.7 - 12.7 Other income 19.2 - 19.2 11.0 - 11.0 Net gains/(losses) on financial instruments and other income - presented within net income 57.4 14.1 71.5 36.3 (22.7) 13.6 Net gains on financial instruments held to hedge deferred cash awards - presented within operating expenses 25.6 - 25.6 - - - Net gains/(losses) on financial instruments and other income 83.0 14.1 97.1 36.3 (22.7) 13.6 5.  Operating expenses Operating expenses include: 2016 £m 2015 £m Salaries, wages and other remuneration 714.9 645.0 Social security costs 63.7 63.3 Pension costs 37.9 33.5 Employee benefits expense 816.5 741.8 Net gains on financial instruments held to hedge deferred cash awards (25.6) - Employee benefits expense net of hedging 790.9 741.8 The employee benefits expense net of hedging of £790.9 million (2015: £741.8 million) includes a credit of £0.7 million (2015: £7.8 million charge) that is presented within exceptional items, comprising a £2.0 million net reduction (2015 £7.8 million charge) of compensation costs relating to acquisitions partially offset by £1.3 million (2015: nil) of restructuring costs. Pre-exceptional compensation costs include a bonus charge of £356.2 million (2015: £359.2 million) relating to discretionary bonuses linked to the Group's performance. 6.  Tax expense Analysis of tax charge reported in the income statement: 2016 £m 2015 £m UK current year charge 54.0 45.7 Rest of the world current year charge 89.0 84.0 Adjustment in respect of prior periods (0.3) 4.9 Total current tax 142.7 134.6 Origination and reversal of temporary differences (10.4) (7.5) Adjustments in respect of prior year estimates (2.0) (4.3) Effect of changes in Corporation Tax rates (2.4) (1.2) Total deferred tax (14.8) (13.0) Tax charge reported in the income statement 127.9 121.6 The UK standard rate of corporation tax for 2016 is 20% (2015: effective rate of 20.25%). The tax charge for the year is higher (2015: higher) than the UK standard rate of corporation tax for the period of 20%.  The differences are explained below: 2016 £m 2015 £m Profit before tax 618.1 589.0 Less post-tax profits of associates and joint ventures (19.5) (19.3) Profit before tax of Group entities 598.6 569.7 Profit before tax of consolidated Group entities multiplied by Corporation Tax at the UK rate of 20% (2015: 20.25%) 119.7 115.4 Effects of: Different statutory tax rates of overseas jurisdictions 12.1 12.8 Permanent differences including non-taxable income and non-deductible expenses 1.7 (4.1) Net movement in timing differences for which no deferred tax is recognised (0.9) (1.9) Deferred tax adjustments in respect of changes in Corporation Tax rates (2.4) (1.2) Prior year adjustments (2.3) 0.6 Tax charge reported in the income statement 127.9 121.6 7.  Earnings per share Reconciliation of the figures used in calculating basic and diluted earnings per share: 2016 Number Millions 2015 Number Millions Weighted average number of shares used in calculation of basic earnings per share 274.7 273.1 Effect of dilutive potential shares - share options 5.6 7.0 Effect of dilutive potential shares - contingently issuable shares 0.2 0.6 Weighted average number of shares used in calculation of diluted earnings per share 280.5 280.7 The earnings per share calculations are based on profit after tax excluding non-controlling interest of £0.5 million (2015: £0.1 million). 8.  Dividends 2017 2016 2015 £m Pence per share £m Pence per share £m Pence per share Prior years final dividend paid 157.7 58.0 147.3 54.0 Interim dividend paid 78.9 29.0 79.0 29.0 Total dividends paid 236.6 87.0 226.3 83.0 Current year final dividend recommended 174.7 64.0 Dividends of £9.2 million (2015: £8.2 million) on shares held by employee trusts have been waived; dividends may not be paid on treasury shares. The Board has recommended a 2016 final dividend of 64.0 pence per share (2015 final dividend: 58.0 pence per share), amounting to £174.7 million (2015 final dividend: £157.7 million). The dividend will be paid on 4 May 2017 to shareholders on the register at 31 March 2017. The final dividend will be accounted for in 2017. The Company offers a dividend reinvestment plan (DRIP). The last date for shareholders to elect to participate in the DRIP for the purposes of the 2016 final dividend is 10 April 2017. Further details are contained on our website. 9.  Fair value measurement disclosures The Group holds financial instruments that are measured at fair value. Fair value is the amount for which an asset could be exchanged, or a liability settled, between knowledgeable, willing parties in an arm's length transaction. The fair value of financial instruments may require some judgement or may be derived from readily available sources. The degree of judgement involved is reflected below, although this does not necessarily indicate that the fair value is more or less likely to be realised. For investments that are actively traded in financial markets, fair value is determined by reference to official quoted market prices. For investments that are not actively traded, fair value is determined by using quoted prices from third parties such as brokers, market makers and pricing agencies. Financial assets that have no quoted price principally consist of investments in private equity, derivatives and certain loans in Wealth Management. The determination of fair value for these instruments requires significant judgement, particularly in determining whether changes in fair value have occurred since the last formal valuation. The Group's financial instruments have been categorised using a fair value hierarchy that reflects the extent of judgements used in the valuation. These levels are based on the degree to which the fair value is observable and are defined as follows: •    Level 1 fair value measurements are those derived from quoted prices (unadjusted) in active markets for identical assets or liabilities and principally comprise investments in quoted equities and government debt, daily-priced funds and exchange-traded derivatives; •    Level 2 fair value measurements are those derived from prices that are not traded in an active market but are determined using valuation techniques, which make maximum use of observable market data. The Group's level 2 financial instruments principally comprise foreign exchange contracts, certain debt securities, asset and mortgage backed securities, and loans held at fair value. Valuation techniques may include using a broker quote in an inactive market or an evaluated price based on a compilation of primarily observable market information utilising information readily available via external sources. For funds not priced on a daily basis, the net asset value which is issued monthly or quarterly is used; and •    Level 3 fair value measurements are those derived from valuation techniques that include inputs for the asset or liability that are not based on observable market data and principally comprise investments in private equity funds. These funds are managed by third parties and are measured at the values provided by the relevant fund managers, unadjusted by the Group except for known events, such as calls or distributions, that have occurred between the valuation and reporting date. The valuation review is a continual process throughout the year. The Group holds certain assets and liabilities at fair value. Their categorisation within the fair value hierarchy is shown below: 2016 Level 1 £m Level 2 £m Level 3 £m Assets and liabilities not at fair value1 £m Total £m Financial assets: Equities 607.2 9.7 38.4 - 655.3 Debt securities 180.1 724.1 1.3 368.4 1,273.9 Derivative contracts 0.6 22.7 17.1 - 40.4 Loans and receivables - 0.6 - 1,134.7 1,135.3 Other instruments - 0.1 - - 0.1 787.9 757.2 56.8 1,503.1 3,105.0 Trade and other receivables 28.8 - - 619.4 648.2 Assets backing unit-linked liabilities 9,063.0 3,289.2 44.5 530.9 12,927.6 9,879.7 4,046.4 101.3 2,653.4 16,680.8 Financial liabilities: Derivative contracts 1.4 22.3 - - 23.7 Deposits by customers and banks - - - 3,762.8 3,762.8 Other financial liabilities 69.5 - 44.2 1.8 115.5 70.9 22.3 44.2 3,764.6 3,902.0 Trade and other payables 151.1 - - 732.2 883.3 Unit-linked liabilities 12,840.9 49.2 - 37.5 12,927.6 13,062.9 71.5 44.2 4,534.3 17,712.9 1 The fair value of financial instruments not held at fair value approximates to their carrying value. 2015 Level 1 £m Level 2 £m Level 3 £m Assets and liabilities not at fair value1 £m Total £m Financial assets: Equities 534.6 6.5 33.6              -  574.7 Debt securities 677.5 21.0 - 302.8 1,001.3 Derivative contracts 15.5 22.7 - - 38.2 Loans and receivables - 10.8 - 821.5 832.3 Other instruments - 0.2 - - 0.2 1,227.6 61.2 33.6 1,124.3 2,446.7 Trade and other receivables 20.1 - - 506.7 526.8 Assets backing unit-linked liabilities 9,007.6 1,605.5 43.4 663.4 11,319.9 10,255.3 1,666.7 77.0 2,294.4 14,293.4 Financial liabilities: Derivative contracts 30.6 16.7 - - 47.3 Deposits by customers and banks - - - 3,019.9 3,019.9 Other financial liabilities 51.0 5.4 - 2.9 59.3 81.6 22.1 - 3,022.8 3,126.5 Trade and other payables 99.3 - - 661.9 761.2 Unit-linked liabilities 11,148.2 129.5 - 42.2 11,319.9 11,329.1 151.6 - 3,726.9 15,207.6 1 The fair value of financial instruments not held at fair value approximates to their carrying value. Movements in assets and liabilities categorised as level 3 during the year were: 2016 2015 Financial assets £m Assets backing unit-linked liabilities £m Financial assets £m Assets backing unit-linked liabilities £m At 1 January 33.6 43.4 40.0 49.6 Exchange translation adjustments 3.9 6.5 (0.9) (3.4) Total gains recognised in the income statement 0.3 4.8 - 12.1 Total gains recognised in other comprehensive income 1.9 - 13.5 - Additions 23.7 0.9 - - Disposals (6.6) (11.1) (19.0) (14.9) At 31 December 56.8 44.5 33.6 43.4 Due to a change in the methodology applied by the Group's third party pricing provider, certain debt securities were transferred from level 1 to level 2 during the year (2015: no transfers from level 1 to level 2).  This change resulted in £703.3 million of debt securities held within Financial assets and £1,927.7 million of debt securities held within Assets backing unit-linked liabilities being transferred from level 1 to 2. This change did not represent degradation in the quality of assets held. No financial assets were transferred from level 2 to level 1 during the year (2015: none). 10. Goodwill and intangible assets Cost Goodwill £m Acquired intangible assets £m Software £m Total £m At 1 January 2016 359.1 136.7 80.8 576.6 Exchange translation adjustments 13.2 5.9 3.1 22.2 Additions 82.6 44.0 32.3 158.9 At 31 December 2016 454.9 186.6 116.2 757.7 Accumulated amortisation At 1 January 2016 - (73.9) (35.3) (109.2) Exchange translation adjustments - (4.0) (2.7) (6.7) Amortisation charge for the year - (19.4) (15.3) (34.7) At 31 December 2016 - (97.3) (53.3) (150.6) Carrying amount at 31 December 2016 454.9 89.3 62.9 607.1 Cost Goodwill £m Acquired intangible assets £m Software £m Total £m At 1 January 2015 357.3 135.5 88.2 581.0 Exchange translation adjustments 1.8 1.2 0.1 3.1 Additions - - 18.4 18.4 Disposals - - (25.9) (25.9) At 31 December 2015 359.1 136.7 80.8 576.6 Accumulated amortisation At 1 January 2015 - (55.1) (51.4) (106.5) Exchange translation adjustments - (0.8) (0.1) (0.9) Amortisation charge for the year - (18.0) (9.7) (27.7) Disposal - - 25.9 25.9 At 31 December 2015 - (73.9) (35.3) (109.2) Carrying amount at 31 December 2015 359.1 62.8 45.5 467.4 Of the total goodwill of £454.9 million (2015: £359.1 million), £320.2 million (2015: £290.2 million) is allocated to Asset Management and £134.7 million (2015: £68.9 million) to Wealth Management. The Group acquired £44.0 million of intangible assets as a result of business combinations completed in 2016 (see note 14). Additionally the Group has intangible assets arising from the 2013 acquisition of Cazenove Capital Holdings Limited (Cazenove Capital); the proportion of assets allocated to Asset Management (£34.1 million at 2 July 2013) is being charged to the income statement over four years, and the proportion allocated to Wealth Management (£66.7 million at 2 July 2013) over eight years. 11.  Share capital and share premium Number of shares Millions Ordinary shares £m Non-voting ordinary shares £m Total shares £m Share premium £m At 1 January 2016 282.5 226.0 56.5 282.5 119.4 Shares issued 0.2 - 0.2 0.2 4.8 At 31 December 2016 282.7 226.0 56.7 282.7 124.2 On 21 December 2016, Schroders plc issued 233,623 non-voting ordinary shares as part of the consideration paid for the acquisition of Benchmark Capital (see note 14). Number of shares Millions Ordinary shares £m Non-voting ordinary shares £m Total shares £m Share premium £m At 1 January 2015 282.5 226.0 56.5 282.5 119.4 At 31 December 2015 282.5 226.0 56.5 282.5 119.4 2016 Number of shares Millions 2015 Number of shares Millions Issued and fully paid: Ordinary shares of £1 each 226.0 226.0 Non-voting ordinary shares of £1 each 56.7 56.5 282.7 282.5 12.  Own shares Own shares include the Group's shares (both ordinary and non-voting ordinary) that are held by employee benefit trusts. Movements in own shares during the year were as follows: 2016 £m 2015 £m At 1 January (175.5) (200.1) Own shares purchased (59.1) (51.1) Awards vested 71.0 75.7 At 31 December (163.6) (175.5) During the year 2.2 million own shares were purchased and held for hedging share-based awards. 3.3 million shares awarded to employees vested in the period and were transferred out of own shares. The total number of shares in the Company held within the Group's employee benefit trusts comprise: 2016 2015 Number of vested shares Millions Number of unvested shares Millions Total Millions Number of vested shares Millions Number of unvested shares Millions Total Millions Ordinary shares 2.0 7.5 9.5 2.2 8.1 10.3 Non-voting ordinary shares 0.2 0.1 0.3 0.2 0.6 0.8 2.2 7.6 9.8 2.4 8.7 11.1 13.  Reconciliation of net cash from operating activities 2016 £m 20151 £m Profit before tax 618.1 589.0 Adjustments for income statement non-cash movements: Depreciation of property, plant and equipment and amortisation of intangible assets 46.4 36.4 Net gains taken through the income statement on financial instruments (45.0) (12.6) Share-based payments 51.5 63.3 Net charge/(release) for provisions 8.3 (14.8) Other non-cash movements (6.1) (3.8) 55.1 68.5 Adjustments for which the cash effects are investing activities: Net finance income (18.8) (12.7) Share of profit of associates and joint ventures (19.5) (19.3) (38.3) (32.0) Adjustments for statement of financial position movements: Increase in loans and advances within Wealth Management (232.9) (237.6) (Increase)/decrease in trade and other receivables (70.7) 6.4 Increase/(decrease) in deposits and customer accounts within Wealth Management 550.4 (160.9) (Decrease)/increase in trade and other payables, financial liabilities and provisions (42.2) 5.0 204.6 (387.1) Adjustments for Life Company movements: Net (increase)/decrease in financial assets backing unit-linked liabilities (1,744.1) 2,245.3 Net increase/(decrease) in unit-linked liabilities 1,607.7 (2,338.5) (136.4) (93.2) Tax paid (139.4) (97.3) Net cash from operating activities 563.7 47.9 1 2015 has been reformatted for consistency with the 2016 presentation, see Basis of preparation. Net cash from operating activities includes cash outflows of £2.9 million (2015: £11.2 million) in respect of exceptional items. 14.  Business combinations The Group completed three business combinations during the year. On 15 December 2016, the Group acquired a 65% interest in Benchmark Capital, a technology-led adviser support business based in the United Kingdom. Benchmark Capital comprises a wealth management business including an IFA network and a full service technology platform. The acquisition provides the Group with enhanced capabilities to meet the needs of retail investors and contributed £3.4 billion of AUM and £11.1 billion of AUA within Wealth Management. On 16 September 2016, the Group acquired a securitised credit business (Securitised Credit) through an asset purchase agreement. The acquisition contributed £3.3 billion of Asset Management AUM and broadens the Group's fixed income offering. On 1 February 2016, the Group took a controlling interest in Secquaero by increasing its holding from 30.0% to 50.1%. This transaction increased the Group's existing relationship with Secquaero, a Swiss based insurance linked securities (ILS) business. Net assets acquired The fair values of the net assets acquired in the transactions together with the goodwill and intangible assets arising are as follows: Net assets acquired: Benchmark Capital £m Securitised Credit £m Secquaero £m Total £m Cash 7.1 - 1.7 8.8 Trade and other receivables 1.6 - 1.0 2.6 Other assets 0.5 - 0.1 0.6 Trade and other payables (0.9) - (1.0) (1.9) Other liabilities (3.8) - (0.9) (4.7) Tangible net assets 4.5 - 0.9 5.4 Goodwill 65.0 11.6 6.0 82.6 Intangible assets 33.5 6.2 4.3 44.0 Deferred tax arising on intangible assets (6.3) - (0.8) (7.1) Non controlling interest (11.1) - (2.2) (13.3) Total 85.6 17.8 8.2 111.6 Satisfied by: Benchmark Capital £m Securitised Credit £m Secquaero £m Total £m Cash 80.6 6.2 3.3 90.1 Fair value of the Group's pre-existing 30% interest - - 4.9 4.9 Issuance of 233,623 Schroders plc - non-voting ordinary shares 5.0 - - 5.0 Contingent consideration1 - 11.6 - 11.6 Total 85.6 17.8 8.2 111.6 1 At the acquisition date, £11.6 million was recognised as contingent consideration. Payment of this amount is contingent upon certain levels of revenue and performance fees being generated during the three years post-acquisition. An estimate of the range of outcomes is that a payment of between £12.0 million and £16.4 million will be payable across 2017, 2018 and 2019. Benchmark Capital Goodwill arising on the acquisition of Benchmark capital represents the value of the acquired business arising from: •    A broader platform for business growth; •    A talented owner along with a talented management and employee pool; and •    Opportunities for synergies from combining certain Wealth Management operations. Goodwill arising on the acquisition of Benchmark Capital will not be deductible for tax purposes. The measurement of the £11.1 million of non-controlling interest (NCI) was determined as the proportion of identifiable net assets at acquisition attributable to third parties. Securitised Credit The goodwill arising from the acquisition is attributable to the anticipated profitability of the business acquired arising from increased investment capabilities in the future. Secquaero The goodwill arising from the acquisition is attributable to the anticipated profitability of the business acquired arising from increased investment capabilities in the future. The measurement of the £2.2 million of NCI recognised at the acquisition date was determined as the proportion of identifiable net assets at acquisition attributable to third parties. At 1 February 2016 the fair value of the 30.0% equity interest held in Secquaero was £4.9 million. As a result of remeasuring the equity interest to fair value at the acquisition date, a gain of £2.7 million was recognised through net gains on financial instruments and other income in the Group's income statement. On acquisition, the Group recognised an obligation to purchase the remaining 49.9% shareholding in Secquaero. This obligation amounted to £9.1 million and was recorded as a financial liability in the Consolidated statement of financial position, with a corresponding debit recorded within Other movements in the Consolidated statement of changes in equity. Impact of the business combinations on the Group's income statement In the period between the acquisition dates and 31 December 2016, the three acquired businesses contributed £10.4 million to the Group's net income. The contribution to profit before tax and exceptional items was £2.1 million and exceptional operating and other expenses of £3.6 million were incurred. If the transactions had been completed on 1 January 2016, the Group's net income for the year before exceptional items would have been £1,828.9 million and profit before tax and exceptional items would have been £652.2 million (profit before tax and after exceptional items: £617.3 million). 15.  Events after the reporting period On 17 February 2017, the Group acquired the Wealth Management business of C. Hoare & Co. The acquisition contributed approximately £2.3 billion of discretionary Wealth Management AUM and increases the Group's scale and capability for its UK private clients. The initial consideration was satisfied by means of a £70.0 million cash payment, of which approximately 63% is represented by goodwill and approximately 37% is represented by intangible assets. The goodwill is not expected to be deductible for tax purposes. Due to the structure of the acquisition, the determination of the final amount is subject to review. Key risks and mitigations Our key risks and mitigations can be read by accessing the link below. Click on or paste the following link into your web browser to view the associated PDF document. http://www.rns-pdf.londonstockexchange.com/rns/2950Y_-2017-3-1.pdf Statement of Directors' responsibilities Directors' statement To the best of their knowledge and belief, each of the Directors listed below confirms that: •    The consolidated financial statements of Schroders plc, prepared in accordance with IFRS as adopted by the EU, give a true and fair view of the assets, liabilities, financial position and profit of Schroders plc and the undertakings included in the consolidation taken as a whole; •    The announcement includes a fair summary of the development and performance of the business and the position of Schroders plc and the undertakings included in the consolidation taken as a whole and a description of the principal risks and uncertainties that they face; •    So far as each Director is aware, there is no relevant audit information of which the Company's auditors are unaware; and •    They have each taken all the steps that ought to have been taken by them as Directors in order to make themselves aware of any relevant audit information and to establish that the Company's auditors are aware of that information. Directors: Michael Dobson Chairman Peter Harrison Group Chief Executive Richard Keers Chief Financial Officer Lord Howard of Penrith Senior Independent Director Robin Buchanan Independent non-executive Director Rhian Davies Independent non-executive Director Rakhi Goss-Custard Independent non-executive Director Ian King Independent non-executive Director Nichola Pease Independent non-executive Director Philip Mallinckrodt Non-executive Director Bruno Schroder Non-executive Director 1 March 2017 Five year consolidated financial summary Before exceptional items 2016 £m 2015 £m 2014 £m 2013 £m 2012 £m Profit before tax 644.7 609.7 565.2 507.8 360.0 Tax (132.4) (126.3) (113.9) (103.0) (76.8) Profit after tax 512.3 483.4 451.3 404.8 283.2 After exceptional items 2016 £m 2015 £m 2014 £m 2013 £m 2012 £m Profit before tax 618.1 589.0 517.1 447.5 360.0 Tax (127.9) (121.6) (103.9) (94.8) (76.8) Profit after tax 490.2 467.4 413.2 352.7 283.2 Pre-exceptionals earnings per share: 2016 Pence 2015 Pence 2014 Pence 2013 Pence 2012 Pence Basic earnings per share1 186.3 176.9 166.8 149.9 104.7 Diluted earnings per share1 182.4 172.2 161.5 144.6 101.3 Post-exceptional earnings per share: 2016 Pence 2015 Pence 2014 Pence 2013 Pence 2012 Pence Basic earnings per share 178.3 171.1 152.7 130.6 104.7 Diluted earnings per share 174.5 166.5 147.8 126.0 101.3 Dividends 2016 2015 2014 2013 2012 Cost (£m) 236.6 226.3 177.7 123.5 104.1 Pence per share2 87.0 83.0 66.0 46.0 39.0 Total equity (£m) 3,152.8 2,795.6 2,537.8 2,268.6 2,069.9 Net assets per share (pence)3 1,115 990 898 802 733 1 See note 7 for the basis of this calculation. 2 Dividends per share are those amounts approved by the shareholders to be paid within the year on a per share basis to the shareholders on the register at the specified dates. 3 Net assets per share are calculated by using the actual number of shares in issue at the year-end date. Exchange rates - closing 31 December 2016 2015 2014 2013 2012 Sterling: Euro 1.17 1.36 1.29 1.20 1.23 US dollar 1.24 1.47 1.56 1.66 1.63 Swiss franc 1.26 1.48 1.55 1.47 1.49 Australian dollar 1.71 2.03 1.91 1.85 1.57 Hong Kong dollar 9.58 11.42 12.09 12.84 12.60 Japanese yen 144.12 177.30 186.95 174.08 140.55 Singaporean dollar 1.79 2.09 2.07 2.09 1.99 Glossary Profit before tax and exceptional items The presentation of profit before tax and exceptional items provides transparency of recurring revenue and expenditure to aid understanding of the financial performance of the Group Total cost ratio Total Group costs before exceptional items divided by net income before exceptional items. A 65% total cost ratio is targeted to ensure costs are aligned with net income, although we recognise that in weaker markets the ratio may be higher than our long-term target Total compensation ratio Pre-exceptional compensation cost divided by pre-exceptional net income, both of which are subject to adjustment by the Remuneration Committee. By targeting a total compensation ratio of 45 to 49%, depending upon market conditions, we align the interests of shareholders and employees Profit share ratio Bonus charge before exceptional items divided by pre-bonus profit before tax and exceptional items. Measuring the bonus charge against pre-bonus profit ensures that the interests of employees are aligned with the Group's financial performance Payout ratio The total dividend per share in respect of the year divided by the pre-exceptional basic earnings per share. Targeting a payout ratio of 45 to 50% allows us to align shareholder return with the success of the Group Basic or diluted earnings per share before exceptional items The presentation of earnings per share before exceptional items provides transparency of recurring revenue and expenditure to aid understanding of the financial performance of the Group Pre or post tax return on average capital before exceptional items Annualised profit before exceptional items divided by the average of the opening and closing capital for the year to date period. The ratio serves to illustrate how effectively Schroders is utilising capital

 

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