Preparation for IFRS

Schroders PLC
14 December 2004


Schroders plc
14th December 2004

Preparation for the transition to International Financial Reporting Standards

As part of the preparation of Schroders plc (the Group) for the adoption of
International Financial Reporting Standards (IFRS), the Group is today providing
an explanation of the key changes under the new standards to the Group's net
asset position at 1 January 2004 and 30 June 2004 and its financial results for
the six months ended 30 June 2004.

This information is being released to provide shareholders and the financial
community with an early indication of the areas which are likely to be subject
to restatement under IFRS, in accordance with the best practice guidance issued
by the Hundred Group of Finance Directors in August 2004.

The information in this announcement has been prepared on the basis of the IFRS
currently in issue and the Group's current understanding of how those standards
should be applied. The standards in issue are subject to ongoing review and
endorsement by the European Union (EU), whilst the application of the standards
continues to be subject to review by the International Financial Reporting
Interpretations Committee (IFRIC).

Summary of Main Changes affecting the Group

A summary of the expected impact on the Group of the transition to IFRS is
provided in the table below:

                                    -----------                  -----------
                                  IFRS-Expected
                                Impact (approx.)                     UK GAAP 
                                            £mn                          £mn
                                    -----------                  -----------
Profit on Ordinary Activities
Before Tax - 30 June 2004                   +10                         60.8
                                    -----------                  -----------
Equity Shareholders' Funds -
1 January 2004                              +12                      1,029.2
                                    -----------                  -----------
Equity Shareholders' Funds -
30 June 2004                                 +8                      1,053.3
------------------------            -----------                  -----------
Basic Earnings Per Share - 
30 June 2004                                +3p                        15.8p


The most significant changes are:

   • The inclusion of a fair value charge in respect of outstanding employee
     share options granted after 7 November 2002 (IFRS 2)

   • The replacement of existing charges for awards under the employee Equity
     Compensation Plan (the details of which are provided on page 15 of our
     Annual Report & Accounts for 2003), with fair value charges spread over
     revised time periods (IFRS 2)

   • The inclusion in the balance sheet of all employee benefit liabilities
     (largely pensions) (IAS 19)

   • The amortisation of leasehold incentives received by the Group over the
     term of the leases rather than over shorter periods (IAS 17)

   • The capitalisation of certain software expenditures as intangible assets
     where the expenditures meet the criteria for capitalisation (IAS 38)

   • The cessation of goodwill amortisation (IFRS 3)

Process of Transition

The Group currently prepares its consolidated financial statements under UK
Generally Accepted Accounting Principles (UK GAAP). For the year ended 31
December 2005, the Group will be required to prepare its consolidated financial
statements in accordance with IFRS as adopted by the EU. The Group's first IFRS
results will be its Q1 2005 trading update and the Group's first Annual Report &
Accounts under IFRS will be for the year ended 31 December 2005. The date of
transition to IFRS is 1 January 2004, this being the start of the earliest
period of comparative information.

Transitional Arrangements

IFRS 1 'First-time Adoption of International Financial Reporting Standards' sets
out how a company should apply IFRS at transition. The standard requires a
company to use accounting policies that comply with each IFRS effective at the
reporting date for its first IFRS financial statements and apply those policies
retrospectively to all periods presented in those statements. The standard does,
however, allow a number of exceptions to this general principle to assist the
transition. The Group's approach to these exemptions, where applicable, is set
out below.

Significant Changes in Accounting Policies

The significant changes in Group accounting policies due to the transition to
IFRS are set out below:

IFRS 2 Share-based Payments

The Group will recognise a charge to the Profit and Loss Account for the fair
value of outstanding share options granted to employees after 7 November 2002.
The charge will be calculated using a stochastic option valuation model and will
be charged over the relevant option vesting periods, adjusted to reflect actual
and expected levels of vesting. Currently there is no charge to the Profit and
Loss Account in relation to share options granted to employees.

In addition the Group will adjust the charge made in the Profit and Loss Account
for awards made under the Equity Compensation Plan and its equivalents to
recognise the fair value of the awards granted to employees. The fair value of
an award is calculated as the value of the shares on the date of grant,
including any applicable uplifts, discounted for the dividends forgone over the
average holding period of the award. The fair value charges, adjusted to reflect
actual and expected levels of vesting, will be spread over the performance year
and vesting period of the awards. Currently the undiscounted value of an award
at the date of grant is charged in the performance year to which it relates,
with the undiscounted value of any uplift in the award spread over the vesting
period; awards that lapse are credited to the Profit and Loss Account in the
year in which they lapse.

The overall impact of these changes is to increase the opening balance sheet
reserves as at 1 January 2004 by approximately £15 million and to reduce the
charge to the Profit and Loss Account for the six months ended 30 June 2004 by
approximately £4 million.

IAS 19 Employee Benefits

The Group will recognise the full net liability on defined benefit schemes in
the Balance Sheet and will take all actuarial gains and losses on a systematic
basis to the Profit and Loss Account, in accordance with the permitted methods
of recognition under the standard. Currently the Group accounts for defined
benefit schemes in accordance with SSAP 24 'Accounting for pension costs'.

These changes reduce opening balance sheet reserves as at 1 January 2004 by
approximately £38 million and reduce the charge to the Profit and Loss Account
for the six months ended 30 June 2004 by approximately £2 million.

The International Accounting Standards Board (IASB) has issued an exposure draft
'Actuarial Gains and Losses, Group Plans and Disclosures', which provides the
option to recognise any actuarial gains and losses in full immediately through
the statement of recognised income and expense, equivalent to the requirement
under FRS 17 'Retirement benefits'. In the event that the draft is adopted, the
Group's policy will be to take advantage of the encouragement for early adoption
and to apply the standard voluntarily from the transition date.

IAS 17 Leases

The Group will amortise leasehold inducements received on entering into leases
for office space over the term of the lease. Currently the inducement is
amortised over the period to the first rental review.

The change reduces opening balance sheet reserves as at 1 January 2004 by
approximately £13 million. The impact on the Profit and Loss Account for the six
months ended 30 June 2004 is negligible.

IAS 38 Intangible Assets

The Group will capitalise certain software expenditures as intangible assets
where the expenditures meet the criteria for capitalisation set out in the
standard. Currently the Group writes off software expenditures as incurred.

The change increases opening balance sheet reserves as at 1 January 2004 by
approximately £10 million and results in a charge to the Profit and Loss Account
for the six months ended 30 June 2004 of approximately £1 million.

IFRS 3 Business Combinations

In accordance with the transitional provisions of IFRS 1, the Group has chosen
to apply IFRS 3 prospectively from the date of transition. This will result in
the value of goodwill arising from previous acquisitions being frozen at the
value held on the Group Balance Sheet as at 1 January 2004 and the reversal of
any amortisation charged in the current year. Goodwill will then be subject to
an annual impairment review in accordance with the standard and will also be
impaired where there are indications that the carrying value may not be
recoverable. The change results in a credit to the Profit and Loss Account for
the six months ended 30 June 2004 of approximately £5 million.

IAS 10 Events After the Balance Sheet Date

The Group will recognise dividends declared after the balance sheet date in the
reporting period in which they are declared, as they represent non-adjusting
events after the balance sheet date under IFRS.

The change results in an increase in opening balance sheet reserves as at 1
January 2004 of approximately £38 million and an increase in the dividend
recorded in relation to the six months ended 30 June 2004 of approximately £19
million.

IAS 39 Financial Instruments

The Group has opted not to apply the requirements of IAS 39 in respect of
comparative information. The Group will therefore follow the requirements of
IFRS 1 and disclose the nature of the main adjustments required for the
comparative information to comply with IAS 39 in the Group's first Annual Report
& Accounts under IFRS. The adoption of IAS 39 for the year ended 31 December
2005 will be treated as if arising from a change in accounting policy and
appropriate disclosures will be provided in accordance with IAS 8 'Accounting
Policies, Changes in Accounting Estimates and Errors'.

It is expected that the impact of IAS 39 on the Group will be focused on the
Balance Sheet, where Fixed Asset Investments will be held at fair value and most
will be classified as 'Available For Sale'. This will mean that unrealised gains
and losses on these investments will be taken to reserves and only recognised
through the Profit and Loss Account on sale or impairment of the investment.

Further Communication

The Group's UK GAAP results for the year ended 31 December 2004 will be
published in March 2005.

In April 2005, the Group intends to provide shareholders and the financial
community with a reconciliation of Equity Shareholders' Funds as at 1 January
2004 from UK GAAP to IFRS. Such reconciliations will also be presented in
respect of the Profit and Loss Account, Balance Sheet and Cash Flow Statement
for the year ended 31 December 2004. The Group will also provide an indication
of the main adjustments required to comply with IAS 39.

The financial information to be presented in April 2005 will still be subject to
the ongoing development of IFRS and hence may change. The Group will keep
shareholders and the financial community informed of the impact of any material
changes as necessary.

Further copies of this announcement are available from the Company Secretary at
31 Gresham Street, London, EC2V 7QA (email: [e-mail]
telephone [phone]) and will be available on the Group's website at
www.schroders.com together with further information about the Group's transition
to IFRS.

Contacts:

Schroders

Jonathan Asquith   Chief Financial Officer             [phone]
Julian Samways     Head of Corporate Communications    [phone]
Chris Coombe       Group Financial Controller          [phone]


The Maitland Consultancy

William Clutterbuck                   [phone]

Forward-looking statements
This announcement contains certain forward-looking statements and forecasts with
respect to the financial condition, results of operations and businesses of
Schroders plc and its subsidiaries. These statements and forecasts involve risk
and uncertainty because they relate to events and depend upon circumstances that
will occur in the future. There are a number of factors that could cause actual
results or developments to differ materially from those expressed or implied by
these forward-looking statements and forecasts. Nothing in this announcement
should be construed as a profit forecast.
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