0% found this document useful (0 votes)
81 views43 pages

Lloyds TSB Bank PLC: Report and Accounts 2002

This document is the report and accounts from Lloyds TSB Bank plc for the year 2002. It provides details on the bank's directors, auditors, financial statements including the profit and loss account and balance sheets, and notes to the accounts. It summarizes the bank's business performance, including a decrease in profit before tax compared to 2001 due to investment losses and increased provisions. It also discusses the bank's policies regarding employees, payment of creditors, and capital requirements.

Uploaded by

saxobob
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
0% found this document useful (0 votes)
81 views43 pages

Lloyds TSB Bank PLC: Report and Accounts 2002

This document is the report and accounts from Lloyds TSB Bank plc for the year 2002. It provides details on the bank's directors, auditors, financial statements including the profit and loss account and balance sheets, and notes to the accounts. It summarizes the bank's business performance, including a decrease in profit before tax compared to 2001 due to investment losses and increased provisions. It also discusses the bank's policies regarding employees, payment of creditors, and capital requirements.

Uploaded by

saxobob
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
You are on page 1/ 43

Lloyds TSB Bank plc

Report and Accounts


2002

Member of Lloyds TSB Group

Member of Lloyds TSB Group


Lloyds TSB Bank plc

Contents

Directors’ report . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1

Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3

Independent auditors’ report . . . . . . . . . . . . . . . . . . . .4

Consolidated profit and loss account . . . . . . . . . . . . .5

Balance sheets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .6

Other statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . .8

Notes to the accounts . . . . . . . . . . . . . . . . . . . . . . . . .9

Registered office:
To 27 March 2003, 71 Lombard Street, London EC3P 3BS.
From 28 March 2003, 25 Gresham Street, London EC2V 7HN.
Registered in England no 2065
Lloyds TSB Bank plc

Directors’ report

Results and dividends £99 million, or 9 per cent. There was strong growth in
The consolidated profit and loss account on page 5 personal loans, up 15 per cent, and in credit card
shows a profit attributable to shareholders for the year lending, up 27 per cent. Current account and savings
ended 31 December 2002 of £1,785 million. An and investment account balances increased by
interim dividend of £597 million for the year ended 10 per cent. Costs remained tightly controlled and
31 December 2002 was paid on 27 September asset quality generally remains satisfactory,
2002. A second interim dividend of £1,311 million notwithstanding the general slowdown in activity
will be paid on 28 March 2003. within the UK. In the mortgage business, gross new
lending increased by 36 per cent to a record
Principal activities £19.0 billion, compared with £14.0 billion a year
The Bank and its subsidiaries provide a wide range of ago. Net new lending was £5.9 billion, compared
banking and financial services through branches and with £3.9 billion in 2001. This resulted in an
offices in the UK and overseas. estimated market share of net new lending of
7.5 per cent. Profit before tax from Insurance and
Business review Investments decreased by £190 million, or
Profit before tax for the Lloyds TSB Bank Group was 13 per cent, to £1,231 million, partly as a result of a
£2,638 million in 2002, compared with £135 million increase in provisions for redress to past
£3,219 million in 2001. Total income decreased by purchasers of endowment and pension products and
£20 million to £8,870 million, whilst operating a reduction of £55 million in benefits from experience
expenses increased by £157 million, or 3 per cent, to variances and assumption changes, largely reflecting
£4,876 million. The substantial turmoil surrounding the implementation of revised actuarial mortality
the operating and stockmarket environment in which assumptions. Overall weighted sales in the Group’s
we operate has been unprecedented in recent times life, pensions and unit trust businesses were
and a number of issues have adversely affected the £767.6 million compared to £754.7 million last year,
profit and loss account in 2002. The Group an increase of 2 per cent. This increase in weighted
experienced a reduction in profit of £952 million as a sales reflected a 7 per cent increase in weighted sales
result of the adverse investment variance following the from life and pensions, partly offset by a 13 per cent
24 per cent fall in the FTSE All Share Index. We have reduction in weighted sales from unit trusts. Weighted
increased the general provision by £50 million in sales from independent financial advisors rose by
respect of our business in Argentina and significantly 25 per cent. There was strong profit growth from the
increased our corporate provisions in respect of certain Group’s general insurance operations. A 19 per cent
US customers as a result of their accounting and other growth in the combined premium income from
irregularities. In addition the Group has absorbed underwriting and commissions from insurance
provisions totalling £205 million for redress to past broking led to an increase in profit before tax of
purchasers of pensions and Abbey Life endowment £103 million, or 16 per cent, to £754 million. In
and long-term savings products. There was however Wholesale Markets pre-tax profit decreased by
good market share growth in many key areas; £226 million, or 27 per cent, to £626 million, partly
customer lending increased by 9 per cent and as a result of the substantial increase in provisions for
customer deposits increased by 7 per cent. The bad and doubtful debts. In International Banking pre-
Group’s efficiency programmes further improved the tax profit was £22 million, or 6 per cent, higher at
Group’s focus on cost control, and were a major £379 million largely as a result of an increase of
contributing factor to the net reduction in the Group’s 32 per cent in pre-tax profits from The National Bank
staff headcount of over 4,000 after adjusting for of New Zealand, as a result of good growth in all core
acquisitions made during the year. businesses, particularly small business banking.
Pre-tax profit from UK Retail Banking and The total Group charge for bad and doubtful
Mortgages decreased by £30 million to debts was 38 per cent higher at £1,029 million,
£1,175 million, compared to £1,205 million in compared with £747 million in 2001. In UK Retail
2001. Excluding the impact of a reduction of Banking and Mortgages the provisions charge
£57 million in profits from the sale and leaseback of increased by £148 million to £563 million, as a result
premises and the non-recurrence of certain provision of volume related asset growth in the personal loan
releases in 2001, profit before tax increased by and credit card portfolios and a lower level of

1
Lloyds TSB Bank plc

Directors’ report

Business review (continued) people with disabilities. This recognises the need for
recoveries and releases than in 2001. Overall the ensuring fair employment practices in recruitment and
arrears position remains stable. In Wholesale Markets selection, and the retention, training and career
the provisions charge increased by £156 million to development of disabled staff.
£311 million, reflecting the higher corporate Employees are kept closely involved in major
provisions. The Group’s charge for bad and doubtful changes affecting them through such measures as
debts, expressed as a percentage of average lending, team meetings, briefings, internal communications
was 0.77 per cent, compared with 0.62 per cent in and opinion surveys. There are well established
2001. Non-performing lending increased to procedures, including regular meetings with
£1,414 million, compared with £1,222 million in recognised unions, to ensure that the views of
December 2001, largely reflecting higher levels of employees are taken into account in reaching
non-performing lending in the Group’s corporate decisions.
portfolio, and general portfolio growth throughout the Schemes offering share options or the
Group. Non-performing lending as a percentage of acquisition of shares are available for most staff, to
total lending was unchanged at 1.0 per cent. encourage their financial involvement in the Lloyds
Profit attributable to shareholders was TSB Group.
19 per cent lower at £1,785 million. Shareholders’
equity decreased by £2,457 million to £9,085 million Policy and practice on payment of creditors
following a reduction of £2,331 million in the value of The Bank follows ‘The Better Payment Practice Code’
the Group’s pension schemes, largely caused by the published by the Department of Trade and Industry
significant reduction in equity market values. These regarding the making of payments to suppliers. A copy
pension scheme related movements are ignored for of the code and information about it may be obtained
regulatory capital purposes and, excluding these from The DTI Publications Orderline 0870 1502 500,
market movements, shareholders’ equity decreased quoting ref URN 01/621.
by £126 million. Risk-weighted assets increased by The Bank’s policy is to agree terms of payment
13 per cent to £122.4 billion. At the end of 2002, the with suppliers and these normally provide for
risk asset ratios, the international standard for settlement within 30 days after the date of the invoice,
measuring capital adequacy, were 9.4 per cent for except where other arrangements have been
total capital and 8.7 per cent for tier I capital. negotiated. It is the policy of the Bank to abide by the
agreed terms of payment, provided the supplier
Directors performs according to the terms of the contract.
The names of the directors of the Bank are shown on The number of days required to be shown in this
page 3. report, to comply with the provisions of the Companies
Mr Urquhart left the board on 17 April 2002 Act 1985, is 30. This bears the same proportion to the
and Mr Atkinson, Mr Butler, Miss Forbes and number of days in the year as the aggregate of the
Mr Moore will leave the board on 16 April 2003. amounts owed to trade creditors at 31 December
Mr Gemmell became a director on 17 April 2002 bears to the aggregate of the amounts invoiced
2002. by suppliers during the year.
Mr Hampton was appointed director from
1 June 2002 and Mr Targett will join the board on On behalf of the board
10 March 2003.

Employees A J Michie
The Bank is committed to employment policies which Secretary
follow best practice, based on equal opportunities for 13 February 2003
all employees irrespective of sex, race, national origin,
religion, colour, disability, sexual orientation, age or
marital status.
In the UK, the Bank supports Opportunity Now
and Race for Opportunity, campaigns to improve
opportunities for women and ethnic minorities in the
work place. The Bank is a member of the Employers’
Forum on Disability in support of employment of

2
Lloyds TSB Bank plc

Directors

M A van den Bergh M K Atkinson


Chairman (leaving on 16 April 2003)

A E Moore CBE Ewan Brown CBE


Deputy Chairman
(leaving on 16 April 2003) A C Butler
(leaving on 16 April 2003)
P B Ellwood CBE
Chief Executive J E Daniels

M E Fairey S M Forbes CBE


Deputy Chief Executive (leaving on 16 April 2003)

G J N Gemmell CBE

C S Gibson-Smith

P R Hampton

D S Julius CBE

A G Kane

Sir Tom McKillop

D P Pritchard
(Deputy Chairman from 16 April 2003)

M D Ross CBE

The Earl of Selborne KBE FRS

S C Targett
(from 10 March 2003)

3
Lloyds TSB Bank plc

Independent auditors’ report

To the members of Lloyds TSB Bank plc

We have audited the financial statements which We report to you our opinion as to whether the
comprise the consolidated profit and loss account, the financial statements give a true and fair view and are
balance sheets, the statement of total recognised gains properly prepared in accordance with the United
and losses and related notes which have been Kingdom Companies Act 1985. We also report to
prepared under the accounting policies set out on you if, in our opinion, the directors’ report is not
pages 9 to 12. consistent with the financial statements, if the Bank
has not kept proper accounting records, if we have
Respective responsibilities of directors and auditors not received all the information and explanations
The directors are responsible for preparing the annual we require for our audit, or if information specified
report including, as described below, the financial by law regarding directors’ remuneration and
statements. The United Kingdom Companies Act transactions is not disclosed.
1985 requires the directors to prepare financial We read the directors’ report contained in the annual
statements for each financial year which give a true report and consider the implications for our report if we
and fair view of the state of affairs of the Bank and the become aware of any apparent misstatements or
Group as at the end of the year and of the profit or loss material inconsistencies with the financial statements.
for that year. In preparing those financial statements,
the directors are required to: Basis of audit opinion
– select suitable accounting policies and then apply We conducted our audit in accordance with Auditing
them consistently; Standards issued by the Auditing Practices Board.
– make judgements and estimates that are An audit includes examination, on a test basis, of
reasonable and prudent; evidence relevant to the amounts and disclosures in
– state whether applicable accounting standards the financial statements. It also includes an
have been followed, subject to any material assessment of the significant estimates and
departures disclosed and explained in the financial judgements made by the directors in the preparation
statements; and of the financial statements, and of whether the
– prepare the financial statements on the going accounting policies are appropriate to the Bank and
concern basis unless it is inappropriate to presume the Group’s circumstances, consistently applied and
that the Bank and the Group will continue in adequately disclosed.
business. We planned and performed our audit so as to
The directors are responsible for keeping accounting obtain all the information and explanations which
records which disclose with reasonable accuracy at we considered necessary in order to provide us with
any time the financial position of the Bank and which sufficient evidence to give reasonable assurance that
enable them to ensure that the financial statements the financial statements are free from material
comply with the United Kingdom Companies Act misstatement, whether caused by fraud or other
1985. They are also responsible for safeguarding the irregularity or error. In forming our opinion we also
assets of the Bank and hence for taking reasonable evaluated the overall adequacy of the presentation of
steps for the prevention and detection of fraud and information in the financial statements.
other irregularities.
Our responsibility is to audit the financial statements Opinion
in accordance with relevant legal and regulatory In our opinion the financial statements give a true
requirements and United Kingdom Auditing Standards and fair view of the state of affairs of the Bank and
issued by the Auditing Practices Board. the Group as at 31 December 2002 and of the profit
Our report, including the opinion, has been of the Group for the year then ended and have been
prepared for and only for the Bank’s members as a properly prepared in accordance with the United
body in accordance with Section 235 of the United Kingdom Companies Act 1985.
Kingdom Companies Act 1985 and for no other
purpose. We do not, in giving this opinion, accept or PricewaterhouseCoopers LLP
assume responsibility for any other purpose or to any Chartered Accountants and Registered Auditors
other person to whom this report is shown or in to Southampton
whose hands it may come save where expressly 13 February 2003
agreed by our prior consent in writing.
4
Lloyds TSB Bank plc

Consolidated profit and loss account


for the year ended 31 December 2002

2002 2001*
Note £ million £ million
aaaasaaaaaaaaaaaa aaaasaaaaaaaaaaaa aaaasaaaaaaaaaaaa

Interest receivable:
Interest receivable and similar income arising from debt securities 567 530
Other interest receivable and similar income 9,957 10,829
Interest payable 5,364 6,439
aaaasaaaaaaaaaaaa aaaasaaaaaaaaaaaa

Net interest income 5,160 4,920


Other finance income 44 165 307
Other income
Fees and commissions receivable 3,056 2,925
Fees and commissions payable (645) (602)
Dealing profits (before expenses) 3 188 233
Income from long-term assurance business 28 (303) (29)
General insurance premium income 486 428
Other operating income 763 708
3,545 3,663
aaaasaaaaaaaaaaaa aaaasaaaaaaaaaaaa

Total income 8,870 8,890


Operating expenses
Administrative expenses 4 4,175 4,169
Depreciation 23 642 511
Amortisation of goodwill 22 59 39
Depreciation and amortisation 701 550
Total operating expenses 4,876 4,719
aaaasaaaaaaaaaaaa aaaasaaaaaaaaaaaa

Trading surplus 3,994 4,171


General insurance claims 229 174
Provisions for bad and doubtful debts 14
Specific 965 736
General 64 11
1,029 747
Amounts written off fixed asset investments 5 87 60
aaaasaaaaaaaaaaaa aaaasaaaaaaaaaaaa

Operating profit 2,649 3,190


Income from joint ventures 19 (11) (10)
Profit on sale of businesses 6 – 39
aaaasaaaaaaaaaaaa aaaasaaaaaaaaaaaa

Profit on ordinary activities before tax 7 2,638 3,219


Tax on profit on ordinary activities 8 791 951
aaaasaaaaaaaaaaaa aaaasaaaaaaaaaaaa

Profit on ordinary activities after tax 1,847 2,268


Minority interests: equity 19 17
Minority interests: non-equity 38 43 40
aaaasaaaaaaaaaaaa aaaasaaaaaaaaaaaa

Profit for the year attributable to shareholders 9 1,785 2,211


Dividends 10 1,908 1,872
aaaasaaaaaaaaaaaa aaaasaaaaaaaaaaaa

(Loss) profit for the year 40 (123) 339


aadffaaa aadffaaa

* restated (see note 1)

5
Lloyds TSB Bank plc

Balance sheets
at 31 December 2002

Group Bank
aaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaa aaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaa

2002 2001* 2002 2001*


Note £ million £ million £ million £ million
aaaaaaaaaaaaaff f f f aaaaaaaaaaaaaaaaa aaaaaaaaaaaaaaaaa aaaaaaaaaaaaaaaaa aaaaaaaaaaaaaaaaa

Assets
Cash and balances at central banks 1,140 1,240 1,005 1,112
Items in course of collection from banks 1,757 1,664 1,708 1,595
Treasury bills and other eligible bills 11 2,409 4,412 2,372 4,087
Loans and advances to banks 12 17,528 15,224 64,163 56,918
Loans and advances to customers 136,289 124,834 60,777 53,876
Non-returnable finance (24) (124) – –
13 136,265 124,710 60,777 53,876
Debt securities 16 29,314 24,225 22,585 20,926
Equity shares 17 206 225 45 27
Interests in joint ventures:
– share of gross assets 336 281
– share of gross liabilities (291) (242)
19 45 39 45 39
Shares in group undertakings 20 – – 18,181 16,944
Intangible fixed assets 22 2,627 2,566 8 11
Tangible fixed assets 23 4,095 3,365 1,237 1,304
Other assets 26 5,236 4,441 4,291 3,597
Prepayments and accrued income 27 2,315 2,298 1,776 1,922
Post-retirement benefit asset 44 – 356 – –
Long-term assurance business attributable to
the shareholder 28 6,228 6,366 – –
aaaaaaaaaaaaaaaaa aaaaaaaaaaaaaaaaa aaaaaaaaaaaaaaaaa aaaaaaaaaaaaaaaaa

209,165 191,131 178,193 162,358


Long-term assurance assets attributable to
policyholders 28 45,340 46,389 – –
aaaaaaaaaaaaaaaaa aaaaaaaaaaaaaaaaa aaaaaaaaaaaaaaaaa aaaaaaaaaaaaaaaaa

Total assets 254,505 237,520 178,193 162,358


aasffaaa aasffaaa aasffaaa aasffaaa

* restated (see note 1)

The directors approved the accounts on 13 February 2003.

M A van den Bergh P B Ellwood CBE P R Hampton


Chairman Chief Executive Finance Director

6
Lloyds TSB Bank plc

Balance sheets
at 31 December 2002

Group Bank
aaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaa aaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaaa

2002 2001* 2002 2001*


Note £ million £ million £ million £ million
aaaaaaaaaaaaaff f f f aaaaaaaaaaaaaaaaa aaaaaaaaaaaaaaaaa aaaaaaaaaaaaaaaaa aaaaaaaaaaaaaaaaa

Liabilities
Deposits by banks 30 25,443 24,310 32,868 32,082
Customer accounts 31 116,658 109,302 89,068 82,091
Items in course of transmission to banks 775 534 699 450
Debt securities in issue 32 30,255 24,420 25,570 20,389
Other liabilities 33 8,200 6,629 6,714 5,386
Accruals and deferred income 34 3,696 3,563 2,326 2,397
Post-retirement benefit liability 44 2,077 75 – –
Provisions for liabilities and charges:
Deferred tax 35 1,330 1,425 (284) (194)
Other provisions for liabilities and charges 36 361 292 59 69
Subordinated liabilities:
Undated loan capital 37 5,499 4,102 5,925 4,511
Dated loan capital 37 5,055 4,391 4,235 3,618
Minority interests:
Equity 37 37 – –
Non-equity 38 694 509 – –
731 546 – –
Called-up share capital 39 1,542 1,542 1,542 1,542
Share premium account 40 2,960 2,960 2,960 2,960
Revaluation reserve 40 – – 2,001 2,048
Profit and loss account 40 4,583 7,040 4,510 5,009
Shareholders’ funds (equity) 9,085 11,542 11,013 11,559
aaaaaaaaaaaaaaaaa aaaaaaaaaaaaaaaaa aaaaaaaaaaaaaaaaa aaaaaaaaaaaaaaaaa

209,165 191,131 178,193 162,358


Long-term assurance liabilities to policyholders 28 45,340 46,389 – –
aaaaaaaaaaaaaaaaa aaaaaaaaaaaaaaaaa aaaaaaaaaaaaaaaaa aaaaaaaaaaaaaaaaa

Total liabilities 254,505 237,520 178,193 162,358


aasffaaa aasffaaa aasffaaa aasffaaa

Memorandum items 45
Contingent liabilities:
Acceptances and endorsements 1,879 2,243 1,880 2,244
Guarantees and assets pledged as collateral
security 5,927 3,789 5,865 3,739
Other contingent liabilities 2,540 1,931 2,542 1,890
aaaaaaaaaaaaaaaaa aaaaaaaaaaaaaaaaa aaaaaaaaaaaaaaaaa aaaaaaaaaaaaaaaaa

10,346 7,963 10,287 7,873


aasffaaa aasffaaa aasffaaa aasffaaa
Commitments 64,504 53,342 60,073 49,731
aasffaaa aasffaaa aasffaaa aasffaaa

* restated (see note 1)

7
Lloyds TSB Bank plc

Statement of total recognised gains and losses


for the year ended 31 December 2002

2002 2001*
£ million £ million
aaaaaaaaaaaaaaaaa aaaaaaaaaaaaaaaaa

Profit attributable to shareholders 1,785 2,211


Currency translation differences on foreign currency net investments (3) (86)
Actuarial losses recognised in post-retirement benefit schemes (note 44) (3,299) (2,873)
Deferred tax thereon (note 44) 968 863
(2,331) (2,010)
aaaaaaaaaaaaaaaaa aaaaaaaaaaaaaaaaa

Total recognised gains and losses relating to the year (549) 115
Prior year adjustment at 1 January 2002 in respect of current year changes
in accounting policy (note 1) (404) –
Prior year adjustment in respect of the adoption of FRS 18 – 248
aaaaaaaaaaaaaaaaa aaaaaaaaaaaaaaaaa

Total gains and losses recognised during the year (953) 363
aasffaaa aasffaaa

* restated (see note 1)

Historical cost profits and losses


for the year ended 31 December 2002

There was no material difference between the results as reported and the results that would have been reported
on an unmodified historical cost basis. Accordingly, no note of historical cost profits and losses has been
included.

Reconciliation of movements in shareholders’ funds


for the year ended 31 December 2002

2002 2001*
£ million £ million
aaaaaaaaaaaaaaaaa aaaaaaaaaaaaaaaaa

Profit attributable to shareholders 1,785 2,211


Dividends (1,908) (1,872)
aaaaaaaaaaaaaaaaa aaaaaaaaaaaaaaaaa

(Loss) profit for the year (123) 339


Currency translation differences on foreign currency net investments (3) (86)
Actuarial losses recognised in post-retirement benefit schemes (2,331) (2,010)
aaaaaaaaaaaaaaaaa aaaaaaaaaaaaaaaaa

Net decrease in shareholders’ funds (2,457) (1,757)


Shareholders’ funds at beginning of year 11,542 11,422
Prior year adjustment at 1 January 2001 (note 1) – 1,877
aaaaaaaaaaaaaaaaa aaaaaaaaaaaaaaaaa

Shareholders’ funds at end of year 9,085 11,542


aasffaaa aasffaaa

* restated (see note 1)

8
Lloyds TSB Bank plc

Notes to the accounts

1 Accounting policies 1 Accounting policies (continued)


Accounting policies are unchanged from 2001, except that: reduce the deferred tax liability by £242 million (2001: £235 million), to
reduce other provisions for liabilities and charges by £76 million (2001:
(i) The Group has implemented the requirements of the Urgent Issues Task
£109 million), to increase other liabilities by £3 million (2001: £34 million)
Force’s Abstract 33 ‘Obligations in capital instruments’. Following its
and to reduce shareholders’ funds by £493 million (2001: £471 million).
implementation the Group has reclassified €750 million of Perpetual Capital
Securities as undated loan capital and the related cost is included within (iv) In December 2001, the Association of British Insurers (ABI) published
interest expense. Previously these securities were included in the balance sheet detailed guidance for the preparation of figures using the achieved profits
as perpetual capital securities, within shareholders’ funds, and the cost was method of accounting which are published as supplementary financial
treated as a deduction from profit after minority interests. The effect of this information accompanying the accounts of most listed insurance companies.
change on the Group’s profit and loss account for the year ended 31 December The ABI guidance recommends the use of unsmoothed fund values to calculate
2002 has been to increase interest payable by £31 million (2001: the value of in-force business. To improve the comparability of the results of the
£22 million); there has been no effect on attributable profit. The effect on the Group’s insurance operations with the supplementary financial information
Group’s and the Bank’s balance sheets at 31 December 2002 has been to published by listed insurers the Group has changed the basis of its embedded
increase undated loan capital and reduce non-equity shareholders’ funds by value calculations to use unsmoothed fund values; previously the effect of
£482 million (2001: £451 million). investment fluctuations had been amortised to the profit and loss account over a
two year period. A prior year adjustment has been made reducing shareholders’
(ii) The Group has implemented the requirements of Financial Reporting
funds by £53 million, to reflect the revised policy.
Standard 19 (“FRS 19”) ‘Deferred Tax’. Following its implementation, the Group
makes full provision for deferred tax assets and liabilities arising from timing The effect of this change on the Group’s profit and loss account for the year
differences between the recognition of gains and losses in the financial ended 31 December 2002 has been to reduce income from long-term
statements and their recognition in a tax computation. Previously provision was assurance business before tax by £104 million (2001: £222 million). The
only made where it was considered that there was a reasonable probability that effect on the Group’s balance sheet at 31 December 2002 has been to reduce
a liability or asset would crystallise in the foreseeable future. A prior year the value of the long-term assurance business attributable to the shareholder
adjustment has been made increasing Group shareholders’ funds by by £281 million (2001: £208 million) and to reduce shareholders’ funds by
£54 million to reflect the revised policy. The effect of this change on the Group’s the same amount.
profit and loss account for the year ended 31 December 2002 has been to
Comparative figures for 2001 have been restated in respect of all of the above
reduce the tax charge by £29 million (2001: increase the tax charge by
changes.
£14 million). The effect on the Group’s balance sheet at 31 December 2002
has been to reduce the deferred tax liability and increase shareholders’ funds The prior year adjustments to Group equity reserves in respect of these changes
by £69 million (2001: £40 million). The effect on the Bank’s balance sheet at can be summarised as follows:
31 December 2002 has been to reduce the deferred tax liability and increase Actuarial
shareholders’ funds by £95 million (2001: £84 million). losses
recognised
(iii) The Group has adopted fully the accounting requirements of Financial in post-
Reporting Standard 17 (“FRS 17”) ‘Retirement Benefits’. FRS 17 replaces Impact on retirement
Statement of Standard Accounting Practice 24 and the Urgent Issues Task Adjustment to attributable benefit Adjustment to
shareholders’ profit for schemes for shareholders’
Force’s Abstract 6 as the accounting standard dealing with post-retirement funds at year ended year ended funds at
benefits. The Group has decided to implement the requirements of FRS 17 in 1 January 31 December 31 December 31 December
2002 to coincide with the triennial full actuarial valuations of the Group’s 2001 2001 2001 2001
pension schemes and because of the significant impact that implementation £m £m £m £m
aaaaaffffffffff aaaaaffffffffff aaaaaffffffffff aaaaaffffffffff
has on the Group’s reported results. FRS 19 Deferred tax (ii) 54 (14) – 40
FRS 17 requires the assets of post-retirement defined benefit schemes to be FRS 17 Retirement
included on the balance sheet together with the related liability to make benefit benefits (iii) 1,876 (102) (2,010) (236)
payments. The profit and loss account includes a charge in respect of the cost ABI guidance (iv) (53) (155) – (208)
of accruing benefits for active employees, benefit improvements and the cost of
severances borne by the schemes; the expected return on the schemes’ assets aaaaaffffffffff aaaaaffffffffff aaaaaffffffffff aaaaaffffffffff

Total 1,877 (271) (2,010)


is included within other finance income net of a charge in respect of the
unwinding of the discount applied to the schemes’ liabilities. It also includes a
affffffffff affffffffff affffffffff af(404)
fffffffff
charge in respect of post-retirement healthcare obligations. Under Statement of a Accounting convention
Standard Accounting Practice 24 the profit and loss account included a charge The accounts are prepared under the historical cost convention as modified by
in respect of the cost of accruing benefits for active employees offset by a credit the revaluation of debt securities and equity shares held for dealing purposes
representing the amortisation of the surplus in the Group’s defined benefit (see g), shares in group undertakings (see h) and assets held in the long-term
pension schemes; a pension prepayment was included in the Group’s balance assurance business (see o), in compliance with Section 255A, Schedule 9 and
sheet, together with a provision in respect of post-retirement healthcare other requirements of the Companies Act 1985 except as described below
obligations. A prior year adjustment has been made increasing Group (see c), in accordance with applicable accounting standards, pronouncements
shareholders’ funds by £1,876 million to reflect the revised policy. of the Urgent Issues Task Force and with the Statements of Recommended
Practice issued by the British Bankers’ Association and the Finance & Leasing
The effect of this change on the Group’s profit and loss account for the year
Association. The Group’s methodology for calculating embedded value follows
ended 31 December 2002 has been to introduce other finance income of
the guidance published by the Association of British Insurers for the preparation
£165 million (2001: £307 million), and to increase administrative expenses
of figures using the achieved profits method of accounting except that tangible
by £323 million (2001: £452 million). Profit before tax has been reduced by
assets attributable to the shareholder are valued at market value. The guidance
£158 million (2001: £145 million). The effect on the Group’s balance sheet
would require those assets backing capital requirements to be discounted to
at 31 December 2002 has been to reflect a net post-retirement benefit liability
reflect the cost of encumbered capital, but such a treatment would be
of £2,077 million (2001: a net post-retirement benefit asset of £356 million
inconsistent with the treatment of capital supporting the Group’s banking
and a post-retirement benefit liability of £75 million), to reduce prepayments
operations. If this treatment had been followed income from long-term
and accrued income by £928 million (2001: £894 million), to reduce the
assurance business before tax in 2002 would have been slightly improved.
deferred tax liability by £251 million (2001: £268 million), to reduce other
Conversely, embedded value would have been some 8 per cent lower given the
provisions for liabilities and charges by £76 million (2001: £109 million) and
size of the shareholder capital required to be retained within Scottish Widows
to reduce shareholders’ funds by £2,678 million (2001: £236 million). The
under the terms of the demutualisation.
effect of this change on the Bank’s balance sheet has been to reduce
prepayments and accrued income by £808 million (2001: £781 million), to

9
Lloyds TSB Bank plc

Notes to the accounts

1 Accounting policies (continued) 1 Accounting policies (continued)


As permitted by Financial Reporting Standard 1 (revised), no cash flow At the date of the disposal of group or associated undertakings, any
statement is presented in these accounts, as the Bank is a wholly owned unamortised goodwill, or goodwill taken directly to reserves prior to 1 January
subsidiary of Lloyds TSB Group plc which presents such a statement in its own 1998, is included in the Group’s share of the net assets of the undertaking in
accounts. In addition, advantage has been taken of the exemption available the calculation of the profit or loss on disposal.
under Financial Reporting Standard 8 not to disclose details of transactions
with Lloyds TSB Group plc or other group or associated undertakings, as the d Income recognition
consolidated accounts of Lloyds TSB Group plc in which the Bank is included Interest income is recognised in the profit and loss account as it accrues, with
are publicly available. the exception of interest on non-performing lending which is taken to income
either when it is received or when there ceases to be any significant doubt
The Group continues to take advantage of the dispensation in the Urgent Issues
about its ultimate receipt (see e).
Task Force’s Abstract 17 ‘Employee Share Schemes’ not to apply that Abstract
to the Lloyds TSB Group’s Inland Revenue approved SAYE schemes. Fees and commissions receivable from customers to reimburse the Group for
costs incurred are taken to income when due. Fees and commissions relating
b Basis of consolidation to the ongoing provision of a service or risk borne for a customer are taken to
Assets, liabilities and results of group undertakings and joint ventures are income in proportion to the service provided or risk borne in each accounting
included in the consolidated accounts on the basis of accounts made up to period. Fees and commissions charged in lieu of interest are taken to income
31 December. Entities that do not meet the legal definition of a subsidiary but on a level yield basis over the period of the loan. Other fees and commissions
which give rise to benefits that are in substance no different to those that would receivable are accounted for as they fall due.
arise from subsidiaries are also included in the consolidated accounts. In order
to reflect the different nature of the shareholder’s and policyholders’ interests in e Provisions for bad and doubtful debts and non-performing lending
the long-term assurance business, the value of long-term assurance business Provisions for bad and doubtful debts
attributable to the shareholder and the assets and liabilities attributable to It is the Group’s policy to make provisions for bad and doubtful debts, by way
policyholders are classified under separate headings in the consolidated of a charge to the profit and loss account, to reflect the losses inherent in the
balance sheet. Details of transactions entered into by the Group which are not loan portfolio at the balance sheet date. There are two types of provision,
eliminated on consolidation are given in note 43. specific and general, and these are discussed further below.

c Goodwill Specific provisions


Goodwill arising on acquisitions of or by group undertakings is capitalised. For Specific provisions relate to identified risk advances and are raised when the
acquisitions prior to 1 January 1998, goodwill was taken direct to reserves in Group considers that recovery of the whole of the outstanding balance is in
the year of acquisition. As permitted by the transitional arrangements of serious doubt. The amount of the provision is equivalent to the amount
Financial Reporting Standard 10, this goodwill was not reinstated when the necessary to reduce the carrying value of the advance to its expected ultimate
Group adopted the standard in 1998. net realisable value.
The useful economic life of the goodwill arising on each acquisition is For the Group’s portfolios of smaller balance homogeneous loans, such as the
determined at the time of the acquisition. The directors consider that it is residential mortgage, personal lending and credit card portfolios, specific
appropriate to assign an indefinite life to the goodwill which arose on the provisions are calculated using a formulae driven approach. These formulae
acquisition of Scottish Widows during 2000 in view of the strength of the take into account factors such as the length of time that payments from the
Scottish Widows brand, developed through over 185 years of trading, and the customer are overdue, the value of any collateral held and the level of past and
position of the business as one of the leading providers of life, pensions, unit expected losses, in order to derive an appropriate provision.
trust and fund management products. Both of these attributes are deemed to
have indefinite durability, which has been determined based on the following For the Group’s other lending portfolios, specific provisions are calculated on a
factors: the nature of the business; the typical lifespans of the products; the case-by-case basis. In establishing an appropriate provision, factors such as the
extent to which the acquisition overcomes market entry barriers; and the financial condition of the customer, the nature and value of any collateral held
expected future impact of competition on the business. and the costs associated with obtaining repayment and realisation of the
collateral are taken into consideration.
The Scottish Widows goodwill is not being amortised through the profit and loss
account; however, it is subjected to annual impairment reviews in accordance General provisions
with Financial Reporting Standard 11. Impairment of the goodwill is evaluated General provisions are raised to cover latent bad and doubtful debts which are
by comparing the present value of the expected future cash flows, excluding present in any portfolio of advances but have not been specifically identified.
financing and tax, (the ‘value-in-use’) to the carrying value of the underlying net The Group holds general provisions against each of its principal lending
assets and goodwill. If the net assets and goodwill were to exceed the value-in- portfolios, which are calculated after having regard to a number of factors; in
use, an impairment would be deemed to have occurred and the resulting write- particular, the level of watchlist or potential problem debt, the observed
down in the goodwill would be charged to the profit and loss account propensity for such debt to deteriorate and become impaired and prior period
immediately. loss rates. The level of general provision held is reviewed on a regular basis to
Paragraph 28 of Schedule 9 to the Companies Act 1985 requires that all ensure that it remains appropriate in the context of the perceived risk inherent
goodwill carried on the balance sheet should be amortised. In the case of the in the related portfolio and the prevailing economic climate.
goodwill arising on the acquisition of Scottish Widows, the directors consider
that it is appropriate to depart from this requirement in order to comply with the Non-performing lending
over-riding requirement for the accounts to show a true and fair view. If this An advance becomes non-performing when interest ceases to be credited to the
goodwill was amortised over a period of 20 years, profit before tax for the year profit and loss account. There are two types of non-performing lending which
ended 31 December 2002 would be £93 million lower (2001: £94 million are discussed further below.
lower), with a corresponding reduction in reserves of £265 million (2001:
£172 million); intangible assets on the balance sheet would also be Accruing loans on which interest is being placed in suspense
£265 million lower (2001: £172 million lower). Where the customer continues to operate the account, but where there is doubt
about the payment of interest, interest continues to be charged to the
Goodwill arising on all other acquisitions after 1 January 1998 is amortised on customer’s account, but it is not applied to income. Interest is placed on a
a straight line basis over its estimated useful economic life, which does not suspense account and only taken to income if there ceases to be significant
exceed 20 years. doubt about its being paid.

10
Lloyds TSB Bank plc

Notes to the accounts

1 Accounting policies (continued) 1 Accounting policies (continued)


Loans accounted for on a non-accrual basis In those cases where the Group is the lessee, operating lease costs are charged
In those cases where the operation of the customer’s account has ceased and to the profit and loss account in equal annual instalments over the life of the
it has been transferred to a specialist recovery department, the advance is lease.
written down to its estimated realisable value and interest is no longer charged
to the customer’s account as its recovery is considered unlikely. Interest is only l Deferred tax
taken to income if it is received. Full provision is made for deferred tax liabilities arising from timing differences
between the recognition of gains and losses in the financial statements and
f Mortgage incentives their recognition in a tax computation. Deferred tax assets are recognised to the
Payments made under cash gift and discount mortgage schemes, which are extent that it is regarded as more likely than not that there will be suitable
recoverable from the customer in the event of early redemption, are amortised taxable profits from which the future reversal of the underlying timing
as an adjustment to net interest income over the early redemption charge differences can be deducted, or where they can be offset against deferred tax
period. Payments cease to be deferred and are charged to the profit and loss liabilities. Deferred tax is measured at the average tax rates that are expected to
account in the event that the related loan is redeemed or becomes impaired. apply in the periods in which the timing differences are expected to reverse,
based on tax rates and laws that have been enacted or substantively enacted
g Debt securities and equity shares by the balance sheet date.
Debt securities, apart from those held for dealing purposes, are stated at cost
as adjusted for the amortisation of any premiums and discounts arising on m Pensions and other post-retirement benefits
acquisition, which are amortised from purchase to maturity in equal annual The Group operates a number of defined benefit pension and post-retirement
instalments, less amounts written off for any permanent diminution in their healthcare schemes, and a number of employees are members of defined
value. Equity shares, apart from those held for dealing purposes, are stated at contribution pension schemes.
cost less amounts written off for any permanent diminution in their value.
Full actuarial valuations of the Group’s main defined benefit schemes are
Debt securities and equity shares held for dealing purposes are included at carried out every three years with interim reviews in the intervening years; these
market value. In rare circumstances where securities are transferred from valuations are updated to 31 December each year by qualified independent
dealing portfolios to investment portfolios or vice versa, the transfer is effected actuaries. For the purposes of these annual updates, scheme assets are
at an amount based on the market value at the date of transfer. Any resulting included at market value and scheme liabilities are measured on an actuarial
profit or loss is reflected in the profit and loss account. basis using the projected unit method; these liabilities are discounted at the
current rate of return on a high quality corporate bond of equivalent currency
h Shares in group undertakings and term. The post-retirement benefit surplus or deficit is included on the
Shares in group undertakings are stated in the balance sheet of the Bank at its Group’s balance sheet, net of the related amount of deferred tax. Surpluses are
share of net assets, with the exception of the life assurance group undertakings only included to the extent that they are recoverable through reduced
which are stated on the basis described in o. Attributable goodwill is included, contributions in the future or through refunds from the schemes. The current
where this has not been written off directly to reserves. service cost and any past service costs are included in the profit and loss
account within operating expenses and the expected return on the schemes’
i Tangible fixed assets assets, net of the impact of the unwinding of the discount on scheme liabilities,
Tangible fixed assets are included at cost less depreciation. is included within other finance income. Actuarial gains and losses, including
differences between the expected and actual return on scheme assets, are
Land is not depreciated. Leasehold premises with unexpired lease terms of 50 recognised, net of the related deferred tax, in the statement of total recognised
years or less are depreciated by equal annual instalments over the remaining gains and losses.
period of the lease. Freehold and long leasehold buildings are depreciated over
50 years. The costs of adapting premises for the use of the Group are separately The costs of the Group’s defined contribution pension schemes are charged to
identified and depreciated over 10 years, or over the term of the lease if less; the profit and loss account in the period in which they fall due.
such costs are included within premises in the balance sheet total of tangible The majority of the Bank’s employees are members of the Group’s two main
fixed assets. Equipment is depreciated by equal annual instalments over the pension schemes, Lloyds TSB Group Pension Schemes No’s 1 and 2, along
estimated useful lives of the assets, which for fixtures and furnishings are with employees of a number of the Bank’s subsidiaries. Because it is not
10-20 years and for computer hardware, operating software and application possible to separately identify the amount of any surpluses or deficits in these
software and the related development costs relating to separable new systems, schemes relating to each employing company, in the accounts of individual
motor vehicles and other equipment are 3-8 years. companies, including the Bank, these schemes are accounted for as defined
Premises and equipment held for letting to customers under operating leases contribution schemes in accordance with the requirements of Financial
are depreciated over the life of the lease to give a constant rate of return on the Reporting Standard 17. The Bank charges contributions to these schemes to its
net investment, taking into account anticipated residual values. Anticipated profit and loss account as and when they fall due.
residual values are reviewed regularly and any impairments identified are
charged to the profit and loss account. n Foreign currency translation
Assets, liabilities and results in foreign currencies are expressed in sterling at
j Vacant leasehold property the rates of exchange ruling on the dates of the respective balance sheets.
When a leasehold property ceases to be used in the business or a commitment Exchange adjustments on the translation of opening net assets held overseas
is entered into which would cause this to occur, provision is made to the extent are taken direct to reserves. All other exchange profits or losses, which arise
that the recoverable amount of the interest in the property is expected to be from normal trading activities, are included in the profit and loss account.
insufficient to cover future obligations relating to the lease.
o Long-term assurance business
k Leasing and instalment credit transactions A number of the Group’s subsidiary undertakings are engaged in writing long-
Assets leased to customers are classified as finance leases if the lease term assurance business, including the provision of life assurance, pensions,
agreements transfer substantially all of the risks and rewards of ownership to annuities and permanent health insurance contracts. In common with other life
the lessee; all other leases are classified as operating leases. assurance companies in the UK, these companies are structured into one or
more long-term business funds, depending upon the nature of the products
Income from both finance and operating leases is credited to the profit and loss being written, and a shareholder’s fund. All premiums received, investment
account in proportion to the net cash invested so as to give a constant rate of returns, claims and expenses, and changes in liabilities to policyholders are
return over each period after taking account of tax. Income from instalment accounted for within the related long-term business fund. Any surplus, which
credit transactions is credited to the profit and loss account using the sum of is determined annually by the Appointed Actuary after taking account of these
the digits method. items, may either be distributed between the shareholder and the policyholders
according to a predetermined formula or retained within the long-term business
11
Lloyds TSB Bank plc

Notes to the accounts

1 Accounting policies (continued) 1 Accounting policies (continued)


fund. The shareholder will also levy investment management and derivatives are included within other assets and other liabilities respectively.
administration charges upon the long-term business fund. These items are reported gross except in instances where the Group has entered
into legally binding netting agreements, where the Group has a right to insist on
The Group accounts for its interest in long-term assurance business using the
net settlement that would survive the insolvency of the counterparty; in these
embedded value basis of accounting, in common with other UK banks with
cases the positive and negative fair values of trading derivatives with the relevant
insurance subsidiaries. The value of the shareholder’s interest in the long-term
counterparties are offset within the balance sheet totals.
assurance business (‘the embedded value’) included in the Group’s balance
sheet is an actuarially determined estimate of the economic value of the Derivatives used in the Group’s non-trading activities are taken out to reduce
Group’s life assurance subsidiaries, excluding any value which may be exposures to fluctuations in interest and exchange rates and include exchange
attributed to future new business. The embedded value is comprised of the net rate forwards and futures, currency swaps together with interest rate swaps,
tangible assets of the life assurance subsidiaries, including any surplus retained forward rate agreements and options. These derivatives are accounted for in the
within the long-term business funds, which could be transferred to the same way as the underlying items which they are hedging. Interest receipts and
shareholder, and the present value of the in-force business. The value of the payments on hedging interest derivatives are included in the profit and loss
in-force business is calculated by projecting the future surpluses and other net account so as to match the interest payable or receivable on the hedged item.
cash flows attributable to the shareholder arising from business written by the
A derivative will only be classified as a hedge in circumstances where there was
balance sheet date, using appropriate economic and actuarial assumptions,
evidence of the intention to hedge at the outset of the transaction and the
and discounting the result at a rate which reflects the shareholder’s overall risk
derivative substantially matches or eliminates the risk associated with the
premium attributable to this business.
exposure being hedged.
Changes in the embedded value, which are determined on a post-tax basis, are
Where a hedge transaction is superseded, ceases to be effective or is
included in the profit and loss account. For the purpose of presentation, the
terminated early the derivative is measured at fair value. Any profit or loss
change in this value is grossed up at the underlying rate of corporation tax.
arising is then amortised to the profit and loss account over the remaining life
The assets held within the long-term business funds are legally owned by the of the item which it was originally hedging. When the underlying asset, liability
life assurance companies, however the shareholder will only benefit from or position that was being hedged is terminated, the hedging derivative is
ownership of these assets to the extent that surpluses are declared or from other measured at fair value and any profit or loss arising is recognised immediately.
cash flows attributable to the shareholder. Reflecting the different nature of
these assets, they are classified separately on the Group’s balance sheet as
‘Long-term assurance assets attributable to policyholders’, with a corresponding
liability to the policyholders also shown. Investments held within the long-term
business funds are included on the following basis: equity shares, debt
securities and unit trusts held for unit linked funds are valued in accordance
with policy conditions at market prices; other equity shares and debt securities
are valued at middle market price and other unit trusts at bid price; investment
properties are included at valuation by independent valuers at existing use
value at the balance sheet date, and mortgages and loans are at cost less
amounts written off.

p General insurance business


The Group both underwrites and acts as intermediary in the sale of general
insurance products. Underwriting premiums are included, net of refunds, in the
period in which insurance cover is provided to the customer; premiums
received relating to future periods are deferred and only credited to the profit
and loss account when earned. Where the Group acts as intermediary,
commission income is included in the profit and loss account at the time that
the underwriter accepts the risk of providing insurance cover to the customer.
Where appropriate, provision is made for the effect of future policy terminations
based upon past experience.
The underwriting business makes provision for the estimated cost of claims
notified but not settled and claims incurred but not reported at the balance
sheet date. The provision for the cost of claims notified but not settled is based
upon a best estimate of the cost of settling the outstanding claims after taking
into account all known facts. In those cases where there is insufficient
information to determine the required provision, statistical techniques are used
which take into account the cost of claims that have recently been settled and
make assumptions about the future development of the outstanding cases.
Similar statistical techniques are used to determine the provision for claims
incurred but not reported at the balance sheet date. Claims equalisation
provisions are calculated in accordance with the relevant legislative
requirements.

q Derivatives
Derivatives are used in the Group’s trading activities to meet the financial needs
of customers, for proprietary purposes and to manage risk in the Group’s trading
portfolios. Such instruments include exchange rate forwards and futures,
currency swaps and options together with interest rate swaps, forward rate
agreements, interest rate options and futures. These derivatives are carried at fair
value and all changes in fair value are reported within dealing profits in the profit
and loss account. Fair values are normally determined by reference to quoted
market prices; internal models are used to determine fair value in instances
where no market price is available. The unrealised gains and losses on trading
12
Lloyds TSB Bank plc

Notes to the accounts

2 Segmental analysis Profit on ordinary 2 Segmental analysis (continued)


activities before tax Net assets† Assets‡
1114 4 4 11144 4 4 414 1114 4 4 11144 4 4 414
2002 2001*
£m £m 2002 2001* 2002 2001*
11144 4 11144 4 £m £m £m £m
11144 4 11144 4 1114 44 1114 44
Class of business:
Class of business:
UK Retail Banking and Mortgages 1,175 1,205
UK Retail Banking and Mortgages 2,543 2,437 85,857 77,982
Insurance and Investments
Insurance and Investments 6,936 6,811 9,161 9,270
Operating profit 1,231 1,421
Wholesale Markets and
Changes in economic assumptions 55 –
International Banking 4,925 4,405 110,845 100,777
Investment variance (952) (859)
Central group items (5,282) (2,074) 3,302 3,102
11144 4 11144 4 11144 4 11144 4
334 562
9,122 11,579 209,165 191,131
Wholesale Markets and International Banking 1,005 1,209 qqqrr r qqqrr r qqqrr r qqqrr r
Central group items 124 243 Geographical area:**
11144 4 11144 4
Domestic 7,747 10,505 179,449 162,523
2,638 3,219
qqqrr r qqqrr r International 1,375 1,074 29,716 28,608
11144 4 11144 4 11144 4 11144 4
Geographical area:** Inter-
Domestic national Total 9,122 11,579 209,165 191,131
2002 2002 2002 qqqrr r qqqrr r qqqrr r qqqrr r
£m
11144 4 £m
11144 4 £m
11144 4 *2001 figures have been restated to take account of the changes in accounting
policy explained in note 1 and the re-classification of emerging markets debt
Interest receivable 8,201 2,323 10,524 earnings from Wholesale Markets and International Banking to Central group
Other finance income 165 – 165 items.
Fees and commissions receivable 2,776 280 3,056 ** The geographical distribution of gross income sources, profit on ordinary
Dealing profits (before expenses) 125 63 188 activities before tax and assets by domestic and international operations is
Income from long-term assurance business (314) 11 (303) based on the location of the office recording the transaction, except for lending
General insurance premium income 486 – 486 by the international business booked in London.
Other operating income 552 211 763 †Net assets represent equity shareholders’ funds plus equity minority interests.
11144 4 11144 4 11144 4
Disclosure of information on net assets is an accounting standard requirement
Total gross income 11,991 2,888 14,879
qqqrr r qqqrr r qqqrr r (SSAP25); it is not appropriate to relate it directly to the segmental profits
above because the business is not managed by the allocation of net assets to
Profit on ordinary activities before tax 2,142 496 2,638
qqqrr r qqqrr r qqqrr r business units.
Inter-
Domestic national Total ‡Assets exclude long-term assurance assets attributable to policyholders.
2001* 2001 2001*
£m £m £m
As the business of the Group is mainly that of banking and insurance, no
11144 4 4 11144 4 11144 4 segmental analysis of turnover is given.
Interest receivable 8,945 2,414 11,359
Other finance income 307 – 307
Fees and commissions receivable 2,639 286 2,925 3 Dealing profits (before expenses) 2002 2001
Dealing profits (before expenses) 138 95 233 £m £m
1114 44 1114 44
Income from long-term assurance business (41) 12 (29) Foreign exchange trading income 173 158
General insurance premium income 428 – 428 Securities and other gains 15 75
Other operating income 538 170 708 11144 4 11144 4
11144 4 11144 4 11144 4 188 233
Total gross income 12,954 2,977 15,931 qqqrr r qqqrr r
qqqrr r qqqrr r qqqrr r
Dealing profits include the profits and losses arising both on the purchase and
Profit on ordinary activities before tax 2,653 566 3,219 sale of trading instruments and from the year-end revaluation to market value,
qqqrr r qqqrr r qqqrr r
together with the interest income earned from these instruments and the
related funding cost.

13
Lloyds TSB Bank plc

Notes to the accounts

4 Administrative expenses 2002 2001* 7 Profit on ordinary activities before tax 2002 2001*
£m £m £m £m
1114 44 1114 44 1114 44 1114 44
Salaries and profit sharing 2,064 2,066
Profit on ordinary activities before tax is stated
Social security costs 134 140
after taking account of:
Other pension costs (note 44) 318 347
11144 4 11144 4
Staff costs 2,516 2,553 Income from:
Other administrative expenses 1,659 1,616 Aggregate amounts receivable, including capital
repayments, in respect of assets leased to customers
11144 4 11144 4
4,175 4,169 and banks under:
qqqrr r qqqrr r
Finance leases and hire purchase contracts 3,290 3,250
*restated (see note 1)
Operating leases 440 329
The average number of persons on a headcount basis Profit less losses on disposal of investment securities 160 160
employed by the Group during the year was as follows:
2002 2001
1114 44 1114 44 Charges:
UK 71,134 71,184 Rental of premises 220 203
Overseas 11,491 11,768 Hire of equipment 18 18
11144 4 11144 4
Interest on subordinated liabilities (loan capital) 521 510
82,625 82,952
qqqrr r qqqrr r *restated (see note 1)
The above staff numbers exclude 5,870 (2001: 5,450) staff employed in the
long-term assurance business. Costs of £209 million (2001: £168 million) in
relation to those staff are reflected in the valuation of the long-term assurance 8 Tax on profit on ordinary activities
business. a Analysis of charge for the year 2002 2001*
£m £m
Details of directors’ emoluments, pensions and interests are given in note 42. 1114 44 1114 44
The auditors’ remuneration was £5 million (2001: £4 million), of which UK corporation tax
£1.4 million (2001: £1.2 million) related to Lloyds TSB Bank plc. Fees paid Current tax on profits for the year 812 844
to the auditors in respect of non-audit services were £6 million (2001: Adjustments in respect of prior years 12 (14)
£14 million). Non-audit fees comprise regulatory and other advisory work. 824 830
Double taxation relief (129) (87)
11144 4 11144 4
5 Amounts written off fixed asset investments 2002 2001 695 743
£m £m Foreign tax
11144 4 11144 4
Current tax on profits for the year 216 179
Debt securities 84 58 Adjustments in respect of prior years (15) (17)
Equity shares 111434 4 111424 4
201 162
87 60 11144 4 11144 4
qqqrr r qqqrr r Current tax charge 896 905
Deferred tax (107) 45
Associated undertakings and joint ventures 2 1
11144 4 11144 4
6 Profit before tax on sale of businesses
791 951
On 3 October 2001 the Group announced the sale of its Brazilian fund qqqrr r qqqrr r
management and private banking business, including its subsidiary, Lloyds
*restated (see note 1)
TSB Asset Management S.A.. This resulted in a profit on sale of £39 million
(tax: £11 million). The charge for tax on the profit for the year is based on a UK corporation tax
rate of 30 per cent (2001: 30 per cent).
In addition to the tax charge in the profit and loss account detailed above,
£968 million (2001: £863 million) of deferred tax has been credited to the
statement of total recognised gains and losses in respect of actuarial losses
recognised in post-retirement benefit schemes (note 44).

14
Lloyds TSB Bank plc

Notes to the accounts

8 Tax on profit on ordinary activities (continued) 11 Treasury bills and other 2002 2002 2001 2001
b Factors affecting the tax charge for the year 13 eligible bills Balance Balance
sheet Valuation sheet Valuation
A reconciliation of the charge that would result from applying the standard UK £m £m £m £m
11144 4 11144 4 11144 4 11144 4
corporation tax rate to profit before tax to the current tax charge and total tax
Group
charge for the year is given below:
Investment securities:
2002 2001* Treasury bills and similar securities 257 258 748 748
£m £m
1114 44 1114 44 Other eligible bills 1,622 1,620 2,034 2,032
11144 4 11144 4 11144 4 11144 4
Profit on ordinary activities before tax 2,638 3,219
qqqrr r qqqrr r 1,879 1,878 2,782 2,780
qqqrr r qqqrr r
Tax charge thereon at UK corporation tax rate of 30% 791 966
Factors affecting charge: Other securities:
Goodwill amortisation 9 8 Treasury bills and similar securities 530 1,630
11144 4 11144 4
Overseas tax rate differences 24 12 2,409 4,412
Non-allowable and non-taxable items (30) 7 qqqrr r qqqrr r
Gains exempted or covered by capital losses (23) (39) Geographical analysis by issuer:
Tax deductible coupons on non-equity minority interests (12) (12) United Kingdom 1,726 2,620
Capital allowances in excess of depreciation 7 (48) Latin America 567 1,412
Other timing differences 100 3 Other 116 380
Life company rate differences 44 21 11144 4 11144 4
Other items (14) (13) 2,409 4,412
11144 4 11144 4 qqqrr r qqqrr r
Current tax charge 896 905 Included above:
Deferred tax – capital allowances in excess of Unamortised discounts
depreciation (7) 48 net of premiums on
Deferred tax – other timing differences (100) (3) investment securities 5 6
Associated undertakings and joint ventures 2 1
11144 4 11144 4
11144 4 11144 4 Movements in investment Premiums
Tax on profit on ordinary activities 791 951 securities comprise: and
11144 4 11144 4 Cost discounts Total
Effective rate 30.0% 29.5% £m £m £m
11144 4 11144 4 1114 44
qqqrr r qqqrr r
At 1 January 2002 2,777 5 2,782
*restated (see note 1) Exchange and other adjustments (3) – (3)
c Factors that may affect the future tax charge Additions 30,402 – 30,402
The current tax charge includes a credit of £46 million (2001: charge of Bills sold or matured (31,301) (76) (31,377)
£11 million) in respect of notional tax on the shareholder’s interest in the Amortisation of premiums and discounts – 75 75
11144 4 11144 4 11144 4
movement in value of the long-term assurance business. Since this derives At 31 December 2002 1,875 4 1,879
from the use of a combination of tax rates it can give rise to a higher or lower qqqrr r qqqrr r qqqrr r
charge compared to an expected 30 per cent rate, depending upon the
reported investment returns. 2002 2002 2001 2001
Balance Balance
In December 2002 the Inland Revenue announced its intention to introduce sheet Valuation sheet Valuation
£m £m £m £m
legislation which may affect the tax treatment of certain transfers from Scottish 11144 4 11144 4 11144 4 1114 44
Widows plc’s long term business fund to its shareholder’s fund. The precise Bank
impact of these proposals is yet to be determined, however it is possible that Investment securities:
these transfers will be subject to a higher tax charge than was previously Treasury bills and similar securities 257 258 748 748
anticipated. Other eligible bills 1,615 1,614 2,021 2,020
11144 4 11144 4 11144 4 11144 4
Factors that may affect the future deferred tax charge are dealt with in note 35. 1,872 1,872 2,769 2,768
qqqrr r qqqrr r

Other securities:
9 Profit for the financial year attributable to shareholders Treasury bills and similar securities 500 1,318
11144 4 11144 4
The profit attributable to shareholders includes a profit of £1,463 million
2,372 4,087
(2001: £1,608 million*) dealt with in the accounts of the parent company, for qqqrr r qqqrr r
which no profit and loss account is shown as permitted by Section 230 of the
Geographical analysis by issuer:
Companies Act 1985.
United Kingdom 1,726 2,620
*restated (see note 1) Latin America 533 1,350
Other 113 117
11144 4 11144 4
10 Dividends 2002 2001 2,372 4,087
£m £m qqqrr r qqqrr r
1114 44 1114 44
First interim 597 566
Second interim 1,311 1,306
11144 4 11144 4
1,908 1,872
qqqrr r qqqrr r

15
Lloyds TSB Bank plc

Notes to the accounts

11 Treasury bills and other 2002 2001 13 Loans and advances to Group Bank
13
11111114 4444444 11111114 4444444
eligible bills (continued) Balance Balance customers 2002 2001 2002 2001
sheet sheet
£m £m £m £m
£m £m 11144 4 11144 4 1114 44 1114 44
11144 4 11144 4
Included above: Lending to customers 124,798 113,316 62,236 55,018
Unamortised discounts Hire purchase debtors 5,990 5,345 – –
net of premiums on Equipment leased to customers 7,300 7,585 1 1
11144 4 11144 4 11144 4 11144 4
investment securities 5 6
Total loans and advances to
11144 4 11144 4
Movements in investment Premiums customers 138,088 126,246 62,237 55,019
securities comprise: and
Cost discounts Total
Provisions for bad and
£m £m £m doubtful debts (1,766) (1,466) (1,425) (1,101)
Interest held in suspense (57) (70) (35) (42)
11144 4 11144 4 11144 4
At 1 January 2002 2,764 5 2,769 11144 4 11144 4 11144 4 11144 4
Additions 30,396 – 30,396 136,265 124,710 60,777 53,876
Bills sold or matured (31,292) (76) (31,368) qqqrr r qqqrr r qqqrr r qqqrr r
Amortisation of premiums and discounts – 75 75 Loans and advances
11144 4 11144 4 11144 4
by residual maturity repayable:
At 31 December 2002 1,868 4 1,872
qqqrr r qqqrr r qqqrr r 3 months or less 25,721 23,108 30,010 26,472
1 year or less but over 3 months 10,357 8,867 6,654 5,192
Investment securities are those intended for use on a continuing basis in the 5 years or less but over 1 year 30,651 27,925 14,837 12,632
activities of the Group and not for dealing purposes. Over 5 years 71,359 66,346 10,736 10,723
The difference between the cost of other securities and market value, where the Provisions for bad and
market value is higher than the cost, is not disclosed as its determination is not doubtful debts (1,766) (1,466) (1,425) (1,101)
practicable. Interest held in suspense (57) (70) (35) (42)
11144 4 11144 4 11144 4 11144 4
It is expected that tax of £1 million (2001: £1 million) would be recoverable if 136,265 124,710 60,777 53,876
the Group’s investment securities were sold at their year end valuation. qqqrr r qqqrr r qqqrr r qqqrr r
Of which repayable on
demand or at short notice 13,415 11,661 15,110 12,735
qqqrr r qqqrr r qqqrr r qqqrr r
12 Loans and advances Group Bank
11114 4 4 4 4 4 411144 11114 4 4 4 4 4 411144 Included above:
to banks 2002 2001 2002 2001 Due from group undertakings
£m £m £m £m
11144 4 11144 4 11144 4 11144 4 – all unsubordinated 18,610 14,345
Lending to banks 2,212 1,616 50,134 44,517 Due from fellow group undertakings
Deposits placed with banks 15,317 13,610 14,030 12,403 – subordinated 14 15 – –
– unsubordinated 1,777 1,760 656 637
11144 4 11144 4 11144 4 11144 4
Total loans and advances to banks 17,529 15,226 64,164 56,920
Provisions for bad and The cost of assets acquired during the year for letting to customers under
doubtful debts (1) (2) (1) (2) finance leases and hire purchase contracts amounted to £3,752 million
11144 4 11144 4 11144 4 11144 4
(2001: £3,166 million).
17,528 15,224 64,163 56,918
qqqrr r qqqrr r qqqrr r qqqrr r Securitisations
Repayable on demand 4,313 2,443 29,512 21,398 Certain instalment credit receivables have been securitised and are subject to
Other loans and advances non-returnable financing arrangements. In accordance with Financial Reporting
by residual maturity repayable: Standard 5, these items have been shown under the linked presentation method.
3 months or less 8,511 8,995 10,361 10,335
The Group’s subsidiary, Black Horse Limited (formerly Chartered Trust plc),
1 year or less but over 3 months 2,624 2,698 8,249 8,877
entered into transactions whereby it disposed of its interest in portfolios of
5 years or less but over 1 year 1,700 708 13,800 15,070
motor vehicle and caravan instalment credit agreements for a total of
Over 5 years 381 382 2,242 1,240
£980 million to Cardiff Automobile Receivables Securitisation (UK) No 4 plc
Provisions for bad and
(CARS 4). CARS Trustee (UK) No 4 Limited is responsible for the collection and
doubtful debts (1) (2) (1) (2)
11144 4 11144 4 11144 4 11144 4 onward payment of all amounts falling due under the terms of the receivables
17,528 15,224 64,163 56,918 sold to CARS 4. Principal receipts up to 10 December 2000 were used to
qqqrr r qqqrr r qqqrr r qqqrr r purchase further receivables; subsequent to this date they are being used to
Included above: redeem floating rate notes. Income receipts are applied in the following order
Due from group undertakings of priority: interest due on the floating rate notes; credit manager fees; payments
– unsubordinated 47,728 42,763 under swaps; amounts due to third parties; dividends; and residual income to
– subordinated 201 151 Black Horse Limited. Black Horse Limited has been appointed by CARS Trustee
(UK) No 4 Limited as credit manager and receives a fee for fulfilling this
function. It has no liability to the noteholders or any creditor of CARS 4 or CARS
Trustee (UK) No 4 Limited other than through failure to meet its obligations as
credit manager or for breach of warranties given. Black Horse Limited has no
interest in the share capital of CARS 4 or CARS Trustee (UK) No 4 Limited.
Black Horse Limited and CARS 4 have also entered into interest rate swaps in
respect of this transaction, the interest rates payable and receivable under these
swaps are set by reference to market rates of interest on an arm’s length basis.
At 31 December 2002 CARS 4 held £24 million (2001: £124 million) of
receivables, matched by non-returnable finance of the same amount.

16
Lloyds TSB Bank plc

Notes to the accounts

14 Provisions for bad and 2002 2002 2001 2001 15 Concentrations of exposure Group
1144 4 4 1Bank
16
1144 4 4 1 111144 4 4 111144 4 4
doubtful debts and Specific General Specific General
2002 2001 2002 2001
£m £m £m £m
non-performing lending 11144 4 11144 4 11144 4 11144 4 £m
11144 4 £m
11144 4 £m
1114 44 £m
1114 44
Group
At 1 January 1,099 369 1,069 357 Loans and advances to customers:
Exchange and other adjustments (55) (3) (15) 1 Domestic:
Adjustments on acquisition – 3 – – Agriculture, forestry and fishing 2,076 2,074 712 727
Advances written off (878) – (885) – Manufacturing 3,373 3,321 2,862 2,855
Recoveries of advances Construction 1,482 1,309 1,358 1,210
written off in previous years 203 – 194 – Transport, distribution and hotels 4,696 4,440 4,052 3,698
Charge to profit and loss account: Property companies 4,008 2,907 3,588 2,711
New and additional provisions 1,544 64 1,310 64
Financial, business and other
Releases and recoveries (579) – (574) (53)
services 8,352 8,736 6,129 6,757
965 64 736 11 Personal: mortgages 62,467 56,578 353 562
11144 4 11144 4 11144 4 11144 4 Personal: other 14,931 12,784 14,244 11,922
At 31 December 1,334 433 1,099 369 Lease financing 7,285 7,552 – –
Hire purchase 5,990 5,345 – –
qqqrr r qqqrr r qqqrr r qqqrr r
1,767 1,468 Due from fellow group
qqqrr r qqqrr r
In respect of: undertakings 1,791 1,775 19,266 14,982
Loans and advances to banks 1 2 Other 3,397 2,992 3,039 2,599
11144 4 11144 4 11144 4 11144 4
Loans and advances to customers 1,766 1,466
11144 4 11144 4 Total domestic 119,848 109,813 55,603 48,023
1,767 1,468 International:
qqqrr r qqqrr r Latin America 1,591 2,347 982 1,572
Bank New Zealand 10,447 8,435 – –
At 1 January 801 302 744 258
Rest of the world 6,202 5,651 5,652 5,424
Exchange and other adjustments (33) – (5) –
Adjustments on acquisition 1 – 5 – Total international 18,240 16,433 6,634 6,996
Advances written off (653) – (618) – 11144 4 11144 4 11144 4 11144 4
Recoveries of advances 138,088 126,246 62,237 55,019
written off in previous years 136 – 119 –
Provisions for bad and doubtful
Charge to profit and loss account:
New and additional provisions 1,289 68 1,028 61 debts* (1,766) (1,466) (1,425) (1,101)
Releases and recoveries (485) – (472) (17) Interest held in suspense* (57) (70) (35) (42)
11144 4 11144 4 11144 4 11144 4
804 68 556 44 136,265 124,710 60,777 53,876
11144 4 11144 4 11144 4 11144 4 qqqrr r qqqrr r qqqrr r qqqrr r
At 31 December 1,056 370 801 302 *Figures exclude provisions and interest held in suspense relating to loans and
qqqrr r qqqrr r qqqrr r qqqrr r
advances to banks.
1,426 1,103
qqqrr r qqqrr r
In respect of: The classification of lending as domestic or international is based on the location
Loans and advances to banks 1 2 of the office recording the transaction, except for certain lending of the
Loans and advances to customers 1,425 1,101 international business booked in London.
11144 4 11144 4
1,426 1,103
qqqrr r qqqrr r

Group Bank
11111114 4444444 11111114 4444444
2002 2001 2002 2001
£m £m £m £m
11144 4 11144 4 1114 44 1114 44
Non-performing lending comprises:
Accruing loans on which interest is
being placed in suspense 752 843 473 494
Loans accounted for on a
non-accrual basis 662 379 603 361
11144 4 11144 4 11144 4 11144 4
1,414 1,222 1,076 855
Provisions (992) (829) (758) (588)
Interest held in suspense (57) (70) (35) (42)
11144 4 11144 4 11144 4 11144 4
365 323 283 225
11144 4 11144 4 11144 4 11144 4

17
Lloyds TSB Bank plc

Notes to the accounts

16 Debt securities 2002 2002 2001 2001 16 Debt securities (continued)


Balance Balance
sheet Valuation sheet Valuation Movements in investment Premiums
£m £m £m £m securities comprise: and
11144 4 11144 4 11144 4 11144 4 Cost discounts Provisions Total
Group £m £m £m £m
1114 44 11144 4 11144 4 1114 44
Investment securities:
Government securities 2,140 2,141 2,781 2,976 At 1 January 2002 10,553 519 83 10,989
Other public sector securities 1 1 – – Exchange and other adjustments (479) (28) (4) (503)
Bank and building society Additions 16,418 – – 16,418
certificates of deposit 3,147 3,148 4,670 4,677 Transfers to other securities (694) (451) (63) (1,082)
Corporate debt securities 1,495 1,496 613 616 Securities sold or matured (13,913) (61) (11) (13,963)
Mortgage backed securities 893 892 521 527 Charge for the year – – 84 (84)
Other asset backed securities 2,817 2,820 1,193 1,198 Amortisation of premiums
Other debt securities 1,369 1,367 1,211 1,209 and discounts – 87 – 87
11144 4 11144 4 11144 4 11144 4 11144 4 11144 4 11144 4 11144 4
11,862 11,865 10,989 11,203 At 31 December 2002 11,885 66 89 11,862
qqqrr r qqqrr r qqqrr r qqqrr r
Other securities:
Government securities 6,035 6,035 4,103 4,103 2002 2002 2001 2001
Other public sector securities 112 112 151 151 Balance Balance
Bank and building society sheet Valuation sheet Valuation
certificates of deposit 340 340 234 234 £m £m £m £m
11144 4 11144 4 11144 4 1114 44
Corporate debt securities 7,842 7,842 7,102 7,102 Bank
Mortgage backed securities 1,838 1,838 1,054 1,054 Investment securities:
Other asset backed securities 1,191 1,191 592 592 Government securities 1,448 1,450 2,091 2,284
Other debt securities 94 94 – – Bank and building society
11144 4 11144 4 11144 4 11144 4
certificates of deposit 2,850 2,851 4,398 4,405
29,314 29,317 24,225 24,439 Corporate debt securities 96 96 92 92
qqqrr r qqqrr r qqqrr r qqqrr r
Mortgage backed securities 17 17 20 20
Due within 1 year 6,412 6,745 Other asset backed securities 598 608 646 648
Due 1 year and over 22,902 17,480 Other debt securities 799 798 695 693
11144 4 11144 4 11144 4 11144 4 11144 4 11144 4
29,314 24,225 5,808 5,820 7,942 8,142
qqqrr r qqqrr r
Geographical analysis by issuer: Other securities:
United Kingdom 5,569 5,947 Government securities 5,624 5,624 3,882 3,882
Other European 13,254 9,920 Other public sector securities 109 109 119 119
North America and Caribbean 6,077 4,708 Bank and building society
Latin America 1,231 1,290 certificates of deposit 27 27 15 15
Asia Pacific 2,763 1,921 Corporate debt securities 7,713 7,713 7,008 7,008
Other 420 439 Mortgage backed securities 1,838 1,838 1,054 1,054
11144 4 4 11144 4 Other asset backed securities 1,191 1,191 592 592
29,314 24,225 Other debt securities 275 275 314 314
qqqrr r qqqrr r 11144 4 11144 4 11144 4 11144 4
Unamortised discounts 22,585 22,597 20,926 21,126
qqqrr r qqqrr r qqqrr r qqqrr r
net of premiums on
investment securities 337 622 Included above:
qqqrr r qqqrr r Due from group undertakings
– all unsubordinated 230 314
qqqrr r qqqrr r
Investment securities:
Listed 6,102 6,101 5,544 5,751 Due within 1 year 5,585 6,294
Unlisted 5,760 5,764 5,445 5,452 Due 1 year and over 17,000 14,632
11144 4 11144 4 11144 4 11144 4 11144 4 11144 4
11,862 11,865 10,989 11,203 22,585 20,926
qqqrr r qqqrr r qqqrr r qqqrr r qqqrr r qqqrr r

Other securities: Geographical analysis by issuer:


Listed 16,034 16,034 12,139 12,139 United Kingdom 4,343 5,320
Unlisted 1,418 1,418 1,097 1,097 Other European 10,580 9,438
11144 4 11144 4 11144 4 11144 4 North America and Caribbean 4,816 3,328
17,452 17,452 13,236 13,236 Latin America 1,412 1,525
qqqrr r qqqrr r qqqrr r qqqrr r Asia Pacific 1,014 876
Other 420 439
11144 4 11144 4
22,585 20,926
qqqrr r qqqrr r
Unamortised discounts
net of premiums on
investment securities 332 609
qqqrr r qqqrr r

18
Lloyds TSB Bank plc

Notes to the accounts

16 Debt securities (continued) 2002 2002 2001 2001 17 Equity shares 2002 2002 2001 2001
Balance Balance Balance Balance
sheet Valuation sheet Valuation sheet Valuation sheet Valuation
£m £m £m £m £m £m £m £m
11144 4 11144 4 11144 4 11144 4 11144 4 11144 4 11144 4 11144 4
Investment securities: Group
Listed 1,141 1,150 3,171 3,365 Investment securities:
Unlisted 4,667 4,670 4,771 4,777 Listed 5 5 4 14
11144 4 11144 4 11144 4 11144 4 Unlisted 33 62 34 52
11144 4 11144 4 11144 4 11144 4
5,808 5,820 7,942 8,142
qqqrr r qqqrr r qqqrr r qqqrr r 38 67 38 66
qqqrr r qqqrr r
Other securities:
Listed 15,623 15,623 11,916 11,916 Other securities:
Unlisted 1,154 1,154 1,068 1,068 Listed 168 187
11144 4 11144 4 11144 4 11144 4 11144 4 11144 4
16,777 16,777 12,984 12,984 206 225
qqqrr r qqqrr r qqqrr r qqqrr r qqqrr r qqqrr r

Movements in investment Premiums Movements in investment Cost Provisions Total


securities comprise: and securities comprise: £m £m £m
1114 44 11144 4 1114 44
Cost discounts Provisions Total
£m4 4
1114 £m
11144 4 11144 4£m £m
1114 44 At 1 January 2002 50 12 38
Additions 10 – 10
At 1 January 2002 7,499 487 44 7,942
Disposals (9) (2) (7)
Exchange and other adjustments (279) (27) (5) (301)
Charge for the year – 3 (3)
Adjustments on acquisition 7 – – 7 11144 4 11144 4 11144 4
Additions 12,636 – – 12,636 At 31 December 2002 51 13 38
Transfers to other securities (684) (451) (61) (1,074) qqqrr r qqqrr r qqqrr r
Securities sold or matured (13,342) (59) – (13,401)
Charge for the year – – 51 (51) 2002 2002 2001 2001
Balance Balance
Amortisation of premiums and sheet Valuation sheet Valuation
discounts – 50 – 50 £m £m £m £m
11144 4 11144 4 11144 4 11144 4 11144 4 11144 4 11144 4 11144 4
At 31 December 2002 5,837 – 29 5,808 Bank
qqqrr r qqqrr r qqqrr r qqqrr r Investment securities:
Unlisted 16 19 15 17
Investment securities are those intended for use on a continuing basis in the qqqrr r qqqrr r
activities of the Group and not for dealing purposes. Transfers to other securities Other securities:
mainly relates to the reclassification of the Group’s portfolio of emerging market Listed 29 12
securities, following the decision to accelerate the disposal programme for these 11144 4 11144 4
investments. 45 27
qqqrr r qqqrr r
The difference between the cost of other securities and market value, where the
market value is higher than the cost, is not disclosed as its determination is not Movements in investment Cost
practicable. securities comprise: £m
1114 44
It is expected that tax of £4 million (2001: £60 million) would be payable if
At 1 January 2002 15
the Group’s investment securities were sold at their year end valuation.
Additions 5
Disposals (4)
11144 4
At 31 December 2002 16
qqqrr r

Investment securities are those intended for use on a continuing basis in the
activities of the Group and not for dealing purposes.

The difference between the cost of other securities and market value, where the
market value is higher than the cost, is not disclosed as its determination is not
practicable.

If the Group’s investment securities were sold at their year end valuation no tax
is expected to be payable as any such gains would be covered by available
capital losses.

19
Lloyds TSB Bank plc

Notes to the accounts

18 Assets transferred under sale and repurchase transactions 20 Shares in group undertakings Bank
Included in the balance sheet are assets subject to sale and repurchase £m
1114 44
agreements as follows: At 1 January 2002 16,944
Group
1111114 4 414 4 4 4 Bank
1111214 4 4 4 411 Additions 2,323
2002 2001 2002 2001 Capital repayments (646)
£m £m £m £m Disposals (408)
1114 44 1114 44 1114 44 1114 44
Treasury bills and other Revaluations (32)
11144 4
eligible bills 588 1,036 484 929
At 31 December 2002 18,181
Debt securities 5,651 4,498 4,517 3,180 qqqrr r
11144 4 11144 4 11144 4 11144 4
6,239 5,534 5,001 4,109 2002 2001
qqqrr r qqqrr r qqqrr r qqqrr r £m £m
1114 44 1114 44
These investments have been sold to third parties but, since the Group is Shares in banks 4,713 4,518
committed to reacquire them at a future date and at a predetermined price, they Shares in other group undertakings 13,468 12,426
11144 4 11144 4
are shown in the balance sheet.
Total – all unlisted 18,181 16,944
qqqrr r qqqrr r
On a historical cost basis, shares in group undertakings
19 Interests in joint ventures would have been included as follows:
Group Bank Cost Provisions Book value
£m £m £m £m £m
1114 44 1114 44 1114 44 11144 4 11144 4
At 1 January 2002 39 39 At 1 January 2002 14,907 15 14,892
Additions 21 21 Additions 2,323 – 2,323
Losses for the year (15) (15) Capital repayments (646) – (646)
11144 4 11144 4
Disposals (408) – (408)
At 31 December 2002 45 45 11144 4 11144 4 11144 4
qqqrr r qqqrr r At 31 December 2002 16,176 15 16,161
The Group’s and the Bank’s principal investments are in two joint ventures: qqqrr r qqqrr r qqqrr r
Group
1114interest
4 4 111 Nature of business
111111111 No deferred tax provision has been made against the liability which could arise
iPSL 19.5% of issued Cheque processing if group undertakings were disposed of at their balance sheet carrying value
because of surplus capital losses and the exemptions for disposals of substantial
ordinary share capital
shareholding investments.
Goldfish Holdings Limited 25.0% of issued Financial services
The principal group undertakings, all of which have prepared accounts to
ordinary share capital
31 December and whose results are included in the consolidated accounts of
During 2002 the Group contributed a further £21 million of capital to Goldfish Lloyds TSB Bank plc, are:
Holdings Limited. Percentage
of equity
In the year ended 31 December 2002 £31 million (2001: £27 million) of fees share
payable to iPSL have been included in the Group’s administrative expenses and Country of capital
registration / and voting
£6 million (2001: £6 million) of charges to iPSL have been included in the incorporation rights held Nature of business
Group’s income. The Group has also prepaid £6 million (2001: £8 million) of 23111144 4 112144 4 11111441112424 4 4
Cheltenham & Gloucester plc England *100% Mortgage lending and
fees in respect of 2003 and this amount is included in prepayments and retail investments
accrued income. Lloyds TSB Commercial England 100% Credit factoring
In the year ended 31 December 2002 £25 million (2001: £1 million) of interest Finance Limited
Lloyds TSB Leasing Limited England 100% Financial leasing
receivable from Goldfish Bank Limited and £12 million (2001: £22 million) of
The Agricultural Mortgage England 100% Long-term agricultural
charges to Goldfish Bank Limited in respect of administrative costs have been Corporation PLC finance
included in the Group’s income. At 31 December 2002 Goldfish Bank Limited The National Bank of New *100% Banking and financial
owed £430 million (2001: £611 million) to the Group, which is included in New Zealand Limited Zealand services
loans and advances to banks. In addition, at 31 December 2002, the Group had Lloyds TSB Bank (Jersey) Jersey *100% Banking and financial
made facilities available for Goldfish Bank Limited to borrow a further Limited services
Lloyds TSB Asset Finance England 100% Consumer credit, leasing
£420 million (2001: £239 million); these facilities are included in undrawn Division Limited and related services
commitments (note 45). Black Horse Limited England *100% Consumer credit, leasing
On a historical cost basis, the Bank’s interests in associated undertakings and and related services
Lloyds TSB Private Banking England 100% Private banking
joint ventures would have been included at £74 million (2001: £53 million). Limited
Included in the gross assets disclosed on the balance sheet is an investment of Lloyds TSB Scotland plc Scotland 100% Banking and financial
£8 million (2001: £5 million) in associated undertakings. services
Lloyds TSB General Insurance England *100% General insurance
Limited
Scottish Widows Investment England *100% Investment
Partnership Group Limited management
Abbey Life Assurance England *100% Life assurance
Company Limited
Lloyds TSB Insurance Services England *100% Insurance broking
Limited
Lloyds TSB Life Assurance England *100% Life assurance and
Company Limited other financial services
Scottish Widows plc Scotland *100% Life assurance
Scottish Widows Annuities Scotland *100% Life assurance
Limited
*Indirect interest.
The country of registration/incorporation is also the principal area of operation
for each of the above group undertakings except that the National Bank of New
Zealand Limited also operates through representative offices in the UK and
Hong Kong.

20
Lloyds TSB Bank plc

Notes to the accounts

21 Quasi-subsidiaries 23 Tangible fixed assets Operating


The Group has interests in a number of entities which, although they do not lease
Premises Equipment assets
meet the legal definition of a subsidiary, give rise to benefits that are in £m £m £m
substance no different from those that would arise if those entities were 11144 4 11144 4 11144 4
subsidiaries. As a consequence, these entities are consolidated in the same way Group
as if they were subsidiaries. Cost:
At 1 January 2002 1,074 2,270 1,771
The primary financial statements of these entities can be summarised as Exchange and other adjustments (1) (7) (3)
follows: Adjustments on acquisition 31 1 351
Additions 174 260 881
Equipment leasing Structured finance Disposals (82) (210) (428)
vehicles vehicles 11144 4 11144 4 11144 4
11111114 4444444 11111114 4444444
2002 2001 2002 2001 At 31 December 2002 1,196 2,314 2,572
£m £m £m £m 11144 4 11144 4 11144 4
1114 44 1114 44 1114 44 1114 44
Profit and loss account
Interest receivable – – 12 – Depreciation:
Interest payable (55) (41) (4) – At 1 January 2002 334 1,278 138
Other operating income 80 58 – – Exchange and other adjustments (2) 1 –
11144 4 11144 4 11144 4 11144 4 Charge for the year 64 286 292
Total income 25 17 8 – Disposals (19) (170) (215)
Operating expenses (24) (8) – – 11144 4 11144 4 11144 4
11144 4 11144 4 11144 4 11144 4 At 31 December 2002 377 1,395 215
Profit on ordinary activities 11144 4 11144 4 11144 4
before taxation 1 9 8 – Balance sheet amount
Tax on profit on ordinary activities 5 (6) – – at 31 December 2002 819 919 2,357
11144 4 11144 4 11144 4 11144 4 qqqrr r qqqrr r qqqrr r
Retained profit 6 3 8 – 4,095
qqqrr r qqqrr r qqqrr r qqqrr r qqqrr r
Balance sheet Balance sheet amount
Assets at 31 December 2001 740 992 1,633
Loans and advances to customers – – 329 – qqqrr r qqqrr r qqqrr r
Tangible fixed assets 1,307 911 – – 3,365
Other assets and prepayments 25 45 4 – qqqrr r
11144 4 11144 4 11144 4 11144 4
Premises Equipment
Total assets 1,332 956 333 – £m £m
11144 4 11144 4 11144 4 11144 4 1114 44 11144 4
Liabilities Bank
Deposits by banks 1,245 923 – – Cost:
Debt securities in issue – – 73 – At 1 January 2002 817 1,802
Other liabilities and accruals 77 29 2 – Exchange and other adjustments (1) (3)
Shareholders’ funds 10 4 258 – Adjustments on acquisition – 1
11144 4 11144 4 11144 4 11144 4 Additions 84 215
Total liabilities 1,332 956 333 – Disposals (69) (178)
qqqrr r qqqrr r qqqrr r qqqrr r 11144 4 11144 4
Cash flow statement At 31 December 2002 831 1,837
Net cash inflow (outflow) from 11144 4 11144 4
operating activities 422 391 (250) –
Depreciation:
At 1 January 2002 302 1,013
Exchange and other adjustments – 6
22 Intangible fixed assets Net Charge for the year 55 220
Cost Amortisation book value
£m £m £m Disposals (17) (148)
11144 4 11144 4 11144 4 11144 4 11144 4
Group
At 31 December 2002 340 1,091
Positive goodwill 11144 4 11144 4
At 1 January 2002 2,640 74 2,566 Balance sheet amount
Exchange and other adjustments 28 4 24 at 31 December 2002 491 746
Acquisitions (note 47) 96 – 96 qqqrr r qqqrr r
Charge for the year – 59 (59) 1,237
11144 4 11144 4 11144 4 qqqrr r
At 31 December 2002 2,764 137 2,627 Balance sheet amount
qqqrr r qqqrr r qqqrr r at 31 December 2001 515 789
Negative goodwill qqqrr r qqqrr r
At 1 January 2002 and 31 December 2002 23 23 – 1,304
qqqrr r qqqrr r qqqrr r qqqrr r
Net
Cost Amortisation book value
£m £m £m
11144 4 11144 4 11144 4
Bank
Goodwill
At 1 January 2002 13 2 11
Exchange and other adjustments (2) – (2)
Charge for the year – 1 (1)
11144 4 11144 4 11144 4
At 31 December 2002 11 3 8
qqqrr r qqqrr r qqqrr r

21
Lloyds TSB Bank plc

Notes to the accounts

23 Tangible fixed assets Group


1111114 4 414 4 4 4 Bank
1111214 4 4 4 411 26 Other assets Group
11111114 4444444 Bank
11111114 4444444
(continued) 2002 2001 2002 2001 2002 2001 2002 2001
£m £m £m £m £m £m £m £m
11144 4 11144 4 11144 4 11144 4 11144 4 11144 4 1114 44 1114 44
Balance sheet amount of Balances arising from derivatives
premises comprises: used for trading purposes
Freeholds 414 436 225 249 (note 46a) 3,428 2,090 3,563 2,284
Leaseholds 50 years and over Balances arising from derivatives
unexpired 132 36 19 17 used for hedging purposes 778 931 237 384
Leaseholds less than 50 years Settlement balances 76 570 11 526
unexpired 273 268 247 249 Other assets 954 850 480 403
11144 4 11144 4 11144 4 11144 4 11144 4 11144 4 11144 4 11144 4
819 740 491 515 5,236 4,441 4,291 3,597
qqqrr r qqqrr r qqqrr r qqqrr r qqqrr r qqqrr r qqqrr r qqqrr r

Land and buildings occupied


for own activities 749 664 435 456
27 Prepayments and accrued Group
11111114 4444444 Bank
11111114 4444444
The Group’s residual value exposure in respect of operating lease assets, all of income 2002 2001* 2002 2001*
which are expected to be disposed of at the end of the lease terms, was as £m £m £m £m
follows:
11144 4 11144 4 1114 44 1114 44
Interest receivable 931 843 1,283 1,172
2002 2001
Residual value expected to be recovered in: £m £m Deferred expenditure incurred
under cash gift and discount
1114 44 1114 44
1 year or less 272 156 mortgage schemes 201 256 – –
2 years or less but over 1 year 173 119 Other debtors and prepayments 1,183 1,199 493 750
5 years or less but over 2 years 542 388 11144 4 11144 4 11144 4 11144 4
Over 5 years 617 482 2,315 2,298 1,776 1,922
11144 4 11144 4 qqqrr r qqqrr r qqqrr r qqqrr r
Total exposure 1,604 1,145 *restated (see note 1).
qqqrr r qqqrr r

24 Lease commitments
Annual commitments under non-cancellable operating leases were:
2002 2002 2001 2001
Premises Equipment Premises Equipment
£m £m £m £m
11144 4 11144 4 11144 4 11144 4
Group
Leases on which the commitment
is due to expire in:
1 year or less 10 2 7 5
5 years or less but over 1 year 29 1 33 3
Over 5 years 188 – 181 –
11144 4 11144 4 11144 4 11144 4
227 3 221 8
qqqrr r qqqrr r qqqrr r qqqrr r
Bank
Leases on which the commitment
is due to expire in:
1 year or less 7 2 4 5
5 years or less but over 1 year 16 1 26 3
Over 5 years 158 – 156 –
11144 4 11144 4 11144 4 11144 4
181 3 186 8
qqqrr r qqqrr r qqqrr r qqqrr r

Obligations under finance leases


for the Group were: 2002 2001
Equipment Equipment
£m £m
11144 4 11144 4
Amounts payable in 1 year or less 1 3

25 Capital commitments
Capital expenditure contracted but not provided for at 31 December 2002
amounted to £117 million for the Group and £9 million for the Bank (2001:
Group £137 million; Bank £10 million). Of the capital commitments of the
Group, £107 million (2001: £125 million) relates to assets to be leased to
customers under operating leases.

22
Lloyds TSB Bank plc

Notes to the accounts

28 Long-term assurance business 28 Long-term assurance business (continued)


a Methodology c Analysis of income from long-term assurance business (continued)
For the purposes of the Group’s consolidated accounts, the value of the • The effects of changes in assumptions, other than economic assumptions,
shareholder’s interest in the long-term assurance business is calculated on an and other items;
embedded value basis. The embedded value is comprised of the net tangible
• Pension provisions (see d); and
assets of the life assurance subsidiaries, including any surplus retained in the
long-term business funds, which could be transferred to shareholders, and the • Endowment provision (see e).
present value of the in-force business. The value of the in-force business is Investment earnings: this represents the expected investment return on both the
calculated by projecting future surpluses and other net cash flows attributable net tangible assets and the value of the shareholder’s interest in the long-term
to the shareholder arising from business written by the balance sheet date and business account, based upon the economic assumptions made at the
discounting the result at a rate which reflects the shareholder’s overall risk beginning of the year.
premium attributable to this business.
Distribution costs: this represents the actual costs of acquiring new business
Surpluses arise following annual actuarial valuations of the long-term business during the year and includes commissions paid to independent financial
funds, which are carried out in accordance with the statutory requirements advisors and other direct sales costs.
designed to ensure and demonstrate the solvency of the funds. Future
surpluses will depend upon experience in a number of areas such as Operating profit is adjusted by the following items to arrive at income from
investment returns, lapse rates, mortality and administrative expenses. long-term assurance business:
Surpluses can be projected by making realistic assumptions about future Investment variance: this represents (a) the difference between the actual
experience, having regard to both actual experience and forecast long-term investment return in the year on investments backing shareholder funds and the
economic trends. Other net cash flows principally comprise annual expected return based upon the economic assumptions made at the beginning
management charges and other fees levied upon the policyholders by the life of the year; (b) the effect of these fluctuations on the value of in-force business;
assurance subsidiaries. and (c) other effects of changes in extraneous economic circumstances beyond
Changes in the embedded value, which are determined on a post-tax basis, are the control of management.
included in the profit and loss account and described as income from long-term Changes in economic assumptions: this represents the effect of changes in the
assurance business. For the purpose of presentation the change in this value economic assumptions referred to in g.
is grossed up at the underlying rate of corporation tax.
Income from long-term assurance business is set out below:
b Analysis of embedded value 2002 2001*
The embedded value included in the consolidated balance sheet comprises: £m
1114 44 £m
1114 44
2002 2001* New business contribution 413 374
£m £m Contribution from existing business
1114 44 1114 44
Net tangible assets of life companies including surplus 3,324 3,628 – expected return 312 348
Value of other shareholder’s interests in the – experience variances (1) 37
long-term assurance business 2,904 2,738 – changes in assumptions and other items 78 95
11144 4 11144 4 – pension provisions (see d) (40) (70)
6,228 6,366 – endowment provision (see e) (165) –
qqqrr r qqqrr r
Investment earnings 214 247
Movements in the embedded value balance have been as follows: Distribution costs (277) (247)
11144 4 11144 4
2002 2001*
£m £m Operating profit 534 784
1114 44 1114 44
Investment variance (892) (813)
At 1 January – as previously reported 6,366 6,549 Changes in economic assumptions (see g) 55 –
Prior year adjustment (note 1) – (53) 11144 4 11144 4
11144 4 11144 4 Income from long-term assurance business before tax (303) (29)
At 1 January – restated 6,366 6,496 Attributed tax 46 (11)
11144 4 11144 4
Exchange and other adjustments (14) (35)
Income from long-term assurance business after tax (257) (40)
Loss after tax (257) (40) qqqrr r qqqrr r
Capital injections 140 100
*restated (see note 1)
Dividends (7) (155)
11144 4 11144 4 d Pension provisions
At 31 December 6,228 6,366 During the early 1990s, there was increasing concern that many customers
qqqrr r qqqrr r
had been given poor advice when they were advised to set up their own
*restated (see note 1)
personal pension plan and that they would, in fact, have been in a better
c Analysis of income from long-term assurance business position if they had remained in, or joined, employer sponsored pension
Income from long-term assurance business included in the profit and loss schemes. The regulator of the pension industry (now the responsibility of the
account can be divided into those items comprising the operating profit of the Financial Services Authority) carried out an industry wide investigation into the
business and other items. Included within operating profit are the following conduct of business involving the transfer of pensions. The conclusion of this
items: investigation was that a large number of customers had been poorly advised,
by insurance companies and intermediaries across the industry. As a result of
New business contribution: this represents the value recognised at the end of this investigation the regulator established an action plan for the pensions
the year from new business written during the year after taking into account industry to follow in reviewing all cases of possible misselling and determining
the cost of establishing technical provisions and reserves. the necessary compensation. As the review of pension cases in the Group has
Contribution from existing business: this comprises the following elements: progressed, provisions have been established for the estimated cost of
compensation.
• The expected return arising from the unwinding of the discount applied to
the expected cash flows at the beginning of the year;
• Experience variances caused by the differences between the actual
experience during the year and the expected experience;

23
Lloyds TSB Bank plc

Notes to the accounts

28 Long-term assurance business (continued) 28 Long-term assurance business (continued)


d Pension provisions (continued) f Guaranteed annuity options (continued)
Movements in the provision over the last two years have been as follows: Having considered a range of possible outcomes, the Group currently expects
that the most likely outcome is that the balance in the Additional Account
2002 2001
available for this purpose will be sufficient to meet the cost of the enhanced
£m £m
1114 4 4 1114 44 benefits payable to the guaranteed annuity option policyholders, as well as
At 1 January 203 352 other contingencies. The cost of enhanced benefits, currently estimated to be
Accrual of interest on the provision 17 20 approximately £1.1 billion (2001: £1.4 billion) on a net present value basis,
Charge for the year 40 70 will be paid out over many years as policies mature. In the event that the
Compensation paid (223) (238) amount in the Additional Account proves, over time, to be insufficient, the
Guarantees* – (1) shortfall will be met by the Group. At this time, no provision is considered
11144 4 11144 4
necessary for such risk.
At 31 December 37 203
qqqrr r qqqrr r g Assumptions
*In some cases, rather than pay cash compensation directly into the customer’s Following the publication, in December 2001, of the Association of British
personal pension plan, the Group has guaranteed to ‘top up’ the customer’s Insurers’ detailed guidance for the preparation of figures using the achieved
pension income on retirement, to the level that they would have received under profits method of accounting, the Group has reviewed the way in which
the relevant occupational scheme. economic assumptions are set for the purposes of embedded value
calculations. The guidance requires that the assumptions should be reviewed
A review of the adequacy of the provision was carried out as at at each reporting date. In order to comply with this guidance, and achieve
31 December 2001. Lower stockmarket levels had had a significant impact on greater comparability with other major insurers, the Group has adopted this
total redress costs as the cost of restitution into company pension schemes rose approach.
as personal pension fund values reduced. As a result of this and the fact that
there was greater certainty as to the number and size of compensation claims The principal economic assumptions have been revised at 31 December 2002
to be paid, an additional provision of £70 million was made in the Group’s as follows:
results for the year ended 31 December 2001. 2002 2001
1114%4 4 1114%4 4
The adequacy of the provision has again been reviewed at 31 December
Risk-adjusted discount rate (net of tax) 7.35 8.50
2002, in the light of final experience as to the amount of compensation to be
Return on equities (gross of tax) 7.10 8.00
paid. Lower stockmarket levels have increased the final cost of redress and a
Return on fixed interest securities (gross of tax) 4.50 5.25
further provision of £40 million has been made in the year ended
Expenses inflation 3.30 3.00
31 December 2002.
The revised assumptions have resulted in a net credit to the profit and loss
e Endowment provision
account of £55 million.
In common with a number of companies in the life assurance industry, Abbey
Life Assurance Company Limited (‘Abbey Life’), one of the Group’s life Other assumptions used to derive the embedded value are as follows:
assurance subsidiaries, has been carrying out a review of the past sales of
• Assumed rates of mortality and morbidity are taken from published tables
certain endowment based and long-term savings products made, primarily in
adjusted for demographic differences. Assumptions in respect of lapse rates
the late 1980s and early 1990s, by the Abbey Life sales force prior to its
reflect the recent actual experience of the companies concerned.
disposal by the Group in February 2000. The Group has assessed the likely
implications for redress to policyholders and as a result a provision of • Current tax legislation and rates have been assumed to continue unaltered,
£165 million has been raised. except where future changes have been announced. The UK corporation tax
rate used for grossing up was 30 per cent (2001: 30 per cent). The
f Guaranteed annuity options
normalised investment earnings have been grossed up at a composite longer
After an extensive review of its existing practices, carried out in the light of
term tax rate of 17 per cent (2001: 17 per cent).
the judgement of the House of Lords in the guaranteed annuities case
Equitable Life vs Hyman, it was announced that Scottish Widows was revising • The value of the in-force business does not allow for future premiums under
the way it calculates benefits for guaranteed annuity policies with effect from recurring single premium business or non-contractual increments, which are
1 February 2002. As a result of this change, the terminal bonuses for included in new business when the premium is received. Department of
guaranteed annuity option policies were increased. Social Security rebates have been treated as recurring single premiums.
Under the terms of the transfer of the Scottish Widows business, a separate • Future bonus rates on with-profits business are set at levels which would
memorandum account was created within the With Profits Fund called the fully utilise the assets supporting the with-profits business. The proportion of
Additional Account. This Account had a value at 31 December 2002 of profits derived from with-profits business allocated to the shareholder has
approximately £1.5 billion (2001: £1.7 billion) and is available to meet any been assumed to continue at the current rate of one-ninth of the cost of the
additional costs of providing guaranteed benefits on transferred policies, bonus.
including guaranteed annuity option policies. The assets allocated to the h Sensitivities
Additional Account include certain hedge assets, to provide protection to the The table below shows the effect on both the embedded value at 31 December
With Profits Fund against the consequences of a future fall in interest rates. 2002 and the new business contribution for the year then ended of theoretical
The eventual costs of providing the enhanced benefits is dependent upon a changes in the main economic assumptions:
number of factors, including in particular: New
Embedded business
• The proportion of policyholders with a guaranteed annuity option policy who value contribution
choose to exercise their options; £m
11144 4 11144 4 £m

• The effect of future interest rate and mortality trends on the cost of annuities; As published 6,228 413
and Effect of a 1% increase in the discount rate (152) (27)
Effect of a 1% reduction in the discount rate 166 32
• The future investment performance of the With Profits Funds.
Effect of a 1% reduction in the return on equities (70) (12)

24
Lloyds TSB Bank plc

Notes to the accounts

28 Long-term assurance business (continued) 28 Long-term assurance business (continued)


i Balance sheet j Disclosures on a modified statutory solvency basis (continued)
The long-term assurance assets attributable to policyholders comprise: Income from long-term assurance business after tax reconciles to the loss
2002 2001* calculated on a modified statutory solvency basis as follows:
£m £m 2002 2001
1114 44 1114 44
£m £m
Investments 47,151 47,910 1114 44 1114 44
Premises and equipment 45 16 Income from long-term assurance business
Other assets 1,468 2,091 attributable to the shareholder after tax (257) (40)
(Increase) decrease in value-in-force (166) 111
11144 4 11144 4
48,664 50,017 11144 4 11144 4
(423) 71
Net tangible assets of life companies including surplus (3,324) (3,628)
11144 4 11144 4
45,340 46,389 Other differences:
qqqrr r qqqrr r – movement in deferred acquisition costs 45 (79)
Investments shown above comprise: – tax adjustment 55 150
Fixed interest securities 14,779 12,642 – other (4) 26
11144 4 11144 4
Stocks, shares and unit trusts 24,143 27,018 (Loss) profit for the financial year
Investment properties 3,623 3,722 – modified statutory solvency basis (327) 168
Other properties 121 121 qqqrr r qqqrr r
Mortgages and loans 53 102
A summarised balance sheet on a modified statutory solvency basis was as
Deposits 4,432 4,305
11144 4 11144 4 follows:
47,151 47,910 2002 2001
qqqrr r qqqrr r £m £m
1114 44 1114 44
The liabilities to policyholders comprise: Assets
Technical provisions: Investments 26,555 27,204
Long-term business provision (net of reinsurance) 23,217 24,129 Assets held to cover linked liabilities 20,996 21,098
Claims outstanding (net of reinsurance) 225 211 Other assets 1,718 2,210
11144 4 11144 4
Technical provisions for linked liabilities 20,996 21,098
Total assets 49,269 50,512
Fund for future appropriations 12 75 qqqrr r qqqrr r
Other liabilities 890 876
11144 4 11144 4 Liabilities
45,340 46,389 Shareholder’s funds 3,929 4,123
qqqrr r qqqrr r Fund for future appropriations 12 75
*restated (see note 1) Long-term business provision† 23,217 24,129
j Disclosures on a modified statutory solvency basis Technical provision for linked liabilities† 20,996 21,098
The individual statutory accounts of the Group’s life assurance subsidiaries are Other creditors 1,115 1,087
11144 4 11144 4
prepared under the modified statutory solvency basis, in the same way as the
Total liabilities 49,269 50,512
statutory accounts of listed insurance groups in the UK. The principal qqqrr r qqqrr r
difference between the modified statutory solvency basis and the embedded
value basis used for the preparation of the Group’s accounts is that accounts †Net of reinsurers’ share of technical provisions
prepared under the modified statutory solvency basis do not reflect the value of The value of long-term business atrributable to the shareholder on an
in-force business. embedded value basis reconciles to the net assets of the Group’s life and
Under the modified statutory solvency basis, the results of the Group’s long- pensions subsidiaries calculated on a modified statutory solvency basis as
term life and pensions businesses were as follows: follows:
2002 2001 2002 2001
£m £m £m £m
1114 44 1114 44 1114 44 1114 44
Premiums 5,524 4,854 Long-term assurance business attributable to the
Investment income 1,942 1,832 shareholder – embedded value basis 6,228 6,366
Other income 33 93 Value of in-force business (2,904) (2,738)
11144 4 11144 4 11144 4 11144 4
7,499 6,779 3,324 3,628
Claims (5,031) (4,957) Other differences:
Change in technical provisions 3,877 2,759 – deferred acquisition costs 430 385
Expenses (720) (625) – tax adjustment 205 150
Realised losses on investments (1,790) (1,031) – other adjustments (30) (40)
11144 4 11144 4
Unrealised losses on investments (4,445) (4,423)
Net tangible assets of life operations
Other charges (3) (8)
– modified statutory solvency basis 3,929 4,123
Tax attributable to long-term business 200 280 qqqrr r qqqrr r
Transfer from the fund for future appropriations 63 1,365
11144 4 11144 4
Balance on the technical account – long-term business (350) 139
Tax credit attributable to balance on the
technical account – long-term business (190) (103)
Income in shareholder fund 35 38
Expenses in shareholder fund (1) –
11144 4 11144 4
(Loss) profit on ordinary activities before tax (506) 74
Tax on (loss) profit on ordinary activities 179 94
11144 4 11144 4
(Loss) profit for the financial year (327) 168
qqqrr r qqqrr r

25
Lloyds TSB Bank plc

Notes to the accounts

29 Assets and liabilities 1414 4 4 4 4 4Group


4 4 4 14 4 411144 1414 4 4 4 4 4 4 Bank
4 4 14 4 411144 32 Debt securities in issue Group
11114 4 4 11144 4 4 4 Bank
11114 4 4 11144 4 4 4
denominated in foreign 2002 2001* 2002 2001* 2002 2001 2002 2001
currencies 11144 4£m
11144 4£m
11144 4£m
11144 4£m £m
11144 4 £m
11144 4 £m
1114 44 £m
1114 44
Assets: denominated in sterling 144,408 134,539 126,497 116,239 4Bonds and medium-term notes by
Assets: denominated in other residual maturity repayable:
Asset currencies 64,757 56,592 51,696 46,119 1 year or less 437 589 346 415
11144 4 11144 4 11144 4 11144 4
2 years or less but over 1 year 443 178 380 88
209,165 191,131 178,193 162,358 5 years or less but over 2 years 746 405 616 375
qqqrr r qqqrr r qqqrr r qqqrr r
Over 5 years 1,659 928 1,022 118
Liabilities: denominated in sterling 144,388 134,642 126,537 116,324 11144 4 1 11144 4 11144 4 11144 4
Liabilities: denominated in other 3,285 2,100 2,364 996
Liabilities currencies 64,777 56,489 51,656 46,034
11144 4 11144 4 11144 4 11144 4 Other debt securities by residual
209,165 191,131 178,193 162,358 maturity repayable:
qqqrr r qqqrr r qqqrr r qqqrr r 3 months or less 19,525 17,070 17,259 15,093
*restated (see note 1) 1 year or less but over 3 months 7,174 4,931 5,883 4,213
Assets and liabilities exclude long-term assurance assets attributable to 5 years or less but over 1 year 30 104 25 79
policyholders and liabilities to policyholders. Over 5 years 241 215 39 8

26,970 22,320 23,206 19,393


11144 4 11144 4 11144 4 11144 4
30 Deposits by banks Group
11114 4 4 14 4 4 41144 Bank
11114 4 4 14 4 4 41144 30,255 24,420 25,570 20,389
2002 2001 2002 2001 qqqrr r qqqrr r qqqrr r qqqrr r
11144 4£m
11144 4£m
11144 4£m
11144 4£m Included above:
Due to group undertakings 24 6
Repayable on demand 8,500 6,634 12,847 10,984
Other deposits by banks with agreed
maturity dates or periods of notice
33 Other liabilities Group Bank
by residual maturity repayable: 11114 4 4 11144 4 4 4 11114 4 4 11144 4 4 4
3 months or less 14,692 14,227 16,796 17,024 2002 2001 2002 2001
£m £m £m £m
1 year or less but over 3 months 1,634 2,529 2,066 2,960 11144 4 11144 4 1114 44 1114 44
5 years or less but over 1 year 487 751 997 988 Balances arising from derivatives
Over 5 years 130 169 162 126 used for trading purposes
11144 4 11144 4 11144 4 11144 4 (note 46a) 4,659 2,360 4,466 2,547
25,443 24,310 32,868 32,082 Balances arising from derivatives
used for hedging purposes 414 404 – –
qqqrr r qqqrr r qqqrr r qqqrr r
Included above:
Current tax 474 594 136 225
Due to group undertakings 8,734 9,090
Dividends 1,311 1,306 1,311 1,306
Settlement balances 49 542 4 501
Other liabilities 1,293 1,423 797 807
31 Customer accounts Group
11114 4 4 11144 4 4 4 Bank
11114 4 4 11144 4 4 4
11144 4 11144 4 11144 4 11144 4
2002 2001 2002 2001 8,200 6,629 6,714 5,386
£m £m £m £m
qqqrr r qqqrr r qqqrr r qqqrr r
11144 4 11144 4 1114 44 1114 44
Repayable on demand 88,242 80,811 64,612 59,715
Other customer accounts with
34 Accruals and deferred Group Bank
agreed maturity dates or 11114 4 4 11144 4 4 4 11114 4 4 11144 4 4 4
income 2002 2001 2002 2001
periods of notice by residual £m £m £m £m
maturity repayable: 11144 4 11144 4 1114 44 1114 44
3 months or less 19,047 19,913 14,368 15,181 Interest payable 1,335 1,291 1,276 1,203
1 year or less but over 3 months 3,099 2,888 1,666 1,971 Other creditors and accruals 2,361 2,272 1,050 1,194
11144 4 11144 4 11144 4 11144 4
5 years or less but over 1 year 4,140 3,369 5,668 3,088
Over 5 years 2,130 2,321 2,754 2,136 3,696 3,563 2,326 2,397
11144 4 11144 4 11144 4 11144 4 qqqrr r qqqrr r qqqrr r qqqrr r
116,658 109,302 89,068 82,091
qqqrr r qqqrr r qqqrr r qqqrr r
Included above:
Due to group undertakings 9,796 7,768
Due to fellow group undertakings 324 186 252 104

26
Lloyds TSB Bank plc

Notes to the accounts

35 Deferred tax Group


11114 4 4 11144 4 4 4 Bank
11114 4 4 11144 4 4 4
2002 2001* 2002 2001*
£m £m £m £m
11144 4 11144 4 1114 44 1114 44
Short-term timing differences (340) (257) (256) (203)
Accelerated depreciation allowances 1,670 1,682 (28) 9
11144 4 11144 4 11144 4 11144 4
1,330 1,425 (284) (194)
qqqrr r qqqrr r qqqrr r qqqrr r
4 Group Bank
£m £m
1114 44 1114 44
At 1 January 2002 – as
previously reported 1,733 125
Prior year adjustment (note 1) (308) (319)
11144 4 11144 4
At 1 January 2002 – restated 1,425 (194)
Exchange and other adjustments 25 (26)
Adjustments on acquisition (13) –
Tax provided (107) (64)
11144 4 11144 4
At 31 December 2002 1,330 (284)
qqqrr r qqqrr r
*restated (see note 1)
Deferred tax is recognised in respect of the retained earnings of overseas
subsidiaries and associates only to the extent that, at the balance sheet date,
dividends have been accrued as receivable or a binding agreement to distribute
past earnings in future has been entered into. Deferred tax balances have not
been discounted.

The deferred tax balance at 31 December 2002 for the Group does not include
any amounts in respect of the Group’s post-retirement benefit liability which is
shown on the balance sheet after deduction of a deferred tax asset of
£854 million (2001: a net post-retirement benefit asset of £281 million after
deduction of a deferred tax liability of £152 million) (note 44).

27
Lloyds TSB Bank plc

Notes to the accounts

36 Other provisions for liabilities and charges Vacant


Post- leasehold
Pension Insurance retirement property
obligations provisions healthcare and other Total
£m £m £m £m £m
11144 4 11144 4 11144 4 11144 4 1114 44
Group
At 1 January 2002 – as previously reported 34 204 75 88 401
Prior year adjustment (note 1) (34) – (75) – (109)
11144 4 11144 4 11144 4 11144 4 11144 4
At 1 January 2002 – restated – 204 – 88 292
Exchange and other adjustments – (2) – – (2)
Provisions applied – (210) – (40) (250)
Charge for the year – 233 – 88 321
11144 4 11144 4 11144 4 11144 4 11144 4
At 31 December 2002 – 225 – 136 361
qqqrr r qqqrr r qqqrr r qqqrr r qqqrr r
Bank
At 1 January 2002 – as previously reported 34 – 75 69 178
Prior year adjustment (note 1) (34) – (75) – (109)
11144 4 11144 4 11144 4 11144 4 11144 4
At 1 January 2002 – restated – – – 69 69
Exchange and other adjustments – – – (2) (2)
Provisions applied – – – (33) (33)
Charge for the year – – – 25 25
11144 4 11144 4 11144 4 11144 4 11144 4
At 31 December 2002 – – – 59 59
qqqrr r qqqrr r qqqrr r qqqrr r qqqrr r
Insurance provisions
The Group’s general insurance subsidiary maintains provisions for outstanding claims which represent the ultimate cost of settling all claims arising from events
which have occurred up to the balance sheet date and these include provisions for the cost of claims notified but not settled and for claims incurred but not yet
reported. In addition, in line with the requirements of the Insurance Companies (Reserves) Act 1995, claims equalisation provisions are maintained in relation to
property, credit and suretyship business. The majority of provisions in respect of claims will be settled in the following year, although new provisions will then be
required in respect of claims arising from that year. The level of the claims equalisation provision will be adjusted annually, taking into account the guidelines
contained in the legislation, and such provisions will be held for as long as the Group continues to write the relevant types of general insurance business.
The Group also carries provisions in respect of its obligations relating to UIC Insurance Company Limited (“UIC”), which is partly owned by the Group. The Group
has indemnified a third party against losses in the event that UIC does not honour its obligations under a re-insurance contract, which is subject to asbestosis and
pollution claims in the US. The ultimate exposure to claims in respect of the insurance business of UIC is uncertain. Accordingly, the provision has been based
upon an actuarial estimate of prospective claims, taking account of re-insurance arrangements protecting UIC and UIC’s available assets. Given the long-term
nature of many of the claims to which UIC is exposed, it is expected to be many years before the Group’s ultimate liability can be assessed with certainty.

Vacant leasehold property and other


Vacant leasehold property provisions are made by reference to a prudent estimate of expected sub-let income and the possibility of disposing of the Group’s interest
in the lease, taking into account conditions in the property market. These provisions are reassessed on an annual basis and will normally run off over the remaining
life of the leases concerned, currently averaging five years; where a property is disposed of earlier than anticipated, any remaining balance in the provision relating
to that property is released.

28
Lloyds TSB Bank plc

Notes to the accounts

Notes
37 Subordinated liabilities 1114 4444 1114Group
4 4 4 411144 4 3333 1114Bank
4 4 4 411144 4 3333
2002 2001* 2002 2001*
£m £m £m £m
**Undated loan capital: 11144 4 11144 4 1114 44 1114 44
Primary Capital Undated Floating Rate Notes: a
Series 1 (US$750 million) 466 516 466 516
Series 2 (US$500 million) 311 344 311 344
Series 3 (US$600 million) 373 412 373 412
113⁄4% Perpetual Subordinated Bonds 100 100 – –
6.625% Perpetual Capital Securities (€750 million) b 482 451 482 451
6.90% Perpetual Capital Securities callable 2007 (US$1,000 million) c, j 610 – 610 –
55⁄8% Undated Subordinated Step-up Notes callable 2009 (€1,250 million) g 807 757 807 757
Undated Step-up Floating Rate Notes callable 2009 (€150 million) a 97 91 97 91
65⁄8% Undated Subordinated Step-up Notes callable 2010 e 406 406 406 406
7.375% Undated Subordinated Step-up Notes callable 2012 (€430 million) – – 278 261
6.35% Step-up Perpetual Capital Securities callable 2013 (€500 million) d, g, j 322 – 322 –
7.834% Undated Subordinated Step-up Notes callable 2015 – – 248 248
5.57% Undated Subordinated Step-up Coupon Notes callable 2015 (¥20 billion) h 104 105 104 105
61⁄2% Undated Subordinated Step-up Notes callable 2019 e 267 266 267 266
8% Undated Subordinated Step-up Notes callable 2023 e 199 199 199 199
61⁄2% Undated Subordinated Step-up Notes callable 2029 e 455 455 455 455
6% Undated Subordinated Step-up Guaranteed Bonds callable 2032 e, j 500 – 500 –
11144 4 11144 4 11144 4 11144 4
5,499 4,102 5,925 4,511
qqqrr r qqqrr r qqqrr r qqqrr r
Dated loan capital:
Eurocurrency Zero Coupon Bonds 2003 (¥3 billion) 14 15 – –
Subordinated Fixed Rate Bonds 2003 (NZ$151 million) f 48 43 – –
Subordinated Floating Rate Notes 2004 a 10 15 – –
73⁄8% Subordinated Bonds 2004 400 399 400 399
Subordinated Floating Rate Notes 2004 a, i 100 100 100 100
Subordinated Floating Rate Notes 2007 200 200 – –
73⁄4% Subordinated Bonds 2007 299 299 299 299
Subordinated Fixed Rate Bonds 2007 (NZ$150 million) f – 43 – –
Subordinated Floating Rate Notes 2008 150 150 – –
51⁄4% Subordinated Notes 2008 (DM750 million) 249 234 249 234
105⁄8% Guaranteed Subordinated Loan Stock 2008 110 112 110 112
91⁄2% Subordinated Bonds 2009 99 99 99 99
Subordinated Step-up Floating Rate Notes 2009 callable 2004 (US$500 million) a 310 343 310 343
Subordinated Fixed Rate Bonds 2010 (NZ$100 million) f 33 29 – –
61⁄4% Subordinated Notes 2010 (€400 million) 259 244 259 244
Subordinated Floating Rate Notes 2010 (US$400 million) a 248 274 248 274
12% Guaranteed Subordinated Bonds 2011 118 121 118 121
43⁄4% Subordinated Notes 2011 (€850 million) 532 498 532 498
Subordinated Floating Rate Notes 2011 150 150 – –
Subordinated Fixed Rate Bonds 2011 (NZ$100 million) f 33 28 – –
Subordinated Floating Rate Notes 2011 100 100 – –
Subordinated Fixed Rate Bonds 2012 (NZ$125 million) f, j 41 – – –
Subordinated Fixed Rate Bonds 2012 (NZ$125 million) f, j 41 – – –
Subordinated Floating Rate Notes 2014 j 464 – 464 –
57⁄8 % Subordinated Notes 2014 j 148 – 148 –
65⁄8% Subordinated Notes 2015 344 343 344 343
Subordinated Floating Rate Notes 2020 (€100 million) a 65 61 65 61
95⁄8% Subordinated Bonds 2023 340 341 340 341
Subordinated Non-Interest Bearing Loan on rolling 6 year notice 150 150 150 150
qqqrr r qqqrr r qqqrr r qqqrr r
5,055 4,391 4,235 3,618
qqqrr r qqqrr r qqqrr r qqqrr r
Total subordinated liabilities 10,554 8,493 10,160 8,129
qqqrr r qqqrr r qqqrr r qqqrr r
*restated (see note 1)
These liabilities will, in the event of the winding-up of the issuer, be subordinated to the claims of depositors and all other creditors of the issuer.
**In certain circumstances, these notes and bonds would acquire the characteristics of preference share capital.
a) These notes bear interest at rates fixed periodically in advance based on London interbank rates.
b) In certain circumstances the interest payments on these securities can be deferred although in this case neither Lloyds TSB Bank plc nor Lloyds TSB Group plc can
declare or pay a dividend until any deferred payments have been made. In the event of a winding up of Lloyds TSB Bank plc, these securities will acquire the
characteristics of preference shares. The securities can be redeemed at par at the option of Lloyds TSB Bank plc on or after 25 October 2006.
c) In certain circumstances the interest payments on these securities can be deferred although in this case neither Lloyds TSB Bank plc nor Lloyds TSB Group plc can
declare or pay a dividend until payments are resumed. Any deferred payments will be made good on redemption of the securities. In the event of a winding up of
Lloyds TSB Bank plc, these securities will acquire the characteristics of preference shares. The securities can be redeemed at par at the option of Lloyds TSB Bank
plc on or after 22 November 2007.
d) In certain circumstances the interest payments on these securities can be deferred although in this case neither Lloyds TSB Bank plc nor Lloyds TSB Group plc can
declare or pay a dividend until any deferred payments have been made. In the event of a winding up of Lloyds TSB Bank plc, these securities will acquire the
characteristics of preference shares. The securities can be redeemed at par at the option of Lloyds TSB Bank plc on or after 25 February 2013.
e) At the callable date, the coupon on these Notes will be reset by reference to the applicable five year benchmark gilt rate.
f) These bonds bear interest, to be reset 5 years before redemption date, at a fixed margin over New Zealand Government stocks.
g) In the event that these Notes are not redeemed at the callable date, the coupon will be reset to a floating rate.
h) In the event that these Notes are not redeemed at the callable date, the coupon will be reset to a fixed margin over the then 5 year yen swap rate.
i) Exchangeable at the election of the Group for further subordinated floating rate notes.
j) Issued during 2002 primarily to finance the general business of the Group.

29
Lloyds TSB Bank plc

Notes to the accounts

37 Subordinated liabilities (continued) 39 Called-up share capital 2002 2001


Dated subordinated liabilities are repayable as follows: £m £m
1114 44 1114 44
Group
11111114 4444444 Bank
11111114 4444444 Authorised: ordinary shares of £1 each* 1,650 1,650
qqqrr r qqqrr r
2002 2001 2002 2001
£m
11144 4 £m
11144 4 £m
11144 4 £m
11144 4 Issued and fully paid: ordinary shares of £1 each
At 1 January and 31 December 1,542 1,542
1 year or less 67 5 – – qqqrr r qqqrr r
2 years or less but over 1 year 505 63 500 –
*Includes one cumulative floating rate preference share of £1.
5 years or less but over 2 years 499 654 299 499
Over 5 years 3,984 3,669 3,436 3,119 The company regarded by the directors as the ultimate parent company is Lloyds
11144 4 11144 4 11144 4 11144 4
TSB Group plc, which is also the parent undertaking of the only group of
5,055 4,391 4,235 3,618 undertakings for which consolidated accounts are drawn up and of which the
qqqrr r qqqrr r qqqrr r qqqrr r
Bank is a member. Copies of the group accounts may be obtained from
the company secretary, Lloyds TSB Group plc, 25 Gresham Street, London
EC2V 7HN.
38 Non-equity minority interests
Non-equity minority interests comprise:
2002 2001
40 Reserves Group Bank
£m £m
1114 44 1114 44 £m £m
1114 44 1114 44
Euro Step-up Non-Voting Non-Cumulative Preferred Share premium account:
Securities (€430 million) callable 2012* 278 261 At 1 January and 31 December 2002 2,960 2,960
Sterling Step-up Non-Voting Non-Cumulative Preferred qqqrr r qqqrr r
Securities callable 2015† 248 248 Revaluation reserve:
11144 4 11144 4
At 1 January 2002 2,048
Capital instruments 526 509
Decrease in net tangible assets of subsidiary
European Financial Institution Investments Partnership• 123 –
undertakings and joint ventures (47)
LM ABS Investment Partnership 45 – 11144 4 4
11144 4 11144 4
At 31 December 2002 2,001
694 509 qqqrr r
qqqrr r qqqrr r
Profit and loss account:
*These securities constitute limited partnership interests in Lloyds TSB Capital 1 At 1 January 2002 – as previously reported 7,444 5,396
L.P., a Jersey limited partnership in which Lloyds TSB (General Partner) Limited, Prior year adjustment (note 1) (404) (387)
a wholly owned subsidiary of the Group, is the general partner. Non-cumulative 11144 4 11144 4
income distributions accrue at a fixed rate of 7.375 per cent per annum up to At 1 January 2002 – restated 7,040 5,009
7 February 2012; thereafter they will accrue at a rate of 2.33 per cent above Exchange and other adjustments (3) (54)
EURIBOR, to be set annually. Actuarial losses recognised in post-retirement
benefit schemes (note 44) (2,331) –
†These securities constitute limited partnership interests in Lloyds TSB Capital 2
Loss for the year (123) (445)
L.P., a Jersey limited partnership in which Lloyds TSB (General Partner) Limited, 11144 4 11144 4
a wholly owned subsidiary of the Group, is the general partner. Non-cumulative
At 31 December 2002 4,583 4,510
income distributions accrue at a fixed rate of 7.834 per cent per annum up to qqqrr r qqqrr r
7 February 2015; thereafter they will accrue at a rate of 3.50 per cent above a
rate based on the yield of specified UK government stock. The Group profit and loss account reserves at 31 December 2002 include
£232 million (2001: £144 million) not presently available for distribution
Both of these issues were made under the limited subordinated guarantee of representing the Group’s share of the value of long-term assurance business in
Lloyds TSB Bank plc. In certain circumstances these preferred securities will be force and the surplus retained within the long-term assurance funds. The Group
mandatorily exchanged for preference shares in Lloyds TSB Group plc. Lloyds profit and loss account reserves at 31 December 2002 are stated after including
TSB Bank plc has entered into an agreement whereby dividends may only be a deficit of £2,077 million relating to the Group’s post-retirement defined benefit
paid on its ordinary shares if sufficient distributable profits are available for schemes (2001: surplus of £281 million).
distributions due in the financial year on these preferred securities.
The cumulative amount of premiums on acquisitions written off against Group
These securities constitute interests in European Financial Institution profit and loss account reserves during previous years amounts to £966 million
Investments Partnership, an English law general partnership in which the of which £887 million was within the last 10 years.
principal partner is Langbourn Holdings Limited, a wholly owned subsidiary of
the Group. The minority interests are entitled to 90 per cent of the partnership’s
41 Directors’ interests
profits. In the event of a winding-up, at least 90 per cent of the capital of the
The directors are also directors of Lloyds TSB Group plc and their interests in the
partnership would be returned to Langbourn Holdings Limited.
share and loan capital of Lloyds TSB Group plc and its subsidiaries are shown
These securities constitute interests in LM ABS Investment Partnership, an in the report and accounts of that company.
English law general partnership in which the principal partner is Lime Street
Holdings Limited, a wholly owned subsidiary of the Group. The minority
interests are entitled to 95 per cent of the partnership’s profits. In the event of a
winding-up, at least 85 per cent of the capital of the partnership would be
returned to Lime Street Holdings Limited.

30
Lloyds TSB Bank plc

Notes to the accounts

42 Directors’ emoluments 44 Pensions and other post-retirement benefits


The aggregate of the emoluments of the directors was £5,864,000 (2001: a The Group accounts
£5,749,000). The pension costs included in administrative expenses are comprised as
The aggregate of the amount of the gains made by directors on the exercise of follows:
Lloyds TSB Group plc share options was £9,000 (2001: £1,793,000). 2002 2001
£m £m
The number of directors to whom retirement benefits were accruing under aaaaaffffffffff aaaaaffffffffff

defined contribution and defined benefit pension schemes were 0 and 9 Defined contribution schemes 25 18
respectively (2001: 0 and 8). Defined benefit schemes 293 329
aaaaaffffffffff aaaaaffffffffff
The total for the highest paid director (Mr Daniels), was £1,263,000.
318
The amount of his accrued pension at the year end was £31,250, being his affffffffff aff347
ffffffff
pension entitlement based on pensionable service with the Group to The majority of the Group’s employees are members of the defined benefit
31 December 2002 but payable at normal retirement age. (The total for the
sections of Lloyds TSB Group Pension Schemes No’s 1 and 2. During the years
highest paid director in 2001 (Mr Fairey), was £882,000).
ended 31 December 2001 and 2002, the Group made no contributions to
these schemes. Since the defined benefit sections of these schemes are now
closed to new members and the age profile of the active members is
43 Related party transactions increasing, under the projected unit method, the current service cost will
a Transactions, arrangements and agreements involving directors and others increase as the members of the schemes approach retirement.
At 31 December 2002, transactions, arrangements and agreements entered
The latest full valuations of the schemes were carried out as at 30 June 2002;
into by the Group’s banking subsidiaries with directors and connected persons
these have been updated to 31 December 2002 by qualified independent
and with officers included:
2002 2002 2001 2001 actuaries. The last full valuations of other group schemes were carried out on
Number of Total Number of Total a number of different dates; these have been updated to 31 December 2002
persons4 4 £0004 4 persons4 4 £0004 4
1114 1114 1114 1114 by qualified independent actuaries or, in the case of the Scottish Widows
Loans and credit card transactions: Retirement Benefits Scheme, by a qualified actuary employed by Scottish
Directors and connected persons 4 3,334 7 1,343 Widows.
Officers 31 3,930 28 4,113
The principal assumptions used in the scheme valuations were as follows:
During the year three officers purchased cars from the Group for a total
31 December 31 December
consideration of £37,000. 2002 2001
% %
b Group undertakings aaaaaffffffffff aaaaaffffffffff

Details of the principal group undertakings are given in note 20. In accordance Rate of inflation 2.30 2.50
with FRS 8, transactions or balances with group entities that have been Rate of salary increases 3.83 4.04
eliminated on consolidation are not reported. Rate of increase for pensions in payment and
c Joint ventures deferred pensions 2.30 2.50
Details of the Group’s joint ventures are provided in note 19. Information Discount rate 5.60 6.00
relating to transactions entered into between Group undertakings and the joint In addition, the Group operates a number of schemes which provide post-
ventures and details of outstanding balances at retirement healthcare benefits to certain employees, retired employees and
31 December 2002 are also shown in note 19. their dependent relatives. The principal scheme relates to former Lloyds Bank
d Long-term assurance business staff and under this scheme the Group has undertaken to meet the cost of post-
retirement healthcare for all eligible former employees (and their dependants)
The Group enters into certain transactions with its long-term assurance who retired prior to 1 January 1996. For retirements subsequent to this date,
businesses, which cannot be eliminated in the consolidated accounts the Group will meet a reducing proportion of the cost until 31 December 2004,
because of the basis of accounting used for the Group’s long-term assurance after which date the only obligation will be in respect of the pre 1 January
businesses. After taking into account legally enforceable netting agreements, at 1996 retirements.
31 December 2002 Group entities owed £1,372 million (2001:
£1,186 million) and were owed £145 million (2001: £299 million); these Included within other finance income is an interest cost of £4 million (2001:
amounts are included in customer accounts and loans and advances to £3 million) in respect of these defined benefit post-retirement healthcare
customers respectively. In addition, fees of £76 million (2001: £62 million) schemes.
were received, and fees of £35 million (2001: £28 million) were paid, in
For the principal post-retirement healthcare scheme, the latest actuarial
respect of asset management services.
valuation of the liability was carried out at 31 December 2000; this valuation
Certain administrative properties used by Scottish Widows are owned by the has been updated to 31 December 2002 by qualified independent actuaries.
long-term assurance funds. During 2002 Scottish Widows paid rent to the The principal assumptions used were as set out above, except that the rate of
long-term assurance funds amounting to £5 million (2001: £4 million). In increase in healthcare premiums has been assumed at 4.86 per cent.
addition, at 31 December 2002, the long-term assurance funds owned
31 million ordinary shares in the Bank’s parent company Lloyds TSB Group
plc (2001: 31 million shares).
e Pension funds
Group entities provide a number of banking and other services to the Group ’s
pension funds, which are conducted on similar terms to third party transactions.
At 31 December 2002, the Group’s pension funds had call deposits with Lloyds
TSB Bank plc amounting to £89 million (2001: £572 million).

31
Lloyds TSB Bank plc

Notes to the accounts

44 Pensions and other post-retirement benefits (continued) 44 Pensions and other post-retirement benefits (continued)
a The Group accounts (continued) a The Group accounts (continued)
The assets of the Group’s defined benefit schemes and the expected rates of The amounts reported on the Group’s balance sheet are comprised of:
return are summarised as follows: 2002 2001
Expected Expected £m £m
aaaaaffffffffff aaaaaffffffffff
long-term long-term
Fair value rate of Fair value rate of Market value of assets 9,083 11,126
at return at at return at Present value of scheme liabilities (12,014) (10,693)
31 December 31 December 31 December 31 December aaaaaffffffffff aaaaaffffffffff
2002 2002 2001 2001
£m % £m % (Deficit) surplus in the schemes (2,931) 433
Related deferred tax asset (liability) 854 (152)
aaaaaffffffffff aaaaaffffffffff aaaaaffffffffff aaaaaffffffffff

Market values of scheme assets: aaaaaffffffffff aaaaaffffffffff


Equities 7,175 8.4 7,779 8.0 Net post-retirement benefit (liability) asset
Fixed interest securities 557 4.5 1,835 5.1
affffffffff aff281
(2,077)
ffffffff
Property 791 6.9 798 7.1 Disclosed in the accounts as follows:
Other 560 5.4 714 4.1 Post-retirement benefit asset – 356
aaaaaffffffffff aaaaaffffffffff Post-retirement benefit liability (2,077) (75)
Total fair value of scheme assets 9,083 11,126 aaaaaffffffffff aaaaaffffffffff

affffffffff aff281
(2,077)
af fffffffff af fffffffff
Other finance income is comprised of:
ffffffff
2002 2001 The movements in the (deficit) surplus in the schemes over the year have been
£m £m as follows:
aaaaaffffffffff aaaaaffffffffff

Expected return on scheme assets 817 844 2002 2001


£m £m
Interest cost of scheme liabilities (652) (537) aaaaaffffffffff aaaaaffffffffff
aaaaaffffffffff aaaaaffffffffff Surplus at beginning of year 433 3,325
aff165
ffffffff aff307
ffffffff Exchange and other adjustments
Other finance income
26
165

307
The pension and other post-retirement benefit cost in respect of defined benefit
Current service costs (244) (212)
schemes is comprised of:
Contributions 37 3
2002 2001 Past service costs (49) (117)
£m £m
aaaaaffffffffff aaaaaffffffffff Actuarial loss (3,299) (2,873)
Current service cost 244 212 aaaaaffffffffff aaaaaffffffffff

(Deficit) surplus at end of year


Past service costs 49
aaaaaffffffffff
117
aaaaaffffffffff
affffffffff aff433
(2,931)
ffffffff
Defined benefit costs b The Bank accounts
aff293
ffffffff aff329
ffffffff The majority of the Bank’s employees are members of the Group’s two main
The amounts recognised in the statement of total recognised gains and losses pension schemes, Lloyds TSB Group Pension Schemes No’s 1 and 2, along
are comprised of: with employees of a number of the Bank’s subsidiaries. Because it is not
2002 2001 possible to separately identify the amount of any surpluses or deficits in these
£m £m schemes relating to each employing company, in the accounts of the Bank,
these schemes are accounted for as defined contribution schemes.
aaaaaffffffffff aaaaaffffffffff

Actual return less expected return on scheme


assets (2,582) (2,015)
Experience gains and losses arising on scheme
liabilities (240) (71)
Effect of changes in demographic and financial
assumptions (477) (787)
aaaaaffffffffff aaaaaffffffffff
Actuarial losses recognised (3,299) (2,873)
Deferred tax thereon 968 863
aaaaaffffffffff aaaaaffffffffff
Amount recognised in the statement of total
recognised gains and losses (2,331) (2,010)
af fffffffff affffffffff
The experience gains and losses recognised can also be interpreted as follows:
2002 2001
£m £m
aaaaaffffffffff aaaaaffffffffff

Actual return less expected return on scheme assets


Amount (2,582) (2,015)
Percentage of scheme assets at balance sheet date 28.4% 18.1%
Experience gains and losses arising on scheme liabilities
Amount (240) (71)
Percentage of scheme liabilities at balance sheet date 2.0% 0.7%
Total amount recognised in the statement of total
recognised gains and losses
Amount (3,299) (2,873)
Percentage of scheme liabilities at balance sheet date 27.5% 26.9%

32
Lloyds TSB Bank plc

Notes to the accounts

45 Contingent liabilities and commitments 46 Derivatives and other financial instruments


a Contingent liabilities and commitments arising out of banking The Group’s activities can be divided into three broad categories: banking and
transactions mortgages, insurance and investments, and trading activities.
Group Bank
11114 4 4 4 4 4 11144 11114 4 4 14 4 4 1144 Banking and mortgage activities represent the most significant element of the
4 2002 2001 2002 2001
Group’s business in terms of profit, assets and exposure to risk. These activities
£m £m £m £m
11144 4 11144 4 11144 4 11144 4 are entered into in both the UK and overseas and principally comprise the
Contingent liabilities: Group’s core business of lending and deposit taking, involving a full range of
Acceptances and endorsements 1,879 2,243 1,880 2,244 personal and corporate customers. In entering into this business, the Group’s
Guarantees 5,927 3,789 5,865 3,739 objective is to secure a margin between the interest paid to customers on their
Other: deposits and interest received on amounts advanced. In order to do this, more
Other items serving as direct complex financial instruments, such as derivatives, are used as a means of
credit substitutes 1,103 460 1,103 441 reducing risk by hedging exposures to movements in exchange rates, interest
Performance bonds and other rates or other market variables.
transaction-related contingencies 1,436 1,469 1,438 1,447
Within its banking activities, the Group has a number of treasury operations
Other contingent liabilities 1 2 1 2
that are responsible for utilising surplus funds and meeting funding shortfalls
by entering into transactions in the money markets. Portfolios of debt securities
2,540 1,931 2,542 1,890
11144 4 11144 4 11144 4 11144 4 and treasury bills are held to provide a source of liquidity. It is the Group’s
10,346 7,963 10,287 7,873 intention to hold these investments until maturity although in certain
qqqrr r qqqrr r qqqrr r qqqrr r circumstances they may be disposed of before then where, for example, the
need to hold the investment no longer applies. Any profits or losses arising from
Commitments:
a sale of this kind are recognised immediately.
Documentary credits and other
short-term trade-related transactions 289 354 372 362 Insurance and investment businesses provide general insurance and market
Forward asset purchases and savings and investment products both within and outside the banking
forward forward deposits placed 394 783 553 764 customer bases. Fund management services are also provided although, whilst
Undrawn note issuing and revolving involving external clients, this activity is currently dominated by the
underwriting facilities 32 35 – – management of internal group funds.
Undrawn formal standby facilities,
Trading activities are restricted to a few highly specialist authorised trading
credit lines and other commitments
centres, the principal one being the Group’s Treasury department in London.
to lend:
Most of the Group’s trading activity is to meet the requirements of customers
Less than 1 year maturity 49,417 42,594 45,876 39,743
for foreign exchange and interest rate products, from which the Group is able
1 year or over maturity 14,372 9,576 13,272 8,862
11144 4 11144 4 11144 4 11144 4 to earn a spread on the rates charged. However, interest rate and exchange
64,504 53,342 60,073 49,731 rate positions are taken out using derivatives (forward foreign exchange
qqqrr r qqqrr r qqqrr r qqqrr r contracts, interest rate swaps and forward rate agreements) and on-balance
sheet instruments (mainly debt securities). The objective of these positions is
Incurred on behalf of group to earn a profit from favourable movements in market rates. Accordingly, these
undertakings: transactions are reflected in the accounts at their fair value and gains and
Contingent liabilities 80 78 losses shown in the profit and loss account as dealing profits.
Commitments 431 250
11144 4 11144 4 Risk
511 328 The board is responsible for determining the long-term strategy of the business,
the markets in which the Group will operate and the level of risk acceptable to
qqqrr r qqqrr r
b Contingent liabilities arising out of past sales of savings and investment the Group in each area of its business. The principal risks arising from the
products Group’s use of financial instruments are as follows:
In common with other companies providing savings and investment products Credit risk
to retail consumers, matters arise from time to time as a result of customer Credit risk arises from extending credit in all forms in the Group’s banking and
complaints or investigations by the regulator requiring remedial action to be trading activities, where there is a possibility that a counterparty may default.
taken, which may include the payment of compensation. The Group has dedicated standards, policies and procedures to control and
One such matter relates to the sale of life assurance products related to the monitor all such risks. Lloyds TSB Group Risk’s responsibilities in respect of
repayment of residential mortgages. Falling investment returns have led to credit risk include the following:
increased concern that the value of some of these policies will be less than the • Formulation of high level credit policies designed to ensure a balanced and
amount required to repay the mortgage. Certain customers have complained managed approach to the identification and mitigation of credit risk. These
that this risk was not properly explained to them at the time of sale. Following policies provide a standard framework within which Group businesses
a review of past sales made by Abbey Life a provision of £165 million has structure their individual policies and rules. Lloyds TSB Group Risk reviews,
been made for the estimated cost of redress (note 28e). approves and monitors credit policy documents established for individual
Other complaints, including those related to the sale of life assurance products, businesses.
are dealt with on a case by case basis and where appropriate compensation is • Provision of lending guidelines. These define the responsibilities for lending
paid. Provision has been made, based upon the level of complaints, for the officers and provide a disciplined and focused benchmark for sound credit
estimated cost of redress which is not significant. If the position changes, decisions. Clear guidance is provided on the Group’s attitude towards and
further provisions may be required. appetite for credit exposure on different market sectors, industries and
Concerns have also been expressed over the appropriateness of certain sales products.
of stockmarket related savings products. In this regard the Group is carrying • Provision of a group rating system. All business units are required to operate
out, in conjunction with the regulator, an investigation into the sales of the an authorised rating system that complies with the Group’s standard
Extra Income & Growth Plan. This investigation is expected to be completed methodology. The Group uses a ‘Master Scale’ rating structure with ratings
during 2003 when the Group will be in a position to estimate the financial corresponding to a range of probabilities of future default.
effect.
• Establishment and maintenance of the Group’s large exposure policy.
Exposure to individual counterparties, groups of counterparties or customer

33
Lloyds TSB Bank plc

Notes to the accounts

46 Derivatives and other financial instruments (continued) 46 Derivatives and other financial instruments (continued)
risk segments is controlled through a tiered hierarchy of delegated Lloyds TSB Group Balance Sheet Management (GBSM) specifically focuses on
sanctioning authorities. Approval requirements for each decision are based the management of interest rate risk in the Group’s retail portfolios, including
on the transaction amount, the customer’s aggregate facilities, credit risk mortgages, and in the Group’s capital funds. GBSM reports to an Asset and
ratings and the nature and term of the risk. Liability Committee. The Group’s policy is to optimise the stability of future net
interest income, which is achieved by entering into hedging transactions using
• Control of bank exposures. In-house proprietary rating systems are used to
interest rate swaps and other financial instruments.
approve bank facilities on a group basis.
• Monitoring of scorecards. The Group utilises statistically-based decisioning Liquidity risk
techniques (primarily credit scoring and performance scoring) for its principal A Group Liquidity Policy is in place which requires a common methodology for
consumer lending portfolios. Lloyds TSB Group Risk reviews and monitors measuring liquidity across the Group. The methodology derives a liquidity ratio
new and material changes to scorecards. calculated by taking the sum of liquid assets, five-day wholesale inflows and
back-up lines, and then dividing this by the sum of five-day wholesale outflows
• Control of cross-border exposures. Country limits are authorised and and a percentage of retail maturities and contingent claims drawable over the
managed by a dedicated unit, using an in-house rating system which takes next five days.
into account economic and political factors.
The Liquidity Policy requires all authorised local treasury operations to
• Maintenance of a centralised facilities database. Lloyds TSB Group Risk maintain a liquidity ratio of over 100 per cent, in addition to ensuring
operates a centralised database of large corporate, sovereign and bank compliance with local regulatory requirements.
facilities designed to ensure that a consistent aggregation policy is
maintained throughout the Group. It is the responsibility of local line management to ensure that the Liquidity
Policy is met, and the sources and maturities of assets and liabilities are
• Formulation of concentration limits on certain industries and sectors. Lloyds
continually managed and appropriately diversified to avoid any undue
TSB Group Risk sets sector caps that reflect risk appetite and monitors
concentration as market conditions evolve. Compliance is monitored by regular
exposures to prevent excessive concentration of risk.
liquidity returns to Group Risk Management.
• Portfolio analysis. In conjunction with Lloyds TSB Group Risk, group
Operational risk
businesses identify and define portfolios of credit and related risk exposures
Operational risk is the risk of loss resulting from inadequate or failed internal
and the key benchmarks, behaviours and characteristics by which those
processes, people and systems, or from external events. For internal purposes,
portfolios are managed in terms of credit risk exposure. This entails the
reputational impact is also included.
production and analysis of regular portfolio monitoring reports for review by
Lloyds TSB Group Risk. Business units have primary responsibility for identifying and managing their
• Communication and provision of general guidance on all credit-related risk operational risks. They employ internal control techniques to reduce their
issues, including regulatory changes and environmental risk policy, to likelihood or impact to tolerable levels within the Group’s risk appetite. Where
promote consistent and best practice throughout the Group. appropriate, risk is mitigated by way of insurance.

Day-to-day credit management and asset quality within each business unit is Lloyds TSB Group Risk’s responsibilities in relation to operational risk include
the primary responsibility of the business unit directors. Each business unit has defining high-level operational risk policies to ensure a comprehensive and
in place established credit processes which are consistent with corresponding consistent approach to the identification and management of operational risk;
Group policies. Authority to delegate lending authorities within business units implementation of a Group-wide standard methodology to ensure consistency
rests with officers holding divisional delegated lending authority. All material in the identification, assessment and management of operational risk;
authorities are advised to Lloyds TSB Group Risk. communication and provision of general guidance on operational risk related
issues, including regulatory changes and developments in the measurement
Specialist units are established within group business units to provide, for and management of operational risk, to promote best practice throughout the
example: intensive management and control; security perfection, maintenance Group; continuous review and improvement of all aspects of operational risk
and retention; expertise in documentation for lending and associated products; management to reflect developments in industry best practice and regulatory
sector-specific expertise; and legal services applicable to the particular market requirements, e.g. the New Basel Accord; approval from a risk perspective of
place and product range offered by the business unit. all new products launched throughout the Group, to ensure their risks are
Market risk understood by the business and managed appropriately; and identification of
Market risk is the risk of losses being incurred as a result of adverse risk through formal risk reviews, covering specific risks, activities, business
movements in interest or exchange rates or other market variables. Market risk sectors or products, and ensuring that prompt and pre-emptive action is taken
arises in all areas of the Group’s activities and is managed by a variety of to address any actual or perceived risks that may emerge, whether specific to
different techniques. the Group or to the industry generally.

Trading activities are restricted to a few highly specialist trading centres and the Insurance risk
level of exposure is strictly controlled and monitored within approved limits The Group offers insurance products to its customers, and actively reviews the
locally and centrally. extent to which the associated risk is underwritten internally, or reinsured with
external underwriters.
A variety of techniques are used to quantify the market risk arising from the
Group’s banking and trading activities. These reflect the nature of the business The Financial Services Authority sets down minimum requirements for
activity, and include simple interest rate gapping, open exchange positions, solvency and reserving for all classes of insurance, which are carefully
sensitivity analysis and Value at Risk (VaR). Stress testing and scenario monitored by the relevant business units within the Group. The retained risk
analysis are also used in certain portfolios, and at Group level, to simulate level is carefully controlled and monitored, with close attention being paid to
extreme conditions to supplement these core measures. the analysis of underwriting experience, product design, policy wordings,
adequacy of reserves, solvency management and regulatory requirements.
Various parameters are used to calculate the value at risk on a given portfolio
of positions, thus avoiding undue reliance on a single measure. Based on the Investment strategy is determined by the term and nature of the underwriting
commonly quoted 95 per cent confidence level, assuming positions are held liabilities and asset/liability matching positions are actively monitored. General
overnight and using observation periods with greater emphasis given to more insurance exposure to accumulations of risk and possible catastrophes is
recent data, during 2002 the value at risk on the Group’s global trading mitigated by reinsurance arrangements which are broadly spread over different
averaged £1.26 million (2001: £1.17 million) with a maximum of £2.07 reinsurers. Appropriate reinsurance arrangements also apply within the life and
million (2001: £1.62 million) and a minimum of £0.93 million (2001: pensions businesses.
£0.78 million). The figure at 31 December 2002 was £1.02 million (2001:
£1.62 million).

34
Lloyds TSB Bank plc

Notes to the accounts

46 Derivatives and other financial instruments (continued) 46 Derivatives and other financial instruments (continued)
Derivatives a Derivatives (continued)
Derivatives are used to meet the financial needs of customers, as part of the Notional Fair values
Group’s trading activities and to reduce its own exposure to fluctuations in principal 11111111144
amount Assets Liabilities
interest and exchange rates. The principal derivatives used by the Group are 31 December 2001 £m £m £m
interest rate and exchange rate contracts; particular attention is paid to the 11144 4 1114 44 1114 44
liquidity of the markets and products in which the Group trades to ensure that Exchange rate contracts:
there are no undue concentrations of activity and risk. Spot, forwards and futures 95,895 1,035 1,038
Currency swaps 6,737 223 152
Interest rate related contracts include interest rate swaps, forward rate Options purchased 3,825 11 –
agreements and options. An interest rate swap is an agreement between two Options written 3,492 – 9
parties to exchange fixed and floating interest payments, based upon interest 11144 4 11144 4 11144 4
rates defined in the contract, without the exchange of the underlying principal 109,949 1,269 1,199
amounts. Forward rate agreements are contracts for the payment of the qqqrr r qqqrr r qqqrr r
difference between a specified rate of interest and a reference rate, applied to Interest rate contracts:
a notional principal amount at a specific date in the future. Interest rate swaps 287,017 4,085 4,607
Forward rate agreements 54,171 78 84
Exchange rate related contracts include forward foreign exchange contracts, Options purchased 8,887 73 –
currency swaps and options. A forward foreign exchange contract is an Options written 3,993 – 58
agreement to buy or sell a specified amount of foreign currency on a specified Futures 35,112 – –
future date at an agreed rate. Currency swaps generally involve the exchange 11144 4 11144 4 11144 4
of interest payment obligations denominated in different currencies; the 389,180 4,236 4,749
exchange of principal can be notional or actual.
qqqrr r qqqrr r qqqrr r
Equity contracts 4,580 428 255
Equity derivatives are also used by the Group as part of its equity based retail qqqrr r qqqrr r qqqrr r
product activity, whereby index-linked equity options are purchased to Effect of netting (3,843) (3,843)
eliminate the Group’s exposure to fluctuations in various international stock 11144 4 11144 4
exchange indices. Balances arising from off-balance sheet
financial instruments 2,090 2,360
a Derivatives qqqrr r qqqrr r
Group Non-trading
Trading Through intra company and intra group transactions, Group companies
The notional principal amounts and fair values (which, after netting, are the establish non-trading derivatives positions with the Group’s independent
carrying values) of trading instruments entered into with third parties were as trading operations, which then enter into similar positions with third parties.
follows: The notional principal amounts and fair values of non-trading instruments
entered into with third parties were as follows:
Notional Fair values
principal 11111111144 Notional Fair values
amount Assets Liabilities principal 11111111144
31 December 2002 £m4 4 £m4 4 £m4 4 amount Positive Negative
1114 1114 1114 31 December 2002 1114 £m4 4 1114 £m4 4 £m4 4
1114
Exchange rate contracts:
Exchange rate contracts:
Spot, forwards and futures 94,250 2,064 2,735 Spot, forwards and futures 146 16 4
Currency swaps 9,019 232 310 Currency swaps 59 4 1
Options purchased 4,468 87 8 11144 4 11144 4 11144 4
Options written 4,303 – 103 205 20 5
11144 4 11144 4 11144 4 qqqrr r qqqrr r qqqrr r
112,040 2,383 3,156 Interest rate contracts:
qqqrr r qqqrr r qqqrr r Interest rate swaps 17,261 129 223
Interest rate contracts: Forward rate agreements 1,279 2 2
Interest rate swaps 259,911 5,473 5,999 Options written 41 – 1
Forward rate agreements 41,768 35 37 11144 4 11144 4 11144 4
Options purchased 8,248 105 – 18,581 131 226
qqqrr r qqqrr r qqqrr r
Options written 4,899 – 152
Effect of netting (36) (36)
Futures 18,963 – – 11144 4 11144 4
11144 4 11144 4 11144 4
333,789 5,613 6,188 115 195
qqqrr r qqqrr r qqqrr r qqqrr r qqqrr r
Equity contracts 5,662 608 491
qqqrr r qqqrr r qqqrr r Notional Fair values
Effect of netting (5,176) (5,176) principal 11111111144
11144 4 11144 4 amount Positive Negative
31 December 2001 £m4 4 £m4 4 £m4 4
Balances arising from off-balance sheet 1114 1114 1114
Exchange rate contracts:
financial instruments 3,428 4,659
qqqrr r qqqrr r Spot, forwards and futures 146 3 1
Currency swaps 70 9 1
11144 4 11144 4 11144 4
216 12 2
qqqrr r qqqrr r qqqrr r
Interest rate contracts:
Interest rate swaps 2,919 164 68
Forward rate agreements 62 – –
11144 4 11144 4 11144 4
2,981 164 68
qqqrr r qqqrr r qqqrr r
Effect of netting (39) (39)
11144 4 11144 4
137 31
qqqrr r qqqrr r
35
Lloyds TSB Bank plc

Notes to the accounts

46 Derivatives and other financial instruments (continued) 46 Derivatives and other financial instruments (continued)
a Derivatives (continued) a Derivatives (continued)
The aggregate carrying value of non-trading derivatives with a positive fair value Bank
was an asset of £54 million (2001: an asset of £18 million) and with a Trading
negative fair value was an asset of £9 million (2001: an asset of £1 million). The notional principal amounts and fair values (which, after netting, are the
carrying values) of trading instruments entered into with third parties were as
The maturity of the notional principal amounts and replacement cost of both
follows:
trading and non-trading instruments entered into with third parties was:
Notional Fair values
Under 1 to 5 Over 5 principal 1111111144444
1 year years years Total amount Assets Liabilities
£m £m £m £m 31 December 2002 £m £m £m
11144 4 11144 4 11144 4 11144 4 11144 4 11144 4 1114 44
31 December 2002 Exchange rate contracts:
Exchange rate contracts: Spot, forwards and futures 88,728 1,976 2,429
Notional principal amount 102,559 6,888 2,798 112,245 Currency swaps 8,004 208 296
Replacement cost 2,209 108 86 2,403 Options purchased 2,326 57 11
Options written 1,535 – 43
Interest rate contracts: 11144 4 11144 4 11144 4
Notional principal amount 150,883 149,631 51,856 352,370 100,593 2,241 2,779
Replacement cost 850 2,682 2,212 5,744 qqqrr r qqqrr r qqqrr r
Interest rate contracts:
Equity contracts: Interest rate swaps 255,331 5,750 6,096
Notional principal amount 1,130 3,714 818 5,662 Forward rate agreements 40,533 34 37
Replacement cost 3 531 74 608 Options purchased 8,309 106 –
Options written 4,873 – 152
Total: Futures 16,645 – –
Notional principal amount 254,572 160,233 55,472 470,277
11144 4 11144 4 11144 4
Replacement cost 3,062 3,321 2,372 8,755 325,691 5,890 6,285
qqqrr r qqqrr r qqqrr r
31 December 2001 Equity contracts 8,038 608 578
Exchange rate contracts:
qqqrr r qqqrr r qqqrr r
Notional principal amount 102,130 6,260 1,775 110,165 Effect of netting (5,176) (5,176)
11144 4 11144 4
Replacement cost 1,087 152 42 1,281
Balances arising from off-balance sheet
financial instruments 3,563 4,466
Interest rate contracts: qqqrr r qqqrr r
Notional principal amount 187,570 155,329 49,262 392,161
Replacement cost 1,300 1,796 1,304 4,400
Notional Fair values
Equity contracts: principal 1111111144444
Notional principal amount 738 3,394 448 4,580 amount Assets Liabilities
31 December 2001 £m £m £m
Replacement cost 75 330 23 428 11144 4 11144 4 1114 44
Exchange rate contracts:
Total: Spot, forwards and futures 90,637 969 969
Notional principal amount 290,438 164,983 51,485 506,906 Currency swaps 5,757 116 147
Replacement cost 2,462 2,278 1,369 6,109 Options purchased 1,564 10 –
Options written 1,030 – 8
11144 4 11144 4 11144 4
The notional principal amount does not represent the Group’s real exposure to
credit risk, which is limited to the current cost of replacing contracts at current 98,988 1,095 1,124
qqqrr r qqqrr r qqqrr r
market rates should the counterparties default. Interest rate contracts:
Net replacement cost represents the total positive fair value of all derivative Interest rate swaps 286,145 4,453 4,716
contracts at the balance sheet date, after allowing for the offset of all negative Forward rate agreements 52,687 77 83
fair values where the Group has a legal right of set-off with the counterparty Options purchased 8,888 74 –
concerned. Options written 3,956 – 58
An analysis of the net replacement cost of both trading and non-trading Futures 33,954 – –
11144 4 11144 4 11144 4
instruments entered into with third parties by counterparty type is set out
385,630 4,604 4,857
below; the Group’s exposure is further reduced by qualifying collateral held. qqqrr r qqqrr r qqqrr r
2002 2001 Equity contracts 6,757 428 409
£m £m qqqrr r qqqrr r qqqrr r
1114 44 1114 44
Effect of netting (3,843) (3,843)
OECD banks 1,939 1,425 11144 4 11144 4
Other 1,604 802 Balances arising from off-balance sheet
11144 4 11144 4
financial instruments 2,284 2,547
Net replacement cost 3,543 2,227 qqqrr r qqqrr r
Qualifying collateral held (521) (339)
11144 4 11144 4
Potential credit risk exposure 3,022 1,888
qqqrr r qqqrr r

36
Lloyds TSB Bank plc

Notes to the accounts

46 Derivatives and other financial instruments (continued) 46 Derivatives and other financial instruments (continued)
a Derivatives (continued) a Derivatives (continued)
Non-trading The maturity of the notional principal amounts and replacement cost of both
The notional principal amounts and fair values of non-trading instruments trading and non-trading instruments entered into with third parties was:
entered into with third parties were as follows: Under 1 to 5 Over 5
Notional Fair values 1 year years years Total
principal 1111111144444 £m £m £m £m
11144 4 11144 4 11144 4 1114 44
amount Positive Negative
31 December 2002
31 December 2002 £m £m £m
11144 4 1114 44 1114 44 Exchange rate contracts:
Exchange rate contracts: Notional principal amount 92,138 6,124 2,818 101,080
Spot, forwards and futures 141 46 – Replacement cost 2,152 83 86 2,321
Currency swaps 346 34 1
11144 4 11144 4 11144 4 Interest rate contracts:
487 80 1 Notional principal amount 145,510 144,218 55,118 344,846
qqqrr r qqqrr r qqqrr r Replacement cost 849 2,666 2,509 6,024
Interest rate contracts:
Interest rate swaps 17,816 132 343 Equity contracts:
Forward rate agreements 1,339 2 3 Notional principal amount 1,307 5,095 1,636 8,038
11144 4 11144 4 11144 4 Replacement cost 3 531 74 608
19,155 134 346
qqqrr r qqqrr r qqqrr r Total:
Notional principal amount 238,955 155,437 59,572 453,964
Effect of netting (36) (36)
11144 4 11144 4 Replacement cost 3,004 3,280 2,669 8,953
178 311
qqqrr r qqqrr r 31 December 2001
Exchange rate contracts:
Notional Fair values
principal 1111111144444 Notional principal amount 92,365 5,327 1,751 99,443
amount Positive Negative Replacement cost 972 93 42 1,107
31 December 2001 £m £m £m
11144 4 11144 4 11144 4 Interest rate contracts:
Exchange rate contracts: Notional principal amount 184,434 151,411 53,434 389,279
Spot, forwards and futures 131 2 1 Replacement cost 1,314 1,782 1,724 4,820
Currency swaps 324 10 16
11144 4 11144 4 11144 4 Equity contracts:
455 12 17 Notional principal amount 1,256 4,606 895 6,757
qqqrr r qqqrr r qqqrr r Replacement cost 75 330 23 428
Interest rate contracts:
Total:
Interest rate swaps 3,610 216 73
Forward rate agreements 39 – – Notional principal amount 278,055 161,344 56,080 495,479
11144 4 11144 4 11144 4 Replacement cost 2,361 2,205 1,789 6,355
3,649 216 73
qqqrr r qqqrr r qqqrr r
An analysis of the net replacement cost of both trading and non-trading
Effect of netting (39) (39)
11144 4 11144 4 instruments entered into with third parties by counterparty type is set out below;
the Bank’s exposure is further reduced by qualifying collateral held.
189 51
qqqrr r qqqrr r 2002 2001
£m £m
1114 44 1114 44
OECD banks 2,277 1,870
Other 1,464 603
11144 4 11144 4
Net replacement cost 3,741 2,473
Qualifying collateral held (521) (339)
11144 4 11144 4
Potential credit risk exposure 3,220 2,134
qqqrr r qqqrr r

37
Lloyds TSB Bank plc

Notes to the accounts

46 Derivatives and other fi f nancial instruments (continued)


b Interest rate sensitivity gap analysis for the non-trading book
The table below summarises the repricing mismatches of the Group’s non-trading assets and liabilities. Items are allocated to time bands by reference to the earlier
of the next contractual interest rate repricing date and the maturity date.
6 months 1 year 5 years
or less or less or less Non-
3 months but over but over but over Over interest Trading
or less 3 months 6 months 1 year 5 years bearing book Total
As at 31 December 2002 11144 4£m
11144 4£m
11144 4£m
11144 4£m £m
11144 4 £m
11144 4 £m
11144 4 £m
1114 44
Assets:
Treasury bills and other eligible bills 1,759 23 94 1 2 – 530 2,409
Loans and advances to banks 12,362 1,362 761 775 200 666 1,402 17,528
Loans and advances to customers 88,527 4,997 8,247 26,787 7,210 (133) 630 136,265
Debt securities and equity shares 6,093 1,049 312 1,972 2,516 (42) 17,620 29,520
Other assets 1304 4
1114 1114254 4 1114254 4 2434 4
1114 1114484 4 16,4934 4 1114
1114 6,4794 4 1114
23,4434 4
Total assets 108,871 7,456 9,439 29,778 9,976 16,984 26,661 209,165
qqqrr r qqqrr r qqqrr r qqqrr r qqqrr r qqqrr r qqqrr r qqqrr r
Liabilities:
Deposits by banks 21,572 817 240 377 112 248 2,077 25,443
Customer accounts 104,257 1,318 1,193 3,829 2,008 3,203 850 116,658
Debt securities in issue 19,169 5,526 2,002 1,212 1,224 – 1,122 30,255
Other liabilities 353 – 6 – – 9,060 7,020 16,439
Subordinated liabilities – loan capital 3,293 1,141 14 950 5,006 150 – 10,554
Minority interests and shareholders’ funds – – – – – 9,968 (152) 9,816
Internal funding of trading business (7,973)
1114 (198)
4 4 1114 (1,545)
4 4 1114 (5,148)
4 4 1114 (880)
4 4 1114 4 4 1114–4 4 11144 4 1114–4 4
15,744
Total liabilities 140,671 8,604 1,910 1,220 7,470 22,629 26,661 209,165
11144 4 11144 4 11144 4 11144 4 11144 4 11144 4 11144 4 11144 4
Off-balance sheet items 10,942 5,939 (10,082) (8,830) 2,031 – – –
11144 4 11144 4 11144 4 11144 4 11144 4 11144 4 11144 4 11144 4
Interest rate repricing gap (20,858) 4,791 (2,553) 19,728 4,537 (5,645) – –
11144 4 11144 4 11144 4 11144 4 11144 4 11144 4 11144 4 11144 4
Cumulative interest rate repricing gap (20,858) (16,067) (18,620) 1,108 5,645 – – –
qqqrr r qqqrr r qqqrr r qqqrr r qqqrr r qqqrr r qqqrr r qqqrr r
6 months 1 year 5 years
or less or less or less Non-
3 months but over but over but over Over interest Trading
or less 3 months 6 months 1 year 5 years bearing book Total
As at 31 December 2001* 11144 4£m
11144 4£m
11144 4£m
11144 4£m £m
11144 4 £m
11144 4 £m
11144 4 £m
1114 44
Assets:
Treasury bills and other eligible bills 2,709 37 26 4 6 – 1,630 4,412
Loans and advances to banks 11,311 1,621 1,076 142 289 452 333 15,224
Loans and advances to customers 74,546 5,252 8,798 28,497 7,108 237 272 124,710
Debt securities and equity shares 2,545 1,662 718 1,940 4,168 (6) 13,423 24,450
Other assets 1544 4
1114 111494 4 111484 4 111444 4 1114154 4 16,4974 4 1114
1114 5,6484 4 1114
22,3354 4
Total assets 91,265 8,581 10,626 30,587 11,586 17,180 21,306 191,131
qqqrr r qqqrr r qqqrr r qqqrr r qqqrr r qqqrr r qqqrr r qqqrr r
Liabilities:
Deposits by banks 19,226 1,859 666 512 90 681 1,276 24,310
Customer accounts 92,958 1,644 1,172 3,228 2,299 7,695 306 109,302
Debt securities in issue 16,453 3,957 1,333 600 890 – 1,187 24,420
Other liabilities 350 – 3 – 5 6,808 5,352 12,518
Subordinated liabilities – loan capital 1,671 716 – 657 5,299 150 – 8,493
Minority interests and shareholders’ funds – – – – – 11,986 102 12,088
Internal funding of trading business (3,736)
1114 (741)
4 4 1114 (1,171)
4 4 1114 (6,051)
4 4 1114 (1,384)
4 4 1114 4 4 1114–4 4 13,0834 4 1114–4 4
1114
Total liabilities 126,922 7,435 2,003 (1,054) 7,199 27,320 21,306 191,131
qqqrr r qqqrr r qqqrr r qqqrr r qqqrr r qqqrr r qqqrr r qqqrr r
Off-balance sheet items 21,937 (10,861) (7,509) (2,896) (671) – – –
11144 4 11144 4 11144 4 11144 4 11144 4 11144 4 11144 4 11144 4
Interest rate repricing gap (13,720) (9,715) 1,114 28,745 3,716 (10,140) – –
11144 4 11144 4 11144 4 11144 4 11144 4 11144 4 11144 4 11144 4
Cumulative interest rate repricing gap (13,720) (23,435) (22,321) 6,424 10,140 – – –
qqqrr r qqqrr r qqqrr r qqqrr r qqqrr r qqqrr r qqqrr r qqqrr r
The table above does not take into account the effect of interest rate options used by the Group to hedge its exposure; details of options are given in note 46a.
*restated (see note 1)

38
Lloyds TSB Bank plc

Notes to the accounts

46 Derivatives and other financial instruments (continued) 46 Derivatives and other financial instruments (continued)
c Fair value analysis e Unrecognised gains and losses on hedging instruments
The table below shows a comparison by category of book values and fair values The Group uses a variety of financial instruments to hedge exposures in its
of the Group’s on-balance sheet financial assets and liabilities: banking book; these hedges are accounted for on an accruals basis, in line
with the underlying instruments being hedged. Any gains or losses that would
As at 31 December 2002 144 4 1Trading
1144 4 book
11144 4 14Non-trading
4 4 11144 4 1book
1144 4 occur if these instruments were carried at market value are therefore not
Book Fair Book Fair recognised.
value value value value
Assets: £m4 4
1114 £m4 4
1114 £m4 4
1114 £m4 4
1114 At 31 December 2002, the unrecognised gains on financial instruments used
Treasury bills and other for hedging were £518 million (2001: £242 million) and unrecognised losses
were £744 million (2001: £820 million).
eligible bills 530 530 1,879 1,878
Loans and advances to The net losses arising in 2001 and earlier years and recognised in 2002
banks and customers 2,032 2,032 151,761 153,316 amounted to £344 million. Net losses of £6 million arose in 2002 but were
not recognised in the year.
Debt securities and equity shares 17,620 17,620 11,900 11,932
Liabilities: Of the net losses of £226 million at 31 December 2002, £38 million of net
Deposits by banks and customers 2,927 2,927 139,174 138,752 losses are expected to be recognised in the year ending 31 December 2003 and
£188 million of net losses in later years.
Debt securities in issue 1,122 1,122 29,133 29,005
Subordinated liabilities – – 10,554 11,410

As at 31 December 2001* 144 4 1Trading


1144 4 book
11144 4 14Non-trading
4 4 11144 4 1book
1144 4 47 Acquisitions
Book Fair Book Fair a) On 18 April 2002 the Group’s subsidiary, Lloyds TSB Asset Finance Division
value value value value Limited, completed the acquisition of First National Vehicle Holdings and
Assets: £m4 4
1114 £m4 4
1114 £m4 4
1114 £m4 4
1114 Abbey National Vehicle Finance, both previously wholly owned subsidiaries of
Treasury bills and other Abbey National plc operating in the UK contract hire and fleet management
eligible bills 1,630 1,630 2,782 2,780 market; the results of these businesses have been consolidated in full from that
date, the effect on the results of the Group is not material. The premium on
Loans and advances to
acquisition of £86 million has been capitalised and will be written off to the
banks and customers 605 605 139,329 140,062 profit and loss account over its estimated useful life of 20 years.
Debt securities and equity shares 13,423 13,423 11,027 11,269
A summarised profit and loss account for First National Vehicle Holdings and
Liabilities:
Abbey National Vehicle Finance for the period from 1 January 2002 to 17 April
Deposits by banks and customers 1,582 1,582 132,030 131,999 2002 is set out below:
Debt securities in issue 1,187 1,187 23,233 23,266
£m4 4
Subordinated liabilities – – 8,493 8,929
1114
Net interest income 6
*restated (see note 1)
Other income 25
The disclosures in this note cover all on-balance sheet financial instruments; 11144 4
fair values of all derivative instruments are disclosed in note 46a. Total income 31
Fair values are determined by reference to quoted market prices or, where no Operating expenses 38
market price is available, using internal models which discount expected future Provisions for bad and doubtful debts 1
cashflows at prevailing interest rates. 11144 4
Loss on ordinary activities before tax (8)
Fair values have not been calculated for sundry debtors and creditors in the
Tax 2
trading book. 11144 4
d Currency exposures Loss after tax for the period to 17 April 2002 (6)
qqqrr r
Structural currency exposures Profit after tax for the year ended 31 December 2001 –
Structural currency exposures arise from the Group’s investments in its qqqrr r
overseas operations. The structural position is managed after having regard to All recognised gains and losses are included in the profit and loss account.
the currency composition of the Group’s risk-weighted assets, the objective
being to limit the effect of exchange rate movements on the published risk asset The combined balance sheet of First National Vehicle Holdings and Abbey
ratio. National Vehicle Finance at 18 April 2002 was as follows:
Book value Fair Fair
The Group’s main overseas operations are in New Zealand, the Americas and at 18 April value value at
Europe. Details of the Group’s structural foreign currency exposures are as 2002 adjustments acquisition
follows: 11144 4£m £m
11144 4 11144 4£m

2002 2001 Loans and advances to customers 64 – 64


Functional currency of Group operation £m
11144 4 £m
11144 4 Tangible fixed assets 355 (8) 347
New Zealand dollar 921 748 Other assets and prepayments 63 – 63
Euro 304 286 Deposits by banks (405) – (405)
US dollar 259 147 Other liabilities and accruals (107) (6) (113)
11144 4 11144 4 11144 4
Swiss franc 100 104
Net liabilities acquired (30) (14) (44)
Other non-sterling 323 438 qqqrr r qqqrr r
11144 4 11144 4
Goodwill 86
Total 1,907 1,723 11144 4
qqqrr r qqqrr r
Consideration 42
Non-structural currency exposures qqqrr r
All foreign exchange exposures in the non-trading book are transferred to the
trading area where they are monitored and controlled.

39
Lloyds TSB Bank plc

Notes to the accounts

47 Acquisitions (continued)
An initial cash payment of £47 million has been made, however following the
preparation of the completion accounts it is believed that this should be subject
to a downward adjustment of £5 million. Accordingly a receivable of this
amount has been recognised in the Group’s balance sheet. The fair value
adjustments principally reflect adjustments to the carrying value of operating
lease assets and related taxation. Negotiations regarding the completion of this
acquisition are still ongoing and, whilst no further significant adjustments to
consideration or fair value adjustments are expected, in accordance with the
requirements of paragraph 27 of Financial Reporting Standard 6, it is noted
that the fair value of the net assets of the acquired businesses and the goodwill
arising shown above are provisional.
b) On 16 December 2002 the Group’s subsidiary, Lloyds TSB Asset Finance
Division Limited, completed the purchase of the business of the Dutton-
Forshaw Group, a motor dealer which has a network of 38 franchised
dealerships representing 14 motor vehicle manufacturers. The consideration
for the purchase was £49 million which was settled in cash. The premium on
acquisition of £10 million has been capitalised and will be written off to the
profit and loss account over its estimated useful life of 20 years. Fair value
adjustments were made to the carrying value of tangible fixed assets and in
respect of certain liabilities. Negotiations regarding the completion of this
acquisition are still ongoing and, whilst no further significant adjustments to
consideration or fair value adjustments are expected, in accordance with the
requirements of paragraph 27 of Financial Reporting Standard 6, it is noted
that the goodwill arising stated above is provisional. The results of this business
have been consolidated in full from the date of acquisition, the effect on the
results of the Group is not material.

40
Printed by St Ives Burrups B694518/9443

You might also like

pFad - Phonifier reborn

Pfad - The Proxy pFad of © 2024 Garber Painting. All rights reserved.

Note: This service is not intended for secure transactions such as banking, social media, email, or purchasing. Use at your own risk. We assume no liability whatsoever for broken pages.


Alternative Proxies:

Alternative Proxy

pFad Proxy

pFad v3 Proxy

pFad v4 Proxy