** Excluding changes in economic assumptions, investment variance and (loss) profit on sale of businesses.
Profit attributable to shareholders decreased by £833 million, or 26 per cent, to £2,421 million.
Dividend maintained. Final dividend of 23.5p per share, making a total of 34.2p for the year (2003: 34.2p).
Results – continuing operations excluding investment variance, changes in economic assumptions and profit/loss on sale of businesses.
During a year when a great deal of management focus has been on positioning the Group to deliver sustainable earnings growth, I am delighted with the 10 per cent growth in profit before tax from the Group’s continuing operations, excluding investment variance, changes in economic assumptions and disposal gains/losses. Each division delivered revenue growth in excess of cost growth, credit quality has remained strong and profitability has improved.
Looking at the UK economy, it is likely that economic growth will continue, with many commentators believing growth in 2005 will remain above 2.5 per cent. Whilst there are downside risks to these expectations, from a possible slowdown in the housing market, there is upside potential as well, such as from higher business investment spending. We expect unemployment and inflation to remain low, and interest rates to peak during 2005.
In line with the rest of the UK banking industry, the Group has now adopted international financial reporting standards and will in future report earnings on the basis of these new standards.
Current indications are that this change will not have a material impact on either the earnings of the Group or its regulatory capital position, although some ongoing earnings volatility may arise. The board has decided to maintain the final dividend at 23.5p per share, making a total for the year of 34.2p (2003: 34.2p). This represents a dividend yield of 7.2 per cent, calculated using the 31 December 2004 share price of 473p.
In Wholesale Banking, each of the major businesses made good progress in acquiring and deepening customer relationships and all delivered year-on-year profit improvements in excess of 20 per cent. The new management team strengthened our competitive position with enhanced product offerings and more proactive calling efforts. This renewed customer focus and better alignment of relationship and product managers resulted in a 25 per cent uplift in earnings in the Corporate Markets franchise. Business Banking and Asset Finance also performed strongly, supported by good income growth and strong cost control.
As we look to the future, we are opening a new chapter focused primarily on growth. We will continue to focus our efforts on our core markets and build our skills to sustain superior performance. Our new priorities are designed to leverage our strengths in those markets and they are: • to materially deepen customer relationships, meeting more of our customers’ needs and winning a greater share of their business. In the last year and a half, we have put in place many of the pieces to build stronger relationships; across all of our divisions we have enhanced service performance and we have introduced improved product ranges. We have also introduced local markets in the Retail Bank and built up strong regional centres in the Wholesale Bank. Our task is now to integrate these pieces so that our customers enjoy better value and view us as the place to bring more of their business.
• to continue to enhance the Group’s capabilities and processes to support faster growth. In Finance, we will further develop our capital management disciplines and our understanding of the key drivers of economic profit growth at a more granular level. In Risk, we will continue to build our skill base to enable us to grow with less volatility in our earnings and to take advantage of the strategic benefits of Basel II. In Human Resources, we are developing our people to perform to their full potential and to create the high performance organisation necessary to achieve our goals.
Looking back on the year, we achieved our three point plan and are now making marked progress on the elements of the Group’s balanced scorecard. Our capital position is in good shape, with the impact of recent accounting changes incorporated into our plans, and we achieved growth and higher quality earnings. Our staff are engaged and the achievement of these favourable results is due to their commitment and dedication to serving our customers.
With some 2,200 branches, Lloyds TSB Group has one of the largest branch networks in the UK as well as being a leading internet and telephone banking provider. Our agreement with the Post Office allows our personal customers to use around 16,000 post offices for their banking needs.
Lloyds TSB has also been at the forefront of developing alternative forms of financial provision and support for those communities where mainstream financial services have traditionally been considered inappropriate or inaccessible. We have been involved in a wide range of projects, on both a commercial and semi-commercial basis, providing capital for loan funds which in turn support individual debt-consolidation, housing improvement, business start-ups and social enterprise.
Our commitment to Investors in People (IIP) is about promoting a culture of career-long learning and a need to equip our staff with the skills and knowledge that will help them to perform in the workplace. In 2004, 87 per cent of our employees worked for business units that are IIP accredited.
Almost £42 million was invested in employee training and development across the Group in 2004. The University for Lloyds TSB provided over 67,000 face-to-face training days and in excess of 29,000 delegate places on residential training courses. We seek to use awards and qualifications as a means of benchmarking staff achievement against external standards.
The Group Community Awards scheme celebrates staff achievement and rewards them for their work in the local community. In 2004, nearly 150 nominations were received and each of the 10 winners was presented with a £1,000 cheque for their nominated organisations.
The majority of Lloyds TSB’s charitable giving is channelled through the four independent Lloyds TSB Foundations, which cover England and Wales, Scotland, Northern Ireland and the Channel Islands. Their mission is to improve the lives of people in local communities, especially those who are disadvantaged or disabled.
Cash machines. Lloyds TSB Group has one of the largest cash machine networks of any leading banking group in the UK and, at 31 December 2004, personal customers of Lloyds TSB Bank and Lloyds TSB Scotland were able to withdraw cash and check balances through some 4,200 ATMs at branches and external locations around the country. In addition, our personal customers have access to a further 50,000 cash machines via LINK in the UK and to cash machines worldwide through the VISA and MasterCard networks.
Credit cards. Lloyds TSB Group provides a range of card-based products and services, including credit and debit cards and card transaction processing services for retailers. Lloyds TSB Group is a member of both the VISA and MasterCard payment systems and had a 12.7 per cent share of outstanding card balances at 31 December 2004.
Insurance and Investments Insurance and Investments offers life assurance, pensions and investment products, general insurance and fund management services.
Scottish Widows Investment Partnership. Scottish Widows Investment Partnership manages funds for Lloyds TSB Group’s retail life, pensions and investment products. Clients also include corporate pension schemes, local authorities and other institutions in the UK and overseas. At 31 December 2004 funds under management amounted to some £82 billion.
During 2004 there has been an increase in the level of complaints relating to past sales and performance of certain endowment based and long-term savings products. Whilst the Group maintains provisions for customer redress in respect of past product sales, the adequacy of these provisions has been reviewed in the light of ongoing experience. As a result, an additional provision of £112 million has been made.
Cost:income ratio, before provisions for customer redress 49.9% 51.0% Total assets (year-end) £101.6bn £90.5bn Total risk-weighted assets (year-end) £60.5bn £54.1bn
During 2004, we completed the restructure of our retail branch network through the establishment of 165 profit centred local markets. Initially, we particularly focused on developing our business in the London and South East markets where Lloyds TSB is currently under represented. Good progress has been made and, in our test markets, we achieved higher growth in quality customer recruitment, and greater improvement in levels of customer satisfaction than elsewhere in the branch network, and this is now starting to deliver an improved sales performance.
In 2004, market shares were increased or maintained in most key product areas including gross and net new mortgage lending, personal loans and credit cards. Income, profit and economic profit per customer all improved during 2004. Strong growth in volumes was achieved with personal loans outstanding at 31 December 2004 of £10.7 billion, an increase of 12 per cent during the year, and card balances of £7.5 billion, an increase of 12 per cent. Gross new mortgage lending increased by 9 per cent to a record £26.3 billion, compared with £24.2 billion in 2003. Net new lending increased to £9.3 billion resulting in a market share of net new lending of 9.2 per cent, and mortgage balances outstanding increased by 13 per cent to £80.1 billion. Credit balances on current accounts and savings and investment accounts increased by 7 per cent.
Within personal loans, key initiatives have been the increased use of behavioural and risk-based pricing, leveraging our customer relationship management capabilities to enable the Group to deliver more competitive pricing to better quality customers and to price by distribution channel within our existing customer base. 99 per cent of new personal loans, and 75 per cent of new credit cards, sold during 2004 were to existing customers, where the Group has a better understanding of an individual customer’s total financial profile. The Group has also continued to avoid sub-prime lending. Dynamic delinquency measures, on a rolling 12 month basis, show an improving position for new business written. We have also continued to rationalise back office operations to improve efficiency and levels of customer service and satisfaction.
Profit before tax (life, pensions and unit trusts)* 605 411 General insurance* 160 153 Scottish Widows Investment Partnership 8 1
Profit before tax from Insurance and Investments, excluding changes in economic assumptions, investment variance and customer redress provisions, increased by 18 per cent to £785 million, from £665 million in 2003. On the same basis, profit before tax from our life, pensions and unit trust businesses increased by £106 million, or 21 per cent, to £617 million. The Group’s strategy to improve its profit mix by focusing on more profitable, less capital intensive, business whilst constantly seeking to improve process and distribution efficiency has led to a 21 per cent increase in new business contribution to £188 million. As a result of this improved capital efficiency, strong sales of pensions and single premium investments, and a reduced emphasis on certain lower return products such as stakeholder pensions, the life and pensions new business margin increased to 28.6 per cent, from 25.8 per cent in 2003.
Weighted sales (regular + 1/10 single): Life and pensions 656.7 601.7 Unit trusts 86.4 131.7
Weighted sales by distribution channel: Branch network 238.9 278.8 Independent financial advisers 431.6 391.6
Claims fell by £12 million to £224 million, compared to 2003, and the claims ratio fell to 38 per cent compared with 42 per cent in 2003, reflecting benign weather conditions and improved leverage of the supply chain. The combined ratio relating to the underwriting business was 83.2 per cent in 2004.
Provisions for bad and doubtful debts (193) (306) (63) (369) Amounts written off fixed asset investments (52) (44) – (44)
In International Banking, profit before tax, excluding the profit/loss on sale of businesses and trading results of discontinued operations, increased by £27 million, or 21 per cent, to £157 million, reflecting a £45 million reduction in provisions, including a £30 million general provision release in Argentina.
During 2004, the Group completed the sale of its businesses in Panama, Guatemala, Honduras, Argentina and Colombia resulting in a net loss on disposal of £15 million.
Accrual for payment to Lloyds TSB Foundations (31) (31) Other finance income 39 34 Funding cost of acquisitions less earnings on capital (342) (345) Profit on sale of emerging markets debt portfolio and certain closed foreign exchange positions – 295 Central costs and other unallocated items 1 35
The group executive committee, assisted by its sub-committees the group business risk committee and the group asset and liability committee, supports the group chief executive in ensuring the development, implementation and effectiveness of the Group’s risk management framework and the clear articulation of the Group’s risk policies, and reviews the Group’s aggregate risk exposures and concentrations of risk. The group executive committee’s duties are described more fully on page 44.
The director of group audit provides the required independent assurance to the board and audit committee that risks within the Group are recognised, monitored and managed within acceptable parameters. Group Audit is fully independent of Group Risk, ensuring objective challenge to the effectiveness of the risk governance framework.
Accountability of line management has also been reinforced in relation to the management of risks arising from its business and in developing the risk awareness and risk management capability of its staff. A key objective is to ensure that business decisions strike an appropriate balance between risk and reward, consistent with the Group’s risk appetite. As shown on page 21, business management forms part of a tiered risk management model, with the divisional risk officers providing oversight and challenge, as described above, and the chief risk director and Group committees establishing the group wide perspective.
Market risk in the wholesale banking books is managed in the UK by Financial Markets in London, and internationally by an authorised local treasury operation in each overseas centre. The levels of exposure within these books are controlled and monitored within approved limits, both locally and also centrally by Group Treasury. Active management of the book is necessary to meet customer requirements and changing market circumstances.
Measurement techniques. 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 activity, and include simple interest rate gapping, open exchange positions, sensitivity analysis and value at risk. Stress testing and scenario analysis are also used in certain portfolios, and at Group level, to simulate extreme conditions to supplement these core measures.
North Asia & Europe & Total Total UK America Australasia Middle East 2005 2004 £m £m £m £m £m £m
Market risk exposure depends upon the nature of the funds in question: • With-profits funds are managed in accordance with the relevant fund’s Principles and Practices of Financial Management. This leads to assets and liabilities that are mismatched with the aim of generating a higher rate of return to meet policyholders’ expectations.
• Unit-linked liabilities are matched with the same assets that are used to define the liability but future fee income is dependent upon the performance of these assets.
The surplus in the Non-Participating Fund of Scottish Widows plc exists to provide the Long-Term Fund with liquidity and working capital. The surplus also forms a capital reserve to support the investments managed on behalf of the With-Profits Fund of Scottish Widows plc. With-profits business involves guaranteed benefits; in adverse market conditions the surplus could be called upon to support with-profits benefits. As a consequence this fund is currently invested in a mix of equities, investment properties, fixed interest investments and cash that takes into account the mix in the With-Profits Fund. This investment policy helps maintain the value of the reserve as a proportion of the underlying With-Profits Fund. The existence and investment mix of the surplus in the Non-Participating Fund can therefore be considered as structural rather than as a traded portfolio. Under UK GAAP the portfolio is shown at market value and gains and losses are recognised in the profit and loss account.
Assets held in shareholder funds are invested in money market funds, gilts and investment grade bonds so as to reduce the risk of statutory insolvency in the event of market crashes.
The General Insurance portfolio is invested in a mixture of assets: cash, bonds and equities.
The following table shows closing, average, maximum and minimum VaR for the years ended 31 December 2004 and 2003 on a 99 per cent confidence ten day basis.
The risk of loss arising from the sensitivity of profits to movements in insurance claims, expenses and persistency experience and expectation. It also covers the risk of inadequate underwriting and/or reinsurance of insured risks and movements in the cost of providing benefits from the Group’s pension schemes that result from social and demographic factors.
Some insurance risks are retained while others are reinsured with external underwriters. The retained risk level is carefully controlled and monitored, with close attention being paid to the analysis of underwriting experience, claims management, product design, policy wordings, adequacy of reserves, solvency management and regulatory requirements.
All compliance personnel also have a reporting line to the group compliance director, who sets compliance standards across the Group and provides independent reporting and assessment to the board and business directors.
Group Compliance includes a dedicated unit, led by the group financial crime director, which is responsible for ensuring that the Group has effective processes in place to identify and report on suspicious transactions and customers, in support of the worldwide fight against financial crime.
A framework is in place to guide the consideration and documentation of customer treatment risk when developing policies and procedures. The Group has defined benchmark standards in all the key areas. The divisions are required to meet or exceed these standards.
Businesses maintain a range of products to meet customers’ needs and the business strategy and are responsible for managing and controlling product risks and compliance with applicable regulations.
Businesses are required, prior to publication of any sales material, to seek confirmation that it complies with the regulatory and legal requirements of the jurisdiction in which the product is offered and marketed. Procedures require that terms and conditions (to include mandates, agreements and other documentation) are approved by legal advisers and reviewed periodically.
Information and communication. It is the Group’s policy for the board and senior management at both Group and business level to receive relevant, reliable and timely management information in line with business objectives to seek to ensure that activities are appropriately controlled, key risks are identified and monitored, decisions are implemented and regulatory obligations are met.
Audit responsibilities and rights. Group Audit has unrestricted access to all functions, property, records and staff. It independently reviews adherence to the policies and processes that make up the control environment, disseminating best practices throughout the Group in the course of its monitoring and corrective action activities. The director of group audit reports to and meets regularly with the group chief executive and periodically with the audit committee.
People. The Group’s approach to people management is to employ skilled, committed staff, working as a team for the benefit of customers and shareholders, who are given the opportunity to fulfil their potential; employ the highest ethical standards of behaviour and best practice management principles; and recruit on the basis of ability and competence.
Standards of behaviour. The Group has a code of business conduct, which applies to the group chief executive, the group finance director, and all other employees. It seeks to ensure that employees act with integrity and endeavour to deliver high levels of customer service. It promotes a working environment free from discrimination, harassment, bullying or victimisation of any kind. Employees are encouraged and expected to alert management to suspected misconduct, fraud or other serious malpractice. The code as amended from time to time is available to the public on the Group’s website at www.lloydstsb.com.
The international standard for measuring capital adequacy is the risk asset ratio, which relates to on- and off-balance sheet exposures weighted according to broad categories of risk. The Group’s capital ratios, calculated in line with the requirements of the FSA, are set out in detail on page 31.
A policy is in place which requires a common methodology to measuring liquidity across the Group. The methodology derives a liquidity ratio 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 and a percentage of retail maturities and contingent claims drawable over the next five days. The Group complies with the FSA’s liquidity requirements and with similar liquidity policies in place across all trading centres worldwide. Compliance is monitored by regular liquidity returns to Group Treasury. Work is ongoing to ensure the Group’s compliance with the new liquidity framework being proposed by the FSA. The liquidity policy requires all authorised local treasury operations to maintain a liquidity ratio of over 100 per cent, in addition to ensuring compliance with local regulatory requirements. 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 continually managed and appropriately diversified to avoid any undue concentration as market conditions evolve. Compliance is monitored by regular liquidity returns to Group Treasury.
Lloyds TSB Group and its regulated subsidiary banks have been allocated an Individual Capital Ratio by the FSA, and the board has agreed a formal buffer to be maintained in addition to the Individual Capital Ratio. Actual or prospective breaches of the formal buffer must be notified to the FSA, together with proposed remedial action; no such notifications have been made during 2004. Informally, a further buffer is maintained. In addition, the board has agreed a maximum limit of the proportion of debt instruments in the capital base. Risk-weighted assets are monitored by businesses, while capital is controlled centrally.
Businesses or reporting entities have formal month-end and quarter-end procedures in place for preparation of management and financial accounts respectively, review and approval of management accounts at a determined level of detail, ensuring consistency with financial accounts, and preparation of forecasts and detailed annual budgets that are subject to formal review and approval. They are further required to implement measures to monitor performance at local level to identify significant fluctuations or unusual activity.
Lloyds TSB Group plc is also able to raise funds by issuing loan capital or equity, although in practice Lloyds TSB Group plc has never issued equity for this purpose and the majority of Lloyds TSB Group’s loan capital has been issued by Lloyds TSB Bank. As at 31 December 2004, Lloyds TSB Group plc had £1,358 million of subordinated debt in issuance compared with £10,252 million for the consolidated Lloyds TSB Group. The cost and availability of subordinated debt finance are influenced by credit ratings. A reduction in these ratings could increase the cost and could reduce market access. At 31 December 2004, the credit ratings of Lloyds TSB Bank were as follows: Senior debt
The ratings outlook from Moody’s and Fitch for Lloyds TSB Bank is stable. The Standard & Poor’s rating outlook is negative. These credit ratings are not a recommendation to buy, hold or sell any security; and each rating should be evaluated independently of every other rating.
The Group’s regulatory capital is divided into tiers defined by the European Community Banking Consolidation Directive as implemented in the UK by the FSA’s Interim Prudential Sourcebook for Banks. Tier 1 comprises mainly shareholders’ funds, tier 1 capital instruments and minority interests, after deducting goodwill and other intangible assets. Tier 2 comprises general bad debt provisions, and qualifying subordinated loan capital, with restrictions on the amount of general provisions and loan capital which may be included. The amount of qualifying tier 2 capital cannot exceed that of tier 1 capital. Total capital is reduced by deducting investments in subsidiaries and associates which are not consolidated for regulatory purposes and investments in the capital of other credit/financial institutions. In the case of Lloyds TSB Group, this means that the net assets of its life assurance and general insurance businesses are deducted from the Group’s regulatory capital.
The board is satisfied that relevant corporate responsibility risks have been assessed during 2004 and that they do not pose a material threat to the Company.
Robust internal audit systems are in place to review adherence to policies and procedures and environmental performance is subject to external independent verification. Overall, the board is satisfied that the Company complies with its corporate responsibility related policies and procedures.
All derivatives contracts will be carried at fair value on the Group’s balance sheet and movements in their fair value reflected in the income statement. The resulting income statement volatility can be mitigated by the application of hedge accounting. IFRS permits the use of two kinds of hedge accounting: fair value and cash flow hedge accounting. The Group is expected to make greater use of fair value hedge accounting which seeks to match, in the income statement, changes in the fair values of the hedged items with the changes in the fair value of the related derivatives. Cash flow hedge accounting is expected to be used to a lesser extent; adjustments reflecting the movements in the fair values of the derivatives concerned are made to a separate reserve in equity and recycled to the income statement as the related cash flows occur. IFRS contains detailed requirements for documentation of hedge relationships and testing their effectiveness. To the extent that a hedge is ineffective, the impact is reflected in the income statement. An adjustment will be made against retained earnings on transition to eliminate the effects of the asymmetrical accounting for derivative transactions entered into between the Group’s banking and trading activities.
Investment securities are classified as either held-to-maturity investments, available-for-sale financial assets or at fair value through profit or loss. While many of the Group’s investment securities will be classified as available-for-sale and will be required to be measured at fair value with changes in their fair values going to a separate reserve in equity, investment securities backing insurance business will be designated at fair value through profit or loss.
Requirement to maintain a Support Account. The Scheme requires the maintenance of a ‘Support Account’ within the Non-Participating Fund. The quantum of the Support Account is calculated with reference to the value of assets backing current with-profits policies which also existed at the date of demutualisation and must be maintained until the value of these assets reaches a minimum level. Assets can only be transferred from the Non-Participating Fund if the value of the remaining assets in the fund exceeds the value of the Support Account. Scottish Widows has obtained from the FSA permission to include the value of the Support Account in assessing the realistic value of assets available to the With-Profits Fund. At 31 December 2004, the value of surplus admissible assets in the Non-Participating Fund was £2,222 million and the value of the Support Account was £1,265 million.
Realistic value of assets of fund 17,814 22,012 Support arrangement assets (value of ‘Support Account’) 1,265 –
The following table reconciles the value of the Long-Term Fund of Scottish Widows quoted above to the total shareholders’ funds attributable to the life assurance business of the Group, calculated on a modified statutory solvency basis: Life assurance business £m
Shareholders’ funds outside the long-term business fund are mainly invested in assets that are less sensitive to market conditions.
The most critical non-economic assumptions are the level of take-up of options inherent in the contracts (higher take up rates are more onerous), mortality rates (lower mortality rates are more onerous) and lapses prior to dates at which a guarantee would apply (lower lapse rates are generally more onerous where guarantees are in the money). The sensitivity of the capital position and capital requirements of the With-Profits Fund is partly mitigated by the actions that can be taken by management.
The Group has sold insurance products that contain options and guarantees, both within the With-Profits Fund and in other funds.
A non-executive director of John Wood Group, Noble Grossart and Stagecoach Holdings. Aged 62.
Michael E Fairey Deputy Group Chief Executive Joined TSB Group in 1991 and held a number of senior and general management appointments before being appointed to the board in 1997 and deputy group chief executive in 1998. He is also acting as interim group executive director, UK Retail Banking. Joined Barclays Bank in 1967 and held a number of senior and general management appointments, including managing director of Barclays Direct Lending Services from 1990 to 1991. President of The British Quality Foundation. Aged 56.
Mr Tate and Sir Julian Horn-Smith joined the board on 1 August 2004 and 1 January 2005, respectively. In accordance with the articles of association, they offer themselves for election at the annual general meeting.
Policy and practice on payment of creditors The Company follows ‘The Better Payment Practice Code’ published by the Department of Trade and Industry, regarding the making of payments to suppliers. A copy of the code and information about it may be obtained from the Department of Trade and Industry as shown on page 113.
All shareholders are encouraged to attend and participate in the Group’s annual general meeting.
The nomination committee, comprising Mr van den Bergh (chairman), Mr Brown, Dr Gibson-Smith and Dr Julius, reviews the composition of the board, taking into account the skills, knowledge and experience of directors and considers and makes recommendations to the board on potential candidates for appointment as directors. The committee also makes recommendations to the board concerning the re-appointment of any independent non-executive director by the board at the conclusion of his or her specified term; the re-election of any director by the shareholders under the retirement provisions of the articles of association; any matters relating to the continuation in office of a director; and the appointment of any director to executive or other office, other than the positions of chairman and group chief executive, the recommendation for which would be considered at a meeting of the non-executive directors regarding the position of group chief executive, and all the directors regarding the position of chairman.
The committee’s terms of reference are available from the company secretary and are displayed on the Company’s website www.lloydstsb.com.
Statement of directors’ responsibilities The directors are required by the Companies Act 1985 to prepare financial statements for each financial year which give a true and fair view of the state of affairs of the Company and the Lloyds TSB Group (‘the Group’) as at the end of the year and of the profit or loss for the year. The directors consider that in preparing the financial statements on pages 59 to 112, the Company and the Group have used appropriate accounting policies, consistently applied and supported by reasonable and prudent judgements and estimates, and that all accounting standards which they consider applicable have been followed.
Towers, Perrin, Forster & Crosby, Inc. (TPFC) were appointed by the committee to advise it on matters relating to executive remuneration. TPFC also provide the management of the Company with competitive market data relating to other employees and administrative services for the Company’s flexible benefits plan for its employees.
Mr van den Bergh, Mr Daniels, Mr Fairey, Mr Hijkoop (Director of Group Human Resources) and Mr Wilson (Compensation & Benefits Director) provided advice to the committee (other than for their own remuneration).
Independent non-executive directors who serve on boards of subsidiary companies may also receive fees from the subsidiaries.
For executive directors except Mr Daniels, individual bonus awards for 2005 will be made from a bonus pool based on Group performance with pre-determined targets relating to profit before tax and economic profit. As in 2004, the maximum size of the bonus pool applicable to these executive directors will remain at 100 per cent of the aggregate of their basic salaries. An amount equal to 75 per cent of these executive directors’ basic salaries will form the bonus pool on the achievement of a stretching budget for 2005; failure to achieve at least 90 per cent of this budget will result in no bonus pool. These executive directors will be considered for awards based on individual targets which will include profitability, franchise growth, risk, service and other specific goals that are relevant to improving overall business performance. The maximum level of any bonus award distributable from the pool to any individual has been set at 150 per cent (100 per cent for 2004) of salary for exceptional performance, to reflect the competitive market position for total earnings opportunity.
The maximum annual bonus opportunity for 2005 for Mr Daniels has also been set at 150 per cent (125 per cent for 2004) of basic salary for exceptional peformance, to increase the proportion of pay which is performance linked and to reflect the competitive market position for total earnings opportunity. An amount equal to 112.5 per cent of basic salary will be available on the achievement of stretching budget targets relating to profit before tax and economic profit; failure to achieve at least 90 per cent of these performance targets would result in no bonus payment. The actual level of bonus award made will take account of individual performance and contribution.
In 2005, options will be granted to executive directors and senior executives within the scheme limits. These limits relate to the number of shares under option and the price payable on exercise. The maximum limit for the grant of options to an executive director in any one year is equal to three times annual basic salary, although in exceptional circumstances, for example on the recruitment of a new executive director, that could be increased to four times annual basic salary.
The following table illustrates the percentage of the grant which would be exercisable depending on the Company’s TSR ranking within the comparator group, shown on page 48.
Mr Ayliffe’s employment has been terminated from 31 March 2005 and the payments to which he is entitled will be settled in accordance with his contractual entitlement. Full details will be reported in the 2005 report and accounts.
Mr Hampton’s employment was terminated on 12 January 2004. He has received payments in accordance with his contractual entitlement.
Mr Targett was a member of a defined contribution scheme. During the period 1 January 2004 to 30 April 2004 the employer made contributions totalling £24,000. As he left before completing two years service no benefits will be vested under the defined contribution scheme in respect of him.
Columns (a) and (b) represent the deferred pension to which the directors would have been entitled had they left the Group on 31 December 2004 and 2003, respectively (ignoring the two-year requirement to qualify for a deferred pension).
Column (e) is the increase in pension built up during the year, recognising (i) the accrual rate for the additional service based on the pensionable salary in force at the year end, and (ii) where appropriate the effect of pay changes in ‘real’ (inflation adjusted) terms on the pension already earned at the start of the year.
Directors’ interests The interests, all beneficial, of those who were directors at 31 December 2004 in shares in Lloyds TSB Group were: At 1 January 2004 (or later date of At 31December At 3 March
The market price for a share in the Company at 1 January 2004 and 31 December 2004 was 448p and 473p, respectively. The range of prices between 1 January 2004 and 31 December 2004 was 391.75p to 476.25p.
Mr Daniels is the only participant in this plan and holds an option, granted to him on 2 November 2001, to acquire 216,763 ordinary shares in Lloyds TSB Group plc for a total price of £1. The option was granted as part of the remuneration package considered necessary to attract him from the USA and was designed to encourage him to remain with Lloyds TSB Group plc. The option was not subject to any performance condition and vested on 31 December 2004, with a six month exercise period finishing on 30 June 2005. Full details of the plan were set out in the 2002 annual report.
That the Company’s ranking based on TSR over the relevant period against a comparator group (17 UK and international financial services companies including Lloyds TSB) must be at least ninth, when 14 per cent of the option will be exercisable. If the Company is ranked first in the group, then 100 per cent of the option will be exercisable and if ranked tenth or below the performance condition is not met. At the end of 2004 Lloyds TSB Group was ranked: 10th after four years of the performance period for options granted in 2001; 14th after three years of the performance period for options granted in 2002; 15th after two years of the performance period for options granted in 2003; and 6th after one year of the performance period for options granted in 2004
As for March 1997 – August 1999 except that there must have been growth in the earnings per share equal to the change in the retail price index plus three percentage points for each complete year of the relevant period.
We report to you our opinion, as to whether the financial statements give a true and fair view and whether the financial statements and the auditable part of the directors’ remuneration report have been properly prepared in accordance with the Companies Act 1985. We also report to you if, in our opinion, the directors’ report is not consistent with the financial statements, if the Company has not kept proper accounting records, if we have not received all the information and explanations we require for our audit, or if information specified by law regarding directors’ remuneration and transactions is not disclosed.
Assets Cash and balances at central banks 1,078 1,195 Items in course of collection from banks 1,462 1,447 Treasury bills and other eligible bills 12 92 539 Loans and advances to banks 13 23,565 15,547 Loans and advances to customers 14 154,240 135,251
Subordinated liabilities: Undated loan capital 38 5,852 5,959 Dated loan capital 38 4,400 4,495
Profit and loss account 41 7,070 6,727 Shareholders’ funds (equity and non-equity) 42 9,977 9,624
Total assets less current liabilities 11,335 10,980 Creditors Amounts falling due after more than one year: Net assets 9,977 9,624
Financing: – Issue of subordinated liabilities (loan capital) 49d 699 533 – Cash proceeds from issue of ordinary share capital and transactions in own shares held in respect of employee share schemes 11 32 – Repayments of subordinated liabilities (loan capital) 49d (764) (75) – Repayment of minority investment in subsidiaries 49d (132) – – Capital element of finance lease rental payments 49d (1) (1) Net cash (outflow) inflow from financing (187) 489
Goodwill arising on acquisitions of or by group undertakings is capitalised. For acquisitions prior to 1 January 1998, goodwill was taken direct to reserves in the year of acquisition. As permitted by the transitional arrangements of Financial Reporting Standard 10, ‘Goodwill and Intangible Assets’, this goodwill was not reinstated when the Group adopted the standard in 1998.
Paragraph 28 of Schedule 9 to the Companies Act 1985 requires that all goodwill carried on the balance sheet should be amortised. In the case of the 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 over-riding requirement for the accounts to show a true and fair view. If this goodwill was amortised over a period of 20 years, profit before tax for the year ended 31 December 2004 would be £92 million lower (2003: £93 million lower), with a corresponding reduction in reserves of £450 million (2003: £358 million); intangible assets on the balance sheet would also be £450 million lower (2003: £358 million lower).
Premises and equipment held for letting to customers under operating leases are depreciated over the life of the lease to give a constant rate of return on the net cash investment, taking into account tax and anticipated residual values. Anticipated residual values are reviewed regularly and any impairments identified are charged to the profit and loss account.
Income from finance leases is credited to the profit and loss account in proportion to the net cash invested so as to give a constant rate of return over each period after taking account of tax. Income from instalment credit transactions is credited to the profit and loss account using the sum of the digits method. Rental income from operating leases is credited to the profit and loss account on an accruals basis.
Full provision is made for deferred tax liabilities arising from timing differences between the recognition of gains and losses in the financial statements and their recognition in a tax computation. Deferred tax assets are recognised to the extent that it is regarded as more likely than not that there will be suitable taxable profits from which the future reversal of the underlying timing differences can be deducted, or where they can be offset against deferred tax liabilities. Deferred tax is measured at the average tax rates that are expected to 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 by the balance sheet date.
Full actuarial valuations of the Group’s principal defined benefit schemes are carried out every three years with interim reviews in the intervening years; these valuations are updated to 31 December each year by qualified independent actuaries, or in the case of the Scottish Widows Retirement Benefits Scheme, by a qualified actuary employed by Scottish Widows. For the purposes of these annual updates, scheme assets are included at market value and scheme liabilities are measured on an actuarial basis using the projected unit method; these liabilities are discounted at the current rate of return on an AA corporate bond of equivalent currency and term. The post-retirement benefit surplus or deficit is included on the Group’s balance sheet, net of the related amount of deferred tax. Surpluses are included only to the extent that they are recoverable through reduced contributions in the future or through refunds from the schemes. The current 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’ assets, after deducting the impact of the unwinding of the discount on scheme liabilities, is included within other finance income. Actuarial gains and losses, including differences between the expected and actual return on scheme assets, are recognised, net of the related deferred tax, in the statement of total recognised gains and losses.
Surpluses arise following annual actuarial valuations of the long-term business funds, which are carried out in accordance with the statutory requirements designed to ensure and demonstrate the solvency of the funds. Future surpluses will depend upon experience in a number of areas such as investment returns, lapse rates, mortality and administrative expenses. Surpluses can be projected by making realistic assumptions about future experience, having regard to both actual experience and forecast long-term economic trends. Other net cash flows principally comprise annual management charges and other fees levied upon the policyholders by the life assurance subsidiaries.
The assets held within the long-term business funds of the Group’s life assurance operations are legally owned by the Group, however the shareholder will only benefit from ownership of these assets to the extent that surpluses are declared or from other 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.
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.
A derivative will only be classified as a hedge in circumstances where there was reasonable evidence of the intention to hedge at the outset of the transaction and the derivative substantially matches or eliminates a proportion of the risk associated with the exposure being hedged.
Where a hedge transaction is superseded, ceases to be effective or is terminated early the derivative is measured at fair value. Any profit or loss arising is then amortised to the profit and loss account over the remaining life of the item which it was originally hedging. When the underlying asset, liability or position that was being hedged is terminated, the hedging derivative is measured at fair value and any profit or loss arising is recognised immediately.
Year ended 31 December 2004 £m £m £m £m £m £m £m £m £m
Profit on ordinary activities before tax 3,295 198 3,493 2,810 355 3,165 1,183 4,348
Insurance and Investments: Life, pensions, unit trusts and asset management 6,908 6,531 9,141 8,835
The Group has procedures to ensure that fees for audit and non-audit services are approved in advance. The audit committee has established de minimis fee limits for particular detailed types of service and has approved in advance all non-audit assignments where the fee falls below the relevant limit. All statutory audit work as well as non-audit assignments where the fee is expected to exceed the relevant limit are subject to individual pre-approval by the audit committee. On a quarterly basis, the audit committee receives a report detailing all pre-approved services and amounts paid to the auditors for such pre-approved services.
Profit on ordinary activities before tax is stated after taking account of: Income from: Aggregate amounts receivable, including capital repayments, in respect of assets leased to customers and banks under: – Finance leases and hire purchase contracts 3,742 3,495 – Operating leases 422 446 Profits less losses on disposal of investment securities 126 47 Charges: Rental of premises 212 220 Hire of equipment 17 18 Interest on subordinated liabilities (loan capital) 601 622
Investment securities: Treasury bills and similar securities 75 77 308 305
Other securities: Treasury bills and similar securities 4 4 9 9
Movements in investment securities: Exchange and other adjustments (3) – (3)
Of which repayable on demand or at short notice 15,805 13,365
In respect of: Loans and advances to banks 1 18 Loans and advances to customers 1,662 1,677 £m £m
Provisions for bad and doubtful debts* (1,662) (1,677) Interest held in suspense* (21) (28)
Geographical analysis by issuer United Kingdom 5,048 5,232 Other European 11,825 15,949 North America and Caribbean 5,080 5,130 Latin America 76 98 Asia Pacific 2,763 1,994
17 Debt securities (continued) Premiums Cost and discounts Provisions Total £m £m £m £m
Investment securities are those intended for use on a continuing basis in the activities of the Group and not for dealing purposes. It is expected that tax of £4 million (2003: £3 million) would be payable if the investment securities were sold at their year end valuation.
Adjustments on disposal of businesses (1) – (1) Charge for the year – 9 (9)
Assets subject to sale and repurchase agreements: Treasury bills and other eligible bills 117 136 Debt securities 10,454 4,503
Lloyds TSB Bank plc England 100% Banking and financial services Cheltenham & Gloucester plc England 100%† Mortgage lending and retail investments Lloyds TSB Commercial Finance Limited England 100%† Credit factoring Lloyds TSB Leasing Limited England 100%† Financial leasing Lloyds TSB Private Banking Limited England 100%† Private banking The Agricultural Mortgage Corporation PLC England 100%† Long-term agricultural finance Lloyds TSB Offshore Limited Jersey 100%† Banking and financial services Lloyds TSB Scotland plc Scotland 100%† Banking and financial services Lloyds TSB General Insurance Limited England 100%† General insurance Scottish Widows Investment Partnership Group Limited England 100%† Investment management Abbey Life Assurance Company Limited England 100%† Life assurance Lloyds TSB Insurance Services Limited England 100%† Insurance broking Lloyds TSB Asset Finance Division Limited England 100%† Consumer credit, leasing and related services Black Horse Limited England 100%† Consumer credit, leasing and related services Scottish Widows plc Scotland 100%† Life assurance Scottish Widows Annuities Limited Scotland 100%† Life assurance
The country of registration/incorporation is also the principal area of operation for each of the above group undertakings except as follows: Lloyds TSB Bank plc operates principally in the UK but also through branches in Belgium, Dubai, Ecuador, Gibraltar, Hong Kong, Japan, Luxembourg, Malaysia, Monaco, Netherlands, Paraguay, Singapore, Spain, Switzerland, Uruguay, the USA and a representative office in Iran.
Acquisition adjustment (34) – (34) Adjustments on disposal of businesses (14) (4) (10) Charge for the year – 44 (44)
Income from long-term assurance business included in the profit and loss account can be divided into those items comprising the operating profit of the business and other items. Included within operating profit are the following items: New business contribution. This represents the value recognised at the end of the year from new business written during the year after taking into account the cost of establishing technical provisions and reserves, less the costs of acquiring the business, including commissions paid to independent financial advisers and other direct sales costs.
In common with other organisations in the life assurance industry, prior to its demutualisation Scottish Widows wrote policies which contained potentially valuable options and guarantees, including guaranteed annuity option policies. Under the terms of the transfer of the Scottish Widows business, a separate memorandum account was created within the With-Profits Fund called the Additional Account which is available, inter alia, to meet any additional costs of providing guaranteed benefits on transferred policies; the Additional Account had a value at 31 December 2004 of £1.4 billion (2003: £1.4 billion). To the extent that the Additional Account is insufficient to provide these benefits any shortfall would be met by Lloyds TSB Group.
The ultimate cost, and any impact upon Lloyds TSB Group, will not be known for many years. However, Scottish Widows has developed, and will continue to develop, an actuarial model to assist in the management of the With-Profits Fund and to meet regulatory requirements. The model allows management to estimate the effects of different economic scenarios upon the financial position of the fund and consider the implications of different management actions. Output from this model indicates that the possible cost of providing benefits on policies containing features such as options and guarantees varies widely and, depending on the economic scenario encountered, could result in Lloyds TSB Group incurring a liability. Based on the information available at present, having considered the range of possible outcomes, and after making allowance for the effect of proposed future management actions, Lloyds TSB Group currently considers that no provision is necessary. However, the model is subject to ongoing development and the position will be kept under review.
• Current tax legislation and rates have been assumed to continue unaltered, except where future changes have been announced. The UK corporation tax rate used for grossing up was 30 per cent (2003: 30 per cent). The normalised investment earnings have been grossed up at a composite longer term tax rate of 18 per cent (2003: 17 per cent).
The liabilities to policyholders comprise: Technical provisions: – Long-term business provision (net of reinsurance) 23,705 23,730 – Claims outstanding (net of reinsurance) 246 238 Technical provisions for linked liabilities 28,256 25,023 Fund for future appropriations 1,379 346 Other liabilities 1,308 863
The individual statutory accounts of the Group’s life assurance subsidiaries are prepared under the modified statutory solvency basis, in the same way as the statutory accounts of listed insurance groups in the UK. The principal difference between the modified statutory solvency basis and the embedded value basis used for the preparation of the Group’s accounts is that accounts prepared under the modified statutory solvency basis do not reflect the value of in-force business.
A summarised balance sheet on a modified statutory solvency basis was as follows: £m £m
Long-term assurance business attributable to the shareholder – embedded value basis 6,781 6,481 Value of in-force business (2,939) (2,879)
Net tangible assets of life operations on a modified statutory solvency basis 4,581 4,234 30 Assets and liabilities denominated in foreign currencies 2004 2003 £m £m
Repayable on demand 5,183 7,455 Other deposits by banks with agreed maturity dates or periods of notice by residual maturity repayable: 3 months or less 31,833 15,002 1 year or less but over 3 months 2,500 1,197 5 years or less but over 1 year 21 69
The breakdown of customer accounts between the domestic and international offices of the Group is set out below: £m £m
Short-term timing differences (196) (229) Accelerated depreciation allowances 1,669 1,605 £m
The deferred tax balance at 31 December 2004 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 £956 million (2003: £916 million) (note 45).
Exchange and other adjustments – (6) – (6) Adjustments on disposal of businesses – – (1) (1)
Notes to the accounts 38 Subordinated liabilities Group Group Company Company
Undated loan capital*† Primary Capital Undated Floating Rate Notes: a Series 1 (US$750 million) 389 419 – – Series 2 (US$500 million) 259 279 – – Series 3 (US$600 million) 311 335 – – 113/4% Perpetual Subordinated Bonds 100 100 – – 6.625% Perpetual Capital Securities (c750 million) b 526 523 – – 6.90% Perpetual Capital Securities callable 2007 (US$1,000 million) c 512 550 – – 55/8% Undated Subordinated Step-up Notes callable 2009 (c1,250 million) g 877 874 – – Undated Step-up Floating Rate Notes callable 2009 (c150 million) a 105 105 – – 65/8% Undated Subordinated Step-up Notes callable 2010 f 407 407 – – 6.35% Step-up Perpetual Capital Securities callable 2013 (c500 million) d, g 350 349 – – 5.57% Undated Subordinated Step-up Coupon Notes callable 2015 (¥20,000 million) h 101 104 – – 5.125% Undated Subordinated Step-up Notes callable 2016 497 496 – – 61/2% Undated Subordinated Step-up Notes callable 2019 f 267 267 – – 8% Undated Subordinated Step-up Notes callable 2023 f 199 199 – – 61/2% Undated Subordinated Step-up Notes callable 2029 f 455 455 – – 6% Undated Subordinated Step-up
Subordinated Step-up Floating Rate Notes 2016 callable 2011 (c500 million) a, i 353 – – – Subordinated Floating Rate Notes 2020 (c100 million) a 70 70 – –
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.
Japanese yen ¥m ¥m 50 million Preference shares of ¥25 each 1,250 1,250 £m
Limited voting ordinary shares of 25p each At 1 January and 31 December 20
Profit and loss account (the Group): Exchange and other adjustments (11) Actuarial losses recognised in post-retirement benefit schemes (note 45) (166) Movements in relation to own shares (note 43) 10 Goodwill written back on sale of businesses 3 Profit for the year 507
Non-equity shareholders’ funds comprise 400 non-cumulative redeemable preference shares of 25p each which were issued during 2004 at par.
Own shares held in relation to employee shares schemes* 14 22
† The long-term assurance funds of Scottish Widows hold 30.5 million shares (2003: 30.5 million shares) in Lloyds TSB Group plc which were bought prior to the acquisition of Scottish Widows by Lloyds TSB Group. Due to the structure of these funds, Lloyds TSB Group is effectively exposed to the risks and rewards of ownership of one tenth of these shares; the risks and rewards of ownership of the remaining nine tenths are borne by the policyholders.
Market values of scheme assets: UK index linked gilts 561 4.3 545 4.4 – –
Expected return on scheme assets 764 696 Interest cost of scheme liabilities (725) (662)
The movements in the deficit in the schemes over the last two years have been as follows: £m £m
Derivatives are used to meet the financial needs of customers, as part of the Group’s trading activities and to reduce its own exposure to fluctuations in interest and exchange rates. The principal derivatives used by the Group are interest rate and exchange rate contracts; particular attention is paid to the liquidity of the markets and products in which the Group trades to ensure that there are no undue concentrations of activity and risk.
Interest rate contracts: Interest rate swaps 34,196 143 350 Forward rate agreements 2,921 6 – Options written 111 – –
Minority interests and shareholders’ funds – – – – – 10,550 23 10,573 Internal funding of trading business (6,577) 635 129 (3,330) (916) – 10,059 –
Minority interests and shareholders’ funds – – – – – 10,333 18 10,351 Internal funding of trading business (11,528) (810) (412) (3,217) (820) – 16,787 –
The Group provides loans and advances to commercial, corporate and personal customers at both fixed and variable rates. The carrying value of the variable rate loans and those relating to lease financing is assumed to be their fair value. For fixed rate lending, several different techniques are used to estimate fair value, as considered appropriate. For commercial and personal customers, fair value is principally estimated by discounting anticipated cash flows (including interest at contractual rates) at market rates for similar loans offered by the Group and other financial institutions. The fair value for corporate loans was estimated by discounting anticipated cash flows at a rate which reflects the effects of interest rate changes, adjusted for changes in credit risk. Certain loans secured on residential properties are made at a fixed rate for a limited period, typically two to five years, after which the loans revert to the relevant variable rate. The fair value of such loans has been estimated by reference to the market rates for similar loans of maturity equal to the remaining fixed interest rate period.
The Group considers that, given the lack of an established market, the diversity of fee structures and the difficulty of separating the value of the instruments from the value of the overall transaction, it is not meaningful to provide an estimate of the fair value of financial commitments and contingent liabilities. These are therefore excluded from the following table.
Assets Treasury bills and other eligible bills 4 4 88 90 Loans and advances to banks and customers 1,556 1,556 176,249 176,712 Debt securities and equity shares 11,002 11,002 14,407 14,443 Liabilities Deposits by banks and customers 814 814 160,986 160,950 Debt securities in issue – – 27,217 26,924 Subordinated liabilities – – 10,252 11,544
47 Derivatives and other financial instruments (continued) Trading book Trading book Non-trading book Non-trading book
All foreign exchange exposures in the non-trading book are transferred to the trading area where they are monitored and controlled.
Information about the management of market risk in the Group’s trading activities is given on pages 24 to 26.
Subordinated liabilities and finance leases: Exchange and other adjustments (137) 34 Issue of subordinated liabilities 699 533 Repayments of subordinated liabilities (764) (75) Lease financing 7 – Finance lease capital repayments (1) (1) Adjustments on disposal – (206)
e Acquisition of group undertakings and businesses 2004 2003 £m £m
Net assets acquired: Loans and advances – 993 Other assets – 18 Tangible fixed assets – 2 Deposits by banks, customer accounts and other liabilities – (13)
The consideration of £1,096 million was settled in cash in 2003.
Share dealing facilities A full range of dealing services is available through Lloyds TSB Registrars.
For postal dealing the current rate for both purchases and sales is 0.75%, no minimum. For full details please contact Lloyds TSB Registrars on: American Depositary Receipts (ADRs) Lloyds TSB shares are traded in the USA through an NYSE-listed sponsored ADR facility, with The Bank of New York as the depositary. The ADRs are traded on the New York Stock Exchange under the symbol LYG. The CUSIP number is 539439109 and the ratio of ADRs to ordinary shares is 1:4.
The community and our business A copy of the Group’s corporate responsibility report may be obtained by writing to Corporate Responsibility, Lloyds TSB Group plc, 25 Gresham Street, London EC2V 7HN. This information together with the Group’s code of business conduct is also available on the Group’s website.
* Includes 747 million shares (13.35%) registered in the names of some 847,000 individuals. 222 million shares (3.97%) are held by over 78,000 staff and Group pensioners, or on their behalf by the trustee of the staff profit sharing schemes or by the trustee of the staff incentive plan.