Final Results - Part 2

20th Feb 2007 07:03

Barclays PLC20 February 2007 FINANCIAL REVIEW Results by nature of income and expense Net interest income 2006 2005 £m £mCash and balances with central banks 16 9Financial investments 2,811 2,272Loans and advances to banks 978 690Loans and advances to customers 16,290 12,944Other 1,710 1,317 -------- --------Interest income 21,805 17,232 -------- -------- Deposits from banks (2,819) (2,056)Customer accounts (3,076) (2,715)Debt securities in issue (5,282) (3,268)Subordinated liabilities (777) (605)Other (708) (513) -------- --------Interest expense (12,662) (9,157) -------- --------Net interest income 9,143 8,075 -------- -------- Group net interest income increased 13% (£1,068m) to £9,143m (2005: £8,075m).The inclusion of Absa contributed net interest income of £1,138m (2005(1):£516m). Group net interest income excluding Absa grew 6%. A component of the benefit of free funds included in Group net interest incomeis the structural hedge which functions to reduce the impact of the volatilityof short-term interest rate movements. The contribution of the structural hedgedecreased to £26m (2005: £145m), largely due to the impact of relatively highershort-term interest rates and lower medium-term rates. Interest income includes £98m (2005: £76m) accrued on impaired loans. (1) For 2005, this reflects the period from 27th July until 31st December 2005. Business margins 2006 2005 % %UK Retail Banking assets 0.84 0.92UK Retail Banking liabilities 2.01 1.99UK Business Banking assets 1.92 1.87UK Business Banking liabilities 1.46 1.46Barclaycard assets 6.47 6.59 -------- --------Barclaycard assets-cards 8.73 7.96Barclaycard assets-loans 4.11 4.96 -------- --------International Retail and Commercial Banking-ex Absa assets(1) 1.28 1.36International Retail and Commercial Banking-ex Absa liabilities(1) 2.04 2.02International Retail and Commercial Banking-Absa assets(1),(2) 2.95 3.52International Retail and Commercial Banking-Absa liabilities(1),(2) 2.29 2.39Barclays Wealth assets 1.11 0.99Barclays Wealth liabilities 1.11 1.04 Average balances 2006 2005 £m £mUK Retail Banking assets 65,486 66,165UK Retail Banking liabilities 79,188 73,473UK Business Banking assets 52,018 43,985UK Business Banking liabilities 44,839 40,545Barclaycard assets 26,204 24,246 -------- --------Barclaycard assets-cards 13,392 13,180Barclaycard assets-loans 12,812 11,066 -------- --------International Retail and Commercial Banking-ex Absa assets(1) 27,434 22,889International Retail and Commercial Banking-ex Absaliabilities(1) 10,780 9,219International Retail and Commercial Banking-Absa assets(1),(2) 24,388 20,225International Retail and Commercial Banking-Absaliabilities1,(2) 12,826 13,338Barclays Wealth assets 5,140 4,395Barclays Wealth liabilities 24,697 23,430 (1) International Retail and Commercial Banking business margins, averagebalances and business net interest income for 2005 have been restated on aconsistent basis to reflect changes in methodology. (2) For 2005, this reflects the period from 27th July until 31st December 2005,on an annualised basis. Business net interest income 2006 2005 £m £mUK Retail Banking assets 552 609UK Retail Banking liabilities 1,595 1,462UK Business Banking assets 999 823UK Business Banking liabilities 655 592Barclaycard assets 1,696 1,598 -------- --------Barclaycard assets-cards 1,169 1,049Barclaycard assets-loans 527 549 -------- --------International Retail and Commercial Banking-ex Absa assets(1) 352 311International Retail and Commercial Banking-ex Absaliabilities(1) 220 186International Retail and Commercial Banking-Absa assets(1),(2) 719 308International Retail and Commercial Banking-Absaliabilities(1),(2) 294 138Barclays Wealth assets 57 43Barclays Wealth liabilities 273 244 -------- --------Business net interest income 7,412 6,314 -------- -------- Reconciliation of business interest income to Group net interest income 2006 2005 £m £mBusiness net interest income 7,412 6,314Other:- Barclays Capital 1,158 1,065- Barclays Global Investors 10 15- Other 563 681 -------- --------Group net interest income 9,143 8,075 -------- -------- Business net interest income is derived from the interest rate earned on averageassets or paid on average liabilities relative to the average Bank of Englandbase rate, local equivalents for international businesses or the rate managed bythe bank using derivatives. The margin is expressed as annualised businessinterest income over the relevant average balance. Asset and liability marginscannot be added together as they are relative to the average Bank of Englandbase rate, local equivalent for international businesses or the rate managed bythe bank using derivatives. The benefit of capital attributed to thesebusinesses is excluded from the calculation of business margins and business netinterest income. Average balances are calculated on daily averages for most UK banking operationsand monthly averages elsewhere. Within the reconciliation of Group net interest income, there is an amountcaptured as Other. This relates to: benefit of capital excluded from thebusiness margin calculation, Head office functions and other operations; netfunding on non-customer assets and liabilities; and Barclays Wealth-closed lifeassurance activities. (1) International Retail and Commercial Banking business margins, averagebalances and business net interest income for 2005 have been restated on aconsistent basis to reflect changes in methodology. (2) For 2005, this reflects the period from 27th July until 31st December 2005. UK Retail Banking assets margin decreased 8 basis points to 0.84% (2005: 0.92%).The mortgage margin has been impacted by changed assumptions used in thecalculation of effective interest rates, a higher proportion of new mortgagesand base rate changes. This was partially offset by increased contributions fromnon-mortgage assets. UK Retail Banking liabilities margin was stable at 2.01%(2005: 1.99%). UK Business Banking assets margin improved to 1.92% (2005: 1.87%). UK BusinessBanking liabilities margin was stable at 1.46% (2005: 1.46%). Barclaycard margins in credit cards improved to 8.73% (2005: 7.96%) due to theimpact of increased card rates and a reduced proportion of promotional ratebalances in the UK. Margins in consumer lending fell to 4.11% (2005: 4.96%) dueto a higher proportion of secured lending and continued competitive pressure. International Retail and Commercial Banking-excluding Absa assets margindecreased 8 basis points to 1.28% (2005: 1.36%) partly reflecting a greatershare of mortgage assets as a proportion of the total book in continental Europe. International Retail and Commercial Banking-Absa assets margin decreased 57basis points to 2.95% (2005(1): annualised 3.52%) reflecting a higher proportionof mortgage assets and competitive pressures in mortgages and asset finance. Theliabilities margin decreased 10 basis points to 2.29% (2005(1): annualised2.39%). The Absa Group Limited net interest margin remained stable compared tothe year to 31st December 2005 as the asset margin decrease was offset by thebenefit of higher returns on free funds and a higher proportion of preferenceshare capital in the funding mix. Barclays Wealth assets margin increased 12 basis points to 1.11% (2005: 0.99%)largely reflecting higher margins on new lending business and a small increasein mortgage margins. The liabilities margin increased 7 basis points to 1.11%(2005: 1.04%) principally due to a slight increase in currency deposit spreads. (1) For 2005, this reflects the period from 27th July until 31st December 2005. Net fee and commission income 2006 2005 £m £mFee and commission income 8,005 6,430Fee and commission expense (828) (725) -------- --------Net fee and commission income 7,177 5,705 -------- -------- Net fee and commission income increased 26% (£1,472m) to £7,177m (2005:£5,705m). The inclusion of Absa contributed net fee and commission income of£850m (2005(1): £334m). Group net fee and commission income excluding Absa grew18%, reflecting growth across all businesses. Fee and commission income rose 24% (£1,575m) to £8,005m (2005: £6,430m). Theinclusion of Absa contributed fee and commission income of £896m (2005(1):£386m). Excluding Absa, fee and commission income grew 18%, driven by a broadlybased performance across the Group, particularly within Barclays GlobalInvestors. Fee and commission expense increased 14% (£103m) to £828m (2005: £725m),reflecting the growth in Barclaycard US. Absa contributed fee and commissionexpense of £46m (2005(1): £52m). Total foreign exchange income was £850m (2005: £648m) and consisted of revenuesearned from both retail and wholesale activities. Foreign exchange income earnedon customer transactions by individual businesses is reported in thoserespective business units within fee and commission income. The foreign exchangeincome earned in Barclays Capital and in Treasury is reported within net tradingincome. (1) For 2005, this reflects the period from 27th July until 31st December 2005. Principal transactions 2006 2005 £m £mRates related business 2,848 1,732Credit related business 766 589 -------- --------Net trading income 3,614 2,321 -------- -------- Cumulative gain from disposal of available for sale assets 307 120Dividend income 15 22Net income from financial instruments designated at fair value 447 389Other investment income 193 327 -------- --------Net investment income 962 858 -------- --------Principal transactions 4,576 3,179 -------- -------- Most of the Group's trading income is generated in Barclays Capital. Net trading income increased 56% (£1,293m) to £3,614m (2005: £2,321m) due toexcellent performances in Barclays Capital Rates and Credit businesses, inparticular in commodities, fixed income, equities, credit derivatives andemerging markets. This was driven by higher volumes of client led activity andfavourable market conditions. The inclusion of Absa contributed net tradingincome of £60m (2005(1): £9m). Group net trading income excluding Absa grew 54%. Net investment income increased 12% (£104m) to £962m (2005: £858m). Theinclusion of Absa contributed net investment income of £144m (2005(1): £62m).Group net investment income excluding Absa increased 3%. The cumulative gain from disposal of available for sale assets increased 156%(£187m) to £307m (2005: £120m) driven by investment realisations, primarily in Private Equity. Fair value movements on certain assets and liabilities have been reported withinnet trading income or within net investment income depending on the nature ofthe transaction. Fair value movements on insurance assets included within netinvestment income contributed £205m (2005: £317m). (1) For 2005, this reflects the period from 27th July until 31st December 2005. Net premiums from insurance contracts 2006 2005 £m £mGross premiums from insurance contracts 1,108 909Premiums ceded to reinsurers (48) (37) -------- --------Net premiums from insurance contracts 1,060 872 -------- -------- Net premiums from insurance contracts increased 22% (£188m) to £1,060m (2005:£872m). The inclusion of Absa contributed net premiums from insurance contractsof £240m (2005(1): £98m). Group net premiums from insurance contracts excludingAbsa increased 6% reflecting growth in UK consumer lending. Other income 2006 2005 £m £mIncrease in fair value of assets held in respect of linkedliabilities to customers under investment contracts 7,417 9,234Increase in liabilities to customers under investmentcontracts (7,417) (9,234)Property rentals 55 54Other 159 93 -------- --------Other income 214 147 -------- -------- Certain asset management products offered to institutional clients by BarclaysGlobal Investors are recognised as investment contracts. Accordingly theinvested assets and the related liabilities to investors are held at fair valueand changes in those fair values are reported within Other income. Net claims and benefits paid on insurance contracts 2006 2005 £m £mGross claims and benefits paid on insurance contracts 588 694Reinsurers' share of claims paid (13) (49) -------- --------Net claims and benefits paid on insurance contracts 575 645 -------- -------- Net claims and benefits paid on insurance contracts decreased 11% (£70m) to£575m (2005: £645m). The inclusion of Absa contributed net claims and benefitsof £106m (2005(1): £44m). Net claims and benefits paid on insurance contractsexcluding Absa decreased 22%, principally reflecting lower investment income andconsequent claims and benefits in Barclays Wealth-closed life assuranceactivities. (1) For 2005, this reflects the period from 27th July until 31st December 2005. Impairment charges 2006 2005Impairment charges on loans and advances £m £m-New and increased impairment allowances 2,722 2,129-Releases (389) (333)-Recoveries (259) (222) -------- --------Impairment charges on loans and advances (see note 5) 2,074 1,574 Other credit provisionsCredits for the year in respect of provision for undrawncontractually committed facilities and guarantees provided (6) (7) -------- --------Impairment charges on loans and advances and other creditprovisions 2,068 1,567 Impairment charges on available for sale assets 86 4 -------- --------Total impairment charges 2,154 1,571 -------- -------- Total impairment charges increased 37% (£583m) to £2,154m (2005: £1,571m). Impairment charges on loans and advances and other credit provisions Impairment charges on loans and advances and other credit provisions increased32% (£501m) to £2,068m (2005: £1,567m). Excluding Absa, the increase was 26%(£395m) and largely reflected the continued challenging credit environment in UKunsecured retail lending through 2006. The wholesale and corporate sectorsremained stable with a low level of defaults. The Group impairment charges on loans and advances and other credit provisionsas a percentage of year-end total loans and advances of £316,561m (2005:£303,451m) increased to 0.65% (2005: 0.52%). Retail impairment charges on loans and advances and other credit provisionsincreased to £1,809m (2005: £1,254m), including £99m (2005(1): £10m) in respectof Absa. Retail impairment charges on loans and advances amounted to 1.30%(2005(2): 0.93%) as a percentage of year-end total loans and advances of£139,350m (2005(2): £134,420m), including balances in Absa of £20,090m (2005:£20,836m). In the UK retail businesses, household cashflows remained under pressure leadingto a deterioration in consumer credit quality. High debt levels and changingsocial attitudes to bankruptcy and debt default contributed to higher levels ofinsolvency and increased impairment charges. In UK cards and unsecured consumerlending, the flows of new delinquencies and the levels of arrears balancesdeclined in the second half of 2006, reflecting more selective customerrecruitment, limit management and improved collections. In UK Home Finance, delinquencies were flat and amounts charged-off remainedlow. The weaker external environment led to increased credit delinquency inLocal Business, where there were both higher balances on caution status andhigher flows into delinquency, which both stabilised towards the year-end. (1) For 2005, this reflects the period from 27th July until 31st December 2005. (2) Prior year analysis of loans and advances to customers between retailbusiness and wholesale and corporate business has been reclassified to reflectenhanced methodology implemented in the current year (see page 78). In the wholesale and corporate businesses, impairment charges on loans andadvances and other credit provisions decreased to £259m (2005: £313m), including£27m (2005(1): £10m) in respect of Absa. The fall was due mainly to recoveriesin Barclays Capital as a result of the benign wholesale credit environment. Thiswas partially offset by an increase in UK Business Banking, reflecting highercharges in Medium Business and growth in lending balances. The wholesale and corporate impairment charge was 0.15% (2005(2): 0.19%) as apercentage of year-end total loans and advances to banks and to customers of£177,211m (2005(2): £169,031m), including balances in Absa of £9,299m (2005:£9,731m). In Absa impairment charges increased to £126m (2005(1): £20m) reflecting a fullyear of business and normalisation of credit conditions in South Africafollowing a period of low interest rates. Impairment on available for sale assets The total impairment charges in Barclays Capital included losses of £83m (2005:£nil) on an available for sale portfolio where an intention to sell caused thelosses to be viewed as other than temporary in nature. These losses in 2006 wereprimarily due to interest rate movements, rather than credit deterioration, witha corresponding gain arising on offsetting derivatives recognised in net tradingincome. (1) For 2005, this reflects the period from 27th July until 31st December 2005. (2) Prior year analysis of loans and advances to customers between retailbusiness and wholesale and corporate business has been reclassified to reflectenhanced methodology implemented in the current year (see page 78). Operating expenses 2006 2005 £m £mStaff costs (refer to page 54) 8,169 6,318Administrative expenses 3,980 3,443Depreciation 455 362Impairment loss -property and equipment 14 - -intangible assets 7 9Operating lease rentals 345 316Gain on property disposals (432) -Amortisation of intangible assets 136 79 -------- --------Operating expenses 12,674 10,527 -------- -------- Operating expenses increased 20% (£2,147m) to £12,674m (2005: £10,527m). Theinclusion of Absa contributed operating expenses of £1,496m (2005(1): £664m).Group operating expenses excluding Absa grew 13%, reflecting a higher level ofbusiness activity and an increase in performance related pay. Administrative expenses increased 16% (£537m) to £3,980m (2005: £3,443m). Theinclusion of Absa contributed administrative expenses of £579m (2005(1): £257m).Group administrative expenses excluding Absa grew 7% principally as a result ofhigher business activity in UK Banking and Barclays Capital. Operating lease rentals increased 9% (£29m) to £345m (2005: £316m). Theinclusion of Absa contributed operating lease rentals of £73m (2005(1): £27m),which more than offset the absence of double occupancy costs incurred in 2005,associated with the head office relocation to Canary Wharf. Operating expenses were reduced by gains from the sale of property of £432m(2005: £nil) as the Group took advantage of historically low yields on propertyto realise gains on some of its freehold portfolio. Amortisation of intangible assets increased 72% (£57m) to £136m (2005: £79m)primarily reflecting the inclusion of Absa for the full year. The Group cost:income ratio improved to 59% (2005: 61%). This reflected improvedproductivity. The Group cost:net income ratio was 65% (2005: 67%). (1) For 2005 this reflects the period from 27th July until 31st December 2005. Staff costs 2006 2005 £m £mSalaries and accrued incentive payments 6,635 5,036Social security costs 502 412Pension costs- defined contribution plans 128 76- defined benefit plans 282 271Other post retirement benefits 30 27Other 592 496 -------- --------Staff costs 8,169 6,318 -------- -------- Staff costs increased 29% (£1,851m) to £8,169m (2005: £6,318m). The inclusion ofAbsa contributed staff costs of £694m (2005(1): £296m). Group staff costsexcluding Absa rose 24%. Salaries and accrued incentive payments rose 32% (£1,599m) to £6,635m (2005:£5,036m), principally due to increased performance related payments and the fullyear inclusion of Absa. The inclusion of Absa contributed salaries and incentivepayments of £615m (2005(1): £276m). Group salaries and accrued incentivepayments excluding Absa rose 26%. (1) For 2005, this reflects the period from 27th July until 31st December 2005. Staff numbers Staff numbers: 2006 2005UK Banking 41,100 39,800 -------- --------UK Retail Banking 33,000 32,000UK Business Banking 8,100 7,800 -------- --------Barclaycard 8,600 7,800International Retail and Commercial Banking 48,000 45,400 -------- --------International Retail and Commercial Banking-ex Absa 14,100 12,700International Retail and Commercial Banking-Absa 33,900 32,700 -------- --------Barclays Capital 13,200 9,900Barclays Global Investors 2,700 2,300Barclays Wealth 7,800 7,200Head office functions and other operations 1,200 900 -------- --------Total Group permanent and fixed term contract staffworldwide 122,600 113,300 Agency staff worldwide 9,100 7,000 -------- --------Total including agency staff 131,700 120,300 -------- -------- Staff numbers are shown on a full-time equivalent basis. Total Group permanentand contract staff comprised 62,400 (31st December 2005: 59,100) in the UK and60,200 (31st December 2005: 54,200) internationally. UK Banking staff numbers increased 1,300 to 41,100 (31st December 2005: 39,800),primarily reflecting the inclusion in UK Retail Banking of mortgage processingstaff involved in activities previously outsourced. Barclaycard staff numbers rose 800 to 8,600 (31st December 2005: 7,800),reflecting growth of 400 in Barclaycard US and increases in operations andcustomer facing staff in the UK. International Retail and Commercial Banking increased staff numbers 2,600 to48,000 (31st December 2005: 45,400). International Retail and CommercialBanking-excluding Absa increased staff numbers by 1,400 to 14,100 (31st December2005: 12,700), mainly due to growth in continental Europe and Africa.International Retail and Commercial Banking-Absa increased staff numbers by1,200 to 33,900 (31st December 2005: 32,700), reflecting continued growth in thebusiness. Barclays Capital staff numbers increased 3,300 during 2006 to 13,200 (31stDecember 2005: 9,900) and included 1,300 from the acquisition of HomEq. Organicgrowth was broadly based across all regions and reflected further investments inthe front office, systems development and control functions to support continuedbusiness expansion. Barclays Global Investors increased staff numbers 400 to 2,700 (31st December2005: 2,300) spread across regions, product groups and support functions,reflecting continued investment to support strategic initiatives. Barclays Wealth staff numbers rose 600 to 7,800 (31st December 2005: 7,200) tosupport the continued expansion of the business, including increased hiring ofclient facing staff. Head office functions and other operations staff numbers grew 300 to 1,200(31st December 2005: 900) primarily reflecting the centralisation of functionalactivity and the increased regulatory environment and audit demands as a resultof the expansion of business areas. Agency staff numbers rose 2,100 to 9,100 (31st December 2005: 7,000), largelydue to an increase in temporary staff at Absa. Share of post-tax results of associates and joint ventures 2006 2005 £m £mProfit from associates 53 53Loss from joint ventures (7) (8) -------- --------Share of post-tax results of associates and joint ventures 46 45 -------- -------- The share of post-tax results of associates and joint ventures increased 2%(£1m) to £46m (2005: £45m). Of the £46m share of post-tax results of associates and joint ventures,FirstCaribbean International Bank contributed £41m (2005: £37m). Profit on disposal of subsidiaries, associates and joint ventures 2006 2005 £m £mProfit on disposal of subsidiaries, associates and jointventures 323 - -------- -------- The profit on disposal of subsidiaries, associates and joint ventures includes£247m profit on disposal of FirstCaribbean International Bank and £76m from thesale of interests in vehicle leasing and vendor finance businesses. Tax The charge for the period is based upon a UK corporation tax rate of 30% for thecalendar year 2006 (2005: 30%). The effective rate of tax for 2006, based onprofit before tax, was 27.2% (2005: 27.3%). The effective tax rate differs from30% as it takes account of the different tax rates which are applied to theprofits earned outside the UK, disallowable expenditure, certain non-taxablegains and adjustments to prior year tax provisions. The effective tax rate for2006 is consistent with the prior period. The tax charge for the year includes£1,234m (2005: £961m) arising in the UK and £707m (2005: £478m) arisingoverseas. The profit on disposal of subsidiaries, associates and joint ventures of £323mwas substantially offset by losses or exemptions. The effective tax rate onprofit before business disposals was 28.5%. Profit attributable to minority interests 2006 2005 £m £mAbsa Group Limited 262 116Preference shares 175 113Reserve capital instruments 92 93Upper tier 2 instruments 15 11Barclays Global Investors minority interests 47 41Other minority interests 33 20 -------- --------Profit attributable to minority interests 624 394 -------- -------- Profit attributable to minority interests increased £230m to £624m (2005: £394m)largely reflecting the full year inclusion of Absa. Earnings per share 2006 2005Profit attributable to equity holders of the parent £4,571m £3,447mDilutive impact of convertible options (£30m) (£38m) -------- --------Profit attributable to equity holders of the parentincluding dilutive impact of convertible options £4,541m £3,409m Basic weighted average number of shares in issue 6,357m 6,337mNumber of potential ordinary shares(1) 150m 149m -------- --------Diluted weighted average number of shares 6,507m 6,486m -------- -------- Basic earnings per ordinary share 71.9p 54.4p Diluted earnings per ordinary share 69.8p 52.6p The calculation of basic earnings per share is based on the profit attributableto equity holders of the parent and the weighted average number of sharesexcluding own shares held in employee benefit trusts, currently not vested andshares held for trading. When calculating the diluted earnings per share, the profit attributable toequity holders of the parent is adjusted for the conversion of outstandingoptions into shares within Absa Group Limited and Barclays Global Investors UKHoldings Limited. The weighted average number of ordinary shares excluding ownshares held in employee benefit trusts currently not vested and shares held fortrading, is adjusted for the effects of all dilutive potential ordinary shares,totalling 150 million (2005: 149 million). (1) Potential ordinary shares reflect the dilutive impact of share optionsoutstanding. Dividends on ordinary shares The Board has decided to pay, on 27th April 2007, a final dividend for the yearended 31st December 2006 of 20.5p per ordinary share for shares registered inthe books of the Company at the close of business on 9th March 2007. The interimdividend of 10.5p per ordinary share for the year ended 31st December 2006 waspaid on 2nd October 2006. Shareholders who have their dividends paid direct totheir bank or building society account will receive a consolidated tax voucherdetailing the dividends paid in the 2006-2007 UK tax year in mid-October 2007. The amount payable for the 2006 final dividend is £1,307m (2005: £1,105m). Thisamount excludes £33m payable on own shares held by employee benefit trusts(2005: £25m). For qualifying US and Canadian resident ADR holders, the final dividend of 20.5pper ordinary share becomes 82.0p per ADS (representing four shares). The ADRdepositary will mail the dividend on 27th April 2007 to ADR holders on therecord on 9th March 2007. For qualifying Japanese shareholders, the final dividend of 20.5p per ordinaryshare will be distributed in mid-May to shareholders on the record on 9th March2007. Shareholders may have their dividends reinvested in Barclays PLC shares byparticipating in the Barclays Dividend Reinvestment Plan. The plan is availableto all shareholders, including members of Barclays Sharestore, provided thatthey neither live in nor are subject to the jurisdiction of any country wheretheir participation in the plan would require Barclays or The Plan Administratorto take action to comply with local government or regulatory procedures or anysimilar formalities. Any shareholder wishing to obtain details and a form tojoin the plan should contact The Plan Administrator by writing to: The PlanAdministrator to Barclays, Share Dividend Team, The Causeway, Worthing, WestSussex, BN99 6DA; or, by telephoning 0870 609 4535. The completed form should bereturned to The Plan Administrator on or before 4th April 2007 for it to beeffective in time for the payment of the final dividend on 27th April 2007.Shareholders who are already in the plan need take no action unless they wish tochange their instructions in which case they should write to The PlanAdministrator. Analysis of amounts included in the balance sheet Capital resources 2006 2005 £m £mShareholders' equity excluding minority interests 19,799 17,426 -------- --------Preference shares 3,414 2,977Reserve capital instruments 1,906 1,868Upper tier 2 instruments 586 581Absa minority interests 1,451 1,351Other minority interests 234 227 -------- --------Minority interests 7,591 7,004 -------- --------Total shareholders' equity 27,390 24,430Subordinated liabilities 13,786 12,463 -------- --------Total capital resources 41,176 36,893 -------- -------- The authorised share capital of Barclays PLC was £2,500m (2005: £2,500m)comprising 9,996 million (2005: 9,996 million) ordinary shares of 25p each and 1million (2005: 1 million) staff shares of £1 each. Called up share capitalcomprises 6,535 million (2005: 6,490 million) ordinary shares of 25p each and 1million (2005: 1 million) staff shares of £1 each. Total capital resources increased £4,283m to £41,176m since 31st December 2005. Shareholders' equity, excluding minority interests, increased £2,373m since31st December 2005. The increase reflected profits attributable to equityholders of the parent of £4,571m, increases in share capital and share premiumof £179m and other increases in retained reserves of £412m. Offsetting thesemovements were dividends paid of £1,771m, decreases in the available for saleand cash flow hedging reserves of £93m and £300m respectively, a £594m decreasein the currency translation reserve and a £31m decrease due to changes intreasury and Employee Share Ownership Plan shares. Subordinated liabilities increased £1,323m since 31st December 2005. Theincrease reflects capital raisings of £2,493m and interest charges of £11m;offset by exchange rate movements of £575m, redemptions of £366m, fair valueadjustments of £214m and amortisation of issue expenses of £26m. Minority interests increased £587m since 31st December 2005. The increaseprimarily reflected the issue by Barclays Bank PLC, during April 2006, of30,000,000 preference shares of US$25 each (US$750m; £419m) with a 6.625%dividend. In addition, during April 2006, Absa issued 3,000,000 preferenceshares of R1,000 per share (£218m). Capital ratios Risk weighted assets and capital resources, as defined for supervisory purposesby the Financial Services Authority, comprised: Risk weighted assets: 2006 2005Banking book £m £mOn-balance sheet 197,979 180,808Off-balance sheet 33,821 31,351Associated undertakings and joint ventures 2,072 3,914 -------- --------Total banking book 233,872 216,073 -------- -------- Trading bookMarket risks 30,291 23,216Counterparty and settlement risks 33,670 29,859 -------- --------Total trading book 63,961 53,075 -------- --------Total risk weighted assets 297,833 269,148 -------- -------- Capital resources:Tier 1Called up share capital 1,634 1,623Eligible reserves 19,608 16,837Minority interests(1) 7,899 6,634Tier one notes(2) 909 981Less: intangible assets (7,045) (7,180) -------- --------Total qualifying tier 1 capital 23,005 18,895 -------- -------- Tier 2Revaluation reserves 25 25Available for sale-equity gains 221 223Collectively assessed impairment allowances 2,556 2,306Minority Interests 451 515Qualifying subordinated liabilities(3)Undated loan capital 3,180 3,212Dated loan capital 7,603 7,069 -------- --------Total qualifying tier 2 capital 14,036 13,350 -------- -------- Less: Supervisory deductions:Investments not consolidated for supervisory purposes (982) (782)Other deductions (1,348) (961) -------- -------- (2,330) (1,743) -------- --------Total net capital resources 34,711 30,502 -------- -------- Tier 1 ratio 7.7% 7.0%Risk asset ratio 11.7% 11.3% (1) Included reserve capital instruments of £2,765m (31st December 2005:£1,735m). Minority interests included issues of £500m and US$1,350m, reservecapital instruments which are eligible for inclusion in tier 1 capital madeduring 2006. These issues are classified within subordinated liabilities on thebalance sheet. (2) Tier 1 notes are included in subordinated liabilities in the consolidatedbalance sheet. (3) Subordinated liabilities included in tier 2 Capital are subject to limits laiddown in the supervisory requirements. At 31st December 2006, the tier 1 Capital ratio was 7.7% and the Risk assetratio was 11.7%. From 31st December 2005, total net capital resources rose£4.2bn and risk weighted assets increased £28.7bn. Tier 1 capital rose £4.1bn, including £2.8bn arising from profits attributableto equity shareholders net of dividends paid. Minority interests within tier 1capital increased £1.3bn primarily due to the issuance of £1.2bn of ReserveCapital Instruments and £0.7bn of preference shares partially offset by adecrease in regulatory associates of £0.4bn driven by the sale of FirstCaribbeanand exchange rate movements of £0.5bn. Tier 2 capital increased £0.7bn mainly asa result of the issuance of £1.5bn of loan capital partially offset by exchangerate movements of £0.6bn and redemptions of £0.4bn. The weakening of the Rand against Sterling had a positive impact on capitalratios in 2006. Reconciliation of regulatory capital Capital is defined differently for accounting and regulatory purposes. Areconciliation of shareholders' equity for accounting purposes to called upshare capital and eligible reserves for regulatory purposes, is set out below: 2006 2005 £m £mShareholders' equity excluding minority interests 19,799 17,426 Available for sale reserve (132) (225)Cash flow hedging reserve 230 (70)Retained earningsDefined benefit pension scheme 1,165 1,215Additional companies in regulatory consolidationand non-consolidated companies (498) (145)Foreign exchange on RCIs and upper tier 2 loan stock 504 289Other adjustments 174 (30) -------- --------Called up share capital and eligible reserves for regulatorypurposes 21,242 18,460 -------- -------- Total assets and risk weighted assets Total assets increased 8% to £996.8bn (2005: £924.4bn). Risk weighted assetsincreased 11% to £297.8bn (31st December 2005: £269.1bn). Loans and advances tocustomers that have been securitised increased £5.8bn to £24.4bn (31st December2005: £18.6bn). The increase in risk weighted assets since 2005 reflected a riseof £18.1bn in the banking book and a rise of £10.9bn in the trading book. UK Retail Banking total assets increased 5% to £74.0bn (31st December 2005:£70.4bn). This was mainly attributable to growth in mortgage balances. Riskweighted assets increased 6% to £34.9bn (31st December 2005: £32.8bn) alsoprimarily reflecting the growth in mortgage balances. UK Business Banking total assets increased 10% to £65.9bn (31st December 2005:£59.9bn) reflecting good growth across short, medium and long term lendingproducts. Risk weighted assets increased 6% to £50.0bn (31st December 2005:£47.1bn), reflecting asset growth and increased regulatory netting. Barclaycard total assets increased 7% to £27.6bn (31st December 2005: £25.8bn)driven by growth in lending balances in the international businesses andFirstPlus. Risk weighted assets increased 16% to £25.2bn (31st December 2005:£21.8bn), primarily reflecting the increase in total assets and lowersecuritised balances. International Retail and Commercial Banking-excluding Absa total assetsincreased 13% to £38.5bn (31st December 2005: £34.2bn) mainly reflectingincreases in mortgage and other lending. Risk weighted assets remained flat at£20.3bn (31st December 2005: £20.4bn), with balance sheet growth offset by thesale of FirstCaribbean International Bank. International Retail and Commercial Banking-Absa total assets increased 3% to£30.4bn (31st December 2005: £29.4bn). Risk weighted assets remained flat at£20.7bn (31st December 2005: £20.8bn). This reflected very strong growth in Randterms offset by a 21% decline in the value of the Rand. In Rand terms assetsgrew 31% to R417bn (31st December 2005: R319bn) and risk weighted assets grew25% to R284bn (31st December 2005: R227bn) due to strong growth in mortgagelending along with growth in corporate lending. Barclays Capital total assets increased 9% to £657.9bn (31st December 2005:£601.2bn). This reflected continued expansion of the business with growth inreverse repurchase agreements, debt securities and traded equity securities.Risk weighted assets increased 18% to £137.6bn (31st December 2005: £116.7bn) inline with risk, driven by the growth in equity derivatives, credit derivativesand fixed income. Barclays Global Investors total assets remained flat at £80.5bn (31st December2005: £80.9bn). The majority of total assets relates to asset managementproducts with equal and offsetting balances reflected within liabilities tocustomers. Risk weighted assets decreased 7% to £1.4bn (31st December 2005:£1.5bn). Barclays Wealth total assets increased 20% to £7.3bn (31st December 2005:£6.1bn) reflecting strong growth in lending to high net worth, affluent andintermediary clients. Risk weighted assets increased 39% to £5.7bn (31stDecember 2005: £4.1bn) above the rate of balance sheet growth driven by changesin the mix of lending and growth in guarantees. Head office functions and other operations total assets decreased 24% to £7.1bn(31st December 2005: £9.3bn). Risk weighted assets decreased 53% to £1.9bn (31stDecember 2005: £4.0bn). Economic capital Barclays assesses capital requirements by measuring the Group risk profile usingboth internally and externally developed models. The Group assigns economiccapital primarily within seven risk categories: Credit Risk, Market Risk,Business Risk, Operational Risk, Insurance Risk, Fixed Assets and PrivateEquity. The Group regularly enhances its economic capital methodology and benchmarksoutputs to external reference points. The framework has been enhanced to reflectdefault probabilities during average credit conditions, rather than thoseprevailing at the balance sheet date, thus seeking to remove cyclicality fromthe economic capital calculation. The framework also adjusts economic capital toreflect time horizon, correlation of risks and risk concentrations. Economic capital is allocated on a consistent basis across all of Barclaysbusinesses and risk activities. A single cost of equity is applied to calculatethe cost of risk. Economic capital allocations reflect varying levels of risk. The total average economic capital required by the Group, as determined by riskassessment models and after considering the Group's estimated portfolio effects,is compared with the supply of economic capital to evaluate economic capitalutilisation. Supply of economic capital is calculated as the average availableshareholders' equity after adjustment and including preference shares. The economic capital methodology will form the basis of the Group's submissionfor the Basel II Internal Capital Adequacy Assessment Process (ICAAP). Economic capital demand(1) 2006 2005 £m £mUK Banking 5,100 4,950 -------- --------UK Retail Banking 2,400 2,350UK Business Banking 2,700 2,600 -------- --------Barclaycard 2,850 2,800International Retail and Commercial Banking 1,950 1,450 -------- --------International Retail and Commercial Banking-ex Absa 1,200 1,150International Retail and Commercial Banking-Absa(2) 750 300 -------- --------Barclays Capital 3,750 2,900Barclays Global Investors 150 150Barclays Wealth 350 400Barclays Wealth-closed life assurance activities 50 50Head office functions and other operations(3) 300 300 -------- --------Business unit economic capital 14,500 13,000Capital held at Group centre(4) 1,450 1,050 -------- --------Economic capital requirement (excluding goodwill) 15,950 14,050Average historic goodwill and intangible assets(5) 7,750 6,450 -------- --------Total economic capital requirement(6) 23,700 20,500 -------- -------- UK Retail Banking economic capital allocation increased £50m to £2,400m (2005:£2,350m), reflecting exposure growth in the portfolio. UK Business Bankingeconomic capital allocation increased £100m to £2,700m (2005: £2,600m) as aconsequence of asset growth offset by changes to estimates of risk correlation. Barclaycard economic capital allocation increased £50m to £2,850m (2005:£2,800m). Exposure growth, primarily in the international cards and securedloans portfolio, was partially offset by risk transfer activity, the decline inUK Card balances and the transition to reflect default probability methodologywhich is based on average credit conditions rather than those prevailing at thebalance sheet date. International Retail and Commercial Banking excluding Absa economic capitalallocation increased £50m to £1,200m (2005: £1,150m). This was due to lendinggrowth primarily in Africa and Iberia. International Retail and CommercialBanking-Absa economic capital allocation (excluding the risk borne by theminority interest) increased £450m to £750m (2005: £300m), reflecting loangrowth and the inclusion of Absa(2) for a full year. Barclays Capital economic capital increased £850m to £3,750m (2005: £2,900m) dueto growth in equity investments, market, business and operational risk andchanges in the sector mix of the corporate lending portfolio. The growth alsoreflects holding the Absa Capital portfolio for the full year. Barclays Wealth economic capital allocation decreased £50m to £350m (2005:£400m) due to changes to estimates of risk correlation on average economiccapital. Capital held at the Group centre increased £400m to £1,450m (2005: £1,050m).Demand for economic capital in the businesses was more than offset by growth inthe funds available to support economic capital (see Economic capital supply onpage 65). (1) Calculated using a five point average over the year and rounded to the nearest £50m for presentation purposes. (2) For 2005 average economic capital demand for Absa related to 5 months. (3) Includes Transition Businesses and capital for central functional risks. (4) The Group's practice is to maintain an appropriate level of excess capital,held at Group centre, which is not allocated to business units. This variancearises as a result of capital management timing and includes capital held tocover pension contribution risk. (5) Average goodwill relates to purchased goodwill and intangible assets frombusiness acquisitions. Absa goodwill is included for 5 months of the second-halfof 2005. As at 31st December 2006 Absa goodwill and intangibles amounted to£1,500m (31st December 2005: £1,800m) and total goodwill and intangibles was£7,900m (31st December 2005: £7,900m). (6) Total economic capital requirement as at 31st December 2006 stood at£25,150m (31st December 2005: £21,850m). Economic capital supply The capital resources to support economic capital comprise adjustedshareholders' equity including preference shares but excluding other minorityinterests. Preference shares have been issued to optimise the long-term capitalbase of the group. The capital resources to support economic capital are impacted by a number offactors arising from the application of IFRS and are modified in calculatingavailable funds for economic capital. This applies specifically to: • Cash flow hedging reserve-to the extent that the Group undertakes the hedging of future cash flows, shareholders' equity will include gains and losses which will be offset against the gain or loss on the hedged item when it is recognised in the income statement at the conclusion of the future hedged transaction. Given the future offset of such gains and losses, they are excluded from shareholders' equity when calculating economic capital. • Available for sale reserve-unrealised gains and losses on such securities are included in shareholders' equity until disposal or impairment. Such gains and losses are excluded from shareholders' equity for the purposes of calculating economic capital. Realised gains and losses, foreign exchange translation differences and any impairment charges recorded in the income statement will impact economic profit. • Retirement benefits liability-the Group has recorded a deficit with a consequent reduction in shareholders' equity. This represents a non-cash reduction in shareholders' equity. For the purposes of calculating economic capital, the Group does not deduct the pension deficit from shareholders' equity. The average supply of capital to support the economic capital framework is setout below(1): 2006 2005 £m £mShareholders' equity excluding minority interests lessgoodwill(2) 11,400 10,850Retirement benefits liability 1,300 1,350Cash flow hedging reserve 100 (250)Available for sale reserve (50) (250)Preference shares 3,200 2,350 -------- --------Available funds for economic capital excluding goodwill 15,950 14,050Average historic goodwill and intangible assets(2) 7,750 6,450 -------- --------Available funds for economic capital(3) 23,700 20,500 -------- -------- (1) Averages for the period will not correspond to period-end balances disclosedin the balance sheet. Numbers are rounded to the nearest £50m for presentationalpurposes only. (2) Average goodwill relates to purchased goodwill and intangible assets frombusiness acquisitions. (3) Available funds for economic capital as at 31st December 2006 stood at£25,150m (31st December 2005: £21,850m). Economic profit Economic profit comprises: • Profit after tax and minority interests; less • Capital charge (average shareholders' equity excluding minority interests multiplied by the Group cost of capital). The Group cost of capital has been applied at a uniform rate of 9.5%(1). Thecosts of servicing preference shares are included in minority interests. The economic profit performance in 2006 and 2005 is shown below: 2006 2005 £m £mProfit after tax and minority interests 4,571 3,447Addback of amortisation charged on acquired intangibleassets(2) 83 29 -------- --------Profit for economic profit purposes 4,654 3,476 -------- --------Average shareholders' equity excluding minorityinterests(3),(4) 11,400 10,850Adjust for unrealised loss/(gains) on cash flow hedgereserve(4) 100 (250)Adjust for unrealised gains on available for salefinancial instruments(4) (50) (250) Add: retirements benefits liability 1,300 1,350 Goodwill and intangible assets arising on acquisitions(4),(5) 7,750 6,450 -------- --------Average shareholders' equity for economic profitpurposes(3),(4) 20,500 18,150 -------- -------- Capital charge at 9.5% (1,950) (1,724) -------- --------Economic profit 2,704 1,752 -------- -------- (1) The Board has determined the Group's cost of capital is to be unchanged for2007 at 9.5%. (2) Amortisation charged for purchased intangibles, adjusted for tax andminority interests. (3) Average ordinary shareholders' equity for Group economic profit calculationis the sum of adjusted equity and reserves plus goodwill and intangible assetsarising on acquisition, but excludes preference shares. (4) Averages for the period will not correspond exactly to period end balancesdisclosed in the balance sheet. Numbers are rounded to the nearest £50m forpresentation purposes only. (5) Absa goodwill is included for 5 months of 2005. As at 31st December 2006Absa goodwill and intangibles amounted to £1,500m (31st December 2005: £1,800m). Economic profit generated by business 2006 2005 £m £mUK Banking 1,431 1,130 -------- --------UK Retail Banking 693 586UK Business Banking 738 544 -------- --------Barclaycard - 183International Retail and Commercial Banking 530 205 -------- --------International Retail and Commercial Banking-ex Absa 346 115International Retail and Commercial Banking-Absa(1) 184 90 -------- --------Barclays Capital 1,181 706Barclays Global Investors 376 299Barclays Wealth 144 109Barclays Wealth-closed life assurance activities (18) (7)Head office functions and other operations (315) (340) -------- -------- 3,329 2,285Historic goodwill and intangibles arising on acquisition (739) (615)Variance to average shareholders' funds(excluding minority interest) 114 82 -------- --------Economic profit 2,704 1,752 -------- -------- Economic profit for the Group increased 54% (£952m) to £2,704m (2005: £1,752m).The rise in economic profit was greater than the increase in both profit beforetax and earnings per share. This was due to the more efficient use of capitalacross the Group and the gains from business disposals partially offset by theincreased share of minority interests. UK Retail Banking economic profit increased 18% (£107m) to £693m (2005: £586m)due to a 17% increase in profit before tax which was partly offset by a 2%increase in the economic capital charge reflecting exposure growth in theportfolio. UK Business Banking economic profit increased 36% (£194m) to £738m(2005: £544m) due to an 18% increase in profit before tax which was partlyoffset by a 3% increase in the economic capital charge arising from the impactof asset growth offset by changes to estimates of risk correlation and profitson business disposals not carrying a tax charge. Barclaycard economic profit decreased £183m to £nil (2005: £183m), due to a 40%decrease in profit before tax and a 2% increase in the economic capital charge.The economic capital charge increase arose primarily through growth in theinternational cards and the secured loans portfolio which was offset by risktransfer activity, the decline in UK card balances and the transition to reflectdefault probability methodology, which is based on average credit conditionsrather than those prevailing at the balance sheet date. International Retail and Commercial Banking - excluding Absa economic profitincreased 201% (£231m) to £346m (2005: £115m), due to a 71% increase in profitbefore tax, including profit on business disposals of £247m substantiallycovered by tax losses offset by an increase in the economic capital charge of3%. The increase in economic capital charge reflects the impact of portfoliogrowth in Africa and Iberia. International Retail and Commercial Banking - Absaeconomic profit increased 104% (£94m) reflecting a full year of ownership. Barclays Capital economic profit increased 67% (£475m) to £1,181m (2005: £706m),due to a 55% increase in profit before tax offset by a 32% increase in theeconomic capital charge. The increased economic capital charge is due to growthin equity investments, market, business and operational risk and changes in thesector mix of the corporate lending portfolio. The growth also reflects holdingthe Absa Capital portfolio for a full year. Barclays Wealth economic profit increased 32% (£35m) to £144m (2005: £109m), dueto a 28% increase in profit before tax and a decrease in the economic capitalcharge of 4%, reflecting the benefit of changes to estimates of risk correlationmethodology on average economic capital. Group performance management Performance relative to the 2004 to 2007 goal period Barclays will continue to use goals to drive performance. At the end of 2003,Barclays established a new set of four year performance goals for the period2004 to 2007 inclusive. The primary goal is to achieve top quartile totalshareholder return (TSR) relative to a peer group(1) of financial servicescompanies and is unchanged from the prior goal period. TSR is defined as thevalue created for shareholders through share price appreciation, plus reinvesteddividend payments. The peer group is regularly reviewed to ensure that itremains aligned to our business mix and the direction and scale of our ambition. For the three years from 31st December 2003 to 31st December 2006, Barclaysdelivered a spot TSR of 66% and was positioned 6th within its peer group, whichis second quartile. The TSR of the FTSE 100 Index for this period was 54%. At the time of setting the TSR goal, we estimated that achieving top quartileTSR would require the achievement of compound annual growth in economic profit(2)in the range of 10% to 13% per annum (£6.5bn to £7.0bn of cumulative economicprofit)(3) over the 2004 to 2007 goal period. Economic profit for 2006 was £2.7bn, which, added to the £3.3bn generated in2004 and 2005, delivered a cumulative total of £6.0bn for the goal period todate. This equates to compound annual growth in economic profit of 28% per annumfor the goal period to date. (1) Peer group for 2006 remained unchanged from 2005: ABN Amro, BBVA, BNPParibas, Citigroup, Deutsche Bank, HBOS, HSBC, JP Morgan Chase, Lloyds TSB,Royal Bank of Scotland and UBS. The peer group for 2007 remains unchanged. (2) Economic profit is defined on page 66. (3) Restated for IFRS. Risk Tendency As part of its credit risk management system, the Group uses a model-basedmethodology to assess the point-in-time expected loss of credit portfoliosacross different customer categories. The approach is termed Risk Tendency andapplies to credit exposures in both wholesale and retail sectors. Risk Tendencyprovides statistical estimates of loss levels within a 12 month period based onaverages in the ranges of possible losses expected from each of the currentportfolios. This can be contrasted with impairment allowances required underaccounting standards, which are based on objective evidence of actual impairmentas at the balance sheet date. Since Risk Tendency and impairment allowances are calculated for differentpurposes and on different bases, Risk Tendency does not predict loan impairment.Risk Tendency is provided to present a view of the evolution of the quality andscale of the credit portfolios. 2006 2005 £m £mUK Banking 515 430 -------- --------UK Retail Banking 225 180UK Business Banking 290 250 -------- --------Barclaycard 1,410 1,100International Retail and Commercial Banking 220 175 -------- --------International Retail and Commercial Banking-ex Absa 75 75International Retail and Commercial Banking-Absa 145 100 -------- --------Barclays Capital 95 110Barclays Wealth 10 5Transition Businesses(1) 10 25 -------- -------- 2,260 1,845 -------- -------- Risk Tendency increased £415m to £2,260m (2005: £1,845m). UK Retail Banking Risk Tendency increased £45m to £225m (2005: £180m) reflectinga methodology enhancement to better reflect expected loss rates in the localbusiness portfolio. The increase in Barclaycard Risk Tendency was £310m, the total rising to £1,410m(2005: £1,100m). This reflected the deterioration in credit conditions in the UKcredit card and unsecured loan market as well as loan balance growth. International Retail and Commercial Banking-Absa Risk Tendency increased £45m,reflecting balance sheet growth, a normalisation of credit conditions in SouthAfrica and an asset transfer from Absa Capital. Risk Tendency in Barclays Capital fell £15m mainly as a result of assets whichwere transferred to International Retail and Commercial Banking - Absa from AbsaCapital. (1) Included within Head office functions and other operations. ADDITIONAL INFORMATION Group reporting changes in 2006 Barclays announced on 16th June 2006 the impact of certain changes in Groupstructure and reporting on the 2005 results. Barclays realigned a number of reportable business segments based on thereorganisation of certain portfolios better to reflect the type of clientserved, the nature of the products offered and the associated risks and rewards.The Group's policy for the internal cost of funding and the segmental disclosureof risk weighted assets was also revised with effect from 1st January 2006. Therestatements had no impact on the Group Income Statement or Balance Sheet. Group structure changes-effective 1st January 2006 UK Retail Banking comprises Personal Customers, Local Business (formerly SmallBusiness), UK Premier and Home Finance. A number of smaller business clientspreviously within UK Business Banking are now managed and reported within UKRetail Banking. UK Business Banking comprises Larger Business and Medium Business includingAsset and Sales Finance. A number of financial institution, large corporate andproperty clients previously within UK Business Banking are now managed by andreported in Barclays Capital. A number of smaller business clients previouslywithin UK Business Banking are now managed and reported within UK Retail Banking. Certain portfolios have been reclassified as businesses in transition and are now managed and reported in Head office functions and other operations. International Retail and Commercial Banking-Absa. The majority of Absa Corporateand Merchant Banking has been relaunched as Absa Capital and is being managedand reported in Barclays Capital. Barclays Capital has added a number of financial institutions, large corporatesand property company clients previously managed within UK Business Banking andAbsa Capital from International Retail and Commercial Banking-Absa. Head office functions and other operations. Certain lending portfoliospreviously managed within UK Business Banking have been reclassified asbusinesses in transition. These businesses are now centrally managed with theobjective of maximising the recovery from these assets. The structure remains unchanged for: Barclays Global Investors; Barclays Wealth;Barclays Wealth-closed life assurance activities; Barclaycard and InternationalRetail and Commercial Banking excluding-Absa. Changes to internal cost of funding-effective 1st January 2006 All transactions between the businesses are conducted on an arms-length basis.Internal charges and transfer pricing adjustments are reflected in theperformance of each business. Head office functions and other operationscontains a centralised Treasury function which manages the Group's capital base,generating a net interest income. Previously the net interest income wasallocated to the businesses based on the level of economic capital held by eachbusiness as a proportion of that held by the Group, which ensured a nil netinterest income result in Treasury. The allocation is now determined by applyingTreasury's effective rate of return on capital to the average economic capitalheld by each business. Changes to risk weighted assets by business-effective 1st January 2006 Under the Group's securitisation programme, certain portfolios of loans andadvances to customers and other assets subject to securitisation or similar risktransfer are adjusted in calculating the Group's risk weighted assets. Witheffect from 1st January 2006 the costs associated with each securitisation,which were previously held centrally, have been allocated to the relevantbusinesses. The regulatory capital adjustments arising from the securitisationprogramme are attributed to the business which bears the costs. Basis of Preparation There have been no significant changes to the accounting policies described inthe 2005 Annual report. Therefore the information in this announcement has beenprepared using the accounting policies and presentation applied in 2005. Future accounting developments IFRS 7 ('Financial Instruments Disclosures') and an amendment to IAS 1('Presentation of Financial Statements') on capital disclosures were issued bythe IASB in August 2005 for application in accounting periods beginning on orafter 1st January 2007 and have been adopted by the European Commission. The newor revised disclosures will be adopted by the Group for reporting in 2007. The following International Financial Reporting Interpretations Committee(IFRIC) interpretations issued during 2005 and 2006 which first apply toaccounting periods beginning on or after 1st January 2007 are not expected toresult in any changes to the Group's accounting policies: • Interpretation 7-Applying the Restatement Approach under IAS 29 Financial Reporting in Hyperinflationary Economies • Interpretation 8-Scope of IFRS 2 • Interpretation 9-Reassessment of Embedded Derivatives • Interpretation 10-Interim Financial Reporting and Impairment Consideration will be given during 2007 to the implications, if any, of thefollowing IFRIC interpretations issued during 2006 which would first apply tothe Group accounting period beginning on 1st January 2008: • IFRIC 11 IFRS 2 - Group and Treasury Share Transactions • IFRIC 12 Service Concession Arrangements IFRS 8 ('Operating Segments') was issued in November 2006 and would first berequired to be applied to the Group accounting period beginning on 1st January2009. The standard replaces IAS 14 Segmental Reporting and would align operatingsegmental reporting with segments reported to senior management as well asrequiring amendments and additions to the existing segmental reportingdisclosures. The Group is considering the advantages that permitted earlyadoption in 2007 may make to the transparency of the segmental disclosures. Share capital The Group manages its debt and equity capital actively. The Group's authority tobuy back ordinary shares (up to 968.6million ordinary shares) was renewed at the2006 Annual General Meeting. The Group will seek to renew its authority to buyback ordinary shares at the 2007 Annual General Meeting to provide additionalflexibility in the management of the Group's capital resources. Group share schemes The independent trustees of the Group's share schemes may make purchases ofBarclays PLC ordinary shares in the market at any time or times following thisannouncement of the Group's results for the purposes of those schemes' currentand future requirements. The total number of ordinary shares purchased would notbe material in relation to the issued share capital of Barclays PLC. Filings with the SEC The results will be furnished as a Form 6-K to the US Securities and ExchangeCommission as soon as practicable following the publication of these results. Competition and regulatory matters The scale of regulatory change remains challenging, arising in part from theimplementation of some key European Union (EU) directives. Many changes tofinancial services legislation and regulation have come into force in recentyears and further changes will take place in the near future. Concurrently,there is continuing political and regulatory scrutiny of the operation of theretail banking and consumer credit industries in the UK and elsewhere. Thenature and impact of future changes in policies and regulatory action are notpredictable and beyond the Group's control but could have an impact on theGroup's businesses and earnings. In the EU as a whole, there was an inquiry into retail banking in all of thethen 25 Member States by the European Commission's Directorate General forCompetition. The inquiry looked at retail banking in Europe generally and theGroup has fully co-operated with the inquiry. On 31st January 2007 the EuropeanCommission announced that the inquiry had identified barriers to competition incertain areas of retail banking, payment cards and payment systems in the EU.The Commission indicated it will use its powers to address these barriers, andwill encourage national competition authorities to enforce European and nationalcompetition laws where appropriate. Any action taken by the Commission andnational competition authorities could have an impact on the payment cards andpayment systems businesses of the Group and on its retail banking activities inthe EU countries in which it operates. In the UK, in September 2005 the Office of Fair Trading (OFT) received asuper-complaint from the Citizens Advice Bureau relating to payment protectioninsurance (PPI). As a result, the OFT commenced a market study on PPI in April2006. In October 2006, the OFT announced the outcome of the market study and,following a period of consultation, the OFT referred the PPI market to the UKCompetition Commission for an in-depth inquiry on 7th February 2007. Thisinquiry could last for up to two years. Also in October 2006, the FinancialServices Authority (FSA) published the outcome of its broad industry thematicreview of PPI sales practices in which it concluded that some firms fail totreat customers fairly. The Group has cooperated fully with these investigationsand will continue to do so. In April 2006, the OFT commenced a review of the undertakings given followingthe conclusion of the Competition Commission Inquiry in 2002 into the supply ofbanking services to Small and Medium Enterprises (SMEs). The Group iscooperating fully with that review. The OFT has carried out investigations into Visa and MasterCard credit cardinterchange rates. The decision by the OFT in the MasterCard interchange casewas set aside by the Competition Appeals Tribunal in June 2006. The OFT'sinvestigation in the Visa interchange case is at an earlier stage and a secondMasterCard interchange case is ongoing. The outcome is not known but theseinvestigations may have an impact on the consumer credit industry in general andtherefore on the Group's business in this sector. On 9th February 2007 the OFTannounced that it was expanding its investigation into interchange rates toinclude debit cards. The OFT announced the findings of its investigation into the level of late andover-limit fees on credit cards on 5th April 2006, requiring a response fromcredit card companies by 31st May 2006. Barclaycard responded by confirming thatit would reduce its late and over-limit fees on credit cards. On 7th September 2006, the OFT announced that it had decided to undertake a factfind on the application of its statement on credit card fees to current accountunauthorised overdraft fees. The OFT expects this work to take up to six months,at which stage the OFT will consider whether a further detailed investigationinto unauthorised overdraft fees is needed. On 26th January 2007 the FSA issued a Statement of Good Practice relating toMortgage Exit Administration Fees. Barclays will charge the fee applicable atthe time the customer took out the mortgage, which is one of the optionsrecommended by the FSA. Acquisitions On 1st November 2006, Barclays Bank PLC acquired the US mortgage servicingbusiness of HomEq Servicing Corporation from Wachovia Corporation. Disposals On 1st January 2006, Barclays completed the sale of the Barclays South Africanbranch business to Absa Group Limited. This consists of the Barclays CapitalSouth African operations and Corporate and Business Banking activitiespreviously carried out by the South African branch of International Retail andCommercial Banking-excluding Absa, together with the associated assets andliabilities. On 25th July 2006, Barclays Asset & Sales Finance (BA&SF) disposed of itsinterest in its vehicle leasing business, Appleyard Finance Holdings Limited. On 22nd December 2006 Barclays disposed of its interest in FirstCaribbeanInternational Bank to Canadian Imperial Bank of Commerce. On 31st December 2006, BA&SF disposed of its European Vendor Finance business,including Barclays Industrie Bank GmbH and Barclays Technology Finance Ltd, toCIT Group. Recent developments On 20th December 2006, Barclays announced that agreement in principle had beenreached for Barclays to acquire 100% of the share capital of Nile Bank inUganda. Barclays expects the transaction to complete during the first quarter of2007, subject to finalisation of confirmatory due diligence and documentationand to receipt of regulatory approval. On 19th January 2007, Barclays announced that it had entered into an agreementto purchase EquiFirst Corporation, the non-prime mortgage origination businessof Regions Financial Corporation. Completion is expected in the first half of2007, subject to the receipt of the required licences and applicable regulatoryapproval. On 8th February 2007, Barclays completed the acquisition of IndexchangeInvestment AG, Germany's leading provider of exchange traded funds, fromBayerische Hypo-und Vereinsbank. The transaction was announced in November 2006. NOTES 1. Assets held in respect of linked liabilities to customers under investment contracts/liabilities to customers under investment contracts 2006 2005 £m £mNon-trading financial instruments fair valuedthrough profit and loss held in respect of linkedliabilities 82,798 83,193Cash and bank balances within the funds 1,839 2,008 -------- --------Assets held in respect of linked liabilities tocustomers under investment contracts 84,637 85,201 -------- -------- Liabilities to customers under investment contracts (84,637) (85,201) -------- -------- 2. Derivative financial instruments The tables set out below analyse the contract or underlying principal and thefair value of derivative financial instruments held for trading purposes and forthe purposes of managing the Group's structural exposures. Derivatives aremeasured at fair value and the resultant profits and losses from derivativesheld for trading purposes are included in net trading income. Where derivativesare held for risk management purposes and when transactions meet the criteriaspecified in IAS 39, the Group applies hedge accounting as appropriate to therisks being hedged. Contract 2006 notional Fair value amount Assets LiabilitiesDerivatives designated as held for £m £m £mtradingForeign exchange derivatives 1,500,774 22,026 (21,745)Interest rate derivatives 17,666,353 76,010 (75,854)Credit derivatives 1,224,548 9,275 (8,894)Equity and stock index and commodityderivatives 495,080 29,962 (33,253) -------- -------- --------Total derivative assets/(liabilities)held for trading 20,886,755 137,273 (139,746) -------- -------- -------- Derivatives designated in hedge accounting relationshipsDerivatives designated as cash flow hedges 63,895 132 (401)Derivatives designated as fair value hedges 19,489 298 (441)Derivatives designated as hedges of netinvestments 12,050 650 (109) -------- -------- --------Total derivative assets/(liabilities)designated in hedge accounting relationships 95,434 1,080 (951) -------- -------- --------Total recognised derivativeassets/(liabilities) 20,982,189 138,353 (140,697) -------- -------- -------- Contract 2005 notional Fair value amount Assets LiabilitiesDerivatives designated as held £m £m £mfor tradingForeign exchange derivatives 1,184,074 18,485 (17,268)Interest rate derivatives 15,374,057 81,028 (79,701) Credit derivatives 609,381 4,172 (4,806)Equity and stock index andcommodity derivatives 637,452 32,481 (35,128) -------- -------- --------Total derivative assets/(liabilities)held for trading 17,804,964 136,166 (136,903) -------- -------- -------- Derivatives designated in hedgeaccounting relationships Derivatives designated as cashflow hedges 40,080 232 (483) Derivatives designated as fairvalue hedges 33,479 423 (331)Derivatives designated as hedgesof net investments 5,919 2 (254) -------- -------- -------- Total derivative assets/(liabilities) designated in hedge accounting relationships 79,478 657 (1,068) -------- -------- -------- Total recognised derivativeassets/(liabilities) 17,884,442 136,823 (137,971) -------- -------- -------- Total derivative notionals have grown over the year primarily due to increasesin the volume of fixed income derivatives, reflecting the continued growth inclient based activity and increased use of electronic trading platforms inEurope and the US. Credit derivative values have also increased significantly,largely due to growth in the market for these products. 3. Loans and advances to banks 2006 2005By geographical area £m £mUnited Kingdom 6,229 4,624Other European Union 8,513 5,423United States 9,056 13,267Africa 2,219 880Rest of the World 4,913 6,915 -------- -------- 30,930 31,109Less: Allowance for impairment (4) (4) -------- --------Total loans and advances to banks 30,926 31,105 -------- -------- 4. Loans and advances to customers 2006 2005(2) £m £mRetail business 139,350 134,420Wholesale and corporate business 146,281 137,922 -------- -------- 285,631 272,342Less: Allowances for impairment (3,331) (3,446) -------- --------Total loans and advances to customers 282,300 268,896 -------- -------- By geographical areaUnited Kingdom 170,518 163,759Other European Union 43,430 38,923United States 25,677 22,925Africa 31,691 33,221Rest of the World 14,315 13,514 -------- -------- 285,631 272,342Less: Allowance for impairment (3,331) (3,446) -------- --------Total loans and advances to customers 282,300 268,896 -------- -------- By industryFinancial institutions 45,954 43,102Agriculture, forestry and fishing 3,997 3,785Manufacturing 15,451 13,779Construction 4,056 5,020Property 16,528 16,325Energy and water 6,810 6,891Wholesale and retail distribution and leisure 15,490 17,760Transport 5,586 5,960Postal and communication 2,180 1,313Business and other services 29,425 24,247Home loans(1) 98,172 89,529Other personal 31,840 35,543Finance lease receivables 10,142 9,088 -------- -------- 285,631 272,342Less: Allowance for impairment (3,331) (3,446) -------- --------Total loans and advances to customers 282,300 268,896 -------- -------- The industry classifications have been prepared at the level of the borrowingentity. This means that a loan to the subsidiary of a major corporation isclassified by the industry in which that subsidiary operates even though theparent's predominant business may be a different industry. (1) Excludes commercial property mortgages. (2) Prior year analysis of loans and advances to customers between retailbusiness and wholesale and corporate business has been reclassified to reflectenhanced methodology implemented in the current year. 5. Allowance for impairment on loans and advances 2006 2005 £m £mAt beginning of period 3,450 2,637Acquisitions and disposals (23) 555Exchange and other adjustments (153) 125Unwind of discount (98) (76)Amounts written off (see below) (2,174) (1,587)Recoveries (see below) 259 222Amounts charged against profit (see below) 2,074 1,574 -------- --------At end of period 3,335 3,450 -------- -------- Amounts written offUnited Kingdom (1,746) (1,302)Other European Union (74) (56)United States (46) (143)Africa (264) (81)Rest of the World (44) (5) -------- -------- (2,174) (1,587) -------- --------RecoveriesUnited Kingdom 178 160Other European Union 18 13United States 22 15Africa 33 16Rest of the World 8 18 -------- -------- 259 222 -------- --------Impairment charged against profit: New and increased impairment allowancesUnited Kingdom 2,253 1,763Other European Union 182 113United States 60 105Africa 209 109Rest of the World 18 39 -------- -------- 2,722 2,129 -------- -------- Less: Releases of impairment allowanceUnited Kingdom (195) (221)Other European Union (72) (25)United States (26) (14)Africa (33) (56)Rest of the World (63) (17) -------- -------- (389) (333) -------- -------- Recoveries (259) (222) -------- -------- Total impairment charges on loans and advances(1) 2,074 1,574 -------- -------- (1) This excludes other credit provisions and impairment on available for saleassets detailed on page 51. 2006 2005Allowance £m £mUnited Kingdom 2,477 2,266Other European Union 311 284United States 100 130Africa 417 647Rest of the World 30 123 -------- --------At end of period 3,335 3,450 -------- -------- 6. Potential credit risk loans The following tables present an analysis of potential credit risk loans(non-performing and potential problem loans). Potential credit risk loans 2006 2005Summary £m £mImpaired loans(1) 4,444 4,550Accruing loans which are contractually overdue90 days or more as to principal or interest 598 609 -------- -------- 5,042 5,159Restructured loans 46 51 -------- --------Total non-performing loans 5,088 5,210Potential problem loans 761 929 -------- --------Total potential credit risk loans 5,849 6,139 -------- -------- Geographical splitImpaired loans(1):United Kingdom 3,340 2,965Other European Union 410 345United States 129 230Africa 535 831Rest of the World 30 179 -------- -------- Total 4,444 4,550 -------- -------- Accruing loans which are contractually overdue90 days or more as to principal or interestUnited Kingdom 516 539Other European Union 58 53United States 3 -Africa 21 17Rest of the World - - -------- -------- Total 598 609 -------- -------- (1) Impaired loans are non-performing loans where, in general, an impairmentallowance has been raised. This classification may also include non-performingloans which are fully collateralised or where the indebtedness has already beenwritten down to the expected realisable value. 2006 2005Restructured loans £m £mUnited Kingdom - 5Other European Union 10 7United States 22 16Africa 14 23Rest of the World - - -------- -------- Total 46 51 -------- -------- Total non-performing loansUnited Kingdom 3,856 3,509Other European Union 478 405United States 154 246Africa 570 871Rest of the World 30 179 -------- -------- Total 5,088 5,210 -------- -------- Potential problem loansUnited Kingdom 465 640Other European Union 32 26United States 21 12Africa 240 248Rest of the World 3 3 -------- -------- Total 761 929 -------- -------- Total potential credit risk loansUnited Kingdom 4,321 4,149Other European Union 510 431United States 175 258Africa 810 1,119Rest of the World 33 182 -------- -------- Total 5,849 6,139 -------- -------- Allowance coverage of non-performing loans % %United Kingdom 64.2 64.6Other European Union 65.1 70.1United States 64.9 52.8Africa 73.2 74.3Rest of the World 100.0 68.7 -------- -------- Total 65.6 66.2 -------- -------- Allowance coverage of total potential credit risk loans % %United Kingdom 57.3 54.6Other European Union 61.0 65.9United States 57.1 50.4Africa 51.5 57.8Rest of the World 91.0 67.6 -------- -------- Total 57.0 56.2 -------- -------- 2006 2005(1)Allowance coverage of non-performing loans: % %Retail 65.6 62.3Wholesale and corporate 65.5 74.2 -------- -------- Total 65.6 66.2 -------- -------- Allowance coverage of total potential credit risk loans:Retail 59.8 57.1Wholesale and corporate 50.6 54.4 -------- -------- Total 57.0 56.2 -------- -------- Non-performing loans (NPLs) were broadly stable at £5,088m (31st December 2005:£5,210m). Retail NPLs increased 5% and wholesale and corporate NPLs declined17%. Potential problem loans (PPLs) decreased 18% to £761m (31st December 2005:£929m). Retail PPLs increased 8% and wholesale and corporate PPLs declined 32%. Potential Credit Risk Loans (PCRLs) decreased 5% to £5,849m (31st December 2005:£6,139m). Retail PCRLs increased 5% and wholesale and corporate PCRLs declined21%. 7. Available for sale financial investments 2006 2005 £m £mDebt securities 47,910 50,024Equity securities 1,379 1,258Treasury bills and other eligible bills 2,420 2,223 -------- -------- 51,709 53,505Less: Allowance for impairment (6) (8) -------- --------Available for sale financial investments 51,703 53,497 -------- -------- (1) Prior year analysis of loans and advances to customers between retailbusiness and wholesale and corporate business has been reclassified to reflectenhanced methodology implemented in the current year. 8. Other assets 2006 2005 £m £mSundry debtors 4,298 3,569Prepayments 658 722Accrued income 722 329Insurance assets, including unit linked assets 172 114 -------- --------Other assets 5,850 4,734 -------- -------- 9. Other liabilities 2006 2005 £m £mObligations under finance leases payable 92 289Sundry creditors 4,118 6,131Accruals and deferred income 6,127 4,711 -------- --------Other liabilities 10,337 11,131 -------- -------- 10. Provisions 2006 2005 £m £mRedundancy and restructuring 102 74Undrawn contractually committed facilities and guarantees 46 55Onerous contracts 71 79Sundry provisions 243 309 -------- --------Provisions 462 517 -------- -------- 11. Other reserves 2006 2005 £m £mAvailable for sale reserve 132 225Cash flow hedging reserve (230) 70Capital redemption reserve 309 309Other capital reserve 617 617Currency translation reserve (438) 156 -------- --------Other reserves 390 1,377 -------- -------- Movements in other reserves reflect the relevant amounts recorded in theconsolidated statement of recognised income and expense on page 90. The movements include related tax impacts but exclude amounts attributable tominority interests. 12. Retirement benefit liabilities The Group's IAS 19 pension deficit across all schemes as at 31st December 2006was £817m (31st December 2005: £2,879m). The deficit comprised net recognised liabilities of £1,719m (31st December 2005: £1,737m) and unrecognised actuarial gains of £902m (31st December 2005: £1,142m unrecognised actuarial loss). The net recognised liabilities comprised retirement benefit liabilities of £1,807m (31st December 2005: £1,823m) and assets of £88m (31st December 2005: £86m). The Group's IAS 19 pension deficit in respect of the main UK scheme as at 31stDecember 2006 was £475m (31st December 2005: £2,535m). Among the reasons forthis change were greater than expected returns on assets and an increase in AAlong-term corporate bond yields which resulted in a higher discount rate of5.12% (31st December 2005: 4.83%), partially offset by an increase in theinflation assumption to 3.08% (31st December 2005: 2.75%). A number ofadditional changes were made to the assumptions used in valuing the liabilities,including a decrease in the assumed rate of real salary increases to 1.0% (31stDecember 2005: 1.55%), a change in the assumption regarding pension increases torecognise the caps and floors which apply to guaranteed pension increases, andthe introduction of an explicit allowance for early retirement and commutation.Mortality assumptions remain unchanged from those in force at 31st December2005. The actuarial funding position of the main UK pension scheme as at 31st December2006, estimated based on assumptions relating to the formal triennial valuationin 2004, was a surplus of £1,300m (31st December 2005: surplus of £900m), representing a funding ratio of 109%. The Pensions Protection Fund (PPF) solvency ratio(1) for the main UK scheme as at 31st December 2006 was estimated to be 121% (31st December 2005: 110%). Cash contributions to the Group's schemes totalled £389m (2005: £373m),including £351m to the main UK scheme (2005: £354m). (1) The PPF solvency ratio represents the funds assets as a percentage ofpension liabilities calculated using a section 179 valuation model. 13. Legal proceedings Barclays has for some time been party to proceedings, including a class action,in the United States against a number of defendants following the collapse ofEnron; the class action claim is commonly known as the Newby litigation. On 20thJuly 2006 Barclays received an Order from the United States District Court forthe Southern District of Texas Houston Division (the 'Court') which dismissedthe claims against Barclays PLC, Barclays Bank PLC and Barclays Capital Inc. inthe Newby litigation. On 4th December 2006, in response to the plaintiffs'procedural objections, the Court stayed Barclays dismissal from the proceedingsand allowed the plaintiffs to file a supplemental complaint. The Court willconsider the plaintiffs' supplemental complaint in connection with considerationof a summary judgment motion filed by Barclays. Barclays considers that the Enron related claims against it are without meritand is defending them vigorously. It is not possible to estimate Barclayspossible loss in relation to these matters, nor the effect that they might haveupon operating results in any particular financial period. Barclays has been in negotiations with the staff of the US Securities andExchange Commission with respect to a settlement of the Commission'sinvestigations of transactions between Barclays and Enron. Barclays does notexpect that the amount of any settlement with the Commission would have asignificant adverse effect on its financial position or operating results. On 3rd November 2006 Barclays announced that it had reached a settlement inprinciple with Enron in the Enron bankruptcy proceedings. A settlement agreementwas signed on 30th November 2006 and became effective on 3rd January 2007. Thesettlement has had no negative impact on Barclays earnings as an adequateprovision had already been made for the likely cost in prior periods. Inreaching the settlement Barclays has denied any wrongdoing or liability. Barclays is engaged in various other litigation proceedings both in the UnitedKingdom and a number of overseas jurisdictions, including the United States,involving claims by and against it which arise in the ordinary course ofbusiness. Barclays does not expect the ultimate resolution of any of theproceedings to which Barclays is party to have a significant adverse effect onthe financial position of the Group and Barclays has not disclosed thecontingent liabilities associated with these claims either because they cannotreasonably be estimated or because such disclosure could be prejudicial to theconduct of the claims. 14. Contingent liabilities and commitments 2006 2005Contingent liabilities £m £mAcceptances and endorsements 287 283Guarantees and letters of credit pledged as collateralsecurity 31,252 38,035Other contingent liabilities 7,880 8,825 -------- -------- 39,419 47,143 -------- -------- Commitments 205,504 203,785 -------- -------- Contingent liabilities decreased 16% (£7.7bn) to £39.4bn (2005: £47.1bn)principally due to changes in the mix of securities lending activity withinBarclays Global Investors. Commitments increased 1% (£1.7bn) to £205.5bn (2005: £203.8bn) primarily due tonew facilities within Barclays Capital and Barclaycard. 15. Market risk Market risk is the risk that the Group's earnings, capital, or ability to meetits business objectives, will be adversely affected by changes in the level orvolatility of market rates or prices such as interest rates, credit spreads,commodity prices, equity prices and foreign exchange rates. Barclays Capital's market risk exposure, as measured by average total DailyValue at Risk (DVaR), increased by 16% to £37.1m (2005: £32.0m). Interest raterisk fell while non-interest rate risks were higher, primarily in commodities.The range of total DVaR between High and Low was consistent with 2005 anddiversification across risk types remains significant, reflecting the broadbusiness mix. Total DVaR as at 31st December 2006 was £41.9m (31st December2005: £37.6m(1)). (1) This was previously reported as £37.4m. The increase reflects the inclusionof Absa Capital. Analysis of Barclays Capital's market risk exposures The daily average, maximum and minimum values of DVaR were calculated as below: DVaR Twelve months to 31st December 2006 ------------------- Average High(1) Low(1) £m £m £mInterest rate risk 20.1 28.8 12.3Credit spread risk 24.3 33.1 17.9Commodities risk 11.3 21.6 5.7Equities risk 7.8 11.6 5.8Foreign exchange risk 4.0 7.7 1.8Diversification effect (30.4) n/a n/a ------- -------- -------Total DVaR 37.1 43.2 31.3 ------- -------- ------- Twelve months to 31st December 2005(2) ------------------- Average High(1) Low(1) £m £m £mInterest rate risk 25.4 44.8 15.4Credit spread risk 23.0 28.3 19.0Commodities risk 6.8 11.4 4.5Equities risk 6.0 8.3 3.9Foreign exchange risk 2.8 5.4 1.6Diversification effect (32.0) n/a n/a ------- -------- -------Total DVaR 32.0 40.7 25.4 ------- -------- ------- (1) The high (and low) DVaR figures reported for each category did notnecessarily occur on the same day as the high (and low) DVaR reported as awhole. Consequently a diversification effect number for the high (and low) DVaRfigures would not be meaningful and it is therefore omitted from the abovetable. (2) 2005 has been restated. The increase reflects the inclusion of Absa Capital. CONSOLIDATED STATEMENT OF RECOGNISED INCOME AND EXPENSE 2006 2005 £m £mNet movements in available for sale reserve (140) (109)Net movements in cash flow hedging reserve (487) (119)Net movements in currency translation reserve (781) 300Tax 253 50Other movements 25 (102) -------- --------Amounts included directly in equity (1,130) 20Profit after tax 5,195 3,841 -------- --------Total recognised income and expense 4,065 3,861 -------- -------- Attributable to:Equity holders of the parent 3,682 3,379Minority interests 383 482 -------- -------- 4,065 3,861 -------- -------- The consolidated statement of recognised income and expense reflects all itemsof income and expense for the year, including items taken directly to equity.Movements in individual reserves are shown including amounts which relate tominority interests; the impact of such amounts is then reflected in the amountattributable to such interests. Movements in individual reserves are also shownon a gross basis with any related tax recorded on the separate tax line. The available for sale reserve reflects gains or losses arising from the changein fair value of available for sale financial assets except for items recordedin the income statement which are: impairment losses; gains or lossestransferred to the income statement due to fair value hedge accounting; andforeign exchange gains or losses on monetary items such as debt securities. Whenan available for sale asset is impaired or derecognised, the cumulative gain orloss previously recognised in the available for sale reserve is transferred tothe income statement. The movement in 2006 reflects the transfer of net realisedgains partially offset by the transfer of impairment losses and the recognitionof net unrealised gains from changes in fair value. Cash flow hedging aims to minimise exposure to variability in cash flows that isattributable to a particular risk associated with a recognised asset orliability or a highly probable forecast transaction that could affect profit orloss. The portion of the gain or loss on the hedging instrument that is deemedto be an effective hedge is recognised in the cash flow hedging reserve. Themovement in 2006 primarily reflects net unrealised losses from changes in thefair value of the hedging instruments. The gains and losses deferred in thisreserve will be transferred to the income statement in the same period orperiods during which the hedged item is recognised in the income statement. Exchange differences arising on the net investments in foreign operations andeffective hedges of net investments are recognised in the currency translationreserve and transferred to the income statement on the disposal of the netinvestment. The movement in the year primarily reflects the impact of changes inthe value of the Rand on the minority interest in Absa Group Limited and changesin the value of the US Dollar on net investments. The net investments areeconomically hedged through US Dollar-denominated preference share capital,which is not revalued for accounting purposes. SUMMARY CONSOLIDATED CASH FLOW STATEMENT 2006 2005 £m £mNet cash flow from operating activities 10,047 3,649Net cash flow from investing activities (1,154) (5,292)Net cash flow from financing activities 692 1,083Exchange loss/(gain) on foreign currency cash and cashequivalents 562 (237) -------- --------Net increase/(decrease) in cash and cash equivalents 10,147 (797)Cash and cash equivalents at beginning of the year 20,805 21,602 -------- --------Cash and cash equivalents at end of the year 30,952 20,805 -------- -------- In order to provide more relevance to users and to enhance the comparability ofits financial statement presentation, the Group has changed certainclassifications within the cash flow statement in 2006. Certain activities which were categorised as operating activities have beenreclassified as financing activities and investing activities. These changeshave increased net cash from operating activities by £14,147m in 2005, with acorresponding decrease in net cash used in investing activities of £111m anddecrease in net cash from financing activities of £14,036m. The amounts of cashand cash equivalents in 2005 have not been affected by the changes. OTHER INFORMATION Registered office 1 Churchill Place, London, E14 5HP, England, United Kingdom. Tel: +44 (0) 207116 1000. Company number: 48839. Website www.barclays.com Registrar The Registrar to Barclays PLC, The Causeway, Worthing, West Sussex, BN99 6DA,England, United Kingdom. Tel: + 44 (0) 870 609 4535. Listing The principal trading market for Barclays PLC ordinary shares is the LondonStock Exchange. Ordinary shares are also listed on the New York Stock Exchangeand the Tokyo Stock Exchange. Trading on the New York Stock Exchange is in theform of ADSs under the ticker symbol 'BCS'. Each ADS represents four ordinaryshares of 25p each and is evidenced by an ADR. The ADR depositary is The Bank ofNew York whose international telephone number is +1-212-815-3700, whose domestictelephone number is 1-888-BNY-ADRS and whose address is The Bank of New York,Investor Relations, PO Box 11258, Church Street Station, New York, NY10286-1258. Filings with the SEC Statutory accounts for the year ended 31st December 2006, which also includecertain information required for the joint Annual Report on Form 20-F ofBarclays PLC and Barclays Bank PLC to the US Securities and Exchange Commission(SEC), can be obtained from Corporate Communications, Barclays Bank PLC, 200Park Avenue, New York, NY 10166, United States of America or from the Director,Investor Relations at Barclays registered office address, shown above, once theyhave been published in late March. Once filed with the SEC, copies of the Form20-F will also be available from the Barclays Investor Relations' website(details below) and from the SEC's website (www.sec.gov). Results timetableEx dividend Date Wednesday, 7th March 2007Dividend Record Date Friday, 9th March 20072007 Annual General Meeting Date Thursday, 26th April 2007Dividend Payment Date Friday, 27th April 20072007 First-half Trading Update* Thursday, 24th May 20072007 Interim Results Announcement* Thursday, 2nd August 2007 *Note that these announcement dates are provisional and subject to change. Economic data 2006 2005 Period end-US$/£ 1.96 1.72Average-US$/£ 1.84 1.82Period end-•/£ 1.49 1.46Average-•/£ 1.47 1.46Period end-R/£ 13.71 10.87Average-R/£ 12.47 11.57 For further information please contact: Investor Relations Media Relations-------------------- -----------------Mark Merson/James S Johnson Jason Nisse/Alistair Smith+44 (0) 20 7116 5752/2927 +44 (0) 20 7116 6223/6132 More information on Barclays can be found on our website at the followingaddress: www.investorrelations.barclays.com ABSA APPENDIX 1 2006 2005(1) Rm Rm -------- --------Interest and similar income 38,368 29,377Interest expense and similar charges (23,427) (17,567) -------- --------Net interest income 14,941 11,810Impairment losses on loans and advances (1,573) (875) -------- --------Fee and commission income 10,951 10,060Fee and commission expense (577) (448) -------- --------Net fee and commission income 10,374 9,612 -------- --------Insurance premium revenue 3,269 2,672Premiums ceded to reinsurers (275) (235) -------- --------Net insurance premium income 2,994 2,437 -------- --------Gross claims and benefits paid on insurancecontracts 1,376 1,195Reinsurance recoveries (57) (142) -------- --------Net claims and benefits paid (1,319) (1,053)Changes in insurance and investment liabilities (748) (532)Gains and losses from banking and tradingactivities 1,347 1,136Gains and losses from investment activities 1,916 1,584Other operating income 938 596 -------- --------Net operating income 28,870 24,715Operating expenses (16,620) (14,598)Impairments (75) (68)Indirect taxation (871) (949)Share of profit of associated and joint venturecompanies 113 112 -------- --------Operating profit before income tax 11,417 9,212 -------- -------- (1) Absa has changed its financial year-end to 31st December to conform withBarclays. The comparable period comprises unaudited results for the year ended31st December 2005. The appendix summarises the Rand results of Absa Group Limited for the year to31st December 2006 as reported to the Johannesburg Stock Exchange, and theirimpact in Sterling on the consolidated results of Barclays. Absa Group Limited results(1) The comparable period referred to below, for illustrative purposes only, is theproforma full year to 31st December 2005. Barclays acquired a controlling stakein Absa Group Limited on 27th July 2005. Absa Group Limited's profit before tax increased 24% to R11,417m (2005: R9,212m)reflecting a very good performance from banking operations, with retail,corporate and business banking operations performing exceptionally well. Absa Group Limited delivered a return on equity of 27.4% (2005: 25.6%). Key factorsimpacting the results included very strong asset growth, strong revenue growth,an increased credit impairment charge, the realisation of synergies from leveraging Barclays expertise and economies of scale and the sale of non-coreoperations. The South African economy continued to expand at a solid pace withreal growth expected to be about 4.9% for 2006 (2005: 5.1%) Net interest income grew 27% (R3,131m) from R11,810m to R14,941m. Loans andadvances to customers increased 26% from R306,856m to R386,174m, underpinned byvery strong growth in mortgages, credit cards and commercial property finance. Non-interest income increased 12% (R1,722m) to R15,502m (2005: R13,780m)reflecting higher transaction volumes, strong growth in insurance relatedearnings and gains on asset sales. As expected the impairment charge on loans and advances rose to R1,573m (2005:R875m) from the very low levels of the prior year, particularly in Absa HomeLoans, Absa Card and Retail Banking Services. Operating expenses increased 14% (R2,022m) to R16,620m (2005: R14,598m)resulting from increased investment in the business in order to supportcontinued growth in volumes and customers. Excellent progress was made with the realisation of synergy benefits. In 2006R753m of synergies were delivered, R453m in excess of the R300m targetoriginally communicated for the year. Integration costs for the period wereR640m, in line with expectations. Impact on Barclays results(2) Absa Group Limited's profit before tax of R11,417m is translated into Barclaysresults at an average exchange rate for 2006 of R12.47/£ (2005: R11.57/£).Consolidation adjustments reflected the amortisation of intangible assets of£75m and internal funding and other adjustments of £72m. The resulting profitbefore tax of £769m (2005: £337m) is represented with International Retail andCommercial Banking - Absa £698m, (2005: £298m) and Barclays Capital, £71m (2005:£39m). Absa Group Limited's total assets at 31st December 2006 were R495,112m (31stDecember 2005: R404,561m), growth of 22%. This is translated into Barclaysresults at a year-end exchange rate of R13.71/£ (31st December 2005: R10.87/£).The consolidation of total assets reflected the impact of the 21% depreciationin the Rand largely offsetting the growth in the Rand balance sheet. (1) Absa has changed its financial year-end to 31st December to conform withBarclays. The comparable period comprises unaudited results for the year ended31st December 2005. (2) For 2005, this reflects the period from 27th July until 31st December 2005. APPENDIX 2 Profit before business disposals 2006 2005 ---------------------------------- -------- UK Business IRCB- Banking ex Absa Group Group £m £m £m £mProfit before tax 1,365 572 7,136 5,280 Excluding profit on disposal ofsubsidiaries, associates and joint ventures (76) (247) (323) - -------- -------- -------- --------Profit before business disposals 1,289 325 6,813 5,280 Tax on profit before business disposals (1,941) (1,439) -------- --------Profit after tax beforebusiness disposals 4,872 3,841 -------- -------- Profit attributable to minorityinterests 624 394 Profit attributable to equityholders of the parentbefore business disposals 4,248 3,447 -------- --------Profit after tax beforebusiness disposals 4,872 3,841 -------- -------- £m £mEconomic profit 2,704 1,752Economic profit before businessdisposals 2,381 1,752 p pEarnings per share 71.9 54.4Earnings per share beforebusiness disposals 66.8 54.4Diluted earnings per share 69.8 52.6Diluted earnings per sharebefore business disposals 64.8 52.6 Post-tax return on averageshareholder equity 24.7% 21.1% Post-tax return on averageshareholder equity before business disposals 23.0% 21.1% In 2005, there were no profits on disposal of subsidiaries, associates and jointventures in the Group. This information is provided by RNS The company news service from the London Stock Exchange

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