# Delivering on our promises
Barclays PLC 
Annual Report 
2010
barclays.com/annualreport10

## Contents

### About Barclays
02 About Barclays
03 2010 Performance highlights
04 Executing our strategy
05 Key performance indicators
07 Group Chairman’s statement
09 Leadership and governance

### Strategy
15 Chief Executive’s review
17 Financial strength
18 Business review
24 Citizenship

### Performance
28 Key performance indicators
32 Financial review

### Risk management and governance
66 Risk management
143 Directors’ report
149 Corporate governance report
166 Remuneration report

### Financial statements
184 Presentation of information
185 Independent Auditors’ report/ 
Independent Registered Public Accounting Firm’s report 
187 Consolidated Financial Statements Barclays PLC

### Shareholder information
272 Shareholder information
275 Shareholder enquiries
276 Index
278 Glossary of terms

The term ‘Barclays PLC Group’ or the ‘Group’ means Barclays PLC together with its subsidiaries and the term ‘Barclays Bank PLC Group’ means Barclays Bank PLC together with its subsidiaries. ‘Barclays’ and ‘Group’ are terms which are used to refer to either of the preceding groups when the subject matter is identical. The term ‘Company’, ‘Parent Company’ or ‘Parent’ refers to Barclays PLC and the term ‘Bank’ refers to Barclays Bank PLC. The term ‘Absa Group Limited’ is used to refer to Absa Group Limited and its subsidiaries and the term ‘Absa’ is used to refer to the Barclays segment represented by this business as described on page 54. In this report, the abbreviations ‘£m’ and ‘£bn’ represent millions and thousands of millions of pounds sterling respectively; the abbreviations ‘US$m’ and ‘US$bn’ represent millions and thousands of millions of US Dollars respectively and ‘€m’ and ‘€bn’ represent millions and thousands of millions of euros respectively.

Unless otherwise stated, the income statement analyses compare the 12 months to 31st December 2010 to the corresponding 12 months of 2009 and balance sheet comparisons, relate to the corresponding position at 31st December 2009. Unless otherwise stated, all disclosed figures relate to continuing operations. Relevant terms that are used in this document but are not defined under applicable regulatory guidance or International Financial Reporting Standards (IFRS) are explained in the glossary on pages 278 to 284.

### Forward-looking statements
This document contains certain forward-looking statements within the meaning of Section 21E of the US Securities Exchange Act of 1934, as amended, and Section 27A of the US Securities Act of 1933, as amended, with respect to certain of the Group’s plans and its current goals and expectations relating to its future financial condition and performance. Barclays cautions readers that no forward-looking statement is a guarantee of future performance and that actual results could differ materially from those contained in the forward-looking statements. These forward-looking statements can be identified by the fact that they do not relate only to historical or current facts. Forward-looking statements sometimes use words such as ‘may’, ‘will’, ‘seek’, ‘continue’, ‘aim’, ‘anticipate’, ‘target’, ‘expect’, ‘estimate’, ‘intend’, ‘plan’, ‘goal’, ‘believe’ or other words of similar meaning. Examples of forward-looking statements include, among others, statements regarding the Group’s future financial position, income growth, assets, impairment charges, business strategy, capital ratios, leverage, payment of dividends, projected levels of growth in the banking and financial markets, projected costs, estimates of capital expenditures, and plans and objectives for future operations and other statements that are not historical fact. By their nature, forward-looking statements involve risk and uncertainty because they relate to future events and circumstances, including, but not limited to, UK domestic and global economic and business conditions, the effects of continued volatility in credit markets, market related risks such as changes in interest rates and exchange rates, effects of changes in valuation of credit market exposures, changes in valuation of issued notes, the policies and actions of governmental and regulatory authorities, including capital requirements, changes in legislation, the further development of standards and interpretations under IFRS applicable to past, current and future periods, evolving practices with regard to the interpretation and application of standards under IFRS, the outcome of pending and future litigation, the success of future acquisitions and other strategic transactions and the impact of competition – a number of such factors being beyond the Group’s control. As a result, the Group’s actual future results may differ materially from the plans, goals, and expectations set forth in the Group’s forward-looking statements.

Any forward-looking statements made herein speak only as of the date they are made. Except as required by the UK Financial Services Authority (FSA), the London Stock Exchange or applicable law, Barclays expressly disclaims any obligation or undertaking to release publicly any updates or revisions to any forward-looking statements contained in this announcement to reflect any change in Barclays expectations with regard thereto or any change in events, conditions or circumstances on which any such statement is based. The reader should, however, consult any additional disclosures that Barclays has made or may make in documents it has filed or may file with the SEC.

Cover image:
Barclays is the exclusive sponsor of Barclays Cycle Hire which was launched on 30th July 2010 in London. It already sees more than 5,000 cycles available in central London, with nearly 3 million journeys completed. The scheme makes a positive contribution to society in London and partners Barclays with a sustainable and environmentally friendly mode of transport.

***

# About Barclays
We are a major global financial services provider engaged in retail banking, credit cards, corporate and investment banking, and wealth management with an extensive international presence.

## Group total income
£31,440m

### By business segment
- UK Retail Banking: £4,518m
- Barclaycard: £4,024m
- Western Europe Retail Banking: £1,164m
- Barclays Africa: £801m
- Absa: £2,899m
- Barclays Capital: £13,600m
- Barclays Corporate: £2,974m
- Barclays Wealth: £1,560m
- Investment Management: £78m
- Head Office and Other Operations: (£178m) (total loss)

### Business segment summaries
- **UK Retail Banking** – £4,518m total income: UK Retail Banking is a leading UK high street bank providing current account and savings products and Woolwich branded mortgages. UK Retail Banking also provides unsecured loans, protection products and general insurance as well as banking and money transmission services to small and medium enterprises.
- **Barclaycard** – £4,024m total income: Barclaycard is an international payments business which manages about £200bn in annual payment value and offers a broad range of payment solutions to consumer and business customers in 22 countries throughout the world.
- **Western Europe Retail Banking** – £1,164m total income: Western Europe Retail Banking provides retail banking and credit card services in Spain, Italy, Portugal and France. The business is building a differentiated proposition providing banking services to retail and mass affluent customers through a variety of distribution channels.
- **Barclays Africa** – £801m total income: Barclays Africa provides retail, corporate and credit card services across Africa and the Indian Ocean. It provides tailored banking (including mobile banking and Sharia-compliant products) to over 2.7m customers and has a top 3 position in 8 of the 10 countries in which we operate. 
- **Absa** – £2,899m total income: Absa provides a full range of retail banking services and insurance products through a variety of distribution channels. It also offers customised business solutions for commercial and large corporate customers. It is part of one of South Africa’s largest financial services organisations.
- **Barclays Capital** – £13,600m total income: Barclays Capital is the investment banking division of Barclays. It provides large corporate, government and institutional clients with a full spectrum of solutions to meet their strategic advisory, financing and risk management needs. Barclays Capital has a global presence providing advisory services and distribution power to meet the needs of issuers and investors worldwide. 
- **Barclays Corporate** – £2,974m total income: Barclays Corporate provides integrated banking solutions to large corporates, financial institutions and multinationals in the UK & Ireland, Continental Europe and New Markets.
- **Barclays Wealth** – £1,560m total income: Barclays Wealth is the wealth management division of Barclays. It focuses on private and intermediary clients worldwide, providing international and private banking, investment management, fiduciary services and brokerage. It has offices in Europe, North America, Asia and Africa.
- **Investment Management** – £78m total income: Investment Management manages the Group’s 19.9% economic interest in BlackRock, Inc. and the residual elements relating to Barclays Global Investors, which was sold on 1st December 2009.
- **Head Office and Other Operations** – £178m total loss: Head Office Functions and Other Operations comprise head office and central support functions, businesses in transition and consolidation adjustments.

### By geographic segment
- UK: £12,807m
- Americas: £7,742m
- Europe: £4,735m
- Africa: £4,697m
- Asia: £1,459m

***

# 2010 performance highlights

- **Profit before tax**: £6,065m (Group profit before tax up 32% on 2009, adjusted profit before tax up 11%)
- **Net income**: 22% up (Net income of £25,768m, up 22% on 2009)
- **Impairment**: 30% down (Impairment of £5,672m, down 30%, giving a loan loss rate of 118bps compared to 156bps for 2009)
- **Return on equity**: 7.2% (Improved returns on average shareholders’ equity of 7.2% (2009: 6.7%))
- **Core Tier 1 ratio**: 10.8% (Core Tier 1 capital ratio of 10.8% (2009: 10.0%))
- **Group liquidity pool**: £154bn (Group liquidity pool improved by 21% from £127bn in 2009)
- **Net hiring**: 2,000 (Created 2,000 new jobs, 80% of which were in the UK)
- **Global tax paid**: £6.1bn (UK tax paid of £2.8bn, including £1.3bn on behalf of employees)
- **Gross new lending to UK**: £43bn (Gross new lending to UK households and businesses increased to £36bn, plus £7.5bn from the acquisition of Standard Life Bank)

```mermaid
graph TD
    A[Income] --> B[£21,199m 2008]
    A --> C[£29,123m 2009]
    A --> D[£31,440m 2010]
    
    E[Earnings per share] --> F[51.4p 2008]
    E --> G[24.1p 2009]
    E --> H[30.4p 2010]
    
    I[Dividends per share] --> J[11.5p 2008]
    I --> K[2.5p 2009]
    I --> L[5.5p 2010]
```

***

# Executing our strategy
## Delivering superior performance through diversification by business, geography and funding sources, and relentless focus on customers and clients

### Strategy and business model
```mermaid
graph TD
    A[Global Universal Bank]
    A --> B[Customer and client focus]
    A --> C[Geographic spread]
    A --> D[Product breadth]
    A --> E[Risk management]
    A --> F[Financial discipline]
```

We continue to believe that our integrated universal banking strategy is the best model to serve our customers and clients as well as optimising risk-adjusted returns for our shareholders.

- **Customer and client focus**: Our customers and clients are at the centre of our strategy and business model. Putting their needs first is essential to developing a long term sustainable business.
- **Geographic spread**: We aim to meet the needs of our clients and build a business with diverse revenue sources, business segments, customer and clients and geographic exposure.
- **Product breadth**: The most successful banks are those that serve their clients across all their needs though a wide range of distribution channels.
- **Risk management**: Effective risk management underpins all the commercial decisions we take. As a global universal bank we are well placed to understand the risks our clients take because of the breadth and depth of the relationships we have with them.
- **Financial discipline**: As we look to execute on our strategy and build the business, it is essential to ensure that we retain financial discipline required to deliver returns.

### How we manage our performance
Whilst business model and strategy determine the shape and direction of Barclays, performance is managed against a specific set of key performance indicators (KPIs).

These KPIs are closely aligned to our execution priorities in order to deliver on our goal of generating top quartile shareholder returns over time.

Our execution priorities are:
- **Capital** – operating within our capital resources 
- **Returns** – generating returns in excess of our cost of equity
- **Income growth** – sustainable growth in selected markets and geographies
- **Citizenship** – demonstrating our wider value to society both globally and in every community we serve

```mermaid
graph TD
    A[Goal] --> B[Execution priorities]
    B --> C[Key performance indicators]
```

***

# Key performance indicators

Our Group KPIs provide a framework of key financial, strategic and citizenship measures which we monitor to assess our aggregate performance. These KPIs are updated periodically as our strategy and execution priorities evolve.

| KPIs | Measures | 2010 | 2009 | 2008 |
| :--- | :--- | :--- | :--- | :--- |
| **Capital** | Core Tier 1 ratio | 10.8% | 10.0% | 5.6% |
| | Adjusted gross leverage | 20x | 20x | 28x |
| **Returns** | Return on average shareholders’ equity (RoE) | 7.2% | 6.7% | 14.3% |
| | Return on average tangible shareholders’ equity (RoTE) | 8.7% | 9.0% | 21.3% |
| | Profit before tax | £6,065m | £4,585m | £5,136m |
| | Cost: income ratio | 64% | 57% | 63% |
| | Loan loss rate | 118bps | 156bps | 95bps |
| | Dividend | 5.5p | 2.5p | 11.5p |
| **Income growth** | Total income | £31,440m | £29,123m | £21,199m |
| | Income by geography: | | | |
| | UK & Ireland | 40% | 45% | 57% |
| | Europe region | 15% | 15% | 19% |
| | Americas | 25% | 22% | 0% |
| | Africa | 15% | 14% | 17% |
| | Asia | 5% | 4% | 7% |
| **Citizenship** | Gross new lending to UK households and businesses | £43bna | £35bn | n/a |
| | Global investment in our communities | £55.3m | £54.9m | £52.2m |
| | Colleagues involved in volunteering, regular giving and fundraising initiatives | 62,000 | 58,000 | 57,000 |
| | Group Employee Opinion Survey (EOS) – Proud to be Barclays | 83% | 81% | 81% |
| | Percentage of senior managers who are female | 24% | 24% | 25% |

Note:
a Gross new UK lending of £43 billion includes £7.5 billion arising from the acquisition of Standard Life Bank.

A fuller analysis of Group KPIs including definitions and why these KPIs are considered important can be found on pages 28 to 31.

***

> Whilst it is too early to say that the financial crisis is over, I believe it is important to reflect on the progress that has been made over the last few years in improving the resilience of the banking sector

Marcus Agius, Group Chairman

***

# Group Chairman’s statement
## Marcus Agius

2010 saw a continuation of the global economic recovery which began in 2009 and while the level of global economic activity remains weak – reflected in high unemployment rates – the recovery is intact, and the fears of a double-dip recession in developed economies that emerged in the middle of last year have largely abated. Indeed, global GDP growth averaged nearly 5% in 2010, led by the emerging economies although growth in most of the developed world was generally below trend. 

Global growth is expected to slow to around 4.25% in 2011, reflecting less rapid growth in Asia and Latin America, where policy has begun to tighten, partly in response to higher inflation. While growth in most of the larger European countries has held up surprisingly well – particularly Germany – the outlook for the UK is more sobering: activity declined unexpectedly in Q4, and policy tightening is likely to temper the pace of recovery this year. Downside risks remain: we saw, for example, the re-emergence of sovereign risk concerns in certain European countries in the last quarter of 2010 and at the start of this year and more recently the unrest in a number of Middle Eastern and North African countries affecting the price of oil and confidence generally. We expect these problems to be contained, but while the outlook for markets is sanguine for now, it is vulnerable to any hints that monetary policy support might be withdrawn.

Whilst it is too early to say that the financial crisis is over, I believe it is important to reflect on the progress that has been made over the last few years in improving the resilience of the banking sector. This is because there is, in some quarters, the sense that nothing has changed as a result of the crisis: in fact a huge amount has already been achieved. To begin with, the banking system as a whole is now much better capitalised than before the crisis – for example, Barclays Core Tier 1 Capital at the end of 2010 was 10.8%, nearly double the level at the end of 2008. We were particularly pleased that the results of the stress tests run by the Committee of European Banking Supervisors (CEBS) in 2010 showed that Barclays Tier 1 ratio was amongst the highest in the European bank sector after application of the CEBS adverse scenario. Liquidity has also been strengthened significantly – Barclays held a Liquidity Pool of over £150bn at the end of 2010, more than three times the level at the end of 2008. Considerable change has also been made in other areas across the sector: leverage is lower; stress testing has been institutionalised; the Financial Stability Board principles on Remuneration have been widely implemented and, finally, good progress is being made in the vital area of recovery and resolution planning. We still await final rules in other important areas however, such as the minimum levels of capital to be held by systemically important financial institutions and, of course, we await the report from the Independent Commission on Banking in the UK which is tasked with examining possible measures to promote stability and competition in UK Banking.

The importance of the regulatory reform agenda cannot be overstated. A great deal has already been achieved and we support strong regulation in order to support strong banks for the benefit of all. Accordingly, we have made a significant contribution to the debate. But the significant volume of work involved in responding to the numerous consultations should not be underestimated and much of it necessarily requires the attention of our most senior people. While we recognise the need for this to happen – and welcome the prospect of a better outcome – we nevertheless also look forward to the time when the ‘new normal’ in regulatory terms is finally established so that we can focus on our core business of banking, namely supporting our clients and so assisting the creation of economic growth and jobs. It is now important that the remaining issues – and in particular uncertainty – are resolved as quickly as possible to allow the sector to manage and plan its activities in a stable regulatory environment.

I stated in my report last year that the new regulatory architecture should meet three objectives and it is important to reiterate them:
- A safer and more secure financial system;
- A banking industry that is well equipped to support the needs of the global economy; and
- The ability of the suppliers of financial capital to earn a positive return on their capital.

The Basel Committee is sensibly phasing in over a period of years the new regulatory requirements in respect of both capital and liquidity. This will help ensure that the banking system can continue to support the needs of the global economy and in particular to finance the recovery in the developed economies. The new architecture will need to be kept under close review, however, to ensure that the three objectives set out above continue to be met. History shows that new regulations invariably lead to unintended consequences, so it will be crucial continuously to monitor their effects to ensure that the desired outcomes are achieved. It will also be vital to ensure that the new rules are applied consistently on a worldwide basis in order to allow international banks such as Barclays to operate on a global level playing field. It would be very dangerous if countries such as the UK continued in a position of regulatory super-equivalence, a position that makes it harder to support private sector led economic growth.

A new regulatory architecture is one aspect of restoring trust in banks but it will not be sufficient by itself. Banks must show by their actions that they understand the public concerns over the mistakes of the past, assist and collaborate in the reform process and recognise their obligation to contribute to economic recovery. A successful banking system brings many benefits to society, including:

### Lending
The supply of credit is at the heart of economic activity and it is the role of banks in performing this function to facilitate appropriate risk taking in the economy by households and businesses. In Barclays alone, we lend about £500bn to customers and clients worldwide. In 2010, our gross new UK lending totalled £43bn, including £7.5bn arising from the acquisition of Standard Life Bank.

The main UK banks recently made substantial commitments relating to lending to UK businesses, including making available the appropriate capital and resources to support gross new lending of £190bn in 2011, should sufficient demand materialise. In addition, the main UK banks have also agreed to contribute to the creation of an equity fund which the banks expect to grow over the coming years to £1.5bn to support growth in companies with an annual turnover of between £10m-£100m.

### Employment
Barclays employs nearly 147,500 people of whom 60,000 are in the UK. The banking sector as a whole employs nearly 500,000 people across the UK and the jobs of many more are related to the success of the wider financial services industry.

***

# Group Chairman’s statement continued

### Payment of Tax
Successful banks pay tax on their profits and in the last ‘normal’ year before the credit crunch (2006), the total direct and indirect taxation paid by the banking sector in the UK was nearly £40bn. As the sector recovers, it will again become a major contributor to Governments across the world and particularly in the UK.

### Payment of Dividends
Successful banks pay dividends to their owners – typically pension funds and mutual funds – and dividend payments from UK banks totalled over 20% of total FTSE dividends in 2006. This figure has been significantly reduced because of the crisis and in Barclays we have had to maintain a conservative dividend policy because of regulatory uncertainty. But it is in the interests of our owners and individual pensioners to see a successful banking system again providing a significant source of income to institutional and private savings vehicles. Our dividend policy has been progressive over the past two years and we expect it to remain so.

### Community Support
Investing in the communities in which we operate is something that has always been important to Barclays and our employees around the world.

During difficult economic times, we have even more responsibility to the communities where we live and work. Despite the impact of the crisis, Barclays resolved not to reduce its level of community support and, in 2010, we invested over £55m in carefully targeted programmes around the world.

Our truly global community investment programme now supports projects in 37 countries, reaching more than one and a half million people and providing support to over 8,000 organisations.

To make this happen, over 62,000 colleagues gave their time, energy and expertise to volunteering, fundraising and regular giving initiatives throughout the year – a record figure, of which we are justifiably proud. You will see from the Chief Executive’s review that Citizenship, and in particular, demonstrating our credentials as a global citizen, is one of our priorities in 2011.

The scale of each of these components of contribution is profoundly affected by the ability of the UK industry to compete with the best international peers. In order to maximise the contribution of UK banks to society, we must be allowed to compete on a level playing field within a secure regulatory framework. We recognise the need to pay responsibly, including much greater levels of deferment, greater use of equity and the ability to claw back payments in specific circumstances. As Chairman, I am acutely aware of the public disquiet over remuneration in the industry. Barclays is committed to acting responsibly in this area. We are fully compliant with all regulatory requirements and our remuneration systems are designed to reward success, not failure. If we are to remain competitive in a global market place, however, it is simply not an option for us unilaterally to reduce compensation levels. We can only contribute to society if we are able to recruit and retain good people. Against the above background, we are very grateful to John Varley in leading the industry discussions with the UK Government which resulted in a collective statement by the principal UK banks on lending, tax, pay and broader contributions to the economy and to society. The statement underlined the banks’ recognition of their responsibility to support economic recovery and to show responsibility on pay. Accordingly, Barclays 2010 bonus pool was down 7%, despite increased profits and income, in line with our commitment to the UK Government for restraint.

### CEO Succession
A key development during the year was the announcement that Bob Diamond would succeed John Varley as Chief Executive. While I set out in the Corporate Governance Report the background to the decision to appoint Bob and in particular, the process that was followed, I would like to pay tribute here to the exceptional job performed by John during his tenure as CEO. Barclays has been transformed since he became CEO in September 2004, enabling Barclays to take its place in the first rank of global universal banks. There can have been no greater test of leadership than to have been CEO during the financial crisis and John brought the bank through this period with courage and creativity. We are fortunate that he will continue to be available to us as an advisor on regulatory matters until September.

We are also fortunate that we have such a capable and qualified replacement in Bob Diamond. He has a proven track record as a business leader and the Board and I are looking forward to working with him to take Barclays forward in the years ahead as he builds on his many achievements to date.

### Board Changes
We appointed two new Directors during the year. Dambisa Moyo was appointed in May and her background in financial services and as a global economist will bring valuable insights to the Board. Alison Carnwath was appointed in August. She is Chair of Land Securities and has a long history in financial services as a banker and a director of a number of global financial services businesses. Leigh Clifford retired from the Board on 30 September. He made an extremely valuable contribution to the Board and we benefitted greatly from his experience and his wisdom, particularly during the financial crisis. We wish him well for the future.

In conclusion, I would like on behalf of the Board to thank two particular groups of stakeholders. First, our many shareholders for their support in 2010. We weathered the storm as well as we did because of a combination of public support – for which we are sincerely grateful – proactive management and the underlying strength of our business. Our resolve now is to build on this strength to sustain the delivery of value for our shareholders into the future. Finally, our thanks go out to all Barclays 147,500 employees who have continued to work very hard and to show dedication to the service of our customers and clients. This lies at the heart of any success we may achieve.

Marcus Agius
Group Chairman
10th March 2011

***

# Leadership and governance: Board of Directors

| | Marcus Agius (64) | Bob Diamond (59) | Sir Richard Broadbent (57) | David Booth (56) |
| :--- | :--- | :--- | :--- | :--- |
| **Position** | Group Chairman | Chief Executive, Executive Director | Deputy Chairman and Senior Independent Director | Non-executive Director |
| **Biography** | Marcus’ extensive background in banking began at Lazard where he worked from 1972 to 2006, latterly as Chairman of Lazard in London and Deputy Chairman of Lazard LLC. He is currently Chairman of the British Bankers’ Association, Senior Independent Director of the British Broadcasting Corporation (BBC) and Chairman of the Trustees of The Royal Botanic Gardens. Marcus is also a Business Ambassador for UK Trade and Investment, a member of the Advisory Council of TheCityUK, and a member of the Takeover Panel. He was formerly Chairman of BAA plc, a position he held from 2002 until 2006. | Bob became Chief Executive on 1st January 2011. Previously, he was President of Barclays PLC and Chief Executive of Corporate & Investment Banking and Wealth Management, comprising Barclays Capital, Barclays Corporate and Barclays Wealth. Before joining Barclays, Bob was Vice Chairman and Head of Global Fixed Income and Foreign Exchange at CS First Boston, where he was also a member of the Executive Board and Operating Committee. Prior to this, he was Managing Director and Head of Fixed Income Trading at Morgan Stanley International, spending 13 years with the firm. Bob is a non-executive Director of BlackRock, Inc. | Sir Richard has experience of both the private and public sector having worked in high-level banking roles and the Civil Service. He was the Executive Chairman of HM Customs and Excise from 2000 to 2003. Formerly he was a member of the Group Executive Committee of Schroders PLC and a non-executive Director of the Securities Institute. He was Chairman of Arriva PLC until August 2010. | David manages his own venture capital investments, having retired from the Management Committee of Morgan Stanley in 1997. David was employed by Morgan Stanley from 1982 to 1992, and again from 1995 to 1997 where he held various key positions, including Head of Government Bond Trading, Head of Mortgage Trading, Sales and Finance and Head of Global Operations and Technology. |
| **Term of office** | Marcus joined the Board in September 2006 as a non-executive Director and was appointed Chairman on 1st January 2007. Marcus was last re-elected by shareholders at the AGM in 2010. | Bob was appointed President and became an executive Director in June 2005. He has been a member of the Barclays Executive Committee since September 1997. Bob was last re-elected by shareholders at the AGM in 2009. | Sir Richard joined the Board in September 2003. Appointed Senior Independent Director on 1st September 2004 and Deputy Chairman on 16 July 2009. Sir Richard was last re-elected by shareholders at the AGM in 2010. | David joined the Board in May 2007. David was last re-elected by shareholders at the AGM in 2010. |
| **Independent** | On appointment | No | Yes | Yes |
| **External appointments** | Chairman of the British Bankers’ Association since 2010. Senior Independent Director of the BBC since 2006. Member of the Executive Committee of the Institut International D’Etudes Bancaires. Business Ambassador for UK Trade and Investment. Member of the Advisory Council of TheCityUK. Member of the Takeover Panel. Chairman of the Trustees of the Royal Botanic Gardens, Kew. Chairman of The Foundation and Friends of the Royal Botanic Gardens, Kew. Chairman of Lazard in London and Deputy Chairman of Lazard LLC until 2006. Chairman of BAA plc until 2006. | Non-executive Director of BlackRock, Inc. Chairman, Board of Trustees of Colby College, Waterville, Maine. Chairman, Old Vic Productions, Plc. Trustee, The Mayor’s Fund for London. Member of the Advisory Board, Judge Business School at Cambridge University. Board Member, The Diamond Family Foundation. Member of International Advisory Board, British-American Business Council. Life Member of The Council on Foreign Relations. Member of The International Advisory Board, The Atlantic Council. | Chairman of Arriva PLC until 2010. Trustee of Relate since 2011. Executive Chairman of HM Customs and Excise until 2003. Former Group Executive Committee member of Schroders PLC. Non-executive Director of the Securities Institute until 1995. | Director of East Ferry Investors, Inc. Various positions at Morgan Stanley & Co. until 1997. Director of the Discount Corporation of New York until 1993. |
| **Committee membership** | Chairman of the Board Corporate Governance and Nominations Committee since January 2007. Member of the Board Remuneration Committee since January 2007. | - | Chairman of the Board Remuneration Committee since January 2007 (member since April 2004). Member of the Board Corporate Governance and Nominations Committee since September 2004. Former member of the Board Risk Committee (April 2004 until September 2010), which he chaired between January 2006 and December 2009. | Chairman of the Board Risk Committee since January 2010 (member since January 2008). Member of the Board Corporate Governance and Nominations Committee since January 2010. |

***

# Leadership and governance: Board of Directors continued

| | Alison Carnwath (58) | Fulvio Conti (63) | Simon Fraser (51) | Reuben Jeffery III (57) |
| :--- | :--- | :--- | :--- | :--- |
| **Position** | Non-executive Director | Non-executive Director | Non-executive Director | Non-executive Director |
| **Biography** | Alison worked in investment banking and corporate finance for 20 years from 1980 to 2000, before pursuing a portfolio career. During her career, Alison became a director of J. Henry Schroder Wagg & Co, where she worked for 10 years. Alison also held the positions of a senior partner of Phoenix Securities and Managing Director, New York at Donaldson, Lufkin & Jenrette. Alison has wide board level experience and is currently non-executive Chairman of Land Securities Group PLC, Senior Independent Director at Man Group plc, non-executive Director of Paccar Inc, and non-executive Chairman of ISIS EP LLP. | Fulvio is currently Chief Executive Officer and General Manager of Enel SpA, the Italian energy group, where he was previously Chief Financial Officer from 1999-2005. Fulvio has held a number of high-level financial roles, including Chief Financial Officer and General Manager of Telecom Italia and General Manager and Chief Financial Officer of Ferrovie dello Stato. He was also head of the accounting, finance, and control department of Montecatini and was in charge of finance at Montedison-Compart. He has held positions in finance and operations in various affiliates of Mobil Oil Corporation in Italy and Europe. | Simon has extensive experience of the institutional fund management industry, having worked at Fidelity International from 1981 to 2008, latterly as President of the Investment Solutions Group and President of the Retirement Institute. Simon held a number of positions during his career at Fidelity International, including President, European & UK Institutional Business, Global Chief Investment Officer, Chief Investment Officer for Asia Pacific and Chief Investment Officer of the European Investment Group. Simon remains a director of Fidelity European Values PLC and Fidelity Japanese Values PLC. He was appointed as the Chairman of Foreign & Colonial Investment Trust PLC and Chairman of The Merchants Trust in May 2010. | Reuben is currently the Chief Executive Officer of Rockefeller & Co., Inc., a member of the Advisory Board of TASC Inc and of TowerBrook Capital Partners LP and Senior Adviser at the Center for Strategic & International Studies in Washington, D.C.. He previously served in the US government as Under Secretary of State for Economic, Energy and Agricultural Affairs (2007-2009). Prior to joining the Department of State, Reuben was the Chairman of the Commodity Futures Trading Commission. He spent eighteen years at Goldman, Sachs & Co. between 1983-2001 where he was managing partner of Goldman Sachs in Paris and led the firm’s European Financial Institutions Group in London. |
| **Term of office** | Alison joined the Board on 1st August 2010. | Fulvio joined the Board in April 2006. Fulvio was last re-elected by shareholders at the AGM in 2009. | Simon joined the Board in March 2009. Simon was last re-elected by shareholders at the AGM in 2009. | Reuben joined the Board in July 2009. Reuben was last re-elected by shareholders at the AGM in 2010. |
| **Independent** | Yes | Yes | Yes | Yes |
| **External appointments** | Non-executive Director of CforC Ltd. Non-executive Chairman of Land Securities Group PLC since November 2008. Senior Independent Director at Man Group plc. Non-executive Director of Paccar Inc. Non-executive Chairman of ISIS EP LLP. | Chief Executive of Enel SpA since 2005. Director of ENDESA SA since June 2009. Director of AON Corporation since January 2008. Chief Financial Officer and General Manager of Telecom Italia until 1999. General Manager and Chief Financial Officer of Ferrovie dello Stato until 1998. | Director of Fidelity European Values PLC since July 2002. Director of Fidelity Japanese Values PLC since May 2000. Chairman of The Merchants Trust PLC since May 2010. Chairman of Foreign & Colonial Investment Trust PLC since May 2010. | Chief Executive Officer of Rockefeller & Co., Inc. since September 2010. Senior Adviser at the Center for Strategic & International Studies, Washington D.C.. Member of the Advisory Board of TASC Inc. Member of the Advisory Board of TowerBrook Capital Partners LP. Director of Transatlantic Holdings Inc since May 2010. |
| **Committee membership** | Member of the Board Audit Committee since October 2010. Member of the Board Remuneration Committee since October 2010. | Member of the Board Audit Committee since September 2006. | Member of the Board Audit Committee since May 2009. Member of the Board Remuneration Committee since May 2009. | Member of Board Risk Committee since January 2010. |

***

# Leadership and governance: Board of Directors continued

| | Sir Andrew Likierman (67) | Chris Lucas (50) | Dambisa Moyo (42) | Sir Michael Rake (63) | Sir John Sunderland (65) |
| :--- | :--- | :--- | :--- | :--- | :--- |
| **Position** | Non-executive Director | Group Finance Director, Executive Director | Non-executive Director | Non-executive Director | Non-executive Director |
| **Biography** | Sir Andrew is the Chairman of the National Audit Office, having held a number of public roles in the financial services sector, including Managing Director, Financial Management, Reporting and Audit and Head of the Government Accountancy Service at HM Treasury and non-executive Director of the Bank of England. Sir Andrew is also Dean of the London Business School. He has been at the London Business School from 1974-1976, 1979-1993 and since 2004. | Chris has worked across financial services for most of his career, including three years in New York as Head of the US Banking Audit Practice of PricewaterhouseCoopers LLP. Chris joined Barclays from PricewaterhouseCoopers LLP, where he was UK Head of Financial Services and Global Head of Banking and Capital Markets. He was Global Relationship Partner for Barclays for the 1999–2004 financial years and subsequently held similar roles for other global financial services organisations. | Dambisa is an international economist who writes on the macroeconomy and global affairs. Dambisa worked for the World Bank from 1993 to 1995. After completing a PhD in Economics, she worked for Goldman Sachs for eight years until November 2008 in the debt capital markets, hedge funds coverage and global macroeconomics teams. Dambisa currently serves as a non-executive Director on the Boards of SABMiller plc and Lundin Petroleum AB (publ). | Sir Michael is currently Chairman of BT Group PLC and Chairman of easyJet plc. Sir Michael previously worked at KPMG from 1974-2007 where he spent a number of years in Continental Europe and the Middle East. He was Senior Partner of the UK firm from 1998-2000 and Chairman of KPMG International from 2002-2007. | Sir John is Chairman of Merlin Entertainments Group. Until July 2008 he was Chairman of Cadbury Schweppes PLC, having worked at Cadbury’s in various roles, including that of Chief Executive and then Chairman, since 1968. He is a Director of the Financial Reporting Council, an Adviser to CVC Capital Partners, an Association Member of BUPA and a Governor of both Reading and Aston University Councils. |
| **Term of office** | Sir Andrew joined the Board in September 2004. Sir Andrew was last re-elected by shareholders at the AGM in 2010. | Chris was appointed Group Finance Director and became a member of the Executive Committee in April 2007. Chris was last re-elected by shareholders at the AGM in 2010. | Dambisa joined the Board on 1st May 2010. | Sir Michael joined the Board in January 2008. Sir Michael was last re-elected by shareholders at the AGM in 2010. | Sir John joined the Board in June 2005. Sir John was last re-elected by shareholders at the AGM in 2009. |
| **Independent** | Yes | No | Yes | Yes | Yes |
| **External appointments** | Dean of the London Business School since January 2009. Chairman of the National Audit Office since December 2008. Trustee of the Institute for Government since September 2008. Chairman of Applied Intellectual Capital Inc. until 2008. Non-executive Director of the Bank of England until 2008. Non-executive Director and Vice-Chairman of the Tavistock and Portman NHS Trust until 2008. Non-executive Director and Chairman of the MORI Group until 2005. | UK Head of Financial Services and Global Head of Banking and Capital Markets of PricewaterhouseCoopers LLP until 2006. | Non-executive Director of SABMiller plc since 2009. Non-executive Director of Lundin Petroleum AB (publ) since 2009. | Chairman of BT Group PLC since 2007. Chairman of easyJet Plc since January 2010 (Deputy Chairman June 2009 – December 2009). Director of the Financial Reporting Council since 2007. Director of the McGraw-Hill Companies since 2007. Chairman of the UK Commission for Employment and Skills until 2010. Chairman of KPMG International until 2007. Chairman of Business in the Community from 2004 until 2007. | Chairman of Merlin Entertainments Group since December 2009. Director of the Financial Reporting Council since 2004. Adviser to CVC Capital Partners. Deputy President of the Chartered Management Institute until 2009 (President 2007-2008). Chairman of Cadbury Schweppes PLC until July 2008. Deputy President of the CBI until June 2008 (former member and President). Non-executive Director of the Rank Group PLC until 2006. |
| **Committee membership** | Member of the Board Audit Committee since September 2004. Member of the Board Risk Committee since September 2004. | - | Member of the Board Risk Committee since October 2010. | Chairman of the Board Audit Committee since March 2009 (member since January 2008). Member of the Board Risk Committee since May 2009. Member of Board Corporate Governance and Nominations Committee since May 2009. | Member of the Board Corporate Governance and Nominations Committee since September 2006. Member of the Board Remuneration Committee since July 2005. |

***

# Leadership and governance: Group Executive Committee

- **Bob Diamond (59)**: Chief Executive, Executive Director
- **Chris Lucas (50)**: Group Finance Director, Executive Director
- **Robert Le Blanc**: Chief Risk Officer. Robert has been the Chief Risk Officer for Barclays Group since 2004. He first joined Barclays in 2002 as Head of Risk Management at Barclays Capital. Robert is a non-executive Director of Absa, which is majority owned by Barclays. Before joining Barclays, Robert spent most of his career at JP Morgan in the capital markets, fixed income, emerging market and credit areas in New York and London.
- **Mark Harding**: Group General Counsel. Mark joined Barclays as Group General Counsel in 2003. Included within his area of responsibility are legal and regulatory compliance issues throughout the bank. He chairs the Group Operating Committee and Group Governance and Control Committee. Previously, Mark was a partner in the international law firm, Clifford Chance, where his practice spanned bank finance, capital markets and financial services regulation. He spent four years at UBS as General Counsel of its investment bank. Mark is past Chairman of the General Counsel 100 Group and of the Board of the International Swaps and Derivatives Association (ISDA). He is a Governor of the College of Law.
- **Antony Jenkins**: Chief Executive of Global Retail Banking. Antony was appointed Chief Executive of Global Retail Banking and joined the Barclays Executive Committee in November 2009. Prior to that he had been Chief Executive of Barclaycard since January 2006. Antony is a Barclays appointed non-executive Director of Absa, which is majority owned by Barclays. Since October 2008, Antony has been on the Board of Visa Europe Ltd.
- **Thomas L Kalaris**: Chief Executive of Barclays Wealth. Tom joined Barclays in September 1996 after 18 years at JP Morgan where he held a number of roles, including Head of Fixed Income Sales, Trading and Research, and was responsible for all activities with investors in the United States. He has served on the US Treasury Borrowing Advisory Committee and is a former Chair of the US Bond Market Association, a predecessor organisation to SIFMA (Securities Industry and Financial Markets Association).
- **Jerry del Missier**: Co-Chief Executive of Barclays Capital and Co-Chief Executive of Corporate and Investment Banking. Jerry joined Barclays Capital in June 1997 from Bankers Trust in London where he had been a Senior Managing Director of Derivatives Products, responsible for the European business. Prior to this, he was based in Toronto, Canada, where he was responsible for the Canadian Dollar interest rate derivatives business. Before Bankers Trust, he worked for the Bank of Nova Scotia. Jerry currently serves on the Boards of Room to Read, the Securities Industry and Financial Markets Association (SIFMA), the Global Financial Markets Association (GFMA), the Markets Management Group (MMG) of the International Institute of Finance (IIF), and the Advisory Board of the Queen’s University School of Business in Kingston, Ontario.
- **Maria Ramos**: Group Chief Executive of Absa. Maria is the Group Chief Executive of Absa Group Ltd, which is majority owned by Barclays. Prior to joining Absa on 1st March 2009, she was the Group Chief Executive of Transnet Limited, the state-owned South African freight transport and logistics service provider. This was after a successful term as Director-General of the National Treasury (formerly the Department of Finance). She currently serves on the executive committees of the International Business Council, the World Bank Chief Economist Advisory Panel, Business Leadership South Africa and the Banking Association of South Africa.
- **Rich Ricci**: Co-Chief Executive of Barclays Capital and Co-Chief Executive of Corporate and Investment Banking. Rich joined Barclays Capital in 1994 and assumed responsibility for several of its support areas. He became Chief Operating Officer (COO) of Barclays Global Investors (BGI) and a member of the BGI Executive Committee in December 2002. In January 2005, Rich was appointed COO of Barclays Investment Banking and Investment Management businesses comprising Barclays Capital, Barclays Wealth and BGI. Prior to joining Barclays Capital, Rich held senior front-office, finance and technology positions at the Bank of Boston and the Bank of New England.
- **Cathy Turner**: Barclays Human Resources Director. Cathy was appointed as Group Human Resources Director in April 2005 prior to which she held the position as Investor Relations Director for four years. In July 2008 her remit was extended to include Strategy, Corporate Affairs and Brand and Marketing. Prior to Barclays, Cathy was a Practice Leader at Ernst and Young and has previously held roles at Deloitte, Watson Wyatt, Percom and Volex Plc. Cathy is a Council Member of the Royal College of Art and a Board Member of the IFS School of Finance. Cathy has announced her departure from Barclays and will be leaving on 31st March 2011.

### Key responsibilities
- **Board of Directors**: The Board is collectively responsible for the success of the Group: the executive Directors are directly responsible for running the business operations and the non-executive Directors are responsible for bringing independent judgement and scrutiny to decisions taken by the Board. In addition to their statutory duties, the Directors must ensure that the Board focuses effectively on all its accountabilities. The Board determines the strategic objectives and policies of the Group to deliver long-term value, providing overall strategic direction within an appropriate framework of rewards, incentives and controls.
- **Executive Committee**: The Board delegates the responsibility for the day-to-day management of the Company to the Chief Executive and he is responsible for ensuring that the business is operating effectively. The Chief Executive chairs the Executive Committee, which supports him in this role. The Executive Committee is supported by a number of management committees, including the Disclosure Committee, the Group Governance and Control Committee, the Group Risk Oversight Committee and the Group Brand and Reputation Committee.

***

# Chief Executive’s review
## Bob Diamond

### Summary
Barclays delivered a significant increase in profit before tax in 2010 on both a headline and underlying basis. This was despite continued economic challenges in our principal markets: historically low interest rates; sluggish volumes in many market segments; and considerable regulatory uncertainty. In light of those circumstances, I am proud of what my colleagues have achieved.

We have much more to do to ensure that we can continue to deliver on our goal to produce top quartile total shareholder returns (TSR) over time. Over 2010, we ranked in the top quartile of our global peer group$^a$ against which we measure our relative TSR performance with a performance of minus 4% reflecting difficult market conditions for bank stocks globally. I focus the latter half of this review on the commitments against which I believe we must deliver to continue to achieve our TSR goal.

> We continue to believe that our integrated model provides superior benefits to our customers, clients and broader stakeholders because of its diversity by business, geography, customer and client type and funding source.

### 2010 Performance
In his review a year ago, John Varley reiterated our focus on the three priorities that had guided us through the financial and economic crises to that point: staying close to customers and clients; managing our risks, and maintaining strategic momentum. That is where we focused our energy throughout 2010, so I will use these priorities for my review of the year.

### Staying Close to Customers and Clients
Many of our customers and clients faced continued challenges throughout 2010. Our responsibility was clear – to be there for them, whatever their needs, whenever those needs arose. Our income performance in 2010 provides a good indication of the health of those customer and client relationships, with overall income up 8% to another new record. Our success by business was more mixed than I would like, reflecting either specific market dynamics or purposeful rebalancing on our part. I was particularly pleased with our income performance in UK Retail Banking, Barclays Africa and Absa, the non-US parts of our Barclaycard portfolio, the core UK arm of Barclays Corporate and Barclays Wealth. In Barclays Capital, while the absolute revenues are not yet where we want them, our progress in Equities and Investment Banking was demonstrably better in the latter half of the year and I am pleased by the way we outperformed most of our peers in the final quarter of the year.

Lending is a fundamental part of what we do to support economic growth and our customers and clients. In the UK, there remains significant political and media attention on the banks’ lending delivery. In 2010, we provided £43bn of gross new lending to UK households and businesses including £7.5bn of UK loans when we acquired Standard Life Bank at the beginning of the year. We are open for business.

### Managing Our Risks
I believe the outcomes on key risk-related metrics demonstrate clearly our success here over the past year.
- We ended 2010 with even stronger positions on capital (10.8% Core Tier 1 ratio) and liquidity (£154bn) than we started the year, whilst maintaining our adjusted gross leverage at 20x;
- Balance sheet growth was modest, particularly on a risk-weighted asset basis; and
- Impairment was down considerably, and our 2010 loan loss rate of 118bps was materially lower than the 156bps charge in 2009, though still above our long term average of around 90bps over the last two decades.

### Maintaining Strategic Momentum
We will continue to pursue the same strategic priorities under my leadership in 2011 that we have pursued under John Varley in 2010. We remain focused on ensuring that we capitalise on the value that our universal banking model brings to our customers and clients. A key part of that remains the diversification of our business by geography, business line, client and customer types, and funding sources.

### Compensation
In making decisions around compensation for 2010, we have sought to balance the responsibility to be sensitive to the external environment with the commercial necessity of ensuring that our decisions allow us to attract and retain the talent we need to deliver for all our stakeholders. This was not an easy task. Our decisions are also fully compliant with the significantly altered regulations that now govern discretionary pay awards, especially the re-written FSA Remuneration Code, and with our commitments made under Project Merlin. As a result, the amount of discretionary compensation awards that are deferred has increased further; the proportion of equity in the deferral structures has increased; and we have developed an innovative structure for a deferred compensation scheme for our most senior employees that links future pay-outs under the scheme to the Group’s core capital position at the time. In total, and against a backdrop of a 32% increase in Group profit before tax for 2010, our performance awards (which exclude charges relating to prior year deferrals but include current year awards vesting in future years) were down 7% on 2009.

> Our focus is on execution, which means delivering on our commitments in four key areas: maintaining a strong capital base; improving returns; delivering selective income growth; and demonstrating our credentials as a global citizen.

***

# Chief Executive’s review continued

### 2011 Execution Priorities
At the time my succession was announced, I made it clear that I had no intention of materially altering the strategy that the Group has been pursuing for some time. My attention has been, and will continue to be, focused squarely on increasing the pace and intensity of execution of that strategy. The level of uncertainty in the economic and regulatory environment remains high, but we cannot allow that to distract us. We must make clear commitments to the market, and then deliver against them, in four areas.

#### 1. Capital
We must remove the uncertainty associated with the impact of the implementation of new Basel rules on our capital ratios. The combination of where we finished 2010 and the continued demonstration of our ability to generate substantial equity organically should go some way towards this. While there are significant regulatory questions to be resolved in 2011 – especially the outcome of the Financial Stability Board’s deliberations on so-called ‘G-SIFIs’ (i.e. systemically important financial institutions at a global level, one of which we expect to be Barclays) and, in the UK, the recommendations of the Independent Commission on Banking – we believe that we will be able to manage those impacts. But we recognise that we must maintain a strict and pro-active focus on our capital levels, leverage, balance sheet growth and utilisation and the disposal of legacy assets.

#### 2. Returns
The new environment will necessitate lower returns than the period just preceding the recent crisis but I believe the difference in performance between winners and losers by this vital measure will be stark. Our priority is to ensure we are a winner. The returns we are currently generating will not be acceptable to our shareholders over the medium term.

We must be in a position to deliver at least a 13% return on equity and a 15% return on tangible equity by the end of our planning cycle. We also expect our cost of equity to decline towards 10% relative to a 12.5% cost in 2010 and the 11.5% cost we have set for 2011 over this period as the worst impacts of the credit crisis abate and the major economies in which we operate return to growth.

We have instigated a disciplined, rigorous and continuous review of our portfolio to ensure that we can achieve those levels of return. We have already undertaken a strategic review of our operating model that should take out considerable running costs over the medium-term, and you should expect us to continue to act to adjust our business and asset portfolio mix as required to achieve our return goals.

#### 3. Top-line growth
While we are focused on improving returns, we cannot take our eye off the top-line, so we will selectively invest for growth in business areas where the return justifies it. There are clear examples across the Group, including: Barclays Wealth (where our strategic investment programme, known as our Gamma plan, is now one year into delivery); Barclaycard’s Global Business Solutions activities which provides commercial payment services; monetising the build-out of Equities and Investment Banking in Barclays Capital; and capitalising on opportunities in Asia and Africa. We expect that this continued investment in growth will be largely organic, as was our development over the past decade of Barclays Capital and Barclays Global Investors.

#### 4. Citizenship
In general we as banks need to do more to help foster economic growth and job creation as well as helping the public understand better the significant role we already play in this regard. I take pride in the culture at Barclays, where many of my colleagues work selflessly to help those in need in their local communities and we apply our expertise to real world issues. We must do a better job of helping those outside the organisation see the scale of what we do and the impact it has as we seek to intensify our efforts here. You can expect to hear much more from us in this space later this year.

> Job creation, stimulating economic growth and investing in communities in which we work are at the core of our citizenship agenda.

### Conclusion
I have 147,500 colleagues around the world who are focused on bringing the best of Barclays to everything that they do, everyday. They have delivered unfailingly over the past three years. We have many more challenges ahead, but I know I have their support in tackling them. It is my honour to lead them, and this great institution, as we look to deliver against the expectations of all of our stakeholders, most importantly our customers and clients, over the coming months and years.

Bob Diamond
Chief Executive

***

# Financial strength

Barclays overall financial strength remains of central importance to the Group. Following the financial crisis we took an early decision to get ahead of regulatory change and manage our business to higher standards than those required by current regulation. We did this because we recognised the importance of providing stability at a time of extreme uncertainty.

### Capital Management
At 31st December 2010, on a Basel II basis, the Group’s Core Tier 1 ratio was 10.8% (2009: 10.0%) and the Tier 1 ratio was 13.5% (2009: 13.0%), representing a strengthening of our capital ratios ahead of the effects of expected regulatory capital changes. Retained profit contributed approximately 70bps to the increase in the Core Tier 1 ratio. Other movements in Core Tier 1 included the exercise of warrants in February and October 2010, which generated shareholders’ equity of £1.5bn, contributing approximately 40bps to the Core Tier 1 ratio. The movement in the fair value of the Group’s holding in BlackRock, Inc. resulted in an adverse impact of approximately 20bps on the Core Tier 1 ratio over the year.

### Capital Strength
% Regulatory capital ratios 

| | 07 | 08 | 09 | 10 |
| :--- | :--- | :--- | :--- | :--- |
| Tier 1 | 7.6 | 8.6 | 13.0 | 13.5 |
| Core Tier 1 | 4.7 | 5.6 | 10.0 | 10.8 |

### Adjusted Gross Leverage
Barclays continues to operate within limits and targets for balance sheet usage as part of its balance sheet management activities. The adjusted gross leverage was 20x as at 31st December 2010 (2009: 20x) principally as a result of a £3.9bn increase in Tier 1 Capital to £53.5bn offset by the impact of a £84.6bn increase in adjusted total tangible assets. At month ends during 2010 the ratio moved within a range from 20x to 24x, with fluctuations arising as a result of normal trading activities, primarily due to increases in reverse repurchase trading and changes in holdings of trading portfolio assets.

The Basel Committee of Banking Supervisors (BCBS) issued final guidelines for ‘Basel III: a global regulatory framework for more resilient banks and banking systems’ in December 2010. The guidelines include a proposed leverage metric, to be implemented by national supervisors in parallel run from 1st January 2013 (migrating to a Pillar 1 measure by 2018). Based on our interpretation of the current BCBS proposals the Group’s Basel III leverage ratio as at 31st December 2010 would be within the proposed limit of 33x.

### Liquidity and Funding
The Group liquidity pool as at 31st December 2010 was £154bn gross (2009: £127bn) and comprised the following cash and unencumbered assets (of which £140bn are FSA eligible). The Group maintains additional liquid assets to support ongoing business requirements such as payment services. The cost of the Group liquidity pool for 2010 is approximately £900m, an increase on the previous year. This cost has been allocated on the basis of the projected stress outflows arising in each relevant business.

| | Cash and deposits with central banks (£bn) | Government guaranteed bonds (£bn) | Governments and supranational bonds (£bn) | Other available liquidity (£bn) | Total (£bn) |
| :--- | :--- | :--- | :--- | :--- | :--- |
| As at 31.12.10 | 96 | 1 | 46 | 11 | 154 |
| As at 31.12.09 | 81 | 3 | 31 | 12 | 127 |

Since June 2010, the Group has reported its liquidity position against backstop Individual Liquidity Guidance (ILG) provided by the FSA. Calibration of the Group’s Liquidity Framework anticipated final FSA rules and is therefore broadly consistent with current FSA standards.

The Basel Committee of Banking Supervisors (BCBS) issued its final guidelines for liquidity risk management, standards and monitoring in December 2010. These guidelines include a short term liquidity stress metric (the Liquidity Coverage Ratio (LCR)) and a longer term liquidity metric (the Net Stable Funding Ratio (NSFR)). The BCBS guidelines have yet to be implemented into European and UK law and therefore remain subject to refinement and change.

However, the Group monitors compliance against these BCBS metrics and the FSA is expected to bring its ILG metrics into line with the Basel LCR over time. Applying the expected BCBS guidelines to the Group’s liquidity position as at 31st December 2010, the relevant ratios were estimated at 80% of the LCR requirement and 94% of the NSFR requirement.

### Credit Ratings
In addition to monitoring and managing key metrics related to the financial strength of Barclays, we also subscribe to independent credit rating agency reviews by Standard & Poor’s, Moody’s Fitch and DBRS. These ratings assess the credit worthiness of Barclays and are based on reviews of a broad range of business and financial attributes including; risk management processes and procedures; capital strength, earnings, funding, liquidity, accounting, and governance.

| As at 31.12.10 | Barclays PLC | Barclays Bank PLC |
| :--- | :--- | :--- |
| **Standard & Poor’s** | | |
| Long Term | A+ | AA- |
| Short Term | A-1 | A-1+ |
| **Moody’s** | | |
| Long Term | A1 | Aa3 |
| Short Term | P-1 | P-1 |
| BFSR | n/a | C(Stable) |
| **Fitch** | | |
| Long Term | AA- | AA |
| Short Term | F1+ | F1+ |
| **DBRS** | | |
| Long Term | - | AA (High) |
| Short Term | - | R-1 (High) |

***

# Business review: Global Retail Banking

> In 2010 we delivered a good financial performance with increasing momentum through the year and made strong progress against our strategic and financial goals.

At the Global Retail Banking investor day in June 2010, we said our strategic goals were “Happy customers, strong profit growth, good returns”. We are making significant progress against these goals.

We are focused on improving the service we provide to our customers and have seen positive results from this. For example, we’ve reduced the time it takes to issue a replacement debit card in the UK from five to two days.

Our use of innovation is also transforming the customer experience. Our pioneering contactless payment strategy in the UK has resulted in a much easier experience for our customers. Ninety percent of the contactless cards issued in the UK are now issued by Barclays, which puts us in a leading position. In Kenya and Botswana, registration for our mobile banking service increased almost four-fold over the year. In Western Europe, we continued to expand our network, increasing the number of distribution points by over a hundred, making it easier for customers to access our banking services. These are just some examples of what we have done to improve the customer experience. Further progress needs to be made and this is a key priority for us.

This focus on our customers will generate sustainable value for our shareholders. We made a strong start in 2010. GRB improved its loan to deposit ratio by 4 percentage points to 140%. Return on equity increased from 10% to 11% reflecting strong profit growth in UKRB, Barclaycard and Barclays Africa. We are facing challenging economic conditions in Western Europe but remain committed to a presence in the region and to converting the investment we have made into sustainable profit. We’ve achieved greater depth through the integration of Standard Life Bank in the UK and Citigroup’s card business in Italy.

I am confident that we are on the right track to meet our objectives and deliver significant value to all our stakeholders.

Antony Jenkins
Chief Executive, Global Retail Banking

### Our promises

| Global Retail Banking | 2013 Targets |
| :--- | :--- |
| Income and profit growth | - Strong compound annual profit growth<br>- Income growth in excess of cost growth |
| Stable funding ratio | - Deposits and secured funding to keep pace with asset growth |
| Depth, not breadth | - Existing markets focus and continued product diversification |
| Strong returns and net equity generation | - c 2% RoRWA<br>- 13-15% RoE<br>- c 20% RoTE |

***

# Reinforcing our leading position in technology and innovation

At Barclays, we continue to lead the technological revolution that is sweeping across the banking world. We have pioneered contactless payments in the UK and we will be offering contactless mobile phone payment solution for customers in the summer of 2011. In addition, customers can also use their GPS facility on their mobiles to find the nearest Barclays branch and cash machines.

Recognising that mobile access is fast becoming the new frontier in the banking space, and building upon our achievements with Barclays.mobi in the UK, we recently went live in France and in Portugal, giving customers access to banking at a place and time that suits them. In Kenya and Botswana, registration for our mobile banking service this year increased almost four-fold.

At the same time, we continue to be leaders in bringing contactless technology to the UK, with approximately 90% of contactless transactions from a Barclays-issued card, and transaction volumes more than doubling in the last year.

Our innovative edge will allow us to move one step further in 2011. In the UK, in association with Orange (or Everything Everywhere as they are now known), Barclaycard customers, from the summer of 2011, will be able to use their mobiles for contactless payments of up to £15 for goods and services at retailers – by simply waving their handset against a contactless reader.

> “This is the beginning of a revolution in how we pay for things on the high street. It’s a cultural shift that is as important as the launch of the personal credit card or ATMs.”
(Gerry McQuade, Chief Development Officer at Everything Everywhere)

### Supporting financial literacy

Helping people manage their money is at the core of our business, and is an important part of Barclays citizenship strategy. In 2010 we delivered more than 8,500 financial literacy workshops around the world, and through a combination of face-to-face seminars and online content, reached more than half a million people, helping them build the skills and confidence to manage their money effectively, achieve financial independence and build a secure future.

In the UK, Barclays Money Skills is working with key partners to develop a range of projects and tools to help vulnerable young people. For example, we’re working in partnership with Action for Children to benefit more than 2,500 of the hardest to reach young people. A case in point is Sean. Sean is 16 years old and lives in Glasgow. He is currently in the process of moving from a care home into supported living accommodation, where he will gradually be assuming responsibility for paying bills, furnishing his flat and providing meals for himself. Sean said: “… because of what I’ve learnt on the Barclays Money Skills course, I’ve made a spending plan, so I know what cash I have for food, travel, bills and my social life”.

GRB is also delivering financial literacy programmes in a number of other countries including Ghana, Mauritius, Zambia and Egypt. In Botswana, Barclays launched a financial literacy campaign in 2010 with the Baylor’s Teen Club. The Club is an organisation that provides life skills training and counselling to HIV positive adolescents. With Barclays support, the Teen Club is now working in six villages across the country and has partnered with Barclays colleagues to deliver training to 280 HIV positive teens.

***

# Business review: Corporate and Investment Banking

> Our integrated universal banking model allows us to meet the needs of our clients by connecting capabilities from across the Barclays Group.

Our Corporate and Investment Banking business provides clients with the lending, finance, risk management, advice, and transactional payments support that they need to succeed, whatever the economic environment. The strength of our model ensures that we are able to focus on their needs when they need us most.

Barclays Capital is a premier global investment bank operating at the very top of the investment banking industry. In a challenging year, the business increased profit before tax by 2%, and generated a 17% increase in total income by remaining close to its clients.

Barclays Corporate is strengthening its relationship-led core UK business, where significantly reduced impairment and a focus on clients drove a 16% increase in profit before tax. Overall though, Barclays Corporate recorded a loss and we have taken decisive action in Russia and Spain to either exit or refocus operations that are not generating the returns we expect.

Corporate and Investment Banking plays a crucial role in supporting corporate clients to achieve growth and job creation in the real economy; governments to deliver their stability and growth plans; and institutional clients to meet the long-term investment needs of their customers.

The strategic build in key growth areas at Barclays Capital is delivering tangible benefits to clients around the world, alongside the focused execution of robust plans for the future right across the business. Barclays Corporate continues to invest in the people, products and infrastructure to support clients in its core UK market, and strengthen its offering for multi-nationals and large companies in overseas markets.

Our integrated universal banking model allows us to meet the needs of our clients by connecting capabilities from across the Barclays Group, and our focus on bringing clients the best solution continues to underpin our commitment to their success.

Jerry del Missier & Rich Ricci
Co-Chief Executive, Corporate and Investment Banking

### Our promises

| Barclays Capital | 2013 Targets |
| :--- | :--- |
| Strong returns | - c 15% RoE on Basel III basis |
| Income growth | - Additional £2bn in Equities and Investment Banking revenues |
| Cost management | - 60-65% cost: net income ratio |
| **Barclays Corporate** | **2012 Target** |
| Profitability | - Return to aggregate profitability |

***

# What is corporate and investment banking?

Corporate and Investment Banking is about helping corporate, government and institutional clients to finance and grow their operations, manage their risks and invest their capital.

- **Capital raising and financing** – We lend money, and enable companies, banks, cities and countries to raise equity capital and issue debt in the capital markets; to provide cash flow and enable investment in the future. The right type of lending is different for every client: from overdraft facilities and asset-based finance, to rights issues and syndicated loans.
- **Providing opportunities to generate returns** – We support clients, like pension managers and investment funds, in making decisions on where to make their investments and in executing those investments. With our support, they can achieve the returns they need to meet their obligations and satisfy their customers.
- **Risk management** – We can help clients manage many of the risks they face, from foreign exchange and interest rate risk, to the varying price of commodities. This reduces uncertainty and allows clients to focus on their core operations.
- **Strategic and financial advice** – We advise clients on how to manage and expand their businesses. That might be through a merger or an acquisition, or it might be through the best way to manage their balance sheet, capital or cash flow.

### Resolution acquires AXA’s UK Life business
Barclays Capital played multiple roles across all aspects of Resolution’s £2.75bn acquisition of the AXA UK Life Business last June. The success of the deal, and strength of relationships, led to the firm being appointed Joint Corporate Broker to Resolution in November – the third FTSE client and seventh overall Corporate Broking win last year. In order to fund the cash component of the acquisition, Resolution announced a fully underwritten rights issue of approximately £2bn, and agreed a fully underwritten bridge facility of £400m.

Financing and executing the deal saw Barclays Capital hold multiple roles, including Joint Underwriter, Joint Bookrunner and Joint Corporate Broker on the rights issue, Joint Lead Arranger on the bridge facility and Joint Financial Adviser to Resolution on both the rights issue and the acquisition. The bridge facility was also jointly underwritten by Barclays Capital.

In the firm’s first lead role in a significant equity capital raising in Europe, and its first advisory role for Resolution, Barclays Capital demonstrated the strength of teamwork across the firm in delivering seamless capital markets, acquisition financing and advisory capabilities.

### Mayfly Containers expands into overseas markets
Established in 1983 Mayfly is a family-run business based in Derbyshire which manufactures containers used for the deep-sea off-shore oil and gas industries. Barclays Corporate has banked the business since 1985. In 2009, Mayfly identified an opportunity to expand into overseas markets, focusing primarily on China and Brazil. Barclays Corporate was able to assist the company with their expansion strategy by providing foreign exchange expertise, information on rates, and risk management solutions to help protect the business from currency fluctuations.

David Rudge, Finance Director, said: “When we took the decision to expand into overseas markets, Barclays Corporate was able to assist us with our foreign exchange requirements. Our joint venture established in Brazil is proving successful and we continue to expand our operations in the export markets.”

***

# Business review: Barclays Wealth

> We are transforming Barclays Wealth into a premier global wealth manager.

In 2010, we launched a five-year strategy to transform Barclays Wealth and, in our first year, financial results were strong, with total income up by 18% to £1.56bn and profit before tax up by 14% to £163m. Adding back investment expenditure of £112m, we achieved a 92% increase in underlying profitability.

The early stages of 2010 marked a pivotal point for the wealth management industry. After the disruptive events of the financial crisis, we entered a more benign environment, with global wealth assets returning to pre-crisis levels. At Barclays Wealth, conditions were particularly favourable thanks to the strength of our balance sheet and brand and the successful consolidation of our Americas business – which made us a truly global player for the first time.

In this context we launched the ‘Gamma’ programme in March. Gamma is a five-year project to invest £350m in our people, platforms and processes in order to achieve a step change in client experience and a significant improvement to our productive efficiency. We believe we can set a standard for the industry.

At the end of 2010 we are on or ahead of all our target metrics. Client assets grew by 8% over the year to £164bn, and we showed a net increase in banker headcount. We have seen an 18% improvement in the productivity of our relationship managers and 30% in our core High Net Worth business.

2011 will be a challenging year as we take on the next set of Gamma targets. These include material upgrades to our core platforms, an accelerated on-boarding process for clients and a refresh of our banker training and marketing tools. I remain confident that we can meet all of our commitments to our clients, thereby beginning to redefine the landscape of the wealth management industry.

Thomas Kalaris
Chief Executive, Barclays Wealth

### Barclays Wealth enters Japan
In July 2010, Barclays Wealth launched a unique joint venture in Japan with two highly qualified partners. SMBC Barclays Wealth Division brings together the local knowledge and heritage of the Japanese bank Sumitomo Mitsui Banking Corporation (SMBC), with the expert wealth management capabilities of Barclays Wealth, and the platform expertise of Nikko Cordial Securities, a wholly-owned subsidiary of SMBC. In its first six months, SMBC Barclays Wealth Division is running successfully and has received a very promising response from the market.

The need to demonstrate established trust and reputation in Japan has historically been a barrier for foreign firms wanting to enter the market. The success of the Barclays Wealth joint venture is testament to the determination of all three partners in building the right proposition for our Japanese clients.

***

# Business review: Absa

> Aligning Absa more closely with Barclays Africa gives us better opportunities to serve clients across the continent.

As expected, 2010 was another challenging year given a slow, uneven economic recovery both globally and in South Africa. In particular, retail and corporate credit demand and transaction volumes remained muted. 

Nonetheless, Absa managed to report 17% higher profit before tax, while continuing to invest significantly in our strategic growth initiatives. Lower interest rates and our enhanced collections capability improved our retail impairments materially. Moreover, our margin hedging strategy protected net interest income as rates fell to 36-year lows.

Our One Absa strategy is on track. It is enhancing business as usual, improving sustainable growth in target areas and strengthening the core fundamentals underlying our operations. While we believe that our operating environment will remain challenging, we also believe that we have the right strategy to grow the business and generate the returns that will keep us competitive.

As you know, Africa presents a significant opportunity for Barclays and the decision to align Absa more closely with Barclays Africa by executing One Bank in Africa strategy gives us better opportunities to serve clients across the continent, thereby enhancing our joint competitive advantage.

Maria Ramos
Group Chief Executive, Absa Group Limited

### Citizenship – Financial Inclusion
A key component of our strategy is to find innovative and cost effective ways to serve Absa’s existing mass segment customers. As such in 2010 we launched a number of innovative offerings:
- a refocused branch approach called Absa 1234 offering transactional, loan, savings and insurance products;
- a branchless banking approach which includes in-store banking (deposits, withdrawals, balance inquiry, air time purchases) with the merchant providing these services using a point of sale terminal with our In-Store Banking application;
- a remote account opening service for savings and transmission accounts using mobile phone technology; and
- a tap-and-go card product for low value payments.

***

# Citizenship

> Our role is to help improve the lives of our customers. We must provide mortgages, allow businesses to invest and create jobs, protect savings, pay tax, be a good neighbour in the community while also generating positive economic returns for our investors.

Bob Diamond, Chief Executive

Our key areas of focus are contributing to growth and supporting our communities. Underpinning these is a foundation of sound business principles and practice that ensures integrity in the way we do business.

Our Group Executive Committee is responsible for our overall citizenship strategy, and supports the Chief Executive in its implementation. This Committee, along with the Board, uses a robust reporting framework to review progress.

### Contributing to growth
We employ nearly 150,000 people around the world. In 2010, 2,000 new jobs were created and 1,200 graduates were hired in the UK, bringing the total employed in the UK to 65,000. Our global tax contributions amounted to £6.1bn, including £2.8bn paid on behalf of our employees. In addition, we paid more than £8.7bn to suppliers in 37 countries.

In 2010, Barclays provided £43bn of gross new lending in the UK including £7.5bn from the acquisition of Standard Life Bank and assisted more than 106,000 business start-ups, an increase of 12% over 2009. In South Africa, Absa’s Enterprise Development Centres helped almost 5,000 new businesses to start up in 2010.

> In 2010, four out of five Barclays UK business lending application were approved.

We’re helping our customers, clients and other stakeholders invest in ways that contribute to growth tomorrow. We are providing financing solutions to private and public sector clients, facilitating investment in infrastructure, development and the low carbon economy.

### Supporting our communities
In 2010, we committed over £55m to community programmes across 37 countries. Our programmes are driven by the passion and energy of 62,118 colleagues around the world, who volunteered their time or took part in fundraising and regular giving. These efforts benefitted 1.5 million people and supported more than 8,000 organisations.

> In the last five years, Barclays employees have volunteered over one million hours in their local communities and raised more than £75m through our matched fundraising scheme.

Barclays Climate Action Programme 2011-2015 is our direct response to issues concerning the environment and climate change. We are focusing on the areas where we have the greatest potential to make a difference, including:
- Managing our carbon footprint – including a commitment to reduce absolute carbon emissions by 4% by 2013 and creating an African Carbon Fund to supply seed capital to carbon mitigation projects in Africa
- Developing products and services to help enable the transition to a low-carbon economy – including financing and risk-management solutions to enable capital to flow to lower carbon opportunities
- Managing climate change risks – including collaborating with other stakeholders to manage the risks of climate change to our operations, our clients and to society at large.

### Citizenship

| Contributing to growth | Supporting our communities |
| :--- | :--- |
| - Direct contribution, employment and economic value added | - Supporting social infrastructure |
| - Supporting growth today: customers and clients | - Increasing access to financial services |
| - Investing in tomorrow | - Investing in the community |
| | - Building a diverse workforce |
| | - Managing our environmental footprint |
| **The way we do business** | |

***

# Citizenship continued

### Supporting UK SMEs
Barclays Business Support Team identifies and works with customers who are experiencing financial difficulty.

In 2010, 80% of the small and medium sized business customers with whom we agreed turnaround strategies were successfully restored to financial health.

The Business Support Team engages with a number of businesses at the earliest signs of difficulty, facilitating financial and operational advice and creating lending arrangements more suited to the long term needs of the business involved. The credit team undertakes proactive identification of financially stressed customers, with reactive engagement carried out by the Business Support Team working alongside the customer’s relationship manager. This maintains close links and consistency throughout the relationship.

### Investing in our communities
Barclays Spaces for Sports is a global programme that recognises the power of sport to deliver social change.

Since 2004, Barclays has committed £37m towards bringing sustainable sports sites and projects to disadvantaged communities. After launching 200 community sports sites in the UK, the programme was extended globally in 2008.

In 2010, we offered young people excluded from mainstream education across England the chance to join FairPlay, a rugby-based education programme in partnership with the children’s charity Wooden Spoon, the Rugby Football Union and the Education Enterprise Trust. The initiative provides training schemes for more than 2,400 young people in pupil referral units. The scheme also includes classroom sessions where young people are taught how to manage their finances through the Barclays Money Skills programme.

### Financing a low carbon economy
Barclays assists renewable energy firms to access finance from the capital markets and offers advisory services across the sector.

The transition to a low carbon economy requires a range of solutions, including new clean forms of generating energy, clean technologies and infrastructure improvements. Barclays published the Carbon Capital report to provide analysis of this opportunity over the next ten years.

In Ireland, Barclays has supported the expansion of the onshore wind sector and played a strategic financing role in vital energy infrastructure projects. An example of this is our central role in financing EirGrid’s East West Interconnector project. This will allow Ireland to integrate more closely with Western European energy markets and release pressure on the domestic grid while still growing its low carbon generation base.

***

# Citizenship continued

### Our People
#### Global minimum standards
To maintain balance between overall control and effective local decision making we have established global governance frameworks and minimum standards to regulate how we manage and treat our employees around the world. The key areas covered are summarised below.

#### Performance management and compensation
The performance and development process provides employees with the opportunity to have regular discussions with their line managers about their performance and to receive coaching for their personal development. This is typically assessed twice a year and a performance rating agreed. We believe in pay for performance based on the performance of individuals and their businesses.

#### Diversity and inclusion
Barclays operates across the globe and engages with employees across a wealth of diverse and rich cultures. Our mission is to create a truly inclusive environment through ensuring that we treat people fairly and value diversity.

#### Health and safety
Our commitment is to ensure the health, safety and welfare of our employees and to provide and maintain safe working conditions. Good working climates will help our employees to better serve our customers and create value for all our stakeholders.

#### Training
Developing both existing and new employees is key to our future prosperity. We undertake this through formal classroom-based training and informal on-the-job training, education and coaching. Minimum mandatory training is provided to all employees on policies and regulatory responsibilities.

### Headcount by world region – full time equivalent (000s)
- **UK**: 58.1 (2010), 55.6 (2009)
- **Africa and Middle East**: 50.4 (2010), 50.7 (2009)
- **Continental Europe**: 13.6 (2010), 13.6 (2009)
- **Americas**: 11.5 (2010), 12.3 (2009)
- **Asia Pacific**: 13.9 (2010), 12.0 (2009)

### Global employment statistics (%)
- **% of female employees**: 52.0 (2010), 51.1 (2009)
- **% of senior executives who are female**: 16.1 (2010), 15.3 (2009)
- **% of senior managers who are female**: 23.7 (2010), 23.6 (2009)
- **% of employees working part-time**: 8.2 (2010), 5.2 (2009)
- **Turnover rate**: 16.9 (2010), 16.9 (2009)
- **Resignation rate**: 10.5 (2010), 9.9 (2009)
- **Sickness absence rate**: 3.0 (2010), 2.3 (2009)

### Total tax contribution
Barclays role as a corporate citizen remained a key priority in 2010 and an important aspect of this was the tax contribution made to governments in the countries in which we operate.

In 2010 we made global tax payments of £6,149m, made up of £3,138m of taxes borne by Barclays and £3,011m of taxes collected from others on behalf of governments, principally being employee income taxes which arise through Barclays economic activity. Barclays paid corporate income tax of £1,458m in 2010.

The total tax paid to the UK Exchequer in 2010 was £2,827m, made up of £1,381m of taxes borne by Barclays and £1,446m of taxes collected on behalf of governments which includes £1,347m of tax payments made on behalf of staff.

#### Tax paid by region
| | Taxes borne (£m) | Taxes collected$^a$ (£m) | Total (£m) |
| :--- | :--- | :--- | :--- |
| 1 UK | 1,381 | 1,446 | 2,827 |
| 2 Americas | 506 | 932 | 1,438 |
| 3 Europe (excluding UK) | 721 | 225 | 946 |
| 4 Africa and Middle East | 324 | 325 | 649 |
| 5 Asia Pacific | 206 | 83 | 289 |
| **Total** | 3,138 | 3,011 | 6,149 |

#### Tax paid by type
| | Total £m |
| :--- | :--- |
| 1 Taxes collected$^a$ | 3,011 |
| 2 Corporate tax paid | 1,458 |
| 3 Employer NIC/social security payments | 736 |
| 4 Irrecoverable VAT paid | 441 |
| 5 Bank payroll tax | 437 |
| 6 Other | 66 |
| **Total** | 6,149 |

Note:
a Taxes collected on behalf of governments, including income tax and social security payments for employees (of which £1,347m relates to UK employees).

***

# Key performance indicators

## Capital KPIs

### Core Tier 1 ratio
- **Definition**: Capital requirements are part of the regulatory framework governing how banks and depository institutions are managed. Capital ratios express a bank’s capital as a percentage of its risk weighted assets. Both Core Tier 1 and Tier 1 capital resources are defined by the UK FSA. Core Tier 1 is broadly tangible shareholders’ funds less certain capital deductions from Tier 1.
- **Why it’s important to the business and management**: The Group’s capital management activities seek to maximise shareholders’ value by prudently optimising the level and mix of its capital resources. The Group’s capital management objectives are to maintain sufficient capital resources to: ensure the financial holding company is well capitalised relative to the minimum regulatory capital requirements set by the UK FSA and US Federal Reserve; ensure locally regulated subsidiaries can meet their minimum regulatory capital requirements; support the Group’s risk appetite and economic capital requirements; and support the Group’s credit rating. During 2010, the Group’s Core Tier 1 ratio improved 0.8% to 10.8%, largely through £3.6bn of attributable profits, demonstrating the Group’s ability to generate capital organically.
- **Performance**: 10 – 10.8%, 09 – 10.0%, 08 – 5.6%

### Adjusted gross leverage
- **Definition**: Adjusted gross leverage is defined as the multiple of adjusted total tangible assets over total qualifying Tier 1 capital. Adjusted total tangible assets are total assets less derivative counterparty netting, assets under management on the balance sheet, settlement balances, goodwill and intangible assets. Tier 1 capital is defined by the UK FSA.
- **Why it’s important to the business and management**: Barclays believes that there will be more capital and less leverage in the banking system and that lower levels of leverage are regarded as a key measure of stability going forward. This is consistent with the views of our regulators and investors. In 2010, adjusted gross leverage remained stable at 20 times principally as a result of a £3.9 billion increase in Tier 1 Capital to £53.5 billion offset by the impact of a £84.6 billion increase in adjusted total tangible assets.
- **Performance**: 10 – 20x, 09 – 20x, 08 – 28x

## Returns KPIs

### Return on average shareholders’ equity (RoE)
- **Definition**: Calculated as profit after tax attributable to equity holders of the parent divided by the average shareholders’ equity for the year. Shareholders’ equity is made up of share capital, retained earnings and other reserves.
- **Why it’s important to the business and management**: These measures indicate the returns generated by the management of business based on the allocation of shareholders’ equity to each component business. Achieving target returns demonstrates the organisation’s ability to execute its strategy and align interests of management and shareholders. We allocate capital to business units based on an assumed Core Tier 1 ratio of 9% and we retain excess capital at Group Centre as a buffer.
- **Performance**: 10 – 7.2%, 09 – 6.7%, 08 – 14.3%

### Return on average tangible equity (RoTE)
- **Definition**: Calculated as profit after tax attributable to equity holders of the parent divided by average shareholders’ equity for the year, excluding non-controlling interests, goodwill and intangible assets.
- **Why it’s important to the business and management**: Returns lie at the heart of our capital allocation. All of our businesses except Western Europe Retail Banking and Barclays Corporate had returns on tangible equity in excess of the 2010 cost of equity of 12.5%. By 2013 the Group has committed to a return on equity of 13% and a return on tangible equity of 15%.
- **Performance**: 10 – 8.7%, 09 – 9.0%, 08 – 21.3%

***

# Key performance indicators continued

### Profit before tax
- **Definition**: Profit before tax and adjusted profit before tax are the two primary profitability measures used to assess performance. Profit before tax represents total income less impairment charges and operating expenses. Adjusted profit before tax represents profit before tax adjusted for movements on own credit, gains on acquisitions and disposals, and gains on debt buy-backs, for comparative purposes.
- **Why it’s important to the business and management**: Profit before tax is a key indicator of financial performance to many of our stakeholders. Adjusted profit before tax increased 11% to £5,464m from £4,942m.
- **Performance**: Profit before tax (10 – £6,065m, 09 – £4,585m, 08 – £5,136m); Adjusted profit before tax (10 – £5,464m, 09 – £4,942m, 08 – £716m)

### Cost: income ratio
- **Definition**: Group cost: income ratio is defined as operating expenses compared to total income net of insurance claims.
- **Why it’s important to the business and management**: This is a measure management uses to assess the productivity of the business operations. Restructuring the cost base is a key execution priority for management and includes a review of all categories of discretionary spending and an analysis of how we can run the business to ensure that costs increase at a slower rate than income. We have set a target is to take £1bn off our run-rate cost base on a full year basis by 2013.
- **Performance**: 10 – 64%, 09 – 57%, 08 – 63%

### Loan loss rate
- **Definition**: The loan loss rate represents the impairment charge on loans and advances as a proportion of the period end balances.
- **Why it’s important to the business and management**: The granting of credit is one of Barclays major sources of income and its most significant risk. The loan loss rate is an indicator of the cost of granting credit. During 2010 impairment continued to improve across all our businesses with one exception, the corporate portfolio in Spain, resulting in a loan loss rate of 118bps compared to 156bps reported in 2009.
- **Performance**: 10 – 118 bps, 09 – 156 bps, 08 – 95 bps

### Dividend
- **Definition**: It is the Group’s policy to declare and pay dividends on a quarterly basis. In a normal year there will be three equal payments in June, September and December and a final variable payment in March.
- **Why it’s important to the business and management**: The ability to pay dividends demonstrates the financial strength of the Group. Whilst recognising the market’s desire for us to maintain strong capital ratios, in light of the regulatory and economic uncertainty, we have taken a prudent approach of prioritising capital retention and significantly reducing the distribution through dividends from historical levels of 50% whilst seeking to ensure that pay-outs also increase progressively from their low point in 2009.
- **Performance**: 10 – 5.5p, 09 – 2.5p, 08 – 11.5p

***

# Key performance indicators continued

## Income growth KPIs

### Total income
- **Definition**: Defined as total income net of insurance claims.
- **Why it’s important to the business and management**: Total income is a key indicator of financial performance to many of our stakeholders and income growth a key execution priority for Barclays management. Group total income increased 8% to £31.4 billion.
- **Performance**: 10 – £31,440m, 09 – £29,123m, 08 – £21,199m

### Income by geography
- **Definition**: Defined as total income net of insurance claims generated in distinct geographic segments. Geographic segmental analysis is based on customer location and the definition of the countries within each region are provided in the glossary.
- **Why it’s important to the business and management**: The goal of increasing the international diversification of our income helps to reduce risk by providing exposure to different economic cycles and is demonstrated by our ratio of non-UK to UK business income.

| Geographic split of income | 2010 (%) | 2009 (%) | 2008 (%) |
| :--- | :--- | :--- | :--- |
| UK & Ireland | 40 | 45 | 57 |
| European Region | 15 | 15 | 19 |
| Americas | 25 | 22 | 0 |
| Africa | 15 | 14 | 17 |
| Asia | 5 | 4 | 7 |

## Citizenship KPIs

### Gross new lending to UK households and businesses
- **Definition**: Defined as lending to UK households and those businesses with UK-based activities.
- **Why it’s important to the business and management**: We have remained ‘open for business’ during the economic downturn, and are focused on lending responsibly to our customers and clients around the world. In 2009, we committed to make an additional £11 billion of credit available to the UK economy, and by the end of 2009, we had lent an additional £35 billion to UK households and businesses. Supporting customers in difficulty has never been more critical, but providing access to credit must be based on the ability to repay. We increased our lending across the UK to £43 billion in 2010, including £7.5 billion arising from the acquisition of Standard Life Bank. We see this as an important performance metric and have formally measured UK gross lending since 2009.
- **Performance**: 10 – £43bn, 09 – £35bn, 08 – n/a

### Global investment in our communities
- **Definition**: Defined as Barclays total contribution to supporting the communities where we operate.
- **Why it’s important to the business and management**: The success and competitiveness of a business and the extent to which it contributes to and is integrated in the communities in which it operates are closely related. We are committed to maintaining investment in our communities for the long-term both in good times and in bad. This performance metric demonstrates the consistency of our commitment over time.
- **Performance**: 10 – £55.3m, 09 – £54.9m, 08 – £52.2m

### Colleagues involved in volunteering, regular giving and fundraising initiatives
- **Definition**: Defined as the total number of Barclays employees taking part in volunteering, giving or fundraising activities.
- **Why it’s important to the business and management**: Barclays community investment programme aims to engage and support colleagues around the world to get involved with our main partnerships, as well as the local causes they care about. Harnessing their energy, time and skills delivers real benefit to local communities, to their own personal development and to their engagement with Barclays.
- **Performance**: 10 – 62,000, 09 – 58,000, 08 – 57,000

***

# Key performance indicators continued

### Citizenship KPIs continued

### Group Employee Opinion Survey (EOS) – Proud to be Barclays
- **Definition**: Employee opinions surveys are used across the organisation to understand our employees’ views and prioritise management actions in order to meet employee needs. This KPI is a calibration of different survey scores across Barclays for a question measuring sense of pride in being associated with or working for Barclays. The average scores for each year are given.
- **Why it’s important to the business and management**: Understanding levels of employee engagement and sense of commitment to Barclays is important as there is a strong correlation between these factors and our employees’ commitment to serving the needs of our customers and clients.
- **Performance**: 10 – 83%, 09 – 81%, 08 – 81%

### Percentage of senior managers who are female
- **Definition**: The number of female colleagues who are working across all Barclays businesses at the senior management level as a percentage of the total senior manager population.
- **Why it’s important to the business and management**: Diversity is important to Barclays as we believe that only through access to the most diverse pool of talent will we recruit and retain the most talented individuals to serve our customers and clients. The number of females at the senior management level has remained flat demonstrating that there is still work to be done to increase the number of women reaching and retaining roles at this level of management.
- **Performance**: 10 – 24%, 09 – 24%, 08 – 25%

### Previously reported KPIs:
KPIs are updated periodically as our strategy and execution priorities evolve. Measures no longer identified as KPIs that were reported in the prior year are as follows:

| Measures | 2010 | 2009 | 2008 |
| :--- | :--- | :--- | :--- |
| Total shareholder return$^a$ | 1st quartile | 1st quartile | 2nd quartile |
| Economic (loss)/profit | (£2,488m) | (£1,890m) | £1,173m |
| Tier 1 ratio | 13.5% | 13.0% | 8.6% |
| Loan funding ratio | 77% | 81% | 93% |
| Average term of unsecured liabilities | 30 months | 26 months | 14 months |
| UK Retail Banking customer satisfaction | 64.0% | 62.5% | n/a |
| Barclaycard International – number of customers | 10.5m | 10.8m | 11.8m |
| Number of distribution outlets outside the UK | 2,906 | 3,603 | 3,158 |
| Proportion of Global Retail and Commercial Banking international income | Replaced by income by geography following Group reorganisation | | |
| Net lending in Barclays Commercial Bank | Replaced by Gross new lending to UK households and businesses | | |

Note:
a 2010 peer group comprises: Bank of America, BBVA, BNP Paribas, Credit Suisse, Deutsche Bank, HSBC, JP Morgan, Morgan Stanley, Santander, Société Générale and UniCredit. 2009 and 2008 peer group includes Citigroup, Lloyds Banking Group, Royal Bank of Scotland and UBS, but excludes Bank of America, Credit Suisse, Morgan Stanley and Société Générale.

***

# Financial review: Consolidated summary income statement

| For the year ended 31st December | 2010 (£m) | 2009 (£m) | 2008 (£m) | 2007 (£m) | 2006 (£m) |
| :--- | :--- | :--- | :--- | :--- | :--- |
| **Continuing operations** | | | | | |
| Net interest income | 12,523 | 11,918 | 11,469 | 9,598 | 9,133 |
| Non-interest income | 19,681 | 18,036 | 9,967 | 11,938 | 11,372 |
| Net claims and benefits incurred on insurance contracts | (764) | (831) | (237) | (492) | (575) |
| **Total income net of insurance claims** | 31,440 | 29,123 | 21,199 | 21,044 | 19,930 |
| Impairment charges and other credit provisions | (5,672) | (8,071) | (5,419) | (2,795) | (2,154) |
| Operating expenses | (19,971) | (16,715) | (13,391) | (12,096) | (11,723) |
| Share of post-tax results of associates and joint ventures | 58 | 34 | 14 | 42 | 46 |
| Profit on disposals and gain on acquisitions | 210 | 214 | 2,733 | 28 | 323 |
| **Profit before tax** | 6,065 | 4,585 | 5,136 | 6,223 | 6,422 |
| Tax | (1,516) | (1,074) | (453) | (1,699) | (1,611) |
| **Profit after tax from continuing operations** | 4,549 | 3,511 | 4,683 | 4,524 | 4,811 |
| Profit for the year from discontinued operations, including gain on disposal | – | 6,777 | 604 | 571 | 384 |
| **Net profit for the year** | 4,549 | 10,288 | 5,287 | 5,095 | 5,195 |
| Profit attributable to equity holders of the Parent | 3,564 | 9,393 | 4,382 | 4,417 | 4,571 |
| Profit attributable to non-controlling interests | 985 | 895 | 905 | 678 | 624 |
| | 4,549 | 10,288 | 5,287 | 5,095 | 5,195 |
| **Selected financial statistics** | | | | | |
| Basic earnings per share | 30.4p | 86.2p | 59.3p | 68.9p | 71.9p |
| Basic earnings per share from continuing operations | 30.4p | 24.1p | 51.4p | 60.6p | 66.6p |
| Diluted earnings per share | 28.5p | 81.6p | 57.5p | 66.9p | 69.8p |
| Dividends per ordinary share | 5.5p | 2.5p | 11.5p | 34.0p | 31.0p |
| Dividend payout ratio | 18.1% | 2.9% | 19.4% | 49.3% | 43.1% |
| Profit attributable to the equity holders of the Parent as a percentage of: | | | | | |
| – average shareholders’ equity | 7.2% | 23.8% | 16.5% | 20.3% | 24.7% |
| – average total assets | 0.2% | 0.5% | 0.2% | 0.3% | 0.4% |
| Average United States Dollar exchange rate$^a$ | 1.55 | 1.57 | 1.86 | 2.00 | 1.84 |
| Average Euro exchange rate$^a$ | 1.17 | 1.12 | 1.26 | 1.46 | 1.47 |
| Average Rand exchange rate$^a$ | 11.31 | 13.14 | 15.17 | 14.11 | 12.47 |

Note:
a The average rates are derived from daily spot rates during the year used to convert foreign currency transactions into Sterling for accounting purposes.

***

# Financial review: Income statement commentary

### 2010
Barclays delivered profit before tax of £6,065m in 2010, an increase of 32% (2009: £4,585m). Excluding movements on own credit, gains on debt buy-backs and gains on acquisitions and disposals, Group profit before tax increased 11% to £5,464m (2009: £4,942m).

Income increased 8% to £31,440m (2009: £29,123m). Barclays Capital reported a 17% increase in total income to £13,600m (2009: £11,625m). This reflected a substantial reduction in losses taken through income relating to credit market exposures which fell to £124m (2009: £4,417m) and a gain relating to own credit of £391m (2009: loss of £1,820m). Top-line income at Barclays Capital, which excludes these items, declined 25% to £13,333m relative to the exceptionally strong levels seen in 2009. Overall activity levels improved towards the end of the year, with top-line income in the fourth quarter of 2010 increasing 20% on the third quarter to £3,380m. Global Retail Banking income increased 1% to £10,507m, with good growth in UK Retail Banking and Barclays Africa, with income flat in Barclaycard, and a decline in Western Europe Retail Banking. Income was up 14% in Absa. Barclays Corporate reported a decrease in income of 7% and income was up 18% in Barclays Wealth.

Impairment charges and other credit provisions improved 30% to £5,672m (2009: £8,071m). This was after an increase of £630m in impairment on the Spanish loan book in Barclays Corporate – Continental Europe and impairment of £532m relating to the Protium loan in Barclays Capital. All businesses other than Barclays Corporate reported improvements in impairment charges. Overall impairment charges as a proportion of Group loans and advances as at 31st December 2010 was 118bps, compared to 156bps for 2009.

As a result, net income for the Group after impairment charges increased 22% to £25,768m (2009: £21,052m).

Operating expenses increased £3,256m to £19,971m, a 19% rise compared to the 22% growth in net income. Costs at Barclays Capital increased £1,703m, largely reflecting investment in the business across sales, origination, trading and research functions, investment in technology and infrastructure and increased charges relating to prior year deferrals. Across the Group, restructuring charges totalled £330m (2009: £87m) particularly in Barclays Corporate (£119m) and Barclays Capital (£90m) focusing on delivering future cost and business efficiencies. Goodwill of £243m was written off in Barclays Corporate – New Markets to reflect impairment to the carrying value of Barclays Bank Russia business as our activities there are refocused. As a result, the Group’s cost: income ratio increased to 64% (2009: 57%). The cost: net income ratio improved from 79% to 78%, reflecting the reduced impairment charges compared with 2009.

Staff costs increased 20% to £11.9bn (2009: £9.9bn), of which performance costs amounted to £3.5bn (2009: £2.8bn). Within this total, 2010 charges relating to prior year deferrals increased by £0.7bn relative to 2009. The Group 2010 performance awards (which exclude charges relating to prior year deferrals but include current year awards vesting in future years) were down 7% on 2009 at £3.4bn. Within this, the Barclays Capital 2010 performance awards were down 12% at £2.6bn, compared to an increase in headcount of 7%.

### 2009
Barclays delivered profit before tax of £4,585m in 2009 (2008: £5,136m), a decrease of 11% on 2008, after absorbing £6,086m in write downs on credit market exposures (including impairment of £1,669m), other Group impairment of £6,402m and a charge of £1,820m relating to the tightening of own credit spreads. Profit also included £1,249m of gains on debt buy-backs and extinguishment.

Total income net of insurance claims grew 37% to £29,123m, with particularly strong growth in Barclays Capital. Within Global Retail Banking, Barclaycard and Western Europe Retail Banking also reported good income growth. The aggregate revenue performance of the Global Retail Banking businesses was, however, affected by the impact of margin compression on deposit income as a result of the very low absolute levels of interest rates. Barclays Capital income was up 122% compared to 2008. Top-line income rose by £8,004m reflecting the successful integration of the acquired Lehman Brothers North American businesses, buoyant market conditions observed across most financial markets in the first half of 2009 and a good relative performance in the second half of 2009 despite weaker markets. Income in Barclays Capital was impacted by write downs of £4,417m (2008: £6,290m) relating to credit market exposures held in its trading books and by a charge of £1,820m (2008: gain of £1,663m) relating to own credit.

Impairment charges against loans and advances, available for sale assets and reverse repurchase agreements increased 49% to £8,071m, reflecting deteriorating economic conditions in 2009, portfolio maturation and currency movements. The impairment charge against credit market exposures included within this total reduced 5% to £1,669m. Impairment charges as a percentage of Group loans and advances as at 31st December 2009 increased to 156bps from 95bps, or 135bps on constant 2008 year end balance sheet amounts and average foreign exchange rates.

Total operating expenses increased 25% to £16,715m, but by 12% less than the rate of increase in Group total income. Expenses in GRB were well controlled, with the cost:income ratio improving from 54% to 53%. Operating expenses in Barclays Capital increased by £2,818m to £6,592m reflecting the inclusion of the acquired Lehman Brothers North American business. The Group total cost:income ratio improved from 63% to 57%. At Barclays Capital the compensation:income ratio improved from 44% to 38%.

***

# Financial review: Income statement commentary continued

### Net interest income
#### 2010
Group net interest income increased £605m to £12,523m (2009: £11,918m) and includes the impact of the acquisitions of Standard Life Bank and the Portuguese and Italian credit card businesses of Citigroup in Western Europe Retail Banking, and currency translation gains in Absa. These impacts have been partly off-set by the continued effects of liability margin compression being felt across the Group.

Group net interest income includes the impact of economic equity structural hedges used to manage the volatility in earnings on the Group’s equity. The impact is allocated to the businesses as part of the share of the interest income benefit on Group equity through net interest income. Equity structural hedges generated a gain of £1,788m in 2010 (2009: gain £1,162m) including net gains on disposal of gilts of approximately £500m.

#### 2009
Group net interest income increased £449m to £11,918m (2008: £11,469m) reflecting growth in average customer balances primarily in Barclaycard and Western Europe Retail Banking, and net funding costs and hedging recognised in Head Office Functions and Other Operations.

Group net interest income includes the impact of structural hedges which function to reduce the impact of the volatility of short-term interest rate movements on equity and customer balances that do not re-price with market rates. In total, equity structural hedges generated a gain of £1,162m (2008: £21m gain).

Further discussion of margins is included in the analysis of results by business.

### Non-interest income
#### 2010
Net fee and commission income increased £453m to £8,871m (2009: £8,418m). Banking and credit related fees and commissions increased £485m to £10,063m (2009: £9,578m), primarily due to Barclays Capital performance across Investment Banking and Equities.

Net trading income increased £1,077m to £8,078m (2009: £7,001m). The majority of the Group’s trading income arises in Barclays Capital. Trading income decreased 14% to £7,017m (2009: £8,139m) reflecting a more challenging market environment compared with the very strong prior year performance. The impact from difficult trading conditions was more than offset by a £4,293m reduction in credit market fair value losses to £124m (2009: £4,417m) and a gain on own credit of £391m (2009: £1,820m loss).

Net investment income increased £1,421m to £1,477m (2009: £56m) driven by the disposal of Gilts held as part of the economic structural hedge portfolio together with realised gains on principal investments, the disposal of available for sale assets and a reduction in fair value losses held at fair value within Barclays Capital.

Net premiums from insurance contracts remained stable at £1,137m (2009: £1,172m).

Gains on debt buy-backs and extinguishments were £nil (2009: £1,249m).

| Net interest income | 2010 (£m) | 2009 (£m) | 2008 (£m) |
| :--- | :--- | :--- | :--- |
| Cash and balances with central banks | 271 | 131 | 174 |
| Available for sale investments | 1,483 | 1,937 | 2,355 |
| Loans and advances to banks | 440 | 513 | 1,267 |
| Loans and advances to customers | 17,677 | 18,456 | 23,754 |
| Other interest income | 164 | 199 | 460 |
| **Interest income** | 20,035 | 21,236 | 28,010 |
| Deposits from banks | (370) | (634) | (2,189) |
| Customer accounts | (1,410) | (2,716) | (6,697) |
| Debt securities in issue | (3,632) | (3,889) | (5,910) |
| Subordinated liabilities | (1,778) | (1,718) | (1,349) |
| Other interest expense | (322) | (361) | (396) |
| **Interest expense** | (7,512) | (9,318) | (16,541) |
| **Net interest income** | 12,523 | 11,918 | 11,469 |

| Non-interest income | 2010 (£m) | 2009 (£m) | 2008 (£m) |
| :--- | :--- | :--- | :--- |
| Net fee and commission income | 8,871 | 8,418 | 6,491 |
| Net trading income | 8,078 | 7,001 | 1,339 |
| Net investment income | 1,477 | 56 | 680 |
| Net premiums from insurance contracts | 1,137 | 1,172 | 1,090 |
| Gains on debt buy-backs and extinguishments | – | 1,249 | 24 |
| Other income | 118 | 140 | 343 |
| **Non-interest income** | 19,681 | 18,036 | 9,967 |

| Net fee and commission income | 2010 (£m) | 2009 (£m) | 2008 (£m) |
| :--- | :--- | :--- | :--- |
| Banking and credit related fees and commissions | 10,063 | 9,578 | 7,208 |
| Brokerage fees | 77 | 88 | 56 |
| Investment management fees | 79 | 133 | 120 |
| Foreign exchange commission | 149 | 147 | 189 |
| **Fee and commission income** | 10,368 | 9,946 | 7,573 |
| Fee and commission expense | (1,497) | (1,528) | (1,082) |
| **Net fee and commission income** | 8,871 | 8,418 | 6,491 |

***

# Financial review: Income statement commentary continued

### 2009
Net fee and commission income increased £1,927m to £8,418m (2008: £6,491m). Banking and credit related fees and commissions increased £2,370m to £9,578m (2008: £7,208m), primarily due to Barclays Capital strong performance in Equities and Investment Banking.

Net trading income increased £5,662m to £7,001m (2008: £1,339m). The majority of the Group’s trading income arises in Barclays Capital. Fixed Income, Currency and Commodities drove the very strong increase in trading income as the expansion of the business and client flows more than absorbed gross credit market losses of £4,417m (2008: £6,290m) and losses relating to own credit of £1,820m (2008: £1,663m gain).

Net investment income decreased £624m to £56m (2008: £680m) driven by realised losses in commercial real estate equity investments and losses in the principal investments business, partially offset by gains on disposal of available for sale investments within Barclays Capital.

Net premiums from insurance contracts increased £82m to £1,172m (2008: £1,090m) primarily reflecting expansion in Western Europe Retail Banking and Absa, partially offset by the impact of the sale of the closed life assurance business in the second half of 2008.

Gains on debt buy-backs and extinguishments includes £1,170m gains relating to Upper Tier 2 perpetual debt and its corresponding hedge and £85m (2008: £24m) from the repurchase of securitised debt issued by Barclays Corporate.

### Impairment charges and other credit provisions
#### 2010
Impairment charges on loans and advances fell 24% to £5,625m (2009: £7,358m), reflecting improving credit conditions in the main sectors and geographies in which Barclays lends, which led to lower charges across the majority of businesses. The largest reduction was in the wholesale portfolios, due to lower charges against credit market exposures and fewer large single name charges. This reduction was partially offset by the impact of deteriorating credit conditions in the Spanish property and construction sectors which resulted in an increase of £630m in impairment against the Barclays Corporate loan book in Spain, and £532m impairment relating to the Protium loan in Barclays Capital. In the retail portfolios, impairment performance improved as delinquency rates fell across Barclays businesses, most notably the UK, US, Spanish, Indian, and African portfolios.

As a result of this fall in impairment and the 1% rise in loans and advances, the loan loss rate decreased to 118bps (2009: 156bps).

The impairment charges against available for sale assets and reverse repurchase agreements fell by 93% to £47m (2009: £713m), principally driven by lower impairment against credit market exposures.

#### 2009
Impairment charges on loans and advances and other credit provisions increased £2,445m to £7,358m (2008: £4,913m). The increase was primarily due to economic deterioration and portfolio maturation, currency movements and methodology enhancements, partially offset by a contraction in loan balances.

| Net Trading Income | 2010 (£m) | 2009 (£m) | 2008 (£m) |
| :--- | :--- | :--- | :--- |
| Trading income/(loss) | 7,017 | 8,139 | (1,596) |
| Gain on foreign exchange dealings | 670 | 682 | 1,272 |
| Own Credit gain/(charge) | 391 | (1,820) | 1,663 |
| **Net trading income** | 8,078 | 7,001 | 1,339 |

| Net investment income | 2010 (£m) | 2009 (£m) | 2008 (£m) |
| :--- | :--- | :--- | :--- |
| Net gain from disposal of available for sale assets | 1,027 | 349 | 212 |
| Dividend income | 116 | 6 | 196 |
| Net gain/(loss) from financial instruments designated at fair value | 274 | (208) | 33 |
| Other net investment income/(losses) | 60 | (91) | 239 |
| **Net investment income** | 1,477 | 56 | 680 |

| Impairment charges and other credit provisions | 2010 (£m) | 2009 (£m) | 2008 (£m) |
| :--- | :--- | :--- | :--- |
| Impairment charges on loans and advances | | | |
| – New and increased impairment allowances | 6,939 | 8,111 | 5,116 |
| – Releases | (1,189) | (631) | (358) |
| – Recoveries | (201) | (150) | (174) |
| **Impairment charges on loans and advances** | 5,549 | 7,330 | 4,584 |
| Charge in respect of provision for undrawn contractually committed facilities and guarantees provided | 76 | 28 | 329 |
| **Impairment charges on loans and advances and other credit provisions** | 5,625 | 7,358 | 4,913 |
| Impairment charges/(writebacks) on reverse repurchase agreements | (4) | 43 | 124 |
| Impairment charges on available for sale assets | 51 | 670 | 382 |
| **Impairment charges and other credit provisions** | 5,672 | 8,071 | 5,419 |

***

# Financial review: Income statement commentary continued

As a result of this increase in impairment and the fall in loans and advances, the impairment charges as a percentage of period end Group total loans and advances increased to 156bps (2008: 95bps).

The impairment charges against available for sale assets and reverse repurchase agreements increased £207m to £713m (2008: £506m), driven by impairment against credit market exposures.

### Operating expenses
#### 2010
Operating expenses increased 19% to £19,971m (2009: £16,715m) driven by increases in staff costs, administration and general expenses and impairment of goodwill.

The impairment of goodwill reflects the write off of the goodwill relating to Barclays Bank Russia of £243m as our activities there are refocused.

#### 2009
Operating expenses increased 25% to £16,715m (2008: £13,391m). The increase was driven by a 38% increase in staff costs to £9,948m (2008: £7,204m).

Amortisation of intangibles increased £171m to £447m (2008: £276m) primarily related to the intangible assets arising from the acquisition of the Lehman Brothers North American businesses.

### Staff costs
#### 2010
Staff costs increased 20% to £11,916m (2009: £9,948m). This was driven by a 13% increase in salaries and accrued performance costs and a £574m increase in share based payments. These increases are primarily due to increased charges relating to prior year awards, the continued build-out in Equities and Investment Banking at Barclays Capital and strategic growth initiatives at Barclays Wealth.

The UK Government applied a bank payroll tax of 50% to all discretionary bonuses over £25,000 awarded to UK bank employees between 9th December 2009 and 5th April 2010. The total bank payroll tax paid was £437m, of which £225m was recognised in 2009 in respect of 2009 cash awards and certain prior year deferrals distributed during the taxable period. For 2010 a charge of £96m has been recognised in relation to prior year deferrals, with the remaining £116m recognised over the period 2011 to 2013.

The defined benefit post retirement charge increased by £246m reflecting the non-recurrence of the benefit of the £371m one-off credit arising on closure of the final salary scheme in 2009 offset by the credit of £250m resulting from amendments to the treatment of minimum defined benefits and £54m relating to the Group’s recognition of a surplus in Absa, as well as favourable investment returns over the period.

| Operating expenses | 2010 (£m) | 2009 (£m) | 2008 (£m) |
| :--- | :--- | :--- | :--- |
| Staff costs | 11,916 | 9,948 | 7,204 |
| Administration and general expenses | 6,585 | 5,560 | 5,193 |
| Depreciation | 790 | 759 | 606 |
| Amortisation of intangible assets | 437 | 447 | 276 |
| Impairment of goodwill | 243 | 1 | 112 |
| **Operating expenses** | 19,971 | 16,715 | 13,391 |

| Staff costs | 2010 (£m) | 2009 (£m) | 2008 (£m) |
| :--- | :--- | :--- | :--- |
| Salaries and accrued performance costs | 8,809 | 7,795 | 5,562 |
| Share based payments | 860 | 286 | 225 |
| Social security costs | 719 | 606 | 444 |
| Bank payroll tax | 96 | 225 | – |
| Post-retirement benefits | | | |
| – defined contribution plans | 297 | 224 | 221 |
| – defined benefit plans | 213 | (33) | 89 |
| – other post-retirement benefits | 18 | 16 | 1 |
| Other | 904 | 829 | 662 |
| **Staff costs** | 11,916 | 9,948 | 7,204 |

***

# Financial review: Income statement commentary continued

### 2009
Staff costs increased 38% to £9,948m (2008: £7,204m) driven by a 40% increase in salaries and accrued performance costs, primarily in Barclays Capital, reflecting the inclusion of the acquired Lehman Brothers North American businesses and associated net increase of 7,000 employees in September 2008.

For 2009, £190m of bank payroll tax costs were included within Other Staff Costs in respect of 2009 cash awards. A further provision of £35m was also included in Other Staff Costs in respect of certain prior year awards being distributed during the tax window.

Defined benefit plan pension costs decreased £122m to £33m credit (2008: cost of £89m) primarily due to the UK Retirement Fund whose charges decreased as a result of a one-off credit of £371m from the closure of the final salary scheme to existing members.

### Staff numbers
#### 2010
Total Group permanent and fixed term contract staff comprised 58,100 (2009: 55,700) in the UK and 89,400 (2009: 88,500) internationally.

Staff numbers have increased by 1,900 to 67,900 (2009: 66,000) for Global Retail Banking largely due to the acquisition of Standard Life Bank, the build-out of Barclays Shared Services in India, the insourcing of operations and the further international development of technology infrastructure.

Barclays Capital staff numbers increased 1,600 to 24,800 (2009: 23,200) as a result of investment in sales, origination, trading and research activities. Barclays Corporate staff numbers decreased 1,000 to 11,900 (2009: 12,900) primarily reflecting restructuring in New Markets.

#### 2009
Total Group permanent and fixed-term contract staff comprised 55,700 (2008: 59,600) in the UK and 88,500 (2008: 93,200) internationally.

Global Retail Banking number of employees decreased by 3,900 to 66,000 (2008: 69,900), reflecting active cost management and restructuring in Spain and Africa, partially offset by increases in Portugal and Italy to support the expansion of the network in these countries. Absa number of employees decreased 2,500 to 33,200 (2008: 35,700), reflecting restructuring and a freeze on recruitment.

Barclays Capital number of employees increased 100 to 23,200 (2008: 23,100) as a net reduction in the first half of the year was offset by strategic growth in the business and the annual graduate intake.

Barclays Corporate number of employees decreased 1,900 to 12,900 (2008: 14,800) reflecting tightly managed costs, partly offset by the expansion of risk and offshore support operations. Barclays Wealth number of employees decreased 500 to 7,400 (2008: 7,900) reflecting active cost management, including efficiency savings in non-client facing areas.

| Staff numbers (full time equivalent) As at 31st December | 2010 | 2009 | 2008 |
| :--- | :--- | :--- | :--- |
| UK Retail Banking | 34,700 | 31,900 | 33,800 |
| Barclaycard | 9,900 | 10,100 | 10,300 |
| Western Europe Retail Banking | 9,400 | 9,600 | 9,300 |
| Barclays Africa | 13,900 | 14,400 | 16,500 |
| Barclays Capital | 24,800 | 23,200 | 23,100 |
| Barclays Corporate | 11,900 | 12,900 | 14,800 |
| Wealth | 7,700 | 7,400 | 7,900 |
| Absa | 33,700 | 33,200 | 35,700 |
| Head Office Functions and Other Operations | 1,500 | 1,500 | 1,400 |
| **Total Group permanent and fixed-term contract staff worldwide$^a$** | 147,500 | 144,200 | 152,800 |

Note:
a Excludes 2,400 employees (2009: 2,500; 2008: Nil) of consolidated entities engaged in activities that are not closely related to our principal businesses.

***

# Financial review: Income statement commentary continued

### Administration and general expenses
#### 2010
Administration and general expenses increased £1,025m to £6,585m (2009: £5,560m). The increase is principally due to greater regulatory related costs across the Group (including a settlement in resolution of the investigation into Barclays compliance with US economic sanctions), investment in technology and infrastructure, the acquisitions of Standard Life Bank within UK Retail Banking and the Portuguese and Italian credit card businesses of Citigroup within Western Europe Retail Banking and adverse impacts of foreign currency movements. Impairment charges on property, equipment and intangible assets of £125m (2009: £61m) were principally driven by restructuring in Barclays Corporate – New Markets and Barclays Capital.

In June 2010, the UK Government announced its intention to introduce a bank levy, which will apply to elements of the Group’s consolidated liabilities and equity held as at 31st December 2011. The draft legislation is expected to be enacted by the UK Parliament later this year. Based on the 31st December 2010 balance sheet position and the draft requirements, we estimate that the bank levy would result in an annual charge to the income statement of approximately £400m from 2011 onwards.

#### 2009
Administration and general expenses grew £367m to £5,560m (2008: £5,193m) reflecting the impact of acquisitions made during 2008, the costs of servicing an expanded distribution network across Global Retail Banking, and expenses relating to the Financial Services Compensation Scheme. There were also decreases of £119m in gains from sale of property (included in other administration and general expenses) as the Group wound down its sale and leaseback programme.

### Share of post-tax results of associates and joint ventures
#### 2010
The share of post-tax results of associates and joint ventures increased £24m to £58m (2009: £34m), reflecting a £24m increase in results from joint ventures largely from Barclaycard and Absa. Results from associates remained constant at £19m (2009: £19m) since the prior year.

#### 2009
The share of post-tax results of associates and joint ventures increased £20m to £34m (2008: £14m), reflecting a £23m increase in results from joint ventures largely from Barclaycard and Barclays Capital, and a £3m decrease in results from associates, mainly due to reduced contributions from private equity instruments.

### Profit on disposals and gain on acquisitions
#### 2010
The profit on disposal of £81m (2009: £188m) is largely attributable to the £77m profit arising from sale of Barclays Africa custody business to Standard Chartered Bank.

On 1st January 2010, the Group acquired 100% ownership of Standard Life Bank PLC realising a gain on acquisition of £100m. On 31st March 2010, the Group acquired 100% of the Italian credit card business of Citibank International PLC realising a gain on acquisition of £29m. On 26th July 2010 the Group acquired 86% of Tricorona recognising goodwill of £13m.

#### 2009
The profit on disposal of £188m (2008: £327m) is largely attributable to the sale of 50% of Barclays Vida y Pensiones Compañía de Seguros (£157m), and the 7% sale of Barclays Africa Botswana business (£24m).

| Administration and general expenses | 2010 (£m) | 2009 (£m) | 2008 (£m) |
| :--- | :--- | :--- | :--- |
| Property and equipment | 1,813 | 1,641 | 1,356 |
| Outsourcing and professional services | 1,705 | 1,496 | 1,472 |
| Operating lease rentals | 637 | 639 | 520 |
| Marketing, advertising and sponsorship | 631 | 492 | 591 |
| Subscriptions, publications and stationery | 584 | 519 | 458 |
| Travel and accommodation | 358 | 273 | 275 |
| Other administration and general expenses | 732 | 439 | 491 |
| Impairment of property, equipment and intangible assets | 125 | 61 | 30 |
| **Administration and general expenses** | 6,585 | 5,560 | 5,193 |

| Share of post-tax results of associates and joint ventures | 2010 (£m) | 2009 (£m) | 2008 (£m) |
| :--- | :--- | :--- | :--- |
| Profit from associates | 19 | 19 | 22 |
| Profit/(loss) from joint ventures | 39 | 15 | (8) |
| **Share of post-tax results of associates and joint ventures** | 58 | 34 | 14 |

| Profit on disposals and gain on acquisitions | 2010 (£m) | 2009 (£m) | 2008 (£m) |
| :--- | :--- | :--- | :--- |
| Profit on disposal of subsidiaries, associates and joint ventures | 81 | 188 | 327 |
| Gain on acquisitions | 129 | 26 | 2,406 |

***

# Financial review: Balance sheet commentary

### Total assets
Total assets increased £111bn to £1,490bn.

Cash, balances at central banks and items in the course of collection have increased £15.9bn contributing to the increase in the Group liquidity pool. Trading portfolio assets increased £17.5bn and reverse repurchase and other similar secured lending increased £62.3bn reflecting business growth while maintaining adjusted gross leverage at 20x. Financial assets designated at fair value have decreased by £1.1bn primarily due to a decrease in debt securities.

Derivative financial assets increased £3.5bn reflecting increases in the mark to market positions in interest rate and foreign exchange derivatives due to movements in forward interest rate curves and volatility in the foreign exchange market. This was partially offset by decreases in credit, equity and commodities derivatives due to reduced volatility.

Loans and advances to banks and customers increased £4.4bn due to an increase in lending to retail customers, including the effect of the acquisition of Standard Life Bank, offset by a reduction in borrowings by wholesale customers and banks.

Available for sale financial investments increased £8.6bn primarily driven by purchase of government bonds increasing the Group’s liquid assets and the transfer from loans and advances to available for sale assets of the receivables arising as part of the acquisition of the North American business of Lehman Brothers. This was partially offset by a £0.8bn reduction in the fair value of the Group’s investment in BlackRock, Inc.

### Total liabilities
Total liabilities increased £107bn to £1,427bn.

Deposits and items in the course of collection from banks and customer accounts increased £24.7bn reflecting the acquisition of Standard Life Bank and customer deposit growth across the Group. Financial liabilities designated at fair value increased £9.8bn primarily due to increased debt securities and debt issuances strengthening the Group’s liquidity position. Debt securities in issue increased £20.7bn primarily due to increases in bonds, medium term notes, certificates of deposit and commercial paper. This growth was primarily to fund the increased liquidity pool and business growth.

Trading portfolio liabilities increased £21.4bn and repurchase agreements and other similar secured borrowing increased £26.8bn reflecting business growth. Derivative financial liabilities increased £2.1bn broadly in line with the increase in gross derivative assets.

Subordinated liabilities increased £2.7bn primarily reflecting issuances and acquisitions partially offset by redemptions. Other liabilities decreased £1.4bn reflecting reduced retirement benefit liabilities, current tax liabilities and other creditors.

***

# Financial review: Balance sheet commentary continued

### Shareholders’ equity
Total shareholders’ equity increased £3.8bn to £62.3bn (2009: £58.5bn), with share capital and share premium increasing £1.5bn to £12.3bn as a result of the issue of new ordinary shares. Retained earnings increased £2.9bn to £36.8bn (2009: £33.8bn). Profit attributable to the equity holders of the Parent of £3.6bn were partially offset by dividends paid to shareholders of £0.5bn.

Significant movements in other reserves comprise: available for sale reserve movement of £1.2bn, primarily due to the decrease in the fair value of the Group’s investment in BlackRock Inc. of £0.8bn and a decrease of £0.3bn of hedged foreign exchange movements related to this investment that have been transferred to the income statement. Currency translation reserve movement of £0.7bn is largely due to the appreciation in the Rand and US Dollar, offset by the depreciation in the Euro.

Non-controlling interests increased £0.2bn to £11.4bn (2009: £11.2bn). The increase primarily reflects profit for the year attributable to non-controlling interests of £1.0bn and currency translation differences of £0.4bn, offset by distributions of £0.8bn and the redemption of £0.5bn reserve capital instruments.

### Adjusted gross leverage
Barclays continues to operate within limits and targets for balance sheet usage as part of its balance sheet management activities.

The adjusted gross leverage was 20x as at 31st December 2010 (2009: 20x) principally as a result of a £3.9bn increase in Tier 1 Capital to £53.5bn offset by the impact of a £84.6bn increase in adjusted total tangible assets. At month ends during 2010 the ratio moved in a range from 20x to 24x, with fluctuations arising as a result of normal trading activities, primarily due to increases in reverse repurchase trading and changes in holdings of trading portfolio assets.

The ratio of total assets to total shareholders equity was 24x as at 31st December 2010 (2009: 24x). The ratio moved within a month end range of 24x to 29x, driven by trading activity fluctuations noted above, as well as changes in gross interest rate derivatives and settlement balances.

The Basel Committee of Banking Supervisors (BCBS) issued final guidelines for ‘Basel III: a global regulatory framework for more resilient banks and banking systems’ in December 2010. The guidelines include a proposed leverage metric, to be implemented by national supervisors in parallel run from 1st January 2013 (migrating to a Pillar 1 measure by 2018). Based on our interpretation of the current BCBS proposals the Group’s Basel III leverage ratio as at 31st December 2010 would be within the proposed limit of 33x.

Further details on leverage are provided on page 128.

***

# Risk management

## Barclays risk management strategy
Barclays has clear risk management objectives and a well-established strategy to deliver them, through core risk management processes.

At a strategic level, our risk management objectives are:
- To identify the Group’s significant risks.
- To formulate the Group’s Risk Appetite and ensure that business profile and plans are consistent with it.
- To optimise risk/return decisions by taking them as closely as possible to the business, while establishing strong and independent review and challenge structures.
- To ensure that business growth plans are properly supported by effective risk infrastructure.
- To manage risk profile to ensure that specific financial deliverables remain possible under a range of adverse business conditions.
- To help executives improve the control and co-ordination of risk taking across the business.

The Group’s approach is to provide direction on: understanding the principal risks to achieving Group strategy; establishing Risk Appetite; and establishing and communicating the risk management framework. The process is then broken down into five steps: identify, assess, control, report, and manage/challenge. Each of these steps is broken down further, to establish end to end activities within the risk management process and the infrastructure needed to support it (see panel below). The Group’s risk management strategy is broadly unchanged from 2009.

### Assigning responsibilities
Responsibility for risk management resides at all levels within the Group, from the Board and the Executive Committee down through the organisation to each business manager and risk specialist. Barclays distributes these responsibilities so that risk/return decisions are taken at the most appropriate level; as close as possible to the business, and subject to robust and effective review and challenge. The responsibilities for effective review and challenges reside with senior managers, risk oversight committees, Barclays Internal Audit, the independent Group Risk function, the Board Risk Committee and, ultimately, the Board.

The Board is responsible for approving Risk Appetite (see page 69), which is the level of risk the Group chooses to take in pursuit of its business objectives. The Chief Risk Officer regularly presents a report to the Board summarising developments in the risk environment and performance trends in the key portfolios. The Board is also responsible for the Internal Control and Assurance Framework (Group Control Framework). It oversees the management of the most significant risks through the regular review of risk exposures and related key controls. Executive management responsibilities relating to this are set via the Group’s Principal Risks Policy.

The Board Risk Committee (BRC) monitors the Group’s risk profile against the agreed appetite. Where actual performance differs from expectations, the actions being taken by management are reviewed to ensure that the BRC is comfortable with them. After each meeting, the Chair of the BRC prepares a report for the next meeting of the Board. Barclays first established a separate Board Risk Committee in 1999 and all members are non-executive directors. The Finance Director and the Chief Risk Officer attend each meeting as a matter of course and the Chief Risk Officer has a dotted reporting line to the Chair. The BRC receives regular and comprehensive reports on risk methodologies and the Group’s risk profile including the key issues affecting each business portfolio and forward risk trends. The Committee also commissions in-depth analyses of significant risk topics, which are presented by the Chief Risk Officer or senior risk managers in the businesses. The Chair of the Committee prepares a statement each year on its activities (see pages 163 and 164).

| Steps | Activity |
| :--- | :--- |
| **Identify** | – Establish the process for identifying and understanding business-level risks. |
| **Assess** | – Agree and implement measurement and reporting standards and methodologies. |
| **Control** | – Establish key control processes and practices, including limit structures, impairment allowance criteria and reporting requirements.<br>– Monitor the operation of the controls and adherence to risk direction and limits.<br>– Provide early warning of control or appetite breaches.<br>– Ensure that risk management practices and conditions are appropriate for the business environment. |
| **Report** | – Interpret and report on risk exposures, concentrations and risk-taking outcomes.<br>– Interpret and report on sensitivities and Key Risk Indicators.<br>– Communicate with external parties. |
| **Manage and Challenge** | – Review and challenge all aspects of the Group’s risk profile.<br>– Assess new risk-return opportunities.<br>– Advise on optimising the Group’s risk profile.<br>– Review and challenge risk management practices. |

***

# Risk management: Risk factors continued

### A summary of the Group’s 13 principal risks is as follows

| Principal Risk Factor | Principal Risk Management | Key Specific Risks and Mitigation |
| :--- | :--- | :--- |
| **1. Wholesale Credit Risk and 2. Retail Credit Risk** | The Board and management have established a number of key committees to review credit risk management, approve overall Group credit policy and resolve all significant credit policy issues. These comprise: the Board Risk Committee, the Risk Oversight Committee, the Wholesale Credit Risk Management Committee and the Retail Credit Risk Management Committee. Barclays constantly reviews its concentration in a number of areas including, for example, portfolio segments, geography, maturity, industry and investment grade. Diversification is achieved through setting maximum exposure guidelines to individual counterparties sectors and countries, with excesses reported to the Risk Oversight Committee and the Board Risk Committee. For further information see pages 88 to 94. | Specific areas and scenarios where credit risk could lead to higher impairment charges in future years include:<br><br>**Credit Market Exposures**<br>Barclays Capital holds certain exposures to credit markets that became illiquid during 2007. These exposures primarily relate to commercial real estate, leveraged finance and a loan to Protium. The Group actively managed down some of these exposures in 2010.<br>For further information see pages 112 to 116.<br><br>**Sovereign Risk**<br>EU deficits approached very high levels during 2010, leading to a loss of market confidence in certain countries to which the Group is exposed. The Group has put certain countries on watch list status with detailed monthly reporting to the Wholesale Credit Risk Management Committee.<br>For further information see page 117.<br><br>**Economic Uncertainty**<br>Conditions have continued to show signs of improvement in many key markets, although the UK has experienced a slowdown in growth in the fourth quarter, US unemployment rates remain high and the Spanish housing sector continues to be depressed, impacting our wholesale and retail credit risk exposures.<br>In particular, in Spain, the Group has experienced elevated impairment across its operations, following a marked reduction in construction activity and shrinking consumer spending. The Group has reduced its credit risk appetite to the most severely affected segments of the economy. In particular, new lending to the property and construction sector ceased and workout team resources have been increased significantly.<br>For further information see pages 99 to 104. |
| **3. Market Risk** | The Board approves market risk appetite for trading and non-trading activities, with limits set within this context by the Group Market Risk Director. The head of each business market risk team is responsible for implementing the Barclays Market Risk Control Framework which sets out how market risk should be identified, measured, controlled, reported and reviewed. Oversight and challenge is provided by business committees, Group committees and the central Group market risk team. Non-traded interest rate risk is hedged with the external market by a business treasury operation or Group Treasury. For further information see pages 118 to 125. | **Traded Market Risk Exposures**<br>While the Group is exposed to continued market volatility, Barclays Capital’s trading activities are principally a consequence of supporting customer activity.<br>Primary stress testing applies stress moves to each of the major asset classes. Most asset class stress limits were, at some point during 2010, near to their limit. There was one instance of an excess to limit in relation to equity risk in March 2010. This was appropriately escalated and remediated promptly.<br>Barclays Capital’s 2010 market risk exposure, as measured by average total DVaR decreased to £53m (2009: £77m).<br>For further information see pages 119 and 120.<br><br>**Non-traded Interest Rate Risk**<br>The Group is exposed to three main types of non-traded interest rate risk:<br>- fixed rate loans and deposits that are not hedged or matched;<br>- structural risk due to variability of earnings on structural product and equity balances which have no contractual maturity and an interest rate which does not move in line with the base rate; and<br>- margin compression.<br>Fixed rate loan risk is mitigated by hedging the risk with the external market either via Group Treasury, or a business treasury operation. Structural risk and margin compression are hedged by equity and structural hedges managed by Group Treasury. The maturities of these hedges were extended during 2010.<br>Due to economic concerns in the third quarter, gilts purchased as part of the equity structural hedge extension were sold. The duration extension process was resumed towards the end of 2010 and is expected to be completed by the end of 2011.<br>For further information see pages 121 to 123.<br><br>**Pension Fund Risk**<br>Barclays could be required or might choose to make extra contributions to the pension fund. Financial details of the pension fund are in Note 28. |

***

# Risk management: Risk factors continued

| Principal Risk Factor | Principal Risk Management | Key Specific Risks and Mitigation |
| :--- | :--- | :--- |
| **4. Capital Risk** | Primary responsibility for managing Capital Risk rests with the Group Treasury Committee, which has defined and implemented a Capital Risk governance framework.<br><br>The Committee monitors the Group’s actual and forecast capital positions on both a pre and post stress basis. Stress testing considers the impact to capital resources and requirements as a result of macroeconomic stresses. The Committee also considers major risks to the capital forecast such as changes to the regulatory requirements.<br><br>The Group has a number of regulated legal entities within the UK and overseas. Local management has primary responsibility for ensuring these entities comply with their local capital requirements. Where necessary, injections of capital may be made. Such injections are approved by Group Treasury Committee.<br><br>For further information see pages 126 to 130. | **Increasing Capital Requirements**<br>There have been a number of recent developments in regulatory capital requirements which are likely to have a significant impact on the Group. Most significantly, during 2010, the Capital Requirement Directives 2 and 3 and the guidelines from the Basel Committee for strengthening capital requirements (Basel III) have been finalised.<br><br>Aligned to this, markets and credit rating agencies now expect equity capital levels significantly in excess of the current regulatory minimum.<br><br>As a result, and in anticipation of the future regulatory changes, the Group continues to build its capital base and actively manage its risk weighted assets. As at 31st December 2010, the Group’s Core Tier 1 Capital ratio was 10.8% (2009: 10.0%).<br><br>For further information see pages 127, 128 and 141. |
| **5. Liquidity Risk** | The Group maintains a substantial liquidity buffer comprised of deposits with central banks and investments in highly liquid securities or deposits.<br><br>Stress reporting for a number of liquidity scenarios is run on a daily basis. These tests measure the survival periods under Barclays defined stress scenarios. Similar stresses are run for key entities within the Group as well as at the Group level.<br><br>Since June 2010, the Group has also reported its liquidity position against backstop Individual Liquidity Guidance provided by the FSA. Calibration of the Group’s liquidity framework anticipated final FSA rules and is therefore broadly consistent with current FSA standards.<br><br>Daily reporting monitors a number of indicators of stress as well as daily cash activity. | **Inability To Meet Obligations As They Fall Due, At Reasonable Cost**<br>As a result of sudden, large and potentially protracted increases in cash outflows, the cash resources of the Group could be severely depleted. These outflows could be principally through customer withdrawals, wholesale counterparties removing financing, ratings downgrades or loan drawdowns. This could result in:<br>- limited ability to support client lending, trading activities and investments;<br>- forced reduction in balance sheet and sales of assets;<br>- inability to fulfil lending obligations; and<br>- regulatory breaches under the liquidity standards introduced by the FSA on 1st December 2009.<br><br>These outflows could be the result of general market dislocations or specific concerns about Barclays.<br>For further information see pages 131 to 136. |

***

# Risk management: Credit risk management continued

### Renegotiated loans and advances (audited)
Loans and advances are generally renegotiated either as part of an ongoing customer relationship or in response to an adverse change in the circumstances of the borrower. In the latter case renegotiation can result in an extension of the due date of payment or repayment plans under which the Group offers a concessionary rate of interest to genuinely distressed borrowers. This will result in the asset continuing to be overdue and will be individually impaired where the renegotiated payments of interest and principal will not recover the original carrying amount of the asset. In other cases, renegotiation will lead to a new agreement, which is treated as a new loan.

### Collateral and other credit enhancements held (audited)
Financial assets that are past due or individually assessed as impaired may be partially or fully collateralised or subject to other forms of credit enhancement.

Assets in these categories subject to collateralisation are mainly corporate loans, Home Loans and finance lease receivables. Credit card receivables and other personal lending are generally unsecured (although in some instances a charge over the borrower’s property or other assets may be sought).

### Corporate loans (audited)
Security is usually taken in the form of a fixed charge over the borrower’s property or a floating charge over the assets of the borrower. Loan covenants may be put in place to safeguard the Group’s financial position. If the exposure is sufficiently large, either individually or at the portfolio level, credit protection in the form of guarantees, credit derivatives or insurance may be taken out. For these and other reasons collateral given is only accurately valued on origination of the loan or in the course of enforcement actions and as a result it is not practicable to estimate the fair value of the collateral held.

### Home loans (audited)
Home loans are secured by a fixed charge over residential property.

The estimated fair value of collateral held as at 31st December 2010 in respect of Home Loans that are past due or individually assessed as impaired was £10,057m (2009: £9,628m).

Collateral held reflects the Group’s interest in the property in the event of default. That held in the form of charges against residential property in the UK is restricted to the outstanding loan balance. In other territories, where the Group is not obliged to return any sale proceeds to the mortgagee, the full estimated fair value has been included.

### Finance lease receivables (audited)
The net investment in the lease is secured through retention of legal title to the leased assets.

### Collateral and other credit enhancements obtained (audited)
The carrying value of assets held by the Group as at 31st December 2010 as a result of the enforcement of collateral was as follows:

| Assets received (audited) As at 31st December | 2010 Carrying amount (£m) | 2009 Carrying amount (£m) |
| :--- | :--- | :--- |
| Residential property | 71 | 71 |
| Commercial and industrial property | 14 | 66 |
| Other credit enhancements | 210 | 248 |
| **Total** | 295 | 385 |

Any properties repossessed are made available for sale in an orderly and timely fashion, with any proceeds realised being used to reduce or repay the outstanding loan. For business customers, in some circumstances, where excess funds are available after repayment in full of the outstanding loan, they are offered to any other, lower ranked, secured lenders. Any additional funds are returned to the customer. Barclays does not, as a rule, occupy repossessed properties for its business use.

The Group does not use assets obtained in its operations. Assets obtained are normally sold, generally at auction, or realised in an orderly manner for the maximum benefit of the Group, the borrower and the borrower’s other creditors in accordance with the relevant insolvency regulations.

***

# Financial statements: Consolidated cash flow statement

| For the year ended 31st December | 2010 (£m) | 2009 (£m) | 2008 (£m) |
| :--- | :--- | :--- | :--- |
| **Continuing operations** | | | |
| **Reconciliation of profit before tax to net cash flows from operating activities:** | | | |
| Profit before tax | 6,065 | 4,585 | 5,136 |
| **Adjustment for non-cash items:** | | | |
| Allowance for impairment | 5,672 | 8,071 | 5,419 |
| Depreciation, amortisation and impairment of property, plant, equipment and intangibles | 1,346 | 1,196 | 885 |
| Other provisions, including pensions | 914 | 428 | 804 |
| Net profit on disposal of investments and property, plant and equipment | (1,057) | (383) | (371) |
| Net profit from disposal of subsidiaries | (77) | (191) | (327) |
| Net gains on acquisitions | (129) | (26) | (2,406) |
| Other non-cash movements$^a$ | (5,698) | 4,542 | 946 |
| **Changes in Operating assets and Liabilities** | | | |
| Net (increase)/decrease in loans and advances to banks and customers | (63,212) | 25,482 | (58,431) |
| Net increase/(decrease) in deposits and debt securities in issue | 63,711 | (49,203) | 77,743 |
| Net (increase)/decrease in derivative financial instruments | (1,298) | 3,321 | (17,529) |
| Net (increase)/decrease in trading assets | (17,505) | 34,334 | 26,919 |
| Net increase/(decrease) in trading liabilities | 21,441 | (8,222) | (5,928) |
| Net decrease in financial investments | 11,126 | 20,459 | 5,229 |
| Net decrease/(increase) in other assets | 1,366 | (465) | (3,016) |
| Net decrease in other liabilities | (2,521) | (907) | (477) |
| Corporate income tax paid | (1,458) | (1,177) | (1,404) |
| **Net Cash from Operating activities** | 18,686 | 41,844 | 33,192 |
| Purchase of available for sale investments | (76,418) | (78,420) | (57,756) |
| Proceeds from sale or redemption of available for sale investments | 71,251 | 88,559 | 51,429 |
| Net addition of intangible assets | (217) | (226) | (666) |
| Purchase of property, plant and equipment | (1,767) | (1,150) | (1,643) |
| Proceeds from sale of property, plant and equipment | 556 | 372 | 799 |
| Acquisitions of subsidiaries, net of cash acquired | 886 | (28) | (961) |
| Disposal of subsidiaries, net of cash disposed | 81 | 339 | 238 |
| Disposal of discontinued operation, net of cash disposed | – | 2,469 | – |
| Other cash flows associated with investing activities | 1 | (27) | (102) |
| **Net Cash from investing activities** | (5,627) | 11,888 | (8,662) |
| Dividends paid | (1,307) | (633) | (2,697) |
| Proceeds of borrowings and issuance of debt securities | 2,131 | 3,549 | 5,763 |
| Repayments of borrowings and redemption of debt securities | (1,211) | (4,383) | (1,207) |
| Net issue of shares and other equity instruments | 1,535 | 773 | 9,505 |
| Repurchase of shares and other equity instruments | – | – | (173) |
| Net (purchase)/disposal of treasury shares | (989) | 33 | 87 |
| Net issue of shares to non-controlling interests | – | – | 1,356 |
| **Net Cash from financing activities** | 159 | (661) | 12,634 |
| **Effect of exchange rates on cash and cash equivalents** | 3,842 | (2,864) | (6,018) |
| Net cash from discontinued operations | – | (376) | 286 |
| **Net increase in cash and cash equivalents** | 17,060 | 49,831 | 31,432 |
| Cash and cash equivalents at beginning of year | 114,340 | 64,509 | 33,077 |
| **Cash and cash equivalents at end of year** | 131,400 | 114,340 | 64,509 |
| **Cash and cash equivalents comprise:** | | | |
| Cash and balances at central banks | 97,630 | 81,483 | 30,019 |
| Loans and advances to banks with original maturity less than three months | 31,934 | 30,461 | 32,279 |
| Available for sale treasury and other eligible bills with original maturity less than three months | 1,667 | 2,244 | 2,100 |
| Trading portfolio assets with original maturity less than three months | 169 | 152 | 111 |
| | 131,400 | 114,340 | 64,509 |

Interest received in 2010 was £28,631m (2009: £32,437m, 2008: £41,017m) and interest paid in 2010 was £20,759m (2009: £20,889m, 2008: £38,975m). 

The Group is required to maintain balances with central banks and other regulatory authorities and these amounted to £2,310m at 31st December 2010 (2009: £2,470m, 2008: £1,050m).

Note:
a Other non-cash movements principally comprise movements in exchange rates less subordinated debt hedging.

***

# Index

- **Absa**: 54-55 (business analysis), 54 (business description)
- **Accounting**: 205 (developments), 194-205 (policies), 184 (presentation)
- **Acquisitions**: 238 (notes to the accounts)
- **Allowance for impairment**: 269 (notes to the accounts), 97 (risk management)
- **Annual General Meeting**: 147
- **Annual Report and Accounts (approval)**: 187
- **Assets**: 265-267 (by class of business)
- **Auditors**: 185-186 (reports)
- **Available for sale investments**: 216
- **Balance sheet**: 189 (consolidated)
- **Barclaycard**: 48-49 (business analysis), 48 (business description)
- **Barclays Africa**: 52-53 (business analysis), 52 (business description)
- **Barclays Capital**: 56-57 (business analysis), 56 (business description)
- **Barclays Corporate**: 58-59 (business analysis), 58 (business description)
- **Barclays Wealth**: 60-61 (business analysis), 60 (business description)
- **Capital adequacy data**: 126-130 (capital management and resources), 40 (capital ratios)
- **Cash flow statement**: 191 (consolidated)
- **Chief Executive’s review**: 15-16
- **Citizenship**: 24-26
- **Competition and regulatory matters**: 228
- **Concentrations of credit risk**: 85-86
- **Contingent liabilities and commitments**: 226-227
- **Corporate governance**: 149-165 (corporate governance report), 152 (attendance at board meetings)
- **Credit risk**: 82-117
- **Critical accounting estimates**: 268-270
- **Currency of presentation**: 195
- **Currency risk**: 124
- **Derivatives and other financial instruments**: 110 (credit risk), 213-216 (notes to the accounts)
- **Directors and officers**: 9-12 (biographies), 144 (emoluments), 144 (interests), 247-249 (notes to the accounts)
- **Directors’ report**: 143-148
- **Dividends**: 211
- **Earnings per share**: 211
- **Economic capital**: 129-130
- **Economic profit**: 130
- **Employees**: 145 (diversity and inclusion), 145 (involvement)
- **Events after the balance sheet date**: 270
- **Executive management structure**: 12
- **Fair value of financial instruments**: 250-263
- **Financial assets designated at fair value**: 212
- **Financial and operating highlights**: 3
- **Financial liabilities designated at fair value**: 221
- **Financial review**: 32-63
- **Financial risks**: 268
- **Financial strength**: 17
- **Global Retail Banking**: 44-53 (business analysis)
- **Glossary**: 278-284
- **Goodwill**: 218-219
- **Group Chairman’s statement**: 6-8
- **Head Office and Other Operations**: 63 (business analysis), 63 (business description)
- **Impairment charges**: 207 (notes to the accounts), 87 (risk management)
- **Income statement**: 187 (consolidated)
- **Intangible assets**: 218-219
- **Interest rate risk**: 121-122
- **Investment in associates and joint ventures**: 217
- **Investment Management**: 62 (business analysis), 62 (business description)
- **Key performance indicators**: 28-31
- **Leasing**: 240
- **Legal proceedings**: 227
- **Liabilities**: 221 (other)
- **Liquidity risk**: 131-136
- **Loans and advances to banks**: 216
- **Loans and advances to customers**: 216
- **Market risk**: 118-125
- **Memorandum and Articles of Association**: 272-274
- **Non-controlling interests**: 235
- **Net fee and commission income**: 206 (notes to the accounts), 34 (summary)
- **Net interest income**: 206 (notes to the accounts), 34 (summary)
- **Off-balance sheet arrangements**: 241-243
- **Operating expenses**: 207-208 (administration and general expenses), 207 (staff costs), 36 (summary)
- **Ordinary shares, share premiums, and other equity**: 234 (called up)
- **Other income**: 34 (summary)
- **Parent Company accounts (Barclays PLC)**: 192-193
- **Pensions**: 173 (Directors), 228-233 (notes to the accounts)
- **Potential credit risk loans**: 98
- **Presentation of information**: 184
- **Property, plant and equipment**: 220
- **Provisions**: 225
- **Related party transactions**: 247-249
- **Remuneration report**: 166-182
- **Reserves**: 234
- **Results by business**: 44-63
- **Risk factors**: 73-81
- **Risk management**: 66-72 (Barclays approach to risk management), 74-81 (principal risks), 82-117 (credit risk management), 118-125 (market risk management), 126-130 (capital risk management), 131-136 (liquidity risk management), 137-138 (operational risk management), 139-142 (supervision and regulation)
- **Risk weighted assets**: 128
- **Securities borrowing, securities lending, repurchase and reverse repurchase agreements**: 217
- **Securitisation**: 239
- **Segmental reporting**: 264-267 (by class of business), 268 (by geographical segments)
- **Share-based payments**: 243-246
- **Shareholder information**: 272-274
- **Statement of comprehensive income**: 188 (consolidated)
- **Subordinated liabilities**: 222-225
- **Tax**: 207 (bank payroll tax and bank levy), 26 (tax contributions), 81 (tax risk), 209-210 (notes to the accounts)
- **Total assets**: 41
- **Trading portfolio**: 212
- **UK Retail Banking**: 46-47 (business analysis), 46 (business description)
- **Western Europe Retail Banking**: 50-51 (business analysis), 50 (business description)

***

# Glossary of terms

| Term used in Annual Report | US equivalent or brief description |
| :--- | :--- |
| Accounts | Financial statements |
| Allotted | Issued |
| Attributable profit | Net income |
| Called up share capital | Ordinary shares, issued and fully paid |
| Capital allowances | Tax term equivalent to US tax depreciation allowances |
| Cash at bank and in hand | Cash |
| Class of business | Industry segment |
| Finance lease | Capital lease |
| Freehold | Ownership with absolute rights in perpetuity |
| Loans and advances | Lendings |
| Loan capital | Long-term debt |
| Net asset value | Book value |
| Net income | Net revenue |
| Profit | Income |
| Share capital | Ordinary shares, capital stock or common stock issued and fully paid |
| Share premium account | Additional paid-up capital or paid-in surplus (not distributable) |
| Shares in issue | Shares outstanding |
| Write-offs | Charge-offs |

‘**Absa**’ The South African segment of Barclays PLC, comprising Absa Group Limited, but excluding Absa Capital, Absa Card and Absa Wealth which are reported within Barclays Capital, Barclaycard, and Barclays Wealth respectively.
‘**Absa Card**’ The portion of Absa’s results that arises from the Absa credit card business and is reported within Barclaycard.
‘**Absa Capital**’ The portion of Absa’s results that is reported by Barclays within the Barclays Capital business.
‘**Absa Group Limited**’ Refers to the consolidated results of the South African group which is listed on the Johannesburg Stock Exchange in which Barclays owns a controlling stake.
‘**ABS CDO Super Senior**’ The super senior tranches of debt linked to collateralised debt obligations of asset backed securities (defined below). Payment of super senior tranches takes priority over other obligations. See Risk Management section – Barclays Capital Credit Market Exposures.
‘**Adjusted Gross Leverage**’ The multiple of adjusted total tangible assets over total qualifying Tier 1 capital. Adjusted total tangible assets are total assets less derivative counterparty netting, assets under management on the balance sheet, settlement balances and cash collateral on derivative liabilities, goodwill and intangible assets. See ‘Tier 1 Capital’ below.
‘**Adjusted profit before tax**’ Profit before tax excluding the gain on own credit of £391m (2009: £1,820m charge), gains on acquisitions and disposals of £210m (2009: £214m) and gains on debt buy-backs and extinguishments of £nil (2009: £1,429m).
‘**Africa**’ The geographic segment comprising countries where Barclays operates within Africa and the Indian Ocean.
‘**Alt-A**’ Loans regarded as lower risk than sub-prime, but with higher risk characteristics than lending under normal criteria. See Risk Management section – Barclays Capital Credit Market Exposures.
‘**Americas**’ The geographic segment comprising the USA, Canada and countries where Barclays operates within Latin America.
‘**Annual Earnings at Risk (AEaR)**’ The sensitivity of annual earnings to shocks in market rates, at approximately 99th percentile for change over one year. For interest rates this equates to a 2% parallel shift in rates. For equity indices, it equates to a 25% change from one-year end to the next, or 15% from one-year end to the next year’s average.
‘**Arrears**’ Customers are said to be in arrears when they are behind in fulfilling their obligations with the result that an outstanding loan is unpaid or overdue. Such a customer is also said to be in a state of delinquency. When a customer is in arrears, his entire outstanding balance is said to be delinquent, meaning that delinquent balances are the total outstanding loans on which payments are overdue.
‘**Asia**’ The geographic segment comprising countries where Barclays operates within Asia (including Singapore, Japan, China and India), Australasia and the Middle East.
‘**Asset backed products**’ As used in Note 41 ‘Fair value of financial instruments’, asset backed products are debt and derivative products that are linked to the cash flow of a referenced asset. This category includes asset backed loans; collateralised debt obligations (CDOs); collateralised loan obligations (CLOs); asset backed credit derivatives (ABS CDS); asset backed and mortgage backed securities.
‘**Asset Backed Securities (ABS)**’ Securities that represent an interest in an underlying pool of referenced assets. The referenced pool can comprise any assets which attract a set of associated cash flows but are commonly pools of residential or commercial mortgages and, in the case of Collateralised Debt Obligations (CDOs), the referenced pool may be ABS or other classes of assets. See Risk Management section – Barclays Capital Credit Market Exposures.
‘**Assets margin**’ Interest earned on customer assets relative to the average internal funding rate, divided by average customer assets, expressed as an annualised percentage.
‘**Average customer balances**’ Balances in the average balance sheet which are based on daily averages for most UK banking operations and monthly averages outside the UK.
‘**Average Daily Value at Risk**’ The average Daily Value at Risk (defined below) for a specified period of time.
‘**Average LTV on new mortgages**’ The ratio of all new mortgage balances disbursed in the period to the appraised property value of those mortgages, i.e. total amount disbursed year-to-date divided by total amount of appraised property value.
‘**Average net income per employee**’ Total operating income compared to the average number of employees for the reporting period.

***

# Glossary of terms continued

‘**Bank levy**’ The levy that will apply to certain UK banks, building societies and the UK operations of foreign banks from 1st January 2011. The levy is payable based on a percentage of the chargeable equity and liabilities of the bank as at the balance sheet date.
‘**Barclays Business**’ The business unit within UK Retail Banking providing banking services to small and medium enterprises.
‘**Barclays Corporate**’ A business unit that provides global banking services across 10 countries grouped into three regions: UK & Ireland, Continental Europe (Spain, Italy, Portugal and France) and New Markets (India, Pakistan, Russia and the UAE).
‘**Backstop facility**’ A standby facility, that is a liquidity arrangement whereby another party agrees to make a payment should the primary party not do so.
‘**Basel III leverage ratio**’ The ratio of Tier 1 capital to certain on and off balance sheet exposures, calculated in accordance with the methodology set out in the Basel III guidelines published in December 2010.
‘**Basis point**’ One hundredth of a per cent (0.01%), so 100 basis points is 1%. Used in quoting movements in interest rates or yields on securities.
‘**BCBS**’ Basel Committee of Banking Supervisors (‘BCBS’, or ‘The Basel Committee’), a forum for regular cooperation on banking supervisory matters which develops global supervisory standards for the banking industry. Its members are officials from central banks or prudential supervisors from 27 countries and territories.
‘**Capital ratios**’ Key financial ratios measuring the Group’s capital adequacy or financial strength. These include the Core Tier 1 ratio, Tier 1 ratio and Risk asset ratio.
‘**Collateralised Debt Obligations (CDOs)**’ Securities issued by a third party which reference Asset Backed Securities (ABSs) (defined above) and/or certain other related assets purchased by the issuer. CDOs may feature exposure to sub-prime mortgage assets through the underlying assets. CDO$^2$ securities represent investments in CDOs that have been securitised by a third party. See Risk Management section – Barclays Capital Credit Market Exposures.
‘**Collateralised Loan Obligation (CLO)**’ A security backed by the repayments from a pool of commercial loans. The payments may be made to different classes of owners (in tranches). See Risk Management section – Barclays Capital Credit Market Exposures.
‘**Collateralised Synthetic Obligation (CSO)**’ A form of synthetic collateralised debt obligation (CDO) that does not hold assets like bonds or loans but invests in credit default swaps (CDSs) or other non-cash assets to gain exposure to a portfolio of fixed income assets.
‘**Commercial Mortgage Backed Securities (CMBS)**’ Securities that represent interests in a pool of commercial mortgages. Investors in these securities have the right to cash received from future mortgage payments (interest and/or principal). See Risk Management section – Barclays Capital Credit Market Exposures.
‘**Commercial Real Estate**’ Includes office buildings, industrial property, medical centres, hotels, malls, retail stores, shopping centres, farm land, multifamily housing buildings, warehouses, garages, and industrial properties. Commercial real estate loans are those backed by a package of commercial real estate assets. See Risk Management section – Barclays Capital Credit Market Exposures.
‘**Commercial Paper**’ An unsecured promissory note issued to finance short‑term credit needs. It specifies the face amount paid to investors on the maturity date. 
‘**Commodity products**’ As used in Note 41 ‘Fair value of financial instruments’, these products are exchange traded and OTC derivatives based on a commodity underlying (e.g. metals, precious metals, oil and oil related, power and natural gas). 
‘**Compensation:income ratio**’ Staff compensation based costs compared to total income.
‘**Conduits**’ A financial vehicle that holds asset-backed debt such as mortgages, vehicle loans, and credit card receivables, all financed with short-term loans (generally commercial paper) that use the asset-backed debt as collateral. The profitability of a conduit depends on the ability to roll over maturing short-term debt at a cost that is lower than the returns earned from asset-backed securities held in the portfolio. See Risk Management section – Barclays Capital Credit Market Exposures.
‘**Continental Europe**’ See Barclays Corporate.
‘**Core Tier 1 capital**’ Called-up share capital and eligible reserves plus equity non-controlling interests, less intangible assets and deductions relating to the excess of expected loss over regulatory impairment allowance and securitisation positions, as specified by the FSA. 
‘**Core Tier 1 capital ratio**’ Core Tier 1 capital as a percentage of risk weighted assets.
‘**Corporate income tax paid**’ Tax paid during the year on taxable profits, including withholding tax deducted from income.
‘**Cost:income ratio**’ Operating expenses compared to total income net of insurance claims.
‘**Cost:net income ratio**’ Operating expenses compared to total income net of insurance claims less impairment charges and other credit provisions. 
‘**Cost of Equity**’ The rate of return targeted by the equity holders of the company.
‘**Coverage ratio (CRL)**’ Impairment allowances as a percentage of CRL balances. 
‘**Covered bonds**’ Debt securities backed by a portfolio of mortgages that i segregated from the issuer’s other assets solely for the benefit of the holders of the covered bonds.
‘**Credit Default Swaps (CDS)**’ A credit derivative is an arrangement whereby the credit risk of an asset (the reference asset) is transferred from the buyer to the seller of protection. A credit default swap is a contract where the protection seller receives premium or interest-related payments in return for contracting to make payments to the protection buyer in the event of a defined credit event. Credit events normally include bankruptcy, payment default on a reference asset or assets, or downgrades by a rating agency.
‘**Credit Derivative Product Company (CDPC)**’ A company that sells protection on credit derivatives. CDPCs are similar to monoline insurers. However, unlike monoline insurers, they are not regulated as insurers. See Risk Management section – Barclays Capital Credit Market Exposures.
‘**Credit market exposures**’ Relates to commercial real estate and leveraged finance businesses that have been significantly impacted by the deterioration in the global credit markets. The exposures include positions subject to fair value movements in the Income Statement, positions that are classified as loans and advances and available for sale.

***

# Glossary of terms continued

‘**Credit Risk Loans (CRLs)**’ A loan becomes a credit risk loan when evidence of deterioration has been observed, for example a missed payment or other breach of covenant. A loan may be reported in one of three categories: impaired loans, accruing past due 90 days or more or impaired and restructured loans. These may include loans which, while impaired, are still performing but have associated individual impairment allowances raised against them.
‘**Credit spread**’ The yield spread between securities with the same coupon rate and maturity structure but with different associated credit risks, with the yield spread rising as the credit rating worsens. It is the premium over the benchmark or risk-free rate required by the market to accept a lower credit quality.
‘**Credit Valuation Adjustment (CVA)**’ The difference between the risk-free value of a portfolio of trades and the market value which takes into account the counterparty’s risk of default. The CVA therefore represents an estimate of the adjustment to fair value that a market participant would make to incorporate the credit risk of the counterparty due to any failure to perform on contractual agreements.
‘**Customer deposits**’ Money deposited by all individuals and companies that are not credit institutions. Such funds are recorded as liabilities in the Group’s balance sheet under Customer Accounts.
‘**Daily Value at Risk (DVaR)**’ An estimate of the potential loss which might arise from market movements under normal market conditions, if the current positions were to be held unchanged for one business day, measured to a confidence level. (Also see VaR).
‘**Debit Valuation Adjustment (DVA)**’ The opposite of credit valuation adjustment (CVA). It is the difference between the risk-free value of a portfolio of trades and the market value which takes into account Barclays Group’s risk of default. The DVA, therefore, represents an estimate of the adjustment to fair value that a market participant would make to incorporate the credit risk of Barclays Group due to any failure to perform on contractual agreements. The DVA decreases the value of a liability to take into account a reduction in the remaining balance that would be settled should Barclays Group default or not perform in terms of contractual agreements.
‘**Debt restructuring**’ This is when the terms and provisions of outstanding debt agreements are changed. This is often done in order to improve cash flow and the ability of the borrower to repay the debt. It can involve altering the repayment schedule as well as reducing the debt or interest charged on the loan.
‘**Debt securities in issue**’ Transferable certificates of indebtedness of the Group to the bearer of the certificates. These are liabilities of the Group and include certificates of deposits.
‘**Delinquency**’ See ‘Arrears’.
‘**Dividend payout ratio**’ Yearly dividends paid per share as a fraction of earnings per share. 
‘**Economic capital**’ An internal measure of the minimum equity and preference capital required for the Group to maintain its credit rating based upon its risk profile.
‘**Economic profit**’ Profit attributable to equity holders of the Parent excluding amortisation of acquired intangible assets less a capital charge representing adjusted average shareholders’ equity excluding non controlling interests multiplied by the Group cost of capital.
‘**Equities and Prime Services**’ The Barclays Capital trading businesses encompassing Cash Equities, Equity Derivatives & Equity Financing.
‘**Equity products**’ As used in Note 41 ‘Fair value of financial instruments’, these products are linked to equity markets. This category includes listed equities, exchange traded derivatives, equity derivatives, preference shares and contract for difference (CFD) products.
‘**Equity structural hedge**’ An interest rate hedge which functions to reduce the impact of the volatility of short-term interest rate movements on equity positions on the balance sheet that do not reprice with market rates.
‘**Europe region**’ The geographic segment comprising countries in which Barclays operates within the EU (excluding UK & Ireland), Northern, Continental and Eastern Europe, including Russia.
‘**Expected loss**’ The Group measure of anticipated loss for exposures captured under an internal ratings based credit risk approach for capital adequacy calculations. It is measured as the Barclays modelled view of anticipated loss based on Probability of Default (PD), Loss Given Default (LGD) and Exposure at Default (EAD), with a one-year time horizon.
‘**Exposure in the event of default (EAD)**’ The estimation of the extent to which Barclays may be exposed to a customer or counterparty in the event of, and at the time of, that counterparty’s default. At default, the customer may not have drawn the loan fully or may already have repaid some of the principal, so that exposure is typically less than the approved loan limit.
‘**First/Second Lien**’ First lien: debt that places its holder first in line to collect compensation from the sale of the underlying collateral in the event of a default on the loan. Second lien: debt that is issued against the same collateral as higher lien debt but that is subordinate to it. In the case of default, compensation for this debt will only be received after the first lien has been repaid and thus represents a riskier investment than the first lien. See Risk Management section – Barclays Capital Credit Market Exposures.
‘**Fixed charge**’ Security taken over a specific asset of a borrower to secure the repayment of a loan. In this arrangement the asset is signed over to the creditor and the borrower would need the lender’s permission to sell it. The lender also registers a charge against the asset which remains in force until the loan is repaid.
‘**Fixed Income, Currency and Commodities**’ The Barclays Capital trading businesses encompassing Rates, Credit, Emerging Markets, Commodities, Foreign Exchange & Fixed Income Financing.
‘**Forbearance**’ Forbearance Programmes that assist customers in financial difficulty through agreements to accept less than contractual amounts due where financial distress would otherwise prevent satisfactory repayment within the original terms and conditions of the contract. These agreements may be initiated by the customer, Barclays or a third party and include approved debt counselling plans, minimum due reductions, interest rate concessions and switches from capital and interest repayments to interest-only payments. 
‘**FSA-eligible pool assets (liquid assets buffer)**’ High quality unencumbered assets that meet the FSA’s requirements for liquidity. These assets include, for example, high quality government or central bank securities, certain sight deposits with central banks, and securities issued by designated multilateral development banks.
‘**Full time equivalent**’ Full time equivalent employee units are the on-job hours paid for employee services divided by the number of ordinary-time hours normally paid for a full-time staff member when on the job (or contract employee where applicable).
‘**Funds and fund-linked products**’ As used in Note 41 ‘Fair value of financial instruments’, this category includes holdings in mutual funds, hedge funds, fund of funds and fund linked derivatives.

***

# Glossary of terms continued

‘**Funded/unfunded**’ Exposures where the notional amount of the transaction is either funded or unfunded. Represents exposures where a commitment to provide future funding has been made and the funds have been released/not released.
‘**FX products**’ As used in Note 41 ‘Fair value of financial instruments’, these products are derivatives linked to the foreign exchange market. This category includes FX spot and forward contracts; FX swaps; FX options.
‘**Gain on acquisition**’ The amount by which the acquirer’s interest in the net fair value of the identifiable assets, liabilities and contingent liabilities, recognised in a business combination, exceeds the cost of the acquisition. 
‘**Global Retail Banking (GRB)**’ UK Retail Banking, Barclaycard, Western Europe Retail Banking and Barclays Africa.
‘**Gross new UK lending**’ New lending advanced to UK customers during the year.
‘**Home Loans**’ Loans to purchase a residential property which is then used as collateral to guarantee repayment of the loan. The borrower gives the lender a lien against the property, and the lender can foreclose on the property if the borrower does not repay the loan per the agreed terms. Also known as a residential mortgage.
‘**Impaired loans**’ Loans are reported as Credit Risk Loans (defined above) and comprise loans where individual identified impairment allowance has been raised and also include loans which are fully collateralised or where indebtedness has already been written down to the expected realisable value. The impaired loan category may include loans, which, while impaired, are still performing.
‘**Impairment allowances**’ Provisions held on the balance sheet as a result of the raising of a charge against profit for the incurred loss inherent in the lending book. An impairment allowance may either be identified or unidentified and individual or collective.
‘**Income**’ Total income net of insurance claims, unless otherwise specified.
‘**Incremental Default Risk Charge (IDRC)**’ The IDRC captures default risk. This means the potential for a direct loss due to an obligor’s default as well as the potential for indirect losses that may arise from a default event.
‘**Individually/Collectively Assessed**’ Impairment is measured individually for assets that are individually significant, and collectively where a portfolio comprises homogenous assets and where appropriate statistical techniques are available.
‘**Individual liquidity guidance (ILG)**’ Guidance given to a firm about the amount, quality and funding profile of liquidity resources that the FSA has asked the firm to maintain.
‘**Interchange income**’ A fee that is paid to a credit card issuer in the clearing and settlement of a sales or cash advance transaction. 
‘**Interest rate products**’ As used in Note 41 ‘Fair value of financial instruments’, these are products with a payoff linked to interest rates. This category includes interest rate swaps, swaptions, caps and exotic interest rate derivatives. 
‘**Internal funds pricing**’ The Group’s mechanism for pricing intra-group funding and liquidity.
‘**Investment banking**’ Fee generating businesses encompassing Advisory, Debt and Equity Origination within Barclays Capital.
‘**Investment grade**’ A debt security, treasury bill or similar instrument with a credit rating measured by external agencies of AAA to BBB.
‘**Leveraged Finance**’ Loans or other financing agreements provided to companies whose overall level of debt is high in relation to their cash flow (net debt: EBITDA) typically arising from private equity sponsor led acquisitions of the businesses concerned.
‘**Liabilities margin**’ Interest paid on customer liabilities relative to the average internal funding rate, divided by average customer liabilities. Expressed as an annualised percentage.
‘**Liquidity and Credit enhancements**’ Credit enhancement facilities are used to enhance the creditworthiness of financial obligations and cover losses due to asset default. Two general types of credit enhancement are third-party loan guarantees and self-enhancement through over collateralization. Liquidity enhancement makes funds available if required, for ther reasons than asset default, e.g. to ensure timely repayment of maturing commercial paper.
‘**Liquidity Coverage Ratio (LCR)**’ The ratio of the stock of high quality liquid assets to expected net cash outflows over the following 30 days. High quality liquid assets should be unencumbered, liquid in markets during a time of stress and, ideally, be central bank eligible. These include, for example, cash and claims on central governments and central banks. The Basel III guidelines require this ratio to be at least 100% and it is expected to apply from 2015.
‘**Liquidity pool/buffer**’ The Group liquidity pool comprises cash at central banks and highly liquid collateral specifically held by the Group as contingency to enable the bank to meet cash outflows in the event of stressed market conditions.
‘**Loan loss rate**’ Defined as total credit impairment charge (excluding available for sale assets and reverse repurchase agreements) divided by gross loans and advances to customers and banks (at amortised cost).
‘**Loan to deposit ratio**’ The ratio of loans and advances to customer accounts. This excludes certain liabilities issued by the retail business that have characteristics comparable to retail deposits (for example, structured CDs and retail bonds), which are included within debt securities in issue.
‘**Loan to deposit and long term funding ratio**’ The ratio of wholesale and retail loans and advances to customers net of impairment allowance, divided by the total of customer accounts, long term debt (due after 1 year) and equity.
‘**Loan funding ratio**’ The ratio of wholesale and retail loans and advances to customers net of impairment allowance, divided by the total of customer accounts, long-term debt (>1 yr) and equity.
‘**Loan to value ratio (LTV)**’ Expresses the amount borrowed against an asset (e.g. a mortgage) as a percentage of the appraised value. The ratio is used in assessing the appropriate level of risk for the loan and is generally reported as an average for new mortgages or an entire portfolio.
‘**Loan to value of new mortgage lending**’ See Average LTV in new mortgage.
‘**Loans past due**’ Loans are past due when a counterparty has failed to make a payment when contractually due. 
‘**Loss Given Default (LGD)**’ The fraction of Exposure at Default (EAD) (defined above) that will not be recovered following default. LGD comprises the actual loss (the part that is not expected to be recovered), together with the economic costs associated with the recovery process. 
‘**Medium Term Notes (MTNs)**’ Corporate notes continuously offered by a company to investors through a dealer. Investors can choose from differing maturities, ranging from nine months to 30 years.

***

This Report is printed on Revive 100 White Offset 
made from 100% FSC® certified recycled fibre sourced from de-inked post-consumer waste. The printer and manufacturing mill are both credited with ISO14001 Environmental Management Systems Standard and both are FSC certified.

Registered office: 
1 Churchill Place, London E14 5HP 
Registered in England. Registered No: 48839

© Barclays Bank PLC 2011

9911688

Designed by Further™ 
www.furthercreative.co.uk

Cover and divider photography by Paul Grundy 
Board photography by Iain Crockart