Barclays PLC Annual Report 2002 a Registered No. 48839 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. The Group may also make forward-looking statements in other written materials, including other documents filed with or furnished to the SEC. In addition, the Group’s senior management may make forward-looking statements orally to analysts, investors, representatives of the media and others. In particular, among other statements, certain statements in the Financial Review and Business Description with regard to management objectives, trends in results of operations, margins, costs, return on equity, risk management, and competition are forward looking in nature. These forward-looking statements can be identified by the fact that they do not relate only to historical or current facts. Forward-looking statements often use words such as “anticipate,” “target,” “expect,” “estimate,” “intend,” “plan,” “goal,” “believe,” or other words of similar meaning. By their nature, forward-looking statements involve risk and uncertainty because they relate to events and depend on circumstances that will occur in the future. The Group’s actual future results may differ materially from those set out in the Group’s forward-looking statements. There are many factors that could cause actual results and developments to differ materially from those expressed or implied by these forward-looking statements. Any forward-looking statements made by or on behalf of the Group speak only as of the date they are made. Barclays does not undertake to update forward- looking statements to reflect any changes in the Group’s expectations with regard thereto or any changes in events, conditions or circumstances on which any such statement is based. The reader should, however, consult any further disclosures Barclays may make in documents it files with the SEC. Section 1 Review 1 Introduction 2 Chairman’s Statement 5 Group Chief Executive’s Statement 8 Financial Performance Group Finance Director 14 The Leadership Team Section 2 Impact 18 Corporate Social Responsibility 32 Directors and officers of Barclays PLC and Barclays Bank PLC 35 Directors’ report 37 Corporate governance report 40 Barclays report on remuneration 52 Accountability and Audit 53 Presentation of information 54 Risk management Section 3 Results 87 Financial Data 90 Business description 96 Financial review 123 Other information 126 Auditors’ reports 128 Consolidated accounts Barclays PLC 235 Shareholder information 242 Group senior management and principal offices Barclays PLC Introduction Our mission Our mission is to be an innovative, customer focused Group that delivers superb products and services, ensures excellent careers for our people and contributes positively to the communities in which we live and work. Our primary goal Our primary goal is consistently to deliver top quartile total shareholder return versus our peers over time. Our beliefs Our operating philosophy is ‘managing for value’. The strategies we follow and the actions we take are aligned to value creation for all stakeholders. 1 Barclays PLC Annual Report 2002 Chairman’s Statement Barclays delivered a sound performance during 2002, while continuing with the transformation of the business and progressing our longer-term economic development. The year was a curious one. The UK, our key market, once again grew more rapidly than other European countries, though in an increasingly lopsided way, biased toward public and personal consumption. The US recovered from an unusually weak performance in 2001 but, if anything, was even more unbalanced and consumption biased. Continental Europe and Japan were lacklustre. It was a year of great uncertainty about the future combined with extremely competitive business conditions. Financial markets were volatile and in decline in 2002; they remain so in 2003. This is partly the result of the collapse of over excited sentiment stirred up primarily by the dotcom boom. Partly it reflects uncertainty about how the national economic imbalances will unfold, especially with the threat of war in Iraq. Partly it reflects the very competitive and difficult conditions in some sectors. But it also reflects the uncertainty imposed on companies by the changing regulatory background. To take our own business: we have had to deal with 18 different government reviews over the past three years. There is a seemingly endless stream of new accounting rules. The capital requirements of the bank will change as a result of Basel II. A whole industry in corporate governance has been created spearheaded by: Sarbanes-Oxley in the US; the UK Government commissioned reports including the Higgs Review of the role and responsibilities of non-executive Directors, and the Smith Review of the role of audit committees. We see the prospect of plenty more on its way from Brussels. We have increasingly tough ‘Know Your Client’ rules from the FSA, which long standing customers find oppressive. And we have seen the emergence of price control – from the Competition Commission Inquiry. The sheer volume of this activity takes up management time and resources, which could otherwise be devoted to driving the business forward. It creates uncertainty and inhibits sensible risk taking. And makes it increasingly difficult to explain our business in simple terms to our stakeholders. We set out to be an open company, communicating extensively with our large and small shareholders, both about our financial results and about the way the company is organised and managed. Within our Annual Report this year there is more on risk management and corporate governance, including a more detailed remuneration report. Once again, we have set out in some detail our efforts under the heading of Corporate Social Responsibility, where the involvement of our employees in our Community Programme grows steadily and is a great source of pleasure. There are several changes to report at Board level. Sir Andrew Large, one of our Deputy Chairmen, left Barclays to become Deputy Governor (Financial Stability) of the Bank of England. Sir Andrew brought a wealth of experience in banking and regulation to the Board; we wish him well in his important role. John Stewart, the Deputy Group Chief Executive, has also left the Board. Mr Stewart was previously Chief Executive of The Woolwich and has played a key role in integrating the business into Barclays. Looking ahead, Sir Nigel Mobbs will be retiring at the AGM in April 2003 after 23 years’ service with Barclays. He has made a huge contribution to the bank over this time. His knowledge and authority have made him an outstanding Chairman of the Audit Committee. It is sad that such length of service is frowned on by current governance fashions. Graham Wallace has indicated his intention to retire from the Board in the summer, after he leaves Cable & Wireless. The Board is grateful for the contribution that he has made since he joined Barclays in April 2001. We shall miss the contribution of these Directors. However, there are two new arrivals to the Board, both of whom are standing for re-election at the AGM. In July, we welcomed Dr Jürgen Zech to the Board as a non-executive Director. Dr Zech is a leading businessman in Germany and brings added financial experience to the team. Professor Sandra Dawson joins the Board as a non-executive Director in March. Professor Dawson is Professor of Management Studies and Director of the Judge Institute at Cambridge University, and brings both academic and management experience to Barclays. Lawrence Dickinson replaced Howard Trust as Group Secretary in September 2002. The Directors are immensely grateful to Mr Trust for his services to the Board over the past eight years. There are only two certainties about 2003. The first is that we shall have to cope again with the uncertain climate we faced in 2002. The second is that Barclays is well placed thanks to the spread of its business, the quality of its staff and its determination to succeed and seize the opportunities that arise. Sir Peter Middleton Chairman 2 Barclays PLC Annual Report 2002 3 Barclays PLC Annual Report 2002 In 2002 the Barclays University (bu) initiative was fully rolled out. Metro centres were opened in Birmingham, Bristol, Manchester and Luton and a further 150 ‘hubs’ were established. Barclays is equipping staff with the skills needed to raise the performance bar. In 2002, around 750,000 hours of training were delivered across the Group. 750,000 Barclaycard has developed innovative ways to share its sponsorship of the Premier League with customers. Fans who subscribe to Barclaycard’s text alert service can receive latest scores and results via their mobile phones. Barclays is dedicated to establishing itself as an employer of choice. Staff are evaluated based not only on what they achieve but also on how they achieve it. Openplan, which was tailored for the Spanish market, achieved tremendous success in Spain during 2002. At year-end, products per person was 4.5, well above the average of 3.2 for customers outside of Openplan. Barclays was the first major high street bank to provide integrated banking. During 2002 almost 2 million UK customers chose the Openplan proposition, which can be individually tailored and accessed through a range of channels.