Directors' report

Business review - Our 2007 performance

Balance sheet reconciliation

1. The financial accounting description of loans made by the Group to customers for the purpose of earning interest income.
2. Loans made to individual customers secured on residential property.
3. Loans to companies who are in the business of providing commercial property (typically retail, office or industrial).
4. Assets held by our Treasury department providing the Group with the liquidity (readily accessible cash resources) to protect our retail depositors and to enable them to withdraw their funds as and when they require, and assets held as investments to supplement the income earned by the Group on its loans to customers.
5. Movement in the value of fixed rate mortgages and savings products as a result of changes in interest rates since the loans were made.
6. Derivatives are instruments held by the Group to manage the naturally occurring interest rate and currency exposures that arise in our normal course of business (for example, when we provide fixed interest rate mortgages to customers). The value of the derivative can be positive or negative depending on the asset or liability it is hedging or the movement in interest and foreign currency exchange rates.
7. Property and other equipment, such as computers and software, and other assets used by our business.
8. Total amount of deposits made in our savings products.
9. Amounts borrowed from banks and other sources which in addition to the retail deposits allow us to make loans to customers.
10. Other amounts provided to enable us to pay known future commitments as they arise. For example, items such as rents and rates on property, national insurance, tax and pension commitments.
11. long-term loans that act as capital, under rules set out by our regulator, the Financial Services Authority. Banks need capital to support the activity of making loans and to provide protection to savings customers.
12. The investment of our shareholders in the business and the net profits retained by the Group from previous financial periods.