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1 Finance$Case$ Studies$ Ted$Wainman$ 07802$863$768$

2 Annual Report and Accounts 2012/13 National Grid plc Trusted to connect ng1

3 Financial Statements Consolidated income statement for the years ended 31 March Notes Revenue 1(a) 14,359 13,832 14,343 Operating costs 2 (10,605) (10,293) (10,598) Operating profit Before exceptional items, remeasurements and stranded cost recoveries 1(b) 3,644 3,495 3,600 Exceptional items, remeasurements and stranded cost recoveries Total operating profit 1(b) 3,754 3,539 3,745 Finance income Before exceptional items 4 1,252 1,301 1,281 Exceptional items 3,4 43 Total finance income 4 1,252 1,301 1,324 Finance costs Before exceptional items and remeasurements 4 (2,172) (2,218) (2,415) Exceptional items and remeasurements 3,4 68 (70) (37) Total finance costs 4 (2,104) (2,288) (2,452) Share of post-tax results of joint ventures and associates Profit before tax Before exceptional items, remeasurements and stranded cost recoveries 1(b) 2,742 2,585 2,473 Exceptional items, remeasurements and stranded cost recoveries (26) 151 Total profit before tax 1(b) 2,920 2,559 2,624 Taxation Before exceptional items, remeasurements and stranded cost recoveries 5 (686) (755) (722) Exceptional items, remeasurements and stranded cost recoveries 3, Total taxation 5 (624) (521) (461) Profit after tax Before exceptional items, remeasurements and stranded cost recoveries 2,056 1,830 1,751 Exceptional items, remeasurements and stranded cost recoveries Profit for the year 2,296 2,038 2,163 Attributable to: Equity shareholders of the parent 2,295 2,036 2,159 Non-controlling interests ,296 2,038 2,163 Earnings per share* Basic p 55.6p 61.2p Diluted p 55.4p 60.9p *Comparative amounts have been restated to reflect the impact of additional shares issued as scrip dividends The notes on pages 105 to 164 form part of the consolidated financial statements. ng2 100 National Grid plc Annual Report and Accounts 2012/13

4 Consolidated statement of comprehensive income for the years ended 31 March Profit for the year 2,296 2,038 2,163 Other comprehensive (loss)/income: Exchange adjustments (95) Actuarial net (losses)/gains 22 (930) (1,325) 571 Deferred tax on actuarial net gains and losses (181) Net (losses)/gains in respect of cash flow hedges (31) (18) 7 Transferred to profit or loss on cash flow hedges (7) Deferred tax on cash flow hedges 5 (13) 2 (2) Net gains on available-for-sale investments Transferred to profit or loss on sale of available-for-sale investments (10) (9) (3) Deferred tax on available-for-sale investments 5 (2) (2) (1) Share of post-tax other comprehensive loss of joint ventures (4) Other comprehensive (loss)/income for the year, net of tax (527) (887) 301 Total comprehensive income for the year 1,769 1,151 2,464 Attributable to: Equity shareholders of the parent 1,768 1,149 2,460 Non-controlling interests Notes ,769 1,151 2,464 Strategic Review Corporate Governance Financial Statements Additional Information ng3 Annual Report and Accounts 2012/13 National Grid plc 101

5 Financial Statements Consolidated statement of financial position as at 31 March Non-current assets Goodwill 8 5,028 4,776 Other intangible assets Property, plant and equipment 10 36,592 33,701 Other non-current assets Pension assets Financial and other investments Investments in joint ventures and associates Derivative financial assets 14 1,972 1,819 Total non-current assets 45,129 41,684 Current assets Inventories and current intangible assets Trade and other receivables 16 2,910 1,971 Financial and other investments 12 5,431 2,391 Derivative financial assets Cash and cash equivalents Total current assets 9,576 5,387 Assets of businesses held for sale Total assets 54,705 47,335 Current liabilities Borrowings 19 (3,448) (2,492) Derivative financial liabilities 14 (407) (162) Trade and other payables 20 (3,051) (2,685) Current tax liabilities (231) (383) Provisions 23 (308) (282) Total current liabilities Notes (7,445) (6,004) Non-current liabilities Borrowings 19 (24,647) (20,533) Derivative financial liabilities 14 (1,274) (1,269) Other non-current liabilities 21 (1,884) (1,921) Deferred tax liabilities 5 (4,076) (3,738) Pensions and other post-retirement benefit obligations 22 (3,694) (3,088) Provisions 23 (1,452) (1,449) Total non-current liabilities (37,027) (31,998) Liabilities of businesses held for sale 18 (87) Total liabilities (44,472) (38,089) Net assets 10,233 9,246 Equity Called up share capital Share premium account 1,344 1,355 Retained earnings 13,132 12,297 Other equity reserves 25 (4,681) (4,835) Shareholders equity 10,228 9,239 Non-controlling interests 5 7 Total equity 10,233 9,246 The consolidated financial statements set out on pages 97 to 164 were approved by the Board of Directors on 15 May 2013 and were signed on its behalf by: Sir Peter Gershon Chairman Andrew Bonfield Finance Director ng4 102 National Grid plc Annual Report and Accounts 2012/13

6 Consolidated statement of changes in equity for the years ended 31 March Called up share capital Share premium account Retained earnings Other equity reserves (i) Total shareholders equity Noncontrolling interests At 1 April ,366 7,316 (4,781) 4, ,211 Profit for the year 2,159 2, ,163 Total other comprehensive income/(loss) for the year 390 (89) Total comprehensive income/(loss) for the year 2,549 (89) 2, ,464 Rights issue 113 3,101 3,214 3,214 Transfer between reserves 3,101 (3,101) Equity dividends (1,064) (1,064) (1,064) Scrip dividend related share issue 5 (5) Issue of treasury shares Purchase of own shares (3) (3) (3) Other movements in non-controlling interests (7) (7) Share-based payment Tax on share-based payment At 31 March ,361 12,153 (4,870) 9, ,069 Profit for the year 2,036 2, ,038 Total other comprehensive income/(loss) for the year (922) 35 (887) (887) Total comprehensive income for the year 1, , ,151 Equity dividends (1,319) (1,319) (1,319) Scrip dividend related share issue 6 (6) Issue of treasury shares Purchase of own shares (4) (4) (4) Other movements in non-controlling interests (4) (4) Share-based payment Tax on share-based payment At 31 March ,355 12,297 (4,835) 9, ,246 Profit for the year 2,295 2, ,296 Total other comprehensive income/(loss) for the year (681) 154 (527) (527) Total comprehensive income for the year 1, , ,769 Equity dividends (1,433) (1,433) (1,433) Scrip dividend related share issue 11 (11) Issue of treasury shares Purchase of own shares (6) (6) (6) Other movements in non-controlling interests (3) (3) Share-based payment Tax on share-based payment (2) (2) (2) At 31 March ,344 13,132 (4,681) 10, ,233 (i) For further details of other equity reserves, see note 25. Total equity Strategic Review Corporate Governance Financial Statements Additional Information ng5 Annual Report and Accounts 2012/13 National Grid plc 103

7 1. Segmental analysis continued (b) Operating profit A reconciliation of the operating segments measure of profit to total profit before tax is provided below. Further details of the exceptional items, remeasurements and stranded cost recoveries are provided in note 3. Before exceptional items, remeasurements and stranded cost recoveries After exceptional items, remeasurements and stranded cost recoveries Operating segments UK Transmission 1,609 1,354 1,363 1,566 1,354 1,293 UK Gas Distribution US Regulated 1,253 1,190 1,407 1,437 1,154 1,704 Other activities (12) (12) ,644 3,495 3,600 3,754 3,539 3,745 Geographical areas UK 2,536 2,353 2,226 2,462 2,357 2,055 US 1,108 1,142 1,374 1,292 1,182 1,690 3,644 3,495 3,600 3,754 3,539 3,745 Reconciliation to profit before tax: Operating profit 3,644 3,495 3,600 3,754 3,539 3,745 Finance income 1,252 1,301 1,281 1,252 1,301 1,324 Finance costs (2,172) (2,218) (2,415) (2,104) (2,288) (2,452) Share of post-tax results of joint ventures and associates Profit before tax 2,742 2,585 2,473 2,920 2,559 2,624 (c) Capital expenditure, depreciation and amortisation 2013 Capital expenditure Depreciation and amortisation Operating segments UK Transmission 1,680 1,397 1,432 (489) (431) (400) UK Gas Distribution (261) (251) (218) US Regulated 1,124 1,052 1,092 (430) (411) (445) Other activities (181) (179) (189) ,686 3,375 3,468 (1,361) (1,272) (1,252) Geographical areas UK 2,471 2,217 2,310 (902) (849) (789) US 1,215 1,158 1,158 (459) (423) (463) 3,686 3,375 3,468 (1,361) (1,272) (1,252) By asset type Property, plant and equipment 3,511 3,172 3,292 (1,260) (1,193) (1,182) Non-current intangible assets (101) (79) (70) 3,686 3,375 3,468 (1,361) (1,272) (1,252) Total non-current assets other than financial instruments, deferred tax assets and pension assets located in the UK and US were 23,344m and 19,340m respectively as at 31 March 2013 (31 March 2012: UK 21,793m, US 17,666m; 31 March 2011: UK 20,720m, US 17,003m). Strategic Review Corporate Governance Financial Statements Additional Information ng6 Annual Report and Accounts 2012/13 National Grid plc 107

8 Financial Statements Consolidated cash flow statement for the years ended 31 March Cash flows from operating activities Total operating profit 1(b) 3,754 3,539 3,745 Adjustments for: Exceptional items, remeasurements and stranded cost recoveries 3 (110) (44) (145) Depreciation, amortisation and impairment 1,361 1,282 1,245 Share-based payment charge Changes in working capital (410) Changes in provisions (53) (116) (93) Changes in pensions and other post-retirement benefit obligations (413) (386) (304) Cash flows relating to exceptional items (112) (205) (147) Cash flows relating to stranded cost recoveries Cash generated from operations 4,037 4,487 4,854 Tax (paid)/received (287) (259) 4 Net cash inflow from operating activities 3,750 4,228 4,858 Cash flows from investing activities Acquisition of investments (14) (13) (135) Proceeds from sale of investments in subsidiaries Purchases of intangible assets (175) (203) (176) Purchases of property, plant and equipment (3,214) (3,147) (2,958) Disposals of property, plant and equipment Dividends received from joint ventures Interest received Net movements in short-term financial investments (2,992) 553 (1,577) Net cash flow used in investing activities (6,130) (2,371) (4,774) Cash flows from financing activities Proceeds of rights issue 3,214 Proceeds from issue of treasury shares Purchase of own shares (6) (4) (3) Proceeds received from loans 5,062 1, Repayment of loans (1,210) (1,914) (2,878) Net movements in short-term borrowings and derivatives 452 (49) 348 Interest paid (792) (749) (965) Exceptional finance costs on the redemption of debt (73) Dividends paid to shareholders (810) (1,006) (858) Net cash flow from/(used in) financing activities 2,715 (1,900) (430) Net increase/(decrease) in cash and cash equivalents 26(a) 335 (43) (346) Exchange movements 14 (3) Net cash and cash equivalents at start of year Net cash and cash equivalents at end of year (i) (i) Net of bank overdrafts of 23m (2012: 33m; 2011: 42m). Notes ng7 104 National Grid plc Annual Report and Accounts 2012/13

9 KF1

10 KF2

11 KF3

12 KF4

13 In1 Annual Report 2013

14 Consolidated financial statements at 31 December Consolidated financial statements Consolidated financial statements at 31 December 2013 Consolidated financial statements Consolidated income statement for the year ended 31 December (million euro) Note Year 2013 Year 2012 restated Revenue 8.1 2, ,893.7 Cost of sales 8.2 (2,054.8) (2,180.2) Selling and distribution expenses 8.3 (437.3) (468.9) General and administrative expenses 8.4 (110.9) (108.8) Operating profit Net interest (27.8) (26.8) Exchange rate 8.6 (18.8) (2.5) Fees and other net financial expenses 8.6 (4.7) (5.3) Share of profit (losses) of associates and other 8.6 (0.0) 0.3 Profit before tax Income taxes 8.7 (13.7) (39.8) Profit for the year Attributable to non-controlling interests 8.8 (0.0) (0.0) Attributable to the owners of the Parent Basic earnings per share (euro) Diluted earnings per share (euro) As indicated in the Reclassifications, the comparative information reported in the consolidated income statement has been restated. With respect to the information presented for 2012, the Group now classifies exchange differences separately from commissions and reports interest income and expense in one line, as net interest, in order to reflect better the underlying economic phenomena. These changes have had no effect on profit for the year. 1. Pursuant to Consob Resolution no dated 27 July 2006, the effects of related-party and non-recurring transactions on the consolidated income statement are reported in Attachment 3 and in notes 8.5 and 12, respectively. 34 In2

15 Consolidated financial statements at 31 December Consolidated financial statements Consolidated statement of comprehensive income for the year ended 31 December 2013 (million euro) Note restated Profit (loss) for the year (A) Effects with possible future impact on the income statement (64.5) 44.0 Profit/(loss) on the cash flow hedge 9.11 (4.8) 8.7 Tax effect (2.1) Total profit/(loss) on the cash flow hedge 9.11 (4.1) 6.5 Total profit/(loss) arising from the translation of foreign operations 9.11 (60.4) 37.4 Effects that do not have future impact on the income statement (10.0) (18.0) Profit/(loss) from the effects of remeasurement 9.11 (14.8) (23.3) Tax effect Total profit/(loss) from the effects of remeasurement 9.11 (10.0) (18.0) Total other comprehensive income/(loss), net of tax (B) (74.5) 26.0 Total comprehensive income/(loss) (A + B) (71.3) 87.6 Attributable to non-controlling interests 0.0 (0.0) Attributable to owners of the Parent (71.3) 87.7 As indicated in the Reclassifications, the comparative information reported in the consolidated statement of comprehensive income has been restated. In3 35

16 Consolidated financial statements at 31 December Consolidated financial statements Consolidated statement of financial position at 31 December (million euro) Note restated Assets restated Property, plant and equipment Goodwill and other intangible assets with an indefinite useful life Other intangible assets with a finite useful life Investments in associates Other non-current assets Deferred tax assets Other non-current financial assets Total non-current assets 1, , ,071.2 Inventories Trade receivables Current financial assets Tax receivables Other receivables and current assets Cash and cash equivalents Assets held for sale Total current assets 1, , ,111.4 Total assets 2, , ,182.6 Equity Share capital Reserves 9.11 (191.0) (103.9) (129.1) Retained earnings Profit attributable to owners of the Parent Equity attributable to owners of the Parent Non-controlling interests Total equity Pursuant to Consob Resolution no dated 27 July 2006, the effects of related-party transactions on the separate statement of financial position are reported in Attachment 4 and in note In4

17 Consolidated financial statements at 31 December Consolidated financial statements (million euro) Note restated Liabilities restated Medium and long-term loans and borrowings Employee benefits Provisions for risks and charges Deferred tax liabilities Other non-current liabilities Total non-current liabilities Banks and other short-term loans and borrowings Provisions for risks and charges Trade payables Tax payables Other payables Total current liabilities 1, , ,210.7 Total liabilities 1, , ,689.6 Total equity and liabilities 2, , ,182.6 As indicated in the Reclassifications, the comparative information reported in the consolidated statement of financial position has been restated. In5 37

18 Consolidated financial statements at 31 December Consolidated financial statements Consolidated cash flow statement for the year ended 31 December (million euro) Note restated restated Profit for the year Income taxes Depreciation and amortisation Other non-monetary income and expenses, net (6.3) Change in trade receivables (24.8) 57.6 Change in inventories (8.6) 2.8 Change in trade payables 10.3 (81.8) 61.2 (32.9) Change in other assets and liabilities 10.4 (26.9) (66.1) (61.7) Taxes paid 10.1 (18.4) (47.8) (56.7) Interest paid 10.2 (27.7) (35.6) (29.8) Interest received Cash flows from/(used in) operating activities Acquisition of property, plant and equipment 10.5 (82.7) (121.9) (105.9) Proceeds from sale of property, plant and equipment Acquisition of intangible assets 10.6 (31.0) (36.1) (30.2) Proceeds from sale of intangible assets Cash flows from/(used in) investing activities (112.3) (142.6) (121.8) Increase in share capital Dividends paid 10.7 (20.6) (23.7) (31.0) New medium/long-term financial liabilities Repayments of medium/long-term financial liabilities and bond issue 10.8 (14.1) (9.5) (195.6) Change in short, medium and long-term financial liabilities (44.0) 53.7 Cash flows from/(used in) financing activities (77.2) 20.2 Net cash flows from/(used in) (91.6) 11.8 Cash and cash equivalents, start of year Cash and cash equivalents, end of year Total change in cash and cash equivalents (91.6) 11.8 As indicated in the Reclassifications, the comparative information reported in the consolidated cash flow statement has been restated. 3. Pursuant to Consob Resolution no dated 27 July 2006, the effects of related-party transactions on the separate statement of financial position are reported in Attachment 4 and in note In6

19 Consolidated financial statements at 31 December Consolidated financial statements Statement of changes in consolidated equity for the year ended 31 December 2013 Nota 9.11 (million euro) Consolidated statement of changes in equity as at 31 December 2013 Opening balances (published on 31 December 2012) Opening balances (restated) Other profit/losses, net of taxation Share capital Share premium reserve Legal reserve Translation reserve (97.7) (97.7) (60.4) - (60.4) (12.4) (12.4) (170.5) Remeasurement reserve - (79.8) (10.0) - (10.0) (89.8) Other reserves (4.1) - (4.1) - (0.4) (0.1) 10.8 Retained earnings (20.6) Profit attributable to owners of the Parent (61.7) - (61.7) 3.2 Equity attributable to owners of the Parent (74.5) 3.2 (71.3) (20.6) - (0.0) 0.3 (20.3) Non-controlling interests (0.0) (0.0) Total equity (74.5) 3.2 (71.3) (20.6) - (0.0) 0.3 (20.3) Profit for the year Income (expenses) recognised directly in equity Dividends paid Exercise of stock option rights and other movements Allocation of profit for the year Other Total effects of transactions with owners of the Parent Closing balances Consolidated statement of changes in equity as at 31 December Restated Share capital Share premium reserve Legal reserve Translation reserve (135.1) (135.1) (97.7) Remeasurement reserve - (61.9) (18.0) - (18.0) (79.8) Other reserves (0.8) (0.8) 15.0 Retained earnings (23.7) Profit attributable to owners of the Parent (58.7) (58.7) 61.7 Equity attributable to owners of the Parent (23.7) (23.7) Non-controlling interests Total equity (23.7) (23.7) As indicated in the Reclassifications, the comparative information reported in the statement of changes in consolidated equity has been restated. In7 39

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21 NMS2

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23 NMS4

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25 IE1

26 Ian Edgar (Liverpool) Limited Financial statements for the year ended 31 March 2009 Profit and loss account Note Turnover 1 14,696,742 9,037,882 Cost of sales 11,096,720 6,073,743 Gross profit 3,600,022 2,964,139 Other operating charges 2 2,610,032 2,075,380 Other operating income 3 (150) (150) Operating profit 4 990, ,909 Interest receivable Interest payable and similar charges 8 (52,730) (45,344) Profit on ordinary activities before taxation 937, ,601 Tax on profit on ordinary activities 9 267, ,227 Profit for the financial year ; ,374 IE2

27 Ian Edgar (Liverpool) Limited Financial statements for the year ended 31 March 2009 Balance sheet Note Fixed assets Tangible assets , ,367 Investments , ,369 Current assets Stocks 13 5,440,505 4,101,896 Debtors 14 2,330,581 1,383,277 Cash at bank 44 11,892 7,771,130 5,497,065 Creditors: amounts falling due within one year 15 5,210,966 3,384,365 Net current assets 2,560,164 2,112,700 Total assets less current liabilities 2,847,062 2,329,069 Provisions for liabilities Deferred taxation 17 20,915 2,826,147 2,329,069 Capital and reserves Called-up equity share capital 22 26,199 26,199 Share premium account 23 7,651 7,651 Other reserves 24 3,559 3,559 Profit and loss account 25 2,788,738 2,291,660 Shareholders' funds 26 2,826,147 2,329,069 I EdgarMBE Director IE3

28 Ian Edgar (Liverpool) Limited Financial statements for the year ended 31 March 2009 Cash flow statement Note Net cash (outflow)/inflow from operating activities 27 (270,135) 419,139 Returns on investments and servicing of finance 27 (52,621) (45,308) Taxation 27 (262,297) (56,930) Capital expenditure and financial investment 27 (152,855) (49,542) Equity dividends paid (172,794) (128,676) Cash (outflow)/ inflow before financing (910,702) 138,683 Financing 27 (17,147) (14,834) (Decrease) / increase in cash 27 (927,849) 123,849 IE4

29 Ian Edgar (Liverpool) Limited Financial statements for the year ended 31 March 2009 At 31 March 2009 the company held more than 10% of the allotted share capital of the following undertakings: Ian Edgar (Macclesfield) Limited Class of Nature Country of share Proportion of Capital and registration capital held held business reserves Profit for the financial year ,440, ,101, Trade debtors 2,144,367 1,273,608 Other debtors 10,935 Prepayments and accrued income 175, ,669 Deferred taxation (note 17) 2,000 2,330,581 1,383, Creditors: amounts falling due within one year Overdrafts 1,437, ,504 Trade creditors 2,631,773 1,932,710 Corporation tax 244, ,297 Other taxation and social security 397, ,855 Amounts due under hire purchase agreements 17,147 Proposed dividends 172, ,794 Other creditors 36,163 Director's loan accounts 39,254 59,515 Accruals and deferred income 251, ,543 5,210,966 3,384,365 IE5

30 Ian Edgar (Liverpool) Limited Financial statements for the year ended 31 March 2009 The following liabilities disclosed under creditors falling due within one year are secured by the company: Overdrafts Amounts due under finance leases and hire purchase agreements 1,437, ,504 17,147 Obligations relate. under finance leases and hire purchase Contracts are secured on the assets to which they ,147 17, Included in debtors (note 14) Included in provisions 20, (2,000) 20,915 Balance brought forward ProfIt and loss account movement arising during the year 2009 (2,000) 22, ,000 (10,000) Balance carried forward 20,915 (2,000) , (2,000) IE6

31 Ian Edgar (Liverpool) Limited Financial statements for the year ended 31 March 2009 The company holds financial instruments in order to manage its exposure to currency risks arising from its operations and from its sources of finance. The company incurs foreign exchange risk on sales and purchases that are denominated in currencies other than sterling. The currencies principally giving rise to risk are US Dollars. The company uses forward exchange contracts to hedge its foreign currency risk. All of the forward exchange contracts have maturities of less than 12 months after the balance sheet date ' ,000 Buy US $ and sell Fair Value of the forward contract as an asset/ (liability) 378, At 31 March 2009 the company had annual commitments under non-cancellable operating leases as set out below Land & Other Land & Other Buildings Items Buildings Items Operating leases which expire: Within 1 year 7,995 4,563 Within 2 to 5 years 63,078 29,498 19,257 After more than 5 years 63, ,078 37,493 63,078 23, Contingent liabilities The company has provided guarantees amounting to 30,000 (2008: 15,000) in connection with the liability for deferred duty under a Customs and Excise bond. During the year interest of 4,739 (2008 : 3,971) was paid by the company to Mr Ian Edgar MBE. The balance owed to Mr Ian Edgar MBE at 31 March 2009 was 39,254 (2008 : 59,515). IE7

32 Ian Edgar (Liverpool) Limited Financial statements for the year ended 31 March Share capital Authorised share capital: ,000 Ordinary shares of 1 each 50,000 50,000 Allotted, called up and fully paid: No No Ordinary shares of 1 each 26,199 26,199 26,199 26, Share premium account 24 Other reserves Other reserve balance brought forward 3,559 3, Profit and loss account Balance brought forward 2,291,660 1,873,078 Profit for the financial year 669, ,374 Equity dividends (172,794) (172,792) Balance carried forward 2,788,738 2,291,660 Profit for the financial year Equity dividends Net addition to shareholders' funds Opening shareholders' funds Closing shareholders' funds ,872 (172,794) 497,078 2,329,069 2,826, ,374 (172,792) 418,582 1,910,487 2,329,069 IE8

33 Ian Edgar (Liverpool) Limited Financial statements for the year ended 31 March 2009 IE9

34 ANNUAL REPORT AND ACCOUNTS 2009 CREATING THE UK S BEST FINANCIAL SERVICES PROVIDER LBG1

35 OVERVIEW Group profile 1 Group strategy 2 Divisional overview 3 Group performance 4 Group KPIs 5 Chairman s statement 6 Group chief executive s review 10 Group chief executive s Q&A 14 Marketplace trends 16 BUSINESS REVIEW Summary of Group results 18 Divisional results 24 Our people 50 Corporate responsibility 52 Risk management 56 Five year financial summary 95 GOVERNANCE The board 96 Directors report 98 Corporate governance 100 Directors remuneration report 105 FINANCIAL STATEMENTS Report of the independent auditors on the consolidated financial statements 126 Consolidated financial statements 127 Notes to the consolidated financial statements 133 Report of the independent auditors on the parent company financial statements 249 Parent company financial statements 250 Notes to the parent company financial statements 253 SHAREHOLDER INFORMATION Shareholder information 261 Glossary 262 Abbreviations 265 Index to annual report Lloyds Banking Group Annual Report and Accounts 2009 CONSOLIDATED INCOME STATEMENT for the year ended 31 December Note million million Interest and similar income 28,238 17,569 Interest and similar expense (19,212) (9,851) Net interest income 5 9,026 7,718 Fee and commission income 4,254 3,231 Fee and commission expense (1,517) (694) Net fee and commission income 6 2,737 2,537 Net trading income 7 19,098 (9,186) Insurance premium income 8 8,946 5,412 Other operating income 9 5, Other income 36,271 (709) Total income 45,297 7,009 Insurance claims 10 (22,019) 2,859 Total income, net of insurance claims 23,278 9,868 Operating expenses 11 (15,984) (6,100) Trading surplus 7,294 3,768 Impairment 12 (16,673) (3,012) Share of results of joint ventures and associates 13 (752) 4 Gain on acquisition 14 11,173 Profit before tax 1, Taxation 15 1, Profit for the year 2, Profit attributable to minority interests Profit attributable to equity shareholders 2, Profit for the year 2, Basic earnings per share p 6.7p Diluted earnings per share p 6.6p The accompanying notes are an integral part of the consolidated financial statements. 1 Restated for IFRS 2 (Revised) LBG2

36 OVERVIEW Group profile 1 Group strategy 2 Divisional overview 3 Group performance 4 Group KPIs 5 Chairman s statement 6 Group chief executive s review 10 Group chief executive s Q&A 14 Marketplace trends 16 BUSINESS REVIEW Summary of Group results 18 Divisional results 24 Our people 50 Corporate responsibility 52 Risk management 56 Five year financial summary 95 GOVERNANCE The board 96 Directors report 98 Corporate governance 100 Directors remuneration report 105 FINANCIAL STATEMENTS Report of the independent auditors on the consolidated financial statements 126 Consolidated financial statements 127 Notes to the consolidated financial statements 133 Report of the independent auditors on the parent company financial statements 249 Parent company financial statements 250 Notes to the parent company financial statements 253 SHAREHOLDER INFORMATION Shareholder information 261 Glossary 262 Abbreviations 265 Index to annual report Lloyds Banking Group Annual Report and Accounts 2009 CONSOLIDATED BALANCE SHEET at 31 December 2009 Assets Note million million Cash and balances at central banks 38,994 5,008 Items in the course of collection from banks 1, Trading and other financial assets at fair value through profit or loss ,011 45,064 Derivative financial instruments 18 49,928 28,884 Loans and receivables: Loans and advances to banks 19 35,361 38,733 Loans and advances to customers , ,344 Debt securities 23 32,652 4, , ,493 Available-for-sale financial assets 25 46,602 55,707 Investment properties 26 4,757 2,631 Investments in joint ventures and associates Goodwill 27 2,016 2,256 Value of in-force business 28 6,685 1,893 Other intangible assets 29 4, Tangible fixed assets 30 9,224 2,965 Current tax recoverable Deferred tax assets 42 5, Other assets 31 12,225 5,801 Total assets 1,027, ,033 The accompanying notes are an integral part of the consolidated financial statements. The directors approved the consolidated financial statements on 25 February Sir Winfried Bischoff J Eric Daniels Tim J W Tookey Chairman Group Chief Executive Group Finance Director LBG3

37 130 Lloyds Banking Group Annual Report and Accounts 2009 CONSOLIDATED BALANCE SHEET at 31 December Equity and liabilities Note million million Liabilities Deposits from banks 32 82,452 66,514 Customer deposits , ,938 Items in course of transmission to banks 1, Trading and other financial liabilities at fair value through profit or loss 34 28,271 6,754 Derivative financial instruments 18 40,485 26,892 Notes in circulation 981 Debt securities in issue ,502 75,710 Liabilities arising from insurance contracts and participating investment contracts 36 76,179 33,792 Liabilities arising from non-participating investment contracts 38 46,348 14,243 Unallocated surplus within insurance businesses 39 1, Other liabilities 40 29,320 11,456 Retirement benefit obligations ,771 Current tax liabilities 51 Deferred tax liabilities Other provisions Subordinated liabilities 44 34,727 17,256 Total liabilities 983, ,334 Equity Share capital 45 10,472 1,513 Share premium account 46 14,472 2,096 Other reserves 47 7,086 (2,476) Retained profits 48 11,248 8,260 Shareholders equity 43,278 9,393 Minority interests Total equity 44,107 9,699 Total equity and liabilities 1,027, ,033 The accompanying notes are an integral part of the consolidated financial statements. LBG4

38 OVERVIEW Group profile 1 Group strategy 2 Divisional overview 3 Group performance 4 Group KPIs 5 Chairman s statement 6 Group chief executive s review 10 Group chief executive s Q&A 14 Marketplace trends 16 BUSINESS REVIEW Summary of Group results 18 Divisional results 24 Our people 50 Corporate responsibility 52 Risk management 56 Five year financial summary 95 GOVERNANCE The board 96 Directors report 98 Corporate governance 100 Directors remuneration report 105 FINANCIAL STATEMENTS Report of the independent auditors on the consolidated financial statements 126 Consolidated financial statements 127 Notes to the consolidated financial statements 133 Report of the independent auditors on the parent company financial statements 249 Parent company financial statements 250 Notes to the parent company financial statements 253 SHAREHOLDER INFORMATION Shareholder information 261 Glossary 262 Abbreviations 265 Index to annual report Lloyds Banking Group Annual Report and Accounts 2009 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY Attributable to equity shareholders Share capital Other Retained Minority and premium reserves profits 1 interests Total 1 million million million million million Balance at 1 January ,730 (60) 9, ,425 Total comprehensive income (2,416) (1,590) Dividends (2,042) (29) (2,071) Private placement of ordinary shares Purchase/sale of treasury shares Employee share option schemes: Value of employee services Proceeds from shares issued Repayment of capital to minority shareholders (3) (3) Balance at 31 December ,609 (2,476) 8, ,699 Total comprehensive income 1,758 2, ,692 Dividends (116) (116) Issue of ordinary shares: Placing and open offer 649 3,781 4,430 Issued on acquisition of HBOS 1,944 5,707 7,651 Placing and compensatory open offer 3,905 3,905 Rights issue 13,112 13,112 Issued to Lloyds TSB Foundations Transfer to merger reserve (1,000) 1,000 Redemption of preference shares 2,684 (2,684) Purchase/sale of treasury shares Employee share option schemes: Value of employee services Adjustment on acquisition 5,567 5,567 Extinguishment of minority interests (5,035) (5,035) Balance at 31 December ,944 7,086 11, ,107 1 Restated for IFRS 2 (Revised) LBG5

39 Annual Report and Accounts 2010 RBS1 rbs.com

40 Consolidated income statement for the year ended 31 December 2010 Note Interest receivable 22,776 26,311 42,190 Interest payable (8,567) (12,923) (26,708) Net interest income 1 14,209 13,388 15,482 Fees and commissions receivable 2 8,193 8,738 8,855 Fees and commissions payable 2 (2,211) (2,790) (2,444) Income/(loss) from trading activities 2 4,517 3,761 (9,025) Gain on redemption of own debt ,790 Other operating income (excluding insurance net premium income) 2 1, ,153 Insurance net premium income 26 5,128 5,266 5,709 Non-interest income 17,659 19,638 5,248 Total income 31,868 33,026 20,730 Staff costs - excluding curtailment gains (9,671) (9,993) (8,898) -pension schemes curtailment gains 2,148 Premises and equipment (2,402) (2,594) (2,163) Other administrative expenses (3,995) (4,449) (4,716) Depreciation and amortisation (2,150) (2,166) (2,377) Write-down of goodwill and other intangible assets (10) (363) (16,911) Operating expenses 3 (18,228) (17,417) (35,065) Profit/(loss) before other operating charges and impairment losses 13,640 15,609 (14,335) Insurance net claims 26 (4,783) (4,357) (3,917) Impairment losses 14 (9,256) (13,899) (7,439) Operating loss before tax (399) (2,647) (25,691) Tax (charge)/credit 6 (634) 429 2,167 Loss from continuing operations (1,033) (2,218) (23,524) Loss from discontinued operations, net of tax 22 (633) (105) (11,018) Loss for the year (1,666) (2,323) (34,542) (1) 2008 (1) Loss attributable to: Non-controlling interests (665) 349 (10,832) Preference shareholders Paid-in equity holders Ordinary and B shareholders (1,125) (3,607) (24,306) (1,666) (2,323) (34,542) Per ordinary and B share (2) Basic loss from continuing operations 10 (0.5p) (6.3p) (146.2p) Diluted loss from continuing operations 10 (0.5p) (6.3p) (146.2p) Basic loss from discontinued operations 10 (0.1p) (0.5p) Diluted loss from discontinued operations 10 (0.1p) (0.5p) Dividends p Notes: (1) The Dutch retail and other banking businesses transferred to the Dutch State on 1 April 2010 are recognised as discontinued operations. Comparative information has been changed accordingly. (2) B shares rank pari-passu with ordinary shares. The accompanying notes on pages 287 to 385, the accounting policies on pages 275 to 286 and the audited sections of the Business review: Risk and balance sheet management on pages 119 to 224 form an integral part of these financial statements. 268 RBS Group 2010 RBS2

41 Balance sheets as at 31 December 2010 Group Company Note Assets Cash and balances at central banks 11 57,014 52,261 12,400 Loans and advances to banks ,518 91, ,197 19,535 31,238 27,031 Loans and advances to customers , , ,722 6,689 2,777 Debt securities subject to repurchase agreements 32 80,104 66,883 80,576 Other debt securities 137, , ,973 1,454 1,286 Debt securities , , ,549 1,454 1,286 Equity shares 17 22,198 19,528 26,330 Investments in Group undertakings 18 49,125 64,766 42,196 Settlement balances 11,605 12,033 17, Derivatives , , ,559 1,475 1,169 1,168 Intangible assets 19 14,448 17,847 20,049 Property, plant and equipment 20 16,543 19,397 18,949 Deferred tax 25 6,373 7,039 7, Prepayments, accrued income and other assets 21 12,576 20,985 24, Assets of disposal groups 22 12,484 18,542 1,581 Total assets 1,453,576 1,696,486 2,401,652 78, ,292 70,887 Liabilities Deposits by banks 11 98, , , ,802 Customer accounts , , ,512 1,029 13, Debt securities in issue , , ,289 8,742 11,788 14,179 Settlement balances 10,991 10,413 11,741 Short positions 23 43,118 40,463 42,536 Derivatives , , , Accruals, deferred income and other liabilities 24 23,089 30,327 31,482 1,034 1, Retirement benefit liabilities 4 2,288 2,963 2,032 Deferred tax 25 2,142 2,811 4,165 Insurance liabilities 26 6,794 10,281 9,976 Subordinated liabilities 27 27,053 37,652 49,154 8,048 8,762 10,314 Liabilities of disposal groups 22 9,428 18, Total liabilities 1,376,725 1,601,855 2,321,154 19,084 35,710 26,729 Non-controlling interests 28 1,719 16,895 21,619 Owners equity 29,30 75,132 77,736 58,879 59,224 65,582 44,158 Total equity 76,851 94,631 80,498 59,224 65,582 44,158 Total liabilities and equity 1,453,576 1,696,486 2,401,652 78, ,292 70,887 The accompanying notes on pages 287 to 385, the accounting policies on pages 275 to 286 and the audited sections of the Business review: Risk and balance sheet management on pages 119 to 224 form an integral part of these financial statements. The accounts were approved by the Board of directors on 23 February 2011 and signed on its behalf by: Philip Hampton Chairman Stephen Hester Group Chief Executive Bruce Van Saun Group Finance Director The Royal Bank of Scotland Group plc Registered No. SC RBS Group 2010 RBS3

42 BT Group plc Annual Report & Form 20-F 2010 BT1

43 FINANCIAL STATEMENTS CONSOLIDATED FINANCIAL STATEMENTS GROUP INCOME STATEMENT Before specific Specific items b items a Total b Year ended 31 March 2008 Notes Revenue 1 20,704 20,704 Other operating income (10) 349 Operating costs 3 (18,168) (529) (18,697) Operating profit 1 2,895 (539) 2,356 Finance expense 6 (2,891) (2,891) Finance income 6 2,513 2,513 Net finance expense (378) (378) Share of post tax loss of associates and joint ventures (11) (11) Profit on disposal of associate 9 9 Profit before taxation 2,506 (530) 1,976 Taxation 8 (581) 343 (238) Profit for the year 1,925 (187) 1,738 Attributable to: Equity shareholders of the parent 1,924 (187) 1,737 Minority interests 1 1 Earnings per share 9 Basic 21.5p Diluted 21.1p a For a definition of specific items, see page 87. An analysis of specific items is provided in note 5. b Restated. See page 94. GROUP STATEMENT OF COMPREHENSIVE INCOME a 2008 a Year ended 31 March Notes Profit (loss) for the year 1,029 (191) 1,738 Other comprehensive (loss) income Actuarial (losses) gains relating to retirement benefit obligations 29 (4,324) (7,037) 2,621 Exchange differences on translation of foreign operations 25 (119) Fair value movements on available-for-sale assets Fair value movements on cash flow hedges: fair value (losses) gains 25 (1,067) 2, reclassified and reported in net profit (loss) (2,144) (294) reclassified and reported in non current assets 25 (4) (5) 11 Tax on components of other comprehensive income 8 1,350 1,859 (832) Other comprehensive (loss) income for the year, net of tax (3,661) (3,911) 2,165 Total comprehensive (loss) income for the year (2,632) (4,102) 3,903 Attributable to: Equity shareholders of the parent (2,633) (4,113) 3,899 Minority interests a Restated. See page 94. (2,632) (4,102) 3,903 BT2 BT GROUP PLC ANNUAL REPORT & FORM 20-F 97 ADDITIONAL INFORMATION FINANCIAL STATEMENTS REPORT OF THE DIRECTORS REVIEW OF THE YEAR OVERVIEW

44 FINANCIAL STATEMENTS CONSOLIDATED FINANCIAL STATEMENTS GROUP STATEMENT OF CHANGES IN EQUITY Shareholders equity (deficit) Share Share Capital Other Retained Minority Total capital a premium a reserve reserves b earnings Total interests c Equity At 1 April ,685 4, ,272 Change in accounting policy for adoption of the amendment to IFRS 2 (see page 94) Total comprehensive income d 344 3,555 3, ,903 Dividends to shareholders (1,241) (1,241) (1,241) Share-based payments Tax on share-based payments (45) (45) (45) Issue of ordinary shares Cancellation of shares (13) (570) Net purchase of treasury shares (1,529) (1,529) (1,529) Other movements in minority interests (15) (15) At 1 April (527) 5,439 5, ,432 Total comprehensive (loss) income d 1,094 (5,207) (4,113) 11 (4,102) Dividends to shareholders (1,222) (1,222) (1,222) Share-based payments Tax on share-based payments (12) (12) (12) Issue of ordinary shares 797 (797) Cancellation of shares (12) 12 Net purchase of treasury shares (63) (63) (63) Other movements in minority interests (7) (7) At 1 April ,301 (1,656) Total comprehensive (loss) income d (548) (2,085) (2,633) 1 (2,632) Dividends to shareholders (263) (263) (263) Share-based payments Tax on share-based payments Net issuance of treasury shares Other movements in minority interests (4) (4) At 31 March (3,904) (2,650) 24 (2,626) a For details of share capital and share premium, see note 24. b For further analysis of Other reserves, see note 25. c For further analysis of minority interests, see note 23. d The group statement of comprehensive income is on page BT GROUP PLC ANNUAL REPORT & FORM 20-F BT3

45 FINANCIAL STATEMENTS CONSOLIDATED FINANCIAL STATEMENTS GROUP BALANCE SHEET a 2008 a At 31 March Notes Non current assets Intangible assets 12 3,672 3,788 3,355 Property, plant and equipment 13 14,856 15,405 15,307 Derivative financial instruments 19 1,076 2, Investments Retirement benefit asset 29 2,887 Associates and joint ventures Trade and other receivables Deferred tax assets 22 2,196 1,103 22,395 23,347 22,835 Current assets Inventories Trade and other receivables 17 3,696 4,185 4,449 Derivative financial instruments Investments Cash and cash equivalents 10 1,452 1,300 1,435 6,285 5,927 6,517 Current liabilities Loans and other borrowings 18 3,269 1,542 1,524 Derivative financial instruments Trade and other payables 20 6,531 7,215 7,591 Current tax liabilities Provisions ,420 9,068 9,495 Total assets less current liabilities 18,260 20,206 19,857 Non current liabilities Loans and other borrowings 18 9,522 12,365 9,818 Derivative financial instruments ,014 Retirement benefit obligations 29 7,864 3, Other payables Deferred tax liabilities 22 1,456 1,728 2,513 Provisions ,886 20,037 14,425 Equity Ordinary shares Share premium Capital redemption reserve Other reserves ,301 (527) Retained (loss) earnings (3,904) (1,656) 5,439 Total parent shareholders (deficit) equity (2,650) 142 5,409 Minority interests Total (deficit) equity b (2,626) 169 5,432 a Restated. See page 94. b The Group statement of changes in equity is on page ,260 20,206 19,857 The consolidated financial statements on pages 87 to 144 and 149 were approved by the Board of Directors on 12 May 2010 and were signed on its behalf by Sir Michael Rake Chairman Ian Livingston Chief Executive Tony Chanmugam Group Finance Director 100 BT GROUP PLC ANNUAL REPORT & FORM 20-F BT4

46 FINANCIAL STATEMENTS CONSOLIDATED FINANCIAL STATEMENTS GROUP BALANCE SHEET a 2008 a At 31 March Notes Non current assets Intangible assets 12 3,672 3,788 3,355 Property, plant and equipment 13 14,856 15,405 15,307 Derivative financial instruments 19 1,076 2, Investments Retirement benefit asset 29 2,887 Associates and joint ventures Trade and other receivables Deferred tax assets 22 2,196 1,103 22,395 23,347 22,835 Current assets Inventories Trade and other receivables 17 3,696 4,185 4,449 Derivative financial instruments Investments Cash and cash equivalents 10 1,452 1,300 1,435 6,285 5,927 6,517 Current liabilities Loans and other borrowings 18 3,269 1,542 1,524 Derivative financial instruments Trade and other payables 20 6,531 7,215 7,591 Current tax liabilities Provisions ,420 9,068 9,495 Total assets less current liabilities 18,260 20,206 19,857 Non current liabilities Loans and other borrowings 18 9,522 12,365 9,818 Derivative financial instruments ,014 Retirement benefit obligations 29 7,864 3, Other payables Deferred tax liabilities 22 1,456 1,728 2,513 Provisions ,886 20,037 14,425 Equity Ordinary shares Share premium Capital redemption reserve Other reserves ,301 (527) Retained (loss) earnings (3,904) (1,656) 5,439 Total parent shareholders (deficit) equity (2,650) 142 5,409 Minority interests Total (deficit) equity b (2,626) 169 5,432 a Restated. See page 94. b The Group statement of changes in equity is on page ,260 20,206 19,857 The consolidated financial statements on pages 87 to 144 and 149 were approved by the Board of Directors on 12 May 2010 and were signed on its behalf by Sir Michael Rake Chairman Ian Livingston Chief Executive Tony Chanmugam Group Finance Director 100 BT GROUP PLC ANNUAL REPORT & FORM 20-F BT5

47 Annual Report and Financial Statements 2012 T1

48 Group income statement 52 weeks 52 weeks Year ended 25 February * notes Continuing operations Revenue 2 64,539 60,455 Cost of sales (59,278) (55,330) Gross profit 5,261 5,125 Administrative expenses (1,652) (1,640) Profits/losses arising on property-related items Operating profit 3,985 3,917 Share of post-tax profits of joint ventures and associates Finance income Finance costs 5 (417) (483) Profit before tax 3 3,835 3,641 Taxation 6 (879) (864) Profit for the year from continuing operations 2,956 2,777 Discontinued operations Loss for the year from discontinued operations 7 (142) (106) Profit for the year 2,814 2,671 Attributable to: Owners of the parent 2,806 2,655 Non-controlling interests ,814 2,671 Earnings per share from continuing and discontinued operations Basic p 33.10p Diluted p 32.94p Earnings per share from continuing operations Basic p 34.43p Diluted p 34.25p Non-GAAP measure: underlying profit before tax 52 weeks weeks 2011* notes Profit before tax from continuing operations 3,835 3,641 Adjustments for: IAS 32 and IAS 39 Financial Instruments fair value remeasurements 1/5 (44) (19) IAS 19 Employee Benefits non-cash Group Income Statement charge for pensions IAS 17 Leases impact of annual uplifts in rent and rent-free periods IFRS 3 Business Combinations intangible asset amortisation charges and costs arising from acquisitions IFRIC 13 Customer Loyalty Programmes fair value of awards Restructuring and other one-off costs Underlying profit before tax from continuing operations 1 3,915 3,853 * See Note 1 Accounting policies for details of reclassifications. The notes on pages 95 to 141 form part of these financial statements. 90 Tesco PLC Annual Report and Financial Statements 2012 T2