Offering Circular
BRADFORD & BINGLEY BUILDING SOCIETY (Incorporated in England under the Building Societies Act 1986 Registered number 701B)
£60,000,000
13 per cent. Permanent Interest Bearing Shares
Application has been made to the Council of The International Stock Exchange of the United Kingdom and the Republic of Ireland Limited (the "London Stock Exchange") for the issue of £60,000,000 13 per cent. Permanent Interest Bearing Shares, comprising 6,000 PIBS of £10,000 each, (the "PIBS") of Bradford & Bingley Building Society (the "Society" or "Bradford & Bingley") to be admitted to the Official List of the London Stock Exchange. The listing of the PIBS will be expressed as a percentage of their principal amount (excluding accrued interest). It is anticipated that the PIBS will be admitted to the Official List on 4th October, 1991, subject only to the issue of the PIBS, and dealings are expected to commence on 8th October, 1991.
Issue Price: 100.2 per cent.
The PIBS will be deferred shares in the Society for the purposes of section 119 of the Building Societies Act 1986 and will not be protected investments for the purposes of the Building Societies Investor Protection Fund.
The PIBS will not be withdrawable at the option of the PIBS holder and are repayable only in certain limited circumstances as described in "Special Terms of Issue of the PIBS—Repayment".
Salomon Brothers International Limited Hoare Govett Corporate Finance Limited
The date of this Offering Circular is 1st October, 1991. The Directors of the Society, whose names appear on page 12, accept responsibility for the information in this document. To the best of the knowledge and belief of the Directors (who have taken all reasonable care to ensure that such is the case), the information contained in this document is in accordance with the facts and does not omit anything likely to affect the import of such information.
No person is authorised to give any information or to make any representation not contained herein and any information or representation not contained herein must not be relied upon as having been authorised by the Society, Salomon Brothers International Limited (the "Arranger") or Hoare Govett Corporate Finance Limited ("Hoare Govett"). This document does not constitute an offer to sell or a solicitation of any offer to buy the PIBS in any jurisdiction to any person to whom it is unlawful to make such an offer or solicitation in such jurisdiction. Neither the delivery of this document nor any sale made hereunder shall, under any circumstances, create any implication that there has been no change in the affairs of the Society since the date hereof.
Copies of this document, which comprises approved listing particulars with regard to the Society in accordance with the listing rules made under section 142 of the Financial Services Act 1986, have been delivered to the Registrar of Companies in England and Wales for registration in accordance with section 149 of that Act.
The PIBS have not been and will not be registered under the United States Securities Act of 1933 and may not be offered or sold, directly or indirectly, in the United States or to U.S. persons otherwise than in accordance with applicable U.S. securities laws and regulations.
The distribution of this document and the offering of the PIBS in certain jurisdictions may be restricted by law. Persons into whose possession this document comes are required by the Society, the Arranger and Hoare Govett to inform themselves about and to observe such restrictions. For a further description of certain restrictions on offering and sale of the PIBS and on distribution of this document, see "Marketing Arrangements" below.
The information contained in this document is intended for professional investors capable of understanding the nature of a PIBS and the risks attaching to it. Accordingly, attention is drawn to the restrictions on offers or sales of the PIBS and distribution of this document and other offering material relating to the PIBS contained in "Marketing Arrangements" below.
In this document, unless otherwise specified or the context otherwise requires, references to "pounds", "sterling" and "£" are to the currency of Great Britain and Northern Ireland (the "United Kingdom") and to the "Act" are to the Building Societies Act 1986, which expression shall include, where applicable, any statutory modification or re-enactment thereof or any statutory instrument, order or regulation made thereunder or under any such statutory modification or re-enactment
TABLE OF CONTENTS Page
Summary of the Key Provisions of the Rules of the Society 3 Special Terms of Issue of the PIBS 5 Use of Proceeds 8 Bradford & Bingley Building Society 9 Capitalisation Statement 11 Board of Directors 12 Financial Statements 13 United Kingdom Taxation 30 Marketing Arrangements 31 General Information 32
2 SUMMARY OF THE KEY PROVISIONS OF THE RULES OF THE SOCIETY
The rights and restrictions attaching to the PIBS will be set out both in the Rules of the Society (the "Rules") and in the special terms of issue of the PIBS. Set out below is a summary of the key provisions of the Rules insofar as they affect the rights of PIBS holders. Terms defined in the Rules will, unless the context otherwise requires, have the same meanings when used in this summary.
1. General A person whose name is entered in the records of the Society as a holder of a PIBS or a fraction of a PIBS (a "PIBS holder") is a member. Each PIBS holder and all persons claiming through him or on his account or under the Rules shall be bound by the Rules and by the provisions of the Society's Memorandum, a copy of which shall be supplied to any PIBS holder on request.
2. Register The Society shall maintain a Register in which shall be entered the name and address of each PIBS holder. Each PIBS holder is obliged by the Rules to notify the Society immediately of any changes of name or address and shall produce such evidence of a change of name as the Board may require. Transfers and other documents relating to or affecting the title of any PIBS shall also be recorded in the Register. No charge shall be made in respect of any entry in the Register. The Register shall be maintained at the principal office of the Society appearing on page 35, or at such other place or places as the Board thinks fit. The Board may decline to issue any PIBS in the names of more than four persons. PIBS holders cease to be members when their names are no longer entered in the records of the Society as a holder of a PIBS or a fraction of a PIBS. 3. Title Except as otherwise provided in the Rules, the Society shall be entitled to treat any PIBS holder as the absolute owner thereof and accordingly shall not, except as ordered by a court of competent jurisdiction or as by statute required, be bound to recognise any trust or equitable or other claim to or interest in or charge on or security over such PIBS {whether partial or otherwise) on the part of any other person whether or not it shall have express or other notice thereof nor be held responsible for omitting or neglecting to recognise any such claim. A fully paid PIBS shall be free of all liens in respect of liabilities to the Society. 4. PIBS Certificate Within one month after becoming registered as the holder of a PIBS {or within such other period as the terms of issue of the PIBS may provide), a PIBS holder shall be supplied by the Society with a PIBS Certificate. 5. Replacement of PIBS Certificates Any PIBS holder losing his PIBS Certificate is obliged by the Rules immediately to give notice in writing of such loss to the Society. If a PIBS Certificate is damaged or is alleged to have been lost, stolen or destroyed, a new PIBS Certificate representing the same PIBS may be issued to the holder upon request subject to delivery up of the old PIBS Certificate or (if alleged to have been lost, stolen or destroyed) subject to compliance with such conditions as to evidence and indemnity as the Board may think fit and to payment of any exceptional expenses of the Society incidental to its investigation of the evidence of such alleged loss, theft or destruction. Where a holder of PIBS has transferred part of his holding, he will be entitled to a PIBS Certificate for the balance without charge. 6. Transfers Any fully paid PIBS may, subject to the terms of issue, be transferred to any person on payment to the Society of such fee (if any) as the Board may from time to time determine and such transferee shall be entitled to have his name entered in the records of the Society following written notice by him to the Society of such transfer. No transfer shall be valid unless made in a form approved by the Board and until registered in the books of the Society.
3 The registration of transfers of PIBS or of any class of PIBS may be suspended at such times and for such periods as the Board may determine but not for more than 30 days in any year and notice of such suspension shall be given by advertisement in not less than two national daily newspapers.
7. Prescription In certain circumstances set out in the Rules, the Society shall be entitled to sell for the best price reasonably obtainable any PIBS in respect of which no interest has been claimed during a period of 12 years. The Society must first give written notice to the Quotations Department of the London Stock Exchange of its intention to sell the PIBS. The Society shall be obliged to account to the PIBS holder or another person entitled to the PIBS for the net proceeds of sale of the PIBS.
8. Meetings As members of the Society, PIBS holders will be entitled to receive notice of, to attend, to be counted in a quorum and to vote at General Meetings of the Society if they meet the requirements set out in the paragraph below. A PIBS holder will be entitled to vote on a resolution if on the Qualifying Shareholding Date and the voting date the PIBS holder was entered in the records of the Society as the holder of PIBS with a paid up nominal value of at least £100. "Qualifying Shareholding Date" means the end of the financial year before the voting date or, if the voting date falls in that part of the financial year which follows the conclusion of the Annual General Meeting commenced that year, at the beginning of the period 56 days immediately preceding the voting date. Each PIBS holder will have one vote regardless of the principal amount of PIBS held by that holder and regardless of any other shares in the Society held by that PIBS holder. At a General Meeting of the Society ten members who are entitled to vote at the meeting may demand a poll. The Rules may be altered or rescinded or added to by passing a resolution as a special resolution.
9. Dissolution If, upon a dissolution of the Society, there are insufficient assets to repay all members the amounts paid up on their shares, no repayments shall be made in respect of any deferred share (which includes a PIBS) until after all other members have been repaid in full.
10. Disputes and Legal Proceedings Subject to the provisions of section 1 of the Courts and Legal Services Act 1990, section 85 and Schedule 14 of the Act provide that in relation to the Society no court other than the High Court of Justice in England shall have jurisdiction to hear and determine disputes between a building society and a member or a representative of a member in that capacity in respect of any rights or obligations arising from the Rules. Pursuant to section 1 of the Courts and Legal Services Act 1990, the County Court Jurisdiction Order 1991 No. 724 has been made which empowers the High Court to transfer cases over which it has jurisdiction to the County Court. Any dispute between the Society and any member or person claiming by or through the member or under the Rules, referred to in Part II of Schedule 14 to the Act (in relation to refusals by the Society to send an election address or a notice of certain resolutions of members to members) shall be referred to arbitration in accordance with the provisions of the Arbitration Acts 1950 to 1979. Complaints by members may be made to the Building Societies Ombudsman in accordance with section 83 of the Act.
11. Registrar The Society has appointed The Royal Bank of Scotland plc (the "Registrar") at its specified office at P. O. Box 435, Owen House, 8 Bankhead Crossway North, Edinburgh EH11 4BR to maintain the Register of PIBS holders at such specified office. It is intended that the Registrar will act as the agent of the Society for the purposes of maintaining the Register of PIBS holders, accepting instructions for, and effecting, transfers of PIBS, issuing PIBS Certificates to new PIBS holders, receiving requests for the replacement of, and replacing, damaged, lost, stolen or destroyed PIBS Certificates and making payments in respect of the PIBS as they fall due.
4 SPECIAL TERMS OF ISSUE OF THE PIBS
The following are the special terms of issue of the PIBS substantially in the form in which they will appear on the reverse of the PIBS Certificate: Terms defined in the Rules of the Society (the "Rules") will, unless the context otherwise requires, have the same meaning when used in these additional special terms of issue (the "Conditions"). The 13 per cent. Permanent Interest Bearing Shares (the "PIBS" which expression, unless the context otherwise requires, shall include any further deferred shares issued pursuant to Condition 8 below and forming a single series with the PIBS) of the Society are deferred shares issued under the Rules. PIBS holders are entitled to the benefit of, are bound by, and are deemed to have notice of, the Rules. The PIBS are also issued subject to, and with the benefit of, the following Conditions, but, in the event of any conflict between the Rules and the following Conditions, the Rules shall take precedence:
1. General The PIBS: (a) are deferred shares for the purposes of section 119 of the Building Societies Act 1986 (the "Act"); (b) are not protected investments for the purposes of the Building Societies Investor Protection Fund; (c) are not withdrawable; and (d) are classified as permanent interest bearing shares for the purposes of the Rules.
2. Form, Denomination and Title The PIBS are in registered form and are available and transferable in amounts and integral multiples of £10,000.
3. Interest (a) The PIBS bear interest from and including 7th October, 1991 at the rate of 13 per cent. per annum (less income tax where appropriate) payable, subject as provided below, in arrear by equal half-yearly instalments on 7th April and 7th October in each year, commencing on 7th April, 1992. Each half-yearly period is referred to as an "Interest Period". Interest on the PIBS is non-cumulative as described below. (b) Interest in respect of the PIBS shall not be payable for any specified Interest Period if the Society has at any time before the date for payment of the interest cancelled the payment of any interest or dividend upon: (i) any other shares of any class (other than deferred shares) of the Society; or (ii) any deposit (as defined in the Act) with the Society, which falls, in accordance with the terms of the share or deposit, to be paid or credited at any time before the end of the relevant Interest Period. For the purposes of this paragraph (b): (i) where the Society has deferred or suspended any payment upon the shares or deposits referred to in (i) or (ii) respectively above it shall be deemed to have cancelled the payment for so long as the payment upon the shares or deposits referred to in (i) or (ii) respectively above remains outstanding; (ii) a payment upon the shares or deposits referred to in (i) or (ii) respectively above is to be taken to fall to be paid or credited in circumstances where it would have so fallen but for any provisions in the terms of the share or deposit entitling the Society to cancel, defer or suspend payment; and (iii) where the Society has cancelled any payment in circumstances that extinguish all future obligations of the Society in relation to that payment, the Society shall only be deemed to have cancelled that payment before the end of the relevant Interest Period if such cancellation occurred during the relevant Interest Period.
5 (c) Interest in respect of the PIBS shall not be payable for any specified Interest Period if and to the extent that the Board has certified that it is of the opinion that: (i) there has been a failure by the Society to satisfy the first criterion of prudent management set out in section 45(3) of the Act and such failure is then continuing; or (ii) the payment or crediting of the interest or, as the case may be, payment or crediting in full of the interest would cause or contribute to such a failure by the Society, and in such case the Board passes a resolution cancelling or, as the case may require, reducing, the interest payable during the relevant Interest Period to such extent as may be necessary to secure that there will be no failure to satisfy the first criterion of prudent management. (d) If and to the extent that paragraphs (b) or (c) above prohibit the payment of interest, interest in respect of the PIBS will be cancelled and PIBS holders will have no rights in respect of the cancelled interest.
4. Repayment (a) The PIBS constitute permanent non-withdrawable deferred shares in the Society and will have no specified final maturity. (b) The PIBS will become repayable on the date that an order is made or an effective resolution is passed for the winding up or, otherwise than by virtue of section 93(5), section 94(10), section 97(9) or section 97(10) of the Act, dissolution of the Society but only to the extent that and subject to the condition that all sums due from the Society to Creditors claiming in the winding up or dissolution have been paid in full. For the purposes of these Conditions "Creditors" means all creditors of the Society and members holding shares (other than deferred shares) as regards the principal and interest due in respect of those shares. (c) The claims of PIBS holders in a winding up or dissolution of the Society will be for the principal amount of their PIBS together, subject to Condition 3, with interest accrued to the date of repayment after all sums due from the Society to Creditors have been paid in full. (d) The Society may, having obtained prior Relevant Supervisory Consent, and subject to and in accordance with the requirements from time to time of The International Stock Exchange of the United Kingdom and the Republic of Ireland Limited, purchase any PIBS. For the purposes of these Conditions, "Relevant Supervisory Consent" means consent to the relevant purchase given by the Building Societies Commission. (e) All PIBS repaid or purchased by the Society in accordance with this Condition (except purchases in the ordinary course of business of a dealer in securities) shall be cancelled forthwith and may not be reissued or resold.
5. Payments All payments in respect of the PIBS will be made by sterling cheque drawn on a bank in the United Kingdom and posted on the day (other than a Saturday or a Sunday) on which banks are open for business in London (a "business day") immediately preceding the relevant due date to the PIBS holder or to the representative joint holder appearing on the Register at the close of business on the fifteenth day before the relevant due date (the "Record Date") at his address shown on the Register on the Record Date. Upon application of the PIBS holder to the Registrar not less than ten business days before the due date for any payment in respect of a PIBS, the payment may be made by transfer on the due date to a sterling account maintained by the payee with a bank in London.
6. Succession and Transfers (a) Upon an amalgamation by the Society with another building society under section 93 of and Schedule 16 to the Act or a transfer of its engagements to any extent to another building society under section 94 of and Schedule 16 to the Act the PIBS shall be deferred shares in the transferee building society without any alteration in their terms. (b) Upon a transfer by the Society of the whole of its business to a successor in accordance with section 97 of the Act the successor is required, in accordance with section 100(2)(a) of the Act, to assume as from the vesting date a liability (subject to this paragraph) to every qualifying member of the Society as in
6 respect of a deposit made with the successor company corresponding in amount to the value of the qualifying shares held by the member in the Society. The liability assumed by the successor company in respect of the PIBS shall be as in respect of a non• transferable deposit carrying the same rate of interest as the PIBS (the "Deposit"). The Deposit will be applied on behalf of the holder in the subscription of a principal amount of perpetual subordinated notes of the successor company carrying the same rate of interest as the PIBS (the "Notes") equivalent to the principal amount of the Deposit. The application of the Deposit will occur automatically on the date occurring five years after the vesting date or earlier if the directors of the successor company receive a certificate in such form as they may reasonably require from the holder of the Deposit, that the effect of the allotment of the Notes would not be that more than the permitted proportion (as defined in section 101 of the Act) (presently, 15 per cent.) of the total indebtedness of the successor company on its debentures would be held by, or by nominees for, the holder of the Deposit. The form of the certificate required will be sent to holders of PIBS prior to the vesting date. The terms of the Deposit and the terms and conditions of the Notes will be such as to secure in the opinion of the Board that they will be: (i) treated as capital designated perpetual subordinated debt (as referred to in the Bank of England Notice to institutions authorised under the Banking Act 1987 BSD/1990/2 of December 1990 as replaced, amended or supplemented from time to time) or its equivalent as determined by the auditors of the Society for the purposes of capital adequacy regulations made from time to time by the Bank of England; and (ii) subordinated debt (as defined in the Building Societies (Designated Capital Resources) (Permanent Interest Bearing Shares) Order 1991 as replaced, amended or supplemented from time to time). The terms of the Deposit and the terms and conditions of the Notes will, not later than the time at which notice is given to members of resolutions to be proposed to approve such transfer, be available for inspection by PIBS holders at the principal office of the Society and, subject as provided above, will be determined by the Board in its absolute discretion. (c) The Society undertakes to procure that any amalgamation or transfer referred to in paragraph (a) or (b) above will comply with the terms of the provisions of paragraph (a) or, as the case may be, (b) above.
7. Variation of these Conditions (a) These Conditions may be varied with the consent in writing of the holders of three-quarters in principal amount of the PIBS or with the sanction of a resolution passed at a separate meeting of the holders of not less than one-third in principal amount of the PIBS by a majority of three-quarters of such holders voting in person or by proxy. (b) All the provisions of the Rules relating to General Meetings of the Society or to proceedings at General Meetings shall apply, mutatis mutandis, to every separate meeting of PIBS holders, except that: (i) the necessary quorum at any such meeting shall be two persons holding or representing by proxy at least one-third in principal amount of the PIBS; (ii) PIBS holders shall, on a poll, have one vote in respect of every £10,000 principal amount of PIBS held by them; and (iii) a poll may be demanded by any one PIBS holder whether present in person or by proxy. (c) The Society undertakes not to initiate any change to the Rules that is both (a) inconsistent with the provisions of these Conditions and (b) materially prejudicial to the interests of the PIBS holders. (d) These Conditions do not limit the rights of members to change the Rules. Any amendment to the Rules that is both (a) inconsistent with the provisions of these Conditions and (b) materially prejudicial to the interests of the PIBS holders, shall not limit any rights of PIBS holders to take legal proceedings against the Society in circumstances where the Society is in breach of the terms of these Conditions nor afford the Society any defence to any claim made in any such proceedings.
7 8. Further Issues The Society shall be at liberty from time to time without the consent of the PIBS holders to create and issue further deferred shares either: (a) ranking pari passu in all respects (or in all respects save for the first payment of interest thereon) and so that the same shall be consolidated and form a single series with the outstanding deferred shares of any series {including the PIBS); or (b) upon such other special terms of issue as the Society may at the time of issue determine provided that the Society shall not issue any deferred shares ranking ahead of the PIBS.
USE OF PROCEEDS
The net proceeds of the issue of the PIBS (estimated to amount to £59,203,875) will be applied by the Society for general purposes of the Society. It is intended that the principal amount of PIBS (£60,000,000) will be treated for capital adequacy purposes as core capital.
8 BRADFORD & BINGLEY BUILDING SOCIETY
The Society was formed in 1964 by the merger of the Bradford Equitable Building Society and the Bingley Building Society which were both established in 1851. At 31st December, 1990, the Society was the eighth largest building society in the United Kingdom with total assets (including the assets of wholly- owned subsidiaries) of £9,047,661,000. The Society is a "building society" within the meaning given to that term in the Building Societies Act 1986. The Society's business is conducted in accordance with that Act and the Rules of the Society. The principal object of the Society, as stated in Clause 2 of its Memorandum, is that of raising, primarily by the subscriptions of the members of the Society, a stock or fund for making to them advances secured on land for their residential use. The Society operates on a countrywide basis through a network of branches and agencies. As at 31st December, 1990 the Society had 260 branches and 413 agencies and employed an average of 2,508 full- time staff and 357 part-time staff during the year. As at 31st December, 1990 the Society had 2,040,802 investing shareholders and 286,187 borrowing members. The Society offers a wide range of investment facilities for savers and is also active in the wholesale money markets raising funds through certificates of deposit, time deposits, U.S. commercial paper, bank loans and floating rate notes. At the end of 1990 non-retail funds balances amounted to £1,819,778,000 representing 21.83 per cent. of share, deposit and loan liabilities. This compares with the overall maximum allowed under the Building Societies Act 1986 of 40 per cent. The Society's principal activity is to make long-term loans for house purchase, repair or improvement which are secured by way of first mortgage of freehold or leasehold property. The rate of interest on a loan is generally variable at the Society's option changing broadly in line with the general level of interest rates. The average life of mortgage loans is approximately six years. At 31st December, 1990, outstanding mortgage balances amounted to £7,318,871,000 represented by 286,187 borrowing members. In the year to 31st December, 1990, the Society lent, by way of mortgage, £2,268,120,000, an increase of 26 per cent. over 1989. With the new powers available to building societies under the Building Societies Act 1986, the Society has entered into a number of new activities since January 1987, some of which are carried out through wholly-owned subsidiaries. The Society was the first building society to market its own Personal Equity Plans. By the end of 1990, Bradford & Bingley (PEPs) Limited had 46,637 plans and over £80,000,000 of funds under management. Further new services were subsequently introduced including a number of corporate Personal Equity Plans, new insurance policies and a Personal Pensions Advisory Service providing independent financial advice. In addition, Bradford & Bingley Personal Finance Limited provides limited unsecured lending under the name of "Bradford & Bingley Personal Loans". Bradford & Bingley Properties Limited is a wholly-owned subsidiary which is undertaking the construction of office premises for the Society. In 1989, the Society established its first offshore branch, in the Isle of Man, whilst in 1990 Bradford & Bingley (Douglas) Limited, a wholly-owned UK subsidiary operating exclusively from Douglas, in the Isle of Man, began offering gross interest deposit account facilities to UK investors.
Operating Performance and Financial Position (The following figures are extracted from the latest Audited Accounts) In 1990, the Society achieved a record level of profit after tax of £65,507,000. This was an increase of £8,165,000 over the previous year. During 1990 the Society issued £50,000,000 Subordinated Floating Rate Notes Due 2005 to enhance its capital base. Reserves at the end of 1990 stood at £394,306,000 or 4.36 per cent of total assets, while liquid assets amounted to £1,566,237,000 representing 17.31 per cent. of total assets.
Recent Developments and Prospects During 1991, three transfers of engagements to the Society have taken place pursuant to Section 94 of the Building Societies Act 1986, one by The Hendon Building Society, one by Hampshire Building Society and the third by Leamington Spa Building Society, which transfers took effect on 18th March, 1991, 17th June, 1991 and 1st July, 1991, respectively.
9 The largest of the transfers was that of Leamington Spa Building Society. In the year ended 31st December, 1990, the last full year of operation, Leamington Spa Building Society recorded an after tax loss for the year of £2.4 million after making substantial provisions against potential mortgage losses. The Capitalisation Statement on page 11 includes figures for Leamington Spa Building Society as at 31st December, 1990. Unaudited accounts of Leamington Spa Building Society for the final period of trading to 30th June, 1991, indicate that on the transfer of engagements the Society's capital was increased by approximately £18 million of reserves and £32 million of subordinated debt. The unaudited balance sheet of Leamington Spa Building Society at 30th June, 1991 indicates the assets transferred amounted to approximately £1,400 million. There were 110,000 investing members and 22,000 borrowing members of Leamington Spa Building Society at the date of transfer. The Society has concentrated on its traditional savings and mortgage lending markets. It also continues to develop its stance as a major independent financial intermediary and is now the largest independent financial adviser amongst building societies. The Society also continues to pursue its policy of accepting transfers of engagements from smaller societies as it believes that this strategy offers considerable long term benefits for the overall development of the Society. Over the next twelve months the Society expects to continue to expand its activities in the UK mortgage lending market against a background of relatively stable house prices and the lower level of general interest rates.
Principal Establishment The principal place of business of the Society is the Head Office which is situated at Main Street, Bingley, BD16 2LW. These premises measure approximately 150,000 square feet and the freehold is wholly owned by the Society. The Society also owns and wholly occupies freehold premises at Milverton Hill, Leamington Spa, CV32 5FE amounting to approximately 81,000 square feet.
10 CAPITALISATION STATEMENT
The following table is a summary of the consolidated shareholders' funds and indebtedness of the Society and its subsidiaries (together the "Group") as at 31st December, 1990 and as at that date adjusted to reflect the subsequent issue by the Society of its Floating Rate Notes due 1995 and its Subordinated Floating Rate Notes due 2001, and the issue by the Society of the PIBS. In view of the recent transfer of engagements from Leamington Spa Building Society, described under "Bradford & Bingley Building Society" above, similar details of the capitalisation of that society and its subsidiary are also given, based on its audited accounts as at 31st December, 1990. Leamington Spa Bradford & Bingley Building Building Society Society
31st 31st 31st December, December, December, 1990 1990 1990 (Audited) (As adjusted) (Audited)(1)
(in thousands (in thousands (in thousands of pounds) of pounds) of pounds) Shareholders' Funds: Shares(2) 5,722,934 5,722,934 1,031,904 PIBS (now being issued) — 60,000 — General Reserve 394,306 394,306 53,210 Revaluation Reserve — — 8,691
Total Shareholders'Funds 6,117,240 6,177,240 1,093,805
Indebtedness: Time Deposits 260,613 260,613 254,658 Deposits and Loans from Banks 404,921 404,921 48,765 Other Deposits and Loans 942,717 942,717 1,509 Certificates of Deposit 364,997 364,997 — U.S. Commercial Paper 117,285 117,285 — Floating Rate Notes Due 1994 151,792 151,792 — Floating Rate Notes due 1995 (issued June 1991) — 100,000 — Initial Tranche of Floating Rate Notes Due 1997 154,717 154,717 — Floating Rate Notes Due 1998 103,193 103,193 — Subordinated Loans due 1998 — — 10,000 Floating Rate Notes Due 1999 206,103 206,103 — Subordinated Floating Rate Notes due 2001 (issued September 1991) — 15,500 — Subordinated Floating Rate Notes Due 2005 50,821 50,821 — Floating Rate Subordinated Notes 2005 — — 22,000
Total Indebtedness 2,757,159 2,872,659 336,932
Total Capitalisation 8,874,399 9,049,899 1,430,737
Notes: (1) The accounts of Leamington Spa Building Society were audited by KPMG Peal Marwick McLintock, Chartered Accountants, Birmingham. (2) The Rules of the Society provide that the Board may limit at any time and from time to time and without notice the amount which may be withdrawn in respect of any share, whether in a class or not. (3) No pro forma figures reflecting the position following the transfer of engagements from Leamington Spa Building Society have been prepared as a simple arithmetic combination of the above figures would not give an accurate view of the current consolidated shareholders' funds and indebtedness of the Group. (4) Save as disclosed in the table above and in the section headed "Recent Developments and Prospects" on pages 9 and 10, in respect of the transfer of engagements from Leamington Spa Building Society, there has been no material change in the indebtedness and shareholders' funds of the Society since 31st December, 1990.
11 BOARD OF DIRECTORS
The business of the Society is under the control of a Board of Directors, all of whom are elected or re- elected at intervals not exceeding every third Annual General Meeting. Their responsibilities are defined in the Act and in the Rules. The composition of the Board is as follows: Directors Other principal directorships Donald Hanson, F.C.I.S., C.B.I.M., F.R.S.A., Chairman, — Non-Executive Director George A. Sykes, Vice-Chairman, Non-Executive Director — Derek Trevor Lewis, LL.B., Non-Executive Director — Geoffrey R. Lister, F.C.A., F.C.B.S.I., C.B.I.M. National House Building Council Sir David Neil Macfarlane, MP., Non-Executive Director The Golf Fund plc, Petron-Boss Limited, R.M.C. Plc, Zetters International plc Jack Lindsay Mackinlay, F.C.A., F.C.M.A., F.B.I.M., Non- Argos plc, Aynsley Group PLC, Henry Executive Director Barrett Group PLC, Steetley PLC Michael Pheasey, F.C.I.S. — William M. Pybus, M.A.(Oxon.), C.B.I.M., F.C.I.M., AAH Holdings plc, Cornhill Insurance Non-Executive Director* PLC, Homeowners Friendly Society, Siebe plc *W. M. Pybus is also a consultant in Denton Hall Burgin & Warrens, legal advisers to the Society in connection with this issue. The business address of the Directors is c/o Bradford & Bingley Building Society, Main Street, Bingley, West Yorkshire BD16 2LW.
Management The implementation of policy made by the Board of Directors and the daily management of the Society is delegated to the management team of: Executive Directors Geoffrey R. Lister, F.C.A., F.C.B.S.I., C.B.I.M., Chief Executive Michael Pheasey, F.C.I.S., Sales and Marketing Director General Managers Steven G. Spilsbury, F.C.B.S.I. John Gordon Lodge, F.B.I.M. John A. W. Smith, F.C.C.A., General Manager Finance Norman Cameron Scott, F.C.A., F.C.B.S.I. Secretary Kevin McGuinness, F.C.B.S.I. Assistant General Managers Leonard S. G. Baldwin, F.C.B.S.I. John H. Bradford David A. Hemsley, F.C.A. John L. McKenzie, B.A. (Open), F.C.B.S.I. David M. Munt, B.Sc, (Hons.), F.C.A., I.P.F.A., Treasurer John Ross, A.I.B. (Scot.) Ian D. Smith, F.C.B.S.I. William R. Thomson Philip Tolchard, F.C.B.S.I. Mark M. J. Trethewey, LL.B. John Phillip Whitaker, F.C.B.S.I.
12 FINANCIAL STATEMENTS
The Financial Statements set out on pages 13 to 29 have been extracted from audited accounts of the Group.
GROUP INCOME AND EXPENDITURE ACCOUNT
For the year ended 31st December, 1990
Notes 1990 1989 1988
£'000 £'000 £'000 Interest receivable 2 1,173,042 813,306 559,595 Interest payable 3 1,014,843 675,867 450,525
Net interest receivable 158,199 137,439 109,070 Other income and charges 4 45,541 30,669 28,423
203,740 168,108 137,493 Management expenses 5 93,731 79,599 66,487
110,009 88,509 71,006 Provisions for tosses on commercial assets 11 9,389 770 487 Provisions for interests and shares in associated bodies — — 42
Profit on ordinary activities before tax 100,620 87,739 70,477 Tax on profit on ordinary activities 9 35,113 30,397 23,117
Profit for the financial year 21 65,507 57,342 47,360
The notes on pages 18 to 29 form part of these Accounts.
13 GROUP BALANCE SHEET
At 31st December, 1990
Notes 1990 1989 1988
Assets £'000 £'000 £'000 Liquid assets 10 1,566,237 1,277,702 1,023,799 Commercial assets 11 Advances secured on residential property 7,147,363 5,694,507 4,570,503 Other advances secured on land 171,508 82,944 34,921 Other commercial assets 12 26,842 9,522 — Fixed assets 14 127,979 85,345 62,788 Other assets 7,732 5,777 1,725
Total assets 9,047,661 7,155,797 5,693,736
Liabilities and reserves Shares, deposits and loans Retail funds and deposits 15 6,626,519 5,509,329 4,752,142 Non-retail funds and deposits 16 1,802,753 1,150,274 541,982 Other liabilities 17 170,811 167,782 128,365 Provisions for liabilities and charges 18 2,451 631 808 Subordinated liabilities 20 50,821 — —
Total liabilities 8,653,355 6,828,016 5,423,297 General reserve 21 394,306 327,781 270,439
Total liabilities and reserves 9,047,661 7,155,797 5,693,736
14 SOCIETY INCOME AND EXPENDITURE ACCOUNT
For the year ended 31st December, 1990
Notes 1990 1989 1988
£'000 £'000 £'000 Interest receivable 2 1,168,264 810,932 559,595 Interest payable 3 1,016,078 675,930 450,621
Net interest receivable 152,186 135,002 108,974 Other income and charges 4 39,262 28,098 27,271
191,448 163,100 136,245 Management expenses 5 88,821 75,941 64,153
102,627 87,159 72,092 Provisions for losses on commercial assets 11 8,402 577 487 Provisions for interests and shares in associated bodies — — 42
Profit on ordinary activities before tax 94,225 86,582 71,563 Tax on profit on ordinary activities 9 33,980 30,203 23,481
Profit for the financial year 21 60,245 56,379 48,082
The notes on pages 18 to 29 form part of these Accounts
15 SOCIETY BALANCE SHEET
At 31st December, 1990
1990 1989 1988
Assets Notes £'000 £'000 £'000 Liquid assets 10 1,547,217 1,256,055 1,023,799 Commercial assets 11 Advances secured on residential property 7,147,363 5,694,507 4,570,503 Other advances secured on land 171,508 82,944 34,921 Other commercial assets 12 34,114 13,178 2,415 Fixed assets 14 140,360 103,869 61,858 Other assets 6,778 4,655 1,553
Total assets 9,047,340 7,155,208 5,695,049
Liabilities and reserves Shares, deposits and loans Retail funds and deposits 15 6,266,438 5,509,329 4,752,142 Non-retail funds and deposits 16 2,171,531 1,151,306 542,969 Other liabilities 17 168,088 166,674 128,171 Provisions for liabilities and charges 18 1,849 549 796 Subordinated liabilities 20 50,821 — —
Total liabilities 8,658,727 6,827,858 5,424,078 General reserve 21 388,613 327,350 270,971
Total liabilities and reserves 9,047,340 7,155,208 5,695,049
16 GROUP STATEMENT OF THE SOURCE AND APPLICATION OF FUNDS
For the year ended 31st December, 1990
1990 1989 1988
Source of funds £'000 £'000 £'000 Increase in free capital (see note below) 74,613 34,885 42,871 Advances and loans repaid by borrowers 726,700 625,916 697,165 Net receipts from retail funds and deposits 1,117,190 757,187 620,751 Net receipts from non-retail funds and deposits 652,479 608,292 62,084 Other items 4,849 39,417 14,704
Total source of funds 2,575,831 2,065,697 1,437,575
Application of funds Increase in liquid assets 288,535 253,903 25,511 Advances and loans made to borrowers 2,268,120 1,797,944 1,409,463 Increase in other commercial assets 17,221 9,621 — Other items 1,955 4,229 2,601
Total application of funds 2,575,831 2,065,697 1,437,575
Increase in free capital Source of funds Profit on ordinary activities after tax 65,507 57,342 47,360 Adjustment for items not involving the movement of funds: Other income and charges 10 (1,534) (4,349) Depreciation and other amounts written off tangible fixed 8,507 6,305 6,730 assets Decrease in general provision for losses on commercial assets (99) 99 —
Funds generated from operations 73,925 62,212 49,741
Funds from other sources Disposal of tangible fixed assets 976 3,382 8,322 Net reserves acquired on transfers of engagements 1,018 — — Issue of subordinated loan capital 50,821 — —
Application of funds Purchase of tangible fixed assets (52,127) (30,709) (15,192)
Increase in free capital 74,613 34,885 42,871
(Free capital comprises the general reserve plus subordinated liabilities and general loss provisions less tangible fixed assets)
The notes on pages 18 to 29 form part of these Accounts
17 NOTES TO THE ACCOUNTS
1. Principal accounting policies (a) Basis of accounting The accounts have been prepared under the historical cost convention. (b) Basis of consolidation The Group accounts consolidate the accounts of Bradford & Bingley Building Society and its subsidiaries, all of which are made up to 31st December, 1990, after eliminating all transactions and balances within the Group. (c) Taxation Income tax is provided at the relevant rates on the interest on shares, deposits and loans charged in these accounts, except where interest is payable gross. Corporation tax is charged on the profit on ordinary activities before taxation and takes into account all deferred taxation adjustments arising from timing differences between the treatment of income and expenditure for taxation and accounting purposes, which, in the opinion of the directors, are likely to become payable in the foreseeable future. The provision for deferred taxation is calculated by the liability method and at the estimated future rate of corporation tax. (d) Fixed assets and depreciation All additions and major alterations to land and buildings and all additions to equipment, fixtures, fittings and vehicles are capitalised. Depreciation is provided for as follows: (i) Land and buildings: Freehold and long leasehold land and buildings are not depreciated. This policy does not comply with Statement of Standard Accounting Practice no. 12. In the opinion of the directors the effect of non• compliance is not material. Short leasehold properties with less than 50 years unexpired are amortised in equal annual instalments over the unexpired period of the lease. Major alterations and non-structural additions to properties are depreciated in equal annual instalments over ten years. (ii) Equipment, fixtures, fittings and vehicles: On reducing balance basis: Fixtures and fittings at 20 per cent. Vehicles at 25 per cent. On straight line basis: Computer equipment at rates ranging from 14 per cent. to 25 per cent. Other equipment at 10 per cent. Certain lower-value items of capital expenditure are depreciated in full in the year of purchase. (e) Assets in course of construction This comprises a payment on account to its wholly owned subsidiary company, Bradford & Bingley Properties Limited, engaged in the development and construction of a new administration centre. (f) Leasing Rentals under operating leases are charged to management expenses in the year in which the expenditure is incurred. (g) Liquid assets Investments are stated at cost, together with accrued interest at the balance sheet date. At the date of purchase the cost is adjusted to exclude accrued interest. Where the adjusted purchase price exceeds par value, the premium is amortised in equal annual instalments over a period ending six months prior to maturity. The profits net of losses arising from investments exclude accrued interest at the time of both purchase and sale. Listed investments are valued according to mid-market prices at close of business on the balance sheet date. (h) Pension costs The Society charges pension costs against profits using an actuarial method and assumptions designed to provide the anticipated pension costs over the service lives of the employees in the scheme. The method ensures that the regular pension cost represents a relatively equal proportion of the current and expected future pensionable payroll in the light of current actuarial assumptions. Variations from regular cost are spread over the remaining service lives of current employees in the scheme. (i) Provisions for losses on commercial assets Provision for losses on commercial assets is based on a year end appraisal of commercial assets. Losses for which no provision has been made are written off against profit, together with the net change in the amount of provision required between the beginning and the end of the year. (j) Non-retail funds and subordinated liabilities Costs associated with these items are held in other assets and amortised over the relevant period. (k) Offshore deposits During the year the Society's offshore deposit taking subsidiary, Bradford & Bingley (Douglas) Limited, commenced trading. Net deposits are lent to the Society and the resulting inter company loan is shown under non-retail deposits in the Society's balance sheet. On consolidation the funds are included within retail deposits in the Group balance sheet.
18 2. Interest receivable 1990 1990 1989 1989 1988 1988 Group Society Group Society Group Society
£'000 £'000 £'000 £'000 £'000 £'000 On secured advances 984,440 984,440 696,199 696,199 465,522 465,522 On other lending 4,021 2,566 593 372 — — On fixed-interest liquid
interest 184,121 181,035 118,222 116,091 93,924 93,924 profits net of losses 103 103 (1,801) (1,801) 85 85 On other liquid assets: interest 357 120 93 71 64 64
1,173,042 1,168,264 813,306 810,932 559,595 559,595
Interest receivable on other lending includes interest receivable from associated bodies — 2,566 — 372 — —
3. Interest payable (a) On retail funds and deposits 808,250 777,915 579,407 579,407 399,825 399,825 On non-retail funds and deposits 203,782 235,352 96,460 96,523 50,700 50,796 On subordinated liabilities 2,811 2,811 — — — —
1,014,843 1,016,078 675,867 675,930 450,525 450,621
Interest payable on non- retail funds and deposits includes interest payable to associated bodies — 31,570 — 63 — 96
(b) Interest payable on retail funds, non-retail funds and deposits and subordinated liabilities: Interest 855,615 856,850 557,522 557,585 363,765 363,861 Income tax on interest 159,228 159,228 118,345 118,345 86,760 86,760 1,014,843 1,016,078 675,867 675,930 450,525 450,621
4. Other income and charges 1990 1990 1989 1989 1988 1988 Group Society Group Society Group Society
£'000 £'000 £'000 £'000 £'000 £'000 Commissions receivable 38,504 34,218 24,320 23,029 19,360 19,251 Commissions payable (4,548) (3,984) (3,037) (2,523) (1,665) (1,428) Other operating income: rent received 1,609 1,609 1,351 1,351 1,173 1,173 other income 9,976 7,419 8,035 6,241 9,555 8,275
45,541 39,262 30,669 28,098 28,423 27,271
19 5. Management expenses 1990 1990 1989 1989 1988 1988 Group Society Group Society Group Society £'000 £'000 £'000 £'000 £'000 £'000 Staff costs (including executive directors): wages and salaries 32,859 32,859 27,436 27,436 22,374 22,374 social security costs 2,375 2,375 1,859 1,859 1,515 1,515 other pension costs (see note below) 3,662 3,662 3,963 3,963 1,761 1,761 38,896 38,896 33,258 33,258 25,650 25,650 Depreciation and other amounts written off: tangible fixed assets 8,507 8,190 6,305 5,822 6,730 6,470 remuneration of auditors 213 164 175 139 119 101 other expenses 46,115 41,571 39,861 36,722 33,988 31,932 93,731 88,821 79,599 75,941 66,487 64,153
Other pension costs The society operates a defined benefit pension scheme for the majority of its employees, administered by trustees, the funds of which are independent from those of the Society. The normal pension age of employees in the scheme is 60 years. Pension costs are assessed on a triennial basis in accordance with the advice of a qualified actuary using the projected unit method. The most recent actuarial valuation of the scheme was at 31 st December, 1989. The actuarial value of the scheme assets was sufficient to cover 144 per cent, of the benefits that had accrued to members after allowing for expected future increases in earnings. The market value of scheme assets at 31st December, 1989 was £94.6m. The assumptions which have the most significant effect on the results of the valuation are those relating to the rate of return on investments and the rates of increase in salaries and pensions. The rate of return on investments has been assumed to exceed the rate of salary increases by 11/2 per cent. and present and future pensions by 3 per cent. per annum. The small reduction in the pension charge compared with the previous year arises as a result of the actuarial valuation as at 31st December, 1989. The pension charge takes account of the surplus disclosed in that valuation which is amortised over a period of 13 years, being the estimated average remaining service lives of pension scheme members. The scheme is wholly financed by the Society, the current rate of contribution being 9.1 per cent. of pensionable earnings.
6. Staff numbers Group and Group and Group and Society 1990 Society 1989 Society 1988 Full Part Full Part Full Part Time Time Time Time Time Time
The average number of persons, including executive directors, employed during the year was as follows: Principal office and administration centres 1,058 49 979 77 844 76 Branch offices 1,450 308 1,312 292 1,178 311
2,508 357 2,291 369 2,022 387
7. Higher-paid employees' emoluments Group and Group and Group and Society 1990 Society 1989 Society 1988
The number of employees whose emoluments, excluding pension contributions, fell within the following ranges were: £30,001 - £35,000 51 22 7 £35,001 - £40,000 19 7 1 £40,001 - £45,000 11 2 3 £45,001 - £50,000 3 2 1 £50,001 - £55,000 1 1 1 £55,001 -£60,000 1 — — £60,001 - £65,000 2 — —
20 8. Society directors' emoluments 1990 1989 1988 £'000 £'000 £'000
Services as a director 279 282 174 Other services 314 221 33 Former directors' pensions for services as directors 43 6 6 636 509 213
1990 1989 1988 £ £ £
Chairman's emoluments (excluding pension contributions) 52,787 36,772 32,699
Highest paid full time director (excluding pension contributions) 127,191 82,777 34,408 One director waived emoluments amounting in aggregate to — 11,250 6,093 Ex gratia payment to former director in respect of the office of director 50,000 — —
The number of directors whose emoluments, excluding pension contributions, fell within the following ranges were: 1990 1989 1988 Up to £5,000 — 1 1 £5,001 — £10,000 1 — 5 £10,001 — £15,000 3 3 2 £15,001 — £20,000 3 — 2 £20,001 — £25,000 — — 1 £25.001 — £30,000 — 3 — £30,001 — £35,000 — — 1 £35,001 — £40,000 1 1 — £50,001 — £55,000 1 — — £60,001 — £65,000 — 3 — £80,001 — £85,000 2 1 — £125,001 — £130,000 1 — —
The emoluments include emoluments for services as directors of the Society and its associated bodies.
At 31 st December, 1990, the aggregate amounts outstanding totalled £511,355 in respect of loans to 7 persons who were directors of the Society or were connected with directors of the Society at any time during the financial year. All loans were made in the normal course of business. The amounts outstanding do not include a mortgage taken as security by the Society in connection with a guarantee given by the Society, under which the Society is liable for a sum not exceeding £50,000. No monies have been advanced by the Society and no interest is chargeable under this mortgage until the Society is required, under the guarantee, to pay any sum or incur any liability. No such sum has been paid nor liability incurred by the Society, and the guarantee provisions are not reflected in the aforementioned information. There were no other transactions, arrangements or agreements for any director at 31st December, 1990 under section 65 of the Building Societies Act 1986. A register is maintained under section 68 of the Act and the requisite particulars from it are available for inspection at the Society's principal office during the period of 15 days prior to the Annual General Meeting and at the Annual General Meeting.
9. Tax on profit on ordinary activities 1990 1990 1989 1989 1988 1988 Group Society Group Society Group Society £'000 £'000 £'000 £'000 £'000 £'000
The charge for the year at 35% comprises: Corporation tax based on the profit for the year 33,293 32,680 30,574 30,450 25,241 25,605 Deferred taxation 1,820 1,300 (177) (247) (2,124) (2,124)
35,113 33,980 30,397 30,203 23,117 23,481
21 1988 Group 1990 1990 1989 1989 and 10. Liquid assets Group Society Group Society Society
£'000 £'000 £'000 £'000 £'000 a) Cash in hand and with banks 1,180,062 1,161,042 994,935 973,288 676,580 UK Government securities 162,933 162,933 169,133 169,133 329,970 Other securities: issued by public bodies 645 645 395 395 3,026 issued by other borrowers 222,597 222,597 113,239 113,239 14,223
1,566,237 1,547,217 1,277,702 1,256,055 1,023,799 b) Repayable from the date of the balance sheet in the ordinary course of business as follows: Cash with banks Repayable on demand 74,305 70,771 87,005 85,725 99,518 In not more than three months 691,244 681,021 588,332 573,972 284,327 In more than three months but not more than one year 405,785 400,522 305,921 299,914 281,070
1,171,334 1,152,314 981,258 959,611 664,915
UK Government securities In not more than one year 44,016 44,016 3,808 3,808 67,458 In more than one year but not more than five years 118,917 118,917 165,325 165,325 262,512
162,933 162,933 169,133 169,133 329,970
Other securities In not more than one year 223,242 223,242 113,634 113,634 17,249 c) Listed investments included under 10(a) above: UK Government securities Book value less accrued interest 159,123 159,123 165,325 165,325 322,224
Market value of listed investments 155,356 155,356 156,528 156,528 310,841
11. Provisions for losses on commercial assets Commercial assets are stated after making provisions for losses on loans and advances as follows: Advances secured Other on residential Commercial Unsecured property Assets loans Total
£'000 £'000 £'000 £'000 Group At 1st January, 1990: 918 — 193 1,111 Increase in provision 7,946 456 987 9,389 Amounts written off during year (1,536) — (17) (1,553)
At 31 st December, 1990 7,328 456 1,163 8,947
Society At 1 st January, 1990 918 — — 918 Increase in provision 7,946 456 — 8,402 Amounts written off during year (1,536) — — (1,536)
At 31st December, 1990 7,328 456 — 7,784
The provision of £193,000 in respect of Unsecured Loans at 1st January, 1990 includes a general provision of £99,000 which has been written back to Revenue Account during the year. All other provisions are specific.
22 12. Other commercial assets 1990 1990 1989 1989 1988 1988 Group Society Group Society Group Society
£'000 £'000 £'000 £'000 £'000 £'000 Unsecured loans 26,742 — 9,422 — — — Investments in associated bodies (see note 13): shares — 6,100 — 1,100 546 1,346 loans 100 28,014 100 12,078 22 1,637
26,842 34,114 9,522 13,178 568 2,983
Less specific provisions for losses _____ 568 568
26,842 34,114 9,522 13,178 — 2,415
13. Investments in associated bodies Class of Country of shares held/ Interest registration Major activity Constitution of Society
The Society has the following operating subsidiaries, which are direct associated bodies, at 31 st December, 1990: Bradford & Bingley (Douglas) Limited England Offshore Ordinary 100% deposit-taker £1 shares Bradford & Bingley (PEPs) Limited England Management of Ordinary 100% personal equity £1 shares plans Bradford & Bingley Personal Finance Limited England Provision of Ordinary 100% unsecured loans £1 shares Bradford & Bingley Personal Pensions Limited England Administrator Ordinary 100% and trustee of £1 shares personal pension plans Bradford & Bingley Properties Limited England Property Ordinary 100% development £1 shares
In addition the Society has the following other direct associated bodies at 31st December, 1990: Link Interchange Network Limited England Operation of Limited by 4.3% automated teller guarantee machine network Bradford & Bingley Pensions Limited England Staff pension Limited by Control of fund trustee guarantee corresponding membership rights
With the exception of Bradford & Bingley (Douglas) Limited, which operates in the Isle of Man, the above associated bodies operate within the United Kingdom. The Society's share of the capital, reserves and profit or loss of Link Interchange Network Limited and Bradford & Bingley Pensions Limited is not material.
23 Equipment, Fixtures, 14. Tangible fixed assets Land and Fittings and Buildings Vehicles Total
£'000 £'000 £'000 Group Cost: At 1 st January, 1990 70,253 47,620 117,873 Additions 29,978 22,149 52,127 Disposals (212) (2,374) (2,586)
At 31 st December, 1990 100,019 67,395 167,414
Depreciation: At 1 st January, 1990 7,330 25,198 32,528 Charged in year 1,679 6,802 8,481 Disposals (142) (1,432) (1,574)
At 31st December, 1990 8,867 30,568 39,435
Net book value: At 31st December, 1990 91,152 36,827 127,979
At 31 st December, 1989 62,923 22,422 85,345
At 31 st December, 1988 44,509 18,279 62,788 The Group's policy is to value approximately one-third of freehold and long leasehold land and buildings each year, although no adjustment is made to the asset values as shown in the balance sheet. On the basis of the latest valuation in each case, the total market value at 31st December, 1990 was substantially higher than the net book value disclosed above. (i) The value attributed by the directors to the land and buildings at 31st December, 1990 is £120m. (ii) The basis on which the value attributed by the directors has been arrived at is open market value, subject to existing tenancies and vacant possession of those parts of the properties occupied by the Group, supported by valuations carried out as stated above by either Members of the Royal Institution of Chartered Surveyors or Members of the Incorporated Society of Valuers and Auctioneers. Included in the Group figure for land and buildings at 31st December, 1990 is an amount of £8.4m for work in progress on property in the course of construction. Equipment, Fixtures, Land and Fittings and Buildings Vehicles Total
Society £'000 £'000 £'000 Cost: At 1st January, 1990 89,362 46,157 135,519 Additions 23,598 22,070 45,668 Disposals (212) (1,823) (2,035)
At 31 st December, 1990 112,748 66,404 179,152
Depreciation: At 1st January, 1990 7,327 24,323 31,650 Charged in year 1,684 6,481 8,165 Disposals (142) (881) (1,023)
At 31 st December, 1990 8,869 29,923 38,792
Net book value: At 31 st December, 1990 103,879 36,481 140,360
At 31 st December, 1989 82,035 21,834 103,869
At 31st December, 1988 44,509 17,349 61,858
24 14. Tangible fixed assets—continued 1988 Group 1990 1990 1989 1989 and Group Society Group Society Society
Land and Buildings £'000 £'000 £'000 £'000 £'000 Land and buildings at end of year consist of: Freehold premises 82,122 93,079 56,155 75,267 40,891 Leasehold premises (50 or more years unexpired) 4,356 6,126 4,181 4,181 1,670 Leasehold premises (less than 50 years unexpired) 4,674 4,674 2,587 2,587 1,948
91,152 103,879 62,923 82,035 44,509
Included in the Society figure for land and buildings at 31st December, 1990 is an amount of £20.5 million representing a prepayment to a subsidiary company for property in the course of construction.
15. Retail funds and deposits 1989 1988 1990 1990 Group and Group and Group Society Society Society
£'000 £'000 £'000 £'000 Shares 5,722,875 5,722,875 5,108,151 4,394,838 Deposits 903,644 543,563 401,178 357,304
6,626,519 6,266,438 5,509,329 4,752,142
Repayable from the date of the balance sheet in the ordinary course of business as follows: Shares Repayable on demand 2,327,413 2,327,413 2,084,347 2,006,664 Repayable on demand but with interest penalty 2,522,949 2,522,949 2,475,676 2,370,002 In not more than three months 437,303 437,303 3,194 4,585 In more than three months but not more than one year 416,755 416,755 409,483 2,048 In more than one year but not more than five years 14,704 14,704 130,660 6,853 In more than five years 3,751 3,751 4,791 4,686
5,722,875 5,722,875 5,108,151 4,394,838
Deposits Repayable on demand 545,527 543,563 401,178 357,304 Repayable on demand but with interest penalty 176,524 — — — In more than three months but not more than one year 181,593 — — —
903,644 543,563 401,178 357,304
Total Repayable on demand 2,872,940 2,870,976 2,485,525 2,363,968 Repayable on demand but with interest penalty 2,699,473 2,522,949 2,475,676 2,370,002 In not more than three months 437,303 437,303 3,194 4,585 In more than three months but not more than one year 598,348 416,755 409,483 2,048 In more than one year but not more than five years 14,704 14,704 130,660 6,853 In more than five years 3,751 3,751 4,791 4,686
6,626,519 6,266,438 5,509,329 4,752,142
25 16. Non-retail funds and 1990 1990 1989 1989 1988 1988 deposits Group Society Group Society Group Society
£'000 £'000 £'000 £'000 £'000 £'000 Amounts owed to banks 404,921 404,921 283,765 283,765 206,973 206,973 Time deposits 260,613 260,613 228,397 228,397 63,203 63,203 Certificates of deposit 364,997 364,997 230,295 230,295 110,988 110,988 Floating rate notes 615,805 615,805 360,007 360,007 102,905 102,905 U.S. Commercial paper 117,285 117,285 — — — — Other deposits and loans 39,073 407,851 47,756 48,788 57,913 58,900 Shares 59 59 54 54 — —
1,802,753 2,171,531 1,150,274 1,151,306 541,982 542,969
Other deposits and loans includes deposits by associated bodies — 368,778 — 1,032 — 987
Repayable from the date of the balance sheet in the ordinary course of business as follows: Amounts owed to banks In not more than three months 115,572 115,572 17,316 17,316 11,859 11,859 In more than three months but not more than one year 7,964 7,964 24,449 24,449 5,114 5,114 In more than one year but not more than five years 271,300 271,300 242,000 242,000 190,000 190,000 In more than five years 10,085 10,085 — — — —
404,921 404,921 283,765 283,765 206,973 206,973
Time deposits In not more than three months 260,497 260,497 228,281 228,281 63,038 63,038 In more than three months but not more than one year 116 116 116 116 165 165
260,613 260,613 228,397 228,397 63,203 63,203
Certificates of deposit In not more than three months 319,569 319,569 172,537 172,537 62,672 62,672 In more than three months but not more than one year 45,428 45,428 57,758 57,758 48,316 48,316
364,997 364,997 230,295 230,295 110,988 110,988
Floating rate notes In not more than three months 15,805 15,805 10,007 10,007 2,905 2,905 In more than one year but not more than five years 150,000 150,000 100,000 100,000 — — In more than five years 450,000 450,000 250,000 250,000 100,000 100,000
615,805 615,805 360,007 360,007 102,905 102,905
US Commercial paper In not more than three months 117,285 117,285 — — — —
Other deposits and loans Repayable on demand 33,770 402,548 42,477 43,509 57,913 58,900 In not more than three months 303 303 279 279 — — In more than one year but not more than five years 5,000 5,000 5,000 5,000 — —
39,073 407,851 47,756 48,788 57,913 58,900
26 16. Non-retail funds and deposits—continued 1990 1990 1989 1989 1988 1988 Group Society Group Society Group Society
£'000 £'000 £'000 £'000 £'000 £'000 Shares Repayable on demand 59 59 54 54 — —
Total Repayable on demand 33,829 402,607 42,531 43,563 57,913 58,900 In not more than three months 829,031 829,031 428,420 428,420 140,474 140,474 In more than three months but not more than one year 53,508 53,508 82,323 82,323 53,595 53,595 In more than one year but not more than five years 426,300 426,300 347,000 347,000 190,000 190,000 In more than five years 460,085 460,085 250,000 250,000 100,000 100,000
1,802,753 2,171,531 1,150,274 1,151,306 541,982 542,969
17. Other liabilities 1990 1990 1989 1989 1988 1988 Group Society Group Society Group Society
£'000 £'000 £'000 £'000 £'000 £'000 Falling due within one year: Income tax 97,618 97,618 80,935 80,935 57,699 57,699 Corporation tax 32,717 32,174 55,776 55,341 45,051 45,051 Other taxation and social security 1,136 1,027 938 855 672 666 Other creditors 32,494 30,423 24,100 23,510 22,225 22,037
163,965 161,242 161,749 160,641 125,647 125,453 Falling due after more than one year: Income tax 4,382 4,382 4,297 4,297 2,718 2,718 Other creditors 2,464 2,464 1,736 1,736 — —
170,811 168,088 167,782 166,674 128,365 128,171
18. Provisions for liabilities and charges Deferred taxation At 1st January, 1990 631 549 Provided during the year 1,820 1,300
At 31 st December, 1990 2,451 1,849
The provision made in the accounts for deferred taxation, and the additional potential liability, are set out below: (i) The provision represents the future liability to corporation tax on: Accrued interest 1,925 1,338 1,496 1,338 3,153 3,153 Capital allowances in advance of depreciation 3,572 3,557 1,718 1,794 1,390 1,378 Other timing differences (3,046) (3,046) (2,583) (2,583) (3,735) (3,735)
2,451 1,849 631 549 808 796
(ii) There is an additional potential liability which represents corporation tax on deferred capital gains 1,573 1,573 1,733 1,733 1,668 1,668
27 19. Guarantees and other financial commitments (a) Building Societies Investor Protection Fund The Society has a contingent liability in respect of contributions to the Building Societies Investor Protection Fund, provided for by the Building Societies Act 1986. (b) Capital Commitments 1990 1990 1989 1989 1988 Group and Group Society Group Society Society
£'000 £'000 £'000 £'000 £'000 At 31st December, 1990 capital commitments were as set out below: Contracts for capital expenditure not provided for 31,801 15,709 31,386 4,431 3,239 Capital expenditure authorised by the directors which has not been contracted for 28,618 28,618 19,557 18,360 8,747
60,419 44,327 50,943 22,791 11,986
(c) Leasing Commitments At 31st December, 1990 the annual commitments under non-cancellable operating leases, relating to land and buildings were as set out below: Leases which expire: within one year 282 282 96 96 67 between two and five years 951 951 399 399 200 after five years 290 290 1,050 1,050 729
1,523 1,523 1,545 1,545 996
The majority of leases are subject to rent reviews.
20. Subordinated liabilities 1990 1989 1988 Group and Group and Group and Society Society Society
£000 £'000 £'000 Subordinated floating rate notes due 2005 50,000 — — Accrued interest 821 — —
50,821 — —
The notes have been issued in order to broaden the Society's capital base and provide capital backing for future developments. The notes are repayable in instalments between the years 2001 and 2005, though the Society has the option to repay from 1995 onwards.
21. General reserve 1990 1990 1989 1989 1988 1988 Group Society Group Society Group Society
£'000 £'000 £'000 £'000 £'000 £'000 At 1st January, 1990 327,781 327,350 270,439 270,971 223,079 222,889 Net Reserves acquired on transfers of engagements 1,018 1,018 — — — — Profit for the financial year 65,507 60,245 57,342 56,379 47,360 48,082
At 31st December, 1990 394,306 388,613 327,781 327,350 270,439 270,971
28 22. Income tax On 12th April, 1989 the Court of Appeal reversed the decision of the High Court in 1986 that the Income Tax (Building Societies) Regulations 1986 were ultra vires in so far as they purported to levy tax on interest paid by building societies in the fiscal year 1985/86. The Court granted the building society concerned leave to appeal to the House of Lords. This appeal proved successful on 25th October, 1990. We believe this judgment should be extended to apply to all building societies affected. The Society is pressing the case, both directly and via the Building Societies Association. The Inland Revenue have not responded to these claims at the present time, but the repayment appertaining to this Society amounts to approximately £4.9 million gross. No credit has been taken in the accounts for this amount.
23. Post balance sheet events Since the financial statements were prepared the Society has accepted three transfers of engagements by The Hendon Building Society, Hampshire Building Society and Leamington Spa Building Society.
29 UNITED KINGDOM TAXATION
The following is a summary of the Society's understanding of current law and practice in the United Kingdom relating to the taxation of the PIBS. The summary relates only to the position of persons who are the absolute beneficial owners of their PIBS and the interest on them and some aspects do not apply to certain classes of taxpayer (such as dealers). Prospective PIBS holders who are in any doubt as to their tax position or who may be subject to tax in a jurisdiction other than the United Kingdom should seek their own professional advice. 1. On payment of interest on the PIBS an amount must be withheld by the Society on account of United Kingdom income tax at the basic rate (currently 25 per cent.). Certain classes of taxpayer (such as tax exempt investors) may be able to reclaim all or part of any tax deducted. Holders of PIBS who are not resident in the United Kingdom may be able to recover all or part of the tax deducted pursuant to the provisions of an applicable double taxation convention and may be able to make an individual claim to the relevant tax authorities for payments of interest gross. 2. PIBS are within the accrued income scheme. Accordingly, a disposal of PIBS by a PIBS holder, who is resident or ordinarily resident in the United Kingdom or who carries on a trade in the United Kingdom through a branch or agency to which the PIBS are attributable, may give rise to a charge to tax on income in respect of an amount representing interest on the PIBS which has accrued since the preceding interest payment date. 3. The PIBS will constitute "qualifying corporate bonds" within the meaning of section 64 of the Finance Act 1984. Accordingly, a disposal by a PIBS holder will not give rise to a chargeable gain or an allowable loss for the purposes of the United Kingdom taxation of capital gains. 4. No United Kingdom stamp duty or stamp duty reserve tax is payable on the issue or transfer of the PIBS or on their redemption.
30 MARKETING ARRANGEMENTS
The Arranger and Hoare Govett have agreed pursuant to a placing agreement dated 30th September, 1991 (the "Placing Agreement") as agents of the Society to use all reasonable endeavours to procure subscribers for the PIBS. The issue of the PIBS has not been underwritten by the Arranger, Hoare Govett or any other person. The Arranger and Hoare Govett as agents of the Society have sent placing letters {the "Placing Letters") to various institutions who have agreed, subject to certain conditions, to subscribe for £60,000,000 principal amount of PIBS at an issue price of 100.2 per cent. of the principal amount of the PIBS. In connection with the placing the Society has agreed with the Arranger and Hoare Govett to pay a commission of 1 % per cent. of the principal amount of the PIBS subscribed pursuant to the Placing Letters and reimburse certain expenses of the Arranger. The PIBS have not been and will not be registered under the U.S. Securities Act of 1933 (the "Securities Act") and may not be offered or sold within the United States or to U.S. persons otherwise than in accordance with applicable U.S. securities laws and regulations. Each subscriber has agreed that it will not offer or sell a PIBS within the United States or to U.S. persons otherwise than in accordance with applicable U.S. securities laws and regulations. In addition, until 40 days after the commencement of the offering, an offer or sale of the PIBS within the United States by any dealer (whether or not participating in the offering) may violate the registration requirements of the Securities Act. All applicable provisions of the Financial Services Act 1986 with respect to anything done in relation to the PIBS, in, from or otherwise involving the United Kingdom must be complied with. Any document received in connection with the issue of the PIBS, other than any document which consists of or of part of listing particulars, supplementary listing particulars or any other document required or permitted to be published by listing rules under Part IV of the Financial Services Act 1986, may be issued or passed on to any person in the United Kingdom only if that person is of a kind described in Article 9(3) of the Financial Services Act 1986 (Investment Advertisements) (Exemptions) Order 1988. No action has been or will be taken by the Society, Hoare Govett or the Arranger outside Great Britain that would, or is intended to, permit a public offer of the PIBS in any country or jurisdiction where action for that purpose is required. PIBS may not be, directly or indirectly, offered or sold in any country or jurisdiction where action for that purpose is required. Accordingly, PIBS may not, directly or indirectly, be offered or sold and neither this Offering Circular (whether in its preliminary or final form) nor any other circular, prospectus, form of application, advertisement or other material may be distributed in or from, or published in, any country or jurisdiction, except under circumstances that will result in compliance with any applicable laws and regulations.
31 GENERAL INFORMATION
Material Change There has been no significant change in the financial or trading position of the Society and its subsidiaries and no material adverse change in the prospects of the Society and its subsidiaries since 31st December, 1990, being the date to which the latest published accounts were made up.
Litigation There are no legal or arbitration proceedings pending or threatened against the Society or its subsidiaries which may have, or have had during the past 12 months, a significant effect on the financial position of the Society and its subsidiaries.
Auditors The consolidated accounts of the Society for the three years ended 31st December, 1990 have been audited in accordance with auditing standards by Mr. A. Ackroyd, F.C.A., Baker Tilly, Chartered Accountants, 1a Manor Row, Bradford BD1 4NS and Mr. D. E. Walker, LL.B., F.C.A., Grant Thornton, Chartered Accountants, Eldon Lodge, Eldon Place, Bradford BD1 3AP.
Documents for Inspection Copies of the following documents may be inspected at the offices of Denton Hall Burgin & Warrens, Five Chancery Lane, Clifford's Inn, London EC4A 1BU during usual business hours on any weekday (Saturdays and public holidays excepted) during the period of 14 days from the date of this document: (i) the Rules and the Memorandum of the Society and the Act; (ii) the audited accounts of the Society for each of the years ended 31 st December, 1989 and 1990; (iii) the audited accounts of Leamington Spa Building Society for each of the years ended 31st December, 1989 and 1990; (iv) the material contracts and Directors' service contracts referred to below; (v) the Placing Agreement; and (vi) drafts (subject to modification) of the PIBS Certificate (including the special terms of issue of the PIBS) and the agreement for the appointment of the Registrar.
Resolution The issue of the PIBS was authorised by a resolution of a duly authorised committee of the Board of Directors on 30th September, 1991.
PIBS Certificates The Registrar will send a PIBS Certificate to each registered holder of a PIBS within one month of registration, in accordance with the Rules, at the risk of the person entitled thereto. No temporary documents of title will be issued.
Material Contracts Other than the Placing Agreement and an agreement dated 4th February, 1991 between Bradford & Bingley Properties Limited and AMEC Projects Limited relating to the development of the proposed new head office of the Society at Croft Road, Crossflatts, Bingley, involving stage payments by Bradford and Bingley Properties Limited aggregating in total £26.3 million, the Society and its subsidiaries have not entered into any material contract other than in the ordinary course of business within the two years immediately preceding the date of this document.
Guarantees and Loans The only outstanding loans granted by any member of the Group to Directors are an aggregate of £287,460 mortgage loans as at 31st August, 1991 made by the Society. No guarantees have been provided by the Society or its subsidiaries and are outstanding to, or in respect of, any Director of the Society.
32 Amounts Payable to Directors It is estimated that an aggregate of £545,994 will be payable to Directors of the Society, including proposed Directors, during the current financial year.
Directors' Interests The Directors of the Society have no interests in any transactions which are or were unusual in their nature or conditions or significant to the business of the Society and its subsidiaries and which were effected by the Society during the current or immediately preceding year or were effected by the Society during an earlier financial year and remain in any respect outstanding or unperformed. The Directors of the Society have no interests in any subsidiary of the Society which have been notified under section 324 or section 328 of the Companies Act 1985 or are required to be registered under section 325 of that Act. Neither any Director of the Society nor any child, stepchild (in each case under the age of 18) or spouse of any Director of the Society has any interest in any PIBS or any debentures of the Society.
Directors' Service Contracts Mr. Lister has a three year service contract with the Society at a current annual salary of £185,000 together with discretionary performance related bonuses, which is renewed at the discretion of the Society on 16th August each year. Mr. Pheasey has a three year service contract with the Society at a current annual salary of £110,000 together with discretionary performance related bonuses, which is renewed at the discretion of the Society on 14th November each year. Save as disclosed above, there are no existing or proposed Directors' service contracts with any member of the Group.
Form of Transfer Currently transfers of the PIBS may be carried out by completion of Stock Transfer Form (Companies ST1) and submitting it together with the relevant registered certificate to the Registrar in accordance with "Summary of the Key Provisions of the Rules of the Society".
General (i) There are no schemes for involving the Directors or any employees of the Society or any of its subsidiaries in any capital of the Society or any of its subsidiaries. (ii) No capital of the Society or any of its subsidiaries is under option or has agreed to be put under option to any person. (iii) So far as is known to the Society no persons, directly or indirectly, or jointly or severally, exercise or could exercise control over the Society nor so far as the Society is aware is any person directly or indirectly interested in 3 per cent or more of the Society's capital. (iv) Payment for the PIBS subscribed will be made by telegraphic transfer by the subscribers to the Arranger which will arrange for funds to be transferred to the Society in accordance with the Placing Agreement. (v) The overall cost of the issue of the PIBS by the Society, including all commissions and expenses, is estimated to amount to £916,125.
33
PRINCIPAL OFFICE OF THE SOCIETY Main Street, Bingley, West Yorkshire BD16 2LW
REGISTRAR The Royal Bank of Scotland pic, P.O. Box 435, Owen House, 8 Bankhead Crossway North, Edinburgh EH11 4BR
LEGAL ADVISERS To the Society To the Arranger Denton Hall Burgin & Warrens, Linklaters & Paines, Five Chancery Lane, Barrington House, Clifford's Inn, 59-67 Gresham Street, London EC4A 1BU London EC2V 7JA
AUDITORS A. Ackroyd, FCA, D. E. Walker, LLB, FCA, Baker Tilly, Grant Thornton, Chartered Accountants, Chartered Accountants, 1a Manor Row, Eldon Lodge, Bradford BD1 4NS Eldon Place, Bradford BD1 3AP
SPONSOR FOR LISTING Salomon Brothers International Limited, Victoria Plaza, 111 Buckingham Palace Road, London SW1W 0SB
35 Printed by Greenawayi.. I oridon SODIUM