Offering Circular
BRADFORD & BINGLEY BUILDING SOCIETY (Incorporated in England under the Building Societies Act 1986 Registered number 701B)
£50,000,000
11 5/8pe r cent. Permanent Interest Bearing Shares
Application has been made to The International Stock Exchange of the United Kingdom and the Republic of Ireland Limited (the "London Stock Exchange") for the issue of £50,000,000 principal amount of 11 5/8 per cent. Permanent Interest Bearing Shares of £10,000 each (the "PIBS") of Bradford & Bingley Building Society (the "Society" or "Bradford & Bingley") to be admitted to the Official List. 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 17th July, 1992, subject only to the issue of the PIBS, and official dealings are expected to commence on 21st July, 1992.
Issue Price: 100.129 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 payments out of the Building Societies Investor Protection Fund. Attention is drawn to certain risk factors set out on page 9.
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".
Hoare Govett Corporate Finance Limited Salomon Brothers International Limited
The date of this Offering Circular is 15th July, 1992. The Directors of the Society, whose names appear on page 13, 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, Hoare Govett Corporate Finance Limited (the "Arranger") or Salomon Brothers International Limited ("Salomon Brothers"). 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 and the PIBS 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 Salomon Brothers 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 "Subscription and Sale" below.
The information contained in this document is intended for sophisticated investors capable of understanding the nature of a PIBS and the risks attaching to it. Accordingly, attention is drawn to certain risk factors set out on page 9.
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 S Page Summary of the Key Provisions of the Rules of the Society Relating to the PIBS 3 Special Terms of Issue of the PIBS 5 Use of Proceeds 8 Risk Factors 9 Bradford & Bingley Building Society 10 Consolidated Capitalisation and Indebtedness 12 Board of Directors 13 Financial Statements 14 United Kingdom Taxation 41 Subscription and Sale 42 General Information 43
2 SUMMARY OF THE KEY PROVISIONS OF THE RULES OF THE SOCIETY RELATING TO THE PIBS
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 of the Society. 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 47, 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, a PIBS holder shall be supplied by the Society with a Share certificate in respect of his PIBS ("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 PIBS holder 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 Genera] 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 11 5/8 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:
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 payments out 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 20th July, 1992 at the rate of 11 5/8 per cent. per annum (less income tax where appropriate) payable, subject as provided below, in arrear by equal half-yearly instalments on 20th January and 20th July in each year, commencing on 20th January, 1993. 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 paid or credited in respect of 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 (as defined in the Act)) 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 taken 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; and (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. If and to the extent that this paragraph prohibits the payment or crediting of interest, interest in respect of the PIBS will be cancelled and PIBS holders will have no rights in respect of the cancelled interest. (c) Interest in respect of the PIBS shall not be paid or credited 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
5 (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 to such extent as may be necessary to secure that there will be no failure to satisfy the first criterion of prudent management and on the passing of the resolution the PIBS holder shall cease to have any right to the interest for that period so cancelled or, as the case may be, any interest other than the reduced amount payable in accordance with that resolution. 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 or the representative joint holder to the registrar for the time being for this issue of PIBS 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 the United Kingdom.
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 will, in accordance with section 100{2)(a) of the Act, assume as from the vesting date a liability (subject to this paragraph (b)) to every qualifying member of the Society as in respect of a deposit made with the successor corresponding in amount to the value of the qualifying shares held by the member in the Society. The liability assumed by the successor in respect of each PIBS shall be as in respect of a non• transferable deposit carrying the same rate of interest as the PIBS (each a "Deposit"). Each Deposit will be applied on behalf of the holder in the subscription of a principal amount of perpetual subordinated notes of the successor carrying the same rate of interest as the PIBS (the "Notes") equivalent to the principal amount of the Deposit.
6 In the case of a transfer by the Society of the whole of its business to a company which is an existing company (as defined in the Act) the application of each Deposit will occur on the vesting date (or as soon as reasonably practicable thereafter). In the case of a transfer by the Society of the whole of its business to a company which is a specially formed company (as defined in the Act) the application of the Deposit will occur either automatically on the date occurring five years after the vesting date (or as soon as reasonably practicable thereafter) or earlier subject to such conditions as the board of directors of the successor may reasonably require, including the receipt of a certificate in such form as they may reasonably require from the holder of any 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 on its debentures would be held by, or by nominees for, the holder of each 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 Deposits 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 at that time 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 for the time being outstanding 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 for the time being outstanding 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 for the time being outstanding; (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 £49,571,185) will be applied by the Society for general purposes of the Society. It is intended that the principal amount of PIBS (£50,000,000) will be treated for capital adequacy purposes as core capital.
8 RISK FACTORS
Investors should be aware that the terms of the PIBS vary considerably from the terms of ordinary building society share accounts. They should particularly note that: {a) the principal amount of the PIBS is not repayable and the PIBS are not withdrawable and accordingly the only way that the PIBS may be realised is by a sale at such price and on such terms as may from time to time be available in the market (which may mean that the investor does not recoup his investment) which may be subject to usual brokers' commissions; (b) in a winding up or dissolution of the Society, the claims of the PIBS holders will rank behind all other creditors of the Society and the claims of members holding shares {other than deferred shares) as to principal and interest; (c) the PIBS are not protected investments for the purposes of payments out of the Building Societies Investor Protection Fund; (d) interest in respect of the PIBS shall not be payable where to make payment would result in the Society's capital falling below prescribed levels if the Directors of the Society resolve that such interest should not be paid or where the Society has not paid interest in respect of deposits or shares (other than deferred shares); and (e) if the Society does not make an interest payment in respect of the PIBS in accordance with paragraph (d) above such interest will be cancelled.
9 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, 1991, the Society was the seventh largest building society in the United Kingdom with total assets (including the assets of wholly- owned subsidiaries) of £11,910,260,000. The Society is incorporated under the Act for an unlimited duration and is registered with the Central Office of the Registry of Friendly Societies in London, Registered Number 701B. The Society is a "building society" within the meaning given to that term in the Act. The Society's business is conducted in accordance with the Act and the Rules of the Society. The Society, whose principal office is in Crossflatts, Bingley, West Yorkshire, operates on a countrywide basis through a network of branches and agencies. As at 31st December, 1991 the Society had 288 branches and 380 agencies and employed an average of 2,980 full-time staff and 439 part-time staff during the year compared to a total of 2,508 full-time staff and 357 part-time staff and 2,291 full-time staff and 369 part-time staff for the years ended 31st December, 1990 and 1989 respectively. As at 31st December, 1991 the Society had over 2 million investing shareholders and more than 300,000 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 1991 non-retail funds balances amounted to £2,387,986,000 representing 23.20 per cent. of share, deposit and loan liabilities. This compares with the overall maximum allowed under the Act of 40 per cent. The Society's principal purpose, as stated in Clause 2 of the 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 rate of interest on an advance is generally variable at the Society's option changing broadly in line with the general level of interest rates. At 31st December, 1991, outstanding mortgage balances amounted to £9,531,890,000 represented by 326,602 borrowing members. In the year to 31 st December, 1991, the Society lent over £2,000,000,000 by way of mortgage. With the new powers available to building societies under the Act, the Society has entered into a number of new activities, 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 1991, Bradford & Bingley (PEPs) Limited had almost 83,000 plans and over £200,000,000 of funds under management. Further new services introduced include 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". In 1989, the Society established its first offshore branch, in the Isle of Man, whilst in 1990 Bradford & Bingley (Douglas) Limited, a wholly-owned U.K. subsidiary operating exclusively from Douglas, in the Isle of Man, began offering gross interest deposit account facilities to U.K. investors. Towards the end of 1991 Bradford & Bingley Treasury Services (Ireland), also a wholly-owned U.K. subsidiary, began funds management operations in the Republic of Ireland. Leamington Mortgage Corporation Limited is a wholly-owned subsidiary which administers certain mortgages which were originated by the former Leamington Spa Building Society, while Bradford & Bingley Homeloans Limited commenced operations in 1992 to acquire third party mortgage books.
Operating performance and financial position In 1991, the Society achieved its record level of profit after tax of £73,051,000. This was an increase of £7,544,000 over the previous year. During 1991 the Society issued £15,500,000 Subordinated Floating Rate Notes due 2001 and issued £60,000,000 13 per cent. Permanent Interest Bearing Shares to enhance its capital base. Total reserves at the end of 1991 stood at £489,791,000 or 4.11 per cent. of total assets, while liquid assets amounted to £2,118,590,000 representing 17.79 per cent. of total assets. (The figures in the above paragraph are extracted from the latest Audited Accounts)
10 Recent developments and prospects The Society's new office premises at Croft Road, Crossflatts, Bingley, BD16 2UA became operational during 1992 and became the new Head Office of the Society and its subsidiaries (together, the "Group") with effect from 1st June, 1992. The Society continues to concentrate 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 operating subsidiaries of the Society, as detailed on page 25, continue to concentrate on their major activities in accordance with the report of the Directors as stated on pages 38 and 39. The Society further pursues 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 Group.
Principal establishment The principal place of business of the Society is at its new Head Office in Crossflatts, Bingley, BD16 2UA (170,000 square feet approximately). Its previous head office at Main Street, Bingley, BD16 2LW (150,000 square feet approximately) now forms the Bingley Operations Centre. The Society also occupies premises at Milverton Hill, Leamington Spa, CV32 5FE (81,000 square feet approximately). All these freehold premises are wholly owned and occupied by the Society and its subsidiary companies for their own use.
11 CONSOLIDATED CAPITALISATION AND INDEBTEDNESS
The following table is a summary of the consolidated shareholders' funds and indebtedness of the Group as at 31st December, 1991 (audited) and as at that date adjusted to reflect the subsequent issue of the Floating Rate Notes Due January 1995, the additional Floating Rate Notes due 1995 and the PIBS now being issued: 31st 31st December, December, 1991 1991 (Audited) (As adjusted)
(in thousands (in thousands of pounds) of pounds) Shareholders' Funds: Shares(1) 7,727,439 7,727,439 13% Permanent Interest Bearing Shares 60,000 60,000 11 5/8% Permanent Interest Bearing Shares (now being issued) — 50,000 General Reserve 482,344 482,344 Revaluation Reserve 7,447 7,447
Total Shareholders'Funds 8,277,230 8,327,230
Indebtedness: Deposits and Loans from Banks 444,175 444,175 Other Deposits and Loans 1,561,536 1,561,536 Certificates of Deposit 372,120 372,120 U.S. Commercial Paper 259,210 259,210 Floating Rate Notes Due 1994 151,454 151,454 Floating Rate Notes Due January 1995 (issued January 1992) — 100,000 Floating Rate Notes due 1995 100,558 100,558 Floating Rate Notes due 1995 (additional issued June 1992) — 100,000 Floating Rate Notes Due 1997 153,581 153,581 Floating Rate Notes Due 1998 102,424 102,424 Floating Rate Notes Due 1999 204,487 204,487 Subordinated Loans due 1998 10,000 10,000 Subordinated Floating Rate Notes due 2001 15,500 15,500 Floating Rate Subordinated Notes 2005 22,000 22,000 Subordinated Floating Rate Notes Due 2005 50,000 50,000
Total Indebtedness 3,447,045 3,647,045
Total Capitalisation 11,724,275 11,974,275
Notes: (1) 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. (2) Save as disclosed in the table above there has been no material change in the indebtedness and shareholders' funds of the Society since 31st December, 1991. (3) So far as is known to the Society no persons, directly or indirectly or jointly and severally, exercise or could exercise control over the Society or are interested, directly or indirectly, in 3 per cent. or more of the Society's shares. (4) No capital of the Society or any of its subsidiaries is under option or has been agreed to be put under option to any person. (5) Other than the issue, dated 7th October, 1991, of 13 per cent. Permanent Interest Bearing Shares at a price of £100.2 per cent, there has been no change in the amount of subscribed capital of the Society during (he three years preceding the date of this document.
12 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 Arthur Sykes, Vice-Chairman, Non-Executive Director — Derek Trevor Lewis, L.L.B., Non-Executive Director — Geoffrey Richard Lister, F.C.A., F.C.B.S.I., C.B.I.M., National House Building Council Chief Executive Sir David Neil Macfarlane, Non-Executive Director Golf Fund plc, Petron-Boss Limited, R.M.C. Plc, Securicor Security Services Limited, Zetters International plc Jack Lindsay Mackinlay, F.C.A., F.C.M.A., F.B.I.M., Argos plc, Aynsley Group PLC, Henry Non-Executive Director Barrett Group PLC, RPC Containers Limited Michael Pheasey, F.C.I.S., Commercial Director — William Michael Pybus, M.A.(Oxon.), C.B.I.M., F.C.I.M., AAH Holdings plc, Cornhill Insurance PLC, Non-Executive Director* Homeowners Friendly Society, Siebe plc John Arthur William Smith, F.C.C.A., Finance Director — Steven Graham Spilsbury, F.C.B.S.I., Sales Director — *W. M. Pybus is also a consultant in Denton Hall Burgin S Warrens, legal advisers to the Society in connection with this issue. The business address of the Directors is c/o Bradford & Bingley Building Society, Croft Road, Crossflatts, Bingley, West Yorkshire BD16 2UA. 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., Commercial Director John A. W. Smith, F.C.C.A., Finance Director Steven G. Spilsbury, F.C.B.S.I., Sales Director General Managers John Gordon Lodge, F.B.I.M. 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. Keith Barraclough, F.C.A. John H. Bradford Michael R. Cole Mark T. Gerdes, M.B.A., F.C.B.S.I., D.M.S. 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 Eric L. F. Nicholls, B.A.(Hons.), F.C.B.S.I., M.I.P.M., D.M.S. John Ross, A.I.B.(Scot.) lanD. 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.
13 FINANCIAL STATEMENTS
The Financial Statements set out on pages 14 to 40 have been extracted from audited accounts of the Group for the year ended 31st December, 1991 (save for the figures for 1989 which have been extracted from the audited accounts of the Group for the year ended 31 st December, 1990).
GROUP INCOME AND EXPENDITURE ACCOUNT
Notes 1991 1990 1989
£'000 £'000 £'000 Interest receivable 2 1,287,507 1,173,042 813,306 Interest payable 3 1,086,095 1,014,843 675,867
Net interest receivable 201,412 158,199 137,439 Other income and charges 4 60,007 45,541 30,669
261,419 203,740 168,108 Management expenses 5 123,186 93,731 79,599
138,233 110,009 88,509 Provisions for losses on commercial assets 10 30,450 9,389 770
Profit on ordinary activities before tax 107,783 100,620 87,739 Tax on profit on ordinary activities 8 34,732 35,113 30,397
Profit for the financial year 21 73,051 65,507 57,342
The notes on pages 19 to 31 form part of these Accounts.
14 GROUP BALANCE SHEET
Notes 1991 1990 1989
Assets £'000 £'000 £'000 Liquid assets 9 2,118,590 1,566,237 1,277,702 Commercial assets 10 Advances secured on residential property 9,236,158 7,147,363 5,694,507 Other advances secured on land 295,732 171,508 82,944 Other commercial assets 11 44,554 26,842 9,522 Fixed assets 13 193,560 127,979 85,345 Other assets 21,666 7,732 5,777
Total assets 11,910,260 9,047,661 7,155,797
Liabilities and reserves Shares, deposits and loans Retail funds and deposits 14 8,688,998 6,626,519 5,509,329 Non-retail funds and deposits 15 2,387,986 1,802,753 1,150,274 Other liabilities 16 182,379 171,632 167,782 Provisions for liabilities and charges 17 3,606 2,451 631 Subordinated liabilities 19 97,500 50,000 — Subscribed capital 20 60,000 — —
Total liabilities 11,420,469 8,653,355 6,828,016 Reserves General reserve 21 482,344 394,306 327,781 Revaluation reserve 22 7,447 — —
Total reserves 489,791 394,306 327,781
Total liabilities and reserves 11,910,260 9,047,661 7,155,797
15 SOCIETY INCOME AND EXPENDITURE ACCOUNT
Notes 1991 1990 1989
£'000 £'000 £'000 Interest receivable 2 1,278,488 1,168,264 810,932 Interest payable 3 1,091,918 1,016,078 675,930
Net interest receivable 186,570 152,186 135,002 Dividends from associated bodies 7,669 — — Other income and charges 4 51,965 39,262 28,098
246,204 191,448 163,100 Management expenses 5 115,807 88,821 75,941
130,397 102,627 87,159 Provisions for losses on commercial assets 10 27,163 8,402 577
Profit on ordinary activities before tax 103,234 94,225 86,582 Tax on profit on ordinary activities 8 31,426 33,980 30,203
Profit for the financial year 21 71,808 60,245 56,379
The notes on pages 19 to 31 form part of these Accounts.
16 SOCIETY BALANCE SHEET
1991 1990 1989
Assets Notes £'000 £'000 £'000 Liquid assets 9 1,912,554 1,547,217 1,256,055 Commercial assets 10 Advances secured on residential property 9,160,590 7,147,363 5,694,507 Other advances secured on land 295,732 171,508 82,944 Other commercial assets 11 326,733 34,114 13,178 Fixed assets 13 191,169 140,360 103,869 Other assets 26,037 6,778 4,655
Total assets 11,912,815 9,047,340 7,155,208
Liabilities and reserves Shares, deposits and loans Retail funds and deposits 14 8,366,495 6,266,438 5,509,329 Non-retail funds and deposits 15 2,727,389 2,171,531 1,151,306 Other liabilities 16 174,951 168,909 166,674 Provisions for liabilities and charges 17 3,518 1,849 549 Subordinated liabilities 19 97,500 50,000 — Subscribed capital 20 60,000 — —
Total liabilities 11,429,853 8,658,727 6,827,858
Reserves General reserve 21 475,515 388,613 327,350 Revaluation reserve 22 7,447 — —
Total reserves 482,962 388,613 327,350
Total liabilities and reserves 11,912,815 9,047,340 7,155,208
17 GROUP STATEMENT OF THE SOURCE AND APPLICATION OF FUNDS
1991 1990 1989
Source of funds £'000 £'000 £'000 Increase in free capital (see note below) 142,404 73,792 34,885 Advances and loans repaid by borrowers 1,093,162 726,700 625,916 Net receipts from retail funds and deposits 2,062,479 1,117,190 757,187 Net receipts from non-retail funds and deposits 585,233 652,479 608,292 Other items 11,902 5,670 39,417
Total source of funds 3,895,180 2,575,831 2,065,697
Application of funds Increase in liquid assets 552,353 288,535 253,903 Advances and loans made to borrowers 3,311,181 2,268,120 1,797,944 Increase in other commercial assets 17,712 17,221 9,621 Other items 13,934 1,955 4,229
Total application of funds 3,895,180 2,575,831 2,065,697
Increase in free capital Source of funds Profit on ordinary activities after tax 73,051 65,507 57,342 Adjustment for items not involving the movement of funds: (Profit)/Loss on disposal of tangible fixed assets (2,013) 10 (1,534) Depreciation of tangible fixed assets 15,379 8,507 6,305 lncrease/(Decrease) in general provision for losses on commercial assets 5,000 (99) 99
Funds generated from operations 91,417 73,925 62,212
Funds from other sources Disposal of tangible fixed assets 3,920 976 3,382 Net reserves acquired on transfers of engagements 22,540 1,018 — Net movement on revaluation reserve (106) — — Subordinated loan capital acquired on transfers of engagements 32,000 — — Issue of subordinated loan capital 15,500 50,000 — Issue of subscribed capital 60,000 — —
Application of funds Purchase of tangible fixed assets (82,867) (52,127) (30,709)
Increase in free capital 142,404 73,792 34,885
Free capital comprises the total reserves plus subordinated liabilities, subscribed capital and general loss provisions less tangible fixed assets. Note 24 to the accounts summarises the effect on the above statement of net assets acquired on transfers of engagements. The notes on pages 19 to 31 form part of these Accounts.
18 NOTES TO ANNUAL ACCOUNTS
1. Principal accounting policies (a) Accounting convention 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, after eliminating all transactions and balances within the Group. All accounts are made up to 31st December, 1991. (c) Taxation Income tax charged in the Accounts relates to the interest on shares, deposits and loans payable net. 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 at the current 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 are amortised in equal annual instalments over the remainder of the lease up to 50 years. Major alterations and non-structural additions to properties are depreciated in equal annual instalments over ten years. (ii) Equipment, fixtures, fittings and vehicles: On a reducing balance basis: Fixtures and fittings at 20 per cent. per annum. Vehicles at 25 per cent. per annum. On a straight line basis: Computer equipment at rates ranging from 14 per cent. to 25 per cent. per annum. Other equipment at 10 per cent. per annum. (e) Assets in course of construction This comprises a payment on account to Bradford & Bingley Properties Limited, a wholly owned subsidiary company, engaged in the development and construction of a new head office. (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 case by case basis. The provision for properties in possession is based on the contracted/agreed sale price or sale valuation with adjustments for expenses of sale and income from insurance policies. Provision for cases in arrear is also made on a case by case basis with the graduated scale being applied to the estimated loss position depending on the number of months subscriptions are in arrear. Cases 12 months or more in arrear are subject to a 100 per cent. provision. Interest charged to mortgage accounts which proves to be irrecoverable is written off against interest receivable in the year.
19 (j) Non-retail funds and subordinated liabilities issue costs These items are held in other assets and amortised over the relevant period to anticipated maturity. (k) Subscribed capital Subscribed capital comprises Permanent Interest Bearing Shares. Costs less the share premium associated with the issue of subscribed capital are held in other assets and amortised in equal instalments over ten years. (I) Offshore deposits Deposits taken by the offshore deposit taking subsidiary, Bradford & Bingley (Douglas) Limited, 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. (m) Segmental reporting The accounts do not contain a segmental report of the Group's business activities. In the opinion of the directors the Group's activities are not sufficiently dissimilar to make disclosure under Statement of Standard Accounting Practice No. 25 meaningful.
2. Interest receivable 1991 1991 1990 1990 Group Society Group Society
£'000 £'000 £'000 £'000 On secured advances 1,069,807 1,064,821 984,440 984,440 On other lending 8,229 8,159 4,021 2,566 On fixed-interest liquid assets: interest 209,124 205,264 184,121 181,035 profits net of losses 147 147 103 103 On other liquid assets: interest 200 97 357 120
1,287,507 1,278,488 1,173,042 1,168,264
Interest receivable on other lending includes interest receivable from associated bodies — 8,159 — 2,566
3. Interest payable 1991 1991 1990 1990 Group Society Group Society
£'000 £'000 £'000 £'000 On retail funds and deposits 832,414 793,812 808,250 777,915 On non-retail funds and deposits 243,169 287,594 203,782 235,352 On subordinated liabilities 8,657 8,657 2,811 2,811 On subscribed capital 1,855 1,855 — —
1,086,095 1,091,918 1,014,843 1,016,078
Interest payable on non-retail funds and deposits includes interest payable to associated bodies 44,425 — 31,570
4. Other income and charges 1991 1991 1990 1990 Group Society Group Society
£'000 £'000 £'000 £'000 Commissions receivable 43,000 38,117 38,504 34,218 Commissions payable (6,832) (5,217) (4,548) (3,984) Other operating income: rent received 1,779 1,779 1,609 1,609 other income 22,060 17,286 9,976 7,419
60,007 51,965 45,541 39,262
20 5. Management expenses 1991 1991 1990 1990 Group Society Group Society
£'000 £'000 £'000 £'000 Staff costs (including executive directors): wages and salaries 43,991 43,991 32,859 32,859 social security costs 3,328 3,328 2,375 2,375 other pension costs (see note below) 3,241 3,241 3,662 3,662
50,560 50,560 38,896 38,896 Depreciation 15,379 15,159 8,507 8,190 Remuneration of auditors 289 210 213 164 Other expenses 56,958 49,878 46,115 41,571
123,186 115,807 93,731 88,821
Other pension costs The Society operates two defined benefit pension schemes 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 schemes is 60 years. Pension costs are assessed in accordance with the advice of a qualified actuary using the projected unit method. The most recent actuarial valuation or formal review of the schemes was at 30th September, 1991. The aggregate actuarial value of the scheme assets was sufficient to cover 151 per cent. of the aggregate benefits that had accrued to members, after allowing for expected future increases in earnings. The aggregate market value of scheme assets at 30th September, 1991 was £112.3m. 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 2 per cent. per annum and present and future pensions by 4 per cent. per annum. The reduction in the pension charge compared with the previous year arises mainly as a result of the actuarial valuation or formal review as at 30th September, 1991. The pension charge takes account of the surpluses disclosed which are amortised over a period of 13 years, being the estimated average remaining service lives of pension scheme members.
6. Staff numbers 1991 1990 Group and Group and Society Society Full Part Full Part Time Time Time Time
The average number of persons, including executive directors, employed during the year was as follows: Principal office and administration centres 1,317 94 1,058 49 Branch offices 1,663 345 1,450 308
2,980 439 2,508 357
21 7. Directors' emoluments 1991 1990 Group and Group and Society Society
£'000 £'000 Services as a director (non executive directors) 305 279 Other services (executive directors) 447 314 Former directors' pensions for services as directors 72 43
824 636
1991 1990
£ £ Chairman's emoluments (excluding pension contributions) 1st January, 1991 to 31st August, 1991 54,738 1st September, 1991 to 31st December, 1991 27,092
81,830 52,787
Highest paid full time director (excluding pension contributions) 189,356 127,191
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: 1991 1990
£5,001 - £10,000 - 1 £10,001 - £15,000 1 3 £15,001 - £20,000 1 3 £20,001 - £25,000 4 - £25,001 - £30,000 1 - £35,001 - £40,000 - 1 £50,001 - £55,000 1 1 £65,001 - £70,000 1 - £70,001 - £75,000 1 - £80,001 - £85,000 - 2 £120,001 -£125,000 1 - £125,001 --£130,000 - 1 £185,001 -£190,000 1 - The emoluments include emoluments for services as directors of the Society and its associated bodies. At 31 st December, 1991, the aggregate amounts outstanding totalled £658,054 in respect of loans to 10 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 £61,105. 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 31 st December, 1991 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.
8. Tax on profit on ordinary activities 1991 1991 1990 1990 Group Society Group Society
£'000 £'000 £'000 £'000 The charge for the year at 33 1/4% (1990 — 35%) comprises: Corporation tax based on the profit for the year 26,577 22,757 33,293 32,680 Deferred taxation 8,155 8,669 1,820 1,300
34,732 31,426 35,113 33,980
22 9. Liquid assets 1991 1991 1990 1990 Group Society Group Society
£'000 £'000 £'000 £'000 (a) Cash in hand and with banks 1,670,584 1,464,548 1,180,062 1,161,042 UK Government securities 47,157 47,157 162,933 162,933 Other securities: issued by public bodies 26,289 26,289 645 645 issued by other borrowers 374,560 374,560 222,597 222,597
2,118,590 1,912,554 1,566,237 1,547,217
(b) Repayable from the date of the balance sheet in the ordinary course of business as follows: Cash with banks Repayable on demand 86,891 86,873 74,305 70,771 In not more than three months 1,010,644 804,626 691,244 681,021 In more than three months but not more than one year 563,939 563,939 405,785 400,522
1,661,474 1,455,438 1,171,334 1,152,314
UK Government securities In not more than one year 26,866 26,866 44,016 44,016 In more than one year but not more than five years 20,291 20,291 118,917 118,917
47,157 47,157 162,933 162,933
Other securities In not more than one year 379,896 379,896 223,242 223,242 In more than one year 20,953 20,953 — —
400,849 400,849 223,242 223,242
(c) Listed investments included under 9(a) above: UK Government securities Book value less accrued interest 45,800 45,800 159,123 159,123
Market value of listed investments 45,556 45,556 155,356 155,356
23 10. Provisions for losses on commercial assets Commercial assets are stated after making provision for losses on loans and advances as follows: Advances Other secured on advances Other residential secured on commercial property land assets Total
£'000 £'000 £'000 £'000 Group At 1st January, 1991: Specific 7,328 456 1,163 8,947 General — — — — Provision acquired on transfers of engagements 54,453 8,919 — 63,372 Charge for the year 26,234 1,145 3,071 30,450 Amounts written off during year (31,487) (220) (558) (32,265)
At 31st December, 1991 56,528 10,300 3,676 70,504
Being: Specific 51,528 10,300 3,676 65,504 General 5,000 — — 5,000
56,528 10,300 3,676 70,504
Society At 1st January, 1991: Specific 7,328 456 — 7,784 General — — — — Provision acquired on transfers of engagements 52,840 8,919 — 61,759 Charge for the year 26,018 1,145 — 27,163 Amounts written off during year (31,486) (220) — (31,706)
At 31st December, 1991 54,700 10,300 — 65,000
Being: Specific 49,700 10,300 — 60,000 General 5,000 — — 5,000
54,700 10,300 — 65,000
11. Other commercial assets 1991 1991 1990 1990 Group Society Group Society
£'000 £'000 £'000 £'000 Unsecured loans 44,325 — 26,742 — Investments in associated bodies (see note 12): shares 129 207,029 — 6,100 loans 100 119,704 100 28,014
44,554 326,733 26,842 34,114
24 12. 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, 1991: 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
Bradford & Bingley Treasury Services (Ireland) England Funds trading Ordinary 100% £1 shares
Leamington Mortgage Corporation PLC England Residential Ordinary 100% mortgage £1 shares lending
In addition the Society has the following other direct associated bodies at 31st December, 1991: APACS (Administration) Limited England Payment Ordinary 4.7% clearing services £1 shares BACS Limited England Automated Ordinary 0.2% payments £1 shares service Bradford & Bingley Pensions Limited England Staff pension Limited by Control of fund trustee guarantee corresponding membership rights Link Interchange Network Limited England Operation of Limited by 4.3% automated teller guarantee machine network
With the exception of Bradford & Bingley (Douglas) Limited, which operates in the Isle of Man, and Bradford & Bingley Treasury Services (Ireland) which operates in the Republic of Ireland, the above associated bodies operate within the United Kingdom. The Society's share of the capital, reserves and profit or loss of APACS (Administration) Limited, BACS Limited, Bradford & Bingley Pensions Limited and Link Interchange Network Limited is not material.
25 13. Tangible fixed assets Equipment, Fixtures, Land and Fittings and Buildings Vehicles Total
£'000 £'000 £'000 Group Cost: At 1st January, 1991 100,019 67,395 167,414 Additions 49,407 33,460 82,867 Disposals (894) (5,179) (6,073)
At 31st December, 1991 148,532 95,676 244,208
Depreciation: At 1st January, 1991 8,867 30,568 39,435 Charged in year 2,568 12,373 14,941 Disposals (430) (3,298) (3,728)
At 31 st December, 1991 11,005 39,643 50,648
Net book value: At 31st December, 1991 137,527 56,033 193,560
At 31 st December, 1990 91,152 36,827 127,979
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, 1991 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, 1991 is £154 million. (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, 1991 is an amount of E21.8 million 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, 1991 112,748 66,404 179,152 Additions 35,108 32,766 67,874 Disposals (894) (5,179) (6,073)
At 31st December, 1991 146,962 93,991 240,953
Depreciation: At 1st January, 1991 8,869 29,923 38,792 Charged in year 2,557 12,163 14,720 Disposals (430) (3,298) (3,728)
At 31st December, 1991 10,996 38,788 49,784
Net book value: At 31st December, 1991 135,966 55,203 191,169
At 31st December, 1990 103,879 36,481 140,360
26 13. Tangible fixed assets—continued 1991 1991 1990 1990 Group Society Group Society
Land and Buildings £'000 £'000 £'000 £'000 Land and buildings at end of year consist of: Freehold premises 122,529 120,968 82,122 93,079 Leasehold premises (50 or more years unexpired) 9,013 9,013 4,356 6,126 Leasehold premises (less than 50 years unexpired) 5,985 5,985 4,674 4,674
137,527 135,966 91,152 103,879
Included in the Society figure for land and buildings at 31st December, 1991 is an amount of £20.5 million representing a prepayment to a subsidiary company for property in the course of construction.
14. Retail funds and deposits 1991 1991 1990 1990 Group Society Group Society
£'000 £'000 £'000 £'000 Shares 7,726,274 7,726,274 5,722,875 5,722,875 Deposits 962,724 640,221 903,644 543,563
8,688,998 8,366,495 6,626,519 6,266,438
Repayable from the date of the balance sheet in the ordinary course of business as follows: Shares Repayable on demand 3,899,963 3,899,963 2,327,413 2,327,413 Repayable on demand but with interest penalty 2,512,760 2,512,760 2,522,949 2,522,949 In not more than three months 561,553 561,553 437,303 437,303 In more than three months but not more than one year 730,250 730,250 416,755 416,755 In more than one year but not more than five years 18,996 18,996 14,704 14,704 In more than five years 2,752 2,752 3,751 3,751
7,726,274 7,726,274 5,722,875 5,722,875
Deposits Repayable on demand 644,687 640,221 545,527 543,563 Repayable on demand but with interest penalty 147,045 — 176,524 — In more than three months but not more than one year 170,992 — 181,593 —
962,724 640,221 903,644 543,563
Total Repayable on demand 4,544,650 4,540,184 2,872,940 2,870,976 Repayable on demand but with interest penalty 2,659,805 2,512,760 2,699,473 2,522,949 In not more than three months 561,553 561,553 437,303 437,303 In more than three months but not more than one year 901,242 730,250 598,348 416,755 In more than one year but not more than five years 18,996 18,996 14,704 14,704 In more than five years 2,752 2,752 3,751 3,751
8,688,998 8,366,495 6,626,519 6,266,438
27 15. Non-retail funds and 1991 1991 1990 1990 deposits Group Society Group Society
£'000 £'000 £'000 £'000 Amounts owed to banks 444,175 444,175 404,921 404,921 Certificates of deposit 372,120 372,120 364,997 364,997 Floating rate notes 712,504 712,504 615,805 615,805 U.S. Commercial paper 259,210 259,210 117,285 117,285 Other deposits and loans 598,812 938,215 299,686 668,464 Shares 1,165 1,165 59 59
2,387,986 2,727,389 1,802,753 2,171,531
Other deposits and loans includes deposits by associated bodies — 339,403 — 368,778
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 112,600 112,600 115,572 115,572 In more than three months but not more than one year 145,490 145,490 7,964 7,964 In more than one year but not more than five years 176,000 176,000 271,300 271,300 In more than five years 10,085 10,085 10,085 10,085
444,175 444,175 404,921 404,921
Certificates of deposit In not more than three months 352,024 352,024 319,569 319,569 In more than three months but not more than one year 20,096 20,096 45,428 45,428
372,120 372,120 364,997 364,997
Floating rate notes in not more than three months 12,504 12,504 15,805 15,805 In more than one year but not more than five years 250,000 250,000 150,000 150,000 In more than five years 450,000 450,000 450,000 450,000
712,504 712,504 615,805 615,805
U.S. Commercial paper In not more than three months 259,210 259,210 117,285 117,285
Other deposits and loans Repayable on demand 41,704 381,107 33,770 402,548 In not more than three months 462,766 462,766 260,800 260,800 In more than three months but not more than one year 29,012 29,012 116 116 In more than one year but not more than five years 65,330 65,330 5,000 5,000
598,812 938,215 299,686 668,464
Shares Repayable on demand 458 458 59 59 In more than three months but not more than one year 707 707 — —
1,165 1,165 59 59
Total Repayable on demand 42,162 381,565 33,829 402,607 In not more than three months 1,199,104 1,199,104 829,031 829,031 In more than three months but not more than one year 195,305 195,305 53,508 53,508 In more than one year but not more than five years 491,330 491,330 426,300 426,300 In more than five years 460,085 460,085 460,085 460,085
2,387,986 2,727,389 1,802,753 2,171,531
28 16. Other liabilities 1991 1991 1990 1990 Group Society Group Society
£'000 £'000 £'000 £'000 Falling due within one year: Income tax 107,175 107,175 97,618 97,618 Corporation tax 13,247 9,442 32,717 32,174 Other taxation and social security 1,711 1,504 1,136 1,027 Other creditors 47,303 43,887 33,315 31,244
169,436 162,008 164,786 162,063 Falling due after more than one year: Income tax 10,176 10,176 4,382 4,382 Other creditors 2,767 2,767 2,464 2,464
182,379 174,951 171,632 168,909
17. Provisions for liabilities and charges Deferred taxation At 1 st January, 1991 2,451 1,849 Provision acquired on transfers of engagements (7,000) (7,000) Provided during the year 8,155 8,669
At 31st December, 1991 3,606 3,518
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 616 585 1,925 1,338 Capital allowances in advance of depreciation 4,928 4,871 3,572 3,557 Other timing differences (1,938) (1,938) (3,046) (3,046)
3,606 3,518 2,451 1,849
(ii) There is an additional potential liability which represents corporation tax on: Deferred capital gains 2,185 2,185 1,573 1,573 Unrealised capital gains on fixed assets 842 842 — —
18. 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) Isle of Man Depositors Compensation Scheme Bradford & Bingley (Douglas) Limited, a subsidiary licensed under the Isle of Man Banking Acts 1975 to 1986 has a contingent liability in respect of contributions to the Isle of Man Depositors Compensation Scheme.
(c) Capital commitments
1991 1991 1990 1990 Group Society Group Society
£'000 £'000 £'000 £'000 At 31st December, 1991 capital commitments were as set out below: Contracts for capital expenditure not provided for 8,774 3,392 31,801 15,709 Capital expenditure authorised by the directors which has not been contracted for 29,234 28,648 28,618 28,618
38,008 32,040 60,419 44,327
29 18. Guarantees and other financial commitments—continued (d) Leasing commitments 1991 1991 1990 1990 Group Society Group Society
£'000 £'000 £'000 £'000 At 31st December, 1991 the annual commitments under non-cancellable operating leases, relating to land and buildings were as set out below: Leases which expire: within one year 449 80 282 282 between two and five years inclusive 646 463 951 951 after five years 1,946 1,946 290 290
3,041 2,489 1,523 1,523
The majority of leases are subject to rent reviews.
19. Subordinated liabilities 1991 1990 Group and Group and Society Society
£'000 £'000 Subordinated loans due 1998 10,000 — Subordinated floating rate notes due 2001 15,500 — Subordinated floating rate notes due 2005 72,000 50,000
97,500 50,000
Of the subordinated floating rate notes due 2005, £50 million is repayable in instalments between the years 2001 and 2005. All the remainder of the debt is repayable in full in the years shown above. The Society also has various options to repay before the due dates.
20. Subscribed capital 1991 1990 Group and Group and Society Society
£'000 £'000 13 per cent. Permanent Interest Bearing Shares 60,000 — The shares have been issued in order to strengthen the Society's capital base and provide capital backing for future developments. They are only repayable in the event of the winding up of the Society and may only be bought back by the Society with the consent of the Building Societies Commission.
21. General reserve 1991 1991 1990 1990 Group Society Group Society
£'000 £'000 £'000 £'000 At 1st January, 1991 394,306 388,613 327,781 327,350 Net reserves acquired on transfers of engagements 14,987 15,094 1,018 1,018 Profit for the financial year 73,051 71,808 65,507 60,245
At 31st December, 1991 482,344 475,515 394,306 388,613
30 22. Revaluation reserve 1991 1991 1990 1990 Group Society Group Society
£'000 £'000 £'000 £'000 At 1st January, 1991 _____ Acquired on transfers of engagements 7,553 7,553 — — Movement during the year (106) (106) — —
At 31st December, 1991 7,447 7,447 — —
23. Share premium Permanent Interest Bearing Shares were issued during the year at a premium of £120,000. This amount has been utilised to write off an equivalent amount of costs associated with the issue.
24. Net assets acquired on transfers of engagements Included in the Source and Application of Funds Statement on page 18 are the following net assets acquired on transfers of engagements during the year: £'000 £'000 Liquid assets 326,688 Reserves acquired 22,540 Commercial assets 1,153,881 (note 21 and note 22) Fixed and other assets 51,620 Shares, deposits and loans (1,471,174) Other liabilities (6,475) Subordinated liabilities (32,000)
22,540 22,540
25. Income tax Following the decision of the House of Lords in 1990 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 Government enacted section 53 of the Finance Act 1991. This effectively removed any automatic rights other societies may have had to recover the sums they had paid pursuant to the Regulations. On advice from Counsel, the Society has commenced an application for judicial review against the Government challenging the rates of tax set by the Treasury in 1986 which, because of the retrospective effect of section 53, are now considered excessive. Including amounts originally paid by the Leamington Spa and certain other societies which have transferred their engagements to Bradford & Bingley, up to £5 million stands to be recovered if the Society is successful in its action. No credit has been taken in these accounts for the above claim.
31 ANNUAL BUSINESS STATEMENT For the year ended 31st December, 1991
Section 74 of the Building Societies Act 1986 (the Act) requires that the Society prepares an annual business statement containing the information specified under the Building Societies (Accounts and Related Provisions) Regulations 1987. The information given below is in accordance with these regulations and has been prepared from the Annual Accounts.
1. Statutory ratios and percentages Ratio at 31st December, 1991 Statutory limit % % Calculated in accordance with the Building Societies Act 1986. Non-retail funds and deposits as a percentage of shares, deposits and loans 23.20 40 Deposits and loans as a percentage of shares, deposits and loans 31.40 50 As a percentage of total commercial assets— (i) Advances secured on residential property (class I assets) 93.60 — (ii) Advances secured on land other than residential properly (class 2 assets) 3.00 — (iii) Other commercial assets (class 3 assets) 3.40 10 (iv) Class 2 assets and class 3 assets 6.40 20
Explanation of terms The amounts shown in the group accounts for non-retail funds and deposits and shares, deposits and loans include interest accrued not yet payable. The ratios above are calculated excluding interest accrued not yet payable as shown below: 1991
£'000 Non-retail funds and deposits represent: Non-retail funds and deposits (accounts note 15) 2,387,986 Subordinated liabilities (accounts note 19) 97,500 Subscribed capital (not qualifying as retail balances) 56,740
2,542,226 Less accrued interest 43,097
2,499,129
Shares, deposits, and loans represent: Retail funds and deposits (accounts note 14) 8,688,998 Non-retail funds and deposits (accounts note 15) 2,387,986 Subordinated liabilities (accounts note 19) 97,500 Subscribed capital (accounts note 20) 60,000
11,234,484 Less accrued interest 462,369
10,772,115
Deposits and loans represent: Retail deposits (accounts note 14) 962,724 Amounts owed to banks 444,175 Certificates of deposit 372,120 Floating rate notes (accounts note 15) 712,504 U.S. Commercial paper 259,210 Other deposits and loans 598,812 Subordinated liabilities (accounts note 19) 97,500
3,447,045 Less accrued interest 64,253
3,382,792
32 1. Statutory ratios and percentages—continued Explanation of terms—continued 1991
£'000 Total commercial assets represent amounts as shown in the group balance sheet: Advances secured on residential property 9,236,158 Other advances secured on land 295,732 Other commercial assets (see below) 336,051 9,867,941
Other commercial assets represent amounts relating to the Society (accounts note 11) 326,733 Business premises—included in fixed assets (accounts note 13) 9,237 Class 3 assets of associated bodies 44,325 Less investment in associated bodies (44,244)
336,051
2. Other percentages Ratio at 31st Ratio at 31st December, December, 1991 1990
% % Gross capital as a percentage of shares, deposits and loans 5.84 5.27 Free capital as a percentage of shares, deposits and loans 4.14 3.75 Liquid assets as a percentage of total assets 17.79 17.31 Profit after taxation as a percentage of: (i) mean reserves 16.53 18.14 (ii) mean total assets 0.70 0.81 The above percentages have been prepared from the group balance sheet.
Explanation of terms: 1991 1990
£'000 £'000 Gross capital represents the total reserves as shown in note 21 and note 22 plus subordinated liabilities as shown in note 19, and subscribed capital as shown in note 20 to the accounts 647,291 444,306
Free capital represents gross capital plus general loss provision less fixed assets: gross capital 647,291 444,306 general loss provision (accounts note 10) 5,000 — fixed assets (accounts note 13) (193,560) (127,979)
458,731 316,327
Shares, deposits and loans represent the total of retail and non-retail funds and deposits as shown in the group balance sheet: retail funds and deposits (accounts note 14) 8,688,998 6,626,519 non-retail funds and deposits (accounts note 15) 2,387,986 1,802,753
11,076,984 8,429,272
Liquid assets represent amounts as shown in note 9(a) to the accounts 2,118,590 1,566,237
Total assets represent amounts as shown in the group balance sheet 11,910,260 9,047,661
Mean reserves are the average of the total reserves at the beginning and end of year as shown in note 21 and note 22 to the accounts: total reserves at beginning of year 394,306 327,781 total reserves at end of year 489,791 394,306 442,049 361,044
33 2. Other percentages—continued Explanation of terms—continued 1991 1990
£'ooo £'ooo Mean total assets are the average of the assets at the beginning and end of year as shown in the group balance sheet: total assets at beginning of year 9,047,661 7,155,797 total assets at end of year 11,910,260 9,047,661
10,478,961 8,101,729
Profit after taxation is profit for the financial year as shown in the group income and expenditure account 73,051 65,507
3. Information relating to the directors and other officers at 31st December, 1991 Date of Date of Name Occupation Birth Appointment
Directors CHAIRMAN Donald Hanson FCIS CBIM FRSA Building Society Director 5.1.1925 5.10.1981 VICE-CHAIRMAN George A. Sykes Building Society Director 31.1.1928 20.10.1986 D. TrevorLewis LLB Solicitor 21.10.1936 21.5.1990 Geoffrey R. Lister FCA FCBSI CBIM Building Society Chief Executive 14.5.1937 1.11.1988 Sir Neil Macfarlane MP Member of Parliament and Company Director 7.5.1936 1.11.1988 J. Lindsay Mackinlay FCA FCMA FBIM Company Director 24.1.1936 24.9.1990 Michael Pheasey FCIS Building Society Commercial Director 12.5.1944 1.11.1988 William M. Pybus MA(Oxon) CBIM FCIM Solicitor 7.5.1923 19.12.1983 John A. W. Smith FCCA Building Society Finance Director 6.6.1947 1.11.1991 Steven G. Spilsbury FCBSI Building Society Sales Director 20.12.1944 1.11.1991 Documents may be served on any of the directors at the offices of Grant Thornton, Chartered Accountants, Eldon Lodge, Eldon Place, Bradford BD1 3AP. Other Directorships Donald Hanson FCIS CBIM FRSA: Bradford & Bingley (Douglas) Ltd, Bradford & Bingley Homeloans Ltd, Bradford & Bingley Homeloans Management Ltd, Bradford & Bingley (Ireland) Ltd, Bradford & Bingley Mortgages Ltd, Bradford & Bingley Mortgage Management Ltd, Bradford & Bingley Pensions Ltd, Bradford & Bingley Pensions Services Ltd, Bradford & Bingley (PEPs) Ltd, Bradford & Bingley Treasury Services (Ireland), Bradford & Bingley Unit Trust Managers Ltd, Maribou Ltd. George A. Sykes: Bradford & Bingley Directors' Pensions Ltd, Bradford & Bingley (Douglas) Ltd, Bradford & Bingley Pensions Services Ltd, Bradford & Bingley Personal Pensions Ltd, Bradford & Bingley Properties Ltd, Bradford & Bingley Unit Trust Managers Ltd, Maribou Ltd.
D. Trevor Lewis LLB: Bradford & Bingley Directors' Pensions Ltd, Bradford & Bingley Personal Finance Ltd, Herbert Roberts Ltd, Yearahead Ltd.
Geoffrey R. Lister FCA FCBSI CBIM: Bradford & Bingley (Douglas) Ltd, Bradford & Bingley Homeloans Ltd, Bradford & Bingley Homeloans Management Ltd, Bradford & Bingley Homes Ltd, Bradford & Bingley (Ireland) Ltd, Bradford & Bingley Mortgage Management Ltd, Bradford & Bingley Mortgages Ltd, Bradford & Bingley Pensions Ltd, Bradford & Bingley (PEPs) Ltd, Bradford & Bingley Personal Finance Ltd, Bradford & Bingley Personal Pensions Ltd, Bradford & Bingley Properties Ltd, Bradford & Bingley Treasury Services (Ireland), Bradford & District TEC Ltd, Electronic Funds Transfer (Clearings) Ltd, Electronic Funds Transfer (Point of Sale) Ltd, Leamington Mortgage Corporation PLC, Maribou Ltd, National House Building Council.
Sir Neil Macfarlane MP: Bloomhaven PLC, Bradford & Bingley Directors' Pensions Ltd, Brookhart PLC, Colin Snape Golf Consultancy Ltd, CPMA Ltd, CPMA Brokers Ltd, Golf Fund PLC, Indemnity International Ltd, Petron-Boss Ltd, PGA European Tour Ltd, PGA Properties Ltd, RMC PLC, Seedy Mill Golf Club Ltd, The Bells Scottish Open Championship Ltd, Zetters International PLC.
34 3. Information relating to the directors and other officers—continued J. Lindsay Mackinlay FCA FCMA FBIM: Argos PLC, Aynsley Group PLC, Bradford & Bingley Directors' Pensions Ltd, Henry Barrett Group PLC, Leamington Mortgage Corporation PLC, Steetley PLC. Michael Pheasey FCIS: Bradford & Bingley Homes Ltd, Bradford & Bingley (PEPs) Ltd, Bradford & Bingley Personal Finance Ltd, Bradford & Bingley Personal Pensions Ltd, Maribou Ltd. William M. Pybus MA (Oxon) CBIM FCIM: A A H Builders Supplies Ltd, A A H Holdings PLC, A A H Investments Ltd, A A H Nominees Limited, A A H (Oil Exploration) Ltd, A A H Pension Trustees Ltd, A A H Pharmaceuticals Ltd, A A H Subsidiaries Ltd, Allianz (U.K.) Ltd, Barber-Colman Co (U.S.A.), D. A. Bateman & Son (Transport) Ltd, CompAir Ltd, The Conservation Foundation Enterprise Ltd, Cornhill Insurance PLC, Henderson's Welsh Anthracite Collieries Ltd, Homeowners Friendly Society, James North (Africa) (Pty) Ltd {South Africa), Ranco Inc (U.S.A.), Robertshaw Controls Company (U.S.A.), Siebe PLC, Siebe North Inc (U.S.A.), Smith Parkinson & Cole (Holdings) Ltd, Springfield Trustees Ltd, Tyler Berlin GmbH (Germany), Vestric Pensions Ltd, Walter Whiteman (Kenilworth) Ltd. John A. W. Smith FCCA: Bradford & Bingley (Douglas) Ltd, Bradford & Bingley Personal Finance Ltd, Bradford & Bingley Properties Ltd, Bradford & Bingley Treasury Services (Ireland). Steven G. Spilsbury FCBSI: Bradford & Bingley (Douglas) Ltd, Bradford & Bingley Personal Pensions Ltd, Leamington Mortgage Corporation PLC.
Service contracts The executive directors, Geoffrey R. Lister, Michael Pheasey, John A. W. Smith and Steven G. Spilsbury have service contracts with the Society. The contracts in the case of Geoffrey R. Lister and Michael Pheasey cover a three year period and are extendable by the Society for a further year on each anniversary of the contract date. All the executive directors must give at least one year's notice of their intention to terminate the contract. Name Occupation Directorships Officers General Managers J. Gordon Lodge, F.B.I.M. Building Society Beckfoot Estate Co. Ltd. General Manager N. Cameron Scott, F.C.A., F.C.B.S.I. Building Society Leamington Mortgage Corporation General Manager PLC, United Mortgage Corporation (Holdings) Ltd., UMC 1 Ltd., UMC 2 Ltd., UMC 3 Ltd., UMC 4 Ltd., Evenlarge Ltd., Spa Financial Management Ltd. Secretary Kevin McGuinness F.C.B.S.I. Building Society Secretary
35 4. Average rates Average amount outstanding Interest Interest Average Average during year earned paid yield rate paid
Assets £'000 £'000 £'000 % % Liquid assets 1,842,414 209,471 11.37 Secured advances 8,425,381 1,069,807 12.70 Liabilities Retail funds and deposits 7,657,759 832,414 10.87 Non-retail funds and deposits 2,095,370 243,169 11.61
The figures shown above are taken from the group accounts and represent the major categories of interest-bearing assets and liabilities. Explanation of terms: The average amount outstanding during the year in respect of liquid assets is the average of 1990 and 1991 liquid asset balances as shown in the group balance sheet and note 9(a) to the accounts: £'000 — liquid assets at 31st December, 1990 1,566,237 — liquid assets at 31 st December, 1991 2,118,590
1,842,414
The interest earned on liquid assets represents the following interest receivable as shown in note 2 to the accounts: On fixed-interest liquid assets — interest 209,124 — profits net of losses 147 On other liquid assets — interest 200
209,471
The average yield on liquid assets is the ratio of the interest earned on liquid assets to the average amount of liquid assets outstanding during the year. Advances Other secured on advances residential secured on property land Total
£'000 £'000 £'000 The average amount outstanding during the year in respect of secured advances is the average of 1990 and 1991 secured advances as shown in the group balance sheet: — at 31 st December, 1990 7,147,363 171,508 7,318,871 — at 31 st December, 1991 9,236,158 295,732 9,531,890
8,191,761 233,620 8,425,381
The interest earned of £1,069.8 million on secured advances represents the interest receivable on secured advances as shown in note 2 to the accounts. The average yield on secured advances is the ratio of the interest earned on secured advances to the average amount outstanding during the year as secured advances. The average amounts outstanding during the year in respect of retail funds and Retail funds Non-retail deposits and non-retail funds and deposits are the average of the respective 1990 and and funds and 1991 balances as shown in the group balance sheet: deposits deposits
£'000 £'000 — at 31 st December, 1990 6,626,519 1,802,753 — at 31st December, 1991 8,688,998 2,387,986
7,657,759 2,095,370
36 4. Average rates—continued The interest paid on retail funds and deposits of E832.4 million and non-retail funds and deposits of £243.2 million represents amounts as shown in note 3 to the accounts. The average rate paid on retail funds and deposits is the ratio of the interest paid on retail funds and deposits to the average amount outstanding during the year as retail funds and deposits. The average rate paid on non-retail funds and deposits is the ratio of interest paid on non-retail funds and deposits to the average amount outstanding during the year as non-retail funds and deposits.
5. Associated bodies not carrying on a business Class of Shares held/ Constitution Interest of Society The Society had the following non-trading subsidiaries, which are direct associated bodies, at 31st December, 1991: BB Limited Ordinary £1 Shares 100% BBBs Limited Ordinary £1 Shares 100% B & B Limited Ordinary £1 Shares 100% 3B's Limited Ordinary £1 Shares 100% Bradford & Bingley Limited Ordinary £1 Shares 100% Bradford & Bingley Broking Services Limited Ordinary £1 Shares 100% BBBs Financial Services Limited Ordinary £1 Shares 100% 3B's Financial Services Limited Ordinary £1 Shares 100% Bradford & Bingley Financial Services Limited Ordinary £1 Shares 100% Bradford & Bingley (Group) Limited Ordinary £1 Shares 100% Bradford & Bingley Health Care Group Limited Ordinary £1 Shares 100% Bradford & Bingley Homeloans Limited Ordinary £1 Shares 100% Bradford & Bingley Homeloans Management Limited Ordinary £1 Shares 100% Bradford & Bingley Homes Limited Ordinary £1 Shares 100% BBBs Insurance Services Limited Ordinary £1 Shares 100% 3B's Insurance Services Limited Ordinary £1 Shares 100% Bradford & Bingley Insurance Services Limited Ordinary £1 Shares 100% 3B's Investment Services Limited Ordinary £1 Shares 100% Bradford & Bingley Mortgage Management Limited Ordinary £1 Shares 100% Bradford & Bingley Mortgages Limited Ordinary £1 Shares 100% BBBs Overseas Limited Ordinary £1 Shares 100% Bradford & Bingley Overseas Limited Ordinary £1 Shares 100% Bradford & Bingley Pensions Services Limited Ordinary £1 Shares 100% Bradford & Bingley (PEPs) Nominees Limited Ordinary £1 Shares 100% BBBs Properties Limited Ordinary £1 Shares 100% 3B's Properties Limited Ordinary £1 Shares 100% Bradford & Bingley Unit Trust Managers Limited Ordinary £1 Shares 100% Maribou Limited Ordinary £1 Shares 100% In addition the Society had the following other direct associated bodies at 31 st December, 1991, which did not trade during the year: Bradford & Bingley Directors' Pensions Limited Limited by guarantee Control of corresponding membership rights Electronic Funds Transfer (Clearings) Limited Ordinary £1 share 14.3% Electronic Funds Transfer (Point of Sale) Limited Ordinary £1 share 16.7%
6. New activities The Society has not exercised any new powers during 1991.
37 DIRECTORS' REPORT FOR THE YEAR ENDED 31st DECEMBER, 1991
The directors have pleasure in presenting their report and audited accounts for the year ended 31st December, 1991.
Principal activities The group is engaged principally in the provision of a comprehensive range of personal financial services through the Society and its wholly owned subsidiaries, Bradford & Bingley (Douglas) Limited, Bradford & Bingley (PEPs) Limited, Bradford & Bingley Personal Finance Limited, Bradford & Bingley Personal Pensions Limited, Bradford & Bingley Properties Limited, Bradford & Bingley Treasury Services (Ireland) and Leamington Mortgage Corporation PLC. The range of activities includes the provision of finance for house purchase and improvements, unsecured loans, savings and investment accounts, insurance services, equity based products, the management of Personal Equity Plans and the provision of personal pensions.
Review of 1991 The group achieved a pre-tax profit of £107.8 million (1990: £100.6 million), reflecting continuing success in providing those services appropriate to the needs of our customers. Despite tough trading conditions, the group achieved lending of £2,157 million and net retail investment inflows of £311 million. A review of the business of the group during the year is included in the Chief Executive's Review of Operations on pages 11 to 29 of the 1991 Annual Report and Accounts. As required by the Building Societies Act 1986, the Board is able to confirm that none of the activities undertaken during 1991 is believed to have been outside the powers of the Society.
Directors The following were directors of the Society during the year: Donald Hanson F.C.I.S., C.B.I.M., F.R.S.A. (Chairman) George A. Sykes (Vice-Chairman) Philip T Duxbury David Hanson F.C.I.S. (Operations Director) D. Trevor Lewis L.L.B. Geoffrey R. Lister F.C.A., F.C.B.S.I., C.B.I.M. (Chief Executive) Sir Neil Macfarlane M.P. J. Lindsay Mackinlay F.C.A., F.C.M.A., F.B.I.M. Michael Pheasey F.C.I.S. (Commercial Director) William M. Pybus M.A. (Oxon), C.B.I.M., F.C.I.M. John A. W. Smith F.C.C.A. (Finance Director) Steven G. Spilsbury F.C.B.S.I. (Sales Director). Sadly on 17th July, 1991 David Hanson, Operations Director, died following a long illness. On 1st September, 1991 Philip T. Duxbury retired as a Director and Chairman and was succeeded as Chairman by Donald Hanson. George A. Sykes succeeded Donald Hanson as Vice-Chairman. Two new directors, John A. W. Smith and Steven G. Spilsbury, were appointed on 1st November, 1991. In accordance with the Rules and the statutory requirements, Geoffrey R. Lister, Sir Neil Macfarlane, Michael Pheasey, John A. W. Smith and Steven G. Spilsbury retire. In the absence of any other nominations, they have been duly re-elected.
Directors' interests None of the directors of the Society has a beneficial interest in the share capital of any of the Society's associated bodies.
Staff The directors are pleased to record their appreciation to management and staff for their loyalty and enthusiasm in maintaining the high standard of service to members in a year of considerable change and development.
38 The Society aims to have effective communication and consultation with its staff. Regular staff involvement is achieved through various committees comprising both staff and management representatives. In addition, conferences and regular circulars and newsletters ensure that staff are kept up to date with the details of the group's performance and objectives. The Society's policy is to give all applications for employment from disabled persons full consideration in relation to the vacancy concerned. In the event of existing staff members becoming disabled, every effort is made to enable them to maintain their present position or to provide appropriate training and employ them in suitable work within another department.
Capital At 31st December, 1991, the group's free capital amounted to 4.14 per cent, of share, deposit and loan liabilities. Gross capital amounted to 5.84 per cent, of share, deposit and loan liabilities.
Liquid assets The liquid assets of the group increased during the year by £552 million to £2,119 million representing 17.79 per cent. of total assets.
Commercial assets At 31st December, 1991, there were 6,103 mortgages where repayments were twelve months or more in arrear. The total amount of arrears in these cases was £61.6 million, representing 0.6 per cent. of mortgage balances.
Fixed assets Changes in fixed assets during the year together with details of the market value of land and buildings at the end of the year are detailed in note 13 to the accounts.
Charitable and political donations During the year, the group made charitable donations totalling £38,644. There were no political contributions.
Future developments Our core business will consist of: ■ Lending (both secured and unsecured loans) ■ Savings (both equity-related and deposit based) ■ Insurance (general and life policies) ■ Other products or services which complement our position to provide financial services for all the family. Our main strategic thrust is to concentrate on our traditional activities whilst developing new services which will satisfy the needs of our customers whilst generating sufficient profits to maintain or improve our capital ratios.
Auditors A resolution to appoint Baker Tilly and Grant Thornton as auditors of the Society in succession to Alan Ackroyd F.C.A. and David E. Walker LL.B., F.C.A., will be proposed at the Annual General Meeting.
On behalf of the board of directors, Donald Hanson, Chairman 25th February, 1992
39 AUDITORS' REPORT
The report of the Auditors to the members of the Society for the year ended 31st December, 1991 is reproduced below: We have audited the accounts on pages 36 to 58 in accordance with Auditing Standards. In our opinion the accounts give a true and fair view of the state of affairs of the Society and of the group at 31st December, 1991, of the income and expenditure of the Society and of the group for the year then ended, and of the manner in which the business of the group was financed and in which the group's financial resources were used during the year. We have examined the annual business statement on pages 59 to 67 other than the details of directors and officers upon which we are not required to report. In our opinion the information which we have examined gives a true representation of those matters referred to therein. We have examined the directors' report on pages 33 and 34. In our opinion the information given therein is consistent with the accounting records and the annual accounts. In our opinion the accounts, the business statement and the directors' report have each been prepared so as to conform to the requirements of Part VIII of the Building Societies Act 1986 and regulations thereunder.
Alan Ackroyd David E. Walker Registered Auditor Registered Auditor Chartered Accountant Chartered Accountant Baker Tilly Grant Thornton 1 a Manor Row Eldon Lodge, Eldon Place Bradford BD1 4NS Bradford BD1 3AP
25th February, 1992
Note: The page references in the above report refer to those contained in the Annual Report and Accounts for the Society for the year ended 31 st December, 1991.
40 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. Notwithstanding that interest is received net of a basic rate income tax deduction, holders of the PIBS who are (a) individuals (either UK resident or non- UK resident) or (b) companies (either resident in the United Kingdom or carrying on a trade in the United Kingdom through a branch or agency) may, depending on the circumstances, be liable to pay further United Kingdom tax on the interest received. 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. However, the accrued income scheme does not apply, inter alia, to individuals who do not hold securities with a nominal value of more than £5,000 at any time in both the year of assessment in which the relevant interest period on the PIBS ends and the preceding year of assessment. 3. The PIBS will constitute "qualifying corporate bonds" within the meaning of section 117 of the Taxation of Chargeable Gains Act 1992. 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. 5. The rules allowing certain United Kingdom resident individual investors to receive building society interest gross on certification that such investors are unlikely to be liable to pay any amount by way of income tax for the year in which the interest is paid do not apply to interest paid on PIBS.
41 SUBSCRIPTION AND SALE
The Arranger and Salomon Brothers have, pursuant to a subscription agreement dated 15th July, 1992 (the "Subscription Agreement") jointly and severally agreed with the Society, subject to the satisfaction of certain conditions, to subscribe for the PIBS at 100.129 percent, of their aggregate principal amount. The Society shall pay the Arranger and Salomon Brothers a commission of 7/6 per cent. of such principal amount for their services as managers and underwriters of the issue 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. The Arranger and Salomon Brothers have agreed that they 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. No document issued 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 in the United Kingdom to any person unless that person is either of a kind described in Article 9(3) of the Financial Services Act 1986 (Investment Advertisements) (Exemptions) Order 1988 {as amended) or is a person to whom the document may otherwise lawfully be issued or passed on. No action has been or will be taken by the Society, the Arranger or Salomon Brothers in any jurisdiction outside Great Britain that would permit a public offer of the PIBS or possession or distribution of this Offering Circular or any amendments or supplement thereto or any other offering or publicity material, 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.
42 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, 1991, 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, 1991 have been audited without qualification in accordance with auditing standards by Mr. A. Ackroyd, F.C.A., Baker Tilly, Chartered Accountants, Carlton House, Grammar School Street, Bradford BD1 4NS and Mr. D. E. Walker, LL.B., F.C.A., Grant Thornton, Chartered Accountants, Eldon Lodge, Eldon Place, Bradford BD1 3AP. At the Annual General Meeting of the Society, held on 27th April, 1992, Baker Tilly and Grant Thornton were appointed as auditors in succession to Mr. Ackroyd, F.C.A. and Mr. Walker, LL.B., F.C.A. The auditors have given and have not withdrawn their consent to the issue of this Offering Circular with their report to members included in the form and context in which it appears.
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, 1990 and 1991; (iii) the material contracts and directors' service contracts referred to below; (iv) the Subscription Agreement; and (v) 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 the Board of Directors on 23rd June, 1992 and by a resolution of a duly authorised committee of the Board of Directors on 14th July, 1992.
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 an agreement dated 4th February, 1991 between Bradford & Bingley Properties Limited and AMEC Projects Limited relating to the development of the new head office of the Society at Croft Road, Crossflatts, Bingley, involving stage payments by Bradford & 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 £281,339 mortgage loans as at 30th June, 1992 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.
43 Amounts Payable to Directors It is estimated that aggregate emoluments of £940,000 will be received by 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 person connected with a director of the Society, within the meaning of section 346 of the Companies Act 1985, 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 £205,000, 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 £120,000, together with discretionary performance related bonuses, which is renewed at the discretion of the Society on 14th November each year.
Mr. Smith 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 1 st November each year. Mr. Spilsbury has a three year service contract with the Society at a current annual salary of £100,000, together with discretionary performance related bonuses, which is renewed at the discretion of the Society on 1st 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 a 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".
Employee Schemes 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.
Expenses The overall cost of the issue of the PIBS to the Society, including all commissions and expenses, is estimated to amount to £493,315.
Payment of Funds 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 Subscription Agreement.
44
ISSUER Bradford & Bingley Building Society, Crossflatts, Bingley, West Yorkshire BD16 2UA
UNDERWRITERS Hoare Govett Corporate Finance Limited, Salomon Brothers International Limited, 4 Broadgate, 111 Buckingham Palace Road, London EC2M 7LE London SW1W 0SB
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 and Salomon Brothers Denton Hall Burgin & Warrens, Allen & Overy, Five Chancery Lane, 9 Cheapside, Clifford's Inn, London EC2V 6AD London EC4A 1BU
STATUTORY AUDITORS Baker Tilly, Grant Thornton, Chartered Accountants, Chartered Accountants, Carlton House, Eldon Lodge, Grammar School Street, Eldon Place, Bradford BD1 4NS Bradford BD1 3AP
SPONSOR FOR LISTING Hoare Govett Corporate Finance Limited, 4 Broadgate, London EC2M 7LE
47 Printed by Greenaways, London H003819