Notes to the accounts

For the year ended 31st December 2007

30 Retirement benefit obligations (continued)

Funding

The most recent triennial funding valuation of the UK Retirement Fund was performed in September 2004 and forms the basis of the Group’s commitment that the fund has sufficient assets to make payments to members in respect of their accrued benefits as and when they fall due. This funding valuation uses a discount rate that reflects the assumed future return from the actual asset allocation at that date, and takes into account projected future salary increases when assessing liabilities arising from accrued service. The funding valuation is updated annually on the basis of interim assumptions. The UK Retirement Fund recorded a funding surplus of £1.2bn as at 31st December 2007 (2006: £1.3bn).

The Group has agreed funding contributions which, in aggregate, are no less than those which are sufficient to meet the Group’s share of the cost of benefits accruing over each year. The Group has, in the recent past, chosen to make funding contributions in excess of this, more consistent with the IAS service cost.

Defined benefit contributions paid with respect to the UKRF were as follows:

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													£m
Contributions paid
2007													355
2006													351
2005													354

There is a triennial valuation currently in progress with an effective date of 30th September 2007. To comply with the requirements of the Pensions Act 2004, the Group and trustees plan to agree a scheme specific funding target, statement of funding principles, and a schedule of contributions which in 2008 will supersede those in place under the current actuarial funding valuation.

Excluding the UKRF, the Group is expected to pay contributions of approximately £2m to UK schemes and £41m to overseas schemes in 2008.

The total contribution to be paid in 2008 to the UKRF is not expected to be significantly different than in previous years.

31 Ordinary shares and share premium

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									Number of	Ordinary	Share
									shares	shares	premium		Total
									m	£m	£m		£m
At 1st January 2007									6,535	1,634	5,818		7,452
Issued to staff under the Sharesave Share Option Scheme									19	6	62		68
Issued under the Incentive Share Option Plan									10	2	40		42
Issued under the Executive Share Option Scheme a									–	–	1		1
Issued under the Woolwich Executive Share Option Plan a									–	–	1		1
Transfer to retained earnings									–	–	(7,223)		(7,223)
Issue of new ordinary shares									337	84	1,357		1,441
Repurchase of shares									(300)	(75)	–		(75)
At 31st December 2007									6,601	1,651	56		1,707
At 1st January 2006									6,490	1,623	5,650		7,273
Issued to staff under the Sharesave Share Option Scheme									18	5	67		72
Issued under the Incentive Share Option Plan									25	6	96		102
Issued under the Executive Share Option Scheme a									1	–	3		3
Issued under the Woolwich Executive Share Option Plan a									1	–	2		2
At 31st December 2006									6,535	1,634	5,818		7,452

The authorised share capital of Barclays PLC is £2,500m (2006: £2,500m), comprising 9,996 million (2006: 9,996 million) ordinary shares of 25p each and 1 million (2006: 1 million) staff shares of £1 each. All issued shares are fully paid.

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											2007		2006
Called up share capital, allotted and fully paid											£m		£m
Ordinary shares:
At beginning of year											1,633		1,622
Issued to staff under the Sharesave Share Option Scheme											6		5
Issued under Incentive Share Option Plan											2		6
Issue of new ordinary shares											84		–
Repurchase of shares											(75)		–
At end of year											1,650		1,633
Staff shares											1		1
Total											1,651		1,634

Note

a

The nominal value for share options issued during 2007 and 2006 for the Executive Share Option Scheme and Woolwich ESOP was less than £500,000 in each case.

31 Ordinary shares and share premium (continued)

Issue of new ordinary shares

On 14th August 2007, 336.8 million ordinary shares with an aggregate nominal value of £84 million were issued for a cash consideration, before issue costs, of £2,425m. The shares were issued to Temasek and China Development Bank at a market price of £7.20 per share. The proceeds of the Temasek issuance in excess of nominal value and issue costs of £941m were credited to retained earnings. This resulted from the operation of section 131 of the Companies Act 1985 with regard to the issue of shares by Barclays PLC in exchange for shares in Odysseus Jersey (No1) Limited and the subsequent redemption of the no par value redeemable preference shares of that company for cash.

Share repurchase

During the year Barclays PLC purchased in the market 300 million of its own ordinary shares of 25p each at a total cost of £1,802m in order to minimise the dilutive effect of the issuance of Barclays shares to Temasek and China Development Bank on existing shareholders. These transactions represent 4.54% of the issued share capital at 31st December 2007. All shares purchased during the period were open market transactions.

At the 2007 AGM on 26th April, Barclays PLC was authorised to repurchase 980,840,000 of its ordinary shares of 25p. The authorisation is effective until the AGM in 2008.

Cancellation of share premium account

On 11th October 2007, the order of the High Court confirming the cancellation of £7,223m of the share premium account was registered with the Registrar of Companies. This created £7,223m of additional distributable reserves in Barclays PLC. The purpose of the cancellation of the share premium account was to create distributable profits in order to allow the payment of dividends following the completion of the share buy-back programme, the redemption of the preference shares which were to have been issued in connection with the proposed merger with ABN AMRO, and to provide maximum flexibility to manage the Group’s capital resources.

Shares under option

The Group has four schemes that give employees rights to subscribe for new shares in Barclays PLC. A summary of the key terms of each scheme are included in Note 44.

At 31st December 2007, 74.0 million (2006: 78.9 million) options were outstanding under the terms of the Sharesave Share Option Scheme (Sharesave), 1.4 million (2006: 1.7 million) options were outstanding under the terms of the Executive Share Option Scheme (ESOS), 0.5 million (2006: 0.7 million) options were outstanding under the terms of the Woolwich Executive Share Option Plan (Woolwich ESOP) and 20.5 million (2006: 77.5 million) options were outstanding under the terms of the Incentive Share Option Plan (ISOP), enabling certain Directors and members of staff to subscribe for ordinary shares between 2007 and 2016 at prices ranging from 176p to 562p.

Options and awards arising under the Executive Share Award Scheme, Performance Share Plan and Sharepurchase Scheme, which are described in Note 44 are not settled by the issuance of new shares but from shares held in employee benefit trusts. Details concerning the shares held in such trusts are provided in Note 32.

Notes to the accounts

For the year ended 31st December 2007

32 Reserves

Other reserves – Barclays PLC Group

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Capital

Other

Available

Cash flow

Currency

redemption

capital

for sale

hedging

translation

reserve

reserve

reserve

reserve

reserve

Total

£m

£m

£m

£m

£m

£m

At 1st January 2007

309

617

132

(230)

(438)

390

Net gains from changes in fair value

–

–

480

182

–

662

Net (gains)/losses transferred to net profit

–

–

(560)

198

–

(362)

Currency translation differences

–

–

–

–

29

29

Losses transferred to net profit due to impairment

–

–

13

–

–

13

Changes in insurance liabilities

–

–

22

–

–

22

Net losses transferred to net profit due to fair value hedging

–

–

68

–

–

68

Tax

–

–

(1)

(124)

102

(23)

Repurchase of shares

75

–

–

–

–

75

At 31st December 2007

384

617

154

26

(307)

874

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Capital

Other

Available

Cash flow

Currency

redemption

capital

for sale

hedging

translation

reserve

reserve

reserve

reserve

reserve

Total

£m

£m

£m

£m

£m

£m

At 1st January 2006

309

617

225

70

156

1,377

Net gains/(losses) from changes in fair value

–

–

71

(421)

–

(350)

Net gains transferred to net profit

–

–

(308)

(51)

–

(359)

Currency translation differences

–

–

–

–

(464)

(464)

Losses transferred to net profit due to impairment

–

–

86

–

–

86

Changes in insurance liabilities

–

–

23

–

–

23

Net losses transferred to net profit due to fair value hedging

–

–

13

–

–

13

Tax

–

–

22

172

(130)

64

At 31st December 2006

309

617

132

(230)

(438)

390

The capital redemption reserve and other capital reserve represent transfers from retained earnings in accordance with relevant legislation. These reserves are not distributable.

The available for sale reserve represents the unrealised change in the fair value of available for sale investments since initial recognition.

The cash flow hedging reserve represents the cumulative gains and losses on effective cash flow hedging instruments that will be recycled to the income statement when the hedged transactions affect profit or loss.

The currency translation reserve represents the cumulative gains and losses on the retranslation of the Group’s net investment in foreign operations, net of the effects of hedging.

Transfers from cash flow hedging reserve

Gains and losses transferred from the cash flow hedging reserve were to: interest income: £93m loss (2006: £7m loss), interest expense: £11m gain (2006: £73m gain), net trading income: £100m loss (2006: £15m loss), and administration and general expenses: £16m loss (2006: £nil).

32 Reserves (continued)

Retained earnings and treasury shares – Barclays PLC Group

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										Retained	Treasury
										earnings	shares		Total
										£m	£m		£m
At 1st January 2007										12,169	(212)		11,957
Profit attributable to equity holders of the parent										4,417	–		4,417
Equity-settled share schemes										567	–		567
Tax on equity-settled share schemes										28	–		28
Net purchases of treasury shares										–	(572)		(572)
Transfer										(524)	524		–
Dividends paid										(2,079)	–		(2,079)
Repurchase of shares										(1,802)	–		(1,802)
Transfer from share premium account										7,223	–		7,223
Arising on share issue										941	–		941
Other										30	–		30
At 31st December 2007										20,970	(260)		20,710
At 1st January 2006										8,957	(181)		8,776
Profit attributable to equity holders of the parent										4,571	–		4,571
Equity-settled share schemes										663	–		663
Tax on equity-settled share schemes										96	–		96
Net purchases of treasury shares										–	(425)		(425)
Transfer										(394)	394		–
Dividends paid										(1,771)	–		(1,771)
Other										47	–		47
At 31st December 2006										12,169	(212)		11,957

The Treasury shares primarily relate to Barclays PLC shares held by employee benefit trusts in relation to the Executive Share Award Scheme, Performance Share Plan and Sharepurchase Scheme, to the extent that such shares have not been allocated to employees. These schemes are described in Note 44.

The total number of Barclays shares held in Group employee benefit trusts at 31st December 2007 was 211.4 million (2006: 168 million). Dividend rights have been waived on nil (2006: nil) of these shares. The total market value of the shares held in trust based on the year-end share price of £5.04 (2006: £7.30) was £1,065m (2006: £1,227m). As at 31st December 2007, options over 16.6 million (2006: 9.6 million) of the total shares held in the trusts were exercisable.

The Group operates in a number of countries subject to regulations under which a local subsidiary has to maintain a minimum level of capital. The current policy of the Group is that local capital requirements are met, as far as possible, by the retention of profit. Certain countries operate exchange control regulations which limit the amount of dividends that can be remitted to non-resident shareholders. It is not possible to determine the amount of profit retained and other reserves that are restricted by these regulations, but the net profit retained of overseas subsidiaries, associates and joint ventures at 31st December 2007 totalled £7,311m (2006: £5,667m). If such overseas reserves were to be remitted, other tax liabilities, which have not been provided for in the accounts, might arise.

Retained earnings – Barclays PLC (Parent company)

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											Capital
										Retained	redemption
										earnings	reserve		Total
										£m	£m		£m
At 1st January 2007										1,468	309		1,777
Profit after tax										3,289	–		3,289
Dividends paid										(2,129)	–		(2,129)
Transfer from share premium account										7,223	–		7,223
Arising on share issue										941	–		941
Repurchase of shares										(1,802)	75		(1,727)
At 31st December 2007										8,990	384		9,374
At 1st January 2006										1,318	309		1,627
Profit after tax										1,964	–		1,964
Dividends paid										(1,814)	–		(1,814)
At 31st December 2006										1,468	309		1,777

Details of principal subsidiaries held through Barclays Bank PLC are shown in Note 40.

The operation of section 131 of the Companies Act 1985 with regard to the issue of shares by Barclays PLC in exchange for shares in Odysseus Jersey (No 1) Limited and the subsequent redemption of the no par value redeemable preference shares of that company for cash, has resulted in additional distributable profits of £941m.

On 11th October 2007, the order of the High Court confirming the cancellation of £7,223m of the share premium account was registered with the Registrar of Companies. This created £7,223m additional distributable reserves in Barclays PLC. The purpose of the cancellation of the share premium account was to create distributable profits in order to allow the payment of dividends following the completion of the share buy-back programme, the redemption of the preference shares which were to have been issued in connection with the proposed merger with ABN AMRO, and to provide maximum flexibility to manage the company’s capital resources.

Notes to the accounts

For the year ended 31st December 2007

33 Minority interests

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											2007		2006
											£m		£m
At beginning of year											7,591		7,004
Share of profit after tax											678		624
Dividend and other payments											(480)		(452)
Equity issued by subsidiaries											1,381		639
Available for sale reserve: net gain/(loss) from changes in fair value											1		(2)
Cash flow hedges: net loss from changes in fair value											(16)		(9)
Currency translation differences											25		(317)
Additions											142		51
Disposals											(111)		(34)
Other											(26)		87
At end of year											9,185		7,591

During the year, subsidiaries issued the following Preference Shares:

• – 1.9 million Preference Shares of nominal ZAR0.01 each (Principal amount: ZAR1,652m; £118m) with a variable dividend issued in 2007
• – 55 million Preference Shares of nominal US$0.25 each (Principal amount: US$1,375m; £677m) with a 7.1% dividend issued on 13th September 2007
• – 46 million Preference Shares of nominal US$0.25 each (Principal amount: US$1,150m; £567m) with a 7.75% dividend issued on 7th December 2007

34 Contingent liabilities and commitments

Contingent liabilities and commitments

The following table summarises the nominal principal amount of contingent liabilities and commitments with off-balance sheet risk:

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											2007		2006
											£m		£m
Acceptances and endorsements											365		287
Guarantees and letters of credit pledged as collateral security											35,692		31,252
Other contingent liabilities											9,717		7,880
Contingent liabilities											45,774		39,419
Documentary credits and other short-term trade related transactions											522		414
Undrawn note issuance and revolving underwriting facilities:
Forward asset purchases and forward deposits placed											283		360
Standby facilities, credit lines and other											191,834		204,730
Commitments											192,639		205,504

Nature of instruments

In common with other banks, the Group conducts business involving acceptances, performance bonds and indemnities. The majority of these facilities are offset by corresponding obligations of third parties.

An acceptance is an undertaking by a bank to pay a bill of exchange drawn on a customer. The Group expects most acceptances to be presented, but reimbursement by the customer is normally immediate. Endorsements are residual liabilities of the Group in respect of bills of exchange, which have been paid and subsequently rediscounted.

34 Contingent liabilities and commitments (continued)

Guarantees and letters of credit are given as security to support the performance of a customer to third parties. As the Group will only be required to meet these obligations in the event of the customer’s default, the cash requirements of these instruments are expected to be considerably below their nominal amounts.

Other contingent liabilities include transaction related customs and performance bonds and are, generally, short-term commitments to third parties which are not directly dependent on the customer’s creditworthiness.

Commitments to lend are agreements to lend to a customer in the future, subject to certain conditions. Such commitments are either made for a fixed period, or have no specific maturity but are cancellable by the lender subject to notice requirements.

Documentary credits commit the Group to make payments to third parties, on production of documents, which are usually reimbursed immediately by customers.

Capital commitments

At 31st December 2007 the commitments for capital expenditure under contract amounted to £6m (2006: £9m).

Assets pledged

Assets are pledged as collateral to secure liabilities under repurchase agreements, securitisations and stock lending agreements or as security deposits relating to futures and options. The disclosure includes any asset transfers associated with liabilities under repurchase agreements and securities lending transactions.

The following table summarises the nature and carrying amount of the assets pledged as security against these liabilities:

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											2007		2006
											£m		£m
Trading portfolio assets											76,226		77,255
Loans and advances											32,846		23,715
Available for sale investments											16,378		20,495
Other											580		4
Assets pledged											126,030		121,469

Collateral held as security for assets

Under certain transactions, including reverse repurchase agreements and stock borrowing transactions, the Group is allowed to resell or repledge the collateral held. The fair value at the balance sheet date of collateral accepted and repledged to others was as follows:

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											2007		2006
											£m		£m
Fair value of securities accepted as collateral											343,986		279,591
Of which fair value of securities repledged / transferred to others											269,157		210,182

35 Legal proceedings

Barclays has for some time been party to proceedings, including a class action, in the United States against a number of defendants following the collapse of Enron; the class action claim is commonly known as the Newby litigation. On 20th July 2006, Barclays received an Order from the United States District Court for the Southern District of Texas Houston Division which dismissed the claims against Barclays PLC, Barclays Bank PLC and Barclays Capital Inc. in the Newby litigation. On 4th December 2006 the Court stayed Barclays dismissal from the proceedings and allowed the plaintiffs to file a supplemental complaint. On 19th March 2007 the United States Court of Appeals for the Fifth Circuit issued its decision on an appeal by Barclays and two other financial institutions contesting a ruling by the District Court allowing the Newby litigation to proceed as a class action. The Court of Appeals held that because no proper claim against Barclays and the other financial institutions had been alleged by the plaintiffs, the case could not proceed against them. The plaintiffs applied to the United States Supreme Court for a review of this decision. On 22nd January 2008, the United States Supreme Court denied the plaintiffs’ request for review. Following the Supreme Court’s decision, the District Court ordered a further briefing concerning the status of the plaintiffs’ claims. Barclays plans to seek the dismissal of the plaintiffs’ claims.

Barclays considers that the Enron related claims against it are without merit and is defending them vigorously. It is not possible to estimate Barclays possible loss in relation to these matters, nor the effect that they might have upon operating results in any particular financial period.

Barclays has been in negotiations with the staff of the US Securities and Exchange Commission with respect to a settlement of the Commission’s investigations of transactions between Barclays and Enron. Barclays does not expect that the amount of any settlement with the Commission would have a significant adverse effect on its financial position or operating results.

Like other UK financial services institutions, Barclays faces numerous County Court claims and complaints by customers who allege that its unauthorised overdraft charges either contravene the Unfair Terms in Consumer Contracts Regulations 1999 or are unenforceable penalties or both. Pending resolution of the test case referred to below (the ‘test case’), existing and new claims in the County Courts are stayed, and there is an FSA waiver of the complaints handling process and a standstill of Financial Ombudsman Service decisions. In July 2007, and by agreement with all parties, the OFT launched the test case by commencing proceedings against seven banks and one building society including Barclays, the first stage of which seeks declarations on two issues of legal principle. The hearing commenced on 17th January 2008. Barclays is defending the test case vigorously. It is not practicable to estimate Barclays possible loss in relation to these matters, nor the effect that they may have upon operating results in any particular financial period.

Barclays is engaged in various other litigation proceedings both in the United Kingdom and a number of overseas jurisdictions, including the United States, involving claims by and against it which arise in the ordinary course of business. Barclays does not expect the ultimate resolution of any of the proceedings to which Barclays is party to have a significant adverse effect on the financial position of the Group and Barclays has not disclosed the contingent liabilities associated with these claims either because they cannot reasonably be estimated or because such disclosure could be prejudicial to the conduct of the claims.

Notes to the accounts

For the year ended 31st December 2007

36 Competition and regulatory matters

The scale of regulatory change remains challenging, arising in part from the implementation of some key European Union (EU) directives. Many changes to financial services legislation and regulation have come into force in recent years and further changes will take place in the near future. Concurrently, there is continuing political and regulatory scrutiny of the operation of the retail banking and consumer credit industries in the UK and elsewhere. The nature and impact of future changes in policies and regulatory action are not predictable and beyond the Group’s control but could have an impact on the Group’s businesses and earnings. In June 2005 an inquiry into retail banking in all of the then 25 Member States was launched by the European Commission’s Directorate General for Competition. The inquiry looked at retail banking in Europe generally. In January 2007 the European Commission announced that the inquiry had identified barriers to competition in certain areas of retail banking, payment cards and payment systems in the EU. The Commission indicated it will use its powers to address these barriers, and will encourage national competition authorities to enforce European and national competition laws where appropriate. Any action taken by the Commission and national competition authorities could have an impact on the payment cards and payment systems businesses of Barclays and on its retail banking activities in the EU countries in which it operates.

In September 2005 the UK Office of Fair Trading (OFT) received a super-complaint from the Citizens Advice Bureau relating to payment protection insurance (PPI). As a result, the OFT commenced a market study on PPI in April 2006. In October 2006, the OFT announced the outcome of the market study and, following a period of consultation, the OFT referred the PPI market to the UK Competition Commission for an in-depth inquiry in February 2007. This inquiry could last for up to two years. Also in October 2006, the UK Financial Services Authority (FSA) published the outcome of its broad industry thematic review of PPI sales practices in which it concluded that some firms fail to treat customers fairly. Barclays has cooperated fully with these investigations and will continue to do so.

In April 2006, the OFT commenced a review of the undertakings given following the conclusion of the Competition Commission inquiry in 2002 into the supply of banking services to small and medium enterprises. Based on the OFT’s report, the Competition Commission issued its final decision on 21st December 2007 and decided to release the UK’s four largest clearing banks (including Barclays) from most of the transitional undertakings given by them in 2002.

The OFT has carried out investigations into Visa and MasterCard credit card interchange rates. The decision by the OFT in the MasterCard interchange case was set aside by the Competition Appeals Tribunal in June 2006. The OFT’s investigation in the Visa interchange case is at an earlier stage and a second MasterCard interchange case is ongoing. The outcome is not known but these investigations may have an impact on the consumer credit industry in general and therefore on Barclays business in this sector. In February 2007 the OFT announced that it was expanding its investigation into interchange rates to include debit cards.

In April 2007, the UK consumer interest association known as Which? submitted a super-complaint to the OFT pursuant to the Enterprise Act 2002. The super-complaint criticises the various ways in which credit card companies calculate interest charges on credit card accounts. In June 2007, the OFT announced a new programme of work with the credit card industry and consumer bodies in order to make the costs of credit cards easier for consumers to understand. This OFT decision follows the receipt by the OFT of the super-complaint from Which? This new work will explore the issues surrounding the costs of credit for credit cards including purchases, cash advances, introductory offers and payment allocation. The OFT’s programme of work is expected to take six months.

On 11th February 2008, the OFT announced its recommendations, which include the introduction of an FSA price comparison website, improvements to customer information in summary boxes and the use of standard terminology.

In September 2006, the OFT announced that it had decided to undertake a fact find on the application of its statement on credit card fees made in April 2006 to current account unauthorised overdraft fees. The fact find was completed in March 2007. On 29th March 2007, the OFT announced its decision to conduct a formal investigation into the fairness of bank current account charges. The OFT announced a market study into personal current accounts (PCAs) in the UK on 26th April 2007. The market study will look at: (i) whether the provision of ‘free if in credit’ PCAs delivers sufficiently high levels of transparency and value for customers; (ii) the implications for competition and consumers if there were to be a shift away from ‘free if in credit’ PCAs; (iii) the fairness and impact on consumers generally of the incidence, level and consequences of account charges; and (iv) what steps could be taken to improve customers’ ability to secure better value for money, in particular to help customers make more informed current account choices and drive competition. The study will focus on PCAs but will include an examination of other retail banking products, in particular savings accounts, credit cards, personal loans and mortgages in order to take into account the competitive dynamics of UK retail banking. The OFT will publish its interim findings after the test case (see below).

In July 2007, the OFT commenced a test case in the High Court by agreement with Barclays and seven other financial institutions in which the parties seek declarations on two legal issues arising from the banks’ terms and conditions relating to overdraft charges. The test case does not encompass claims from local, medium or larger business customers. The proceedings will run in parallel with the ongoing OFT dual inquiry into unauthorised overdraft charges and PCAs. Please also refer to Note 35.

In January 2007, the FSA issued a statement of good practice relating to mortgage exit administration fees. Barclays agreed to charge the fee applicable at the time the customer took out the mortgage, which was one of the options recommended by the FSA.

US laws and regulations require compliance with US economic sanctions, administered by the Office of Foreign Assets Control, against designated foreign countries, nationals and others. HM Treasury regulations similarly require compliance with sanctions adopted by the UK government. Barclays has been conducting an internal review of its conduct with respect to US dollar payments involving countries, persons or entities subject to these sanctions and has been reporting to governmental agencies about the results of that review. Barclays received inquiries relating to these sanctions and certain US dollar payments processed by its New York branch from the New York County District Attorney’s Office and the US Department of Justice, which, along with other authorities, has been reported to be conducting investigations of sanctions compliance by non-US financial institutions. Barclays has responded to those inquiries and is cooperating with regulators, the Department of Justice and the District Attorney’s Office in connection with their investigations of Barclays conduct with respect to sanctions compliance. Barclays has also been keeping the FSA informed of the progress of these investigations and Barclays internal review. Barclays review is ongoing. It is currently not possible to predict the ultimate resolution of the issues covered by Barclays review and the investigations, including the timing and potential financial effect of any resolution, which could be substantial. Barclays does not expect these matters to have a material adverse effect on the financial position of the Group, but it is not possible to estimate the effect they might have upon operating results in any particular financial period.

37 Leasing

The Group is both lessor and lessee under finance and operating leases, providing asset financing for its customers and leasing assets for its own use. In addition, assets leased by the Group may be sublet to other parties. An analysis of the impact of these transactions on the Group balance sheet and income statement is as follows:

(a) As Lessor

Finance lease receivables

The Group specialises in asset-based lending and works with a broad range of international technology, industrial equipment and commercial companies to provide customised finance programmes to assist manufacturers, dealers and distributors of assets.

Finance lease receivables are included within loans and advances to customers.

The Group’s net investment in finance lease receivables was as follows:

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			2007									2006
		Gross			Present value of					Gross					Present value of
		investment in	Future		minimum lease		Unguaranteed			investment in		Future			minimum lease			Unguaranteed
		finance lease	finance		payments		residual			finance lease		finance			payments			residual
		receivables	income		receivable		values			receivables		income			receivable			values
		£m	£m		£m		£m			£m		£m			£m			£m
Not more than one year		3,657	(780)		2,877		213			3,650		(734)			2,916			166
Over one year but not more
than five years		7,385	(1,613)		5,772		374			5,824		(1,490)			4,334			334
Over five years		3,476	(935)		2,541		14			3,790		(898)			2,892			15
Total		14,518	(3,328)		11,190		601			13,264		(3,122)			10,142			515

The allowance for uncollectable finance lease receivables included in the allowance for impairment amounted to £113m at 31st December 2007 (2006: £99m).

Operating lease receivables

The Group acts as lessor, whereby items of plant and equipment are purchased and then leased to third parties under arrangements qualifying as operating leases. The items purchased to satisfy these leases are treated as plant and equipment in the Group’s financial statements and are generally disposed of at the end of the lease term (see Note 23).

The future minimum lease payments expected to be received under non-cancellable operating leases at 31st December 2007 were as follows:

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											2007		2006
											Plant and		Plant and
											equipment		equipment
											£m		£m
Not more than one year											29		18
Over one year but not more than two years											24		5
Over two years but not more than three years											22		3
Over three years but not more than four years											20		3
Over four years but not more than five years											11		3
Over five years											10		7
Total											116		39

(b) As Lessee

Finance lease commitments

The Group leases items of property, plant and equipment on terms that meet the definition of finance leases. Finance lease commitments are included within other liabilities (see Note 25).

Obligations under finance leases were as follows:

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											2007		2006
											Total future		Total future
											minimum		minimum
											payments		payments
											£m		£m
Not more than one year											12		6
Over one year but not more than two years											14		21
Over two years but not more than three years											13		11
Over three years but not more than four years											12		14
Over four years but not more than five years											15		9
Over five years											17		31
Net obligations under finance leases											83		92

Notes to the accounts

For the year ended 31st December 2007

37 Leasing (continued)

(b) As Lessee (continued)

The carrying amount of assets held under finance leases at the balance sheet date was:

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											2007		2006
											£m		£m
Cost											94		44
Accumulated depreciation											(24)		(25)
Net book value											70		19

Operating lease commitments

The Group leases various offices, branches and other premises under non-cancellable operating lease arrangements. The leases have various terms, escalation and renewal rights. There are no contingent rents payable. The Group also leases equipment under non-cancellable lease arrangements.

Where the Group is the lessee the future minimum lease payment under non-cancellable operating leases are as follows:

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									2007			2006
									Property		Equipment	Property		Equipment
									£m		£m	£m		£m
Not more than one year									191		6	335		9
Over one year but not more than two years									396		1	337		9
Over two years but not more than three years									357		1	311		2
Over three years but not more than four years									323		–	268		–
Over four years but not more than five years									287		–	223		–
Over five years									2,225		–	2,057		–
Total									3,779		8	3,531		20

The total of future minimum sublease payments to be received under non-cancellable subleases at the balance sheet date is £167m (2006: £251m).

38 Acquisitions

The Group made the following material acquisitions in 2007:

(a) Indexchange Investment AG

On 8th February 2007, the Group acquired 100% of the ordinary shares of Indexchange Investment AG, based in Munich offering exchange traded fund products.

(b) Equifirst Corporation

On 30th March 2007, the Group acquired 100% of the ordinary shares of Equifirst Corporation, a sub-prime mortgage origination business.

(c) Walbrook Group Limited

On 18th May 2007, the Group acquired 100% of the ordinary shares of Walbrook Group Limited. The business serves high net worth private clients and corporate customers.

38 Acquisitions (continued)

Details of the net assets of material companies acquired and consideration paid were as follows:

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												Carrying
												value pre-	Fair value
												acquisition	adjustments		2007
												£m	£m		£m
Assets
Cash and balances at central banks												51	–		51
Assets designated at fair value												133	–		133
Goodwill												41	(41)		–
Property, plant and equipment												7	–		7
Other assets												19	–		19
Intangible assets												–	53		53
Deferred tax assets												10	–		10
Total assets												261	12		273
Liabilities
Deposits from banks												162	–		162
Deferred tax liabilities												–	4		4
Other liabilities												98	(38)		60
Total liabilities												260	(34)		226
Net assets acquired															47
Goodwill															267
Total															314

The excess of proceeds over the net assets acquired has generated goodwill of £267m, based on the exchange rate at the date of acquisition and is attributable to the operational synergies and earnings potential expected to be realised over the longer term.

In aggregate, the acquired businesses generated a loss of (£15m) to consolidated profit before tax for the period from acquisition date to 31st December 2007.

If all of the above acquisitions had occurred on 1st January 2007 the impact on total Group income and net profit for the year would have been immaterial.

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													2007
													£m
Acquisition cost
Cash paid													297
Deferred consideration													11
Attributable costs													6
Total consideration													314

Cash outflows in respect of acquisitions

The aggregate net outflow of cash from the acquisition of the above Group entities was as follows:

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													2007
													£m
Cash paid													297
Cash and cash equivalents acquired													(51)
Net cash outflow on acquisition													246
Cash paid in respect of acquisition of shares in Barclays Global Investors UK Holdings Limited													488
Cash paid in respect of acquisition of shares in Absa Bank Limited													180
Increase in investment in subsidiaries													668

39 Investment in subsidiaries

The investment in Barclays Bank PLC is stated in the balance sheet of Barclays PLC at a cost of £10,186m (2006: £8,641m). The increase of £1,545m (2006: £179m) during the year represents the cost of additional shares of £111m (2006: £179m) and a capital contribution of £1,434m (2006: £nil).

The investment in Barclays Investments (Netherlands) N.V. is stated in the balance sheet of Barclays PLC at a cost of £205m (2006: £nil). The increase of £205m (2006: £nil) during the year represents the cost of the initial share issue.

The investment in Odysseus Jersey (No. 1) Limited is stated in the balance sheet of Barclays PLC at a cost of £0.1m (2006: £nil). The increase of £0.1m (2006: £nil) during the year represents the cost of the initial share issue.

Notes to the accounts

For the year ended 31st December 2007

40 Principal subsidiaries

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									Percentage
									of equity
Country of registration									capital held
or incorporation		Company name		Nature of business					%
Botswana		Barclays Bank of Botswana Limited		Banking					74.9
Egypt		Barclays Bank Egypt SAE		Banking					100
England		Barclays Bank PLC		Banking, holding company					100*
England		Barclays Mercantile Business Finance Limited		Loans and advances including leases to customers					100*
England		Barclays Global Investors UK Holdings Limited		Holding company					94.1
England		Barclays Global Investors Limited		Investment management					94.1*
England		Barclays Life Assurance Company Limited		Life assurance					100
England		Barclays Bank Trust Company Limited		Banking, securities industries and trust services					100
England		Barclays Stockbrokers Limited		Stockbroking					100
England		Barclays Capital Securities Limited		Securities dealing					100
England		Barclays Global Investors Pensions Management Limited		Investment management					94.1*
England		FIRSTPLUS Financial Group PLC		Secured loan provider					100
England		Gerrard Investment Management Limited		Investment management					100*
Ghana		Barclays Bank of Ghana Limited		Banking					100
Ireland		Barclays Insurance (Dublin) Limited		Insurance provider					100*
Ireland		Barclays Assurance (Dublin) Limited		Insurance provider					100*
Isle of Man		Barclays Private Clients International Limited a		Banking					100*
Japan		Barclays Capital Japan Limited		Securities dealing					100*
Jersey		Barclays Private Bank & Trust Limited		Banking, trust company					100*
Kenya		Barclays Bank of Kenya Limited		Banking					68.5
South Africa		Absa Group Limited		Banking					58.8
Spain		Barclays Bank SA		Banking					99.7
Switzerland		Barclays Bank (Suisse) S.A.		Banking and trust services					100*
USA		Barclays Capital Inc.		Securities dealing					100*
USA		Barclays Financial Corporation		Holding company for US credit card issuer					100*
USA		Barclays Global Investors, National Association		Investment management and securities industry					94.1*
Zimbabwe		Barclays Bank of Zimbabwe Limited		Banking					67.8*

In accordance with Section 231(5) of the Companies Act 1985, the above information is provided solely in relation to principal subsidiaries.

The country of registration or incorporation is also the principal area of operation of each of the above subsidiaries. Investments in these subsidiaries are held directly by Barclays Bank PLC except where marked *.

Full information of all subsidiaries will be included in the Annual Return to be filed at Companies House.

Note

a

BBPLC is the beneficial owner of 38.1% of shares and Barclays Holdings (Isle of Man) Limited is the beneficial owner of 61.9% of shares.