FINANCIAL HIGHLIGHTS CHAIRMAN'S STATEMENT CHIEF EXECUTIVE'S STATEMENT BROADENING OUR INTERNATIONAL PROFILE GROUP FINANCE DIRECTOR'S REPORT BOARD OF DIRECTORS CORPORATE CITIZENSHIP CONSOLIDATED FINANCIAL STATEMENTS

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

1 Accounting policies 2 Foreign currencies 3 Segment information 4 Operating profit adjusting items 5 Income tax expense 6 Minority interests - Income statement 7 Earnings and earnings per share 8 Investment income (net of investment losses) 9 Banking interest and similar income 10 Fee and commission income, and income from service activities 11 Finance costs (including interest and similar expenses) 12 Banking interest expense 13 Fees and commission expense, and other acquisition costs 14 Other operating and administrative expenses 15 Acquisition of subsidiaries 16 Goodwill and other intangible assets 17 Investments in associated undertakings 18 Investment property 19 Property, plant and equipment 20 Operating lease arrangements 21 Finance lease arrangements 22 Deferred tax assets and liabilities 23 Insurance contract provisions 24 Deferred acquisition costs 25 Loans, receivables and advances 26 Derivative financial instruments - assets and liabilities 27 Financial assets fair valued through income statement 28 Other financial assets 29 Short-term securities 30 Other assets 31 Assets and liabilities held-for-sale 32 Financial liabilities fair valued through income statement 33 Borrowed funds 34 Provisions 35 Deferred revenue 36 Amounts owed to depositors 37 Other liabilities 38 Equity 39 Minority interests - balance sheet 40 Post balance sheet events 41 Post employment benefits 42 Share-based payments 43 Dividends 44 Contingent liabilities 45 Commitments 46 Related parties 47 Principal subsidiaries and Group enterprises 48 Financial risk 49 Insurance risk

COMPANY FINANCIAL STATEMENTS NOTES TO THE COMPANY FINANCIAL STATEMENTS EUROPEAN EMBEDDED VALUE SUPPLEMENTARY INFORMATION NOTICE OF ANNUAL GENERAL MEETING SHAREHOLDER INFORMATION

Notes to the consolidated financial statements

For the year ended 31 December 2006

34 Provisions

		£m
	At 31 December 2006	At 31 December 2005
Surplus property	41	54
Client compensation	8	10
Warranties on sale of business	113	20
Liability for long service leave	30	35
Other provisions	337	123
	529	242
Post employment benefits	13	43
Total	542	285

						£m
Year ended 31 December 2006	Surplus property	Client compen- sation	Warranties on sale of business	Liability for long service leave	Other	Total
Balance at beginning of the year	54	10	20	35	123	242
Additions from business combinations	3	-	102	-	146	251
Unused amounts reversed	(5)	(2)	(6)	-	(15)	(28)
Unwind of discount	2	-	-	-	-	2
Charge to income statement	1	1	-	3	136	141
Utilised during the year	(14)	(1)	(3)	(1)	(39)	(58)
Foreign exchange and other movements	-	-	-	(7)	(14)	(21)
Balance at end of the year	41	8	113	30	337	529

At 31 December 2006 provisions in relation to sale of business were £113 million. These principally relate to warranties in respect of the sale of American Skandia to Prudential Financial, which were recognised by the Group upon acquisition.

At 31 December 2006 other provisions include £115 million in respect of the distribution of proceeds arising upon the closure of the unclaimed shares trusts. Further information is included in note 4 (viii). Also included in this amount are provisions for ongoing litigation across the Group totalling £71 million.

						£m
Year ended 31 December 2005	Surplus property	Client compen- sation	Warranties on sale of business	Liability for long service leave	Other	Total
Balance at beginning of the year	67	12	20	36	98	233
Unused amounts reversed	(2)	(3)	-	-	(5)	(10)
Unwind of discount	3	-	-	-	-	3
Charge to income statement	3	2	-	-	38	43
Utilised during the year	(16)	(3)	-	(1)	(6)	(26)
Foreign exchange and other movements	(1)	2	-	-	(2)	(1)
Balance at end of the year	54	10	20	35	123	242