Barclays universal banking model continues to be a competitive strength. Revenues remained resilient overall, reflecting the strength of our customer franchise and the balanced mix of our business. We have intensified our cost discipline while selectively investing in growth areas that support our execution priorities.

Barclays is a major global financial services provider engaged in retail banking, credit cards, corporate and investment banking and wealth management with an extensive international presence.

With over 300 years of history and expertise in banking, Barclays operates in over 50 countries and employs over 140,000 people.

*excluding own credit and debt buy-backs

Retail and Business Banking

1   UK Retail and Business Banking – £4,656m

UK Retail and Business Banking is a leading UK high street bank providing current account and savings products and Woolwich branded mortgages. UK Retail and Business Banking also provides unsecured loans and general insurance as well as banking and money transmission services to small and medium sized businesses.

2   Europe Retail and Business Banking – £1,226m

Europe Retail and Business Banking provide retail services, including credit cards, in Spain, Italy, Portugal and France, as well as lending to small and medium sized businesses, through a variety of distribution channels.

3   Africa Retail and Business Banking – £3,767m

Africa Retail and Business Banking provides retail, corporate and credit card services across Africa and the Indian Ocean. Africa Retail and Business Banking combines the operations previously reported as Barclays Africa and Absa.

4   Barclaycard – £4,095m

Barclaycard is an international payments business service provider to retail and business customers including credit cards and consumer lending.

Corporate and Investment Banking

5   Barclays Capital – £10,335m

Barclays Capital is the investment banking division of Barclays providing large corporate, government and institutional clients with a full spectrum of solutions to meet their strategic advisory, financing and risk management needs.

6   Barclays Corporate – £2,912m

Barclays Corporate provides integrated banking solutions to large corporates, financial institutions and multi-nationals in the UK and internationally.

7   Barclays Wealth – £1,744m

Barclays Wealth is the wealth management division of Barclays. It focuses on private and intermediary clients worldwide, providing international and private banking, fiduciary services and brokerage.

8   Investment Management – £53m

Investment Management manages the Group’s economic interest in BlackRock, Inc. and the residual elements relating to Barclays Global Investors, which was sold on 1 December 2009.

Barclays Head Office Functions and Other Operations – (£334m) Head Office Functions and Other Operations comprise head office and central support functions and consolidation adjustments. This figure excludes own credit gain of £2,708m and gains on debt buy-backs of £1,130m.

Market conditions in the second half of the year were particularly difficult as investor nervousness over global economic growth prospects grew and concerns about the fiscal deficit of certain Eurozone countries became acute.

The Board is resolved to navigate the current difficult economic environment safely, ensuring that Barclays is positioned to continue to be profitable and successful in the future. We are also committed to acting as responsible corporate citizens at a time when so many people have been affected by the financial crisis and subsequent economic downturn.

The Board and I are very conscious that returns to shareholders have been unacceptably low in recent years. The urgent priority for the Group in this respect is to improve its Return on Equity (whilst not increasing leverage), as the correlation between the price to book value ratio (and hence share price) and Return on Equity has been very strong. In the short term, our business is still adjusting to the significantly higher levels of capital that we now have to hold as a result of new regulatory requirements. Accordingly, we are focused on ensuring that actions are in place to drive a significant and sustainable increase in the Return on Equity and, hence, the share price over the medium term. The share prices of banks were impacted during the year by the Eurozone debt crisis, which deteriorated further in 2011, with sovereign bond yields in a number of countries rising to unsustainable levels. Fortunately, there has been notable progress over the past few months, with Eurozone leaders committing to a system of enforceable fiscal rules designed to bolster confidence in the ability of countries to service and repay their debt. In addition, the action of the European Central Bank to provide liquidity support to banks has helped confidence. Although financial market volatility is likely to remain high, we believe the current European downturn will be moderate.

Uncertainty of regulation continues to dominate the agenda, however there are welcome signs that some of the regulatory fog within which we have been operating over the last four years is beginning to clear. The publication of the rules regarding the capital levels to be held by “Systemically Important Financial Institutions”, of which Barclays is one, and the acceptance by the UK Government of the Final Report by the Independent Commission on Banking, were important milestones in this respect. We welcome the move towards regulatory certainty that this brings, as it allows Barclays and the rest of the banking industry in the UK to plan ahead with a greater level of clarity. Barclays engaged constructively with the commissioners during their deliberations and the final report makes a number of recommendations which will make the industry safer and more sound. Whilst we do not agree that the proposed retail ring-fence is the best solution, we are clear that Barclays can accommodate it and we will work with the regulators and the Government on its introduction. Most importantly, it means that the universal banking model which we operate, and which we believe brings diversified strength to our business, will continue to be valid for the future. It is critically important that the new regulatory architecture is monitored carefully to ensure that it does not result in unintended consequences, particularly given the essential role that banks need to play in supporting economic recovery. It also continues to be vital that international banks such as Barclays can operate on a global level playing field and there are some concerning signs that the UK continues to be super equivalent in a number of key areas.

Remuneration

Remuneration continues to be the subject of considerable discussion. It remains our policy that we only pay for performance, not failure, and that we only pay the minimum necessary to be competitive. Historically, there

has been intense competition for talent, particularly in the investment banking industry. The difficult economic environment and the impact of regulation on the profitability of investment banking lessened this competition in 2011 and, as a consequence, performance related pay across the Group reduced significantly. We recognise that compensation has to adjust to the new reality of lower returns for the sector and we will continue to ensure that our remuneration policies and practices are aligned with the long-term interests of our shareholders.

Citizenship

Barclays has always taken its role in society seriously and believes that being a valued, respected and trusted citizen is vital in creating sustainable shareholder value. That ethos has been part of our corporate values since the bank was founded over 300 years ago. Events in the global economy have led us to reflect further on how we help others recognise the value of what we do.

Citizenship as an execution priority for Barclays is about three things: how we contribute to growth in the real economy; the way we do business; and supporting our communities. We see our success as inseparable from that of the communities we serve and so will bring the same discipline and focus to this part of our agenda as for everything else that we do. Indeed, our community investment increased by 15% to £63m in 2011. More importantly, by aligning our community investment strategy to our core business, the positive impact of our activity is much more than just a financial contribution. Youth unemployment is at record levels and last year we saw the consequences of the resulting disaffection expressed in a very public way. The future of communities and economies around the world is reliant on the next generation having the right skills. Our community programmes are focused on empowering disadvantaged young people by helping them access the skills they need to achieve financial independence and security.

Talented and diverse employees are not only crucial to delivering our Citizenship agenda, but are the foundation of our success across all business priorities. We have committed to ensure that at least 20% of our Board will be made up of women by the end of 2013, rising to 25% by 2015.

Board Changes

The only Board change during the year was the retirement of Sir Richard Broadbent as Deputy Chairman in September. Richard joined the Board in 2003 and was an outstanding non-executive Director, chairing the Board Risk Committee from 2006 to 2009 and the Board Remuneration Committee from 2007 to 2011. He became Senior Independent Director in 2004 and Deputy Chairman in 2009. His clarity of thought and steadiness of nerve were particularly valuable during the financial crisis. We will miss his insights and immense contribution and wish him well for the future.

Conclusion

In conclusion, I would like, on behalf of the Board – and on behalf of all our shareholders – to thank Barclays 140,000 employees. They have continued to work hard in a very difficult environment to deliver excellent service to our customers and clients. It is through their efforts that Barclays will succeed in rebuilding the trust of our key stakeholders and deliver sustainable value to our shareholders.

2011 was marked by a challenging market and economic environment and our solid performance relative to global peers demonstrates the strength of our universal banking model and our relentless focus on clients and customers. Our focus in 2011 was firmly on delivering progress against the four execution priorities. I’d like to give you a review of what we achieved.

Capital, Funding and Liquidity

When I look back over the last few years, one of Barclays best decisions came in October 2008 when regulators made clear that they wanted banks to raise the bar for equity capital. We decided to raise capital swiftly and in scale, to put our ratios ahead of regulatory requirements. We wanted to put a metaphorical sign up for customers and clients saying that Barclays was open for business. Today we’re recognised for our strength in terms of capital, liquidity and funding, and as a result we are seen by customers as a safe haven in times of stress.

Our capital position remains rock solid. Even after absorbing the full impact of the third Capital Requirements Directive, our Core Tier 1 ratio stands at 11% and we have a liquidity pool of £152bn that provides protection against unexpected market fluctuations.

Returns

While we use many metrics to manage and measure the business, return on equity is the financial measure that correlates most closely with shareholder value, so it’s extremely important to us. Our 13% return target was a vital factor in helping us make disciplined choices over the last 12 months, but we know that our returns today remain unsatisfactory and that we have a lot more work to do.

Since we set this target last year we have faced some significant external headwinds which are detailed over the page in our review of the market and operating environment. Notwithstanding these, we have made a lot of progress on the journey towards achieving our targets. Through operating as a more integrated business we have been able to begin to drive the cost efficiency that will be necessary to deliver that goal, and as a result have increased our cost target to a saving of £2bn by 2013.

Our portfolio of businesses continued to evolve and strengthen, and most of our businesses increased their return on equity in 2011.

We continue to believe that a return on equity of 13% is the right goal, but our ability to achieve this by 2013 will depend upon economic, market and regulatory developments. We remain fully committed to delivering 13% returns over time, by driving improved business performance, reducing expenses, and maintaining a disciplined approach to capital and funding costs.

Income growth

Given the difficult economic environment, we’re pleased that we were able to grow income, underlying profit, and market share in many of our businesses. We enter 2012 in a stronger competitive position.

In UK Retail and Business Banking net operating income grew 11%, Barclaycard net income was up 21%, our African business net income grew 11% in local currencies, and Wealth Management had its third successive year of double digit income growth as we continue to build that business.

Income and profits were down in Investment Banking in a very tough market but we continue to have real momentum, which is particularly evident in those areas where we’ve been actively investing, such as Equities and Advisory. This progress was recognized by International Financing Review (IFR) when it named Barclays Capital its “2011 Bank of the Year” for “growing market share across the board, and becoming an increasingly go-to investment bank”.

Citizenship

We have recognized that banks need to become better citizens and that our ability to do this is critical to generate long term value for shareholders. This is not philanthropy – it’s about using Barclays unique skills and resources to deliver real commercial benefits in a way that also creates sustainable value for society.

We have made firm progress against our Citizenship agenda in 2011, delivering benefits to the real economy. We exceeded our Project Merlin targets by 13% and delivered £44bn to UK business; we helped 108,000 businesses start up; we helped corporates and institutions raise $1 trillion of financing through the capital markets globally, including almost $400bn for governments and the public sector; we employed almost 1,500 graduates and have committed to creating over 1,000 apprenticeships; and we will continue to do everything we can to support our customers and clients in 2012.

We know we have a responsibility to help generate economic growth and create jobs – and we are fully committed to playing our part.

You will find additional information relating to our Citizenship agenda in this document and a Citizenship Report with detailed information on our goals, our targets and our achievements will be available online from 23 April 2012.

Looking forward to 2012

As I look back at 2011, we made firm progress and right across Barclays we entered 2012 in a stronger position. We recognise that in order to achieve our return target we need to improve profitability substantially going forward and we are determined to do that, using all the means within our control to drive the business.

Turning to the external environment, while there are some positive signs of economic recovery, particularly in the US, and increasing clarity on regulation, the global macro-economic, political and regulatory environment remains uncertain and we must again expect a challenging environment in 2012.

As we have shown in the past year, however, Barclays is well positioned to improve our competitive positioning across businesses in challenging environments. Our universal banking model, as well as our rock solid capital, liquidity and funding positions, give us the balance and flexibility to meet the challenges ahead. We are confident that by putting clients and customers at the center of everything we do, we will support economic growth more broadly and generate the financial returns we’re targeting over time.

When we’re at our best, we serve the real economy by doing our best for all our stakeholders: our customers and clients, the communities we serve, our people and our shareholders. To be anything less than our best is letting all these people down. That’s why we aspire for Barclays to be one of the best organised, best managed and most productive private sector banks in the world.

2011 saw further clarity from regulators with implementation of the third Capital Requirements Directive and the final report from the Independent Commission on Banking. The year also saw difficult conditions due to the Eurozone crisis and a slowdown in economic growth, with both events adversely impacting client activity and funding markets.

Although our performance in 2011 was adversely impacted by difficult economic conditions, we welcome the increased clarity from the UK and global regulators and expect further developments throughout 2012. Nevertheless, our capital, funding and liquidity positions remain a source of stability for our customers and clients and support us meeting future regulatory requirements.

Economic growth

2011 saw a number of government agencies, including the UK Treasury and US Fed, and supranational bodies, such as the IMF and the World Bank, downgrade their GDP growth forecasts. Although financial market volatility is likely to remain high, we believe the current European downturn will be moderate.

Eurozone

The issue. In 2011, the Eurozone continued to weaken with slowing GDP growth, high unemployment and ongoing political uncertainty. This has impacted Barclays through low client volumes as investors reduced their exposure to riskier asset classes, currency risk with significant fluctuations in the value of the Euro, and through increased funding costs due to a perceived deterioration in the credit risk of European banks.

What we have done about it. Barclays continues to closely monitor its exposure to Eurozone countries. The majority of sovereign exposures are used for hedging interest rate risk relating to local activities and have been actively replaced by non-government instruments. The remaining portion is actively managed reflecting our role as leading primary dealer, market maker and liquidity provider to our clients. Barclays also enters into credit mitigation arrangements to further protect against adverse Eurozone conditions. Despite the difficult conditions, Barclays remains open for business and will continue to contribute to growth in the Eurozone economies in which we operate.

Funding

The issue. In the summer of 2011, the funding markets experienced significant stress due to market concerns on the European sovereign debt crisis, resulting in sovereign bond yields for a number of European countries rising to unsustainable levels.

What we have done about it. Barclays emerged as one of the higher quality names in Europe and we have continued to access a variety of global funding markets. Our funding strategy is to maintain a diversified funding base, access a variety of alternate funding sources and hold liquidity to meet unexpected demands. This enables us to minimise the cost of funding and provides protection against unexpected fluctuations in the market. In 2011, our strong position gave us a competitive advantage during the market dislocation in the second half of the year. Recently, the ECB introduced mechanisms to provide liquidity to banks. This action was a positive development for the sector and reduces the risk of a funding-induced credit crunch in 2012.

Regulatory change

There has been continuing regulatory change in the wake of the financial crisis. Barclays maintains a proactive stance to regulation, seeking to be involved in the policy discussion in a constructive manner, and taking a serious approach to ensuring compliance with the resulting legislation and regulation. Outlined below are the key regulatory uncertainties we face.

Basel and the Capital Requirements Directive (CRD)

The issue. The Basel Committee published a paper on ‘Strengthening resilience of the banking sector’ in 2009. The report covered wide ranging proposals including more stringent capital and Risk Weighted Asset (RWA) treatments than the current regulatory regime.

What we have done about it. Barclays maintains a strong dialogue with international regulators including the FSA and the Basel Committee. We are focused on conservative capital management and management of our RWAs with significant reductions of Credit Market Exposures improving the capital efficiency of the Group, enabling us to maintain a robust Core Tier 1 ratio of 11.0% after the impact of CRD3. The strength of our capital ratios, our ability to generate capital organically and our actions to optimise RWAs will enable us to meet our targeted capital ratios under CRD4.

Independent Commission on Banking (ICB)

The issue. One of the key proposals in the final ICB report, which has been endorsed by the Government, is for UK retail and SME operations to be ring-fenced entities. The ICB has also recommended a potential loss-absorbing capacity of 17%. These factors are likely to increase operational costs and could have an adverse impact on the cost of funding for UK banks.

What we have done about it. Barclays strategy and financial targets remain valid in the context of the ICB recommendations. The ICB has estimated the cost to the industry at £4-7bn per annum, however we are unable to provide more accurate estimates of the cost to Barclays until detailed specification is provided and the market reflects the cost of funding. We welcome both the implementation timeline, allowing opportunity to get the detail right, and the ring-fenced entity design flexibility. In addition, we continue to develop internal Recovery and Resolution Plans to ensure Barclays remains a going concern and to assist regulators in the unlikely event that the bank is wound down.

Dodd-Frank Wall Street Reform and Consumer Protection Act (DFA)

The issue. The DFA was enacted by the US to implement financial regulatory reform as a response to the recent economic crisis. Certain provisions of the DFA may have an effect on the Group, including:

What we have done about it. Barclays continues to engage with the US authorities as they consult on proposals for rules and proceed to rule-making. We have taken a centralised approach to monitoring this process and to ensuring compliance with the rules that are developed as a result.

The ultimate objective of our strategy is to create and deliver long-term sustainable shareholder value. We fulfil our purpose by delivering the fundamental functions of a bank to our customers. We do this through an integrated universal banking model which we believe is the best model through which to build strong and stable relationships with our customers, employees and suppliers to deliver operational excellence; manage our risks appropriately; and allocate scarce resources, including capital, efficiently.

We take a long-term view on our strategy and have not changed it for many years. Changes in the environment continue to influence Barclays, especially how we choose to execute our strategy. We are currently focused on four execution priorities: Capital, Funding and Liquidity; Returns; Income Growth; and Citizenship.

As banking markets around the world continue to evolve, with regulatory change, and with the distinct need for rebuilding trust in the banking industry post crisis, our strategy and our execution priorities allow us to continue to serve the wide ranging needs of our customers in a safe and stable manner that is aligned with our responsibilities as corporate citizens and is able to deliver attractive returns for shareholders.

Strategy

Our focus is on execution and in particular delivering our promises in four key areas.

At the beginning of 2011 we set out our execution priorities based on a three year plan to improve both the bank’s performance and its position. We have made solid progress in 2011 despite the market uncertainty.

1. Capital, Funding and Liquidity

We remain mindful of the changing regulatory environment and our rock solid capital, funding and liquidity positions give us confidence that we will meet future requirements. Our robust Core Tier 1 ratio of 11.0% is supported by our ability to generate capital organically and we do not expect to seek additional capital from our shareholders. We have also maintained resilient funding and liquidity profiles despite recent market stresses caused by the Eurozone crisis. This has allowed us to access diverse funding sources, minimising the cost of funding and providing protection against unexpected fluctuations.

2. Returns

Our focus on delivering returns is a key driver in the way we manage the business. We seek to improve return on equity to ultimately increase shareholder returns, reflecting the strong link between the share price and return on equity. In doing so we also look to maintain strong capital, liquidity and leverage ratios, to enable us to deliver returns on a sustainable basis. Although the worse than predicted macroeconomic conditions as well as new regulatory constraints mean that we may not be able to deliver 13% returns by 2013, we will continue to focus on delivering a steady improvement in returns and achieve 13% over time.

3. Income Growth

A component of delivering improved returns is generating income growth. Despite the macro environment depressing income growth, we generated momentum and improved the competitive positions of all our major businesses in 2011. We grew net operating income in all businesses, except Barclays Capital which was most affected by difficult trading conditions, as we remain focused on improving the quality of assets to ensure that we do not grow at the expense of future credit losses.

4. Citizenship

We believe that being a valued, respected and trusted citizen is vital in creating long term value for all our stakeholders. We produce a Citizenship Report each year in order to benchmark our progress in the key areas of focus: contributing to growth in the real economy; the way we do business; and supporting our communities.

		For more detailed information, please see Financial review, please see page 159

The non-executive Directors are independent of management. Their role is to advise and constructively challenge management and monitor the success of management in delivering the agreed strategy within the risk appetite and control framework set by the Board.

		For more detailed information, please see Board of Directors page 50

Key responsibilities of the Board of Directors

The Board’s principal duty is to promote the long-term success of Barclays by creating and delivering sustainable shareholder value. It does this by setting strategy and overseeing its implementation by management. While the ultimate focus is long-term growth, the Board seeks to ensure that management strikes the right balance between long and short-term objectives.

In setting and monitoring the execution of strategy, the Board aims to ensure that the Group maintains an effective system of internal control and an effective risk management and oversight process across the Group, delivering growth in a controlled and sustainable way.

Key responsibilities of the Executive Committee

The Board delegates responsibility for the day-to-day management of the Group to the Chief Executive, who is responsible for ensuring that the business is operating effectively within the strategy and risk appetite agreed by the Board. The Chief Executive is supported by the Executive Committee, which he chairs.

The fundamental purpose of any company is the creation and delivery of long-term sustainable shareholder value in a manner consistent with its obligations as a responsible corporate citizen, and corporate governance must be seen in this context.

We aim to create and sustain value over the long term by understanding the external factors that present risks and opportunities for our business, thereby ensuring our strategy is appropriate; building strong and stable relationships with our customers, employees and suppliers; and ensuring that we manage our risks and resources, including capital, appropriately. Our strategy is focused on four key priorities: Capital; Returns; Income Growth; and Citizenship and we ensure our Board discussions are focused on these issues.

We have complied with the UK Corporate Governance Code and applied its principles throughout 2011 and we continue to review our corporate governance processes and practices to ensure they remain fit for purpose.

Actions taken in this respect during the year included:

Marcus Agius

Group Chairman

7 March 2012

Banking involves risks that must be understood and managed to successfully deliver sustainable returns and play our key role in supporting wider economic growth.

Our impairment performance and asset quality continued to improve in spite of the difficult economic environment.

Robert Le Blanc

Chief Risk Officer

Risk management

Barclays has clear risk management objectives and a well-established strategy to deliver them, through core risk management processes.

Responsibility for risk management resides at all levels within the Group, from the Board and the Executive Committee down through the organisation to each business manager and risk specialist. Barclays distributes these responsibilities so that risk/return decisions are taken at the most appropriate level: as close as possible to the business, and subject to robust and effective review and challenge.

Risk appetite, which is the level of risk Barclays is prepared to sustain whilst pursuing its business strategy, is approved by the Board. Financial Risk Committee, Treasury Committee, Operational Risk Committee and Tax Risk Committee monitor their relevant risk profiles against risk appetite and the output is presented to the Board Risk Committee. Management assurance processes are assessed by Barclays Internal Audit and the effectiveness of the Group’s control framework is assessed by the Governance and Control Committee.

During 2011, the Principal Risk Policy, which covers the categories of risk to which Barclays has its most significant actual or potential exposures, was updated resulting in risks being grouped into four categories: Credit, Market, Funding and Operational. Each risk owned is by a Group Principal Risk Owner, who is a senior individual within the Group Risk function. There was no significant change to the underlying risk types monitored as a result of this regrouping.

Performance in 2011

Loan impairment charges reduced 33% on 2010 reflecting the generally improving underlying trends across the retail and wholesale businesses. The Group loan loss rate decreased to 77bps (2010: 118bps), which was a very strong performance for this point in the economic cycle.

Retail loan impairment decreased as portfolio quality improved across almost all businesses. This included lower charges in our cards businesses in the UK and internationally. Similarly, impairment rates in unsecured loans and mortgages remained very moderate in the domestic and international markets.

Loan impairment also dropped in our wholesale portfolios across all businesses. Our corporate portfolios in Spain and Portugal remained under pressure from the difficult economic environment in those countries.

Key developments in relation to capital funding and liquidity are covered in the Finance Director’s review on page 22.

Market exposures decreased in 2011 although there was a moderate increase in daily value at risk due to higher market volatility.

There have been no significant changes in our operational risk profile during 2011.

Credit risk

Credit risk is the risk of the Group suffering financial loss if any of its customers, clients or market counterparties fails to fulfil their contractual obligations to the Group. This arises mainly from wholesale and retail loans and advances together with the counterparty credit risk arising from derivative contracts entered into with its clients. Other sources of credit risk arise from trading activities, including debt securities, settlement balances with market counterparties, available for sale assets and reverse repurchase loans. This can also arise when an entity’s credit rating is downgraded, leading to a fall in the value of Barclays investment in its issued financial instruments.

Funding risk

Funding risk comprises three key risks:

Liquidity risk – the Group is unable to meet its obligations as they fall due resulting in: an inability to support normal business activity; failing to meet liquidity regulatory requirements; or changes to credit ratings. Capital risk – the Group is unable to maintain appropriate capital ratios which could lead to an inability to support business activity; failing to meet regulatory requirements; or changes to credit ratings.

Structural risk – management of non-contractual risks and primarily arises from the impact on the Group’s balance sheet of changes in primarily interest rates on income or foreign exchange rates on capital ratios.

Market risk

Market risk is the risk of the Group suffering financial loss due to being unable to hedge its balance sheet at prevailing market levels. The Group can be impacted by changes in both the level and volatility of prices e.g. interest rates, credit spreads, commodity prices, equity prices and foreign exchange rates. The risk is reported as traded risk where Barclays supports customer activity primarily via Barclays Capital; non-traded risk to support customer products primarily in the retail bank; and pension risk in relation to investment returns within the defined benefit scheme.

Operational risk

Operational risk is the risk of direct or indirect impacts resulting from human factors, inadequate or failed internal processes and systems or external events. Operational risks are inherent in the Group’s business activities. The key risks that this principal risk includes are external suppliers, fraud, financial reporting, information, legal, product, payments, people, premises & security, regulatory, taxation, technology and transaction operations. For definitions of these key risks see pages 74 to 78.

		For more detailed information, please see the Risk Management section pages 67 to 158

 Banks need to become better citizens. This is not about philanthropy – it’s about delivering real commercial benefits in a way that also creates value for society. 

Bob Diamond

Chief Executive

Citizenship is one of Barclays four execution priorities and is integral to our business.

In the first instance, Citizenship is about contributing to growth in the real economy, creating jobs and supporting sustainable growth. Second, it is about the way we do business: putting our customers’ interests at the heart of what we do, and managing our impact responsibly. Third, it is about supporting our communities through investment programmes and the direct efforts of our employees.

Our approach

Throughout the year, we engaged with a diverse set of stakeholders to understand the challenges they face and how we can best help. Stakeholders play a pivotal role in helping us determine how we prioritise the issues we need to address. This involves listening to our customers and clients, our shareholders and employees, while working in collaboration with charities and governments.

We made firm progress in 2011 but still have a long way to go. That’s why in 2012 we will launch a Citizenship Plan outlining our longer term commitments to 2015. These objectives will be aligned to rigorous planning and reporting processes to drive delivery of this agenda, including responsibilities as corporate taxpayers. In this respect, we note HMRC’s reaction to a transaction that we voluntarily disclosed to them and recognise that we need to anticipate better its changing approach to the taxation of corporates.

Board Citizenship Committee

In 2011, we strengthened our governance framework by creating a Board Citizenship Committee as a formal sub-committee of our Board of Directors. The committee is chaired by Group Chairman Marcus Agius and includes two non-executive Directors.

Progress against our priorities is reviewed regularly and will be formally assessed at least twice yearly by the Board Citizenship Committee and the Executive Committee. A range of management committees are responsible for specific aspects of Citizenship performance.

We have delivered resilient profits in 2011 despite the difficult trading environment in the second half of the year. Our capital, funding and liquidity positions remained strong throughout 2011 and we are well protected against further economic stress.

We have delivered profit before tax of £5.9bn in 2011 which was well balanced across our retail and investment banking businesses. Our Core Tier 1 ratio improved to 11.0% despite the impact of the third Capital Requirements Directive (CRD3).

Chris Lucas

Group Finance Director

For 2011 we reported a slight decrease in profits, as a reduction in income at Corporate and Investment Banking was partly offset by income improvements in all other businesses, a significant improvement in credit impairment and cost reductions. Prudent capital management led to a further increase in our Core Tier 1 ratio. Our funding and liquidity remains strong.

Income Statement

Barclays delivered adjusted profit before tax of £5.6bn in 2011 which was well balanced across the Group. Statutory profits were broadly similar at £5.9bn. The adjusted basis helps to provide a more consistent basis for comparing business performance between periods and principally excludes gains on own credit and debt buy-backs of £3.8bn, impairment on our stake in BlackRock, Inc. of £1.8bn, a £1bn provision for PPI, and almost £600m of goodwill write offs, mainly in Spain.

Income increased 3% including gains on debt buy-backs of £1.1bn and an increase in own credit gains of £2.3bn. Excluding these one-off items, income declined 8% to £28,512m, principally reflecting a decrease in income at Barclays Capital. However, income increased in most other businesses despite continued low interest rates and difficult macroeconomic conditions. This resilience of income is reflected in the RBB, Corporate and Wealth net interest margin which remained stable at 204bps (2010: 203bps). Net interest income from RBB, Corporate, Wealth and Barclays Capital increased 5% to £13.2bn of which the contribution from hedging (including £463m of increased gains from the disposal of hedging instruments) increased by 3%.

Credit impairment charges decreased 33% to £3,802m, reflecting significant improvements across all businesses, and impairment charges as a proportion of Group loans and advances improved to 77bps, compared to 118bps for 2010. In addition, impairment of £1.8bn was taken against our investment in BlackRock, Inc.

Adjusted operating expenses, which exclude the £1bn provision for PPI redress and £597m (2010: £243m) goodwill impairment, were down £548m to £19,180m. Excluding the UK bank levy of £325m introduced in 2011, operating expenses were down 4% to £18,855m, which included £408m (2010: £330m) of restructuring charges taken now in order to deliver future benefits.

Despite cost savings, the adjusted cost: income ratio increased to 67% (2010: 64%), reflecting lower income, increased restructuring charges and the UK bank levy. At Barclays Capital the cost: net operating income ratio was 71% (2010: 65%) and the compensation: income ratio was 47% (2010: 43%), reflecting lower income in difficult conditions.

Balance Sheet

Net asset value per share increased 9% to 456p with net tangible asset value per share, which adjusts for goodwill and other intangible assets, increasing 13% to 391p.

Total shareholders’ equity (including non-controlling interests) was £65.2bn (2010: £62.3bn). Excluding non-controlling interests, shareholders’ equity increased £4.7bn to £55.6bn, driven by profit after tax of £3.0bn and positive available for sale and cash flow hedge reserve movements offset by negative currency translation and dividends paid.

Total assets increased to £1,564bn (2010: £1,490bn), principally due to an increase in the fair value of gross interest rate derivative assets as major forward curves decreased, partially offset by a decrease in reverse repurchase agreements.

The Group’s loan to deposit ratio continued to improve to 118% (2010: 124%) and the loan to deposit and long term funding ratio was 75% (2010: 77%). As a key measure of stability, adjusted gross leverage remained at 20x, moving within a month end range of 20x to 23x. Excluding the liquidity pool assets held as contingency to meet cash outflows in the event of stressed market conditions, adjusted gross leverage remained flat at 17x.

Capital Management

At 31 December 2011, the Group’s Core Tier 1 ratio was 11.0% (2010: 10.8%) reflecting the contribution from retained earnings and reductions in risk weighted assets, which more than offset the impact of CRD3.

The Group continued to generate Core Tier 1 capital from retained profits (excluding own credit, impairment of investment in BlackRock, Inc. and goodwill impairment, which are added back for regulatory capital purposes). This contribution of £2.6bn was largely offset by other movements in Core Tier 1 capital, notably pension contributions and foreign currency movements, resulting in an increase in Core Tier 1 capital of £0.2bn to £43.1bn.

Risk weighted assets decreased slightly to £391bn (2010: £398bn) largely reflecting foreign exchange movements and decreases in Barclays Capital from lower levels of activity, risk reduction and sales of credit market exposures, which more than outweighed the approximate £30bn increase resulting from the implementation of CRD3 in December.

We expect that the strength of our Core Tier 1 ratio, our ability to generate capital organically and our optimal use of risk weighted assets will enable us to meet our targeted capital ratios after absorbing the impact of Basel 3.

Funding and Liquidity

The Group’s overall funding strategy is to develop a diversified funding base and maintain access to a variety of alternate funding sources, so minimising the cost of funding and providing protection against unexpected fluctuations. Within this, the Group aims to align the sources and uses of funding. Customer loans and advances are largely funded by customer deposits, with any excess being funded by long-term wholesale secured debt and equity. Wholesale funding is well managed with derivative assets and liabilities largely matched.

The Group had £265bn of wholesale debt diversified across currencies, of which just £39bn was secured. Term funding maturing in 2012 totals £27bn. Term funding raised in 2011 amounted to £30bn (2010: £35bn) compared to term funding maturities of £25bn. During January 2012, £5bn of term funding was raised.

Approximately 10% of customer loans and advances at 31 December 2011 were secured against external funding, leaving significant headroom for further secured issuance.

The liquidity pool remained resilient at £152bn and moved within a month-end range of £140bn to £167bn, with short-term funding being rolled over despite the stress in the wholesale funding markets. The liquidity pool comprises high quality liquid unencumbered assets, diversified across currencies, broadly in line with wholesale debt requirements, with 93% (2010: 88%) of the pool comprising cash and deposits with central banks and government bonds.

The Group monitors compliance against anticipated Basel 3 metrics, including the Liquidity Coverage Ratio at 82% and Net Stable Funding Ratio at 97%, and is on track to meet the 100% compliance required by 2015 and 2018 respectively.

Conclusion

To summarise, we delivered resilient adjusted profits of £5.6bn, with adjusted net operating income growth in every business except Barclays Capital. We delivered a 33% improvement in credit impairment, managed adjusted costs down 4% excluding the bank levy, and we increased the dividend by 9%. Our Core Tier 1 ratio increased to 11%, and our funding and liquidity strength continues to give us a competitive advantage.

Retail and Business Banking (RBB) has performed strongly in 2011 with two businesses, UK RBB and Barclaycard, delivering returns well above our 2013 goal. We have also made significant progress in implementing our vision of One Africa and have taken robust action to reposition Europe RBB.

In a tough economic climate, we have ensured we are ‘open for business’, supporting our customers when and where they need us.

Antony Jenkins

Chief Executive, Retail and Business Banking

Our focus in Retail and Business Banking (RBB) is on making our customers’ lives much easier. We have put this at the heart of our business and this is now making a significant difference for our customers.

We have focused on improving customer service, listening to our customers and understanding their needs. As a result, we have made changes, so that, for example, all standing order and direct debit changes in the UK are now processed on the day they are received. On a year-on-year basis, banking complaints in the UK (excluding PPI) reduced by 30% and we are committed to reducing these further still.

In a tough economic climate, we have ensured we are ‘open for business’, supporting our customers when and where they need us. In addition to exceeding our lending targets to businesses in the UK, Barclays ran more than 800 seminars across the country to help customers network with their peers and improve their growth. We returned 1,900 existing businesses to health and helped 108,000 entrepreneurs to open their doors for the first time. Of the almost one million home owners to whom we provided loans, more than 10,000 were buying their first property, with our new 90 per cent loan to value mortgage helping customers access the housing market. Every day, across our network, our staff help customers to achieve their aspirations, whether buying a new home, starting a business, investing for the future or simply managing their day to day finances. Their engagement and commitment is the bedrock of our success.

Innovation has also continued to be a differentiator for Barclays as we look to address the changing needs of our customers. We now have 17 million contactless cards in issue in the UK and we have maintained our leading position in this fast-developing area of payments with more than 61,000 retailers using our contactless terminals. We also began the roll-out of contactless payments in South Africa during 2011 and Barclaycard launched the first contactless mobile phone in the UK with Orange. More recently we have launched Barclays Pingit in 2012, Europe’s first person-to-person service for sending and receiving money using mobile phone numbers. We will continue to innovate to meet our customers’ needs.

A relentless focus on our customers is the foundation of our performance and, we believe, will generate sustainable value for our shareholders. In 2011, in our core UK banking market, we attracted new customers in all our major product categories. Adjusted return on average equity in UK Retail and Business Banking at 15%, and in Barclaycard at 17%, exceeded the Barclays target of 13%, with Africa RBB improving to 10% and Europe RBB returns reflecting the repositioning of the business. Adjusted profit before tax in Retail and Business Banking increased 48% in 2011.

I am confident that we are making good progress on our customer agenda and that through this we are delivering significant value to all our stakeholders.

Against a backdrop of challenging economic and market conditions, results for Barclays Capital were resilient compared with the industry, and the business held or gained market share. The year also saw Barclays Corporate return to profitability driven by a strong underlying performance in the UK business.

 Through continued uncertainty in the markets, and in the global economy, we will continue to focus relentlessly on the need of our clients. 

Jerry del Missier and Rich Ricci

Co-Chief Executives, Corporate and Investment Banking

Our Corporate and Investment Banking business provides clients with loans, financing, risk management, strategic advice and transactional payments support. It supports corporate clients to achieve growth and job creation in the real economy, governments to deliver their stability and growth plans, and institutions to meet the long-term investment needs of their clients.

Against a backdrop of challenging economic and market conditions, results for Barclays Capital were resilient compared with the industry. Profit before tax fell 32%, driven by a 22% reduction in income. However we held or gained market share, and continued to win recognition for our client focus – including Euromoney’s Best Global Investment Bank and IFR’s Bank of the Year.

The strength of our client-focused model means that we are bringing clients integrated solutions that draw expertise from across the organisation. We continued to see real client benefits in 2011 from managing the business in a more integrated way, to bring clients the best of Barclays.

Revenues generated from delivering Barclays Capital products to Barclays Corporate clients increased 28% year on year, and 73% over the past three years, while revenues from delivering Barclays Corporate products to Barclays Capital clients are up 20%.

The substantial improvements we have seen in the results for Barclays Corporate reflect the significant progress we’ve made across every aspect of the business in 2011, delivering on a clear growth strategy and turning an adjusted loss of £388m in 2010 into an adjusted profit of £126m in 2011.

We have continued to take a disciplined approach to investment across Corporate and Investment Banking. Our focus remains on building our platform in those areas where we see real opportunity to deliver an advantage for our clients.

Barclays Capital continues to strengthen its Equities and Investment Banking franchises in EMEA and Asia Pacific, and Barclays Corporate has expanded its hubs in Frankfurt, Hong Kong, Singapore and New York. Our success in securing 16 Corporate Broking mandates in the UK last year is a good example of the strength and reputation we are building in our newer businesses.

We remain committed to our targets for returns, income growth and cost management. Through continued uncertainty in the markets, and in the global economy, we will continue to focus relentlessly on the needs of our clients.

		For more detailed information, please see Analysis of results by business page 173

In 2011, Barclays Wealth demonstrated its third successive year of double digit income growth. Now in its third year of the five year Gamma Plan, Wealth is on track to position itself at the top tier of the industry.

 We continue to transform Barclays Wealth into a premier global wealth manager. 

Thomas L. Kalaris

Chief Executive, Barclays Wealth

In 2011, the second year of our five year strategy, we delivered a first rate performance and continued to meet all our financial and franchise targets. We remain well on track against our 2014 commitments.

Unprecedented market turmoil and a challenging business environment underpinned most of 2011. Under these conditions we benefited as a part of Barclays, a global institution with a robust balance sheet, significant product capability and a clear strategy. This provided us with a unique opportunity to serve our clients more comprehensively than before; positioned to bring the best of Barclays to them.

2011 also marked the second year of the five year “Gamma” program; a complex, challenging and ambitious plan to transform Barclays Wealth into a premier global wealth manager. We are well on track to deliver against our promises - a step change improvement in client experience and a significant increase in the productive capacity of the firm.

The execution of this strategy delivered differentiating performance. Our financial results were strong with income growth of 12% to £1.7bn and 27% growth in profit before tax to £207m. The productivity of our relationship managers improved; with the top 25 generating 21% higher revenue than last year. Our clients have begun to benefit from better on-boarding processes; faster turn around of credit decisions; improved reporting and a broader set of products.

2012 will undoubtedly be a challenging year as we deliver the third year of our Gamma plan while still meeting ambitious financial targets. But we are strongly positioned; we have proven the concept and shown that we can deliver. I remain confident that we can meet our commitments to our clients, thereby meeting our commitments to our shareholders.

		For more detailed information, please see Analysis of results by business page 173

The Board Remuneration Committee provides governance and strategic oversight of remuneration.

 The Committee will continue to focus on reaching a sustainable balance between shareholder returns and employee remuneration. 

Alison Carnwath

Chairman, Board Remuneration Committee

We recognise that executive remuneration generally, and bank remuneration in particular, is an important issue. Barclays needs to work with the acceptance of the communities in which we operate and balance the competing demands of our many stakeholders. This includes a close and continuous engagement with the Financial Services Authority and with our shareholders.

In 2011 Barclays delivered a solid set of results, achieved in challenging market and economic conditions. The results were reflected in the remuneration decisions across Barclays including those for Bob Diamond and Chris Lucas. 2011 total incentive awards were down 26% across the Group compared with a 3% reduction in profit. Bonuses for our executive Directors and our eight highest paid senior executive officers were down 48% versus 2010 on a “like-for-like” basis (namely the reduction for individuals in service in both 2010 and 2011).

The Board and the Committee recognise that our return on equity has to improve. In order to achieve this, our operating costs need to be reduced. Remuneration has its part to play in that. We fully recognise that higher capital requirements and the economic environment mean that remuneration levels in the industry have to adjust. That journey will take time and we have taken important steps in the right direction in 2011. Total incentive awards for Barclays Capital were down 35% on 2010 with Barclays Capital profit before tax reducing 32%. The Committee will continue to focus on reaching a sustainable balance between shareholder returns and employee remuneration.

The full remuneration report provides an overview of executive remuneration for 2011, details of the total incentive awards for 2011 and additional disclosures to comply with legal and regulatory requirements. Additional information on Barclays approach to remuneration can be found at www.barclays.com/investorrelations. I trust the remuneration report provides you with a clear picture of how the Committee has discharged its responsibilities in 2011.

Alison Carnwath

Chairman, Board Remuneration Committee