2013 Bos Hy Results

Bank of Scotland plc
Half-Year Management Report
For the half-year to 30 June 2013
Member of the Lloyds Banking Group

FORWARD LOOKING STATEMENTS
This announcement contains forward looking statements with respect to the business, strategy and plans of Bank of
Scotland plc, its current goals and expectations relating to its future financial condition and performance. Statements
that are not historical facts, including statements about the Bank of Scotland Group or the Bank of Scotland Group’s
management’s beliefs and expectations, are forward looking statements. By their nature, forward looking statements
involve risk and uncertainty because they relate to future events and circumstances that will or may occur. The Bank of
Scotland Group’s actual future business, strategy, plans and/or results may differ materially from those expressed or
implied in these forward looking statements as a result of a variety of factors, including UK domestic and global economic
and business conditions; the ability to derive cost savings and other benefits, including as a result of the Lloyds Banking
Group’s Simplification programme and to access sufficient funding to meet the Bank of Scotland Group’s liquidity needs;
changes to Bank of Scotland plc’s, HBOS plc’s, Lloyds TSB Bank plc’s or Lloyds Banking Group plc’s credit ratings; risks
concerning borrower or counterparty credit quality; instability in the global financial markets, including Eurozone
instability and the impact of any sovereign credit rating downgrade or other sovereign financial issues; market-related
risks including changes in interest rates and exchange rates; changing demographic and market related trends; changes
in customer preferences; changes to laws, regulation, accounting standards or taxation, including changes to regulatory
capital or liquidity requirements; the policies and actions of governmental or regulatory authorities in the UK, the
European Union, or other jurisdictions in which the Group operates, including the US; the implementation of the
Recovery and Resolution Directive and banking reform following the recommendations made by the Independent
Commission on Banking; the ability to attract and retain senior management and other employees; requirements or
limitations imposed on Lloyds Banking Group plc, Lloyds TSB Bank plc and the Bank of Scotland Group as a result of
HM Treasury’s investment in Lloyds Banking Group plc; the ability to satisfactorily dispose of certain assets or otherwise
meet the Lloyds Banking Group’s EC state aid obligations; the extent of any future impairment charges or write-downs
caused by depressed asset valuations, market disruptions and illiquid markets; the effects of competition and the actions
of competitors, including non-bank financial services and lending companies; exposure to regulatory scrutiny, legal
proceedings, regulatory investigations or complaints, and other factors. Please refer to Lloyds Banking Group plc’s latest
Annual Report on Form 20-F filed with the US Securities and Exchange Commission for a discussion of certain factors
together with examples of forward looking statements. The forward looking statements contained in this announcement
are made as at the date of this announcement, and the Bank of Scotland Group undertakes no obligation to update any
of its forward looking statements.
CONTENTS
Page
Financial review 1
Principal risks and uncertainties 3
Condensed consolidated half-year financial statements (unaudited)
Consolidated income statement 8
Consolidated statement of comprehensive income 9
Consolidated balance sheet 10
Consolidated statement of changes in equity 12
Consolidated cash flow statement 14
Notes 15
Statement of directors’ responsibilities 36
Independent review report 37
Contacts 38
BANK OF SCOTLAND PLC 2013 HALF-YEAR RESULTS
FINANCIAL REVIEW
Principal activities
Bank of Scotland plc (the Bank) and its subsidiaries (together, the Group) provide a wide range of banking and financial
services in the UK and overseas.
During the half-year to 30 June 2013, the Group earned revenue through interest and fees on a broad range of financial
services products including current and savings accounts, personal loans, credit cards and mortgages within the retail
market; loans and capital market products to commercial, corporate and asset finance customers; and private banking.
Review of results
The Group recorded a profit before tax of £1,031 million for the half year to 30 June 2013 compared to a loss before tax
of £660 million for the half year to 30 June 2012.
Total income increased by £666 million, or 19 per cent, to £4,164 million for the half year to 30 June 2013 from
£3,498 million in the half year to 30 June 2012.
Net interest income decreased by £105 million, or 3 per cent, to £3,296 million in the half year to 30 June 2013 compared
to £3,401 million in the same period in 2012. This decrease reflected lower lending volumes; however the net interest
margin on relationship lending and similar interest-earning assets improved.
Other income increased by £771 million to £868 million in the half year to 30 June 2013, compared to £97 million in the
same period in 2012, largely due to a £253 million improvement in net trading income and a £536 million improvement in
other operating income. The improvement in net trading income was driven by the impact of market conditions relative to
the half year to 30 June 2012. Net fee and commission income was £18 million, or 5 per cent, lower at £351 million in
the half year to 30 June 2013 compared to £369 million in the half-year to 30 June 2012. Fees and commission
receivable were £26 million, or 5 per cent, lower at £500 million in the half year to 30 June 2013 compared to
£526 million in the same period in 2012. A £3 million increase in credit and debit card fees was more than offset by a
£9 million decrease in current account fees and an £18 million decrease in other fees receivable. Fees and commissions
payable were £8 million, or 5 per cent, lower at £149 million in the half year to 30 June 2013 compared to £157 million in
the same period in 2012. Other operating income was £536 million higher at £264 million in the half year to 30 June
2013 compared to a deficit of £272 million in the same period in 2012, with the deficit in 2012 reflecting losses on sale of
assets which were outside of the Group’s risk appetite.
Total operating expenses decreased by £338 million, or 18 per cent, to £1,538 million in the half year to 30 June 2013
compared to £1,876 million in the half year to 30 June 2012; partly reflecting a reduced regulatory provisions charge of
£52 million in the half year to 30 June 2013 compared to £240 million in the same period in 2012. Excluding regulatory
provisions, other operating expenses decreased by £150 million, or 9 per cent, to £1,486 million in the half year to 30 June
2013 compared to £1,636 million in the half year to 30 June 2012 as a result of cost savings arising from the rundown of
portfolios of assets which are outside of the Group’s risk appetite.
Impairment losses decreased by £687 million, or 30 per cent, to £1,595 million in the half year to 30 June 2013 compared to
£2,282 million in the half year to 30 June 2012. The lower charge reflected the substantial reductions in the portfolios of
assets which are outside of the Group’s risk appetite.
On the balance sheet, total assets were flat at £561,978 million at 30 June 2013, compared to £561,433 million at
31 December 2012, as funds released by the continuing rundown of assets which are outside of the Group’s risk appetite were
placed with fellow Lloyds Banking Group subsidiaries. Loans and advances to customers decreased by £24,327 million, or
7 per cent, from £329,636 million at 31 December 2012 to £315,309 million at 30 June 2013, reflecting the rundown of assets
outside of the Group’s risk appetite. Shareholders’ equity increased by £831 million, from £18,114 million at 31 December
2012 to £18,945 million at 30 June 2013, principally as a result of the profit attributable to equity shareholders.
The Group's core tier 1 capital ratio increased to 12.2 per cent at the end of June 2013 from 9.8 per cent at the end of
December 2012, principally driven by a reduction in risk-weighted assets and the retained profit for the period. The total
capital ratio increased to 21.7 per cent from 17.4 per cent at 31 December 2012.
Page 1 of 38
FINANCIAL REVIEW (continued)
Capital ratios
At At
30 June 31 Dec
Capital resources 2013 2012
£m £m
Core tier 1
Shareholders’ equity per balance sheet 18,945 18,114
Non-controlling interests per balance sheet 20 20
Regulatory adjustments:
Regulatory adjustments to non-controlling interests (4) 7
Unrealised reserve on available-for-sale debt securities 14 178
Unrealised reserve on available-for-sale equity investments (32) (33)
Cash flow hedging reserve (1,121) (1,238)
17,822 17,048
Less: deductions from core tier 1
Goodwill (385) (374)
Intangible assets (83) (92)
50 per cent excess of expected losses over impairment provisions (164) (550)
50 per cent of securitisation positions (15) (113)
Core tier 1 capital 17,175 15,919
1
Preferred securities 709 700
Less: deductions from tier 1
50 per cent of material holdings (36) (3)
Total tier 1 capital 17,848 16,616
Tier 2
Undated subordinated debt 4,816 4,776
Dated subordinated debt 7,615 7,530
Unrealised gains on available for sale equity investments 32 33
Eligible provisions 692 942
Less: deductions from tier 2
50 per cent excess of expected losses over impairment provisions (164) (550)
50 per cent of securitisation positions (15) (113)
50 per cent of material holdings (36) (3)
Total tier 2 capital 12,940 12,615
Supervisory deductions
2
Unconsolidated investments – (64)
2
Connected lending of a capital nature (106) (855)
Total supervisory deductions (106) (919)
Total capital resources 30,682 28,312
Risk-weighted assets 141,236 162,582

Core tier 1 capital ratio 12.2% 9.8%
Tier 1 capital ratio 12.6% 10.2%
Total capital ratio 21.7% 17.4%
1
Covered by grandfathering provisions issued by FSA.
2
Comparatives have been represented to reflect the reanalysis of connected lending amounts which were previously incorporated within
unconsolidated investments.
Page 2 of 38
PRINCIPAL RISKS AND UNCERTAINTIES
At present the most significant risks faced by the Group are:
CREDIT RISK
Principal risks
Adverse changes in the credit quality or behaviour of the Group’s borrowers and counterparties would be expected to
reduce the value of the Group’s assets and increase the Group’s write-downs and allowances for impairment losses.
Credit risk can be affected by a range of macroeconomic, environment and other factors, including, inter alia, increased
unemployment, reduced asset values (including residential and commercial real estate), lower consumer spending,
increased consumer indebtedness, increased personal or corporate insolvency levels, reduced corporate profits,
increased interest rates and/or higher tenant defaults. The Group has exposure to commercial customers in both the UK
and internationally, including Europe and Ireland, particularly related to commercial real estate lending, where the Group
has a high level of lending secured on secondary and tertiary assets. The Group’s portfolios may be impacted by some
or all of these factors and the possibility of further economic downside risk remains.
Mitigating actions
The Group takes many mitigating actions with respect to this principal risk. The Group manages its credit risk in a variety
of ways such as:
– through prudent and through the cycle credit risk appetite and policies;
– clearly defined levels of authority (including, independently sanctioned and controlled credit limits for commercial
customers and counterparties, sound credit scoring models and credit policies for retail customers);
– robust credit processes and controls, including those governing forbearance; and
– well-established Group and Divisional committees that ensure distressed and impaired loans are identified,
considered, controlled and appropriately escalated and appropriately impaired (taking account of the Group’s latest
view of current and expected market conditions, as well as refinancing risk).
Reviews are undertaken at least quarterly and incorporate internal and external audit review and challenge.
CONDUCT RISK
Principal risks
As a provider of a wide range of financial services products distributed through numerous channels to a broad and varied
customer base, and as a participant in market activities the Group faces significant conduct risks, such as: products or
services not meeting the needs of its customers; sales processes which could result in selling products to customers
which do not meet their needs; failure to deal with a customer’s complaint effectively where the Group has got it wrong
and not met customer expectations; and behaviours which do not meet market standards. Given the high level of
scrutiny regarding financial institutions’ treatment of customers and business conduct from regulatory bodies, the media
and politicians, there is a risk that certain aspects of the Group’s current or historic business may be determined by the
Financial Conduct Authority (FCA) and other regulatory bodies or the courts as not being conducted in accordance with
applicable laws or regulations, or fair and reasonable treatment in their opinion. The Group may also be liable for
damages to third parties harmed by the conduct of its business.
Page 3 of 38
PRINCIPAL RISKS AND UNCERTAINTIES (continued)
Mitigating actions
The Group takes a range of mitigating actions with respect to this principal risk with clear and visible leadership from the
top. These actions are being developed within the Group’s Conduct Strategy initiative, including:
− To support the Group’s strategy to be the best bank for customers: the Group is enhancing its approach to business
strategy and planning, with the customer at the heart; it is continuing its journey to industry-leading complaints
performance; its simplification programme is making customer interactions easy and straightforward.
− To support the transparency and simplification of the Group’s products: the Group is enhancing its conduct risk
appetite statements, with detailed supporting MI and customer analytics to track continuous improvement, and a
robust product governance framework; it is developing its framework for rectifying and undertaking root-cause
analysis of conduct issues where they arise; it is improving how it keeps a record of the delivery of fair outcomes for
customers.
− To support how colleagues deliver the right outcomes for customers: the Group is enhancing recruitment and training
and how it manages performance with clearer customer accountabilities; it is reviewing and developing how rewards
and incentives drive customer-centric behaviours; it is strengthening sales processes and frameworks to deliver
consistently fair outcomes for customers.
– This is supported by policies and standards in key areas, including product governance, customer treatment, sales,
responsible lending, customers in financial difficulties, claims and complaints handling. The Group develops
colleagues’ awareness of these and other expected standards of conduct through these and other policies and
standards and codes of responsibility.
– The Group actively engages with regulatory bodies and other stakeholders in developing its understanding of current
customer treatment concerns to ensure that the implementation of the Group’s Conduct Strategy meets evolving
stakeholder expectations.
MARKET RISK
Principal risks
The Group has a number of market risks, the principal one being:
– Interest rate risk: This risk to the Group’s banking income arises from competitive pressures on product terms in
existing loans and deposits, which sometimes restrict the Group in its ability to change interest rates applying to
customers in response to changes in interbank and central bank rates. A further related risk arises from the level of
interest rates and the margin of interbank rates over central bank rates.
Mitigating actions
Market risk is managed within a Board approved framework using a range of metrics to monitor the Group’s profile
against its stated appetite and potential market conditions.
High level market risk exposure is reported regularly to appropriate committees for monitoring and oversight by senior
management.
A variety of risk measures are used such as:
– Sensitivity based measures (e.g. sensitivity to 100 basis points move in interest rates)
– Percentile based measures (e.g. Value at Risk)
– Scenario/stress based measures (e.g. single factor stresses, macroeconomic scenarios)
In addition, profit and loss triggers are used in the Trading Books in order to ensure that mitigating action is discussed if
profit and loss becomes volatile.
Page 4 of 38
– Interest rate risk: Exposure arising from the different repricing characteristics of the Group’s non-trading assets and
liabilities, and from the mismatch between interest rate sensitive assets and interest rate sensitive liabilities, is
managed centrally. Matching assets and liabilities are offset against each other and interest rate swaps are also
used to manage the residual exposure to within the non-traded market risk appetite. Exposure arising from the
margin of interbank rates over central bank rates is monitored and managed within the non-traded market risk
appetite through appropriate hedging activity.
OPERATIONAL RISK
Principal risks
The principal operational risks in the Group are:
– IT systems and resilience: The risk of customer impact and/or loss to the Group resulting from failure to develop,
deliver or maintain effective IT solution.
– Information security: The risk of information leakage, loss or theft.
– External fraud: The risk of loss to the Group and/or its customers resulting from an act of deception or omission.
– Customer process: The risk of new issues, process weaknesses and control deficiencies within the Group’s customer
facing processes.
Mitigating actions
The Group operates a robust control environment with regular review and investment. Contingency plans are maintained
for a range of potential scenarios with a regime of regular disaster recovery exercises, both Group specific and industry
wide. Significant investment has been, and continues to be made in IT infrastructure and systems to ensure their
resilience, security and to enhance the services they support.
The Group adopts a risk based approach to mitigate the external fraud risk it faces, reflecting the current and emerging
external fraud risks within the market. This approach drives an annual programme of enhancements to the Group’s
technology, process and people related controls; with emphasis on preventative controls, supported by real time
detective controls wherever feasible. Through Group-wide policies and operational control frameworks the Group has
developed robust fraud operating model with centralised accountability. Over the past six months the Group has revised
and enhanced its incident management capability to increase its speed of response to customer impacting incidents.
Material operational risks are reported regularly to appropriate committees, attracting senior management visibility, and
are managed via a range of strategies – avoidance, mitigation, transfer (including insurance), and acceptance.
PEOPLE RISK
Principal risks
The Group’s management of material people risks is critical to its capacity to deliver against its strategic objectives and
achieve Lloyd’s Banking Group’s aim to be the best bank for customers. Over the coming six months the Group’s ability
to manage people risks successfully is likely to be affected by the following factors:
– The ongoing pace of change may disrupt the Group’s ability to lead and manage its people effectively in some
areas;
– The developing and increasingly rigorous and intrusive regulatory environment may challenge the Group’s people
strategy, remuneration practices and retention; and
– Negative political and media attention on banking sector culture, sales practices and ethical conduct may impact
colleague engagement, investor sentiment and the Group’s cost base.
Page 5 of 38
Mitigating actions
The Group takes many mitigating actions with respect to people risk. Key examples include:
– Strengthening the risk and customer focused culture amongst colleagues by developing and delivering a number of
initiatives that reinforce behaviours to generate the best possible long-term outcomes for customers and colleagues;
– Continuing to ensure strong management of the impact of organisational change and consolidation on colleagues;
– Embedding the Group’s Codes of Personal and Business Responsibility across the Group;
– Reviewing and developing incentives continually to ensure they promote colleagues’ behaviours that meet customer
needs and regulatory expectations;
– Focusing on leadership and colleague engagement, through delivery of strategies to attract, retain and develop high
calibre people together with implementation of rigorous succession planning;
– Maintaining focus on people risk management across the Group; and
– Ensuring compliance with legal and regulatory requirements related to Approved Persons and the Remuneration
Code, and embedding compliant and appropriate colleague behaviours in line with Group policies, values and its
people risk priorities.
LIQUIDITY AND FUNDING RISK
Principal risks
Lloyds Banking Group is dependent on confidence in the short and long-term wholesale funding markets. Should the
Group, due to exceptional circumstances, be unable to continue to source sustainable funding, its ability to fund its
financial obligations could be impacted. The key dependencies on successfully funding the Group’s balance sheet
include:
– continued functioning of the money and capital markets;

– the continuation of Lloyds Banking Group’s strategy of right-sizing the balance sheet and development of the retail
deposit base which has led to a significant reduction in the wholesale funding requirement;
– limited further deterioration in the UK’s and the Group’s credit rating; and
– no significant or sudden withdrawal of customer deposits.
Mitigating actions
Liquidity and funding risk appetite for the banking business is set by the Board and this statement of the Group’s overall
appetite for liquidity risk is reviewed and approved annually by the Board.
– The Group’s liquidity and funding position is underpinned by its significant customer deposit base, and has been
supported by stable funding from the wholesale markets with a reduced dependence on short-term wholesale
funding;
– Daily monitoring and control processes are in place to address regulatory liquidity requirements. The Group monitors
a range of market and internal early warning indicators on a daily basis for early signs of liquidity risk in the market or
specific to the Group;
– The Group carries out stress testing of its liquidity position against a range of scenarios, including those prescribed by
the Prudential Regulatory Authority (PRA) on an ongoing basis. The Group’s liquidity risk appetite is also calibrated
against a number of stressed liquidity metrics; and
– The Group has a contingency funding plan embedded within the Group Liquidity Policy which has been designed to
identify emerging liquidity concerns at an early stage, so that mitigating actions can be taken to avoid a more serious
crisis developing.
Page 6 of 38
STATE FUNDING AND STATE AID
Principal risks
HM Treasury currently holds 38.7 per cent of Lloyds Banking Group’s ordinary share capital. United Kingdom Financial
Investments Limited (UKFI), as manager of HM Treasury’s shareholding, continues to operate in line with the framework
document between UKFI and HM Treasury, managing the investment in Lloyds Banking Group on a commercial basis
without interference in day-to-day management decisions. There is a risk that a change in Government priorities could
result in the framework agreement currently in place being replaced leading to interference in the operations of the
Group.
In addition, Lloyds Banking Group is subject to European State Aid obligations in line with the Restructuring Plan agreed
with HM Treasury and the EU College of Commissioners in November 2009. This has placed a number of requirements
on Lloyds Banking Group including an asset reduction target from a defined pool of assets by the end of 2014 (Project
Atlantic), and the disposal of certain portions of its Retail business by the end of November 2013 (Project Verde). There
is a risk that if the Group does not deliver its divestment commitments by then, a Divestiture Trustee would be appointed
to dispose of the divestment, which could be sold at a negative price.
Mitigating actions
Lloyds Banking Group has received no indications that the Government intends to change the existing operating
arrangements with regard to the role of UKFI and engagement with the Group.
Lloyds Banking Group continues to make good progress in respect to its State Aid commitments. In line with the
strengthening of the balance sheet, the Group has made excellent progress against its asset reduction commitment and
reached the reduction total required in December 2012, two years ahead of the mandated completion date. The
European Commission confirmed in May 2013 to HM Treasury that the Group had satisfied and therefore was formally
released from this commitment.
As announced on 24 April 2013, following the withdrawal of the Co-Operative Group from the sale process Lloyds
Banking Group now intends to divest Verde through an IPO, subject to regulatory and EU Commission approval, having
maintained this option throughout the process to ensure best value for shareholders and certainty for customers and
colleagues. The Group has already made good progress in the creation of Verde as a stand-alone bank with a strong
management team already in place and good progress made in delivering segregated IT systems on the proven Lloyds
Banking Group platform. Detailed plans are in place to rebrand the business as TSB which will be visible on the high
street from September this year, at which point the TSB Bank (Verde) will operate as a separate business within Lloyds
Banking Group. As a result of the Co-op’s withdrawal, the Group will not meet the November 2013 deadline and is
currently in discussions regarding a revised timeline for disposal via an IPO, with the EU Commission and HM Treasury.
To date, the Group has received no indication that the EU Commission intends to appoint a Divestiture Trustee post
November 2013.
The Group continues to work closely with the PRA, FCA, EU Commission, HM Treasury and the Monitoring Trustee
appointed by the EU Commission to ensure the successful implementation of the Restructuring Plan and mitigate
customer impact.
Page 7 of 38
CONDENSED CONSOLIDATED HALF-YEAR FINANCIAL STATEMENTS (UNAUDITED)
CONSOLIDATED INCOME STATEMENT
Half-year Half-year
to 30 June to 30 June
2013 2012
Note £ million £ million
Interest and similar income 7,072 8,057
Interest and similar expense (3,776) (4,656)
Net interest income 3,296 3,401
Fee and commission income 500 526
Fee and commission expense (149) (157)
Net fee and commission income 351 369
Net trading income 253 –
Other operating income 264 (272)
Other income 2 868 97
Total income 4,164 3,498
Regulatory provisions 14 (52) (240)
Other operating expenses (1,486) (1,636)
Total operating expenses 3 (1,538) (1,876)
Trading surplus 2,626 1,622
Impairment 4 (1,595) (2,282)
Profit (loss) before tax 1,031 (660)
Taxation 5 (218) 71
Profit (loss) for the period 813 (589)
Profit attributable to non-controlling interests – –

Profit (loss) attributable to equity shareholders 813 (589)
Page 8 of 38
CONDENSED CONSOLIDATED HALF-YEAR FINANCIAL STATEMENTS (UNAUDITED) (continued)
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Half-year Half-year
2013 2012
£ million £ million
Other comprehensive income:
Items that may subsequently be reclassified to profit or loss:
Movements in revaluation reserve in respect of available-for-sale financial assets:
Change in fair value 216 338
Income statement transfers in respect of disposals (28) (140)
Income statement transfers in respect of impairment 23 333
Taxation (48) (128)
163 403
Movements in cash flow hedging reserve:
Effective portion of changes in fair value 62 408
Net income statement transfers (214) 29
Taxation 35 (94)
(117) 343
Currency translation differences (tax: nil) (28) 37
Other comprehensive income for the period, net of tax 18 783
Total comprehensive income for the period 831 194
Total comprehensive income attributable to non-controlling interests – –

Total comprehensive income attributable to equity shareholders 831 194
Total comprehensive income for the period 831 194
Page 9 of 38
CONSOLIDATED BALANCE SHEET
At At
30 June 31 Dec
2013 2012
Assets
Cash and balances at central banks 7,291 6,084
Items in course of collection from banks 488 416
Trading and other financial assets at fair value through profit or loss 6 33,843 32,585
Derivative financial instruments 27,576 35,863
Loans and receivables:
Loans and advances to banks 161,898 138,207
Loans and advances to customers 7 315,309 329,636
Debt securities 688 4,600
477,895 472,443
Available-for-sale financial assets 2,930 3,572
Investment properties 624 705
Goodwill 385 385
Other intangible assets 83 92
Tangible fixed assets 1,673 1,701
Current tax recoverable 13 873
Deferred tax assets 3,645 3,640
Other assets 5,532 3,074
Total assets 561,978 561,433
Page 10 of 38
CONSOLIDATED BALANCE SHEET (continued)
At At
30 June 31 Dec
2013 2012
Equity and liabilities
Liabilities
Deposits from banks 187,194 170,118
Customer deposits 229,035 235,051
Items in course of transmission to banks 473 518
Trading liabilities 35,008 33,610
Notes in circulation 1,354 1,198
Debt securities in issue 10 43,764 49,508
Other liabilities 6,233 4,415
Current tax liabilities 6 59
Deferred tax liabilities 28 –
Other provisions 912 1,146
Subordinated liabilities 11 13,430 14,404
Total liabilities 543,013 543,299
Equity
Share capital 12 5,847 5,847
Share premium account 13 27,479 27,479
Other reserves 13 3,092 3,074
Retained profits 13 (17,473) (18,286)
Shareholders’ equity 18,945 18,114
Non-controlling interests 20 20
Total equity 18,965 18,134
Total equity and liabilities 561,978 561,433
Page 11 of 38
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Attributable to equity shareholders

Share capital Non-
and Other Retained controlling
premium reserves profits Total interests Total
£ million £ million £ million £ million £ million £ million
Balance at 1 January 2013 33,326 3,074 (18,286) 18,114 20 18,134
Comprehensive income
Profit for the period – – 813 813 – 813
Other comprehensive income
Movements in revaluation reserve in
respect of available-for-sale financial
assets, net of tax – 163 – 163 – 163
Movements in cash flow hedging
reserve, net of tax – (117) – (117) – (117)
Currency translation differences (tax: nil) – (28) – (28) – (28)
Total other comprehensive income – 18 – 18 – 18
Total comprehensive income – 18 813 831 – 831
Transactions with owners
Change in non-controlling interests – – – – – –
Balance at 30 June 2013 33,326 3,092 (17,473) 18,945 20 18,965
Page 12 of 38
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (continued)
Attributable to equity shareholders

Share capital Non-
and Other Retained controlling
premium reserves profits Total interests Total
£ million £ million £ million £ million £ million £ million
Balance at 1 January 2012 33,326 2,275 (17,204) 18,397 16 18,413
Loss for the period – – (589) (589) – (589)
assets, net of tax – 403 – 403 – 403
reserve, net of tax – 343 – 343 – 343
Currency translation differences (tax: nil) – 37 – 37 – 37
Total comprehensive income – 783 (589) 194 – 194
Change in non-controlling interests – – – – 4 4
Balance at 30 June 2012 33,326 3,058 (17,793) 18,591 20 18,611
(Loss) profit for the period – – (493) (493) 3 (490)
assets, net of tax – (31) – (31) – (31)
reserve, net of tax – 34 – 34 – 34
Currency translation differences (tax: nil) – 13 – 13 – 13
Total comprehensive income – 16 (493) (477) 3 (474)
Dividends paid – – – – (3) (3)
Balance at 31 December 2012 33,326 3,074 (18,286) 18,114 20 18,134
Page 13 of 38
CONSOLIDATED CASH FLOW STATEMENT
Half-year Half-year
2013 2012
£ million £ million
Adjustments for:
Change in operating assets 1,091 (2,456)
Change in operating liabilities 1,048 2,547
Non-cash and other items (2,670) (841)
Tax received (paid) 631 (7)
Net cash provided by (used in) operating activities 1,131 (1,417)
Cash flows from investing activities

Purchase of available-for-sale financial assets (816) (996)
Proceeds from sale and maturity of available-for-sale financial assets 1,743 4,925
Purchase of fixed assets (512) (160)
Proceeds from sale of fixed assets 898 463
Acquisition of businesses, net of cash acquired (2) (10)
Disposal of businesses, net of cash disposed 35 5
Net cash provided by investing activities 1,346 4,227
Cash flows from financing activities

Change in non-controlling interests – 4
Interest paid on subordinated liabilities (243) (115)
Repayment of subordinated liabilities (951) –
Net cash used in financing activities (1,194) (111)
Effects of exchange rate changes on cash and cash equivalents – (1)
Change in cash and cash equivalents 1,283 2,698
Cash and cash equivalents at beginning of period 7,451 4,918
Cash and cash equivalents at end of period 8,734 7,616
Cash and cash equivalents comprise cash and balances at central banks (excluding mandatory deposits) and amounts
due from banks with a maturity of less than three months.
Page 14 of 38
NOTES
Page
1 Accounting policies, presentation and estimates 16
2 Other income 18
3 Operating expenses 18
4 Impairment 18
5 Taxation 19
6 Trading and other financial assets at fair value through profit or loss 19
7 Loans and advances to customers 20
8 Allowance for impairment losses on loans and receivables 20
9 Securitisations and covered bonds 21
10 Debt securities in issue 22
11 Subordinated liabilities 22
12 Share capital 22
13 Reserves 22
14 Provisions for liabilities and charges 23
15 Contingent liabilities and commitments 24
16 Fair values of financial assets and liabilities 27
17 Related party transactions 33
18 Future accounting developments 35
19 Ultimate parent undertaking 35
20 Other information 35
Page 15 of 38
1. Accounting policies, presentation and estimates
These condensed consolidated half-year financial statements as at and for the period to 30 June 2013 have been
prepared in accordance with the Disclosure Rules and Transparency Rules of the Financial Conduct Authority (FCA) and
with International Accounting Standard 34 (IAS 34), Interim Financial Reporting as adopted by the European Union and
comprise the results of Bank of Scotland plc (the Bank) together with its subsidiaries (the Group). They do not include all
of the information required for full annual financial statements and should be read in conjunction with the Group’s
consolidated financial statements as at and for the year ended 31 December 2012 which were prepared in accordance
with International Financial Reporting Standards (IFRS) as adopted by the European Union. Copies of the 2012 annual
report and accounts are available on the Lloyds Banking Group’s website and are available upon request from Investor
Relations, Lloyds Banking Group plc, 25 Gresham Street, London EC2V 7HN.
The directors consider that it is appropriate to continue to adopt the going concern basis in preparing the condensed
consolidated half-year financial statements. In reaching this assessment, the directors have considered projections for
the Group’s capital and funding position and have had regard to the factors set out in Principal risks and uncertainties:
Liquidity and funding on page 6.
As the Group’s share of results of joint ventures and associates is no longer significant, this is now included within other
operating income and the related asset reported within other assets; comparatives have been re-presented on a
consistent basis.
The accounting policies are consistent with those applied by the Group in its 2012 annual report and accounts except as
described below.
On 1 January 2013 the Group adopted the following new accounting standards and amendments to standards:
IFRS 10 Consolidated Financial Statements

IFRS 10 supersedes IAS 27 Consolidated and Separate Financial Statements and SIC-12 Consolidation – Special
Purpose Entities and establishes the principles for when the Group controls another entity and is therefore required to
consolidate the other entity in the Group’s financial statements. Under IFRS 10, the Group controls an entity when it is
exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns
through the exercise of power. IFRS 10 has been applied retrospectively, and in accordance with the transitional
provisions included in the standard, the Group re-assessed its control conclusions as at 1 January 2013 and determined
that it was not necessary to consolidate any entities that were not previously consolidated nor to deconsolidate any
entities which were already consolidated.
IFRS 13 Fair value measurement

IFRS 13 has been applied with effect from 1 January 2013. IFRS 13 defines fair value as the price that would be received
to sell an asset, or paid to transfer a liability, in an orderly transaction between market participants at the measurement date
in the principal or, in its absence, the most advantageous market to which the Group has access at that date. IFRS 13
requires that the fair value of a non-financial asset is determined based on the highest and best use of the asset, and that
the fair value of a liability reflects its non-performance risk. These changes had no significant impact on the measurement
of the Group’s assets and liabilities. The IFRS 13 disclosures required by IAS 34 are given in note 16.
Amendments to IAS 1 Presentation of Financial Statements – ‘Presentation of Items of Other Comprehensive Income’
The amendments to IAS 1 require entities to group items presented in other comprehensive income on the basis of
whether they may potentially be reclassified to profit or loss subsequently. The statement of other comprehensive
income in these condensed consolidated half-year financial statements has been revised to reflect the new requirements.
Amendments to IFRS 7 Financial Instruments: Disclosures – ‘Disclosures - Offsetting Financial Assets and Financial Liabilities’
The amendments to IFRS 7 require entities to disclose information to enable users of the financial statements to evaluate
the effect or potential effect of netting arrangements on the balance sheet. These disclosures will be made in the
Group’s financial statements for the year ended 31 December 2013.
Page 16 of 38
1. Accounting policies, presentation and estimates (continued)
IFRS 12 Disclosure of Interests in Other Entities

IFRS 12 requires an entity to disclose information that enables users of financial statements to evaluate the nature of,
and risks associated with, its interests in other entities and the effects of those interests on its financial position, financial
performance and cash flows. These disclosures will be made in the Group’s financial statements for the year ended
31 December 2013.
Future accounting developments

Details of those IFRS pronouncements which will be relevant to the Group but which will not be effective at 31 December
2013 and which have not been applied in preparing these condensed consolidated half-year financial statements are set
out in note 18.
Critical accounting estimates and judgements

The preparation of the Group’s financial statements requires management to make judgements, estimates and
assumptions that impact the application of accounting policies and the reported amounts of assets, liabilities, income and
expenses. Due to the inherent uncertainty in making estimates, actual results reported in future periods may include
amounts which differ from those estimates. Estimates, judgements and assumptions are continually evaluated and are
based on historical experience and other factors, including expectations of future events that are believed to be
reasonable under the circumstances. There have been no significant changes in the basis upon which estimates have
been determined, compared to that applied at 31 December 2012.
Page 17 of 38
2. Other income
Half-year Half-year
2013 2012
£m £m
Fee and commission income:
Current account fees 138 149
Credit and debit card fees 134 131
Other fees and commissions 228 246
500 526
Fee and commission expense (149) (157)
Net fee and commission income 351 369
Net trading income 253 –
Other operating income 264 (272)
Total other income 868 97
3. Operating expenses
Half-year Half-year
2013 2012
£m £m
Administrative expenses:
Staff 859 884
Premises and equipment 187 183
Other expenses 311 435
1,357 1,502
Depreciation and amortisation 129 134
Total operating expenses, excluding regulatory provisions 1,486 1,636
Regulatory provisions (note 14) 52 240
Total operating expenses 1,538 1,876
4. Impairment
Half-year Half-year
2013 2012
£m £m
Impairment losses on loans and receivables:
Loans and advances to customers 1,617 2,221
Debt securities classified as loans and receivables (24) 33
Impairment losses on loans and receivables (note 8) 1,593 2,254
Impairment of available-for-sale financial assets 2 28
Total impairment charged to the income statement 1,595 2,282
Page 18 of 38
5. Taxation
A reconciliation of the tax (charge) credit that would result from applying the standard UK corporation tax rate to the profit
(loss) before tax to the actual tax (charge) credit is given below:
Half-year Half-year
2013 2012
£m £m
Tax (charge) credit thereon at UK corporation tax rate of 23.25 per cent (2012:
24.5 per cent) (240) 162
Factors affecting tax credit:
UK corporation tax rate change – (156)
Disallowed and non-taxable items (67) 16
Overseas tax rate differences 97 44
Gains exempted or covered by capital losses 8 2
Tax losses where no deferred tax recognised – (25)
Deferred tax on losses not previously recognised 43 –
Adjustments in respect of previous years (59) 24
Effect of results in joint ventures and associates – 3
Other items – 1
Tax (charge) credit (218) 71
In accordance with IAS 34, the Group’s income tax expense for the half-year to 30 June 2013 is based on the best
estimate of the weighted-average annual income tax rate expected for the full financial year. The tax effects of one-off
items are not included in the weighted-average annual income tax rate, but are recognised in the relevant period.
The Finance Act 2013 (the “Act”) was substantively enacted on 2 July 2013. The Act further reduces the rate of
corporation tax to 21 per cent with effect from 1 April 2014 and 20 per cent with effect from 1 April 2015. The impact of
the corporation tax reductions to 21 and 20 per cent will be accounted for in the second half of 2013. The effect of these
rate reductions on the Group’s deferred tax balance is estimated to be a reduction in the net deferred tax asset of
£0.3 billion.
6. Trading and other financial assets at fair value through profit or loss
At At
30 June 31 Dec
2013 2012
£m £m
Trading assets 33,475 32,201
Other financial assets at fair value through profit or loss:

Loans and advances to customers 23 22
Debt securities 14 15
Equity shares 331 347
368 384
Total trading and other financial assets at fair value through profit or loss 33,843 32,585
Page 19 of 38
7. Loans and advances to customers

At At
30 June 31 Dec
2013 2012
£m £m
Agriculture, forestry and fishing 588 501
Energy and water supply 708 1,200
Manufacturing 1,544 1,842
Construction 3,367 3,956
Transport, distribution and hotels 12,129 14,898
Postal and communications 179 297
Property companies 26,357 30,163
Financial, business and other services 14,021 14,419
Personal:
Mortgages 237,976 237,466
Other 12,680 13,302
Lease financing 2,541 2,953
Hire purchase 361 506
Due from fellow Group undertakings 19,703 26,014
332,154 347,517
Allowance for impairment losses on loans and advances (note 8) (16,845) (17,881)
Total loans and advances to customers 315,309 329,636
Loans and advances to customers include advances securitised under the Group's securitisation and covered bond
programmes. Further details are given in note 9.
8. Allowance for impairment losses on loans and receivables

Half-year Year ended
to 30 June 31 Dec
2013 2012
£m £m
At 1 January 18,869 24,499
Exchange and other adjustments 483 (346)
Advances written off (3,914) (9,723)
Recoveries of advances written off in previous years 82 499
Unwinding of discount (126) (329)
Charge for the half-year to 30 June (note 4) 1,593 2,254
Charge for the half-year to 31 December – 2,015
Charge to the income statement 1,593 4,269
At end of period 16,987 18,869
In respect of:
Loans and advances to customers (note 7) 16,845 17,881
Debt securities 142 988
Page 20 of 38
9. Securitisations and covered bonds
The Group's principal securitisation and covered bond programmes, together with the balances of the loans subject to
these arrangements and the carrying value of the notes in issue, are listed in the table below.
At 30 June 2013 At 31 December 2012

Loans and Loans and
advances Notes in advances Notes in
securitised issue securitised issue
£m £m £m £m
Securitisation programmes
UK residential mortgages 41,536 31,272 44,647 32,201
US residential mortgage-backed securities – – 3,909 5,237
Irish residential mortgages 5,374 3,598 5,194 3,509
Credit card receivables 6,017 2,889 7,001 3,794
Dutch residential mortgages 4,632 4,765 4,551 4,692
Commercial loans 643 643 675 675
Motor vehicle loans 715 762 1,039 1,086
58,917 43,929 67,016 51,194
Less held by the Group (28,946) (33,570)
Total securitisation programmes (note 10) 14,983 17,624
Covered bond programmes

Residential mortgage-backed 43,486 32,425 46,311 33,414
Social housing loan-backed 2,747 1,800 2,934 2,400
46,233 34,225 49,245 35,814
Less held by the Group (9,682) (10,226)
Total covered bond programmes (note 10) 24,543 25,588
Total securitisation and covered bond programmes 39,526 43,212
Securitisation programmes
Loans and advances to customers and debt securities classified as loans and receivables include loans securitised
under the Group's securitisation programmes, the majority of which have been sold by subsidiary companies to
bankruptcy remote special purpose entities (SPEs). As the SPEs are funded by the issue of debt on terms whereby the
majority of the risks and rewards of the portfolio are retained by the subsidiary, the SPEs are consolidated fully and all of
these loans are retained on the Group's balance sheet, with the related notes in issue included within debt securities in
issue (note 10).
Covered bond programmes

Certain loans and advances to customers have been assigned to bankruptcy remote limited liability partnerships to
provide security to issues of covered bonds by the Group. The Group retains all of the risks and rewards associated with
these loans and the partnerships are consolidated fully with the loans retained on the Group's balance sheet, and the
related covered bonds in issue included within debt securities in issue (note 10).
Cash deposits of £12,462 million (31 December 2012: £12,710 million) held by the Group are restricted in use to
repayment of the debt securities issued by the SPEs and other legal obligations.
Asset-backed conduit
In addition to the SPEs detailed above, the Group sponsors an asset-backed conduit, Grampian, which invests in debt
securities.
Page 21 of 38
10. Debt securities in issue

At At
30 June 31 Dec
2013 2012
£m £m
Medium-term notes issued 4,112 5,611
Covered bonds (note 9) 24,543 25,588
Certificates of deposit 1 29
Securitisation notes (note 9) 14,983 17,624
Commercial paper – 121
43,639 48,973
Amounts due to fellow Group undertakings 125 535
Total debt securities in issue 43,764 49,508
11. Subordinated liabilities
The movement in subordinated liabilities during the period was as follows:

Half-year Year ended
to 30 June 31 Dec
2013 2012
£m £m
At 1 January 14,404 15,155
Repurchases and redemptions during the period (951) (649)
Foreign exchange and other movements (23) (102)
12. Share capital
Ordinary share capital in issue is as follows:

Number of
shares
Ordinary shares of 25 pence each (millions) £m
At 1 January and 30 June 2013 23,388 5,847
13. Reserves
Other reserves
Share Available- Cash flow Merger Retained
premium for-sale hedging and other Total profits
£m £m £m £m £m £m
At 1 January 2013 27,479 (145) 1,238 1,981 3,074 (18,286)

Profit for the period – – – – – 813
Change in fair value of
available-for-sale assets
(net of tax) – 172 – – 172 –
Change in fair value of
hedging derivatives
(net of tax) – – 48 – 48 –
Transfers to income
statement (net of tax) – (9) (165) – (174) –
Exchange and other
adjustments – – – (28) (28) –
At 30 June 2013 27,479 18 1,121 1,953 3,092 (17,473)
Page 22 of 38
14. Provision for liabilities and charges
Payment protection insurance

Following the unsuccessful legal challenge by the British Bankers’ Association against the FSA and the Financial
Ombudsman Service, the Group held discussions with the FSA with a view to seeking clarity around the detailed
implementation of the FSA Policy Statement which set out evidential provisions and guidance on the fair assessment of a
complaint and the calculation of redress in respect of payment protection insurance (PPI) sales standards. As a result,
the Group concluded that there are certain circumstances where customer redress will be appropriate. Accordingly the
Group made provisions totalling £2,005 million during 2011 and 2012 in respect of the anticipated costs of such redress,
including administrative expenses.
The volume of PPI complaints has continued to fall in line with expectations, with monthly complaint volumes in the first
half of 2013 on average 40 per cent below the level experienced in the second half of 2012. However, costs have been
higher than expected due to the acceleration of the settlement of cases currently held with the Financial Ombudsman
Service, a VAT ruling and higher uphold and settlement rates. The Group has also increased its estimate of future
administration costs. In view of this, the Group is increasing the provision by £47 million with approximately £26 million
relating to redress costs and approximately £21 million to additional administration costs.
In addition the Group has been informed that it has been referred to the Enforcement Team of the Financial Conduct
Authority for investigation over the governance of a third party supplier and failings in the PPI complaint handling
process. A provision of £5 million has been made in respect of the likely administration costs of this exercise.
These provisions will bring the total amount provided to £2,057 million (of which £210 million relates to administration
costs). In the first half of 2013 total costs incurred were £269 million including approximately £36 million of administration
costs, leaving approximately £534 million of the provision unutilised at 30 June 2013. This represents the Group’s
current best estimate of the likely future costs, but a number of risks and uncertainties remain and it is possible that the
eventual outcome may differ materially from the current estimate resulting in a further provision being required.
The provision has been based on a number of subjective assumptions, which are discussed below including the effect on
the provision if actual future experience differs from that assumed:
– The scope of the proactive mailing exercise covers 0.9 million policies, mailing is due to commence in the second half
of 2013 and some customers have already contacted the Group. If the scope of the proactive mailing was 50,000
higher than that assumed in the provision, the additional provision would be approximately £14 million;
– If the future response rate was 1 per cent higher than the 20 per cent assumed in the provision, the additional
provision would be approximately £9 million;
– The number of customer initiated complaints received to date, where a PPI policy existed, is 0.8 million. If the future
level of complaints was 40,000 higher than that assumed in the provision, the additional provision would be
approximately £60 million;
– The average uphold rate per policy in the last six months, excluding those customers with no PPI policy, is
61 per cent. If the future uphold rate was 1 per cent higher than the 70 per cent assumed in the provision, the
additional provision would be approximately £4 million; and
– The average redress rate per policy in the last six months was £1,700. If the future average redress was £100 higher
than the £1,500 assumed in the provision, (which is lower than the average over the last six months due to the
expected mix of future complaints), the additional provision would be approximately £26 million.
The Group will reassess the continued appropriateness of the assumptions underlying its analysis at each reporting date
in light of current experience and other relevant evidence.
Page 23 of 38
14. Provision for liabilities and charges (continued)
Other regulatory provisions
Interest rate hedging products

In June 2012, a number of banks, including the Lloyds Banking Group, reached agreement with the FSA (now FCA) to
carry out a review of sales made since 1 December 2001 of interest rate hedging products (IRHP) to certain small and
medium-sized businesses. The Lloyds Banking Group agreed that on conclusion of this review it would provide redress
to any of these customers where appropriate.
Following the completion of a pilot review of a sample of IRHP sales to small and medium-sized businesses and a
supplemental agreement reached with the FSA on 30 January 2013 on the principles to be adopted during the course of
the wider review, the Group provided £139 million in its accounts for the year ended 31 December 2012 for the estimated
cost of redress and related administration costs. At 31 December 2012, £10 million of the provision had been utilised; no
further amounts have been utilised in the half-year to 30 June 2013. A number of uncertainties remain as to the eventual
costs given the inherent difficulties in determining the number of customers within the scope of the review and the
amount of any redress to be provided to customers.
Other regulatory matters

In the course of its business, the Group is engaged in discussions with the PRA, FCA and other regulators in relation to a
range of matters. In 2012 a provision of £50 million was made in respect of certain UK retail and other matters; this
provision has remained unchanged during the first half of the year. The ultimate impact on the Group of these
discussions can only be known at the conclusion of such discussions.
15. Contingent liabilities and commitments
Interchange fees
On 24 May 2012, the General Court of the European Union (the General Court) upheld the European Commission’s
2007 decision that an infringement of EU competition law had arisen from arrangements whereby MasterCard issuers
charged a uniform fallback multilateral interchange fee (MIF) in respect of cross border transactions in relation to the use
of a MasterCard or Maestro branded payment card.
MasterCard has appealed the General Court’s judgment to the Court of Justice of the European Union. MasterCard is
supported by several card issuers, including the Lloyds Banking Group. Judgment is not expected until late 2013 or later.
In parallel:
– the European Commission is also considering further action, and has proposed legislation to regulate interchange
fees, following its 2012 Green Paper (Towards an integrated European market for cards, internet and mobile
payments) consultation;
– the European Commission has consulted on commitments proposed by VISA to settle an investigation into whether
arrangements adopted by VISA for the levying of the MIF in respect of cross-border credit card payment transactions
also infringe European Union competition laws. VISA has proposed inter alia to reduce the level of interchange fees
on cross-border credit card transactions to the interim level (30 basis points) also agreed by Mastercard. VISA has
previously reached an agreement (which expires in 2014) with the European Commission to reduce the level of
interchange fees for cross-border debit card transactions to the interim levels agreed by MasterCard;
– the Office of Fair Trading (OFT) has placed on hold its examination of whether the levels of interchange fees paid by
retailers in respect of MasterCard and VISA credit cards, debit cards and charge cards in the UK infringe competition
law. The OFT has placed the investigation on hold pending the outcome of the Mastercard appeal to the Court of
Justice of the European Union; and
– the UK Government held a consultation in 2013, Opening Up UK Payments. The consultation included a proposal to
legislate to introduce a new economic regulator with responsibility for payment systems, including three and four
party card schemes, and a role in setting or approving interchange fees.
Page 24 of 38
15. Contingent liabilities and commitments (continued)
The ultimate impact of the investigations and any regulatory developments on the Lloyds Banking Group can only be
known at the conclusion of these investigations and any relevant appeal proceedings and once regulatory or legislative
proposals are more certain.
Interbank offered rate setting investigations

A number of government agencies in the UK, US and elsewhere, including the UK Financial Services Authority, the US
Commodity Futures Trading Commission, the US Securities and Exchange Commission, the US Department of Justice
and a number of State Attorneys General, as well as the European Commission, are conducting investigations into
submissions made by panel members to the bodies that set various interbank offered rates including the BBA London
Interbank Offered Rates (LIBOR) and the European Banking Federation’s Euribor. Certain Lloyds Banking Group
companies were (at the relevant times) and remain members of various panels whose members make submissions to
these bodies including the BBA LIBOR panels. No Lloyds Banking Group company is or was a member of the Euribor
panel. Certain Lloyds Banking Group companies have received subpoenas and requests for information from certain
government agencies and the Lloyds Banking Group is co-operating with their investigations. In addition certain
Lloyds Banking Group companies, together with other panel banks, have been named as defendants in private lawsuits,
including purported class action suits in the US with regard to the setting of LIBOR. It is currently not possible to predict
the scope and ultimate outcome of the various regulatory investigations or private lawsuits, including the timing and scale
of the potential impact of any investigations and private lawsuits on the Lloyds Banking Group.
Financial Services Compensation Scheme

The Financial Services Compensation Scheme (FSCS) is the UK’s independent statutory compensation fund of last
resort for customers of authorised financial services firms and pays compensation if a firm is unable or likely to be unable
to pay claims against it. The FSCS is funded by levies on the authorised financial services industry. The levies raised
may comprise a management expenses levy and a compensation costs levy.
Following the default of a number of deposit takers in 2008, the FSCS borrowed funds from HM Treasury to meet the
compensation costs for customers of those firms. The interest rate on the borrowings with HM Treasury, which totalled
approximately £17 billion at 31 March 2013, is 12 month LIBOR plus 100 basis points. Each deposit-taking institution
contributes towards the FSCS levies in proportion to their share of total protected deposits on 31 December of the year
preceding the scheme year, which runs from 1 April to 31 March.
The substantial majority of the principal balance of the £17 billion loan between the FSCS and HM Treasury will be
repaid from funds the FSCS receives from asset sales, surplus cash flow or other recoveries in relation to the assets of
the firms that defaulted. In July 2013, the FSCS confirmed that it expects to raise compensation costs levies of
approximately £1.1 billion on all deposit-taking participants over a three year measurement period from 2012 to 2014 to
enable it to repay an HM Treasury loan which matures in 2016. The amount of future compensation costs levies payable
by the Group depends on a number of factors including participation in the market at 31 December, the level of protected
deposits and the population of deposit-taking participants.
FSA investigation into Bank of Scotland and report on HBOS

The FSA’s enforcement investigation into Bank of Scotland plc’s Corporate division between 2006 and 2008 concluded
with the publication of a Final Notice on 9 March 2012. No financial penalty was imposed on the Group or Bank of
Scotland plc. On 12 September 2012 the FSA confirmed it was starting work on a public interest report on HBOS. That
report is expected to be published in 2013.
Shareholder complaints
In November 2011 the Lloyds Banking Group and two former members of the Lloyds Banking Group’s Board of Directors
were named as defendants in a purported securities class action filed in the United States District Court for the Southern
District of New York. The complaint asserted claims under the Securities Exchange Act of 1934 in connection with
alleged material omissions from statements made in 2008 in connection with the acquisition of HBOS. No quantum is
specified. In October 2012 the court dismissed the complaint. An appeal against this decision has been filed. The
Lloyds Banking Group continues to consider that the allegations are without merit.
Page 25 of 38
15. Contingent liabilities and commitments (continued)
Other legal actions and regulatory matters

In addition, during the ordinary course of business the Lloyds Banking Group is subject to other threatened and actual
legal proceedings (which may include class action lawsuits brought on behalf of customers, shareholders or other third
parties), regulatory challenges, investigations, and enforcement actions, both in the UK and overseas. All such material
matters are periodically reassessed, with the assistance of external professional advisers where appropriate, to
determine the likelihood of the Lloyds Banking Group incurring a liability. In those instances where it is concluded that it
is more likely than not that a payment will be made, a provision is established to management's best estimate of the
amount required to settle the obligation at the relevant balance sheet date. In some cases it will not be possible to form
a view, either because the facts are unclear or because further time is needed properly to assess the merits of the case
and no provisions are held against such matters. However the Lloyds Banking Group does not currently expect the final
outcome of any such case to have a material adverse effect on its financial position, operations or cash flows.
Contingent liabilities and commitments arising from the banking business
At At
30 June 31 Dec
2013 2012
£m £m
Contingent liabilities
Acceptances and endorsements 2 2
Other:
Other items serving as direct credit substitutes 25 28
Performance bonds and other transaction-related contingencies 485 565
510 593
Total contingent liabilities 512 595
Commitments
Documentary credits and other short-term trade-related transactions 4 4
Undrawn formal standby facilities, credit lines and other commitments to lend:
Less than 1 year original maturity:
Mortgage offers made 8,438 6,346
Other commitments 19,842 20,828
28,280 27,174
1 year or over original maturity 4,570 7,664
Total commitments 32,854 34,842
Page 26 of 38
16. Fair values of financial assets and liabilities
The valuations of financial instruments have been classified into three levels according to the quality and reliability of
information used to determine the fair values.
Level 1 portfolios
Level 1 fair value measurements are those derived from unadjusted quoted prices in active markets for identical assets
or liabilities. Products classified as level 1 predominantly comprise equity shares, treasury bills and other government
securities.
Level 2 portfolios
Level 2 valuations are those where quoted market prices are not available, for example where the instrument is traded in
a market that is not considered to be active or valuation techniques are used to determine fair value and where these
techniques use inputs that are based significantly on observable market data. Examples of such financial instruments
include most over-the-counter derivatives, financial institution issued securities, certificates of deposit and certain asset-
backed securities.
Level 3 portfolios
Level 3 portfolios are those where at least one input which could have a significant effect on the instrument’s valuation is
not based on observable market data. Such instruments would include the Group’s venture capital and unlisted equity
investments which are valued using various valuation techniques that require significant management judgement in
determining appropriate assumptions, including earnings multiples and estimated future cash flows. Certain of the
Group’s asset-backed securities and derivatives, principally where there is no trading activity in such securities, are also
classified as level 3.
Valuation control framework

Key elements of the valuation control framework, which covers processes for all levels in the fair value hierarchy
including level 3 portfolios, include model validation (incorporating pre-trade and post-trade testing), product
implementation review and independent price verification. Formal committees meet quarterly to discuss and approve
valuations in more judgemental areas.
Transfers into and out of level 3 portfolios

Transfers out of level 3 portfolios arise when inputs that could have a significant impact on the instrument’s valuation
become market observable; conversely, transfers into the portfolios arise when consistent sources of data cease to be
available.
Valuation methodology
Loans and advances and debt securities measured at fair value through profit or loss and classified as level 2 are valued
by discounting expected cash flows using an observable credit spread applicable to the particular instrument. The fair
value of non-derivative liabilities measured at fair value through profit or loss and classified as level 2 is calculated in a
similar way.
For other level 2 and level 3 portfolios, there is no significant change to what was disclosed in the Group’s 2012 annual
report and accounts in respect of the valuation methodology (techniques and inputs) applied to such portfolios.
Page 27 of 38
16. Fair values of financial assets and liabilities (continued)
The table below summarises the carrying values of financial assets and liabilities presented on the Group’s balance
sheet. The fair values presented in the table are at a specific date and may be significantly different from the amounts
which will actually be paid or received on the maturity or settlement date.
1
30 June 2013 31 December 2012
Carrying Fair Carrying Fair
value value value value
£m £m £m £m
Financial assets
Cash and balances at central banks 7,291 7,291 6,084 6,084
Items in the course of collection from banks 488 488 416 416
Trading and other financial assets at fair value
through profit or loss 33,843 33,843 32,585 32,585
Derivative financial instruments 27,576 27,576 35,863 35,863
Loans and receivables:
Loans and advances to banks 161,898 161,916 138,207 138,208
Loans and advances to customers 315,309 307,523 329,636 320,236
Debt securities 688 557 4,600 4,784
Available-for-sale financial instruments 2,930 2,930 3,572 3,572
Financial liabilities
Deposits from banks 187,194 187,251 170,118 170,192
Customer deposits 229,035 230,056 235,051 236,641
Items in course of transmission to banks 473 473 518 518
Trading liabilities 35,008 35,008 33,610 33,610
Derivative financial instruments 25,576 25,576 33,272 33,272
Notes in circulation 1,354 1,354 1,198 1,198
Debt securities in issue 43,764 43,969 49,508 50,015
Financial guarantees 16 16 14 14
Subordinated liabilities 13,430 12,750 14,404 13,359
1
Restated – see note 1.
The Group manages valuation adjustments for its derivative exposures on a net basis; the Group determines their fair
values on the basis of their net exposures. In all other cases, fair values of financial assets and liabilities measured at
fair value are determined on the basis of their gross exposures.
The following table provides an analysis of the financial assets and liabilities of the Group that are carried at fair value in
the Group’s consolidated balance sheet, grouped into levels 1 to 3 based on the degree to which the fair value is
observable.
Page 28 of 38
Valuation hierarchy
Level 1 Level 2 Level 3 Total
£m £m £m £m
At 30 June 2013
Trading and other financial assets at fair value
through profit or loss:
Loans and advances to customers – 25,985 – 25,985
Loans and advances to banks – 3,903 – 3,903
Debt securities:
Government securities 361 – – 361
Bank and building society certificates of deposit – 2,501 – 2,501
Corporate and other debt securities – 638 14 652
361 3,139 14 3,514
Equity shares 156 – 177 333
Treasury and other bills 108 – – 108
Total trading and other financial assets at fair
value through profit or loss 625 33,027 191 33,843
Available-for-sale financial assets:
Debt securities:
Government securities 30 – – 30
Bank and building society certificates of deposit – 26 – 26
Asset-backed securities:
Mortgage-backed securities – 773 – 773
Other asset-backed securities – 406 – 406
Corporate and other debt securities 21 1,274 – 1,295
51 2,479 – 2,530
Equity shares – 33 367 400
Total available-for-sale financial assets 51 2,512 367 2,930
Derivative financial instruments 37 27,103 436 27,576
Total financial assets carried at fair value 713 62,642 994 64,349
Trading liabilities:
Liabilities in respect of securities sold under
repurchase agreements – 33,191 – 33,191
Short positions in securities 1,817 – – 1,817
1,817 33,191 – 35,008
Total trading liabilities 1,817 33,191 – 35,008
Derivative financial instruments – 25,520 56 25,576
Financial guarantees – – 16 16
Total financial liabilities carried at fair value 1,817 58,711 72 60,600
There were no transfers between level 1 and level 2 during the period.
Page 29 of 38
Movements in Level 3 portfolio
The table below analyses movements in the level 3 financial assets portfolio.
Trading
and other Total
financial Available- financial
assets at fair for-sale assets
value through financial Derivative carried at
profit or loss assets assets fair value
£m £m £m £m
At 1 January 2013 163 428 172 763

Exchange and other adjustments 1 16 – 17
Gains (losses) recognised in the income statement
within other income 26 (1) 87 112
Gains recognised in other comprehensive income
within the revaluation reserve in respect of
available-for-sale financial assets – 31 – 31
Purchases 6 27 1 34
Sales (5) (114) (5) (124)
Transfers into the level 3 portfolio – 1 187 188
Transfers out of the level 3 portfolio – (21) (6) (27)
At 30 June 2013 191 367 436 994
Gains recognised in the income statement
within other income attributable to the change
in unrealised gains (losses) relating to those
assets held at 30 June 2013 11 2 84 97
The table below analyses movements in the level 3 financial liabilities portfolio.
Total
financial
liabilities
Derivative Financial carried at
liabilities guarantees fair value
£m £m £m
At 1 January 2013 54 14 68
Exchange and other adjustments – – –
Gains (losses) recognised in the income statement within other income (30) 2 (28)
Additions – – –
Redemptions (17) – (17)
Transfers into the level 3 portfolio 49 – 49
At 30 June 2013 56 16 72
Gains (losses) recognised in the income statement within other
income attributable to the change in unrealised gains (losses)
relating to those liabilities held at 30 June 2013 28 (2) 26
Page 30 of 38
Sensitivity of level 3 valuations

Valuation techniques applied to many of the Group’s level 3 instruments often involve the use of two or more inputs
whose relationship is interdependent. The calculation of the effect of reasonably possible alternative assumptions
included in the table below reflects such relationships.
The following information relates to significant unobservable inputs in respect of derivatives and debt investments shown
in the table that follows:
• Interest rates and inflation rates are referenced in some derivatives where the payoff that the holder of the derivative
receives depends on the behaviour of those underlying references through time.
• Credit spreads represent the premium above the benchmark reference instrument required to compensate for lower
credit quality; higher spreads lead to a lower fair value.
• Volatility parameters represent key attributes of option behaviour; higher volatilities typically denote a wider range of
possible outcomes.
The fair values of certain equity investments, mainly those in the Group’s venture capital businesses, are determined by
identifying the earnings multiple for comparable companies and applying this multiple to the earnings of the entity whose
value is being estimated; a higher earnings multiple will result in a higher fair value.
Reasonably possible alternative assumptions

The following information relates to reasonably possible alternative assumptions shown in the table that follows.
Debt securities
Reasonably possible alternative assumptions have been determined in respect of the Group’s structured credit
investment by flexing credit spreads to a range between 685 basis points and 1,016 basis points.
Derivatives
(i) In respect of the embedded equity conversion feature of the Enhanced Capital Notes, the sensitivity was based on
the absolute difference between the actual price of the Enhanced Capital Note and the closest, alternative broker
quote available plus the impact of applying a 10 basis points increase/decrease in the market yield used to derive a
market price for similar bonds without the conversion feature. The effect of interdependency of the assumptions is
not material to the effect of applying reasonably possible alternative assumptions to the valuations of derivative
financial instruments.
(ii) Uncollateralised inflation swaps are valued using appropriate discount spreads for such transactions. These spreads
are not generally observable for longer maturities. The reasonably possible alternative valuations reflect flexing of
the spreads for the differing maturities to alternative values of between 75 basis points and 230 basis points.
(iii) Swaptions are priced using industry standard option pricing models. Such models require interest rate volatilities
which may be unobservable at longer maturities. To derive reasonably possible alternative valuations these
volatilities have been flexed within a range of 1 per cent to 118 per cent.
Equity and venture capital investments

The valuation techniques used for unlisted equities and venture capital investments vary depending on the nature of the
investment. Reasonably possible alternative valuations for these investments have been calculated as follows:
– for valuations derived from earnings multiples, a 10 per cent increase/decrease in the earnings multiple has been
applied; and
– for fund investment portfolios, the values of underlying investments have been flexed in line with International Private
Equity and Venture Capital Guidelines.

Page 31 of 38
At 30 June 2013
Effect of reasonably
possible alternative
2
assumptions
Significant
Valuation unobservable Carrying Favourable Unfavourable
technique(s) inputs Range1 value changes changes
£m £m £m
Trading and other financial assets at fair value through profit or loss
Equity and venture Underlying
capital asset/net asset
investments value (incl.
3
property prices) n/a n/a 191 41 (20)
191
Available-for-sale financial assets
Equity and venture Underlying
capital asset/net asset
investments value (incl.
property prices)3 n/a n/a 367 19 (10)
367
Derivative financial assets
Interest rate Discounted cash Inflation swap rate
derivatives flow – funding
component (bps) 54/189 246 66 (24)
Option pricing Interest rate
model volatility 26%/121% 190 – –
436
Financial assets carried at fair value 994
Derivative financial liabilities
Interest rate Discounted cash Inflation swap rate
derivatives flow – funding
component (bps) 54/189 7 – –
Option pricing Interest rate
model volatility 26%/121% 49 – –
56
Financial guarantees 16
Financial liabilities carried at fair value 72
1
The range represents the highest and lowest inputs used in the level 3 valuations.
2
Where the exposure to an unobservable input is managed on a net basis, only the net input is shown in the table.
3
Underlying asset/net asset values represent fair value.
Page 32 of 38
17. Related party transactions
Balances and transactions with Lloyds Banking Group plc and fellow Group undertakings
The Bank and its subsidiaries have balances due to and from the Bank’s ultimate parent company, Lloyds Banking
Group plc, and fellow Group undertakings of the Bank. These are included on the balance sheet as follows:
At At
30 June 31 Dec
2013 2012
£m £m
Assets
Loans and advances to banks 159,157 135,316
Loans and advances to customers 19,703 26,014
Trading and other financial assets at fair value through profit or loss 12,771 14,761
Other 1,086 1,574
Liabilities
Deposits from banks 183,134 163,005
Customer deposits 22,458 29,782
Trading liabilities 6,948 8,479
Debt securities in issue 708 535
Subordinated liabilities 11,207 11,140
Other 390 27
During the half-year ended 30 June 2013 the Group earned £876 million (half-year ended 30 June 2012: £770 million) of
interest income and incurred £1,621 million (half-year ended 30 June 2012: £1,858 million) of interest expense on
balances and transactions with Lloyds Banking Group plc and fellow Group undertakings.
UK Government
In January 2009, the UK Government through HM Treasury became a related party of Lloyds Banking Group plc, the
Bank’s ultimate parent company, following its subscription for ordinary shares issued under a placing and open offer. As
at 30 June 2013, HM Treasury held a 38.7 per cent (31 December 2012: 39.2 per cent) interest in Lloyds Banking
Group plc’s ordinary share capital and consequently HM Treasury remained a related party of Lloyds Banking Group plc,
and therefore of the Group, during the half-year to 30 June 2013.
In accordance with IAS 24, UK Government-controlled entities are related parties of the Group. The Group regards the
Bank of England and entities controlled by the UK Government, including The Royal Bank of Scotland Group plc, Northern
Rock (Asset Management) plc and Bradford & Bingley plc, as related parties.
The Lloyds Banking Group has participated in a number of schemes operated by the UK Government and central banks
and made available to eligible banks and building societies.
National Loan Guarantee Scheme

The Lloyds Banking Group is participating in the UK Government's National Loan Guarantee Scheme, which was
launched on 20 March 2012. Through the scheme, the Lloyds Banking Group expects to provide eligible UK businesses
with discounted funding over the next two years, subject to continuation of the scheme and its financial benefits, and
based on the Lloyds Banking Group’s existing lending criteria. Eligible businesses who take up the funding will benefit
from a 1 per cent discount on their funding rate for a certain period of time.
Page 33 of 38
17. Related party transactions (continued)
Business Growth Fund

In May 2011 the Lloyds Banking Group agreed, together with The Royal Bank of Scotland plc (and three other non-
related parties), to commit up to £300 million of equity investment by subscribing for shares in the Business Growth
Fund plc which is the company created to fulfil the role of the Business Growth Fund as set out in the British Bankers’
Association’s Business Taskforce Report of October 2010. As at 30 June 2013, the Lloyds Banking Group had invested
£54 million (31 December 2012: £50 million) in the Business Growth Fund and carried the investment at a fair value of
£44 million (31 December 2012: £44 million).
Big Society Capital

In January 2012 the Lloyds Banking Group agreed, together with The Royal Bank of Scotland plc (and two other non-
related parties), to commit up to £50 million each of equity investment into the Big Society Capital Fund. The Fund,
which was created as part of the Project Merlin arrangements, is a UK social investment fund. The Fund was officially
launched on 3 April 2012 and the Lloyds Banking Group had invested £12 million in the Fund by 31 December 2012 and
invested a further £4 million during the half-year to 30 June 2013.
Funding for Lending

In August 2012 the Lloyds Banking Group announced its support for the UK Government’s Funding for Lending Scheme
and confirmed its intention to participate in the scheme; and in June 2013 the Lloyds Banking Group accepted the UK
Government’s invitation to take part in the extension of the scheme until the end of January 2015. The Funding for
Lending Scheme represents a further source of cost effective secured term funding available to the Lloyds Banking
Group. The initiative supports a broad range of UK based customers, providing householders with more affordable
housing finance and businesses with cheaper finance to invest and grow. The Lloyds Banking Group drew down
£3.0 billion during the year ended 31 December 2012; there have been no further drawings in the half-year to 30 June
2013.
Central bank facilities

In the ordinary course of business, the Lloyds Banking Group may from time to time access market-wide facilities provided
by central banks.
Other government-related entities

There were no significant transactions with other UK Government-controlled entities (including UK Government-
controlled banks) during the period that were not made in the ordinary course of business or that were unusual in their
nature or conditions.
Other related party transactions

Other related party transactions for the half-year to 30 June 2013 are similar in nature to those for the year ended
31 December 2012.
Page 34 of 38
18. Future accounting developments
The following pronouncements may have a significant effect on the Group’s condensed consolidated half-year financial
statements but are not applicable for the year ending 31 December 2013 and have not been applied in preparing these
financial statements. Save as disclosed below, the full impact of these accounting changes is being assessed by the
Group.
Pronouncement Nature of change IASB effective date

Amendments to IAS 32 Provides additional application guidance to address Annual periods
Financial Instruments: inconsistencies identified in applying the offsetting criteria used beginning on or after
Presentation – ‘Offsetting in the standard. Some gross settlement systems may qualify 1 January 2014.
Financial Assets and Financial for offsetting where they exhibit certain characteristics akin to
Liabilities’ net settlement.
IFRS 9 Financial Instruments1 Replaces those parts of IAS 39 Financial Instruments: Annual periods
Recognition and Measurement relating to the classification, beginning on or after
measurement and derecognition of financial assets and 1 January 2015.
liabilities. IFRS 9 requires financial assets to be classified into
two measurement categories, fair value and amortised cost, on
the basis of the objectives of the entity’s business model for
managing its financial assets and the contractual cash flow
characteristics of the instruments and eliminates the available-
for-sale financial asset and held-to-maturity investment
categories in IAS 39. The requirements for derecognition are
broadly unchanged from IAS 39. The standard also retains most
of the IAS 39 requirements for financial liabilities except for those
designated at fair value through profit or loss whereby that part
of the fair value change attributable to an entity’s own credit risk
is recorded in other comprehensive income.
1
As at 31 July 2013, this pronouncement is awaiting EU endorsement. IFRS 9 is the initial stage of the project to replace IAS 39. Future
stages are expected to result in amendments to IFRS 9 to deal with changes to the impairment of financial assets measured at amortised cost
and hedge accounting, as well as a reconsideration of classification and measurement. Until all stages of the replacement project are
complete, it is not possible to determine the overall impact on the financial statements of the replacement of IAS 39.
19. Ultimate parent undertaking
Bank of Scotland plc's ultimate parent undertaking and controlling party is Lloyds Banking Group plc which is
incorporated in Scotland. Lloyds Banking Group plc has published consolidated accounts for the year to 31 December
2012 and copies may be obtained from Investor Relations, Lloyds Banking Group, 25 Gresham Street, London EC2V
7HN and available for download from www.lloydsbankinggroup.com
20. Other information
The financial information in these condensed consolidated half-year financial statements does not constitute statutory
accounts within the meaning of section 434 of the Companies Act 2006. Statutory accounts for the year ended
31 December 2012 have been delivered to the Registrar of Companies. The auditors’ report on those accounts was
unqualified, did not include an emphasis of matter paragraph and did not include a statement under section 498 of the
Companies Act 2006.
Page 35 of 38
STATEMENT OF DIRECTORS’ RESPONSIBILITIES
The directors listed below (being all the directors of Bank of Scotland plc) confirm that to the best of their knowledge
these condensed consolidated half-year financial statements have been prepared in accordance with International
Accounting Standard 34, Interim Financial Reporting, as adopted by the European Union, and that the half-year
management report herein includes a fair review of the information required by DTR 4.2.7R and DTR 4.2.8R, namely:
• an indication of important events that have occurred during the six months ended 30 June 2013 and their impact on
the condensed consolidated half-year financial statements, and a description of the principal risks and uncertainties
for the remaining six months of the financial year; and
• material related party transactions in the six months ended 30 June 2013 and any material changes in the related
party transactions described in the last annual report.
Signed on behalf of the board by
António Horta-Osório
Group Chief Executive
31 July 2013
Bank of Scotland plc board of directors:

Sir Winfried Bischoff (Chairman)
António Horta-Osório (Chief Executive)
George Culmer (Finance Director)
Lord Blackwell
Carolyn Fairbairn
Anita Frew
Nicholas Luff
David Roberts
Anthony Watson CBE
Sara Weller
Page 36 of 38
INDEPENDENT REVIEW REPORT TO BANK OF SCOTLAND PLC
Introduction
We have been engaged by the Bank to review the condensed consolidated half-year financial statements in the half-year
management report for the six months ended 30 June 2013, which comprise the consolidated income statement,
consolidated statement of comprehensive income, consolidated balance sheet, consolidated statement of changes in
equity, consolidated cash flow statement and related notes. We have read the other information contained in the half-
year management report and considered whether it contains any apparent misstatements or material inconsistencies
with the information in the condensed consolidated half-year financial statements.
Directors’ responsibilities
The half-year management report is the responsibility of, and has been approved by, the directors. The directors are
responsible for preparing the half-year management report in accordance with the Disclosure Rules and Transparency
Rules of the United Kingdom’s Financial Conduct Authority.
As disclosed in note 1, the annual financial statements of the Group are prepared in accordance with International
Financial Reporting Standards as adopted by the European Union. The condensed consolidated half-year financial
statements included in the half-year management report have been prepared in accordance with International
Accounting Standard 34, Interim Financial Reporting, as adopted by the European Union.
Our responsibility
Our responsibility is to express to the Bank a conclusion on the condensed consolidated half-year financial statements in
the half-year management report based on our review. This report, including the conclusion, has been prepared for and
only for the Bank for the purpose of the Disclosure Rules and Transparency Rules of the Financial Conduct Authority and
for no other purpose. We do not, in producing this report, accept or assume responsibility for any other purpose or to
any other person to whom this report is shown or into whose hands it may come save where expressly agreed by our
prior consent in writing.
Scope of review
We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410,
‘Review of Interim Financial Information Performed by the Independent Auditor of the Entity’ issued by the Auditing
Practices Board for use in the United Kingdom. A review of interim financial information consists of making enquiries,
primarily of persons responsible for financial and accounting matters, and applying analytical and other review
procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards
on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of
all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.
Conclusion
Based on our review, nothing has come to our attention that causes us to believe that the condensed consolidated half-
year financial statements in the half-year management report for the six months ended 30 June 2013 are not prepared, in
all material respects, in accordance with International Accounting Standard 34 as adopted by the European Union and
the Disclosure Rules and Transparency Rules of the United Kingdom’s Financial Conduct Authority.
PricewaterhouseCoopers LLP
Chartered Accountants
London
31 July 2013
Notes:
a) The maintenance and integrity of the Lloyds Banking Group plc website is the responsibility of the Group directors; the work carried out
by the auditors does not involve consideration of these matters and, accordingly, the auditors accept no responsibility for any changes
that may have occurred to the financial statements since they were initially presented on the website.
b) Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other
jurisdictions.
Page 37 of 38
CONTACTS
For further information please contact:
INVESTORS AND ANALYSTS

Charles King
Investor Relations Director
020 7356 3537
charles.king@finance.lloydsbanking.com
CORPORATE AFFAIRS
Matthew Young
Group Corporate Affairs Director
020 7356 2231
matt.young@lloydsbanking.com
Ed Petter
Group Media Relations Director
020 8936 5655
ed.petter@lloydsbanking.com
Registered office: Bank of Scotland plc, The Mound, Edinburgh EH1 1YZ
Registered in Scotland no. SC327000
Page 38 of 38

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Bank of Scotland plc

Half-Year Management Report

For the half-year to 30 June 2013

Member of the Lloyds Banking Group

FINANCIAL REVIEW (continued)

Risk-weighted assets 141,236 162,582

PRINCIPAL RISKS AND UNCERTAINTIES

At present the most significant risks faced by the Group are:

PRINCIPAL RISKS AND UNCERTAINTIES (continued)

A variety of risk measures are used such as:

PRINCIPAL RISKS AND UNCERTAINTIES (continued)

PRINCIPAL RISKS AND UNCERTAINTIES (continued)

LIQUIDITY AND FUNDING RISK

– continued functioning of the money and capital markets;

PRINCIPAL RISKS AND UNCERTAINTIES (continued)

STATE FUNDING AND STATE AID

CONDENSED CONSOLIDATED HALF-YEAR FINANCIAL STATEMENTS (UNAUDITED)

CONSOLIDATED INCOME STATEMENT

Profit attributable to non-controlling interests – –

CONDENSED CONSOLIDATED HALF-YEAR FINANCIAL STATEMENTS (UNAUDITED) (continued)

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

Total comprehensive income attributable to non-controlling interests – –

CONDENSED CONSOLIDATED HALF-YEAR FINANCIAL STATEMENTS (UNAUDITED) (continued)

CONSOLIDATED BALANCE SHEET

CONDENSED CONSOLIDATED HALF-YEAR FINANCIAL STATEMENTS (UNAUDITED) (continued)

CONSOLIDATED BALANCE SHEET (continued)

CONDENSED CONSOLIDATED HALF-YEAR FINANCIAL STATEMENTS (UNAUDITED) (continued)

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

Attributable to equity shareholders

CONDENSED CONSOLIDATED HALF-YEAR FINANCIAL STATEMENTS (UNAUDITED) (continued)

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (continued)

Attributable to equity shareholders

CONDENSED CONSOLIDATED HALF-YEAR FINANCIAL STATEMENTS (UNAUDITED) (continued)

CONSOLIDATED CASH FLOW STATEMENT

Cash flows from investing activities

Cash flows from financing activities

1. Accounting policies, presentation and estimates

IFRS 10 Consolidated Financial Statements

IFRS 13 Fair value measurement

1. Accounting policies, presentation and estimates (continued)

IFRS 12 Disclosure of Interests in Other Entities

Future accounting developments

Critical accounting estimates and judgements

Other financial assets at fair value through profit or loss:

7. Loans and advances to customers

8. Allowance for impairment losses on loans and receivables

9. Securitisations and covered bonds

At 30 June 2013 At 31 December 2012

Covered bond programmes

Covered bond programmes

10. Debt securities in issue

11. Subordinated liabilities

The movement in subordinated liabilities during the period was as follows:

12. Share capital

Ordinary share capital in issue is as follows:

At 1 January 2013 27,479 (145) 1,238 1,981 3,074 (18,286)

14. Provision for liabilities and charges

Payment protection insurance