The movement on treasury bills and other eligible bills held for investment purposes was as follows:


Included in the above balances are unamortised discounts on investment securities of £0.4m for Group and Company (2002: £2.3m).

11. Loans and advances to banks

12. Loans and advances to customers

It should be noted that this may not reflect actual experience of repayments since many mortgage loans are repaid early.

Within loans and advances to customers are included £2,094.8m (2002: £1,204.0m) of advances which act as security for funding.

Included within the above are the following non-performing loans and advances to customers:

13. Provisions for bad and doubtful debts

14. Debt securities





All debt securities are intended for use on a continuing basis in the operations of the Group and it is for this reason that they are classified as financial fixed assets.

15. Investment in joint ventures

On 3 January 2003 the Group acquired an additional 74.9% investment in ALLTEL Mortgage Solutions Ltd joint venture company from Alltel. At this point the company became a wholly owned subsidiary.The cost of the additional investment was £2.1m and this represented the book value of net assets acquired. No fair value adjustments were required.The net assets acquired are included in the acquisitions table in note 39.

16. Investments

(a) Shares in Group undertakings
Details of businesses acquired in the year are given in note 39.

The principal trading subsidiary undertakings of Bradford & Bingley plc at 31 December 2003 held directly or indirectly are listed below:

The Company’s shareholding in Bradford & Bingley Insurance (Isle of Man) Ltd is in partly paid ordinary shares.The Company has a future liability of £7.75m to pay fully for all shares issued to the balance sheet date.

The above principal subsidiary undertakings all operate in the country of registration with the exception of Bradford & Bingley Treasury Services (Ireland) which operates in the Republic of Ireland. Bradford & Bingley Investments, Bradford & Bingley Treasury Services (Ireland) and Mortgage Express are all unlimited companies.

The results of all subsidiary undertakings have been included in these Financial Statements.

(b) Quasi-subsidiaries
(i) Advances secured on residential property subject to non-recourse funding
A quasi-subsidiary of the Group, Aire Valley Finance plc, has a portfolio of residential mortgage assets.The portfolio was funded by the issue of £989.0m of bonds, serviceable only from the cash flows generated by the mortgage portfolio, together with £36.0m of subordinated finance from the Group. At 31 December 2003, bonds including accrued interest and the aforementioned subordinated finance to the value of £41.7m were held by the Group. Aire Valley Finance plc has the option to redeem all classes of bonds at their principal amount outstanding on the interest payment date falling in November 2004 and on any interest payment date falling thereafter or when the value of bonds falls below £100m.

A second quasi-subsidiary of the Group, Aire Valley Trustees (No. 2) Ltd, also has a portfolio of residential mortgage assets.The beneficial interest in this portfolio was subsequently transferred to a third quasi-subsidiary of the Group, Aire Valley Finance (No. 2) plc. Aire Valley Finance (No. 2) plc was funded by the issue of £1.0 billion of bonds, serviceable only from the cash flows generated by the mortgage portfolio, together with £22.9m of subordinated finance from the Group. At 31 December 2003 the subordinated finance from the Group, including accrued interest, was £23.1m.The company has the option to redeem all classes of bonds at their principal amount outstanding on the interest payment date falling in September 2008 and on any interest payment date falling thereafter or when the value of bonds falls below £100m.

Aire Valley Trustees (No. 2) Ltd has entered into an interest rate swap with Bradford & Bingley plc as the swap counterparty to manage the interest rate basis risk payable on the loan notes issued by Aire Valley Finance (No. 2) plc. Mortgage income received by Aire Valley Trustees (No. 2) Ltd from the securitised mortgage portfolio is passed to Bradford & Bingley plc which then pays a floating rate of interest to Aire Valley Trustees (No. 2) Ltd to enable payment of interest on the loan notes.There is one fixed rate swap, with a capped notional volume of £600m and a maximum term of ten years.

The Group is not obliged to support any losses in respect of these mortgages, other than to the extent of its subordinated funding, nor does it intend to do so.This is clearly stated in the agreements with the bond holders.

The controlling interests of Aire Valley Finance plc, Aire Valley Finance (No. 2) plc and Aire Valley Trustees (No. 2) Ltd are held by a discretionary trustee.The Group receives an administration fee for servicing the mortgage portfolios of both Aire Valley Finance plc and Aire Valley Finance (No.2) plc, together with any residual income arising after the claims of the bond holders are met.

The detailed Profit and Loss Accounts and Balance Sheet linked presentation of these quasi-subsidiaries included in the Group consolidation are:



(ii) Secured funding

On 3 August 2003 a quasi-subsidiary of the Group, Legaless Ltd, was assigned equitable title to a £1.0 billion portfolio of residential mortgage assets from Mortgage Express, a subsidiary of the Group. Mortgage Express and the Group continue to be exposed to the risk that the principal amount and interest receivable on the mortgage loans are not collectable.The mortgage loans are not ring-fenced and so a linked presentation is not appropriate and the loans continue to be shown within loans and advances to customers in the Group accounts. Legaless Ltd funded the purchase of mortgages through a participation agreement with a third party bank and the funding is shown within deposits by banks in the Group accounts.

17 Intangible fixed assets - goodwill

The goodwill arising on the purchase of BBG Estate Agencies Ltd and the Douglas Duff partnership is being amortised over a period of 10 years.
The goodwill arising on the purchase of John Charcol Holdings Ltd, Holden Meehan Ltd and Aitchison & Colegrave Group Ltd is being amortised over a period of 20 years.The amortisation periods are based upon an assessment of their estimated economic lives made by the Directors.

Note 39 provides further details of the acquisitions during the year.

18. Tangible fixed assets

Sale proceeds from asset disposals were £15.1m (2002: £17.6m) resulting in a loss on sale of £0.4m (2002: £1.1m) which has been charged in the Profit and Loss Account to depreciation and amortisation. In addition, sale proceeds from the sale and leaseback of land and buildings assets were £9.8m resulting in a profit of £8.1m which has been included in the Profit and Loss Account in other operating income.

Included within Group tangible fixed assets are leased vehicles in the Company Car Ownership Scheme. At 31 December 2003 the net book value of these assets was £20.3m (2002: £20.2m).

The Group’s policy is to value approximately one third of land and buildings each year, although no adjustment is made to the asset values as shown in the Balance Sheets. On the basis of the latest valuation in each case, the total market value at 31 December 2003 was £98.3m compared with a net book value of £82.7m.

The value attributed has been arrived at by the Directors on an open market valuation, with the exception of the Group’s principal administration centres at Crossflatts and Bingley.These properties are regarded as specialised properties which have a long term benefit to the Group and are valued on the basis of depreciated replacement cost.The valuations have been carried out by members of the Royal Institution of Chartered Surveyors.

19. Other assets