Good morning, ladies and gentlemen, and welcome to you. Both those of you here and those on the webcast, welcome to the presentation of our results for the first half of 2007. I'm delighted to report that the Group has delivered another strong performance, building on the improved earnings momentum that's been achieved over the last few reporting periods. Let me just share something with you. Since I took over as Chairman just over a year ago, I have seen the scale of change that Lloyds TSB has undergone over the last few years, which, quite frankly, has been massive. The way that Eric Daniels and the management team have transformed the culture of the Group and transformed the dynamics within our business has been underestimated by many people outside the organization. These results truly demonstrate the progress that has been made, and they point to the opportunity ahead of us over the next few years. I think it's fair to say that 2007 is a year of considerable delivery. Lloyds TSB now operates to its own focused and balanced business model. It's a business model that generates a higher quality, lower-risk earnings profile, and one where we're now delivering broad-based revenue and earnings growth. Eric and Helen will take you through the key operating highlights and the numbers shortly. But, perhaps, I could just steal a little bit of their thunder by touching on some of the key issues from the Board's perspective. Throughout the business, Lloyds TSB is continuing to achieve good levels of business growth. The combination of improved income growth and strong cost management has led to accelerating profit momentum. And at the same time, it's improved our profitability in many areas of the Group. This is the first time for some while that we're in…

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Thank you, Victor, and good morning everyone. This morning, I'm very pleased to be presenting a strong set of results, continuing and improving the momentum we've established in the business. It's clear that this performance is not just a result of the actions we've taken over the last six months but is underpinned by steady improvements that we've been making to the business over the last few years. As you can see, we've delivered an excellent first-half performance. Profit before tax, excluding volatility, is up by 15%, with strong double-digit growth in earnings per share and an economic profit growth of 31%. Our return on equity has also increased from what was already a high base and now stands at 27%. As Victor mentioned, we've taken the decision to increase our interim dividend by 5%. We've said frequently in the past that our approach has been to grow into our dividend, and I think that the last few years have proved that this was the correct strategy. We're now clearly demonstrating strong capital efficient earnings growth. Once again, we've delivered a balanced trading performance, with all three divisions showing double-digit profit growth. This is a strong and consistent performance in what remains a competitive environment and is driven by our improved rate of revenue growth, excellent cost management and very satisfactory asset quality. Our high quality business model means that we're well positioned to outperform and out-compete in the future. But growth is only good, if it's profitable. Our focus is very much on capital efficient growth throughout the business and on operating in a more profitable business segments, and this slide demonstrates the results of that focus. We've managed to deliver strong growth, while at the same time improving our return on equity. Our increased earnings momentum has not…

Good morning, and thank you for coming. I'm very pleased to be reporting a very strong set of results for the first half of the year. This is the strongest rate of growth that we've had in this decade. In my view, the very good performance is the latest in a series of results that we've been building over the past few years, but in some sense, they also mark a watershed for the Group. In previous presentations, we told you we had a view for our future, that we could get both growth and returns by better leveraging our franchise. We told you that we needed to put in place the underpinnings to allow us to perform. With this set of results, we can show you that the fundamental processes which drive the business model, customer acquisition, relationship deepening, managing the cost base effectively, and managing capital efficiently, are firmly in place and are delivering and have led to our strong performance. We've improved our topline growth to the highest level in ten years. This is our fifth straight year of productivity improvement. We have double-digit economic profit growth, and we're delighted to announce the dividend increase. Our view is that we've built momentum in the franchise from these very solid foundations. We believe we have much more opportunity and a clear roadmap toward realizing that opportunity. What makes these results particularly good is that we have momentum across all three divisions, in retail, wholesale, and insurance. We have good income growth in each division. We have positive jaws in each. Asset quality is being well managed across the piece, and each has delivered double-digit profit growth. The results are income-led, and it's increasingly better-quality income as it's built on deep relationships with our customers. We're successfully acquiring more…

Can I ask a couple of questions on recent disposals please? Both the Registrars business and the Abbey Life business have added about 45 basis points, I think, to your Tier 1 capital; can you give us some idea of how that would be invested to offset earnings dilution from those sales? And secondly, more strategically, as we're in phase two now with double-digit profit growth moving into phase three, should we expect any more portfolio realignment from the Group?

Well, I'll ask Helen to answer as well but basically what we have done, as we talked about on the platform, is that we have used our resources more efficiently. So we have had a systematic program over the past two to three years of managing our capital and these latest disposals are part of that where we are allocating our capital toward our best growth opportunities, and that's how we're generating the headroom for future growth. Very clearly, one of the things that we set out when we started the strategy was to get both growth and returns, and a strong part of that has been due to not only the productivity but the capital management disciplines. So I think that what you'll see in terms of the Registrars and Abbey transactions specifically is more of the same, that we will continue to allocate the capital toward the highest areas of growth. In terms of where we are in turning phase two, phase three, we're very solidly in phase two, but as I just signaled, we continue to see terrific headroom within the franchises, we continue to see good growth going forward and so that's where we'll stay for a while. Helen?

I don't think there's anything I can add, Eric.

Sorry.

Thank you. It's Ian Smillie from ABN Amro. Two questions, please, both on the quality of revenue, an angle that you've encouraged us to think about over the last 12 months or so, and it goes back to the charts that you have given us, Helen, on the breakdown of revenue both in retail firstly and then secondly in wholesale. It looks like something like 85 million or so of the increase in retail revenues has come from insurance and other, so I was wondering whether you could talk to us a bit about how much of that is dependent on the flow of new business and how much of that is repeatable going forward? What I'm thinking about here is the potential volatility or the cyclicality of revenues that we have seen in historic years. That's the first question.

Helen, do you want to do that?

Yes, I men, you're right in saying that we're seeing a significant improvement in our lending-related insurance income coming through. I find your question slightly strange though because the nature of the retail business is that there are a number of annual flows and every year you have to start the year and make up those annual flows. So that's part of our overall business model. Yes, it’s not the annuity in the same way as the savings and investment side, and that's one of the reasons why we've clearly been growing our savings and investments side, but it's part of our overall business model to have some flows that are also annualized flows. One of the things that Terry and the team sit down at the beginning of every year, they sit down and think, okay, fine, what are we going to do this year to generate those annualized flows? So it's just part of our overall business model.

Can you give us some sense as to what products those insurance relate to? Is that mortgage rather than unsecured?

It's across the piece. So it's mortgage related, insurance and also it's the creditor insurance. It's both.

Okay. And on the other number that's in there?

That includes sort of general insurance, house insurance, and things of that type as well.

Thank you. And the second question, the same thing but for the wholesale bank chart that you gave us and the venture capital gains, which you referred to being above normal, can you give us some sense of the size of the book there and potentially the unrealized gains which should still come through in future periods?

Okay. I mean the overall book is somewhat less than £1 billion in terms of our venture capital. We normally have a run rate of earnings, which I think would run at about £50 million, something like that in a half and then we've seen an upside of about £50 million extra in the half that came through. So last year we had about £30 million in the first half, this year we've got about £100 million. £50 million is what we'd normally expect as an average although you can understand there's a bit of variability. But we do see it as an ongoing part of our business and part of our business flow and it's an area that's served us very well in recent times as well.

Thank you.

If I can just add on to that. Ian, it's good to see you. The venture capital portfolio, as you know, over the past two to three years has been very solid in terms of its performance. Now we'll always have some lumpiness but it's an ongoing feature and it's certainly part of the wholesale bank. We do that very, very well.

Okay. Thanks.

Thank you. It's Stephen Andrews from UBS. It's a question for Truett really and his appetite for risk in the corporate bank. I'm just interested in the -- his current appetite for property lending because I think, since the beginning of the year, his property book's grown at an annualized rate of 50%. And I think it's now over the last five years it's gone from 8% of total corporate lending to almost a quarter of the book at a time when other banks are looking to actually reduce their commercial real estate lending and prices anecdotally look like they're now falling. Can you give us an explanation why you have such an appetite for that particular sector at this particular moment in the cycle? And I've got a second question as well on Widows.

Can Eric start that one off anyway?

Thank you. I'll just top it and then ask Truett to comment, but basically, as you know, we have been under-leveraged in the real estate part of our portfolio. We are underrepresented, probably a better way to say it, but what Truett and his team have done over the past couple of years is started to grow that book but we're still very much under our natural share. We've been very selective. It's a very high quality book. Truett, would you care to comment more?

Sure. First of all, Eric's generalization is absolutely right. We feel quite good about the book. And probably the best way to give you a little bit of detail, I think in the half draw on balances went from about £13 billion to £16 billion. That's -- you're right, 25% increase. The fact is you have to look at the way we've focused it, which is very, very much on our traditional focus on our customers that we know well. Of that £3 billion two names basically accounted for over £1.2 billion of it, two names alone, both of those strong investment grade names. Those are -- that's name property lending versus opposite a given project. Another £800 million would come out of packs or public sector, half of that to a given name investment grade, almost all of the rest coming from RSLs and Housing Associations, government supported if not guaranteed. £300 million in business banking, of the business banking 64% of that is to existing customers. So you break the £3 billion down and in very short order you come up with an accounting, which makes you feel very comfortable that it's not about a large exposure to vulnerable properties but rather an extension on our normal focus on our known business, our known customers and it's high quality portfolio.

Thanks, Truett. Stephen, do you have a second question?

Yes, sorry. Just a second question. Just thank you very much for the additional net flow data in Scottish Widows. It's extremely useful in terms of understanding how that business is progressing. Can I ask and just put you -- obviously you've got the flow numbers now but on the stock, just the split between retail and institutional where the -- how much of the £102 million, £103 million -- £1 billion of stock at the end of the year was at retail versus institutional so we can put the £1 billion of net inflows in retail in the context of the stock you've got there?

Archie, can you answer that one?

Most of the growth you can see on the fund management side is coming through in the retail side. The institutional side which includes I think in that schedule that you're talking about, includes the cash flows of the global liquidity fund and that washes around quite a bit. Institutional relatively flat and the retail side is the one that's contributing mostly to the growth.

Okay, thanks Archie.

Good morning. It's Jonathan Pierce from Credit Suisse. Can I ask a question, just going back to Ian's question in the Retail Bank because the other income growth is good versus both the first and the second half of last year, and I just wanted to clarify has there been any assumption changes in terms of the commission payments that are paid out of general insurance into the Retail Bank for the writing of general insurance products?

Helen.

No, I don't believe there have. No, there haven't been.

Okay, thank you. The second question is on capital, previously the cover target was 1.4 to 1.6 times, I think this year you're probably going to be around the middle of that. But you're still talking about increasing the cover from here. Is the 1.4 to 1.6 still the sort of range we should be thinking about? And as a supplementary to that, can I ask whether you've taken the dividend that has been declared out of the Tier I at the interim stage?

In terms of dividend guidance going forward we had basically said that we would hold our dividend position over the past several years until we hit the 1.4 to 1.6 level. And that was what we in fact did. We grew into our dividend very nicely. We're delighted to be reporting the first increase in dividend in five years. We've said in terms of future guidance that of course the Board is going to take each decision as it comes and look at the future and the quality of the earnings. You would expect that. But what we've gone further in saying is that we would expect to grow the dividend and increase the cover and that's the extent of the guidance we've given.

In terms of the second part of the question, the dividend has not been deducted. So the interim dividend has not been deducted from the capital ratios in the half year.

Okay, thanks.

Just on this question of dividend cover, under Basel II I suspect there'll be a very significant reduction in risk-weighted assets. Have you thought about how that might cause you to operate with an even lower level of dividend cover than you might have previously been assuming?

We've clearly looked into Basel II. We're comfortable with our capital position. We're comfortable with the guidance that we've given thus far.

Yeah. It's Bruce Packard at Pali. I just wanted to explore a little bit at expanding new business margin in the Insurance and Investment division and, sort of, the capital intensity of that business as well. It's quite unusual to see the new business margin expanding at the same time as writing less capitally intensive business. So I was just wondering if you could give us some help there?

Eric?

Thank you. Again, I'll give you, sort of, an overview and then ask Archie to comment. But what I had talked to you about on the platform is we've done really two major -- we've had two major thrusts. The first is that we've rewritten a lot of our products. We're redesigned an awful lot of the product to be more friendly in terms of its capital usage. Archie and his team have also done an absolutely brilliant job in terms of managing the productivity and efficiency within Widows, which, of course, helps our capital ratios. So what we've done is basically reworked the whole franchise over the past several years. It's been hard work, but you're starting to see the results of that now. We've also gone further than that. In addition to improving the overall efficiency and the overall capital efficiency within Widows, we're moving more toward the bancassurance channel, which, of course, has higher margins and higher returns. So that's, sort of, a broad brush frame of what we've done. Archie?

As Eric says, we've put a lot of effort into improving the efficiency and the productivity and the margins within our various products. An example of that is the protection for life product, which we launched at the start of this year into the bancassurance channel, which is selling well. We've had very good growth in that protection product, in excess of 20% year-on-year. And the way the product is structured is it consumes less capital for a shorter period of time. Also in terms of the pensions market, we've introduced our retirement product, our new pensions product, sit-tight (ph) product, which was launched at the end of the first quarter, and that is much more capital efficient. One of the things we've done is we've looked at the payback periods of all of the products. And as we redesigned them, we reduced the payback period and, hence, the capital consumption. One other thing that has impacted the overall margins is that we've seen a movement from regular OEICs to single-premium OEICs, and single premium OEICs are -- have a better margin and, therefore, improve the overall margin as well.

Thanks, Archie.

Alistair Ryan at UBS. Two questions if I may. One of them (inaudible). Helen, you mentioned that there's been a change in how you're writing protection business. You've brought some in-house. That's about 98% of the increase in PVNBP in the first half. And is that the main driver of that? And subsequent to that, is the flat OEICs sales performance -- I mean, we typically expect strong bancassurance to reflect good OEICs performance. That's not the case. And then I have a second unrelated question. Thanks.

Okay. I mean, on the PVNBP and the protection item, I mean, there were two key things there. The first one is the protection for life product that Archie has just referred to. And so that accounts -- that increased year-on-year by about 20 to 30%. So that's the first element. And then the rest of the increase, as you rightly say, is accounted for by the product that we now have brought in-house and we're underwriting ourselves. So that is the reason for the 340% increase that you see coming through there. The second question was in terms of OEICs. Basically, what we saw was a slight fall in bancassurance OEICs. I think they were down about 10%. But don't forget that was up against a 153% or something in that kind of order of magnitude increase last year. So we more than doubled the sales last year. So the overall level of OEICs, we think, remains -- sales within the branch network remains pretty strong. And we actually think we've maintained our share within that, although the second quarter numbers aren't yet out. What we have seen is an uplift in OEICs through the IFA network. So that's why the overall PVNBP on OEICs is broadly flat.

Thanks, again. And the second question was, I mean, you've guided 1.6 billion pounds in disposals, and you increased the divvy by a 100. I mean, presumably, there is an earnings dilution impact from the sales you've made, particularly as the Registrars business wasn't using any capital at all. I mean, just to re-ask the question, maybe, what are you going to do with the difference?

I'm sorry. What are going to do with the dividends? What are we going to…

No. The difference. The 1…

The difference.

… billion you've now got in your pocket.

Well, I'll, again, give a summary answer and then ask Helen to comment. But I will simply repeat what we had said before that we are very comfortable in terms of our efficient use of capital. And what we have done is redirected capital from businesses or from areas where we didn't think we had good growth possibilities to those that we did, and this is part of an ongoing program. Helen?

I think our capital stance, as Eric says, has been very focused on being capital-efficient, at the same time, as being shareholder-friendly. And if you think about our yields, we're one of the highest yielding stocks in terms of return on capital to shareholders through the dividend. We've also demonstrated that the capital that we have retained in the business we've used effectively. So as Eric says, that's what we would expect to continue to do with the proceeds from the sales as well.

Thank you. It's Carla Antunes, JP Morgan. I wonder if I can turn you to the Retail Banking and, in particular, to the mortgage aspect. And you gave the very helpful spreads of the new businesses both through the IFA and the bancassurance. Could you please give us a similar comment along the lines on the mortgage product, particularly in context of your competitive pressures and comments?

Eric?

We've maintained a very consistent posture over the last several years regarding mortgages. But we really view that there are two different channels, there are two really completely different businesses. We've been focusing more and more on the branch-delivered business. This is relationship business. It's not done through the IFAs, but rather directly with our customers. We view this as being key to the relationship. It also is higher return business. So that we will continue to grow. You've seen some of the redesigned product that we've launched in the fairly recent months, and that's going very successfully. In the IFA business, what we have is, basically, a good channel. We like our IFA business. We're strengthening it. But there will be times when we can't get the credit conditions that we want or the returns that we want, and so our share will tend to fluctuate there. And so what you're seeing is the balance between profitability and share. And as Helen had said on the platform that we basically will not run for share alone, but we will look for both profitability and share through the IFA channel. We will look to grow the relationship or the branch channel significantly and continue to do that consistently. Derek Chambers - Standard & Poor's: Derek Chambers from Standard & Poor's Equity Research. Can I ask two questions? One is on headcount. The headcount overall and division-by-division look very stable in the first half. I wonder if that is the position you've reached, that there might be changes in mix but it's going to be stable? And I wonder what implication that has for the continued low growth of costs in the retail division in particular? And could I ask an unrelated question on -- just going back to capital ratios. I note that you said you're comfortable with your guidance. So you're probably not going to say too much. But when you said that you've expected to maintain satisfactory capital ratios during the transition, that sounded to me somewhat more cautious than I thought you had been before. So I wonder if you could correct or refine that? And I wonder if you're now taking the -- you're expecting to take out the innovative elements from the Tier 1 in future?

Eric?

Let me start by talking about our staff. We are always careful not to refer to people as headcount. They're people. They are valued members of staff -- I said, valued members of staff. We continue to believe that managing efficiency and managing productivity is a necessary discipline for us. We've used it, basically, very successfully to help fund our growth over the past several years. As you know, when we started the strategy, we said that we think we can get both growth and returns, although I think there were some skeptics in the room when we said that. Clearly, one of the ways in which we've been able to fund the growth is by managing for efficiency. We will continue to use this as a key discipline, going forward. What you'll see is that it's rare that you see productivity improvements being absolutely linear. You'll see, as projects come on stream, usually, an increase in staffing before you get new launches and so on -- that's a normal thing. And then you'll see, basically, some step changes further on. So what I would basically say is, our guidance going forward is that productivity is going to continue to be a watchword. It's a discipline that we have used to build the business. It's something that we view as critical, going forward. In terms of our capital ratios, I'll ask Helen to answer. But basically, I think, our guidance has been consistent all the way along. We are not signaling any change.

Yeah. I think I do try and use the same words I've used before. Maybe I should say we are very confident we'll maintain satisfactory capital ratios with -- throughout, because that's the tonality of what we're trying to convey here. Clearly, we're still in discussions with the FSA, and we don't expect to hear finally until the fourth quarter. I think that -- I know that there are some institutions who've probably talked in more detail than we have about the FSA position, but they tend to be the mortgage businesses, which are much simpler. And I think what you'll find is, generally, companies such as ours or banks such as ours, which tend to have a variety of different lines of business.

Good morning. It's JP from Merrill Lynch. I wanted maybe to actually target a question specifically at Terri, if I could. I wanted to really just frame the 6% retail growth in the first half. There's been a flurry of initiatives, marketing etcetera over the last 6 to 12 months from the Retail Bank. And I just wondered, if you can just comment on your aspirations for Retail Bank revenue growth generally, whether you're happy with that 6% number, or whether we should expect a faster growth in the future, without looking for specific forecasts in the coming period? And secondly, related to that, a number of your peers have, who've also been very selective in terms of asset quality, like yourselves, have struck distribution arrangements with investment banks to do business which they wouldn't want on their balance sheets, but to get distribution income from that. Is that something you've looked at and/or discounted, and I'm just wondering if you can comment on that strategy too?

Eric is going to just make a couple of remarks…

I'll give Terri an introduction, because to save her blushes. That Terri and her team have just done an outstanding job at getting very good retail growth and frankly, a very -- well, a changing market. As you know, the business that had powered the U.K. Retail Bank for many years was being really terrific at personal lending. We continue to be the leader there we continue to have a good share. And that really powered the earnings. What Terri has done, and the reason why I wanted to just sort of introduce her on this, was that the entire UK. Retail Bank has been refocused. It works just so much better. If you look at our sales, if you look at our liability sales especially, that has completely transitioned, so we are no longer a one-trick pony. If you look at the productivity, if you look at the seller effectiveness, there has just been a revolution there. So, I think that it again, in a fairly well, febrile market, let's put it that way, that Terri and her team have just done an outstanding job. We are very pleased with the progress to-date, and we continue to expect growth. Terri?

Thank you. I was feeling left out. I'll answer the easier question, the latter part, have we looked at distribution agreements? Yes, and there probably is some opportunity in the mortgage space. I would not say there's much opportunity in the unsecured space; from my past life experience it's a lot of work, a lot of effort, a lot of hand-off, and frankly never enough payback for the diversion of attention. So it will probably be, if any opportunity, in the mortgage space, not the unsecured loan space. Thank you for acknowledging the marketing efforts and the product efforts, but first and foremost retail is a sales business, and yes, we need new product and pricing, and promotion and advertising, but those are all in support of sales, and we never forget that. We meet every week, two hours every week, as a leadership team, and go through excruciatingly granular detail on what's working and not working from a sales perspective, and then go adjust accordingly. So the credit goes to the front line, it really does, they're the ones that are delivering, and ultimately that's what this business is all about, and that's why we call it retail. Am I happy with 6%? It's a yes and no answer. No, you're never happy with 6%. Over the long-term, as a Retail Bank you'd always like to be delivering more than that. Am I happy that we are achieving this in this environment? Actually, I am pretty happy. I mean, one of the headwinds that we're definitely having to work against is some of what's happening on the balance side. I mean credit card balance is a very good example. We can hold our market share, but it's in a declining marketplace, and those are balances with very high margins. Now, admittedly, we give a lot of that margin away in impairment costs in that product, but it's a very high margin business, and when it declines, it has very real and immediate impact on your P&L statement. And at the end of the day, as I said certainly, you can't control the market. This is a market phenomena in the U.K., and all you can do is control your sales and service efforts, and you have to sell and serve through it, which is why you've seen some of the increases in some of the commission-related products, because we have simply have put as much of our effort and attention as we can behind those.

Thanks, Terri. Any more questions, or should we call it a day? Thank you all very much indeed for coming. Thank you. What you WON'T hear on the call!: In 1957, a young couple named Bill and Carol Angle invested half their life savings in Berkshire Hathaway. According to Forbes magazine, today it’s worth over $300 million. What if you could do even half or a third as well? One stock looks uncannily similar to an early investment in Berkshire Hathaway. Get its name now in a new FREE report from The Motley Fool.

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