TSB Banking Group plc — Annual Report 2016

Dec 31, 2016

Registered Number OC411834

TSB Covered Bonds LLP

Members’ Annual Report and Financial Statements

For the period from incorporation on 16 May 2016 to 31 December 2016

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TSB Covered Bonds LLP

Members and LLP Information

Designated members

TSB Bank Plc
TSB Covered Bonds (LM) Limited

Management board

Ralph Coates (appointed on 1 July 2016)
Darren Pope (appointed on 16 May 2016 and resigned on 30 June 2016)
Ian Firth (appointed on 16 May 2016)
Steve Vance (appointed on 16 May 2016)
Andy Stalmanis (appointed on 16 May 2016)

Registered office

35 Great St. Helen's
London
EC3A 6AP

Registered number

Registered Number OC411834

Independent auditors

PricewaterhouseCoopers LLP
Chartered Accountants and Statutory Auditors
Atria One
144 Morrison Street
Edinburgh
EH3 8EX

Registered Number OC411834

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TSB Covered Bonds LLP

Members' Report

The members of TSB Covered Bonds LLP (the "LLP") present their first report and audited financial statements for the period from 16 May 2016 to 31 December 2016.

The LLP qualifies as a small limited liability partnership in accordance with sections 381-382 of the Companies Act 2006 (the "Act") as applied by The Limited Liability Partnerships (Accounts and Audit) (Application of Companies Act 2006) Regulations 2008 (the "LLP Regulation") and the Members' report has therefore been prepared taking into consideration the provisions of section 393 of the LLP Regulation.

Incorporation and principal activity

The LLP, a limited liability partnership, was incorporated on 16 May 2016 in the United Kingdom and registered in England and Wales under the Companies Act 2006.

The LLP has been created to support TSB Bank plc's ("TSB" or the "Originator") Covered Bond Programme (the "Programme") and the LLP's business is the acquisition, management and sale of mortgage loans and their related security, to enter into other associated financial instruments and guarantee the bonds (the "Covered Bonds") which will be issued by TSB.

The LLP has not traded since incorporation, and was therefore dormant for the entire period. As a result, the LLP has not been exposed to any financial or business risk during the period under review.

Business review

The LLP did not trade during the period and consequently no results are reported. A statement of comprehensive income and a cash flow statement have not been prepared.

Designated members

The designated members during the period and up to the date of signing the financial statements were as follows:

• TSB Bank plc
• TSB Covered Bonds (LM) Limited

Management board

The members of the LLP management board during the period and up to the date of signing of the financial statements were:

• Ralph Coates (appointed on 1 July 2016)
• Darren Pope (appointed on 16 May 2016 and resigned on 30 June 2016)
• Ian Firth (appointed on 16 May 2016)
• Steve Vance (appointed on 16 May 2016)
• Andy Stalmanis (appointed on 16 May 2016)

Members' Interests

Under the terms of the Programme, TSB may make cash capital contributions to the LLP or capital contributions in kind, represented by the excess of the current balance of the mortgage loans and the cash payment made by the LLP on that transfer date. There were no capital contributions made for the period ending 31 December 2016.

As the LLP is dormant and did not trade during the financial period ended 31 December 2016, there are no results to be reported. Consequently no profit was distributed to the members.

Members' responsibilities statement

The members are responsible for preparing the Annual Report and the financial statements in accordance with applicable law and regulation.

Company law requires the members to prepare financial statements for each financial year. Under that law the members have prepared the financial statements in accordance with International Financial Reporting Standards (IFRSs) as adopted by the European Union. Under company law the members must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the limited liability partnership and of the profit or loss of the limited liability partnership for that period.

Registered Number OC411834

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TSB Covered Bonds LLP

Members' Report (continued)

Members' responsibilities statement (continued)

In preparing the financial statements, the members are required to:

• select suitable accounting policies and then apply them consistently;
• state whether applicable IFRSs as adopted by the European Union have been followed, subject to any material departures disclosed and explained in the financial statements;
• make judgements and accounting estimates that are reasonable and prudent; and
• prepare the financial statements on the going concern basis unless it is inappropriate to presume that the limited liability partnership will continue in business.

The members are responsible for keeping adequate accounting records that are sufficient to show and explain the limited liability partnership's transactions and disclose with reasonable accuracy at any time the financial position of the limited liability partnership and enable them to ensure that the financial statements comply with the Companies Act 2006.

The members are also responsible for safeguarding the assets of the limited liability partnership and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

Employees

The LLP had no employees during the period ended 31 December 2016.

Independent auditors

PricewaterhouseCoopers LLP have been appointed by the members as the auditors of the LLP during the period under review and is to remain in office until the conclusion of the LLP's first annual general meeting. Having expressed their willingness to continue in office, a resolution for the re-appointment of PricewaterhouseCoopers LLP will be proposed at the forthcoming Annual Members' Meeting, in accordance with the Companies Act 2006 as applied to the Limited Liability Partnerships (Accounts and Audit) (Application of Companies Act 2006) Regulations 2008.

Disclosure of information to auditors

So far as the members are each aware, there is no relevant audit information of which the LLP's auditors are unaware. The members have each taken all the steps that he or she ought to have taken as a member in order to make himself or herself aware of any relevant audit information and to establish that the LLP's auditors are aware of the information.

Statement of going concern

The LLP is dormant and has not traded during the period since incorporation. However the members recognise their responsibility to make an assessment of the LLP's ability to continue as a going concern, for a period of at least twelve months from the date the financial statements are approved.

In light of the LLP's intention to commence trading within the next 12 months, the members are satisfied that adequate funding and liquidity resources are in place and are not aware of any material uncertainties that may cast significant doubt upon the LLP's ability to continue as a going concern. For this reason, they have adopted the going concern basis in preparing the financial statements.

Signed for and on behalf of the members of TSB Covered Bonds LLP

Helena Whitaker
Per pro Intertrust Directors 1 Limited
As director of TSB Covered Bonds (LM) Limited
35 Great St. Helen's
London EC3A 6AP

Ian Firth
On behalf of
TSB Bank plc
Henry Duncan House, 120 George Street
Edinburgh EH2 4LH

07 March 2017

Registered Number OC411834

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TSB Covered Bonds LLP
Independent auditors' report to the members of TSB Covered Bonds LLP
for the period ended 31 December 2016

Report on the financial statements

Our opinion

In our opinion, TSB Covered Bond LLP's financial statements (the "financial statements"):

• give a true and fair view of the state of the limited liability partnership's affairs as at 31 December 2016 and of its result for the 8 month period (the "period") then ended;
• have been properly prepared in accordance with International Financial Reporting Standards ("IFRSs") as adopted by the European Union; and
• have been prepared in accordance with the requirements of the Companies Act 2006 as applied to limited liability partnerships by the Limited Liability Partnerships (Accounts and Audit) (Application of Companies Act 2006) Regulations 2008.

What we have audited

The financial statements, included within the Members' Annual Report and Financial Statements (the "Annual Report"), comprise:

• the balance sheet as at 31 December 2016;
• the statement of changes in members' other interests for the period then ended; and
• the notes to the financial statements, which include a summary of significant accounting policies and other explanatory information.

The financial reporting framework that has been applied in the preparation of the financial statements is IFRSs as adopted by the European Union, and applicable law.

Other matters on which we are required to report by exception

Adequacy of accounting records and information and explanations received

Under the Companies Act 2006 as applicable to limited liability partnerships we are required to report to you if, in our opinion:

• we have not received all the information and explanations we require for our audit; or
• adequate accounting records have not been kept, or returns adequate for our audit have not been received from branches not visited by us; or
• the financial statements are not in agreement with the accounting records and returns.

We have no exceptions to report arising from this responsibility.

Entitlement to exemptions

Under the Companies Act 2006 as applicable to limited liability partnerships we are required to report to you if, in our opinion, the members were not entitled to prepare financial statements in accordance with the small limited liability partnerships regime. We have no exceptions to report arising from this responsibility.

Responsibilities for the financial statements and the audit

Our responsibilities and those of the members

As explained more fully in the Members' Responsibilities Statement set out on page 2, the members are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view.

Our responsibility is to audit and express an opinion on the financial statements in accordance with applicable law and International Standards on Auditing (UK and Ireland) ("ISAs (UK & Ireland)"). Those standards require us to comply with the Auditing Practices Board's Ethical Standards for Auditors.

This report, including the opinion, has been prepared for and only for the members of the partnership as a body in accordance with the Companies Act 2006 as applied to limited liability partnerships by the Limited Liability Partnerships (Accounts and Audit) (Application of Companies Act 2006) Regulations 2008 and for no other purpose. We do not, in giving this opinion, 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.

Registered Number OC411834

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TSB Covered Bonds LLP

Independent auditors’ report to the members of TSB Covered Bonds LLP (continued)

for the period ended 31 December 2016

What an audit of financial statements involves

We conducted our audit in accordance with ISAs (UK & Ireland). An audit involves obtaining evidence about the amounts and disclosures in the financial statements sufficient to give reasonable assurance that the financial statements are free from material misstatement, whether caused by fraud or error. This includes an assessment of:

• whether the accounting policies are appropriate to the limited liability partnership’s circumstances and have been consistently applied and adequately disclosed;
• the reasonableness of significant accounting estimates made by the members; and
• the overall presentation of the financial statements.

We test and examine information, using sampling and other auditing techniques, to the extent we consider necessary to provide a reasonable basis for us to draw conclusions. We obtain audit evidence through testing the effectiveness of controls, substantive procedures or a combination of both.

In addition, we read all the financial and non-financial information in the Annual Report to identify material inconsistencies with the audited financial statements and to identify any information that is apparently materially incorrect based on, or materially inconsistent with, the knowledge acquired by us in the course of performing the audit. If we become aware of any apparent material misstatements or inconsistencies we consider the implications for our report.

Allan McGrath (Senior Statutory Auditor)
for and on behalf of PricewaterhouseCoopers LLP
Chartered Accountants and Statutory Auditors
Edinburgh

07 March 2017

Registered Number OC411834

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TSB Covered Bonds LLP
Balance Sheet
as at 31 December 2016

31 Dec 2016
£

Assets

Cash and cash equivalents

Total assets

Members' other interests and liabilities

Capital Contributions

Reserves

Total members' other interests

Total members' other interests and liabilities

The accompanying notes on pages 8 to 9 are an integral part of the financial statements.

The LLP has not traded since incorporation and has received no income nor incurred expenditure, and consequently, has made neither a profit nor a loss. Therefore a statement of comprehensive income and a cash flow statement have not been produced for the reporting period.

The members acknowledge responsibility for:

i) ensuring the LLP keeps accounting records which comply with section 386 of the Act, and
ii) preparing accounts which give a true and fair view of the state of affairs of the LLP as at the end of the financial period, in accordance with the requirements of section 393, and which otherwise comply with the requirements of the Act relating to accounts, so far as applicable to the LLP.

The financial statements on pages 6 to 9 were approved by the members on 07 March 2017 and signed on their behalf by

Helena Whitaker
Per pro Intertrust Directors 1 Limited
As director of TSB Covered Bonds (LM) Limited

Ian Firth
On behalf of
TSB Bank plc

Registered Number OC411834

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TSB Covered Bonds LLP

Statement of changes in members’ other interests

for the period ended 31 December 2016

| | Reserves
£ |
| --- | --- |
| Balance at 16 May 2016 | - |
| Result for the period | - |
| Balance at 31 December 2016 | - |

The accompanying notes on pages 8 to 9 are an integral part of the financial statements.

Registered Number OC411834

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TSB Covered Bonds LLP

Notes to the financial statements

for the period ended 31 December 2016

1. Significant accounting policies

TSB Covered Bonds LLP (the "LLP") is a limited liability partnership incorporated in the United Kingdom and registered in England and Wales under the Companies Act 2006.

(a) Basis of preparation

The financial statements of the LLP for the period ended 31 December 2016 have been prepared in accordance with the Companies Act 2006, as applied to limited liability partnerships, and with International Financial Reporting Standards (IFRS), as adopted by the European Union (EU). IFRS comprises accounting standards prefixed IFRS, issued by the International Accounting Standards Board (IASB) and those prefixed IAS, issued by the IASB's predecessor body, as well as interpretations issued by the IFRS Interpretations Committee (IFRS IC) and its predecessor body.

The principal accounting policies applied in the preparation of these financial statements are set out below and have been consistently applied in the financial statements.

The financial statements are presented in Sterling which is the LLP's functional and presentation currency and have been prepared on the historical cost basis.

The members consider that there are no critical accounting estimates and judgments.

(b) Going concern

The financial statements have been prepared using the going concern basis. The LLP has not traded during the period since incorporation. In light of the LLP's intention to commence trading within the next 12 months, the members are satisfied that adequate funding and liquidity resources are in place and are not aware of any material uncertainties that may cast significant doubt upon the LLP's ability to continue as a going concern.

(c) Statement of comprehensive income

As the LLP is dormant and did not trade during the financial period ended 31 December 2016, the LLP has no results to be reported.

2. Related party transactions

The LLP intends to enter into related party transactions with Intertrust Management Limited ("Intertrust") and TSB Bank plc ("TSB").

During the period, Intertrust provided corporate administration services to the LLP. The corporate services fees of £16,643 for the period ended 31 December 2016 are borne by TSB.

Intertrust Corporate Services Limited is a wholly owned subsidiary of Intertrust, and provide corporate directors to TSB Covered Bonds (LM) Limited and TSB Covered Bonds (Holdings) Limited and share trustee services to TSB Covered Bonds (Holdings) Limited.

The audit fees for the LLP are paid by TSB; the fee for the current period is £6,000.

Registered Number OC411834

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TSB Covered Bonds LLP

Notes to the financial statements (continued)

for the period ended 31 December 2016

3. Future accounting pronouncements

The following pronouncements are not applicable for the period ended 31 December 2016 and have not been applied in preparing these financial statements.

Pronouncement	Nature of Change	IASB effective date
IFRS 9: Financial Instruments	Replaces IAS 39 Financial Instruments: Recognition and Measurement. IFRS 9 requires financial assets to be classified into three measurement categories: fair value; amortised cost; and fair value through other comprehensive income, on the basis of the objective of the entity's business model for managing its financial assets and the contractual cash flow characteristics of the instruments. The requirements for derecognition are 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. Changes are also made to the impairment of financial assets measured at amortised cost, which will be based on expected rather than incurred credit losses. The hedge accounting requirements are more closely aligned with risk management practices and follow a more principle-based approach. The impact of IFRS 9 on the LLP is still being assessed.	Annual periods beginning on or after 1 January 2018
IFRS 15: Revenue from Contracts with Customers	Replaces IAS 18 Revenue and other existing revenue recognition interpretations and requires revenue to be recognised when goods or services are transferred to customers and at an amount that reflects the consideration to which an entity expects to be entitled in exchange for those goods or services. The standard does not apply to financial instruments contracts. The impact of IFRS 15 on the LLP is still being assessed.	Annual periods beginning on or after 1 January 2018

4. Parent undertaking and controlling party

The designated members of the LLP are TSB Bank plc and TSB Covered Bonds (LM) Limited (as Liquidation Member).

For accounting purposes, at 31 December 2016 the LLP's ultimate controlling party was Banco de Sabadell S.A., which is the parent undertaking of the largest group to consolidate these financial statements. Copies of the consolidated financial statements may be obtained from Banco de Sabadell S.A, Sena, 12, Pol. Ind. Can Sant Joan, 08174 Sant Cugat del Vallès, Barcelona, Spain. TSB Banking Group plc is the parent undertaking of the smallest group to consolidate these financial statements. Copies of the consolidated financial statements may be obtained from 20 Gresham Street, London, EC2V 7JE or downloaded via www.tsb.co.uk.

Registered Number OC411834