Barclays 2007 Annual Report Download - page 46

Financial review
Analysis of results by business
44 Barclays PLC Annual Report 2007
Head office functions and
other operations
Who we are
Head office functions and other operations comprises:
–Head office and central support functions
–Businesses in transition
–Inter segment adjustments.
What we do
Head office and central support functions comprises the following areas:
Executive Management, Finance, Treasury, Corporate Affairs, Human
Resources, Strategy and Planning, Internal Audit, Legal, Corporate
Secretariat, Property, Tax, Compliance and Risk. Costs incurred wholly
on behalf of the businesses are recharged to them.
Businesses in transition principally relate to certain lending portfolios
that are centrally managed with the objective of maximising recovery
from the assets.
Performance
2007/06
Head office functions and other operations loss before tax increased
£169m to £428m (2006: £259m).
Group segmental reporting is performed in accordance with Group
accounting policies. This means that inter-segment transactions are
recorded in each segment as if undertaken on an arm's length basis.
Adjustments necessary to eliminate inter-segment transactions are
included in Head office functions and other operations.
The impact of such inter-segment adjustments increased £86m to
£233m (2006: £147m). These adjustments included internal fees for
structured capital market activities of £169m (2006: £87m) and fees
paid to Barclays Capital for debt and equity raising and risk management
advice of £65m (2006: £23m), both of which increased net fee and
commission expense in head office. The impact on the inter-segment
adjustments of the timing of the recognition of insurance commissions
included in Barclaycard was a reduction in head office income of £9m
(2006: £44m). This net reduction was reflected in a decrease in net fee
and commission income of £162m (2006: £184m) and an increase in
net premium income of £153m (2006: £140m).
Principal transactions decreased to a loss of £83m (2006: £42m profit).
2006 included a £55m profit from a hedge of the expected Absa foreign
currency earnings. 2007 included a loss of £33m relating to fair valuation
of call options embedded within retail US$ preference shares arising from
widening of own credit spreads.
Operating expenses decreased £35m to £234m (2006: £269m).
The primary driver of this decrease was the receipt of a break fee relating
to the ABN AMRO transaction which, net of transaction costs, reduced
expenses by £58m. This was partially offset by lower rental income and
lower proceeds on property sales.