HELPING BRITAIN PROSPER ESG BONDS & TERM DEPOSITS · currently two 12 month fixed rate Term...

HELPING BRITAIN PROSPER

ESG BONDS & TERM DEPOSITS

Annual Report

Statement of Allocation

31st December 2015

2

I don’t believe that our responsible business activities are separate from any of our other business

activities. We have one strategy for delivering sustainable success – being the best bank for

customers – and doing business responsibly is inherent in this strategy.

The helping Britain Prosper Plan makes best sense for our Group because of our scale and

presence in communities across Britain. As a result, we believe no other bank is better placed to

help Britain prosper.

António Horta-Osório

CEO, Lloyds Banking Group

3

James Garvey

Managing Director, Capital Markets

Having demonstrated last year both the strong investor appetite for an ESG bond and also the

social and economic benefit such a bond could provide to disadvantaged communities across the

UK, we are confident that this new ESG bond will be similarly positively received by investors. We

are proud the Group is leading the way in this nascent investment area, whilst at the same time

creating a funding solution that also underpins the Group’s commitment to support SMEs within our

Helping Britain Prosper Plan.

CONTENTS

Introduction 5

Section 1: The ESG Bonds Aggregated Highlights 6

ESG Bonds Case Studies 10

Bond I Eligible Assets & Highlights as at 31st December 2015 14

Bond II Eligible Assets & Highlights as at 31st December 2015 19

Section 2: Term Deposit Eligible Assets & Highlights as at 31st December 2015 23

Appendix A: Reporting Criteria 27

Appendix B: PwC Assurance Report 37

4

ESG BONDS & TERM DEPOSITS INTRODUCTION

5

In support of its Helping Britain Prosper Plan, Lloyds Bank plc (the Bank) has the ESG Bond I, the ESG Bond II and two Term Deposits. All loans

allocated to the bonds and term deposits were made in accordance with the lending criteria described below and are within the reporting criteria set out

in Appendix A.

The £250 million ESG Bond I was issued on the 9th July 2014, maturing on 9th December 2018 and pays 2.75% fixed coupon semi annually. The

£250 million ESG Bond II was issued on the 1st June 2015, maturing on 1st June 2022 and pays 2.50% fixed coupon semi annually. There are

currently two 12 month fixed rate Term Deposits totalling £40m . Qualifying loans are matched to bonds and term deposits from 9th July 2014 to 31st

December 2015 and represent new bank lending.

All balances used throughout this report are sourced from Lloyds Bank source systems as at 31st December 2015. These loans underwent three tiers

of eligibility criteria, resulting in amounts allocated to the selected key performance indicators.

•SIC1 code screening to exclude alcohol, tobacco, gambling, military weapons, fossil fuels, palm oil and payday lending

Tier 1 Exclusionary Criteria

•Lloyds Bank Code of Business Responsibility (link)

•Lloyds Bank SME Charter (link)

Tier 2 Governance Criteria

Tier 3 Environmental and Social Criteria

Regional Growth Fund (RGF)

Small scale renewable energy projects

SMEs and healthcare providers in the

bottom 30% of economically

disadvantaged areas2

Small scale and mid market renewable

energy projects




Small scale renewable energy projects




1. SIC refers to Standard Industry Code

2. List of postcodes as defined by the Index of Multiple Deprivation produced by the Office for National Statistics

ESG BOND I ESG BOND II ESG TERM DEPOSITS

http://www.lloydsbankinggroup.com/globalassets/our-group/responsible-business/download-centre/lloyds-banking-group_code-of-business-responsibility_v3_2015.pdf

http://www.lloydsbank.com/business/who-we-are/charter.asp

SECTION 1: THE ESG

BONDS I & II

BOND I & BOND II AGGREGATED HIGHLIGHTS

7

£500m

Of allocated

eligible loans

93%

Allocated to 30% most

economically

disadvantaged areas

343

Jobs created or saved

through lending awarded

under the RGF

2,573

Qualifying

loans

£11m

Lent via the

RGF

£47m

Allocated to

Healthcare providers

44

Renewable

projects

£29m

Allocated to

Renewable Projects

8

ESG BONDS HIGHLIGHTS

£500m Allocation by Region

Central London North EastMidlands North WestSouth East Wales & BordersSouth West East MidlandsScotland East EnglandCentral England South Central

£500m Lending by Type1

RGFRenewablesHealthcareDisadvantaged Areas

1. Lending can meet one or more of the eligible criteria. For example, healthcare is a subset of the economically disadvantaged areas.

£29m Total Renewables

by Type

Wind Solar

Other Biomass

Anaerobic Hydro

ZE

ZE3

KW

KW

AL

B

BA

BB

BD

BHDT

GY

JE

BL

BN

BRBS

CA

CB

CF

CH

CM

CO

CR

CT

CV

CW

DA

DD

AB

DE

DG

DH

LD

DN

DY

EEC

EH

EN

EX

FY

GL

GU

HA

HD

HG

HP

HR

HS

HS

HU

HX

IG

IM

IP

IV

KA

KA

KT

KY

KY

L

LA

LD

LL

LLLN

LS

LU

M

ME

MK

ML

N

NE

NG

NN

NP

NR

NW

OL

FK

OX

PA

PA

PA

PA

PA

PA

PA

PA

PA

PA

PE

PH

PL

PO

PR

RG

RH

RM

S

SA

SE

SG

SK

SL

SM

SN

SOSP

SR

SS

ST

SW

SY

TA

TD

TF

TN

TQ

G

TR

LE

TS

TW

UB W

WA

WC

WD

WF

WN

WR

WS

WV

YO

BT

BR

CR

EEC

EN

H A

IG

KT

N

LONDON

NW

SE

SL

SM

SWTW

UBW

WC

WD

HEALTHCARE ALLOCATION BY REGION AND SECTOR

9

£46.8m of healthcare lending distributed across the UK to 154 customers

within the two Bonds. All sectors within Human Health and Social Work are

considered.

Over £14m provided to hospital activities, with a further £14m to general

medical practices.

Healthcare

£ millions

0 - 0.5

0.5 - 1

1 - 5

5 - 10

10+

Regional Loan Allocation by Value

£47m Lending

by Sector

Hospital activitiesGeneral medical practice activitiesDental practice activitiesOther residential care activitiesSocial work activities without accommodationMedical nursing home activitiesOther health activities

Healthcare Lending by Sector

ESG BONDS CASE

STUDIES

Two Bristol-based medical practices have

combined under one roof, moving to a new

state-of-the-art surgery to widen the services

on offer to patients. With the support of a

seven-figure funding package from Lloyds

Bank Commercial Banking, the partners at

Eastville Medical Practice and Maytrees

Medical Practice built a new surgery on East

Park Road, to help them meet the increased

requirements of Patients across the area.

The new surgery has space for 30 consulting

rooms, including a minor operations facility as

well as a dedicated base for community Nurses

and health visitors. Midwifery, speech and

language and podiatry services are also available,

and a number of clinical rooms will be used by

visiting services, such as physiotherapists.

The site also boasts a health Education room and

kitchen where health specialists and nutritionists

can teach people in the local area about the

benefits of healthy eating and cooking with fresh

ingredients.

Steve Hartnell, partner at Maytrees Medical

Practice, said: “Combining under one roof has

allowed us to create a progressive medical centre

that will not only be a clinical space but a resource

for the whole community.

“One problem facing a lot of people across Bristol

is that they aren’t registered to a local practice,

making it difficult for them to access the correct

care and support when needed. Situating both

practices in one place will enable us to widen the

range of support services on offer to patients, as

well as enabling us to significantly increase patient

numbers.”

The partners of both Practices approached Lloyds

Bank Commercial Banking’s specialist healthcare

team to gain funding for the site, after being

impressed by the team’s diverse range of

knowledge of the medical sector.

Steve Hartnell, added: “Building a new business

premises can often be a complex process,

especially when there are multiple partners

involved. Our professional team worked closely

with us to make buying the site as simple as

possible, and were always on hand to discuss any

worries or problems that we had.”

Steve Pratt, senior healthcare banking consultant

at Lloyds Bank Commercial Banking, said: “When

we spoke to the partners of both Eastville and

Maytrees Medical Practices’ we recognised that

building a new centre would benefit members of

the local community immensely, not only providing

exceptional medical care but offering additional

services.

We are dedicated to helping medical firms to

access the tailored funding needed to operate in

this complex sector, and our team of specialist

relationship managers are always on hand to offer

the tailored guidance and support needed to

grow.”

EASTVILLE & MAYTREES MEDICAL PRACTICE

11

CASE STUDY

From left: Steve Pratt of Lloyds Bank, Angela Toumi and Steve Hartnell, Managing Partners

of Eastville & Maytrees Medical Practices and Richard Saunders of Lloyds Bank.

STAIRCRAFT (MIDLANDS) LTD

12

Leading staircase manufacturer, Staircraft

(Midlands) Limited, has opened two new

sites in the West Midlands following a

£1.6million investment from Lloyds Bank.

The expansion came after the firm exceeded

its manufacturing capacity at its Nuneaton

base, and needed to identify new space. A

combined financial package of £700,000 from

Lloyds Bank Commercial Banking and

£900,000 from Lloyds Bank Commercial

Finance has now enabled the acquisition of a

new freehold unit in Coventry, together with

the lease of an additional production space in

Wednesbury.

With more than 25 years of experience in the

sector, Staircraft, which produces wooden

staircases for major house builders, is using

the funding to reinforce its status as one of the

leading national suppliers in its field.

Through the expansion, Staircraft expects to

increase its sales turnover from £6million to

around £10million in 2014, growing to an

estimated £15million next year. In line with its

increased capacity, the move has also seen

approximately 50 new roles offered between

the two additional manufacturing sites,

increasing its employee numbers to 150.

Throughout the fundraising process, Staircraft

was assisted by Coventry and Leamington

based accountants and financial advisors

Harrison Beale & Owen which also helped to

secure additional funding through the

Regional Growth Fund provided by the

Coventry and Warwickshire Local Enterprise

Partnership.

The Regional Growth Fund is a Government

initiative that provides grants to SMEs looking

to purchase new assets and create economic

growth and local employment opportunities.

Andrew Hamilton, Director at Staircraft

(Midlands) Limited, said: “After exceeding our

production capabilities at our Nuneaton base,

it was vital for us to secure new premises in

order to meet customer demand for our

products, and we are pleased to announce our

expansion into Coventry and the Black

Country.”

Kevin Roberts, Relationship Director at Lloyds

Bank Commercial Banking, said: “We’re

passionate about helping to drive the

economic recovery by providing access to

lending for businesses, and we’re pleased to

have worked with Staircraft on this ambitious

plan for growth.”

Lauro Rodi, Regional Manager at Lloyds Bank

Commercial Finance in the Midlands, said:

“The financial package we’ve provided to

Staircraft (Midlands) Limited has allowed it to

spread the cost of its investment over a fixed

term, enabling a more manageable and

beneficial acquisition process.

“We’re committed to working with

businesses to demonstrate how they can

benefit from asset finance funding, offering

a means to realise growth ambitions

without any adverse impact on day-to-day

operations.”

“The support of Lloyds Bank has allowed us to realise

our vision for growth in the Midlands, and through this

investment, we are looking forward to maximising our

performance as a business, whilst creating new jobs for

the local community.” Andrew Hamilton, Director, Staircraft (Midlands) Ltd

From left: Kevin Roberts, Lauro Rodi of Lloyds and Andrew

Hamilton, Director at Staircraft (Midlands) Ltd

CASE STUDY

An Oldbury-based provider of supported

living for adults with learning and physical

difficulties and autism is to open a new

facility in Birmingham, following an

investment of over £300,000 from Lloyds

Bank Commercial Banking.

The package will fund the latest

expansion for Livewell

(Care & Support) Ltd, as it

prepares to open a new project

in Great Barr, which will feature

accommodation for six people

requiring supported living care

in a socially inclusive

community environment.

The project is the company’s

biggest scheme to date, and will

also generate up to 15 new jobs

in the next 12 months, reinforcing

Lloyds Bank’s commitment to

helping to drive the economy by

supporting the growth of small

businesses within the healthcare

sector.

Founded in 2011, Livewell works

with adults living with autism,

learning and physical disabilities and other

long-term health conditions, and provides

specialist supported living and domiciliary

care.

The company specialises in encouraging

social inclusion, enablement, independence,

choice and autonomy, whilst involving family

and friends to enhance the levels

of support provided. Livewell currently

provides support to 30 people across the

Midlands, ranging from three hours of care

per day to a round-the-clock service.

It works with individuals both in their own

home and in the supported living properties

and, with the support of Lloyds Bank, this

number is set to increase to 48 before the

end of 2014.

Jayne Watkins, Director at Livewell (Care &

Support) Ltd, said: “Since 2011, we have

been working hard to provide

support to adults living with

autism, learning disabilities

and other long-term health

conditions, and this

investment from Lloyds Bank

has helped us to activate our

biggest project to date.”

Andy Pearson, Relationship

Manager at Lloyds Bank

Commercial Banking, said:

“At Lloyds Bank, we pride

ourselves on our in-depth

understanding of the

specific requirements of the

healthcare industry, and

we’re proud to be

supporting Livewell as it

presses ahead with its latest

expansion.

“This is a package which underpins our

commitment to the sector, helping to

safeguard the availability of quality care and

support here in the Midlands.”

LIVEWELL (CARE & SUPPORT) LTD

13

From left: Jayne Watkins, Nick Stanley and Raj Rana from Livewell (Care & Support) Ltd

“In the planning stages of the project, Lloyds

Bank stood out to us thanks to its innovative

approach and understanding of what we were

trying to do. The team have been great to work

with, and we thank them for their support.” Jayne Watkins, Director, Livewell (Care & Support) Ltd.

CASE STUDY

THE ESG BOND I

Eligible Assets & Highlights

BOND I ELIGIBLE ASSETS: AS AT 31 DECEMBER 2015

15

TOTAL ALLOCATION

£250.0m

of eligible loans allocated

ECONOMICALLY DISADVANTAGED AREAS

£241.1m

of eligible loans allocated to the 30% most

economically disadvantaged areas1

HEALTHCARE

£17.1m

allocated to healthcare providers in the 30% most


REGIONAL GROWTH FUND

£10.7m

lent to customers who have been awarded

grants through the Regional Growth Fund1

RENEWABLE ENERGY

£1.1m

allocated to small scale renewable

energy projects1

- indicator has been subject to limited independent assurance. PwC’s assurance report can be found in Appendix B.

1. Lending can meet one or more of the above eligible criteria. For example, healthcare is a subset of the economically disadvantaged areas.

A

A

A

A

A

A

BOND I HIGHLIGHTS

16

£250m

Of eligible

loans

100%

Of the bond

allocated

96%

Allocated to 30%

most economically

disadvantaged areas

343

Jobs created or saved

through lending awarded

under the RGF

1,394

Qualifying

loans

£11m

Lent via the

RGF

£17m

Allocated to

Healthcare

providers

4

Renewable

projects

ZE

ZE3

KW

KW

AL

B

BA

BB

BD

BHDT

GY

JE

BL

BN

BRBS

CA

CB

CF

CH

CM

CO

CR

CT

CV

CW

DA

DD

AB

DE

DG

DH

LD

DN

DY

EEC

EH

EN

EX

FY

GL

GU

HA

HD

HG

HP

HR

HS

HS

HU

HX

IG

IM

IP

IV

KA

KA

KT

KY

KY

L

LA

LD

LL

LLLN

LS

LU

M

ME

MK

ML

N

NE

NG

NN

NP

NR

NW

OL

FK

OX

PA

PA

PA

PA

PA

PA

PA

PA

PA

PA

PE

PH

PL

PO

PR

RG

RH

RM

S

SA

SE

SG

SK

SL

SM

SN

SOSP

SR

SS

ST

SW

SY

TA

TD

TF

TN

TQ

G

TR

LE

TS

TW

UB W

WA

WC

WD

WF

WN

WR

WS

WV

YO

BT

BR

CR

EEC

EN

H A

IG

KT

N

LONDON

NW

SE

SL

SM

SWTW

UBW

WC

WD

THE ESG BOND I: OVERALL ALLOCATION SUMMARY

17

The £250m bond is fully allocated as at 31st December 2015.

Lending across the UK in 98 of 122 postcode areas

Average loan per customer equates to £179k

A total of 1,394 qualifying loans across 17 industrial sectors £ millions

0 - 0.5

0.5 - 1

1 - 5

5 - 10

10+

UK Regional Loan Allocation by Value

Loan Value by Criteria (£ millions)

Deprived Area

Regional Growth

Fund

Healthcare RenewableEnergy

221.1

17.1

7.8

2.9

1.1

ZE

ZE3

KW

KW

AL

B

BA

BB

BD

BHDT

GY

JE

BL

BN

BRBS

CA

CB

CF

CH

CM

CO

CR

CT

CV

CW

DA

DD

AB

DE

DG

DH

LD

DN

DY

EEC

EH

EN

EX

FY

GL

GU

HA

HD

HG

HP

HR

HS

HS

HU

HX

IG

IM

IP

IV

KA

KA

KT

KY

KY

L

LA

LD

LL

LLLN

LS

LU

M

ME

MK

ML

N

NE

NG

NN

NP

NR

NW

OL

FK

OX

PA

PA

PA

PA

PA

PA

PA

PA

PA

PA

PE

PH

PL

PO

PR

RG

RH

RM

S

SA

SE

SG

SK

SL

SM

SN

SOSP

SR

SS

ST

SW

SY

TA

TD

TF

TN

TQ

G

TR

LE

TS

TW

UB W

WA

WC

WD

WF

WN

WR

WS

WV

YO

BT

BR

CR

EEC

EN

H A

IG

KT

N

LONDON

NW

SE

SL

SM

SWTW

UBW

WC

WD

RGF ALLOCATION BY REGION AND SECTOR

18

RGF £10.7m of lending to customers who have been awarded grants through the

regional growth fund .

343 jobs created or saved across the UK as a result of the grants awarded.

The regional growth fund scheme closed on 3rd December 2015, therefore as

of this date no further RGF grants have been issued.

Regional Jobs Created or Safeguarded

Jobs

0 - 5

5 - 10

10 - 20

20 - 30

30+

RGF by Sector

ManufacturingConstructionProfessional, Scientific & TechnicalTransportation & StorageWholesale & Retail TradeAdministrative & SupportInformation & CommunicationWater Supply, Sewerage & Waste MngtAccommodation & FoodReal Estate

RGF by Sector

THE ESG BOND II

Eligible Assets & Highlights

BOND II ELIGIBLE ASSETS: AS AT 31 DECEMBER 2015

20

TOTAL ALLOCATION

£250.0m



£222.6m



HEALTHCARE

£29.7m

allocated to healthcare providers in the 30%

most economically disadvantaged areas1

RENEWABLE ENERGY

£27.4m

allocated to small scale and mid market

renewable energy projects1



A

A

A

A

A

BOND II HIGHLIGHTS

21

£250m

Of eligible

loans

100%

Of the bond

allocated

89%

Allocated to 30% most

economically

disadvantaged areas

1,179

Qualifying

loans

£30m

Allocated to


40

Renewable

projects

ZE

ZE3

KW

KW

AL

B

BA

BB

BD

BHDT

GY

JE

BL

BN

BRBS

CA

CB

CF

CH

CM

CO

CR

CT

CV

CW

DA

DD

AB

DE

DG

DH

LD

DN

DY

EEC

EH

EN

EX

FY

GL

GU

HA

HD

HG

HP

HR

HS

HS

HU

HX

IG

IM

IP

IV

KA

KA

KT

KY

KY

L

LA

LD

LL

LLLN

LS

LU

M

ME

MK

ML

N

NE

NG

NN

NP

NR

NW

OL

FK

OX

PA

PA

PA

PA

PA

PA

PA

PA

PA

PA

PE

PH

PL

PO

PR

RG

RH

RM

S

SA

SE

SG

SK

SL

SM

SN

SOSP

SR

SS

ST

SW

SY

TA

TD

TF

TN

TQ

G

TR

LE

TS

TW

UB W

WA

WC

WD

WF

WN

WR

WS

WV

YO

BT

BR

CR

EEC

EN

H A

IG

KT

N

LONDON

NW

SE

SL

SM

SWTW

UBW

WC

WD

THE ESG BOND II: OVERALL ALLOCATION SUMMARY

22

The £250m bond is fully allocated as at 31st December 2015.



A total of 1,179 qualifying loans across 19 industrial sectors £ millions

0 - 0.5

0.5 - 1

1 - 5

5 - 10

10+


Loan Value by Criteria (£ millions)

29.7

192.9 27.4

Deprived Area

Healthcare

RenewableEnergy

SECTION 2: THE ESG

TERM DEPOSITS

TERM DEPOSIT ELIGIBLE ASSETS: AS AT 31 DECEMBER 2015

24

TOTAL ALLOCATION

£40.0m



£40.0m



HEALTHCARE

£3.2m

allocated to healthcare providers in the 30%

most economically disadvantaged areas1



A

A

A

A

TERM DEPOSIT HIGHLIGHTS

25

£40m

Of allocated eligible loans

£3m

Allocated to


224

Qualifying

loans

100%

allocated to 30% most

economically disadvantaged areas

ZE

ZE3

KW

KW

AL

B

BA

BB

BD

BHDT

GY

JE

BL

BN

BRBS

CA

CB

CF

CH

CM

CO

CR

CT

CV

CW

DA

DD

AB

DE

DG

DH

LD

DN

DY

EEC

EH

EN

EX

FY

GL

GU

HA

HD

HG

HP

HR

HS

HS

HU

HX

IG

IM

IP

IV

KA

KA

KT

KY

KY

L

LA

LD

LL

LLLN

LS

LU

M

ME

MK

ML

N

NE

NG

NN

NP

NR

NW

OL

FK

OX

PA

PA

PA

PA

PA

PA

PA

PA

PA

PA

PE

PH

PL

PO

PR

RG

RH

RM

S

SA

SE

SG

SK

SL

SM

SN

SOSP

SR

SS

ST

SW

SY

TA

TD

TF

TN

TQ

G

TR

LE

TS

TW

UB W

WA

WC

WD

WF

WN

WR

WS

WV

YO

BT

BR

CR

EEC

EN

H A

IG

KT

N

LONDON

NW

SE

SL

SM

SWTW

UBW

WC

WD

TERM DEPOSIT: OVERALL ALLOCATION SUMMARY

26

The £40m term deposits are fully allocated as at 31st December 2015.


£40m allocated to the 30% most economically disadvantaged

areas of the UK


A total of 224 qualifying loans across 18 industrial sectors

£3m allocated to Healthcare providers

£ millions

0 - 0.5

0.5 - 1

1 - 5

5 - 10

10+


APPENDIX A

Reporting Criteria

APPENDIX A – CONTENTS

Introduction 29

Total amount of lending to SMEs 32

Total amount of lending to Healthcare providers 33

Total amount of lending to participants of the RGF 34

Total amount of lending to renewable projects 35

Tier 1 Exclusionary List 36

28

APPENDIX A – REPORTING CRITERIA

29

The Reporting Criteria document details the approach and scope used to allocate qualifying loans to the ESG Bond I and II and the ESG Term Deposits.

Background

The loans allocated to the ESG Bond I were assessed in accordance with the eligibility criteria agreed in conjunction with Sustainalytics, the Bank’s sustainability partner. The same eligibility criteria has been applied to the loans allocated to the ESG Bond II and the ESG Term Deposits.

A process to identify all loans to SMEs from Lloyds Bank systems has been put in place. These loans then undergo 3 tiers of eligibility criteria resulting in amounts allocated to selected key performance indicators.

Period covered by the data for the Bonds:

The period in scope is from bond issue or when the deposit was placed with Lloyds Bank. These are as follows:

• ESG Bond I: 9th July 2014 to 31st December 2015

• ESG Bond II: 1st June 2015 to 31st December 2015

Period covered by the data for the Term Deposits:

• Term Deposit : 1st May 2015 to 31st December 2015

Scope and Organisation Boundary for ESG Reporting

The scope covers the loans allocated to the ESG Bonds, which have been issued by Lloyds Banking Group, and the ESG Term Deposits, all of which meet numerous eligibility criteria.

Introduction


30

Bond I

1. Total amount allocated to the bond issue.

2. Total amount of lending to Small and Medium sized enterprises (“SMEs”) in the most economically disadvantaged areas.

3. Total amount of lending to Healthcare Providers in the most economically disadvantaged areas.

4. Total amount of lending to enterprises which have been awarded grants through the UK’s Regional Growth Fund (“RGF”).

5. Total amount of lending to small scale renewable energy projects.

Bond II

1. Total amount allocated to the bond issue.



4. Total amount of lending to small scale and mid market renewable energy projects.

Term Deposit

1. Total amount allocated to the term deposit.



Key Performance Indicators


31

Tier 1: Exclusionary Criteria

Lloyds Bank has categorised borrowers in accordance with Standard Industrial Classification (“SIC”) code. The SIC is a system for

classifying industries by a five-digit code. Lloyds Bank has agreed a list of SIC codes with Sustainalytics, the Bank’s sustainability partner,

for the ESG Bond I, which covers the sectors to be excluded. The same exclusionary criteria has been used for the ESG Bond II and the

ESG Term Deposits.

Tier 2: Governance/Responsible Lending Criteria

1. Loans must comply with Lloyds Bank code of business responsibility and

2. Loans must comply with Lloyds Bank SME charter

Tier 3: Environmental and Social Criteria

SMEs or agricultural enterprises that pass through Tiers 1 and 2 criteria are available for allocation to the ESG Bonds I and II and the ESG

Term Deposits if they fulfil one or more of the following criteria:

1. SME is located in the 30% most economically disadvantaged areas of the UK. Disadvantaged areas are determined using the Index

of Multiple Deprivation (IMD) published by the Office for National Statistics.

2. Healthcare providers located in the 30% most economically disadvantaged areas of the UK.

3. Enterprises which have been awarded grants through the UK’s Regional Growth Fund (“RGF”) – Bond I only

4. Small scale renewable projects that increase energy efficiency or climate change resilience (including flood recovery) of operations

(for Bond II only, AMC and Mid Market loans are also considered in addition to SMEs).

Loan Allocation

All loans allocated to the ESG Bonds I and II and the ESG Term Deposits represent new to bank lending from 9th July 2014 to 31st

December 2015. This includes any new lending applications by existing or new qualifying customers. The allocated amount is the amount

lent not the committed value and as a result material drawings and repayments (greater than 20% of the drawn value) are considered.

Allocated amounts may include an upfront arrangement fee depending on the terms and conditions of the loan.

Reporting

As at the 31st December 2015 the ESG Bonds I and II and the ESG Term Deposits were fully allocated. An annual report will be produced

as at 31st December of each corresponding year until maturity of the ESG Bonds I and II and the ESG Term Deposits.


32

Definition Product This Key Performance Indicator (“KPI”) measures the amount of lending to SMEs in the most economically disadvantaged areas of the

UK.

Scope Bond I, Bond II,

Term Deposit

The KPI applies to all lending across the UK.

Bond I It covers the period from 9th July 2014 to 31st December 2015.

Bond II It covers the period from 1tstJune 2015 to 31st December 2015.

Term deposit It covers the period from 1tstMay 2015 to 31st December 2015.

Units Bond I, Bond II,

Term Deposit

Total amount of lending (£) drawn during the above mentioned periods.

Method Bond I, Bond II,

Term Deposit

The total amount of new lending drawn during the above period by SME customers.

This KPI applies to all lending across postcode areas within the UK.

Lending from our core systems (“ACBS” and “CAP”) covering both fixed and floating rate lending as well as Hire Purchase Agreements sourced

from our Commercial Finance team have been retrieved and filtered to ensure compliance with Tier 1 and Tier 2 Criteria. All data is considered and

where data quality is an issue, such loans are excluded from the amount allocated to the bond.

Tier 1 filtering is based on excluding lending to companies within certain industrial sectors. A defined set of Standard Industrial Classification

(“SIC”) codes agreed with our sustainability partner (Sustainalytics) is used. These can be found on slide 35.

Tier 2 filtering is based on responsible lending and covers compliance with Lloyds Bank code of business responsibility and SME charter. Such

compliance is monitored through various businesses as usual governance committees. In addition to this a qualifying sample of eligible loans is

distributed to the front line to attest compliance.

The remaining population is filtered to ensure compliance with our Tier 3 criteria, which, in the case of this KPI, identifies lending to SMEs in the

most economically disadvantaged areas. This KPI relates to lending in the 30% most economically disadvantaged areas of the UK. To determine

all loans eligible, the post code for each loan is mapped to the Index of Multiple Deprivation and the bottom 30% of postcodes are used to create

this KPI.

Source Bond I, Bond II,

Term Deposit

Lending activity has been sourced from our core systems.

Bond I Hire Purchase Agreements have been sourced from our Commercial Finance Team.

Bond I, Bond II,

Term Deposit

The most economically disadvantaged area has been defined using the Index of Multiple Deprivation (“IMD”) published by the Office for National

Statistics (”ONS”).

Total amount of lending to Small and Medium Sized Enterprises (“SMEs”) in the most

economically disadvantaged areas


33

Definition Product This Key Performance Indicator (“KPI”) monitors the amount of lending to Healthcare Providers within the most economically disadvantaged areas of the

UK.

Scope Bond I, Bond II,

Term Deposit

The KPI applies to all lending across the UK.



Term Deposit It covers the period from 1tstMay 2015 to 31st December 2015.

Units Bond I, Bond II,

Term Deposit

Total amount of lending (£) drawn during the above mentioned period.

Method

Bond I, Bond II,

Term Deposit


This KPI applies to all lending across postcode areas within the UK.

The KPI monitors the amount of lending to Healthcare Providers within the most economically disadvantaged areas of the UK.

Lending from our systems (“ACBS” and “CAP”) covering both fixed and floating rate lending as well as Hire Purchase Agreements sourced from our Commercial

Finance team has been retrieved and filtered to ensure compliance with Tier 1 and Tier 2 Criteria. All data is considered and where data quality is an issue such

loans are excluded from the amount allocated to the bond.

Tier 1 filtering is based on excluding lending to companies within certain industrial sectors. A defined set of Standard Industrial Classification (“SIC”) codes agreed

with our sustainability partner (Sustainalytics) is used. These can be found on slide 35.

Tier 2 filtering is based on responsible lending and covers compliance with Lloyds Bank code of business responsibility and SME charter. Such compliance is

monitored through various businesses as usual governance committees. In addition to this a qualifying sample of eligible loans is distributed to the front line to attest

compliance.

The remaining population is filtered to ensure compliance with our Tier 3 criteria. This KPI relates to lending in:

a. The 30% most economically disadvantaged areas of the UK. To determine all loans eligible, the post code for each loan is mapped to the Index of Multiple

Deprivation, and the bottom ranked 30% of the postcodes are used.

b. Healthcare Providers. To determine qualifying Healthcare Providers, SIC codes have been used covering sectors within Human Health and Social Work.

Source Bond I, Bond II,

Term Deposit



Bond I, Bond II,

Term Deposit

The most economically disadvantaged area has been defined using the Index of Multiple Deprivation (“IMD”) published by the Office for National Statistics (”ONS”).

Bond I, Bond II,

Term Deposit

The 2007 SIC Codes for Human Health and Social Work have been used.

Section Q: Human Health and Social Work Activities

Division 86: Human Health Activities

Division 87: Residential Care Activities

Division 88: Social work Activities without accommodation

Total amount of lending to Healthcare Providers in the most disadvantaged areas


34

Total amount of lending to participants of the Regional Growth Fund

Definition Product This Key Performance Indicator (“KPI”) monitors the amount of lending awarded to recipients of the Regional Growth Fund (“RGF”).

Scope Bond I The KPI applies to all lending that meets the criteria of the Department for Business, Innovation & Skills scheme. Grants are awarded to qualifying

companies for asset purchases by SMEs that lack sufficient deposits to meet Lloyds Bank normal lending requirements.

London is excluded from the RGF and only 8% of allocated grants can be in the South East England so as to promote employment in areas where it is

most required.

Lloyds Bank can contribute up to 20% of the value of assets purchased by qualifying SMEs.


Units Bond I Total amount of lending drawn during the above mentioned period.

Method

Bond I The total amount of new lending drawn during the above period by SME customers.

Bond I

Lending from our core systems (“ACBS” and “CAP”) covering both fixed and floating rate lending as well as Hire Purchase Agreements sourced from our

Commercial Finance team has been retrieved and filtered to ensure compliance with Tier 1 and Tier 2 Criteria. All data is considered and where data

quality is an issue such loans are excluded from the amount allocated to the bond.

Tier 1 filtering is based on excluding lending to companies within certain industrial sectors. A defined set of Standard Industrial Classification (“SIC”) codes

agreed with our sustainability partner (Sustainalytics) is used. These can be found on slide 35.

Tier 2 filtering is based on responsible lending and covers compliance with Lloyds Bank code of business responsibility and SME charter. Such compliance

is monitored through various businesses as usual governance committees. In addition to this a qualifying sample of eligible loans is distributed to the front

line to attest compliance.

The remaining population is filtered to ensure compliance with our Tier 3 criteria, which in the case of this KPI relates to two types of lending:

a. Outright lending for asset purchases that have been approved for grants. These loans are booked to core systems, ACBS and CAP.

b. Assets purchased through Hire Purchase Agreements. These loans are appended to the dataset as lending administered throughout Commercial

Finance Teams.

The above qualifying drawn loans are mapped to the SME inventory sourced from core systems or appended (in the case of Hire Purchase Agreements)

following confirmation that such lending has taken place by our Commercial Finance Team.

Source Bond I Lending activity has been sourced from our core system or confirmed by Commercial Finance.


Bond I A complete view of RGF activity is received from the Specialist Business Lending Unit. This covers both types of lending mentioned above.


35

Total amount of lending to small scale renewable energy projects

Definition Product This Key Performance Indicator (“KPI”) monitors the amount of lending to small scale renewable energy projects.

Scope Bond I & Bond II

The KPI applies to all lending related to small renewable energy projects.

Lloyds Bank provide loans to help SMEs and Mid Market customers in the agricultural sector to undertake small-scale renewable energy projects including

(but not restricted to) wind, solar, hydro and anaerobic digestion.



Units Bond I & Bond II

Total amount of lending drawn during the abovementioned period.

Method Bond I


Bond II The total amount of new lending drawn during the above period by SME, AMC and Mid Market customers.

Bond I & Bond II

Lending from our core systems (“ACBS” and “CAP”) covering both fixed and floating rate lending as well as Hire Purchase Agreements sourced from our

Commercial Finance team has been retrieved and filtered to ensure compliance with Tier 1 and Tier 2 Criteria. All data is considered and where data quality

is an issue such loans are excluded from the amount allocated to the bond.

Tier 1 filtering is based on excluding lending to companies within certain industrial sectors. A defined set of Standard Industrial Classification (“SIC”) codes

agreed with our sustainability partner (Sustainalytics) is used. These can be found on slide 35.

Tier 2 filtering is based on responsible lending and covers compliance with Lloyds Bank code of business responsibility, and additionally the SME charter for

SME loans only. Such compliance is monitored through various businesses as usual governance committees. In addition to this a qualifying sample of

eligible loans is distributed to the front line to attest compliance. The remaining population is filtered to ensure compliance with our Tier 3 criteria.

The above qualifying SME drawn loans from the data provided by the SME Banking Credit team are mapped to the SME inventory sourced from core

systems, to enable qualifying loans to be clearly attributed to the bond. Qualifying mid market drawn loans are provided by the Relationship Managers.

Qualifying AMC drawn loans are provided by the SME Business Partner Finance team and mapped to the AMC inventory sourced from core systems to

enable qualifying loans to be clearly attributed to the bond.

Bond II Renewables are prioritised in the allocation methodology.

Source Bond I & Bond II


Bond I & Bond II

Hire Purchase Agreements have been sourced from our Commercial Finance Team.

Bond I & Bond II

A summary view of qualifying SME activity received from the SME banking credit team.


36

Tier 1: Exclusionary Criteria

Exclusionary Criteria SIC 2007 Code Description

Alcohol

46342 Wholesale of wine, beer, spirits and other alcoholic beverages

11010 Distilling, rectifying and blending of spirits

11020 Manufacture of wine from grape

Gambling 92000 Gambling and betting activities

Tobacco

01150 Growing Tobacco

12000 Manufacture of tobacco products

46350 Wholesale of tobacco products

47260 Retail sale of tobacco products in specialised store

Military Weapons 30400 Manufacture of military fighting vehicles

25400 Manufacture of weapons and ammunition

Payday Lending

64999 Financial Intermediation

64929 Other Credit Granting

64921 Specialist consumer credit grantors

Fossil Fuels

05101 Deep coal mines

05102 Open cast coal mines

05200 Mining of lignite

06100 Extraction of crude petroleum

06200 Extraction of natural gas

08920 Extraction of peat

20110 Manufacture of industrial gases

19100 Manufacture of coke oven products

35210 Manufacture of gas

Palm Oil

01260 Oil Palm Growing

10410 Palm Oil Production/Refining

46630 Wholesale of dairy products, eggs & edible oils and fats

APPENDIX B

PwC Assurance Report

_Lpwc

Our conctusionBased on the procedures we have performed and the evidence we have obtained, nothinghas come to our attention that causes us to believe that the Selected Information as at 31

December 2015 has not been prepared, in all material respects, in accordance with theReporting Criteria.

This conclusion is to be read in the context of what we say in the remainder of our report.

Selected Information

The scope of our work was limited to assurance over the information marked with the symbol inLloyds Bank plc’s Helping Britain Prosper ESG Bonds & Term Deposits: Annual Report, Statement ofAllocation as at 31 December 2015 (the “Selected Information”).The Selected Information and the Reporting Criteria against which it was assessed are summarised inthe table below. Our assurance does not extend to information in respect of earlier periods or to anyother information included in Lloyds Bank plc’s Helping Britain Prosper ESG Bonds & Term Deposits:Annual Report, Statement of Allocation as at 31 December 2015.

Selected Information Reporting Criteria*

ESGBondI• Total ligible loans allocated - Page 31

: Total allocated to 30% most economically disadvantaged areas Page 32• Total allocated to healthcare providers located within the 30% Page 33

most economically disadvantaged areas• Total lending to customers who have been awarded grants Page 34

through the regional growth fund .

-

. Total allocated to small scale renewable energy projects Page 35ESG Bond II

• Tot•• eligible loans allocated Page 31

• Total allocated to 30% most economically disadvantaged areas Page 32

• Total allocated to healthcare providers located within the 30% Page 33most economically disadvantaged areas

. Total allocated to renewable energy projects Page 35Term Deposit

. Total eligible loans allocated; Page i

. Total allocated to 30% most economically disadvantaged Page 32areas; and

• Total allocated to healthcare providers located within the 30% Page 33most economically disadvantaged areas.

Professional standards applied and level ofassurance

We performed a limited assurance engagement in accordance with International Standard onAssurance Engagements 3000 (Revised) ‘Assurance Engagements other than Audits and Reviews ofHistorical Financial Information’ issued by the International Auditing and Assurance StandardsBoard. A limited assurance engagement is substantially less in scope than a reasonable assuranceengagement in relation to both the risk assessment procedttres, including an understanding of internalcontrol, and the procedures performed in response to the assessed risks.

Our Independence and Quahizj ControlWe applied the Institute of Chartered Accountants in England and Wales (ICAEW) Code of Ethics,which includes independence and other requirements founded on fundamental principles of integrity,objectivity, professional competence and due care, confidentiality and professional behaviour.We apply International Standard on Quality Control (UK & Ireland) 1 and accordingly maintain acomprehensive system of quality control including documented policies and procedures regardingcompliance with ethical requirements, professional standards and applicable legal and regulatoryrequirements.Our work was carried out by an independent and multi-disciplinary team with experience insustainability reporting and assurance.

Understanding reporting and measurement methodologies

The Selected Information needs to be read and understood together with the Reporting Criteria, whichLloyds Bank plc is solely responsible for selecting and applying. The absence of a significant body ofestablished practice on which to draw to evaluate and measure non-financial information allows fordifferent, but acceptable, measurement techniques and can affect comparability between entities andover time. The Reporting Criteria used for the reporting of the Selected Information are as at 31

December 2015.

IVork done

We are required to plan and perform our work in order to consider the risk of material misstatementof the Selected Information. In doing so, we:• made enquiries of Lloyds Bank plc’s management, including those with responsibility for the Helping

Britain Prosper ESG Bonds & Term Deposits: Annual Report, Statement of Allocation as at 31

December ors;• evaluated the design of the key structures, systems, processes and controls for managing, recording

and reporting the Selected Information. This included analysing a limited number of lendingprojects, selected on the basis of our risk assessment to understand the key processes and controlsfor reporting the Selected Information;

• performed limited substantive testing on a selective basis of the Selected Information in relation to alimited number of lending projects to check that data had been appropriately measured, recorded,collated and reported; and

• considered the disclosure and presentation of the Selected Information.

Independent Limited Assurance Report to the Directors of Lloyds Bank plc

The Board of Directors of Lloyds Bank plc engaged us to provide limited assurance on the information described below and set out in Lloyds Bank plc’s Helping BritainProsper ESG Bonds & Term Deposits: Annual Report, Statement of Allocation as at 31 December 2015.

* Pages referred to in the table above refer to the Reporting Criteria as set out on pages 28 to 36 ofLloyds Bank plc’s Helping Britain Prosper ESG Bonds & Term Deposits: Annual Report, Statement ofAllocation as at 31 December 2015’.

38

— Independent Limited Assurance Report to the Directors of Lloyds Bank plcpwc

The Board of Directors of Lloyds Bank plc engaged us to provide limited assurance on the information described below and set out in Lloyds Bank plc’s Helping BritainProsper ESG Bonds & Term Deposits: Annual Report, Statement of Allocation as at 31 December 2015.

Lloyds Bank plc’s rc:sportsibitities

The Directors of Lloyds Bank plc are responsible for:designing, implementing and maintaining internal controls over information relevant to thepreparation of the Selected Information that is free from material misstatement, whether due to fraudor error;

• establishing objective Reporting Criteria for preparing the Selected Information;• measuring and reporting the Selected Information based on the Reporting Criteria; and• the content of the Helping Britain Prosper ESG Bonds & Term Deposits: Annual Report, Statement

of Allocation as at 31 December 2015.

Ottr responsibilities

We are responsible for:• planning and performing the engagement to obtain limited assurance about whether the Selected

Information is free from material misstatement, whether due to fraud or error;• forming an independent conclusion, based on the procedures we have performed and the evidence

we have obtained; and• reporting our conclusion to the Directors of Lloyds Bank plc.

This report, including our conclusions, has been prepared solely for the Board of Directors of LloydsBank plc in accordance with the agreement between us, to assist the Directors in reporting the HelpingBritain Prosper ESG Bonds & Term Deposits: Annual Report, Statement of Allocation as at 31

December 2015. We permit this report to be disclosed on Lloyds Bank plc’s website, to assist theDirectors in responding to their governance responsibilities by obtaining an independent assurancereport in connection with the Selected Information. To the fullest extent permitted by law, we do notaccept or assume responsibility to anyone other than the Board of Directors and Lloyds Bank plc forour work or this report except where terms are expressly agreed between us in writing.

(Lf

PricewaterhouseCoopers LLPChartered AccountantsLondon31 March 2016

‘The maintenance and integrity of Uovds Bank plc’s website is the responsibility of the Directors; the work carried out by us does not

involve consideration of these matters and, accordingly, we accept no responsibility for any changes that mat have occurred to the

reported Selected Information or Reporting criteria when presented on Lloyds Bank plc’s website,

39

IMPORTANT INFORMATION

40

This Report, its contents and any related communication (altogether, the “Report”): (i) does not constitute or form part of any offer to sell or an invitation to subscribe

for, hold or purchase any securities or any other investment; (ii) shall not form the basis of or be relied on in connection with any transaction, contract or commitment

whatsoever; (iii) is provided for information purposes only and is not intended to form, and should not form, the basis of any investment decision; (iv) is not and should

not be treated as investment research, a research recommendation, an opinion or advice; (v) is confidential and has been prepared by, and is subject to the copyright

of, Lloyds Bank plc or its affiliates (together, “Lloyds Bank”); (vi) is in summary form and therefore may not be complete; (vii) may refer to future events which may or

may not be within the control of Lloyds Bank, and its group companies, and its or their directors, officers, employees, associates and agents (altogether, “Lloyds

Persons”), and no representation or warranty, express or implied, is made as to whether or not such an event will occur; (viii) is subject to change at any time and

Lloyds Bank is under no obligation to inform any person of any such change; (ix) may only be sent to recipients who may lawfully receive it in accordance with

applicable law, regulation and rule of regulatory body (“Laws”); and (x) is not being distributed to and must not be passed on to the general public in the U.K., and may

only be distributed in the U.K. to persons who are investment professionals within the meaning of Article 19 of the Financial Services and Markets Act 2000 (Financial

Promotion) order 2005 (the “Order”), or are persons falling within Article 49(2)(a) to (d) of the Order (all such persons being “Relevant Persons”), is directed only at

Relevant Persons and must not be acted on or relied on by persons who are not Relevant Persons.

Securities services offered in the United States are offered by Lloyds Securities Inc. (“LSI”), a broker-dealer registered with the U.S. Securities and Exchange

Commission and a member of the U.S. Financial Industry Regulatory Authority. LSI services are provided only in the United States.

Lloyds Bank has exercised reasonable care in preparing this Report (and in confirming that where any information or opinion in this Report is from or based on a third

party source, that the source is accurate and reliable), however, no representation or warranty, express or implied, is made as to the accuracy, reliability or

completeness of the facts contained in this Report by Lloyds Persons. This report may refer to future events which may or may not be within the control of Lloyds

Persons, and no representation or warranty, express or implied, is made as to whether or not such an event will occur. To the fullest extent permitted by Laws, Lloyds

Persons accept no responsibility for and shall have no liability for any loss (including without limitation direct, indirect, consequential and loss of profit), damages, or

for any liability to a third party however arising in relation to this Report (including without limitation in relation to any projection, analysis, assumption and opinion in

this Report). Lloyds Bank reserves the right to terminate discussions with any recipient in its sole and absolute discretion at any time and without notice.

By accessing, viewing, attending or reading this Report, and by not immediately returning or deleting it, or leaving, you confirm and represent that: (a) you understand

and agree to the contents of this important notice; (b) you are a person that may lawfully receive this Report in accordance with Laws applicable to you including those

of the jurisdiction in which you are located; (c) if you are not located in the U.S., you are not a U.S. Person, as defined in SEC Rule 902 of Regulation S under the U.S.

Securities Act 1933, as amended; (d) if you are located in the U.K., you are a Relevant Person; (e) you consent to delivery of this document by electronic transmission;

(f) any transaction which you may subsequently enter into will only be on the basis of your enquiries and advice, your own knowledge and experience, and on the

basis of the documents that relate specifically to that transaction; (g) you will keep this Report strictly confidential and will not transmit or distribute this Report, or any

reproduction or translation it, in whole or in part, of this Report, to any person without Lloyds Bank’s prior written consent; and (h) you will not use this Report to the

detriment of Lloyds Bank or for any matter other than in relation to the transaction contemplated in this Report.

Lloyds Bank may engage in transactions in a manner inconsistent with any opinion in this Report. Lloyds Bank trades or may trade as principal in the securities or

related derivatives included in this Report (“Relevant Securities”), and may have proprietary positions in, and/or may make markets in, Relevant Securities. Lloyds

Persons may have an interest in any securities or financial product mentioned in this Report.

Lloyds Bank and Lloyds Bank Commercial Banking are trading names of Lloyds Bank plc. Lloyds Bank and Lloyds Bank Commercial Banking are trading names of

Bank of Scotland plc. Lloyds Bank plc. Registered Office: 25 Gresham Street, London EC2V 7HN. Registered in England and Wales no. 2065. Bank of Scotland plc.

Registered Office: The Mound, Edinburgh EH1 1YZ. Registered in Scotland no. SC327000. Authorised by the Prudential Regulation Authority and regulated by the

Financial Conduct Authority and the Prudential Regulation Authority under registration numbers 119278 & 169628, respectively.

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