annual report & financial statements 2011 deposit friendly society annual report & financial...

Annual Report & Financial Statements 2011

Contents

Advisors & Contact Details 3

Chairman’s Review 4–5

Financial Highlights 4–5

Chief Executive’s Report 6–16

Treating Customers Fairly 17

Corporate Governance Review 18–21

The Board Report 22–25

Director’s Remuneration Report 26–27

Independent Auditors’ Report 28

Income Statement 29

Balance Sheet 30–31

Statement of Total Recognised 32 Gains and Losses

Notes to the Accounts 33–50

�

Advisors

Independent AuditorsPricewaterhouseCoopers LLP, 31 Great George Street, Bristol, BS1 5QD

BankersNational Westminster, The Mall, Clifton, Bristol, BS99 5AJ

CustodiansNorthern Trust, 50 Bank Street, Canary Wharf, London, E14 5NT

Internal AuditorsMazars LLP, Clifton Down House, Beaufort Buildings, Clifton, Bristol, BS8 4AN

Investment ManagersEquity and Fixed Income Fund,Fidelity Investments, 25 Cannon Street, London, EC4M 5TA

Unit Linked Fund,Church House Investments, 3 Goldcroft, Yeovil, Somerset, BA21 4DQ

SolicitorsBeachcroft LLP, 100 Fetter Lane, London, EC4A 1BN

Lovells, Atlantic House, Holborn Viaduct, London, EC1A 2FG.

Thring Townsend Lee & Pembertons, The Paragon, Counterslip,Bristol, BS1 6BX

SurveyorsMellersh & Harding, 6 Duke Street, St James’s, London, SW1Y 6BN

With-Profit ActuaryBWCI Limited, Albert House, South Esplanade, St Peter Port, Guernsey, GY1 1AW

Contact DetailsHead Office4-5 Worcester Road, Clifton, Bristol BS8 3JLTelephone 0117 973 9003 [email protected]

www.nationalfriendly.co.uk

Established 1868 – Registered and incorporated Friendly Society no. 369F.

Member of the Association of Financial Mutuals.

Authorised and regulated by the Financial Services Authority.

Chief Executive Officer: J. Long Company Secretary: J. Long

Chairm

an’s ReviewFinancial H

ighlightsC

hief Executive’s ReportTreating C

ustomers Fairly

Corporate G

overnanceBoard Report

Remuneration Report

Financial Statement

Notes to the A

ccounts

� National Deposit Friendly Society Annual Report & Financial Statements 2011

When reviewing the business at the time of the last annual report in June 2011 it was against the backdrop of us being in breach of our minimum capital requirements and the consequential decision to suspend the writing of new insurance business.

I said at the time that our primary objective was to take whatever actions were necessary to restore our capital position. I also said that standing still was not an option.

Nine months later I am happy to be able to tell you that we can report favourably against both those commitments.

We have certainly not been standing still. A series of decisions were taken which have given us greater control over our products, reduced our future liabilities, streamlined our business processes and cut our cost base. I would invite you to read the detail of these actions in Jonathan Long’s CEO report but I should just say here that the net result has been to move from a deficit of free assets at the end of 2010 to a positive free asset position by the end of 2011.

This is a significant achievement which is a tribute to the loyalty and hard work of everyone in the business. In this context, I am sure members will want to know that this has been achieved despite an unhelpful macro-economic backdrop and not because of any external factors working in our favour. In particular, and as we are all aware, the government’s determination to reduce the public spending deficit has resulted in the UK being seen as a safe-haven for international investors. This has driven demand for government debt in the form of gilts with a consequential reduction in yields. Whilst this has no real impact on the actual financial strength of your Society it does have an impact on the deemed actuarial value of future earnings from gilts and

similar interest bearing corporate bond investments. This reduction in our theoretical returns increased our total reserves and further exacerbated the problem we had to deal with during the year.

In addition, of course, like any other small business, we have been obliged to cope with a general increase in costs. Notwithstanding this adverse external environment however, I should repeat that the internal actions taken have resulted in our free assets being restored to a positive position. This means that your Society is in a much stronger position than last year to re-define the most appropriate future strategy and the coming year will see significant developments in that area.

Before looking forward in more detail, however, I will highlight some of the people changes within your Society over the past year.

I am particularly pleased to be able to tell you that Jonathan Long has been promoted to the position of Chief Executive Officer having initially been acting CEO whilst the Board took stock of its needs. Prior to this and as most of you will know Jonathan was our Finance Director and I am sure members will draw comfort from knowing

Our asset base has fallen, primarily due to market movements in 2011 and the buyout of the Healthguard Direct renewal commission stream and associated share purchase.

Total Assets

2007 £178.1m

2008 £151.8m

2009 £157.9m

2010 £157.9m

2011 £152.2m

Chairman’s Review

Financial Highlights

Alan Lewis

�

The Fund for Future Appropriations has increased reflecting improvement in morbidity experience offset by market movements, in particular the fall in UK gilt yields.

2007 £39.8m

2008 £25.0m

2009 £19.0m

2010 £8.4m

2011 £10.5m

Chairm


ighlightsC


ustomers Fairly

Corporate G


Remuneration Report

Financial Statement

Notes to the A

ccounts

that his financial disciplines and long experience of the Society have been and remain at the fore during this time of change.

We have also welcomed Ian Talbot to the Board as Commercial Director. Ian was previously our Chief Commercial Officer and has wide experience of products, customers and distribution channels. This appointment is a clear signal that even during the testing times we have experienced over the past twelve months we are very mindful of the need to focus externally on our partners and stakeholders as well as making sure the numbers are moving in the right direction. It is also a clear sign that we are looking ahead to a commercially active future for the Society, without which members would face the prospect of increasing per policy administration costs and a potential decline in service levels.

At Executive level we also promoted from within the business by appointing Teresa Harding as Chief Operating Officer (previously HR manager). Overall these appointments have allowed us to create a lean executive team with a remit to simplify the business and make it more effective.

Also during the year we appointed Andy Pearson to head up our 425 Direct selling operation. Andy joined us from Zurich Financial Services and has brought new vigour to the team. This is being reflected in improving results and we are all encouraged by the enthusiasm of and can-do attitude of this call centre operation.

Of equal if not more importance to these senior appointments, however, are the consistent and hard working efforts of all our colleagues starting from the cheery smile at our reception desk and on through the entire organisation. I would like to say a special thank you to all for this great commitment.

Last but not least I am pleased to be able to tell members that during the year each of the Non-Executive Directors have put their shoulders to the wheel not only in the deployment of their general experience but also in the utilisation of their specific skills.

Having restored financial stability we now have to look ahead for the benefit of members. To help achieve this we have increased our face time with members through focus groups and we are very grateful for the time and effort that members put into this activity. We intend to continue this form of contact.

Our business development plans for 2012 are focused on products and services which meet the ever increasing healthcare and welfare needs of existing and prospective members. Whilst we might expect governments to create a framework for dealing with the consequences of people enjoying longer lives and the increasing costs of healthcare and welfare, there will be an increasing need for self help on whatever financial scale. This is exactly the sort of activity which fits with the ethos and culture of a mutual.

Foremost in our minds of course is the need to contain any financial risk arising from this activity well within the constraints of our balance sheet and having restored financial stability during 2011 we intend to guard and consolidate it carefully in the year ahead. So we will continue cautiously but with purpose and I have every confidence that all connected with National Friendly will rise to the continuing challenge.

Alan Lewis Chairman26 March 2012

Fund for Future Appropriations

Premium income has increased due to the full year benefit of premiums from policies written during 2010.

*Calculated using 10% of Single Premium Business.

Annual Premiums Earned & Premium Income*

2007 £6.8m

2008 £8.3m

2009 £10.9m

2010 £16.7m

2011 £20.5m


Chief Executive’s Report

2011 has been one of the more challenging years in the Society’s history with the Society undergoing radical and extensive change in order to remedy its capital position since the identification of a breach in our minimum capital requirement which was confirmed in June 2011 as £6.2m as at the end of 2010.

I am pleased to report that the capital position is very much improved and that, through management actions, we have remedied this breach, ending 2011 with positive free assets of £0.7m. This has been achieved in spite of very volatile markets in the second half of the year and, in particular with a significant fall in gilt yields which has had an adverse capital impact.

Jonathan Long

“I wish to thank all of our staff for their actions, over the past very difficult year, that have enabled us to achieve such a positive outcome and also to our policyholders for their loyalty and support.”

Capital Restoration

On 1 June 2011 we announced formally that we had decided to temporarily cease effecting new contracts of insurance whilst we reviewed our future options and put in place our capital restoration plan.

This ensured that we did not take on further risk over and above that already in place and was part of our approach to stabilising our capital position and securing existing policyholder benefits.

Cessation of writing new contracts of insurance

Since the identification of the breach, we have identified, assessed and, as appropriate, implemented a wide range of actions in order

to remedy the position as soon as practicable and establish a business model that can lead to a sustainable future.

�

Aggressively cut cost out of the business – reducing headcount by one third, costs by ��% and down-sizing our office premises.

Chairm


ighlightsC


ustomers Fairly

Corporate G


Remuneration Report

Financial Statement

Notes to the A

ccounts

The previous Senior Management team has been replaced by a newly formed Executive Committee comprising myself, as Chief Executive Officer, Ian Talbot, who has joined the Board as our Commercial Director and Teresa Harding, our Chief Operating Officer.

The Executive Committee has taken the primary role, under the guidance and oversight of the Board, of identifying, assessing and, as appropriate, implementing the actions set out below in order to remedy the breach, with the support and assistance of all of our management team and staff.

Furthermore, moving into 2012, we have strengthened our corporate governance structure by the recruitment of a Head of Risk and Compliance who, along with the existing Head of Actuarial Function, operate independently to the Executive Committee. This independence is further strengthened by the Head of Actuarial Function having a dotted reporting line into the Board, and the Head of Risk and Compliance into the Risk Management Committee. The Internal Audit function also operates in a similar manner, with a dotted reporting line into the Audit Committee, and, together, these roles allow for a robust check and balance on the operations of the Society.

With the temporary closure to new business resulting in a reduction in top line income, we have had to radically re-engineer our cost base in order to “right size” it to the current circumstances. We undertook a restructuring programme, with inevitable headcount reduction, firstly in May/June 2011 where we reduced our sales and marketing cost base and then again in

September when we further refined our structure to reflect the future requirements as determined by our capital restoration plan.

We have also reduced our footprint in our Head Office building, separating off one end of the building which is now on the market to be sub-let, which will yield both additional income and reduce our overheads.

More robust claims management process, with tighter control on claims being applied and greater clarity on policy wording.

We have undertaken an extensive review of claims management that has resulted in:

Refinement of our terms and conditions where required in order to provide further clarity and/or remove uncertainty.

Introduction of a cash incentive to use the NHS for treatment rather than a private provider.

Strict application of our policy terms and conditions, such that we pay all legitimate claims but not non-legitimate ones.

Closer liaison and co-operation with Healix, our claims handling partner.

Furthermore, we engaged an actuarial consultancy that are recognised as industry specialists in healthcare to review our claims management processes. They have provided us with a comprehensive list of findings and recommendations on how we can improve our claims management going forward that we are now in the process of implementing. As part of this, we are currently assessing whether we should change our outsourced claims administrator, primarily to improve processing time, minimise claims leakage and to secure complete, accurate and timely management information.

New management team in place along with a more effective organisational design


Revised investment approach to better match assets and liabilities and improve resilience reserving requirements.

With an unexpected increase in reserving at the end of 2010 due to poor morbidity experience, we were not able to optimise the matching of our assets to our liabilities, in particular as we were overweight in our investment in equities. The result of this was an increase in our resilience reserving requirements in order to allow for the greater volatility of equity investments.

We corrected this in the first quarter of 2011, disinvesting £9.0m from equities and reinvesting in corporate bonds resulting in a reduction of circa £0.5m in our resilience reserve and a corresponding increase in free capital.

We continue to assess ways in which we can further refine our investment strategy in order to protect ourselves from market movements, in particular from further falls in gilt yields (more on this later).

Buy out of Healthguard renewal commission stream

One of our products, Healthguard, is a fixed term medical insurance contract which covers the policyholder for a capped sum over the duration of the policy, usually ten years. Healthguard was distributed almost exclusively by a single appointed representative, Healthguard Direct Limited, to whom the Society paid both an initial commission on the date of sale of the policy and a further renewal commission on each anniversary that the policy remains in force. With the temporary closure to writing new business, initial commission is no longer paid out, although renewal commission was due over the lifetime of the policies in force.

We therefore negotiated with the Directors and shareholder of Healthguard Direct Limited to exit from the current obligation to pay renewal commission by means of a one-off buy out payment. This was agreed at a total sum of £2.9m and resulted in the removal of a renewal commission liability significantly in excess of the amount paid; we acquired an asset of £0.2m and the immediate reduction in reserves was £2.7m which will be followed up with further releases each and every year over the remaining life of the policy book.

Investigated and determined future options to gain capital input, in particular by the transfer of engagements

A transfer of engagements to another insurer may provide further protection to our policyholders and we are considering this. Preferred parties will utilise the National Friendly brand and market presence to further distribution capability, in particular in the healthcare market, whilst providing significant protection to our policyholders due to increased capital strength.

In making an assessment of the desirability of potential partners, prior to proceeding to due diligence, the

culture, values and ethos of the organisation need to be consistent with that of our own and, to this end, the preferred parties identified to date are all mutual organisations.

Furthermore, any such action would only be taken after listening to the views of our members and determining that it is in the best interests of all of our members to proceed with the transaction.

We are continuing with the implementation of our capital restoration plan in 2012 further strengthening our capital position as we move forwards.

Transfer of broker consultant team and the One Fund cash plan product to Engage Mutual

We negotiated a TUPE transfer of our broker distribution team of five who, with the temporary cessation of writing new business, unfortunately no longer had an active role to play in the business for the time being, to Engage Mutual along with the right to use the One Fund cash plan and product literature.

The primary benefits of this proposal were that it provided us with an immediate saving on salary and related costs of circa £0.5m per annum, there were no exit costs and it was a positive outcome for the team in potentially difficult circumstances.

�

The Society’s vision and long term strategy is to create a modern mutual for the twenty first century that provides our policyholders with products and services that look after their health and welfare needs to give certainty and control over their wellbeing both now and in the future. This will be delivered in a timely, personal and friendly manner using technology as appropriate.

Overall Strategy

Chairm


ighlightsC


ustomers Fairly

Corporate G


Remuneration Report

Financial Statement

Notes to the A

ccounts

Distribution To re-enter into our chosen markets with innovative sustainable products tailored to our customers needs without taking undue risk; reinsurance will be considered in this respect.

Claims ManagementTo operate a robust claims management system ensuring that all legitimate claims are paid correctly and on time and identifying and eradicating all non-legitimate claims.

Systems and ProcessingTo deliver a single stable scalable IT platform with a modern technological base to enable us to meet our regulatory obligations and provide quality, cost effective, customer service and support.

Risk ManagementTo further refine our risk management framework and embed the identification and management of risk across all of our processes and activities.

Our trading subsidiary 425 Direct, which has now completed its second year of trading, has had a challenging year.

The removal of National Friendly products has had a direct impact on gross profit and this was addressed by a management restructure at the end of the first quarter which, once bedded in, delivered a very strong finish to the year. The operation, reliant solely on savings and protection leads from the Phoenix Assurance group of companies for the second half of 2011, achieved

a 51% increase on the income generated from these leads over 2010 which is a very positive reflection on both the management team and staff.

The outlook for 425 Direct is extremely positive with the operation generating a positive monthly contribution for the Society and with excellent growth prospects for 2012 already in place, Ian Talbot, who leads the business, is confident of generating a healthy return for the Society.

425 Direct

It is essential that, both now and in the future, we assume risk only to the extent that it is appropriate to the scale of our balance sheet. We are currently choosing not to write new contracts of insurance and we will only reconsider doing so once our free capital has been restored to an acceptable level in line with our stated risk appetite.

In 2012, we have set five core areas of focus that will provide us with a robust platform and infrastructure enabling us to build a sustainable future, which are:

Capital Management To enhance our capital management framework to enable more effective use of capital and facilitate more informed business decision making.

Retaining existing policyholders and

attracting new ones through differentiated

service and proposition development guided

by the principles of TCF

Continually striving to attain cost,

system and process efficiency

Adopting a progressive, modern, long term

approach to the leadership of our people – a unified,

motivated and developed team

Maintaining our financial strength through a robust risk and

governance approach

10 National Deposit Friendly Society Annual Report & Financial Statements 2011

Total assets by type £m

2008 2009 2010 2011

Other

CorporateBonds

Cash

Equities

Property

Gilts

2007

200

150

100

50

0

Liabilities v Fund for Future Appropriations £m

Free assets £m

Fund for future appropriations

Liabilities

200

150

100

50

0

2008 2009 2010 2011

Expense Breakdown £’000

Investment Management Expense

Acquisition Expenses Administration Expenses

Other Technical Charges

2007 2008 2009 2010 20112007

0

-10

30

10

20

2008 2009 2010 20112007

18,000

14,000

10,000

6,000

2,000

12,000

6,000

0

-6,000

-12,000

2009 201020072008 2011

Investment Return £’000Equities

Other

Fixed Interest

Property

However in the third quarter, due to mounting Eurozone uncertainty, the FTSE100 fell significantly to 5,128 at the end of September before picking up to 5,572 at the year end. Meanwhile 20 year gilt yields declined over the second half of 2011 and finished the year at a low point of 2.78%, levels of which have not been experienced for decades.

Although we have protected ourselves against equity movements fairly well, the decline in the gilt yields had a significant negative impact on our reserves. This is due to the reduction that we have had to apply to the valuation discount rate used to calculate our future liabilities. This is closely correlated to gilt yields, and, as such, does not allow us to take full credit of the higher yields on our corporate bond portfolio, that have remained broadly stable, or of the higher property portfolio yield. A lower valuation discount rate means

that we have to increase our reserves to meet future liabilities resulting in less free capital.

To protect our capital position against further drops in UK yields the Society is considering whether to move from a pooled corporate bond portfolio to a segregated fund with nominated holdings held for duration. This will enable us to take full credit for the higher yield on these holdings when calculating our reserves, rather than using the risk free rate based on gilt yields.

Looking ahead, the prolonged uncertainty in the Eurozone will continue to have an impact on the Society’s investments as, although we have minimal exposure directly to Euro assets, we do have second order exposure in particular through our investments in the UK banks which do have Euro exposure.

Market conditions during the first half of 2011 were stable, with the FTSE 100 increasing marginally to 5,945 and the 20 year gilt yield remaining relatively stable at circa 4.2%.

Investment Performance

EquitiesThe market uncertainty surrounding the Eurozone caused the FTSE100 to decrease by 5.4%, as a result our equity portfolio had a negative return of 7.1%. Our holdings in banks and mining stock in particular have been affected, but these stocks have been maintained due to the growth anticipated in the coming months.

Fixed InterestOur fixed interest portfolio returned 12.3% against a benchmark of 12.0%. This return has been driven by the flight to safety in the markets with UK Gilts finishing the year as the best absolute performing government bond market following a move from euro denominated sovereign debt to UK Gilts by the Asian central banks.

PropertyThe property market remained weak in 2011 and we have experienced a decrease in the valuation of our property portfolio due to impending lease terminations and break options coming up on a number of leases.

During 2011 we sold one property and there were a number of properties under offer at the end of the year that, once completed, will realise £5m from our property portfolio in order to reduce our market risk going forwards into 2012.

11

Total assets by type £m

2008 2009 2010 2011

Other

CorporateBonds

Cash

Equities

Property

Gilts

2007

200

150

100

50

0

Liabilities v Fund for Future Appropriations £m

Free assets £m

Fund for future appropriations

Liabilities

200

150

100

50

0

2008 2009 2010 2011

Expense Breakdown £’000

Investment Management Expense

Acquisition Expenses Administration Expenses

Other Technical Charges

2007 2008 2009 2010 20112007

0

-10

30

10

20

2008 2009 2010 20112007

18,000

14,000

10,000

6,000

2,000

12,000

6,000

0

-6,000

-12,000

2009 201020072008 2011

Investment Return £’000Equities

Other

Fixed Interest

Property

Chairm

an’s ReviewC


ustomers Fairly

Corporate G


Remuneration Report

Financial Statement

Notes to the A

ccounts

With Profits ReviewOver the past few years we have been considering how best to differentiate between the respective rights of our policyholders, in particular between with profit and non profit policies and also in respect of our deposit account based healthcare policies.

Currently all of these policies are written in one single insurance fund. However, going forwards, we are of the opinion that policyholders would be better served if the single fund was split into two creating an Assurance Fund and a Deposit Fund. The Assurance Fund would comprise our savings and investment products, such as the With Profit ISA and Tax Exempt Savings Plan, along with the life policies such as our 50+ whole of life insurance product. The Deposit Fund would comprise our healthcare related policies, such as the Healthcare Deposit Account, Healthguard and the old Care Plus policies. The key benefits to this are a greater

transparency and the removal of cross-subsidy between policy groups such that surpluses accrue specifically to those policyholders where policies have generated them.

We will determine how the current surplus can be fairly appropriated between the two funds in the first half of 2012 and we will be seeking the input of our members in doing this, primarily through the Focus Group in May and then at the Annual General Meeting this July. We will then retrospectively apply this split to the results at the end of 2011 and adopt the two funds from 1 January 2012 onwards.

Although we were in breach of our minimum capital requirement at the start of the year, there has not been a detrimental impact on our with profit policyholders as we have maintained our investment strategy for assets matched against with profit liabilities as before, in accordance with our Principles and Practices of Financial Management, bonus payments have continued in

accordance with asset share and no changes have been made to market value adjustments. The only change we have made is the declaration of interim bonuses, which are not guaranteed, rather than reversionary bonuses, although we have maintained terminal bonuses at the same level as before.

Financial Position & Expense Breakdown

Financial Highlights

12 National Deposit Friendly Society Annual Report & Financial Statements 201112 National Deposit Friendly Society Annual Report & Financial Statements 2011

Our MembersAs a mutual insurer and as a friendly society, engaging with our members is a very important aspect of our operation. This has never been more so than in 2011 with the reduced capital position highlighting the need for communication and engagement with our membership.

That said, with the management team necessarily focused on the recovery of capital we had to strike a careful balance between keeping our members informed and allowing opportunity to listen to their views and feedback whilst identifying, evaluating and implementing our capital restoration plan.

The primary mechanism for engaging with our members is the Focus Group, a group of fifty policyholders selected for both their skills and experience and also to allow a wide cross section of different policy holdings, age, gender and national coverage. We held two Focus Group meetings in 2011, one in August when we explained that we had entered into breach, what this meant, how

it came about and what we were doing about it, and then again in November when we updated on actions taken so far.

Our Annual General Meeting also provides us with an opportunity to meet our members. This year the meeting was held in August in Bristol and was very well attended. The meeting allowed members the opportunity to question the Board on the operation of the Society, both in open forum or, if preferred, on a one to one basis either before or after the main session.

We are looking to further improve our communications with members as we progress through 2012.

Our PeopleOur people are key to us achieving our strategic aim of being a ‘Modern mutual for the 21st century’. They help to ensure our organisational values are adhered to and that we continue to seek and embrace changes necessary to face a tough commercial environment.

The past year has seen significant changes in the Society. There has been a major organisational restructure and the appointment of a new senior management team in the form of the Executive Committee.

Personal development, training, support and competenceIn 2011 we reduced our costs in staffing and training, focusing on essential training requirements. We have

extended our e-learning training capabilities covering essential compliance components. We have also brought in a new Appraisal process and Personal Development Plans in order to identify and evaluate job specific, management and soft skills needed for staff.

SupportThroughout the year variations in work load for different departments have led to secondment opportunities

1� Chairman’s Report

Financial HighlightsO

ur mem

bersCorporate Governance

Balance SheetNotes to the Accounts

Chairm


ighlightsC


ustomers Fairly

Corporate G


Remuneration Report

Financial Statement

Notes to the A

ccounts

becoming available which we have been keen to promote to all staff. These opportunities have given employees the prospect to develop new skills and have a wider perspective of the business and it has led to some of them furthering their career within the Society.

As well as enhancing our commitments to existing staff we have recruited fresh talent into key areas of the business. Over the last year the Society has had the opportunity to asses what skills and experience are needed to drive the business forward. Specific recruitment with the future in mind ensures we will be able to better serve our members for the future.

Investing in peopleEvery three years we review our Investors in People award and in 2011 we conducted the review which resulted in retaining this recognised award. This review has helped us to formulate an Action Plan for 2012 with improvements for how we might invest in our staff for the future.

The Executive Committee meet on a weekly basis and have departmental meetings with their managers who in turn meet with their teams. Also the regular all staff meetings have continued, whereby employees are given an update on the position of the Society by the CEO. This also provides an opportunity for staff to ask questions. More informally we reviewed our intranet, ‘Grapevine’ and the information it contains, and we have adopted a monthly ‘catch up’ meeting available for all staff to meet outside of work.

Throughout the year the Social Committee has also maintained a good level of activities available to staff and their family members.

The overall Business Plan for 2012 has been communicated to all staff helping to formulate personal objectives for the year to come. These will reflect the personal objectives and enable employees to feel part of the overall strategy.

In 2011 the Society had to adapt to a very difficult situation and take appropriate action to reduce costs. However, the changes brought about have helped to provide a strong platform for us to move forward and build upon in the coming year.

1� National Deposit Friendly Society Annual Report & Financial Statements 2011

Corporate Social ResponsibilityOur approach to Corporate Social Responsibility is a practical one, aimed at areas where we can fundamentally make a difference.

The Foundation FundThe Foundation Fund was established in 2008 to provide discretionary grants to deserving causes identified by our members. The aim since inception has been to award grants and disbursements from the Fund that are meaningful and make a significant difference to the recipients whether charities, groups or individuals. The Foundation Fund committee, consisting of three

members of staff and two members from our Focus Group, meets twice a year to consider applications made with particular consideration given to applications relating to member health and welfare, youth education and sport, care of the elderly, and organisations working with the disabled. Over a period of four years the Foundation Fund has donated £38,365 to worthy causes.

1 2

3 4 5

1. National Friendly employees handing over the cheque to St Peters Hospice. 2. Rachel Higgins helping a young reader at Reading Buddies

3. Alex Thorn abseiling to raise money for St. Peters Hospice 4. Catherine Macdonald abseiling to raise money for St. Peters Hospice

5. Jon Haynes helping a young reader at Reading Buddies

1�

Charity of the Year Following nominations from our staff members the Society’s chosen ‘Charity of the Year – 2011’ was St Peter’s Hospice, Bristol’s only adult hospice caring for people with incurable illnesses. Their commitment is to improve the quality of life of patients while extending care and support to their families and loved ones.

As in previous years, a significant effort was made by staff to raise money for what is considered to be a more than worthy cause. Events ranged from a team taking part in the Bristol 10K run, abseiling down Bristol’s Premier Inn building, and a Christmas raffle with prizes generously donated by many of our suppliers and advisors. We raised in total £4,200 and, once again we are grateful to the Society’s Foundation Fund which has agreed to match the funds raised bringing the grand total to £8,400.

For 2012, our staff have voted that Children’s Hospice South West is our chosen charity of the year and we are confident that it will receive resounding staff support throughout the course of the year.

Our communityNational Friendly continued to work with the Reading Buddies programme and four volunteers provide one to one support for pupils at Gay Elms Primary School. The volunteers are committed to help pupils practice their reading skills, supporting their learning and help to raise aspirations, attainment and achievements. In return our volunteers have gained valuable experiences which help to further develop their own coaching and communication skills.

The EnvironmentWe are always trying to improve our environmental impact. Over the last year we have carried out a number of activities to become a more environmentally friendly business such as:

Migrating to a virtual hosted IT server environment and to virtual desktops.

Using our recycling waste bins – plastic, metal and paper.

Using secure waste paper collections.

Recycling building materials, such as slates, stonework and slabs.

I would like to draw attention in particular to the hosted server environment and virtual desktops, which brings a number of efficiencies:

Reduced the number of physical servers we run in Bristol from 30 to 5 thus reducing our greenhouse gas emissions.

Reduces power consumption from 200W per person to 50W per person. Reduction in power consumption brings with it comparable reduction in cooling requirements which means that our server room air conditioning runs for fewer hours and further reduces our carbon footprint.

Usually a standard non-virtualised desktop spends most of its time running at about 20% capacity. We can increase our utilisation to typically 90% by centralising and sharing resources.

Equipment lasts longer without becoming obsolete thus reducing the amount of electrical waste that goes to landfill.

Ethical Suppliers We deal with our customers and suppliers responsibly by:

Being open and honest about our products and services.

Using local suppliers wherever possible and appropriate.

Working with suppliers and distributors who take steps to minimise their environmental impact.

Working with printers that are endorsed by the FSC using recycled paper and vegetable inks where possible.

1�

Chairm


ighlightsC


ustomers Fairly

Corporate G


Remuneration Report

Financial Statement

Notes to the A

ccounts


Our forecasts show that our capital position should strengthen as the year progresses which is essential in order to secure the benefits of our policyholders along with the systems and mechanisms that administer them.

As our capital base grows stronger, we will also be seeking opportunities to enhance our proposition to our members, both current policyholders and, in time, for new ones and we will announce how we will achieve this as we progress through the year.

2012 is a year for strengthening our capital base and developing our long term future, based upon a sustainable business model and robust risk management. I am looking forward to what I hope will be a successful and rewarding year for all of us.

To remedy our breach of minimum capital requirement by the end of 2011 has been a fantastic achievement and I should like to take this opportunity to thank all of those that have contributed to this: our staff, our policyholders, advisors, partners and suppliers. It is with a degree of growing confidence that we proceed into 2012, keen to re-establish our distribution capability but cautious not to repeat the mistakes of the past.

Conclusion

“As our capital base grows stronger, we will also be seeking opportunities to enhance our proposition to our members.”

Jonathan Long Chief Executive Officer26 March 2012

1�

Every member of staff and third party supplier knows and understands our values.

We develop innovative products and services through continued research into emerging customers’ needs.

We continue to improve the clarity and effectiveness of communications to customers.

We deliver on our promises.

We enable our customers to have the freedom to manage their financial products.

We understand our customers’ needs in order to support and help their decision making.

What Treating Customers Fairly (TCF) means to National Friendly.

The Society is committed to both achieving the outcomes expected by the FSA, and to improving the customer journey for our members. This year our focus has been:

Delivering our strategy. Our members can be confident that they are dealing with a firm where fair treatment is central to the corporate culture. This is achieved by:

Raising staff awareness through induction and refresher training.

Developing our TCF dashboards and management information.

A comprehensive review of Training and Competence requirements across the Society.

Providing products and services that are marketed and sold in the retail market, are designed to meet the needs of identified consumer groups and are targeted accordingly. We have undertaken:

Consumer market research

The collection and evaluation of customer feedback across the Society in conjunction with complaints surveys.

Extensive sign off processes to manage website content.

Ensuring our members are provided with clear information and are kept appropriately informed before, during and after the point of sale. We undertake to:

Obtain feedback through our Member Relations strategy.

Maintain product literature that clearly reflects risks, rewards and product limitations where they apply.

Continue to commit to developing the use of plain language.

Continually review any claims statistics to ensure any links between documentation and declined claims are identified.

Members do not face unreasonable post-sale barriers imposed by us. We ensure:

All means of contacting the Society continue to be accessible to the member.

We continue to guide customers through the complaints procedures and to ensure these remain as straightforward as possible.

No unreasonable exit penalties are incurred on key products.

Complaints procedures are in line with the regulatory requirements and are monitored to ensure these requirements are met.

Where our members receive advice, the advice is suitable and takes account of their circumstances. Developments include:

Strengthened controls in place around the provision of information rather than advice across the Society.

Providing members with products that perform as we have led them to expect, and the associated service is both of an acceptable standard and as they have been led to expect. We commit to:

Maintaining defined service levels that are monitored to ensure members receive a timely and efficient service.

Investing in accordance with investment strategy that is reviewed regularly by the Investment Committee.

Protecting the interests of our with-profit policyholders through the With Profit Committee.

Protecting the interests of non with-profit policyholders through the Board.

Treating Customers Fairly

Chairm


ighlightsC


ustomers Fairly

Corporate G


Remuneration Report

Financial Statement

Notes to the A

ccounts


The Board is of the view that good corporate governance is fundamental to the Society’s operations. To comply with best practice in corporate governance it aims to adhere to the principles and provisions of the Combined Code on Corporate Governance annotated by the Association of Financial Mutuals (“the Code”).

Our policy is to observe the Code wherever appropriate to our size, status and objectives or to explain why we feel any deviation from the Code is acceptable or necessary. The Board considers that it complies with all aspects of the Code unless the contrary is stated in this review.

Role of the Board The Board’s principal role is to determine the strategic direction of the Society ensuring the necessary financial and human resources are in place to meet its objectives and that financial control and risk management procedures are robust. In particular, its role is to provide general direction to the Society and to safeguard the interests of members.

The Board meets a minimum of 6 times a year – and more often if necessary. Additionally it meets at least once a year for a detailed review of the Society’s strategy.

The Board maintains a schedule of matters relating to approval of the strategic aims of the Society as well as approval of policies and matters which must be approved by the Board under legislation and the Society’s rules.

The Board has delegated responsibility for managing the system of internal control to senior management. The Internal Audit function provides independent assurance to the Board on the effectiveness of the system on internal control through the Audit Committee.

The information received and considered by the Audit Committee provided reasonable assurance that during 2011 there were no material breaches of control or regulatory standards and that, overall, the Society maintained an adequate system of internal control.

The Society maintains liability insurance for all officers throughout the year.

Chairman and Chief Executive Officer The role of the Chairman and Chief Executive Officer are held by different people and are distinct and separate in their purpose.

The Chairman is responsible for leadership of the Board and ensuring that the Board acts effectively. The Chief Executive Officer has overall responsibility for managing the Society and its subsidiaries and for implementing the strategies and policies agreed by the Board.

Board Balance and Independence The Board consists of five Non-Executive Directors and two Executive Directors.

The Board continues to review its own balance, completeness and appropriateness to meet the complexities of the business. The Board has and will continue to assess the balance of skills and where necessary will appoint individuals to meet the demands.

The Society has appointed Peter McIlwraith as Senior Independent Director (SID). The SID will be available to members if they have concerns where contact through the Chairman or Chief Executive has failed to resolve or for which such contact is inappropriate.

In the opinion of the Board, each Non-Executive Director, including the Chairman, is independent in character and judgement.

Appointments to the Board The appointment and re-election of Directors is considered by the Nominations Committee (see page 20), which makes recommendations to the Board.

All Directors are subject to election by members at the AGM following their appointment. In addition, all Directors are subject to approval from the Financial Services Authority as an Approved Person.

Corporate Governance Review

Jonathan Long

1�

The terms and conditions of appointment of Non-Executive Directors are available for inspection at our Head Office and can be viewed by contacting the Company Secretary.

Information and Professional Development The Chairman ensures all Directors receive accurate, timely and clear information, which is fundamental to the effective function of the Board.

The Chairman ensures that, on appointment, Non-Executive Directors receive a comprehensive induction programme. Non-Executive Directors update their skills, knowledge and familiarity with the Society through meetings with the Executive and employees and through attending external courses when relevant.

The Board has access to independent professional advice at the Society’s expense where they consider it necessary to discharge their responsibilities. In addition all Directors have access to the advice and services of the Company Secretary who is responsible for ensuring the Board procedures are complied with and advising the Board, through the Chairman, on governance matters.

Due to restructuring and consolidation during 2011 the Company Secretary and Chief Executive roles became the remit of one person; this person is also responsible for the good flow of information between the Board, its committees, senior management and Non-Executive Directors. The Board is satisfied that the combining of the roles is appropriate for the Society and will review the responsibility for information flows during 2012.

Performance Evaluation A formal performance evaluation scheme is in place for Society staff including the Executive Directors. The Chief Executive appraises the Executive Directors on their performance and the Chairman undertakes an appraisal of the Chief Executive.

Non-Executive remuneration is not performance related, however, an annual appraisal process is undertaken. Fees paid to Non-Executive Directors recognise the responsibilities of Non-Executive Directors and are designed to attract individuals with the necessary skills and expertise to fill the role.

Re-election The appointment of Non-Executive Directors is for a period of no more than three years at a time and is subject to election and re-election at the Society’s AGM. Any Non-Executive Director who has served the Society for longer than 9 years is subject to annual re-election.

Board Committees The Board has established a number of Committees which have their own terms of reference. Each Committee is chaired by a Non-Executive Director and all members are considered to have appropriate skills and expertise to undertake their role within the committees. The Terms of Reference of the Audit, Nomination and Remuneration Committees are available on the Society’s website and on request to the Company Secretary.

Annual General Meeting The 2011 Annual General Meeting was held in Bristol and was attended by Members, Board Members, and Officers of the Society.

A number of resolutions were voted on including:

The Board Report

The Directors‘ Remuneration Report

The Auditor’s Report and the Annual Report and Accounts

Reappointment of PricewaterhouseCoopers as auditors

Re-election of John Greenhalgh as a Non-Executive Director.

The response from members submitting their postal/proxy forms was just over 10% of members eligible to vote electing to do so. The Society wishes to encourage more members to attend the AGM and arrangements are in place for the 2012 AGM to be held again in Bristol.

Chairm


ighlightsC


ustomers Fairly

Corporate G


Remuneration Report

Financial Statement

Notes to the A

ccounts


Audit Committee

Members Responsibilities

Peter Mcllwraith (Chairman)

Mark Jackson

Tracy Morshead

The Audit Committee meets at least four times a year at appropriate times in the financial reporting and audit cycle. The main function of the Committee is to assist the Board in fulfilling its oversight responsibilities, specifically the ongoing review, monitoring and assessment of:

The integrity of the financial statements and reviewing significant financial reporting judgements contained in them.

The effectiveness of internal control and risk management processes. The effectiveness of the internal and external audit processes. The recommendation to the Board in relation to the appointment, reappointment, remuneration and removal of the external auditors.

The objectivity and independence of the external auditor in respect of the provision of any non-audit services.

Investment Committee


Alan Lewis (Chairman)

Azim Dinani (Head of Actuarial Function)

John Greenhalgh

Jonathan Long

Peter McIlwraith

Richard Sear (resigned 22 July 2011)

The Investment Committee meets as required at least four times a year to ensure compliance with the terms of the Principles and Practices of Financial Management in relation to the investment strategy and review its continuing appropriateness in the light of changing circumstances with consideration to the needs of both With-Profit and non With-Profit policyholders.

The Committee also has responsibility for: Appointing the Society’s Investment Fund Managers. Determining the asset allocation and performance benchmarks. Monitoring the performance of the Funds.

Nomination Committee


Peter McIlwraith (Chairman)

John Greenhalgh


Tracy Morshead

The Nominations Committee meets as appropriate to review the structure, size and composition of the Board and to make recommendations to the Board with regard to any adjustments that are deemed necessary. Nominations for appointment to the Board are considered for approval by the full Board. In instances where a member of the Nomination Committee is to be nominated for appointment that member stands down from the Committee and their place is taken by another member of the Board.

Professional recruitment consultants can and are normally consulted to ensure that non-executive vacancies on the Board are considered appropriately resulting in reduced reliance on the personal connections of any of the existing Board members.

The Executive Directors and internal and external auditors attend meetings of the Committee as appropriate. The internal and external auditors also have meetings with the Committee without the Executive Directors or any other members of staff present.

Internal audits of the regulated business are conducted by an independent external firm that reports to the Committee.

During 2011 the Committee received and considered reports provided by the internal and external auditors and considered other reports and matters falling within its responsibilities.

Sub-Committees

Remuneration Committee


Peter McIlwraith (Chairman)

Mark Jackson

Tracy Morshead

The Remuneration Committee meets at least once a year to review the remuneration policy and determines the remuneration packages of Executive Directors and senior managers. Remuneration packages contain performance related elements that are linked to the achievement of objectives.

The remuneration of Non-Executive Directors is based upon a survey of similar organisations carried out and recommended by the Executive Directors and approved by the Board. Further details on Directors’ remuneration are set out in the Directors’ Remuneration Report on pages 26-27.

21

Risk Management Committee


John Greenhalgh (Chairman)

Alan Lewis

Jonathan Long

Fay Randall


The Risk Management Committee meets at least four times a year. The main function of the Committee is to assist the Board in fulfilling its oversight responsibilities with regard to the risk appetite of the Society and the risk management and compliance framework that supports it.

The Chairman of the Committee meets the Risk Manager at least once a year, without management present, to discuss their remit and any issues arising from the risk and control assessments that have been carried out.

With-Profit Committee


John Greenhalgh (Chairman)

Tracy Morshead

Stephen Ainsworth (With-Profits Actuary)

The With-Profit Committee meets as required and at least once a year to independently monitor and bring independent judgment on the extent to which procedures, systems and controls are adequate and effective to ensure that the Society complies with the requirements of the FSA Handbook over the management and governance of With-Profit business.

The Terms of Reference of all Sub-Committees are available on the Society’s website and on request to the Company Secretary.

Board Audit Committee Remuneration Committee

Meetings attended

Meetingsheld*

Meetings attended

Meetingsheld*

Meetings attended

Meetingsheld*

Meetingsattended

Meetingsheld*

Non Executive

J Greenhalgh 11 11 2 ** 1 ** 2 3

M Jackson 11 11 5 5 3 3 - -

A Lewis 10 11 4 ** 1 ** 1 **

P McIlwraith 11 11 5 5 3 3 2 3

T Morshead 11 11 5 5 3 3 3 3

Executive

J J Long 11 11 5 ** 1 ** 1 **

R Sear*** 6 7 3 ** 1 ** - 2

I Talbot**** 3 3 1 ** - - - -

* Meetings held whilst appointed to Board/Committee** Attendance at Audit, Remuneration and/or Nomination Committee on an invitation basis*** Resigned on 22nd July 2011**** Appointed to the Board on 30 September 2011

Chairm


ighlightsC


ustomers Fairly

Corporate G


Remuneration Report

Financial Statement

Notes to the A

ccounts

Nominations Committee

Executive Committee

The Executive Committee forms part of the corporate governance structure. The Board is the main decision making body and the Executive Committee, whilst not a sub-committee of the Board, is charged (either individually or collectively) with running the Society’s business within the delegated authority of the Board.

Statement of Compliance with the Annotated Combined CodeThe Board considers that throughout 2011 the Society applied the relevant principles and complied with the relevant provisions of the annotated Combined Code for Mutual insurers issued by the Association of Financial Mutuals unless otherwise noted below.

The Board notes that the recommendation of the revised Code (October 2010) that Directors of larger organisations be subject to annual election by members. The Board considers, however, that the existing arrangements for re-election ensures proper accountability and underpins Board effectiveness.

Due to restructuring and consolidation during 2011 the Company Secretary and Chief Executive roles became the remit of one person; this person is also responsible for the good flow of information between the Board, its Committees, senior management and Non-Executive Directors. The Board is satisfied that the combining of the roles is appropriate for the Society and will review the responsibility for information flows during 2012.


The Board

Alan Lewis(Chairman)

Alan, an MBA, was with Black & Decker and RTZ before spending 30 years in the Private Equity industry, firstly with 3i, then as a founding Partner of Bridgepoint (previously Natwest Ventures). He has served on over 20 boards in the UK, France, Italy, Holland and Finland. He is Chairman of both Leeds Bradford Airport and Porterbrook, the train leasing company, and on the board of LSE listed Safestore plc.

The Board Report

Ian Talbot(Commercial Director)

Ian Talbot was appointed Director on 30 September 2011. Ian has worked for the insurance industry for over a decade and joined National Friendly in 2005 after working for Medisure. He has held a number of senior roles at National Friendly, including that of Chief Commercial Officer.

Mark Jackson(Non-Executive Director)

Mark is a medical doctor, a former GP and successful business man. Mark was CEO of Helphire which he founded and developed to the point of flotation on the main London Stock Exchange. He was also the co-founder and is a Non-Executive Chairman of The Assura Group from 2003 to 2008, and Non Executive Deputy Chairman of Saga Independent Living, a division of the Acromas Group.

2�

Chairm


ighlightsC


ustomers Fairly

Corporate G


Remuneration Report

Financial Statement

Notes to the A

ccounts

Jonathan Long(Chief Executive & Company Secretary)

Jonathan was appointed as a Director on 1 May 2007. After qualifying as a Chartered Accountant at Coopers & Lybrand, he went on to perform a variety of financial, strategic and business development roles at Prudential and Barclays before joining the Society as the Finance Director in 2006. Jonathan was appointed Chief Executive on 30 September 2011.

Peter McIlwraith(Senior Independent Non-Executive Director)

Peter is a Chartered Accountant. He was a partner with PricewaterhouseCoopers (and prior to that Price Waterhouse) and was the Regional Chairman for the West and Wales and Senior Partner in Bristol from 1991 to 2001. Peter is also Senior Independent Non-Executive Director of Bristol Water Plc.

John Greenhalgh (Non-Executive Director)

John was appointed as a Director on 1 October 2007. He is a qualified Actuary and has extensive experience in financial services, having worked for Wesleyan & General, Worldwide Reassurance and Hearts of Oak Friendly Society.

Tracy Morshead(Non-Executive Director)

Tracy has held senior management positions with three major Building Societies, Birmingham Midshires, Principality, where he was MD, and Nationwide where he was Divisional Director. He is a Fellow of the Chartered Institute of Marketing and is a chartered marketer. Tracy is also a Non-Executive Director of Assurant Group Limited and is Non-Executive Chairman of a leading financial services software company.


A modern mutual for the 21st century

Board of DirectorsA list of Directors of the Board who held office during the year, appears on pages 22 and 23. In addition Richard Sear held office as Chief Executive until his resignation on 22nd July 2011.

Corporate GovernanceThe Board supports the general principles of corporate governance and is committed to maintaining a high standard. Our approach to corporate governance is set out in our report on pages 18-19.

Business Objectives and ActivitiesThe Society’s objective is to provide our policyholders with products and services that look after their health, welfare and protection to give certainty and control over their wellbeing both now and in the future. This will be delivered in a timely, personal and friendly manner using technology as appropriate.

Throughout the year the Society and its subsidiaries have always carried out activities that are within their respective powers.

The Board sets key performance indicators (KPIs) and targets, which it monitors on a regular basis throughout the year. These KPIs change in line with the Society’s objectives and priorities. For 2011 the KPIs were focused on capital management and, in particular, the restoration of free capital, risk management, claims management and cost efficiency. The financial performance of the Society, including the KPI’s, is reviewed by the Chief Executive on pages 6-16.

Statement of Directors’ ResponsibilitiesThe Board is required to prepare financial statements for each financial year which give a true and fair view of the state of affairs of the Society as at the end of the financial year and of the results for that year. In preparing these financial statements the Board is required to:

Select suitable accounting policies and then apply them consistently.

Make judgements and estimates that are reasonable and prudent.

State whether applicable accounting standards have been followed, subject to any material departures disclosed and explained in the financial statements.

Prepare the statements on a going concern basis unless it is inappropriate to assume that the Society will continue in business.

Prepare the accounts in accordance with the Friendly Societies (Accounts and Related Provisions) Regulations 1994 and in accordance with the applicable accounting standards in the United Kingdom.

The Directors confirm that the accounts comply with the above.

The Directors are responsible for keeping appropriate accounting records which disclose with reasonable accuracy, at any time, the financial position of the Society and to enable it to ensure that the financial statements comply with the Friendly Societies Act 1992. They are also responsible for safeguarding the assets of the Society and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

Disclosure of information to auditorsThe Directors who held office at the date of approval of this Director’s Report confirm that, so far as they are aware, there is no relevant audit information of which the Society’s auditors are unaware, and each Director has taken all the steps he ought to have taken as a Director to make himself aware of any relevant audit information and to establish that the Society’s auditors are aware of that information.

2�

Going Concern The Society’s business activities, together with the factors likely to affect its future development, performance and position are set out in the Chief Executive’s Report for the year. The financial position of the Society, its cashflows, liquidity position and borrowing facilities have also been considered by the Board. The Society’s policies and processes for managing capital are highlighted in Note 16 to the financial statements. The Society considers that it has adequate financial resources, supported by long-term relationships with its policyholders and suppliers and as a consequence, the Directors believe that the Society is well placed to manage its business risks in respect of liquidity and cashflows. After making enquiries, the Directors have a reasonable expectation that the Society has adequate resources to continue in operational existence for the foreseeable future. Accordingly, they continue to adopt the going concern basis in preparing the annual report and accounts.

EmployeesThe average number of Directors and staff employed by the Society totalled 53 (2010: 67).

The aggregate remuneration paid to Directors and staff employed by the Society during the year amounted to £2.7 million (2010: £3.1 million).

Communication with staff was undertaken through a weekly communication circle (with upward feedback positively encouraged) and open meetings with the Chief Executive and other members of the Executive Committee. The Society is committed to the ongoing development of its staff.

Member RelationsThe Board is committed to maintaining good communications with members. In order to fulfil this commitment, a Members’ Focus Group and Research Community have been established. Engagement with the Focus Group has been positive and feedback valued. The Board also firmly believes in the principles of Treating Customers Fairly and adheres to these in its day to day operation. Our approach to Treating Customers Fairly is set out on page17.

Complaints PolicyThe Society aims to deliver the highest possible level of service to members. If any member believes that the Society has failed in this aim they have recourse to the Society’s Complaints Procedure.

The Society has a documented procedure for the handling and recording of complaints. The Board, through the Risk Committee, regularly review the number and type of complaint received in order to monitor that complaints are properly dealt with and corrective action has been taken to prevent recurrence.

Charitable DonationsThe National Deposit Foundation Fund, whose activities are described on pages 14 and 15, made charitable donations of £22,565 (2010: £2,000). In addition, the Society’s charitable donations totalled £5,415 (2010: £5,275). There were no political donations (2010: £nil).

Auditors The Audit Committee monitors the use of the external auditors for non audit work to ensure the continued independence and objectivity of the external auditors. The external auditors undertook a number of non-audit assignments during 2011 and in the opinion of the Audit Committee these were considered to be consistent with the professional and ethical standards expected of the external auditors.

Re-appointment of AuditorsA resolution to re-appoint PricewaterhouseCoopers LLP as Independent Auditors will be proposed at the forthcoming Annual General Meeting.

By order of the BoardJonathan Long Company Secretary

26 March 2012

Chairm


ighlightsC


ustomers Fairly

Corporate G


Remuneration Report

Financial Statement

Notes to the A

ccounts


Directors’ emoluments

Salaries & Fees

£

PerformanceRelated Pay*

£

Other Benefits#

£

Total2011

£

Total2010

£

Chairman

Don Burgess (Resigned 8 June 2010) - - - - 9,250

Alan Lewis (appointed 8 June 2010) 40,000 - - 40,000 28,000

Executive Directors

Richard Sear + 89,846 - 36,849 126,695 295,920

Jonathan Long 117,500 23,500 23,700 164,700 196,100

Ian Talbot (appointed 30 Sept 2011) 23,750 4,750 3,195 31,695 -

Non-Executive Directors

John Greenhalgh 25,000 - - 25,000 21,000

Mark Jackson 30,000 - - 30,000 25,279

Peter McIlwraith 25,000 - - 25,000 22,000

Tracy Morshead 25,000 - - 25,000 20,250

* Payment of performance related pay has been deferred.

# Other benefits include pension scheme contributions, car allowances, medical and other benefits in kind or their equivalent monetary value.

+ Resigned 22 July 2011. In addition to the above, received £170,200 by way of payment in lieu of notice, £20,000 by way of compensation for loss of office and £27,000 in respect of the 2010 bonus deferred from last year as reported in last year’s Directors’ Remuneration Report.

Emoluments have been pro-rated to reflect the period of service as a director if less than one year.

Peter McIlwraith

Introduction This report sets out the remuneration policy for the Society in 2011.

The report has been prepared to comply with the requirements of the Combined Code on Corporate Governance annotated for mutual insurers and the Directors’ Remuneration Report Regulations 2002.

The composition and responsibilities of the Society’s

Remuneration Committee are set out on page 20.

The Remuneration Committee keeps itself informed of relevant developments and best practice and is authorised at its discretion to obtain advice from external advisers.

Policy It is the Society’s policy to enable it to attract, retain and motivate good quality staff.

Remuneration for Executive Directors is in three parts comprising a basic salary, a non-pensionable annual performance award linked to each individual Director’s own contribution to the Society, a non pensionable long term incentive plan (’LTIP’) linked to the achievement of strategic objectives over a four year period, all designed to enhance overall business performance. In addition, Executive Directors receive a company car (or cash allowance) and access to benefits such as membership of a pension scheme, private medical insurance

and death in service benefit.

Remuneration for Non-Executive Directors comprises a basic fee plus a supplement for the Chairman of the Board. Additional amounts may be paid to Chairmen of Sub-Committees.

Summary This report, together with the disclosures opposite, is provided to give members a full explanation of the policy and application of Directors’ remuneration. A resolution will be put to the Annual General Meeting inviting members to vote on the Directors’ Remuneration Report. This vote is advisory and the Board will consider what action is required.

Peter McIlwraith Chairman26 March 2012

Directors’ Remuneration Report

2�

Pension Entitlement

Years of Service

Pension accrued

during2011

£

Accrued pension

as at 31/12/2011

£

Accrued pension

as at 31/12/2010

£

Transfervalue of accrued

pension as at 31/12/2011

£

Increase in transfer value

during the year net of Director’s

contribution £

Executive Directors

Richard Sear 4 104 3,229 3,125 34,156 2,124

Jonathan Long 5 391 3,672 3,281 39,161 13,739

Ian Talbot 6 287 3,667 3,380 29,226 5,326

Executive Directors

Base salaries Base salaries are normally reviewed annually by reference to jobs carrying similar responsibilities in comparable organisations. Salary amendments are normally effective from 1 January each year.

Performance Related Pay The Executive Directors have a part of their total emoluments linked to performance. The current annual performance related pay scheme represents up to a maximum of 30% of base salaries.

The performance related pay scheme comprises two elements. The first which is assessed on a collective basis has identified six major corporate objectives and all Executive Directors participate on the same basis. The maximum amount payable under this element is 10% of base salaries.

The second element is an individual performance related programme where each Executive Director is assessed against personal goals and objectives. The individual performance related element of the scheme can award up to a maximum 20% of base salaries.

LTIP Milestone Completion Bonuses The Remuneration Committee set in place a four year LTIP for the Executive Directors that encourages successful delivery of the Strategy by the end of 2011, as determined by the achievement of pre-defined financial milestones, by a lump sum payment at either the end of the period or earlier if the milestones are achieved in advance. A further lump sum may be payable if the milestones are exceeded by a predefined amount.

The milestones address key aspects of the corporate strategy which was put in place at the beginning of the period and included stretching targets.

They cover the level of administration surplus (to be calculated after charging an appropriate cost for amounts earned under LTIP), the achievement of new business represented by APE, the cost of acquiring new business based on an amount per £ of APE and the level of claims compared with the original business model for the Healthcare products. In the event of out-performance by 25% on any of the first three of these criteria, a further bonus will become payable. The maximum available to all the Executive Directors for achieving all of the first four criteria is £500,000 and a maximum of a further £500,000 is available if all the second three criteria are met. A payment totalling £140,000 was made in January 2011 in respect of performance achieved in 2010 and is included within the Directors’ emoluments for 2010. It is not currently expected that any further amounts will be paid under the terms of the Scheme.

Retirement and Related Benefits The Executive Directors are members of the National Deposit Staff Superannuation Scheme. This is a defined benefit retirement plan that closed to future accrual on 31 May 2009. A defined contribution pension scheme is now in place to which the Society contributes up to a maximum of 12% per Director, dependent upon personal contribution levels.

Other Benefits Executive Directors are entitled to private medical insurance, death in service benefit of four times basic salary and a company car or car cash allowance.

Directors’ Contract The Executive Directors have service agreements which incorporate their terms and conditions of employment. Service agreements are normally

terminable by the Society giving twelve months’ notice or by the Executive Director giving twelve months’ notice.

Non-Executive Directors All Non-Executive Directors including the Chairman have letters of appointment which set out their duties and responsibilities. The appointment of Non-Executive Directors is generally for a period of three years and is subject to election and re-election at the Society’s Annual General Meeting.

Fees are benchmarked against similar roles in comparable organisations. Fees are calculated on an annual rather than a daily basis. However, it is assumed that to fulfil the basic role of a Non-Executive Director, an average of two days minimum is required per month for review work and attendance at regular Board meetings, the Society’s Annual General Meeting, Special General Meetings where appropriate, other ad hoc meetings with regulators and advisers as may be required and training courses.

Non-Executive Directors remuneration is not performance related nor pensionable and Non-Executive Directors do not participate in any incentive plans. However, a formal annual appraisal process is undertaken where the views of all Directors are taken into consideration and the outcome of this is ratified by the Board.

Fees for Non-Executive Directors are determined by the Executive Directors and subject to approval of the Board as a whole. They are designed to recognise the responsibilities of Non-Executive Directors and to attract individuals with the necessary skills and experience to contribute to the operations of the Society. In addition to the basic annual fee additional fees may be awarded for the chairmanship of any Committees although no such fees are being made currently.

Chairm


ighlightsC


ustomers Fairly

Corporate G


Remuneration Report

Financial Statement

Notes to the A

ccounts


We have audited the financial statements of National Deposit Friendly Society Limited for the year ended 31 December 2011 which comprise the Group and Society Income Statement, the Group and Society Balance Sheet, the Group and Society Statement of Total Recognised Gains and Losses and the related notes. The financial reporting framework that has been applied in their preparation is applicable law and United Kingdom Accounting Standards (United Kingdom Generally Accepted Accounting Practice).

Respective responsibilities of the Directors and Auditors

As explained more fully in the Statement of Directors’ Responsibilities set out on page 24, the Directors are responsible for preparing financial statements which 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). Those standards require us to comply with the Auditing Practices Board’s Ethical Standards for Auditors.

This report, including the opinions, has been prepared for and only for the Society’s members as a body in accordance with the Friendly Societies Act 1992 and the Regulations made under it and for no other purpose. We do not, in giving these opinions, 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.

Scope of the audit of the financial statements

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 Group’s and Society’s circumstances and have been consistently

Joanne Leeson Senior Statutory Auditor For and on behalf of PricewaterhouseCoopers LLP Chartered Accountants and Statutory Auditors Bristol 26 March 2012

applied and adequately disclosed; the reasonableness of significant accounting estimates made by the Directors; and the overall presentation of the financial statements. In addition, we read all the financial and non-financial information in the annual report to identify material inconsistencies with the audited financial statements. If we become aware of any apparent material misstatements or inconsistencies we consider the implications for our report.

Opinion on financial statements

In our opinion the financial statements:

give a true and fair view, in accordance with UK Generally Accepted Accounting Practice, of the state of the Society’s and the Group’s affairs as at 31 December 2011 and of the income and expenditure of the Society and the Group for the year then ended; and

have been properly prepared in accordance with the Friendly Societies Act 1992.

Opinion on other matters prescribed by the Friendly Societies Act 1��2

In our opinion the Board Report has been prepared in accordance with the Friendly Societies Act 1992 and the regulations made under it, and the information given therein is consistent with the financial statements for the financial year.

Matters on which we are required to report by exception

We have nothing to report in respect of the following matters where the Friendly Societies Act 1992 requires us to report to you if, in our opinion:

proper accounting records have not been kept; or

the financial statements are not in agreement with the accounting records; or

we have not received all the information and explanations and access to documents that we require for our audit.

INDEPENDENT AUDITORS’ REPORT TO THE MEMBERS OF NATIONAL DEPOSIT FRIENDLY SOCIETY LIMITED

Independent Auditors’ Report

The maintenance and integrity of the National Deposit Friendly Society Limited and Group website is the responsibility of the Directors; the work carried out by the auditors does not involve consideration of these matters and, accordingly, the auditors accept no responsibility for any changes that may have occurred to the financial statements since they were initially presented on the website. Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

2�

Group Society

2011 2010 2011 2010

Notes £’000 £’000 £’000 £’000 £’000 £’000 £’000 £’000

Gross premiums written and paymentsto deposits

2 21,0�� 17,368 21,0�� 17,368

Outward reinsurance premiums (��) (36) (��) (36)

Earned premiums net of reinsurance 21,0�0 17,332 21,0�0 17,332

Investment income 3 10,�� 9,478 10,�� 9,478

Unrealised gains / (losses)

- Investments 3 �0� 4,707 �0� 4,707

- Assets held to cover linked liabilities 3 (1��) 214 (1��) 214

Other technical income 4 1,2�0 616 �� 57

�2,�� 2,�� 1,�12 �1,��

Claims paid 22,�� 17,040 22,�� 17,040

Change in provision for claims 2,��1 97 2,��1 97

Change in long term funds

Long term business provision (�,0��) 9,616 (�,0��) 9,616

Provision for linked liabilities (20�) 72 (20�) 72

Bonuses and rebates (��) 94 (��) 94

Net operating expenses 5a

Acquisition costs �,�� 8,786 �,�� 8,186

Administrative expenses �,��1 3,384 �,�1� 3,146

�,2�� 12,170 �,0�1 11,332

Other technical charges - project costs 5b �,10� 1,904 �,10� 1,904

- other 2� 191 2� 191

Investment expenses 6 �� 1,248 �� 1,248

Impairment of subsidiary 20 - - �0� 527

Redundancy and end of contractterm payments

�� 147 �� 147

FRS17 retirement benefit credit (��) - (��) -

Tax attributable to long term business 8a ��0 501 ��0 501

Transfer to/(from) the fund for future appropriations

�,2�1 (10,733) �,�02 (10,981)

�2,�� 2,�� 1,�12 �1,��

Income StatementFor the year ended 31 December 2011

Chairm


ighlightsC


ustomers Fairly

Corporate G


Remuneration Report

Financial Statement

Notes to the A

ccounts

All operating activites relate to continuing operations conducted in the United Kingdom. The information on pages 33 to 50 form an integral part of these financial statements.

�0 National Deposit Friendly Society Annual Report & Financial Statements 2011

Group Society

2011 2010 2011 2010

Notes £’000 £’000 £’000 £’000 £’000 £’000 £’000 £’000

ASSETS

Intangible assets 9 2�� 21 - -

Investments

Land and buildings 10 2�,��2 32,104 2�,��2 32,104

Other financial investments 11 11�,��2 119,846 11�,��2 119,846

Investment in subsidiaries 20 - - 2�� 78

1��,20� 151,950 1��,�� 152,028

Assets held to cover linked liabilities 12 2,1�� 2,364 2,1�� 2,364

Reinsurers’ share of technical provisions �0� 405 �0� 405

Debtors

Debtor arising from direct insurance operations 2�� 558 2�1 520

Other debtors � 11 2�� 273

�0� 569 ��0 793

Other assets

Tangible assets 13 �2� 427 22� 272

Cash at bank and in hand 11 1,��2 1,398 1,�2� 1,210

Deferred tax asset 8c 110 230 110 230

2,1�� 2,055 1,�� 1,712

Prepayments and accrued income

Accrued interest and rent 2�0 191 2�0 191

Other prepayments and accrued income ��2 340 �� 289

��2 531 �2� 480

1�2,1�� 1��,�� 1�2,0�� 1��,��2

Balance SheetAs at 31 December 2011

The information on pages 33 to 50 form an integral part of these financial statements.

�1

Group Society

2011 2010 2011 2010

Notes £’000 £’000 £’000 £’000 £’000 £’000 £’000 £’000

LIABILITIES

Fund for future appropriations 10,�� 8,351 10,�� 8,351

Technical provisions

Long term business provision 15 1��,01� 142,103 1��,01� 142,103

Claims outstanding �,2�0 659 �,2�0 659

Provision for bonuses and rebates �� 1,629 �� 1,629

1��,200 144,391 1��,200 144,391

Technical provision for linked liabilities 1,�10 1,814 1,�10 1,814

Provisions for other risks and charges

Net pension liability 17 �00 - �00 -

Creditors

Arising out of direct insurance operations �� 49 �� 49

Other creditors including taxation andsocial security

�21 894 ��2 842

Accruals and deferred income 1,�02 2,396 1,�� 2,335

2,1�2 3,339 2,10� 3,226

1�2,1�� 1��,�� 1�2,0�� 1��,��2

Balance Sheet - continuedAs at 31 December 2011

Chairm


ighlightsC


ustomers Fairly

Corporate G


Remuneration Report

Financial Statement

Notes to the A

ccounts


These accounts were approved by the Board on 26 March 2012.

Alan Lewis Jonathan Long Chairman Chief Executive Officer and Company Secretary


Group Society

Notes

2011£’000

2010

£’000

2011£’000

2010

£’000

Surplus/(deficit) for the financial year �,2�1 (10,733) �,�02 (10,981)

Actuarial (loss)/gain on pension scheme 17 (1,1��) 79 (1,1��) 79

Movement in deferred tax on pension scheme 1� (3) 1� (3)

Total recognised gains and losses relating to the year 2,122 (10,��) 2,1�� (10,�0�)

Statement of total recognised gains and lossesFor the year ended 31 December 2011


��

(1) Accounting policies

Basis of preparationThe accounts have been prepared in accordance with The Friendly Societies (Accounts and Related Provisions) Regulations 1994, with applicable accounting standards in the United Kingdom and with the Statement of Recommended Practices issued by the Association of British Insurers.

Basis of consolidationThe Group accounts comprise the assets, liabilities and income and expenditure account transactions of the Society and its subsidiaries 425 Direct Limited, ND Member Services and Healthguard Direct Limited. The net results are included in the fund for future appropriations for the Group. The activities of the Society and Group are accounted for in the income statement.

PremiumsPremiums are accounted for when due for payment. Payments to Healthcare Deposit Accounts are accounted for when received.

Investment incomeIncome from rents and securities is taken into account on an accruals basis. Dividends are accounted for on the date the shares become quoted ex-dividend. UK dividends are shown excluding their irrecoverable associated tax credit. Bank interest is accrued in the period in which it arises.

Realised and unrealised gains and lossesRealised investment gains and losses represent the difference between the sale proceeds and original cost. Unrealised investment gains and losses represent the net movement in the market value of investments during the year after allowing for realised gains and losses recognised in the technical account.

ClaimsMaturity claims and annuities are charged against income when due for payment. Surrenders are accounted for when paid or, if earlier, on the date when the policy ceases to be included within the calculation of the long term business provision.

Death claims and all other claims including Healthcare are accounted for when notified.

Long term business provisionThe long term business provision is determined by the Society’s Board and is calculated on a statutory solvency basis to comply with reporting requirements under the Prudential Sourcebook for Insurers. The calculation uses a net premium method for with-profit policies and as such includes explicit provision for annual reversionary bonuses declared prior to the valuation date. Implicit provision is made for future bonuses by using a valuation rate of interest lower than the expected return on the assets.

For conventional non-profit business, a gross premium valuation method is used, which brings into account the

full premiums receivable under contracts written by the Society, estimated renewal and maintenance costs and contractually guaranteed benefits.

The calculation of the long term business provision for unit linked policies is based on the fund valuation at the valuation date.

Claims OutstandingThe claims outstanding provision provides for all the Healthcare and Healthguard claims payable as at 31 December, where the claim has been notified but not yet paid.

BonusesBonuses charged to the long term business technical account in a given year comprise:

new reversionary bonuses declared in respect of that year which are provided within the calculation of the long term business provision.

terminal bonuses paid out to policyholders on maturity which are included within claims paid.

DepreciationPropertiesInvestment properties - no depreciation has been provided in accordance with SSAP 19.

Non-investment properties - no depreciation has been provided as the Society’s policy is to maintain the properties in good condition. Accordingly the Board consider that the lives of these assets and their residual values are such that their depreciation is insignificant and is thus not provided. The underlying assets are reviewed for impairment annually.

Tangible fixed assets and depreciationTangible fixed assets are held at cost less accumulated depreciation.

Depreciation has been provided at the following rates calculated to write off each asset over its estimated useful life: Computer equipment is depreciated at 25% per annum on a straight line basis; Office equipment is depreciated at 12.5% per annum on a straight line basis.

Intangible AssetsCustomer bookThe customer book has been recognised at market value and will be amortised on a straight line basis over its useful life of 3 years, starting in the first full year following acquisition.

GoodwillGoodwill is amortised at 25% per annum on a straight line basis from the first full month after acquisition.

An impairment review is undertaken after the first full year of acquisition and subsequently if adverse events indicate that the carrying value may not be recoverable.

Notes to the accountsFor the year ended 31 December 2011

Chairm


ighlightsC


ustomers Fairly

Corporate G


Remuneration Report

Financial Statement

Notes to the A

ccounts

�� National Deposit Friendly Society Annual Report & Financial Statements 2011

(1) Accounting policies (Continued)

Project costsProject costs comprise expenditure on acquisitions and on business process improvements which are intended to deliver future financial benefits to the Society through reducing operating costs and/or creating operational efficiencies.

Projects costs are charged to the income statement with the exception of major projects where the outcome is assessed to be reasonably certain as regards viability and feasibility. Amortisation is charged once the economic benefits of the project start to be realised.

Pension costsThe Society operates a defined benefit pension scheme. This scheme closed to new entrants and future accrual on 31 May 2009. A pensions asset / liability is calculated as the recoverable amount of the scheme’s assets less the present value of the scheme’s liabilities. Any net asset arising is not recognised in the balance sheet as, under the terms of the scheme, the Society is unable to recover the surplus either through reduced contributions in the future or refunds from the scheme. A net liability is recognised to the extent that it represents a legal or constructive obligation of the Society.

The pension cost for the scheme is analysed between current service cost, past service cost and net return on pension scheme. Current service cost is the actuarially calculated present value of the benefits earned by the active employees in each period. Past service costs relating to employee service in prior periods arising in the current period as a result of the introduction of, or improvement to, retirement benefits, are recognised in the profit and loss account on a straight-line basis over the period in which the increase in benefits vest.

The actuarial gains and losses which arise from a valuation and from updating the latest actuarial valuation to reflect conditions at the balance sheet date are taken to the statement of total recognised gains and losses for the period to the extent they are attributable to members. The attributable deferred taxation is shown separately in the statement of total recognised gains and losses.

Payments made to the defined contribution scheme for current employees are charged as an expense as they fall due.

TaxationDeferred tax is provided using the full provision method. Deferred tax is recognised in respect of all timing differences that have originated but not reversed at the balance sheet date. It is calculated at rates expected to be applicable when the asset or liability crystallises on a non-discounted basis. Deferred tax assets are recognised only to the extent that there will be sufficient foreseeable future taxable profits from which the future reversal of timing differences can be deducted.

Cash flow statementThe Society, being a mutual life assurance company, is exempt from the requirement under Financial Reporting Standard 1 ‘Cash Flow Statements’ (‘FRS1’) to produce a cash flow statement.

InvestmentsListed securities are shown in the accounts at mid market value. Properties are shown in the accounts at open market value, aside from one owner occupied property that is valued on an existing use basis.

Mortgages and loans are valued at the estimated net realisable value after provision for doubtful debts, if this is considered necessary.

Investments in subsidiary companies are held at cost less any provisions for diminution in value. In accordance with Financial Reporting Standard 11 ‘Impairment of fixed assets and goodwill’ (‘FRS11’); the carrying value of the subsidiary undertaking is compared to its recoverable amount.

Acquisition costsAcquisition costs represent commission payable and other related expense of acquiring insurance policies written during the financial year. Acquisition costs which relate to subsequent periods are deferred and charged to the accounting periods in which related premiums are earned.

Fund for future appropriationsThe fund for future appropriations incorporates amounts which have yet to be allocated to participating policyholders. Any surplus or deficit arising in the technical account is transferred to or from the fund on an annual basis. Surpluses are allocated by the Directors to participating policyholders by way of bonuses. Any unallocated surplus is carried forward in the fund for future appropriations.

Operating leasesThe Society leases motor vehicles under contracts of operating leases. The leases are cancellable. The lease expenses are accounted for as an operating expense as incurred.

Notes to the accounts (Continued)

For the year ended 31 December 2011

��

Society

2011£’000

2010

£’000

(2) Gross premiums written and payments to deposit

Assurance �,��0 5,222

Bonds and other single premiums �� 774

Healthcare and Healthguard 1�,0�� 10,760

Payments to deposit �� 515

Unit linked �� 97

21,0�� 1�,��



Chairm


ighlightsC


ustomers Fairly

Corporate G


Remuneration Report

Financial Statement

Notes to the A

ccounts

The gross premiums written and payments to deposit above include gross new business premiums as detailed below:

Society

2011£’000

2010

£’000

Gross new business premiums written

Assurance �2 229

Bonds and other single premiums 10� 164

Healthcare and Healthguard �,11� 7,798

�,�0� �,1�1

The Society only transacts long term business within the United Kingdom.




Group Society

2011£’000

2010

£’000

2011£’000

2010

£’000

(�) Other technical income

Insurance commission �� 588 2� 29

Other income ��1 28 ��1 28

1,2�0 �1� ��

Society

2011£’000

2010

£’000

(�) Investment income

Income from:

Fixed interest stocks 11� 159

Ordinary shares �2� 691

Listed investments ��0 850

Land and buildings 2,��0 1,820

Mortgages and ground rents � 10

Realised gains �,100 6,754

Bank Interest �� 44

Investment income 10,�� 9,478

Movement in unrealised gains and losses in the year 1�0 4,921

Total investment return 10,�� 1�,��

��

Group Society

2011£’000

2010

£’000

2011£’000

2010

£’000

(�) Net operating expenses

(a) Included in operating expenses are:

Fees payable to external auditors

Auditing of current year accounts and other services pursuant to legislation

12� 140 11� 135

Non-recurring audit fees in respect of 2010 �� - �� -

Services relating to taxation �� 51 �� 48

Other services 1� - 1� -

Fees payable to internal auditors in respect of:

Internal audit 2� 42 2� 38

Actuarial fees �1 323 �1 323

Depreciation of tangible assets 1�� 152 �2 95

Amortisation of goodwill � 7 - -

(b) Other technical charges - project costs:

Cost & process efficiency 1,1�� 1,093 1,1�� 1,093

Product and proposition development 21� 231 21� 231

People & communication �� 115 �� 115

Capital management 21� 92 21� 92

CRM - 106 - 106

Costs re potential acquisitions - 14 - 14

Healthguard Direct buy out 2,�00 - 2,�00 -

Advice on Healthguard Direct buy out 111 1 111 1

Other costs �1� 232 �1� 232

Business intelligence 2� 21 2� 21

Total project costs �,10� 1,�0� �,10� 1,�0�

Group Society

2011£’000

2010

£’000

2011£’000

2010

£’000

(�) Investment expenses

Investment management expenses 2�� 797 2�� 797

Investment property direct costs �21 451 �21 451

�� 1,2�� 1,2��



Chairm


ighlightsC


ustomers Fairly

Corporate G


Remuneration Report

Financial Statement

Notes to the A

ccounts




Group & Society

2011£’000

2010

£’000(�) Taxation

(a) Attributable to long term business

Tax charged in the long term business technical account comprises:

Current tax

UK corporation tax �1� 166

Prior year adjustments (��) (25)

Total current tax �� 141

Deferred tax

Origination and reversal of timing differences 1�� 360

Total deferred tax 1�� 360

Total tax charged in the long term business technical account ��0 �01

Group Society

2011 2010 2011 2010

(�) Staff costs

Average number of employees:

Administration �2 70 �2 51

Sales 2� 38 � 16

�� 10� ��

Group Society

2011£’000

2010

£’000

2011£’000

2010

£’000

Wages and salaries (inc commission) 2,�� 3,377 2,0�� 2,766

Social security costs �0� 370 2�� 306

Pension costs 1�2 164 1�0 163

�,0�� ,�11 2,�� ,2��

Includes temporary, part-time and fixed contract staff of 13 (2010:9) and excludes Non-Executive Directors of 5 (2010:5).

This includes Executive Directors’ emoluments totalling £403,096 (2010: £617,799). Details of Directors’ remuneration are set out on page 26.

��

(�) Taxation (Continued) Group & Society

2011£’000

2010

£’000(b) Factors that may affect future tax charges

The deferred tax assets which have not been recognised due to the uncertainty of their recoverability in the foreseeable future comprise:

Realised capital losses �� 453

Pension business losses ��1 389

Accelerated capital allowances �� 126

Expenses deductible in future periods �1� 405

Unrealised capital losses 2�� 110

Undiscounted deferred tax asset balance 1,�0� 1,��

These deferred tax assets may be realised, and therefore reduce future tax payable, when net gains chargeable to corporation tax are realised or when there is sufficient taxable income with which to offset carried forward expenses and/or losses. This will therefore depend substantially upon future movements in the stock market and on future taxable income which cannot be predicted with certainty.



Chairm


ighlightsC


ustomers Fairly

Corporate G


Remuneration Report

Financial Statement

Notes to the A

ccounts

Group & Society

2011£’000

2010

£’000(c) Balance sheet

The deferred tax balance included within other assets comprises:

Unrelieved expenses carried forward �2 57

Accelerated capital allowances �0 -

Unrealised gains on investments - 173

Deferred tax on Pension Scheme deficit 1� -

Undiscounted deferred tax asset balance 110 2�0

(d) Reconciliation of deferred taxation balances

Opening deferred tax asset 2�0 590

Charge to operating profit (1��) (360)

Charge to statement of total recognised gains and losses 1� -

Closing deferred tax asset 110 2�0


Group

(�) Intangible assets Customer Book£’000

Goodwill£’000

Total£’000

Cost

At 1 January - �0 �0

Additions 22� - 22�

At �1 December 22� �0 2��

Amortisation

At 1 January - � �

Provided in the year - � �

At �1 December - 1� 1�

Net book value

�1 December 2011 22� 1� 2��

31 December 2010 - 21 21

The customer book intangible asset arose in 2011, when ND Member Services Limited acquired Healthguard Direct Limited. £224,000 represents the market value of Healthguard Direct’s customer book.

The goodwill arose in 2009 when the Group, through 425 Direct Limited, acquired by way of asset purchase agreement a part of the operations of AWD Direct Limited. £30,100 of goodwill arose through the transaction.



The Finance (No 2) Act 2010 included legislation to reduce the main rate of corporation tax from 28% to 27% with effect from 1 April 2011. In his Budget speech on 23 March 2011 the Chancellor announced a further reduction in the rate of corporation tax to 26% with effect from 1 April 2011. This further reduction was enacted under the Provisional Collection of Taxes Act 1968 on 29 March 2011. Legislation to reduce the main rate of corporation tax from 26% to 25% from 1 April 2012 has been included in the Finance Act 2011 and substantively enacted on 5 July 2011.

In his Budget speech on 21 March 2012 the Chancellor announced a further reduction in the rate of corporation tax to 24% with effect from 1 April 2012. This further reduction is expected to be enacted under the Provisional Collection of Taxes Act 1968 on 26 March 2012.

In addition to the changes in rates of corporation tax disclosed above, a number of further changes to the UK corporation tax system were announced in the March 2012 UK Budget Statement. Further reductions to the main rate are proposed to reduce the rate by 1% per annum to 22% by 1 April 2014. These changes are expected to be enacted separately each year.

Due to changes in the tax regime for insurance companies which will take effect from 1 January 2013, it is expected (based on draft legislation available to date) that the pension business losses will become irrelevant as such business will no longer be taxable. The legislation is yet to be finalised and hence it is not possible to quantify the impact on the Society at this stage.

(�) Taxation (Continued)

�1

Chairm


ighlightsC


ustomers Fairly

Corporate G


Remuneration Report

Financial Statement

Notes to the A

ccounts



(12) Assets held to cover linked liability

Included within assets held to cover linked liabilities is £568,301 (2010: £550,509) representing units not yet purchased by policyholders.

Of the listed fixed interest securities £849,675 (2010: £779,625) relates to overseas fixed interest securities, with the remainder relating to UK fixed interest securities.

Of the listed shares £928,253 (2010: £nil) relates to overseas investments, with the remainder relating to UK investments.

Deposits with credit institutions were previously classified within cash at bank and in hand.

The Directors have the opinion that the carrying value of the investments are supported by their net underlying assets.

Group & Society

2011 £’000

2011 £’000

2010 £’000

2010 £’000

Cost Valuation Cost Valuation

(11) Other financial investments

Listed fixed interest securities ��,�� ,1�� 72,518 89,263

Listed shares 1�,��2 1�,0�1 20,740 28,233

Deposits with credit institutions 2,01� 2,01� 2,022 2,022

Mortgages 2�� 2�� 295 295

Freehold ground rent � �� 8 33

�0,�� 11�,��2 ��,�� 11�,��

The Society’s properties are included at open market values, aside from one owner occupied property that is valued on an existing use basis. Significant property holdings are valued independently by Mellersh and Harding, Chartered Surveyors, on an open market value basis on a triennial basis. The most recent valuation being at 31 December 2011. This valuation was carried out in accordance with the Royal Institute of Chartered Surveyors appraisal and valuation standards. The remaining properties are valued by the Society’s Property Manager, and reviewed by the Board, at the same date on an open market value basis. Property valuations are adjusted for the results of annual reviews carried out by the Society’s Property Manager, and reviewed by the Board, to reflect fluctuations in the market values arising between the triennial valuations.

Group & Society

2011 £’000

2011 £’000

2010 £’000

2010 £’000

Cost Valuation Cost Valuation

(10) Investments

Land and buildings

Freehold investment properties 21,�� 1�,1�2 22,749 20,407

Freehold properties fully occupied by the Society 1,2�2 2,�00 1,102 2,282

2�,0�� 20,��2 23,851 22,689

Long leasehold properties 10,2�� ,200 10,254 9,415

��,�� 2�,��2 ��,10� �2,10�


(1�) Tangible Assets Group

ComputerEquipment

OfficeEquipment

Total

£’000 £’000 £’000

CostAt 1 January ��1 2�� 0

Additions �� 2 ��

Disposals (1��) (1�) (1�1)

At �1 December �� 2��

Depreciation

At 1 January �00 1��

Provided in the year �� 1��

Disposals (1��) (1�) (1�1)

At �1 December 2�� 1�� 0

Net book value

�1 December 2011 2�� 2�

31 December 2010 291 136 427

Society

ComputerEquipment

OfficeEquipment

Total

£’000 £’000 £’000

CostAt 1 January ��0 1��

Additions �� 2 ��

Disposals (1��) (1�) (1�1)

At �1 December �� 1�� 0

Depreciation

At 1 January 2�� 11� ��2

Provided in the year �� 2� �2

Disposals (1��) (1�) (1�1)

At �1 December 1�� 12� �0�

Net book value

�1 December 2011 1�2 �� 22�

31 December 2010 195 77 272



(1�) Capital commitments

Amounts authorised and contracted for at 31 December 2011 £nil (2010: £nil).

��

Chairm


ighlightsC


ustomers Fairly

Corporate G


Remuneration Report

Financial Statement

Notes to the A

ccounts



(1�) Long term business provision

The long term business provision has been calculated on the basis of the following principal assumptions:

Rates of Interest 2011 Valuation Assumptions 2010 Valuation AssumptionsOld deposit contracts 2.42% per annum. 3.33% per annum.

Healthcare and Healthguard contracts 2.62% per annum. 3.53% per annum.

Other PHI contracts 2.27% 3.14%

With profits life assurance policies

2.15% per annum for tax exempt policies and 1.72% per annum for taxable policies.

2.61% per annum for tax exempt policies and 2.09% per annum for taxable policies.

With profits bonds andinvestment ISAs

Not applicable since the basic reserve is equal to current death benefits.

Not applicable since the basic reserve is equal to current death benefits.

With profits personal pensions and retirement annuities

2.76% per annum before vesting and 0.65% per annum after vesting (for retirement annuities).

3.68% per annum before vesting and 2.50% per annum after vesting (for retirement annuities).

Other non profit business 2.27% per annum for tax exempt policies, 1.82% for taxable policies and 0.20% for short term non-profit bonds.

3.14% per annum for tax exempt policies, 2.51% for taxable policies and 0.52% for short term non-profit bonds.

Rates of Mortality 2011 Valuation Assumptions 2010 Valuation Assumptions

DBO contracts 26% of the AMN00 and 31% of the AFN00 ultimate table for assured lives (assumed to be transferred to suspense at age 100).

33% of the AMN00 and 39% of the AFN00 ultimate table for assured lives (assumed to be transferred to suspense at age 100).

Deposit (non-DBO) contracts 75% of the AMN00 and 85% of the ultimate table for assured lives.

75% of the AMN00 and 85% of the ultimate table for assured lives.

Healthcare contracts 75% of the AMN00 and 85% of the ultimate table for assured lives.

75% of the AMN00 and 85% of the ultimate table for assured lives.

PHI deferred sickness claims in payment

Nil. Nil.

Other PHI contracts 75% of the AMN00 ultimate table for assured lives.

75% of the AMN00 ultimate table for assured lives.

Critical illness policies Table provided by reinsurer combining mortality and sickness rates.

Table provided by reinsurer combining mortality and sickness rates.

�0+ life plan policies 145% of the AMN00 ultimate table for non-smokers or 145% of the AMS00 ultimate table for smokers.

135% of the AMN00 ultimate table for non-smokers or 135% of the AMS00 ultimate table for smokers.

Other life assurance policies 77% of the AMN00 ultimate table for assured lives or 97% of the AMS00 ultimate table for smokers.

72% of the AMN00 ultimate table for assured lives or 90% of the AMS00 ultimate table for smokers.

Rates of Mortality 2011 Valuation Assumptions 2010 Valuation Assumptions

Healthcare and Healthguard contracts

Morbidity assumptions are based upon the Society’s actual experience plus a margin for prudence.

Morbidity assumptions are based upon the Society’s actual experience plus a margin for prudence.

Lapses 2011 Valuation Assumptions 2010 Valuation Assumptions

All policies Lapse assumptions are based upon the Society’s actual experience less a margin for prudence.

Lapse assumptions are based upon the Society’s actual experience less a margin for prudence.

Full details of the method and assumptions used in calculating the long term business provision are given in the Society’s FSA Return.


(1�) Capital management

Society

Funding position as at�1 December 2011

£’000

Funding position as at�1 December 2010

£’000

Total balance sheet assets 1�2,0�� 157,782

Inadmissible assets (��2) (679)

Total statutory assets 1�1,�� 1��,10�

Total statutory reserves 1��,�0� 145,802

Total other liabilities 2,�0� 3,226

Total statutory liabilities 1�1,211 1��,02�

Statutory surplus (before capital requirement) 10,�� ,0��

Total minimum capital requirement �,�11 14,317

Excess/(deficit) over minimum capital requirement �� (�,2�2)



Society

2011£’000

2010£’000

Changes in capital

Statutory surplus at 1 January �,0�� 18,648

Changes to existing book �,0�0 (5,069)

Healthguard Direct buy-out reserves impact 2,�01 -

Adjustment to IPT rates - (596)

Adjustment to Care Plus benefits �00 -

Provision for bonuses/benefits �� (74)

Adjustment to per policy expenses (1,�0�) 3,333

Adjustment to decrement assumption (i) 1,�� 15,483

Adjustment to morbidity assumption �,�0� (22,126)

Adjustment to interest rates (�,��) (3,318)

Adjustment to claim inflation 2,�2� -

Adjustment to expense inflation 1,�� -

Adjustment to guarantees (1,��) 776

Adjustment to outstanding claim reserve (2,2�2) -

Adjustment to expense overrun reserve (1,1�0) -

Adjustment to cost of pension guarantees - 1,668

Change in statutory assets (including Healthguard Direct buy-out) (�,��0) 4

Change in other liabilities (��2) (654)

Statutory surplus as at �1 December 10,�� ,0��

(i) Decrement assumptions cover future policy movements such as lapses and exits on death.

��



Chairm


ighlightsC


ustomers Fairly

Corporate G


Remuneration Report

Financial Statement

Notes to the A

ccounts

(1�) Capital management (Continued)

The Society maintains a single long term business fund. The available capital for the fund is represented by the fund for future appropriations which represents the difference between the assets and liabilities of the Society and Group. For statutory purposes certain assets are deemed inadmissible for meeting the capital requirement. As at the date of these accounts the items deemed inadmissible were the deferred tax asset and the reinsurance asset.

The capital requirement for the Society is determined as the greater of the statutory requirement based on formulae and calculations specified by regulations and the capital requirement determined by reference to the Society’s Individual Capital Assessment (“ICA”). The ICA is subject to guidance but is not prescriptive and involves a significant level of judgement to be exercised by the Board. The ICA requirement is subject to review by the FSA and an additional capital requirement known as an ICG may be imposed. For the Society, it is the statutory basis that provides the greater capital requirement.

The available capital resources in excess of the capital requirements on the statutory basis have increased by £7m (2010: decrease of £14.9m). This has resulted in the Society having a surplus of £0.7m of assets over its minimum capital requirement (2010: deficit of £6.2m).

The improvement in free capital has been driven by a combination of three primary factors:

An improvement in morbidity experience, which peaked in the first quarter of the year and then stabilised for the remainder of the year at a slightly lower level. This allowed us to reduce some of the reserves made at the end of 2011;

Increased policy lapses, both during the year and also in our expectations looking ahead, again reducing our exposure to morbidity risk; offset by

The fall in gilt yields, which has had an adverse capital impact, as detailed below.

The capital restoration plan, agreed with the FSA when the breach was identified, has restored the capital resources of the Society. The capital position should continue to improve as the prudential margins in the existing policy book unwind over the next few years as long as the scale of any additional risk added onto the Society’s balance sheet is appropriate.

The solvency position of the Society is continually monitored and the level of liquid assets is managed to ensure that sufficient liquid funds are held to cover liabilities and claims as they fall due.

Capital resource sensitivities

The preparation of the Society’s capital position requires management to make complex judgments based on information and financial data that may change in future periods. Although the estimates are based on management’s best knowledge of current facts as at the reporting date, taking into account matters that have arisen following the year end but before the accounts are finalised, the actual outcome may differ from those estimates, impacting the Society’s future capital position and the ability of management to achieve the capital restoration plan.

The key assumptions underlying the capital position are discussed below.

A key determinant of our capital position is morbidity assumptions and modest changes in morbidity experience can cause significant movements in reserves as experienced towards the end of 2010 and early in 2011. We have estimated our future claims experience based upon our current experience plus a margin for future adverse experience. We monitor claims closely to assess the continued validity of these assumptions.

The capital position is also sensitive to changes in market conditions, due to both changes in the value of the assets and the effect that changes in investment conditions may have on the value of the liabilities. A significant sensitivity arises from the market risk in relation to the with-profit business, which would arise if adverse changes in the value of the assets supporting this business could not be reflected in payments to policyholders because of the effect of guarantees and options. A second significant sensitivity is a fall in UK gilt yields which has a detrimental impact on our liabilities as it reduces the valuation discount rate that we use to determine our reserves. The capital position of this business would also deteriorate if increases to the market cost of derivatives resulted in an increase in the liability for guarantees and options.

The capital position is also sensitive to assumptions and experience relating to expenses and persistency.


(1�) Pensions

National Deposit Staff Superannuation Fund The Fund is a defined benefit arrangement which provides retirement benefits based on final pensionable salary. The Fund was closed to new entrants and future accrual from 31 May 2009.

The valuation used for FRS17 disclosures has been based on a full assessment of the liabilities of the Fund. The last valuation was performed as at 31 December 2010. The present values of the defined benefit obligation, the related current service cost and any past service cost (if applicable) were measured using the projected unit method.

The amounts recognised in the balance sheet on closure are as follows:-

Society

2011 2010

£’000 £’000

Fair value of fund assets 1�,�� 18,203

Present value of funded obligations (1�,1��) (18,203)

(�00) -

Liability recognised on the balance sheet (�00) -

Net pension liability (�00) -

Amounts in the balance sheet

Liabilities (�00) -

Net pension liability (�00) -



Society

2011 2010

£’000 £’000

Analysis of Policy Holders Liabilities

With profit liabilities

Guarantees and options �,��0 3,047

Other policyholder obligations ��,0�� 72,968

��,02� ��,01�

Unit linked 1,�� 1,838

Deposit and other non-profit liabilities ��,�� 67,947

1��,�0� 1��,�00

(1�) Capital management (Continued)

��

Chairm


ighlightsC


ustomers Fairly

Corporate G


Remuneration Report

Financial Statement

Notes to the A

ccounts



Changes in the present value of the defined obligation are as follows:

Society

2011 2010

£’000 £’000

Opening defined benefit obligation 1�,20� 18,098

Interest cost �� 1,007

Actuarial losses 1,�1� 154

Past service costs (��1) -

Benefits paid (��) (1,056)

Closing defined benefit obligation 1�,1�� 1�,20�

Society

2011 2010

£’000 £’000

Interest on obligation �� 1,007

Expected return on fund assets (��) (1,007)

Past service costs (��1) -

Expense recognised in income statement (��) -

Actual return on fund assets �� 1,814

(1�) Pensions (Continued)

The amounts recognised in income statement are as follows:


Society

2011 2010

£’000 £’000

Opening fair value of fund assets 1�,20� 18,019

Expected return �� 1,007

Actuarial gains 2�0 233

Benefits paid (��) (1,056)

Closing fair value of fund assets 1�,�� 18,203

Analysis of amounts recognised in statement of total recognised gains and losses (STRGL)

Total actuarial (losses)/gains (1,1��) 79

Total (loss)/gain in STRGL (1,1��) 79

Cumulative amount of loss recognised in STRGL (�,��) (�,210)

The major categories of fund assets as a percentage of the total fund assets are as follows: % %

Equities 2� 36

Gilts 1� 20

Corporate bonds �2 24

Index linked bonds � 6

Property 1� 13

Cash 12 1




��

Chairm


ighlightsC


ustomers Fairly

Corporate G


Remuneration Report

Financial Statement

Notes to the A

ccounts



Defined contribution schemeThe contributions to the defined contribution scheme amounts to £170,391 (2010: £163,406).


Principal actuarial assumptions at the balance sheet date (expressed as weighted averages (where applicable)).

2011 2010 200� 200� 200� 200�£’000 £’000 £’000 £’000 £’000 £’000

Defined benefit obligation 1�,1�� 18,203 18,098 14,568 18,284 18,014

Fund assets 1�,�� 18,203 18,019 16,456 19,621 19,629

Surplus/(deficit) (�00) - (79) 1,888 1,337 1,615

Experience gains/(losses) on fund assets

2�0 233 1,489 (3,831) (657) (138)

Experience gains/(losses) on fund liabilities

(��1) 319 525 363 (252) 687

Change in assumptions underlying the present value of fund liabilities

(��1) (473) (4,225) 3,948 579 370

Experience gain/(losses) on fund liabilities

(1,�12) (154) (3,700) 4,311 327 1,057

Group & National Friendly

Society

2011 2010

%pa %pa

Discount rate at 31 December �.� 5.4

Expected return on fund assets at 31 December (for following year) �.� 6.1

Rate of increase in pensionable salaries �.� 4.6

Rate of increase in deferred pensions 2.2 3.6

Rate of increase in pensions in payment – service pre 06/04/2005 �.0 3.4

Rate of increase in pensions in payment – service post 06/04/2005 2.1 2.2

Mortality assumptionsThe mortality assumptions are based on standard mortality tables which allow for future mortality improvements. The assumptions are that a member aged 65 will live on average until age 88 if they are male and until 90 if female. For a member currently aged 47 the assumptions are that if they attain age 65 they will live on average until age 90 if they are male and until 92 if female.

Description of the basis used to determine the expected rate of returnThe employer adopts a building block approach in determining the expected rate of return on the fund’s assets. Historic markets are studied and assets with high volatility are assumed to generate higher returns consistent with widely accepted capital market principles.

Each different asset class is given a different expected rate of return. The overall rate of return is then derived by aggregating the expected return for each asset class over the actual asset allocation for the fund at the year end.

Employee benefit obligations for National Deposit Friendly Society LimitedAmounts for the current and previous periods are as follows:


(1�) Assets attributable to the long term business fundOther than assets of £2,177,757 (2010: £2,364,305) used to match linked liabilities all of the assets shown on page 30 are attributable to the long term business fund.

(1�) Operating lease commitmentsThe Society leases various motor vehicles and office equipment under cancellable operating lease agreements. The lease terms are for 36 months, with penalty for early cancellation.

The future aggregate minimum lease payments under cancellable operating leases are as follows:

(20) Subsidiary undertakingsThe ultimate parent undertaking and controlling party is National Deposit Friendly Society Limited, a Friendly Society incorporated in the UK.

The Society has two wholly owned subsidiary companies incorporated in the United Kingdom. 425 Direct Limited and ND Member Services Limited.

During the year additional capital of £275,000 was provided to 425 Direct Limited. 425 Direct Limited operates a call centre giving financial advice. 425 Direct Limited is held by the Society at a value of £50,000 (2010: £78,000) after an impairment charge of £303,000 (2010: £527,000).

ND Member Services Limited does not currently trade, it was provided with £2,700,000 of additional share capital during the year to enable it to acquire Healthguard Direct Limited on 16 September 2011, a dormant company that had previously acted as the Society’s Appointed Representative. As part of the acquisition, ND Member Services Limited made a deemed distribution of its reserves back to the Society of £2,476,000 reducing the level of its share capital. ND Member Services Limited is held in the Society at a value of £224,000 at 31 December 2011 which represents the net realisable value of its assets.

The results of all subsidiaries for the year ended 31 December 2011 have been consolidated into the Group accounts.

(21) Related party transactionsThe Society paid £93,257 (2010: £584,112) in commission to its wholly owned subsidiary, 425 Direct Limited, in respect of products sold on its behalf. 425 Direct Limited was charged £18,651 (2010: £355,597) by the Society in respect of lead generation costs and service charges.

As at 31 December 2011, 425 Direct Limited owed the Society a net amount of £281,483 (2010: £261,203) and ND Member Services Limited owed the Society a net amount of £17,017 (2010: £11,295).

Society

2011 2010

£’000 £’000

No later than 1 year � -

Later than 1 year and no later than 3 years - 42

Greater than 3 years 20 20

Total 2� 62



Registered office: 4-5 Worcester Road, Clifton, Bristol BS8 3JL.Tel: 0117 973 9003 Fax: 0117 980 9358 Email: [email protected]

National Friendly is the trading name of National Deposit Friendly Society Limited. Incorporated and registered Friendly Society no. 369F. Authorised and regulated by the Financial Services Authority. Registration no. 110008.Annual Report & Financial Statements published: June 2012

www.nationalfriendly.co.uk

For further information or to request a copy in Braille, large print or audio please call us on:

0�00 1�� 2�� (8am-6pm weekdays)

or visit us at www.nationalfriendly.co.uk

annual report & financial statements 2011 deposit friendly society annual report & financial...

Documents