You are on page 1of 76

Annual Report and Accounts 2011/12

Food Travel Funeral Pharmacy Energy Childcare Employee Benefits Post Office

AWARDED

Contents
3.............. Welcome 4-5 .......... Your Board and Executive 6.............. International Year of Co-operatives 7-23 ........ Directors’ Report 24-30 ...... Governance Report 31-37 ...... Remuneration Report 38-71 ...... Financial Report

Highlights

Co-operative Energy received three industry awards, including the Consumer Action award from the independent consumer body, Which?

We were awarded the Carbon Trust Standard, which recognises the action we are taking to reduce our carbon emissions

Our operating profit increased by 15% to £20.9 million

We achieved the Platinum standard in Business in the Community’s Corporate Responsibility Index

We are one of the Sunday Times 25 Best Big Companies To Work For for the second year running

We invested 32,500 colleague work hours in community projects

Our overall gross sales grew by 6.7%

2

Welcome to The Midcounties Co-operative
Who we are
We are a consumer co-operative owned by our members, part of the global co-operative movement.

What we do
We operate a range of businesses in Food, Travel, Pharmacy, Funeral, Childcare, Energy, Employee Benefits and Post Offices. We also manage commercial and residential properties and run the .coop domain name.

Where we trade
Our heartlands are in Oxfordshire, Gloucestershire, Buckinghamshire, Shropshire, Staffordshire, the West Midlands, Wiltshire and Worcestershire. However, our Energy, Childcare and Employee Benefits businesses trade across the UK.

How we work
We have four core values that guide the way we work Democracy, Openness, Equality and Social Responsibility. These are derived from the values and principles of the co-operative movement. We believe they demonstrate the strength of co-operation and set us apart from our competitors.

Our aim
Our aim is to be a successful consumer co-operative working towards creating a better, fairer world, and to enhance the lives of our colleagues, members, customers and the communities we serve.

To ensure the views of our members are reflected in the way the Society is run. Being open, honest and fair in our dealings with everyone we come into contact with. Recognising the contribution that everyone can make to develop the Society.

Key facts
- We are the largest independent co-operative society in the UK - We employ over 8,600 colleagues at 470 branches - We have more than 245,000 trading members - Our gross sales for the year were £788 million

Reflecting our responsibilities to the wider community in the way we conduct our business.

3

Your Board of Directors
President Vice-Presidents

1. Patrick Gray OBE - Economist 4. Sheila Allen - Retired Teacher 5. Steve Allsopp - HR Manager 6. Olivia Birch - Company Director 7. Isobel Burbidge - Accountant 8. Bernadette Connor - Retail Supervisor 9. Ruth FitzJohn - Chair of NHS Trust 10. Roy Frodsham - Retired Retailer

2. John Boot - Retired HR Manager 3. Helen Wiseman - HR Consultant 11. Margaret Jarvis - Retired Teacher 12. Donald Morrison - Retired Probation Officer 13. Jean Nunn-Price MBE - Legal Executive 14. Trish Poole - Retailer 15. George Waddell - IT Technical Lead 16. Vivian Woodell - CEO, The Phone Co-op

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

4

The Executive Team
1. Ben Reid OBE 2. Andy Cresswell 3. Steve Ridler 4. Lee Coleyshaw 5. Simon Fisher 6. Mari Frost 7. Edward Parker 8. Alistair Rowland 9. Adrian Wilkinson Chief Executive Deputy Chief Executive, Trading Deputy Chief Executive, Services Chief Financial Officer Group General Manager, Funeral Group General Manager, Personnel Services Secretary & Head of Governance Group General Manager, Travel Group General Manager, Pharmacy

1

2

3

4

5

6

7

8

9

5

The International Year of Co-operatives
The United Nations has declared 2012 the International Year of Co-operatives. This is a great accolade and one that co-operatives around the world are using to showcase the positive impact they can have on the lives of ordinary people. It is estimated that 3 billion people in the world benefit from co-operatives and in the UK alone there are over 5,450 co-operative enterprises of all sizes sharing the same values. Over the course of the year we will be hosting further events to celebrate not just our own Society, but cooperatives around the world.

Details of these events can be found We celebrated the launch of the at www.midcounties.coop. international year with a range of events at several of our sites involving members, local co-operatives and suppliers.

Did you know?

- 75% of Fairtrade goods are produced by co-operatives - The co-operative economy in the UK has grown by 21% to £33 billion since the start of the economic downturn in 2008 - There are three times as many member owners of co-operatives as individual shareholders worldwide. 328 million people own shares, but 1 billion people are member owners of co-operative enterprises.

As part of our commitment to the Find out more about the International International Year we have pledged Year of Co-operatives at US $250,000 to the Global www.2012.coop Development Co-operative Fund. The Fund has been set up to help provide finance to co-operatives in the developing world that have difficulty accessing conventional funding.

6

Directors’ Report
On the following pages you will find businesses, followed by the main co-operative and allows us to give your directors’ report for the year to body of the report which we have appropriate focus to the elements that 28 January 2012. divided into the five sections of our make up our Society: Steering Wheel. » Co-operation President, Patrick Gray, and Chief Executive, Ben Reid welcome you The Steering Wheel helps us » People to the report with an overview of balance our co-operative, social and » Customers the year. You will then find short commercial goals. It captures all » Delivery trading updates from the Society’s that we do as a business and as a » Finance

Trading with Members Sup por ting Pr om our oti Com ng mu nitie Co s -o pe ra tio n

CE AN ally strong FIN nci
Be ing

Co-op er a t

COing

OP ER
to m ak e
a

a fin

AT
N e IO ifferenc

d

Growing

Imp

Us ing ou rA ss
rovi Imp ng A tten

rovi ng P

Sales

rofit s

ets
dan

Waste

Reducin

Han

dlin

I

Putting customers first

CUSTOMERS

The Directors’ Report is signed on behalf of the Board of Directors.

Patrick Gray OBE President

Wo rk

gy Saving Ener y afel gS rkin rds Wo da an St ch an Br ing rov mp
plai gC om

g Comp

ing to

John Boot Vice-President

Helen Wiseman Vice-President

18 April 2012

P EO PLE
Edward Parker Secretary

ter laints

Bet

geth e

nts

r as T eam Midcounties

Reducing

ce

ally thic ng E Acti of Choice Employer Being an Providing Op portunities fo r all Com mun Pe icat rfo ing rm effe ing ctive ly at ou rB es t

Be

tte r

Doing th
b ings
r ette

E DELIV

ers stom l Cu oya gL atin Cre ts Complimen Increasing

RY

7

President’s Introduction

I am happy to report that, once again, our Society has achieved strong trading results over the last year, not only in comparison with most of our peers in the Movement, but also with private sector competitors. While significant expenditure on the launch of new trading activities and deteriorating trading conditions in the second half of the year have had some impact on trading profit, operating profit, which takes into account all costs and revenues for the year and is the main measure of success used in the private sector, has improved. However, in view of the need to conserve resources to match our ambitious plans for development over the next 12 months, and the continuing sluggishness in the national economy, your Board has decided to recommend a modest reduction from last year’s dividend of 1.8 pence per point to 1.5 pence for the year to 31 January 2012. We believe that members will agree that our priority should be to ensure a strong foundation for future growth and that dividend should reflect both an individual member’s purchases through the year and also the Society’s overall trading position and longer term development plans. This is one of the things that distinguishes our co-operative system, where each member has one vote and a lifelong stake in the business, from investor-driven retailers such as Tesco or Sainsbury’s where institutional shareholders buy and sell huge blocks of votes on a daily basis and a plastic card is simply a marketing device.

This approach will help to ensure that resources are available to maintain other aspects of our member benefits package, to strengthen our existing business activities and to invest in new initiatives. High on our priorities over the next 12 months will be developing Co-operative Energy, our new electricity and gas supply business. We will be working hard to consolidate Co-operative Childcare, already well on the way to being one of the largest child care nursery groups in the country, and to further develop our Cooperative Travel business, now the country’s largest truly co-operative travel agent. And since the year end we have been able to announce a further major expansion in our network of food shops, which as ever remains the foundation of our business and our first point of contact with most of our members. In the area of member services and community initiatives, your Board continues to work closely with the Membership Strategy Committee. Progress has been made with our new Community Fund, and Society membership continues to rise. We continue to work to further consolidate our already very friendly relations with our neighbour Co-operative societies and, through the UN International Year of Co-operatives, with cooperative organisations in other parts of the world. Finally, our Society has once again won a number of important national awards over the year, notably being included, for the second year running, in the prestigious Sunday Times

25 Best Big Companies to Work For list. The engagement and support of colleagues is absolutely central to our success, and it is a matter of real pride that all of the efforts that have gone into making our Society responsive to their needs and wishes have been publicly acknowledged in this way.

Patrick Gray OBE President

8

Chief Executive’s Overview

I am pleased to report that we have once again been able to buck the trend in difficult trading conditions and confound critics of the Movement by demonstrating that the co-operative model is one that can deliver outstanding results in the highly competitive sectors in which we operate. A constant theme in the press and in directors’ reports this year is the impact that the recession is having on business. But in Midcounties we have turned these difficult conditions to our advantage by focusing on the opportunities that the current market conditions have presented to us. Our operating profits have increased from £18.1million to £20.9 million and this continuing strong profit performance has given the Board the confidence to invest in all of our business groups. We have reviewed each area of our business activities to identify opportunities and have produced plans to take advantage of them. The success of Co-operative Energy has been well documented and we see no impediment to significant continued growth, while managing the rate of development to ensure we continue to deliver a first class service. There is no doubt that Co-operative Energy has the capacity to be a notable player in the energy market in years to come. In Co-operative Childcare, we started the year with just six nurseries and ended it with 30. And since the year end we have made further acquisitions increasing the number

of nurseries we own to 46. This is a clear statement of our commitment to an area where we believe we can add real value by introducing Co-operative Values. Co-operative Travel has had an unsettled year as a result of some of our partner cooperatives deciding to form a joint venture with Thomas Cook. Despite this, the trading performance has been outstanding with a doubling of profits. Having made the decision to retain our co-operative status we have worked hard to create a viable standalone business. The first stage is complete with the strengthening of the management team. We are now pressing on to develop the critical mass necessary to negotiate competitive commercial terms with the support of other independent co-operative societies. This work is already bearing fruit with the acquisition of Kwik Travel, a travel homeworking business, just after the year end. 2012 will be a busy year for the Travel Group but we relish the opportunity to prove that there is a place in the travel market for a genuine co-operative model of doing business. Other parts of our business have also seen major developments in the year. Two trading websites have been launched in Pharmacy, our stonemasonry facilities have been restructured and our Employee Benefits business has been remodelled. The final and indeed the core element of our Society is our food business where like for like sales have seen an increase of 3.4%

and more importantly a 2.3% increase in profitability. This clearly marks us out from many other food retailers who have not been able to adapt as well to the current trading conditions. Our determination to reinforce this performance is underlined by our announcement of the acquisition of the Harry Tuffins food business just after the year end. This will bring in 10 new stores with anticipated sales of £60 million and represents a significant strengthening of our presence in and around Shropshire. The integration of these stores will be a management challenge but we are confident that the long term benefits will be significant. Our response to the tough trading conditions is to raise our game and take advantage of the opportunities that are presenting themselves. None of this would be possible if we were not confident that “Team Midcounties” was able to respond to the challenge. Being placed in The Sunday Times 25 Best Big Companies to Work For, for the second year running, indicates the high level of engagement of our colleagues. This and the full support of our members and customers allows us to view the future with confidence. I look forward to being able to report on 2012 as another successful co-operative year.

Ben Reid OBE Chief Executive

9

Trading Updates
The Co-operative Travel The Co-operative Food
In difficult trading conditions we have achieved significant like-for-like sales growth, well above the industry average. Our focus on improved availability has had a positive impact on our sales figures and our shelves are better stocked than ever. We have continued to invest in our colleagues by offering training and NVQs and we also recruited a record number of apprentices into our Food team. This has been a year of change and development for our Travel team following the formation of the joint venture between Thomas Cook and branches of The Co-operative Travel owned by The Co-operative Group and Midlands Co-operative. We chose not to join the joint venture and have been working hard through the year to strengthen our online business and to continue our focus on offering unbiased, independent advice. We have plans to grow the group significantly in the coming months, reinforcing the Board’s decision to remain independent.

The Co-operative Funeralcare
Funeral’s focus has been on continuing to offer the best customer service to its clients at their time of need. During the year it has developed its green credentials by investing in environmentally-friendly vehicles, including an electric ambulance. The Group has also launched a purposebuilt, open plan memorials site in Walsall.

Co-operative Employee Benefits
Employee Benefits continues to expand. We now offer a package of eight benefits to our customers, including discounts on childcare, energy, phone packages and financial and legal services. This growth can be seen in the Group’s performance, with sales for the year increasing by 7.8%.

10

Post Office
The Society is the fourth largest Post Office operator in the UK and sales related to our mail and travel money products have grown year on year. We have restructured our Post Office management team and we are now looking to engage our Post Office colleagues more effectively. This includes providing them with their own Colleague Council forum.

The Co-operative Pharmacy
Pharmacy continues to face a difficult trading environment, with Government cost reduction measures impacting on both the number and value of prescriptions. To counteract these cuts the Group has focused on growing its professional services, such as smoking cessation, and is now beginning to work on developing an online presence.

The Co-operative Energy
Our Energy business has had a successful first year, signing up 16,700 customers in the trading year. The business has been recognised nationally, receiving three prestigious awards - a Consumer Action award from the independent consumer body Which?, Best Energy Provider at the Consumer Moneyfacts Awards, and Best Corporate Venture Award at the UK Corporate Entrepreneur Awards.

The Co-operative Childcare
With the integration of the Buffer Bear nurseries nearly completed Co-operative Childcare is now a significant childcare provider in the UK. We are keen to grow the business further in the coming year and will focus on developing the quality of our offer so we can provide the best possible childcare for the children we look after.

11

Co-operation
“Co-operating to make a difference”

Trade with members

During the year we focused on engaging with our members through events and by promoting our cooperative values. Over 23,000 members took part in our membership activities and trade with members now represents 38% of our sales (2010: 34%). Providing exclusive member offers is important to us. We sent out vouchers with our share of profits mailings and placed offers in our members’ calendar. We also ran 12 lapsed member campaigns contacting members who had not shopped with us for some time. Over 18,500 members took advantage of these various incentives.

“We achieved Platinum in the 2012 Corporate Responsibility Index”
Supporting our communities
Through fundraising, grant giving and projects we have supported 1,525 organisations during the year and given the equivalent of more than £2.8 million back to our local communities. Included in this figure is £1.5 million of our new £2 million Community Fund, which distributes grants twice a year to support grassroots community groups. This £1.5 million comes from dormant share accounts with additional funding sourced through the Community Foundation Network. Colleagues donated more than 32,500 volunteer hours to community activity (2010: 26,000 hours) and 1,950 colleagues took part in a volunteer project for the first time (2010: 1,600). Participation in community volunteering has risen from 38.3% of colleagues to 51.1% and our colleague volunteering has been valued at more than £472,000 (2010: £376,000). Our two year charity partnership with Women’s Aid, the national coordinating body for a network of domestic violence charities, began in February 2011. We raised £170,000 during the year which will really help make a difference. We were also proud to be shortlisted as an Example of National Excellence by Business in the Community for our work with the Oxfordshire Primary Care Trust in improving the dental health of young people.

12

Acting ethically

Business in the Community has awarded our Society ‘Platinum’ in the Corporate Responsibility Index, one step up from the Gold we achieved last year. This benchmark assesses our work on colleague engagement, the environment, community and diversity and helps us measure our business practices against our competitors and other big businesses. Our Local Harvest sales have grown by 6.59% during the year on a like for like basis and we are now working with 118 local suppliers, selling their products in our stores. Our Funeral Group is continuing its efforts to become the most environmentally friendly funeral provider. During the year it replaced 13 of its funeral support vehicles with Toyota Prius hybrids and invested in an all-electric Mercedes Benz van fitted out as a private ambulance – a first for any business in the UK.

Promoting co-operation

As the UN has declared 2012 the International Year of Co-operatives, our focus for the coming year will be on raising awareness of co-operation and its benefits to the public, as well as engaging with our members and customers to ensure they understand the co-operative difference. We have pledged US $250,000 to the Global Development Cooperative Fund, which launched as part of the International Year to support co-operative businesses in the developing world. This investment sits alongside our ongoing commitment to provide financial support to Co-operative Futures who offer specialist advice to newly formed co-operatives in the UK. We launched our first Member of the Year Awards in July 2011, to recognise members who work with us to make positive differences to their communities and the wider world. The winners of the awards were offered the chance to travel to Tanzania to take part in a community project. We also recruited 41 member ambassadors who have representative roles in the local communities where we trade and actively promote co-operative values and principles in these positions.

13

People
“Working together as Team Midcounties”
Being an employer of choice
Our annual Colleague Survey, returned by 97% of our colleagues, shows that colleague engagement has increased for the fifth year in a row. This tells us that our colleagues feel positive about their work and so are more likely to provide the best possible service to customers and help drive our business forward. Because we recognise the importance of creating and maintaining an engaged workforce, we have put together a dedicated Colleague Engagement Team consisting of senior managers from across the business. The team meets regularly to turn colleague feedback into actions that improve our business practices. Pleasingly, the effort we put into colleague engagement has been recognised and, we have, for a second year, been ranked in The Sunday Times 25 Best Big Companies to Work For – a great achievement.

“Once again we have been ranked in The Sunday Times 25 Best Big Companies To Work For”

Providing opportunities for all

During the year we delivered 106,000 training hours – the equivalent of 12 hours of training per colleague. More than 350 colleagues have begun an NVQ and we have continued to offer and develop our Essential Business Skills courses. We launched our Team Midcounties Manager Programme in April 2011 and all our managers have received a minimum of three days’ training during this first year. The course, which continues for another two years, has been designed to ensure our managers have the skills they require to do their job to the best of their ability. We welcomed our third intake of graduates in September with four new colleagues joining the scheme. The number of apprentices joining our Apprentice Programme grew from 13 in 2010 to 52 this year, selected from over 500 applicants.

14

Performing at our best

We have made our performance review documents easier to use and we are now ensuring that all colleagues have a proper review each year. To capture training needs identified at the reviews we have launched an online system to help managers report these requests. We launched a new Wellbeing Campaign for colleagues, consisting of a range of guides to offer tips on living a healthier life. We issued a Guide to Better Sleep and a Guide to a Healthy 2012 that gives advice on healthy eating and exercise. To complement the campaign we have also signed the Charter for Employers who are Positive About Mental Health. The work we’ve done around wellbeing for our colleagues has been recognised by Simplyhealth, who awarded us their Healthy Workplace Award.

Communicating effectively

Our second Managers’ Conference took place in September with over 500 managers attending. Managers had the opportunity to discuss customer service initiatives, have their say and discover more about the direction the Society is taking. During the year we hosted Big Conversation events designed to gather more detailed information on areas where scores in the Colleague Survey could be improved. Colleagues and managers from all of our trading and support groups attended to give their views. Their comments were reviewed by the Colleague Engagement Team and have been turned into a number of actions. The Big Conversations helped us gain an Innovation Award nomination from The Sunday Times. Colleagues have told us that they prefer to receive information and news from their managers face to face. To address this we launched the first Managers’ Matters magazine to provide managers with the tools to deliver key messages, and our Core Brief which highlights key points in the business has been redesigned and will be presented each quarter to all colleagues by line management.

15

Customers
“Putting customers first”
Creating loyal customers
We have continued our customer loyalty questionnaire programme, reviewing the outcomes of our regular surveys and using them to make improvements. During the year our Customer Loyalty Index increased from 61 to 66 which shows that more of our customers have been giving us higher scores. We have also recruited a Customer Service Specialist to work in partnership with our trading groups to ensure we are putting customers at the heart of everything we do. Our Pharmacy team has had a record year for Medicine Use Reviews. It has also introduced a New Medicines Service. Both these services require dedicated one-toone time with patients and it is this personal engagement that enhances relationships between our colleagues and customers and improves loyalty. Our Co-operative Employee Benefits business has achieved the ISO9001 standard which acknowledges the quality of the management system they have in place. The standard provides clients with greater peace of mind and gives us an advantage over our competitors.

“Colleagues from our Funeral Group have recently been awarded the UK’s first Funeral Customer Service NVQs”
Reducing complaints

Our Travel Group has introduced team observations in every branch, where we observe the level of service given to our customers by team members on a monthly basis to ensure we provide consistently great service. This focus was reflected in a five point increase in Travel’s Customer Loyalty Index at the end of 2011. Travel has also launched a Talk To Us scheme asking customers for their views on our service. This is being trialled at a number of sites and will be taken into the wider business if successful. Food Retail has begun using the new Store Managers’ Council as an additional forum through which to share best practices and improve customer focus. By assessing how well we have handled each customer complaint we can continuously improve our customer focus. As a result Food Retail achieved an increased Customer Loyalty Index score of 58.

16

Handling complaints better

Our Employee Benefits business has implemented a formal complaints procedure to improve the openness in the way in which we deal with complaints. This allows the team to track trends and identify opportunities for service improvement. With the growth of the business the number of call centre staff has also increased to meet demand and ensure we are responding effectively to our customers’ comments. Our Pharmacy team shares its NHS complaints with its local Primary Care Trusts and together they come up with action plans for improvements. To support the expansion of our Energy business we have commissioned a complaints management software system to ensure that we offer the very best customer experience in a competitive marketplace.

Increasing compliments

Colleagues from our Funeral Group have recently been awarded the UK’s first Funeral Customer Service NVQs. The qualification focuses on the importance of a professional customer service approach and encourages colleagues to think of creative solutions to customer service issues. The Customer Loyalty Index for Funeral continued to demonstrate this focus on customer service, achieving a very high score of 95. Our Travel website, cooptravel.co.uk, has undergone some major developments this year. The new and improved site contains more content, an improved customer experience and an increased range of holidays to book online. In the first four weeks of January 2012 the Group achieved record levels of online bookings which is very encouraging. The Co-operative Childcare has launched an ‘introduce a friend’ initiative to increase word-of-mouth promotion. Meanwhile Pharmacy has improved the delivery of its dispenser training courses which in turn means better service for customers.

17

Delivery
“Doing things better”
Reducing waste
We continue to work hard to increase our recycling rates and have been recycling more during the year. 50.5% of our total waste is now recycled (2010: 37.0%). Our Environment team ran an awareness raising workshop and communications programme to ensure colleagues at head office were using the recycling facilities effectively. We now have over 100 Environmental Champions, with each one taking personal responsibility to deliver environmental initiatives at their sites. We are also sending food waste from all of our Food stores to an anaerobic digestion facility in Leicestershire which generates electricity. Our Co-operative Energy business is looking to buy the electricity and sell it on to our customers.

“We have achieved the Carbon Trust Standard – independent recognition of our commitment to reporting and reducing our carbon emissions”
Saving energy

We have achieved the Carbon Trust Standard – independent recognition of our commitment to reporting and reducing our carbon emissions. This can be seen in practice as we have reduced our energy consumption by 2.5% compared with last year thanks to colleague awareness campaigns and increased energy efficiency measures. A number of energy-saving trials have taken place at our supermarket and convenience stores including the introduction of LED lighting which is very energy efficient and fitting doors to refrigerators. Once the results of these trials have been assessed these projects will be rolled out across more of our stores during the coming year. We have also installed solar panels on a number of our properties including our new Warwick head office to help reduce our energy consumption. Working with the Marches Energy Agency we ran another round of Energy Roadshows this year supplying energy-saving devices and tips to customers in our stores. We estimate that this will save 181 tonnes of CO2 over the life of these products.

18

Working safely

We have begun working with a new occupational health services provider, COPE, to help us provide the right support in the workplace for our colleagues. Feedback from our colleagues tells us that this support is valued and appreciated. We have also introduced a new workplace risk assessment process and our Health & Safety team is working with all managers to ensure colleagues are fully supported in the workplace when they return after an absence. It is encouraging that all of our sites achieved at least 85% in their annual Health & Safety audit. Our Pharmacy Group has undertaken a comprehensive risk analysis across all branches with each branch producing an action plan to ensure that the service they offer is of the highest possible standard.

Improving branch standards

Almost all of the nurseries we bought with the acquisition of Buffer Bear Limited have now been refurbished and rebranded as The Co-operative Childcare. Pleasingly they are starting to deliver some great results with Burton-on-Trent (following Waterloo) being rated as ‘Outstanding’ by Ofsted. Other developments include the relocation of Co-operative Memorials from Bilston to a more spacious facility in Walsall. The new facility allows clients to view workshop areas and see memorials in production. The Funeral Group has also launched a new funeral home in Wombourne and refurbished three further sites. Food Retail’s estate has changed during the past year with the sale of 42 of the smaller News Express stores. We kept 12 of the stores and have now integrated these into our convenience estate, with a better product range and new fascias. The Food Group has also opened a new store at Rose Hill and refurbished a further four stores.

19

Finance
“Being financially strong”
Growing sales
Gross sales for the Society have grown by 6.7% to £788 million, with much stronger growth in the second half of the year (figures at the half year point reported growth of 3.1%). This is a very pleasing result, especially given current market conditions. This increase in sales can be attributed in part to the success of our Co-operative Energy business, which generated gross sales of £7.2 million in its first full year of trading. Food Retail also achieved a 4.6% increase in gross sales (3.4% like-for-like) and sales were up by 6.7% within the Funeral Group. Our Employee Benefits business continues to perform well, with the introduction of a range of new benefits helping to create a 7.8% increase in sales. The continued expansion of our Childcare business, which had 30 sites at our financial year end, has enabled this Group to return gross sales of £14.0 million (2010: £5.0 million).

“Overall gross sales for the Society have grown by 6.7% - a very pleasing result, especially given current market conditions”

Improving profits

Despite the significant investment in Co-operative Energy and the reduction in Pharmacy’s profitability as a result of Government cuts, operating profits increased from £18.1 million last year to £20.9 million in 2011. Our Food Retail Group achieved an increase in profits of 2.3%, which is a great achievement for the business at a time when many of our competitors are reporting a dip in profit levels. Travel has had a strong year on the back of a 3% increase in gross sales, despite challenging trading conditions and January 2012 saw record weekly sales for the Group. The retained profit transferred to reserves for the year was £9.5 million – a 21% increase on last year (2010: £7.9 million).

20

Using our assets better

Net debt has fallen from £13.8 million to £9.2 million and our gearing ratio (the ratio between the Society’s net debt and net assets) has also decreased from 8% to 6% – the lowest it’s been since The Midcounties Co-operative was formed in 2005. We generated £17.0 million of cash from operations and invested £12.6 million in property and equipment (2010: £13.0 million). Net assets have decreased from £175 million to £166 million, due to a significant increase in the pension deficit. We also redistributed £1.5 million out of dormant share capital to create the Community Fund, which makes grants to grassroots community projects.

Improving attendance

Absence levels have continued to decrease, moving from 8.86 days per full time colleague in 2010 to 8.03 days in 2011. However, there is still work to be done if we are to improve attendance as we are currently above the national average of 7.7 days per full time employee in 2011. We are in the process of drafting new guidance for managers to help them manage attendance at their site. In the meantime our HR Advisers are providing coaching to emphasise the importance of using the tools that are already available to manage attendance. This includes the completion of return to work interviews for all colleagues who have been absent from work. By doing this managers can identify areas of concern and deal with colleagues more readily using resources such as our Employee Assistance Programme. Coaching and encouraging managers to deal with any minor complaints within their teams before they escalate to formal grievances builds team spirit, improves morale and helps to contribute to lower absence levels in the long term.

21

Measuring our Co-operative Performance
Each year we report our performance using the key co-operative and social performance indicators set out by Co-operatives UK. Using these ten indicators ensures that we report fully on our involvement with members, our environmental actions and our community and co-operative investments - all important elements of being a true co-operative enterprise. For completeness, we also report on our supplier payment policy here and our trade with other co-operatives.
1. Member economic involvement score rose from 61 to 66. Trade with members increased again this year, and now represents 38% of our total 7. Considerations of ethical issues sales (2010: 34%). in procurement and investment decisions 2. Member democratic participation In the 2011 elections 41,729 members Procurement decisions voted in our Board and Membership We procure the majority of our goods Strategy Committee elections, a turnout through the Co-operative Retail Trading of 13.0% (2010:10.2%). Attendance at Group (CRTG), the buying group of the the AGM was 427 and for the Half Yearly Food Retail businesses in the co-operative Meetings was 399, making a total of 826 movement. CRTG is run by The Comembers (2010: 779). operative Group. 3. Participation of employees and members in training and education Attendance at member events and activities reached 23,511 during the year. The total number of members receiving training was 17,504, equating to 99 minutes of training per member (2010: 124 minutes). The average number of learning hours received per colleague was 12.3 hours (2010: 11.8 hours). 4. Staff injury and absentee rates 871 accidents were reported in 2011 (2010: 509). The total number reported under RIDDOR (Reporting of Injuries Disease and Dangerous Occurrences Regulations) was 16 (2010:11). The average number of absence days per full time colleague was 8.03 days (2010: 8.86). 5. Staff profile – gender and ethnicity At the end of January 2012 we employed 8,682 colleagues (33% male and 67% female). In January 2011 we employed 8,971 colleagues (32% male and 68% female). We have a total of 523 women in management grades representing 51% of all management roles (2010: 50%). 636 of our colleagues have an ethnic minority background (7.3%) compared with 611 colleagues (6.8%) in 2010. 6. Customer satisfaction In 2010 we launched a Customer Loyalty Index to assess how our members and customers rate us. During 2011 our overall 22 We support the ethical buying decisions of CRTG and The Co-operative Group’s Sustainability Report explains in detail the processes CRTG uses to audit suppliers and the principles it employs when acquiring goods for resale. The focus is on the following four key areas:
• Ethical trading

ensuring that own-brand products carry clear and honest labelling. We have also made a number of decisions about the sourcing of our own products and services. These include:
• ensuring that the benefits of Fairtrade

are promoted alongside the products themselves our Local Harvest range energy sources

• working with local suppliers to provide • sourcing all our electricity from renewable • switching the majority of our stationery

printing to recycled paper

• employing an Ethical Trade Manager to

oversee the stocking and promotion of ethical products.

Investment decisions CRTG is committed to supporting the We continue to provide grants to a number Universal Declaration of Human Rights of co-operative organisations. These and improving conditions within the organisations create, support and promote supply chain by promoting Fairtrade co-operative enterprises and include The and applying a Sound Sourcing Code of Plunkett Foundation, Co-operative Futures Conduct across its suppliers. and the Black Country Reinvestment Society. • Animal welfare CRTG seeks to promote animal welfare and works towards progressively 8. Investment in community and improving standards of well-being by co-operative initiatives extending the range of products that Our investment in community and comeet higher animal welfare standards operative initiatives across our trading heartlands during the year totalled more and opposing animal testing. than £2.8 million (2010: £1.2 million), • Environmental impact representing 23% of profit before tax. This CRTG recognises nature’s limited figure includes the money given out as capacity to generate resources and grants, the value of our volunteering work absorb waste and commits to reducing and our annual investment in co-operative the carbon footprint of products and the initiatives. amount of packaging used in its ownbrand products. 9. Net carbon dioxide emissions arising from operations • Food quality, diet and health Our CO2 emissions for the year were 2.5 CRTG believes that consumers should tonnes per £1 million turnover (2010:2.7 have access to high quality food that is produced and offered in a way that tonnes). This figure is calculated from our they can trust. Hence it is committed to energy consumption (1,160 tonnes CO2), removing substances of concern and colleague business miles (610 tonnes CO2)

During 2011 we recycled 2,999 tonnes of materials (2010: 2,894 tonnes) through 10. Proportion of waste improved processes and raising awareness recycled or reused amongst colleagues. This represents 50.5% We have three main recycling methods: of our total Society waste (2010: 37.0%). we recover cardboard and plastic waste Working with Biffa we have improved the generated from our retail stores and return measuring and reporting of our waste and it to a central facility through our distribution recycling. We now measure the actual network, and we use a recycling collection weight of material collected to give a more company to collect and monitor our accurate record of our recycling levels. segregated recycling waste from our sites.

and Chilled Distribution miles (193 tonnes CO2). As all our electricity comes from 100% green sources our electricity use is not included in these figures. We currently report on our CDC, colleague business miles and energy use, but are looking to develop accurate measures for other areas that contribute to CO2.

We also send the food waste from our Food Retail sites to an anaerobic digester to produce renewable energy. We have an ongoing campaign to increase our recycling and to reduce the amount of waste we generate.

Supplier payment policy It is the Society’s policy to agree the terms of payment as part of the commercial arrangements with suppliers and to pay according to those terms once an invoice is received. Trade creditor days for the year were 19 days (2010: 20 days). Trading with other co-operatives Our Society spend with other co-operative organisations was £403 million in 2011, compared with £341 million in 2010. Most of this spend was through the Cooperative Retail Trading Group, but also with neighbouring co-operatives and Cooperative Financial Services.

23

Governance report
OVERVIEW
Introduction This report covers the governance policies and practices within the Society for the year ended 28 January 2012. The report is prepared in accordance with the Code of Best Practice adopted by Co-operatives UK in 2005. The Code sets out the recommended best practice on issues of governance for organisations in the cooperative sector. Under the Code, the Board has a responsibility to ensure that the Society complies with the recommendations in the Code that are appropriate to its circumstances and to report to members on this. Where the Society does not comply the Code stipulates that the Board should explain the reasons why. the Society’s Board, a natural area for focus given the power vested in the Board and the role it plays in setting the course of the Society. The third section covers internal control, providing assurance to members that this critical area receives sufficient attention. This is followed by two short sections, describing (i) the links the Society has with the Co-operative and Labour Parties and the political donations made by the Society during the year, and (ii) the material interests in the Society declared by a director. The Society’s Social Responsibility commitment is then laid out, followed by a final section that contains a formal statement of compliance and sets out where the Society does not comply with the provisions of the Code. has been a member of the Society for more than six months can stand for election. Terms of office are for three years. The Society sends information on how to self-nominate to the Committee to all trading sites in July of every year and there are details in relation to the election procedures on the Society’s website. The current members of the Committee are: - Judith Feeney – Chair - Sheridan Hindle – Vice-Chair - Clive Booker - Christopher Chandler - Pat Juby - John McPhail - Janet Warren - Derek Watkins - Olivia Birch – Board Representative - Trish Poole – Board Representative Patrice Garrigues stepped down from the Committee in March 2012 Membership Team The Membership Team comprises a Head of Membership Engagement, four Member Development Officers, a Data Co-ordinator, a Member Benefits Manager and a team of eight people dealing with member share accounts and member correspondence. The team had three main areas of focus during the year: - Member community involvement - More activities for more members - Member trade Detail is set out below on each of these areas. In 2012, the team will continue to work on these themes, but will also focus on maximising the opportunities that the International Year of Co-operatives provides. The Society has five main aims for the Year and the Membership Team will be working to promote these: - raising awareness of the International Year of Co-operatives - raising awareness of the Co-operative Difference

MEMBERSHIP MATTERS

This report serves to discharge the Board of Introduction Membership is a fundamental part of any these obligations. true co-operative enterprise. Hence, this first The Board is conscious that governance section of the report provides members with and related compliance matters can be an overview of the formal structure of the difficult to convey, particularly within the Society’s membership activity, centred on confines of a formal report, so would the Membership Strategy Committee, and welcome questions and comments from highlights the activities of the Society’s members on the report at the Society’s membership team during the year in support Annual General Meeting or at any other of the Committee. time. In the latter case, interested members should contact the Secretary. A copy of the Membership Strategy Committee Code is available from the Secretary and The Membership Strategy Committee is the can be found on the ‘about us’ pages at focal point of membership activity within the Society and is responsible for the strategic www.midcounties.coop. direction of member engagement in the Society. So in broad terms, the Committee Why governance matters The Board views good governance, which is looking at ways to best recruit, engage, concerns itself with the way an organisation develop, educate and involve members in is run and controlled, as an essential the Society, as well as reaching out to others foundation, particularly so for a co-operative who have not engaged with the Society society owned by its members. This has previously. been a long held view and one which the Board seeks to demonstrate through its The Committee operates under terms of reference approved by the Board and is adherence to best governance practices. made up of 10 members elected from the Society’s membership and 2 members of Contents The sections in this report cover the key the Board appointed by the Board. areas of governance as set down in the Code. The first section deals with Elections to the Committee are held during membership, the heart of any co-operative the autumn each year in conjunction with enterprise. The second section concerns the Society’s Board elections. Anyone who 24

awareness of Co-operative planned to continue to work with the College Benefits and offer a programme around Member - raising awareness of the size and diversity Induction and the Environment. of the Co-operative Movement, and - raising awareness of how members can Member Trade become involved in the activities of the As a successful consumer co-operative it is Society. important that members trade with the Society as well as participate in member Member community involvement events and activities. Member Economic The Membership Team continues to offer Participation is one of the seven core coThe Co-operative Membership Ambassador operative principles and is critical for Programme. The aim of the programme is success. During the year the percentage of to encourage and enable co-operators trade with members increased from 34% to (‘ambassadors’) to share their knowledge 38%. and expertise by taking on roles within local organisations and groups. Currently the Members requiring more information on Society has 41 ambassadors. how to get involved or who have general queries are encouraged to contact the Team During 2012 it is planned to offer some of at member.communications@midcounties. the training modules available to coop or by phoning 0800 435902. ambassadors to all members and a Members’ Education Programme is to be THE BOARD launched with the following modules: Introduction This section provides detail on the Society’s - Member Induction Board, its duties and responsibilities, how it - Values and Principles is structured and how it functions. These are - Co-operative Heritage natural areas of focus in a governance In 2011 a Member Volunteering Programme report given the power vested in the Board was piloted in Swindon. This attracted over and the key role it plays in setting the course 100 volunteers. In addition, a Member of of the Society. the Year award was held. This recognised members in the following categories: active, Society rules eco, ethical, community, colleague and As a first point, it is helpful to remind young. The 6 winners took part in a members that the Society is bound by a set of rules which are approved by its members. volunteering trip to Tanzania. In broad terms, these prescribe how the Society operates and the way it is structured. More activities for more members Over 23,000 members attended local A copy of the rules is available from the events during the year and 826 members Secretary or can be found on the ‘about us’ attended the AGM and Half Year Meetings. pages at www.midcounties.coop. Events were also run in support of Health, Fairtrade, Community, Heritage and The directors Environmental issues, all topics requested The Society’s rules provide for 16 directors elected by and from the Society’s members. by members. The current directors of the Society are A number of members were heavily involved listed on page 4. in planning the events and the Membership Team wishes to put on record its thanks for Director elections this help. The Team also wish to thank the Elections to the Board are conducted by Membership Strategy Committee for their way of postal ballot. An online option is also support and guidance throughout the year. available. The Society uses Electoral Reform Services, an independent body that During the year the Team worked in specialises in running elections on behalf of partnership with the Co-operative College to member based organisations, to conduct its offer training on Fairtrade and the Society’s elections. Elections are held once a year heritage. To take this forward for 2012, it is during the autumn. Details of candidates are

- raising

sent to members at the time of the ballot to help them cast their votes. In the 2011 elections there were 19 candidates standing for 6 vacancies. Roy Frodsham, Patrick Gray and Vivian Woodell were re-elected as directors, and Bernadette Connor, Trish Poole and George Waddell were elected as directors for the first time. Norman Heywood and Doreen Shaw retired from the Board, Doreen Shaw after 40 years continuous service on the Board, a considerable achievement. Graham Adams who had stood for re-election was unsuccessful. Director induction Current arrangements for the induction of new directors involve meetings with the Society’s Secretary and members of the Executive to apprise the individuals of the breadth of the Society’s operations and its co-operative context. A full induction pack is also given to new directors. Term of office The term of office on the Board is three years. However, the Society’s rules state that a director may be removed from office at any time by a two-thirds majority of the votes cast at a special meeting. President and Vice-Presidents The Board is chaired by the President who is supported by two Vice-Presidents. One Vice-President comes from the ‘northern’ area of the Society and one from the ‘southern’ area of the Society, such areas corresponding broadly with the former West Midlands Region and the former Oxford, Swindon and Gloucester Region of the Society respectively. The President is elected by the Board each year. The Vice-Presidents are elected by and from directors living in the ‘northern’ or ‘southern’ areas as applicable. These location stipulations will cease to apply as from 2012. The President leads the Board in the determination of the Society’s strategy and in the achievement of its objectives. The Society’s Rules stipulate that the President cannot be an employee of the Society and cannot act for more than six consecutive years. 25

Following the Board elections in October 2011 Patrick Gray was re-elected as the Society’s President. John Boot was reelected as the ‘northern’ Vice-President and Helen Wiseman was elected as the ‘southern’ Vice-President. Duties and responsibilities The Board is responsible for setting the Society’s objectives and strategy, monitoring the delivery of that strategy by management, and identifying and managing risk. In addition, and given the distinctive nature of co-operative societies, the Board has a duty to ensure that the Society acts as a bona fide co-operative and adheres to the cooperative values and principles set out by the International Co-operative Alliance. All of the directors on the Board, which collectively is responsible for the success of the Society, are equally responsible in law for the Board’s decisions and are bound by an overriding fiduciary duty to act in good faith in pursuit of the best interests of the Society as a whole.

Board procedures The Board meets on a monthly basis throughout the year. At its meetings it receives reports from management on trading and other matters, reviews the financial performance of the Society for the period and cumulatively for the year and considers papers presented for decision or information. In addition, the Board discusses and approves the Society’s strategy and annual budgets at appropriate points during the year. Papers for Board meetings are circulated in advance and the minutes of all Board meetings are provided to directors for their review. Decisions made are actioned as appropriate by management. The Board also meets in private session without the presence of management as and when required.

Independence and managing conflicts To ensure the Board retains its independence, the directors of the Society have access to the advice and services of the Society’s Secretary. Furthermore, the Society’s rules prescribe that one-third of the Board can request independent professional advice funded by the Society on questions relating to the governance of the Society or the conduct of its affairs. In addition, the rules prescribe that a director, their partner or close family member cannot be engaged in a managerial capacity for any business which competes in a material way with the Society or for any supplier (other than a co-operative or social enterprise) that is reliant to a material extent on the Society. The rules also state that no more than six directors on the Board can be current employees or former employees of the Society who have left the Society within the preceding 5 years (or spouses or partners thereof), and that directors must resign their position at the next election following their 70th birthday. In both these cases transitional arrangements applied to directors of the former West Midlands Co-operative Society still serving on the Board (these arrangements expired at the 2011 Board elections). The Board has approved a protocol on conflicts of interest. The Secretary maintains a register to record any conflicts of interest that may arise for directors and also the Executive. Formal updates to the register are requested at the end of each financial year and individuals are charged with informing the Secretary at the first opportunity of any conflicts should they arise in the interim. In addition, at each Board meeting, directors are asked to declare any interests they may have in relation to the business on the agenda. A separate section, found later in this report, sets out the material interests in the Society declared by a director. Legislation provides that only registered Industrial & Provident Societies can invest more than £20,000 in societies. In addition

Training and evaluation The Board is aware of the need for directors to be kept informed of the strategic issues facing the Society and its businesses, as well as more detailed operational matters. In The Board has a set of Guiding Principles this regard, presentations from each of the which provide the framework and Society’s trading businesses and support expectations for the way directors interact groups are made by management on a with one another and with others with whom regular basis. These focus on strategic they have business. The Guiding Principles issues and risk, and highlight areas for incorporate Appendix 9 of the Code which discussion and future decision. In addition, covers the duties of directors and a code of the Chief Executive keeps the Board advised conduct. of matters affecting the Society at each Board meeting and more regularly if The Society’s rules prescribe certain duties required, and twice a year an external and responsibilities that are the sole preserve specialist presents to the Board on the wider of the Board and the Board has a formal issues impacting particular elements of the schedule of matters reserved for its decision Society’s operations. which is reviewed on an annual basis. The rules and the schedule include, for example, The Board is also conscious that directors all matters concerning the determination will wish to update their skills in order to and general operation of the Society’s rules, perform their duties effectively. The training the appointment and removal of the Chief courses offered by the Co-operative College Executive and the Secretary, and the (and other courses from alternative approval of all funding arrangements, providers) are available to all directors property acquisitions and capital spend should the need arise. above certain thresholds. In 2010 a number of directors availed The Board has delegated the day-to-day themselves of the opportunity to have a management of the Society’s activities to structured evaluation discussion with an the Chief Executive. The Chief Executive is experienced consultant on a one-to one responsible for the execution of the Society’s basis. The Board did not consider evaluation strategy within the framework laid down by formally in 2011, but has scheduled a the Board. discussion on the matter for June 2012. 26

to this, the Board has a policy to limit the COMMITTEES amount a registered Industrial & Provident In order to discharge its duties effectively, Society can invest in the Society to a the Board has delegated certain of its responsibilities to three committees, the maximum of £250,000. Audit & Risk Committee, the Remuneration The Board believes the above measures Committee and the Membership Strategy serve to ensure that the independence of Committee. Details of the Audit & Risk Committee are set out in the next section, a directors is safeguarded. full report on the Remuneration Committee is set out in the Remuneration Report and Attendance The table below lists the attendance record details of the Membership Strategy of directors at Board and Committee Committee are set out in the Membership meetings for the year under review. The section earlier in this report. figures show the number of meetings each director actually attended, against (in Audit & Risk brackets) the number of meetings they Committee were eligible to attend. Terms The Audit & Risk Committee operates under terms of reference approved by the Board. These include:
- monitoring the integrity of the Society’s

- monitoring

and reviewing the effectiveness of the Society’s Audit & Risk function, including an assessment of the resources available to the function - responsibility for the appointment/ removal of the Head of Audit & Risk - reviewing the Society’s whistleblowing procedures. Significant decisions by the Committee are referred to the Board for consideration. The Committee’s terms specify a Committee of at least four and no more than six directors. Terms of office on the Committee are for two years, which may be extended for two further two year periods. The terms also specify that the President of the Society cannot be a member of the Committee, nor can any director who is a current employee of the Society or has been so within the previous 12 months. The Board reviews the Committee’s terms on an annual basis.

financial statements
- reviewing the effectiveness of the

Members Society’s internal control and risk The Directors who served on the Committee management systems during the year were: - monitoring and reviewing the work of the Society’s external auditors and assessing - Steve Allsopp - Chair their independence
- Ruth FitzJohn - Vice-Chair - John Boot - stepped down 31 October 2011 - Isobel Burbidge - Roy Frodsham - elected 31 October 2011 - Jean Nunn-Price - Helen Wiseman

Attendance record of directors at Board and Committee meetings
Directors
Mr G Adams Mrs S Allen Mr S Allsopp Mrs O Birch Mr J Boot Mrs I Burbridge Mrs B Connor Ms R FitzJohn Mr R Frodsham Mr P Gray Mr N Heywood Mrs M Jarvis Mr D Morrison Ms J Nunn-Price Mrs P Poole Mrs D Shaw Mr G Waddell Mrs H Wiseman Mr V Woodell

Board
8 (9) 12 (12) 10 (12) 11 (12) 11 (12) 12 (12) 3 (3) 12 (12) 9 (12) 12 (12) 9 (9) 9 (12) 11 (12) 11 (12) 3 (3) 9 (9) 3 (3) 10 (12) 12 (12)

Remuneration Audit Committee Committee

Membership Strategy Committee
3 (4)

The Society’s Secretary acts as secretary to the Committee. Meetings The Committee met six times during the year under review and has six scheduled meetings for the 2012/13 financial year. Meeting agendas track an annual schedule to ensure that all the areas under the Committee’s remit are covered. The Board is apprised of the Committee’s proceedings at the next Board meeting following a Committee meeting. The Committee’s minutes are also made available to the Board. At least once each year the Committee has the opportunity to meet the external auditors and the Society’s Head of Audit & Risk without the presence of management. In 27

6 (6) 5 (5) 6 (6) 6 (6) 1 (1)

7 (7) 2 (2) 7 (7) 2 (2) 6 (7) 7 (7) 1 (2) 4 (4) 2 (2) 5 (5)

6 (6)

5 (6) 5 (5)

addition, the Chair of the Committee with assurance that this critical area receives maintains a dialogue with the external sufficient attention. auditors and the Head of Audit & Risk between Committee meetings. To provide some context, it is helpful to note that the Code charges the Board to review The Deputy Chief Executive, Services and the effectiveness of the Society’s system of the Head of Audit & Risk attend the internal control and to report formally on this Committee’s meetings. review each year to members. The Code states that the review is expected to cover Auditor independence all material controls, including financial, To ensure auditor independence and operational and compliance controls and objectivity is safeguarded, the Committee also risk management. has a policy of awarding project work (save for tax related work) requiring the expertise At the outset, it should be noted that whilst of an audit firm to a firm other than the the Board is responsible for the Society’s Society’s auditors unless there is a strong system of internal control and for reviewing reason to use the Society’s auditors. The its effectiveness, the system is designed to expenditure on any non-audit work manage rather than eliminate the risk of undertaken by the Society’s auditors is failure to achieve the Society’s objectives monitored carefully. All non-audit and can only provide reasonable, not engagements costing over £10,000 absolute, assurance against material undertaken by the auditors require formal misstatement or loss. It should also be noted approval by the Committee. that the Board is of the view that the controls and processes in place are appropriate for Should the value of non-audit work an organisation of the size and complexity undertaken exceed the annual audit fee, of the Society. then all subsequent non-audit related engagements require approval. Internal control framework The Board has adopted an internal control During the year under review, non-audit framework that contains the following key work undertaken by the Society’s auditors elements: (KPMG) amounted to £180,000 (this - An organisational structure with clearly includes fees of £124,000 incurred by the defined lines of responsibility, delegations trustees of the Society’s pension scheme of authority and reporting requirements paid to KPMG for assistance with pension - Policies for expenditure with set scheme related matters). It should also be authorisation levels – for example, larger noted that the Society and its auditors have capital projects and acquisitions and both adopted a policy whereby the audit disposals require Board approval engagement partner does not conduct the - A comprehensive system of financial Society’s audit for more than five years. reporting – actual results together with comparisons to budget are reported Training regularly to the Board throughout the The Committee receives training twice a year year either during a formal meeting or at a - Board review and approval of the annual separate training session. In addition, the budget and plans for each business Committee is given updates on relevant group and support function matters at its meetings and presentations - Policies and procedures for the reporting from management on significant issues as and resolution of suspected fraudulent and when required. activities INTERNAL CONTROL - A risk management process designed to monitor the major risks facing the Society. Introduction This section of the report sets out the Society’s approach to internal control and the measures taken to review its effectiveness, so as to provide members 28

is assured, and the potential exposure to loss of assets or fraud is limited. Measures taken include physical controls, segregation of duties and reviews of processes by management, the Audit & Risk function and the external auditors. In addition, it is also Society policy that all members of the Board are also directors of the Society’s trading subsidiaries to ensure sufficient control is maintained. Risk management The Board and the Executive have primary responsibility for identifying and controlling the key risks facing the Society. In this regard, the Society operates a risk management process that aims to identify the key risks in each business group and support function. The risks are reviewed by the Executive on a regular basis and by the Audit & Risk Committee at each of its meetings. Where weaknesses in controls are identified action is taken to implement control mechanisms to mitigate the risks identified. Matters are reported to the Board as appropriate. More broadly, the Board and the Executive consider the risks impacting on the Society from a strategic perspective at appropriate intervals. Monitoring The Society’s Audit & Risk function carries out independent reviews of the Society’s operational and financial control environments and its risk management systems. A risk based approach is used to identify areas for attention. Reports containing recommendations and action plans to improve controls are issued to management and follow up reviews are made to ensure actions have been implemented. A summary of significant matters is reported to each meeting of the Audit & Risk Committee for review and decision. Review processes The processes used by the Audit & Risk Committee to review the effectiveness of the Society’s system of internal control include the following:

Control procedures The Society’s control procedures are - Review of the external and internal audit designed to ensure that appropriate levels work plans of control are maintained, complete and - Consideration of reports from the Audit & accurate accounting of financial transactions Risk function and the external auditors on

the system of internal control - Discussion with management of the actions taken to resolve issues identified in such reports - Review of the effectiveness of the Society’s risk management processes. Opinion The Audit & Risk Committee has reviewed the operation and effectiveness of the Society’s internal control system during the year under review and through to the date of this report. The Committee considers that there have been no weaknesses that have resulted in any material losses or contingencies which require disclosure.

and interest earned during the year amounted to £nil. (2011: £11). The Phone Co-op also holds £250,000 in a Society Share Bond (2011: £500,000) which earned interest of £37,058 during the year (2011: £34,460).

trading, along with the other trading group general managers. Most products in the Society’s food stores are sourced through the Co-operative Retail Trading Group and the Society adheres to CRTG’s buying guidelines (The Co-operative Group’s Sustainability Report contains more information).

POLITICAL SUPPORT
The Co-operative Party The Society has been a long standing supporter of the Co-operative Party, the political arm of the Co-operative Movement. The Party aims to promote the principles of co-operation and all forms of co-operative organisation within political circles. The Party has a close and enduring relationship with the Labour Party. This includes a formal electoral agreement which enables candidates to stand as Labour and Cooperative representatives in General and Local elections. Political donations At the Annual General Meeting held on 14 May 2011, members approved a donation of £66,000 to the Co-operative Party. This included support at national level and grants to the Society’s three Co-operative Party Councils.

DECLARATION OF INTEREST
Vivian Woodell, a director of the Society, is Chief Executive of the Phone Co-op Limited. He has declared the following interests. Given the nature of these, the Board feels it is appropriate that they are disclosed in full in this report. Disclosure is also made in the notes to the accounts in accordance with accounting standards. The Phone Co-op is a corporate member of the Society and has a share account with the Society. The balance on this account at 28 January 2012 was £42 (2011: £31)

The Society has a share account with The Phone Co-op. As at 28 January 2012 the - Certain directors take a lead in matters relating to Environment and Community. balance was £62,976 (2011: £53,910). Isobel Burbidge sits on the Society’s During the year, the Society received interest Environmental Steering Group while of £1,386 (2011: £1,186) on this account Olivia Birch and Trish Poole sit on the and a dividend of £7,681 (2011: Membership Strategy Committee which £11,915). is responsible for the Society’s Member Engagement Strategy. In addition, the Society has a contract for telecommunication services with The Phone Co-op. The contract is at arm’s length. The STATEMENT OF value of services including VAT provided COMPLIANCE under the contract during the year was £967,058 (2011: £851,676). Introduction To help members assess the Society’s The Phone Co-op made purchases of governance arrangements, the Society is various goods and services from the Society required to specify those elements of the amounting to £3,205 during the year Code with which it does not comply. This (2011: £3,043). section covers that requirement. The matters listed are reviewed by the Board each year. Finally, two directors of the Society, Isobel Burbidge and Helen Wiseman, provided Board size consultancy services to The Phone Co-op The rules of the Society stipulate a Board of during the year. 16 directors, whilst the Code recommends a maximum of 15 directors. The number of SOCIAL directors on the Board reflects the situation RESPONSIBILITY agreed at the time of the merger of the former Oxford, Swindon & Gloucester and Social Responsibility is one of the Society’s West Midlands Co-operative societies in four key values and is an integral part of September 2005. The Board believes that being a co-operative. Therefore, the Society 16 directors is an appropriate number given undertakes a number of actions to ensure it the need to ensure an appropriate level of supports its local and global communities democratic representation. and the environment. To find out more about the Society’s commitments, targets Search and selection committee and achievements please see the Social The Board has not set up a Search and Responsibility Report at www.midcounties. Selection Committee (for the recruitment of coop or call 0800 435902 for a copy. potential directors) as recommended under the Code. The Board believes that the To ensure the Society continues to meet its current membership structures and Social Responsibility objectives the following processes it has in place are appropriate to members of the Executive and Board of attract candidates with the requisite abilities Directors hold named responsibility: and co-operative credentials to stand for election to the Board. - Steve Ridler holds overall accountability for social responsibility. Professional external directors The Society’s Rules do not allow the co- Andy Cresswell holds accountability for option of professional external directors. The social responsibility in marketplace Board does not believe that co-option is 29

appropriate for a bona fide co-operative as it overrides the fundamental principle of democratic member control. Should expert opinion be required by the Board independent to that provided by management, the Board is content to engage external professionals on an as needs basis. Board evaluation As noted earlier in the report, in 2010 a number of directors availed themselves of the opportunity to have a structured evaluation discussion with an experienced consultant on a one-to-one basis. However, the Board has not undertaken a full evaluation process as envisaged by the Code including individual appraisal of directors and the President. The Board is scheduled to discuss evaluation at its meeting in June 2012.

CONCLUDING REMARKS
The sound governance of any organisation is critical to ensure appropriate accountability, transparency and control, and to allow the organisation to work effectively within acceptable boundaries. This is particularly so for a co-operative society where members entrust the control and direction of their society to a board of elected directors. The Board is fully aware of the responsibilities and obligations imposed upon it by its elected status and the prerequisites of the co-operative ethos. It believes this report serves to demonstrate to members the importance it attaches to governance issues and to illustrate that the measures it has taken befit a true co-operative enterprise.
On behalf of the Board

Patrick Gray OBE - President

Ben Reid OBE - Chief Executive

Edward Parker - Secretary

18 April 2012 30

Remuneration Report
Introduction
The Remuneration Committee is pleased to present its Report to members for the year ended 28 January 2012. The Committee’s primary role is to provide robust, independent governance for executive remuneration, to ensure that pay for the Society’s Executive team: As noted in the Chief Executive’s report on page 9, the Society has continued to perform strongly during the year both financially and across a range of non-financial indicators aligned to our co-operative values. However, it is important to note that incentive pay for executives in the Society is around half the level for executives in comparable public limited companies (PLCs). This lower incentive pay means that total remuneration for the Society’s executives is also significantly below that in PLCs.

-

The Committee’s policy is to pay competitive base salaries, positioned around the middle of the range for equivalent roles in retail The Committee would be pleased to have businesses of a similar size to the Society. members’ support for this report. This helps to ensure that the Society retains supports the Society’s business strategy talented leaders and managers to allow it to and values; perform well for the benefit of members and is dependent on the Society’s other stakeholders. John Boot performance and on personal Chair of the Remuneration Committee performance (through the use of The Committee also operates annual and 3 April 2012 performance-related reward); longer-term incentive plans aligned to enables the Society to attract, motivate the Society’s objectives and co-operative and retain talented individuals; and, values. This to ensure that total pay is not does not exceed what is necessary to guaranteed and varies with performance. achieve the aims above.

The Report
The Report has been prepared in accordance with the Code of Best Practice published by Co-operatives UK and will be put to an advisory vote at the forthcoming Annual General Meeting on 19 May 2012.

The Remuneration Committee
Composition The Remuneration Committee of the Board is comprised of six directors all of whom act in a non-executive capacity: - the President and one Vice-President (as chosen by the Board) hold ex-officio positions - the remaining four Committee positions are elected annually from the directors on the Board. The Committee’s Chair is elected annually by the Board. Consistent with current best practice in corporate governance, the Society’s President may not be elected as Chair of the Committee, and directors who are also colleagues employed in the Society cannot serve on the Committee.

The Society’s Secretary acts as secretary to - Determining, within the terms of the policy, the specific remuneration packages for the Committee. each Executive; Members - Setting targets for the Society’s short and long-term performance-related incentives, and reviewing outcomes The directors who served on the Committee relative to these targets; and, throughout the year were: - Monitoring the overall approach to remuneration across the Society. John Boot (elected Chair on 31 October 2011) Steve Allsopp (Chair until 31 October 2011) Roy Frodsham The Committee’s terms of reference can Patrick Gray be found in the governance section of the Society’s website at www.midcounties.coop. In addition, on 31 October 2011 Ruth FitzJohn and Margaret Jarvis were elected The Committee is accountable to the Board, to the Committee, Vivian Woodell stepped and reports on its activities at the Board down from the Committee, and Doreen meeting following each Committee meeting. Shaw retired as a Director hence ceding Substantive decisions of the Committee her place on the Committee. are subject to Board endorsement before implementation. Responsibilities External advice The Committee oversees the Executive team’s remuneration, and also monitors pay The Committee receives external advice policy relating to other colleagues across from independent remuneration consultants, the Society. New Bridge Street (a part of Aon Hewitt Limited). Neither New Bridge Street nor The Committee is responsible for: any other part of Aon Hewitt provided other services to the Society during the year. - Developing the Executive remuneration policy covering base salary, pensions, When necessary, the Committee also benefits and performance-related engages external lawyers for advice and guidance. incentive arrangements;

31

Meetings

believes strongly that these principles should be reflected in the Society’s approach to Seven meetings were held during the year. remuneration. Attendance by Committee members at these meetings is reported in the table in the The Society’s remuneration policy for the Society’s governance report on page 27. Executive aims to: The Chief Executive is also invited to attend Committee meetings, but is not present - Pay competitive base salaries, relative when his own remuneration is determined. to a group of similar-sized businesses No Executive plays any part in deciding his within the retail sector or her own remuneration. - Reward performance through an appropriate balance of short and longRemuneration policy term performance-related pay and outcomes - Maintain an appropriate balance between fixed and variable pay Co-operative societies are founded on the - Provide a clear link between Executive principles of fairness and equity. The Board pay and the Society’s business strategy.

Variable pay is set at substantially lower levels, and represents a very much smaller proportion of Executives’ packages, compared to the typical PLC pay model. This also results in lower total remuneration than in the PLC market. Summary of the remuneration components The table below provides a summary of the components of the Executive remuneration package.

Component Base salary

Policy

How it operates

- To pay a fair base salary, commensurate with the - Increased each year in line with the NACO1 individual’s role, responsibilities and experience, agreement to reflect inflation. and having regard to the market rates for similar - Formally reviewed every two years to ensure roles in other retail businesses of equivalent size. market competitiveness. - To provide a performance-related reward aligned - The maximum annual bonus payment is currently to targets set for the year. set at 35% of base salary, payable for outstanding - To set the maximum annual bonus at a level that performance. is significantly lower than in equivalent PLCs. - Performance targets comprise a combination of financial and personal objectives. - To provide performance-related reward aligned to the long-term, strategic goals of the Society. - To set the maximum LTIP at a level that is significantly lower than in equivalent PLCs. - Previously grants were made once every three years. The Society has moved to annual grants with effect from the grant in calendar year 2012. - The maximum payment under the LTIP grant that matured in January 2011 was 15% of base salary (ie. 5% of base salary on an annualised basis). - Performance targets are related to the Society’s strategic objectives. - A number of the Executive are eligible for the Society’s pension scheme on the same terms available to all Society colleagues. The remaining members of the Executive have opted out of the pension scheme following a one-off option, available to members of the Executive in 2010, to withdraw from the scheme in exchange for a taxable cash allowance on account of changes to the tax rules on pensions for ‘high earners’. - Executives are eligible for a company car, life insurance, long-term disability income protection, and, in some cases, travelling allowances available to all colleagues affected by the relocation of the Head Office.

Annual bonus

Long-term incentive plan (LTIP)

Pension plan

- To provide pension arrangements on similar terms to other colleagues in the Society.

Benefits-in-kind

- To provide benefits-in-kind broadly in line with market practice.

1NACO

– National Association of Co-operative Officials.

32

Changes to remuneration structure In line with the Society’s remuneration policy to achieve the right balance between short and long-term performance goals, the Committee is implementing the following changes:

the pay and conditions for these colleagues is taken into account when considering Executive pay.

The graph below shows the approximate ratio of the Chief Executive’s base salary and total target remuneration, pre and post-tax, relative to the lowest rate of pay in the Society, and compares this with typical - The maximum annual bonus opportunity ratios in the wider PLC retail sector. As the for Executives will be reduced from 35% graph indicates, the total pay ratio for the to 20% of base salary starting with the Society is significantly lower than in the PLC 2014/15 financial year. retail sector. - Following the move to annual LTIP grants and starting from the 2012/13 Base salary grant, an LTIP grant will mature each year providing an LTIP payment of up The Society’s remuneration policy for its to 20% of base salary annually subject Executives is to position base salaries around to performance conditions. The first the median of the relevant comparator such grant will mature at the end of the group, maintaining competitiveness against 2014/15 financial year and any payment similar-sized retailers. In determining salary due will become payable in early 2015. levels, the Committee also considers the These changes will not result in any increase performance of the individual, the scope of in the potential total value of remuneration each role and internal relativities between for members of the Executive. other positions within the Society.

In addition to the NACO-related increase, a formal review of Executive salaries is undertaken every 2 years. The last such review concluded in January 2012. The Chief Executive’s base salary was increased by 1% to assist with market competitiveness and take account of his sustained, strong performance in the role. The Society Secretary’s base salary was increased by 1.6% to bring his salary to the mid-market position. Salaries for the remainder of the Executive were left unchanged. The Committee also agreed to undertake a full review of the Chief Executive’s remuneration package in the autumn of 2012 and to review the base salaries of two further members of the Executive at the same time, dependent on their level of performance. Annual bonus

The annual bonus scheme aims to drive improved performance by rewarding Executives for achieving a mix of financial targets (at Society and trading/support group level) and personal objectives. The Remuneration for Base salaries are increased each year by a Executives, together with the Society’s other colleagues percentage agreed with NACO and applied Leadership Team (the 60 or so most senior to the Society’s senior management grades managers within the Society) and other The Committee has a responsibility for for the year. Therefore, for 2012/13 all managers within the Society participate monitoring the pay policy for colleagues Executives’ base salaries will be increased in the annual bonus scheme. In total below Executive level in the Society and in line with the NACO agreement. around 900 of the Society’s employees

80 70
Chief Executive total target pay as a multiple of the lowest pay (full-time)

60 50 40 30 20 10 0
Pre-tax The Midcounties Co-operative Retail PLCs of similar size to The Midcounties Co-operative Post-tax

Total pay includes base salary, target incentives (actual 2011/12 bonus and actual LTI, annualised, for the Society’s Chief Executive), pension, and benefits.

33

Performance Scale for Financial Component
Performance scale for financial component 115% of budget 100% of budget 95% of budget Less than 95% of budget Bonus payable for Chief Executive (% of base salary) 24.5% 9.8% 4.9% 0% Bonus payable for other members of the Executive team (% of base salary) 26.25% 10.5% 5.25% 0%

Performance Outcomes for the Year Ending January 2012
Actual outcome Actual outcome for financial component Actual outcome for personal objectives TOTAL Bonus payable for Chief Executive (% of base salary) 22.85% 9.8% 32.65% Bonus payable for other members of the Executive team (% of base salary) Average of 18.38% Average of 4.23% Average of 22.61%

participate in a bonus scheme. In addition, The Committee has put the following all employees (other than members of the additional safeguards in place for bonus: Executive and Leadership Team) are eligible to receive an annual ‘Thank you’ payment. - All bonus payments are self-funding – the cost of payments to be made is factored into the profit figures before As discussed above, a disproportionate bonuses are calculated. emphasis on incentive pay is considered inappropriate for the Society’s Executive - In addition to the minimum performance requirement of 95% of budgeted profits and therefore, on-target and maximum on the financial component, there is also bonus opportunity levels are significantly a requirement that no bonus is payable lower than those available to executives for the personal component if Society at PLCs. The maximum annual bonus trading profit is less than 90% of budget opportunity for all Executives is 35% of for the year. base salary (to be reduced to 20% of base salary in 2014/15). - The Committee has a guideline that limits the aggregate amount of bonus that can be paid to the Executive team below the The Chief Executive’s bonus outturn is Chief Executive. The guideline is set at based on overall Society financial targets 30% of the total base salary bill for the (24.5% of salary) and personal objectives Executive (excluding the Chief Executive) (10.5% of salary). The bonus outturn for the year. This implies that, in the event, of other members of the Executive is for example, that the financial portion of measured against Society and individual the bonus is at maximum, the average trading/support group financial performance bonus for personal objectives is limited (26.25% of salary) and personal objectives to 3.75% of base salary (compared to a (8.75% of salary). maximum of 8.75%). The tables above show the performance scale and the outcome for 2011/12, relative to target for the financial component of the bonus. Long-Term Incentive Plan
Key Performance Area Return on capital employed (£) Corporate reputation Percentage of trade with members Colleague engagement How measured? Cumulative trading profit relative to 3-year plan

Long-Term Incentive Plan (LTIP) The long-term element of remuneration continues to be delivered through the Society’s LTIP, which was introduced for Executives in 2008. Under the initial award granted in 2008, an Executive could receive a cash award of up to 15% of average base salary over the three-year performance period (2008/9 – 2010/11) subject to challenging performance targets linked to the long-term development of the Society. Following the full vesting of the 2008 LTIP award in 2011 (reported last year) a further three-year award was granted to the Executive in 2011 based on the performance requirements outlined in the table below, measured over the three years, 2011/12, 2012/13, and 2013/14. The maximum payable under the 2011 grant of LTIP is 15% of average base salary over the three-year performance period. Pensions The Society operates a career-average, defined benefit pension scheme. Members build up pension based on their base salary and contributions each year.

Weighting at target 50.00% 16.67% 16.67% 16.67%

From Business in the Community’s Corporate Responsibility index The value of sales made to members of the Society during the year Measured through the Society's annual colleague survey

34

The normal retirement age under the career average scheme is 65 save that, at the Society’s discretion, those with over 25 years’ service with the Society are able to retire without a reduction in their pension for early retirement from age 60, and those with between 15–25 years’ service can retire with a reduced penalty (based on a graded scale) from age 60. Following significant changes to the tax rules for the pensions of ‘high earners’ announced during 2010, the Committee offered Executives at the time a one-off option to exit active membership of the career-average scheme in exchange for a cash allowance of 16% of base salary in lieu of pension contributions. A similar choice was presented to individuals in the Society affected by the introduction of the Lifetime Allowance in 2006. A number of individuals on the Executive at the time withdrew from active membership of the career-average scheme and now receive the cash allowance. The option has not been made available to individuals who have joined the Executive since then. In line with the Society’s policy, only basic salary is pensionable. Furthermore, the cash allowance in lieu of pension is excluded from the calculation of the annual bonus and LTIP award.

60 provided he remains employed by the - Deputy Chief Executive Services – 6 Society until he reaches that age. months - all other Executives – 3 months The career-average scheme replaced the Society’s final salary scheme in 2004. At If the Society merges with another society the time of its introduction, all members of and the Chief Executive’s role becomes the predecessor scheme were offered the redundant, the Chief Executive has a right to option to keep the link to their final salary two years’ compensation for loss of office. on the pension they had built-up to date Termination payments for other members by making additional contributions of 3.5% of the Executive in such a situation would of salary each year. One Executive, Trish be based on the terms agreed with NACO Poole, made such additional contributions at the time. These would also apply to the during the year. Chief Executive if more favourable than the above arrangement. Benefits-in-kind Redundancy payments The benefits-in-kind available to Executives during the year comprised the provision In February 2011, the Society consolidated of a car or a cash alternative (the amount its Head Office from two sites based in disclosed is either the taxable amount for Oxford and Walsall, to a single site at the car provided or the cash alternative), Warwick. The option of redundancy, life insurance, long-term disability income under the Society’s standard redundancy protection, and disturbance and other travel policy, was made available to all colleagues payments available to all colleagues affected affected by the move who did not wish to by the consolidation of the Society’s Head relocate their place of work. Office from two sites based in Oxford and Walsall to a single site at Warwick in 2011. Three members of the Executive, Paul Byrne, Alan Miller and Trish Poole, left the The value of these benefits-in-kind are set Society during the year, each receiving a out in the annual remuneration table. redundancy payment under the Society’s policy with Paul Byrne and Alan Miller also Service contracts receiving payment in lieu of notice for their 3 months notice periods. The following notice periods, from the Society to Executives, are in place:

The Chief Executive has the right to take his deferred pension penalty-free at age - Chief Executive – 12 months Annual Pension table
Name Age at year end Years of Total accrued Increase in accrued pensionable pension at year pension during the service end year £ £ 10 8 13 18 6 7 25 21 10 9 19,315 29,142 22,806 18,308 13,638 14,894 25,471 200,749 38,592 10,447 755 1,081 949 4,242 422 467 1,178 9,366 1,505 1,630 Date withdrawn from scheme Salary Supplement £ 18,845 36,218 16,360 6,749 20,105 20,841 69,888 36,217 -

Paul Byrne Andy Cresswell Simon Fisher Mari Frost Alan Miller Edward Parker Trish Poole Ben Reid Steve Ridler Adrian Wilkinson

55 42 47 55 48 44 51 57 51 39

6 November 2010 31 December 2010 3 December 2010 9 September 2011 31 December 2010 3 December 2010 1 August 2009 3 December 2010 -

35

Annual remuneration and pensions tables
The tables on page 35 and below provide details of the remuneration and pension benefits received by Executives for the financial year under review. The pensions table on page 35 presents information as required under the Code of Best Practice, including details of the 16% salary supplement. More detailed (and complex) pensions information, as required under the Listing Rules and the Directors’ Remuneration Regulations applicable to PLCs, is available from the Secretary on request.

Board director fees
This section of the Report provides details of the fees, expenses and benefits for directors of the Society.

Proposals are put forward by the Board to can be claimed by directors who participate members on a periodic basis. in pre-approved external meetings and events, for example Congress and Sectional The Board is conscious that the fee levels Council meetings. paid to Directors, whilst reflecting the level of responsibility the role of a Director in a Benefits co-operative society carries, should also take into account the long held co-operative The Society’s Colleague Discount scheme traditions of fairness and equity. is available to directors and their partners. A number of directors are also members of The current annual fees payable to directors the Society’s pension scheme in respect of and those serving on various committees service as an employee with the Society, as and formal groups of the Society are set out noted in the second table on page 37. in the first table on page 37. Directors’ All the fees listed are increased each year remuneration table by the inflation-related increase awarded to the Society’s senior management grades The second table on page 37 lists the fees for the year as negotiated with NACO. The and expenses paid to the directors of the increase awarded in 2011 was 2.5%. Society who served during the year under review. Expenses

Directors are reimbursed all reasonable The Rules of the Society require that the expenses incurred while carrying out fees and expenses paid to directors are their duties for the Society. In addition, an approved by the Society’s members. attendance allowance of £25 per half day Annual Remuneration table
Employment commenced Paul Byrne1
left 4 November 2011

Basic salary £ 121,221 10,230 223,457 102,052 98,892 130,510 130,019 53,145 435,982 224,043 25,384 23,077

Bonus payment £3 62,883 30,611 27,570 34,216 142,261 44,108 8,578

Benefits Redundancy 2011/12 total -in-kind payment emoluments £4 £ £ 9,337 467 11,974 16,966 9,873 8,496 16,194 1,850 20,763 13,566 1,836 3,152 79,817 59,843 93,410 210,375 10,697 298,314 149,629 136,335 198,849 180,429 148,405 599,006 281,717 27,220 34,807

2010/11 total emoluments £ 160,476 299,967 139,304 210,434 193,684 148,627 643,909 296,178 -

1 April 2000 3 January 2012 8 April 2002 23 June 1997 2 February 1993 3 February 2000 6 January 2003 29 July 1985 21 March 1988 1 May 2000 14 November 2011 4 November 2002

Lee Coleyshaw2
joined the Executive 3 January 2012

Andy Cresswell Simon Fisher Mari Frost2
joined the Executive 6 March 2011

Alan Miller1
left 2 September 2011

Edward Parker Trish Poole
left 6 May 2011

Ben Reid Steve Ridler Alistair Rowland2
joined the Executive 14 November 2011

Adrian Wilkinson2
joined the Executive 6 November 2011

Notes 1. basic salary includes payment in lieu of notice 2. basic salary and benefits-in-kind are disclosed from the date of joining the Executive 3. bonus payments shown relate to the bonuses paid for 2011/12 4. benefits-in-kind include the provision of a car or a cash alternative, and disturbance and other travel payments available to all affected colleagues in relation to the relocation of the Society’s Head Office in 2011

36

Board director fees
Board/Committee Board Director President Vice-Presidents Audit & Risk Committee Committee member Chair Vice-Chair Remuneration Committee Colleague Support & Social Fund Energy and Environmental Steering Group Membership Strategy Committee All Committee members Board representative Board representative Committee member Role £6,965 £9,751 (40% above Director fee) £8,358 (20% above Director fee) £445 £534 (20% above Committee member fee) £490 (10% above Committee member fee) £445 £209 £445 £445 Fees £

Directors’ Remuneration table
Director Mr G Adams Mrs S Allen Mr S Allsopp Mrs O Birch Mr J Boot* Mrs I Burbridge Mrs B Connor* Ms R FitzJohn Mr R Frodsham Mr P Gray Mr N Heywood Mrs M Jarvis Mr D Morrison Ms J Nunn-Price Mrs P Poole* Mrs D Shaw Mr G Waddell* Mrs H Wiseman* Mr V Woodell Fees £ 4,991 7,223 7,864 7,005 9,095 7,776 1,929 7,490 7,446 10,092 4,991 7,542 6,894 7,335 2,040 5,461 1,929 7,683 8,254 Expenses/Delegation allowance £ 809 480 1,212 489 4,927 803 149 2,472 241 478 1,260 1,863 0 2,911 151 713 32 546 1,124 Total 2011/12 emoluments £ 5,800 7,703 9,076 7,494 14,022 8,579 2,078 9,962 7,687 10,570 6,251 9,405 6,894 10,246 2,191 6,174 1,961 8,229 9,378 Total 2010/11 emoluments £ 8,106 7,738 10,080 1,359 12,712 8,796 1,519 7,184 8,036 7,810 9,684 6,703 7,132 9,454 7,741 9,557

* member of the Society’s pension scheme

37

38

Financial Report
On the following pages you will find the Society’s Financial Statements for the year to 28 January 2012, together with the accompanying notes, the auditors’ report, the statement of directors’ responsibilities and detail on the Society’s accounting policies. Graphs showing the development of key financial measures for the Society over the last five years are set out below for information.
Gross sales (£million) 800
712

Gross sales
787 748 738 788

Net assets (£million) 200
169

Net assets

700 600 500 400 300 200 100 0
2007 2008 2009 2010

166

175 161

166

150

100

50

2011

0

2007

2008

2009

2010

2011

Trading pro t (£million)

Trading profit

Community support provided (£million)

Community support

30
26.0

3.5 3.0
23.2

2.8

25

2.5 2.0 1.5
1.2 1.2

20
16.2

19.3

15

1.0
11.9

0.8 0.7 0.6
0.5 0.7

10

5

0.5

0

2007

2008

2009

2010

2011

0

2007

2008

2009

2010

2011

39

Statement of directors’ responsibilities in respect of the financial statements
The directors are responsible for preparing the Directors’ Report and the Society financial statements in accordance with applicable law and regulations. Industrial and Provident Society law requires the directors to prepare financial statements for each financial year. Under that law the directors have elected to prepare the financial statements in accordance with International Financial Reporting Standards as adopted by the EU. The Society’s financial statements are required by law to give a true and fair view of the state of affairs of the Society and of the profit or loss of the Society for that period. In preparing the Society’s financial statements, the directors are required to: - select suitable accounting policies and then apply them consistently - make judgments and estimates that are reasonable and prudent - state whether applicable IFRSs as adopted by the EU have been followed, subject to any material departures disclosed and explained in the financial statements - prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Society will continue in business. The directors are responsible for keeping proper accounting records that disclose with reasonable accuracy at any time the financial position of the Society and enable them to ensure that its financial statements comply with the Industrial and Provident Societies Acts 1965 to 2003. They have general responsibility for taking such steps as are reasonably open to them to safeguard the assets of the Society and to prevent and detect fraud and other irregularities. The directors are responsible for the maintenance and integrity of the corporate and financial information included on the Society’s website. Legislation in the UK governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

Statement on going concern
The Society has procedures for assessing its capital and funding requirements, which are monitored regularly. The day to day working capital needs are met through a number of facilities. The Society has prepared detailed forecasts and projections for the period to January 2014 which, taking account of possible changes in trading performance in the current economic environment, show that the Society should be able to operate within the level of its current available facilities. Based on this, the directors have a reasonable expectation that the Society has adequate resources to continue in operational existence for the foreseeable future and they continue to adopt the going concern basis in preparing the Society’s financial statements.

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

Approval
The Financial Statements are signed on behalf of the Board of Directors.
Patrick Gray OBE President John Boot Vice-President Helen Wiseman Vice-President Edward Parker Secretary

18 April 2012

40

Independent auditor’s report to the members of The Midcounties Co-operative Limited
We have audited the financial statements of The Midcounties Co-operative Limited (the ‘Society’) for the year ended 28 January 2012 set out on pages 42 to 71. The financial reporting framework that has been applied in their preparation is applicable law and International Financial Reporting Standards (IFRSs) as adopted by the EU. This report is made solely to the Society’s members, as a body, in accordance with Section 9 of the Friendly and Industrial and Provident Societies Act 1968. Our audit work has been undertaken so that we might state to the Society’s members those matters we are required to state to them in an auditors’ report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Society and the Society’s members, as a body, for our audit work, for this report, or for the opinions we have formed.

Opinion on financial statements
In our opinion the financial statements: - give a true and fair view, in accordance with IFRSs as adopted by the EU, of the state of the Society’s affairs as at 28 January 2012 and of the Society’s profit or loss for the year then ended; and - have been properly prepared in accordance with the Industrial and Provident Societies Acts 1965 to 2003 and the Industrial and Provident Societies (Group Accounts) Regulations 1969.

Governance Statement reflects the Society’s compliance with the five provisions of the Code specified for our review. S Haydn-Jones (Senior Statutory Auditor) for and on behalf of KPMG LLP, Statutory Auditor Chartered Accountants One Snowhill Snow Hill Queensway Birmingham B4 6GH 18 April 2012

Matters on which we are required to report by exception
Under the Industrial and Provident Societies Act 1965 to 2003 we are required to report to you if, in our opinion: - a satisfactory system of control over transactions has not been maintained; or - the Society has not kept proper accounting records; or - the financial statements are not in agreement with the books of account; or - we have not received all the information and explanations we need for our audit. We have nothing to report in respect of the above. In addition to our audit of the financial statements, the directors have engaged us to review their Corporate Governance Statement on pages 24 to 30 as regards the Society’s compliance with paragraphs D1.1 (paragraph 5), D2.1, D2.4, D3.1 (paragraph 3) and D3.2 of the Co-operatives UK Limited’s Corporate Governance Code of Best Practice issued in May 2005 (‘the Code’) and we report if it does not. Under the terms of our engagement, we are required to review whether the Corporate

Respective responsibilities of directors and auditor
As more fully explained in the Statement of directors’ responsibilities set out on page 40 the Society’s directors are responsible for the preparation of 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 (APB’s) Ethical Standards for Auditors.

Scope of the audit of the financial statements
A description of the scope of an audit of financial statements is provided on the APB’s website at www.frc.org.uk/apb/scope/private.cfm.

41

Consolidated Statement of Comprehensive Income
For the year ended 28 January 2012

Note

2012 £’000 641,131 (442,616) 198,515

2011 £’000 604,922 (424,477) 180,445 (154,480) 25,965 (7,853) 18,112 1,257 (2,498) 16,871 (6,240) 10,631 (2,760) 7,871

Revenue Cost of sales Gross profit Operating expenses Trading profit Other operating expenses Operating Profit Finance income Finance expenses Profit before payments to and on behalf of members Payments to and on behalf of members Profit before tax Income tax expense Profit for the year Other comprehensive (expense)/income Revaluation of property, plant and equipment Actuarial (losses)/gains on defined benefit pension plans Income tax on other comprehensive income Other comprehensive (expense)/income for the period, net of income tax Total comprehensive (expense)/income for the period

1

2

(175,347) 23,168

3

(2,241) 20,927

4 5

2,189 (2,498) 20,618

6

(8,239) 12,379

7

(2,830) 9,549

19

213 (22,134) 5,927 (15,994) (6,445)

1,340 4,229 (607) 4,962 12,833

42

Consolidated Statement of Financial Position
As at 28 January 2012
Restated* 2009 2011 £’000 195,469 184,588 28,443 37,750 22,286 18,510 17,890 24,621 7,603 9,061 271,691 274,530 2,758 2,070 30,788 23,308 42,848 37,305 22,441 37,421 199 13,429 99,034 113,533 370,725 388,063 33,084 35,874 51,093 51,002 82,096 87,828 166,273 174,704

Note ASSETS Non-current assets Property, plant and equipment Intangible assets Investment property Other investments Deferred tax assets Total non-current assets Current assets Other investments Stocks Trade and other receivables Cash and cash equivalents Assets held for sale Total current assets TOTAL ASSETS EQUITY Share capital Other reserves Retained earnings TOTAL EQUITY LIABILITIES Current liabilities Loans and borrowings Financial liabilities and derivatives Trade and other payables Provisions Current tax liabilities Total current liabilities Non-current liabilities Loans and borrowings Other payables Provisions Pension obligations Deferred tax liabilities Total non-current liabilities TOTAL LIABILITIES TOTAL EQUITY AND LIABILITIES Total equity represents total members’ funds.

2012 £’000 181,818 38,870 16,296 28,447 13,319 278,750 2,213 22,030 48,675 41,100 7,840 121,858 400,608

8 9 10 11 12

11 13 14 15 16

17

31,491 48,264 85,958 165,713

18 23 20 21

994 0 93,205 465 6,345 101,009 49,255 32,751 1,174 40,889 9,817 133,886 234,895 400,608

984 965 488 34 91,777 91,336 192 879 3,360 5,322 96,801 98,536 54,192 50,222 18,062 25,487 804 998 15,837 23,433 18,756 14,683 107,651 114,823 204,452 213,359 370,725 388,063

18 20 21 19 12

43

Consolidated Statement of Changes in Equity
For the year ended 28 January 2012
Share Capital £’000 Balance at 23 January 2010 Profit for the year Other comprehensive income: Revaluation of property plant and equipment Actuarial gains on defined benefit pension plans Income tax on other comprehensive income Total other comprehensive income Contributions by and distributions to members: Shares issued and interest credited less shares withdrawn Members’ share interest Income tax on contributions by and distributions to members Total contributions by and distributions to members Balance at 22 January 2011 Profit for the year Other comprehensive income: Revaluation of property plant and equipment Realised on disposal of properties Actuarial losses on defined benefit pension plans Income tax on other comprehensive income Total other comprehensive expense Contributions by and distributions to members: Shares issued and interest credited less shares withdrawn Dormant share accounts to reserves Members’ share interest Income tax on contributions by and distributions to members Total contributions by and distributions to members Balance at 28 January 2012 34,542 0 0 0 0 0 1,332 0 0 1,332 35,874 0 0 0 0 0 0 (1,050) (3,333) 0 0 (4,383) 31,491 Revaluation Reserve £’000 49,530 0 1,340 0 132 1,472 0 0 0 0 51,002 0 213 (3,720) 0 769 (2,738) 0 0 0 0 0 48,264 Retained Earnings £’000 77,097 7,871 0 4,229 (739) 3,490 0 (875) 245 (630) 87,828 9,549 0 3,720 (22,134) 5,158 (13,256) 0 3,333 (839) (657) 1,837 85,958 Total Equity £’000 161,169 7,871 1,340 4,229 (607) 4,962 1,332 (875) 245 702 174,704 9,549 213 0 (22,134) 5,927 (15,994) (1,050) 0 (839) (657) (2,546) 165,713

44

Consolidated Statement of Cash Flows
For the year ended 28 January 2012
Note 2012 £’000 9,549 8 9 3 3 3 4, 5 7 6 9,235 82 (344) 29 1,190 309 2,830 8,239 31,119 1,337 (11,201) 1,439 (8,425) (5,661) 17,033 4 580 14,368 10 22 (12,641) (135) (1,940) 232 8,470 (9,520) (2,172) (941) (9) (9,414) (13,586) 3,679 37,421 41,100 2011 £’000 7,871 9,325 37 (10) 239 343 1,241 2,760 6,240 28,046 304 4,380 1,050 5,734 (2,928) 30,852 422 2,107 (13,031) (48) 227 (10,323) 8,695 (7,363) (2,050) (1,916) (50) (6,693) (9,377) 11,152 26,269 37,421

Cash flows from operating activities Profit for the period Adjustments for: Depreciation Amortisation of intangible assets Gain on sale of property, plant and equipment Change in fair value of investment property Change in fair value of trading property Net finance expense Income tax expense Payments to and on behalf of members Change in: Stocks Trade and other receivables Trade payables, provisions and other payables Income tax paid Net cash from operating activities Cash flows from investing activities Interest received Proceeds from: Sale of investment properties, property, plant and equipment and intangible assets Purchase of: Property, plant and equipment Investment properties Intangible assets and businesses Net cash used in investing activities Cash flows from financing activities Proceeds from issue of share capital Repayment of share capital Interest paid on borrowings Repayment of bank facilities Repayment of finance lease liabilities Payments to and on behalf of members and share interest paid Net cash used in financing activities Net increase in cash and cash equivalents Cash and cash equivalents at start of period Cash and cash equivalents at end of period

5 18 18

45

Accounting Policies
1. Basis of Preparation
a) Statement of compliance Midcounties Co-operative Limited is an Industrial and Provident Society domiciled in the United Kingdom. The Group financial statements for the year ended 28 January 2012 have been prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the EU. As permitted by statute and International Accounting Standard No.1 (IAS 1), the financial statements format has been adapted as necessary to give a fair presentation of the state of affairs and result of the Group. As allowed by Industrial and Provident Societies Acts, a separate set of financial statements for the Society are not included and are published separately. b) Basis of preparation The financial statements are presented in thousands of pounds sterling. The financial statements have been prepared on a going concern basis. In determining the appropriate basis of the financial statements the directors are required to consider whether the Group can continue in operational existence for the foreseeable future. The financial statements are prepared on an historical cost basis except for the following material items in the statement of financial position which are measured at fair value: revaluation of financial assets and liabilities valued at fair value through the statement of comprehensive income, derivative financial instruments, property, plant and equipment, investment properties, assets held for sale and disposal group. c) Use of estimates and judgements The preparation of financial statements in conformity with IFRS requires management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates. Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimates are revised and in any future periods affected. Information about areas of estimation, uncertainty and critical judgements used in applying accounting policies that have the most significant effect on the amounts recognised in the Financial Statements is included in the following notes: Note 8 Valuation of trading properties 9 Measurement of the recoverable amounts from cash generating units containing goodwill 10 Valuation of investment properties 16 Valuation of assets held for sale 19 Measurement of pension obligations 22 Business combinations 23 Valuation of financial instruments 24 Valuation of funeral prepayment plans d) Basis of consolidation The consolidated financial statements include the Society and its subsidiary undertakings. Subsidiaries are entities controlled by the Society. Control exists when the Society has the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities. In assessing control, potential voting rights that are currently exercisable are taken into account. The financial statements of subsidiaries are included in the consolidated financial statements from the date that control commences until the date that control ceases. e) Significant items Certain income and expenditure items are disclosed separately when they are material to the Society and require further explanation. f) Changes in accounting policies There have been no changes in accounting policies within the year. g) New endorsed standards and interpretations not adopted A number of new standards, amendments to standards and interpretations are effective for annual periods beginning after 1 January 2012 and have not been applied in preparing these consolidated financial statements. None of these are expected to have a significant effect on the consolidated financial statements of the Group.

2. Accounting Reference Dates
For operational reasons the financial statements of the Society and the retail subsidiaries are prepared to the fourth Saturday in January. Those of the property subsidiaries are prepared to 31 January 2012. The financial statements of the Society and the retail subsidiaries are for the 53 weeks ended 28 January 2012 and are compared with a 52 week period to 22 January 2011. The comparative amounts are not entirely comparable with the results of 2011 as they are based on a longer period.

3. Significant Accounting Policies
a) Business Combinations Business combinations are accounted for using the acquisition method as at the acquisition date which is the date on which control is transferred to the Group. Control is the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities. In assessing control the Group takes into consideration potential voting rights that are currently exercisable. i) For acquisitions on or after 24 January 2010 the Group measures goodwill at the acquisition date as: • The fair value of consideration transferred; plus • The net recognised amount (generally fair value) of the identifiable assets acquired and liabilities assumed. Costs, other than those associated with the issue of debt or equity securities, that the Group incurred in connection with business combination are expensed as incurred.

46

Any contingent consideration payable is recognised at fair value at the acquisition date. Subsequent changes to the fair value of the contingent consideration are recognised in profit or loss. ii) For acquisitions between 29 January 2006 and 24 January 2010 goodwill represents the excess of the cost of the acquisition over the Groups interest in the recognised amount (generally fair value) of the identifiable assets, liabilities and contingent liabilities of the acquired entity. When the excess was negative a bargain purchase was recognised immediately in profit or loss. Costs, other than those associated with the issue of debt or equity securities, that the Group incurred in connection with business combination were capitalised as incurred. iii) For acquisitions which occurred prior to 29 January 2006 goodwill represents the amount recognised under the Groups previous accounting framework, UK GAAP. b) Property, plant and equipment After initial recognition, classes of assets valued under the cost model are carried at cost less any accumulated depreciation and any accumulated impairment losses. Classes of assets valued under the revaluation model are carried at a revalued amount, being their fair value at the date of the revaluation, less any subsequent accumulated depreciation and subsequent accumulated impairment losses. Depreciation is calculated to write off the cost or valuation, less estimated residual value, in profit or loss on a straight line basis over the estimated useful lives of each part of an item of property, plant and equipment. Land is not depreciated. Depreciation methods, useful lives and residual values are reviewed at each reporting date. Depreciation rates used are as follows: Freehold buildings Leasehold buildings Plant, fixtures and fittings Vehicles c) Intangible assets 2% per annum Over the unexpired term of the lease 5% to 33.3% per annum 12.5% to 33.3% per annum

recognised in profit or loss. Investment property additions/disposals are recognised when there has been an unconditional exchange of contracts. When the use of a property changes such that it is reclassified as property, plant and equipment its fair value at the date of reclassification becomes its cost for subsequent accounting. e) Leased assets Leases under which the Society assumes substantially all the risks and rewards of ownership are classified as finance leases. Upon initial recognition the leased asset is measured at an amount equal to the lower of its fair value and the present value of the minimum lease payments. After the initial recognition, the asset is accounted for in accordance with the accounting policy applicable to that class of asset. Minimum finance lease payments are apportioned between the finance charge and the redemption of the outstanding liability. The finance charge is allocated to each period of the lease term so as to produce a consistent periodic rate of interest on the remaining balance of the liability. Other leases are operating leases, these leased assets are not recognised on the Society’s Statement of Financial Position. Operating lease payments are recognised in the Income Statement over the life of the lease on a straight line basis. f) Stocks Stocks are stated at the lower of cost and net realisable value. Net realisable value is the price at which stocks can be sold in the normal course of business after allowing for the cost of realisation. Provision is made where necessary for slow moving and defective stocks. g) Funeral Prepayment Plans Funeral prepayment plans under which the Society accepts risk from another party (the policyholder) by agreeing to compensate the policyholder in respect of an uncertain future event are classified as insurance contracts under IFRS 4. A contract that qualifies as an insurance contract remains an insurance contract until all the risks and obligations are extinguished or expire. h) Government Grants Grants are credited to deferred income. Grants towards capital expenditure are released to the income statement over the expected useful life of the assets. i) Financial assets and liabilities

i) Goodwill Goodwill is measured at cost less accumulated impairment losses. Goodwill is allocated to cash generating units (CGUs) and is tested annually for impairment. ii) Intangible assets Intangible assets acquired by the Society are measured at cost less accumulated amortisation and impairment losses. Pharmacy licenses are deemed to have indefinite lives and are tested annually for impairment. Post Office licences are amortised over various periods depending on the revenue earned and customer relationships are amortised over 3 years as set out in Note 9. d) Investment properties Investment properties are held either to earn rental income or for capital appreciation or for both, but not for sale in the ordinary course of business. Investment properties are measured at fair value with any change in value

i) Non derivative financial assets and liabilities Non derivative financial assets and liabilities comprise trade and other receivables, investments in equities, cash and cash equivalents, loans and other borrowings, and trade and other payables. Loans and receivables are initially recognised at fair value and subsequently will be carried at amortised cost less any impairment losses. Available for sale financial assets are equity investments. They are measured at fair value with movements in the carrying value brought into equity through other comprehensive income as they arise, except for changes in value arising from impairment, which are recognised in profit or loss. On disposal, gains and losses recognised previously in equity are transferred to profit or loss. Financial instruments at fair value through profit or loss include funeral prepayment plans. These are measured at fair value with movements

47

in the carrying value brought into profit or loss as they arise. Hedge accounting is not applied to such instruments. Cash and cash equivalents comprise cash balances and short-term deposits. Bank overdrafts that are repayable on demand and form an integral part of the Society’s cash management are included as a component of cash and cash equivalents for the purpose of the statement of cash flows. Other non-derivative financial assets and liabilities are measured at amortised cost using the effective interest method, less any impairment losses. ii) Derivative financial instruments The Society holds derivative financial instruments to provide an economic hedge against its interest rate exposures arising from operational, financing and investment activities (interest rate swaps). The Society does not hold or issue derivative financial instruments for trading purposes. Derivative financial instruments are measured at fair value and any gains or losses are included in profit or loss. Interest payments or receipts arising from interest rate swaps are recognised within net interest payable in the period in which the interest is incurred or earned. j) Determination of fair values A number of the Society’s accounting policies and disclosures require the determination of fair value for both financial and non-financial assets and liabilities. Fair values have been determined for measurement and/or disclosure purposes based on the following methods. When applicable, further information about the assumptions made in determining fair values is disclosed in the notes specific to each asset or liability. i) Property, Plant and Equipment The fair value of property, plant and equipment recognised as a result of a business combination is based on market values. The market value of property is the established amount for which a property could be exchanged on the date of valuation between a willing buyer and a willing seller, in an arm’s length transaction, after proper marketing and the parties each acting knowledgeably, prudently and without compulsion. The market value of items of plant, equipment, fixtures and fittings is based on the quoted market prices for similar items. ii) Intangible Assets The fair value of intangible assets is based on the discounted cash flows expected to be derived from the use and eventual sale of the assets. iii) Investment property In the absence of current prices in an active market, the valuations are prepared by considering the aggregate amount of the estimated cash flows expected to be received from renting out the property. A yield that reflects the specific risks inherent in the net cash flows is then applied to the net annual cash flows to arrive at the property valuation. When appropriate valuations reflect the type of tenants actually in occupation or responsible for meeting lease commitments or likely to be in occupation after letting vacant accommodation; the market’s

general perception of their creditworthiness; the allocation of maintenance and insurance responsibilities between the Society and the lessee; the remaining economic life of the property. When rent reviews or lease renewals are pending with anticipated reversionary increases, it is assumed that all notices and when appropriate counter-notices, have been served validly and within the appropriate time. iv) Funeral Payment Plans The fair value of funeral prepayment plans is based on the ‘at need’ price discounted over the average life of a plan at the a risk free rate over a comparable period. v) Stocks The fair value of stocks acquired in a business combination is determined based on its estimated selling price in the ordinary course of business less the estimated costs of completion and sale, plus a reasonable profit margin based on the effort required to complete and sell those stocks. vi) Trade and other receivables The fair value of trade and other receivables is estimated as the present value of future cash flows, discounted at the market rate of interest at the reporting date. vii) Derivative financial instruments The fair value of interest rate swaps is the estimated amount that the Society would receive or pay to terminate the swap at the balance sheet date, taking into account current interest rates and the current credit worthiness of the swap counter-parties. k) Impairment i) Financial assets A financial asset is assessed at each reporting date to determine whether there is any objective evidence that it is impaired. A financial asset is considered to be impaired if evidence indicates that one or more events have had a negative effect on the estimated future cash flows of that asset. An impairment loss in respect of a financial asset measured at amortised cost is calculated as the difference between its carrying amount and the present value of the estimated future cash flows discounted at the original effective interest rate. Significant financial assets are tested for impairment on an individual basis. The remaining financial assets are assessed collectively in groups that share similar credit risk characteristics. All impairment losses are recognised in profit or loss. Impairment losses recognised in prior periods are assessed at each reporting date for any indications that the loss has decreased or no longer exists. An impairment loss is reversed if the reversal can be related objectively to an event occurring after the impairment loss was recognised. For financial assets measured at amortised cost, the reversal is recognised in the profit or loss. ii) Non financial assets - tangible assets, goodwill and intangible assets For goodwill and intangible assets that have an indefinite useful life, the recoverable amount is estimated at each balance sheet date. The recoverable amount of tangible assets and intangible assets with a finite life are reviewed should there be an indication of impairment at the balance sheet date. The recoverable amount is the greater of their fair value less costs to sell and their value in use. In assessing value in use, the

48

estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. For the purpose of impairment testing assets are grouped together into the smallest group of assets that generate cash inflows from continuing use and are largely independent of the cash inflows of other assets or groups of assets. These are known as the cash generating unit (CGU). Management have determined that in most cases the cash generating units are individual branches. However, goodwill impairment testing is carried out at a divisional level being the lowest level at which goodwill is monitored. An impairment loss is recognised whenever the carrying amount of an asset or its cash generating unit exceeds its recoverable amount. Impairment losses are recognised in profit or loss. Impairment losses in respect of a CGU are allocated first to reduce the carrying amount of any goodwill allocated to the CGU and then to reduce the carrying value of the net operating assets. An impairment loss in respect of goodwill is not reversed. In respect of other assets, impairment losses recognised in prior periods are assessed at each reporting date for any indications that the loss has decreased or no longer exists. An impairment loss is reversed if there has been a change in the estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortisation, if no impairment loss had been recognised. iii) Non current assets held for sale Non-current assets (or disposal groups comprising assets and liabilities) that are expected to be recovered primarily through sale rather than through continuing use are classified as held for sale. Immediately before classification as held for sale, the assets (or components of a disposal group) are remeasured in accordance with the Society’s accounting policies. Thereafter the assets (or disposal group) are generally measured at the lower of their carrying amount and fair value less cost to sell. Any impairment loss on a disposal group is first allocated to goodwill and then to remaining assets and liabilities on a pro-rata basis. No loss is allocated to stocks, financial assets, deferred tax assets, pension assets and investment property, which continue to be measured in accordance with the Society’s accounting policies. Impairment losses on initial classification as held for sale, and subsequent gains or losses on remeasurement, are recognised in the profit or loss. Gains are not recognised in excess of any cumulative impairment loss. l) Pension obligations i) Defined contribution plans The Society operates a defined contribution scheme under the Stakeholder provisions for all employees who are ineligible to join or choose not to join the defined benefit schemes. All costs relating to the defined contribution scheme are charged to profit or loss as incurred. ii) Defined benefit plans A defined benefit plan is a post-employment benefit plan other than a defined contribution plan. The Society’s net obligation in respect of defined benefit pension plans is calculated separately for each plan by

estimating the amount of future benefit that employees have earned in return for their service in the current and prior periods. That benefit is discounted to determine its present value. Any unrecognised past service costs and the fair value of any plan assets are deducted. The discount rate is the yield at the reporting date on a high quality corporate bond that has a maturity date approximating to the terms of the Society’s obligations and that are denominated in the same currency in which the benefits are expected to be paid. The calculation is performed annually by a qualified actuary using the projected unit credit method. The Society recognises all actuarial gains and losses arising from the defined benefit plans directly in other comprehensive income immediately. m) Provisions A provision is recognised in the Statement of Financial Position when the Society has a present legal or constructive obligation as a result of a past event and it is probable that an outflow of economic benefits will be required to settle the obligation. If the effect is material provisions are determined by discounting the expected, risk adjusted, future cash flows at a pre-tax risk-free rate. n) Reserves The revaluation reserve is not distributable to members until it has been realised on the sale of the property it relates to. Included within retained earnings there are reserves related to the recognition of the changes in the fair value of investment properties. This is not distributable to members until it has been realised through a sale. o) Revenue Revenue from the sale of goods and services is measured at the fair value of the consideration received or receivable net of returns, trade discounts and volume rebates. Revenue is recognised when the significant risks and rewards of ownership have been transferred to the buyer, recovery of the consideration is probable, the associated costs and possible return of goods can be estimated reliably, there is no continuing management involvement with the goods and the amount of revenue can be measured reliably. The following criteria must be met before revenue is recognised: Sale of goods - revenue is recognised at the point of sale; Agency fees and commissions - agency fees and commissions are earned in the travel and employee benefits divisions and represents the gross amount of commission earned and are recognised on booking; Energy – the point of delivery to the end-user customers; and Rental income - rental income arising from operating leases on investment properties is accounted for on a straight line basis for the lease term. Revenue on energy sales comprises sales to retail end-user customers including an estimate of the value of electricity and gas supplied to customers between the date of the last meter reading and the year end. Unread energy sales are estimated using historical consumption patterns taking account of industry volume reconciliation processes. p) Cost of Sales Cost of sales are measured at the cost of goods purchased for resale and delivery net of rebates. Cost of sales for energy supply includes the cost of gas and electricity

50

purchased during the year taking into account the industry reconciliation process for total gas and total electricity usage by supplier, and related transportation and distribution costs. q) Commodity Contracts Within its regular course of business, the Society routinely enters into sale and purchase derivative contracts for the commodities electricity and gas. These contracts are entered into and continue to be held for the purpose of receipt or delivery in accordance with the Society’s expected sale, purchase or usage requirements, the contracts are designated as ‘own use’ contracts under IAS 39 and are measured at cost. r) Finance income and expense Finance income comprises interest income on funds invested, dividend income and changes in the fair value of interest rate swaps and funeral prepayment plans. Interest income is recognised as it accrues in profit or loss using the effective interest method. Dividend income is recognised in profit or loss on the date that the Society’s right to receive payment is established which, in the case of quoted securities, is the ex-dividend date. Finance expenses comprise interest expense on borrowings, changes in the fair value of interest rate swaps and funeral prepayment plans, and impairment losses recognised on financial assets. Borrowing costs that are not directly attributable to the acquisition, construction or production of a qualifying asset are recognised in the profit or loss using the effective interest method. s) Payments to and on behalf of members Payments to and on behalf of members, including dividends, grants to community projects and payments in support of co-operative developments, are recognised as a liability when approved by members in general meetings and are treated as an appropriation of profits. Where payments to employee members in their capacity as employees are non-contractual and distinguishable from the operating activities of the business and payment is dependent on, and subject to, member approval in a general meeting, these payments are termed ‘Payments to and on behalf of members’. t) Current and Deferred taxation Income tax expense comprises current and deferred tax. Tax is recognised in profit or loss except to the extent that it relates to items recognised directly in equity through other comprehensive income, in which case it is recognised in equity. Current tax is the expected tax payable on the taxable income for the year using tax rates enacted or substantively enacted at the balance sheet date and any adjustment to tax payable in respect of previous years. Deferred tax is recognised on temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. The following temporary differences are not recognised: the initial recognition of goodwill; the initial recognition of assets or liabilities that affect neither accounting nor taxable profit other than in a business combination; and the differences relating to the investments in subsidiaries to the extent that it is probable that they will not reverse in the foreseeable future.

The amount of deferred tax provided is based on the expected manner of realisation or settlement of the carrying amount of assets and liabilities, using tax rates enacted or substantively enacted at the balance sheet date. A deferred tax asset is recognised only to the extent that it is probable that future taxable profits will be available against which the asset can be utilised. u) Managing capital The Society’s policy is to maintain a strong capital base as external equity funding is unavailable. The Society recognises the need to maintain a balance between the potential higher returns that might be achieved with greater gearing and the security afforded by a sound capital position. The Midcounties Co-operative Limited is not a regulated entity and manages capital to ensure an appropriate balance between investing in the future growth of the Society and rewarding its members. v) Transfer of engagements Assets and liabilities accepted under a transfer of engagements are restated at fair value, including any adjustments necessary to comply with the accounting policies of the Society. Any surplus or deficit is taken straight to retained earnings. When reassessments are made to those fair values in subsequent years then the difference is taken through retained earnings and is reflected in the Statement of Comprehensive Income. transferred to profit or loss. Financial instruments at fair value through profit or loss include funeral prepayment plans. These are measured at fair value with movements in the carrying value brought into profit or loss as they arise. Hedge accounting is not applied to such instruments. Cash and cash equivalents comprise cash balances and short-term deposits. Bank overdrafts that are repayable on demand and form an integral part of the Society’s cash management are included as a component of cash and cash equivalents for the purpose of the statement of cash flows. Other non-derivative financial assets and liabilities are measured at amortised cost using the effective interest method, less any impairment losses.

50

51

Notes to the Financial Statements
Note 1. Revenue Gross Sales Less Agency Sales Adjustment and staff discount Less Value Added Tax Revenue Analysis of Revenue: Food Funeral Pharmacy Travel Childcare Energy Post Offices Other Retail revenue Property rentals 2012 £’000 787,736 (97,983) (48,622) 641,131 £’000 503,263 25,494 42,173 38,987 13,927 6,891 3,966 2,412 637,113 4,018 641,131 2012 £’000 107,620 19,293 354 10,547 9,218 82 17 158 180 144 27,734 175,347 Personnel costs: Wages and salaries Compulsory social security payments Expenses related to defined contribution pension schemes Expenses related to defined benefit pension schemes £’000 99,521 6,233 196 1,670 107,620 2011 £’000 738,494 (91,905) (41,667) 604,922 £’000 485,678 23,916 41,605 39,560 4,976 0 4,116 1,152 601,003 3,919 604,922 2011 £’000 94,948 18,068 339 9,202 9,273 37 52 151 122 122 22,166 154,480 £’000 87,547 5,714 183 1,504 94,948

2. Operating expenses Personnel costs (see below) Occupancy costs Hire of plant and equipment - operating leases Hire of land and buildings - operating leases Depreciation of owned assets - Property, Plant & Equipment Depreciation of owned assets - Intangibles Depreciation of assets held under finance leases Fees paid to auditors: Audit Other Director fees Other expenses

8 9 8

19 19

52

2. Operating expenses (continued) The average monthly number of employees employed by the Society was: Note Full time Part time 2012 Number 3,442 5,058 8,500 3. Other operating (expenses)/income Net gain on disposal of property, plant and equipment Change in the fair value of trading properties Change in the fair value of investment properties Expenses of business acquisitions Other income Head office re-location costs Contributions to Co-operative Retail Trading Group efficiencies 2012 £’000 344 (1,190) (29) (482) 14 (898) 0 (2,241) 2011 Number 3,114 5,225 8,339 2011 £’000 10 (343) (239) (199) 0 (872) (6,210) (7,853)

10

4. Finance income Interest income on available for sale financial assets Interest income on bank deposits Fair value movement on interest rate swaps Net finance income in respect of pension obligations Change in fair value of finance lease liability

2012 £’000 108 472 34 1,575 0 2,189

2011 £’000 103 319 256 572 7 1,257 2011 £’000 2,050 0 448 2,498 2011 £’000 2,903 1,956 1,381 0 6,240

23 19

5. Finance expenses Interest expense on financial liabilities measured at amortised cost Interest expense in respect of finance lease liabilities Fair value movement on funeral prepayment liabilities

2012 £’000 2,172 13 313 2,498 2012 £’000 17 2,726 2,244 1,745 1,524 8,239

6. Payments to and on behalf of members Members’ dividend Grants and other member benefits Employee member benefits Charitable donations

53

7. Income tax expense Current tax expense: Current period Benefit of previously unrecognised tax losses Adjustment for prior periods Deferred tax expense: Origination and reversal of temporary differences Adjustment for prior periods Effects on deferred tax of change in tax rate Total income tax Factors affecting the tax charge for the period: Profit before taxation Income tax using the Society’s domestic tax rate (2012: 26.3%, 2011: 28.0%) Expenses not deductible for tax purposes Profit on sale of properties subject to indexation and rollover relief Effects on deferred tax of change in tax rate Adjustment for prior periods Utilisation of losses Total income tax expense Tax recognised directly in equity: Members’ share interest Dormant shares Tax recognised in other comprehensive income: Revaluation of property, plant and equipment Actuarial gains/(losses) on defined benefit pension plans Deferred tax: Net liability at start of period Deferred tax charge in revenue account for the period Movement on net pension liability deferred tax Deferred tax recognised directly in other comprehensive income Acquisition Net (asset)/liability at end of period Note

2012 £’000 8,441 (165) (2,248) 6,028 (3,796) 916 (318) (3,198) 2,830 £’000 12,379 3,255 1,352 38 (318) (1,332) (165) 2,830 £’000 (220) 877 657 £’000 (769) (5,158) (5,927) £’000 5,622 (3,198) (5,158) (769) 1 (3,502)

2011 £’000 4,376 (178) (415) 3,783 (625) (167) (231) (1,023) 2,760 £’000 10,631 2,977 1,051 (277) (231) (582) (178) 2,760 £’000 (245) 0 (245) £’000 (811) 1,418 607 £’000 6,066 (1,023) 1,418 (811) (28) 5,622

12

The Budget on 21 March 2012 announced that the UK corporation tax rate would reduce by an additional 1% to 24% from April 2012 with further reductions to 23% in 2013 and 22% in 2014. The reduction will reduce the Society’s future current tax charge accordingly. The deferred tax liability at 28 January 2012 has been calculated based on the rate of 25% which was substantively enacted at the balance sheet date. It has not yet been possible to quantify the full anticipated effect of the announced further 2% rate reduction, although this will further reduce the Society’s future current tax charge and reduce the Society’s deferred tax liability.

54

8. Property, plant and equipment Land & buildings £’000 174,577 7,229 430 (195) 876 (1,414) (13,418) 168,085 5,420 623 216 (1,746) (1,515) (1,169) (482) (3,990) 165,442 Plant, fixtures & fittings £’000 86,457 5,778 83 0 0 (4,612) 0 87,706 7,221 4 0 0 1,515 0 (3,119) 0 93,327 Vehicles £’000 1,745 24 0 0 0 (116) 0 1,653 0 0 0 0 0 0 (486) 0 1,167 Total £’000 262,779 13,031 513 (195) 876 (6,142) (13,418) 257,444 12,641 627 216 (1,746) 0 (1,169) (4,087) (3,990) 259,936

Note Cost or valuation: At 23 January 2010 Additions Acquisitions Transfers to investment properties Revaluation Disposals Transfers to assets held for sale At 22 January 2011 Additions Acquisitions Transfer from Investment Properties Transfer to Investment Properties Reclassification Revaluation Disposals Transfer to assets held for sale At 28 January 2012 Accumulated depreciation: At 23 January 2010 Provided in the year Disposals Revaluation At 22 January 2011 Provided this year Disposals Revaluation At 28 January 2012 Carrying amount At 22 January 2011 At 28 January 2012

22

22

3,974 860 0 (120) 4,714 1,028 (240) (192) 5,310 163,371 160,132

62,966 8,302 (4,517) 0 66,751 8,103 (3,062) 0 71,792 20,955 21,535

1,338 163 (110) 0 1,391 104 (479) 0 1,016 262 151

68,278 9,325 (4,627) (120) 72,856 9,235 (3,781) (192) 78,118 184,588 181,818

Reclassifications represent the transfer of assets following completion of the Society’s Head Office to plant, fixtures & fittings from Land & buildings of certain elements of the build costs. The net book value of assets held under finance leases is £212,000 (2011: Nil). The historical cost of revalued assets is £112,183,000 (2011: £107,543,000) Security Bank loans and the overdraft facility are fully secured by a legal charge on trading and investment properties owned by the Society. Valuations The property valuations in January 2012 are based on open market rental values. The properties are valued by a combination of external and internal valuers on a rotational basis. The external valuations were carried out by Philip Tapper and Co and VSL and Partners. The internal valuations are performed by in-house surveyors and Richard Holmes (Property Consultants). All valuations were performed by Chartered Surveyors and in accordance with the RICS ‘Red Book’ seventh edition which came into effect 2 May 2011. The properties are valued individually and yields are therefore varying on a property by property basis.

55

9. Intangible assets
Note Cost: At 23 January 2010 Acquisition Disposals At 22 January 2011 Acquisition Fair Value Adjustments Disposals Reclassifications At 28 January 2012 Accumulated amortisation: At 23 January 2010 Charge for the year At 22 January 2011 Charge for the year Disposals At 28 January 2012 Carrying Amount At 22 January 2011 At 28 January 2012 Licences relate to the pharmacy and post office businesses. 22

Purchased goodwill £’000 36,599 2,663 (68) 39,194 791 322 (183) 113 40,237 9,466 0 9,466 0 (132) 9,334 29,728 30,903

Licences £’000 8,148 105 (444) 7,809 327 0 (213) (113) 7,810 6 21 27 0 0 27 7,782 7,783

Customer relationships £’000 0 256 0 256 26 0 0 0 282 0 16 16 82 0 98 240 184

Total £’000 44,747 3,024 (512) 47,259 1,144 322 (396) 0 48,329 9,472 37 9,509 82 (132) 9,459 37,750 38,870

22

A pharmacy licence is assumed to have an indefinite life based on the market where licences are not freely bought and sold. Therefore it is assumed that the fair value is equal to the carrying value and annual impairment testing is performed on the carrying value of pharmacy licences. The life of a post office licence is dependent on the branch’s annual income. Branches with an income of less than £15,000 per annum are amortised over 5 years, those with income between £15,000 and £25,000 over 10 years and those with an annual income of more than £25,000 have an indefinite life. Post office licences with an indefinite life are annually impairment tested. Customer relationships relate to acquisitions within the Childcare business. All such customer relationships are assumed to have a life of 3 years. Goodwill is not amortised but is subject to annual impairment reviews. Impairment testing is performed at the level at which management monitor goodwill which is the divisional trading groups (classified as groups of cash generating units (CGUs)). Impairment testing compares the recoverable amount of goodwill with the book value. Recoverable amount is calculated by discounting future cash flows of the divisional trading groups. The key factors are future growth rates and discount rates which are based on a market participants, cost of capital for each business and range from 7.8% to 11.1%. Business specific growth rates are used to extrapolate cash flows for a period of 19 years, beyond a detailed one year budget. The growth rates have been derived using historical analysis and future plans of the business. They do not exceed the long-term growth rates for the relevant industries. Fair value adjustments have arisen following the Society’s re-assessment of the goodwill generated from the acquisition of Buffer Bear Limited as permitted under IFRS 3 (note 22). The intangible assets are held as follows: Purchased goodwill £’000 Food Retail Pharmacy Funeral Childcare Post Office 22,855 4,739 22 3,287 0 30,903 Licences £’000 0 5,007 0 0 2,776 7,783 Customer relationships £’000 0 0 0 184 0 184 Business growth rate 3.00% 4.00% 3.00% 3.00% 3.00%

56

10. Investment property Cost or valuation: At start of year Additions Transfers to trade properties Transfers from trade properties Transfers to assets held for sale Revaluation At end of year
Investment properties are not depreciated. Bank loans and the overdraft facility are fully secured by a legal charge on trading and investment properties owned by the Society. Valuations The property valuations in January 2012 are based on open market rental values. The properties are valued by a combination of external and internal valuers on a rotational basis. The external valuations were carried out by Philip Tapper and Co and VSL and Partners. The internal valuations are performed by in-house surveyors and Richard Holmes (Property Consultants). All valuations were performed by Chartered Surveyors and in accordance with the RICS ‘Red Book’ seventh edition which came into effect 2 May 2011. The properties are valued individually and yields therefore vary on a property by property basis. Yields range from 5.9% to 10.0% (2011: 6.0% to 10.0%), with a mean yield for commercial investment property of 8.3% (2011: 8.3%) before costs and 7.8% (2011: 7.8%) before costs for residential investment property. 11. Other investments Non current investments: Available for sale financial assets Financial assets designated at fair value through the Income Statement 1,884 26,563 28,447 Are held as follows: Co-operative Group shares Other Industrial & Provident Societies shares Other investments Total available for sale financial assets Funeral prepayment plans £’000 1,562 255 67 1,884 26,563 28,447 Current investments: Financial assets designated at fair value through the income statement 2012 £’000 2,213 1,854 22,767 24,621 £’000 1,562 225 67 1,854 22,767 24,621 2011 £’000 2,070 2012 £’000 2011 £’000 2012 £’000 18,510 135 (216) 1,746 (3,850) (29) 16,296 2011 £’000 18,506 48 0 195 0 (239) 18,510

Moneys received before 1 January 2002 in respect of funeral prepayments plans are invested under the terms of custodian arrangements with the State Street Bank. From 1 January 2002 cash received relating to funeral prepayment plans have been invested in individual whole of life insured arrangements with the Co-operative Insurance Society Limited. Interest earned on such investments is reinvested. An appropriate proportion of the investments (including accrued interest) is withdrawn when each funeral plan is invoked by the clients representative. Available for sale financial assets are held at fair value. The Society’s exposure to credit, currency and interest rate risks related to other investments is disclosed in Note 23.

57

12. Deferred tax assets and liabilities Note

2012 £’000 9,817 0 9,817 (2,383) (10,222) (714) (13,319)

2011 £’000 10,888 3,795 14,683 (2,734) (6,327) 0 (9,061) 5,622

Property, plant and equipment Short term temporary differences Deferred tax liability Intangible assets Deferred tax asset in respect of pension obligations Short term temporary differences Deferred tax asset Total net (asset)/liability 7

(3,502)

Recognised deferred tax assets and liabilities are attributable to temporary timing differences relating to the following: Assets 2012 £’000 Property, plant and equipment Intangible assets Pension obligations Other items Tax (assets) / liabilities There are no unrecognised deferred tax assets (2011: £Nil). Movements in deferred tax assets and liabilities during the year were as follows: At 22 January 2011 £’000 Recognised in Income statement £’000 Recognised in other comprehensive income £’000 (769) 0 (5,158) 0 (5,927) Acquisition £’000 At 28 January 2012 £’000 0 (2,383) (10,222) (714) (13,319) Assets 2011 £’000 0 (2,734) (6,327) 0 (9,061) Liabilities 2012 £’000 9,817 0 0 0 9,817 Liabilities 2011 £’000 10,888 0 0 3,795 14,683

Property, plant and equipment Intangible assets Pension obligations Other items Tax liabilities / (assets)

10,888 (2,734) (6,327) 3,795 5,622

(302) 351 1,263 (4,510) (3,198)

0 0 0 1 1

9,817 (2,383) (10,222) (714) (3,502)

58

13. Stocks Goods for resale

2012 £’000 22,030

2011 £’000 23,308

All stock is expected to be realised within 12 months. Goods bought for resale recognised as a cost of sale amounted to £400,997,000 (2011: £387,555,000). The year-end stock provision is £827,000 (2011: £621,000). There were no reversals of stock write downs in the year (2011: £Nil).

14. Trade and other receivables Trade receivables Prepayments and accrued income Other receivables

2012 £’000 27,097 6,974 14,604 48,675

2011 £’000 22,871 4,297 10,137 37,305

The Society’s exposure to credit risk and impairment losses related to trade and other receivables is disclosed in note 23. 2012 £’000 9,766 31,334 41,100 2011 £’000 11,884 25,537 37,421

15. Cash and cash equivalents Cash and cash equivalents Short-term deposits

The Society’s exposure to interest rate risk is disclosed in Note 23. 16. Assets held for sale Assets classified as held for sale: Land and buildings Other 7,840 0 7,840 13,418 11 13,429 2012 £’000 2011 £’000

The land and buildings held for sale are freehold properties where the Society is entering into either a sale and lease back agreement or a complete sale. The Society expects these agreements to be finalised in the next 12 months.

59

17. Capital and reserves
Share capital is comprised entirely of equity shares of £1 each (as defined by IFRIC 2 Members’ Shares in Co-operative Entities and Similar Instruments). Shares currently attract interest at rates between 0% and 4.7%. Shares are withdrawable on periods of notice from one week and longer dependent on the amount involved. The right to withdraw may by resolution of the Board be suspended either wholly or partially and either indefinitely or for a fixed period Each member is entitled to one vote irrespective of the number of shares held. In the event of a solvent winding up of the Society, the Society’s rules state that a surplus remaining after all liabilities, including paid up share capital, had been settled would not be distributed to the members of the Society but would be: - transferred to one or more societies in membership of Co-operatives UK Limited having the same or similar rule provisions as regards surplus distribution or, - if not so transferred shall be paid or transferred to Co-operatives UK Limited. Dividends are paid to members, either directly into their share account, or in vouchers which can be spent or exchanged for cash in stores, or donated to specific charities. Dividends are based on purchases made by members at a rate proposed by the Board and subject to approval at a members meeting. This Society follows a Code of Practice and has to provide a statement to its members of the nature of their share holding investment and any change affecting it. The statement is set out here. “As a member you are a shareholder of The Midcounties Co-operative Limited. If the Society is unable to meet its debts and other liabilities, you will lose the whole amount held in shares, hence it is known as risk capital. This may make it inappropriate as a place to invest savings. The Financial Services Compensation Scheme, which applies to bank and building society accounts and to some investments, does not apply to your share account. The Society, unlike banks and building societies and investment firms, is not authorized and supervised by the Financial Services Authority (although it may be registered by it). Therefore you cannot claim compensation under this Scheme in the event of the Society not being able to pay out your share capital. You may withdraw money from your share account at any time unless the board of directors have removed the facility under the Society’s rules. Withdrawable share capital does not characterise an investment in the conventional sense. The withdrawable share capital held in your share account may receive interest but the shares do not increase in value. It is primarily for the purpose of supporting your Society rather than making an investment. The Financial Ombudsman Service does not apply to your share account or your relationship with the Society but under the Society’s rules any dispute may be subject of arbitration.” Dividends: The following dividends were declared and paid by the Society: £’000 Final Dividend 2010/11 (approved May 2011) Interim Dividend 2011/12 (approved October 2011) 1,387 1,339 2,726

60

18. Loans and borrowings This note provides information about the contractual terms of the Society’s interest-bearing loans and borrowings that are measured at amortised cost. For more information about the Society’s exposure to interest rate and liquidity risk see Note 23.

Current liabilities: Savings stamp club Current portion of secured bank loans (see notes 8 & 10) Current portion of finance lease liabilities

2012 £’000 15 970 9 994

2011 £’000 15 941 9 965

Non-current liabilities : Secured bank loans (see notes 8 & 10) Finance lease liabilities 49,049 206 49,255 50,019 203 50,222

Terms and conditions of outstanding loans were as follows: Rate Co-operative Bank loan Co-operative Bank loan Royal Bank of Scotland loan Royal Bank of Scotland loan Savings stamp club Total interest bearing liabilities Variable Fixed Fixed Variable Nominal interest rate 1.74% 6.53% 5.73% 1.99% Year of maturity 2021 2019 2022 2017 2012 £’000 17,000 4,394 26,000 2,625 15 50,034 2011 £’000 17,000 4,835 26,000 3,125 15 50,975

Finance lease liabilities are payable as follows: Future minimum lease payments 2012 £’000 Less than one year Between one and five years More than five years 9 36 262 307 Future minimum lease payments 2011 £’000 9 35 256 300

Present value of minimum lease payments 2012 £’000 9 34 172 215

Present value of minimum lease payments 2011 £’000 9 33 170 212

61

19. Pensions obligations As at 28 January 2012 the Society operates a defined benefit pension and a defined contribution plan for its employees. Previously The Midcounties Co-operative operated two defined benefit schemes (the Oxford, Swindon & Gloucester Co-operative Society Limited Employees Pension Scheme and the West Midlands Co-operative Society Limited Employees Superannuation Fund) and a defined contribution scheme. The two defined benefit schemes were merged on 28 February 2008. The prior year comparative notes in the five year history have been combined for clarity. The defined benefit scheme is a career average revalued earnings (care) scheme. Contributions to the defined contribution scheme in the year were £196,000 (2011: £183,000) and were charged through the Income Statement. A full actuarial valuation of the scheme was carried out at 22 January 2010, for the purposes of these financial statements, and was updated to 28 January 2012 by a qualified independent actuary. 2012 £’000 55,642 50,146 0 13,460 3,452 122,700 2011 £’000 56,145 39,234 11,168 8,441 4,025 119,013

Plan Assets comprise: Equities Bonds Senior Secured Loans Property Other

To develop the expected long-term rate of return on assets assumption, the Society considered the current level of expected returns on risk free investments (primarily government bonds), the historical level of the risk premium associated with the other asset classes in which the portfolio is invested and the expectations for future returns of each asset class. The expected return for each asset class was then weighted based on the target asset allocation to develop the expected long-term rate of return on assets assumption for the portfolio. This resulted in the selection of the weighted average 7.8% assumption as at 28 January 2012. On 8 July 2010, the government announced it would change the inflation index used for statutory pension increases that would apply to private sector pension schemes to Consumer Price Index (CPI), where previously it was based on the Retail Price Index (RPI). However, as RPI is stipulated in the Society’s pension scheme rules, there has been no change to the inflation index used in the calculation at 28 January 2012. 2012 £’000 Actual return on plan assets 2,780 2011 £’000 10,513

The fair value of plan assets does not include any of the Society’s own financial instruments or any property occupied by, or other assets used by the Society. 2012 £’000 Change in defined benefit obligation Defined benefit obligation at beginning of year Current service cost Interest cost Plan participants’ contributions Actuarial losses/(gains) Benefits paid Defined benefit obligation at end of year 142,446 1,670 7,929 1,296 15,410 (5,162) 163,589 2011 £’000 137,604 1,504 7,681 1,558 (1,969) (3,932) 142,446

62

Change in plan assets Fair value of plan assets at beginning of year Expected return on plan assets Actuarial (losses)/gains Employer contribution Plan participants’ contributions Benefits paid Fair value of plan assets at end of year Deficit in the plan

2012 £’000 119,013 9,504 (6,724) 4,773 1,296 (5,162) 122,700 (40,889)

2011 £’000 108,676 8,253 2,260 2,198 1,558 (3,932) 119,013 (23,433)

Components of pension cost Current service cost Interest cost Expected return on plan assets Total pension cost recognised in the Income statement Total pension cost/(income) recognised in other comprehensive income Cumulative amount of actuarial losses immediately recognised Weighted average assumptions used to determine defined benefit obligations: Discount rate Future salary increases Inflation Rate of increase to pensions in payment (pre July 2006) Rate of increase to pensions in payment (post July 2006) Weighted average assumptions used to determine net pension cost: Discount rate Expected long-term return on plan assets Future salary increases Rate of increase to pensions in payment (pre July 2006) Rate of increase to pensions in payment (post July 2006)

2012 £’000 1,670 7,929 (9,504) 95 22,134 43,308 2012 4.85% 4.50% 3.00% 2.80% 2.25% 2012 5.50% 7.80% 4.70% 3.00% 2.25%

2011 £’000 1,504 7,681 (8,253) 932 (4,229) 21,174 2011 5.50% 4.70% 3.20% 3.00% 2.25% 2011 5.60% 7.60% 4.80% 3.10% 2.25%

Assumptions regarding future mortality are based on published statistics and mortality tables. The average life expectancy of an individual retiring at age 65 is 20.8 (2011: 20.7) years for males and 23.4 (2011: 23.3) years for females. The average life expectancy of an individual aged 45 retiring at age 65 is 41.9 (2011: 41.9) years for males and 44.3 (2011: 44.3) years for females. Five year history Benefit obligation at end of year Fair value of plan assets at end of year Deficit Difference between expected and actual return on scheme assets: Amount (£’000) Percentage of scheme assets Experience gains and losses on scheme liabilities: Amount (£’000) Percentage of scheme assets 2012 £’000 163,589 122,700 (40,889) (6,724) (5)% 0 0% 2011 £’000 142,446 119,013 (23,433) 2,260 2% 4,296 3% 2010 £’000 137,604 108,676 (28,928) 10,270 9% 0 0% 2009 £’000 107,980 92,143 (15,837) (24,780) (27)% 0 0% 2008 £’000 115,703 108,650 (7,053) (6,874) (6)% (3,246) (3)%

The Society estimates that it will contribute a minimum of £5.0 million to the defined benefit scheme and a minimum of £196,000 to the defined contribution scheme in 2012-13. These figures have been set at the level of the contributions made for the year to 2011-12.

63

20. Trade and other payables Current liabilities: Trade payables Government Grants Other payables Funeral bonds Accrued charges 2012 £’000 58,793 23 11,796 2,484 20,109 93,205 £’000 Non current liabilities: Funeral bonds Other Payables Government Grants 29,824 2,544 383 32,751 The Society’s exposure to liquidity risk related to its trade and other payables is disclosed in note 23. The government grant was acquired as part of Buffer Bear acquisition. The grant was received in relation to the construction of a property and is being amortised over the life of the building. Onerous lease £’000 1,393 (315) 418 1,496 1,174 322 1,496 Restructuring £’000 484 (484) 143 143 0 143 143 Total £’000 1,877 (799) 561 1,639 1,174 465 1,639 25,487 0 0 25,487 2011 £’000 54,469 430 14,376 2,315 19,746 91,336 £’000

21. Provisions Balance brought forward Provisions used during the period Provisions made during the period Balance carried forward Non - current Current Total Provisions

The provision for leases primarily relates to properties which are no longer used for trading. The provision is net of estimated rental income from sub-letting the properties. All of the leases expire within 16 years and payments under these lease commitments, net of amounts receivable under sub lettings, will be approximately £912,000 within the next 5 years. The restructuring provision related to a redundancy programme associated with the Society’s move to a new head office facility. The provision will be fully utilised in 2012.

64

22. Acquisitions

2012 Provisional identifiable assets acquired and liabilities assumed £’000 327 26 627 58 169 (381) 0 74 900 791 1,691 1,691 0 1,691

2011 Provisional identifiable assets acquired and liabilities assumed £’000 105 256 513 0 64 (1,302) (430) 1,438 644 2,663 3,307 1,211 2,096 3,307

Licences Customer Relationships Fixed assets Stock Debtors Creditors Government Grant Cash Net assets Goodwill Purchase Price Consideration: Cash Contingent Consideration Purchase price

The fair values shown above are provisional and may be amended if information not currently available comes to light. The disclosure principally relates to the acquisition on 2 May 2011 of GM Bailey (Hednesford) Limited and on 8 January 2012 of Early Birds Nursery School Limited. Goodwill arises on the acquisitions due to consideration paid over and above the fair value of the net assets acquired. It is attributable to the synergies expected to be achieved by integrating these acquisitions into the Group’s existing business, and to the location of the units.

The goodwill generated upon acquisition is split as follows: GM Bailey (Hednesford) Limited Early Birds Nursery School Limited £’000 489 302 791

The fair value of the financial assets includes trade receivables with a fair value of £169,000. At the date of acquisition it is estimated that all outstanding trade receivables will be collected. The fair value adjustment in relation to intangible assets recognises customer relationships in accordance with IFRS 3. Acquisition related costs (included in other operating expenses) amounted to £55,000. Revenue and profit received since the acquisitions are £579,000 and £33,000 respectively. If the acquisitions had been in place for the full financial year the consolidated revenue and profit would have been £642,237,000 and £9,675,000 respectively. Following the acquisition of Buffer Bear Limited in December 2010 a fair value assessment, as permitted under IFRS 3 (Revised), has been carried out resulting in an additional goodwill upon acquisition of £322,000. This is primarily due to liabilities arising which were prevalent at the acquisition date which were not recorded in the vendors financial statements.

65

23. Financial Instruments and Derivatives Credit risk: Credit risk arises from the possibility of customers failing to meet their obligations to the Society. Management has a credit policy in place and the exposure to credit risk is monitored on an ongoing basis. Credit evaluations are performed on customers requiring credit over a certain amount. The Society does not require collateral in respect of financial assets. The Society considers that it is prudent in its impairment provisioning and it has no significant customer credit risk. The carrying amount of financial assets represents the maximum exposure to credit risk at the reporting date was:

2012 £’000 Available for sale financial assets Financial assets at fair value through profit or loss Loans and receivables Cash and cash equivalents Note 11 11 14 15 1,884 28,776 41,701 41,100 113,461

2011 £’000 1,854 24,837 33,008 37,421 97,120

The ageing of trade receivables at the reporting date was: Not overdue Overdue 0-30 days Overdue 31-120 days 121 days to one year More than one year overdue

Gross 2012 £’000 25,518 1,338 394 452 325 28,027

Impairment 2012 £’000 0 0 (153) (452) (325) (930)

Gross 2011 £’000 22,178 469 444 657 220 23,968

Impairment 2011 £’000 0 0 (220) (657) (220) (1,097)

The movement in the allowance for impairment in respect of trade receivables during the year was as follows:

2012 £’000 Balance at the start of the year Provided for in year Released in the year Balance at the end of the year (1,097) (588) 755 (930)

2011 £’000 (1,239) (378) 520 (1,097)

Based on historic default rates, the Society believes that no further impairment allowance is necessary in respect of trade receivables not overdue by 120 days.

66

23. Financial Instruments and Derivatives (continued) Liquidity risk: Borrowing requirements are managed in line with a three year cash flow forecast revised annually and reviewed against the Society’s debt portfolio and maturity profile. The following are the contractual maturities of financial liabilities, including estimated interest payments and excluding the impact of netting agreements:

28 January 2012 Secured bank loans Finance lease liabilities Trade and other payables Provisions Contingent consideration

Carrying amount £’000 50,019 215 124,259 1,639 1,697 177,829

Contractual cash flows £’000 68,773 307 124,259 1,639 1,697 196,675

6 months or less £’000 1,540 4 91,506 341 445 93,836

6-12 months £’000 1,538 5 1,254 124 0 2,921

1-2 years £’000 4,056 10 2,652 169 425 7,312

2-5 years £’000 12,005 26 7,957 421 827 21,236

More than 5 years £’000 49,634 262 20,890 584 0 71,370

22 January 2011 Secured bank loans Finance lease liabilities Trade and other payables Provisions Contingent consideration Interest rate swaps used for hedging: Liabilities

Carrying amount £’000 50,960 212 114,727 1,877 2,096 34 169,906

Contractual cash flows £’000 71,421 300 114,727 1,877 2,096 11 190,432

6 months or less £’000 1,513 4 87,667 197 399 11 89,791

6-12 months £’000 1,511 5 1,170 682 445 0 3,813

1-2 years £’000 3,016 9 2,339 306 425 0 6,095

2-5 years £’000 8,999 26 7,017 433 827 0 17,302

More than 5 years £’000 56,382 256 16,534 259 0 0 73,431

Interest rate risk: At the reporting date the interest rate profile of the Society’s interest-bearing financial instruments was: Carrying amount 2012 £’000 Fixed rate instruments: Financial liabilities Variable rate instruments: Financial assets Financial liabilities 41,100 (19,625) 37,421 (20,125) (30,394) (30,835) 2011 £’000

67

23. Financial Instruments and Derivatives (continued) Interest rate risk - hedging: Interest rate risk arises from movements in interest rates that impact on the fair value of the assets and liabilities and related finance flows. The Society adopts a policy of ensuring that a proportion of its exposure to changes in interest rates on borrowings is on a fixed rate basis. Interest rate swaps, denominated in sterling, had been entered into to achieve an appropriate mix of fixed and floating rate exposure within the Society’s policy. The £3m 5.25% fixed interest rate swap matured in April 2011 and was not renewed due to beneficial prevailing market conditions. Commodity price risk: The Society’s operations results in exposure to fluctuations in energy prices. Management monitors energy prices and will enter into forward energy supply contracts to manage exposure to future price fluctuations when it is deemed appropriate. Foreign currency risk: The Society is exposed to foreign currency risk on currencies held in travel branches for resale. The currencies giving rise to this risk are primarily Euros and US Dollars. Any adverse movements on these exchange rates would not have a material impact on the Society. The Society trading group Domain Names receives and makes some payments in US Dollars. Capital Management: The Society’s policy is to maintain a strong capital base to sustain business performance and future development. Capital consists of total equity, loans and borrowings and at 28 January 2012 amounted to £215,962,000 (2011: £225,891,000). The Society’s return on capital employed for the year was 10.46% (2011: 11.77%). There were no changes in the Society’s approach to capital management during the year. Guarantees: In the course of conducting its operations, the Society has issued a number of bank guarantees in favour of counter-parties. The total amount of bank guarantees outstanding is £1,379,000 (2011: £1,212,000). Fair values: The fair values of financial assets and liabilities, together with the carrying amounts shown in the balance sheet, are as follows: Note

2012
Carrying amount £’000

2012
Fair value £’000 1,884 28,776 41,701 41,100 0 54,764 215 124,259 1,697

2011
Carrying amount £’000 1,854 24,837 33,008 37,421 34 50,960 212 114,727 2,096

2011
Fair value £’000 1,854 24,837 33,008 37,421 34 57,917 212 114,727 2,096

Available for sale financial assets Financial assets designated at fair value through profit or loss Loans and receivables Cash and cash equivalents Liabilities: Interest rate swaps used for hedging Secured bank loans Finance lease liabilities Trade and other payables Contingent Consideration

11 11 14 15

1,884 28,776 41,701 41,100 0 50,019 215 124,259 1,697

18 18 20 20

Estimation of fair values The following summarises the major methods and assumptions used in estimating the fair values of financial instruments. Financial assets designated at fair value through the Income statement, available for sale assets and interest rate swaps are carried at fair value. Under IFRS 7 Financial Instruments disclosures, such assets are classified by the way in which their fair value is calculated. All of the assets are level 2 assets under IFRS 7. IFRS 7 defines level 2 assets as, inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices).

68

23. Financial Liabilities and Derivatives (continued) Interest rate swaps and collar Interest-rate swaps are valued using pricing models and discounted cash flow techniques. Where discounted cash flow techniques are used, estimated future cash flows are based on the assumptions provided by The Co-operative Bank plc and the discount rate is a market-related rate for a similar instrument at the balance sheet date. Where other pricing models are used, inputs are based on market-related data at the balance sheet date. All of the Society’s interest rate swaps expired in the year. Interest-bearing loans and borrowings Fair values have been determined by discounting future cash flows at 3.27% (2011 2.78%) The basis of the interest rate was the London interbank offered rate (LIBOR) plus a margin available to the Society for bank borrowings at the year end. Contingent Consideration The Society has a liability for deferred consideration following the acquisition of Buffer Bear Limited in 2010. The remaining contingent consideration of £1,697,000 has a fair value equal to the carrying value. Other Items For all other receivables/payables, the notional amount is deemed to reflect the fair value.

24. Insurance Contracts The Society sells Funeral Prepayment Plans which are shown at fair value to reflect the projected at need price. Assets Note Funeral Prepayment Plans - Current Funeral Prepayment Plans - Non-Current Funeral Bond Liability - Current Funeral Bond Liability - Non-Current Net 11 11 20 20 2012 £’000 2,213 26,563 (2,484) (29,824) (3,532) 2011 £’000 2,070 22,767 (2,315) (25,487) (2,965)

The assumptions used for the Funeral Bonds are as follows, discount rate 4.85% (2011: 5.50%), cost increase of 7.13% (2011: 5.50%), bond growth 6.54% (2011: 5.45%) and expected life expectancy for males is 83.4 (2011: 83.2) and 86.1 (2011: 85.9) for females. Movement in net liability for year ended 28 January 2012 2012 £’000 Net liability at the start of the year Cash in transit Fair value movement of funeral prepayment plans liabilities Net liability at the end of the year (2,965) (254) (313) (3,532)

69

25. Operating leases Non-cancellable operating lease rentals are payable as follows: 2012 £’000 Less than one year Between two and five years Greater than five years 10,446 34,877 85,515 130,838 2011 £’000 9,390 29,330 64,641 103,361

£130,130,000 relates to land and buildings (2011: £100,228,000). The leases of land and buildings are subject to periodic rent reviews. The Society leases out properties, the future minimum rental receivables are as follows 2012 £’000 Less than one year Between two and five years Greater than five years 4,083 9,940 13,691 27,714 2011 £’000 4,114 9,239 15,512 28,865

26. Capital commitments 2012 £’000 2011 £’000 4,253

Expenditure contracted but not provided for
27. Subsequent Events

5,076

On 23 February 2012, the Society acquired the assets and trade of two nurseries for £1,440,000. The acquisition will enable the Society to continue the development of its Childcare portfolio and generate additional synergies within the business. On 21 March 2012, the Society obtained control of Kwik Travel (Holdings) Limited, a home worker travel business, by acquiring 100% of the shares and voting rights in the Company for preliminary consideration of £240,000. The acquisition will enable the Society to continue the development and diversification of its travel operations and generate additional synergies within the business. On 26 March 2012, the Society obtained control of Petit Enfant Group Limited, a childcare business, by acquiring 100% of the shares and voting rights in the Company for preliminary consideration of £625,000. The acquisition will enable the Society to continue the development of its Childcare portfolio and generate additional synergies within the business. On 30 March 2012, the Society acquired control of Places for Children Limited, a childcare business, by acquiring 100% of the shares and voting rights in the Company for preliminary consideration of £2,800,000. The acquisition will enable the Society to continue the development of its Childcare portfolio and generate additional synergies within the business. The Society has also conditionally exchanged contracts to acquire 100% of the share capital of Harry Tuffins Limited, a food retail business based in Shropshire. Consideration for the acquisition is still to be determined. Due to the timing of the acquisition the fair values have yet to be determined and will be announced in the half yearly financial report. The determination of the fair values may change the consideration paid for these acquisitions which will impact upon the balance of intangibles recognised. Costs incurred to date are recognised in the Statement of Comprehensive Income and amount to £145,000 in the year.

70

28. Related party transactions The Society has a contract for telecommunication services with The Phone Co-op Ltd, a co-operative organisation whose chief executive is Vivian Woodell, a director of the Society. The contract is at arm’s length and the value of services including VAT provided for the year ended 28 January 2012 was £967,058 (2011: £851,676). The Phone Co-op is a corporate member of the Society & has a share account with the Society. The balance on this account at 28 January 2012 was £42 (2011: £31) and interest earned during the year amounted to £nil (2011: £11). In addition The Phone Co-op has invested £250,000 in a Society Share Bond (2011: £500,000) and earned interest on the bond of £37,058 (2011: £34,460). The Society has a share account with The Phone Co-op. As at 28 January 2012 the balance was £62,976 (2011: £53,910). During the year, the Society received interest of £1,386 (2011: £1,186) and a dividend of £7,681 (2011: £11,915). The Phone Co-op made purchases of various goods and services from the Society amounting to £3,205 during the year (2011: £3,043). Please also refer to the declarations of interest within the directors’ report. 29. Wholly owned subsidiaries As at 28 January 2012, the Group consisted of The Midcounties Co-operative Limited and the wholly owned subsidiaries and companies listed below, which are all registered in England: Principal Activity Property Management Internet Domains Names Property Management Property Management Retail Retail Utilities Childcare Property Management Retail Childcare

Kenmare Estates Limited The Midcounties Co-operative Domains Limited The Midcounties Co-operative Investments Limited The Midcounties Co-operative Properties Limited The Midcounties Co-operative Trading Limited West Midlands Co-operative Chemists Limited Co-operative Energy Limited Buffer Bear Limited Childcare Partners Limited GM Bailey (Hednesford) Limited Early Birds Nursery School Limited The following subsidiaries were dormant throughout the year: Arthur W. Bruce Limited Buffer Bear Nurseries Limited Childcare Limited Codsall Travel Centre Limited Co-op Direct Limited Co-op Energy Limited Co-operative Payroll Giving Limited Co-op Travel Direct Limited Debt Recoveries (Oxford) Limited F G Hopkins (Wolverhampton) Limited George Webb & Son Funeral Directors Limited Gloucester Co-operative Pharmacies Limited Holidays-in-heaven.com Limited Hubcentre Limited The Co-operative Childcare Limited J Whitmore Limited Lichpharm Limited Co-operative IT Limited

Midcounties Leasing Limited The Midcounties Co-operative MG Limited Motorworld Leasing Limited Motovine Limited News Shops Limited Nurserynet Limited Reeves & Pain Limited Rusts Limited S & M (Wholesalers) Limited The Green Energy Co-op Limited The Midcounties Co-operative Developments Limited The Midcounties Co-operative Estates Limited Thomas Ely Limited Tilley & Daniells (Birmingham) Limited Tilley & Daniells (Pensnett) Limited Tilley & Daniells Limited Twentieth Century Suppliers Ltd Volt Energy Supply Ltd

The Society also owns 20% of Co-operative Web Limited and 16.66% of Co-op Travel Limited.

71

We are happy to provide publications in alternative formats
0800 435902 member.communications@midcounties.coop The Midcounties Co-operative Limited Co-operative House, Warwick Technology Park, Warwick, CV34 6DA Registered as an Industrial and Provident Society under no. IP19025R www.midcounties.coop
Printed on: 100% Recycled stock Printed by: Hickling & Squires Designed by: The Midcounties Co-operative Design Studio