r111 - Financial Services Authority

BANK OF ENGLAND

PRUDENTIAL REGULATION AUTHORITY

l\'r111 ~

Mutual Societies Annual Return Form (AR30) \ ' \ For societies registered under the Co-operative and Community Benefit Societies Act 2014 ' .\

Society name:

HEART OF ENGLAND CO-OPERATIVE SOCIETY LIMITED

Important information you should read before completing this form

You must use this form if you are a:

• registered society (previously referred to as an 'industrial and provident society')

• co-operative society

• community benefit society

registered under the Co-operative and Community Benefit Societies Act 2014.

You must submit this form and the society's accounts within 7 months of the end of your financial year. Failure to submit is an offence for which the society may be prosecuted.

Please note:

• we have an information note that may assist you in completing this application

• any personal details you give on the form will be placed on the society's public file.

• it is important you give accurate and complete information and disclose all relevant information. If you do not, it may take us longer to process your annual return.

Please keep a copy of the form and supporting documents for future reference.

Terms in this form \ 'FCA', 'PRA', 'us' and 'we' refer to the Financial Conduct Authority or Prudential Regulation Authority.

'You' refers to the person signing the form on behalf of the society.

'The 2014 Act' is the Co-operative and Community Benefit Societies Act 2014

-- 5 OCT 2015

MU'ff.ftl\l.. ftr!~·' 1·t:~l'~1'toN Ori;P/.;.iri f,il!NT

FCA • Mutuals AR 30 - registered societies (F) • Release 3 • July 2014 page 1

• BANK OF ENC.LAND PRUDENTIAL REGULATION AUTHORITY

Mutual Societies Annual Return Form (AR30)

For societies registered under the Co-operative and Community Benefit Societies Act 2014

Filling in the form

1 If you are using your computer to complete the form:

• use the TAB key to move from question to question and press SHIFT TAB to move back to the previous question; and

• print the completed form and arrange for it to be signed by all relevant individuals.

2 If you are filling in the form by hand:

• use black ink;

• write clearly; and

• arrange for it to be signed and dated by all relevant individuals.

3 If you make a mistake, cross it out and initial the changes; do not use correction fluid.

4 lfyou: • leave a question blank; • do not get the form signed; or • do not attach the required supporting information

without telling us why, we will treat the application as incomplete. This will increase the time taken to assess your application.

5 If there is not enough space on the form, you may use separate sheets of paper. Clearly mark each separate sheet of paper with the relevant question number. Any separate sheets should be signed by the signatories to the form.

6 Email a scanned copy of the signed form and supporting documents to

[email protected]

or send it by post to:

Mutuals Team Financial Conduct Authority 25 The North Colonnade Canary Wharf LONDON E145HS

7. Please make sure you include:

• this form

• a set of printed accounts - signed by two members and the secretary (3 signatures in total)

• an audit report or accountant's report where required; and

• any supporting documents.

FCA • Mutuals AR 30 - registered societies (F) • Release 3 • July 2014 page2

1 Details of society

1.1 Details of the society

I Register number 12399R

Registered office 22 ABBEY STREET address NUNEATON

WARIWCKSHIRE

Postcode CV11 5BU

1.2 Year end date (dd/mm/yyyy) See Note 1.2

~/Btl2iol1is!

Committee of management If you are a club you do not need to give a year of birth in questions 1.3-1.6. The names of the members of the Committee at the date on which the return is signed should be entered below in BLOCK CAPITALS.

1.3 Detalls of Chairman

!Name lsEE ATIACHED SHEET

I

Address

_Postcode

!Year of birth IYYYY

Business occupation! and other directorships

1.4 Details of Treasurer

!Name

.; _Postcode

!Year of birth IYYYY

Business occupation! and other directorships



1.5 Details of Secretary

I Name lsEE ATIACHED SHEET

Address

Postcode

lvear of birth IYYYY Business occupation! and other directorshios

1.6 Details of Members of the Committee Name Address Year of Business

birth occupation and other directorships

SEEATIACHED yyyy SHEET

yyyy

yyyy

yyyy

yyyy

yyyy

Please use separate sheets of paper if you need more space, following the instructions provided in section 5 above. Please indicate how many separate sheets of paper you have used

I 1 I Please continue, answering all questions.

FCA • Mutuals AR 30 - registered societies (F) • Release 3 • July 2014 page4


1. 7 Are any members of the society's committee disqualified as directors under the Company Director Dlsqualificatlon Act 1986? 181 No D Yes

1.8 Does the society carry out any activity which Is regulated under the Financial Services and Markets Act 2000? (e.g. accepting deposits in a form other than withdrawable shares; offering insurance products; undertaking residential mortgage business). If 'yes' please state the society's Financial Services Register finn reference number 181 No D Yes Financial Services Register firm reference number

I I 1.9 Is the society a subsidiary of another society?

181 No D Yes

1.1 o Does the society have one or more subsidiaries? D No 181 Yes

1.11 Is the society currently accepted by the HM Revenue and Customs as a charity for tax purposes? 181 No D Yes

Please confirm you have attached a copy of the letter from HM Revenue and Customs confirming charitable tax status: 0Yes

1.12 Is this society a charity registered with the Office of the Scottish Charity Regulator (OSCR)? 181 No D Yes ~ provide your Scottish Charity number below

I I 1.13 Is the society registered with one of the following (please tick)?

D Homes and Communities Agency D The Welsh Ministers D Scottish Housing Regulator

If so, please provide your register number


. '


All societies must answer the following questions:

• if a bona fide co-operative society go to question 1.14

• if existing for the benefit of the community go to question 1.19

Bona fide co-operative society

1.14 How did members benefit from the business, Industry or trade of the society during the year?

Our member privilege scheme provided benefits worth £1.9 million. This demonstrated the genuine and tangible benefits of membership of a successful Co-operative business.

1.15 Is membership of the society required to obtain the benefits offered by It? [8J Yes D No

1.16 In what way did members participate In an ongoing basis In the society's primary business during the year?

Our members events held four time during the year provided additional savings. Member numbers increased by 7,658 during the year.

1.17 How did members democratically control the society?

Members were invited to attend AGMs and to appoint the directors on the basis of one member one vote.

FCA • Mutuals AR 30 - registered societies (F) • Release 3 • July 2014 pages

. '


1.18 How did the society use any surplus/profit?

If the society distributed the surplus/profit to members please explain how this was done.

The members privilege scheme gives members their 'instant dividend' and forms part of the benefits shared with our members as part of our normal trading arrangements.

Please use separate sheets of paper if you need more space (see section 5 above) Please indicate how many separate sheets of paper you have used.

I I Continue to 2.1


. . 1 Details of society

Community benefit society

1.19 Who are the community the society benefited?

1.20 How did the society benefit that community during the year?

1.21 How did the society use any surplus/profit?

Please use separate sheets of paper if you need more space (see section 5 above).

Please indicate how many separate sheets of paper you have used.

I I

Continue to 2.1


2 Statistics

Account details

2.1 You must enter the figures below See notes for help on items E-T. Enter NIL where applicable

!Members at beginning of year 248,156

IM.embers ceased during year 472

!Members admitted during year 7,658

I Members at end of year 255,342

ITumover for year 86,724,168

Total of income and expenditure F (receipts and payments added -

together)

G Net surplus/(deficit) for year 3,956,420

!Fixed assets 39,421,032

!current assets 26,596,214

J Total assets (equal to amount in row 0, below) 66,017,246

!current liabilities 9,028,670

!share capital 2,757,553

ILong-term liabilities 19,766,331

I Reserves 34,464,692

Total liabilities, share capital & 0 reserves (K+L+M+N) (equal to 66,017,246

amount in J above) All societies (excluding clubs) must complete boxes P-T

p Investments in other registered societies 480,644

ILoans from members

R Loans from Employees' Superannuation Schemes

!Dividends on sales

!share interest 10,284

FCA • Mutuals AR 30 - co-operative and community benefit societies (F) • Release 3 • July 2014 page9

2 Statistics '

2.2 Names of subsidiaries as defined In sections 100 and 101 of the Co-operative and Community Benefit Societies Act 2014

ICHARTRIDGE PROPERTIES LIMITED

21st CENTURY CO-OPERATIVE SOCIETY LIMITED

2.3Names of subsidiaries not dealt with In group accounts (if any) and reasons for exclusions (as approved by the FCA) The society must have written authority from us to exclude a subsidiary from group accounts

I I I I I


3 The audit

3.1 Type of audit used for the attached accounts. If the society has used a full professional audit or an accountant's report then the report must be prepared by a registered auditor. 181 Full professional audit • Continue to section 4 D Accountant's report • Complete questions 3.2 and 3.3 D Lay audit • Complete questions 3.2 and 3.3 D Unaudited • Complete questions 3.2 and 3.3

3.2 Do the society's registered rules allow the society not to undertake a full professional audit? D No D Yes

3.3 Has the membership passed at a general meeting a resolution allowing the society not to undertake a full professional audit for the year of account In question? (In accordance with section 84 of the Co-operative and Community Benefit Societies Act 2014)

D No D Yes


4 Accounts and signature

Accounts

4.1 Date on which the accounts and balance sheet will be/were laid before the AGM (dd/mm/yyyy)

B1~112!01115!

4.2 Has your society produced accounts to the minimum standard required? 18! Yes ~ you must confirm that you have attached the accounts

and the audit/accountant's report bearing the original signatures of the auditor (if required by law), the secretary and the two committee members. 18!Attached

D No ~ you must produce accounts to the minimum standard required, see notes for details.

Signature - all societies to complete

4.3 The Secretary of the society must sign and date below

I certify that the information in this form is correct to the best of my knowledge and belief.

'STEPHEN GARETH SLATER

Signature

~ . Phone number 1024 76382331

Email 'Steve.Slater@heartofengland- coop.co.uk

!oate 124/03/2015


Committee of Management

NAME ADDRESS YEAR BUSINESS OCCUPATION OF AND BIRTH OTHER DIRECTORSHIPS

Chair ELIZABETH COTTAGE, 84 CLINTON LANE, KENILWORTH, CVS 1959 ACCOUNTANT MRS. H. S. HOECK IAX MR.B.BOYD 107 CASTLE ROAD, NUNEATON, CVIO OEP 1957 ASSIST ANT MANAGER MR.C.BROWN 36 CUMBERLAND DRIVE, NUNEATON, CVlO 8BU 1957 ASSISTANT MANAGER MR. P. ELVERSON 3 DICKENS CLOSE, NUNEATON, CVIO 9SO 1959 MANAGER MR. R. FORREST 43 SEAFORTH DRIVE, HINCKLEY, LEIO OXJ 1948 RETIRED MR. G. S. HAIGH 14 EDYTH ROAD, WYKEN, COVENTRY, CV2 SET 1964 SELF EMPLOYED MR. A. J. LEWELL 72 ANSLEY ROAD, NUNEATON, CVIO 8NU 1947 RETIRED MR. N.J. 11 BARLEY CLOSE, HILLMORTON, RUGBY, CV21 4HA 1956 LECTURER MATTHEWS MR. C. E. MILES GREENACRES,TOFT,DUNCHURCH,RUGBY,CV226NR 1943 RETIRED MR. C. J. NEWMAN 20 ERSKINE CLOSE, HINCKLEY, LEIO OXL 1958 MANAGER MR. M. RUMSEY 6 FISHER AVENUE, HILLMORTON, RUGBY, CV22 5HN 1962 AREA MANAGER MR. R. A. STAIN "BELVEDERE" WOODSIDE, ARLEY, COVENTRY, CV7 8GH 1953 RETIRED MRS. P. SUNNER 6 VILLA ROAD, COVENTRY, CV6 3DA 1944 . RETIRED MR. A. N. TAMPION 48 TENNYSON ROAD, HINCKLEY, LEIO 0TH 1964 , ' · LEGAL ADVISOR MRS. L. WOOLCOCK 4 ELMWOOD COURT, ST. NICHOLAS STREET, COVENTRY,CVI 1968 ' .ASSISTANT MANAGER

4BS .. • :1 .. MR. L. WOOLCOCK 4 ELMWOOD COURT, ST. NICHOLAS STREET, COVENTRY,CVI. 1966 CREDIT CONTROLLER

4BS • · .... ' Secretary APARTMENT 37Q, 21 NEWHALL HILL, BIRMINGHAM, B 1 ·3JA 1956 .. .. MR. S. G. SLATER

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SIGNED COPY

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advisers

vision/mission statement Independent auditors 0 Grant Thornton Bankers

0BARCIAYS Solicitors Cocks Lloyd

fit' fbl1M1•B•Jli{iHliifftaqm1YIINiD

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illustrated five year period

directors'· report

statement of the directors cmJCH•JijI•Jiff¥•W9ilhlllll9

GUJI01EWliifl3•i11i1ri11,!, a1W!Mrn@iqm1B1M!J

Heart of England Co-operative Society Limited

is registered under the Co-operati\'e and Community

'1l dlD-iimi'}

fli&mm~a

Benefit Societies Act 2014. Registered No. -2399R

22 Abbey Street, Nuneaton, Warwickshire, CVI 1 SBU.

Telephone: 024 7638 2331.

VAT Registration No. 328 0789 38.

~ ' '

I

vision/mission statement ~ Hearto/England Co-operative

welcome to the heart of england I

we are ... I

an independent, regional co-operative society, known as the Heart of England Co-operative Society Limited. Our origins go back to 1832, when the Lockhurst Lane Industrial Co-operative Society was founded, near Coventry. Our cw::rent name came into being in January 2000, after more than 160 years during which more than twenty local, independent co-operative societies joined together to pool their resources.

our vision ... is to be an innovative regional business, always seeking

...._ ..... 2014

·- - ...... 2014

opportunities for profitable growth, whilst demonstrating that a retail co-operative society can bring genuine benefits to local customers, members and communities.

our mission ... as a consumer co-operative is to provide good value for money through a range of shopping facilities and services. Our trading practices are based on a combination of sound co-operative business ethics and the need to trade profitably. We will always seek ways to share our success with our members and the local communities in which we trade.

('

=o•.Jlt'IRIJfU -·- 2014

, ' ._ ...... -- 2014

=o""""""'' - }lfi'l()',ft - £.ifttime}f.:ilt'VtMfflt)luoarl

Coventry Te~raph Buslnns Awards 2014 Friday 20 June 2014

Coventry cathedral

Ali Kurji receiving a Lifetime Achievement Award from Selim Ozturk from Turkish Airlines and Alun Thorne Editor of the Coventry Telegraph at the Coventry Telegraph Business Awards 2014

HEART OF ENGLAND CO-OPERATIVE SOCIETY II

directors and officials

management executive ALIKURJI Chief Executive

STEPHEN SLATER Secretary

PETER FLETCHER General Manager, Food

board of directors

BRYAN WHEATLEY General Manager, Non-Food and Travel

DARRYL SMITH General Manager, Funerals

MAUREEN EMMS Personnel Manager

II qc·: ..•. ·.;,.·.· ' -- -- - _ _.,. ' ~ -

_·,-, -.-,

-~ -,. -·--t BRIAN BOYD COLIN BROWN PAUL ELVERSON ROGER FORREST

HANNEHOECK President

ALANLEWELL Vice President

,I

ALIKURJI Chief Executive

11 •..•. . . 1' · : _. .• . . ii .~-: · . l · .. ,,,. : .

' t; . '

GARY HAIGH NICK MATTHEWS

HIJBll•B CHRIS NEWMAN MARK RUMSEY

HANNEHOECK President ALANLEWELL Vice President BRIANBOY.D COLIN BROWN PAUL ELVERSON+ ROGER FORREST+ MICHAEL GREEN* GARY HAIGH NICK MATTHEWS CLIVE MILES+ CHRIS NEWMAN MARK RUMSEY ROGER STAIN PATSUNNER ANDREW TAMPION LESLEY WOOLCOCK+ LLOYD WOOLCOCK=

ROGER STAIN

Occupation

Accountant

Retired

Employee Employee Manager Retired Retired

Self Employed Lecturer Retired

Employee Employee Retired Retired

Legal Advisor Employee

Credit Controller

+ Retires May 2015, eligible for re-election * Resigned September 2014 = Resigned February 2015

PATSUNNER

Main Board Attendance

Possible Actual 14 13

14

14 14 14 14 9

14 14 14 14 14 14 14 14 14 14

II ANNUAL REPORT AND FINANCIAL STATEMENTS

14

14 14 14 13 7

11 13 13 12 14 13 14 13 11 8

ANDREW TAMPION LESLEY WOOLCOCK

Audit Committee Attendance Elected

Possible Actual 2 2 1996

2 2 1998

2 2 2 2 2 2 2 2 2 2 2 2 2 2 2

2 2 2 2 1

2002 2011 1997 2009 1980 2011 2007 1996 1998 2010 2013 1991 2013 2009 2012

2 2 2 2 2 2 2 2 2

CLIVE MILES

Term 2014 Expires Remuneration 2016 £2,719

2016

2017 2017 2015 2015 2015 2017 2017 2015 2016 2016 2016 2016 2017 2015 2015

£2,311

£1,683 £1,683 £1,683 £1,683 £1,161 £1,683 £1,683 £1,683 £1,683 £1,683 £1,683 £1,683 £1,683 £1,683 £1,683

notice of meetings ~ Hearto/England Co-operative

annual meetings of members, may 2015 will be held at:-

The Coffee Stop, The co-operative home & living store, Hill Street, Hinckley LElO lDA (entrance via the foodhall) on Monday, 11th May 2015.

Sherbourne Suite, The co-operative home & living store, Corporation Street, Coventry CVl 1 GE on Tuesday, 12th May 2015.

The co-operative home & living store, 10-11 Chapel Street, Rugby CV21 3EB on Wednesday, 13th May 2015.

Central Hall, Co-operative Department Store, 22 Abbey Street, Nuneaton CVl 1 SEU on Thursday, 14th May 2015.

Meetings to commence at 6.30 p.m.

Refreshments will be available prior to the meetings.

agenda 1. To confirm the minutes of the

Annual General Meetings held in May 2014.

2. To receive the Board of Directors' Report (pages 6 to 13).

3. To adopt the Accounts for the year ended 24th January 2015 together with the Independent Auditor's Report therein (pages 19 to 37).

· 4. To approve the following recommendation of the Board of Directors that the fees for the Board of Directors shall be as follows:-

President: £2,785 per annum Vice President: £2,368 per annum Directors: £1,725 per annum

5. To appoint Auditors»- I I

A husband cannot attend a members' I

meeting on presentation of his wife's pass book nor may a wife attend a members' meeting on presentation of her husband's pass book.

Nominated: Grant Thornton UK LLP

6. To receive the Report of the Education and Member Relations Committees. Members shall be entitled to attend

only one divisional meeting. 7. Declaration of the result of voting

for Board of Directors and Member Relations Committees.

Each member shall have one vote only and must have been accepted into membership at least six months prior to the date of the meeting and must have held at least one £1 share (fully paid up) for the period of six months immediately preceding the date of the meeting.

By order of the Board S. G. Slater Secretary 24th March 2015

to obtain admission to the meetings Admission to meetings shall only be by production of the member's share pass book or a receipt in lieu thereof.

complaints The Directors respectfully point out that no complaints can be entered into at the Annual General Meetings unless they have been submitted in accordance with Rule 69.

Co-operative funeralcare, Park House, Nuneaton Dedication Service


five year comparative staterrient

January January January January January

2011 2012 2013 2014 2015

£ 000 £ 000 £ 000 £ 000 £ 000

52 weeks 52 weeks 53 weeks 53 weeks 52 weeks

REVENUE ACCOUNT Gross value of sales 87 261 89 503 93 329 95 439 94 551

Depreciation 1 353 1 847 1 859 1 999 2 162

Other expenses 21 843 21 852 22 784 23 728 23 839

Trading surplus 5 181 5 311 5 897 5 201 3 792

Investment income 120 203 256 236 114

Retained surplus 1 896 2 032 2 193 1 765 784

BALANCE SHEET

Fixed Assets Intangible assets 136 126 116 308 287

Tangible assets 34 571 36 064 36 040 38 905 38 654

Investments 481 481 481 481 481

Current Assets Stocks 5 187 5 454 5 272 5 340 5 538

Debtors 6 906 7 641 9 040 10 300 12 130

Cash at bank and in hand 9 961 11180 12 103 10 066 8 929

Current Liabilities Creditors 8 057 8 268 8 063 8 264 9 022

Long Term Liabilities Creditors 4 208 5 218 5 922 6 814 7 959

Deferred tax 736 768 753 736 829

Pension deficit 5 268 5 544 7 428 7 987 10 979

Net Assets 38 973 41148 40 886 41 599 37 230

Net Assets excluding Pension Deficit 44 241 46 692 48 314 49 586 48 209

Share capital 2 636 2 683 2 750 2 758 2 757

Revaluation reserve 4 341 5 459 5 459 5 449 3 943

Revenue reserve 31 996 33 006 32 677 33 392 30 530

38 973 41148 40 886 41 599 37 230

Surplus after interest 4 948 5 532 5 685 5 017 3 892

Capital expenditure 4 915 2 522 1 945 5 109 3 621

Net cash 9 961 10 850 11 862 9 914 8 861


illustrated five year period

gross value of sales £m

89.5 93.3 ..-..

95.4 94.6

Jan 2011 Jan 2012 Jan 2013 Jan 2014 Jan 2015 52 weeks 52 weeks 53 weeks 53 weeks 52 weeks

net cash £m

11.9 ..-.. 9.9


These bar charts represent figures extracted from the five year comparative statement on page 4. The Society's 'net worth' is based upon the 'net assets' figure.

trading surplus £m (after exceptional items)

5.9 ..-.. 5.3 5.2


net worth £m

41.1 39.0 ..-._

41.6


~ Hearto/England Co-operative

trading surplus after interest £m

5.5 .-.. 5.7 ..-..

5.0


capital expenditure £m

4.9 5.1

3.6 2.5 ..-.. 1.9

Jan 2011 Jan 2012 Jan 2013 Jan 2014 Jan 2015 52 weeks 52 weeks 53 weeks 53 weeks 52 weeks ··--v-··

r


directors' report

to the members We are pleased to present the Annual Report of the Heart of England Co-operative Society Limited for the 52 weeks ended 24th January 2015.

general The year 2014 turned out to be one of the most challenging and difficult years in recent history, which witnessed very tough trading conditions, and an unprecedented level of competition from the major multiples, in general, and the discount stores in particular. Although the economy saw some improvement, retailing continued to remain depressed and volatile throughout the year as a result of continued price reductions by the multiples in order to compete with the discounters, the likes of Aldi and Lidl and the single price discounters who all saw an increase in their market share. We continued to witness the difficulties at Tesco who recently announced plans to close 43 stores and axe up to 10,000 jobs.

Consumer confidence continues to remain low in spite of inflation falling to its lowest level since the sixties driven by the biggest ever annual fall in groceries and energy prices. The Bank of England has kept the base rate on hold at a record low of 0.5 per cent since March 2009 but there still remains some uncertainty about the economy. The Co-operative Group disposed of their Pharmacy and Farm businesses during the year whilst the Co-operative Bank is now controlled by external institutions who have a majority stake in the Bank.

We face an extremely challenging and very uncertain 2015 which has started very slowly in growth terms albeit, the economy seems to be picking up and all the economic indicators are pointing towards a marginal growth across the economy. Inflation has dipped to its lowest level and there is a

real danger of deflation in the economy.

financial review The gloomy economic backdrop also had an impact on our performance. We achieved a trading surplus of £3.Bm for the 52 weeks compared to £5.2m for 53 weeks last year, after an exceptional charge of £165,000 relating to the impairment of the trading property at our Rugby development. Our trading surplus is well ahead of budget and in percentage terms it equates to 4.5% of turnover, which in the current trading climate is a satisfactory achievement in comparison with many other retailers.

Group gross sales for the year were £94.6m, which is a decrease of 0.3% on a 52 week period compared to 53 weeks last year, on a like-for-like basis.

The policies put in place in recent years are being successfully implemented and are helping to create a strong regional co-operative business which can and which will withstand the economic challenges ahead.

We are delighted to have continued to operate with no borrowings, indeed we are very well placed to continue with our re-development programme without having to rely on external funding. The Society continues to invest substantial sums of money in its renewal programme, with a further £3.6m having been utilised on new projects during 2014. A number of further projects, which will involve significant capital expenditure, will be looked at in the coming years.

In line with most final salary pension schemes which are running in deficit, our pension liability calculated in accordance with FRS 1 7 for accounting purpose only, has once again increased significantly this year


trading surplus £m

5.9

5.2 5.3 ....-... 5.2

3.8


by 37.5%, and now stands at £10.9m compared to £7.9m last year. This is a snapshot of the position on a particular day based on a number of assumptions.

The final salary scheme was closed to all new entrants in October 2012. All new employees join a defined contribution scheme operated by NOW Pensions.

trading review food division There can be no doubt that the golden era of food retailing has changed and it continues to be fiercely contested. Food deflation is being accelerated by the continuing price war started by the multinationals in order to compete with the discounters who have continued to see growth in their market share at the expense of the multinationals. Our food sales for the 52 week period decreased by 1.11 % on a like-for-like basis. The margins also came under extreme pressure during the year due to the price reductions by the multinationals and the competition from the discount stores.


Refurbished Wellesbourne co-operative food store

Our margins dropped by 0.70% compared to last year including the loss of £225,000 in dividend from the Co-operative Group.

During the year, we refitted our Wellesbourne food store near Stratford upon Avon.

We also managed to obtain planning permission and work has already started to build a brand new food store in Galley Common in Nuneaton. We are also in the process of acquiring a closed pub in Coventry with a view to convert it into a food store.

As a responsible retailer and as part of our commitment to helping the environment, we have installed and will continue to install energy efficient lighting and refrigeration.

We have continued to review and improve our product ranges paying particular attention to our fresh food range. This is in direct response to the changes in the convenience market and we have also continued to support and extend our Fairtrade product range.

non-food division The continued downturn within the non-food sector once again put the division under tremendous pressure across most of the departments. However, the Floorcoverings department achieved a superb increase in like-for-like sales of 29.0%.

Our stores faced tremendous difficulties to maintain sales growth. The sector has also been affected by

the rapid growth in internet retailing and the multinationals who continue to increase their share in this market. Against this back drop, we recorded sales increases of 0.35% on a like-for like basis.

Our once popular members' discount events witnessed a decline in their popularity and it proved difficult to achieve the expected level of sales increase.

The co-operative home and living store, Rugby

i j


directors' report

Refurbished co-operative funeralcare, Rugby

We have continued to improve our non-transactional website with a dedicated page of White Goods on offer at our refurbished store in Atherstone.

travel division In spite of more people booking their holidays online, our travel business recorded a sales increase of 8.26%, on a like-for-like basis. However, the commissions we earned declined compared to the previous year.

funeral division Our funeral division performed satisfactorily in a declining market place. We are pleased to report an increase in sales of 1.80% on a like for-like basis. We once again achieved a satisfactory level of profitability.

The level of pre-paid funeral plans sold during the year decreased slightly compared to last year.

We continue to take steps to develop our standards to the highest possible level, whilst maintaining a very

competitive pricing policy for our client families.

Our client surveys showed a very positive experience from our client families with 95% of the families stating they would definitely recommend our services.

During the year we fully refurbished our funeral home in Rugby and we also developed a new state of the art funeral home in Nuneaton, the combined cost of the two projects was in excess of £2.3m.

We replaced a ceremonial fleet in Rugby and we also renewed an ambulance in Coventry.

Once again, Christmas 2014 saw the memorial Christmas tree initiative rolled out in all our funeral homes, which was very well received by our client families.

membership Total Society membership now stands at 255,342 showing an increase of 7,658 new members or 3.0%, with 472 members having left during the year.


The Society continues to actively promote new membership and encourages existing members to re register. This drive has resulted in the total number of members who have registered for our Members' privilege scheme rising to 133,396, an increase of 5.7%.

Our Members' privilege scheme provided benefits worth £1.9million. This demonstrates the genuine and tangible benefits of membership of a successful Co-operative business.

supplier payments policy It is the Society's policy to agree and clearly communicate the supplier payment terms we operate as part of the commercial arrangements negotiated with suppliers, and then pay according to those terms based upon the timely receipt of accurate invoices.

Trade creditor days of the Group for the year ended 24th January 2015 were 25 days (2014:23 days). This represents the ratio, expressed in days,

Proud to Support~ TheM~pices ~mytori

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Society Charity of the Year

between the amounts invoiced to the Society by its suppliers in the year and the amounts due at the year end, to trade creditors within one year.

our employees In recent years we have placed great emphasis on training and development of our employees at all levels throughout the Society. This is supported by our training department headed by Catherine Evans.

We remain committed to realising the potential of every member of staff within our Society.

appreciation We would like to take this opportunity to thank all our staff for their personal efforts in contributing to the Society's trading surplus in what has truly been a very difficult trading year.

society charity The Society raised £22,000 on behalf of the Myton Hospice. We wish to thank all the employees who took an active part in various fundraising activities during the year.

Our staff have voted to support the Myton Hospice charity once again over the next 12 months during which they will engage in numerous ideas

and initiatives to raise funds for the charity which supports terminally ill people and their families and friends.

oscas awards The 'Outstanding Service to Customers and Staff (OSCAS) Awards Ceremony took place at the National Motorcycle Museum in Catherine-De Barnes, Solihull, in October, with around 265 people in attendance. The event was a huge success with the award for the Society Employee of the


Year going to Wendy Hextall from the Cedar Road food store.

retired colleagues/long service awards In December, many of our retired colleagues were able to join us at the Benn Hall in Rugby as our guests for their annual Society luncheon.

During the event, a number of long service awards were given out to employees in recognition of their service with the Society ranging from 25 to 45 years. We are always pleased to celebrate our longer-serving colleagues' loyalty to the Society.

We would also like to offer our best wishes for a long, healthy and happy retirement to all our retired former colleagues.

obituaries Sadly, we must record the deaths, over the past year, of a number of people associated with the Society.

To the families involved, we would like to extend our deepest sympathy in their sad loss. Those who knew them will remember them with affection and gratitude.

Society Employee of the Year, Wendy Hextall receiving Award from Hanne Hoeck, Society President and Ali Kurji, Chief Executive


directors' report

corporate governance As custodians of the Society, the

I Directors are committed and intend to continue to work towards meeting the highest possible standards of corporate governance.

The Co-operatives= Limited issued the Code of Best Practice in July 1995 followed by subsequent amendments and updates. In May 2005 the Co-operative Congress approved the adoption of the updated and revised version of the Corporate Governance Code of Best Practice for Consumer Co-operative Societies, issued by Co-operatives= Limited. This succeeded the earlier version of the Code following extensive consultation with member societies. The new Code presents societies with a significant task in reviewing current practices and to decide whether change is necessary to comply or to provide valid explanations for non-compliance. Accordingly the Society provides

explanation in regards to those areas of the Code where it is non-compliant in the Statement of the Directors on Corporate Governance.

corporate social responsibility The Heart of England Co-operative Society's origins are based upon the fundamental principles of co-operation and the Society continues to operate with these principles in mind. The Society genuinely strives to put co-operative values into practice in every aspect of its business. Wherever practicable, this co-operation extends to other co-operative organisations, as it is our belief that the most successful co-operative businesses are focused on meeting genuine local community requirements, whilst working together with other co-operative organisations for mutual benefit.

Description Measure

social & co-operative performance indicators

Performance in 2014/2015

1 Member economic involvement.

Trade conducted with members as a proportion of turnover,

2 Member democratic participation.

Number of members voting in elections and as a percentage of total membership.

3 Participation of employees and members in training and education.

Hours of training undertaken.

m ANNUAL REPORT AND FINANCIAL STATEMENTS

Those principles of co-operation are fundamental to the Society's objectives of demonstrating how it differs from other retailers, and having completed 15 years operating as the Heart of England Co-operative Society, along with a heritage of over a 180 years of continuous co-operative trading, we take great pride in being able to demonstrate that difference.

In order to more clearly measure and monitor our performance in achieving this aim, the Society has adopted a series of Key Social and Co-operative Indicators building on the Code of Business Conduct. As these develop over the coming years they will enable us to measure progress on a range of social and co-operative issues, by monitoring trends and identifying opportunities for continuous improvement. In that way, the co-operative principles and values will remain at the forefront of all that we do. These are shown in the tables on pages 10, 11 and 12.

One of the key benefits of membership of the Heart of England Co-operative Society is to share in the success that it generates through our Members' privilege scheme that enables members to take advantage of our exclusive members' events and discounts throughout all of our trading divisions. It is not feasible to identify a meaningful percentage of trade that distinguished between members and non-members.

There was no requirement for any voting for Director appointments this year.

1 ...............••.••.••............................•.....•.....•..•.• During the year the Society provided 6,246 hours of training to our employees (2014:7,678 hours), which equates to an average of 9.55 hours per full-time equivalent employee (2014:11.67 hours). There were 55 hours of training for members.


social & co-operative performance indicators - ( continued)

Description Measure

4 Staff injury and absentee rates.

Total number of accidents and reportable accidents. Staff absentee rates.

5 Staff profile -gender and ethnicity.

Gender split and % employees from different ethnic groups.

·6 Customer satisfaction.

% of customers being satisfied with service.

7 Consideration of ethical issues and procurement and investment decisions.

Evidence of ethical issues in decision making.

8 Investment in community and co-operative initiatives.

Annual proportion of investment in community/ co-operative initiatives as a% of pre-tax profits.

Performance in 2014/2015

During the year the Society has recorded a total of 15 reportable accidents (2014:10) and 135 minor accidents (2014:168). The average number of absence days was 2.59.

62% ofour employees are female (2014:64%) and 38% male (2014: 36%). We also monitor the diversity of our staff and currently 6% have an ethnic minority background (2014: 6%). Further details are listed on page 12.

Customer satisfaction is fundamental to the success of our business. We regularly seek feedback from our customers to try and gauge levels of satisfaction, through the media of surveys, feedback questionnaires and random sampling. We actively encourage our customers to feedback their comments direct to the Chief Executive, both positive and negative, in order that we can continue to develop and improve in the area of customer service. In the funeral division we regularly send out customer feedback questionnaires to our clients, and in the food and non-food divisions we provide point of sale comment cards for customers to fill in there and then or to take away with them. We monitor all responses. The nature of the customer feedback we seek in the food and non-food divisions does not provide a percentage satisfaction rating.

The Heart of England Co-operative Society is a member of the Co-operative Retail Trading Group (CRTG), which in turn is a member of the Ethical Trading Initiative (ETI) and is working to ETI and International Labour Organisation (ILO) principles and standards. The Society also sources products from and maintains links with, wherever practicable, a number of other UK co-operative businesses and organisations that are committed to the application of the same co-operative values. Further details are listed on page 12.

The Society donates a percentage of its profits to local charitable causes. As such since its inception the society has donated £791,000 and a further £55,000 has been committed in the period.

The annual commitment represents 4.1 % of our pre-tax profits.

continued overleaf

HEART OF ENGLAND CO-OPERATIVE SOCIETY m.

directors' report

social & co-operative performance indicators - ( continued)

Description Measure Performance in 2014/2015

•9• • • • • • • • • • ·an~~s:1.·n;mg0 0fri:o;im·~~;

• • • • •,:',,,_!,:,:• • ;;::~ ·~f· ~~: • • • • •, • • ~~~ ~; ~:: ·~:· ~:;;~· ;;~::t:~· ::~~; :~:~ ·;; ~~: ~;~; ;:~:;:; • • • • • emissions from tonnes), which is equivalent to 10.52 tonnes per full-time equivalent

operations. energy used for all employee (2014: 9.73 tonnes), or alternatively 72.80 tonnes per £1m of on-site operations. turnover (2014:66.46 tonnes).

"1"0' • • • • • • ~~::: ·;e~~c;:~~ • • • ·:,,,_: • :~ • ;; ~~s:: • • • • • • • • • I,,,. • • ~~~ ~; ;~~ ·~:· ~:;;;· ;;~;:t:~· ;,~05°~ :~:~ 0~f0 :~:; ~;~ ~ ::~.~·1 ~ • recycled/re-used as tonnes) of which 42.5% was recycled (2014: 41.7%). The Society is always

j % of total waste. ; exploring new ways to generate less waste and to increase the level of

• • • • • • • • • • • • • • • " • • • • • • • • • • • • .l • • • • • • • • • • • • • • • • • • • • J. • -~~~~~. :':e. :~~~~e: • • • • • • • .. • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • • •

staff profile The Society operates an equal opportunities policy. During the period the Society recorded staff profiles as follows:-

procurement and investment We currently maintain links of various types with the following co-operative organisations:-

Male full-time 173 18 175 18

• Co-operative Employers' Association (CEA) • Co-operative Group Limited • Co-operative Retail Trading Group (CRTG) • Co-operatives= • Co-operatives West Midlands • Central England Co-operative • West Midland Co-operatives Member Education Group

2015

........................•.....•..•.............................. ethnicity profile

African - Caribbean

African - Other 2

Asian - British 30 3 31 3

Asian - Other 8 8

British 912 94 925 94

European 7 12

Other 5 5 ................................................................

2014 No. % No. %

male and female/full and part-time

Female full-time 158 16 172 17

Male part-time 188 20 177 18

Female part-time 446 46 459 47

age profile

Between 16 and 18 58 6 56 5

Between 19 and 25 197 20 227 23

Between 26 and 35 135 14 126 13

Between 36 and 45 130 14 146 15

Between 46 and 55 221 23 224 23

Between 56 and 65 194 20 189 19

Over 65 30 3 15 2


T

I .f i

the heart of england co-operative difference The Society believes that this information demonstrates how it consolidates the principles of

I co-operation into its everyday activity, both locally and nationally, and how it further shows in a tangible way what is meant by the Heart of England Co-operative difference. Given that other types of organisations exist primarily to maximise their profits in order to create wealth for shareholders, with little genuine concern for the local community from which these profits originate, the Heart of England Co-operative Society believes its approach provides tangible evidence of an alternative and successful model of business practice.

- I I I

The profits we make produce direct benefit for our primary stakeholders, i.e. our customers, our members, our employees and our local communities.

for our customers We intend to continue to plough back a major proportion of our profits into improving our shops and other facilities, whilst also seeking new suitable trading opportunities, to expand our business throughout the heart of England.

for our members The Society has continued with its unique Members' privilege scheme each year since its inception in 2000.

This scheme gives each member the opportunity to make exclusive savings across a range of products and services, which can be worth hundreds of pounds per year.

The Society believes it is the best way of giving the members their 'instant dividend' and enabling them to share in the Society's trading success.

The Society still wishes to encourage even more of our existing members to re-register with us for the Members' privilege scheme, so that they can take full advantage of all the available privileges of membership.

for our employees Another successful trading year has meant that for the nineteenth successive year our unique staff bonus scheme has been implemented. This is in keeping with our aim of making the Heart of England Co-operative Society an excellent place to work, by providing employees with security of employment, competitive remuneration packages and good career opportunities.

for our local communities Our commitment to giving a percentage of our profits to local good causes has resulted in more than £791,000 being made available for this purpose within the first 15 years since the introduction of this initiative in 2000.

Our locally elected Education/Member Relations Committees have already been able to provide much appreciated assistance to more than 4,050 local good causes since the inception of the scheme.

Our local communities have also benefited from several millions of pounds worth of local investment in recent years as we continue to plough the greatest part of our profits back into creating new and modern stores and services for local people - following the principles of co-operation set out many generations ago.

Local communities also benefit from the retention of local secure employment and by 24th January 2015 our total employee numbers were 965.


to the future Increasing sales levels, whilst carefully controlling costs, remains the best way to achieve a consistent growth in profits and in the long-term maintain our Society's outstanding level of success.

We intend to continue with our strategy of renewing and expanding our businesses and the cash reserves we have built up will enable us to continue to do this without the need for any external financial assistance in the short-term.

In spite of these pressures, we intend to maintain our unique position in the heart of England by building on our reputation as one of the UK's leading retail co-operatives by continuing to:-

• Develop profitable trading activities.

• Maintain community friendly initiatives and policies.

• Pursue and enhance the range of member privileges.

In spite of the uncertain economic outlook ahead, we remain optimistic about our Society's future prospects as one of the leading independent regional co-operative societies.

~,!!:!: ;1~ w A. Kurji - Chief Executive.

S. G. Slater - Secretary

24th March 2015

HEART OF ENGLAND CO-OPERATIVE SOCIETY m

statement of the directors on corporate governance statement of the directors on corporate governance This report is published in accordance with the Code of Best Practice adopted by the Co-operative Congress in May 2005. The Code sets out the recommended best practice on issues of governance for organisations in the co-operative sector.

The following statement, authorised by the Directors, outlines how the Society has complied with the principles of the Code and explains in its final statement any provisions the Society does not comply with and the reasons for non-compliance. The statement relates to the period 26th January 2014 to 24th January 2015.

the members Co-operatives are member owned democratic organisations and the Board has sought to encourage members to play their part in the governance of the business and improve membership participation. The Society continues to actively promote new membership and encourages existing members to re-register. As a result the Society defines an active member as a member who has recently joined or re-registered for the Members' privilege scheme.

members'meetings The Society operates with a single tier board structure. The Society actively promotes the Annual General Meetings via posters in branches, through the Annual Report, the Society's website, the Members' privilege calendar and through newspaper advertisements. The Society provides refreshments to encourage members to attend the meetings.

the board's role It is the responsibility of the Board of Directors to determine the vision and the strategy of the Society.

The Board of Directors currently consists of fifteen members, directly elected by the membership, who appoint the President and Vice President annually from within their number.

The Board of Directors is charged with ensuring that the business of the Society is conducted in accordance with the co-operative principles, as set out by the International Co operative Alliance and with the interests of the Society and its members uppermost at all times.

The Board of Directors also has the responsibility for supervising the work of the Chief Executive and the Management Executive.

The Board of Directors meet every four weeks. They also meet twice a year as the Audit Committee and would also meet as a Search Committee and Remuneration Committee as required.

The matters reserved to the Board of Directors are in accordance with Appendix 5 of the Code except for the appointment and removal of the Secretary. All items of capital expenditure over £15,000 in value must be approved by the Board of Directors.

It is the responsibility of the Management Executive to meet the strategic objectives of the Society. Day-to-day management of the Society's activities rests with the Chief Executive and the Management Executive.

Ill ANNUAL REPORT AND FINANCIAL STATEMENTS

election, renewal of the board and succession planning The Society has amended the age rule for new Directors in line with the Combined Code. The Board of Directors is comprised of employees, retired employees and members, with a broad range of skills and experience and it does not have power under the existing rules to co-opt professional non-executive directors. At present a Search Committee has not been established but will be constituted as and when required.

board balance and independence No Director or member of the Management Executive holds any other significant directorships.

president and vice president of the society The President and Vice President of the Society are elected annually by all the Directors and the term of office is for a period of twelve months. Whilst the rules of the Society do not preclude an employee or recently retired superannuated employee from being the President or Vice President, the Directors believe that it is best practice not to elect the President from the employee Directors.

information and professional development The Directors receive regular information at each board meeting and its accuracy, quality and timing are reviewed on a regular basis.

All new Directors are offered the opportunity to spend time with the President and the Chief Executive before attending the Board for the first time, to outline to them the procedures, rules, standing orders and conduct required of individual Directors. In addition, all Directors are offered the opportunity to undertake further formal training to develop their skills and experience.

board skills and performance evaluation The Board of Directors believe that the experience gained through their working career with the Society and the common sense approach used when making Board decisions is adequate. However, during the year the Directors did identify training needs which they undertook. In addition no performance evaluation of the Board or its individual Directors is undertaken.

remuneration report The Society is committed to the highest standards of good corporate governance. To that end it uses as a guideline for its disclosure in relation to remuneration, the disclosure requirements set out in the Co-operatives= Corporate Governance Code of Best Practice, as. endorsed by the Co-operative Congress in May 2005.

The Society's Board is entirely non executive, the Directors being elected from its membership. The day-to-day management of the Society falls to the Management Executive.

The remuneration report is presented by the Board and contains the following information:- • A description of the role of the

Remuneration Committee. • A summary of the Society's

remuneration policy. • Details of the terms of the service

contracts and the remuneration of each Management Executive member for the year ended 24th January 2015.

role of the remuneration committee The Remuneration Committee is made up of the full Board of Directors. The Committee is responsible for all aspects of remuneration and contractual terms and conditions of the Management Executive team. The Committee sets the remuneration policy and strategy for these individuals.

remuneration policy The current policy is to pay remuneration determined and agreed by the Directors. The Committee considers that a successful remuneration policy needs to be sufficiently flexible to take account of changes in the Society's business environment and in remuneration practice.

elements of remuneration Management Executive remuneration consists of salary, pension and the provision of a Society car.

salary Management Executive salaries are reviewed annually with any increases normally payable with effect from 1st July each year. Salaries paid to the Management Executive in the financial year ended 24th January 2015 are set out in Note 4 in the notes to the accounts.

The Board of Directors is of the opinion that there is no value to be gained by disclosing the individual Management Executive remuneration packages.

service contracts No member of the Management Executive has a notice period of greater than 12 months.

~ Heart a/England Co-operative

pension The Management Executive (excluding the Secretary who is a member of the Defined Contribution Scheme) are members of the Society's Defined Benefit pension scheme as at 24th January 2015. These schemes are funded, Inland Revenue approved, defined benefit final salary occupational pension schemes. Members of the fund contribute between 6.5% and 8.5%, dependant on age, of their pensionable salary up to the Inland Revenue maximum. Basic salary is the only element of remuneration that is pensionable.

directors The Directors do not have service contracts. The years of their election are shown on page 2 together with the expiry of their current term of office. Each Director is subject to re-election every three years.

Directors' fees are approved by the Society's members. The current fee levels were recommended to the membership and approved by them in May 2014.

The total fees received by each Director are set out on page 2.

HEART OF ENGLAND CO-OPERATIVE SOCIETY m.

statement of the directors on corporate governance audit committee There are clear and consistent procedures in place for monitoring the system of internal financial controls.

The Internal Auditor and Accountant/Assistant Secretary meet regularly within their remit and review the effectiveness of the Society's system of internal financial controls. The Accountant/Assistant Secretary receives reports from the Society internal audit function and management where appropriate.

A documented whistle-blowing procedure is in place to enable staff to raise concerns in confidence, in matters of financial reporting, financial control or any other issues. These procedures are made available to staff at their time of commencing employment.

The full Board of Directors meet twice a year as the Audit Committee. This Committee is responsible for reviewing the effectiveness of the Society's systems of internal control.

The Committee meets to:-

• Consider reports from the Management Executive, internal audit and external audit on the systems of internal control and any material control weaknesses.

• Discuss with the Internal Auditor the actions taken on problem areas identified in these reports or by the Board.

• Review the effectiveness of the risk management process and ensure significant risk issues are referred to the Board for consideration so that appropriate steps can be taken to minimise such risks to the Society.

• Consider the effectiveness of the operation of the internal audit function.

• Consider the appointment of external auditors and in conjunction with management agree the nature and scope of the external audit review.

• Review the external audit management letter and the management response to the report.

• Recommend reviews of other areas of the business where a more intense audit procedure is necessary.

The Audit Committee also has a duty to discuss problems and reservations arising from the Society's audit and any matter the Auditor may wish to discuss, if necessary, in the absence of the Chief Executive.

Accordingly the Board of Directors confirms that the effectiveness of the system of internal controls for the year ended 24th January 2015 has been reviewed in line with the criteria set out in the Corporate Governance Code of Best Practice.

co-operative and social responsibility The Society takes seriously its commitment to the principles of co-operation and social responsibility. It has therefore fully adopted the 10 Key Social and Co-operative Indicators outlined by the Co-operativesvk, The policies and progress the Society has made in relation to the 10 Key Social and Co-operative Performance Indicators are detailed on pages 10 to 12 of the Directors' report.

statement of compliance As custodians of the Society, the Directors are committed and intend to continue to work towards meeting the highest possible standards of corporate governance.

The Society provides explanation in regards to those areas of the Code where it is non-compliant, as follows:-

The Code prescribes that the Board of Directors adopt a code of conduct for Directors, and sign an acceptance of that code of conduct. The Board of Directors believe that the signing of the code of conduct by individual


Directors is currently not necessary and accordingly have left the letter on the table. However, in the absence of a signed letter, the Board of Directors amended Clause 17 of the Society's standing orders to reflect the need for ongoing confidentiality as well as confidentiality upon the cessation of their term of office.

The Code prescribes that the Directors should give consideration to holding an Interim General Meeting. The Directors considered the requirement to hold members' interim meetings. However, the Directors are currently of the opinion that such a meeting is not necessary and would not serve a useful purpose for the Society.

The Code prescribes that the Society should ensure that financial information is made available to members twenty-one days prior to the Annual General Meetings. The Society's rules state that the members will receive financial information fourteen days prior to the Annual General Meetings. The Society will aim to increase this time period to twenty-one days by reviewing the year-end processes and timetable accordingly.

The Code prescribes that the term of office of the Chair should be no longer than three years and that the Chair should serve for a maximum of six years before standing down. The Chair would not normally be eligible for the office again. Further, the Code states that a mechanism should be in place to remove a poorly performing Chair and that the Chair should not be a current employee or recently retired superannuated employee. The President of the Society is elected annually by all the Directors and the term of office is for a period of twelve months. The Board of Directors believe that this annual election of the President, coupled with the rules allowing for the removal of any

Director under given circumstances, means that there is no further need for a mechanism to remove a poorly performing incumbent. The Board of Directors believe that the individual elected annually should be judged on merit and should not be restricted to a pre-set maximum term. Whilst the rules of the Society do not preclude an employee or recently retired superannuated employee from being the President or Vice President, the Board of Directors believe that it is best practice not to elect the President from the employee Directors.

The Code prescribes that there should be a Chief Executive succession plan in place and that this should be reviewed annually. The Board does not maintain a standing Search Committee; as such a Committee would comprise the full Board. A Search Committee is formed of the full Board of Directors when the existing Chief Executive announces their resignation or retirement.

The Code prescribes that a minimum of three Directors or a third of the Board, whichever is the greater, be sufficient for independent professional advice to be accessed at the Society's expense. The Board of Directors are currently able to seek independent professional advice, at the Society's expense, subject to the request being supported by Directors making up not less than one third of the full Board.

The Code prescribes that the Directors should undertake a periodic skills audit in order to identify appropriate training needs. The Board should also undertake a formal and rigorous annual evaluation of its own performance and that of its Committees and individual Directors. Further, the Chair should be subject to an annual appraisal in their absence. The Board of Directors believe that they are fully accountable

to the membership and that the ultimate test of its performance and that of individual Directors is at election time. The membership has the opportunity at the Annual General Meetings to fully question the Board of Directors and in total can express their satisfaction or otherwise by casting their ballot.

The Code prescribes that no Director who is also a current employee of the Society should serve on the Remuneration Committee. The agenda of the Remuneration Committee is an integral part of the main Board agenda. As a result the full Board of Directors will be present when these matters are discussed, including employee Directors. However, where an issue arises that directly impacts upon an employee Director they are precluded from voting. No member of the Management Executive is a Director.

The Code prescribes that neither the Chair, nor a current employee or superannuated recently retired employee, should serve on the Audit Committee. The full Board of Directors, including the President and current and superannuated ex employees, meets as the Audit Committee twice a year without the Chief Executive present. The Internal Auditor attends the meeting and is questioned as such in the absence of the Chief Executive. The Board, having considered the aspect of the Audit Committee function, believes that there are major benefits for all the Directors to be actively involved in the audit process.

internal control The Board is ultimately responsible for the Society's system of internal control and for reviewing its effectiveness. However, such a system is designed to manage rather than eliminate the risk of failure to achieve business objectives and can provide only reasonable and not absolute


assurance against material misstatement or loss.

The Co-operatives" revised (May 2005) Corporate Governance Code of Best Practice maintains a requirement that the Directors review the effectiveness of the Society's system of internal controls. This extends the existing requirement in respect of internal financial controls to cover all controls including financial, operational, compliance and risk management.

The Internal Auditor has continued to review and report upon internal financial controls.

Key elements of the Society's system of internal financial controls are as follows:-

risk identification Society Managers are responsible for the identification and evaluation of key risks applicable to their areas of business. These risks are assessed on a continual basis and may be associated with a variety of internal or external sources including control breakdowns, disruption in information systems, competition, natural catastrophe and regulatory requirements.

control environment The Society is committed to the highest standards of business conduct and seeks to maintain these standards across all of its operations, which provide practical guidance for all staff. Also in place are supporting Society policies and employee procedures for the reporting and resolution of suspected fraudulent activities.

The Society has an appropriate organisational structure for planning, executing, controlling and monitoring business operations in order to achieve Society objectives. Lines of responsibility and delegations of authority are documented.


statement of the directors on corporate governance information and communication Society divisions participate in periodic strategic reviews, which include consideration of long-term financial projections and the evaluation of business alternatives. Operating units prepare annual budgets and performance against budget is actively monitored at the Board and divisional level supported by regular forecasts. Forecasts and results are consolidated and presented to the Board on a regular basis.

Through the above mechanisms, Society performance is continually monitored, risks identified in a timely manner, their financial implications assessed, control procedures re-evaluated and corrective actions agreed and implemented.

control procedures The Society and its operating units have implemented control procedures designed to ensure complete and accurate accounting for financial transactions and to limit the potential exposure to loss of assets or fraud. Measures taken include physical controls, segregation of duties, reviews by management and internal audit and external audit to the extent necessary to arrive at their audit opinions.

statement of the board responsibilities The Board are required to prepare financial statements, which give a true and fair view of the state of affairs of the Group at the end of each financial year and of the income and expenditure of the Group for the year to that date. The financial statements must be prepared in compliance with the required format and disclosures of the Co-operative and Community Benefit Societies Act 2014.

The Board confirm that:- Suitable accounting policies, consistently applied and supported by reasonable and prudent judgements and estimates, have been used in the preparation of the Group's financial statements and applicable accounting standards have been followed.

The Board are responsible for keeping proper accounting records, which disclose with reasonable accuracy at any time the financial position of the Group.

The Board have general responsibility for taking such steps as are reasonably open to them to safeguard the assets of the Group and to prevent and detect fraud and any other irregularities.

In so far as the Board are awarer-

• There is no relevant audit information of which the Group's auditors are unaware; and

• The Board have taken all steps that they ought to have taken to make themselves aware of any relevant audit information and to establish that the auditors are aware of that information.

going concern After making all appropriate enquiries the Board have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future. For this reason, they continue to adopt the going concern basis in preparing the Group's accounts.


Board certification:-

The accounts and notes on pages 20 to 37 are hereby signed on behalf of the Board pursuant to Co-operative and Community Benefit Societies Act 2014.

4-pµJ)Jt/c 2::=,,v~ A. J. Lewell - Vice President

A?:fE,ecuti~Pffr 24th March 2015

~ Hearto/England

~~eL4C4 David P White Senior Statutory Auditor for and on behalf of Grant Thornton UK LLP Statutory Auditor, Chartered Accountants Birmingham

independent auditor's report

independent auditor's report to the members of the heart of england co-operative society limited We have audited the financial statements of the Heart of England Co-operative Society Limited for the year ended 24 January 2015 which comprises the Group revenue account, the Group balance sheet, the Group cash flow statement, the Group statement of total recognised gains and losses, the reconciliation of movements in members funds and the related notes. The financial reporting framework that has been applied in their preparation is applicable law and United Kingdom Accounting Standards (United Kingdom Generally Accepted Accounting Practice).

This report is made solely to the Society's members, as a body, in accordance with section 87(2) and 98(7) of the Co-operative and Community Benefit Societies Act 2014. Our audit work has been undertaken so that we might state to the Society those matters we are required to state to them in an auditor's 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 as a body, for our audit work, for this report, or for the opinions we have formed.

respective responsibilities of the board and the auditor As explained more fully in the Statement of Directors' Responsibilities set out on page 18, the 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 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 Financial Reporting Council's website at www.frc.org.uk/auditscopeukprivate.

opinion on financial statements In our opinion the financial statements:

• give a true and fair view of the state of the group's affairs as at 24 January 2015 and of the group's income and expenditure for the year then ended;

• have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice: and

• comply with the requirements of the Co-operative and Community Benefit Societies Act 2014.

matters on which we are required to report by exception We have nothing to report in respect of the following matters where the Co-operative and Community Benefit Societies Act 2014 requires us to report to you if, in our opinion:

• the parent society has not kept proper books of account, or a satisfactory system of control over its transactions has not been maintained; or

• the financial statements are not in agreement with the society's books of account; or

• we have not received all the information and explanations we need for our audit.

24th March 2015


statement of accounting policies

basis of accounting The accounts are prepared under the historical cost accounting convention, modified by the revaluation of investment properties and in accordance with applicable accounting standards.

basis of consolidation The Group accounts consolidate the accounts of the Society and its subsidiary, Chartridge Properties Limited, a company incorporated in England and Wales. Chartridge Properties Limited is now dormant.

accounting date The current period is for the 52 weeks ended 24th January 2015 compared with a period of 53 weeks ended 25th January 2014.

turnover Turnover includes cash sales, goods sold on credit, commissions and property rental income. It is stated net of VAT, discounts and incentives. Travel commissions are recognised at point of sale, with appropriate provision for anticipated cancellations.

goodwill Positive purchased goodwill arising on acquisition is capitalised, classified as an asset on the balance sheet and amortised over its useful economic life up to a maximum of twenty years. This length of time is presumed to be the maximum useful life of purchased goodwill because it is difficult to make projections beyond this period. Goodwill is reviewed for impairment at the end of the first full financial year following each acquisition and subsequently as and when necessary if circumstances emerge that indicate that the carrying value may not be recoverable.

amortisation Amortisation is calculated to write off the cost of an asset, less its estimated residual value, over the useful economic life of that asset as follows:-

Goodwill - 20 years

tangible fixed assets and depreciation Fixed assets are recorded at cost less any permanent diminution in value.

Fixed assets other than land are depreciated by equal instalments over their estimated working lives:-

Buildings - freehold - 50 years Buildings - leasehold - period of

lease Fixtures, Fittings and Plant - 5/10 years Transport - 5/7 years

investment properties Investment properties are included at a professional valuation in accordance with Statement of Standard Accounting Practice No. 19.

No depreciation is provided in respect of freehold investment properties. The Directors consider that this accounting policy results in the financial statements giving a true and fair view. Depreciation is only one of many factors reflected in this annual valuation and the amount which might otherwise have been shown cannot be separately identified or quantified.

assets acquired under leases Rentals due under operating leases are charged to revenue in the year that the expenditure is incurred.

Assets obtained under finance lease are capitalised in the balance sheet at cost value and are depreciated over the lease term. The interest element of the rental obligation is charged to the revenue


account over the period of the lease based on the balance of the outstanding commitment. The outstanding commitment is analysed between current and long term liabilities.

investment income Interest receivable is accounted for on an accruals basis. Dividends are accounted for on the receipts basis.

"1 ! ..

repairs Repair expenditure is charged against surplus in the year that the cost is incurred.

funeral plans State Street Trustees Limited act as Independent Custodian Trustees for the scheme for all funeral plans prior to 5th February 2004. All new plans are held by the Royal London Mutual Insurance Society Limited. Such receipts are shown within debtors and creditors. Liabilities under the funeral plans are based on total commitments at the balance sheet date.

taxation Current taxation: Corporation tax is provided at the applicable rate on the taxable profits and chargeable gains of the year.

Deferred taxation: Deferred tax is recognised on all timing differences where the transactions or events that give the Group an obligation to pay more tax in the future, or a right to pay less tax in the future, have occurred by the balance sheet date. Deferred tax on defined benefit final salary pension scheme deficits is adjusted against these deficits. Deferred tax assets are recognised when it is more likely than not that they will be recovered. Deferred tax is measured using rates of tax that have been enacted or substantively enacted by the balance sheet date.

stocks Stocks are valued at the lower of cost and net realisable value.

pensions The Group operates two defined benefit final salary pension schemes covering a large number of employees, which require contributions to be made to separately administered funds.

Scheme assets are measured at fair values.

Scheme liabilities are measured on an actuarial basis using the projected unit method and are discounted at appropriate high quality corporate bond rates. The net deficit, adjusted for deferred tax, is presented separately from other net assets on the balance sheet.

The current service costs are charged to the Group revenue account. Interest on the scheme liabilities and the expected return on scheme assets are included net against interest receivable. Actuarial gains and losses are reported in the statement of total recognised gains and losses.

financial instruments Financial assets, financial liabilities and equity instruments are classified according to the substance and the contractual arrangements entered into. An equity instrument is any contract that evidences a residual interest in the assets of the entity after deducting all of its liabilities.

~ Heartq/England Co-operative

Where the contractual terms of share capital do not have any terms meeting the definition of a financial liability then this is classed as an equity instrument. Dividends and distributions relating to equity instruments are charged direct to equity.

Payments made to and on behalf of members that are not related to equity instruments but are of a discretionary nature and remain subject to member approval are charged direct to the revenue account.

Share u:iterest is charged directly to the Revenue Reserves.


group revenue account for the year ended 24th January 2015

2015 2014 Note (52 Weeks) (53 Weeks)

£ 000 £ 000 £ 000 £ 000

GROSS VALUE OF SALES (INCLUDING VAT) 94 551 95 439 Less gross value of agency sales (2 254) (1 899)

GROSS SALES (EXCLUDING AGENCY SALES) 92 297 93 540 Value added tax (7 827) (7 847)

TURNOVER 1 84 470 85 693 Cost of sales (54 677) (54 765)

GROSS PROFIT 29 793 30 928 Expenses:- FRS 17 current pension service costs 17 (703) (758) Exceptional items 3 (165) Other expenses 2 (25 133) (24 969)

(26 001) (25 727)

TRADING SURPLUS BEFORE EXCEPTIONAL ITEMS 3 957 5 201

Exceptional items 3 (165)

TRADING SURPLUS 3 792 5 201 Surplus/(deficit) on sale of fixed assets 68 (7)

TRADING SURPLUS BEFORE INTEREST Net interest receivable/(payable) 5

3 860 5 194 32 (177)

3 892 5 017

(1 929) (1 935) (485) (500) (150) (148)

(2 564) (2 583)

1 328 2 434 (544) (669)

784 1 765

SURPLUS AFTER INTEREST Payments to and on behalf of stakeholders: Members' privilege scheme Staff dividend Grants and donations 6

SURPLUS BEFORE TAXATION Taxation 7

SURPLUS TRANSFERRED TO RESERVES 19

The results relate wholly to continuing operations.

The accompanying accounting policies and notes form an integral part of these financial statements.


group balance sheet as at 24th January 2015

FIXED ASSETS

Intangible assets Tangible assets Investments

CURRENT ASSETS

Stocks Debtors - Amounts due within one year

- Amounts due after more than one year Cash at bank and in hand

CURRENT LIABILITIES

Amounts falling due within one year: Creditors

NET CURRENT ASSETS

TOTAL ASSETS LESS CURRENT LIABILITIES

LONG TERM LIABILITIES Amounts falling due after more than one year: Creditors

PROVISIONS FOR LIABILITIES AND CHARGES

Deferred tax

NET ASSETS EXCLUDING PENSION DEFICIT

Pension deficit

NET ASSETS

FINANCED BY:-

SHARE CAPITAL

REVALUATION RESERVE REVENUE RESERVE

MEMBERS' FUNDS

Note £ 000

8

9

11

12 13 13

5 538 4 171 7 959 8 929

26 597

2015

£ 000

287 38 654

481 39 422

17 575

56 997

(7 959)

48 209 (10 979)

37 230

2 757 3 943

30 530

37 230

~ Heart a/England Co-operative

2014

£ 000 £ 000

14 (9 022) (9 022)

308 38 905

481 39 694

5 340 3 554 6 746 10 066 25 706

(8 264) (8 264)

17 442

57 136

(6 814) 14

15

17

16 18 19

(829) (736) .

49586~ (7 987)

41 599

The~ccompanying accounting policies and notes form an integral part of these financial statements.

I~__-/,,.; ---


group cash flow statement for the year ended 24th January 2015

2015 2014 Note (52 Weeks) (53 Weeks)

£ 000 £ 000 £ 000 £ 000

NET CASH INFLOW FROM OPERATING ACTIVITIES 20(a) 3 765 4 508

RETURNS ON INVESTMENTS AND SERVICING OF FINANCE Bank interest received 114 236 Share interest (10) (8) NET CASH INFLOW FROM RETURNS ON INVESTMENTS AND SERVICING OF FINANCE 104 228

TAXATION (584) (681)

CAPITAL EXPENDITURE AND FINANCIAL INVESTMENT Purchase of fixed assets (3 621) (5 109) Proceeds from sale of fixed assets 220 31 Pension fund special contributions (936) (933} Capital repayments of finance leases (84) (89)

NET CASH OUTFLOW FROM INVESTING ACTIVITIES (4 421) (6 100)

NET CASH OUTFLOW (1 136) (2 045)

FINANCING (Decrease)/increase in members' share capital (1) 8 NET CASH (OUTFLOW) INFLOW FROM FINANCING (1) 8

DECREASE IN CASH 20(b) (1 137) (2 037) .___.

The accompanying accounting policies and notes form an integral part of these financial statements.


other primary statements for the year ended 24th January 2015

GROUP STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES

Retained surplus for the year Actuarial loss on pension scheme funds Movement in the pension scheme deferred tax asset

Total gains and losses relating to the year

RECONCILIATION OF MOVEMENTS IN MEMBERS' FUNDS

Retained surplus for the year Movement in revaluation reserve Actuarial loss on pension scheme funds Movement in the pension scheme deferred tax asset Share interest less related taxation deduction Movement in share capital Net (reduction)/addition to members' funds

Opening members' funds

Closing members' funds


2015 2014 £ 000 £ 000

784 1 765 (4 688) (954)

938 (99)

(2 966) 712 ' ' , ---~ _______ ....

' -------------- ~ 2015 2014

£ 000 £ 000

784 1 765 (1 394) (4 688) (954)

938 (99) (8) (7) (1) 8

(4 369) 713

41 599 40 886

37 230 41 599 - - ------- .---- -


notes to the accounts for the year ended 24th January 2015

1 TURNOVER

Food Non-food Travel commission Funeral Post office Property

2 EXPENSES

Personnel costs Occupancy costs Hire of plant and machinery - Operating leases Hire of other assets - Operating leases Amortisation of goodwill Depreciation of owned assets Audit fees - Audit

- Non-audit Directors' fees Other expenses

Directors' Remuneration The total remuneration of the Directors for their board duties was as follows:- Fees

The number of Directors whose remuneration fell in each £5 000 bracket was as follows:-

£0 - £5 000

3 EXCEPTIONAL ITEMS

Impairment of fixed assets


2015 2014 £ 000 £ 000

62 170 63 023 13 794 14 102

209 404 7 287 7 141 186 222 824 801

84470 85 693

2015 2014 £ 000 £ 000

13 157 12 999 2 843 3 042 157 205 26 26 21 16

2 161 1 999 17 16 10 10 44 45

6 697 6 611

25 133 24 969

£ 000 £ 000

44 45

Number Number

17 19

2015 £ 000

2014 £ 000

165

165


4EMPLOYEES

The average number employed by the Society was: Full-time Part-time

The costs incurred in respect of these employees were:-

Wages and salaries Social security costs

Other pension costs

Management Executive Remuneration The total remuneration of the Management Executive was as follows:-

Salaries Taxable benefits

Pension contributions

Chief Executive Remuneration The remuneration of the Chief Executive (who is also the highest paid employee) included above was as follows:-

Salary Bonus Taxable benefits


-·-----.~·- 2015 2014

Number Number

340 347 629 622

969 969

2015 2014 £ 000 £ 000

12 344 12 186 813 813

13 157 12 999

703 758

13 860 13 757

£ 000 £ 000

565 560 43 43 608 603 42 42

650 645

_,,._-·

£ 000

176 175 15 19 8 8

199 202



4 EMPLOYEES (CONTINUED)

The following number of Management Executive employees received remuneration including taxable benefits (excluding pension contributions) falling within the following ranges:-

6 GRANTS AND DONATIONS

-- --·-----··- ·---- 2015 2014

Number Number

1

1 1

1 1 1

- - -----·. -----

2015 2014 £ 000 £ 000

(49) (46) 114 236 (14) (14) (19) (353)

32 (177)

- 2015 2014 £ 000 £ 000

88 85 62 63

150 148

£10 001 - £15 000 £55 001 - £60 000 £60 001 - £65 000 £70 001 - £75 000 £75 001 - £80 000 £85 001 - £90 000 £90 001 - £95 000 £105 001 - £110 000 £195 001 - £200 000 £200 001 - £205 000

5 NET INTEREST RECEIVABLE/(PAYABLE)

Bank interest Interest receivable (Note 11) Finance lease interest Other finance costs on pension scheme liabilities

Education/member relations Donations

7 TAXATION 2015 2014 £ 000 £ 000

(a) Corporation tax at 21.36% (2014:23.19%) 261 562 261 562

Deferred tax 93 (17) Movement in the pension scheme deferred tax asset 190 124

544 669



7 TAXATION (CONTINUED)

(b) The tax assessed for the period is lower than the standard rate of corporation tax in the UK of 21.36% (2014:23.19%) The differences are explained as follows:-

Surplus on ordinary activities before tax Surplus on ordinary activities multiplied by the standard rate of corporation tax in the UK of 21.36% (2014:23.19%) Effect of:- Expenses not deductible for tax purposes Capital allowances for the period in excess of depreciation

Current tax charge for period

8 FIXED ASSETS - INTANGIBLE

Cost at 25th January 2014 and at 24th January 2015

AMORTISATION At 25th January 2014 Provided this period

At 24th January 2015

NET BOOK VALUE 2015 2014


-, 2015 £ 000

2014 £ 000

1 328 ' 2 434

283 565

87 104 (109) , (107)

261 562

-----, Goodwill

£ 000

417

109 21

130

287 308

HEART OF ENGLAND CO-OPERATIVE SOCIETY El


9 FIXED ASSETS Fixtures Trade Investment fittings

properties properties & plant Transport Total

£ 000 £ 000 £ 000 £ 000 £ 000

Cost or valuation at 25th January 2014 16 906 14 959 24 308 1 389 57 562 Additions 2 210 100 1 267 44 3 621 Disposals (152) (152) Revaluations (1 394) (1 394)

At 24th January 2015 19 116 13 513 25 575 1433 59 637

Depreciation and impairment at 25th January 2014 2 576 15 653 428 18 657 Provided this year 146 1 777 238 2 161 Impairment 165 165 Disposals

At 24th January 2015 2 887 17 430 666 20 983

NET BOOK VALUE 2015 16 229 13 513 8 145 767 38 654 2014 14 330 14 959 8 655 961 38 905

The historical cost of investment properties now included at valuation 2015 2014 £ 000 £ 000

Cost 2 557 2 557

Investment properties were valued by Bruton Knowles, as at 24th January 2015.

All other fixed assets are stated at cost. Trade properties held by the Group were valued by Bruton Knowles, as at 24th January 2015 on the basis of open market value for existing use. This valuation shows an excess over book value of some £11m before taxation, which is not reflected in the accounts.

In the opinion of the Directors, the total realisable values of the properties are considerably higher than book values and the total residual values of buildings will be at least equal to their book values.

Included in the net book value of Transport are £68,229 of assets held on finance leases (2014: £151,892). The related depreciation charge is £83,663 (2014: £89,312).



10 COMMITMENTS

Operating leases At 24th January 2015 the Group had annual commitments under non-cancellable operating leases as follows:-

2015 Land and buildings Other

£ 000 £ 000 Operating leases expiring:- Within one year 60 In the second to fifth year inclusive 104 Over five years 26

26 164

The leases of land and buildings are subject to rent reviews.

Finance leases Finance leases expiring: Within one year In the second to fifth year inclusive

2015 ' £ 000

68

. _J

Capital commitments This year there are capital commitments of £6,607,991 which have not been provided for in the accounts (2014: £2,682,964) and capital expenditure of £Nil has been authorised but not contracted for (2014: Nil).

11 INVESTMENTS Fixed assets

Co-operative Group Ltd. - Shares Other I&P Societies - Shares Bank

------ -.-~-- 2015 2014 £ 000 £ 000

476 476 5 5

481 481

12 STOCKS

Finished goods


2014 Land and buildings Other

£ 000 £ 000

96 45

26

26 141

2014 £ 000

84 68

68 152

Interest receivable r-··-

2015 £ 000 £ 000

19 ~:~ 95 208

114 236

2015 £ 000

2014

\ £000

\ 5,340 5 538

In the opinion of the Directors the replacement cost of stocks is not materially different from historical cost.



13 DEBTORS Falling due within one year

Falling due after one year

2015 £ 000 ,

2014 £ 000

2015 £ 000

2014 £ 000

Trade debtors Prepayments and accrued income Corporation tax Funeral plans Stamp club

557 855 76

2 653 30

628 677

2 249 7 959 6 746

4 171 3 554 7 959 6 746

Customer debts are included after making suitable provision for bad and doubtful items.

14 CREDITORS Falling due Falling due within one year after one year

---··--- ---- 2015 2014 2015 2014 £ 000 £ 000 £ 000 £ 000

Trade creditors 3 779 , 3 473 Obligations under finance leases (Note 10) 68 84 68 Holiday pay 405 426 V.A.T. 192 17 Funeral prepayment plans 2 653 2 249 7 959 6 746 Accrued charges 1 700 1 555 Corporation tax - ' 247 Other taxation and social security 215 · 190 ; Share interest 10 1 9 Stamp club 14

9 022 8 264 7 959 6 814 -· - __ . _ _;, ----------


notes to the accounts ~ Hearto/England Co-operative for the year ended 24th January 2015

15 PROVISION FOR LIABILITIES AND CHARGES 2015 £ 000

2014 £ 000

(a) Deferred tax At 25th January 2014 Provided during the period

736 93

753 (17)


(b) Deferred tax Deferred tax provided for in the financial statements is set out below: Accelerated capital allowances Other timing differences

829 736

(c) Deferred tax asset included in pension scheme liabilities at 25th January 2014 Provided during the year for revenue account items Provided during the year for balance sheet items

845 738 (16) (2)

829 736

1 996 2 219 (190) (124) 938 (99)

2 744 1 996 -·------~-


No deferred tax is provided on timing differences arising from the revaluation of investment properties as there are no plans for disposals in the foreseeable future. The potential deferred tax liability should a disposal be made at the current market value is estimated as £789,000, before taking into account indexation and other reliefs available.

16 SHARE CAPITAL 2015 £ 000

2014 £ 000

At 25th January 2014 Contributions Interest

2 758 393 10

2 750 445

9

Withdrawals 3 161 (404)

3 204

__ <_44_6~ '\_

2758- "' Balance at 24th January 2015 2 757

The whole of the Share capital comprises of non-equity Shares of £1 each attracting interest between 0% & 1 % per annum depending on the amounts. Shares are withdrawable on periods of notice varying from one week to two months depending on the amount involved. However, this requirement has been waived by the Directors in accordance

\

with rule 26(c). Every member who has been a member of the Society for not less than six months and holds a minimum of one £1 share is entitled to one vote. '\ , In accordance with the Society's rules, any surplus arising in the event of winding up would be distributed within the co-operative movement. \,



17 SUPERANNUATION FUNDS

The Society operates two defined benefit final salary pension schemes, covering a large number of employees, which are funded by payment of contributions to separately administered funds. The contributions to the funds are determined with the advice of an independent qualified Actuary on the basis of triennial valuations using the aggregate and projected unit methods of funding as appropriate. The Coventry & District Co-operative Society Limited Employees' Superannuation Fund was closed to new entrants following the transfer of engagements to East Mercia Co-operative Society Limited in September 1991. The Heart of England Co-operative Society Limited Employees' Superannuation Fund was closed to new entrants in October 2012. The assets continue to be administered by Trustees and the investments are managed by Schroder Investment Management. Costs and liabilities of the schemes are based on actuarial valuations. The latest full actuarial valuation was carried out at 5th April 2012 and updated to 24th January 2015 by a qualified independent Actuary employed by KPMG LLP. The following disclosure shows the position of the combined funds. The Actuary has used the same assumptions for each fund.

The main assumptions used by the Actuary were:- 2015 2014 % %

Rate of increase in salaries Rate of increase for pensions in payment Discount rate Future pension increases

2.9 2.9 3.2 2.9

SAPS based on year of birth with an allowance for CMI 2013 improvements and 1%

long term trend

3.2 3.2 4.3 3.2

SAPS based on year of birth with an allowance for CMI 2013 improvements and 1%

long term trend

Mortality - actuarial tables used

Male life expectancy at age 65 for current 65 year old Male life expectancy at age 65 for current 45 year old Female life expectancy at age 65 for current 65 year old Female life expectancy at age 65 for current 45 year old

22.2 23.5 24.4 25.9

22.1 23.S 24.3 25.8

_______ .J

Where investments are held in bonds and cash, the expected long term rate of return is taken to be the yields generally prevailing on such assets at the balance sheet date. A higher rate of return is expected on equity investments, which iS based more on realistic future expectations than on the returns that have been available historically.

The expected rates of return for each asset class were:- r-·-2oisl 2014 % %

Equities 6.3 5.5 Bonds 3.5 3.1

The amounts recognised in the balance sheet are as follows:- 2015 2014 £000 £000

Present value of funded obligations (61 603) (52 078) Fair value of scheme assets 47 880 42 095 Deficit (13 723) (9 983) Related deferred tax asset 2 744 1 996 Net liability (10 979) (7 987)

The amounts charged in the revenue account are as follows:-

Current service cost 703 758 Interest on obligations 2 191 2 147 Expected return on scheme assets (2 172) (1 794)

722 1 111 Current service costs are charged in expenses. '- ------ The net of interest on obligations and expected return on scheme assets is charged to net interest payable (Note S).



17 SUPERANNUATION FUNDS (CONTINUED)

Changes in the fair value of the scheme assets are as follows:- 2015 2014 £ 000 £ 000

42 095 39 672 2 172 1 794 3 727 705 1 670 ! 1 729 432 468

(2 216) (2 273)

47 880 42 095

Opening fair value of scheme assets Expected return Actuarial gains Contributions by employer Contributions by employees Benefits paid

Closing fair value of scheme assets

The Society expects to contribute £1,735,000 to its pension scheme in 2015.

The major categories of scheme assets as a percentage of total scheme assets are as follows:-

2015 2014 % %

Schroder Life Diversified Growth Fund Schroder Life Index Linked Bond Fund Schroder Life All Maturities Corporate Bond Fund

59.6 29.1 11.3

62.3 26.3 11.4

The pension scheme assets include no assets from the Society's own financial instruments. The pension scheme assets include no property occupied by, or other assets used by, the Society. The Society has pledged various properties to the pension scheme.

The actual return on scheme assets were as follows:- 2015 £ 000

5 899

2015 £ 000

(52 078) (703)

(2 191) (8 415) \

\ (432)

2 216

(61 603)

2014 £ 000

Actual return on scheme assets

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

Opening scheme liabilities Service cost Interest cost Actuarial losses Contributions by employees Benefits paid

(49 319) (758)

(2 147) (1 659) (468)

2 273

Closing scheme liabilities



17 SUPERANNUATION FUNDS (CONTINUED)

Changes in the fair value of scheme assets are as follows:- 2015 £ 000

2014 £ 000

2013 £ 000

2012 £ 000

2011 £ 000

Total market value of assets 47 880 42 095 39 672 36 344 34 644 Present value of scheme liabilities (61 603) (52 078) (49 319) (43 836) (41 960)

Deficit in the scheme (13 723) (9 983) (9 647) (7 492) (7 316) Related deferred tax asset 2 744 1 996 2 219 1 948 2 048 Net pension deficit (10 979) (7 987) (7 428) (5 544) (5 268)

Experience adjustments on scheme assets 3 727 705 2 251 (426) 1 145

Experience adjustments on scheme liabilities (1 397) : (544) 327 317 741 t

--··-·--·-

19 REVENUE RESERVE

2015 2014 £ 000 £ 000

5 449 5 459 (112) (10)

(1 394)

3 943 5 449 ··-····--·-----

2015 2014 £ 000 £ 000

33 392 32 677 938 (99)

(4 688) (954) (8) (7)

112 10

784 1 765

30 530 33 392

18 REVALUATION RESERVE

Balance at start of period On disposal Revaluation

Balance at end of period

Balance at start of period Movement in the pension scheme deferred tax asset relating to balance sheet items Actuarial loss on the pension funds Share interest charged direct to revenue reserve On disposal Surplus transferred to reserves

Balance at end of period



20 CASHFLOW 2015 £ 000

2014 £ 000

(a) Reconciliation of trading surplus to net cash inflow from operating activities

Net cash inflow from operating activities

3 792 5 201 2 347 2 014 (198) (68)

(1 755) (1 261) 2 143 1 205 (2 564) (2 583)

3 765 4 508

Trading surplus Depreciation, amortisation and impairment Increase in stocks Increase in debtors Increase in creditors Grants and donations

(b) Reconciliation of net cash flow to movement in net funds

(1137) (2 037) 84 89

(1 053) (1 948) 9 914 11 862 8 861 9 914

Cash Other 2015 Flows Movements 2014 £ 000 £ 000 £000 £ 000

8 929 (1 137) 10 066 (68) 84 -(152)~

8 861 (1 137) 84 9 914 ,···~

Decrease in cash in the year Other movements Change in net funds Net funds at 25th January 2014 Net funds at 24th January 2015

(c) Analysis of changes in net funds

Cash at bank and in hand Obligation under finance leases

Net funds

21 CONTINGENT LIABILITIES

The Society operates a deposit protection scheme to protect Members' Share Capital by securing a charge on the Society's Hinckley store and the Rugby funeral home properties.

The Society has a contingent liability of £1.225m in respect of the Swan Centre development in Rugby. However, the Board of Directors do not consider this justified and have therefore not provided the amount in the financial statements,

22 RELATED PARTY TRANSACTIONS

There were no related party transactions to report under Financial Reporting Standard 8 in the year (2014:none).

/ ·- ~.


community support and member relations

Kat: Cross and Canine Partner. May receiving a donation from Jo Dyke, Community & Membership Adviser and Hanne Hoeck, Society President

community support The Society's Helping Hearts Awards scheme continues to be a huge success with our commitment in the community pledging in excess of over £786,000, which has helped over 4,000 groups since its inception in 2000.

Last year we donated in the region of £52,000 to over 300 charities and groups. As the country marked the 100th Anniversary of the First World War, the Society chose to help a number of armed forces charities including a 'Book of Remembrance' for service personnel who lost their lives in conflict from 1914 to the present day.

members' charity giveaway Members were invited to vote for a £5,000 giveaway, by nominating one of three local charities, which were; Canine Partners, Crossroads Care and The Laura Centre.

Our members chose Canine Partners to receive £3,000. Canine Partners trains assistance dogs for people with physical disabilities to help them with everyday activities. The dogs help increase their independence, confidence and provide loving companionship. The other two charities each received £1,000.

local schools The Food for Thought project was supported by the Society, a community based project dedicated to inspiring Coventry children to get out into the garden and grow their own food. The project helps them to discover the life cycle of foods on their plates from seed to consumption. It also teaches them valuable cooking skills and to learn the importance of nutrition and a healthy lifestyle.

Schools in the Nuneaton and Bedworth region were asked to participate in a

Gardening Olympics project. The competition required the children to put together a display considering the theme "Celebration of Summer". Schools put on magnificent displays of grown flowers and vegetables, creating miniature gardens using recycled materials and included poetry and artwork to complement the theme.

christmas card competition The Society invited Primary School children from across the trading region to design our corporate Christmas card incorporating the theme "What Christmas means to you". The winner for 2014 was Cole Sephton-Grant from Milverton House School who was presented with a prize and £500 worth of goods for his school.

heart of england community foundation The Society would like to thank the Heart of England Community Foundation, who administers the Helping Hearts Award scheme.

pamper with a hamper The Society once again ran the popular 'Pamper with a Hamper' campaign by teaming up with TNT Express, Coventry Telegraph and its sister newspapers to distribute 250 Christmas hampers during the festive season. Volunteering employees helped pack the hampers full of

Food for Thought Project


co-operative goodies and fairtrade items. Local newspaper readers were asked to nominate a special person over the age of 65 to receive a Christmas hamper which was then kindly delivered by TNT Express.

member relations The three regional Member Relations Committees, consisting of members and employees, review the Helping Hearts applications and organise activities for members.

A Members Draw took place for members with forty or more year's membership to enter a free prize draw. A £10 gift voucher was sent to all the 200 winners.

co-operative women's guild The Co-operative Women's Guild met for. their regular meetings and social activities during the year with members attending the Annual Guild Congress in Liverpool.

heart of england co-operative orchestra The orchestra membership continues to grow with weekly rehearsals well

attended, enabling five concerts to be performed and raising over £2,500 for local charities including the Society's corporate charity Myton Hospice. The Orchestra also enjoyed performing to an outside audience at their 'Proms in the Precinct' concert in Coventry.

co-operative ladies choir The Ladies Choir enjoyed a busy year entertaining and bringing pleasure to many audiences and also welcomed a number of new members to their rehearsals.

woodcraft folk The Woodcraft Folk is a voluntary co operative organisation for children and young people. The Society is delighted to support the West Coventry group whose main focus for the year was 'Fairness' teaching them the value of fairness and shopping fairly.

During the Summer months, the theme was 'Have fun with nature' where the group visited the Lockerbrook Outdoor Centre in the Peak District enjoying lots of activities including hiking, making and flying kites and orienteering.


wheatsheaf theatre The Wheatsheaf Players, the amateur dramatics group enjoyed a great year of productions entertaining audiences with five performances which included their customary Pantomime 'Cinderella' and 'Coventry Ties' a gripping story of two Coventry soldiers stranded in Northern France set in 1916.

west midland co-operative's member education group The Society is a member of the West Midland Co-operative's Member Education Group which links up with neighbouring co-operative societies to promote and organise education in the West Midlands area. During the year the group supported and attended the Warwick Folk Festival. The theme was 'Co-operatives in Unity' and the group invited other co-operatives to the four day event to promote their business which included Revolver Coffee, The Phone Coop and Co-operative Energy. The Society also contributed to the children's workshops and circus skills.

Circus skills at the Warwick Folk Festival


trading area and operations The co-operative food Balsall Common - Kenilworth Road 01676 535006 Barwell - Malt Mill Bank 01455 846200 Bishops ltchington - Chapel Street 01926 612180 Coventry - Allesley Old Road, Allesley 024 7667 2783 Coventry - Ansty Road, Wyken 024 7644 5616 Coventry - Earlsdon Street, Earlsdon 024 7671 3377 Coventry - Norman Place Road, Coundon 024 7633 2548 Coventry - Tile Hill Lane, Tile Hill 024 7646 6170 Crick - High Street 01788 822277 Fenny Compton - High Street... 01295 770246 Harbury - High Street.. 01926 612252 Hinckley - Hill Street and Castle Street.. 01455 238011 Long ltchington - Church Road 01926 812411 Market Bosworth - Main Street 01455 290231 Meriden - The Green 01676 522378 New Arley - Gun Hill 01676 540480 Nuneaton - Coniston Way, St Nicolas Park 024 7632 9974 Nuneaton - Copper Beech Road, Camp Hill 024 7639 2438 Nuneaton - Kem Street, Attleborough 024 7634 4938 Nuneaton - New Century Way and Queens Road 024 7638 2331 Nuneaton - School Road, Bulkington 024 7631 2146 Royal Leamington Spa - Warwick Gates, Cressida Close 01926 426506 Rugby - High Street, Hillmorton 01788 543567 Rugby - Lawford Road, New Bilton 01788 536248 Rugby - The Green, Old Bilton 01788 811774 Ryton-On-Dunsmore - High Street 024 7630 2691 5apcote - Church Street 01455 272257 Southam - Coventry Road 01926 812308 Stoney Stanton - Long Street.. 01455 273813 Warwick - Woodloes Avenue South .' 01926 493281 Wellesbourne - Loxley Close 01789 840861

..-0-..... Foodcentres Coventry - Corporation Street.. 024 7663 0606 Coventry - Remembrance Road, Willenhall 024 7630 3034

..-0-..... lateshops Long Lawford - Townsend Lane 01788 565066

Co-operative Department Store Nuneaton - Abbey Street and Queens Road 024 7638 2331

Co-operative Electrical Departments Atherstone - Long Street and Station Street 01827 712277 Bedworth - High Street and Spitalfields 024 7631 3627 Coventry - Corporation Street and Lower Precinct 024 7663 0606 Hinckley - Castle Street and Hill Street.. 01455 238011 Nuneaton - Abbey Street and Queens Road 024 7638 2331 Royal Leamington Spa -Warwick Street 01926 832738 Rugby- Chapel Street... 01788 536245

Co-operative Furniture Departments Atherstone - Long Street and Station Street 01827 712277 Coventry - Corporation Street and Lower Precinct 024 7663 0606 Hinckley - Castle Street and Hill Street 01455 238011 Nuneaton - Abbey Street and Queens Road 024 7638 2331 Royal Leamington Spa - Warwick Street 01926 832738 Rugby - Chapel Street.. 01788 536245


The co-operative home & living Atherstone - Long Street and Station Street 01827 712277 Coventry - Corporation Street & Lower Precinct 024 7663 0606 Hinckley - Castle Street and Hill Street 01455 238011 Rugby - Chapel Street.. 01788 536245

R_oorA& Royal Leamington Spa - Warwick Street 01926 832738

Co-operative Toy Department Nuneaton - Abbey Street and Queens Road 024 7638 2331

. ~ The co-operative funeralcare Barlestone - 'Gilliver's', Church Road 01455 290356 Bedworth - High Street.. 024 7631 4823 Coventry - Ansty Road, Wyken 024 7665 0619 Coventry - Foleshill Road, Foleshill 024 7666 5676 Coventry - Lower Holyhead Road 024 7622 5826 Daventry - High Street.. 01327 707905 Earl Shilton - Kings Walk 01455 844400 Hinckley - 'A. J. Murray', Lower Bond Street... 01455 233974 Kenilworth - Warwick Road 01926 856699 Nuneaton - Park House, Riversley Road 024 7638 2535 Royal Leamington Spa - Warwick Street 01926 428665 Rugby - Bilton Road : 01788 576099

.. (Within Co-operative Stores)

Atherstone - Long Street 01827 718365 Bulkington - School Road 024 7631 2100 Long ltchington - Church Road 01926 812315 Long Lawford - Townsend Lane 01788 547174

Bedworth - High Street and Spitalfields 024 7664 3667 Royal Leamington Spa -Warwick Street 01926 430003

Co-operative Distribution Centre Nuneaton - Gaston Road 024 7638 3857

Co-operative Property Services Nuneaton - Gaston Road 024 7635 3419

Community & Membership Office Nuneaton - Abbey Street... 024 7638 2331

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