Welcome from Iain Cornish, Chief Executive

Welcome to Yorkshire Building Society's 2010 Annual General Meeting (AGM) website. Over the following pages we set out the key matters of interest to you, our members, ahead of this year's AGM.

The following information answers some of the most common questions from members about the current economic situation, the Yorkshire's position, the merger with Chelsea Building Society and the Society's performance in 2009. It also explains how you can vote at the AGM to be held on Wednesday 28 April 2010 in Bradford. Further details can be found in the Notice of Meeting.

If you are able to attend the AGM, you may wish to view the map showing the meeting venue which is different from the usual location. If you are unable to attend the meeting, you can still vote on the resolutions by completing and returning the enclosed voting form in your voting pack or by voting online. Your vote is important to us – please use it.

In my welcome message last year, I said:

• we were committed to remaining an independent mutual building society;
• our focus in 2009 would be in helping our members through these difficult times and balancing the interests of our savers and borrowers in a fair way; and
• we would build on the financial strength of the Society.

Independent mutual building society

The Yorkshire's position as the second largest building society will be reinforced when the merger with Chelsea Building Society completes on 1 April 2010 (subject to confirmation by the Financial Services Authority).

The merger is the most significant development in our recent history and will strengthen our ability to deliver long-term value, financial security and excellent service to all our members.

Helping our members

We have protected our loyal long-standing savers by ensuring that our products are competitive on a sustainable basis, for example, by continuing to not pass on the full Bank of England base rate cuts. This decision meant that during 2009 our savers were £85m a year better off than they would otherwise have been. For our borrowers we have proactively helped them manage their finances in the continuing difficult economic conditions. For example, we have offered our existing borrowers further fixed-rate products at the end of their mortgage deal, regardless of the loan-to-value on their property at the time. We remain committed to our branch and agency network and opened 11 new agencies in 2009, as well as developing our other distribution channels. Our Barnsley members now have an online product range and we have maintained all the Barnsley-branded branches following completion of our merger on 31 December 2008.

Financial strength

Our 2009 financial results have been affected by the challenging economic conditions. However, we have demonstrated resilience and maintained a strong underlying position, with an improvement in performance in the second half of the year. In an extreme economic environment we achieved a core operating profit of £7.7m with an overall statutory loss of £12.5m. The results were also affected by our deliberate decisions to deliver value and increased financial security to members. For example we have:

• maintained a high level of high-quality liquid assets which provide greater member security but generate a low return;
• protected our savers from the full impact of the cuts in the Bank of England base rate; and
• adopted a conservative approach to lending in an uncertain climate.

However, we emerged from the year demonstrating continued resilience, having maintained one of the strongest capital positions of any major UK lender. All of these matters are covered in more detail in the Summary Financial Statement.

The year ahead

In summary, 2009 was a landmark year for the Yorkshire. It was also a year of opportunity and challenge. In 2010 we expect that market conditions will continue to be every bit as tough as they were in 2009, both in the UK retail savings and residential mortgage markets. We are however seeing green shoots in the housing and mortgage markets, and we are planning to prudently increase our lending in the core prime residential market.

I am very optimistic about the future prospects of the Yorkshire as a leading mutual organisation, committed to delivering financial security and long-term value to you, our members. In particular, on behalf of the board and all of my colleagues, we welcome members of Chelsea to Yorkshire Building Society. I can assure all members that their interests will remain at the heart of the combined Society and that we are committed to being a competitive member-owned organisation and a secure alternative to the retail banks, providing real choice to consumers across the UK.