Our review of 2015 Annual General Meeting 2016 Monday 25 April, 6.30pm Welcome Contents

Welcome to our review of 2015. I’m delighted Retiresavvy, our online community focusing 4-5 A summary of 2015 to say that we’ve had another successful year on retirement, launched last year and is already 6 Improvements for our and in 2015 we enabled more people to save proving very popular with those planning for customers for their future and buy their own home than and already in retirement. We also introduced we ever have before. the Skipton Building Society Retirement 7 Top 10 for service Index in November to help us build a picture 8 Savings specialists Throughout the year we’ve offered competitive of people’s attitudes towards retirement at mortgage and savings products that have different stages of life, so we can further 9 Our Bereavement Team featured in best buy tables. I’m thrilled that develop our retirement planning service. some have even won awards. We also had 10-11 Grassroots Giving & fundraising great news that, following our upgrades in Please make sure you vote in our Annual 2014, Fitch and Moody’s both upgraded General Meeting (AGM) to have your say in 12-13 Focus on retirement our credit ratings again showing that we’re how your Society is run. The back page of 14 Our Remuneration Policy “Our members are at the continuing to strengthen our position. this booklet shows the full list of our 2016 resolutions. On pages 14-19 you can read 15 Memorandum changes th forefront of everything we I’m very proud that Skipton came 7 in the more about your Board members along 16-19 Meet your Board do. I’m very proud that 2015 KPMG Nunwood Customer Experience with information about the changes you’re we’re ranked 7th out of 272 Excellence Survey. We’ve also been voting on. 20-26 Summary Financial Statement “ We strive to deliver excellent recognised as a great place to work and are customerUK brands service for customerand I would like now listed in the Sunday Times 100 Best 27-35 Summary Directors’ Remuneration Report toexperience thank all our excellence people for and their the Companies to Work For. Our continued focus commitmenttop rated UK in buildingmaking this society.” on our customers and colleagues means Back Notice of AGM & how to find us happen so often throughout 2014.” we can keep making improvements to the David Cutter services and products we offer. Group Chief Executive 2015 at a glance November April • Chancellor’s Autumn Statement February • Annual General Meeting • Skipton Building Society Retirement Index launched • Listed in Sunday Times June • Government changes September • Grassroots Giving winners announced 100 Best Companies pension rules ★ Awarded 5 stars at the Financial Adviser Service to Work For survey • Fitch and Moody’s upgrade • Retiresavvy.co.uk launches Skipton’s credit rating • Grassroots Giving voting opens Awards for Mortgage Lenders

March May July August October December • Chancellor’s Budget • UK General Election • Chancellor’s Summer Budget • Our new • 7th in KPMG Nunwood’s Customer • Skipton launches text ★ • Skipton’s Loyalty ISA • Skipton’s Grassroots Skipton wins Best National Bereavement Team Experience Excellence Survey and email alert service range launches Giving scheme launches Building Society at the What in place ★ Skipton wins Best Junior/Children’s • Our online complaints Mortgage Awards Savings Provider at Personal process improved Finance Awards

2 Vote in branch or by post To vote online visit skipton.co.uk 3 A summary of 2015

Customers Online

2.5 million 88% net satisfaction 7 visits to skipton.co.uk More than 1,000 (satisfied customers (91%) minus dissatisfied customers (3%), more branches changes made to 2,400 customers asked in KPMG Nunwood Relationship Survey January-December 2015) refurbished skipton.co.uk to maintain more accounts opened and improve the website 60% online than in 2014 7th out of 272 UK brands 29,502 KPMG Nunwood Customer Experience customers attended Excellence Survey reviews in branch Source: KPMG Nunwood, August 2015 Colleagues

Investors Savings in People Gold Standard 19 Digital Guides in branch

growth in mentions in newspaper th 461 best buy tables 11.9% savings balances Ranked 58 93% in the Sunday Times 100 of our colleagues are proud Best Companies to Work For to work for Skipton 30,249 Over 39,000 more savings customers texts sent to customers about than 2014 their ISA transfer Community

Mortgages Colleagues 162 2 days raised over community groups available to all helped by employees to £40,000 12,576 11.9% Helped 618 Grassroots Giving volunteer for charity more mortgage growth in customers through customers group mortgage the Help to Buy than 2014 balances Scheme Charitable Foundation gave More than 30,000 public votes cast for mentions in newspaper mortgages for £150,000 Grassroots Giving 80 best buy tables 3,847 first time buyers to UK charities

4 Vote in branch or by post To vote online visit skipton.co.uk 5 Improvements for our customers Top 10 for service Keeping you We always try to listen to customers and look for ways to do things better, We’re thrilled to have come th in secure online whether it’s using new technologies or offering you more support. Here are just 7 KPMG Nunwood’s latest Customer some of the improvements we made in 2015. Experience Excellence Survey out of We take online safety very seriously. 272 UK brands – six places higher Here are some of the features we use Digital Guides: Face-to-face help than last year. to keep your details secure: Many customers said it would be useful to have people in our We now sit in the top 10 among great • Unique login – we’ll never contact you branches to support them with their online Skipton accounts. brands like John Lewis and First Direct and to ask for your login information. So we’ve created a new team of Digital Guides. They each look we’re the top-rated building society! The • Grid Card – you can’t withdraw money after a group of branches and are there to help, whether you results came from customer feedback, so it need hints and tips for using our website or just want or change your details online without this really means a lot to us and shows that our extra layer of security. information about our online services. constant focus on improving our service Your memorable image and phrase – is being recognised. • They’re also sharing their digital knowledge with our make sure you can see these when branch teams, so there are even more people you can you log in. turn to for support. • Padlock icon – if you can’t see it in your Putting you in the picture browser’s window, don’t log in. “ I’m really excited about my new role. There’s so When we’re talking to customers in branch, we can now Making the most of your bring things to life using iPads. Our customers say it helps much you can do on our accounts online website now, I want to to highlight the important points to think about and makes help our customers get things clear and simple. iPads are also Feedback matters being trialled in some branches If you’ve registered on our website, the most out of it.” Our Customer Panel makes a huge for anyone who wants help depending on the type of account Jemma Tidswell, opening an online difference when it comes to you have, you can: Digital Guide, savings account. improving our services. Leeds branch • See your savings summary or the Over 4,000 of you have already joined the balance of your mortgage. panel and signed up to take part in our • Pay money into your online savings research. In 2015, we asked for feedback Web chat account with a debit card. on our AGM booklet, Loyalty Cash ISAs, We’ve recently launched a web chat service for our mortgage broker partners and they’re mortgage calculators, how they feel about • Transfer money between savings finding it really useful. We’ll be rolling it out to customers over the next year so there’ll be web chat and much more. accounts when you need to. another convenient way for you to get in touch. • Check the interest rate on your What’s most important, of course, is how savings account. Keeping you updated we use the feedback. For example, when we asked about voting at our AGM, panel • Update your details and We’ve also introduced a new text and email alert service to let you know when an electronic members said they wanted to know more contact preferences. payment has gone into your savings account. You can set up account alerts for your online about who they were voting for. So, this If you opened your account in a branch, and offline accounts at skipton.co.uk (if you’re registered with Skipton Online) or call us on year, we’ve allowed more space in this you can still register for Skipton Online 0345 702 5026 and we’ll set it up for you. booklet so each Board member can explain and check your balance whenever you their role and what they bring to the Board. want to. A more personal service As brilliant as technology is, we know there are times when you just want to speak to To find out more or to join To register go to skipton.co.uk someone who understands. Our new Bereavement Team is specially trained to help you the panel, visit and click on the blue login button. during difficult times. You can find out more about this on page 9. skipton.co.uk/customerpanel

6 Vote in branch or by post To vote online visit skipton.co.uk 7 Savings knowledge Savings market changes Combining our strengths From 6 April 2016 – Personal Savings Allowance Skipton Building Society launched Skipton Financial Services Limited (SFS) to rely on All non-ISA savings interest will be paid gross from 6 April. This means income tax will no 28 years ago to offer expert financial advice on the high street for customers with more complex investment needs. The Government has introduced longer be deducted before it’s paid to you. some new initiatives recently For basic rate taxpayers the first £1,000 earned in savings interest won’t be subject to The two businesses share the same values and have (shown right). As savings specialists, tax. The allowance will be £500 for higher rate worked closely together over the years. We have now we’re here to help make sense of the taxpayers and won’t apply to additional rate decided to combine the two organisations to enable us changes so the money you’re saving taxpayers. It will be up to you to pay tax on to provide an even better service to our customers. We’re still awaiting regulatory approval for this but hope works as hard as possible. any interest above your allowance limits. “We think it’s really the proposed integration will be completed later this year. ISAs will still be tax-free. important to be able to Best for our customers From 6 April 2016 - Flexible Cash ISAs We know it’s important for our customers to have access offer face-to-face financial With a Flexible ISA you’ll be able to withdraw As usual, our branch and telephone to financial advice. These days it’s becoming harder to advice and a stronger, funds and top them back up again in the teams know about the new initiatives find advice on the high street, as other banks and building combined Skipton same tax year without losing your ISA societies have reduced or withdrawn their services. Building Society will mean and can explain what they mean for each allowance. We’ll be offering flexibility on all our saver. Even if we don’t offer a specific we can do more to help easy access ISAs from April 2016. We hope that by bringing the Society and SFS together account, we’ll try to provide information our customers.” From 1 January 2016 - Lower FSCS limit we can build on the strengths of both businesses to so customers can decide what’s best  David Cutter, The Financial Services Compensation Scheme offer customers the advice and guidance they need, for them. Group Chief Executive (FSCS) has reduced the amount of savings all under one roof. Our No Pressure Promise means that our it protects from £85k to £75k per person for customers get just what they need to make each provider you have savings with. The limit an informed decision and can think about applies to the total amount saved with each things in their own time. provider, including your share of any joint accounts. We’re also working with our subsidiary Our new Bereavement Team Skipton Financial Services Limited and From 1 December 2015 - Help to Buy Cash ISAs These help first time buyers save a deposit for looking at ways to provide the right level of When someone close to you dies, we understand a house. You can save up to £200 per month guidance and advice in the future following and the Government adds 25% to whatever that working through their finances can be all these changes. you put in, up to a maximum bonus of £3,000. stressful. So we’ve listened to customers who’ve We don’t offer these at the moment. been through such difficult times and created a specially trained Bereavement Team. From 6 April 2016 – 2016/17 ISA allowance The limits are frozen for the 2016/17 tax year Kirsty Greig, our Bereavement Team Manager explains: for ISAs at £15,240 and for JISAs at £4,080. “If you ever need us, the first team member you speak to will become your personal contact, so you don’t have to keep explaining things to different people. They’ll give Here’s what some of our customers say you their direct number and email address and will talk “Lots of customers say about our service: you through what you need to do. From registering the it’s such a relief to have “The lady that helped me was very knowledgeable and death to getting account information, settling a mortgage someone to turn to. I love offered me another option that I hadn’t thought about.” and claiming life cover. We deal with everything really coming to work knowing I may be able to help just “They exceeded my expectations. The service was excellent.” sensitively and will make sure it’s all sorted as quickly as possible for you.” one person through a “The customer service representative was so nice, so very difficult time.” professional yet friendly and very, very helpful.” Kirsty Greig, Bereavement Team Manager Bereavement Team helpline 0345 266 1209

8 Vote in branch or by post To vote online visit skipton.co.uk 9 Giving something back We all get stuck in As well as donating to charities and local causes, our head office and branch Grassroots Giving is flourishing teams across the country give their time Grassroots Giving, our award-winning scheme to support generously to volunteer and fundraise too. good causes across the UK, was launched as part of our 160th anniversary in 2013. In 2015 we raised more than £40,000 for all In 2015 we had just over 1,000 entries from across the country. sorts of charities through activities ranging from a Family Fun Day to swimming the channel and An incredible 30,000 votes were cast by the public for the Scafell Pike 363 community organisations shortlisted. These ranged climbing the O2 arena. from sports clubs to theatre troupes and gardening clubs to Kingsthorpe Karate Here are just a few other examples of the things children’s playgroups. Club say thank you we do. Vital funding Well done Keswick Each of the 162 winners in 2015 received a £500 donation. As Left out in the cold Our Keswick branch goes to none of the groups are registered charities, they may struggle to great lengths to support its get funding elsewhere and they all say the money makes a real Branch manager Jags Uppal persuaded more than 20 colleagues from across the Society to local community. In 2015, the difference. For some, it’s absolutely vital. For example, it helped team hiked up Scafell Pike, to save North Park Bowls Club in Darlington from closure. join her in sleeping outside overnight in the biting cold, wind and rain at St Basil’s BIG SleepOut took part in the Great Cumbrian Valuable support in Birmingham. Run, organised a sunflower competition and held a coffee It’s not just the winners who benefit though. On the Grassroots “Grassroots Giving Each year, the charity morning. They raised over Giving website there are lots of free resources and guidance is an amazing idea organises the event £2,000 for Parkinson’s UK, which to help with everything from grant applications to recruiting and really does help in November to help they’ll split equally between raise money for, and members. Those shortlisted can also get a boost from the PR smaller, unknown national research and their local and social media campaigns in their area. awareness of, youth Parkinson’s UK branch. community groups homelessness. Jags Along with other branches, Continuing to grow to grow and wanted to support the Keswick also supported the In 2016 we’ll support 163 organisations with £500 donations, work harder.” charity after hearing flood-hit communities in January bringing the total donated since 2013 to £323,000. about it from one of Eccles Special Needs 2016, volunteering at the local our customers, and Stay & Play food bank and collecting cleaning @skiptonbs_grg /skiptongrg her team raised £2,179 Helping the homeless products and food donations. to support the crucial work they do. More donations Another way we give something back is through our Charitable Foundation. In Volunteering locally 2015 we donated £150,000, which was shared between 70 registered charities, including youth initiatives, health projects and support for the elderly. We’re all encouraged to volunteer in our local communities. All colleagues can take up to two days every year to An independent group of Trustees decides which charities the Foundation donates to. volunteer as long as they also match this with two days For example, in 2015, two of the recipients were: volunteering in their own time. • Combe Down Holiday Trust in Bath - providing holidays and days out for disabled Laura Smyth from our Financial Crime Team at head office gave a talk to a Safer Neighbourhood group. Covering fraud people and their carers. Doorstep crime and doorstep crime, she used her experiences at Skipton • Sefton Children’s Trust in Liverpool - helping young people and families to advise the group how to help people in their community experiencing difficulties. be more aware and stay safe.

10 Vote in branch or by post To vote online visit skipton.co.uk 11 Rethinking retirement All change for pensions As the traditional views of retirement are changing, we’re working hard to make The new pension rules introduced by the sure we’re ready to support our customers in navigating any new legislation Government in 2015 have made it more and making the right plans. From our retirement review service to carrying out important than ever to get advice about funding retirement. Whether you’re right at the start of industry research and our popular retiresavvy.co.uk online community, we’re your career or are already retired, it’s important helping people make the most of their life ahead. to have plans in place. We’ve been working with our subsidiary, Skipton Financial Services Limited, to help many of our customers put pension plans together for their retirement. A first for retirement Life catches up at As retirement specialists we understand 35 the facts and figures but, to get the full One of the main findings from picture, we also want to know how people the research is that reality tends really feel about it. So we commissioned to bite when we hit 35. It showed a detailed study and, working with Ipsos that younger people feel optimistic MORI, interviewed 3,000 people across the about retirement, even if they Make sure you country aged between 18 and 75. haven’t done anything to prepare. And those in their mid-30s are We wanted to find out whether people increasingly aware that they need Retiresavvy.co.uk is a great place to visit if you’re thinking about or are already are confident about retirement and how to start planning, but can’t see in retirement. It’s our online community that’s full of useful information to help expectations compare to reality. The result beyond current priorities such as you plan and enjoy your retirement your way. is The Skipton Building Society Retirement children and mortgages. Index – Britain’s first ever index to focus on people’s feelings about retirement. We’ll Plan for a bright future You’ll find everything from interviews with famous over 60s like Sir Michael Caine, Dame update our research regularly and use Helen Mirren and Harrison Ford, to useful guides and articles full of expert financial tips. the index to monitor people’s changing The good news is that people attitudes over time. who’ve planned for their retirement Chat and share are far more likely to feel satisfied when they reach it. 77% of retirees Many people say one of the things they like most about retiresavvy.co.uk is being able who prepared in advance said to share ideas and experiences with others and get inspiration. Our forum is a great place to they’re living the lifestyle they talk about all things retirement. want, compared to just 43% of those who didn’t prepare. Designed to suit you There was a difference between The site has something for everyone. You might just want expectations and reality too – to gather information or you can get involved by blogging, retirees were almost twice as joining discussions on our forum or doing our monthly quiz. positive about retirement as those who are still working.

To see other key findings from the research or read the full report, You can also keep track of what’s happening on retiresavvy on visit skipton.co.uk/retirement-index Facebook: /retiresavvy and Twitter: @retiresavvy

12 Vote in branch or by post To vote online visit skipton.co.uk 13 Your vote matters

As a mutual organisation, our members have a real say in how we run things. The back page of this booklet and the enclosed voting form list the Ordinary and Special Resolutions, along with the Directors for election and re-election for 2016. Before you vote, you can see the proposed changes to the Society’s Memorandum on the next page and we’ve included information about the Directors’ Remuneration Report and Policy below. Pages 16-19 have details of your Board members so you can find out more about who you’re voting for. To vote online, visit skipton.co.uk/agm and enter your unique login and password (you’ll find these on your Notice of AGM letter). Alternatively, you can send your voting form to us in the enclosed pre-paid envelope or hand it in at any of our branches. We really care about what you think so don’t miss the opportunity to use your vote.

More about the resolutions Special Resolution – Approval of the changes to our Memorandum The Board is proposing some changes to our Memorandum at this year’s AGM. You’ll find a Resolution 3 – Approval of the Directors’ Remuneration Report summary of what’s changed and why we’re proposing them below. Resolution 3 relates only to the Directors’ Remuneration Report which is summarised in You can also read a copy of the document with details of the proposed amendments at the back pages of this booklet. The section headed ‘Remuneration Policy’ is covered by skipton.co.uk/agm or you can request a copy from: The Secretary, Skipton Building Society, Resolution 4, as explained below. The Bailey, Skipton, North Yorkshire BD23 1DN or by calling 0345 850 1733. As we’ve done in previous years and in line with best practice, we’re proposing an Ordinary Our Memorandum outlines the Society’s activities. The current wording stops us from creating Resolution to approve the Directors’ Remuneration Report for the financial year ended 31 floating charges on our assets because of the Building Societies Act 1986. An example of a December 2015. fixed charge is a mortgage on a property. A floating charge is a form of security given over a changing pool of assets. Resolution 4 – Approval of the Directors’ Remuneration Policy The law has now been updated to allow building societies to create floating charges. As Resolution 4 relates to the Directors’ Remuneration Policy, which is summarised in the back creating these charges may help us in our treasury activities and could help reduce our pages of this booklet as a section of the Directors’ Remuneration Report. funding costs, we’re proposing changes to our Memorandum so we can create floating Although we’re not required to prepare a Remuneration Policy or propose a resolution charges if we need to. for its approval we set out the Directors’ Remuneration Policy in our 2013 Annual Report and Accounts. Due to regulatory changes, we’ve reviewed and updated this policy. We’re The proposed changes are: proposing an Ordinary Resolution to approve the revised policy. In paragraph 4.(a) delete ‘other than by the creation of a floating charge’ We’ll make sure that a vote on the Remuneration Policy takes place every year, unless the • approved policy hasn’t changed, in which case we’ll propose a similar resolution at least every • In paragraph 7. in the definition ‘dispose (or disposing)’, three years in line with the requirements for listed companies. delete ‘(except by way of floating charge)’ • In paragraph 7. in the definition ‘parent undertaking’, delete ‘section 258 of The vote on both of these resolutions will be treated as advisory only and the Directors’ the Companies Act 1985’ and insert ‘section 1162 of the Companies Act 2006’. entitlement to remuneration is not conditional on this resolution being passed. You can read both the full Directors’ Remuneration Report and Directors’ Remuneration The Board believes that these amendments will benefit the Society and its members Policy at skipton.co.uk/financialresults or you can request a copy from: The Secretary, and recommends that members vote FOR the amendments. Skipton Building Society, The Bailey, Skipton, North Yorkshire BD23 1DN or by calling 0345 850 1733. If our Memorandum changes are approved at the AGM and registered by the Financial Conduct Authority it is intended that the changes would take effect from 1 August 2016. 14 Vote in branch or by post To vote online visit skipton.co.uk 15 Meet your Board Directors for re-election Your vote really does make a difference – a Director will only be elected or re-elected if the Responsibilities: Chairman of Audit Committee and member of the Marisa Cassoni, majority of members who vote, vote in their favour. You can see what skills and experience 64 Nominations Committee. Joined the Board: 2012 each of the Directors brings to the Board in the following pages. Previous experience: Group Finance Director of John Lewis Partnership, Royal Mail Group, Britannic Assurance Group & Prudential UK Group. New Directors for election Member of Accounting Standards Board 2005-11 and the CBI Economics Committee 2001-12. 15 years of Non-Executive Directorships of listed companies in the UK and USA. Chair and Director Trustee and Governor of Responsibilities: Distribution and Financial Services Director, member of a number of UK charity and pension funds. Andrew Bottomley, 50 the Executive Committee and Chairman of the Skipton Financial Services Joined the Board: 2016 Limited Board. Other directorships: Non-Executive Director of AO World plc, The People’s Operator plc, Enterprise Inns plc and Member of the Previous experience: Mortgage and Bancassurance Director, Lloyds Competition and Markets Commission. Bank. Senior roles at the Halifax encompassing branches, mortgages and head office positions, Chairman of Halifax Sharedealing. What I bring to the Board: Chartered Accountant with 40 years’ experience as a financial professional, 20 years as an Executive Board member across various customer facing industries, including financial What I bring to the Board: 30 years’ tenure in building societies and services and 15 years as a pension fund Trustee, with 9 years as Chair. banking. Wide experience in change management, distribution strategy and conduct risk. “Skipton has a strong and unique culture and brings important diversity to the marketplace. I believe businesses are about people. By employing the right ones, then nurturing and challenging them, you “Having worked in financial services for many years, I was keen to join an organisation that cares for ensure success. As a former Finance Director with many years of practical experience, I can relate to both its customers and colleagues. I thrive on a challenge and an action-orientated environment where what the teams I oversee are trying to do and offer a wider perspective which will help them to achieve the team has strong values that won’t be compromised. I’ve dealt with many cultures and segments their goals.” of the financial services industry and I’m keen to develop people and help them grow. I also have wide experience in conduct risk and change management and ensure there’s a rigorous customer focus. I’m pragmatic and bring energy and a clear set of values to work every day.” Responsibilities: Commercial Director, member of the Executive, Retail Ian Cornelius, 47 Credit and Asset & Liability Committees and Chairman of the Skipton Joined the Board: 2012 International Limited Board. Responsibilities: Member of Audit and Nominations Committees. Denise Cockrem, 53 Previous experience: Commercial Director of Homeloan Management Previous experience: Over 20 years’ experience in financial services Joined the Board: 2015 Limited, senior roles at Virgin Money, Bradford & Bingley, Capital One in Barclays, RBS, Direct Line & RSA Insurance. Currently CFO for Good and Boots. Energy plc, a fast-growing, AIM listed renewable energy supplier. What I bring to the Board: A strong and clear focus on understanding and Other directorships: Good Energy plc, MacIntyre (charity). meeting the needs of our customers. Ensuring that we continually improve What I bring to the Board: Financial experience combined with a passion the products and services that we offer. for delivering excellent customer service and developing people. “I joined Skipton because it has strong values that resonate with my own “Customer service is really important to me and Skipton’s reputation for and a great reputation for looking after its customers. I see my role as building on the heritage and this and its investment in its people who deliver that, were strong drivers in reputation that Skipton already has, with the aim of becoming the very best place to go to for financial attracting me to join. I enjoy being part of an organisation that really makes help and advice ‘for life ahead’ for both current and future generations.” a difference to its customers and colleagues. I have experience in financial services in a variety of finance roles as well as being part of customer-centric and growing businesses.” Responsibilities: Group Chief Executive, Chairman of the Executive and Responsibilities: Member of Risk and Nominations Committees. David Cutter, 54 Mark Lund, 58 Retail Credit Committees and member of the Asset & Liability Committee. Previous experience: Operated at Director/CEO level for the last 15 years Joined the Board: 2000 Joined the Board: 2016 Previous experience: A Chartered Accountant, joined the Society as Head in both plc and private businesses in the UK and internationally, CEO of Internal Audit. of St James’s Place plc, CEO of Virgin Direct (secondment), Director of Other directorships: Council member of the Building Societies Association Henderson Investors plc. and Trustee of The Craven Educational Trust. Other directorships: Appointed by the Cabinet Office in 2012 to Chair What I bring to the Board: Over 20 years’ experience working in many the Employee Benefit Trust of My CSP Limited. Board member of My areas of the business, including periods as Operations Director and Group CSP Limited, Vice Chairman at British Ski and Snowboard Limited, Non- Corporate Development Director. Executive Director of Skipton Financial Services Limited, Non-Executive Director of Coutts and Chairman of Equiniti Financial Services Limited. “I’ve been with Skipton for over 20 years and I still enjoy learning something new every day and seeing What I bring to the Board: 30 years’ experience in commercial and financial services including two the culture of continual improvement we’ve developed over the years. Skipton is a trusted business and a half years as Non-Executive Director of Skipton Financial Services Limited. which aspires to consistently provide excellent service and build strong relationships with its customers. “I’m very pleased to be continuing my involvement with Skipton on the Board. Through my role on the It’s important to me that I can lead a team to build a trusted, values-driven Society which inspires its Skipton Financial Services Board I’ve got to know the business well and, importantly, what it stands for people. My ambition for the business is for Skipton to thrive and be a beacon for our customers in a - especially in terms of serving customers who are at the heart of everything we do. My goal is to play confusing financial world.” my part in ensuring we continue to really understand our customers’ needs and provide them with the right solutions.”

16 Vote in branch or by post To vote online visit skipton.co.uk 17 Directors for re-election (continued) Responsibilities: Member of Audit, Risk and Nominations Committees and Graham Picken, 67 a Non-Executive Director of Connells Limited. Joined the Board: 2012 Responsibilities: Chairman of the Risk Committee and member of Previous experience: Senior positions at HSBC, including Executive Robert East, 56 the Nominations Committee. Chairman of First Direct and Chief Executive of Forward Trust Group. Joined the Board: 2011 Non-Executive Director then Chief Executive of Derbyshire Building Society Previous experience: 32 years with Barclays Bank including as Chief 2005-9. Risk Officer of Absa South Africa and other leadership roles in retail and commercial banking. Leadership of Cattles Limited restructuring Other directorships: Chairman of the FTSE listed HICL Infrastructure from 2009. Company Limited and Non-Executive Chairman of Hampshire Trust plc. Other directorships: Chief Executive of Welcome Financial Services What I bring to the Board: Wide experience of financial services and Limited and Non-Executive Director of Hampshire Trust plc. business management generally. What I bring to the Board: Extensive experience in, and understanding of, “My executive career was largely in retail banking but when I moved to Non-Executive duties I was retail and commercial banking in the UK and internationally over 40 years. attracted by Skipton’s mutual ethos which demands and encourages a clear focus on the interests of customers. I gain the greatest satisfaction from being part of, and contributing to, a growing and “In 1976, I joined a branch of Barclays in South East London first as the office junior and then as a successful business and Skipton has more than fulfilled my expectations. Financial services never cashier. Since then, I have spent 40 years working in financial services in many varied roles, seeing stands still and there will be new opportunities and challenges ahead. I would like to believe that by some of the best and some of the worst practices. This time has taught me that well-led and motivated sharing my knowledge and experience of the wider industry with the Society, Skipton will maintain the people will give great service to, and do the right thing for, their customers. I really believe in this. momentum that has enabled it to prosper and serve its customers well.” I joined Skipton because I saw a business with the same ambition and one where I could use my experience to help it deliver that ambition both now and in the future.”

Responsibilities: Member of Risk, Remuneration and Nominations Helen Stevenson, 55 Committees. Joined the Board: 2013 Responsibilities: Chairman of the Board and the Nominations Committee. Mike Ellis, 64 Previous experience: 19 years with Mars Inc, Group Marketing Director of Previous experience: Held various senior executive positions with Halifax Joined the Board: 2011 Lloyds TSB 2003-6, Chief Marketing Officer of Yell Group 2006-11. Building Society and its successor Halifax plc. Board member of Halifax Other directorships: Non-Executive Director of St Ives plc, Non-Executive plc 1997-2001 and its successor HBOS plc, retiring at the end of 2004. Director of Trinity Mirror Group plc and member of Henley Business School Returned to HBOS plc late 2007 - Group Finance Director January 2008 Advisory Board. to January 2009. What I bring to the Board: A passion for maintaining a strong connection Other directorships: M H Ellis Consulting Limited and Leeds Theatre in the boardroom between the customer and commercial agendas. Trust Limited. “I joined Skipton because I believe the mutual model serves customers particularly well in Financial What I bring to the Board: Over 25 years’ experience in financial services. Services and Skipton is well placed to continue to strengthen both its excellent customer service “I joined Skipton because it stands out for its excellent customer service and financial stability. I am interested in creating a powerful connection between customers and our and supports the local communities it serves. It’s important to me that we provide financial security business. I have deep experience of building strategies for businesses so that they make the right for our customers and are known for being an organisation that really cares. I understand the financial choices and continue to thrive in the context of a changing marketplace.” services industry and how we can work together to make Skipton the best it can be.” Retiring Directors Responsibilities: Group Finance Director, Chairman of Asset and Liability Responsibilities: Responsibilities: Bobby Ndawula, 42 Cheryl Black, 57 Peter (Nimble) and Model Governance Committees, member of Executive and Retail Member of Audit, Thompson, 69 Deputy Chairman. Joined the Board: 2015 Credit Committees and Chairman of our subsidiaries Amber and NYM. Joined the Board: 2013 Remuneration Joined the Board: 2009 Chairman of the Previous experience: A Chartered Accountant, who has held a number of and Nominations Remuneration senior positions in Group Finance and Financial Risk before appointment as Committees. Committee and Group Finance Director. Previous member of the Audit What I bring to the Board: 12 years’ experience with the Society, including experience: and Nominations managing all aspects of financial risk and a desire to ensure that our Non-Executive Committees. customers’ financial and service interests are safeguarded. Director, Southern Previous Water (2008-15), experience: “Being part of an organisation which is values-led and has its members at the heart of everything it Customer Service Director, Telefonica O2 (2006- Deputy Chairman of Eversheds and Chairman of does, keeps me highly motivated to do my best each and every day. I enjoy leading teams that look 11), Customer Service Director, Scottish Water NG Bailey. to embrace change and continuously improve the financial strength of the Society for the long term (2002-06), senior service and operations roles in benefit of our members. My ambition for the business is for it to grow sustainably, so we can continue the Telecoms and Utilities sectors. Other directorships: Deputy Chairman of the to provide more opportunities for people to save for their futures and buy their own homes.” Other directorships: Non-Executive Director Institute of Directors, Non-Executive Director at Unum Limited and Telefonica UK Pension of Rushbond plc, TEP Electrical Distributors Trustee Limited. Limited and Governor of Giggleswick School. Special note: Cheryl is retiring as a Director Special note: Nimble is retiring as a Director and so she is not standing for re-election at and so he is not standing for re-election at our 2016 AGM. our 2016 AGM.

18 Vote in branch or by post To vote online visit skipton.co.uk 19 ten, alongside brands like John Lewis, Amazon Market conditions continue to have an impact Summary Financial Statement and American Express, we were named the UK’s on savers. The average savings rate paid across top building society for customer experience. all our accounts reduced by 0.25% during the This financial statement is a summary of information from the audited Annual Report and Accounts, Our people are an integral part of our continued 12 month period. Despite the Bank Base Rate the Directors’ Report and Annual Business Statement, all of which are available now to members and success. We recognise that investing in them has remaining at 0.5%, Skipton’s rates averaged depositors online at www.skipton.co.uk/financialresults or free of charge on demand at every office of a positive impact on both the customer experience 1.69% during the year. Skipton paid, on average, Skipton Building Society from 31 March 2016. and employee engagement. In 2015, our employee 0.48% higher interest than the market average for Summary Directors’ Report engagement level stood at 90%, higher than 2014 banks and building societies during the 10 month period to 31 October 2015 (the latest available It is pleasing to report another year of strong performance. In 2015, we enabled more people to save and significantly ahead of industry norms, and for comparable data – source: CACI Savings Market for their future and buy their own home than we ever have before. At the same time, we continued to the first time ever Skipton was listed in The Sunday Database). And our savings rates received 461 strengthen our financial position. Times 100 Best Companies to Work For. independent media best buy table mentions over Our commitment to providing a first-rate experience for our members is, as always, paramount to us. We’re investing across all channels so customers the year. They are at the heart of everything we do. This forms an integral part of our overall ethos of ‘Building a can easily interact through the channel of their better Society’. Here’s how we’ve put these words into action during 2015: choice. Helping our members buy their own homes Helping our members save for the future and Our gross mortgage lending increased by 23.3% • Customer numbers continued to grow and increased investment across all areas of the plan for life ahead to £3.7bn and our mortgage book grew by £1.5bn increased by 43,348 to 838,087; business to help ensure we deliver a sustainable Supporting our members at key life stages with to £14.2bn, an annual growth rate of 11.9%. As • We were declared the UK’s top building society performance over the long term; good value products and a first-rate service such, net mortgage lending accounted for 6.4% of for customer experience in the KPMG Nunwood • The Group Common Equity Tier 1 (CET 1) ratio with the human touch remained our key focus the growth in the UK residential mortgage market Customer Experience Excellence survey and 7th increased to 16.80% from 16.09%; throughout 2015. (source: Bank of England statistics, December 2015). Skipton’s share of UK residential mortgage best out of 272 UK brands; • The Leverage ratio remained strong at 6.1%, During the year, we continued to provide balances stood at 1.0%. • Our mortgage book increased by £1.5bn to comfortably ahead of the regulator’s expected competitive, innovative and award-winning £14.2bn, a growth rate of 11.9%. We helped minimum; and products and services to our savers. We launched The Society helped 23,094 homeowners to 23,094 homeowners purchase or remortgage • Skipton was upgraded by both Fitch and a base rate tracker savings account and we added purchase or remortgage their properties, their properties, including 3,847 first time buyers; Moody’s credit ratings agencies during the year. to our loyalty range by offering preferential ISA including 3,847 first time buyers, and 618 via the • We saw a £1.4bn growth in savings balances We are particularly pleased that despite the Bank rates to qualifying members. Government’s ‘Help to Buy’ equity loan scheme. The rental market remained strong and £467m (a growth rate of 11.9%) as we continued to Base Rate being held at 0.5% for over six years, During 2015 we launched retiresavvy.co.uk – a of the Group’s gross lending was on buy-to-let offer a suite of competitive and award-winning and the effect of the Funding for Lending Scheme unique online community and information hub mortgages. products; (FLS) on demand for retail savings, our savings that brings together people with an interest in • Total Group Profit Before Tax (PBT) amounted balances have grown well in excess of overall retirement to share their knowledge, ideas and In recognition of the growing new-build market, we to £146.9m (2014: £180.6m). The sale of growth in the market. We also saw excellent experiences. By December 2015, we had reached launched a suite of bespoke mortgage products subsidiaries, associates and equity investments growth in our mortgage book. This is testament 10,000 users per month. specifically for this type of property and invested heavily in our operational support teams. generated a combined profit of £1.0m (2014: to our competitive pricing and service proposition Our subsidiary Skipton Financial Services Limited £38.2m); and is the third successive year of excellent (SFS) launched a pensions accumulation and Our prudent approach to lending is demonstrated • Underlying Group PBT from continuing growth, during which time savings balances have pension switching service which is designed to by the relatively low number of Group residential operations (prior to Financial Services increased by 36.0% and mortgage balances by help people navigate their way through the pension mortgages with arrears. As at 31 December 2015, Compensation Scheme (FSCS) charges, gains 35.8%. reforms and better prepare for life ahead. only 0.91% (2014: 1.20%) of accounts were three months or more in arrears, compared to the on the disposal of subsidiary, associate and Our strong underlying profits and robust capital Despite the early part of 2015 seeing net savings Council of Mortgage Lenders’ (CML) industry equity share investments and profits from position provide a firm foundation for realising our outflows, due to the market distortion created average of 1.12% (2014: 1.30%) of mortgages in discontinued operations) increased by 2.1% to ongoing ambition of ‘Building a better Society.’ by National Savings & Investments’ pensioner arrears by more than three months. £153.3m (2014: £150.1m); Looking forward, we will continue to invest back bonds, strong growth resumed throughout the • Group administrative expenses increased into the business to ensure we continue to serve remainder of the year, culminating in the highest A strong financial Group performance by 8.6% to £464.4m (2014: £427.7m), partly our members for their lives ahead. level of savings balances ever held by the Society. • Group total assets increased by 9.7% during the due to increased activity and partly due to Our range of competitive savings products saw year to £17.5bn (2014: 10.3% to £16.0bn); members’ deposit balances grow by £1.4bn to • Group net interest margin reduced to 1.33% We’re extremely proud that our efforts to provide Putting people first £12.8bn, an annual growth rate of 11.9%. The (2014: 1.40%); the very best in customer experience have, Over the last 12 months, we’ve continued to growth in Skipton’s savings balances accounted • Total Group PBT amounted to £146.9m (2014: once again, been acknowledged in high-profile engage with our members to understand their for 2.1% of the growth in the UK deposit savings £180.6m); needs and deliver what’s important to them. We consumer research. market (source: Bank of England statistics, • Underlying Group PBT from continuing work hard to create a customer-focused culture Skipton Building Society was named the 7th best December 2015), compared to our market share of operations increased by 2.1% to £153.3m and in 2015 have invested heavily in our Delivering UK brand (2014: 13th) for customer experience savings balances of 1.0%. Skipton was the UK’s (2014: £150.1m); Service Excellence programme, an initiative for our across many different industries in the most recent fourth largest ISA provider in terms of transfers-in • Included in underlying Group PBT is a £15.9m entire workforce ensuring we keep members at the KPMG Nunwood Customer Experience Excellence activity during April and May 2015. forefront of everything we do. Survey. As well as leaping into the prestigious top (2014: £5.4m) charge for a long term incentive 20 Vote in branch or by post To vote online visit skipton.co.uk 21 scheme for senior management of Connells • The percentage of cases in Amber Homeloans Survey and Valuation also had a record year, with and savings well in excess of our market share Limited. Excluding this charge gives an adjusted Limited and North Yorkshire Mortgages Limited its pre-tax profits more than doubling in the year; of balances. The investment made in our people underlying Group PBT of £169.2m, up 8.8% on where the balances were three or more months and in recent years and their focus on customers the prior year (2014: £155.5m); in arrears at 31 December 2015 were 6.64% and • At 31 December 2015, Connells operated 542 culminated during the year in external recognition th • The charge to loan loss provisions reduced by 5.54% respectively (2014: 8.13% and 6.45%), branches. and a ranking of 7 for customer experience a significant improvement on reducing closed excellence out of 272 UK brands. £4.9m to £8.4m from £13.3m; Results from remaining subsidiaries books; The outlook for the UK economy does not • The charge to provisions for liabilities reduced by • SFS recorded a loss before tax of £(1.7)m (2014: • The Society’s three months or more arrears levels cause us undue concern, but its connectivity to £5.7m to £11.8m from £17.5m, and included a levy PBT of £0.2m), which included restructuring costs fell from 0.52% at 31 December 2014 to 0.44% a global economy where growth is moderating of £7.4m payable to the FSCS (2014: £7.8m); and of £1.3m; at 31 December 2015. The quality of the SIL and volatility is experienced in many markets • In June 2015, two credit ratings agencies • The provision of financial advice remains integral mortgage book remains excellent with nil cases means that we remain cautious. We anticipate upgraded the Society’s long term ratings: Fitch to the delivery of our ‘For Life Ahead’ customer where the arrears balance was three months or the gradual reduction in our net interest margin to BBB+ with a stable outlook from BBB, and proposition. In January 2016, the Society more in arrears (2014: nil); witnessed over the last 18 months will continue, Moody’s to Baa2 with a stable outlook from Baa3. announced that, subject to regulatory approval, • The average indexed loan-to-value of residential due to competitors having an increased appetite Both upgrades followed an upgrade by each the assets and business of SFS will be hived mortgages across the division reduced to 48.5% for growth and the unwinding of the FLS in the rating agency within the previous nine months. up into Skipton Building Society, to form one (2014: 50.3%); medium term. We are disappointed that the Society’s retained stronger organisation that is better aligned to Continuing house price growth outstripping wage profits for 2016 onwards will be impacted by the • At 31 December 2015, the Society had drawn meet the needs of our customers; down £880m under the Government’s Funding for inflation remains a major barrier to potential first introduction of an 8% corporation tax surcharge • Skipton Business Finance Limited recorded a Lending Scheme (2014: £650m); and time buyers, in some regions more than others. on banking companies. If this surcharge had PBT of £3.2m (2014: £2.9m); applied in 2015 the cost to us would have been • At 31 December 2015, liquidity amounted to We are conscious of the continuing low interest • Jade Software Corporation Limited recorded a £5.5m, which could have reduced our appetite 17.0% of shares, deposits and borrowings (2014: rate environment and the impact that it has on our loss before tax of £(1.3)m (2014: loss of £(0.7)m); to lend. The collateral damage of this tax raising 18.4%). savers, but the good value that we offer relative • Our share of Wynyard Group losses was £(2.3)m initiative, mainly aimed at banks, fails to recognise to the market is demonstrated by our very strong Improved performance and a growing presence (2014: £(2.6)m), and our shareholding reduced the distinctive legal form, business model, and savings growth over the past three years. in Estate Agency from 21.7% to 17.8% following share issues in the reduced risk of failure implicit in building societies. 2016 will see some positive taxation changes • Connells, our estate agency division, delivered year to which the Group did not subscribe; for savers and we anticipate a shift in customer Excellent results from the Mortgages and a good set of results in 2015 with profits before • In May, Skipton completed the sale of its entire behaviour following the introduction of the Savings division tax of £62.5m. This is compared to a total profit shareholding in Pearson Jones plc resulting in a Personal Savings Allowance in April. ISAs may play • In addition to reporting strong growth in of £62.2m in 2014 which included a £10.1m profit loss on disposal of £(0.8)m; and a less important part in savings decisions than in mortgage and savings balances the Mortgages from the part disposal of shares on the flotation of • £0.7m of deferred cash consideration was previous years. And with the increased flexibility and Savings division produced PBT of £104.8m, Zoopla (the 2015 results include a profit of £0.3m received in 2015 following the disposal of around ISAs, some customers may start to treat up from £98.4m in 2014, an increase of £6.4m (or arising from the sale of shares). Excluding these subsidiary undertakings in prior years. them more as transactional accounts rather than 6.5%); gains, Connells’ pre-tax profits increased by Giving something back to our communities longer term savings. • Group net interest income (98% of which is 19.4% year-on-year; There will certainly be more complexity for savers derived from this division) increased by £10.0m • Connells continued to invest heavily in the Our vision to ‘Build a better Society’ encapsulates to digest and members may need more help in (or 4.7%) to £223.3m from £213.3m; business for the benefit of future years our mutual heritage and our wider role to be a positive part of the communities in which we making decisions about their money, including • The division’s profits were impacted by a 14.2% with £11.8m capital expenditure on branch operate. In 2015, we played an active role in investments and pensions, particularly in light of increase in administrative costs to £111.3m as we refurbishment and other business investment, as supporting our communities in a number of the Government’s pension reform agenda. Our invested more in our customer proposition, risk well as £9.2m on business acquisitions including different ways. Through our Grassroots Giving established ‘My Review’ service is well positioned management frameworks, processes and people; the 18-branch Gascoigne Halman operating in appeal, we gave 162 donations of £500 to to provide invaluable support to our members who • The cost income ratio of the Mortgages and South Manchester and Cheshire and the addition community groups voted for by the public, in line may need advice and guidance. Savings division was 48.0% (2014: 44.5%), whilst of online estate agency Hatched – Connells’ with our founding ethos of ‘helping people to help The outlook for the Society remains healthy, the management expense ratio of the division venture into online estate agency; themselves’. We continued to support a number although we remain vigilant to factors which was 67bps (2014: 65bps); • House sales (exchanges) by Connells increased of key community partners, including the Great may impact its performance, most noticeably by 1% compared to 2014 (excluding properties • The Society remains primarily funded by retail Yorkshire Show and Skipton Building Society the economy, new regulatory requirements, and sold by Gascoigne Halman) and the business savings, representing 87.8% of total funding Camerata. And we donated £150,000 to the changes in consumer behaviour, in particular enters 2016 with a significantly stronger pipeline (2014: 85.9%); Skipton Building Society Charitable Foundation, their desire to engage with the Society through than it did in 2015; • In addition, the division also accepts deposits which enabled the Foundation to support the channel of their choice, and for it to be easy • Income from lettings increased by 26% and through its Guernsey based subsidiary, Skipton registered charities, involved in helping people of to access, easy to understand, and easy to use. It income from mortgage services increased by International Limited (SIL). Offshore deposits all ages. has been another strong year for the Society and 30% compared with the prior year. Mortgage increased by 20.2% to £1.08bn from £0.90bn; we remain extremely well placed to capitalise upon Services reported a record year, with mortgage Conclusion and outlook • SIL increased PBT by £1.5m (12.3%) to £13.7m the opportunities that lie ahead as well as mitigate sign ups increasing by 23% over 2014. Connells 2015 saw another strong performance by the from £12.2m; the risks that arise in an uncertain world. Society, with further good growth in mortgages

22 Vote in branch or by post To vote online visit skipton.co.uk 23 2015 2014 2015 2014 Restated Restated (note 1) (note 1) Group financial position at 31 December £m £m Group results for the year ended 31 December £m £m Assets Net interest receivable 223.3 213.3 Other income and charges 403.2 392.8 Liquid assets 2,637.8 2,594.1 (Loss) / profit on disposal of subsidiary undertakings (0.4) 1.1 Residential mortgages 13,905.7 12,357.1 Profit on part disposal of equity share investments 0.3 10.1 Commercial and other loans 457.5 479.7 Profit on part disposal of associate 1.1 2.3 Derivative financial instruments 95.1 133.4 Fair value gains / (losses) on financial instruments 4.0 (2.0) Fixed and other assets 415.3 397.8 Administrative expenses and provisions for liabilities (476.2) (445.2) Total assets 17,511.4 15,962.1 Impairment losses (8.4) (16.6) Liabilities and reserves Profit for the year before tax from continuing operations 146.9 155.8 Shares 12,828.2 11,467.5 Tax expense (33.5) (34.9) Borrowings 2,733.9 2,663.6 Profit for the financial year from continuing operations 113.4 120.9 Profit after tax from discontinued operation - 24.8 Derivative financial instruments 296.9 307.3 Profit for the financial year 113.4 145.7 Other liabilities 302.8 279.1 Non-controlling interests’ share of losses 0.6 0.4 Subordinated liabilities 78.5 98.0 Profit for the financial year attributable to members 114.0 146.1 Subscribed capital 93.5 94.3 Non-controlling interests (1.6) (0.7) Total Group PBT for 2015 was £146.9m (2014: £180.6m) as follows: Reserves 1,179.2 1,053.0 Total liabilities and reserves 17,511.4 15,962.1 2015 2014 Restated (note 1) Group statement of movement in reserves £m £m £m £m Reserves at 1 January 1,053.0 913.4 Profit before tax from continuing operations 146.9 155.8 Net income / (expense) for the year not recognised in the Income Statement 12.2 (6.5) Profit before tax from discontinued operations - 0.1 Profit for the year 114.0 146.1 Profit on disposal of discontinued operations - 24.7 Reserves at 31 December 1,179.2 1,053.0 Total Group profit before tax 146.9 180.6

Summary of key financial ratios % % Underlying Group PBT from continuing operations for 2015 was £153.3m (2014: £150.1m) as follows: Gross capital as a percentage of shares, deposits and borrowings 8.67 8.81 2015 2014 Liquid assets as a percentage of shares, deposits and borrowings 16.95 18.36 Restated Group profit after tax for the year as a percentage of mean total assets 0.68 0.79 (note 1) Group management expenses as a percentage of mean total assets £m £m 2.77 2.81 Society management expenses as a percentage of mean total assets 0.60 0.57 Total Group profit before tax 146.9 180.6 Less profit before tax from discontinued operations - (0.1) Definitions Less profit on disposal of discontinued operations - (24.7) Gross capital represents the general reserve together with the available-for-sale reserve, cash flow hedging reserve, Add back loss / less profit on disposal of subsidiary undertakings 0.4 (1.1) translation reserve, subordinated liabilities, subscribed capital and non-controlling interests as shown in the Group Statement of Financial Position. The gross capital ratio measures the proportion which the Group’s gross capital bears to the Group’s Less profit on part disposal of associate and equity share investments (1.4) (12.4) liabilities to holders of shares, depositors and other providers of funds, that is, its investors. Add back FSCS levy 7.4 7.8 Liquid assets represent the total of cash in hand and balances with the Bank of England, loans and advances to credit Underlying Group profit before tax from continuing operations 153.3 150.1 institutions and debt securities. Liquid assets are generally readily realisable, enabling the Group to meet its general liabilities during the year. Note 1 Group profit after tax for the year as a percentage of mean total assets measures the proportion that the Group’s profit after tax from continuing operations for the year bears to the average of the Group’s total assets during the year. Mean total assets During the year the Group’s accounting policy relating to dividends paid to non-controlling shareholders of subsidiary are calculated as the average of the closing total asset balances as at 31 December 2014 and 31 December 2015 as shown in undertakings was revised, to more accurately represent the economic substance of these transactions. Previously, dividends the Group Statement of Financial Position. A reasonable level of profit is required each year to maintain the gross capital ratio paid to non-controlling shareholders were accounted for as a reduction to related put option liabilities. Under the revised at a suitable level to protect investors’ funds. accounting policy, these dividends are expensed through the Income Statement. The management expense ratios measure the proportion that the administrative expenses from continuing operations bear to If the above policy had been applied in 2014, administrative expenses would have been £1.0m higher than previously stated the average of the total assets during the year. at 31 December 2014 and intangible assets and general reserves would have been £19.6m lower than previously stated at 31 December 2014. The 2014 comparatives included in this Summary Financial Statement have been restated accordingly. This Summary Financial Statement was approved by the Board of Directors on 23 February 2016 and was signed on its behalf by: M H Ellis Chairman D J Cutter Group Chief Executive R S D M Ndawula Group Finance Director 24 Vote in branch or by post To vote online visit skipton.co.uk 25 Independent auditor’s statement to the Summary Directors’ Remuneration Report members and depositors of Skipton Introduction from the Chairman of the Performance Indicators (KPIs). We have, wherever Remuneration Committee possible, sought to retain these features. We Building Society also concluded that the revised regulatory This report summarises the Remuneration requirements would make retaining our existing Committee’s report which sets out details of the separate short term and medium term incentive We have examined the Summary Financial Accounts, the Annual Business Statement and pay, bonuses and benefits for the Directors for the arrangements too complicated and would Statement of Skipton Building Society (‘the Directors’ Report of the Society for that year; year ended 31 December 2015. Society’) for the year ended 31 December 2015 on diminish their effectiveness as an incentive. • Checking that the format and content of the This report is a summary of the full report set pages 20 to 25. The key features of our proposed new policy are Summary Financial Statement is consistent with out in our Annual Report and Accounts which as follows: This auditor’s statement is made solely to the the requirements of section 76 of the Building can be found on our website at skipton.co.uk/ Society’s members, as a body, and to the Societies Act 1986 and regulations made under financialresults, or on request from the Group • Replacement of the separate short term and Society’s depositors, as a body, in accordance it; and Secretary of the Society. The full report contains medium term incentive arrangements with a with section 76 of the Building Societies Act 1986. • Considering whether, in our opinion, information more details including: single variable pay arrangement; Our work has been undertaken so that we might has been omitted which although not required • The remuneration principles which underpin the • The long-term focus of the existing arrangements state to the Society’s members and depositors to be included under the relevant requirements policy presented to you in this summary report; will be maintained by a requirement that at least those matters we are required to state to them in of section 76 of the Building Societies Act 1986 50% of any variable pay awarded will be deferred • Details on how we pay the Society’s ‘Material such a statement and for no other purpose. To the and regulations made under it, is nevertheless and will vest pro-rata over a period of five years Risk Takers’– those senior managers who fullest extent permitted by law, we do not accept necessary to include to ensure consistency with (unless a greater proportion or a longer deferral have a material impact on the risk profile of the or assume responsibility to anyone other than the the full Annual Report and Accounts, the Annual period is required by regulation); business; Society and the Society’s members as a body and Business Statement and Directors’ Report of the • Deferred payments will be subject to a • The history of the Group Chief Executive’s the Society’s depositors as a body, for our work, Society for the year ended 31 December 2015. sustainability assessment one year after award remuneration over the last seven years; and for this statement, or for the opinions we have We also read the other information contained in and can be reduced if the Committee determines formed. the ‘Our Review of 2015’ document and consider • Details on the Remuneration Committee and its that the performance which generated the award Respective responsibilities of directors and the implications for our statement if we become advisers. has not been sustained; auditor aware of any apparent misstatements or material This summary report is presented in two sections: • We will rebalance remuneration between fixed The directors are responsible for preparing the inconsistencies with the Summary Financial • The Remuneration Policy part of the report on and variable pay by reducing the overall variable Summary Financial Statement, within the ‘Our Statement. pages 29 to 33 explains how we plan to pay the pay opportunity for Executive Directors from Review of 2015’ document, in accordance with Our report on the Society’s full Annual Accounts Directors in 2016. 100% of salary to 50% of salary whilst as the applicable United Kingdom law. describes the basis of our opinions on those • The Annual Report on Remuneration part of the same time increasing base salaries by around Our responsibility is to report to you our opinion Annual Accounts, the Annual Business Statement report on pages 34 to 35 explains how we put 15%. The overall impact of this change for on the consistency of the Summary Financial and Directors’ Report. our existing policy into practice in 2015. Executive Directors is that the net present value Statement within the ‘Our Review of 2015’ Opinion on Summary Financial Statement Revised remuneration policy for 2016 of on-target remuneration is broadly the same, but the maximum opportunity is significantly document with the full Annual Report and On the basis of the work performed, in our opinion During 2015 we have been preparing for a change reduced in the longer term. Accounts, Annual Business Statement and the Summary Financial Statement is consistent in the way the Remuneration Code will apply Directors’ Report and its conformity with the with the full Annual Report and Accounts, the to the Society going forward. The Prudential Remuneration in respect of 2015 relevant requirements of section 76 of the Building Annual Business Statement and Directors’ Regulation Authority (PRA) takes into account a Performance in 2015 built on the strong Societies Act 1986 and regulations made under it. Report of the Society for the year ended 31 firm’s size, internal organisation and the nature, foundations set in previous years in the context Basis of opinion December 2015 and conforms with the applicable scope and complexity of its activities when of increasing competition for both mortgages Our examination of the Summary Financial requirements of section 76 of the Building determining the code rules which are applicable. and savings. The underlying Group profit before Statement consisted primarily of: Societies Act 1986 and regulations made under it. The considerable success of the Society in recent tax (PBT) was £153.3m (2014: £150.1m), the core • Agreeing the amounts and disclosures included years and the consequent steady growth in our Mortgages and Savings division PBT reached in the Summary Financial Statement to the total assets means that additional requirements £104.8m (2014: £98.4m) and the CET 1 ratio will apply to remuneration awarded in respect increased to 16.80% (2014: 16.09%). corresponding items within the full Annual Jonathan Holt (Senior Statutory Auditor) of 2016 onwards. This, together with updated Report and Accounts, Annual Business for and on behalf of KPMG LLP, Key decisions taken in 2015 regulation brought into effect by the PRA in June Statement and Directors’ Report of the Society Statutory Auditor • Within the context of good performance in 2015 2015, means that we have had to review our for the year ended 31 December 2015, including and taking into account our approach to risk Chartered Accountants remuneration policy for Executive Directors. consideration of whether, in our opinion, the Leeds management, the Committee made awards Our review concluded that there were many information in the Summary Financial Statement 23 February 2016 under the Society’s short term incentive scheme. has been summarised in a manner which is features of our existing arrangements which have The average award payable to the Executive not consistent with the full Annual Report and worked well, such as the balance of performance Directors is 36.4% of base salary (as at measures and the inclusion of team based Key

26 Vote in branch or by post To vote online visit skipton.co.uk 27 31 December 2015) out of a possible maximum Conclusion Directors’ Remuneration Policy effective from 2016 50% and to the senior managers in the Senior On behalf of the Committee, I trust you The Board’s policy is designed to ensure that Executive Directors’ remuneration reflects performance Leadership Incentive scheme is 22.8% of base will find this summary report useful and and enables the Group to attract, retain and motivate a sufficient number of high calibre individuals to salary. In 2014 we introduced an annual incentive informative and look forward to your feedback lead and direct the organisation and deliver sustainable business performance for our members. scheme for the remainder of our people in the on our Remuneration Policy. The Committee Remuneration Policy for Executive Directors Society, the average payment for which is 5.4% recommends that members vote both for the The table below shows in more detail the elements of remuneration for Executive Directors, the reasons of base salary for 2015. Directors’ Remuneration Policy and the Directors’ for their inclusion and the way they operate with effect from 1 January 2016. • In 2015 we again awarded to Executive Directors Remuneration Report at the forthcoming AGM. and other members of the Executive Committee a Medium Term Incentive scheme (MTI) of up Element Operation Maximum potential Performance to 50% of salary which will operate over a three conditions and Nimble Thompson How element supports value year performance period ending 31 December assessment Chairman of the Remuneration Committee our strategy 2017. The MTI rewards the achievement 23 February 2016 Base salary Base salary reflects the size of the Increases to base salary None applicable, of sustainable profit, increased customer • Supports the recruitment role and responsibilities, individual are determined annually by although we do take satisfaction and growth in customer numbers. and retention of Executive performance (assessed annually) and the the Committee taking into account of individual Payments for the 2015/2017 performance period Directors, reflecting their skills and experience of the individual. account: performance when will be made in 2018, 2019 and 2020 subject to individual roles, skills and In setting appropriate salary levels, the • Individual performance; considering base pay contribution. Committee takes into account data • The scope of the role; increases. performance. Half of the amount due will be paid for similar positions in comparable • Pay levels in comparable in 2018, one quarter in 2019 and one quarter organisations. The data is independently organisations; and in 2020. Due to the change of policy referred commissioned and the Society aims to • Pay increases elsewhere to earlier in this report, the 2014/2016 and position Executive Directors competitively within the Group. 2015/2017 MTI schemes will continue to run until within this reference group. the end of their respective performance periods Pension Generally, the Society contributes to a The maximum is 20% of None applicable. • Supports recruitment and defined contribution pension scheme for base salary. but a new MTI scheme will not be commenced retention of Executive the Executive Directors. The contribution Mr Cutter receives 20% for 2016 to 2018. Directors at a cost that can instead be paid in cash (which is of base salary and the In the 2014 Directors’ Remuneration Report we can be controlled by the excluded from incentive calculations) other Executive Directors stated our intention to review the Committee’s Society. if the Executive Director is likely to be between 10% and 15% of affected by the limits for tax-approved base salary. advisers. Our requirement for a full service pension saving. provision on remuneration and related matters, Benefits A number of benefits are provided to The Society bears the None applicable. combined with in-depth knowledge of current • To attract, retain and Executive Directors, including a car or car cost of providing benefits, and proposed regulation, was met convincingly provide security for allowance, private medical insurance, life which may vary from year by PwC who are independent of the Society and Executive Directors; and insurance and disability benefits. to year. were appointed as the Committee’s advisers in • Provides a competitive The Committee reviews benefits from level of benefits to assist time to time and may make changes, for February 2015. Executive Directors example, to reflect market practice or the to carry out their roles needs of the business. effectively.

Single Variable Pay A combination of financial and non- The maximum incentive The performance Arrangement (SVPA) financial measures and targets are set which may be earned for measures attached (from 2016) with a weighting which will not exceed any year by the SVPA is to the SVPA will be • Supports the attraction 50% of the total incentive opportunity 50% of base salary. determined by the and retention of Executive for financial measures and which will not For each performance Committee from year Directors; exceed 60% for non-financial measures. measure, the Committee to year, but might • Supports the development The latter includes personal objectives determines a threshold, typically include (but of a high performance (normally up to 20%). target and maximum are not limited to) any culture; Targets are set and assessed against level of performance. of the following: • Rewards performance these criteria each year relative to the No incentive is payable • Group profit; within the context of Society’s strategic aims. for performance below • Mortgages and achieving corporate goals 50% of earned incentive is normally paid the threshold level, with Savings division and objectives as set out in cash shortly after performance has varying levels of pay-out profit; in the corporate plan; been assessed. The remaining 50% of for performance between • Efficiency measures; • Encourages the right earned incentive is deferred over a period threshold and maximum. • Customers (growth behaviours in respect of of one to five years and is normally paid in On-target performance and satisfaction); sustainable performance cash subject to performance adjustment. generally attracts an • Risk and that supports the A greater proportion of the incentive may incentive of 60% of the governance; achievement of strategic be deferred, and a longer deferral period maximum. • People; goals. applied, if this is required by regulation.

28 Vote in branch or by post To vote online visit skipton.co.uk 29 Element Operation Maximum potential Performance Notes to the table How element value conditions and Base Salary In light of the additional regulatory requirements relating to remuneration for the Society in 2016, a review has been carried out supports our strategy assessment as to the most appropriate structure for remuneration. As a consequence, a change to the ratio between fixed and variable pay SVPA continued Current regulations also require that for those • Personal objectives has been made which reduces the overall remuneration opportunity for each executive, reduces the maximum variable pay to (from 2016) whose total remuneration exceeds £500,000 (includes an 50% and increases fixed pay by an average of 15% as explained in the section ‘Statement of implementation of Remuneration Policy in 2016’. or whose variable pay (for the relevant element for strategy performance year) exceeds 33% of total development and Performance measures remuneration (de minimis threshold), 50% of implementation). The performance conditions attached to the SVPA scheme have been selected as they support the sustainable success of the Society. The Committee believes that the use of a range of financial and non-financial measures provides a balanced the SVPA will be delivered in the form of an Performance against assessment of the overall performance of the Society. “instrument” which will be subject to a further the measures The Committee considers the targets attached to the SVPA to be commercially sensitive and will not therefore disclose these holding period (currently six months). The is reviewed and at the beginning of the financial years to which they relate. The Committee will, however, disclose the weightings that will be instrument will be subject to a write down if approved by the attached to each SVPA performance measure at the beginning of the financial year to which they relate. the Common Equity Tier 1 capital ratio falls Remuneration A summary of performance against the targets will be disclosed following the end of the relevant financial year. In setting the below a prescribed level. Committee. target and maximum payments, the Committee considers both the market position and the risk appetite of the Society and An element of the performance assessment The weightings sets these levels accordingly. The weightings for 2016 are outlined in the ‘Statement of implementation of Remuneration Policy will be made over a period of more than one attached to the types in 2016’ section of the full report. financial year to meet regulatory requirements of measure and the Changes from remuneration arrangements operated in 2015 and to maintain a longer term perspective individual weightings There will be no new MTI scheme in 2016. The MTI and Short Term Incentive (STI) schemes will be replaced by the SVPA. in the scheme. This will be achieved by attached to each The SVPA is a new arrangement, designed to re-balance the total reward packages for our Executive Team and to reward the the Remuneration Committee making a individual measure achievement of sustainable performance in line with member interests over a number of years. The scheme will commence sustainability assessment one year after the may vary from year to in 2016, with the first payments (based on performance in the year ending 31 December 2016) commencing from 2017. These award of the incentive. Up to 25% of the year as determined by payments are subject to the new deferral arrangements set out in the table. Payments from the 2014/2016 and 2015/2017 MTI incentive originally awarded can be reduced the Committee. schemes will continue to be made (subject to performance and risk adjustment) together with any deferred incentive payments or cancelled as a result of this assessment. from prior performance year STI schemes. The percentage of deferred incentive, the Deferral periods required by regulation deferral period (one to five years) and the From 2016, current regulations mean that the Group Chief Executive will, in normal circumstances, have 40% of his incentive payment instrument may be amended in payment paid in year one (20% in quarter one and 20% subject to a six month retention period). 60% of the incentive will response to changes in regulation. be paid pro-rata in years four to eight following the bonus award. For other Executive Directors above de minimis, a longer The Committee may reduce or withdraw deferral period may also be required by the regulators. the payment of a deferred amount in certain Remuneration for other employees circumstances and has the power to reduce, All employees of the Society receive a base salary and benefits consistent with market practice, and are eligible to participate cancel or recover payments under the SVPA if in the Society’s pension plan and in the incentive arrangements relevant to their role. Members of the Executive Committee and other selected senior managers may be eligible to participate in the SVPA on the it believes there are circumstances where the same terms as the Executive Directors, subject to the discretion of the Group Chief Executive and the Committee. The award payments are not appropriate, for example, size for these individuals may be lower than for the Executive Directors. due to failure to maintain certain capital A variable pay arrangement for all employees is in place, so that everyone employed by the Society will have the opportunity to levels, evidence of systemic conduct risk, share in the Society’s success. The key measures for the scheme are aligned with those that apply for senior management. or evidence of significant control failures or Committee’s discretion in relation to the SVPA and MTI schemes weaknesses. As noted above, the Committee has the discretion to reduce, defer or recover payments under the SVPA in accordance with Medium Term Payments are based on performance (as The MTI will be 50% of the award is the Society’s Policy on Malus and Clawback. Malus refers to the reduction or withdrawal of deferred awards and clawback is the repayment of amounts already paid. The Committee also has the discretion to cease or amend the operation of either Incentive (MTI) 2014 determined by performance against agreed discontinued in 2016. based on Group profit arrangement where this is necessary to ensure the arrangements continue to meet the Committee’s overriding remuneration corporate plan targets) over rolling three year The current MTI schemes and 2015 Schemes and 50% of the award principles. This might include, for example, amending the deferral arrangements to comply with changing regulation. - to be discontinued cycles. for 2014/2016 and is based on customer in 2016 The corporate plan targets for each three year 2015/2017 will continue measures. • Encourages the performance period are reviewed and agreed until completion of the The measures Remuneration policy for Non-Executive Directors right behaviours by the Board annually. performance period and are assessed The table below sets out the elements of Non-Executive Directors’ remuneration and the policy on how in respect of long The performance for each three year cycle is will be paid as per scheme independently. each element is determined. term, sustainable based on cumulative performance against the rules. Any payment from performance annual targets for the three year cycle. The maximum incentive the MTI is subject to Element Approach to determination that supports the Payments are made over three years so that: which may be earned for reduction, up to and achievement of • 50% of the incentive earned is paid any year from the MTI including the whole Base fees Reviewed annually based on time commitment and responsibility required for Board strategic goals; and immediately following completion of the scheme is 50% of salary. payment, based on • Provides a balance three year performance period; For each performance CET 1 capital levels at and Board committee meetings. between long and • 25% is deferred for one year; measure, the Committee the end of each three short term rewards • 25% is deferred for two years. determines a threshold, year cycle. Review takes into account fees paid by comparable financial services organisations. in the overall The Committee may reduce or withdraw target and maximum level Any payment from Additional fees Additional fees are payable for additional responsibilities such as committee remuneration package the payment of a deferred amount in certain of performance. No MTI is the MTI is subject to for those senior circumstances and has the power to reduce payable for performance satisfactory individual chairmanship or other duties. executives eligible to or cancel payments due under the MTI if it below the threshold level, performance. Other items Non-Executive Directors are not eligible to participate in any form of performance pay participate. believes in extreme circumstances that the with varying levels of payments are not appropriate, for example, pay-out for performance plans and do not receive pensions or other benefits. Travel and subsistence expenses due to failure to maintain certain capital between threshold and between home and Skipton Head Office, including for attendance at Board and levels, evidence of systemic conduct risk, maximum. On-target committee meetings, are reimbursed. or evidence of significant control failures or performance generally weaknesses. attracts a MTI of 60% of The Remuneration Committee determines the Chairman’s fee while the fees of the other Non-Executive the maximum. Directors are determined by the Non-Executive Remuneration Committee. 30 Vote in branch or by post To vote online visit skipton.co.uk 31 Approach to recruitment remuneration Eligible leavers (as set out above) will be considered for an SVPA award in respect of a partially Overall, the Committee aims to recruit Executive Directors using remuneration packages that are completed performance year. Such an award would usually be pro-rated to take account of the service market-competitive and as consistent as possible with the existing remuneration structure. In doing so, completed during the year. The award would be paid at the usual time, after the end of the performance the Committee seeks to pay no more than necessary to attract talented individuals to join the Society. year, taking account of the outcome of any performance conditions. Any deferred elements of the SVPA Newly recruited Executive Directors are eligible to receive the same remuneration elements as existing scheme for eligible leavers will continue to be paid on the usual payment dates. Executive Directors as set out in the policy table above, namely: Statement of implementation of Remuneration Policy in 2016 • Base salary – set at an appropriate level taking into account the experience and quality of the candidate; From 2016, as detailed in the policy section of this report, we will be introducing a new Single Variable • Pension and benefits – in line with our standard policy; and Pay Arrangement (SVPA). In reviewing our remuneration policies and variable pay schemes for • Single Variable Pay Arrangement – in line with our standard policy. Executive Directors and other senior colleagues, we have taken into account member interests, market The Committee does not expect to make additional recruitment arrangements (such as signing on practice, the enhanced regulatory requirements for 2016 and our existing remuneration principles, bonuses) as standard practice but may (subject to regulation), from time to time, be required to do so in including the need to attract and retain key talent within the organisation. order to secure the appointment of the right candidate. The new SVPA will retain many of the design elements from the existing STI and MTI schemes, In addition to ongoing remuneration arrangements, the Society may, where necessary, make including an enhanced balanced scorecard of financial and non-financial measures. The financial replacement awards to ‘buy-out’ any remuneration awards or opportunities that an incoming Executive measures include Group profit, Mortgages and Savings division profit and its management expense Director has forfeited in order to join the Society. Where this is necessary, the Committee will ensure ratio. The non-financial measures include customer growth and satisfaction scores, risk and that the overall value does not exceed the value being given up and will take into account regulatory governance, and people measures. For 2016, the weighting will be 50% based on financial, 30% requirements, performance conditions and timing of payments. on non-financial measures and 20% on personal objectives which include an element for strategy development and implementation. Newly appointed Non-Executive Directors will receive fees in line with the policy outlined above. In order to retain the longer term focus of the scheme, performance will be assessed against annual Directors’ service contracts and notice periods targets but will be subject to a sustainability assessment one year after the initial award has been made. The Executive Directors are employed on rolling service contracts which can be terminated by either The Remuneration Committee has the discretion, subject to agreed criteria, to reduce the overall award the Society or the Director giving one year’s notice. Unless notice to terminate is given by either party, by up to 25%. the contracts continue automatically. For Executive Directors (except the Group Chief Executive), 50% of the award will be paid in cash Non-Executive Directors do not have service contracts. in 2017 and the remaining 50% will be deferred and paid pro-rata in 2018 to 2022 (unless a greater Policy on termination payments proportion, a longer deferral period or a retention period is required by regulations). For the Group Chief The Committee’s overarching aim is to treat departing Executive Directors fairly, taking into account the Executive, 20% of his 2016 award will be paid in cash in 2017 and 20% will be retained for a further circumstances of their departure, but always taking care to ensure that the interests of members are six months subject to write down if the CET 1 ratio falls below an agreed level. The remaining 60% is considered and that there are no rewards for failure. deferred for three to seven years and is paid pro-rata in 2020 to 2024, again subject to the write down Executive Directors are entitled to be paid their base salary and contractual benefits (including pension condition and a six month retention period for 50% of payments in each year. contributions) during the notice period. The Society has the discretion to pay these as a lump sum The deferred payments for all participants are subject to the sustainability assessment and normal risk benefit in lieu of notice. adjustment at the discretion of the Remuneration Committee. The Rules of the SVPA scheme and the MTI scheme1 set out the treatment of awards for individuals The SVPA will reduce the overall maximum variable pay opportunity, from 100% to 50% of base salary. who cease to be an employee or Director of the Society. The target for all Executive Directors is 30% of base salary. In the following circumstances an individual will be eligible for a payment under the SVPA scheme: As part of the review of Executive remuneration, due to the significant reduction in variable pay • Normal retirement; opportunity, the Remuneration Committee proposes to increase base pay by 15% and implement retrospectively from 1 January 2016. The increase in base pay will mean that, in the longer term, the • Death; value of on-target total remuneration for the Executive Directors will remain broadly the same as the • Injury or disability; or levels projected under the current STI and MTI schemes. • Any other circumstances which the Committee may in its discretion determine. In exercising discretion on eligibility for payment of annual or deferred amounts, the Committee will consider the circumstances surrounding the departure. For the SVPA and until the outstanding MTI cycles are completed, the Society will continue to pay any payment due to an eligible leaver in respect of a completed performance year. Deferred awards for completed performance periods and for part completed performance periods will be paid on the due date, except in the event of death, when the Committee may exercise its discretion and pay the deferred amount due immediately.

1. The rules of the MTI scheme remain unchanged from our 2014 policy and include redundancy in the eligible leaver criteria in addition to those set out for the SVPA above. 32 Vote in branch or by post To vote online visit skipton.co.uk 33 Annual Report on Remuneration in 2015 2015 2014

Executive Directors’ remuneration Committee Committee chair Taxable chair Taxable The total remuneration for Executive Directors in 2015 is set out in the table below: Fees fees benefits(1) Total Fees fees benefits(1) Total

Prior years’ Audited Notes £000 £000 £000 £000 £000 £000 £000 £000 Current year deferred Mr M H Ellis 162 - 5 167 157 - 4 161 annual performance (Chairman) performance pay now (1) (2) (3) Mr P J S Thompson Salary Benefits pay Pension Total released 2 52 10 2 64 51 9 2 62 (Deputy Chairman) 2015 Audited £000 £000 £000 £000 £000 £000 Mrs C Black 47 - 4 51 45 - 3 48 Ms M Cassoni 3 47 13 5 65 45 12 6 63 Mr D J Cutter (note 4) 418 15 149 84 666 90 Mrs D P Cockrem 4 16 - 2 18 - - - - Mr I M Cornelius 244 12 91 21 368 21 Mr R D East 5 47 13 1 61 45 - 1 46 Mr R S D M Ndawula (note 5) 221 10 93 19 343 - Mr P R Hales 6 12 - - 12 45 12 1 58 883 37 333 124 1,377 111 Mr G E Picken 7 72 - 4 76 70 - 4 74 Ms H C Stevenson 47 - 3 50 45 - 4 49 2014 Audited 502 36 26 564 503 33 25 561 Mr D J Cutter 408 15 195 81 699 64 Notes: 1. In line with the requirements for UK listed companies, we have, this year, opted to disclose the taxable benefits paid to Mr I M Cornelius 236 12 111 19 378 21 our Non-Executive Directors. The taxable benefits shown in the table above relate to the reimbursement of travel and Mr M R Fleet (note 6) 251 19 115 20 405 23 subsistence expenses between home and Skipton Head Office, including attendance at Board and committee meetings. 2. Mr Thompson is Deputy Chairman and Chairman of the Remuneration Committee. Mr R J Twigg (note 6) 76 14 46 15 151 27 3. Ms Cassoni is the Chairman of the Audit Committee. 4. Mrs Cockrem was appointed to the Board on 1 September 2015. 971 60 467 135 1,633 135 5. Mr East was appointed as Chairman of the Board Risk Committee on 1 January 2015. 6. Mr Hales stepped down as the Chairman of the Board Risk Committee on 31 December 2014 and retired from the Board Notes: on 31 March 2015. Mr Hales joined the Board of SFS for the remainder of 2015 and received fees of £37,548 (2014: Nil) in relation to his contribution to that Board, which is not included in the above table as he is no longer a Director of the Society. 1. Benefits comprise the provision of a car or car allowance and private medical insurance contributions. 7. Mr Picken is also a Non-Executive Director of Connells Limited for which he receives an annual fee of £25,000 included in 2. £59,718 of the 2015 Short Term Incentive for Mr Cutter has been deferred under the rules of the scheme (2014: £77,802). the table above. No amounts relating to the 2014/2016 or 2015/2017 MTI are included in the above figures, as payments will be based on performance in the stated periods and are not due to commence until 2017. For Messrs Cutter, Cornelius and Ndawula, a total of £314,877 has been accrued to 31 December 2015. This represents two thirds of the estimated payment for the The Committee and its advisers 2014/2016 scheme and one third of the estimated payment for the 2015/2017 scheme based on current performance. The accrual will be reviewed at the end of each qualifying year and adjusted, as required, based on that year’s performance. The purpose of the Remuneration Committee is to determine, on behalf of the Board, the Remuneration 3. The Incentive Scheme rules include the requirement to defer over three years a portion of the amount earned by any Policy and to: individual if the total amount earned by that individual is greater than £500,000, or the amount earned under the Incentive • Ensure that remuneration policies, principles and practices are appropriate to enable the business Scheme is more than 33% of his or her total remuneration. 4. Mr Cutter’s 2015 pension figure includes the additional value earned in the defined benefit scheme during 2015 and to attract, retain and reward people with the right skills, experience, knowledge and behaviours to a non-consolidated allowance paid in lieu of contributions. For the other Executive Directors, the figure relates to support achievement of business goals and objectives; contributions to the defined contribution pension scheme and/or a non-consolidated cash allowance. 5. Mr Ndawula was appointed as Group Finance Director on 23 February 2015. • Maintain policies which are compliant with governing laws and regulations; 6. Mr Fleet resigned on 31 December 2014 and Mr Twigg transferred to Connells Limited on 7 April 2014. • Ensure that remuneration arrangements support and encourage desired behaviours and culture; and • Ensure appropriate governance of remuneration practices across the Society and its subsidiary Non-Executive Directors’ remuneration companies and exercise effective oversight of these. Non-Executive Directors’ fees (excluding those of the Chairman) are reviewed annually by the Non- The full terms of reference of the Remuneration Committee and the remuneration principles are Executive Directors’ Remuneration Committee, in line with the policy outlined earlier in the report. available, on request, from the Secretary. The terms of reference are also available online at The Non-Executive Directors’ Remuneration Committee makes recommendations concerning www.skipton.co.uk. Non-Executive Directors’ remuneration to the Board and in 2015 recommended that the basic Non- Executive Director fee and Deputy Chairman fee should be increased by £2,000 and £1,000 to £48,000 and £53,000 respectively with effect from 1 August 2015. The fees for chairing the Audit and Board Risk Nimble Thompson Committees were increased by £500 to £13,000 per annum. The fee for the chair of the Remuneration Chairman of the Remuneration Committee Committee was increased by £1,000 to £11,000 per annum to reflect the increasing complexity in the 23 February 2016 role. These fee increases were also effective from 1 August 2015. The Chairman’s fees are reviewed and approved by the Remuneration Committee. Mr Ellis’ fee was agreed as £160,000 from 1 August 2014 and when reviewed by the Remuneration Committee in 2015 was increased to £165,000 with effect from 1 August 2015.

34 Vote in branch or by post To vote online visit skipton.co.uk 35 Notice of 2016 Annual General Meeting This year’s Annual General Meeting (AGM) of Skipton Building Society will be held at the Skipton Building Society Principal Office, The Bailey, Skipton, North Yorkshire BD23 1AP on Monday 25 April 2016 at 6.30pm for the following purposes:

Ordinary Resolutions 1. To receive the Report & Accounts How to find us 2. To re-appoint KPMG LLP as auditors 3. To approve the Directors’ Remuneration Our AGM takes place at: Report (other than the section headed Skipton Building Society ‘Directors’ Remuneration Policy’) for the The Bailey year ended 31 December 2015 Skipton 4. To approve the Directors’ Remuneration Policy (as contained in the Directors’ Remuneration North Yorkshire BD23 1DN Report for the year ended 31 December 2015) (Sat Nav postcode: BD23 1AP) Elections of Directors 5.1 To elect Andrew Paul Bottomley • Free parking is available on site 5.2 To elect Denise Patricia Cockrem • Nearest train station: Skipton 5.3 To elect Mark Joseph Lund There’s a taxi rank at the station or 5.4 To re-elect Maria-Luisa Cassoni it takes about 20 minutes to walk 5.5 To re-elect Ian Michael Cornelius 5.6 To re-elect David John Cutter • For more detailed directions, 5.7 To re-elect Robert David East please visit skipton.co.uk/thebailey 5.8 To re-elect Michael Henry Ellis or call 0345 850 1733. 5.9 To re-elect Robert Samuel Duncan Mugenyi Ndawula 5.10 To re-elect Graham Edward Picken 5.11 To re-elect Helen Claire Stevenson Special Resolution 6. To approve changes to the Society’s Memorandum Notes that form part of this Notice of AGM can be found on the enclosed voting form. By order of the Board

John Gibson, Secretary Map data ©2016 Google 26 February 2016

We can provide documents in large print, Braille or audio cassette or CD if you need them. Please speak to a member of our team on 0345 850 1733 to find out more. Skipton Building Society is a member of the Building Societies Association and Financial Ombudsman Service. Authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and Prudential Regulation Authority under registration number 153706 for accepting deposits, advising on and arranging mortgages and insurance. Principal Office, The Bailey, Skipton, North Yorkshire BD23 1DN. Stock code 306790_19/02/16