The directors have pleasure in presenting the summary financial statement of the Group for the year ended 30 September 2007.
This financial statement is a summary of the information in the audited annual accounts, the directors’ report and the annual business statement, all of which will be available to members and depositors free of charge on demand from the Kent Reliance Building Society Head Office from 8 January 2008.

The summary financial statement was approved by the Board of Directors on
27 November 2007.

Summary directors’ report 2007

The year to 30 September 2007 has been another outstanding period of growth and financial consolidation combined with further progress in the programme of modernisation. The Society featured regularly throughout the year in the media and particularly in national press ‘best buy’ tables for both its investment and mortgage products. In addition the Society continued to win awards: in 2007 the Society was voted best mini cash ISA provider by What Investment. The Society was also nominated for two innovation awards for the intergenerational mortgage option.

The requirement for new members to sign a charitable assignment clause was removed last year. While charitable assignment had been a useful deterrent against the unwelcome disruptive impact of carpet bagging, the Society had built up both a strong and varied range of investors and a processing capacity sufficient to avoid day to day operations being adversely affected by a large uplift in member applications. Indeed, since that decision was made there have been no noticeable adverse effects upon the Society. The removal of the clause enables the Society to be unencumbered in developing the future strategy of the business.

Total assets increased by 32% in the year and now stand at £2.1 billion. Mortgage assets at the year end were around £1.6 billion – an increase of £270 million over the previous year end – which is an outstanding performance in a very competitive market. While the costs of doing business are increasing and margins are falling this additional mortgage business was achieved at satisfactory, albeit keen, rates. The directors are delighted that national recognition and prestigious awards from financial services industry publications for high quality customer service and product innovation continue to accompany these levels of growth, all of which was organic.

For the past few years we have noted that all building societies – if they are to be serious players in the sector – will need to find ways of reducing relative costs in order to be able to operate on a finer interest margin as competition increases. The continuing increase in the level of regulation creates its own set of cost pressures. Your Society has dealt with these challenges through a programme of modernisation and growth to deal with the higher costs and lower potential to earn profits. We have continued to invest in technology, to process re-engineer the business and to capitalise upon the investment in our Bangalore based subsidiary company. As a consequence we are able to process back office work faster, more efficiently, with more flexibility and at less cost than is possible in the UK and the results are evident from these accounts. Against the trend in the industry our relative costs have again reduced significantly – where most other societies have seen little change or an increase – our underlying profit level has been maintained and our levels of growth have outpaced the industry at more than three times the national average. The Society remains in good shape and well placed to move forward with confidence.

The review of the Society’s operations continues. The franchise of the branch network to agents has proved very successful. Business volumes have increased where historically they had been in decline. We are convinced that the local and focused management afforded by our agent partners has had a significant beneficial impact upon the business levels and quality of service. We have one full branch remaining at Hempstead Valley and it is our aspiration to relocate that branch to more suitable premises. We may then consider transfer to an agency arrangement. The transfers undertaken thus far have ensured that member access to local services are maintained for those that wish to do business in the high street, whilst enabling cost savings through shared use of premises. This strategy means that those members who do not use the branches are not cross subsidising those that do.

This year saw the sixth consecutive reduction in the management expense ratio from 50p last year to 44p per £100 of assets as a result of the process changes, re-engineering and outsourcing initiatives. No other UK building society has a lower expense ratio based on published information available at the end of September 2007.

The Society’s business in the Channel Islands enjoyed another year of remarkable growth with total mortgage balances increasing by a further 41% to almost £700 million. This continues to be a great achievement considering the Society has no formal presence on the islands of Jersey and Guernsey. All the customers are managed from the Society’s Head Office in Chatham. In order to accommodate changes to Jersey tax law it was necessary to form a new subsidiary registered on the island which is also called Jersey Home Loans Limited. For that reason two Jersey Home Loan subsidiaries appear in these accounts. We expect a similar arrangement for Guernsey in the next financial year.

Reliance Property Loans Limited is the subsidiary business that acquired a £22 million portfolio of buy to let mortgages from a subsidiary of the Skipton Building Society three years ago. Since that time no significant developments have taken place, the business is performing as expected and attrition is within the anticipated tolerances, although overall the Society enjoys a significant average mortgage life in excess of 7 years against an industry average which is anecdotally less than half of that.

The Society remains committed to local initiatives alongside its wider developments. In particular, the innovative Really useful save and borrow account in partnership with Maidstone and Gravesham Borough Councils offers tenants of a number of local housing associations competitive rates of interest in an easy access savings account and the opportunity to take out small loans, thus helping reduce financial exclusion. In addition a special mortgage scheme for key NHS workers operates in conjunction with the staff of Kent Ambulance. Alongside Gillingham Football Club the Society has launched an affinity account that offers an attractive rate of interest whilst giving the Club a commission. Nationally the Society is providing shared ownership loans for people with learning disabilities. The scheme is run in conjunction with Government agencies and local authorities.

The Board is mindful that the market in which the Society operates is increasingly competitive and therefore opportunities to develop other strategic options will be considered as they emerge, subject to the best interests of members and other stakeholders being upheld.

This is the second set of results under International Financial Reporting Standards (“IFRS”). As a result interest income and expense now represents the expected yield that will be earned or paid over the estimated life of an asset or liability taking into account not only interest received or paid but also any directly related fees, commissions and costs. When assessing provisions against mortgage balances the evidence required to demonstrate impairment is substantially more specific than was required under the previous rules. Derivatives (ie interest rate swap contracts) are shown on the face of the balance sheet at fair value rather than as an “off balance sheet” note. This has the capacity to produce significant volatility in the Group income statement. As the Group only enters into derivative arrangements to mitigate interest rate risk and not to speculate on value movements, hedge accounting has been applied with the result that the value of derivatives has been matched by equal and opposite movements in the value of the underlying instruments being hedged to a significant degree.

Explanations of all the accounting policies applied during the year, which are in accordance with all standards and related interpretations adopted by the European Union as at 30 September 2007, are set out in note 1 to the accounts.

Results of the Group for the year

Financial position of the Group at the end of the year

Summary of key financial ratios

The gross capital ratio measures the proportion which the Group's capital bears to the Group's liabilities to shareholders and borrowers. The Group's capital consists of profits accumulated over many years in the form of reserves, subscribed capital and subordinated liabilities. Capital provides a financial cushion against difficulties which might arise in the Group's business and therefore protects investors.

The liquid assets ratio measures the proportion of investors' funds which are held in the form of cash, short term deposits and marketable securities. Liquid assets are generally realisable, enabling the Group to meet requests by investors for withdrawals from their accounts, to make new mortgage loans and to fund its general business activities.

The profit/mean total assets ratio measures the proportion which the profit after taxation for the year bears to the average of total assets at the start and end of the year. The Group needs to make a reasonable level of profit each year in order to maintain its capital at a suitable level to protect investors.

The management expenses/mean total assets ratio measures the proportion which the Group's administrative expenses bears to the average of total assets at the start and end of the year.

Statement of the auditors to the members and depositors of the Kent Reliance Building Society

Pursuant to Section 76 of the Building Societies Act 1986, we have examined the summary financial statement of Kent Reliance Building Society set out on pages 1 to 3.

This report is made solely to the members and depositors of Kent Reliance Building Society, both as a body, in accordance with Section 76 of the Building Societies Act 1986. Our examination has been undertaken so that we might state to the Society’s members and depositors those matters we are required to state in an auditors’ statement and for no other purpose. To the fullest extent permitted by law, we do not accept responsibility to anyone other than the Society and the Society’s members and depositors, both as a body, for our examination, for this statement, or for the opinions we have formed.

Respective responsibilities of directors and auditors

The directors are responsible for preparing the summary financial statement, in accordance with applicable United Kingdom law. Our responsibility is to report to you our opinion on the consistency of the summary financial statement with the full annual accounts, annual business statement and directors’ report and its conformity with the requirements of Section 76 of the Building Societies Act 1986 and regulations made under it. We also read the other information attached to the summary financial statement consisting of the directors’ remuneration report and consider the implications for our report if we become aware of any apparent misstatements or material inconsistencies with the summary financial statement.

Basis of Opinion

We conducted our examination in accordance with Bulletin 1999/6 ‘The auditors’ statement on the summary financial statement' issued by the Auditing Practices Board for use in the United Kingdom. Our report on the Society’s full annual accounts describes the basis of our audit opinion on those annual accounts.

Opinion

In our opinion the summary financial statement is consistent with the full annual accounts, the annual business statement and directors’ report of the Kent Reliance Building Society for the year ended 30 September 2007 and complies with the requirements of Section 76 of the Building Societies Act 1986, and regulations made under it.

Ernst & Young LLP
Registered Auditor
London
27 November 2007

Directors' remuneration report

Introduction

The purpose of this report is to inform members about the board's policy for the remuneration of the Group's executive team and its non-executive directors and explains the process for setting directors' remuneration and how the Society applies the principles of the Combined Code. The Combined Code was developed by the Committee on Corporate Governance for listed companies: details are available from the Financial Services Authority and a copy can be downloaded from www.fsa.gov.uk/pubs/ukla/lr_comcode2003.pdf.

Remuneration of Group's Executive Management Team

The remuneration of each executive director is set out in note 7 to the annual report and accounts.

Executive Management remuneration comprises a number of elements: basic salary, annual and medium term incentive scheme and contributions to the Group pension scheme:

Specific remuneration and terms and conditions of employment of members of the Executive Management Team are determined annually by the board on the basis of recommendations by the remuneration committee. The committee ensures that the Group’s policy remains appropriate to attract, motivate and retain high calibre executives with the skills and experience needed to lead a business of this nature and complexity, and develop it for the long term benefit of members.

The remuneration committee comprises three non-executive directors, as set out in the directors’ report, with attendance by the chief executive as appropriate. The chief executive withdraws from the meeting when his own remuneration is considered. The committee is provided with executive remuneration and benefits data from comparative organisations across the financial services industry and building society sector and procures such other relevant data from independent expert sources as appropriate.

Non-executive directors' fees

Fees for each non-executive director are set out in note 7 to the annual report and accounts. Non-executive directors are remunerated solely by fees. They do not receive any salary, bonus incentives, pension contribution or other taxable benefit.

The Group’s policy is to position fees so that they are in line with fees paid by similarly performing financial services organisations. Enhanced fees are paid to the chairmen of the board, audit committee and mortgage committee commensurate with the additional responsibilities inherent in these roles.

Fees are determined annually by the board on the basis of recommendations by the remuneration committee. The committee is provided with fee data from comparative organisations across the financial services industry and building society sector and procures such other relevant data from independent expert sources as appropriate.

In summary

This report, together with the disclosures in note 7 to the annual report and accounts (and set out in the table opposite), is provided to give members a full explanation of the policy and application of directors’ remuneration. A resolution will be put to the Annual General Meeting, inviting members to vote on the directors’ remuneration report. The vote is advisory and the board will carefully consider the outcome of the vote.

Malcolm Mackenzie
Chairman of the Remuneration Committee
27 November 2007

Directors' emoluments

Board and Management

Results of the AGM

The Society’s Annual General Meeting (AGM) was held on 22 January 2008.

A total of 24,525 votes were cast on the Ordinary Resolutions by members who either attended the AGM in person or voted by proxy.

The following Resolutions were passed at the meeting;