Financial StatementsYear ended 31 March 2009

Financial StatementsYear ended 31 March 2009

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Financial StatementsFor the year ended 31 March 2009

The Riverside Group Limited Industrial and Provident Society Registered Number 30670R

ContentsHighlights – five year summary 3

The Board, Executives and Advisors 5

Group Chairman’s statement 6

Operating and financial review 8

Report of the Board 13

Report of the independent auditors 17

Group income and expenditure account 18

Statement of total recognised surpluses and deficits 19

Group balance sheet 20

Group cash flow statement 21

Company income and expenditure account and balance sheet 22

Notes to the financial statements 23

2

Revitalising neighbourhoods – cleaner, greener, safer.

3

Highlights – five year summaryFor the year ended 31 March 2009 2008 2007 2006 2005 RestatedIncome and expenditure accountTurnover £’000 249,278 251,801 176,162 122,680 110,215Operating surplus £’000 24,950 34,496 16,824 21,159 22,322Surplus on ordinary activities before tax £’000 9,736 13,315 6,197 14,322 16,474

Balance sheet Tangible assets £’000 1,692,132 1,648,068 1,589,833 832,959 770,720Loans repayable after more than one year £’000 621,674 569,313 508,493 272,227 240,970Reserves: Designated and restricted £’000 66,269 63,696 54,372 51,101 44,239 Income and expenditure £’000 89,653 80,092 62,770 54,051 44,512 Consolidation £’000 152,340 155,815 161,038 — —

Accommodation figuresTotal housing stock, owned and managed Units 51,762 52,339 52,641 40,579 39,071

Statistics Interest cover 1.9 1.7 1.7 2.2 2.3(surplus before interest payable, depreciation &impairment divided by net interest payable)

Gearing % 56.4 53.0 48.1 52.5 49.4(long term loans as % of Social Housing Grantplus reserves)

Voids and bad debts as % of rent % 2.7 4.4 3.4 2.8 3.1and service charge receivable

Rent arrears Days 14.5 17.8 21.5 15.9 15.8(rent arrears divided by net rent and service charges receivable multiplied by 365 days)

All figures have been extracted from current and prior years’ audited financial statements.

4

Tranforming lives –investing in the future.

The Board, Executives and Advisors

President

1. K Clifford Cook OBE KStJ FCA

The Board of The Riverside Group Limited

Group Chairman 2. Professor J N Tarn OBE DL FRIBA

Group Vice Chairman 3. P Brant LLB BL

Group Treasurer 4. P R Deyes BCom FCA

Members P J Chesters MA (retired 31 March 2009) (Not pictured)

5. P J Han (appointed 1 April 2009)

6. A M Jones (appointed 3 June 2009)

R M Kelly (appointed 2 April 2008) (retired 3 June 2009) (Not pictured)

7. P H Raw FRICS FBEng MFPWS

A J Redmond BA(Hons) ACA (retired 31 March 2009) (Not pictured)

8. M Steinberg OBE FRSA (appointed 1 April 2009)

9. Y Turgut BSc MSc FCA

Group Directors

Group Chief Executive10. D F Shackleton CBE MA(Oxon) FCIH FRSA MAPM*

Group Deputy Chief Executive & Group Finance Director11. J E Baggaley BA(Hons) FCA*

Group Deputy Chief Executive12. D A Jepson BA(Hons) MBA*

Group Director – Subsidiaries J Heverin MSc DPA FCIH (retired 31 March 2009) (Not pictured)

Group Director of Corporate Services 13. R Clawson BSc(Hons)

Group Director, Housing Services14. J R W Wood BSc(Hons) FIH

Managing Director ECHG15. D Caren BSc MA MBA CQSW*

* Co-opted Board Members

Registered auditors

KPMG LLPSt James’ SquareManchesterM2 6DS

Principal solicitors

Brabners Chaffe StreetHorton HouseExchange FlagsLiverpoolL2 3YL

Trowers & HamlinsSceptre Court40 Tower HillLondonEC3N 4DX

Principal bankers

National Westminster Bank PLC22 Castle StreetLiverpoolL69 2BE

Secretary and Registered Office

L F Hughes BA(Hons) MBA CertCIH

Solicitor2 Estuary BoulevardEstuary Commerce ParkLiverpoolL24 8RF

Registered Numbers

Post 18 December 2008Industrial and Provident SocietyRegistered number: 30670R

Pre 18 December 2008Company Limited by Guarantee: 4091048

Post 1 April 2009Tenant Services Authority Registered Number: L4537

Pre 1 April 2009Tenant Services Authority Registered Number: L4294

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11 12

13 14

9 10

7 8

5 6

1 2

3 4

5

We are presenting these results in the context of an astonishing year. As I reflect on the past 12 months and look forward to the next, it is hard not to conclude that Riverside is facing some of the most difficult operating conditions any of us can remember.

Traditionally housing association activity has been seen as counter cyclical – in other words we have been well placed to prosper in times of economic downturn. However we cannot consider ourselves immune from the consequences of the current turmoil. In the housing market, we have seen a collapse of prices and fall off of activity as the severe constraint on lending has effected the number of people able to access mortgages. We have seen our own sales of affordable homes fall, and have had to be fleet footed to ensure that we are able to offer other options so that properties generate income and do not stand empty. However there is a significant financial cost which we need to manage, although ironically this comes at a time when demand for our housing for rent – and of course the core services which go with it – is burgeoning.

The dramatic fall in values seen in the commercial market over the last year have also been felt by the Group’s property company, Prospect (GB) Ltd. Prospect has been quick to amend its strategy in response to the challenging market conditions it faces and we are confident it is well placed to ride out the current turmoil in the commercial property market.

The collapse of the housing market bubble has been a significant factor in the onset of recession, and whether we believe there are signs of ‘green shoots’ or not, the Riverside economy faces increasing challenges. I am very concerned at the prospect of rent deflation when we have such pressures on our services, and we will continue to make the case to government and the Tenant Services Authority for a change to rent regulation. Notwithstanding negative RPI , many of our real costs continue to rise. Whilst we must continue our drive to take excessive cost out of the business and maximise value for money, we must not compromise excellence.

Amidst all of this we have seen fundamental changes to our regulatory and funding context with the creation of the Tenant Services Authority and Home and Communites Agency. We welcome the renewed energy and focus they are bringing. We have had the opportunity to engage directly with both the Chairman and Chief Executive of the Homes and Communities Agency, and look forward to welcoming the Chief Executive of the Tenant Services Authority to address Board members at our annual conference in November.

However the creation of two separate and powerful new agencies will, in time, create pressures which we will need to reconcile as we seek to balance investment in developing services for existing customers with the provision of much needed new homes for new ones. Both present a call on limited resources, but if we are to fulfil our mission of ‘transforming lives, revitalising neighbourhoods’, we must find creative and innovative ways of doing both. Now is not the time to retrench, and it is precisely at these times that the Board must show strong leadership. Nothing less is expected of an association of our scale and pedigree.

Going forward, we must learn to manage risk in a climate of great uncertainty. We don‘t know how quickly the economy will recover, but we must be prepared for alternative scenarios, whether it is steady recovery from next year, or medium term stagnation. We don’t know which political party will form the next government, but we must be prepared to influence politicians across the spectrum, and ensure that housing gets the best deal possible. However we do know that after 2011 the nation’s public finances will be severely constrained, and that whoever leads us, we are facing a prolonged period of public sector austerity for all service providers. There is no point being overwhelmed by circumstances – too many people depend upon our homes and services and we must be there for them.

Group Chairman’s statement

6

But we will only do this by being cost effective and focused in the delivery of our core services, and brave and innovative in our delivery of new homes.

These financial statements give a clue about how we are going to achieve this. They demonstrate that amidst the grey skies, Riverside’s performance continues to be robust – both in terms of our financial position, where we have exceeded our target surplus, and our performance in delivering the key service outcomes which are vital to delivering customer delight. I am particularly pleased to be able to report a steady improvement across a range of performance indicators, and this year we are presenting a more detailed analysis of performance in these statements.

So how have we been able to achieve this? I believe there are a couple of key factors.

First, we have completed the initial phase of a process of consolidation, to create a simpler and more effective organisation. We have called this ‘Better Together’, and on 1st April this culminated with the amalgamation of seven of our former subsidiaries with the parent association to create a new Riverside. We achieved this against all odds – a change in regulator, an adverse funding climate, multiple pension arrangements – and I would like to take the opportunity of thanking all our

stakeholders who demonstrated their trust in this organisation by providing their vital support. This could not have happened without the full support of Board members across the Group, and I pay tribute to their courage and commitment. Better Together could easily have been seen as a threat, but rather Board members have embraced it as an opportunity to refocus and adopt changed roles which, I believe, will enable more meaningful engagement in driving performance and developing appropriate local strategies. During this period we have also been fortunate enough to be able to strengthen the membership of the Board of The Riverside Group Limited and we have welcomed a number of new members bringing additional strategic, financial and community skills.

I believe we have put in place a Riverside which is strategically focused, more efficient – delivering at least £3 million savings over 5 years to re-invest in improved services and more homes – and better equipped to engage with communities and deliver improved services. This is precisely the type of organisation we need to weather the storm and prosper in the challenging climate I have described. As we plan ahead, we look forward to the second stage of Better Together, where discussions are under way to achieve further benefits by bringing our colleagues in ECHG into these simpler working relationships.

The second factor is the dedication and performance of an impressive staff team led by a remarkable Chief Executive. For the second year running, their commitment to excellence has been recognised by winning the title of ‘Social Landlord of the Year’, and I felt enormous pride in accepting the award on their behalf in May.

It seems appropriate to finish by paying particular tribute to Deb, our Chief Executive. I was delighted when her outstanding contribution to housing was acknowledged by the award of a CBE in the Queen’s New Year’s Honours List. Of course, this brought recognition at the highest level of what we have known for some time – the vision and leadership which has seen Riverside grow and prosper over the last decade, and her wider contribution to the sector through her work with the National Housing Federation. I know Deb is deeply respected across the whole movement, and this puts Riverside in a strong position to influence housing policy and investment going forward.

John TarnGroup Chairman

7

Principal activities The Riverside Group Limited is the ultimate parent entity of the Riverside Group. During the year the Group consisted of ten Registered Social Landlords (RSLs); providing general needs housing at affordable rents, low cost home ownership, sheltered and supported housing and services for people who need additional housing related support. These subsidiaries also promoted regeneration and provide investment in the communities in which they operate. There are non RSLs within the Group including property investment and management companies, commercial trading companies and joint ventures. These companies seek to make profits to contribute to the overall aims of the Group. The Group also contains charitable trusts and technical subsidiaries.

On 1 April 2009 eight of the Group's RSLs (with the exception of ECHG and The St. Michael's Housing Trust) amalgamated to form one RSL, The Riverside Group Limited. ECHG and the non RSLs continue to be subsidiaries of The Riverside Group Limited.

Objectives and strategiesThe Corporate Plan is written in three parts as follows:

Part 1 Strategic plan: this sets out Group Objectives, or the ends that we need to achieve to deliver the Group’s ‘vision’. It describes new or enhanced programmes of activities required to deliver these objectives. The objectives are as follows:

We will transform lives by…— Delivering excellent housing services and support — Acquiring and building more affordable homes — Supporting vulnerable residents to live with dignity

in their own homes— Helping our residents become more prosperous

We will revitalise neighbourhoods by…— Improving our homes so that they are decent,

modern and warm— Focusing our services in places where we can make

a difference— Managing places so that they are cleaner, greener

and safer

Part 2 Performance plan: this identifies Performance Objectives, based around the enablers or means which need to be in place to deliver the vision. These focus on continuous improvement, organisational development and organisational structure.

Part 3 Business plan: this establishes the resources the Group requires to deliver the Group and Performance Objectives; the income required to fund activities and priorities for expenditure.

Measurable Group targets have been set for each of these objectives, these have been used as the basis of establishing targets for all subsidiaries and corporate departments.

Operating review Improvement of our housing stock remains a priority and during the year the Group spent a total of £101.5 million on its new and rehabilitated stock (2008: £125.4 million). A further £75.2 million (2008: £83.9 million) was spent on routine maintenance and non-capitalised major repairs across the Group.

All this expenditure, together with investment in wider community regeneration was targeted in line with the Group’s neighbourhood investment strategies. These are designed to deliver the sustainable communities which are essential to the maintenance of the housing stock and therefore the strength of the balance sheet. In addition, the Group remains focused on the 2010 Decent Homes target.

Performance in the period

Operational key indicators2008/09 has been a very solid performance year for Riverside with 11 of our 17 targets having been matched or exceeded, a further three showing improvement since last year, and only three which neither improved nor met target. Many Key Performance Indicators (KPIs) are showing strong movement towards the three-year target in our Performance Plan with a number being ahead of where we would have expected in Year One.

Operating and financial review

8

Our tenants’ overall satisfaction with services provided by the landlord exceeded target across the Group (at 79%). This sees a continuations of a very encouraging trend, with satisfaction improving steadily over the past four years, reflecting our ongoing investment in delivering excellent custormer services (see page 12, fig. 1). Our commitment to improving satisfaction levels has been reflected and strengthened in our comprehensive review of resident involvement which has re-shaped our delivery mechanisms. Our new involvement structure maximises formal and informal involvement opportunities; it helps us to capture residents’ needs and wishes whilst responding to business needs and external changes which include the establishment of the new Tenant Services Authority.

For telephone callers to our Customer Service Centre, average call waiting time has shown a massive improvement over the year with performance improving by more than 50% (from 74 to 34 seconds).

The graph in fig. 2 shows all four repairs response time targets have been achieved at Group level which places Riverside comfortably above the national average performance level. Not only is our performance in this area strong, it has also been steadily improving. Our partnering arrangement with Morrison Facilities Services in North Merseyside is now well established and providing effective value for money services with additional community development benefits. This relationship will be strengthened when a new contract for repairs to properties in the South East is launched in July.

In difficult economic circumstances for our tenants, current rent arrears performance has still shown substantial improvement from 8.0% last year to 6.7% this year against a target of 7.5% (fig. 3).

Following a major focus on relet times the year-end position has shown a vast improvement from 12 months previously; 39.7 days this year against 52.7 days last year, even with a higher turnover (9.2% against last year’s 8.2%). This performance is better than target (43 days) and equates to a reduction in void rent loss of approximately £400k.

Whilst we continue to work in challenging areas with Housing Market Renewal status and where we have demolition programmes, “stock void and not available for letting” indicator will remain high for some time. However the Group target was achieved.

We have captured our best gas servicing performance for the last four years with a year-end position of 0.9% which, at Group level represents upper quartile performance.

Group turnover for the year to 31 March 2009 decreased by 1.0% to £249.3 million (2008: £251.8 million).

Operating surplus decreased to 10.0% of turnover at £25.0 million (2008: £34.5 million). This reduction is due to a £10.0 million property impairment within Prospect (GB) Limited, the Group's commercial property company. The impairment consists of £8.6m charged to the Income and Expenditure account (see note 9) in addition to a £1.4m reduction in the revaluation reserve (see note 20).

The financial statements include £1.6 million turnover and £0.04 million operating loss from the Group’s joint venture activities, all of which are in the early stages of development.

Financial reviewVoid losses were 1.8% of gross rent receivable in the year, down from 2.3%. Bad debt write-offs decreased to 0.9% from 2.1%, following a higher than normal charge last year, as a result of ECHG's adoption of the Group's calculation basis. The surplus before tax for the year was £9.7 million (2008: £13.3 million). The decrease in operating surplus as a result of the property impairment being partially offset by the increased surplus on the sale of property at £18.7 million (2008: £12.3 million). Net interest payable has increased to £33.8 million (2008: £33.4 million).

9

The major movements on the Group's consolidated balance sheet are:

— An increase in fixed assets of £44.3 million which relates to the ongoing construction of social housing properties and investment in housing stock.

— A reduction in debtors greater than one year of £17.0 million as a result of the ongoing stock investment by the stock transfer subsidiaries and Community Seven. This reflects a reduction in the obligation of the respective local authorities to carry out improvement works to housing stock transferred to Riverside.

— An increase in long term loans of £53.6 million, which relates to the increase in borrowing across the Group to finance the construction of and improvement to the housing stock.

— A reduction in provisions and liabilities of £20.6 million. £18.1 million of this relates to a reduction in the outstanding commitments for improvement works to properties transferred from Local Authorities. The stock transfer subsidiaries and Community Seven are required to complete these works on behalf of their respective Local Authority.

Trends in performance over the last five years are shown on page 3 of these financial statements.

Dynamics of the Group The Group faces a number of key risks that could impact on future performance, some of which are referred to elsewhere in the annual report. Other examples include:

— The impact of the credit crunch on both the availability of funding and the wider property market.

— Income restriction due to rent increase regulations and the prospect of low inflation.

— The availability of, and increased competition for, social housing grant.

— Increased expectations from customers, including the need to deal with anti-social behaviour.

— Changes in the Supporting People income regime.— Requirements to fund future pension liabilities.— Changes to Decent Home Standards and

Eco-homes ratings.

The Group has allocated actions, as appropriate, to attempt to mitigate these risks, as part of the risk management process.

Investment for the future The Group’s annual surplus is vitally important for a number of reasons: continued investment in improved services and new homes; meeting commitments to lenders; raising further finance; providing protection against the unexpected and allowing further growth and diversification.

Diversification of the Group’s activities brings the benefit of alternative revenue streams, together with the opportunity for greater efficiency and economies of scale.

The Group has continued its focus on establishing efficiency as one of the five strategic objectives of the Group's Corporate Plan.

Financial reviewThe principal accounting policies of the Group are set out in note 1 to the financial statements. The Group has adopted the accounting treatment for shared ownership properties per the Statement of Recommended Practice "Accounting for Registered Social Landlords" (updated 2008) and as a result the 2008 figures have been restated. The impact on reserves was £3.3m.

10

Capital structure and treasury policyEffective treasury risk management is crucial both to financial performance and balance sheet stability.Treasury management is operated centrally in accordance with Board approved objectives and operating parameters, set out in the Group Treasury Policy and treasury strategy of each subsidiary.

Key issues the treasury strategies seek to address are funding and liquidity risk, interest rate risk, covenant compliance and exposure to counterparties. The Group borrows at both fixed and floating interest rates. Derivative instruments are used to manage its exposure to interest rate fluctuations.

The treasury strategies are carefully tailored to meet the needs of the individual subsidiaries and the overall Group. Strategies are tested by business plan sensitivities and evolve through a process of regular review and refinement. Regular updates on all treasury activities are given to the Group Finance Committee.

Group borrowings total £630.3 million (2008: £576.6 million), the increase being due to the continuing development programme in RHA and the progressing improvement programmes in the stock transfer subsidiaries. New debt drawn in the year totalled £60.4 million (2008: £70.9 million). Interest costs increased to £38.2 million (2008: £35.9 million). The average rate of interest paid in the year declined slightly to 6.1% from 6.8%. Gearing increased to 56.4% (2008: 53.0%), whilst interest cover increased to 1.9.

The Group has £147.5 million of unutilised committed borrowing facilities. Each of the stock transfer subsidiaries has a committed facility covering the life of their business plan.

Going concernAfter due consideration, the Board is confident that the Riverside Group has adequate resources to continue in operational existence for the foreseeable future. Accordingly, it continues to adopt the going concern basis in preparing the Riverside Group’s financial statements.

Statement of ComplianceThe form and content of the operating and financial review has been prepared in line with the recommended practice provided by the Statement of Recommended Practice ‘Accounting for Registered Social Landlords’ (Updated 2008). The statement has also been prepared in accordance with Reporting Standard 1: ‘Operating and Financial Review’.

J E BaggaleyGroup Deputy Chief Executive & Group Finance Director

11

12

Overall satisfaction with service provided by landlord

80.0%

75.0%

70.0%

65.0%March 2005 March 2006 March 2007 March 2008 March 2009

Repairs Response

100.0%

98.0%

96.0%

92.0%

90.0%

88.0%

86.0%

84.0%

94.0%

March 2005 March 2006 March 2007 March 2008 March 2009

% c

ompl

eted

in ta

rget

Emergency Repairscompleted in the same day1

Emergency Repairscompleted the next day1

Urgent Repairscompleted within target2

Routine Repairscompleted within target2

Current rent arrears

Fig. 1

Fig. 2

Fig. 3

10.0%

8.0%

6.0%

2.0%

0.0%

4.0%

March 2005 March 2006 March 2007 March 2008 March 2009

Group target 1 97%2 94%

Group target 75%

Group target 7.8%

1

2

The Board is pleased to present its report and the audited consolidated financial statements for the year ended 31 March 2009

Principal activityThe Riverside Group Limited is an Industrial and Provident Society incorporated under the Industrial and Provident Society Act 1965 and a Registered Social Landlord, and is the ultimate holding company within a group structure (‘the Riverside Group’). Details of members of the Riverside Group are given on page 37 of these financial statements.

The Riverside Group Limited exercises control over the members of the Riverside Group through the provision, in the rules or articles of association of each entity, for the appointment and removal of a majority of the subsidiary Board.

The Riverside Group Limited is responsible for establishing the Riverside Group’s overall policies and strategies, for monitoring compliance with Group values and performance against Group targets, within a clearly defined framework of delegation and system of control.

The Riverside Group Limited oversees the work of the Riverside Group, providing a number of corporate services to Group members. The operational relationship between The Riverside Group Limited and its subsidiary undertakings is managed through a series of intra-group agreements.

The principal activity of the Riverside Group is the provision of affordable rented accommodation and appropriate support services for people in need.

On 18 December 2008, The Riverside Group Limited converted from a Company Limited by Guarantee to an Industrial and Provident Society.

Post balance sheet eventsThe amalgamation of The Riverside Group Limited occurred on 1 April 2009. The Riverside Group Limited participated in this amalgamation along with eight of Riverside's RSL subsidiaries (with the exception of ECHG and The St. Michael's Housing Trust). The amalgamation rationalises the Group structure with all the assets and liabilities of the RSL members, including those of The Riverside Group Limited being amalgamated into one RSL, The Riverside Group Limited.

The Board confirm that there have been no other events since the financial year end that have had a material effect on the financial position of the Group.

Review of business and future developmentsThe review of business and future developments is discussed in the Group Chairman’s statement and the operating and financial review on pages 8 to 12.

The Board of DirectorsThe Board of Directors of The Riverside Group Limited are listed on page 5.

The Directors holding office during the period 1 April 2008 to 8 July 2009 are detailed below:

— P Brant LLB BL

— P J Chesters MA (retired 31 March 2009)

— P R Deyes BCom FCA

— P J Han (appointed 1 April 2009)

— A M Jones (appointed 3 June 2009)

— R M Kelly (appointed 2 April 2008), (retired 3 June 2009)

— P H Raw FRICS FBEng MFPWS

— A J Redmond BA(Hons) ACA

(retired 31 March 2009)

— M Steinberg OBE (appointed 1 April 2009)

— Professor J N Tarn OBE DL FRIBA

— Y Turgut BSc MSc FCA

In accordance with the rules, P Brant, P R Deyes and Professor J N Tarn retire at the Annual General Meeting, and being eligible, offer themselves for re-election.

P J Han, A M Jones and M Steinberg will offer themselves for election at the Annual General Meeting.

Executive DirectorsWhilst the Board is responsible for the Riverside Group’s overall policy and strategy; management is delegated to the Group Chief Executive. The Group Directors are the senior management team appointed, and act as executives within the authority delegated by the Board. They meet every two months under the chairmanship of the Group Chief Executive in order to consider all matters that will be reported to The Riverside Group Limited Board, its subsidiary boards, and all major management issues. This meeting is a key decision making forum for the management of the Riverside Group, reviewing all proposed policy changes and the comparative performance of subsidiaries and divisions and also assessing the management implications of decisions taken by members of the Riverside Group.

The Group Directors hold no interest in the share capital of any member of the Riverside Group.

Report of the Board

13

14

Corporate governanceThe Board is committed to integrity and accountability in the stewardship of the Riverside Group’s affairs. The National Housing Federation (NHF) Code of Governance is a Riverside Group policy requirement underpinning all governance issues. The Riverside Group complies with the NHF Code of Governance except that, to allow an appropriate balance between renewal and continuity, the Chair of the Board may be requested to extend his or her service as Chair for a limited period; and that, to promote a culture of openness, Audit Committees within Riverside meet with paid staff present. In addition, the Group Chief Executive is appraised by the Group Chairman.

The external auditors have undertaken non-audit work for the Group during the year ended 31 March 2009. More information about the level of fees paid for this work is set out in note 9 to the financial statements.

The Group Audit Committee has a protocol with the external auditors, which sets out policies for determining what non-audit work can be undertaken by the external auditors and procedures for periodic review and selection of external auditors.

Corporate role of the BoardThe Board comprises eight non-executive Board members, together with the Group Chief Executive, the Group Deputy Chief Executives and the Managing Director of ECHG, who are all co-opted members.

Terms of reference are issued to the Board. Board members act in the interest of the Riverside Group and not on behalf of any interest group.

The principal obligations of the Board to the Riverside Group are:

— to be committed to the values and objectives of the Riverside Group

— to develop strategy and drive the Riverside Group’s core policies

— to uphold the NHF Code of Governance — to represent the Riverside Group and enhance its

profile externally

The Board is drawn from a wide background and its members are selected to ensure that they bring relevant experience, skills and understanding to the discussions and decision making process of the Board. A system of annual appraisal has been implemented, both in relation to individual members and the Board as a whole.

The Board meets formally six times a year for regular business, including approval of the Budget and Business Plan. Board members also attend an annual conference to discuss future strategy. Also in attendance at Board meetings are the Group Directors and the Assistant Company Secretary.

Reporting to the Board are the Group Membership Committee, the Group Finance Committee, the Group Audit Committee and the Remuneration Committee.

Group Membership CommitteeThe Group Membership Committee considers Board appointments, including co-options, and submits recommendations to the Board. A range of recruitment techniques is used to secure a wide choice of candidates for vacancies on the Board, including advertising externally. It comprises Professor J N Tarn (Chair), P Brant, P R Deyes and B T Lawlor.

Group Finance CommitteeThe Group Finance Committee is a non-executive committee and meets four times a year. Its members are P R Deyes (Chair), P J Han and Professor J N Tarn. It recommends to the Board the adoption of the annual financial statements, and oversees the raising of finance.

Group Audit CommitteeThe Group Audit Committee is a non-executive committee and meets four times a year, addressing internal and external audit issues. Its members are P J Han (Chair), P R Deyes, N Rimmer and M D Taylor.

Remuneration CommitteeThe Remuneration Committee is a non-executive committee. Its members are Professor J N Tarn (Chair), P R Deyes and C J Kennefick. It agrees the appointment of Group Directors and their remuneration, after taking external advice. The Directors are not present at the meeting when their salaries are determined.

J Green joins the Committee as the Chair to consider non-executive remuneration. It also agrees the brief within which the Group Chief Executive can negotiate staff salaries with the union, Unite. The Committee takes specialist human resources advice from external consultants.

Internal controls assuranceThe Board has reviewed the effectiveness of the system of internal control for the year ended 31 March 2009 and to the date of approval of these financial statements. The Board complies with the requirements

set out in Circular 07/07 Internal Controls Assurance issued by the Regulator (‘the Circular’). This statement of compliance with the Circular has been reviewed by the auditors and their report is given on page 17. For the year ended 31 March 2009, the Board can make the following statement required by the above Circular:

— The Board is the ultimate governing body and is responsible for the Group’s system of internal control.

— The system is designed to provide the Board with reasonable but not absolute assurance that problems are identified on a timely basis and dealt with appropriately; that assets are safeguarded against unauthorised use or disposition; that proper accounting records are maintained; and that the financial information used within the business or for publication is reliable. Control is exercised through an organisational structure with clearly defined levels of responsibility and authority and appropriate reporting procedures.

— The identification of major business risks, and the appropriate response, is ongoing through a bottom up risk management process that involves staff across the Group. This process has been in place for the year ended 31 March 2009 and to the date of approval of these financial statements. Risk maps are reviewed by the Group Directors and approved by the appropriate Boards.

— On reviewing the effectiveness of the Group’s system of internal control, the Board has considered the following:

– Management reports on operational and financial matters

– Key performance indicators– Management assurances on internal controls– Risk management activities– Internal audit reports (including Fraud and

Loss Register)– Quality management systems– External audit reports– External regulatory reports

— Group policies which have been established in the following areas have been adopted throughout the Group by all subsidiaries:

– Equality and diversity– Finance (including anti-fraud)– Human Resources Management– Customer Care and Information– Health and Safety– Procurement– Risk Management– Growth– Environment

— The anti-fraud policy sets out the commitment to preventing fraud. All staff are responsible for ensuring that systems of internal control are operated effectively. Confidential reporting arrangements are in place to protect and to allow staff to voice their concerns and know that they will be properly investigated.

— The Riverside Group has a written code on business ethics which sets out guidelines for all staff to ensure the highest standards of conduct in business dealings and this has been adopted throughout the Group.

— During the year there were no identified weaknesses in internal controls which resulted in material losses, contingencies or uncertainties that require disclosure in these financial statements.

Statement of the Board’s responsibilitiesThe Board of Directors are responsible for preparing the Board of Directors’ Report and the financial statements in accordance with applicable law and regulations.

Industrial and Provident Society law requires the Board of Directors to prepare financial statements for each financial year. Under those regulations the Board of Directors have elected to prepare the financial statements in accordance with UK Accounting Standards.

The financial statements are required by law to give a true and fair view of the state of affairs of the Association and of the surplus or deficit for that period.

In preparing these financial statements, the Board of Directors are required to:

— select suitable accounting policies and then apply them consistently;

— make judgements and estimates that are reasonable and prudent;

— state whether applicable UK Accounting Standards and the Statement of Recommended Practice have been followed, subject to any material departures disclosed and explained in the financial statements; and

— prepare the financial statements on the going concern basis unless it is inappropriate to presume that the Association will continue in business.

The Board of Directors are responsible for keeping proper accounting records that disclose with reasonable accuracy at any time the financial position of the Association and enable them to ensure that its financial statements comply with the Industrial and Provident Societies Acts 1965 to 2002, the Housing Act 1996

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and the Accounting Requirements for Registered Social Landlords General Determination 2006. They have general responsibility for taking such steps as are reasonably open to them to safeguard the assets of the Association and to prevent and detect fraud and other irregularities.

The Board of Directors is responsible for the maintenance and integrity of the corporate and financial information included on the Group’s website. Legislation in the UK governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

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

EmployeesThe Riverside Group’s policy is to consult directly with employees through regular team meetings and through negotiation and consultation with the union, Unite. Additional information is given through internal communication systems.

Emphasis is placed on training for all staff using both internal and external facilities to encourage staff in personal development.

Suitable procedures are in operation to support the Riverside Group’s policy that disabled persons shall be considered for employment and subsequent training, career development and promotion on the basis of their aptitudes and abilities.

Equality and diversityThe Riverside Group’s policies reflect its commitment to equality and the value it places on diversity in all aspects of its work.

Financial contributions to housing related workContributions by the Riverside Group to housing related work during the year totalled £nil (2008: £7,877). No donations for political purposes were made during the year.

Policy on payment of creditorsIn the absence of any dispute, the Riverside Group’s policy is to pay non-development invoices within 30 days of the date of approval of the invoice. Development creditors, paid under certificate, are settled within 21 days of the valuation date.

Changes in fixed assetsThe movements in fixed assets during the year are set out in note 11 to the financial statements.

Single European currencyThe accounting system is capable of accommodating the Euro.

Tenant involvementThe Board actively encourages tenants’ involvement in decision making by promoting formal mechanisms of tenant involvement. There is one tenant member on the Group Board and clear reporting arrangements have been established between tenant associations and the Board. Across the Group, 25 tenants sit on subsidiary and divisional Boards. A clear complaints policy is issued to all tenants.

Investment PowerThe Association's Rules permit investment of monies not immediately required to carry out its objectives, as it determines and is permitted by law.

StatusThe Riverside Group Limited was a company limited by guarantee, incorporated under the Companies Act 1985 up until 18 December 2008 when its status changed to an industrial and provident society incorporated under the Industrial and Provident Societies Act 1965. It is registered with The Tenant Services Authority as a Registered Social Landlord as defined by the Housing Act 1996.

Annual General MeetingThe Annual General Meeting will be held on 28 September 2009.

AuditorsA resolution for the re-appointment of KPMG LLP as auditors of The Riverside Group Limited will be proposed at the Annual General Meeting.

Professor J N TarnChairman8 July 2009

We have audited the financial statements of The Riverside Group Limited ('the Group') and the Company for the year ended 31 March 2009 which comprise the Income and Expenditure Accounts, the Statement of Total Recognised Surpluses and Deficits, the Balance Sheets and the Cash Flow Statement and the related notes. These financial statements have been prepared under the accounting policies set out therein.

This report is made solely to the Group’s members, as a body, in accordance with Schedule 1 paragraph 16 to the Housing Act 1996 and section 235 of the Companies Act 1985. Our audit work has been undertaken so that we might state to the Group’s members those matters we are required to state to them in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Group and the Group’s members, as a body, for our audit work, for this report, or for the opinions we have formed. Respective responsibilities of the Board and auditors The responsbility of the association's Board for the preparation of the Board's report, and the preparation of financial statements in accordance with applicable United Kingdom law and UK accounting standards (UK Generally Accepted Accounting Practice) are set out in the Statement of Board's Responsbilities on pages 15 and 16.

Our responsibility is to audit the financial statements in accordance with relevant legal and regulatory requirements and International Standards on Auditing (UK and Ireland).

We report to you our opinion as to whether the financial statements give a true and fair view and are properly prepared in accordance with the requirements of the Companies Act 1985, the Housing Act 1996 and the Accounting Requirements for Registered Social Landlords General Determination 2006. We also report to you whether in our opinion the information given in the Board Report is consistent with the audited financial statements.

We also report to you if, in our opinion, the Group has not kept proper accounting records, if we have not received all the information and explanations we require for our audit, or if information specified by law regarding the directors’ remuneration and other transactions is not disclosed.

We read the other information accompanying the financial statements and consider whether it is consistent with those statements. We consider the implications for our report if we become aware of any apparent mis-statements within it. Basis of audit opinion We conducted our audit in accordance with International Standards on Auditing (UK and Ireland) issued by the Auditing Practices Board. An audit includes examination, on a test basis, of evidence relevant to the amounts and disclosures in the financial statements. It also includes an assessment of the significant estimates and judgements made by the Board in the preparation of the financial statements, and of whether the accounting policies are appropriate to the Group’s circumstances, consistently applied and adequately disclosed.

We planned and performed our audit so as to obtain all the information and explanations which we considered necessary in order to provide us with sufficient evidence to give reasonable assurance that the financial statements are free from material misstatement, whether caused by fraud or other irregularity or error. In forming our opinion we also evaluated the overall adequacy of the presentation of information in the financial statements.

Opinion In our opinion:

— the financial statements give a true and fair view, in accordance with UK Generally Accepted Accounting Practice, of the state of affairs of the Group and of the Company as at 31 March 2009 and of Group's surplus for the year then ended;

— the financial statements have been properly prepared in accordance with the Companies Act 1985, the Housing Act 1996 and the Accounting Requirements for Registered Social Landlords General Determination 2006; and

— the information given in the Board Report is consistent with the financial statements.

KPMG LLPChartered AccountantsRegistered AuditorSt James’ SquareManchesterM2 6DS

Report of the independent auditorsto the members of The Riverside Group Limited

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Group income and expenditure account for the year ended 31 March 2009 Notes 2009 2008 £’000 £’000 Restated Turnover: Group and share of joint venture 250,878 253,570Less: share of joint venture turnover (1,600) (1,769) ———— ————Group turnover 2 249,278 251,801Operating costs 2 (224,328) (217,305) ———— ————Group operating surplus 2 24,950 34,496Share of operating loss in joint ventures (37) (100)Surplus on sale of property 6 18,652 12,296 ———— ————Surplus on ordinary activities before interest 9 43,565 46,692Interest receivable and other income 7 4,364 2,530Interest payable and similar charges 8 (38,193) (35,907) ———— ————Surplus on ordinary activities before tax 9,736 13,315Taxation 10 456 (89)Share of joint venture taxation 4 6 ———— ————Surplus for the year 10,196 13,232 ———— ————

Income and expenditure account at 1 April 2008 restated 80,092 62,770Surplus for the year 10,196 13,232Transfer to reserves 20 (15,074) (13,137)Transfer from reserves 20 8,896 8,808Amortisation of negative goodwill 20 3,069 5,223Actuarial gain 20 & 26 2,474 160Prior year adjustment 32 — 3,036 ———— ————Income and expenditure account at 31 March 2009 89,653 80,092 ———— ————All of the above results derive from continuing operations.

There is no material difference between the surplus on ordinary activities before tax and the surplus for the year as reported and their historical cost equivalent.

The notes on pages 23 to 59 form an integral part of the financial statements.

There are no historical cost surpluses or deficits other than those recognised within the income and expenditure account.

Group statement of total recognised surpluses and deficitsfor the year ended 31 March 2009 Notes 2009 2008 £’000 £’000 Restated Surplus for the financial year 10,196 13,232Actuarial gain on pension scheme 20 & 26 2,474 160Recognised on acquisitions 20 (406) —Prior year adjustment 32 — 3,036 ———— ————Total recognised surpluses relating to the year 12,264 16,428Unreleased (deficit) / surplus on revaluation of properties 20 (3,605) 4,995 ———— ————Total recognised since last annual report 8,659 21,423 ———— ————Group reconciliation of movement of fundsfor the year ended 31 March 2009 2009 2008 £’000 £’000

Total recognised surpluses 8,659 21,423Total funds at 1 April 2008 20 299,603 278,180 ———— ————Total funds at 31 March 2009 20 308,262 299,603 ———— ————The notes on pages 23 to 59 form an integral part of the financial statements.

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Group balance sheetas at 31 March 2009 Notes 2009 2008 Restated £’000 £’000 £’000 £’000Fixed assetsTangible assets 11 1,692,132 1,648,068Social Housing Grant 11 (817,107) (811,626)Investments 12 21,848 30,206

Investment in joint ventureGroup share of gross assets of joint ventures 12 524 993 Group share of gross liabilities of joint ventures 12 (417) (980) ———— ———— 107 13 ———— ———— 896,980 866,661 ———— ————

Debtors greater than one year 13 44,441 61,454

Current assetsInvestments 12 14,058 15,031Debtors 13 75,100 75,929Properties for sale 14 45,364 40,795Cash at bank and in hand 16,042 — ———— ———— 150,564 131,755

Creditors: amounts falling due within one year 15 (104,020) (105,905) ———— ————Net current assets 46,544 25,850 ———— ————Total assets less current liabilities 987,965 953,965 ———— ————Creditors: amounts falling due after more than one year 16 634,317 588,292Deferred income 19 367 423Provisions for liabilities and charges 28 45,019 65,647

Capital and reservesNon-equity share capital 1 — —Consolidation reserve (negative goodwill) 20 152,340 155,815Designated reserves 20 66,269 63,696Income and expenditure account 20 89,653 80,092 ———— ———— 987,965 953,965 ———— ————The financial statements on pages 18 to 59 were approved by the Board on 8 July 2009 and were signed on its behalf by:

— Professor J N Tarn, Group Chairman

— P R Deyes, Group Treasurer

— D F Shackleton, Group Chief Executive

— L F Hughes, Secretary

The notes on pages 23 to 59 form an integral part of the financial statements.

Group cash flow statementfor the year ended 31 March 2009 2009 2008 Restated

£’000 £’000 £’000 £’000

Net cash inflow from operating activities (note 21) 53,526 57,141

Returns on investments and servicing of finance Interest received 4,476 2,256 Interest paid (43,243) (30,504) ———— ————Net cash (outflow) from returns on investments and servicing of finance (38,767) (28,248)

Taxation Tax paid (165) (107)

Capital expenditure and financial investmentCash paid for housing construction (65,654) (63,979) Cash paid for other fixed assets (6,460) (2,463) Cash received for fixed asset investments 2,481 — Expenditure on capitalised improvements (35,894) (61,434) Social Housing Grant received 22,154 17,434 Receipts from property sales 32,081 19,021 ———— ————Net cash (outflow) from capital expenditure and financial investment (51,292) (91,421)

Management of liquid resourcesIncrease / (decrease) in short term deposits 973 (5,312) ———— ————Net cash inflow / (outflow) from management of liquid resources 973 (5,312) ———— ————Net cash (outflow) before financing (35,725) (67,947)

Financing Loans raised 60,429 70,895 Loan principal repayments (6,798) (9,470) ———— ————Net cash inflow from financing 53,631 61,425 ———— ————Increase / (decrease) in cash (note 22) 17,906 (6,522) ———— ————The notes on pages 23 to 59 form an integral part of the financial statements.

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Company income and expenditure accountfor the year ended 31 March 2009 Notes 2009 2008 £’000 £’000

Turnover 19,558 19,314Operating costs (19,409) (19,274) ———— ————Surplus on ordinary activities before interest 149 40Interest receivable 7 75 79Interest payable 8 (29) (51) ———— ————Surplus on ordinary activities before tax 195 68Taxation 10 (275) (117) ———— ————Surplus for the financial year (80) (49) Income and expenditure account at 1 April 2008 375 319Actuarial gain 231 105 ———— ————Income and expenditure account at 31 March 2009 526 375 ———— ————There is no material difference between the surplus on ordinary activities before tax and the surplus for the year as reported, and their historical cost equivalent. All of the above results derive from continuing operations.

Company balance sheetas at 31 March 2009 Notes 2009 2008 £’000 £’000Fixed assetsTangible assets 11 1,757 2,013Investment in joint ventures 460 175 ———— ———— 2,217 2,188Current assets Investments — 1,200 Debtors 13 2,397 4,213Cash at bank and in hand 73 — ———— ———— 2,470 5,413Creditors: amounts falling due within one year 15 (4,012) (6,860) ———— ————Net current liabilities (1,542) (1,447) ———— ————Total assets less current liabilities 675 741 ———— ————Creditors falling due after more than one year 149 126Provisions for liabilities and charges 28 — 240

Capital and reservesNon-equity share capital 1 — — Income and expenditure account 526 375 ———— ———— 675 741 ———— ————The notes on pages 23 to 59 form an integral part of the financial statements.

Notes to the financial statements*for the year ended 31 March 2009*All notes relate to the Riverside Group unless otherwise stated.

1 Principal accounting policies

Basis of accountingThe financial statements have been prepared under the historical cost convention, and in accordance with applicable United Kingdom Accounting and Financial Reporting Standards and the Statement of Recommended Practice for Registered Social Landlords issued in 1999, revised in 2008. The financial statements are in accordance with the Companies Act 1985, The Housing Act 1996 and comply with the Accounting Requirements for Registered Social Landlords General Determination 2006. The accounting policies adopted have been applied consistently year on year.

Basis of consolidationThe financial statements are group statements and consolidate the financial statements of The Riverside Group Limited and its subsidiary undertakings. The financial statements have been prepared in accordance with FRS 2 'Accounting for Subsidiary Undertakings'.

The consolidated income and expenditure account includes the results of the Group’s equity interests and results of the Group’s joint ventures in accordance with FRS 9 'Associates and Joint Ventures'.

Details of subsidiaries and joint ventures are included in note 12 to the financial statements.

Supported housingIn addition to its own directly managed supported housing schemes, the Riverside Group owns a number of schemes that are run by outside agencies. Where the Riverside Group carries the financial risk all the scheme’s income and expenditure is included in the income and expenditure account. Where the agency carries the financial risk only the income and expenditure which relates solely to the Riverside Group is included. Other income and expenditure of schemes in this category is excluded from the income and expenditure account.

Supporting People Contract IncomeSupporting People contracts are entered into with local authorities. There are two types:

(i) A block subsidy is determined for each tenancy based on support services provided.

(ii) A block gross contract is a fixed sum payable based upon the number of qualifying bed spaces, subject to minimum occupancy levels as agreed with local authorities.

TurnoverTurnover comprises rental and service charge income receivable, certain revenue grants from local authorities and the Homes and Communities Agency together with other income.

Turnover of The Riverside Group Limited mainly comprises of the recharge of salaries and other overheads.

Turnover of the joint ventures comprises the receipts from the sale of sustainable housing components and other income.

Retirement benefitsThe Group operates a group pension scheme, contributes to local government pension schemes and the Social Housing Pension Scheme (SHPS), all providing benefits based on final pensionable pay. The assets of the schemes are held separately from those of the Group. The Group also contributes to defined contribution schemes.

The assets of the pension schemes are measured using market values. The liabilities of the pension schemes are measured using a projected unit method discounted at the current rate of return on a high quality corporate bond of equivalent term and currency to the liabilities.

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Due to the nature of SHPS, it is not possible to identify the share of underlying assets and liabilities belonging to individual participating employers. As a result, no surplus or deficit is included in the financial statements and the accounting charge for the period is represented by the employer contribution payable.

Excluding SHPS, the surpluses of the pension schemes (to the extent that they are recoverable) or deficits are recognised in full. The movements in the schemes' surpluses/deficits are included in the income and expenditure account and shown in the statement of total recognised surpluses and deficits, under the heading actuarial gains and losses.

Fixed assetsTangible fixed assets are stated at cost less accumulated depreciation. The cost of housing land and properties comprises purchase price together with incidental costs of acquisition and improvements, including related administration charges.

Depreciation and impairmentDepreciation is charged on a straight line basis over the expected useful economic lives of the assets at the following rates:

— Housing properties (newbuild) over 100 years to residual value.

— Housing properties (rehabilitated) over 50 years to residual value.

— Freehold and long leasehold offices over 15 years to residual value.

— Fixtures and fittings over 10 years.— IT equipment over 3 to 5 years.— Setting up costs (included within housing

properties) over 10 years.— Leasehold improvements over the term of the lease.

Assets in the course of construction are held at cost and are not depreciated until reclassified as housing properties completed.

Housing properties are principally properties available for rent. Cost includes the cost of acquiring the land and buildings, development costs and expenditure incurred in respect of improvements.

An annual impairment review of housing properties is undertaken in accordance with FRS 11, and where appropriate the carrying value is adjusted to take account of permanent diminutions in value.

First tranche shared ownership salesRiverside Group has adopted the accounting treatment per the SORP 2008 such that:

— Shared ownership properties are split proportionally between current and fixed assets based on the first tranche proportion;

— First tranche proportions are accounted for as current assets and the related sales proceeds shown in turnover; and

— The remaining element of the shared ownership property is accounted for as a fixed asset so that any subsequent sale is treated as a part disposal of a fixed asset.

Amortisation of goodwillNegative goodwill arising on the acquisition of subsidiaries represents the excess of the fair value of the identifiable net assets acquired over the fair value of the consideration given and is included in reserves.

Negative goodwill is recognised in the income and expenditure account in the periods in which the non-monetary assets are recovered, whether through depreciation or sale.

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Improvements to propertyExpenditure incurred on general repairs to housing properties is charged to the income and expenditure account in the year in which it is incurred.

Expenditure on improvements to existing housing properties which will generate increased future rents or otherwise add to the value is capitalised as part of the cost of the properties.

Pre-contract costsCosts incurred in bidding for and securing contracts for the supply of products and services under the Private Finance Initiative are recognised as expenses incurred up to the date of announcement of preferred bidder. Where the Group is successful in attaining preferred bidder status, those costs incurred after attaining preferred bidder status that are directly attributable to the contract are recognised as an asset.

Properties for SaleCompleted properties for outright sale and property under construction are valued at the lower of cost and net realisable value. Cost comprises materials, direct labour and direct development overheads. Net realisable value is based on estimated sales price after allowing for all further costs of completion and disposal.

Social Housing Grant Where developments have been financed wholly or partly by Social Housing Grant (SHG) and other capital subsidies, the cost of these developments has been reduced by the amount of the grant received. SHG received in excess of current development costs is shown as a current liability.

SHG received for items of cost written off in the income and expenditure account is matched against those costs. When properties are demolished, with the intention of redevelopment, a contingent liability is recognised related to the repayment of SHG.

If a property is sold, SHG may be repayable but is normally available to be recycled and is credited to a Recycled Capital Grant Fund or Disposal Proceeds Fund and included in the balance sheet in creditors.

Other grantsOther grants are receivable from local authorities and other organisations. Capital grants are utilised to reduce the capital cost of housing properties, including land costs. Grants in respect of revenue expenditure are credited to the income and expenditure account in the same period as the expenditure to which they relate.

Capitalisation of administration costsAdministration costs relating to development activities are capitalised only to the extent that they are directly attributable to the development process and in bringing the properties into their intended use.

InvestmentsFixed asset investments are stated at market value.

Current asset investments listed on the London Stock Exchange are stated at cost. Money market deposits are also stated at cost. Investment properties are carried at the lower of cost and net realisable value, and in accordance with SSAP 19 Accounting for Investment Properties are revalued annually.

Liquid resourcesLiquid resources are readily disposable current asset investments, which include some money market deposits, held for more than 24 hours that can only be withdrawn without penalty on maturity, or by giving notice of more than one working day.

Value Added TaxThe Riverside Group is partially exempt in relation to value added tax (VAT), and accordingly is able to recover from HM Revenue and Customs part of the VAT incurred on expenditure. At the year end VAT recoverable or payable is included in the balance sheet. Irrecoverable VAT is accounted for in the income and expenditure account.

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TaxationThe charge for taxation is based on the surplus or deficit for the year and takes into account deferred taxation arising from timing differences between the treatment of certain items for taxation and accounting purposes.

Leased assetsRentals payable in respect of operating leases are charged to the income and expenditure account on a straight-line basis over the lease term.

Work in progressWork in progress on developments for sale is stated at the lower of cost and net realisable value.

Loan issue costs and interest payableThe cost of raising loans is amortised over the period of the loan. The deferred cost is offset against the liability and included within creditors: amounts falling due after more than one year, in accordance with FRS 4, 'Capital Instruments'.

Loan interest payable is charged to the income and expenditure account at the relevant rates based on the carrying amount of the debt.

Designated reservesThese represent reserves earmarked for a specific use and are not part of free reserves.

Charitable reserveThis reserve represents donations and legacies received for which expenditure has not yet been incurred.

Some of the funds have restricted use, but the non-restricted funds in the reserve are available to meet expenditure that falls within the Group's objectives for which statutory or other finance is not available.

Consolidation reserveThis represents the excess of the fair value of assets acquired over the consideration given in respect of the identifiable assets and liabilities acquired. The reserve is amortised to the income and expenditure account in the periods in which the non monetary assets are recovered, whether through depreciation or sale.

DerivativesThe Group applies the provisions of FRS 13 in the treatment of financial instruments and derivatives. The Group uses interest rate swaps to reduce exposure to future increases in interest rates on floating rate loans. The notional principal is not reflected in the Group’s balance sheet. Payments made under swaps are accrued over the payment period on a straight line basis and adjusted against interest payable on loans.

Non-equity share capitalThe Riverside Group Limited is an Industrial and Provident Society incorporated under the Industrial and Provident Society Act 1965 and not having a share capital. In the event of a winding up, the liability of individual members to contribute towards the liabilities of the company shall not exceed £1.

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2 Turnover, operating costs and operating surplus 2009 Operating Turnover Cost of sales Operating costs surplus/(deficit) £’000 £’000 £’000 £’000Social housing activitiesLettings (note 3) 210,494 — (178,957) 31,537

Other social housing activitiesDevelopment for sale 3,118 (2,998) — 120 Management services 3,299 — (1,608) 1,691Community regeneration — — (4,834) (4,834)Other 24,957 — (22,167) 2,790 ———— ———— ———— ———— 241,868 (2,998) (207,566) 31,304 ———— ———— ———— ————Non-social housing activitiesLettings 3,239 — (10,521) (7,282)Developments for sale 3,509 (3,133) — 376Other 662 — (110) 552 ———— ———— ———— ———— 7,410 (3,133) (10,631) (6,354) ———— ———— ———— ————Total 249,278 (6,131) (218,197) 24,950 ———— ———— ———— ———— 2008 – Restated Operating Turnover Cost of sales Operating costs surplus/(deficit) £’000 £’000 £’000 £’000Social housing activitiesLettings (note 3) 206,192 — (174,105) 32,087

Other social housing activitiesDevelopment for sale 6,490 (6,190) — 300 Management services 950 — (1,338) (388)Community regeneration — — (5,184) (5,184)Other 25,516 — (19,346) 6,170 ———— ———— ———— ———— 239,148 (6,190) (199,973) 32,985 ———— ———— ———— ————Non-social housing activitiesLettings 2,527 — (2,415) 112Developments for sale 9,870 (8,663) — 1,207Other 256 — (64) 192 ———— ———— ———— ———— 12,653 (8,663) (2,479) 1,511 ———— ———— ———— ————Total 251,801 (14,853) (202,452) 34,496 ———— ———— ———— ————

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3 Income and expenditure from social housing lettings 2008 General Supported Shared Key worker 2009 Restated housing housing ownership housing Total Total £’000 £’000 £’000 £’000 £’000 £’000Income from lettingsRent receivable net of identifiable service charges 121,545 30,791 1,847 2,912 157,095 160,984Income for support services 1,477 21,672 — — 23,149 25,783Service charges receivable 3,860 20,834 — — 24,694 12,069 ———— ———— ———— ———— ———— ————Net rental income 126,882 73,297 1,847 2,912 204,938 198,836 ———— ———— ———— ———— ———— ————Homes and Communities Agency grants for major repairs 4,616 — — — 4,616 5,392Other revenue grants 40 900 — — 940 1,964 ———— ———— ———— ———— ———— ————Turnover from lettings 131,538 74,197 1,847 2,912 210,494 206,192 ———— ———— ———— ———— ———— ————Expenditure on lettingsManagement (23,961) (39,749) — 66 (63,644) (51,235)Services (6,581) (18,821) (833) (140) (26,375) (23,810)Routine maintenance (44,454) (8,494) — (423) (53,371) (58,740) Major repairs expenditure (14,712) (7,150) — (2) (21,864) (25,163)Bad debts (1,977) 24 — — (1,953) (4,207) Depreciation of housing properties (8,353) (1,185) (130) — (9,668) (9,134)Impairment of housing properties (82) — (2,000) — (2,082) (1,816) ———— ———— ———— ———— ———— ————Operating costs on lettings (100,120) (75,375) (2,963) (499) (178,957) (174,105) ———— ———— ———— ———— ———— ————Operating surplus on social housing lettings 31,418 (1,178) (1,116) 2,413 31,537 32,087 ———— ———— ———— ———— ———— ————Void loss (1,912) (1,748) — — (3,660) (4,715) ———— ———— ———— ———— ———— ————

Particulars of turnover from non-social housing lettings 2009 2008 £’000 £’000

Student accommodation 988 1,029Market rent 2,251 1,498 ———— ———— 3,239 2,527 ———— ————

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4 Directors’ emolumentsThe Directors are defined for the purpose of this note as the members of the Board and Group Directors of The Riverside Group Limited. Directors appointed after the end of the financial year are not included in the disclosure. This satisfies the definition included in the Accounting Requirements for Registered Social Landlords General Determination 2006. The Group Directors do not receive any chargeable benefits in kind other than company cars. The emoluments of the Directors are set out below.

2009 2008 £’000 £’000

Emoluments (including pension contributions and benefits in kind) 1,234 1,276Termination payments 132 — ———— ————Total emoluments 1,366 1,276 ———— ————Highest paid Director – Group Chief Executive Emoluments (excluding pension contributions) 231 231Accrued annual pension at year end 57 54 Expenses reimbursed to Directors not chargeable to income tax 14 9 The 2009 figures include additional payments in the form of one-off bonuses paid to several Directors.

The number of Directors who received emoluments (excluding pension contributions) in the following ranges was:

2009 2008 Number Number

£Nil 3 4 £5,001 — £10,000 2 2 £10,001 — £15,000 1 1 £15,001 — £20,000 1 1 £20,001 — £25,000 1 1 £65,001 — £70,000 — 1 £95,001 — £100,000 — 1 £105,001 — £110,000 1 1 £115,001 — £120,000 1 — £120,001 — £125,000 1 2 £125,001 — £130,000 1 — £145,001 — £150,000 1 1 £165,001 — £170,000 1 1 £230,001 — £235,000 1 1 ———— ———— 15 17 ———— ————Certain Group Directors, including the Group Chief Executive, are required under their contracts of employment to retire at the age of 60; consequently, the benefits provided to them by the Riverside Group Pension Scheme have been amended to reflect this commitment, which is not applicable to any other staff. In all other respects, the Group Chief Executive is an ordinary member of the Scheme. The Group does not make any further contribution to an individual pension arrangement for the Group Chief Executive. Contributions were made to the Riverside Group Pension Scheme at a rate of 17.5% of pensionable salary in 2009. This applies to all staff including Group Directors. Further details on the Scheme are given in note 26 to the financial statements.

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5 Employee informationStaff numbersThe average number of persons (including the Group Directors) employed during the year was (full time equivalent):

2009 2008 Number Number

Office staff and care support workers 2,186 2,027Wardens, caretakers, cleaners and maintenance staff 136 171 ———— ———— 2,322 2,198 ———— ————Staff costs (for the above persons) 2009 2008 £’000 £’000

Wages and salaries 55,791 54,430Social security costs 4,667 4,786Other pension costs 4,152 3,970 ———— ———— 64,610 63,186 ———— ————Staff costs and numbers referred to above relate to all staff employed by the Riverside Group, including wardens, but exclude staff costs and numbers employed by the managing agents at supported housing schemes.

6 Surplus on sale of property 2009 2008 £’000 £’000

Proceeds of sales 35,052 29,695Cost of sales (16,400) (17,399) ———— ————Surplus on sale of property 18,652 12,296

———— ————7 Interest receivable and other income Group 2009 2008 £’000 £’000

Bank and other interest receivable 4,278 2,443Income from listed investments 86 87 ———— ———— 4,364 2,530 ———— ———— CompanyBank and other interest receivable 75 79 ———— ————

30

8 Interest payable and similar charges Group

2009 2008 £’000 £’000 Bank loans and overdrafts 33,284 30,356Other loans 4,747 4,290Other interest payable 162 1,261 ———— ———— 38,193 35,907 ———— ———— Company 2009 2008 £’000 £’000

Other interest payable 29 51

———— ————9 Surplus on ordinary activities Group Surplus on ordinary activities is stated after charging: 2009 2008 £’000 £’000Depreciation for the year: Housing properties 9,746 10,192 Other tangible fixed assets 2,748 2,270Impairment charge for the year: Housing properties 2,082 1,816 Investment properties and properties awaiting sale 8,633 —Auditors’ remuneration: For audit services 232 246 For non-audit services – tax advisory 162 111 – other 53 93Operating lease rentals: Land and buildings 1,281 1,242 Other 407 343 ———— ———— CompanySurplus on ordinary activities is stated after charging: 2009 2008 £’000 £’000Depreciation charge for the year:Other tangible fixed assets 613 519Auditors’ remuneration: For audit services 19 32 For non-audit services – tax advisory 140 108 – other 38 34Operating lease rentals: Land and buildings 283 569 Other 113 174 ———— ————

31

10 Tax on surplus on ordinary activities Group 2009 2008 £’000 £’000Analysis of charge in periodCurrent tax charge 424 58Deferred tax charge / (credit) (880) 31 ———— ———— (456) 89 ———— ————Factors affecting tax charge for periodThe tax assessed for the year is lower than the standard rate of corporation tax in the UK (28%). The differences are explained below: 2009 2008 £’000 £’000

Profit on ordinary activities before tax 9,736 13,015 ———— ————Profit on ordinary activities multiplied by the standard rate of corporation tax in the UK of 28% (2008: 30%) 2,726 3,905Effects of:Expenses not deductible for tax purposes 1,983 72Short term timing differences — (24) Profits exempt from tax due to charitable exemption (5,123) (3,661) Adjustment to tax charge in respect of previous periods (6) (58) Utilisation of tax losses 952 114Depreciation in excess (less than) of capital allowances (108) (286) Change of rate — (4) ———— ————Current tax charge 424 58 ———— ————Deferred taxationThe movement in the year is as follows: 2009 2008 £’000 £’000

At the beginning of the year 92 61(Credit) / charge for the year (880) 31 ———— ————At the end of the year (788) 92 ———— ————The elements of the deferred tax asset and amounts not provided are as follows: Provided Unprovided £’000 £’000Difference between accumulated depreciation and capital allowances 471 — Losses (1,259) — ———— ———— (788) — ———— ————

32

10 Tax on surplus on ordinary activities – continued Company 2009 2008 £’000 £’000Analysis of charge in period Current tax charge 123 150 Deferred tax (credit) / charge 123 (33)Prior period tax charge 29 — ———— ———— 275 117 ———— ————Factors affecting tax charge for periodThe tax assessed for the year is higher than the standard rate of corporation tax in the UK (28%). The differences are explained below: 2009 2008 £’000 £’000

Profit on ordinary activities before tax 195 68 ———— ————Profit on ordinary activities multiplied by the standard rate of corporation tax in the UK of 28% (2008: 30%) 54 20Effects of: Losses — 1 Adjustment to tax charge in respect of previous periods 29 150Expenses not deductible for tax purposes 72 58Depreciation (less than) / in excess of capital allowances 26 (66) Short term timing differences — (24) Profits exempt from tax as a result of charitable exemption (29) — Change of rate — 11 ———— ————Current tax charge 152 150 ———— ————Deferred taxationThe movement in the year is as follows: 2009 2008 £’000 £’000

At the beginning of the year (123) (90)Charge/(credit) for the year 123 (33) ———— ————At the end of the year — (123) ———— ————The elements of the deferred tax asset and amounts not provided are as follows: Provided Unprovided £’000 £’000

Difference between accumulated depreciation and capital allowances — — Losses — — Other timing differences — — ———— ———— — — ———— ————

33

11 Tangible fixed assetsGroup Social Non-social Total Social housing housing housing housing properties properties properties properties held for held for held for under letting letting letting construction £’000 £’000 £’000 £’000

CostAt 1 April 2008 (restated) 1,542,855 8,555 1,551,410 58,768Schemes completed 45,944 — 45,944 (45,944)Additions 4,807 — 4,807 33,507Disposals (27,210) — (27,210) (265)Improvements to existing properties 24,646 — 24,646 —Reclassification 1,609 — 1,609 (2,871) ———— ———— ———— ————At 31 March 2009 1,592,651 8,555 1,601,206 43,195 ———— ———— ———— ————DepreciationAt 1 April 2008 55,023 705 55,728 —Reclassification (1,873) — (1,873) —Charge for the year 9,538 78 9,616 —Impairment 2,082 — 2,082 —Eliminated in respect of disposals (2,129) — (2,129) — ———— ———— ———— ————At 31 March 2009 62,641 783 63,424 — ———— ———— ———— ————Net book value (before SHG)at 31 March 2009 1,530,010 7,772 1,537,782 43,195 ———— ———— ———— ————Net book value (before SHG) at 31 March 2008 (restated) 1,487,832 7,850 1,495,682 58,768 ———— ———— ———— ————Social Housing GrantAt 1 April 2008 746,934 1,680 748,614 29,580Receivable in the year (net) 4,161 — 4,161 14,686Schemes completed 22,046 — 22,046 (22,046)Disposals (13,223) — (13,223) —Reclassification 40 — 40 (40) ———— ———— ———— ————At 31 March 2009 759,958 1,680 761,638 22,180 ———— ———— ———— ————Net book value (after SHG)at 31 March 2009 770,052 6,092 776,144 21,015 ———— ———— ———— ————Net book value (after SHG) at 31 March 2008 (restated) 740,898 6,170 747,068 29,188 ———— ———— ———— ————Improvements to existing properties consists of £24.6m capitalised costs in addition to £22.6m non-capitalised improvements, which have been charged to the income and expenditure account.

34

11 Tangible fixed assets – continuedGroup Shared Fixtures Completed ownership Freehold vehicles shared properties and long and ownership under Total leasehold computer properties construction properties offices equipment Total £’000 £’000 £’000 £’000 £’000 £’000

Cost At 1 April 2008 (restated) 70,712 10,950 1,691,840 12,251 11,667 1,715,758Schemes completed 21,963 (21,963) — — — —Additions 5 16,825 55,144 524 6,117 61,785Disposals (2,526) — (30,001) (505) (849) (31,355)Improvements to existing properties — — 24,646 — — 24,646Reclassification 1,888 (6) 620 (146) 104 578 ———— ———— ———— ———— ———— ————At 31 March 2009 92,042 5,806 1,742,249 12,124 17,039 1,771,412 ———— ———— ———— ———— ———— ————Depreciation At 1 April 2008 1,024 — 56,752 3,941 6,997 67,690Reclassification — — (1,873) — 1,873 —Charge for the year 130 — 9,746 755 1,993 12,494Impairment — — 2,082 — — 2,082Eliminated in respect of disposals (2) — (2,131) (149) (706) (2,986) ———— ———— ———— ———— ———— ————At 31 March 2009 1,152 — 64,576 4,547 10,157 79,280 ———— ———— ———— ———— ———— ————Net book value (before SHG) at 31 March 2009 90,890 5,806 1,677,673 7,577 6,882 1,692,132 ———— ———— ———— ———— ———— ————Net book value (before SHG) at 31 March 2008 (restated) 69,688 10,950 1,635,088 8,310 4,670 1,648,068 ———— ———— ———— ———— ———— ————Social Housing GrantAt 1 April 2008 27,253 6,179 811,626 — — 811,626Receivable in the year (net) — — 18,847 — — 18,847Schemes completed 4,407 (4,407) — — — —Disposals (143) — (13,366) — — (13,366)Reclassification — — — — — — ———— ———— ———— ———— ———— ————At 31 March 2009 31,517 1,772 817,107 — — 817,107 ———— ———— ———— ———— ———— ————Net book value (after SHG)at 31 March 2009 59,373 4,034 860,566 7,577 6,882 875,025 ———— ———— ———— ———— ———— ————Net book value (after SHG)at 31 March 2008 (restated) 42,435 4,771 823,462 8,310 4,670 836,442 ———— ———— ———— ———— ———— ———

35

11 Tangible fixed assets – continuedHousing properties and offices include freehold and long leasehold land and buildings as analysed below (net of SHG and depreciation): 2009 2008 Restated £’000 £’000Housing PropertiesFreehold 854,691 818,509Long leasehold 5,875 4,953 ———— ———— 860,566 823,462 ———— ————OfficesFreehold 5,328 6,042Long leasehold 2,249 2,268 ———— ———— 7,577 8,310 ———— ————The net book value of tangible fixed assets includes £Nil (2008: £Nil) in respect of assets held under finance leases.

Company Fixtures and Leasehold IT equipment improvements Total £’000 £’000 £’000CostAt 1 April 2008 1,344 1,791 3,135Additions 500 (14) 486Disposals (246) — (246) ———— ———— ————At 31 March 2009 1,598 1,777 3,375 ———— ———— ————Depreciation At 1 April 2008 596 526 1,122Charge in year 435 178 613Eliminated in respect of disposals (117) — (117) ———— ———— ————At 31 March 2009 914 704 1,618 ———— ———— ————Net book value at 31 March 2009 684 1,073 1,757 ———— ———— ————Net book value at 31 March 2008 748 1,265 2,013 ———— ———— ————

36

12 InvestmentsA. Fixed assets

The principal subsidiary undertakings consolidated within the financial statements as at 31 March 2009 all of which were controlled by The Riverside Group Limited, unless otherwise stated, were as follows:

Name of undertaking Nature of undertaking Principal activity

Berrybridge Housing Limited Registered Industrial and Provident Society Registered Social Landlord

Bowlee Park Housing Association Limited Registered Industrial and Provident Society Registered Social Landlord

Carlisle Housing Association Limited Registered Industrial and Provident Society Registered Social Landlord

Community Seven Limited1 Registered Industrial and Provident Society Registered Social Landlord

ECHG (Contracting) Limited2 Company incorporated and limited by Design and build service guarantee under the Companies Act 1985

ECHG (Harrow) Homes plc3 Public Limited Company Property investment

ECHG (Kensington & Chelsea) Public Limited Company Property investment Homes plc3

ECHG (No 1) Limited2 Registered Industrial and Provident Society Property investment

ECHG Services Limited2 Company incorporated and limited by Property management guarantee under the Companies Act 1985

English Churches Housing Group Limited Registered Industrial and Provident Society Registered Social Landlord

Lee Valley Housing Association Limited Registered Industrial and Provident Society Registered Social Landlord

Naylands (51-68) Limited4 Company incorporated and limited by Property management guarantee under the Companies Act1985

Prospect (GB) Limited Company incorporated and limited by Property development and shares under the Companies Act 1985 investment

Riverside Consultancy Services Limited Company incorporated and limited by Design and build services shares under the Companies Act 1985

Riverside Housing Association Limited Registered Industrial and Provident Society Registered Social Landlord

Riverside North East Limited Registered Industrial and Provident Society Registered Social Landlord

Riverside Regeneration Limited Company incorporated and limited by Urban regeneration initiatives shares under the Companies Act 1985

Riverside Urban Services Limited1 Company incorporated and limited by Leasing of offices premises guarantee under the Companies Act 1985

The St Michael’s Housing Trust1 Charitable Trust Management of supported housing

Circle Limited5 Joint Venture company incorporated and Construction waste recycling limited by shares under the Companies Act 1985

Compendium Group Limited6 Joint Venture company incorporated and limited Strategic urban regeneration by shares under the Companies Act 1985 and development

Wave Homes Limited Company incorporated and limited Design and manufacture of by shares under the Companies Act 1985 sustainable housing systems

For key to numbering, see overleaf.

37

12 Investments – continued1 Entity is a wholly-owned subsidiary undertaking of Riverside Housing Association Limited.2 Entity is a wholly-owned subsidiary undertaking of English Churches Housing Group Limited.3 Entity is a wholly-owned subsidiary undertaking of ECHG (No 1) Limited.4 Entity is 76% owned by English Churches Housing Group Limited.5 Entity is 22.5% owned by The Riverside Group Limited.6 Entity is 50% owned by The Riverside Group Limited.

(i) Investments in subsidiaries Company 2009 2008 £ £

Cost 655 655 ———— ————(ii) Other investments Group 2009 2008 £’000 £’000

8¾% Treasury Stock 2017 372 355Charifund 4,683 6,923Investment properties (see (iii) below) 14,784 20,919Investment in Joint Ventures 107 13Other 2,009 2,009 ———— ———— 21,955 30,219 ———— ————(iii) Investment properties Group 2009 2008 £’000 £’000

Valuation at 1 April 2008 20,919 19,439Additions 1,967 99Revaluation (8,102) 1,381 ———— ————Valuation at 31 March 2009 14,784 20,919 ———— ————B. Current assets Group 2009 2008 £’000 £’000Unit Trusts, Investment Trusts and listed investments on the London Stock Exchange 3,206 3,068Money market deposits and charged bank accounts 10,852 11,963 ———— ———— 14,058 15,031 ———— ————

38

13 Debtors Group 2009 2008 £’000 £’000

Amounts falling due after more than one year: 44,441 61,454 ———— ————Amounts falling due within one year:Gross rent arrears 13,628 16,334Less: bad debt provision (5,348) (6,545) ———— ————Net rental debtors 8,280 9,789

Social Housing Grant receivable 6,030 10,681Other debtors 54,719 44,862Prepayments and accrued income 5,193 10,434Corporation tax 788 — Amount due from joint venture 90 163 ———— ———— 75,100 75,929 ———— ————A debtor of £43.4m (2008: £61.2m) has been established representing the obligation of the local authorities that transferred stock to the Group’s stock transfer subsidiaries and Community Seven Limited to have improvement work carried out to the properties. The stock transfer subsidiaries and Community Seven Limited are contracted by the local councils to carry out these improvement works on their behalf.

Company 2009 2008 Restated £’000 £’000

Amounts owed by Group undertakings 11 2,720Prepayments and accrued income 1,643 753Corporation tax — 123Other 705 617Pension 38 — ———— ———— 2,397 4,213 ———— ————14 Properties for sale Group 2009 2008 £’000 £’000

Properties under construction 5,384 39,962Completed properties 39,980 833 ———— ———— 45,364 40,795 ———— ————

39

15 Creditors: amounts falling due within one year Group 2009 2008 £’000 £’000

Bank loans (see note 17) 5,387 4,647Other loans (see note 17) 380 380Trade creditors 8,016 12,324Rent and service charges received in advance 6,656 7,039Capital grants received in advance 6,184 8,392Other creditors 27,425 23,219Recycled Capital Grant Fund (see note 16a) 6,112 190Disposal Proceeds Fund (see note 16a) 151 285Accruals and deferred income 43,279 47,473Corporation tax 430 92Bank overdraft — 1,864 ———— ———— 104,020 105,905 ———— ————Capital grants received in advance will be utilised against the related capital expenditure.

Company 2009 2008 £’000 £’000

Amounts owed to group undertakings 1,058 3,538Other creditors and accruals 2,954 3,152Bank overdraft — 170 ———— ———— 4,012 6,860 ———— ————

40

16 Creditors: amounts falling due after more than one year 2009 2008 £’000 £’000

Long term loans (see note 17) 621,674 569,313Recycled Capital Grant Fund (see note 16a) 10,258 16,666Disposal Proceeds Fund (see note 16a) 2,037 1,260Other 348 1,053 ———— ———— 634,317 588,292 ———— ————Long term loans are secured by fixed and floating charges on the Riverside Group’s properties.

16a Creditors: Analysis of Disposal Proceeds Fund and Recycled Capital Grant Fund Disposal Proceeds Fund disclosure 2009 2008 £’000 £’000

Opening balance 1,545 632Inputs to reserve: Grants recycled 958 989 Interest accrued 48 59 Major repairs and works to existing stock (363) (135) ———— ————Closing balance 2,188 1,545 ———— ————No amounts are due for repayment to the Tenant Services Authority.

Recycled Capital Grant Fund disclosure 2009 2008 £’000 £’000

Opening balance 16,856 13,473Inputs to reserve: Grants recycled 4,025 5,636 Interest accrued 619 824 Major repairs and works to existing stock (5,130) (3,077) ———— ————Closing balance 16,370 16,856 ———— ————No amounts are due for repayment to the Homes and Communities Agency.

41

17 Debt analysis 2009 2008 £’000 £’000Due within one yearBank loans 5,387 4,647Other loans 380 380 ———— ———— 5,767 5,027 ———— ————Due after more than one yearBank loans 576,617 523,346Local authority loans 950 950Other loans 46,932 47,312Less finance costs capitalised (2,825) (2,295) ———— ———— 621,674 569,313 ———— ————Housing loans, included in creditors falling due within one year and creditors falling due after more than one year, bear rates of interest between 1.7% and 11.6%, and fall due for repayment as follows:

2009 2008Debt maturity profile £’000 £’000

In one year or less 5,767 5,027Between one and two years 42,851 16,358Between two and five years 29,659 49,753In five years or more 551,989 505,497 ———— ———— 630,266 576,635Less:Loans due in one year or less 5,767 5,027Finance costs capitalised 2,825 2,295 ———— ———— 621,674 569,313 ———— ————

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18 Derivatives and financial instrumentsThe operating and financial review on pages 8 to 12 includes an explanation of the role financial instruments have had during the period in managing the risks the Riverside Group faces in its treasury activities.

Financial assets and liabilitiesFinancial assets and liabilities at 31 March 2009 have book and fair values as detailed below.

Book Value Fair Value £’000 £’000

Charifund 4,683 4,6838¾% Treasury stock 2017 372 372Interest rate swap agreements — (21,332)Unit trusts, investment trusts and listed investments 3,206 3,206 ———— ———— 8,261 (13,071) ———— ————Fixed asset investments are detailed at note 12A(ii). The investment in 8¾% Treasury Stock 2017 is held as a requirement of the loan from Funding For Homes Limited and cannot be disposed of until the loan has been repaid (see note 27). The investment in Charifund is held by virtue of a Board decision to actively provide for the bullet repayment of the loans due to HACO Limited and Funding For Homes Limited in 2017 and 2018 respectively.

The fair value of the interest rate swap agreements at 8 July 2009 was £17.4m in favour of the counterparties.

Interest rate risk profile of financial assets With the exception of the investment of £372,000 (2008: £355,000) in 8¾% Treasury Stock 2017, all investments have variable rates of return. Money market deposits and other cash deposits, all of which are denominated in sterling, bear interest at variable rates based upon LIBOR.

Interest rate risk profile of financial liabilities 2009 2008 £’000 £’000

Floating rate 194,485 133,895Fixed rate 434,831 441,790Interest free 950 950 ———— ———— 630,266 576,635 ———— ————The floating weighted rate financial instruments comprise sterling denominated bank borrowings that bear interest at rates based upon LIBOR. The weighted average rate of interest paid on the fixed rate debt during the year is 6.14% and the weighted average of the period for which the interest rates are fixed is 14.4 years.

Borrowing facilitiesUndrawn committed borrowing facilities at 31 March 2009 were as follows: 2009 2008 £’000 £’000

Expiring between 1 and 3 years — 15,000Expiring in more than 5 years 147,460 127,683 ———— ———— 147,460 142,683 ———— ————£64.4m of the undrawn committed borrowing facilities requires fixed charged security to be placed with the lender before it can be utilised.

43

19 Deferred incomeDeferred income relates to a receipt of £1.1m arising from the transfer to the Riverside Group of another association’s HACO fixed interest debt of £11.0m as compensation for the decrease in long-term interest rates. The balance of £0.4m (2008: £0.4m) is released over the remaining life of the loan.

20 Reserves Consolidation Charitable Other Income and reserve reserve reserves Expenditure (negative goodwill) (designated) (designated) Account Total £’000 £’000 £’000 £’000 £’000

At 1 April 2008 (restated) 155,815 609 63,087 80,092 299,603Surplus for the year — — — 10,196 10,196Arising on acquisition (406) — — — (406)Transfer from income and expenditure account to reserves — — 15,074 (15,074) —Revaluation of fixed assets — — (3,605) — (3,605)Transfer to income andexpenditure account from reserves (3,069) — (8,896) 11,965 —Actuarial gain on pension scheme — — — 2,474 2,474 ———— ———— ———— ———— ————At 31 March 2009 152,340 609 65,660 89,653 308,262 ———— ———— ———— ———— ————The consolidation reserve arose on the merger of Newcastle and Whitley Housing Trust Limited and English Churches Housing Group Limited with the Group. The difference between the fair value of assets acquired and consideration provided gave rise to negative goodwill of £164.3m. Cumulative amortisation of this reserve is £11.6m. In addition £0.4m has been put to the reserve, being goodwill on the acquisition of Wave Homes Limited on 17 June 2008.

The revaluation of fixed assets consists of £1.4m for Prospect Investment properties, and £2.4m for Riverside Housing Association Charifund investments.

44

21 Reconciliation of operating surplus to net cash inflow from operating activities 2009 2008 £’000 £’000 Restated

Operating surplus 24,950 34,496Depreciation charge 14,576 14,278 Decrease in other debtors and prepayments 26,648 30,991Decrease in other creditors and accruals (14,656) (22,382) Decrease / (increase) in rent arrears 1,509 (127) Fixed assets written off 499 (115) ———— ————Net cash inflow from operating activities 53,526 57,141 ———— ————22 Reconciliation of net cash flow to movement in net debt 2009 2008 £’000 £’000

Increase / (decrease) in cash in the year 17,906 (6,522) Increase in loans (53,631) (61,425) Movement in liquid resources (973) 5,312 ———— ————Change in net debt resulting from cash flows (36,698) (62,635)

Finance costs capitalised 530 (7) ———— ———— (36,168) (62,642) Net debt at 1 April 2008 (561,173) (498,531) ———— ————Net debt at 31 March 2009 (597,341) (561,173) ———— ————23 Analysis of net debt At 1 April Cash Other 31 March 2008 flows changes 2009 £'000 £’000 £’000 £'000 Cash at bank and in hand (1,864) 17,906 — 16,042Loans due within one year (5,027) 6,798 (7,538) (5,767)Loans due after one year (569,313) (60,429) 8,068 (621,674)Current asset investments 15,031 (973) — 14,058 _______ ______ ______ _______Total (561,173) (36,698) 530 (597,341) ———— ———— ———— ————

45

24 Capital commitments 2009 2008 £’000 £’000Capital expenditure that has been contracted for but whichhas not been provided for in the financial statements 41,269 28,715 ———— ————Capital expenditure that has been authorised by theBoard but which has not yet been contracted for 28,065 66,851 ———— ———— 2009 2008 £’000 £’000

Grants to be generated from the above expenditure contracted not provided for 28,742 9,631 ———— ————Grants to be generated from the above expenditure authorised by the Board 10,179 32,011 ———— ————The remaining commitments will be fully financed from internal cash resources and existing loan facilities as required.

25 Financial commitmentsAt 31 March 2009 annual commitments under non-cancellable operating leases were as follows:

Group 2009 2008 £’000 £’000 Land & Land & Buildings Other Buildings Other Expiring within one year 142 149 40 79Expiring between two and five years 357 138 70 217Expiring in five or more years 727 4 1,166 141 ———— ———— ———— ———— 1,226 291 1,276 437 ———— ———— ———— ———— Company 2009 2008 £’000 £’000 Land & Land & Buildings Other Buildings Other Expiring within one year — 61 — 44 Expiring between two and five years — 52 — 64 Expiring in five or more years 569 — 569 66 ———— ———— ———— ———— 569 113 569 174 ———— ———— ———— ————

46

26 Pension informationFRS17 – Retirement Benefits

i) The Riverside Group Pension SchemeThe Riverside Group operates a pension scheme providing benefits based on final pensionable pay. The contributions are determined by an independent qualified actuary on the basis of triennial valuation using the projected unit method. The most recent formal valuation was 31 March 2008. This has been updated for FRS 17 purposes to 31 March 2009 by an independent qualified actuary. The assumptions used are the best estimates chosen from a range of possible actuarial assumptions which, due to the timescale covered, may not necessarily be borne out in practice.

The major assumptions used in this valuation are:

2009 2008 2007 2006 2005 Inflation 2.5% 3.4% 3.1% 2.9% 2.8% Rate of discount on scheme liabilities 6.7% 6.3% 5.3% 5.1% 5.6% Rate of salary increase 3.5% 4.4% 4.1% 3.7% 3.6% Rate of increase of pensions in payment 2.5% 3.4% 3.1% 2.9% 2.8% Rate of increase of deferred pensions 2.5% 3.4% 3.1% 2.9% 2.8%

2009 2008

Life expectancy male non-pensioner 20.2 20.2Life expectancy female non-pensioner 23.1 23.1Life expectancy male pensioner 18.8 18.8Life expectancy female pensioner 21.7 21.7

The fair value of the scheme’s assets at 31 March 2009, which are not intended to be realised in the short term and may be subject to significant change before they are realised, and the present value of the scheme’s liabilities, which are derived from cash flow projections over long periods and are thus inherently uncertain, were:

2009 2008 2007 2006 2005 £’000 £’000 £’000 £’000 £’000

Fair value of assets 47,100 54,700 55,500 50,200 38,400Present value of liabilities (46,700) (57,200) (59,700) (55,400) (44,500) ———— ———— ———— ———— ————Surplus / (deficit) in the scheme 400 (2,500) (4,200) (5,200) (6,100) ———— ———— ———— ———— ————

47

26 Pension information – continuedThe market value of the assets of the scheme and the expected long term rates of return at 31 March 2009 were:

Market value 2009 2008 2007 2006 2005 £’000 £’000 £’000 £’000 £’000

Equities 33,100 37,600 39,100 35,700 26,400Fixed Interest Bonds 5,800 6,900 6,600 5,500 4,500Index Linked Bonds 3,300 4,300 3,900 3,100 2,500Corporate Bonds 4,800 5,700 5,400 4,200 3,600Cash 100 200 500 1,700 1,400 ———— ———— ———— ———— ————Total 47,100 54,700 55,500 50,200 38,400 ———— ———— ———— ———— ————Expected long term return 2009 2008 2007 2006 2006

Equities 7.50% 7.50% 7.50% 7.25% 7.25% Fixed Interest Bonds 3.70% 4.55% 4.85% 4.35% 4.75% Index Linked Bonds 3.70% 4.55% 4.85% 4.35% 4.75% Corporate Bonds 6.70% 6.30% 5.30% 5.10% 5.55% Cash 3.70% 4.55% 4.85% 4.35% 4.75% ———— ———— ———— ———— ————Total 6.68% 6.76% 6.76% 6.48% 6.55% ———— ———— ———— ———— ————Analysis of the amount charged to operating profit 2009 2008 2007 2006 2005 £’000 £’000 £’000 £’000 £’000

Current service cost 2,000 2,400 2,500 2,200 2,200Past service cost — — — — — ———— ———— ———— ———— ————Total operating charge 2,000 2,400 2,500 2,200 2,200 ———— ———— ———— ———— ————Analysis of the amount credited to other finance income 2009 2008 2007 2006 2005 £’000 £’000 £’000 £’000 £’000

Expected return on pension scheme assets 3,300 3,800 3,300 2,500 2,200Interest on pension liabilities (3,600) (3,200) (2,800) (2,500) (2,300) ———— ———— ———— ———— ————Net return (300) 600 500 — (100) ———— ———— ———— ———— ————

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26 Pension information – continuedMovement in surplus / (deficit) during year 2009 2008 2007 2006 2005 £’000 £’000 £’000 £’000 £’000

Deficit in scheme at beginning of the year (2,500) (4,200) (5,200) (6,100) (7,700) Movement in year:Current service cost (2,000) (2,400) (2,500) (2,200) (2,200) Past service cost — — — — — Contributions 2,800 2,400 2,300 2,000 2,400Other finance income (300) 600 500 — (100) Actuarial gain in STRSD 2,400 1,100 700 1,100 1,500 ———— ———— ———— ———— ————Surplus / (deficit) in scheme at end of the year 400 (2,500) (4,200) (5,200) (6,100) ———— ———— ———— ———— ————Amount recognised in the statement of total recognised surpluses and deficits (STRSD) 2009 2008 2007 2006 2005 £’000 £’000 £’000 £’000 £’000

Actual return less expected return on pension scheme assets (13,100) (6,700) 400 7,700 1,300Experienced gains / (losses) arising on the scheme liabilities 3,100 500 900 (100) 1,100Changes in assumptions underlying the present value of the scheme liabilities 12,400 7,300 (600) (6,500) (900) ———— ———— ———— ———— ————Actuarial gain / (loss) recognised in STRSD 2,400 1,100 700 1,100 1,500 ———— ———— ———— ———— ————History of experience surpluses and deficits 2009 2008 2007 2006 2005

Difference between actual and expected returns on assets (£’000) (13,100) (6,700) 400 7,700 1,300% of scheme assets (27.8%) (12.2%) 0.7% 15.3% 3.4%

Experienced gains / (losses) on liabilities (£’000) 3,100 500 900 (100) 1,100% of scheme liabilities 6.6% 0.9% 1.5% (0.2%) 2.5%

Total amount recognised in STRSD (£’000) 2,400 1,100 700 1,100 1,500% of scheme liabilities 5.1% 1.9% 1.2% 2.0% 3.4%

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26 Pension information – continued 2009 2008 £’000 £’000Reconciliation of AssetsAssets at beginning of period 54,700 55,500Employer contributions 2,800 2,400Employee contributions 900 800Benefits paid (1,900) (1,100)Expected return on plan assets 3,700 3,800Assets out / under performance (13,100) (6,700) ———— ———— Assets at end of period 47,100 54,700 ———— ———— Reconciliation of liabilitiesPBO at the beginning of period 57,200 59,700Oeprating charge 2,000 2,400Interest cost 3,600 3,200Employee contributions 900 800Benefits paid (1,500) (1,100)Actuarial gain / loss (3,100) (500)Change in assumptions (12,400) (7,300) ———— ———— Projected benefit obligation at end of period 46,700 57,200 ———— ————Recognition of surplusSurplus / (Deficit) Brought forward (2,500) (4,200)Finance Income (300) 600Actual less expected investment return (13,100) (6,800)Acutarial gain 15,500 7,800Contribution gain 800 100 ———— ————Surplus / (Deficit) Carried forward 400 (2,500) ———— ————(PBO: Projected benefit obligation)

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26 Pension information – continuedii) Other defined benefit pension schemesThe Riverside Group also makes contributions to other defined benefit pension schemes. Berrybridge Housing Limited and Lee Valley Housing Association Limited contribute to the Merseyside Pension Scheme. Bowlee Park Housing Association Limited contributes to the Greater Manchester Pension Fund. Carlisle Housing Association Limited contributes to the Cumbria Local Government Pension Scheme. Each entity is a participating employer in its respective scheme.

The most recent actuarial valuations of these schemes have been updated for FRS 17 purposes by independent qualified actuaries. The disclosures represent each entity’s share of the overall scheme’s assets and liabilities. As permitted by FRS 17 the disclosures for these entities have been consolidated. The assumptions used, which have been combined on a weighted average basis on asset values, are the best estimates chosen from a range of possible actuarial assumptions, which due to the timescale covered may not necessarily be borne out in practice.

The major assumptions used in this valuation are:

2009 2008 2007 2006 2005

Inflation 3.28% 3.60% 3.11% 2.92% 2.89% Rate of discount on scheme liabilities 7.08% 6.17% 5.40% 4.90% 5.41% Rate of salary increase 4.93% 5.26% 4.74% 4.55% 4.47% Rate of increase of pensions in payment 3.28% 3.60% 3.11% 2.92% 2.89% Rate of increase of deferred pensions 3.28% 3.60% 3.11% 2.92% 2.89%

Life Exp male non-pensioner 21.4 21.4Life Exp female non-pensioner 24.2 24.2Life Exp male pensioner 21.1 21.1Life Exp female pensioner 23.9 23.9

The fair value of the schemes’ assets at 31 March 2009, which are not intended to be realised in the short term and may be subject to significant change before they are realised, and the present value of the scheme’s liabilities, which are derived from cash flow projections over long periods and are thus inherently uncertain, were:

2009 2008 2007 2006 2005 £’000 £’000 £’000 £’000 £’000

Fair value of assets 20,137 24,243 26,885 24,661 18,155Present value of liabilities (21,906) (25,758) (27,253) (26,717) (21,690) ———— ———— ———— ———— ————Deficit in the schemes (1,769) (1,515) (368) (2,056) (3,535) ———— ———— ———— ———— ————

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26 Pension information – continuedThe market value of the assets of the scheme and the expected long term rates of return at 31 March 2009 were:

Market value 2009 2008 2007 2006 2005 £’000 £’000 £’000 £’000 £’000

Equities 10,511 13,617 16,171 14,922 10,784Fixed Interest Bonds 3,948 4,670 5,044 4,881 3,598Index Linked Bonds 1,477 2,075 2,100 1,843 1,404Property 1,367 1,852 2,377 1,783 1,622Other 2,142 782 214 403 179Cash 692 1,247 979 829 568 ———— ———— ———— ———— ————Total 20,137 24,243 26,885 24,661 18,155 ———— ———— ———— ———— ————Expected long term return 2009 2008 2007 2006 2005

Equities 7.44% 7.52% 7.54% 7.05% 7.53% Fixed Interest Bonds 4.16% 4.72% 4.72% 4.34% 4.71% Index Linked Bonds 5.32% 5.41% 4.75% 4.32% 4.74% Property 6.32% 6.41% 6.42% 5.94% 6.40% Other 6.64% 6.65% 6.60% 1.35% 5.33% Cash 0.90% 5.20% 5.21% 3.97% 4.75% ———— ———— ———— ———— ————Total 6.26% 6.57% 6.60% 6.03% 6.52% ———— ———— ———— ———— ————Analysis of the amount charged to operating profit 2009 2008 2007 2006 2005 £’000 £’000 £’000 £’000 £’000

Current service cost 669 682 806 764 806Past service cost 88 423 250 (450) — ———— ———— ———— ———— ————Total operating charge 757 1,105 1,056 314 806 ———— ———— ———— ———— ————Analysis of the amount credited to other finance income 2009 2008 2007 2006 2005 £’000 £’000 £’000 £’000 £’000

Expected return on pension scheme assets 1,567 1,730 1,468 1,221 1,095Interest on pension liabilities (1,606) (1,479) (1,329) (1,186) (1,056) ———— ———— ———— ———— ————Net return (39) 251 139 35 39 ———— ———— ———— ———— ————

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26 Pension information – continuedMovement in surplus / (deficit) during year 2009 2008 2007 2006 2005 £’000 £’000 £’000 £’000 £’000

Deficit in scheme at beginning of the year (1,515) (368) (2,056) (3,535) (2,635) Movement in year: Current service cost (669) (682) (806) (764) (806) Past service cost (146) (423) (250) 450 — Contributions 526 647 670 743 658Other finance income / (expenditure) (39) 251 139 35 39Actuarial gain / (loss) in STRSD 74 (940) 1,935 1,015 (791) ———— ———— ———— ———— ————Deficit in scheme at end of the year (1,769) (1,515) (368) (2,056) (3,535) ———— ———— ———— ———— ————Amount recognised in the statement oftotal recognised surpluses and deficits (STRSD) 2009 2008 2007 2006 2005 £’000 £’000 £’000 £’000 £’000 Actual return less expected return on pension scheme assets (4,134) (1,936) 117 3,016 735Experienced losses arising on the scheme liabilities 4,208 1,289 2 (957) (74) Changes in assumptions underlying the present value of the scheme liabilities — (293) 1,816 (1,044) (1,452) ———— ———— ———— ———— ————Actuarial gain / (loss) recognised in STRSD 74 (940) 1,935 1,015 (791) ———— ———— ———— ———— ————History of experience surpluses and deficits 2009 2008 2007 2006 2005 £’000 £’000 £’000 £’000 £’000

Difference between actual and expected returns on assets (£’000) (4,134) (1,936) 117 3,016 735% of scheme assets (20.5%) (8.0%) 0.4% 12.2% 4.1%

Experienced gains / (losses) on liabilities (£’000) 4,208 1,289 2 (957) (74)% of scheme liabilities 19.2% 5.0% 0.0% (3.6%) (0.3%)

Total amount recognised in STRSD (£’000) 74 (940) 1,935 1,015 (791) % of scheme liabilities 0.3% (3.7%) 7.1% 3.8% (3.7%)

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26 Pension information – continuedReconciliation of assets 2009 2008 £'000 £'000

Assets at beginning of period 24,243 26,885Employer contributions 526 648Employee contributions 211 219Benefits paid (420) (632)Expected return on plan assets 1,567 1,673Assets out / (under) performance (5,991) (4,549) ———— ————Assets at end of period 20,136 24,244 ———— ————Reconciliation of liabilities Projected Benefit Obligation at beginning of period 25,758 27,253Operating charge 815 1,074Interest cost 1,606 1,479Employee contributions 211 219Benefits paid (420) (601)Actuarial gain / loss (6,065) (3,666) ———— ————Projected Benefit Obligation at end of period 21,905 25,758 ———— ————Recognition of surplus Surplus / (Deficit) Brought forward (1,515) (368)Finance Income (39) 251Actual less expected investment return (5,991) (4,550)Actuarial gain 6,065 3,666Contribution gain (289) (514) ———— ————Surplus / (Deficit) Carried forward (1,769) (1,515) ———— ————

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26 Pension information – continued(iii) Defined contribution pension schemesThe Riverside Group also contributes to defined contribution schemes. The cost for the year was £4,070k (2008: £6,043k).

(iv) The Social Housing Pension SchemeRiverside North East Limited (RNE) and English Churches Housing Group Limited (ECHG) participate in the Social Housing Pension Scheme (SHPS). SHPS is a multi-employer defined benefit scheme. The Scheme is funded and is contracted out of the state scheme.

Up to March 2007, the Scheme operated a single benefit structure, final salary with a 1/60th accrual rate. From April 2007 there were three benefit structures available, namely:

— Final salary with a 1/60th accrual rate.

— Final salary with a 1/70th accrual rate.

— Career average revalued earnings with a 1/60th accrual rate.

RNE and ECHG have elected to operate the final salary with a 1/60th accrual rate benefit structure for active members as at 1 April 2007. RNE have closed the Scheme to new entrants, whilst ECHG have elected to operate the final salary with a 1/60th accrual rate benefit structure for new entrants from 1 April 2007.

During the accounting period RNE paid contributions at the rate of 15.9%. Member contributions varied between 4.1% and 6.1% depending on their age.

As at the balance sheet date there were 13 active members of the Scheme employed by RNE and 301 employed by ECHG. RNE and ECHG continue to offer membership of the Scheme to its employees.

It is not possible in the normal course of events to identify the share of underlying assets and liabilities belonging to individual participating employers. Accordingly, due to the nature of the Scheme, the accounting charge for the period under FRS 17 represents the employer contribution payable.

During the accounting period the employer contribution rates for ECHG were 16.4%. Member contributions varied between 4.1% and 6.1% depending on their age.

Following a change in legislation in September 2005 there is a potential debt on the employer that could be levied by the Trustee of the Scheme. The debt is due in the event of the employer ceasing to participate in the Scheme or the Scheme winding up.

The debt for the Scheme as a whole is calculated by comparing the liabilities for the Scheme (calculated on a buyout basis i.e. the cost of securing benefits by purchasing annuity policies from an insurer, plus an allowance for expenses) with the assets of the Scheme. If the liabilities exceed assets there is a buy-out debt.

The amount of the debt therefore depends on many factors including total Scheme liabilities, Scheme investment performance, the liabilities in respect of current and former employees of the employer, financial conditions at the time of the cessation event and the insurance buy-out market. The amounts of debt can therefore be volatile over time.

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27 Contingent liabilitiesAs at 31 March 2009, the Riverside Group had a contingent liability totalling £372,000 (2008: £355,000) in respect of its entire holding of 8¾% Treasury Stock 2017. This stock is held by the Trustee for Funding For Homes Limited, subject to certain rights, and could be sold should a fellow borrower fail to service the interest or repay the stock.

Following the demolition of properties on certain sites, costs of £407,109 (2008: £407,109) have been written off, and the related grant has been written back. A contingent liability to a maximum of £2,122,931 (2008: £2,122,931) exists in respect of this grant; in the unlikely event of the sale of the land, the grant becomes repayable to the extent of any surplus generated on sale.

At the financial year end the Riverside Group had a contingent liability of £7m (2008: £6m) in connection with a debt service guarantee arrangement in favour of Royal Bank of Canada Europe Limited (RBC). Should any of Bowlee Park Housing Association, Berrybridge Housing Limited, Carlisle Housing Association Limited, Community Seven Limited or Lee Valley Housing Association Limited (all members of the Riverside Group) default on loan arrangements with RBC, the above liability may be called upon.

English Churches Housing Group has performance guarantees with Barclays Bank totalling £225,000 (2008: £310,001).

28 Provisions for liabilities and charges Group 2009 2008 £’000 £’000

Improvement programme (i) 43,174 61,228Pension liabilities (ii) 1,369 4,015Other 476 404 ———— ————At 31 March 2009 45,019 65,647 ———— ———— Company 2009 2008 £’000 £’000

Pension liabilities (ii) — 240 ———— ————The company pension deficit has been included in the Group pension disclosure note 26.

(i) Improvement programmeOn the transfer of properties from local councils to the Group’s four stock transfer subsidiaries and Community Seven Limited, the subsidiaries were contracted to carry out improvement works to those properties. A provision of £43.2m (2008: £61.2m) has been made in respect of the subsidiaries’ outstanding commitments to their local councils to carry out improvement work.

(ii) Pension liabilitiesIn line with the full adoption of FRS 17 Retirement Benefits the net deficit on the Riverside Group Pension Scheme and Local Authority funds are recognised as a liability on the balance sheet (note 26).

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29 Housing stock GroupDwellings owned and in management 2009 2008 Number NumberSocial housing General housing 33,966 34,897 Supported housing 10,352 9,851 Shared ownership 1,952 1,635 Key worker 362 447 ———— ————Total social housing 46,632 46,830

Dwellings managed for other organisations 3,736 3,387 ———— ————Total managed social housing 50,368 50,217

Non social housing Student accommodation 421 421 Market rent 37 37 Specialist housing 241 305 ———— ————Total owned and managed 51,067 50,980 ———— ————Staff accommodation 113 126Awaiting major repair/disposal 582 1,233 ———— ————Total Stock 51,762 52,339 ———— ————Accommodation in development at the year end 453 200 ———— ————30 Related party transactionsTwo Board members of The Riverside Group Limited are tenants of The Riverside Group Limited. Their tenancies are on normal commercial terms, and they cannot use their position to their advantage. There are no other related party transactions.

There are no other related party transactions.

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31 Post Balance SheetThe amalgamation of The Riverside Group Limited occurred on 1 April 2009. The amalgamation rationalises the Group structure with all the assets and liabilities of the Registered Social Landlord members (with the exception of ECHG and The St Michael's Housing Trust) being amalgamated into one Registered Social Landlord, The Riverside Group Limited.

32 Prior year adjustmentThe prior year adjustment reflects a change in the accounting for shared ownership first tranche sales.

Under the SORP for Registered Social landlords the 2005 shared ownerhship sales of property were treated as follows:— All shared ownership (SO) properties were classified as fixed assets;— Proceeds from first tranche disposals were credited against the cost of SO properties; and— Surplus/deficit on second and subsequent tranche SO sales were accounted for in the Income and Expenditure

Account as differences between the net sale and the carrying value.

Changes to this acounting treatment as recommended in the SORP 2008 such that:— SO properties are split proportionally between current and fixed assets based on the first tranche proportion;— First tranche proportions must be accounted for as current assets and the related sales proceeds shown in

turnover; and— The remaining element of the SO property must be accounted for as a fixed asset so that any subsequent sale is

treated as a part disposal.

Cumulative adjustment to 31 March 2008 £’000Revenue reservesAs previously stated at 31 March 2008 76,756Add: Surplus on first tranche shared ownership sales (see below) Cumulative adjustment to 31 March 2007 3,036 As restated 2007/08 (note 2) 300 ————Revenue reserves as at 31 March 2008 restated (note 20) 80,092 ————Shared Ownership first tranche salesSurplus on first tranche shared ownership sales Proceeds cumulative to 31 March 2007 35,594 Cost sales adjustment to 31 March 2007 (32,558)

Proceeds as restated at 31 March 2008 (note 2) 6,490 Cost sales adjustment to 31 March 2008 (6,190) ————Revenue reserves as at 31 March 2008 restated 3,336 ————

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32 Prior year adjustment – continued Tangible fixed assets Current assets Social Social Completed Shared Social Properties housing housing Shared Ownership housing for sale properties under Ownership properties grant held for construction properties under letting construction

Balance as previously statedat 31 March 2008 1,545,916 73,983 63,994 15,529 26,993 21,062Reclassification of: First tranche sales — — 31,853 4,390 — (36,243) Costs — (15,215) (28,845) 2,311 — 41,748 Surplus from prior years — — 6 (5) — 3,036 Cross subsidy (3,061) — 3,321 — 260 —2007/08: First tranche sales — — 3,054 — — (3,054) Costs — — (2,671) (11,275) — 13,946 Surplus from prior years — — — — — 300 ———— ———— ———— ———— ———— ————Balance as at 31 March 2008 restated (note 11) 1,542,855 58,768 70,712 10,950 27,253 40,795 ———— ———— ———— ———— ———— ————

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The Riverside Group Limited Registered Office: 2 Estuary Boulevard, Estuary Commerce Park, Liverpool L24 8RF

A charitable Industrial and Provident Society No. 30670R

Tenant Services Authority No. L4537

August 2009Details correct at time of printing

Printed on 75% recycled paper with 25% from FSC-certified sources

R8/006-0809V1.0C

Contact us www.riverside.org.uk email: enquiries@riverside.org.uk

Customer Service Centre 24 hours a day, 365 days a year 0845 111 0000 With inclusive call packages or mobile phones, it may be cheaper to call 0345 111 0000

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