Financial Statements · For the year ended 31 March 2016 2015 2014 2013 2012 Group Key ratios Voids and bad debts – Group %2.1 2.5 2.5 2.2 2.2 (as % of rent and service charge receivable)

Income collection

Build homes

Digital inclusion

Develop our people

Serviceimprovement

Stock disposal

Financial resilience

Investment in assets

Businesseffectiveness

Governance

Scotland

Return on assets

Financial Statements Year ended 31 March 2016 The Riverside Group Limited

Contents

01. At a glance 102. Five year summary of financial highlights 303. The Board, Executives and Advisors 704. Group Chair’s introduction 11 05. Group Chief Executive’s statement 1506. Strategic report 1907. Report of the Board 3508. Independent auditor’s report 4509. Group and Association statements 49

Group: Consolidated statement of comprehensive income 50

Group: Consolidated statement of financial position 51

Group: Consolidated statement of changes in reserves 52

Group: Consolidated statement of cash flows 53

Association statement of comprehensive income 54

Association statement of financial position 55

Association statement of changes in reserves 56

10. Notes to the financial statements 59

These statements demonstrate we are in a strong position to deliver our vision of transforming lives and revitalising neighbourhoods.

In 2015/16 we achieved the following:At a glance

750New homes built

23.1Net promoter score

£128.3mInvestment in new and improved homes and extra services

Better Places Connected Customers Effective Business

602Customers helped into paid employment

£6.1mCashable gains for tenants as a result of money and affordable warmth advice

Resilient Lives Resilient Lives Great Team

GoldInvestor in People standard achieved

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Last year : 689 Last year : 14 Last year : £123.5m

Last year : 412 Last year : £4.1m Last year : Silver

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02. Five year summary of financial highlights

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2016 750

2013 407

2014 713

2015 689

2012 755

New homes builtRiverside is committed to increasing its investment in new homes and 2016 saw more new homes built in any year since 2012.

Operating surplus as a percentage of turnover Operating surplus has dipped in 2016 as costs are incurred as the Group responds to the challenges of the Government spending review by making changes that will ensure the Group’s financial strength is maintained in future years.

2013 20.1%

2014 22.5%

2015 24.7%

2016 19.9%

2012 14.8%

For the year ended 31 March 2016 2015 2014 2013 2012Group Restated

Statement of comprehensive incomeTurnover £’000 365,598 325,977 303,933 291,890 270,800Operating surplus £’000 72,812 80,549 68,377 58,811 40,139Operating surplus as a percentage of turnover % 19.9% 24.7% 22.5% 20.1% 14.8%Surplus on ordinary activities before tax £’000 50,087 48,052 49,126 32,787 22,098Surplus as a percentage of turnover % 13.7% 14.7% 16.2% 11.2% 8.2%

Statement of financial position Tangible assets £’000 1,778,548 1,750,256 1,835,516 1,802,147 1,743,999Loans repayable after more than one year £’000 774,867 749,810 681,846 743,834 701,740Reserves £’000 389,843 334,835 311,132 257,320 234,883

Accommodation figuresTotal housing stock owned and managed Units 52,945 53,164 52,980 53,573 53,774New homes built Units 750 689 713 407 755

Five year summary of financial highlights

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Gearing The Association’s gearing fell as surpluses helped fund the building programme without the need to borrow.

2013 38%

2014 36.5%

2015 38.2%

2016 36.0%

2012 38.1%

Interest coverInterest cover remains static despite costs being incurred which prepare the Group for future years. The level of headroom remains substantial at £48m and can accommodate a significant reduction in operating surplus before covenants are breached.

For the year ended 31 March 2016 2015 2014 2013 2012Group

Key ratiosVoids and bad debts – Group % 2.1 2.5 2.5 2.2 2.2(as % of rent and service charge receivable)

Rent and service charge arrears – Group Days 9.4 9.2 13.0 9.7 12.5(current rent and service charge arrears divided by net rent and service charges receivable, multiplied by 365 days)

Interest cover – Association 2.6 2.6 3.2 3.1 2.3(operating surplus plus property depreciation, amortisation and grant divided by net interest payable)

Gearing – Association % 36.0 38.2 36.5 38 38.1(loans as % of properties)

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

2013 3.1

2014 3.2

2015 2.6

2016 2.6

2012 2.3

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03. The Board, Executives and Advisors

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The Board, Executives and Advisors

Jonathan Dale

Carol Matthews*

Susan Jee Group Treasurer

The Board is responsible for Riverside’s overall policy and strategy and is committed to integrity and accountability in the stewardship of the Group’s affairs.

Group Board

Max Steinberg CBE Group Chair

Paul Forster-Jones

Sally Trueman

Joy Baggaley*

Philip Han

Philip Raw Group Vice Chair

Peter White*

Pauline Davis

Detailed information can be found about each Group Board member on our website www.riverside.org.uk

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Registered auditors

KPMG LLP 1 St Peter’s Square Manchester M2 3AE

Principal bankers

National Westminster Bank Plc 28 Castle Street Liverpool L2 OUP

Secretary and Registered Office

Lynn McCracken Solicitor 2 Estuary Boulevard Estuary Commerce Park Liverpool L24 8RF

Registered Numbers

Co-operative and Community Benefit Society Registered number: 30938R

Homes and Communities Agency Registered Number: L4552

Executive Directors

Details of Board Member resignations and appointments for the period 1 April 2015 to 7 July 2016 are listed on page 36.

*Co-opted Board Members

(Left to right) John Wood Executive Director, Neighbourhood Services Ronnie Clawson Executive Director, Corporate Services Joy Baggaley Chief Financial Officer John Glenton Executive Director, Care and Support Carol Matthews Group Chief Executive Ian Gregg Executive Director, Asset Management Léann Hearne Executive Director, Shared Services

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04. Group Chair’s introduction

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There have been many, many words written, trying to forecast the implications of Brexit and I’ll not add to them here, other than to observe that it is at times like these that effective governance is really put to the test. I’m proud to say that through a period as challenging as the last year we have again retained the highest regulatory ratings for governance and viability.

This time last year I was writing about the recently announced plans of the new Conservative Government, and in particular its proposal to reduce rents, introduce a right to buy for housing association tenants and curb welfare spending further. A year on, and two major Acts of Parliament later, we understand the detail – and indeed have been able to have a positive influence on the fine print along the way. There are big opportunities to do more, in particular helping many households realise their aspirations for home ownership, building on the expertise we have developed over many years. But we can also see further risks to our income stream, with the proposed capping of housing benefit from 2018 posing a major threat to our supported housing services.

In September last year, the sector was able to negotiate a voluntary approach to the Government’s plan to extend the right to buy. This felt like a breakthrough moment in our relationship with Government, and with full compensation for discounts available, it will help ensure that we are in a position to replace homes sold, at least on a national basis. I’m delighted that Riverside was approached as one of five associations to pilot the new voluntary deal, and we have made significant progress as we prepare to complete the sale of up to 250 homes over the coming months.

Other unexpected challenges have also emerged during the year. With the ONS ruling that housing association debt now counts as public borrowing, there were fears that there could be a move to limit or control sector borrowing. However, the Government has responded with impressive speed, and is creating the conditions to enable a reversal of this decision through deregulatory moves in the new Housing and Planning Act. This is most welcome and in the long-run should present opportunities to act with more freedom and flexibility.

Of course all of this has been eclipsed by the unprecedented events triggered by the EU referendum in June which have shaken the country and indeed the rest of the world. There have been many, many words written, trying to forecast the implications of Brexit and I’ll not add to them here, other than to observe that it is at times like these that effective governance is really put to the test. I’m proud to say that through a period as challenging as the last year we have again retained the highest regulatory ratings for governance and viability, and these statements provide evidence to our stakeholders of our continued strength and resilience, a product of the wise stewardship of board members across the Group over many years.

Group Chair’s introduction

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But we know we cannot stand still and so in line with work on a new operating model, we have completed a review of local governance and scrutiny, agreeing a way forward which will move away from a geographical approach, to one better aligned with our business streams.

In responding to the year’s challenges, Riverside’s highly committed team of Group, subsidiary and divisional board members have demonstrated huge flexibility and courage in supporting the outcome of a review which will lead to radical change. We are also indebted to our involved tenants who hold us to account and add real value.

So as our governance arrangements evolve, I would like to express my immense gratitude for the guidance and expertise of our governance community in enabling the conditions for our continued financial strength, whilst retaining a focus on the vision and values of Riverside.

Max Steinberg CBE Group Chair

We are indebted to our involved tenants who hold us to account and add real value.

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05. Group Chief Executive’s statement

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These financial statements provide clear evidence of our fundamental financial strength, giving us the resilience to meet our charitable objectives of building homes and providing great service for the long term. 2015/16 has been a bumper year for new homes built and investment in improved stock and services. Over 1,300 new homes have been started across all tenures.

These financial statements provide clear evidence of our fundamental financial strength, with a headline surplus increasing to £50m and a statement of financial position total of almost £2bn, giving us the resilience to meet our charitable objects of building homes and providing great service for the long term. As a net borrower, strong surpluses are essential in reducing borrowing requirements, offering a sustainable financial strategy and enabling us to build affordable homes today and in ten year’s time.

Our operating surplus is lower than last year. This reflects the costs of the reshaping of our financial and operational plans as we responded to the challenges of the Government’s budget and spending review, for example through the closure of defined benefit pension arrangements. But the real focus has been on a process which had, in fact, already started, whereby we have reviewed every aspect of the business in order to develop a new target operating model based on agility, efficiency, consistency and of course, great customer services. That has now been approved by the Board, and forms the basis of our business plan going forward and a Corporate Plan which we have adjusted for its final year. At the end of five years, and based on up front investment of nearly £25m, the new model will deliver over £30m annual recurring savings without, I believe, cutting back on the things we really believe in – building more homes and improving services.

Despite the short term squeeze on operating surplus, 2015/16 has been a bumper year for new homes built and investment in improved stock and services, as we have been able to draw on the surplus we have retained in previous years. Over 1,300 new homes have been started across all tenures, representing a near doubling of recent output. We have also achieved a strong set of operational results, with our cash leakage metrics – arrears and voids – showing significant improvement. Our voids and re-let times are at a five year low.

We continue to tell this story in “Business Effectiveness”, our value for money self-assessment, and a summary is included in this document. I am determined that our assessment is honest, and presents a balanced picture of Riverside. Whilst we have made steady progress, we have not yet met all of our corporate targets – though we have a year to go to address some of our weaker areas of performance. In particular we need to do more to embed our proactive MOT based approach to repairs and maintenance, in order to drive improved customer satisfaction with repairs.

Group Chief Executive’s statement

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Most of all “Business Effectiveness” shows how we have been able to harness our financial strength and convert this into real benefits for our customers, future customers and the nation’s taxpayers, as we help tackle the most intractable of housing crises.

Carol Matthews Group Chief Executive

It has been a bumper year for new homes built and investment in improved stock and services, with 750 new homes built and a further 1,300 started across all tenures.

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06. Strategic report

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Overview of the businessThe Riverside Group Limited is registered with the Homes and Communities Agency (HCA) as a Private Registered Provider (PRP) of social housing as defined by the Housing and Regeneration Act 2008 and it is a charitable Registered Society under the Co-operative and Community Benefit Societies Act 2014. It is also the parent of Irvine Housing Association Limited, which is registered with the Scottish Housing Regulator (SHR). The Group also engages in commercial activities through its subsidiaries Prospect (GB) Limited (residential development), Evolve Facility Services Limited (property maintenance) and The Compendium Group Limited, a joint venture with Lovell Partnerships Limited (large scale urban regeneration and development). Riverside Estuary Limited operates our Hull Extra Care PFI. Riverside

Finance plc was set up to enable funding to be secured from the capital markets for the Group.

The Group’s structure is summarised in the table below and governance related matters are discussed in the Board report.

More detail of the Group’s structure and its activities is set out in Note 12 of the financial statements.

The strategic report will provide information across three themes:

— Our strategy— Our business environment— Our business performance

Each of these will be expanded upon in the paragraphs which follow.

Transforming the business is key to unlocking efficiencies which will allow us to prosper for years to come, building affordable homes and improving our customers’ experience, with a more streamlined, cost effective and targeted approach.

Strategic report

Irvine Housing Association Limited

Prospect (GB) Limited

Evolve Facility Services Limited

The Compendium Group Limited

Riverside Estuary Limited

Riverside Finance plc

The Riverside Group Limited: 52,945 units

Scottish RSL1 Property development and investment

Property maintenance

Major regeneration projects

Construction and management of extra care units

Bond finance

1Note: Registered Social Landlord

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Our strategyObjectives

Our vision is “transforming lives, revitalising neighbourhoods”.

We seek to transform the lives of individuals by providing quality services and better opportunities, whilst revitalising the places they live through investing in our homes and leading regeneration.

Riverside’s plans for achievement of its objectives are managed on a three year cycle. We have just completed the second year of our Corporate Plan 2014-17, and we are in the final year of delivery.

Following the well documented challenges introduced into our operating environment in the last year, we have reassessed our plans and our targets. The Board has agreed that its underpinning structure and values remain valid, although there will be a change of emphasis in some areas ahead of the triennial review in September 2016.

One Riverside corporate plan and strategyThe Riverside corporate plan, which is called One Riverside, sets out how we will continue to deliver our vision.

We have broken the strategy down into three objectives – to have connected customers, with resilient lives, living in better places.

— Connected customers We aim to improve our customers’ experiences

by modernising our services and delivering a consistent and quality service.

— Resilient lives We aim to provide a comprehensive range of

services to support those customers who need extra help to thrive in their homes.

— Better places We aim to improve neighbourhoods by investing

in our existing homes, building and acquiring new ones and selling stock to focus and concentrate our geographical footprint.

To achieve those objectives we need a great team working together as part of an effective business.

— Great team We aim to ensure our colleagues and board

members are well led, fully engaged and supported to deliver our strategy, involving our customers in scrutinising and influencing what we do.

— Effective business We aim to secure the resources to deliver our

objectives, managing them effectively in order to generate the capacity to make choices and do more.

Underpinning the corporate plan is a project to develop a new Target Operating Model (TOM) for the whole Group. This has taken on more significance with the financial pressures arising from the budget in July last year. The purpose of developing the Group-wide TOM for Riverside is:

— To support our primary objective of delivering quality services to customers.

— To establish a “One Riverside” approach with consistent, fair and quality services at the heart of the choices we make across our services, businesses and geography.

— To enable delivery of our corporate objectives and support the closing of the “rent gap” of £34m per annum which we face in four years’ time, following the reduction of rents of 1% p.a, by delivering a leaner operating model in which duplication and waste has been reduced and productivity and resilience has been increased.

Creating and implementing a new Group-wide model will be the biggest change Riverside has undertaken for many years. It will enhance the value for money we offer to our stakeholders, and ensure that Riverside is a flexible and adaptable organisation able to meet immediate and future challenges.

The TOM is based on two foundation principles:— Keeping separate lines of business for Care and

Support, social housing, and non-social housing, but focusing on customer type, not building type.

— Creation of the “inverted triangle”, with front line teams actively supported by the shared services. Administrative activities are stripped out, processes are simplified and productivity of frontline is maximised.

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Business and the environment

Explanation – The political and economic environment has been unpredictable for some time now; with the results of the referendum on EU membership this is more than ever the case. Levels of uncertainty around Government policy and both financial and housing markets are very high.

Mitigation – Riverside’s financial strength ensures that it has breathing space to assess and respond to financial risk. The Group has a track record of playing a significant role in informing and influencing Government policy. The Board and the Executive team have the skills and experience to steer the Group through new challenges.

Our business environment The following paragraphs will explain the internal and external environment in which Riverside operates.

Safety first

Explanation – Enhanced arrangements are needed to manage a number of internal risks, particularly in relation to our Care and Support business.

Mitigation – A cross functional group is working on the embedding of a ‘safety first’ culture, with the Group aiming to achieve ISO27001 by the end of 2016.

Maintain and improve financial strength

Explanation – The Summer Budget 2015 which reduced rents by 1% for the next four years will result in a £7m loss of income in 2016-17 rising to £34m in 2019-20, with no certainty thereafter. This is alongside the risk that comes from welfare reform on our income collection and rent arrears.

Mitigation – An updated business plan was submitted to the regulator ahead of the 31 October 2015 deadline. It does not rely on the increased commercial activities or sales but reaches 25% operating margin by 2020 and retains significant headroom on all loan covenants. Savings plans have been agreed and targets built into the business plan.

Delivering the Vision

Explanation – A group wide transformation project is underway looking at the TOM.

Mitigation – A new IT strategy has been approved by Group Board including the replacement of a number of legacy systems and moves to support agile working. A range of improvements have been implemented to ensure the Human Resources team can support the people related challenges arising out of the TOM.

Leadership and People

Explanation – The implementation of the new TOM may lead to uncertainty around roles so this may result in a loss of key skills from the organisation and cause difficulties as we try to maintain customer service.

Mitigation – Recent staff surveys have shown improvements since the last survey in 2014 and there is a renewed focus for managers to engage their teams and support will be given for them to do this from the Human Resources team.

Risk managementRiverside directs its affairs in a prudent manner and safeguards its assets through the effective management of risk, with regular reviews of the risk universe and Board approval of business developments involving significant risk. The Board gives those risks which threaten the wellbeing of tenants and others a high profile on the risk map.

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Our corporate social responsibilityRiverside has been committed to regenerating neighbourhoods and providing affordable homes for nearly 90 years. We invest millions of pounds in community projects and in hundreds of new homes built each year. Corporate Social Responsibility (CSR) is an extension of Riverside’s traditional role and links closely with our vision and values.

As a leading national provider of social and affordable housing, Riverside is about so much more than bricks and mortar. We have an impressive track record of investing in added-value activities for both individuals and communities to deliver measurable positive outcomes. We will continue to operate within and beyond this framework across the areas in which we work. Over and above the fact that our core operation is socially responsible, we contribute through specific initiatives, some of which are described below.

— Community Riverside staff have surpassed the last two charity

fundraising targets, raising more than £76k in total for Wateraid and Alzheimer’s Society. We are currently on target to raise £60k for Cancer Research UK by October 2016.

Through the Riverside Foundation we have committed to invest £2.2m in eight community projects between 2014 and 2017.

— Environment We are revitalising our estates to make them

better places to live. By involving residents and the wider community in the transformation of green and open spaces we aim to nurture and strengthen neighbourhood identity and create well-loved spaces.

Our planned maintenance programme includes energy efficient boilers and double-glazing. We also work to targets for the energy efficiency of our properties based on the SAP (Standard Assessment Procedure) methodology.

Neighbourhood management helps develop and maintain cleaner, safer and greener places to live. Financially unviable properties are brought back to use through our Own Place Project, with the local area gaining a physical and economic boost.

— Marketplace We maintain an ongoing commitment to

responsible procurement, with every Pre-Qualification Questionnaire or tender including our standard requirements on social value and CSR. We have a menu of ‘social value services’, which aims to incorporate tenant work experience and training, apprenticeships, charitable support, and the use of social enterprise within the supply chain.

— Workplace Our volunteering programme allows every

employee two days to spend volunteering, offering a unique opportunity for personal development, whilst at the same time assisting those who need our support. The business benefits are enhanced job satisfaction, employee engagement and customer satisfaction.

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Our business performanceIn 2015/16 the Group delivered another strong performance and further improved its financial position.

Statement of comprehensive incomeThe detailed results for the year are set out in the consolidated statement of comprehensive income on page 50 and the notes to the financial statements on pages 59 to 121. The following table provides a summary of the Group’s results:

For the year ended 31 March 2016 2015

£m £m

Group turnover 366 326

Operating surplus 73 81

Surplus on sale of property 13 5

Net interest payable (38) (38)

Other movements 2 —

Surplus for the year 50 48

Operating margin % 19.9% 24.7%

Turnover has increased year on year as a result of the annual rent increase, additional development sales, and construction related full year income from the Hull PFI contract.

The reported operating surplus is lower than last year as costs have been incurred which will serve to ensure the Group’s financial strength is maintained in future years. A £7m provision has been made in respect of the TOM and £2m of pension de-participation costs have been incurred as the Group withdraws from defined benefit pension schemes in order to mitigate its pension risk. During the year the Riverside Group Pension Scheme was closed to further accrual and the Group no longer participates in the Greater Manchester and West Midlands Pension Funds and the Pension Trust’s Growth Plan. An agreed increase in the deficit contributions made to the Social Housing Pension Scheme (SHPS) results in a £5.6m charge to operating costs.

The contribution from property disposals of £13m reflects the Group’s active asset management strategy of exiting local authorities where we hold limited stock levels, and this, coupled with the net interest charge remaining the same, resulted in an increase in the year on year surplus.

Statement of financial positionThe consolidated statement of financial position is provided on page 51 and supporting details can be found in the notes to the financial statements on pages 59 to 121. The following table provides a summary of the key elements.


£m £m

Fixed assets 1,814 1,786

Debtors receivable after more than one year 12 14

Net current assets 136 98

Total assets less current liabilities 1,962 1,898

Creditors falling due after more than one year

1,572 1,563

Reserves 390 335

1,962 1,898

Debt per unit (£’000) 15.0 14.5

The construction of new affordable homes for rent and shared ownership and our continued investment in existing properties increased fixed assets by £28m. New build is also occurring in our extra care PFI in Hull where three large extra care schemes are in the course of construction. The investment in the PFI is recorded in net current assets which have increased by £38m in the year.

Long term creditors have only increased by £9m. Borrowing in the PFI subsidiary has grown in order to finance the construction of the three extra care schemes but the Association’s borrowings have fallen by £19m as debt has been repaid reducing gearing to a low of 36%.

Restated

Restated

25

Over the year reserves grew by £55m. Creating a level of surplus which enables the strength of the financial position to be maintained is important as it allows the Group to continue to meet its charitable objectives. When the operating environment is challenging, this financial strength ensures Riverside can still maintain its properties to a high standard and just as importantly increase the number of new homes created.

Statement of cash flowsThe consolidated statement of cash flows is provided on page 53 and supporting details can be found in the notes to the financial statements on pages 59 to 121. The following table provides a summary of the key elements.


£m £m

Operating activities 86 117

Returns on investment and servicing of finance

(38) (36)

Capital expenditure (109) (100)Proceeds from property sales 33 20

Change in short term deposits 11 (21)Cash outflow (17) (20)

Financing 27 27

Increase in cash 10 7

The net cash received from operating activities at £86m was £31m lower this year as a result of the construction spend on the Group’s Hull extra care PFI where three large extra care units are currently being built. In addition to this considerable investment the Group has also increased the amount it spends on building new homes and improving its existing homes, with net capital expenditure of £109m in the year. Active asset management remains a key aim with surplus properties being sold allowing the proceeds to be reinvested in our remaining homes. The proceeds from sales this year increased by £13m to £33m. The net cash outflow and net funds received from financing remained broadly level on the year with cash increasing by £10m over the course of the year.

Our borrowing structure and interest costs The Group defines its treasury management activities as “The management of the Group’s investment of surplus funds and cash flows, its banking, loan funding, money market and capital market transactions; the effective control of risks associated with these activities; and the pursuit of optimum performance consistent with those risks”.

The Group treasury policy sets out the Group’s objectives and approach to risk management of its treasury management activities and the high-level treasury controls to be implemented throughout the Group. The policy is reviewed annually to ensure it continues to meet best practice with any changes being approved by the Board.

A requirement of the treasury policy is that a treasury strategy is prepared annually. The strategy is also approved by the Board and includes an assessment of the Group’s treasury position in the context of the current economic conditions and considers a range of risks: planning, borrowing, hedging, performance, liquidity, counterparty, regulatory and recommends actions to be undertaken during the course of the financial year.

As at 31 March 2016, the Group has committed funding of £1,073m of which £788m is drawn. Available facilities are comprised of £155m of facilities fully secured and ready to draw and £21m of funding for the Group’s Hull Extra Care PFI which will be drawn down in line with construction of the Extra Care properties. In addition to loan facilities the Group also had £34m of cash and cash equivalents at 31 March 2016.

During the course of the year a further £15m of funding was secured when the retained element of low cost government guaranteed funding from AHF plc was issued.

The Group’s treasury policy aims to minimise refinancing risk and the Group has to repay £104m of loans over the next five years, 13% of drawn debt.

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Net interest costs are £38m (2015: £38m). The weighted average cost of drawn debt, inclusive of margins and hedging activities was 5.0% (2015: 5.1%). The Group manages its exposure to fluctuations in interest rate risk by ensuring the proportion of its debt on fixed interest rates provides a high level of certainty over its net interest costs. Fixed rates are provided via a combination of fixed rate debt, embedded and standalone interest rate swaps. At 31 March 2016 96% of Group’s drawn debt (inclusive of hedging activity) was fixed (2015: 98%). This would fall to 80% if all loan facilities were fully drawn.

The Group applies FRS 102 accounting. Under FRS 102 the fair value of derivatives are shown on the balance sheet with the corresponding fair value movement disclosed in the cash flow hedge reserve or via the statement of comprehensive income, dependent on whether the requirements of hedge accounting have been achieved.

At 31 March 2016 the Group had a standalone interest rate swap exposure of £29m (2015: £31m) based on fixed rate interest rates with a notional value of £256m. The weighted duration of the swaps is 5.4 years (2015: 5.7 years). For the year ended 31 March 2016 the application of hedge accounting has resulted in limiting the impact of the movement in fair value of derivatives to a £1.0m credit to the statement of comprehensive income (2015: £1.0m debit).

Loan covenants, actual and forecast are monitored monthly and reported to the Board on a quarterly basis. The key covenants are interest cover, gearing ratios and asset cover. All covenants have been met throughout the year and at the year end.

As at 31 March 2016 the Group had a Moody’s credit rating of Aa3 and the outlook for the Group is deemed to be stable. On 29 June 2016, following the EU referendum result, Moody’s changed their outlook for all housing associations to negative.

Our developmentWe remain on course to achieve our three year target for the period from 1 April 2014 to 31 March 2017 of 1,500 affordable homes with opportunities secured for 1,425 homes. Of these 1,126 are committed and 299 in the pipeline. During the year there have been new challenges presented by future rent reductions and questions over capping housing benefit to Local Housing Allowance (LHA) levels. Riverside has responded by adjusting the tenure profile of its forward programme, by increasing grant and other subsidy, and postponing projects that could be at risk from LHA changes.

We continued to focus our investment on core areas, where we have a strong presence, working closely with local authorities to deliver significant programmes in Cumbria, Tyneside, Liverpool, Derby, Leicester and Hull.

In addition to the 1,500 affordable home programme, work progresses well with the Hull Extra Care PFI project which will see 316 homes primarily for older people, completing in early 2017. Prospect and Compendium (our joint venture company) have built 767 homes in the three year plan period, taking the Group total development programme target to 2,583.

Looking forward Riverside has been undertaking a review of its London assets over the last six months and has approved the next stage of a significant mixed tenure redevelopment and regeneration programme which could provide up to 1,500 new homes.

Riverside has been delivering a significant shared ownership programme on a national basis for 20 years. This knowledge and commercial experience will place Riverside in a strong position to bid for funds under the Shared Ownership Affordable Homes Programme 2016-21 which the Government has recently launched to invite bids for £4.3bn of funding.

Riverside continues to work collaboratively with other housing partners and a new “The Cutting Edge Framework for Procurement” will be launched in 2016 and plans to deliver homes manufactured off-site with the Modular Allianz.

The Group leads The Riverside Consortium, a group of North West based housing associations for which Riverside co-ordinates development bids to the HCA and is also a Lead Partner with the HCA.

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Business Effectiveness: Riverside’s value for money self-assessment 2016Each year Riverside undertakes a self-assessment against the Regulator’s value for money standard. This is the fourth year we have published a statement summarising this self-assessment, where we demonstrate how we are managing our resources and assets to further our objectives, and how we are re-investing the efficiency gains we make. We call this review “Business Effectiveness” to reflect the embedded approach we take to value for money at Riverside.

Any judgement of our business effectiveness needs to be seen in the context of our objectives, and last year we explicitly realigned our self-assessment to follow the structure of our Corporate Plan 2014-17. We have come to see value for money as the delivery of the objectives set out in the plan in the most cost effective way possible, which is why we measure performance against the strategic measures derived from the plan and monitored by the Board every six months. In doing this we present the outcomes and impact of our activities for three key stakeholder groups: customers, taxpayers and funders.

This is a summary of “Business Effectiveness”. A full version of the document can be found on our website, www.riverside.org.uk.

ContextThe drivers to achieve value for money at Riverside have never been greater. At no point in our history have we striven to do so much more, with limited and reducing income streams.

The UK faces a housing crisis, as millions of households across the income spectrum struggle to find decent affordable housing, as a result of house building rates being barely half of what is needed. At the same time, many of our existing customers have been dealing with real reductions to their incomes, notwithstanding an improving economy and employment growth. Welfare reform has already had a significant impact, and the further cuts announced in the 2015 budget brings the prospect of more, as tax credits are curbed and absorbed into Universal Credit, housing benefit is pegged to the level available to tenants in the private rented sector and overall benefits for individual households are capped.

For Riverside and other social landlords, our capacity to respond is being tested, as we face the prospect of a declining income stream with rents reduced by 1% each year for four years. This will result in £100m less income than we had planned for.

However, as a charitable housing association, Riverside needs to face these realities, focus on our current and future customers, and find new and creative ways to meet their needs. This means spending less by being more efficient in our transactions, focusing our services on the things that really matter, unlocking the capacity of our huge asset base through good intelligence and proactive management, and generating profit to re-invest through our commercial arms. In other words delivering better value for money.

These are already themes built into our Corporate Plan, and this self-assessment will set out the progress we are making in delivering our objectives, as well as some of the extra things we have been able to achieve.

What the numbers sayOur Corporate Plan sets our three strategic objectives, and two routes by which we will achieve them (see page 21). The Board monitors the delivery of the plan against 27 strategic measures. At the end of the second year of the plan (2015/16):

— Nearly half are on or ahead of the stretch targets we set for year two of the plan and nine are already ahead of the original three year target set. Progress has been particularly strong under the “resilient lives” objective and “effective business” theme. Targets for 2016/17 will now be adjusted to ensure we stretch ourselves in our final year of delivery.

— A further five measures whilst not at target, have shown an improvement over the course of the year.

— One measure is awaiting publication of CORE data (which is later than usual this year), whilst the remaining eight are below target and have shown a decline in performance over the year, usually marginal. These will be the focus for concerted effort over the remaining year of the plan.

The detailed results are set out in the following tables. where: red = below target, below baseline; amber = below target, above baseline; and green = above target.

The baseline is the actual performance for the previous financial year (2014/15).

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Connected customersBase Target Result

Customers

Net promoter score 14 16 23.1

% of customers satisfied with repairs and maintenance 73% 76% 75%

% of key transactions accessed by customers online through self-service approach n/a 16.5% 18.0%

% repairs completed without customers having to chase up the repair 96.0% 97.5% 97.4%

Taxpayers

% of working age tenants in full time employment 2 29.0% 30.0% 19.8%

% of new lettings to working age tenants in full time employment 34.0% 36.0% awaiting CORE%

— We continue to make steady progress in meeting this Corporate Plan objective, with our first truly digital services launched partway through the year, with tenants able to access their rent account and pay their rent online. Over 2,000 customers have signed up and nearly 20% of transactions for these services have come through this route, meaning we are well on the way to achieving our three year target of a third of transactions accessed on-line (where a digital service is offered).

— Satisfaction with our repairs and maintenance services has increased slightly to 75%, slightly short of target, but we expect to see the benefit of our shift to a proactive ‘MOT’ driven service across the whole Group and the extension of the reach of our in-house contractor Evolve reflected in satisfaction figures by the end of the plan period. Fewer than 3% of our repairs now require the customer to have to ‘chase’ completion, slightly below target.

— Overall our service modernisation journey continues, reflected in a sharp rise on our net promoter score to 23.1, well ahead of target. Plans for a new operating model based upon agile, targeted front-line delivery supported by efficient shared services, have now been approved and these will be implemented over the next two years.

Resilient LivesBase Target Result

Customers

Number of customers assisted into paid employment 412 600 602

Annualised cashable gain (£m’s) arising from money or affordable warmth advice 4.1 3.7 6.1

Taxpayers

% tenants receiving support who are maintaining a clear rent account or reducing arrears 73% 60% 71%

% active leads for health and care contracts via tender or renegotiation 23% 25% 26%

% Care and Support turnover commissioned to deliver healthcare outcomes 7% 25% 36%

% Care and Support services funded by self payers 9% 10% 10%

2Note: The % of working age tenants in full time employment appears to have dropped significantly since September 2015. However, this may be a product of the way we are collecting this data, which is now through a continuous telephone survey, rather then through an annual postal survey. We will investigate this issue over the coming months and investigate whether the result can be weighted to provide a more comparable position.

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— At a time of increasing hardship for our customers, we are delivering outcomes to support incomes and earning capacity that are well ahead of target. We have helped over 600 tenants into work, and have increased annual cashable gains to household incomes by £2m to over £6m. There is a clear business imperative to doing this, with over seven in ten tenants helped in this way retaining clear rent accounts or reducing their arrears.

— Our other main aim is to re-orientate our Care and Support Services towards health and social care outcomes, providing good value preventative services as part of a more sustainable business model for Riverside Care and Support. We are ahead of target, with over one third of new services over the year (by value) commissioned to deliver health and social care outcomes. This growth should be sustainable given that a quarter of active leads are for similar contracting opportunities.

Better placesBase Target Result

Customers

% tenants satisfied with quality of home 81% 83% 86%

% homes with SAP rating less than 60 14.5% 13.0% 12.7%

Taxpayers

Number of affordable new homes committed 448 1,000 1,126

Number of Local Authorities where we own fewer than 50 homes 76 67 77

Funders

Average NPV per property (HFAT) (£k) 33.4 34.0 33.7

— We have now committed more than two thirds of our three year development programme and identified firm opportunities for almost all of the remaining balance. We started over 1,100 new homes in 2015/16 (across all tenures), a record output for Riverside at a time of national housing crisis.

— Our stock of energy inefficient homes (SAP <60) has continued to fall, with investment in affordable warmth measures to over 1,000 homes completed. This represents a small part of our £37m annual decent homes programme, which continues to drive significant increases in tenant satisfaction.

— Our targeted approach to active asset management continues as we seek to renew our stock in neighbourhoods where we can make a real difference. Whilst we have disposed of over 800 homes, converting these into complete local authority exits has proved more difficult, with the number of authorities where we own fewer than 50 homes remaining virtually static.

— The average NPV per home continues to move in a positive direction, with modest growth in 2015/16 contributing to a 5% increase over the first two years of our current corporate planning period. This is our litmus test, demonstrating that our development, investment and disposal activities taken as a whole, are driving up the value of our stock portfolio.

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— The proportion of employees with confidence in the skills and support of the senior team and their own line managers has remained fairly static, despite an ongoing focus on developing leadership skills across Riverside – reflected by a sharp increase in training completion rates albeit short of target. After such a significant improvement last year, this may reflect the impact of the major organisational changes which have commenced. All managers have personal leadership development objectives in their appraisals.

— The recent achievement of Investors in People ‘Gold’ and improvement in our Best Companies Index score (including a place in the Sunday Times ‘not for profit’ Best Companies to Work For list) provides external validation that our overall approach to developing a “great team” at Riverside is bearing fruit.

Great teamBase Target Result

Customers, taxpayers and funders

% employees: confident in leadership skills of senior management 71% 75% 70%

% employees: agreeing my manager helps me fulfil my potential 72% 75% 70%

% managers and directors completing relevant training 62% 95% 86%

% of business units with up to date people plan 87% 100% 87%

Effective businessBase Target Result

Customers

Investment in new and improved homes and extra services (£m’s) 123.5 113.3 128.3

Taxpayers

% Return on assets 3.7% 4.0% 3.5%

Net savings arising from the Think Forward programme (£m) (where “-” indicates a saving) 0.6 -0.1 1.4

Procurement savings (non repair) (£m) 1.9 1.0 1.9

Annual profit from commercials (£m) 6.1 5.6 5.3

Funders

% Operating margin 25.3% 23.9% 22.0%

— This year we have been able to re-invest £128m in new homes and extra services, an increase of £15m more than target and an improvement on last year. Driving the value for money agenda, we have also generated higher than target procurement savings, by consolidating and re-negotiating existing contracts. Our commercial subsidiaries and joint ventures have also performed well, although not to target, in what has been a challenging commercial property market. The metrics show our strong performance in these critical areas.

— There are also areas in which we can still continue to improve. The savings from our Think Forward programme are below target due to costs associated with developing the new TOM which required additional investment of £1.5m this year, impacting net savings. Our return on asset performance is lower than target and base this year as surplus has been reduced as a result of incurring pension de-participation costs, a provision for the cost of TOM implementation and a charge relating to increased SHPS deficit contributions. It is expected the return on assets will remain below target as further TOM implementation costs are incurred to realise future efficiencies. Return on assets has been restated to adjust for the impact of FRS 102. A more detailed analysis is included in the full “Business Effectiveness” report.

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Total cost per property £ 2014/15 2013/14

Housing management 532.29 534.55

Responsive repairs 569.82 573.49

Major works 963.86 785.47

Cyclical maintenance 275.73 295.94

Major works and cyclical 1,239.59 1,081.41

Responsive repairs and void works 887.13 909.42

Other Housing Management Performance IndicatorsTotal overheads as a % of adjusted turnover

11.9% 11.8%

Total arrears as % of rent due 10.2% 9.5%

Rent collected as % of rent due 98.7% 98.0%

Re-let time (days) 30.0 29.8

Tenancy turnover % 9.9% 9.8%

Tenant satisfaction with the overall service %

82.6% 81.0%

Tenant satisfaction with neighbourhood %

83.7% 82.0%

Tenants believing rent = value for money %

79.1% 77.6%

Upper QuartileUpper MedianMedianLover MedianLower Quartile

Benchmarking We compare our performance with that of our peers in two ways: firstly by comparing high level financial performance with a group of peers who have credit ratings provided by Moody’s, and secondly through using the Housemark benchmarking service to compare service costs and performance.3 In addition this year, we have been able to reflect on the recently published cost per unit regression analysis from the HCA.

Benchmarking of operationsComparison of cost and performance using HouseMark shows a mixed picture and clearly illustrates the areas which need to be a focus for improvement.

Whilst our housing management costs remain relatively high compared to our peers, reflecting significantly higher spending on resident involvement and lettings, our repairs expenditure is upper median/upper quartile and lower than our peers.

Satisfaction measures all show year on year improvement and whilst these results remain below the median, comparison with other landlords show our levels are improving more quickly than the trend for our peer group.

Income collection performance remained in the bottom quartile in 2014/15, however since then the first phase of our income collection review has delivered sustained improvement. The March 2016 current rent arrears performance of 3.7% is a very positive outcome in the context of the tough financial and welfare reform challenges faced by our customers.

3Note: Housemark comparisons are only available for 2014/15, and so are for the year prior to the reporting period for this self-assessment

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Regression analysisThe Homes and Communities Agency has recently released an analysis of comparative social housing unit costs across the sector as part of its ongoing focus on efficiency. The data analysed is drawn from audited accounts for 2014/15. Costs vary significantly, and in order to understand what drives this variation the HCA has undertaken regression modelling. This has identified a number of key contextual factors which influence unit costs, the most important of which are the proportion of supported and older persons housing managed (normally associated with higher costs) and regional variation in wage levels.

The analysis indicates that Riverside’s headline annual social housing cost per unit is £4,220, which when benchmarked against the rest of the sector lies between median and upper quartile – in other words above average. However taking account of the contextual factors identified in the regression analysis we have been able to derive an indicative ‘expected’ cost per unit – that is the cost per unit that would be expected if Riverside’s costs reflected those of a typical association, given our mix of housing types and the labour markets within which we operate. This gives an estimated ‘expected’ cost/unit of around £4,270 per annum (for 2014/15), marginally higher than our actual cost per unit. When contextualised, Riverside’s headline social housing cost per unit is slightly below expectations.

This confirms that Riverside’s higher than average (median) cost per unit, is most likely explained by our stock composition and in particular the prevalence of supported housing and housing for older people. This is demonstrated by our very high service charge cost per unit, given that costs per unit for supported housing are approximately 3.0 times higher than those for general needs homes. The multiplier for housing for older people is approximately 1.5. This reflects the cost of services associated with facilities management services within what are often complex and bespoke buildings, and higher staffing costs related to access, security and intensive housing management.

Further analysis is provided in our full “Business Effectiveness” document.

Benchmarking of financial performanceRiverside also benchmarks its financial performance against that of a group of 16 peers, selected for their comparability to the Group, by size, geography and credit rating. Riverside ranked 5th strongest in this group for the year ended 2014/15 (the most recent period for which full peer data is available), with strong performance across many measures. This included the balance sheet measure of debt to revenue, which at 2.4 ranked us 2nd. Two measures where we ranked below in our comparable performance are direct operating cost per unit (9th) and, consequently, operating margin (14th). However, both these rankings, and Riverside’s absolute performance, has improved year-on-year. These results also reflect the Group’s presence in, and the share of turnover from, the Care and Support sector.

Realising the gainsReflecting on our performance overall, we are in a strong position to demonstrate continuing value for money gains from the perspective of all of our stakeholders: customers; the taxpayer and funders.

In simple terms, this financial strength has enabled us to increase investment in new homes, major repairs and extra services for tenants – the Association has invested 78% (2015: 73%) of its reserves in these activities. At the end of the year we have started building over 1,300 homes across all tenures, and are planning for a higher level of development in our next business planning cycle. We have also protected key discretionary services, despite beginning to pare back operational costs as we roll out a new TOM. Our focus is on driving out duplication and inefficiency, rather than cutting the services our customers have told us are important.

However given the significant financial challenges of the next four years, our approach remains a long-term one. At a time when we are building more, increased operating surpluses ultimately temper our borrowing and constrain the growth in our gearing, ensuring that Riverside can face the future on a sustainable footing.

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Our futureThere are significant challenges facing PRPs of affordable housing and the protection of Riverside’s robust financial health is more important than ever.

Our fundamental financial strength serves to maintain the confidence the Group’s funders have in the organisation and help protect against the unexpected.

The Group remains committed to its vision of “transforming lives and revitalising neighbourhoods” and the surplus delivered over the last financial year combined with a business plan that reflects the current operating environment and associated risks ensure the Group remains well placed for the successful achievement of this vision.

Statement of complianceThe form and content of the strategic report review has been prepared in line with the Statement of Recommended Practice for registered Social Housing Providers 2014. The statement has also been prepared in accordance with The Accounting Direction for Private Registered Providers of Social Housing from April 2015. Joy Baggaley Chief Financial Officer

At a time when we are building more, Riverside can face the future on a sustainable footing.

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35

07. Report of the Board

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Principal activityThe Riverside Group Limited (TRGL) is the ultimate holding company within a group structure (‘The Riverside Group’). Details of members of the Riverside Group are given on page 87 of these financial statements.

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 principal activity of the Riverside Group is the provision of affordable homes for rent and shared ownership, together with housing support for vulnerable and elderly residents.

These objectives are carried out for the public benefit as set out in the financial statements. The Board considers legal advice and Charity Commission guidance when determining the activities that the Group undertakes to deliver these objectives.

Post year end eventsThe Board has considered the implications of the result of the EU referendum and confirm that there have been no events since the financial year end that have had a material effect on the financial position of the Group.

The Board of The Riverside Group LimitedThe Board members of The Riverside Group Limited holding office during the period 1 April 2015 to 7 July 2016 are detailed below:

— Joy Baggaley — Jonathan Dale— Pauline Davis (appointed 9 June 2016)— Paul Forster-Jones— Philip Han — Susan Jee— Mike Little (resigned 16 June 2016)— Carol Matthews— Philip Raw — Max Steinberg CBE

— Sally Trueman— Peter White (appointed 17 June 2016)

Board membership includes a tenant and Board meetings are also attended by a tenant observer, who serves for a twelve month term. Currently the role is filled by Walter Macfarlane who is serving a second twelve month term, approved by Board. Also in attendance at Board meetings are the other Executive Directors and the Assistant Company Secretary.

Membership of the Board comprises 50% women, (2015: 40%), which compares to a 52% female population in the areas where Riverside works. Board membership of both those declaring themselves to be disabled or BME is in line with the percentage of the relevant population.

The Board is pleased to present its report and the audited consolidated financial statements for the year ended 31 March 2016.

Report of the Board

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During the year payments made to Board members totalled £513k (2015: £496k), which represented 0.14% (2015: 0.15%) of annual turnover. Payment of the Group Chair and Group Board members is calculated by taking into account the size of the Group and industry norms.

The Board carries out an annual appraisal of its performance and an annual appraisal of individual Board members. The Chair is appraised by an external consultant every other year. The whole Group Board will be appraised by an external consultant in 2016.

Each board member (excluding co-optees) is appointed for a fixed term of office, of up to three years. Reappointment is possible for up to a maximum of two additional terms.

Review of business and future developmentsThe review of business and future developments is discussed in the Group Chair’s introduction, the Group Chief Executive’s statement and the strategic report on pages 11 to 33.

Executive DirectorsWhilst the Board is responsible for the Group’s overall policy and strategy, management is delegated to the Group Chief Executive. The Executive Directors are the senior management team and act as executives within

the authority delegated by the Board. They meet formally under the chairmanship of the Group Chief Executive in order to consider all major management issues. This meeting is a key decision making forum for the management of the Group, reviewing all proposed policy changes and performance.

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

Corporate governanceThe Board is committed to integrity and accountability in the stewardship of the Group’s affairs. The Group complies with the NHF Code of Governance, except that, to promote a culture of openness, Audit Committees within Riverside meet with staff present.

The Group has carried out its annual assessment of governance, including roles, responsibilities and accountabilities of the Board, Chair and Chief Executive and is satisfied that its arrangements are clear and effective.

The external auditors have undertaken non-audit work for the Group during the year ended 31 March 2016. Details of 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 the annual review of external auditor performance.

Executive Directors meet formally under the chairmanship of the Group Chief Executive in order to consider all major management issues.

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Corporate role of the BoardThe Board comprises nine non-executive Board members, including Peter White who is a co-optee and is Chair of the Housing Services Committee, together with the Group Chief Executive and the Chief Financial Officer who are co-opted executive 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 other interest group.

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

— be committed to the values and objectives of the Group

— develop strategy and implement the Group’s core policies

— uphold the NHF code of governance — represent the 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.

Each subsidiary has a Board of Directors chosen for their specific area of expertise including appropriately experienced non-executives. A non-executive Commercial Ventures Review Group, which includes three Group Board members, provides additional scrutiny through the review of business plans, performance and key decisions.

The Board has a schedule of six meetings a year for regular business. It also convenes if decisions are required for urgent matters between meetings. Three of these meetings were held during the year, to discuss the October business plan, the pensions strategy and the pension strategy consultation outcome. The constitution allows attendance by telephone and video conference which facilitates this responsiveness of governance. Board members also attend an annual conference to discuss strategy.

Reporting to the Board are the Group Governance and Remuneration Committee, the Group Audit Committee, the Group Treasury Committee, the Housing Services Committee and the Scotland Committee, all of which, other than the Housing Services Committee are comprised of non-executive members. There are over 30 tenants actively involved in the formal governance structure through their roles as divisional Board and Federation members. Further information on the Committees is given below and the membership is shown in table 1 with attendance at Board and Committee meetings being shown in table 2.

Each subsidiary has a Board of Directors chosen for their specific area of expertise.

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Group Governance and Remuneration CommitteeThe Committee advises the Board on the appointment of Group Board members, the Group Chief Executive and her salary. It agrees the appointment of all other non-executives and the appointment of Executive Directors. The Group Chief Executive’s contract is reviewed by independent consultants in line with the triennial review of the salary level of all Executive Directors. The Executive Directors are not present at any meeting when their remuneration packages are determined. The Committee also agrees the brief within which the Group Chief Executive can negotiate staff salaries with the union, Unite. Jackie Green, an independent director of human resources joins the Committee as the Chair to consider non-executive remuneration. The Committee also takes specialist human resources advice from external consultants as appropriate. It meets on an ad hoc basis and met seven times during the year.

Group Audit Committee The Committee addresses internal and external audit issues and advises the Board on risk management policies and processes. It also considers the financial statements and recommends their approval by the Board. It meets four times a year.

Group Treasury CommitteeThe Committee considers technical and complex treasury matters and makes recommendations to the Board. It meets on an ad-hoc basis and met once during the year.

Housing Services Committee The Housing Services Committee has the following functions:

— oversight of operational performance— development of housing policy and the

Group-wide service improvement framework— promotion of a Group-wide culture of

excellence and the sharing of best practice— acting as conduit between Group Board,

divisional, area and relevant subsidiary boards.

It meets six times a year.

Scotland Committee The Committee oversees and monitors the implementation of the Group business strategy for Scotland. It comprises three nominees from the Board of Irvine Housing Association Limited and two nominees from the Board of The Riverside Group Limited. The Committee met three times during the year.

Table 1

Group Audit Committee

Group Treasury Committee

Housing Services Committee

ScotlandCommittee

Jackie GreenSusan JeePhilip Raw (Chair)Max Steinberg

Adrian CrookesTim CrostonPhilip Han (Chair)Susan JeeNeill Skinner

Philip HanSusan Jee (Chair)Robert Towers

Joy Baggaley Pauline Davis (appointed 9 November 2015)

Barbara Fitzgerald ((appointed 21 April 2016)

Kathleen Forsyth-SmithWilliam McCarthySue Powell (appointed 17 June 2016)

Darren Warneford Alan WestPeter White (Interim Chair) (appointed 20 February 2016)

John WoodLinda Wright

Susan JeeDuncan McEachranMax Steinberg Robert SturgeonAlan West (Chair)

The Riverside Group Limited Board

Group Governance and Remuneration Committee

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Board/committee members Group Board Group Governance & Remuneration

Housing Services

Group Treasury

Group Audit Scotland

Meetings attended/Eligible to attend

Max Steinberg 5/6 6/7 – – – 2/3

Philip Raw 6/6 6/7 – – – –

Susan Jee 6/6 7/7 – 1/1 4/4 3/3

Joy Baggaley 6/6 – 5/6 – – –

Jonathan Dale 6/6 – – – – –

Pauline Davis3 0/0 – 1/2 – – –

Paul Forster-Jones 5/6 – – – – –

Philip Han 5/6 – – 1/1 3/4 –

Mike Little 6/6 6/7 6/6 – – 3/3

Carol Matthews 6/6 – – – – –

Sally Trueman 4/6 – – – – –

Peter White6 0/0 – 0/0 – – –

Jackie Green – 1/1 – – – –

Barbara Fitzgerald1 – – 0/0 – – –

Kathleen Forsyth-Smith – – 4/6 – – –

William McCarthy4 – – 0/0 – – –

Sue Powell5 – – 0/0 – – –

Darren Warneford – – 5/6 – – –

Alan West – – 5/6 – – 3/3

John Wood – – 6/6 – – –

Linda Wright – – 6/6 – – –

Adrian Crookes2 – – – – 0/1 –

Tim Croston2 – – – – 0/1 –

Neill Skinner – – – – 4/4 –

Robert Towers – – – 1/1 – –

Duncan McEachran – – – – – 3/3

Robert Sturgeon – – – – – 3/3

Table 2: Member attendance at Board and/or Committee meetings.

(–) = Not a Board/Committee member

Key to numbering1 Barbara Fitzgerald was appointed to the Housing Services Committee on 21 April 2016.2 Tim Croston and Adrian Crookes were appointed on 10 December 2015, completed their induction and attended their first meeting in June 2016.3 Pauline Davis was appointed to Group Board on 9 June 2016 and to the Housing Services Committee on 9 November 2015.4 William McCarthy, will attend meetings from 28 October 2017.5 Sue Powell was appointed to the Housing Services Committee on 17 June 2016. 6 Peter White was appointed to Group Board on 17 June 2016 and to the Housing Services Committee on 20 February 2016.

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Internal controls assuranceThe Board is the ultimate governing body and is responsible for the Group’s system of internal control.

The Board, advised by the Group Audit Committee, has reviewed the effectiveness of the system of internal control for the year ended 31 March 2016 and to the date of approval of these financial statements. For the year ended 31 March 2016, the Board makes the following statements:

— The system of internal control is designed to provide the Board with reasonable but not absolute assurance that risks are identified on a timely basis and dealt with appropriately; that assets are safeguarded; 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 authority, responsibility and accountability.

— The Group maintains a culture of risk awareness, based on a sound control environment with high regard for integrity and ethical values. Regular reviews of the risk universe and risk mitigation actions are carried out. Any business development involving significant risk is subject to Board approval.

— The framework of internal control is subject to a regular programme of review. In particular, the Group maintains a fully resourced Internal Audit team led by an appropriately qualified Director reporting directly to the Group Audit Committee. Service delivery risk is monitored through the service improvement framework, quality self-assessment and tenant scrutiny processes. All this ensures that the control environment framework remains robust during a period of continued external change.

— The Group is committed to sound financial management in all aspects of its business. It has a robust business planning process and all parts of the Group have detailed annual budgets and longer term business plans. The Group has a comprehensive system of management reporting. This includes a monthly reporting package of financial results and key performance indicators. Overall scrutiny is provided by the Board.

— The Group maintains a suite of policies covering the main elements of its business. The policies are subject to a rolling programme of review to confirm their continued appropriateness with all Group policies approved by the Board.

— The anti-fraud policy sets out the commitment to preventing fraud. Confidential reporting arrangements are in place to allow staff to voice their concerns and know that they will be properly investigated. The anti-bribery and corruption policy sets out guidelines for all staff to ensure the highest standards of conduct in business dealings and this has been adopted throughout the Group, in addition to the NHF’s publication “Code of conduct with good practice for members” (2012).

— The Group has made good progress in implementing the various new regulatory requirements including annual certification of compliance with laws and regulatory standards together with the compilation of our assets and liabilities into a single register. These all strengthen the control environment.

— The Group is embarking on its new Target Operating Model. The design principles include a number of elements which will improve the control environment including consistency, standardisation and clarity about performance management. The design phase will include up front consideration of risk to ensure the control environment remains effective.

— In reviewing the effectiveness of the Group’s system of internal control, the Board has considered a range of sources of assurance including:— management reports— key performance indicators— audit reports— quality management systems and— external regulator reports.

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

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Statement of Board’s responsibilities in respect of the Board’s report and the financial statementsThe Board is responsible for preparing this report and the financial statements in accordance with applicable law and regulations.

The Co-operative and Community Benefit Society law requires the Board to prepare financial statements for each financial year. Under those regulations the Board has elected to prepare the financial statements in accordance with United Kingdom Accounting Standards FRS 102 ‘The Financial Reporting Standard applicable in the UK and Republic of Ireland’.

The financial statements are required by law to give a true and fair view of the state of affairs of the Group and the Association and of income and expenditure of the Group and the Association for that period.

In preparing these financial statements, the Board is 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 is responsible for keeping proper books of account 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 Co-operative and Community Benefit Society Act 2014, the Housing and Regeneration Act 2008 and the Accounting Direction for Private Registered Providers of Social Housing 2015.

The Board has general responsibility for taking such steps as are reasonably open to it to safeguard the assets of the Association and to prevent and detect fraud and other irregularities.

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

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

Political donationsNo donations for political purposes were made during the year.

Policy on payment of creditorsIn the absence of any dispute, the Group’s policy is to pay non-development invoices within 30 days of the date 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.

Investment powerThe Group’s Rules permit investment of monies not immediately required to carry out its objectives as it determines and is permitted by law.

Annual General MeetingThe Annual General Meeting will be held on 8 September 2016.

AuditorsA resolution to re-appoint the auditors KPMG LLP will be put to the Annual General Meeting.

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Statement of compliance The Board confirms that the strategic report and board report have been prepared in accordance with principles set out in paragraph 4.7 of the 2014 SORP for Registered Social Housing Providers.

The Board certifies that as a registered provider, The Riverside Group Limited complies with the Homes and Communities Agency’s Governance and Financial Viability Standard 2015.

Lynn McCracken Secretary 7 July 2016

We need to focus on the issues that face current and future customers, and find new and creative ways to meet their needs.

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08. Independent auditor’s report

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We have audited the financial statements of The Riverside Group Limited for the year ended 31 March 2016 set out on pages 50 to 121. The financial reporting framework that has been applied in their preparation is applicable law and UK Accounting Standards (UK Generally Accepted Accounting Practice), including FRS 102 ‘The Financial Reporting Standard applicable in the UK and Republic of Ireland’.

This report is made solely to the Association, as a body, in accordance with section 87 of the Co-operative Community Benefit Societies Act 2014 and section 128 of the Housing and Regeneration Act 2008. Our audit work has been undertaken so that we might state to the Association’s members those matters we are required to state to it 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 Association as a body for our audit work, for this report, or for the opinions we have formed.

Respective responsibilities of the Board and auditorAs more fully explained in the Statement of Board’s Responsibilities set out on page 42, the Association’s Board is responsible for the preparation of financial statements which give a true and fair view. Our responsibility is to audit, and express an opinion on, the financial statements in accordance with applicable law and International Standards on Auditing (UK and Ireland). Those standards require us to comply with the Auditing Practices Board’s Ethical Standards for Auditors.

Scope of the audit of the financial statements A description of the scope of an audit of financial statements is provided on the Financial Reporting Council’s website at www.frc.org.uk/auditscopeukprivate.

Opinion on financial statements In our opinion the financial statements:

— give a true and fair view, in accordance with UK Generally Accepted Accounting Practice, of the state of affairs of the Group and the Association as at 31 March 2016 and of the income and expenditure of the Group and the Association for the year then ended;

— comply with the requirements of the Co-operative and Community Benefit Societies Act 2014; and

— have been properly prepared in accordance with the Housing and Regeneration Act 2008 and the Accounting Direction for Private Registered Providers of Social Housing 2015.

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

— the Association has not kept proper books of account; or

— the Association has not maintained a satisfactory system of control over transactions; or

— the financial statements are not in agreement with the Association’s books of account; or

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

Michael Davies for and on behalf of KPMG LLP, Statutory Auditor

Chartered Accountants 1 St Peter’s Square Manchester M2 3AE

Independent auditor’s reportto The Riverside Group Limited

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09. Group and Association statements

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Consolidated statement of comprehensive income

for the year ended 31 March 2016 Notes 2016 2015 £’000 £’000 Restated Group turnover 2 365,598 325,977Operating costs 2 (292,786) (245,428) ———— ————Group operating surplus 2 72,812 80,549Share of operating profit in joint ventures 509 328Gain on the sale of fixed assets 6 13,498 5,045Interest receivable and other income 7 5,784 5,127Interest payable and similar charges 8 (43,542) (43,404)Changes in value of investments — 1,402Movement in fair value of financial instruments 1,026 (995) ———— ————Surplus on ordinary activities before tax 9 50,087 48,052Taxation 10 (93) 11Share of joint venture taxation 10 (5) (6) Transfer to reserves (52) (64) ———— ————Surplus for the year after tax 49,937 47,993

Other comprehensive incomeGain/(loss) recognised on cashflow hedges 1,483 (7,431)Actuarial gain/(loss) on pension scheme 26 4,116 (7,202) Donations and draw downs (580) 27 ———— ————Total comprehensive income for the year 54,956 33,387 ———— ————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 59 to 121 form an integral part of the financial statements.

There are no historical cost surpluses or deficits other than those recognised within the statement of comprehensive income.

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Consolidated statement of financial position

as at 31 March 2016 Notes 2016 2015 £’000 £’000 Restated

Fixed assetsIntangible assets:Goodwill 31 467 1,343Tangible assets:Housing properties 11 1,762,277 1,735,375Other tangible fixed assets 11 16,271 14,881 ———— ———— 1,778,548 1,750,256

Investments Investment in joint ventures 12 755 333Investment properties 12 14,258 13,644Other investments 12 14,511 14,147 Homebuy equity loans 12 5,666 6,204 ———— ———— 1,814,205 1,785,927 ———— ————Debtors: amounts receivable after more than one year 13 12,269 14,413

Current assetsInvestments 12 56,322 64,116Trade and other debtors 13 111,440 80,236Properties for sale 14 52,843 44,816Cash and cash equivalents 34,403 24,681 ———— ———— 255,008 213,849

Creditors: amounts falling due within one year 15 (118,884) (116,024) ———— ————Net current assets 136,124 97,825 ———— ————Total assets less current liabilities 1,962,598 1,898,165 ———— ———— Creditors: amounts falling due after more than one year 16 1,541,090 1,529,267Deferred income 19 5,203 1,812Provisions for liabilities Pension provision 28 7,513 18,443Other provision 28 18,949 13,808 ———— ———— 1,572,755 1,563,330

Capital and reservesNon-equity share capital 20 — — Cashflow hedge reserve (23,329) (24,812)Designated reserves 2,836 3,364Income and expenditure reserve 410,336 356,283 ———— ———— 1,962,598 1,898,165 ———— ———— The financial statements on pages 50 to 121 were approved by the Board on 7 July 2016 and were signed on its behalf on 25 July 2016 by:

Max Steinberg CBE, Group Chair Susan Jee, Group Treasurer

Joy Baggaley, Chief Financial Officer Lynn McCracken, Secretary


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Consolidated statement of changes in reserves

Cashflow Income Designated hedge expenditure Total reserves reserve reserve reserves

£’000 £’000 £’000 £’000

At 1 April 2015 as previously reported 19,885 — 330,373 350,258Effects of adoption of FRS 102 (note 32) (16,521) (24,812) 25,910 (15,423) ———— ———— ———— ————Balance as at 1 April 2015 3,364 (24,812) 356,283 334,835

Surplus for the year 52 — 49,937 49,989Donations and other movements (580) — — (580)Effective position of changes in fair value of cash flow hedges — 1,483 — 1,483Transfer from income and expenditure reserve — — — —Actuarial loss on pension scheme — — 4,116 4,116 ———— ———— ———— ————

At 31 March 2016 2,836 (23,329) 410,336 389,843 ———— ———— ———— ———— Within designated reserves are the charitable reserves of £2.6m analysed between restricted reserves £1.5m and unrestricted reserves £1.1m.

In addition there is a further £0.2m restricted reserve relating to 50% of proceeds on qualifying land disposals which are subject to a clawback agreement with Carlisle City Council.

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Consolidated statement of cash flows

for the year ended 31 March 2016 2016 2015

£’000 £’000 £’000 £’000

Net cash inflow from operating activities (note 21) 85,757 117,301

Returns on investments and servicing of financeInterest received 8,261 5,090Interest paid (46,581) (40,939) ———— ————

Net cash outflow from returns on investments and servicing of finance (38,320) (35,849)

Taxation Tax paid (5) —

Capital expenditure and financial investmentCash paid for housing construction (86,938) (96,796)Cash paid for other fixed assets (7,873) (4,470)Cash flow for fixed asset investments 4,385 476Expenditure on capitalised improvements (26,317) (17,736)Social Housing Grant received 8,391 17,708Receipts from property sales 32,904 19,767Investment in joint ventures (410) — ———— ————

Net cash outflow from capital expenditure and financial investment (75,858) (81,051)

Management of liquid resourcesIncrease/(decrease) in short term deposits 11,017 (20,877) ———— ————

Net cash inflow/(outflow) from management of liquid resources 11,017 (20,877) ———— ————

Net cash outflow before financing (17,409) (20,476)

FinancingLoans raised 42,187 192,862Loan principal repayments (15,056) (165,613) ———— ————

Net cash inflow from financing 27,131 27,249 ———— ————

Increase in cash (note 22) 9,722 6,773 ———— ————The notes on pages 59 to 121 form an integral part of the financial statements.

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Association statement of comprehensive income

for the year ended 31 March 2016 Notes 2016 2015 £’000 £’000 Restated Turnover 2 292,913 283,821Operating costs 2 (229,947) (213,588) ———— ————Operating surplus 2 62,966 70,233

Gain on the sale of fixed assets 6 13,442 5,040Interest receivable and other income 7 4,138 6,465Interest payable and similar charges 8 (38,887) (41,285)Changes in value of investments — 1,401Movement in fair value of financial instruments 1,023 (941)Gift Aid 3,019 2,250 ———— ————Surplus on ordinary activities before tax 9 45,701 43,163Taxation 10 15 (30)Transfer to reserves (52) (64) ———— ————Surplus for the year after tax 45,664 43,069

Other comprehensive incomeGain/(loss) recognised on cashflow hedges 1,429 (7,453)Actuarial gain/(loss) on pension scheme 26 2,503 (6,091)Donations (580) 27 ———— ————Total comprehensive income for the year 49,016 29,552 ———— ————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.


There are no historical cost surpluses or deficits other than those recognised within the statement of comprehensive income.

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Association statement of financial position

as at 31 March 2016 Notes 2016 2015 £’000 £’000 Restated

Fixed assetsTangible assets Housing properties 11 1,679,562 1,652,028Other tangible fixed assets 11 15,669 14,195 ———— ———— 1,695,231 1,666,223 ———— ————Investments Investment properties 12 1,123 1,106Other investments 12 45,491 44,990Homebuy equity loans 12 329 401 ———— ———— 1,742,174 1,712,720 ———— ————

Debtors: amounts receivable after more than one year 13 60,657 63,416

Current assetsInvestments 12 36,155 57,531Trade and other debtors 13 58,121 62,863Properties for sale 14 14,955 13,730Cash and cash equivalents 29,690 21,057 ———— ———— 138,921 155,181

Creditors: amounts falling due within one year 15 (97,285) (104,059) ———— ————Net current assets 41,636 51,122 ———— ————Total assets less current liabilities 1,844,467 1,827,258 ———— ———— Creditors: amounts falling due after more than one year 16 1,422,810 1,453,638Deferred income 19 5,203 1,812Provisions for liabilities Pension provision 28 6,243 15,805Other provision 28 18,949 13,809 ———— ———— 1,453,205 1,485,064Capital and reservesNon-equity share capital 20 — —Cashflow hedge reserve (23,244) (24,673)Designated reserves 2,783 3,311Income and expenditure reserve 411,723 363,556 ———— ———— 1,844,467 1,827,258 ———— ———— The financial statements on pages 50 to 121 were approved by the Board on 7 July 2016 and were signed on its behalf on 25 July 2016 by:

Max Steinberg CBE, Group Chair Susan Jee, Group Treasurer

Joy Baggaley, Chief Financial Officer Lynn McCracken, Secretary


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Cashflow Income Restricted hedge expenditure Total reserves reserve reserve reserves

£’000 £’000 £’000 £’000

At 1 April 2015 as previously reported 19,824 — 338,927 358,751Effects on adoption of FRS 102 (note 32) (16,513) (24,673) 24,629 (16,557) ———— ———— ———— ————Balance as at 1 April 2015 3,311 (24,673) 363,556 342,194

Surplus for the year 52 — 45,664 45,716Donations and other movements (580) — — (580)Effective position of changes in fair value of cash flow hedges — 1,429 — 1,429 Transfer from income and expenditure account to reserves — — — —Actuarial loss on pension scheme — — 2,503 2,503 ———— ———— ———— ————

At 31 March 2016 2,783 (23,244) 411,723 391,262 ———— ———— ———— ———— Within restricted reserves are the charitable reserves of £2.6m analysed between restricted reserves £1.5m and unrestricted reserves £1.1m.

In addition there is a further £0.2m restricted reserve relating to 50% of proceeds on qualifying land disposals which are subject to a clawback agreement with Carlisle City Council.

Association statement of changes in reserves

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10. Notes to the financial statements

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Principal accounting policies1

The financial statements are group statements and consolidate the financial statements of The Riverside Group Limited and its subsidiary undertakings.

Legal statusThe parent association, The Riverside Group Limited, is registered under the Co-operative and Community Benefit Societies Act 2014 and is registered with the Homes and Communities Agency as a Private Registered Provider of Social Housing.

Basis of accountingThe Group’s financial statements have been prepared in accordance with Financial Reporting Standard 102: The Financial Reporting Standard applicable in the UK and Republic of Ireland (FRS 102) and the Statement of Recommended Practice for registered housing providers: Housing SORP 2014. The Group is required under the Co-operative and Community Benefit Societies (Group Accounts) Regulations 1969 to prepare consolidated Group accounts.

The financial statements comply with the Co-operative and Community Benefit Societies Act 2014, the Co-operative and Community Benefit Societies (Group Accounts) Regulations 1969, the Housing and Regeneration Act 2008 and the Accounting Direction for Private Registered Providers of Social Housing 2015. The accounts are prepared on the historical cost basis of accounting as modified by the revaluation of housing properties, investments and derivative financial instruments and are presented in £ sterling.

The Group’s financial statements have been prepared in compliance with FRS 102 as it applies for the first time to the financial statements of the Group for the year ended 31 March 2016.

The Group transitioned from previous UK GAAP to FRS 102 as at 1 April 2014. An explanation of how the transition to FRS 102 has affected the reported financial position and performance, as well as the exemptions taken on transition, is given in note 32.

Parent association disclosure exemptionsIn preparing the separate financial statements of the parent company, advantage has been taken of the following disclosure exemptions available in FRS 102:

— No cash flow statement has been presented for the parent association;

— Disclosures in respect of the parent company’s financial instruments have not been presented as equivalent disclosures and have been provided in respect of the Group as a whole; and

— No disclosure has been given for the aggregate remuneration of the key management personnel of the parent association as their remuneration is the same as the totals for the Group as a whole.

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Basis of consolidationThe financial statements are Group statements and consolidate the financial statements of The Riverside Group Limited and its subsidiary undertakings.

The Riverside Group Limited’s interest in joint ventures is accounted for using the equity method.

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

Going concernThe Board has a reasonable expectation that based on forecasts and current expectations of future sector conditions the Group and Association have adequate resources to continue in operational existence for the foreseeable future, being a period of at least twelve months after the date on which the report and financial statements are signed. As a consequence the Board continues to adopt the going concern basis in preparing these financial statements.

Judgements and key sources of estimation uncertaintyThe preparation of the financial statements requires management to make judgements, estimates and assumptions that affect the amounts reported for assets and liabilities as at the statement of financial position date and the amounts reported for revenues and expenses during the year. However, the nature of estimation means that actual outcomes could differ from those estimates.

The following judgements, estimates and assumptions have had the most significant effect in amounts recognised in the financial statements:

— The categorisation of housing properties. In determining the intended use, the Group has considered if the asset is held for social benefit or to earn commercial rentals. The Group has determined that market rented properties are investment properties;

— Tangible fixed assets. Other than investment properties, tangible assets are depreciated over their useful lives taking into account residual values where appropriate. The estimates of useful life for the different component types and assets are detailed on page 64;

We have been able to harness our financial strength and convert this into real benefits for our customers.

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— Impairment of non-financial assets. Reviews for impairment of housing properties are carried out when a trigger has occurred. During the year the government announced a change in rent policy which resulted in a material impact on the net income collected in the future for housing properties and the Group have assessed that this impact represents a trigger for impairment review;

— Pension and other post-employment benefits. The cost of defined benefit pension plans and other post-employment benefits are determined using actuarial valuations. The actuarial valuation involves making assumptions about discount rates, future salary increases, mortality rates and future pension increases. Due to the complexity of the valuation, the underlying assumptions and long term nature of these plans, such estimates are subject to considerable uncertainty and the Group relies on the expert input of actuaries. Further details of the assumptions made are provided in Note 26.

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 statement of comprehensive income. 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 statement of comprehensive income.

Supporting people contract incomeSupporting People (SP) contract income received from Administering Authorities is accounted for as income for support services in the turnover in note 3 to the financial statements. The related support costs are matched against this income.

Service chargesService charge income and costs are recognised on an accruals basis. The Group operates both fixed and variable service charges on a scheme by scheme basis in full consultation with residents. Where variable service charges are used the charges will include an allowance for the surplus or deficit from prior years, with the surplus being returned to residents by a reduced charge and a deficit being recovered by a higher charge. Until these are returned or recovered they are held as creditors or debtors in the statement of financial position.

Where periodic expenditure is required a provision may be built up over the years, in consultation with the residents; until these costs are incurred this liability is held in the statement of financial position within creditors.

TurnoverTurnover comprises rental and service charge income receivable (net of void losses), certain revenue grants from local authorities and the Homes and Communities Agency, together with other income and income from the sale of shared ownership and other properties developed for outright sale. Income from property sales is recognised as receivable on the delivery of services provided.

Joint ventures An entity is treated as a joint venture where the group holds an interest and shares control under a contractual arrangement with one or more parties external to the group.

In the group accounts, joint ventures are accounted for using the equity method. The consolidated statement of comprehensive income includes the group’s share of the operating results, pre-tax results and attributable taxation of such undertakings based on audited financial statements. In the consolidated statement of financial position, the group’s share of the identifiable net assets attributable to its joint ventures are shown separately.

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Retirement benefitsDuring the year the Group operated a group pension scheme and contributed to local government pension schemes and the Social Housing Pension Scheme (SHPS), all of which were defined benefit schemes. The assets of the schemes are held separately from those of the Group. At the year end the group pension scheme closed to future accrual. The Group also exited one of the local government pension schemes and the SHPS defined benefit section. The de-participation cost payable on exit of local government pension schemes, to the extent that they relate to an outstanding deficit, are used to remove this deficit from the statement of financial position. Any remaining costs are expensed through the statement of comprehensive income. 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.

The disclosures in the accounts follow the requirements of Section 28 of FRS 102 in relation to multi-employer funded schemes in which the Group has a participating interest.

Contributions payable under an agreement with SHPS to fund past deficits are recognised as a liability in the Group’s financial statements calculated by the repayments known, discounted to the net

present value at the year ended using a market rate discount factor of 3.02% at 31 March 2014, 1.92% at 31 March 2015 and 2.06% at 31 March 2016. The unwinding of the discount is recognised as a finance cost in the statements of comprehensive income in the period incurred.

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 statement of comprehensive income and shown in the statement of movement in reserves, under the heading actuarial gains and losses.

The Group also contributes to defined contribution plans. Under a defined contribution plan the Group pays fixed contributions into a separate entity and will have no legal or constructive obligation to pay further amounts. Obligations for contributions to defined contribution pension schemes are recognised as an expense in the statement of comprehensive income periods during which services are rendered by employees.

Holiday pay accrualA liability is recognised to the extent of any unused holiday pay entitlement which has accrued at the statement of financial position date and carried forward to future periods. This is measured at the undiscounted salary cost of the future holiday entitlement so accrued at the statement of financial position date.

Our service charges operate on a scheme by scheme basis, in full consultation with residents.

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Fixed assetsTangible fixed assets are stated at cost less accumulated depreciation.

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.

Properties acquired in stock transfers are recognised at fair value.

Leasing and hire purchaseWhere assets are financed by hire purchase contracts and leasing agreements that give rights approximating to ownership (finance leases), they are treated as if they had been purchased outright. The amount capitalised is the present value of the minimum lease payments payable over the term of the lease. The corresponding leasing commitments are shown as obligations to the lessor in creditors. They are depreciated over the shorter of the lease term and their economic useful lives.

Lease payments are analysed between capital and interest components so that the interest element of the payment is charged to the statement of comprehensive income over the term of the lease and is calculated so that it represents a constant proportion of the balance of capital repayments outstanding. The capital part reduces the amounts payable to the lessor.

Other leases are treated as operating leases and payments are charged to the statement of comprehensive income on a straight line basis over the term of the lease.

Reverse premiums and similar incentives received on leases to enter into operating lease agreements are released to the statement of comprehensive income over the term of the lease.

Investment propertyInvestment property includes commercial and other properties not held for the social benefit of the Group. Investment property is measured at cost on initial recognition, which includes purchase cost and any directly attributable expenditure, and subsequently at fair value at the reporting date. Fair value is determined annually by external valuers and derived from the current market rents and investment property yields for comparable real estate, adjusted if necessary

for any difference in the nature, location or condition of the specific asset. No depreciation is provided. Changes in fair value are recognised in the statement of comprehensive income.

Depreciation and impairmentWhere a housing property comprises two or more major components with substantially different useful economic lives, each component is accounted for separately and depreciated on a straight line basis over its individual useful economic life. The estimated individual useful economic life of the components are as follows:

Component Useful Economic Life (years)

Structure – new build 100

Structure – rehabilitated up to 50

Kitchens 20

Bathrooms 30

Roofs 60

Boilers 15

Full heating system 30

Windows and doors 25

Depreciation on non-housing property stock is charged on a straight-line basis over the expected useful economic lives of the assets at the following rates:

Asset Useful Economic Life (years)

Freehold and long leasehold offices 15 to residual value

Office fixtures and fittings 10

Care and support scheme fixtures and fittings

3 – 25

IT equipment 3 – 5

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.

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Improvement to propertyExpenditure incurred on general repairs to housing properties is charged to the statement of comprehensive income in the year in which it is incurred.

Expenditure on refurbishment or replacement of identified housing property components is capitalised.Non-component works to existing housing properties are capitalised where they relate to an improvement, which is defined as an increase in the net rental stream or the life of a property.

Impairment of non-financial assetsThe carrying amount of the group’s non-financial assets are reviewed at each reporting date to determine whether there is any indication of impairment. If any indication exists, then the asset’s recoverable amount is estimated. For the purpose of impairment testing, assets that cannot be tested individually are grouped together into the smallest group of assets that generates cash inflows from continuing use that are largely independent of the cash inflows of other assets or groups of assets (the “cash generating unit” or “CGU”).

An impairment loss is recognised if the carrying amount of an asset or its CGU exceeds its estimated recoverable amount. Impairment losses are recognised in the statement of consolidated income.

Impairment losses recognised in prior periods are assessed at each reporting date for any indications that the loss has decreased or no longer exists. An impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined net of depreciation or amortisation if no impairment loss had been recognised

First tranche shared ownership salesShared 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. 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.

GoodwillGoodwill 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 paid.

Goodwill is carried at cost less accumulated amortisation and impairment losses.

Amortisation is calculated on the straight line basis over estimated useful life, which is estimated at five years. The amortisation period and method is reviewed when events and circumstances indicate that the useful life may have changed since the last reporting date.

HomeBuyThe Group operates this scheme by lending a percentage of the cost to home purchasers, secured on the property. The loans are interest free and repayable only on the sale of the property. On a sale, the fixed percentage of the proceeds is repaid. The loans are financed by an equal amount of Social Housing Grant (SHG). On redemption:

— the SHG is recycled— the SHG is written off if a loss occurs or— the Group keeps any surplus.

Homebuy loans are treated as concessionary loans and are initially recognised as fixed asset investments in the statement of financial position at the amount paid to the purchaser and reviewed annually for impairment. The associated Homebuy grant from the HCA is recognised as deferred income within creditors until the loan is redeemed.

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.

ArrearsDebtors include the total rent and service charge arrears which is comprised of both current and former tenant arrears. Former tenant arrears are fully provided for in the financial statements at the point the tenant leaves the property. Current tenant arrears are provided for at specific rates according to the age of the debt.

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Social Housing and other government grantsWhere developments have been financed wholly or partly by social housing and other grants, the amount of the grant received has been included as deferred income and is recognised in Turnover over the estimated useful life of the associated asset, under the accruals model. Social Housing Grant (SHG) received for items of cost written off in the statement of comprehensive income is included as part of Turnover.

When SHG in respect of housing properties in the course of construction exceeds the total cost to date of those housing properties, the excess is shown as a current liability.

SHG must be recycled by the Group under certain conditions, if a property is sold, or if another relevant event takes place. In these cases, the SHG can be used for projects approved by the Homes and Communities Agency and Greater London Authority. However, SHG may have to be repaid if certain conditions are not met. If grant is not required to be recycled or repaid, any unamortised grant is recognised as Turnover. In certain circumstances, SHG may be repayable, and, in that event, is a subordinated unsecured repayable debt.

Non-monetary government grantOn disposal of assets for which non-monetary government grants are held as deferred income in the statement of financial position, the unamortised amount in creditors is derecognised and recognised as income in the statement of comprehensive income.

Recycling of Capital GrantWhere SHG is recycled, as described above, it is credited to a fund which appears as a creditor until used to fund the acquisition of new properties. Where recycled grant is known to be repayable it is shown as a creditor within one year.

Disposal Proceeds Fund (DPF)Receipts from the sale of SHG funded properties less the net book value of the property and the costs of disposal are credited to the DPF. This creditor is carried forward until it is used to fund the acquisition of new social housing.

Non government grantsGrants received from non-government sources are recognised under the performance model. If there are no specific performance requirements the grants are recognised when received or receivable. Where grant is received with specific performance requirements it is shown as deferred income until the conditions are met and then it is recognised as Turnover.

ProvisionsA provision is recognised in the statement of financial position when the Group has a present legal or constructive obligation as a result of a past event, that can be reliably measured and it is probable that an outflow of economic benefits will be required to settle the obligation. Provisions are recognised at the best estimate of the amount required to settle the obligation at the reporting date.

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.

Valuation of investmentsInvestments in subsidiaries are measured at cost less accumulated impairment. Where merger relief is applicable, the cost of the investment in a subsidiary undertaking is measured at the normal value of the shares issued together with the fair value of any additional consideration.

Investments in unlisted company shares, which have been classified as fixed asset investments as the Group intends to hold them on a continuing basis, are re-measured to fair value at each statement of financial position date. Gains and losses on re-measurement are recognised in the statement of consolidated income for the period.

Investments in listed company shares, which have been classified as current asset investments, are re-measured to fair value at each statement of financial position date. Gain and losses on re-measurement are recognised in the statement of consolidated income for the period.

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Current asset investments Current asset investments include cash and cash equivalents invested for periods of more than 24 hours. They are recognised initially at cost and subsequently at fair value at the reporting date. Any change in valuation between reporting dates is recognised in the statement of comprehensive income.

Value Added TaxThe Riverside Group is partially exempt in relation to Value Added Tax (VAT), and accordingly is able to recover from HM Revenue & Customs part of the VAT incurred on expenditure. At the year end VAT recoverable or payable is included in the statement of financial position. Irrecoverable VAT is accounted for in the statement of comprehensive income.

TaxationThe charge for taxation is based on the surplus or deficit for the year. It takes into account deferred taxation arising from timing differences between the treatment of certain items for taxation and accounting purposes to the extent that a liability or asset is expected to be payable or receivable in the foreseeable future.

Loan issue costs and interest payableThe cost of raising loans is amortised over the period of the loan.

Loans are stated in the statement of financial position at the amount of the net proceeds after issue, plus increases to account for any subsequent amounts amortised. Where loans are redeemed during the year any redemption penalty and any connected loan finance issue costs are recognised in the statement of comprehensive income in the year in which the redemption took place.

Loans interest costs are calculated using the effective interest method of the difference between the loan amount at initial recognition and amount of maturity of the related loan.

As we tackle the current housing crises, our robust financial health is more important than ever.

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Financial InstrumentsFinancial assets and financial liabilities are measured at transaction price initially, less transaction costs that are directly attributable to the acquisition or issue of the financial asset or financial liability.

At the end of each reporting period, financial instruments are measured without any deduction for transaction costs the entity may incur on sale or other disposal as follows:

— Debt instruments that meet the conditions in paragraph 11.8(b) of FRS 102 are measured at amortised cost using the effective interest method, except where the arrangement constitutes a financing transaction. In this case the debt instrument is measured at the present value of the future payments discounted at a market rate of interest for a similar debt.

— Commitments to receive or make a loan to another entity which meet the conditions in para 11.8(c) of FRS 102 are measured at cost less impairment.

Financial instruments held by the Group are classified as follows:

— Financial assets such as cash, current asset investments and receivables are classified as loans and receivables and held at amortised cost using the effective interest method unless a quoted price is available, in which case they are held at fair value.

— Financial liabilities such as bonds and loans are held at amortised cost using the effective interest method.

— Loans to or from subsidiaries including those that are due on demand are held at amortised cost using the effective interest method.

— Commitments to receive or make a loan to another entity which meet the conditions above are held at cost less impairment.

— An investment in another entity’s equity instruments other than non-convertible preference shares and non-puttable ordinary and preference shares are held at fair value.

— Derivatives such as interest rate swaps are classified as financial assets or financial liabilities at fair value.

Financial assets and financial liabilities at fair value are classified using the following fair value hierarchy:

— The best evidence of fair value is a quoted price in an active market;

— When quoted prices are unavailable, the price of a recent transaction for an identical asset, adjusted to reflect any circumstances specific to the sale, such as a distress sale, if appropriate;

— Where there is no active market or recent transactions then a valuation technique is used to estimate what the transaction price would have been on the measurement date in an arm’s length exchange motivated by normal business considerations.

Hedging Interest rate swaps relate to fixing variable rate interest and are therefore designated as cash flow hedges. A cash flow hedge is a hedge of the exposure to variability in cash flows that is attributable to a particular risk associated with a recognised asset or liability or a highly probable transaction, which could affect profit or loss. They are measured at fair value at each reporting date.

Gains and losses on cash flow hedges which are highly effective are recognised in other comprehensive income. Any ineffective portion of a gain or loss on cash flow hedges is recognised in profit or loss.

In order to apply hedge accounting, an economic relationship must exist between the hedged item and the hedging instrument. The Group must formally designate and document the hedging relationship at inception so that the risk being hedged, the hedged item and the hedging instrument are clearly identified, and the risk management objective for undertaking the hedge. It is also required to determine and document the causes of hedge ineffectiveness.

In a cash flow hedge, if the hedged future cash flows are no longer expected to occur, the amount that has been accumulated in the cash flow hedge reserve is reclassified from the cash flow hedge reserve to profit or loss immediately.

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Service concession arrangements The Group’s Private Finance Initiatives (PFI) contracts with Sandwell Metropolitan Borough Council and Hull City Council meet the conditions of a service concession arrangement.

For service concession arrangements entered into after the date of transition to FRS 102 the service concession arrangements will be accounted for using the financial asset model whereby costs incurred in constructing the PFI assets are initially recognised as a financial asset at the fair value of the construction costs. Thereafter accounting is in accordance with FRS 102 section 11 “Basic Financial Instruments”.

Service concession arrangements entered into before the date of transition to FRS 102 continue to be accounted for using the same accounting policies being applied at the date of transition to FRS 102.

Impairment of financial assets Financial assets are assessed at each reporting date to determine whether there is any objective evidence that a financial asset or group of financial assets is impaired. If there is objective evidence of impairment, an impairment loss is recognised in the consolidated statement of comprehensive income immediately.

An impairment loss is measured as follows on the following instruments measured at cost or amortised cost:

— For an instrument measured at amortised cost, the impairment loss is the difference between the asset’s carrying amount and the present value of the estimated future cash flows discounted at the asset’s original effective interest rate.

— For an instrument measured at cost less impairment, the impairment loss is the difference between the asset’s carrying amount and the best estimate of the amount that the entity would receive for the asset if it were to be sold at the reporting date.

If, in a subsequent period, the amount of an impairment loss decreases and the decrease can be related objectively to an event occurring after the impairment was recognised, the previously recognised impairment loss is reversed either directly or by adjusting an allowance account. The reversal cannot result in a carrying amount (net of any allowance account) which exceeds what the carrying amount would have been had the impairment not previously been recognised. The amount of the reversal is recognised in profit or loss immediately.

Non-equity share capital15 shares have been issued to the members of The Riverside Group Limited. In the event of winding up the liability of individual members shall not exceed £1.

Cashflow hedge reserveThe hedge reserve comprises the effective portion of the cumulative net change on the fair value of cashflow hedging instruments related to hedged transactions that have not yet occurred.

Restricted reservesRestricted reserves represent reserves earmarked for a specific use.

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Turnover, operating costs and operating surplus2 Group 2016

Operating Turnover Cost of sales Operating costs surplus/(deficit) £’000 £’000 £’000 £’000

Social housing activitiesLettings (note 3) 282,621 — (219,814) 62,807

Other social housing activitiesDevelopment for sale shared ownership 3,994 (3,463) — 531Management services 964 — (2,016) (1,052)Community regeneration 92 — (5,818) (5,726)Other 47,468 — (38,712) 8,756 ———— ———— ———— ———— 335,139 (3,463) (266,360) 65,316 ———— ———— ———— ————

Non-social housing activitiesLettings (note 3) 3,323 — (437) 2,886Developments for outright sale 25,212 (21,048) — 4,164Other 1,924 — (1,478) 446 ———— ———— ———— ———— 30,459 (21,048) (1,915) 7,496 ———— ———— ———— ————Total 365,598 (24,511) (268,275) 72,812 ———— ———— ———— ————

2015 Restated



Other social housing activitiesDevelopment for sale shared ownership 2,856 (2,268) — 588Management services 988 — (76) 912Community regeneration 215 — (7,085) (6,870)Other 17,544 — (13,444) 4,100 ———— ———— ———— ———— 298,286 (2,268) (222,408) 73,610 ———— ———— ———— ————

Non-social housing activitiesLettings (note 3) 2,702 — (1,125) 1,577Developments for outright sale 23,486 (19,299) — 4,187Other 1,503 — (328) 1,175 ———— ———— ———— ———— 27,691 (19,299) (1,453) 6,939 ———— ———— ———— ————Total 325,977 (21,567) (223,861) 80,549 ———— ———— ———— ————

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Turnover, operating costs and operating surplus – continued2

Association 2016



Other social housing activitiesDevelopment for sale shared ownership 3,994 (3,463) — 531Management services 964 — (2,016) (1,052)Community regeneration 92 — (5,808) (5,716)Other 12,285 — (2,643) 9,642 ———— ———— ———— ———— 290,229 (3,463) (225,556) 61,210 ———— ———— ———— ————

Non-social housing activitiesLettings (note 3) 2,667 — (673) 1,994Development for outright sale — — — —Other 17 — (255) (238) ———— ———— ———— ———— 2,684 — (928) 1,756 ———— ———— ———— ————Total 292,913 (3,463) (226,484) 62,966 ———— ———— ———— ————

2015 Restated



Other social housing activitiesDevelopment for sale shared ownership 2,286 (1,666) — 620Management services 988 — (76) 912Community regeneration 191 — (5,921) (5,730)Other 10,084 — (5,522) 4,562 ———— ———— ———— ———— 280,264 (1,666) (211,291) 67,307 ———— ———— ———— ————

Non-social housing activitiesLettings (note 3) 2,580 — (478) 2,102Development for outright sale 120 (4) — 116Other 857 — (149) 708 ———— ———— ———— ———— 3,557 (4) (627) 2,926 ———— ———— ———— ————Total 283,821 (1,670) (211,918) 70,233 ———— ———— ———— ————

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Group Restated General Supported Shared Key worker 2016 2015 housing housing ownership housing Total Total £’000 £’000 £’000 £’000 £’000 £’000

Income from lettingsRent receivable net of Service charge income 168,254 38,970 4,890 67 212,181 207,999Income for support services 6,232 21,079 — — 27,311 28,409Service charge receivable 4,634 26,968 — 137 31,739 30,081 ———— ———— ———— ———— ———— ————Net rental income 179,120 87,017 4,890 204 271,231 266,489 ———— ———— ———— ———— ———— ————Other revenue grants 198 4 — — 202 239Amortisation of government grants 7,041 3,450 367 — 10,858 9,955Government grants taken to income 330 — — — 330 — ———— ———— ———— ———— ———— ————Turnover from lettings 186,689 90,471 5,257 204 282,621 276,683 ———— ———— ———— ———— ———— ————

Expenditure on lettingsManagement (38,263) (13,550) (891) (187) (52,891) (47,101)Service charge costs and support services (11,307) (52,281) (120) (65) (63,773) (56,708)Routine maintenance (45,539) (8,413) (816) 14 (54,754) (49,160)Major repairs expenditure (7,769) (1,764) (4) — (9,537) (14,474)Bad debts (1,574) (687) 49 16 (2,196) (2,909)Depreciation of housing properties (27,571) (6,236) (904) (16) (34,727) (30,954)Impairment of housing properties (1,636) (300) — — (1,936) (497) ———— ———— ———— ———— ———— ————Operating costs on lettings (133,659) (83,231) (2,686) (238) (219,814) (201,803) ———— ———— ———— ———— ———— ————Operating surplus on social housing lettings 53,030 7,240 2,571 (34) 62,807 74,880 ———— ———— ———— ———— ———— ————Void loss (1,057) (2,469) (9) (1) (3,536) (3,774) ———— ———— ———— ———— ———— ————

2016 2015 £’000 £’000

Particulars of turnover from non-social housing lettingsStudent accommodation — 23Market rent 3,323 2,679 ———— ———— 3,323 2,702 ———— ————

Income and expenditure from social housing lettings3

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Income and expenditure from social housing lettings – continued3

Association Restated General Supported Shared Key worker 2016 2015 housing housing ownership housing Total Total £’000 £’000 £’000 £’000 £’000 £’000

Turnover from lettingsRent receivable net of Service charge income 159,522 38,736 4,890 67 203,215 198,835Income for support services 6,231 21,078 — — 27,309 28,409Service charges receivable 4,488 26,793 — 137 31,418 29,737 ———— ———— ———— ———— ———— ————Net rental income 170,241 86,607 4,890 204 261,942 256,981 ———— ———— ———— ———— ———— ————Other revenue grants 113 — — — 113 —Amortisation of government grants 6,692 3,450 367 — 10,509 9,734Government grants taken to income 330 — — — 330 — ———— ———— ———— ———— ———— ————Turnover from lettings 177,376 90,057 5,257 204 272,894 266,715 ———— ———— ———— ———— ———— ————

Expenditure on lettingsManagement (38,124) (13,516) (891) (188) (52,719) (38,259)Service charge cost and support services (10,852) (52,003) (120) (65) (63,040) (55,995)Routine maintenance (44,118) (8,373) (816) 14 (53,293) (58,309)Major repairs expenditure (7,448) (1,751) (4) — (9,203) (13,956)Bad debts (1,547) (688) 49 16 (2,170) (2,856)Depreciation of housing properties (25,572) (6,236) (904) (16) (32,728) (29,900)Impairment of housing properties (1,636) (300) — — (1,936) (497) ———— ———— ———— ———— ———— ————Operating costs on lettings (129,297) (82,867) (2,686) (239) (215,089) (199,772) ———— ———— ———— ———— ———— ————Operating surpluson social housing lettings 48,079 7,190 2,571 (35) 57,805 66,943 ———— ———— ———— ———— ———— ————Void loss (1,042) (2,468) (9) (1) (3,520) (3,747) ———— ———— ———— ———— ———— ————

2016 2015 £’000 £’000

Particulars of turnover from non-social housing lettings Student accommodation — 23Market rent 2,667 2,557 ———— ———— 2,667 2,580 ———— ————

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Directors’ and senior staff emoluments4The Directors are defined for the purpose of this note as the members of the Board and Executive 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 Direction for Private Registered Providers of Social Housing 2015. The Executive Directors do not receive any chargeable benefits in kind other than company cars. The emoluments of the Directors are set out below. There are three (2015: three) Executive Directors included within the total below who are not Board members.

Group 2016 2015 £’000 £’000

Emoluments (including pension contributions and benefits in kind) 973 947 ———— ————Highest paid Director – Group Chief Executive Emoluments (excluding pension contributions) 195 179 ———— ————Expenses reimbursed to Directors not chargeable to income tax 14 12 ———— ————During the year the Group Chief Executive exited the pension arrangements offered by the Group and was paid a settlement by way of an increased salary of £13,521. Group Board approved a policy for such settlements at a rate which does not involve the Group incurring any greater cost than that of the individual’s pension membership.

The Group does not make any further contribution to any individual pension arrangements.

One Executive Director is required under their contract of employment to retire at the age of 60; consequently, the benefits provided to them by The Riverside Group Pension Scheme were amended to reflect this commitment, which is not applicable to other staff.

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Directors’ and senior staff emoluments – continued4The emoluments (including pension contributions and benefits in kind) or fees paid to Executive and Non-Executive Directors were as follows: 2016 2015 £’000 £’000

Joy Baggaley 201 195 Ronnie Clawson 147 143 Jonathan Dale1 10 9 Pauline Davis1 — — Paul Forster-Jones1 10 9 Philip Han1 10 9 Léann Hearne 147 143 Susan Jee1 19 19 Mike Little1 10 9 Carol Matthews 207 201 Philip Raw1 19 19 Max Steinberg CBE1 27 26 Sally Trueman1 — — Peter White1 — — John Wood 168 163

No compensation payments were made to Directors, past or present, in respect of loss of office (2015: nil).

The number of staff whose remuneration is £60,000 or more (including pension contributions) is disclosed below: 2016 2015

£60,001 — £70,000 26 29 £70,001 — £80,000 13 7 £80,001 — £90,000 7 10 £90,001 — £100,000 9 10 £100,001 — £110,000 5 10 £110,001 — £120,000 5 1 £120,001 — £130,000 3 2 £130,001 — £140,000 — 2 ———— ———— 68 71 ———— ————The salary bandings do not include Directors who are disclosed above.Two Executive Directors appointed on 1 April 2016 have been included in the staff bandings.

Key to numbering1 Non-executive Directors.

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Employee information5Staff numbersThe average number of persons (including the Executive Directors) employed during the year (based on 35-37.5 hours) was:

Group 2016 2015 Number Number

Full time equivalent 2,711 2,695 ———— ———— 2016 2015 £’000 £’000

Staff costs (for the above persons) Wages and salaries 75,311 72,442Social security costs 6,091 5,969Other pension costs 5,858 6,313 ———— ———— 87,260 84,724 ———— ————Staff costs and numbers referred to above all relate to staff employed by The Riverside Group, but exclude staff costs and numbers employed by the managing agents at supported housing schemes.

The total amount of severance and redundancy payments made during the year was £1.178m (2015: £1.060m).

Association 2016 2015 Number Number

Full time equivalent 2,211 2,200 ———— ———— 2016 2015 £’000 £’000

Staff costs (for the above persons) Wages and salaries 61,394 60,527Social security costs 4,943 4,874Other pension costs 5,378 5,862 ———— ———— 71,715 71,263 ———— ————The total amount of severance and redundancy payments made during the year was £1.142m (2015:£1.035m)

Gain on the sale of fixed assets6

Interest receivable and other income7

Group 2016 2015 £’000 £’000

Proceeds of sales 32,717 19,948Cost of sales (19,219) (14,903) ———— ————Surplus on sale of property 13,498 5,045 ———— ———

Association 2016 2015 £’000 £’000

Proceeds of sales 32,501 19,906Cost of sales (19,059) (14,866) ———— ————Surplus on sale of property 13,442 5,040 ———— ———— Surplus on sale of property includes shared ownership staircasing sales surplus of £398k (2015: £277k).

Group 2016 2015 £’000 £’000

Bank and other interest receivable 5,762 5,003Income from listed investments 22 124 ———— ———— 5,784 5,127 ———— ————

Association 2016 2015 £’000 £’000

Bank and other interest receivable 2,382 4,899Income from listed investments 22 124Intercompany interest from subsidiary 1,734 1,442 ———— ———— 4,138 6,465 ———— ————

77

78

Interest payable and similar charges8 Group

2016 2015 £’000 £’000

Bank loans and overdrafts 23,928 29,288Other loans 18,061 12,695Finance costs 1,553 1,421 ———— ———— 43,542 43,404 ———— ————

Association 2016 2015 £’000 £’000

Bank loans and overdrafts 20,539 27,391Other loans 16,864 12,695Other interest payable 61 62Finance costs 1,387 1,101Intercompany interest 36 36 ———— ———— 38,887 41,285 ———— ————

79

Surplus on ordinary activities9 Group

2016 2015 £’000 £’000

Surplus on ordinary activities is stated after charging:Depreciation for the year

Housing properties 33,048 32,569Other tangible fixed assets 3,623 3,496Amortisation of government grant (10,858) (9,955)

Impairment charge/(credit) for the yearHousing properties 1,936 497Investment properties and properties awaiting sale (1,052) (623)Released on disposal (798) (1,171)

Auditors’ remunerationFor audit services 162 163For non-audit services— tax advisory 180 232— pension advisory 200 —— PFI advisory — 510— other 78 24

Operating lease rentalsLand and buildings 1,208 2,054Other 747 918 ———— ————

Association 2016 2015 £’000 £’000

Surplus on ordinary activities is stated after charging: Depreciation for the year

Housing properties 31,926 29,901Other tangible fixed assets 3,434 3,204Amortisation of government grant (10,509) (9,734)

Impairment charge/(credit) for the yearHousing properties 1,936 497Released on disposal (798) (1,171)

Auditors’ remunerationFor audit services 111 114For non-audit services— tax advisory 180 232— other 278 534

Operating lease rentalsLand and buildings 1,104 1,280Other 702 698 ———— ————

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Tax on surplus on ordinary activities10 Group

2016 2015 £’000 £’000

Analysis of charge in periodCurrent tax charge 142 189Deferred tax credit (49) (200) ———— ————Total tax charge/(credit) 93 (11) ———— ————Factors affecting tax charge for periodThe tax assessed for the year is lower than the standard rate of corporation tax in the UK of 20%. The differences are explained below: 2016 2015 £’000 £’000

Profit on ordinary activities before tax 50,087 48,052 ———— ————Profit on ordinary activities multiplied by the standard rate of corporation tax in the UK of 20% (2015: 21%) 10,017 10,091Effects of:Expenses not deductible for tax purposes 18 72Profits exempt from tax due to charitable exemption (8,835) (9,393)Income not subject to tax (121) (185)Movement in deferred tax (447) (559)Consolidation adjustments (674) (21)Prior year deferred tax 3 —Joint Ventures tax (5) (6)Fixed Asset Differences 3 26Rate change 134 (36) ———— ————Total charge 93 (11) ———— ————Deferred taxationThe movement in the year is as follows: 2016 2015 £’000 £’000

At the beginning of the year (1,303) (1,292)Charge for the year 233 178Equity credit current year — 53Equity credit – consolidation asset (143) (189)Prior year 3 (53) ———— ————At the end of the year (1,210) (1,303) ———— ————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 449 —Losses (1,630) —Other timing differences (29) — ———— ———— (1,210) — ———— ————

81

Tax on surplus on ordinary activities – continued10 Association

2016 2015 £’000 £’000

Analysis of charge in period Current tax charge — 25Deferred tax charge — —Prior period tax (15) 5 ———— ———— (15) 30 ———— ————Factors affecting tax charge for periodThe tax assessed for the year is higher than the standard rate of corporation tax in the UK of 20%.The differences are explained below: 2016 2015 £’000 £’000

Profit on ordinary activities before tax 45,701 43,163 ———— ————Profit on ordinary activities multiplied by the standard rate of corporation tax in the UK of 20% (2015: 21%) 9,140 9,064Effects of:Losses — —Adjustment to tax charge in respect of previous periods (15) 5Expenses not deductible for tax purposes — —Depreciation in excess of capital allowances — —Profits exempt from tax as a result of charitable exemption (9,140) (9,039) ———— ————Current tax (15) 30 ———— ————

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Tangible fixed assets11 Group Social Social Shared housing housing Completed ownership properties properties shared properties held for under ownership under Total letting construction properties construction properties £’000 £’000 £’000 £’000 £’000

CostAt 1 April 2015 restated 1,892,778 69,935 83,694 459 2,046,866Schemes completed 67,861 (67,790) 3,809 (3,866) 14Additions 138 53,227 84 8,077 61,526Improvements to existing properties 29,446 — 89 — 29,535Disposals (28,996) (947) (1,786) — (31,729)Accelerated replacement of components (1,749) — — — (1,749)Reclassification (728) (749) — — (1,477) ———— ———— ———— ———— ————At 31 March 2016 1,958,750 53,676 85,890 4,670 2,102,986 ———— ———— ———— ———— ————Depreciation and impairmentAt 1 April 2015 309,223 — 2,268 — 311,491Charge for the year 32,379 — 669 — 33,048Eliminated in respect of disposals (4,146) — (27) — (4,173)Eliminated for accelerated replacements (795) — — — (795)Impairment 1,138 — — — 1,138 ———— ———— ———— ———— ————At 31 March 2016 337,799 — 2,910 — 340,709 ———— ———— ———— ———— ————Net book value at 31 March 2016 1,620,951 53,676 82,980 4,670 1,762,277 ———— ———— ———— ———— ————Net book value at 31 March 2015 1,583,555 69,935 81,426 459 1,735,375 ———— ———— ———— ———— ————Improvements to existing properties consist of £29.5m (2015: £29.3m) capitalised costs in addition to £9.5m (2015: £15.3) non-capitalised improvements, which have been charged to the income and expenditure account.

The net book value of tangible fixed assets includes £Nil (2015: £Nil) in respect of assets held under finance leases.

During the year The Riverside Group Limited entered into a stock transaction with another social landlord. Housing properties with a fair value of £11.8m were acquired. This value includes government grant funding of £8.8m, which has an obligation to be recycled in accordance with the original grant funding terms and conditions which is recognised as a contingent liability.

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Tangible fixed assets – continued11 Group Fixtures Scheme Freehold vehicles Total fixtures and long and other and leasehold computer fixed fittings offices equipment assets £’000 £’000 £’000 £’000

CostAt 1 April 2015 restated 12,775 11,834 10,153 34,762Additions 1,636 118 3,349 5,103Disposals (540) (86) (2,483) (3,109) ———— ———— ———— ————At 31 March 2016 13,871 11,866 11,019 36,756 ———— ———— ———— ————DepreciationAt 1 April 2015 8,383 6,144 5,354 19,881Charge for the year 1,583 320 1,720 3,623Eliminated in respect of disposals (487) (14) (2,518) (3,019) ———— ———— ———— ————At 31 March 2016 9,479 6,450 4,556 20,485 ———— ———— ———— ————Net book value at 31 March 2016 4,392 5,416 6,463 16,271 ———— ———— ———— ————Net book value at 31 March 2015 4,392 5,690 4,799 14,881 ———— ———— ———— ————

84

Tangible fixed assets – continued11 Association Social Social Shared housing housing Completed ownership properties properties shared properties held for under ownership under Total letting construction properties construction properties £’000 £’000 £’000 £’000 £’000

CostAt 1 April 2015 restated 1,804,229 64,324 83,694 459 1,952,706Schemes completed 64,847 (64,759) 3,809 (3,897) —Additions 138 53,057 84 8,108 61,387Improvements to existing properties 28,879 — 89 — 28,968Disposals (28,748) (947) (1,786) — (31,481)Accelerated replacement of components (1,749) — — — (1,749)Reclassification (728) (725) — — (1,453) ———— ———— ———— ———— ————At 31 March 2016 1,866,868 50,950 85,890 4,670 2,008,378 ———— ———— ———— ———— ————DepreciationAt 1 April 2015 299,432 — 1,246 — 300,678Charge for the year 31,257 — 669 — 31,926Eliminated in respect of disposals (3,947) — (26) — (3,973)Impairment 1,138 — — — 1,138Eliminated in respect of accelerated replacements (953) — — — (953) ———— ———— ———— ———— ————At 31 March 2016 326,927 — 1,889 — 328,816 ———— ———— ———— ———— ————Net book value at 31 March 2016 1,539,941 50,950 84,001 4,670 1,679,562 ———— ———— ———— ———— ————Net book value at 31 March 2015 1,504,797 64,324 82,448 459 1,652,028 ———— ———— ———— ———— ————Improvements to existing properties consist of £29.0m (2015: £29.3m) capitalised costs in addition to £9.2m (2015: £14.0m) non-capitalised improvements, which have been charged to the income and expenditure account.

The net book value of tangible fixed assets includes £Nil (2015: £Nil) in respect of assets held under finance leases.

During the year The Riverside Group Limited entered into a stock transaction with another social landlord. Housing properties with a fair value of £11.8m were acquired. This value includes government grant funding of £8.8m, which has an obligation to be recycled in accordance with the original grant funding terms and conditions which is recognised as a contingent liability.

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Tangible fixed assets – continued11 Association Fixtures Scheme Freehold vehicles Total fixtures and long and other and leasehold computer fixed fittings offices equipment assets £’000 £’000 £’000 £’000

CostAt 1 April 2015 restated 12,775 11,160 9,363 33,298Additions 1,636 94 3,267 4,997Disposals (540) (86) (2,237) (2,863) ———— ———— ———— ————At 31 March 2016 13,871 11,168 10,393 35,432 ———— ———— ———— ————DepreciationAt 1 April 2015 8,383 5,889 4,831 19,103Charge for the year 1,583 275 1,576 3,434Eliminated in respect of disposals (488) (14) (2,272) (2,774) ———— ———— ———— ————At 31 March 2016 9,478 6,150 4,135 19,763 ———— ———— ———— ————Net book value at 31 March 2016 4,393 5,018 6,258 15,669 ———— ———— ———— ————Net book value at 31 March 2015 4,392 5,271 4,532 14,195 ———— ———— ———— ————

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Tangible fixed assets – continued11Housing properties and offices include freehold and long leasehold land and buildings as analysed below:

Group Restated 2016 2015 £’000 £’000

Housing PropertiesFreehold 1,762,150 1,735,248Long leasehold 127 127 ———— ———— 1,762,277 1,735,375 ———— ————OfficesFreehold 4,852 5,062Long leasehold 564 628 ———— ———— 5,416 5,690 ———— ————

Association 2016 2015 £’000 £’000

Housing PropertiesFreehold 1,679,435 1,651,901Long leasehold 127 127 ———— ———— 1,679,562 1,652,028 ———— ————OfficesFreehold 4,611 4,790Long leasehold 407 481 ———— ———— 5,018 5,271 ———— ————

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Investments12A. Fixed assets

Name of undertaking Nature of undertaking Principal activity

Caribou Green Warmth LLP4 Joint Venture partnership incorporated under Energy improvement works the Limited Liability Partnership Act 2000

Circle Liverpool Limited2 Joint Venture company incorporated and Construction waste recycling limited by shares under the Companies Act 1985

The Compendium Group Limited3 Joint Venture company incorporated and limited Strategic urban regeneration by shares under the Companies Act 1985 and development

Donald Bates Charity Charitable Trust Management of sheltered housing

ECHG (Harrow) Homes plc Public Limited Company limited by shares Property investment under the Companies Act 1985

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

ECHG (No. 1) Limited A charitable Registered Society under the Property investment Co-operative and Community Benefits Society Act 2014

Eleanor Godfrey Crittall Charity Charitable Trust Management of sheltered housing

Eventide Homes Trust Charitable Trust Management of supported housing

Evolve Facility Services Limited Company incorporated and limited by Property maintenance shares under the Companies Act 2006

Irvine Housing Association Limited Registered Society and Scottish Registered Registered provider of social housing Charity under the Co-operative and Community Benefits Society 2014

Naylands (51-68) Limited1 Company incorporated and limited by Property management guarantee under the Companies Act 1985

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

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

Riverside Finance plc Public Limited Company incorporated under Bond issuance the Companies Act 2006

Riverside Foundation5 Charitable Trust Funding charitable activities

Riverside Estuary Limited Private charitable company limited by Construction and management shares under the Companies Act 1985 of Extra Care units

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

Riverside Urban Services Limited Company incorporated and limited by Leasing of office premises guarantee under the Companies Act 1948 – 1981

The St. Michael’s Housing Trust Registered charity and registered provider Management of supported housing

Key to numbering1 Entity is 77% owned by The Riverside Group Limited.2 Entity is 22.5% owned by The Riverside Group Limited.3 Entity is 50% owned by The Riverside Group Limited.4 Entity is 40% owned by The Riverside Group Limited.5 Entity was established under a Declaration of Trust in 1983 and operates independently of The Riverside Group Limited.All other undertakings are 100% owned by The Riverside Group Limited.

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Investments – continued12 Group

Restated 2016 2015 £’000 £’000

(i) Other investments8¾% Treasury Stock 2017 321 329Charifund 11,525 11,753Other 2,665 2,065 ———— ———— 14,511 14,147

Investment properties (see (ii) below) 14,258 13,644Homebuy 5,666 6,204 ———— ———— 34,435 33,995

Group share of gross assets of joint ventures 7,310 5,897Group share of gross liabilities of joint ventures (6,555) (5,564) ———— ———— 35,190 34,328 ———— ————

Association 2016 2015 £’000 £’000

(i) Other investments8¾% Treasury Stock 2017 321 329Charifund 11,525 11,753Other 2,501 1,901Investment in subsidiaries 29,703 29,666Investment in joint ventures 1,441 1,341 ———— ———— 45,491 44,990

Investment properties (see (ii) below) 1,123 1,106Homebuy equity loans 329 401 ———— ———— 46,943 46,497 ———— ————

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Investments – continued12 Group

2016 2015 £’000 £’000

(ii) Investment propertiesValuation at 1 April 2015 13,644 15,776Additions 17 —Reversal of impairment 597 623Disposals — (2,755) ———— ————Valuation at 31 March 2016 14,258 13,644 ———— ————

Association 2016 2015 £’000 £’000

(ii) Investment propertiesValuation at 1 April 2015 1,106 1,106Additions 17 —Impairment — —Disposals — — ———— ————Valuation at 31 March 2016 1,123 1,106 ———— ————B. Current assets

Group 2016 2015 £’000 £’000

Unit trusts, investment trusts and listed investments on the London Stock Exchange — 5,224Charged bank accounts 56,322 58,892 ———— ———— 56,322 64,116 ———— ————

Association 2016 2015 £’000 £’000

Unit trusts, investment trusts and listed investments on the London Stock Exchange — 5,224Charged bank accounts 36,155 52,307 ———— ———— 36,155 57,531 ———— ————

90

Group 2016 2015 £’000 £’000

Amounts falling due after more than one year: 12,269 14,413 ———— ————Amounts falling due within one year:Rent and service charge arrears 14,593 24,147Less: provision for bad and doubtful debts (7,497) (17,332) ———— ————Net rental debtors 7,096 6,815

Social Housing Grant receivable 113 4,823Other debtors 90,727 55,522Prepayments and accrued income 7,050 7,025Deferred tax 1,210 1,303Amount due from joint venture 5,244 4,748 ———— ———— 111,440 80,236 ———— ————Included in debtors due after more than one year is £6.8m (2015: £8.3m) representing the obligation of the local authorities that transferred stock to the Group to have improvement work carried out to the properties. The Group is contracted by the local authorities to carry out these improvement works on their behalf. A further £5.4m (2015 : £6.1m) is held in respect of Fire Risk Assessment obligations.

Association 2016 2015 £’000 £’000

Amounts falling due after more than one year:Improvement programmes 12,269 14,413Intra group debtors 48,388 49,003 ———— ———— 60,657 63,416 ———— ————Amounts falling due within one year:Rent and service charge arrears 13,944 23,549Less: provision for bad and doubtful debts (7,051) (16,900) ———— ————Net rental debtors 6,893 6,649

Due from subsidiary undertakings 130 —Social Housing Grant receivable 113 4,823Other debtors 44,940 46,156Prepayments and accrued income 6,045 5,235 ———— ———— 58,121 62,863 ———— ————

Debtors13

91

Properties for sale14 Group

2016 2015 £’000 £’000

Properties under construction – outright sales 14,760 8,649Properties under construction – shared ownership 3,409 1,252Completed properties – outright sales 23,128 22,437Completed properties – shared ownership 11,546 12,478 ———— ———— 52,843 44,816 ———— ————

Association 2016 2015 £’000 £’000

Properties under construction – shared ownership 3,409 1,252Completed properties – shared ownership 11,546 12,478 ———— ———— 14,955 13,730 ———— ————

92

Group 2016 2015 £’000 £’000

Bank and other loans (see note 17) 10,226 8,319Trade creditors 5,431 8,331Rent and service charges received in advance 3,839 4,266Social Housing Grant received in advance 6,539 8,104Other taxation and social security payable 1,683 1,497Other creditors 27,026 24,821Recycled Capital Grant Fund (see note 16a) 390 3,675Disposal Proceeds Fund (see note 16a) 438 403Accruals and deferred income 61,111 54,556Corporation tax 197 197Deferred Government Grant — —Accumulated amortisation of grant 220 220Grant on Homebuy equity loans 1,784 1,635 ———— ———— 118,884 116,024 ———— ————

Association 2016 2015 £’000 £’000

Bank and other loans (see note 17) 10,226 7,026Trade creditors 2,788 6,281Rent and service charges received in advance 3,628 4,077Social Housing Grant received in advance 6,438 7,990Other taxation and social security payable — —Other creditors 30,439 27,873Recycled Capital Grant Fund (see note 16a) 390 3,675Disposals Proceeds Fund (see note 16a) 438 403Accruals and deferred income 40,672 40,480Intra group creditors 1,937 5,853Deferred Government Grant — —Accumulated amortisation of grant — —Grant on Homebuy equity loans 329 401 ———— ———— 97,285 104,059 ———— ————Social Housing Grant received in advance will be utilised against the related capital expenditure during the next twelve months. Deferred government grant received from the Homes and Communities agency is initially stated at fair value as a long term liability and is amortised as income over the life of the structure of properties.

Creditors: amounts falling due within one year15

93

Creditors: amounts falling due after more than one year16 Group

Restated 2016 2015 £’000 £’000

Long term loans (see note 17) 774,867 749,810Recycled Capital Grant Fund (see note 16a) 7,769 7,225Disposal Proceeds Fund (see note 16a) 1,428 936Deferred Government Grant (note 16b) 893,078 897,636Accumulated amortisation of grant (182,318) (175,245)SHPS pension agreement plan (note 26 (iv)) 16,255 11,861 Fair value of derivatives 28,950 31,458Other 1,061 5,586 ———— ———— 1,541,090 1,529,267 ———— ————

Association Restated 2016 2015 £’000 £’000

Long term loans (see note 17) 680,811 703,317Recycled Capital Grant Fund (see note 16a) 7,769 7,225Disposal Proceeds Fund (see note 16a) 1,428 936Deferred Government Grant (note 16b) 867,320 871,752Accumulated amortisation of grant (note 16b) (179,615) (172,768)SHPS pension agreement plan (note 26 (iv)) 16,255 11,861Fair value of derivatives 28,816 31,268Other 26 47 ———— ———— 1,422,810 1,453,638 ———— ————Long term loans are secured by fixed charges on properties.

Creditors: analysis of disposal proceeds fund and recycled capital grant fund16a

Group and Association 2016 2015 £’000 £’000

Disposal Proceeds FundOpening balance 1,339 840Inputs to DPF:

Grants recycled 923 493Interest accrued 7 6

Recycling of grant:Newbuild (403) —

———— ————Closing balance 1,866 1,339 ———— ———— 2016 2015 £’000 £’000

Recycled Capital Grant FundOpening balance 10,900 11,183Inputs to RCGF:

Grants recycled 3,959 3,693Interest accrued 55 55

Recycling of grant:Newbuild (6,755) (4,031)

———— ————Closing balance 8,159 10,900 ———— ————No amounts are due for repayment to the Homes and Communities Agency.

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Group Restated 2016 2015 £’000 £’000

Deferred capital grantAt start of the year 897,636 886,427Grant received in the year 13,902 18,019Disposals (18,460) (6,810) ———— ————As at 31 March 2016 893,078 897,636 ———— ————Amortisation at start of the year (175,245) (165,290)Released to income (10,858) (9,955)Released to disposals 3,785 — ———— ————As at 31 March 2016 (182,318) (175,245) ———— ————

Association 2016 2015 £’000 £’000

Deferred capital grantAt start of the year 871,752 860,602Grant received in the year 13,902 17,953 Disposals (18,334) (6,803) ———— ————As at 31 March 2016 867,320 871,752 ———— ————Amortisation at start of the year (172,768) (163,034)Released to income (10,509) (9,734)Released to disposals 3,662 — ———— ————As at 31 March 2016 (179,615) (172,768) ———— ————

Deferred Capital Grant16b

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Group 2016 2015 £’000 £’000

Due within one yearBank loans 5,324 6,577Other loans 4,902 1,742 ———— ———— 10,226 8,319 ———— ————Due after more than one yearBank loans 438,851 470,329Local authority loans 67 67Other loans 197,260 140,474Less finance costs capitalised (6,535) (6,162) ———— ———— 629,643 604,708 ———— ————Bond 150,000 150,000Discount on issue (3,115) (3,223)Bond issue costs (1,661) (1,675) ———— ————Net bond balance 145,224 145,102 ———— ————The loans and bond are secured by way of a first fixed charge over assets of the Group.

Bank loans are repaid in instalments at a combination of fixed and variable rates of interest inclusive of lending margins of between 1.2% and 7.4%. The instalments fall to be repaid in the periods 2017 to 2046.

The local authority loan is interest free and is repaid in 2021.

Other loans are repaid in instalments at fixed rates of interest of between 3.7% and 11.7%. The instalments fall to be repaid in the periods 2017 to 2044.

The bond is repaid in one instalment in 2045. Fixed interest is paid at 3.9%.

2016 2015 £’000 £’000

Debt maturity profileIn one year or less 10,226 8,319Between one and two years 49,564 11,477Between two and five years 44,458 59,970In five years or more 692,156 689,423 ———— ———— 796,404 769,189Less:Loans due in one year or less (10,226) (8,319)Finance costs capitalised (8,196) (7,837)Discount on issue of bond (3,115) (3,223) ———— ———— 774,867 749,810 ———— ————

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Debt analysis17

Debt analysis – continued17 Association

2016 2015 £’000 £’000

Due within one yearBank loans 5,324 5,284Other loans 4,902 1,742 ———— ———— 10,226 7,026 ———— ————Due after more than one year Bank loans 391,213 423,392Local authority loans 67 67Other loans 150,572 140,474Less finance costs capitalised (6,265) (5,718) ———— ———— 535,587 558,215 ———— ————Bond 150,000 150,000Discount on issue (3,115) (3,223)Bond issue costs (1,661) (1,675) ———— ————Net bond balance 145,224 145,102 ———— ————The loans and bond are secured by way of a first fixed charge over assets of the Association.

Bank loans are repaid in instalments at a combination of fixed and variable rates of interest inclusive of lending margins of between 1.2% and 7.4%. The instalments fall to be repaid in the periods 2017 to 2046.

The local authority loan is interest free and is repaid in 2021.

Other loans are repaid in instalments at fixed rates of interest of between 3.8% and 11.7%. The instalments fall to be repaid in the periods 2017 to 2044.

The bond is repaid in one instalment in 2045. Fixed interest is paid at 3.9%. The bond was issued by Riverside Finance plc which on-lends all of the proceeds of the issue to the Association. The assets of the Association act as security for the issuance through a security trust arrangement with Prudential Trustee Company Limited.

2016 2015 £’000 £’000

Debt maturity profileIn one year or less 10,226 7,026Between one and two years 41,611 10,184Between two and five years 29,374 33,677In five years or more 620,867 670,072 ———— ———— 702,078 720,959 ———— ————Less:Loans due in one year or less (10,226) (7,026)Finance costs capitalised (7,926) (7,393)Discount on issue of bond (3,115) (3,223) ———— ———— 680,811 703,317 ———— ————

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Borrowing facilities17aBorrowing facilitiesUndrawn committed borrowing facilities at 31 March 2016 were as follows:

Group 2016 2015 £’000 £’000

Expiring in one year or less — 9,658Expiring between one and five years 56,000 147,942Expiring in more than five years 119,784 42,128 ———— ———— 175,784 199,728 ———— ————£20.9m (2015 : £63.1m) of the undrawn committed borrowing facilities requires fixed charged security to be placed with the lender before it can be utilised.

Association 2016 2015 £’000 £’000

Expiring in one year or less — 9,658Expiring between one and five years 56,000 84,881Expiring in more than five years 98,839 42,128 ———— ———— 154,839 136,667 ———— ————£0m (2015 : £0m) of the undrawn committed borrowing facilities requires fixed charged security to be placed with the lender before it can be utilised.

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Financial instruments and risk management18A. Carrying amount of financial instruments

The carrying value of the financial assets and liabilities include:

Group Group Association Association 2016 2015 2016 2015 £’000 £’000 £’000 £’000

Assets at fair value through profit or loss Fixed asset investments (Note 12) 14,511 14,147 14,347 13,983Current asset investments (Note 12) — 5,224 — 5,224

Assets measured at amortised costFixed asset investments (Note 12) 5,666 6,204 329 401 Current asset investments (Note 12) 56,322 62,115 36,155 55,530Debtors (Note 13) 104,277 68,388 51,833 52,805Cash and cash equivalents 34,403 24,681 29,690 21,057

Liabilities measured at amortised cost Loans (Notes 15, 16 and 17) (785,093) (758,129) (691,037) (710,343)Trade creditors (Notes 15 and 16) (100,348) (99,254) (79,490) (84,611)

DerivativesDesignated as hedges (Note 16) (28,950) (30,211) (28,816) (30,021)Fair value through the profit or loss (Note 16) — (1,247) — (1,247) ———— ———— ———— ———— (699,212) (708,082) (666,989) (677,222) ———— ———— ———— ————B. Financial instruments measured at fair value

Where financial instruments are measured in the statement of financial position at fair value, disclosure of fair value measurements by level is required, in accordance with the following fair value measurement hierarchy;

Level 1 – Quoted prices in active markets for identical assets or liabilities.Level 2 – Inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly (from prices) or indirectly (that is derived from prices).Level 3 – Inputs from the asset or liability that are not based on observable market data (that is, unobservable inputs).

Investments measured at fair value through profit and loss comprise investments in bonds and funds investing in UK stocks. The fair value is determined by reference to their market price.

Derivative financial instruments are interest rate swaps designed to hedge the interest rate risk associated with the variability of cashflows on variable rate loans. All of the Group’s derivatives are carried at fair value. Fair value measurement is provided by the Group’s external advisors and is categorised as Level 2. The valuation techniques include discounted cash flow pricing models with observable inputs. The most significant inputs into those models are interest rate yield curves, developed from publicly quoted rates and market available information. All valuations have been compared to similar market transactions or alternative third-party pricing services to ensure current market conditions are properly represented.

For all other financial instruments fair value equates to book value.

99

Financial instruments and risk management (continued)18C. Hedge accounting

Periods in which the cash flows associated with hedge accounting are expected to occur.

Group Group Association Association 2016 2015 2016 2015 £’000 £’000 £’000 £’000

Interest rate swaps In one year or less 7,586 8,254 7,491 8,144Between one and two years 6,031 6,037 5,992 5,976Between two and three years 4,677 4,142 4,677 4,124Between three and five years 7,262 5,249 7,262 5,249In five years or more 11,710 9,890 11,710 9,890 ———— ———— ———— ————Total 37,266 33,572 37,132 33,383 ———— ———— ———— ————Nominal values of the above Cash flow hedge 252,077 305,273 240,577 291,273Fair value — 4,458 — 4,458 ———— ———— ———— ————Total 252,077 309,731 240,577 295,731 ———— ———— ———— ————D. Risk

The main risks arising from the from the Group’s financial instruments are liquidity risk, interest rate risk, credit and counterparty risk, and market risk.

Liquidity RiskThe Group will ensure it has adequate though not excessive cash resources, borrowing arrangements, overdraft or standby facilities to enable it all times to have the level of funds available to it which are necessary for the achievement of its business objectives.

The Group has a policy to maintain sufficient liquidity:

i) In cash to cover the next one months forecast net cash requirement;ii) In cash and committed loan facilities capable of immediate drawdown to cover the next twelve months forecast net

cash requirement, including an estimate of cash collateral requirements; and iii) In cash and committed loan facilities (whether or not capable of immediate drawdown) to cover the higher of

committed development spend and the next eighteen months forecast net cash requirement, including an estimate of cash collateral requirements.

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Financial instruments and risk management (continued)18Interest Rate RiskThe Group has a policy of managing its exposure to fluctuations in interest rates so as to minimise any detrimental impact on its budgeted expenditure and income levels. In respect of its borrowings the Group is risk adverse and will endeavour to ensure that its borrowings contain a mix of fixed and variable interest rate structures. The optimum mix will be determined in the Annual Treasury Strategy.

Variable rates include borrowing linked to LIBOR and borrowings linked to an index. Fixed rate interest includes borrowing in relation to which the interest rate has been fixed in excess of twelve months.

The Chief Financial Officer is responsible for monitoring the Group’s interest rate risk exposures and in managing this risk they will pay due regards to:— Minimising the risk of future covenant breach;— Current interest rate levels and the structure of the interest rate market;— Current interest rates and inflation compared with historic trends;— Anticipated future trend movements;— The impact on revenue of estimated movements in interest rate and inflation trends;— Sensitivity of revenue to movement in interest rates and inflation trends; and — Policy and/or budgetary implications.

The Group has adopted the wider constitutional rule permitting the use of interest rate derivatives to manage its interest rate exposures. The Group will only use derivatives for managing interest rate and inflation risk and not for speculative purposes. All derivative transactions will be subject to standard ISDA documentation.

The Chief Financial Officer will monitor the mark to market of derivatives and ensure sufficient security is available to meet any requirements.

Credit and Counterparty riskCredit risk applies to all debtor balances, the majority relating to tenant and other arrears. There are dedicated teams assigned to manage the recovery of these arrears which are reported monthly as one of the Group’s key performance indicators.

The Group Treasury Policy specifies minimum credit ratings for counterparties. The Chief Financial Officer monitors the credit quality of all counterparties and if the credit rating of a counterparty is downgraded below the minimum requirement it is reported to the Group Board with appropriate recommendations, which might include proposals to cease investing surplus funds, to refinance loans or unwind a derivative position.

If possible the Group will spread transactions over a number of financial institutions at a level appropriate to their efficient management.

Market RiskThe Group seeks to ensure that its treasury management policies and objectives will not be compromised by adverse market fluctuations in the value of the principle sums it invests, and will seek to protect itself from the effects of such fluctuations.

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Group and Association 2016 2015 £ £

At 1 April 2015 14 15Appointed in year 3 1Resigned in year (2) (2) ———— ———— At 31 March 2016 15 14 ———— ————

Share capital 20

Deferred income represents the amount received in excess of nominal value of the bond. This includes £4.6m for the AHF Bond and £0.8m for the £25m THFC loan. These amounts are being released over the life of the loan and the balances at 31 March 2016 are £4.5m and £0.7m respectively.

Deferred income19

102

Reconciliation of operating surplus to net cash inflow from operating activities21

Reconciliation of net cash flow to movement in net debt22

Group 2016 2015 £’000 £’000

Operating surplus 72,812 80,549Depreciation and impairment 32,841 34,311Increase in other debtors and prepayments (35,407) (7,962)Increase in other creditors and accruals 10,707 3,828(Decrease)/increase in rent arrears (282) 2,672Fixed asset disposals 16,274 14,153 Amortisation of Grant (11,188) (9,955) FRS adjustments non cash — (295) ———— ————Net cash inflow from operating activities 85,757 117,301 ———— ————

Group 2016 2015 £’000 £’000

Increase in cash in the year 9,722 6,773Increase in loans (27,131) (27,249)(Decrease)/increase in liquid resources (11,017) 20,877 ———— ————Change in net debt resulting from cash flows (28,426) 401

Movement on investment — 909 Release of finance costs 3,390 4,935 ———— ———— (25,036) 6,245Net debt at 1 April 2015 (669,332) (675,577) ———— ————Net debt at 31 March 2016 (see note 23) (694,368) (669,332) ———— ————

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Analysis of net debt23

Capital commitments24

Group 1 April Cash Other 31 March 2015 flows changes 2016 £’000 £’000 £’000 £’000

Cash at bank and in hand 24,681 9,722 — 34,403Loans due within one year (see note 15) (8,319) 15,056 (16,963) (10,226)Loans due after one year (see note 17) (749,810) (42,187) 17,130 (774,867)Current asset investments (see note 12B) 64,116 (11,017) 3,223 56,322 ———— ———— ———— ————Total (669,332) (28,426) 3,390 (694,368) ———— ———— ———— ————

Group and Association 2016 2015 £’000 £’000

Capital expenditure that has been contracted for but whichhas not been provided for in the financial statements 50,140 33,662 ———— ————Capital expenditure that has been authorised by theBoard but which has not yet been contracted for 4,046 8,186 ———— ———— Income to be generated from the above expenditure contracted not provided for 19,246 4,418 ———— ————Income to be generated from the above expenditure authorised by the Board 330 1,077 ———— ————The remaining commitments will be fully financed from internal cash resources and existing loan facilities as required.

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Financial commitments25At 31 March 2016 commitments under non-cancellable operating leases were as follows:

Group 2016 2015 £’000 £’000

Land & Land & buildings Other buildings Other

Expiring within one year 9 818 601 90Expiring between two and five years 1,003 539 903 328Expiring in five or more years 6,583 2,502 4,224 723 ———— ———— ———— ———— 7,595 3,859 5,728 1,141 ———— ———— ———— ————

Association 2016 2015 £’000 £’000

Land & Land & buildings Other buildings Other Expiring within one year — 791 592 82Expiring between two and five years 909 532 903 296Expiring in five or more years 6,383 1,926 3,940 712 ———— ———— ———— ———— 7,292 3,249 5,435 1,090 ———— ———— ———— ————

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Pension information26i) 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 2014. This has been updated for FRS 102 purposes to 31 March 2016 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.

At 31 March 2016 a final employer contribution of £7.5m was made to the scheme and the scheme was then closed to further accrual.

The major assumptions used in this valuation are:

2016 2015 2014 2013 2012

Inflation CPI 2.3% 2.3% 2.7% 2.7% 1.9%Rate of discount on scheme liabilities 3.5% 3.3% 4.5% 4.6% 4.6% Rate of salary increase 2.4% 2.3% 3.7% 3.7% 2.9%

Rate of increase of pensions in payment 3.1% 3.0% 3.3% 3.4% 2.6%Rate of increase of deferred pensions 2.3% 2.1% 2.7% 3.4% 2.6%

Life expectancy male non-pensioner 25.5 24.4 23.6 23.2 23.2Life expectancy female non-pensioner 26.7 26.6 26.3 26.0 26.0Life expectancy male pensioner 22.7 22.6 21.7 22.2 22.2Life expectancy female pensioner 24.8 24.7 24.5 25.0 25.0

The Minister for Pensions announced on 8 July 2010 the Government’s intention to move to using the Consumer Prices Index (CPI) rather than Retail Prices Index (RPI) as the inflation measure for determining minimum pension increases to be applied to the statutory index-linked features of retirement benefits. As a result CPI has been applied to future deferred revaluations, salary increases and increases to Guaranteed Minimum Pensions (GMP). RPI continues to be applied to CARE revaluations and increases to pensions in excess of GMP.

The fair value of the scheme’s assets at 31 March 2016, 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:

2016 2015 2014 2013 2012 £’000 £’000 £’000 £’000 £’000

Fair value of assets 129,000 122,100 105,000 95,800 82,900Present value of liabilities (133,800) (134,800) (116,100) (106,700) (86,500) ———— ———— ———— ———— ————Deficit in the scheme (4,800) (12,700) (11,100) (10,900) (3,600) ———— ———— ———— ———— ————

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Pension information – continued26The market value of the assets of the scheme and the expected long term rates of return at 31 March 2016 were:

2016 2015 2014 2013 2012 £’000 £’000 £’000 £’000 £’000

Market value Equities 74,433 67,781 77,900 69,500 57,400Index Linked Gilts 11,223 15,544 12,200 12,800 11,500Cash 8,256 1,625 — — —Other 35,088 37,150 14,900 13,500 14,000 ———— ———— ———— ———— ————Total 129,000 122,100 105,000 95,800 82,900 ———— ———— ———— ———— ———— 2016 2015 2014 2013 2012

Expected long term return Equities 7.50% 7.50% 7.50% 7.30% 7.75%Index Linked Gilts 3.20% 3.20% 2.30% 2.30% 2.75%Cash 3.20% 3.20% 3.20% 2.30% 2.75%Other 4.45% 4.45% 4.45% 4.60% 4.60% ———— ———— ———— ———— ————Total 6.08% 6.25% 6.46% 6.25% 6.52% ———— ———— ———— ———— ———— 2016 2015 2014 2013 2012 £’000 £’000 £’000 £’000 £’000

Analysis of the amount charged to operating profit Current service cost 4,200 3,600 3,400 2,500 2,300Past service cost and curtailments (1,300) — — — — ———— ———— ———— ———— ————Total operating charge 2,900 3,600 3,400 2,500 2,300 ———— ———— ———— ———— ———— 2016 2015 2014 2013 2012 £’000 £’000 £’000 £’000 £’000

Analysis of the amount credited to interest receivable Interest on assets 4,100 7,000 6,000 5,400 5,400Interest on pension liabilities (4,400) (5,200) (5,000) (4,000) (4,500) ———— ———— ———— ———— ————Net return (300) 1,800 1,000 1,400 900 ———— ———— ———— ———— ————

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Pension information – continued26 2016 2015 2014 2013 2012 £’000 £’000 £’000 £’000 £’000

Movement in (deficit)/surplus during yearDeficit in scheme at beginning of the year (12,700) (11,100) (10,900) (3,600) (3,400)Movement in year:Current service cost (4,200) (3,600) (3,400) (2,500) (2,300)Past service cost 1,300 — — — —Contributions 10,400 3,100 3,100 3,100 2,800Other finance income (300) 1,800 1,000 1,500 900Remeasurements 700 (2,900) (900) (9,400) (1,600) ———— ———— ———— ———— ————Deficit in scheme at end of the year (4,800) (12,700) (11,100) (10,900) (3,600) ———— ———— ———— ———— ———— 2015 2014 2013 2012 2012 £’000 £’000 £’000 £’000 £’000

Amount recognised in Other Comprehensive Income (OCI)Net interest (5,500) 8,400 800 4,900 (2,700)Experienced gains arising on the scheme liabilities 6,200 (11,300) (1,700) 300 1,100Changes in assumptions underlying the present value of the scheme liabilities — — — (14,600) — ———— ———— ———— ———— ————Remeasurements 700 (2,900) (900) (9,400) (1,600) ———— ———— ———— ———— ———— 2016 2015 2014 2013 2012

History of experienced surpluses and deficitsDifference between actual and expected returns on assets (£’000) (5,500) 8,400 800 4,900 (2,700)% of scheme assets 4.26% 6.88% 0.76% 5.11% (3.26%)

Experienced gains/(losses) on liabilities (£’000) 6,200 (11,300) (1,700) 300 1,100% of scheme liabilities 4.63% (8.38%) (1.46%) 0.28% 1.27%

Total amount recognised in (OCI) (£’000) 700 (2,900) (900) (9,400) (1,600)% of scheme liabilities 0.52% (2.15%) (0.78%) (8.8%) (1.85%)

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Pension information – continued26 2016 2015 £’000 £’000

Reconciliation of assetsAssets at beginning of period 122,100 105,000Employer contributions 10,400 3,100Employee contributions 1,300 1,500Benefits paid (3,400) (2,900)Interest on assets 4,100 7,000Asset performance (5,500) 8,400 ———— ————Assets at end of period 129,000 122,100 ———— ————Reconciliation of liabilitiesProjected benefit obligation at the beginning of period 134,800 116,100Operating charge 2,900 3,600Interest cost 4,400 5,200Employee contributions 1,300 1,500Benefits paid (3,400) (2,900)Actuarial (loss)/gain (6,200) 11,300Change in assumptions — — ———— ————Projected benefit obligation at end of period 133,800 134,800 ———— ————Recognition of surplusDeficit brought forward (12,700) (11,100)Finance income (300) 1,800Net interest (5,500) 8,400Actuarial gain/(loss) 6,200 (11,300)Contribution gain/(loss) 7,500 (500) ———— ————Deficit carried forward (4,800) (12,700) ———— ————

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ii) Other defined benefit pension schemesDuring the year the Riverside Group also made contributions to other defined benefit pension schemes: Merseyside Pension Scheme, Greater Manchester Pension Fund, East Riding Pension Fund, Cumbria Local Government Pension Scheme and Strathclyde Pension Fund. Each entity is a participating employer in its respective scheme.

At 31 March 2016 the Group ceased accrual to the Greater Manchester Pension Fund.

The most recent actuarial valuations of these schemes have been updated for FRS 102 purposes by independent qualified actuaries. The disclosures represent each entity’s share of the overall scheme’s assets and liabilities. As permitted by FRS 102 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:

2016 2015 2014 2013 2012

Inflation CPI 2.1% 2.3% 2.6% 2.6% 2.1%Rate of discount on scheme liabilities 3.5% 3.3% 4.4% 4.3% 3.2%Rate of salary increase 3.7% 3.8% 4.2% 4.5% 3.4%Rate of increase of pensions in payment 2.1% 2.3% 2.7% 2.6% 2.1%Rate of increase of deferred pensions 2.2% 2.3% 2.7% 2.6% 2.1%

Life expectancy male non-pensioner 24.7 24.7 24.4 23.7 23.2Life expectancy female non-pensioner 27.4 27.4 27.2 26.4 25.9Life expectancy male pensioner 22.3 22.2 22.1 21.6 21.4Life expectancy female pensioner 24.7 24.7 24.6 24.4 24.1

The Chancellor of the Exchequer announced on 22 June 2010 as part of the Emergency Budget that with effect from April 2011 public service pensions would have their pension increases calculated by reference to CPI rather than RPI. The majority of local government pension schemes have taken the view that a constructive obligation to increase pensions in line with RPI exists and as a result the change was regarded as a change in benefits and was shown in 2011 as a credit to past service cost.

The fair value of the schemes’ assets at 31 March 2016, 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:

2016 2015 2014 2013 2012 £’000 £’000 £’000 £’000 £’000

Fair value of assets 46,984 51,329 44,844 40,142 35,044Present value of liabilities (49,697) (57,072) (46,597) (46,918) (39,195) ———— ———— ———— ———— ————Deficit in the schemes (2,713) (5,743) (1,753) (6,776) (4,151) ———— ———— ———— ———— ————

Pension information – continued26

110

Pension information – continued26The market value of the assets of the scheme and the expected long term rates of return at 31 March 2016 were:

2016 2015 2014 2013 2012 £’000 £’000 £’000 £’000 £’000

Market value Equities 26,721 30,229 28,681 24,595 20,550Fixed Interest Gilts 5,781 7,417 5,686 5,293 4,720Index Linked Gilts 4,408 3,620 4,082 4,973 4,239Property 5,110 5,237 3,174 2,462 2,346Other 2,573 2,097 2,231 2,084 2,209Cash 2,391 2,729 990 735 980 ———— ———— ———— ———— ————Total 46,984 51,329 44,844 40,142 35,044 ———— ———— ———— ———— ———— 2016 2015 2014 2013 2012

Expected long term return Equities 5.84% 5.62% 6.89% 6.64% 6.81%Fixed Interest Gilts 1.74% 1.89% 2.83% 2.38% 2.66%Index Linked Gilts 2.20% 1.93% 2.99% 3.42% 3.65%Property 4.58% 4.40% 4.79% 5.20% 5.57%Other 5.14% 4.73% 5.08% 5.07% 5.12%Cash 0.40% 0.66% 0.71% 1.19% 1.21% ———— ———— ———— ———— ————Total 4.54% 4.42% 5.77% 5.41% 5.52% ———— ———— ———— ———— ———— 2016 2015 2014 2013 2012 £’000 £’000 £’000 £’000 £’000

Analysis of the amount charged to operating profit Current service cost 1,116 1,017 1,006 804 809Past service cost 151 4 22 22 102 ———— ———— ———— ———— ————Total operating charge 1,267 1,021 1,028 826 911 ———— ———— ———— ———— ———— 2016 2015 2014 2013 2012 £’000 £’000 £’000 £’000 £’000

Analysis of the amount credited to other interest receivable Interest on assets 1,517 2,534 2,168 1,944 2,135Interest on pension liabilities (1,705) (2,076) (2,026) (1,914) (1,961) ———— ———— ———— ———— ————Net return (188) 458 142 30 174 ———— ———— ———— ———— ————

111

2016 2015 2014 2013 2012 £’000 £’000 £’000 £’000 £’000

Movement in deficit during yearDeficit in scheme at beginning of the year (5,743) (1,753) (6,776) (4,151) (1,813)Movement in year: Schemes exited in year 161 — — — —Current service cost (1,116) (1,017) (1,006) (804) (809)Past service cost (151) (4) (22) (22) (296)Contributions 907 875 808 800 936Other finance (expenditure)/income (188) 458 100 30 174Remeasurements 3,417 (4,302) 5,143 (2,629) (2,343) ———— ———— ———— ———— ————Deficit in scheme at end of the year (2,713) (5,743) (1,753) (6,776) (4,151) ———— ———— ———— ———— ———— 2016 2015 2014 2013 2012 £’000 £’000 £’000 £’000 £’000

Amount recognised in Other Comprehensive Income (OCI)Net interest (699) 3,640 2,196 2,905 (1,011)Experienced gains/(losses) arising on the scheme liabilities 4,116 (7,942) 2,947 (5,534) (1,332)Changes in assumptions underlying the present value of the scheme liabilities — — — — — ———— ———— ———— ———— ————Remeasurements 3,417 (4,302) 5,143 (2,629) (2,343) ———— ———— ———— ———— ———— 2016 2015 2014 2013 2012

History of experienced surpluses and deficitsDifference between actual and expected returns on assets (£’000) (699) 3,640 2,196 2,905 (1,011)% of scheme assets (1.49%) 7.09% 4.90% 7.24% (2.88%)

Experienced gains/(losses) on liabilities (£’000) 4,116 (7,942) 2,947 (5,534) (1,332)% of scheme liabilities 8.28% (13.92%) 6.32% (11.80%) (3.40%)

Total amount recognised in OCI (£’000) 3,417 (4,302) 5,143 (2,629) (2,343)% of scheme liabilities 6.88% 7.54% 11.04% (5.60%) (5.98%)

Pension information – continued26

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Pension information – continued26 2016 2015 £’000 £’000

Reconciliation of assetsAssets at beginning of period 51,329 44,844Schemes exited in year (4,691) —Employer contributions 907 875Employee contributions 250 278Benefits paid (1,629) (842)Interest on assets 1,517 2,534Asset performance (699) 3,640 ———— ————Assets at end of period 46,984 51,329 ———— ————Reconciliation of liabilitiesProjected benefit obligation at beginning of period 57,072 46,597Schemes exited in year (4,852) —Operating charge 1,267 1,021Interest cost 1,705 2,076Employee contributions 250 278Benefits paid (1,629) (842)Remeasurements (4,116) 7,942 ———— ————Projected benefit obligation at end of period 49,697 57,072 ———— ————Recognition of surplusDeficit brought forward (5,743) (1,753)Schemes exited in year 161 —Finance income (188) 458Net interest (699) 3,640Remeasurements 4,116 (7,942)Contribution loss (360) (146) ———— ————Deficit carried forward (2,713) (5,743) ———— ————(iii) Defined contribution pension schemesThe Riverside Group also contributes to defined contribution schemes. The cost for the year was £1.3m (2015: £1.4m).

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Pension information – continued26(iv) The Social Housing Pension SchemeFrom August 2013 the defined contribution scheme is the vehicle the organisation uses for Auto Enrolment. The scheme is split into two separate sections with auto enrolment contribution rates currently set at employer 4%, employee 1% and enhanced rates of employer 9%, employee 6% with an exclusive tier for eligible members of employer 12%, employee 9%.

The Riverside Group has elected to operate the final salary with a 1/60th accrual rate benefit structure for active members as at 31 March 2010 and from 1 April 2010 CARE for new entrants. As from 1 August 2013 the CARE section of the scheme was closed to new entrants. Employees no longer have the option to join a defined benefit scheme.

During the accounting period The Riverside Group contributed at the rate of 10.7% Final Salary and 12.4% CARE plus past deficit annual payment of £1.5m. Member contributions varied between 4.1% and 6.1% (CARE) and 6.1% and 9.1% (Final Salary) depending upon their age.

As at the balance sheet date 190 employees of the Group were active members of the SHPS Final Salary and CARE schemes: 890 were members of the Auto Enrolment scheme and 212 were members of the Defined Contribution scheme.

It is not possible in the normal course of events to identify, on a consistent and reasonable basis, the share of underlying assets and liabilities belonging to individual participating employers. This is because the Scheme is a multi-employer scheme where the Scheme assets are co-mingled for investment purposes and benefits are paid from total Scheme assets. Accordingly, due to the nature of the Scheme, the accounting charge for the period under FRS 102 represents the employer contribution payable.

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

The debt for SHPS as a whole is calculated by comparing the liabilities for SHPS (calculated on a buyout basis i.e. the cost of securing benefits by purchasing annuity policies from an insurer, plus an allowance for expenses) versus 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 liabilities, 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.

The Trustee commissions an actuarial valuation of the Scheme every three years. The main purpose of the valuation is to determine the financial position of the Scheme in order to address the level of future contributions required so that the Scheme can meet its pension obligations as they fall due.

The last formal valuation of the Scheme was performed as at 30 September 2014 by a professionally qualified Actuary using the Projected Unit Method. The market value of the Scheme’s assets at the valuation date was £3,123 million. The valuation revealed a shortfall of assets compared with the value of liabilities of £1,323 million, equivalent to a past service funding level of 70%.

Both the Final Salary and CARE sections of the Defined Benefit Scheme are now closed for future accrual on and after 1 April 2016.

SHPS deficit payment agreementThe association has a contractual obligation under an agreement to pay additional deficit payments to SHPS of £1.2m per annum for 12 years to 2026.

In calculating the net present value of the liability included within provisions the association has used a discount rate based on a market rate AA corporate bond for the same period as the contractual obligations.

Group £’000 £’000

At start of the year 11,861 12,161Deficit contributions paid (1,286) (1,237)Interest for the year 215 348Impact of changes in assumptions (104) 589Amendments to the contribution schedule 5,569 — ———— ———— 16,255 11,861 ———— ————

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Contingent liabilities27

Provisions for liabilities and charges28

As at 31 March 2016, The Riverside Group had a contingent liability totalling £0.3m (2015: £0.3m) 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 in 2010 the related grant has been written back and a contingent liability to a maximum of £2.1m (2015: £2.1m) 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 the sale.

During the year a further £8.8m government grant has been recognised, arising from a stock acquisition from another social landlord. This grant is recyclable in the event of the housing properties being disposed.

The Group has performance bonds with Barclays Bank totalling £0.1m (2015: £0.1m).

Group 2016 2015 £’000 £’000

Improvement programmes (i) 11,720 13,581Pension liabilities (ii) 7,513 18,443Target operating model implementation 7,000 —Other 229 227 ———— ————At 31 March 2016 26,462 32,251 ———— ————(i) Improvement programmes A provision of £6.8m (2015: £8.3m) has been made in respect of The Riverside Group’s outstanding contractual and statutory commitment to carry out improvement work, in addition to a further £4.9m (2015: £5.2m) for Fire Risk Assessment works.

(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).

Association 2016 2015 £’000 £’000

Improvement programmes (i) 11,720 13,582Pension liabilities (ii) 6,243 15,805Other 7,229 227 ———— ————At 31 March 2016 25,192 29,614 ———— ————

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Accommodation in management and development29 Group Group Association Association 2016 2015 2016 2015 Number Number Number Number

Social housing ownershipGeneral housing social rent 33,432 34,274 31,262 32,111Intermediate rent 263 304 263 304Affordable rent 4,145 3,485 4,145 3,485Housing for older people 4,786 4,790 4,786 4,790Supported housing 4,281 4,356 4,240 4,315Care homes 264 283 264 283Leasehold where purchaser owns less then 100% 1,617 1,579 1,617 1,579Leasehold where purchaser owns 100% 847 810 847 810 ———— ———— ———— ————Total social housing owned 49,635 49,881 47,424 47,677

Social housing management onlyGeneral housing social rent 1,208 1,213 1,208 1,213Supported housing 118 160 118 160Leasehold where purchaser owns less then 100% 19 24 19 24Leasehold where purchaser owns 100% 110 97 110 97 ———— ———— ———— ————Total managed 1,455 1,494 1,455 1,494

Non-social housingRented owned 358 260 358 260Rented managed for others 2 2 2 2Lease owned 821 821 821 821Leased managed for others 674 706 674 706 ———— ———— ———— ————Total non-social housing 1,855 1,789 1,855 1,789 ———— ———— ———— ————Total stock 52,945 53,164 50,734 50,960 ———— ———— ———— ————Accommodation in development at the year end 1,317 827 890 803 ———— ———— ———— ————

116

Goodwill arose on the acquisition of Evolve Facility Services Limited on 1 December 2011, £4.3m cost less amortisation of £3.8m to date, balance as at 31 March 2016 £0.5m (2015:£1.3m).

Related party transactions30One Board member of The Riverside Group Limited is a tenant of The Riverside Group Limited. Their tenancy is on normal commercial terms, and they cannot use their position to their advantage. There are no other related party transactions.

The Riverside Group Limited provides a number of central services for its subsidiaries including unregulated entities Pros-pect (GB) Limited and Evolve Facility Services Limited and these are recharged accordingly.

Evolve Facility Services Limited is a wholly owned subsidiary which performs maintenance services for the Group. Its income is derived entirely from the repair contracts it has in place with the Group.

During the year the parent association, The Riverside Group Limited, transacted with its subsidiary undertakings as follows:

2016 2015 £’000 £’000

Net payments to/(from) related entities Caribou Green Warmth LLP 100 —The Compendium Group Limited 500 1,483Evolve Facility Services Limited 37,818 32,345Irvine Housing Association Limited (1,750) 878Prospect (GB) Limited 2,412 4,380Riverside Consultancy Services Limited 37,312 39,767Riverside Finance plc 38 13Riverside Estuary Ltd 1,078 9,552 ———— ————Total 77,508 88,418 ———— ————

Goodwill31

117

First time adoption of FRS 10232First time adoption of FRS 102On adoption of FRS 102 the Group has restated the comparatives, the impact on reserves is as follows:

Group Notes Reserves Total as at recognised transition Surplus Reserves date Year ended as at 1 Apr 2014 31 Mar 2015 31 Mar 2015 £’000 £’000 £’000 As previously stated under former UK GAAP 311,132 39,126 350,258

Transitional adjustmentsIncrease in depreciation of housing properties a (143,960) (7,931) (151,891)Increase in amortisation of grants relating to housing properties b 165,069 9,955 175,024Adjustment for non-government grant to reserves c 4,129 — 4,129 Gain on investment properties d 410 — 410Inclusion of SHPS pension deficit payment liability e (12,161) 300 (11,861) Fair value adjustment for financial instruments f (22,875) (8,587) (31,462)Revaluation to fair value of current asset investments g 672 237 909Improvement work transferred to operating costs h (870) — (870)Deferred tax i — 189 189 ———— ———— ————As stated in accordance with FRS 102 301,546 33,289 334,835 ———— ———— ————Movement due to prior year adjustment (9,586) (5,837) (15,423) ———— ———— ————

118

First time adoption of FRS 102 – continued32Explanation of changes to previously reported profit and equity:

a) The capital grant previously deducted from the cost of fixed assets, is treated as creditors where the fixed assets are carried at cost. The effect compared to current UK GAAP is an increase to the carrying cost of housing properties resulting in an increase in the depreciation at transition of £143.9m and a decrease in the surplus for the year ended 31 March 2015 of £7.9m.

b) The government capital grant previously deducted from the carrying cost of housing properties is treated as a deferred capital grant creditor and released to the statement of comprehensive income over the useful life of the associated assets. The effect compared to current UK GAAP is an increase in income recognised on transition of £165.1m, and £10.0m increase in surplus for the year ended 31 March 2015.

c) The grant received from non-government sources is recognised in the statement of comprehensive income when performance conditions are met. The effect compared to current UK GAAP is to increase reserves at the transition by £4.1m and increase the surplus for the year ended 31 March 2015 by £0.0m.

d) Property where commercial rentals are earned is carried at fair value as investment property at the reporting date. The effect is that the value of the market rented properties has been recognised at transition as £0.4m and the movement in the year to 31 March 2015 was £0m.

e) A liability is recognised for the contributions that arise from an agreement to fund a deficit in a multi-employer pension scheme. The effect is that a liability for the SHPS payment plan has been recognised at the present value of the contributions payable using the discount rate specified in note 26. This has resulted in a decrease in reserves of £12.2m at transition and an increase in the surplus in the year ended 31 March 2015 of £0.3m.

f) Changes in the fair value of financial instruments are recognised in the statement of comprehensive income for the period. The effect is the reduction in reserves at transition of £22.9m and decrease in reported surplus for the year ended 31 March 2015 £8.6m of which £1.0m is recognised in surplus for the year and £7.4m is in other comprehensive income via reserves.

g) The changes in the fair value of investments are recognised in the statement of comprehensive income. At transition the effect has increased reserves by £0.7m and increased reported profit for year 31 March 2015 by £0.2m. The revaluation reserve has been transferred to the income and expenditure reserves as all movements are recognised in the statement of comprehensive income.

h) Improvement work previously capitalised of £0.9m has been charged to operating costs and the performance grant has been recognised as income accordingly.

i) Deferred tax adjustment in respect of Gift Aid timing differences consolidation adjustment. Exemptions taken on transition to FRS 102:

— The Group has taken the exemption relating to business combinations and goodwill, and previous business combinations have not been restated.

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First time adoption of FRS 102 – continued32First time adoption of FRS 102On adoption of FRS 102 the Association has restated the comparatives, the impact on reserves is as follows:

Association Notes Reserves Total as at recognised transition Surplus Reserves date Year ended as at 1 Apr 2014 31 Mar 2015 1 Apr 2015 £’000 £’000 £’000

As previously stated under former UK GAAP 323,350 35,401 358,751

Transitional adjustmentsIncrease in depreciation of housing properties a (142,364) (7,664) (150,028)Increase in amortisation of grants relating to housing properties b 163,034 9,734 172,768Adjustment for non-government grant to reserves c 2,513 — 2,513 Gain on investment properties d 410 — 410Inclusion of SHPS pension deficit payment liability e (12,161) 300 (11,861)Fair value adjustment for financial instruments f (22,875) (8,393) (31,268)Revaluation to fair value of current asset investments g 672 237 909 ———— ———— ————As stated in accordance with FRS102 312,579 29,615 342,194 ———— ———— ————Movement due to prior year adjustment (10,771) (5,786) (16,557) ———— ———— ————

120

Explanation of changes to previously reported profit and equity:

a) The capital grant previously deducted from the cost of fixed assets, is treated as creditors where the fixed assets are carried at cost. The effect compared to current UK GAAP is an increase to the carrying cost of housing properties resulting in an increase in the depreciation at transition of £142.3m and a decrease in the surplus for the year ended 31 March 2015 of £7.7m.

b) The government capital grant previously deducted from the carrying cost of housing properties is treated as a deferred capital grant creditor and released to the statement of comprehensive income over the useful life of the associated assets. The effect compared to current UK GAAP is an increase in income recognised on transition of £163.0m, and £9.7m increase in surplus for the year ended 31 March 2015.

c) The grant received from non-government sources is recognised in the statement of comprehensive income when performance conditions are met. The effect compared to current UK GAAP is to increase reserves at the transition by £2.5m and increase the surplus for the year ended 31 March 2015 by £0.0m.

d) Property where commercial rentals are earned is carried at fair value as investment property at the reporting date. The effect is that the value of the market rented properties has been recognised at transition as £0.4m and the movement in the year to 31 March 2015 was £0m.

e) A liability is recognised for the contributions that arise from an agreement to fund a deficit in a multi-employer pension scheme. The effect is that a liability for the SHPS payment plan has been recognised at the present value of the contributions payable using the discount rate specified in note 26. This has resulted in a decrease in reserves of £12.2m at transition and an increase in the surplus in the year ended 31 March 2015 of £0.3m.

f) Changes in the fair value of financial instruments are recognised in the statement of comprehensive income for the period. The effect is the reduction in reserves at transition of £22.9m and decrease in reported surplus for the year ended 31 March 2015 £8.4m of which £1.0m is recognised in surplus for the year and £7.4m is in other comprehensive income via reserves.

g) The changes in the fair value of investments are recognised in the statement of comprehensive income. At transition the effect has increased reserves by £0.7m and increased reported profit for year 31 March 2015 by £0.2m. The revaluation reserve has been transferred to the income and expenditure reserves as all movements are recognised in the statement of comprehensive income.

h) Improvement work previously capitalised has been charged to operating costs, and the performance grant has been recognised as income accordingly.

Exemptions taken on transition to FRS 102: — The Group has taken the exemption relating to business combinations and goodwill, and previous business

combinations have not been restated.

First time adoption of FRS 102 – continued32

121

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

A charitable Registered Society under the Co-operative and Community Benefit Societies Act 2014

September 2016Details correct at time of publishing

R8/046-0916V1.0E

Documents

Financial Statements · For the year ended 31 March 2016 2015 2014 2013 2012 Group Key ratios Voids and bad debts – Group %2.1 2.5 2.5 2.2 2.2 (as % of rent and service charge receivable)