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Peabody Trust (92IA)

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Tuesday 25 July, 2006

Peabody Trust

Annual Report and Accounts

Peabody Trust
25 July 2006


     Report and Financial Statements

              31 March 2006

              PEABODY TRUST

                                                    Charity registration: 206061

                                         Housing Corporation registration: L0014



Deloitte & Touche LLP

St Albans


Operating and financial review                                                 1

Governors' statement of internal control                                      11

Independent auditor's report                                                  12

Trust income and expenditure account                                          13

Trust statement of total recognised surpluses and deficits                    14

Trust balance sheet                                                           15

Trust cash flow statement                                                     16

Notes to the Trust cash flow statement                                        17

Consolidated income and expenditure account                                   19

Consolidated statement of total recognised surpluses and deficits             20

Consolidated balance sheet                                                    21

Consolidated cash flow statement                                              22

Notes to the consolidated cash flow statement                                 23

Notes to the accounts                                                         25



BOARD, EXECUTIVE OFFICERS AND ADVISORS

Members of the Board of Governors

Pam Alexander (Chair of the Board, Member of the Nominations & Remuneration
Committee)

James Hambro (Vice Chair of the Board; Chair of the Finance Committee, Chair of
the Nominations & Remuneration Committee and Member of the Audit & Risk
Committee) - retired 31 December 2005

Teddy Bourne (Member of the Property Committee) - retired 31 December 2005

Fred Calcott (Chair of Resident Liaison Committee and Member of the Resident &
Community Committee)

Anne Chan (Member of the Resident & Community Committee) - retired 20 July 2005

Peter Doyle (Member of the Property, Finance and Audit & Risk Committees)

Ngaire Drake (Member of the Property Committee)

Dudley Fishburn (Member of the Finance Committee and Chair of the Audit & Risk
Committee to 31 December 2005) (from 1 January 2006, Vice-Chair of the Board,
Chair of the Finance Committee, Member of the Audit & Risk Committee, Chair of
the Nominations & Remuneration Committee)

Hattie Llewelyn-Davies (Chair of the Resident & Community Committee and Member
of the Nominations & Remuneration Committee)

Ken Olisa (Member of the Resident & Community and the Finance Committees, and
Chair of the Audit & Risk Committee from 1 January 2006)

Christopher Strickland (Chair of the Property Committee and Member of the
Nominations & Remuneration Committee)

Marc Hume (Member of the Resident & Community Committee) - appointed 20 July
2005

Marisa Cassoni (Member of the Finance, Audit & Risk and Property Committees) -
appointed 20 July 2005


Co-opted Committee Members

Jane Atkinson (Property Committee)

Simon Hill (Property Committee)

Elizabeth Moxon (Property Committee) - appointed 20 July 2005

Neil Gardiner (Property Committee) - appointed 20 March 2006

Margaret Kerss (Resident & Community Committee)

Janet McLagan (Resident & Community Committee)

Ian Parkes (Resident & Community Committee)

Kirk Mitchell (Resident & Community Committee)


Executive Officers

Stephen Howlett (Group Chief Executive)

Catriona Simons (Group Finance Director)

Sally Harvey (Director of Resident Services) - resigned 3 April 2006

Ronnie Clawson (Corporate Services Director)

Nick Dudman (Interim Property Director) - appointed 5 April 2005

Maura Santos (Director of Community Regeneration)

Julie Webb (Interim Director of Resident Services) - appointed 24 October 2005


BOARD, EXECUTIVE OFFICERS AND ADVISORS


Auditors                                        Company Secretary

Deloitte & Touche LLP                           Graham Lawrence

3 Victoria Square

Victoria Street

St Albans AL1 3TF


Bankers                                         Registered Office

Coutts & Co                                     45 Westminster Bridge Road

440 Strand                                      London SE1 7JB

London WC2R 0QS


Solicitors                                      Registration Details

Lewis Silkin                                    Housing Corporation Registration - L0014

12 Gough Square                                 Charity Commission Registration - 206061

London EC4A 3DW


Rollits Solicitors

Rowntree Wharf

Navigation Road

York YO1 9WE


Trowers & Hamlins

Sceptre Court

40 Tower Hill

London EC2N 4DX



OVERVIEW

Peabody Trust is one of London's oldest housing associations and a general
charity. Uniquely for a housing association, it has its own Act of Parliament
stipulating the Trust's objective to work solely within London for the relief of
poverty.

Founded in 1862 by George Peabody, an American banker, entrepreneur and
philanthropist, today the Peabody Trust Group owns or manages more than 18,000
homes in London, providing affordable homes for some 50,000 people in 32
boroughs. Most are in central and inner London, with over 5,750 properties built
before 1900 and 2,300 of these built before 1875. This legacy of Victorian and
Edwardian properties presents us with significant refurbishment challenges.

Peabody's portfolio comprises a significant number of properties in central
London. The majority of our homes are on estates with open, communal green
spaces. There are also a number of street properties. The Trust also acquired
three local authority estates in Islington, Hackney and Barnet with difficult
management challenges between 1998 and 2000 comprising 2,271 homes.

KEY MISSION AND VISION

Peabody Trust's principal activity is the provision of accommodation for those
in housing need with the mission of tackling poverty in London. This will be
achieved by providing excellent customer services, thriving communities and
desirable homes through a first class organisation. Along with CBHA the group
owns or manages over 18,000 homes across London, providing affordable homes for
over 50,000 people. The Trust also provides a wide range of economic and
community regeneration activities. The Trust's long term vision is to become a
beacon organisation recognised for our clarity of purpose, excellent services
and innovative approach to today's housing and community regeneration
challenges.

DESCRIPTION OF OPERATIONS

The Peabody Group is a housing group based in London. The Group consists of two
registered social landlords, Peabody Trust and CBHA, and a number of smaller
trading companies.

Peabody Trust is a charitable organisation and has 4 key areas of activity:

• The provision of rented housing for families and single people who are
unable to afford to rent or buy in the open market

• The provision of supported housing and care for those who need
additional support, because they are old or for other reasons

• The provision of low cost home ownership homes, particularly shared
ownership

• The delivery of community regeneration activities such as the
provision of learning opportunities and access to ICT training and
accreditation.

In 1997 a Community Regeneration directorate was established to tackle poverty
at its roots - poor education, low skills and lack of opportunity. Working on
and around our estates in some of the most deprived areas of London, the team is
well placed to reach the most excluded and to ensure that services are
accessible, by taking support right into the heart of the community.

• Since 1998, from our Digital Learning Ring Thresholds Single
Regeneration Budget (SRB) Programme alone we have helped 2,047 people find a job
and 4,488 gain a qualification - many for the first time.

Annually we continue to help around 500 people into work and over 900 to gain a
qualification.

OBJECTIVES AND STRATEGY

The Trust's Business Plan 2006-2009 takes forward the Trust's vision and mission
and recognises certain key areas on which to focus in the short term. These are
providing excellent customer services, with our customer service centre at the
heart of this, and improving our maintenance and lettings services. The Trust
will also deliver the Asset Management Strategy, including the Decent Homes
Standard, and improve efficiency by reducing expenditure, increasing income and
reducing future borrowings to ensure long term viability.

The objectives and strategy of the Trust are set out in a rolling three year
business plan that is reviewed annually and approved by the Board. The business
planning process includes an assessment of strengths and weaknesses,
opportunities and threats, which are discussed between the Executive team and
the Board of Governors. The Trust's main objectives for the forthcoming year are
summarised below.

Excellent Customer Services

In order to ensure we deliver excellent customer services, we will:

• Introduce a package of initiatives to improve the accessibility of
Estate Managers and provide clarity concerning service levels

• Launch the new customer website

• Evaluate the caretaking and cleaning pilot

• Develop and implement an action plan to address the outcomes of the
Trust's resident satisfaction surveys

• Support enhanced consultation with our customers

Thriving Communities

In order to ensure we promote thriving communities, we will:

• Develop initiatives to promote community cohesion on estates and
reduce antisocial behaviour

• Review community facilities and develop a Community Facilities
Strategy

• Provide alternative housing for Clays Lane residents and transfer the
site to the LDA

• Implement the Supported Housing and Vulnerable Residents Strategies

• Redefine the Trust's role in tackling poverty, in conjunction with
other strategic partners

• Extend the modern apprenticeship scheme across the Trust

Desirable Homes

In order to ensure our homes are desirable, we will:

• Implement the Asset Management and Disposals Strategies

• Ensure we deliver a maintenance service that is customer focused,
effective and efficient

• Agree development of the Ladbroke Green site

• Develop plans for other key Trust sites

First Class Organisation

In order to be a first class organisation, we will:

• Reduce the Trust's cost of borrowing

• Develop and implement efficiency and procurement strategies

• Invest in ICT and staff training in new packages

• Restore the Housing Corporation 'green' light for management

• Achieve a satisfactory Audit Commission inspection result

• Improve performance by reducing rent arrears and achieving target
re-let times for void properties

• Provide training programmes for staff

• Develop the Resident Diversity Forum and deliver diversity training
for residents

• Improve local authority liaison in key boroughs

• Renew Investors in People accreditation and achieve entry to the
Sunday Times Top 100 UK Employers.

Performance Indicators

The section below reviews the key indicators used by senior management and the
Board of Governors to monitor achievement of these objectives.


Development

• New units into management by tenure type

• Timeliness/lateness of units into management

Asset management

• Progress towards Decent Homes Standard

Housing Management and Maintenance

• Rent collection rate

• Current arrears as % of gross annual debit

• Average re-let times

• Number of empty properties

• Repair response times

• Customer satisfaction

• Percentage of properties in possession of a valid gas safety
certificate

Financial

• Results compared to budget

• Loan covenants

Results

The results for the key operations are set out below:

                             Turnover      Operating Surplus
                          2006     2005      2006     2005
                           £m       £m        £m       £m

General needs             75.2     70.4      22.8     24.1
Shared ownership          1.0       0.8      0.4      0.2
Key worker accomodation   2.3       1.8      1.7      1.3
Market renting            1.7       2.2      1.1      1.8
Commercial lettings       2.7       2.4      1.4      1.6
Community Regeneration    3.0       2.9     (1.3)    (1.6)


Five year trends for the Group are set out at the end of this review.

All operations achieved their budgeted turnover and surplus, with the exception
of the maintenance service to which it was decided to apply additional financial
resource during the course of the financial year.

All areas achieved their target performance indicators, with the exception of
the following:

• Current tenants' arrears stood at 8.5% at the year end. An increased
range of payment options introduced in early 2006/07 is expected to improve
performance in this area.

• As at 31 March 2006 96% of properties (where gas is supplied to the
premises) were in possession of a valid gas safety certificate with the
remaining covered by the Trust's no access protocol.

• The average number of days to re-let empty properties was 132 as at 31
March 2006. This average has been distorted by a small number of properties that
had been empty for a considerable period but have now been let. At 31 March 2006
the Trust only had 60 properties available to let.

• The percentage of emergency repairs completed within target stood at
90% at 31 March 2006, performance on urgent and routine repairs was 85% and 84%
respectively. A new appointment scheduling system was introduced early in 2006/
07 and this is expected to improve performance in this area.

The Trust has detailed action plans in place to address these issues, and both
gas servicing and reactive repairs performance has improved considerably since
31 March 2006.

The Trust's programme of works to meet the Decent Homes Standard exceeded target
at 31 March 2006 and the Trust's Development programme outperformed financial
targets for the year.

REGULATION AND GOVERNANCE

The Group is regulated by the Housing Corporation with whom it is registered. It
has to comply with the Housing Corporation's Regulatory Code. Performance is
assessed by means of annual assessments against four main criteria - governance,
viability, management and development. The corporation uses a 'traffic light'
system to measure compliance. At the start of 2005/06 the Group had green lights
for Governance and Development and the remaining two, for viability and
management, as amber. Much of the Group's efforts in 2005/2006 were focused on
addressing the issues underlying the amber lights. In November 2005 the green
light for viability was restored.

The Trust is subject to an Audit Commission inspection in July 2006 and it is
hoped that this will demonstrate the progress made and the prospects for
improvement for Peabody.

The Board of Governors is the incorporated body of trustees of the charity and
as such is the ultimate governing body of the Trust. The Board members are
charity trustees and comprise 12 non-executive directors who meet no less than
seven times each year. All members give their time voluntarily. Members of the
Board of Governors of Peabody Trust are listed on page 1 of these financial
statements. Recruitment of members to fill the vacancies on the Board is in
progress.

The Trust is managed by an Executive Team headed by the chief executive and
supported by directors of finance, resident services, property, corporate
services and community regeneration. All members of the Executive Team attend
board meetings. Executive Officers of the Trust are not members of the Board
and, although for the purposes of salary disclosure they are referred to as
directors, they are not regarded as directors for legal purposes. The Executive
Officers meet on a fortnightly basis under the chairship of the Chief Executive
in order to manage the Trust's affairs within the framework set by the Board.
The Executive Officers of Peabody Trust are listed on page 1 of these financial
statements.

During the year, the Charity Commission issued a Scheme altering the provisions
of Trust's constitution (primarily set out in The Peabody Donation Fund Order
1997) in respect of the terms of office for Governors. The maximum permitted
term of office is now limited to three periods of three years.

The Group is eligible for exemption from the Financial Services Authority's
requirements relating to corporate governance disclosures but the Governors have
elected to provide the majority of applicable disclosures. These are set out in
the appropriate parts of this report and the financial statements.

The Group complies with the fundamental aspects of the National Housing
Federation's code of governance.

Subsidiary Entity Boards

The Board of Trustees of CBHA comprises two Peabody Trust Board members and 3
Peabody Trust Executive Officers as nominated by the Peabody Trust Board of
Governors. The Trustees are supported by a range of functional committees and a
local Board.

The non-charitable entities within the Group each have a board of directors
comprising two Peabody Trust governors and two Peabody Trust executive officers
in order that, in line with Housing Corporation guidance and other good
practice, these boards should not replicate the main governing body.

Delegation and Functional Committees

The Board is supported by 5 functional committees each of which meets 4 times
per year and which are composed of members of the Board and co-opted members.
Each of these committees has clear terms of reference and delegated authority.
They report back to the Board at each meeting, where their recommendations are
fully considered and approved where appropriate.

The Audit and Risk Committee is responsible for overseeing internal audit,
external audit, and control and risk management. The Finance Committee oversees
and reports to the Board on the Trust's financial performance, treasury matters
and financial statements. The Resident and Community Committee is responsible
for overseeing the provision of services to the Trust's current and prospective
tenants, leaseholders and other customers. The Property Committee is responsible
for overseeing effective asset management and the control and delivery of
development and reinvestment programmes. The Nominations and Remuneration
Committee advises the Board on appointments to the Board and Committees,
remuneration issues, including senior staff salaries, and human resource
policies.

RISK MANAGEMENT

The main risks faced by the Group are considered by the Executive Team with the
Board as part of the business planning process. The Trust has taken steps to
ensure that it identifies factors that may affect future performance. The
Trust's Risk and Risk Management Strategy identifies the key risks facing the
Trust and strategies for monitoring and mitigating them. An Officer Risk
Committee, which meets quarterly, also plays an active part in embedding a
culture of risk awareness and risk management amongst staff.

Further details of the Group's risk management activities are provided in the
Governor's statement on internal control.

CUSTOMER AND EMPLOYEE INVOLVEMENT AND DIVERSITY

The Group has developed policies for customer and employee involvement, as well
as for sustainable development.

Employees

The Group considers that employee involvement is essential to its success and
uses a variety of methods to inform, consult and involve its employees which
includes a staff forum. Union representation is recognised through the Joint
Negotiating Committee (JNC) and Joint Consultative Committee (JCC).

The Group has a comprehensive learning and development policy and maintained the
Investors in People accreditation during the current financial year.

Diversity

The Group is committed to achieving equality of opportunities and values
diversity. Its policies and strategies reflect this. The Group recognises its
ability to meet the diverse needs of both individuals and communities through
its diverse workforce which reflects local populations and has the necessary
skills to enable the Group to achieve its service objectives. The Group makes
efforts to extend its commitment through its governance structures and through
its use of suppliers and contractors.

Applications for employment from disabled persons are given fair and full
consideration, having regard to their particular skills and abilities. In the
event of employees becoming disabled, every effort is made to retain them in
continued employment within the Group.

Health and Safety

The Group takes its responsibilities for health and safety seriously and all
managers are provided with training in this area.

FINANCIAL PERFORMANCE

The financial position and results for the year are set out on pages 13 to 54 of
these statements. The financial statements have been prepared in accordance with
the relevant provisions of the Peabody Donation Fund Act 1948 as amended by the
Charities (The Peabody Donation Fund Act) Order 1997, Schedule 1 to the Housing
Act 1996 and the Accounting Requirements for Registered Social Landlords General
Determination 2000.

Performance in the period

The Trust made a surplus for the year after tax of £25.4 million compared to
£14.6 million in the previous year.

The consolidated results for the Group, which include the results of those
entities detailed above, show a surplus for the year after tax of £27.6 million
compared to £18.4 million in the previous year.

All of the Trust's surpluses are re-invested in the Charity with the surplus on
the sale of properties invested directly in a programme of works to meet the
Decent Homes Standard by 2010. The Trust also has a small development programme
focussing on the provision of new affordable homes for Londoners. During 2005/06
£17.6 million was invested in the ongoing programme of works required to meet
the Decent Homes Standard by 2010 and 335 new homes were completed during the
year costing a total of £50.9 million with £21.9 million of Social Housing Grant
having been received in respect of these homes. Of these new homes 138 were for
affordable rent, 71 were Shared Ownership properties and 126 were other tenures.

During 2005/06 the Trust borrowed £35 million of new debt which was used to
redeem the £25 million Zero Coupon Bond during February 2006 and to redeem £8.9
million of the Guaranteed Secured Stock due 2023.


Decent Homes

The age profile of the Trust's homes presents a particular investment challenge.
Investment of £108.4 million is required between 2006/07 and 2010 to ensure that
all the Trust's homes meet the Decent Homes Standard.

As noted above the Trust's Decent Homes programme is funded through
re-investment of annual surpluses. These amounts include surpluses on the
disposal of properties under a strategic disposal programme. During the year
ended 31 March 2006 surpluses totalling £32 million were received from the
disposal of such properties.

As at 31 March 2006 75% of the Trust's homes met the Decent Homes Standard with
25 homes per week being made 'Decent'.

All of the properties owned and managed by CBHA meet the Decent Homes Standard.

Treasury Management

The Group's Treasury Management Policy is updated and submitted annually to the
Group's Finance Committee for approval. Treasury Management performance, which
includes ongoing review of the loan portfolio and compliance with financial
covenants, is reviewed quarterly by the Committee.

During the year the Trust renegotiated all of its bilateral loans with the
exception of the former Housing Corporation Loan assigned on transfer of the
Clays Lane Estate to the Trust.

At 31 March 2006 the Group complied with all financial covenants in place.

Interest

In accordance with the Group's Interest Rate Management Strategy and in order to
mitigate the risk of rises in variable interest rates at 31 March 2006 £276.5
million of the Group's debt was at fixed rates.

In June 2006 the Trust successfully redeemed its 10.25% First Mortgage Debenture
Stock due 2018. The redemption was largely funded through new borrowing
facilities totalling £135 million that had been arranged with Barclays Bank plc
and Royal Bank of Scotland. It is anticipated that this redemption will deliver
annual cash interest savings of £3 million.

Financing

New borrowings of £35 million were drawn during 2005/06 in order to refinance
existing debt being a Zero Coupon Bond, and £8.9 million of the Guaranteed
Secured Stock due 2023 which became available for repurchase. Breakage costs of
£5.2 million were incurred in respect of this repayment. It is anticipated that
these repayments will deliver annual interest savings of £170,000. A cash
balance of £1.6 million was assigned to the Trust on the transfer of the Clays
Lane Estate to Peabody Trust on 1 August 2005.

Liquidity

The Group's Treasury Management Policy dictates that the Group's available
liquidity should not at any time fall below the forecast outflow for the next
calendar month. The Group has been compliant with this policy throughout 2005/06
and is expecting to be compliant for the foreseeable future.

The group has sufficient committed facilities available to meet known
requirements until 31 March 2007 and for the foreseeable future.

At the year end the Trust held cash balances totalling £35.7 million in
anticipation of the redemption of the Trust's First Mortgage Debenture Stock due
2018 (see note 25).

Accounting Policies

No new accounting policies have been adopted during the current financial year.

Reserves

The Board of Governors has reviewed the reserves of the Group taking into
consideration the nature of income and expenditure streams and has concluded
that the level of reserves shown at 31 March 2006 is appropriate to ensure that
the Group is viable as a going concern in all reasonably foreseeable
circumstances.

Going Concern

After making enquiries, the Governors have a reasonable expectation that the
Group has adequate resources to continue in operational existence for the
foreseeable future. For this reason they continue to adopt the going concern
basis in preparing the accounts.

Group Highlights - five year           2006     2005     2004     2003     2002
summary

For the year ended 31 March              £m       £m       £m       £m       £m


Group income and expenditure
account

Total turnover                         98.5     86.9     81.9     86.4     72.1
Income from lettings                   78.4     72.9     70.7     66.4     62.5
Depreciation & amortisation of          7.6      6.0      2.6      2.2        -
housing properties
Operating surplus                      25.7     24.3     22.1     23.3     12.5
Surplus after interest and tax         27.6     18.4     12.9     10.3     13.4
Surplus before housing sales          (5.4)    (2.0)    (1.4)      2.0      8.9


Group balance sheet

Tangible fixed assets, at cost        964.4    924.8    894.8    830.3    737.3
Social Housing Grant                (445.0)  (423.8)  (413.4)  (376.8)  (352.2)
Net current assets                     38.2    (2.6)     17.3     14.0     34.2
Indebtedness                          364.5    363.8    360.1    341.1    304.4
Total reserves                        161.8    135.5    114.5    118.4    109.2


Key financial performance              2006     2005     2004     2003     2002
information
                                          %        %        %        %        %

Surplus before tax at year end as        28       21       16       12       19
% of turnover
Surplus before tax for the year as       35       25       18       15       21
% of income from lettings
Operating Surplus as a % of              26       28       27       27       17
turnover
Void loss as % of rent & service        2.4      2.8      2.6      2.9      3.2
charges receivable
Gross current tenant arrears as %       8.5      7.6      7.6      7.9      8.5
of rent and service charges
receivable
Total loans as % of capital grants       66       65       71       74       71
plus reserves (Gearing)
Total debt less cash and short           34       37       38       38       36
term investments as % of total
debt plus capital and reserves
less intangible fixed assets
(Adjusted net leverage)
EBITDA as a % of interest payable       109      114      112      122       83
EBITDA as a % of interest payable       125      118      112      122       83
excluding loan redemption
penalties


STATEMENT OF GOVERNORS' RESPONSIBILITIES

The Governors are responsible for preparing the Annual Report and the financial
statements. The Governors have chosen to prepare accounts for the Trust and the
group in accordance with United Kingdom Generally Accepted Accounting Practice
(UK GAAP). Housing Association legislation requires the Governors to prepare
such financial statements for each financial year which give a true and fair
view of the state of affairs of the Trust and of the group and of the surplus or
deficit of the Trust and the group for that period and comply with UK GAAP and
the Peabody Donation Fund Act 1948 as amended by the Charities (The Peabody
Donation Fund) Order 1997, Schedule 1 to the Housing Act 1996 and the Accounting
Requirements for Registered Social Landlords General Determination 2000. In
preparing these financial statements, the Governors are required to:


   •select suitable accounting policies and then apply them consistently;
   •make judgments and estimates that are reasonable and prudent;
   •state whether applicable accounting standards 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 Trust will continue in business.


The Governors are responsible for keeping proper accounting records which
disclose with reasonable accuracy at any time the financial position of the
Trust, for safeguarding the assets, for taking reasonable steps for the
prevention and detection of fraud and other irregularities.

EXTERNAL AUDITORS

Deloitte & Touche LLP have expressed their willingness to continue in office.
Accordingly a resolution is to be proposed at the Annual General Meeting for the
re-appointment of Deloitte & Touche LLP as auditors of the Group.


Approved by the Board of Governors on 2006 and signed on their behalf by:


Pam Alexander                           Stephen Howlett

Chair                                   Chief Executive


The Governors acknowledge their ultimate responsibility for ensuring that the
Group has in place a system of controls that is appropriate to the various
business environments in which it operates. These controls are designed to give
reasonable assurance with respect to:

• The reliability of financial information used within the Group, or for
publication; and

• The maintenance of proper accounting records, and the safeguarding of
assets against unauthorised use or disposition.

It is the Governors' responsibility to establish and maintain systems of
internal control. Such systems can only provide reasonable, and not absolute,
assurance against material financial misstatement or loss in accordance with the
principles established in the Housing Corporation Circular R2-25/01 Internal
Controls Assurance. The following key elements of internal control have been in
place for all or part of the financial year 2005/6:

• The Trust has an Executive Team comprising functional directors which
meets fortnightly to consider ongoing operations, financial performance,
management and major new projects and initiatives.

• Experienced and suitably qualified staff take responsibility for
important business functions. Annual appraisal procedures and a training
programme have been established to maintain standards of performance;

• Formal policies and procedures are in place, including the documentation
of key systems and rules relating to the delegation of authorities, which allow
the monitoring of controls and prevent the unauthorised use of the Group's
assets;

• Forecasts and budgets are prepared which allow the Governors and
management to monitor the key business risks and financial objectives, and
progress towards financial plans set for the year and medium term; regular
management accounts are prepared promptly, providing relevant, reliable and
up-to-date financial and other information, and significant variances from
budgets are investigated as appropriate;

• The Group has a Project Approval Committee which meets fortnightly to
approve all investment decisions involving capital programme expenditure and to
review the ongoing management and control of capital projects;

• All other significant new initiatives, major commitments and investment
projects are subject to formal authorisation, through relevant executive team
and Governors' meetings;

• The Audit and Risk Committee reviews reports from management, from the
internal auditor and from the external auditor to provide reasonable assurance
that control procedures are in place and are being adhered to.

• The Group has a risk management strategy which is reviewed and updated
and formally reported to the Audit and Risk Committee quarterly. The Group's
risk map, which is a key component of its risk management procedures, is also
reviewed and updated quarterly, and all risks ranking as high are reported on a
rolling quarterly basis to the Audit and Risk Committee;

• The Group has an officer Risk Committee comprising senior staff which
meets quarterly to consider key risks and risk management reports. The minutes
of these meetings and risk monitoring reports are submitted to Audit and Risk
Committee for approval;

• The Group has a comprehensive business continuity and disaster recovery
plan. This was implemented promptly and efficiently in September 2005 following
a fire which destroyed a number of the Trust's IT and telecommunication servers.
Services to residents were resumed within 24 hours and there was minimal loss of
data as a result of the fire;

• The Group has a dedicated Internal Audit service whose annual programme
of work is approved by Audit and Risk Committee. The findings of this work are
presented to the Audit and Risk Committee and formal procedures have been
established for instituting appropriate action to correct weaknesses identified
from the above reports.

On behalf of the Governors, the Audit and Risk Committee has reviewed the
effectiveness of the system of internal control in existence in the Group for
the year ended 31 March 2006 and until 24 July 2006. No weaknesses were found in
internal controls which resulted in material losses.

REPORT OF THE INDEPENDENT AUDITORS TO THE GOVERNORS OF PEABODY TRUST

We have audited the financial statements of Peabody Trust for the year ended 31
March 2006 which comprise the Trust and consolidated income and expenditure
accounts, the Trust and consolidated statements of total recognised surpluses
and deficits, the Trust and consolidated balance sheets, the Trust and
consolidated cash flow statements, the respective notes to the cash flow
statements a to c and the related notes 1 to 25. These financial statements have
been prepared under the accounting policies set out therein.

This report is made solely to the governors, as a body, in accordance with
Schedule 1 paragraphs 16 to 18 of the Housing Act 1996. Our audit work has been
undertaken so that we might state to the governors those matters we are required
to state to them in an auditors' 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 trust and the governors as a body, for our audit work, for this
report, or for the opinions we have formed.

Respective Responsibilities of the Board and Auditors

The Board's responsibilities for preparing the Annual Report and the financial
statements in accordance with applicable United Kingdom law and United Kingdom
Generally Accepted Accounting Practice are set out in the statement of the
Board's responsibilities.

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

We report to you our opinion as to whether the financial statements give a true
and fair view in accordance with the relevant framework and are properly
prepared in accordance with the Peabody Donation Fund Act 1948 as amended by the
Charities (The Peabody Donation Fund Act) Order 1997, Schedule 1 to the Housing
Act 1996 and the Accounting Requirements for Registered Social Landlords General
Determination 2000. We also report to you if, in our opinion, the Report of the
Governors is not consistent with the Financial Statements, if the group has not
kept proper accounting records, if we have not received all the information and
explanations we require for our audit, or if information specified by law
regarding board members' and directors' remuneration and transactions with the
Trust and other members of the group is not disclosed.

We read the other information contained in the annual report for the above year
as described in the contents section and consider the implications for our
report if we become aware of any apparent misstatements or material
inconsistencies with the financial statements.

Basis of Audit Opinion

We conducted our audit in accordance with International Standards on Auditing
(UK and Ireland) issued by the Auditing Practices Board. An audit includes
examination, on a test basis, of evidence relevant to the amounts and
disclosures in the financial statements. It also includes an assessment of the
significant estimates and judgments made by the directors in the preparation of
the financial statements, and of whether the accounting policies are appropriate
to the circumstances of the Trust and the group, consistently applied and
adequately disclosed.

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

Opinion

In our opinion:

• the financial statements give a true and fair view, in accordance with
United Kingdom Generally Accepted Accounting Practice, of the state of the
group's and the Trust's affairs as at 31 March 2006 and of the group's and the
Trust's surplus for the year then ended; and

• the financial statements have been properly prepared in accordance
with the Peabody Donation Fund Act 1948 as amended by the Charities (The Peabody
Donation Fund Act) Order 1997, Schedule 1 to the Housing Act 1996 and the
Accounting Requirements for Registered Social Landlords General Determination
2000.



Deloitte & Touche LLP

Chartered Accountants and Registered Auditors

St Albans

                               2006

                               Note               2006                2005
                                                  £'000               £'000

TURNOVER                       2(a)               83,985              79,223
Operating costs                2(a)               (60,797)            (57,539)

OPERATING SURPLUS                                 23,188              21,684

Surplus on sale of fixed       23                 31,627              17,541
assets
Surplus on sale of investments 11                 -                   120
Change in market value of      11                 -                   411
investments
Interest receivable and        5                  10,501              10,642
similar income
Other interest payable and     6        (34,755)            (34,586)
similar charges
Cost of early redemption of    6        (5,160)             (1,192)
loans

Total interest payable                            (39,915)            (35,778)

Surplus on ordinary activities 7                  25,401              14,620
before taxation
                               8                  -                   -
Taxation charge

Surplus on ordinary activities                    25,401              14,620
after taxation

The turnover and surplus for the current and prior years derive from continuing
operations.



These financial statements were approved by the Board of Governors on 2006 and
signed on their behalf by:


Pam Alexander Stephen Howlett

Chair Chief Executive


                                                  2006                2005
                                                  £'000               £'000

Surplus for the year                              25,401              14,620
Actuarial (loss)/gain
relating to the pension
scheme                        17                  (1,908)             2,648
Increase in value of                              903                 -
investments above cost

Total recognised surpluses                        24,396              17,268
and deficits in year



                               Note                2006                2005
                                         £'000     £'000     £'000     £'000
FIXED ASSETS
Housing properties -           9(a)                907,128             868,891
depreciated cost
Less: Social Housing Grant               (372,951)           (355,170)

Other Public Grants                      (55,890)  (428,841) (53,412)  (408,582)

                                                   478,287             460,309
Other tangible fixed assets    10(a)               11,232              11,533

                                                   489,519             471,842
Fixed asset investments        11                  12,781              16,602

                                                   502,300             488,444
CURRENT ASSETS
Stocks                         12        -                   160
Debtor due in more than one    13        34,438              38,638
year
Debtors due in less than one   13        13,366              11,440
year
Cash at bank and in hand                 35,680              19,050

                                         83,484              69,288
CREDITORS: Amounts falling due
within one year
                               14        (24,557)            (54,263)

NET CURRENT ASSETS                                 58,927              15,025

TOTAL ASSETS LESS CURRENT
LIABILITIES
                                                   561,227             503,469

PENSION DEFICIT                17                  16,408              13,880

CREDITORS: Amounts falling due
after more than one year
                               15                  397,548             366,714

RESERVES
Revenue reserve                16        137,673             114,468
Designated reserves            16        9,598               8,407
                                                   147,271             122,875

                                                   561,227             503,469



These financial statements were approved by the Board of Governors on 2006 and
signed on their behalf by:


Pam Alexander                         Stephen Howlett

Chair                                 Chief Executive


                                 Note                  2006                2005
                                                       £'000               £'000

Net cash inflow from operating   (a)                   39,646              27,270
activities

  Net interest paid                          (22,849)            (22,112)
  Cost of early redemption of loans          (5,160)             (1,192)

  Returns on investments and             (b)           (28,009)            (23,304)
  servicing of finance

   Capital expenditure and financial (b)                810                 (4,156)
                          investment

  Net cash inflow/(outflow) before financing           12,447              (190)

Financing                        (b)                   4,183               (595)

Increase/(decrease) in cash                            16,630              (785)

   Reconciliation of net cash inflow to
                   movement in net debt
                                              £'000     £'000     £'000     £'000

Increase/(decrease) in cash in   (c)         16,630              (785)
the year
Cash (inflow)/outflow from       (b)         (4,183)             595
financing

Change in net debt resulting                           12,447              (190)
from cash flows
Non cash transactions            (c)                   425                 511

Movement in net debt in the year                       12,872              321
Net debt at beginning of the                           (333,842)           (334,163)
year

Net debt at the end of the year                        (320,970)           (333,842)


(a) RECONCILIATION OF OPERATING SURPLUS TO NET CASH INFLOW FROM OPERATING
ACTIVITIES
                                                           2006      2005
                                                           £'000     £'000


Operating surplus                                          23,188    21,684
Depreciation                                               8,749     7,569
Decrease in stocks                                         160       1,001
Increase in debtors                                        (1,926)   (2,457)
Increase/(decrease) in creditors                           9,111     (868)
Adjustment for pension funding                             364       341

Net cash inflow from operating                             39,646    27,270
activities

(b) ANALYSIS OF CASH FLOWS FOR HEADINGS NETTED IN THE CASH FLOW STATEMENT

                                                   2006              2005
                                          £'000    £'000    £'000    £'000
Returns on investments and
servicing of finance
Interest received                         4,504             3,517
Dividends received                        234               274
Interest paid                             (27,587)          (25,903)
Cost of early redemption of               (5,160)           (1,192)
loans

         Net cash outflow from returns on
     investments and servicing of finance
                                                   (28,009)          (23,304)

Capital expenditure and
financial investment
Cash paid for construction of,            (52,790)          (37,481)
investment in, and purchase of
housing properties
Social Housing Grant received             12,063            5,476
Other grants received                     2,551             3,301
Cash received on sale of                  41,748            25,664
property
Cash received on sale of                  -                 2,170
investments
Cash paid for investments                 (276)             (235)
Cash paid for purchase of other
tangible fixed assets
                                          (962)             (1,131)
Internal costs capitalised                (1,524)           (1,920)

   Net cash inflow/(outflow) from capital
     expenditure and financial investment
                                                   810               (4,156)



(b) ANALYSIS OF CASH FLOWS FOR HEADINGS NETTED IN THE CASH FLOW STATEMENT
(continued)
                                                  2006                2005
                                        £'000     £'000     £'000     £'000

Financing
New loans                               35,000              6,500
Loan to subsidiary undertaking          (2,800)             (4,200)
Repayment of loans made to
subsidiary undertaking                  7,000               -
                                        
Repayment of loans                      (26,102)            (2,895)
Repurchase of the Guaranteed
Secured Stock due 2023                  (8,915)             -
                                        
Net cash inflow/(outflow) from
financing                                         4,183               (595)
                                                  


(c)            ANALYSIS OF NET DEBT

                                                                  Other
                                                At 1    Cash   non-cash    At 31
                                               April    Flow    changes    March
                                                2005                        2006
                                               £'000   £'000      £'000    £'000
                                            
Cash at bank and in                            19,050   16,630       -    35,680
hand
Debt due after one year                     (364,790) (25,085) (1,213) (391,088)
Debt due within one                          (26,740)   25,102   1,638         -
year
Debtor due after more
than one year                                  38,638  (4,200)       -    34,438
                                            
                                            (333,842)   12,447     425 (320,970)


The amount of £34,438,000 on-lent by the Trust to CBHA has been included in the
analysis of net debt to correctly reflect the element of the increase in net
debt which represents the financing of the CBHA loan facility.

The loan due in more than one year made to Blue Hut Developments Limited was
repaid during the year.

                                                  2006                2005
                                                  £'000               £'000

                               Note

Turnover: group and share of                      98,475              86,932
joint ventures
Less: share of joint venture                      -                   -
turnover

GROUP TURNOVER                 2(a)               98,475              86,932
Group operating costs          2(a)               (72,783)            (62,602)

GROUP OPERATING SURPLUS                           25,692              24,330
Share of operating profit in                      -                   56
joint venture

                                                  25,692              24,386
Surplus on sale of fixed       23                 33,021              20,465
assets
Surplus on sale of investments 11                 -                   120
Change in market value of      11                 -                   411
investments
Interest receivable and        5                  8,470               8,752
similar income
Other interest payable and     6        (34,388)            (34,508)
similar charges
Cost of early redemption of    6        (5,160)             (1,192)
loans

Total interest payable                            (39,548)            (35,700)

Surplus on ordinary activities 7                  27,635              18,434
before taxation
Taxation charge                8                  -                   -

Surplus on ordinary activities                    27,635              18,434
after taxation

The turnover and operating surplus for the current and prior years derive from
continuing operations.



These financial statements were approved by the Board of Governors on 2006 and
signed on their behalf by:


Pam Alexander                   Stephen Howlett

Chair                           Chief Executive

                                                  2006                2005
                                                  £'000               £'000

Surplus for the year                              27,635              18,434
Actuarial (loss)/gain
relating to the pension
scheme                        17                  (2,217)             2,563
Increase in value of                              903                 -
investments above cost

Total recognised surpluses                        26,321              20,997
and deficits in year


                                                   2006                2005
                                         £'000     £'000     £'000     £'000


                               Note
FIXED ASSETS
Housing properties -           9(b)                964,406             924,778
depreciated cost
Less: Social Housing Grant               (372,951)           (355,170)

Other Public Grants                      (72,083)  (445,034) (68,615)  (423,785)

                                                   519,372             500,993
Other tangible fixed assets    10(b)               11,737              12,063

                                                   531,109             513,056

Fixed asset investments
Shares in quoted securities    11                  7,781               6,602
Investments in joint ventures:
Share of gross assets                    -                   -
Share of gross liabilities               -         -         (52)      (52)

                                                   538,890             519,606
CURRENT ASSETS
Stocks                         12        2,166               5,070
Debtors due in more than 1     13        620                 620
year
Debtors due in less than 1     13        9,325               8,657
year
Cash at bank and in hand                 51,948              34,521

                                         64,059              48,868
CREDITORS: Amounts falling due           (25,869)            (51,446)
within one year
                               14

NET CURRENT ASSETS/                                38,190              (2,578)
(LIABILITIES)

TOTAL ASSETS LESS CURRENT
LIABILITIES
                                                   577,080             517,028

PENSION DEFICIT                17                  18,220              15,349

CREDITORS: Amounts falling due
after more than one year
                               15                  397,076             366,216

RESERVES
Revenue reserve                16        148,064             122,653
Designated reserves            16        9,598               8,407
Revaluation reserve            16        4,122               4,403

                                                   161,784             135,463

                                                   577,080             517,028



These financial statements were approved by the Board of Governors on 2006 and
signed on their behalf by:


Pam Alexander                   Stephen Howlett

Chair                           Chief Executive

                               Note                  2006                 2005
                                                     £'000                £'000

Net cash inflow from operating (a)                   45,288               30,078
activities

Net interest paid                          (24,471)             (23,881)
Cost of early redemption of loans          (5,160)              (1,192)

Returns on investments and             (b)            (29,631)             (25,073)
servicing of finance

 Capital expenditure and financial (b)                1,787                (4,400)
                        investment

         Net cash inflow before financing            17,444               605

Financing                      (b)                   (17)                 3,605

Increase in cash                                     17,427               4,210

Reconciliation of net cash inflow to
                movement in net debt
                                           £'000      £'000     £'000      £'000

Increase in cash in the year   (c)        17,427               4,210
Cash outflow/(inflow) from     (c)        17                   (3,605)
financing

Change in net debt resulting                         17,444               605
from cash flows
Non cash transactions          (c)                   399                  484

Movement in net debt in the                          17,843               1,089
year
Net debt at beginning of the                         (356,511)            (357,600)
year

Net debt at end of the year                          (338,668)            (356,511)



(a) RECONCILIATION OF OPERATING SURPLUS TO NET CASH INFLOW FROM OPERATING
ACTIVITIES

                                                             2006      2005
                                                             £'000     £'000

Operating surplus for the year                               25,692    24,386
Depreciation                                                 8,790     7,604
Decrease/(increase) in stocks                                2,904     (1,431)
(Increase)/decrease in debtors                               (668)     210
Increase/(decrease) in                                       8,214     (1,074)
creditors
Adjustment for pension funding                               356       383

Net cash inflow from operating activities                    45,288    30,078


(b) ANALYSIS OF CASH FLOWS FOR HEADINGS NETTED IN THE CASH FLOW STATEMENT

                                                   2006              2005
                                          £'000    £'000    £'000    £'000
Returns on investments and
servicing of finance
Interest received                         2,707             1,901
Interest paid                             (27,178)          (25,782)
Cost of early redemption of               (5,160)           (1,192)
loans

         Net cash outflow from returns on
     investments and servicing of finance       (29,631)          (25,073)
                                                 

Capital expenditure and
financial investment
Cash paid for construction of,            (56,911)          (42,960)
investment in and purchase of
housing properties                                          
Social Housing Grant received             12,063            5,476
Other grants received                     3,541             5,300
Cash received on sale of                  45,872            29,402
property
Cash received on sale of                  -                 2,170
investments
Cash paid for the purchase of
other tangible fixed assets
                                          (978)             (1,633)
Cash paid for investments                 (276)             (235)
Internal costs capitalised                (1,524)           (1,920)

   Net cash inflow/(outflow) from capital
     expenditure and financial investment         1,787            (4,400)
                                                  


(b) ANALYSIS OF CASH FLOWS FOR HEADINGS NETTED IN THE CASH FLOW STATEMENT
(continued)
                                                  2006                2005
                                        £'000     £'000     £'000     £'000
Financing
New loans                               35,000              6,500
Repayment of loans                      (26,102)            (2,895)
Repurchase of the Guaranteed
Secured Stock due 2023
                                        (8,915)             -

Net cash (outflow)/inflow from
financing                                         (17)                3,605
                                                  

(c)            ANALYSIS OF NET DEBT
                                                       Other
                             At 1 April     Cash    non-cash   At 31 March
                                2005        flow     changes          2006
                               £'000       £'000       £'000         £'000

Cash at bank and in hand     34,521       17,427       -            51,948
Debt due within one year     (26,740)     25,102       1,638        -
Debt due after one year      (364,292)    (25,085)     (1,239)      (390,616)

                              (356,511)   17,444       399          (338,668)


1. ACCOUNTING POLICIES

The financial statements have been prepared in accordance with applicable United
Kingdom Accounting Standards, Statements of Recommended Practice and the
Accounting Requirements for Registered Social Landlords General Determination
2000.

A summary of the more important accounting policies as amended for the adoption
of the above is set out below.

Basis of accounting

The financial statements are prepared on the historical cost basis of
accounting. The exceptions to this are the revaluation of quoted securities held
as Fixed Asset Investments to reflect market value and the £4,684,000
revaluation of properties repurchased from a BES Company in 1999.

The assets and liabilities associated with the transfer of the Clays Lane estate
to the trust on 1 August 2005 have been recorded at their fair value.

Basis of consolidation

The group accounts comprise those of the Trust and its subsidiaries, in
accordance with the requirements of FRS 2 - 'Accounting for subsidiary
undertakings'.

Turnover

Turnover represents rental income receivable, fees and revenue grants from local
authorities, the Housing Corporation and other funding bodies, and income from
the sale of housing properties built for sale.

Tangible fixed assets, depreciation and impairment

Tangible fixed assets are stated at cost less accumulated depreciation and any
provision for impairment, except for the revaluation of properties repurchased
from the BES Company as noted above. The cost of housing properties comprises
their purchase price, together with directly attributable costs in bringing them
into working condition for their intended use. Directly attributable costs, in
accordance with FRS 15, include labour costs of own employees incurred directly
on the construction or acquisition of the property, and incremental costs that
would have been avoided only if individual properties had not been constructed
or acquired.

Interest on borrowings is charged to housing properties under construction up to
the date of completion of each scheme. The interest charged is on net borrowings
to the extent that they are deemed to be financing a scheme. This treatment
applies irrespective of the original purpose for which the loan was raised.

Freehold land is not depreciated. Depreciation is charged on a straight line
basis over the estimated useful economic lives of other assets at the following
annual rates:

Housing properties                      1% - 7%

Freehold offices                        1.67%

Office equipment                        20%

Motor vehicles                          25%

The Group depreciates housing properties by component on a straight line basis
over the estimated useful economic lives of component categories.

Component categories used by the Trust include general structure, windows,
doors, roofs, lifts, boilers and electrical installations.

Properties held on long leases are depreciated over their estimated useful
economic lives or the life of the lease if shorter.

Impairment reviews are carried out on an annual basis on assets whose useful
economic lives exceed 50 years, in accordance with Financial Reporting Standard
11.


1. ACCOUNTING POLICIES

Social Housing Grant

Where developments have been financed wholly or partly by Social Housing Grant
(SHG), the amount of SHG received and receivable in respect of housing
properties is deducted from the cost of housing properties.

At the balance sheet date, if the SHG received or receivable on the development
programme as a whole is greater than gross cost, the difference is included
within creditors falling due within one year and shown as SHG in advance.

Sale of housing properties

Where properties built for sale are disposed of during the year, the disposal
proceeds are included in turnover, and the attributable costs are included as
costs of sales within operating costs.

The surplus or deficit on the disposal of housing properties held as fixed
assets is shown on the face of the income and expenditure account.

Shared ownership properties

Shared ownership properties are included in fixed assets at their cost net of
social housing grant. Proceeds from first tranche sales are credited against
cost. Sales of subsequent tranches are accounted for as disposals of fixed
assets, with the relevant proportion of cost being accounted for as a cost of
the disposal.

Shared ownership properties in the course of construction are stated at cost and
transferred to housing properties when completed.

Operating leases

Rentals paid under operating leases are charged to the income and expenditure
account in equal amounts over the lease term.

Investments

Fixed asset investments are stated at their market value except for investments
in subsidiary undertakings, which are carried at cost less any provision for
impairment.

Stocks

Stocks and work in progress represent land and properties being held for resale
and are stated at the lower of cost and net realisable value.

Pension costs

The Group provides membership of the Local Government Pension Scheme, the London
Pension Fund Authority, for its employees. This is a funded pension scheme. The
assets of the pension fund are managed by third-party investment managers and
are held separately in trust.

Regular valuations are prepared by independent professionally qualified
actuaries. These determine the level of contributions required to fund the
benefits set out in the rules of the fund and allow for the periodic increase of
pensions in payment. Following the full adoption of FRS 17, the regular service
cost of providing retirement benefits to employees during the year, together
with the cost of any benefits relating to past service is charged against the
operating surplus in the year.

A credit representing the expected return on the assets of the pension fund
during the year is included within other finance income. This is based on the
market value of the assets of the fund at the start of the financial year.

A charge within other finance charges representing the expected increase in the
liabilities of the pension fund during the year is included within net interest.
This arises from the liabilities of the fund being one year closer to payment.

The difference between the market value of assets and the present value of
accrued pension liabilities is shown as an asset or liability in the balance
sheet net of deferred tax.



1. ACCOUNTING POLICIES

Pension costs (continued)

Differences between actual and expected returns on assets during the year are
recognised in the statement of total recognised surpluses and deficits in the
year, together with differences arising from changes in assumptions.

Loans and other financial instruments

Loans and other financial instruments are stated in the balance sheet at the
amount of the net proceeds.

Loan arrangement costs, including incremental issue costs, are deducted from the
loan and amortised over the term of the loan at a constant rate.

Where loans and other financial instruments are redeemed during the year, any
redemption penalty is recognised in the income and expenditure account of the
year in which redemption takes place.

Designated reserves

The Trust designates reserves for particular purposes with the expectation that
amounts from these reserves will be transferred back to general reserves to
match relevant expenditure in the income and expenditure account.

Revaluation reserve

The revaluation reserve records any appreciation in value of fixed asset
investments except where the revalued asset represents designated reserves, in
which case the revaluation element is shown separately as part of the designated
reserve. The revaluation reserve also records the revaluation of properties
repurchased from the BES Company as noted above in 1999.

Recycled capital grant fund/Disposal Proceeds Fund

On disposal of relevant housing property the Trust is allowed to retain social
housing grant for eligible re-investment. This amount is included in creditors.

Homes managed by other parties on behalf of the Trust

A number of the Trust's supported homes are managed by third parties on behalf
of the Trust. Where the risks and benefits of managing these homes have been
transferred to the third party the transactions relating to such homes are
excluded from the Trust's revenue account.

Related party transactions

The Trust has taken advantage of the exemption permitted by FRS 8 - 'Related
Party Disclosures', and does not disclose transactions with group undertakings
that are eliminated on consolidation.



2(a) TURNOVER AND OPERATING SURPLUS
TRUST                           2006                              2005
                                        Operating                         Operating
                                        surplus/                          surplus/
                             Operating  (deficit)               Operating (deficit)
                    Turnover Costs                   Turnover   Costs
                    £'000    £'000      £'000        £'000      £'000     £'000
                             
Social housing lettings

General needs       69,423   (48,993)   20,430       64,801     (43,317)  21,484
housing
Shared ownership    980      (570)      410          777        (610)     167
Key worker          2,255    (561)      1,694        1,755      (442)     1,313

                    72,658   (50,124)   22,534       67,333     (44,369)  22,964
Other social
housing activities
Donations received  2,099    -          2,099        1,864      -         1,864
Development costs   751      (3,522)    (2,771)      673        (5,597)   (4,924)
Supporting People
contract income
                    256      -          256          305        (310)     (5)
Non social-housing
activities
Market renting      1,702    (645)      1,057        2,190      (395)     1,795
Commercial lettings 2,656    (1,218)    1,438        2,395      (785)     1,610
Leasehold           541      (755)      (214)        431        (536)     (105)
properties
Community           3,030    (4,370)    (1,340)      2,900      (4,521)   (1,621)
regeneration
Sale of properties  292      (163)      129          1,132      (1,026)   106

Total               83,985   (60,797)   23,188       79,223     (57,539)  21,684


In addition to the above the Trust administered income and expenditure during
the year totalling £2,016,000 (2005: £2,110,000) on behalf of the Local Network
Fund for Children and Young People (LNF). These figures are excluded from the
above results.


2(a) TURNOVER AND OPERATING SURPLUS

                                2006                               2005
GROUP
                                        Operating                         Operating
                                        surplus/                          surplus/
                              Operating (deficit)               Operating (deficit)
                              costs                             costs     
                    Turnover                         Turnover
                    £'000     £'000     £'000        £'000      £'000     £'000 
                                                     
Social housing lettings

General needs       75,195    (52,359)  22,836       70,402     (46,288)  24,114
housing
Shared ownership    980       (570)     410          777        (610)     167
Key worker          2,255     (561)     1,694        1,755      (442)     1,313

                    78,430    (53,490)  24,940       72,934     (47,340)  25,594
Other social
housing lettings
Donations received  40        -         40           -          -         -
Development costs   751       (3,522)   (2,771)      673        (5,597)   (4,924)
Other               951       (808)     143          27         (27)      -
Supporting People
contract income
                    320       (80)      240          343        (358)     (15)
Non social housing
activities
Market renting      1,702     (645)     1,057          2,190    (395)     1,795
Commercial lettings 2,656     (1,218)   1,438          2,395    (785)     1,610
Leasehold           541       (755)     (214)           431     (536)     (105)
properties
Community           3,030     (4,370)   (1,340)        2,900    (4,521)   (1,621)
regeneration
Sale of sites and   9,770     (7,856)   1,914          5,039    (2,902)   2,137
properties
Other               284       (39)      245              -      (141)     (141)

Total               98,475    (72,783)  25,692       86,932     (62,602)  24,330


2(b) PARTICULARS OF INCOME AND EXPENDITURE FROM SOCIAL HOUSING LETTINGS

TRUST

Income from lettings
                                          General   Supported    Shared Key Worker
                                          Needs     Housing   Ownership    Housing
                                          Housing
                                                                                                Total     Total
                                          2006      2006       2006     2006                    2006      2005

                                         £'000     £'000      £'000     £'000                   £'000     £'000

Rents receivable                             58,480 3,776     647       2,267                   65,170    61,298
Service charges receivable                    4,094 1,082     289       16                       5,481     4,483
Charges for support services                      2 1,294       -       -                        1,296     1,353
Other income                                    797 1,503     46        94                       2,440     2,073

Gross rental income                          63,373 7,655     982       2,377                   74,387    69,207
Less: Rent losses from voids                (1,394) (211)     (2)       (122)                  (1,729)   (1,874)

Total income from social housing             61,979 7,444     980       2,255                   72,658    67,333

Services                                  (5,525)   (525)     (147)     (36)                    (6,233)   (5,504)
Management                                (14,752)  (2,877)   (143)     (266)                   (18,038) (18,428)
Routine maintenance                       (7,375)   (501)     (55)      (122)                   (8,053)  (6,643)
Cyclical maintenance                      (8,697)   (744)     (41)      -                       (9,482)  (6,669)
Rent losses from bad debts                (1,160)   (81)      -         (2)                     (1,243)  (1,169)
Depreciation of housing properties        (6,514)   (242)     (184)     (135)                   (7,075)  (5,956)

Operating costs on social housing         (44,023)  (4,970)   (570)                             (561)    (50,124)       
(44,369)

Operating surplus on social housing       17,956    2,474     410       1,694                   22,534    22,964
lettings


2(b) PARTICULARS OF INCOME AND EXPENDITURE FROM SOCIAL HOUSING LETTINGS

GROUP

Income from lettings
                                        General   Supported Shared           Key Worker       Total       Total
                                        Needs     Housing   Ownership
                                        Housing                                 Housing
                                        2006      2006      2006                   2006        2006        2005
                                        £'000     £'000     £'000                 £'000       £'000       £'000



Rents receivable                           64,221 3,776     647                   2,267       70,911    66,835
Service charges receivable                  4,094 1,082     289                   16          5,481     4,483
Charges for support services                   44 1,294     -                     -           1,338     1,431
Other income                                  797 1,503     46                    94          2,440     2,073

Gross rental income                     69,156    7,655     982                   2,377       80,170    74,822
Less: Rent losses from voids              (1,405) (211)     (2)                   (122)       (1,740)   (1,888)

Turnover from social housing            67,751    7,444     980                   2,255       78,430    72,934

      Expenditure on letting activities
Services                                (5,567)   (525)     (147)                 (36)        (6,275)   (5,582)
Management                              (16,724)  (2,877)   (143)                 (266)       (20,010)  (20,303)
Routine maintenance                     (8,558)   (501)     (55)                  (122)       (9,236)   (7,608)
Cyclical maintenance                    (8,697)   (744)     (41)                  -           (9,482)   (6,669)
Rent losses from bad debts              (1,329)   (81)      -                     (2)         (1,412)   (1,222)
Depreciation of housing properties      (6,514)   (242)     (184)                 (135)       (7,075)   (5,956)

Operating costs on social housing       (47,389)  (4,970)   (570)                 (561)       (53,490)  (47,340)

Operating surplus on social housing     20,362    2,474     410                   1,694       24,940    25,594
lettings


3. EMOLUMENTS OF GOVERNORS AND EXECUTIVE OFFICERS

None of the Governors received any emoluments during the year (2005: £nil) and
Governors were reimbursed expenses totalling £1,155.


The remuneration paid to the Chief Executive and Executive Officers (as listed
on page 1) was as follows:
                                                             2006      2005

                                                             £         £
Total emoluments (including pension
contributions and benefits in kind)                          559,243   692,615
                                                             
Amounts paid in respect of interim directors                 212,691   -

Emoluments (excluding pension
contributions) paid to the Chief
Executive                                                    135,854   128,488



The Chief Executive is an ordinary member of the Trust's pension scheme.

The Nominations and Remuneration Committee of the Governors meets at least three
times a year and fixes the remuneration of the Chief Executive and the Executive
Team.

4. EMPLOYEE INFORMATION

The average number of persons employed during the year was:
                                                                  2006    2005
The average number of full-time                                   No.     No.
equivalent employees

Head office functions                                             145     163
Housing management                                                254     269
Maintenance workforce                                             94      97
Community regeneration                                            76      74

                                                                  569     603

                                                                  2006    2005
Staff costs for the above                                         £'000   £'000
persons:

Wages and salaries                                                15,186  15,850
Other staff costs                                                 1,439   1,797
Social security costs                                             1,438   1,484
Other pension costs (note 17)                                     2,261   1,574

                                                                  20,324  20,705




5. INTEREST RECEIVABLE AND SIMILAR INCOME
                                              Trust               Group
                                         2006      2005      2006      2005
                                         £'000     £'000     £'000     £'000


Income from listed investments           234       354       234       354
Other interest receivable and similar    7,579     7,859     8,236     8,398
income
Interest received from Group entities    2,688     2,429     -         -

                                         10,501    10,642    8,470     8,752


6. INTEREST PAYABLE AND SIMILAR CHARGES
                                              Trust               Group
                                         2006      2005      2006      2005
                                         £'000     £'000     £'000     £'000

Interest payable on loans                36,849    36,410    36,849    36,410
Amounts capitalised                      (2,350)   (2,250)   (2,759)   (2,369)
Former Housing Corporation loan breakage -         1,192     -         1,192
costs
Penalty on repurchase of £8.9m of the    5,160     -         5,160     -
Guaranteed Secured Stock due 2023
Interest cost of funding pension scheme  256       426       298       467
liability

                                         39,915    35,778    39,548    35,700

7. SURPLUS ON ORDINARY ACTIVITIES BEFORE TAXATION

                                             Trust                Group
                                         2006      2005      2006      2005
                                         £'000     £'000     £'000     £'000

Surplus on ordinary activities before
taxation is stated after charging/
(crediting):

Depreciation on tangible fixed assets    8,749     7,569     8,790     7,604
Auditors' remuneration:
In their capacity as auditors :
Group                                    -         -         107       96
Trust                                    82        78        -         -
In respect of other services             15        56        15        56



8. TAXATION CHARGE
                                              Trust               Group
                                         2006      2005      2006      2005

                                         £'000     £'000     £'000     £'000
The taxation charge comprises:
Adjustment in respect of prior           -         -         -         -
years
United Kingdom corporation tax
at 30% (2005 - 30%)                      -         -         -         -
                                         
                                         -         -         -         -


The tax assessed for the period is lower than that resulting from applying the
standard rate of 30% corporation tax in the UK. The differences are explained
below:

                                                           Group     Group
                                                           2006      2005

                                                           £'000     £'000

Surplus on ordinary activities before                      27,635    18,434
taxation

Tax on profit on ordinary activities at
standard rate of 30%                                       (8,291)   (5,530)
                                                           
Factors affecting charge for the year:

Charitable surplus exempt taxation                         8,291     5,530

                                                           -         -


A deferred tax asset has not been recognised in respect of the timing
differences relating to trading losses as there is insufficient evidence that
the asset will be recovered. The amount of the asset not recognised is £530,000
(2005: £612,000). The asset would be recovered if suitable taxable profits were
to arise in the future against which the losses could be offset.


9 (a) HOUSING PROPERTIES - TRUST
                                                            Housing
                                                            properties
                                                            under
                                                            construction
                                                 Housing
                                                 properties
                                                                         Total
                                                 £'000      £'000        £'000
Cost:

At 1 April 2005                                  820,822    66,069       886,891
Schemes completed                                76,693     (76,693)     -
Additions                                        5,000      50,917       55,917
Disposals                                        (10,121)   -            (10,121)

At 31 March 2006                                 892,394    40,293       932,687

Social housing grant:

At 1 April 2005                                  326,776    28,394       355,170
Schemes                                          22,827     (22,827)     -
Received                                         5,718      15,914       21,632
Disposals                                        (3,851)    -            (3,851)

At 31 March 2006                                 351,470    21,481       372,951

Other public grants:

At 1 April 2005                                  40,501     12,911       53,412
Schemes completed                                10,051     (10,051)     -
Received                                         -          2,478        2,478

At 31 March 2006                                 50,552     5,338        55,890

Depreciation:
At 1 April 2005                                  18,000     -            18,000
Charge for the year                              7,559      -            7,559

At 31 March 2006                                 25,559     -            25,559

Net book value
At 31 March 2006                                 464,813    13,474       478,287

Net book value
At 31 March 2005                                 435,545    24,764       460,309



Additions during the year comprise £31.6 million of major repairs and
refurbishment works, £19.3 million of expenditure on new-build properties and £5
million in respect of the properties transferred to the Trust from the Clays
Lane Housing Co-operative on 1 August 2005.


9 (a) HOUSING PROPERTIES - TRUST (continued)

Additions to housing properties in the course of construction during the year
included capitalised interest (at an average rate during the year of 7.6%) of
£2,350,000 (2005 - £2,250,000).

Housing properties includes shared ownership properties that have a cost of
£59,204,000 (2005:£41,038,000) and associated Social Housing Grant of
£12,090,000 (2005:£8,866,000).

Housing properties includes £168 million of land which has not been depreciated.
                                                              2006     2005
                                                              £'000    £'000
Housing properties comprise:
Freeholds                                                     839,302  799,223
Long leaseholds                                               93,385   87,668

                                                              932,687  886,891


9 (b) HOUSING PROPERTIES - GROUP
                                                             Housing
                                                             properties
                                                  Housing    under
                                                  properties construction Total
                                                  £'000      £'000        £'000

Cost:

At 1 April 2005                                   874,723    68,055       942,778
Schemes completed                                 78,592     (78,592)     -
Additions                                         7,705      52,333       60,038
Disposals                                         (12,851)   -            (12,851)

At 31 March 2006                                  948,169    41,796       989,965

Social housing grant:

At 1 April 2005                                   326,776    28,394       355,170
Schemes completed                                 22,827     (22,827)     -
Received                                          5,718      15,914       21,632
Disposals                                         (3,851)    -            (3,851)

At 31 March 2006                                  351,470    21,481       372,951

Other public grants:

At 1 April 2005                                   54,785     13,830       68,615
Schemes completed                                 10,969     (10,969)     -
Received                                          29         3,439        3,468

At 31 March 2006                                  65,783     6,300        72,083

Depreciation:

At 1 April 2005                                   18,000     -            18,000
Charge for the year                               7,559      -            7,559

At 31 March 2006                                  25,559     -            25,559

Net book value

At 31 March 2006                                  505,357    14,015       519,372

Net book value

At 31 March 2005                                  475,162    25,831       500,993



Additions during the year comprise £31.6 million of major repairs and
refurbishment works, £23.4 million of expenditure on new-build properties and £5
million in respect of the properties transferred to the Trust from the Clays
Lane Housing Co-operative on 1 August 2005.
9(b) HOUSING PROPERTIES - GROUP (continued)

Additions to housing properties in the course of construction during the year
included capitalised interest (at an average rate during the year of 7.9 %) of
£2,759,000 (2005 - £2,369,000).

Housing properties include shared ownership properties that have a cost of
£63,275,000 (2005:£44,738,000) and associated Social Housing Grant of
£13,222,000 (£2005:£8,866,000).

Housing properties includes £180 million of land which has not been depreciated.

                                                             2006      2005
                                                             £'000     £'000
Housing properties comprise:
Freeholds                                                    896,580   855,110
Long leaseholds                                              93,385    87,668

                                                             989,965   942,778

9(c) SOCIAL HOUSING GRANT

The total Social Housing Grant receivable to date is £372,951,000 (2005:
£355,170,000), as shown in note 9(b) with no amounts credited to the income and
expenditure account.


10 (a) OTHER TANGIBLE FIXED ASSETS - TRUST

                                             Freehold Motor    Office
                                             offices  vehicles equipment
                                                                         Total
                                             £'000    £'000    £'000     £'000

Cost:

At 1 April 2005                              13,523   100      10,322    23,945
Additions                                    42       15       905       962

At 31 March 2006                             13,565   115      11,227    24,907

Other public grants:

At 1 April 2005                              -        -        4,138     4,138
Received                                     -        -        73        73

At 31 March 2006                             -        -        4,211     4,211

Depreciation:

At 1 April 2005                              3,608    100      4,566     8,274
Charge for the year                          509      15       666       1,190

At 31 March 2006                             4,117    115      5,232     9,464

Net book value

At 31 March 2006                             9,448    -        1,784     11,232

Net book value

At 31 March 2005                             9,915    -        1,618     11,533



10 (b) OTHER TANGIBLE FIXED ASSETS - GROUP



                                               Freehold Motor    Office
                                               offices  vehicles equipment Total
                                               £'000    £'000    £'000     £'000

Cost:

At 1 April 2005                                13,965   100      10,648    24,713
Additions                                      42       15       921       978

At 31 March 2006                               14,007   115      11,569    25,691

Other public grants:

At 1 April 2005                                -        -        4,138     4,138
Received                                       -        -        73        73

At 31 March 2006                               -        -        4,211     4,211

Depreciation:

At 1 April 2005                                3,615    100      4,797     8,512
Charge for the year                            517      15       699       1,231

At 31 March 2006                               4,132    115      5,496     9,743

Net book value

At 31 March 2006                               9,875    -        1,862     11,737

Net book value

At 31 March 2005                               10,350   -        1,713     12,063


11. FIXED ASSET INVESTMENTS
Trust                                        Shares in  Shares in
                                            subsidiary     quoted
                                          undertakings securities

                                                                  Total
                                          £'000        £'000      £'000

Market Value

At 1 April 2005                           10,000       6,602      16,602
Additions                                 -            276        276
Wind up of company                        (5,000)    -            (5,000)
Change in market value of
Peabody Community Fund (PCF)              -            903        903
                                                     

At 31 March 2006                          5,000        7,781      12,781


As at 31 March 2006 all of the former BES subsidiaries had been wound up with
House The Homeless of London (Greenwich) Limited having been wound up during the
year.

In addition to investment in subsidiary companies, Trust fixed asset investments
comprise shares in quoted securities held by the Peabody Community Fund. The
investment income generated from the Peabody Community Fund shares is used to
fund the activities of Peabody Community Fund. The historic cost of these shares
is £6,878,000 and the market value as at 31 March 2006 was £7,781,000 (2005:
£6,602,000).

Group fixed assets investments comprise the above shares in quoted securities.

12. STOCKS AND WORK IN PROGRESS
                                                  Trust               Group
                                        2006      2005      2006      2005
                                        £'000     £'000     £'000     £'000

Housing properties held for             -         160       1,366     4,270
sale
Land held for sale                      -         -         800       800

                                        -         160       2,166     5,070


13. DEBTORS
                                       Trust               Group
                                       2006      2005      2006      2005
                                       £'000     £'000     £'000     £'000
Amounts falling due within
one year

Rent and service charges in            10,079    8,180     10,834    8,924
arrears
Less: provision for bad debts          (4,182)   (3,259)   (4,655)   (3,605)

                                       5,897     4,921     6,179     5,319

Operating lease payments in            76        164       78        176
advance
Amounts owed by subsidiary
undertakings                           4,883     3,730     -         -
                                       
Loans to employees                     62        71        62        71
Other debtors and prepayments          1,908     1,911     2,466     2,448
Loan to Shelter                        -         117       -         117
Loan to Charity Bank                   540       526       540       526

                                       13,366    11,440    9,325     8,657

Amounts falling due after one
year

Amounts owed by subsidiary
undertakings                           34,438    38,638    -         -
                                       
Blue Hut Escrow account                    -         -           500       500
Loan to SCORE                              -         -           120       120

                                        34,438    38,638         620       620

During the year Shelter repaid the loan outstanding to the Trust.

At the balance sheet date, a total of £34,438,000 is on-lent to CBHA at terms
which reflect the terms of the main loan agreement between Peabody Trust and
Abbey plc, including a fixed rate of 6.79% applicable to £25 million of the
loan, maintained as part of the refinancing of the original facility. The term
of the loan is 30 years and repayments will be made annually commencing in 2007.

During the year ended 31 March 2005 CBHA made an unsecured loan to Sporting Club
Orient (SCORE), a charitable organisation providing sports facilities in East
London. A fixed rate of interest at 5.5% applies to the loan, which is repayable
over five years with the first repayment being due on the third anniversary of
the loan.

During the year Blue Hut Developments Limited drew down a further £2.9 million
of a £10 million loan facility with the Trust and subsequently repaid £7
million. This loan was at a variable rate of 1.5% above LIBOR. The loan was used
to fund property construction. All surpluses generated by the company are paid
to the Trust under gift aid.



14. CREDITORS: AMOUNTS FALLING DUE WITHIN ONE YEAR

                                         Trust                Group
                                         2006       2005      2006     2005
                                         £'000      £'000     £'000    £'000

Instalments of loan principal             -         26,740    -        26,740
Rent and service charges received in     2,881      3,042     3,127    3,337
advance
Trade creditors                          8,065      5,352     8,318    5,634
Amounts owed to subsidiary undertakings   686       5,003     -        -
Amounts owed to joint venture            46         64        46       64
Loan from Peabody Pension Trust          26         24        26       24
Taxation and social security costs        786       658       801      1,217
Accruals and deferred income             12,067     13,380    13,551   14,430

                                         24,557     54,263    25,869   51,446

During the year the final BES Company, House The Homeless of London (Greenwich)
Limited, was wound up with all intercompany balances settled.

15. CREDITORS: AMOUNTS FALLING DUE AFTER MORE THAN ONE YEAR

                                         Trust             Group
                                         2006     2005     2006      2005
                                         £'000    £'000    £'000     £'000

Bank and building society                173,869  137,534  173,397   137,036
loans
Debenture stock                          150,000  150,000  150,000   150,000
Guaranteed secured debenture             91,085   100,000  91,085    100,000
stock
Debenture stock held by Peabody Trust    (50,000) (50,000) (50,000)  (50,000)
Debenture and guaranteed debenture stock 14,564   16,239   14,564    16,239
premium
SAGE investors' scheme                   11,570   11,017   11,570    11,017

                                         391,088  364,790  390,616   364,292
Recycled capital grant and
disposal proceeds fund                   6,460    1,924    6,460     1,924
                                        
                                         397,548  366,714  397,076   366,216

Bank and building society loans

Bank and building society loans represent loans from Nationwide Building Society
and Abbey plc.

The Trust has a £75 million loan facility with Abbey plc to provide general
finance for the group. Of the total facility amount £60 million may be on-lent
to CBHA. The term of the loan is 30 years and repayments will be made annually
commencing in 2007.

At the balance sheet date, a total of £34,438,000 is on-lent to CBHA at terms
which reflect the terms of the main loan agreement between Peabody Trust and
Abbey plc, including a fixed rate of 6.79% applicable to £25 million of the
loan, maintained as part of the refinancing of the original facility. The
on-lending is disclosed as a debtor due in more than one year in the Trust's
balance sheet.

During the year the Trust extended its existing undrawn loan facility with
Barclays Bank plc to provide a facility of £120 million. In addition a new loan
facility providing £100m was arranged with Royal Bank Of Scotland. Subsequent to
the balance sheet date, on 2 June 2006, £135 million of these facilities were
used to redeem the £100 million First Mortgage Debenture Stock due 2018, in line
with a resolution passed at an EGM of stockholders on 18 May 2006. The balance
of the redemption sum of £151.3 million was funded from cash balances held in
anticipation of the transaction.


15. CREDITORS: AMOUNTS FALLING DUE AFTER MORE THAN ONE YEAR (continued)

On 8 February 2006 the Trust redeemed its zero coupon bond with AIB.

All other loans are secured by specific charges on the Trust's housing
properties and are repayable at interest rates of between 5.29% and 13.625% and
are repayable in instalments due as shown on page 45.

Debentures

Debenture Stock is 10.25% First Mortgage Debenture Stock redeemable in 2018. The
stock is secured on selected housing properties.

Guaranteed Secured Debenture Stock is 10.25% Guaranteed Secured Stock redeemable
in 2023. The stock is secured on selected housing properties and on the 2018
Debenture Stock. During the year £8.9 million of the Guaranteed Secured Stock
due 2023 became available for repurchase. The Trust took advantage of this
opportunity. A penalty of £5.2 million was paid. Interest savings will be
reflected in future years' financial statements.

The fair value (market value) of the Trust's Loan stock at 31 March 2006 was
£310 million, compared to a balance sheet value of £191 million.

Risks

The main risks arising from the groups' financial instruments are interest rate
risk and liquidity risk. The Finance and Audit Committee reviews and agrees
policies for managing these risks and these are summarised below:

Interest rate risk

The Group borrows at both fixed and floating interest rates. £277 million of the
Group's borrowings are at fixed rates with the remainder at floating rates.

Liquidity risk

The Group's policy is to limit liquidity risks by a regular review by the
Finance Committee of the current situation. In broad terms, the group ensures
that it has adequate short and long term negotiated facilities, together with
overdraft facilities and loans to provide the required level of funding
flexibility.

15. CREDITORS: AMOUNTS FALLING DUE AFTER MORE THAN ONE YEAR (continued)
                                                                2006      2005

                                         Bank and
                                         building
                                         society
                                         loans
                                                   Orchardbrook
                                         £'000     Limited
TRUST                                                           Total     Total
                                                   £'000
                                                                £'000     £'000

At beginning of year                     137,534   -            137,534   161,164
New loans                                35,000    -            35,000    5,035
Assigned upon transfer of Clays
Lane Estate
                                         -         985          985       -
Reclassification of amounts due
within one year
                                         1,638     -            1,638     -
Accrued interest                         -         -            -         1,477

                                         174,172   985          175,157   167,676
Less:
Instalments repaid during the            (1,000)   -            (1,000)   (2,895)
year
Loan arrangement fees                    (288)     -            (288)     (507)
Repayable within one year                -         -            -         (26,740)

At end of year                           172,884   985          173,869   137,534

Repayable in:
2-5 years                                9,710     -            9,710     16,804
More than 5 years                        163,174   985          164,159   120,730

                                         172,884   985          173,869   137,534

15. CREDITORS: AMOUNTS FALLING DUE AFTER MORE THAN ONE YEAR (continued)
                                                                2006      2005

                                         Bank and  Orchardbrook
                                         building  Limited
GROUP                                    society                Total     Total
                                         loans
                                         £'000     £'000        £'000     £'000

At beginning of year                     137,036   -            137,036   160,666
New loans                                35,000    -            35,000    5,035
Assigned upon transfer of Clays
Lane Estate                              -         985          985
                                         
Reclassification of amounts due
within one year                          1,638     -            1,638
                                         
Accrued interest                         --        -            -         1,477

                                         173,674   985          174,659   167,178
Less:
Instalments repaid during the            (1,000)   -            (1,000)   (2,895)
year
Loan arrangement fees                    (262)     -            (262)     (507)
Repayable within one year                -         -            -         (26,740)

At end of year                           172,412   985          173,397   137,036

Repayable in:
2-5 years                                9,710     -            9,710     16,804
More than 5 years                        162,702   985          163,687   120,232

                                         172,412   985          173,397   137,036


16. RESERVES
                                                       -- Designated Reserves --
                                                                      Peabody
                                                                      Community
                                    Revenue    Revaluation Subsidence Fund
                                    Reserve                Reserve
                                               Reserve                           Total
                                    £'000      £'000       £'000      £'000      £'000
Trust
At 1 April 2005                     114,468    -           1,000      7,407      122,875
Transfers                           (288)      -           -          288        -
Surplus in the year                 25,401     -           -          -          25,401
Other (losses)/gains                (1,908)    -           -          903        (1,005)

At 31 March 2006                    137,673    -           1,000      8,598      147,271

Group
At 1 April 2005                     122,653    4,403       1,000      7,407      135,463
Transfers                           (7)        (281)       -          288        -
Surplus in the year                 27,635     -           -          -          27,635
Other (losses)/gains                (2,217)    -           -          903        (1,314)

At 31 March 2006                    148,064    4,122       1,000      8,598      161,784


The Peabody Community Fund designated reserve includes £903,000 in respect of
the revaluation of the Peabody Community Fund investment portfolio.


The annual surpluses ensure that Peabody is able to meet its commitment to
providers of private finance and to continue fighting poverty in London.


At 31 March 2006 the Trust's General Reserves, being those which are not
designated, were all used in financing investment in social housing.

.

17. PENSION LIABILITIES

The London Pensions Fund Authority

The Trust participates in the London Pensions Fund Authority Scheme (LPFA) for
those employees who elect to join.

The pension cost, which includes liability for pension increases, has been
determined in accordance with the advice of professionally qualified consulting
actuaries based on an actuarial valuation made as at 31 March 2004 using the
projected unit method. The most significant actuarial assumptions used in this
valuation were:

Rate of return on investments           -     6.3% per annum

Rate of general pay increases           -     4.40% per annum

Rate of increase in pensions in payment -     2.90% per annum

Valuation of assets                     -     assets have been valued at a
                                              12 month smoothed market value.

The actuarial valuation at 31 March 2004 showed that the market value of the
LPFA's assets represented 74% of the value of benefits that had accrued to the
Fund's pensioners, deferred pensioners and members based on past service,
allowing for assumed future pay and pension increases. The valuation has been
updated to 31 March 2006.

The Trust's service cost under the LPFA was £1,537,000 (2005 - £1,527,000).

The Group's service cost under the LPFA was £1,662,000 (2005 - £1,645,000)

The major assumptions used by the actuary to value the liabilities of the scheme
under FRS 17 are:
                                                  At 31     At 31     At 31
                                                  March     March     March
                                                  2006      2005      2004
                                                  % per     % per     % per
                                                  annum     annum     annum

Rate of increase in payment:                      3.1       2.9       2.9
Rate of increase in salaries                      4.6       4.4       4.4
Discount rate                                     4.9       5.4       5.5
Inflation assumptions                             3.1       2.9       2.9

Valuation method                                  Projected Projected Projected
                                                       unit      unit      unit

17. PENSION LIABILITIES (continued)

The London Pensions Fund Authority

The assets in the Scheme and expected rates of return were:

                                 Expected  Value at Expected   Value at Expected   Value at
                                     long  31 March     long   31 March     long   31 March
                                     term      2006     term       2005     term       2004
                                  rate of            rate of             rate of
                                   return     £'000   return      £'000   return      £'000

Equities                         7.3%     23,613    7.7%     23,044     7.7%     20,703
Target return funds/Bonds        6.0%     7,134     4.8%     3,156      5.1%     3,157
Alternative assets/Property      6.5%     4,416     5.7%     2,080      6.5%     950
Cash                             4.6%     2,302     4.8%     980        4.0%     399

Total market value of assets              37,465             29,260              25,209

Present value of scheme liabilities       (53,791)           (43,050)            (40,870)
Present value of unfunded liabilities     (82)               (90)                (100)

Net pension liability                     (16,408)           (13,880)            (15,761)


                                               2006      2006       2005      2005
    Amounts Charged to Operating Profit        £'000     (% of      £'000     (% of
                                                         payroll)             payroll)

    Service cost                               1,537     16.1       1,527     14.9
    Curtailments and settlements               724       7.5        47        0.5

    Total operating charge (A)                 2,261     23.6       1,574     15.4

    Projected amount credited to other finance £'000     (% of      £'000     (% of
    income                                               payroll)             payroll)

    Expected return on employer assets         2,117     22.1       1,854     18.1
    Interest on pension scheme liabilities     (2,373)   (24.7)     (2,280)   (22.2)

    Net Return (B)                             (256)     (2.6)      (426)     (4.1)

    Net Revenue account cost (A) - (B)         2,517     26.2       2,000     19.5



    Analysis of Amount Recognisable in
    Statement of Total Recognised Surpluses
    and Deficits (STRSD)

                                                                    2006      2005
                                                                    £'000     £'000
    Annual return less expected return on
    pension scheme assets                                           4,818     806
                                                                    
    Experience gains and losses arising on the
    scheme liabilities                                              57        2,664
                                                                    
    Changes in financial assumptions                                (6,783)   (822)
    underlying the present value of the scheme
    liabilities

    Actuarial (loss)/gain recognisable in the                       (1,908)   2,648
    STRSD


17. PENSION LIABILITIES (continued)

The London Pensions Fund Authority

Movement in deficit during the year                          2006     2005
                                                             £'000        £'000

Deficit at beginning of the year                             (13,880) (15,761)
Current service cost                                         (1,537)  (1,527)
Employer contributions                                       1,890    1,225
Contributions in respect of unfunded                         7        8
benefits
Impacts of settlements and curtailments                      (724)    (47)
Net return on assets                                         (256)    (426)
Actuarial (losses)/gains                                     (1,908)  2,648

Deficit at end of year                                       (16,408) (13,880)


History of experience gains and losses   2006      2005      2004     2003
                                         £'000     £'000     £'000    £'000
                                         

Difference between the expected and
actual return on assets                  4,818     806       3,203    (8,467)
Value of assets                          37,465    29,260    25,209   19,438
Percentage of assets                     12.9%          2.8% 12.7%    (43.6)%
Experience gains/(losses) on liabilities 57        2,664     (18)     (53)
Total present value of liabilities       53,873    43,140    40,970   34,549
Percentage of the total present value of 0.1%           6.2% (0.0%)   (0.2%)
liabilities
Actuarial (losses)/gains recognised in   (1,908)   2,648     808      (9,770)
STRSD
Total present value of liabilities       53,873    43,140    40,970   34,549
Percentage of the total present value of (3.5%)         6.1% 2.0%     28.3%
liabilities



17. PENSION LIABILITIES (continued)

The London Pensions Fund Authority


The following are the disclosures presented in the financial statements of the
Trust's wholly owned subsidiary CBHA in respect of the LPFA pension scheme


                                                    2006       2005     2004
                                                    £'000      £'000    £'000

Total market value of assets ( CBHA                  2,807     2,151    1,670
share)
Present value of liabilities                         (4,619)   (3,620)  (2,970)

Net pension liability                                (1,812)   (1,469)  (1,300)



                                      2006       2006          2005      2005
Amounts Charged to Operating Profit   £'000      (% of       £'000       (% of
                                                 payroll)                payroll)

Service cost                          125        18.4%       118         17.3%
Curtailments and settlements          -          0%          22          3.2%

Total operating charge (A)            125        18.4%       140         20.5%

Amount credited to other finance
income

Expected return on employer assets    157        23.2%       125         18.3%
Interest on pension scheme            (199)      (29.4%)     (167)        (24.4%)
liabilities

Net Return (B)                        (42)       (6.2%)      (42)        (6.1%)

Net Revenue account cost (A) - (B)    167        24.6%       182         26.6%


Analysis of Amount Recognisable in                 2006              2005
Statement of Total Recognised Gains and
Losses (STRSD)
                                                   £'000             £'000
Annual return less expected return on
pension scheme assets
                                                   358               58
Experience gains and losses arising on
the scheme liabilities
                                                   -                 (64)
Changes in financial assumptions
underlying the present value of the
scheme liabilities                                 (667)             (79)

Actuarial gain/(loss) recognisable in              (309)             (85)
the STRSD


17. PENSION LIABILITIES (continued)

The London Pensions Fund Authority

Movement in deficit during the year             2006                 2005
                                                £'000                £'000

Deficit at beginning of the year                (1,469)              (1,300)
Current service cost                            (125)                (118)
Employer contributions                          133                  98
Impact of settlements and                       -                    (22)
curtailments
Net return on assets                            (42)                 (42)
Actuarial losses                                (309)                (85)

Deficit at end of year                          (1,812)              (1,469)


History of experience gains and       2006                2005          2004      2003
losses                                £'000               £'000         £'000     £'000

Difference between the expected and   358                   58           208     (529)
actual return on assets
Value of assets                       2,807              2,151         1,670     1,231
Percentage of assets                  12.7%               2.7%         12.4%   (42.9%)
Experience losses on liabilities      -                   (64)             1      (26)
Total present value of liabilities    4,619              3,620         2,970     2,455
Percentage of the total present       -                 (1.8%)          (0%)    (1.1%)
value of liabilities
Actuarial gains/(losses) recognised   (309)               (85)          (18)     (674)
in STRSD
Total present value of liabilities    4,619              3,620         2,970     2,455
Percentage of the total present       (6.7%)            (2.3%)        (0.6%)   (27.5%)
value of liabilities


Peabody Pension Trust Limited (PPT) and other pension commitments

Peabody Pension Trust acts as Trustee for the Governors of Peabody Trust for the
operation of a retirement benefits scheme for those Peabody employees who became
eligible by 31 December 1977. The Trust has entered into commitments to pay the
shortfall of pension payments over income for PPT for each year. The excess of
liabilities over commitments is measured with respect to RPI in April of each
year and in the year ended 31 March 2006 was £24,000 (2005: £21,000).

PPT is not a pension scheme under the terms of the Pension Scheme Disclosure
Regulations.


18. CAPITAL COMMITMENTS

Capital expenditure, contracted for and not provided for in the accounts,
amounts to £28,313,000 (2005 - £19,482,000).


All of this anticipated expenditure is covered by Social Housing Grant, reserves
and private finance.

19. CONTINGENT LIABILITIES

There are no known material contingent liabilities as at 31 March 2006 (2005:
£nil).

20. LEGISLATIVE PROVISIONS, TAXATION, SUBSIDIARY UNDERTAKINGS AND JOINT VENTURES

The Trust is a registered charity formed under an Act of Parliament, and a
housing association registered with the Housing Corporation.

The Trust has the following wholly owned subsidiaries, all of which are
incorporated in Great Britain and have been included in the Group results:

   • CBHA (a charitable company, limited by guarantee and a registered
    social landlord)

   • Peabody Enterprises Limited

   • Peabody Land Limited

   • Ladbroke Developments Limited
   • Blue Hut Developments Limited

Peabody Land Limited, Peabody Enterprises Limited, Ladbroke Developments Limited
and Blue Hut Developments Limited are trading subsidiaries involved in the
development and sale of land and private residential property.

The Trust has a 50% interest in a joint venture in Safe in the City Limited
which is a charitable company limited by guarantee This company no longer trades
and is in the process of being wound up.

21. ACCOMMODATION IN MANAGEMENT

                                        Trust                 Group
Managed directly at 31 March    2006             2005 2006             2005
Social Housing                  Units           Units Units           Units

Housing accommodation           15,042     15,260     16,371     16,698
Shared ownership                424        589        450        589
Keyworker                       312        250        312        250
Supported housing               558        497        613        497

                                16,336     16,596     17,746     18,034

Managed by others at 31 March

Social Housing

Housing accomodation            431        375        431        375
Supported housing               349        366        349        366

                                780        741        780        741

Non - social housing

Accommodation let at market     202        170        202        170
rent


22. TRANSACTIONS WITH RELATED PARTIES

At 31 March 2006 there were 6 members of the Board or other Committees who have
tenancy agreements with the Trust. There were 8 residents involved with the
Governance of CBHA at 31 March 2006. The tenancy agreements have been granted on
the same terms as for all other residents, and the housing management
procedures, including those relating to management of arrears have been applied
consistently to these residents.

23. SURPLUS ON SALE OF FIXED ASSETS

During the year the Trust sold 189 properties which were void and economically
unviable to retain generating a surplus of £29.8 million. In addition the Trust
generated surpluses on the sale of other properties, (largely those previously
market rented, staircasing on shared ownership properties or under the preserved
right to buy or right to acquire) generating a surplus of £1.8 million.

CBHA sold 15 properties during the year generating a surplus of £1.4 million.

24. TRANSFER OF CLAYS LANE ESTATE

On 1 August 2005 the Trust took transfer of the assets and liabilities including
leasehold land and buildings at the Clays Lane Estate in Stratford from the
Clays Lane Housing Co-operative Limited under the direction of the Housing
Corporation and at nil consideration. The fair values of the assets and
liabilities assigned to the Trust at the date of the transfer are detailed
below:

Fair Value Table
                               Book Value      Fair Value     Fair Value
                                               Adjustment  
                               £'000           £'000          £'000

Housing properties             6,114           (1,114)         5,000
Other fixed assets             -               -               -
Debtors                        -               -               -
Bank and cash                  1,663           -               1,663
Creditors                      -               -               -
Former Housing Corporation     (387)           (598)           (985)
loan
Social Housing Grant           (5,678)         -               (5,678)

                               1,712           (1,712)         -


Because of geographical proximity the day to day management of the Clays Lane
Estate is undertaken by CBHA, the Trust's wholly owned subsidiary.

Subsequent to the year end Peabody Trust entered into a conditional contract for
the sale of the site. The value expected under the conditional contract is no
lower than the amount included above for housing properties.


25. POST BALANCE SHEET EVENT

On 1 June 2006, the Trust successfully redeemed its £100m First Mortgaged
Debenture Stock due 2018. The redemption was funded through new borrowing
facilities with Barclays Bank plc and Royal Bank Of Scotland and through cash.
An early redemption penalty of approximately £51m associated with this
transaction will be accounted for in the accounts for the year ended 31 March
2007.


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