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Peabody Trust (92IA)

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Friday 27 July, 2007

Peabody Trust

Annual Report and Accounts

Peabody Trust
26 July 2007


                                    PEABODY TRUST

                         Report and Financial Statements

                                   31 March 2007
              



                                                    Charity registration: 206061

                                         Housing Corporation registration: L0014



Deloitte & Touche LLP
St Albans


PEABODY TRUST

OPERATING AND FINANCIAL REVIEW


Operating and financial review                                             1

Governors' statement of internal control                                  12

Independent auditor's report                                              13

Trust income and expenditure account                                      14

Trust statement of total recognised surpluses and deficits                15

Trust balance sheet                                                       16

Trust cash flow statement                                                 17

Notes to the Trust cash flow statement                                    18

Consolidated income and expenditure account                               20

Consolidated statement of total recognised surpluses and deficits         21

Consolidated balance sheet                                                22

Consolidated cash flow statement                                          23

Notes to the consolidated cash flow statement                             24



BOARD, EXECUTIVE OFFICERS AND ADVISORS

Members of the Board of Governors

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

Farmida Bi (Member of the Resident & Community Committee) - appointed 25 October
2006

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

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

Ngaire Drake (Member of the Property Committee)

Dudley Fishburn (Vice-Chair of the Board, Chair of the Finance Committee, Chair
of the Nominations & Remuneration Committee and Member of the Audit & Risk
Committee)

Karl King (Member of the Property Committee) - appointed 13 December 2006

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

Ken Olisa (Chair of the Audit & Risk Committee and Member of the Resident &
Community and Finance Committees)

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

Marc Hume (Member of the Resident & Community Committee)

Marisa Cassoni (Member of the Finance, Audit & Risk and Property Committees)


Co-opted Committee Members

Jane Atkinson (Property Committee) - resigned 29 August 2006

Simon Hill (Property Committee)

Elizabeth Moxon (Property Committee) - resigned 2 November 2006

Neil Gardiner (Property Committee)

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)

Ronnie Clawson (Corporate Services Director) - resigned 22 September 2006

Siobhan McHale (Interim Corporate Services Director) - appointed 27 September
2006, resigned 2 February 2007

David Lavarack (Corporate Services Director) - appointed 2 April 2007

Nick Dudman (Interim Property Director)

Maura Santos (Director of Community Services) - resigned 1 July 2006

Stephen Burns (Acting Director of Community Services) - appointed 3 July 2006

Julie Webb (Interim Director of Customer Services)


BOARD, EXECUTIVE OFFICERS AND ADVISORS


Auditors Company Secretary                                     Company Secretary

Deloitte & Touche LLP Graham Lawrence                          Graham Lawrence

3 Victoria Square

Victoria Street

St Albans AL1 3TF


Bankers Registered Office                                      Registered Office

Coutts & Co 45 Westminster Bridge Road                         45 Westminster Bridge Road

440 Strand London SE1 7JB                                      London SE1 7JB

London WC2R 0QS


Solicitors Registration Details                                Registration Details

Lewis Silkin Housing Corporation Registration - L0014          Housing Corporation Registration - L0014

5 Chancery Lane Charity Commission Registration - 206061       Charity Commission Registration - 206061

Clifford's Inn

London EC4A 1BL


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 Group owns or manages more than 18,000 homes
in London, providing affordable homes for some 50,000 people in 32 boroughs.

Peabody's portfolio comprises a significant number of properties in central
London. 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. 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 between 1998 and 2000
comprising 2,271 homes.

KEY MISSION AND VISION

Peabody Trust's principal activity within its mission of tackling poverty in
London is the provision of accommodation for those in housing need. This will be
achieved by providing excellent customer services, thriving communities and
desirable homes through a first class organisation. 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 based in London. The Group consists of two registered
social landlords, Peabody Trust and CBHA, and a number of smaller trading
companies.

The Group is a charitable organisation and has 4 key areas of activity:

   • The provision of rented housing for 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;

   • The provision of low cost home ownership, particularly shared ownership;
     and

   • 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 being established, the team have set up a wide range of anti poverty
initiatives that helped 2,500 people find jobs and 5,000 people achieve
qualifications - many for the first time. In 2006-07 we assisted over 300 people
into employment and almost 800 in achieving qualifications.

OBJECTIVES AND STRATEGY

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 Business Plan 2007-2010, entitled 'Putting the customer first',
takes forward the Trust's vision and mission and recognises certain key areas on
which to focus during the business plan period. The Trust's priorities have been
distilled into eight key areas:

   • Clear customer focus - Improve customer satisfaction with the quality
     and accessibility of services;

   • More choice - Offer customers more choice about where they live and the
     type of tenure they prefer, providing opportunities for greater customer
     involvement;

   • 21st Century Peabody Community - Define an ideal Peabody community in
     consultation with customers and all our stakeholders;

   • Improve life chances - Improve life chances for people of all ages and
     champion neighbourliness;

   • Improve and build homes - Provide customers with good quality homes that
     meet their expectations;

   • Cleaner, safer, greener - Improve our estate environments and reduce our
     carbon footprint;

   • Deliver value for money - Deliver high quality, value for money
     services; and

   • Develop a skilled workforce - Recruit and retain high calibre staff to
     deliver the Trust's objectives for customers.


The Trust's main objectives for the forthcoming year in each of the key areas
detailed above are outlined below.

Clear customer focus

In order to ensure have clear customer focus, we will:

   • Improve the quality and effectiveness of the maintenance service through
     the maintenance turnaround team;

   • Define and implement estate plans to improve service delivery on each
     estate; and

   • Roll-out a core competencies training programme for customer services
     frontline staff.


More choice

In order to ensure we provide more choice, we will:

   • Implement a choice based lettings service for transfers;

   • Research customer appetite and ability to become full or partial
     homeowners;

   • Review our customer involvement strategy;

   • Improve our understanding of customers' needs and priorities based on
     survey feedback;

   • Introduce local and regional plans that set priorities for each estate;
     and

   • Ask customers what community development initiatives they want.

21st Century Peabody Community

In order to deliver the 21st Century Peabody Community, we will:

   • Carry out research on a sample of Peabody estates to assess the
     condition of the homes and the aspirations and needs of customers;

   • Project these conclusions into the future;

   • Define 'ideals'; to include a good home and services, an attractive
     environment, a safe community and opportunities for training, jobs and
     social interaction; and

   • Measure the gap between the 'ideal' and our current service provision
     and plan how to move towards the customer's ideal over time.

Improve Life Chances

In order to improve the life chances of our customers, we will:

   • Increase the delivery of basic skills and 'english for speakers of other
     languages' provision;

   • Develop and implement a programme for financial inclusion;

   • Establish management committees for all community centres;

   • Increase the number of Youth Forums;

   • Develop and implement an employer-led approach on employment programmes;
     and

   • Deliver debt counselling alongside rent collection enforcement to reduce
     rent arrears.

Improve and build homes

In order to improve and build homes, we will:

   • Continue with work to ensure compliance with the DECENT Homes Standard
     by 2010;

   • Commence project SOUND (works to external fabric of estates);

   • Dispose of properties to meet the Asset Management delivery timetable;
     and

   • Develop current and programmed new build schemes to time and on budget.

Cleaner, safer, greener

In order to be cleaner, safer and greener, we will:

   • Roll out the cleaning pilot to all estates;

   • Define and implement a revised approach to anti-social behaviour;

   • Integrate grounds maintenance into estate services;

   • Specify and tender grounds maintenance contracts;

   • Add energy efficiency targets to the asset management strategy;

   • Measure the carbon footprint of the central office; and

   • Implement the findings of the Trust's Green Taskforce.

Deliver value for money

In order to deliver value for money services, we will:

   • Develop effective measures and targets for efficiency and value for
     money;

   • Embed our new procurement procedures through training and support to
     ensure that procurement processes deliver value for money and promote
     efficiency, compliance and probity;

   • Develop integrated IT systems to enhance recording and management of
     supplier and contract details;

   • Review the corporate overhead allocation policy to ensure it is
     equitable and enables enhanced understanding of business performance;

   • Review the Group structure to ensure relevance to the current business
     activities and optimised risk management, particularly in respect of future
     new developments;

   • Increase partnership working to enable community regeneration to deliver
     more projects for less direct expenditure; and

   • Produce and monitor performance information more efficiently.

Develop a skilled workforce

In order to develop and retain a skilled workforce, we will:

   • Redefine the performance management system to provide a clear line of
     sight to the business priorities and greater fairness and consistency in
     performance evaluation;
   • Develop and implement new pay, benefits and grading structures which
     facilitate recruitment and progression within the Trust; and
   • Redefine key staff behaviours.

Performance Indicators

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

Housing Management and Maintenance

   • Customer satisfaction

   • Rent collection rate

   • Current rent arrears as % of rent roll

   • Average re-let times for empty properties

   • Number of empty properties

   • Repair response times

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

Asset management

   • Progress towards Decent Homes Standard

Financial

   • Results compared to budget

   • Operating margin

   • Compliance with loan covenants

Performance against key indicators

All operations achieved their budgeted turnover and surplus.

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

   • As at 31 March 2007 98% of properties (where gas is supplied to the
     premises) were in possession of a valid gas safety certificate or were
     covered by the Trust's no access protocol.

   • The average number of days to re-let empty properties was 87 as at 31
     March 2007. This average continued to be distorted by a small number of
     properties that had been empty for a considerable period but have now been
     let, however, performance for the year was a 66% improvement on 2005/06. At
     31 March 2007 the Trust only had 44 properties available to let.

   • The percentage of emergency repairs completed within target stood at 90%
     at 31 March 2007, performance on urgent and routine repairs was at 90%
     compared with 85% and 84% respectively for 31 March 2006. A new appointment
     scheduling system was introduced early in 2006/07 and this is expected to
     further improve performance in this area.

The Trust has detailed action plans in place to address the above issues. These
plans have delivered improvements in all areas since 31 March 2006, and will
continue to do so in 2007/08.

REGULATION AND GOVERNANCE

The Group is regulated by the Housing Corporation with whom it is registered and
it complies with the Housing Corporation's Regulatory Code. Peabody Trust and
CBHA are also both registered charities and are regulated by the Charity
Commission. Performance is assessed by the Housing Corporation by means of
annual assessments against four main criteria - viability, governance,
management and development. The corporation uses a 'traffic light' system to
measure compliance. At the start of 2006/07 the Group had green lights for
viability, governance and development and the remaining, for management, as
amber. Much of the Group's efforts in 2006/2007 were focused on addressing the
issues underlying the remaining amber light and in December 2006 the green light
for management was restored.

During July 2006 the Trust was inspected by the Audit Commission and achieved a
one star rating with promising prospects for improvement demonstrating the
progress made since the last inspection and leading to the reinstatement of the
green light for management.

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

The Trust is managed by an Executive Team headed by the Chief Executive and
supported by directors of finance, customer services, property, corporate
services and community services. 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.

The maximum permitted term of office for Governors is limited to three periods
of three years and thereafter a maximum of three terms of one year each.

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

CBHA is regulated by the Housing Corporation, with whom it is registered. 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 Peabody Trust Board is supported by 5 functional committees each of which
meets 4 times per year (the Nominations and Remuneration Committee only meets
twice each year) and is composed of members of the Board and co-opted members.
The co-opted members are not full Committee members and as such do not have
voting rights at meetings. Each of these committees has clear terms of reference
and delegated authority. They report back to the Board at each Board meeting,
where their recommendations are fully considered and approved as 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.

The Group considers the following to be key risks during the business plan
period

   • Build cost inflation increasing at a higher rate than underlying
     inflation indicators;

   • A significant downturn in the London housing market;

   • An inability to fully recover service costs from residents;

   • Interest rate exposure in a time of increasing interest rates;

   • The need to ensure that development projects meet the Group's financial
     requirements.

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

CUSTOMER AND EMPLOYEE INVOLVEMENT AND DIVERSITY

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

Customers

The Trust's Resident Liaison Committee, Homeowners' Forum and Diversity Forum
were all involved in the development of the business plan. The Customer Panel
has been involved in a number of key areas across the Trust, for example in the
development of the revised Customer Service Charter, the Rents Policy and the
DECENT and SOUND programmes of major works to homes and estates.

The Trust conducts resident surveys on an ongoing basis in a manner designed to
be consistent with the methodology used in our Resident Satisfaction Survey
(STATUS).  The results are used to develop and continually improve our services.

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), Joint Consultative Committee (JCC) and the staff
consultation group (SCG).

The Group has a comprehensive learning and development policy and has been
awarded the Investors in People accreditation.

Equality and Diversity

The Group is committed to achieving equality of opportunities and values
diversity. Its policies and strategies reflect this. The Group recognises that
its ability to meet the diverse needs of both individuals and communities relies
on 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.  It seeks to involve residents and
customers in the design and delivery of its services. It has developed a menu of
involvement so that residents can become involved as much as they want and in a
way that they choose.

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 recognises and accepts its legal and moral responsibilities, as
defined in the Health and Safety at Work Act 1974 and other legislation to
ensure, as far as reasonably practicable, the health, safety and welfare of all
of its employees, customers and other persons who may be affected by the way it
carries out its activities.


FINANCIAL PERFORMANCE

The financial position and results for the year are set out on pages 15 to 56 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 2006.

Performance in the period

The Trust made a deficit for the year after tax of £10.6 million compared to a
surplus of £25.4 million in the previous year.

The consolidated results for the Group, which include the results of those
entities detailed above, show a deficit for the year after tax of £8.6 million
compared to a surplus of £27.6 million in the previous year.

The Trust's deficit for the year is entirely attributable to £52.3 million of
redemption penalties associated with the redemption of the £100 million 2018
bond, and the repurchase of £12.6 million of the 2023 bond during the 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 and to ensure that they remain desirable places to live.
The Trust also has a small development programme focussing on the provision of
new affordable homes for Londoners. During 2006/07 £32.3 million of major
repairs and refurbishment works were completed, of which £11.6 million was
invested in the ongoing programme of works required to meet the Decent Homes
Standard by 2010 and £1.5 million was incurred in relation to the Trust's SOUND
programme of external works.

On 2 June 2006, the Trust successfully redeemed its £100m First Mortgaged
Debenture Stock due 2018 and in December 2006 £12.6 million of the Guaranteed
Secured Debenture Stock due 2023 became available for repurchase. These
redemptions were funded through new borrowing facilities with Barclays Bank plc,
Royal Bank of Scotland plc and through existing cash reserves. Early redemption
premiums totalling £52.3m associated with these transactions are included within
the income and expenditure account for the year ended 31 March 2007.

Decent Homes

The age profile of the Trust's homes presents a particular investment challenge.
Just under £110 million is required between 2006/07 and 2010 to ensure that all
the Trust's homes meet the Decent Homes Standard, are maintained in good
condition and remain desirable places to live.

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 2007 surpluses totalling £38.0 million were generated by property
disposals.

As at 31 March 2007 80% of the Trust's homes met the Decent Homes Standard with
1616 homes being made Decent during the year ended 31 March 2007.

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

Treasury Management

The Group's Treasury Management Strategy and 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.

At 31 March 2007 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 2007
£283.5 million of the Group's debt was at fixed rates.

Financing

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 plc, this redemption will deliver annual cash
interest savings of £3 million. Breakage costs of £45 million were incurred in
respect of this redemption.

During the year £12.6 million of the Trust's Guaranteed Secured Stock due 2023
became available for repurchase. The Trust took advantage of this opportunity
and breakage costs of £7.3 million were incurred in respect of this repurchase.

Payments totalling £10.0 million were made to investors in the SAGE investors
scheme during December 2006 and February 2007, these were loans made following
wind-up of the BES investment schemes.

In March 2007 the Trust repaid £10 million of the revolving Nationwide facility
using its existing cash reserves.

Liquidity

The Group's Treasury Management Policy dictates that the Group's available cash
should not at any time fall below the forecast outflow for the next calendar
month and sufficient facilities should be in place to fund it's business and
service objectives. The Group has been compliant with this policy throughout
2006/07 and is expecting to be compliant for the foreseeable future.

The Group has sufficient committed facilities available to meet known
requirements until 31 March 2008 and for the foreseeable future.

At the year end the Trust held cash balances totalling £18.3 million.

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 2007 is commensurate with the
performance and investment profile of a housing charity.

Going Concern

After making all reasonable 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           2007     2006     2005     2004     2003
summary
For the year ended 31 March              £m       £m       £m       £m       £m

Group income and expenditure
account
Total turnover                         98.7     98.5     86.9     81.9     86.4
Income from lettings                   82.0     78.4     72.9     70.7     66.4
Depreciation & amortisation of         
housing properties                      9.8      7.6      6.0      2.6      2.2
Operating surplus                      25.0     25.7     24.3     22.1     23.3
Surplus before tax (excluding     
redemption penalties)                  43.7     32.7     18.4     12.9     10.3
(Deficit)/Surplus after interest     
and tax                               (8.6)     27.6     18.4     12.9     10.3

Group balance sheet
Tangible fixed assets, at cost        986.9    964.4    924.8    894.8    830.3
Social Housing Grant                (449.8)  (445.0)  (423.8)  (413.4)  (376.8)
Net current assets                      6.9     38.2    (2.6)     17.3     14.0
Indebtedness                          375.1    364.5    363.8    360.1    341.1
Total reserves                        157.8    161.8    135.5    114.5    118.4

Key financial performance              2007     2006     2005     2004     2003
information                               %        %        %        %        %
                                          
Operating Surplus as a % of turnover     25       26       28       27       27
Void loss as % of rent & service     
charges receivable                      1.7      2.4      2.8      2.6      2.9
Gross current tenant arrears as %      
of rent and service charges
receivable                              8.4      8.5      7.6      7.6      7.9
Total loans as % of capital grants     
plus reserves (Gearing)                  65       66       65       71       74
Total debt less cash and short         
term investments as % of total
debt plus capital and reserves
less intangible fixed assets
(Adjusted net leverage)                  39       34       37       38       38
EBITDA as a % of interest payable        47      109      114      112      122
EBITDA as a % of interest payable      
excluding loan redemption
penalties                               156      125      118      112      122










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 2006. 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 24 July 2007 and signed on their behalf
by:


Pam Alexander           Stephen Howlett
Chair                   Chief Executive





GOVERNORS' STATEMENT ON INTERNAL CONTROL

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 2006/7:

   • 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. Performance management processes including
     annual appraisal procedures and training programmes 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, budgets and operational targets 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. Key 
     performance indicators are monitored monthly by management and quarterly by
     the Board;

   • The Group has a Project Approval Committee which meets monthly 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 on an annual
     basis and is reported to and approved by the Audit and Risk Committee. The
     Audit and Risk Committee receive reports on all high ranking risks on a
     rolling quarterly basis, in addition to reports concerning risks which have
     crystallised during the quarter;

   • 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 business continuity and disaster recovery plan;

   • 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 2007 and until 24 July 2007. 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 2007 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 24. 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 2006. 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 2007 and of the Group's and
     the Trust's deficit 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 2006.


Deloitte & Touche LLP
Chartered Accountants and Registered Auditors
St Albans


24 July 2007


TRUST INCOME AND EXPENDITURE ACCOUNT
Year ended 31 March 2007  

                               Note                 2007                2006
                                                   £'000               £'000

TURNOVER                       2(a)               88,074              83,985
Operating costs                2(a)              (65,681)            (60,797)

OPERATING SURPLUS                                 22,393              23,188

Profit on sale of fixed assets 23                 40,907              31,627
Interest receivable and         5                  3,728              10,501
similar income
Other interest payable and      6        (25,325)            (34,755)
similar charges
Cost of early redemption of     6        (52,341)            (5,160)
loans

Total interest payable                            (77,666)            (39,915)

(Deficit)/Surplus on ordinary
activities before and after
taxation                                          (10,638)             25,401

The turnover and (deficit)/surplus for the current and prior years derive from
continuing operations.



These financial statements were approved by the Board of Governors on 24 July
2007 and signed on their behalf by:


Pam Alexander           Stephen Howlett
Chair                   Chief Executive



TRUST STATEMENT OF TOTAL RECOGNISED SURPLUSES AND DEFICITS
Year ended 31 March 2007  

                                                     2007                2006
                                                    £'000               £'000

(Deficit)/Surplus for the year                    (10,638)             25,401
Actuarial gain/(loss)
relating to the pension
scheme                        17                    4,032              (1,908)
Unrealised surplus on                                 
revaluation of investments                            200                 903

Total recognised surpluses            
and deficits in year                               (6,406)             24,396



TRUST BALANCE SHEET
31 March 2007 

                               Note                   2007                2006
                                           £'000     £'000     £'000     £'000
FIXED ASSETS
Housing properties -           9(a)                927,649             907,128
depreciated cost
Less: Social Housing Grant              (376,574)           (372,951)
Other Public Grants                      (56,244) (432,818)  (55,890) (428,841)

                                                   494,831             478,287
Other tangible fixed assets    10(a)                11,571              11,232

                                                   506,402             489,519
Fixed asset investments        11                   13,257              12,781

                                                   519,659             502,300
CURRENT ASSETS
Debtor due in more than one    13         29,438              34,438
year
Debtors due in less than one   13         15,768              13,366
year
Cash at bank and in hand                  18,347              35,680

                                          63,553              83,484
CREDITORS: Amounts falling due
within one year
                               14        (36,766)            (24,557)

NET CURRENT ASSETS                                  26,787              58,927

TOTAL ASSETS LESS CURRENT
LIABILITIES                                        546,446             561,227

PENSION DEFICIT                17                   13,091              16,408

CREDITORS: Amounts falling due
after more than one year       15                  392,490             397,548

RESERVES
Revenue reserve                16        131,073             137,673
Designated reserves            16          9,792               9,598
                                                   140,865             147,271

                                                   546,446             561,227



These financial statements were approved by the Board of Governors on 24 July
2007 and signed on their behalf by:


Pam Alexander           Stephen Howlett
Chair                   Chief Executive



TRUST CASH FLOW STATEMENT
Year ended 31 March 2007


                                    Note             2007               2006
                                                    £'000              £'000

Net cash inflow from operating      (a)            35,096             39,646
activities

Net interest paid                         (24,609)          (22,849)
Cost of early redemption of loans         (52,341)           (5,160)

Returns on investments and          (b)           (76,950)           (28,009)
servicing of finance

Capital expenditure and financial   (b)            18,134                810
investment

Net cash (outflow)/inflow before                  (23,720)            12,447
financing

Financing                           (b)             6,387              4,183

(Decrease)/Increase in cash                       (17,333)            16,630


Reconciliation of net cash inflow
to movement in net debt                     £'000   £'000     £'000    £'000
                                            
(Decrease)/Increase in cash in the  (c)   (17,333)           16,630
year
Cash inflow from financing          (b)    (6,387)           (4,183)

Change in net debt resulting from                 (23,720)            12,447
cash flows
Non cash transactions               (c)             6,579                425

Movement in net debt in the year                  (17,141)            12,872
Net debt at beginning of the year                (320,970)          (333,842)

Net debt at the end of the year                  (338,111)          (320,970)



NOTES TO THE TRUST CASH FLOW STATEMENT
Year ended 31 March 2007

(a) RECONCILIATION OF OPERATING SURPLUS TO NET CASH INFLOW FROM OPERATING
    ACTIVITIES
                                                             2007      2006
                                                            £'000     £'000

Operating surplus                                          22,393    23,188
Depreciation                                               10,715     8,749
Decrease in stocks                                              -       160
Increase in debtors                                        (2,402)   (1,926)
Increase in creditors                                       3,788     9,111
Adjustment for pension funding                                602       364

Net cash inflow from operating                             35,096    39,646
activities

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

                                                    2007              2006
                                          £'000    £'000    £'000    £'000
Returns on investments and
servicing of finance
Interest received                         3,464             4,504
Dividends received                          264               234
Interest paid                           (28,337)          (27,587)
Cost of early redemption of loans       (52,341)           (5,160)


Net cash outflow from returns on
 investments and servicing of finance            (76,950)          (28,009)
                                           
Capital expenditure and
financial investment
Cash paid for construction of,          (39,217)          (52,790)
investment in, and purchase of
housing properties
Social Housing Grant received             8,022            12,063
Other grants received                        40             2,551
Cash received on sale of                 52,281            41,748
property
Cash paid for investments                  (276)             (276)
Cash paid for purchase of other
tangible fixed assets
                                         (1,256)             (962)
Internal costs capitalised               (1,460)           (1,524)

Net cash inflow from capital 
expenditure and financial investment              18,134               810
                                   

(b) ANALYSIS OF CASH FLOWS FOR HEADINGS NETTED IN THE CASH FLOW STATEMENT
    (continued)
                                                   2007                 2006
                                          £'000   £'000      £'000     £'000

Financing
New loans                               135,000             35,000
Loan to subsidiary undertaking                -             (2,800)
Repayment of loans made to
subsidiary undertaking
                                          5,000               7,000
Repayment of loans                     (133,613)            (35,017)


Net cash inflow from financing                    6,387               4,183



(c) ANALYSIS OF NET DEBT
                                                            Other
                                         At 1      Cash     non-cash  At 31
                                         April     Flow     changes   March                     
                                          2006                         2007
                                         £'000     £'000    £'000     £'000

Cash at bank and in hand                35,680   (17,333)       -    18,347
Debt due after one year              (391,088)    (1,387)   8,771  (383,704)
Debt due within one year                    -         -    (2,192)   (2,192)
Debtor due after more                  34,438    (5,000)        -    29,438
than one year
                                       

                                         (320,970) (23,720) 6,579     (338,111)


CONSOLIDATED INCOME AND EXPENDITURE ACCOUNT
Year ended 31 March 2007

                                                   2007                2006
                                                  £'000               £'000


                               Note

GROUP TURNOVER                 2(a)               98,710              98,475
Group operating costs          2(a)              (73,717)            (72,783)

GROUP OPERATING SURPLUS                           24,993              25,692

Profit on sale of fixed assets 23                 41,695              33,021
Interest receivable and        5                   2,382               8,470
similar income
Other interest payable and     6        (25,323)            (34,388)
similar charges
Cost of early redemption of    6        (52,341)             (5,160)
loans

Total interest payable                           (77,664)            (39,548)

(Deficit)/Surplus on ordinary
activities before and after
taxation                                          (8,594)             27,635

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 24 July
2007 and signed on their behalf by:

Pam Alexander           Stephen Howlett
Chair                   Chief Executive



CONSOLIDATED STATEMENT OF TOTAL RECOGNISED SURPLUSES AND DEFICITS
Year ended 31 March 2007

                                                   2007                2006
                                                  £'000               £'000

(Deficit)/Surplus for the                        (8,594)             27,635
year
Actuarial gain/(loss)
relating to the pension
scheme                        17                  4,416              (2,217)
Unrealised surplus on                               200                 903
revaluation of investments

Total recognised surpluses                       (3,978)             26,321
and deficits in year



CONSOLIDATED BALANCE SHEET
31 March 2007 

                                                      2007                2006
                                          £'000      £'000    £'000      £'000

                               Note
FIXED ASSETS
Housing properties -           9(b)                986,927             964,406
depreciated cost
Less: Social Housing Grant             (376,574)           (372,951)

Other Public Grants                     (73,217)  (449,791) (72,083)  (445,034)

                                                   537,136             519,372
Other tangible fixed assets    10(b)                12,120              11,737

                                                   549,256             531,109

Fixed asset investments
Shares in quoted securities    11                    8,257               7,781

                                                   557,513             538,890
CURRENT ASSETS
Stocks                         12         1,186               2,166
Debtors due in more than 1     13           120                 620
year
Debtors due in less than 1     13        12,954               9,325
year
Cash at bank and in hand                 30,755              51,948

                                         45,015              64,059
CREDITORS: Amounts falling due 14     
within one year                         (38,087)            (25,869)
                               

NET CURRENT ASSETS                                  6,928               38,190

TOTAL ASSETS LESS CURRENT
LIABILITIES                                       564,441              577,080

PENSION DEFICIT                17                   14,591              18,220

CREDITORS: Amounts falling due
after more than one year       15                  392,044             397,076
                            

RESERVES
Revenue reserve                16        144,173             148,064
Designated reserves            16          9,792               9,598
Revaluation reserve            16          3,841               4,122
                                                   157,806             161,784

                                                   564,441             577,080



These financial statements were approved by the Board of Governors on 24 July
2007 and signed on their behalf by:



Pam Alexander           Stephen Howlett
Chair                   Chief Executive





CONSOLIDATED CASH FLOW STATEMENT
Year ended 31 March 2007

                                    Note              2007               2006
                                                     £'000              £'000

Net cash inflow from operating      (a)             42,145             45,288
activities

Net interest paid                         (25,993)           (24,471)
Cost of early redemption of loans         (52,341)            (5,160)

Returns on investments and          (b)            (78,334)          (29,631)
servicing of finance

Capital expenditure and financial   (b)             13,609             1,787
investment

Net cash (outflow)/inflow before                   (22,580)           17,444
 financing

Financing                           (b)              1,387               (17)

(Decrease)/Increase in cash                        (21,193)           17,427


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

(Decrease)/Increase in cash in the  (c)   (21,193)          17,427
year
Cash (inflow)/outflow from          (c)   (1,387)               17
financing

Change in net debt resulting from                  (22,580)           17,444
cash flows
Non cash transactions               (c)              6,553               399

Movement in net debt in the year                   (16,027)           17,843
Net debt at beginning of the year                  (338,668)        (356,511)

Net debt at end of the year                        (354,695)        (338,668)



NOTES TO THE ACCOUNTS
Year ended 31 March 2007

(a) RECONCILIATION OF OPERATING SURPLUS TO NET CASH INFLOW FROM OPERATING
ACTIVITIES
                                                              2007      2006
                                                             £'000     £'000

Operating surplus for the year                               24,993   25,692
Depreciation                                                 10,757    8,790
Decrease in stocks                                              980    2,904
Increase in debtors                                          (3,093)    (668)
Increase in creditors                                         7,870    8,214
Adjustment for pension funding                                  638      356

Net cash inflow from operating activities                    42,145    45,288

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

                                                    2007              2006
                                          £'000    £'000    £'000    £'000
Returns on investments and
servicing of finance
Interest received                         2,382             2,707
Interest paid                           (28,375)          (27,178)
Cost of early redemption of             (52,341)          (5,160)
loans

         Net cash outflow from returns on
     investments and servicing of finance
                                                 (78,334)          (29,631)

Capital expenditure and
financial investment
Cash paid for construction of,          (41,355)          (56,911)
investment in and purchase of
housing properties
Social Housing Grant received             3,623            12,063
Other grants received                     1,174             3,541
Cash received on sale of                 53,245            45,872
property
Cash paid for the purchase of
other tangible fixed assets
                                         (1,342)             (978)
Cash paid for investments                  (276)             (276)
Internal costs capitalised               (1,460)           (1,524)

Net cash inflow from capital expenditure
 and financial investment                         13,609             1,787



(b) ANALYSIS OF CASH FLOWS FOR HEADINGS NETTED IN THE CASH FLOW STATEMENT
(continued)
                                                   2007                2006
                                        £'000     £'000     £'000     £'000
Financing
New loans                               135,000             35,000
Repayment of loans                     (133,613)           (35,017)

Net cash inflow/(outflow) from
financing
                                                  1,387               (17)

(c) ANALYSIS OF NET DEBT
                                                     Other
                        At 1 April       Cash      non-cash    At 31 March
                            2006         flow       changes         2007
                           £'000        £'000         £'000        £'000

Cash at bank and in hand    51,948     (21,193)          -          30,755
Debt due after one year   (390,616)    (1,387)       8,745        (383,258)
Debt due within one year         -          -       (2,192)         (2,192)

                          (338,668)    (22,580)      6,553        (354,695)


NOTES TO THE ACCOUNTS
Year ended 31 March 2007

1. ACCOUNTING POLICIES

The financial statements have been prepared in accordance with applicable United
Kingdom Accounting Standards, Statement of Recommended Practice and the
Accounting Requirements for Registered Social Landlords General Determination
2006 and under the historical cost convention as modified by the revaluation of
quoted investments and the £4,684,000 revaluation of properties repurchased from
a BES Company in 1999.

A summary of the more important accounting policies is set out below.

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.

Housing Properties and Stock for Sale

Housing properties developed for sale are stated at cost less any capital grant
received. Stock and work in progress is stated at the lower of cost and net
realisable value.

Housing Properties and Depreciation

Housing properties in the course of construction are stated at cost and are not
depreciated.

Freehold housing properties are transferred to completed properties when they
are ready for letting and are stated at cost.

Freehold land is not depreciated.

The Group depreciates housing properties by component on a straight line basis
over the estimated useful economic lives of component categories, these lives
range from 15 to 100 years.

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

Works to properties enabling their conversion from general needs rented to
market rent properties is capitalised and depreciated over 5 years.

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.

Shared Ownership housing properties and staircasing

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 ('staircasing') 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.

Capital Grant

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

At the balance sheet date, if the capital grant 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 grant
received in advance.

Capital grant is repayable indefinitely unless formally abated or waived. On the
occurrence of certain relevant events, primarily following the sale of property,
the capital grant repayable will be restricted to the net proceeds of sale where
applicable.

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 disclosed separately
within creditors. If unused within a three year period, it will be repayable to
the Housing Corporation with interest.

Other Fixed Assets and depreciation

Other fixed assets are stated at cost less accumulated depreciation.

Depreciation is charged on a straight line basis over the estimated useful
economic lives of assets at the following annual rates:

Freehold offices 1.67%

Office and IT equipment 20%

Motor vehicles 25%

Depreciation is charged on the above assets from the month of purchase until the
month of disposal.

Capitalisation of Interest

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.

Capitalisation of Development Administration Costs

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.

Overheads and other indirect costs are written off as incurred.

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.

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.

Quoted investments are shown at market value. The movement in the difference
between the cost and market value of these investments is shown in as unrealised
gains or losses in the statement of total recognised surpluses and deficits when
in excess of the original cost.

Value Added Tax

Value added tax is accounted for on an accruals basis. The primary activities of
the Group, social housing lettings, constitute exempt supplies, and accordingly
no input tax borne is recoverable. For business supplies chargeable to tax, or
where special dispensations have been agreed, input tax directly relating to
goods and services that have enabled the supply, and relating to a fair
proportion of the cost of central services in support of these, are recovered
from Customs and Excise.


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.

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.

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.

Capitalisation of Loan Costs

The initial cost of raising finance is deducted from the loan proceeds and
amortised over the period of the loan.

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.

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.

Deferred taxation

Deferred taxation is provided in full on timing differences that result in an
obligation at the balance sheet date to pay more tax, or a right to pay less
tax, at a future date, at rates expected to apply when they crystallise based on
current tax rates and law. Timing differences arise from the inclusion of items
of income and expenditure in taxation computations in periods different from
those in which they are included in the financial statements. Deferred tax
assets are recognised to the extent that it is regarded as more likely than not
that they will be recovered. Deferred tax assets and liabilities are not
discounted.


2(a) TURNOVER AND OPERATING SURPLUS

TRUST                           2007                               2006
                                       Operating                         Operating
                                        surplus/                          surplus/
                                       (deficit)                         (deficit)
                          Operating       £'000               Operating      £'000
                  Turnover   Costs                   Turnover     Costs
                     £'000   £'000                     £'000      £'000
Social housing
lettings

General needs       72,730   (54,562)    18,168       69,423     (48,993)  20,430
housing
Shared ownership    1,193       (686)       507          980        (570)     410
Key worker          2,004       (553)     1,451        2,255        (561)   1,694

                    75,927   (55,801)    20,126       72,658     (50,124)  22,534
Other social
housing activities
Donations received  2,654          -      2,654        2,099           -    2,099
Development costs   545       (2,317)    (1,772)         751      (3,522)  (2,771)
Supporting People
contract income
                    212         (210)         2          256           -      256
Non social-housing
activities
Market renting      2,835     (1,007)     1,828        1,702        (645)   1,057
Commercial lettings 2,547     (1,398)     1,149        2,656      (1,218)   1,438
Leasehold           791       (1,013)      (222)         541        (755)    (214)
properties
Community           2,563     (3,935)    (1,372)       3,030      (4,370)  (1,340)
regeneration
Sale of properties      -          -          -          292        (163)     129

Total               88,074   (65,681)    22,393       83,985     (60,797)  23,188


In addition to the above the Trust administered income and expenditure during
the year totalling £2,243,000 (2006: £2,016,000) 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

                                2007                             2006
GROUP
                                        Operating                       Operating
                                        surplus/                         surplus/
                           Operating   (deficit)           Operating    (deficit)
                              costs       £'000                costs     £'000
                    Turnover  £'000                  Turnover
                    £'000                                       
                                                     £'000      £'000
Social housing
lettings
General needs       78,806    (58,056)  20,750       75,195   (52,359)   22,836
housing
Shared ownership    1,193     (686)     507          980        (570)       410
Key worker          2,005     (553)     1,452        2,255      (561)     1,694

                    82,004    (59,295)  22,709       78,430  (53,490)    24,940
Other social
housing lettings
Donations received       -         -         -           40         -        40
Development costs      545    (2,317)   (1,772)         751    (3,522)   (2,771)
Other                2,310    (2,109)      201          951      (808)      143
Supporting People
contract income       276       (283)       (7)         320       (80)      240
                     
Non social housing
activities
Market renting      2,835     (1,007)   1,828        1,702       (645)     1,057
Commercial lettings 2,773     (1,430)   1,343        2,656     (1,218)   1,438
Leasehold             791     (1,014)    (223)         541       (755)     (214)
properties
Community           2,563     (3,935)   (1,372)      3,030     (4,370)   (1,340)
regeneration
Sale of sites and   4,227     (2,185)   2,042        9,770     (7,856)    1,914
properties
Other                 386       (142)     244          284        (39)      245

Total              98,710    (73,717)  24,993       98,475    (72,783)   25,692


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

TRUST

                                         General Supported    Shared Key Worker
                                           Needs   Housing Ownership    Housing     Total     Total
                                         Housing
                                            2007     2007      2007      2007        2007      2006
                                           £'000    £'000     £'000     £'000       £'000     £'000
Income from lettings
Rents receivable                          61,205    4,025       766     1,981      67,977    65,170
Service charges receivable                 4,666      892       377        65       6,000     5,481
Charges for support services                   -      489         -     - 489       1,296
Other income                                 655    2,069        56         1       2,781     2,440

Gross rental income                       66,526    7,475     1,199     2,047      77,247    74,387
Less: Rent losses from voids              (1,070)    (201)       (6)      (43)     (1,320)   (1,729)

Total income from social housing          65,456    7,274     1,193     2,004      75,927    72,658

Expenditure on letting activities
Services                                  (6,780)    (579)     (228)      (37)     (7,624)   (6,233)
Management                               (18,834)  (3,405)     (112)     (165)    (22,516)  (18,038)
Routine maintenance                       (7,945)    (948)      (71)     (144)     (9,108)   (8,053)
Cyclical maintenance                      (6,716)    (384)      (50)      (37)     (7,187)   (9,482)
Rent losses from bad debts                  (732)     (78)        -        (1)       (811)   (1,243)
Depreciation of housing properties        (7,766)    (395)     (225)     (169)     (8,555)   (7,075)

Operating costs on social housing          (48,773) (5,789)    (686)     (553)    (55,801)  (50,124)

Operating surplus on social housing       16,683    1,485       507     1,451      20,126    22,534
lettings


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

GROUP

                                            General   Supported      Shared  Key Worker      Total      Total
                                              Needs     Housing   Ownership     Housing
                                            Housing                             
                                               2007        2007        2007        2007       2007       2006           
                                              £'000       £'000       £'000       £'000      £'000      £'000
Income from lettings
Rents receivable                             67,222       4,025         766       1,982     73,995     70,911
Service charges receivable                    4,666         892         377          65      6,000      5,481
Charges for support services                      -         541           -           -        541      1,338
Other income                                    674       2,069          56           1      2,800      2,440

Gross rental income                          72,562       7,527       1,199       2,048     83,336     80,170
Less: Rent losses from voids                 (1,082)       (201)         (6)        (43)    (1,332)    (1,740)

Turnover from social housing                 71,480       7,326       1,193       2,005     82,004     78,430

      Expenditure on letting activities
Services                                     (6,780)       (630)       (228)        (37)    (7,675)    (6,275)
Management                                  (21,231)     (3,405)       (112)       (165)   (24,913)   (20,010)
Routine maintenance                          (9,063)       (948)        (71)       (144)   (10,226)    (9,236)
Cyclical maintenance                         (6,716)       (384)        (50)        (37)    (7,187)    (9,482)
Rent losses from bad debts                     (660)        (78)          -          (1)      (739)    (1,412)
Depreciation of housing properties           (7,766)       (395)       (225)       (169)    (8,555)    (7,075)

Operating costs on social housing           (52,216)     (5,840)       (686)       (553)   (59,295)   (53,490)

Operating surplus on social housing          19,264       1,486         507       1,452     22,708     24,940
lettings


3. EMOLUMENTS OF GOVERNORS AND EXECUTIVE OFFICERS

None of the Governors received any emoluments during the year (2006: £nil).

Governors were reimbursed expenses totalling £1,163 (2006: £1,155).

The remuneration paid to the Chief Executive and Executive Officers (as listed
on page 1) was as follows:
                                                               2007      2006
                                                                  £         £
Total emoluments (including pension
contributions and benefits in kind)
                                                            539,715   559,243
Amounts paid in respect of interim directors                189,544   212,691

Emoluments (excluding pension contributions) paid
to the Chief Executive                                      148,654   135,854


The Chief Executive is an ordinary member of the Trust's pension scheme. The
Trust paid £20,246 of employers contributions into the pension scheme on behalf
of the Chief Executive in the year ended 31 March 2007 (2006: £14,045) .

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:

                                                             2007     2006
The average number of full-time                               No.      No.
equivalent employees
Head office functions                                         122      145
Housing management                                            305      254
Maintenance workforce                                          86       94
Community regeneration                                         56       76

                                                              569      569

                                                             2007     2006
Staff costs for the above persons:                          £'000    £'000

Wages and salaries                                         14,924   15,186
Other staff costs                                           1,037    1,439
Social security costs                                       1,379    1,438
Other pension costs (note 17)                               1,970    2,261

                                                           19,310   20,324

5. INTEREST RECEIVABLE AND SIMILAR INCOME
                                              Trust              Group
                                         2007      2006      2007      2006
                                         £'000     £'000     £'000     £'000

Income from listed investments             264       234       264       234
Other interest receivable and similar    1,178     7,579     2,118     8,236
income
Interest received from Group entities    2,286     2,688         -         -

                                         3,728     10,501    2,382     8,470

6. INTEREST PAYABLE AND SIMILAR CHARGES
                                              Trust               Group
                                          2007      2006      2007      2006
                                         £'000     £'000     £'000     £'000

Interest payable on loans               26,268    36,849    26,268    36,849
Amounts capitalised                     (1,056)   (2,350)   (1,094)   (2,759)
Premium on repurchase of Debt           52,341     5,160    52,341     5,160
Interest cost of funding pension scheme    113       256       149       298
liability

                                         77,666    39,915    77,664    39,548

7. DEFICIT/SURPLUS ON ORDINARY ACTIVITIES BEFORE TAXATION

                                              Trust               Group
                                          2007      2006      2007      2006
                                         £'000     £'000     £'000     £'000
Deficit on ordinary activities before
taxation is stated after charging/
(crediting):
Depreciation on tangible fixed assets   10,715     8,749    10,757     8,790
Auditors' remuneration:
In their capacity as auditors :
Group                                        -         -        93       107
Trust                                       72        82         -         -
In respect of other services                 8        15         8        15


8. TAXATION CHARGE
                                              Trust               Group
                                          2007      2006      2007      2006
                                         £'000     £'000     £'000     £'000
The taxation charge comprises:
Adjustment in respect of prior               -         -         -         -
years
United Kingdom corporation tax
at 30% (2006 - 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
                                                            2007      2006
                                                           £'000     £'000

(Deficit)/Surplus on ordinary activities               
before taxation                                           (8,594)   27,635

Tax on profit on ordinary activities at
standard rate of 30%                                           -    (8,291)

Factors affecting charge for the year:

Charitable surplus exempt taxation                             -     8,291
                                                               -         -

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 £495,000
(2006: £530,000). 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
                                               Housing             under
                                            properties      construction     Total
                                                 £'000             £'000     £'000
Cost:
At 1 April 2006                                892,394            40,293   932,687
Works completed                                 48,241           (48,241)        -
Additions                                            -            41,733    41,733
Disposals                                      (11,649)                -   (11,649)

At 31 March 2007                               928,986            33,785   962,771

Social housing grant:
At 1 April 2006                                351,470            21,481   372,951
Works completed                                 10,474           (10,474)        -
Received                                             -             7,668     7,668
Disposals                                       (4,045)                -    (4,045)

At 31 March 2007                               357,899            18,675   376,574

Other public grants:
At 1 April 2006                                 50,552             5,338    55,890
Works completed                                  5,349            (5,349)        -
Received                                             -               354       354

At 31 March 2007                                55,901               343    56,244

Depreciation:
At 1 April 2006                                 25,559                -     25,559
Charge for the year                              9,838                -      9,838
Disposals                                         (275)               -       (275)
                                            
At 31 March 2007                                35,122                -     35,122

Net book value
At 31 March 2007                               480,064           14,767    494,831

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

Additions during the year comprise £32.3 million (2006:£31.6 million) of major
repairs and refurbishment works, and £9.4 million (2006:£19.3 million) of
expenditure on new-build properties.


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
£1,056,000 (2006 - £2,350,000).

Housing properties includes shared ownership properties that have a cost of
£49,384,000 (2006:£45,185,000) and associated Social Housing Grant of
£12,832,000 (2006: £9,551,000).

Housing properties includes £168 million of land which has not been depreciated.

                                                                 2007     2006
                                                                £'000    £'000
Housing properties comprise:
Freeholds                                                     866,551  839,302
Long leaseholds                                                96,220   93,385

                                                              962,771  932,687

9 (b) HOUSING PROPERTIES - GROUP
                                                                    Housing
                                                                 properties
                                                     Housing          under
                                                  properties   construction      Total
                                                       £'000          £'000      £'000
Cost:
At 1 April 2006                                      948,169         41,796    989,965
Works completed                                       50,099        (50,099)         -
Additions                                                  -         43,909     43,909
Disposals                                            (11,825)             -    (11,825)

At 31 March 2007                                     986,443         35,606  1,022,049

Social housing grant:
At 1 April 2006                                      351,470         21,481    372,951
Works completed                                       10,474        (10,474)         -
Received                                                   -          7,668      7,668
Disposals                                             (4,045)             -     (4,045)

At 31 March 2007                                     357,899         18,675    376,574

Other public grants:
At 1 April 2006                                       65,783          6,300     72,083
Works completed                                        5,843         (5,843)         -
Received                                                  39          1,095      1,134

At 31 March 2007                                      71,665          1,552     73,217

Depreciation:
At 1 April 2006                                       25,559              -     25,559
Charge for the year                                    9,838              -      9,838
Disposals                                               (275)             -       (275)

At 31 March 2007                                      35,122              -     35,122

Net book value
At 31 March 2007                                     521,757         15,379    537,136

Net book value
At 31 March 2006                                     505,357         14,015    519,372



Additions during the year comprise £32.3 million (2006:£31.6 million) of major
repairs and refurbishment works, and £11.6 million (2006:£23.4 million) of
expenditure on new-build properties.
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
£1,094,000 (2006 - £2,759,000).

Housing properties include shared ownership properties that have a cost of
£53,482,000 (2006:£47,134,000) and associated Social Housing Grant of
£13,969,000 (£2006:£10,688,000).

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

                                                                2007      2006
                                                               £'000     £'000
Housing properties comprise:
Freeholds                                                    925,829   896,580
Long leaseholds                                               96,220    93,385

                                                           1,022,049   989,965

9(c) SOCIAL HOUSING GRANT

The total Social Housing Grant receivable to date is £376,574,000 (2006:
£372,951,000), 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 2006                             13,565       115     11,227     24,907
Additions                                      384         -        872      1,256

Adjustment for fully
depreciated items                             (308)     (115)    (7,659)    (8,082)
                                             

At 31 March 2007                            13,641         -      4,440     18,081

Other public grants:
At 1 April 2006                                  -         -      4,211      4,211
Received                                         -         -         40         40
Adjustment for fully
depreciated items                                -         -     (3,581)    (3,581)
                                              

At 31 March 2007                                 -         -        670        670

Depreciation:
At 1 April 2006                              4,117       115      5,232      9,464
Charge for the year                            477         -        400        877

Adjustment for fully
depreciated items                             (308)     (115)    (4,078)    (4,501)

At 31 March 2007                             4,286         -      1,554      5,840

Net book value
At 31 March 2007                             9,355         -      2,216     11,571

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


During the year Peabody Trust has scrapped £8.1 million of Other Tangible Fixed
Assets which have been fully depreciated.

10 (b) OTHER TANGIBLE FIXED ASSETS - GROUP
                                               Freehold     Motor      Office
                                                offices  vehicles   equipment     Total
                                                  £'000     £'000       £'000     £'000
Cost:
At 1 April 2006                                  14,007       115      11,569    25,691
Additions                                           384         -         958     1,342

Adjustment for fully
depreciated items                                  (308)    (115)      (7,659)   (8,082)

At 31 March 2007                                 14,083        -        4,868    18,951

Other public grants:
At 1 April 2006                                       -        -        4,211     4,211
Received                                              -        -           40        40
Adjustment for fully
depreciated items                                     -        -       (3,581)   (3,581)

At 31 March 2007                                      -        -          670       670

Depreciation:
At 1 April 2006                                   4,132      115        5,496     9,743
Charge for the year                                 484        -          435       919

Adjustment for fully
depreciated items                                  (308)    (115)      (4,078)   (4,501)

At 31 March 2007                                  4,308        -        1,853     6,161

Net book value
At 31 March 2007                                  9,775        -        2,345    12,120

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


During the year Peabody Trust has scrapped £8.1 million of Other Tangible Fixed
Assets which have been fully depreciated.

11. FIXED ASSET INVESTMENTS
Trust                                        Shares in    Shares in
                                            subsidiary       quoted
                                          undertakings   securities      Total
                                                 £'000        £'000      £'000
Market Value
At 1 April 2006                                  5,000        7,781     12,781
Additions                                            -          276        276
Change in market value of
Peabody Community Fund (PCF)                         -          200        200

At 31 March 2007                                 5,000        8,257     13,257

In addition to a £5 million investment in Peabody Enterprises Limited, Peabody
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 £7,153,000 and the market value as at 31
March 2007 was £8,257,000 (2006: £7,781,000).

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

12. STOCKS AND WORK IN PROGRESS
                                              Trust               Group
                                          2007      2006      2007      2006
                                         £'000     £'000     £'000     £'000

Housing properties held for sale             -         -         -     1,366
Land held for sale                           -         -     1,186       800

                                             -         -     1,186     2,166

13. DEBTORS
                                               Trust              Group
                                          2007      2006      2007      2006
                                         £'000     £'000     £'000     £'000
Amounts falling due within
one year

Rent and service charges in              9,744     9,822    10,782    10,834
arrears
Less: provision for bad debts           (3,850)   (3,925)   (4,231)   (4,655)

                                         5,894     5,897     6,551     6,179
Operating lease payments in                 22        76        22        78
advance
Amounts owed by subsidiary
undertakings
                                         3,782     4,883         -         -
Loans to employees                          55        62        55        62
Other debtors and prepayments            5,465     1,908     5,676     2,466
Loan to Charity Bank                       550       540       550       540
Blue Hut Escrow account                      -         -       100         -

                                        15,768    13,366    12,954     9,325

Amounts falling due after one
year

Amounts owed by subsidiary
undertakings
                                        29,438    34,438         -         -
Blue Hut Escrow account                      -         -         -       500
Loan to SCORE                                -         -       120       120

                                        29,438    34,438       120       620

At the balance sheet date, a total of £29,438,000 (2006: £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. During the year CBHA repaid £5 million of this loan to the Trust. The
on-lending is disclosed above as a debtor due in more than one year in the
Trust's balance sheet.

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.


14. CREDITORS: AMOUNTS FALLING DUE WITHIN ONE YEAR

                                             Trust               Group
                                        2007      2006      2007      2006
                                       £'000     £'000     £'000     £'000

Rent and service charges received      3,958     2,881     4,184     3,127
in advance
Trade creditors                        6,734     8,065     7,369     8,318
Amounts owed to subsidiary               758       686         -         -
undertakings
Amounts owed to joint venture              -        46         -        46
Loan from Peabody Pension Trust           28        26        28        26
Other taxation and social                569       786       575       801
security costs
Accruals and deferred income          22,527    12,067    23,739    13,551
SAGE investors' scheme                 2,192         -     2,192         -

                                      36,766    24,557    38,087    25,869

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

                                               Trust              Group
                                          2007     2006      2007      2006
                                         £'000    £'000     £'000     £'000

Bank and building society loans        297,080  173,869   296,634   173,397
Debenture stock                              -  150,000         -   150,000
Guaranteed secured debenture stock      78,485   91,085    78,485    91,085
Debenture stock held by Peabody Trust        -  (50,000)        -   (50,000)
Debenture and guaranteed debenture 
stock premium                            8,139   14,564     8,139     14,564
SAGE investors' scheme                       -   11,570         -     11,570

                                       383,704  391,088   383,258    390,616
Recycled capital grant and
disposal proceeds fund                   8,786    6,460     8,786      6,460
                                       
                                       392,490  397,548   392,044    397,076

Bank and building society loans

Bank and building society loans represent loans from Nationwide Building
Society, Royal Bank of Scotland plc, Barclays plc and Abbey plc.

The Trust has a loan facility with Barclays plc providing a facility of £120
million. During the year the Trust drew £75 million of this facility to fund the
redemption of the 2018 First Mortgaged Debenture Stock.

Royal Bank of Scotland plc provide the Trust with a £100 million loan facility
and the Trust drew £60 million of this facility during the year to fund the
redemption of the 2018 First Mortgaged Debenture Stock.

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. At the balance sheet date, a total of £29,438,000 (2006: £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. During the year CBHA repaid £5 million of this loan to the
Trust. The on-lending is disclosed as a debtor due in more than one year in the
Trust's balance sheet.


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

All other loans are secured by specific charges on the Trust's housing
properties and are repayable at interest rates of between 4.59% and 10.25% and
are repayable in instalments due as shown on page 47.

Debentures

On 2 June 2006, the £100 million First Mortgage Debenture Stock due 2018 was
redeemed, in line with a resolution passed at an EGM of stockholders on 18 May
2006.

Guaranteed Secured Debenture Stock is 10.25% Guaranteed Secured Stock redeemable
in 2023. The stock is secured on selected housing properties. During the year
£12.6 million of this Stock became available for repurchase. The Trust took
advantage of this opportunity. A premium of £7.3 million was paid with
associated interest savings being reflected in future years' financial
statements.

The fair value (market value) of the Trust's Loan stock at 31 March 2007 was
£123.1 million, compared to a balance sheet value of £78.5 million.

Risks

The main risks arising from the Groups' financial instruments are interest rate
risk and liquidity risk. The Finance 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. £283.5 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)

                                                                2007      2006

                                      Bank and
                                      building
                                       society  Orchardbrook
                                         loans       Limited    Total     Total
TRUST                                    £'000         £'000    £'000     £'000
                                                     
At beginning of year                   172,884           985  173,869   137,534
New loans                              135,000             -  135,000    35,000
Assigned upon transfer of Clays
Lane Estate                                  -             -        -       985
Reclassification of amounts due
within one year                              -             -        -     1,638
                           
                                       307,884           985  308,869   175,157
Less:
Instalments repaid during the          (10,000)         (985) (10,985)   (1,000)
year
Loan arrangement fees                     (804)            -     (804)     (288)
Repayable within one year                    -             -        -         -

At end of year                         297,080             -  297,080   173,869

Repayable in:
2-5 years                                    -             -        -     9,710
More than 5 years                      297,080             -  297,080   164,159

                                       297,080             -  297,080   173,869


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

                                                                2007      2006

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

At beginning of year                   172,412           985  173,397   137,036
New loans                              135,000             -  135,000    35,000
Assigned upon transfer of Clays
Lane Estate                                  -             -        -       985
Reclassification of amounts due                             
within one year                              -             -        -     1,638

                                       307,412           985  308,397   174,659
Less:
Instalments repaid during the          (10,000)         (985) (10,985)   (1,000)
year
Loan arrangement fees                     (778)            -     (778)     (262)
Repayable within one year                    -             -        -         -

At end of year                         296,634             -  296,634   173,397

Repayable in:
2-5 years                                    -             -        -     9,710
More than 5 years                      296,634             -  296,634   163,687

                                       296,634             -  296,634   173,397


16. RESERVES
                                                          Designated Reserves 
                                                                        Peabody
                                    Revenue  Revaluation  Subsidence  Community 
                                    Reserve      Reserve     Reserve       Fund     Total
                                      £'000        £'000       £'000      £'000     £'000
Trust
At 1 April 2006                     137,673            -       1,000      8,598   147,271
Transfers                                 6            -           -         (6)        -
Deficit in the year                 (10,638)           -           -          -   (10,638)
Other gains                           4,032            -           -        200     4,232

At 31 March 2007                    131,073            -       1,000      8,792   140,865

Group
At 1 April 2006                     148,064        4,122       1,000      8,598   161,784
Transfers                               287         (281)          -         (6)        -
Deficit in the year                  (8,594)           -           -          -    (8,594)
Other gains                           4,416            -           -        200     4,616

At 31 March 2007                    144,173        3,841       1,000      8,792   157,806



The Peabody Community Fund designated reserve includes £200,000 in respect of
the revaluation of the Peabody Community Fund investment portfolio.


Any surpluses are reinvested in Peabody's own stock or in schemes which deliver
new social housing in London. This ensures that Peabody is able to continue to
deliver its mission of fighting poverty in London.


At 31 March 2007 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 2007.

The Trust's service cost under the LPFA was £1,970,000 (2006 - £1,537,000).

The Group's service cost under the LPFA was £2,147,000 (2006 - £1,662,000)

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
                                                   2007      2006      2005
                                                  % per     % per     % per
                                                  annum     annum     annum

Rate of increase in payment:                        3.2       3.1       2.9
Rate of increase in salaries                        4.7       4.6       4.4
Discount rate                                       5.4       4.9       5.4
Inflation assumptions                               3.2       3.1       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      2007     term       2006     term       2005
                                  rate of            rate of             rate of
                                   return     £'000   return      £'000   return      £'000

Equities                             7.7%     25,594    7.3%     23,613     7.7%     23,044
Target return funds/Bonds            6.4%      9,189    6.0%      7,134     4.8%      3,156
Alternative assets/Property          6.8%      5,211    6.5%      4,416     5.7%      2,080
Cash                                 4.9%      1,103    4.6%      2,302     4.8%        980

Total market value of assets                  41,097             37,465              29,260

Present value of scheme liabilities          (54,106)           (53,791)            (43,050)
Present value of unfunded liabilities            (82)               (82)                (90)

Net pension liability                        (13,091)           (16,408)            (13,880)


                                                2007      2007       2006      2006
    Amounts Charged to Operating Profit        £'000     (% of      £'000     (% of
                                                         payroll)             payroll)

    Service cost                               1,970      20.7      1,537      16.1
    Curtailments and settlements                   5       0.1        724       7.5

    Total operating charge (A)                 1,975      20.8      2,261      23.6

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

    Expected return on employer assets         2,559      26.8      2,117      22.1
    Interest on pension scheme liabilities    (2,672)    (28.0)    (2,373)    (24.7)

    Net Return (B)                              (113)     (1.2)      (256)     (2.6)

    Net Revenue account cost (A) - (B)         2,088      22.0      2,517      26.2

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

                                                                     2007      2006
                                                                    £'000     £'000
    Annual return less expected return on
    pension scheme assets                                             363     4,818
    Experience gains and losses arising on the
    scheme liabilities                                                 (4)       57
    Changes in financial assumptions                                3,673    (6,783)
    underlying the present value of the scheme
    liabilities
    Actuarial gain/(loss) recognisable in the                       4,032    (1,908)
    STRSD

17. PENSION LIABILITIES (continued)

The London Pensions Fund Authority
Movement in deficit during the                                   2007     2006
year                                                            £'000    £'000
                                                                

Deficit at beginning of the year                              (16,408) (13,880)
Current service cost                                           (1,970)  (1,537)
Employer contributions                                          1,365    1,890
Contributions in respect of                                         8        7
unfunded benefits
Impacts of settlements and                                         (5)    (724)
curtailments
Net return on assets                                             (113)    (256)
Actuarial gains/(losses)                                        4,032   (1,908)

Deficit at end of year                                        (13,091) (16,408)


History of experience gains and       2007     2006     2005     2004     2003
losses                               £'000    £'000    £'000    £'000    £,000                  
                                                       

Difference between the expected
and actual return on assets            363    4,818      806    3,203  (8,467)
Value of assets                     41,097   37,465   29,260   25,209   19,438
Percentage of assets                  0.9%    12.9%     2.8%    12.7%  (43.6%)
Experience (losses)/gains on           (4)       57    2,664     (18)     (53)
liabilities
Total present value of liabilities  54,188   53,873   43,140   40,970   34,549
Percentage of the total present     (0.0%)     0.1%     6.2%   (0.0%)   (0.2%)
value of liabilities
Actuarial gains/(losses)             4,032  (1,908)    2,648      808  (9,770)
recognised in STRSD
Total present value of liabilities  54,188   53,873   43,140   40,970   34,549
Percentage of the total present       7.4%   (3.5%)     6.1%     2.0%  (28.3%)
value of 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.

                          Expected  Value at   Expected   Value at   Expected   Value at
                              long  31 March       long   31 March  long term   31 March
                              term      2007       term       2006    rate of       2005
                           rate of              rate of                return       
                            return               return
                                       £'000                 £'000                 £'000
Equities                      7.7%     1,983       7.3%      1,769       7.7%      1,694
Target Return Funds/Bonds     6.4%       712       6.0%        535       4.8%        232
Alternative Assets/           6.8%       404       6.5%        331       5.7%        153
Property
Cash                          4.9%        85       4.6%        172       4.8%         72

Total market value of
assets (active sub fund)               3,184                 2,807                 2,151

Present value of                   
liabilities                           (4,684)               (4,619)               (3,620)

Net pension liability                (1,500)                (1,812)               (1,469)


                                        2007        2007      2006      2006
Amounts Charged to Operating Profit    £'000       (% of     £'000     (% of
                                                 payroll)            payroll)

Service cost                             177        23.1       125      18.4

Total operating charge (A)               177        23.1       125      18.4

Projected amount credited to other
finance income

Expected return on employer assets      195         25.5       157      23.2
Interest on pension scheme            
liabilities                            (231)       (30.2)     (199)    (29.4)

Net Return (B)                          (36)        (4.7)      (42)     (6.2)

Net Revenue account cost (A) - (B)      213         27.8       167      24.6


17. PENSION COMMITMENTS (continued)

Analysis of Amount Recognisable in                  2007              2006
Statement of Total Recognised Surpluses
and Deficits (STRSD)
                                                   £'000             £'000
Annual return less expected return on
pension scheme assets                                 28               358
Experience gains and losses arising on
the scheme liabilities                                (1)                -
Changes in financial assumptions
underlying the present value of the
scheme liabilities                                   357              (667)

Actuarial loss recognisable in the               
STRSD                                                384              (309)

Movement in deficit during the year                 2007              2006

                                                   £'000             £'000
Deficit at beginning of the year                  (1,812)           (1,469)
Current service cost                                (177)             (125)
Employer contributions                               141               133
Impact of settlements and curtailments                 -                 -
Net return on assets                                 (36)              (42)
Actuarial gains/ (losses)                            384              (309)

Deficit at end of year                            (1,500)           (1,812)



History of experience gains and        2007     2006     2005     2004      2003
losses                                £'000    £'000    £'000    £'000     £'000
                                              
Difference between the expected          28      358       58      208     (529)
and actual return on assets
                                                                           
Value of assets                       3,184    2,807    2,151    1,670     1,233
Percentage of assets                   0.9%    12.7%     2.7%    12.4%   (42.9%)
Experience losses on liabilities        (1)        -     (64)        1      (26)
Total present value of liabilities   4,684    4,619    3,620    2,970     2,455
Percentage of the total present
value of liabilities                     0%        -   (1.8%)   (0.0%)    (1.1%)
Actuarial gains/(losses)           
recognised in STRSD                     384    (309)     (85)     (18)     (674)
Total present value of               
liabilities                           4,684    4,619    3,620    2,970     2,455
Percentage of the total present
value of liabilities                   8.2%   (6.7%)   (2.3%)   (0.6%)   (27.5%)


17. PENSION COMMITMENTS (continued)

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 2007 was £19,000 (2006: £18,000).

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 £46,279,000 (2006: £28,313,000).


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 2007 (2006:
£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.

During the year, Safe in the City Limited, a charitable company limited by
guarantee, within which the Trust had a 50% interest, was placed into Members
Voluntary Liquidation.


21. ACCOMMODATION IN MANAGEMENT
                                       Trust                 Group
Managed directly at 31 March      2007       2006       2007       2006
Social Housing                   Units      Units      Units      Units

Housing accommodation           14,721     15,042     16,062     16,371
Shared ownership                   448        424        474        450
Keyworker                          338        312        338        312
Supported housing                  562        558        617        613

                                16,069     16,336     17,491     17,746

Managed by others at 31 March
Social Housing

Housing accommodation              422        431        422        431
Supported housing                  347        349        347        349

                                   769        780        769        780
Non - social housing

Total non-social rented housing    313        202        313        202



22. TRANSACTIONS WITH RELATED PARTIES

At 31 March 2007 there were 5 members of the Board or other Committees of the
Trust who had tenancy agreements with the Trust. There were 8 residents involved
with the Governance of CBHA at 31 March 2007. 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. PROFIT ON SALE OF FIXED ASSETS

During the year the Trust sold 210 properties which were void and economically
unviable to retain generating a profit of £37.8 million. In addition the Trust
generated profit 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 profit of £3.1 million.

CBHA sold 6 properties during the year, under the preserved right to buy,
generating a profit of £0.8 million.

24. POST BALANCE SHEET EVENT

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. The Trust
has entered into a conditional contract for the sale of the site to the London
Development Agency; the sale is due to complete on 31 July 2007.

The value expected under the conditional contract is no lower than the book
value of £5m for the estate included within housing properties.



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FR EAXXKAEPXEFE                                                                                                                                                                                                                                            

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