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						      Cheshire	Pension	Fund	Annual	Report	2008-09	Forward	   1




    Annual Report 2008-09
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Foreword                                  1
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Management Structure                      2
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Governance Report                         4
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Administration Report                     8
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Investment Report                        14
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Auditor’s Report                         24
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Financial Statements                     28
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Notes to the Accounts                    32
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Actuarial Statement                      42
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Participating Employers & Publications   44
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Contacts & Further Information           45
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                                                                                                             Cheshire Pension Fund Annual Report 2008-09 Foreword      1




Foreword
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Welcome to the Annual Report of the Cheshire               A new Pension Fund Committee and                        The Fund’s investments were a victim of the
Pension Fund for the financial year 2008-09.               governance arrangements came into being on              collapse in equity markets and other asset prices as
                                                           the 1 April 2009 and this is covered in more detail     investors sold out of risky assets. A negative return
2008-09 was a year of landmark events being the
                                                           in the Governance section of this report. Governance    of -21.5% against a benchmark return of -16.8% was
lead up to Local Government Reorganisation (LGR)
                                                           arrangements and transparency continue to be major      disappointing as the Fund’s investment managers
This saw the disbanding of the former administering
                                                           themes for Local Government Pension funds so we         struggled in such a difficult environment. At the time
authority to the Fund, Cheshire County Council and
                                                           have also set up a new Pension Consultative Forum       of writing, markets have appeared to stabilise and
also the six district councils to be replaced from
                                                           to provide a platform for stakeholders in the Fund      recover some of these losses and with a valuation year
1st April 2009 by two new unitary authorities –
                                                           to participate in our Governance Arrangements.          fast approaching we hope this recovery continues.
Cheshire West and Chester and Cheshire East
Councils respectively.                                     I would like to thank all employers and their           Mark Wynn
                                                           HR and payroll teams who worked with us                 Head of Finance, Cheshire West and Chester Council.
Responsibility for the administration of the Fund
                                                           to deliver a seamless implementation of
transferred by statute to the new Cheshire West and
                                                           the “New Look” LGPS from 1 April 2008.
Chester Council and it is in my responsibility as Head
of Finance of this authority that I write this foreword.   And last but not least, 2008-09 will long
                                                           be remembered as the year when the global
LGR brought many challenges, most notably on
                                                           financial markets went into meltdown requiring
the workloads of the department, further details of
                                                           unprecedented Government intervention
which are included in the Administration section of
                                                           across the globe to prop up the banking
this report. LGR also brought about the end of long
                                                           systems, followed by every major developed
established governance arrangements and I would
                                                           market entering recession as the world
like to take this opportunity to thank former Officers
                                                           faced a global recession.
of Cheshire County Council and former members
of the Pensions Investment Panel for the skills,
experience, knowledge and unstinting commitment
and dedication they brought to the management
of the Fund’s business over many years.
2




Management	Structure

                        Administering Authority up to 31 March 09	
                        Cheshire	County	Council
                        Administering Authority post 1 April 09
                        Cheshire	West	and	Chester	Council


                        Pensions Investment Panel up to 31 March 09
                        Councillor C Bain
                        Cheshire	County	Council,	Chairman
                        Councillor P Mason
                        Cheshire	County	Council,	Vice	Chairman
                        Councillor G Cousins
                        Cheshire	County	Council
                        Councillor D Newton
                        Cheshire	County	Council
                        Councillor A Richardson (Deceased)
                        Cheshire	County	Council
                        Councillor L Toale
                        Cheshire	County	Council
                        Councillor B Wolstencroft
                        Cheshire	County	Council

                        Councillor F Bruce
                        Warrington	Borough	Council
                        Councillor M Wharton
                        Halton	Borough	Council
                        Councillor F Keegan
                        Cheshire	District	Councils

                        Mr M Dolman
                        Unison,	Employee	Representative
	                                                                                     Cheshire	Pension	Fund	Annual	Report	2008-09	Management Structure	    3




Pension Fund Committee post 1 April 09   Cheshire County Council Officers    Investment Managers                      Custodian
                                         up to 31 March 09
Councillor P Mason                                                           Adams Street Partners                    BNY Mellon Asset Servicing
Cheshire	East	Council,	Chairman          Paul Heath                          Private	Equity
                                         Director	of	Policy	&	Resources
Councillor W Fitzgerald*                                                     Baillie Gifford                          AVC Providers
Cheshire	East	Council                    Bill Tunnicliffe                    Fixed	Income	&	Equities
                                         County	Finance	Officer                                                       Clerical Medical
Councillor F Keegan                                                          European Credit Management
Cheshire	East	Council                    Mark Wynn                           Secured	Loans                            Equitable Life
                                         Head	of	Corporate	Finance                                                    Standard Life
Councillor J Narraway*                                                       GMO
Cheshire	East	Council                    Nick McGinn                         Global	Equities
                                         Principal	Solicitor                                                          Investment Consultant
Councillor D Beckett*                                                        Goldman Sachs Asset Management
Cheshire	West	and	Chester	Council                                            Fixed	Income
                                         Cheshire West and Chester Council                                            John Hastings
Councillor K Birtwistle*                                                     Henderson                                Hymans	Robertson	LLP
                                         Officers post 1 April 2009
Cheshire	West	and	Chester	Council                                            Fixed	Income
Councillor B Crowe*                      Julie Gill                          Legal & General                          Actuary
Cheshire	West	and	Chester	Council        Director	of	Resources               Equities,	Index	Tracking
                                         Mark Wynn                                                                    John Wright
Councillor H McNae*                                                          Lexington Capital Partners
                                         Head	of	Finance                                                              Hymans	Robertson	LLP
Cheshire	West	and	Chester	Council                                            Private	Equity
                                         Stephan Van Arendsen                Mellon Capital
Councillor F Bruce                       Senior	Manager,	Corporate	Finance                                            Auditors
                                                                             Global	Tactical	Asset	Allocation
Warrington	Borough	Council
                                         Nick McGinn                         M&G                                      Judith Tench	
Councillor M Wharton                     Principal	Solicitor                                                          District	Auditor,	Audit	Commission
                                                                             Secured	Loans
Halton	Borough	Council
                                                                             Pantheon Ventures
Mrs O Kokkinis                                                               Private	Equity
Unison,	Employee	Representative                                              Rockspring
                                                                             Property
* Newly	elected	councillors.                                                 Standard Life
                                                                             UK	Equities
4




Governance	Report

                     Governance Arrangements

                     Cheshire	West	and	Chester	Council	is	the	new	
                     administering	authority	of	the	Cheshire	Pension	
                     Fund,	responsible	for	all	aspects	of	managing	the	
                     Fund	including	receipt	of	employer	and	employee	
                     contributions,	payment	of	benefits,	investment		
                     of	the	Fund’s	assets	and	maintaining	financial		
                     and	personal	records.

                     Cheshire	West	and	Chester	Council	administers	
                     the	Fund	for	its	own	employees,	for	Cheshire	East	
                     Borough	Council,	Warrington	and	Halton	Unitary	
                     Authorities	and	88	other	approved	bodies.

                     The	Fund	takes	corporate	governance	and	social	
                     responsibility	seriously.	We	are	responsible	for	
                     ensuring	business	is	conducted	in	accordance	with	
                     the	law	and	proper	standards	and	that	public	money	
                     is	safeguarded,	properly	accounted	for	and	used	
                     economically,	efficiently	and	effectively.

                     It	is	important	that	the	Fund’s	governance	is	
                     transparent	and	information	about	investments,	
                     service	levels	and	performance	is	readily	available		
                     to	members,	employers,	statutory	bodies	and	any	
                     other	interested	parties.	We	achieve	this	through		
                     a	series	of	publications	which	can	be	found	on		
                     the	Fund’s	website	www.cheshirepensionfund.org
	                                                                                                Cheshire	Pension	Fund	Annual	Report	2008-09	Governance Report	   5




Pension Fund Committee                               Pension Fund Committee
Local Government Reorganisation (LGR)                Terms of Reference

In	2008-09	Cheshire	was	subject	to	LGR	which		       The	PFC	will	exercise	the	Authority’s	responsibility	
meant	the	disbanding	of	the	County	Council	and		     for	the	management	of	the	Fund	including	the	
six	district	councils,	with	the	formation	of	two	    management	of	the	administration	of	the	benefits		
borough	Councils,	Cheshire	West	and	Chester		        and	the	strategic	management	of	the	Fund’s	assets.	
and	Cheshire	East.	The	two	new	organisations	        This	includes:
became	effective	from	1	April	2009,	and	resulted		
                                                     •	 Meeting	quarterly	or	otherwise	as	necessary		
in	four	former	Members	retaining	their	seat	on		        to	effectively	monitor	investment	strategy
the	Pension	Fund	Committee	(PFC)	and	six	newly	
                                                     •	 Overall	responsibility	for	the	investment		
elected	members	joining	the	PFC.
                                                        strategy	and	monitor	overall	performance	
To	support	the	new	members	in	the	lead	up		          •	 Appointment	and	termination	of	investment	
to	April	2009,	new	members	underwent	a	thorough	        managers
training	programme	including	a	three	day	Local	      •	 Setting	performance	benchmarks	and	targets		
Government	Trustees	Training	course	run	by	the	         for	investment	managers
Local	Government	Employers	(LGE).	This	was	          •	 Review	governance	arrangements	and	the	effective	
supplemented	by	a	two	day	training	course	on	the	       use	of	its	advisors	to	ensure	good	decision	making
internal	workings	of	the	Cheshire	Fund.	The	new	
                                                     •	 To	oversee	the	Pension	Consultative	Forum	(PCF)	
members	were	also	invited	to	attend	as	observers		      arrangements	and	compliance	with	best	practice	
at	the	February	Pensions	Investment	Panel.
                                                     •	 Receive	regular	updates	from	(PCF)	on		
                                                        Scheme	administration	to	ensure	that	best	
                                                        practice	standards	are	met	and	communicate	to	
                                                        stakeholders	that	the	Fund	is	being	run	effectively.
                                                     •	 To	approve	and	maintain	a	Statement	of	
                                                        Investment	Principles,	Funding	Strategy	
                                                        Statement,	Governance	Policy	and	publish		
                                                        a	Pension	Fund	Annual	Report.
6	    Cheshire	Pension	Fund	Annual	Report	2008-09	Governance Report




New Pension Consultative Forum                             Representation                                          Pension Consultative Forum
Stakeholder Representation                                 Councillor Peter Mason                                  Terms of Reference
                                                           Chairman,	Cheshire	East	Council
The	Fund	is	keen	for	all	stakeholders	to	participate	                                                              The	role	of	the	PCF	is	to	ensure	that	best	practice	
                                                           Paul Bradshaw
in	its	governance	arrangements	and	in	accordance	          Head	of	HR,	Cheshire	East	Council                       standards	are	satisfied,	published	targets	are	met		
with	the	Government’s	best	practice	principles	and	                                                                and	that	an	efficient	and	professional	service	is		
                                                           Lisa Quinn
following	consultation	with	employers	and	members,	        Borough	Treasurer	&	Head	of	Assets,		                   provided	to	all	stakeholders.	Its	main	responsibilities	
a	Pension	Consultative	Forum	(PCF)	was	created.            Cheshire	East	Council                                   will	include:
                                                           Nicola Pierce HR	Strategy	Consultant,		
The	PCF	will	ensure	a	better	shared	understanding	of	      Cheshire	West	and	Chester	Council                       •	 Bring	stakeholder	perspective	to	the	aspects		
the	many	challenges	facing	the	Administering	Authority,	   Joanne Jones                                               of	the	Fund’s	business	covered	by	the	Terms		
employers,	admitted	bodies,	housing	trusts,	colleges	      HR	Manager,	Cheshire	Police	Authority                      of	Reference
and	members	of	the	scheme	and	will	facilitate	the	         Darren Griffiths                                        •	 To	discuss	minutes	and	updates	from	the	Pension	
effective	communication	between	fund	stakeholders		        Head	of	Finance	and	Governance,		
                                                           Cheshire	Fire	Authority                                    Fund	Committee	and	ensure	a	flow	of	information	
and	officers	of	the	Administering	Authority.
                                                           Derek Hughes                                               from	the	committee	to	the	Fund’s	stakeholders
                                                           Finance	Manager,		                                      •	 Approve	and	monitor	the	Pension	Administration	
                                                           Cheshire	Probation	(Admitted	Bodies)
                                                                                                                      Strategy	Statement	which	covers	service	
                                                           Eddie Austin
                                                           Director	of	Finance,	University	of	Chester	(Colleges)      standards,	policies	and	benchmarking
                                                           Danny Mather                                            •	 To	agree	and	monitor	the	performance		
                                                           Head	of	Financial	&	Business	Planning,		                   of	the	agreed	service	levels	between	the	
                                                           Warrington	Borough	Council
                                                                                                                      Administering	Authority	and	Fund	Employers
                                                           Bill Dodd
                                                           Operational	Director	Financial	Services,	               •	 Review	and	approve	the	Administering		
                                                           Halton	Borough	Council
                                                                                                                      Authority’s	Discretionary	Policies
                                                           Su Bramley
                                                           Deputy	Chief	Executive,		                               •	 Respond	to	Government	consultations	relating		
                                                           Chester	and	District	Housing	(Housing	Trusts)              to	the	administration	and	benefits	of	the	LGPS.
                                                           Olga Kokkinis
                                                           Unison,	Cheshire	West	and	Chester	Council
                                                           John Feeney
                                                           Unison,	Cheshire	East	Council
	
                                                                                                  Cheshire	Pension	Fund	Annual	Report	2008-09	Governance Report	           7




Delegation                                               The	Head	of	Finance	and	officers	in	Corporate		            The	Head	of	Finance	will	approve	admission	into		
                                                         Finance	will	have	specific	responsibility	for:             the	Cheshire	Pension	Fund,	employees	of	authorities	
The	Administering	Authority	has	delegated		
                                                                                                                    and	bodies	as	prescribed	in	the	Regulations,	subject		
the	following	responsibilities:-                         •	 Preparation	and	maintenance	of	the	accounts		
                                                                                                                    to	an	approved	Admission	Agreement,	and	subject		
                                                            of	the	Pension	Fund,	including	the	Pension	Fund	
The	Director	of	Resources	is	responsible	for		                                                                      to	any	necessary	indemnities	as	appropriate.
                                                            Annual	Report	and	Business	Plan.
setting	the	appropriate	funding	target	for	the	Fund.
                                                                                                                    In	addition,	the	Head	of	Finance	and	his	staff	have	
                                                         •	 Advising	and	servicing	the	Pension	Fund	Committee	
Day	to	day	responsibility	is	delegated	to	the	Head	                                                                 delegated	responsibility	for	the	effective	discharge		
                                                            and	other	Pension	Fund	investment	meetings.
of	Finance,	who	will	carry	out,	in	consultation	with	                                                               of	the	LGPS	administration	function	including:
                                                         •	 Maintaining	regular	dialogue	with	the	Fund’s	
the	Pension	Fund	Committee;	the	requirement	to	
                                                            advisers,	investment	managers	and	custodian.            •	 Record	keeping
review	the	investments	made	by	the	Fund	Managers	
and	will	report	to	each	meeting	of	the	Pension	Fund	     •	 Monitoring	and	reconciling	of	investment	manager	       •	 The	calculation	and	authorisation		
Committee	on	the	exercise	of	this	delegation.               and	custodian	records.                                     of	benefit	payments

                                                         •	 Preparation	and	maintenance	of	the	Fund’s	              •	 Provision	of	membership	data		
In	addition	the	Head	of	Finance	will	execute	
                                                            Statement	of	Investment	Principles	and	compliance	         for	actuarial	valuation	purposes
documentation	relating	to	the	implementation	of	a	new	
investment	mandate	or	existing	investment	mandates.         with	the	requirements	under	the	Myners	review.          •	 Preparation	and	maintenance	of	the	Funding	
                                                         •	 Monitoring	the	activity	and	performance		                  Strategy	Statement,	the	Governance	Policy	
Day	to	day	management	of	the	Fund’s	investments	has	
                                                            of	the	Fund’s	investment	managers	including	               Statement,	the	Communication	Policy	Statement,	
been	delegated	to	the	external	investment	managers	
                                                            compliance	with	policy	and	performance	objectives.         and	the	Pensions	Administration	Strategy	
in	accordance	with	their	mandates,	details	of	which	
                                                                                                                       Statement.
are	set	out	in	the	Statement	of	Investment	Principles.   •	 Interpretation	and	implementation	of	new	legislation.
                                                         •	 Monitoring	the	corporate	governance	activity		
                                                            of	the	Fund.
                                                         •	 Ensuring	appropriate	research	is	undertaken		
                                                            into	new	investment	initiatives.	
8




Adminstration	Report

                        This	Year	has	proved	to	be	an	exceptional	one		
                        in	terms	of	the	administration	of	the	LGPS	in		
                        general	and	the	Cheshire	Pension	Fund	in		
                        particular.	Not	only	did	we	see	the	introduction		
                        of	the	‘New	Look’	LGPS	from	April	2008,	but		
                        we	also	had	to	plan	for	Local	Government		
                        Reorganisation	(LGR)	and	the	impact	this	would		
                        have	on	our	workloads	and	resources.	It	is	testament	
                        to	the	dedication	and	professionalism	of	the	pension	
                        staff	that	these	challenges	were	met	whilst	also	
                        maintaining	a	high	level	of	service	to	all	stakeholders.

                        The	introduction	of	the	‘New	Look’	LGPS	meant		
                        all	stakeholders	needed	to	be	fully	aware	and	
                        prepared	for	the	changes.	This	involved	the	Fund	
                        working	closely	with	all	participating	employers	to	
                        ensure	information	was	relayed	to	those	concerned	
                        and	responsible	for	it.	An	extensive	publicity		
                        campaign	was	undertaken	which	included:

                        •	 Presentations	to	Scheme	Members	and	Employers	
                        •	 Roadshows	and	drop	in	sessions
                        •	 Posters	outlining	the	key	differences		
                           between	the	new	and	old	schemes
                        •	 Updates	available	on-line	via	internet		
                           and	intranets
                        •	 Scheme	Literature	(booklets,	leaflets	etc).
	
                                                                                                  Cheshire	Pension	Fund	Annual	Report	2008-09	Administration Report	       9




In	addition	to	raising	awareness	of	the	changes	         The	transfer	of	the	Administering	Authority	role		           •	 Benefits and Leavers Team	Responsible	for		
brought	about	by	the	introduction	of	the	new	scheme,	    to	Cheshire	West	and	Chester	Council	also	meant		               the	large	volume	of	day	to	day	case	work	for	the	
we	worked	closely	with	our	software	provider	to	         that	all	of	our	scheme	literature,	stationery	and	              leavers	from	the	Scheme	including	all	types	of	
ensure	the	changes	to	the	benefit	calculations		         website	required	updating.	The	Fund	took	this	as		              retirements,	deferred	pensioners,	transfers	out,	
were	implemented	accurately	to	reflect	the	new	          an	opportunity	to	rebrand	all	scheme	literature		               and	estimates
calculation	methods	and	as	soon	as	possible.	            with	the	Fund’s	logo	becoming	more	prominent		
                                                                                                                      •	 Actives Team	Responsible	for	dealing	with	those	
                                                         on	our	materials	and	products.
LGR	brought	about	a	further	challenge	to	our	                                                                            current	members	of	the	Scheme	who	wish	to	
administration	activity	as	responsibility	for	the	                                                                       investigate	transferring	previous	pension	rights	
                                                         Staffing Structure                                              into	the	LGPS	as	well	as	providing	information	
administration	of	the	Fund	transferred	from	Cheshire	
County	Council	to	Cheshire	West	and	Chester	Council.	    During	2008	the	Management	Team	undertook		                     for	anyone	who	wants	to	improve	their	retirement	
From	the	outset	the	message	from	the	Fund	was	that	      a	comprehensive	review	of	the	staffing	structure	in	            benefits	by	paying	additional	contributions.		
it	was	business	as	usual	and	any	disruption	would	       order	to	meet	the	challenges	ahead.	A	new	structure	         •	 Systems Team	Responsible	for	maintaining	our	
be	kept	to	an	absolute	minimum.	All	pension	staff	       was	put	in	place	which	is	now	aligned	to	our	desire	            pension	system	database	and	other	integrated	
transferred	to	the	new	authority	on	1	April	2009		       to	continually	improve	our	service		standards	and	              office	systems	as	well	as	testing	new	software	
which	meant	their	knowledge	and	expertise	was	           delivery	and	to	meet	the	changing	demands	of	the	               releases	and	processes	and	system	improvements	
retained.	The	transition	was	seamless,	with	no	          LGPS.	We	will	continue	to	monitor	our	structure	                by	working	closely	with	practitioners	from	the	
disruption	to	our	ability	to	deliver	a	high	level	of	    to	ensure	that	we	are	working	as	efficiently	and	               other	teams.
service.	The	most	significant	impact	of	LGR	was	         effectively	as	possible.		
                                                                                                                      •	 Communications Team	Responsible	for	ensuring	
caused	by	the	increased	number	of	early	retirement	
                                                         As	a	consequence	of	the	review,	we	have	created		               our	major	communication	exercises	are	met.		
estimates	and	subsequent	‘actual’	retirement		
                                                         the	following	teams.                                            The	production	of	scheme	publications,	delivery		
cases	processed	by	the	Section.	Resources	were		
                                                                                                                         of	road-shows,	website	maintenance	and	delivery	
re-allocated	to	ensure	all	estimates	and	retirements	    •	 Data Management Team	Responsible	for	handling	               of		in–house	training	and	technical	support.		
were	calculated	and	processed	within	the	timescales	        the	major	processes	required	to	support	our	large	
agreed	between	the	Fund	and	the	seven	legacy	councils.      document	image	system,	as	well	as	data	integrity	
                                                            and	record	maintenance.	As	the	Helpdesk,	they		
                                                            also	act	as	first	point	of	contact	for	all	new	queries.
10	   Cheshire	Pension	Fund	Annual	Report	2008-09	Administration Report




                                                                          Staff Development / Training

                                                                          The	Fund	recognises	that	its	most	valuable	resource	
                                                                          is	its	staff.	As	a	consequence	the	Fund	encourages	
                                                                          all	staff	to	fulfil	their	potential	through	a	staff	
                                                                          development	and	training	program.	Our	staff	need	
                                                                          to	be	able	to	adapt	to	the	changes	in	the	regulatory	
                                                                          framework	which	governs	the	pensions	industry.	
                                                                          This	is	achieved	through	a	combination	of	external	
                                                                          courses,	in-house	training	and	specialist	training	
                                                                          arranged	in	partnership	with	the	Local	Government	
                                                                          Employers	(LGE)	training	unit.	In	addition	to	this,	
                                                                          several	staff	have	been	successful	in	gaining	
                                                                          qualifications	which	are	recognised	throughout		
                                                                          the	pensions	industry.


                                                                          Working With Employers

                                                                          We	view	our	relationship	with	Fund	employers	as	
                                                                          one	of	an	important	partnership,	working	together	
                                                                          to	achieve	common	goals.	One	of	our	principal	roles	
                                                                          is	to	ensure	employers	understand	the	key	aspects	
                                                                          of	the	LGPS,	as	well	as	making	them	fully	aware	of	
                                                                          their	responsibilities	in	terms	of	the	administration	
                                                                          of	the	scheme.	One	of	the	ways	we	achieve	this	is	
                                                                          by	inviting	employers	to	attend	training	sessions	
                                                                          which	are	tailored	to	meet	their	requirements.	This	
                                                                          represents	an	on-going	commitment	by	both	parties	
                                                                          as	the	regulations	governing	the	LGPS	are	continually	
                                                                          amended,	and	employers	experience	a	turnover	of	
                                                                          their	staff	experienced	in	pensions	administration.		
	
                                                                                                Cheshire	Pension	Fund	Annual	Report	2008-09	Administration Report	     11




Employer Handbook                                          Membership Statistics                                    New Employer Admissions to the Fund

Upon	admittance	to	the	Fund,	each	employer	is	issued	      The	total	membership	of	the	Fund	increased		             During	the	year	the	Fund	admitted	five	new	employers	
with	a	copy	of	the	administration	Handbook	which	          again	this	year.	The	number	of	pensioners	and	           into	the	scheme.	Pensions	staff	supported	them	
covers	all	aspects	of	their	responsibility	in		            deferred	members	is	increasing	at	a	faster	rate		        through	the	admission	process	to	ensure	they	were	
the	LGPS.	The	handbook	also	includes	copies	of		           than	active	members,	continuing	the	growing	maturity	    fully	aware	of	their	roles	and	responsibilities	in	terms	
all	forms	employers	are	required	to	complete.		            of	membership	that	we	have	seen	previously.	The	         of	pensions	administration.
The	handbook	is	constantly	updated	and	revised		           increasing	number	of	deferred	benefits	reflects	
to	reflect	the	current	legislative	position.	An	on-line	   modern	working	trends	and	career	choices,	with	more	      Organisation                Type of Employer
version	of	the	handbook	has	also	been	made	available	      people	engaged	in	multiple	employments	and	fewer	         Poulton	with	Fearnhead		 Scheme		
so	employers	can	be	assured	that	the	information	they	     people	staying	in	the	same	job	for	life.                  Parish	Council           Employer
are	accessing	is	as	accurate	and	as	up	to	date		
                                                                                                                     Innovate	Services		         Best	Value		
as	possible.                                               March               06       07        08        09       Limited                     Contractor
                                                           Contributors    30,242   30,888    31,534    32,499
                                                                                                                     FOCSA	Services	(UK)	        Best	Value		
On-line Employer Portal                                    Pensioners      17,622   17,901    18,558    19,009	
                                                                                                              	      Limited                     Contractor

This	year,	we	have	been	busy	developing	our	new	           Deferreds       12,455   13,927    15,225    16,329                                   Scheme		
                                                                                                                     North	West	Fire	Control
                                                                                                                                                 Employer
website	which	was	launched	in	September	2009		
                                                           Total           60,319   62,716    65,317    67,837
The	website	has	its	own	domain	name:	                                                                                Catering	for	Education	     Best	Value		
www.cheshirepensionfund.org	and	includes	                                                                            (Colleges	)                 Contractor
a	dedicated	employer	portal	which	will	only	be	            Fund Membership as at 31 March 2009
accessible	by	Fund	employers	using	a	unique	login	
                                                           Pensioners
and	password	supplied	by	the	Fund.	The	portal	will	be	           28%
used	by	the	Fund	to	share	information	with	employers	
and	allow	them	to	download	specific	on-line	forms.
                                                                                         Contributors
                                                                                         48%


                                                             Deferred
                                                           Pensioners
                                                                 24%
12	   Cheshire	Pension	Fund	Annual	Report	2008-09	Administration Report




Service Standards                                         Performance 2008-2009
�

Our	current	service	standards	incorporate	the	industry	    Letter Detailing Transfer in Detail                                     91.75%
recognised	Chartered	Institute	of	Public	Finance	
and	Accountancy	(CIPFA)	standards.	The	target	is	         Letter Detailing Transfer Out Quote                                  82.89%

measured	from	the	point	at	which	the	last	piece	of	                     Processing a Refund                          62.36%
information	needed	for	the	calculation	is	received,		
in	line	with	the	national	CIPFA	benchmarking.	                         Retirement Estimates                                             99.92%

                                                                    Actual Retirement Letter                                       92.4%
The	chart	below	summarises	how	the	Fund	has	
performed	against	national	benchmarked	standards.	                  Death Acknowledgement                                      84.02%
As	a	member	of	the	CIPFA	benchmarking	club	this	
                                                                  Dependent Benefits Letter                                       85%
data	will	be	submitted	so	that	we	can	compare	
ourselves	to	all	other	members	of	the	club	and	also	to	        Deferred Benefits Notification                           70.18%
a	number	of	comparator	LGPS	Funds.	
                                                                                                 0%   20%     40%        60%       80%       100%


                                                          It	is	important	to	note	that	we	rely	heavily	on	third	       We	believe	our	overall	performance,	in	what	has		
                                                          parties	to	provide	accurate	and	timely	information	to	       been	a	very	challenging	year,	will	compare	favourably	
                                                          be	able	to	process	cases	within	target.	The	majority	of	     to	our	comparators.	At	the	same	time	we	recognise	
                                                          information	is	supplied	to	us	by	our	employers,	their	       the	need	to	constantly	review	all	procedures	and	
                                                          payroll	providers	and	scheme	members	themselves.			          processes	to	further	improve	our	performance.	
	                                                                                                 Cheshire	Pension	Fund	Annual	Report	2008-09	Administration Report	   13




Cases Processed                                             Case Type                                                          Actual                       Actual
                                                                                                        Quotations       Calculations   Quotations    Calculations
Although	LGR	brought	about	a	significant	increase		                                                      Provided           Provided     Provided        Provided
in	workloads,	we	have	worked	hard	to	ensure	that		                                                        2007/08            2007/08      2008/09         2008/09
all	of	our	members	and	employers	continue	to	receive	       Retirements                                         2,324          1,102         3739              1309
a	high	quality	standard	of	service.	In	addition	to	this,	   Transfer In                                          931             861          525              493
delays	in	the	issuing	of	amendment	regulations	from	        Transfer Out                                         633             425          258               228
Communities	&	Local	Government	relating	to	transfer	
                                                            Refunds                                              n/a             555           n/a              301
values	meant	that	calculations	were	‘stockpiled’	
                                                            Deferred benefits                                     77           3,389           65              2780
for	a	period	which	resulted	in	a	significant	backlog.	
Throughout	this	period,	the	pension	section	kept	           AVCs and Added years (07/08) ARCs (08/09)            433             117          224               121
members	who	had	applied	to	investigate	the	possibility	     Death in Service                                     n/a              80           n/a              73
of	transferring	their	benefits	fully	informed	of	the	       Death of a Pensioner                                 n/a             511           n/a              668
reasons	for	the	delay.	

Once	the	legislation	was	introduced,	there	was		            Benchmarking
                                                                                                                                         2007/08     2008/09
also	a	subsequent	delay	in	updating	our	software	to	
                                                            The	Fund	continues	to	participate	in	the	CIPFA	             Cheshire	
reflect	the	changes.	This	meant	that	administration	                                                                                      £18.11      £18.92
                                                            benchmarking	survey.	In	2008/2009	we	continued	             Pension	Fund
staff	were	asked	to	perform	time	consuming	and	
                                                            to	maintain	a	lower	than	average	cost	per	member	           CIPFA	Average     £21.40      £21.77
complex	calculations	manually.	
                                                            compared	to	funds	of	a	similar	size.
The	following	table	shows	the	number	of	calculations	
performed	in	some	of	the	key	areas	this	year	
compared	with	the	previous	year.
14	   Cheshire	Pension	Fund	Annual	Report	2008-09	Investment Report
14




Investment	Report

                                                                      Investment Strategy and Governance

                                                                      As	noted	earlier	in	the	Governance	section	of	this	
                                                                      report,	responsibility	for	the	Fund’s	investment	
                                                                      strategy	for	the	financial	year	2008-9	lay	with	the	
                                                                      County	Finance	Officer	advised	by	the	Pensions	
                                                                      Investment	Panel	(The	Panel).

                                                                      The	Fund’s	primary	investment	objective	as	set	out	
                                                                      in	the	published	Statement	of	Investment	Principles	
                                                                      is	to	achieve	a	return	from	the	Fund’s	investments	
                                                                      sufficient	to	ensure	it	can	meet	its	pension	liabilities	
                                                                      whilst	also	managing	investment	risk.

                                                                      The	Fund	targets	a	return	of	at	least	6.1%	per	annum	
                                                                      to	eliminate	the	funding	deficit	assessed	at	the	2007	
                                                                      valuation	over	a	twenty	year	deficit	recovery	period	
                                                                      and	to	deliver	a	return	from	investments	sufficient	to	
                                                                      keep	pace	with	the	cost	of	future	pension	provision.

                                                                      To	assist	delivery	of	these	objectives	the	Panel		
                                                                      also	advises	on	the	Fund’s	strategic	asset	allocation.	
                                                                      This	sets	out	the	amounts	to	be	invested	in	a	
                                                                      diversified	portfolio	of	assets.	

                                                                      The	Fund	invests	in	a	wide	range	of	asset	classes	
                                                                      and	regions	across	the	world	in	the	belief	that	a	
                                                                      diversified	portfolio	of	different	kinds	of	investments	
                                                                      will,	on	average,	yield	higher	returns	and	pose	a	lower	
                                                                      risk	than	any	individual	investment	found	within	the	
                                                                      portfolio.	
	
                                                                                                         Cheshire	Pension	Fund	Annual	Report	2008-09	Investment Report	     15




Diversification	also	strives	to	smooth	out	risk		              Significant Changes in 2008-09                            The	successful	transition	involved	trading	£195m		
in	a	portfolio	so	that	the	positive	performance	of		                                                                     of	segregated	bonds	and	£47.4m	of	foreign	exchange,	
                                                               The	most	significant	event	in	2008-09	was	the	
some	investments	will	neutralise	the	negative	                                                                           with	£23.4m	of	bonds	crossed	in-kind	between	
                                                               funding	of	the	new	fixed	income	mandates	managed	
performance	of	others.                                                                                                   legacy	and	destination	portfolios.	It	culminated	with	
                                                               by	Henderson,	Goldman	Sachs	and	Baillie	Gifford.	
                                                                                                                         a	complete	disinvestment	from	Legal	&	General	
                                                               Although	appointed	in	spring	2008,	funding	of	these	
Asset Allocation                                                                                                         fixed	income	funds,	while	achieving	a	reduced	target	
                                                               mandates	was	delayed	until	the	summer	of	2008.		
                                                                                                                         allocation	of	20%	to	Baillie	Gifford,	and	40%	each		
The	Fund’s	strategic	asset	allocation	benchmark		              The	impact	of	the	credit	crunch	was	still	working	its	
                                                                                                                         to	Henderson	and	GSAM.	
as	at	31	March	2009	and	over	3	years	is:                       way	through	markets	and	had	prohibitively	increased	
                                                               the	risks	and	costs	of	trading	in	bonds.	                 The	total	implementation	shortfall	(or	cost)	of	
                                     %       %       %                                                                   £811,486	(0.33%	of	destination	asset	value)	compared	
                                   2007    2008    2009        The	transition	was	successfully	managed	and	
                                                                                                                         favourably	with	the	pre	trade	estimate	of	£1,078,685.
UK	equities                         34.5    32.5       25.0
   executed	by	the	Fund’s	transition	manager	–		
                                                               (the	now	defunct)	Lehman	Brothers	Europe.		               Other	notable	transactions	in	the	year	were	a	£50m	
Overseas	equities                   34.5    34.5       37.0

                                                               The	primary	objective	of	the	transition	was	to	           transfer	from	the	UK	equities	component	of	the	
Total Equities                      69.0    67.0       62.0    redistribute	the	Fund’s	fixed	income	investments		        Baillie	Gifford	portfolio	to	the	Global	unconstrained	
Fixed	Income                        14.0    14.0       14.0    from	the	incumbent	managers	(Legal	and	General	           equity	portfolio	managed	by	the	same	manager.	
                                                               and	Bailie	Gifford)	to	newly	appointed	Henderson	         The	Fund	also	made	an	opportunistic	additional	
Property                             9.0     9.0        9.0
                                                               Global	Investors	(Henderson)	and	Goldman	Sachs	           investment	of	£50m	to	take	advantage	of	distressed	
Secured	Loans                        2.0     2.0        5.0    Asset	Management	(GSAM)	and	a	new	Baillie	Gifford	        pricing	in	secured	loans.	This	was	funded	from	
Private	Equity                       1.0     3.0        5.0    Fixed	Income	Fund,	whilst	maintaining	exposure		          passively	managed	UK	equities	managed	by	Legal	
                                                               and	minimising	the	cost	of	the	transition	to	the	Fund.	   and	General	and	was	invested	through	existing	
Global	Tactical	Asset	Allocation     3.0     3.0        3.0
                                                               Exposure	was	maintained	throughout	the	entirety		         managers	M&G	and	ECM,	awarded	an	additional	
Cash                                 2.0     2.0        2.0    of	the	transition	by	ensuring	the	phased	purchase		       £35m	and	£15m	respectively.
                                   100.0   100.0   100.0
�     and	sale	of	segregated	assets	and	pooled	funds		
                                                                                                                         Following	a	period	of	underperformance	the	Fund	
                                                               was	carefully	managed	on	a	coordinated	basis.
                                                                                                                         reduced	the	Standard	Life	UK	equities	mandate	by	
                                                                                                                         broadly	one	third	or	£58m.	This	was	transferred	to	UK	
                                                                                                                         equities	units	passively	managed	by	Legal	and	General.	
16	   Cheshire	Pension	Fund	Annual	Report	2008-09	Investment Report




The	Fund’s	commitments	to	existing	and	new	private	          Manager              Assets Date       Mandate      Investment   Benchmark          Performance
equity	funds	continued	to	be	drawn	down	during	the	                                £000 appointed                Style                                 Target
year	and	as	other	asset	prices	fell,	the	Fund	reached	its	                                          Global		                  Specific		
                                                             Baillie Gifford     362,583     1993                Active                                +1.5%
                                                                                                    Equities	                 Benchmark
long	term	allocation	of	5%	to	this	particular	asset	class.
                                                                                                    Equities		   Passive/     Specific		
                                                             Legal & General     304,619     1993                                                 Track	index
The	overall	impact	and	strategic	objective	of	the	                                                  and	bonds    Tracker      Benchmark
                                                                                                    Global		
changes	over	recent	years	has	been	to	reduce	                GMO                 226,026     2005                Active       MSCI	World	Index         +2.0%
                                                                                                    Equities
the	reliance	on	equities	(particularly	UK	equities)	                                                UK		                      FTSE	All	Share	
for	generating	performance	and	to	improve	the	               Standard Life       102,177     2005                Active                                +2.0%
                                                                                                    Equities                  Index
diversification	of	the	underlying	assets.                                                           Global		                  FTSE		
                                                             Baillie Gifford     113,689     2005                Active                                +3.0%
                                                                                                    Equities                  All	World	
                                                                                                    Fixed		                   Merrill	Lynch	
Appointed investment managers                                Henderson           132,631    2008                 Active                                +2.0%
                                                                                                    Income                    Sterling	Broad
The	Fund	has	appointed	thirteen	external	investment	         Goldman Sachs                          Fixed		                   Merrill	Lynch	
                                                                                 129,199    2008                 Active                                +2.0%
                                                             Asset Management                       Income                    Sterling	Broad
managers	to	undertake	the	day	to	day	management	
                                                                                                    Fixed		                   Merrill	Lynch	
of	the	Fund’s	assets.	Each	manager	has	a	specific	           Baillie Gifford       56,196   2008                 Active                                +2.0%
                                                                                                    Income                    Sterling	Broad
performance	target	against	which	their	performance	                                                                           CAPS	direct	
                                                             Rockspring          147,364    1988    Property     Active                           Outperform
is	regularly	monitored.	The	value	of	direct	assets	                                                                           property
under	management	(excluding	any	accrued	income	                                                     Secured		
                                                             M&G                   57,693   2006                 Active       LIBOR                   +1.75%
                                                                                                    Loans
entitlements)	by	each	manager	and	their	respective	
                                                             BNY Mellon Asset
benchmarks	are	shown	in	the	table	adjacent:                                        39,936   2006    GTAA         Active       LIBOR                     +20%	
                                                             Management
                                                                                                    Secured		
                                                             ECM                   53,084   2006                 Active       EURIBOR             3.5%	-	4.5%
                                                                                                    Loans
                                                             Adam Street                            Private		                                           Cash	 	
                                                                                   63,721   2003                 Active       Cash
                                                             Partners                               Equity                                          multiples
                                                                                                    Private		                                           Cash	 	
                                                             Pantheon              52,951   2003                 Active       Cash
                                                                                                    Equity                                          multiples
                                                                                                    Private		                                           Cash	 	
                                                             Lexington              5,994   2005                 Active       Cash
                                                                                                    Equity                                          multiples
                                                             Other                    66

                                                                                1,847,929
	
                                                                                                                   Cheshire	Pension	Fund	Annual	Report	2008-09	Investment Report	     17




The	£1,847,929	of	direct	assets	under	management	              Top 10 holdings                                                     Property Holdings
as	at	31st	March	were	split	across	the	various	asset	
                                                               The	Fund	had	£729m	invested	directly	in	equities	                   The	Fund	holds	direct	UK	property	assets	totalling	
classes	as	noted	in	the	following	charts:
                                                               around	the	world	with	a	further	£356m	invested	                     £123.1m	in	a	diversified	portfolio	of	UK	retail,	
                          GTAA 2.2%                            indirectly	through	pooled	or	collective	investment	                 industrial	and	office	properties	with	a	further	£24.2m	
     Currency Forwards 0.1%
            y                    Cash 1.0%
                                      1.0%
                                                               vehicles.	The	top	10	combined	direct	equity	holdings	               invested	in	UK	and	European	property	unit	trusts.
     Secured Loans 6.0%
                                                               held	by	the	investment	managers	are	shown	below:
Private Equity 6.7%
            ty                                                                                                                     The	largest	direct	holdings	by	market	value	are		
            erty
        Property
                                                                   British American Tobacco                                        shown	in	the	table	below:
             9%
           7.9%                                                                                Glaxosmithkline
                                                    Ove
                                                    Overseas                         £10.2m
                                                                        BHP Billiton           £18.9m
                                                    Equ
                                                    Equities
                                                    35.
                                                    35.0%                   £10.3m                                                 Property                             Sector         £m
           Fixed
             ixed                                               HSBC Holdings                           Royal Dutch Shell          Norfolk	House,	Guildford             Retail     13.75m
            ome
         Income                                                         £11m                            £18.1m
            7.3%
           17.3%                                                                                                                   St	Vincent	Street,	Glasgow           Office     	7.75m
                                      UK Equities                      BP PLC
                                      23 8%
                                      23.8%                            £11.1m                                                      Fort	Wallington,	Fareham             Industrial 	7.60m
                                                                                                      BG Group PLC
                                                               Wal Mart Stores Inc.                   £15.8m                       St	Catherine’s	Trading	Estate,	Cardiff Industrial 	7.55m
                                                                           £11.7m
                                                                        Johnson & Johnson     Vodaphone Group                      MFI	Botley	Road,	Oxford              Retail     	7.15m
                                                                                   £12.3m     £15m
The	overseas	equity	component	of	the	portfolio		                                                                                   Tower	House,	Bristol                 Office     	6.25m
is	spread	across	the	following	regions:
                    Emerging

                     Markets

                     Markets
                      12.1%
            Pacific
             4.5%


         Japan
             an
         11.4%
            4%                                      North
                                                    No
                                                    Am
                                                    America
                                                    44.
                                                    44.9%



                Europe
         (excluding UK)
                  27.1%
                  27 1%
18	   Cheshire	Pension	Fund	Annual	Report	2008-09	Investment Report




Bell Street, Maidenhead                                                                                              Market Commentary

During	the	year	work	commenced	on	the	£5.5m	refurbishment	of	Thames	House,	Bell	Street,	Maidenhead	an	office	        In	writing	these	notes	it	proved	irresistible	not	to	
building	originally	purchased	by	the	Fund	in	1997.	The	scheme	involved	demolishing	the	existing	building,	a	tired	   revisit	the	previous	years	report	to	compare	notes.	
8,000sq	ft	1970’s	three	storey	office	block	located	in	a	prime	location	in	Maidenhead.	This	was	replaced	by	a	new	   Written	in	September	2008,	the	report	contained	the	
larger	20,000	sq	ft	four	storey	modern,	airy	office	building,	with	modern	interior	offices	and	service	facilities.   comment	“the	consensus	view	is	that	the	full	impact	
                                                                                                                     of	the	credit	crunch	is	still	working	its	way	through	
Before                                                     After                                                     the	financial	markets”.

                                                                                                                     Whilst	the	prescience	of	the	statement	could	be	
                                                                                                                     applauded,	it	proved	something	of	an	understatement,	
                                                                                                                     although	few	would	have	predicted	that	by	the	end		
                                                                                                                     of	the	next	month	we	would	be	witnessing	a	financial	
                                                                                                                     meltdown.	The	list	of	casualties	was	remarkable	-		
                                                                                                                     the	once	mighty	investment	bank	Lehman	Brothers	
                                                                                                                     had	filed	for	bankruptcy	and	US	mortgage	giants	
                                                                                                                     Fannie	Mae	and	Freddie	Mac	and	the	international	
                                                                                                                     insurer	AIG	were	saved	by	the	US	Government.	While	
                                                                                                                     here	in	the	UK,	HBOS	was	absorbed	by	Lloyds	TSB	
                                                                                                                     and	Bradford	and	Bingley	was		part	nationalised.	
                                                                                                                     These	extraordinary	events	all	occurring	within		
                                                                                                                     one	month	of	writing	the	above.

                                                                                                                     Government	intervention	across	the	world	to	prop	up	
                                                                                                                     the	 ailing	 banking	 system	 was	 truly	 unprecedented	
                                                                                                                     and	 many	 banks	 owed	 their	 survival	 to	 government	
                                                                                                                     intervention	leaving	some	effectively	state	owned.
	                                                                                                       Cheshire	Pension	Fund	Annual	Report	2008-09	Investment Report	   19




As	the	year	progressed,	the	crisis	spread	from	the	         The	worst	of	the	financial	crisis	may	have	passed	
financial	sector	to	the	real	economy	with	every	major	      but	the	damage	inflicted	on	the	real	economy	
developed	economy	entering	recession	and	the	world	         is	now	biting	deeply.	The	rebuilding	of	financial	
facing	arguably	its	first	ever	truly	global	recession.	     structures	and	restoration	of	economic	growth	will	
The	response	from	the	authorities	was	again	on	             take	time.	The	various	economic	stimulus	packages	
an	unprecedented	scale,	including	the	reduction	            implemented	around	the	world	have	resulted	in	
of	short-term	interest	rates	to	close	to	zero,	fiscal	      an	explosive	growth	in	public	debt	which	has	to	
stimulus	packages	and,	in	the	US	and	UK	,	the	much	         be	serviced	and,	ultimately,	re-paid.	This	raises	
vaunted	(and	misunderstood)	quantitative	easing.            questions	over	the	course	of	fiscal	policy	in	the		
                                                            years	to	come.	
Against	this	gloomy	economic	background,	equities	
fell	sharply.	In	the	UK,	the	FTSE	All	Share	index	
                                                            Investment Performance
returned	-29.3%.	In	Sterling	terms,	the	FTSE	All	
World	(ex	UK)	fell	by	19.6%.	The	best	performing	           The	Fund	has	adopted	a	tailored	benchmark	in	line	
sectors	in	a	global	context	(relative	to	the	‘All	World’	   with	its	specific	asset	allocation	rather	than	a	peer	
Index)	were	Health	Care	(+38.2%)	and	Technology	            group	benchmark.	The	Panel	regularly	reviews	the	
(+16.1%):	the	worst	performing	were	Financials		            performance	of	both	the	investment	strategy	and	
(-25.5%)	and	Basic	Materials	(-16.0%).	                     the	contribution	of	the	Fund’s	investment	managers.	
                                                            Managers	are	required	to	submit	reports	on	
Fixed	interest	government	bonds	performed	well,	
                                                            performance	and	investment	activity	to	the		
as	investors	sought	the	safety	of	this	asset	class.	
                                                            Panel	on	a	quarterly	basis.	The	Fund	also		
UK	fixed	interest	government	bonds	(gilts)	returned	
                                                            engages	an	independent	performance	measurer	–		
10.3%	during	the	year.	In	contrast,	corporate	bonds	
                                                            BNY	Mellon	Asset	Servicing	to	independently		
weakened	(All	Investment	Grade	issues	returned		
                                                            assess	the	rates	of	return	received.
-13.5%),	as	values	fell	due	to	increased	default	risk.	
                                                            The	Fund’s	overall	performance	in	the	year	and		
Major	shifts	in	currency	exchange	rates	during	the	
                                                            over	the	longer	term	is	set	out	in	the	following		
year	reflected	the	economic	dislocation	and	meltdown	
                                                            charts	and	tables.
in	the	global	financial	sector.	Sterling	fell	sharply		
(-27.9%	against	the	US$	and	-13.9%	against	the	Euro)	
on	concerns	over	the	scale	of	public	debt	in	the		
years	to	come.	
20	    Cheshire	Pension	Fund	Annual	Report	2008-09	Investment Report
�




The	table	below	shows	the	Fund’s	returns	in	the	different	asset	classes	and	also	the	benchmark		
                           The	majority	of	the	Fund’s	assets	are	managed	
return	for	each	for	the	12	months	ending	31	March	2009:                                                                     actively	by	external	investment	managers	in	the		
                                                                                                                            belief	that	active	management	will	add	more	value	
                                               -26.0%                                                                       (net	of	management	fees)	than	index	or	benchmark	
                                                                                                    Baille Gifford Equity
                                               -25.3%                                                                       returns.	Notwithstanding	this	expectation	of	
                                                                          -12.4%                                            outperformance	from	active	management,	the	
                                                                                                    Baille Gifford Fixed
                                                                                      4.3%                                  Fund’s	performance	will	inevitably	be	linked	to	the	
                                                                                                                            performance	of	the	global	financial	markets	and	the	
                                                   -24.7%
                                                                                                    Baille Gifford Global   underlying	assets	that	the	Fund	is	actually	invested		
                                                            -20.4%
                                                                                                                            in.	Most	notably	overseas	equities,	UK	equities,		
         -46.2%                                                                                                             bond	markets	and	the	UK	property	market	which	
                                                                                                    ECM
                                                                                          4.4%
                                                                                                                            account	for	37%,	25%,	14%	and	9%	(85%	in	total)		
                                                               -18.5%                                                       of	the	Fund’s	assets	respectively.
                                                                                                    GMO
                                                            -20.4%
                                                                                                                            Unfortunately	2008-09	has	been	described	as	an	
                                                                                           2.0%
                                                                                                    Goldman Sachs           ‘annus	horriblis’	for	UK	and	overseas	equity	markets	
                                                                                      4.3%
                                                                                                                            as	markets	and	investors	reacted	to	the	continued	
                                                                                      3.7%                                  ripples	of	the	credit	crunch,	a	lack	of	market	liquidity,	
                                                                                                    Henderson
                                                                                      4.3%                                  a	huge	deleveraging	process	and	then	the	spectre	
                                                      -23.4%                                                                of	and	finally	the	realisation	of	a	global	recession.	
                                                                                                    Legal & General
                                                      -23.0%                                                                If	the	period	2003	through	to	2007	marked	a	period	
                                                                                                                            of	“irrational	exuberance”	then	fear	returned	to	the	
                                                                     -16.3%
                                                                                                    M&G                     markets	with	a	vengeance	in	2008-09	and	investors	
                                                                                          4.4%
                                                                                                                            sold	out	of	equities	and	other	risky	assets	heavily,	
                          -37.1%
                                                                                                    Mellon                  most	notably	in	the	Autumn	of	2008.
                                                                                           4.7%

                                                   -25.1%
                                                                                                    Rockspring
                                             -27.4%

       Portfolio
         r
       Por                -37.6%
                                                                                                    Standard Life
       Benchmark
         n
       Ben                                -29.3%

-50%               -40%            -30%                -20%                   -10%   0%           10%
	                                                                                                         Cheshire	Pension	Fund	Annual	Report	2008-09	Investment Report	      21





If	2008-09	will	be	remembered	as	a	bad	year	for	               Against	this	backdrop,	all	the	Fund’s	assets	returned	   Secured	Loans	experienced	significant	mark	downs	
markets	in	general	it	will	also	be	remembered		                negative	returns	in	the	year	and	with	the	exception		    in	prices	as	forced	selling	from	amongst	others	
as	a	bad	year	for	active	management	as	managers	               of	Rockspring	the	Fund’s	property	manager	               banks	and	hedge	funds	forced	prices	down	and	the	
either	failed	to	or	could	not	react	to,	being	caught		         and	GMO’s	global	equity	mandate,	no	manager	             quantitative	modelling	of	the	Global	Tactical	Asset	
in	the	maelstrom	of	what	may	prove	to	be	a	once		              outperformed	their	specific	benchmark.	                  Allocation	mandate	suffered	another	difficult	year		
in	a	lifetime	experience.                                                                                               as	markets	responded	to	sentiment	and	fear	rather	
                                                               Manager	underperformance	most	notably	an	
                                                                                                                        than	fundamental	factors.
Note	the	Fixed	Income	mandates	were	funded		                   overweight	to	the	troubled	UK	banking	sector	was		
in	July	2008	and	the	figures	below	do	not	represent		          the	primary	driver	of	underperformance	in	the	Fund’s		   In	summary	2008-09	will	be	remembered	as	a		
a	full	year.                                                   UK	equities.	Overseas	equities	were	broadly	in	line	     painful	year	for	markets	and	the	Fund	did	not	avoid	
                                                               with	benchmark	returns	with	GMO’s	outperformance	        this	pain.	A	Pension	Fund	is	however	by	its	very	
                    -21.5%                                     being	offset	by	underperformance	elsewhere	              nature	a	long	term	investor	and	we	can	hopefully		
                                                    Total
                                -4.7%                          primarily	from	stock	selection	in	US	equities.           take	some	positives	that	the	fund	continues	to	collect	
                                                                                                                        in	more	cash	than	it	pays	out	in	pensions	and	as	long	
                     -20.7%                         Overseas   As	spreads	on	corporate	bonds	widened	(prices	
                                                    Equities                                                            term	investors	have	not	been	forced	to	sell	any	of	
                                        -1%                    fell)	the	three	fixed	income	managers’	overweight	
                                                                                                                        it’s	assets	at	distressed	prices.	At	the	time	of	writing	
    -33.1%
                                                               to	corporate	bonds	hampered	performance	relative	
                                                    UK                                                                  and	since	the	year	end	equity	markets	have	rallied	
                                 -3.8%
                                                    Equities   to	the	benchmark.	An	exposure	to	financial	bonds	
                                                                                                                        significantly	as	have	other	assets	values	as	investor	
                                                               in	particular	was	detrimental	to	the	fixed	income	
                                        -1%                                                                             appetite	for	risk	has	returned.
                                                    Fixed      returns.	Government	bonds	were	a	rare	good	news	
                                -5.3%               Home
                                                               story	as	investors	fled	to	the	perceived	safety	of	
              -25.1%                                           government	backed	bonds.
                                                    Property
                                         2.3%

         -29.1%                                     Secured
                                                    Loans
    -33.5%

                       -18
                        18.6%
                        18
                         8.
                       -18.6%
                       -18.6%
                                                    GTAA
                  -23.8%

-35% -30% -25% -20% -15% -10% -5%
           25%                                0%   5%
                       Return
    Fund Return
    Relative to Benchmark
    Re
 22	   Cheshire	Pension	Fund	Annual	Report	2008-09	Investment Report
�




 Nevertheless	2008-09	and	to	a	lesser	extent	the	negative	returns	of	2007-8	have	impacted	upon	the	Fund’s	returns		    Corporate Governance and Shareholder Activism
 over	the	mid	term	(3	years)	but	the	Fund	remains	in	positive	territory	albeit	below	benchmark	over	the	longer	term:
                                                                                                                       Corporate	governance	is	about	making	sure	that	
                                                                                                                       companies’	operational	processes	and	policies	are	
                   -21.5%
                                                                                             robust	and	responsible.	Good	governance	ensures	
                               -16.8%
                                16
                                16.
                                16.8%
                                16
                                 6.
                               -16.8%
                                                                                 that	a	company	has	clear	direction,	plans,	structure	
                                                                                             2.9%          1 year      and	resources,	all	of	which	are	necessary	for	financial	
                                                                                             1.1%                      success.	The	onus	is	on	the	companies	to	adopt	an	
                                                                                                                       accountable,	transparent	approach,	demonstrating	
                                                                                                                       principles	of	integrity	in	their	business	practice
                                                                  -6.7%
                                                                           -4.8%
                                                                           -4.8%
                                                                           -4.8%
                                                                            4.8%
                                                                              8%
                                                                              8                                        The	revised	Myners	principles	recommend	that	
                                                                                                           3 year
                                                                                             2.8%                      Funds	adopt	the	key	requirements	of	the	Institutional	
                                                                                              3.1%                     Shareholders	Committees	statement	of	principles		
                                                                                                                       on	the	responsibilities	of	institutional	shareholders

                                                                                             2.8%                      This	Statement	sets	out	best	practice	for	institutional	
                                                                                                   3.9%                shareholders	and/or	their	agents	in	relation	to	their	
                                                                                                           5 year
                                                                                            2.4%                       responsibilities	in	respect	of	investee	companies,		
                                                                                                                       in	that	they	will:
                                                                                                3.5%
                                                                                                                       •	 Set	out	their	policy	on	how	they	will	discharge	their	
       Portfolio
       Por
         r                                                                               1.7%                             responsibilities	-	clarifying	the	priorities	attached	
       Ben
         n
       Benchmark                                                                         2.0%                             to	particular	issues	and	when	they	will	take	action;
                                                                                                           10 year
       Inflation
          l
       Infl
       I fl                                                                              1.8%                          •	 Monitor	the	performance	of,	and	establish,		
       Average Earnings
         e                                                                                         3.8%                   where	necessary,	a	regular	dialogue	with		
                                                                                                                          investee	companies;	
                                                                                                                       •	 Intervene	where	necessary;	
 And	finally	as	we	approach	another	valuation	year,	the	Panel	and	its	investment	consultant	continue	to		              •	 Evaluate	the	impact	of	their	engagement;	and	
 keep	the	performance	of	its	assets,	investment	managers	and	its	investment	strategy	under	constant	review.
-25%                -20%         -15%              -10%              -5%               0%                 5%           •	 Report	back	to	clients/beneficial	owners.	
	
                                                                                                     Cheshire	Pension	Fund	Annual	Report	2008-09	Investment Report	   23




The	Council’s	corporate	governance	arrangements		          The	table	below	summaries	the	voting	activity		
as	published	in	the	Statement	of	Investment	               for	the	fund	over	the	12	months	to	31	March	2009:
Principles	do	incorporate	these	principles.	

The	Fund’s	overall	policy	is	to	obtain	the	best		          Number	of	UK	AGMS                                   153
possible	return	using	the	full	range	of	investments	       AGMS	in	Total                                       234
authorised	under	the	Local	Government	Pension	
                                                           Voted	for	in	respect	of	all	resolutions             168
Scheme	regulations.	
                                                           Vote	against	or	abstain	                            		66
The	Fund	recognises	that	social,	environmental		
and	external	considerations	can	affect	financial	
return.	The	Fund’s	managers	have	been	requested		          The	table	below	highlights	those	resolutions	that		
to	give	due	consideration	to	these	factors,		              were	voted	against	or	abstained	and	the	under	which	
particularly	in	the	areas	of	business	sustainability		     broad	governance	categories	the	resolutions	fall:
and	reputational	risk	when	selecting,	retaining		
and	realising	individual	investments.	                                                                            Service
                                                                            Remuneration         Executive       Contract
Managers	of	the	portfolios	containing	listed	UK		                             Policy and         Incentive   Duration and   Re-election
and	Overseas	Equities	are	required	to	vote	at	all	                               Report          Schemes        Migration   of Directors        Other
meetings	where	the	Fund	has	a	voting	interest.	            Abstained                     5              5                             1              1

Wherever	practicable,	votes	must	be	cast	in	
                                                           Voted Against                14             29              2             13            10

accordance	with	industry	best	practice	as	set	out	
in	the	Combined	Code	of	Corporate	Governance.	
The	managers	are	required	to	specifically	notify	any	
voting	exceptions.	All	abstentions	must	be	specifically	
reported	and	justified.	The	Fund’s	non-equity	
Managers	are	required	to	take	account	of	the	Fund’s	
views	as	far	as	possible.	The	managers’	quarterly	
reports	include	a	specific	briefing	on	corporate	
governance	and	all	votes	cast	on	the	Fund’s	behalf.
24




Auditor’s	Report

                    Independent Auditor’s report on Cheshire
                    Pension Fund to the members of Cheshire West
                    and Chester Council

                    I	have	audited	the	pension	fund	accounts	for		
                    the	year	ended	31	March	2009.	The	pension	fund	
                    accounts	comprise	the	Fund	Account,	the	Net	Assets	
                    Statement	and	the	related	notes.	The	pension	fund	
                    accounts	have	been	prepared	under	the	accounting	
                    policies	set	out	in	the	Statement	of	Accounting	
                    Policies.

                    This	report	is	made	solely	to	the	members	of	
                    Cheshire	West	and	Chester	Council	in	accordance	
                    with	Part	II	of	the	Audit	Commission	Act	1998	and	
                    for	no	other	purpose,	as	set	out	in	paragraph	49	of	
                    the	Statement	of	Responsibilities	of	Auditors	and	of	
                    Audited	Bodies	prepared	by	the	Audit	Commission.
	
                                                                                                       Cheshire	Pension	Fund	Annual	Report	2008-09 Auditor’s Report	    25




Respective responsibilities of the                         I	report	to	you	my	opinion	as	to	whether	the	pension	     I	am	not	required	to	consider,	nor	have	I	considered,	
Director of Resources and Auditor                          fund	accounts	present	fairly,	in	accordance	with	         whether	the	governance	statement	covers	all	risks	
                                                           relevant	legal	and	regulatory	requirements	and	the	       and	controls.	Neither	am	I	required	to	form	an		
The	Director	of	Resources	is	responsible	for	
                                                           Code	of	Practice	on	Local	Authority	Accounting	in	        opinion	on	the	effectiveness	of	the	Authority’s	
preparing	the	pension	fund	accounts,	in	accordance	
                                                           the	United	Kingdom	2008,	the	financial	transactions	      corporate	governance	procedures	or	its	risk		
with	relevant	legal	and	regulatory	requirements	and	
                                                           of	the	pension	fund	during	the	year	and	the	amount	       and	control	procedures.
the	Code	of	Practice	on	Local	Authority	Accounting		
                                                           and	disposition	of	the	fund’s	assets	and	liabilities,	
in	the	United	Kingdom	2008.	In	preparing	this		                                                                      I	read	other	information	published	with	the	pension	
                                                           other	than	liabilities	to	pay	pensions	and	other	
pension	fund	accounts,	the	Director	of	Resources		                                                                   fund	accounts	and	related	notes	and	consider	
                                                           benefits	after	the	end	of	the	scheme	year.	I	also	
is	responsible	for:                                                                                                  whether	it	is	consistent	with	the	audited	pension	
                                                           report	to	you	whether,	in	my	opinion,	the	information	
                                                                                                                     fund	accounts.	This	other	information	comprises	
•	 selecting	suitable	accounting	policies		                which	comprises	the	commentary	on	the	financial	
                                                                                                                     the	remaining	elements	of	the	Pension	Fund	Annual	
   and	then	applying	them	consistently;	                   performance	included	within	the	Pension	Fund	
                                                                                                                     Report	comprising	the	Foreword,	Management	
                                                           Annual	Report,	is	consistent	with	the	pension	fund	
•	 making	judgments	and	estimating		                                                                                 Structure,	Governance	Report,	Administration	Report,	
                                                           accounts.	That	information	comprises	the	Financial	
   that	were	reasonable	and	prudent;	                                                                                Actuarial	Statement	and	Participating	Employers.		
                                                           Statements	and	Notes	to	the	Accounts.
•	 keeping	proper	accounting	records		                                                                               I	consider	the	implications	for	my	report	if	I	become	
   which	were	up	to	date;                                  Preview	whether	the	governance	compliance	                aware	of	any	apparent	misstatements	or	material	
                                                           statement	published	in	the	Pension	Fund	Annual	           inconsistencies	with	the	pension	fund	accounts	and	
•	 taking	reasonable	steps	for	the	prevention		            Report	reflects	compliance	with	the	requirements		        related	notes.	My	responsibilities	do	not	extend	to		
   and	detection	of	fraud	and	other	irregularities.        of	Regulation	34(1)(e)	of	the	Local	Government	           any	other	information.
My	responsibility	is	to	audit	the	pension	fund	accounts	   Pension	Scheme	(Administration)	Regulations	2008	
and	related	notes	in	accordance	with	relevant	legal	       and	related	guidance.	I	report	if	it	does	not	meet	
and	regulatory	requirements	and	International	             the	requirements	specified	by	the	Department	
Standards	on	Auditing	(UK	and	Ireland).                    of	Communities	and	Local	Government	or	if	the	
                                                           statement	is	misleading	or	inconsistent	with	other	
                                                           information	I	am	aware	of	from	my	audit	of	the	
                                                           financial	statements.	
26	   Cheshire	Pension	Fund	Annual	Report	2008-09	Auditor’s Report




                                                                     Basis of Audit opinion

                                                                     I	conducted	my	audit	in	accordance	with	the	Audit	
                                                                     Commission	Act	1998,	the	Code	of	Audit	Practice	
                                                                     issued	by	the	Audit	Commission	and	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	pension	
                                                                     fund	accounts	and	related	notes.	It	also	includes	
                                                                     an	assessment	of	the	significant	estimates	and	
                                                                     judgments	made	by	the	Authority	in	the	preparation		
                                                                     of	the	pension	fund	accounts	and	related	notes,		
                                                                     and	of	whether	the	accounting	policies	are	
                                                                     appropriate	to	the	Authority’s	circumstances,	
                                                                     consistently	applied	and	adequately	disclosed.

                                                                     I	planned	and	performed	my	audit	so	as	to		
                                                                     obtain	all	the	information	and	explanations	which	
                                                                     I	considered	necessary	in	order	to	provide	me	with	
                                                                     sufficient	evidence	to	give	reasonable	assurance		
                                                                     that	the	pension	fund	accounts	and	related	notes		
                                                                     are	free	from	material	misstatement,	whether		
                                                                     caused	by	fraud	or	other	irregularity	or	error.		
                                                                     In	forming	my	opinion	I	also	evaluated	the	overall	
                                                                     adequacy	of	the	presentation	of	information	in		
                                                                     the	pension	fund	accounts	and	related	notes.
	                                                         Cheshire	Pension	Fund	Annual	Report	2008-09	Auditor’s Report	   27




Opinion

In	my	opinion	the	pension	fund	accounts	and		
related	notes	present	fairly,	in	accordance	with		
the	Code	of	Practice	on	Local	Authority	Accounting		
in	the	United	Kingdom	2008,	the	financial	transactions	
of	the	Pension	Fund	during	the	year	ended	31	March	
2009,	and	the	amount	and	disposition	of	the	fund’s	
assets	and	liabilities	as	at	31	March	2009,	other	than	
liabilities	to	pay	pensions	and	other	benefits	after		
the	end	of	the	scheme	year.

Judith Tench
Officer	of	the	Audit	Commission

The	Heath	Technical	&	Business	Park,		
The	Heath,	Runcorn,	Cheshire,	WA7	4QF

30	September	2009
28




Financial	Statements

                        Introduction                                                 Matters	relating	to	benefit	administration	are	
                                                                                     largely	governed	by	the	Local	Government	Pension	
                        As	at	31	March	2009	Cheshire	County	Council		
                                                                                     Scheme	regulations.	In	relation	to	investments	the	
                        was	the	statutory	Administering	Authority		
                                                                                     Council	sets	the	overall	investment	strategy	for	the	
                        for	the	Cheshire	Pension	Fund	(the	Fund).		
                                                                                     Fund	which	takes	into	account	the	Fund’s	pension	
                        Following	Local	Government	Reorganisation		
                                                                                     liabilities	and	the	prospects	for	future	investment	
                        this	responsibility	transferred	to	Cheshire	West		
                                                                                     returns.	To	manage	the	Fund’s	assets	in	accordance	
                        and	Chester	Council	on	1	April	2009.
                                                                                     with	the	agreed	investment	strategy,	the	Council	has	
                        The	Council	administers	the	Fund	for	its	own	                appointed	thirteen	external	investment	managers	
                        employees,	for	Warrington	and	Halton	Unitary	                who	each	have	specific	responsibility	for	part	of	the	
                        Authorities,	Cheshire’s	two	new	Unitary	Authorities,	        Fund’s	investment	portfolio.	
                        the	six	outgoing	Cheshire	District	Councils	and	88	
                                                                                     The	Council	uses	the	services	of	BNY	Mellon	Asset	
                        other	approved	bodies.	The	Fund	excludes	provision	
                                                                                     Servicing	to	independently	monitor	the	performance	
                        for	teachers,	fire	fighters	and	police	officers	for	whom	
                                                                                     of	the	investment	strategy	and	the	contributions	
                        separate	arrangements	exist.	A	full	list	of	the	employers	
                                                                                     of	individual	managers.	Performance	is	monitored	
                        with	active	members	participating	in	the	Fund	is	shown	
                                                                                     against	the	Fund’s	tailored	asset	allocation	
                        at	the	end	of	this	Annual	Report.
                                                                                     benchmark	rather	than	to	a	peer	group	benchmark.
                        Responsibility	for	the	Fund	in	2008-09	lay	with	the	
                                                                                     BNY	Mellon	Asset	Servicing’s	report	for	the	year	
                        full	Council	of	Cheshire	County	Council.	Under	this,	
                                                                                     ended	31	March	2009	shows	that	the	Fund		
                        the	Director	of	Policy	&	Resources	had	lead	officer	
                                                                                     achieved	a	return	from	its	investments	of	-21.5%	
                        responsibility	for	the	Fund.	Day	to	day	management	
                                                                                     (-3.5%	in	2007-08)	compared	with	the	Fund’s	tailored	
                        of	the	Fund’s	affairs	was	delegated	to	the	County	
                                                                                     benchmark	return	of	-16.8%	(-3.3%	in	2007-08).	
                        Finance	Officer	advised,	with	regard	to	investment	
                        matters,	by	the	Pensions	Investment	Panel	and	               The	Fund’s	target	return	is	to	outperform	its	
                        external	advice	from	Hymans	Robertson.                       benchmark	by	+0.75%	over	a	rolling	three	year	period.	
                                                                                     For	the	three	years	ended	31	March	2009	the	Fund	
                                                                                     achieved	a	return	of	-6.7%	(+9.2%	2007-08)	against		
                                                                                     the	Fund’s	benchmark	return	of	-4.8%	(+8.8%	2007-08)
	
                                                                                                     Cheshire	Pension	Fund	Annual	Report	2008-09	Financial Statements	   29




Fund	Account                                                     2008-09
                                                                              2007-08
                                                                             Restated
                                                                                          Net	Assets	Statement		
                                                                                                                                                       2008-09
                                                                                                                                                                     2008-09
                                                                                                                                                                    Restated
                                                       Notes        £000         £000                                                     Notes           £000          £000
                                                                                          Investment Assets
Contributions and Benefits                                                                Fixed	Interest	Securities                       10               689        53,010
Contributions Receivable                                                                  Equities                                        11           729,281     1,066,343
From	Employers                                             1      110,918      107,264    Index	Linked	Securities                                            -             -
From	Employees                                                     36,369       32,658    Pooled	Investment	Vehicles                      12,18        696,989       735,134
Total Contributions Receivable                           1,	2     147,287      139,922    Derivative	Contracts                            13             1,903             -
Transfers in from Other Schemes                                     9,489       14,290    Direct	Property                                 14           123,160       184,150
                                                                                          Private	Equity                                  29           122,634        84,033
Benefits Payable                                                                          Global	Tactical	Asset	Allocation                16            39,936        50,444
Pensions                                                         (84,865)     (78,989)    Secured	Loans                                   17           110,352        68,650
Lump	Sums                                                        (18,518)     (21,142)                                                               1,824,944     2,241,764
Death	Benefits                                                    (2,406)      (1,310)    Cash                                            19            18,626        51,407
Total Benefits Payable                                     3    (105,789)    (101,441)                                                               1,843,570     2,293,171
Payments to and on account of Leavers                                                     Outstanding	dividend	entitlements		
                                                                                                                                                         4,359         9,159
Refund	of	Contributions                                               (41)         (97)   &	recoverable	withholding	tax
Transfers	to	Other	Schemes                                 4      (10,082)     (10,132)                                                               1,847,929    2,302,330
                                                                  (10,123)     (10,229)   Investment Liabilities
Administration Expenses                                    5       (1,835)      (1,947)   Derivative	Contracts                            13            (2,033)            -
Net Additions                                                      39,029       40,595    Total Net Investments                                       1,845,896    2,302,330
                                                                                          Current Assets
Returns on Investments                                                                    Cash	at	Bank                                                   3,730        20,491
Investment Income                                          6       49,708       55,707    Debtors                                         20            11,979        12,250
Change in Market Value                                     7    (555,636)    (134,639)    Payments	In	Advance                                                -         1,459
Taxation                                                   8        (609)        (714)
                                                                                          Current Liabilities
Investment Management Expenses                                    (5,553)      (7,781)
                                                                                          Investment	Management	Fees	&	Expenses                           (944)       (2,012)
Net Returns On Investments                                      (512,090)     (87,427)
                                                                                          Other	Creditors                                 21            (3,632)       (3,721)
                                                                                          Receipts	In	Advance                                           (1,759)       (2,466)
Net	Additions	from	Dealings	with	Members                            39,029       40,595
Net	Increase/	(Decrease)	in	the	Fund	During	the	Year             (473,061)     (46,832)   Net Current Assets                                             9,374        26,001
Opening	Net	Assets	of	the	Scheme                                2,328,331    2,375,163    Add	Total	Net	Investments                                  1,845,896     2,302,330
Closing Net Assets of the Scheme                                1,855,270    2,328,331    Total Net Assets                                           1,855,270     2,328,331
30	   Cheshire	Pension	Fund	Annual	Report	2008-09	Financial Statements




Statement of Accounting Policies                        Investments                                               	   Where	this	is	not	the	Fund’s	balance	sheet	date,	
                                                                                                                      this	valuation	has	been	adjusted	having	due	
The	financial	statements	have	been	prepared	in	         Investments	are	shown	in	the	accounts	at	market	
                                                                                                                      regard	to	latest	dealings,	asset	values	and	other	
accordance	with	the	accounting	recommendations	         value,	which	has	been	determined	as	follows:	-
                                                                                                                      appropriate	financial	information.	
of	the	Pension	Research	Accountants	Group	(PRAG)	
                                                        •	 Listed	securities	are	shown	by	reference	to	bid	       •	 Fixed	Interest	investments	have	been	valued	at	
‘Financial	Reports	of	Pension	Schemes	–		
                                                           market	prices	at	close	of	business	on	31	March	2009.      the	market	value	as	at	31	March	2009	which	does	
a	Statement	of	Recommended	Practice	May	2007’.	
However	disclosures	have	been	limited	to	those	         •	 Pooled	investment	vehicles	are	stated	at	the		            not	include	any	accrued	interest.	The	interest	due	
required	by	the	Code	of	Practice	on	Local	Authority		      bid	point	of	the	latest	prices	quoted	by	their	           but	not	received	is	shown	in	the	accounts	within	
Accounting	in	the	United	Kingdom:	a	Statement		            respective	managers	at	31	March	2009.		                   accrued	interest	income.
of	Recommended	Practice.	                                  Where	such	information	is	not	available	the		          •	 Future	contracts	have	been	valued	at	the	exchange	
                                                           assets	are	priced	at	the	single	price	provided.	          price	for	closing	out	the	contract	at	the	year	end	
The	financial	statements	summarise	the	transactions	
                                                        •	 Investments	held	in	foreign	currencies	are	shown	         date	and	this	represents	the	unrealised	profit	or	
of	the	Scheme	and	deal	with	net	assets	at	the	
                                                           at	market	value	translated	into	the	equivalent	           loss	of	the	contract.	Amounts	due	from	the	broker	
disposal	of	the	Fund.		They	do	not	take	account	of	
                                                           sterling	rate	prevailing	at	31	March	2009.                represent	the	amounts	outstanding	in	respect	of	
obligations	to	pay	pensions	and	benefits	which	fall	
                                                                                                                     the	initial	margin	and	any	variation	margin	which	
due	after	the	end	of	the	Scheme	year.	The	actuarial	    •	 Properties	are	included	on	the	basis	of	their	
                                                                                                                     is	due	to	or	from	the	broker.	
position	of	the	Scheme,	which	does	take	account	of	        open	market	value.	The	property	portfolio	was	
such	obligations,	is	dealt	with	in	the	statement	in	       independently	valued	by	Colliers	CRE,	Chartered	       •	 Forward	foreign	exchange	contracts	are	stated	at	
Note	32	on	page	41	and	these	financial	statements		        Surveyors	at	31	March	2009	in	accordance	with		           fair	value	which	is	determined	as	the	gain	or	loss	
should	be	read	in	conjunction	with	that	note.              the	Royal	Institution	of	Chartered	Surveyors’	            that	would	arise	if	the	outstanding	contract	was	
                                                           Valuation	Standards.                                      matched	at	year	end	with	an	equal	and	opposite	
Basis of Preparation                                                                                                 contract.
                                                        •	 Indirect	private	equity	investments	are	interests	
Except	where	otherwise	stated,	the	accounts	have	          in	limited	partnerships	which	are	valued	based	on	     •	 The	Fund’s	investments	in	Global	Tactical	
been	prepared	on	an	accruals	basis,	that	is,	income	       the	Fund’s	share	of	the	net	assets	of	the	limited	        Allocation	and	Secured	Loans	are	valued	at	their	
and	expenditure	is	recognised	as	it	is	earned	or	          partnership	according	to	the	latest	financial	            Net	Asset	Value	by	the	respective	managers’	
incurred	not	as	it	is	received	or	paid.	                   statements	published	by	the	respective	managers	in	       administrators	as	at	31	March	2009.
                                                           accordance	with	FAS	157:	Fair	Value	Measurements.		
	                                                                                                Cheshire	Pension	Fund	Annual	Report	2008-09	Financial Statements	    31




Contributions                                           Investment Income                                         Investment Management Expenses

Contributions	represent	amounts	receivable	             Income	from	fixed	interest	and	index	linked	securities	   Each	individual	manager	receives	a	fee	based		
from	employers	in	respect	of	their	own	and	their	       and	other	interest	receivable	is	accounted	for	on	an	     on	the	market	value	of	the	assets	they	manage.	
pensionable	employees’	contributions.	Employers’	       accruals	basis.	Income	from	all	equities	is	accounted	    Certain	managers	also	receive	a	performance	related	
contributions	are	determined	by	the	Scheme	Actuary	     for	when	the	stocks	are	quoted	ex-dividend.	Rental	       fee	(over	and	above	a	base	fee)	for	achieving	agreed	
at	each	triennial	valuation	of	the	Fund’s	assets	and	   income	is	accounted	for	on	an	accruals	basis	with	        levels	of	out	performance.	Where	the	Fund	pays	the	
liabilities.	Employee	contribution	rates	are	set	in	    reference	to	the	periods	to	which	the	rent	relates.       manager	fees	directly	from	the	Fund’s	own	resources	
the	Local	Government	Pension	Scheme	(Benefits,	                                                                   such	fees	are	shown	as	Investment	Management	
Membership	and	Contributions)	Regulations	2007.	        Foreign Investment Income                                 Expenses	in	the	fund	account	and	are	accounted		
Contributions	are	recorded	on	an	accruals	basis	in	                                                               for	on	an	accruals	basis.
relation	to	when	they	were	deducted	from	earnings.      Foreign	income	has	been	translated	into	sterling		
                                                        at	the	date	of	the	transaction.	Income	from	overseas	     Where,	as	part	of	the	Investment	Management	
                                                        investments	is	recorded	net	of	any	withholding	tax	       Agreement	the	manager	deducts	their	fee	directly	
Benefits and Refunds of Contribution
                                                        where	this	cannot	be	recovered.                           from	funds	under	management	by	netting	off		
Benefits	payable,	lump	sums	and	refunds	of	                                                                       their	fee	from	the	Gross	Asset	Value,	such	fees		
contributions	have	been	brought	into	the	accounts		                                                               are	accounted	for	on	an	accruals	basis	and	are		
on	an	accruals	basis	with	reference	to	the	date	                                                                  reflected	in	a	reduced	closing	Net	Asset	Value.
payment	is	due	as	governed	by	the	Local	Government	
Pension	Scheme	(Administration)	Regulations	2008.


Transfer Values

Transfer	values	are	sums	paid	between		
pension	schemes	and	relate	to	the	value		
of	previous	pension	scheme	membership.		
Transfers	into	and	out	of	the	fund	are		
recognised	on	a	cash	received	or	paid	basis.	
32




Notes	to	the	Accounts

                         1 Employer Contributions                       2007-08	      Augmentation	Contributions	relate	to	Employers	
                           Receivable                      2008-09     Restated	      meeting	the	capitalised	costs	of	discretionary	early	
                                                              £000         £000       retirements.	The	Fund	recharges	the	Employers	for	
                         Normal	Contributions                81,707       65,953      such	costs	and	the	income	received	is	made	up	of	
                         *Deficit	Funding	                   24,512       35,514      both	one-off	lump	sum	payments	and	instalments	
                         Augmentation	Contributions           4,699        5,797      where	the	Employer	has	chosen	to	spread	the	cost		
                         Total                             110,918      107,264       in	accordance	with	the	Fund’s	agreed	policy.

                                                                                      For	those	Employers	who	were	affected	by	Local	
                         *	Employer	Normal	Contributions	may	include		
                                                                                      Government	Reorganisation	in	Cheshire	and	who	
                         an	element	towards	reducing	any	deficit	in	the	
                                                                                      incurred	additional	costs	as	a	result	of	discretionary	
                         scheme’s	funding	position.	At	the	latest	triennial	
                                                                                      early	retirements	on	31	March	2009,	the	agreed	policy	
                         valuation	(31	March	2007)	the	Actuary	calculated		
                                                                                      is	that	the	two	new	unitary	authorities	will	meet	the	
                         a	common	employer	contribution	rate	of	19.5%,		
                                                                                      costs	in	five	annual	instalments	starting	in	2009-10.	
                         of	which	4.5%	targeted	recovering	the	funding	deficit	
                                                                                      The	total	capitalised	cost	of	these	early	retirements		
                         with	15%	towards	future	service	costs.	It	is	estimated	
                                                                                      is	£13.760m.	None	of	this	income	has	been	received	
                         that	employers	contributed	a	notional	£24.5m		
                                                                                      or	recognised	in	2008-09.
                         in	2008-09	towards	deficit	funding.


                         2 Analysis of Contributions Receivable                         2008-09                          2007-08
                                                                                   Employers      Employees       Employers	       Employees	
                                                                                        £000           £000            £000             £000
                         Cheshire	County	Council                                      43,678          14,545          42,929          13,264
                         Scheme	Employers                                             55,773          17,875          53,247          15,903
                         Admitted	Bodies                                              11,467           3,949          11,088           3,491
                         Total                                                       110,918          36,369         107,264          32,658
	                                                                                              Cheshire	Pension	Fund	Annual	Report	2008-09	Notes to the Accounts	    33




3 Benefits Payable              2008-09      2007-08	   5 Administration Expenses                               6 Investment Income               2008-09     2007-08	
                                   £000         £000                                                                                                 £000        £000
                                                        The	costs	incurred	by	the	County	Council	in	
Cheshire	County	Council           38,211      36,207                                                              Income	from	Fixed		
                                                        administering	the	Fund,	as	declared	annually		                                             6,448        1,504
Scheme	Employers                  58,016      55,954                                                              Interest	Securities
                                                        to	Communities	and	Local	Government	totalled	
Admitted	Bodies                    9,562       9,280    £1.835m	for	the	year	ended	31	March	2009.		               Dividends	from	Equities         30,785      36,064
Total                            105,789     101,441    A	breakdown	of	the	significant	items	is	shown	below.      Income	from	Index	Linked	
                                                                                                                                                     153            128
                                                                                                                  Securities
                                                                                         2008-09     2007-08	     Income	from	Pooled	
                                                                                            £000    Restated	     Investment	Vehicles:
4 Transfers to Other Schemes                                                                            £000
                                                                                                                  		Property                         543        1,141
                                                        Direct	Staffing                     1,114       1,097
The	Transfers	to	Other	Schemes	figure	represents		                                                                		Other                             92        3,039
the	cash	payments	from	the	Fund	in	relation	to	         IT                                   175          297
                                                                                                                  Net	Rents	from	Properties       10,427      11,559
individual	scheme	members’	transfers	of	benefits		      Senior	Management	Support            103           91
                                                                                                                  Interest	from	Cash	
in	line	with	the	Fund’s	accounting	policy.              Legal	Fees                             44          43                                        604        2,153
                                                                                                                  Deposits
                                                        External	Audit	Fees                    55          37     Other                              656            119
                                                        Actuarial	Fees                         75         204     Total                           49,708      55,707
                                                        Printing	&	Postage                     49          23
                                                        Other	Supplies	and	Services          221          275
                                                        Income                                (1)       (120)
                                                        Total                               1,835       1,947
34	     Cheshire	Pension	Fund	Annual	Report	2008-09	Notes to the Accounts




                                                                                                                      Transaction	costs	are	included	in	the	cost	of	
7     Change In Market Value                                   Purchases        Sales
                                                  Restated       at cost & proceeds &       Change                    purchases	and	sale	proceeds.	Transaction	costs	
                                                   Value at     derivative derivative     in Market        Value at   include	costs	charged	directly	to	the	scheme	such		
                                                31.03.2008      payments      receipts        Value     31.03.2009    as	fees,	commissions,	stamp	duty	and	other	fees		
                                                      £000           £000        £000          £000           £000
                                                                                                                      and	amounted	to	£1.791m	for	the	year.	In	addition		
Fixed	Interest	Securities                            53,010       151,207      200,889        (2,639)          689
                                                                                                                      to	the	transaction	costs	disclosed	above,	indirect	
Equities                                          1,066,343       488,026      499,971     (325,117)        729,281   costs	are	incurred	through	the	bid-offer	spread		
Index	Linked                                               -       69,562       69,625            63              -   on	investments	within	pooled	investment	vehicles.	
Pooled	Investment	Vehicles                          735,134       430,641      362,200     (106,586)        696,989   The	amount	of	indirect	costs	is	not	separately	
Derivative	Contracts                                       -       56,406       58,841         4,338          1,903   provided	to	the	scheme.	It	is	impracticable	to	obtain	
Direct	Property                                     184,150         4,520        5,275       (60,235)       123,160   or	estimate	the	transaction	costs	incurred	in	2007-08.

Private	Equity                                       84,033        39,832        6,175         4,944        122,634
                                                                                                                      8    Taxation
Global	Tactical	Asset	Allocation                     50,444        14,000             -      (24,508)        39,936
Secured	Loans                                        68,650       108,598       25,030       (41,866)       110,352   The	Fund	is	exempt	from	UK	income	tax	on	interest	
                                                  2,241,764     1,362,792    1,228,006     (551,606)     1,824,944    and	from	capital	gains	tax	on	the	profits	resulting	
                                                                                                                      from	the	sale	of	investments.	The	Fund	is	exempt	
Cash	                                                51,407        90,832      119,583        (4,030)        18,626
                                                                                                                      from	United	States	withholding	tax	on	dividends	and	
                                                  2,293,171     1,453,624    1,347,589     (555,636)     1,843,570
                                                                                                                      can	recover	all	or	part	of	the	withholding	tax	deducted	
Outstanding	dividend	entitlements,	accrued	                                                                           in	some	other	countries.	The	amount	of	withholding	
                                                      9,159                                                   4,359
interest	and	recoverable	withholding	tax
                                                                                                                      tax	deducted	from	overseas	dividends	which	the	Fund	
                                                  2,302,330                                              1,847,929
                                                                                                                      is	unable	to	reclaim	amounts	to	£609K	and	is	shown	
                                                                                                                      as	a	tax	charge.
The	change	in	market	value	of	investments	during	the	year	comprises	all	increases	and	decreases	in		
the	market	value	of	investments	held	at	any	time	during	the	year,	including	profits	and	losses	realised		             As	Cheshire	County	Council	was	the	administering	
on	sales	of	investments	during	the	year.                                                                              authority	for	the	Fund,	VAT	input	tax	was	recoverable	
                                                                                                                      on	all	Fund	activities	including	expenditure	on	
                                                                                                                      investment	and	property	expenses.
	
                                                                                          Cheshire	Pension	Fund	Annual	Report	2008-09	Notes to the Accounts	     35




9    Prior Year Adjustments
                                                           10   Fixed Interest         2008-09    2007-08	   12 Managed Funds,                 2008-09     2007-08	
                                                                Securities                £000       £000       Open Ended Investment             £000    Restated	
The	Fund	has	adopted	the	revised	Statement	of	
                                                           UK	Non-Government	Quoted       689       7,051       Companies & Unit Trusts                       £000
Recommended	Practice	(SORP)	May	2007.	As	a		
result	investments	previously	valued	at	mid	prices	        Overseas	Government	                              UK	Equity	Listed                  147,828     173,966
                                                                                             -     29,376
are	now	valued	at	bid	or	offer	prices	for	assets	and	      Quoted                                            UK	Equity	Unlisted                     61             57
liabilities	respectively	where	there	is	a	bid/offer	       Overseas	Non-Government	                          UK	Government		
                                                                                             -     16,583                                             -      34,037
                                                           Quoted                                            Fixed	Interest
spread.	This	is	a	change	in	accounting	policy	but	the	
difference	in	valuation	is	considered	to	be	immaterial	    Total                          689      53,010    UK	Non-Government		
                                                                                                                                                      -    156,727
                                                                                                             Fixed	Interest
to	the	financial	statements	and	therefore	comparative	
figures	for	2007-08	have	not	been	restated.	As	a	result	                                                     UK	Index	Linked                          -      62,212
the	comparative	figures	for	investments	are	reported	                                                        UK	Property                         3,555           7,421
                                                           11      Equities            2008-09    2007-08	
on	a	mid	price	basis	and	the	adjustment	in	valuation	                                     £000       £000    Fixed	Income	–	Multi	Strategy     318,026               -
from	mid	to	bid/offer	prices	is	included	in	current		                                                        Overseas	Equity	Listed            207,998     281,429
                                                           UK	Quoted                   290,420    570,850
year	‘Change	in	Market	Value’.                                                                               Overseas	Property                  19,521       19,285
                                                           UK	Index	Future	Contracts         -     (5,823)
Fees	paid	to	the	Fund’s	actuary	(Hymans	Robertson)	        Overseas	Quoted             438,861    495,424    Total                             696,989     735,134
are	now	included	within		Administration	Expenses	          Overseas	Index	Future	
                                                                                             -      5,892
rather	than	Investment	Management	Expenses.                Contracts
Figures	for	2007-08	have	been	restated	accordingly,	       Total                       729,281   1,066,343   13. Derivative Contracts                      2008-09
resulting	in	a	movement	of	£204,000	from	Investment	                                                                                                          £000
Management	Expenses	to	Administration	Expenses.                                                              Equity	Futures	Contracts                             211
                                                                                                             Forward	Foreign		
                                                                                                                                                                 (341)
                                                                                                             Exchange	Contracts
                                                                                                                                                                 (130)
36	     Cheshire	Pension	Fund	Annual	Report	2008-09	Notes to the Accounts




Equity Futures Contracts                                                                                              The	Fund	uses	exchange	traded	index	futures	
                                                                        Economic                                      contracts	for	hedging	purposes,	direct	investing		
                                                                   Exposure Value         Asset           Liability
                                                                            £’000         £’000              £’000    as	a	means	of	creating	equity	exposure	and	for	
                                                                                                                      managing	risk	by	implementing	shifts	in	investment	
Country           Exchange             Expiration
                                                                                                                      exposure.	Forward	currency	contracts	are	used		
UK                FTSE	                Less	than	1	year                      2,681             71
                                                                                                                      to	hedge	the	risks	associated	with	the	foreign	
France            CAC	                 Less	than	1	year                        260              5                     currencies	represented	by	the	securities	held,	or		
Germany           DAX	                 Less	than	1	year                      2,280             29                     to	adjust	the	foreign	currency	exposure	of	the	Fund.
Spain             IBEX                 Less	than	1	year                      (578)                              17
                                                                                                                      As	a	result	of	the	Fund	adopting	the	revised	SORP,	
USA               S&P	                 Less	than	1	year                     (5,018)                            258
                                                                                                                      derivatives	are	now	valued	at	fair	value,	which	is	the	
Japan             TOPIX                Less	than	1	year                      5,159            393                     bid	price	for	asset	positions	and	offer	price	for	liability	
China             HANG	SENG	           Less	than	1	year                     (1,709)            40                     positions.	This	is	a	change	in	accounting	policy	but	
Australia         SPI	                 Less	than	1	year                     (1,080)                             52    as	it	is	impracticable	to	obtain	comparative	figures	
                                                                             1,995            538              327    for	2007-08,	and	the	difference	is	considered	to	be	
                                                                                                                      immaterial	to	the	financial	statements,	the	2007-08	
                                                                                                                      figures	have	not	been	restated.	Comparative	figures	
                                                                                                                      therefore	remain	at	their	economic	exposure	value.	
Forward Foreign Exchange Contracts

Number of Contracts Trade Type                Expiration                     Asset £’000            Liability £’000   14 Property                          2008-09     2007-08	
                                                                                                                                                              £000        £000
                    31 Over	the	counter       Less	than	1	year                        1,365                  1,706
                                                                                                                      Freehold                             101,430      147,925
                                                                                                                      Heritable                             12,745       18,900
                                                                                                                      Leasehold                               8,985      17,325
                                                                                                                      Total                                123,160      184,150
	
                                                                                            Cheshire	Pension	Fund	Annual	Report	2008-09	Notes to the Accounts	     37




                                                    16	� Global Tactical Asset Allocation                      18	� Fixed Income Multi Strategy
15	� Investment by            2008-09          	
                                        2007-08	
     Fund Manager                £000      £000
                                                    The	Fund	has	invested	in	a	Global	Tactical	Asset	          The	Fund	has	invested	in	three	pooled	fixed		
Baillie	Gifford	&	Co          532,468    803,642    Allocation	vehicle	managed	by	BNY	Mellon	Asset	            income	investment	vehicles	managed	separately		
Legal	&	General               304,619    531,214    Management.	This	strategy	attempts	to	add	value	           by	Goldman	Sachs,	Henderson	and	Baillie	Gifford.	
Goldman	Sachs                 129,199          -    through	asset	allocation	between	local	equity	and	         The	underlying	assets	of	these	pooled	vehicles	are	
Henderson                     132,631          -    bond	markets,	country	selection	across	individual	         invested	by	the	managers	in	diversified	portfolios	
GMO                           226,026    277,163    national	equity	and	bond	markets	and	also	through	         of	a	wide	range	of	fixed	income	assets	including	
                                                    active	currency	management.	The	strategies	are	            Government	Bonds	(UK	and	Overseas),	Corporate	
Standard	Life                 102,177    256,986
                                                    implemented	through	the	use	of	derivatives,	such		         Bonds,	High	Yield	Bonds,	Emerging	Market	Bonds,	
Rockspring                    147,364    211,647
                                                    as	(but	not	restricted	to)	equity	and	bond	futures,	       Asset	and	Mortgage	Backed	Securities,	Secured	
BNY	Mellon	Asset	                                   options	and	currency	forward	contracts.                    Loans	and	currency.	The	managers	may	use		
                               39,936     50,444
Management
                                                                                                               derivate	instruments	to	manage	risk	and	to		
European	Credit	                                    17	� Secured Loans
                               53,084     33,092                                                               express	their	investment	convictions.
Management	(ECM)
M&G                            57,693     35,558    The	Fund	has	invested	in	two	Secured	Loan		
                                                                                                               19   Cash                         2008-09    2007-08	
Adams	Street	Partners          63,721     47,357    vehicles	managed	by	European	Credit	Management	                                                 £000       £000
Pantheon	Ventures              52,951     32,704    and	M&G.	Secured	loans	are	bonds,	or	debt,	issued		        Cash	Deposits                      12,594     21,664
                                                    by	companies,	typically	to	finance	internal	growth,	
Lexington	Capital	Partners      5,994      4,042                                                               Cash	Instruments                    8,027     29,814
                                                    acquisitions,	mergers	and	leveraged	buy-outs.		
Other                              66     18,481                                                               Cash	Backing	Futures               (1,995)          (71)
                                                    They	are	senior	loans	in	that	they	have	a	priority		
Total	�                      1,847,929 2,302,330
   claim	over	specific	assets	of	the	company	if	it	fails		                                       18,626     51,407
                                                    to	meet	its	debt	obligations.
38	   Cheshire	Pension	Fund	Annual	Report	2008-09	Notes to the Accounts




20    Debtors                      2008-09    2007-08	      A	full	copy	of	the	SIP	can	be	obtained	from	the	              Fund	members’	accrued	benefits	are	guaranteed	
                                      £000       £000       Pensions	Section,	Cheshire	West	and	Chester	                  by	statute.	Members’	contributions	are	fixed	in	the	
Rental	Income                          862           965    Council,	County	Hall,	Chester,	CH1	1SG		                      Regulations	at	a	level	which	covers	only	part	of	the	
Due	from	Cheshire	County	                                   or	from	the	Fund’s	website	at:	                               cost	of	accruing	benefits.	Employers	pay	the	balance	
                                     5,215      4,719       www.cheshirepensionfund.org                                   of	the	cost	of	delivering	the	benefits	to	members		
Council
Due	from	Employers                   6,041      6,545                                                                     (net	of	returns	from	the	Fund’s	investments).		
                                                            23   Funding Strategy Statement                               The	FSS	focuses	on	the	pace	at	which	these	liabilities	
Other	Debtors                           46           123
                                                                                                                          are	funded	and,	insofar	as	is	practical,	the	measures	
Less	Provision	for	Doubtful	Debt     (185)          (102)   Under	the	LGPS	(Administration)	Regulations	2008	
                                                                                                                          to	ensure	that	employers	pay	for	their	own	liabilities.
                                    11,979     12,250       administering	authorities	are	required	to	prepare	a	
                                                            Funding	Strategy	Statement	(FSS).The	key	requirements	        The	Funding	Strategy	Statement	for	the	Cheshire	
The	debtors	figure	above	does	not	include	future	
                                                            relating	to	the	FSS	in	the	regulations	are	that;              Pension	Fund	can	be	obtained	from	the	Pensions	
payments	due	from	employers	who	are	making	
special	additional	payments	in	respect	of	early	                                                                          Section,	Cheshire	West	and	Chester	Council,		
                                                            •	 After	consultation	with	all	relevant	interested	parties	
retirement	costs	over	an	agreed	number	of	years.                                                                          County	Hall,	Chester,	CH1	1SG	or	from	the		
                                                               involved	with	the	Fund,	the	administering	authority	
                                                                                                                          Fund’s	website	at:	www.cheshirepensionfund.org
                                                               will	prepare	and	publish	their	funding	strategy.
21. Creditors                      2008-09     2007-08	
                                      £000        £000      •	 In	preparing	the	FSS,	the	administering		                  24   Trustee Fees
                                                               authority	must	have	regard	to:
Pension	Benefits	Payable               494            554                                                                 As	the	Cheshire	Pension	Fund	forms	part	of	the	LGPS	
Due	to	Cheshire	County	                                     •	 FSS	guidance	produced	by	CIPFA                             it	does	not	strictly	have	trustees.	The	members	of	the	
                                     1,778          2,089
Council
                                                            •	 Its	Statement	of	Investment	Principles	published	          Pensions	Investment	Panel	do	not	receive	any	fees	in	
Other	Creditors                      1,360          1,078
                                                               under	Regulation	9A	of	the	Local	Government	               relation	to	their	specific	responsibilities	as	members	
                                     3,632          3,721
                                                               Pension	Scheme	(Management	and	Investment		                of	the	Panel.
                                                               of	Funds)	Regulations	1998	(as	amended).
22    Statement of Investment Principles                                                                                  Since	January	2004	elected	members	who	are	offered	
                                                            •	 The	FSS	must	be	revised	and	published	whenever	            membership	of	the	Scheme	under	their	council’s	
The	Fund’s	Statement	of	Investment	Principles		                there	is	a	material	change	in	either	the	policy	on	        scheme	of	allowances	have	been	eligible	to	join	the	
(SIP)	sets	out	the	Fund’s	investment	objectives		              the	matters	set	out	in	the	FSS	or	the	Statement		          Scheme.	As	at	31	March	2009	six	members	of	the	
and	investment	management	arrangements.		                      of	Investment	Principles.                                  Pensions	Investment	Panel	had	taken	this	option		
                                                            •	 The	Fund’s	actuary	must	have	regard	to	the		               and	were	members	of	the	Scheme.
                                                               FSS	as	part	of	the	fund	valuation	process.
	
                                                                                              Cheshire	Pension	Fund	Annual	Report	2008-09	Notes to the Accounts	      39




25	� Related Party Transactions                         26	� Stock Lending                                        29	� Contingent Liabilities and
                                                                                                                       Contractual Commitments
The	relationship	between	the	Administering	Authority	   The	Cheshire	Pension	Fund	policy	is	not	to		
and	the	Fund	is	by	its	very	nature	a	close	one.		       undertake	stock	lending	of	Pension	Fund	assets.           The	Fund	has	contractual	commitments	to		
The	majority	of	the	Fund’s	cash	is	invested	with	the	                                                             the	value	of	£336.4m	in	private	equity	funds.		
Fund’s	investment	managers	or	directly	with	external	   27	� Leverage                                             At	31	March	the	Fund	had	actually	invested		
financial	institutions.	The	Fund	did	however	hold	an	                                                             £158.9m	and	therefore	had	an	outstanding	
                                                        Some	of	the	Fund’s	investments,	including		
amount	of	cash	with	Cheshire	County	Council	in	order	                                                             commitment	of	£177.5m.	As	these	funds	are	
                                                        Private	Equity	and	GTAA	use	leverage	as	a	tool		
to	meet	its	short	term	cash	flow	needs	e.g.	payment	                                                              denominated	in	US	Dollars	and	Euros	the	
                                                        to	achieve	higher	returns.	Leverage	can	be	described	
of	pension	benefits.	In	2008-09	Cheshire	County	                                                                  commitment	in	Sterling	is	subject	to	change		
                                                        as	exposure	to	changes	in	asset	values	at	a	ratio	of	
Council	paid	the	Fund	£225K	for	interest	accrued		                                                                due	to	currency	fluctuations.	
                                                        greater	than	1:1	in	reference	to	the	amount	invested.	
on	these	balances,	with	the	average	balance	through	
                                                        Leverage	magnifies	both	favourable	and	unfavourable	      With	effect	from	1	April	2005	the	Magistrates		
the	year	standing	at	£3.540m.
                                                        movements	in	asset	values.                                Courts	service	became	part	of	the	Civil	Service.		
At	the	year	end,	a	balance	of	£6.455m	was	due	to		                                                                Terms	have	been	agreed	for	the	transfer	of	liabilities	
the	Fund	from	Cheshire	County	Council,	primarily	       28	� Illiquidity of Assets                                from	all	of	the	Local	Government	Pension	Schemes	
relating	to	contributions	which	were	paid	in	April	                                                               (LGPS)	to	the	Principal	Civil	Service	Pension	Scheme	
                                                        Some	of	the	Fund’s	assets	can	be	relatively	illiquid.	
but	became	due	in	March	and	a	balance	of	£1.778m	                                                                 (PCSPS).	Each	LGPS	Fund’s	actuary	will	determine	
                                                        Illiquidity	in	this	context	means	the	Fund	may	not	
was	owing	to	Cheshire	County	Council	for	Fund	                                                                    the	value	of	pensioner	and	deferred	liabilities	
                                                        always	be	able	to	sell	these	assets	quickly	and	at	the	
transactions	processed	through	the	Administering	                                                                 remaining	with	the	LGPS	and	will	retain	enough	
                                                        desired	price.	Either	because	there	is	no	secondary	
Authority’s	accounts	payable	and	receivable	systems.                                                              assets	to	meet	these	liabilities.	The	remaining	(if	any)	
                                                        market	for	them	or	a	lack	of	investors	wishing	to	
                                                                                                                  share	of	Fund	assets	relating	to	Magistrates	Courts	
The	Fund	has	not	made	any	employer	related	             purchase	them.	As	an	investor	with	a	long	investment	
                                                                                                                  will	then	be	transferred	over	to	the	PCSPS.	
investment	at	any	time	during	the	period.               horizon	the	Fund	can	invest	in	such	assets	with	the	
                                                        expectation	of	being	rewarded	with	excess	returns		
                                                        (a	liquidity	premium).
40	   Cheshire	Pension	Fund	Annual	Report	2008-09	Notes to the Accounts




30    Additional Voluntary Contributions (AVCs)                                                                   31   Post Balance Sheet Events

The	AVC	providers	to	the	members	of	the	Fund	are	Clerical	Medical,	Standard	Life	and	Equitable	Life.		            A	review	has	been	undertaken	to	identify	any		
The	AVCs	are	invested	separately	from	the	Fund’s	main	assets	and	used	to	acquire	additional	pension	benefits.	    material	post	balance	sheet	events	which	would	
Members	participating	in	these	AVC	arrangements	each	receive	an	annual	statement	confirming	the	amounts	          either	require	restatement	of	the	2008-09	accounts		
held	in	their	account	and	the	movements	during	the	year.	                                                         or	a	note	to	the	accounts	to	highlight	any	non	
                                                                                                                  adjusting	events.	This	review	covers	events	up	to		
A	summary	of	the	information	provided	by	Clerical	Medical,	Standard	Life	and	Equitable	Life	for	the	year		
                                                                                                                  18	September	2009	and	two	non-adjusted	events		
to	31	March	2009	is	shown	below.	(This	summary	has	not	been	subject	to	audit	and	the	Fund	relies	on	the	
                                                                                                                  have	been	identified:
individual	contributors	to	check	deductions	made	on	their	behalf	are	accurately	reflected	in	the	statements	
provided	by	the	AVC	providers).                                                                                   Firstly,	as	a	result	of	Local	Government	
                                              Clerical Medical   Standard Life    Equitable Life          Total   Reorganisation	on	1	April	2009	the	existing	local	
                                                         £000            £000              £000           £000    authorities	in	Cheshire	were	replaced	by	two	new	
Contributions	received	in	year                             293              350               11           654    unitary	authorities:	Cheshire	West	and	Chester	
                                                                                                                  Council	(covering	the	districts	of	Chester,	Ellesmere	
Market	Value	at	31	Mar	2008                              1,651            2,027            1,155          4,833
                                                                                                                  Port	&	Neston	and	Vale	Royal)	and	Cheshire	East	
Market	Value	at	31	Mar	2009                              1,434            1,660              943          4,037
                                                                                                                  Council	(covering	the	districts	of	Crewe	&	Nantwich,	
                                                                                                                  Congleton	and	Macclesfield).	

                                                                                                                  The	seven	demising	local	authorities	were	all		
                                                                                                                  Major	Scheme	Employers	within	the	Cheshire	
                                                                                                                  Pension	Fund	in	2008-09.	As	part	of	the	LGR	
                                                                                                                  transition	they	undertook	a	programme	of	voluntary	
                                                                                                                  redundancies,	resulting	in	a	number	of	employees	
                                                                                                                  taking	early	retirement	with	their	last	day	of	work	
                                                                                                                  being	31	March	2009.	
	                                                                                                 Cheshire	Pension	Fund	Annual	Report	2008-09	Notes to the Accounts	   41




In	accordance	with	the	LGPS	(Administration)	           32   Actuarial Valuation
Regulations	2008	&	the	SORP	the	payment	of		
                                                        The	accounts	summarise	the	transactions	and		
the	lump	sum	retirement	benefits	to	these	retirees	
                                                        net	assets	of	the	Fund;	they	do	not	take	account	of	
has	been	accounted	for	on	1	April	2009	and	has		
                                                        future	liabilities	to	pay	pensions	and	other	benefits.	
not	been	included	in	the	2008-09	accounts.
                                                        The	Actuary	carries	out	an	actuarial	valuation	of		
The	monetary	total	of	lump	sums	paid	out	in		
                                                        the	Fund’s	assets	and	liabilities	every	three	years.		
April	which	related	to	these	retirees	is	£13.988m.		
                                                        The	rate	of	employers’	contributions	payable	in	the	year	
This	amount	will	be	included	within	Lump	Sums		
                                                        to	March	2009	was	determined	at	the	2007	valuation	
in	the	Fund	Account	for	2009-10.		The	actuarial	
                                                        of	the	Fund.	The	Actuary	set	the	common	rate	of	
cost	associated	with	these	retirements	is	£13.760m	
                                                        employers’	contribution	phased	from	1	April	2008		
and	the	two	new	unitary	authorities	will	reimburse	
                                                        to	31	March	2011	at	19.5%	of	pensionable	pay.		
the	Pension	Fund	for	these	costs	in	five	annual	
                                                        This	was	expected	to	be	the	rate	sufficient	over		
instalments	starting	in	2009-10.	The	contributions	
                                                        a	period	of	20	years	to	meet	100%	of	existing	and	
received	will	be	included	within	Employer	
                                                        prospective	liabilities,	including	pension	increases.		
Contributions	in	the	Fund	Account.	
                                                        At	the	valuation	date	the	valuation	showed	that		
The	second	non-adjusting	event	is	that	the	valuation	   the	value	of	the	Fund’s	assets	represented	85%		
of	the	Pension	Fund’s	Investments,	which	at	the	time	   of	the	Fund’s	accrued	liabilities.
these	Accounts	went	to	print	had	increased	from	
                                                        Fund	assets	were	valued	under	the	projected	unit		
£1,846m	to	£2,057m.
                                                        method	and	the	Actuary	made	the	following	assumptions:

                                                        •	 nominal	investment	returns	on	assets	of		
                                                           6.1%	per	annum
                                                        •	 nominal	rate	of	future	earnings	increases		
                                                           of	4.7%	(with	assumptions	about	pay	awards		
                                                           and	promotions	but	excluding	increments);	and
                                                        •	 nominal	rate	of	pension	increases	at	3.2%	per	annum	
                                                        At	the	time	of	the	actuarial	valuation	the	Fund’s	
                                                        assets	were	valued	at	£2,385m.
42




Actuarial	Statement

CHESHIRE PENSION FUND   Cheshire Pension Fund (“the Fund”) 2008/09                 Summary of Method and Assumptions Used
                        Actuarial Statement
HYMANS ROBERTSON LLP                                                               Full	details	of	the	method	and	assumptions	are	
                        As	required	by	regulations,	an	actuarial	valuation		       described	in	the	valuation	report	dated	31	March	2008.
                        of	the	Fund’s	assets	and	liabilities	was	carried	out		
                                                                                   My	opinion	on	the	security	of	the	prospective	rights		
                        as	at	31	March	2007.
                                                                                   is	based	on	the	projected	unit	valuation	method.		
                                                                                   This	assesses	the	cost	of	benefits	accruing	to	existing	
                        Security of Prospective Rights
                                                                                   members	during	the	year	following	the	valuation,		
                        In	my	opinion,	the	resources	of	the	Scheme	are	likely		    allowing	for	future	salary	increases.	The	resulting	
                        in	the	normal	course	of	events	to	meet	the	liabilities		   contribution	rate	is	adjusted	to	allow	for	any	
                        of	the	Fund,	as	required	by	the	Regulations.	In	giving	    difference	in	the	value	of	accrued	liabilities	(allowing	
                        this	opinion	I	have	assumed	that	the	following		           for	future	salary	increases)	and	the	market	value	of	
                        amounts	will	be	paid	to	the	Fund:                          assets.	For	employers	which	are	no	longer	admitting	
                                                                                   new	entrants	to	the	Fund,	I	adopted	the	attained	age	
                        •	 contributions	by	the	members	are	in	accordance	         valuation	method	which	assesses	the	cost	of	benefits	
                           with	the	Local	Government	Pension	Scheme		              accruing	to	existing	members	over	their	expected	
                           Regulations	1997	until	31	March	2008,	then	in	          future	working	lifetime.
                           accordance	with	the	Local	Government	Pension	
                           Scheme	(Benefits,	Membership	and	Contributions)	        Since	I	have	taken	assets	into	account	at	their	market	
                           Regulations	2007;	and                                   value	it	is	appropriate	for	me	to	take	my	lead	from	the	
                                                                                   market	when	setting	the	financial	assumptions	used	
                        •	 contributions	are	in	accordance	with	the	Rates		
                                                                                   to	value	the	ongoing	liabilities,	to	ensure	consistency	
                           and	Adjustments	Certificate	dated	31	March	2005	
                                                                                   between	the	asset	and	liability	valuation	bases.
                           for	the	year	ending	31	March	2008.	Thereafter	
                           for	the	three	years	commencing	1	April	2008	as	
                           specified	in	our	Rates	and	Adjustments	Certificate	
                           dated	31	March	2008.
	
                                                                                                        Cheshire	Pension	Fund	Annual	Report	2008-09	Actuarial Statement	            43




The	key	financial	assumptions	adopted	for	this	valuation	were	as	follows:                                                  Experience since April 2007

Assumption                          Derivation                                                 Rate at 31 March 2007       The	financial	experience	that	affects	the	Fund’s	assets		
                                                                                                Nominal         Real       and	liabilities	since	the	valuation	at	31	March	2007	
Price Inflation (RPI)               Market	expectation	of	long	term	future	inflation	                3.2%              -   has	been	unfavourable.	Assets	have	significantly	
                                    as	measured	by	the	difference	between	yields	on	                                       underperformed	relative	to	the	long	term	assumptions		
                                    fixed	and	index-linked	Government	bonds	as	at	the	                                     set	at	the	valuation	causing	the	funding	level	to	deteriorate.	
                                    valuation	date	
                                                                                                                           This	has	been	compounded	by	a	fall	in	real	gilts	yields	
Pay Increases*                      Assumed	to	be	1.5%	p.a.	in	excess	of	price	inflation             4.7%        1.5%      which	has	increased	the	value	placed	on	liabilities.
‘Gilt-based’ discount rate          The	yield	on	fixed-interest	(nominal)	and	index-linked	          4.5%        1.3%      Accordingly,	the	level	of	employer	contributions	would	
                                    (real)	Government	bonds
                                                                                                                           be	expected	to	increase	above	those	currently	and	
Funding basis discount rate         Assumed	to	be	1.55%	p.a.	above	the	yield	on	fixed	               6.1%        2.8%      prospectively	payable	based	on	the	2007	valuation	if	
                                    interest	Government	bonds                                                              a	valuation	were	carried	out	at	a	current	date	on	the	
                                                                                                                           current	funding	strategy.	My	opinion	on	the	security	
*plus	an	allowance	for	promotional	increases
                                                                                                                           of	prospective	rights	above	is	dependent	upon	any	
In	order	to	value	both	those	liabilities	which	have	          The	deficits	for	each	individual	employer	are	being	         increased	contribution	requirements	being	met	by	
accrued	at	the	valuation	date	and	those	accruing	in	          spread	over	a	period,	chosen	by	the	Administering	           employers,	although	this	statement	should	also	be	
respect	of	future	service	the	stream	of	expected	future	      Authority,	ranging	from	the	future	working	lifetime	         read	in	context	of	the	statutory	nature	of	the	scheme.
liability	payments	is	converted	into	a	capital	value	today	   of	employees	up	to	20	years.	Any	rise	in	contribution	
                                                                                                                           It	should	be	noted	that	employer	contributions	from		
by	assuming	a	return	on	Fund	assets	of	6.1%	a	year.           rates	from	31	March	2008,	are	being	phased	in	over		
                                                                                                                           1	April	2011	will	be	set	following	the	next	valuation		
                                                              a	period,	chosen	by	the	employer,	up	to	a	maximum		
2007 Valuation Results                                                                                                     of	the	Fund	as	at	31	March	2010.
                                                              of	4	years.	Employers	can	pay	more	than	the	
                                                              minimum	rate	if	they	wish.
The	2007	valuation	revealed	that	the	Fund’s	assets,	
which	at	31	March	2007	were	valued	at	£2,385	million,	        Copies	of	the	valuation	report	are	available		
were	sufficient	to	meet	approximately	85%	of	the	             on	request	from	the	Finance	Department	of		
                                                                                                                           John Wright Fellow	of	the	Faculty	of	Actuaries	
liabilities	accrued	up	to	that	date.	Assets	were		            Cheshire	West	and	Chester	Borough	Council.	
                                                                                                                           For	and	on	behalf	of	Hymans	Robertson	LLP	
valued	at	their	market	value.
                                                              The	next	valuation	will	be	carried	out	as	at		               1	September	2009
Individual	employers’	contributions	have	been	set	in	         31	March	2010.                                               Hymans Robertson LLP
accordance	with	the	Fund’s	Funding	Strategy	Statement.	                                                                    20	Waterloo	Street,	GLASGOW	G2	6DB.
44
44	    Cheshire	Pension	Fund	Annual	Report	2008-09	Participating Employers & Publications




Participating	Employers	&	Publications
Employers with active members participating in the Cheshire Pension Fund as at 31 March 2009                         The Cheshire Pension Fund produces a number of publications,
                                                                                                                     hard copies of which are available upon request.
Major Scheme Employers          Other Scheme Employers            Admitted Bodies
Cheshire	County	Council         Alderley	Edge	Parish	Council      Active8	Leisure	Ltd       Halton		                 Please	contact	the	Pensions	section	on	01244	976000		
Cheshire	East	Council           Birchwood	Town	Council	           Age	Concern	(Halton)      Housing	Trust            or	email	pensions@cheshirewestandchester.gov.uk	
                                                                                            BAM	Construct		          if	you	require	a	copy.	
Cheshire	West	and		             Bollington	Parish	Council         Berkeley	Care		
Chester	Council                                                   Management                UK	Ltd
                                Congleton	Town	Council                                                               The	publications,	which	are	listed	below,	are	also		
Cheshire	Police	Authority                                         CADSART                   Hope	Inclusion		
                                Connexions	-		                                              Time	&	Success           available	on	our	website:	www.cheshirepensionfund.org
Cheshire	Probation	Committee    Cheshire	&	Warrington             Catering	for	Education
                                                                                            King’s	School            Funding Strategy Statement
Cheshire	Fire	Authority         Disley	Parish	Council             Cheshire	&	Warrington	
                                                                  Economic	Alliance         Macclesfield		           This	document	sets	out	the	Fund’s	commitment		
Chester	City	Council	           Frodsham	Town	Council                                       Museum	Trust
                                                                  Cheshire	&	Warrington		
                                                                                                                     to	meeting	its	liabilities	while	at	the	same	time		
Congleton	Borough	Council       Grappenhall	and	Thelwall		                                  Making	Space             maintaining	stable	employer	contribution	rates.
                                Parish	Council                    Tourism	Board
Crewe	&	Nantwich		                                                                          Middlewich	Joint		
Borough	Council                 Knutsford	Town	Council            Cheshire		                                         Statement of Investment Principles
                                                                  Community	Action          Cemetery	Committee
Ellesmere	Port	&		              Macclesfield	College                                        Norton	Priory		
                                                                                                                     Summarises	the	Fund’s	investment	objectives		
Neston	Borough	Council                                            Cheshire	County		                                  and	the	policies	it	uses	to	manage	objectives.
                                Mid	Cheshire	College              Sports	Club               Museum	Trust
Halton	Borough	Council          Middlewich	Town	Council                                     Reliance	Secure		
                                                                  Cheshire	Peaks	and		                               Governance Policy Statement
Halton	Borough	Transport        Nantwich	Town	Council             Plains	Housing	Trust      Task	Management
                                                                                                                     This	document	describes	the	governance	arrangements		
Macclesfield	Borough	Council    Nether	Alderley	Parish	Council    Cheshire		                Sandbach	School          in	place	for	the	management	of	the	fund’s	affairs.
Vale	Royal	Borough	Council      Northwest	Fire	Control            Sports	Trust              South	Cheshire		
Warrington	Borough	Council                                        Chester	Diocesan		        Enterprises              Governance Compliance Statement
                                Northwich	Town	Council
Warrington	Borough	Transport                                      Adoption	Services         Strata                   Defines	the	extent	the	Fund	complies	with	the	best		
                                Odd	Rode	Parish	Council                                                              practice	governance	arrangements	laid	down	by	CLG.
                                                                  Chester	District		        Superclean-Fire
                                Penketh	Parish	Council            Housing	Trust             The	Dinner	Ladies        Communication Policy Statement
                                Poynton-with-Worth		              CLS	Care	Services
                                Parish	Council                                              The	Waterways	Trust      Outlines	the	Fund’s	policy	on	communication		
                                                                  Commission	for		          Vale	Contract	Services   with	its	stakeholders.
                                Poulton	with	Fearnhead		          Social	Care	Inspection
                                Parish	Council                                              Valuation		
                                                                  Creative	Support          Tribunal	Service         Valuation Report
                                Prestbury	Parish	Council
                                                                  Dane	Housing		            Volunteer	Centre		
                                                                                                                     This	is	produced	by	the	Fund’s	actuary	every	3	years		
                                Priestley	Sixth	Form	College      (Congleton)	Ltd                                    following	the	valuation	of	the	fund.	It	outlines	the	assets		
                                                                                            Warrington
                                Reaseheath	College	of	            David	Lewis	Centre                                 and	liabilities	of	the	fund	as	well	as	stating	the	employer	
                                Agriculture                                                 Warrington		
                                                                                            Community	Living
                                                                                                                     contribution	rate	for	the	next	3	years.
                                                                  DC	Leisure		
                                Riverside	College                 Management	Ltd            Warrington	Council		
                                Sandbach	Town	Council             Deafness		                for	Voluntary	Services
                                Sir	John	Deane’s	College          Support	Network           Warrington		
                                South	Cheshire	College            Eric	Wright	FM	Ltd        Housing	Association
                                University	College	Chester        First	Bus	(Chester)       Weaver	Vale		
                                Warrington	Collegiate	Institute   Food	for	Thought          Housing	Trust
                                West	Cheshire	College             Golden	Gates	Housing      Wulvern		
                                                                                            Housing	Trust
                                Winsford	Town	Council             Groundwork		
                                Wybunbury	Parish	Council          Mersey	Valley
Contacts & Further Information

For more information on the Cheshire Pension Fund
please contact the Pensions Section using the following
contact details.

Benefits Administration
Sue Smith
Tel: 01244 972032
Email: susan.smith@cheshirewestandchester.gov.uk

Investments & Accounts
Nick Jones
Tel: 01244 972652
Email: nick.jones@cheshirewestandchester.gov.uk

Business Information
Mark Futter
Tel: 01244 972963
Email: mark.futter@cheshirewestandchester.gov.uk

You can also email the office on:
pensions@cheshirewestandchester.gov.uk

or write to us at:
Cheshire Pension Fund, Cheshire West and Chester Council,
County Hall, Chester CH1 1SG.

To get in touch with the Senior Manager,
Corporate Finance, contact:
Stephan Van Arendsen
Tel: 01244 973727
Email: stephan.vanarendsen@cheshirewestandchester.gov.uk

To get in touch with the Head of Finance,
contact:
Mark Wynn
Tel: 01244 972537
Email: mark.wynn@cheshirewestandchester.gov.uk


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