Annual Report 2007 - Church of England

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Annual Report 2007 - Church of England

Church Commissioners’

Annual Report 2007

Our mission is to support the

Church of England’s ministry,

particularly in areas of need

and opportunity

The Church Commissioners for England


2 FIRST CHURCH ESTATES

COMMISSIONER’S INTRODUCTION

WHO WE ARE AND WHAT WE DO

4 Origins and purpose

4 Internal organisation and governance

5 Trustees and staff

GROWING THE FUND

8 Investment

9 Fund performance highlights

10 Securities and cash

12 Real estate

FUNDING THE CHURCH’S MISSION

19 How much can we spend

20 Parish ministry and mission

22 Supporting clergy in retirement

23 Bishops and cathedrals

ADAPTING LOCAL CHURCH STRUCTURES FOR MISSION

26 Pastoral administration

28 Church buildings closed for regular public worship

CORPORATE RESPONSIBILITY AND COMMUNICATION

32 Ethical investment

34 Accountability and communication

Financial statements

36 Statement of responsibilities of the Church Commissioners

37 Report of the auditors to the Church Commissioners

38 Consolidated statement of financial activities

40 Balance sheets

41 Consolidated cash flow statement

42 Notes to the financial statements

55 Funds held on behalf of others and professional advisers

56 Money available resolution and actuaries’ report

57 Commissioners’ non-pensions support

58 Ten year financial record

60 Lists of larger investments

Mission and

key responsibilities

The Church Commissioners’ mission is

to support the Church of England’s

ministry, particularly in areas of need

and opportunity.

The Commissioners’ responsibilities

are

» To obtain the best possible long

term return from a diversified

investment portfolio in order

› to meet our pension

commitments; and

› to provide the maximum

sustainable funding for our other

purposes such as support for the

work of bishops, cathedrals and

parish ministry.

» In doing so, to pay particular

regard to making ‘additional

provision for the cure of souls in

parishes where such assistance is

most required’.

» To administer the legal framework

for pastoral reorganisation and

settling the future of closed church

buildings.

Inside back cover

The Church Commissioners and Board of Governors

at 1 January 2008


Key aims and outcomes in 2007

AIM

GROWING THE FUND

Aim to exceed a range of fund

performance benchmarks

OUTCOME

» Consistently achieved: average total return of 9.5% pa over the last 10 years

compared with average UK pension funds return of 7.1% pa has produced an

extra £37m pa for the Church annually. » page 9

Re-seed property portfolio » New overseas property investments did well in 2007. » page 17

for long-term growth » Continued to rebrand and invest in Connaught Village for added value. » page 15

Review and manage risks » Management programme set up to control exposure to non-sterling currencies. » page 12

to the fund

» Sale of housing-related income stream reduced our exposure to the UK

housing market. » page 17

Ensure effective fund » External managers for all sectors of the portfolio kept under regular review and

management action taken where needed. » page 5

TARGETING NEEDS AND REALISING OPPORTUNITIES

Increase financial support for » Directed almost £33m towards parish-level mission while providing required

local mission and ministry level of other support, compared with £19.5m in 1997. » page 20

» Ensured grants towards cathedrals’ work were targeted where financial needs

are greatest. » page 25

Look to identify new opportunities » Organised an inter-diocesan conference on funding opportunities in new

to support the Church’s mission housing areas which will inform spending plans currently in development. » page 20

Build up information-sharing » Worked with Archbishops’ Council and dioceses to promote outcomes-led

within the Church reporting, including by monitoring the use of parish mission fund monies. » page 21

EFFECTIVE ADMINISTRATION

Renew Commissioners’ » Work on the legislative process started. Renewal will enable clergy pensions to

power to spend capital

stay securely funded and the Commissioners to invest for total return and

long-term growth of assets and distributions. » page 19

Improve administration of » Flexible and lighter-touch global budgets system developed in the year and

bishops’ working costs now running. » page 23

Provide effective support for » Appointed a Leeds-based planning adviser to work with and support dioceses

dioceses handling church

in seeking new uses for closed church buildings. » page29

buildings closures and seek » Highest level of sale proceeds from church buildings in 10 years, with two-thirds

financial value from those properties of the money going back to dioceses to support the living Church. » page 29

GOVERNANCE AND SOCIAL RESPONSIBILITY

Refresh understanding of » Agreed to develop a Commissioners-specific ethical investment policy statement

Commissioners’ ethical

reflecting the nature of our fund and its commitments and the distinctive ethical

investment policy issues attached. » page 32

Contribute to the Church’s goal » Ensured energy-efficient office equipment and recycling systems instituted.

of reducing its carbon footprint Working to promote good and sustainable practice on the estates and properties

we manage. » page 33

Develop Commissioners’ » Reviewed procedures for public hearings in matters of pastoral reorganisation and

service to the public the future of closed churches; findings to be published in spring this year. » page 26


2

F

irst Church Estates

Commissioner’s introduction

The substantial funds of the Church Commissioners

are managed on the basis that they are a perpetual

endowment. They are to last, if you like, for ever.

This may sound unremarkable, but relatively few

types of fund, mainly charities, have this character.

Pension funds are influenced by the average age of

their beneficiaries. Savings plans have various terms,

but few go beyond 20 years. Holders of unit trusts

and private investors want to see good performance

as soon as possible.

Our investment policy pays attention to the long

term. When the Church Commissioners invest in

smaller companies it is in the hope that some of

them will become the market leaders of the future,

perhaps many years ahead. The giant Vodafone, for

instance, grew out of a small company making radio

receivers called Racal which was quoted on the

London Stock Exchange during the 1960s and 1970s.

When we buy into emerging economies, to take

another example, it is with the expectation that they

will enjoy the fast period of growth that often precedes

full maturity as a developed country. Britain’s

‘Golden Age’ was in the nineteenth century, Japan’s

in the third quarter of the 20th century, China’s is

taking place now. Similarly in real estate we look

well ahead. In part of our portfolio, for example, we

favour investing in world cities such as London, New

York and Tokyo. We think they will remain magnets

for talented people and businesses for a long time.

Even in the case of our rural estates, we are prepared

to hold land for several generations in the

anticipation that opportunities will come through.

Not only do we invest long term, but we distribute

the return we receive from our funds on the

same basis. We ask our actuaries to calculate

how much can be made available to the wider

Church after meeting our pension commitments

without impairing the ability of the fund to

maintain its value in real terms over time. In

other words, in making their distributions the

Church Commissioners do not give advantage to

current Church members at the expense of future

generations. Thus investment policy and distribution

policy are aligned, both looking ahead to the far

horizon.

This long term approach means, for instance, that

in assessing the current banking crisis we have to

consider not only what effect it may have on our

holdings of financial and other shares but also how

it might influence public opinion and, as a result,

the attitude of governments. The Commissioners

manage their funds within a framework of market

capitalism or super-capitalism as it is sometimes

called. The question is whether we should expect

that the resolution of the banking crisis will change

this context. By market capitalism is meant the

world of hedge funds, of private equity where large

enterprises come under the control of small groups

of investors, of huge sums of money moving from

one investment to another. For since the second

half of the 1980s, financial markets have been much

less regulated than they were between 1945 and,

say, 1985. Only the supervision of a limited class of

banking and insurance activities for the purposes of

capital adequacy has been maintained. And while

this freedom has made possible an immense amount

of innovation in financial markets which in turn has

contributed to the steady growth of the past fifteen

years, there have also been abuses. As I write, the

fear is growing that the recklessness of banks and

other financial institutions with regard to risk may

have been on a sufficient scale to plunge the world

into recession.

At the same time, it is beginning to be perceived that

market capitalism, alongside its many virtues, has

disadvantages that were present before the banking

crisis and will last beyond it. Its development has

been accompanied by a growing inequality of

incomes. The gap between the rich and the poor

has widened in Britain despite Government’s best

efforts to reduce the difference. Across the Atlantic,

a recent study showed that not since the 1920s

have Americans experienced such inequality of

income. A second unwelcome feature has been a


3

heightened sense of economic insecurity. You see

this at all levels of the jobs market, from the board

room to the shop floor. Even though aggregate

employment is at a high level, few people feel safe

in their position. Likewise the residential property

market engenders fear. Either it is rising quickly

and doubts multiply concerning the ability of young

people to accumulate enough cash to make their first

purchase. Or it starts to decline and raises economic

concerns.

This is the context, full of doubt and uncertainty, in

which the Commissioners’ funds are managed.

I believe our position is prudent. We ourselves have

no borrowings at present, though we invest in some

companies and some property partnerships that

have. Our assets are well spread between sectors

and countries. We employ a range of investment

management firms with varying styles. While we

cannot escape storms, we will survive them.

Andreas Whittam Smith

First Church Estates Commissioner

17 April 2008

Investment

in new

opportunities

We are looking to

extend our holdings

beyond the UK

commercial property

market. Chief

Surveyor Joseph

Cannon says ‘Our

purchase of a stake in

a Manhattan-based

residential property

fund has produced

strong returns in 2007

and will contribute to

the future long-term

strength and diversity

of our fund.’


4

W

ho

we are and what we do

Origins and purpose

The Church Commissioners’ mission is to support

the Church of England’s ministry, particularly in

areas of need and opportunity.

That mission derives from our two founding bodies.

One is Queen Anne’s Bounty, a charity founded in

1704 to supplement the incomes of poor clergy and

improve their housing in what was then largely a

rural Church. The Ecclesiastical Commissioners,

our other ‘parent’, were endowed by Parliament

with some of the estates belonging to bishops

and cathedral chapters and charged with using

the income to fund the extension of the Church’s

ministry into new urban areas. Their role, in the

words of an 1840 Act, was to make ‘additional

provision for the cure of souls in parishes where

such assistance is most required’.

With the two bodies’ amalgamation in 1948, the new

Church Commissioners inherited the assets and

responsibilities of both. Their duty to pay ‘particular

regard’ to the obligation quoted above lives on in

the National Institutions Measure of 1998, which

created the Archbishops’ Council to co-ordinate the

Church of England’s policy and administrative work

and defined its relationship with the other national

Church bodies.

Our goal today, therefore, is two-fold: to use our

resources to sustain and extend the Church’s

ministry. That aim has guided us in 2007.

Internal organisation and

governance

The 33 Church Commissioners at the start of the

current year are listed at the back of this report. Six

of them are holders of high state office, including

the Prime Minister, Home Secretary and Speakers

of both Houses of Parliament, and receive regular

invitations to the Commissioners’ annual general

meeting in June. The other 27 make up the Board of

Governors and, along with some external members,

are further organised into six committees whose

areas of responsibility are also set out at the back

of the report. Members’ attendance throughout the

year is shown in the table opposite.

The Management Advisory Committee has special

responsibility for management and appointment

matters and advises the Board of Governors. All its

members are governors. In 2007 the committee did

not meet but conducted its business by

correspondence. As part of our ongoing attention to

governance, the future role of this committee will be

considered in the round at the governors’ awayday

in spring 2008.

The statutory Audit Committee, which includes

external members, examines our business and risk

management activity, appoints the external auditors

and considers internal audit reviews of departmental

processes. Each meeting of the Assets Committee

was attended by an Audit Committee member as

observer. The Audit Committee has reviewed the

Commissioners’ annual financial statements and

recommended their approval.

Key business risks potentially facing the Commissioners

are reviewed annually. The 2007 review enabled the

Board of Governors and the Assets Committee, and

other committees reviewing relevant sections of the

risk register, to satisfy themselves that effective

control systems remain in place.


The Church Commissioners for EnglandAnnual Report 2007 who are we and what we do.

5

We regularly review the appointment of all our

professional advisers. Upon review, we ended our

UK equities fund management contract with

Barclays Global Investors, appointed Pareto

Investment Management to handle our new

currency hedging programme and reappointed

global equities fund managers Capital International

and smaller companies specialists T Rowe Price

(US) and Aberforth Partners (UK). On the property

side, we appointed DTZ as valuers for the urban/

residential portfolio and reappointed Savills as

valuers and strategic advisers for the rural portfolio.

In early 2008 we appointed Strutt & Parker as

managers for the southern element of the rural

property portfolio.

Trustees and staff

Governors

Governors reflect a mix of talent and expertise.

Drawing effectively on that mix is essential to

ensuring that they are in the best possible position

to provide strategic direction for all aspects of

the Commissioners’ work. New governors and

committee members receive individually-tailored

induction into the work and practices of the

organisation. All governors receive a copy of our

handbook which outlines their responsibilities and

includes policies on procedures such as handling

conflicts of interest. Building on the trustee training

programme developed in 2006, we are planning a

governors’ awayday in the first half of 2008. Based

on the theme of governance, it will aim to explore

further issues around trusteeship and promote

effective co-operation.

In September, the Bishop of Worcester and the

Dean of Wakefield stepped down from their

responsibilities as Commissioners upon retirement.

A Commissioner since 1999 and a member of

the Assets Committee, the bishop was strongly

committed to the ethical dimension of the

Commissioners’ work. He will be much missed.

The dean had been a Commissioner and member of

the Bishoprics & Cathedrals Committee since 2004

and, more recently, of the Management Advisory

Committee. His pragmatic business sense and

infectious enthusiasm were real assets in our work.

Commissioners’ and non-Commissioners’ attendance

at Board and committee meetings in 2007

Board / Committee

(number of meetings)

Archbishop of Canterbury

(5) Board

(7) Assets

(5) Audit

(7) Bishoprics & Cathedrals

(11) Pastoral

The Archbishop of Canterbury chairs the annual

general meeting. By arrangement, he did not attend

the Board of Governors’ meetings in 2007.

Archbishop of York 1 - - - - -

Mr A Whittam Smith * † 5 6 - - - -

Sir Stuart Bell 3 1 - - - -

Mr T E H Walker 5 - - 7 9 5

Bishop of Bristol a 0 0 - - - -

Bishop of Hulme 4 - - 7 - 1 b

Bishop of London 5 - - - - -

Bishop of Peterborough 3 - - 6 5 -

Bishop of Worcester c 4 5 - - - -

Dean of Bristol 5 - - 7 - -

Dean of Truro d 1 - - - 8 -

Dean of Wakefield c 2 - - 6 - -

The Ven R W B Atkinson 4 - - 6 - -

The Ven C N R Mansell 4 6 - - - 6

The Revd R E Harrison 4 - - - 7 -

The Revd S J Trott 3 - - - 4 2

Canon P N E Bruinvels 5 - - - 8 -

Canon E C Paver 3 - - - 9 -

Mr J S Brock e 1 - - - 1 -

Mr B Carroll † 3 7 - - - 4

Sir Robert Finch 4 1 f 3 - - -

Mr R Heskett * g 1 4 - - - -

Mr G D R Oldham † 5 7 - - - -

Mrs E C Osborne 5 2 f 5 - - 4

Mr P W Parker † 5 7 - 7 - -

Mr J N Sykes † 3 6 - - - -

Canon J A Spence 4 2 f 5 - - -

Mr J Wythe * 3 6 - - - -

Non-Commissioners

Bishop of Truro - - - - 6 -

The Ven J Duncan - - - - - 6

The Ven D Gerrard - - - - 8 -

The Revd Canon J M Haselock - - - 5 - -

The Revd J Swanton - - - - - 6

Mrs J M Atkinson - - - - 8 -

Ms S Bassham - - - 6 - -

Mr R C Clarke - - 2 - - -

Mr C D Daykin - - 3 - - -

Mrs H Hill - - - 7 - -

Mrs C McMullen - - - - 4 -

Mr P W Morriss - 2 f 5 - - -

Mr C J Perrett - - - - - 5

Mr C A Wilson - - - - - 6

a from 01/10/07

b from 01/11/07

c until 30/09/07

d Commissioner from 23/10/07; previously

non-Commissioner member of the Pastoral

Committee

(6) Redundant Churches

e served until June 2007

f observers on behalf of the Audit Committee

g until 22/11/07

* additionally attended the property group meetings

† additionally attended the securities group meetings

- not a member


6

A mix of talents John Wythe

FRICS is a Director of PRUPIM

where he is Head of Life Funds

and International Property.

He joined us in January 2007,

and is a member of the Board,

the Assets Committee and the

Property Group. Of his work

with these bodies he writes

‘As a Christian working in the

property investment profession

for nearly 30 years, in 2006

I felt led to offer my services

to the Commissioners. Since

my appointment, I have been

most impressed by the skill

and dedication of my fellow

Commissioners and the staff at

Church House.’

In their place, in October, the Rt Revd Mike

Hill, Bishop of Bristol, became a Commissioner

and Assets Committee member and the Dean of

Truro, already a non-Commissioner member of

the Pastoral Committee, joined the Board as a

Commissioner.

Robert Heskett retired at the end of the year.

A Commissioner since 1999, he gave valuable

service on the Assets Committee and as chair of

the Property Group. In his place the Crown has

appointed Richard Powers, Managing Director and

Co-Head of Real Estate Principalling at Goldman

Sachs, to join the Assets Committee and Board. John

Wythe now chairs the Property Group.

Chris Daykin joined the Audit Committee in April

2007, replacing Hugh Scurfield. Government

actuary for the UK from 1989 until last year and

President of the Institute of Actuaries between 1994

and 1996, he brings a wealth of experience to his

new position. Committee member John Spence has

taken on the role of committee chairman.

We are saddened to report that Commissioner

Jonathan Brock QC died in July after a short illness.

He served on the Redundant Churches Committee

and on the team handling bishops’ legal costs,

and helped to lead the Commissioners’ training

on trustee responsibilities and to develop new

governance structures for Lambeth Palace Library,

of which he was a trustee. His advice on holding

fiduciary responsibility in balance with ethical

investment policy aims was invaluable in helping to

further the Commissioners’ understanding of their

role as fund trustees. He was a generous contributor

in all he undertook for the Church and is greatly

missed. Our condolences go to his wife and family.

Staff and administration

Four staff joined our office in 2007 and eleven

left, bringing the number of staff for whom the

Commissioners were the managing employer to

77 at the end of the year (84 at the end of 2006).

We also employed 90 staff on our property estates,

including porters, cleaners and maintenance staff,

managed by property agents Cluttons.


The Church Commissioners for EnglandAnnual Report 2007 who are we and what we do.

7

We draw on common services such as information

technology and accounting, provided via the

Archbishops’ Council. 2007 saw significant

investment in preparation for developing and

installing a new financial and real-estate information

management system: a phased project that will

eventually replace some 20 stand-alone and in many

cases outdated financial IT systems across the main

national Church bodies with a single, integrated

system that has the capacity to handle present and

expected future needs in what is an ever more

complex regulatory and technological environment.

It will be capable of ongoing modification and

upgrade as required. Implementation for the

Commissioners is on schedule for January 2009.

As with any such investment, the key aim is to

strike a balance between cost control and effective

capacity to handle our ongoing business needs.

Administrative costs, the majority being staff salaries,

totalled £10.3 million, broadly the same as ten years

ago – a reduction of around one third in real terms.

In 2007 the Archbishops’ Council’s Human

Resources department supported the

Commissioners with employee consultation

relating to the review of see house management

and a number of performance management and

development cases and job evaluations.

Church Commissioners’ staff undertook training

in areas including health and safety, absence

management, public policy, fair selection

interviewing, equal opportunities awareness and

induction for new staff: 19 courses in all were held

with 69 attendances by Commissioners’ staff. Six

staff undertook sponsored professional study.

In March 2007 the Commissioners’ staff moved

into new office accommodation at Church House,

Westminster, joining Archbishops’ Council and

Pensions Board colleagues. A shared single site for

the main national Church bodies has produced

substantial cost benefits as well as modest gains such

as time saved in planning and travelling to meetings.

We are confident that continuing close co-operation

will lead to further benefits in future.

Drawing on diverse expertise

Emma Osborne has been a Church

Commissioner since 2004, serving on the

Audit and Redundant Churches committees

as well as the Board of Governors, and

works as an investment manager for the

Chubb Corporation, an American insurance

company. She says ‘I very much value

being part of a body which has a central

and historic role within the Church. It is

rewarding to work on a wide variety of issues

in a group which brings together such a

range of skills and perspective in supporting

the Church’s ministry.’


8

G

rowing

the Fund

Investment

The Commissioners aim to achieve the best possible

total return whilst maintaining an acceptable level

of risk and within their ethical investment policy

framework. We invest in a range of holdings. Most

of the fund is in equities and property which, over

the long term, are likely to achieve better returns

than bonds and cash.

The Assets Committee reviewed our long-term asset

allocation strategy, looking at the range of acceptable

exposure to each asset class and setting investment

plans for the coming year. It broadly endorsed the

existing balance of equity and property investments.

In line with agreed plans, we increased our stake

in equities and global property funds, and reduced

exposure to the let land, residential and value-linked

loan portfolios. We reduced our cash holdings by

less than originally planned, as the volatility in real

asset markets increased the advantages of greater

cash liquidity.

In 2008 we will invest further in private equity and

global indirect property funds, provided we find

satisfactory opportunities. We will look at setting up

a global tactical asset allocation mandate. We plan to

finance new investment by reducing cash holdings

and making selective sales of land and residential

property. These plans will stay under review as we

respond to the changing market environment.

Sound fund management

Looking after the Commissioners’

£3 bn+ securities portfolio

involves ensuring that there is an

appropriate mix in fund management

arrangements. Some mandates are

for UK equities only, others for global

equities. There is a mix between active

and passive management. There

are holdings in long-established,

major companies but these are

complemented by exposure to

smaller companies with greater

growth potential in the UK, Europe

and the USA. Chief Investment

Officer Mark Chaloner says ‘It’s the

overall balance of the approach that

is crucial. We keep both the strategy

and the individual management

arrangements under close scrutiny

and regular review.’


The Church Commissioners for EnglandAnnual Report 2007 GROWING THE FUND .

9

Fund performance highlights

Economic background

The world economy grew strongly in 2007, particularly

in Asia and other rapidly developing regions, though

with some slowing during the second half of the

year. The US economy was notably weaker, reflecting

the difficulties in its housing market and relatively

subdued consumer expenditure. The UK and major

continental European economies were relatively

resilient. For much of the year, sterling was firm

against other major currencies but weakened sharply

towards the year end, particularly against the euro.

Stock markets in general performed well in the first

half of the year but were weaker and more volatile

in the second half, reflecting the well-publicised

problems faced by many financial institutions and

fears of an impending credit crunch. Developed

government bond markets weakened in the spring

but benefited from their safe haven status later in

the year and delivered positive returns over the year

as a whole. Property markets, after a strong start,

weakened in the latter part of the year.

Performance highlights

Our long term aim is to achieve an average total

return (income and capital gains) of at least 5%

above inflation. Over the past ten years the total

return from our fund has averaged 9.5% per

annum compared with our long term objective of

7.8% per annum, and with 7.1% per annum from

the average fund in the WM All Funds universe 1 .

This outperformance, over ten years, equates to

£37 million more in Commissioners’ distributions

to the Church each year than would have been

possible on the basis only of industry-average fund

performance. The stock exchange and property

management firms we employ are also reviewed

regularly against performance targets.

In 2007 the total return on our assets was 9.4%. This

was usefully ahead of our performance target of 9.0%

and the 7.0% return from the average fund in the

WM All Funds universe. Strong performance from the

property portfolio was the major positive contributor,

but all our main asset classes generated positive

returns. During the year and over the longer term, as

the tables on page 11 show, the balance of asset types

within the fund and the strength of the Commissioners’

stock selection have both contributed to these results.

1. An index made up of over 230 large UK pension funds and widely used as a comparative

performance measure.

6,000

5,000

4,000

3,000

2,000

20

15

10

5

0

Church Commissioners’ total returns per annum

against an independent comparator (percentage)

9.5%

7.1%

7.8%

14.5%

Legal & General Ltd:

one of our UK securities

fund managers

»

Church Commissioners’ performance since 1997

compared with a fund achieving returns in line with

the WM All Funds universe (£million)

1997

1998

1999

2000

Church Commissioners

WM All Funds universe

2001

10 years 1998-2007 5 years 2003-2007 1 year 2007

Church Commissioners’ total assets

WM All Funds universe

Minimum return target

2002

13.1%

2003

8.4%

2004

9.4%

2005

2006 2007

7.0%

9.0%


10

.GROWING THE FUND The Church Commissioners for EnglandAnnual Report 2007

80

Strategic asset allocation (percentage)

Securities and cash

UK equities

70

60

50

40

30

20

10

0

50-75%

62%

Equities

2-8%

Alternative

securities

1% allocation

2007 asset allocation %

Strategic range %

2-10%

5%

Bonds

and cash

12-17%

16%

Urban

commercial

and

residential

3-5%

6%

Rural let

land

1-4%

3%

Strategic

land

4-7%

7%

Global

indirect

The UK stock market delivered a modest positive

return in 2007 with the FTSE All-Share index

generating a total return of 5.3%. The differences

in returns from sectors and individual stocks were

very marked. Mining and natural resources were

exceptionally firm, reflecting higher commodity

prices. Cash-generating companies, notably

tobacco and food manufacturing, also fared well.

Financial stocks generally had a poor year. Larger

capitalisation stocks mainly fared better than their

smaller counterparts.

Our consolidated UK equities portfolios, including

cash held by the managers, achieved a return of

3.1%, lagging the UK stock market. There were

two key reasons for the underperformance. First,

most of the UK equities are managed in an indextracking

portfolio that complies with our ethical

investment policy, and the negative impact of ethical

investment policy restrictions was an unusually high

1.3% in 2007, reflecting strong performances from

Asset returns, total and by class (10, 5 and 1-year)

Total returns %p.a. measured by WM 10 years 5 years 1 year

(securities) or IPD (real estate) 1998 -2007 2003 -2007 2007

Commissioners’ total assets 9.5 14.5 9.4

WM All Funds universe 7.1 13.1 7.0

Retail price index + 5% 7.8 8.4 9.0

Average earnings 4.1 4.1 3.8

Commissioners’ main asset classes

UK equities mandates 6.5 14.5 3.1

Global equities mandates 8.2 13.9 9.9

Bonds 6.6 4.5 5.1

Urban commercial 13.9 15.4 6.5

Urban residential 20.4 22.1 15.4

Rural let land 16.6 22.7 36.6

Rural strategic property 24.1 18.5 49.8

Global indirect 10.1 7.0 2.7

Value-linked loans 11.9 6.2 4.6


Out-performing

11

the market We

sold multi-tenanted

office Verulam Point,

St Albans, in 2007

for £17.9 million –

significantly above book

value. This property did

well for the fund during

several years of strong

performance in the

commercial office sector.

But as Head of Urban

Asset Management

Rosemarie Carty

explains: ‘We recognised

that the office cycle

was reaching its peak.

It was the ideal time to

sell and reinvest in new

opportunities.’

tobacco, alcoholic beverage and defence stocks.

Second, a satellite mandate produced unacceptably

weak performance and we ended the managing

firm’s contract late in the year. During the year, £125

million was allocated to the index tracking mandate

from cash resources during periods of stock market

weakness.

Global equities

International stock markets delivered positive

returns in 2007 and the FTSE All World index

generated a return of 10.8% for a sterling based

investor. Emerging markets and European stocks

posted strong returns, whilst the US and Japanese

stock markets were relatively subdued. As in the UK,

larger capitalisation stocks fared better than smaller

ones. The fall in sterling against the euro enhanced

returns for UK investors.

The Commissioners’ global equities portfolio’s

return, including cash held by the managers, was,

at 9.9%, slightly behind the benchmark return. This

was caused by underperformance by one of the

global equities fund managers. During the year, £25

million was allocated to the global equities portfolio.

Relative returns (10, 5 and 1-year)

Return relative to WM universe 10 years (1998-2007)

Asset allocation impact

0.6% per annum

Stock selection impact

1.7% per annum

Relative return

2.3% per annum

Return relative to WM universe 5 years (2003-2007)

Asset allocation impact

0.2% per annum

Stock selection impact

1.1% per annum

Relative return

1.3% per annum

Return relative to WM universe in 2007

Asset allocation impact (2.5)%

Stock selection impact 4.7%

Relative return 2.2%


12

.GROWING THE FUND The Church Commissioners for EnglandAnnual Report 2007

30

20

10

0

-10

-20

-30

Exposure to US smaller companies was reduced

and some profits were taken in emerging markets

funds. Ethical investment policy restrictions reduced

performance by 0.3%.

Alternative securities

The private equity funds portfolio performed

strongly, generating a return of 34.0%, with a

number of profitable realisations, especially in the

first half of the year. Further commitments totalling

£61.5 million were made during 2007. Additional

investments were made in specialist investment

vehicles focusing on environmental investment and

private equity.

Fixed interest

The fixed interest portfolio delivered a return of

5.3%, in line with the FTSE Actuaries UK

Government All Stocks index. Over the year,

virtually all of this portfolio remained in a passively

managed UK gilts fund managed by Legal & General.

Annual return on UK equities compared with

WM All Funds universe (percentage)

1998

1999

2000

2001

2002

2003

2004

2005

2006 2007

Currency management

By investing internationally, we have sought to

diversify our asset base and to take advantage of

wider investment opportunities than are available

in the UK. But in doing so we have increased our

exposure to foreign currencies, with the risk that

a significant fall in the value of a major foreign

currency against sterling would reduce the value of

our assets. At the end of 2007 our exposure to non

sterling denominated assets amounted to 34.9% of

the equities asset base.

After considering alternative approaches, a hedging

programme managed by Pareto Investment

Management was set up during the year. With the

sharp fall in sterling towards the end of the year,

we spent £6 million on the settlement of hedging

contracts. This was more than offset by the increase

in the sterling value of our assets denominated

in foreign currencies, which appreciated with the

weakness in sterling.

Real estate

During 2007 we reorganised the property portfolio

into four categories to reflect our management

arrangements for these holdings more closely. These

are: the urban portfolio, which comprises directly

held commercial and residential property; let farmland;

strategic land which we hold with a view to possible

development; and our global indirect property

holdings, whereby we have a stake in both specialist

UK and overseas property markets via managed

property funds.

Church Commissioners’ UK equities

WM All Funds universe UK equities

50

40

30

20

10

0

-10

-20

-30

Annual return on global equities compared with

WM All Funds universe (percentage)

1998

1999

2000

2001

2002

2003

2004

2005

2006 2007

Church Commissioners’ global equities

WM All Funds universe global equities


The Church Commissioners for EnglandAnnual Report 2007 GROWING THE FUND .

13

Urban portfolio

The urban portfolio consists of commercial and

residential investment property that we own and

manage within the UK. It performed well, generating

a total return of 9.0% compared with the relevant

investment property benchmark return (IPD) of -2.7%.

UK commercial property is widely thought to have

reached the peak of its performance cycle during 2007

and we are keen to look for opportunities elsewhere

within the property field as part of our strategy.

We took advantage of the peak in the UK market

cycle to sell two commercial properties during 2007,

at prices above book value. We sold a

Commissioners’ 1980s office development at Verulam

Point, St Albans for £17.9 million and a City office,

27-32 Old Jewry, London EC1 for £10.15 million.

We carried out programmes to improve the value of

a number of our properties during the year. At our

multi-let office building Imperial House, Kingsway,

London WC2, we refurbished three floors, made lift

improvements and achieved six new lettings. Rents

Shops in Connaught

Village, London W2 at

Christmas

»

Investing in the

community We

have continued

to reposition and

redevelop Connaught

Village on our Hyde

Park estate. Residential

Asset Manager Mark

McKeown says ‘There’s

a good community feel

and local businesses

are flourishing. The

Commissioners are

pleased to have played

a part in that.’ The 2007

Christmas festival drew

many visitors and

included carol singing

and fundraising for the

local hospital care unit.


14

Investing

in new

opportunities

A recent aim has

been to invest in

areas globally that

offer prospects of

growth in value

over the longterm

and will

contribute usefully

to the overall

performance

and balance of

our property

portfolio. In 2007

a property fund in

which we have a

stake performed

well, following

the development

of this Polish

shopping centre.

As Chief Surveyor

Joseph Cannon

says, ‘It’s good

to look overseas:

investment

abroad helps

local economies

and exposure to

different regions

and real estate

sectors is good

for the strength

of our fund going

forward.’


The Church Commissioners for EnglandAnnual Report 2007 GROWING THE FUND .

15

During the year there were three negotiated surrenders

enabling tenants who wished to exit their tenancies

to do so. Three more are under discussion for 2008

and this continues our policy of working with

tenants to find suitable solutions for all concerned.

Zlote Tarasy

shopping centre

»

Title research and mapping of our ownership of

surface estates are now substantially completed

and our voluntary first registration of the

Commissioners’ surface ownership should be

completed by the end of 2008. We also made good

progress identifying our manorial and mineral

interests across the country, with a view to ensuring

our interests and ownership are registered before the

Land Registry’s deadline for doing so.

are now being quoted at £49.50 per square foot,

having moved on from £32.00 per square foot at the

end of 2006.

We achieved a number of significant lettings which

reduced the vacancy rate on the commercial element

of the portfolio to 3.4% at the end of the year.

We have continued our reinvestment in and

rebranding strategy for Connaught Village, London

W2 which forms the core of the Hyde Park estate.

This included consolidating our retail holdings with

the acquisition of ten shops in Kendal Street for £8.5

million. We established the inaugural Connaught

Village festival and revived the Christmas festival.

These events have raised the profile of the area and

attracted local residents and new visitors. We have

successfully re-developed three properties on

Connaught Street which will increase the revenue

flowing from the portfolio.

Rural

Our let land holdings had a strong year, driven by

significant increase in land values, and produced a

total return of 36.6%. More rent reviews have been

satisfactorily concluded than in recent years, reflecting

the rise in farm profitability in certain sectors, and

further review notices have been served to enable the

Commissioners to share in strengthening farm incomes.

We sold the 1,039 hectares (2,566 acres) Dissington

estate in Northumberland in September for £18.5

million, significantly above book value.

We took the opportunity to buy Binchester Hall as

an addition to our Bishop Auckland estate. With

refurbishment for use as a hostel and base for site

visitors, it will facilitate the development of the

Roman fort known as Vinovia into what it is hoped

will become a significant tourist attraction.

80

70

60

50

40

30

20

10

0

-10

30

20

10

0

-10

Annual returns on Commissioners’ investment property

and land compared with IPD benchmark (percentage)

1998

Rural let land

Strategic land

Urban property

Global indirect

1999

2000

Total real estate

IPD comparative return

2001

2002

2003

2004

2005

2006 2007


16

Managing rural property and

adding value The Commissioners

hold some 112,000 acres of tenanted

farmland across the country. The

purchase of Binchester Hall as an

addition to our Bishop Auckland

estate helped us to facilitate the

archaeological exploration of the

Roman fort ‘Vinovia ’– built around

79AD and for some three centuries

a key staging post on the road to

Hadrian’s wall and the hub of a busy

community of farmers, craftsmen

and traders of every kind, serving the

needs of travellers and of the Roman

army stationed nearby. We worked

with the farm tenant to enable the

site’s exploration, featured on Channel

4’s Time Team programme in January

2008 and watched by some 2.2 million

viewers.

Filming the Time

Team programme

»

Strategic land

By ‘strategic’ we mean land that we hold and manage

with a view to securing planning permissions for

future development. We had a successful year

taking forward our strategic land development sites

throughout England, producing a very positive

return of 49.8%.

After a thorough consultation and planning process,

our share of the North Bersted, Bognor Regis

residential development site was sold to Persimmon.

Progress was also made on a future phase of

development west of Bersted to help meet long term

housing requirements and to further regenerate

Bognor Regis.

A major milestone was reached with the

Commissioners’ extensive greenfield portfolio at

Ashford upon the sale of phase 1 (1,100 dwellings)

to Crest Nicholson in January 2008. This will ensure

that the long-planned Cheeseman’s Green extension

to the town will start in the next few years.


The Church Commissioners for EnglandAnnual Report 2007 GROWING THE FUND .

17

In Somerset a major industrial site on the edge of

Wells was sold to David McLean Developments.

They are currently pursuing detailed planning

permission for 240,000ft 2 of employment space

which should bring welcome extra jobs to the city.

Planning permission for a southern residential

expansion of Leighton Buzzard was granted in

December and our share of the scheme has been sold

to Persimmon/Taylor Wimpey.

In December planning permission was granted for a

rail freight facility and distribution centre on

Commissioners’ land next to Exeter Airport. Exeter

Gateway, as it is known, will be the only such facility

serving Devon and Cornwall. Planning permission

provides for over 65,000m 2 of storage and

distribution space.

Global indirect portfolio

During 2007, we established a dedicated team

specialising in sourcing and managing the

Commissioners’ indirectly-held real estate

investments both in the UK - including exposure to

shopping centres, retail warehouses and student

housing - and overseas. This portfolio also includes

our loans supporting the CHARM housing scheme

(below).

We have invested further in a pan-Asian property

fund and a prime residential estate in Manhattan,

New York. Both offer the prospect of long term outperformance

relative to our holdings in the UK. Our

indirect property portfolio returned an overall 2.7%

in the year, reflecting strong overseas performance

offset by weaker UK markets.

Value-linked loans

Our property-related holdings include value-linked

housing loans under two broad headings: those to

dioceses, cathedrals and other Church bodies; and

those to the Church of England Pensions Board for

clergy retirement housing (the CHARM scheme).

The role these loans play in supporting the Church’s

work is further set out at pages 21 and 22.

As these loans form part of the investment portfolio,

we are obliged to manage them to produce an

acceptable return. The return on our value-linked

loans in 2007 was 4.6% and our financial interest in

both categories of loan at the end of 2007 totalled

£50.9 million and £128.5 million respectively. The

latter figure reflects the sale of our financial interest

in part of the retirement housing loan portfolio to

Grainger plc in early 2007, allowing us to reduce our

allocation to the UK housing market at a time when

we were concerned that prices might begin to fall.

We have recently bought a

stake in a Manhattan residential

property-based fund

»

»


18

New mission

projects One

fresh expression in

Peterborough diocese

supported by parish

mission funding is

Kettering’s Saint and

Drews, billed as ‘church

with a smile on its face’.

Its Saturday services

are timed to fit in with

family life and reflect

the enthusiasms of its

congregation, many

of whom have no

experience of church.

Popular songs have

Christian words set to

them, there is drama,

and adults as well

as children enjoy the

messy play activities.

It’s all built into the

wider picture at St

Andrew’s church,

with its well-attended

Sunday choir and

organ services, whose

motto is ‘everyone

welcome’ and whose

regular participants

share in practical

jobs like delivering

publicity cards and

praying to support the

new venture. ‘Saint

and Drews would not

be possible without

lots and lots of people

helping,’ said Nick Wills,

priest in charge.


F

unding the Church’s mission

19

How much can we spend

Context

The annual cost of running the Church of England is

just over £1 billion. Over three-quarters of its

income comes from dioceses and parishes, mostly

through members’ giving. In 2007 the Commissioners

contributed £177.8 million, around one sixth of the

total cost, to the Church’s work.

We fund pensions earned by clergy on service before

1998. We also support ministry in parishes and the

work of bishops and cathedrals. Our twin spending

aims are to fulfil our clergy pensions obligations and

to increase our financial support for other Church

purposes in line with average earnings.

Essential to these objectives, and to our capacity to

deliver our spending strategy, is our legal power,

subject to renewal by Synod and Parliament every

seven years, to spend capital for pensions purposes.

This power currently runs until the end of 2011 and

a key objective over the next two years is to achieve

its extension to 2018. During the year we began

preparations and, in February 2008, Synod’s support

enabled the draft legislation to pass to the next stage.

Our independent actuaries, Hymans Robertson

LLP, assist us in maintaining a sustainable spending

strategy. They undertake a full review of our

pension liabilities and our fund’s capacity for other

distributions every three years and carry out desktop

reviews in the intervening years.

Spending capacity in 2008-10

During the year the General Synod made some

changes to clergy pensions policy to underpin

the future of the defined benefit scheme. Of most

relevance to us was the decision that, from April

2008, post-retirement pension increases should be

in line with what is guaranteed (retail price inflation

up to 5%) without further discretionary payments

linked to stipend increases.

Taking that into account, our actuaries advised

that we could develop spending plans for 2008-

2010 on the basis that, after meeting our pension

commitments, £262.3 million would be available

for distribution for other purposes over this period.

This is £18.5 million more than would have been

the case without the change to pensions policy, and

substantially more than would have been available

on the basis of industry-average fund performance

rather than the consistently above-average results

achieved by our fund. Their annual update of the

fund as at 31 December 2007 showed that the

proportion of the fund earmarked for pensions had

reduced to 28.7% and that planned distributions for

2008-2010 remained affordable.

We have a general fund into which all investment

income is paid and from which we fund all

expenditure, which includes transfers from

endowment capital to fund some clergy pensions

expenditure. A reserve of £10 million on the general

fund is held at the year end to enable us to meet

spending commitments before income is received.

All other reserves are held as endowment capital.

» Kettering’s family-oriented

Saint and Drews attracts some

150 children and adults per

week to its early Saturday

evening service


20

.FUNDING THE CHURCH’S MISSION The Church Commissioners for EnglandAnnual Report 2007


The Commissioners’

support per diocese

excluding clergy pensions

and national costs























Support per diocese as shown

in the table on page 57. The

Commissioners also support

the bishops’ ministry in the

Diocese in Europe.





























During 2007, with the Archbishops’ Council,

the House of Bishops and other stakeholders, we

developed spending plans for the next triennium. A

key outcome of these discussions was the aspiration

to increase our three main grant categories –

ministry support for low-income dioceses, mission

development funding and grants to cathedrals –

annually in line with forecast average earnings until

2010. It was also decided to make £7.25 million

available for investment in areas of new housing

and other development. Working with the Council’s

mission and stewardship staff, we organised an interdiocesan

conference on this topic at Church House,

Westminster in the autumn.

Parish ministry and mission

Our payments for parish mission and ministry

support in 2007 totalled £32.9 million, £32.4 million

of which was distributed via the Archbishops’

Council. The remaining £0.5 million represents

time-limited payments directly to clergy.

Of the £32.4 million, the Council distributed

£27.0 million between dioceses, mainly to support

ministry and mission in areas of need. Dioceses

certify annually that they have used this money to

assist parishes least able to meet their ministry costs.

In 2007, 21 dioceses each received grants of over

£0.5 million with 14 dioceses receiving none.


The Church Commissioners for EnglandAnnual Report 2007 FUNDING THE CHURCH’S MISSION.

21

It distributed a further £4.5 million between

dioceses as parish mission funding. This money

aims to help dioceses promote new and innovative

projects, and links into the Church of England’s

fresh expressions agenda. A report is made to the

General Synod each year on the variety of ways in

which dioceses have used this money. The Council

used a further £0.8 million to raise its grant to the

Church Urban Fund to £1.0 million, as part of its

agreement to put £3 million towards the Fund’s

national fundraising campaign over 2006-09. The

Fund will distribute this money as grants for specific

projects. The Council applied the remaining £0.1

million to its youth evangelism fund.

Clergy payroll

The Commissioners are responsible for ensuring

that the Church of England’s 18,000 serving and

retired clergy are paid accurately and promptly each

month. We also monitor changes to the various

statutory systems such as PAYE tax. During 2007,

we were concerned that a proposed change in the

law, extending the tax charge on benefits-in-kind

to pensioners, would have impacted unfairly on

our payees. We therefore took part in discussions

with the Treasury, as a result of which additional

safeguards for clergy were agreed.

Housing loans

We make value-linked loans to dioceses to assist

with housing curates, other non-incumbent

clergy and clergy spouses whose marriages have

broken down. We hold a share in the equity of the

properties purchased. In 2007 we advanced loans

of £0.5 million (£0.6 million in 2006) in respect

of seven properties. £4.6 million in respect of 38

properties was repaid. At the end of 2007, a sum of

£50.9 million (including capital appreciation) was

outstanding in respect of loans for 386 properties.

We also advanced loans to dioceses of £2.4 million

(2006: £0.7 million) at variable rates of interest to

help finance parsonage housing projects.

Car loans

At the end of the year 1,682 clergy had car loans

with us with a total value of £6.1 million (£6.6 million

in 2006). We charge interest at 5% per annum on the

amount borrowed. In 2007 new loans of £3.0 million

were granted and repayments totalled £3.5 million.

100

80

60

40

20

0

The Commissioners’ support for the Church in 2007

(£million)

Clergy

pensions

Parish mission

and ministry

support

Bishops Cathedrals Other costs

Non-selective expenditure

Targeted according to financial need

Clergy pensions 105.5

105.5

Parish mission and ministry support

Selective grants to lower-income dioceses 26.8

Parish mission funding 4.5

Church Urban Fund 0.8

Youth evangelism fund 0.1

Other grants 0.2

Non-selective 0.5

32.9

Bishops

Stipends 5.0

Housing and office premises 7.9

Office and working costs 12.0

24.9

Cathedrals

Stipends 4.2

Grants towards staff costs 2.6

6.8

Other costs

Commissioners’ administrative

and restructuring costs 6.1

Repairs, maintenance and rent of

administrative offices 0.5

Support for other Church bodies 0.2

Church buildings 0.9

7.7

Total 177.8

Regular = non-selective

Italic = targeted on financial need


22

Shrinking the Footprint Offering an

energy-efficient alternative for bishops’

official car travel plays a small part

in reducing the Church’s use of nonrenewable

resources. In 2007 we provided

a hybrid Honda Civic for Stephen Cottrell,

Bishop of Reading, pictured here with

account manager Carol Haines of Hitachi.

He says ‘One way or another we are

going to have to find ways of consuming

less and living differently. Choosing the

Honda hybrid car seemed like an obvious

and easy way to make a small difference.

Its battery assisted engine is more fuel

efficient than other cars and the damage

it does to the environment is slightly less.

We need to go much further, and this is

an area where the Church needs to take

a lead, but every long journey is made of

hundreds of small steps. This seemed like

a good one.’

Supporting clergy in retirement

Clergy pensions

The Commissioners fund all clergy pensions earned

on service before 1998. In 2007 our total spending

on pension benefits for clergy and spouses’ and

dependants’ pensions was £105.5 million, an

increase of £2.8 million from 2006. This reflected

a 3.0% increase in basic pension from April

2007, matching the 2006 increase in the national

minimum stipend.

Pensions earned on service from 1998 onwards

are paid from a contributory scheme administered

by the Church of England Pensions Board and

largely funded, via dioceses, by Church members.

The Commissioners pay the contributions for

those bishops and cathedral clergy whose stipends

they fund. We engaged with the Church-wide

consultation process on pensions strategy as the

Church worked towards its decisions on future

clergy pensions policy at the July 2007 Synod.

Retirement housing

We provide a large share of the capital required for

the Church’s Housing Assistance for the Retired

Ministry scheme (CHARM) administered by the

Pensions Board. Clergy who are retiring, or are

within three years of the normal pension age, may

apply for a value-linked loan at an initial interest rate

of 4% to assist with their purchase of a property for

their retirement. Rental property is also available to

those who retire with little capital of their own.

In 2007 we advanced £7.0 million for 57 new

CHARM loans. A total of £12.5 million for 80

loans was repaid. The scheme now provides almost

2,700 properties to house retired clergy and their

spouses, of which we originally funded just over

2,200, although we sold our financial interest in

approximately 1,200 of these loans during the year.

This step has reduced our commitment to the UK

housing market to a more acceptable level and

allowed reinvestment elsewhere, while enabling the

Pensions Board and retired clergy to continue to

benefit from the scheme. During the year we also

agreed to increase the maximum loan level for the

schemes and to review our assistance in mid-2010.


The Church Commissioners for EnglandAnnual Report 2007 FUNDING THE CHURCH’S MISSION.

23

Looking to the longer term, throughout 2007 the

Church’s review of clergy retirement housing has

gone forward, and Commissioners’ staff have been

part of that process. The review’s initial report and

package of suggested options are currently out to

consultation, and the Commissioners look forward

to sharing in the development of the Church’s future

thinking and policy on facilitating the clergy’s access

to housing in retirement.

Bishops and cathedrals

The Commissioners meet bishops’ stipends and

pension contributions, and those of the deans

and two residentiary canons at each cathedral in

England. In 2007 these payments totalled £5.0

million for 113 bishops and £4.2 million for 124

cathedral clergy.

In addition, we provide other funding to support the

work of bishops and cathedrals in their leadership

roles in the Church of England’s ministry.

Global budgets

Grants for bishops’ support staff, office and working

costs in 2007 totalled £12.0 million. During the

year we worked towards the introduction of a new

budgeting system for these grants that took effect at

the start of 2008. ‘Global budgets’ will reduce day-today

management by the Bishoprics and Cathedrals

department, giving bishops more flexibility

and autonomy in their spending and budgeting

decisions, but with the continuing benefit of a

Shanine Meadowcroft,

estate worker at Oldham’s

Limeside Park

»

New mission projects Community

development worker Shanine Meadowcroft,

helped by mission funding via Manchester

diocese, is based at Oldham’s Limeside

Park estate. Working for better facilities for

residents, she has helped to secure funds

to convert a hall to an internet café, and for

park improvements to enable regular use for

sports. The Limeside Park festival (pictured)

in August brought residents together for

a host of events: a Chinese dragon carried

by 50 children, bands, Morris dancers,

a dancing and talent show, stalls, face

painting, beer tent and refreshments, a mini

railway, and much more. The Revd David

Hawthorne of St Margaret’s, Hollinwood,

said ‘This festival is about bringing the

communities of Hollinwood and Limeside

together.’ ‘It’s been really well supported by

local businesses’, added Shanine.


24

Targeting funds

effectively How to distribute

£2.6 million in grants for

cathedrals’ lay staff and

administrative costs Christopher

Lewis, Dean of Christ Church,

Oxford writes: ‘One might

expect street fighting between

cathedrals, adjudicated by

haggard officials from the

Commissioners. But no: there

is one amicable meeting each

year between the Association

of English Cathedrals and the

Commissioners at which the

grants are agreed. The system

is based on the ‘unrestricted

income’ of each cathedral.

The eight best-funded

cathedrals get nothing, the

middle-range, often with

enormous commitments and

few resources, are helped to

the tune of £55,000 and the

least well off receive around

three times that amount. The

grants support an innovative

and outward-facing part of the

Church’s mission’. One practical

expression of that mission is

the week-long Feast of Title

in Newcastle during which St

Nicholas Cathedral hosts visits by

local school children and every

year St Nicholas introduces the

children to some of his friends.

Here, he’s trying to wake up

Jack Tar, a sailor on Admiral

Lord Collingwood’s flagship.

(Collingwood was born a stone’s

throw away - and won the

victory at Trafalgar after Nelson’s

death.) Jack tells the children

about life aboard ship.


The Church Commissioners for EnglandAnnual Report 2007 FUNDING THE CHURCH’S MISSION.

25

fewest financial resources, goes to help them to ‘be

cathedrals’ - responding to the many expectations of

Church and world.

St Nicholas

guides children around

Newcastle cathedral and

tells its story

»

»

relationship with a central department providing

the strategic oversight to benchmark spending, and

offering savings through economies of scale.

To facilitate the introduction of the new system, the

Bishoprics and Cathedrals team carried out

consultations and training sessions with bishops’ staff

at a number of central locations around the country.

Bishops’ staff were able to share experiences and ideas,

and they have since asked that we look for ways to

promote and support similar networks in the future.

It is anticipated that the development and

automation of new supporting systems will

streamline and improve data collection and analysis,

free up more time for ongoing training and support

of bishops’ staff, and help pave the way for the

introduction of the new accounting system to the

Commissioners after 2008.

Bishops’ housing and office premises

We provide and maintain for each diocesan bishop a

house that will be suitable as a base for his ministry,

a workplace and a family home. We spent £7.9

million on these properties’ upkeep in 2007. The

expenditure included repairs and maintenance,

running expenses and furnishings, and is offset by

income from lettings of surplus areas.

Follow up work from the see house review has been

at the centre of the portfolio’s management for 2007.

Reviews were undertaken at eleven houses and new

houses purchased for the Bishops of Worcester and

Bristol following their former houses being deemed

unsuitable.

Alteration works continue at the house for Ripon &

Leeds and the Archbishop’s residence in York. Major

renovation and refurbishments to the Old Palace,

Canterbury, plus necessary remedial work following

the discovery of asbestos throughout the building,

were completed and it is hoped the Palace will play a

valuable role in the Archbishop’s hosting of the

Lambeth Conference which is to be held in 2008.

2007 saw the first formal valuation of see heirlooms

throughout the portfolio in order to identify clearly

the properties in our ownership and to highlight

their condition. The survey was conducted by Gurr

Johns and involved reviewing the contents of all the

see houses under the Commissioners’ management.

Cars

We were pleased in 2007 to increase the number

of hybrid cars driven by bishops from seven to 18,

reducing CO 2

emissions and thus the resultant

impact on the environment. This was facilitated

by our negotiation with Toyota that enabled us to

offer the Prius to those bishops who chose to drive a

hybrid car, as well as the hybrid Honda Civic.

Support for cathedrals

As well as meeting the stipends of some cathedral

clergy, the 1999 Cathedrals Measure, section 23

enables the Commissioners to make grants towards

the cost of employing staff at 42 cathedrals. The £2.6

million in grants, targeted on those cathedrals with


26

A

dapting local Church

structures for mission

Sunderland Minster

»

Pastoral administration

The Commissioners’ role in pastoral administration

underpins the Church’s work across the country

by helping to adapt local structures to changing

pastoral and mission needs.

The Dioceses, Pastoral and Mission Measure,

which received Royal Assent in 2007, represents

a significant new chapter in our work. The most

substantial piece of Church legislation for over

twenty years, it gives effect to the recommendations

of the Toyne report A Measure for Measures: In

Mission and Ministry (2004) and will support a

mixed economy of fresh expressions of church

alongside traditional parish structures. We look

forward to facilitating and participating in its

successful implementation.

During 2007 we held a further nine diocesan

regional seminars in partnership with the Mission

and Public Affairs Division of the Archbishops’

Council. These explored the ‘mixed economy’ and

other topics involving reorganisation and redundant

churches. We also responded to several additional

requests to address diocesan and other gatherings.

For 2008 we are arranging regional conferences to

deal with the changes to the Pastoral Measure 1983

and other provisions in the new legislation. Written

guidance and training will also be provided to assist

dioceses and the wider Church, particularly where

responsibilities are being devolved. We expect a busy

and challenging year as the new arrangements come

into force.

Following consultation with dioceses and others we

have reviewed our procedures, introduced in 2005,

for the public hearing of representations in respect

of pastoral reorganisation and proposals for the

future of church buildings closed for worship. These

have been generally well received and we will be

publishing the outcome of the review early in 2008.

Pastoral reorganisation

Under the Pastoral Measure we draft and publish

schemes or orders to give effect to diocesan

proposals for pastoral reorganisation. In 2007, we

received 162 new cases (156 in 2006) and brought

forward 95 from the previous year. We completed

155 cases, resulting in a net reduction of 61 benefices

and 40 parishes. 102 cases were carried forward at

the end of the year. During the year 29 churches

were declared closed for regular public worship.

The Church of England maintains more than 16,000

churches across the country, with new churches and

places of worship periodically built and opened as

needs and opportunities for the Church’s ministry

arise. Responding to such needs is principally a

matter for dioceses, where the planting of new

churches continues. Some 5,000 new congregations,

or ‘fresh expressions’ of church, have been created

since 2000 alongside traditional churches or are

being planned.


Supporting

27

diverse models of

Church Sunderland

Minster was

established as an

extra-parochial place

in 2007 by a pastoral

scheme facilitated by

the Commissioners.

It will no longer have

a defined parish.

Instead its team,

which includes

chaplains with

the University and

with Northumbria

Industrial Mission,

will serve a wide

area and range

of communities

within and around

Sunderland. Local

historian Geoffrey

Milburn has written

of ‘the model of the

Middle Ages, before

the country was

covered by a network

of parishes and parish

churches, in which

minster churches

were bases for

Christian missionary

work.’ Inspired by

just such a vision, the

Minster will strive

to be an icon for the

whole city and a

focus of unity for the

spiritual well-being of

its people.


28

.Adapting local Church structures for mission The Church Commissioners for EnglandAnnual Report 2007

30

25

20

15

10

5

0

Pastoral representation cases dealt with 2003-2007

21

1

1

1

7

1

10

Former church of Peterborough

St Barnabas, now home to the

Family Welfare Association

»

19

4

3

12

2003 2004 2005 2006 2007

Scheme to proceed

Draft amended

Scheme not to proceed

24

1

2

1

8

12

27

1

3

1

19

1

2

Draft withdrawn

Representation withdrawn

Draft referred back to bishop

33

2

2

9

1

19

Clergy housing and glebe

Transactions involving parsonages and glebe

land which do not meet certain criteria, or where

there are objections, need to be referred to us. In

2007, other than objection cases, no (one in 2006)

parsonage purchases, one (five) parsonage sales,

one (no) parsonage demolition and four (six) glebe

sales came to us and all, except one glebe sale, were

approved. We approved 22 (13) miscellaneous

transactions, mostly releases of covenants.

Our quasi-judicial role

Of the schemes and orders published during the year,

41 (or 24%) drew objections. The Pastoral Committee

considered 22 cases, in 16 of which representors

attended and spoke to the committee. It decided in 19

cases that the scheme or order should proceed and

that one scheme should not. Two others were referred

back to the bishop to consider further. Eleven cases

were resolved without adjudication, in nine of which

the representations were withdrawn following

correspondence or discussion at diocesan level and

in two of which the diocese agreed to amendments

to take account of the representations. There were three

applications to the Judicial Committee of the Privy

Council for leave to appeal against our decision. One

was refused and two were outstanding at the end of

the year. We received representations against two

glebe and parsonage proposals and considered four,

including three cases carried forward from 2006, in

all of which the objectors attended and spoke at the

committee meeting. Two were allowed to proceed,

one was not and one was referred back to the

diocese for further consideration. One case was

carried forward at the end of the year.

Church buildings closed for

regular public worship

The Commissioners decide the future of closed

church buildings and work closely with dioceses to

find suitable alternative uses. In the minority of

cases where the search for a new use proves

unsuccessful we normally have to decide, upon

advice from our statutory advisers, between

preservation by the Churches Conservation Trust or

demolition. With the Government we co-sponsor

the Churches Conservation Trust (70% state-funded

and 30% Church-funded) which preserves, in the

interests of the nation and the Church of England,

outstanding redundant churches for which no

suitable alternative use can be found.


The Church Commissioners for EnglandAnnual Report 2007 Adapting local Church structures for mission.

29

Contributing to the Church’s mission

2007 saw the highest level of sale proceeds from the

disposal of closed churches and sites in a decade.

This amounted to just under £3 million, bringing to

£40.8 million the amount raised since 1969. Of this

total we have passed nearly £32 million to dioceses

for the work of the living Church, £8.9 million

towards financing the Churches Conservation Trust

and £450,000 to the redundant churches temporary

maintenance account which helps Diocesan Boards

of Finance with the cost of repairing and insuring

these buildings while their future is under

consideration.

Progress in 2007

29 schemes determining the future of closed

churches were made in 2007 (31 in 2006), including

twelve that amended earlier schemes. 23 provided

for new uses, five for demolition and one for

preservation by the Churches Conservation Trust.

During 2007 the Redundant Churches Committee

considered representations against provisions

for the future of closed church buildings in three

cases, deciding in each case that the scheme should

continue.

Much of our role lies in facilitating diocesan efforts

to secure the future of these buildings. Following

staff restructuring during the year we are now working

towards providing a specialist professional team

deployed locally to assist dioceses in seeking new uses

for closed churches. As a starting point we have

appointed an associate planner based in Leeds. On a

case by case basis, much of our work takes place before

or after the scheme-making process and there were 265

current cases at the year end (268 at the end of 2006).

Committee visit to the dioceses of

Ripon & Leeds and York

In June the Redundant Churches Committee,

together with diocesan colleagues and others, visited

nine redundant or potentially redundant churches

in the diocese of Ripon & Leeds and eight in York,

seeing a number of imaginative new uses, often

providing continuing amenities for the wider local

community. In other cases it was apparent that the

need to prove by a period of extensive marketing

that no alternative community use was possible,

even for a remote church without a population

big enough to sustain it, could cause significant

The future of closed church buildings since 1969, when the

Pastoral Measure came into effect, and in the last five years

1969-2007 2003-07

Alternative use 1007 81

Private and school chapels 27 2

Arts, crafts, music and drama 38 2

Storage 35 -

Museums and educational 42 2

Miscellaneous 44 1

Light industry, office, shopping 64 7

Worship by other Christian bodies 130 11

Monuments 141 4

Residential 233 29

Civic, cultural or community 253 24

Demolition and site disposal 382 22

Housing associations 71 2

Local authorities 49 1

Additions to churchyards 47 1

New places of worship 67 7

Other community purposes 25 2

Other purchasers 116 5

Not yet decided 7 4

Preservation 352 11

Churches Conservation Trust 341 10

Department of the Environment 4 -

Diocesan Boards of Finance 7 1

Total redundant churches dealt with 1741 115

Alternative use

Demolition and site disposal

Preservation

1007

58% 71%

382

22% 19%

352

81

22

11

20% 10%


30

Promoting

imaginative

re-use of buildings

St Barnabas Church

was closed for worship

in 2004, sold in 2006

to Peterborough City

Council, and renovated

and remodelled

through a £1 million

regeneration scheme.

It is now home to

the Family Welfare

Association with

subsidised childcare

facilities, pre-and

after-school clubs,

sports classes, lunch

clubs for senior citizens

and other cultural,

educational and

leisure pursuits. Family

Welfare Association

Manager Chris Akril

says ‘The new centre

has enriched our

services and has

enabled us to be more

flexible and creative in

meeting the needs of

local residents.’ Local

children took part in

the centre’s opening

event in autumn,

attended by the Mayor

and other community

figures.


The Church Commissioners for EnglandAnnual Report 2007 Adapting local Church structures for mission.

31

Less welcome was the application by the

Government of End Year Flexibility Rules to the

Churches Conservation Trust in respect of the

expenditure of resources carried forward from

previous financial years. We were particularly

concerned about the implications for the Church’s

grant and voluntary donations to the Trust

becoming subject to Treasury control. We and the

Trust continue to represent on this issue.

Family Welfare

Association opening event

with (left) a member

of the teaching staff

from the neighbouring

Gladstone Primary School

introducing the children’s

performance

»

»

delays and even endanger achieving a solution.

Our response to the white paper on Planning for

a Sustainable Future highlighted the need for a

pragmatic approach in the interest of long-term

preservation of such buildings.

The Committee also visited Harrogate St Mary, a

very large twentieth century Grade II* listed church

suffering severe structural problems and facing a

huge repair bill. Finding any use for this building

which might create sufficient value to finance

necessary repairs presents a daunting challenge.

Funding the Churches

Conservation Trust

Following a period of flat funding since 2001 for the

Churches Conservation Trust, the Department for

Culture, Media and Sport announced a modest

increase in grant in aid for 2008 to 2011, amounting

to just over £3.16 million per annum in this period.

This will mean that the Commissioners’ contribution

for the final year of the 2006 to 2009 triennial funding

order will be just under £1.36 million. Although this

slight increase is welcome it does little to reduce the

financial pressures facing the Trust and so we will

continue to work strenuously with dioceses to find

new uses where possible and also carefully manage

the flow of new vestings.


32

C

orporate responsibility

and communication

Ethical investment

In order to meet our commitments to our

beneficiaries we have a legal and moral responsibility

to obtain the best possible long-term return from

our fund. We seek to hold financial and ethical

issues together, endeavouring to maximise the

return from our assets within the context of the

Church’s teaching.

Our investment decisions are informed by the

work of the Church of England Ethical Investment

Advisory Group, and we are committed to the

group’s policy, long shared by all the main central

Church of England investment bodies. The group

was established in 1994 to develop and co-ordinate

ethical investment policy for the Commissioners,

the CBF Church of England Funds, and the Church

of England Pensions Board. In addition to these

bodies, it includes representation from the General

Synod, the Archbishops’ Council and the Mission

and Public Affairs Council. The Commissioners

are represented on the advisory group by two

non-executive voting members, one of whom must

be a clerk in holy orders, and by three senior staff

representatives. Further information can be found at

www.cofe.anglican.org/info/ethical.

Following review, we are looking to build further on

the group’s work and develop our own more specific

ethical investment policy. Ethical considerations form

part of any new decision to invest or continue to invest.

The due diligence work undertaken by staff will

always cover this aspect. This year, areas of particular

concern have included our moves to invest further

in overseas economies and our ongoing engagement

with supermarkets over farming practices and with

British Airways regarding its equal opportunities

policy. One of our fundamental principles, aside

from asset class restrictions such as armaments, is to

engage with organisations and seek to work with

‘best in class’ companies. Such ongoing

conversations enable us actively to encourage better

practice and have a voice to encourage change and

development, which disinvestment does not allow.

We invest on both a passive and active basis. We

employ fund managers to invest assets on our

behalf, but also seek to invest proactively in areas,

such as the environment, that are likely, through

an increasing awareness of their beneficial impact

on society, to enhance our long-term financial

return. We are supportive of companies that will

successfully develop their business financially in

the interests of their shareholders, and whose main

business does not conflict with our Christian witness

and values.

As substantial landowners, our long-standing

approach to property management – that of

responsible stewardship – continues to sustain

long-term financial returns. We keep in mind our

legal obligations in respect of existing tenancies and

leases when applying our ethical criteria and this,

along with our commitment to be good landlords,

strongly influences our daily management decisions.

Across our investments we seek to employ a broad

range of tools on ethical and governance issues:

from exercising our voting rights as shareholders

and discreet engagement with companies, to

disinvestment.

We avoid companies that promote pornography

or supply armaments. Separate media and defence

investment policies have been published by the

advisory group outlining the criteria used to

determine whether companies breach the Church’s

policy in these areas.

We avoid investment in any company where over

25% of group turnover relates to gambling, tobacco

and tobacco-related products, the manufacture or

licensed sale of alcoholic drinks, military equipment,

home-collected credit (doorstep lending), or human

embryonic cloning.

These exclusions apply both to our stock exchange

and property investments. Companies are

monitored according to our ethical investment

policy and, where appropriate, by developing an

ongoing dialogue and engagement with them


The Church Commissioners for EnglandAnnual Report 2007 Corporate responsibility and communication .

33

via the group. We consider disinvestment only

if a company’s activities fall outside this ethical

investment policy or if, after sustained dialogue, it

does not respond positively to our concerns.

We take seriously our responsibilities as voting

shareholders in the companies in which we invest,

and the opportunity that this gives us to express a

Church voice in matters of company policy. Our

fund managers routinely vote our shares, operating

within guidelines agreed by the Assets Committee.

In 2007, they cast votes in favour of management

on 94% of resolutions, opposed in 3% and abstained

in 3% of cases. In respect of overseas holdings, of

the voting decisions taken, 93% were in favour of

resolutions proposed and 7% against.

The environment

During the year the Commissioners joined the

Institutional Investors’ Group on Climate Change, a

forum that seeks to promote better understanding of

the implications of climate change and to encourage

companies and markets in which its members invest

to address the associated risks and opportunities. We

hold an £8.8 million stake (as at the end of 2007) in

Impax Environmental Markets Plc, an investment

trust that has focused on investment in markets for

cleaner or more efficient delivery of energy, water

and waste. We hope to invest more in this area if we

can find sufficiently attractive opportunities.

In common with our partner national Church

bodies, we share in the Church’s goal of reducing

carbon emissions through best practice in our own

office, including through installing energy-efficient

lighting and information technology. As opportunity

Shrinking the Footprint Sustainability has become the

new buzzword among developers, tenants and landlords in

the built environment. In handling the refurbishment project

at Church House, energy efficiency and waste reduction

have played an important role. Older heating systems have

been replaced with a much more efficient boiler, reducing

energy use and running costs. Ventilation is similarly

controlled. The lighting system includes low energy

bulbs and ensures that lights are on only when needed.

There are facilities in the building for recycling waste

paper, glass, ink/copier cartridges and plastics, and

we take care to dispose of electrical and hazardous

material suitably. We are working with the Carbon

Trust to evaluate our efforts and to implement

improvements in some areas of our environmental

management. Project adviser John Wallace adds

‘Our energy management system indicates how

efficiently the building is performing and enables us to

make adjustments. It is an ongoing process of assessment

and improvement.’

© Church House Publishing


34

.Corporate responsibilit y and communication The Church Commissioners for EnglandAnnual Report 2007

allows, we aim to roll out similar benefits across

the bishops’ offices that we are responsible for

resourcing. As landowners and landlords we

promote sound environmental practice where

possible.

Accountability and communication

The Commissioners are accountable to both the

Church and the State, via the General Synod and

Parliament. Both bodies are represented in the

Commissioners’ composition; both have a role in

approving Church of England legislative measures,

including those affecting our assets and duties;

and both receive copies of our annual report and

accounts.

The First and Third Church Estates Commissioners

answered eight questions at the February and July

meetings of the General Synod. Topics included

asset valuation, spending plans and the impact

of actuarial assessment, new funding for mission

initiatives, the handling of sale proceeds from closed

church buildings and our input to the Church’s

carbon footprint minimisation objectives. Synod

also debated the Commissioners’ annual report, with

the main part of the debate built around an informal

question-and-answer session that allowed for a

free exchange of views, insights and information,

and was well received by those present. We held a

fringe meeting for any Synod members to attend,

which provided a further informal opportunity for

discussion and conversation about our work.

Parliament’s interest in Church affairs remains

strong as shown by the steady stream of

parliamentary questions to the Second Church

Estates Commissioner. He answered 69 oral and

written questions in 2007 (71 in 2006). Although

question time continues to be dominated by MPs’

calls for more state funding for church repairs, a

range of other topics relating to the work of the

Commissioners (e.g. clergy pensions or cathedral

grants) or the wider Church (e.g. clergy terms of

service, stipends policy and ordination statistics)

was also covered during the year. The Second

Commissioner also steered the Dioceses, Pastoral

and Mission Measure through the Commons and

this gained Royal Assent at the end of October.

Following guidance recently published by the

Charity Commission, the staff level corporate

governance group devised a feedback procedure for

both the general public and our other stake holders.

This procedure provides a formal avenue whereby

those who deal with us can raise concerns and make

comments about how we operate in order for us to

learn and improve the service we provide.

Communication

We held three induction days for diocesan secretaries,

cathedral deans and others with an interest in our

activities and our relationship with other Church

bodies. These were attended by two deans, four

diocesan secretaries, two diocesan finance directors,

a member of the General Synod’s business committee

and the Archbishop of York’s chief of staff. The Third

Commissioner continued to visit bishops and deans

in their dioceses to discuss a range of national and

local issues of mutual interest and concern.

Throughout the year we worked closely with the

Communications Office of the Archbishops’ Council,

which provides communications support to all the

national Church institutions. Staff in the office

provided media relations support over matters

including the Commissioners’ annual financial

results, bishops’ working costs, property developments,

the sale of part of our housing loans book, the future

use of church buildings closed for worship, and

ethical investment issues ranging from fair trade to

investment in particular regions and companies.

We also draw on the communications media

promoted by the Communications Office. These

include In Review, a twice-yearly bulletin about the

work of the national Church bodies, published in the

Church press and on the web; and Communications

Update, a monthly briefing that is distributed widely

across the Church and made available via free

registration on the Church of England website. We

further developed our on-line presence at www.

cofe.anglican.org/about/churchcommissioners,

which includes the First Commissioner’s quarterly

newsletter on fund performance and related matters.

The newsletter goes to diocesan bishops, diocesan

secretaries and communications officers for wider

distribution.


Church

35

35

Commissioners

for England

Financial

Statements 2007

2009

2010

2011

The Church Commissioners for EnglandAnnual Report 2005

2012


36

Statement of responsibilities of the

Church Commissioners

Under section 11(1) of the Church Commissioners

Measure 1947 (as amended), the Church Commissioners

shall cause such accounts to be kept as may be required

for the due performance and discharge of their functions.

The Measure requires the Commissioners to keep a

general fund, to which they shall carry all income received

in respect of property and funds held by them. Subject

to section 7 of the Pensions Measure 1997 (as amended)

(which permits the Commissioners to apply capital funds

to meet the cost of clergy pensions and certain other

pensions expenditure within the period expiring on 31

December 2011), they will discharge out of the general

fund all trusts and commitments to which the income is

subject and all expenses and obligations falling upon them

in the due discharge of their functions. The balance on the

general fund is available for specified purposes.

Section 3 of the Church Commissioners Measure provides

for the business of the Commissioners (save where

required by law to be transacted by the Commissioners

in general meeting) to be transacted by a Board of

Governors and the committees constituted by or under

the Measure.

The Assets Committee has, subject to any general rules

made by the Board, an exclusive power and duty to act on

behalf of the Commissioners in all matters relating to the

management of the assets of the Commissioners. It has a

duty to recommend to the Board what sums are available

for application or distribution by the Commissioners

and what sums should be appropriated to reserve and for

investment. Before making any such recommendation it

shall obtain the advice of an actuary on the likely effect of

those recommendations on the Commissioners’ financial

position as a whole and shall have regard to that advice.

The Board, on behalf of the Commissioners, is responsible

for ensuring the financial statements are prepared for

each financial year which give a true and fair view of the

state of affairs of the Commissioners and of the group and

of the net movement in the general fund and change in

endowment capital. Subject to the requirements of the

Church Commissioners Measure, the Board has elected

to prepare the financial statements in accordance with

United Kingdom Generally Accepted Accounting Practice

(United Kingdom accounting standards, the Charities

SORP 2005 and applicable law). In preparing these

financial statements, the Board confirms that:

• suitable accounting policies have been selected and

applied consistently;

• reasonable and prudent judgements and estimates

have been made;

• the financial statements comply with all applicable

United Kingdom accounting standards and Statements

of Recommended Practice; and

• the financial statements have been prepared on the

going concern basis, which is appropriate.

The Board is responsible for keeping proper accounting

records which disclose with reasonable accuracy at

any time the financial position of the Commissioners

and of the group and to enable them to comply with

applicable law. It is also responsible for safeguarding the

Commissioners’ assets and hence for taking reasonable

steps for the prevention and detection of fraud and other

irregularities.

The Board is responsible for the maintenance and

integrity of the organisational and financial information

included on the Commissioners’ section of the Church

of England website. Legislation in the United Kingdom

governing the preparation and dissemination of

financial statements may differ from legislation in other

jurisdictions.

By order of the Board

Andreas Whittam Smith

First Church Estates Commissioner

17 April 2008


Independent auditors’ report to the Church

Commissioners for England (The Commissioners)

37

We have audited the group and parent entity financial

statements of the Commissioners for the year ended 31

December 2007 set out on pages 38 to 54, which comprise

the consolidated statement of financial activities, the

consolidated balance sheet, the balance sheet of the

Commissioners, the consolidated cashflow statement

and the related notes numbered 1 to 28. These financial

statements have been prepared under the accounting

policies set out in note 1. The accounting policy in respect

of the clergy pension obligation, and the reasons why the

Commissioners do not make provision for this obligation,

are explained in note 1(a). This report is made solely

to the Commissioners in accordance with the Church

Commissioners Measure 1947 (as amended). Our audit

work has been undertaken so that we might state those

matters we are required to state to the Commissioners in

an auditors’ report and for no other purpose. To the fullest

extent permitted by law, we do not accept or assume

responsibility to anyone other than the Commissioners

for our audit work, for this report or for the opinions we

have formed.

Respective responsibilities of Church Commissioners

and auditors

The Board of Governors’ responsibilities, on behalf of

the Commissioners, for preparing the annual report and

the financial statements in accordance with applicable

United Kingdom law and accounting standards are set

out in the Statement of Responsibilities of the Church

Commissioners, as is the Assets Committee’s responsibility

for the management of the assets. We have been

appointed as auditors under section 11 (2) of the Church

Commissioners Measure 1947. Our responsibility is to

audit the financial statements, in accordance with relevant

legal and regulatory requirements and International

Standards on Auditing (UK & Ireland).

We report to you our opinion as to whether the financial

statements give a true and fair view and are properly

prepared in accordance with the Church Commissioners

Measure 1947 (as amended). We also report to you if, in

our opinion, the Commissioners have not kept proper

accounting records or if we have not received all the

information and explanations we require for our audit.

We read the other information contained in the annual

report as described in the contents section and consider

whether it is consistent with the audited financial

statements. We consider the implications for our report

if we become aware of any apparent misstatements or

material inconsistencies with the financial statements. Our

responsibilities do not extend to any other information

outside the annual report.

Basis of audit opinion

We conducted our audit in accordance with International

Standards on Auditing (UK & Ireland) issued by the

Auditing Practices Board. An audit includes examination,

on a test basis, of evidence relevant to the amounts and

disclosures in the financial statements. It also includes an

assessment of the significant estimates and judgements

made by the Board of Governors in the preparation of

the financial statements and of whether the accounting

policies are appropriate to the circumstances of the group

and the Commissioners and are consistently applied and

adequately disclosed.

We planned and performed our audit so as to obtain all

the information and explanations which we considered

necessary in order to provide us with sufficient evidence

to give reasonable assurance that the financial statements

are free from material misstatement, whether caused

by fraud or other irregularity or error. In forming our

opinion we also evaluated the overall adequacy of

the presentation of the information in the financial

statements.

Opinion

In our opinion:

• the financial statements give a true and fair view in

accordance with UK Generally Accepted Accounting

Practice of the state of affairs of the Commissioners

and their consolidated affairs at 31 December 2007

and of the group’s incoming resources and application

of resources for the year then ended; and

• the financial statements have been properly prepared

in accordance with the Church Commissioners

Measure 1947 (as amended).

Deloitte & Touche LLP

Chartered Accountants and Registered Auditors

London, UK

17 April 2008


38

Consolidated statement of financial activities

for the year ended 31 December 2007

GENERAL FUND Notes 2007 2006

£m £m

INCOME

Investments 2,5 97.0 88.0

Investment properties 5 50.1 49.6

Mortgages and loans 3,5 5.9 8.7

Other interest 4,5 18.5 13.8

Gross income 171.5 160.1

External management costs 5 11.1 9.9

Commissioners’ management costs 5 3.7 3.3

Other property expenses 5 8.7 11.4

Interest payable 4,5 0.6 0.7

Cost of generating funds 24.1 25.3

Net income after cost of generating funds 147.4 134.8

Less proportion of net income attributed to staff pension provision 14 (2.8) (3.3)

Net income available for charitable application 144.6 131.5

CHARITABLE EXPENDITURE

Parish mission and ministry support 6 32.9 32.4

Bishops’ stipends 5.0 4.6

Bishops’ housing and office premises 7 7.9 8.6

Bishops’ office and working costs 8 12.0 11.3

Total bishops’ ministry 24.9 24.5

Cathedral clergy stipends 4.2 4.0

Grants to cathedrals 9,28 2.6 2.6

Total cathedrals’ ministry 6.8 6.6

Church buildings 10 0.9 1.3

Commissioners’ administration of national Church functions 11 2.9 2.9

Administration costs of other Church bodies 0.2 0.1

Financial provision for resigning clergy .- 0.1

Total other non-pensions charitable expenditure 4.0 4.4

Total clergy pensions 105.5 102.7

Less clergy pensions paid from endowment capital (33.2) (41.1)

Clergy pensions paid from general fund 15 72.3 61.6

Total charitable expenditure charged to the general fund 140.9 129.5

COMMISSIONERS’ OWN ADMINISTRATION COSTS

Governance 11 2.3 2.0

Restructuring costs 11 0.9 0.1

Refurbishment and repairs to Commissioners’ offices 11 0.5 (0.1)

Total Commissioners’ own administration costs 3.7 2.0

TOTAL EXPENDITURE 144.6 131.5

NET INCREASE IN GENERAL FUND FOR THE YEAR .- .-


Consolidated statement of financial activities

39

ENDOWMENT CAPITAL Notes 2007 2006

£m £m

CHARITABLE EXPENDITURE

Clergy pensions paid from endowment capital 33.2 41.1

Total charitable expenditure charged to endowment capital 33.2 41.1

OTHER RECOGNISED GAINS AND LOSSES

Investments 16 107.2 302.3

Investment properties 17 165.3 228.5

Shared and partnership property interests 18 30.8 51.9

Mortgages and loans 20 6.8 (65.7)

Foreign currency bank balances 0.1 (1.0)

Non investment fixed assets 21 36.7 5.3

Total surplus on realisation and revaluation of assets 346.9 521.3

Less proportion of surplus attributed to staff pension provision 14 (6.1) (12.8)

Net surplus on realisation and revaluation of assets 340.8 508.5

Legacies .- 0.2

Staff pension provision

- excess of actual total return over interest on liabilities 14 3.8 10.7

- actuarial surplus for the year 14 3.8 5.3

Transfers out of Church of England Pensions Scheme 15 (0.8) (0.5)

Total other capital movements 6.8 15.7

Total other recognised gains and losses 347.6 524.2

NET INCREASE IN ENDOWMENT CAPITAL FOR THE YEAR 314.4 483.1

MOVEMENTS IN FUNDS Notes General fund Endowment capital Total

2007 2006 2007 2006 2007 2006

£m £m £m £m £m £m

Consolidated and Commissioners

At 1 January 10.0 10.0 5,350.0 4,866.9 5,360.0 4,876.9

Incoming resources 5 171.5 160.1 .- .- 171.5 160.1

Cost of generating funds 5 (24.1) (25.3) .- .- (24.1) (25.3)

Charitable expenditure (140.9) (129.5) (33.2) (41.1) (174.1) (170.6)

Commissioners’ own administration costs (3.7) (2.0) .- .- (3.7) (2.0)

Total resources expended (168.7) (156.8) (33.2) (41.1) (201.9) (197.9)

Net incoming resources 2.8 3.3 (33.2) (41.1) (30.4) (37.8)

Surplus on realisation and revaluation of assets .- .- 346.9 521.3 346.9 521.3

Other capital movements (2.8) (3.3) 0.7 2.9 (2.1) (0.4)

Total other recognised gains and losses (2.8) (3.3) 347.6 524.4 344.8 520.9

Net movement .- .- 314.4 483.1 314.4 483.1

At 31 December 10.0 10.0 5,664.4 5,350.0 5,674.4 5,360.0

The incoming resources, resources expended and other

recognised gains and losses all relate to continuing operations,

none of which were acquired in the year.


40

Balance sheets

as at 31 December 2007

Consolidated

Commissioners

Notes 2007 2006 2007 2006

£m £m £m £m

FIXED ASSETS

Investments 16 3,601.6 3,349.9 3,601.6 3,349.9

Investment properties 17 1,200.8 1,134.5 1,086.7 1,011.6

Shared and partnership property interests 18 397.2 294.4 397.2 294.4

Subsidiary undertakings 19 .- .- 123.9 115.4

Mortgages and loans 20 193.9 324.5 193.9 324.5

Total investment assets 5,393.5 5,103.3 5,403.3 5,095.8

Non investment fixed assets 21 124.9 86.3 124.9 86.3

5,518.4 5,189.6 5,528.2 5,182.1

CURRENT ASSETS

Debtors 22 41.6 68.6 87.6 135.8

Short term deposits 137.5 130.0 137.5 130.0

Cash at bank and in hand 109.8 119.3 108.8 119.0

288.9 317.9 333.9 384.8

CURRENT LIABILITIES

Creditors due within one year 23 (33.8) (44.9) (88.6) (104.3)

Net current assets 255.1 273.0 245.3 280.5

Total assets less current liabilities 5,773.5 5,462.6 5,773.5 5,462.6

Staff pension provision 14 (99.1) (102.6) (99.1) (102.6)

NET ASSETS 5,674.4 5,360.0 5,674.4 5,360.0

CAPITAL AND RESERVES

Endowment capital 5,664.4 5,350.0 5,664.4 5,350.0

General fund 10.0 10.0 10.0 10.0

5,674.4 5,360.0 5,674.4 5,360.0

By order of the Board

Andreas Whittam Smith

First Church Estates Commissioner

Church House

London SW1P 3AZ

17 April 2008


Consolidated cash flow statement

41

for the year ended 31 December 2007

Notes 2007 2006

£m £m

Net cash outflow from operating activities 24 (1.0) (8.2)

Servicing of finance

Interest paid 4 (0.6) (0.7)

Capital expenditure and financial investment

Purchase of investments (1,649.9) (1,418.2)

Sale of investments 1,505.4 1,253.6

Expenditure on investment properties (18.5) (48.8)

Sale of investment properties 107.9 336.7

Investment in shared and partnership property interests (72.2) (29.6)

Sale of investment in shared and partnership property interests 0.2 .-

Mortgages and loans advanced (10.1) (11.8)

Mortgages and loans repaid 15.8 28.0

Sale of financial interest in loans 134.5 .-

Expenditure on non investment fixed assets (4.0) (3.3)

Sale of non investment fixed assets 24.4 .-

Net cash inflow relating to capital expenditure and financial investment 33.5 106.6

Cash inflow before management of liquid resources and financing 31.9 97.7

Management of liquid resources

Net increase in short term deposits 25 (7.5) (50.0)

Financing

Legacies .- 0.2

Transfers out of Church of England Pensions Scheme (0.8) (0.5)

Charitable expenditure paid from endowment capital (33.2) (41.1)

Net cash outflow from financing (34.0) (41.4)

(Decrease)/Increase in cash 25 (9.6) 6.3


42

Notes to the financial statements

for the year ended 31 December 2007

1. ACCOUNTING POLICIES

a) Principal accounting policies

The Church Commissioners for England are a statutory

body established by the Church Commissioners Measure

1947 (as amended) and are currently an exempt charity

under the Charities Act 1993, although the Charities Act

2006 provides for the exempt status to be removed in

due course and for the Commissioners to be regulated

by the Charity Commission. The Measure requires the

Commissioners, as an endowed charity, to separate

their capital and revenue transactions. Legal advice has

confirmed that this separation should be in accordance

with the principles of trust law. The Commissioners have

taken and followed, as appropriate at the time, legal advice

on the practical application of trust law to the accounting

treatment of their transactions.

The Pensions Measure 1997 (as amended) gives the

Commissioners power to spend capital on certain pension

commitments. Payments made to clergy pensioners under

the Church of England Pensions Scheme are charged

partly against the general fund and partly to endowment

capital. Consistent with the Commissioners’ status, and

their powers under the Pensions Measure 1997, the

financial statements do not make provision in the balance

sheets for the obligation to pay clergy pensions which

fall due after the balance sheet date. Information on this

obligation is provided in note 15.

The financial statements are prepared in accordance with

the Statement of Recommended Practice ‘Accounting and

Reporting by Charities’ issued by the Charity Commission

in 2005 (the Charities SORP 2005). The statement of

financial activities is divided into two sections in order

to show (1) for the general fund, the income legally

available for distribution, the charitable expenditure from

income on behalf of the Church and the amount spent

on administration and (2) for endowment capital, the

amount of charitable expenditure from capital and all

capital surpluses and deficits.

The financial statements are also prepared in accordance

with the historical cost convention modified by the

revaluation of investments and properties on a basis

materially consistent with the preceding year. They

comply with all applicable United Kingdom law and

accounting standards.

b) Basis of consolidation and subsidiary undertakings

The consolidated statement of financial activities and

balance sheet include the financial statements of the

Commissioners and all their subsidiary undertakings

made up to 31 December each year. Intragroup

transactions are eliminated on consolidation.

The Commissioners do not present their nonconsolidated

statement of financial activities in these

financial statements.

c) Income from investments

Income is recognised on the accruals basis. Dividends,

including any recoverable tax, are credited to income on

the ex div date of the underlying shares.

d) Income from investment properties

Income is recognised on the accruals basis. Costs of

concessions given to tenants as an incentive to sign a lease

are spread on a straight line basis over the shorter of the

period of the lease and the period to the first rent review.

e) Expenditure

Charitable expenditure on behalf of the Church is

presented on a functional basis in the statement of

financial activities. Grants payable in respect of particular

periods out of the income for that period (being the

grants for parish mission and ministry support shown in

note 6 and the section 23 grants to cathedrals shown in

notes 9 and 28) are recognised when a firm commitment

to pay the grant is made.

Cars for the use of bishops are normally obtained

under four year leases, the full cost of which is paid at

commencement. The cost of such leases is charged to

expenditure over the period of the lease (note 8). The

balance of the payments not yet charged to expenditure is

included in debtors (note 22).

The Ordination of Women (Financial Provisions) Measure

1993 provides for payments to be made to those who

resigned from ecclesiastical service before 21 February

2004 on account of the ordination of women to the

priesthood. Provision is made in the balance sheet for

the estimated outstanding liability to those who have

resigned. The annual charge in the statement of financial

activities represents the change in the estimated liability,

together with expenditure on housing subsidies to those

who have resigned, which is charged in the year in which

it is paid.


Notes to the financial statements 43

f) Pensions

Staff

As described in note 14, the liability for staff pensions arising from

service before 2000 is provided for in the balance sheet. There is no

separately invested fund.

Pension benefits arising from service after 1 January 2000 for staff

in service as at 30 June 2006 are provided by a defined benefit

scheme (note 14). This scheme is considered to be a multiemployer

scheme as described in FRS17: Retirement Benefits

paragraph 9(b). The Commissioners are unable to identify

their share of the underlying assets and liabilities. A defined

contribution scheme, administered by the Church of England

Pensions Board, provides for those commencing service after 30

June 2006. Consequently the amounts charged to expenditure in

the statement of financial activities in respect of staff pension costs

are the contributions payable in the year. The Commissioners have

adopted early the Amendment to FRS 17 which was published in

December 2006. No restatement of the prior period is necessary as

the standard impacts disclosure only for the Commissioners.

Clergy

As described in note 15, the Commissioners are obliged to pay clergy

pensions in respect of service up to 31 December 1997. As described

in note 1(a), the Commissioners do not make provision in the

balance sheets for the obligation to pay clergy pensions which fall

due after the balance sheet date. Amounts charged in the statement

of financial activities represent the pensions payable in the year. A

proportion of clergy pensions payable in the year is charged direct

to endowment capital, as permitted by the Pensions Measure 1997.

Pension benefits arising from service after 1 January 1998 are

mainly provided by a defined benefit scheme. This scheme is

considered to be a multi-employer scheme and consequently the

amounts charged in the statement of financial activities represent

the contributions payable in the year. The Commissioners

are unable to identify their share of the underlying assets and

liabilities. Where pensions are provided by a defined contribution

scheme, the contributions payable in the year are charged.

g) Capitalisation of expenditure on fixed assets

Costs incurred on acquiring, improving or adding to properties are

capitalised. Other expenditure is written off to the general fund in

the year in which it is incurred.

Costs capitalised in respect of properties under development

include expenditure relating to the property of a revenue nature,

less rent and other income receivable, incurred up to the end of the

development period.

Properties under development are transferred to the completed

property portfolio at their book value on practical completion.

Unless its market value is material (note 1(i)), expenditure on

household and office furniture, fixtures and fittings and office

equipment, with the exception of historic items within the contents

of see houses, is written off when incurred. No value is attributed

to it in the balance sheet.

h) Depreciation of fixed assets

Depreciation is charged on a straight-line basis over the estimated

useful life of the asset, calculated on the opening balance sheet

value, on the following fixed assets:

Fixed Assets

Investment properties

Class of assets

Leasehold with less

Estimated useful life

Years of lease

than 50 years to run unexpired

Administrative offices

Leasehold alterations

10 years

In accordance with Statement of Standard Accounting Practice

No. 19, no depreciation is charged on investment properties as

the effect of depreciation is reflected in the annual valuations and

cannot be quantified separately. No depreciation is charged on non

investment fixed assets as the Commissioners have concluded that

it would not have a material impact.

i) Revaluation and realisation of fixed assets

Investment assets are valued as follows:

Listed investments: valued at mid market values in accordance with

the practice of the appropriate stock exchange.

Unlisted investments: valued by reference to latest dealing prices,

valuations from reliable sources or net asset values.

Investment properties: valued individually at market value in

accordance with the Appraisal & Valuation Manual issued by the

Royal Institution of Chartered Surveyors.

Shared and partnership property interests and subsidiary

undertakings: valued at the Commissioners’ share of the underlying

net assets which are valued on the same bases as those held direct.

Value linked loans: valued individually taking into account current

vacant possession of the properties, estimated future house price

growth and income flows and the anticipated dates of repayment

Non investment fixed assets are valued as follows:

Lambeth Palace and see houses: Lambeth Palace is valued at £1

as the Charities SORP 2005 (paragraph 293) recognises that

certain unique buildings that are integral to the activities of the

charity may present difficulties in ascertaining a current cost of

construction of an asset that has both the same service potential

and replicates the uniqueness of the original. In such cases the

SORP recognises that conventional valuation techniques may not

be applicable to previously non-capitalised assets. Other see houses

are stated at their market valuations as at 31 December 2003 by

Knight Frank LLP in accordance with the Appraisal & Valuation

Manual issued by the Royal Institution of Chartered Surveyors,

or purchase price if acquired later, adjusted in line with indices of

second-hand house prices. A full revaluation of see houses will be

carried out every five years.


44

Notes to the financial statements

Contents of see houses: In previous years, historic items such as

works of art and furniture were not valued or included on the

balance sheet. A full valuation has been carried out by Gurr

Johns over the two years preceding 31 December 2007 and the

value is included within non-investment fixed assets on the

balance sheet. In view of the fact that the balance was judged

immaterial in previous years, no prior year adjustment has been

made and the balance has been recognised in movements in

endowment capital in the current year.

Surpluses or deficits on the disposal and revaluation of

investments and properties, including the gains or losses on

any related foreign currency transactions, are taken directly to

endowment capital. The surplus or deficit arising on the disposal

of a property is recognised on completion.

j) Foreign currencies

Assets and liabilities denominated in foreign currencies are

translated into sterling at the rates of exchange ruling at the

balance sheet date. Monetary assets and liabilities denominated

in foreign currencies are retranslated at the rate of exchange

ruling at the balance sheet date or if appropriate at the forward

contract rate.

Profits and losses on sales of overseas investments are translated

at the rate ruling on the date of the transaction. Unrealised

surpluses and deficits on overseas investments arising on

translation are included in the net surpluses or deficits on

realisation and revaluation transferred to endowment capital.

Revenue receipts in foreign currencies are recorded at the rate

ruling on the date of conversion into sterling. If retained in

foreign currencies they are translated at the rate ruling on the

first day of the month in which they are received. Subsequent

profits or losses on conversion into sterling are taken to

endowment capital.

k) Legacies

Legacies are credited to endowment capital and are included in

the financial statements when the conditions for entitlement,

certainty of receipt and measurability have been met.

l) Taxation

The Commissioners, as an exempt charity, are exempt from

taxation on their income and gains to the extent that they are

applied to their charitable purposes. Provision is made for

any tax payable by the Commissioners and their subsidiary

undertakings.

m) Related parties

The Church of England is governed by a large number of legally

independent bodies in its parishes, cathedrals and dioceses as well

as at national level. These bodies are not related parties as defined

in the Charities SORP 2005 or FRS 8. Transactions and balances

with these bodies are accounted for in the same way as other

transactions and, where material, are separately identified in the

notes to the financial statements.

2. INCOME FROM INVESTMENTS

2007 2006

£m £m

UK: Listed 75.7 70.8

Overseas: Listed 21.3 17.2

97.0 88.0

Included in the above income from UK and overseas listed

securities are special dividends amounting to £3.4m and £1.4m

respectively (2006: £7.4m and £2.5m respectively).

3. INTEREST FROM MORTGAGES AND LOANS

2007 2006

£m £m

Loans to provide and

improve Church property 1.3 1.3

Loans to Church of England

Pensions Board 3.8 6.7

Loans for other purposes 0.8 0.7

4. OTHER INTEREST

5.9 8.7

2007 2006

£m £m

Interest receivable

Bank interest 7.1 5.5

Interest on short term deposits 11.2 8.2

Other interest 0.2 0.1

18.5 13.8

Interest payable

Diocesan and other Church funds (0.6) (0.7)

(0.6) (0.7)


Notes to the financial statements

45

5. NET INCOME FROM ASSETS

Investments Investment Mortgages Other Total

properties and loans interest

2007 2006 2007 2006 2007 2006 2007 2006 2007 2006

£m £m £m £m £m £m £m £m £m £m

Gross income 97.0 88.0 50.1 49.6 5.9 8.7 18.5 13.8 171.5 160.1

Cost of generating funds:

External management costs (7.8) (7.2) (3.3) (2.7) .- .- .- .- (11.1) (9.9)

Commissioners’ asset

management costs (0.8) (0.7) (2.8) (2.5) (0.1) (0.1) .- .- (3.7) (3.3)

Other property expenses .- .- (8.7) (11.4) .- .- .- .- (8.7) (11.4)

Interest payable .- .- .- .- .- .- (0.6) (0.7) (0.6) (0.7)

(8.6) (7.9) (14.8) (16.6) (0.1) (0.1) (0.6) (0.7) (24.1) (25.3)

88.4 80.1 35.3 33.0 5.8 8.6 17.9 13.1 147.4 134.8

Commissioners’ asset management costs do not include

restructuring costs or the cost of repairs, maintenance and

rent of administrative offices. These costs are included in the

Commissioners’ own administration costs (note 11).

Other property expenses include annual valuation fees

of £0.3m (2006: £0.2m). They are stated net of service

charge income of £1.7m (2006: £2.2m).

6. PARISH MISSION AND MINISTRY SUPPORT

2007 2006

£m £m

Ministry support to low income dioceses 26.8 26.3

Parish mission funding 4.5 4.5

Other grants 0.2 0.2

Total grants for parish mission

and ministry support 31.5 31.0

Statutory and discretionary

payments direct to parish clergy 0.5 0.6

Church Urban Fund 0.8 0.8

Youth evangelism 0.1 .-

Total parish mission and ministry support 32.9 32.4

The Commissioners’ payments for total grants for parish mission

and ministry support were distributed to dioceses and other

beneficiaries under the direction of the Archbishops’ Council, in

accordance with the National Institutions Measure 1998. Details of

the amounts allocated to dioceses will be disclosed in the financial

statements of the Archbishops’ Council.

Of the sum distributed as ministry support to low income dioceses,

£4.0m (2006: £4.0m) must be used for clergy stipends in

accordance with the Stipends (Cessation of Special Payments)

Measure 2005.

The Commissioners agreed, in March 2008, to make grants for

parish mission and ministry support totalling £41.2m in 2008 out

of the income for that year. These will be recognised in the 2008

financial statements.

7. BISHOPS’ HOUSING AND OFFICE PREMISES

2007 2006

£m £m

Building maintenance and repairs 3.9 5.3

External property management costs 0.5 0.4

Staff 1.0 1.0

Heating, lighting, cleaning and equipment

maintenance 0.4 0.4

Council tax, insurance and other running costs 1.5 1.0

Lambeth Palace Library running costs 0.7 0.6

Support services (see note 12) 0.1 0.1

Rent paid .- 0.1

Rental income (0.2) (0.3)

7.9 8.6


46

Notes to the financial statements

8. BISHOPS’ OFFICE AND WORKING COSTS

2007 2006

£m £m

Office and support staff 7.8 7.3

Individual working costs 1.8 1.6

Other diocesan administrative

and operational costs 1.8 1.9

Premises - suffragan bishops’ costs 0.1 0.1

Overseas travel 0.2 0.1

Lambeth Conference 0.1 0.1

Support services (see note 12) 0.2 0.2

12.0 11.3

Individual working costs include £134,000 (2006: £38,000) in respect

of the amortisation of the cost of car leases. With effect from

1 January 2006 the cost of such leases, which are normally for four

years, is charged to expenditure over the period of the lease. In years

prior to 2006, the full cost of the lease was charged to expenditure

on commencement, which will result in the charges in the years

from 2006 to 2009 not reflecting the true charge for the period.

Details of the grants made to individual bishops towards their

office and working costs, and of how those amounts were spent,

will be contained in the publication “Bishops’ Office and Working

Costs for the year ended 31 December 2007” to be issued by the

House of Bishops later in 2008.

9. GRANTS TO CATHEDRALS

The Cathedrals Measure 1999 enables the Commissioners to make

grants to cathedrals out of their general fund. Section 23 grants are

made towards the stipend of any clerk other than a dean or

residentiary canon whose stipend is paid by the Commissioners

and the salary of any lay person employed in connection with the

cathedral. Section 25 grants are made towards the repair of any

chancel, other than that of the cathedral, which the cathedral is

wholly or partly liable to repair. Grants made to cathedrals are

shown in note 28.

The Commissioners agreed, in March 2008, to make grants to

cathedrals totalling £2.8m in 2008 out of the income for that year.

These will be recognised in the 2008 financial statements.

10. CHURCH BUILDINGS

2007 2006

£m £m

Churches Conservation Trust

Grant in aid 1.3 1.3

Funded from share of proceeds

of redundant churches (0.8) (0.5)

Net cost to Commissioners 0.5 0.8

Chancel repair liability 0.4 0.5

0.9 1.3

The grant in aid made to the Churches Conservation Trust

supports the Trust’s work in preserving redundant churches of

historic and archaeological interest and architectural quality. The

Commissioners’ liability for chancel repairs arises from their

former ownership of rectorial property.

11. COMMISSIONERS’ COSTS

During the year the Commissioners incurred costs in (a) managing

their own expenditure on behalf of the Church, (b) administering

legal procedures relating to pastoral reorganisation, redundant

churches, cathedrals and other matters and (c) administering the

clergy payroll. Their costs attributable to these activities were:

2007 2006

£m £m

Commissioners’ administration

of national Church functions

Bishops’ housing and office premises 0.7 0.7

Bishops’ office and working costs 0.3 0.3

Cathedrals, chancel repairs

and other responsibilities 0.2 0.2

Pastoral reorganisation

and redundant churches 1.0 1.0

Clergy payroll 0.6 0.6

Other charitable expenditure 0.1 0.1

2.9 2.9

Commissioners’ own administration costs

Governance 2.3 2.0

Restructuring costs 0.9 0.1

Refurbishment and repairs

to Commissioners’ offices 0.5 (0.1)

3.7 2.0

The Commissioners also incurred costs in the management of their

assets (note 5).

Governance costs comprise staff and non-staff costs relating to the

general running of the Commissioners including supporting the

work of their Board and Committees.

Restructuring costs comprise redundancy payments, the costs

of enhancing pension entitlements on early retirement and

any associated legal/advisory costs. These payments were

made to facilitate restructuring and provide cost effectiveness

in administration costs. Restructuring costs and the costs of

refurbishment and repairs to the Commissioners’ offices relate

to all the Commissioners’ staff, including those involved in asset

management (note 5) and the administration of national Church

functions.

The fee for the group, excluding VAT, for audit services for the year

was £175,000 (2006: £170,000) and for the subsidiary undertakings

was £42,000 (2006: £41,000). In addition, the Commissioners bore

a share of £60,000 paid by the Archbishops’ Council on behalf of

the NCIs for non audit services (2006: Commissioners only cost of

£4,000).


Notes to the financial statements

47

12. STAFF NUMBERS AND REMUNERATION

The Commissioners are joint employer, together with the other National

Church Institutions (the NCIs), of most of the staff of the NCIs.

The cost of staff for whom the Commissioners are the managing employer was:

Asset management

Local property

and Church functions

management

2007 2006 2007 2006

Number Number Number Number

Average number employed 80 84 94 101

£m £m £m £m

Salaries 3.0 3.0 1.0 1.4

Social security costs 0.3 0.3 0.1 0.1

Pension contributions 0.7 0.7 .- .-

4.0 4.0 1.1 1.5

Recoverable from third parties .- .- (1.1) (1.5)

4.0 4.0 .- .-

The numbers of staff whose emoluments for

the year fell in the following bands were:

2007 2006 2007 2006

Number Number Number Number

£60,001 to £70,000 2 3 - -

£70,001 to £80,000 2 1 - -

£80,001 to £90,000 3 3 - -

£100,001 to £110,000 2 - - -

£110,001 to £120,000 - 2 - -

£130,001 to £140,000 1 1 - -

The Commissioners share the costs of the

common services departments managed by the

Archbishops’ Council on behalf of the NCIs. Those

departments provide accounting, internal audit,

communications, information technology, human

resources, legal, records and office services to the

NCIs and, in some areas, to bishops. The average

number employed was 102 (2006: 113) and the

Commissioners’ share of the costs was £3.5m –

48.2% (2006: £3.4m – 50.1%). This cost is included

in the Commissioners’ asset management costs

(note 5), bishops’ housing and office premises (note

7), bishops’ office and working costs (note 8) and

Commissioners’ costs (note 11).

The Commissioners provided services to other

NCIs at a cost of £0.1m (2006: £0.1m).

Asset management and Church functions:

The net cost of the planning and management

of the Commissioners’ assets is included in

net income from assets (note 5) and for the

administration of national Church functions is

included in Commissioners’ costs (note 11).

Local property management: The net cost of

on site management and servicing of residential

blocks of flats is included in other property

expenses (note 5).

In addition to the amounts shown above, the

Commissioners provide loans under the staff house

mortgage scheme which are currently valued at

£0.6m (2006: £1.0m). The scheme, which was

closed to new business in 2004, has 32 (2006: 45)

loans outstanding to 25 (2006: 34) members of

staff. In addition interest free loans are made for

travel season tickets.

13. COMMISSIONERS’ EMOLUMENTS AND EXPENSES

2007 2006

£000 £000

First Church Estates Commissioner

Salary 52 49

Social security costs 6 6

Third Church Estates Commissioner

(appointed September 2006)

Salary 45 11

Social security costs 5 1

Pension contributions (note 14) 8 3

116 70

The First Church Estates Commissioner has waived any

entitlement to pension.

Commissioners, other than the First and Third Church Estates

Commissioners, have no entitlement to salary or pension.

Pensions paid to former First and Third Church Estates

Commissioners of £91,000 (2006: £100,000) were charged to

the staff pension provision (note 14).

Expenses incurred in attending Board and committee meetings

and on other business of the Commissioners were reimbursed

to Commissioners. Claims were submitted in respect of travel

and subsistence. There were claims from 17 Commissioners

(2006: 13) amounting to £22,000 (2006: £11,000).


48

Notes to the financial statements

14. STAFF PENSIONS

The First Church Estates Commissioner and the staff of the

Commissioners, bishops and the Church of England Pensions

Board who commenced service before 1 July 2006 are entitled

to pension benefits based on final pensionable pay. Increases of

pensions in payment and preserved pensions are linked to the

retail prices index by reference to the Pension Increase (Review)

Orders. There are no other post-retirement benefits.

The Third Church Estates Commissioner and others who

commenced service after 30 June 2006 are entitled to the pensions

earned from the contributions paid into a personal pension scheme

by their employers and by themselves. The contribution rate

payable by the Commissioners is between 8% and 18%. None of

the figures below relate to these arrangements.

Service before 2000

Benefits arising from service before 2000 and benefits in respect of

former First and Third Church Estates Commissioners are not

separately funded but are provided for in the balance sheet. A full

valuation of the provision was carried out as at 31 December 2006.

This provision is calculated by Hymans Robertson LLP,

independent qualified actuaries, using the projected unit method,

on two bases: (i) using Financial Reporting Standard 17 Retirement

Benefits (FRS17) assumptions; (ii) using assumptions based on

those used for the clergy pension scheme with a margin of

prudence. The provision calculated on the former basis is included

in the balance sheet and the provision calculated on the latter basis

is used for financial planning purposes when calculating the level of

non-pensions distributions that can be made from the

Commissioners’ fund.

(i) FRS 17 basis

The movements on the provision

during the year were:

2007 2006

£m £m

At 1 January 102.6 107.5

Pensions and lump sums paid (4.8) (5.0)

Interest on provision 5.1 5.4

Actuarial gain (3.8) (5.3)

At 31 December 99.1 102.6

Analysis of investment return gain

credited to endowment capital

2007 2006

£m £m

Actual return attributed to provision:

Income attributed 2.8 3.3

Capital gain attributed 6.1 12.8

Interest on provision (5.1) (5.4)

3.8 10.7

The provision at 1 January 2007 was 1.9% (2006: 2.5%) of the

Commissioners’ assets. This proportion of the income and capital

returns on the Commissioners’ assets has been attributed to the

provision.

Analysis of actuarial surplus credited to endowment capital

2007 2006

£m £m

Experience (loss)/gain on provision (0.2) 4.5

Gain due to effect of change in

financial assumptions 4.0 1.5

Loss due to effect of change in

mortality assumptions .- (0.7)

3.8 5.3

The principal assumptions used in estimating the liability were:

2007 2006

% %

Retail price inflation 3.5 3.1

Rate of salary increases 5.0 4.6

Rate of increase of pensions in payment 3.5 3.1

Discount rate (annual rate of return on

AA rated corporate bonds) 5.8 5.1

In their assessments of the pensions liability as at 31 December

2006 and 2007, Hymans Robertson used the standard mortality

table PA92. In respect of future improvements in mortality rates

the medium cohort assumption has been used. This assumes

that the accelerated improvements in mortality that have been

experienced by those currently in their 70s will continue until 2020.

History of experience gains and losses since the adoption of FRS17

(with effect from 31 December 2005)

2007 2006

£m £m

Investment return gain 3.8 10.7

Actuarial gain 3.8 5.3

(ii) Planning basis

For planning purposes, Hymans Robertson LLP have estimated the

liability at £87.8m (2006: £83.3m). The assumption for the prospective

annual rate of return on investments was 6.2% (2006: 6.3%). This is

based on the assumption used to estimate the Commissioners’

clergy pension obligations but with a margin of prudence as is

normally included in similar calculations for an occupational

pension scheme. The other assumptions used were the rate of

salary increases of 4.5% (2006: 4.3%), the rate of pension increases

of 3.0% (2006: 2.8%) and retail price inflation of 3.0% (2006: 2.8%)

Service from 2000

Benefits for staff arising from service from 1 January 2000

are provided by the Church Administrators Pension Fund,

administered by the Church of England Pensions Board, who

publish the Fund’s financial statements. The assets of the Fund are

held separately from those of the Commissioners.

The contributions to the Fund are assessed by an independent

qualified actuary using the projected unit method of valuation. In

2007 the Commissioners contributed at the rate of 27.8% (2006:

22.5%) of members’ salaries.

A full valuation of the Fund was carried out as at 31

December 2005. The contribution rate for future service was

increased to 27.8% of members’ salaries from 1 January 2007.

Additional contributions of £250,000 per annum (of which the

Commissioners’ share is £107,000) for fifteen years, increasing

annually in line with average salaries, are to be shared between

the participating employers towards removing the shortfall on the

scheme. In effect this represents an additional 1.4% of salaries.


Notes to the financial statements

49

15. CLERGY PENSIONS

On retirement clergy are entitled to pension benefits based on the

national minimum stipend of those in active service in the preceding

March. Post retirement increases are in line with the retail prices

index, subject to a maximum of 5% in any one year (guaranteed by

the scheme rules), plus any further discretionary increases determined

by the Commissioners (in respect of service up to 1997) or the

Church of England Pensions Board (in respect of service from

1998). In July 2007 General Synod passed certain resolutions

regarding clergy pensions which included the statement that future

policy for post-retirement pension increases would be to pay only

what was guaranteed by the scheme rules. The Commissioners

have agreed to follow this policy and have changed assumptions for

post retirement pension increases accordingly. Prior year

comparatives have been restated using the changed assumptions.

The Church of England Pensions Scheme

The Church of England Pensions Scheme provides benefits based

on years of service until 31 December 1997. The Commissioners

are obliged to pay these pensions.

As described in note 1(a), the past service obligation at 31 December

2007 is not provided for in the Commissioners’ balance sheets. The

obligation has been estimated by Hymans Robertson LLP,

independent qualified actuaries, using the projected unit method,

at £1,595.4m (2006 restated: £1,541.8m) if all benefits including

post retirement increases continue to be paid in accordance with

current practice. A full valuation of the obligation was carried out

as at 31 December 2006. The amount of the obligation represents

28.7% (2006: 33.0%) of the market value of the Commissioners’

assets, excluding non investment fixed assets, of £5,549.5m (2006:

£5,273.7m). The principal assumptions were the annual rate of

return on investments of 7.2% (2006: 7.3%), the rate of stipend and

increases in the starting pension of 4.5% (2006: 4.3%) and the rate

of post retirement pension increases of 3.0% (2006 restated: 2.8%).

The assumptions were made on a best estimate basis which did not

include the margins of prudence which would normally be

included in similar calculations for determining technical

provisions for an occupational pension scheme. The assumption

for retail price inflation was 3.0% (2006: 2.8%). In their assessments

of the pensions obligation as at 31 December 2006 and 2007,

Hymans Robertson have used the standard mortality table PA92

but referring to an age one year younger than a person’s actual age

as clergy have experienced lighter mortality rates than the UK

population as a whole. In respect of future improvements in mortality

rates the medium cohort assumption has been used. This assumes

that the accelerated improvements in mortality that have been

experienced by those currently in their 70s will continue until 2020.

The cost of pensions and benefits funded by the Commissioners

during the year was:

2007 2006

£m £m

Benefits under the Church of

England Pensions Scheme

Pensions to clergy 71.9 69.7

Lump sum payments on retirement 7.9 7.8

Pensions to clergy widows and children 25.2 24.7

105.0 102.2

Benefits under the Deaconesses and

Layworkers (Pensions) Measure 1980

Pensions to deaconesses and licensed lay workers 0.5 0.5

Other pension costs

Pension contributions for

mission clergy (see below) .- .-

105.5 102.7

Transfers out of the Scheme amounted to £0.8m (2006: £0.5m)

during the year.

Deaconesses and licensed lay workers who retired before

December 1988 also receive pensions from another separately

invested scheme.

The Church of England Funded Pensions Scheme

Pensions in respect of service after 1997 are provided by the

Church of England Funded Pensions Scheme, administered by

the Church of England Pensions Board, who publish the Scheme’s

financial statements. The assets of the Scheme are held separately

from those of the Commissioners.

Each responsible body in the Scheme, including dioceses and

parishes, pays a common contribution rate. The contributions to

the Scheme are assessed by an independent qualified actuary using

the projected unit method of valuation. A valuation of the Scheme

was carried out as at 31 December 2003. Following an interim

valuation, the contribution rate was increased for 2007 to 39.8% of

pensionable stipends (2006: 33.8%). A further full valuation of the

scheme was carried out as at 31 December 2006 and a contribution

rate of 39.7% of pensionable stipends has been determined with

effect from 1 April 2008.

The Commissioners’ contributions payable to the Scheme totalled

£2.5m (2006: £2.1m) in respect of those bishops, cathedral clergy

and bishops’ chaplains for whose stipends they are responsible

and in respect of clergy receiving periodical payments under the

Ordination of Women (Financial Provisions) Measure 1993.

The Commissioners are also required by the Pensions Measure

1997 to meet the pension costs of clergy who are employed by

Church of England members of the Partnership for World Mission.

In 2007 the Archbishops’ Council met the full cost of this liability

(2006: full cost) amounting to £0.7m (2006: £0.7m).

Application of endowment capital to meet

certain pension payments

The Pensions Measure 1997, as amended, enables the

Commissioners to use endowment capital until 31 December 2011

to meet the costs of paying clergy pensions in respect of service

before 1998. The amount of £33.2m used in 2007 (2006: £41.1m)

was the overall excess of the Commissioners’ expenditure over

their income for the year.


50

Notes to the financial statements

16. INVESTMENTS

Consolidated

and Commissioners

£m

At 1 January 2007 3,349.9

Additions 1,649.9

Proceeds from disposals (1,505.4)

Net surplus on disposals and revaluation 115.0

Net realised and unrealised deficit on

forward foreign currency contracts (7.8)

At 31 December 2007 3,601.6

2007 2006

£m £m

Listed UK 2,279.9 2,138.9

Listed overseas 1,261.1 1,162.9

Unlisted UK 60.6 48.1

3,601.6 3,349.9

Future commitments in respect of unlisted UK investments are

disclosed in note 27. Forward contracts are used to hedge some

foreign exchange exposure. Foreign currency forward contracts

valued at £(1.8)m, are included in the value of the assets covered by

the currency management scheme. The effect of this is equivalent

to translating the underlying hedged investments at the forward

contract rates. The realised and unrealised surplus is taken to

endowment capital.

17. INVESTMENT PROPERTIES

Consolidated

Commissioners

£m £m

At 1 January 2007 1,134.5 1,011.6

Additions 18.3 17.0

Proceeds from disposals (117.3) (76.7)

Net surplus on disposals and revaluation 165.3 134.8

At 31 December 2007 1,200.8 1,086.7

Consolidated

Commissioners

2007 2006 2007 2006

£m £m £m £m

Valuations

Freehold interests 1,173.2 1,093.9 1,059.1 971.0

Leasehold interests with more than 50 years to run 28.5 41.2 28.5 41.2

Total valuations 1,201.7 1,135.1 1,087.6 1,012.2

Adjustment for concessions to tenants (see note 22) (0.9) (0.6) (0.9) (0.6)

The valuers of investment properties were:

Commercial properties: DTZ Debenham Tie Leung

Rural properties: Savills

Residential properties: DTZ Debenham Tie Leung

All investment properties are located in the United Kingdom.

1,200.8 1,134.5 1,086.7 1,011.6

18. SHARED AND PARTNERSHIP PROPERTY INTERESTS 2007 2006

Consolidated

and Commissioners

£m

At 1 January 2007 294.4

Additions 72.2

Proceeds from disposals (0.2)

Net surplus on disposals and revaluation 31.4

Net realised and unrealised deficit

on forward foreign currency contracts (0.6)

At 31 December 2007 397.2

£m £m

Shared interests

Properties 215.8 166.9

Borrowings (33.8) (14.9)

Other assets (0.2) 0.1

181.8 152.1

Partnership interests

Properties 409.3 201.3

Borrowings (227.7) (70.8)

Other assets 33.8 11.8

215.4 142.3

397.2 294.4

The valuers of shared and partnership property interests were:

Shared interests: DTZ Debenham Tie Leung

Partnership interests: partnerships’ valuers

All the interests were held in the United Kingdom other than

partnership interests valued at £110.9m (2006: £32.8m).

Forward contracts are used to hedge some foreign exchange

exposure. Foreign currency forward contracts valued at £(0.1)m,

are included in the value of the assets covered by the currency

management scheme. The effect of this is equivalent to translating

the underlying hedged investments at the forward contract rates.

The realised and unrealised surplus is taken to endowment capital.


Notes to the financial statements

51

19. SUBSIDIARY AND OTHER UNDERTAKINGS

2007 2006

£m £m

At 1 January 2007 115.4 102.3

Net surplus on revaluation and realisation 8.5 13.1

At 31 December 2007 123.9 115.4

The Commissioners’ principal subsidiary undertakings, all of

which are 100% owned and registered in England and Wales,

formed for property purchase, development and management, are:

Limited liability companies: CC Trading Ltd, CC Lincoln Ltd

Unlimited liability companies: CC Licensing, Quivercourt

Unlimited liability companies held through intermediate limited

liability companies: CC Projects, Cedarvale

The Ashford Great Park Partnership, held through intermediate

limited liability companies, has its principal offices at 29 Great

Smith Street, London SW1P 3PS.

The Commissioners have no associated undertakings.

20. MORTGAGES AND LOANS

Investment Loans to Loans to Loans for Consolidated

mortgages provide and Church of other and

improve England purposes Commissioners

Church Pensions Total

property Board

£m £m £m £m £m

Value linked loans .- 35.2 262.9 11.9 310.0

Other loans 1.4 5.2 0.3 7.6 14.5

At 1 January 2007 1.4 40.4 263.2 19.5 324.5

Advances .- 2.6 7.0 3.3 12.9

Proceeds from repayments .- (5.0) (6.2) (4.6) (15.8)

Proceeds from sale of financial interests .- .- (134.5) .- (134.5)

Net surplus on repayments and revaluation .- 6.8 (1.0) 1.0 6.8

At 31 December 2007 1.4 44.8 128.5 19.2 193.9

Comprising:

Value linked loans .- 38.4 128.2 12.5 181.1

Other loans 1.4 6.4 0.3 6.7 12.8

1.4 44.8 128.5 19.2 193.9

Value linked loans are granted for the purchase of residential

properties. On disposal of a property, the Commissioners are

entitled to a share of the proceeds corresponding to the proportion

of the original purchase price which was financed by the loan.

In January 2007 the Commissioners sold their financial interest in

certain loans made to the Church of England Pensions Board for

£134.5m.

In 2007 all value linked loans were valued by DTZ Debenham

Tie Leung. In previous years the loans were valued at the

Commissioners’ estimate of their market value with the exception

of the loans which were sold in January 2007, which were included

at the valuation at the date of sale.

Other loans of £6.7m shown under Loans for other purposes

comprise car loans to clergy of £6.1m (2006: £6.6m) on which

interest is charged at 5% per annum and loans under the staff

house mortgage scheme of £0.6m (2006: £1.0m) described in note

12. The remaining other loans are made to Church bodies: interest

on the majority of those loans is charged at variable rates.


52

Notes to the financial statements

21. NON INVESTMENT FIXED ASSETS Administrative offices Lambeth Palace and see houses Consolidated

and

Freehold Leasehold Freehold Leasehold Contents Commissioners

property property property property Total

£m £m £m £m £m £m

Cost or valuation

At 1 January 2007 1.7 0.9 82.3 1.4 .- 86.3

Additions .- 0.8 3.2 .- .- 4.0

Proceeds from disposals (2.0) .- .- .- .- (2.0)

Net surplus on disposals and revaluation 0.3 .- 5.1 0.3 31.0 36.7

At 31 December 2007 .- 1.7 90.6 1.7 31.0 125.0

Depreciation

At 1 January 2007 .- .- .- .- .- .-

Charge for the year .- (0.1) .- .- .- (0.1)

At 31 December 2007 .- (0.1) .- .- .- (0.1)

Net book value

At 1 January 2007 1.7 0.9 82.3 1.4 .- 86.3

At 31 December 2007 .- 1.6 90.6 1.7 31.0 124.9

Lambeth Palace is valued at £1 as explained in note 1 (i).

With minor exceptions, see houses and properties ancillary to see houses

which are occupied by employees or available to rent are held freehold.

If the see houses and ancillary properties were let on the open market

with vacant possession, it was estimated that as at 31 December

2007 the gross annual rental income would be £1.6m (2006: £1.6m).

All non investment properties are located in the United Kingdom.

The valuers of contents at Lambeth Palace and see houses were

Gurr Johns. These assets were valued for the first time in 2007.

22. DEBTORS Consolidated Commissioners

2007 2006 2007 2006

£m £m £m £m

Rental and service charge debtors 6.4 14.3 6.4 7.0

Dioceses and benefices 2.1 3.5 2.1 3.5

Subsidiary undertakings .- .- 61.8 85.5

VAT recoverable .- 0.1 ..- .-

Non investment property sale proceeds .- 22.4 ..- 22.4

Other debtors 13.5 17.6 6.7 7.6

Prepayments and accrued income 19.0 10.5 10.0 9.6

Bishops’ cars - lease payments 0.6 0.2 0.6 0.2

41.6 68.6 87.6 135.8

Other debtors include £0.9m (2006: £0.6m) relating to concessions to

tenants which are amortised over the period to the next open market rent

review. Accordingly the independent valuation of investment properties is

reduced by this amount.

Prepayments and accrued income include £5.1m (2006: nil)

which is due after one year.

23. CREDITORS DUE WITHIN ONE YEAR Consolidated Commissioners

2007 2006 2007 2006

£m £m £m £m

Dioceses and other Church bodies 4.9 17.4 4.9 17.4

Subsidiary undertakings .- .- 57.4 63.5

VAT payable 5.4 4.6 4.9 2.2

Taxation and social security 5.1 5.0 5.1 5.0

Other creditors 4.8 4.1 3.1 3.6

Accruals and deferred income 13.6 13.8 13.2 12.6

33.8 44.9 88.6 104.3

At 31 December 2006 amounts due to dioceses and other Church bodies

included £12.3m from the sale of parsonages for benefice purposes. These

monies were transferred to dioceses during 2007, in line with the Church

of England (Miscellaneous Provisions) Measure 2006.

Amounts due to dioceses and other Church bodies include

£1.4m (2006: £0.8m) which is charged, by the relevant

Measure, on the Commissioners’ general fund.


Notes to the financial statements

53

24. RECONCILIATION OF EXCESS OF

EXPENDITURE OVER INCOME TO CASH

FLOW FROM OPERATING ACTIVITIES

2007 2006

£m £m

Excess of expenditure over income .- .-

Net income attributed to

staff pension provision 2.8 3.3

Depreciation 0.1 .-

Staff pensions paid (note 14) (4.8) (5.0)

Interest payable 0.6 0.7

Decrease/(Increase) in operating debtors 11.4 (13.1)

(Decrease)/Increase in

creditors and provisions (11.1) 5.9

25. RECONCILIATION OF NET CASH FLOW

TO MOVEMENT IN NET FUNDS

2007 2006

£m £m

(Decrease)/Increase in cash in the year (9.6) 6.3

Foreign currency exchange profit/(loss) 0.1 (1.0)

Cash outflow from increase

in short term deposits 7.5 50.0

(Decrease)/Increase in net funds in the year (2.0) 55.3

Net funds at 1 January 249.3 194.0

Net funds at 31 December 247.3 249.3

Net cash outflow from operating activities (1.0) (8.2)

26. ANALYSIS OF CHANGE IN NET FUNDS

At Cash Foreign At 31

1 January flow currency December

2007 2007

£m £m £m £m

Cash at bank and in hand: sterling 110.1 (13.6) .- 96.5

foreign currency 9.2 4.0 0.1 13.3

119.3 (9.6) 0.1 109.8

Short term deposits: sterling 130.0 7.5 .- 137.5

249.3 (2.1) 0.1 247.3

Cash at bank includes funds held in interest

bearing accounts repayable on demand.

27. CAPITAL COMMITMENTS AND CONTINGENT LIABILITIES

2007 2006

£m £m

Capital commitments

Unlisted UK investments 86.2 41.1

Investment property - partnership interests 52.5 44.6

138.7 85.7

Capital commitments are agreements the Commissioners have

entered into to purchase investments in future periods.

Contingent liabilities

The Commissioners are a body responsible for contributions

to the Church of England Funded Pensions Scheme for clergy.

Dioceses and other Church bodies are similarly responsible. In the

event of defaults by any of the responsible bodies, the remaining

responsible bodies, including the Commissioners, would continue to

be responsible for the entire liabilities of the Scheme.

The Commissioners are joint employer, together with the other NCIs,

of most of the staff of the NCIs and, as such, have a contingent liability

for salaries and other employment costs in the event of a default by any

of the other joint employers.

The Commissioners have a contingent liability for potential severance

costs in respect of certain former NCI employees whose employment

has been transferred to other organisations under TUPE.

Following the sale of the financial interest in certain loans made to the

Church of England Pensions Board, the Commissioners may be liable

for possible future deficits resulting from sales of properties at less than

fair value.

It is not practicable to reliably estimate the quantum of the above

contingent liabilities.


54

Notes to the financial statements

28. GRANTS PAYABLE

Grants to cathedrals

(note 9)

Section 23 grants

Section 25 grants

2007 2006 2007 2006

£000 £000 £000 £000

Bath & Wells 25 26 - -

Birmingham 96 89 - -

Blackburn 137 133 - -

Bradford 151 145 - -

Bristol 108 111 - -

Canterbury - - - -

Carlisle 98 98 - -

Chelmsford 104 95 - -

Chester 38 33 - -

Chichester 33 32 - -

Coventry 70 71 - -

Derby 123 122 - -

Durham - - - -

Ely 42 41 - -

Exeter 56 57 - -

Gloucester 32 27 23 5

Guildford 60 53 - -

Hereford 67 67 4 13

Leicester 146 136 - -

Lichfield 63 63 - -

Lincoln - 9 - -

Liverpool 3 - - -

London - - - -

Manchester 43 39 - -

Newcastle 120 120 - -

Norwich 8 13 2 3

Oxford - - - -

Peterborough 50 31 - -

Portsmouth 108 117 - -

Ripon & Leeds 121 115 - -

Rochester 83 81 12 3

St Albans 56 53 - -

St Edmundsbury & Ipswich 73 79 - -

Salisbury - - 2 -

Sheffield 79 82 - -

Sodor & Man - - - -

Southwark 65 76 - -

Southwell & Nottingham 110 107 - -

Truro 88 94 - -

Wakefield 141 134 - -

Winchester - - - 2

Worcester 58 56 - -

York - - - -

Europe - - - -

Non diocesan bodies - - - -

2,645 2,605 43 26


Funds held on behalf of others and

professional advisers

55

FUNDS HELD ON BEHALF OF OTHERS

The Commissioners are trustees of funds with an aggregate value of £5.5m

(2006: £6.4m). These are mainly restricted permanent endowment funds as

defined by the Charities SORP 2005. They are invested in CBF funds. Their

income, £0.2m (2006: £0.2m), is applicable, in accordance with the terms of

the trusts, to church repair and other purposes.

Certain other trustees are directed to pay some or all of their income to

the Commissioners for specified purposes. The total amount received was

£0.1m (2006: £0.1m).

STIPENDS

The Commissioners administer the national clergy payroll on behalf of

the Church. This payroll covers the majority of clergy. Exceptions include

chaplains working in the Forces, hospitals, prisons and schools. The table

below shows the total cost of stipends and national insurance paid through the

national payroll which is administered by the Commissioners. The table does

not include local income received direct by clergy.

Payments directed

by dioceses and

cathedrals

Statutory and

discretionary payments

by the Commissioners

2007 2006 2007 2006 2007 2006

£m £m £m £m £m £m

Diocesan bishops .- .- 1.6 1.6 1.6 1.6

Suffragan and assistant bishops .- .- 2.0 1.9 2.0 1.9

Archdeacons 3.0 3.0 .- .- 3.0 3.0

Cathedral clergy 0.6 0.6 3.0 3.0 3.6 3.6

Incumbents 92.7 92.4 1.4 1.5 94.1 93.9

Incumbent status - parish clergy 41.7 40.0 0.1 0.1 41.8 40.1

Assistant curates 26.4 27.0 .- .- 26.4 27.0

Other clergy, deaconesses and licensed lay workers 11.8 11.5 0.1 0.1 11.9 11.6

Employers’ national insurance 10.4 10.4 0.4 0.3 10.8 10.7

Total met from national payroll 186.6 184.9 8.6 8.5 195.2 193.4

Total

PENSIONS

The Commissioners also use the national payroll

to pay pensions to clergy. Apart from the

amounts disclosed in note 15 to the financial

statements, they also paid pensions under the

Church of England Funded Pensions Scheme on

behalf of the Church of England Pensions Board.

These amounted to £5.6m (2006: £4.5m) and

were reimbursed by the Scheme.

PROFESSIONAL ADVISERS

as at 1 April 2008

Bankers:

Custodians:

Solicitors:

Auditors:

Actuaries:

Investment

managers

Property

managing agents:

National Westminster Bank plc

JP Morgan Chase Bank

Official Solicitor to the Church Commissioners, Charles Russell,

Farrer & Co and RadcliffesLeBrasseur

Deloitte & Touche LLP

Hymans Robertson LLP

Aberforth Partners, AXA Rosenberg Investment Management Ltd,

Capital International Ltd, Fidelity Pensions Management,

Legal & General Investment Managers Ltd, Montanaro Investment

Managers Ltd, Pareto and T Rowe Price Global Investment

Services Ltd

Cluttons, King Sturge, Smiths Gore, Strutt & Parker

and Wardell Armstrong

Property

strategic advisers: DTZ Debenham Tie Leung and Savills


56

Money available resolution and actuaries’ report

MONEY AVAILABLE RESOLUTION

As required by the Church Commissioners Measure

1947, at the Annual General Meeting of the Church

Commissioners to be held on 18 June 2008, the Board of

Governors will recommend that the meeting (a) receives

the Annual Report and Financial Statements and (b) notes

the revised sum which the Board advises is available to be

spent in 2008-2010.

At its meeting in March 2008, the Assets Committee

resolved to inform the Board that the following sums

could be made available in 2008-2010, to be spent on

statutory and discretionary support:

Up to £339.0 million for clergy pensions and £267.1

million for non-pensions distributions.

Before making its recommendation on the money

available, the Assets Committee (as required by the

Pensions Measure 1997) sought advice from its actuarial

advisers, Hymans Robertson. This advice is summarised

as follows:

INDEPENDENT ACTUARIES’ REPORT

The Commissioners hold assets from which they pay

pensions to retired clergy, other licensed ministers and

staff and provide money to support the mission and

ministry of bishops, cathedrals and parishes and for other

purposes. The sums available for non-pensions support

are significantly affected by the extent of their pensions

liabilities.

In order to assist the Commissioners in formulating their

distribution policy, we carried out a detailed review of

the Commissioners’ fund and pensions liabilities as at 31

December 2006. The main purposes of our review were

to (i) place a value on the Commissioners’ liabilities to

pay pensions to clergy; (ii) determine a sustainable level

of annual discretionary distribution that can be paid by

the Commissioners from their funds after taking into

account their pension liabilities; and (iii) recommend

maximum distribution levels to the Commissioners’

Assets Committee.

We recently carried out an interim review as at 31

December 2007 in order to update our assessment of the

fund’s capacity for distributions for purposes other than

pensions.

Many occupational pension schemes have actuarial

valuations performed using significant margins for

prudence. This is done so that the scheme has a funding

buffer should future events prove unfavourable,

in particular if the scheme’s sponsoring employer

becomes insolvent. In contrast, our calculations for the

Commissioners were made on a ‘best estimate basis’ and

did not include such margins of prudence. We consider

that margins are not required, as the Commissioners’

assets are already significantly larger than their obligations

to pay pensions, and no further margin is required.

Moreover, if margins were to be included, current

non-pension distributions would be reduced, with the

expectation that they could be increased in future by more

than the planned increases in line with earnings. This

would lead to intergenerational inequity, with the future

recipients of distributions receiving more at the expense

of current recipients.

On this basis, the planned distributions for 2008-2010 are

not likely to lead to an adverse consequence for the longterm

financial position of the Commissioners. However, it

should be noted that the sums which the Commissioners’

assets are able to support by way of sustainable nonpensions

distributions are extremely sensitive to a

number of factors, including the Commissioners’ actual

investment performance, the prospects for future

investment returns, actual increases in stipends and

pensions and the longevity of pensioners.

The main results of our calculation were that:

(i) As at 31 December 2007, £1,595 million of the

Commissioners’ assets were required to meet their

pensions liabilities.

(ii) We note that expenditure for purposes other than

pensions in 2005-2007 did not exceed the maximum

recommended level for these years

(iii) Having regard to the Commissioners’ objective

to increase the level of their support for purposes

other than pensions in line with the general level of

earnings, we recommend that no more than £267.1

million should be distributed for these purposes in

2008-2010.

(iv) We recommend that the Commissioners organise

some of their non-pensions distributions, say at least

between 5% and 10% of annual distributions, so that

there is no expectation that these distributions will

continue for more than a year or two from now. This

will put the Commissioners in a good position to

cut back distributions more easily in future, if this

becomes necessary because future experience turns

out to be unfavourable.

We have been provided with details of the Commissioners’

actual distributions in 2007 and a forecast of proposed

distributions in 2008. The proposals are in line with the

results of our review set out above.

We recommend that the Commissioners’ situation be

reviewed at least annually with a detailed re-assessment of

the position at three-yearly intervals. We recommend that

the next detailed reassessment should take place in early

2010.

C Young FIA

Hymans Robertson LLP

25 March 2008


Commissioners’ non-pensions support

57

ANALYSIS BETWEEN DIOCESES OF THE MAIN ELEMENTS

OF CHARITABLE EXPENDITURE (excluding clergy pensions)

Parish mission

and ministry

support 3

Bishops’

ministry 4

Cathedrals’

ministry 5

Total

2007 2006 2007 2006 2007 2006 2007 2006

£m £m £m £m £m £m £m £m

Bath & Wells 0.1 0.1 0.5 0.7 0.1 0.1 0.7 0.9

Birmingham 1.4 1.4 0.2 0.3 0.2 0.2 1.8 1.9

Blackburn 0.9 0.9 0.4 0.3 0.2 0.2 1.5 1.5

Bradford 1.0 1.0 0.1 0.2 0.2 0.2 1.3 1.4

Bristol 0.1 0.1 0.4 0.4 0.2 0.2 0.7 0.7

Canterbury 0.7 0.6 1.3 3.4 0.1 0.1 2.1 4.1

Carlisle 0.6 0.6 0.3 0.3 0.2 0.2 1.1 1.1

Chelmsford 2.5 2.3 0.5 0.4 0.2 0.2 3.2 3.0

Chester 0.2 0.2 0.3 0.3 0.1 0.1 0.6 0.6

Chichester 0.2 0.2 0.4 0.4 0.1 0.1 0.7 0.7

Coventry 0.1 0.1 0.2 0.3 0.2 0.2 0.5 0.5

Derby 1.0 1.0 0.3 0.4 0.2 0.2 1.5 1.6

Durham 2.4 2.3 0.4 0.4 0.1 0.1 2.9 2.8

Ely 0.1 0.1 0.3 0.3 0.1 0.1 0.5 0.5

Exeter 1.3 1.0 0.4 0.4 0.2 0.1 1.9 1.7

Gloucester 1 - - 0.3 0.3 0.2 0.1 0.5 0.5

Guildford 1 - - 0.3 0.3 0.2 0.1 0.5 0.4

Hereford 0.3 0.4 0.3 0.3 0.2 0.2 0.8 0.9

Leicester 1.0 1.0 0.3 0.3 0.2 0.2 1.5 1.5

Lichfield 2.2 2.0 0.4 0.4 0.2 0.1 2.8 2.5

Lincoln 0.5 0.6 0.3 0.3 0.1 0.1 0.9 0.9

Liverpool 1.4 1.4 0.3 0.3 0.1 0.1 1.8 1.8

London 0.4 0.5 0.8 0.6 0.1 0.1 1.3 1.2

Manchester 2.0 1.8 0.5 0.5 0.1 0.1 2.6 2.4

Newcastle 1.3 1.3 0.3 0.2 0.2 0.2 1.8 1.8

Norwich 1.0 0.9 0.4 0.4 0.1 0.1 1.5 1.4

Oxford 2 0.1 0.2 0.6 0.4 - - 0.7 0.5

Peterborough 0.3 0.2 0.3 0.3 0.2 0.1 0.8 0.6

Portsmouth 0.2 0.2 0.2 0.2 0.2 0.2 0.6 0.6

Ripon & Leeds 0.7 0.7 0.5 0.3 0.2 0.2 1.4 1.1

Rochester 0.2 0.2 0.4 0.3 0.2 0.2 0.8 0.7

St Albans 0.2 0.2 0.4 0.3 0.2 0.1 0.8 0.7

St Edmundsbury & Ipswich 0.2 0.2 0.5 0.3 0.2 0.2 0.9 0.6

Salisbury 1 - 0.1 0.4 0.3 0.1 0.1 0.5 0.5

Sheffield 1.6 1.5 0.3 0.3 0.2 0.2 2.1 1.9

Sodor & Man 1 - - 0.1 0.1 - - 0.1 0.1

Southwark 0.2 0.3 0.5 0.4 0.2 0.2 0.9 0.8

Southwell & Nottingham 1.2 1.3 0.3 0.3 0.2 0.2 1.7 1.7

Truro 0.7 0.7 0.3 0.3 0.2 0.2 1.2 1.2

Wakefield 1.4 1.3 0.3 0.3 0.2 0.2 1.9 1.8

Winchester 0.1 0.1 0.5 0.4 0.1 0.1 0.7 0.6

Worcester 0.3 0.3 0.4 0.3 0.2 0.1 0.9 0.7

York 1.8 1.9 2.0 1.0 0.1 0.1 3.9 2.9

Europe - - 0.4 0.3 - - 0.4 0.3

National support 1.0 1.0 6.3 6.5 - 0.2 7.3 7.6

Totals (per SOFA) 32.9 32.4 24.9 24.5 6.8 6.6 64.6 63.5

Due to rounding, column and row totals may

appear not to equal the sums of the individual

figures.

Note:

1

Gloucester, Guildford, Salisbury and Sodor

& Man received parish mission and ministry

support in 2007 and 2006 but the amounts were

less than £50,000.

2

Oxford received support for cathedral ministry

in 2007 and 2006 but the amount was less than

£50,000.

3

Comprises grants to dioceses by the Archbishops’

Council, payments direct to clergy and national

support (insurance subsidies and minor grant

payments): see table below.

4

Includes, under national support, (1) housing

and office premises costs for Lambeth Palace,

Lambeth Palace library and ancillary properties

in all sees and (2) office and working costs for the

two Archbishops, their advisors and the Provincial

Episcopal Visitors.

5

Includes, under national support, other stipend

grants.

Reconciliation between the amounts shown

for Parish mission and ministry support in the

financial statements of the Archbishops’ Council

(AC) and Church Commissioners (CC)

2007 2006

£m £m

Amount to be shown in the

financial statements of the AC 32.4 31.8

Sums distributed by the AC

but accounted for by the CC

in previous years (0.9) (0.9)

Sum to be distributed by the AC

in future years 0.9 0.9

.- .-

Payments made by the CC

direct to beneficiaries 0.5 0.6

Amount shown in the financial

statements of the CC 32.9 32.4


58

Ten year financial record

GENERAL FUND 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007

£m £m £m £m £m £m £m £m £m £m

INCOME

Investments 78.2 95.2 81.1 73.0 68.7 66.0 66.4 73.5 88.0 97.0

Investment properties,

less other property expenses 48.5 44.8 43.6 45.9 45.2 41.1 38.2 42.5 38.2 41.4

Value linked loans 7.5 7.7 7.5 7.7 7.6 7.7 7.8 7.9 7.7 4.9

Other loans 1.8 1.7 1.4 1.6 1.4 1.3 1.1 1.0 1.0 1.0

Short term deposits 8.5 6.9 7.2 3.7 3.4 3.2 6.0 8.4 13.8 18.5

External management costs (4.9) (5.0) (6.8) (6.3) (6.4) (6.5) (8.7) (9.1) (9.9) (11.1)

Commissioners’ management costs (3.9) (3.7) (2.4) (2.9) (3.2) (3.4) (3.2) (3.6) (3.3) (3.7)

Interest payable (4.1) (3.2) (3.4) (1.6) (1.1) (1.2) (1.3) (0.8) (0.7) (0.6)

Attributed to staff pension provision (2.9) (3.2) (2.9) (2.5) (2.4) (2.2) (2.1) (2.2) (3.3) (2.8)

Net income available for charitable application 128.7 141.2 125.3 118.6 113.2 106.0 104.2 117.6 131.5 144.6

EXPENDITURE

Parish mission and ministry support 20.0 20.6 22.4 22.0 25.5 26.4 27.1 31.5 32.4 32.9

Bishops’ stipends 3.3 3.5 3.5 3.8 4.0 4.1 4.3 4.5 4.6 5.0

Bishops’ housing and office premises 3.0 3.3 3.0 3.3 3.4 3.5 4.1 5.8 8.6 7.9

Bishops’ office and working costs 8.8 8.5 9.3 9.6 9.8 10.2 10.1 10.4 11.3 12.0

Cathedral clergy stipends 3.0 3.1 3.2 3.3 3.5 3.6 3.6 3.9 4.0 4.2

Grants to cathedrals 2.4 2.6 2.5 2.6 2.5 2.5 2.5 2.7 2.6 2.6

Retirement housing subsidy 1.3 1.6 1.4 1.3 1.3 1.9 1.3 .- .- .-

Church buildings 1.1 1.0 1.2 1.4 1.6 1.1 1.1 1.0 1.3 0.9

Commissioners’ administration costs 5.2 5.4 5.0 4.7 5.1 5.1 4.9 4.8 4.9 5.2

Administration costs of other Church bodies 2.0 2.0 2.0 1.8 1.7 1.0 1.1 0.2 0.1 0.2

Restructuring costs .- .- .- 0.1 1.0 0.4 0.2 .- 0.1 0.9

Office repairs, maintenance and rent 0.2 0.6 3.0 3.4 0.9 0.8 0.7 0.9 (0.1) 0.5

Transitional support for clergy

pension contributions 23.2 17.3 11.3 7.1 8.1 3.7 1.5 .- .- .-

Financial provision for resigning clergy 1.8 1.8 1.2 1.2 0.8 1.4 1.1 0.1 0.1 .-

Clergy pensions 62.9 69.9 56.3 53.0 44.0 40.3 40.6 51.8 61.6 72.3

Total expenditure 138.2 141.2 125.3 118.6 113.2 106.0 104.2 117.6 131.5 144.6

Increase/(Decrease) in general fund (9.5) .- .- .- .- .- .- .- .- .-

ENDOWMENT CAPITAL

Charitable expenditure 20.8 15.4 34.7 41.0 52.4 58.0 59.6 48.5 41.1 33.2

Investments 305.7 566.4 (95.7) (434.6) (678.8) 308.9 163.9 452.2 302.3 107.2

Investment properties 44.1 107.2 92.3 75.7 110.1 87.0 186.4 213.5 280.4 196.1

Value linked loans 10.5 22.2 19.2 30.5 66.0 70.0 50.8 4.8 (65.7) 6.8

Other loans, foreign currency and borrowings 2.6 0.3 0.6 (0.1) 0.5 (0.6) 0.2 1.1 (1.0) 0.1

Non investment fixed assets 3.8 2.8 2.8 2.7 6.0 30.6 13.6 12.6 5.3 36.7

Attributed to staff pension provision (8.0) (15.6) (0.4) 6.6 10.1 (10.2) (8.3) (12.9) (12.8) (6.1)

358.7 683.3 18.8 (319.2) (486.1) 485.7 406.6 671.3 508.5 340.8

Staff pension provision (74.6) .- .- .- .- .- .- .- .-

Actuarial surplus/(deficit)

on staff pension provision - for the year .- .- .- 9.7 (1.7) 2.5 2.6 1.9 16.0 7.6

- from change in basis of estimation .- .- .- .- .- .- .- (16.3) .- .-

Legacies .- .- .- 0.1 0.5 0.1 .- 0.4 0.2 .-

Transfers from Pensions Scheme (0.4) (1.1) (1.4) (1.2) (1.0) (0.8) (0.9) (0.2) (0.5) (0.8)

Net increase/(decrease) in endowment capital 262.9 666.8 (17.3) (351.6) (540.7) 429.5 348.7 608.6 483.1 314.4


Ten year financial record

59

BALANCE SHEETS 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007

£m £m £m £m £m £m £m £m £m £m

Investments

Fixed interest 304.3 231.5 154.8 106.5 109.5 85.7 60.2 61.6 58.8 58.7

Equities UK 1,895.2 2,359.7 2,309.1 1,943.2 1,388.5 1,521.3 1,603.9 1,759.3 2,010.3 2,164.4

Equities overseas 426.6 648.1 682.8 644.1 516.0 691.8 751.5 1,062.1 1,280.8 1,378.5

2,626.1 3,239.3 3,146.7 2,693.8 2,014.0 2,298.8 2,415.6 2,883.0 3,349.9 3,601.6

Investment properties

Commercial 461.9 477.2 527.2 537.0 548.0 522.5 631.1 688.0 815.9 882.9

Rural 237.1 228.8 222.1 229.7 250.7 288.2 317.2 333.4 364.0 450.5

Residential 205.4 234.7 266.9 289.2 315.0 333.6 374.9 393.3 249.0 264.6

904.4 940.7 1,016.2 1,055.9 1,113.7 1,144.3 1,323.2 1,414.7 1,428.9 1,598.0

Other investments

Value linked loans 184.1 201.9 217.6 239.1 298.2 359.4 399.9 391.3 309.9 181.1

Other loans 30.0 27.1 27.0 26.7 23.7 22.8 18.1 16.4 14.6 12.8

Short term deposits 78.2 44.0 10.0 10.0 20.0 .- 20.0 80.0 130.0 137.5

Cash 19.3 50.3 57.5 54.0 62.5 112.2 100.6 114.0 119.3 109.8

311.6 323.3 312.1 329.8 404.4 494.4 538.6 601.7 573.8 441.2

Borrowings (3.8) (3.2) (2.5) (1.7) (1.0) (0.3) .- .- .- .-

Net investment assets 3,838.3 4,500.1 4,472.5 4,077.8 3,531.1 3,937.2 4,277.4 4,899.4 5,352.6 5,640.8

Non investment fixed assets 35.8 39.7 38.3 44.8 49.3 78.4 91.9 77.8 86.3 124.9

Debtors less creditors (55.9) (37.4) (37.5) (8.3) (16.8) (17.0) (18.7) 7.2 23.7 7.8

Staff pension provision (85.3) (102.7) (90.9) (83.5) (73.5) (79.0) (82.3) (107.5) (102.6) (99.1)

3,732.9 4,399.7 4,382.4 4,030.8 3,490.1 3,919.6 4,268.3 4,876.9 5,360.0 5,674.4

Capital and reserves

Endowment capital 3,722.9 4,389.7 4,372.4 4,020.8 3,480.1 3,909.6 4,258.3 4,866.9 5,350.0 5,664.4

General fund 10.0 10.0 10.0 10.0 10.0 10.0 10.0 10.0 10.0 10.0

3,732.9 4,399.7 4,382.4 4,030.8 3,490.1 3,919.6 4,268.3 4,876.9 5,360.0 5,674.4

CASHFLOWS

Investments (76.9) (46.5) (8.4) 23.5 1.0 24.1 47.2 (15.2) (164.6) (144.5)

Investment properties 65.1 47.9 32.7 37.9 53.8 56.4 7.2 122.5 258.3 17.4

Value linked and other loans 3.9 6.8 3.4 8.5 10.2 9.1 13.9 15.8 16.2 5.7

Sale of financial interest in loans .- .- .- .- .- .- .- .- .- 134.5

Short term deposits 10.6 34.2 34.0 .- (10.0) 20.0 (20.0) (60.0) (50.0) (7.5)

Decrease in borrowings (0.7) (0.7) (0.7) (0.7) (0.7) (0.7) (0.3) .- .- .-

Net disinvestment 2.0 41.7 61.0 69.2 54.3 108.9 48.0 63.1 59.9 5.6

Income less expenditure, plus depreciation (29.7) (15.1) (34.4) (40.5) (50.8) (56.4) (58.1) (48.5) (41.1) (35.1)

Increase/(Decrease) in creditors less debtors (1.0) 6.8 (15.5) (31.5) 6.2 (3.4) (0.7) (6.9) (8.9) 0.3

Net receipts from/(expenditure on)

non investment properties (1.2) (1.3) (2.5) (4.4) (0.2) 1.4 0.1 4.4 (3.3) 20.4

Other capital receipts/(payments) (0.4) (1.1) (1.4) (1.2) (1.0) (0.8) (0.9) 0.2 (0.3) (0.8)

Increase/(Decrease) in cash (30.3) 31.0 7.2 (8.4) 8.5 49.7 (11.6) 12.3 6.3 (9.6)

TOTAL RETURNS ON INVESTMENTS (TEN YEAR AVERAGE)

Average % per annum % % % % % % % % % %

Average total return over previous ten years 10.4 10.5 12.7 12.0 10.7 10.2 11.1 11.0 10.7 9.5

Average retail price inflation over previous ten years 4.1 3.5 2.9 2.5 2.5 2.6 2.7 2.6 2.8 2.8


60

Lists of larger investments

Stock exchange and property investments as at 31 December 2007

STOCK EXCHANGE AND FIXED INTEREST

HOLDINGS VALUED OVER £6m

£m

Royal Dutch Shell 180.2

BP 144.3

Vodafone 133.7

HSBC 125.6

GlaxoSmithKline 87.2

Rio Tinto 70.7

Royal Bank of Scotland 59.3

Legal & General All Stocks Gilt Fund 58.7

Capital International

Emerging Markets Fund 55.3

Anglo American 53.3

BG 53.2

Fidelity Institutional

Emerging Markets Fund 52.1

Tesco 48.0

BHP Billiton 47.5

AXA Global Emerging Markets Fund 47.2

Astra Zeneca 43.3

Barclays 40.4

Lloyds TSB 35.8

HBOS 34.5

Xstrata 33.2

Standard Chartered 32.7

Unilever 30.7

National Grid 27.0

BT 27.0

Reckitt Benckiser 26.1

Prudential 23.4

Aviva 23.2

Scottish & Southern Energy 19.5

Centrica 17.4

Cadbury Schweppes 15.9

Exxon Mobil 15.7

Nestle 14.9

Arisaig Asia Fund 13.9

Man 13.0

Old Mutual 13.0

Marks & Spencer 12.2

Microsoft 11.8

Reed Elsevier 11.7

Legal & General 11.6

General Electric 10.7

Morrison (Wm) Supermarkets 10.5

Roche 10.3

Genesis Emerging Markets 10.1

United Utilities 9.8

Reuters 9.8

WPP 9.8

Apple 9.6

Shire 9.4

International Power 9.2

Imperial Chemical Industries 9.1

Sainsbury (J) 8.9

Bank of America 8.8

Impax Environmental Markets 8.8

Allianz 8.6

Land Securities 8.5

Novartis 8.4

Schlumberger 8.0

British Energy 7.8

Hewlett-Packard 7.8

Sanofi-Aventis 7.7

American International 7.7

Compass 7.6

Swiss Re-Insurance 7.5

Standard Life 7.5

Applied Materials 7.3

ConocoPhillips 7.2

Google 7.2

Pearson 7.1

Smith & Nephew 7.0

JPMorgan Chase & Co 6.9

Telefonica 6.9

Apax Europe Fund VI-A 6.9

ING 6.9

Charterhouse Capital

Partners Fund VIII 6.9

Wolseley 6.8

Cable & Wireless 6.4

Verizon Communications 6.4

Unitedhealth 6.3

International Business Machines 6.1

Capita 6.0

AT&T 6.0

Sumitomo Mitsui Financial 6.0

TWENTY MOST VALUABLE URBAN AND

GLOBAL PROPERTY HOLDINGS

77-81 Clarence Street,

Kingston upon Thames

19-26 Long Acre, London WC2

26 Throgmorton Street, London EC2

Crown Business Park, West Drayton

Goodman UK Retail Parks Fund

(partnership interest)

Hyde Park Estate, London W2

Imperial House, Kingsway, London, WC2

ING Nordic Fund (partnership interest)

ING Property Fund Central Europe

(partnership interest)

IO Centre, Waltham Cross

IO Centre, Swindon

The Junction Unit Trust (partnership interest)

Lend Lease Retail Fund (partnership interest)

Mannings Heath Retail Park, Poole

MetroCentre, Gateshead (10% interest and

associated land)

Pollen Estate, London W1 (shared interest)

Reedswood Retail Park, Walsall

Royal Lancaster Hotel, London W2

Trafalgar Way Retail Park, Purley

Unite UK Student Accomodation Fund

TWENTY MOST VALUABLE RURAL LET

LAND AND STRATEGIC SITE HOLDINGS

Ashford Great Park, Ashford

Bishop Auckland

Bishopstone

Canterbury

Carlisle

Chester

Chichester

Ely

Exeter

Foremarke

Halsall

Huntingdon

Kelmscott

Peterborough

Rochester

South Durham

South Lincolnshire

Winchester

Wollaston

York

Notes:

1. The aggregate values of the holdings

shown in the three sectors above are

respectively 58%, 87% and 77% of the total

values of each sector.

2. These lists record the Commissioners’

most valuable stock exchange and property

holdings. Requests for further information

should be made to the Policy Unit - see

back cover for contact details.


The Church Commissioners and Board of Governors

61

at 1 January 2008

The Board of Governors transacts the functions

and business of the Commissioners except

where, by statute or through delegation by

the Board, these are exercised by Committees.

Except State office holders, all Church

Commissioners are members of the Board of

Governors.

The Most Reverend and Right Honourable

Dr R D Williams

Archbishop of Canterbury, Chairman

The Most Reverend and Right Honourable

Dr J T M Sentamu

Archbishop of York

Church Estates Commissioners appointed by:

HER MAJESTY

A Whittam Smith CBE

First Church Estates Commissioner

Sir Stuart Bell MP

Second Church Estates Commissioner*

THE ARCHBISHOP OF CANTERBURY

T E H Walker CB FRSA

Third Church Estates Commissioner

Elected by the General Synod

HOUSE OF BISHOPS

The Right Reverend and Right Honourable

Dr R J C Chartres Bishop of London

The Right Reverend M Hill, Bishop of Bristol

The Right Reverend I P M Cundy

Bishop of Peterborough

The Right Reverend S R Lowe Bishop of Hulme

HOUSE OF CLERGY

The Venerable R W B Atkinson OBE

The Venerable C N R Mansell

The Reverend S J Trott FRSA

HOUSE OF LAITY

Canon P N E Bruinvels FRSA

Canon E C Paver FRSA

G D R Oldham FSI

Mrs E C Osborne

Elected by the deans

The Very Reverend R W Grimley, Dean of Bristol

The Very Reverend Dr C Hardwick, Dean of Truro

Nominated by:

HER MAJESTY

R H Powers

Canon J A Spence OBE FCIBS FIFS FRSA

J Wythe FRICS

THE ARCHBISHOPS OF

CANTERBURY AND YORK

P Harrison QC

P W Parker TD FIA

J N Sykes

THE ARCHBISHOPS OF CANTERBURY

AND YORK

after consultation with others including the Lord

Mayors of the Cities of London and York and the Vice-

Chancellors of Oxford and Cambridge Universities

B Carroll

Sir Robert Finch

The Reverend R E Harrison

State office holders

The First Lord of the Treasury

The Lord President of the Council

The Secretary of State for the Home Department

The Secretary of State for Culture, Media and Sport

The Speaker of the House of Commons

The Speaker of the House of Lords

Secretary to the Church Commissioners

and Board of Governors

A C Brown FRICS

Assets Committee

Subject to any general rules made by the Board, has

an exclusive power and duty to act in all matters

relating to the management of the Commissioners’

assets

A Whittam Smith CBE Chairman

R H Powers

The Bishop of Bristol

The Venerable C N R Mansell

G D R Oldham FSI

P W Parker TD FIA

J N Sykes

B Carroll

J Wythe FRICS

Committee Secretary A C Brown FRICS

Audit Committee

Acts in matters relating to the external auditors, the

annual accounts and internal control systems

Canon J A Spence OBE FCIBS FIFS FRSA Chairman

R C Clarke FCA†

C D Daykin CB FIA†

Sir Robert Finch

P W Morriss CA†

Mrs E C Osborne

Committee Secretary K Parry MIIA DipCG

Bishoprics and Cathedrals Committee

Acts for the Board in matters relating to episcopal

and cathedral support

T E H Walker CB FRSA Chairman

The Bishop of Peterborough

The Dean of Bristol

The Dean of Truro

The Venerable R W B Atkinson OBE

The Reverend Canon J M Haselock†§

Ms S Bassham†§

P W Parker TD FIA

Mrs H Hill Representative of Bishops’ Wives†‡

Vacancy Archbishops’ Advisor

for Bishops’ Ministry†‡

Vacancy§

Committee Secretary Mrs H Sim

Management Advisory Committee

Has a general duty to advise the Board and, in

particular, on appointments and staff issues

A Whittam Smith CBE Chairman

T E H Walker CB FRSA

The Bishop of London

The Dean of Truro

The Venerable R W B Atkinson OBE

Canon P N E Bruinvels FRSA

Canon E C Paver FRSA

Sir Robert Finch

Committee Secretary A C Brown FRICS

Pastoral Committee

Acts for the Board in matters relating to pastoral

reorganisation, parsonages and diocesan glebe

T E H Walker CB FRSA Chairman

The Right Reverend W Ind,

Bishop of Truro† Deputy Chairman

The Dean of Truro

The Venerable D Gerrard†

The Reverend R E Harrison

The Reverend S J Trott FRSA

Mrs J M Atkinson†

Canon P N E Bruinvels FRSA

Mrs C McMullen†§

Canon E C Paver FRSA

Committee Secretary P Lewis MRTPI

Redundant Churches Committee

Acts for the Board in matters relating to the future

of churches declared redundant

T E H Walker CB FRSA Chairman

The Venerable C N R Mansell Deputy Chairman

The Bishop of Hulme

The Venerable J Duncan MBE†

The Reverend J Swanton†

The Reverend S J Trott FRSA

B Carroll

Mrs E C Osborne

C J Perrett†

C A Wilson†

Committee Secretary P Lewis MRTPI

* Entitled to attend and speak at any Committee

‡ Consultant or Observer

† Non-Commissioner

§ Nominated by the Archbishops’ Council

The Church Commissioners’ Annual Report &

Accounts for the year to 31 December 2007 have

been prepared by the Board of Governors and

will be presented to the Commissioners’ Annual

General Meeting in June 2008. They will be sent

to the Lord Chancellor and to the Secretary

General of the General Synod in accordance with

the Church Commissioners Measure 1947.


a

Further copies of this report may be

obtained free of charge from:

The Policy Unit

Church Commissioners

Church House

Great Smith Street

London SW1P 3AZ

Telephone 020 7898 1135/1619/1623

Fax 020 7898 1131

E-mail commissioners.enquiry@c-of-e.org.uk

Website www.cofe.anglican.org/about/churchcommissioners/

This report is printed on elemental chlorine

free paper taken from sustainable forests

Designed and produced

by Lawrence Cheung Limited

www.lawrencecheung.co.uk

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