Investment Analysis Review
Monthly Economic Summary General Economy The Bank of England left the bank rate unchanged at a record low of 0.50% and explained it would keep its asset buying programme unchanged at 200billion in December, as expected by the market. This was the ninth month that the MPC kept bank rate on hold, since last September, having cut rates by a total of 4.5% to deal with Britain s first economic recession since the 1990 s. The UK's inflation rate accelerated at its fastest pace since May in November after a sharp jump in fuel and lubricants prices. The third estimate of the UK GDP, showed the economy was still in recession though improved from original estimates, with a upward revised third estimate of -0.3%q/q to -0.2%q/q, whilst the yearly figure remained at -5.1%. CPI rose 0.3%m/m in November, leaving the annual rate to rise to 1.9%y/y. RPI also rose higher than expected by 0.3%m/m in November, taking the yearly figure to +0.3%, the highest y/y pace since December 2008. Retail Sales dropped expectedly by 0.3% in November, the fastest pace since May, after the previous rate was revised up to +0.6%, taking the annual rate to +3.1%.The claimant count change fell in November for the first time in almost two years, whilst the ILO rate remained at 7.9%. The ONS said the claimant count fell by 6,300 against forecasts of a rise by 13,300 and also October s figure was more than halved to 5,900. CIPS PMI manufacturing index expanded at its fastest pace in more than two years in December to 54.1 from Novembers figure of 51.8. The headline services PMI rose to 56.8 in December from 56.6, though was its eighth successive month above the 50-level. UK manufacturing and Industrial production unexpectedly failed to grow in October, suggesting the economy made a weak start to the fourth quarter. Housing Market Nationwide house prices rose for the eighth month running in December by 0.4%m/m, taking the yearly figure to positive territory of +5.9%y/y, the highest since November 2007. Furthermore, the UK average house price recorded at 162,103. BBA reported that in November mortgage approvals rose to 44,713 from last month s reading of 42,552. The RICS house price balance rose to +35 in November, compared to +34 in October. The reading is the strongest since November 2006 and the organisation says that they expect the rises to continue. Currency Sterling started the month at $1.662 and reached a high of $1.665 before ending the month at $1.617. Sterling ended at 1.128 against the Euro having started the month at 1.101. The Euro started at $1.506 against the dollar, before ending the month at $1.434. Forecast Sector believes that the Bank rate will remain at 0.5% for the rest of the year although expects the next upward move to be Q3 2010 and eventually reaching 4.50% in March Bank Rate Mar-10 Jun-10 Sep-10 Dec-10 Mar-11 2013. UBS continues to believe that the bank rate will remain at 0.5% for the rest of the Sector 0.50% 0.50% 0.75% 1.00% 1.50% year and start to increase in Q3 of 2010, reaching 3% by the end of 2011. Capital UBS 0.50% 0.50% 0.75% 1.00% 1.50% Economics have not changed their forecast and believe that rates will be held at 0.5% for Capital Economics 0.50% 0.50% 0.50% 0.50% 0.50% up to five years, if things do not.
Current Investment List Borrower Principal ( ) Interest Rate Start Date Maturity Date Natwest Instant Access Account 9,670,000 0.80% call Abbey 2,000,000 0.88% 28/08/2009 26/02/2010 Barclays 1,000,000 0.90% 02/09/2009 02/03/2010 Abbey 1,000,000 0.79% 18/09/2009 18/03/2010 Abbey 2,860,000 0.80% 20/10/2009 20/04/2010 Barclays 2,940,000 0.50% 29/10/2009 29/01/2010 Northern Rock 1,900,000 0.55% 30/10/2009 29/01/2010 Abbey 1,840,000 0.80% 30/10/2009 29/04/2010 Barclays 4,030,000 0.48% 30/10/2009 29/01/2010 Lloyds TSB 2,000,000 1.33% 04/11/2009 04/05/2010 Abbey 2,300,000 0.81% 04/11/2009 29/04/2010 Northern Rock 5,000,000 0.52% 27/11/2009 12/01/2010 Northern Rock 1,660,000 0.52% 27/11/2009 12/01/2010 Stockport MBC 1,700,000 0.28% 01/12/2009 05/01/2010 Telford & Wrekin Council 2,000,000 0.28% 02/12/2009 04/01/2010 Telford & Wrekin Council 1,000,000 0.28% 02/12/2009 04/01/2010 Lloyds TSB 2,170,000 1.35% 03/12/2009 03/06/2010 Sheffield City Council 3,850,000 0.28% 03/12/2009 14/01/2010 Coventry Building Society 2,590,000 0.45% 04/12/2009 04/01/2010 Lloyds TSB 950,000 1.08% 04/12/2009 04/03/2010 Clydesdale 3,260,000 0.40% 07/12/2009 08/01/2010 North Warwickshire B.C 2,000,000 0.30% 07/12/2009 07/01/2010 Bournemouth B.C 1,760,000 0.27% 08/12/2009 05/01/2010 DMO 1,490,000 0.30% 09/12/2009 11/01/2010 Exeter City Council 2,950,000 0.32% 10/12/2009 05/01/2010 Barnsley MBC 1,930,000 0.31% 14/12/2009 14/01/2010 Barnsley MBC 3,820,000 0.31% 14/12/2009 14/01/2010 Lloyds TSB 5,000,000 1.82% 15/12/2009 15/12/2010 DMO 5,000,000 0.30% 15/12/2009 18/01/2010 DMO 4,000,000 0.30% 16/12/2009 11/01/2010
Current Investment List Borrower Principal ( ) Interest Rate Start Date Maturity Date DMO 4,000,000 0.30% 16/12/2009 13/01/2010 Stirling Council 3,080,000 0.35% 18/12/2009 18/01/2010 Clydesdale 3,240,000 0.40% 18/12/2009 20/01/2010 Salford City Council 3,200,000 0.35% 21/12/2009 08/01/2010 Nationwide B Soc 2,130,000 0.41% 21/12/2009 21/01/2010 Redditch B.C 1,000,000 0.32% 22/12/2009 19/01/2010 Coventry Building Society 1,410,000 0.45% 29/12/2009 29/01/2010 Lloyds TSB 4,880,000 1.35% 31/12/2009 30/06/2010 Nationwide B Soc 3,650,000 0.41% 31/12/2009 29/01/2010 Total Investments 110,260,000 0.61%
Portfolio Decomposition by Sector's Suggested Lending Criteria 90% 80% 70% 60% 50% 40% 30% 20% 10% Purple Purple Calls Blue Blue Calls Orange Orange Calls Red Red Calls Green Green Calls No Colour NC Calls 0% Under 1 Month 1-3 Months 3-6 Months 6-9 Months 9-12 Months 12 Months + Up to 2 Years Up to 1 Year Up to 1 Year Up to 6 Months Up to 3 Months No Colour WARoR = Weighted Average Rate of Return WAM = Weighted Average Time to Maturity % of Colour Amount of % of Call Excluding Calls/MMFs % of Portfolio Amount in Calls Colour in Calls in Portfolio WARoR WAM WAM at Execution WAM WAM at Execution Purple 38.80% 42,780,000 0.00% 0 0.00% 0.31% 12 30 12 30 Blue 22.37% 24,670,000 39.20% 9,670,000 8.77% 1.22% 133 144 218 237 Orange 0.00% 0 0.00% 0 0.00% 0.00% 0 0 0 0 Red 16.83% 18,560,000 0.00% 0 0.00% 0.68% 61 123 61 123 Green 18.37% 20,250,000 0.00% 0 0.00% 0.46% 25 59 25 59 No Colour 3.63% 4,000,000 0.00% 0 0.00% 0.45% 13 31 13 31 100.00% 110,260,000 8.77% 9,670,000 8.77% 0.61% 49 77 54 84
Date Update Number Shropshire Council Monthly Credit Rating Changes FITCH Institution Country Rating Action 01/12/2009 667 Singapore Banks Singapore Limited impact on Singapore Banks from Dubai's debt standstill. 01/12/2009 669 UK Major Banks UK UK major bank ratings likely to be unaffected by middle east exposures. 02/12/2009 670 Mizuho Corporate Bank Ltd Japan Individual rating downgraded and removed from Negative Watch. Outlook on L/T rating is 'Stable'. 02/12/2009 672 Chelsea Building Society UK L/T and Individual ratings placed on a 'Positive Watch'. 02/12/2009 672 Yorkshire Building Society UK All ratings affirmed, whilst the L/T on a 'Stable Outlook'. 02/12/2009 673 EBS Building Society Ireland L/T and Individual ratings placed on a 'Positive Watch' whilst the S/T remains on 'Negative Watch' 03/12/2009 676 Merrill Lynch International Bank Ltd Ireland Individual rating upgraded and all other ratings affirmed. 09/12/2009 681 Allied Irish Banks plc Ireland S/T rating downgraded and removed from 'Negative Watch'. 09/12/2009 681 Bank of Ireland Ireland S/T rating downgraded and removed from 'Negative Watch'. 09/12/2009 681 EBS Building Society Ireland S/T rating downgraded and removed from 'Negative Watch'. 09/12/2009 684 Northern Rock Plc UK L/T rating upgraded with 'Stable Outlook'. Individual rating withdrawn and support rating removed from Negative Watch. 17/12/2009 687 Landshypotek AB Sweden L/T rating placed on 'Negative Outlook' and all other ratings affirmed. 18/12/2009 689 HSBC Bank Plc UK Individual rating downgraded. L/T rating placed on 'Stable Outlook' and other ratings affirmed. 18/12/2009 692 HSBC Bank USA, NA USA Individual rating downgraded. L/T rating placed on 'Stable Outlook' and other ratings affirmed. 18/12/2009 693 The Royal Bank of Scotland Group UK Individual rating upgraded and all other ratings affirmed. L/T remains on 'Stable Outlook'. 18/12/2009 693 The Royal Bank of Scotland Plc UK Individual rating upgraded and all other ratings affirmed. L/T remains on 'Stable Outlook'. 21/12/2009 694 Norddeutsche Landesbank Girozenrale Germany Individual rating downgraded, whilst all other ratings affirmed. L/T rating remains on 'Stable Outlook'. 21/12/2009 695 Caixa Geral de Depositos Portugal Individual rating downgraded, whilst all other ratings affirmed. L/T rating remains on 'Negative Outlook'. 22/12/2009 697 State Street Bank and Trust Company USA Individual rating upgraded, whilst L/T and S/T ratings affirmed. L/T remains on 'Stable Outlook'.
Date Update Number Shropshire Council Monthly Credit Rating Changes MOODY'S Institution Country Rating Action 01/12/2009 668 UAE & Abu Dhabi Sovereign rating UAE & Abu Dhabi Dubai World restructuring unlikely to threaten sovereign credit of UAE and Abu Dhabi. 02/12/2009 671 Chelsea Building Society UK All ratings are 'under review for possible upgrade'. 02/12/2009 671 Yorkshire Building Society UK All ratings affirmed, with the L/T and FSR ratings placed on 'Negative Outlook'. 09/12/2009 682 Anglo Irish Bank Corporation Ltd Ireland L/T and S/T ratings placed 'under review for possible downgrade'. 11/12/2009 686 Swiss Banking System Switzerland Fundamental credit outlook is 'Negative'. 21/12/2009 696 DnB NOR Bank ASA Norway FSR rating placed on 'Negative Outlook', whilst L/T rating remains on 'Stable Outlook'. 22/12/2009 698 Ulster Bank Ltd UK FSR rating downgraded, whilst both the FSR and L/T placed on 'Negative Outlook'.
Date Update Number Shropshire Council Monthly Credit Rating Changes S&P Institution Country Rating Action 02/12/2009 674 Yorkshire Building Society UK L/T rating placed on a 'Negative Outlook', whilst all ratings have been affirmed. 03/12/2009 675 Emirates Bank International UAE L/T rating downgraded, whilst both L/T and S/T ratings remain on 'Negative Watch'. 07/12/2009 678 Portuguese Sovereign Rating Portugal Sovereign rating placed on 'Negative Outlook'. 07/12/2009 679 Banco Santander Totta Portugal L/T rating placed on 'Negative Outlook' and all ratings affirmed. 08/12/2009 680 Cooperative Centrale Raiffeisen-Boerenleenbank Netherlands L/T rating placed on 'Negative Outlook' and all ratings affirmed. 09/12/2009 683 Northern Rock Plc UK L/T and S/T ratings removed from 'Negative Watch'. L/T remains on 'Stable Outlook'. 09/12/2009 685 Spain Sovereign Rating Spain Sovereign rating placed on 'Negative Outlook'. 18/12/2009 688 Banco Popolare Societa Cooperativa Italy L/T rating placed on 'Negative Outlook' and all ratings affirmed. 18/12/2009 690 DnB NOR Bank ASA Norway L/T and S/T ratings downgraded whilst the L/T rating placed on 'Stable Outlook'. 18/12/2009 691 Danske Bank Denmark L/T rating downgraded and remains on 'Negative Outlook', whilst S/T rating is affirmed.