Dear Mr Tod,

Firstly I must apologise for the time it has taken for my response, outside of the 20 day guideline for one of your requests.

This response addresses the 3 Freedom of information requests that I have received from you on this matter.

Butlers provide advice to the Council in the preparation of its Treasury Management Strategy which incorporates its Investment Strategy. The Council's Treasury Management Strategy is approved by the full Council, annually as a minimum.

The relevant Strategy at the time the investment in the Heritable Bank Ltd. was made can be found on the Council's website on the following link:

http://www.winchester.gov.uk/Download.asp?path=/Documents/Committees/Cabinet/1500_1599/CAB1599.pdf

This was approved by the full Council in February 2008.

Investments are made in accordance with the Policy, and Butlers support this by maintaining information on the Council's approved counterparties including advising of any changes to the ratings by the 3 main rating agencies: Fitch, Moody's and Standard and Poors.

As part of their regular provision of information Butlers advise daily of any changes to ratings, and provide weekly newsletters and a weekly “investment monitor” report.

Butlers' Weekly Investment Monitor on 7^th April 2008 included Fitch credit rating changes as follows:

Kaupthing Singer and Friedlander Ltd - Negative

Heritable Bank Limited - Negative

Glitnir - Negative

Landsbanki Islands HF - Negative

Butlers' Weekly Investment Monitor on 12^th May 2008 included Fitch credit rating changes as follows:

Kaupthing Singer and Friedlander Ltd - Rating Downgraded

Heritable Bank Limited - Negative rating watch removed

Glitnir - Rating Downgraded

Landsbanki Islands HF - Negative rating watch removed

There were no further changes to the ratings for Heritable Bank Limited until 30^th September 2008, when notification was received from Butlers as part of their daily update service.

Therefore, at the time of the Investment 16th September 2008 the Fitch ratings for Heritable Bank Ltd. were as follows:

Short term (less than a year) - "F1" where the definition of F1 is "Indicates the strongest capacity for timely payment of financial commitments”

Support rating "1" where the definition of 1 is “A bank for which there is an extremely high probability of external support. The potential provider of support is very highly rated in its own right and has a very high propensity to support the bank in question.”

On 30th September 2008 - Butlers advised the Council that the Fitch rating had been downgraded to F3 with a support rating of 3 and that this bank should be removed from the Council's counterparty list, which it was immediately.

On 9^th October we received a briefing note from Butlers on the Icelandic bank situation including evidence that the rating had been affirmed on 25 September 2008.

Heritable was a small UK Bank established in 1877, acquired in 2000 by Landsbanki.

The Council's Chief Executive undertook a review of the circumstances surrounding this investment and reported to Cabinet in November. The report can be found on the following link:

http://www.winchester.gov.uk/Download.asp?path=/Documents/Committees/Cabinet/1700_1799/CAB1752.pdf

The Investment Strategy was also reviewed in October:

http://www.winchester.gov.uk/Download.asp?path=/Documents/Committees/Cabinet/1700_1799/CAB1754.pdf

Butlers supported the review of the strategy by providing advice leading to the proposals.

I have not included copies of documents from Butlers with this response. This is because they are supplied to their clients on the understanding that they will not be copied to third parties. However, the information you have requested in relation to the nature of the advice given is included in this letter and the attached documents.

I trust this covers your questions.

Yours sincerely,

Alexis Garlick

Head of Finance

Winchester City Council

Colebrook Street

Winchester, SO23 9LJ

Tel: 01962 848 224

Email: [email address]