1 Annual Investment Strategy

1.1 This proposed Annual Investment Strategy has been prepared in accordance with guidance issued under section 15(1)(a) of the Local Government 2003.

1.2 When investing its surplus funds, the Council's investment priority is to continue to maintain the security of capital and maintain policy flexibility through liquidity of its investments. The Council will aim to achieve the optimum return on its investments commensurate with the proper levels of security and liquidity.

1.3 Accordingly, only `specified investments' will be used in 2008/09. These categories of investment are defined in the Government's guidance as offering both high security and liquidity.

1.4 In particular, the Council's surplus funds will either be invested in:-

· fixed-term deposits for periods of up to 364 days with local authorities, the Government's Debt Management Office, or banks and building societies rated at least A2 by Moody's (a Government-recognised credit rating agency) that are included on the Council's lending list;

· call deposits with both the Bank of Scotland (rated AA2) and NatWest Bank (rated AAA); and

· call / 7-day notice deposits with three managed AAA-rated money market funds included on the Council's lending list.

1.5 The `call deposits' may be recalled by the County Council at any time. The Council's cash flow position will be monitored on a daily basis and adjustments made as necessary to the funds placed on call.

1.6 The Council's lending list includes the major UK clearing banks and building societies, two highly-rated European banks, the Government's Debt Management Office and all UK local authorities.

1.7 The lending list is reviewed quarterly using Moody's ratings. Institutions will be removed immediately from the list if any doubt is cast on their credit worthiness, pending confirmation of the position by Moody's.

1.8 Limits are placed on levels of total deposits made with individual institutions.

1.9 An overall review of the lending list, including the money market funds and the investment limits is undertaken annually.

1.10 Changes to the lending list and the limits on investments will be subject to the approval of the County Treasurer.

1.11 Other, or `non-specified', investments will not be used.

1.12 Treasury management staff operate within detailed parameters set out in an internal code of practice, which takes account of the Code of Practice on Treasury Management and other guidance issued by CIPFA.