J'C' Rathbone Associates Limited

1
J.C. Rathbone Associates Limited
2
West of Scotland Finance ForumSeptember 2007

• Jackie Bowie
• Director
• JC Rathbone Associates

3
Overview

• Intro Financial Risk Management
• Treasury Management Policy
• Construction
• Ongoing monitoring
• Focus on Interest Rate Hedging
• Common Hedging Instruments
• Housing Association Case Study
• Role of the lenders and advisors

4
Financial Risk Management

• Funding Requirements
• Timing
• Risk Exposures
• Interest Rates applies debt and cash
• Forecasts
• Sensitivity in the budget

5
TMP

• Addresses all issues concerning funding, cash
  management, interest rate risk.
• Policy guidance/template only
• Reviewed on annual basis

6
TMP

• Authorisation
• Process
• Parameters for decisions
• Reduce subjective judgement
• Remove arbitrary input

7
Interest Rate Hedging

• Usually controlling exposure to rising interest
  rates
• Floating rate loan
• Base rate versus LIBOR
• Interest costs move with underlying interest rates

8
Why hedge?

• Could be mandatory
• Risk Reduction
• Accurate Forecasting/Controls
• Statement within TMP

9
What hedging is not..

• Speculation
• Costly/Expensive
• About being locked in

10
Making a hedging decision

• Business Plan/Budget Rate
• Opportunity Cost
• Attitude to risk
• Market expectations

11
Yield Curves
12
Instruments

• Interest rate swap
• Interest rate cap
• Interest rate collar
• Swaptions
• Embedded structures
• Enhanced options
• Cancellable swaps
• Combinations

13
HA Considerations

• Credit Spreads/Bank Charges
• Documentation ISDA versus Loan
• Difference between stand alone and in underlying
  loan

14
Appendix
15
Presenters CV

• Jackie Bowie has over 10 years financial markets
  experience having spent the last decade as a US
  equity Fund Manager and equity analyst. Jackie
  has held senior positions with Aegon Asset
  Management and Murray Johnstone Ltd. Jackie
  joined JC Rathbone in August 2004 to augment the
  expertise in the Scottish office. Jackie is a
  Director of the firm and has responsibility for
  all regions outside London.
• She has a First class Honours degree in
  Economics from Strathclyde University, an MSc in
  Investment Analysis and is a fully qualified
  member of the Society of Investment
  Professionals.

16
Who we are?

• Independent and FSA regulated
• 18 years old, 5 UK offices
• Specialist consultants and dedicated pricing team

17
What we do

• Debt raising and funding advice
• Constructing or advising on TMP
• Interest rate hedging advice
• Align hedging with overall objectives
• Tailor strategy to exact requirements
• Independently benchmark all pricing
• FX, Structured Finance, Commodity hedging

18
Client Sectors

• Property
• Investors, developers, funds, partnerships
• Private Equity/Corporate/General Cos
• Not for profit
• Social Housing, PFI, Universities

19
JC Rathbone

• Diverse client list across all sectors
• In depth market expertise
• Implementing 2bn hedging transactions per month
• Excellent client testimonials
• Majority new business from referrals
• 80 repeat business rate
• Focused post transaction contact

20
J.C. Rathbone Associates Limited