Fitch: Money Market Fund Criteria Update and Funds SMART Tool

1. 0 Fitch: Money Market Fund Criteria Update and Funds SMART Tool Roxana MahboubianDirector, London

2. Agenda

3. Agenda

4. 3 Background Market events of 2007 and 2008 fundamentally challenged the way money market funds (MMF) operate globally Credit deterioration lead to near or actual fund failures Sudden and significant rise in redemption requests Illiquid secondary markets Absent sponsor support more fund losses likely Heterogeneous MMF universe in Europe To date country regulations provided no precise and risk-limiting provisions Risk profiles vary

5. 4 Growth in Offshore �AAA� Rated Money Market Funds

6. 5 Evolution of Asset Class Breakdown �AAA� Rated Money Market Funds

7. 6 Variance Among Money Market Funds

8. Agenda

9. 8 Fitch�s MMF Rating Highlights Only rating agency to update criteria post financial crisis New money market fund rating scale Provides clear definitions and improved transparency Better differentiates MMF ratings from ratings on debt instruments and higher-risk bond funds Addresses credit, market and liquidity risks Speaks to full repayment of principal upon demand

10. 9 Value of a Fitch�s Money Market Fund Rating For investors A standardized measure of risk on capital and liquidity Regular surveillance (of portfolios and managers) Independent publications (paper and online) For fund providers An international benchmark in an increasingly global market A factual risk analysis in a moving regulatory environment An independent opinion

11. Agenda

12. 11 Criteria Highlights Only highest credit quality, short-term investments Portfolio credit factor (PCF) matrix � evaluates portfolio credit risk on the basis of asset maturity and credit quality Enhanced diversification criteria accounting for both direct and indirect (ABCP, repo, etc) exposures Updated criteria for measuring portfolio liquidity and ability to meet�redemptions Weighted average days to final maturity (WAMF) introduced as spread risk metric. Complements existing weighted average days to reset (WAMR) measure of interest rate risk Limits on counterparty risk and leverage Revised framework for evaluating the role of the fund�s sponsor, including possibility of implicit support, if needed in times of stress

13. 12 Summary of �AAAmmf� Global MMF Rating Guidelines

14. 13 Evaluating the Roles of Fund�s Sponsor and Investment Advisor Differentiating factor in Fitch MMF ratings vs. other MMF ratings Intrinsic quality of the fund on a stand alone basis remains the primary source of protection for investors However, the sponsor/investment advisor is an important rating�consideration Fund sponsor�s role is multifaceted and includes Operational oversight and controls Infrastructure capabilities Potential support during periods of severe stress A weak sponsor or a tightly resourced manager may lead to more conservative guidelines at the same rating level Support is viewed as implicit since there is no contractual guarantee Evaluated in the context of implicit willingness and ability

15. 14 Criteria Highlights at �AAmmf� and �Ammf� Levels

16. 15 Fitch�s Short-Term Bond Fund Ratings Short-term bond fund rating criteria updated in Q110 Two measures of risk: A fund credit rating and a complementary fund volatility rating Fund credit rating is an opinion as to the vulnerability to losses as a result of defaults in a bond fund portfolio Fund volatility rating is an opinion as to the relative sensitivity of a portfolio�s total return and/or net asset value to assumed changes in market risk parameters While highly rated funds (ie �V1� rated) are expected to offer good liquidity and limited risk on NAV, they are not comparable to Fitch-rated money market funds, where the core investment objective is capital preservation and liquidity Generally, short term bond funds (incl. higher risk broad MMF under CESR definition) are rated �AAA� or �AA�/�V1� or �V2�

17. 16 Profiling European MMF (Under New CESR Rules)

18. Agenda

19. 18 Surveillance: Integral Part of the Rating Surveillance process is critical to ensure existing fund ratings remain appropriate Weekly to monthly surveillance checks against Fitch�s rating�guidelines Based on portfolio holdings and key credit, market and liquidity risk�metrics Monitor mark-to-market valuation and investor concentrations Frequency increased during periods of stress Annual onsite reviews to assess sponsor, processes, procedures and systems Fund profiles and commentaries

20. 19 Beyond the Rating: Funds SMART Consistent portfolio analytical framework covers all Fitch-rated MMF Provides fund-level summaries and analytical metrics, including Rating history, rating rationale and fund general information Portfolio composition by asset type and credit quality Portfolio maturity distribution, WAMf and WAMr Evolution of portfolio credit factor, PCF (from January 2010) Evolution of fund�s total assets and yield Updated on a monthly basis Based on fund surveillance reports submitted to Fitch Available to investors on Fitch web-site at no charge www.fitchratings.com/surveillance/funds On top of rating actions and fund profiles (currently published annually)

21. 20 Funds SMART � Rating Transparency and�Surveillance

22. 21 Funds SMART � Rating Transparency and Surveillance (cont.)

23. Agenda

24. 23 Research Activity European money market funds quarterly US money market funds quarterly Investors� Q&A Topical reports and commentaries

25. Agenda

26. 25 Why Fitch?

27. Appendices

28. 27 Appendix 1: Fitch Today Majority-owned subsidiary of Fimalac S.A., an international business support services group headquartered in Paris, France Dual Headquarters in London and New York 2,104 employees, across 51 offices

29. 28 Appendix 2: Global Presence (March 2010)

30. 29 Appendix 3: Recent Criteria Reports, Research Notes and Commentaries

31. 30 Appendix 3: Recent Criteria Reports, Research Notes and Commentaries (cont.)

32. 31 Appendix 3: Recent Criteria Reports, Research Notes and Commentaries (cont.)

33. 32 Appendix 4: Fitch�s FAM Group Contacts in EMEA