Standard Poors Fund Ratings How SP applies its

Standard & Poor’s Fund Ratings How S&P applies its Fund Ratings Criteria to Local Government Investment Pools Government Investment Officers Association Annual Conference Anthony Ivancich Client Business Manager, Associate Director Fund Ratings & U. S. Public Finance Ratings March 21, 2012 Permission to reprint or distribute any content from this presentation requires the prior written approval of Standard & Poor’s. Copyright © 2011 Standard & Poor’s Financial Services LLC, a subsidiary of The Mc. Graw-Hill Companies, Inc. All rights reserved.

Agenda/Talking Points 2. • Overview of the Fund Ratings Group • Principal Stability Fund Ratings (PSFRs) or ‘m’ ratings • Fund Credit Quality & Volatility Ratings (FCQRs & FVRs) or ‘f’ ratings • Differences between ‘m’ & ‘f’ ratings • Reasons Why Pools Request Ratings • Fund Rating Process and Additional Services • Surveillance Process • Rated Government Investment Pools (LGIPs) Indices • Impact of Recent US Downgrade on Rated LGIPs • Q&A Permission to reprint or distribute any content from this presentation requires the prior written approval of Standard & Poor’s.

Overview of Standard & Poor’s Fund Ratings • Rating Funds Since December 1983 • Funds Group Officially Formed In 1989 • Provide value-added fund safety, credit and volatility ratings, portfolio evaluations, monitoring for fixed-income funds, government investment pools, exchange traded funds, separate accounts and municipal debt issuers • Comprised of 20+ fund analysts in 5 countries averaging 10+ years of fixedincome and fund ratings experience • Provides ratings and evaluations for over 950+ “funds” globally, from over 250 sponsors: Ø 750+ Principal Stability Fund Ratings Ø 200+ Fund Credit and Volatility Rated funds Ø Includes 90+ Local Government Investment Pools Ø Includes approximately 60+ Liquidity Assessments 3. Permission to reprint or distribute any content from this presentation requires the prior written approval of Standard & Poor’s.

States with Rated Local Government Investment Pools/Portfolios 4. Permission to reprint or distribute any content from this presentation requires the prior written approval of Standard & Poor’s.

Number of Rated Pools 5. Permission to reprint or distribute any content from this presentation requires the prior written approval of Standard & Poor’s.

Total S&P Rated LGIP Assets (As of November 2011) 6. Permission to reprint or distribute any content from this presentation requires the prior written approval of Standard & Poor’s.

List of Principal Stability Rated LGIP’s 7. Permission to reprint or distribute any content from this presentation requires the prior written approval of Standard & Poor’s.

List of Principal Stability Rated LGIP’s (continued) 8. Permission to reprint or distribute any content from this presentation requires the prior written approval of Standard & Poor’s.

List of Fund Credit Quality Rated LGIP’s 9. Permission to reprint or distribute any content from this presentation requires the prior written approval of Standard & Poor’s.

Types of Government Investment Pool (Fund) Ratings Principal Stability Fund Ratings • Assigned to funds whose investment policies are consistent with providing a stable or accumulating NAV (i. e. 2 a-7 $1. 00 NAV funds) ð max WAM to Reset 60 days (AAAm) ð max WAM to Final 90 -120 days (AAAm) ð max final maturity 397 days (fixed rate) ð high credit quality (Tier 1 only) ð highly diversified (issuers, counterparties, etc. ) • Assigned to funds with investment policies beyond what is permitted by rule 2 a-7 (i. e. Variable NAV Funds) ð max WAM to Reset > 90 days ð max WAM to Final > 120 days ð max final maturity > 397 days (fixed rate) • Fund Credit Quality Ratings • Also known as Money Market Fund Ratings or Stable NAV Fund Ratings ðAddresses level of protection a fund’s portfolio holdings provide against losses from credit defaults • Represented by ‘m’ suffix after the traditional rating symbology (AAAm) ðRepresented by ‘f’ suffix after the traditional rating symbology (AAAf) • Address the ability of a fund to maintain principal stability and to limit exposure to principal losses due to credit risk 10. Fund Credit Quality & Volatility Ratings • Fund Volatility Ratings ðRepresented by ‘S’ scale (S 1, S 2, etc. ) ðAddresses a fund’s sensitivity to changing market conditions Permission to reprint or distribute any content from this presentation requires the prior written approval of Standard & Poor’s.

Estimated Risk/Reward Tradeoff of S&P Fund Ratings 11. Permission to reprint or distribute any content from this presentation requires the prior written approval of Standard & Poor’s.

Principal Stability Fund Ratings 12. Permission to reprint or distribute any content from this presentation requires the prior written approval of Standard & Poor’s.

Rated Principal Stability Fund (MMF) Statistics (US) # Rated Taxable Funds # Rated Tax Exempt Funds Total # Rated Funds May-07 666 100 766 Jun-08 728 127 855 Jun-09 675 104 779 Jun-10 657 109 766 Jun-11 652 114 766 Rated Taxable-Assets (Billions) Rated Tax-Exempt-Assets (Billions) Overall Rated Funds-Assets (Billions) May-07 $ 1, 016 $ 90 $ 1, 106 Jun-08 $ 1, 737 $ 150 $ 1, 887 Jun-09 $ 2, 091 $ 139 $ 2, 230 Jun-10 $ 1, 525 $ 106 $ 1, 631 Jun-11 $ 1, 549 $ 97 $ 1, 646 Source: Rated Money Fund Report 13. Permission to reprint or distribute any content from this presentation requires the prior written approval of Standard & Poor’s.

Principal Stability Fund Ratings Definitions AAAm A fund rated 'AAAm' demonstrates extremely strong capacity to maintain principal stability and to limit exposure to principal losses due to credit risk. 'AAAm' is the highest principal stability fund rating assigned by Standard & Poor's. AAm A fund rated 'AAm' demonstrates very strong capacity to maintain principal stability and to limit exposure to principal losses due to credit risk. It differs from the highest-rated funds only to a small degree. Am A fund rated 'Am' demonstrates strong capacity to maintain principal stability and to limit exposure to principal losses due to credit risk, but is somewhat more susceptible to the adverse effects of changes in circumstances and economic conditions than funds in higher-rated categories BBBm A fund rated 'BBBm' demonstrates adequate capacity to maintain principal stability and to limit exposure to principal losses due to credit risk. However, adverse economic conditions or changing circumstances are more likely to lead to a reduced capacity to maintain principal stability. BBm A fund rated 'BBm' demonstrates speculative characteristics and uncertain capacity to maintain principal stability. It is vulnerable to principal losses due to credit risk. While such funds will likely have some quality and protective characteristics, these may be outweighed by large uncertainties or major exposures to adverse conditions. Dm A fund rated 'Dm' has failed to maintain principal stability resulting in a realized or unrealized loss of principal. Plus (+) or minus (-) The ratings may be modified by the addition of a plus (+) or minus (-) sign to show relative standing within the rating categories. 14. Permission to reprint or distribute any content from this presentation requires the prior written approval of Standard & Poor’s.

Overview of Standard & Poor’s Fund Ratings A S&P Principal Stability Fund Rating Is… A S&P Principal Stability Fund Rating Is NOT… • An opinion on relative safety of invested principal. • A guarantee. • An indication of the extent to which a portfolio is comprised of high credit quality instruments. • An indication of the willingness and/or ability of sponsor to provide support. • A comment on the yield or performance. • An indication investments are risk free. • A weekly review of the investment holdings and key fund statistics including but not limited to NAV, WAM and asset flows. • An indication of the extent to which a fund provides principal stability. • Impacted by fund management’s decision to make payments in kind versus cash. • Impacted by a fund management’s decision to suspend redemptions (i. e. do not guarantee daily liquidity). • An independent, third party review of management’s experience, operations and controls. 15. Permission to reprint or distribute any content from this presentation requires the prior written approval of Standard & Poor’s.

PSFR Criteria Summary Table (Changes in Red) Rating AAAm Minimum Maximum A-1+ & A-1 WAM (R) in WAM (F) in A-1 ≤ 5 > 5 business Days¶ business days* days 50% 60 90 NAV Ranges § Max Final Maturity Per Fixed Rate Security Max Final Maturity Per Floating Rate Security 0. 25% (0. 9975 to 1. 0025) 13 months (397 days) Two Years (762 days) AAm 20% 80% 70 100 0. 30% (0. 9970 to 1. 0030) 13 months (397 days) Three Years (1, 127 days) Am 0% 100% 80 110 0. 35% (0. 9965 to 1. 0035) 13 months (397 days) Four Years (1, 492 days) BBBm 0% 100% 90 120 0. 40% (0. 9960 to 1. 0040) 13 months (397 days) Five Years (1, 857 days) *Exposures to securities rated below 'A-1' are "higher-risk investments. " ¶ May be adjusted upward by 30 days if invested only in government/GSE floaters rated 'AA-' or higher. If a fund invests in a combination of government floaters rated 'AA-' or higher and nongovernment floating-rate instruments (or sovereigns rated below 'AA-'), the maximum is based on the weighted average of exposures to each type of floater. §For all funds, regardless of rating, daily portfolio pricing, daily marked-to-market NAV calculations, and daily stress testing commence when NAV goes beyond +/- 0. 15% deviation or 0. 9985 or 1. 0015. 16. Permission to reprint or distribute any content from this presentation requires the prior written approval of Standard & Poor’s.

Differences in Criteria for Rated & Unrated PSFRs Non AAAm Am Rated Max Fund WAM (R) 60 days 70 days 80 days Max Fund WAM (F) 120 days 90* days 100* days 110* days Max maturity per security (Floating - Government) None 2 years 3 years 4 years Max maturity per security (Fixed & Floating - Corp) 397 days Minimum A-1+ allocation N/A 50% 20% 0% Maximum A-1 allocation N/A 50% 80% 100% Maximum A-2 allocation 3% 0% 0% 0% Discretionary Weekly Max per Security/Industry 5%/25% Max per Repo Counterparty Unrestricted Restricted 10%/30% N/A N/A Maturity Credit Quality Pricing Frequency Diversification Minimum Liquidity Overnight/7 days * WAM(F) criteria for all rating categories may be adjusted upward by 30 days (e. g. 'AAAm' 120 days) if a fund invests only in national government (sovereign) and/or government-sponsored entity (GSE) floating-rate notes. In addition, if a fund invests in a combination of government and nongovernment floating-rate instruments, a sliding scale between 90 and 120 days will be applied based on percentage exposures to each type of floater. 17. Permission to reprint or distribute any content from this presentation requires the prior written approval of Standard & Poor’s.

Cure Periods Metric/Threshold Category Cure Period* NAV Up to 5 business days % of portfolio Downgrades below ‘A-1’ ≤ 0. 5% >0. 5% ≤ 1. 0% >1. 0% ≤ 5. 0% >5% = 397 calendar days = 120* calendar days = 60* calendar days = 7 calendar days * Regardless of the short-term rating, if the long-term rating is 'BBB+' and on Credit. Watch negative or 'BBB' or lower, the cure period drops to seven calendar days. Maturity 10 business days 10% illiquid/limited liquidity bucket 10 business days Diversification 10 business days Overall Credit Quality (i. e. , 50% maximum in A-1) 10 business days * NOTE: The cure period related to a breach applies only to that specific metric/threshold and to no others and begins on the date the breach occurs. All cure periods are based on a fund's NAV remaining within the ranges outlined for each rating category (i. e. , AAAm +/- 0. 25%) 18. Permission to reprint or distribute any content from this presentation requires the prior written approval of Standard & Poor’s.

Fund Credit Quality & Volatility Ratings 19. Permission to reprint or distribute any content from this presentation requires the prior written approval of Standard & Poor’s.

Fund Credit Quality Ratings Symbols & Definitions AAAf Portfolio holdings provide VERY STRONG protection against losses from credit defaults Af Portfolio holdings provide STRONG protection against losses from credit defaults BBBf Portfolio holdings provide ADEQUATE protection against losses from credit defaults BBf Portfolio holdings provide UNCERTAIN protection against losses from credit defaults Bf CCCf 20. Portfolio holdings provide EXTREMELY STRONG protection against losses from credit defaults Portfolio holdings provide VULNERABLE protection against losses from credit defaults Portfolio holdings provide EXTREMELY VULNERABLE protection against losses from credit defaults Permission to reprint or distribute any content from this presentation requires the prior written approval of Standard & Poor’s.

Fund Credit Quality Ratings Methodology Ø Evaluation of Fund’s Portfolio Credit Risk § Use of credit matrix approach derived from S&P’s historical default and ratings transition studies based on singular, discrete, worst-case one-year default rates experienced since 1981. § Factors and scores from matrix applied to fund’s portfolio holdings. § All securities rated by a nationally recognized statistical rating organisation. Ø Maturity of Securities Considered § Maturity buckets within matrix distinguish long term securities from short term securities. § Recognises that probability of default decreases as security nears maturity. Ø Treatment of Non-Standard & Poor’s Rated Issues § Securities rated by other rating agencies (not exceeding 25% in total) are “haircut” for purposes of credit matrix score. Ø Management § Detailed assessment of depth and quality of research and analysis, consistency of approach, and risk tolerance. Ø Qualitative Credit Overlay Process § The strength of manager’s overall credit analysis may allow rating to be enhanced by one notch. 21. Permission to reprint or distribute any content from this presentation requires the prior written approval of Standard & Poor’s.

S&P Fund Credit Quality Rating Matrix 22. Permission to reprint or distribute any content from this presentation requires the prior written approval of Standard & Poor’s.

Principal Stability Fund Ratings Definitions Rating Pool’s Sensitivity To Changing Market Conditions Aggregate Risk Level S 1* S 2 S 3 S 4 S 5 S 6 Low To Moderate To Highest 1 To 3 Year U. S. Governments 3 To 7 Year U. S. Governments 7 To 10 Year U. S. Governments 10+ Year U. S. Governments Concentrated, Illiquid /Leveraged Highly Speculative * Within the S-1 category certain pools may be designated with a plus sign (+). This indicates the pool’s extremely low sensitivity to changing market conditions. Additionally, these pools possess a risk level that is less than or equal to a portfolio comprised of the highest quality instruments with an average maturity of one year or less. 23. Permission to reprint or distribute any content from this presentation requires the prior written approval of Standard & Poor’s.

Volatility Ratings Methodology Portfolio-level risk analysis § Focuses on interest rate risk, currency risk, credit quality, liquidity, concentration, call and option risks. The effects of various portfolio strategies such as the use of leverage, hedging, and derivative instruments are also factored in. Historical return volatility analysis § A minimum of 36 months are looked at in relation to established fixed income government indices with different maturity bands and we review how past volatility relates to the portfolio’s investment objectives and construction process Management assessment § In depth understanding of different factors that could affect a fund’s overall risk profile: Management sophistication and experience, portfolio strategies, internal research capabilities, risk controls, portfolio rotation, etc. 24. Permission to reprint or distribute any content from this presentation requires the prior written approval of Standard & Poor’s.

Process & Application of Criteria 25. Permission to reprint or distribute any content from this presentation requires the prior written approval of Standard & Poor’s.

Summary of Main Differences Amongst ‘m’& ‘f’ ratings Principal Stability Fund Ratings; aka Money Market Fund Ratings (eg. ‘AAAm’) Fund Credit Quality & Volatility Ratings; aka Bond Fund Ratings (eg. ‘AAAf/S 1’) Eligible Investments We require a short term rating of at least ‘A-1’. If it is not rated by The securities must be rated by S&P or another NRSRO. (According to Rating) S&P but has the highest short-term rating of another NRSRO, it If it is unrated by S&P, certain notching rules may apply. must either be backed by a highly rated LOC provider, or have an S&P long term rating of at least ‘AA’. Ratings Breakdown For ‘AAAm’ rated funds, at least 50% must be in ‘A-1+’, with the There is no minimum requirement, but the outcome of other 50% in ‘A-1’ securities. For ‘AAm’ funds, 20% is required in the rating will be dependent on our “ratings matrix. ” The ‘A-1+’, with the other 80% in ‘A-1’ securities, with up to 5% in Fund Credit Quality Ratings Matrix takes into account the overnight ‘A-2’ securities. For ‘Am’ funds, 100% may be in ‘A-1’, rating on the security (long term or short term), the with up to 10% in overnight ‘A-2’ securities. maturity (< 90 days, > 90 but < = 365 days, > 365 days), and the percentage held by the fund in each security. Types of Securities Common security types are Repurchase Agreements, Fixed and Common security types are Mortgage Backed Securities, Floating Corporate Bonds, Commercial Paper, Certificates of Fixed and Floating Rate Corporate Bonds, Commercial Deposits, U. S. Treasury Securities, U. S. Agency Securities, etc. Paper, Certificates of Deposits, U. S. Treasuries, U. S. Agencies, Municipal Bonds, etc. Reporting Frequency Fund must submit weekly surveillance. 26. Fund must submit monthly surveillance. NAV When the NAV of a ‘AAAm’ rated fund moves outside 0. 9985 and The NAV may fluctuate but a material deviation may 1. 0015, daily pricing is required. If the NAV for a ‘AAAm’ fund impact the fund volatility rating. continues to deviate beyond 0. 9975 or 1. 0025, rating action may be taken. Weighted Average Maturity (WAM) Guidelines ‘AAAm’ - 60 days, ‘AAm’ - 75 days, ‘Am’ and ‘BBBm’ - 90 days There is no WAM limit, but the longer the maturity dates, the more likely it is that the security will contribute to a lower rating. Permission to reprint or distribute any content from this presentation requires the prior written approval of Standard & Poor’s.

Why Do Managers Request an S&P Fund Rating? § Asset Growth / Retention § Third Party Credibility § Board Oversight § Diversified Product Mix § Regulatory/Compliance q N. A. I. C. Reduced Capital Reserve Requirements - Investments by insurance companies in AAAm rated funds have 0% capital reserve requirements. Capital reserve requirements are reduced to 1% when investing into AAm or Am rated money market funds or AAAf rated government bond funds. q State & Local Governments - GFOA recommends AAAm rated funds as investments for local & state governments. q Bond Proceeds - AAAm rated funds are Eligible Investments for bond proceeds of Standard & Poor’s rated debt issues 27. Permission to reprint or distribute any content from this presentation requires the prior written approval of Standard & Poor’s.

How are Funds/Pools Rated? Source : Guide to Credit Rating Essentials 28. Permission to reprint or distribute any content from this presentation requires the prior written approval of Standard & Poor’s.

Sample Components of S&P Fund Rating Analysis Quantitative • Overall portfolio credit quality • Individual security credit quality • Counterparty risk and exposure • Diversification of securities • Credit Deterioration vs. Default • Net Asset Value Stability • Weighted Average Maturity (WAM) / Duration • Maturity Structure (Ladder vs. Barbell) Qualitative • Depth and stability of organization & management team • Experience and track record of fund manager • Operating policies and risk preferences • Internal controls • Fund Governance • Communication with S&P and commitment to rating • Pricing • Liquidity • Shareholder Composition/Asset Volatility • Structured & Variable / Floating Rate Notes • Leverage: Rev Repo/Sec Lending 29. Permission to reprint or distribute any content from this presentation requires the prior written approval of Standard & Poor’s.

Surveillance (Monitoring) of Fund Ratings • Dedicated Staff of Surveillance Analysts & Proprietary Systems (Web. DC & MFDB) • Portfolio Holdings, Cash Flows & Risk Parameters are reviewed: • Weekly for Stable NAV Pools • Monthly for Variable NAV Pools • Portfolio Level & Security Level Analysis » » » » portfolio maturity credit quality illiquid and market sensitive securities sector allocations variable / floating rate instruments net asset value (pricing) fluctuations comparison of CDS vs. current ratings highest yielding fund analysis • Internal Monthly Surveillance Meetings to Review Material Events • Frequent Communication with Fund Management • Annual On-Site Management Review Meeting 30. Permission to reprint or distribute any content from this presentation requires the prior written approval of Standard & Poor’s.

Sample of Surveillance Summary Information 31. Permission to reprint or distribute any content from this presentation requires the prior written approval of Standard & Poor’s.

PSFR Sensitivity Matrix 32. Permission to reprint or distribute any content from this presentation requires the prior written approval of Standard & Poor’s.

PSFR Sensitivity Matrix 33. Permission to reprint or distribute any content from this presentation requires the prior written approval of Standard & Poor’s.

Sample Press Release 34. Permission to reprint or distribute any content from this presentation requires the prior written approval of Standard & Poor’s.

Sample Investment Pool Profile 35. Permission to reprint or distribute any content from this presentation requires the prior written approval of Standard & Poor’s.

S&P’s Principal Stability Rated GIP Indices S&P Rated Government Investment Pool Indices 7 Day 30 Day Average Maturity GROSS NET (Days) Yield % S&P Rated GIP Index/ALL 0. 08% 0. 20% 0. 21% 42 S&P Rated GIP Index 1. 61% 1. 86% 1. 87% 43 (Week Ended August Dec. 16, (Week 30, 2011) 2002) S&P Rated GIP Index/Government $33. 5 (Week Ended Dec 16, 2011) S&P Rated GIP Index/G. P. Taxable $68. 8 (Week Ended Dec 16, 2011) 0. 06% 0. 14% 0. 15% 41 Billion 0. 09% 0. 22% 0. 23% 43 To View In Bloomberg: LGIP <Index> <Go> Reported Weekly By Standard & Poor’s Note: Indices comprised Of ‘AAAm’ Rated Government Investment Pools 36. $102. 4 $57. 4 Billion Permission to reprint or distribute any content from this presentation requires the prior written approval of Standard & Poor’s. Billion

Sample of S&P Principal Stability Rated Fund Indices S&P Rated Money Fund Indices (Week ended December 20, 2011) Index Name 7 Day Net Yield % 30 Day Net Yield % Avg. Maturity (days) S&P 'AAAm' Money Fund Index/Government 0. 01 46 S&P 'AAAm' Money Fund Index/Taxable 0. 02 43 S&P 'AAAm' Money Fund Index/Tax-Free 0. 02 36 AAAm European & Offshore PSFR Risk Metrics (as of September 30, 2011) 37. Index Name 7 Day Net Yield % 30 Day Net Yield % Avg. Maturity (days) Total Net Assets (billions) Credit Quality% (A-1+/A-1) S&P 'AAAm' European and Offshore PSFR – EUR 0. 90 0. 89 21 EUR 161. 90 73/27 S&P 'AAAm' European and Offshore PSFR – GBP 0. 53 0. 52 30 GBP 122. 50 70/30 S&P 'AAAm' European and Offshore PSFR – USD 0. 06 0. 05 34 USD 308. 40 81/19 Permission to reprint or distribute any content from this presentation requires the prior written approval of Standard & Poor’s.

S&P’s Principal Stability Rated GIP Index – Quartile Rankings 7 Day Ranking Top Yield Gross Yields (%) Low Yield Top Yield Low Yield Top Quartile 0. 31 0. 25 0. 31 0. 24 Second Quartile 0. 25 0. 20 0. 24 0. 20 Third Quartile 0. 20 0. 15 Fourth Quartile 0. 15 0. 08 Net Yields (%) Top Quartile 0. 25 0. 11 0. 23 0. 12 Second Quartile 0. 11 0. 05 0. 12 0. 05 Third Quartile 0. 05 0. 03 Fourth Quartile 0. 03 0. 01 (As of September 30, 2011) 38. 30 Day Permission to reprint or distribute any content from this presentation requires the prior written approval of Standard & Poor’s.

Recent Developments 39. Permission to reprint or distribute any content from this presentation requires the prior written approval of Standard & Poor’s.

Impact of USA Rating Actions on S&P’s Pool Ratings Ø July 14, 2011: United States of America 'AAA/A-1+' Ratings Placed On Credit. Watch Negative On Rising Risk Of Policy Stalemate (Credit. Watch placement signals our view that, owing to the dynamics of the political debate on the debt ceiling, there is at least a one-in-two likelihood that we could lower the long-term rating on the U. S. within the next 90 days. ) Ø July 15, 2011: 73 Fund Credit Quality Ratings Put On Credit. Watch Negative Following Sovereign Ratings Credit. Watch Placement NO impact to PSFR pools as the short term rating of the USA remains at A-1+ Ø August 5, 2011: United States of America Long Term Rating Lowered To 'AA+' On Rising Debt Burden And Political Risks; Outlook Negative (The Negative Outlook means we could lower the long-term rating to 'AA' within the next two years if we see that less reduction in spending than agreed to, higher interest rates, or new fiscal pressures during the period result in a higher general government debt trajectory than we currently assume in our base case. ) Ø August 8, 2011: 73 Fund Credit-Quality Ratings Lowered And Removed From Credit. Watch Following U. S. Sovereign Downgrade NO impact to PSFR pools as the short term rating of the USA remains at A-1+ 40. Permission to reprint or distribute any content from this presentation requires the prior written approval of Standard & Poor’s.

More Details on Pool Rating Changes Ø We lowered our FCQRs on 73 of the 206 funds (including 14 GIPs) managed in the U. S. , Europe, and Bermuda because of their significant exposures (generally greater than 50%) to direct or indirect investments in U. S. Treasury and U. S. government agency securities. Ø The ratings were lowered by up to two notches as determined by our fund credit-quality matrix approach. Ø Our FCQR methodology utilizes a fund credit-quality matrix to apply a set of credit factors for each rating category (e. g. , 'AAA', 'A') and a set of credit scores for each FCQR category (e. g. 'AAAf', 'Af'). The factors are based on our historical ratings stability and ratings transition studies and do not differentiate between rating notches within a specific rating category (e. g. , the same factor is applied for exposure to 'AA+' securities as to 'AA' or 'AA-‘ securities). Ø Because the probability of a rating transition and default decreases as a security nears maturity, we evaluate investment-grade holdings that mature in 365 days or less in the matrix at a lower credit factor, reducing the impact to the overall fund rating score. For example, a portfolio comprised 60% of 'AA+' rated securities that mature in more than 365 days with the remainder in 'AAA' rated securities would result in the FCQR category of 'AAf' according to our fund credit-quality matrix approach. Ø San Mateo (CA), Manatee County (FL), City of LA (CA) and Santa Barbara County (CA) have since withdrawn their ratings 41. Permission to reprint or distribute any content from this presentation requires the prior written approval of Standard & Poor’s.

Appendix Additional Information on LGIP Ratings & S&P 42. Permission to reprint or distribute any content from this presentation requires the prior written approval of Standard & Poor’s.

S&P’s Credit Rating Guides To help raise awareness, S&P has published guides to credit ratings essentials, performance and criteria Additional resources are available @ www. Understanding. Ratings. com & www. About. Credit. Ratings. com 43. Permission to reprint or distribute any content from this presentation requires the prior written approval of Standard & Poor’s.

Principal Stability Fund Ratings Definitions (Effective January 5, 2010) • A Standard & Poor's principal stability fund rating, also known as a "money market fund rating, " is a forward-looking opinion about a fixed income fund's capacity to maintain stable principal (net asset value). When assigning a principal stability rating to a fund, Standard & Poor's analysis focuses primarily on the creditworthiness of the fund's investments and counterparties, and also its investments’ maturity structure and management's ability and policies to maintain the fund's stable net asset value. Principal stability fund ratings are assigned to funds that seek to maintain a stable or an accumulating net asset value. • Generally, when faced with an unanticipated level of redemption requests during periods of high market stress, the manager of any fund may suspend redemptions for up to five business days or meet redemption requests with payments in-kind in lieu of cash. A temporary suspension of redemptions or meeting redemption requests with distributions in-kind does not constitute a failure to maintain stable net asset values. However, higher rated funds are expected to have stronger capacities to pay investor redemptions in cash during times of high market stress because they generally comprise shorter maturity and higher quality investments. • Principal stability fund ratings, or money market fund ratings, are identified by the 'm' suffix (e. g. , ‘AAAm’) to distinguish the principal stability rating from a Standard & Poor's traditional issue or issuer credit rating. A traditional issue or issuer credit rating reflects Standard & Poor’s view of a borrower’s ability to meet its financial obligations. Principal stability fund ratings are not commentaries on yield levels. 44. Permission to reprint or distribute any content from this presentation requires the prior written approval of Standard & Poor’s.

Diversification Subfactors AAAm Am BBBm 5% 5% Maximum per sovereign (i. e. , national government) entity rated 'AA-' or higher 100% Maximum per sovereign entity rated 'A-1' or 'A+' and that matures in one business day 25% 25% Maximum per sovereign entity rated 'A-1' or 'A+' and that matures between two and five business days 10% 10% Maximum per sovereign entity rated 'A-1' or 'A+' and that matures in more than five business days 5% 5% Maximum per bank rated 'A-1' or higher or 'A+' or higher for uncollateralized overnight bank deposits, including uninvested cash 10% 10% Maximum per issuer (including debt guaranteed by the same issuer)--except for the items below Tiered maximums for investments that are fully (100%) collateralized or overcollateralized (more than 100%) See charts 2, 3 and 4 in “Methodology: Principal Stability Fund Ratings Criteria” for details Maximum exposure per sovereign government related/guaranteed entity rated 'AA-' or higher¶¶ 33% 50% 67% 75% Maximum exposure to another Standard & Poor's rated fund 10% 15% 20% 25% ¶¶GRE or government-guaranteed investments rated 'AA-' or higher with final maturities of 30 days or less are excluded from these limits. 45. Permission to reprint or distribute any content from this presentation requires the prior written approval of Standard & Poor’s.

Maturity Subfactors AAAm Am BBBm Maximum WAM(R) (days)§ 60 70 80 90 Maximum WAM(F) (days)§^ 90 100 110 120 Maximum final maturity per fixed-rate investment, nonsovereign government floating-rate investment, and sovereign floating-rate investments rated below 'AA-' 13 months (397 days) Maximum final maturity per sovereign government (including sovereign government related/guaranteed) floating-rate security rated 'AA-' or higher Two years (762 days) Three years (1, 127 days) Four years (1, 492 days) Five years (1, 857 days) § The maximum WAM(R) and WAM(F) limits may be reduced for funds with certain characteristics (such as limited operating history or start-up funds, small asset size, a concentrated shareholder base, or a new shareholder base with uncertain liquidity needs). ^ May be adjusted upward by 30 days if invested only in government/GSE floaters rated 'AA-' or higher. If a fund invests in a combination of government floaters rated 'AA-' or higher and nongovernment floating-rate instruments (or sovereigns rated below 'AA'), the maximum is based on the weighted average of exposures to each type of floater. 46. Permission to reprint or distribute any content from this presentation requires the prior written approval of Standard & Poor’s.

Portfolio Credit Quality Metrics Minimum 'A-1+' and 'A-1' investments maturing within five business days Maximum 'A-1' investments maturing in more than five business days** Maximum exposure to unrated municipal bonds secured by escrow account AAAm Am BBBm 50% 20% 0% 0% 50% 25% 80% 33% 100% 40% Imputing Short-Term Ratings From Long-Term Ratings 100% 50% Maximum exposure to municipal securities rated only by Moody's or Fitch¶ 15% 20% 25% 30% Maximum exposure to unrated credit-enhanced variable-rate demand obligations (VRDOs) 10% 15% 20% 25% Long-Term Rating Imputed Short-Term Rating 'AAA' through 'AA-' 'A-1+' 'A+' 'A-1' 'A' or lower "Higher-risk investment" ** Exposures to securities rated below 'A-1' are "higher-risk investments. “ • ¶ This limit does not apply to securities that possess a direct pay letter of credit that Standard & Poor's rates 'A-1+' or 'A-1'. 47. Permission to reprint or distribute any content from this presentation requires the prior written approval of Standard & Poor’s.

Sample MMF Portfolio – Maturity Calculations ABC MONEY MARKET FUND 31 -Mar-10 A B C D E F G Market Value Days to Maturit y Maturity Date Days to Reset Next Reset Date % REPO $ 3, 500, 000 1 04/01/10 52. 63% COPORATE BOND $ 300, 000 244 11/30/10 91 06/30/10 4. 51% COPORATE BOND $ 250, 000 334 02/28/11 3. 76% AGENCY $ 500, 000 244 11/30/10 60 05/30/10 7. 52% AGENCY $ 1, 000, 000 183 09/30/10 30 04/30/10 15. 04% AGENCY $ 350, 000 157 09/04/10 5. 26% TREASURY $ 750, 000 91 06/30/10 11. 28% Security Description Total Fund: 48. $ 6, 650, 000 Permission to reprint or distribute any content from this presentation requires the prior written approval of Standard & Poor’s. 100. 00%

Money Market Fund Industry Events on ‘Richter Scale’ * Dates noted on graph indicate regulatory rule changes 49. Permission to reprint or distribute any content from this presentation requires the prior written approval of Standard & Poor’s.

Noteworthy Events in the Money Market Industry Feb-70 Jul-83 Mar-86 Feb-91 May-94 Jun-94 Dec-94 Jun-96 Jan-97 Aug-99 Apr-01 Aug-07 Sep-07 Oct-07 Nov-07 Feb-08 Mar-08 Sep-08 Oct-08 Nov-08 Dec-08 Jan-09 Mar-09 Jul-09 Jan-10 50. 4. 0 5. 5 4. 0 6. 0 5. 5 4. 0 5. 5 5. 5 6. 5 4. 0 4. 5 4. 0 10. 0 4. 0 5. 5 5. 0 First MMF Created SEC Adopts Rule 2 a-7 SEC Amends Rule 2 a-7 Derivatives in MMFs Community Bankers US Government Fund breaks the buck Orange County Bankruptcy SEC Amends Rule 2 a-7 Mercury Finance CP Default General American Funding Agreement Problems PG&E Default (CA Energy Crisis) XABCP SIV-lites SIVs FL SBA LGIP Auction Rate Securities, Bond Insurers Bear Stearns Lehman Bankrupt; Reserve Primary Fund ‘Breaks the Buck’ & Govt Gty Lehman/Reserve Fallout Very Low Yields G 30 Report on Financial Reform ICI MMF Working Group Report SEC Propose Money Market Fund Reforms SEC Adopts Amendments to Rule 2 a-7 Permission to reprint or distribute any content from this presentation requires the prior written approval of Standard & Poor’s.

Standard & Poor’s Initiatives Action Steps & Initiatives 51. Permission to reprint or distribute any content from this presentation requires the prior written approval of Standard & Poor’s.

Key Leadership Actions Taken Since February 2008* Governance, Analytics, Education, Information - Incorporated stability as a ratings factor Strengthen the ratings process - Enhanced criteria used to rate U. S. RMBS, CMBS and CDOs - Introduced hypothetical stress scenarios to be used as benchmarks for calibrating criteria across different sectors and over time Better serve the markets - Re-launched standardandpoors. com providing easy access to ratings, criteria, reports of ratings performance, updates on leadership actions and related information - Published “Guide to Credit Ratings Essentials”, “Guide to Ratings Performance” and “Guide to Credit Ratings Criteria” - Published Landmark Deal reports - Issued RFCs on non-default risks focusing on liquidity, volatility, correlation and recovery - Added the “SF” symbol to all ratings on structured finance instruments on a global basis (to comply with a European Union regulation) - Launched Recovery Analytics for U. S. RMBS, CLOs and issued a market feedback request (MFR) for CMBS recovery analytics - Separated the criteria management and development, quality assurance and policy governance groups from the analytic teams within ratings - Implemented ‘look-back’ reviews of analysts work whenever one leaves to work for an issuer - Instituted an analyst rotation program - Established new leadership in ratings criteria, structured finance, compliance and quality review - New personnel and resources in compliance functions and enhanced global compliance training - Established the Enterprise Risk Oversight Committee Enhance Governance Launched new tools for surveillance Created a Model Quality Review group Established “what if” scenarios for the majority of rated structured finance securities - Instituted a new credit analyst certification program and increased analyst continuing education requirements *Representative listing of Standard & Poor’s Leadership Actions. For more information please visit the Leadership Actions section on standardandpoors. com. 52. Permission to reprint or distribute any content from this presentation requires the prior written approval of Standard & Poor’s.

Standard & Poor’s Globally • • • 53. 150 years of experience Global office network in 23 Countries and markets. European operations established in 1984, with offices in London, Frankfurt, Paris, Madrid, Milan, Stockholm, Moscow, Dubai, Johannesburg and Tel Aviv. Asia Pacific operations commenced 1986 with an office in Tokyo followed by Melbourne, Hong Kong, Singapore, Taipei and Mumbai Over 1, 300 credit ratings analysts globally Permission to reprint or distribute any content from this presentation requires the prior written approval of Standard & Poor’s.

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