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Management Side
S&P: Latest Developments For Rated Money Market Funds
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New York, New York, USA, 19 September 2008 -- /PRNewswire/ -- Standard & Poor's Ratings Services said today that its principal stability fund ratings (PSFRs) on money market funds that elect to meet investor redemptions with payments in kind (PIK) will not be negatively affected as long as investors receive the equivalent of a USD 1.00 per share net asset value (NAV).

Our PSFRs address our opinion of a fund's capacity to maintain principal stability and limit exposure to principal losses due to credit, market, and/or liquidity risks. We believe PIKs made by rated money market funds in an attempt to avoid losses and maintain the fund's USD 1.00 per share NAV during these unprecedented market events are consistent with acting in the best interest of shareholders and their stated investment objective of preservation of capital. Based on this, we would not take rating actions on money market funds that elect to make PIK at a USD 1.00 per share NAV.

Historically, money market funds have provided investors with daily access to their money. The breadth and depth of credit concerns in this week's market has caused a liquidity crunch even in the high-quality, short-term markets. As a result, some funds have elected to redeem in kind, delay payment on redemptions, and/or freeze subscriptions and redemptions to funds. All have indicated that they took this action to maintain their funds' principal stability or USD 1.00 NAV.

Standard & Poor's Fund Ratings Group believes the U.S. Treasury's 18 September announcement to provide a guaranty program for money market funds will help restore investor confidence and liquidity. We also believe the announcement by the Federal Reserve Board of its intention to provide liquidity to markets by extending nonrecourse loans to U.S. depository institutions and bank holding companies to finance their purchases of high-quality asset-backed commercial paper from money market mutual funds will help to improve liquidity and pricing for money market funds.

The fund rating actions we took during the past week are as follows:

-- Reserve Funds - Primary Fund to 'Dm' from 'AAAm' on 16 September 2008;

-- Reserve International Liquidity Fund Ltd. to 'Dm' from 'AAAm' on 16 September 2008;

-- Colorado Diversified Trust (CDT) to 'Dm' from 'AAAm' and then to NR on 16 September 2008;

-- Reserve Funds - Interstate Tax Exempt Fund to 'AAAm/Watch Neg' from 'AAAm' on 16 September 2008;

-- Reserve Funds - Primary II Fund to 'AAAm/Watch Neg' from 'AAAm' on 16 September 2008;

-- Reserve Funds - Treasury & Repo Fund to 'AAAm/Watch Neg' from 'AAAm' on 16 September 2008;

-- Reserve Funds - U.S. Government Fund to 'AAAm/Watch Neg' from 'AAAm' on 16 September 2008;

-- Reserve Funds - U.S. Government II Fund to 'AAAm/Watch Neg' from 'AAAm' on 16 September 2008;

-- Reserve USD International Government Fund Ltd. to 'AAAm/Watch Neg' from 'AAAm' on 16 September 2008;

-- Reserve USD International Treasury & Repo Fund Ltd. to 'AAAm/Watch Neg' from 'AAAm' on 16 September 2008;

-- Reserve USD International Treasury Fund Ltd. to 'AAAm/Watch Neg' from 'AAAm' on 16 September 2008;

-- Reserve Yield Plus Fund to 'AAAf/S1+/Watch Neg' from 'AAAf/S1+' on 16 September 2008;

-- Putnam Prime Money Market Fund to 'AAAm Watch Neg' from 'AAAm' on 18 September 2008;

We remain in close communication with the portfolio managers of PSFR-rated funds, focusing on operational, NAV pricing, and liquidity concerns in the marketplace. In addition to these discussions, we are receiving key portfolio information that includes portfolio structure, shareholder activity, and most importantly, the marked-to-market NAV per share figures.

Standard & Poor's, a division of The McGraw-Hill Companies (NYSE:MHP), is the world's foremost provider of financial market intelligence, including independent credit ratings, indices, risk evaluation, investment research, and data. With approximately 8500 employees, including wholly owned affiliates, located in 23 countries, Standard & Poor's is an essential part of the world's financial infrastructure and has played a leading role for more than 140 years in providing investors with the independent benchmarks they need to feel more confident about their investment and financial decisions. For more information, visit www.standardandpoors.com.

Source: Standard & Poor's
 

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