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NEW YORK (Standard & Poor's) Sept. 19, 2008--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 $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 $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 $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 $1.00 NAV.
Standard & Poor's Fund Ratings Group believes the U.S. Treasury's Sept.
18 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 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 Sept. 16, 2008;
-- Reserve International Liquidity Fund Ltd. to 'Dm' from 'AAAm' on Sept.
16, 2008;
-- Colorado Diversified Trust (CDT) to 'Dm' from 'AAAm' and then to NR on
Sept. 16, 2008;
-- Reserve Funds - Interstate Tax Exempt Fund to 'AAAm/Watch Neg' from
'AAAm' on Sept. 16, 2008;
-- Reserve Funds - Primary II Fund to 'AAAm/Watch Neg' from 'AAAm' on
Sept. 16, 2008;
-- Reserve Funds - Treasury & Repo Fund to 'AAAm/Watch Neg' from 'AAAm'
on Sept. 16, 2008;
-- Reserve Funds - U.S. Government Fund to 'AAAm/Watch Neg' from 'AAAm'
on Sept. 16, 2008;
-- Reserve Funds - U.S. Government II Fund to 'AAAm/Watch Neg' from
'AAAm' on Sept. 16, 2008;
-- Reserve USD International Government Fund Ltd. to 'AAAm/Watch Neg'
from 'AAAm' on Sept. 16, 2008;
-- Reserve USD International Treasury & Repo Fund Ltd. to 'AAAm/Watch
Neg' from 'AAAm' on Sept. 16, 2008;
-- Reserve USD International Treasury Fund Ltd. to 'AAAm/Watch Neg' from
'AAAm' on Sept. 16, 2008;
-- Reserve Yield Plus Fund to 'AAAf/S1+/Watch Neg' from 'AAAf/S1+' on
Sept. 16, 2008;
-- Putnam Prime Money Market Fund to 'AAAm Watch Neg' from 'AAAm' on
Sept. 18, 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 8,500 employees, including wholly owned affiliates,
located in 23 countries, Standard & Poor's is an essential part of the world's
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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.
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