Fitch Affirms Marin County Investment Pool at 'AAA/V1'

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NEW YORK--(BUSINESS WIRE)-- Fitch Ratings affirms the 'AAA/V1' ratings assigned to Marin County Investment Pool, a local government investment pool managed and administered solely for the benefit of Marin County, CA by the Marin County treasurer-tax collector.

The main drivers of the fund's credit rating affirmation are the high credit quality and diversification of the portfolio's assets and the capabilities of the office of the Marin County treasurer-tax collector as pool manager. The fund's 'AAA' fund credit rating reflects the fund's vulnerability to losses as a result of defaults based on the actual and prospective average credit quality of the fund's invested portfolio. As such, the pool is expected to maintain a weighted average portfolio rating of 'AAA', taking into account certain adjustments for the reduced credit risk of short-term securities.

The main drivers of the fund's volatility rating affirmation are the stability of the fund's market risk profile, as reflected by the short-dated nature of the portfolio, the high allocation to government securities, as well as appropriate levels of liquidity relative to expected cash outflows. The fund's 'V1' fund volatility rating reflects low market risk and a capacity to return stable principal value to meet anticipated cash flow requirements, even in adverse interest rate environments.

The pool's primary investment objective is preservation of capital. The pool's secondary objective is to maintain sufficient liquidity to enable participants to meet their operating requirements. The last objective of the pool is to obtain a rate of return consistent with the first two objectives. The pool seeks to pursue its investment objectives by investing in a diversified portfolio of high-quality debt securities rated at least 'A/F1' by Fitch or of a comparable credit quality by other global rating agencies. Permitted investments include U.S. Treasury and government agency securities and state of California bonds, as well as registered warrants, bankers' acceptances, commercial paper, negotiable certificates of deposit, time deposits, medium-term notes, shares of money market funds, repurchase agreements, and the Local Agency Investment Fund (LAIF). LAIF is a local government investment pool managed by California's Pooled Money Investment Board, which is headed by the state treasurer and includes the state's controller and director of finance. By policy, the pool must maintain an average maturity of less than 18 months and is not allowed to purchase securities with maturities greater than two years. However, the treasurer may authorize the purchase of U.S. government agency obligations with final maturities of five years or less.

While the pool is permitted, per its investment policy, to invest in securities rated at least 'A/F1' or equivalent, the pool has historically focused its investment strategy on 'AAA' rated government agency securities and high-quality money market funds. By its investment policy, the pool is also permitted to enter into repurchase agreements with counterparties rated at least 'A/F1' by Fitch or of a comparable credit quality by other global rating agencies and overcollateralized by at least 102%. Permitted repurchase agreements are backed by U.S. Treasury securities.

As of Jan. 31, 2011, the portfolio was comprised of 97.5% U.S. government agency securities, 2.5% government institutional money market funds and 0.03% LAIF. The U.S. government agency portion was represented by 40.5% in Federal Home Loan Mortgage Corp. securities, 25.5% in Federal Home Loan Bank securities, 24.9% in Federal Agriculture Mortgage Corp. securities and 5.4% in Federal Farm Credit Bank securities. As of Jan. 31, 2011, the weighted average credit quality of the fund, as measured by Fitch's weighted average rating factor (WARF), was 0.050, which is consistent with 'AAA' guidelines published in Fitch's criteria.

The maturity profile of the pool is managed to meet anticipated cash flow needs of the pool's participants. Investments are generally matched to scheduled cash outflows, using historical cash flow assumptions. The portfolio has historically benefited from highly predictable cash outflow needs and, at present, is comprised of sales and property tax revenues and bond issuance proceeds. Participants in the pool include: Marin County; the Marin public school agency; Marin Community College; the Marin County office of education; districts under the control of the county board of supervisors; autonomous/independent districts, whose treasurer is the Marin County treasurer; and any other districts or agencies approved by the board of supervisors and the county treasurer, using Marin County as their fiscal agent. The portfolio's anticipated redemptions include payroll and benefit payments, accounts payable, debt services and other planned expenditures of the county. As of Jan. 31, 2011, 55% of the portfolio's assets matured within 90 days. Given the short-dated nature of the portfolio, along with the high allocation to government agency securities (which receive a 0.00 spread factor under Fitch's analytical framework for determining fund volatility ratings), the market risk of the portfolio is viewed as consistent with a 'V1' fund volatility rating.

The Marin County Investment Pool is managed by the Marin County treasurer-tax collector's office investment staff. As of Jan. 31, 2011, the pool had approximately $805 million in assets under management.

The ratings may be sensitive to material changes in the credit quality or market risk profiles of the fund. A material adverse deviation from Fitch guidelines for any key rating driver could cause the rating to be lowered by Fitch. For example, should portfolio parameters change or volatility of outflows increase, this could adversely affect the portfolio's fund credit and/or fund volatility ratings. For additional information about Fitch closed-end fund ratings guidelines, please review the criteria referenced below, which can be found on Fitch's website.

Additional information is available at 'www.fitchratings.com'.

The sources of information used to assess these ratings were the public domain and San Luis Obispo County, CA Treasurer's Office.

Applicable Criteria and Related Research:

--'Global Bond Fund Rating Criteria', dated Feb. 10, 2010;

--'Global Bond Fund Rating Criteria - Short-Term Bond Fund Addendum', dated March 22, 2010.

Applicable Criteria and Related Research:

Global Bond Fund Rating Criteria - Short-Term Bond Fund Addendum

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=505657

Global Bond Fund Rating Criteria

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=499472

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