Fitch Affirms San Bernardino County Investment Pool at 'AAA/V1'

Tools

NEW YORK--(BUSINESS WIRE)-- Fitch Ratings affirms the 'AAA/V1' ratings assigned to the San Bernardino County Investment Pool, a local government investment pool managed by the San Bernardino County Treasurer's Office on behalf of the county, local school districts and other special districts. As of Jan. 31, 2011, the pool had approximately $4.7 billion in assets under management.

The ratings affirmations follow Fitch's annual review of the pool. The main drivers of the affirmations are the credit quality and diversification of the pool's approved investments, sufficient portfolio liquidity relative to investor composition and the investment management and oversight capabilities of the San Bernardino Treasurer's Office. The affirmation of the pool's 'AAA' credit rating reflects the pool's lowest vulnerability to losses as a result of defaults in its portfolio and is based on the actual and prospective average credit quality of the pool's investments. Per its statement of investment policy, the pool is permitted to invest in securities rated at least 'AA/F1' by Fitch or equivalent.

The affirmation of the pool's 'V1' volatility rating is based on the stability of the market risk profile, as reflected by fund duration. Pools rated 'V1' are expected to have very low sensitivity to market risk, and as such, exhibit high stability, performing consistently across a broad range of market scenarios.

The San Bernardino County Investment Pool's primary investment objective is to safeguard investment principal. The secondary objective is to maintain sufficient liquidity to ensure that funds are available to meet daily cash flow requirements. The third consideration is to achieve a reasonable rate of return or yields consistent with the first two objectives.

The pool invests in U.S. Treasury and government agency securities, U.S. money market funds and other money market instruments including commercial paper, certificates of deposit bankers' acceptances and corporate medium-term notes. As of Jan. 31, 2011, approximately 70% of the fund was invested in securities issued or guaranteed by the U.S. government, 19% was in short-term obligations of financial and non-financial corporations rated at least 'AA/F1' by Fitch or equivalent, 11% was in bank certificates of deposit and 0.5% was allocated to domestic money market funds. As of the same date, the weighted average credit quality of the fund, as measured by Fitch's weighted average rating factor (WARF), was 0.1, which corresponds to an 'AAA' fund credit rating.

As of Jan. 31, 2011, the pool's modified adjusted duration stood at 0.72 years and the weighted average maturity to reset date (WAMr) and weighted average final maturity (WAMf) were 0.69 and 1.03 years, respectively. The pool is permitted by its statement of investment policy to increase the weighted average effective duration up to 1.5 years. The final maturity of certain holdings such as obligations of the U.S. Treasury and government agencies can be as long as five years. While longer-dated assets within the portfolio may not exhibit high levels of liquidity, this is mitigated by the highly predictable nature of the pool's cash outflows. Specifically, the pool is comprised almost entirely of monies held by the San Bernardino County Treasurer on behalf of school districts, community college districts, and certain special districts within the county. The captive nature of the investor base allows the pool to invest in maturity-matching eligible securities. In addition, the pool maintains a portion of its net assets in overnight investments such as U.S. money market funds. As of Jan. 31, 2011, 9% of the pool's portfolio assets matured overnight. Additionally, per its investment policy the pool must hold 40% of its value in securities having a maturity of 12 months or less.

The pool's custodian, The Bank of New York Co., Inc., holds all investments and collateral (excluding collateralized certificates of deposit) in constructive possession on behalf of the pool. The San Bernardino County Treasurer's Office provides Fitch with monthly surveillance information, including details of the portfolios' holdings, such as credit quality, market value and duration of the individual securities. The pool is subject to an external annual audit. The pool's current investment policy, the list of pre-approved issuers, and the most recent monthly portfolio holdings are posted on the county treasurer office's web site.

The assigned fund credit rating and fund volatility rating may be sensitive to material changes in the credit quality or market risk profile of the pool. A material adverse deviation from Fitch guidelines for any key rating driver could cause the rating to be changed by Fitch. For example, a material decrease in portfolio credit quality could result in the fund credit rating being lowered, while a material increase in portfolio duration could result in fund volatility rating being lowered. For additional information about Fitch short-term bond fund rating guidelines, please review the criteria referenced below, which can be found on Fitch's web site.

Additional information is available at www.fitchratings.com.

The sources of information used to assess this rating were the public domain and The San Bernardino County Treasurer's Office.

Applicable Criteria and Related Research:

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

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

Applicable Criteria and Related Research:

Global Bond Fund Rating Criteria

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

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

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

ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE.

CONTACT:

Fitch Ratings
Primary Analyst
Gwen Fink-Stone, +1-212-908-9128
Associate Director
Fitch, Inc.
One State Street Plaza
New York, NY 10004
or
Secondary Analyst
Viktoria Baklanova, CFA, +1-212-908-9162
Senior Director
or
Committee Chairperson
Ralph Aurora, +1-212-908-0528
Senior Director
or
Media Relations:
Brian Bertsch, +1-212-908-0549
Email: brian.bertsch@fitchratings.com