The pool is a local government investment pool (LGIP) with approximately $2.4 billion in assets under management as of Oct. 31, 2008. It is managed by the San Mateo County treasurer on behalf of the county, school districts, special districts, and other pool participants. The pool's approved investments include U.S. Treasury and government securities, commercial paper, corporate bonds, and repurchase agreements with highly rated counterparties. The pool operates under the California Government Code.

On Sept. 22, 2008 Fitch downgraded the pool to 'A-/V2' from 'AA/V1+', as a result of underlying exposure to commercial paper and medium term notes issued by Lehman Brothers Holdings, Inc. (Lehman), which filed for bankruptcy protection on Sept. 15, 2008. As of Sept. 19, 2008 the par value of the pool's exposure to debt securities issued by Lehman totaled $154,645,980 million or 5.9% of the total portfolio at cost. On Oct. 1, 2008, the exposure to Lehman was written off and held as a non-performing exposure. The pool has subsequently filed a lawsuit against a number of officers of Lehman and Lehman's auditor, Ernst & Young, seeking relief for capital losses incurred in the pool by the virtue of holding the defaulted securities. At present, the outcome of the lawsuit is pending.

As of Oct. 31, 2008, 52.8% of the pool's portfolio was allocated to the U.S. Treasury and government agency securities, 33% was in corporate commercial paper, fixed and floating rate securities and 14.2% was in other securities including certificate of deposits and other pooled investments. As of the same date, the pool had dollar weighted-average maturity of 1.1 years.

Fitch Ratings assigns volatility and credit ratings to LGIPs on the basis of total market and credit exposure. Fitch's process for rating local government investment pools is described in detail in a Fitch report titled 'Local Government Investment Pool Ratings' published on March 3, 2006 and available on the Fitch Ratings web site at www.fitchratings.com.

An updated credit analysis report on the San Mateo County Pool will be published by Fitch in the near future.

Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site, 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.