European Structured Finance Rating Transitions:

Special Comment February 2007 Contact Phone New York Jian Hu 1.212.553.1653 Hadas Alexander Julia Tung Richard Cantor London David Rosa 44.20.7772.5454 Frankfurt Detlef Scholz 49.69.70730.700 Paris Paul Mazataud 33.1.5330.1020 European Structured Finance Rating Transitions: 1988-2006 Summary Opinion Moody's fifth annual European 1 structured finance rating transitions study reviews the 2006 and historical rating transition experiences both on an aggregate basis and across asset classes. The average credit quality of European structured finance securities continued to improve in 2006 relative to 2005, as the number of upgrades (totaled 163) greatly exceeded the number of downgrades (totaled 68). Both the frequencies of downgrades and upgrades declined across all broad structured finance sectors (see Figure 1). In addition, no tranches were downgraded into below in 2006. In the ABS and RMBS sectors, ratings were especially stable as 97% of the ratings remained unchanged in 2006. In the CMBS sector, upgrades exceeded downgrades by almost four to one, resulting in a positive 11.6% rating drift, significantly higher than all other major structured finance sectors. As in 2005, downgrades continued to be concentrated in the CDO sector, accounting for almost 90% of all downgrades in the region in 2006. Static synthetic arbitrage transactions accounted for 82% of all CDO downgrades and 72% of all downgrades in European structured finance in 2006. Upgrade activity was also significant for CDOs, making up 43% of all upgrades for European structured finance. Figure 1 - European Structured Finance 12-Month Rating Transition Rates in 2006, 2005, and Average over 1998-2006 by Sector Downgrade Rate Upgrade Rate 2006 2005 1998-2006 2006 2005 1998-2006 European Structured Finance 1.6% 2.0% 4.1% 3.7% 7.3% 3.9% ABS 0.1% 0.7% 1.5% 2.0% 2.8% 2.3% CDOs 3.4% 3.8% 9.3% 4.0% 8.3% 4.4% CMBS 2.1% 3.0% 3.3% 8.0% 12.3% 5.3% RMBS 0.0% 0.3% 0.3% 3.3% 7.9% 4.3% European Corporate 7.7% 7.1% 11.7% 10.5% 14.1% 9.3% Global Structured Finance 1.9% 2.0% 3.9% 5.8% 6.0% 4.1% Global Corporate 8.9% 8.3% 13.6% 13.0% 13.9% 9.7% 1. This study includes deals issued in the Middle East and Africa. Please see the appendix for data sample criteria and a glossary of terms.

Table of Contents Page An Overview of Rating Distributions and Rating Transitions... 3 Sector Specific Analysis... 10 ABS... 10 CDOs... 12 CMBS... 14 RMBS... 16 Rating Transitions in Other Sectors... 19 Repacks... 19 Structured Covered Bonds... 20 Appendix 1: Description of Data Sample and Glossary... 22 Appendix 2: Methodology... 25 Appendix 3: Rating Transitions Data...27 Transition Matrices by Cohort Rating... 27 Transition Matrices by Original Rating... 38 Related Research... 44 2 Moody s Special Comment

An Overview of Rating Distributions and Rating Transitions The European structured finance sector continued to grow strongly in 2006 (Figure 2). The number of ratings rose to 5,727 at the end of 2006 from 4,631 at the beginning of the year, an increase of 24%, which was about the same level of growth experienced in 2005. 2 The substantial increase in the number of ratings was seen across all sectors with the RMBS sector experiencing the highest growth rate of about 30% in 2006. Figure 2 - Number of Ratings Outstanding at the Beginning of Each Year 6000 5000 4000 CDOs RMBS CMBS ABS 3000 2000 1000 0 2007 Of the 4,631 ratings outstanding at the beginning of 2006, more than 90% were investment-grade (Baa3 or higher) and 30% were rated Aaa (Figure 3). CDOs continued to be the leading structured finance sector by number of ratings, accounting for more than 40% of all ratings in Europe. RMBS made up about one third of all ratings outstanding and continued to be the second largest sector. Figure 3 - Distribution of Outstanding Ratings on 1/1/2006 Outstanding Total (4631) Outstanding Total (4631) Baa 19% Ba 6% B 1% <=Caa 1% Aaa 30% RMBS 33% ABS 18% A 22% Aa 21% CMBS 8% CDOs 41% 2. Multiple tranches carrying the same rating within the same deal are treated as a single rating observation. Repackaged deals and structured covered bonds are not included and analyzed in the last section. Moody s Special Comment 3

Only 231 securities experienced rating transitions in 2006, about 30% fewer than the total of 333 rating transitions in 2005, making 2006 the most stable year in European structured finance since 2001. 3 Among securities that experienced rating changes in 2006, there were more upgrades than downgrades (Figure 4), and the upgrade-to-downgrade ratio was 2.4:1. While this represents a decline from the historical high ratio of 3.7:1 in 2005, it was still markedly higher than the historical average ratio of about 1:1. Figure 4 - Distribution of Downgrades and Upgrades in 2006 by Sector Upgrades (163) Downgrades (68) RMBS 30% ABS 10% CMBS 10% RMBS 0% ABS 1% CMBS 17% CDOs 43% CDOs 89% The CDO sector was again the most active sector in rating transitions, accounting for 43% of all upgrades and almost 90% of all downgrades. The number of upgrades in RMBS continued to be significant due in almost all cases to the build-up in credit enhancement in these transactions. In addition, there were no downgrades in RMBS and only one in ABS. The CMBS sector saw seven securities downgraded, which was about 10% of all downgrades in the region in 2006. Figure 5 further disaggregates the ratings outstanding at the beginning of 2006 and their subsequent rating transitions by asset class and country of collateral origin. In the next section, we will discuss sector specific rating transitions in more detail. 3. In counting downgrades and upgrades, we only consider ratings at the beginning and the end of each year. Multiple tranches carrying the same rating within the same deal are treated as one. Aaa-wrapped tranches are excluded as well. 4 Moody s Special Comment

Figure 5 - Number of Downgrades, Upgrades, and Withdrawals in 2006 by Asset Class and Country of Collateral Origin By Asset Class Ratings Outstanding on 1/1/2006 Upgrades Downgrades Withdrawals European ABS 844 16 1 123 Autos 144 2 0 29 Cards 130 0 0 13 Consumer Loans 88 0 0 15 Small Business Loans 192 0 0 32 Whole Business 28 2 0 4 Other ABS 262 12 1 30 European CDOs 1,907 71 60 255 Synthetic Arbitrage Managed 246 5 1 30 Synthetic Arbitrage Static 492 47 49 119 Balance Sheet Cash Flow 58 4 0 13 Balance Sheet Synthetic 149 11 0 33 HY CBOs 32 1 0 1 HY CLOs 237 0 2 13 Resecuritization 568 2 8 31 Other CDOs 125 1 0 15 European CMBS 369 27 7 65 European RMBS 1,511 49 0 69 Other European Structured Finance 767 17 0 90 Repacks 564 17 0 68 Structured Covered Bonds 170 0 0 13 Others 33 0 0 9 By Collateral Origin (excl. CDOs and other structured finance) Ratings Outstanding on 1/1/2006 Upgrades Downgrades Withdrawals United Kingdom 759 40 6 87 Spain 444 0 0 13 Netherlands 376 10 0 6 Italy 366 2 2 33 Germany 259 16 0 36 Portugal 109 0 0 8 France 108 3 0 31 Others 303 21 0 43 European Structured Finance (excl. CDOs and other structured finance) 2,724 92 8 257 Moody s Special Comment 5

Figure 6 shows that upgrades in 2006 were concentrated in the 2002 and 2003 vintages - securities issued in 2002 and 2003 - while downgrades mostly affected the 2003 vintage, which accounted for 45% of all downgrades. Across sectors, most CDO upgrades involved transactions from the 2002 vintage, and to a lesser extent, in the 2001 and 2003 vintages. Most CMBS upgrades occurred in the 2002 vintage, whereas most RMBS upgrades were in the 2003 and 2004 vintages. Meanwhile, almost all CDO downgrade actions were taken on securities issued in 2003. Figure 6 - Distribution of Downgrades and Upgrades in 2006 by Vintage Upgrades (163) Downgrades (68) 2004 15% 2005 7% 2000 2001 9% 2005 4% 2001 2002 19% 16% 9% 2004 16% 2003 23% 2002 37% 2003 45% As a result of both the increased number of ratings outstanding and decreased number of downgrades and upgrades, both the 12-month downgrade and upgrade rates declined. The downgrade rate went down slightly to 1.6% in 2006 from 2.0% in 2005, and the upgrade rate dropped to 3.7% from 7.3%, which was the highest annual upgrade rate in Europe since 1998 (Figure 7). Additionally, the downgrade-to-upgrade ratio was 1:2.4 in 2006, compared to 1:3.7 in 2005 (Figure 8), whereas the rating stability rate rose to roughly 95% in 2006 from 91% in 2005. Figure 7a also depicts a significant trend of rising withdrawal rates over time, which reached above 11% in 2006, the highest rate since 1998. Rating withdrawals (abbreviated as WR in this report) were almost always the result of securities being paid down in full, therefore the withdrawal rate is an important component of credit analysis for structured finance securities even though WR is not a rating category per se. 4 4. Securities whose rating was withdrawn during the year are not included in the calculation of rating transition rates. In calculating rating transition rates, however, we remove half of the ratings withdrawn from the total population at the beginning of the cohort to account for the potential impact on rating transitions from these withdrawn securities. Other methods of adjusting for withdrawals include removing all withdrawals from the total outstanding or using the rating before withdrawal as the end of period rating. 6 Moody s Special Comment

Figure 7 - European Structured Finance 12-Month Rating Transition Trends 5 Figure 7a Upgrade Rates, Downgrade Rates, and Withdrawal Rates Figure 7b Magnitude of Upgrades and Downgrades Upgrade Rate Downgrade Rate Withdrawal Rate 16% 14% 12% 10% 8% 6% 4% 2% 0% Upgrades Downgrades 5.0 4.0 3.0 2.0 1.0 0.0 Figure 7c Rating Volatility and Rating Drift Figure 7d Fallen Angel Rates and Aaa Downgrade Rates Rating Volatility Rating Drift Fallen Angels Rate Aaa Downgrade Rate 60% 5.0% 40% 4.0% 20% 3.0% 0% -20% -40% 2.0% 1.0% 0.0% Note: The horizontal axis represents the year of each 12-month cohort ending date. Both the magnitude of downgrades and upgrades were around two notches in 2006, with the magnitude of downgrades slightly lower than that of upgrades. Both magnitudes were about the same as those in 2005. In addition, the rating drift - the difference between the upgrade rate and the downgrade rate weighted by the magnitude of rating transitions - was a positive 5% in 2006 and has remained in the positive territory since the beginning of 2004 (Figure 7c). Figure 8 - Summary of European Structured Finance 12-Month Rating Transitions 2006 2005 1998-2006 1988-2006 Downgrade Rate 1.55% 1.99% 4.06% 4.13% Upgrade Rate 3.73% 7.34% 3.93% 3.86% Downgrade/Upgrade Ratio 0.42 0.27 1.03 1.07 Downgrade Rate (notch weighted) 2.99% 3.75% 10.91% 10.83% Upgrade Rate (notch weighted) 8.00% 15.20% 8.15% 7.97% Downgrade/Upgrade Ratio (notch weighted) 0.37 0.25 1.34 1.36 Rating Drift (notch weighted) 5.01% 11.45% -2.76% -2.86% Rating Volatility (notch weighted) 10.99% 18.96% 19.06% 18.81% Stability Rate 94.72% 90.68% 92.01% 92.01% Withdrawal Rate 11.06% 8.19% 7.82% 7.74% Notches per Downgrade per Year 1.93 1.89 2.69 2.62 Notches per Upgrade per Year 2.15 2.07 2.08 2.07 Note: See Appendix 1 for a glossary of terms and Appendix 3 for rating transition matrices. 5. Twelve-month rating cohorts are formed at the beginning of each month. Only the rating at the beginning and the end of each 12-month cohort are considered in calculating these rating transition statistics. The horizontal axis represents the cohort ending date. Moody s Special Comment 7

Figure 7d provides the downgrade rate of Aaa-rated securities and the rate of investment-grade securities falling into speculative-grade ("fallen angels") over a 12-month window. These two rates can be particularly useful for investors who are permitted to invest in securities above a certain rating threshold such as Aaa only or investment-grade only. As can be seen from Figure 7d, there was an up-tick in the Aaa downgrade rate in 2006, rising a bit above 1% in September 2006 before falling to 0.7% in December. The fallen angel rate was 0.15% in the latest 12-month cohort ending December 2006 and has remained very low since the beginning of 2005. It is important to note that the rating transition statistics presented in Figures 7 and 8 include all structured finance sectors, in particular, CDOs. Ratings in the non-cdo structured finance sectors such as ABS, CMBS and RMBS in Europe have historically been less volatile than those in CDOs. Figure 9 demonstrates the impact of CDOs on the fallen-angel rate and Aaa downgrade rate. Figure 9 - Comparisons of 12-Month Fallen-Angel Rates and Aaa Downgrade Rates in the European Structured Finance Sector including and excluding CDOs Figure 9a Fallen Angel Rates Figure 9b Aaa Downgrade Rates CDOs excluded All including CDOs CDOs excluded All including CDOs 5.0% 5.0% 4.0% 4.0% 3.0% 3.0% 2.0% 2.0% 1.0% 1.0% 0.0% 0.0% Note: The horizontal axis represents the year of each 12-month cohort ending date. With CDOs included, the highest 12-month fallen-angel rate in European structured finance was 3.7%, which was observed in the cohort ending November 2002. By contrast, once CDOs are excluded, the fallen-angel rate never exceeded 1%. Similarly, with CDOs included, the 12-month Aaa downgrade rate reached 5% in the cohort ending May 2003, but without CDOs, the rate has stayed under 1% consistently over the entire period, and has been close to zero since mid-2004. 8 Moody s Special Comment

Figure 10 summarizes the 2006 rating transition experiences of European structured finance securities in a transition matrix. Additional rating transition matrices appear in Appendix 3. Figure 10 - European Structured Finance Rating Transition Matrix for the 12-Month Cohort Ending December 2006 Cohort End Rating Cohort Beginning Rating Aaa Aa A Baa Ba B Aaa 89.14% 0.50% 0.00% 0.14% 0.00% 0.00% 0.00% 10.21% Aa 2.06% 85.14% 0.62% 0.21% 0.00% 0.00% 0.00% 11.97% A 0.29% 2.71% 86.54% 1.26% 0.00% 0.00% 0.00% 9.20% Baa 0.23% 0.58% 2.67% 84.70% 0.70% 0.00% 0.00% 11.12% Ba 0.00% 0.00% 1.03% 3.44% 84.19% 0.00% 0.00% 11.34% B 0.00% 0.00% 0.00% 0.00% 6.06% 60.61% 0.00% 33.33% below 0.00% 0.00% 0.00% 0.00% 0.00% 3.92% 58.82% 37.25% Figure 11 compares lifetime cumulative rating transition rates by original rating and by vintage using all securities issued as of the end of 2004. Figure 11 - Lifetime Cumulative Rating Transitions for European Structured Finance Securities Issued Before 2005 6 Figure 11a By Original Rating Figure 11b By Vintage 1600 1200 1400 1200 1000 Downgraded 1000 800 Downgraded 800 Upgraded 600 Upgraded 600 400 400 200 Unchanged 200 Unchanged 0 Aaa Aa A Baa Ba B Original Rating below 0 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 Vintage The downgrade rate of Aaa securities was much lower, at about 5%, than those of non-aaa rated securities, which were largely similar at about 12% within each rating category (Figure 11a). Also, there appears to be little correlation between original rating and lifetime rating transition rates. To date, securities issued in 2000 and 2001 were the least stable vintages, as 17% of the securities issued in 2000 and 23% of the securities issued in 2001 were downgraded. By comparison, more than 95% of the securities issued during 1996-1999 were either upgraded or experienced no rating change. Securities issued in 2002 and 2003 performed well with a 10% and 6% cumulative downgrade rate, respectively. 28 securities issued in 2004 were downgraded, resulting in a 3% lifetime downgrade rate for this vintage. It is still too early to draw any conclusions about the credit performance of this vintage, however, as those securities have not seasoned for more than two years. 6. Lifetime rating transitions are based on the original rating and the latest rating of securities. If the rating on the security was withdrawn before the end of our study period, the rating before withdrawal is used in the calculation. Moody s Special Comment 9

Sector Specific Analysis ABS Out of a total universe of 844 European ABS ratings outstanding at the beginning of 2006, one was lowered and 16 ratings involving 15 transactions were raised during the course of the year, resulting in an upgrade-to-downgrade ratio of 16:1. By comparison, five ratings were lowered and 20 were raised in 2005. The only ABS downgrade in Europe was taken on an Italian healthcare-receivable-backed security as a result of the downgrade of the Region of Abruzzo's issuer and its senior unsecured debt rating. The security's rating was ultimately backed by unsecured, direct obligations of the Region of Abruzzo. 7 Eight of the 16 ABS upgrades were related to the upgrade of a third party and the rest were the result of better-than-expected collateral performance. Key rating transition trends for the European ABS sector include: The downgrade rate further declined from 0.7% in 2005 to 0.1% in 2006 and reached a 6-year low (Figure 12). The upgrade rate decreased to 2.0% from 2.8% in 2005. In addition, there was an increase in the withdrawal rate in 2006, reaching 14.6% in the latest cohort ending December 2006, about four percentage points higher than the historical average of 10.5% per year. The magnitude of rating downgrades was one notch in 2006, lower than the magnitude of 2.2 notches in 2005. The magnitude of upgrades also declined to 1.4 notches from 2.9 notches. Both the downgrade rate and upgrade rate for European ABS, when weighted by their respective magnitudes, declined. The rating drift was still positive at 2.7%, although it was lower than the rating drift of 6.4% in 2005. Also, as a result of low rating activity in the sector, rating volatility declined to 2.9% from 9.5% in 2005, while the rating stability rate rose to 97.8% in 2006 from 96.5% in 2005 (Figure 13). There were no Aaa downgrades in 2006 and, in fact, European ABS has never seen an Aaa downgrade within a twelve-month period since 1998. The fallen-angel rate - share of securities downgraded from investment-grade to below-investment-grade - was zero in both 2005 and 2006, down from 0.5% in the cohort ending December 2004, and about 1.0% in the cohort ending December 2003. 7. The downgrade of the region was the result of the application of the joint default analysis (JDA) methodology for regional and local governments (RLGs) in Europe. 10 Moody s Special Comment

Figure 12 - European ABS 12-Month Rating Transition Trends Figure 12a Upgrade Rates, Downgrade Rates, and Withdrawal Rates Figure 12b Magnitude of Upgrades and Downgrades 16% 14% Upgrade Rate Downgrade Rate Withdrawal Rate 5.0 Upgrades Downgrades 12% 4.0 10% 8% 3.0 6% 2.0 4% 2% 1.0 0% 0.0 Figure 12c Rating Volatility and Rating Drift Figure 12d Fallen Angel Rates and Aaa Downgrade Rates Rating Volatility Rating Drift Fallen Angels Rate Aaa Downgrade Rate 15% 2.0% 10% 1.5% 5% 1.0% 0% -5% -10% 0.5% 0.0% Note: The horizontal axis represents the year of each 12-month cohort ending date. Figure 13 - Summary of European ABS 12-Month Rating Transitions 2006 2005 1998-2006 1988-2006 Downgrade Rate 0.13% 0.70% 1.51% 2.03% Upgrade Rate 2.04% 2.79% 2.28% 2.21% Downgrade/Upgrade Ratio 0.06 0.25 0.66 0.92 Downgrade Rate (notch weighted) 0.13% 1.54% 3.26% 3.70% Upgrade Rate (notch weighted) 2.81% 7.96% 4.82% 4.69% Downgrade/Upgrade Ratio (notch weighted) 0.05 0.19 0.68 0.79 Rating Drift (notch weighted) 2.68% 6.42% 1.56% 0.99% Rating Volatility (notch weighted) 2.94% 9.49% 8.08% 8.39% Stability Rate 97.83% 96.51% 96.21% 95.76% Withdrawal Rate 14.57% 12.43% 10.46% 10.28% Notches per Downgrade per Year 1.00 2.20 2.15 1.82 Notches per Upgrade per Year 1.38 2.85 2.11 2.12 Note: See Appendix 1 for a glossary of terms and Appendix 3 for rating transition matrices. Moody s Special Comment 11

By original rating, nine out of 338 Aaa securities were downgraded, resulting in a lifetime downgrade rate of 2.6% in the Aaa category (Figure 14a). Lifetime upgrade rates were generally higher in the higher rating categories such as Aa and single-a than in the lower rating categories such as Baa and Ba. By vintage, 14 securities issued in 2000 were downgraded, representing 13% of all securities in this vintage, the highest of all vintages. Securities issued in 1999 recorded the highest upgrade rate. In addition, there was just one downgrade in the 2003 vintage and two downgrades in the 2004 vintage, but eight and six upgrades in the 2003 and 2004 vintages, respectively, making these two vintages the best performing ones since 1998. Figure 14 - Lifetime Cumulative Rating Transitions for European ABS Securities Issued before 2005 Figure 14a By Original Rating Figure 14b By Vintage 240 210 180 Downgraded 150 Downgraded 400 360 320 280 240 200 160 120 80 40 0 Aaa Aa A Baa Ba B Original Rating below 120 Upgraded 90 60 30 Unchanged 0 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 Vintage Upgraded Unchanged CDOS Out of a total universe of 1,907 European CDO ratings outstanding at the beginning of 2006, 60 ratings involving 52 transactions were lowered and 71 ratings involving 42 transactions were raised during the year, resulting in an upgrade-to-downgrade ratio of approximately 1.2:1, a 50% decrease from the 2.2:1 ratio exhibited in 2005. Static (not actively managed) synthetic arbitrage deals dominated the 2006 downgrade activity in European CDOs. Out of a total of 492 such CDO securities outstanding at the beginning of 2006, 49 were downgraded, compared to 30 downgrades in 2005 in this CDO deal type. The heightened downgrade activity of synthetic arbitrage deals was mainly the result of the increases in the corporate downgrade rate, which went from 8.1% in 2004, to 8.3% in 2005, and 8.9% in 2006. 8 As a result, the 12-month downgrade rate of synthetic arbitrage CDOs rose to 6.8% in 2006 from 4.6% in the previous year. More than half of the synthetic-arbitrage CDOs downgraded in 2006 were issued in 2003. Eight resecuritization CDOs were also downgraded, roughly 1.4% of its 568 ratings outstanding at the beginning of 2006. This marked a significant decline from the 24 downgrades in 2005. In addition, two tranches of a single CLO deal were downgraded as a result of several amendments to the transaction. Most upgrades also involved static synthetic arbitrage deals, making up 66% of all CDO upgrades in 2006. 33, or 70%, of the 47 upgraded synthetic arbitrage CDO tranches were issued in 2002, and 10 were issued 2003. Upgrades were the result of deal seasoning in combination with strong collateral performance. In addition, the 15 upgraded balance-sheet CDO securities were evenly split across four different vintages from 2000 to 2003. Key rating transition trends for the European CDO sector include: The downgrade rate fell slightly to 3.4% in 2006 from 3.8% in the prior year, while the upgrade rate dropped to 4.0% from 8.3% (Figure 15a). The magnitude of rating downgrades averaged 1.8 notches in 2006, the same as that in 2005, while the magnitude of upgrades increased to 2.6 notches from 2.1 notches in 2005 (Figure 15b). The downgrade rate, when weighted by the magnitude of downgrades, declined to 6.2% from 6.9%, and the weighted upgrade rate fell to 10.2% from 17.5%. As a result, the rating drift of European CDOs was lower than that in 2005, but was still positive at 4.0% (Figure 15c). 8. Please see Moody's Special Comment, "Structured Finance Rating Transitions: 1983-2006," January 2006, for a comparison of rating transitions in the global corporate and structured finance sectors. 12 Moody s Special Comment

There was a significant number of rating withdrawals in 2006, most of which were from 2001 and 2003 vintages. As a result, the 12-month rating withdrawal rate was 13.4% in 2006 from 8.7% in the prior year and was the highest level over the last five years. There was an up-tick in the fallen-angel rate among European CDOs, increasing from 0.2% in the prior year to 0.3% in 2006. The 12-month downgrade rate of Aaa securities, however, increased from its trough of 0.3% in the cohort ending May 2005, to 1.6% in the latest cohort ending December 2006 (see Appendix 3 for detailed rating transition matrices). Figure 15 - European CDO 12-Month Rating Transition Trends Figure 15a Upgrade Rates, Downgrade Rates, and Withdrawal Rates Figure 15b Magnitude of Upgrades and Downgrades Upgrade Rate Downgrade Rate Withdrawal Rate Upgrades Downgrades 35% 6.0 30% 5.0 25% 20% 15% 4.0 3.0 10% 2.0 5% 1.0 0% 0.0 Figure 15c Rating Volatility and Rating Drift Figure 15d Fallen Angel Rates and Aaa Downgrade Rates Rating Volatility Rating Drift Fallen Angels Rate Aaa Downgrade Rate 140% 20.0% 100% 16.0% 60% 20% 12.0% -20% -60% 8.0% 4.0% -100% -140% 0.0% Note: The horizontal axis represents the year of each 12-month cohort ending date. Figure 16 - Summary of European CDO 12-Month Rating Transitions 2006 2005 1998-2006 1988-2006 Downgrade Rate 3.37% 3.77% 9.32% 9.24% Upgrade Rate 3.99% 8.29% 4.36% 4.32% Downgrade/Upgrade Ratio 0.85 0.46 2.14 2.14 Downgrade Rate (notch weighted) 6.18% 6.88% 26.28% 26.05% Upgrade Rate (notch weighted) 10.17% 17.53% 9.69% 9.60% Downgrade/Upgrade Ratio (notch weighted) 0.61 0.39 2.71 2.71 Rating Drift (notch weighted) 3.99% 10.65% -16.59% -16.45% Rating Volatility (notch weighted) 16.35% 24.40% 35.97% 35.66% Stability Rate 92.64% 87.93% 86.32% 86.44% Withdrawal Rate 13.37% 8.70% 8.40% 8.36% Notches per Downgrade per Year 1.83 1.82 2.82 2.82 Notches per Upgrade per Year 2.55 2.11 2.22 2.22 Note: See Appendix 1 for a glossary of terms and Appendix 3 for rating transition matrices. Moody s Special Comment 13

By original rating, 83 securities in the Baa category were downgraded to date, resulting in a lifetime downgrade rate of 29%, the highest across all rating categories. 97 Aa-rated securities were downgraded, representing 20% of 497 such securities. The lowest lifetime downgrade rate was seen in the Aaa category, at about 10% (Figure 17a). In addition, 58 Aa-rated securities were upgraded, representing a 12% upgrade rate that is the highest among investmentgrade rating categories. By vintage, 124 securities issued in 2001 were downgraded, resulting in a 47% lifetime downgrade rate, the highest across all vintages in the CDO sector. This is followed by the 2000 vintage, which experienced a lifetime downgrade rate of 37%, as compared to 19%, 22%, and 17% in the 1998, 1999, and 2002 vintages, respectively. Among securities issued in 2003 and 2004, downgrades exceeded upgrades by a ratio of 1.7:1 and 4.3:1, respectively. Figure 17 - Lifetime Cumulative Rating Transitions for European CDO Securities Issued before 2005 Figure 17a By Original Rating Figure 17b By Vintage 550 500 450 400 350 300 250 200 150 100 50 0 Aaa Aa A Baa Ba B Original Rating below 550 500 450 Downgraded 400 350 300 250 Upgraded 200 150 100 50 Unchanged 0 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 Vintage Downgraded Upgraded Unchanged CMBS Out of a total universe of 369 European CMBS ratings outstanding at the beginning of 2006, seven ratings involving three transaction were lowered and 27 ratings involving eight transactions were raised during the course of the year, resulting in an upgrade-to-downgrade ratio of 4:1, similar to the upgrade-to-downgrade ratio in 2005. Five of the seven securities downgraded in 2006 had experienced downgrades in previous years. Four of the seven rating downgrades were from a single CMBS transaction, HOTELoc. The downgrades were triggered by the increasing uncertainty that full note repayment would be received by the note-holders by May 2007, the legal final maturity date. 9 Two tranches of another transaction, Craegmoor Funding (No.2) Limited, were also downgraded due to the continued underperformance of the underlying loan. The seventh downgrade was prompted by a combination of factors including adverse prepayments, a reduction in pool diversity, and the downgrade of a third party. All upgrades were due to the build-up in credit enhancement in combination with strong collateral performance. 16 of the 27 raised ratings were issued in 2002, nine were issued in 2003 and 2004, and two were issued in 2005. Key rating transition trends for the European CMBS sector include: The downgrade rate decreased to 2.1% in 2006 from 3.0% in the prior year, and the upgrade rate also declined to 8.0% from 12.3% (Figure 18). As a result, the rating stability rate increased to 89.9% from 84.8%. The magnitude of rating downgrades rose significantly to 2.9 notches from 1.4 notches, driven primarily by the downgrade magnitude of HOTELoc tranches. Meanwhile, the magnitude of upgrades increased to 2.2 notches in 2006 from 1.5 notches in 2005. Both rating drift and rating volatility continued to remain substantially above zero and above their respective historical averages, as a result of significant upgrade activity (Figure 19). The fallen-angel rate was zero during most of the period since 1998 and up a bit to 0.3% in the latest 12- month cohort ending December 2006. The Aaa downgrade also ticked up from zero due to the downgrade of a single HOTELoc tranche. 9. In May 2005, the loan matured and the borrower failed to make the required payment. 14 Moody s Special Comment

Figure 18 - European CMBS 12-Month Rating Transition Trends Figure 18a Upgrade Rates, Downgrade Rates, and Withdrawal Rates 35% 30% 25% 20% 15% 10% 5% Upgrade Rate Downgrade Rate Withdrawal Rate 0% Figure 18b Magnitude of Upgrades and Downgrades Upgrades Downgrades 4.0 3.0 2.0 1.0 0.0 Figure 18c Rating Volatility and Rating Drift Rating Volatility Rating Drift 30% 25% 20% 15% 10% 5% 0% -5% -10% Figure 18d Fallen Angel Rates and Aaa Downgrade Rates 10.0% 8.0% 6.0% 4.0% 2.0% Fallen Angels Rate Aaa Downgrade Rate 0.0% Note: The horizontal axis represents the year of each 12-month cohort ending date. Figure 19 - Summary of European CMBS 12-Month Rating Transitions 2006 2005 1998-2006 1988-2006 Downgrade Rate 2.08% 2.96% 3.27% 3.21% Upgrade Rate 8.02% 12.26% 5.27% 5.17% Downgrade/Upgrade Ratio 0.26 0.24 0.62 0.62 Downgrade Rate (notch weighted) 5.94% 4.23% 5.15% 5.06% Upgrade Rate (notch weighted) 17.53% 18.60% 8.15% 8.00% Downgrade/Upgrade Ratio (notch weighted) 0.34 0.23 0.63 0.63 Rating Drift (notch weighted) 11.59% 14.38% 2.99% 2.94% Rating Volatility (notch weighted) 23.48% 22.83% 13.30% 13.06% Stability Rate 89.90% 84.78% 91.46% 91.62% Withdrawal Rate 17.62% 10.04% 11.86% 11.68% Notches per Downgrade per Year 2.86 1.43 1.57 1.57 Notches per Upgrade per Year 2.19 1.52 1.54 1.54 Note: See Appendix 1 for a glossary of terms and Appendix 3 for rating transition matrices. By original rating, five or less securities in each rating category were downgraded. In the Aa, single-a, and Baa categories, there were many more upgrades than downgrades. As a result, the lifetime upgrade rate overwhelmed the lifetime downgrade rate for all rating categories except Aaa (which cannot be upgraded) and single-b. Moody s Special Comment 15

By vintage, 27 securities issued in 2002 were upgraded, resulting in the highest lifetime upgrade rate across all vintages at 42%. Eleven securities issued in 2003 and nine securities issued in 2004 were upgraded, resulting in impressive upgrade rates of 19% and 14%, respectively. The 2002 vintage, which had the highest lifetime upgrade rate across all vintages, also experienced the highest lifetime downgrade rate, as seven ratings, or about 14% of all ratings in the vintage, were downgraded. Figure 20 - Lifetime Cumulative Rating Transitions for European CMBS Securities Issued before 2005 Figure 20a By Original Rating Figure 20b By Vintage 100 70 90 80 70 Downgraded 60 50 Downgraded 60 50 40 Upgraded 40 30 Upgraded 30 20 10 Unchanged 20 10 Unchanged 0 Aaa Aa A Baa Ba B Original Rating below 0 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 Vintage RMBS Out of a total universe of 1,511 European RMBS ratings outstanding at the beginning of 2006, none were lowered and 49 ratings involving 18 deals were raised during the year as a result of a build-up in credit enhancement and strong collateral performance. Of the 49 upgraded securities, 16 were issued in 2003, 15 were issued in 2004, and the rest were issued during 2000-2002. By collateral origin, 33 of the upgraded securities were backed by the collateral originated from the United Kingdom, 10 were from the Netherlands, five from Germany, and one from South Africa. Key rating transition trends for the European RMBS sector include: The downgrade rate dropped to zero in 2006 from 0.3% in 2005, while the upgrade rate also decreased to 3.3% to 7.9% (Figure 21). The magnitude of upgrades averaged 1.8 notches in 2006, slightly lower than the 2.0 notch magnitude in the prior year. Both the rating drift and rating volatility were positive at 6.0% in 2006, which were markedly lower than those in 2005. Correspondingly, the rating stability rate rose to 96.7% from 91.8%. There were no Aaa downgrades in 2006, and in fact, no Aaa-rated European RMBS security has ever been downgraded since 1998. The fallen-angel rate in the European RMBS sector was also zero in 2006, and on average the sector has had the lowest fallen-angel rate among all four major sectors. 16 Moody s Special Comment

Figure 21 - European RMBS 12-Month Rating Transition Trends Figure 21a Upgrade Rates, Downgrade Rates, and Withdrawal Rates Figure 21b Magnitude of Upgrades and Downgrades 10% Upgrade Rate Downgrade Rate Withdrawal Rate 5.0 Upgrades Downgrades 8% 4.0 6% 3.0 4% 2.0 2% 1.0 0% 0.0 Figure 21c Rating Volatility and Rating Drift Figure 21d Fallen Angel Rates and Aaa Downgrade Rates Rating Volatility Rating Drift Fallen Angels Rate Aaa Downgrade Rate 18% 1.0% 14% 0.8% 10% 0.6% 6% 0.4% 2% -2% 0.2% 0.0% Note: The horizontal axis represents the year of each 12-month cohort ending date. Figure 22 - Summary of European RMBS 12-Month Rating Transitions 2006 2005 1998-2006 1988-2006 Downgrade Rate 0.00% 0.26% 0.28% 0.43% Upgrade Rate 3.32% 7.93% 4.28% 4.22% Downgrade/Upgrade Ratio 0.00 0.03 0.07 0.10 Downgrade Rate (notch weighted) 0.00% 0.97% 0.76% 1.05% Upgrade Rate (notch weighted) 5.96% 16.04% 8.75% 8.54% Downgrade/Upgrade Ratio (notch weighted) 0.00% 0.06 0.09 0.12 Rating Drift (notch weighted) 5.96% 15.07% 7.99% 7.49% Rating Volatility (notch weighted) 5.96% 17.00% 9.50% 9.59% Stability Rate 96.68% 91.81% 95.44% 95.35% Withdrawal Rate 4.57% 4.31% 4.46% 4.43% Notches per Downgrade per Year NA 3.67 2.68 2.45 Notches per Upgrade per Year 1.80 2.02 2.05 2.02 Note: See Appendix 1 for a glossary of terms and Appendix 3 for rating transition matrices. By original rating, a total of six Aaa-rated securities were downgraded (prior to 1998) and five of them were due to the downgrade of the same third party credit enhancer. The number of downgrades in other rating categories was also very small (less than four). At the same time, there was remarkable upgrade activity across all rating categories, most evidently, in the single-a and Baa categories. The lifetime upgrade rate was 20%, 26%, 23%, and 23% in the Aa, single-a, Baa, and Ba categories, respectively. Moody s Special Comment 17

By vintage, more than one third of the securities issued in 1999 and 2000 experienced upgrades. As a matter of fact, more than 24% of all securities issued prior to 2003 were upgraded. The lifetime upgrade rate was 6% for both the 2003 and 2004 vintages. Figure 23 - Lifetime Cumulative Rating Transitions for European RMBS Securities Issued before 2005 Figure 23a By Original Rating Figure 23b By Vintage 500 350 450 400 350 Downgraded 300 250 Downgraded 300 250 200 150 100 50 0 Aaa Aa A Baa Ba B Original Rating below Upgraded Unchanged 200 150 100 50 0 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 Vintage Upgraded Unchanged 18 Moody s Special Comment

Rating Transitions in Other Sectors The structured finance category we have analyzed so far consists of four broad sectors: ABS, CDOs, CMBS, and RMBS; however, there also exist other types of structured finance transactions that employ SPVs and similar structures. We refer to these transactions as "other structured finance" and have excluded them from the overall structured finance category. Most of the other structured finance ratings in Europe are repacks and structured covered bonds. 10 In this section, we study their rating transition experiences separately. REPACKS A total of 929 ratings from 912 repackaged deals have been issued in Europe since 1993. At the beginning of 2006, 564 ratings from 549 transactions were still outstanding. Figure 24 plots the distribution of ratings by rating category and vintage, and reveals that almost two thirds of the repackage ratings were in the Aa category, and about 96% were in the investment grade rating categories. By vintage, securities issues in 2005 and 2004 accounted for 61% of the ratings outstanding, securities issued in 2003 and 2002 made up 23%, and the remaining 16% were from various pre-2002 vintages. Figure 24 - Distribution of Outstanding Repack Ratings on 1/1/2006 By Rating Category (Total 564) By Vintage (Total 564) Baa 6% A 14% Ba 2% B 1% Caa 1% Aaa 11% 2005 35% Pre1996 2% 1997 4% 1998 3% 1999 1% 2002 10% 2000 1% 2001 5% 2003 13% Aa 65% 2004 26% Out of a total universe of 564 outstanding ratings, 17 were upgraded and none was downgraded in 2006, compared to 10 upgrades and three downgrades in 2005. As a result, the 12-month upgrade rate increased to 3.2% from 2.5% while the downgrade rate declined to 0% for the first time in five years, from 0.8% in the prior year. Figure 25 depicts the detailed rating transition trends of repackaged securities from 1998 to 2006 and the lifetime cumulative rating transitions by original rating and vintage. 10. There were also a small number (totaled 46) of long-term ratings from structured investment vehicles (SIV). 19, or about 59%, of these SIV long-term ratings were in the Baa category. Only one rating, originally rated Ba2 (a rating on a capital note), was downgraded and 12 were upgraded. Moody s Special Comment 19

Figure 25 - European Repack Rating Transition Trends Figure 25a - 12-Month Upgrade Rates, Downgrade Rates, and Withdrawal Rates Figure 25b - Magnitude of Upgrades and Downgrades over a 12-Month Period Upgrade Rate Downgrade Rate Withdrawal Rate Upgrades Downgrades 50% 3.0 40% 30% 2.0 20% 1.0 10% 0% 0.0 Figure 25c - Lifetime Rating Transitions by Original Rating for Securities Issued before 2006 Figure 25d - Lifetime Rating Transitions by Vintage for Securities Issued before 2006 600 250 500 Downgraded 200 Downgraded 400 150 300 200 Upgraded 100 Upgraded 100 50 0 Aaa Aa A Baa Ba B Caa Original Rating Unchanged 0 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 Vintage Unchanged Note: The horizontal axis of Figures 26a and 26b represents the year of each 12-month cohort ending date. STRUCTURED COVERED BONDS A total of 251 ratings from 238 structured covered bond programs have been issued since 1996. Figure 26 demonstrates the credit performance of structured covered bond ratings. It shows that to date, this deal type has experienced no downgrades and nine upgrades, resulting in a 3.3% lifetime upgrade rate and a 96.7% rating stability rate. An overwhelming majority of structured covered bonds were rated Aaa, totaling 225 or about 90% of all ratings in this sector. 23 were rated Aa with eight already having been upgraded. Upgrades mostly affected securities issued during 1996-1998, although there was an upgrade on a security that was just issued in 2006 due to the revision of the foreign currency ceiling of foreign currency denominated bonds for Hungary. In addition, the magnitude of upgrades averaged between one and a half notches, generally lower than that in the overall structured finance sector. 20 Moody s Special Comment

Figure 26 - European Structured Covered Bonds Rating Transition Trends Figure 26a - 12-Month Upgrade Rates, Downgrade Rates, and Withdrawal Rates Figure 26b - Magnitude of Upgrades and Downgrades over a 12-Month Period Upgrade Rate Downgrade Rate Withdrawal Rate Upgrades Downgrades 80% 3.0 70% 60% 50% 2.0 40% 30% 20% 1.0 10% 0% 0.0 Figure 26c - Lifetime Rating Transitions by Original Rating for Securities Issued before 2006 Figure 26d - Lifetime Rating Transitions by Vintage for Securities Issued before 2006 250 200 70 60 50 150 Upgraded 40 Upgraded 100 Unchanged 30 20 Unchanged 50 10 0 Aaa Aa A Baa Ba B Caa 0 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 Original Rating Vintage Note: The horizontal axis of Figures 26a and 26b represents the year of each 12-month cohort ending date. Moody s Special Comment 21

Appendix 1: Description of Data Sample and Glossary DESCRIPTION OF DATA SAMPLE The data sample for the study covers all structured finance rating observations in the Europe, Middle East, and Africa (EMEA) region between 1988 and 2006 and uses the following set of criteria: Only securities carrying Moody's long-term bond ratings are included, whereas short-term ratings, foreign national ratings, provisional ratings, and rating estimates are excluded. Tranches wrapped by financial guarantors, government agencies, or government sponsored enterprises (GSEs) are excluded. Interest-only (IO) tranches and residual tranches are excluded. Other structured finance securities such as those from repackaged deals and structured covered bonds are excluded from the overall structured finance statistics, and analyzed separately in the report. Tranches carrying the same rating from the same deal are collapsed into a single rating observation. The corporate data set used to compare corporate rating transitions to structured finance rating transitions includes international corporate and sovereign issuers, but excludes US municipal ratings. The structured finance data set used in this study is available through Moody's Structured Finance Default Risk Service (DRS) database and the corporate data set is available through Moody's Corporate Default Risk Service (DRS) database. GLOSSARY Broad Ratings and Refined Ratings Broad ratings refer to the following Moody's long-term bond rating categories: Aaa, Aa, A, Baa, Ba, B, and below. Refined ratings or ratings with numeric modifiers refer to Aaa, Aa1, Aa2, Aa3, A1, A2, A3, Baa1, Baa2, Baa3, Ba1, Ba2, Ba3, B1, B2, B3, Caa1, Caa2, Caa3, Ca, and C. The broad rating category below includes the following refined ratings: Caa1, Caa2, Caa3, Ca, and C. Investment-Grade and Below Investment-Grade (or Speculative-Grade) Ratings Investment-grade ratings refer to Aaa, Aa1, Aa2, Aa3, A1, A2, A3, Baa1, Baa2, and Baa3. Below investment-grade or speculative-grade ratings refer to Ba1, Ba2, Ba3, B1, B2, B3, Caa1, Caa2, Caa3, Ca, and C. Downgrade (Upgrade) Rate A security is considered to have been downgraded (upgraded) if its rating at the end of a pre-specified time period is lower (higher) than at the beginning of the time period on the basis of ratings with numeric modifiers (also known as refined ratings or modified ratings). The downgrade rate is the number of securities downgraded (or upgraded) divided by the total number of outstanding securities at the beginning of the time period, after excluding half of the ratings withdrawn during that time period. Note that in measuring downgrade rates and upgrade rates, only ratings at the beginning and the end of the time period are considered. Average Number of Total Notches Downgraded (Upgraded) per Year The number of total notches downgraded (upgraded) per year for a downgraded (upgraded) security is the difference in the rating of that security at the beginning and end of a 12-month period based on refined ratings. This term is also referred to as the magnitude, size, or severity of the rating change. The average number of total notches downgraded (upgraded) per year averages this quantity for all downgraded (upgraded) securities over the 12-month period. A security can experience multiple rating actions during a 12-month period, and therefore, this measure is different from the average number of notches changed per rating action. For example, if a security is downgraded from Baa1 to Baa2 and then Baa2 to Baa3 over 12 months, then the average number of notches changed per rating action would be one, but the average number of total notches changed per year would be two. 22 Moody s Special Comment

Weighted Downgrade (Upgrade) Rate The weighted downgrade (upgrade) rate is computed as the number of securities downgraded (upgraded), weighted by the number of total notches changed per downgrade (upgrade) per year, divided by the total number of outstanding securities at the beginning of the 12-month period, after excluding half of the ratings withdrawn during that period. For example, a security downgraded from Baa1 to B1 over 12 months is counted as three downgrades in the calculation of a weighted downgrade rate, but counted as only one downgrade in the calculation of the unweighted downgrade rate. Lifetime Cumulative Downgrades and Upgrades A security is considered to have experienced a cumulative or lifetime downgrade (upgrade), if its rating before withdrawal or rating at the end of the study period is lower (higher) than its original rating. The lifetime cumulative downgrade (upgrade) rate for a particular group of securities is computed as the number of securities to experience a cumulative downgrade (upgrade) divided by the total number of securities in the group. Rating Stability Rate The rating stability rate is a measure of the proportion of ratings that were unchanged over a pre-specified time period. It is calculated as one minus the sum of the downgrade rate and upgrade rate. Withdrawal Rate The withdrawal rate is computed as the total number of ratings withdrawn by the end of a pre-specified time period divided by the total number of ratings outstanding at the beginning of that time period. Rating Drift The rating drift is defined as the weighted upgrade rate minus the weighted downgrade rate. Rating Volatility The rating volatility is defined as the weighted upgrade rate plus the weighted downgrade rate. ABS ABS stand for asset-backed securities. This structured finance sector includes securities backed by home equity loans (HEL) and both traditional asset types such as auto loans, credit card receivables, student loans, and manufactured housing loans, and non-traditional asset types such as mutual fund fees, tax liens, tobacco settlement payments, and intellectual property. Whole business securitizations (WBS) are included in this sector. Non-mortgage ABS Non-mortgage ABS are asset-backed securities excluding both HEL and securities backed by manufactured housing (MH) loans. HEL The home equity loan or HEL sector include securities back by subprime (B&C) mortgage loans, home improvement loans, high loan-to-value (high LTV) loans, home equity lines of credit (HELOCs), and closed-end second-lien loans, as well as net interest margin (NIM) securitizations. It does not include securities backed by Alt-A mortgages, which are included in the RMBS sector. HEL is part of the ABS sector. Moody s Special Comment 23

CDOs CDOs stand for collateralized debt obligations. Derivative securities such as structured notes and repackaged securities are not considered to be part of this sector. Commercial real estate (CRE) CDOs, where 70% or more of the collateral is composed of CRE loans, are classified as CMBS. If the collateral backing the transaction contains less than 70% CRE loans, then the deal is classified as a CDO. CMBS CMBS stand for commercial mortgage-backed securities. Commercial real estate (CRE) CDOs, where 70% or more of its collateral is composed of CRE loans, are classified as CMBS. If the collateral backing the transaction contains less than 70% CRE loans, then the deal is classified as a CDO. RMBS RMBS stand for residential mortgage-backed securities. The large majority of these securities are backed by first-lien prime mortgages, but some are backed by Alt-A mortgages. In some older vintage RMBS transactions, subprime mortgages may also be included in the collateral. HEL is not considered to be part of this sector. Other Structured Finance The other structured finance category contains repackaged securities, structured notes, credit derivatives, as well as structured covered bonds, catastrophe-linked notes, and structured investment vehicles. This sector was denoted as "Others" in Moody's first transition study in 2003, and then named "Derivatives" from 2004 to 2006. Global structured finance Global structured finance captures global structured securities in four major sectors: ABS, CDO, CMBS, and RMBS. Repacks, structured notes, credit derivatives, structured covered bonds, and long-term ratings from structured investment vehicles (SIV) are excluded from this term. U.S. Structured Finance Securities U.S. structured finance securities are denominated in U.S. dollars and issued in the U.S. market or denominated in Canadian dollars and issued in Canada. In cases where the source of the underlying collateral and the denomination of the securities crossed multiple countries/regions, deals are classified by the location at which they are monitored. EMEA (or European) Structured Finance Securities EMEA is an abbreviation for Europe, the Middle East, and Africa. EMEA structured finance securities are denominated in a currency from or issued out of a country in the EMEA region. In cases where the source of the underlying collateral and the denomination of the securities crossed multiple countries/regions, deals are classified by the location at which they are monitored. Asia-Pacific Structured Finance Securities Asia-Pacific structured finance securities are denominated in the currency of a country in the Asia-Pacific region or issued in an Asia-Pacific country (including Japan and Australia). In cases where the source of the underlying collateral and the denomination of the securities crossed multiple countries/regions, deals are classified by the location at which they are monitored. Latin American Structured Finance Securities Latin American structured finance securities are denominated in a Latin American currency or issued in Latin America. In cases where the source of the underlying collateral and the denomination of the securities crossed multiple countries/regions, deals are classified by the location at which they are monitored. 24 Moody s Special Comment