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Fitch Affirms Fator Administracao de Recursos' Rating at 'High Standards'

January 30, 2014

SAO PAULO & RIO DE JANEIRO --(BUSINESS WIRE)-- Fitch Ratings today affirmed the International Asset Manager Rating of Fator Administracao de Recursos Ltda. (FAR) at 'High Standards'. The Rating Outlook remains Stable. Key Rating Drivers The 'High Standards' rating assigned to FAR reflects Fitch's opinion that the investment platform and operational framework of the asset manager are strong relative to the standards applied by institutional investors in international markets. The rating reflects FAR's well-formalized and consistent practices for investment process, risk controls and compliance, in addition to its robust and segregated structures for fiduciary administration and custody, which are in line with the good practices in the market. The rating also benefits from the corporate structure of Banco Fator SA . (Fator, L-T National Rating 'BBB' / Outlook Stable), from FAR's continuous investments in technology and satisfactory distribution channels. The manager's rating applies to its activities in the local market and does not contemplate offshore, private banking, fiduciary administration and custody operations. Those areas have their own processes and policies, which are segregated from the traditional fund management. Fitch believes that FAR's main challenges are: to increase its participation in higher value added funds in a scenario of stronger competition from other managers and funding products, provide consistent returns on its mandates, and reduce the high turnover of senior executives. The 'High Standards' rating is based on the following assessments: Company: Good Controls: High Investments: High Operations: High Technology: Good Company Fator Administracao de Recursos is an asset manager with focus on equities and multimarket funds with significant experience in the local market. It is a wholly owned subsidiary of Banco Fator S.A. with a track record in equity research, mainly in mid- and small-cap companies listed on BM&F Bovespa. The asset management business is segregated from the other activities of Banco Fator, with good corporate governance and compliance policies. Its structure is lean, with well-planned processes and highly qualified seasoned professionals. Banco Fator and FAR have undergone a significant restructuring process in the last couple of years, with may changes in its senior management team, including the bank's CEO, FAR's CEO, and the group's CRO. The changes have been implemented as part of an overall effort aimed at balancing revenues between the business areas on a more consistent and profitable basis. The group reported losses in recent periods and FAR, in the nine first months of 2013. Assets under management (AUM) on Sept. 30, 2013 of BRL 4 billion (also taking in account the volume in managed accounts) showed a slight reduction of 0.5% from September 2012 , well below the asset management industry's growth (+10.7%). As of September 2013 , the investor profile was comprised of retail and private (5%), institutional (9%), distributors (14%), closed pension funds (67%) and others (5%). AUM profile is concentrated on strategies in which the asset manager has acknowledged expertise, with 10% in open-end equities funds, 20% in closed-end equities funds (Sinergia fund family), 24% in fixed-income funds, 35% in multimarket funds and 11% in others. Controls FAR relies on independent and well-organized corporate risk and compliance structures, following well-defined methodologies and guidelines. Such structures have not shown relevant changes after the admission of the new CRO. The asset manager has strong operational risk controls, with low operating losses, well-formalized and documented compliance policies and procedures, as well as solid systems and policies for market risk and liquidity control. Limit mismatches have been low and promptly resolved. Investments The asset manager presents a sound investment process, based on committees supported by solid fundamentalist and quantitative macroeconomic analyses. The process is well-formalized, being carried out by qualified and experienced professionals. Although the managers enjoy a certain autonomy in their decisions, all committee guidelines must be complied with. In mid-2013, FAR CEO/CIO was changed, when Patricia Stierli left (to another business unit of the group) and Fabio Moser (former director of Fator investment bank) joined. In 2012, Roseli Machado had been replaced by Patricia Stierli and Damont Carvalho , head of fixed-income funds, by Marcos Palozzi . While steady personnel changes increase the risk of process and control discontinuation, no material negative changes to the investment process or investment performance have been observed in light of these developments. Operations Fiduciary administration activities are developed by another Fator group business unit, such as in other fund managers linked to banks in Brazil . Asset custody is carried out by renowned companies in the sector. The processes comply with the regulations and best practices and are supported by adequate technology platforms with a good level of automation. Furthermore, middle office and market risk areas carry out the daily reconciliation of the whole operational process, including trading activity and calculation of quotas. Technology FAR relies upon adequate management, risk control and automated back office systems, besides benefiting from Banco Fator's good structure and technology platform. The asset manager has made adequate investments in systems and controls to improve the efficiency and agility of the processes. Besides its risk control and post-trading compliance systems, it is implementing an internally developed platform, with pre-trading resources and attribution of performance. Company Profile FAR is an asset manager created in 1997, with AUM of BRL4.0 billion . The company is responsible for the asset management activities of Banco Fator S.A. Rating Sensitivities Fator Administracao de Recursos' rating is sensitive to relevant adverse changes to any of its above mentioned major fundamentals, mainly in case of weakening of its financial profile, high professional turnover or deterioration in its processes and policies. A relevant deviation from Fitch's guidelines for any key-factor could also result in a rating downgrade. For further information on Fitch's asset manager rating analysis, please refer to the methodologies mentioned below, which are available at the agency's websites, at '' or '' . Additional information is available at '' . Applicable Criteria and Related Research : --'Asset Manager Rating Criteria' ( April 22, 2013 ). Applicable Criteria and Related Research : Asset Manager Rating Criteria Additional Disclosure Solicitation Status 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. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE. Fitch Ratings Primary Analyst Alexandre Yamashiro , CAIA Director +55-11-4504-2606 Fitch Ratings Brasil Ltda. Alameda Santos , 700 - 7th floor - Cerqueira Cesar Sao Paulo - SP - CEP: 01418-100 or Secondary Analyst Pedro Gomes Director +55-11-4504-2604 or Tertiary Analyst Lucas Bender Analyst +55-11-4504-2217 or Committee Chairperson Davie R. Rodriguez , CFA Senior Director +1-212-908-0386 or Media Relations: Elizabeth Fogerty , +1-212-908-0526 ( New York ) Source: Fitch Ratings

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