Fitch Rates Western Asset Ultra Short-Term Funds 'AAA/V1'

Fitch Ratings has assigned 'AAA/V1' Fund Credit Quality Ratings (FCQR) and Fund Volatility Ratings to the Western Asset Ultra Short Obligations Fund and the Western Asset Ultra Short Obligations Fund Ltd., both advised by Legg Mason Partners Fund Advisor, LLC. and subadvised by Western Asset Management Company. The funds were launched in January, and are feeder funds that invest in securities through an underlying mutual fund, Ultra Short Obligations Portfolio, which has the same goals and strategies as the funds.

The ratings reflect Fitch's review of the funds' investment and credit guidelines, the portfolios' credit quality and diversification and Legg Mason and Western Asset's capabilities as investment advisor and subadvisor, respectively. The 'AAA' FCQR indicates the highest underlying credit quality (or lowest vulnerability to default). The 'V1' rating indicates a very low sensitivity to market risk. On a relative basis, total returns and/or changes in net asset value are expected to exhibit high stability, showing low relative volatility across a broad range of market scenarios.

KEY RATING DRIVERS

Asset Credit Quality

The funds' portfolio composition meets Fitch's criteria for an 'AAA' FCQR. The weighted average rating factor of the portfolios is 0.28, within the range for an 'AAA' FCQR.

The portfolios are comprised largely of short-term securities rated 'F1' or higher. The 'AAA' FCQR reflect the vulnerability to losses as a result of defaults, and are based on the actual and prospective weighted average credit quality of the portfolio assets. The funds' offering documents indicate that they will limit their investments in Tier-2 securities to 5% of assets, although the funds do not currently hold any 'F2' exposure.

Portfolio Sensitivity to Market Risks

The funds' 'V1' Volatility Ratings indicate the low sensitivity to market risk, given the short-dated nature of the assets as mandated by offering documents. The funds manage their market risk by maintaining a dollar-weighted average portfolio maturity (WAM) that does not exceed 90 days under normal circumstances. The funds invests in securities that have remaining maturities of 397 days or less at the time of purchase, taking into account demand features and interest rate provisions.

The funds seek a high level of income, consistent with liquidity and the preservation of capital. The funds invest in U.S. dollar denominated short-term debt including bank obligations, commercial paper, asset-backed securities, structured instruments, and repurchase agreements.

INVESTMENT ADVISOR

Legg Mason Partners Fund Advisor is the investment advisor for these funds, and had $242.9 billion of assets under management (AUM) as of Dec. 31, 2014.

Western Asset is the subadvisor for these funds. Western Asset specializes in fixed-income strategies and had AUM of $466 billion as of Dec. 31, 2014. Legg Mason Partners Fund Advisor and Western Asset are wholly-owned subsidiaries of Legg Mason, Inc. As of December 31, 2014, Legg Mason's asset management operations, including Western Asset and its supervised affiliates, had aggregate assets under management of approximately $709.1 billion. Fitch views Legg Mason and Western Asset's investment advisory capabilities, resource commitment, operational controls, corporate governance, and compliance procedures as consistent with the ratings assigned to the funds.

RATING SENSITIVITIES

The ratings are sensitive to material changes in the credit quality or market risk profiles of the funds. A material decrease in portfolio credit quality could result in the FCQR being lowered, while a material increase in portfolio duration could result in fund volatility ratings being lowered.

Fitch utilized stress analysis to test the sensitivity of the funds' ratings against potential changes in the portfolios' credit quality and maturity profiles. Under certain adverse scenarios, if the average credit quality of the portfolios deteriorates and the maturity profiles of portfolio securities are extended to the outer limits of the funds' operating and investment guidelines, the funds' ratings could be lowered.

Fitch receives monthly fund portfolio holdings information including credit quality, market value and duration of the individual securities to conduct surveillance against ratings guidelines. For additional information about Fitch bond 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'.

Applicable Criteria and Related Research:

--'Global Bond Fund Rating Criteria', Dec. 12, 2014.

Applicable Criteria and Related Research:

Global Bond Fund Rating Criteria

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=814528

Additional Disclosure

Solicitation Status

http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=982267

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