Fitch Affirms InCapS Funding II, Ltd./Corp.

CHICAGO -- Fitch affirms five classes of notes issued by InCapS Funding II, Ltd./Corp. (InCapS II).

These affirmations are the result of Fitch's review process and are effective immediately:

--$111,703,903 class A-1 Notes affirmed at 'AAA';

--$50,500,000 class A-2 Notes affirmed at 'AAA';

--$47,500,000 class B-1 Notes affirmed at 'A-';

--$47,000,000 class B-2 Notes affirmed at 'A-';

--$16,000,000 class C Notes affirmed at 'BBB'.

InCapS II is a collateralized debt obligation (CDO), which closed December 16, 2003. InCapS II is a static pool composed of insurance trust preferred securities, senior notes, and surplus notes. Included in this review, Fitch performed break-even cash flow analysis in addition to a full analysis of the collateral included in the portfolio.

The InCapS II portfolio is experiencing two current asset deferrals totaling $20 million, or approximately 6.6% of the outstanding balance. Specifically related to these deferrals is the failure of both the Senior Subordinate and Junior Subordinate overcollateralization (OC) tests. As of the October 2006 payment date report, the senior subordinate OC ratio has fallen below its trigger level by 1.64% and the Junior Subordinate OC ratio shows a shortfall of 2.32% versus its trigger. The senior subordinate test failure has caused a temporary interest shortfall to the class C notes due to required partial senior note redemption using collateral interest proceeds. Derivative Fitch expects the senior subordinate ratio to be in compliance within the next two payment periods resulting in resumed full current interest payments to the class C notes.

The ratings of the class A-1 and A-2 notes address the likelihood that investors will receive timely payments of interest as well as ultimate payment of principal by the stated maturity date. The ratings of the class B-1, B-2, and C notes address the likelihood that investors will receive ultimate payment of interest and principle by the stated maturity date.

As a result of this analysis, Fitch has determined that the current ratings assigned to the A-1, A-2, B-1, B-2 and C notes still reflect the current risk to noteholders. Fitch will continue to monitor and review this transaction for future rating adjustments. Additional deal information and historical data are available on the Fitch web site at (www.derivativefitch.com). For more information on Fitch's approach to rating CDOs of trust preferred securities, see the special report, 'Rating Criteria for US Bank and Insurance Trust Preferred CDOs' dated February 2, 2005 and available on Fitch's web site.

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.