Fitch Ratings Upgrades Five Tranches of Archimedes Funding III, Ltd.

NEW YORK -- Fitch Ratings upgrades five classes of notes issued by Archimedes Funding III, Ltd. (Archimedes). The following rating actions are effective immediately:

--$5,000,000 class C-1 fixed-rate third priority senior secured notes to 'BBB' from 'BBB-';

--$85,000,000 class C-2 floating rate third priority senior secured notes to 'BBB' from 'BBB-';

--$5,000,000 class D-1 fixed rate fourth priority senior secured notes to 'B+' from 'B-';

--$23,000,000 class D-2 floating rate fourth priority senior secured notes to 'B+' from 'B-';

--$17,000,000 class D-3 fixed rate fourth priority senior secured notes to 'B+' from 'B-'.

Archimedes is a collateralized debt obligation (CDO) managed by ING Capital Advisors, LLC. that closed Nov. 2, 1999. Archimedes was established to issue approximately $1 billion in debt and equity securities and invest the proceeds in a portfolio of predominantly high yield bank loans and high-yield bonds. As of the July 20, 2004 trustee report, approximately 92% of the portfolio consisted of senior secured loans and bonds, 6% senior unsecured loans and bonds and the remaining 2% in subordinated and synthetic securities. Included in this review, Fitch discussed the current state of the portfolio with the asset manager and their portfolio management strategy going forward. In addition, Fitch conducted cash flow modeling utilizing various default timing and interest rate scenarios.

Since the last rating action on July 24, 2003, the class A/B overcollateralization (OC) ratio increased from 122% to 124.7% as reported on the July 20, 2004 trustee report. The class C OC ratio increased from 105.1% to 107.3%, however the class D OC ratio of 100.3% failed marginally versus the trigger of 100.5%. The weighted average rating of the performing collateral has improved from 'B/B-' to 'B'. Assets rated 'CCC+' or lower represent 10.1% of Archimedes' maximum investment amount, a sharp decrease from 27.7% as of the last rating action. Archimedes' portfolio included $70.1 million par amount of defaulted assets when last reviewed, representing roughly 9.4% of the total pledged securities. That number has been reduced to less than 1% of the total pledged securities or $6.2 million as of the most recent trustee report. On the November 2003 and February 2004 payment dates, Archimedes paid all deferred interest which had accrued on the class C and D notes, respectively.

As indicated by the Trustee, the class D notes have been paid down by $1,440,427.52 as of the Aug. 30, 2004 payment date. The payment has brought the class D OC ratio into compliance at 100.5%. The balances shown above are as of the July 20, 2004 trustee report and do reflect the August 30, 2004 payment.

The rating of the class C and D notes addresses the likelihood that investors will receive ultimate and compensating interest payments, as well as the stated balance of principal by the final payment date. Fitch does not rate the class A or B notes issued by Archimedes.

Fitch conducted cash flow modeling utilizing various default timing and interest rate scenarios to measure the breakeven default rates going forward relative to the minimum cumulative default rates required for the rated liabilities. (For more information on the Fitch Vector Model, see 'Global Rating Criteria for Collateralised Debt Obligations', dated Aug. 1, 2003 and available on the Fitch Ratings web site at 'www.fitchratings.com'. As a result of this analysis, Fitch has determined that the current ratings assigned to the class C-1, C-2, D-1, D-2 and D-3 notes no longer reflect the current risk to noteholders and has subsequently improved over the past year.

Fitch will continue to monitor and review this transaction for future rating adjustments. Additional deal information and historical data is also available at 'www.fitchratings.com'.