Location of fault policy file (fault-policies.xml) and fault policy bindings file (fault-bindings.xml)?

1. In the same directory as the composite.xml  file of the SOA composite application. 

2. In a different location that is specified with two properties that you add to the composite.xml file. This option is useful if a fault policy must be used by multiple SOA composite applications. This option overrides any fault policy files that are included in the same directory as the composite.xmlfile, the fault policy files are placed into the SOA Metadata Service (MDS) shared area.