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TEXT-Fitch affirms 3 Morgan Stanley liquidity funds at 'AAAmmf'
September 26, 2012 / 4:31 PM / 5 years ago

TEXT-Fitch affirms 3 Morgan Stanley liquidity funds at 'AAAmmf'

Sept 26 - Fitch Ratings has affirmed three money market funds managed by
Morgan Stanley Investment Management (MSIM) at 'AAAmmf' as follows:

Morgan Stanley Euro Liquidity Fund, affirmed at 'AAAmmf'

Morgan Stanley Sterling Liquidity Fund, affirmed at 'AAAmmf'

Morgan Stanley US Dollar Liquidity Fund, affirmed at 'AAAmmf'

The three money market funds are set-up as sub-funds of Ireland-domiciled Morgan
Stanley Fund PLC

KEY RATING DRIVERS

The main drivers for the ratings affirmation are:

-- The portfolios' overall strong credit quality and diversification, 

-- Short maturity profile,

-- Minimal exposure to interest rate and spread risks,

-- High levels of overnight and one-week liquidity, and,

-- The capabilities and resources of MSIM as asset manager.

The 'AAAmmf' money market fund ratings reflect the funds' extremely strong 
capacity to achieve the investment objectives of preserving principal and 
providing shareholder liquidity through limiting credit, market and liquidity 
risk.

PORTFOLIO CREDIT QUALITY / DIVERSIFICATION

The funds maintain high credit quality portfolios consistent with Fitch's 
criteria for 'AAAmmf'-rated money market funds. The funds invest exclusively in 
short-term securities rated at least 'F1' by Fitch (or of a comparable credit 
quality by other global rating agencies). Counterparty risk is limited by 
transacting with entities rated 'F1' or higher, or those that are integrated 
members of financial institutions rated 'F1' or higher. The funds also limit 
concentration risk arising from exposures to individual issuers and 
counterparties.

Each fund's Portfolio Credit Factor (PCF) met Fitch's 'AAAmmf' rating criterion 
of 1.50 or less. The PCF is a risk-weighted measure of the funds' portfolio 
assets that accounts for the credit quality and maturity profile of a fund's 
portfolio securities.

MATURITY PROFILE

The funds seek to limit interest rate and spread risk consistent with Fitch's 
ratings criteria for funds rated 'AAAmmf'. Each fund limits its weighted average
maturity to reset date (WAM) and weighted average life (WAL) to 60 days and 120 
days, respectively. It also limits the maturity date of any single investment to
397 days or less. At end-August 2012, the euro fund's WAM and WAL were 23 and 26
days, respectively, the sterling fund's WAM and WAL were 27 and 30 days, and the
dollar fund's WAM and WAL were 29 and 52 days respectively.

LIQUIDITY PROFILE

The funds seek to manage investor redemption risk through investment 
restrictions that aim to maintain sufficient levels of daily and weekly 
liquidity. In line with Fitch's rating criteria, the funds seek to maintain at 
least 10% of their assets in securities maturing overnight or other qualifying 
liquid assets such as government securities and at least 25% in securities 
maturing within seven days or other qualified liquid assets. The liquidity 
cushion has proved suitably sized and managed in the light of some observed 
volatility among the funds' investor base. At end-August, overnight liquidity 
was at 55%, 60% and 40% for the Euro, Sterling and US dollar portfolios, 
respectively. 

FUND OBJECTIVES

The funds' objective is to offer capital preservation and liquidity, while 
providing a competitive level of return. The funds pursue their investment 
objective by investing in a diversified portfolio of short-term money market 
instruments including time deposits, commercial papers, certificates of deposit,
corporate bonds and notes, asset-backed commercial papers (ABCP), government and
government agency debt as well as, for the US dollar portfolio, repurchase 
agreements.

INVESTMENT ADVISOR

MSIM, the funds' investment manager, is the asset management arm of Morgan 
Stanley, whose 'A'/'F1' ratings were affirmed by Fitch on 15 December 2011. At 
September 2012, MSIM was managing approximately USD311bn of assets globally, of 
which about 28% were money market assets. Fitch views Morgan Stanley and MSIM's 
investment advisory capabilities, financial and resource commitments, 
operational controls, corporate governance, and compliance procedures as 
consistent with the 'AAAmmf' ratings assigned to the funds.

The euro, sterling and US dollar funds are sub-funds of the Dublin-domiciled 
Morgan Stanley Funds plc umbrella fund and had total assets of EUR1.09m, 
GBP0.4bn and USD3bn, respectively, at end-August 2012. 

RATING SENSITIVITY AND SURVEILLANCE

The ratings may be sensitive to material changes in the credit quality or market
risk profiles of the funds. A material adverse deviation from Fitch's guidelines
for any key rating driver could cause Fitch to downgrade the ratings.Additional information is available at www.fitchratings.com. 

The ratings above were solicited by, or on behalf of, the issuer, and therefore,
Fitch has been compensated for the provision of the ratings.

The sources of information used to assess this rating were the public domain, 
MSIM and State Street, the funds' custodian and administrator.

Applicable criteria, 'Global Money Market Fund Rating Criteria', dated March 29,
2012 is available at www.fitchratings.com.

Applicable Criteria and

Our Standards:The Thomson Reuters Trust Principles.
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