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NEW YORK (Standard & Poor's) June 14, 2007--Standard & Poor's Ratings Services
today said that on June 13, 2007, it assigned its 'AAf' fund credit quality
and 'S1+' volatility rating to the Morgan Stanley Funds plc US Dollar Enhanced
Yield Fund.
"The 'AAf' fund credit quality rating is based on our analysis of the
credit quality of the fund's eligible investments, the counterparties, and
overall management of Morgan Stanley Investment Management Inc., which serves
as the adviser for the fund," said Standard & Poor's credit analyst Ruth Shaw.
"The 'AAf' rating signifies that the portfolio holdings provide very strong
protection against losses from credit defaults."
The 'S1+' volatility rating is based on Morgan Stanley's target duration
of one year or less, defensive interest rate strategy, and limited spread
risk. As part of its volatility analysis, Standard & Poor's assessed the
management, portfolio level risk, target durations, and comparable return
strategies of the fund. The 'S1+' volatility rating signifies that a fund
possesses extremely low sensitivity to changing market conditions and a level
of risk that is less than or equal to that of a portfolio comprised of the
highest-quality fixed-income instruments with an average maturity of one year
or less.
Morgan Stanley Funds plc US Dollar Enhanced Yield Fund is an open-ended
investment company domiciled in Ireland and all shares are listed on the Irish
Stock Exchange. The US Dollar Enhanced Yield Fund's investment objective is to
provide high current income, to the extent consistent with maintaining capital
stability and liquidity. Portfolio holdings consist of highly rated securities
including money market instruments, U.S. treasury and agency securities,
agency MBS, ABS, investment-grade corporate debt, and treasury futures to
hedge interest rate exposure and duration. The fund uses the Merrill Lynch US
Dollar LIBOR 3-month index as its benchmark and strives to maintain a duration
of one year or less. In addition to the current fund rating, Standard & Poor's
rates a total of 21 funds managed by the Morgan Stanley teams located in West
Conshohocken, Penn. and Harborside, N.J.
The investment adviser for the fund is Morgan Stanley Investment
Management Inc., a division of Morgan Stanley, a global organization with
offices worldwide. As of June 30, 2006, the firm had more than $433 billion in
assets under management firm-wide and more than $94 billion in fixed-income
assets. The custodian for the fund is State Street.
Standard & Poor's fund credit quality and volatility ratings are based on
its analysis of a fund's eligible portfolio investments and strategy,
historical return volatility, and management. The seven-category credit
quality rating scale ranges from 'AAAf' (highest level of protection) to
'CCCf' (least protection). The ratings from 'AAAf' to 'CCCf' may be modified
by the addition of a plus (+) or minus (-) sign to show relative standing
within the major rating categories.
Volatility ratings range from lowest volatility ('S1', with certain funds
designated a plus sign {+} to indicate the fund's extremely low sensitivity to
changing market conditions) to highest volatility ('S6'). The ratings are
based on analysis of a fund's investment strategy and portfolio risk,
including interest rate risk, credit quality, liquidity, concentration, call
and option risk, and currency risk. The effects of various portfolio
strategies, such as the use of leverage, hedging, and derivative instruments,
are also factored into the ratings.
Our analysis seeks to uncover risk sources in a managed fund's portfolio
and investment strategies and to assess the likelihood of losses from credit
defaults in the portfolio and the potential impact on returns and net
asset-value variability. We monitor fixed-income funds monthly to ensure the
consistency of the funds' credit quality and volatility profiles with the
assigned ratings.
Complete ratings information is available to subscribers of
RatingsDirect, the real-time Web-based source for Standard & Poor's credit
ratings, research, and risk analysis, at www.ratingsdirect.com. All ratings
affected by this rating action can be found on Standard & Poor's public Web
site at www.standardandpoors.com; under Credit Ratings in the left navigation
bar, select Find a Rating, then Credit Ratings Search.
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