Fitch Affirms Morgan Stanly Institutional Liquidity Funds: Tax-Exempt Portfolio at 'AAA/V1+'

Fitch Ratings affirms the 'AAA/V1+' ratings assigned to Morgan Stanley Institutional Liquidity Funds: Tax-Exempt Portfolio, a money market fund managed by Morgan Stanley Investment Management, Inc. (MSIM). The affirmation is a result of Fitch's annual review of the fund and is based on the high credit quality of the funds' assets and the capabilities of MSIM as investment advisor. . As of Oct. 31, 2008, the portfolio had approximately $3.2 billion in total assets under management.

The Morgan Stanley Institutional Liquidity Funds: Tax-Exempt Portfolio seeks the maximum level of current income exempt from U.S. federal income consistent with preservation of capital and maintenance of liquidity. As of Oct. 31, 2008, the portfolio was comprised of 60.1% municipal variable rate demand obligations, 19.5% investment in the Morgan Stanley Institutional Liquidity: Government Portfolio, 16.1% municipal bonds, notes, and commercial paper, 2.7% put option bonds and 1.6% in semi-annual bonds. As of Oct. 31, 2008, the fund's weighted-average maturity was 36 days.

Fitch views the 19.5% exposure to Morgan Stanley Institutional Liquidity: Government Portfolio as atypical for a municipal money market fund, given both the size of the exposure and the tax status of the investment relative to the fund's stated investment objective. That said, the Morgan Stanley Institutional Liquidity: Government Portfolio is invested in obligations of the U.S. government, which mitigates potential credit and/or concentration risk with respect to such exposure. Fitch's understanding is that the investment advisor views this as a temporary investment strategy in the face of limited supply of eligible municipal collateral given current market volatility and credit pressures. Furthermore, the investment advisor deems the investment strategy to be consistent with the fund investment parameter's 'safe harbor' provisions.

MSIM is a wholly owned subsidiary of Morgan Stanley (rated 'A/F1' by Fitch). As of Sept. 30, 2008, MSIM, together with its affiliated asset management companies, had approximately $476.3 billion in assets under management. The firm manages assets on behalf of institutions and individuals worldwide through a variety of equity, fixed income, cash management and alternative investment products. In the fund's semi-annual report as of April 30, 2008, it was disclosed that MSIM has voluntarily agreed to reduce its advisory fee and/or absorb other expenses, so that the total annual expense of each share in the fund does not exceed 20 basis points. Although this may be discontinued at any time in the future at MSIM's discretion, it serves to improve investors' yield in the interim. Fitch views MSIM's investment advisory capabilities, resource commitment, operational controls, corporate governance, and compliance procedures as consistent with the rating assigned to the fund.

Fitch will publish the fund's credit profile on its website www.fitchratings.com in the near future.

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.