Morgan Stanley Insured Municipal Securities Adopts Investment Policy Changes

NEW YORK--(BUSINESS WIRE)--Morgan Stanley Insured Municipal Securities (NYSE: IMS) (the “Trust”) has received shareholder approval to adopt changes to the Trust’s investment policies, as described below. These changes are designed to expand the investment universe in which the Trust can invest, thereby providing the Trust’s portfolio management team with important flexibility to respond to ongoing developments in the insured municipal bond market. The Trust seeks to achieve its investment objective by providing income which is exempt from federal income tax. The Trust is not changing its investment objective.

In connection with the recent instability in the marketplace, some of the insurers of municipal obligations have experienced ratings downgrades by the ratings agencies that rate such insurers’ claims paying ability. This affects many funds that invest in insured municipal obligations because many of these funds (including the Trust) currently have policies that require such funds to invest 80 percent of their net assets in municipal obligations that are insured by an insurer rated “AAA” at the time of purchase. At a meeting held on November 14, 2008, the Trust’s shareholders have approved the following investment policy changes:

• To allow the Trust to invest, under normal market conditions, at least 80 percent of the Trust’s net assets in municipal obligations which are covered by insurance guaranteeing the timely payment of principal and interest thereon and that are rated at least “A” by a nationally recognized statistical rating organization (“NRSRO”) or are unrated but judged to be of similar credit quality by the Trust’s Investment Adviser, or covered by insurance issued by insurers rated at least “A” by a NRSRO.
• To allow the Trust to invest up to 20 percent of the Trust’s net assets in taxable or tax-exempt fixed income securities rated at least investment grade by a NRSRO or, if not rated, determined by the Trust’s Investment Adviser to be of comparable quality, including uninsured municipal obligations, obligations of the U.S. government, its respective agencies or instrumentalities, and other fixed income obligations, and, during periods in which the Investment Adviser believes that changes in economic, financial or political conditions make it advisable to do so, to invest an unlimited extent in such investments for temporary defensive purposes. The Trust may also invest in options, futures, swaps and other derivatives.
• The elimination and modification of certain fundamental investment policies and restrictions of the Trust.

The Trust’s Management believes that the changed policy allows the Trust to continue to purchase higher quality insured municipal obligations, while acknowledging the changing market and economic conditions. While the market risk and the credit risk of the Trust investing in insured municipal obligations generally should be lower than the risks of a fund investing in similar municipal obligations that are uninsured, insurance does not eliminate the market risk or credit risk of the securities in the Trust’s portfolio. A downgrade of an insurer would generally subject the Trust to potential market value declines and increased credit risk on the municipal obligations insured by such insurer.

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