Fitch Ratings Affirms 10 Classes of Duke Funding High Grade III Ltd.

NEW YORK -- Fitch Ratings affirms ten classes of notes issued by Duke Funding High Grade III Ltd. (Duke High Grade III). These affirmations are the result of Fitch's review process and are effective immediately:

--$443,500,000 Class A-1A notes affirmed at 'AAA';

--$1,306,500,000 Class A-1B1 notes affirmed at 'AAA';

--$1,306,500,000 Class A-1B2 notes affirmed at 'AAA';

--$102,000,000 Class A-2 notes affirmed at 'AAA';

--$8,000,000 Class B-1 notes affirmed at 'AA+';

--$8,000,000 Class B-2 notes affirmed at 'AA-';

--$44,000,000 Class C-1 notes affirmed at 'A+';

--$44,000,000 Class C-2 notes affirmed at 'A-';

--$12,000,000 Class D notes affirmed at 'BBB';

--$32,000,000 Subordinated notes affirmed at 'BB+'.

Duke High Grade III is a collateralized debt obligation (CDO) which closed Aug. 3, 2005 and is managed by Duke Funding Management, LLC. Duke High Grade III is a revolving transaction and will exit its reinvestment period in August, 2009. The portfolio is composed of residential mortgage-backed securities (RMBS) and commercial mortgage-backed securities (CMBS).

Since the last review on Feb. 24, 2006, the transaction has been actively managed through the collateral quality and coverage tests which have changed very little. The weighted average rating factor has remained stable at 1.22 ('AA-/A+') from 1.24 ('AA-/A+'). The class A/B overcollateralization (OC) ratio, class C OC ratio, and class D OC ratio are currently at 107.07%, 102.26% and 101.63%, respectively; from 107.08%, 102.26% and 101.64% at the last review. Additionally, there has been only positive rating migration within the portfolio and trading gains have caused credit enhancement levels to increase. There are no defaulted assets, and only 0.25% of the assets are rated lower than 'A-'.

The ratings of the class A-1A notes, class A-1B1 notes, class A-2 notes, class B-1 notes, and class B-2 notes address the likelihood that investors will receive full and timely payments of interest, as per the governing documents, as well as the stated balance of principal by the legal final maturity date. The ratings of the class C-1 notes, class C-2 notes, and class D notes address the likelihood that investors will receive ultimate and compensating interest payments, as per the governing documents, as well as the stated balance of principal by the legal final maturity date. The rating of the class A-1B2 notes addresses the likelihood that investors will receive only full and timely payments of interest as per the governing documents. The rating of the Subordinated Notes addresses the likelihood that investors will receive only the ultimate payment of principal by the stated maturity date.

Fitch will continue to monitor and review this transaction for future rating adjustments. Additional deal information and historical data are available on the Fitch Ratings web site at (www.fitchratings.com). (For more information on the Fitch VECTOR Model, see 'Global Rating Criteria for Collateralised Debt Obligations,' dated Sept. 13, 2004, available on Fitch's web site at www.fitchratings.com).

Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site, www.derivativefitch.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. Fitch means Fitch, Inc., Fitch Ratings, Ltd. and their subsidiaries including Derivative Fitch, Inc. and Derivative Fitch Ltd. and any successor or successors thereto.