Fitch Rates Morgan Stanley Institutional Fund Trust Ultra-Short Income Portfolio 'AAA/V1'

Fitch Ratings has assigned an 'AAA/V1' Fund Credit Quality Rating (FCQR) and Fund Volatility Rating to the Morgan Stanley Institutional Fund Trust Ultra-Short Income Portfolio, advised by Morgan Stanley Investment Management Inc. The fund launched on April 29, 2016.

The ratings reflect Fitch's review of the fund's investment and credit guidelines, the portfolio's expected credit quality, maturities and diversification, and Morgan Stanley Investment Management Inc.'s capabilities as investment advisor. The 'AAA' FCQR indicates the highest underlying credit quality (or lowest vulnerability to default). The 'V1' Volatility Rating indicates a very low sensitivity to market risk. On a relative basis, total returns and/or changes in net asset value are expected to exhibit high stability, showing low relative volatility across a broad range of market scenarios.

KEY RATING DRIVERS

Asset Credit Quality

Since the fund launched today, Fitch's analysis was based on a model portfolio that reflects the expected portfolio composition of the fund and taking into account the fund's credit and maturity limit guidelines. The fund's model portfolio composition meets Fitch's criteria for a 'AAA' FCQR.

The portfolio is expected to consist largely of short-term securities rated 'F1' or higher. The fund's offering documents indicate that the fund will limit its investments in securities rated 'F2' by Fitch, or the equivalent, to 5% of total assets. The 'AAA' FCQR reflects the vulnerability to losses as a result of defaults, and is based on the prospective weighted average credit quality of the portfolio assets.

Portfolio Sensitivity to Market Risks

The fund's 'V1' Volatility Rating indicates low sensitivity to market risk, given the expected short-dated nature of the assets as mandated by offering documents. The fund will manage its market risk by maintaining a dollar-weighted average portfolio maturity (WAM) that does not exceed 90 days and dollar-weighted average portfolio life (WAL) that does not exceed 180 days, under normal circumstances. The fund will invest in money market instruments that have remaining maturities of 397 days and U.S. Government securities that have remaining maturities of 762 days or less at the time of purchase, taking into account demand features and interest rate reset provisions.

The fund will seek a high level of income, consistent with liquidity and the preservation of capital. The fund will invest in U.S. dollar-denominated short-term debt including bank obligations, commercial paper, asset-backed securities, repurchase agreements, and government securities.

INVESTMENT ADVISOR

Morgan Stanley Investment Management Inc., a global investment manager, is the investment advisor for the fund, and had $406 billion in assets under management (AUM) as of Dec. 31, 2015. Fitch views Morgan Stanley Investment Management Inc.'s advisory capabilities, resource commitments, operational controls, corporate governance, and compliance procedures as consistent with the ratings assigned to the funds.

RATING SENSITIVITIES

The ratings are sensitive to material changes in the expected credit quality or market risk profile of the fund. A material decrease in portfolio credit quality could result in the FCQR being lowered, while a material increase in portfolio duration could result in the fund Volatility Rating being lowered.

Fitch utilized stress analysis to test the sensitivity of the fund's ratings against potential changes in the portfolio's expected credit quality and maturity profile. Under certain adverse scenarios, if the credit quality of the portfolio deteriorates and the maturity profile of portfolio securities are extended to the outer limits of the fund's operating and investment guidelines, the fund's ratings could be lowered.

Fitch will receive monthly fund portfolio holdings information including credit quality, market value and duration of the individual securities to conduct surveillance against ratings criteria. For additional information about Fitch's bond fund ratings criteria, please review the criteria referenced below, which can be found on Fitch's website.

Additional information is available on www.fitchratings.com

Applicable Criteria

Global Bond Fund Rating Criteria (pub. 12 Dec 2014)

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=814528

Additional Disclosures

Solicitation Status

https://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=1003682

Endorsement Policy

https://www.fitchratings.com/jsp/creditdesk/PolicyRegulation.faces?context=2&detail=31

ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE '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. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.

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