2023-09-22MSIFTDiscoveryPortfolio_485B_PSP_January2024
Morgan
Stanley Institutional Fund Trust
Ultra-Short
Portfolios
Ultra-Short
Income Portfolio
Short
Duration Municipal Income Portfolio
Prospectus | January
28, 2024
|
| |
Ultra-Short
Income Portfolio Share
Class |
Ticker
Symbol |
Class
IR |
MULSX |
Institutional
Class |
MUIIX |
Class
A |
MUAIX |
|
| |
Short
Duration Municipal Income Portfolio Share
Class |
Ticker
Symbol |
Class
IR |
MULMX |
Class
A |
MUAMX |
The
Securities and Exchange Commission (“SEC”) has not approved or disapproved these
securities or passed upon the adequacy
of this Prospectus. Any representation to the contrary is a criminal
offense.
An
investment in a Fund
is not a bank deposit and is not insured by the Federal Deposit Insurance
Corporation or any other government
agency. An investment in a Fund
involves investment risks, and you may lose money in the Fund.
Morgan
Stanley Institutional Fund Trust Prospectus | Fund
Summary
Ultra-Short
Income Portfolio
Investment
Objective
The
Ultra-Short Income Portfolio (the “Fund”) seeks current income with capital
preservation while maintaining liquidity.
Fees
and Expenses
The
table below describes the fees and expenses that you may pay if you buy, hold
and sell shares of the Fund. You
may pay fees other
than the fees and expenses of the Fund, such as brokerage commissions and other
fees charged by financial intermediaries,
which are not reflected in the tables and examples below. The Fund does not
charge any sales loads or other fees
when you purchase or redeem shares.
Annual
Fund Operating Expenses (expenses
that you pay each year as a percentage of the value of your
investment)
|
|
|
| |
|
Class
IR |
Institutional
Class |
Class
A |
|
Advisory
Fee |
0.20% |
0.20% |
0.20% |
|
Shareholder
Service or 12b-1 Fee |
None |
0.05% |
%1 |
|
Other
Expenses |
0.10% |
0.10% |
0.10% |
|
Total
Annual Fund Operating Expenses2
|
% |
% |
%1 |
|
Fee
Waiver and/or Expense Reimbursement2
|
% |
% |
%1 |
|
Total
Annual Fund Operating Expenses After Fee Waiver and/or Expense
Reimbursement2
|
% |
% |
%1 |
|
Example
The
example below is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds.
The
example assumes that you invest $10,000 in the Fund, your investment has a 5%
return each year and that the Fund’s operating expenses
remain the same (except that the example incorporates the fee waiver and/or
expense reimbursement arrangement for only the
first year). Although your actual costs may be higher or lower, based on
these assumptions your costs would be:
|
|
|
|
| |
If
You SOLD Your Shares |
|
|
1
Year |
3
Years |
5
Years |
10
Years |
|
Class
IR |
$26 |
$91 |
$164 |
$376 |
|
Institutional
Class |
$31 |
$107 |
$191 |
$438 |
|
Class
A |
$41 |
$161 |
$292 |
$675 |
|
|
|
|
|
| |
If
You HELD Your Shares |
|
|
1
Year |
3
Years |
5
Years |
10
Years |
|
Class
IR |
$26
|
$91 |
$164 |
$376 |
|
Institutional
Class |
$31 |
$107
|
$191 |
$438
|
|
Class
A |
$41 |
$161 |
$292
|
$675 |
|
1 |
The
Fund’s “Distributor,” Morgan Stanley Distribution, Inc., has agreed to
waive the 12b-1 fee on Class A shares of the Fund to the extent it exceeds
0.10%
of the average daily net assets of such shares on an annualized basis.
This waiver will continue for at least one year from the date of this
Prospectus
or until such time as the Board of Trustees of Morgan Stanley
Institutional Fund Trust (the “Trust”) acts to discontinue all or a
portion of such
waiver when it deems such action is
appropriate. |
2 |
The
Fund’s “Adviser,” Morgan Stanley Investment Management Inc., has agreed to
reduce its advisory fee and/or reimburse the Fund so that Total
Annual
Fund Operating Expenses, excluding acquired fund fees and expenses (as
applicable), certain investment related expenses, taxes, interest and
other
extraordinary expenses (including litigation), will not exceed 0.25% for
Class IR, 0.30% for Institutional Class and 0.40% for Class A. The fee
waivers
and/or expense reimbursements will continue for at least one year from the
date of this Prospectus or until such time as the Board of Trustees
of
the Trust acts to discontinue all or a portion of such waivers and/or
reimbursements when it deems such action is
appropriate. |
Portfolio
Turnover
The
Fund pays transaction costs, such as commissions, when it buys and sells
securities (or “turns over” its portfolio). A higher portfolio
turnover rate may indicate higher transaction costs and may result in higher
taxes when Fund shares are held in a taxable account.
These costs, which are not reflected in Total Annual Fund Operating Expenses or
in the example, affect the Fund’s performance.
During
the reporting period, the Fund did not hold any long-term investments and
accordingly portfolio turnover is not
applicable.
Principal
Investment Strategies
The
Fund invests primarily in liquid, high quality U.S. dollar-denominated money
market instruments of U.S. and foreign financial issuers
and non-financial issuers. The Fund also invests in obligations issued or
guaranteed by the U.S. Government and its agencies
Morgan
Stanley Institutional Fund Trust Prospectus | Fund
Summary
Ultra-Short
Income Portfolio (Con’t)
and
instrumentalities. The Fund’s money market investments may include commercial
paper, corporate debt obligations, debt obligations
(including certificates of deposit and promissory notes) of U.S. banks or
foreign banks, or of U.S. branches or subsidiaries of
foreign banks, or foreign branches of U.S. banks (such as Yankee obligations),
certificates of deposit of savings banks and savings and
loan organizations, asset-backed securities, repurchase agreements and municipal
obligations.
Pursuant
to a fundamental policy adopted by the Fund, the Fund invests, under normal
circumstances, at least 25% of its total assets in
securities issued by companies in the financial services industry, including
banks, broker-dealers and insurance
companies.
Securities
purchased by the Fund (or the issuers of such securities) will carry a rating in
the highest two rating categories, A-2, P-2 or F2
or better by S&P Global Ratings Group, a division of S&P Global Inc.
(“S&P”), Moody’s Investors Service, Inc. (“Moody’s”), or Fitch
Ratings, Inc. (“Fitch”), respectively, or the equivalent by another nationally
recognized statistical rating organization (“NRSRO”),
or if unrated, considered by the Adviser to be of equivalent quality. The
Fund may invest up to 5% of its assets, determined
at the time of investment, in securities (or the issuers of such securities)
rated A-2, P-2 or F2 by S&P, Moody’s or Fitch, respectively,
and no more than 1% of its assets will be invested in an individual security or
issuer with such rating. In the case of a security
that is rated differently by these three rating agencies, where two rating
agencies rate the security in the highest rating category
and the third rating agency rates the security in the second highest rating
category, the security will be treated as rated in the highest
rating category. In the case of a security that is differently rated by only two
of these rating agencies, the security will be treated
as rated in the lower rating category.
Under
normal circumstances, the Fund intends to maintain a maximum weighted average
maturity of 90 days and a maximum weighted
average life of 180 days.
The
Fund is not a money market fund and does not seek to maintain a stable net asset
value per share (“NAV”).
The
Adviser follows a multi-pronged investment process with respect to credit risk,
interest rate risk and liquidity. Securities are reviewed
on an ongoing basis to maintain or improve creditworthiness taking into
consideration factors such as cash flow, asset quality,
debt service coverage ratios and economic developments. Additionally, exposure
to guarantors and liquidity providers is monitored
separately as are the various diversification requirements. The Adviser manages
the Fund’s assets in an attempt to reduce credit
and interest rate risks.
Principal
Risks
There
is no assurance that the Fund will achieve its investment objective, and you can
lose money investing in this Fund.
The principal
risks of investing in the Fund include:
• |
Fixed-Income
Securities.
Fixed-income securities are subject to the risk of the issuer’s inability
to meet principal and interest payments
on its obligations (i.e., credit risk) and are subject to price volatility
resulting from, among other things, interest rate sensitivity
(i.e., interest rate risk), market perception of the creditworthiness of
the issuer and general market liquidity (i.e., market risk). The
Fund may face a heightened level of interest rate risk in times of
monetary policy change and/or uncertainty, such as when
the Federal Reserve Board adjusts a quantitative easing program and/or
changes rates. The Fund may be subject to certain liquidity
risks that may result from the lack of an active market and the reduced
number and capacity of traditional market participants
to make a market in fixed-income
securities. |
• |
Financial
Services.
The Fund is more susceptible to any economic, business, political,
regulatory or other developments that adversely
affect issuers in the financial services industry than a fund that does
not invest significantly in the financial services industry.
The profitability of many types of financial services companies may be
adversely affected in certain market cycles, including
periods of rising interest rates, which may restrict the availability and
increase the cost of capital, and declining economic
conditions, which may cause credit losses due to financial difficulties of
borrowers. Financial services companies are also subject
to extensive government regulation, including policy and legislative
changes in the United States and other countries that are
changing many aspects of financial
regulation. |
• |
Credit
and Interest Rate Risk.
Credit risk refers to the possibility that the issuer or guarantor of a
security will be unable or unwilling
or perceived to be unable or unwilling to make interest payments and/or
repay the principal on its debt. In such instances,
the value of the Fund could decline and the Fund could lose money.
Interest rate risk refers to the decline in the value of
a fixed-income security resulting from changes in the general level of
interest rates. When the general level of interest rates goes up,
the prices of most fixed-income securities go down. When the general level
of interest rates goes down, the prices of most fixed-income
securities go up. The
Fund may invest in variable and floating rate loans and other variable and
floating rate securities.
Although these instruments are generally less sensitive to interest rate
changes than fixed rate instruments, the value of variable
and floating rate loans and other securities may decline if their interest
rates do not rise as quickly, or as much, as general interest
rates. The
Fund may face a heightened level of interest rate risk in times of
monetary policy change and/or uncertainty, such
as when the Federal Reserve Board adjusts a quantitative easing program
and/or changes rates. A changing interest rate environment
increases certain risks, including the potential for periods of
volatility, increased redemptions, shortened durations (i.e.,
prepayment risk) and extended durations (i.e., extension risk). For
example, during periods when interest rates are low, the
|
Morgan
Stanley Institutional Fund Trust Prospectus | Fund
Summary
Ultra-Short
Income Portfolio (Con’t)
|
Fund’s
yield (and total return) also may be low or otherwise adversely affected
or the Fund may be unable to maintain positive returns.
Credit ratings may not be an accurate assessment of liquidity or credit
risk. Although credit ratings may not accurately reflect
the true credit risk of an instrument, a change in the credit rating of an
instrument or an issuer can have a rapid, adverse effect
on the instrument’s liquidity and make it more difficult for the Fund to
sell at an advantageous price or
time. |
• |
U.S.
Government Securities. Different
types of U.S. government securities are subject to different levels of
credit risk, including the risk
of default, depending on the nature of the particular government support
for that security. For example, a U.S. government-sponsored
entity, such as Federal National Mortgage Association or Federal Home Loan
Mortgage Corporation, although chartered
or sponsored by an Act of Congress, may issue securities that are neither
insured nor guaranteed by the U.S. Treasury and,
therefore, are not backed by the full faith and credit of the United
States. With respect to U.S. government securities that are not
backed by the full faith and credit of the United States, there is the
risk that the U.S. Government will not provide financial support
to such U.S. government agencies, instrumentalities or sponsored
enterprises if it is not obligated to do so by
law. |
• |
Asset-Backed
Securities.
Asset-backed securities are subject to credit (such as a borrower’s
default on its mortgage obligation and the
default or failure of a guarantee underlying the asset-backed security),
interest rate and certain additional risks, including the risk
that various federal and state consumer laws and other legal and economic
factors may result in the collateral backing the securities
being insufficient to support payment on the securities. Some asset-backed
securities also entail prepayment risk and extension
risk, which may vary depending on the type of asset. Due to these risks,
asset-backed securities may become more volatile
in certain interest rate
environments. |
• |
Repurchase
Agreements.
Repurchase agreements are subject to risks associated with the possibility
of default by the seller at a time when
the collateral has declined in value, or insolvency of the seller, which
may affect the Fund’s right to control the collateral and result
in certain costs and delays. Repurchase agreements may involve a greater
degree of credit risk than investments in U.S. government
securities. |
• |
Money
Market Instrument Risk.
Money market instruments may be adversely affected by market and economic
events, such as a sharp
rise in prevailing short-term interest rates; adverse developments in the
banking industry, which issues or guarantees many money
market instruments; adverse economic, political or other developments
affecting issuers of money market instruments; changes
in the credit quality of issuers; and default by a
counterparty. |
• |
Foreign
Money Market Securities.
Investing in money market securities of foreign issuers involves some
additional risks, including the
possibility of adverse political, economic or other developments affecting
the issuers of these
securities. |
• |
Foreign
Securities.
The Fund may invest in U.S. dollar-denominated securities issued by
foreign governmental or corporate issuers. Investing
in securities of foreign issuers involves some additional risks than
securities of U.S. issuers. While these securities are subject
to the same type of risks that pertain to domestic issuers, namely credit
risk and interest rate risk, they are also subject to other
additional risks. Foreign issuers generally are subject to different
accounting, auditing and financial reporting standards than U.S.
issuers. There may be less information available to the public about
foreign issuers. In some foreign countries, there is also the
risk of government expropriation, excessive taxation, political or social
instability, economic sanctions or other similar governmental
activity or diplomatic developments that could affect an investment. There
also can be difficulty obtaining and enforcing
judgments against issuers in foreign countries. Governmental actions can
have a significant effect on the economic conditions
in foreign countries, which also may adversely affect the Fund’s
investments in foreign
issuers. |
• |
Municipals.
Because the Fund may
invest in municipal securities (also referred to as municipal
obligations), the Fund may be susceptible
to political, legislative, economic, regulatory, tax or other factors
affecting issuers of these municipal securities, such as state
and local governments and their agencies. To the extent that the Fund
invests in municipal securities of issuers in the same economic
sector, it could be more sensitive to economic, business or political
developments that affect such sector. Municipal securities
and their issuers may be more susceptible to downgrade, loss of revenue,
default and bankruptcy during recent periods of
economic stress. Municipal securities also involve the risk that an issuer
may call the securities for redemption, which could force
the Fund to reinvest the proceeds at a lower rate of
interest. |
• |
Liquidity.
The Fund may make investments that are illiquid or restricted or that may
become illiquid or less liquid in response to overall
economic conditions or adverse investor perceptions, and which may entail
greater risk than investments in other types of securities.
These investments may be more difficult to value or sell, particularly in
times of market turmoil, and there may be little trading
in the secondary market available for particular securities. Liquidity
risk may be magnified in a market where credit spread and
interest rate volatility is rising and where investor redemptions from
fixed-income mutual funds may be higher than normal. If
the Fund is forced to sell an illiquid or restricted security to fund
redemptions or for other cash needs, it may be forced to
sell the security at a loss or for less than its fair
value. |
• |
Commercial
Paper.
Commercial paper is subject to interest rate risk and is susceptible to
changes in the issuer’s financial condition or
credit quality. Commercial paper is typically repaid with the proceeds
from the issuance of new commercial paper. Thus, investments
in commercial paper are subject to the risk (commonly referred to as
rollover risk) that the issuer will be unable to issue
sufficient new commercial paper to meet the repayment obligations under
its outstanding commercial paper. Because commercial
paper is typically unsecured, investments in commercial paper are subject
to increased credit
risk. |
Morgan
Stanley Institutional Fund Trust Prospectus | Fund
Summary
Ultra-Short
Income Portfolio (Con’t)
• |
Market
and Geopolitical Risk.
The value of your investment in the Fund is based on the values of the
Fund’s investments, which change
due to economic and other events that affect markets generally, as well as
those that affect particular regions, countries, industries,
companies or governments. These events may be sudden and unexpected, and
could adversely affect the liquidity of the Fund’s
investments, which may in turn impact valuation, the Fund’s ability to
sell securities and/or its ability to meet redemptions.
The risks associated with these developments may be magnified if certain
social, political, economic and other conditions
and events (such as war, natural disasters, epidemics and pandemics,
terrorism, conflicts, social unrest, recessions, inflation,
interest rate changes and supply chain disruptions) adversely interrupt
the global economy and financial markets. It is difficult
to predict when events affecting the U.S. or global financial
markets may occur, the effects that such events may have and the
duration of those effects (which may last for extended periods). These
events may negatively impact broad segments of businesses
and populations and have a significant and rapid negative impact on the
performance of the Fund’s investments, and exacerbate
pre-existing risks to the
Fund. |
• |
Active
Management Risk.
In pursuing the Fund’s investment objective, the Adviser has considerable
leeway in deciding which investments
to buy, hold or sell on a day-to-day basis, and which trading strategies
to use. For example, the Adviser, in its discretion,
may determine to use some permitted trading strategies while not using
others. The success or failure of such decisions will
affect the Fund’s
performance. |
Shares
of the Fund are not bank deposits and are not guaranteed or insured by the
Federal Deposit Insurance Corporation or any other
government agency.
Performance
Information
The
bar chart and table below provide some indication of the risks of investing in
the Fund by showing changes in the Fund’s Institutional
Class shares’ performance from
year-to-year
and by showing how the Fund’s average annual returns for the past one
and five
year periods and since inception compare with those of a
broad measure of market performance, as well as an index that represents
a group of similar mutual funds, over time. The
performance of the other classes, which is shown in the table below, will
differ
because the classes have different ongoing fees.
The
Fund’s past performance, before and after taxes, is not necessarily an
indication
of how the Fund will perform in the future.
Updated performance information is available online at www.morganstanley.com/im
or by calling toll-free 1-800-869-6397.
Annual
Total Returns—Calendar Years
|
| |
High
Quarter |
12/31/23
|
1.52% |
Low
Quarter |
03/31/20
|
-0.17% |
Average
Annual Total Returns
(for
the calendar periods ended December
31, 2023)
|
|
| |
|
Past
One Year |
Past
Five Years |
Since
Inception |
Institutional
Class
(commenced operations on 4/28/2016) |
Return
Before Taxes |
5.57% |
2.05% |
1.82% |
Return
After Taxes on Distributions1
|
% |
% |
% |
Return
After Taxes on Distributions and Sale of Fund Shares |
3.27% |
1.20% |
1.07% |
Class
A
(commenced operations on 4/28/2016) |
Return
Before Taxes |
5.52% |
1.94% |
1.68% |
Class
IR
(commenced operations on 4/28/2016) |
Return
Before Taxes |
5.63% |
2.10% |
1.87% |
Morgan
Stanley Institutional Fund Trust Prospectus | Fund
Summary
Ultra-Short
Income Portfolio (Con’t)
|
|
| |
|
Past
One Year |
Past
Five Years |
Since
Inception |
ICE
BofA 3-Month U.S. Treasury Bill Index (reflects no deductions for fees,
expenses
or taxes)2
|
% |
% |
%3 |
Lipper
Ultra Short Obligations Funds Index (reflects no deduction for
taxes)4
|
% |
% |
%3 |
1 |
These
returns do not reflect any tax consequences from a sale of your shares at
the end of each
period. |
2 |
The
ICE BofA (Intercontinental Exchange Bank of America) 3-Month U.S. Treasury
Bill Index tracks the performance of U.S. Treasury bills with a
remaining
maturity of three months. It is not possible to invest directly in an
index. |
3 |
Since
Inception reflects the inception date of the
Fund. |
4 |
The
Lipper Ultra Short Obligations Funds Index is an equally weighted
performance index of the largest qualifying funds (based on net assets) in
the Lipper
Ultra Short Obligations Funds classification. There are currently 30 funds
represented in this Index. It is not possible to invest directly in an
index. |
The
after-tax returns shown in the table above are calculated using the historical
highest individual federal marginal income tax rates during
the period shown and do not reflect the impact of state and local
taxes.
After-tax
returns for the Fund’s other classes will vary from
Institutional
Class shares’ returns. Actual
after-tax returns depend on the investor’s tax situation and may differ from
those shown,
and after-tax returns are not relevant to investors who hold their Fund shares
through tax deferred arrangements such as 401(k)
plans or individual retirement accounts. After-tax
returns may be higher than before-tax returns due to foreign tax credits
and/or
an assumed benefit from capital losses that would have been realized had Fund
shares been sold at the end of the relevant periods,
as applicable.
Fund
Management
Adviser.
Morgan Stanley Investment Management Inc.
Portfolio
Managers. The
Fund is managed by members of the Global
Liquidity team. Information about the members jointly and primarily
responsible for the day-to-day management of the Fund is shown
below:
|
| |
Name |
Title
with Adviser |
Date
Began Managing
Fund |
Jonas
Kolk |
Managing
Director |
Since
Inception |
Michael
Cha |
Executive
Director |
Since
Inception |
David
Schoenfeld |
Executive
Director |
January
2018 |
Purchase
and Sale of Fund Shares
The
minimum initial investment generally is $5
million for Institutional
Class shares and $1,000
for Class
A shares of the Fund. To purchase
Class
IR shares, an investor must meet a minimum initial investment of
$10
million or be a defined contribution, defined benefit
or other employer sponsored employee benefit plan, in each case provided that
the plan trades on an omnibus level, whether or
not qualified under the Internal Revenue Code of 1986, as amended (the “Code”),
and in each case subject to the discretion of the Adviser.
The minimum initial investment requirements may be waived for certain
investments. For more information, please refer to the
section of the Prospectus entitled “Shareholder Information—Minimum Investment
Amounts.”
Shares
of the Fund may be purchased or sold on any day the New York Stock Exchange
(“NYSE”) is open for business (except when the
following federal holidays are observed: Columbus Day and Veterans Day) directly
from the Fund by mail (c/o SS&C Global Investor
and Distribution Solutions, Inc. (“SS&C GIDS”), P.O. Box 219804, Kansas
City, MO 64121-9804), by telephone (1-888- 378-1630)
or by contacting an authorized third-party, such as a broker-dealer or other
financial intermediary that has entered into a selling
agreement with the Fund’s Distributor (each, a “Financial Intermediary”). In
addition, you can sell Fund shares at any time by enrolling
in a systematic withdrawal plan. For more information, please refer to the
sections of the Prospectus entitled “Shareholder Information—How
To Purchase Fund Shares” and “—How To Redeem Fund Shares.”
Tax
Information
The
Fund intends to make distributions that may be taxed as ordinary income or
capital gains, unless you are investing through a tax-deferred
arrangement, such as a 401(k) plan or an individual retirement
account.
Payments
to Broker-Dealers and Other Financial Intermediaries
If
you purchase shares of the Fund through a Financial Intermediary (such as a
bank), the Adviser and/or the Distributor may pay the Financial
Intermediary for the sale of Fund shares and related services. These payments,
which may be significant in amount, may create
a conflict of interest by influencing the Financial Intermediary and your
salesperson to recommend the Fund over another investment.
Ask your salesperson or visit your Financial Intermediary’s web site for more
information.
Morgan
Stanley Institutional Fund Trust Prospectus | Fund
Summary
Short
Duration Municipal Income Portfolio
Investment
Objective
The
Short Duration Municipal Income Portfolio (the “Fund”) seeks current income
exempt from federal income tax and capital preservation
while maintaining liquidity.
Fees
and Expenses
The
table below describes the fees and expenses that you may pay if you buy, hold
and sell shares of the Fund. You
may pay fees other
than the fees and expenses of the Fund, such as brokerage commissions and other
fees charged by financial intermediaries,
which are not reflected in the tables and examples below. The Fund does not
charge any sales loads or other fees
when you purchase or redeem shares.
Annual
Fund Operating Expenses (expenses
that you pay each year as a percentage of the value of your
investment)
|
|
| |
|
Class
IR |
Class
A |
|
Advisory
Fee |
0.20% |
0.20% |
|
Shareholder
Service or 12b-1 Fee |
None |
%1 |
|
Other
Expenses |
0.23% |
0.23% |
|
Total
Annual Fund Operating Expenses2
|
% |
%1 |
|
Fee
Waiver and/or Expense Reimbursement2
|
% |
%1 |
|
Total
Annual Fund Operating Expenses After Fee Waiver and/or Expense
Reimbursement2
|
% |
%1 |
|
Example
The
example below is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds.
The
example assumes that you invest $10,000 in the Fund, your investment has a 5%
return each year and that the Fund’s operating expenses
remain the same (except that the example incorporates the fee waiver and/or
expense reimbursement arrangement for only the
first year). Although your actual costs may be higher or lower, based on
these assumptions your costs would be:
|
|
|
|
| |
If
You SOLD Your Shares |
|
|
1
Year |
3
Years |
5
Years |
10
Years |
|
Class
IR |
$26 |
$120 |
$223 |
$525 |
|
Class
A |
$36 |
$173 |
$323 |
$760 |
|
|
|
|
|
| |
If
You HELD Your Shares |
|
|
1
Year |
3
Years |
5
Years |
10
Years |
|
Class
IR |
$26
|
$120
|
$223
|
$525 |
|
Class
A |
$36 |
$173 |
$323 |
$760
|
|
1 |
The
Fund’s “Distributor,” Morgan Stanley Distribution, Inc., has agreed to
waive the 12b-1 fee on Class A shares of the Fund to the extent it exceeds
0.10%
of the average daily net assets of such shares on an annualized basis.
This waiver will continue for at least one year from the date of this
Prospectus
or until such time as the Board of Trustees of Morgan Stanley
Institutional Fund Trust (the “Trust”) acts to discontinue all or a
portion of such
waiver when it deems such action is
appropriate. |
2 |
The
Fund’s “Adviser,” Morgan Stanley Investment Management Inc., has agreed to
reduce its advisory fee and/or reimburse the Fund so that Total
Annual
Fund Operating Expenses, excluding acquired fund fees and expenses (as
applicable), certain investment related expenses, taxes, interest and
other
extraordinary expenses (including litigation), will not exceed 0.25% for
Class IR and 0.35% for Class A. The fee waivers and/or expense
reimbursements
will continue for at least one year from the date of this Prospectus or
until such time as the Board of Trustees of the Trust acts to discontinue
all or a portion of such waivers and/or reimbursements when it deems such
action is appropriate. |
Portfolio
Turnover
The
Fund pays transaction costs, such as commissions, when it buys and sells
securities (or “turns over” its portfolio). A higher portfolio
turnover rate may indicate higher transaction costs and may result in higher
taxes when Fund shares are held in a taxable account.
These costs, which are not reflected in Total Annual Fund Operating Expenses or
in the example, affect the Fund’s performance.
During
the reporting period, the Fund did not hold any long-term investments and
accordingly portfolio turnover is not
applicable.
Principal
Investment Strategies
Under
normal circumstances, the Fund invests at least 80% of its net assets in
municipal securities, the income from which is exempt from
federal income tax. This policy is fundamental and may not be changed without
shareholder approval. The Fund may also invest
in variable and floating rate demand instruments and tender option
bonds.
Morgan
Stanley Institutional Fund Trust Prospectus | Fund
Summary
Short
Duration Municipal Income Portfolio (Con’t)
The
Fund may invest up to 100% of its assets in municipal securities, the interest
on which may be subject to the federal alternative minimum
tax for individuals. In addition, the Fund may invest up to 20% of its assets in
securities subject to federal income tax.
The
Fund may invest 25% or more of its total assets in certain types of municipal
obligations (such as general obligations, municipal leases,
principal only municipal investments, revenue bonds and industrial development
bonds) and in one or more states, territories and
economic sectors (such as housing, hospitals, healthcare facilities or
utilities). At least 85% of the Fund’s net assets normally will be
invested in municipal obligations rated at least investment grade at the time of
investment (which are those rated Baa3 or higher by
Moody’s Investors Service, Inc (“Moody’s”), or BBB- or higher by either S&P
Global Ratings (“S&P”) or Fitch Ratings (“Fitch”)) or,
if unrated, determined by the Adviser to be of at least investment grade
quality. The balance of net assets may be invested in municipal
obligations rated below investment grade and in unrated municipal obligations
considered to be of comparable quality by the
Adviser (“junk bonds”). The Fund will not invest more than 5% of its net assets
in obligations rated below B3 by Moody’s, or B- by
either S&P or Fitch, or in unrated obligations considered to be of
comparable quality by the Adviser. For purposes of rating restrictions,
if securities are rated differently by two or more rating agencies, the highest
rating is used.
Under
normal circumstances, the Fund intends to maintain a dollar-weighted average
portfolio duration of less than three years; however,
the Fund may invest in individual municipal obligations of any
maturity.
The
Adviser’s process for selecting obligations for purchase and sale emphasizes the
creditworthiness of the issuer or other person obligated
to repay the obligation and the relative value of the obligation in the market.
In evaluating creditworthiness, the Adviser considers
ratings assigned by rating agencies and generally performs additional credit and
investment analysis. The portfolio managers also
may trade securities to seek to minimize taxable capital gains to shareholders.
A portion of the Fund’s distributions generally will be
subject to federal alternative minimum tax. The Fund may not be suitable for
investors subject to the federal alternative minimum tax.
The
Fund may, but is not required to, use derivatives and similar instruments, such
as residual interest bonds, futures contracts and options
thereon, interest rate swaps and forward rate agreements, for a variety of
purposes, including hedging, to seek total return or as
a substitute for the purchase or sale of securities. Derivative instruments used
by the Fund will be counted toward the Fund’s 80% policy
discussed above to the extent they have economic characteristics similar to the
securities included within that policy.
Principal
Risks
There
is no assurance that the Fund will achieve its investment objective, and
you can lose money investing in this Fund.
The principal
risks of investing in the Fund include:
• |
Fixed-Income
Securities.
Fixed-income securities are subject to the risk of the issuer’s inability
to meet principal and interest payments
on its obligations (i.e., credit risk) and are subject to price volatility
resulting from, among other things, interest rate sensitivity
(i.e., interest rate risk), market perception of the creditworthiness of
the issuer and general market liquidity (i.e., market risk). The
Fund may face a heightened level of interest rate risk in times of
monetary policy change and/or uncertainty, such as when
the Federal Reserve Board adjusts a quantitative easing program and/or
changes rates. The Fund may be subject to certain liquidity
risks that may result from the lack of an active market and the reduced
number and capacity of traditional market participants
to make a market in fixed-income
securities. |
• |
Credit
and Interest Rate Risk.
Credit risk refers to the possibility that the issuer or guarantor of a
security will be unable or unwilling
or perceived to be unable or unwilling to make interest payments and/or
repay the principal on its debt. In such instances,
the value of the Fund could decline and the Fund could lose money.
Interest rate risk refers to the decline in the value of
a fixed-income security resulting from changes in the general level of
interest rates. When the general level of interest rates goes up,
the prices of most fixed-income securities go down. When the general level
of interest rates goes down, the prices of most fixed-income
securities go up. The
Fund may invest in variable and floating rate loans and other variable and
floating rate securities.
Although these instruments are generally less sensitive to interest rate
changes than fixed rate instruments, the value of variable
and floating rate loans and other securities may decline if their interest
rates do not rise as quickly, or as much, as general interest
rates. The
Fund may face a heightened level of interest rate risk in times of
monetary policy change and/or uncertainty, such
as when the Federal Reserve Board adjusts a quantitative easing program
and/or changes rates. A changing interest rate environment
increases certain risks, including the potential for periods of
volatility, increased redemptions, shortened durations (i.e.,
prepayment risk) and extended durations (i.e., extension risk). For
example, during periods when interest rates are low, the Fund’s
yield (and total return) also may be low or otherwise adversely affected
or the Fund may be unable to maintain positive returns.
Credit ratings may not be an accurate assessment of liquidity or credit
risk. Although credit ratings may not accurately reflect
the true credit risk of an instrument, a change in the credit rating of an
instrument or an issuer can have a rapid, adverse effect
on the instrument’s liquidity and make it more difficult for the Fund to
sell at an advantageous price or
time. |
• |
U.S.
Government Securities. Different
types of U.S. government securities are subject to different levels of
credit risk, including the risk
of default, depending on the nature of the particular government support
for that security. For example, a U.S. government-sponsored
entity, such as Federal National Mortgage Association or Federal Home Loan
Mortgage Corporation, although
|
Morgan
Stanley Institutional Fund Trust Prospectus | Fund
Summary
Short
Duration Municipal Income Portfolio (Con’t)
|
chartered
or sponsored by an Act of Congress, may issue securities that are neither
insured nor guaranteed by the U.S. Treasury and,
therefore, are not backed by the full faith and credit of the United
States. With respect to U.S. government securities that are not
backed by the full faith and credit of the United States, there is the
risk that the U.S. Government will not provide financial support
to such U.S. government agencies, instrumentalities or sponsored
enterprises if it is not obligated to do so by
law. |
• |
Municipals.
Because the Fund may
invest in municipal securities (also referred to as municipal
obligations), the Fund may be susceptible
to political, legislative, economic, regulatory, tax or other factors
affecting issuers of these municipal securities, such as state
and local governments and their agencies. To the extent that the Fund
invests in municipal securities of issuers in the same state
or economic sector, it could be more sensitive to economic, business or
political developments that affect such state or sector. Municipal
securities and their issuers may be more susceptible to downgrade, loss of
revenue, default and bankruptcy during periods
of economic stress. Municipal securities also involve the risk that an
issuer may call the securities for redemption, which could
force the Fund to reinvest the proceeds at a lower rate of interest. While
interest earned on municipal securities is generally not
subject to federal income tax, any interest earned on taxable municipal
securities is fully taxable at the federal level and may be subject
to state and/or local income
tax. |
• |
Tender
Option Bonds. The
risks of tender option bonds include the risk that the owner of such
instrument may not be considered the
owner for federal income tax purposes and thus will not be entitled to
treat such interest as exempt from federal income tax. Additionally,
the occurrence of certain defaults or a credit rating downgrade on the
underlying security may impair the ability to tender
the bond back to the third-party provider of the demand option, thus
causing the bond to become
illiquid. |
• |
Taxability
Risk. Changes
in tax laws or adverse determinations by the Internal Revenue Service
(“IRS”) may make the income from some
municipal obligations
taxable. |
• |
Liquidity.
The Fund may make investments that are illiquid or restricted or that may
become illiquid or less liquid in response to overall
economic conditions or adverse investor perceptions, and which may entail
greater risk than investments in other types of securities.
These investments may be more difficult to value or sell, particularly in
times of market turmoil, and there may be little trading
in the secondary market available for particular securities. Liquidity
risk may be magnified in a market where credit spread and
interest rate volatility is rising and where investor redemptions from
fixed-income mutual funds may be higher than normal. If
the Fund is forced to sell an illiquid or restricted security to fund
redemptions or for other cash needs, it may be forced to
sell the security at a loss or for less than its fair
value. |
• |
Market
and Geopolitical Risk.
The value of your investment in the Fund is based on the values of the
Fund’s investments, which change
due to economic and other events that affect markets generally, as well as
those that affect particular regions, countries, industries,
companies or governments. These events may be sudden and unexpected, and
could adversely affect the liquidity of the Fund’s
investments, which may in turn impact valuation, the Fund’s ability to
sell securities and/or its ability to meet redemptions.
The risks associated with these developments may be magnified if certain
social, political, economic and other conditions
and events (such as war, natural disasters, epidemics and pandemics,
terrorism, conflicts, social unrest, recessions, inflation,
interest rate changes and supply chain disruptions) adversely interrupt
the global economy and financial markets. It is difficult
to predict when events affecting the U.S. or global financial
markets may occur, the effects that such events may have and the
duration of those effects (which may last for extended periods). These
events may negatively impact broad segments of businesses
and populations and have a significant and rapid negative impact on the
performance of the Fund’s investments, and exacerbate
pre-existing risks to the
Fund. |
• |
Residual
Interest Bonds.
The Fund may enter into residual interest bond transactions, which expose
the Fund to leverage and greater
risk than an investment in a fixed-rate municipal bond. The interest
payments that the Fund receives on the residual interest
bonds acquired in such transactions vary inversely with short-term
interest rates, normally decreasing when short-term rates
increase. The value and market for residual interest bonds are volatile
and such bonds may have limited liquidity. As required by
applicable accounting standards, the Fund records interest expense as a
liability with respect to floating-rate notes and also records
offsetting interest income in an amount equal to this
expense. |
• |
Active
Management Risk.
In pursuing the Fund’s investment objective, the Adviser has considerable
leeway in deciding which investments
to buy, hold or sell on a day-to-day basis, and which trading strategies
to use. For example, the Adviser, in its discretion,
may determine to use some permitted trading strategies while not using
others. The success or failure of such decisions will
affect the Fund’s
performance. |
Shares
of the Fund are not bank deposits and are not guaranteed or insured by the
Federal Deposit Insurance Corporation or any other
government agency.
Morgan
Stanley Institutional Fund Trust Prospectus | Fund
Summary
Short
Duration Municipal Income Portfolio (Con’t)
Performance
Information
The
bar chart and table below provide some indication of the risks of investing in
the Fund by showing the Fund’s Class
IR shares’ performance
from year-to-year and by showing how the Fund’s average annual returns for the
past one
year period and since inception
compare with those of a broad measure of market performance, as well as an index
that represents a group of similar mutual
funds, over time. The
performance of the other classes, which is shown in the table below, will differ
because the classes have different
ongoing fees. The Fund changed its name from Ultra-Short Municipal Income
Portfolio to Short Duration Municipal Income
Portfolio effective July 31, 2023.
The
Fund’s past performance, before and after taxes, is not necessarily an
indication of how the
Fund will perform in the future.
Updated performance information is available online at www.morganstanley.com/im
or by calling
toll-free 1-800-869-6397.
Annual
Total Returns—Calendar Years
|
| |
High
Quarter |
12/31/23
|
2.72% |
Low
Quarter |
09/30/21
|
0.00% |
Average
Annual Total Returns
(for
the calendar periods ended December
31, 2023)
|
|
| |
|
Past
One Year |
Past
Five Years |
Since
Inception |
Class
IR
(commenced operations on 12/19/2018) |
|
|
|
Return
Before Taxes |
4.64% |
1.59% |
1.59% |
Return
After Taxes on Distributions1
|
% |
% |
% |
Return
After Taxes on Distributions and Sale of Fund Shares |
2.72% |
0.98% |
0.98% |
Class
A
(commenced operations on 12/19/2018) |
|
|
|
Return
Before Taxes |
4.53% |
1.47% |
1.46% |
ICE
BofA 1-3 Year US Municipal Securities Index (reflects no deduction for
fees,
expenses or taxes)2
|
% |
% |
%3 |
Short
Duration Municipal Income Blend Index (reflects no deduction for
fees,
expenses or taxes)4
|
% |
% |
%3 |
Bloomberg
BVAL Municipal AAA Yield Curve (Callable) 3 Month Index (reflects
no deduction for fees, expenses or taxes)5
|
% |
% |
%3 |
Lipper
Short Municipal Debt Funds Index (reflects no deduction for
taxes)6
|
% |
% |
%3 |
1 |
These
returns do not reflect any tax consequences from a sale of your shares at
the end of each
period. |
2 |
The
ICE BofA (Intercontinental Exchange Bank of America) 1-3 Year US Municipal
Securities Index is a subset of ICE BofA US Municipal Securities
Index including
all securities with a remaining term to final maturity less than 3 years.
ICE BofA US Municipal Securities Index tracks the performance of US
dollar
denominated investment grade tax-exempt debt publicly issued by US states
and territories, and their political subdivisions, in the US domestic
market.
Qualifying securities must have at least one year remaining term to final
maturity, at least 18 months to final maturity at the time of issuance, a
fixed
coupon schedule and an investment grade rating (based on an average of
Moody’s, S&P and Fitch). It is not possible to invest directly in an
index. Effective
July 31, 2023, the Fund changed its primary benchmark to the ICE BofA 1-3
Year US Municipal Securities Index because the Adviser believes it
is
a more appropriate
benchmark. |
3 |
Since
Inception reflects the inception date of the
Fund. |
4 |
The
Short Duration Municipal Income Blended Index is a performance linked
benchmark of the old and new benchmark of the Fund. The old benchmark
represented
by Bloomberg BVAL Municipal AAA Yield Curve (Callable) 3-Month Index from
the Fund’s inception to July 30, 2023 and the new benchmark
represented by ICE BofA 1-3 Year US Municipal Securities Index for the
periods thereafter. It is not possible to invest directly in an
index. |
Morgan
Stanley Institutional Fund Trust Prospectus | Fund
Summary
Short
Duration Municipal Income Portfolio (Con’t)
5 |
Bloomberg
BVAL Municipal AAA Yield Curve (Callable) 3-Month Index is Bloomberg’s
evaluated pricing service, BVAL, provides a municipal “AAA” 5%
coupon
benchmark yield curve that is the baseline curve for BVAL tax-exempt
municipals. It is populated with high quality U.S. municipal bonds with an
average
rating of “AAA” from Moody’s and S&P. The yield curve is built using
nonparametric fit of market data obtained from the Municipal Securities
Rulemaking
Board, new issues and other proprietary contributed prices. The benchmark
is updated hourly and utilizes eligible “AAA” traded observations
throughout the day and accessible on through Bloomberg services. It is not
possible to invest directly in an
index. |
6 |
The
Lipper Short Municipal Debt Funds Index is an equally weighted performance
index of the largest qualifying funds (based on net assets) in the
Lipper
Short Municipal Debt Funds classification. There are currently 30 funds
represented in this Index. It is not possible to invest directly in an
index. |
The
after-tax returns shown in the table above are calculated using the historical
highest individual federal marginal income tax rates during
the period shown and do not reflect the impact of state and local taxes.
After-tax
returns for the Fund’s other class will vary from
Class IR shares’ returns. Actual
after-tax returns depend on the investor’s tax situation and may differ from
those shown, and after-tax
returns are not relevant to investors who hold their Fund shares through tax
deferred arrangements such as 401(k) plans or individual
retirement accounts. After-tax
returns may be higher than before-tax returns due to foreign tax credits and/or
an assumed benefit
from capital losses that would have been realized had Fund shares been sold at
the end of the relevant periods, as
applicable.
Fund
Management
Adviser.
Morgan Stanley Investment Management Inc.
Portfolio
Managers. The
Fund is managed by members of the Municipals
team. Information about the members jointly and primarily
responsible for the day-to-day management of the Fund is shown
below:
|
| |
Name |
Title
with Adviser |
Date
Began Managing
Fund |
Julie
P. Callahan, CFA |
Managing
Director |
May
2023 |
Paul
Metheny, CFA |
Executive
Director |
July
2023 |
Carl
Thompson, CFA |
Executive
Director |
July
2023 |
Purchase
and Sale of Fund Shares
The
minimum initial investment generally is $1,000
for Class
A shares of the Fund. To purchase Class
IR shares, an investor must meet
a minimum initial investment of $15
million or be a defined contribution, defined benefit or other employer
sponsored employee
benefit plan, in each case provided that the plan trades on an omnibus level,
whether or not qualified under the Internal Revenue
Code of 1986, as amended (the “Code”), and in each case subject to the
discretion of the Adviser. The minimum initial investment
requirements may be waived for certain investments. For more information,
please refer to the section of the Prospectus entitled
“Shareholder Information—Minimum Investment Amounts.”
Shares
of the Fund may be purchased or sold on any day the New York Stock Exchange
(“NYSE”) is open for business directly from the
Fund by mail (c/o SS&C GIDS, P.O. Box 219804, Kansas City, MO 64121-9804),
by telephone (1-888-378-1630) or by contacting
an authorized third-party, such as a broker-dealer or other financial
intermediary that has entered into a selling agreement with
the Fund’s Distributor (each, a “Financial Intermediary”). In addition, you can
sell Fund shares at any time by enrolling in a systematic
withdrawal plan. For more information, please refer to the sections of the
Prospectus entitled “Shareholder Information— How
To Purchase Fund Shares” and “—How To Redeem Fund Shares.”
Tax
Information
Your
income dividend distributions are normally exempt from federal tax to the extent
they are derived from municipal obligations. Income
derived from other portfolio securities may be subject to federal, state and/or
local income taxes. Income derived from some municipal
securities is subject to the federal alternative minimum tax. If the Fund makes
any capital gain distributions, those distributions
will normally be subject to federal and state income tax when they are paid,
whether you take them in cash or reinvest them
in Fund shares.
Payments
to Broker-Dealers and Other Financial Intermediaries
If
you purchase shares of the Fund through a Financial Intermediary (such as a
bank), the Adviser and/or the Distributor may pay the Financial
Intermediary for the sale of Fund shares and related services. These payments,
which may be significant in amount, may create
a conflict of interest by influencing the Financial Intermediary and your
salesperson to recommend the Fund over another investment.
Ask your salesperson or visit your Financial Intermediary’s web site for more
information.
Morgan
Stanley Institutional Fund Trust Prospectus | Details
of the Funds
Ultra-Short
Income Portfolio
Investment
Objective
The
Ultra-Short Income Portfolio seeks current income with capital preservation
while maintaining liquidity.
The
Fund’s investment objective may be changed by the Trust’s Board of Trustees
without shareholder approval, but no change is anticipated.
If the Fund’s investment objective changes, the Fund will notify shareholders
and shareholders should consider whether the
Fund remains an appropriate investment in light of the change.
Approach
The
Fund invests primarily in liquid, high quality U.S. dollar-denominated money
market instruments of U.S. and foreign financial issuers
and non-financial issuers. The Fund also invests in obligations issued or
guaranteed by the U.S. Government and its agencies and
instrumentalities. The Fund’s money market investments may include commercial
paper, corporate debt obligations, debt obligations
(including certificates of deposit and promissory notes) of U.S. banks or
foreign banks, or of U.S. branches or subsidiaries of
foreign banks, or foreign branches of U.S. banks (such as Yankee obligations),
certificates of deposit of savings banks and savings and
loan organizations, asset-backed securities, repurchase agreements and municipal
obligations.
Pursuant
to a fundamental policy adopted by the Fund, the Fund invests, under normal
circumstances, at least 25% of its total assets in
securities issued by companies in the financial services industry, including
banks, broker-dealers and insurance companies.
Securities
purchased by the Fund (or the issuers of such securities) will carry a rating in
the highest two rating categories, A-2, P-2 or F2
or better by S&P, Moody’s or Fitch, respectively, or the equivalent by
another NRSRO, or if unrated, considered by the Adviser to
be of equivalent quality. The Fund may invest up to 5% of its assets,
determined at the time of investment, in securities (or the issuers
of such securities) rated A-2, P-2 or F2 by S&P, Moody’s or Fitch,
respectively, and no more than 1% of its assets will be invested
in an individual security or issuer with such rating. In the case of a security
that is rated differently by these three rating agencies,
where two rating agencies rate the security in the highest rating category and
the third rating agency rates the security in the second
highest rating category, the security will be treated as rated in the highest
rating category. In the case of a security that is differently
rated by only two of these rating agencies, the security will be treated as
rated in the lower rating category.
Under
normal circumstances, the Fund intends to maintain a maximum weighted average
maturity of 90 days and a maximum weighted
average life of 180 days.
The
Fund is not a money market fund and does not seek to maintain a stable
NAV.
Process
The
Adviser follows a multi-pronged investment process with respect to credit risk,
interest rate risk and liquidity. Securities are reviewed
on an ongoing basis to maintain or improve creditworthiness taking into
consideration factors such as cash flow, asset quality,
debt service coverage ratios and economic developments. Additionally, exposure
to guarantors and liquidity providers is monitored
separately as are the various diversification requirements. The Adviser manages
the Fund’s assets in an attempt to reduce credit
and interest rate risks.
Morgan
Stanley Institutional Fund Trust Prospectus | Details
of the Funds
Short
Duration Municipal Income Portfolio
Investment
Objective
The
Short Duration Municipal Income Portfolio seeks current income exempt from
federal income tax and capital preservation while maintaining
liquidity.
The
Fund’s investment objective may be changed by the Trust’s Board of Trustees
without shareholder approval, but no change is anticipated.
If the Fund’s investment objective changes, the Fund will notify shareholders
and shareholders should consider whether the
Fund remains an appropriate investment in light of the change.
Approach
Under
normal circumstances, the Fund invests at least 80% of its net assets in
municipal securities, the income from which is exempt from
federal income tax. This policy is fundamental and may not be changed without
shareholder approval. The Fund may also invest
in variable and floating rate demand instruments and tender option
bonds.
The
Fund may invest up to 100% of its assets in municipal securities, the interest
on which may be subject to the federal alternative minimum
tax for individuals. In addition, the Fund may invest up to 20% of its assets in
securities subject to federal income tax.
The
Fund may invest 25% or more of its total assets in certain types of municipal
obligations (such as general obligations, municipal leases,
principal only municipal investments, revenue bonds and industrial development
bonds) and in one or more states, territories and
economic sectors (such as housing, hospitals, healthcare facilities or
utilities). At least 85% of the Fund’s net assets normally will be
invested in municipal obligations rated at least investment grade at the time of
investment (which are those rated Baa3 or higher by
Moody’s, or BBB- or higher by either S&P or Fitch) or, if unrated,
determined by the Adviser to be of at least investment grade quality.
The balance of net assets may be invested in municipal obligations rated below
investment grade and in unrated municipal obligations
considered to be of comparable quality by the Adviser (“junk bonds”). The Fund
will not invest more than 5% of its net assets
in obligations rated below B3 by Moody’s, or B- by either S&P or Fitch, or
in unrated obligations considered to be of comparable
quality by the Adviser. For purposes of rating restrictions, if securities are
rated differently by two or more rating agencies,
the highest rating is used.
Under
normal circumstances, the Fund intends to maintain a dollar-weighted average
portfolio duration of less than three years; however,
the Fund may invest in individual municipal obligations of any
maturity.
Process
The
Adviser’s process for selecting obligations for purchase and sale emphasizes the
creditworthiness of the issuer or other person obligated
to repay the obligation and the relative value of the obligation in the market.
In evaluating creditworthiness, the Adviser considers
ratings assigned by rating agencies and generally performs additional credit and
investment analysis. The portfolio managers also
may trade securities to seek to minimize taxable capital gains to shareholders.
A portion of the Fund’s distributions generally will be
subject to federal alternative minimum tax. The Fund may not be suitable for
investors subject to the federal alternative minimum tax.
The
Fund may, but is not required to, use derivatives and similar instruments, such
as residual interest bonds, futures contracts and options
thereon, interest rate swaps and forward rate agreements, for a variety of
purposes, including hedging, to seek total return or as
a substitute for the purchase or sale of securities. Derivative instruments used
by the Fund will be counted toward the Fund’s 80% policy
discussed above to the extent they have economic characteristics similar to the
securities included within that policy.
For
purposes of policies adopted in accordance with Rule 35d-1 under the 1940 Act,
the term “assets,” as defined in Rule 35d-1 under
the 1940 Act, means net assets plus the amount of any borrowings for investment
purposes.
Morgan
Stanley Institutional Fund Trust Prospectus | Additional
Information About Fund Investment Strategies and Related Risks
Additional
Information About Fund Investment Strategies and Related Risks
|
| |
This
section discusses additional information relating to Fund investment
strategies, other types of investments that the Fund
may make and related risk factors. Fund investment practices and
limitations are also described in more detail in the Statement
of Additional Information (“SAI”), which is incorporated by reference and
legally is a part of this Prospectus. For details
on how to obtain a copy of the SAI and other reports and information, see
the back cover of this Prospectus. “Fund”
as
used herein and under “Additional Information About Fund Investment
Strategies and Related Risks” refers to each Fund listed
on the cover page of this Prospectus (unless otherwise
noted). |
Economies
and financial markets worldwide have recently experienced periods of increased
volatility, uncertainty, distress, government
spending, inflation and disruption to consumer demand, economic output and
supply chains. To the extent these conditions
continue, the risks associated with an investment in the Fund, including those
described below, could be heightened and the
Fund’s investments (and thus a shareholder’s investment in the Fund) may be
particularly susceptible to sudden and substantial losses,
reduced yield or income or other adverse developments. The occurrence, duration
and extent of these or other types of adverse economic
and market conditions and uncertainty over the long term cannot be reasonably
projected or estimated at this time.
Fixed-Income
Securities
Fixed-income
securities are securities that pay a fixed or a variable rate of interest until
a stated maturity date. Fixed-income securities include
U.S. government securities, securities issued by federal or federally sponsored
agencies and instrumentalities, corporate bonds and
notes, asset-backed securities, mortgage securities, municipal bonds, zero
coupon bonds, Eurobonds, Yankee Bonds, repurchase agreements,
commercial paper and cash equivalents.
Fixed-income
securities are subject to the risk of the issuer’s inability to meet principal
and interest payments on its obligations (i.e., credit
risk) and are subject to price volatility resulting from, among other things,
interest rate sensitivity (i.e., interest rate risk), market
perception of the creditworthiness of the issuer and general market liquidity
(i.e., market risk). The Fund may face a heightened
level of interest rate risk in times of monetary policy change and/or
uncertainty, such as when the Federal Reserve Board adjusts
a quantitative easing program and/or changes rates. A changing interest rate
environment increases certain risks, including the potential
for periods of volatility, increased redemptions, shortened durations (i.e.,
prepayment risk) and extended durations (i.e., extension
risk).
Fixed
income and other debt instruments, including mortgage- and other asset-backed
securities, are subject to prepayment risk, which
is the risk that the principal of such obligation is paid earlier than expected,
such as in the case of refinancing. This risk is increased
during periods of declining interest rates and prepayments may reduce the Fund’s
yield or income as a result of reinvesting the
income or other proceeds in lower yielding securities or instruments. These
investments are also subject to extension risk, which is the
risk that the principal of such obligation is paid lower or later than expected.
This may negatively affect Fund returns, as the value of
the investment decreases when principal payments are made later than expected.
This risk is elevated during periods of increasing interest
rates. In addition, because principal payments are made later than expected, the
investment’s duration may extend (and result in
increased interest rate risk) and the Fund may be prevented from investing
proceeds it would otherwise have received at the higher prevailing
interest rates. Prepayments and extensions may result in a security or debt
instrument offering less potential for gains during
periods of declining interest rates or rising interest rates,
respectively.
Securities
with longer durations are likely to be more sensitive to changes in
interest rates, generally making them more volatile than securities
with shorter durations. Lower rated fixed-income securities have greater
volatility because there is less certainty that principal
and interest payments will be made as scheduled. The Fund may be subject to
liquidity risk, which may result from the lack of
an active market and the reduced number and capacity of traditional market
participants to make a market in fixed-income securities.
Fixed-income securities may be called (i.e., redeemed by the issuer) prior to
final maturity. If a callable security is called, the
Fund may have to reinvest the proceeds at a lower rate of interest.
Financial
Services
The
Fund is more susceptible to any economic, business, political, regulatory or
other developments that adversely affect issuers in the
financial services industry than a fund that does not invest significantly in
the financial services industry. The profitability of many
types of financial services companies may be adversely affected in certain
market cycles, including periods of rising interest rates,
which may restrict the availability and increase the cost of capital, and
declining economic conditions, which may cause credit losses
due to financial difficulties of borrowers. Financial services companies are
also subject to extensive government regulation, including
policy and legislative changes in the United States and other countries that are
changing many aspects of financial regulation.
Adverse developments that affect financial institutions or the financial
services sector generally, or concerns or rumors about
any events of these kinds or other similar risks, may reduce liquidity in the
market generally or have other adverse effects on the economy,
the Fund, or issuers in which the Fund invests. In addition, the Fund and
issuers in which it invests may not be able to identify
all potential solvency or stress concerns with respect to a financial
institution or to transfer assets from one bank or financial institution
to another in a timely manner in the event such bank or financial institution
comes under stress or fails.
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Credit
and Interest Rate Risk
Fixed-income
securities, such as bonds, generally are subject to two types of risk: credit
risk and interest rate risk. Credit risk refers to the
possibility that the issuer or guarantor of a security will be unable or
unwilling or perceived to be unable or unwilling to make interest
payments and/or repay the principal on its debt. The risk of defaults across
issuers and/or counterparties increases in adverse market
and economic conditions. Interest rate risk refers to fluctuations (such as a
decline) in the value of a fixed-income security resulting
from changes in the general level of interest rates. When the general level of
interest rates goes up, the prices of most fixed-income
securities go down. When the general level of interest rates goes down, the
prices of most fixed-income securities go up. A low
interest rate environment may prevent a Fund from providing a positive yield or
paying Fund expenses out of current income. The
Fund may face a heightened level of interest rate risk in times of monetary
policy change and/or uncertainty, such as when the Federal
Reserve Board adjusts a quantitative easing program and/or changes rates. For
example, during periods when interest rates are low,
the Fund’s yield (and total return) also may be low or otherwise adversely
affected or the Fund may be unable to maintain positive
returns. Monetary policies, and market interest rates, are subject to change at
any time and potentially frequently based on a variety
of market and economic conditions. The impact on fixed income and other debt
instruments from interest rate changes, regardless
of the cause, could be significant and could adversely affect the Fund and its
investments. Credit ratings may not be an accurate
assessment of liquidity or credit risk. Although credit quality may not
accurately reflect the true credit risk of an instrument, a
change in the credit rating of an instrument or an issuer can have a rapid,
adverse effect on the instrument’s liquidity and make it more
difficult for the Fund to sell at an advantageous price or time.
In
addition, under certain conditions, there may be an increasing amount of issuers
that are unprofitable, have little cash on hand and/or
are unable to pay the interest owed on their debt obligations and the number of
such issuers may increase if demand for their goods
and services falls, borrowing costs rise due to governmental action or inaction
or other reasons.
Market
and Geopolitical Risk
The
value of your investment in the
Fund is based on the values of the
Fund’s investments, which may change due to economic and other
events that affect markets generally, as well as those that affect particular
regions, countries, industries, companies or governments.
Price movements, sometimes called volatility, may be greater or less depending
on the types of securities the
Fund owns and
the markets in which the securities trade. Volatility and disruption in
financial markets and economies may be sudden and unexpected,
expose the
Fund to greater risk, including risks associated with reduced market liquidity
and fair valuation, and adversely affect
the
Fund’s operations. For example, the Adviser potentially will be prevented from
executing investment decisions at an advantageous
time or price as a result of any domestic or global market disruptions and
reduced market liquidity may impact the
Fund’s
ability to sell securities to meet redemptions.
The
increasing interconnectivity between global economies and markets increases the
likelihood that events or conditions in one region,
sector, industry, market or with respect to one company may adversely impact
other companies and issuers in a different country,
region, sector, industry, or market. For example, adverse developments in the
banking or financial services sector could impact
companies operating in various sectors or industries and adversely
impact the
Fund’s investments. Securities in the
Fund’s portfolio
may underperform due to inflation (or expectations for inflation), interest
rates, global demand for particular products or resources,
natural disasters and extreme weather events, health emergencies (such as
epidemics and pandemics), terrorism, regulatory events
and governmental or quasi-governmental actions. The occurrence of global events
such as terrorist attacks around the world, natural
disasters, health emergencies, social and political (including geopolitical)
discord and tensions or debt crises and downgrades, among
others, may result in market volatility and may have long term effects on both
the U.S. and global financial markets. Inflation rates
may change frequently and significantly because of various factors, including
unexpected shifts in the domestic or global economy
and changes in monetary or economic policies (or expectations that these
policies may change). Changes in expected inflation
rates may adversely affect market and economic conditions, the
Fund’s investments and an investment in the
Fund. Other financial,
economic and other global market and social developments or disruptions may
result in similar adverse circumstances, and it
is difficult to predict when similar events affecting the U.S. or global
financial markets may occur, the effects that such events may have
and the duration of those effects (which may last for extended periods). In
general, the securities or other instruments that the Adviser
believes represent an attractive investment opportunity or in which the
Fund seeks to invest may be unavailable entirely or in the
specific quantities sought by the
Fund. As a result, the
Fund may need to obtain the desired exposure through a less advantageous
investment,
forgo the investment at the time or seek to replicate the desired exposure
through a derivative transaction or investment in
another investment vehicle. Any such event(s) could have a significant adverse
impact on the value and risk profile of the
Fund’s portfolio.
There is a risk that you may lose money by investing in the
Fund.
Social,
political, economic and other conditions and events, such as war, natural
disasters, health emergencies (e.g., the novel coronavirus
outbreak, epidemics and other pandemics), terrorism, conflicts, social unrest,
recessions, inflation, interest rate changes and
supply chain disruptions could reduce consumer demand or economic output, result
in market closures, travel restrictions or quarantines,
and generally have a significant impact on the economies and financial markets
and the Adviser’s investment advisory activities
and services of other service providers, which in turn could adversely
affect the
Fund’s investments and other operations.
Government
and other public debt, including municipal obligations in which the
Fund may invest, can be adversely affected by changes
in local and global economic conditions that result in increased debt levels.
Although high levels of government and other
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public
debt do not necessarily indicate or cause economic problems, high levels of debt
may create certain systemic risks if sound debt management
practices are not implemented. A high debt level may increase market pressures
to meet an issuer’s funding needs, which
may increase borrowing costs and cause a government or public or municipal
entity to issue additional debt, thereby increasing the
risk of refinancing. A high debt level also raises concerns that the issuer may
be unable or unwilling to repay the principal or interest
on its debt, which may adversely impact instruments held by the
Fund that rely on such payments. Governmental and quasi-governmental
responses to certain economic or other conditions may lead to increasing
government and other public debt, which heighten
these risks. Unsustainable debt levels can lead to declines in the value of
currency, and can prevent a government from implementing
effective counter-cyclical fiscal policy during economic downturns, can generate
or contribute to an economic downturn
or cause other adverse economic or market developments, such as increases in
inflation or volatility. Increasing government and
other public debt may adversely affect issuers, obligors, guarantors or
instruments across a variety of asset classes.
Global
events may negatively impact broad segments of businesses and populations, cause
a significant negative impact on the performance
of the
Fund’s investments, and exacerbate pre-existing political, social and
economic risks to the
Fund. The
Fund’s operations
may be interrupted as a result, which may contribute to the negative impact on
investment performance. In addition, governments,
their regulatory agencies, or self-regulatory organizations may take actions
that affect the instruments in which the
Fund
invests, or the issuers of such instruments, in ways that could have a
significant negative impact on the
Fund’s investment performance.
In addition, government actions (such as changes to interest rates) could have
unintended economic and market consequences
that adversely affect the
Fund’s investments.
U.S.
Government Securities
The
U.S. government securities that the
Fund may purchase include U.S. Treasury bills, notes and bonds, all of which are
direct obligations
of the U.S. Government. In addition, the
Fund may purchase securities issued or guaranteed by agencies and instrumentalities
of the U.S. Government which are backed by the full faith and credit of the
United States. Among the agencies and instrumentalities
issuing these obligations are the Government
National Mortgage Association and the Federal Housing Administration.
Also, the
Fund may purchase securities issued by agencies and instrumentalities
which are not backed by the full faith
and credit of the United States, but whose issuing agency or instrumentality has
the right to borrow, to meet its obligations, from
the U.S. Treasury. Among these agencies and instrumentalities are the
Federal National Mortgage Association (“Fannie Mae”), the
Federal Home Loan Mortgage Corporation (“Freddie Mac”) and the Federal Home Loan
Banks. Further, the
Fund may purchase
securities issued by agencies and instrumentalities which are backed solely by
the credit of the issuing agency or instrumentality.
Among these agencies and instrumentalities is the Federal Farm Credit System.
Because these securities are not backed
by the full faith and credit of the United States, there is a risk that the U.S.
Government will not provide financial support to these
agencies if it is not obligated to do so by law, and therefore these U.S.
government securities involve greater credit risk than other
types of U.S. government securities. The maximum potential liability of
the issuers of some U.S. government securities held by the
Fund may greatly exceed their current resources, including their legal right to
support from the U.S. Treasury. It is possible that
these issuers will not have the funds to meet their payment obligations in the
future. The interest from U.S. government securities
generally is not subject to state and local taxation. In addition, uncertainty
regarding the status of negotiations in the U.S. government
to increase the statutory debt ceiling could increase the risk that the U.S.
government may default on payments on certain
U.S. government securities and may cause the credit rating of the U.S.
government to be downgraded. Any uncertainty regarding
the ability of the United States to repay its debt obligations, and any default
by the U.S. government, would have a negative
impact on the Fund’s investments in U.S. government securities.
Money
Market Instruments
Money
market instruments may be adversely affected by market and economic events, such
as a change in prevailing short-term interest
rates; adverse developments in the banking industry, which issues or guarantees
many money market instruments; adverse economic,
political or other developments affecting issuers of money market instruments;
changes in the credit quality of issuers; and default
by a counterparty or an issuer. These instruments may be subject to federal
income, state income and/or other taxes. Instead of
investing in money market instruments directly, the Fund may invest money market
funds, including those advised by the Adviser or
its affiliates. These instruments may be adversely affected by changes to
interest rates, which may be sudden and significant. During
unusual market conditions, the Fund may invest up to 100% of its assets in cash
or cash equivalents temporarily, which may be
inconsistent with its investment objective(s) and other policies.
Taxability
Risk
Changes
in tax laws or adverse determinations by the Internal Revenue Service (“IRS”)
may make the income from some municipal obligations
taxable.
Liquidity
The
Fund may make investments that are illiquid or restricted or that may become
illiquid or less liquid in response to, among other developments,
overall economic conditions or adverse investor perceptions, and which may
entail greater risk than investments in other
types of securities. Illiquidity can be also caused by, among other things, a
drop in overall market trading volume, an inability to
find a willing buyer, or legal restrictions on the securities’ resale. These
investments may be more difficult to value or sell, particularly
in times of market turmoil, and there may be little trading in the secondary
market available for particular securities.
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Liquidity
risk may be magnified in a market where credit spread and interest rate
volatility is rising and where investor redemptions from
fixed-income mutual funds may be higher than normal. If the Fund is forced to
sell an illiquid or restricted security to fund redemptions
or for other cash needs, it may be forced to sell the security at a loss or for
less than its fair value and may be unable to sell
the security at all.
Foreign
Securities
Investments
in foreign securities, including in foreign government obligations and other
foreign money market securities, entail risks relating
to political, social, economic and market developments abroad to a greater
extent than investing in the securities of U.S. issuers.
There also may be less reliable financial information, less stringent investor
protections and disclosure standards, higher transaction
and custody costs and less government regulation. In addition, investments in
foreign securities may become subject to increased
risk due to developments and changing conditions in such countries. Moreover,
the growing interconnectivity of global economies
and financial markets has increased the probability that adverse developments
and conditions in one country or region will affect
the stability of economies in other countries or regions. Certain foreign
countries may rely heavily on particular industries or foreign
capital and are more vulnerable to diplomatic developments, the imposition of
economic sanctions against a particular country
or countries, organizations, companies, entities and/or individuals, changes in
international trading patterns, trade barriers and
other protectionist or retaliatory measures. Investments in foreign securities
may also be adversely affected by governmental actions
such as the imposition of capital controls, nationalization of companies or
industries, expropriation of assets or the imposition of
punitive taxes.
Tender
Option Bonds
A
tender option bond is a municipal obligation (generally held pursuant to a
custodial arrangement) having a relatively long maturity and
bearing interest at a fixed rate substantially higher than prevailing
short-term, tax-exempt rates. The bond is typically issued in conjunction
with the agreement of a third-party, such as a bank, broker-dealer or other
financial institution, pursuant to which the institution
grants the security holder the option, at periodic intervals, to tender its
securities to the institution. As consideration for providing
the option, the financial institution receives periodic fees equal to the
difference between the bond’s fixed coupon rate and the
rate, as determined by a remarketing or similar agent, that would cause the
securities, coupled with the tender option, to trade at par
on the date of such determination. Thus, after payment of this fee, the security
holder effectively holds a demand obligation that bears
interest at the prevailing short-term, tax-exempt rate. An institution will
normally not be obligated to accept tendered bonds in the
event of certain defaults or significant downgrading in the credit rating
assigned to the issuer of the bond. The tender option will be
taken into account in determining the maturity of the tender option bonds and
average portfolio maturity. There is a risk that the Fund
will not be considered the owner of a tender option bond for federal income tax
purposes, and thus will not be entitled to treat such
interest as exempt from federal income tax. Certain tender option bonds may be
illiquid or may become illiquid as a result of a credit
rating downgrade, a payment default or a disqualification from tax-exempt
status.
The
residual interest certificates may be more volatile and less liquid than other
municipal bonds of comparable maturity. In most circumstances,
the residual interest certificates holder bears substantially all of the
underlying fixed-rate municipal bond’s downside investment
risk and also benefits from any appreciation in the value of the underlying
fixed-rate municipal bond. Investments in a residual
interest certificate typically will involve greater risk than investments in
fixed-rate municipal bonds.
The
residual interest certificates held by the Fund provide the Fund with the right
to: (1) cause the holders of the floating rate certificates
to tender their notes at par, and (2) cause the sale of the fixed-rate municipal
bond held by the tender option bond trust, thereby
collapsing the tender option bond trust. Tender option bond trusts are generally
supported by a liquidity facility provided by a
third party bank or other financial institution (the “Liquidity Provider”) that
provides for the purchase of floating rate certificates that
cannot be remarketed. The holders of the floating rate certificates have the
right to tender their certificates in exchange for payment
of par plus accrued interest on a periodic basis (typically weekly) or on the
occurrence of certain mandatory tender events. The
tendered floating rate certificates are remarketed by a remarketing agent, which
is typically an affiliated entity of the Liquidity Provider.
If the floating rate certificates cannot be remarketed, the floating rate
certificates are purchased by the tender option bond trust
either from the proceeds of a loan from the Liquidity Provider or from a
liquidation of the fixed-rate municipal bond.
The
tender option bond trust may also be collapsed without the consent of the Fund,
as the residual interest certificate holder, upon the
occurrence of certain “tender option termination events” (or “TOTEs”) as defined
in the tender option bond trust agreements. Such
termination events typically include the bankruptcy or default of the municipal
bond, a substantial downgrade in the credit quality
of the municipal bond, or a judgment or ruling that interest on the fixed-rate
municipal bond is subject to federal income taxation.
Upon the occurrence of a termination event, the tender option bond trust would
generally be liquidated in full with the proceeds
typically applied first to any accrued fees owed to the trustee, remarketing
agent and liquidity provider, and then to the holders
of the floating rate certificates up to par plus accrued interest owed on the
floating rate certificates and a portion of gain share, if
any, with the balance paid out to the residual interest certificate holder. In
the case of a mandatory termination event, after the payment
of fees, the floating rate certificates holders would be paid before the
residual interest certificates holders (i.e., the Fund). In contrast,
in the case of a TOTE, after payment of fees, the floating rate certificates
holders and the residual interest certificates holders
would be paid pro rata in proportion to the respective face values of their
certificates.
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Corporate
Debt Obligations
Corporate
debt obligations are fixed-income securities issued by private corporations. The
investment return of corporate debt obligations
reflects interest earnings and changes in the market value of the security. The
market value of a corporate debt obligation may
be expected to rise and fall inversely with interest rates generally. There also
exists the risk that the issuers of the securities may not
be able to meet their obligations on interest or principal payments at the time
called for by an instrument. Debtholders, as creditors,
have a prior legal claim over common and preferred stockholders of the
corporation as to both income and assets for the principal
and interest due to the bondholder.
Revenue
Bonds
Revenue
bonds are municipal obligations that are secured by the revenue from a specific
project. To the extent that such revenues do not
materialize, the revenue bonds may not be repaid. If the Fund invests in revenue
bonds that are issued by municipal issuers in the same
economic sector, the Fund would be particularly susceptible to developments
adversely affecting that sector. Revenue bonds historically
have been subject to a greater risk of default than general obligation bonds
because investors can look only to the revenue generated
by the project or other revenue source backing the project, rather than to the
general taxing authority of the state or local government
issuer of the obligations. For example, investments in revenue bonds backed by
receipts from hospitals are sensitive to hospital
bond ratings, which are often based on feasibility studies that contain
projections of expenses, revenues and occupancy levels. Additional
factors which could affect a hospital’s gross receipts and net income available
to service its debt are demand for hospital services,
the ability of the hospital to provide the services required, management
capabilities, economic developments in the service area,
efforts by insurers and government agencies to limit rates and expenses,
reputational issues, competition, availability and expenses
of malpractice insurance, Medicaid and Medicare funding and possible federal
legislation regulating hospital charges.
Asset-Backed
Securities
Asset-backed
securities represent an interest in a pool of assets such as automobile loans,
credit card receivables or mortgage or home equity
loans, or certificates of participation or lease obligations or other municipal
debt obligations, that have been securitized in pass-through
structures. These types of pass-through securities provide for monthly payments
that are a “pass-through” of the monthly
interest and principal payments made by the individual borrowers on the pooled
receivables. Such securities also may be debt
instruments, which are also known as collateralized obligations and are
generally issued as the debt of a special purpose entity, such
as a trust, organized solely for the purpose of owning such assets and issuing
such debt. Credit support for asset-backed securities may
be based on the underlying assets and/or provided by a third-party through
credit enhancements. Credit enhancement techniques
include letters of credit, insurance bonds, limited guarantees (which are
generally provided by the issuer), senior-subordinated
structures and over-collateralization.
To
the extent the Fund invests in asset-backed securities issued by
non-governmental issuers, such as commercial banks, savings and loan
institutions, and other secondary market issuers, the Fund will be exposed to
additional risks because, among other things, there are
no direct or indirect government or agency guarantees of payments in the pools
underlying the securities. Privately-issued asset-backed
securities may be less readily marketable, subject to heightened credit risk and
the market for such securities is typically smaller
and less liquid than other asset-backed securities.
Asset-backed
securities are not issued or guaranteed by the U.S. Government or its agencies
or instrumentalities; however, the payment
of principal and interest on such obligations may be guaranteed up to certain
amounts for a certain period by a letter of credit
issued by a financial institution (such as a bank or insurance company)
unaffiliated with the issuers of such securities. The purchase
of asset-backed securities raises risk considerations specific to the financing
of the instruments underlying such securities. For
example, there is a risk that another party could acquire an interest in the
obligations superior to that of the holders of the asset-backed
securities. Asset-backed securities entail prepayment risk and extension risk,
which may vary depending on the type of asset. Securities
subject to prepayment risk generally offer less potential for gains when
interest rates decline, and may offer a greater potential
for loss when interest rates rise. In addition, rising interest rates may cause
prepayments to occur at a slower than expected rate,
thereby effectively lengthening the maturity of the security and making the
security more sensitive to interest rate changes. Other
factors, such as changes in credit card use and payment patterns, may also
influence prepayment rates. Asset-backed securities also
involve the risk that various federal and state consumer laws and other legal
and economic factors such as defaults on the underlying
loans may result in the collateral backing the securities being insufficient to
support payment on the securities. The risk of such
defaults is generally higher in the case of mortgage pools that include
sub-prime mortgages. There is also the possibility that recoveries
on repossessed collateral may not, in some cases, be available to support
payments on those securities.
Repurchase
Agreements
Repurchase
agreements are fixed-income securities in the form of agreements backed by
collateral. These agreements typically involve the
acquisition by the
Fund of securities from the selling institution (such as a bank or a
broker-dealer), coupled with the agreement that
the selling institution will repurchase the underlying securities at a specified
price and at a fixed time in the future (or on demand,
if applicable). The underlying securities which serve as collateral for the
repurchase agreements entered into by the
Fund may
include U.S. government securities, municipal securities, corporate debt
obligations, convertible securities and common and preferred
stock and may be of below investment grade quality. These securities are
marked-to-market daily in order to maintain full collateralization
(typically purchase price plus accrued interest). The use of repurchase
agreements involves certain risks. For example,
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if
the selling institution defaults on its obligation to repurchase the underlying
securities at a time when the value of the securities has declined,
the
Fund may incur a loss upon disposition of them. The risk of such loss may be
greater when utilizing collateral other than
U.S. government securities. In the event of an insolvency or bankruptcy by the
selling institution, the
Fund’s right to control the
collateral could be affected and result in certain costs and delays.
Additionally, if the proceeds from the liquidation of such collateral
after an insolvency were less than the repurchase price, the Fund could
suffer a loss. Fund procedures are followed that are designed
to minimize such risks.
Investment
Company Securities
Subject
to the limitations set forth in the 1940 Act, or as otherwise permitted by the
SEC, the Fund may acquire shares in other investment
companies, including foreign investment companies, ETFs and money market funds,
which may be managed by the Adviser
or its affiliates. The market value of the shares of other investment companies
may differ from the NAV of the Fund. The shares
of closed-end investment companies frequently trade at a discount to their NAV.
As a shareholder in an investment company, the
Fund would bear its ratable share of that entity’s expenses, including its
investment advisory and administration fees. At the same time,
the Fund would continue to pay its own advisory and administration fees and
other expenses. As a result, the Fund and its shareholders
will directly bear the expenses of their investment in the Fund and indirectly
bear the expenses of the Fund’s investments
in other investment companies.
Promissory
Notes
Promissory
notes are generally debt obligations of the issuing entity and are subject to
the risks of investing in the banking industry.
Tax-Exempt
Variable Rate Demand Notes
Tax-exempt
variable rate demand notes are variable rate tax-exempt debt obligations that
give investors the right to demand principal repayment.
Due to cyclical supply and demand considerations, at times the yields on these
obligations can exceed the yield on taxable money
market obligations. The interest rate on these instruments may be reset daily,
weekly or on some other reset period and may have
a floor or ceiling on interest rate changes. The interest rate of a floating
rate instrument may be based on a known lending rate, such
as a bank’s prime rate, and is reset whenever such rate is adjusted. The
interest rate on a variable rate demand note is reset at specified
intervals at a market rate. The Fund’s ability to receive payments of principal
and interest and other amounts in connection with
loans held by it will depend primarily on the financial condition of the issuer.
The failure by the Fund to receive scheduled interest
or principal payments on a loan would adversely affect the income of the Fund
and would likely reduce the value of its assets, which
would be reflected in a reduction in the Fund’s NAV.
Floating
rate and variable rate demand notes and bonds may have a stated maturity in
excess of one year, but may have features that permit
a holder to demand payment of principal plus accrued interest upon a specified
number of days’ notice. Frequently, such obligations
are secured by letters of credit or other credit support arrangements provided
by banks. If these obligations are not secured
by letters of credit or other credit support arrangements, the Fund’s right to
demand payment will be dependent on the ability
of the issuer to pay principal and interest on demand. In addition, these
obligations frequently are not rated by credit rating agencies
and may involve heightened risk of default by the issuer. The issuer of such
obligations normally has a corresponding right, after
a given period, to prepay in its discretion the outstanding principal of the
obligation plus accrued interest upon a specific number
of days’ notice to the holders. There is no assurance that the Fund will be able
to reinvest the proceeds of any prepayment at the
same interest rate or on the same terms as those of the original
instrument.
In
the absence of an active secondary market for floating rate and variable rate
demand notes, the Fund may find it difficult to dispose
of the instruments, and the Fund could suffer a loss if the issuer defaults or
during periods in which the Fund is not entitled to
exercise its demand rights. If a reliable trading market for the floating rate
and variable rate instruments held by the Fund does not exist
and the Fund may not demand payment of the principal amount of such instruments
within seven days, the instruments may be deemed
illiquid and therefore subject to the Fund’s limitation on investments in
illiquid securities.
Municipals
Municipal
securities (also referred to as municipal obligations) include debt obligations
of states, territories or possessions of the United
States and the District of Columbia and their political subdivisions, agencies
and instrumentalities, such as local or regional governments.
The income on municipal securities is generally exempt from federal income tax
at the time of issuance, in the opinion of
bond counsel or other counsel to the issuers of such securities. However, the
Fund may purchase municipal securities that pay interest
that is subject to the federal alternative minimum tax, and municipal securities
on which the interest payments are taxable. These
securities typically are “general obligation” or “revenue” bonds, notes or
commercial paper, including participations in lease obligations
and installment purchase contracts of municipalities. General obligation bonds
are secured by the issuer’s full faith and credit
including its taxing power for payment of principal and interest. Revenue bonds,
however, are generally payable from a specific revenue
source. They are issued for a wide variety of projects such as financing public
utilities, hospitals, housing, airports, highways and
educational facilities. These types of bonds involve the risk that the tax or
other revenues so derived will not be sufficient to meet interest
and or principal payment obligations. These obligations may have fixed, variable
or floating rates.
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Because
the
Fund may invest
in municipal securities, the Fund may be affected significantly by the economic,
regulatory, legislative, tax
or political developments affecting the ability of issuers of municipal
securities to pay interest or repay principal. The risks of municipal
securities generally depend on the financial and credit status of the issuer and
may rely on a specific stream of revenue associated
with a project or other revenue source. Thus, adverse developments related to a
municipality’s ability to raise revenue, including
through its taxing authority, or the failure of specific revenues to materialize
would negatively impact such investments. Changes
in the financial health of an issuer of municipal securities may make it
difficult for the issuer to make interest and principal payments
when due. Some municipalities have had significant financial problems recently,
and these and other municipalities could, potentially,
continue to experience significant financial problems resulting from lower tax
revenues and/or decreased aid from state and
local governments in the event of an economic downturn. In addition, adverse
legislative, tax, regulatory, demographic or political
changes may negatively impact the Fund’s investments in municipal securities.
These events could decrease the Fund’s
income
and/or adversely affect the Fund’s
performance and investments. Municipal securities also involve the risk that an
issuer may call
securities for redemption, which could force the Fund to reinvest the proceeds
at a lower rate of interest, and the value of municipal
securities may be affected by the rights of municipal security
holders.
Municipal
securities may be more susceptible to downgrades, defaults or loss of tax or
other revenue during recessions or similar periods
of economic stress. Factors contributing to the financial stress on
municipalities may include lower property tax collections as a
result of lower home values, lower sales tax revenue as a result of consumers
cutting back spending and lower income tax revenue as a
result of a higher unemployment rate. These factors, which may also impact other
municipal obligations, include, among others, changing
demographic trends, such as population shifts or changing tastes and values, or
increasing vacancies or declining rents resulting
from legal, cultural, technological, global or local economic developments, as
well as reduced demand for properties, revenues
or goods. In addition, because some municipal obligations may be secured or
guaranteed by banks and other institutions, the
risk to the Fund associated with investments in such municipal securities could
increase if the banking or financial sector suffers an
economic downturn and/or if the credit ratings of the institutions issuing the
guarantee are downgraded or at risk of being downgraded
by a national rating organization. If such events occur, the value of the
security could decrease or the value could be lost entirely,
and it may be difficult or impossible for the Fund to sell the security at the
time and the price that normally prevails in the market.
For
example, recent public health emergencies have significantly stressed the
financial resources of many municipalities and other issuers
of municipal securities, which may impair their ability to meet their financial
obligations and may harm the value or liquidity of
the Fund’s investments in municipal securities (or the income generated by such
investments). In particular, responses by municipalities
to recent public health emergencies have caused disruptions in business
activities. These and other effects of recent public
health emergencies, such as increased unemployment levels, have impacted tax and
other revenues of municipalities and other issuers
of municipal securities and the financial conditions of such issuers. As a
result, there is an increased budgetary and financial pressure
on municipalities and other issuers of municipal securities and heightened risk
of default or other adverse credit or similar events
for issuers of municipal securities, which would adversely impact the Fund’s
investments.
In
addition, the ability of an issuer to make payments or repay interest may be
affected by litigation or bankruptcy. In the event of bankruptcy
of such an issuer, the Fund investing in the issuer’s securities could
experience delays in collecting principal and interest, and
the Fund may not, in all circumstances, be able to collect all principal and
interest to which it is entitled. To enforce its rights in the
event of a default in the payment of interest or repayment of principal, or
both, the Fund may, in some instances, take possession of,
and manage, the assets securing the issuer’s obligations on such securities,
which may increase the Fund’s operating expenses. Any income
derived from the Fund’s ownership or operation of such assets may not be
tax-exempt. Municipal securities are subject to, among
other risks, credit and interest rate risk and market and geopolitical
risk.
Because
many municipal securities are issued to finance similar projects (such as those
relating to education, health care, housing, transportation,
and utilities), conditions in those sectors, similar projects or particular
states or geographic regions may particularly affect
the overall municipal securities market. In addition, changes in the financial
condition of an individual municipal issuer can affect
the overall municipal market. Municipal securities backed by current or
anticipated revenues from a specific project or specific assets
can be negatively affected by the discontinuance of the supporting taxation or
the inability to collect revenues for the specific project
or specific assets. Moreover, as a result of various economic, market and other
factors, there could be reduced tax or other revenue
available to issuers of municipal obligations and, in turn, increased budgetary
and financial pressure on municipalities and other
issuers of municipal obligations, which could adversely impact the risks
associated with municipal obligations of such issuer. As a
result, the Fund’s investments in municipal obligations may be subject to
heightened risks relating to the occurrence of such developments.
Some
municipal securities are subject to the risk that the U.S. Internal Revenue
Service (“IRS”) may determine that an issuer has not complied
with applicable tax requirements (or the occurrence of other adverse tax
developments) and that interest from the municipal
security is taxable, which may result in a significant decline in the value of
the security. In addition, interest on municipal obligations,
while generally exempt from federal income tax, may not be exempt from the
federal alternative minimum tax. Municipal
securities may be less liquid than taxable bonds and there may be less publicly
available information on the financial condition
of municipal security issuers than for issuers of other securities, and the
investment performance of the Fund investing in
Morgan
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municipal
securities may therefore be more dependent on the analytical abilities of the
Adviser than if the Fund held other types of investments
such as stocks or taxable bonds. The secondary market for municipal securities
also tends to be less well developed or liquid
than many other securities markets, which may adversely affect the Fund’s
ability to sell municipal securities it holds at attractive
prices or value municipal securities. In addition, the demand for municipal
securities is strongly influenced by the value of tax-exempt
income to investors and lower income tax rates could reduce the advantage of
owning municipal securities, which may also
adversely affect the value and liquidity of municipal securities.
Commercial
Paper
The
Fund may invest in commercial paper. Commercial paper normally represents
short-term unsecured promissory notes issued in bearer
form by banks or bank holding companies, corporations, finance companies and
other issuers. Commercial paper is subject to interest
rate risk and is susceptible to changes in the issuer’s financial condition or
credit quality. Commercial paper is typically repaid with
the proceeds from the issuance of new commercial paper. Thus, investments in
commercial paper are subject to the risk (commonly
referred to as rollover risk) that the issuer will be unable to issue sufficient
new commercial paper to meet the repayment obligations
under its outstanding commercial paper. Because commercial paper is typically
unsecured, investments in commercial paper
are subject to increased credit risk.
Large
Shareholder Transactions Risk
The Fund
may experience adverse effects when certain shareholders, or shareholders
collectively, purchase or redeem large amounts of
shares of the Fund. Such larger than normal redemptions may cause the Fund to
sell portfolio securities at times when it would not
otherwise do so, which may negatively impact the Fund’s NAV and liquidity.
Similarly, large Fund share purchases may adversely
affect the Fund’s performance to the extent that the Fund is delayed in
investing new cash and is required to maintain a larger
cash position than it ordinarily would. Large shareholder transactions may also
accelerate the realization of taxable income to shareholders
if such sales of investments resulted in gains, and may also increase
transaction costs. In addition, a large redemption could
result in the Fund’s current expenses being allocated over a smaller asset base,
leading to an increase in the Fund’s expense ratio.
Although large shareholder transactions may be more frequent under certain
circumstances, the Fund is generally subject to the risk
that shareholders can purchase or redeem a significant percentage of Fund shares
at any time.
Active
Management Risk
In
pursuing the Fund’s investment objective, the Adviser has considerable leeway in
deciding which investments it buys, holds or sells on
a day-to-day basis, and which trading strategies it uses. For example, the
Adviser, in its discretion, may determine to use some permitted
trading strategies while not using others. The success or failure of such
decisions will affect the Fund’s performance. In addition,
it is expected that confidential or material non-public information regarding an
investment or potential investment opportunity
may become available to the Adviser. If such information becomes available, the
Adviser may be precluded (including by applicable
law or internal policies or procedures) from pursuing an investment or
disposition opportunity with respect to such investment
or investment opportunity and the Adviser may be restricted in its ability to
cause the Fund to buy or sell securities of an issuer
for substantial periods of time when the Fund otherwise could realize profit or
avoid loss. This may adversely affect the Fund’s flexibility
with respect to buying or selling securities and may impair the Fund’s
liquidity.
Temporary
Defensive Investments
Under
adverse or unstable market conditions or abnormal circumstances or when the
Adviser believes that changes in market, economic,
political or other conditions warrant, the Fund may, in the discretion of the
Adviser, take temporary positions that are inconsistent
with the Fund’s principal investment strategy in attempting to respond to such
conditions or circumstances. For example,
the Fund may invest without limit in cash, cash equivalents or other
fixed-income instruments, derivatives, repurchase agreements
or securities of other investment companies, including money market funds, for
temporary purposes. In addition, when the
Adviser believes that conditions warrant, including when suitable municipal
obligations are unavailable, the Short Duration Municipal
Income Portfolio may invest without limit in securities subject to federal
income tax or in securities that pay interest income
subject to the federal alternative minimum tax. Under such circumstances, a
higher portion of the Fund’s distributions will likely
be subject to federal income tax and/or the federal alternative minimum tax. If
the Adviser incorrectly predicts the effects of these
changes or during periods of temporary defensive or other temporary positions,
such temporary investments may adversely affect
the Fund’s performance and the Fund may not achieve its investment
objective.
State
and Municipal Project-Specific Risk
The
Short Duration Municipal Income Portfolio may invest in municipal securities
that are related in such a way that an economic, business,
or political development or change affecting one such security would likewise
affect the other municipal securities. For example,
the Fund may invest 25% or more of its total assets in certain types of
municipal obligations (such as general obligations, municipal
leases, principal only municipal investments, revenue bonds and industrial
development bonds) and in one or more states, territories
and economic sectors (such as housing, hospitals, healthcare facilities or
utilities). Because the Fund may invest a significant
portion of its assets in obligations issued in one or more states and/or U.S.
territories and in certain types of municipal or other
obligations and/or in certain sectors, the value of Fund shares may be affected
by events that adversely affect that state, U.S. territory,
sector or type of obligation and may fluctuate more than that of a fund that
invests more broadly. These developments or changes
may include, among other things, legislative developments involving the
financing of projects, judicial decisions regarding
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Additional
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the
validity of the projects or the means of financing such projects, shortages or
price increases of materials needed for the project or declining
needs for the projects as well as other developments that may adversely affect
municipalities and other issuers of municipal securities
located within the same state, such as natural disasters, health emergencies,
and adverse economic, political or social environments.
General obligation bonds issued by municipalities can be adversely affected by,
among other things, economic downturns
and other developments that result in a decline in tax revenues. Revenue bonds
can be adversely affected by, among other things,
the negative economic performance or viability of the facility or revenue
source.
Duration
Duration
is a measure of the expected life of a bond that is used to determine the
sensitivity of an instrument’s price to changes in interest
rates. Thus, the average duration of a portfolio of fixed-income securities
represents its exposure to changing interest rates. For
example, when the level of interest rates increases by 1%, a fixed-income
security having a positive duration of four years generally
will decrease in value by 4%; when the level of interest rates decreases by 1%,
the value of that same security generally will increase
by 4%. A portfolio with a shorter average duration generally will experience
less price volatility in response to changes in interest
rates than a portfolio with a longer average duration.
Measures
such as average duration may not accurately reflect the true interest rate
sensitivity of the Fund, particularly if the Fund consists
of securities with widely varying durations. As a result, if the Fund has an
average duration that suggests a certain level of interest
rate risk, the Fund may in fact be subject to greater interest rate risk than
the average would suggest. This risk is greater to the extent
the Adviser uses leverage or derivatives in connection with the management of
the Fund.
Residual
Interest Bonds
The
Short Duration Municipal Income Portfolio may enter into residual interest bond
transactions, which expose the Fund to leverage
and greater risk than an investment in a fixed-rate municipal bond. The interest
payments that the Fund receives on the residual
interest bonds acquired in such transactions vary inversely with short-term
interest rates, normally decreasing when short-term
rates increase. The value and market for residual interest bonds are volatile
and such bonds may have limited liquidity. As required
by applicable accounting standards, the Fund records interest expense as a
liability with respect to floating-rate notes and also
records offsetting interest income in an amount equal to this
expense.
Derivatives
The Short
Duration Municipal Income Portfolio may, but is not required to, use
derivatives and other similar instruments for a variety
of purposes, including hedging, risk management, portfolio management or to seek
to earn income. Derivative instruments used
by the Fund will be counted towards the Fund’s exposure in the types of
securities listed herein to the extent they have economic
characteristics similar to such securities. A derivative is a financial
instrument whose value is based, in part, on the value of an
underlying asset, interest rate, index or financial instrument. Prevailing
interest rates and volatility levels, among other things, also affect
the value of derivative instruments. Derivatives and other similar instruments
that create synthetic exposure often are subject to risks
similar to those of the underlying asset or instrument and may be subject to
additional risks, including imperfect correlation between
the value of the derivative and the underlying asset, risks of default by the
counterparty to certain transactions, magnification of
losses incurred due to changes in the market value of the securities,
instruments, indices or interest rates to which the derivative instrument
relates, risks that the transactions may not be liquid, risks arising from
margin and payment requirements, risks arising from
mispricing or valuation complexity and operational and legal risks. The use of
derivatives involves risks that are different from, and
possibly greater than, the risks associated with other portfolio investments.
Derivatives may involve the use of highly specialized instruments
that require investment techniques and risk analyses different from those
associated with other portfolio investments.
Certain
derivative transactions may give rise to a form of leverage. Leverage magnifies
the potential for gain and the risk of loss. Leverage
associated with derivative transactions may cause the Fund to liquidate
portfolio positions when it may not be advantageous to
do so, or may cause the Fund to be more volatile than if the Fund had not been
leveraged. Although the Adviser seeks to use derivatives
to further the Fund’s investment objective, there is no assurance that the use
of derivatives will achieve this result.
The
derivative instruments and techniques that the Fund may use
include:
Futures.
A futures contract is a standardized, exchange-traded agreement to buy or sell a
specific quantity of an underlying asset, reference
rate or index at a specific price at a specific future time. While the value of
a futures contract tends to increase or decrease in tandem
with the value of the underlying instrument, differences between the futures
market and the market for the underlying asset may
result in an imperfect correlation. Depending on the terms of the particular
contract, futures contracts are settled through either physical
delivery of the underlying instrument on the settlement date or by payment of a
cash settlement amount on the settlement date.
A decision as to whether, when and how to use futures contracts involves the
exercise of skill and judgment and even a well-conceived
futures transaction may be unsuccessful because of market behavior or unexpected
events. In addition to the derivatives risks
discussed above, the prices of futures contracts can be highly volatile, using
futures contracts can lower total return, and the potential
loss from futures contracts can exceed the Fund’s initial investment in such
contracts. No assurance can be given that a liquid
market will exist for any particular futures contract at any particular time.
There is also the risk of loss by the Fund of margin deposits
in the event of bankruptcy of a broker with which the Fund has open
positions in the futures contract.
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Options.
If the Fund buys an option, it buys a legal contract giving it the right to buy
or sell a specific amount of the underlying instrument,
or contract, such as a swap agreement or futures contract, on the underlying
instrument at an agreed-upon price typically in
exchange for a premium paid by the Fund. If the Fund sells an option, it sells
to another person the right to buy from or sell to the Fund
a specific amount of the underlying instrument, swap, or futures contract on the
underlying instrument at an agreed-upon price
during a period of time or on a specified date typically in exchange for a
premium received by the Fund. When options are purchased
OTC, the Fund bears the risk that the counterparty that wrote the option will be
unable or unwilling to perform its obligations
under the option contract. Options may also be illiquid and the Fund may have
difficulty closing out its position. A decision
as to whether, when and how to use options involves the exercise of skill and
judgment and even a well-conceived option transaction
may be unsuccessful because of market behavior or unexpected events. The prices
of options can be highly volatile and the
use of options can lower total returns.
Swaps.
The Fund may enter into OTC swap contracts or cleared swap transactions. An OTC
swap contract is an agreement between two
parties pursuant to which the parties exchange payments at specified dates on
the basis of a specified notional amount, with the payments
calculated by reference to specified securities, indices, reference rates,
currencies or other instruments. Typically swap agreements
provide that when the period payment dates for both parties are the same, the
payments are made on a net basis (i.e., the two
payment streams are netted out, with only the net amount paid by one party to
the other). The Fund’s obligations or rights under
a swap contract entered into on a net basis will generally be equal only to the
net amount to be paid or received under the agreement,
based on the relative values of the positions held by each party. Cleared swap
transactions may help reduce counterparty credit
risk. In a cleared swap, the Fund’s ultimate counterparty is a clearinghouse
rather than a swap dealer, bank or other financial institution.
OTC swap agreements are not entered into or traded on exchanges and often there
is no central clearing or guaranty function
for swaps. These OTC swaps are often subject to credit risk or the risk of
default or non-performance by the counterparty. Certain
swaps have begun trading on exchanges called swap execution facilities. Exchange
trading is expected to increase liquidity of swaps
trading. Both OTC and cleared swaps could result in losses if interest rates,
foreign currency exchange rates or other factors are not
correctly anticipated by the Fund or if the reference index, security or
investments do not perform as expected. The Dodd-Frank Wall
Street Reform and Consumer Protection Act and related regulatory developments
require the clearing and exchange trading of certain
standardized swap transactions. Mandatory exchange-trading and clearing is
occurring on a phased-in basis. The Fund may pay
fees or incur costs each time it enters into, amends or terminates a swap
agreement.
The
Fund’s use of swaps may include those based on the credit of an underlying
security, commonly referred to as “credit default swaps.”
Where the Fund is the buyer of a credit default swap contract, it would
typically be entitled to receive the par (or other agreed-upon)
value of a referenced debt obligation from the counterparty to the contract only
in the event of a default or similar event
by a third-party on the debt obligation. If no default occurs, the Fund would
have paid to the counterparty a periodic stream of payments
over the term of the contract and received no benefit from the contract.
When the Fund is the seller of a credit default swap
contract, it typically receives the stream of payments but is obligated to pay
an amount equal to the par (or other agreed-upon) value
of a referenced debt obligation upon the default or similar event of the issuer
of the referenced debt obligation.
Regulatory
and Legal Risk
U.S.
and non-U.S. governmental agencies and other regulators regularly implement
additional regulations and legislators pass new laws
that affect the investments held by the Fund, the strategies used by the Fund or
the level of regulation or taxation applying to the
Fund (such as regulations related to investments in derivatives and other
transactions). These regulations and laws impact the investment
strategies, performance, costs and operations of the Fund or taxation of
shareholders.
The
SEC has recently proposed amendments to Rule 22e-4 of the 1940 Act that, if
adopted, would result in changes to the Fund’s liquidity
classification framework and could potentially increase the percentage of the
Fund’s investments classified as illiquid. In addition,
the Fund’s operations and investment strategies may be adversely impacted if the
proposed amendments are adopted.
Morgan
Stanley Institutional Fund Trust Prospectus | Fund
Management
Adviser
Morgan
Stanley Investment Management Inc., with principal offices at 1585 Broadway, New
York, NY 10036, conducts a worldwide
portfolio management business and provides a broad range of portfolio management
services to customers in the United States
and abroad. Morgan Stanley (NYSE: “MS”) is the parent of the Adviser, which is
the parent of the Distributor. Morgan Stanley
is a preeminent global financial services firm engaged in securities trading and
brokerage activities, as well as providing investment
banking, research and analysis, financing and financial advisory services. As of
December
31, 2023, the Adviser, together with
its affiliated asset management companies, had approximately $1.5 trillion
in assets under management or supervision.
A
discussion regarding the basis for the Board of Trustees’ approval of the
investment advisory agreements is available in each Fund’s Annual
Report to Shareholders for the fiscal year ended September
30, 2023.
Advisory
Fees
For
the fiscal year ended September
30, 2023, the Adviser received from each Fund the advisory fee (net of fee
waivers, if applicable) set
forth in the table below.
|
| |
Fund
(as a percentage of average daily net assets) |
|
Ultra-Short
Income Portfolio |
0.15% |
|
Short
Duration Municipal Income Portfolio |
0.00% |
|
The
Adviser has agreed to reduce its advisory fee and/or reimburse each Fund, if
necessary, if such fees would cause the total annual operating
expenses of such Funds to exceed the percentage of average daily net assets set
forth in the table below. In determining the actual
amount of fee waiver and/or expense reimbursement for each Fund, if any, the
Adviser excludes from total annual operating expenses
acquired fund fees and expenses (as applicable), certain investment related
expenses, taxes, interest and other extraordinary expenses
(including litigation). The fee waivers and/or expense reimbursements for each
Fund will continue for at least one year from the
date of this Prospectus or until such time as the Trust’s Board of Trustees acts
to discontinue all or a portion of such waivers and/or
reimbursements when it deems such action is appropriate. The Adviser may make
additional voluntary fee waivers and/or expense reimbursements.
With respect to the Ultra-Short Income Portfolio, the Distributor, the Adviser
and the Administrator may also waive
distribution fees, advisory fees, administration fees and/or reimburse expenses
to enable the Fund to maintain a minimum level of
daily net investment income. The Distributor, the Adviser and the Administrator
may discontinue these voluntary fee waivers and/or
expense reimbursements at any time in the future.
A
Fund’s
annual operating expenses may vary throughout the period and from year to year.
A Fund’s
actual expenses may be different
than the expenses listed in the Fund’s fee and expense table based upon the
extent and amount of a fee waiver and/or expense
reimbursement.
|
|
|
| |
|
Expense
Cap Class
IR |
Expense
Cap Institutional
Class |
Expense
Cap Class
A |
|
Ultra-Short
Income Portfolio |
0.25% |
0.30% |
0.40% |
|
Short
Duration Municipal Income Portfolio |
0.25% |
– |
0.35% |
|
Portfolio
Management
Ultra-Short
Income Portfolio
The
Fund is managed by members of the Global Liquidity team. The team consists of
portfolio managers and analysts. Current members
of the team who are jointly and primarily responsible for the day-to-day
management of the Fund are Jonas Kolk, Michael Cha
and David Schoenfeld.
Messrs.
Kolk, Cha and Schoenfeld have been associated with the Adviser in an investment
management capacity since 2004, 2008 and
2012, respectively.
Short
Duration Municipal Income Portfolio
The
Fund is managed by members of the Municipals team. The team consists of
portfolio managers and analysts. Current members of
the team who are jointly and primarily responsible for the day-to-day management
of the Fund are Julie P. Callahan, CFA, Paul Metheny,
CFA and Carl Thompson, CFA.
Ms.
Callahan has been a Managing Director of the Adviser since 2020. Prior to
joining the Adviser, Ms. Callahan was a senior member
of the municipal bond portfolio management team at PIMCO from 2011 to 2020.
Messrs. Metheny and Thompson are
Morgan
Stanley Institutional Fund Trust Prospectus | Fund
Management
Executive
Directors of the Adviser. Messrs. Metheny and Thompson are also Senior
Quantitative Portfolio Analysts and have been employed
by the Morgan Stanley organization for more than five years.
Additional
Information
The
Funds’
SAI provides additional information about the portfolio managers’ compensation
structure, other accounts managed by the
portfolio managers and the portfolio managers’ ownership of securities in the
Funds.
The
composition of each
team may change from time to time.
Morgan
Stanley Institutional Fund Trust Prospectus | Shareholder
Information
Share
Class Arrangements
The
Trust currently offers investors Class
IR, Class
A shares of each
Fund and Institutional Class shares of Ultra-Short Income Portfolio. Class
IR, Institutional
Class and Class
A shares of each
Fund are not subject to a sales charge, and Class
IR shares are not subject
to a shareholder service or 12b-1 fee. In addition, no sub-accounting or other
similar fees, or any finder’s fee payments are charged
or paid on Class
IR, Institutional
Class or Class
A shares. Class
IR and Institutional
Class shares
generally require investments
in minimum amounts that are substantially higher than Class
A shares.
Minimum
Investment Amounts
Institutional
Class Shares
Institutional
Class shares are available to investors who at the time of initial purchase make
a minimum investment of $5
million with
respect to the Ultra-Short
Income Portfolio. Each Fund, in its sole discretion, may waive the minimum
initial investment amount
in certain cases including, but not limited to, shares of the Fund purchased
through a Financial Intermediary, when the Adviser
anticipates the combined value of a client’s investments will meet or exceed the
minimum or to clients of the Adviser’s broker-dealer
affiliates.
Class
A Shares
The
minimum initial investment amount is generally $1,000 for Class A shares of a
Fund. The minimum initial investment amount may
be waived by the Adviser for the following categories: (1) sales through banks,
broker-dealers and other financial institutions (including
registered investment advisers and financial planners) purchasing shares on
behalf of their clients in (i) discretionary and non-discretionary
advisory programs, (ii) asset allocation programs, (iii) other programs in which
the client pays an asset-based fee for advice
or for executing transactions in Fund shares or for otherwise participating in
the program or (iv) certain other investment programs
that do not charge an asset-based fee, as outlined in an agreement between the
Distributor and such financial institution; (2)
sales through a Financial Intermediary that has entered into an agreement with
the Distributor to offer Fund shares to self-directed
investment brokerage accounts, which may or may not charge a transaction fee;
(3) qualified state tuition plans described in Section
529 of the Code (subject to all applicable terms and conditions); (4) defined
contribution, defined benefit and other employer-sponsored
employee benefit plans, whether or not qualified under the Code, where such
plans purchase Class A shares through
a plan-level or omnibus account sponsored or serviced by a Financial
Intermediary that has entered into an agreement with a Fund,
the Distributor and/or the Adviser pursuant to which such Class A shares are
available to such plans; (5) certain retirement and
deferred compensation programs established by Morgan Stanley Investment
Management or its affiliates for their employees or the
Trust’s Trustees; (6) current or retired directors, officers and employees of
Morgan Stanley and any of its subsidiaries, such persons’
spouses, and children under the age of 21, and trust accounts for which any of
such persons is a beneficiary; (7) current or retired
Directors or Trustees of the Morgan Stanley Funds (as defined herein), such
persons’ spouses, and children under the age of 21,
and trust accounts for which any of such persons is a beneficiary; (8) certain
other registered open-end investment companies, whose
shares are distributed by the Distributor; (9) investments made in connection
with certain mergers and/or reorganizations as approved
by the Adviser; (10) the reinvestment of dividends from Class A shares of the
Fund in additional Class A shares of the Fund;
or (11) certain other institutional investors based on assets under management
or other considerations at the discretion of the Adviser.
Certain
waivers may not be available depending on the policies at certain Financial
Intermediaries. Each Financial Intermediary may also
have its own rules about minimum initial investment amounts, minimum account
balances, share transactions and limits on the number
of share transactions you are permitted to make in a given time period and about
rights of accumulation and letters of intent. When
purchasing shares through a Financial Intermediary, you may not benefit from
certain policies and procedures of the Fund as your
eligibility may be dependent upon the policies and procedures of your Financial
Intermediary, including those regarding reductions
of sales charges. Please consult your Financial Intermediary for more
information.
Class
IR Shares
Class
IR shares are offered only to eligible investors meeting certain minimum
investment requirements at the discretion of the Adviser.
To purchase Class IR shares, an investor must meet a minimum initial investment
of $10
million with respect to the Ultra-Short
Income Portfolio and $15
million with respect to the Short
Duration Municipal Income Portfolio or be a defined contribution,
defined benefit or other employer sponsored employee benefit plan, whether or
not qualified under the Code, in each case
provided that the plan trades through an intermediary that combines its clients’
assets in a single omnibus account and in each case
subject to the discretion of the Adviser. Initial omnibus trades of $10
million or $15 million or more, as the case may be, may be accepted
from certain platforms, including (i) banks and trust companies; (ii) insurance
companies; and (iii) registered investment advisory
firms. The applicable minimum initial investment amount may be waived for Fund
shares purchased: (1) by or through certain
other registered open-end investment companies whose shares are distributed by
the Distributor; (2) by investments made in connection
with certain mergers and/or reorganizations as approved by the Adviser; or (3)
when the Adviser anticipates the combined value
of a client’s investments will meet or exceed the minimum.
General
If
the value of your account falls below the minimum initial investment amount for
a class of shares of a Fund as a result of share
Morgan
Stanley Institutional Fund Trust Prospectus | Shareholder
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Information (Con’t)
redemptions
or you no longer meet one of the waiver criteria set forth above, as applicable,
your account may be subject to involuntary
conversion or involuntary redemption, as applicable. You will be notified prior
to any such conversions or redemptions.
The
Adviser, in its sole discretion, may waive a minimum initial investment amount
in certain cases.
Distribution
of Fund Shares
Morgan
Stanley Distribution, Inc. is the exclusive distributor of the shares of the
Funds. The
Distributor receives no compensation from
the Funds for distributing Class
IR shares of each Fund. The Trust has adopted a Shareholder Services Plan
with respect to Institutional
Class shares of the Ultra-Short Income Portfolio, under which the Fund pays the
Distributor a shareholder services fee of
up to 0.05%
of the average daily net assets of Institutional
Class shares of the Ultra-Short
Income Portfolio. The Trust has adopted
a Shareholder Services Plan with respect to the Class
A shares of each Fund pursuant to Rule 12b-1 under the Investment
Company
Act of 1940, as amended (the “1940 Act”), under which the Funds pay the
Distributor a shareholder services fee of up to 0.25%
or 0.20% of the average daily net assets of the Class
A shares of the Ultra-Short
Income Portfolio or the Short
Duration Municipal
Income Portfolio, respectively. For
at least one year from the date of this Prospectus, the Distributor has agreed
to waive the
12b-1 fee on Class A shares of the Ultra-Short Income and Short Duration
Municipal Income Portfolios to the extent it exceeds 0.10%
of the average daily net assets of such shares on an annualized basis. This
waiver will continue for at least one year from the date
of this Prospectus or until such time as the Trust’s Board of Trustees acts to
discontinue all or a portion of such waiver when it deems
such action is appropriate. The
Distributor may compensate other parties for providing distribution-related
and/or shareholder
support services to investors who purchase Institutional
Class or Class A shares. Such fees relate solely to Institutional
Class
or Class A shares and will reduce the net investment income and total return of
Institutional
Class or Class A shares.
With respect
to the Ultra-Short Income Portfolio, the Distributor may waive distribution fees
to enable a Fund to maintain a minimum level
of daily net investment income. The Distributor may discontinue these voluntary
fee waivers at any time in the future. Because
the
fees are paid out of a Fund’s assets on an ongoing basis, over time these fees
will increase the cost of your investment and may cost
you more than paying other types of sales charges.
The
Adviser and/or Distributor may pay compensation to Financial Intermediaries in
connection with the sale, distribution, marketing
and retention of the
Funds’ shares and/or shareholder servicing. Such compensation may be
significant in amount and the prospect
of receiving any such additional compensation may provide affiliated or
unaffiliated Financial Intermediaries with an incentive
to favor sales of shares of a
Fund over
other investment options. Any such payments will not change the NAV or the price
of
a Fund’s
shares. For more information, please see the
Funds’ SAI.
About
Net Asset Value
The
NAV of a class of shares of a Fund is determined by dividing the total of the
value of the Fund’s investments and other assets attributable
to the class, less any liabilities attributable to the class, by the total
number of outstanding shares of that class of the Fund.
In making this calculation, each Fund
values its securities at market value. When no market quotations are readily
available for securities,
including circumstances under which the Adviser determines that a security’s
market price is not accurate, we will determine
the value for those securities in good faith at fair value using methods
approved by the Trust’s Board of Trustees. Fair value
pricing involves subjective judgment and it is possible that the fair value
determined for a security is materially different than the
value that could be realized upon the sale of that security.
To
the extent a Fund invests in open-end management companies (other than
exchange-traded funds) that are registered under the 1940
Act, the Fund’s NAV is calculated based in relevant part upon the NAV of such
funds. The prospectuses for such funds explain the
circumstances under which they will use fair value pricing and its
effects.
Fair
value pricing involves subjective judgments and it is possible that the fair
value determined for a security or other asset is materially
different than the value that could be realized upon the sale of that security
or other asset. With respect to securities that are
primarily listed on foreign exchanges, the values of the
Fund’s portfolio securities may change on days when you will not be able
to
purchase or sell your shares. The NAV of the
Fund (excluding any applicable sales charges) is based on the value of the
Fund’s portfolio
securities or other assets. Although the assets of each class are invested in
the same portfolio of securities or other assets, the NAV
of each class will differ because the classes have different class specific
expenses.
A
Fund
relies on various sources to calculate its NAV. The ability of a Fund’s provider
of administrative services to calculate the NAV
per share of a Fund is subject to operational risks associated with processing
or human errors, systems or technology failures, cyber
attacks and errors caused by third-party service providers, data sources, or
trading counterparties. Such failures may result in delays
in calculating a Fund’s NAV and/or inability to calculate NAV over extended
periods. A Fund may be unable to recover any losses
associated with such failures. In addition, if the third-party service providers
and/or data sources upon which a Fund directly or indirectly
relies to calculate its NAV or price individual securities are unavailable or
otherwise unable to calculate the NAV correctly, it
may be necessary for alternative procedures to be utilized to price the
securities at the time of determining a Fund’s NAV.
Morgan
Stanley Institutional Fund Trust Prospectus | Shareholder
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Shareholder
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A
Fund’s NAV per share is subject to various investment and other risks. Please
refer to the “Additional Information About Fund Investment
Strategies and Related Risks” and “Fund Investments and Strategies” sections of
the Prospectus and SAI, respectively, for more
information regarding risks associated with an investment in a Fund.
Pricing
of Fund Shares
Shares
of the Funds may
be purchased or sold (redeemed) at the NAV next determined after the Fund
receives your order in good order
and State Street Bank and Trust Company (the “Custodian”) receives monies
credited by a Federal Reserve Bank (“Federal Funds”)
prior to the close of the Federal Reserve Wire Network. For
Short Duration Municipal Income Portfolio, you begin earning dividends
the same day your Shares are purchased provided the Fund receives your purchase
amount in Federal Funds that day as set forth
above.
For the Ultra-Short Income Portfolio, you begin earning dividends the business
day after the Fund receives your order in good
order provided the Fund receives your purchase amount in Federal Funds that day
as set forth above. Orders to purchase shares of
a Fund
must be received by the Fund prior to 4:00
p.m. Eastern time. The Trust determines the NAV for each
Fund as of the close
of the NYSE (normally 4:00 p.m. Eastern time) on each day the NYSE is open for
business (the “Pricing Time”), except, with respect
to Ultra-Short Income Portfolio, when the following federal holidays are
observed: Columbus Day and Veterans Day. On any business
day that the NYSE closes early, or when Securities Industry and Financial
Markets Association (“SIFMA”) recommends that the
securities markets close early, the Funds may
close early and purchase orders received after such earlier closing times will
be processed
the following business day. If the NYSE is closed due to inclement weather,
technology problems or any other reason on a day
it would normally be open for business, or the NYSE has an unscheduled early
closing on a day it has opened for business, each
Fund
reserves the right to treat such day as a business day and accept purchase and
redemption orders until, and calculate its NAV as of,
the normally scheduled close of regular trading on the NYSE for that day, so
long as the Adviser believes there generally remains an
adequate market to obtain reliable and accurate market quotations. The
Funds may
elect to remain open and price their shares on days
when the NYSE is closed or closes early but on which SIFMA recommends that the
bond markets remain open for all or part of the
day. Trading of securities that are primarily listed on foreign exchanges may
take place on weekends and other days when a Fund does
not price its shares. Therefore, to the extent, if any, that a Fund
invests in securities primarily listed on foreign exchanges, the value
of the Fund’s portfolio securities may change on days when you will not be able
to purchase or sell your shares. Purchase orders received
by the Funds and
not funded by 6:45 p.m. Eastern time on the trade date may be subject to an
overdraft charge.
Portfolio
Holdings
A
description of the Trust’s policies and procedures with respect to the
disclosure of a Fund’s portfolio securities is available in the Trust’s
SAI.
How
To Purchase Fund Shares
You
may purchase shares of a Fund on each day that the Fund is open for business by
contacting your Financial Intermediary or directly
from the Fund.
Purchasing
Shares Through a Financial Intermediary
You
may open a new account and purchase shares of a Fund
through a Financial Intermediary. The Financial Intermediary will assist
you
with the procedures to invest in shares of a Fund.
Investors purchasing or selling shares of a Fund
through a Financial Intermediary,
including Morgan Stanley Wealth Management, may be charged transaction-based or
other fees by the Financial Intermediary
for its services. If you are purchasing shares of a
Fund through a Financial Intermediary, please consult your Financial
Intermediary
for more information regarding any such fees and for purchase
instructions. Purchase
orders placed with a Financial Intermediary
and transmitted through a trading platform utilized by the Financial
Intermediary may be transmitted by the trading platform
after the deadlines established by the Trust for receipt of purchase orders, as
set forth above; so long as a purchase order is received
in good order prior to the time set forth above in “Pricing of Fund Shares”, it
will receive a trade date of the same day and, with
respect to purchases of the Ultra-Short Income Portfolio only, will begin
earning dividends the business day after.
You
should discuss with your Financial Intermediary which share class is most
appropriate for you based on the size of your investment,
your expected time horizon for holding the shares and other
factors.
With
respect to sales through Financial Intermediaries, no offers or sales of Fund
shares may be made in any foreign jurisdiction, except
with the consent of the Distributor.
Purchasing
Shares Directly From the Funds
Initial Purchase
You
may open a new account, subject to acceptance by a Fund,
and purchase shares of the Fund by completing and signing a New Account
Application which you can obtain by calling Morgan Stanley Services Company Inc.
or the Fund at (888) 378-1630 (which is
generally accessible weekdays 8:00 a.m.-6:00 p.m. Eastern time) and mailing it
to Morgan Stanley Institutional Fund Trust, c/o SS&C
GIDS, P.O. Box 219804, Kansas City, MO 64121-9804.
Morgan
Stanley Institutional Fund Trust Prospectus | Shareholder
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Shareholder
Information (Con’t)
After
submitting a completed New Account Application to SS&C GIDS, you may wire
Federal Funds (monies credited by a Federal Reserve
Bank) to the
Custodian. You should instruct your bank to send a Federal Funds wire in a
specified amount to the Custodian using
the following wire instructions:
State
Street Bank and Trust Company
One
Lincoln Street
Boston,
MA 02111-2101
ABA
#011000028
DDA
#00575373
Attn:
Morgan
Stanley Institutional Fund Trust
Subscription
Account
Ref:
(Fund Name, Account Number, Account Name)
Purchase by Internet
If
you have properly authorized the Internet Trading Option on your New Account
Application and completed, signed and returned to
the Fund an Electronic Transactions Agreement, you may place a purchase order
for additional shares online through Morgan Stanley’s
Treasury Investment Portal service at www.morganstanley.com/liquidity. For more
information, call Morgan Stanley Services
Company Inc. at 1-888-378-1630.
You
are responsible for transmitting payments for shares purchased via the Internet
in a timely fashion, as set forth above.
Purchase
by Internet is not available for the Short
Duration Municipal Income Portfolio.
Automatic Purchases
Selected
accounts that utilize the Funds as their sweep vehicle will be reviewed on each
business day to determine whether the account
has a positive balance as a result of credits incurred that day. If an account
has a positive (credit) balance, shares of a Fund will
automatically be purchased. Any positive (credit) balance will be reduced by any
debits to the account on that day and shares of a Fund
will automatically be sold.
Additional Investments
You
may purchase additional shares of a Fund
for your account at any time by contacting your Financial Intermediary or by
contacting
the Fund directly. For additional purchases directly from a Fund,
you should write a “letter of instruction” that includes your
account name, account number, the Fund name and the class selected, signed by
the account owner(s), to assure proper crediting
to your account. After mailing a “letter of instruction,” you may wire Federal
Funds by following the instructions under “Initial
Purchase.”
General
Shares
of a Fund
may, in the Fund’s discretion, be purchased with investment securities (in lieu
of or, in conjunction with, cash) acceptable
to the Fund. The securities would be accepted by a Fund
at their market value in return for Fund shares of equal value, taking
into account any applicable sales charge.
To
help the U.S. Government fight the funding of terrorism and money laundering
activities, federal law requires all financial institutions
to obtain, verify and record information that identifies each person who opens
an account. What this means to you is that
when you open an account, we will ask your name, address, date of birth and
other information that will allow us to identify you.
If we are unable to verify your identity, we reserve the right to restrict
additional transactions and/or liquidate your account at the
next calculated NAV after your account is closed (less any applicable
sales/account charges and/or tax penalties) or take any other action
required by law. In accordance with federal law requirements, the Trust
has implemented an anti-money laundering compliance
program, which includes the designation of an anti-money laundering compliance
officer.
When
you buy Fund shares, the shares (plus any applicable sales charge) will be
purchased at the next share price calculated after we receive
your purchase order in good order. Your
payment is due on the next business day after you place your purchase
order.
We reserve
the right to reject any order for the purchase of Fund shares for any
reason.
The
Trust may suspend the offering of shares, or any class of shares, of
a Fund
or reject any purchase orders when we think it is in the
best interest of the Fund.
Certain
patterns of past exchanges and/or purchase or sale transactions involving
a Fund
may result in the Fund rejecting, limiting or prohibiting,
at its sole discretion and without prior notice, additional purchases and/or
exchanges and may result in a shareholder’s account
being closed. Determinations in this regard may be made based on the frequency
or dollar amount of previous exchanges or purchase
or sale transactions. For more information, please refer to the section of this
Prospectus entitled “Frequent Purchases and Redemptions
of Shares.”
Morgan
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How
To Redeem Fund Shares
You
may process a redemption request by contacting your Financial Intermediary.
Otherwise, you may redeem shares of a Fund by mail
or, if authorized, by telephone, at no charge other than as described below. The
value of shares redeemed may be more or less than
the purchase price, depending on the NAV at the time of redemption. Shares of a
Fund will be redeemed at the NAV next determined
after we receive your redemption request in good order.
Redemptions by Letter
Requests
should be addressed to Morgan
Stanley Institutional Fund Trust,
c/o SS&C
GIDS, P.O. Box 219804, Kansas City, MO 64121-9804.
To
be in good order, redemption requests must include the following
documentation:
(a)
A letter of instruction, if required, or a stock assignment specifying the
account name, the account number, the name of the Fund and
the number of shares or dollar amount to be redeemed, signed by all registered
owners of the shares in the exact names in which the
shares are registered, and whether you wish to receive the redemption proceeds
by wire
to the bank account we have on file for you;
(b)
Any required signature guarantees if you are requesting payment to anyone other
than the registered owner(s) or that payment be sent
to any address other than the address of the registered owner(s) or
pre-designated bank account; and
(c)
Other supporting legal documents, if required, in the case of estates, trusts,
guardianships, custodianship, corporations, pension and
profit sharing plans and other organizations.
Redemptions
by Telephone
You
automatically have telephone redemption and exchange privileges unless you
indicate otherwise by checking the applicable box on
the New Account Application or calling Morgan Stanley Shareholder Services to
opt out of such privileges. You may request a redemption
of shares of a Fund
by calling the Morgan Stanley Shareholder Services at 1-888-378-1630
and requesting that the redemption
proceeds be mailed or wired to you. You cannot redeem shares of a Fund
by telephone if you hold share certificates for those
shares. For your protection when calling a Fund,
we will employ reasonable procedures to confirm that instructions communicated
over the telephone are genuine. These procedures may include requiring various
forms of personal identification (such as
name, mailing address, social security number or other tax identification
number), tape-recording telephone communications and providing
written confirmation of instructions communicated by telephone. If reasonable
procedures are employed, neither Morgan Stanley,
SS&C GIDS nor a Fund
will be liable for following telephone instructions that it reasonably believes
to be genuine. Telephone
redemptions and exchanges may not be available if you cannot reach Morgan
Stanley Shareholder Services by telephone, whether
because all telephone lines are busy or for any other reason; in such case, a
shareholder would have to use a Fund’s
other redemption
and exchange procedures described in this section. Telephone instructions will
be accepted if received by Morgan Stanley Shareholder
Services between 9:00 a.m. and 4:00
p.m. Eastern time on any day the NYSE is open for business,
except, with respect to
Ultra-Short Income Portfolio, when the following federal holidays are observed:
Columbus Day and Veterans Day.
During periods
of drastic economic or market changes, it is possible that the telephone
privileges may be difficult to implement, although this
has not been the case with the Funds in
the past. To opt out of telephone privileges, please contact the Funds at
1-888-378-1630.
Redemption by
Internet
You
may redeem shares online through Morgan Stanley’s Treasury Investment Portal
service at www.morganstanley.com/ liquidity, provided
you have a pre-established Internet trading account, as set forth above under
“How To Purchase Fund Shares.” For more information,
call the Funds at 1-888-378-1630.
Redemption
by Internet is not available for the Short
Duration Municipal Income Portfolio.
Automatic Redemptions
Selected
accounts that utilize a Fund as their sweep vehicle will be reviewed on each
business day to determine whether the account has
any debits that were incurred that day and shares of the Fund will automatically
be redeemed to cover the debits if such debits have
not been reduced by any credits which may have accrued to the account on the
same day.
Systematic
Withdrawal Plan
If
your investment in all of the Morgan Stanley Funds has a total market value of
at least $10,000,
you may elect to withdraw amounts
of $25
or more, or in any whole percentage of a fund’s balance (provided the amount is
at least $25), on a monthly, quarterly,
semi-annual or annual basis, from any fund with a balance of at least
$1,000.
Each time you add a fund to the plan, you must
meet the plan requirements.
Morgan
Stanley Institutional Fund Trust Prospectus | Shareholder
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To
sign up for the systematic withdrawal plan, contact your Morgan Stanley
Financial Advisor or call toll-free 1-888-378-1630.
You may
terminate or suspend your plan at any time. Please remember that withdrawals
from the plan are sales of shares, not Fund “distributions,”
and ultimately may exhaust your account balance. The Trust may terminate or
revise the plan at any time.
Redemption
Proceeds
Each
Fund typically expects to pay redemption proceeds to you within two business
days following receipt of your redemption request
for those payments made to your brokerage account held with a Financial
Intermediary. For redemption proceeds that are paid
directly to you by a Fund, the Fund typically expects to pay redemption proceeds
by wire to
you within one business day, following
receipt of your redemption request; however, in all cases, it may take up to
seven calendar days to pay redemption proceeds.
Each
Fund typically expects to meet redemption requests by using a combination of
sales of securities held by the Fund and/or holdings
of cash and cash equivalents. On a less regular basis, each
Fund also reserves the right to use borrowings or interfund lending
to meet redemption requests, and the Fund may use these methods during both
normal and stressed market conditions.
If
we determine that it is in the best interest of the Trust or a Fund not to pay
redemption proceeds in cash, we may distribute to you securities
held by the Fund. If requested, we will pay a portion of your redemption(s) in
cash (during any 90 day period) up to the lesser
of $250,000 or 1% of the net assets of a Fund at the beginning of such period.
If a Fund redeems your shares in-kind, you will bear
any market risks associated with the securities paid as redemption proceeds.
Such in-kind securities may be illiquid and difficult or
impossible for a shareholder to sell at a time and at a price that a shareholder
would like. Redemptions paid in such securities generally
will give rise to income, gain or loss for income tax purposes in the same
manner as redemptions paid in cash. In addition, you
may incur brokerage costs and a further gain or loss for income tax purposes
when you ultimately sell the securities.
Exchange
Privilege
You
may exchange shares of any class of a Fund for the same class (Class I with
respect to Institutional Class) of shares of any mutual fund
(excluding money market funds) sponsored and advised by the Adviser (each, a
“Morgan Stanley Multi-Class Fund”), if available,
without the imposition of an exchange fee. In addition, you may exchange shares
of any class of a Fund for shares of Morgan
Stanley U.S. Government Money Market Trust (a “Morgan Stanley Money Market Fund”
and, together with the Morgan Stanley
Multi-Class Funds, the “Morgan Stanley Funds”), if available, without the
imposition of an exchange fee. Because purchases of
Class A shares of Morgan Stanley Institutional Fund Trust Ultra-Short Income
and Short Duration Municipal Income Portfolios are
not subject to a sales charge, and purchases of Class A shares of Morgan Stanley
Institutional Fund Trust Short Duration Income Portfolio
are subject to a reduced sales charge, you may be subject to the payment of a
sales charge by your Financial Intermediary, at time
of exchange into Class A shares of a Morgan Stanley Fund, based on the amount
that you would have owed if you directly purchased
Class A shares of that Morgan Stanley Fund (less any sales charge previously
paid in connection with shares exchanged for such
shares of Morgan Stanley Institutional Fund Trust Short Duration Income,
Ultra-Short Income or Short Duration Municipal Income
Portfolios, as applicable). Exchanges are effected based on the respective NAVs
of the applicable Morgan Stanley Fund (subject
to any applicable redemption fee) and in accordance with the eligibility
requirements of such Fund. To obtain a prospectus for
another Morgan Stanley Fund, contact your Financial Intermediary or call the
Fund at 1-888-378-1630. Prospectuses are also available
on our Internet site at www.morganstanley.com/im. If you purchased Fund shares
through a Financial Intermediary, certain Morgan
Stanley Funds may be unavailable for exchange. Contact your Financial
Intermediary for more information regarding the exchange
privilege and to determine which Morgan Stanley Funds are available for
exchange.
The
current prospectus for each Morgan Stanley Fund describes its investment
objective(s), policies, investment minimums and applicable
sales charges, and should be read before investing. Since exchanges are
available only into continuously offered Morgan Stanley
Funds, exchanges are generally not available into Morgan Stanley Funds or
classes of Morgan Stanley Funds that are not currently
being offered for purchase.
You
can process your exchange by contacting your Financial Intermediary. You may
also send exchange requests to the Trust’s transfer
agent, SS&C GIDS, by mail to Morgan Stanley Institutional Fund Trust, c/o
SS&C GIDS, P.O. Box 219804, Kansas City, MO
64121-9804 or by calling 1-888-378-1630.
You
will be subject to the same minimum initial investment and account size as an
initial purchase. Your exchange price will be the price
calculated at the next Pricing Time after the Morgan Stanley Fund receives your
exchange order. The Morgan Stanley Fund, in its
sole discretion, may waive the minimum initial investment amount in certain
cases. For direct accounts, the check writing privilege
is not available for Morgan Stanley Money Market Fund shares you acquire in an
exchange from a non-money market fund. If
you are investing through a financial advisor, check with your advisor regarding
the availability of check writing privileges. A Fund may
terminate or revise the exchange privilege upon required notice or in certain
cases without notice. A Fund reserves the right to reject
an exchange order for any reason.
If
you exchange shares of a Fund for shares of another Morgan Stanley Fund, there
are important tax considerations. For tax purposes,
the exchange out of a Fund is considered a sale of Fund shares and the exchange
into the other fund is considered a
Morgan
Stanley Institutional Fund Trust Prospectus | Shareholder
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Shareholder
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purchase.
As a result, you may realize a capital gain or loss. You should review the
“Taxes” section and consult your own tax professional
about the tax consequences of an exchange.
Frequent
Purchases and Redemptions of Shares
We
expect that the Funds may
be used by shareholders for short-term investing. Therefore, reasonably frequent
purchases and redemptions
of Fund shares by shareholders do not present risks for other shareholders of
the Fund, and the policies and procedures adopted
by the Board of Trustees/Directors as applicable to other funds in the Morgan
Stanley family of funds are generally not applicable
with respect to frequent purchases and redemptions of Fund shares. However,
frequent trading by shareholders can disrupt management
of a Fund and raise its expenses. Therefore, we may not accept any request for a
purchase or exchange when we think it is
being used as a tool for market-timing, and we may bar a shareholder who trades
excessively from making further purchases for an indefinite
period.
Taxes
As
with any investment, you should consider how your Fund investment will be taxed.
The tax information in this Prospectus is provided
as general information. You should consult your own tax professional about the
tax consequences of an investment in a Fund.
Unless your investment in a Fund is through a tax deferred retirement account,
such as a 401(k) plan or IRA, you need to be aware
of the possible tax consequences when the Fund makes distributions and when you
sell shares, including an exchange to another
Morgan Stanley Fund.
Taxation
of Distributions.
With respect to the Ultra-Short Income Portfolio, your distributions normally
are subject to federal and state
income tax when they are paid, whether you take them in cash or reinvest them in
Fund shares. A distribution also may be subject
to local income tax. Any income dividend distributions and any short-term
capital gain distributions are taxable to you as ordinary
income. Any long-term capital gain distributions are taxable as long-term
capital gains, no matter how long you have owned shares
in the Fund. It is not anticipated that any portion of the distributions by the
Fund would qualify for a lower tax rate as qualified
dividend income. Further, such distributions are not anticipated to be eligible
for a dividends-received deduction for corporate
shareholders.
With
respect to the Short Duration Municipal Income Portfolio, your income dividend
distributions are normally exempt from federal
income tax—to the extent they are derived from municipal obligations. Income
derived from other portfolio securities may be subject
to federal, state and/or local income taxes. Income derived from some municipal
securities is subject to the federal alternative minimum
tax. Certain tax-exempt securities whose proceeds are used to finance private,
for-profit organizations are subject to this special
tax system that ensures that individuals pay at least some federal taxes.
Although interest on these securities is generally exempt from
federal income tax, some individual taxpayers who have many tax deductions or
exemptions nevertheless may have to pay tax on the
income. However, the alternative minimum tax consequences discussed in this
paragraph do not apply with respect to interest paid
on bonds issued after December 31, 2008 and before January 1, 2011 (including
refunding bonds issued during that period to refund
bonds originally issued after December 31, 2003 and before January 1,
2009).
The
Fund may derive gains in part from municipal obligations that the Fund purchased
below their principal or face values. All or a portion
of these gains may be taxable to you as ordinary income rather than capital
gains. If the Fund makes any capital gain distributions,
those distributions will normally be subject to federal and state income tax
when they are paid, whether you take them in
cash or reinvest them in Fund shares. Any short-term capital gain distributions
are taxable to you as ordinary income. Any long-term
capital gain distributions are taxable to you as long-term capital gains, no
matter how long you have owned shares in the Fund. The
Fund does not anticipate that it will make any distributions eligible for the
reduced rate of taxation applicable to qualified dividend
income.
If
you borrow money to purchase shares of the Fund, the interest on the borrowed
money is generally not deductible for income tax purposes.
Investment
income received by the Funds from sources within foreign countries may be
subject to foreign income taxes.
You
will be sent a statement (IRS Form 1099-DIV) by February of each year showing
the taxable distributions paid to you in the previous
year. The statement provides information on your dividends and any capital gains
for tax purposes.
Taxation
of Sales.
Your sale of Fund shares normally is subject to federal and state income tax and
may result in a taxable gain or loss to
you. A sale also may be subject to local income tax. Your exchange of Fund
shares for shares of another Morgan Stanley Fund is treated
for tax purposes like a sale of your original shares and a purchase of your new
shares. Thus, the exchange may, like a sale, result
in a taxable gain or loss to you and will give you a new tax basis for your
shares.
The
Funds (or
their
administrative agent)
are
required to report to the IRS and furnish to Fund shareholders the cost basis
information
for sale transactions of shares purchased on or after January 1, 2012.
Shareholders may elect to have one of several cost basis
methods applied to their account when calculating the cost basis of shares sold,
including average cost, FIFO (“first-in, first-
Morgan
Stanley Institutional Fund Trust Prospectus | Shareholder
Information
Shareholder
Information (Con’t)
out”)
or some other specific identification method. Unless you instruct otherwise,
a
Fund will use average cost as its default cost basis method,
and will treat sales as first coming from shares purchased prior to January 1,
2012. If average cost is used for the first sale of Fund
shares covered by these rules, the shareholder may only use an alternative cost
basis method for shares purchased prospectively. Fund
shareholders should consult with their tax advisors to determine the best cost
basis method for their tax situation.
An
additional 3.8% Medicare tax is imposed on certain net investment income
(including ordinary dividends and capital gain distributions
received from a Fund
and net gains from redemptions or other taxable dispositions of Fund shares) of
U.S. individuals, estates
and trusts to the extent that such person’s “modified adjusted gross income” (in
the case of an individual) or “adjusted gross income”
(in the case of an estate or trust) exceeds certain threshold
amounts.
When
you open your account, you should provide your social security or tax
identification number on your investment application. By
providing this information, you will avoid being subject to federal backup
withholding at the applicable rate on taxable distributions
and redemption proceeds. Any withheld amount would be sent to the IRS as an
advance payment of your taxes due on your
income for such year.
Shareholders
who are not citizens or residents of the United States and certain foreign
entities will generally be subject to withholding of
U.S. tax of 30% on distributions made by a Fund
of investment income (other than “exempt-interest dividends” disclosed above)
and
short-term capital gains.
Dividends
paid by the Funds to
shareholders who are nonresident aliens or foreign entities that are derived
from short-term capital gains
and qualifying U.S. source net interest income (including income from original
issue discount and market discount), and that are
designated by the Funds as
“interest-related dividends” or “short-term capital gain dividends,” will
generally not be subject to U.S.
withholding tax, provided that the income would not be subject to U.S. federal
income tax if earned directly by the foreign shareholder.
However, depending on the circumstances, the Funds may
designate all, some or none of the Fund’s
potentially eligible dividends
as exempt.
Each
Fund is required to withhold U.S. tax (at a 30% rate) on payments of taxable
dividends made to certain non-U.S. entities that fail
to comply (or be deemed compliant) with extensive reporting and withholding
requirements designed to inform the U.S. Department
of the Treasury of U.S.-owned foreign investment accounts. Shareholders may be
requested to provide additional information
to a Fund
to enable the Fund to determine whether withholding is required.
Because
each investor’s tax circumstances are unique and the tax laws may change, you
should consult your tax advisor about your investment.
Dividends
and Distributions
The
Ultra-Short Income Portfolio’s policy is to declare income dividends daily on
each business day and pay them monthly to shareholders.
The Short Duration Municipal Income Portfolio’s policy is to distribute to
shareholders substantially all of its net investment
income, if any, in the form of a monthly dividend.
Each
Fund’s policy is to distribute net realized capital gains, if any, at least
annually. Each
Fund automatically reinvests all dividends and
distributions in additional shares. However, you may elect to receive
distributions in cash by giving written notice to the Funds or
your Financial Intermediary or by checking the appropriate box in the
Distribution Option section on the New Account Application.
If
any distribution check remains uncashed for six months, the Adviser reserves the
right to invest the amount represented by the check
in Fund shares at the then-current net asset value of the Fund and all future
distributions will be reinvested. For accounts held directly
with a Fund’s transfer agent for which the shareholder has elected to receive
distributions via check, any distribution (dividend
or capital gain) under $10.00 is automatically reinvested in additional shares
regardless of your elected distribution option.
Potential
Conflicts of Interest
As
a diversified global financial services firm, Morgan Stanley, the parent company
of the Adviser, engages in a broad spectrum of activities,
including financial advisory services, investment management activities,
lending, commercial banking, sponsoring and managing
private investment funds, engaging in broker-dealer transactions and principal
securities, commodities and foreign exchange
transactions, research publication and other activities. In the ordinary course
of its business, Morgan Stanley is a full-service investment
banking and financial services firm and therefore engages in activities where
Morgan Stanley’s interests or the interests of its
clients may conflict with the interests of a Fund.
Morgan Stanley advises clients and sponsors, manages or advises other investment
funds
and investment programs, accounts and businesses (collectively, together with
any new or successor funds, programs, accounts or
businesses, the ‘‘Affiliated Investment Accounts’’) with a wide variety of
investment objectives that in some instances may overlap or
conflict with a Fund’s
investment objectives and present conflicts of interest. In addition, Morgan
Stanley may also from time to time
create new or successor Affiliated Investment Accounts that may compete with
a Fund
and present similar conflicts of interest. The
discussion below enumerates certain actual, apparent and potential conflicts of
interest. There is no assurance that conflicts of
Morgan
Stanley Institutional Fund Trust Prospectus | Shareholder
Information
Shareholder
Information (Con’t)
interest
will be resolved in favor of Fund shareholders and, in fact, they may not be.
Conflicts of interest not described below may also
exist.
For
more information about conflicts of interest, see the section entitled
“Potential Conflicts of Interest” in the SAI.
Material
Nonpublic Information.
It is expected that confidential or material nonpublic information regarding an
investment or potential
investment opportunity may become available to the Adviser. If such information
becomes available, the Adviser may be precluded
(including by applicable law or internal policies or procedures) from pursuing
an investment or disposition opportunity with
respect to such investment or investment opportunity. Morgan Stanley has
established certain information barriers and other policies
to address the sharing of information between different businesses within Morgan
Stanley. In limited circumstances, however,
including for purposes of managing business and reputational risk, and subject
to policies and procedures and any applicable
regulations, personnel, including personnel of the investment adviser, on one
side of an information barrier may have access
to information and personnel on the other side of the information barrier
through “wall crossings.” The Adviser faces conflicts of
interest in determining whether to engage in such wall crossings. Information
obtained in connection with such wall crossings may limit
or restrict the ability of the Adviser to engage in or otherwise effect
transactions on behalf of the Funds (including
purchasing or selling
securities that the Adviser may otherwise have purchased or sold for
a Fund
in the absence of a wall crossing).
Investments
by Morgan Stanley and its Affiliated Investment Accounts.
In serving in multiple capacities to Affiliated Investment Accounts,
Morgan Stanley, including the Adviser and the Investment team, may have
obligations to other clients or investors in Affiliated
Investment Accounts, the fulfillment of which may not be in the best interests
of a Fund
or its shareholders. A Fund’s investment
objectives may overlap with the investment objectives of certain Affiliated
Investment Accounts. As a result, the members of
an Investment team may face conflicts in the allocation of investment
opportunities among a Fund
and other investment funds, programs,
accounts and businesses advised by or affiliated with the Adviser. Certain
Affiliated Investment Accounts may provide for higher
management or incentive fees or greater expense reimbursements or overhead
allocations, all of which may contribute to this conflict
of interest and create an incentive for the Adviser to favor such other
accounts. To seek to reduce potential conflicts of interest
and to attempt to allocate such investment opportunities in a fair and equitable
manner, the Adviser has implemented allocation
policies and procedures. These policies and procedures are intended to give all
clients of the Adviser, including the Funds,
fair
access to investment opportunities consistent with the requirements of
organizational documents, investment strategies, applicable
laws and regulations, and the fiduciary duties of the
Adviser.
Payments
to Broker-Dealers and Other Financial Intermediaries.
The Adviser and/or the Distributor may pay compensation, out of their
own funds and not as an expense of a Fund,
to certain Financial Intermediaries (which may include affiliates of the Adviser
and Distributor),
including recordkeepers and administrators of various deferred compensation
plans, in connection with the sale, distribution,
marketing and retention of shares of the Fund and/or shareholder servicing. The
prospect of receiving, or the receipt of, additional
compensation, as described above, by Financial Intermediaries may provide such
Financial Intermediaries and their financial
advisors and other salespersons with an incentive to favor sales of shares of
a Fund
over other investment options with respect
to which these Financial Intermediaries do not receive additional compensation
(or receives lower levels of additional compensation).
These payment arrangements, however, will not change the price that an investor
pays for shares of a Fund
or the amount
that the Fund receives to invest on behalf of an investor. Investors may wish to
take such payment arrangements into account when
considering and evaluating any recommendations relating to Fund shares and
should review carefully any disclosures provided by
Financial Intermediaries as to their compensation. In addition, in certain
circumstances, the Adviser restricts, limits or reduces the amount
of a Fund’s
investment, or restricts the type of governance or voting rights it acquires or
exercises, where the Fund (potentially
together with Morgan Stanley) exceeds a certain ownership interest, or possesses
certain degrees of voting or control or has
other interests.
Morgan
Stanley Trading and Principal Investing Activities.
Notwithstanding anything to the contrary herein, Morgan Stanley will
generally
conduct its sales and trading businesses, publish research and analysis, and
render investment advice without regard for a Fund’s
holdings, although these activities could have an adverse impact on the value of
one or more of the Fund’s investments, or could
cause Morgan Stanley to have an interest in one or more portfolio investments
that is different from, and potentially adverse to,
that of a Fund.
Morgan
Stanley’s Investment Banking and Other Commercial Activities.
Morgan Stanley advises clients on a variety of mergers, acquisitions,
restructuring, bankruptcy and financing transactions. Morgan Stanley may act as
an advisor to clients, including other investment
funds that may compete with a Fund
and with respect to investments that a Fund
may hold. Morgan Stanley may give advice
and take action with respect to any of its clients or proprietary accounts that
may differ from the advice given, or may involve an
action of a different timing or nature than the action taken, by a Fund.
Morgan Stanley may give advice and provide recommendations
to persons competing with a Fund
and/or any of a Fund’s
investments that are contrary to the Fund’s best interests and/or
the best interests of any of its investments. Morgan Stanley’s activities on
behalf of its clients (such as engagements as an underwriter
or placement agent) may restrict or otherwise limit investment opportunities
that may otherwise be available to a Fund.
Morgan
Stanley Institutional Fund Trust Prospectus | Shareholder
Information
Shareholder
Information (Con’t)
Morgan
Stanley may be engaged to act as a financial advisor to a company in connection
with the sale of such company, or subsidiaries
or divisions thereof, may represent potential buyers of businesses through its
mergers and acquisition activities and may provide
lending and other related financing services in connection with such
transactions. Morgan Stanley’s compensation for such activities
is usually based upon realized consideration and is usually contingent, in
substantial part, upon the closing of the transaction.
Under these circumstances, the Fund may be precluded from participating in a
transaction with or relating to the company
being sold or participating in any financing activity related to a merger or an
acquisition.
Morgan
Stanley Institutional Fund Trust Prospectus | Financial
Highlights
The
financial highlights tables that follow are intended to help you understand the
financial performance of the Class IR and Class A shares
of each Fund and Institutional Class shares of the Ultra-Short Income Portfolio
for the past five years or since inception if less than
five years. Certain information reflects financial results for a single Fund
share. The total returns in the tables represent the rate that
an investor would have earned (or lost) on an investment in each Fund (assuming
reinvestment of all dividends and distributions).
The
ratio of expenses to average net assets listed in the tables below for each
class of shares of a Fund are based on the average net assets
of the Fund for each of the periods listed in the tables. To the extent that a
Fund’s average net assets decrease over the Fund’s next
fiscal year, such expense ratios can be expected to increase, potentially
significantly, because certain fixed costs will be spread over
a smaller amount of assets.
The
information below has been derived from the financial statements audited by
Ernst & Young LLP, the Funds’ independent registered
public accounting firm. Ernst & Young LLP’s reports, along with each Fund’s
financial statements, are incorporated by reference
into the Funds’ SAI. The Annual Reports to Shareholders (which include each
Fund’s financial statements) and SAI are available
at no cost from the Trust at the toll-free number noted on the back cover to
this Prospectus.
Morgan
Stanley Institutional Fund Trust Prospectus | Financial
Highlights
Ultra-Short
Income Portfolio
|
|
|
|
|
|
|
|
|
| |
|
|
Class
IR |
|
Year
Ended September 30, |
Selected
Per Share Data and Ratios |
2023 |
2022 |
2021 |
2020 |
2019 |
Net
Asset Value, Beginning of Period |
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
Income
(Loss) from Investment Operations: |
Net
Investment Income(1)
|
|
|
|
|
|
|
|
|
|
|
Net
Realized and Unrealized Gain (Loss) |
|
|
|
|
|
|
|
|
|
|
Total
from Investment Operations |
|
|
|
|
|
|
|
|
|
|
Distributions
from and/or in Excess of: |
Net
Investment Income |
|
|
|
|
|
|
|
|
|
|
Net
Asset Value, End of Period |
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
Total
Return(2)
|
|
|
|
|
|
|
|
|
|
|
Ratios
to Average Net Assets and Supplemental Data: |
Net
Assets, End of Period (Thousands) |
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
Ratio
of Expenses Before Expense Limitation |
|
|
|
|
|
|
|
|
|
|
Ratio
of Expenses After Expense Limitation |
|
|
|
|
|
|
|
|
|
|
Ratio
of Expenses After Expense Limitation Excluding Interest
Expenses |
|
|
|
|
|
|
|
|
|
|
Ratio
of Net Investment Income |
|
|
|
|
|
|
|
|
|
|
Portfolio
Turnover Rate |
|
|
|
|
|
|
|
|
|
|
| |
(1) |
Per
share amount is based on average shares outstanding. |
(2) |
Calculated
based on the net asset value as of the last business day of the
period. |
(3) |
During
the reporting period, the Fund did not hold any long-term investments and
accordingly portfolio turnover is not
applicable. |
Morgan
Stanley Institutional Fund Trust Prospectus | Financial
Highlights
Ultra-Short
Income Portfolio
|
|
|
|
|
|
|
|
|
| |
|
|
Institutional
Class |
|
Year
Ended September 30, |
Selected
Per Share Data and Ratios |
2023 |
2022 |
2021 |
2020 |
2019 |
Net
Asset Value, Beginning of Period |
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
Income
(Loss) from Investment Operations: |
Net
Investment Income(1)
|
|
|
|
|
|
|
|
|
|
|
Net
Realized and Unrealized Gain (Loss) |
|
|
|
|
|
|
|
|
|
|
Total
from Investment Operations |
|
|
|
|
|
|
|
|
|
|
Distributions
from and/or in Excess of: |
Net
Investment Income |
|
|
|
|
|
|
|
|
|
|
Net
Asset Value, End of Period |
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
Total
Return(2)
|
|
|
|
|
|
|
|
|
|
|
Ratios
to Average Net Assets and Supplemental Data: |
Net
Assets, End of Period (Thousands) |
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
Ratio
of Expenses Before Expense Limitation |
|
|
|
|
|
|
|
|
|
|
Ratio
of Expenses After Expense Limitation |
|
|
|
|
|
|
|
|
|
|
Ratio
of Expenses After Expense Limitation Excluding Interest
Expenses |
|
|
|
|
|
|
|
|
|
|
Ratio
of Net Investment Income |
|
|
|
|
|
|
|
|
|
|
Portfolio
Turnover Rate |
|
|
|
|
|
|
|
|
|
|
| |
(1) |
Per
share amount is based on average shares outstanding. |
(2) |
Calculated
based on the net asset value as of the last business day of the
period. |
(3) |
During
the reporting period, the Fund did not hold any long-term investments and
accordingly portfolio turnover is not
applicable. |
Morgan
Stanley Institutional Fund Trust Prospectus | Financial
Highlights
Ultra-Short
Income Portfolio
|
|
|
|
|
|
|
|
|
| |
|
|
Class
A |
|
Year
Ended September 30, |
Selected
Per Share Data and Ratios |
2023 |
2022 |
2021 |
2020 |
2019 |
Net
Asset Value, Beginning of Period |
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
Income
(Loss) from Investment Operations: |
Net
Investment Income(1)
|
|
|
|
|
|
|
|
|
|
|
Net
Realized and Unrealized Gain (Loss) |
|
|
|
|
|
|
|
|
|
|
Total
from Investment Operations |
|
|
|
|
|
|
|
|
|
|
Distributions
from and/or in Excess of: |
Net
Investment Income |
|
|
|
|
|
|
|
|
|
|
Net
Asset Value, End of Period |
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
Total
Return(3)
|
|
|
|
|
|
|
|
|
|
|
Ratios
to Average Net Assets and Supplemental Data: |
Net
Assets, End of Period (Thousands) |
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
Ratio
of Expenses Before Expense Limitation |
|
|
|
|
|
|
|
|
|
|
Ratio
of Expenses After Expense Limitation |
|
|
|
|
|
|
|
|
|
|
Ratio
of Expenses After Expense Limitation Excluding Interest
Expenses |
|
|
|
|
|
|
|
|
|
|
Ratio
of Net Investment Income |
|
|
|
|
|
|
|
|
|
|
Portfolio
Turnover Rate |
|
|
|
|
|
|
|
|
|
|
| |
(1) |
Per
share amount is based on average shares outstanding. |
(2) |
Amount
is less than $0.005 per share. |
(3) |
Calculated
based on the net asset value as of the last business day of the
period. |
(4) |
During
the reporting period, the Fund did not hold any long-term investments and
accordingly portfolio turnover is not
applicable. |
Morgan
Stanley Institutional Fund Trust Prospectus | Financial
Highlights
Short
Duration Municipal Income Portfolio
|
|
|
|
|
|
|
|
|
| |
|
|
Class
IR |
|
Year
Ended September 30, |
Period
from December 19, 2018(1) to
September 30, 2019 |
Selected
Per Share Data and Ratios |
2023 |
2022 |
2021 |
2020 |
Net
Asset Value, Beginning of Period |
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
Income
(Loss) from Investment Operations: |
Net
Investment Income(2)
|
|
|
|
|
|
|
|
|
|
|
Net
Realized and Unrealized Gain (Loss) |
|
|
|
|
|
|
|
|
|
|
Total
from Investment Operations |
|
|
|
|
|
|
|
|
|
|
Distributions
from and/or in Excess of: |
Net
Investment Income |
|
|
|
|
|
|
|
|
|
|
Net
Realized Gain |
|
|
|
|
|
|
|
|
|
|
Total
Distributions |
|
|
|
|
|
|
|
|
|
|
Net
Asset Value, End of Period |
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
Total
Return(4)
|
|
|
|
|
|
|
|
|
|
|
Ratios
to Average Net Assets and Supplemental Data: |
Net
Assets, End of Period (Thousands) |
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
Ratio
of Expenses Before Expense Limitation |
|
|
|
|
|
|
|
|
|
|
Ratio
of Expenses After Expense Limitation |
|
|
|
|
|
|
|
|
|
|
Ratio
of Net Investment Income |
|
|
|
|
|
|
|
|
|
|
Ratio
of Rebate from Morgan Stanley Affiliates |
|
|
|
|
|
|
|
|
|
|
Portfolio
Turnover Rate |
|
|
|
|
|
|
|
|
|
|
| |
(1) |
Commencement
of Operations. |
(2) |
Per
share amount is based on average shares outstanding. |
(3) |
Amount
is less than $0.005 per share. |
(4) |
Calculated
based on the net asset value as of the last business day of the
period. |
(5) |
Not
annualized. |
(6) |
Annualized. |
(7) |
The
Ratio of Expenses After Expense Limitation and Ratio of Net Investment
Income reflect the rebate of certain Fund expenses in connection with the
investments
in Morgan Stanley affiliates during the period. The effect of the rebate
on the ratios is disclosed in the above table as “Ratio of Rebate from
Morgan Stanley
Affiliates.” |
(8) |
Amount
is less than 0.005%. |
(9) |
During
the reporting period, the Fund did not hold any long-term investments and
accordingly portfolio turnover is not
applicable. |
Morgan
Stanley Institutional Fund Trust Prospectus | Financial
Highlights
Short
Duration Municipal Income Portfolio
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Class
A |
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Year
Ended September 30, |
Period
from December 19, 2018(1) to
September 30, 2019 |
Selected
Per Share Data and Ratios |
2023 |
2022 |
2021 |
2020 |
Net
Asset Value, Beginning of Period |
$ |
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$ |
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$ |
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$ |
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$ |
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Income
(Loss) from Investment Operations: |
Net
Investment Income(2)
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Net
Realized and Unrealized Gain (Loss) |
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Total
from Investment Operations |
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Distributions
from and/or in Excess of: |
Net
Investment Income |
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Net
Realized Gain |
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Total
Distributions |
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Net
Asset Value, End of Period |
$ |
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$ |
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$ |
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$ |
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$ |
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Total
Return(4)
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Ratios
to Average Net Assets and Supplemental Data: |
Net
Assets, End of Period (Thousands) |
$ |
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$ |
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$ |
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$ |
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$ |
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Ratio
of Expenses Before Expense Limitation |
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Ratio
of Expenses After Expense Limitation |
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Ratio
of Net Investment Income (Loss) |
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Ratio
of Rebate from Morgan Stanley Affiliates |
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Portfolio
Turnover Rate |
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(1) |
Commencement
of Operations. |
(2) |
Per
share amount is based on average shares outstanding. |
(3) |
Amount
is less than $0.005 per share. |
(4) |
Calculated
based on the net asset value as of the last business day of the
period. |
(5) |
Not
annualized. |
(6) |
Annualized. |
(7) |
The
Ratio of Expenses After Expense Limitation and Ratio of Net Investment
Income (Loss) reflect the rebate of certain Fund expenses in connection
with the investments
in Morgan Stanley affiliates during the period. The effect of the rebate
on the ratios is disclosed in the above table as “Ratio of Rebate from
Morgan Stanley
Affiliates.” |
(8) |
Amount
is less than 0.005%. |
(9) |
During
the reporting period, the Fund did not hold any long-term investments and
accordingly portfolio turnover is not
applicable. |
(This
page intentionally left blank)
Where
to Find Additional Information
In
addition to this Prospectus, the Funds have an SAI, dated January
28, 2024 (as may be supplemented from time to time), which contains
additional, more detailed information about the Trust and the Funds. The SAI is
incorporated by reference into this Prospectus
and, therefore, legally forms a part of this Prospectus.
The
Trust publishes Annual and Semi-Annual Reports (“Shareholder Reports”) that
contain additional information about the respective
Fund’s investments. In each Fund’s Annual Report to Shareholders, you will find
a discussion of the market conditions and
the investment strategies that significantly affected such Fund’s performance
during the last fiscal year. For additional Trust information,
including information regarding the investments comprising each of the Funds,
please call the toll-free number below.
You
may obtain the SAI and Shareholder Reports without charge by contacting the
Trust at the toll-free number below or on its Internet
site at: www.morganstanley.com/im.
If you purchased shares through a Financial Intermediary, you may also obtain
these documents,
without charge, by contacting your Financial Intermediary.
Shareholder
Reports and other information about the Funds
are available on the EDGAR Database on the SEC’s Internet site at http://www.sec.gov,
and copies of this information may be obtained, after paying a duplicating fee,
by electronic request at the following
e-mail address: [email protected].
Morgan
Stanley Institutional Fund Trust
c/o SS&C
GIDS
P.O.
Box 219804
Kansas
City, MO 64121-9804
For
Shareholder Inquiries,
call
toll-free 1-888-378-1630.
Prices
and Investment Results are available at www.morganstanley.com/im.
The
Trust’s
1940 Act registration number is 811-03980.