INVESTMENT IDEA | SEPTEMBER 30, 2016

Missing the middle markets?Often overlooked in favor of their larger peers, middle market issuers — companies with less than $1 billion in outstanding bonds — are typically under-researched and their credit ratings frequently do not reflect their most recent credit profiles. This enables a diligent investment manager to identify issuers with stronger credit metrics and potentially benefit from the additional yield.We believe that with the right disciplined and diversified approach, the middle market can provide a “sweet spot” for investors within the high yield sector.

Middle market comparison: real yields across investment options

Symbols

Class A MSYPX

Class C MSHDX

Class I MSYIX

Class IS MSHYX

MSIFT High Yield Portfolio1 Yield advantage

Around 80% of the Fund is invested in middle market issuers, which typically offer a yield advantage of 100 to 150 basis points over larger issuers1, as they are smaller and often overlooked by larger market participants.

2 Attractive risk metrics

Middle market issuers tend to have shorter maturities and durations, reducing sensitivity to interest rate risk. They also tend to trade more on their intrinsic fundamentals, which can help price volatility over time.

3 Deeper research capabilities

Due to the size of middle market organizations, direct dialogue with CEOs or CFOs is possible and can lead to a better understanding of management’s focus. Capital structures also tend to be simpler, and investors can often demand greater protections for new issue bonds. Nevertheless, size by itself is not a defense against default. Intensive fundamental research, as always, is key.

Source: MSIM and Bloomberg. Data as of September 30, 2016. Real yields highlighted are yield to maturity for fixed income and 12-month dividend yield for the equity asset classes. Real yields are the nominal yield of the asset less country specific CPI inflation. Dividend yields are viewed as real because inflation is already netted out. Past performance is not indicative of future results. The index performance is provided solely for illustrative purposes only and is not indicative of any specific MSIM investment or strategy. Investing involves risks including the possible loss of principal. Investors should carefully review the risks of each asset class, including High Yield, Foreign and Emerging Market investments, prior to investing. For risks considerations of the fund, please refer to the back cover and the fund’s prospectus.European Investment Grade is represented by the Bloomberg Barclays Euro Aggregate Corporate Index, U.S. Mortgages by Bloomberg Barclays U.S. MBS, U.S. Investment Grade by Bloomberg Barclays U.S. Agg Corp, U.S. Equities by the S&P 500, U.S. HY Issues > $1 Billion by the over $1 billion portion of the Bloomberg Barclays U.S. Corporate High Yield Index, Emerging Markets Sovereign by JPM EMBI Global Composite, European Equities by Euro Stoxx 50, Bank Loans by Credit Suisse Leveraged Loan Index, U.S. High Yield by Bloomberg Barclays U.S. Corporate High Yield Index, European High Yield by BAML Euro High Yield Constrained, Master Limited Partnerships by S&P MLP Index, and U.S. HY Issues < $1 Billion by the under $1 billion portion of the Bloomberg Barclays U.S. Corporate High Yield Index.

Morgan Stanley Institutional Fund Trust High Yield Portfolio At Morgan Stanley Investment Management, our Global Fixed Income Team strives to uncover solutions that go beyond the traditional. In today’s yield environment, consider the Morgan Stanley Institutional Fund Trust High Yield Portfolio.

Yield (%) 0 2 4 6 8

U.S. Mortgages

European Investment Grade

U.S. Investment Grade

U.S. Equities

European Equities

European High Yield

Emerging Markets Sovereign

U.S. HY Issues > $1 Billion

Bank Loans

U.S. High Yield

U.S. HY < $1 Billion 6.8

0.5

1.8

2.1

3.1

3.8

5.2

4.4

4.8

0.5

5.2

★★★★Overall Morningstar Rating™ for Class IOut of 659 High Yield Bond Funds. Based on Risk Adjusted Return as of September 30, 2016. Class I Shares Fund ratings out of 5 Stars: 3 years, 4 Stars.

1 Source: MSIM and Barclays. Based on historical analysis of the Bloomberg Barclays High Yield Index.

© 2016 Morgan Stanley. All rights reserved. Morgan Stanley Distribution, Inc. 1402128 Exp. 01/26/2017 8765599_KC_1116 Lit-Link: HYINVIDEA

Beta is a measure of a portfolio’s sensitivity to market movements. By definition, the Beta of the stock market is 1.00. Therefore, a portfolio with a Beta of 1.10 is expected to perform 10% better than the stock market in “up” markets and 10% worse in “down” markets. Average maturity is the weighting the maturity of each security in the portfolio by the market value of the security, then averaging these weighted figures. Duration is an approximate measure of the portfolio’s sensitivity to a parallel shift in interest rates. For example, a portfolio with a duration of five years would gain 5% in market value if interest rates declined by 1%. SEC 30-day yield is a measure of the income generated by the portfolio’s underlying assets over the trailing 30 days, relative to the asset base of the portfolio itself. The SEC 30-day yield - Subsidized (Sub.) reflects current fee waivers in effect. Absent such fee waivers, the yield would have been lower. The SEC 30-day yield - Unsubsidized (Unsub.) does not reflect the fee waivers currently in effect. One basis point = 0.01%. RISK CONSIDERATIONS There is no assurance that a Portfolio will achieve its investment objective. Portfolios are subject to market risk, which is the possibility that the market values of securities owned by the Portfolio will decline and that the value of Portfolio shares may therefore be less than what you paid for them. Accordingly, you can lose money investing in this Portfolio. Please be aware that this Portfolio may be subject to certain additional risks. Fixed-income securities are subject to the ability of an issuer to make timely principal and interest payments (credit risk), changes in interest rates (interest-rate risk), the creditworthiness of the issuer and general market liquidity (market risk). In the current rising interest-rate environment, bond prices may fall and may result in periods of volatility and increased portfolio redemptions. Longer-term securities may be more sensitive to interest rate changes. In a declining interest-rate environment, the portfolio may generate less income. High yield securities (“junk bonds”) are lower rated securities that may have a higher degree of credit and liquidity risk. Public bank loans are subject to liquidity risk and the credit risks of lower rated securities. In general, equity securities’ values also fluctuate in response to activities specific to a company. The strategy may invest in restricted and illiquid securities, which may be difficult for the strategy to sell at a reasonable price. (Liquidity Risk). Derivative instruments may disproportionately increase losses and have a significant impact on performance. They also may be subject to counterparty, liquidity, valuation, correlation and market risks. Distressed and defaulted securities are speculative

and involve substantial risks in addition to the risks of investing in junk bonds. The Portfolio will generally not receive interest payments on the distressed securities and the principal may also be at risk. These securities may present a substantial risk of default or may be in default at the time of investment, requiring the portfolio to incur additional costs. Preferred securities are subject to interest rate risk and generally decreases in value if interest rates rise and increase in value if interest rates fall. Mezzanine investments are subordinated debt securities, thus they carry the risk that the issuer will not be able to meet its obligations and they may lose value. Foreign securities are subject to currency, political, economic and market risks. The risks of investing in emerging market countries are greater than risks associated with investments in foreign developed countries.Please consider the investment objective, risks, charges and expenses of the fund carefully before investing. The prospectus contains this and other information about the fund. To obtain a prospectus, download one at morganstanley.com/im or call 1-800-548-7786. Please read the prospectus carefully before investing.Morningstar Ratings and Ranking as of 9/30/2016.. Ratings: High Yield Bond Category - Class I Shares 3 Year 4 stars out of 653 funds. Morningstar, Inc. is an independent publisher of mutual fund research and ratings. Ratings reflect a fund’s risk-adjusted 3-, 5-, and 10-year total returns, including any sales charge. A Fund is rated against all other funds in its category. 5 stars are assigned to the top 10%; 4 stars to the next 22.5%; 3 stars to the next 35%; 2 stars to the next 22.5%; and 1 star to the bottom 10%. Morningstar only rates funds with at least a 3-year history. Morningstar ratings may vary for other share classes. Past performance is no guarantee of future results. © 2016 Morningstar, Inc. All Rights Reserved. The Morningstar information contained herein: (1) is proprietary to Morningstar; (2) may not be copied or distributed; and (3) is not warranted to be accurate, complete or timely. Morningstar is not responsible for any damages or losses arising from any use of this information.Morgan Stanley Investment Management is the asset management division of Morgan Stanley.

Investment performance – Class I (% net of fees)2

Average annual total return (Periods ending September 30, 2016)Beta by issuer’s total debt outstandingBased on monthly returns for the period ended September 30, 2016Beta U.S. HY U.S. HY < $1bn U.S. HY ≥ $1bn3y (trailing) 1.00 0.89 1.04

5y (trailing) 1.00 0.85 1.06

10y (trailing) 1.00 0.86 1.06

12/31/2000–9/30/2016 1.00 0.81 1.13

Source: Barclays, MSIM. U.S. HY = Bloomberg Barclays U.S. Corporate High Yield Index

Morningstar ranking for High Yield Bond4 category – Class I

Percentile in Category(Rank/Total Number in Category)

1 Year 68% (522/765)

3 Year 12% (76/659)

Source: Morningstar. Rankings are based on total returns, are historical and do not guarantee future results.

Portfolio characteristics – Class IAverage maturity (years) 3.83

Duration (years) 3.32

SEC 30-day yield subsidized (%) 6.32

SEC 30-day yield unsubsidized (%) 5.88

Source: MSIM, Barclays. Performance data quoted represents past performance, which is no guarantee of future results, and current performance may be lower or higher than the figures shown. For the most recent month end performance figures, please visit morganstanley.com/im or call 1-800-548-7786. Investment returns and principal value will fluctuate and fund shares, when redeemed, may be worth more or less than their original cost. The gross expense ratio is 1.17% for Class I shares and the net expense ratio is 0.65%. Where the net expense ratio is lower than the gross expense ratio, certain fees have been waived and/or expenses reimbursed. These waivers and/or reimbursements will continue for at least one year from the date of the applicable fund’s current prospectus (unless otherwise noted in the applicable prospectus) or until such time as the fund’s Board of Trustees acts to discontinue all or a portion of such waivers and/or reimbursements. Absent such waivers and/or reimbursements, returns would have been lower. Expenses are based on the fund’s current prospectus. The minimum initial investment is $5,000,000.

2 Returns are net of fees and assume the reinvestment of all dividends and income. Returns for less than one year are cumulative (unannualized). Performance of other share classes will vary.3 The Bloomberg Barclays U.S. Corporate High Yield Index covers the

MSIFT High Yield Portfolio Bloomberg Barclays U.S. Corporate High Yield Index3

QTD

6.02, 5.55

YTD

12.38, 15.11

1 Year

8.72, 12.73

3 Year

5.23, 5.28

Since Inception(2/7/2012)8.60, 6.68

Investment teamThe Morgan Stanley Institutional Fund Trust High Yield Portfolio is managed by senior members of the Global Fixed Income team.RICHARD LINDQUIST, Managing DirectorJoined the firm in 2011, with 33 years of financial industry experience.

CHRISTIAN G. ROTH, Managing DirectorJoined the firm in 1991, with 28 years of financial industry experience.

20

15

10

0

5

universe of fixed rate, non-investment grade debt. The index includes both corporate and noncorporate sectors. The index is unmanaged and should not be considered an investment. It is not possible to invest directly in an index.4 Funds with at least 65% of assets in bonds rated below BBB.