UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number | 811-06515 | |||||||
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Morgan Stanley Global Fixed Income Opportunities Fund | ||||||||
(Exact name of registrant as specified in charter) | ||||||||
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522 Fifth Avenue, New York, New York |
| 10036 | ||||||
(Address of principal executive offices) |
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John H. Gernon 522 Fifth Avenue, New York, New York 10036 | ||||||||
(Name and address of agent for service) | ||||||||
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Registrant’s telephone number, including area code: | 212-296-0289 |
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Date of fiscal year end: | October 31, |
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Date of reporting period: | April 30, 2017 |
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Item 1 - Report to Shareholders
Trustees
Frank L. Bowman
Kathleen A. Dennis
Nancy C. Everett
Jakki L. Haussler
Dr. Manuel H. Johnson
Joseph J. Kearns
Michael F. Klein
Patricia Maleski
Michael E. Nugent, Chair of the Board
W. Allen Reed
Fergus Reid
Officers
John H. Gernon
President and Principal Executive Officer
Timothy J. Knierim
Chief Compliance Officer
Francis J. Smith
Treasurer and Principal Financial Officer
Mary E. Mullin
Secretary
Michael Key
Vice President
Transfer Agent
Boston Financial Data Services, Inc.
2000 Crown Colony Drive
Quincy, Massachusetts 02169
Custodian
State Street Bank and Trust Company
One Lincoln Street
Boston, Massachusetts 02111
Independent Registered Public Accounting Firm
Ernst & Young LLP
200 Clarendon Street
Boston, Massachusetts 02116
Legal Counsel
Dechert LLP
1095 Avenue of the Americas
New York, New York 10036
Counsel to the Independent Trustees
Perkins Coie LLP
30 Rockefeller Plaza
New York, New York 10112
Adviser and Administrator
Morgan Stanley Investment Management Inc.
522 Fifth Avenue
New York, New York 10036
Sub-Adviser
Morgan Stanley Investment Management Limited
25 Cabot Square, Canary Wharf
London, E14 4QA, England
The financial statements included herein have been taken from the records of the Fund without examination by the independent auditors and accordingly they do not express an opinion thereon.
This report is submitted for the general information of the shareholders of the Fund. For more detailed information about the Fund, its fees and expenses and other pertinent information, please read its Prospectus. The Fund's Statement of Additional Information contains additional information about the Fund, including its trustees. It is available, without charge, by calling (800) 548-7786.
This report is not authorized for distribution to prospective investors in the Fund unless preceded or accompanied by an effective Prospectus. Please read the Prospectus carefully before investing.
Morgan Stanley Distribution, Inc., member FINRA.
© 2017 Morgan Stanley
INVESTMENT MANAGEMENT
Morgan Stanley Global Fixed Income Opportunities Fund
Semi-Annual Report
April 30, 2017
DINSAN
1807117 EXP. 06.30.18
Morgan Stanley Global Fixed Income Opportunities Fund
Table of Contents
Welcome Shareholder | 3 | ||||||
Fund Report | 4 | ||||||
Performance Summary | 10 | ||||||
Expense Example | 11 | ||||||
Portfolio of Investments | 13 | ||||||
Statement of Assets and Liabilities | 39 | ||||||
Statement of Operations | 40 | ||||||
Statements of Changes in Net Assets | 42 | ||||||
Notes to Financial Statements | 43 | ||||||
Financial Highlights | 65 | ||||||
Privacy Notice | 71 |
2
Welcome Shareholder,
We are pleased to provide this Semi-Annual report, in which you will learn how your investment in Morgan Stanley Global Fixed Income Opportunities Fund (the "Fund") performed during the latest six-month period. It includes an overview of the market conditions and discusses some of the factors that affected performance during the reporting period. In addition, the report contains financial statements and a list of portfolio holdings.
Morgan Stanley Investment Management is a client-centric, investor-led organization. Our global presence, intellectual capital, and breadth of products and services enable us to partner with investors to meet the evolving challenges of today's financial markets. We aim to deliver superior investment service and to empower our clients to make the informed decisions that help them reach their investment goals.
As always, we thank you for selecting Morgan Stanley Investment Management, and look forward to working with you in the months and years ahead.
This material must be preceded or accompanied by a prospectus for the fund being offered.
Market forecasts provided in this report may not necessarily come to pass. There is no assurance that the Fund will achieve its investment objective. The Fund is subject to market risk, which is the possibility that market values of securities owned by the Fund will decline and, therefore, the value of the Fund's shares may be less than what you paid for them. Accordingly, you can lose money investing in this Fund. Please see the prospectus for more complete information on investment risks.
3
Fund Report (unaudited)
For the six months ended April 30, 2017
Total Return for the 6 Months Ended April 30, 2017 | |||||||||||||||||||||||
Class A | Class B | Class L | Class I | Class C | Class IS | ||||||||||||||||||
2.92 | % | 2.51 | % | 2.80 | % | 3.06 | % | 2.40 | % | 3.09 | % |
Total Return for the 6 Months Ended April 30, 2017 | |||||||||||||||
Bloomberg Barclays Global Aggregate Hedged USD Index1 | Blended Index2 | Bloomberg Barclays Global Aggregate Index3 | Lipper Global Income Funds Index4 | ||||||||||||
–0.27 | % | –3.34 | % | –1.63 | % | 1.04 | % |
The performance of the Fund's six share classes varies because each has different expenses. The Fund's total returns assume the reinvestment of all distributions but do not reflect the deduction of any applicable sales charges. Such costs would lower performance. See Performance Summary for standardized performance and benchmark information.
Market Conditions
For much of 2016, bearish views on global growth and inflation as well as technical forces from central bank bond purchases served to push term premium, driving risk-free yields lower than fundamentals would suggest. In the beginning of the fourth quarter of 2016, however, those forces started to reverse as the market focused on the potential for higher inflation, improvements in economic data, and monetary policy changes. The surprise Trump win in November 2016 dominated the news flow for the remainder of the quarter, widely impacting global rates, credit spreads, and equity markets. Financial market conditions changed rapidly as investors priced in the inflationary impact of anticipated fiscal stimulus, reduced trade, and a more aggressive
Federal Reserve. In December 2016, the U.S. Federal Open Market Committee raised rates by 25 basis points and was hawkish about projected future rate increases.
After the U.S. elections, global fixed income markets priced in a significant relaxation in U.S. fiscal policy that may boost economic growth, strengthen the U.S. dollar and further steepen yield curves. At the beginning of the first quarter of 2017, markets were looking toward the beginning of the Trump presidency for possible clues about his economic agenda. Political events toward the end of the quarter suggested that the market's optimism might be misplaced. In particular, the administration's failure to pass health care reform generated concern over the administration's ability to enact other reforms, particularly tax policy. Though we believe some form of tax reform will pass eventually, the changes are unlikely to be as extensive as hoped by some. After a quarter of rising market optimism, the markets began focusing more on political risks in April 2017. For much of the month, investors reduced their risk exposure in anticipation of a close French election, with the risk of far-right candidate Marine Le Pen becoming president. U.S. Treasury and German bund yields declined, while French and peripheral European bond spreads, as well as corporate spreads, widened. However, centrist candidate Emmanuel Macron won the first round and was likely to win the final round, given polling data at the time (and ultimately was voted president in early May, after the close of the period). The market-friendly projection led markets to reverse in the last week of April 2017; yields rose, spreads tightened.
4
On a sector basis, global credit markets have remained well supported, though the rally has generally faded to a slow grind tighter. In November 2016, U.S. investment grade corporate spreads tightened as the Trump election brightened the economic outlook and the narrative in the market changed from slow growth and low inflation to higher growth and rising inflation. December 2016 continued the rally we saw over the month of November, as post-election growth expectations and the Organization of the Petroleum Exporting Countries ("OPEC") deal continued to fuel positive sentiment in credit markets. For the first few months of 2017, investment grade credit spreads have continued to tighten but there has been relatively low performance dispersion among sectors. In November 2016, U.S. high yield bonds suffered their first loss since February 2016 as investors had to contend with the sharpest increase in Treasury yields since the 2013 Taper Tantrum.(i) Despite this, the U.S. high yield market ended the last quarter of 2016 on a positive note and spreads have continued to tighten into 2017.
Within the securitized market, credit-related mortgage-backed securities ("MBS") continued to perform well, buoyed by expectations of improved U.S. economic growth and higher rates, which allowed spreads to tighten while still offering higher yields. Non-agency MBS spreads continued to tighten as cash flow and credit performance continued to improve. Non-agency MBS spreads remained at their tightest levels since 2014 for most securities, and fundamental U.S. housing market and mortgage market conditions remained positive. Commercial mortgage-backed securities ("CMBS")
spreads were also tighter, though in 2017 we have seen significant performance variations, with collateral composition having a more substantial impact than usual on pricing. CMBS deals backed by office buildings, hotels, industrial buildings and multi-family rental properties are seeing strong demand, while CMBS deals with meaningful retail shopping center exposures are under significant selling pressure. The increasing announcements of retail store closings and poor retail earnings are causing credit concerns for many retail properties.
Emerging markets fixed income assets came under pressure during the month of November 2016, applying a brake on what was a strong year for the asset class. However, in December 2016, emerging markets fixed income assets regained some of the ground lost during a challenging November. Aided in part by stronger oil prices, emerging market debt overcame the headwinds of continued outflows, geopolitical tensions, and rising U.S. Treasury yields. Strong emerging market debt performance continued into 2017 on the back of good global economic growth and stable commodity prices.
(i) Source: JP Morgan. Data as of November 30, 2016.
5
Performance Analysis
Morgan Stanley Global Fixed Income Opportunities Fund changed its benchmark from Bloomberg Barclays Global Aggregate Index to Bloomberg Barclays Global Aggregate Hedged USD Index, effective market open on January 1, 2017. The Fund's Performance Linked benchmark, the Blended Index,(ii) reflects the performance of the Bloomberg Barclays Global Aggregate Index from the beginning of the fiscal period to December 31, 2016 and the performance of the Bloomberg Barclays Global Aggregate Hedged USD Index for the period thereafter to April 30, 2017.
All share classes of Morgan Stanley Global Fixed Income Opportunities Fund outperformed the Bloomberg Barclays Global Aggregate Hedged USD Index, the Blended Index, the Bloomberg Barclays Global Aggregate Index, and the Lipper Global Income Funds Index for the six months ended April 30, 2017, assuming no deduction of applicable sales charges.
Currency positioning, which was nearly 100 percent hedged to the U.S. dollar using foreign exchange forward contracts, had the largest positive impact on relative performance versus the Blended Index during the period. The Fund's underweight exposure to the Japanese yen relative to the Blended Index boosted relative performance as the yen depreciated in value relative to the U.S. dollar. Underweight exposure to the euro and a long position in the Mexican peso also aided relative performance. However, the Fund's short position in the British pound and long positions in the Brazilian real and South African rand detracted somewhat from performance.
The Fund's duration and interest rate positioning, which is managed in part using interest rate futures, contributed to relative performance. This was mainly attributable to two factors: an underweight exposure to developed market interest rates in the fourth quarter of 2016 as interest rates rose, and an overweight exposure to emerging market local rates in the first quarter of 2017 as rates fell in select local markets. Slightly offsetting relative gains were the Fund's underweight exposure to U.K. sterling rates and overweight exposure to Polish rates, which detracted.
From a sector perspective, overweight positions in high yield credit, convertible bonds, and non-agency residential mortgage-backed securities were the largest contributors to positive relative performance. There were no material detractors at the sector level during this reporting period.
There is no guarantee that any sectors mentioned will continue to perform as discussed herein or that securities in such sectors will be held by the Fund in the future.
(ii) The Fund's Performance Linked benchmark, the Blended Index, reflects the performance of the Bloomberg Barclays Global Aggregate Index from the beginning of the fiscal period to December 31, 2016 (which resulted in a return of –4.41%) linked to the performance of the Bloomberg Barclays Global Aggregate Hedged USD Index from the period thereafter to April 30, 2017 (which resulted in a return of 1.12%). Effective market open on January 1, 2017, the Fund changed its benchmark from the Bloomberg Barclays Global Aggregate Index to the Bloomberg Barclays Global Aggregate Hedged USD Index.
6
PORTFOLIO COMPOSITION* as of 04/30/17 | |||||||
Corporate Bonds | 44.8 | % | |||||
Sovereign | 21.0 | ||||||
Mortgages — Other | 12.4 | ||||||
Asset-Backed Securities | 10.4 | ||||||
Commercial Mortgage-Backed Securities | 4.7 | ||||||
Short-Term Investments | 2.3 | ||||||
Variable Rate Senior Loan Interests | 1.9 | ||||||
U.S. Treasury Securities | 1.6 | ||||||
Collateralized Mortgage Obligations — Agency Collateral Series | 0.9 | ||||||
Agency Fixed Rate Mortgages | 0.0 | ** |
* Does not include open long/short futures contracts with an underlying face amount of $61,190,192 with net unrealized appreciation of $77,274. Does not include open foreign currency forward exchange contracts with net unrealized depreciation of $2,221,904 and does not include open swap agreements with total unrealized depreciation of $2,857,527.
** Amount is less than 0.05%.
LONG-TERM CREDIT ANALYSIS as of 04/30/17 | |||||||
AAA | 4.3 | % | |||||
AA | 1.7 | ||||||
A | 14.3 | ||||||
BBB | 21.7 | ||||||
BB | 21.4 | ||||||
B or Below | 22.5 | ||||||
Not Rated | 14.1 |
Subject to change daily. Provided for informational purposes only and should not be deemed as a recommendation to buy or sell the types of securities mentioned above. All percentages for portfolio composition are stated as a percentage of total investments and all percentages for long-term credit analysis are stated as a percentage of total long-term investments.
Security ratings disclosed with the exception for those labeled "not rated" have been rated by at least one Nationally Recognized Statistical Rating Organization ("NRSRO"). These ratings are obtained from Standard & Poor's Ratings Group ("S&P"), Moody's Investors Services, Inc. ("Moody's") or Fitch Ratings ("Fitch"). If two or more NRSROs have assigned a rating to a security, the highest rating is used and if securities are not rated, Morgan Stanley Investment Management Inc. (the "Adviser") has deemed them to be of comparable quality. Ratings from Moody's or Fitch, when used, are converted into their equivalent S&P rating.
Morgan Stanley is a full-service securities firm engaged in securities trading and brokerage activities, investment banking, research and analysis, financing and financial advisory services.
7
Investment Strategy
The Fund will normally invest at least 80 percent of its assets in a portfolio of fixed-income securities. This policy may be changed without shareholder approval; however, you would be notified upon 60 days' notice in writing of any changes. The Fund's "Adviser," Morgan Stanley Investment Management Inc., and/or "Sub-Adviser," Morgan Stanley Investment Management Limited, will allocate the Fund's investments among the following asset classes or market segments: (1) corporate securities, (2) residential and commercial mortgage-backed securities, (3) asset-backed securities, (4) emerging market securities, (5) convertible securities, (6) U.S. government securities and foreign sovereign debt, and (7) currency derivatives. Securities may be rated either investment grade or below investment grade and denominated in any currency, hedged or un-hedged. The amount of the Fund's assets committed to any one asset class or market segment will fluctuate. However, the Fund may invest up to 65 percent of its net assets in any one asset class or market segment. The Adviser and Sub-Adviser have the flexibility to select any combination of at least two asset classes of the aforementioned groups depending upon market conditions and the current economic environment and, as a result, at any given time the Fund's assets may be invested in certain groups and not others.
For More Information About Portfolio Holdings
Each Morgan Stanley fund provides a complete schedule of portfolio holdings in its semiannual and annual reports within 60 days of the end of the fund's second and fourth fiscal quarters. The semiannual
reports and the annual reports are filed electronically with the Securities and Exchange Commission (SEC) on Form N-CSRS and Form N-CSR, respectively. Morgan Stanley also delivers the semiannual and annual reports to fund shareholders and makes these reports available on its public web site, www.morganstanley.com/im. Each Morgan Stanley fund also files a complete schedule of portfolio holdings with the SEC for the fund's first and third fiscal quarters on Form N-Q. Morgan Stanley does not deliver the reports for the first and third fiscal quarters to shareholders, nor are the reports posted to the Morgan Stanley public web site. You may, however, obtain the Form N-Q filings (as well as the Form N-CSR and N-CSRS filings) by accessing the SEC's web site, http://www.sec.gov. You may also review and copy them at the SEC's public reference room in Washington, DC. Information on the operation of the SEC's public reference room may be obtained by calling the SEC at (800) SEC-0330. You can also request copies of these materials, upon payment of a duplicating fee, by electronic request at the SEC's e-mail address (publicinfo@sec.gov) or by writing the public reference section of the SEC, 100 F Street, NE, Washington, DC 20549-1520.
Proxy Voting Policy and Procedures and Proxy Voting Record
You may obtain a copy of the Fund's Proxy Voting Policy and Procedures without charge, upon request, by calling toll free (800) 548-7786 or by visiting the Mutual Fund Center on our web site at www.morganstanley.com/im. It is also available on the SEC's web site at http://www.sec.gov.
You may obtain information regarding how the Fund voted proxies relating to portfolio securities during the
8
most recent twelve-month period ended June 30 without charge by visiting the Mutual Fund Center on our web site at www.morganstanley.com/im. This information is also available on the SEC's web site at http://www.sec.gov.
Householding Notice
To reduce printing and mailing costs, the Fund attempts to eliminate duplicate mailings to the same address. The Fund delivers a single copy of certain shareholder documents, including shareholder reports, prospectuses and proxy materials, to investors with the same last name who reside at the same address. Your participation in this program will continue for an unlimited period of time unless you instruct us otherwise. You can request multiple copies of these documents by calling (800) 548-7786, 8:00 a.m. to 6:00 p.m., ET. Once our Customer Service Center has received your instructions, we will begin sending individual copies for each account within 30 days.
9
Performance Summary (unaudited)
Average Annual Total Returns—Period Ended April 30, 2017 | |||||||||||||||||||||||||||
Symbol | Class A Shares* (since 07/28/97) DINAX | Class B Shares** (since 04/09/92) DINBX | Class L Shares*** (since 07/28/97) DINCX | Class I Shares† (since 07/28/97) DINDX | Class C Shares†† (since 04/30/15) MSIPX | Class IS Shares††† (since 09/13/13) MGFOX | |||||||||||||||||||||
1 Year | 6.40 1.876 | %5 | 5.75 0.756 | %5 | 6.14 — | %5 | 6.65 — | %5 | 5.48 4.486 | %5 | 6.73 — | %5 | |||||||||||||||
5 Years | 4.255 3.366 | 3.555 3.206 | 3.945 — | 4.565 — | — — | — — | |||||||||||||||||||||
10 Years | 4.625 4.176 | 4.095 4.096 | 4.155 — | 4.935 — | — — | — — | |||||||||||||||||||||
Since Inception | 4.025 3.796 | 4.425 4.426 | 3.475 — | 4.305 — | 1.435 1.436 | 4.675 — | |||||||||||||||||||||
Gross Expense Ratio | 0.90 | 1.84 | 1.13 | 0.60 | 1.61 | 0.53 |
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 most recent month-end performance figures, please visit www.morganstanley.com/im or speak with your Financial Advisor. Investment returns and principal value will fluctuate and fund shares, when redeemed, may be worth more or less than their original cost. The table does not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares. Performance for Class A, Class B, Class L, Class I, Class C and Class IS shares will vary due to differences in sales charges and expenses. See the Fund's current prospectus for complete details on fees and sales charges. Expense ratios are as of each Fund's fiscal year end as outlined in the Fund's current prospectus.
* The maximum front-end sales charge for Class A is 4.25%.
** The maximum contingent deferred sales charge (CDSC) for Class B is 5.0%. The CDSC declines to 0% after six years. Effective April 2005, Class B shares will generally convert to Class A shares approximately eight years after the end of the calendar month in which the shares were purchased. Performance for periods greater than eight years reflects this conversion (beginning April 2005). Class B shares are closed to new investments.
*** Class L has no sales charge. Class L shares are closed to new investments.
† Class I has no sales charge.
†† The maximum contingent deferred sales charge for Class C is 1.0% for shares redeemed within one year of purchase.
††† Class IS had no sales charge.
(1) The Bloomberg Barclays Global Aggregate (Hedged USD) Index provides a broad-based measure of the global investment grade fixed-rate debt markets. Currency exposure is hedged to the U.S. dollar. The Index is unmanaged and its returns do not include any sales charges or fees. Such costs would lower performance. It is not possible to invest directly in an index. The primary benchmark of the Fund changed from Bloomberg Barclays Global Aggregate Index (unhedged) to Bloomberg Barclays Global Aggregate (Hedged USD) Index effective January 1, 2017 because the Adviser believes the Bloomberg Barclays Global Aggregate (Hedged USD) Index is a more appropriate benchmark for the Fund.
(2) The Global Fixed Income Opportunities Index Blend is a performance linked bencmark of the old and new benchmark of the Fund. Old represented by Bloomberg Barclays Global Aggregate Index (unhedged USD) from the Fund's inception to December 31, 2016 and the new represented by Bloomber Barclays Global Aggregate (Hedged USD) Index for periods thereafter. The Index is unmanaged and its returns do not include any sales charges or fees. Such costs would lower performance. It is not possible to invest directly in a index.
(3) The Bloomberg Barclays Global Aggregate Index provides a broad-based measure of the global investment grade fixed-rate debt markets. Total Returns shown in unhedged USD. The Index is unmanaged and its returns do not include any sales charges or fees. Such costs would lower performance. It is not possible to invest directly in an index.
(4) The Lipper Global Income Funds Index is an equally weighted performance index of the largest qualifying funds (based on net assets) in the Lipper Global Income Funds classification. The Index, which is adjusted for capital gains distributions and income dividends, is unmanaged and should not be considered an investment. There are currently 30 funds represented in this Index. The Fund was in the Lipper Global Income Funds classification as of the date of this report.
(5) Figure shown assumes reinvestment of all distributions and does not reflect the deduction of any sales charges.
(6) Figure shown assumes reinvestment of all distributions and the deduction of the maximum applicable sales charge. See the Fund's current prospectus for complete details on fees and sales charges.
10
Expense Example (unaudited)
As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase payments; and (2) ongoing costs, which may include advisory fees, administration fees, distribution and shareholder services (12b-1) fees, and other Fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.
This example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period 11/01/16 – 04/30/17.
Actual Expenses
The first line of the table on the following page provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled "Expenses Paid During Period" to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The second line of the table on the following page provides information about hypothetical expenses based on the Fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing cost of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads). Therefore, the second line of the table is useful in comparing ongoing costs, and will not help you determine the relative total cost of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
11
Expense Example (unaudited) continued
Beginning Account Value | Ending Account Value | Expenses Paid During Period(1) | |||||||||||||
11/01/16 | 04/30/17 | 11/01/16 – 04/30/17 | |||||||||||||
Class A | |||||||||||||||
Actual (2.92% return) | $ | 1,000.00 | $ | 1,029.20 | $ | 4.48 | |||||||||
Hypothetical (5% annual return before expenses) | $ | 1,000.00 | $ | 1,020.38 | $ | 4.46 | |||||||||
Class B | |||||||||||||||
Actual (2.51% return) | $ | 1,000.00 | $ | 1,025.10 | $ | 7.93 | |||||||||
Hypothetical (5% annual return before expenses) | $ | 1,000.00 | $ | 1,016.96 | $ | 7.90 | |||||||||
Class L | |||||||||||||||
Actual (2.80% return) | $ | 1,000.00 | $ | 1,028.00 | $ | 5.63 | |||||||||
Hypothetical (5% annual return before expenses) | $ | 1,000.00 | $ | 1,019.24 | $ | 5.61 | |||||||||
Class I | |||||||||||||||
Actual (3.06% return) | $ | 1,000.00 | $ | 1,030.60 | $ | 2.77 | |||||||||
Hypothetical (5% annual return before expenses) | $ | 1,000.00 | $ | 1,022.07 | $ | 2.76 | |||||||||
Class C | |||||||||||||||
Actual (2.40% return) | $ | 1,000.00 | $ | 1,024.00 | $ | 7.83 | |||||||||
Hypothetical (5% annual return before expenses) | $ | 1,000.00 | $ | 1,017.06 | $ | 7.80 | |||||||||
Class IS | |||||||||||||||
Actual (3.09% return) | $ | 1,000.00 | $ | 1,030.90 | $ | 2.52 | |||||||||
Hypothetical (5% annual return before expenses) | $ | 1,000.00 | $ | 1,022.32 | $ | 2.51 |
(1) Expenses are equal to the Fund's annualized expense ratios of 0.89%, 1.58%, 1.12%, 0.55%, 1.56% and 0.50% for Class A, Class B, Class L, Class I, Class C and Class IS shares, respectively, multiplied by the average account value over the period, multiplied by 181/365 (to reflect the one-half year period). If the Fund had borne all of its expenses, the annualized expense ratios would have been 1.96% for Class B shares.
12
Morgan Stanley Global Fixed Income Opportunities Fund
Portfolio of Investments n April 30, 2017 (unaudited)
PRINCIPAL AMOUNT (000) | COUPON RATE | MATURITY DATE | VALUE | ||||||||||||||||
Corporate Bonds (44.9%) | |||||||||||||||||||
Australia (1.9%) | |||||||||||||||||||
Consumer, Non-Cyclical | |||||||||||||||||||
$ | 950 | Transurban Finance Co., Pty Ltd. (a) | 3.375 | % | 03/22/27 | $ | 928,582 | ||||||||||||
Energy | |||||||||||||||||||
1,200 | APT Pipelines Ltd. (a)(b) | 4.20 | 03/23/25 | 1,236,338 | |||||||||||||||
EUR | 2,000 | Origin Energy Finance Ltd. | 7.875 | (c) | 06/16/71 | 2,314,492 | |||||||||||||
900 | Santos Finance Ltd. | 8.25 | (c) | 09/22/70 | 1,007,320 | ||||||||||||||
4,558,150 | |||||||||||||||||||
Finance | |||||||||||||||||||
1,800 | Commonwealth Bank of Australia | 2.00 | (c) | 04/22/27 | 2,032,263 | ||||||||||||||
Industrials | |||||||||||||||||||
1,850 | Aurizon Network Pty Ltd. | 3.125 | 06/01/26 | 2,233,222 | |||||||||||||||
Total Australia | 9,752,217 | ||||||||||||||||||
Austria (0.2%) | |||||||||||||||||||
Finance | |||||||||||||||||||
600 | Vienna Insurance Group AG Wiener Versicherung Gruppe | 5.50 | (c) | 10/09/43 | 764,426 | ||||||||||||||
Belgium (0.4%) | |||||||||||||||||||
Basic Materials | |||||||||||||||||||
1,000 | Solvay Finance SA | 5.118 | (c) | (d) | 1,205,190 | ||||||||||||||
700 | Solvay Finance SA | 5.425 | (c) | (d) | 857,145 | ||||||||||||||
Total Belgium | 2,062,335 | ||||||||||||||||||
Brazil (0.3%) | |||||||||||||||||||
Consumer, Non-Cyclical | |||||||||||||||||||
800 | BRF SA | 2.75 | 06/03/22 | 877,411 | |||||||||||||||
Finance | |||||||||||||||||||
$ | 450 | Banco Daycoval SA (a) | 5.75 | 03/19/19 | 464,625 | ||||||||||||||
Total Brazil | 1,342,036 | ||||||||||||||||||
Canada (0.6%) | |||||||||||||||||||
Basic Materials | |||||||||||||||||||
410 | Eldorado Gold Corp. (a)(b) | 6.125 | 12/15/20 | 423,325 | |||||||||||||||
1,000 | IAMGOLD Corp. (a) | 7.00 | 04/15/25 | 1,005,000 | |||||||||||||||
500 | Lundin Mining Corp. (a) | 7.50 | 11/01/20 | 532,500 | |||||||||||||||
1,960,825 |
See Notes to Financial Statements
13
Morgan Stanley Global Fixed Income Opportunities Fund
Portfolio of Investments n April 30, 2017 (unaudited) continued
PRINCIPAL AMOUNT (000) | COUPON RATE | MATURITY DATE | VALUE | ||||||||||||||||
Consumer, Cyclical | |||||||||||||||||||
$ | 750 | Air Canada (a)(b) | 7.75 | % | 04/15/21 | $ | 851,250 | ||||||||||||
Total Canada | 2,812,075 | ||||||||||||||||||
Chile (0.1%) | |||||||||||||||||||
Consumer, Non-Cyclical | |||||||||||||||||||
425 | Cencosud SA (a)(b) | 6.625 | 02/12/45 | 447,515 | |||||||||||||||
China (0.7%) | |||||||||||||||||||
Communications | |||||||||||||||||||
1,400 | Baidu, Inc. | 2.75 | 06/09/19 | 1,418,799 | |||||||||||||||
1,200 | Ctrip.com International Ltd. (a) | 1.25 | 09/15/22 | 1,260,000 | |||||||||||||||
2,678,799 | |||||||||||||||||||
Utilities | |||||||||||||||||||
750 | ENN Energy Holdings Ltd. | 0.00 | (e) | 02/26/18 | 783,750 | ||||||||||||||
Total China | 3,462,549 | ||||||||||||||||||
Colombia (0.5%) | |||||||||||||||||||
Energy | |||||||||||||||||||
2,210 | Ecopetrol SA | 5.875 | 09/18/23 | 2,397,187 | |||||||||||||||
Denmark (0.0%) (f) | |||||||||||||||||||
Finance | |||||||||||||||||||
DKK | (g) | Nordea Kredit Realkreditaktieselskab, Series ANN | 5.00 | 07/01/29 | 1 | ||||||||||||||
France (2.5%) | |||||||||||||||||||
Basic Materials | |||||||||||||||||||
$ | 1,500 | Air Liquide Finance SA (a) | 1.75 | 09/27/21 | 1,462,542 | ||||||||||||||
Communications | |||||||||||||||||||
1,175 | SFR Group SA (a) | 6.00 | 05/15/22 | 1,229,344 | |||||||||||||||
Consumer, Non-Cyclical | |||||||||||||||||||
EUR | 500 | Eurofins Scientific | 4.875 | (c) | (d) | 580,317 | |||||||||||||
800 | Europcar Groupe SA | 5.75 | 06/15/22 | 917,404 | |||||||||||||||
1,497,721 | |||||||||||||||||||
Energy | |||||||||||||||||||
700 | TOTAL SA | 2.25 | (c) | (d) | 771,170 | ||||||||||||||
$ | 600 | TOTAL SA, Series FP | 0.50 | 12/02/22 | 613,200 | ||||||||||||||
1,384,370 |
See Notes to Financial Statements
14
Morgan Stanley Global Fixed Income Opportunities Fund
Portfolio of Investments n April 30, 2017 (unaudited) continued
PRINCIPAL AMOUNT (000) | COUPON RATE | MATURITY DATE | VALUE | ||||||||||||||||
Finance | |||||||||||||||||||
EUR | 250 | AXA SA | 5.125 | (c)% | 07/04/43 | $ | 319,546 | ||||||||||||
350 | AXA SA | 5.25 | (c) | 04/16/40 | 426,165 | ||||||||||||||
$ | 875 | BPCE SA (a) | 5.15 | 07/21/24 | 912,959 | ||||||||||||||
EUR | 1,400 | Credit Agricole Assurances SA | 4.50 | (c) | (d) | 1,592,336 | |||||||||||||
500 | Societe Generale SA | 2.625 | 02/27/25 | 571,402 | |||||||||||||||
3,822,408 | |||||||||||||||||||
Industrials | |||||||||||||||||||
1,300 | Airbus SE, Series AIR | 0.00 | (e) | 07/01/22 | 1,517,694 | ||||||||||||||
1,000 | Safran SA, Series SAF | 0.00 | (e) | 12/31/20 | 1,050,793 | ||||||||||||||
2,568,487 | |||||||||||||||||||
Utilities | |||||||||||||||||||
500 | Electricite de France SA | 5.00 | (c) | (d) | 563,749 | ||||||||||||||
Total France | 12,528,621 | ||||||||||||||||||
Germany (1.4%) | |||||||||||||||||||
Communications | |||||||||||||||||||
800 | Unitymedia Hessen GmbH & Co., KG/Unitymedia NRW GmbH | 4.00 | 01/15/25 | 920,023 | |||||||||||||||
Consumer, Cyclical | |||||||||||||||||||
500 | Volkswagen International Finance N.V. | 4.625 | (c) | (d) | 583,440 | ||||||||||||||
Consumer, Non-Cyclical | |||||||||||||||||||
550 | Bayer AG | 3.75 | (c) | 07/01/74 | 637,196 | ||||||||||||||
Finance | |||||||||||||||||||
1,000 | Allianz Finance II BV | 5.75 | (c) | 07/08/41 | 1,282,815 | ||||||||||||||
1,200 | Muenchener Rueckversicherungs-Gesellschaft AG in Muenchen | 6.00 | (c) | 05/26/41 | 1,560,376 | ||||||||||||||
1,100 | Vonovia Finance BV | 4.625 | (c) | 04/08/74 | 1,274,818 | ||||||||||||||
4,118,009 | |||||||||||||||||||
Utilities | |||||||||||||||||||
GBP | 500 | RWE AG | 7.00 | (c) | (d) | 685,801 | |||||||||||||
Total Germany | 6,944,469 | ||||||||||||||||||
Hong Kong (0.2%) | |||||||||||||||||||
Consumer, Cyclical | |||||||||||||||||||
$ | 1,170 | CK Hutchison International 16 Ltd. (a) | 1.875 | 10/03/21 | 1,135,122 |
See Notes to Financial Statements
15
Morgan Stanley Global Fixed Income Opportunities Fund
Portfolio of Investments n April 30, 2017 (unaudited) continued
PRINCIPAL AMOUNT (000) | COUPON RATE | MATURITY DATE | VALUE | ||||||||||||||||
India (0.1%) | |||||||||||||||||||
Basic Materials | |||||||||||||||||||
$ | 550 | Vedanta Resources PLC (a) | 6.00 | % | 01/31/19 | $ | 569,937 | ||||||||||||
Israel (0.5%) | |||||||||||||||||||
Consumer, Non-Cyclical | |||||||||||||||||||
1,300 | Teva Pharmaceutical Finance Netherlands III BV | 2.20 | 07/21/21 | 1,264,664 | |||||||||||||||
1,300 | Teva Pharmaceutical Finance Netherlands III BV (b) | 3.15 | 10/01/26 | 1,212,852 | |||||||||||||||
Total Israel | 2,477,516 | ||||||||||||||||||
Italy (0.8%) | |||||||||||||||||||
Communications | |||||||||||||||||||
EUR | 415 | Telecom Italia Finance SA | 7.75 | 01/24/33 | 604,224 | ||||||||||||||
Finance | |||||||||||||||||||
1,100 | Assicurazioni Generali SpA | 10.125 | (c) | 07/10/42 | 1,605,072 | ||||||||||||||
$ | 500 | Intesa Sanpaolo SpA (a) | 6.50 | 02/24/21 | 553,878 | ||||||||||||||
2,158,950 | |||||||||||||||||||
Utilities | |||||||||||||||||||
EUR | 1,000 | Enel SpA | 5.00 | (c) | 01/15/75 | 1,178,629 | |||||||||||||
Total Italy | 3,941,803 | ||||||||||||||||||
Jamaica (0.2%) | |||||||||||||||||||
Communications | |||||||||||||||||||
$ | 1,000 | Digicel Ltd. | 6.00 | 04/15/21 | 955,000 | ||||||||||||||
Japan (0.2%) | |||||||||||||||||||
Consumer, Cyclical | |||||||||||||||||||
JPY | 100,000 | Sony Corp., Series 6 | 0.00 | (e) | 09/30/22 | 986,993 | |||||||||||||
Jersey (0.1%) | |||||||||||||||||||
Finance | |||||||||||||||||||
GBP | 400 | Derwent London Capital No. 2 Jersey Ltd., Series DLN | 1.125 | 07/24/19 | 557,739 | ||||||||||||||
Mexico (0.6%) | |||||||||||||||||||
Communications | |||||||||||||||||||
EUR | 800 | America Movil SAB de CV | 0.00 | (e) | 05/28/20 | 851,179 | |||||||||||||
Utilities | |||||||||||||||||||
$ | 2,110 | Fermaca Enterprises S de RL de CV (a)(b) | 6.375 | 03/30/38 | 2,197,154 | ||||||||||||||
Total Mexico | 3,048,333 |
See Notes to Financial Statements
16
Morgan Stanley Global Fixed Income Opportunities Fund
Portfolio of Investments n April 30, 2017 (unaudited) continued
PRINCIPAL AMOUNT (000) | COUPON RATE | MATURITY DATE | VALUE | ||||||||||||||||
Netherlands (1.8%) | |||||||||||||||||||
Basic Materials | |||||||||||||||||||
EUR | 400 | Constellium N.V. | 4.625 | % | 05/15/21 | $ | 438,212 | ||||||||||||
Consumer, Cyclical | |||||||||||||||||||
$ | 585 | Playa Resorts Holding BV (a) | 8.00 | 08/15/20 | 618,638 | ||||||||||||||
Finance | |||||||||||||||||||
EUR | 1,000 | ABN Amro Bank N.V. | 2.875 | (c) | 06/30/25 | 1,153,538 | |||||||||||||
550 | ABN Amro Bank N.V. | 6.375 | 04/27/21 | 733,677 | |||||||||||||||
450 | Aegon N.V. | 4.00 | (c) | 04/25/44 | 513,737 | ||||||||||||||
$ | 500 | AerCap Ireland Capital Ltd./AerCap Global Aviation Trust | 3.75 | 05/15/19 | 514,594 | ||||||||||||||
EUR | 1,400 | ASR Nederland N.V. | 5.00 | (c) | (d) | 1,671,823 | |||||||||||||
1,825 | Cooperatieve Rabobank UA | 5.50 | (c) | (d) | 2,104,735 | ||||||||||||||
$ | 1,325 | ING Bank N.V. (a) | 5.80 | 09/25/23 | 1,485,024 | ||||||||||||||
8,177,128 | |||||||||||||||||||
Total Netherlands | 9,233,978 | ||||||||||||||||||
Portugal (0.5%) | |||||||||||||||||||
Utilities | |||||||||||||||||||
EUR | 1,600 | EDP - Energias de Portugal SA | 5.375 | (c) | 09/16/75 | 1,891,608 | |||||||||||||
$ | 425 | EDP Finance BV (a) | 4.125 | 01/15/20 | 439,079 | ||||||||||||||
Total Portugal | 2,330,687 | ||||||||||||||||||
South Africa (0.2%) | |||||||||||||||||||
Finance | |||||||||||||||||||
GBP | 1,000 | BRAIT SE | 2.75 | 09/18/20 | 1,232,058 | ||||||||||||||
Spain (1.8%) | |||||||||||||||||||
Communications | |||||||||||||||||||
EUR | 1,100 | Telefonica Europe BV | 5.875 | (c) | (d) | 1,346,156 | |||||||||||||
Energy | |||||||||||||||||||
500 | Repsol International Finance BV | 4.50 | (c) | 03/25/75 | 559,077 | ||||||||||||||
Finance | |||||||||||||||||||
1,000 | Banco Bilbao Vizcaya Argentaria SA | 6.75 | (c) | (d) | 1,129,032 | ||||||||||||||
900 | Banco Santander SA | 6.25 | (c) | (d) | 993,835 | ||||||||||||||
$ | 800 | Banco Santander SA | 6.375 | (c) | (d) | 817,642 | |||||||||||||
EUR | 1,100 | BBVA Subordinated Capital SAU | 3.50 | (c) | 04/11/24 | 1,263,800 | |||||||||||||
4,204,309 |
See Notes to Financial Statements
17
Morgan Stanley Global Fixed Income Opportunities Fund
Portfolio of Investments n April 30, 2017 (unaudited) continued
PRINCIPAL AMOUNT (000) | COUPON RATE | MATURITY DATE | VALUE | ||||||||||||||||
Utilities | |||||||||||||||||||
EUR | 1,200 | Gas Natural Fenosa Finance BV | 3.375 | (c)% | (d) | $ | 1,296,003 | ||||||||||||
1,200 | IE2 Holdco SAU | 2.875 | 06/01/26 | 1,399,691 | |||||||||||||||
2,695,694 | |||||||||||||||||||
Total Spain | 8,805,236 | ||||||||||||||||||
Sweden (0.3%) | |||||||||||||||||||
Diversified | |||||||||||||||||||
SEK | 12,000 | Industrivarden AB, Series ICA | 0.00 | (e) | 05/15/19 | 1,509,941 | |||||||||||||
Switzerland (0.7%) | |||||||||||||||||||
Finance | |||||||||||||||||||
$ | 1,125 | Credit Suisse Group Funding Guernsey Ltd. | 4.55 | 04/17/26 | 1,182,781 | ||||||||||||||
950 | UBS AG | 5.125 | 05/15/24 | 1,001,760 | |||||||||||||||
1,450 | UBS Group Funding Switzerland AG (a) | 3.491 | 05/23/23 | 1,474,071 | |||||||||||||||
Total Switzerland | 3,658,612 | ||||||||||||||||||
Taiwan (0.3%) | |||||||||||||||||||
Technology | |||||||||||||||||||
1,600 | United Microelectronics Corp. | 0.00 | (e) | 05/18/20 | 1,606,000 | ||||||||||||||
United Arab Emirates (0.3%) | |||||||||||||||||||
Finance | |||||||||||||||||||
EUR | 1,600 | Aabar Investments PJSC, Series UCG | 0.50 | 03/27/20 | 1,572,949 | ||||||||||||||
United Kingdom (3.5%) | |||||||||||||||||||
Communications | |||||||||||||||||||
1,500 | British Telecommunications PLC | 1.75 | 03/10/26 | 1,690,947 | |||||||||||||||
GBP | 509 | Virgin Media Finance PLC (a) | 6.375 | 10/15/24 | 710,616 | ||||||||||||||
EUR | 750 | Vodafone Group PLC | 2.20 | 08/25/26 | 871,293 | ||||||||||||||
3,272,856 | |||||||||||||||||||
Consumer, Cyclical | |||||||||||||||||||
1,500 | International Consolidated Airlines Group SA, Series IAG | 0.625 | 11/17/22 | 1,548,167 | |||||||||||||||
850 | International Game Technology PLC | 4.75 | 02/15/23 | 1,014,361 | |||||||||||||||
GBP | 1,050 | Jaguar Land Rover Automotive PLC | 3.875 | 03/01/23 | 1,417,921 | ||||||||||||||
500 | John Lewis PLC | 4.25 | 12/18/34 | 706,821 | |||||||||||||||
4,687,270 |
See Notes to Financial Statements
18
Morgan Stanley Global Fixed Income Opportunities Fund
Portfolio of Investments n April 30, 2017 (unaudited) continued
PRINCIPAL AMOUNT (000) | COUPON RATE | MATURITY DATE | VALUE | ||||||||||||||||
Consumer, Non-Cyclical | |||||||||||||||||||
GBP | 1,000 | J Sainsbury PLC, Series SBRY | 1.25 | % | 11/21/19 | $ | 1,372,911 | ||||||||||||
350 | Voyage Care Bondco PLC | 6.50 | 08/01/18 | 460,234 | |||||||||||||||
1,833,145 | |||||||||||||||||||
Finance | |||||||||||||||||||
EUR | 400 | Aviva PLC | 3.875 | (c) | 07/03/44 | 464,097 | |||||||||||||
1,200 | Lloyds Bank PLC | 6.50 | 03/24/20 | 1,534,296 | |||||||||||||||
1,200 | Lloyds Banking Group PLC | 6.375 | (c) | (d) | 1,397,256 | ||||||||||||||
GBP | 500 | Nationwide Building Society | 6.875 | (c) | (d) | 672,700 | |||||||||||||
$ | 1,425 | Santander UK PLC (a) | 5.00 | 11/07/23 | 1,501,883 | ||||||||||||||
5,570,232 | |||||||||||||||||||
Industrials | |||||||||||||||||||
1,080 | CEVA Group PLC (a) | 4.00 | 05/01/18 | 1,058,873 | |||||||||||||||
Utilities | |||||||||||||||||||
GBP | 750 | NGG Finance PLC | 5.625 | (c) | 06/18/73 | 1,081,983 | |||||||||||||
Total United Kingdom | 17,504,359 | ||||||||||||||||||
United States (24.2%) | |||||||||||||||||||
Basic Materials | |||||||||||||||||||
EUR | 900 | Axalta Coating Systems Dutch Holding B BV | 3.75 | 01/15/25 | 1,037,643 | ||||||||||||||
$ | 512 | Chemtura Corp. | 5.75 | 07/15/21 | 529,728 | ||||||||||||||
500 | International Wire Group, Inc. (a) | 10.75 | 08/01/21 | 491,250 | |||||||||||||||
1,067 | MSCI, Inc. (a) | 4.75 | 08/01/26 | 1,099,010 | |||||||||||||||
750 | Prince Mineral Holding Corp. (a)(b) | 11.50 | 12/15/19 | 776,250 | |||||||||||||||
3,933,881 | |||||||||||||||||||
Communications | |||||||||||||||||||
2,626 | AT&T, Inc. | 4.50 | 03/09/48 | 2,376,063 | |||||||||||||||
500 | Cable One, Inc. (a) | 5.75 | 06/15/22 | 525,000 | |||||||||||||||
900 | Charter Communications Operating LLC/Charter Communications Operating Capital | 4.908 | 07/23/25 | 966,169 | |||||||||||||||
750 | CSC Holdings LLC | 5.25 | 06/01/24 | 760,777 | |||||||||||||||
500 | DISH DBS Corp. | 5.00 | 03/15/23 | 502,500 | |||||||||||||||
1,250 | Gray Television, Inc. (a) | 5.125 | 10/15/24 | 1,256,250 | |||||||||||||||
500 | Lamar Media Corp. | 5.00 | 05/01/23 | 525,260 | |||||||||||||||
1,475 | MDC Partners, Inc. (a)(b) | 6.50 | 05/01/24 | 1,445,500 | |||||||||||||||
400 | Midcontinent Communications & Midcontinent Finance Corp. (a) | 6.25 | 08/01/21 | 418,000 | |||||||||||||||
500 | Midcontinent Communications & Midcontinent Finance Corp. (a) | 6.875 | 08/15/23 | 538,750 |
See Notes to Financial Statements
19
Morgan Stanley Global Fixed Income Opportunities Fund
Portfolio of Investments n April 30, 2017 (unaudited) continued
PRINCIPAL AMOUNT (000) | COUPON RATE | MATURITY DATE | VALUE | ||||||||||||||||
$ | 625 | Netflix, Inc. (a)(b) | 4.375 | % | 11/15/26 | $ | 617,187 | ||||||||||||
950 | Omnicom Group, Inc. | 3.60 | 04/15/26 | 959,070 | |||||||||||||||
1,100 | Priceline Group, Inc. (The) (b) | 0.90 | 09/15/21 | 1,254,687 | |||||||||||||||
1,425 | Shutterfly, Inc. | 0.25 | 05/15/18 | 1,447,266 | |||||||||||||||
1,100 | Sprint Communications, Inc. | 6.00 | 11/15/22 | 1,148,812 | |||||||||||||||
925 | T-Mobile USA, Inc. | 6.836 | 04/28/23 | 994,375 | |||||||||||||||
1,275 | Verizon Communications, Inc. | 4.672 | 03/15/55 | 1,168,905 | |||||||||||||||
1,400 | Viavi Solutions, Inc. | 0.625 | 08/15/33 | 1,526,875 | |||||||||||||||
18,431,446 | |||||||||||||||||||
Consumer Discretionary | |||||||||||||||||||
2,450 | Sprint Spectrum Co., LLC/Sprint Spectrum Co., II LLC/Sprint Spectrum Co., III LLC (a) | 3.36 | 03/20/23 | 2,477,563 | |||||||||||||||
Consumer, Cyclical | |||||||||||||||||||
1,000 | Aramark Services, Inc. | 4.75 | 06/01/26 | 1,022,500 | |||||||||||||||
1,575 | CalAtlantic Group, Inc. | 0.25 | 06/01/19 | 1,479,516 | |||||||||||||||
900 | Century Communities, Inc. | 6.875 | 05/15/22 | 947,250 | |||||||||||||||
438 | CVS Pass-Through Trust (a) | 4.163 | 08/11/36 | 441,462 | |||||||||||||||
2,225 | Delta Air Lines, Inc. | 2.875 | 03/13/20 | 2,246,437 | |||||||||||||||
785 | Ferrellgas LP/Ferrellgas Finance Corp. (b) | 6.75 | 01/15/22 | 759,487 | |||||||||||||||
1,500 | Ford Motor Credit Co., LLC | 3.096 | 05/04/23 | 1,477,923 | |||||||||||||||
1,000 | General Motors Financial Co., Inc. | 2.35 | 10/04/19 | 999,650 | |||||||||||||||
1,400 | General Motors Financial Co., Inc. | 4.30 | 07/13/25 | 1,427,600 | |||||||||||||||
500 | Global Partners LP/GLP Finance Corp. | 6.25 | 07/15/22 | 497,500 | |||||||||||||||
425 | Global Partners LP/GLP Finance Corp. | 7.00 | 06/15/23 | 422,875 | |||||||||||||||
400 | Guitar Center, Inc. (a)(b) | 6.50 | 04/15/19 | 343,500 | |||||||||||||||
982 | Hanesbrands, Inc. (a) | 4.875 | 05/15/26 | 982,000 | |||||||||||||||
500 | JC Penney Corp., Inc. | 8.125 | 10/01/19 | 547,500 | |||||||||||||||
1,000 | KFC Holding Co./Pizza Hut Holdings LLC/Taco Bell of America LLC (a) | 5.25 | 06/01/26 | 1,027,500 | |||||||||||||||
575 | Lear Corp. | 5.25 | 01/15/25 | 610,256 | |||||||||||||||
1,000 | Lions Gate Entertainment Corp. (a) | 5.875 | 11/01/24 | 1,042,500 | |||||||||||||||
750 | MGM Resorts International | 6.00 | 03/15/23 | 821,250 | |||||||||||||||
3,904 | Resort at Summerlin LP, Series B (h)(i)(j)(k)(l)(m) | 13.00 | 12/15/07 | 0 | |||||||||||||||
345 | Rite Aid Corp. (b) | 6.75 | 06/15/21 | 349,313 | |||||||||||||||
1,050 | Rivers Pittsburgh Borrower LP/Rivers Pittsburgh Finance Corp. (a) | 6.125 | 08/15/21 | 1,063,996 | |||||||||||||||
500 | RSI Home Products, Inc. (a) | 6.50 | 03/15/23 | 520,000 | |||||||||||||||
750 | Sally Holdings LLC/Sally Capital, Inc. | 5.625 | 12/01/25 | 778,125 | |||||||||||||||
500 | Sonic Automotive, Inc. | 5.00 | 05/15/23 | 481,875 |
See Notes to Financial Statements
20
Morgan Stanley Global Fixed Income Opportunities Fund
Portfolio of Investments n April 30, 2017 (unaudited) continued
PRINCIPAL AMOUNT (000) | COUPON RATE | MATURITY DATE | VALUE | ||||||||||||||||
$ | 750 | Speedway Motorsports, Inc. | 5.125 | % | 02/01/23 | $ | 761,250 | ||||||||||||
500 | Tempur Sealy International, Inc. | 5.50 | 06/15/26 | 498,440 | |||||||||||||||
1,100 | Tesla, Inc. | 0.25 | 03/01/19 | 1,157,062 | |||||||||||||||
1,000 | Tops Holding LLC/Tops Markets II Corp. (a) | 8.00 | 06/15/22 | 880,000 | |||||||||||||||
975 | Wolverine World Wide, Inc. (a) | 5.00 | 09/01/26 | 948,187 | |||||||||||||||
24,534,954 | |||||||||||||||||||
Consumer, Non-Cyclical | |||||||||||||||||||
1,200 | Acadia Healthcare Co., Inc. | 5.125 | 07/01/22 | 1,219,500 | |||||||||||||||
1,150 | Avis Budget Car Rental LLC/Avis Budget Finance, Inc. (b) | 5.50 | 04/01/23 | 1,137,063 | |||||||||||||||
500 | Central Garden & Pet Co. (b) | 6.125 | 11/15/23 | 536,250 | |||||||||||||||
750 | HCA, Inc. | 4.50 | 02/15/27 | 758,993 | |||||||||||||||
975 | Illumina, Inc. | 0.00 | (e) | 06/15/19 | 1,003,031 | ||||||||||||||
1,250 | Lamb Weston Holdings, Inc. (a) | 4.875 | 11/01/26 | 1,292,187 | |||||||||||||||
1,350 | Live Nation Entertainment, Inc. | 2.50 | 05/15/19 | 1,510,312 | |||||||||||||||
1,375 | Mallinckrodt International Finance SA/Mallinckrodt CB LLC (a)(b) | 5.50 | 04/15/25 | 1,258,125 | |||||||||||||||
2,050 | Molson Coors Brewing Co. (a) | 2.25 | 03/15/20 | 2,054,350 | |||||||||||||||
611 | Pinnacle Foods Finance LLC/Pinnacle Foods Finance Corp. | 5.875 | 01/15/24 | 654,534 | |||||||||||||||
400 | Quintiles IMS, Inc. (a) | 4.875 | 05/15/23 | 413,000 | |||||||||||||||
1,100 | Tenet Healthcare Corp. | 6.00 | 10/01/20 | 1,160,500 | |||||||||||||||
1,300 | TMS International Corp. (a) | 7.625 | 10/15/21 | 1,316,250 | |||||||||||||||
775 | Whole Foods Market, Inc. | 5.20 | 12/03/25 | 813,432 | |||||||||||||||
15,127,527 | |||||||||||||||||||
Diversified | |||||||||||||||||||
1,150 | PetSmart, Inc. (a)(b) | 7.125 | 03/15/23 | 1,053,688 | |||||||||||||||
Energy | |||||||||||||||||||
250 | Crestwood Midstream Partners LP/Crestwood Midstream Finance Corp. | 6.25 | 04/01/23 | 262,188 | |||||||||||||||
1,150 | Hilcorp Energy I LP/Hilcorp Finance Co. (a) | 5.00 | 12/01/24 | 1,083,875 | |||||||||||||||
55 | Hilcorp Energy I LP/Hilcorp Finance Co. (a) | 5.75 | 10/01/25 | 53,625 | |||||||||||||||
675 | MPLX LP | 4.00 | 02/15/25 | 679,433 | |||||||||||||||
350 | Newfield Exploration Co. | 5.375 | 01/01/26 | 368,812 | |||||||||||||||
400 | Northern Tier Energy LLC/Northern Tier Finance Corp. | 7.125 | 11/15/20 | 415,750 | |||||||||||||||
500 | Rice Energy, Inc. | 6.25 | 05/01/22 | 525,315 | |||||||||||||||
1,070 | Tallgrass Energy Partners LP/Tallgrass Energy Finance Corp. (a) | 5.50 | 09/15/24 | 1,080,700 | |||||||||||||||
4,469,698 |
See Notes to Financial Statements
21
Morgan Stanley Global Fixed Income Opportunities Fund
Portfolio of Investments n April 30, 2017 (unaudited) continued
PRINCIPAL AMOUNT (000) | COUPON RATE | MATURITY DATE | VALUE | ||||||||||||||||
Finance | |||||||||||||||||||
$ | 450 | Ally Financial, Inc. | 4.125 | % | 03/30/20 | $ | 462,069 | ||||||||||||
450 | Ally Financial, Inc. | 4.25 | 04/15/21 | 461,250 | |||||||||||||||
375 | Bank of America Corp. | 6.11 | 01/29/37 | 440,507 | |||||||||||||||
2,425 | Bank of America Corp., MTN | 4.25 | 10/22/26 | 2,477,288 | |||||||||||||||
3,000 | Citigroup, Inc. | 3.887 | (c) | 01/10/28 | 3,050,175 | ||||||||||||||
925 | Citigroup, Inc. | 5.50 | 09/13/25 | 1,023,534 | |||||||||||||||
1,375 | Colony NorthStar, Inc. | 5.00 | 04/15/23 | 1,412,812 | |||||||||||||||
400 | CTR Partnership LP/CareTrust Capital Corp. | 5.875 | 06/01/21 | 413,000 | |||||||||||||||
1,000 | DuPont Fabros Technology LP | 5.625 | 06/15/23 | 1,060,000 | |||||||||||||||
775 | Extra Space Storage LP (a) | 3.125 | 10/01/35 | 810,359 | |||||||||||||||
1,330 | Goldman Sachs Group, Inc. (The) | 6.75 | 10/01/37 | 1,663,428 | |||||||||||||||
1,050 | Icahn Enterprises LP/Icahn Enterprises Finance Corp. (a)(b) | 6.75 | 02/01/24 | 1,098,563 | |||||||||||||||
600 | Iron Mountain, Inc. (a) | 4.375 | 06/01/21 | 624,000 | |||||||||||||||
500 | iStar, Inc. | 6.50 | 07/01/21 | 522,500 | |||||||||||||||
1,100 | Jack Ohio Finance LLC/Jack Ohio Finance 1 Corp. (a) | 6.75 | 11/15/21 | 1,152,250 | |||||||||||||||
1,200 | Jefferies Finance LLC/JFIN Co-Issuer Corp. (a) | 7.375 | 04/01/20 | 1,233,000 | |||||||||||||||
1,825 | JPMorgan Chase & Co. | 4.125 | 12/15/26 | 1,884,477 | |||||||||||||||
875 | KCG Holdings, Inc. (a) | 6.875 | 03/15/20 | 910,547 | |||||||||||||||
1,149 | Kennedy-Wilson, Inc. | 5.875 | 04/01/24 | 1,196,396 | |||||||||||||||
1,000 | Post Holdings, Inc. (a) | 5.00 | 08/15/26 | 997,500 | |||||||||||||||
400 | Provident Funding Associates LP/PFG Finance Corp. (a) | 6.75 | 06/15/21 | 412,000 | |||||||||||||||
520 | Prudential Financial, Inc. | 5.625 | (c) | 06/15/43 | 568,100 | ||||||||||||||
1,375 | Spirit Realty Capital, Inc. (b) | 3.75 | 05/15/21 | 1,418,835 | |||||||||||||||
500 | Starwood Property Trust, Inc. | 4.55 | 03/01/18 | 545,625 | |||||||||||||||
1,225 | Synchrony Financial | 2.60 | 01/15/19 | 1,234,535 | |||||||||||||||
27,072,750 | |||||||||||||||||||
Industrials | |||||||||||||||||||
1,325 | Apex Tool Group LLC (a) | 7.00 | 02/01/21 | 1,232,250 | |||||||||||||||
500 | Artesyn Embedded Technologies, Inc. (a) | 9.75 | 10/15/20 | 482,500 | |||||||||||||||
500 | Ball Corp. | 4.00 | 11/15/23 | 509,375 | |||||||||||||||
1,100 | Coveris Holdings SA (a)(b) | 7.875 | 11/01/19 | 1,091,750 | |||||||||||||||
250 | CTP Transportation Products LLC/CTP Finance, Inc. (a) | 8.25 | 12/15/19 | 232,188 | |||||||||||||||
475 | Dollar Tree, Inc. | 5.75 | 03/01/23 | 506,350 | |||||||||||||||
500 | Florida East Coast Holdings Corp. (a) | 6.75 | 05/01/19 | 515,250 | |||||||||||||||
550 | JB Poindexter & Co., Inc. (a) | 9.00 | 04/01/22 | 577,500 |
See Notes to Financial Statements
22
Morgan Stanley Global Fixed Income Opportunities Fund
Portfolio of Investments n April 30, 2017 (unaudited) continued
PRINCIPAL AMOUNT (000) | COUPON RATE | MATURITY DATE | VALUE | ||||||||||||||||
$ | 800 | Kemet Corp. | 10.50 | % | 05/01/18 | $ | 803,500 | ||||||||||||
500 | Kratos Defense & Security Solutions, Inc. | 7.00 | 05/15/19 | 503,750 | |||||||||||||||
500 | Martin Midstream Partners LP/Martin Midstream Finance Corp. | 7.25 | 02/15/21 | 515,000 | |||||||||||||||
1,000 | MasTec, Inc. | 4.875 | 03/15/23 | 1,005,000 | |||||||||||||||
1,000 | Michael Baker International LLC/CDL Acquisition Co., Inc. (a) | 8.25 | 10/15/18 | 1,043,750 | |||||||||||||||
705 | OPE KAG Finance Sub, Inc. (a) | 7.875 | 07/31/23 | 731,438 | |||||||||||||||
440 | SAExploration Holdings, Inc. (a)(h) | 10.00 | 04/14/19 | 354,215 | |||||||||||||||
1,250 | SBA Communications Corp. (a) | 4.875 | 09/01/24 | 1,264,062 | |||||||||||||||
1,000 | Select Medical Corp. (b) | 6.375 | 06/01/21 | 1,027,500 | |||||||||||||||
500 | Standard Industries, Inc. (a) | 5.375 | 11/15/24 | 523,750 | |||||||||||||||
600 | Summit Materials LLC/Summit Materials Finance Corp. | 6.125 | 07/15/23 | 631,500 | |||||||||||||||
400 | Summit Materials LLC/Summit Materials Finance Corp. | 8.50 | 04/15/22 | 451,000 | |||||||||||||||
700 | XPO Logistics, Inc. (a) | 6.125 | 09/01/23 | 737,625 | |||||||||||||||
500 | Zachry Holdings, Inc. (a) | 7.50 | 02/01/20 | 518,750 | |||||||||||||||
15,258,003 | |||||||||||||||||||
Technology | |||||||||||||||||||
1,375 | Akamai Technologies, Inc. (b) | 0.00 | (e) | 02/15/19 | 1,371,569 | ||||||||||||||
650 | Citrix Systems, Inc. | 0.50 | 04/15/19 | 799,094 | |||||||||||||||
2,625 | Dell International LLC / EMC Corp. (a) | 3.48 | 06/01/19 | 2,686,189 | |||||||||||||||
1,175 | First Data Corp. (a) | 5.75 | 01/15/24 | 1,223,469 | |||||||||||||||
318 | Hanesbrands, Inc. (a) | 4.625 | 05/15/24 | 317,205 | |||||||||||||||
950 | Harland Clarke Holdings Corp. (a) | 6.875 | 03/01/20 | 976,125 | |||||||||||||||
1,375 | ON Semiconductor Corp. | 1.00 | 12/01/20 | 1,456,640 | |||||||||||||||
8,830,291 | |||||||||||||||||||
Total United States | 121,189,801 | ||||||||||||||||||
Total Corporate Bonds (Cost $226,620,780) | 224,829,495 | ||||||||||||||||||
Sovereign (21.0%) | |||||||||||||||||||
Argentina (1.1%) | |||||||||||||||||||
3,400 | Argentine Republic Government International Bond | 7.50 | 04/22/26 | 3,733,200 | |||||||||||||||
1,500 | Provincia de Entre Rios Argentina (a) | 8.75 | 02/08/25 | 1,536,270 | |||||||||||||||
Total Argentina | 5,269,470 | ||||||||||||||||||
Australia (0.5%) | |||||||||||||||||||
AUD | 3,600 | Australia Government Bond | 2.75 | 11/21/27 | 2,722,839 |
See Notes to Financial Statements
23
Morgan Stanley Global Fixed Income Opportunities Fund
Portfolio of Investments n April 30, 2017 (unaudited) continued
PRINCIPAL AMOUNT (000) | COUPON RATE | MATURITY DATE | VALUE | ||||||||||||||||
Bermuda (0.1%) | |||||||||||||||||||
$ | 530 | Bermuda Government International Bond (a) | 4.854 | % | 02/06/24 | $ | 564,890 | ||||||||||||
Brazil (3.9%) | |||||||||||||||||||
BRL | 32,900 | Brazil Notas do Tesouro Nacional, Series F | 10.00 | 01/01/21 | 10,401,106 | ||||||||||||||
14,600 | Brazil Notas do Tesouro Nacional, Series F | 10.00 | 01/01/23 | 4,579,612 | |||||||||||||||
14,500 | Brazil Notas do Tesouro Nacional, Series F | 10.00 | 01/01/25 | 4,516,650 | |||||||||||||||
Total Brazil | 19,497,368 | ||||||||||||||||||
Colombia (1.0%) | |||||||||||||||||||
COP | 13,292,000 | Colombian TES | 7.50 | 08/26/26 | 4,939,889 | ||||||||||||||
Cyprus (1.0%) | |||||||||||||||||||
EUR | 4,400 | Cyprus Government International Bond | 3.875 | 05/06/22 | 5,131,510 | ||||||||||||||
Dominican Republic (0.3%) | |||||||||||||||||||
$ | 1,220 | Dominican Republic International Bond | 5.50 | 01/27/25 | 1,270,813 | ||||||||||||||
Ecuador (0.3%) | |||||||||||||||||||
1,500 | Ecuador Government International Bond | 10.75 | 03/28/22 | 1,631,250 | |||||||||||||||
Greece (0.4%) | |||||||||||||||||||
EUR | 113 | Hellenic Republic Government Bond | 3.00 | (n) | 02/24/23 | 106,503 | |||||||||||||
113 | Hellenic Republic Government Bond | 3.00 | (n) | 02/24/24 | 104,836 | ||||||||||||||
113 | Hellenic Republic Government Bond | 3.00 | (n) | 02/24/25 | 103,091 | ||||||||||||||
113 | Hellenic Republic Government Bond | 3.00 | (n) | 02/24/26 | 102,287 | ||||||||||||||
113 | Hellenic Republic Government Bond | 3.00 | (n) | 02/24/27 | 101,365 | ||||||||||||||
113 | Hellenic Republic Government Bond | 3.00 | (n) | 02/24/28 | 97,869 | ||||||||||||||
113 | Hellenic Republic Government Bond | 3.00 | (n) | 02/24/29 | 95,082 | ||||||||||||||
113 | Hellenic Republic Government Bond | 3.00 | (n) | 02/24/30 | 93,589 | ||||||||||||||
113 | Hellenic Republic Government Bond | 3.00 | (n) | 02/24/31 | 92,259 | ||||||||||||||
113 | Hellenic Republic Government Bond | 3.00 | (n) | 02/24/32 | 90,713 | ||||||||||||||
113 | Hellenic Republic Government Bond | 3.00 | (n) | 02/24/33 | 89,762 | ||||||||||||||
113 | Hellenic Republic Government Bond | 3.00 | (n) | 02/24/34 | 88,402 | ||||||||||||||
113 | Hellenic Republic Government Bond | 3.00 | (n) | 02/24/35 | 87,405 | ||||||||||||||
113 | Hellenic Republic Government Bond | 3.00 | (n) | 02/24/36 | 86,615 | ||||||||||||||
113 | Hellenic Republic Government Bond | 3.00 | (n) | 02/24/37 | 86,001 | ||||||||||||||
113 | Hellenic Republic Government Bond | 3.00 | (n) | 02/24/38 | 85,733 | ||||||||||||||
113 | Hellenic Republic Government Bond | 3.00 | (n) | 02/24/39 | 85,664 | ||||||||||||||
113 | Hellenic Republic Government Bond | 3.00 | (n) | 02/24/40 | 85,551 |
See Notes to Financial Statements
24
Morgan Stanley Global Fixed Income Opportunities Fund
Portfolio of Investments n April 30, 2017 (unaudited) continued
PRINCIPAL AMOUNT (000) | COUPON RATE | MATURITY DATE | VALUE | ||||||||||||||||
EUR | 113 | Hellenic Republic Government Bond | 3.00 | (n)% | 02/24/41 | $ | 85,613 | ||||||||||||
113 | Hellenic Republic Government Bond | 3.00 | (n) | 02/24/42 | 85,843 | ||||||||||||||
Total Greece | 1,854,183 | ||||||||||||||||||
Indonesia (2.8%) | |||||||||||||||||||
$ | 3,300 | Indonesia Government International Bond (a) | 5.875 | 01/15/24 | 3,769,188 | ||||||||||||||
IDR | 85,350,000 | Indonesia Treasury Bond | 8.25 | 07/15/21 | 6,749,111 | ||||||||||||||
42,358,000 | Indonesia Treasury Bond | 9.00 | 03/15/29 | 3,571,870 | |||||||||||||||
Total Indonesia | 14,090,169 | ||||||||||||||||||
Ivory Coast (0.3%) | |||||||||||||||||||
$ | 1,568 | Ivory Coast Government International Bond | 5.75 | 12/31/32 | 1,510,376 | ||||||||||||||
Kazakhstan (0.4%) | |||||||||||||||||||
2,000 | KazMunayGas National Co., JSC | 6.375 | 04/09/21 | 2,200,084 | |||||||||||||||
Mexico (4.1%) | |||||||||||||||||||
MXN | 378,000 | Mexican Bonos, Series M | 5.75 | 03/05/26 | 18,259,216 | ||||||||||||||
$ | 2,460 | Petroleos Mexicanos (b) | 4.875 | 01/18/24 | 2,494,440 | ||||||||||||||
Total Mexico | 20,753,656 | ||||||||||||||||||
Portugal (1.4%) | |||||||||||||||||||
EUR | 1,260 | Portugal Obrigacoes do Tesouro OT (a) | 2.875 | 07/21/26 | 1,334,427 | ||||||||||||||
2,800 | Portugal Obrigacoes do Tesouro OT (a) | 4.125 | 04/14/27 | 3,198,195 | |||||||||||||||
2,060 | Portugal Obrigacoes do Tesouro OT (a) | 5.65 | 02/15/24 | 2,641,064 | |||||||||||||||
Total Portugal | 7,173,686 | ||||||||||||||||||
Russia (2.2%) | |||||||||||||||||||
RUB | 434,100 | Russian Federal Bond - OFZ | 7.00 | 08/16/23 | 7,403,897 | ||||||||||||||
$ | 2,200 | Russian Foreign Bond - Eurobond | 4.875 | 09/16/23 | 2,388,408 | ||||||||||||||
1,000 | Russian Foreign Bond - Eurobond | 4.875 | 09/16/23 | 1,085,640 | |||||||||||||||
Total Russia | 10,877,945 | ||||||||||||||||||
South Africa (0.6%) | |||||||||||||||||||
ZAR | 44,300 | South Africa Government Bond | 8.00 | 01/31/30 | 3,040,159 | ||||||||||||||
Ukraine (0.5%) | |||||||||||||||||||
$ | 660 | Ukraine Government International Bond | 7.75 | 09/01/22 | 646,302 | ||||||||||||||
1,950 | Ukraine Government International Bond | 7.75 | 09/01/26 | 1,829,587 | |||||||||||||||
Total Ukraine | 2,475,889 |
See Notes to Financial Statements
25
Morgan Stanley Global Fixed Income Opportunities Fund
Portfolio of Investments n April 30, 2017 (unaudited) continued
PRINCIPAL AMOUNT (000) | COUPON RATE | MATURITY DATE | VALUE | ||||||||||||||||
United States (0.1%) | |||||||||||||||||||
$ | 400 | Shape Technologies Group, Inc. (a) | 7.625 | % | 02/01/20 | $ | 412,000 | ||||||||||||
Total Sovereign (Cost $102,677,996) | 105,416,176 | ||||||||||||||||||
Agency Fixed Rate Mortgages (0.0%) (f) | |||||||||||||||||||
1 | Federal Home Loan Mortgage Corporation, Gold Pool: | 6.50 | 10/01/32 | 898 | |||||||||||||||
Federal National Mortgage Association, Conventional Pools: | |||||||||||||||||||
57 |
| 6.50 | 05/01/28 - 09/01/32 | 63,789 | |||||||||||||||
6 |
| 7.00 | 08/01/29 - 11/01/32 | 5,930 | |||||||||||||||
Government National Mortgage Association, Various Pools: | |||||||||||||||||||
16 |
| 7.50 | 07/20/25 | 17,307 | |||||||||||||||
69 |
| 8.00 | 01/15/22 - 05/15/30 | 73,276 | |||||||||||||||
Total Agency Fixed Rate Mortgages (Cost $149,712) | 161,200 | ||||||||||||||||||
Asset-Backed Securities (10.4%) | |||||||||||||||||||
305 | Asset-Backed Securities Corp. Home Equity Loan Trust | 1.181 | (c) | 03/25/36 | 270,422 | ||||||||||||||
691 | Bayview Opportunity Master Fund IIIb Trust (a) | 3.475 | 07/28/18 | 689,014 | |||||||||||||||
Bear Stearns Asset-Backed Securities I Trust | |||||||||||||||||||
702 |
| 1.251 | (c) | 10/25/36 | 528,415 | ||||||||||||||
1,640 |
| 1.311 | (c) | 03/25/37 | 1,037,426 | ||||||||||||||
469 | Bear Stearns Asset-Backed Securities Trust | 1.311 | (c) | 01/25/47 | 461,349 | ||||||||||||||
306 | CDC Mortgage Capital Trust | 1.611 | (c) | 01/25/33 | 285,799 | ||||||||||||||
2,000 | Colony American Homes (a) | 3.994 | (c) | 07/17/32 | 2,020,211 | ||||||||||||||
1,427 | Credit-Based Asset Servicing & Securitization LLC | 1.141 | (c) | 05/25/36 | 1,127,866 | ||||||||||||||
1,794 | CWABS Asset-Backed Certificates Trust | 1.231 | (c) | 10/25/46 | 1,566,192 | ||||||||||||||
1,093 | EMC Mortgage Loan Trust (a) | 1.982 | (c) | 11/25/30 | 1,048,632 | ||||||||||||||
3,876 | GMAT Trust (a) | 4.25 | 09/25/20 | 3,895,578 | |||||||||||||||
603 | GSAA Home Equity Trust | 6.002 | 11/25/36 | 364,231 | |||||||||||||||
1,193 | GSAA Trust | 6.099 | 03/25/37 | 575,688 | |||||||||||||||
1,000 | Home Partners of America Trust (a) | 4.774 | (c) | 10/17/33 | 1,017,541 | ||||||||||||||
450 | InSite Issuer LLC (a) | 6.414 | 11/15/46 | 462,823 | |||||||||||||||
Invitation Homes Trust | |||||||||||||||||||
2,000 | (a) | 4.093 | (c) | 06/17/32 | 2,021,120 | ||||||||||||||
1,700 | (a) | 5.294 | (c) | 03/17/32 | 1,711,808 |
See Notes to Financial Statements
26
Morgan Stanley Global Fixed Income Opportunities Fund
Portfolio of Investments n April 30, 2017 (unaudited) continued
PRINCIPAL AMOUNT (000) | COUPON RATE | MATURITY DATE | VALUE | ||||||||||||||||
$ | 700 | (a) | 5.494 | (c)% | 12/17/31 | $ | 703,587 | ||||||||||||
1,700 | (a) | 5.744 | (c) | 08/17/32 | 1,736,061 | ||||||||||||||
Mastr Asset-Backed Securities Trust | |||||||||||||||||||
2,020 |
| 1.041 | (c) | 08/25/36 | 964,248 | ||||||||||||||
2,595 |
| 1.231 | (c) | 08/25/36 | 1,280,883 | ||||||||||||||
491 | Mastr Specialized Loan Trust (a) | 1.341 | (c) | 05/25/37 | 396,092 | ||||||||||||||
850 | Merrill Lynch Mortgage Investors Trust | 1.231 | (c) | 08/25/37 | 545,138 | ||||||||||||||
Nationstar HECM Loan Trust | |||||||||||||||||||
2,280 | (a) | 3.147 | 08/25/26 | 2,285,928 | |||||||||||||||
1,300 | (a) | 3.598 | 06/25/26 | 1,331,148 | |||||||||||||||
688 | (a) | 4.115 | 11/25/25 | 689,080 | |||||||||||||||
529 | (a) | 4.36 | 02/25/26 | 529,169 | |||||||||||||||
1,826 | (a) | 6.657 | 11/25/25 | 1,826,000 | |||||||||||||||
970 | Nationstar Home Equity Loan Trust | 1.241 | (c) | 04/25/37 | 938,446 | ||||||||||||||
1,727 | NRZ Excess Spread-Collateralized Notes (a) | 5.683 | 07/25/21 | 1,726,816 | |||||||||||||||
2,899 | Oakwood Mortgage Investors, Inc. | 7.405 | (c) | 06/15/31 | 1,217,845 | ||||||||||||||
1,395 | Ownit Mortgage Loan Trust | 1.261 | (c) | 03/25/37 | 1,165,104 | ||||||||||||||
1,700 | PNMAC GMSR Issuer Trust (a) | 5.741 | (c) | 02/25/50 | 1,712,417 | ||||||||||||||
700 | RAMP Series Trust | 5.703 | 10/25/33 | 702,840 | |||||||||||||||
638 | RAMP Trust | 1.311 | (c) | 11/25/35 | 546,072 | ||||||||||||||
RASC Trust | |||||||||||||||||||
1,788 |
| 1.151 | (c) | 11/25/36 | 1,666,223 | ||||||||||||||
1,000 |
| 2.121 | (c) | 10/25/35 | 791,400 | ||||||||||||||
636 | RMAT LLC (a) | 4.826 | 06/25/35 | 637,949 | |||||||||||||||
800 | Silver Bay Realty Trust (a) | 4.544 | (c) | 09/17/31 | 801,410 | ||||||||||||||
1,600 | Stanwich Mortgage Loan Co., LLC (a) | 3.598 | 03/16/22 | 1,600,000 | |||||||||||||||
145 | Sunset Mortgage Loan Co., LLC (a) | 3.721 | 11/16/44 | 145,210 | |||||||||||||||
1,619 | Truman Capital Mortgage Loan Trust (a) | 1.251 | (c) | 03/25/36 | 1,505,422 | ||||||||||||||
938 | VOLT LI LLC (a) | 3.50 | 10/25/46 | 941,956 | |||||||||||||||
1,126 | VOLT NPL X LLC (a) | 4.75 | 10/26/54 | 1,124,671 | |||||||||||||||
400 | VOLT XIX LLC (a) | 5.00 | 04/25/55 | 400,143 | |||||||||||||||
586 | VOLT XL LLC (a) | 4.375 | 11/27/45 | 592,173 | |||||||||||||||
1,703 | VOLT XLIV LLC (a) | 4.25 | 04/25/46 | 1,723,437 | |||||||||||||||
399 | VOLT XXII LLC (a) | 4.25 | 02/25/55 | 397,038 | |||||||||||||||
595 | VOLT XXXIII LLC (a) | 4.25 | 03/25/55 | 591,898 | |||||||||||||||
Total Asset-Backed Securities (Cost $51,644,664) | 52,299,919 |
See Notes to Financial Statements
27
Morgan Stanley Global Fixed Income Opportunities Fund
Portfolio of Investments n April 30, 2017 (unaudited) continued
PRINCIPAL AMOUNT (000) | COUPON RATE | MATURITY DATE | VALUE | ||||||||||||||||
Collateralized Mortgage Obligations - Agency Collateral Series (0.9%) | |||||||||||||||||||
Federal Home Loan Mortgage Corporation | |||||||||||||||||||
$ | 971 |
| 5.829 | (c)% | 07/25/23 | $ | 982,155 | ||||||||||||
613 | (a) | 6.039 | (c) | 07/25/26 | 625,449 | ||||||||||||||
IO | |||||||||||||||||||
8,481 |
| 1.097 | (c) | 01/25/31 | 781,779 | ||||||||||||||
12,000 |
| 1.764 | (c) | 01/25/41 | 999,220 | ||||||||||||||
Federal National Mortgage Association, IO REMIC | |||||||||||||||||||
4,181 |
| 2.043 | (c) | 10/25/39 | 247,530 | ||||||||||||||
2,754 |
| 2.175 | (c) | 03/25/44 | 201,702 | ||||||||||||||
897 |
| 5.559 | (c) | 08/25/41 | 142,494 | ||||||||||||||
2,673 | Government National Mortgage Association, IO | 5.257 | (c) | 12/20/42 | 447,011 | ||||||||||||||
Total Collateralized Mortgage Obligations - Agency Collateral Series (Cost $3,960,561) | 4,427,340 | ||||||||||||||||||
Commercial Mortgage-Backed Securities (4.7%) | |||||||||||||||||||
633 | BAMLL Commercial Mortgage Securities Trust (a) | 6.494 | (c) | 12/15/31 | 602,024 | ||||||||||||||
COMM Mortgage Trust | |||||||||||||||||||
363 | (a) | 3.495 | 09/10/47 | 268,626 | |||||||||||||||
490 | (a) | 4.309 | (c) | 03/10/46 | 452,679 | ||||||||||||||
139 | (a) | 4.894 | (c) | 07/15/47 | 123,403 | ||||||||||||||
473 | (a) | 4.906 | (c) | 12/10/23 | 449,357 | ||||||||||||||
Commercial Mortgage Pass-Through Certificates | |||||||||||||||||||
335 | (a) | 4.748 | (c) | 02/10/47 | 308,654 | ||||||||||||||
IO | |||||||||||||||||||
4,747 |
| 0.973 | (c) | 02/10/47 | 150,391 | ||||||||||||||
2,553 | COOF Securitization Trust, IO (a) | 3.012 | (c) | 10/25/40 | 259,540 | ||||||||||||||
16,157 | COOF Securitization Trust II, IO (a) | 2.756 | (c) | 08/25/41 | 1,271,852 | ||||||||||||||
EUR | 1,156 | Deco Ltd. (Ireland) (a) | 4.50 | (c) | 11/07/24 | 1,278,742 | |||||||||||||
$ | 2,000 | EQTY Mortgage Trust (a) | 4.439 | (c) | 05/08/31 | 2,007,612 | |||||||||||||
GS Mortgage Securities Trust | |||||||||||||||||||
1,000 | (a) | 4.661 | (c) | 11/10/47 | 854,427 | ||||||||||||||
410 | (a) | 4.662 | (c) | 09/10/47 | 330,937 | ||||||||||||||
JP Morgan Chase Commercial Mortgage Securities Trust | |||||||||||||||||||
690 | (a) | 4.724 | (c) | 07/15/47 | 556,151 | ||||||||||||||
1,500 |
| 6.37 | (c) | 02/12/51 | 1,537,433 | ||||||||||||||
IO | |||||||||||||||||||
6,366 |
| 1.281 | (c) | 07/15/47 | 287,120 |
See Notes to Financial Statements
28
Morgan Stanley Global Fixed Income Opportunities Fund
Portfolio of Investments n April 30, 2017 (unaudited) continued
PRINCIPAL AMOUNT (000) | COUPON RATE | MATURITY DATE | VALUE | ||||||||||||||||
JPMBB Commercial Mortgage Securities Trust | |||||||||||||||||||
$ | 600 | (a) | 3.984 | (c)% | 02/15/48 | $ | 483,030 | ||||||||||||
236 | (a) | 4.108 | (c) | 09/15/47 | 196,438 | ||||||||||||||
1,835 | (a) | 4.816 | (c) | 08/15/47 | 1,548,102 | ||||||||||||||
405 | (a) | 4.822 | (c) | 04/15/47 | 362,170 | ||||||||||||||
1,004 | (a) | 5.214 | (c) | 11/15/45 | 967,641 | ||||||||||||||
IO | |||||||||||||||||||
3,867 |
| 1.242 | (c) | 08/15/47 | 226,749 | ||||||||||||||
3,321 | KGS-Alpha SBA COOF Trust, IO (a) | 2.939 | (c) | 07/25/41 | 427,087 | ||||||||||||||
270 | LB-UBS Commercial Mortgage Trust | 6.456 | (c) | 09/15/45 | 274,804 | ||||||||||||||
GBP | 725 | Logistics PLC (United Kingdom) (a) | 3.756 | (c) | 08/20/25 | 944,330 | |||||||||||||
$ | 1,000 | Morgan Stanley Bank of America Merrill Lynch Trust (a) | 4.75 | 12/15/46 | 982,475 | ||||||||||||||
2,000 | Motel 6 Trust (a) | 5.279 | 02/05/30 | 2,015,863 | |||||||||||||||
EUR | 1,200 | Taurus Ltd. (Germany) | 4.40 | (c) | 02/01/26 | 1,319,681 | |||||||||||||
Wells Fargo Commercial Mortgage Trust | |||||||||||||||||||
$ | 535 | (a) | 3.938 | 08/15/50 | 450,865 | ||||||||||||||
650 | (a) | 4.51 | (c) | 04/15/50 | 529,857 | ||||||||||||||
WF-RBS Commercial Mortgage Trust | |||||||||||||||||||
248 | (a) | 3.692 | 11/15/47 | 161,572 | |||||||||||||||
1,005 | (a) | 3.803 | (c) | 11/15/47 | 744,407 | ||||||||||||||
303 | (a) | 3.986 | 05/15/47 | 235,110 | |||||||||||||||
419 | (a) | 4.137 | (c) | 10/15/57 | 335,354 | ||||||||||||||
250 | (a) | 4.274 | (c) | 05/15/45 | 226,355 | ||||||||||||||
541 | (a) | 5.147 | (c) | 09/15/46 | 515,319 | ||||||||||||||
Total Commercial Mortgage-Backed Securities (Cost $24,272,481) | 23,686,157 | ||||||||||||||||||
Mortgages - Other (12.4%) | |||||||||||||||||||
Alba PLC (United Kingdom) | |||||||||||||||||||
GBP | 400 |
| 2.356 | (c) | 04/24/49 | 504,494 | |||||||||||||
500 |
| 2.956 | (c) | 04/24/49 | 603,986 | ||||||||||||||
Alternative Loan Trust | |||||||||||||||||||
$ | 941 |
| 1.121 | (c) | 03/25/47 | 684,512 | |||||||||||||
307 |
| 1.151 | (c) | 02/25/47 | 283,358 | ||||||||||||||
217 |
| 1.171 | (c) | 05/25/47 | 201,011 | ||||||||||||||
567 |
| 1.491 | (c) | 10/25/35 | 430,674 | ||||||||||||||
465 |
| 2.71 | (c) | 10/25/35 | 395,529 | ||||||||||||||
184 |
| 2.96 | (c) | 08/25/35 | 164,876 | ||||||||||||||
527 |
| 3.009 | (c) | 05/25/36 | 385,578 | ||||||||||||||
41 |
| 5.50 | 02/25/36 | 35,799 |
See Notes to Financial Statements
29
Morgan Stanley Global Fixed Income Opportunities Fund
Portfolio of Investments n April 30, 2017 (unaudited) continued
PRINCIPAL AMOUNT (000) | COUPON RATE | MATURITY DATE | VALUE | ||||||||||||||||
$ | 603 |
| 6.00 | % | 04/25/36 | $ | 471,168 | ||||||||||||
164 |
| 6.00 | 04/25/36 | 127,476 | |||||||||||||||
318 |
| 6.00 | 07/25/37 | 282,611 | |||||||||||||||
PAC | |||||||||||||||||||
32 |
| 5.50 | 02/25/36 | 27,514 | |||||||||||||||
86 |
| 6.00 | 04/25/36 | 71,772 | |||||||||||||||
American Home Mortgage Assets Trust | |||||||||||||||||||
222 |
| 1.116 | (c) | 03/25/47 | 189,237 | ||||||||||||||
388 |
| 1.632 | (c) | 10/25/46 | 342,391 | ||||||||||||||
American Home Mortgage Investment Trust | |||||||||||||||||||
244 | (a) | 6.60 | 01/25/37 | 129,443 | |||||||||||||||
IO | |||||||||||||||||||
3,311 |
| 2.078 | 05/25/47 | 581,066 | |||||||||||||||
Banc of America Alternative Loan Trust | |||||||||||||||||||
1,510 |
| 1.441 | (c) | 11/25/36 | 1,034,866 | ||||||||||||||
233 |
| 1.641 | (c) | 07/25/46 | 164,837 | ||||||||||||||
Banc of America Funding Trust | |||||||||||||||||||
313 |
| 5.25 | 07/25/37 | 313,836 | |||||||||||||||
119 |
| 6.00 | 07/25/37 | 96,986 | |||||||||||||||
BCAP LLC Trust | |||||||||||||||||||
792 | (a) | 1.162 | (c) | 07/26/35 | 733,411 | ||||||||||||||
266 | (a) | 3.483 | (c) | 03/26/37 | 220,703 | ||||||||||||||
763 | Bear Stearns Structured Products, Inc. Trust | 3.293 | (c) | 01/26/36 | 676,634 | ||||||||||||||
Bear Stearns Trust | |||||||||||||||||||
563 |
| 2.742 | (c) | 05/25/36 | 483,332 | ||||||||||||||
187 |
| 3.466 | (c) | 05/25/47 | 163,101 | ||||||||||||||
181 | Chase Mortgage Finance Trust | 1.591 | (c) | 02/25/37 | 108,641 | ||||||||||||||
114 | ChaseFlex Trust | 6.50 | 02/25/35 | 111,587 | |||||||||||||||
CHL Mortgage Pass-Through Trust | |||||||||||||||||||
577 |
| 2.857 | (c) | 09/25/34 | 499,960 | ||||||||||||||
444 |
| 5.50 | 05/25/34 | 453,100 | |||||||||||||||
1,580 | CHL Mortgage Pass-Through Trust Resecuritization | 6.00 | 12/25/36 | 1,511,241 | |||||||||||||||
261 | Citigroup Mortgage Loan Trust | 3.334 | (c) | 11/25/36 | 236,379 | ||||||||||||||
Credit Suisse European Mortgage Capital Ltd. (Ireland) | |||||||||||||||||||
EUR | 1,925 | (a) | 2.75 | (c) | 04/20/20 | 2,059,799 | |||||||||||||
IO | |||||||||||||||||||
1,925 | (a) | 0.25 | 04/20/20 | 10,482 | |||||||||||||||
Credit Suisse First Boston Mortgage Securities Corp. | |||||||||||||||||||
$ | 971 |
| 6.50 | 12/25/33 | 1,032,325 | ||||||||||||||
685 |
| 7.50 | 10/25/32 | 706,963 |
See Notes to Financial Statements
30
Morgan Stanley Global Fixed Income Opportunities Fund
Portfolio of Investments n April 30, 2017 (unaudited) continued
PRINCIPAL AMOUNT (000) | COUPON RATE | MATURITY DATE | VALUE | ||||||||||||||||
CSMC Mortgage-Backed Trust | |||||||||||||||||||
$ | 1,055 |
| 5.587 | (c)% | 04/25/37 | $ | 492,962 | ||||||||||||
2,019 |
| 6.50 | 05/25/36 | 996,554 | |||||||||||||||
CSMC Trust | |||||||||||||||||||
900 | (a) | 4.662 | (c) | 11/25/57 | 904,978 | ||||||||||||||
764 | (a) | 4.826 | (c) | 08/25/62 | 755,495 | ||||||||||||||
GBP | 1,000 | Eurosail PLC (United Kingdom) | 1.294 | (c) | 06/13/45 | 1,177,721 | |||||||||||||
Fannie Mae Connecticut Avenue Securities | |||||||||||||||||||
$ | 795 |
| 4.991 | (c) | 05/25/25 | 862,810 | |||||||||||||
1,596 |
| 5.891 | (c) | 11/25/24 | 1,822,064 | ||||||||||||||
GBP | 700 | Farringdon Mortgages No. 2 PLC (United Kingdom) | 1.836 | (c) | 07/15/47 | 859,341 | |||||||||||||
First Horizon Alternative Mortgage Securities Trust | |||||||||||||||||||
$ | 67 |
| 6.00 | 08/25/36 | 56,087 | ||||||||||||||
479 |
| 6.25 | 08/25/36 | 383,121 | |||||||||||||||
Freddie Mac Structured Agency Credit Risk Debt Notes | |||||||||||||||||||
720 |
| 4.741 | (c) | 09/25/24 | 781,938 | ||||||||||||||
466 |
| 4.991 | (c) | 08/25/24 | 507,518 | ||||||||||||||
1,100 |
| 5.241 | (c) | 11/25/23 | 1,213,874 | ||||||||||||||
GreenPoint Mortgage Funding Trust | |||||||||||||||||||
656 |
| 1.151 | (c) | 02/25/37 | 603,284 | ||||||||||||||
627 |
| 1.171 | (c) | 01/25/37 | 574,587 | ||||||||||||||
277 |
| 1.281 | (c) | 02/25/36 | 256,107 | ||||||||||||||
EUR | 1,603 | Grifonas Finance PLC (Greece) | 0.042 | (c) | 08/28/39 | 1,423,147 | |||||||||||||
GSR Mortgage Loan Trust | |||||||||||||||||||
$ | 279 |
| 3.35 | (c) | 03/25/37 | 241,449 | |||||||||||||
39 |
| 3.50 | (c) | 05/25/35 | 35,963 | ||||||||||||||
1,437 |
| 3.858 | (c) | 12/25/34 | 1,389,536 | ||||||||||||||
Impac CMB Trust | |||||||||||||||||||
124 |
| 1.726 | (c) | 04/25/35 | 97,655 | ||||||||||||||
153 |
| 1.741 | (c) | 04/25/35 | 103,551 | ||||||||||||||
516 |
| 1.771 | (c) | 10/25/35 | 451,728 | ||||||||||||||
JP Morgan Alternative Loan Trust | |||||||||||||||||||
330 |
| 6.00 | 12/25/35 | 300,989 | |||||||||||||||
233 |
| 6.00 | 08/25/36 | 236,420 | |||||||||||||||
Lehman Mortgage Trust | |||||||||||||||||||
48 |
| 5.50 | 11/25/35 | 44,396 | |||||||||||||||
170 |
| 5.50 | 02/25/36 | 150,793 | |||||||||||||||
162 |
| 5.50 | 02/25/36 | 150,685 | |||||||||||||||
1,079 |
| 6.00 | 06/25/37 | 717,745 | |||||||||||||||
637 |
| 6.50 | 09/25/37 | 469,971 |
See Notes to Financial Statements
31
Morgan Stanley Global Fixed Income Opportunities Fund
Portfolio of Investments n April 30, 2017 (unaudited) continued
PRINCIPAL AMOUNT (000) | COUPON RATE | MATURITY DATE | VALUE | ||||||||||||||||
$ | 1,240 | Lehman XS Trust | 1.211 | (c)% | 06/25/47 | $ | 1,023,088 | ||||||||||||
EUR | 1,584 | Ludgate Funding PLC (United Kingdom) | 0.091 | (c) | 12/01/60 | 1,402,757 | |||||||||||||
$ | 1,347 | Luminent Mortgage Trust | 1.221 | (c) | 05/25/37 | 1,087,324 | |||||||||||||
GBP | 766 | Mansard Mortgages PLC (United Kingdom) | 1.436 | (c) | 10/15/48 | 920,332 | |||||||||||||
MASTR Adjustable Rate Mortgages Trust | |||||||||||||||||||
$ | 810 |
| 3.08 | (c) | 02/25/36 | 750,482 | |||||||||||||
693 | (a) | 3.354 | (c) | 11/25/35 | 561,733 | ||||||||||||||
1,661 | MASTR Alternative Loan Trust | 6.00 | 05/25/33 | 1,727,033 | |||||||||||||||
95 | MASTR Asset Securitization Trust | 6.00 | (c) | 06/25/36 | 91,840 | ||||||||||||||
2,495 | Merrill Lynch Mortgage Investors Trust, IO (a) | 2.151 | (c) | 02/25/36 | 238,554 | ||||||||||||||
GBP | 197 | Money Partners Securities 4 PLC (Ireland) | 5.144 | (c) | 03/15/40 | 267,310 | |||||||||||||
$ | 765 | MortgageIT Trust | 1.441 | (c) | 10/25/35 | 729,641 | |||||||||||||
Nomura Asset Acceptance Corp. Alternative Loan Trust | |||||||||||||||||||
323 |
| 1.051 | (c) | 10/25/36 | 249,068 | ||||||||||||||
2,495 |
| 5.755 | (c) | 06/25/36 | 1,328,333 | ||||||||||||||
GBP | 1,000 | Paragon Mortgages No. 13 PLC (United Kingdom) | 1.136 | (c) | 01/15/39 | 1,131,037 | |||||||||||||
RALI Trust | |||||||||||||||||||
$ | 164 |
| 6.00 | 04/25/36 | 142,147 | ||||||||||||||
228 |
| 6.00 | 08/25/36 | 192,366 | |||||||||||||||
328 |
| 6.00 | 11/25/36 | 279,686 | |||||||||||||||
609 |
| 6.00 | 11/25/36 | 520,279 | |||||||||||||||
71 |
| 6.00 | 01/25/37 | 56,003 | |||||||||||||||
PAC | |||||||||||||||||||
90 |
| 6.00 | 04/25/36 | 78,028 | |||||||||||||||
Reperforming Loan REMIC Trust | |||||||||||||||||||
480 | (a) | 6.50 | 03/25/35 | 477,421 | |||||||||||||||
679 | (a) | 7.50 | 11/25/34 | 687,320 | |||||||||||||||
1,050 | Residential Asset Securitization Trust | 6.00 | 05/25/36 | 993,377 | |||||||||||||||
ResLoC UK PLC (United Kingdom) | |||||||||||||||||||
EUR | 1,125 |
| 0.12 | (c) | 12/15/43 | 1,028,383 | |||||||||||||
GBP | 799 |
| 0.564 | (c) | 12/15/43 | 944,097 | |||||||||||||
$ | 1,080 | RFMSI Series Trust | 6.00 | 07/25/36 | 1,034,210 | ||||||||||||||
GBP | 958 | RMAC Securities No. 1 PLC (United Kingdom) | 0.814 | (c) | 06/12/44 | 1,123,413 | |||||||||||||
1,000 | Southern Pacific Securities PLC (United Kingdom) | 0.877 | (c) | 03/10/44 | 1,193,179 | ||||||||||||||
$ | 292 | STARM Mortgage Loan Trust | 3.428 | (c) | 10/25/37 | 274,944 | |||||||||||||
Structured Adjustable Rate Mortgage Loan Trust | |||||||||||||||||||
921 |
| 1.944 | (c) | 11/25/34 | 830,856 | ||||||||||||||
660 |
| 3.303 | (c) | 06/25/37 | 617,842 |
See Notes to Financial Statements
32
Morgan Stanley Global Fixed Income Opportunities Fund
Portfolio of Investments n April 30, 2017 (unaudited) continued
PRINCIPAL AMOUNT (000) | COUPON RATE | MATURITY DATE | VALUE | ||||||||||||||||
$ | 1,787 | Structured Asset Mortgage Investments II Trust | 1.47 | (c)% | 04/19/35 | $ | 1,633,085 | ||||||||||||
2,328 | Structured Asset Securities Corp., IO (a) | 3.798 | (c) | 07/25/35 | 308,819 | ||||||||||||||
2,507 | TBW Mortgage-Backed Trust | 6.50 | 07/25/36 | 1,738,776 | |||||||||||||||
Washington Mutual Mortgage Pass-Through Certificates Trust | |||||||||||||||||||
932 |
| 1.422 | (c) | 04/25/47 | 766,491 | ||||||||||||||
1,004 |
| 1.632 | (c) | 05/25/46 | 814,059 | ||||||||||||||
344 |
| 2.894 | (c) | 10/25/36 | 323,110 | ||||||||||||||
Total Mortgages - Other (Cost $59,751,035) | 62,159,570 | ||||||||||||||||||
U.S. Treasury Securities (1.6%) | |||||||||||||||||||
U.S. Treasury Bonds | |||||||||||||||||||
2,700 |
| 2.50 | 02/15/45 | 2,461,007 | |||||||||||||||
4,600 |
| 3.875 | 08/15/40 | 5,386,853 | |||||||||||||||
Total U.S. Treasury Securities (Cost $9,015,271) | 7,847,860 | ||||||||||||||||||
Variable Rate Senior Loan Interests (1.9%) | |||||||||||||||||||
995 | American Bath Group, LLC, Term B | 6.40 | 09/30/23 | 1,008,885 | |||||||||||||||
593 | Apex Tool Group LLC, Term B | 4.50 | 02/01/20 | 584,634 | |||||||||||||||
1,200 | Checkers Drive-In Restaurants, Term Loan | 1.00 | 04/25/24 | 1,195,500 | |||||||||||||||
713 | Commercial Barge Line Co., 1st Lien Term | 9.75 | 11/12/20 | 654,609 | |||||||||||||||
1,350 | Commercial Vehicle Group, Inc., Term B | 1.00 | 04/12/23 | 1,360,125 | |||||||||||||||
877 | Coveris Holdings SA (Luxembourg), Term B | 4.65 | 05/08/19 | 878,655 | |||||||||||||||
741 | Gruden Acquisition, Inc., 1st Lien Term | 5.90 | 08/18/22 | 719,332 | |||||||||||||||
658 | Harsco Corp., Term B | 6.00 | 11/02/23 | 671,929 | |||||||||||||||
1,000 | Kemet Electronic Corp., Term B | 1.00 | 04/21/24 | 980,000 | |||||||||||||||
1,240 | Neiman Marcus Group, Inc., Term Loan | 4.25 | 10/25/20 | 992,996 | |||||||||||||||
500 | SAExploration Holdings, Inc., Term Loan | 10.00 | 06/28/23 | 495,000 | |||||||||||||||
Total Variable Rate Senior Loan Interests (Cost $9,660,229) | 9,541,665 | ||||||||||||||||||
Short-Term Investments (4.3%) | |||||||||||||||||||
U.S. Treasury Securities (1.4%) | |||||||||||||||||||
U.S. Treasury Bills | |||||||||||||||||||
554 | (o)(p) | 0.615 | 07/27/17 | 552,949 | |||||||||||||||
6,492 | (o)(p) | 0.637 | 07/27/17 | 6,479,685 | |||||||||||||||
Total U.S. Treasury Securities (Cost $7,035,369) | 7,032,634 |
See Notes to Financial Statements
33
Morgan Stanley Global Fixed Income Opportunities Fund
Portfolio of Investments n April 30, 2017 (unaudited) continued
NUMBER OF SHARES (000) | VALUE | ||||||||||||||||||
Securities held as Collateral on Loaned Securities (1.9%) | |||||||||||||||||||
Investment Company (1.9%) | |||||||||||||||||||
9,654 | Morgan Stanley Institutional Liquidity Funds - Government Portfolio - Institutional Class (See Note 7) (Cost $9,653,525) | $ | 9,653,525 | ||||||||||||||||
Investment Company (1.0%) | |||||||||||||||||||
4,804 | Morgan Stanley Institutional Liquidity Funds - Government Portfolio - Institutional Class (See Note 7) (Cost $4,803,589) | 4,803,589 | |||||||||||||||||
Total Short-Term Investments (Cost $21,492,483) | 21,489,748 | ||||||||||||||||||
Total Investments (Cost $509,245,212) (q)(r) | 102.1 | % | 511,859,130 | ||||||||||||||||
Liabilities in Excess of Other Assets | (2.1 | ) | (10,505,405 | ) | |||||||||||||||
Net Assets | 100.0 | % | $ | 501,353,725 |
Country assignments and aggregations are based generally on third party vendor classifications and information, and may be different from the assignments and aggregations under the policies set forth in the Fund's prospectus and/or statement of additional information relating to geographic classifications.
IO Interest Only.
MTN Medium Term Note.
OFZ Obilgatsyi Federal'novo Zaima (Russian Federal Loan Obligation)
PAC Planned Amortization Class.
PJSC Public Joint Stock Company.
REMIC Real Estate Mortgage Investment Conduit.
(a) 144A security - Certain conditions for public sale may exist. Unless otherwise noted, these securities are deemed to be liquid.
(b) All or a portion of this security was on loan at April 30, 2017.
(c) Variable/Floating Rate Security - Interest rate changes on these instruments are based on changes in a designated base rate. The rates shown are those in effect on April 30, 2017.
(d) Perpetual - One or more securities do not have a predetermined maturity date. Rates for these securities are fixed for a period of time, after which they revert to a floating rate. Interest rates in effect are as of April 30, 2017.
(e) Capital appreciation bond.
(f) Amount is less than 0.05%.
(g) Par is less than $500.
(h) Payment-in-kind security.
(i) Issuer in bankruptcy.
(j) Non-income producing security; bond in default.
(k) Illiquid security.
(l) Acquired through exchange offer.
(m) At April 30, 2017, the Fund held a fair valued security valued at $0, representing 0.0% of net assets. This security has been fair valued as determined in good faith under procedures established by and under the general supervision of the Fund's Trustees.
(n) Multi-step - Coupon rate changes in predetermined increments to maturity. Rate disclosed is as of April 30, 2017. Maturity date disclosed is the ultimate maturity date.
See Notes to Financial Statements
34
Morgan Stanley Global Fixed Income Opportunities Fund
Portfolio of Investments n April 30, 2017 (unaudited) continued
(o) Rate shown is the yield to maturity at April 30, 2017.
(p) All or a portion of the security was pledged to cover margin requirements for swap agreements.
(q) Securities are available for collateral in connection with an open foreign currency forward exchange contracts, futures contracts and swap agreements.
(r) At April 30, 2017, the aggregate cost for federal income tax purposes approximates the aggregate cost for book purposes. The aggregate gross unrealized appreciation is $14,396,883 and the aggregate gross unrealized depreciation is $11,782,965 resulting in net unrealized appreciation of $2,613,918.
Foreign Currency Forward Exchange Contracts Open at April 30, 2017:
COUNTERPARTY | CONTRACTS TO DELIVER | IN EXCHANGE FOR | DELIVERY DATE | UNREALIZED APPRECIATION (DEPRECIATION) | |||||||||||||||
HSBC Bank PLC | $ | 2,526,846 | GBP | 2,025,000 | 05/05/17 | $ | 96,083 | ||||||||||||
HSBC Bank PLC | $ | 2,455,183 | ZAR | 31,500,000 | 05/05/17 | (98,884 | ) | ||||||||||||
HSBC Bank PLC | ZAR | 42,040,497 | $ | 3,316,432 | 05/05/17 | 171,671 | |||||||||||||
JPMorgan Chase Bank NA | BRL | 21,362,881 | $ | 6,849,273 | 05/05/17 | 122,335 | |||||||||||||
JPMorgan Chase Bank NA | BRL | 3,394,445 | $ | 1,076,952 | 05/05/17 | 8,078 | |||||||||||||
JPMorgan Chase Bank NA | BRL | 15,149,681 | $ | 4,809,575 | 05/05/17 | 39,106 | |||||||||||||
JPMorgan Chase Bank NA | IDR | 13,850,000,000 | $ | 1,031,657 | 05/05/17 | (7,213 | ) | ||||||||||||
JPMorgan Chase Bank NA | RUB | 122,750,000 | $ | 2,053,362 | 05/05/17 | (101,706 | ) | ||||||||||||
JPMorgan Chase Bank NA | RUB | 154,498,000 | $ | 2,669,074 | 05/05/17 | (43,380 | ) | ||||||||||||
JPMorgan Chase Bank NA | $ | 138,099 | IDR | 1,841,000,000 | 05/05/17 | (8 | ) | ||||||||||||
JPMorgan Chase Bank NA | $ | 2,467,068 | INR | 162,000,000 | 05/05/17 | 50,359 | |||||||||||||
JPMorgan Chase Bank NA | $ | 2,467,433 | INR | 161,000,000 | 05/05/17 | 34,454 | |||||||||||||
JPMorgan Chase Bank NA | ZAR | 14,300,000 | $ | 1,063,460 | 05/05/17 | (6,225 | ) | ||||||||||||
JPMorgan Chase Bank NA | ZAR | 47,200,000 | $ | 3,481,113 | 05/05/17 | (49,595 | ) | ||||||||||||
State Street Bank and Trust Co. | SEK | 21,200,000 | $ | 2,377,948 | 05/05/17 | (15,801 | ) | ||||||||||||
UBS AG | COP | 14,152,676,376 | $ | 4,846,392 | 05/05/17 | 37,790 | |||||||||||||
UBS AG | IDR | 58,724,628,400 | $ | 4,369,392 | 05/05/17 | (35,466 | ) | ||||||||||||
UBS AG | $ | 2,392,421 | ZAR | 30,000,000 | 05/05/17 | (148,326 | ) | ||||||||||||
Australia and New Zealand Banking Group | AUD | 6,978,956 | $ | 5,301,355 | 05/08/17 | 76,110 | |||||||||||||
Australia and New Zealand Banking Group | JPY | 113,164,000 | $ | 1,020,714 | 05/08/17 | 5,336 | |||||||||||||
Australia and New Zealand Banking Group | $ | 2,548,068 | GBP | 1,983,000 | 05/08/17 | 20,681 | |||||||||||||
Bank of America NA | $ | 727,641 | EUR | 685,252 | 05/08/17 | 18,985 | |||||||||||||
Citibank NA | EUR | 2,302,698 | SEK | 22,000,000 | 05/08/17 | (24,479 | ) | ||||||||||||
Citibank NA | EUR | 70,630,678 | $ | 75,353,751 | 05/08/17 | (1,602,890 | ) | ||||||||||||
Citibank NA | $ | 38,183 | EUR | 35,062 | 05/08/17 | 20 | |||||||||||||
Citibank NA | $ | 3,416,748 | SEK | 30,548,464 | 05/08/17 | 33,087 | |||||||||||||
HSBC Bank PLC | AUD | 3,775,000 | $ | 2,827,939 | 05/08/17 | 1,543 | |||||||||||||
HSBC Bank PLC | CAD | 3,400,000 | $ | 2,528,445 | 05/08/17 | 37,438 | |||||||||||||
HSBC Bank PLC | CAD | 3,389,229 | $ | 2,531,128 | 05/08/17 | 48,013 | |||||||||||||
HSBC Bank PLC | GBP | 1,925,000 | EUR | 2,253,030 | 05/08/17 | (38,796 | ) | ||||||||||||
HSBC Bank PLC | GBP | 18,530,449 | $ | 23,137,860 | 05/08/17 | (866,204 | ) | ||||||||||||
HSBC Bank PLC | $ | 81,853 | EUR | 76,500 | 05/08/17 | 1,498 | |||||||||||||
HSBC Bank PLC | $ | 19,260 | EUR | 18,000 | 05/08/17 | 353 | |||||||||||||
HSBC Bank PLC | $ | 235,909 | EUR | 220,381 | 05/08/17 | 4,210 | |||||||||||||
HSBC Bank PLC | $ | 2,628 | GBP | 2,047 | 05/08/17 | 23 |
See Notes to Financial Statements
35
Morgan Stanley Global Fixed Income Opportunities Fund
Portfolio of Investments n April 30, 2017 (unaudited) continued
COUNTERPARTY | CONTRACTS TO DELIVER | IN EXCHANGE FOR | DELIVERY DATE | UNREALIZED APPRECIATION (DEPRECIATION) | |||||||||||||||
HSBC Bank PLC | $ | 2,472,400 | GBP | 1,940,000 | 05/08/17 | $ | 40,647 | ||||||||||||
JPMorgan Chase Bank NA | EUR | 3,177,455 | PLN | 13,500,000 | 05/08/17 | 17,853 | |||||||||||||
JPMorgan Chase Bank NA | EUR | 220,381 | $ | 236,528 | 05/08/17 | (3,591 | ) | ||||||||||||
JPMorgan Chase Bank NA | PLN | 3,487,346 | $ | 876,952 | 05/08/17 | (21,981 | ) | ||||||||||||
JPMorgan Chase Bank NA | $ | 45,915 | GBP | 35,726 | 05/08/17 | 364 | |||||||||||||
State Street Bank and Trust Co. | MXN | 48,650,000 | $ | 2,559,449 | 05/08/17 | (22,495 | ) | ||||||||||||
UBS AG | EUR | 650,000 | $ | 693,163 | 05/08/17 | (15,053 | ) | ||||||||||||
UBS AG | EUR | 394,636 | $ | 420,650 | 05/08/17 | (9,331 | ) | ||||||||||||
UBS AG | MXN | 84,183,533 | $ | 4,471,022 | 05/08/17 | 3,249 | |||||||||||||
UBS AG | MXN | 69,814,155 | $ | 3,721,625 | 05/08/17 | 16,461 | |||||||||||||
UBS AG | $ | 240,689 | EUR | 221,323 | 05/08/17 | 457 | |||||||||||||
UBS AG | $ | 54,155 | EUR | 50,875 | 05/08/17 | 1,277 | |||||||||||||
UBS AG | $ | 72,901 | EUR | 68,376 | 05/08/17 | 1,599 | |||||||||||||
UBS AG | $ | 31,527 | GBP | 25,175 | 05/08/17 | 1,085 | |||||||||||||
UBS AG | $ | 78,580 | GBP | 63,342 | 05/08/17 | 3,472 | |||||||||||||
UBS AG | $ | 14,533 | HKD | 112,855 | 05/08/17 | (23 | ) | ||||||||||||
UBS AG | $ | 2,441,121 | SEK | 21,580,000 | 05/08/17 | (4,094 | ) | ||||||||||||
Net Unrealized Depreciation | $ | (2,221,904 | ) |
Futures Contracts Open at April 30, 2017:
NUMBER OF CONTRACTS | LONG/SHORT | DESCRIPTION, DELIVERY MONTH AND YEAR | UNDERLYING FACE AMOUNT AT VALUE | UNREALIZED APPRECIATION (DEPRECIATION) | |||||||||||||||
72 | Long | U.S. Treasury 2 yr. Note, Jun-17 | $15,595,875 | $60,750 | |||||||||||||||
129 | Long | Australian 10 yr. Bond, Jun-17 | 12,530,249 | 274,905 | |||||||||||||||
28 | Long | U.S. Treasury Ultra Bond, Jun-17 | 4,562,250 | 53,724 | |||||||||||||||
27 | Short | U.S. Treasury 10 yr. Note, Jun-17 | (3,394,406) | 1,687 | |||||||||||||||
39 | Short | German Euro Bund, Jun-17 | (6,872,849) | (45,544) | |||||||||||||||
154 | Short | U.S. Treasury 5 yr. Note, Jun-17 | (18,234,563) | (268,248) | |||||||||||||||
Net Unrealized Appreciation | $ | 77,274 |
See Notes to Financial Statements
36
Morgan Stanley Global Fixed Income Opportunities Fund
Portfolio of Investments n April 30, 2017 (unaudited) continued
Credit Default Swap Agreements Open at April 30, 2017:
SWAP COUNTERPARTY & REFERENCE OBLIGATION | BUY/SELL PROTECTION | NOTIONAL AMOUNT (000) | INTEREST RATE | TERMINATION DATE | UNREALIZED DEPRECIATION | UPFRONT PAYMENTS PAID (RECEIVED) | VALUE | CREDIT RATING OF REFERENCE OBLIGATION† | |||||||||||||||||||||||||||
Credit Suisse International CMBX.NA.BBB.60 | Sell | $ | 1,500 | 3.00 | % | 5/11/63 | $ | (66,534 | ) | $ | (100,239 | ) | $ | (166,773 | ) | NR | |||||||||||||||||||
Credit Suisse International CMBX.NA.BBB.60 | Sell | 3,000 | 3.00 | 5/11/63 | (130,414 | ) | (203,132 | ) | (333,546 | ) | NR | ||||||||||||||||||||||||
Credit Suisse International CMBX.NA.BBB.60 | Sell | 4,096 | 3.00 | 5/11/63 | (300,716 | ) | (154,686 | ) | (455,402 | ) | NR | ||||||||||||||||||||||||
Deutsche Bank AG CMBX.NA.BB.60 | Sell | 335 | 5.00 | 5/11/63 | (65,242 | ) | 2,284 | (62,958 | ) | NR | |||||||||||||||||||||||||
Goldman Sachs International CMBX.NA.BB.60 | Sell | 416 | 5.00 | 5/11/63 | (18,297 | ) | (59,883 | ) | (78,180 | ) | NR | ||||||||||||||||||||||||
Goldman Sachs International CMBX.NA.BB.60 | Sell | 586 | 5.00 | 5/11/63 | (109,729 | ) | (401 | ) | (110,130 | ) | NR | ||||||||||||||||||||||||
Goldman Sachs International CMBX.NA.BBB.60 | Sell | 2,473 | 3.00 | 5/11/63 | (180,147 | ) | (94,806 | ) | (274,953 | ) | NR | ||||||||||||||||||||||||
Goldman Sachs International CMBX.NA.BBB.60 | Sell | 2,431 | 3.00 | 5/11/63 | (175,775 | ) | (94,508 | ) | (270,283 | ) | NR | ||||||||||||||||||||||||
Morgan Stanley & Co., LLC** CDX.NA.HY.27 | Buy | 3,465 | 5.00 | 12/20/21 | (159,689 | ) | (144,356 | ) | (304,045 | ) | NR | ||||||||||||||||||||||||
Morgan Stanley & Co., LLC* CDX.NA.HY.27 | Buy | 24,750 | 5.00 | 12/20/21 | (563,578 | ) | (1,609,369 | ) | (2,172,947 | ) | NR | ||||||||||||||||||||||||
Total Credit Default Swaps | $ | (1,770,121 | ) | $ | (2,459,096 | ) | $ | (4,229,217 | ) |
See Notes to Financial Statements
37
Morgan Stanley Global Fixed Income Opportunities Fund
Portfolio of Investments n April 30, 2017 (unaudited) continued
Interest Rate Swap Agreements Open at April 30, 2017:
SWAP COUNTERPARTY | NOTIONAL AMOUNT (000) | FLOATING RATE INDEX | PAY/RECEIVE FLOATING RATE | FIXED RATE | TERMINATION DATE | UNREALIZED DEPRECIATION | |||||||||||||||||||||
Morgan Stanley & Co., LLC* | $ | 5,000 | 3 Month LIBOR | Receive | 1.86 | % | 12/08/21 | $ | (17,349 | ) | |||||||||||||||||
Morgan Stanley & Co., LLC* | 5,100 | 3 Month LIBOR | Receive | 2.07 | 12/21/21 | (67,740 | ) | ||||||||||||||||||||
Morgan Stanley & Co., LLC* | 8,000 | 3 Month LIBOR | Receive | 2.28 | 12/08/26 | (72,846 | ) | ||||||||||||||||||||
Morgan Stanley & Co., LLC* | 21,800 | 3 Month LIBOR | Receive | 2.48 | 12/21/26 | (583,977 | ) | ||||||||||||||||||||
Morgan Stanley & Co., LLC* | 1,100 | 3 Month LIBOR | Receive | 2.59 | 12/08/46 | (16,670 | ) | ||||||||||||||||||||
Morgan Stanley & Co., LLC* | 6,900 | 3 Month LIBOR | Receive | 2.74 | 12/21/46 | (328,824 | ) | ||||||||||||||||||||
Total Unrealized Depreciation | $ | (1,087,406 | ) |
† Credit rating as issued by Standard & Poor's.
* Cleared swap agreement, the broker is Morgan Stanley & Co., LLC.
NR Not rated.
LIBOR London Interbank Offered Rate.
Currency Abbreviations:
AUD Australian Dollar.
BRL Brazilian Real.
CAD Canadian Dollar.
COP Colombian Peso.
DKK Danish Krone.
EUR Euro.
GBP British Pound.
HKD Hong Kong Dollar.
IDR Indonesian Rupiah.
INR Indian Rupee.
JPY Japanese Yen.
MXN Mexican Peso.
PLN Polish Zloty.
RUB Russian Ruble.
SEK Swedish Krona.
ZAR South African Rand.
See Notes to Financial Statements
38
Morgan Stanley Global Fixed Income Opportunities Fund
Financial Statements
Statement of Assets and Liabilities April 30, 2017 (unaudited)
Assets: | |||||||
Investments in securities, at value (cost $494,788,098) (Including $19,351,164 for securities loaned) | $ | 497,402,016 | |||||
Investment in affiliate, at value (cost $14,457,114) | 14,457,114 | ||||||
Total investments in securities, at value (cost $509,245,212) | 511,859,130 | ||||||
Unrealized appreciation on open foreign currency forward exchange contracts | 893,637 | ||||||
Cash | 868,588 | ||||||
Receivable for: | |||||||
Interest | 5,275,206 | ||||||
Investments sold | 650,829 | ||||||
Variation margin on open futures contracts | 516,198 | ||||||
Shares of beneficial interest sold | 438,954 | ||||||
Foreign withholding taxes reclaimed | 26,044 | ||||||
Dividends from affiliate | 2,637 | ||||||
Premium paid on open swap agreements | 2,284 | ||||||
Prepaid expenses and other assets | 142,587 | ||||||
Total Assets | 520,676,094 | ||||||
Liabilities: | |||||||
Collateral on securities loaned, at value | 9,653,525 | ||||||
Unrealized depreciation on open swap agreements | 1,046,854 | ||||||
Unrealized depreciation on open foreign currency forward exchange contracts | 3,115,541 | ||||||
Payable for: | |||||||
Investments purchased | 3,481,000 | ||||||
Premium received on open swap agreements | 707,655 | ||||||
Shares of beneficial interest redeemed | 585,097 | ||||||
Advisory fee | 130,260 | ||||||
Dividends to shareholders | 93,094 | ||||||
Variation margin on open swap agreements | 91,088 | ||||||
Transfer and sub transfer agent fees | 62,579 | ||||||
Trustees' fees | 55,285 | ||||||
Distribution fee | 38,902 | ||||||
Administration fee | 32,794 | ||||||
Deferred capital gain country tax | 43,528 | ||||||
Accrued expenses and other payables | 185,167 | ||||||
Total Liabilities | 19,322,369 | ||||||
Net Assets | $ | 501,353,725 | |||||
Composition of Net Assets: | |||||||
Paid-in-capital | $ | 584,895,487 | |||||
Net unrealized depreciation (Net of $43,528 of deferred capital gain country tax) | (2,419,448 | ) | |||||
Dividends in excess of net investment income | (3,005,970 | ) | |||||
Accumulated net realized loss | (78,116,344 | ) | |||||
Net Assets | $ | 501,353,725 | |||||
Class A Shares: | |||||||
Net Assets | $ | 80,703,189 | |||||
Shares Outstanding (unlimited shares authorized, $0.01 par value) | 14,566,476 | ||||||
Net Asset Value Per Share | $ | 5.54 | |||||
Maximum Offering Price Per Share, (net asset value plus 4.44% of net asset value) | $ | 5.79 | |||||
Class B Shares: | |||||||
Net Assets | $ | 523,227 | |||||
Shares Outstanding (unlimited shares authorized, $0.01 par value) | 94,009 | ||||||
Net Asset Value Per Share | $ | 5.57 | |||||
Class L Shares: | |||||||
Net Assets | $ | 8,960,878 | |||||
Shares Outstanding (unlimited shares authorized, $0.01 par value) | 1,617,636 | ||||||
Net Asset Value Per Share | $ | 5.54 | |||||
Class I Shares: | |||||||
Net Assets | $ | 188,053,751 | |||||
Shares Outstanding (unlimited shares authorized, $0.01 par value) | 33,568,518 | ||||||
Net Asset Value Per Share | $ | 5.60 | |||||
Class C Shares: | |||||||
Net Assets | $ | 22,163,776 | |||||
Shares Outstanding (unlimited shares authorized, $0.01 par value) | 4,004,622 | ||||||
Net Asset Value Per Share | $ | 5.53 | |||||
Class IS Shares: | |||||||
Net Assets | $ | 200,948,904 | |||||
Shares Outstanding (unlimited shares authorized, $0.01 par value) | 35,865,937 | ||||||
Net Asset Value Per Share | $ | 5.60 |
See Notes to Financial Statements
39
Morgan Stanley Global Fixed Income Opportunities Fund
Financial Statements continued
Statement of Operations For the six months ended April 30, 2017 (unaudited)
Net Investment Income: Income | |||||||
Interest (net of $38,560 foreign withholding tax) | $ | 10,593,685 | |||||
Income from securities loaned - net | 32,141 | ||||||
Dividends from affiliate (Note 7) | 30,075 | ||||||
Total Income | 10,655,901 | ||||||
Expenses | |||||||
Advisory fee (Note 4) | 776,755 | ||||||
Distribution fee (Class A shares) (Note 5) | 101,069 | ||||||
Distribution fee (Class B shares) (Note 5) | 2,701 | ||||||
Distribution fee (Class L shares) (Note 5) | 22,939 | ||||||
Distribution fee (Class C shares) (Note 5) | 107,802 | ||||||
Administration fee (Note 4) | 194,189 | ||||||
Sub transfer agent fees and expenses (Class A shares) | 45,261 | ||||||
Sub transfer agent fees and expenses (Class B shares) | 534 | ||||||
Sub transfer agent fees and expenses (Class L shares) | 4,514 | ||||||
Sub transfer agent fees and expenses (Class I shares) | 47,450 | ||||||
Sub transfer agent fees and expenses (Class C shares) | 5,786 | ||||||
Professional fees | 66,502 | ||||||
Custodian fees (Note 8) | 61,471 | ||||||
Registration fees | 37,343 | ||||||
Shareholder reports and notices | 27,414 | ||||||
Transfer agent fees and expenses (Class A shares) (Note 6) | 13,042 | ||||||
Transfer agent fees and expenses (Class B shares) (Note 6) | 1,405 | ||||||
Transfer agent fees and expenses (Class L shares) (Note 6) | 1,382 | ||||||
Transfer agent fees and expenses (Class I shares) (Note 6) | 3,762 | ||||||
Transfer agent fees and expenses (Class C shares) (Note 6) | 1,710 | ||||||
Transfer agent fees and expenses (Class IS shares) (Note 6) | 987 | ||||||
Trustees' fees and expenses | 6,049 | ||||||
Other | 43,222 | ||||||
Total Expenses | 1,573,289 | ||||||
Less: rebate from Morgan Stanley affiliated cash sweep (Note 7) | (11,568 | ) | |||||
Less: reimbursement of class specific expenses (Class B shares) (Note 4) | (1,175 | ) | |||||
Net Expenses | 1,560,546 | ||||||
Net Investment Income | 9,095,355 |
See Notes to Financial Statements
40
Morgan Stanley Global Fixed Income Opportunities Fund
Financial Statements continued
Statement of Operations For the six months ended April 30, 2017 (unaudited)
Realized and Unrealized Gain (Loss): Realized Gain (Loss) on: | |||||||
Investments | $ | (4,411,692 | ) | ||||
Futures contracts | 2,474,240 | ||||||
Swap agreements | 448,311 | ||||||
Foreign currency forward exchange contracts | 6,919,989 | ||||||
Foreign currency translation | 84,052 | ||||||
Net Realized Gain | 5,514,900 | ||||||
Change in Unrealized Appreciation (Depreciation) on: | |||||||
Investments (Net of increase in deferred capital gain country tax of $43,528) | 9,466,153 | ||||||
Futures contracts | (373,593 | ) | |||||
Swap agreements | (2,444,143 | ) | |||||
Foreign currency forward exchange contracts | (6,874,118 | ) | |||||
Foreign currency translation | 48,980 | ||||||
Net Change in Unrealized Appreciation (Depreciation) | (176,721 | ) | |||||
Net Gain | 5,338,179 | ||||||
Net Increase | $ | 14,433,534 |
See Notes to Financial Statements
41
Morgan Stanley Global Fixed Income Opportunities Fund
Financial Statements continued
Statements of Changes in Net Assets
FOR THE SIX MONTHS ENDED APRIL 30, 2017 | FOR THE YEAR ENDED OCTOBER 31, 2016 | ||||||||||
(unaudited) | |||||||||||
Increase (Decrease) in Net Assets: Operations: | |||||||||||
Net investment income | $ | 9,095,355 | $ | 14,775,113 | |||||||
Net realized gain (loss) | 5,514,900 | (5,211,734 | ) | ||||||||
Net change in unrealized appreciation (depreciation) | (176,721 | ) | 8,329,917 | ||||||||
Net Increase | 14,433,534 | 17,893,296 | |||||||||
Dividends and Distributions to Shareholders from: | |||||||||||
Class A shares | (1,597,115 | ) | (4,020,915 | ) | |||||||
Class B shares | (9,675 | ) | (29,879 | ) | |||||||
Class L shares | (170,232 | ) | (433,610 | ) | |||||||
Class I shares | (3,801,069 | ) | (6,601,888 | ) | |||||||
Class C shares | (356,181 | ) | (560,218 | ) | |||||||
Class IS shares | (4,202,131 | ) | (4,816,297 | ) | |||||||
Total Dividends | (10,136,403 | ) | (16,462,807 | ) | |||||||
Net increase from transactions in shares of beneficial interest | 8,623,574 | 152,001,755 | |||||||||
Net Increase | 12,920,705 | 153,432,244 | |||||||||
Net Assets: | |||||||||||
Beginning of period | 488,433,020 | 335,000,776 | |||||||||
End of Period (Including dividends in excess of net investment income of $(3,005,970) and $(1,964,922)) | $ | 501,353,725 | $ | 488,433,020 |
See Notes to Financial Statements
42
Morgan Stanley Global Fixed Income Opportunities Fund
Notes to Financial Statements n April 30, 2017 (unaudited)
1. Organization and Accounting Policies
Morgan Stanley Global Fixed Income Opportunities Fund (the "Fund") is registered under the Investment Company Act of 1940, as amended (the "Act"), as a diversified, open-end management investment company. The Fund applies investment company accounting and reporting guidance. The Fund's primary investment objective is to seek a high level of current income and, as a secondary objective, to maximize total return, but only to the extent consistent with its primary objective. The Fund was organized as a Massachusetts business trust on December 20, 1991 and commenced operations on April 9, 1992. On July 28, 1997, the Fund converted to a multiple class share structure.
The Fund offers Class A shares, Class B shares, Class L shares, Class I shares, Class C shares and Class IS shares. The six classes are substantially the same except that most Class A shares are subject to a sales charge imposed at the time of purchase and some Class A shares, most Class B shares, and most Class C shares are subject to a contingent deferred sales charge imposed on shares redeemed within eighteen months, six years and one year, respectively. Class L shares, Class I shares and Class IS shares are not subject to a sales charge. Additionally, Class A shares, Class B shares, Class L shares, and Class C shares incur distribution expenses.
The Fund suspended offering Class B and Class L shares to all investors (February 25, 2013 and April 30, 2015, respectively). Class B and Class L shareholders of the Fund do not have the option of purchasing additional Class B or Class L shares. However, the existing Class B and Class L shareholders may invest through reinvestment of dividends and distributions.
The following is a summary of significant accounting policies:
A. Valuation of Investments — (1) Certain portfolio securities may be valued by an outside pricing service/vendor approved by the Fund's Board of Trustees (the "Trustees"). The pricing service/vendor may employ a pricing model that takes into account, among other things, bids, yield spreads, and/or other market data and specific security characteristics. Alternatively, if a valuation is not available from an outside pricing service/vendor, and the security trades on an exchange, the security may be valued at its latest reported sale price (or at the exchange official closing price if such exchange reports an official closing price), prior to the time when assets are valued. If there are no sales on a given day and if there is no official exchange closing price for that day, the security is valued at the mean between the last reported bid and asked prices if such bid and asked prices are available in the relevant exchanges; (2) an equity portfolio security listed or traded on an exchange is valued at its latest reported sales price (or at the exchange official closing price if such exchange reports an official closing price), and if there were no sales on a given day and if there is no official exchange closing price for that day, the security is valued at the mean between the last reported bid and asked prices if such bids and asked prices are available on the relevant exchanges; (3) all other equity portfolio securities for which over-the-counter ("OTC") market quotations are readily available are valued at the latest reported sales price (or at the market
43
Morgan Stanley Global Fixed Income Opportunities Fund
Notes to Financial Statements n April 30, 2017 (unaudited) continued
official closing price if such market reports an official closing price), and if there was no trading in the security on a given day and if there is no official closing price from relevant markets for that day, the security is valued at the mean between the last reported bid and asked prices if such bid and asked prices are available on the relevant markets. Listed equity securities not traded on the valuation date with no reported bid and asked prices available on the exchange are valued at the mean between the current bid and asked prices obtained from one or more reputable brokers or dealers. An unlisted equity security that does not trade on the valuation date and for which bid and asked prices from the relevant markets are unavailable is valued at the mean between the current bid and asked prices obtained from one or more reputable brokers or dealers. In cases where a security is traded on more than one exchange, the security is valued on the exchange designated as the primary market; (4) when market quotations are not readily available, including circumstances under which Morgan Stanley Investment Management Inc. (the "Adviser") or Morgan Stanley Investment Management Limited (the "Sub-Adviser"), each a wholly owned subsidiary of Morgan Stanley, determines that the closing price, last sale price or the mean between the last reported bid and asked prices are not reflective of a security's market value, portfolio securities are valued at their fair value as determined in good faith under procedures established by and under the general supervision of the Trustees. Occasionally, developments affecting the closing prices of securities and other assets may occur between the times at which valuations of such securities are determined (that is, close of the foreign market on which the securities trade) and the close of business on the New York Stock Exchange ("NYSE"). If developments occur during such periods that are expected to materially affect the value of such securities, such valuations may be adjusted to reflect the estimated fair value of such securities as of the close of the NYSE, as determined in good faith by the Trustees or by the Adviser using a pricing service and/or procedures approved by the Trustees; (5) certain senior collateralized loans ("Senior Loans") are valued based on quotations received from an independent pricing service; (6) futures are valued at the settlement price on the exchange on which they trade or, if a settlement price is unavailable, at the last sale price on the exchange; (7) OTC swaps may be valued by an outside pricing service approved by the Trustees or quotes from a broker or dealer. Swaps cleared on a clearinghouse or exchange may be valued using the closing price provided by the clearinghouse or exchange; (8) quotations of foreign portfolio securities, other assets and liabilities and forward contracts stated in foreign currency are translated into U.S. dollar equivalents at the prevailing market rates prior to the close of the NYSE; and (9) investments in mutual funds, including the Morgan Stanley Institutional Liquidity Funds, are valued at the net asset value ("NAV") as of the close of each business day.
The Trustees have responsibility for determining in good faith the fair value of the investments, and the Trustees may appoint others, such as the Fund's Adviser or a valuation committee, to assist the Trustees in determining fair value and to make the actual calculations pursuant to the fair valuation methodologies previously approved by the Trustees. Under procedures approved by the Trustees, the Fund's Adviser has formed a Valuation Committee whose members are approved by the Trustees. The
44
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Notes to Financial Statements n April 30, 2017 (unaudited) continued
Valuation Committee provides administration and oversight of the Fund's valuation policies and procedures, which are reviewed at least annually by the Trustees. These procedures allow the Fund to utilize independent pricing services, quotations from securities and financial instrument dealers, and other market sources to determine fair value.
The Fund has procedures to determine the fair value of securities and other financial instruments for which market prices are not readily available. Under these procedures, the Valuation Committee convenes on a regular and ad hoc basis to review such securities and considers a number of factors, including valuation methodologies and significant unobservable valuation inputs, when arriving at fair value. The Valuation Committee may employ a market-based approach which may use related or comparable assets or liabilities, recent transactions, market multiples, book values and other relevant information for the investment to determine the fair value of the investment. An income-based valuation approach may also be used in which the anticipated future cash flows of the investment are discounted to calculate fair value. Discounts may also be applied due to the nature or duration of any restrictions on the disposition of the investments. Due to the inherent uncertainty of valuations of such investments, the fair values may differ significantly from the values that would have been used had an active market existed. The Valuation Committee employs various methods for calibrating these valuation approaches including a regular review of valuation methodologies, key inputs and assumptions, transactional back-testing or disposition analysis, and reviews of any related market activity.
B. Accounting for Investments — Security transactions are accounted for on the trade date (date the order to buy or sell is executed). Realized gains and losses on security transactions are determined by the identified cost method. Dividend income and other distributions are recorded on the ex-dividend date. Discounts are accreted and premiums are amortized over the life of the respective securities and are included in interest income. Interest income is accrued daily as earned.
C. Multiple Class Allocations — Investment income, realized and unrealized gain (loss), and non-class specific expenses are allocated daily based upon the proportion of net assets of each class. Class specific expenses are borne by the respective share classes and include Distribution, Transfer Agent and Sub Transfer Agent fees.
D. Senior Loans — Senior Loans are typically structured by a syndicate of lenders ("Lenders"), one or more of which administers the Senior Loan on behalf of the Lenders ("Agent"). Lenders may sell interests in Senior Loans to third parties ("Participations") or may assign all or a portion of their interest in a Senior Loan to third parties ("Assignments"). Senior Loans are exempt from registration under the Securities Act of 1933. Presently, Senior Loans are not readily marketable and are often subject to restrictions on resale.
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Notes to Financial Statements n April 30, 2017 (unaudited) continued
E. Foreign Currency Translation and Foreign Investments — The books and records of the Fund are maintained in U.S. dollars. Foreign currency amounts are translated into U.S. dollars as follows:
— investments, other assets and liabilities at the prevailing rate of exchange on the valuation date;
— investment transactions and investment income at the prevailing rates of exchange on the dates of such transactions.
Although the net assets of the Fund are presented at the foreign exchange rates and market values at the close of the period, the Fund does not isolate that portion of the results of operations arising as a result of changes in the foreign exchange rates from the fluctuations arising from changes in the market prices of securities held at period end. Similarly, the Fund does not isolate the effect of changes in foreign exchange rates from the fluctuations arising from changes in the market prices of securities sold during the period. Accordingly, realized and unrealized foreign currency gains (losses) on investments in securities are included in the reported net realized and unrealized gains (losses) on investment transactions and balances. However, pursuant to U.S. federal income tax regulations, gains and losses from certain foreign currency transactions and the foreign currency portion of gains and losses realized on sales and maturities of foreign denominated debt securities are treated as ordinary income for U.S. federal income tax purposes.
Net realized gains (losses) on foreign currency transactions represent net foreign exchange gains (losses) from foreign currency forward exchange contracts, disposition of foreign currencies, currency gains (losses) realized between the trade and settlement dates on securities transactions, and the difference between the amount of investment income and foreign withholding taxes recorded on the Fund's books and the U.S. dollar equivalent amounts actually received or paid. Net unrealized currency gains (losses) from valuing foreign currency denominated assets and liabilities at period end exchange rates are reflected as a component of unrealized appreciation (depreciation) in the Statement of Assets and Liabilities. The change in unrealized currency gains (losses) on foreign currency translations for the period is reflected in the Statement of Operations.
F. Securities Lending — The Fund may lend securities to qualified financial institutions, such as broker-dealers, to earn additional income. Any increase or decrease in the fair value of the securities loaned that might occur and any interest earned or dividends declared on those securities during the term of the loan would remain in the Fund. The Fund receives cash or securities as collateral in an amount equal to or exceeding 100% of the current fair value of the loaned securities. The collateral is marked-to-market daily by State Street Bank and Trust Company ("State Street"), the securities lending agent, to ensure that a minimum of 100% collateral coverage is maintained.
Based on pre-established guidelines, the securities lending agent invests any cash collateral that is received in an affiliated money market portfolio and repurchase agreements. Securities lending income
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Notes to Financial Statements n April 30, 2017 (unaudited) continued
is generated from the earnings on the invested collateral and borrowing fees, less any rebates owed to the borrowers and compensation to the lending agent, and is recorded as "Income from Securities Loaned — Net" in the Fund's Statement of Operations.
The Fund has the right under the lending agreement to recover the securities from the borrower on demand.
The following table presents financial instruments that are subject to enforceable netting arrangements as of April 30, 2017.
GROSS AMOUNTS NOT OFFSET IN THE STATEMENT OF ASSETS AND LIABILITIES
GROSS ASSET AMOUNT PRESENTED IN STATEMENT OF ASSETS AND LIABILITIES | FINANCIAL INSTRUMENT | COLLATERAL RECEIVED | NET AMOUNT (NOT LESS THAN $0) | ||||||||||||
$ | 19,351,164 | (a) | $ | — | $ | (19,351,164 | )(b)(c) | $ | 0 |
(a) Represents market value of loaned securities at period end.
(b) The Fund received cash collateral of $9,653,525, which was subsequently invested in Morgan Stanley Institutional Liquidity Funds as reported in the Portfolio of Investments. In addition, the Fund received non-cash collateral of 10,061,845 in the form of U.S. Government obligations, which the Fund cannot sell or repledge, and accordingly are not reflected in the Portfolio of Investments.
(c) The actual collateral received is greater than the amount shown here due to overcollateralization.
FASB Accounting Standards Update No. 2014-11 ("ASU No. 2014-11"), "Transfers & Servicing (Topic 860): Repurchase-to-Maturity Transactions, Repurchase Financings, and Disclosures", is intended to provide increased transparency about the types of collateral pledged in securities lending transactions and other similar transactions that are accounted for as secured borrowing.
The following table displays a breakdown of transactions accounted for as secured borrowings, the gross obligations by class of collateral pledged, and the remaining contractual maturity of those transactions as of April 30, 2017.
REMAINING CONTRACTUAL MATURITY OF THE AGREEMENTS AS OF APRIL 30, 2017 | |||||||||||||||||||||||
OVERNIGHT AND CONTINUOUS | <30 DAYS | BETWEEN 30 & 90 DAYS | >90 DAYS | TOTAL | |||||||||||||||||||
Securities Lending Transactions | |||||||||||||||||||||||
Corporate Bonds | $ | 9,653,525 | $ | — | $ | — | $ | — | $ | 9,653,525 | |||||||||||||
Total Borrowings | $ | 9,653,525 | $ | — | $ | — | $ | — | $ | 9,653,525 | |||||||||||||
Gross amount of recognized liabilities for securities lending transactions | $9,653,525 |
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Notes to Financial Statements n April 30, 2017 (unaudited) continued
G. Dividends and Distributions to Shareholders — Dividends and distributions to shareholders are recorded on the ex-dividend date. Dividends from net investment income, if any, are declared and paid monthly. Net realized capital gains, if any, are distributed at least annually.
H. Use of Estimates — The preparation of financial statements in accordance with generally accepted accounting principles in the United States ("GAAP") requires management to make estimates and assumptions that affect the reported amounts and disclosures. Actual results could differ from those estimates.
I. Indemnifications — The Fund enters into contracts that contain a variety of indemnifications. The Fund's maximum exposure under these arrangements is unknown. However, the Fund has not had prior claims or losses pursuant to these contracts and expects the risk of loss to be remote.
2. Fair Valuation Measurements
Financial Accounting Standards Board ("FASB") Accounting Standards CodificationTM ("ASC") 820, "Fair Value Measurement" ("ASC 820"), defines fair value as the value that the Fund would receive to sell an investment or pay to transfer a liability in a timely transaction with an independent buyer in the principal market, or in the absence of a principal market, the most advantageous market for the investment or liability. ASC 820 establishes a three-tier hierarchy to distinguish between (1) inputs that reflect the assumptions market participants would use in valuing an asset or liability developed based on market data obtained from sources independent of the reporting entity (observable inputs); and (2) inputs that reflect the reporting entity's own assumptions about the assumptions market participants would use in valuing an asset or liability developed based on the best information available in the circumstances (unobservable inputs) and to establish classification of fair value measurements for disclosure purposes. Various inputs are used in determining the value of the Fund's investments. The inputs are summarized in the three broad levels listed below.
• Level 1 — unadjusted quoted prices in active markets for identical investments
• Level 2 — other significant observable inputs (including quoted prices for similar investments, interest rates, prepayment speeds, credit risk, etc.)
• Level 3 — significant unobservable inputs including the Fund's own assumptions in determining the fair value of investments. Factors considered in making this determination may include, but are not limited to, information obtained by contacting the issuer, analysts, or the appropriate stock exchange (for exchange-traded securities), analysis of the issuer's financial statements or other available documents and, if necessary, available information concerning other securities in similar circumstances
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Notes to Financial Statements n April 30, 2017 (unaudited) continued
The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities and the determination of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to each security.
The following is a summary of the inputs used to value the Fund's investments as of April 30, 2017.
INVESTMENT TYPE | LEVEL 1 UNADJUSTED QUOTED PRICES | LEVEL 2 OTHER SIGNIFICANT OBSERVABLE INPUTS | LEVEL 3 SIGNIFICANT UNOBSERVABLE INPUTS | TOTAL | |||||||||||||||
Assets: | |||||||||||||||||||
Fixed Income Securities | |||||||||||||||||||
Corporate Bonds | $ | — | $ | 224,829,495 | $ | — | † | $ | 224,829,495 | ||||||||||
Sovereign | — | 105,416,176 | — | 105,416,176 | |||||||||||||||
Agency Fixed Rate Mortgages | — | 161,200 | — | 161,200 | |||||||||||||||
Asset-Backed Securities | — | 52,299,919 | — | 52,299,919 | |||||||||||||||
Collateralized Mortgage Obligations — Agency Collateral Series | — | 4,427,340 | — | 4,427,340 | |||||||||||||||
Commercial Mortgage-Backed Securities | — | 23,686,157 | — | 23,686,157 | |||||||||||||||
Mortgages — Other | — | 62,159,570 | — | 62,159,570 | |||||||||||||||
U.S. Treasury Securities | — | 7,847,860 | — | 7,847,860 | |||||||||||||||
Variable Rate Senior Loan Interests | — | 9,541,665 | — | 9,541,665 | |||||||||||||||
Total Fixed Income Securities | — | 490,369,382 | — | † | 490,369,382 | ||||||||||||||
Short-Term Investments | |||||||||||||||||||
U.S. Treasury Securities | — | 7,032,634 | — | 7,032,634 | |||||||||||||||
Investment Company | 14,457,114 | — | — | 14,457,114 | |||||||||||||||
Total Short-Term Investments | 14,457,114 | 7,032,634 | — | 21,489,748 | |||||||||||||||
Foreign Currency Forward Exchange Contracts | — | 893,637 | — | 893,637 | |||||||||||||||
Futures Contracts | 391,066 | — | — | 391,066 | |||||||||||||||
Total Assets | 14,848,180 | 498,295,653 | — | † | 513,143,833 | ||||||||||||||
Liabilities: | |||||||||||||||||||
Foreign Currency Forward Exchange Contracts | — | (3,115,541 | ) | — | (3,115,541 | ) | |||||||||||||
Futures Contracts | (313,792 | ) | — | — | (313,792 | ) | |||||||||||||
Credit Default Swap Agreements | — | (1,770,121 | ) | — | (1,770,121 | ) | |||||||||||||
Interest Rate Swap Agreements | — | (1,087,406 | ) | — | (1,087,406 | ) | |||||||||||||
Total Liabilities | (313,792 | ) | (5,973,068 | ) | — | (6,286,860 | ) | ||||||||||||
Total | $ | 14,534,388 | $ | 492,322,585 | $ | — | † | $ | 506,856,973 |
† Includes one security which is valued at zero.
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Notes to Financial Statements n April 30, 2017 (unaudited) continued
Transfers between investment levels may occur as the markets fluctuate and/or the availability of data used in an investment's valuation changes. The Fund recognizes transfers between the levels as of the end of the period. As of April 30, 2017, the Fund did not have any investments transfer between investment levels.
Following is a reconciliation of investments in which significant unobservable inputs (Level 3) were used in determining fair value:
CORPORATE BOND | |||||||
Beginning Balance | $ | — | † | ||||
Purchases | — | ||||||
Sales | — | ||||||
Amortization of discount | — | ||||||
Transfers in | — | ||||||
Transfers out | — | ||||||
Corporate actions | — | ||||||
Change in unrealized appreciation (depreciation) | — | ||||||
Realized gains (losses) | — | ||||||
Ending Balance | $ | — | † | ||||
Net change in unrealized appreciation (depreciation) from investments still held as of April 30, 2017 | $ | — | † |
† Includes one security which is valued at zero.
3. Derivatives
The Fund may, but it is not required to, use derivative instruments for a variety of purposes, including hedging, risk management, portfolio management or to earn income. Derivatives are financial instruments 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. A derivative instrument often has risks similar to its underlying asset and may have 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 and risks arising from margin requirements. 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. All of the Fund's holdings, including derivative
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Notes to Financial Statements n April 30, 2017 (unaudited) continued
instruments, are marked-to-market each day with the change in value reflected in unrealized appreciation (depreciation). Upon disposition, a realized gain or loss is recognized.
Certain derivative transactions may give rise to a form of leverage. Leverage magnifies the potential for gain and 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 to satisfy its obligations or to meet earmarking or segregation requirements, pursuant to applicable Securities and Exchange Commission rules and regulations, or may cause the Fund to be more volatile than if the Fund had not been leveraged. Although the Adviser and/or Sub-Adviser seek to use derivatives to further the Fund's investment objectives, there is no assurance that the use of derivatives will achieve this result.
Following is a description of the derivative instruments and techniques that the Fund used during the period and their associated risks:
Foreign Currency Forward Exchange Contracts — The Fund entered into contracts with banks, brokers or dealers to purchase or sell securities or foreign currencies at a future date. A foreign currency forward exchange contract ("currency contract") is a negotiated agreement between the contracting parties to exchange a specified amount of currency at a specified future time at a specified rate. The rate can be higher or lower than the spot rate between the currencies that are the subject of the contract. Currency contracts may be used to protect against uncertainty in the level of future foreign currency exchange rates or to gain or modify exposure to a particular currency. In addition, the Fund may use cross currency hedging or proxy hedging with respect to currencies in which the Fund has or expects to have portfolio or currency exposure. Cross currency hedges involve the sale of one currency against the positive exposure to a different currency and may be used for hedging purposes or to establish an active exposure to the exchange rate between any two currencies. To the extent hedged by the use of currency contracts, the precise matching of the currency contract amounts and the value of the securities involved will not generally be possible because the future value of such securities in foreign currencies will change as a consequence of market movements in the value of those securities between the date on which the contract is entered into and the date it matures. Furthermore, such transactions may reduce or preclude the opportunity for gain if the value of the currency should move in the direction opposite to the position taken. There is additional risk to the extent that currency contracts create exposure to currencies in which the Fund's securities are not denominated. Unanticipated changes in currency prices may result in poorer overall performance for the Fund than if it had not entered into such contracts. The use of currency contracts involves the risk of loss from the insolvency or bankruptcy of the counterparty to the contract or the failure of the counterparty to make payments or otherwise comply with the terms of the contract. A currency contract is marked-to-market daily and the change in market value is recorded by the Fund as unrealized gain or loss. The Fund records realized gains (losses) when the currency contract is closed
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Notes to Financial Statements n April 30, 2017 (unaudited) continued
equal to the difference between the value of the currency contract at the time it was opened and the value at the time it was closed.
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. The value of a futures contract tends to increase and decrease in tandem with the value of the underlying instrument. 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. During the period the futures contract is open, payments are received from or made to the broker based upon changes in the value of the contract (the variation margin). 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.
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 OTC swaps. These OTC swaps are often subject to credit risk or the risk of default or non-performance by the counterparty. 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. During the period swap agreements are open, payments are received from or made to the clearinghouse or counterparty based upon changes in the value of the contract (variation margin). The Dodd-Frank Wall Street Reform and Consumer Protection Act and related regulatory
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Notes to Financial Statements n April 30, 2017 (unaudited) continued
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's use of swaps during the period included those based on the credit of an underlying security commonly referred to as "credit default swaps." The Fund may be either the buyer or seller in a credit default swap. 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 the issuer of 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 by the issuer of the referenced debt obligation. The use of credit default swaps could result in losses to the Fund if the Adviser fails to correctly evaluate the creditworthiness of the issuer of the referenced debt obligation.
If the Fund is a seller of protection and a credit event occurs, as defined under the terms of that particular swap agreement, the Fund will either (i) pay to the buyer of protection an amount equal to the notional amount of the swap agreement and take delivery of the referenced obligation, other deliverable obligations or underlying securities comprising the referenced index or (ii) pay a net settlement amount in the form of cash or securities equal to the notional amount of the swap agreement less the recovery value of the referenced obligation or underlying securities comprising the referenced index. If the Fund is a buyer of protection and a credit event occurs, as defined under the terms of that particular swap agreement, the Fund will either (i) receive from the seller of protection an amount equal to the notional amount of the swap agreement and deliver the referenced obligation, other deliverable obligations or underlying securities comprising the referenced index or (ii) receive a net settlement amount in the form of cash or securities equal to the notional amount of the swap agreement less the recovery value of the referenced obligation or underlying securities comprising the referenced index. Recovery values are estimated by market makers considering either industry standard recovery rates or entity specific factors and considerations until a credit event occurs. If a credit event has occurred, the recovery value is determined by a facilitated auction whereby a minimum number of allowable broker bids, together with a specified valuation method, are used to calculate the settlement value. The Fund's maximum risk of loss from counterparty risk, either as the protection seller or as the protection buyer, is the fair value of the swap agreement.
The current credit rating of each individual issuer is listed in the table following the Portfolio of Investments and serves as an indicator of the current status of the payment/performance risk of the credit derivative. Alternatively, for credit default swaps on an index of credits, the quoted market prices
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Notes to Financial Statements n April 30, 2017 (unaudited) continued
and current values serve as an indicator of the current status of the payment/performance risk of the credit derivative. Generally, lower credit ratings and increasing market values, in absolute terms, represent a deterioration of the credit and a greater likelihood of an adverse credit event of the issuer.
When the Fund has an unrealized loss on a swap agreement, the Fund has instructed the custodian to pledge cash or liquid securities as collateral with a value approximately equal to the amount of the unrealized loss. Collateral pledges are monitored and subsequently adjusted if and when the swap valuations fluctuate. If applicable, cash collateral is included with "Due from (to) broker" in the Statement of Assets and Liabilities.
Upfront payments paid or received by the Fund will be reflected as an asset or liability, respectively, in the Statement of Assets and Liabilities.
FASB ASC 815, "Derivatives and Hedging" ("ASC 815"), is intended to improve financial reporting about derivative instruments by requiring enhanced disclosures to enable investors to better understand how and why the Fund uses derivative instruments, how these derivative instruments are accounted for and their effects on the Fund's financial position and results of operations.
The following table sets forth the fair value of the Fund's derivative contracts by primary risk exposure as of April 30, 2017.
PRIMARY RISK EXPOSURE | ASSET DERIVATIVES STATEMENT OF ASSETS AND LIABILITIES LOCATION | FAIR VALUE | LIABILITY DERIVATIVES STATEMENT OF ASSETS AND LIABILITIES LOCATION | FAIR VALUE | |||||||||||||||
Interest Rate Risk | Variation margin on open futures contracts | $ | 391,066 | (d) | Variation margin on open futures contracts | $ | (313,792 | )(d) | |||||||||||
Credit Risk | Unrealized appreciation on open swap agreements | — | Unrealized depreciation on open swap agreements | (1,046,854 | ) | ||||||||||||||
Variation margin on open swap agreements | — | Variation margin on open swap agreements | (723,267 | )(d) | |||||||||||||||
Interest Rate Risk | Variation margin on open swap agreements | — | Variation margin on open swap agreements | (1,087,406 | )(d) | ||||||||||||||
Currency Risk | Unrealized appreciation on open foreign currency forward exchange contracts | 893,637 | Unrealized depreciation on open foreign currency forward exchange contracts | (3,115,541 | ) | ||||||||||||||
$ | 1,284,703 | $ | (6,286,860 | ) |
(d) Includes cumulative appreciation (depreciation) as reported in the Portfolio of Investments. Only current day's net variation margin is reported within the Statement of Assets and Liabilities.
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Notes to Financial Statements n April 30, 2017 (unaudited) continued
The following tables set forth by primary risk exposure the Fund's realized gains (losses) and change in unrealized appreciation (depreciation) by type of derivative contract for the six months ended April 30, 2017 in accordance with ASC 815.
AMOUNT OF REALIZED GAIN (LOSS) ON DERIVATIVES | |||||||||||||||
PRIMARY RISK EXPOSURE | FUTURES CONTRACTS | FOREIGN CURRENCY FORWARD EXCHANGE CONTRACTS | SWAP AGREEMENTS | ||||||||||||
Interest Rate Risk | $ | 2,474,240 | $ | — | $ | 109,700 | |||||||||
Credit Risk | — | — | 338,611 | ||||||||||||
Currency Risk | — | 6,919,989 | — | ||||||||||||
Total | $ | 2,474,240 | $ | 6,919,989 | $ | 448,311 | |||||||||
CHANGE IN UNREALIZED APPRECIATION (DEPRECIATION) ON DERIVATIVES | |||||||||||||||
PRIMARY RISK EXPOSURE | FUTURES CONTRACTS | FOREIGN CURRENCY FORWARD EXCHANGE CONTRACTS | SWAP AGREEMENTS | ||||||||||||
Interest Rate Risk | $ | (373,593 | ) | $ | — | $ | (1,087,406 | ) | |||||||
Credit Risk | — | — | (1,356,737 | ) | |||||||||||
Currency Risk | — | (6,874,118 | ) | — | |||||||||||
Total | $ | (373,593 | ) | $ | (6,874,118 | ) | $ | (2,444,143 | ) |
At April 30, 2017, the Fund's derivative assets and liabilities are as follows:
GROSS AMOUNTS OF ASSETS AND LIABILITIES PRESENTED IN THE STATEMENT OF ASSETS AND LIABILITIES | |||||||||||
DERIVATIVES(e) | ASSETS(f) | LIABILITIES(f) | |||||||||
Foreign Currency Forward Exchange Contracts | $ | 893,637 | $ | (3,115,541 | ) | ||||||
Swap Agreements | — | (1,046,854 | ) | ||||||||
Total | $ | 893,637 | $ | (4,162,395 | ) |
(e) Excludes exchange-traded derivatives.
(f) Absent an event of default or early termination, OTC derivative assets and liabilities are presented gross and not offset in the Statement of Assets and Liabilities.
The Fund typically enters into International Swaps and Derivatives Association, Inc. Master Agreements ("ISDA Master Agreements") or similar master agreements (collectively, "Master Agreements") with its contract counterparties for certain OTC derivatives in order to, among other things, reduce its credit risk to counterparties. ISDA Master Agreements include provisions for general obligations, representations, collateral and events of default or termination. Under an ISDA Master Agreement, the Fund typically may offset with the counterparty certain OTC derivative financial instruments' payables and/or receivables with collateral held and/or posted and create one single net payment (close-out netting) in the event of default, termination and/or potential deterioration in the credit quality of the
55
Morgan Stanley Global Fixed Income Opportunities Fund
Notes to Financial Statements n April 30, 2017 (unaudited) continued
counterparty. Various Master Agreements govern the terms of certain transactions with counterparties, including transactions such as swap, forward, repurchase and reverse repurchase agreements. These Master Agreements typically attempt to reduce the counterparty risk associated with such transactions by specifying credit protection mechanisms and providing standardization that improves legal certainty. Cross-termination provisions under Master Agreements typically provide that a default in connection with one transaction between the Fund and a counterparty gives the non-defaulting party the right to terminate any other transactions in place with the defaulting party to create one single net payment due to/due from the defaulting party and may be a feature in certain Master Agreements. In the event the Fund exercises its right to terminate a Master Agreement after a counterparty experiences a termination event as defined in the Master Agreement, the return of collateral with market value in excess of the Fund's net liability may be delayed or denied.
The following tables present derivative financial instruments that are subject to enforceable netting arrangements as of April 30, 2017.
GROSS AMOUNTS NOT OFFSET IN THE STATEMENTS OF ASSETS AND LIABILITIES | |||||||||||||||||||
COUNTERPARTY | GROSS ASSET DERIVATIVES PRESENTED IN STATEMENTS OF ASSETS AND LIABILITIES | FINANCIAL INSTRUMENT | COLLATERAL RECEIVED | NET AMOUNT (NOT LESS THAN $0) | |||||||||||||||
Australia and New Zealand Banking Group | $ | 102,127 | $ | — | $ | — | $ | 102,127 | |||||||||||
Bank of America NA | 18,985 | — | — | 18,985 | |||||||||||||||
Citibank NA | 33,107 | (33,107 | ) | — | 0 | ||||||||||||||
HSBC Bank PLC | 401,479 | (401,479 | ) | — | 0 | ||||||||||||||
JPMorgan Chase Bank NA | 272,549 | (233,699 | ) | — | 38,850 | ||||||||||||||
UBS AG | 65,390 | (65,390 | ) | — | 0 | ||||||||||||||
Total | $ | 893,637 | $ | (733,675 | ) | $ | — | $ | 159,962 | ||||||||||
GROSS AMOUNTS NOT OFFSET IN THE STATEMENTS OF ASSETS AND LIABILITIES | |||||||||||||||||||
COUNTERPARTY | GROSS LIABILITY DERIVATIVES PRESENTED IN STATEMENTS OF ASSETS AND LIABILITIES | FINANCIAL INSTRUMENT | COLLATERAL PLEDGED(g) | NET AMOUNT (NOT LESS THAN $0) | |||||||||||||||
Citibank NA | $ | 1,627,369 | $ | (33,107 | ) | $ | (1,455,234 | ) | $ | 139,028 | |||||||||
Credit Suisse International | 497,664 | — | (497,664 | ) | 0 | ||||||||||||||
Deutsche Bank AG | 65,242 | — | (65,242 | ) | 0 | ||||||||||||||
Goldman Sachs International | 483,948 | — | (483,948 | ) | 0 | ||||||||||||||
HSBC Bank PLC | 1,003,884 | (401,479 | ) | — | 602,405 | ||||||||||||||
JPMorgan Chase Bank NA | 233,699 | (233,699 | ) | — | 0 | ||||||||||||||
State Street Bank and Trust Co. | 38,296 | — | — | 38,296 | |||||||||||||||
UBS AG | 212,293 | (65,390 | ) | (146,903 | ) | 0 | |||||||||||||
Total | $ | 4,162,395 | $ | (733,675 | ) | $ | (2,648,991 | ) | $ | 779,729 |
(g) In some instances, the actual collateral pledged may be more than the amount shown here due to overcollateralization.
56
Morgan Stanley Global Fixed Income Opportunities Fund
Notes to Financial Statements n April 30, 2017 (unaudited) continued
For the six months ended April 30, 2017, the average monthly amount outstanding for each derivative type is as follows:
Foreign Currency Forward Exchange Contracts: | |||||||
Average monthly principal amount | $ | 405,115,473 | |||||
Futures Contracts: | |||||||
Average monthly original value | $ | 97,868,027 | |||||
Swap Agreements: | |||||||
Average monthly notional amount | $ | 69,819,500 |
4. Advisory/Administration and Sub-Advisory Agreements
Pursuant to an Investment Advisory Agreement with the Adviser, the Fund pays an advisory fee, accrued daily and paid monthly, by applying the annual rate of 0.32% to the net assets of the Fund determined as of the close of each business day.
The Adviser also serves as the Administrator to the Fund and provides administrative services pursuant to an Administration Agreement for an annual fee, accrued daily and paid monthly, of 0.08% of the Fund's average daily net assets.
Under a Sub-Administration Agreement between the Administrator and State Street, State Street provides certain administrative services to the Fund. For such services, the Administrator pays State Street a portion of the fee the Administrator receives from the Fund.
Under a Sub-Advisory Agreement between the Adviser and the Sub-Adviser, the Sub-Adviser provides the Fund with advisory services, subject to the overall supervision of the Adviser and the Fund's Officers and Trustees. The Adviser pays the Sub-Adviser on a monthly basis a portion of the net advisory fees the Adviser receives from the Fund.
The Adviser/Administrator has agreed to reduce its advisory fee, its administration fee and/or reimburse the Fund so that total annual operating expenses, excluding certain investment related expenses, taxes, interest and other extraordinary expenses (including litigation), will not exceed 0.95% for Class A, 1.59% for Class B, 1.24% for Class L, 0.60% for Class I, 1.70% for Class C and 0.57% for Class IS. The fee waivers and/or expense reimbursements will continue for at least one year from the date of the Fund's prospectus or until such time that the Trustees act to discontinue all or a portion of such waivers and/or expense reimbursements when they deem such action is appropriate. For the six months ended April 30, 2017, $1,175 of other expenses were reimbursed by the Adviser pursuant to this arrangement.
57
Morgan Stanley Global Fixed Income Opportunities Fund
Notes to Financial Statements n April 30, 2017 (unaudited) continued
5. Plan of Distribution
Shares of the Fund are distributed by Morgan Stanley Distribution, Inc. (the "Distributor"), an affiliate of the Adviser/Administrator and Sub-Adviser. The Fund has adopted a Plan of Distribution (the "Plan") pursuant to Rule 12b-1 under the Act. The Plan provides that the Fund will pay the Distributor a fee which is accrued daily and paid monthly at the following annual rates: (i) Class A — up to 0.25% of the average daily net assets of Class A shares; (ii) Class B — up to 0.85% of the average daily net assets of Class B shares; (iii) Class L — up to 0.50% of the average daily net assets of Class L shares; and (iv) Class C — up to1.00% of the average daily net assets of Class C shares.
In the case of Class B shares, provided that the Plan continues in effect, any cumulative expenses incurred by the Distributor but not yet recovered may or may not be recovered through the payment of future distribution fees from the Fund pursuant to the Plan and contingent deferred sales charges paid by investors upon redemption of Class B shares. Although there is no legal obligation for the Fund to pay expenses incurred in excess of payments made to the Distributor under the Plan and the proceeds of contingent deferred sales charges paid by investors upon redemption of shares, if for any reason the Plan is terminated, the Trustees will consider at that time the manner in which to treat such expenses. The Distributor has advised the Fund that such excess amounts totaled $12,735,190 at April 30, 2017.
In the case of Class A shares, Class L shares and Class C shares, expenses incurred pursuant to the Plan in any calendar year in excess of 0.25%, 0.50% and 1.00% of the average daily net assets of Class A shares, Class L shares and Class C shares, respectively, will not be reimbursed by the Fund through payments in any subsequent year, except that expenses representing a gross sales commission credited to Financial Intermediaries at the time of sale may be reimbursed in the subsequent calendar year. For the six months ended April 30, 2017, the distribution fee was accrued for Class A shares, Class L shares and Class C shares at the annual rate of 0.25%, 0.50% and 1.00%, respectively.
The Distributor has informed the Fund that for the six months ended April 30, 2017, it received contingent deferred sales charges from certain redemptions of the Fund's Class B shares and Class C shares of $217 and $286, respectively, and received $11,728 in front-end sales charges from sales of the Fund's Class A shares. The respective shareholders pay such charges, which are not an expense of the Fund.
6. Dividend Disbursing and Transfer Agent
The Fund's dividend disbursing and transfer agent is Boston Financial Data Services, Inc. ("BFDS"). Pursuant to a Transfer Agency Agreement, the Fund pays BFDS a fee based on the number of classes, accounts and transactions relating to the Fund.
58
Morgan Stanley Global Fixed Income Opportunities Fund
Notes to Financial Statements n April 30, 2017 (unaudited) continued
7. Security Transactions and Transactions with Affiliates
The cost of purchases and proceeds from sales of investment securities, excluding short-term investments, for the six months ended April 30, 2017, aggregated $232,749,235 and $206,438,930, respectively. Included in the aforementioned are purchases and sales of U.S. Government securities of $3,989,568 and $23,616,444, respectively.
The Fund invests in the Institutional Class of the Morgan Stanley Institutional Liquidity Funds – Government Portfolio (the "Liquidity Funds"), an open-end management investment company managed by the Adviser, both directly and as a portion of the securities held as collateral on loaned securities. Advisory fees paid by the Fund are reduced by an amount equal to its pro-rata share of the advisory and administration fees paid by the Fund due to its investment in the Liquidity Funds. For the six months ended April 30, 2017, advisory fees paid were reduced by $11,568 relating to the Fund's investment in the Liquidity Funds.
A summary of the Fund's transactions in shares of the Liquidity Funds during the six months ended April 30, 2017 is as follows:
VALUE OCTOBER 31, 2016 | PURCHASES AT COST | SALES | DIVIDEND INCOME | VALUE APRIL 30, 2017 | |||||||||||||||
$ | 21,047,998 | $ | 132,307,554 | $ | 138,898,438 | $ | 30,075 | $ | 14,457,114 |
The Fund has an unfunded noncontributory defined benefit pension plan covering certain independent Trustees of the Fund who will have served as independent Trustees for at least five years at the time of retirement. Benefits under this plan are based on factors which include years of service and compensation. The Trustees voted to close the plan to new participants and eliminate the future benefits growth due to increases to compensation after July 31, 2003. At April 30, 2017, the Fund had an accrued pension liability of $55,285, which is reflected as "Trustees' fees" in the Statement of Assets and Liabilities.
The Fund is permitted to purchase and sell securities ("cross-trade") from and to other Morgan Stanley Funds as well as other funds and client accounts for which the Adviser or an affiliate of the Adviser serves as investment adviser, pursuant to procedures approved by the Trustees in compliance with Rule 17a-7 under the Act (the "Rule"). Each cross-trade is executed at the current market price in compliance with provisions of the Rule. For the six months ended April 30, 2017, the Fund did not engage in any cross-trade transactions.
The Fund has an unfunded Deferred Compensation Plan (the "Compensation Plan"), which allows each independent Trustee to defer payment of all, or a portion, of the fees he or she receives for serving on the Board of Trustees. Each eligible Trustee generally may elect to have the deferred amounts credited with a return equal to the total return on one or more of the Morgan Stanley funds that are offered as
59
Morgan Stanley Global Fixed Income Opportunities Fund
Notes to Financial Statements n April 30, 2017 (unaudited) continued
investment options under the Compensation Plan. Appreciation/depreciation and distributions received from these investments are recorded with an offsetting increase/decrease in the deferred compensation obligation and do not affect the NAV of the Fund.
8. Custodian Fees
State Street (the "Custodian") serves as Custodian for the Fund in accordance with a Custodian Agreement. The Custodian holds cash, securities, and other assets of the Fund as required by the Act. Custody fees are payable monthly based on assets held in custody, investment purchases and sales activity and account maintenance fees, plus reimbursement for certain out-of-pocket expenses.
9. Federal Income Tax Status
It is the Fund's intention to continue to qualify as a regulated investment company and distribute all of its taxable and tax-exempt income. Accordingly, no provision for federal income taxes is required in the financial statements.
The Fund may be subject to taxes imposed by countries in which it invests. Such taxes are generally based on income and/or capital gains earned or repatriated. Taxes are accrued based on net investment income, net realized gains and net unrealized appreciation as such income and/or gains are earned. Taxes may also be based on transactions in foreign currency and are accrued based on the value of investments denominated in such currency.
FASB ASC 740-10, "Income Taxes — Overall", sets forth a minimum threshold for financial statement recognition of the benefit of a tax position taken or expected to be taken in a tax return. Management has concluded there are no significant uncertain tax positions that would require recognition in the financial statements. If applicable, the Fund recognizes interest accrued related to unrecognized tax benefits in "Interest Expense" and penalties in "Other Expenses" in the Statement of Operations. The Fund files tax returns with the U.S. Internal Revenue Service, New York and various states. Each of the tax years in the four-year period ended October 31, 2016, remains subject to examination by taxing authorities.
The tax character of distributions paid may differ from the character of distributions shown in the Statements of Changes in Net Assets due to short-term capital gains being treated as ordinary income for tax purposes. The tax character of distributions paid during fiscal years 2016 and 2015 was as follows:
2016 DISTRIBUTIONS PAID FROM: ORDINARY INCOME | 2015 DISTRIBUTIONS PAID FROM: ORDINARY INCOME | ||||||
$ | 16,462,807 | $ | 11,277,949 |
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Morgan Stanley Global Fixed Income Opportunities Fund
Notes to Financial Statements n April 30, 2017 (unaudited) continued
The amount and character of income and gains to be distributed are determined in accordance with income tax regulations which may differ from GAAP. These book/tax differences are either considered temporary or permanent in nature.
Temporary differences are attributable to differing book and tax treatments for the timing of the recognition of gains (losses) on certain investment transactions and the timing of the deductibility of certain expenses.
Permanent differences, primarily due to gains/losses on paydowns, swaps and foreign currency, tax adjustments on debt securities sold by the Fund and an expired capital loss carryforward, resulted in the following reclassifications among the Fund's components of net assets at October 31, 2016:
DIVIDENDS IN EXCESS OF NET INVESTMENT INCOME | ACCUMULATED NET REALIZED LOSS | PAID-IN-CAPITAL | |||||||||
$ | (2,799,406 | ) | $ | 16,912,605 | $ | (14,113,199 | ) |
At October 31, 2016, the components of distributable earnings for the Fund on a tax basis were as follows:
UNDISTRIBUTED ORDINARY INCOME | UNDISTRIBUTED LONG-TERM CAPITAL GAIN | ||||||
$ | 2,769,085 | $ | — |
At October 31, 2016, the Fund had available for federal income tax purposes unused short-term capital losses of $3,787,176 and long term capital losses of $4,628,677 that do not have an expiration date.
In addition, at October 31, 2016, the Fund had available for federal income tax purposes capital loss carryforwards which will expire on the indicated dates:
AMOUNT | EXPIRATION | ||||||
$ | 29,800,962 | October 31, 2017 | |||||
44,367,385 | October 31, 2018 |
To the extent that capital loss carryforwards are used to offset any future capital gains realized during the carryover period as provided by U.S. federal income tax regulations, no capital gains tax liability will be incurred by the Fund for gains realized and not distributed. To the extent that capital gains are offset, such gains will not be distributed to the shareholders.
61
Morgan Stanley Global Fixed Income Opportunities Fund
Notes to Financial Statements n April 30, 2017 (unaudited) continued
10. Shares of Beneficial Interest
Transactions in shares of beneficial interest were as follows:
FOR THE SIX MONTHS ENDED APRIL 30, 2017 | FOR THE YEAR ENDED OCTOBER 31, 2016 | ||||||||||||||||||
(unaudited) | |||||||||||||||||||
SHARES | AMOUNT | SHARES | AMOUNT | ||||||||||||||||
CLASS A SHARES | |||||||||||||||||||
Sold | 726,538 | $ | 3,985,363 | 3,184,869 | $ | 17,140,887 | |||||||||||||
Conversion from Class B | 34,879 | 192,270 | 43,544 | 233,927 | |||||||||||||||
Reinvestment of dividends | 267,490 | 1,461,308 | 695,607 | 3,749,853 | |||||||||||||||
Redeemed | (2,390,711 | ) | (13,069,832 | ) | (8,367,201 | ) | (45,097,559 | ) | |||||||||||
Net decrease — Class A | (1,361,804 | ) | (7,430,891 | ) | (4,443,181 | ) | (23,972,892 | ) | |||||||||||
CLASS B SHARES | |||||||||||||||||||
Exchanged | 16,047 | 88,374 | 23,889 | 129,169 | |||||||||||||||
Conversion to Class A | (34,757 | ) | (192,270 | ) | (43,360 | ) | (233,927 | ) | |||||||||||
Reinvestment of dividends | 1,572 | 8,607 | 5,063 | 27,392 | |||||||||||||||
Redeemed | (32,056 | ) | (175,395 | ) | (30,662 | ) | (165,302 | ) | |||||||||||
Net decrease — Class B | (49,194 | ) | (270,684 | ) | (45,070 | ) | (242,668 | ) | |||||||||||
CLASS L SHARES | |||||||||||||||||||
Exchanged | 65,564 | 357,418 | 85,570 | 455,616 | |||||||||||||||
Reinvestment of dividends | 31,002 | 169,328 | 80,220 | 432,338 | |||||||||||||||
Redeemed | (282,874 | ) | (1,545,368 | ) | (689,846 | ) | (3,735,772 | ) | |||||||||||
Net decrease — Class L | (186,308 | ) | (1,018,622 | ) | (524,056 | ) | (2,847,818 | ) | |||||||||||
CLASS I SHARES | |||||||||||||||||||
Sold | 6,941,342 | 38,409,536 | 18,315,257 | 100,488,512 | |||||||||||||||
Reinvestment of dividends | 591,043 | 3,265,637 | 1,048,170 | 5,716,645 | |||||||||||||||
Redeemed | (5,202,027 | ) | (28,801,277 | ) | (12,322,476 | ) | (67,326,296 | ) | |||||||||||
Net increase — Class I | 2,330,358 | 12,873,896 | 7,040,951 | 38,878,861 | |||||||||||||||
CLASS C SHARES | |||||||||||||||||||
Sold | 509,639 | 2,789,256 | 2,559,885 | 13,858,145 | |||||||||||||||
Reinvestment of dividends | 59,375 | 323,764 | 92,826 | 500,675 | |||||||||||||||
Redeemed | (513,087 | ) | (2,808,999 | ) | (567,435 | ) | (3,077,015 | ) | |||||||||||
Net increase — Class C | 55,927 | 304,021 | 2,085,276 | 11,281,805 | |||||||||||||||
CLASS IS SHARES | |||||||||||||||||||
Sold | — | — | 25,996,977 | 141,516,581 | |||||||||||||||
Reinvestment of dividends | 760,566 | 4,201,917 | 865,094 | 4,740,712 | |||||||||||||||
Redeemed | (6,528 | ) | (36,063 | ) | (3,175,875 | ) | (17,352,826 | ) | |||||||||||
Net increase — Class IS | 754,038 | 4,165,854 | 23,686,196 | 128,904,467 | |||||||||||||||
Net increase in Fund | 1,543,017 | $ | 8,623,574 | 27,800,116 | $ | 152,001,755 |
62
Morgan Stanley Global Fixed Income Opportunities Fund
Notes to Financial Statements n April 30, 2017 (unaudited) continued
11. Credit Facility
The Fund and other Morgan Stanley funds participated in a $150,000,000 committed, unsecured revolving line of credit facility (the "facility") with State Street. This facility is to be used for temporary emergency purposes or funding of shareholder redemption requests. The interest rate on borrowings is based on the federal funds rate or one month libor rate plus a spread. The facility also has a commitment fee of 0.25% per annum based on the unused portion of the facility. During the six months ended April 30, 2017, the Fund did not have any borrowings under the facility.
12. Other
At April 30, 2017, the Fund had record owners of 10% or greater. Investment activities of these shareholders could have a material impact on the Fund. The aggregate percentage of such owners was 44.2%.
13. Purposes of and Risks Relating to Certain Financial Instruments
The Fund may invest in mortgage securities, including securities issued by the Federal National Mortgage Association ("FNMA") and Federal Home Loan Mortgage Corporation ("FHLMC"). These are fixed income securities that derive their value from or represent interests in a pool of mortgages or mortgage securities. An unexpectedly high rate of defaults on the mortgages held by a mortgage pool may adversely affect the value of a mortgage-backed security and could result in losses to the Fund. The risk of such defaults is generally higher in the case of mortgage pools that include sub-prime mortgages. Sub-prime mortgages refer to loans made to borrowers with weakened credit histories or with a lower capacity to make timely payments on their mortgages. The securities held by the Fund are not backed by sub-prime mortgages.
Additionally, securities issued by FNMA and FHLMC are not backed by or entitled to the full faith and credit of the United States; rather, they are supported by the right of the issuer to borrow from the U.S. Department of the Treasury.
The Federal Housing Finance Agency ("FHFA") serves as conservator of FNMA and FHLMC and the U.S. Department of the Treasury has agreed to provide capital as needed to ensure FNMA and FHLMC continue to provide liquidity to the housing and mortgage markets.
The Fund may lend securities to qualified financial institutions, such as broker-dealers, to earn additional income. Risks in securities lending transactions are that a borrower may not provide additional collateral when required or return the securities when due, and that the value of the short-term investments will be less than the amount of cash collateral plus any rebate that is required to be returned to the borrower.
63
Morgan Stanley Global Fixed Income Opportunities Fund
Notes to Financial Statements n April 30, 2017 (unaudited) continued
Foreign security and currency transactions may involve certain considerations and risks not typically associated with those of U.S. dollar denominated transactions as a result of, among other factors, fluctuations of exchange rates in relation to the U.S. dollar, the possibility of lower levels of governmental supervision and regulation of foreign securities markets and the possibility of political or economic instability.
14. Accounting Pronouncement
In October 2016, the Securities and Exchange Commission ("SEC") issued a new rule, Investment Company Reporting Modernization, which, among other provisions, amends Regulation S-X to require standardized, enhanced disclosures, particularly related to derivatives, in investment company financial statements. Compliance with the guidance is effective for financial statements filed with the SEC on or after August 1, 2017; adoption will have no effect on the Fund's net assets or results of operations. Although still evaluating the potential impacts of the Investment Company Reporting Modernization to the Fund, management expects that the impact of the Fund's adoption will be limited to additional financial statement disclosures.
64
Morgan Stanley Global Fixed Income Opportunities Fund
Financial Highlights
Selected ratios and per share data for a share of beneficial interest outstanding throughout each period:
FOR THE SIX | FOR THE YEAR ENDED OCTOBER 31, | ||||||||||||||||||||||||||
MONTHS ENDED | |||||||||||||||||||||||||||
APRIL 30, 2017 | 2016(1) | 2015 | 2014 | 2013 | 2012 | ||||||||||||||||||||||
(unaudited) | |||||||||||||||||||||||||||
Class A Shares | |||||||||||||||||||||||||||
Selected Per Share Data: | |||||||||||||||||||||||||||
Net asset value, beginning of period | $ | 5.49 | $ | 5.51 | $ | 5.77 | $ | 5.65 | $ | 5.70 | $ | 5.35 | |||||||||||||||
Income (loss) from investment operations: | |||||||||||||||||||||||||||
Net investment income(2) | 0.09 | 0.19 | 0.18 | 0.22 | 0.26 | 0.26 | |||||||||||||||||||||
Net realized and unrealized gain (loss) | 0.07 | 0.01 | (0.21 | ) | 0.11 | (0.06 | ) | 0.39 | |||||||||||||||||||
Total income (loss) from investment operations | 0.16 | 0.20 | (0.03 | ) | 0.33 | 0.20 | 0.65 | ||||||||||||||||||||
Less dividends from net investment income | (0.11 | ) | (0.22 | ) | (0.23 | ) | (0.21 | ) | (0.25 | ) | (0.30 | ) | |||||||||||||||
Net asset value, end of period | $ | 5.54 | $ | 5.49 | $ | 5.51 | $ | 5.77 | $ | 5.65 | $ | 5.70 | |||||||||||||||
Total Return(3) | 2.92 | %(8) | 3.72 | % | (0.53 | )% | 5.91 | % | 3.53 | % | 12.54 | % | |||||||||||||||
Ratios to Average Net Assets: | |||||||||||||||||||||||||||
Net expenses | 0.89 | %(4)(9) | 0.88 | %(4)(6) | 1.04 | %(4) | 1.16 | %(4)(5) | 1.19 | %(4)(5) | 1.09 | %(4) | |||||||||||||||
Net investment income | 3.49 | %(4)(9) | 3.46 | %(4)(6) | 3.16 | %(4) | 3.72 | %(4)(5) | 4.51 | %(4)(5) | 4.76 | %(4) | |||||||||||||||
Rebate from Morgan Stanley affiliate | 0.00 | %(7)(9) | 0.01 | % | 0.00 | %(7) | 0.00 | %(7) | 0.00 | %(7) | 0.00 | %(7) | |||||||||||||||
Supplemental Data: | |||||||||||||||||||||||||||
Net assets, end of period, in thousands | $ | 80,703 | $ | 87,515 | $ | 112,333 | $ | 106,612 | $ | 68,732 | $ | 77,573 | |||||||||||||||
Portfolio turnover rate | 45 | %(8) | 120 | % | 102 | % | 83 | % | 91 | % | 131 | % |
(1) Reflects prior period custodian out-of-pocket expenses that were reimbursed in September 2016. The amount of the reimbursement was immaterial on a per share basis and did not impact the total return of Class A shares.
(2) The per share amounts were computed using an average number of shares outstanding during the period.
(3) Does not reflect the deduction of sales charge. Calculated based on the net asset value as of the last business day of the period.
(4) The ratios reflect the rebate of certain Fund expenses in connection with investments in a Morgan Stanley affiliate during the period. The effect of the rebate on the ratios is disclosed in the above table as "Rebate from Morgan Stanley affiliate."
(5) If the Fund had borne all of its expenses that were waived by the Adviser/Administrator, the annualized expense and net investment income ratios, would have been as follows:
PERIOD ENDED | EXPENSE RATIO | NET INVESTMENT INCOME RATIO | |||||||||
October 31, 2014 | 1.20 | % | 3.68 | % | |||||||
October 31, 2013 | 1.31 | 4.39 |
(6) If the Fund had not received the reimbursement from the custodian, the annualized expense and net investment income ratios would have been as follows:
PERIOD ENDED | EXPENSE RATIO | NET INVESTMENT INCOME RATIO | |||||||||
October 31, 2016 | 0.90 | % | 3.44 | % |
(7) Amount is less than 0.005%.
(8) Not annualized.
(9) Annualized.
See Notes to Financial Statements
65
Morgan Stanley Global Fixed Income Opportunities Fund
Financial Highlights continued
FOR THE SIX | FOR THE YEAR ENDED OCTOBER 31, | ||||||||||||||||||||||||||
MONTHS ENDED | |||||||||||||||||||||||||||
APRIL 30, 2017 | 2016(1) | 2015 | 2014 | 2013 | 2012 | ||||||||||||||||||||||
(unaudited) | |||||||||||||||||||||||||||
Class B Shares | |||||||||||||||||||||||||||
Selected Per Share Data: | |||||||||||||||||||||||||||
Net asset value, beginning of period | $ | 5.52 | $ | 5.54 | $ | 5.79 | $ | 5.67 | $ | 5.72 | $ | 5.37 | |||||||||||||||
Income (loss) from investment operations: | |||||||||||||||||||||||||||
Net investment income(2) | 0.08 | 0.15 | 0.15 | 0.18 | 0.22 | 0.23 | |||||||||||||||||||||
Net realized and unrealized gain (loss) | 0.06 | 0.01 | (0.21 | ) | 0.11 | (0.06 | ) | 0.38 | |||||||||||||||||||
Total income (loss) from investment operations | 0.14 | 0.16 | (0.06 | ) | 0.29 | 0.16 | 0.61 | ||||||||||||||||||||
Less dividends from net investment income | (0.09 | ) | (0.18 | ) | (0.19 | ) | (0.17 | ) | (0.21 | ) | (0.26 | ) | |||||||||||||||
Net asset value, end of period | $ | 5.57 | $ | 5.52 | $ | 5.54 | $ | 5.79 | $ | 5.67 | $ | 5.72 | |||||||||||||||
Total Return(3) | 2.51 | %(8) | 2.94 | % | (1.01 | )% | 5.15 | % | 2.85 | % | 11.79 | % | |||||||||||||||
Ratios to Average Net Assets: | |||||||||||||||||||||||||||
Net expenses | 1.58 | %(4)(5)(9) | 1.60 | %(4)(5)(6) | 1.68 | %(4)(5) | 1.84 | %(4)(5) | 1.77 | %(4)(5) | 1.69 | %(4) | |||||||||||||||
Net investment income | 2.79 | %(4)(5)(9) | 2.74 | %(4)(5)(6) | 2.63 | %(4)(5) | 3.10 | %(4)(5) | 3.91 | %(4)(5) | 4.16 | %(4) | |||||||||||||||
Rebate from Morgan Stanley affiliate | 0.01 | %(9) | 0.01 | % | 0.01 | % | 0.00 | %(7) | 0.00 | %(7) | 0.00 | %(7) | |||||||||||||||
Supplemental Data: | |||||||||||||||||||||||||||
Net assets, end of period, in thousands | $ | 523 | $ | 790 | $ | 1,042 | $ | 1,502 | $ | 1,969 | $ | 4,406 | |||||||||||||||
Portfolio turnover rate | 45 | %(8) | 120 | % | 102 | % | 83 | % | 91 | % | 131 | % |
(1) Reflects prior period custodian out-of-pocket expenses that were reimbursed in September 2016. The amount of the reimbursement was immaterial on a per share basis and did not impact the total return of the Class B shares.
(2) The per share amounts were computed using an average number of shares outstanding during the period.
(3) Does not reflect the deduction of sales charge. Calculated based on the net asset value as of the last business day of the period.
(4) The ratios reflect the rebate of certain Fund expenses in connection with investments in a Morgan Stanley affiliate during the period. The effect of the rebate on the ratios is disclosed in the above table as "Rebate from Morgan Stanley affiliate."
(5) If the Fund had borne all of its expenses that were waived by the Adviser/Administrator, the annualized expense and net investment income ratios, would have been as follows:
PERIOD ENDED | EXPENSE RATIO | NET INVESTMENT INCOME RATIO | |||||||||
April 30, 2017 | 1.96 | % | 2.41 | % | |||||||
October 31, 2016 | 1.84 | 2.50 | |||||||||
October 31, 2015 | 1.88 | 2.43 | |||||||||
October 31, 2014 | 2.02 | 2.92 | |||||||||
October 31, 2013 | 1.88 | 3.80 |
(6) If the Fund had not received the reimbursement from the custodian, the annualized expense and net investment income ratios would have been as follows:
PERIOD ENDED | EXPENSE RATIO | NET INVESTMENT INCOME RATIO | |||||||||
October 31, 2016 | 1.62 | % | 2.72 | % |
(7) Amount is less than 0.005%.
(8) Not annualized.
(9) Annualized.
See Notes to Financial Statements
66
Morgan Stanley Global Fixed Income Opportunities Fund
Financial Highlights continued
FOR THE SIX | FOR THE YEAR ENDED OCTOBER 31, | ||||||||||||||||||||||||||
MONTHS ENDED | |||||||||||||||||||||||||||
APRIL 30, 2017 | 2016(1) | 2015 | 2014 | 2013 | 2012 | ||||||||||||||||||||||
(unaudited) | |||||||||||||||||||||||||||
Class L Shares | |||||||||||||||||||||||||||
Selected Per Share Data: | |||||||||||||||||||||||||||
Net asset value, beginning of period | $ | 5.49 | $ | 5.51 | $ | 5.77 | $ | 5.65 | $ | 5.70 | $ | 5.35 | |||||||||||||||
Income (loss) from investment operations: | |||||||||||||||||||||||||||
Net investment income(2) | 0.09 | 0.17 | 0.17 | 0.20 | 0.24 | 0.23 | |||||||||||||||||||||
Net realized and unrealized gain (loss) | 0.06 | 0.01 | (0.21 | ) | 0.12 | (0.06 | ) | 0.39 | |||||||||||||||||||
Total income (loss) from investment operations | 0.15 | 0.18 | (0.04 | ) | 0.32 | 0.18 | 0.62 | ||||||||||||||||||||
Less dividends from net investment income | (0.10 | ) | (0.20 | ) | (0.22 | ) | (0.20 | ) | (0.23 | ) | (0.27 | ) | |||||||||||||||
Net asset value, end of period | $ | 5.54 | $ | 5.49 | $ | 5.51 | $ | 5.77 | $ | 5.65 | $ | 5.70 | |||||||||||||||
Total Return(3) | 2.80 | %(8) | 3.48 | % | (0.73 | )% | 5.63 | % | 3.16 | % | 11.88 | % | |||||||||||||||
Ratios to Average Net Assets: | |||||||||||||||||||||||||||
Net expenses | 1.12 | %(4)(9) | 1.11 | %(4)(6) | 1.25 | %(4) | 1.42 | %(4)(5) | 1.55 | %(4)(5) | 1.68 | %(4) | |||||||||||||||
Net investment income | 3.26 | %(4)(9) | 3.23 | %(4)(6) | 2.94 | %(4) | 3.46 | %(4)(5) | 4.15 | %(4)(5) | 4.17 | %(4) | |||||||||||||||
Rebate from Morgan Stanley affiliate | 0.00 | %(7)(9) | 0.01 | % | 0.01 | % | 0.00 | %(7) | 0.00 | %(7) | 0.00 | %(7) | |||||||||||||||
Supplemental Data: | |||||||||||||||||||||||||||
Net assets, end of period, in thousands | $ | 8,961 | $ | 9,909 | $ | 12,834 | $ | 9,275 | $ | 5,942 | $ | 6,744 | |||||||||||||||
Portfolio turnover rate | 45 | %(8) | 120 | % | 102 | % | 83 | % | 91 | % | 131 | % |
(1) Reflects prior period custodian out-of-pocket expenses that were reimbursed in September 2016. The amount of the reimbursement was immaterial on a per share basis and did not impact the total return of the Class L shares.
(2) The per share amounts were computed using an average number of shares outstanding during the period.
(3) Does not reflect the deduction of sales charge. Calculated based on the net asset value as of the last business day of the period. Effective February 25, 2013, Class C shares were renamed Class L shares. Class C shares held for less than one year were subject to a 1.0% contingent deferred sales charge. The contingent deferred sales charge on Class L shares was eliminated effective February 25, 2013.
(4) The ratios reflect the rebate of certain Fund expenses in connection with investments in a Morgan Stanley affiliate during the period. The effect of the rebate on the ratios is disclosed in the above table as "Rebate from Morgan Stanley affiliate."
(5) If the Fund had borne all of its expenses that were waived by the Adviser/Administrator, the annualized expense and net investment income ratios, would have been as follows:
PERIOD ENDED | EXPENSE RATIO | NET INVESTMENT INCOME RATIO | |||||||||
October 31, 2014 | 1.44 | % | 3.44 | % | |||||||
October 31, 2013 | 1.67 | 4.03 |
(6) If the Fund had not received the reimbursement from the custodian, the annualized expense and net investment income ratios would have been as follows:
PERIOD ENDED | EXPENSE RATIO | NET INVESTMENT INCOME RATIO | |||||||||
October 31, 2016 | 1.13 | % | 3.21 | % |
(7) Amount is less than 0.005%.
(8) Not annualized.
(9) Annualized.
See Notes to Financial Statements
67
Morgan Stanley Global Fixed Income Opportunities Fund
Financial Highlights continued
FOR THE SIX | FOR THE YEAR ENDED OCTOBER 31, | ||||||||||||||||||||||||||
MONTHS ENDED | |||||||||||||||||||||||||||
APRIL 30, 2017 | 2016(1) | 2015 | 2014 | 2013 | 2012 | ||||||||||||||||||||||
(unaudited) | |||||||||||||||||||||||||||
Class I Shares | |||||||||||||||||||||||||||
Selected Per Share Data: | |||||||||||||||||||||||||||
Net asset value, beginning of period | $ | 5.55 | $ | 5.57 | $ | 5.82 | $ | 5.71 | $ | 5.75 | $ | 5.39 | |||||||||||||||
Income (loss) from investment operations: | |||||||||||||||||||||||||||
Net investment income(2) | 0.11 | 0.21 | 0.18 | 0.23 | 0.27 | 0.28 | |||||||||||||||||||||
Net realized and unrealized gain (loss) | 0.06 | 0.00 | (3) | (0.18 | ) | 0.11 | (0.05 | ) | 0.39 | ||||||||||||||||||
Total income (loss) from investment operations | 0.17 | 0.21 | (0.00 | )(3) | 0.34 | 0.22 | 0.67 | ||||||||||||||||||||
Less dividends from net investment income | (0.12 | ) | (0.23 | ) | (0.25 | ) | (0.23 | ) | (0.26 | ) | (0.31 | ) | |||||||||||||||
Net asset value, end of period | $ | 5.60 | $ | 5.55 | $ | 5.57 | $ | 5.82 | $ | 5.71 | $ | 5.75 | |||||||||||||||
Total Return(4) | 3.06 | %(9) | 4.00 | % | (0.17 | )% | 6.19 | % | 3.95 | % | 12.91 | % | |||||||||||||||
Ratios to Average Net Assets: | |||||||||||||||||||||||||||
Net expenses | 0.55 | %(5)(10) | 0.57 | %(5)(7) | 0.69 | %(5) | 0.80 | %(5)(6) | 0.94 | %(5)(6) | 0.84 | %(5) | |||||||||||||||
Net investment income | 3.84 | %(5)(10) | 3.77 | %(5)(7) | 3.18 | %(5) | 3.88 | %(5)(6) | 4.77 | %(5)(6) | 5.01 | %(5) | |||||||||||||||
Rebate from Morgan Stanley affiliate | 0.00 | %(8)(10) | 0.01 | % | 0.01 | % | 0.01 | % | 0.00 | %(8) | 0.00 | %(8) | |||||||||||||||
Supplemental Data: | |||||||||||||||||||||||||||
Net assets, end of period, in thousands | $ | 188,054 | $ | 173,507 | $ | 134,841 | $ | 29,761 | $ | 3,130 | $ | 1,892 | |||||||||||||||
Portfolio turnover rate | 45 | %(9) | 120 | % | 102 | % | 83 | % | 91 | % | 131 | % |
(1) Reflects prior period custodian out-of-pocket expenses that were reimbursed in September 2016. The amount of the reimbursement was immaterial on a per share basis and did not impact the total return of the Class I shares.
(2) The per share amounts were computed using an average number of shares outstanding during the period.
(3) Amount is less than $0.005.
(4) Calculated based on the net asset value as of the last business day of the period.
(5) The ratios reflect the rebate of certain Fund expenses in connection with investments in a Morgan Stanley affiliate during the period. The effect of the rebate on the ratios is disclosed in the above table as "Rebate from Morgan Stanley affiliate."
(6) If the Fund had borne all of its expenses that were waived by the Adviser/Administrator, the annualized expense and net investment income ratios, would have been as follows:
PERIOD ENDED | EXPENSE RATIO | NET INVESTMENT INCOME RATIO | |||||||||
October 31, 2014 | 0.86 | % | 3.82 | % | |||||||
October 31, 2013 | 1.08 | 4.63 |
(7) If the Fund had not received the reimbursement from the custodian, the annualized expense and net investment income ratios would have been as follows:
PERIOD ENDED | EXPENSE RATIO | NET INVESTMENT INCOME RATIO | |||||||||
October 31, 2016 | 0.60 | % | 3.74 | % |
(8) Amount is less than 0.005%.
(9) Not annualized.
(10) Annualized.
See Notes to Financial Statements
68
Morgan Stanley Global Fixed Income Opportunities Fund
Financial Highlights continued
FOR THE SIX MONTHS ENDED APRIL 30, 2017 | FOR THE YEAR ENDED OCTOBER 31, 2016(1) | PERIOD FROM APRIL 30, 2015(2) TO OCTOBER 31, 2015 | |||||||||||||
(unaudited) | |||||||||||||||
Class C Shares | |||||||||||||||
Selected Per Share Data: | |||||||||||||||
Net asset value, beginning of period | $ | 5.49 | $ | 5.51 | $ | 5.73 | |||||||||
Income (loss) from investment operations: | |||||||||||||||
Net investment income(3) | 0.08 | 0.15 | 0.03 | ||||||||||||
Net realized and unrealized gain (loss) | 0.05 | 0.01 | (0.17 | ) | |||||||||||
Total income (loss) from investment operations | 0.13 | 0.16 | (0.14 | ) | |||||||||||
Less dividends from net investment income | (0.09 | ) | (0.18 | ) | (0.08 | ) | |||||||||
Net asset value, end of period | $ | 5.53 | $ | 5.49 | $ | 5.51 | |||||||||
Total Return(4) | 2.40 | %(8) | 3.03 | % | (2.48 | )%(8) | |||||||||
Ratios to Average Net Assets: | |||||||||||||||
Net expenses | 1.56 | %(5)(9) | 1.58 | %(5)(6) | 1.74 | %(5)(9) | |||||||||
Net investment income | 2.82 | %(5)(9) | 2.76 | %(5)(6) | 1.22 | %(5)(9) | |||||||||
Rebate from Morgan Stanley affiliate | 0.00 | %(7)(9) | 0.01 | % | 0.00 | %(7)(9) | |||||||||
Supplemental Data: | |||||||||||||||
Net assets, end of period, in thousands | $ | 22,164 | $ | 21,673 | $ | 10,269 | |||||||||
Portfolio turnover rate | 45 | %(8) | 120 | % | 102 | % |
(1) Reflects prior period custodian out-of-pocket expenses that were reimbursed in September 2016. The amount of the reimbursement was immaterial on a per share basis and did not impact the total return of the Class C shares.
(2) Commencement of Offering.
(3) The per share amounts were computed using an average number of shares outstanding during the period.
(4) Does not reflect the deduction of sales charge. Calculated based on the net asset value as of the last business day of the period.
(5) The ratios reflect the rebate of certain Fund expenses in connection with investments in a Morgan Stanley affiliate during the period. The effect of the rebate on the ratios is disclosed in the above table as "Rebate from Morgan Stanley affiliate."
(6) If the Fund had not received the reimbursement from the custodian, the annualized expense and net investment income ratios would have been as follows:
PERIOD ENDED | EXPENSE RATIO | NET INVESTMENT INCOME RATIO | |||||||||
October 31, 2016 | 1.61 | % | 2.73 | % |
(7) Amount is less than 0.005%.
(8) Not annualized.
(9) Annualized.
See Notes to Financial Statements
69
Morgan Stanley Global Fixed Income Opportunities Fund
Financial Highlights continued
FOR THE SIX MONTHS ENDED | FOR THE YEAR ENDED OCTOBER 31, | PERIOD FROM SEPTEMBER 13, 2013(2) TO | |||||||||||||||||||||
APRIL 30, 2017 | 2016(1) | 2015 | 2014 | OCTOBER 31, 2013 | |||||||||||||||||||
(unaudited) | |||||||||||||||||||||||
Class IS Shares | |||||||||||||||||||||||
Selected Per Share Data: | |||||||||||||||||||||||
Net asset value, beginning of period | $ | 5.55 | $ | 5.57 | $ | 5.83 | $ | 5.71 | $ | 5.55 | |||||||||||||
Income (loss) from investment operations: | |||||||||||||||||||||||
Net investment income(3) | 0.11 | 0.21 | 0.21 | 0.18 | 0.03 | ||||||||||||||||||
Net realized and unrealized gain (loss) | 0.06 | 0.01 | (0.22 | ) | 0.17 | 0.17 | |||||||||||||||||
Total income (loss) from investment operations | 0.17 | 0.22 | (0.01 | ) | 0.35 | 0.20 | |||||||||||||||||
Less dividends from net investment income | (0.12 | ) | (0.24 | ) | (0.25 | ) | (0.23 | ) | (0.04 | ) | |||||||||||||
Net asset value, end of period | $ | 5.60 | $ | 5.55 | $ | 5.57 | $ | 5.83 | $ | 5.71 | |||||||||||||
Total Return(4) | 3.09 | %(9) | 4.07 | % | (0.13 | )% | 6.21 | % | 3.70 | %(9) | |||||||||||||
Ratios to Average Net Assets: | |||||||||||||||||||||||
Net expenses | 0.50 | %(5)(10) | 0.49 | %(5)(6)(7) | 0.64 | %(5) | 0.66 | %(5)(6) | 0.84 | %(5)(6)(10) | |||||||||||||
Net investment income | 3.90 | %(5)(10) | 3.85 | %(5)(6)(7) | 3.60 | %(5) | 3.06 | %(5)(6) | 4.54 | %(5)(6)(10) | |||||||||||||
Rebate from Morgan Stanley affiliate | 0.00 | %(8)(10) | 0.01 | % | 0.00 | %(8) | 0.02 | % | 0.00 | %(8)(10) | |||||||||||||
Supplemental Data: | |||||||||||||||||||||||
Net assets, end of period, in thousands | $ | 200,949 | $ | 195,039 | $ | 63,680 | $ | 40,579 | $ | 10 | |||||||||||||
Portfolio turnover rate | 45 | %(9) | 120 | % | 102 | % | 83 | % | 91 | % |
(1) Reflects prior period custodian out-of-pocket expenses that were reimbursed in September 2016. The amount of the reimbursement was immaterial on a per share basis and did not impact the total return of the Class IS shares.
(2) Commencement of Offering.
(3) The per share amounts were computed using an average number of shares outstanding during the period.
(4) Calculated based on the net asset value as of the last business day of the period.
(5) The ratios reflect the rebate of certain Fund expenses in connection with investments in a Morgan Stanley affiliate during the period. The effect of the rebate on the ratios is disclosed in the above table as "Rebate from Morgan Stanley affiliate."
(6) If the Fund had borne all of its expenses that were waived by the Adviser/Administrator, the annualized expense and net investment income ratios, would have been as follows:
PERIOD ENDED | EXPENSE RATIO | NET INVESTMENT INCOME RATIO | |||||||||
October 31, 2014 | 0.97 | % | 2.75 | % | |||||||
October 31, 2013 | 1.91 | 3.47 |
(7) If the Fund had not received the reimbursement from the custodian, the annualized expense and net investment income ratios would have been as follows:
PERIOD ENDED | EXPENSE RATIO | NET INVESTMENT INCOME RATIO | |||||||||
October 31, 2016 | 0.53 | % | 3.81 | % |
(8) Amount is less than 0.005%.
(9) Not annualized.
(10) Annualized.
See Notes to Financial Statements
70
Morgan Stanley Global Fixed Income Opportunities Fund
Privacy Notice (unaudited)
Morgan Stanley Investment Management Inc.
An Important Notice Concerning Our U.S. Privacy Policy
We are required by federal law to provide you with a copy of our privacy policy annually. This policy applies to current and former individual investors in funds managed or sponsored by Morgan Stanley Investment Management Inc. ("MSIM") as well as current and former individual clients of MSIM. This policy is not applicable to partnerships, corporations, trusts or other non-individual clients or investors. Please note that we may amend this policy at any time, and will inform you of any changes as required by law.
We Respect Your Privacy
We appreciate that you have provided us with your personal financial information. We strive to maintain the privacy of such information while we help you achieve your financial objectives. This Notice describes what non-public personal information we collect about you, why we collect it, when we may share it with others and how certain others may use it. It discusses the steps you may take to limit our sharing of certain information about you to affiliated companies in the Morgan Stanley family of companies ("other Morgan Stanley companies"). It also discloses how you may limit use of certain shared information for marketing purposes by other Morgan Stanley branded companies. Throughout this policy, we refer to the non-public information that personally identifies you or your accounts as "personal information.''
1. What Personal Information Do We Collect About You?
We obtain personal information from applications and other forms you submit to us, from your dealings with us, from consumer reporting agencies, from our Web sites and from third parties and other sources.
For example:
• We may collect information such as your name, address, e-mail address, telephone/fax numbers, assets, income and investment objectives through subscription documents, applications and other forms you submit to us.
• We may obtain information about account balances, your use of account(s) and the types of products and services you prefer to receive from us through your dealings and transactions with us and other sources.
• We may obtain information about your creditworthiness and credit history from consumer reporting agencies.
• We may collect background information from and through third-party vendors to verify representations you have made and to comply with various regulatory requirements.
71
Morgan Stanley Global Fixed Income Opportunities Fund
Privacy Notice (unaudited) continued
• If you interact with us through our public and private Web sites, we may collect information that you provide directly through online communications (such as an e-mail address). We may also collect information about your Internet service provider, your domain name, your computer's operating system and Web browser, your use of our Web sites and your product and service preferences, through the use of "cookies." Please consult the Terms of Use of these sites for more details.
2. When Do We Disclose Personal Information We Collect About You?
We may disclose personal information we collect about you to other Morgan Stanley companies and to non-affiliated third parties.
a. Information We Disclose To Other Morgan Stanley Companies. We may disclose personal information to other Morgan Stanley companies for a variety of reasons, including to manage your account(s) effectively, to service and process your transactions, to let you know about products and services offered by us and other Morgan Stanley companies, to manage our business, and as otherwise required or permitted by law. Offers for products and services from other Morgan Stanley companies are developed under conditions designed to safeguard your personal information.
b. Information We Disclose To Non-affiliated Third Parties. We do not disclose personal information that we collect about you to non-affiliated third parties except to those who provide marketing services on our behalf, to financial institutions with whom we have joint marketing agreements, and as otherwise required or permitted by law. For example, we may disclose personal information to non-affiliated third parties for servicing and processing transactions, to offer our own products and services, to protect against fraud, for institutional risk control, to respond to judicial process or to perform services on our behalf. When we share personal information with a non-affiliated third party, they are required to limit their use of personal information to the particular purpose for which it was shared and they are not allowed to share personal information with others except to fulfill that limited purpose or as may be permitted or required by law.
3. How Do We Protect The Security And Confidentiality Of Personal Information We Collect About You?
We maintain physical, electronic and procedural security measures to help safeguard the personal information we collect about you. We have internal policies governing the proper handling of client information. Third parties that provide support or marketing services on our behalf may also receive personal information, and we require them to adhere to confidentiality standards with respect to such information.
72
Morgan Stanley Global Fixed Income Opportunities Fund
Privacy Notice (unaudited) continued
4. How Can You Limit The Sharing Of Certain Types Of Personal Information With Other Morgan Stanley Companies?
We offer you choices as to whether we share with other Morgan Stanley companies the personal information that was collected to determine your eligibility for products and services you request ("eligibility information"). Eligibility information does not include your identification information or personal information pertaining to our transactions or experiences with you. Please note that, even if you direct us not to share eligibility information with other Morgan Stanley companies ("opt-out"), we may still share personal information, including eligibility information, with those companies in circumstances excluded from the opt-out under applicable law, such as to process transactions or to service your account.
5. How Can You Limit The Use Of Certain Types Of Personal Information By Other Morgan Stanley Companies For Marketing?
By following the opt-out instructions in Section 6 below, you may limit other Morgan Stanley branded companies from marketing their products or services to you based on personal information we disclose to them. This information may include, for example, your income and account history with us. Please note that, even if you choose to limit Other Morgan Stanley Companies from using personal information about you that we may share with them for marketing their products and services to you, Other Morgan Stanley Companies may use your personal information that they obtain from us to market to you in circumstances permitted by law, such as if the Other Morgan Stanley Company has its own relationship with you.
6. How Can You Send Us An Opt-Out Instruction?
If you wish to limit our sharing of eligibility information about you with other Morgan Stanley companies or other Morgan Stanley companies' use of personal information for marketing purposes, as described in this notice, you may do so by:
• Calling us at (800) 548-7786
Monday–Friday between 8a.m. and 6p.m. (EST)
• Writing to us at the following address:
Boston Financial Data Services, Inc.
c/o Privacy Coordinator
P.O. Box 219804
Kansas City, Missouri 64121
73
Morgan Stanley Global Fixed Income Opportunities Fund
Privacy Notice (unaudited) continued
Your written request should include your name, address, telephone number and account number(s) to which the opt-out applies and whether you are opting out with respect to sharing of eligibility information (Section 4 above), or if information used for Marketing (Section 5 above) or both. Written opt-out requests should not be sent with any other correspondence. In order to process your request, we require that the request be provided by you directly and not through a third party.
Your opt-out preference will remain in effect with respect to this policy (as it may be amended) until you notify us otherwise. If you have a joint account, your direction for us not to share this information with other Morgan Stanley companies and for those other Morgan Stanley companies not to use your personal information for marketing will be applied to all account holders on that account. Please understand that if you limit our sharing or our affiliated companies' use of personal information, you and any joint account holder(s) may not receive information about Morgan Stanley products and services, including products or services that could help you manage your financial resources and achieve your investment objectives.
7. What If An Affiliated Company Becomes A Non-Affiliated Third Party?
If, at any time in the future, an affiliated company becomes a non-affiliated third party, further disclosures of personal information made to the former affiliated company will be limited to those described in Section 2(b) above relating to non-affiliated third parties. If you elected under Section 6 to limit disclosures we make to affiliated companies, or use of personal information by affiliated companies, your election will not apply to use by any former affiliated company of your personal information in their possession once it becomes a non-affiliated third party.
74
Morgan Stanley Global Fixed Income Opportunities Fund
Privacy Notice (unaudited) continued
Special Notice to Residents of Vermont
The following section supplements our policy with respect to our individual clients who have a Vermont address and supersedes anything to the contrary in the above policy with respect to those clients only.
The state of Vermont requires financial institutions to obtain your consent prior to sharing personal information that they collect about you with affiliated companies and non-affiliated third parties other than in certain limited circumstances. Except as permitted by law, we will not share personal information we collect about you with non-affiliated third parties or other Morgan Stanley companies unless you provide us with your written consent to share such information ("opt-in").
If you wish to receive offers for investment products and services offered by or through other Morgan Stanley companies, please notify us in writing at the following address:
Boston Financial Data Services, Inc.
c/o Privacy Coordinator
P.O. Box 219804
Kansas City, Missouri 64121
Your authorization should include your name, address, telephone number and account number(s) to which the opt-in applies and should not be sent with any other correspondence. In order to process your authorization, we require that the authorization be provided by you directly and not through a third party.
Special Notice to Residents of California
The following section supplements our policy with respect to our individual clients who have a California address and supersedes anything to the contrary in the above policy with respect to those clients only.
In response to a California law, if your account has a California home address, your personal information will not be disclosed to non-affiliated third parties except as permitted by applicable California law, and we will limit sharing such information with our affiliates to comply with California privacy laws that apply to us.
75
Item 2. Code of Ethics.
Not applicable for semiannual reports.
Item 3. Audit Committee Financial Expert.
Not applicable for semiannual reports.
Item 4. Principal Accountant Fees and Services
Not applicable for semiannual reports.
Item 5. Audit Committee of Listed Registrants.
Not applicable for semiannual reports.
Item 6.
(a) Refer to Item 1.
(b) Not applicable.
Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies.
Not applicable for semiannual reports.
Item 8. Portfolio Managers of Closed-End Management Investment Companies
Applicable only to annual reports filed by closed-end funds.
Item 9. Closed-End Fund Repurchases
Applicable to reports filed by closed-end funds.
Item 10. Submission of Matters to a Vote of Security Holders
Not applicable.
Item 11. Controls and Procedures
(a) The Fund’s principal executive officer and principal financial officer have concluded that the Fund’s disclosure controls and procedures are sufficient to ensure that information required to be disclosed by the Fund in this Form N-CSR was recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, based upon such officers’ evaluation of these controls and procedures as of a date within 90 days of the filing date of the report.
(b) There were no changes in the registrant’s internal control over financial reporting that occurred during the second fiscal quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting.
Item 12. Exhibits
(a) Code of Ethics — Not applicable for semiannual reports.
(b) A separate certification for each principal executive officer and principal financial officer of the registrant are attached hereto as part of EX-99.CERT.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Morgan Stanley Global Fixed Income Opportunities Fund |
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/s/ John H. Gernon |
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John H. Gernon |
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Principal Executive Officer |
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June 20, 2017 |
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Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
/s/ John H. Gernon |
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John H. Gernon |
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Principal Executive Officer |
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June 20, 2017 |
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/s/ Francis Smith |
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Francis Smith |
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Principal Financial Officer |
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June 20, 2017 |
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