Washington, D.C. 20549
John H. Gernon
Item 4. Principal Accountant Fees and Services.
(a)(b)(c)(d) and (g). Based on fees billed for the periods shown:
2019
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|
|
Registrant
|
|
|
Covered Entities(1)
|
|
|
Audit Fees
|
|
$
|
65,533
|
|
|
|
N/A
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-Audit Fees
|
|
|
|
|
|
|
|
|
|
Audit-Related Fees
|
|
$
|
-
|
(2)
|
|
$
|
-
|
(2)
|
|
Tax Fees
|
|
$
|
5,125
|
(3)
|
|
$
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535,939
|
(4)
|
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All Other Fees
|
|
$
|
-
|
|
|
$
|
30,000
|
(5)
|
|
Total Non-Audit Fees
|
|
$
|
5,125
|
|
|
$
|
565,939
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
70,658
|
|
|
$
|
565,939
|
|
2018
|
|
|
Registrant
|
|
|
Covered Entities(1)
|
|
|
Audit Fees
|
|
$
|
70,533
|
|
|
|
N/A
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-Audit Fees
|
|
|
|
|
|
|
|
|
|
Audit-Related Fees
|
|
$
|
-
|
(2)
|
|
$
|
-
|
(2)
|
|
Tax Fees
|
|
$
|
5,125
|
(3)
|
|
$
|
8,773,935
|
(4)
|
|
All Other Fees
|
|
$
|
-
|
|
|
$
|
18,115
|
(5)
|
|
Total Non-Audit Fees
|
|
$
|
5,125
|
|
|
$
|
8,792,050
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
75,658
|
|
|
$
|
8,792,050
|
|
N/A- Not applicable, as not required by
Item 4.
|
|
(1)
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Covered Entities include the Adviser (excluding sub-advisors)
and any entity controlling, controlled by or under common control with the Adviser that provides ongoing services to the Registrant.
|
|
|
(2)
|
Audit-Related Fees represent assurance and related services provided that
are reasonably related to the performance of the audit of the financial statements of the Covered Entities' and funds advised by
the Adviser or its affiliates, specifically data verification and agreed-upon procedures related to asset securitizations and agreed-upon
procedures engagements.
|
|
|
(3)
|
Tax Fees represent tax compliance, tax planning and tax
advice services provided in connection with the preparation and review of the Registrant’s tax returns.
|
|
|
(4)
|
Tax Fees represent tax compliance, tax planning and tax
advice services provided in connection with the review of Covered Entities' tax returns.
|
|
|
(5)
|
All other fees represent project management for future
business applications and improving business and operational processes.
|
(e)(1) The audit committee’s pre-approval policies and
procedures are as follows:
APPENDIX A
AUDIT COMMITTEE
AUDIT AND NON-AUDIT SERVICES
PRE-APPROVAL POLICY AND PROCEDURES
OF THE
MORGAN STANLEY FUNDS
AS ADOPTED AND AMENDED JULY 23, 2004
AND JUNE 15 AND 16, 20163
|
|
1.
|
Statement of Principles
|
The Audit Committee of the Board is required to review and,
in its sole discretion, pre-approve all Covered Services to be provided by the Independent Auditors to the Fund and Covered Entities
in order to assure that services performed by the Independent Auditors do not impair the auditor’s independence from the
Fund.
The SEC has issued rules specifying the types of services that
an independent auditor may not provide to its audit client, as well as the audit committee’s administration of the engagement
of the independent auditor. The SEC’s rules establish two different approaches to pre-approving services, which the SEC considers
to be equally valid. Proposed services either: may be pre-approved without consideration of specific case-by-case services by the
Audit Committee (“general pre-approval”); or require the specific pre-approval of the Audit Committee or its
delegate (“specific pre-approval”). The Audit Committee believes that the combination of these two approaches
in this Policy will result in an effective and efficient procedure to pre-approve services performed by the Independent Auditors.
As set forth in this Policy, unless a type of service has received general pre-approval, it will require specific pre-approval
by the Audit Committee (or by any member of the Audit Committee to which pre-approval authority has been delegated) if it is to
be provided by the Independent Auditors. Any proposed services exceeding pre-approved cost levels or budgeted amounts will also
require specific pre-approval by the Audit Committee.
The appendices to this Policy describe the Audit, Audit-related,
Tax and All Other services that have the general pre-approval of the Audit Committee. The term of any general pre-approval is 12 months
from the date of pre-approval, unless the Audit Committee considers and provides a different period and states otherwise. The Audit
Committee will annually review and pre-approve the services that may be provided by the Independent Auditors without obtaining
specific pre-approval from the Audit Committee. The Audit Committee will add to or subtract from the list of general pre-approved
services from time to time, based on subsequent determinations.
The purpose of this Policy is to set forth the policy and procedures
by which the Audit Committee intends to fulfill its responsibilities. It does not delegate the Audit Committee’s responsibilities
to pre-approve services performed by the Independent Auditors to management.
The Fund’s Independent Auditors have reviewed this Policy
and believes that implementation of the Policy will not adversely affect the Independent Auditors’ independence.
3 This Audit Committee Audit and Non-Audit Services
Pre-Approval Policy and Procedures (the “Policy”), adopted as of the date above, supersedes and replaces all
prior versions that may have been adopted from time to time.
As provided in the Act and the SEC’s rules, the Audit
Committee may delegate either type of pre-approval authority to one or more of its members. The member to whom such authority is
delegated must report, for informational purposes only, any pre-approval decisions to the Audit Committee at its next scheduled
meeting.
The annual Audit services engagement terms and fees are subject
to the specific pre-approval of the Audit Committee. Audit services include the annual financial statement audit and other procedures
required to be performed by the Independent Auditors to be able to form an opinion on the Fund’s financial statements. These
other procedures include information systems and procedural reviews and testing performed in order to understand and place reliance
on the systems of internal control, and consultations relating to the audit. The Audit Committee will approve, if necessary, any
changes in terms, conditions and fees resulting from changes in audit scope, Fund structure or other items.
In addition to the annual Audit services engagement approved
by the Audit Committee, the Audit Committee may grant general pre-approval to other Audit services, which are those services that
only the Independent Auditors reasonably can provide. Other Audit services may include statutory audits and services associated
with SEC registration statements (on Forms N-1A, N-2, N-3, N-4, etc.), periodic reports and other documents filed with the SEC
or other documents issued in connection with securities offerings.
The Audit Committee has pre-approved the Audit services in Appendix
B.1. All other Audit services not listed in Appendix B.1 must be specifically pre-approved by the Audit Committee (or by any member
of the Audit Committee to which pre-approval has been delegated).
|
|
4.
|
Audit-related Services
|
Audit-related services are assurance and related services that
are reasonably related to the performance of the audit or review of the Fund’s financial statements and, to the extent they
are Covered Services, the Covered Entities or that are traditionally performed by the Independent Auditors. Because the Audit Committee
believes that the provision of Audit-related services does not impair the independence of the auditor and is consistent with the
SEC’s rules on auditor independence, the Audit Committee may grant general pre-approval to Audit-related services. Audit-related
services include, among others, accounting consultations related to accounting, financial reporting or disclosure matters not classified
as “Audit services”; assistance with understanding and implementing new accounting and financial reporting guidance
from rulemaking authorities; agreed-upon or expanded audit procedures related to accounting and/or billing records required to
respond to or comply with financial, accounting or regulatory reporting matters; and assistance with internal control reporting
requirements under Forms N-SAR and/or N-CSR.
The Audit Committee has pre-approved the Audit-related services
in Appendix B.2. All other Audit-related services not listed in Appendix B.2 must be specifically pre-approved by the Audit Committee
(or by any member of the Audit Committee to which pre-approval has been delegated).
The Audit Committee believes that the Independent Auditors can
provide Tax services to the Fund and, to the extent they are Covered Services, the Covered Entities, such as tax compliance, tax
planning and tax advice without impairing the auditor’s independence, and the SEC has stated that the Independent Auditors
may provide such services.
Pursuant to the preceding paragraph, the Audit Committee has
pre-approved the Tax Services in Appendix B.3. All Tax services in Appendix B.3 must be specifically pre-approved by the Audit
Committee (or by any member of the Audit Committee to which pre-approval has been delegated).
The Audit Committee believes, based on the SEC’s rules
prohibiting the Independent Auditors from providing specific non-audit services, that other types of non-audit services are permitted.
Accordingly, the Audit Committee believes it may grant general pre-approval to those permissible non-audit services classified
as All Other services that it believes are routine and recurring services, would not impair the independence of the auditor and
are consistent with the SEC’s rules on auditor independence.
The Audit Committee has pre-approved the All Other services
in Appendix B.4. Permissible All Other services not listed in Appendix B.4 must be specifically pre-approved by the Audit Committee
(or by any member of the Audit Committee to which pre-approval has been delegated).
|
|
7.
|
Pre-Approval Fee Levels or Budgeted Amounts
|
Pre-approval fee levels or budgeted amounts for all services
to be provided by the Independent Auditors will be established annually by the Audit Committee. Any proposed services exceeding
these levels or amounts will require specific pre-approval by the Audit Committee. The Audit Committee is mindful of the overall
relationship of fees for audit and non-audit services in determining whether to pre-approve any such services.
All requests or applications for services to be provided by
the Independent Auditors that do not require specific approval by the Audit Committee will be submitted to the Fund’s Principal
Financial and Accounting Officer and must include a detailed description of the services to be rendered. The Fund’s Principal
Financial and Accounting Officer will determine whether such services are included within the list of services that have received
the general pre-approval of the Audit Committee. The Audit Committee will be informed on a timely basis of any such services rendered
by the Independent Auditors. Requests or applications to provide services that require specific approval by the Audit Committee
or Chairman of the Audit Committee will be submitted to the Audit Committee by the Fund’s Principal Financial and Accounting
Officer, who, after consultation with the Independent Auditors, will discuss whether the request or application is consistent with
the SEC’s rules on auditor independence.
The Audit Committee has designated the Fund’s
Principal Financial and Accounting Officer to monitor the performance of all services provided by the Independent Auditors
and to determine whether such services are in compliance with this Policy. The Fund’s Principal Financial and
Accounting Officer will report to the Audit Committee on a periodic basis on the results of its monitoring. Both the
Fund’s Principal Financial and Accounting Officer and management will immediately report to the chairman of the Audit
Committee any breach of this Policy that comes to the attention of the Fund’s Principal Financial and Accounting
Officer or any member of management.
|
|
9.
|
Additional Requirements
|
The Audit Committee has determined to take additional measures
on an annual basis to meet its responsibility to oversee the work of the Independent Auditors and to assure the auditor’s
independence from the Fund, such as reviewing a formal written statement from the Independent Auditors delineating all relationships
between the Independent Auditors and the Fund, consistent with the PCAOB’s Ethics and Independence Rule 3526, and discussing
with the Independent Auditors its methods and procedures for ensuring independence.
Covered Entities include the Fund’s investment adviser(s)
and any entity controlling, controlled by or under common control with the Fund’s investment adviser(s) that provides ongoing
services to the Fund(s). Beginning with non-audit service contracts entered into on or after May 6, 2003, the Fund’s audit
committee must pre-approve non-audit services provided not only to the Fund but also to the Covered Entities if the engagements
relate directly to the operations and financial reporting of the Fund. This list of Covered Entities would include:
Morgan Stanley Funds
Morgan Stanley & Co. LLC
Morgan Stanley Investment Management Inc.
Morgan Stanley Investment Management Limited
Morgan Stanley Investment Management Private Limited
Morgan Stanley Asset & Investment Trust Management
Co., Limited
Morgan Stanley Investment Management Company
Morgan Stanley Services Company, Inc.
Morgan Stanley Distribution, Inc.
Morgan Stanley AIP GP LP
Morgan Stanley Alternative Investment Partners LP
Morgan Stanley Smith Barney LLC
Morgan Stanley Capital Management
LLC
Morgan Stanley Asia Limited
(e)(2) Beginning with non-audit service contracts entered into
on or after May 6, 2003, the audit committee also is required to pre-approve services to Covered Entities to the extent that the
services are determined to have a direct impact on the operations or financial reporting of the Registrant. 100% of such services
were pre-approved by the audit committee pursuant to the Audit Committee’s pre-approval policies and procedures (attached
hereto).
(f) Not applicable.
(g) See table above.
(h) The audit committee of the Board of Directors has considered
whether the provision of services other than audit services performed by the auditors to the Registrant and Covered Entities is
compatible with maintaining the auditors' independence in performing audit services.
Item 7. Disclosure of Proxy Voting Policies and Procedures for
Closed-End Management Investment Companies.
The registrant’s and its Investment
Advisor’s Proxy Voting Policies and Procedures are as follows:
September 2019
MORGAN STANLEY INVESTMENT MANAGEMENT
PROXY VOTING POLICY AND PROCEDURES
I Policy Statement
Morgan Stanley Investment Management’s
policy and procedures for voting proxies, the Proxy Voting Policy and Procedures (the “Policy”) with respect to securities
held in the accounts of clients applies to those Morgan Stanley Investment Management ("MSIM") entities that provide
discretionary investment management services and for which a MSIM entity has authority to vote proxies. For purposes of this Policy,
clients shall include: Morgan Stanley U.S. registered investment companies, other Morgan Stanley pooled investment vehicles, and
MSIM separately managed accounts (including accounts for Employee Retirement Income Security (“ERISA”) clients and
ERISA- equivalent clients). This Policy is reviewed and updated as necessary to address new and evolving proxy voting issues and
standards.
The MSIM entities covered by this Policy currently include the
following: Morgan Stanley AIP GP LP, Morgan Stanley Investment Management Inc., Morgan Stanley Investment Management Limited, Morgan
Stanley Investment Management Company, Morgan Stanley Investment Management (Japan) Co. Limited and Morgan Stanley
Investment Management Private Limited (each a “MSIM Affiliate”
and collectively referred to as the “MSIM Affiliates” or as “we” below).
Each MSIM Affiliate will use its best efforts to vote proxies
as part of its authority to manage, acquire and dispose of account assets.
|
|
·
|
With respect to the U.S. registered investment companies sponsored, managed or advised by any
MSIM Affiliate (the “MSIM Funds”), each MSIM Affiliate will vote proxies under this Policy pursuant to authority granted
under its applicable investment advisory agreement or, in the absence of such authority, as authorized by the Board of Directors/Trustees
of the MSIM Funds.
|
|
|
·
|
For other pooled investment vehicles (e.g., UCITS), each MSIM Affiliate will vote proxies under
this Policy pursuant to authority granted under its applicable investment advisory agreement or, in the absence of such authority,
as authorized by the relevant governing board.
|
|
|
·
|
For separately managed accounts (including ERISA and ERISA-equivalent clients), each MSIM Affiliate
will vote proxies under this Policy pursuant to authority granted under the applicable investment advisory agreement or investment
management agreement. Where a MSIM Affiliate has the authority to vote proxies on behalf of ERISA and ERISA-equivalent clients,
the MSIM Affiliate must do so in accordance with its fiduciary duties under ERISA (and the Internal Revenue Code).
|
|
|
·
|
In certain situations, a client or its fiduciary may reserve the authority to vote proxies for
itself or an outside party or may provide a MSIM Affiliate with a statement of proxy voting policy. The MSIM Affiliate will comply
with the client’s policy.
|
A MSIM Affiliate will not vote proxies unless
the investment management agreement, investment advisory agreement or other authority explicitly authorizes the MSIM Affiliate
to vote proxies.
MSIM Affiliates will vote proxies in a prudent and diligent
manner and in the best interests of clients, including beneficiaries of and participants in a client’s benefit plan(s) for
which the MSIM Affiliates manage assets, consistent with the objective of maximizing long-term investment returns (“Client
Proxy Standard”) and this Policy. In addition to voting proxies of portfolio companies, MSIM routinely engages with the management
or board of companies in which we invest on a range of environmental, social and governance issues. Governance is a window into
or proxy for management and board quality. MSIM engages with companies where we have larger positions, voting issues are material
or where we believe we can make a positive impact on the governance structure. MSIM’s engagement process, through private
communication with companies, allows us to understand the governance structures at investee companies and better inform our voting
decisions.
Retention and Oversight of Proxy Advisory Firms
– Institutional Shareholder Services (“ISS”) and Glass Lewis (together with other proxy research providers
as we may retain from time to time, the “Research Providers”) are independent advisers that specialize in
providing a variety of fiduciary-level proxy-related services to institutional investment managers, plan sponsors,
custodians, consultants, and other institutional investors. The services provided include in-depth research, global issuer
analysis, and voting recommendations.
MSIM has retained Research Providers to analyze proxy issues
and to make vote recommendations on those issues. While we review the recommendations of one or more Research Providers in making
proxy voting decisions, we are in no way obligated to follow such recommendations. MSIM votes all proxies based on its own proxy
voting policies in the best interests of each client. In addition to research, ISS provides vote execution, reporting, and recordkeeping
services to MSIM.
As part of MSIM’s ongoing oversight of the Research Providers,
MSIM performs periodic due diligence on the Research Providers. Topics of the reviews include, but are not limited to, conflicts
of interest, methodologies for developing their policies and vote recommendations, and resources.
Voting Proxies for Certain Non-U.S. Companies - Voting proxies
of companies located in some jurisdictions may involve several problems that can restrict or prevent the ability to vote such proxies
or entail significant costs. These problems include, but are not limited to: (i) proxy statements and ballots being written in
a language other than English; (ii) untimely and/or inadequate notice of shareholder meetings; (iii) restrictions on the ability
of holders outside the issuer’s jurisdiction of organization to exercise votes; (iv) requirements to vote proxies in person;
(v) the imposition of restrictions on the sale of the securities for a period of time in proximity to the shareholder meeting;
and (vi) requirements to provide local agents with power of attorney to facilitate our voting instructions. As a result, we vote
clients’ non-U.S. proxies on a best efforts basis only, after weighing the costs and benefits of voting such proxies, consistent
with the Client Proxy Standard. ISS has been retained to provide assistance in connection with
voting non-U.S. proxies.
Securities Lending - MSIM Funds or any other investment
vehicle sponsored, managed or advised by a MSIM affiliate may participate in a securities lending program through a third party
provider. The voting rights for shares that are out on loan are transferred to the borrower and therefore, the lender (i.e.,
a MSIM Fund or another investment vehicle sponsored, managed or advised by a MSIM affiliate) is not entitled to vote the lent shares
at the company meeting. In general, MSIM believes the revenue received from the lending program outweighs the ability to vote and
we will not recall shares for the purpose of voting. However, in cases in which MSIM believes the right to vote outweighs the revenue
received, we reserve the right to recall the shares on loan on a best efforts basis.
II General Proxy
Voting Guidelines
To promote consistency in voting proxies on behalf of our
clients, we follow this Policy (subject to any exception set forth herein). The Policy addresses a broad range of issues, and
provides general voting parameters on proposals that arise most frequently. However, details of specific proposals vary, and
those details affect particular voting decisions, as do factors specific to a given company. Pursuant to the procedures set
forth herein, we may vote in a manner that is not in accordance with the following general guidelines, provided the vote is
approved by the Proxy Review Committee (see Section III) and is consistent with the Client Proxy Standard. Morgan Stanley AIP
GP LP ("Morgan Stanley AIP") will follow the procedures as described in Appendix A.
We endeavor to integrate governance and proxy voting policy
with investment goals, using the vote to encourage portfolio companies to enhance long-term shareholder value and to provide a
high standard of transparency such that equity markets can value corporate assets appropriately.
We seek to follow the Client Proxy Standard for each client.
At times, this may result in split votes, for example when different clients have varying economic interests in the outcome of
a particular voting matter (such as a case in which varied ownership interests in two companies involved in a merger result in
different stakes in the outcome).
We also may split votes at times based on differing views of
portfolio managers.
We may abstain on matters for which disclosure is inadequate.
A Routine Matters
We generally support routine management proposals. The following
are examples of routine management proposals:
|
|
¨
|
Approval of financial statements and auditor reports if delivered with an unqualified auditor’s opinion.
|
|
|
¨
|
General updating/corrective amendments to the charter, articles of association or bylaws, unless we believe that such amendments
would diminish shareholder rights.
|
|
|
¨
|
Most proposals related to the conduct of the annual meeting, with the following exceptions. We generally oppose proposals that
relate to “the transaction of such other business which may come before the meeting,” and open-ended requests for adjournment.
However, where management specifically states the reason for requesting an adjournment and the requested adjournment would facilitate
passage of a proposal that would otherwise be supported under this Policy (i.e., an uncontested corporate transaction), the adjournment
request will be supported. We do not support proposals that allow companies to call a special meeting with a short (generally two
weeks or less) time frame for review.
|
We generally support shareholder proposals advocating confidential
voting procedures and independent tabulation of voting results.
B. Board of Directors
|
|
1.
|
Election of directors: Votes on board nominees can involve balancing a variety of considerations. In vote decisions,
we may take into consideration whether the company has a majority voting policy in place that we believe makes the director vote
more meaningful. In the absence of a proxy contest, we generally support the board’s nominees for director except as follows:
|
|
|
a.
|
We consider withholding support from or voting against a nominee if we believe a direct conflict exists between the interests
of the nominee and the public shareholders, including failure to meet fiduciary standards of care and/or loyalty. We may oppose
directors where we conclude that actions of directors are unlawful, unethical or negligent. We consider opposing individual board
members or an entire slate if we believe the board is entrenched and/or dealing inadequately with performance problems; if we believe
the board is acting with insufficient independence between the
board and management; or if we believe the board has not been sufficiently forthcoming with information on key governance or other
material matters.
|
|
|
b.
|
We consider withholding support from or voting against interested directors if the company’s board does not meet market
standards for director independence, or if otherwise we believe board independence is insufficient. We refer to prevalent market
standards as promulgated by a stock exchange or other authority within a given market
(e.g., New York Stock Exchange or Nasdaq rules for most U.S. companies, and The Combined Code on Corporate Governance in the United
Kingdom). Thus, for an NYSE company with no controlling shareholder, we would expect that at a minimum a majority of directors should
be independent as defined by NYSE. Where we view market standards as inadequate, we may withhold votes based on stronger independence
standards. Market standards notwithstanding, we generally do not view long board tenure alone as a basis to classify
a director as non-independent.
|
|
|
i.
|
At a company with a shareholder or group that controls the company by virtue of a majority economic interest in the
company, we have a reduced expectation for board independence, although we believe the presence of independent directors can
be helpful, particularly in staffing the audit committee, and at times we may withhold support from or vote against a nominee
on the view the board or its committees are not sufficiently independent. In markets where board independence is not the norm
(e.g. Japan), however, we consider factors including whether a board of a controlled company includes independent members who
can be expected to look out for interests of minority holders.
|
|
|
ii.
|
We consider withholding support from or voting against a nominee if he or she is affiliated with a major shareholder that has
representation on a board disproportionate to its economic interest.
|
|
|
c.
|
Depending on market standards, we consider withholding support from or voting against a nominee who is interested and who is
standing for election as a member of the company’s compensation/remuneration, nominating/governance or audit committee.
|
|
|
d.
|
We consider withholding support from or voting against nominees if the term for which they are nominated is excessive. We consider
this issue on a market-specific basis.
|
|
|
e.
|
We consider withholding support from or voting against nominees if in our view there has been insufficient board renewal (turnover),
particularly in the context of extended poor company performance. Also, if the board has failed to consider diversity, including
but not limited to, gender and ethnicity, in its board composition.
|
|
|
f.
|
We consider withholding support from or voting against a nominee standing for election if the board has not taken action to
implement generally accepted governance practices for which there is a “bright line” test. For example, in the context
of the U.S. market, failure to eliminate a dead hand or slow hand poison pill would be seen as a basis for opposing one or more
incumbent nominees.
|
|
|
g.
|
In markets that encourage designated audit committee financial experts, we consider voting against members of an audit committee
if no members are designated as such. We also consider voting against the audit committee members if the company has faced financial
reporting issues and/or does not put the auditor up for ratification by shareholders.
|
|
|
h.
|
We believe investors should have the ability to vote on individual nominees, and may abstain or vote against a slate of nominees
where we are not given the opportunity to vote on individual nominees.
|
|
|
i.
|
We consider withholding support from or voting against a nominee who has failed to attend at least 75% of the nominee’s
board and board committee meetings within a given year without a reasonable excuse. We also consider opposing nominees if the company
does not meet market standards for disclosure on attendance.
|
|
|
j.
|
We consider withholding support from or voting against a nominee who appears overcommitted, particularly through service on
an excessive number of boards. Market expectations are incorporated into this analysis; for U.S. boards, we generally oppose election
of a nominee who serves on more than five public company boards (excluding
investment companies), or public company CEOs that serve on more than two outside boards given level of time commitment required
in their primary job.
|
|
|
k.
|
We consider withholding support from or voting against a nominee where we believe executive remuneration practices are poor,
particularly if the company does not offer shareholders a separate “say-on-pay” advisory vote on pay.
|
|
|
2.
|
Discharge of directors’ duties: In markets where an annual discharge of directors' responsibility is a routine
agenda item, we generally support such discharge. However, we may vote against discharge or abstain from voting where there are
serious findings of fraud or other unethical behavior for which the individual bears responsibility. The annual discharge of responsibility
represents shareholder approval of disclosed actions taken by the board during the year and may make future shareholder action
against the board difficult to pursue.
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|
|
3.
|
Board independence: We generally support U.S. shareholder proposals requiring that a certain percentage (up to 66⅔%)
of the company’s board members be independent directors, and promoting all-independent audit, compensation and nominating/governance
committees.
|
|
|
4.
|
Board diversity: We consider on a case-by-case basis shareholder proposals urging diversity of board membership with
respect to gender, race or other factors.
|
|
|
5.
|
Majority voting: We generally support proposals requesting or requiring majority voting policies in election of directors,
so long as there is a carve-out for plurality voting in the case of contested elections.
|
|
|
6.
|
Proxy access: We consider proposals on procedures for inclusion of shareholder nominees and to have those nominees included
in the company’s proxy statement and on the company’s proxy ballot on a case-by-case basis. Considerations include
ownership thresholds, holding periods, the number of directors that shareholders may nominate and any restrictions on forming a
group.
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7.
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Reimbursement for dissident nominees: We generally support well-crafted U.S. shareholder proposals that would provide
for reimbursement of dissident nominees elected to a board, as the cost to shareholders in electing such nominees can be factored
into the voting decision on those nominees.
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8.
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Proposals to elect directors more frequently: In the U.S. public company context, we usually support shareholder and
management proposals to elect all directors annually (to “declassify” the board), although we make an exception to
this policy where we believe that long-term shareholder value may be harmed by this change given particular circumstances at the
company at the time of the vote on such proposal. As indicated above, outside the United States we generally support greater accountability
to shareholders that comes through more frequent director elections, but recognize that many markets embrace longer term lengths, sometimes
for valid reasons given other aspects of the legal context in electing boards.
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9.
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Cumulative voting: We generally support proposals to eliminate cumulative voting in the U.S. market context. (Cumulative
voting provides that shareholders may concentrate their votes for one or a handful of candidates, a system that can enable a minority
bloc to place representation on a board.) U.S. proposals to establish cumulative voting in the election of directors generally
will not be supported.
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10.
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Separation
of Chairman and CEO positions: We vote on shareholder proposals to separate the Chairman and CEO positions and/or
to appoint an independent Chairman based in part on prevailing practice in particular markets, since the context for such a
practice varies. In many non-U.S. markets, we view separation of the roles as a market standard practice, and support
division of the roles in that context. In the United States, we consider such proposals on a case-by-case basis, considering,
among other things, the existing board leadership structure, company performance, and any evidence of entrenchment or
perceived risk that power is overly concentrated in a single individual.
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11.
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Director retirement age and term limits: Proposals setting or recommending director retirement ages or director term
limits are voted on a case-by-case basis that includes consideration of company performance, the rate of board renewal, evidence
of effective individual director evaluation processes, and any indications of entrenchment.
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12.
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Proposals to limit directors’ liability and/or broaden indemnification of officers and directors: Generally, we
will support such proposals provided that an individual is eligible only if he or she has not acted in bad faith, with gross negligence
or with reckless disregard of their duties.
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C.
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Statutory Auditor Boards
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The statutory auditor board, which is separate
from the main board of directors, plays a role in corporate governance in several markets. These boards are elected by
shareholders to provide assurance on compliance with legal and accounting standards and the company’s articles of
association. We generally vote for statutory auditor nominees if they meet independence standards. In markets that require
disclosure on attendance by internal statutory auditors, however, we consider voting against nominees for these positions who
failed to attend at least 75% of meetings in the previous year. We also consider opposing nominees if the company does not
meet market standards for disclosure on attendance.
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D.
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Corporate Transactions and Proxy Fights
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We examine proposals relating to mergers, acquisitions
and other special corporate transactions (i.e., takeovers, spin-offs, sales of assets, reorganizations, restructurings and recapitalizations)
on a case-by-case basis in the interests of each fund or other account.
Proposals for mergers or other significant transactions
that are friendly and approved by the Research Providers usually are supported if there is no portfolio manager objection. We also
analyze proxy contests on a case-by-case basis.
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E.
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Changes in Capital Structure
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1. We generally support the following:
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¨
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Management and shareholder proposals aimed at eliminating unequal voting rights, assuming fair economic treatment of classes
of shares we hold.
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¨
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U.S. management proposals to increase the authorization of existing classes of common stock (or securities convertible into
common stock) if: (i) a clear business purpose is stated that we can support and the number of shares requested is reasonable in
relation to the purpose for which authorization is requested; and/or (ii) the authorization does not exceed 100% of shares currently
authorized and at least 30% of the total new authorization will be outstanding. (We consider proposals that do not meet these criteria
on a case-by-case basis.)
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¨
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U.S. management proposals to create a new class of preferred stock or for issuances of preferred stock up to 50% of issued
capital, unless we have concerns about use of the authority for anti-takeover purposes.
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¨
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Proposals in non-U.S. markets that in our view appropriately limit potential dilution of existing shareholders. A major consideration
is whether existing shareholders would have preemptive rights for any issuance under a proposal for standing share issuance authority.
We generally consider market-specific guidance in making these decisions; for example, in the U.K. market we usually follow Association
of British Insurers’ (“ABI”) guidance, although company-specific factors may be considered and for example, may
sometimes lead us to voting against share authorization proposals even if they meet ABI guidance.
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¨
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Management proposals to authorize share repurchase plans, except in some cases in which we believe there are insufficient protections
against use of an authorization for anti-takeover purposes.
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¨
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Management proposals to reduce the number of authorized shares of common or preferred stock, or to eliminate classes of preferred
stock.
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¨
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Management proposals to effect stock splits.
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¨
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Management proposals to effect reverse stock splits if management proportionately reduces the authorized share amount set forth
in the corporate charter. Reverse stock splits that do not adjust proportionately to the authorized share amount generally will
be approved if the resulting increase in authorized shares coincides with the proxy guidelines set forth above for common stock
increases.
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¨
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Management dividend payout proposals, except where we perceive company payouts to shareholders as inadequate.
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2. We generally oppose
the following (notwithstanding management support):
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¨
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Proposals to add classes of stock that would substantially dilute the voting interests of existing shareholders.
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Proposals to increase the authorized or issued number of shares of existing classes of stock that are unreasonably dilutive,
particularly if there are no preemptive rights for existing shareholders. However, depending on market practices, we consider voting
for proposals giving general authorization for issuance of shares not subject to pre-emptive rights if the authority is limited.
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Proposals that authorize share issuance at a discount to market rates, except where authority for such issuance is de minimis,
or if there is a special situation that we believe justifies such authorization (as may be the case, for example, at a company
under severe stress and risk of bankruptcy).
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Proposals relating to changes in capitalization by 100% or more.
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We consider on a case-by-case basis shareholder proposals to
increase dividend payout ratios, in light of market practice and perceived market weaknesses, as well as individual company payout
history and current circumstances. For example, currently we perceive low payouts to shareholders as a concern at some Japanese
companies, but may deem a low payout ratio as appropriate for a growth company making good use of its cash,
notwithstanding the broader market concern.
F. Takeover Defenses
and Shareholder Rights
1. Shareholder rights plans: We generally
support proposals to require shareholder approval or ratification of shareholder rights plans (poison pills). In voting on
rights plans or similar takeover defenses, we consider on a case-by-case basis whether the company has demonstrated a need
for the defense in the context of promoting long-term share value; whether provisions of the defense are in line with
generally accepted governance principles in the market (and specifically the presence of an adequate qualified offer
provision that would exempt offers meeting certain conditions from the pill); and the specific context if the proposal is
made in the midst of a takeover bid or contest for control.
2. Supermajority voting requirements: We
generally oppose requirements for supermajority votes to amend the charter or bylaws, unless the provisions protect minority
shareholders where there is a large shareholder. In line with this view, in the absence of a large shareholder we support
reasonable shareholder proposals to limit such supermajority voting requirements. Also, we oppose provisions that do not
allow shareholders any right to amend the charter of bylaws.
3. Shareholders right to call a special meeting:
We consider proposals to enhance a shareholder’s rights to call meetings on a case-by-case basis. At large-cap U.S. companies,
we generally support efforts to establish the right of holders of 10% or more of shares to call special meetings, unless the board
or state law has set a policy or law establishing such rights at a threshold that we believe to be acceptable.
4. Written consent rights: In the U.S. context,
we examine proposals for shareholder written consent rights on a case-by-case basis.
5. Reincorporation: We consider management
and shareholder proposals to reincorporate to a different jurisdiction on a case-by-case basis. We oppose such proposals if we
believe the main purpose is to take advantage of laws or judicial precedents that reduce shareholder rights.
6. Anti-greenmail provisions: Proposals relating
to the adoption of anti-greenmail provisions will be supported, provided that the proposal: (i) defines greenmail; (ii) prohibits
buyback offers to large block holders (holders of at least 1% of the outstanding shares and in certain cases, a greater amount)
not made to all shareholders or not approved by disinterested shareholders; and (iii) contains no anti-takeover measures or other
provisions restricting the rights of shareholders.
7. Bundled proposals: We may consider opposing
or abstaining on proposals if disparate issues are “bundled” and presented for a single vote.
G. Auditors
We generally support management proposals for selection or
ratification of independent auditors. However, we may consider opposing such proposals with reference to incumbent audit
firms if the company has suffered from serious accounting irregularities and we believe rotation of the audit firm is
appropriate, or if fees paid to the auditor for non-audit-related services are excessive. Generally, to determine if
non-audit fees are excessive, a 50% test will be applied (i.e., non-audit-related fees should be less than 50% of the total
fees paid to the auditor). We generally vote against proposals to indemnify auditors.
H. Executive and Director
Remuneration
1. We
generally support the following:
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¨
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Proposals for employee equity compensation plans and other employee ownership plans, provided that our research does not indicate
that approval of the plan would be against shareholder interest. Such approval may be against shareholder interest if it authorizes
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excessive dilution and shareholder cost, particularly
in the context of high usage (“run rate”) of equity compensation in the recent past; or if there are objectionable
plan design and provisions.
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¨
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Proposals relating to fees to outside directors, provided the amounts are not excessive relative to other companies in
the country or industry, and provided that the structure is appropriate within the market context. While stock-based
compensation to outside directors is positive if moderate and appropriately structured, we are wary of significant stock option awards or other performance-based awards for outside directors, as well as provisions that could result in significant
forfeiture of value on a director’s decision to resign from a board (such forfeiture can undercut director
independence).
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¨
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Proposals for employee stock purchase plans that permit discounts, but only for grants that are part of a broad-based employee
plan, including all non-executive employees, and only if the discounts are limited to a reasonable market standard or less.
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¨
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Proposals for the establishment of employee retirement and severance plans, provided that our research does not indicate that
approval of the plan would be against shareholder interest.
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2.
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We generally oppose retirement plans and bonuses for non-executive directors and independent statutory auditors.
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3.
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In the U.S. context, we generally vote against shareholder proposals requiring shareholder approval of all severance agreements,
but we generally support proposals that require shareholder approval for agreements in excess of three times the annual
compensation (salary and bonus) or proposals that require companies to adopt a provision requiring an executive to receive
accelerated vesting of equity awards if there is a change of control and the executive is terminated. We generally
oppose shareholder proposals that would establish arbitrary caps on pay. We consider on a case-by-case basis shareholder
proposals that seek to limit Supplemental Executive Retirement Plans (SERPs), but support such shareholder proposals where we
consider SERPs excessive.
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4.
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Shareholder proposals advocating stronger and/or particular pay-for-performance models will be evaluated on a case-by-case
basis, with consideration of the merits of the individual proposal within the context of the particular company and its labor markets,
and the company’s current and past practices. While we generally support emphasis on long-term components of senior executive
pay and strong linkage of pay to performance, we consider factors including whether a proposal may be overly prescriptive, and the impact of the proposal,
if implemented as written, on recruitment and retention.
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5.
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We generally support proposals advocating reasonable senior executive and director stock ownership guidelines and holding requirements
for shares gained in executive equity compensation programs.
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6.
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We generally support shareholder proposals for reasonable “claw-back” provisions that provide for company recovery
of senior executive bonuses to the extent they were based on achieving financial benchmarks that were not actually met in light
of subsequent restatements.
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7.
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Management proposals effectively to re-price stock options are considered on a case-by-case basis. Considerations include the
company’s reasons and justifications for a re-pricing, the company’s competitive position, whether senior executives
and outside directors are excluded, potential cost to shareholders, whether the re-pricing or share exchange is on a value-for-value
basis, and whether vesting requirements are extended.
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8.
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Say-on-Pay: We consider proposals relating to an advisory vote on remuneration on a case-by-case basis. Considerations include
a review of the relationship between executive remuneration and performance based on operating trends and total shareholder return
over multiple performance periods. In addition, we review remuneration structures
and potential poor pay practices, including relative magnitude of pay, discretionary bonus awards, tax gross ups,
change-in-control features, internal pay equity and peer group construction. As long-term investors, we support remuneration
policies that align with long-term shareholder returns.
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I. Social and Environmental
Issues
Shareholders in the United States and
certain other markets submit proposals encouraging changes in company disclosure and practices related to particular social
and environmental matters. As MSIM believes that relevant social and environmental issues can influence risk and return, we
consider how to vote on proposals related to social and environmental issues on a case-by-case basis by determining the
relevance of social and environmental issues identified in the proposal and their likely impacts on shareholder value. We
generally support proposals that, if implemented, would enhance useful disclosure, such as disclosures aligned with SASB
(Sustainability Accounting Standards Board) and the TCFD (Task Force on Climate-related Financial Disclosures) and proposals
that aim to reduce or mitigate a company’s impact on the global climate. We generally vote against proposals requesting
reports or actions that we believe are duplicative, related to matters not material to the business, or that would impose
unnecessary or excessive costs. In reviewing proposals on social and environmental issues, we consider a company’s
current disclosures and our understanding of the company’s management of material social and environmental issues in
comparison to peers. We seek to balance concerns on reputational and other risks that lie behind a proposal against costs of
implementation, while considering appropriate shareholder and management prerogatives. We may abstain from voting on
proposals that do not have a readily determinable financial impact on shareholder value and we may oppose proposals that
intrude excessively on management prerogatives and/or board discretion.
J. Funds of Funds
Certain MSIM Funds advised by an MSIM Affiliate invest
only in other MSIM Funds. If an underlying fund has a shareholder meeting, in order to avoid any potential conflict of
interest, such proposals will be voted in the same proportion as the votes of the other shareholders of the underlying fund,
unless otherwise determined by the Proxy Review Committee. In markets where proportional voting is not available we will not
vote at the meeting, unless otherwise determined by the Proxy Review Committee. Other MSIM Funds invest in unaffiliated
funds. If an unaffiliated underlying fund has a shareholder meeting and the MSIM Fund owns more than 25% of the voting shares
of the underlying fund, the MSIM Fund will vote its shares in the unaffiliated underlying fund in the same proportion as the
votes of the other shareholders of the underlying fund to the extent possible.
III Administration
of the Policy
The MSIM Proxy Review Committee (the “Committee”)
has overall responsibility for the Policy. The Committee consists of investment professionals who represent the different investment
disciplines and geographic locations of MSIM, and is chaired by the director of the Global Stewardship Team (“GST”).
Because proxy voting is an investment responsibility and may affect shareholder value, and because of their knowledge of companies
and markets, portfolio managers and other members of investment staff play a key role in proxy voting, although the Committee has
final authority over proxy votes. The GST administers and implements the Policy, as well as monitoring services provided by the
proxy advisory firms and other research providers used in the proxy voting process.
The GST Director is responsible for identifying issues that
require Committee deliberation or ratification. The GST, working with advice of investment teams and the Committee, is responsible
for voting on routine items and on matters that can be addressed in line with these Policy guidelines. The GST has responsibility
for voting case-by-case where guidelines and precedent provide adequate guidance.
The Committee may periodically review and has the authority
to amend, as necessary, the Policy and establish and direct voting positions consistent with the Client Proxy Standard.
GST and members of the Committee may take into account Research
Providers’ recommendations and research as well as any other relevant information they may request or receive, including
portfolio manager and/or analyst comments and research, as applicable. Generally, proxies related to securities held in client
accounts that are managed pursuant to quantitative, index or index-like strategies ("Index Strategies") will be voted
in the same manner as those held in actively managed accounts, unless economic interests of the accounts differ. Because accounts
managed using Index Strategies are passively managed accounts, research from portfolio managers and/or analysts related to securities
held in these accounts may not be available. If the affected securities are held only in accounts that are managed pursuant to
Index Strategies, and the proxy relates to a matter that is not described in this Policy, the GST will consider all available information
from the Research Providers, and to the extent that the holdings are significant, from the portfolio managers and/or analysts.
The Committee meets at least quarterly, and reviews and considers
changes to the Policy at least annually. Through meetings and/or written communications, the Committee is responsible for monitoring
and ratifying “split votes” (i.e., allowing certain shares of the same issuer that are the subject of the same proxy
solicitation and held by one or more MSIM portfolios to be voted differently than other shares) and/or “override voting”
(i.e., voting all MSIM portfolio shares in a manner contrary to the Policy). The Committee will review developing issues and approve
upcoming votes, as appropriate, for matters as requested by GST. The Committee reserves the right to review voting decisions at
any time and to make voting decisions as necessary to ensure the independence and integrity of the votes.
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B.
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Material Conflicts of Interest
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In addition to the procedures discussed above, if the GST Director
determines that an issue raises a material conflict of interest, the GST Director may request a special committee (“Special
Committee”) to review, and recommend a course of action with respect to, the conflict(s) in question.
A potential material conflict of interest could exist in the
following situations, among others:
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1.
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The issuer soliciting the vote is a client of MSIM or an affiliate of MSIM and the vote is on a matter that materially affects
the issuer.
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2.
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The proxy relates to Morgan Stanley common stock or any other security issued by Morgan Stanley or its affiliates except if
echo voting is used, as with MSIM Funds, as described herein.
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3.
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Morgan Stanley has a material pecuniary interest in the matter submitted for a vote (e.g., acting as a financial advisor to
a party to a merger or acquisition for which Morgan Stanley will be paid a success fee if completed).
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4.
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One of Morgan Stanley’s independent directors or one of MSIM Funds’ directors also serves on the board of directors
or is a nominee for election to the board of directors of a company held by a MSIM Fund or affiliate.
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If the GST Director determines that an issue raises a potential
material conflict of interest, depending on the facts and circumstances, the issue will be addressed as follows:
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1.
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If the matter relates to a topic that is discussed in this Policy, the proposal will be voted as per the Policy.
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2.
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If the matter is not discussed in this Policy or the Policy indicates that the issue is to be decided case-by-case, the proposal
will be voted in a manner consistent with the Research Providers, provided that all the Research Providers consulted have the same
recommendation, no portfolio manager objects to that vote, and the vote is consistent with MSIM’s Client Proxy Standard.
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3.
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If the Research Providers’ recommendations differ, the GST Director will refer the matter to a Special Committee to vote
on the proposal, as appropriate.
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Any Special Committee shall be comprised of the GST Director,
and at least two portfolio managers (preferably members of the Committee), as approved by the Committee. The GST Director may
request non-voting participation by MSIM’s General Counsel or his/her designee and the Chief Compliance Officer or his/her
designee.
In addition to the research provided by Research Providers, the Special Committee may request analysis from MSIM Affiliate
investment professionals and outside sources to the extent it deems appropriate.
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C.
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Proxy Voting Reporting
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The GST will document in writing all Committee and Special Committee
decisions and actions, which documentation will be maintained by the GST for a period of at least six years. To the extent these
decisions relate to a security held by a MSIM Fund, the GST will report the decisions to each applicable Board of Trustees/Directors
of those MSIM Funds (the "Board") at each Board’s next regularly scheduled Board meeting. The report will contain
information concerning decisions made during the most recently ended calendar quarter immediately preceding the Board meeting.
In addition, to the extent that Committee and Special Committee
decisions and actions relate to a security held by other pooled investment vehicles, the GST will report the decisions to the relevant
governing board of the pooled investment vehicle.
MSIM will promptly provide a copy of this Policy to any client
requesting it. MSIM will also, upon client request, promptly provide a report indicating how each proxy was voted with respect
to securities held in that client’s account.
MSIM’s Legal Department, in conjunction with GST and GST
IT for MSIM Fund reporting and with the AIP investment team for AIP Closed-End 40 Act Fund reporting, is responsible for filing
an annual Form N-PX on behalf of each MSIM Fund and AIP Closed-End 40 Act Fund for which such filing is required, indicating how
all proxies were voted with respect to each such fund’s holdings.
Also, MSIM maintains voting records of individual agenda items
a company meetings in a searchable database on its website on a rolling 12-month basis.
In addition, ISS provides vote execution, reporting and recordkeeping
services to MSIM.
IV Recordkeeping
Records are retained in accordance with
Morgan Stanley’s Global Information Management Policy, which establishes
general Firm-wide standards and procedures regarding the retention, handling, and destruction of official books and records and
other information of legal or operational significance. The Global Information Management Policy incorporates Morgan
Stanley’s Master Retention Schedule, which lists various record classes
and associated retention periods on a global basis.
Approved by the Board September 2015, September
27-28, 2016, September 27-28, 2017, October 3-4, 2018 and September 24-25, 2019.
Appendix A
Appendix A applies to the following accounts managed by Morgan
Stanley AIP GP LP (i) closed-end funds registered under the Investment Company Act of 1940, as amended; (ii) discretionary separate
accounts; (iii) unregistered funds; and (iv) non-discretionary accounts offered in connection with AIP’s Custom Advisory
Portfolio Solutions service. Generally, AIP will follow the guidelines set forth in Section II of MSIM’s Proxy Voting Policy
and Procedures. To the extent that such guidelines do not provide specific direction, or AIP determines that consistent with the
Client Proxy Standard, the guidelines should not be followed, the Proxy Review Committee has delegated the voting authority to
vote securities held by accounts managed by AIP to the Fund of Hedge Funds investment team, the Private Markets investment team
or the Portfolio Solutions team of AIP. A summary of decisions made by the applicable investment teams will be made available to
the Proxy Review Committee for its information at the next scheduled meeting of the Proxy Review Committee.
In certain cases, AIP may determine to abstain from determining
(or recommending) how a proxy should be voted (and therefore abstain from voting such proxy or recommending how such proxy should
be voted), such as where the expected cost of giving due consideration to the proxy does not justify the potential benefits to
the affected account(s) that might result from adopting or rejecting (as the case may be) the measure in question.
Waiver of Voting Rights
For regulatory reasons, AIP may either 1) invest in a class
of securities of an underlying fund (the “Fund”) that does not provide for voting rights; or 2) waive 100% of its voting
rights with respect to the following:
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1
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Any rights with respect to the removal or replacement of a director, general partner, managing member or other person acting
in a similar capacity for or on behalf of the Fund (each individually a “Designated Person,” and collectively, the
“Designated Persons”), which may include, but are not limited to, voting on the election or removal of a Designated
Person in the event of such Designated Person’s death, disability, insolvency, bankruptcy, incapacity, or other event
requiring a vote of interest holders of the Fund to remove or replace a Designated Person; and
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2.
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Any rights in connection with a determination to renew, dissolve, liquidate, or otherwise terminate or continue the Fund, which
may include, but are not limited to, voting on the renewal, dissolution, liquidation, termination or continuance of the Fund upon
the occurrence of an event described in the Fund’s organizational documents; provided, however, that, if the Fund’s
organizational documents require the consent of the Fund’s general partner or manager, as the case may be, for any such termination
or continuation of the Fund to be effective, then AIP may exercise its voting rights with respect to such matter.
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Item 8.
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Portfolio Managers of Closed-End Management Investment
Companies
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Morgan Stanley India Investment Fund,
Inc.
FUND MANAGEMENT
PORTFOLIO MANAGEMENT. As of the date of
this report, the Fund is managed by members of the Emerging Markets Equity team. The team consists of portfolio managers and analysts.
Current members of the team jointly and primarily responsible for the day-to-day management of the Fund's portfolio and the overall
execution of the strategy of the Fund are Ruchir Sharma, a Managing Director of the Adviser and Amay Hattangadi, a Managing Director
of the Sub-Adviser. Mr. Sharma has been associated with the Adviser in an investment management capacity since October 1996 and
joined the team managing the Fund in January 2001. Mr. Hattangadi has been associated with the Sub-Adviser or its affiliates in
an investment management capacity since 1997 and began managing the Fund in March 2019.
The composition of the team may change
from time to time.
OTHER ACCOUNTS MANAGED BY THE PORTFOLIO
MANAGERS
As of December 31, 2019:
Mr. Sharma managed five other registered
investment companies with a total of approximately $1.5 billion in assets; seven pooled investment vehicles other than registered
investment companies with a total of approximately $4.6 billion in assets; and 15 other accounts with a total of approximately
$3.9 billion in assets. Of these other accounts, five accounts with a total of approximately $1.5 billion in assets had performance-based
fees.
Mr. Hattangadi managed four other registered
investment company with a total of approximately $1.5 billion in assets; seven pooled investment vehicles other than registered
investment companies with a total of approximately $4.6 billion in assets; and 15 other accounts with a total of approximately
$7.8 billion in assets. Of these other accounts, five accounts with a total of approximately $1.5 billion in assets had performance-based
fees.
Because the portfolio managers manages
assets for other investment companies, pooled investment vehicles and/or other accounts (including institutional clients, pension
plans and certain high net worth individuals), there may be an incentive to favor one client over another resulting in conflicts
of interest. For instance, the Adviser may receive fees from certain accounts that are higher than the fee it receives from the
Fund, or it may receive a performance-based fee on certain accounts. In those instances, the portfolio manager may have an incentive
to favor the higher and/or performance-based fee accounts over the Fund. In addition, a conflict of interest could exist to the
extent the Adviser has proprietary investments in certain accounts, where portfolio managers have personal investments in certain
accounts or when certain accounts are investment options in the Adviser’s employee benefits and/or deferred compensation
plans. The portfolio managers may have an incentive to favor these accounts over others. If the Adviser manages accounts that engage
in short sales of securities of the type in which the Fund invests, the Adviser could be seen as harming the performance of the
Fund for the benefit of the accounts engaging in short sales if the short sales cause the market value of the securities to fall.
The Adviser has adopted trade allocation and other policies and procedures that it believes are reasonably designed to address
these and other conflicts of interest.
Portfolio Manager Compensation Structure
Morgan Stanley’s compensation
structure is based on a total reward system of base salary and incentive compensation, which is paid either in the form of
cash bonus, or for employees meeting the specified deferred compensation eligibility threshold, partially as a cash bonus and
partially as mandatory deferred compensation. Deferred compensation granted to Investment Management employees are generally
granted as a mix of deferred cash awards under the Investment Management Alignment Plan (IMAP and equity-based awards in the
form of stock units. The portion of incentive compensation granted in the form of a deferred compensation award and the terms
of such awards are determined annually by the Compensation, Management Development and Succession Committee of the Morgan
Stanley Board of Directors.
Base salary compensation.
Generally, portfolio managers receive base salary compensation based on the level of their position with the Adviser.
Incentive compensation.
In addition to base compensation, portfolio managers may receive discretionary year-end compensation.
Incentive compensation
may include:
• Cash Bonus.
• Deferred Compensation:
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·
|
A mandatory program that defers a portion of incentive compensation
into restricted stock units or other awards based on Morgan Stanley common stock or other plans that are subject to vesting and
other conditions.
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·
|
IMAP is a cash-based deferred compensation plan designed to increase the alignment of participants’
interests with the interests of the Advisor’s clients. For eligible employees, a portion of their deferred compensation is
mandatorily deferred into IMAP on an annual basis. Awards granted under IMAP are notionally invested in referenced funds available
pursuant to the plan, which are funds advised by Investment Management. Portfolio managers are required to notionally invest a
minimum of 25% of their account balance in the designated funds that they manage and are included in the IMAP notional investment
fund menu.
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Deferred compensation awards are typically subject to vesting over a multi-year period and are
subject to cancellation through the payment date for competition, cause (i.e., any act or omission that constitutes a breach of
obligation to the Company, including failure to comply with internal compliance, ethics or risk management standards, and failure
or refusal to perform duties satisfactorily, including supervisory and management duties), disclosure of proprietary information,
and solicitation of employees or clients. Awards are also subject to clawback through the payment date if an employee’s act
or omission (including with respect to direct supervisory responsibilities) causes a restatement of the Firm’s consolidated
financial results, constitutes a violation of the Firm’s global risk management principles, policies and standards, or causes
a loss of revenue associated with a position on which the employee was paid and the employee operated outside of internal control
policies.
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Investment Management compensates employees
based on principles of pay-for-performance, market competitiveness and risk management. Eligibility for, and the amount of any,
discretionary compensation is subject to a multi-dimensional process. Specifically, consideration is given to one or more of the
following factors, which can vary by portfolio management team and circumstances:
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Revenue and profitability of the business and/or each fund/accounts managed by the portfolio manager
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Revenue and profitability of the Firm
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Return on equity and risk factors of both the business units and Morgan Stanley
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Assets managed by the portfolio manager
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External market conditions
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New business development and business sustainability
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Contribution to client objectives
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The pre-tax investment performance of the funds/accounts managed by the portfolio manager (which
may, in certain cases, be measured against the applicable benchmark(s) and/or peer group(s) over one, three and five-year periods.
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Individual contribution and performance
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Further, the Firm’s Global
Incentive Compensation Discretion Policy requires compensation managers to consider only legitimate, business related factors
when exercising discretion in determining variable incentive compensation, including adherence
to Morgan Stanley’s core values, conduct, disciplinary actions in the current performance year, risk management and
risk outcomes.
SECURITIES OWNERSHIP OF PORTFOLIO MANAGERS
As of December 31, 2019, the portfolio
managers did not own any shares of the Fund.
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Item 9.
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Closed-End Fund Repurchases
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REGISTRANT PURCHASE OF EQUITY SECURITIES
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Period
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(a) Total Number of Shares (or Units) Purchased
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(b) Average Price Paid per Share (or Unit)
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(c) Total Number of Shares (or Units) Purchased as Part of Publicly Announced Plans or Programs
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(d) Maximum Number (or Approximate Dollar Value) of Shares (or Units) that May Yet Be Purchased Under the Plans or Programs
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January 2019
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—
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N/A
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N/A
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February 2019
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—
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—
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N/A
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N/A
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March 2019
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8,478
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N/A
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N/A
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April 2019
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—
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—
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N/A
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N/A
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May 2019
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19,657
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—
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N/A
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N/A
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June 2019
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—
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—
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N/A
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N/A
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July 2019
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10,061
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—
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N/A
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N/A
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August 2019
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28,387
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—
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N/A
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N/A
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September 2019
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41,910
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—
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N/A
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N/A
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October 2019
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40,750
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—
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N/A
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N/A
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November 2019
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60,815
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—
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N/A
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N/A
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December 2019
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16,898
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N/A
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N/A
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Total
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226,956
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$ 19.15
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N/A
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N/A
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Item 10.
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Submission of Matters to a Vote of Security Holders
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There have been no material changes to the procedures by which
shareholders may recommend nominee to the Fund’s Board of Directors since the Fund last provided disclosure in response to
this item.