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:
Morgan Stanley Investment Management's policy and procedures
for voting proxies, the Equity 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 an MSIM entity has authority to vote proxies.1 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 Asia Limited, Morgan Stanley Investment Management (Japan)
Co. Limited, Morgan Stanley Investment Management Private Limited, MS 522 CLO Manager LLC, and MS 522 CLO CM LLC (each an "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 "MS 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 MS 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 an 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 an MSIM Affiliate with a statement of proxy
voting policy. The MSIM Affiliate will comply with the client's policy.
An 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.
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, record retention, ballot processing and voting recommendations.
To facilitate proxy voting MSIM has retained Research Providers
to provide company level reports that summarize key data elements contained within an issuer's proxy statement. Although we are
aware of the voting recommendations included in the Research Providers' company level reports, these recommendations are not an
input into our vote nor is any potential vote prepopulated based on a Research Provider's research. MSIM votes all proxies based
on its own proxy voting policies in the best interests of each client. In addition to research, MSIM retains ISS to provide vote
execution, reporting, and recordkeeping services.
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 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.
MS Funds or any other investment vehicle sponsored, managed
or advised by an 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., an MS Fund or another investment
vehicle sponsored, managed or advised by an 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.
2. 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 and is consistent with the Client Proxy Standard. Morgan Stanley AIP GP LP (“Morgan Stanley AIP”) will follow
the procedures as described in Appendix B.
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 from or vote against matters for which disclosure
is inadequate.
A. Routine Matters
We generally support routine management proposals. The following
are examples of routine management proposals:
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
¨ 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:
¨ 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.
¨ 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.
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a.
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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.
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b.
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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.
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¨ 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.
¨ 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.
¨ 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.
¨ 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.
¨ 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.
¨ 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.
¨ 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.
¨ 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.
¨ 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.
¨ 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.
¨ 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.
¨ Board diversity:
We generally support shareholder proposals urging diversity
of board membership with respect to gender, race or other factors where we believe the board has failed to take these factors into
account.
¨ 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.
¨ 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.
¨ 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.
¨ 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.
¨ 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.
¨ 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.
¨ 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.
¨ 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.
C. Statutory Auditor Boards
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.
D. Corporate Transactions and Proxy Fights
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.
E. Changes in Capital Structure
¨ We generally support the following:
¨ Management and shareholder proposals
aimed at eliminating unequal voting rights, assuming fair economic treatment of classes of shares we hold.
¨ 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.)
¨ 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.
¨ 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.
¨ 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.
¨ Management proposals to reduce the
number of authorized shares of common or preferred stock, or to eliminate classes of preferred stock.
¨ Management proposals
to effect stock splits.
¨ 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.
¨ Management dividend payout proposals,
except where we perceive company payouts to shareholders as inadequate.
¨ We generally oppose the following (notwithstanding
management support):
¨ Proposals to add classes of stock
that would substantially dilute the voting interests of existing shareholders.
¨ 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.
¨ 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).
¨ Proposals relating
to changes in capitalization by 100% or more.
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
¨ 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.
¨ 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.
¨ 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.
¨ Written consent rights: In
the U.S. context, we examine proposals for shareholder written consent rights on a case-by-case basis.
¨ 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.
¨ 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.
¨ 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
¨ We generally support the following:
¨ 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 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.
¨ 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).
¨ 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.
¨ 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.
¨ We generally oppose retirement plans
and bonuses for non-executive directors and independent statutory auditors.
¨ 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.
¨ 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.
¨ We generally support proposals advocating
reasonable senior executive and director stock ownership guidelines and holding requirements for shares gained in executive equity
compensation programs.
¨ 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.
¨ 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.
¨
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.
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. 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. 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.
Environmental Issues:
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). We also generally support proposals that aim to meaningfully reduce or mitigate
a company's impact on the global climate.
Social Issues:
We generally support proposals that, if implemented,
would enhance useful disclosure on employee and board diversity, including gender, race, and other factors. We consider proposals
on other social issues on a case-by-case basis but generally support proposals that seek to enhance useful disclosure on material
issues such as human rights risks, supply chain management and human capital management.
J. Funds of Funds
Certain MS Funds advised by an MSIM Affiliate
invest only in other MS 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 MS Funds invest in unaffiliated funds. If an unaffiliated underlying
fund has a shareholder meeting and the MS Fund owns more than 25% of the voting shares of the underlying fund, the MS 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.
3. 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.
A. Committee Procedures
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.
B. Material Conflicts of Interest
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:
¨ 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.
¨ 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 MS Funds,
as described herein.
¨ 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).
¨ One of Morgan Stanley's independent
directors or one of MS 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 an MS Fund or affiliate.
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:
¨ If the matter relates to a topic that
is discussed in this Policy, the proposal will be voted as per the Policy.
¨ 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.
¨ If the Research Providers' recommendations
differ, the GST Director will refer the matter to a Special Committee to vote on the proposal, as appropriate.
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.
C. Proxy Voting Reporting
The CGT 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 an MS Fund, the GST will report the decisions to each applicable Board
of Trustees/Directors of those MS 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 MS 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 MS 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.
4. 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; and September 30 –
October 1, 2020 [pending].
Appendix B
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:
1. 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
2. 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.
Item 8. Portfolio Managers of Closed-End Management Investment
Companies
Applicable only to reports filed by closed-end funds.
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, 2020:
Mr. Sharma managed three other registered
investment companies with a total of approximately $1.3 billion in assets; six pooled investment vehicles other than registered
investment companies with a total of approximately $3.9 billion in assets; and 13 other accounts with a total of approximately
$3.8 billion in assets. Of these other accounts, five accounts with a total of approximately $1.4 billion in assets had performance-based
fees.
Mr. Hattangadi managed four other registered
investment company with a total of approximately $1.3 billion in assets; eight pooled investment vehicles other than registered
investment companies with a total of approximately $4.0 billion in assets; and 13 other accounts with a total of approximately
$8.6 billion in assets. Of these other accounts, five accounts with a total of approximately $1.4 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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·
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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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·
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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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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, 2020, the portfolio
managers did not own any shares of the Fund.
Item 9. Closed-End Fund Repurchases
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 2020
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11,668
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—
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N/A
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N/A
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February 2020
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55,397
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—
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N/A
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N/A
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March 2020
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4,592
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—
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N/A
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N/A
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April 2020
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9,907
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—
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N/A
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N/A
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May 2020
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—
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—
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N/A
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N/A
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June 2020
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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 2020
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—
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—
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N/A
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N/A
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August 2020
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—
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—
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N/A
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N/A
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September 2020
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—
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—
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N/A
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N/A
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October 2020
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—
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—
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N/A
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N/A
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November 2020
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—
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—
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N/A
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N/A
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December 2020
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—
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—
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N/A
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N/A
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Total
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81,564
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$ 19.48
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N/A
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N/A
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Item 10. Submission of Matters to a Vote of Security Holders
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.