2024-05-02MSIFEmergingMarketsEquity_497C_PSP_April2024
Morgan
Stanley Institutional Fund, Inc.
Emerging
Markets Equity Portfolios
Passport
Overseas Equity Portfolio
Emerging
Markets Leaders Portfolio
Emerging
Markets Portfolio
Prospectus | April
30, 2024
| |
Passport
Overseas Equity Portfolio Share
Class |
Ticker
Symbol |
Class
IR |
MAIHX |
| |
Emerging
Markets Leaders Portfolio Share
Class |
Ticker
Symbol |
Class
IR |
MSIWX |
| |
Emerging
Markets Portfolio Share
Class |
Ticker
Symbol |
Class
IR |
MRGEX |
The
Securities and Exchange Commission (“SEC”) has not approved or disapproved these
securities or passed upon the adequacy
of this Prospectus. Any representation to the contrary is a criminal
offense.
An
investment in the Fund is not a bank deposit and is not insured by the
Federal Deposit Insurance Corporation or any other
government agency. An investment in the Fund involves investment risks,
and you may lose money in the Fund.
Morgan
Stanley Institutional Fund, Inc. Prospectus | Fund
Summary
Passport
Overseas Equity Portfolio
Investment
Objective
The
Passport Overseas Equity Portfolio (the “Fund”) seeks long-term capital
appreciation.
Fees
and Expenses
The
table below describes the fees and expenses that you may pay if you buy, hold
and sell Class IR shares of the Fund. The Fund does
not charge any sales loads or other fees when you purchase or redeem Class IR
shares. You
may pay fees other than the fees and
expenses of the Fund, such as brokerage commissions and other fees charged by
financial intermediaries, which are not reflected
in the tables and examples below.
Annual
Fund Operating Expenses (expenses
that you pay each year as a percentage of the value of your
investment)
|
| |
|
Class
IR |
|
Advisory
Fee |
0.65% |
|
Distribution
and/or Shareholder Service (12b-1) Fee |
None |
|
Other
Expenses |
18.97% |
|
Total
Annual Fund Operating Expenses1
|
% |
|
Fee
Waiver and/or Expense Reimbursement1
|
% |
|
Total
Annual Fund Operating Expenses After Fee Waiver and/or Expense
Reimbursement1
|
% |
|
Example
The
example below is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds.
The
example assumes that you invest $10,000 in the Fund, your investment has a 5%
return each year and the Fund’s operating expenses
remain the same (except that the example incorporates the fee waiver and/or
expense reimbursement arrangement for only the
first year). Although your actual costs may be higher or lower, based on these
assumptions your costs would be:
|
|
|
|
| |
If
You SOLD Your Shares |
|
|
1
Year |
3
Years |
5
Years |
10
Years |
|
Class
IR |
$87 |
$3,598 |
$6,157 |
$9,918 |
|
|
|
|
|
| |
If
You HELD Your Shares |
|
|
1
Year |
3
Years |
5
Years |
10
Years |
|
Class
IR |
$87 |
$3,598 |
$6,157 |
$9,918 |
|
1 |
The
Fund’s “Adviser,” Morgan Stanley Investment Management Inc., has agreed to
reduce its advisory fee and/or reimburse the Fund so that Total
Annual
Fund Operating Expenses, excluding acquired fund fees and expenses (as
applicable), certain investment related expenses, taxes, interest and
other
extraordinary expenses (including litigation), will not exceed 0.85% for
Class IR. The fee waivers and/or expense reimbursements will continue for
at
least one year from the date of this Prospectus or until such time as the
Board of Directors of Morgan Stanley Institutional Fund, Inc. (the
“Company”)
acts to discontinue all or a portion of such waivers and/or reimbursements
when it deems such action is
appropriate. |
Portfolio
Turnover
The
Fund pays transaction costs, such as commissions, when it buys and sells
securities (or “turns over” its portfolio). A higher portfolio
turnover rate may indicate higher transaction costs and may result in higher
taxes when Fund shares are held in a taxable account.
These costs, which are not reflected in Total Annual Fund Operating Expenses or
in the example, affect the Fund’s performance.
During the most recent fiscal year, the Fund’s portfolio turnover rate was
14% of
the average value of its portfolio.
Principal
Investment Strategies
The
Adviser actively selects among developed and emerging countries applying its
investment process to determine a country’s future economic
growth and equity return potential. The Adviser’s approach combines a top-down
country process with sector allocation and
bottom-up stock selection. Under normal circumstances, the Fund invests at least
80% of its net assets (plus any borrowings for investment
purposes) in the equity securities of issuers located outside of the United
States. This policy may be changed without shareholder
approval; however, you would be notified upon 60 days’ notice in writing of any
changes.
The
Adviser analyzes the global economic environment and each country’s
fundamentals and actively allocate the Fund’s assets among
countries and sectors located throughout the world (the investment universe is
developed markets, including the United States,
and emerging markets, including frontier markets). Investment decisions may be
implemented through sector, industry and stock-specific
allocations within and across markets that best capture the top-down view.
Country and sector weightings are based on relative
economic, political and social fundamentals, stock valuations and investor
sentiment and are a function of the Adviser’s
Morgan
Stanley Institutional Fund, Inc. Prospectus | Fund
Summary
Passport
Overseas Equity Portfolio (Con’t)
conviction
levels, the size of the economy and liquidity. The investment process considers
analysis of sustainability with respect to financial
strength, environmental and social factors and governance (also referred to as
ESG).
Investments
are based on fundamental analysis in an effort to identify those equities
that stand to benefit most from the Adviser’s current
and prospective macro views and that are likely to experience attractive
earnings growth prospects as a result of exposure and gearing
to those top-down conditions. Investment decisions are implemented by equity
positions in sectors, industries, customized baskets
and/or individual stocks. The equity securities in which the Fund may invest
include common stock, preferred stock, convertible
securities, depositary receipts, rights and warrants. The Adviser generally
considers selling a portfolio holding when they determine
that the position no longer satisfies their investment
criteria.
The
Fund may, but it is not required to, use derivative instruments for a variety of
purposes, including hedging, risk management, portfolio
management or to earn income. The Fund’s use of derivatives may involve the
purchase and sale of derivative instruments such
as futures, options, swaps, contracts for difference (“CFDs”) and other related
instruments and techniques. The Fund may utilize
foreign currency forward exchange contracts, which are also derivatives, in
connection with its investments in foreign securities.
Derivative instruments used by the Fund will be counted toward the Fund’s 80%
policy discussed above to the extent they have
economic characteristics similar to the securities included within that
policy.
Principal
Risks
There
is no assurance that the Fund will achieve its investment objective, and you can
lose money investing in this Fund.
The principal
risks of investing in the Fund include:
• |
Equity
Securities.
In general, prices of equity securities are more volatile than those of
fixed-income securities. The prices of equity securities
fluctuate, and sometimes widely fluctuate, in response to activities
specific to the issuer of the security as well as factors unrelated
to the fundamental condition of the issuer, including general market,
economic, political conditions and public health conditions. During
periods when equity securities experience heightened volatility, such as
during periods of market, economic or financial
uncertainty or distress, the Fund’s investments in equity securities may
be subject to heightened
risks. |
|
The
value of equity securities and related instruments may decline in response
to adverse changes in the economy or the economic outlook;
deterioration in investor sentiment; interest rate, currency, and
commodity price fluctuations; adverse geopolitical, social or
environmental developments; issuer- and sector-specific considerations;
unexpected trading activity among retail investors; and other
factors. Market conditions may affect certain types of stocks to a greater
extent than other types of stocks. If the stock market
declines, the value of Fund shares will also likely
decline. |
• |
Foreign
and Emerging Market Securities.
Investments in foreign markets entail special risks such as currency,
political (including geopolitical),
economic and market risks. There also may be greater market volatility,
less reliable financial information, less stringent
investor protections and disclosure standards, higher transaction and
custody costs, decreased market liquidity and less government
and exchange regulation associated with investments in foreign markets. In
addition, investments in certain foreign markets
that have historically been considered stable may become more volatile and
subject to increased risk due to developments and
changing conditions in such markets. Moreover, the
growing interconnectivity of global economies and financial markets
has increased
the probability that adverse developments and conditions in one country or
region will affect the stability of economies and
financial markets in other countries or regions. Certain foreign markets
may rely heavily on particular industries or foreign capital
and are more vulnerable to diplomatic developments, the imposition of
economic sanctions against a particular country or countries,
organizations, companies, entities and/or individuals, changes in
international trading patterns, trade barriers and other protectionist
or retaliatory measures. Investments in foreign markets may also be
adversely affected by governmental actions such as
the imposition of capital controls, nationalization of companies or
industries, expropriation of assets or the imposition of punitive
taxes. The governments of certain countries may prohibit or impose
substantial restrictions on foreign investing in their capital
markets or in certain sectors or industries. In addition, a foreign
government may limit or cause delay in the convertibility or
repatriation of its currency which would adversely affect the U.S. dollar
value and/or liquidity of investments denominated in that
currency. Certain foreign investments may become less liquid in response
to market developments or adverse investor perceptions,
or become illiquid after purchase by the Fund, particularly during periods
of market turmoil. When the Fund holds illiquid
investments, its portfolio may be harder to value. The risks of investing
in emerging market countries are greater than the risks
associated with investments in foreign developed countries. Certain
emerging market countries may be subject to less stringent
requirements regarding accounting, auditing, financial reporting and
record keeping and therefore, material information related
to an investment may not be available or reliable. In addition, the Fund
is limited in its ability to exercise its legal rights or enforce
a counterparty’s legal obligations in certain jurisdictions outside of the
United States, in particular, in emerging market countries.
In addition, the Fund’s investments in foreign issuers may be denominated
in foreign currencies and therefore, to the extent
unhedged, the value of those investments will fluctuate with U.S. dollar
exchange rates. To the extent hedged by the use of foreign
currency forward exchange contracts, the precise matching of the foreign
currency forward exchange contract amounts and the
value of the securities involved will not generally be possible because
the future value of such securities in foreign currencies will
change as a consequence of market movements in the value of those
securities between the date on which the contract is entered
into and the date it matures. There is additional risk that such
transactions may reduce or preclude the opportunity for
|
Morgan
Stanley Institutional Fund, Inc. Prospectus | Fund
Summary
Passport
Overseas Equity Portfolio (Con’t)
|
gain
if the value of the currency should move in the direction opposite to the
position taken and that foreign currency forward exchange
contracts create exposure to currencies in which the Fund’s securities are
not denominated. The use of foreign currency forward
exchange contracts involves the risk of loss from the insolvency or
bankruptcy of the counterparty to the contract or the failure
of the counterparty to make payments or otherwise comply with the terms of
the contract. Economic sanctions or other similar
measures may be, and have been, imposed against certain countries,
organizations, companies, entities and/or individuals. Economic
sanctions and other similar measures could, among other things,
effectively restrict or eliminate the Fund’s ability to purchase
or sell securities, negatively impact the value or liquidity of the
Fund’s investments, significantly delay or prevent the settlement
of the Fund’s securities transactions, force the Fund to sell or otherwise
dispose of investments at inopportune times or prices,
or impair the Fund’s ability to meet its investment objective or invest in
accordance with its investment
strategies. |
• |
Variable
Interest Entities.
Chinese operating companies sometimes rely on variable interest entity
(“VIE”) structures to raise capital from
non-Chinese investors because of Chinese government limitations or
prohibitions on direct foreign ownership in certain industries.
In a VIE structure, a series of contractual arrangements are entered into
between a holding company domiciled outside of
China and a Chinese operating company or companies, which are intended to
mimic direct ownership in the operating company,
but in many cases these arrangements have not been tested in court and it
is not clear that the contracts are enforceable or
that the structures will otherwise work as intended. The offshore holding
company, which is not a Chinese operating company, then
issues exchange-traded shares that are sold to the public, including
non-Chinese investors (such as the Fund). Shares of the offshore
entity purchased by the Fund would not be equity ownership interests in
the Chinese operating company and the Fund’s interest
would be subject to legal, operational and other risks associated with the
company’s use of the VIE structure. For example, at
any time the Chinese government could determine that the contractual
arrangements constituting part of the VIE structure are unenforceable
or do not comply with applicable law or regulations, these laws or
regulations could change or be interpreted differently
in the future, and the Chinese government may with no advance notice
otherwise intervene in or exert influence over VIE
structures or the related Chinese operating companies. If any of these or
similar risks or developments materialize, the Fund’s investment
in the offshore entity may suddenly and significantly decline in value or
become worthless because of, among other things,
difficulty enforcing (or the inability to enforce) the contractual
arrangements or materially adverse effects on the Chinese operating
company’s performance. In these circumstances, the Fund could experience
significant losses with no recourse available. From
time to time, the Fund’s investments in U.S.-listed shell companies
relying on VIE structures to consolidate China-based operations
could be
significant. |
• |
India
Risk.
To the extent that the Fund invests a substantial portion of its assets in
Indian issuers, the value of the Fund’s assets may
be adversely affected by political, economic, social and religious factors
impacting Indian businesses and the Indian economy, changes
in Indian law or regulations and the status of India’s relations with
other countries. Indian government actions in the future
could have a significant effect on the Indian economy, which could affect
private sector companies and the Fund, market conditions,
and prices and yields of securities in the Fund’s portfolio. To the extent
the Fund invests a significant portion of its assets
in Indian businesses and the Indian economy, factors that have an adverse
impact on Indian businesses and the Indian economy
may have a disproportionate impact on the Fund’s
performance. |
• |
Small
and Mid Cap Companies.
Investments in small and mid cap companies may involve greater risks than
investments in larger, more
established companies. The securities issued by small and mid cap
companies may be less liquid and such companies may have
more limited markets, financial resources and product lines, and may lack
the depth of management of larger
companies. |
• |
Liquidity.
The Fund may make investments that are less liquid, illiquid or restricted
or that may become illiquid or less liquid in response
to overall economic conditions or adverse investor perceptions, and which
may entail greater risk than investments in other
types of securities. These investments may be more difficult to value or
sell, particularly in times of market turmoil, and there
may be little trading in the secondary market available for particular
securities. If the Fund is forced to sell an illiquid or restricted
security to fund redemptions or for other cash needs, it may be forced to
sell the security at a loss or for less than its fair value
and may be unable to sell the security at
all. |
• |
Derivatives.
Derivatives and other similar instruments that create synthetic exposure
often are subject to risks similar to those of the
underlying asset or instrument, including market risk, and may be subject
to additional risks, including imperfect correlation between
the value of the derivative and the underlying asset, risks of default by
the counterparty to certain transactions, magnification
of losses incurred due to changes in the market value of the securities,
instruments, indices or interest rates to which the
derivative instrument relates, risks that the transactions may not be
liquid, risks arising from margin and payment requirements,
risks arising from mispricing or valuation complexity and operational and
legal risks. Certain derivatives transactions
may give rise to a form of leverage. Leverage magnifies the potential for
gain and the risk of
loss. |
• |
Market
and Geopolitical Risk.
The value of your investment in the Fund is based on the values of the
Fund’s investments, which change
due to economic and other events that affect markets generally, as well as
those that affect particular regions, countries, industries,
companies or governments. These events may be sudden and unexpected, and
could adversely affect the liquidity of the Fund’s
investments, which may in turn impact valuation, the Fund’s ability to
sell securities and/or its ability to meet redemptions.
The risks associated with these developments may be magnified if certain
social, political, economic and other conditions
and events (such as war, natural disasters, epidemics and pandemics,
terrorism, conflicts, social unrest, recessions, inflation,
interest rate changes and supply chain disruptions) adversely interrupt
the global economy and financial markets. It is
|
Morgan
Stanley Institutional Fund, Inc. Prospectus | Fund
Summary
Passport
Overseas Equity Portfolio (Con’t)
|
difficult
to predict when events affecting the U.S. or global financial markets may
occur, the effects that such events may have and the
duration of those effects (which may last for extended periods). These
events may negatively impact broad segments of businesses
and populations and have a significant and rapid negative impact on the
performance of the Fund’s investments, adversely
affect and increase the volatility of the Fund’s share price
and exacerbate pre-existing risks to the
Fund. |
• |
Active
Management Risk.
In pursuing the Fund’s investment objective, the Adviser has considerable
leeway in deciding which investments
to buy, hold or sell on a day-to-day basis, and which trading strategies
to use. For example, the Adviser, in its discretion,
may determine to use some permitted trading strategies while not using
others. The success or failure of such decisions will
affect the Fund’s
performance. |
Shares
of the Fund are not bank deposits and are not guaranteed or insured by the
Federal Deposit Insurance Corporation or any other
government agency.
Morgan
Stanley Institutional Fund, Inc. Prospectus | Fund
Summary
Passport
Overseas Equity Portfolio (Con’t)
Performance
Information
The
bar chart and table below provide some indication of the risks of investing in
the Fund by showing changes in the Fund’s Class IR
shares’ performance from year-to-year and by showing how the Fund’s average
annual returns for the past one year period and since
inception compare with those of an
index intended to measure broad market performance.
The Fund changed its name from Active
International Allocation Portfolio to Passport Overseas Equity Portfolio
effective May 31, 2023. The
Fund’s past performance,
before and after taxes, is not necessarily an indication of how the Fund will
perform in the future.
Updated performance
information is available online at www.morganstanley.com/im
or by calling toll-free 1-800-869-6397.
Annual
Total Returns—Calendar Years
|
| |
High
Quarter |
12/31/20
|
22.26% |
Low
Quarter |
03/31/20
|
-21.66% |
Average
Annual Total Returns
(for
the calendar periods ended December
31, 2023)
|
| |
|
Past
One Year |
Since
Inception |
Class
IR (commenced
operations on 10/31/2019) |
|
|
Return
Before Taxes |
12.49% |
5.80% |
Return
After Taxes on Distributions1
|
% |
% |
Return
After Taxes on Distributions and Sale of Fund Shares |
8.18% |
4.48% |
MSCI
All Country World ex USA Index (reflects no deduction for fees,
expenses
or taxes)2
|
% |
%3 |
1 |
These
returns do not reflect any tax consequences from a sale of your shares at
the end of each
period. |
2 |
The
MSCI All Country World ex USA Index is a free float-adjusted market
capitalization weighted index designed to measure the equity market
performance
of developed and emerging markets, excluding the United States. The term
“free float” represents the portion of shares outstanding that
are
deemed to be available for purchase in the public equity markets by
investors. The performance of the index is listed in U.S. dollars and
assumes reinvestment
of net dividends. Net total return indices reinvest dividends after the
deduction of withholding taxes, using (for international indices) a tax
rate
applicable to non-resident institutional investors who do not benefit from
double taxation treaties. It is not possible to invest directly in an
index. |
3 |
Since
Inception reflects the inception date of Class
IR. |
The
after-tax returns shown in the table above are calculated using the historical
highest individual federal marginal income tax rates during
the period shown and do not reflect the impact of state and local taxes.
After-tax
returns for the Fund’s other classes will vary from
Class IR shares’ returns. Actual
after-tax returns depend on the investor’s tax situation and may differ from
those shown, and after-tax
returns are not relevant to investors who hold their Fund shares through tax
deferred arrangements such as 401(k) plans or individual
retirement accounts. After-tax
returns may be higher than before-tax returns due to an assumed benefit from
capital losses that
would have been realized had Fund shares been sold at the end of the relevant
periods, as applicable.
Fund
Management
Adviser.
Morgan Stanley Investment Management Inc.
Portfolio
Managers.
The Fund is managed by members of the Passport Equity team. Information about
the members primarily responsible
for the day-to-day management of the Fund is shown below:
|
| |
Name |
Title
with Adviser |
Date
Began Managing
Fund |
Ben
V. Rozin |
Executive
Director of the Adviser |
April
2017 |
Jitania
Kandhari |
Managing
Director of the Adviser |
April
2017 |
Morgan
Stanley Institutional Fund, Inc. Prospectus | Fund
Summary
Passport
Overseas Equity Portfolio (Con’t)
Purchase
and Sale of Fund Shares
To
purchase Class IR shares, an investor must meet a minimum initial investment of
$5 million or be a defined contribution, defined benefit
or other employer sponsored employee benefit plan, in each case provided that
the plan trades through an intermediary that combines
its clients’ assets in a single omnibus account, whether or not such plan is
qualified under the Internal Revenue Code of 1986,
as amended (the “Code”), and in each case subject to the discretion of the
Adviser. The minimum initial investment may be waived
for certain investments. For more information, please refer to the section of
the Prospectus entitled “Shareholder Information—Minimum
Investment Amounts.”
Shares
of the Fund may be purchased or sold on any day the New York Stock Exchange
(“NYSE”) is open for business directly from the
Fund by mail (c/o SS&C Global Investor and Distribution Solutions, Inc.,
P.O. Box 219804, Kansas City, MO 64121-9804), by
telephone (1-800-869-6397) or by contacting an authorized third-party, such as a
broker-dealer or other financial intermediary that
has entered into a selling agreement with the Fund’s “Distributor,” Morgan
Stanley Distribution, Inc. (each, a “Financial Intermediary”).
For more information, please refer to the sections of the Prospectus entitled
“Shareholder Information—How To Purchase
Fund Shares” and “—How To Redeem Fund Shares.”
Tax
Information
The
Fund intends to make distributions that may be taxed as ordinary income or
capital gains, unless you are investing through a tax-deferred
arrangement, such as a 401(k) plan or an individual retirement
account.
Payments
to Broker-Dealers and Other Financial Intermediaries
If
you purchase Class IR shares of the Fund through a Financial Intermediary (such
as a bank), the Adviser and/or the Distributor may
pay the Financial Intermediary for the sale of Class IR shares and related
services. These payments, which may be significant in amount,
may create a conflict of interest by influencing the Financial Intermediary and
your salesperson to recommend the Fund over
another investment. Ask your salesperson or visit your Financial Intermediary’s
web site for more information. For additional information
about the Fund’s revenue sharing arrangements for Class IR shares, see the
section of the Statement of Additional Information
entitled “Revenue Sharing.”
Morgan
Stanley Institutional Fund, Inc. Prospectus | Fund
Summary
Emerging
Markets Leaders Portfolio
Investment
Objective
The
Emerging Markets Leaders Portfolio (the “Fund”) seeks long-term capital
appreciation.
Fees
and Expenses
The
table below describes the fees and expenses that you may pay if you buy, hold
and sell Class IR shares of the Fund. The Fund does
not charge any sales loads or other fees when you purchase or redeem Class IR
shares. You
may pay fees other than the fees and
expenses of the Fund, such as brokerage commissions and other fees charged by
financial intermediaries, which are not reflected
in the tables and examples below.
Shareholder
Fees (fees
paid directly from your investment)
|
| |
|
Class
IR |
|
Maximum
sales charge (load) imposed on purchases (as a percentage of offering
price) |
None |
|
Maximum
deferred sales charge (load) (as a percentage based on the lesser of the
offering price or NAV at redemption) |
None |
|
Redemption
Fee (as a percentage of the amount redeemed on redemptions made within 30
days of purchase) |
2.00% |
|
Annual
Fund Operating Expenses (expenses
that you pay each year as a percentage of the value of your
investment)
|
| |
|
Class
IR |
|
Advisory
Fee |
0.75% |
|
Distribution
and/or Shareholder Service (12b-1) Fee |
None |
|
Other
Expenses |
29.23% |
|
Total
Annual Fund Operating Expenses1
|
% |
|
Fee
Waiver and/or Expense Reimbursement1
|
% |
|
Total
Annual Fund Operating Expenses After Fee Waiver and/or Expense
Reimbursement1
|
% |
|
Example
The
example below is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds.
The
example assumes that you invest $10,000 in the Fund, your investment has a 5%
return each year and the Fund’s operating expenses
remain the same (except that the example incorporates the fee waiver and/or
expense reimbursement arrangement for only the
first year). Although your actual costs may be higher or lower, based on these
assumptions your costs would be:
|
|
|
|
| |
If
You SOLD Your Shares |
|
|
1
Year |
3
Years |
5
Years |
10
Years |
|
Class
IR |
$102 |
$4,878 |
$7,565 |
$10,203 |
|
|
|
|
|
| |
If
You HELD Your Shares |
|
|
1
Year |
3
Years |
5
Years |
10
Years |
|
Class
IR |
$102 |
$4,878 |
$7,565 |
$10,203 |
|
1 |
The
Fund’s “Adviser,” Morgan Stanley Investment Management Inc., has agreed to
reduce its advisory fee and/or reimburse the Fund so that Total
Annual
Fund Operating Expenses, excluding acquired fund fees and expenses (as
applicable), certain investment related expenses, taxes, interest and
other
extraordinary expenses (including litigation), will not exceed 1.00% for
Class IR. The fee waivers and/or expense reimbursements will
continue for at
least one year from the date of this Prospectus or until such time as the
Board of Directors of Morgan Stanley Institutional Fund, Inc. (the
“Company”)
acts to discontinue all or a portion of such waivers and/or reimbursements
when it deems such action is
appropriate. |
Portfolio
Turnover
The
Fund pays transaction costs, such as commissions, when it buys and sells
securities (or “turns over” its portfolio). A higher portfolio
turnover rate may indicate higher transaction costs and may result in higher
taxes when Fund shares are held in a taxable account.
These costs, which are not reflected in Total Annual Fund Operating Expenses or
in the example, affect the Fund’s performance.
During the most recent fiscal year, the Fund’s portfolio turnover rate was
54% of
the average value of its portfolio.
Principal
Investment Strategies
The
Adviser and the Fund’s “Sub-Adviser,” Morgan Stanley Investment Management
Company (“MSIM Company”), seek to achieve
the Fund’s investment objective by investing primarily in equity securities of
companies located in emerging market countries.
Morgan
Stanley Institutional Fund, Inc. Prospectus | Fund
Summary
Emerging
Markets Leaders Portfolio (Con’t)
The
Adviser and/or Sub-Adviser generally use a fundamental bottom-up stock selection
process informed by macro thematic research on
overall emerging markets. The Adviser and/or Sub-Adviser will employ this
consistent and targeted approach seeking companies they
expect to become leading companies in emerging markets as well as developed
country domiciled companies where a large portion
of the companies’ growth is taking place in emerging market countries. The
Adviser and/or Sub-Adviser seek to construct a focused
portfolio of equity securities designed to take advantage of thematic
opportunities in emerging markets by seeking to invest in
companies that they believe have the potential to outperform emerging markets
generally over the long-term.
The
investment process takes into account information about environmental, social
and governance issues (also referred to as ESG) when
making investment decisions. The Adviser and/or Sub-Adviser focus on engaging
company management around corporate governance
practices as well as what the Adviser and/or Sub-Adviser deem to be materially
important environmental and/or social issues
facing a company. The investment process excludes holdings in tobacco
companies.
Under
normal circumstances, at least 80% of the Fund’s assets will be invested in
equity securities of issuers located in emerging market
countries. This policy may be changed without shareholder approval; however, you
would be notified upon 60 days’ notice in writing
of any changes. The Adviser and/or Sub-Adviser generally consider selling an
investment when they determine the company no
longer satisfies their investment criteria.
The
equity securities in which the Fund may primarily invest include common and
preferred stocks, convertible securities, rights, warrants,
depositary receipts, limited partnership interests and other specialty
securities having equity features. The Fund may hold or have
exposure to equity securities of companies of any size, including small and
medium capitalization companies, and to companies in
any industry or sector.
For
purposes of maintaining exposure of at least 80% of the Fund’s assets to equity
securities of companies located in emerging market
countries, the Fund may also invest in American Depositary Receipts (“ADRs”),
Global Depositary Receipts (“GDRs”) and other
types of depositary receipts with respect to companies located in emerging
market countries.
The
Fund may, but it is not required to, use derivative instruments for a variety of
purposes, including hedging, risk management, portfolio
management or to earn income. The Fund’s use of derivatives may involve the
purchase and sale of derivative instruments such
as options, futures, swaps, contracts for difference (“CFDs”), structured
investments and other related instruments and techniques.
The Fund may utilize foreign currency forward exchange contracts, which are also
derivatives, in connection with its investments
in foreign securities. Derivative instruments used by the Fund will be counted
toward the Fund’s 80% policy discussed above
to the extent they have economic characteristics similar to the securities
included within that policy.
Principal
Risks
There
is no assurance that the Fund will achieve its investment objective, and you can
lose money investing in this Fund.
The principal
risks of investing in the Fund include:
• |
Equity
Securities.
In general, prices of equity securities are more volatile than those of
fixed-income securities. The prices of equity securities
fluctuate, and sometimes widely fluctuate, in response to activities
specific to the issuer of the security as well as factors unrelated
to the fundamental condition of the issuer, including general market,
economic, political conditions and public health conditions.
During periods when equity securities experience heightened volatility,
such as during periods of market, economic or financial
uncertainty or distress, the Fund’s investments in equity securities may
be subject to heightened
risks. |
|
The
value of equity securities and related instruments may decline in response
to adverse changes in the economy or the economic outlook;
deterioration in investor sentiment; interest rate, currency, and
commodity price fluctuations; adverse geopolitical, social or
environmental developments; issuer- and sector-specific considerations;
unexpected trading activity among retail investors; and other
factors. Market conditions may affect certain types of stocks to a greater
extent than other types of stocks. If the stock market
declines, the value of Fund shares will also likely
decline. |
• |
Convertible
Securities.
A convertible security is a bond, debenture, note, preferred stock, right,
warrant or other security that may be
converted into or exchanged for a prescribed amount of common stock or
other security of the same or a different issuer or into cash
within a particular period of time at a specified price or formula. To the
extent that the Fund invests in convertible securities, and
the convertible security’s investment value is greater than its conversion
value, its price will be likely to increase when interest rates
fall and decrease when interest rates rise. If the conversion value
exceeds the investment value, the price of the convertible security
will tend to fluctuate directly with the price of the underlying
security. |
• |
Foreign
and Emerging Market Securities.
Investments in foreign markets entail special risks such as currency,
political (including geopolitical),
economic and market risks. There also may be greater market volatility,
less reliable financial information, less stringent
investor protections and disclosure standards, higher transaction and
custody costs, decreased market liquidity and less government
and exchange regulation associated with investments in foreign markets. In
addition, investments in certain foreign markets
that have historically been considered stable may become more volatile and
subject to increased risk due to developments and
changing conditions in such markets. Moreover, the
growing interconnectivity of global economies and financial markets
has |
Morgan
Stanley Institutional Fund, Inc. Prospectus | Fund
Summary
Emerging
Markets Leaders Portfolio (Con’t)
|
increased
the probability that adverse developments and conditions in one country or
region will affect the stability of economies and
financial markets in other countries or regions. Certain foreign markets
may rely heavily on particular industries or foreign capital
and are more vulnerable to diplomatic developments, the imposition of
economic sanctions against a particular country or countries,
organizations, companies, entities and/or individuals, changes in
international trading patterns, trade barriers and other protectionist
or retaliatory measures. Investments in foreign markets may also be
adversely affected by governmental actions such as
the imposition of capital controls, nationalization of companies or
industries, expropriation of assets or the imposition of punitive
taxes. The governments of certain countries may prohibit or impose
substantial restrictions on foreign investing in their capital
markets or in certain sectors or industries. In addition, a foreign
government may limit or cause delay in the convertibility or
repatriation of its currency which would adversely affect the U.S. dollar
value and/or liquidity of investments denominated in that
currency. Certain foreign investments may become less liquid in response
to market developments or adverse investor perceptions,
or become illiquid after purchase by the Fund, particularly during periods
of market turmoil. When the Fund holds illiquid
investments, its portfolio may be harder to value. The risks of investing
in emerging market countries are greater than the risks
associated with investments in foreign developed countries. Certain
emerging market countries may be subject to less stringent
requirements regarding accounting, auditing, financial reporting and
record keeping and therefore, material information related
to an investment may not be available or reliable. In addition, the Fund
is limited in its ability to exercise its legal rights or enforce
a counterparty’s legal obligations in certain jurisdictions outside of the
United States, in particular, in emerging market countries.
In addition, the Fund’s investments in foreign issuers may be denominated
in foreign currencies and therefore, to the extent
unhedged, the value of those investments will fluctuate with U.S. dollar
exchange rates. To the extent hedged by the use of foreign
currency forward exchange contracts, the precise matching of the foreign
currency forward exchange contract amounts and the
value of the securities involved will not generally be possible because
the future value of such securities in foreign currencies will
change as a consequence of market movements in the value of those
securities between the date on which the contract is entered
into and the date it matures. There is additional risk that such
transactions may reduce or preclude the opportunity for gain
if the value of the currency should move in the direction opposite to the
position taken and that foreign currency forward exchange
contracts create exposure to currencies in which the Fund’s securities are
not denominated. The use of foreign currency forward
exchange contracts involves the risk of loss from the insolvency or
bankruptcy of the counterparty to the contract or the failure
of the counterparty to make payments or otherwise comply with the terms of
the contract. Economic sanctions or other similar
measures may be, and have been, imposed against certain countries,
organizations, companies, entities and/or individuals. Economic
sanctions and other similar measures could, among other things,
effectively restrict or eliminate the Fund’s ability to purchase
or sell securities, negatively impact the value or liquidity of the
Fund’s investments, significantly delay or prevent the settlement
of the Fund’s securities transactions, force the Fund to sell or otherwise
dispose of investments at inopportune times or prices,
or impair the Fund’s ability to meet its investment objective or invest in
accordance with its investment
strategies. |
• |
China
Risk.
Investments in securities of Chinese issuers, including A shares, involve
risks associated with investments in foreign markets
as well as special considerations not typically associated with
investments in the U.S. securities markets. For example, the Chinese
government has historically exercised substantial control over virtually
every sector of the Chinese economy through administrative
regulation and/or state ownership and actions of the Chinese central and
local government authorities continue to have
a substantial effect on economic conditions in China. In addition, the
Chinese government has taken actions that influenced the
prices at which certain goods may be sold, encouraged companies to invest
or concentrate in particular industries, induced mergers
between companies in certain industries and induced private companies to
publicly offer their securities. Investments in China
involve risk of a total loss due to government action or
inaction. Additionally,
the Chinese economy is export-driven and highly reliant on trade. Adverse
changes to the economic conditions of its primary
trading partners, such as the United States, Japan and South Korea, would
adversely impact the Chinese economy and the
Fund’s investments. Moreover, a slowdown in other significant economies of
the world, such as the United States, the European
Union and certain Asian countries, may adversely affect economic growth in
China. An economic downturn in China would
adversely impact the Fund’s investments. In addition, certain securities
are, or may in the future, become restricted, and/or sanctioned
by the U.S. government or other governments and the Fund may be forced to
sell such restricted securities and incur a loss
as a result. These
and other developments, including government actions, may result in
significant illiquidity risk or forced disposition for Chinese
investments. The Chinese securities markets are emerging markets
characterized by a relatively small number of equity issues
and relatively low trading volume, resulting in decreased liquidity,
greater price volatility (caused by, among other things, military,
diplomatic, or trade conflicts), and potentially fewer investment
opportunities for the Fund. Ongoing political tension between
the People’s Republic of China and the Hong Kong Special Administrative
Region may have impacts on the economy of Hong
Kong, and these impacts remain
uncertain. |
|
Risks
of Investing through Stock Connect.
The Fund may invest in A-shares listed and traded through Stock Connect,
or on such other
stock exchanges in China which participate in Stock Connect from time to
time or in the future. Trading through Stock Connect
is subject to a number of restrictions that may affect the Fund’s
investments and returns. Moreover, Stock Connect A-shares
generally may not be sold, purchased or otherwise transferred other than
through Stock Connect in accordance with
|
Morgan
Stanley Institutional Fund, Inc. Prospectus | Fund
Summary
Emerging
Markets Leaders Portfolio (Con’t)
|
applicable
rules. The Stock Connect program is a relatively new program and may be
subject to further interpretation and guidance.
There can be no assurance as to the program’s continued existence or
whether future developments regarding the program
may restrict or adversely affect the Fund’s investments or returns.
Because certain transactions through Stock Connect may
not be subject to certain investor protection programs, the Fund may be
exposed to the risks of default of the broker(s) they engage
in their trading in China A
Shares. |
|
Variable
Interest Entities.
Chinese operating companies sometimes rely on variable interest entity
(“VIE”) structures to raise capital from
non-Chinese investors because of Chinese government limitations or
prohibitions on direct foreign ownership in certain industries.
In a VIE structure, a series of contractual arrangements are entered into
between a holding company domiciled outside of
China and a Chinese operating company or companies, which are intended to
mimic direct ownership in the operating company,
but in many cases these arrangements have not been tested in court and it
is not clear that the contracts are enforceable or
that the structures will otherwise work as intended. The offshore holding
company, which is not a Chinese operating company, then
issues exchange-traded shares that are sold to the public, including
non-Chinese investors (such as the Fund). Shares of the offshore
entity purchased by the Fund would not be equity ownership interests in
the Chinese operating company and the Fund’s interest
would be subject to legal, operational and other risks associated with the
company’s use of the VIE structure. For example, at
any time the Chinese government could determine that the contractual
arrangements constituting part of the VIE structure are unenforceable
or do not comply with applicable law or regulations, these laws or
regulations could change or be interpreted differently
in the future, and the Chinese government may with no advance notice
otherwise intervene in or exert influence over VIE
structures or the related Chinese operating companies. If any of these or
similar risks or developments materialize, the Fund’s investment
in the offshore entity may suddenly and significantly decline in value or
become worthless because of, among other things,
difficulty enforcing (or the inability to enforce) the contractual
arrangements or materially adverse effects on the Chinese
operating
company’s performance. In these circumstances, the Fund could experience
significant losses with no recourse available. From
time to time, the Fund’s investments in U.S.-listed shell companies
relying on VIE structures to consolidate China-based operations
could be
significant. |
• |
Small
and Mid Cap Companies.
Investments in small and mid cap companies may involve greater risks than
investments in larger, more
established companies. The securities issued by small and mid cap
companies may be less liquid and such companies may have
more limited markets, financial resources and product lines, and may lack
the depth of management of larger
companies. |
• |
India
Risk.
To the extent that the Fund invests a substantial portion of its assets in
Indian issuers, the value of the Fund’s assets may
be adversely affected by political, economic, social and religious factors
impacting Indian businesses and the Indian economy, changes
in Indian law or regulations and the status of India’s relations with
other countries. Indian government actions in the future
could have a significant effect on the Indian economy, which could affect
private sector companies and the Fund, market conditions,
and prices and yields of securities in the Fund’s portfolio. To the extent
the Fund invests a significant portion of its assets
in Indian businesses and the Indian economy, factors that have an adverse
impact on Indian businesses and the Indian economy
may have a disproportionate impact on the Fund’s
performance. |
• |
Liquidity.
The Fund may make investments that are less liquid, illiquid or restricted
or that may become illiquid or less liquid in response
to overall economic conditions or adverse investor perceptions, and which
may entail greater risk than investments in other
types of securities. These investments may be more difficult to value or
sell, particularly in times of market turmoil, and there
may be little trading in the secondary market available for particular
securities. If the Fund is forced to sell an illiquid or restricted
security to fund redemptions or for other cash needs, it may be forced to
sell the security at a loss or for less than its fair value
and may be unable to sell the security at
all. |
• |
Derivatives.
Derivatives and other similar instruments that create synthetic exposure
often are subject to risks similar to those of the
underlying asset or instrument, including market risk, and may be subject
to additional risks, including imperfect correlation between
the value of the derivative and the underlying asset, risks of default by
the counterparty to certain transactions, magnification
of losses incurred due to changes in the market value of the securities,
instruments, indices or interest rates to which the
derivative instrument relates, risks that the transactions may not be
liquid, risks arising from margin and payment requirements,
risks arising from mispricing or valuation complexity and operational and
legal risks. Certain derivatives transactions
may give rise to a form of leverage. Leverage magnifies the potential for
gain and the risk of
loss. |
• |
Non-Diversification.
The Fund is non-diversified, which means that the Fund may invest a
greater percentage of its assets in a smaller
number of issuers than a diversified fund. Because the Fund is
non-diversified, it may be more susceptible to an adverse event
affecting a single issuer or portfolio investment than a diversified
portfolio and a decline in the value of that issuer’s securities
or that portfolio investment may cause the Fund’s overall value to decline
to a greater degree than a diversified portfolio.
|
• |
Market
and Geopolitical Risk.
The value of your investment in the Fund is based on the values of the
Fund’s investments, which change
due to economic and other events that affect markets generally, as well as
those that affect particular regions, countries, industries,
companies or governments. These events may be sudden and unexpected, and
could adversely affect the liquidity of the Fund’s
investments, which may in turn impact valuation, the Fund’s ability to
sell securities and/or its ability to meet redemptions.
The risks associated with these developments may be magnified if certain
social, political, economic and other conditions
and events (such as war, natural disasters, epidemics and pandemics,
terrorism, conflicts, social unrest, recessions,
|
Morgan
Stanley Institutional Fund, Inc. Prospectus | Fund
Summary
Emerging
Markets Leaders Portfolio (Con’t)
|
inflation,
interest rate changes and supply chain disruptions) adversely interrupt
the global economy and financial markets. It is difficult
to predict when events affecting the U.S. or global financial markets may
occur, the effects that such events may have and the
duration of those effects (which may last for extended periods). These
events may negatively impact broad segments of businesses
and populations and have a significant and rapid negative impact on the
performance of the Fund’s investments, adversely
affect and increase the volatility of the Fund’s share price
and exacerbate pre-existing risks to the
Fund. |
• |
Active
Management Risk.
In pursuing the Fund’s investment objective, the Adviser has considerable
leeway in deciding which investments
to buy, hold or sell on a day-to-day basis, and which trading strategies
to use. For example, the Adviser, in its discretion,
may determine to use some permitted trading strategies while not using
others. The success or failure of such decisions will
affect the Fund’s
performance. |
Shares
of the Fund are not bank deposits and are not guaranteed or insured by the
Federal Deposit Insurance Corporation or any other
government agency.
Morgan
Stanley Institutional Fund, Inc. Prospectus | Fund
Summary
Emerging
Markets Leaders Portfolio (Con’t)
Performance
Information
The
bar chart and table below provide some indication of the risks of
investing in the Fund by showing changes in the Fund’s Class IR
shares’ performance from year-to-year and by showing how the Fund’s average
annual returns for the past one year period and since
inception compare with those of an index intended to measure broad market
performance. The
Fund’s past performance, before
and after taxes, is not necessarily an indication of how the Fund will
perform in the future.
Updated performance information is
available online at www.morganstanley.com/im or
by calling toll-free 1-800-869-6397.
Annual
Total Returns*—Calendar
Years
|
| |
High
Quarter |
12/31/2023
|
10.37% |
Low
Quarter |
03/31/2022
|
-17.31% |
Average
Annual Total Returns
(for
the calendar periods ended December 31, 2023)
|
|
| |
|
Past
One Year |
Since
Inception |
Class
IR (commenced
operations on 04/12/2021) |
|
Return
Before Taxes |
12.29% |
-9.39% |
Return
After Taxes on Distributions1
|
% |
-% |
Return
After Taxes on Distributions and Sale of Fund Shares |
7.28% |
-7.01% |
MSCI
Emerging Markets Net Index (reflects no deduction for fees, expenses
or
taxes)2
|
% |
-%3 |
1 |
These
returns do not reflect any tax consequences from a sale of your shares at
the end of each
period. |
2 |
The
MSCI Emerging Markets Net Index is a free float-adjusted market
capitalization weighted index that is designed to measure equity market
performance
of emerging markets. The term “free float” represents the portion of
shares outstanding that are deemed to be available for purchase in
the
public equity markets by investors. The MSCI Emerging Markets Net Index
currently consists of 24 emerging market country indices. The performance
of the index is listed in U.S. dollars and assumes reinvestment of net
dividends. Net total return indices reinvest dividends after the
deduction
of withholding taxes, using (for international indices) a tax rate
applicable to non-resident institutional investors who do not benefit from
double
taxation treaties. It is not possible to invest directly in an
index. |
3 |
Since
Inception reflects the inception date of Class
IR. |
The
after-tax returns shown in the table above are calculated using the historical
highest individual federal marginal income tax rates during
the period shown and do not reflect the impact of state and local taxes.
After-tax
returns for the Fund’s other classes will vary from
Class IR shares’ returns. Actual
after-tax returns depend on the investor’s tax situation and may differ from
those shown, and after-tax
returns are not relevant to investors who hold their Fund shares through tax
deferred arrangements such as 401(k) plans or individual
retirement accounts. After-tax
returns may be higher than before-tax returns due to foreign tax credits and/or
an assumed benefit
from capital losses that would have been realized had Fund shares been sold at
the end of the relevant periods, as
applicable.
Fund
Management
Adviser.
Morgan Stanley Investment Management Inc.
Sub-Adviser.
Morgan Stanley Investment Management Company.
Portfolio
Manager.
The Fund is managed by the Emerging Markets Equity team. Information about the
member primarily responsible
for the day-to-day management of the Fund is shown below:
|
| |
Name |
Title
with Sub-Adviser |
Date
Began Managing
Fund |
Vishal
Gupta |
Managing
Director of MSIM Company |
November
2015 |
Morgan
Stanley Institutional Fund, Inc. Prospectus | Fund
Summary
Emerging
Markets Leaders Portfolio (Con’t)
Purchase
and Sale of Fund Shares
To
purchase Class IR shares, an investor must meet a minimum initial investment of
$5 million or be a defined contribution, defined benefit
or other employer sponsored employee benefit plan, in each case provided that
the plan trades through an intermediary that combines
its clients’ assets in a single omnibus account, whether or not such plan is
qualified under the Internal Revenue Code of 1986,
as amended (the “Code”), and in each case subject to the discretion of the
Adviser. The minimum initial investment may be waived
for certain investments. For more information, please refer to the section of
the Prospectus entitled “Shareholder Information—Minimum
Investment Amounts.”
Shares
of the Fund may be purchased or sold on any day the New York Stock Exchange
(“NYSE”) is open for business directly from the
Fund by mail (c/o SS&C Global Investor and Distribution Solutions, Inc.,
P.O. Box 219804, Kansas City, MO 64121-9804), by
telephone (1-800-869-6397) or by contacting an authorized third-party, such as a
broker-dealer or other financial intermediary that
has entered into a selling agreement with the Fund’s “Distributor,” Morgan
Stanley Distribution, Inc. (each, a “Financial Intermediary”).
For more information, please refer to the sections of the Prospectus entitled
“Shareholder Information—How To Purchase
Fund Shares” and “—How To Redeem Fund Shares.”
Tax
Information
The
Fund intends to make distributions that may be taxed as ordinary income or
capital gains, unless you are investing through a tax-deferred
arrangement, such as a 401(k) plan or an individual retirement
account.
Payments
to Broker-Dealers and Other Financial Intermediaries
If
you purchase Class IR shares of the Fund through a Financial Intermediary
(such as a bank), the Adviser and/or the Distributor may
pay the Financial Intermediary for the sale of Class IR shares and
related services. These payments, which may be significant in amount,
may create a conflict of interest by influencing the Financial
Intermediary and your salesperson to recommend the Fund over
another investment. Ask your salesperson or visit your Financial
Intermediary’s web site for more information. For additional information
about the Fund’s revenue sharing arrangements for Class IR shares, see the
section of the Statement of Additional Information
entitled “Revenue Sharing.”
Morgan
Stanley Institutional Fund, Inc. Prospectus | Fund
Summary
Emerging
Markets Portfolio
Investment
Objective
The
Emerging Markets Portfolio (the “Fund”) seeks long-term capital appreciation by
investing primarily in growth-oriented equity securities
of issuers in emerging market countries.
Fees
and Expenses
The
table below describes the fees and expenses that you may pay if you buy, hold
and sell Class IR shares of the Fund. The Fund does
not charge any sales loads or other fees when you purchase Class IR shares.
You
may pay fees other than the fees and expenses of
the Fund, such as brokerage commissions and other fees charged by financial
intermediaries, which are not reflected in the tables
and examples below.
Shareholder
Fees (fees
paid directly from your investment)
|
| |
|
Class
IR |
|
Maximum
sales charge (load) imposed on purchases (as a percentage of offering
price) |
None |
|
Maximum
deferred sales charge (load) (as a percentage based on the lesser of the
offering price or net asset value per share (“NAV”)
at redemption) |
None |
|
Redemption
Fee (as a percentage of the amount redeemed on redemptions made within 30
days of purchase) |
2.00% |
|
Annual
Fund Operating Expenses (expenses
that you pay each year as a percentage of the value of your
investment)
|
| |
|
Class
IR |
|
Advisory
Fee1
|
% |
|
Distribution
and/or Shareholder Service (12b-1) Fee |
None |
|
Other
Expenses |
22.16% |
|
Total
Annual Fund Operating Expenses2
|
% |
|
Fee
Waiver and/or Expense Reimbursement2
|
% |
|
Total
Annual Fund Operating Expenses After Fee Waiver and/or Expense
Reimbursement2
|
% |
|
Example
The
example below is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds.
The
example assumes that you invest $10,000 in the Fund, your investment has a 5%
return each year and the Fund’s operating expenses
remain the same (except that the example incorporates the fee waiver and/or
expense reimbursement arrangement for only the
first year). Although your actual costs may be higher or lower, based on these
assumptions your costs would be:
|
|
|
|
| |
If
You SOLD Your Shares |
|
|
|
|
|
|
1
Year |
3
Years |
5
Years |
10
Years |
|
Class
IR |
$97 |
$4,049 |
$6,712 |
$10,164 |
|
|
|
|
|
| |
If
You HELD Your Shares |
|
|
|
|
|
|
1
Year |
3
Years |
5
Years |
10
Years |
|
Class
IR |
$97 |
$4,049 |
$6,712 |
$10,164 |
|
1 |
The
Advisory Fee has been restated to reflect the decrease in the advisory fee
schedule effective April 28, 2023.
|
2 |
The
Fund’s “Adviser,” Morgan Stanley Investment Management Inc., has agreed to
reduce its advisory fee and/or reimburse the Fund so that Total
Annual
Fund Operating Expenses, excluding acquired fund fees and expenses (as
applicable), certain investment related expenses, taxes, interest and
other
extraordinary expenses (including litigation), will not exceed 0.95%
for Class IR. The fee waivers and/or expense reimbursements will continue
for at
least one year from the date of this Prospectus or until such time as the
Board of Directors of Morgan Stanley Institutional Fund, Inc. (the
“Company”)
acts to discontinue all or a portion of such waivers and/or reimbursements
when it deems such action is
appropriate. |
Portfolio
Turnover
The
Fund pays transaction costs, such as commissions, when it buys and sells
securities (or “turns over” its portfolio). A higher portfolio
turnover rate may indicate higher transaction costs and may result in higher
taxes when Fund shares are held in a taxable account.
These costs, which are not reflected in Total Annual Fund Operating Expenses or
in the example, affect the Fund’s performance.
During the most recent fiscal year, the Fund’s portfolio turnover rate was
34% of
the average value of its portfolio.
Principal
Investment Strategies
The
Adviser and the Fund’s “Sub-Adviser,” Morgan Stanley Investment Management
Company (“MSIM Company”), seek to maximize
returns by investing primarily in quality growth-oriented equity securities in
emerging markets.
Morgan
Stanley Institutional Fund, Inc. Prospectus | Fund
Summary
Emerging
Markets Portfolio (Con’t)
The
Adviser’s and/or Sub-Adviser’s investment approach combines top-down country and
thematic allocation with bottom-up stock selection.
The Adviser and/or Sub-Adviser allocate the Fund’s assets among emerging markets
based on relative economic, political and
social fundamentals, stock valuations and investor sentiment. To manage risk,
the Adviser and/or Sub-Adviser emphasize macroeconomic
and fundamental research.
The
investment process integrates information about environmental, social and
governance issues (also referred to as ESG) when making
investment decisions. The Adviser and/or Sub-Adviser believe that monitoring ESG
helps build a more complete picture of the
opportunities and risks facing companies, and seeks to engage directly with
company management to gain insights on how each company
addresses material ESG issues and how these may affect long-term financial
performance.
Under
normal circumstances, at least 80% of the Fund’s assets will be invested in
equity securities of issuers located in emerging market
countries. This policy may be changed without shareholder approval; however, you
would be notified upon 60 days’ notice in writing
of any changes. The Adviser and/or Sub-Adviser generally consider selling an
investment when they determine the company no
longer satisfies their investment criteria.
The
Fund may, but it is not required to, use derivatives and similar instruments for
a variety of purposes, including hedging, risk management,
portfolio management or to earn income. The Fund’s use of derivatives may
involve the purchase and sale of derivative instruments
such as futures and other similar instruments and techniques. The Fund may
utilize foreign currency forward exchange contracts,
which are also derivatives, in connection with its investments in foreign
securities. Derivative instruments used by the Fund
will be counted toward the Fund’s 80% policy discussed above to the extent they
have economic characteristics similar to the securities
included within that policy.
Principal
Risks
There
is no assurance that the Fund will achieve its investment objective, and you can
lose money investing in this Fund.
The principal
risks of investing in the Fund include:
• |
Equity
Securities.
In general, prices of equity securities are more volatile than those of
fixed-income securities. The prices of equity securities
fluctuate, and sometimes widely fluctuate, in response to activities
specific to the issuer of the security as well as factors unrelated
to the fundamental condition of the issuer, including general market,
economic, political conditions and public health conditions.
During periods when equity securities experience heightened volatility,
such as during periods of market, economic or financial
uncertainty or distress, the Fund’s investments in equity securities may
be subject to heightened
risks. |
|
The
value of equity securities and related instruments may decline in response
to adverse changes in the economy or the economic outlook;
deterioration in investor sentiment; interest rate, currency, and
commodity price fluctuations; adverse geopolitical, social or
environmental developments; issuer- and sector-specific considerations;
unexpected trading activity among retail investors; and other
factors. Market conditions may affect certain types of stocks to a greater
extent than other types of stocks. If the stock market
declines, the value of Fund shares will also likely
decline. |
• |
Foreign
and Emerging Market Securities.
Investments in foreign markets entail special risks such as currency,
political (including geopolitical),
economic and market risks. There also may be greater market volatility,
less reliable financial information, less stringent
investor protections and disclosure standards, higher transaction and
custody costs, decreased market liquidity and less government
and exchange regulation associated with investments in foreign markets. In
addition, investments in certain foreign markets
that have historically been considered stable may become more volatile and
subject to increased risk due to developments and
changing conditions in such markets. Moreover, the
growing interconnectivity of global economies and financial markets
has increased
the probability that adverse developments and conditions in one country or
region will affect the stability of economies and
financial markets in other countries or regions. Certain foreign markets
may rely heavily on particular industries or foreign capital
and are more vulnerable to diplomatic developments, the imposition of
economic sanctions against a particular country or countries,
organizations, companies, entities and/or individuals, changes in
international trading patterns, trade barriers and other protectionist
or retaliatory measures. Investments in foreign markets may also be
adversely affected by governmental actions such as
the imposition of capital controls, nationalization of companies or
industries, expropriation of assets or the imposition of punitive
taxes. The governments of certain countries may prohibit or impose
substantial restrictions on foreign investing in their capital
markets or in certain sectors or industries. In addition, a foreign
government may limit or cause delay in the convertibility or
repatriation of its currency which would adversely affect the U.S. dollar
value and/or liquidity of investments denominated in that
currency. Certain foreign investments may become less liquid in response
to market developments or adverse investor perceptions,
or become illiquid after purchase by the Fund, particularly during periods
of market turmoil. When the Fund holds illiquid
investments, its portfolio may be harder to value. The risks of investing
in emerging market countries are greater than the risks
associated with investments in foreign developed countries. Certain
emerging market countries may be subject to less stringent
requirements regarding accounting, auditing, financial reporting and
record keeping and therefore, material information related
to an investment may not be available or reliable. In addition, the Fund
is limited in its ability to exercise its legal rights or enforce
a counterparty’s legal obligations in certain jurisdictions outside of the
United States, in particular, in emerging market countries.
In addition, the Fund’s investments in foreign issuers may be denominated
in foreign currencies and therefore, to the
|
Morgan
Stanley Institutional Fund, Inc. Prospectus | Fund
Summary
Emerging
Markets Portfolio (Con’t)
|
extent
unhedged, the value of those investments will fluctuate with U.S. dollar
exchange rates. To the extent hedged by the use of foreign
currency forward exchange contracts, the precise matching of the foreign
currency forward exchange contract amounts and the
value of the securities involved will not generally be possible because
the future value of such securities in foreign currencies will
change as a consequence of market movements in the value of those
securities between the date on which the contract is entered
into and the date it matures. There is additional risk that such
transactions may reduce or preclude the opportunity for gain
if the value of the currency should move in the direction opposite to the
position taken and that foreign currency forward exchange
contracts create exposure to currencies in which the Fund’s securities are
not denominated. The use of foreign currency forward
exchange contracts involves the risk of loss from the insolvency or
bankruptcy of the counterparty to the contract or the failure
of the counterparty to make payments or otherwise comply with the terms of
the contract. Economic sanctions or other similar
measures may be, and have been, imposed against certain countries,
organizations, companies, entities and/or individuals. Economic
sanctions and other similar measures could, among other things,
effectively restrict or eliminate the Fund’s ability to purchase
or sell securities, negatively impact the value or liquidity of the
Fund’s investments, significantly delay or prevent the settlement
of the Fund’s securities transactions, force the Fund to sell or otherwise
dispose of investments at inopportune times or prices,
or impair the Fund’s ability to meet its investment objective or invest in
accordance with its investment
strategies. |
• |
Foreign
Currency.
The Fund’s investments in foreign securities may be denominated in foreign
currencies. The value of foreign currencies
may fluctuate relative to the value of the U.S. dollar. Since the Fund may
invest in such non-U.S. dollar-denominated securities,
and therefore may convert the value of such securities into U.S. dollars,
changes in currency exchange rates can increase or
decrease the U.S. dollar value of the Fund’s assets. Currency exchange
rates may fluctuate significantly over short periods of time
for a number of reasons, including changes in interest rates and the
overall economic health of the issuer. Devaluation of a currency
by a country’s government or banking authority also will have a
significant impact on the value of any investments denominated
in that currency. The Adviser may use derivatives to seek to reduce this
risk. The Adviser may in its discretion choose
not to hedge against currency risk. In addition, certain market conditions
may make it impossible or uneconomical to hedge
against currency
risk. |
• |
China
Risk.
Investments in securities of Chinese issuers, including A shares, involve
risks associated with investments in foreign markets
as well as special considerations not typically associated with
investments in the U.S. securities markets. For example, the Chinese
government has historically exercised substantial control over virtually
every sector of the Chinese economy through administrative
regulation and/or state ownership and actions of the Chinese central and
local government authorities continue to have
a substantial effect on economic conditions in China. In addition, the
Chinese government has taken actions that influenced the
prices at which certain goods may be sold, encouraged companies to invest
or concentrate in particular industries, induced mergers
between companies in certain industries and induced private companies to
publicly offer their securities. Investments in China
involve risk of a total loss due to government action or
inaction. Additionally,
the Chinese economy is export-driven and highly reliant on trade. Adverse
changes to the economic conditions of its primary
trading partners, such as the United States, Japan and South Korea, would
adversely impact the Chinese economy and the
Fund’s investments. Moreover, a slowdown in other significant economies of
the world, such as the United States, the European
Union and certain Asian countries, may adversely affect economic growth in
China. An economic downturn in China would
adversely impact the Fund’s investments. In addition, certain securities
are, or may in the future, become restricted, and/or sanctioned
by the U.S. government or other governments and the Fund may be forced to
sell such restricted securities and incur a loss
as a result. These
and other developments, including government actions, may result in
significant illiquidity risk or forced disposition for Chinese
investments. The Chinese securities markets are emerging markets
characterized by a relatively small number of equity issues
and relatively low trading volume, resulting in decreased liquidity,
greater price volatility (caused by, among other things, military,
diplomatic, or trade conflicts), and potentially fewer investment
opportunities for the Fund. Ongoing political tension between
the People’s Republic of China and the Hong Kong Special Administrative
Region may have impacts on the economy of Hong
Kong, and these impacts remain
uncertain. |
|
Risks
of Investing through Stock Connect.
The Fund may invest in A-shares listed and traded through Stock Connect,
or on such other
stock exchanges in China which participate in Stock Connect from time to
time or in the future. Trading through Stock Connect
is subject to a number of restrictions that may affect the Fund’s
investments and returns. Moreover, Stock Connect A-shares
generally may not be sold, purchased or otherwise transferred other than
through Stock Connect in accordance with applicable
rules. The Stock Connect program is a relatively new program and may be
subject to further interpretation and guidance.
There can be no assurance as to the program’s continued existence or
whether future developments regarding the program
may restrict or adversely affect the Fund’s investments or returns.
Because certain transactions through Stock Connect may
not be subject to certain investor protection programs, the Fund may be
exposed to the risks of default of the broker(s) they engage
in their trading in China A
Shares. |
|
Variable
Interest Entities.
Chinese operating companies sometimes rely on variable interest entity
(“VIE”) structures to raise capital from
non-Chinese investors because of Chinese government limitations or
prohibitions on direct foreign ownership in certain
|
Morgan
Stanley Institutional Fund, Inc. Prospectus | Fund
Summary
Emerging
Markets Portfolio (Con’t)
|
industries.
In a VIE structure, a series of contractual arrangements are entered into
between a holding company domiciled outside of
China and a Chinese operating company or companies, which are intended to
mimic direct ownership in the operating company,
but in many cases these arrangements have not been tested in court and it
is not clear that the contracts are enforceable or
that the structures will otherwise work as intended. The offshore holding
company, which is not a Chinese operating company, then
issues exchange-traded shares that are sold to the public, including
non-Chinese investors (such as the Fund). Shares of the offshore
entity purchased by the Fund would not be equity ownership interests in
the Chinese operating company and the Fund’s interest
would be subject to legal, operational and other risks associated with the
company’s use of the VIE structure. For example, at
any time the Chinese government could determine that the contractual
arrangements constituting part of the VIE structure are unenforceable
or do not comply with applicable law or regulations, these laws or
regulations could change or be interpreted differently
in the future, and the Chinese government may with no advance notice
otherwise intervene in or exert influence over VIE
structures or the related Chinese operating companies. If any of these or
similar risks or developments materialize, the Fund’s investment
in the offshore entity may suddenly and significantly decline in value or
become worthless because of, among other things,
difficulty enforcing (or the inability to enforce) the contractual
arrangements or materially adverse effects on the Chinese
operating
company’s performance. In these circumstances, the Fund could experience
significant losses with no recourse available. From
time to time, the Fund’s investments in U.S.-listed shell companies
relying on VIE structures to consolidate China-based operations
could be
significant. |
• |
India
Risk.
To the extent that the Fund invests a substantial portion of its assets in
Indian issuers, the value of the Fund’s assets may
be adversely affected by political, economic, social and religious factors
impacting Indian businesses and the Indian economy, changes
in Indian law or regulations and the status of India’s relations with
other countries. Indian government actions in the future
could have a significant effect on the Indian economy, which could affect
private sector companies and the Fund, market conditions,
and prices and yields of securities in the Fund’s portfolio. To the extent
the Fund invests a significant portion of its assets
in Indian businesses and the Indian economy, factors that have an adverse
impact on Indian businesses and the Indian economy
may have a disproportionate impact on the Fund’s
performance. |
• |
Liquidity.
The Fund may make investments that are less liquid, illiquid or restricted
or that may become illiquid or less liquid in response
to overall economic conditions or adverse investor perceptions, and which
may entail greater risk than investments in other
types of securities. These investments may be more difficult to value or
sell, particularly in times of market turmoil, and there
may be little trading in the secondary market available for particular
securities. If the Fund is forced to sell an illiquid or restricted
security to fund redemptions or for other cash needs, it may be forced to
sell the security at a loss or for less than its fair value
and may be unable to sell the security at
all. |
• |
Derivatives.
Derivatives and other similar instruments that create synthetic exposure
often are subject to risks similar to those of the
underlying asset or instrument, including market risk, and may be subject
to additional risks, including imperfect correlation between
the value of the derivative and the underlying asset, risks of default by
the counterparty to certain transactions, magnification
of losses incurred due to changes in the market value of the securities,
instruments, indices or interest rates to which the
derivative instrument relates, risks that the transactions may not be
liquid, risks arising from margin and payment requirements,
risks arising from mispricing or valuation complexity and operational and
legal risks. Certain derivatives transactions
may give rise to a form of leverage. Leverage magnifies the potential for
gain and the risk of
loss. |
• |
Market
and Geopolitical Risk.
The value of your investment in the Fund is based on the values of the
Fund’s investments, which change
due to economic and other events that affect markets generally, as well as
those that affect particular regions, countries, industries,
companies or governments. These events may be sudden and unexpected, and
could adversely affect the liquidity of the Fund’s
investments, which may in turn impact valuation, the Fund’s ability to
sell securities and/or its ability to meet redemptions.
The risks associated with these developments may be magnified if certain
social, political, economic and other conditions
and events (such as war, natural disasters, epidemics and pandemics,
terrorism, conflicts, social unrest, recessions, inflation,
interest rate changes and supply chain disruptions) adversely interrupt
the global economy and financial markets. It is difficult
to predict when events affecting the U.S. or global financial markets may
occur, the effects that such events may have and the
duration of those effects (which may last for extended periods). These
events may negatively impact broad segments of businesses
and populations and have a significant and rapid negative impact on the
performance of the Fund’s investments, adversely
affect and increase the volatility of the Fund’s share price
and exacerbate pre-existing risks to the
Fund. |
• |
Active
Management Risk.
In pursuing the Fund’s investment objective, the Adviser has considerable
leeway in deciding which investments
to buy, hold or sell on a day-to-day basis, and which trading strategies
to use. For example, the Adviser, in its discretion,
may determine to use some permitted trading strategies while not using
others. The success or failure of such decisions will
affect the Fund’s
performance. |
Shares
of the Fund are not bank deposits and are not guaranteed or insured by the
Federal Deposit Insurance Corporation or any other
government agency.
Morgan
Stanley Institutional Fund, Inc. Prospectus | Fund
Summary
Emerging
Markets Portfolio (Con’t)
Performance
Information
The
bar chart and table below provide some indication of the risks of
investing in the Fund by showing changes in the Fund’s Class IR
shares’ performance from year-to-year and by showing
how the Fund’s average annual returns for the past one year period and
since
inception compare with those of an
index intended to measure broad market performance.
The
Fund’s past performance, before
and after taxes, is not necessarily an indication of how the Fund will
perform in the future.
Updated performance information is
available online at www.morganstanley.com/im or
by calling toll-free 1-800-869-6397.
Annual
Total Returns—Calendar Years
|
| |
High
Quarter |
06/30/20
|
19.87% |
Low
Quarter |
03/31/20
|
-26.69% |
Average
Annual Total Returns
(for
the calendar periods ended December
31, 2023)
|
|
| |
|
Past
One Year |
Past
Five Years |
Since
Inception |
Class
IR (commenced
operations on 06/15/2018) |
|
|
Return
Before Taxes |
12.18% |
3.65% |
0.97% |
Return
After Taxes on Distributions1
|
% |
% |
-% |
Return
After Taxes on Distributions and Sale of Fund Shares |
7.74% |
2.88% |
0.73% |
MSCI
Emerging Markets Net Index (reflects no deduction for fees, expenses
or
taxes)2
|
% |
% |
%3 |
1 |
These
returns do not reflect any tax consequences from a sale of your shares at
the end of each
period. |
2 |
The
MSCI Emerging Markets Net
Index
is a free float-adjusted market capitalization weighted index that is
designed to measure equity market performance
of emerging markets. The term “free float” represents the portion of
shares outstanding that are deemed to be available for purchase in
the
public equity markets by investors. The MSCI Emerging Markets Index
currently consists of 24 emerging market country indices. The performance
of
the index is listed in U.S. dollars and assumes reinvestment of net
dividends. Net total return indices reinvest dividends after the deduction
of withholding
taxes, using (for international indices) a tax rate applicable to
non-resident institutional investors who do not benefit from double
taxation treaties.
It is not possible to invest directly in an
index. |
3 |
Since
Inception reflects the inception date of Class
IR. |
The
after-tax returns shown in the table above are calculated using the historical
highest individual federal marginal income tax rates during
the period shown and do not reflect the impact of state and local taxes.
After-tax
returns for the Fund’s other classes will vary from
Class IR shares’ returns. Actual
after-tax returns depend on the investor’s tax situation and may differ from
those shown, and after-tax
returns are not relevant to investors who hold their Fund shares through tax
deferred arrangements such as 401(k) plans or individual
retirement accounts. After-tax
returns may be higher than before-tax returns due to an assumed benefit from
capital losses that
would have been realized had Fund shares been sold at the end of the relevant
periods, as applicable.
Fund
Management
Adviser.
Morgan Stanley Investment Management Inc.
Sub-Adviser.
Morgan Stanley Investment Management Company.
Portfolio
Managers.
The Fund is managed by members of the Emerging Markets Equity team. Information
about the members jointly
and primarily responsible for the day-to-day management of the Fund is shown
below:
Morgan
Stanley Institutional Fund, Inc. Prospectus | Fund
Summary
Emerging
Markets Portfolio (Con’t)
|
| |
Name |
Title
with Adviser/ Sub-Adviser
or Affiliate |
Date
Began Managing
Fund |
Eric
Carlson |
Managing
Director of the Adviser |
September
1997 |
Paul
Psaila |
Managing
Director of the Adviser |
February
1994 |
Amay
Hattangadi |
Managing
Director of MSIM Company |
July
2018 |
Purchase
and Sale of Fund Shares
To
purchase Class IR shares, an investor must meet a minimum initial investment of
$5 million or be a defined contribution, defined benefit
or other employer sponsored employee benefit plan, in each case provided that
the plan trades through an intermediary that combines
its clients’ assets in a single omnibus account, whether or not such plan is
qualified under the Internal Revenue Code of 1986,
as amended (the “Code”), and in each case subject to the discretion of the
Adviser. The minimum initial investment may be waived
for certain investments. For more information, please refer to the section of
the Prospectus entitled “Shareholder Information—Minimum
Investment Amounts.”
Shares
of the Fund may be purchased or sold on any day the New York Stock Exchange
(“NYSE”) is open for business directly from the
Fund by mail (c/o SS&C Global Investor and Distribution Solutions, Inc.,
P.O. Box 219804, Kansas City, MO 64121-9804), by
telephone (1-800-869-6397) or by contacting an authorized third-party, such as a
broker-dealer or other financial intermediary that
has entered into a selling agreement with the Fund’s “Distributor,” Morgan
Stanley Distribution, Inc. (each, a “Financial Intermediary”).
For more information, please refer to the sections of the Prospectus entitled
“Shareholder Information—How To Purchase
Fund Shares” and “—How To Redeem Fund Shares.”
Tax
Information
The
Fund intends to make distributions that may be taxed as ordinary income or
capital gains, unless you are investing through a tax-deferred
arrangement, such as a 401(k) plan or an individual retirement
account.
Payments
to Broker-Dealers and Other Financial Intermediaries
If
you purchase Class IR shares of the Fund through a Financial Intermediary
(such as a bank), the Adviser and/or the Distributor may
pay the Financial Intermediary for the sale of Class IR shares and
related services. These payments, which may be significant in amount,
may create a conflict of interest by influencing the Financial
Intermediary and your salesperson to recommend the Fund over
another investment. Ask your salesperson or visit your Financial
Intermediary’s web site for more information. For additional information
about the Fund’s revenue sharing arrangements for Class IR shares, see the
section of the Statement of Additional Information
entitled “Revenue Sharing.”
Morgan
Stanley Institutional Fund, Inc. Prospectus | Details
of the Fund
Passport
Overseas Equity Portfolio
Investment
Objective
The
Passport Overseas Equity Portfolio seeks long-term capital
appreciation.
The
Fund’s investment objective may be changed by the Company’s Board of Directors
without shareholder approval, but no change is
anticipated. If the Fund’s investment objective changes, the Fund will notify
shareholders and shareholders should consider whether
the Fund remains an appropriate investment in light of the change.
Approach
The
Adviser actively selects among developed and emerging countries applying its
investment process to determine a country’s future economic
growth and equity return potential. The Adviser’s approach combines a top-down
country process with sector allocation and
bottom-up stock selection.
Process
Under
normal circumstances, the Fund invests at least 80% of its net assets (plus any
borrowings for investment purposes) in the equity
securities of issuers located outside of the United States. This policy may be
changed without shareholder approval; however, you
would be notified upon 60 days’ notice in writing of any changes. An issuer is
considered to be from a particular country or geographic
region if: (i) its principal securities trading market is in that country or
geographic region; (ii) alone or on a consolidated basis
it derives 50% or more of its annual revenue or profits from goods produced,
sales made or services performed in that country or
geographic region or has at least 50% of its assets, core business operations
and/or employees in that country or geographic region; or
(iii) it is organized under the laws of, or has a principal office in, that
country or geographic region. By applying these tests, it is possible
that a particular issuer could be deemed to be from more than one country or
geographic region.
The
Adviser analyzes the global economic environment and each country’s fundamentals
and actively allocate the Fund’s assets among
countries and sectors located throughout the world (the investment universe is
developed markets, including the United States,
and emerging markets, including frontier markets). Investment decisions may be
implemented through sector, industry and stock-specific
allocations within and across markets that best capture the top-down view.
Country and sector weightings are based on relative
economic, political and social fundamentals, stock valuations and investor
sentiment and are a function of the Adviser’s conviction
levels, the size of the economy and liquidity. The investment process considers
analysis of sustainability with respect to financial
strength, environmental and social factors and governance (also referred to as
ESG).
Investments
are based on fundamental analysis in an effort to identify those equities that
stand to benefit most from the Adviser’s current
and prospective macro views and that are likely to experience attractive
earnings growth prospects as a result of exposure and gearing
to those top-down conditions. Investment decisions are implemented by equity
positions in sectors, industries, customized baskets
and/or individual stocks. The equity securities in which the Fund may invest
include common stock, preferred stock, convertible
securities, depositary receipts, rights and warrants. The Adviser generally
considers selling a portfolio holding when they determine
that the position no longer satisfies their investment criteria.
The
Fund may, but it is not required to, use derivative instruments for a variety of
purposes, including hedging, risk management, portfolio
management or to earn income. Derivatives are financial instruments whose value
is based on the value of an underlying asset,
interest rate, index or financial instrument. The Fund’s use of derivatives may
involve the purchase and sale of derivative instruments
such as futures, options, swaps, CFDs and other related instruments and
techniques. The Fund may utilize foreign currency
forward exchange contracts, which are also derivatives, in connection with its
investments in foreign securities. Derivative instruments
used by the Fund will be counted toward the Fund’s 80% policy discussed above to
the extent they have economic characteristics
similar to the securities included within that policy.
Morgan
Stanley Institutional Fund, Inc. Prospectus | Details
of the Funds
Emerging
Markets Leaders Portfolio
Investment
Objective
The
Emerging Markets Leaders Portfolio seeks long-term capital
appreciation.
The
Fund’s investment objective may be changed by the Company’s Board of Directors
without shareholder approval, but no change is
anticipated. If the Fund’s investment objective changes, the Fund will notify
shareholders and shareholders should consider whether
the Fund remains an appropriate investment in light of the change.
Approach
The
Adviser and Sub-Adviser seek to achieve the Fund’s investment objective by
investing primarily in equity securities of companies located
in emerging market countries. The Adviser and/or Sub-Adviser generally use a
fundamental bottom-up stock selection process
informed by macro thematic research on overall emerging markets. The Adviser
and/or Sub-Adviser will employ this consistent
and targeted approach seeking companies they expect to become leading companies
in emerging markets as well as developed
country domiciled companies where a large portion of the companies’ growth is
taking place in emerging market countries.
Process
The
Adviser and/or Sub-Adviser seek to construct a focused portfolio of equity
securities designed to take advantage of thematic opportunities
in emerging markets by seeking to invest in companies that they believe have the
potential to outperform emerging markets
generally over the long-term.
The
investment process takes into account information about environmental, social
and governance issues (also referred to as ESG) when
making investment decisions. The Adviser and/or Sub-Adviser focus on engaging
company management around corporate governance
practices as well as what the Adviser and/or Sub-Adviser deem to be materially
important environmental and/or social issues
facing a company. The investment process excludes holdings in tobacco
companies.
Under
normal circumstances, at least 80% of the Fund’s assets will be invested in
equity securities of issuers located in emerging market
countries. This policy may be changed without shareholder approval; however, you
would be notified upon 60 days’ notice in writing
of any changes. The Adviser and/or Sub-Adviser generally consider selling an
investment when they determine the company no
longer satisfies their investment criteria.
The
equity securities in which the Fund may primarily invest include common and
preferred stocks, convertible securities, rights, warrants,
depositary receipts, limited partnership interests and other specialty
securities having equity features. The Fund may hold or have
exposure to equity securities of companies of any size, including small and
medium capitalization companies, and to companies in
any industry or sector.
For
purposes of maintaining exposure of at least 80% of the Fund’s assets to equity
securities of companies located in emerging market
countries, the Fund may also invest in ADRs, GDRs and other types of depositary
receipts with respect to companies located in
emerging market countries.
The
Adviser and/or Sub-Adviser consider an issuer to be located in an emerging
market country if (i) its principal securities trading market
is in an emerging market country, (ii) alone or on a consolidated basis it
derives 50% or more of its annual revenue or profits from
goods produced, sales made or services performed in emerging market countries or
has at least 50% of its assets, core business operations
and/or employees in emerging markets countries or (iii) it is organized under
the laws of, or has a principal office in, an emerging
market country. By applying this test, it is possible that a particular issuer
could be deemed to be located in more than one country.
Emerging
market or developing countries are countries that major international financial
institutions or the Fund’s benchmark index generally
consider to be less economically mature than developed nations, such as the
United States Canada, Japan, Australia, New Zealand
and most countries located in Western Europe (such as the United Kingdom and
France). The specific countries that comprise
emerging markets or developing countries may change from time to
time.
The
Fund may, but it is not required to, use derivative instruments for a variety of
purposes, including hedging, risk management, portfolio
management or to earn income. The Fund’s use of derivatives may involve the
purchase and sale of derivative instruments such
as options, futures, swaps, CFDs, structured investments and other related
instruments and techniques. The Fund may utilize foreign
currency forward exchange contracts, which are also derivatives, in connection
with its investments in foreign securities. Derivative
instruments used by the Fund will be counted toward the Fund’s 80% policy
discussed above to the extent they have economic
characteristics similar to the securities included within that
policy.
For
purposes of policies adopted in accordance with Rule 35d-1 under the 1940 Act,
the term “assets,” as defined in Rule 35d-1 under
the 1940 Act, means net assets plus the amount of any borrowings for investment
purposes.
Morgan
Stanley Institutional Fund, Inc. Prospectus | Details
of the Funds
Emerging
Markets Portfolio
Investment
Objective
The
Emerging Markets Portfolio seeks long-term capital appreciation by investing
primarily in growth-oriented equity securities of issuers
in emerging market countries.
The
Fund’s investment objective may be changed by the Company’s Board of Directors
without shareholder approval, but no change is
anticipated. If the Fund’s investment objective changes, the Fund will notify
shareholders and shareholders should consider whether
the Fund remains an appropriate investment in light of the change.
Approach
The
Adviser and/or Sub-Adviser seek to maximize returns by investing primarily in
quality growth-oriented equity securities in emerging
markets. The Adviser’s and/or Sub-Adviser’s investment approach combines
top-down country and thematic allocation with
bottom-up stock selection. Investment selection criteria include attractive
growth characteristics, reasonable valuations and company
managements with strong shareholder value orientation.
Process
The
Adviser’s and/or Sub-Adviser’s global strategists analyze the global economic
environment, particularly its impact on emerging markets,
and allocate the Fund’s assets among emerging markets based on relative
economic, political and social fundamentals, stock valuations
and investor sentiment. The Adviser and/or Sub-Adviser invest in countries based
on the work of country specialists who conduct
extensive fundamental analysis of companies within these markets and seeks to
identify companies with strong earnings growth
prospects. To manage risk, the Adviser and/or Sub-Adviser emphasize
macroeconomic and fundamental research. The Adviser
and/or Sub-Adviser generally consider selling a portfolio holding when it
determines that the holding no longer satisfies its investment
criteria.
The
investment process integrates information about environmental, social and
governance issues (also referred to as ESG) when making
investment decisions. The Adviser and/or Sub-Adviser believe that monitoring ESG
helps build a more complete picture of the
opportunities and risks facing companies, and seeks to engage directly with
company management to gain insights on how each company
addresses material ESG issues and how these may affect long-term financial
performance.
Under
normal circumstances, at least 80% of the Fund’s assets will be invested in
equity securities of issuers located in emerging market
countries. This policy may be changed without shareholder approval; however, you
would be notified upon 60 days’ notice in writing
of any changes.
The
Adviser and/or Sub-Adviser consider an issuer to be located in an emerging
market country if (i) its principal securities trading market
is in an emerging market country, (ii) alone or on a consolidated basis it
derives 50% or more of its annual revenue or profits from
goods produced, sales made or services performed in emerging market countries or
has at least 50% of its assets, core business operations
and/or employees in emerging markets countries or (iii) it is organized under
the laws of, or has a principal office in, an emerging
market country. By applying this test, it is possible that a particular issuer
could be deemed to be located in more than one country.
Emerging
market or developing countries are countries that major international financial
institutions or the Fund’s benchmark index generally
consider to be less economically mature than developed nations, such as the
United States or most nations in Western Europe.
Emerging market or developing countries can include every nation in the world
except the United States, Canada, Japan, Australia,
New Zealand and most countries located in Western Europe.
The
Fund may, but it is not required to, use derivatives and similar instruments for
a variety of purposes, including hedging, risk management,
portfolio management or to earn income. Derivatives are financial instruments
whose value is based on the value of an underlying
asset, interest rate, index or financial instrument. The Fund’s use of
derivatives may involve the purchase and sale of derivative
instruments such as futures and other similar instruments and techniques. The
Fund may utilize foreign currency forward exchange
contracts, which are also derivatives, in connection with its investments in
foreign securities. Derivative instruments used by the
Fund will be counted toward the Fund’s 80% policy discussed above to the extent
they have economic characteristics similar to the
securities included within that policy.
For
purposes of policies adopted in accordance with Rule 35d-1 under the 1940 Act,
the term “assets,” as defined in Rule 35d-1 under
the 1940 Act, means net assets plus the amount of any borrowings for investment
purposes.
Morgan
Stanley Institutional Fund, Inc. Prospectus | Additional
Information About Fund Investment Strategies and Related Risks
Additional
Information About Fund Investment Strategies and Related Risks
|
| |
This
section discusses additional information relating to Fund investment
strategies, other types of investments that the Funds
may make and related risk factors. “Fund” as used herein and under
“Additional Information About Fund Investment Strategies
and Related Risks” refers to each Fund listed on the cover page of this
Prospectus (unless otherwise noted). In addition,
references to the “Adviser” under “Additional Information
About Fund Investment Strategies and Related Risks” refer
to the Adviser and/or Sub-Adviser. Fund investment practices and
limitations are also described in more detail in the Statement
of Additional Information (“SAI”), which is incorporated by reference and
legally is a part of this Prospectus. For details
on how to obtain a copy of the SAI and other reports and information, see
the back cover of this Prospectus. |
There
is no assurance that the Fund will achieve its investment objective. The Fund’s
share price and yield will fluctuate with changes in
the market value and/or yield of the Fund’s portfolio securities. When you sell
Fund shares, they may be worth less than what you paid
for them and, accordingly, you can lose money investing in this
Fund.
Economies
and financial markets worldwide have recently experienced periods of increased
volatility, uncertainty, distress, government
spending, inflation and disruption to consumer demand, economic output and
supply chains. To the extent these conditions
continue, the risks associated with an investment in the Fund, including those
described below, could be heightened and the
Fund’s investments (and thus a shareholder’s investment in the Fund) may be
particularly susceptible to sudden and substantial losses,
reduced yield or income or other adverse developments. The occurrence, duration
and extent of these or other types of adverse economic
and market conditions and uncertainty over the long term cannot be reasonably
projected or estimated at this time.
The
percentage limitations relating to the composition of the Fund’s portfolio apply
at the time the Fund acquires an investment. Subsequent
percentage changes that result from market fluctuations generally will not
require the Fund to sell any portfolio security. However,
the Fund may be required to reduce its borrowings, if any, in response to
fluctuations in the value of such holdings. The Fund
may change its principal investment strategies without shareholder approval;
however, you would be notified of any changes.
Equity
Securities
Equity
securities may include common and preferred stocks, convertible securities and
equity-linked securities, rights and warrants to purchase
common stocks, depositary receipts, shares of investment companies
(including those which may be managed by the Adviser
or its affiliates),
limited partnership interests and other specialty securities having equity
features. Many factors affect the value
of equity securities, including earnings, earnings forecasts, corporate events
and factors impacting the issuer’s industry and the market
generally. The Fund may invest in equity securities that are publicly traded on
securities exchanges or over-the-counter (“OTC”)
or in equity securities that are not publicly traded. Securities that are not
publicly traded may be more difficult to value or sell
and their value may fluctuate more dramatically than other securities. The
prices of convertible securities are affected by changes similar
to those of equity and fixed-income securities.
The
value of equity securities and related instruments may decline in response to
adverse changes in the economy or the economic outlook;
deterioration in investor sentiment; interest rate, currency, and commodity
price fluctuations; adverse geopolitical, social or environmental
developments; issuer- and sector-specific considerations; unexpected trading
activity among retail investors; and other factors.
Market conditions may affect certain types of stocks to a greater extent than
other types of stocks. If the stock market declines,
the value of Fund shares will also likely decline. Although stock prices can
rebound, there is no assurance that values will return
to previous levels.
During
periods when equity securities experience heightened volatility, such as during
periods of market, economic or financial uncertainty
or distress, the Fund’s investments in equity securities may be subject to
heightened risks.
Convertible
Securities
A
convertible security is a bond, debenture, note, preferred stock, right, warrant
or other security that may be converted into or exchanged
for a prescribed amount of common stock or other security of the same or a
different issuer or into cash within a particular period
of time at a specified price or formula. A convertible security generally
entitles the holder to receive interest paid or accrued on debt
securities or the dividend paid on preferred stock until the convertible
security matures or is redeemed, converted or exchanged. Before
conversion, convertible securities generally have characteristics similar to
both debt and equity securities. The prices of convertible
securities are affected by changes similar to those of equity and fixed-income
securities. The value of convertible securities tends
to decline as interest rates rise and, because of the conversion feature, tends
to vary with fluctuations in the market value of the underlying
securities. Convertible securities ordinarily provide a stream of income with
generally higher yields than those of common stock
of the same or similar issuers. Convertible securities generally rank senior to
common stock in a corporation’s capital structure but
are usually subordinated to other comparable nonconvertible fixed-income
securities in such capital structure. Convertible securities
generally do not participate directly in any dividend increases or decreases of
the underlying securities although the market prices
of convertible securities may be affected by any dividend changes or other
changes in the underlying securities.
Morgan
Stanley Institutional Fund, Inc. Prospectus | Additional
Information About Fund Investment Strategies and Related Risks
Additional
Information About Fund Investment Strategies and Related Risks (Con’t)
Liquidity
The Fund
may make investments that are less
liquid, illiquid
or restricted or that may become illiquid or less liquid in response to,
among
other developments, overall economic conditions or adverse investor perceptions,
and which may entail greater risk than investments
in other types of securities. Illiquidity can also be caused by, among other
things, a drop in overall market trading volume,
an inability to find a willing buyer, or legal restrictions on the securities’
resale. These investments may be more difficult to value
or sell, particularly in times of market turmoil, and there may be little
trading in the secondary market available for particular securities.
If the Fund is forced to sell an illiquid or restricted security to fund
redemptions or for other cash needs, it may be forced to
sell the security at a loss or for less than its fair value and may be unable to
sell the security at all.
Fixed-Income
Securities
Fixed-income
securities are securities that pay a fixed or a variable rate of interest until
a stated maturity date. Fixed-income securities include
U.S. government securities, securities issued by federal or federally sponsored
agencies and instrumentalities, corporate bonds and
notes, asset-backed securities, mortgage-backed securities, securities rated
below investment grade (commonly referred to as “junk
bonds” or “high yield/high risk securities”), municipal bonds, loan
participations and assignments, zero coupon bonds, convertible
securities, Eurobonds, Brady Bonds, Yankee Bonds, repurchase agreements,
commercial paper and cash equivalents.
Fixed-income
securities are subject to the risk of the issuer’s inability to meet principal
and interest payments on its obligations (i.e., credit
risk) and are subject to price volatility resulting from, among other things,
interest rate sensitivity (i.e., interest rate risk), market
perception of the creditworthiness of the issuer and general market liquidity
(i.e., market risk). The Fund may face a heightened
level of interest rate risk in times of monetary policy changes and/or
uncertainty, such as when the Federal Reserve Board adjusts
a quantitative easing program and/or changes rates. A changing interest rate
environment increases certain risks, including the potential
for periods of volatility, increased redemptions, shortened durations (i.e.,
prepayment risk) and extended durations (i.e., extension
risk).
Securities
with longer durations are likely to be more sensitive to changes in
interest rates, generally making them more volatile than securities
with shorter durations. Lower rated fixed-income securities have greater
volatility because there is less certainty that principal
and interest payments will be made as scheduled. The Fund may be subject to
liquidity risk, which may result from the lack of
an active market and the reduced number and capacity of traditional market
participants to make a market in fixed-income securities.
Fixed-income securities may be called (i.e., redeemed by the issuer) prior to
final maturity. If a callable security is called, the
Fund may have to reinvest the proceeds at a lower rate of interest.
Market
and Geopolitical Risk
The
value of your investment in the Fund is based on the values of the Fund’s
investments, which change
due to economic and other events
that affect markets generally, as well as those that affect particular regions,
countries, industries, companies or governments. Price
movements, sometimes called volatility, may be greater or less depending on the
types of securities the
Fund owns and the markets
in which the securities trade. Volatility and disruption in financial markets
and economies may be sudden and unexpected, expose
the Fund to greater risk, including risks associated with reduced market
liquidity and fair valuation, and adversely affect the Fund’s
operations. For example, the Adviser potentially will be prevented from
executing investment decisions at an advantageous time
or price as a result of any domestic or global market disruptions,
and reduced market liquidity may impact the Fund’s ability to sell
securities to meet redemptions.
The
increasing interconnectivity between global economies and markets increases the
likelihood that events or conditions in one region,
sector, industry, market or with respect to one company may adversely impact
other companies and issuers in a different country,
region, sector, industry, or market. For example, adverse developments in the
banking or financial services sector could impact
companies operating in various sectors or industries and adversely impact the
Fund’s investments. Securities in the Fund’s portfolio
may underperform due to inflation (or expectations for inflation), interest
rates, global demand for particular products or resources,
natural disasters and extreme weather events, health emergencies (such as
epidemics and pandemics), terrorism, regulatory events
and governmental or quasi-governmental actions. The occurrence of global events,
such as terrorist attacks around the world, natural
disasters, health emergencies, social and political (including geopolitical)
discord and tensions or debt crises and downgrades, among
others, may result in market volatility and may have long term effects on both
the U.S. and global financial markets. Inflation rates
may change frequently and significantly because of various factors, including
unexpected shifts in the domestic or global economy
and changes in monetary or economic policies (or expectations that these
policies may change). Changes in expected inflation
rates may adversely affect market and economic conditions, a Fund’s investments
and an investment in a Fund. Other financial,
economic and other global market and social developments or disruptions may
result in similar adverse circumstances, and it
is difficult to predict when similar events affecting the U.S. or global
financial markets may occur, the effects that such events may have
and the duration of those effects (which may last for extended periods). In
general, the securities or other instruments that the Adviser
believes represent an attractive investment opportunity or in which the Fund
seeks to invest may be unavailable entirely or in the
specific quantities sought by the Fund. As a result, the Fund may need to obtain
the desired exposure through a less advantageous investment,
forgo the investment at the time or seek to replicate the desired exposure
through a derivative transaction or investment in
another investment vehicle. Any such event(s) could have a significant adverse
impact on the value and risk profile of the Fund’s portfolio.
There is a risk that you may lose money by investing in the
Fund.
Morgan
Stanley Institutional Fund, Inc. Prospectus | Additional
Information About Fund Investment Strategies and Related Risks
Additional
Information About Fund Investment Strategies and Related Risks
(Con’t)
Social,
political, economic and other conditions and events, such as war, natural
disasters, health emergencies (e.g., the coronavirus,
epidemics
and other pandemics), terrorism, conflicts, social unrest, recessions,
inflation, rapid interest rate changes and supply chain disruptions
could reduce consumer demand or economic output, result in market closures,
travel restrictions or quarantines, and generally
have a significant impact on the economies and financial markets and the
Adviser’s investment advisory activities and services
of other service providers, which in turn could adversely affect the Fund’s
investments and other operations.
Global
events may negatively impact broad segments of businesses and populations, cause
a significant negative impact on the performance
of the Fund’s investments, adversely
affect and increase the volatility of the Fund’s share price, and/or
exacerbate pre-existing
political, social and economic risks to the Fund. The Fund’s operations may be
interrupted as a result, which may contribute to
the negative impact on investment performance. In addition, governments, their
regulatory agencies, or self-regulatory organizations
may take actions that affect the instruments in which the Fund invests, or the
issuers of such instruments, in ways that could
have a significant negative impact on the Fund’s investment performance. In
addition, government actions (such as changes to interest
rates) could have unintended economic and market consequences that adversely
affect the Fund’s investments.
Foreign
Investing
To
the extent that the Fund invests in foreign issuers, there is the risk that news
and events unique to a country or region will affect those
markets and their issuers. These same events will not necessarily have an effect
on the U.S. economy or similar issuers located in the
United States. In addition, some of the Fund’s securities, including underlying
securities represented by depositary receipts, may be
denominated in foreign currencies. As a result, changes in the value of a
country’s currency compared to the U.S. dollar may affect the
value of the Fund’s investments. These changes may happen separately from, and
in response to, events that do not otherwise affect
the value of the security in the issuer’s home country. These risks may be
intensified for the Fund’s investments in securities of issuers
located in emerging market or developing countries.
Foreign
Securities
Foreign
issuers generally are subject to different accounting, auditing and financial
reporting standards than U.S. issuers. There may be
less information available to the public about foreign issuers. Securities of
foreign issuers can be less liquid and experience greater price
movements. In addition, the prices of such securities may be susceptible to
influence by large traders, due to the limited size of many
foreign securities markets. Moreover, investments in certain foreign markets
that have historically been considered stable may become
more volatile and subject to increased risk due to developments and changing
conditions in such markets. Also, the growing interconnectivity
of global economies and financial markets has increased the probability that
adverse developments and conditions
in one country or region will affect the stability of economies and financial
markets in other countries or regions. In some foreign
countries, there is also the risk of government expropriation, excessive
taxation, political or social instability, the imposition of currency
controls or diplomatic developments that could affect the Fund’s
investment. There also can be difficulty obtaining and enforcing
judgments against issuers in foreign countries. Foreign stock exchanges,
broker-dealers and listed issuers may be subject to less
government regulation and oversight. The cost of investing in foreign
securities, including brokerage commissions and custodial expenses,
can be higher than the cost of investing in domestic securities.
Certain
foreign markets may rely heavily on particular industries or foreign capital and
are more vulnerable to diplomatic developments,
the imposition of economic sanctions against a particular country or countries,
organizations, companies, entities and/or
individuals, changes in international trading patterns, trade
barriers and other protectionist or retaliatory measures. International
trade
barriers or economic sanctions against foreign countries, organizations,
companies, entities and/or individuals may adversely affect
the Fund’s foreign holdings or exposures. Investments in foreign markets may
also be adversely affected by less stringent investor
protections and disclosure standards, and governmental actions such as the
imposition of capital controls, nationalization of companies
or industries, expropriation of assets or the imposition of punitive taxes.
Governmental actions can have a significant effect
on the economic conditions in foreign countries, which also may adversely affect
the value and liquidity of the Fund’s investments.
Foreign investment in the securities markets of certain foreign countries is
restricted or controlled to varying degrees. For
example, the governments of certain countries may prohibit or impose substantial
restrictions on foreign investing in their capital markets
or in certain sectors or industries. In addition, a foreign government may limit
or cause delay in the convertibility or repatriation
of its currency which would adversely affect the U.S. dollar value and/or
liquidity of investments denominated in that currency.
Moreover, if a deterioration occurs in a country’s balance of payments, the
country could impose temporary restrictions on foreign
capital remittances. The Fund could also be adversely affected by delays in, or
a refusal to grant, any required governmental approval
for repatriation, as well as by the application to it of other restrictions on
investment. Any of these actions could severely affect
security prices, which could result in losses to the Fund and increased
transaction costs, impair the Fund’s ability to purchase or sell
foreign securities or transfer the Fund’s assets back into the United States, or
otherwise adversely affect the Fund’s operations. Certain
foreign investments may become less liquid in response to market developments or
adverse investor perceptions, or become illiquid
after purchase by the Fund, particularly during periods of market turmoil.
Certain foreign investments may become illiquid when,
for instance, there are few, if any, interested buyers and sellers or when
dealers are unwilling to make a market for certain securities.
When the Fund holds illiquid investments, its portfolio may be harder to
value.
Economic
sanctions or other similar measures may be, and have been, imposed against
certain countries, organizations, companies, entities
and/or individuals. The Fund’s investments in foreign securities are subject to
trade laws and
potential economic sanctions in
Morgan
Stanley Institutional Fund, Inc. Prospectus | Additional
Information About Fund Investment Strategies and Related Risks
Additional
Information About Fund Investment Strategies and Related Risks (Con’t)
the
United States and other jurisdictions. These laws and related governmental
actions, including counter-sanctions and other retaliatory
measures, can, from time to time, prevent or prohibit the Fund
from investing in certain foreign securities. In addition, economic
sanctions could prohibit the Fund from transacting with particular
countries, organizations, companies, entities and/or individuals
by banning them from global payment systems that facilitate cross-border
payments, restricting their ability to settle securities
transactions, and freezing their assets. The imposition of sanctions and other
similar measures could, among other things, cause
a decline in the value of securities issued by the sanctioned country or
companies located in, or economically linked to, the sanctioned
country, downgrades in the credit ratings of the sanctioned country or companies
located in, or economically linked to, the
sanctioned country, devaluation of the sanctioned country’s currency, and
increased market volatility and disruption in the sanctioned
country and throughout the world. Economic sanctions or other similar measures
could, among other things, effectively restrict
or eliminate the Fund’s ability to purchase or sell securities, negatively
impact the value or liquidity of the Fund’s investments,
significantly delay or prevent the settlement of the Fund’s securities
transactions, force the Fund to sell or otherwise dispose
of investments at inopportune times or prices, increase the Fund’s transaction
costs, make the Fund’s investments more difficult
to value or impair the Fund’s ability to meet its investment objective or
invest in accordance with its investment strategies. These
conditions may be in place for a substantial period of time and enacted with
limited advance notice to the Fund. Even if the Fund
does not have significant investments in securities affected by sanctions,
sanctions or the threat of sanctions may cause volatility in
regional and global markets and may negatively impact the performance of various
sectors and industries, as well as companies in other
countries, including through global supply chain disruptions, increased
inflationary pressures, and reduced economic activity, which
could have a negative effect on the Fund’s performance. In addition, trade
disputes may affect investor and consumer confidence
and adversely affect financial markets and the broader economy, perhaps suddenly
and to a significant degree. Events such as
these and their impact on the Fund are difficult to predict.
In
addition, the Holding Foreign Companies Accountable Act (the “HFCAA”) could
cause securities of a foreign (non-U.S.) company,
including American Depositary Receipts, to be delisted from U.S. stock exchanges
if the company does not allow the U.S. government
to oversee the auditing of its financial information. Although the requirements
of the HFCAA apply to securities of all foreign
(non-U.S.) issuers, the SEC has thus far limited its enforcement efforts to
securities of Chinese companies. If securities are delisted,
the Fund’s ability to transact in such securities will be impaired, and the
liquidity and market price of the securities may decline.
The Fund may also need to seek other markets in which to transact in such
securities, which could increase the Fund’s costs.
Sovereign
Debt Obligations
The Fund may
invest in debt obligations known as “sovereign debt,” which are obligations of
governmental issuers in emerging market
or developing countries and industrialized countries. Certain emerging market or
developing countries are among the largest debtors
to commercial banks and foreign governments. The issuer or governmental
authority that controls the repayment of sovereign
debt may not be willing or able to repay the principal and/or pay interest when
due in accordance with the terms of such obligations.
Uncertainty surrounding the level and sustainability of sovereign debt of
certain countries has at times increased volatility in
the financial markets. In addition, a number of Latin American countries are
among the largest debtors of developing countries and
have a long history of reliance on foreign debt. Additional factors that may
influence the ability or willingness to service debt include,
but are not limited to, a country’s cash flow situation, the availability of
sufficient foreign exchange on the date a payment is due,
the relative size of its debt service burden to the economy as a whole and its
government’s policy towards the International Monetary
Fund, the World Bank and other multilateral agencies. A country whose exports
are concentrated in a few commodities or whose
economy depends on certain strategic imports could be vulnerable to fluctuations
in international prices of these commodities or
imports. If a foreign sovereign obligor cannot generate sufficient earnings from
foreign trade to service its external debt, it may need
to depend on continuing loans and aid from foreign governments, commercial banks
and multilateral organizations, and inflows
of foreign investment. The commitment on the part of these foreign governments,
multilateral organizations and others to make
such disbursements may be conditioned on the government’s implementation of
economic reforms and/or economic performance
and the timely service of its obligations. Failure to implement such reforms,
achieve such levels of economic performance
or repay principal or interest when due may result in the cancellation of such
third-parties’ commitments to lend funds, which
may further impair the foreign sovereign obligor’s ability or willingness to
timely service its debts. In addition, there is no legal process
for collecting on a sovereign debt that a government does not pay or bankruptcy
proceeding by which all or part of the sovereign
debt that a government entity has not repaid may be collected.
Depositary
Receipts
A
depositary receipt is generally issued by a bank or financial institution and
represents the common stock or other equity securities of
a foreign company. Depositary receipts involve many of the same risks as those
associated with direct investment in foreign securities.
In addition, the underlying issuers of certain depositary receipts, particularly
unsponsored or unregistered depositary receipts,
are under no obligation to distribute shareholder communications to the holders
of such receipts, or to pass through to them any
voting rights with respect to the deposited securities.
Frontier
Market Securities
The Fund
may invest in the securities of issuers operating in frontier emerging markets.
The term “frontier emerging markets” refers to
those emerging market countries outside the “mainstream” emerging markets, whose
capital markets have traditionally been
Morgan
Stanley Institutional Fund, Inc. Prospectus | Additional
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Additional
Information About Fund Investment Strategies and Related Risks
(Con’t)
difficult
for foreign investors to enter or are in early stages of capital market and/or
economic development. The countries that comprise
frontier emerging markets may change from time to time. Investing in the
securities of issuers operating in frontier emerging
markets involves a high degree of risk and special considerations not typically
associated with investing in the securities of other
foreign or U.S. issuers. In addition, the risks associated with investing in the
securities of issuers operating in emerging market countries
are magnified when investing in frontier emerging market countries. These types
of investments could be affected by factors not
usually associated with investments in U.S. issuers, including risks associated
with expropriation and/or nationalization, political or
social instability, pervasiveness of corruption and crime, armed conflict, the
impact on the economy of civil war, religious or ethnic unrest
and the withdrawal or nonrenewal of any license enabling the Fund to trade
in securities of a particular country, confiscatory taxation,
restrictions on transfers of assets, lack of uniform accounting, auditing and
financial reporting standards, less publicly available
financial and other information, less stringent investor protections and
disclosure standards, diplomatic developments which could
affect U.S. investments in those countries and potential difficulties in
enforcing contractual obligations. These risks and special considerations
make investments in companies operating in frontier emerging market countries
highly speculative in nature and, accordingly,
an investment in the Fund must be viewed as highly speculative in nature and may
not be suitable for an investor who is not
able to afford the loss of his or her entire investment. To the extent
that the Fund invests a significant percentage of its assets in a
single
frontier emerging market country, the Fund will be subject to heightened
risk associated with investing in frontier emerging market
countries and additional risks associated with that particular country. A
government of a frontier emerging market country may
limit or cause delay in the convertibility or repatriation of its currency and
therefore could adversely affect the U.S. dollar value and/or
liquidity of investments denominated in that currency. Certain foreign
investments may become less liquid in response to market
developments or adverse investor perceptions, or become illiquid after purchase
by the Fund, particularly during periods of market
turmoil. When the Fund holds illiquid investments, its portfolio may be
harder to value. From time to time, certain of the companies
in which the Fund expects to invest may operate in, or have dealings with,
countries subject to sanctions or embargoes imposed
by the U.S. Government and the United Nations and/or countries identified by the
U.S. Government as state sponsors of terrorism.
A company may suffer damage to its reputation if it is identified as such a
company and, as an investor in such companies, the
Fund will be indirectly subject to those risks. Certain frontier market
countries may be subject to less stringent requirements
regarding accounting, auditing, financial reporting and record keeping and
therefore, material information related to an investment
may not be available or reliable. In addition, the Fund is limited in its
ability to exercise its legal rights or enforce a counterparty’s
legal obligations in certain jurisdictions outside of the United States, in
particular, in frontier market countries. Economic
sanctions may be, and have been, imposed against certain countries,
organizations, companies, entities and/or individuals. Economic
sanctions and other similar governmental actions could, among other things,
effectively restrict or eliminate the Fund’s ability
to purchase or sell securities or groups of securities, and thus may make the
Fund’s investments in such securities less liquid or more
difficult to value. In addition, as a result of economic sanctions, the Fund may
be forced to sell or otherwise dispose of investments
at inopportune times or prices.
Emerging
Market Securities
The Fund may
invest in emerging market or developing countries, which are countries that
major international financial institutions generally
consider to be less economically mature than developed nations (such as the
United States or most nations in Western Europe).
Emerging market or developing countries may be more likely to experience
political turmoil or rapid changes in economic conditions
than more developed countries, and the financial condition of issuers in
emerging market or developing countries may be more
precarious than in other countries. Certain emerging market countries may be
subject to less stringent requirements regarding accounting,
auditing, financial reporting and record keeping and therefore, material
information related to an investment may not be available
or reliable. In addition, the Fund is limited in its ability to exercise its
legal rights or enforce a counterparty’s legal obligations
in certain jurisdictions outside of the United States, in particular, in
emerging markets countries. In addition, due to jurisdictional
limitations, U.S. authorities (e.g., SEC and the U.S. Department of Justice) may
be limited in their ability to enforce regulatory
or legal obligations in emerging market countries. In addition, emerging market
securities generally are less liquid and subject
to wider price and currency fluctuations than securities issued in more
developed countries. These characteristics result in greater
risk of price volatility in emerging market or developing countries, which may
be heightened by currency fluctuations relative to
the U.S. dollar.
Foreign
Currency
Investments
in foreign securities may be denominated in foreign currencies. The value of
foreign currencies may fluctuate relative to the
value of the U.S. dollar or other applicable foreign currency. Since the Fund
may invest in such non-U.S. dollar-denominated securities,
and therefore may convert the value of such securities into U.S. dollars,
changes in currency exchange rates can increase or decrease
the U.S. dollar value of the Fund’s
assets. Currency exchange rates may fluctuate significantly over short periods
of time for a number
of reasons, including changes in interest rates and the overall economic health
of the issuer. Devaluation of a currency by a country’s
government or banking authority also will have a significant impact on the value
of any investments denominated in that currency.
The Adviser may use derivatives to seek
to reduce
this risk. The Adviser may in its discretion choose not to hedge against
currency
risk. In addition, certain market conditions may make it impossible or
uneconomical to hedge against currency risk.
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Foreign
Currency Forward Exchange Contracts
In
connection with their investments in foreign securities, certain
Funds also may enter into contracts with banks, brokers or dealers to
purchase or sell securities or foreign currencies at a future date. A foreign
currency forward exchange contract is a negotiated agreement
between the contracting parties to exchange a specified amount of currency at a
specified future time at a specified rate. The
rate can be higher or lower than the spot rate between the currencies that are
the subject of the contract. Foreign currency forward
exchange contracts may be used to seek to protect against uncertainty in the
level of future foreign currency exchange rates or to
gain or modify exposure to a particular currency. In addition, the Fund may use
cross currency hedging or proxy hedging with respect
to currencies in which the Fund has or expects to have portfolio or currency
exposure. Cross currency and proxy hedges involve
the sale of one currency against the positive exposure to a different currency
and may be used for hedging purposes or to establish
an active exposure to the exchange rate between any two currencies.
Investments
in foreign currency forward exchange contracts may substantially change
the Fund exposure to currency exchange rates and
could result in losses to the Fund if currencies do not perform as the
Adviser expects. The Adviser’s success in these transactions will
depend principally on its ability to predict accurately the future exchange
rates between foreign currencies and the U.S. dollar. Foreign
currency forward exchange contracts may be used for non-hedging purposes in
seeking to meet the Fund investment objectives,
such as when the Adviser anticipates that particular non-U.S. currencies will
appreciate or depreciate in value, even though securities
denominated in those currencies are not then held in the Fund investment
portfolios. Investing in foreign currency forward exchange
contracts for purposes of gaining from projected changes in exchange rates, as
opposed to hedging currency risks applicable to
the Fund holdings, further increases the Fund exposure to foreign
securities losses. There is no assurance that the Adviser’s use of currency
derivatives will benefit the Fund or that they will be, or can be, used at
appropriate times.
REITs
and Foreign Real Estate Companies
Investing
in real estate investment trusts (“REITs”) and foreign real estate
companies exposes investors to the risks of owning real estate
directly and investing in companies in the real estate industry, as well as to
risks that relate specifically to the way in which REITs
and foreign real estate companies are organized and operated. REITs and foreign
real estate companies generally invest directly in
real estate, in mortgages or in some combination of the two. Real estate income
and values may also be greatly affected by demographic
trends, such as population shifts or changing tastes, preferences (such as
remote work arrangements) and values,
and the demand
for real estate and rental property.
Real
estate development involves additional risks to those involved in the ownership
and operation of established properties, including
the risks that financing, if needed, may not be available on favorable terms for
development projects, and that properties may
not be leased, rented or operated on profitable terms and therefore will fail to
perform in accordance with expectations. Real estate
securities have limited diversification, are subject to risks inherent in
operating and financing a limited number of projects.
Operating
REITs and foreign real estate companies requires specialized management skills
and the Fund indirectly bears management
expenses along with the direct expenses of the Fund. The value of REIT and
foreign real estate company securities will also
rise and fall in response to the management skill and creditworthiness of the
issuer. In particular, the value of these securities may decline
when interest rates rise and will also be affected by the real estate market and
by the management or development of the underlying
properties, which may also be subject to mortgage loans and the underlying
mortgage loans may be subject to the risks of default.
REITs
may be more volatile and/or more illiquid than other types of securities, and
publicly traded REIT and real estate company shares
are also subject to risks associated with equity securities. In addition,
individual REITs and foreign real estate companies may own
a limited number of properties and may concentrate in a particular region or
property type. REITs may also be subject to heavy cash
flow dependency, default by borrowers or tenants and
self-liquidation.
REITs
also must satisfy specific requirements of the Code in order to qualify
for tax-free pass-through income. The failure of a company
to qualify as a REIT could have adverse consequences for the Fund,
including significantly reducing the return to the Fund on
its investment in such company. Foreign real estate companies may be subject to
laws, rules and regulations governing those entities
and their failure to comply with those laws, rules and regulations could
negatively impact the performance of those entities. In
addition, REITs and foreign real estate companies, like mutual funds, have
expenses, including management and administration fees,
that are paid by their shareholders. As a result, shareholders will directly
bear the expenses of their investment in the Fund and indirectly
bear the expenses of the Fund’s investments when the Fund invests in REITs and
foreign real estate companies.
Derivatives
The Fund may,
but is not required to, use derivatives and other similar instruments for a
variety of purposes, including hedging, risk management,
portfolio management or to seek to earn income. Derivative instruments used by
the Fund will be counted towards the Fund’s
exposure in the types of securities listed herein to the extent they have
economic characteristics similar to such securities. A derivative
is a financial instrument whose value is based, in part, on the value of an
underlying asset, interest rate, index or financial instrument.
Prevailing interest rates and volatility levels, among other things, also affect
the value of derivative instruments. Derivatives
and other similar instruments that create synthetic exposure often are subject
to risks similar to those of the underlying
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asset
or instrument and may be subject to additional risks, including imperfect
correlation between the value of the derivative and the underlying
asset, risks of default by the counterparty to certain transactions,
magnification of losses incurred due to changes in the market
value of the securities, instruments, indices or interest rates to which the
derivative instrument relates, risks that the transactions
may not be liquid, risks arising from margin and payment requirements, risks
arising from mispricing or valuation complexity
and operational and legal risks. The use of derivatives involves risks that are
different from, and possibly greater than, the risks
associated with other portfolio investments. Derivatives may involve the use of
highly specialized instruments that require investment
techniques and risk analyses different from those associated with other
portfolio investments.
Certain
derivatives transactions may give rise to a form of leverage. Leverage magnifies
the potential for gain and the risk of loss. Leverage
associated with derivative transactions may cause the Fund to liquidate
portfolio positions when it may not be advantageous to
do so, or may cause the Fund to be more volatile than if the Fund had not been
leveraged. Although the Adviser seeks to use derivatives
to further the Fund’s investment objective, there is no assurance that the use
of derivatives will achieve this result.
The
derivative instruments and techniques that the Fund may use
include:
Futures.
A futures contract is a standardized, exchange-traded agreement to buy or sell a
specific quantity of an underlying asset, reference
rate or index at a specific price at a specific future time. While the value of
a futures contract tends to increase or decrease in tandem
with the value of the underlying instrument, differences between the futures
market and the market for the underlying asset may
result in an imperfect correlation. Depending on the terms of the particular
contract, futures contracts are settled through either physical
delivery of the underlying instrument on the settlement date or by payment of a
cash settlement amount on the settlement date.
A decision as to whether, when and how to use futures contracts involves the
exercise of skill and judgment and even a well-conceived
futures transaction may be unsuccessful because of market behavior or unexpected
events. In addition to the derivatives risks
discussed above, the prices of futures contracts can be highly volatile, using
futures contracts can lower total return, and the potential
loss from futures contracts can exceed the Fund’s initial investment in such
contracts. No assurance can be given that a liquid
market will exist for any particular futures contract at any particular time.
There is also the risk of loss by the Fund of margin deposits
in the event of bankruptcy of a broker with which the Fund has open
positions in the futures contract.
Options.
If the Fund buys an option, it buys a legal contract giving it the right to buy
or sell a specific amount of the underlying instrument,
foreign currency or contract, such as a swap agreement or futures contract, on
the underlying instrument or foreign currency
at an agreed-upon price during a period of time or on a specified date typically
in exchange for a premium paid by the Fund.
If the Fund sells an option, it sells to another person the right to buy from or
sell to the Fund a specific amount of the underlying
instrument, swap, foreign currency, or futures contract on the underlying
instrument or foreign currency at an agreed-upon
price during a period of time or on a specified date typically in exchange for a
premium received by the Fund. When options are
purchased OTC, the Fund bears the risk that the counterparty that wrote
the option will be unable or unwilling to perform its obligations
under the option contract. Options may also be illiquid and the Fund may
have difficulty closing out its position. A decision
as to whether, when and how to use options involves the exercise of skill and
judgment and even a well-conceived option transaction
may be unsuccessful because of market behavior or unexpected events. The prices
of options can be highly volatile and the
use of options can lower total returns.
Investments
in foreign currency options may substantially change the Fund’s exposure to
currency exchange rates and could result in losses
to the Fund if currencies do not perform as the Adviser expects. There is a risk
that such transactions may reduce or preclude the
opportunity for gain if the value of the currency should move in the direction
opposite to the position taken. The value of a foreign
currency option is dependent upon the value of the underlying foreign currency
relative to the U.S. dollar or other applicable foreign
currency. The price of the option may vary with changes in the value of either
or both currencies and has no relationship to the
investment merits of a foreign security. Options on foreign currencies are
affected by all of those factors that influence foreign exchange
rates and foreign investment generally. Unanticipated changes in currency prices
may result in losses to the Fund and poorer
overall performance for the Fund than if it had not entered into such contracts.
Options on foreign currencies are traded primarily
in the OTC market, but may also be traded on U.S. and foreign
exchanges.
Foreign
currency options contracts may be used for hedging purposes or non-hedging
purposes in pursuing the Fund’s investment objective,
such as when the Adviser anticipates that particular non-U.S. currencies will
appreciate or depreciate in value, even though securities
denominated in those currencies are not then held in the Fund’s investment
portfolio. Investing in foreign currencies for purposes
of gaining from projected changes in exchange rates, as opposed to only hedging
currency risks applicable to the Fund’s holdings,
further increases the Fund’s exposure to foreign securities losses. There is no
assurance that the Adviser’s use of currency derivatives
will benefit the Fund or that they will be, or can be, used at appropriate
times.
Swaps.
The Fund may enter into OTC swap contracts or cleared swap transactions. An OTC
swap contract is an agreement between two
parties pursuant to which the parties exchange payments at specified dates on
the basis of a specified notional amount, with the payments
calculated by reference to specified securities, indices, reference rates,
currencies or other instruments. Typically swap agreements
provide that when the period payment dates for both parties are the same, the
payments are made on a net basis (i.e., the two
payment streams are netted out, with only the net amount paid by one party to
the other). The Fund’s obligations or rights
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under
a swap contract entered into on a net basis will generally be equal only to the
net amount to be paid or received under the agreement,
based on the relative values of the positions held by each party. Cleared swap
transactions may help reduce counterparty credit
risk. In a cleared swap, the Fund’s ultimate counterparty is a clearinghouse
rather than a swap dealer, bank or other financial institution.
OTC swap agreements are not entered into or traded on exchanges and often there
is no central clearing or guaranty function
for swaps. These OTC swaps are often subject to credit risk or the risk of
default or non-performance by the counterparty. Certain
swaps have begun trading on exchanges called swap execution facilities. Exchange
trading is expected to increase liquidity of swaps
trading. Both OTC and cleared swaps could result in losses if interest rates,
foreign currency exchange rates or other factors are not
correctly anticipated by the Fund or if the reference index, security or
investments do not perform as expected. The Dodd-Frank Wall
Street Reform and Consumer Protection Act and related regulatory developments
require the clearing and exchange trading of certain
standardized swap transactions. Mandatory exchange-trading and clearing is
occurring on a phased-in basis. The Fund may pay
fees or incur costs each time it enters into, amends or terminates a swap
agreement.
CFDs.
A contract for difference (“CFD”) is a privately-negotiated contract
between two parties, buyer and seller, stipulating that the seller
will pay to or receive from the buyer the difference between the nominal value
of the underlying instrument at the opening of the
contract and that instrument’s value at the end of the contract. The underlying
instrument may be a single security, stock basket or
index. A CFD can be set up to take either a short or long position on the
underlying instrument. The buyer and seller are typically both
required to post margin, which is adjusted daily. The buyer will also pay to the
seller a financing rate on the notional amount of the
capital employed by the seller less the margin deposit. In addition to the
general risks of derivatives, CFDs may be subject to liquidity
risk and counterparty risk.
Structured
Investments. The
Fund
also may invest a portion of their assets in structured investments. A
structured investment is a derivative
security designed to offer a return linked to a particular underlying security,
currency, commodity or market. Structured investments
may come in various forms including notes (such as exchange-traded notes),
warrants and options to purchase securities. The Fund
will typically use structured investments to gain exposure to a permitted
underlying security, currency, commodity or market
when direct access to a market is limited or inefficient from a tax or cost
standpoint. There can be no assurance that structured
investments will trade at the same price or have the same value as the
underlying security, currency, commodity or market. Investments
in structured investments involve risks including issuer risk, counterparty risk
and market risk. Holders of structured investments
bear risks of the underlying investment and are subject to issuer or
counterparty risk because the Fund is relying on the creditworthiness
of such issuer or counterparty and has no rights with respect to the underlying
investment. Certain structured investments
may be thinly traded or have a limited trading market and may have the effect of
increasing the Fund’s illiquidity to the extent
that the Fund, at a particular point in time, may be unable to find qualified
buyers for these securities.
Exchange-Traded
Funds
The
Fund
may invest in exchange-traded funds (“ETFs”)
(including those which may be managed by the Adviser or its
affiliates).
ETFs
seek to track the performance of various portions or segments of the equity and
fixed-income markets. Shares of ETFs have many
of the same risks as direct investments in common stocks or bonds. In addition,
the market value of ETF
shares may differ from
their NAV because the supply and demand in the market for ETF shares at
any point in time is not always identical to the supply
and demand in the market for the underlying securities. Also, ETFs that track
particular indices typically will be unable to match
the performance of the index exactly due to, among other things, the ETF’s
operating expenses and transaction costs. ETFs typically
incur fees that are separate from those fees incurred directly by the Fund.
Therefore, as a shareholder in an ETF, the Fund would
bear its ratable share of that entity’s expenses. At the same time, the Fund
would continue to pay its own investment management
fees and other expenses. As a result, shareholders will directly bear the
expenses of their investment in the Fund and indirectly
bear the expenses of the Fund’s investments in ETFs with respect to investments
in ETFs. The Fund and its shareholders will
be subject to the risks of the purchased investment company and its portfolio of
securities.
IPOs
The
Fund may purchase shares issued as part of, or a short period after, a
company’s initial public offering (“IPO”), and may at times dispose
of those shares shortly after their acquisition. The Fund’s purchase of
shares issued in IPOs exposes it to the risks associated with
companies that have little operating history as public companies, including
unseasoned trading, small number of shares available for
trading and limited information about the issuer, as well as to the risks
inherent in those sectors of the market where these new issuers
operate. The market for IPO issuers may be volatile, and share prices of
newly-public companies have fluctuated significantly over
short periods of time. IPOs may produce high, double-digit returns. Such returns
are highly unusual and may not be sustainable.
Private
Placements and Restricted Securities
The
Fund investments may include privately placed securities, which are subject to
resale restrictions. These securities could have the effect
of increasing the level of Fund illiquidity to the extent the Fund may be unable
to sell or transfer these securities due to restrictions
on transfers or on the ability to find buyers interested in purchasing the
securities. Additionally, the market for certain investments
deemed liquid at the time of purchase may become illiquid under adverse market
or economic conditions. The illiquidity of
the market, as well as the lack of publicly available information regarding
these securities, may also adversely affect the ability to arrive
at a fair value for certain securities at certain times and could make it
difficult for
the Fund to sell certain securities. If
the Fund
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is
forced to sell an illiquid security to fund redemptions or for other cash needs,
it may be forced to sell the security at a loss or for less than
its fair value.
Small
and Mid Cap Companies
The Fund’s
investments in small and mid cap companies carry more risk than investments in
larger companies. While some of the Fund’s
holdings in these companies may be listed on a national securities exchange,
such securities are more likely to be traded in the OTC
market. The low market liquidity of these securities may have an adverse impact
on the Fund’s ability to sell certain securities at
favorable prices and may also make it difficult for the Fund to obtain market
quotations based on actual trades for purposes of valuing
the Fund’s securities. Investing in lesser-known, small and mid cap companies
involves greater risk of volatility of the Fund’s net
asset value per share (“NAV”) than is customarily associated with larger,
more established companies. In addition, at times, small and
mid cap growth-oriented equity securities may underperform relative to the
overall market. Growth stocks may trade at higher multiples
of current earnings compared to other styles of investing (e.g., “value”),
leading to inflated prices and thus potentially greater
declines in value. Often small and mid cap companies and the industries in which
they are focused are still evolving and, while
this may offer better growth potential than larger, more established companies,
it also may make them more sensitive to changing
market conditions. The shares of small and micro cap companies may be thinly
traded and may be at risk of delisting from a
securities exchange, making it difficult for the Fund to buy and sell shares of
a particular small and micro cap company.
China
Risk
Investments
in securities of Chinese issuers, including A-shares, involve risks associated
with investments in foreign markets as well as special
considerations not typically associated with investments in the U.S. securities
markets. For example, the Chinese government has
historically exercised substantial control over virtually every sector of the
Chinese economy through administrative regulation and/or
state ownership and actions of the Chinese central and local government
authorities continue to have a substantial effect on economic
conditions in China. In addition, the Chinese government has taken actions that
influenced the prices at which certain goods
may be sold, encouraged companies to invest or concentrate in particular
industries, induced mergers between companies in certain
industries and induced private companies to publicly offer their securities.
Investments in China involve risk of a total loss due
to government action or inaction. Additionally, the Chinese economy is
export-driven and highly reliant on trade. Adverse changes
to the economic conditions of its primary trading partners, such as the United
States, Japan and South Korea, would adversely
impact the Chinese economy and the Fund’s investments. Moreover, a slowdown in
other significant economies of the world,
such as the United States, the European Union and certain Asian countries, may
adversely affect economic growth in China. An
economic downturn in China would adversely impact the Fund’s investments. In
addition, certain securities are, or may in the future
become restricted and/or sanctioned by the U.S. government or other governments
and the Fund may be forced to sell such restricted
securities and incur a loss as a result.
These
and other developments, including government actions, may result in significant
illiquidity risk or forced disposition for Chinese
investments. The Chinese securities markets are emerging markets characterized
by a relatively small number of equity issues and
relatively low trading volume, resulting in decreased liquidity, greater price
volatility (caused by, among other things, military, diplomatic,
or trade conflicts), and potentially fewer investment opportunities for the
Fund. Ongoing
political tension between the People’s
Republic of China and the Hong Kong Special Administrative Region may have
impacts on the economy of Hong Kong, and
these impacts remain uncertain.
Risks
of Investing through Stock Connect. The
Fund may invest in A-shares listed and traded through Stock Connect, or on such
other stock
exchanges in China which participate in Stock Connect from time to time or in
the future. Trading through Stock Connect is subject
to a number of restrictions that may affect the Fund’s investments and returns.
For example, trading through Stock Connect is
subject to daily quotas that limit the maximum daily net purchases on any
particular day, which may restrict or preclude the Fund’s
ability to invest in Stock Connect A-shares. In addition, investments made
through Stock Connect are subject to trading, clearance
and settlement procedures that are relatively untested in China, which could
pose risks to the Fund. Furthermore, securities purchased
via Stock Connect will be held via a book entry omnibus account in the name of
Hong Kong Securities Clearing Company
Limited (“HKSCC”), Hong Kong’s clearing entity, at the China Securities
Depository and Clearing Corporation Limited (“CSDCC”).
The Fund’s ownership interest in Stock Connect securities will not be
reflected directly in book entry with CSDCC and
will instead only be reflected on the books of its Hong Kong sub-custodian.
The Fund may therefore depend on HKSCC’s ability
or willingness as record-holder of Stock Connect securities to enforce the
Fund’s shareholder rights. Chinese law did not historically
recognize the concept of beneficial ownership; while Chinese regulations and the
Hong Kong Stock Exchange have issued clarifications
and guidance supporting the concept of beneficial ownership via Stock Connect,
the interpretation of beneficial ownership
in China by regulators and courts may continue to evolve. Moreover, Stock
Connect A-shares generally may not be sold, purchased
or otherwise transferred other than through Stock Connect in accordance with
applicable rules. The Stock Connect program
is a relatively new program and may be subject to further interpretation and
guidance. There can be no assurance as to the program’s
continued existence or whether future developments regarding the program may
restrict or adversely affect the Fund’s investments
or returns. In addition, the application and interpretation of the laws and
regulations of China and Hong Kong, and the rules,
policies or guidelines published or applied by relevant regulators and exchanges
in respect of the Stock Connect program, are uncertain,
and they may have a detrimental effect on the Fund’s investments and returns.
Because certain transactions through Stock
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Connect
may not be subject to certain investor protection programs, the Fund may be
exposed to the risks of default of the broker(s) it
engages in its trading in China A Shares.
Variable
Interest Entities. The
Fund could seek to gain economic exposure to certain operating companies in
China through legal structures
known as variable interest entities (“VIEs”). In a VIE structure, a series of
contractual arrangements are entered into between
a holding company domiciled outside of China and a Chinese operating company or
companies. More specifically, in a VIE structure,
a China-based operating company (“Operating Company”) typically establishes an
offshore shell company (“Shell Company”)
in another jurisdiction, such as the Cayman Islands, which generally does not
conduct operations but enters into service and
other contracts with the Operating Company and issues shares on a foreign
exchange, like the New York Stock Exchange or Hong
Kong Exchange. U.S. investors, such as the Fund, would hold stock in the Shell
Company with contractual arrangements with a
VIE based in China rather than hold stock in the Operating Company and the Shell
Company does not typically own stock or other
equity in the Operating Company. Thus, VIE structures and these contractual
arrangements are not equivalent to equity ownership
in the Operating Company, which presents additional risks. Certain Chinese
companies have used VIEs to facilitate foreign
investment because of Chinese governmental prohibitions or restrictions on
non-Chinese ownership (e.g., by U.S. persons and
entities) of companies in certain industries in China. Through a VIE
arrangement, the Operating Companies indirectly raise capital
from U.S. investors (such as the Fund) without distributing ownership of the
Operating Companies to such U.S. investors.
Investments
in VIEs are subject to unique risks in addition to those generally associated
with investments in China. For example, breaches
of the contractual arrangements, changes in Chinese law or regulation with
respect to enforceability or permissibility of these
arrangements or failure of these contracts to function as intended would likely
adversely materially affect the Operating Company’s
performance and an investment in the Shell Company. In addition, VIE structures
are also subject to the risk of inconsistent
and unpredictable application of Chinese law and regulations, that the Shell
Company could be limited in its ability to control,
or may lose control over, the Operating Company, and that the equity owners of
the Operating Company might have interests
conflicting with those of the Shell Company’s investors. There is also
uncertainty related to the Chinese taxation of VIEs and
the Chinese tax authorities could take positions that result in increased tax
liabilities. Thus, investors, such as the Fund, face risks and
uncertainty about future actions or intervention by the government of China or
other similar developments (such as changes in regulations,
laws and judicial decisions or interpretations), which could occur at any time
and without advance notice and which could
suddenly and significantly affect VIE structures, the Operating Companies and
the Shell Companies (such as impacting or limiting
the enforceability of the Shell Company’s contractual arrangements with the
Operating Company or restricting the listing of the
shares of the offshore entity). If any of these or similar risks materialize,
the value and liquidity of the Fund’s investments in the Shell
Company would likely be significantly adversely affected, causing the Fund to
incur significant losses with no recourse available.
Although
the China Securities Regulatory Commission published its position that it does
not object to the use of VIE structures for Operating
Companies to raise capital from non-Chinese investors, there is no guarantee
that the Chinese government or Chinese regulator
or court will not determine that these arrangements are inconsistent with
Chinese laws or regulations or otherwise interfere with
the operation of or disallow VIE structures or that this published position will
remain unchanged. Intervention by the Chinese government
with respect to VIE structures could materially adversely affect the Operating
Company’s performance, the enforceability
of the Shell Company’s contractual arrangements with the Operating Company and
the value of the Shell Company’s shares.
Further, if the Chinese government or other regulatory or judicial authority
determines that the agreements establishing the VIE
structure do not comply with Chinese law and regulations, including those
related to prohibitions on foreign ownership, the Operating
Company could be subject to penalties, revocation of business and operating
licenses or forfeiture of ownership interests. Much
of the value of an investment in the Shell Company depends on the enforceability
of the contractual arrangements entered into as
part of the VIE structure, which are generally less effective than direct
ownership, and a Shell Company’s ability to exert any control
over the Operating Company could be jeopardized if certain legal formalities are
not observed in connection with the agreements,
if the agreements are breached, or if the agreements are otherwise determined
not to be enforceable. In addition, the Offshore
Company could incur significant costs to seek to enforce the terms of these
arrangements because of, among other things, legal
uncertainties and jurisdictional limits. If any of the foregoing or similar
developments were to occur, the market value and liquidity
of the associated investments would fall, causing substantial investment losses
for investors with no recourse available.
India
Risk
Investments
in securities of Indian issuers may be adversely affected by political,
economic, social and religious factors impacting Indian
businesses and the Indian economy, changes in Indian law or regulations and the
status of India’s relations with other countries.
In addition, the economy of India may differ favorably or unfavorably from the
U.S. economy in such respects as the rate of
growth of gross domestic product, the rate of inflation, capital reinvestment,
resource self-sufficiency and balance of payments position.
The Indian government has exercised and continues to exercise significant
influence over many aspects of the economy, and the
number of public sector enterprises in India is substantial. Accordingly, Indian
government actions in the future could have a significant
effect on the Indian economy, which could affect private sector companies and
the Fund, market conditions, and prices and
yields of securities in the Fund’s portfolio. To the extent the Fund invests a
substantial portion of its assets in Indian businesses and
the Indian economy, factors that have an adverse impact on Indian businesses and
the Indian economy may have a disproportionate
impact on the Fund’s performance.
Morgan
Stanley Institutional Fund, Inc. Prospectus | Additional
Information About Fund Investment Strategies and Related Risks
Additional
Information About Fund Investment Strategies and Related Risks
(Con’t)
Investment
Company Securities
Subject
to the limitations set forth in the 1940 Act, or as otherwise permitted by the
SEC, the Fund may acquire shares in other investment
companies, including foreign investment companies, ETFs and money market funds
(which may be managed by the Adviser
or its affiliates). The market value of the shares of other investment companies
may differ from the NAV of the Fund. The shares
of closed-end investment companies frequently trade at a discount to their NAV.
As a shareholder in an investment company, the
Fund would bear its ratable share of that entity’s expenses, including its
investment advisory and administration fees. At the same time,
the Fund would continue to pay its own advisory and administration fees and
other expenses. As a result, the Fund and its shareholders
will directly bear the expenses of their investment in the Fund and indirectly
bear the expenses of the Fund’s investments
in other investment companies.
Large
Shareholder Transactions Risk
The Fund
may experience adverse effects when certain shareholders, or shareholders
collectively, purchase or redeem large amounts of
shares of the Fund. Such larger than normal redemptions may cause the Fund
to sell portfolio securities at times when it would not
otherwise do so, which may negatively impact the Fund’s NAV and liquidity.
Similarly, large Fund share purchases may adversely
affect the Fund’s performance to the extent that the Fund is delayed in
investing new cash and is required to maintain a larger
cash position than it ordinarily would. These transactions may also accelerate
the realization of taxable income to shareholders if
such sales of investments resulted in gains, and may also increase transaction
costs. In addition, a large redemption could result in the Fund’s
current expenses being allocated over a smaller asset base, leading to an
increase in the Fund’s expense ratio. Although large
shareholder transactions may be more frequent under certain circumstances,
the Fund is generally subject to the risk that shareholders
can purchase or redeem a significant percentage of Fund shares at any
time.
Active
Management Risk
In
pursuing the
Fund’s
investment objective, the Adviser has considerable leeway in deciding which
investments it buys, holds or sells on
a day-to-day basis, and which trading strategies it uses. For example, the
Adviser, in its discretion, may determine to use some permitted
trading strategies while not using others. The success or failure of such
decisions will affect
the Fund’s performance.
The
success or failure of such decisions will affect the Fund’s performance. In
addition, it is expected that confidential or material non-public
information regarding an investment or potential investment opportunity may
become available to the Adviser. If such information
becomes available, the Adviser may be precluded (including by applicable law or
internal policies or procedures) from pursuing
an investment or disposition opportunity with respect to such investment or
investment opportunity and the Adviser may be
restricted in its ability to cause the Fund to buy or sell securities of an
issuer for substantial periods of time when the Fund otherwise
could realize profit or avoid loss. This may adversely affect the Fund’s
flexibility with respect to buying or selling securities and
may impair the Fund’s liquidity.
Temporary
Defensive Investments
Under
adverse or unstable market conditions or abnormal circumstances or when the
Adviser believes that changes in market, economic,
political or other conditions warrant, the Fund may, in the discretion of the
Adviser, take temporary positions that are inconsistent
with the Fund’s principal investment strategy in attempting to respond to such
conditions or circumstances. For example,
the Fund may invest without limit in cash, cash equivalents or other
fixed-income instruments, for temporary defensive purposes.
If the Adviser incorrectly predicts the effects of these changes, or during
periods of temporary defensive or other temporary positions,
such temporary investments may adversely affect the Fund’s performance and the
Fund may not achieve its investment objective.
ESG
Investment Risk
The
Fund’s adherence to its ESG criteria and application of related analyses when
selecting investments may impact the Fund’s performance,
including relative to similar funds that do not adhere to such criteria or apply
such analyses. Additionally, the Fund’s adherence
to its ESG criteria and application of related analyses in connection with
identifying and selecting investments may require subjective
analysis and may be difficult if data about a particular company is limited.
A
company’s ESG practices or the Adviser’s assessment
of such may change over time.
Non-Diversification
Risk
The
Emerging Markets Leaders Portfolio is non-diversified, which means that the Fund
may invest a greater percentage of their assets in
a smaller number of issuers than diversified funds. The Emerging Markets Leaders
Portfolio that is classified as non-diversified may
be more susceptible to an adverse event affecting a single issuer or portfolio
investment than a diversified portfolio and a decline in
the value of issuer’s securities or that portfolio that investment may cause the
Fund’s overall value to decline to a greater degree than
a diversified portfolio.
Regulatory
and Legal Risk
U.S.
and non-U.S. governmental agencies and other regulators regularly implement
additional regulations and legislators pass new laws
that affect the investments held by the Fund, the strategies used by the Fund or
the level of regulation or taxation applying to
Morgan
Stanley Institutional Fund, Inc. Prospectus | Additional
Information About Fund Investment Strategies and Related Risks
Additional
Information About Fund Investment Strategies and Related Risks (Con’t)
the
Fund (such as regulations related to investments in derivatives and other
transactions). These regulations and laws impact the investment
strategies, performance, costs and operations of the Fund or taxation of
shareholders.
The
SEC has recently proposed amendments to Rule 22e-4 of the 1940 Act that, if
adopted, would result in changes to the Fund’s liquidity
classification framework and could potentially increase the percentage of the
Fund’s investments classified as illiquid. In addition,
the Fund’s operations and investment strategies may be adversely impacted if the
proposed amendments are adopted.
Morgan
Stanley Institutional Fund, Inc. Prospectus | Fund
Management
Adviser
Morgan
Stanley Investment Management Inc., with principal offices at 1585 Broadway, New
York, NY 10036, conducts a worldwide
portfolio management business and provides a broad range of portfolio management
services to customers in the United States
and abroad. Morgan Stanley (NYSE: “MS”) is the parent of the Adviser, which is
the parent of the Distributor. Morgan Stanley
is a preeminent global financial services firm engaged in securities trading and
brokerage activities, as well as providing investment
banking, research and analysis, financing and financial advisory services. As of
March 31, 2024, the Adviser, together with its
affiliated asset management companies, had approximately $1.5
trillion in assets under management or supervision.
A
discussion regarding the Board of Directors’ approval of the Investment Advisory
and Sub-Advisory Agreements, as applicable, is available
in each Fund’s Semi-Annual Report to Shareholders for the period ended June 30,
2023.
Sub-Adviser
The
Adviser has entered into a Sub-Advisory Agreement with MSIM Company, located at
23 Church Street, 16-01 Capital Square, Singapore
049481 (with respect to the Emerging Markets Leaders and Emerging Markets
Portfolios). The Sub-Adviser is a wholly owned
subsidiary of Morgan Stanley. The Sub-Adviser provides the relevant
Funds
with investment advisory services subject to the overall
supervision of the Adviser and the Company’s
officers and Directors. The Adviser pays the Sub-Adviser on a monthly basis a
portion
of the net advisory fees the Adviser receives from the relevant
Funds.
Advisory
Fees
For
the fiscal year ended December 31, 2023, the Adviser received from each Fund the
advisory fee (net of fee waivers, if applicable) set
forth in the table below.
|
| |
Fund
(as a percentage of average daily net assets) |
|
Passport
Overseas Equity |
0.56% |
|
Emerging
Markets Leaders |
0.73% |
|
Emerging
Markets |
0.73% |
|
The
Adviser has agreed to reduce its advisory fee and/or reimburse the Funds, if
necessary, if such fees would cause the total annual operating
expenses of each Fund to exceed the percentage of average daily net assets set
forth in the table below. In determining the actual
amount of fee waiver and/or expense reimbursement for each Fund, if any, the
Adviser excludes from total annual operating expenses,
acquired fund fees and expenses (as applicable), certain investment related
expenses, taxes, interest and other extraordinary expenses
(including litigation). The fee waivers and/or expense reimbursements for each
Fund will continue for at least one year from the
date of this Prospectus or until such time as the Company’s Board of Directors
acts to discontinue all or a portion of such waivers and/or
reimbursements when it deems such action is appropriate. The Adviser may make
additional voluntary fee waivers and/or expense
reimbursements. The Adviser may discontinue these voluntary fee waivers and/or
expense reimbursements at any time in the future.
A
Fund’s annual operating expenses may vary throughout the period and from year to
year. A Fund’s actual expenses may be different
than the expenses listed in the Fund’s fee and expense table based upon the
extent and amount of a fee waiver and/or expense
reimbursement.
|
| |
Fund |
Expense
Cap Class IR |
|
Passport
Overseas Equity |
0.85% |
|
Emerging
Markets Leaders |
1.00% |
|
Emerging
Markets |
0.95% |
|
Morgan
Stanley Institutional Fund, Inc. Prospectus | Portfolio
Management
Passport
Overseas Equity Portfolio
The
Fund is managed by members of the Passport Equity team. The team consists of
portfolio managers and analysts. The current members
of the team primarily responsible for the day-to-day management of the Fund are
Ben V. Rozin and Jitania Kandhari.
Mr.
Rozin has been associated with the Adviser in an investment management capacity
since January 2017. Ms.
Kandhari has been associated
with the Adviser in an investment management capacity since 2006.
Emerging
Markets Leaders Portfolio
The
Fund is managed by members of the Emerging Markets Equity team. The team
consists of portfolio managers and analysts. The member
of the team primarily responsible for the day-to day management of the Fund is
Vishal Gupta.
Mr.
Gupta has been associated with MSIM Company since 2014 and has 19
years of investment experience. Prior to joining MSIM Company
in 2014, Mr. Gupta worked at Sansar Capital from 2007 to 2013 as a research
analyst covering Asian equities.
Emerging
Markets Portfolio
The
Fund is managed by members of the Emerging Markets Equity team. The team
consists of portfolio managers and analysts. The team
works collaboratively when making portfolio decisions. Current members of the
team jointly and primarily responsible for the day-to-day
management of the Fund are Eric Carlson, Paul Psaila, and Amay
Hattangadi.
Mr.
Carlson has been associated with the Adviser in an investment management
capacity since 1997. Mr. Psaila has been associated with
the Adviser in an investment management capacity since 1994. Mr. Hattangadi has
been associated with MSIM Company or its affiliates
in an investment management capacity since 1997.
The
Emerging Markets Equity team is comprised of dedicated portfolio
managers/analysts that have extensive experience in analyzing emerging
markets equity securities for investors. Portfolio managers generally specialize
by region, with the exception of a few specialized
groups focusing on specific sectors.
The
Funds’ SAI provides additional information about the portfolio managers’
compensation structure, other accounts managed by the
portfolio managers and the portfolio managers’ ownership of securities in the
Funds.
The
composition of each team may change from time to time.
Morgan
Stanley Institutional Fund, Inc. Prospectus | Shareholder
Information
Share
Class Arrangements
This
Prospectus offers Class IR shares of the Funds. Shares of the Funds are
available in other share classes that have different fees and
expenses. The Company currently also offers investors Class I, Class A, Class C
and Class R6 shares of the Funds and Class L shares
of the Passport Overseas Equity and Emerging Markets Portfolios through separate
prospectuses. The Class L shares of the Passport
Overseas Equity and Emerging Markets Portfolios are currently closed to all
investors except in the limited circumstances set forth
in such prospectus. Class IR shares are not subject to a sales charge and
are not subject to a distribution and/or shareholder service
(12b-1) fee. In addition, no sub-accounting or other similar fees, or any
finder’s fee payments are charged or paid on Class IR shares.
Minimum
Investment Amounts
Class
IR shares are offered only to eligible investors meeting certain minimum
investment requirements. To purchase Class IR shares, an
investor must meet a minimum initial investment of $5 million or be a defined
contribution, defined benefit or other employer sponsored
employee benefit plan, in each case provided that the plan trades through an
intermediary that combines its clients’ assets in
a single omnibus account, whether or not such plan is qualified under the Code
and in each case subject to the discretion of the Adviser.
Initial omnibus trades of $5 million or more shall be accepted from certain
platforms, including (i) banks and trust companies;
(ii) insurance companies; and (iii) registered investment advisory firms. The $5
million minimum initial investment amount
may be waived for Fund shares purchased by or through: (1) certain registered
open-end investment companies whose shares are
distributed by the Distributor; or (2) investments made in connection with
certain mergers and/or reorganizations as approved by the
Adviser.
If
the value of your account falls below the applicable minimum initial investment
amount for a class of shares of the Funds as a result
of share redemptions or you no longer meet one of the waiver criteria set forth
above, your account may be subject to involuntary
conversion or involuntary redemption, as applicable. You will be notified prior
to any such conversions or redemptions.
The
Adviser, in its sole discretion, may waive a minimum initial investment amount
in certain cases.
Distribution
of Fund Shares
Morgan
Stanley Distribution, Inc. is the exclusive distributor of the shares of
each
Fund.
The Distributor receives no compensation from
the Funds for distributing Class IR
shares of the Funds.
The
Adviser and/or Distributor may pay compensation to Financial Intermediaries in
connection with the sale, distribution, marketing
and retention of the Funds’ Class IR shares and/or Class IR shareholder
servicing. Such compensation may be significant in
amount and the prospect of receiving any such additional compensation may
provide affiliated or unaffiliated Financial Intermediaries
with an incentive to favor sales of shares of the Funds over other investment
options. Any such payments will not change
the NAV
or the
price
of the Funds. For more information, please see the Company’s
SAI.
About
Net Asset Value
The
NAV of a class of shares of the Fund is determined by dividing the total of the
value of the Fund’s investments and other assets attributable
to the class, less any liabilities attributable to the class, by the total
number of outstanding shares of that class of the Fund.
In making this calculation, each Fund generally values its portfolio securities
and other assets at market price. When no market quotations
are readily available for a security or other asset, including circumstances
under which the Adviser or Sub-Adviser determines
that a market quotation is not accurate, fair value for the security or other
asset will be determined in good faith using
methods approved by the Company’s Board of Directors.
In
addition, with respect to securities that primarily are listed on foreign
exchanges, when an event occurs after the close of such exchanges
that is likely to have changed the value of the securities (e.g., a percentage
change in value of one or more U.S. securities indices
in excess of specified thresholds), such securities will be valued at their fair
value, as determined under procedures approved by the
Company’s Board of Directors. Securities also may be fair valued in the event of
a significant development affecting a country or region
or an issuer-specific development that is likely to have changed the value of
the security. In these cases, the Fund’s NAV will reflect
certain portfolio securities’ fair value rather than their market price. To the
extent the Fund invests in open-end management companies
(other than ETFs) that are registered under the 1940 Act, the Fund’s NAV is
calculated based in relevant part upon the NAV
of such funds. The prospectuses for such funds explain the circumstances under
which they will use fair value pricing and its effects.
Fair
value pricing involves subjective judgments and it is possible that the fair
value determined for a security or other asset is materially
different than the value that could be realized upon the sale of that security
or other asset. With respect to securities that are
primarily listed on foreign exchanges, the values of the Fund’s portfolio
securities may change on days when you will not be able to
purchase or sell your shares. The NAV of the Fund (excluding any applicable
sales charges) is based on the value of the Fund’s portfolio
securities or other assets. Although the assets of each class are invested in
the same portfolio of securities or other assets, the NAV
of each class will differ because the classes have different class specific
expenses.
Morgan
Stanley Institutional Fund, Inc. Prospectus | Shareholder
Information
Shareholder
Information (Con’t)
The
Funds rely on various sources to calculate their NAVs. The ability of a Fund’s
provider of administrative services to calculate the NAV
per share of the Fund is subject to operational risks associated with processing
or human errors, systems or technology failures, cyber
attacks and errors caused by third party service providers, data sources, or
trading counterparties. Such failures may result in delays
in the calculation of the Fund’s NAV and/or the inability to calculate NAV over
extended time periods. A Fund may be unable
to recover any losses associated with such failures. In addition, if the third
party service providers and/or data sources upon which
a Fund directly or indirectly relies to calculate its NAV or price individual
securities are unavailable or otherwise unable to calculate
the NAV correctly, it may be necessary for alternative procedures to be utilized
to price the securities at the time of determining
the Fund’s NAV.
The
Fund’s NAV per share is subject to various investment and other risks. Please
refer to the “Additional Information About Fund Investment
Strategies and Related Risks” and “The Fund’s
Investments and Strategies” sections of the Prospectus and SAI, respectively,
for more information regarding risks associated with an investment in the
Fund.
Pricing
of Fund Shares
You
may buy or sell (redeem) shares of the Funds at the NAV next determined for the
class after receipt of your order in good order, plus
any applicable sales charge. The Company determines the NAV for the Funds
as of the close of the NYSE (normally 4:00 p.m. Eastern
time) on each day that the NYSE is open for business (the “Pricing Time”).
Shares generally will not be priced on days that the
NYSE is closed. If the NYSE is closed due to inclement weather, technology
problems or any other reason on a day it would normally
be open for business, or the NYSE has an unscheduled early closing on a day it
has opened for business, a
Fund
reserves the right
to treat such day as a business day and accept purchase and redemption orders
until, and calculate its NAV as of, the normally scheduled
close of regular trading on the NYSE for that day, so long as the Adviser
believes there generally remains an adequate market
to obtain reliable and accurate market quotations. A Fund may elect to remain
open and price its shares on days when the NYSE
is closed but the primary securities markets on which the Fund’s securities
trade remain open. Trading of securities,
which are traded
on exchanges other than the NYSE,
may take place on days
when a
Fund does not price its shares. Therefore, to the extent, if any,
that a
Fund invests in securities traded
on other
exchanges, the value of the Fund’s portfolio securities may change on days
when you
will not be able to purchase or sell your shares.
Portfolio
Holdings
A
description of the Funds’ policies and procedures with respect to the disclosure
of the Funds’ portfolio securities is available in the Funds’
SAI.
How
To Purchase Fund Shares
You
may purchase shares of the Fund on each day that the Fund is open for business
by contacting your Financial Intermediary or directly
from the Fund.
Purchasing
Shares Through a Financial Intermediary
You
may open a new account and purchase shares of the Fund through a Financial
Intermediary. The Financial Intermediary will assist
you with the procedures to invest in shares of the Fund. Investors purchasing or
selling shares of the Fund through a Financial Intermediary,
including Morgan Stanley Wealth Management, may be charged transaction-based or
other fees by the Financial Intermediary
for its services. If you are purchasing shares of the Fund through a Financial
Intermediary, please consult your Financial Intermediary
for more information regarding any such fees and for purchase
instructions.
With
respect to sales through Financial Intermediaries, no offers or sales of Fund
shares may be made in any foreign jurisdiction, except
with the consent of the Distributor.
Purchasing
Shares Directly From the Fund
Initial Purchase
You
may open a new account, subject to acceptance by the Fund, and purchase shares
of the Fund by completing and signing a New Account
Application provided by SS&C Global Investor and Distribution Solutions,
Inc. (“SS&C GIDS”), the Company’s transfer agent
or Eaton Vance Management, the Fund’s co-transfer agent, which you can obtain by
calling Morgan Stanley Shareholder Services
and
Eaton Vance Management at
1-800-869-6397 (our automated telephone system (which is generally accessible 24
hours a
day, seven days a week)) and mailing it to Morgan Stanley Institutional Fund,
Inc., c/o SS&C Global Investor and Distribution Solutions,
Inc., P.O. Box 219804, Kansas City, MO 64121-9804.
After
submitting a completed New Account Application to SS&C GIDS, you may wire
Federal Funds (monies credited by a Federal Reserve
Bank) to State Street Bank and Trust Company (the “Custodian”). You should
instruct your bank to send a Federal Funds wire
in a specified amount to the Custodian using the following wire
instructions:
State
Street Bank and Trust Company
One
Congress Street
Boston,
MA 02114
Morgan
Stanley Institutional Fund, Inc. Prospectus | Shareholder
Information
Shareholder
Information (Con’t)
ABA
#011000028
DDA
#00575373
Attn:
Morgan Stanley Institutional Fund, Inc.
Subscription
Account
Ref:
(Fund Name, Account Number, Account Name)
Additional Investments
You
may purchase additional shares of the Fund for your account at any time by
contacting your Financial Intermediary or by contacting
the Fund directly. For additional purchases directly from the Fund, you should
write a “letter of instruction” that includes your
account name, account number, the Fund name and the class selected, signed by
the account owner(s), to assure proper crediting
to your account. After mailing a “letter of instruction,” you may wire Federal
Funds by following the instructions under “Initial
Purchase.”
Conversion
Feature
The
Adviser may in its sole discretion permit a conversion of one share class to
another share class of the Fund
in certain circumstances,
provided that the Fund’s eligibility requirements are met, and subject to the
shareholder’s consent. Such conversions will
be on the basis of the relative NAVs and without the imposition of any
redemption fee or other charge.
A
conversion of shares of one class directly for shares of another class of the
Fund
normally should not be taxable for federal income tax
purposes.
Please
ask your financial advisor if you are eligible for converting a class of shares
pursuant to this conversion feature. You should talk to
your tax advisor before making a conversion.
General
Shares
of the Fund may, in the Fund’s discretion, be purchased with investment
securities (in lieu of or, in conjunction with, cash) acceptable
to the Fund. The securities would be accepted by the Fund at their market value
in return for Fund shares of equal value, taking
into account any applicable sales charge.
To
help the U.S. Government fight the funding of terrorism and money laundering
activities, federal law requires all financial institutions
to obtain, verify and record information that identifies each person who opens
an account. What this means to you: when
you open an account, we will ask your name, address, date of birth and other
information that will allow us to identify you. If we
are unable to verify your identity, we reserve the right to restrict additional
transactions and/or liquidate your account at the next calculated
NAV after your account is closed (less any applicable sales/account charges
and/or tax penalties) or take any other action required
by law. In accordance with federal law requirements, the Funds have implemented
an anti-money laundering compliance program,
which includes the designation of an anti-money laundering compliance
officer.
When
you buy Fund shares, the shares will be purchased at the next share price
calculated after we receive your purchase order in good
order. Purchase orders not received in good order prior to Pricing Time will be
executed at the NAV next determined after the purchase
order is received in good order. Certain institutional investors and financial
institutions have entered into arrangements with
the Funds, the Adviser and/or the Distributor pursuant to which they may
place orders prior to the Pricing Time, but make payment
in Federal Funds for those shares up to three days after the purchase order is
placed, depending on the arrangement. We reserve
the right to reject any order for the purchase of Fund shares for any
reason.
The
Company may suspend the offering of shares, or any class of shares, of the Fund
or reject any purchase orders when we think it is
in the best interest of the Fund.
Certain
patterns of past exchanges and/or purchase or sale transactions involving the
Fund may result in the Fund rejecting, limiting or
prohibiting, at its sole discretion, and without prior notice, additional
purchases and/or exchanges and may result in a shareholder’s
account being closed. Determinations in this regard may be made based on the
frequency or dollar amount of previous exchanges
or purchase or sale transactions. See “Frequent Purchases and Redemptions of
Shares.”
How
To Redeem Fund Shares
You
may process a redemption request by contacting your Financial Intermediary.
Otherwise, you may redeem shares of the Funds by
mail or, if authorized, by telephone, at no charge other than as described
below. The value of shares redeemed may be more or less than
the purchase price, depending on the NAV at the time of redemption. Shares of
the Funds will be redeemed at the NAV next determined
after we receive your redemption request in good order and will be reduced by
the amount of any applicable CDSC.
Morgan
Stanley Institutional Fund, Inc. Prospectus | Shareholder
Information
Shareholder
Information (Con’t)
Redemptions by Letter
Requests
should be addressed to Morgan Stanley Institutional Fund, Inc., c/o SS&C
Global Investor and Distribution Solutions, Inc. P.O.
Box 219804, Kansas City, MO 64121-9804.
To
be in good order, redemption requests must include the following
documentation:
(a)
A letter of instruction, if required, or a stock assignment specifying the
account name, the account number, the name of the Fund and
the number of shares or dollar amount to be redeemed, signed by all registered
owners of the shares in the exact names in which the
shares are registered, and whether you wish to receive the redemption proceeds
by check or by wire to the bank account we have on
file for you;
(b)
Any required signature guarantees if you are requesting payment to anyone other
than the registered owner(s) or that payment be sent
to any address other than the address of the registered owner(s) or
pre-designated bank account; and
(c)
Other supporting legal documents, if required, in the case of estates, trusts,
guardianships, custodianship, corporations, pension and
profit sharing plans and other organizations.
Redemptions by
Telephone
You
automatically have telephone redemption and exchange privileges unless you
indicate otherwise by checking the applicable box on
the New Account Application or calling Morgan Stanley Shareholder Services to
opt out of such privileges. You may request a redemption
of shares of the Fund by calling Morgan Stanley Shareholder Services at
1-800-869-6397 and requesting that the redemption
proceeds be mailed or wired to you. You cannot redeem shares of the Funds
by telephone if you hold share certificates for
those shares. For your protection when calling the Fund, we will employ
reasonable procedures to confirm that instructions communicated
over the telephone are genuine. These procedures may include requiring various
forms of personal identification (such as
name, mailing address, social security number or other tax identification
number), tape-recording telephone communications and providing
written confirmation of instructions communicated by telephone. If reasonable
procedures are employed, neither Morgan Stanley
(or its affiliates), nor the Funds will be liable for following telephone
instructions that it reasonably believes to be genuine. Telephone
redemptions and exchanges may not be available if you cannot reach Morgan
Stanley Shareholder Services by telephone, whether
because all telephone lines are busy or for any other reason; in such case, a
shareholder would have to use the Fund’s other redemption
and exchange procedures described in this section. Telephone instructions will
be accepted if received by Morgan Stanley Shareholder
Services between 9:00 a.m. and 4:00 p.m. Eastern time on any day the NYSE is
open for business. During periods of drastic
economic or market changes, it is possible that the telephone privileges may be
difficult to implement, although this has not been
the case with the Funds in the past. To opt out of telephone privileges, please
contact Morgan Stanley Shareholder Services at 1-800-869-6397.
Redemption Proceeds
The
Funds typically expect
to pay redemption proceeds to you within two business days following receipt of
your redemption request for
those payments made to your brokerage account held with a Financial
Intermediary. For redemption proceeds that are paid directly
to you by the Fund, the Fund typically expects to pay redemption proceeds by
check or by wire to you within one business day,
following receipt of your redemption request; however, in all cases, it may take
up to seven calendar days to pay redemption proceeds.
A
Fund typically expects to meet redemption requests by using a combination of
sales of securities held by the Fund and/or holdings of
cash and cash equivalents. On a less regular basis, a
Fund also reserves the right to use borrowings to meet redemption requests,
and
the Fund may use these methods during both normal and stressed market
conditions.
If
we determine that it is in the best interest of the Company or a Fund not to pay
redemption proceeds in cash, we may distribute to you
securities held by the Fund. If requested, we will pay a portion of your
redemption(s) in cash (during any 90 day period) up to the
lesser of $250,000 or 1% of the net assets of the Fund at the beginning of such
period. If the Fund redeems your shares in-kind, you
will bear any market risks associated with the securities paid as redemption
proceeds. Such in-kind securities may be illiquid and difficult
or impossible for a shareholder to sell at a time and at a price that a
shareholder would like. Redemptions paid in such securities
generally will give rise to income, gain or loss for income tax purposes in the
same manner as redemptions paid in cash. In addition,
you may incur brokerage costs and a further gain or loss for income tax purposes
when you ultimately sell the securities.
Redemption
Fees
Shares
of a
Fund (except Passport Overseas Equity Portfolio)
redeemed within 30 days of purchase may be subject to a 2% redemption
fee, payable to the Fund. The redemption fee is designed to protect a
Fund and its remaining shareholders from the effects
of short-term trading. The redemption fee is not imposed on redemptions made:
(i) through systematic withdrawal/exchange plans,
(ii) through asset allocation programs, such as model programs, including
redemptions or exchanges that are part of a periodic rebalancing,
(iii) of shares received by reinvesting income dividends or capital gain
distributions, (iv) through certain collective trust funds
or other pooled vehicles, including funds of funds, (v) on behalf of advisory
accounts where client allocations are solely at the
Morgan
Stanley Institutional Fund, Inc. Prospectus | Shareholder
Information
Shareholder
Information (Con’t)
discretion
of the Morgan Stanley Investment Management investment team and (vi) in
qualified retirement plans maintained pursuant
to Sections 401 (tax-qualified pension, profit sharing, 401(k), money purchase
and stock bonus plans), 403 (qualified annuity
plans and tax-sheltered annuities) and 457 (deferred compensation plans for
employees of tax-exempt entities or governments)
of the Code, or certain transactions in other types of retirement accounts,
including but not limited to required minimum
distributions and redemptions relating to forfeitures, death, disability or
qualified domestic relations order.
The
redemption fee is based on, and deducted from, the redemption proceeds. Each
time you redeem or exchange shares of a
Fund, the
shares held the longest will be redeemed or exchanged first. The redemption
fee
may not be imposed on transactions that occur through
certain omnibus accounts at Financial Intermediaries. Certain Financial
Intermediaries may not have the ability to assess a redemption
fee. Certain Financial Intermediaries may apply different methodologies than
those described above in assessing redemption
fees, may impose their own redemption fee that may differ from a
Fund’s redemption fee or may impose certain trading restrictions
to deter market-timing and frequent trading. If you invest in a
Fund through a Financial Intermediary, please read that Financial
Intermediary’s materials carefully to learn about any other restrictions or fees
that may apply.
Exchange
Privilege
You
may exchange shares of any class of the Fund for the same class of shares of any
mutual fund (excluding money market funds) sponsored
and advised by the Adviser (each, a “Morgan Stanley Multi-Class Fund”), if
available, without the imposition of an exchange
fee. In addition, you may exchange shares of any class of the Fund for shares of
Morgan Stanley U.S.
Government Money Market
Trust (
a “Morgan Stanley Money Market Fund” and, together with the Morgan Stanley
Multi-Class Funds, the “Morgan Stanley
Funds”), if available, without the imposition of an exchange fee. Because
purchases of Class A shares of Morgan Stanley Institutional
Fund Trust Ultra-Short Income Portfolio are not subject to a sales charge, and
purchases of Class A shares of Morgan Stanley
Institutional Fund Trust Short Duration Income Portfolio are subject to a
reduced sales charge, you may be subject to the payment
of a sales charge by your Financial Intermediary, at time of exchange into Class
A shares of a Morgan Stanley Fund, based on
the amount that you would have owed if you directly purchased Class A shares of
that Morgan Stanley Fund (less any sales charge previously
paid in connection with shares exchanged for such shares of Morgan Stanley
Institutional Fund Trust Short Duration Income
or Ultra-Short Income Portfolios, as applicable). Exchanges
are effected based on the respective NAVs
of the applicable Morgan
Stanley Fund (subject to any applicable redemption fee) and in accordance with
the eligibility requirements of the
Fund. To obtain
a prospectus for another Morgan Stanley Fund, contact your Financial
Intermediary or call Morgan Stanley Shareholder Services
at 1-800-869-6397. Prospectuses are also available on our Internet site at
www.morganstanley.com/im.
If you purchased Fund
shares through a Financial Intermediary, certain Morgan Stanley Funds may be
unavailable for exchange. Contact your Financial
Intermediary for more information regarding the exchange privilege and to
determine which Morgan Stanley Funds are available
for exchange.
The
current prospectus for each Morgan Stanley Fund describes its investment
objective(s), policies,
investment minimums, and should
be read before investing. Since exchanges are available only into continuously
offered Morgan Stanley Funds, exchanges are generally
not available into Morgan Stanley Funds or classes of Morgan Stanley Funds that
are not currently being offered for purchase.
You
can process your exchange by contacting your Financial Intermediary. You may
also send exchange requests to the Company’s transfer
agent, SS&C GIDS, or Eaton Vance Management, the Fund’s co-transfer agent,
by mail to Morgan Stanley Institutional Fund,
Inc., c/o SS&C GIDS,
P.O. Box 219804, Kansas City, MO 64121-9804 or by calling
1-800-869-6397.
You
will be subject to the same minimum initial investment and account size as an
initial purchase. Your exchange price will be the price
calculated at the next Pricing Time after the Morgan Stanley Fund receives your
exchange order. The Morgan Stanley Fund, in its
sole discretion, may waive the minimum initial investment amount in certain
cases. For direct accounts, the check writing privilege
is not available for Morgan Stanley Money Market Fund shares you acquire in an
exchange from a non-money market fund. If
you are investing through a financial advisor, check with your advisor regarding
the availability of check writing privileges. A
Fund may
terminate or revise the exchange privilege upon required notice or in certain
cases without notice. A Fund
reserve the right to reject
an exchange order for any reason.
If
you exchange shares of the Fund for shares of another Morgan Stanley Fund, there
are important tax considerations. For tax purposes,
the exchange out of the Fund is considered a sale of Fund shares and the
exchange into the other fund is considered a purchase.
As a result, you may realize a capital gain or loss. You should review the
“Taxes” section and consult your own tax professional
about the tax consequences of an exchange.
Frequent
Purchases and Redemptions of Shares
Frequent
purchases and redemptions of shares by Fund shareholders are referred to as
“market-timing” or “short-term trading” and may
present risks for other shareholders of the Fund, which may include, among other
things, diluting the value of the Fund’s shares held
by long-term shareholders, interfering with the efficient management of the
Fund, increasing brokerage and administrative costs,
incurring unwanted taxable gains and forcing the Fund to hold excess levels of
cash.
Morgan
Stanley Institutional Fund, Inc. Prospectus | Shareholder
Information
Shareholder
Information (Con’t)
In
addition, the Funds are subject to the risk that market-timers and/or short-term
traders may take advantage of time zone differences
between the foreign markets on which the Funds’ securities trade and the time
the Fund’s NAV is calculated (“time-zone arbitrage”).
For example, a market-timer may purchase shares of the Fund based on events
occurring after foreign market closing prices
are established, but before the Fund’s NAV calculation, that are likely to
result in higher prices in foreign markets the following
day. The market-timer would redeem the Fund’s shares the next day, when the
Fund’s share price would reflect the increased
prices in foreign markets for a quick profit at the expense of long-term Fund
shareholders.
Investments
in other types of securities also may be susceptible to short-term trading
strategies. These investments include securities that
are, among other things, thinly traded, traded infrequently or relatively
illiquid, which have the risk that the current market price for
the securities may not accurately reflect current market values. A shareholder
may seek to engage in short-term trading to take advantage
of these pricing differences (referred to as “price arbitrage”). Investments in
certain fixed-income securities may be adversely
affected by price arbitrage trading strategies.
The
Company discourages and does not accommodate frequent purchases and redemptions
of Fund shares by Fund shareholders and the
Company’s Board of Directors has adopted policies and procedures with respect to
such frequent purchases and redemptions.
The
Company’s policies with respect to purchases, redemptions and exchanges of Fund
shares are described in the “Shareholder Information—How
To Purchase Fund Shares,” “Shareholder Information—General,” “Shareholder
Information—How To Redeem Fund
Shares” and “Shareholder Information—Exchange Privilege” sections of this
Prospectus. Except as described in each of these sections,
and with respect to trades that occur through omnibus accounts at Financial
Intermediaries, as described below, the Company’s
policies regarding frequent trading of Fund shares are applied uniformly to all
shareholders. With respect to trades that occur
through omnibus accounts at Financial Intermediaries, such as investment
advisers, broker-dealers, transfer agents and third-party
administrators, the Company (i) has requested assurance that such Financial
Intermediaries currently selling Fund shares have in
place internal policies and procedures reasonably designed to address
market-timing concerns and has instructed such Financial Intermediaries
to notify the Fund immediately if they are unable to comply with such policies
and procedures and (ii) requires all prospective
Financial Intermediaries to agree to cooperate in enforcing the Company’s
policies (or, upon prior written approval only, a
Financial Intermediary’s own policies) with respect to frequent purchases,
redemptions and exchanges of Fund shares.
With
respect to trades that occur through omnibus accounts at Financial
Intermediaries, to some extent, the Company relies on the Financial
Intermediary to monitor frequent short-term trading within the Fund by the
Financial Intermediary’s customers and to collect
the Fund’s redemption fee, as applicable, from its customers. However,
a
Fund has entered into agreements with Financial Intermediaries
whereby Financial Intermediaries are required to provide certain customer
identification and transaction information upon the
Fund’s request. A Fund may use this information to help identify and prevent
market-timing activity in the Fund. There can
be no assurance that the Fund will be able to identify or prevent all
market-timing activities.
Dividends
and Distributions
Each
Fund’s policy is to distribute to shareholders substantially all of its net
investment income, if any, in the form of an annual dividend
and to distribute net realized capital gains, if any, at least
annually.
The
Funds automatically reinvest all dividends and distributions in additional
shares. However, you may elect to receive distributions in
cash by giving written notice to the Fund or your Financial Intermediary or by
checking the appropriate box in the Distribution Option
section on the New Account Application.
If
any distribution check remains uncashed for six months, Morgan Stanley reserves
the right to invest the amount represented by the check
in Fund shares at the then-current net asset value of the Fund and all future
distributions will be reinvested.
For accounts held directly
with a Fund’s transfer agent for which the shareholder has elected to receive
distributions via check, any distribution (dividend
or capital gain) under $10.00 is automatically reinvested in additional shares
regardless of your elected distribution option.
Inactive
Accounts and Risk of Escheatment
In
accordance with state “unclaimed property” laws, your Fund shares may legally be
considered abandoned and required to be transferred
to the relevant state (also known as “escheatment”) under various circumstances.
These circumstances, which vary by state,
can include inactivity (e.g., no owner-initiated contact for a certain period),
returned mail (e.g., when mail sent to a shareholder is
returned by the post office as undeliverable), uncashed checks or a combination
of these. An incorrect address may cause a shareholder’s
account statements and other mailings to be returned to the Fund or your
Financial Intermediary. Since states’ statutory
requirements regarding inactivity differ, it is important to regularly contact
your Financial Intermediary or the Fund’s transfer
agent. The process described above, and the application of state escheatment
laws, may vary by state and/or depending on how
shareholders hold their shares in the Fund.
It
is your responsibility to ensure that you maintain a valid mailing address for
your account, keep your account active by contacting your
Financial Intermediary or the Fund’s transfer agent (e.g., by mail or
telephone), and promptly cash all checks for dividends,
Morgan
Stanley Institutional Fund, Inc. Prospectus | Shareholder
Information
Shareholder
Information (Con’t)
capital
gains and redemptions. Neither the Fund nor the Adviser will be liable to
shareholders or their representatives for good faith compliance
with escheatment laws.
For
more information, please contact us at 1-888-378-1630.
Taxes
The
dividends and distributions you receive from the Fund may be subject to federal,
state and local taxation, depending on your tax situation.
The tax treatment of dividends and distributions is the same whether or not you
reinvest them. Dividends paid by the Fund
that are attributable to “qualified dividends” received by the Fund may be taxed
at reduced rates to individual shareholders (either
15% or 20%, depending on whether the individual’s income exceeds certain
threshold amounts), if certain requirements are met
by the Fund and the shareholders. “Qualified dividends” include dividends
distributed by U.S. and certain foreign corporations (generally,
corporations incorporated in a possession of the United States, some
corporations eligible for treaty benefits under a treaty with
the United States and corporations whose stock with respect to which such
dividend is paid is readily tradable on an established securities
market in the United States, but not including passive foreign investment
companies). Dividends paid by the Fund not attributable
to “qualified dividends” received by the Fund, including distributions of
short-term capital gains, will generally be taxed at
normal tax rates applicable to ordinary income. The maximum individual rate
applicable to long-term capital gains (including capital
gain dividends received from the Fund) is generally either 15% or 20%, depending
on whether the individual’s income exceeds
certain threshold amounts. A Fund may be able to pass through to you a credit
for foreign income taxes it pays. A Fund will tell
you annually how to treat dividends and distributions.
If
certain holding period requirements are met, corporate shareholders may be
entitled to a dividends-received deduction for the portion
of dividends they receive which are attributable to dividends received by a Fund
from U.S. corporations.
If
you redeem shares of the Fund, you may be subject to tax on any gains you earn
based on your holding period for the shares and your
marginal tax rate. An exchange of shares of the Fund for shares of another
portfolio is treated for tax purposes as a sale of the original
shares in the Fund, followed by the purchase of shares in the other portfolio.
Conversions of shares between classes will not result
in taxation.
If
you buy shares of the Fund before a distribution, you will be subject to tax on
the entire amount of the taxable distribution you receive.
Distributions are taxable to you even if they are paid from income or gain
earned by the Fund before your investment (and thus
were included in the price you paid for your Fund shares).
An
additional 3.8% Medicare tax is imposed on certain net investment income
(including ordinary dividends and capital gain distributions
received from the Fund and net gains from redemptions or other taxable
dispositions of Fund shares) of U.S. individuals,
estates and trusts to the extent that such person’s “modified adjusted gross
income” (in the case of an individual) or “adjusted
gross income” (in the case of an estate or trust) exceeds certain threshold
amounts.
Shareholders
who are not citizens or residents of the United States and certain foreign
entities will generally be subject to withholding of
U.S. tax of 30% on distributions made by the Fund of investment income and
short-term capital gains.
The
Funds are required to withhold U.S. tax (at a 30% rate) on payments of taxable
dividends made to certain non-U.S. entities that fail
to comply (or be deemed compliant) with extensive reporting and
withholding requirements designed to inform the U.S. Department
of the Treasury of U.S.-owned foreign investment accounts. Shareholders may be
requested to provide additional information
to the Fund to enable the Fund to determine whether withholding is
required.
A
Fund (or its administrative agent) is required to report to the U.S.
Internal Revenue Service (“IRS”) and furnish to Fund shareholders
the cost basis information for sale transactions of shares purchased on or after
January 1, 2012. Shareholders may elect to
have one of several cost basis methods applied to their account when calculating
the cost basis of shares sold, including average cost,
FIFO (“first-in, first-out”) or some other specific identification method.
Unless you instruct otherwise, a
Fund will use average cost
as its default cost basis method, and will treat sales as first coming from
shares purchased prior to January 1, 2012. If average cost is
used for the first sale of Fund shares covered by these
rules, the shareholder may only use an alternative cost basis method for shares
purchased
prospectively. Fund shareholders should consult with their tax advisors to
determine the best cost basis method for their tax
situation.
A
Fund may be required to withhold U.S. federal income tax (currently, at a
rate of 24%) (“backup withholding”) from all taxable distributions
payable to (1) any shareholder who fails to furnish the Fund with its correct
taxpayer identification number or a certificate
that the shareholder is exempt from backup withholding, and (2) any shareholder
with respect to whom the IRS notifies the
Fund that the shareholder has failed to properly report certain interest and
dividend income to the IRS and to respond to notices to
that effect. An individual’s taxpayer identification number is his or her social
security number. The 24% backup withholding tax is not
an additional tax and may be credited against a taxpayer’s regular federal
income tax liability.
Morgan
Stanley Institutional Fund, Inc. Prospectus | Shareholder
Information
Shareholder
Information (Con’t)
Because
each investor’s tax circumstances are unique and the tax laws may change, you
should consult your tax advisor about your investment.
Potential
Conflicts of Interest
As
a diversified global financial services firm, Morgan Stanley, the parent company
of the Adviser, engages in a broad spectrum of activities,
including financial advisory services, investment management activities,
lending, commercial banking, sponsoring and managing
private investment funds, engaging in broker-dealer transactions and principal
securities, commodities and foreign exchange
transactions, research publication and other activities. In the ordinary course
of its business, Morgan Stanley is a full-service investment
banking and financial services firm and therefore engages in activities where
Morgan Stanley’s interests or the interests of its
clients may conflict with the interests of the Fund. Morgan Stanley advises
clients and sponsors, manages or advises other investment
funds and investment programs, accounts and businesses (collectively, together
with any new or successor funds, programs,
accounts or businesses, the ‘‘Affiliated Investment Accounts’’) with a wide
variety of investment objectives that in some instances
may overlap or conflict with the Fund’s investment objectives and present
conflicts of interest. In addition, Morgan Stanley may
also from time to time create new or successor Affiliated Investment Accounts
that may compete with the Fund and present similar
conflicts of interest. The discussion below enumerates certain actual, apparent
and potential conflicts of interest. There is no assurance
that conflicts of interest will be resolved in favor of Fund shareholders and,
in fact, they may not be. Conflicts of interest not
described below may also exist.
For
more information about conflicts of interest, see the section entitled
“Potential Conflicts of Interest” in the SAI.
Material
Nonpublic Information.
It is expected that confidential or material nonpublic information regarding an
investment or potential
investment opportunity may become available to the Adviser. If such information
becomes available, the Adviser may be precluded
(including by applicable law or internal policies or procedures) from pursuing
an investment or disposition opportunity with
respect to such investment or investment opportunity. Morgan Stanley has
established certain information barriers and other policies
to address the sharing of information between different businesses within Morgan
Stanley. In limited circumstances, however,
including for purposes of managing business and reputational risk, and subject
to policies and procedures and any applicable
regulations, personnel, including personnel of the investment adviser, on one
side of an information barrier may have access
to information and personnel on the other side of the information barrier
through “wall crossings.” The Adviser faces conflicts of
interest in determining whether to engage in such wall crossings. Information
obtained in connection with such wall crossings may limit
or restrict the ability of the Adviser to engage in or otherwise effect
transactions on behalf of the Fund (including purchasing or selling
securities that the Adviser may otherwise have purchased or sold for the Fund in
the absence of a wall crossing).
Investments
by Morgan Stanley and its Affiliated Investment Accounts.
In serving in multiple capacities to Affiliated Investment Accounts,
Morgan Stanley, including the Adviser and the Investment team, may have
obligations to other clients or investors in Affiliated
Investment Accounts, the fulfillment of which may not be in the best interests
of the Fund or its shareholders. The Fund’s investment
objectives may overlap with the investment objectives of certain Affiliated
Investment Accounts. As a result, the members of
an Investment team may face conflicts in the allocation of investment
opportunities among the Fund and other investment funds, programs,
accounts and businesses advised by or affiliated with the Adviser. Certain
Affiliated Investment Accounts may provide for higher
management or incentive fees or greater expense reimbursements or overhead
allocations, all of which may contribute to this conflict
of interest and create an incentive for the Adviser to favor such other
accounts. To seek to reduce potential conflicts of interest
and to attempt to allocate such investment opportunities in a fair and equitable
manner, the Adviser has implemented allocation
policies and procedures. These policies and procedures are intended to give all
clients of the Adviser, including the Fund, fair
access to investment opportunities consistent with the requirements of
organizational documents, investment strategies, applicable
laws and regulations, and the fiduciary duties of the
Adviser.
Payments
to Broker-Dealers and Other Financial Intermediaries.
The Adviser and/or the Distributor may pay compensation, out of their
own funds and not as an expense of the Fund, to certain Financial Intermediaries
(which may include affiliates of the Adviser and
Distributor), including recordkeepers and administrators of various deferred
compensation plans, in connection with the sale, distribution,
marketing and retention of shares of the Fund and/or shareholder servicing. The
prospect of receiving, or the receipt of, additional
compensation, as described above, by Financial Intermediaries may provide such
Financial Intermediaries and their financial
advisors and other salespersons with an incentive to favor sales of shares of
the Fund over other investment options with respect
to which these Financial Intermediaries do not receive additional compensation
(or receives lower levels of additional compensation).
These payment arrangements, however, will not change the price that an investor
pays for shares of the Fund or the amount
that the Fund receives to invest on behalf of an investor. Investors may wish to
take such payment arrangements into account when
considering and evaluating any recommendations relating to Fund shares and
should review carefully any disclosures provided by
Financial Intermediaries as to their compensation. In addition, in certain
circumstances, the Adviser restricts, limits or reduces the amount
of the Fund’s investment, or restricts the type of governance or voting rights
it acquires or exercises, where the Fund (potentially
together with Morgan Stanley) exceeds a certain ownership interest, or possesses
certain degrees of voting or control or has
other interests.
Morgan
Stanley Institutional Fund, Inc. Prospectus | Shareholder
Information
Shareholder
Information (Con’t)
Morgan
Stanley Trading and Principal Investing Activities.
Notwithstanding anything to the contrary herein, Morgan Stanley will
generally
conduct its sales and trading businesses, publish research and analysis, and
render investment advice without regard for the Fund’s
holdings, although these activities could have an adverse impact on the value of
one or more of the Fund’s investments, or could
cause Morgan Stanley to have an interest in one or more portfolio investments
that is different from, and potentially adverse to,
that of the Fund.
Morgan
Stanley’s Investment Banking and Other Commercial Activities.
Morgan Stanley advises clients on a variety of mergers, acquisitions,
restructuring, bankruptcy and financing transactions. Morgan Stanley may act as
an advisor to clients, including other investment
funds that may compete with the Fund and with respect to investments that the
Fund may hold. Morgan Stanley may give
advice and take action with respect to any of its clients or proprietary
accounts that may differ from the advice given, or may involve
an action of a different timing or nature than the action taken, by the Fund.
Morgan Stanley may give advice and provide recommendations
to persons competing with the Fund and/or any of the Fund’s investments that are
contrary to the Fund’s best interests
and/or the best interests of any of its investments. Morgan Stanley’s activities
on behalf of its clients (such as engagements as an
underwriter or placement agent) may restrict or otherwise limit investment
opportunities that may otherwise be available to the Fund.
Morgan
Stanley may be engaged to act as a financial advisor to a company in connection
with the sale of such company, or subsidiaries
or divisions thereof, may represent potential buyers of businesses through its
mergers and acquisition activities and may provide
lending and other related financing services in connection with such
transactions. Morgan Stanley’s compensation for such activities
is usually based upon realized consideration and is usually contingent, in
substantial part, upon the closing of the transaction.
Under these circumstances, the Fund may be precluded from participating in a
transaction with or relating to the company
being sold or participating in any financing activity related to a merger or an
acquisition.
Morgan
Stanley Institutional Fund, Inc. Prospectus | Shareholder
Information
Shareholder
Information (Con’t)
The
Company currently consists of the following funds:
U.S.
Equity
Advantage
Portfolio
American
Resilience Portfolio*
Growth
Portfolio
Inception
Portfolio
Permanence
Portfolio*
US
Core Portfolio*
Vitality
Portfolio*
Global
and International Equity
Asia
Opportunity Portfolio*
Counterpoint
Global Portfolio*
Developing
Opportunity Portfolio*
Emerging
Markets ex China Portfolio*
Emerging
Markets Leaders Portfolio*
Emerging
Markets Portfolio
Global
Concentrated Portfolio*
Global
Core Portfolio*
Global
Endurance Portfolio*
Global
Franchise Portfolio
Global
Insight Portfolio
Global
Opportunity Portfolio
Global
Permanence Portfolio*
Global
Sustain Portfolio
International
Advantage Portfolio
International
Equity Portfolio
International
Opportunity Portfolio
International
Resilience Portfolio*
Next
Gen Emerging Markets Portfolio
Passport
Overseas Equity Portfolio
Listed
Real Asset
Global
Focus Real Estate Portfolio*
Global
Infrastructure Portfolio
Global
Real Estate Portfolio
U.S.
Focus Real Estate Portfolio*
U.S.
Real Estate Portfolio
Asset
Allocation
Multi-Asset
Real Return Portfolio*
The
Company has suspended offering Class L shares of each fund to all
investors.
|
*
The American Resilience, Asia Opportunity, Counterpoint Global, Developing
Opportunity, Emerging Markets Leaders, Global
Concentrated, Global Core, Global Endurance, Global Focus Real Estate,
Global Permanence, International Resilience, Multi-Asset
Real Return, Permanence, Emerging Markets ex China, US Core, U.S. Focus
Real Estate and Vitality Portfolios do not
offer Class L shares. |
Morgan
Stanley Institutional Fund, Inc. Prospectus | Financial
Highlights
The
financial highlights tables that follow are intended to help you understand the
financial performance of the Class IR shares of each
Fund,
as applicable, for the past five years or since inception if less than five
years.
Certain information reflects financial results for
a single Fund share. The total returns in the tables represent the rate that an
investor would have earned (or lost) on an investment
in each Fund (assuming reinvestment of all dividends and
distributions).
The
ratio of expenses to average net assets listed in the tables below for Class IR
shares of the Funds is based on the average net assets of
such
Fund for each of
the periods listed in the tables. To the extent that a Fund’s average net assets
decrease over the Fund’s next fiscal
year, such expense ratios can be expected to increase, potentially
significantly, because certain fixed costs will be spread over a smaller
amount of assets.
The
information below has been derived from the financial statements audited by
Ernst
& Young LLP,
the Funds’ independent registered
public accounting firm. Ernst
& Young LLP’s
reports, along with each Fund’s financial statements, are incorporated by
reference
into the Funds’ SAI. The Annual Reports to Shareholders (which include
each Fund’s financial statements) and SAI are available
at no cost from the Company at the toll-free number noted on the back cover to
this Prospectus.
Morgan
Stanley Institutional Fund, Inc. Prospectus | Financial
Highlights
Passport
Overseas Equity Portfolio
|
|
|
|
|
|
|
|
|
| |
|
|
Class
IR |
|
Year
Ended December 31, |
Period
from October 31, 2019(1) to
December 31, 2019 |
Selected
Per Share Data and Ratios |
2023 |
2022 |
2021 |
2020 |
Net
Asset Value, Beginning of Period |
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
Income
(Loss) from Investment Operations: |
Net
Investment Income(2)
|
|
|
|
|
|
|
|
|
|
|
Net
Realized and Unrealized Gain (Loss) |
|
|
|
|
|
|
|
|
|
|
Total
from Investment Operations |
|
|
|
|
|
|
|
|
|
|
Distributions
from and/or in Excess of: |
Net
Investment Income |
|
|
|
|
|
|
|
|
|
|
Net
Realized Gain |
|
|
|
|
|
|
|
|
|
|
Total
Distributions |
|
|
|
|
|
|
|
|
|
|
Net
Asset Value, End of Period |
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
Total
Return(4)
|
|
|
|
|
|
|
|
|
|
|
Ratios
to Average Net Assets and Supplemental Data: |
Net
Assets, End of Period (Thousands) |
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
Ratio
of Expenses Before Expense Limitation |
|
|
|
|
|
|
|
|
|
|
Ratio
of Expenses After Expense Limitation |
|
|
|
|
|
|
|
|
|
|
Ratio
of Expenses After Expense Limitation Excluding
Interest Expenses |
|
|
|
|
|
|
|
|
|
|
Ratio
of Net Investment Income |
|
|
|
|
|
|
|
|
|
|
Ratio
of Rebate from Morgan Stanley Affiliates |
|
|
|
|
|
|
|
|
|
|
Portfolio
Turnover Rate |
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
(1) |
Commencement
of Offering. |
(2) |
Per
share amount is based on average shares outstanding. |
(3) |
Amount
is less than $0.005 per share. |
(4) |
Calculated
based on the net asset value as of the last business day of the
period. |
(5) |
Refer
to Note B in the Notes to Financial Statements for discussion of prior
period transfer agency fees that were reimbursed in the current period.
The amount of the
reimbursement was immaterial on a per share basis and the impact was less
than 0.005% to the total return of Class IR shares. |
(6) |
Not
annualized. |
(7) |
Annualized. |
(8) |
If
the Fund had not received the reimbursement of transfer agency fees from
the Adviser, the Ratio of Expenses After Expense Limitation and Ratio of
Net Investment
Income, would have been as follows for Class IR shares: |
|
Period
Ended |
Expense Ratio |
Net
Investment Income
Ratio |
|
December
31, 2023 |
0.85% |
1.48% |
|
(9) |
The
Ratio of Expenses After Expense Limitation and Ratio of Net Investment
Income reflect the rebate of certain Fund expenses in connection with the
investments
in Morgan Stanley affiliates during the period. The effect of the rebate
on the ratios is disclosed in the above table as “Ratio of Rebate from
Morgan Stanley
Affiliates.” |
(10) |
Amount
is less than 0.005%. |
Morgan
Stanley Institutional Fund, Inc. Prospectus | Financial
Highlights
Emerging
Markets Leaders Portfolio
|
|
|
|
|
| |
|
|
Class
IR |
|
Year
Ended December 31, |
Period
from April 12, 2021(1) to
December 31, 2021 |
Selected
Per Share Data and Ratios |
2023 |
2022 |
Net
Asset Value, Beginning of Period |
$ |
|
$ |
|
$ |
|
Income
(Loss) from Investment Operations: |
Net
Investment Loss(2)
|
|
|
|
|
|
|
Net
Realized and Unrealized Gain (Loss) |
|
|
|
|
|
|
Total
from Investment Operations |
|
|
|
|
|
|
Distributions
from and/or in Excess of: |
Net
Realized Gain |
|
|
|
|
|
|
Redemption
Fees |
|
|
|
|
|
|
Net
Asset Value, End of Period |
$ |
|
$ |
|
$ |
|
Total
Return(4)
|
|
|
|
|
|
|
Ratios
to Average Net Assets and Supplemental Data: |
Net
Assets, End of Period (Thousands) |
$ |
|
$ |
|
$ |
|
Ratio
of Expenses Before Expense Limitation |
|
|
|
|
|
|
Ratio
of Expenses After Expense Limitation |
|
|
|
|
|
|
Ratio
of Expenses After Expense Limitation Excluding Interest
Expenses |
|
|
|
|
|
|
Ratio
of Net Investment Loss |
|
|
|
|
|
|
Ratio
of Rebate from Morgan Stanley Affiliates |
|
|
|
|
|
|
Portfolio
Turnover Rate |
|
|
|
|
|
|
|
|
|
| |
(1) |
Commencement
of Offering. |
(2) |
Per
share amount is based on average shares outstanding. |
(3) |
Amount
is less than $0.005 per share. |
(4) |
Calculated
based on the net asset value as of the last business day of the
period. |
(5) |
Refer
to Note B in the Notes to Financial Statements for discussion of prior
period transfer agency fees that were reimbursed in the current period.
The amount of the
reimbursement was immaterial on a per share basis and the impact was less
than 0.005% to the total return of Class IR shares. |
(6) |
Not
annualized. |
(7) |
If
the Fund had not received the reimbursement of transfer agency fees from
the Adviser, the Ratio of Expenses After Expense Limitation and Ratio of
Net Investment
Loss, would have been as follows for Class IR shares: |
|
Period
Ended |
Expense Ratio |
Net
Investment Loss
Ratio |
|
December
31, 2023 |
1.00% |
(0.06)% |
|
(8) |
The
Ratio of Expenses After Expense Limitation and Ratio of Net Investment
Loss reflect the rebate of certain Fund expenses in connection with the
investments in
Morgan Stanley affiliates during the period. The effect of the rebate on
the ratios is disclosed in the above table as “Ratio of Rebate from Morgan
Stanley Affiliates.” |
(9) |
Effective
October 1, 2022, the Adviser has agreed to limit the ratio of expenses to
average net assets to the maximum ratio of 1.00% for Class IR shares.
Prior to October
1, 2022, the maximum ratio was 1.10% for Class IR
shares. |
(10) |
Annualized. |
(11) |
Amount
is less than 0.005%. |
Morgan
Stanley Institutional Fund, Inc. Prospectus | Financial
Highlights
Emerging
Markets Portfolio
|
|
|
|
|
|
|
|
|
| |
|
|
Class
IR |
|
Year
Ended December 31, |
Selected
Per Share Data and Ratios |
2023 |
2022 |
2021 |
2020 |
2019 |
Net
Asset Value, Beginning of Period |
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
Income
(Loss) from Investment Operations: |
Net
Investment Income(1)
|
|
|
|
|
|
|
|
|
|
|
Net
Realized and Unrealized Gain (Loss) |
|
|
|
|
|
|
|
|
|
|
Total
from Investment Operations |
|
|
|
|
|
|
|
|
|
|
Distributions
from and/or in Excess of: |
Net
Investment Income |
|
|
|
|
|
|
|
|
|
|
Net
Realized Gain |
|
|
|
|
|
|
|
|
|
|
Total
Distributions |
|
|
|
|
|
|
|
|
|
|
Redemption
Fees |
|
|
|
|
|
|
|
|
|
|
Net
Asset Value, End of Period |
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
Total
Return(3)
|
|
|
|
|
|
|
|
|
|
|
Ratios
to Average Net Assets and Supplemental Data: |
Net
Assets, End of Period (Thousands) |
$ |
|
$ |
|
$ |
|
$ |
|
$ |
|
Ratio
of Expenses Before Expense Limitation |
|
|
|
|
|
|
|
|
|
|
Ratio
of Expenses After Expense Limitation |
|
|
|
|
|
|
|
|
|
|
Ratio
of Expenses After Expense Limitation Excluding Interest
Expenses |
|
|
|
|
|
|
|
|
|
|
Ratio
of Net Investment Income |
|
|
|
|
|
|
|
|
|
|
Ratio
of Rebate from Morgan Stanley Affiliates |
|
|
|
|
|
|
|
|
|
|
Portfolio
Turnover Rate |
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
(1) |
Per
share amount is based on average shares outstanding. |
(2) |
Amount
is less than $0.005 per share. |
(3) |
Calculated
based on the net asset value as of the last business day of the
period. |
(4) |
Refer
to Note B in the Notes to Financial Statements for discussion of prior
period transfer agency fees that were reimbursed in the current period.
The amount of the
reimbursement was immaterial on a per share basis and the impact was less
than 0.005% to the total return of Class IR shares. |
(5) |
If
the Fund had not received the reimbursement of transfer agency fees from
the Adviser, the Ratio of Expenses After Expense Limitation and Ratio of
Net Investment
Income, would have been as follows for Class IR shares: |
|
Period
Ended |
Expense Ratio |
Net
Investment Income
Ratio |
|
December
31, 2023 |
0.95% |
1.85% |
|
(6) |
The
Ratio of Expenses After Expense Limitation and Ratio of Net Investment
Income reflect the rebate of certain Fund expenses in connection with the
investments
in Morgan Stanley affiliates during the period. The effect of the rebate
on the ratios is disclosed in the above table as “Ratio of Rebate from
Morgan Stanley
Affiliates.” |
(7) |
Amount
is less than 0.005%. |
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page intentionally left blank)
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page intentionally left blank)
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page intentionally left blank)
Where
to Find Additional Information
In
addition to this Prospectus, the Funds have an SAI, dated April
30, 2024 (as
may be supplemented from time to time), which contains
additional, more detailed information about the Company and the Funds. The SAI
is incorporated by reference into this Prospectus
and, therefore, legally forms a part of this Prospectus.
The
Company publishes Annual and Semi-Annual Reports (“Shareholder Reports”) that
contain additional information about the respective
Funds’ investments. In each Fund’s Annual Report to Shareholders you will find a
discussion of the market conditions and the
investment strategies that significantly affected such Funds’ performance during
the last fiscal year. For additional Company information,
including information regarding the investments comprising each of the Funds,
please call the toll-free number below.
You
may obtain the SAI and Shareholder Reports without charge by contacting the
Company at the toll-free number below or on our
Internet site at: www.morganstanley.com/im. If you purchased shares through a
Financial Intermediary, you may also obtain these
documents, without charge, by contacting your Financial
Intermediary.
Shareholder
Reports and other information about the Funds are available on the EDGAR
Database on the SEC’s Internet site at http://www.sec.gov,
and copies of this information may be obtained, after paying a duplicating fee,
by electronic request at the following
e-mail address: [email protected].
Morgan
Stanley Institutional Fund, Inc.
c/o SS&C
Global Investor and Distribution Solutions, Inc.
P.O.
Box 219804
Kansas
City, MO 64121-9804
For
Shareholder Inquiries,
call
toll-free 1-800-869-6397.
Prices
and Investment Results are available at www.morganstanley.com/im.
The
Company’s 1940 Act registration number is 811-05624.