Our Approach on Environmental, Social, and Governance Factors

2018

ESG: Deep Understanding of Good Governance

Morgan Stanley Investment Management appreciates that environmental, social and governance ("ESG") factors can impact long-term performance. Our investment teams have a variety of methods for considering such factors, including analysis of reputational risks and litigation and other exposures as an element of fundamental analysis. Providing central support, our Corporate Governance team works closely with the investment teams on matters of proxy voting, governance analysis and engagement, as well as related social and environmental issues.

As active owners, part of our investment approach focuses on well-governed companies with long-term, sustainable business models. Good corporate governance is essential. Portfolio managers are responsible for evaluating risks and opportunities for each investment, at both industry and company levels. As we believe that ESG issues can influence risk and return, we consider these factors in evaluating and engaging with portfolio companies.

Morgan Stanley Investment Management is a signatory of the UN Principles for Responsible Investing ("UNPRI") and a signatory to the UK Stewardship Code.

Morgan Stanley Investment Management Sustainability Council

The Morgan Stanley Investment Management Sustainability Council is a cross-functional team of leaders committed to delivering value across multiple dimensions by promoting a disciplined approach for integrating ESG factors into the investment process. The Council drives Investment Management’s global effort by promoting an overall framework for integrating ESG and ESG standards into investment processes, product development, measurement, education, client engagement and reporting. The Council relies on an Advisory Committee, comprised of senior investors and subject matter experts within the Firm, for relevant insights and perspectives.

Process and Engagement

As part of the research process, our equity analysts and portfolio managers develop long-term relationships with the management teams of the companies we invest in. Our regular contact allows for ongoing dialogue with respect to issues that could affect long-term returns. Together with external research and data, this helps our investment teams distil any ESG issues that may impact long-term value.

A key input in our investment selection process is a deep understanding of management quality. Our investment teams regularly monitor and engage with companies, including active dialogues where positions are significant. In addition, they selectively interact with company Boards of Directors when necessary and beneficial for shareholder value.

Proxy Voting

Morgan Stanley Investment Management views proxy voting as an integral part of the investment process and post-buy oversight. All proxy voting decisions are made in-house based on collaboration between members of the investment team and the Corporate Governance team, and do not automatically support management recommendations. We combine the in-depth knowledge of the investment teams with the global governance expertise of the Corporate Governance team to make informed voting decisions, rather than relying on external advisory firms or making proxy voting a rote, box-ticking exercise.

The Corporate Governance team oversees the proxy voting process, with an internal system for documenting vote rationale and controls to help ensure that all meetings are voted in a timely manner and that a consistent set of policies is applied across our global portfolios.

Reporting

The Corporate Governance team provides clients with proxy voting records relating to votes held and voted on their behalf. In addition, we publish voting records for our 1940 Act registered open-end and closed-end mutual funds annually, through N-PX filings in the United States and for our SICAV funds on our website in the United Kingdom in relation to the UK Stewardship Code. For a number of years, MSIM has obtained an independent audit opinion on proxy voting processes in SSAE-16 reviews.

Our Goal

Morgan Stanley Investment Management’s goal is to add value to clients by meeting their investment objectives and providing a comprehensive array of investment services, competitive results and enduring client relationships. By reviewing and understanding the range of potential issues, such as ESG, and their impact on investments, in addition to the myriad other investment factors, we are well positioned to deliver consistent, long-term results for our clients.

Related Documents: publically available in the "About Us" section on www.morganstanley.com/im

• Morgan Stanley Investment Management’s Proxy Voting Policy and Procedures

• Morgan Stanley Investment Management’s Engagement Principles

• Morgan Stanley Investment Management’s Proxy Voting and Engagement Report