UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number: 811-07607
Morgan Stanley Variable Insurance Fund, Inc.
(Exact name of registrant as specified in charter)
522 Fifth Avenue, New York, New York | 10036 | |
(Address of principal executive offices) | (Zip code) |
John H. Gernon
522 Fifth Avenue, New York, New York 10036
(Name and address of agent for service)
Registrant's telephone number, including area code: 212-762-1886
Date of fiscal year end: December 31,
Date of reporting period: June 30, 2023
Item 1 - Report to Shareholders
Morgan Stanley Variable Insurance Fund, Inc.
Semi-Annual Report – June 30, 2023
Core Plus Fixed Income Portfolio
The Fund is intended to be a funding vehicle for variable annuity contracts and variable life insurance policies offered by the separate accounts of certain life insurance companies.
Morgan Stanley Variable Insurance Fund, Inc.
Semi-Annual Report – June 30, 2023 (unaudited)
Table of Contents
Expense Example | 2 | ||||||
Portfolio of Investments | 3 | ||||||
Statement of Assets and Liabilities | 11 | ||||||
Statement of Operations | 12 | ||||||
Statements of Changes in Net Assets | 13 | ||||||
Financial Highlights | 14 | ||||||
Notes to Financial Statements | 16 | ||||||
Investment Advisory Agreement Approval | 27 | ||||||
Liquidity Risk Management Program | 29 | ||||||
Director and Officer Information | Back Cover |
1
Morgan Stanley Variable Insurance Fund, Inc.
Semi-Annual Report – June 30, 2023 (unaudited)
Expense Example
Core Plus Fixed Income Portfolio
As a shareholder of the Core Plus Fixed Income Portfolio (the "Fund"), you incur two types of costs: (1) insurance company charges; and (2) ongoing costs, which may include advisory fees, administration fees, distribution (12b-1) fees and other Fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.
This example is based on an investment of $1,000 invested at the beginning of the six-month period ended June 30, 2023 and held for the entire six-month period.
Actual Expenses
The table below provides information about actual account values and actual expenses. You may use the information in this table, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the table under the heading entitled "Actual Expenses Paid During Period" to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The table below provides information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any insurance company charges. Therefore, the table below is useful in comparing ongoing costs, but will not help you determine the relative total cost of owning different funds. In addition, if these insurance company charges were included, your costs would have been higher.
Beginning Account Value 1/1/23 | Actual Ending Account Value 6/30/23 | Hypothetical Ending Account Value | Actual Expenses Paid During Period* | Hypothetical Expenses Paid During Period* | Net Expense Ratio During Period** | ||||||||||||||||||||||
Core Plus Fixed Income Portfolio Class I | $ | 1,000.00 | $ | 1,027.20 | $ | 1,021.67 | $ | 3.17 | $ | 3.16 | 0.63 | % | |||||||||||||||
Core Plus Fixed Income Portfolio Class II | 1,000.00 | 1,025.60 | 1,020.43 | 4.42 | 4.41 | 0.88 |
* Expenses are calculated using each Fund Class' annualized net expense ratio (as disclosed), multiplied by the average account value over the period and multiplied by 181/365 (to reflect the most recent one-half year period).
** Annualized.
2
Morgan Stanley Variable Insurance Fund, Inc.
Semi-Annual Report – June 30, 2023 (unaudited)
Portfolio of Investments
Core Plus Fixed Income Portfolio
Face Amount (000) | Value (000) | ||||||||||
Fixed Income Securities (95.6%) | |||||||||||
Agency Adjustable Rate Mortgage (0.0%) ‡ | |||||||||||
Federal National Mortgage Association, Conventional Pool: 12 Month USD LIBOR + 1.59%, 3.84%, 12/1/45 | $ | 10 | $ | 10 | |||||||
Agency Fixed Rate Mortgages (24.4%) | |||||||||||
Federal Home Loan Mortgage Corp., Conventional Pools: 2.50%, 7/1/51 - 4/1/52 | 758 | 644 | |||||||||
Federal Home Loan Mortgage Corporation, Conventional Pools: 2.00%, 10/1/51 | 53 | 41 | |||||||||
Gold Pools: 3.50%, 1/1/44 | 263 | 245 | |||||||||
4.00%, 12/1/41 - 10/1/44 | 286 | 273 | |||||||||
5.41%, 7/1/37 - 8/1/37 | 10 | 10 | |||||||||
5.44%, 1/1/37 - 2/1/38 | 39 | 40 | |||||||||
5.46%, 8/1/37 - 1/1/38 | 26 | 28 | |||||||||
5.50%, 8/1/37 - 11/1/37 | 39 | 40 | |||||||||
5.52%, 10/1/37 | 5 | 5 | |||||||||
5.62%, 12/1/36 - 8/1/37 | 43 | 44 | |||||||||
6.00%, 8/1/37 - 5/1/38 | 8 | 9 | |||||||||
7.50%, 5/1/35 | 13 | 14 | |||||||||
8.00%, 8/1/32 | 8 | 9 | |||||||||
8.50%, 8/1/31 | 12 | 12 | |||||||||
Federal National Mortgage Association, Conventional Pools: 2.00%, 11/1/51 | 287 | 225 | |||||||||
2.50%, 2/1/50 - 2/1/52 | 751 | 641 | |||||||||
3.00%, 7/1/49 | 47 | 41 | |||||||||
3.50%, 7/1/46 - 7/1/49 | 586 | 540 | |||||||||
4.00%, 11/1/41 - 8/1/49 | 529 | 505 | |||||||||
4.50%, 8/1/40 - 9/1/48 | 157 | 153 | |||||||||
5.00%, 7/1/40 | 43 | 43 | |||||||||
5.62%, 12/1/36 | 17 | 17 | |||||||||
6.00%, 12/1/38 | 139 | 143 | |||||||||
6.50%, 11/1/27 - 10/1/38 | 10 | 10 | |||||||||
7.00%, 6/1/29 | 2 | 2 | |||||||||
7.50%, 8/1/37 | 23 | 25 | |||||||||
8.00%, 4/1/33 | 18 | 19 | |||||||||
8.50%, 10/1/32 | 19 | 20 | |||||||||
9.50%, 4/1/30 | 1 | 1 | |||||||||
July TBA 2.50%, 7/1/53 (a) | 850 | 721 | |||||||||
3.50%, 7/1/53 (a) | 2,825 | 2,574 | |||||||||
4.00%, 7/1/53 (a) | 1,225 | 1,150 | |||||||||
4.50%, 7/1/53 (a) | 4,225 | 4,061 | |||||||||
5.00%, 7/1/53 (a) | 1,900 | 1,862 | |||||||||
5.50%, 7/1/53 (a) | 5,125 | 5,102 | |||||||||
Government National Mortgage Association, Various Pools: 3.50%, 11/20/40 - 7/20/46 | 233 | 217 | |||||||||
4.00%, 7/15/44 | 82 | 79 | |||||||||
5.00%, 12/20/48 | 10 | 9 | |||||||||
19,574 |
Face Amount (000) | Value (000) | ||||||||||
Asset-Backed Securities (8.9%) | |||||||||||
AIMCO CLO, Series 2018-B 3 Month USD LIBOR + 1.10%, 6.36%, 1/15/32 (b)(c) | $ | 625 | $ | 619 | |||||||
Allegro CLO XI Ltd., 3 Month USD LIBOR + 1.39%, 6.66%, 1/19/33 (b)(c) | 250 | 248 | |||||||||
American Homes 4 Rent Trust, 6.07%, 10/17/52 (b) | 490 | 479 | |||||||||
Benefit Street Partners CLO XX Ltd., 3 Month USD LIBOR + 1.17%, 6.43%, 7/15/34 (b)(c) | 390 | 384 | |||||||||
Blackbird Capital Aircraft Lease Securitization Ltd., 5.68%, 12/16/41 (b) | 347 | 243 | |||||||||
Cologix Canadian Issuer LP, 4.94%, 1/25/52 (b) | CAD | 400 | 274 | ||||||||
Cologix Data Centers US Issuer LLC, 3.30%, 12/26/51 (b) | $ | 225 | 200 | ||||||||
Falcon Aerospace Ltd., 3.60%, 9/15/39 (b) | 149 | 127 | |||||||||
GAIA Aviation Ltd., 7.00%, 12/15/44 (b) | 362 | 191 | |||||||||
Goodgreen Trust, 5.53%, 4/15/55 (b) | 368 | 310 | |||||||||
JOL Air Ltd., 4.95%, 4/15/44 (b) | 223 | 159 | |||||||||
Lunar 2021-1 Structured Aircraft Portfolio Notes, 2.64%, 10/15/46 (b) | 295 | 257 | |||||||||
Lunar Aircraft Ltd., 3.38%, 2/15/45 (b) | 100 | 87 | |||||||||
Mosaic Solar Loan Trust, 1.92%, 6/20/52 (b) | 174 | 125 | |||||||||
Newday Funding Master Issuer PLC, SOFR + 1.50%, 6.57%, 4/15/30 (b)(c) | 500 | 496 | |||||||||
NovaStar Mortgage Funding Trust, 1 Month USD LIBOR + 1.06%, 6.21%, 12/25/33 (c) | 168 | 166 | |||||||||
Octagon Investment Partners 51 Ltd., 3 Month USD LIBOR + 1.15%, 6.40%, 7/20/34 (b)(c) | 900 | 883 | |||||||||
Oxford Finance Funding LLC, 5.44%, 2/15/27 (b) | 67 | 67 | |||||||||
PMT Issuer Trust — FMSR, 1 Month USD LIBOR + 3.00%, 8.15%, 3/25/26 (b)(c) | 650 | 629 | |||||||||
SOFR30A + 4.19%, 9.26%, 6/25/27 (b)(c) | 300 | 301 | |||||||||
PRET 2021-NPL6 LLC, 2.49%, 7/25/51 (b) | 121 | 112 | |||||||||
Sculptor CLO XXVI Ltd., 3 Month USD LIBOR + 1.27%, 6.52%, 7/20/34 (b)(c) | 840 | 825 | |||||||||
7,182 |
The accompanying notes are an integral part of the financial statements.
3
Morgan Stanley Variable Insurance Fund, Inc.
Semi-Annual Report – June 30, 2023 (unaudited)
Portfolio of Investments (cont'd)
Core Plus Fixed Income Portfolio
Face Amount (000) | Value (000) | ||||||||||
Collateralized Mortgage Obligations — Agency Collateral Series (0.5%) | |||||||||||
Federal Home Loan Mortgage Corp. Multifamily Structured Pass-Through Certificates, IO 4.48%, 11/25/55 (c) | $ | 1,050 | $ | 289 | |||||||
Federal Home Loan Mortgage Corporation, IO REMIC 6.00% - 1 Month USD LIBOR, 0.81%, 11/15/43 - 6/15/44 (d) | 755 | 65 | |||||||||
IO STRIPS 7.50%, 12/15/29 | 1 | — | @ | ||||||||
Federal National Mortgage Association, IO REMIC 6.00%, 5/25/33 - 7/25/33 | 90 | 18 | |||||||||
IO STRIPS 9.00%, 11/25/26 | — | @ | — | @ | |||||||
IO STRIPS Series 356, Class 30 8.00%, 6/25/35 (c) | 4 | — | @ | ||||||||
REMIC 7.00%, 9/25/32 | 14 | 15 | |||||||||
Government National Mortgage Association, IO 0.68%, 8/20/58 (c) | 1,812 | 16 | |||||||||
5.00%, 2/16/41 | 40 | 8 | |||||||||
411 | |||||||||||
Commercial Mortgage-Backed Securities (8.8%) | |||||||||||
BANK 2019-BNK21, IO 0.96%, 10/17/52 (c) | 3,748 | 151 | |||||||||
Citigroup Commercial Mortgage Trust, 3.62%, 12/10/41 (b)(c) | 300 | 192 | |||||||||
IO 0.87%, 11/10/48 (c) | 2,250 | 30 | |||||||||
1.02%, 9/10/58 (c) | 4,123 | 61 | |||||||||
Commercial Mortgage Trust, IO 0.81%, 10/10/47 (c) | 2,175 | 12 | |||||||||
1.08%, 7/15/47 (c) | 1,978 | 10 | |||||||||
Credit Suisse Mortgage Trust, 1 Month Term SOFR + 4.08%, 9.23%, 4/15/26 (b)(c) | 474 | 462 | |||||||||
Federal Home Loan Mortgage Corp. Multifamily Structured Pass-Through Certificates, IO 2.72%, 1/25/49 (c) | 2,950 | 441 | |||||||||
2.72%, 1/25/49 (c) | 715 | 102 | |||||||||
2.74%, 2/25/49 (c) | 1,635 | 243 | |||||||||
2.98%, 1/25/49 (c) | 800 | 138 | |||||||||
3.08%, 1/25/32 (c) | 625 | 113 | |||||||||
3.17%, 11/25/36 (c) | 475 | 126 | |||||||||
3.32%, 5/25/32 (c) | 1,300 | 260 | |||||||||
3.58%, 10/25/38 (c) | 800 | 224 | |||||||||
3.69%, 6/25/54 (c) | 775 | 173 | |||||||||
3.92%, 6/25/50 (c) | 900 | 212 | |||||||||
4.29%, 8/25/54 (c) | 650 | 172 |
Face Amount (000) | Value (000) | ||||||||||
FREMF 2016-KF21 Mortgage Trust, 1 Month USD LIBOR + 5.25%, 10.44%, 7/25/26 (b)(c) | $ | 42 | $ | 40 | |||||||
FREMF 2017-KF27 Mortgage Trust, 1 Month USD LIBOR + 4.35%, 9.54%, 12/25/26 (b)(c) | 39 | 38 | |||||||||
GS Mortgage Securities Trust, 4.71%, 8/10/46 (b)(c) | 500 | 428 | |||||||||
IO 0.83%, 9/10/47 (c) | 4,008 | 23 | |||||||||
1.36%, 10/10/48 (c) | 4,392 | 95 | |||||||||
Highways 2021 PLC, 3 Month GBP SONIA + 1.35%, 6.25%, 12/18/31 (b)(c) | GBP | 300 | 368 | ||||||||
JP Morgan Chase Commercial Mortgage Securities Trust, IO 0.65%, 4/15/46 (c) | $ | 6,000 | 17 | ||||||||
0.71%, 12/15/49 (c) | 2,505 | 38 | |||||||||
0.87%, 7/15/47 (c) | 1,952 | 4 | |||||||||
JPMBB Commercial Mortgage Securities Trust, IO 1.09%, 8/15/47 (c) | 2,810 | 14 | |||||||||
Last Mile Logistics Pan Euro Finance DAC, 3 Month EURIBOR + 1.90%, 5.26%, 8/17/33 (b)(c) | EUR | 98 | 100 | ||||||||
Life Mortgage Trust, 1 Month Term SOFR + 2.09%, 7.24%, 5/15/39 (b)(c) | $ | 175 | 171 | ||||||||
MF1 2021-W10X, 1 Month Term SOFR + 2.82%, 7.97%, 12/15/34 (b)(c) | 475 | 437 | |||||||||
MFT Mortgage Trust, 3.59%, 2/10/42 (b)(c) | 200 | 124 | |||||||||
MKT 2020-525M Mortgage Trust, 3.04%, 2/12/40 (b)(c) | 200 | 82 | |||||||||
Multifamily Connecticut Avenue Securities Trust, 1 Month USD LIBOR + 1.95%, 7.10%, 3/25/50 (b)(c) | 13 | 13 | |||||||||
Natixis Commercial Mortgage Securities Trust, 4.46%, 1/15/43 (b)(c) | 200 | 158 | |||||||||
1 Month Term SOFR + 2.28%, 7.43%, 7/15/36 (b)(c) | 500 | 427 | |||||||||
Real Estate Asset Liquidity Trust, IO 1.16%, 2/12/31 (b)(c) | CAD | 3,403 | 104 | ||||||||
SG Commercial Mortgage Securities Trust, 3.85%, 3/15/37 (b)(c) | $ | 450 | 403 | ||||||||
SLG Office Trust, IO 0.26%, 7/15/41 (b)(c) | 3,650 | 56 | |||||||||
Taubman Centers Commercial Mortgage Trust, 1 Month Term SOFR + 2.19%, 7.33%, 5/15/37 (b)(c) | 450 | 439 | |||||||||
WFRBS Commercial Mortgage Trust, 4.18%, 5/15/45 (b)(c) | 385 | 367 | |||||||||
7,068 |
The accompanying notes are an integral part of the financial statements.
4
Morgan Stanley Variable Insurance Fund, Inc.
Semi-Annual Report – June 30, 2023 (unaudited)
Portfolio of Investments (cont'd)
Core Plus Fixed Income Portfolio
Face Amount (000) | Value (000) | ||||||||||
Corporate Bonds (29.0%) | |||||||||||
Basic Materials (1.0%) | |||||||||||
Celanese U.S. Holdings LLC 6.17%, 7/15/27 | $ | 250 | $ | 249 | |||||||
Georgia-Pacific LLC 2.3%, 4/30/30 (b) | 175 | 149 | |||||||||
Newcastle Coal Infrastructure Group Pty Ltd. 4.4%, 9/29/27 (b) | 275 | 251 | |||||||||
NOVA Chemicals Corp. 4.25%, 5/15/29 (b) | 165 | 135 | |||||||||
784 | |||||||||||
Communications (2.6%) | |||||||||||
Alibaba Group Holding Ltd. 2.13%, 2/9/31 | 200 | 163 | |||||||||
Amazon.com, Inc. 3.1%, 5/12/51 | 175 | 131 | |||||||||
AT&T, Inc. 3.55%, 9/15/55 | 50 | 35 | |||||||||
4.5%, 5/15/35 | 200 | 184 | |||||||||
Charter Communications Operating LLC/ Charter Communications Operating Capital 2.8%, 4/1/31 | 150 | 121 | |||||||||
3.5%, 3/1/42 | 400 | 268 | |||||||||
Comcast Corp. 1.95%, 1/15/31 | 200 | 164 | |||||||||
NBN Co. Ltd. 2.63%, 5/5/31 (b) | 225 | 189 | |||||||||
Rogers Communications, Inc. 4.55%, 3/15/52 (b) | 275 | 221 | |||||||||
Sirius XM Radio, Inc. 3.88%, 9/1/31 (b) | 225 | 174 | |||||||||
Spotify USA, Inc. 0.00%, 3/15/26 | 140 | 119 | |||||||||
Verizon Communications, Inc. 1.75%, 1/20/31 | 400 | 316 | |||||||||
2,085 | |||||||||||
Consumer, Cyclical (1.6%) | |||||||||||
American Airlines, Inc./AAdvantage Loyalty IP Ltd. 5.75%, 4/20/29 (b) | 160 | 156 | |||||||||
Dick's Sporting Goods, Inc. 4.1%, 1/15/52 | 290 | 202 | |||||||||
General Motors Co. 6.6%, 4/1/36 | 75 | 77 | |||||||||
6.75%, 4/1/46 | 75 | 76 | |||||||||
Lowe's Cos., Inc. 5.8%, 9/15/62 | 75 | 74 | |||||||||
Macy's Retail Holdings LLC 5.88%, 3/15/30 (b) | 80 | 72 | |||||||||
Marriott International, Inc. 4.9%, 4/15/29 | 75 | 73 | |||||||||
Peloton Interactive, Inc. 0.00%, 2/15/26 | 170 | 130 | |||||||||
Resorts World Las Vegas LLC/ RWLV Capital, Inc. 4.63%, 4/16/29 (b) | 200 | 165 |
Face Amount (000) | Value (000) | ||||||||||
Warnermedia Holdings, Inc. 4.28%, 3/15/32 | $ | 175 | $ | 155 | |||||||
5.05%, 3/15/42 | 100 | 84 | |||||||||
1,264 | |||||||||||
Consumer, Non-Cyclical (1.7%) | |||||||||||
Anheuser-Busch InBev Worldwide, Inc. 4.6%, 4/15/48 | 73 | 68 | |||||||||
Ashtead Capital, Inc. 5.55%, 5/30/33 (b) | 250 | 244 | |||||||||
BAT Capital Corp. 2.26%, 3/25/28 | 275 | 236 | |||||||||
Centene Corp. 2.5%, 3/1/31 | 300 | 240 | |||||||||
Grifols SA 2.25%, 11/15/27 (b) | EUR | 200 | 198 | ||||||||
HCA, Inc. 4.63%, 3/15/52 (b) | $ | 225 | 185 | ||||||||
JBS USA LUX SA/JBS USA Food Co./ JBS USA Finance, Inc. 2.5%, 1/15/27 (b) | 225 | 197 | |||||||||
1,368 | |||||||||||
Energy (1.3%) | |||||||||||
BP Capital Markets PLC 4.88%, 3/22/30 (e) | 75 | 68 | |||||||||
Energy Transfer LP 2.9%, 5/15/25 | 250 | 237 | |||||||||
Enterprise Products Operating LLC 3.3%, 2/15/53 | 175 | 125 | |||||||||
5.35%, 1/31/33 | 75 | 76 | |||||||||
Global Partners LP/GLP Finance Corp. 7.0%, 8/1/27 | 80 | 78 | |||||||||
Matador Resources Co. 5.88%, 9/15/26 | 121 | 117 | |||||||||
ONEOK, Inc. 3.4%, 9/1/29 | 50 | 44 | |||||||||
Rockies Express Pipeline LLC 3.6%, 5/15/25 (b) | 100 | 95 | |||||||||
Var Energi ASA 7.5%, 1/15/28 (b) | 200 | 206 | |||||||||
1,046 | |||||||||||
Finance (11.7%) | |||||||||||
Air Lease Corp. 2.1%, 9/1/28 | 25 | 21 | |||||||||
American International Group, Inc. 5.13%, 3/27/33 | 175 | 171 | |||||||||
Australia & New Zealand Banking Group Ltd. 2.57%, 11/25/35 (b) | 200 | 152 | |||||||||
Aviation Capital Group LLC 6.25%, 4/15/28 (b) | 150 | 150 | |||||||||
6.38%, 7/15/30 (b) | 50 | 50 | |||||||||
Banco de Credito e Inversiones SA 2.88%, 10/14/31 (b) | 225 | 187 | |||||||||
Banco Santander Chile 2.7%, 1/10/25 (b) | 150 | 144 | |||||||||
Banco Santander SA 4.18%, 3/24/28 | 200 | 187 |
The accompanying notes are an integral part of the financial statements.
5
Morgan Stanley Variable Insurance Fund, Inc.
Semi-Annual Report – June 30, 2023 (unaudited)
Portfolio of Investments (cont'd)
Core Plus Fixed Income Portfolio
Face Amount (000) | Value (000) | ||||||||||
Finance (cont'd) | |||||||||||
Bank Hapoalim BM 3.26%, 1/21/32 (b) | $ | 225 | $ | 193 | |||||||
Bank of America Corp. 2.69%, 4/22/32 | 175 | 145 | |||||||||
3.85%, 3/8/37 | 50 | 43 | |||||||||
4.38%, 4/27/28 | 350 | 336 | |||||||||
4.57%, 4/27/33 | 650 | 611 | |||||||||
Bank of Ireland Group PLC 2.03%, 9/30/27 (b) | 250 | 217 | |||||||||
Bank of Montreal 3.09%, 1/10/37 | 150 | 118 | |||||||||
BNP Paribas SA 2.59%, 1/20/28 (b) | 450 | 403 | |||||||||
BPCE SA 5.15%, 7/21/24 (b) | 300 | 295 | |||||||||
Capital One Financial Corp. 6.31%, 6/8/29 | 25 | 25 | |||||||||
6.38%, 6/8/34 | 75 | 74 | |||||||||
Charles Schwab Corp. 5.85%, 5/19/34 | 185 | 188 | |||||||||
Citigroup, Inc. 3.06%, 1/25/33 | 325 | 271 | |||||||||
3.79%, 3/17/33 | 125 | 110 | |||||||||
5.5%, 9/13/25 | 150 | 149 | |||||||||
CNO Financial Group, Inc. 5.25%, 5/30/29 | 95 | 90 | |||||||||
Coinbase Global, Inc. 3.38%, 10/1/28 (b) | 170 | 114 | |||||||||
Goldman Sachs Group, Inc. 2.62%, 4/22/32 | 250 | 205 | |||||||||
Grupo Aval Ltd. 4.38%, 2/4/30 (b) | 200 | 157 | |||||||||
HSBC Holdings Plc 3.8%, 3/11/25 | 450 | 441 | |||||||||
JPMorgan Chase & Co. 2.55%, 11/8/32 | 250 | 205 | |||||||||
SOFR + 1.85%, 5.35%, 6/1/34 (c) | 650 | 655 | |||||||||
Life Storage LP 2.4%, 10/15/31 | 125 | 99 | |||||||||
Lincoln National Corp. 3.05%, 1/15/30 | 100 | 83 | |||||||||
Macquarie Group Ltd. 2.87%, 1/14/33 (b) | 125 | 100 | |||||||||
Marsh & McLennan Cos., Inc. 5.88%, 8/1/33 | 125 | 133 | |||||||||
Metropolitan Life Global Funding I 5.15%, 3/28/33 (b) | 150 | 148 | |||||||||
Nationwide Building Society 4.3%, 3/8/29 (b) | 375 | 348 | |||||||||
Nordea Bank Abp 5.38%, 9/22/27 (b) | 200 | 198 | |||||||||
Oversea-Chinese Banking Corp. Ltd. 1.83%, 9/10/30 (b) | 200 | 182 | |||||||||
Rocket Mortgage LLC/Rocket Mortgage Co-Issuer, Inc. 3.88%, 3/1/31 (b) | 170 | 138 |
Face Amount (000) | Value (000) | ||||||||||
Societe Generale SA 2.63%, 1/22/25 (b) | $ | 225 | $ | 212 | |||||||
Toronto-Dominion Bank 8.13%, 10/31/82 | 200 | 204 | |||||||||
Truist Financial Corp. SOFR + 2.36%, 5.87%, 6/8/34 (c) | 300 | 300 | |||||||||
U.S. Bancorp 5.85%, 10/21/33 | 200 | 200 | |||||||||
UBS Group AG 6.54%, 8/12/33 (b) | 250 | 256 | |||||||||
United Overseas Bank Ltd. 3.86%, 10/7/32 (b) | 325 | 305 | |||||||||
UnitedHealth Group, Inc. 5.2%, 4/15/63 | 100 | 100 | |||||||||
Wells Fargo & Co. 3.07%, 4/30/41 | 125 | 92 | |||||||||
MTN 2.88%, 10/30/30 | 200 | 173 | |||||||||
Westpac Banking Corp. 2.67%, 11/15/35 | 75 | 58 | |||||||||
9,436 | |||||||||||
Industrials (6.1%) | |||||||||||
Airbnb, Inc. 0.00%, 3/15/26 | 130 | 114 | |||||||||
Boeing Co. 3.25%, 2/1/35 | 150 | 122 | |||||||||
Cheniere Energy Partners LP 5.95%, 6/30/33 (b) | 75 | 75 | |||||||||
Children's Health System of Texas 2.51%, 8/15/50 | 175 | 109 | |||||||||
Crown Castle, Inc. 3.3%, 7/1/30 | 150 | 133 | |||||||||
CVS Health Corp. 5.88%, 6/1/53 | 100 | 103 | |||||||||
Delta Air Lines Pass Through Trust Series AA 3.2%, 10/25/25 | 150 | 147 | |||||||||
Energy Transfer LP 4.75%, 1/15/26 | 75 | 73 | |||||||||
Foundry JV Holdco LLC 5.88%, 1/25/34 (b) | 275 | 274 | |||||||||
Garda World Security Corp. 4.63%, 2/15/27 (b) | 200 | 183 | |||||||||
General Motors Financial Co., Inc. 5.8%, 6/23/28 | 425 | 424 | |||||||||
GLP Capital LP/GLP Financing II, Inc. 5.38%, 4/15/26 | 125 | 122 | |||||||||
Hyundai Capital America 1.8%, 1/10/28 (b) | 250 | 211 | |||||||||
5.6%, 3/30/28 (b) | 250 | 249 | |||||||||
Imperial Brands Finance PLC 3.13%, 7/26/24 (b) | 350 | 338 | |||||||||
Johns Hopkins University Series A 2.81%, 1/1/60 | 145 | 95 | |||||||||
McLaren Health Care Corp. Series A 4.39%, 5/15/48 | 150 | 133 |
The accompanying notes are an integral part of the financial statements.
6
Morgan Stanley Variable Insurance Fund, Inc.
Semi-Annual Report – June 30, 2023 (unaudited)
Portfolio of Investments (cont'd)
Core Plus Fixed Income Portfolio
Face Amount (000) | Value (000) | ||||||||||
Industrials (cont'd) | |||||||||||
Medline Borrower LP 3.88%, 4/1/29 (b) | $ | 150 | $ | 131 | |||||||
RingCentral, Inc. 0.00%, 3/15/26 | 125 | 104 | |||||||||
Silgan Holdings, Inc. 1.4%, 4/1/26 (b) | 200 | 177 | |||||||||
Splunk, Inc. 1.13%, 6/15/27 | 150 | 130 | |||||||||
Standard Industries, Inc. 2.25%, 11/21/26 (b) | EUR | 125 | 121 | ||||||||
Syngenta Finance NV 4.89%, 4/24/25 (b) | $ | 300 | 294 | ||||||||
Telefonica Emisiones SA 4.1%, 3/8/27 | 300 | 288 | |||||||||
Uber Technologies, Inc. 0.00%, 12/15/25 | 145 | 133 | |||||||||
Volkswagen Group of America Finance LLC 4.75%, 11/13/28 (b) | 275 | 266 | |||||||||
Vontier Corp. 2.4%, 4/1/28 | 250 | 209 | |||||||||
Warnermedia Holdings, Inc. 5.39%, 3/15/62 | 150 | 122 | |||||||||
4,880 | |||||||||||
Technology (0.9%) | |||||||||||
Dell International LLC/EMC Corp. 3.45%, 12/15/51 (b) | 275 | 185 | |||||||||
Intel Corp. 5.9%, 2/10/63 | 125 | 129 | |||||||||
McAfee Corp. 7.38%, 2/15/30 (b) | 150 | 131 | |||||||||
Oracle Corp. 3.6%, 4/1/50 | 350 | 250 | |||||||||
695 | |||||||||||
Utilities (2.1%) | |||||||||||
Duke Energy Indiana LLC 2.75%, 4/1/50 | 83 | 53 | |||||||||
Enel Finance America LLC 2.88%, 7/12/41 (b) | 200 | 132 | |||||||||
Entergy Louisiana LLC 1.6%, 12/15/30 | 125 | 98 | |||||||||
Eversource Energy 5.13%, 5/15/33 | 75 | 74 | |||||||||
Fells Point Funding Trust 3.05%, 1/31/27 (b) | 250 | 230 | |||||||||
Jersey Central Power & Light Co. 2.75%, 3/1/32 (b) | 150 | 124 | |||||||||
Mississippi Power Co. 3.95%, 3/30/28 | 275 | 259 | |||||||||
NextEra Energy Capital Holdings, Inc. 3.0%, 1/15/52 | 150 | 99 | |||||||||
6.05%, 3/1/25 | 75 | 75 | |||||||||
Northern States Power Co. 2.9%, 3/1/50 | 150 | 103 | |||||||||
NRG Energy, Inc. 3.88%, 2/15/32 (b) | 160 | 123 |
Face Amount (000) | Value (000) | ||||||||||
Public Service Enterprise Group, Inc. 2.45%, 11/15/31 | $ | 100 | $ | 81 | |||||||
Southern California Edison Co. 5.88%, 12/1/53 | 175 | 179 | |||||||||
Virginia Electric & Power Co. 2.95%, 11/15/51 | 125 | 84 | |||||||||
1,714 | |||||||||||
23,272 | |||||||||||
Mortgages — Other (17.4%) | |||||||||||
Alternative Loan Trust, 5.50%, 2/25/36 | 5 | 3 | |||||||||
1 Month USD LIBOR + 0.36%, 5.51%, 5/25/47 (c) | 68 | 59 | |||||||||
6.00%, 7/25/37 | 36 | 23 | |||||||||
PAC 5.50%, 2/25/36 | 2 | 1 | |||||||||
6.00%, 4/25/36 | 11 | 6 | |||||||||
Banc of America Alternative Loan Trust, 1 Month USD LIBOR + 0.65%, 5.80%, 7/25/46 (c) | 85 | 68 | |||||||||
6.36%, 10/25/36 (c) | 249 | 73 | |||||||||
Banc of America Funding Trust, 5.25%, 7/25/37 | 12 | 11 | |||||||||
6.00%, 7/25/37 | 12 | 10 | |||||||||
Bayview MSR Opportunity Master Fund Trust, 3.00%, 11/25/51 (b)(c) | 215 | 181 | |||||||||
BBCMS Mortgage Trust, IO 0.64%, 12/15/55 (c) | 2,566 | 99 | |||||||||
Brean Asset Backed Securities Trust, 1.40%, 10/25/63 (b)(c) | 236 | 202 | |||||||||
1.75%, 10/25/61 (b)(c) | 240 | 210 | |||||||||
CFMT 2022-HB8 LLC, 3.75%, 4/25/25 (b)(c) | 300 | 275 | |||||||||
CFMT LLC, 3.25%, 9/25/37 (b)(c) | 230 | 180 | |||||||||
3.85%, 10/27/31 (b)(c) | 350 | 318 | |||||||||
ChaseFlex Trust, 6.00%, 2/25/37 | 309 | 128 | |||||||||
CIM Trust, 2.50%, 7/1/51 (b)(c) | 359 | 287 | |||||||||
2.57%, 7/25/55 (b) | 249 | 240 | |||||||||
2.82%, 10/25/61 (b) | 207 | 194 | |||||||||
COLT 2021-RPL1 Trust, 1.67%, 9/25/61 (b)(c) | 145 | 124 | |||||||||
CSFB Mortgage-Backed Pass-Through Certificates, 6.50%, 11/25/35 | 752 | 166 | |||||||||
Federal Home Loan Mortgage Corp. Whole Loan Securities Trust, 3.00%, 9/25/45 - 5/25/47 | 482 | 419 | |||||||||
3.50%, 5/25/45 - 5/25/47 | 287 | 254 | |||||||||
4.00%, 5/25/45 | 7 | 6 | |||||||||
Flagstar Mortgage Trust, 2.50%, 9/25/51 (b)(c) | 361 | 289 | |||||||||
FMC GMSR Issuer Trust, 7.90%, 7/25/27 (b) | 300 | 296 |
The accompanying notes are an integral part of the financial statements.
7
Morgan Stanley Variable Insurance Fund, Inc.
Semi-Annual Report – June 30, 2023 (unaudited)
Portfolio of Investments (cont'd)
Core Plus Fixed Income Portfolio
Face Amount (000) | Value (000) | ||||||||||
Mortgages — Other (cont'd) | |||||||||||
GSR Mortgage Loan Trust, 5.75%, 1/25/37 | $ | 74 | $ | 47 | |||||||
Headlands Residential 2021-RPL1 LLC, 2.49%, 9/25/26 (b)(c) | 350 | 326 | |||||||||
Hundred Acre Wood Trust, 2.50%, 12/25/51 (b)(c) | 470 | 376 | |||||||||
Imperial Fund Mortgage Trust, 2.09%, 1/25/57 (b)(c) | 461 | 388 | |||||||||
JP Morgan Alternative Loan Trust, 6.00%, 12/25/35 | 31 | 22 | |||||||||
JP Morgan Mortgage Trust, 4.40%, 6/25/37 (c) | 24 | 19 | |||||||||
6.00%, 6/25/37 | — | @ | — | @ | |||||||
Legacy Mortgage Asset Trust, 6.25%, 2/25/60 (b) | 286 | 281 | |||||||||
Lehman Mortgage Trust, 6.50%, 9/25/37 | 623 | 224 | |||||||||
PMC PLS ESR Issuer LLC, 5.11%, 2/25/27 (b) | 221 | 210 | |||||||||
Preston Ridge Partners Mortgage LLC, 2.49%, 11/25/26 (b) | 281 | 260 | |||||||||
5.00%, 3/25/27 (b) | 274 | 264 | |||||||||
5.56%, 6/25/27 (b) | 257 | 249 | |||||||||
PRET 2022-NPL4 LLC, 6.56%, 8/25/52 (b) | 242 | 238 | |||||||||
Rate Mortgage Trust, 2.50%, 11/25/51 (b)(c) | 510 | 408 | |||||||||
Residential Accredit Loans, Inc. Trust, 6.00%, 4/25/36 - 1/25/37 | 21 | 16 | |||||||||
Residential Asset Securitization Trust, 6.00%, 7/25/36 | 19 | 10 | |||||||||
Seasoned Credit Risk Transfer Trust, 3.00%, 7/25/56 - 5/25/60 | 3,857 | 3,390 | |||||||||
4.00%, 7/25/56 - 2/25/59 (c) | 436 | 407 | |||||||||
4.50%, 6/25/57 | 548 | 527 | |||||||||
4.75%, 7/25/56 - 6/25/57 (b)(c) | 696 | 636 | |||||||||
Stanwich Mortgage Loan Co. LLC, 2.74%, 10/16/26 (b) | 222 | 202 | |||||||||
Structured Asset Securities Corp. Reverse Mortgage Loan Trust, 1 Month USD LIBOR + 1.85%, 7.00%, 5/25/47 (b)(c) | 920 | 865 | |||||||||
TVC Mortgage Trust, 3.47%, 9/25/24 (b) | 2 | 2 | |||||||||
UWM Mortgage Trust, 2.50%, 8/25/51 (b)(c) | 456 | 367 | |||||||||
VOLT CV LLC, 2.49%, 11/27/51 (b) | 154 | 142 | |||||||||
13,998 | |||||||||||
Municipal Bonds (1.1%) | |||||||||||
Chicago O'Hare International Airport, IL, O'Hare International Airport Revenue Series 2010B 6.40%, 1/1/40 | 115 | 132 |
Face Amount (000) | Value (000) | ||||||||||
Illinois State Toll Highway Authority, IL, Highway Revenue, Build America Bonds Series A 6.18%, 1/1/34 | $ | 705 | $ | 768 | |||||||
900 | |||||||||||
Sovereign (5.1%) | |||||||||||
Australia Government Bond, 1.25%, 5/21/32 | AUD | 825 | 437 | ||||||||
Dominican Republic International Bond, 13.63%, 2/3/33 (b) | DOP | 16,000 | 360 | ||||||||
Egypt Government International Bond, 6.38%, 4/11/31 (b) | EUR | 200 | 121 | ||||||||
Export-Import Bank of India, 3.25%, 1/15/30 (b) | $ | 200 | 177 | ||||||||
Indonesia Treasury Bond, 8.38%, 3/15/34 | IDR | 5,580,000 | 429 | ||||||||
Italy Buoni Poliennali Del Tesoro, 0.65%, 10/28/27 (b) | EUR | 600 | 627 | ||||||||
Ivory Coast Government International Bond, 4.88%, 1/30/32 (b) | 125 | 107 | |||||||||
Mexican Bonos, Series M 7.75%, 5/29/31 | MXN | 12,500 | 691 | ||||||||
Petroleos Mexicanos, 6.70%, 2/16/32 | $ | 448 | 341 | ||||||||
Philippine Government International Bond, 4.20%, 3/29/47 | 200 | 173 | |||||||||
Republic of South Africa Government Bond, 8.25%, 3/31/32 | ZAR | 15,048 | 672 | ||||||||
4,135 | |||||||||||
Supranational (0.4%) | |||||||||||
Banque Ouest Africaine de Developpement, 4.70%, 10/22/31 (b) | $ | 350 | 285 | ||||||||
Total Fixed Income Securities (Cost $83,602) | 76,835 | ||||||||||
Shares | |||||||||||
Short-Term Investments (21.4%) | |||||||||||
Investment Company (10.2%) | |||||||||||
Morgan Stanley Institutional Liquidity Funds — Government Portfolio — Institutional Class (See Note H) (Cost $8,185) | 8,184,668 | 8,185 | |||||||||
Face Amount (000) | |||||||||||
U.S. Treasury Securities (11.2%) | |||||||||||
U.S. Treasury Bill, 5.01%, 11/30/23 (f) | $ | 833 | 815 | ||||||||
5.32%, 12/14/23 (f) | 8,400 | 8,200 | |||||||||
Total U.S. Treasury Securities (Cost $9,018) | 9,015 | ||||||||||
Total Short-Term Investments (Cost $17,203) | 17,200 | ||||||||||
Total Investments (117.0%) (Cost $100,804) (g)(h) | 94,035 | ||||||||||
Liabilities in Excess of Other Assets (–17.0%) | (13,663 | ) | |||||||||
Net Assets (100.0%) | $ | 80,372 |
The accompanying notes are an integral part of the financial statements.
8
Morgan Stanley Variable Insurance Fund, Inc.
Semi-Annual Report – June 30, 2023 (unaudited)
Portfolio of Investments (cont'd)
Core Plus Fixed Income Portfolio
@ Value is less than $500.
‡ Amount is less than 0.05%.
(a) Security is subject to delayed delivery.
(b) 144A security — Certain conditions for public sale may exist. Unless otherwise noted, these securities are deemed to be liquid.
(c) Floating or variable rate securities: The rates disclosed are as of June 30, 2023. For securities based on a published reference rate and spread, the reference rate and spread are indicated in the description in the Portfolio of Investments. Certain variable rate securities may not be based on a published reference rate and spread but are determined by the issuer or agent and are based on current market conditions. These securities do not indicate a reference rate and spread in their description in the Portfolio of Investments.
(d) Inverse Floating Rate Security — Interest rate fluctuates with an inverse relationship to an associated interest rate. Indicated rate is the effective rate at June 30, 2023.
(e) Perpetual — One or more securities do not have a predetermined maturity date. Rates for these securities are fixed for a period of time after which they revert to a floating rate. Interest rates in effect are as of June 30, 2023.
(f) Rate shown is the yield to maturity at June 30, 2023.
(g) Securities are available for collateral in connection with securities purchased on a forward commitment basis, open foreign currency forward exchange contracts, futures contracts and an swap agreement.
(h) At June 30, 2023, the aggregate cost for federal income tax purposes approximates the aggregate cost for book purposes. The aggregate gross unrealized appreciation is approximately $529,000 and the aggregate gross unrealized depreciation is approximately $7,459,000, resulting in net unrealized depreciation of approximately $6,930,000.
CLO Collateralized Loan Obligation.
EURIBOR Euro Interbank Offered Rate.
IO Interest Only Security.
LIBOR London Interbank Offered Rate.
MTN Medium Term Note.
PAC Planned Amortization Class.
REMIC Real Estate Mortgage Investment Conduit.
SOFR Secured Overnight Financing Rate.
SONIA Sterling Overnight Index Average.
STRIPS Separate Trading of Registered Interest and Principal of Securities.
TBA To Be Announced.
Foreign Currency Forward Exchange Contracts:
The Fund had the following foreign currency forward exchange contracts open at June 30, 2023:
Counterparty | Contracts to Deliver (000) | In Exchange For (000) | Delivery Date | Unrealized Appreciation (Depreciation) (000) | |||||||||||||||
Bank of America NA | EUR | 126 | $ | 137 | 8/10/23 | $ | (— | @) | |||||||||||
Bank of America NA | GBP | 656 | $ | 830 | 8/10/23 | (3 | ) | ||||||||||||
Goldman Sachs International | $ | 213 | NOK | 2,247 | 8/10/23 | (3 | ) | ||||||||||||
JPMorgan Chase Bank NA | DOP | 3,857 | $ | 70 | 8/10/23 | 1 | |||||||||||||
JPMorgan Chase Bank NA | EUR | 87 | $ | 94 | 8/10/23 | (— | @) | ||||||||||||
JPMorgan Chase Bank NA | $ | 214 | JPY | 28,443 | 8/10/23 | (16 | ) | ||||||||||||
Royal Bank of Canada (UK) | $ | 442 | EUR | 405 | 8/10/23 | (— | @) | ||||||||||||
UBS AG | AUD | 672 | $ | 452 | 8/10/23 | 4 | |||||||||||||
UBS AG | CAD | 508 | $ | 378 | 8/10/23 | (6 | ) | ||||||||||||
UBS AG | IDR | 6,513,007 | $ | 441 | 8/10/23 | 7 | |||||||||||||
UBS AG | MXN | 9,606 | $ | 531 | 8/10/23 | (27 | ) | ||||||||||||
UBS AG | $ | 3 | AUD | 5 | 8/10/23 | (— | @) | ||||||||||||
UBS AG | $ | 2 | CAD | 3 | 8/10/23 | (— | @) | ||||||||||||
UBS AG | ZAR | 13,178 | $ | 710 | 8/10/23 | 12 | |||||||||||||
Westpac Banking Corp. | EUR | 1,671 | $ | 1,852 | 8/10/23 | 25 | |||||||||||||
$ | (6 | ) |
Futures Contracts:
The Fund had the following futures contracts open at June 30, 2023:
Number of Contracts | Expiration Date | Notional Amount (000) | Value (000) | Unrealized Appreciation (Depreciation) (000) | |||||||||||||||||||
Long: | |||||||||||||||||||||||
U.S. Treasury 10 yr. Note (United States) | 19 | Sep-23 | $ | 1,900 | $ | 2,133 | $ | (32 | ) | ||||||||||||||
U.S. Treasury 2 yr. Note (United States) | 8 | Sep-23 | 1,600 | 1,627 | (19 | ) | |||||||||||||||||
U.S. Treasury 5 yr. Note (United States) | 50 | Sep-23 | 5,000 | 5,355 | (98 | ) | |||||||||||||||||
U.S. Treasury Long Bond (United States) | 45 | Sep-23 | 4,500 | 5,711 | (20 | ) | |||||||||||||||||
U.S. Treasury Ultra Long Bond (United States) | 35 | Sep-23 | 3,500 | 4,767 | 53 |
The accompanying notes are an integral part of the financial statements.
9
Morgan Stanley Variable Insurance Fund, Inc.
Semi-Annual Report – June 30, 2023 (unaudited)
Portfolio of Investments (cont'd)
Core Plus Fixed Income Portfolio
Number of Contracts | Expiration Date | Notional Amount (000) | Value (000) | Unrealized Appreciation (Depreciation) (000) | |||||||||||||||||||
Short: | |||||||||||||||||||||||
Euro-Buxl 30 yr. Bond (Germany) | 1 | Sep-23 | EUR | (100 | ) | $ | (153 | ) | $ | (8 | ) | ||||||||||||
German Euro-BTP Index (Germany) | 3 | Sep-23 | (300 | ) | (380 | ) | (13 | ) | |||||||||||||||
U.S. Treasury 10 yr. Ultra Note (United States) | 12 | Sep-23 | $ | (1,200 | ) | (1,421 | ) | 10 | |||||||||||||||
$ | (127 | ) |
Credit Default Swap Agreement:
The Fund had the following credit default swap agreement open at June 30, 2023:
Swap Counterparty and Reference Obligation | Credit Rating of Reference Obligation† | Buy/Sell Protection | Pay/ Received Fixed Rate | Payment Frequency | Maturity Date | Notional Amount (000) | Value (000) | Upfront Payment Paid (000) | Unrealized Depreciation (000) | ||||||||||||||||||||||||||||||
Morgan Stanley & Co. LLC* CDX.NA.HY.S40 | NR | Buy | 5.0 | % | Quarterly | 6/20/28 | $ | 878 | $ | (24 | ) | $ | 4 | $ | (28 | ) |
† Credit rating as issued by Standard & Poor's.
* Cleared swap agreement, the broker is Morgan Stanley & Co. LLC.
@ Value is less than $500.
NR Not rated.
AUD — Australian Dollar
CAD — Canadian Dollar
DOP — Dominican Peso
EUR — Euro
GBP — British Pound
IDR — Indonesian Rupiah
JPY — Japanese Yen
MXN — Mexican Peso
NOK — Norwegian Krone
USD — United States Dollar
ZAR — South African Rand
Portfolio Composition
Classification | Percentage of Total Investments | ||||||
Corporate Bonds | 24.8 | % | |||||
Agency Fixed Rate Mortgages | 20.8 | ||||||
Mortgages — Other | 14.9 | ||||||
U.S. Treasury Securities | 9.6 | ||||||
Investment Company | 8.7 | ||||||
Asset-Backed Securities | 7.6 | ||||||
Commercial Mortgage-Backed Securities | 7.5 | ||||||
Other* | 6.1 | ||||||
Total Investments | 100.0 | %** |
* Industries and/or investment types representing less than 5% of total investments.
** Does not include open long/short futures contracts with a value of approximately $21,547,000 and net unrealized depreciation of approximately $127,000. Does not include open foreign currency forward exchange contracts with net unrealized depreciation of approximately $6,000. Also does not include an open swap agreement with unrealized depreciation of approximately $28,000.
The accompanying notes are an integral part of the financial statements.
10
Morgan Stanley Variable Insurance Fund, Inc.
Semi-Annual Report – June 30, 2023 (unaudited)
Core Plus Fixed Income Portfolio
Statement of Assets and Liabilities | June 30, 2023 (000) | ||||||
Assets: | |||||||
Investments in Securities of Unaffiliated Issuers, at Value (Cost $92,619) | $ | 85,850 | |||||
Investment in Security of Affiliated Issuer, at Value (Cost $8,185) | 8,185 | ||||||
Total Investments in Securities, at Value (Cost $100,804) | 94,035 | ||||||
Foreign Currency, at Value (Cost $1,026) | 1,044 | ||||||
Receivable for Investments Sold | 837 | ||||||
Receivable for Variation Margin on Futures Contracts | 689 | ||||||
Interest Receivable | 548 | ||||||
Receivable for Fund Shares Sold | 78 | ||||||
Due from Broker | 75 | ||||||
Receivable from Affiliate | 56 | ||||||
Unrealized Appreciation on Foreign Currency Forward Exchange Contracts | 49 | ||||||
Tax Reclaim Receivable | 4 | ||||||
Other Assets | 11 | ||||||
Total Assets | 97,426 | ||||||
Liabilities: | |||||||
Payable for Investments Purchased | 16,380 | ||||||
Payable for Fund Shares Redeemed | 364 | ||||||
Unrealized Depreciation on Foreign Currency Forward Exchange Contracts | 55 | ||||||
Payable for Servicing Fees | 54 | ||||||
Payable for Professional Fees | 44 | ||||||
Deferred Capital Gain Country Tax | 32 | ||||||
Payable for Custodian Fees | 11 | ||||||
Payable for Variation Margin on Swap Agreements | 6 | ||||||
Payable for Administration Fees | 5 | ||||||
Payable for Transfer Agency Fees | 2 | ||||||
Payable for Advisory Fees | 1 | ||||||
Payable for Distribution Fees — Class II Shares | 1 | ||||||
Other Liabilities | 99 | ||||||
Total Liabilities | 17,054 | ||||||
NET ASSETS | $ | 80,372 | |||||
Net Assets Consist of: | |||||||
Paid-in-Capital | $ | 91,514 | |||||
Total Accumulated Loss | (11,142 | ) | |||||
Net Assets | $ | 80,372 | |||||
CLASS I: | |||||||
Net Assets | $ | 68,175 | |||||
Net Asset Value, Offering and Redemption Price Per Share Applicable to 7,857,606 Outstanding $0.001 Par Value Shares (Authorized 500,000,000 Shares) | $ | 8.68 | |||||
CLASS II: | |||||||
Net Assets | $ | 12,197 | |||||
Net Asset Value, Offering and Redemption Price Per Share Applicable to 1,384,408 Outstanding $0.001 Par Value Shares (Authorized 500,000,000 Shares) | $ | 8.81 |
The accompanying notes are an integral part of the financial statements.
11
Morgan Stanley Variable Insurance Fund, Inc.
Semi-Annual Report – June 30, 2023 (unaudited)
Core Plus Fixed Income Portfolio
Statement of Operations | Six Months Ended June 30, 2023 (000) | ||||||
Investment Income: | |||||||
Interest from Securities of Unaffiliated Issuers (Net of $1 of Foreign Taxes Withheld) | $ | 1,930 | |||||
Dividends from Security of Affiliated Issuer (Note H) | 302 | ||||||
Income from Securities Loaned — Net | 4 | ||||||
Total Investment Income | 2,236 | ||||||
Expenses: | |||||||
Advisory Fees (Note B) | 156 | ||||||
Servicing Fees (Note D) | 60 | ||||||
Professional Fees | 56 | ||||||
Administration Fees (Note C) | 33 | ||||||
Custodian Fees (Note G) | 24 | ||||||
Pricing Fees | 23 | ||||||
Shareholder Reporting Fees | 17 | ||||||
Distribution Fees — Class II Shares (Note E) | 16 | ||||||
Transfer Agency Fees (Note F) | 7 | ||||||
Directors' Fees and Expenses | 3 | ||||||
Other Expenses | 31 | ||||||
Total Expenses | 426 | ||||||
Waiver of Advisory Fees (Note B) | (138 | ) | |||||
Rebate from Morgan Stanley Affiliate (Note H) | (10 | ) | |||||
Net Expenses | 278 | ||||||
Net Investment Income | 1,958 | ||||||
Realized Loss: | |||||||
Investments Sold | (2,606 | ) | |||||
Foreign Currency Forward Exchange Contracts | (333 | ) | |||||
Foreign Currency Translation | (5 | ) | |||||
Futures Contracts | (168 | ) | |||||
Swap Agreements | (45 | ) | |||||
Net Realized Loss | (3,157 | ) | |||||
Change in Unrealized Appreciation (Depreciation): | |||||||
Investments (Net of Increase in Deferred Capital Gain Country Tax of $1) | 3,227 | ||||||
Foreign Currency Forward Exchange Contracts | 240 | ||||||
Foreign Currency Translation | 16 | ||||||
Futures Contracts | (105 | ) | |||||
Swap Agreements | 31 | ||||||
Net Change in Unrealized Appreciation (Depreciation) | 3,409 | ||||||
Net Realized Loss and Change in Unrealized Appreciation (Depreciation) | 252 | ||||||
Net Increase in Net Assets Resulting from Operations | $ | 2,210 |
The accompanying notes are an integral part of the financial statements.
12
Morgan Stanley Variable Insurance Fund, Inc.
Semi-Annual Report – June 30, 2023
Core Plus Fixed Income Portfolio
Statements of Changes in Net Assets | Six Months Ended June 30, 2023 (unaudited) (000) | Year Ended December 31, 2022 (000) | |||||||||
Increase (Decrease) in Net Assets: | |||||||||||
Operations: | |||||||||||
Net Investment Income | $ | 1,958 | $ | 3,035 | |||||||
Net Realized Loss | (3,157 | ) | (6,019 | ) | |||||||
Net Change in Unrealized Appreciation (Depreciation) | 3,409 | (11,329 | ) | ||||||||
Net Increase (Decrease) in Net Assets Resulting from Operations | 2,210 | (14,313 | ) | ||||||||
Dividends and Distributions to Shareholders: | |||||||||||
Class I | — | (4,090 | ) | ||||||||
Class II | — | (657 | ) | ||||||||
Total Dividends and Distributions to Shareholders | — | (4,747 | ) | ||||||||
Capital Share Transactions:(1) | |||||||||||
Class I: | |||||||||||
Subscribed | 3,199 | 12,715 | |||||||||
Distributions Reinvested | — | 4,090 | |||||||||
Redeemed | (7,384 | ) | (15,846 | ) | |||||||
Class II: | |||||||||||
Subscribed | 854 | 1,115 | |||||||||
Distributions Reinvested | — | 657 | |||||||||
Redeemed | (1,890 | ) | (2,543 | ) | |||||||
Net Increase (Decrease) in Net Assets Resulting from Capital Share Transactions | (5,221 | ) | 188 | ||||||||
Total Decrease in Net Assets | (3,011 | ) | (18,872 | ) | |||||||
Net Assets: | |||||||||||
Beginning of Period | 83,383 | 102,255 | |||||||||
End of Period | $ | 80,372 | $ | 83,383 | |||||||
(1) Capital Share Transactions: | |||||||||||
Class I: | |||||||||||
Shares Subscribed | 368 | 1,435 | |||||||||
Shares Issued on Distributions Reinvested | — | 467 | |||||||||
Shares Redeemed | (850 | ) | (1,732 | ) | |||||||
Net Increase (Decrease) in Class I Shares Outstanding | (482 | ) | 170 | ||||||||
Class II: | |||||||||||
Shares Subscribed | 97 | 118 | |||||||||
Shares Issued on Distributions Reinvested | — | 74 | |||||||||
Shares Redeemed | (214 | ) | (272 | ) | |||||||
Net Decrease in Class II Shares Outstanding | (117 | ) | (80 | ) |
The accompanying notes are an integral part of the financial statements.
13
Morgan Stanley Variable Insurance Fund, Inc.
Semi-Annual Report – June 30, 2023
Financial Highlights
Core Plus Fixed Income Portfolio
Class I | |||||||||||||||||||||||||||
Six Months Ended June 30, 2023 | Year Ended December 31, | ||||||||||||||||||||||||||
Selected Per Share Data and Ratios | (unaudited) | 2022 | 2021 | 2020 | 2019 | 2018 | |||||||||||||||||||||
Net Asset Value, Beginning of Period | $ | 8.45 | $ | 10.47 | $ | 11.72 | $ | 11.31 | $ | 10.63 | $ | 10.98 | |||||||||||||||
Income (Loss) from Investment Operations: | |||||||||||||||||||||||||||
Net Investment Income(1) | 0.20 | 0.32 | 0.26 | 0.28 | 0.35 | 0.34 | |||||||||||||||||||||
Net Realized and Unrealized Gain (Loss) | 0.03 | (1.80 | ) | (0.29 | ) | 0.58 | 0.79 | (0.41 | ) | ||||||||||||||||||
Total from Investment Operations | 0.23 | (1.48 | ) | (0.03 | ) | 0.86 | 1.14 | (0.07 | ) | ||||||||||||||||||
Distributions from and/or in Excess of: | |||||||||||||||||||||||||||
Net Investment Income | — | (0.37 | ) | (0.46 | ) | (0.33 | ) | (0.46 | ) | (0.28 | ) | ||||||||||||||||
Net Realized Gain | — | (0.17 | ) | (0.76 | ) | (0.12 | ) | — | — | ||||||||||||||||||
Total Distributions | — | (0.54 | ) | (1.22 | ) | (0.45 | ) | (0.46 | ) | (0.28 | ) | ||||||||||||||||
Net Asset Value, End of Period | $ | 8.68 | $ | 8.45 | $ | 10.47 | $ | 11.72 | $ | 11.31 | $ | 10.63 | |||||||||||||||
Total Return(2) | 2.72 | %(3) | (14.33 | )% | (0.32 | )% | 7.80 | % | 10.88 | %(4) | (0.65 | )% | |||||||||||||||
Ratios to Average Net Assets and Supplemental Data: | |||||||||||||||||||||||||||
Net Assets, End of Period (Thousands) | $ | 68,175 | $ | 70,482 | $ | 85,556 | $ | 86,993 | $ | 92,157 | $ | 70,476 | |||||||||||||||
Ratio of Expenses Before Expense Limitation | 0.98 | %(5) | 0.98 | % | 0.82 | % | 0.75 | % | 0.77 | % | 0.76 | % | |||||||||||||||
Ratio of Expenses After Expense Limitation | 0.63 | %(5)(6) | 0.64 | %(6) | 0.67 | %(6)(7) | 0.68 | %(6) | 0.69 | %(6) | 0.68 | %(6) | |||||||||||||||
Ratio of Expenses After Expense Limitation Excluding Interest Expenses | N/A | N/A | N/A | 0.68 | %(6) | N/A | N/A | ||||||||||||||||||||
Ratio of Net Investment Income | 4.74 | %(5)(6) | 3.47 | %(6) | 2.35 | %(6) | 2.47 | %(6) | 3.16 | %(6) | 3.12 | %(6) | |||||||||||||||
Ratio of Rebate from Morgan Stanley Affiliates | 0.02 | %(5) | 0.01 | % | 0.01 | % | 0.02 | % | 0.01 | % | 0.02 | % | |||||||||||||||
Portfolio Turnover Rate | 191 | %(3) | 272 | % | 399 | % | 296 | % | 231 | % | 220 | % |
(1) Per share amount is based on average shares outstanding.
(2) Calculated based on the net asset value as of the last business day of the period. Performance does not reflect fees and expenses imposed by your insurance company's separate account. If performance information included the effect of these additional charges, the total return would be lower.
(3) Not annualized.
(4) Performance was positively impacted by approximately 0.10% due to the receipt of proceeds from the settlement of class action suit involving the Fund's past holdings. This was a one-time settlement, and as a result, the impact on the NAV and consequently the performance will not likely be repeated in the future. Had this settlement not occurred, the total return for Class I shares would have been approximately 10.78%.
(5) Annualized.
(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) Effective July 1, 2021, the Adviser has agreed to limit the ratio of expenses to average net assets to the maximum ratio of 0.65% for Class I shares. Prior to July 1, 2021, the maximum ratio was 0.70% for Class I shares.
The accompanying notes are an integral part of the financial statements.
14
Morgan Stanley Variable Insurance Fund, Inc.
Semi-Annual Report – June 30, 2023
Financial Highlights
Core Plus Fixed Income Portfolio
Class II | |||||||||||||||||||||||||||
Six Months Ended June 30, 2023 | Year Ended December 31, | ||||||||||||||||||||||||||
Selected Per Share Data and Ratios | (unaudited) | 2022 | 2021 | 2020 | 2019 | 2018 | |||||||||||||||||||||
Net Asset Value, Beginning of Period | $ | 8.59 | $ | 10.56 | $ | 11.68 | $ | 11.27 | $ | 10.59 | $ | 10.94 | |||||||||||||||
Income (Loss) from Investment Operations: | |||||||||||||||||||||||||||
Net Investment Income(1) | 0.20 | 0.30 | 0.24 | 0.25 | 0.32 | 0.31 | |||||||||||||||||||||
Net Realized and Unrealized Gain (Loss) | 0.02 | (1.82 | ) | (0.30 | ) | 0.58 | 0.79 | (0.41 | ) | ||||||||||||||||||
Total from Investment Operations | 0.22 | (1.52 | ) | (0.06 | ) | 0.83 | 1.11 | (0.10 | ) | ||||||||||||||||||
Distributions from and/or in Excess of: | |||||||||||||||||||||||||||
Net Investment Income | — | (0.28 | ) | (0.30 | ) | (0.30 | ) | (0.43 | ) | (0.25 | ) | ||||||||||||||||
Net Realized Gain | — | (0.17 | ) | (0.76 | ) | (0.12 | ) | — | — | ||||||||||||||||||
Total Distributions | — | (0.45 | ) | (1.06 | ) | (0.42 | ) | (0.43 | ) | (0.25 | ) | ||||||||||||||||
Net Asset Value, End of Period | $ | 8.81 | $ | 8.59 | $ | 10.56 | $ | 11.68 | $ | 11.27 | $ | 10.59 | |||||||||||||||
Total Return(2) | 2.56 | %(3) | (14.58 | )% | (0.54 | )% | 7.55 | % | 10.61 | %(4) | (0.91 | )% | |||||||||||||||
Ratios to Average Net Assets and Supplemental Data: | |||||||||||||||||||||||||||
Net Assets, End of Period (Thousands) | $ | 12,197 | $ | 12,901 | $ | 16,699 | $ | 94,060 | $ | 95,952 | $ | 91,733 | |||||||||||||||
Ratio of Expenses Before Expense Limitation | 1.23 | %(5) | 1.23 | % | 1.07 | % | 1.00 | % | 1.02 | % | 1.01 | % | |||||||||||||||
Ratio of Expenses After Expense Limitation | 0.88 | %(5)(6) | 0.89 | %(6) | 0.92 | %(6)(7) | 0.93 | %(6) | 0.94 | %(6) | 0.93 | %(6) | |||||||||||||||
Ratio of Expenses After Expense Limitation Excluding Interest Expenses | N/A | N/A | N/A | 0.93 | %(6) | N/A | N/A | ||||||||||||||||||||
Ratio of Net Investment Income | 4.49 | %(5)(6) | 3.21 | %(6) | 2.10 | %(6) | 2.22 | %(6) | 2.91 | %(6) | 2.87 | %(6) | |||||||||||||||
Ratio of Rebate from Morgan Stanley Affiliates | 0.02 | %(5) | 0.01 | % | 0.01 | % | 0.02 | % | 0.01 | % | 0.02 | % | |||||||||||||||
Portfolio Turnover Rate | 191 | %(3) | 272 | % | 399 | % | 296 | % | 231 | % | 220 | % |
(1) Per share amount is based on average shares outstanding.
(2) Calculated based on the net asset value as of the last business day of the period. Performance does not reflect fees and expenses imposed by your insurance company's separate account. If performance information included the effect of these additional charges, the total return would be lower.
(3) Not annualized.
(4) Performance was positively impacted by approximately 0.10% due to the receipt of proceeds from the settlement of class action suit involving the Fund's past holdings. This was a one-time settlement, and as a result, the impact on the NAV and consequently the performance will not likely be repeated in the future. Had this settlement not occurred, the total return for Class II shares would have been approximately 10.51%.
(5) Annualized.
(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) Effective July 1, 2021, the Adviser has agreed to limit the ratio of expenses to average net assets to the maximum ratio of 0.90% for Class II shares. Prior to July 1, 2021, the maximum ratio was 0.95% for Class II shares.
The accompanying notes are an integral part of the financial statements.
15
Morgan Stanley Variable Insurance Fund, Inc.
Semi-Annual Report – June 30, 2023 (unaudited)
Notes to Financial Statements
Morgan Stanley Variable Insurance Fund, Inc. (the "Company") is registered under the Investment Company Act of 1940, as amended (the "Act"), as an open-end management investment company. The Company is comprised of ten separate active, diversified and non-diversified funds (individually referred to as a "Fund," collectively as the "Funds"). The Company applies investment company accounting and reporting guidance Accounting Standards Codification ("ASC") Topic 946.
The accompanying financial statements relate to the Core Plus Fixed Income Portfolio. The Fund seeks above-average total return over a market cycle of three to five years by investing primarily in a diversified portfolio of fixed income securities. The Fund offers two classes of shares — Class I and Class II. Both classes of shares have identical voting rights (except that shareholders of a Class have exclusive voting rights regarding any matter relating solely to that Class of shares), dividend, liquidation and other rights.
The Company is intended to be a funding vehicle for variable annuity contracts and variable life insurance policies offered by the separate accounts of certain life insurance companies.
A. Significant Accounting Policies: The following significant accounting policies are in conformity with U.S. generally accepted accounting principles ("GAAP"). Such policies are consistently followed by the Company in the preparation of its financial statements. GAAP may require management to make estimates and assumptions that affect the reported amounts and disclosures in the financial statements. Actual results may differ from those estimates.
1. Security Valuation: (1) Fixed income securities may be valued by an outside pricing service/vendor approved by the Company's Board of Directors (the "Directors"). The pricing service/vendor may employ a pricing model that takes into account, among other things, bids, yield spreads and/or other market data and specific security characteristics. If Morgan Stanley Investment Management Inc. (the "Adviser"), a wholly-owned subsidiary of Morgan Stanley, determines that the price provided by the outside pricing service/vendor does not reflect the security's fair value or is unable to provide a price, prices from brokers/dealers may also be utilized. In these circumstances, the value of the security will be the mean of bid and asked prices obtained from brokers/dealers; (2) futures are valued at the settlement price on the exchange on which they trade or, if a settlement price is unavailable, at the last sale price on the exchange; (3) when market quotations are not readily available, as defined by Rule 2a-5 under the Act, including circumstances under which the Adviser determines that the closing price, last sale price or the mean between the last reported bid and
asked prices are not reflective of a security's market value, portfolio securities are valued at their fair value as determined in good faith under procedures approved by and under the general supervision of the Directors. Occasionally, developments affecting the closing prices of securities and other assets may occur between the times at which valuations of such securities are determined (that is, close of the foreign market on which the securities trade) and the close of business of the New York Stock Exchange ("NYSE"). If developments occur during such periods that are expected to materially affect the value of such securities, such valuations may be adjusted to reflect the estimated fair value of such securities as of the close of the NYSE, as determined in good faith by the Directors or by the Adviser using a pricing service and/or procedures approved by the Directors; (4) foreign exchange transactions ("spot contracts") and foreign exchange forward contracts ("forward contracts") are valued daily using an independent pricing vendor at the spot and forward rates, respectively, as of the close of the NYSE; and (5) investments in mutual funds, including the Morgan Stanley Institutional Liquidity Funds, are valued at the net asset value ("NAV") as of the close of each business day.
In connection with Rule 2a-5 of the Act, the Directors have designated the Company's Adviser as its valuation designee. The valuation designee has responsibility for determining fair value and to make the actual calculations pursuant to the fair valuation methodologies previously approved by the Directors. Under procedures approved by the Directors, the Company's Adviser, as valuation designee, has formed a Valuation Committee whose members are approved by the Directors. The Valuation Committee provides administration and oversight of the Company's valuation policies and procedures, which are reviewed at least annually by the Directors. These procedures allow the Company to utilize independent pricing services, quotations from securities and financial instrument dealers and other market sources to determine fair value.
2. Fair Value Measurement: Financial Accounting Standards Board ("FASB") ASC 820, "Fair Value Measurement" ("ASC 820"), defines fair value as the price that would be received to sell an asset or pay to transfer a liability in an orderly transaction between market participants at the measurement date. ASC 820 establishes a three-tier hierarchy to distinguish between (1) inputs that reflect the assumptions market participants would use in valuing an asset or liability developed based on market data obtained from sources independent of the reporting entity (observable inputs) and (2) inputs that reflect the
16
Morgan Stanley Variable Insurance Fund, Inc.
Semi-Annual Report – June 30, 2023 (unaudited)
Notes to Financial Statements (cont'd)
reporting entity's own assumptions about the assumptions market participants would use in valuing an asset or liability developed based on the best information available in the circumstances (unobservable inputs) and to establish classification of fair value measurements for disclosure purposes. Various inputs are used in determining the value of the Fund's investments. The inputs are summarized in the three broad levels listed below:
• Level 1 – unadjusted quoted prices in active markets for identical investments
• Level 2 – other significant observable inputs (including quoted prices for similar investments, interest rates, prepayment speeds, credit risk, etc.)
• Level 3 – significant unobservable inputs including the Fund's own assumptions in determining the fair value of investments. Factors considered in making this determination may include, but are not limited to, information obtained by contacting the issuer, analysts, or the appropriate stock exchange (for exchange-traded securities), analysis of the issuer's financial statements or other available documents and, if necessary, available information concerning other securities in similar circumstances.
The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities and the determination of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to each security.
The following is a summary of the inputs used to value the Fund's investments as of June 30, 2023:
Investment Type | Level 1 Unadjusted quoted prices (000) | Level 2 Other significant observable inputs (000) | Level 3 Significant unobservable inputs (000) | Total (000) | |||||||||||||||
Assets: | |||||||||||||||||||
Fixed Income Securities | |||||||||||||||||||
Agency Adjustable Rate Mortgage | $ | — | $ | 10 | $ | — | $ | 10 | |||||||||||
Agency Fixed Rate Mortgages | — | 19,574 | — | 19,574 | |||||||||||||||
Asset-Backed Securities | — | 7,182 | — | 7,182 | |||||||||||||||
Collateralized Mortgage Obligations - Agency Collateral Series | — | 411 | — | 411 | |||||||||||||||
Commercial Mortgage - Backed Securities | — | 7,068 | — | 7,068 | |||||||||||||||
Corporate Bonds | — | 23,272 | — | 23,272 | |||||||||||||||
Mortgages - Other | — | 13,998 | — | 13,998 | |||||||||||||||
Municipal Bonds | — | 900 | — | 900 |
Investment Type | Level 1 Unadjusted quoted prices (000) | Level 2 Other significant observable inputs (000) | Level 3 Significant unobservable inputs (000) | Total (000) | |||||||||||||||
Fixed Income Securities (cont'd) | |||||||||||||||||||
Sovereign | $ | — | $ | 4,135 | $ | — | $ | 4,135 | |||||||||||
Supranational | — | 285 | — | 285 | |||||||||||||||
Total Fixed Income Securities | — | 76,835 | — | 76,835 | |||||||||||||||
Short-Term Investments | |||||||||||||||||||
Investment Company | 8,185 | — | — | 8,185 | |||||||||||||||
U.S. Treasury Securities | — | 9,015 | — | 9,015 | |||||||||||||||
Total Short-Term Investments | 8,185 | 9,015 | — | 17,200 | |||||||||||||||
Foreign Currency Forward Exchange Contracts | — | 49 | — | 49 | |||||||||||||||
Futures Contracts | 63 | — | — | 63 | |||||||||||||||
Total Assets | 8,248 | 85,899 | — | 94,147 | |||||||||||||||
Liabilities: | |||||||||||||||||||
Foreign Currency Forward Exchange Contracts | — | (55 | ) | — | (55 | ) | |||||||||||||
Futures Contracts | (190 | ) | — | — | (190 | ) | |||||||||||||
Credit Default Swap Agreement | — | (28 | ) | — | (28 | ) | |||||||||||||
Total Liabilities | (190 | ) | (83 | ) | — | (273 | ) | ||||||||||||
Total | $ | 8,058 | $ | 85,816 | $ | — | $ | 93,874 |
Transfers between investment levels may occur as the markets fluctuate and/or the availability of data used in an investment's valuation changes.
3. Foreign Currency Translation and Foreign Investments: The books and records of the Fund are maintained in U.S. dollars. Foreign currency amounts are translated into U.S. dollars as follows:
— investments, other assets and liabilities at the prevailing rate of exchange on the valuation date;
— investment transactions and investment income at the prevailing rates of exchange on the dates of such transactions.
Although the net assets of the Fund are presented at the foreign exchange rates and market values at the close of the period, the Fund does not isolate that portion of the results of operations arising as a result of changes in the foreign exchange rates from the fluctuations arising from changes in the market prices of securities held at period end. Similarly, the Fund does not isolate the effect of changes in foreign exchange rates from the fluctuations arising from changes in the market prices of securities
17
Morgan Stanley Variable Insurance Fund, Inc.
Semi-Annual Report – June 30, 2023 (unaudited)
Notes to Financial Statements (cont'd)
sold during the period. Accordingly, realized and unrealized foreign currency gains (losses) on investments in securities are included in the reported net realized and unrealized gains (losses) on investment transactions and balances. However, pursuant to U.S. federal income tax regulations, gains and losses from certain foreign currency transactions and the foreign currency portion of gains and losses realized on sales and maturities of foreign denominated debt securities are treated as ordinary income for U.S. federal income tax purposes.
Net realized gains (losses) on foreign currency transactions represent net foreign exchange gains (losses) from sales and maturities of foreign currency forward exchange contracts, disposition of foreign currencies, currency gains (losses) realized between the trade and settlement dates on securities transactions, and the difference be-tween the amount of investment income and foreign withholding taxes recorded on the Fund's books and the U.S. dollar equivalent amounts actually received or paid. The change in unrealized currency gains (losses) on foreign currency transactions for the period is reflected in the Statement of Operations.
Foreign security and currency transactions may involve certain considerations and risks not typically associated with those of U.S. dollar denominated transactions as a result of, among other factors, fluctuations of exchange rates in relation to the U.S. dollar, the possibility of lower levels of governmental supervision and regulation of foreign securities markets and the possibility of political or economic instability.
Governmental approval for foreign investments may be required in advance of making an investment under certain circumstances in some countries, and the extent of foreign investments in U.S. companies may be subject to limitation in other countries. Foreign ownership limitations also may be imposed by the charters of individual companies to prevent, among other concerns, violations of foreign investment limitations. As a result, an additional class of shares (identified as "Foreign" in the Port-folio of Investments) may be created and offered for investment. The "local" and "foreign shares" market values may differ. In the absence of trading of the foreign shares in such markets, the Fund values the foreign shares at the closing exchange price of the local shares.
4. Derivatives: The Fund may, but is not required to, use derivative instruments for a variety of purposes, including hedging, risk management, portfolio management or 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. Derivatives are financial instruments whose value is based, in part, on the value of an underlying asset, interest rate, index or financial instrument. Prevailing interest rates and volatility levels, among other things, also affect the value of derivative instruments. A derivative instrument often has risks similar to its underlying asset and may have additional risks, including imperfect correlation between the value of the derivative and the underlying asset, risks of default by the counterparty to certain transactions, magnification of losses incurred due to changes in the market value of the securities, instruments, indices or interest rates to which the derivative instrument relates, risks that the transactions may not be liquid, 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. All of the Fund's holdings, including derivative instruments, are marked-to-market each day with the change in value reflected in unrealized appreciation (depreciation). Upon disposition, a realized gain or loss is recognized.
Certain derivative transactions may give rise to a form of leverage. Leverage magnifies the potential for gain and the risk of loss. Leverage associated with derivative trans-actions may cause the Fund to liquidate portfolio positions when it may not be advantageous to do so to satisfy its obligations 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 objectives, there is no assurance that the use of derivatives will achieve this result.
Following is a description of the derivative instruments and techniques that the Fund used during the period and their associated risks:
Foreign Currency Forward Exchange Contracts: In connection with its investments in foreign securities, the Fund also entered into contracts with banks, brokers/dealers to purchase or sell foreign currencies at a future date. A foreign currency forward exchange contract ("currency contract") is a negotiated agreement between the contracting parties to exchange a specified amount of currency at a specified future time at a specified rate. The rate can be higher or lower than the spot rate between the currencies that are the subject of the
18
Morgan Stanley Variable Insurance Fund, Inc.
Semi-Annual Report – June 30, 2023 (unaudited)
Notes to Financial Statements (cont'd)
contract. Currency contracts may be used to protect against uncertainty in the level of future foreign currency exchange rates or to gain or modify exposure to a particular currency. In addition, the Fund may use cross currency hedging or proxy hedging with respect to currencies in which the Fund has or expects to have portfolio or currency exposure. Cross currency hedges involve the sale of one currency against the positive exposure to a different currency and may be used for hedging purposes or to establish an active exposure to the exchange rate between any two currencies. To the extent hedged by the use of currency contracts, the precise matching of the currency contract amounts and the value of the securities involved will not generally be possible because the future value of such securities in foreign currencies will change as a consequence of market movements in the value of those securities between the date on which the contract is entered into and the date it matures. Furthermore, such transactions may reduce or preclude the opportunity for gain if the value of the currency should move in the direction opposite to the position taken. There is additional risk to the extent that currency contracts create exposure to currencies in which the Fund's securities are not denominated. Unanticipated changes in currency prices may result in poorer overall performance for the Fund than if it had not entered into such contracts. The use of currency contracts involves the risk of loss from the insolvency or bankruptcy of the counterparty to the contract or the failure of the counter-party to make payments or otherwise comply with the terms of the contract. A currency contract is marked-to-market daily and the change in market value is recorded by the Fund as unrealized gain or loss. The Fund records realized gains (losses) when the currency contract is closed equal to the difference between the value of the currency contract at the time it was opened and the value at the time it was closed.
Futures: A futures contract is a standardized, exchange-traded agreement to buy or sell a specific quantity of an underlying asset, reference rate or index at a specific price at a specific future time. The value of a futures contract tends to increase and decrease in tandem with the value of the underlying instrument. Depending on the terms of the particular contract, futures contracts are settled through either physical delivery of the underlying instrument on the settlement date or by payment of a cash settlement amount on the settlement date. During the period the futures contract is open, payments are received from or made to the broker based upon changes in the value of the contract (the variation margin). A decision as
to whether, when and how to use futures contracts involves the exercise of skill and judgment and even a well-conceived futures transaction may be unsuccessful because of market behavior or unexpected events. In addition to the derivatives risks discussed above, the prices of futures contracts can be highly volatile, using futures contracts can lower total return and the potential loss from futures contracts can exceed the Fund's initial investment in such contracts. No assurance can be given that a liquid market will exist for any particular futures contract at any particular time.
Swaps: The Fund may enter into OTC swap contracts or cleared swap transactions. A swap contract is an agreement between two parties pursuant to which the parties exchange payments at specified dates on the basis of a specified notional amount, with the payments calculated by reference to specified securities, indices, reference rates, currencies or other instruments. Typically swap agreements provide that when the period payment dates for both parties are the same, the payments are made on a net basis (i.e., the two payment streams are netted out, with only the net amount paid by one party to the other). The Fund's obligations or rights under a swap contract entered into on a net basis will generally be equal only to the net amount to be paid or received under the agreement, based on the relative values of the positions held by each party. Cleared swap transactions may help reduce counterparty credit risk. In a cleared swap, the Fund's ultimate counterparty is a clearinghouse rather than a swap dealer, bank or other financial institution. OTC swap agreements are not entered into or traded on exchanges and often there is no central clearing or guaranty function for OTC swaps. These OTC swaps are often subject to credit risk or the risk of default or non-performance by the counterparty. Both OTC and cleared swaps could result in losses if interest rates, foreign currency exchange rates or other factors are not correctly anticipated by the Fund or if the reference index, security or investments do not perform as expected. During the period swap agreements are open, payments are received from or made to the counterparty or clearing-house based on changes in the value of the contract or variation margin, respectively. 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 based on the type of market participant and U.S. Commodities Futures Trading Commission ("CFTC") approval of contracts for central clearing and exchange trading.
19
Morgan Stanley Variable Insurance Fund, Inc.
Semi-Annual Report – June 30, 2023 (unaudited)
Notes to Financial Statements (cont'd)
The Fund's use of swaps during the period included those based on the credit of an underlying security commonly referred to as "credit default swaps." The Fund may be either the buyer or seller in a credit default swap. Where the Fund is the buyer of a credit default swap contract, it would typically be entitled to receive the par (or other agreed-upon) value of a referenced debt obligation from the counterparty to the contract only in the event of a default or similar event by the issuer of the debt obligation. If no default occurs, the Fund would have paid to the counterparty a periodic stream of payments over the term of the contract and received no benefit from the contract. When the Fund is the seller of a credit default swap contract, it typically receives the stream of payments but is obligated to pay an amount equal to the par (or other agreed-upon) value of a referenced debt obligation upon the default or similar event by the issuer of the referenced debt obligation. The use of credit default swaps could result in losses to the Fund if the Adviser fails to correctly evaluate the creditworthiness of the issuer of the referenced debt obligation.
If the Fund is a seller of protection and a credit event occurs, as defined under the terms of that particular swap agreement, the Fund will either (i) pay to the buyer of protection an amount equal to the notional amount of the swap agreement and take delivery of the referenced obligation, other deliverable obligations or underlying securities comprising the referenced index or (ii) pay a net settlement amount in the form of cash or securities equal to the notional amount of the swap agreement less the recovery value of the referenced obligation or underlying securities comprising the referenced index. If the Fund is a buyer of protection and a credit event occurs, as defined under the terms of that particular swap agreement, the Fund will either (i) receive from the seller of protection an amount equal to the notional amount of the swap agreement and deliver the referenced obligation, other deliverable obligations or underlying securities comprising the referenced index or (ii) receive a net settlement amount in the form of cash or securities equal to the notional amount of the swap agreement less the recovery value of the referenced obligation or underlying securities comprising the referenced index. Recovery values are estimated by market makers considering either industry standard recovery rates or entity specific factors and considerations until a credit event occurs. If a credit event has occurred, the recovery value is determined by a facilitated auction whereby a minimum number of allowable
broker bids, together with a specified valuation method, are used to calculate the settlement value. The Fund's maximum risk of loss from counterparty risk, either as the protection seller or as the protection buyer, is the fair value of the swap agreement.
The current credit rating of each individual issuer is listed in the table following the Portfolio of Investments and serves as an indicator of the current status of the payment/performance risk of the credit derivative. Alternatively, for credit default swaps on an index of credits, the quoted market prices and current values serve as an indicator of the current status of the payment/performance risk of the credit derivative. Generally, lower credit ratings and increasing market values, in absolute terms, represent a deterioration of the credit and a greater likelihood of an adverse credit event of the issuer.
When the Fund has an unrealized loss on a swap agreement, the Fund has instructed the custodian to pledge cash or liquid securities as collateral with a value approximately equal to the amount of the unrealized loss. Collateral pledges are monitored and subsequently adjusted if and when the swap valuations fluctuate. If applicable, cash collateral is included with "Due from (to) Broker" in the Statement of Assets and Liabilities.
Upfront payments paid or received by the Fund will be reflected as an asset or liability, respectively, in the Statement of Assets and Liabilities.
FASB ASC 815, "Derivatives and Hedging" ("ASC 815"), is intended to improve financial reporting about derivative instruments by requiring enhanced disclosures to enable investors to better understand how and why the Fund uses derivative instruments, how these derivative instruments are accounted for and their effects on the Fund's financial position and results of operations.
The following tables set forth the fair value of the Fund's derivative contracts by primary risk exposure as of June 30, 2023:
Asset Derivatives Statement of Assets and Liabilities Location | Primary Risk Exposure | Value (000) | |||||||||||||
Foreign Currency Forward Exchange Contracts | Unrealized Appreciation on Foreign Currency Forward Exchange Contracts | Currency Risk | $ | 49 | |||||||||||
Futures Contracts | Variation Margin on Futures Contracts | Interest Rate Risk | 63 | (a) | |||||||||||
Total | $ | 112 |
20
Morgan Stanley Variable Insurance Fund, Inc.
Semi-Annual Report – June 30, 2023 (unaudited)
Notes to Financial Statements (cont'd)
Liability Derivatives Statement of Assets and Liabilities Location | Primary Risk Exposure | Value (000) | |||||||||||||
Foreign Currency Forward Exchange Contracts | Unrealized Depreciation on Foreign Currency Forward Exchange Contracts | Currency Risk | $ | (55 | ) | ||||||||||
Futures Contracts | Variation Margin on Futures Contracts | Interest Rate Risk | (190 | )(a) | |||||||||||
Swap Agreements | Variation Margin on Swap Agreements | Credit Risk | (28 | )(a) | |||||||||||
Total | $ | (273 | ) |
(a) This amount represents the cumulative appreciation (depreciation) as reported in the Portfolio of Investments. The Statement of Assets and Liabilities only reflects the current day's net variation margin.
The following tables set forth by primary risk exposure the Fund's realized gains (losses) and change in unrealized appreciation (depreciation) by type of derivative contract for the six months ended June 30, 2023 in accordance with ASC 815:
Realized Gain (Loss) | |||||||||||
Primary Risk Exposure | Derivative Type | Value (000) | |||||||||
Currency Risk | Foreign Currency Forward Exchange Contracts | $ | (333 | ) | |||||||
Interest Rate Risk | Futures Contracts | (168 | ) | ||||||||
Credit Risk | Swap Agreements | (45 | ) | ||||||||
Total | $ | (546 | ) | ||||||||
Change in Unrealized Appreciation (Depreciation) | |||||||||||
Primary Risk Exposure | Derivative Type | Value (000) | |||||||||
Currency Risk | Foreign Currency Forward Exchange Contracts | $ | 240 | ||||||||
Interest Rate Risk | Futures Contracts | (105 | ) | ||||||||
Credit Risk | Swap Agreements | 31 | |||||||||
Total | $ | 166 |
At June 30, 2023, the Fund's derivative assets and liabilities are as follows:
Gross Amounts of Assets and Liabilities Presented in the Statement of Assets and Liabilities | |||||||||||
Derivatives(a) | Assets(b) (000) | Liabilities(b) (000) | |||||||||
Foreign Currency Forward Exchange Contracts | $49 | $(55) |
(a) Excludes exchange-traded derivatives.
(b) Absent an event of default or early termination, OTC derivative assets and liabilities are presented gross and not offset in the Statement of Assets and Liabilities.
The Fund typically enters into International Swaps and Derivatives Association, Inc. Master Agreements ("ISDA Master Agreements") or similar master agreements (collectively, "Master Agreements") with its contract
counter-parties for certain OTC derivatives in order to, among other things, reduce its credit risk to counterparties. ISDA Master Agreements include provisions for general obligations, representations, collateral and events of default or termination. Under an ISDA Master Agreement, the Fund typically may offset with the counterparty certain OTC derivative financial instruments' payables and/or receivables with collateral held and/or posted and create one single net payment (close-out netting) in the event of default, termination and/or potential deterioration in the credit quality of the counterparty. Various Master Agreements govern the terms of certain transactions with counterparties, including transactions such as swap, forward, repurchase and reverse repurchase agreements. These Master Agreements typically attempt to reduce the counterparty risk associated with such transactions by specifying credit protection mechanisms and providing standardization that improves legal certainty. Cross-termination provisions under Master Agreements typically provide that a default in connection with one transaction between the Fund and a counterparty gives the non-defaulting party the right to terminate any other transactions in place with the defaulting party to create one single net payment due to/due from the defaulting party and may be a feature in certain Master Agreements. In the event the Fund exercises its right to terminate a Master Agreement after a counterparty experiences a termination event as defined in the Master Agreement, the return of collateral with market value in excess of the Fund's net liability may be delayed or denied.
The following tables present derivative financial instruments that are subject to enforceable netting arrangements as of June 30, 2023:
Gross Amounts Not Offset in the Statement of Assets and Liabilities | |||||||||||||||||||
Counterparty | Gross Asset Derivatives Presented in the Statement of Assets and Liabilities (000) | Financial Instrument (000) | Collateral Received (000) | Net Amount (not less than $0) (000) | |||||||||||||||
JPMorgan Chase Bank NA | $ | 1 | $ | (1 | ) | $ | — | $ | 0 | ||||||||||
Royal Bank of Canada (UK) | — | @ | — | — | — | @ | |||||||||||||
UBS AG | 23 | (23 | ) | — | 0 | ||||||||||||||
Westpac Banking Corp. | 25 | — | — | 25 | |||||||||||||||
Total | $ | 49 | $ | (24 | ) | $ | — | $ | 25 |
21
Morgan Stanley Variable Insurance Fund, Inc.
Semi-Annual Report – June 30, 2023 (unaudited)
Notes to Financial Statements (cont'd)
Gross Amounts Not Offset in the Statement of Assets and Liabilities | |||||||||||||||||||
Counterparty | Gross Liability Derivatives Presented in the Statement of Assets and Liabilities (000) | Financial Instrument (000) | Collateral Pledged (000) | Net Amount (not less than $0) (000) | |||||||||||||||
Bank of America NA | $ | 3 | $ | — | $ | — | $ | 3 | |||||||||||
Goldman Sachs International | 3 | — | — | 3 | |||||||||||||||
JPMorgan Chase Bank NA | 16 | (1 | ) | — | 15 | ||||||||||||||
UBS AG | 33 | (23 | ) | — | 10 | ||||||||||||||
Total | $ | 55 | $ | (24 | ) | $ | — | $ | 31 |
@ Value is less than $500.
For the six months ended June 30, 2023, the approximate average monthly amount outstanding for each derivative type is as follows:
Foreign Currency Forward Exchange Contracts: | |||||||
Average monthly principal amount | $ | 7,814,000 | |||||
Futures Contracts: | |||||||
Average monthly notional value | $ | 30,209,000 | |||||
Swap Agreements: | |||||||
Average monthly notional amount | $ | 878,000 |
5. When-Issued/Delayed Delivery Securities: The Fund purchases and sells when-issued and delayed delivery securities. Securities purchased on a when-issued or delayed delivery basis are purchased for delivery beyond the normal settlement date at a stated price and yield, and no income accrues to the Fund on such securities prior to delivery date. Payment and delivery for when-issued and delayed delivery securities can take place a month or more after the date of the transaction. When the Fund enters into a purchase transaction on a when-issued or delayed delivery basis, securities are available for collateral in an amount at least equal in value to the Fund's commitments to purchase such securities. Purchasing securities on a when-issued or delayed delivery basis may involve a risk that the market price at the time of delivery may be lower than the agreed upon purchase price, in which case there could be an unrealized loss at the time of delivery. Purchasing investments on a when-issued or delayed delivery basis may be considered a form of leverage which may increase the impact that gains (losses) may have on the Fund.
6. Securities Lending: The Fund lends securities to qualified financial institutions, such as broker/dealers, to earn additional income. Any increase or decrease in the fair value of the securities loaned that might occur and any interest earned or dividends declared on those
securities during the term of the loan would remain in the Fund. The Fund would receive cash or securities as collateral in an amount equal to or exceeding 100% of the current fair value of the loaned securities. The collateral is marked-to-market daily by State Street Bank and Trust Company ("State Street"), the securities lending agent, to ensure that a minimum of 100% collateral coverage is maintained.
Based on pre-established guidelines, the securities lending agent invests any cash collateral that is received in an affiliated money market portfolio and repurchase agreements. Securities lending income is generated from the earnings on the invested collateral and borrowing fees, less any rebates owed to the borrowers and compensation to the lending agent, and is recorded as "Income from Securities Loaned — Net" in the Fund's Statement of Operations. Risks in securities lending transactions are that a borrower may not provide additional collateral when required or return the securities when due, and that the value of the short-term investments will be less than the amount of cash collateral plus any rebate that is required to be returned to the borrower.
The Fund has the right under the securities lending agreement to recover the securities from the borrower on demand.
At June 30, 2023, the Fund did not have any outstanding securities on loan.
7. Indemnifications: The Company enters into contracts that contain a variety of indemnifications. The Company's maximum exposure under these arrangements is unknown. However, the Company has not had prior claims or losses pursuant to these contracts and expects the risk of loss to be remote.
8. Security Transactions, Income and Expenses: Security transactions are accounted for on the trade date (date the order to buy or sell is executed). Realized gains and losses on the sale of investment securities are determined on the specific identified cost method. Dividend income and other distributions are recorded on the ex-dividend date net of applicable withholding taxes. Non-cash dividends received in the form of stock, if any, are recognized on the ex-dividend date and recorded as non-cash dividend income at fair value. Interest income is recognized on the accrual basis (except where collection is in doubt) net of applicable withholding taxes. Discounts are accreted and premiums are amortized over the life of the respective securities. Most expenses of the Company can be directly attributed to a particular Fund. Expenses which cannot be directly attributed are
22
Morgan Stanley Variable Insurance Fund, Inc.
Semi-Annual Report – June 30, 2023 (unaudited)
Notes to Financial Statements (cont'd)
apportioned among the Funds based upon relative net assets or other appropriate methods. Income, expenses (other than class specific expenses) and realized and unrealized gains or losses are allocated to each class of shares based upon their relative net assets.
Settlement and registration of foreign securities transactions may be subject to significant risks not normally associated with investments in the United States. In certain markets, ownership of shares is defined according to entries in the issuer's share register. It is possible that a Fund holding these securities could lose its share registration through fraud, negligence or even mere oversight. In addition, shares being delivered for sales and cash being paid for purchases may be delivered before the ex-change is complete. This may subject the Fund to further risk of loss in the event of a failure to complete the transaction by the counterparty.
9. Dividends and Distributions to Shareholders: Dividends and distributions to shareholders are recorded on the ex-dividend date. Dividends from net investment income, if any, are declared and paid annually. Net realized capital gains, if any, are distributed at least annually.
B. Advisory Fees: The Adviser, a wholly-owned subsidiary of Morgan Stanley, provides the Fund with advisory services under the terms of an Investment Advisory Agreement, paid quarterly, at the annual rate based on the daily net assets as follows:
First $1 | Over $1 | ||||||
0.375% | 0.30% |
For the six months ended June 30, 2023, the advisory fee rate (net of waiver/rebate) was equivalent to an annual effective rate of 0.02% of the Fund's average daily net assets.
The Adviser has agreed to reduce its advisory fee and/or re-imburse the Fund so that total annual Fund operating expenses, excluding certain investment related expenses, taxes, interest and other extraordinary expenses (including litigation), will not exceed 0.65% for Class I shares and 0.90% for Class II shares. The fee waivers and/or expense reimbursements will continue for at least one year from the date of the Fund's prospectus or until such time as the Directors act to discontinue all or a portion of such waivers and/or reimbursements when they deem such action is appropriate. For the six months ended June 30, 2023, approximately $138,000 of advisory fees were waived pursuant to this arrangement.
C. Administration Fees: The Adviser also serves as Administrator to the Company and provides administrative
services pursuant to an Administration Agreement for an annual fee, accrued daily and paid monthly, of 0.08% of the Fund's average daily net assets.
Under a Sub-Administration Agreement between the Administrator and State Street, State Street provides certain administrative services to the Company. For such services, the Administrator pays State Street a portion of the fee the Administrator receives from the Fund.
D. Servicing Fees: The Company accrues daily and pays quarterly a servicing fee of up to 0.17% of the average daily value of shares of the Fund held in an insurance company's account. Certain insurance companies have entered into a servicing agreement with the Company to provide administrative and other contract-owner related services on behalf of the Fund.
E. Distribution Fees: Morgan Stanley Distribution, Inc. ("MSDI" or the "Distributor"), a wholly-owned subsidiary of the Adviser and an indirect subsidiary of Morgan Stanley, serves as the Distributor of the Fund and provides the Fund's Class II shareholders with distribution services pursuant to a Distribution Plan (the "Plan") in accordance with Rule 12b-1 under the Act. Under the Plan, the Fund is authorized to pay the Distributor a distribution fee, which is accrued daily and paid monthly, at an annual rate of 0.25% of the Fund's average daily net assets attributable to Class II shares.
F. Dividend Disbursing and Transfer/Co-Transfer Agent: The Company's dividend disbursing and transfer agent is SS&C Global Investor & Distribution Solutions, Inc. ("SS&C GIDS, Inc."). Pursuant to a Transfer Agency Agreement, the Company pays SS&C GIDS, Inc. a fee based on the number of classes, accounts and transactions relating to the Funds of the Company.
Eaton Vance Management ("EVM"), an affiliate of Morgan Stanley, provides co-transfer agency and related services to the Fund pursuant to a Co-Transfer Agency Services Agreement. For the six months ended June 30, 2023, co-transfer agency fees and expenses incurred to EVM, included in "Transfer Agency Fees" in the Statement of Operations, amounted to less than $500.
G. Custodian Fees: State Street (the "Custodian") also serves as Custodian for the Company in accordance with a Custodian Agreement. The Custodian holds cash, securities and other assets of the Company as required by the Act. Custody fees are payable monthly based on assets held in custody, investment purchases and sales activity and account maintenance fees, plus reimbursement for certain out-of-pocket expenses.
23
Morgan Stanley Variable Insurance Fund, Inc.
Semi-Annual Report – June 30, 2023 (unaudited)
Notes to Financial Statements (cont'd)
H. Security Transactions and Transactions with Affiliates: For the six months ended June 30, 2023, purchases and sales of investment securities for the Fund, other than long-term U.S. Government securities and short-term investments were approximately $13,044,000 and $19,145,000, respectively. For the six months ended June 30, 2023, purchases and sales of long-term U.S. Government securities were approximately $142,183,000 and $142,139,000, respectively.
The Fund invests in the Institutional Class of the Morgan Stanley Institutional Liquidity Funds — Government Portfolio (the "Liquidity Funds"), an open-end management investment company managed by the Adviser, both directly and as a portion of the securities held as collateral on loaned securities. Advisory fees paid by the Fund are reduced by an amount equal to its pro-rata share of the advisory and administration fees paid by the Fund due to its investment in the Liquidity Funds. For the six months ended June 30, 2023, advisory fees paid were reduced by approximately $10,000 relating to the Fund's investment in the Liquidity Funds.
A summary of the Fund's transactions in shares of affiliated investments during the six months ended June 30, 2023 is as follows:
Affiliated Investment Company | Value December 31, 2022 (000) | Purchases at Cost (000) | Proceeds from Sales (000) | Dividend Income (000) | |||||||||||||||
Liquidity Funds | $ | 10,218 | $ | 20,932 | $ | 22,965 | $ | 302 |
Affiliated Investment Company (cont'd) | Realized Gain (Loss) (000) | Change in Unrealized Appreciation (Depreciation) (000) | Value June 30, 2023 (000) | ||||||||||||
Liquidity Funds | $ | — | $ | — | $ | 8,185 |
The Fund has an unfunded Deferred Compensation Plan (the "Compensation Plan"), which allows each independent Director to defer payment of all, or a portion, of the fees he or she receives for serving on the Board of Directors. Each eligible Director generally may elect to have the deferred amounts credited with a return equal to the total return on one or more of the Morgan Stanley funds that are offered as investment options under the Compensation Plan. Appreciation/depreciation and distributions received from these investments are recorded with an offsetting increase/decrease in the deferred compensation obligation and do not affect the NAV of the Fund.
I. Federal Income Taxes: It is the Fund's intention to continue to qualify as a regulated investment company and distribute all of its taxable and tax-exempt income. Accordingly, no provision for federal income taxes is required in the financial statements.
The Fund may be subject to taxes imposed by countries in which it invests. Such taxes are generally based on income and/or capital gains earned or repatriated. Taxes are accrued based on net investment income, net realized gains and net unrealized appreciation as such income and/or gains are earned. Taxes may also be based on transactions in foreign currency and are accrued based on the value of investments denominated in such currency.
FASB ASC 740-10, "Income Taxes — Overall", sets forth a minimum threshold for financial statement recognition of the benefit of a tax position taken or expected to be taken in a tax return. Management has concluded there are no significant uncertain tax positions that would require recognition in the financial statements. If applicable, the Fund recognizes interest accrued related to unrecognized tax benefits in "Interest Expense" and penalties in "Other Expenses" in the Statement of Operations. The Fund files tax returns with the U.S. Internal Revenue Service, New York and various states. Generally, each of the tax years in the four-year period ended December 31, 2022 remains subject to examination by taxing authorities.
The tax character of distributions paid may differ from the character of distributions shown for GAAP purposes due to short-term capital gains being treated as ordinary income for tax purposes. The tax character of distributions paid during fiscal years 2022 and 2021 was as follows:
2022 Distributions Paid From: | 2021 Distributions Paid From: | ||||||||||||||
Ordinary Income (000) | Long-Term Capital Gain (000) | Ordinary Income (000) | Long-Term Capital Gain (000) | ||||||||||||
$ | 3,240 | $ | 1,507 | $ | 8,540 | $ | 2,064 |
The amount and character of income and gains to be distributed are determined in accordance with income tax regulations which may differ from GAAP. These book/tax differences are either considered temporary or permanent in nature.
Temporary differences are attributable to differing book and tax treatments for the timing of the recognition of gains (losses) on certain investment transactions and the timing of the deductibility of certain expenses.
The Fund had no permanent differences causing reclassifications among the components of net assets for the year ended December 31, 2022.
At December 31, 2022, the components of distributable earnings for the Fund on a tax basis were as follows:
Undistributed | Undistributed | ||||||
$3,403 | $— |
24
Morgan Stanley Variable Insurance Fund, Inc.
Semi-Annual Report – June 30, 2023 (unaudited)
Notes to Financial Statements (cont'd)
At December 31, 2022, the Fund had available for federal income tax purposes unused short-term and long-term capital losses of approximately $3,155,000 and 3,555,000, respectively, that do not have an expiration date.
To the extent that capital loss carryforwards are used to offset any future capital gains realized, no capital gains tax liability will be incurred by the Fund for gains realized and not dis-tributed. To the extent that capital gains are offset, such gains will not be distributed to the shareholders.
J. Credit Facility: The Company and other Morgan Stanley funds participated in a $300,000,000 committed, unsecured revolving line of credit facility (the "Facility") with State Street. Effective April 17, 2023, the committed line amount increased to $500,000,000. This Facility is to be used for temporary emergency purposes or funding of shareholder redemption requests. The interest rate for any funds drawn will be based on the federal funds rate or overnight bank funding rate plus a spread. The Facility also has a commitment fee of 0.25% per annum based on the unused portion of the Facility, which is allocated among participating funds based on relative net assets. During the six months ended June 30, 2023, the Fund did not have any borrowings under the Facility.
K. Other: At June 30, 2023, the Fund had record owners of 10% or greater. Investment activities of these shareholders could have a material impact on the Fund. The aggregate percentage of such owners was 71.6%.
L. Market Risk: An investment in the Fund is based on the values of the Fund's investments, which may change due to economic and other events that affect markets generally, as well as those that affect particular regions, countries, industries, companies or governments. Social, political, economic and other conditions and events, such as war, natural disasters, health emergencies (e.g., epidemics and pandemics), terrorism, conflicts, social unrest, recessions, inflation, rapid interest rate changes and supply chain disruptions, may occur and could significantly impact issuers, industries, governments and other systems, including the financial markets and global economy. It is difficult to predict when events affecting the U.S. or global financial markets and economies may occur, the effects that such events may have and the duration of those effects (which may last for extended periods). These events may be sudden and significant and may negatively impact broad segments of businesses and populations and have a significant and rapid negative impact on the performance of and/or income or yield from the Fund's investments and exacerbate pre-existing risks to the Fund. 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 ultimate impact of public health emergencies or other adverse economic or market developments and the extent to which the associated conditions impact the Fund and its investments will also depend on other future developments, which are highly uncertain, difficult to accurately predict and subject to change at any time. The financial performance of the Fund's investments (and, in turn, the Fund's investment results) as well as their liquidity may be adversely affected because of these and similar types of factors and developments.
M. LIBOR Discontinuance or Unavailability Risk: The London Interbank Offering Rate ("LIBOR") was a leading floating rate benchmark used in loans, notes, derivatives and other instruments or investments. As a result of benchmark reforms, publication of most LIBOR settings has ceased. Some LIBOR settings continue to be published but only on a temporary, synthetic and non-representative basis. Regulated entities have generally ceased entering into new LIBOR contracts in connection with regulatory guidance or prohibitions. Public and private sector actors have worked to establish new or alternative reference rates to be used in place of LIBOR. There is no assurance that the composition or characteristics of any such new or alternative reference rate will be similar to or produce the same value or economic equivalence as LIBOR or that it will have the same volume or liquidity as did LIBOR, which may affect the value or liquidity or return on certain of the Fund's investments and result in costs incurred in connection with closing out positions and entering into new trades.
Neither the effect of the LIBOR transition process nor its ultimate success can yet be known. The transition process might lead to increased volatility and illiquidity in markets for, and reduce the effectiveness of hedges placed against, instruments whose terms currently include (or previously included) LIBOR. While some LIBOR-based instruments contemplated a scenario where LIBOR is no longer available by providing for an alternative rate-setting methodology, there may be significant uncertainty regarding the effectiveness of any such alternative methodologies to replicate or replace LIBOR. Some of the Fund's investments may be so-called "tough legacy" LIBOR instruments which may not have effective alternative rate-setting provisions or may involve counterparties who are unwilling to add or exercise rights under alternative rate-setting provisions in such instruments. On March 15, 2022, the Adjustable Interest Rate (LIBOR) Act was signed into law. This law provides a statutory fallback mechanism on a nationwide basis to replace U.S. Dollar LIBOR with a benchmark rate that is selected by the Board of Governors of the Federal Reserve System based on the Secured Overnight Financing Rate ("SOFR") for tough legacy contracts. On
25
Morgan Stanley Variable Insurance Fund, Inc.
Semi-Annual Report – June 30, 2023 (unaudited)
Notes to Financial Statements (cont'd)
February 27, 2023, the final rule in connection with this law became effective, establishing benchmark replacements based on SOFR and Term SOFR (a forward-looking measurement of market expectations of SOFR implied from certain derivatives markets) for applicable tough legacy contracts governed by U.S. law. In addition, the FCA has announced that it will require the publication of the one-month, three-month and six-month U.S. Dollar LIBOR settings on the basis of a changed methodology (known as "synthetic LIBOR"), after June 30, 2023 through at least September 30, 2024, addressing non-U.S. law governed U.S. Dollar LIBOR instruments, but this synthetic LIBOR will be designated by the FCA as unrepresentative of the underlying market that it seeks to measure and will be solely available for use in legacy transactions. The transition of investments from LIBOR to a new or replacement rate as a result of amendment, application of existing fallbacks, statutory requirements, the application of synthetic LIBOR or otherwise may also result in a reduction in the value of certain instruments held by the Fund or a reduction in the effectiveness of related Fund transactions such as hedges. In addition, a liquid market for newly-issued instruments that use a reference rate other than LIBOR is still developing. There may also be challenges for the Fund to enter into hedging transactions against such newly-issued instruments until a market for such hedging transactions more fully develops. All of the aforementioned may adversely affect the Fund's investments (including their volatility, value and liquidity) and, as a result, the performance or NAV.
N. Subsequent Event: On April 10, 2023, the Directors of the Company approved a Plan of Liquidation with respect to the Fund. The Fund will suspend the offering of its shares to all investors at the close of business on or about July 26, 2023 and the liquidation is expected to occur on or about July 28, 2023 ("Liquidation Date"). Pursuant to the Fund's Plan of Liquidation, substantially all of the assets of the Fund will be liquidated, known liabilities of the Fund will be satisfied or provided for, the remaining proceeds will be distributed to the Fund's remaining shareholders of the record (in this case insurance company separate accounts) equal to their proportionate interest in the Fund, and all of the issued and outstanding shares of the Fund will be redeemed on the Liquidation Date.
26
Morgan Stanley Variable Insurance Fund, Inc.
Semi-Annual Report – June 30, 2023 (unaudited)
Investment Advisory Agreement Approval
Nature, Extent and Quality of Services
The Board reviewed and considered the nature and extent of the investment advisory services provided by the Adviser under the advisory agreement, including portfolio management, investment research and equity and fixed income securities trading. The Board also reviewed and considered the nature and extent of the non-advisory, administrative services provided by the Administrator under the administration agreement, including accounting, operations, clerical, bookkeeping, compliance, business management and planning, legal services and the provision of supplies, office space and utilities at the Adviser's expense. The Board also considered the Adviser's investment in personnel and infrastructure that benefits the Fund. (The Adviser and Administrator together are referred to as the "Adviser" and the advisory and administration agreements together are referred to as the "Management Agreement.") The Board also considered that the Adviser serves a variety of other investment advisory clients and has experience overseeing service providers. The Board also compared the nature of the services provided by the Adviser with similar services provided by non-affiliated advisers as prepared by Broadridge Financial Solutions, Inc. ("Broadridge").
The Board reviewed and considered the qualifications of the portfolio managers, the senior administrative managers and other key personnel of the Adviser who provide the advisory and administrative services to the Fund. The Board determined that the Adviser's portfolio managers and key personnel are well qualified by education and/or training and experience to perform the services in an efficient and professional manner. The Board concluded that the nature and extent of the advisory and administrative services provided were necessary and appropriate for the conduct of the business and investment activities of the Fund and supported its decision to approve the Management Agreement.
Performance, Fees and Expenses of the Fund
The Board reviewed the performance, fees and expenses of the Fund compared to its peers, as prepared by Broadridge, and to appropriate benchmarks where applicable. The Board discussed with the Adviser the performance goals and the actual results achieved in managing the Fund. When considering a fund's performance, the Board and the Adviser place emphasis on trends and longer-term returns (focusing on one-year, three-year and five-year performance, as of December 31, 2022, or since inception, as applicable). When a fund underperforms its benchmark and/or its peer group average, the Board and the Adviser discuss the causes of such underperformance and, where necessary, they discuss specific changes to investment strategy or investment personnel. The Board noted that the Fund's performance was better than its peer group average for the five-year period but below its peer group average for the one- and three-year periods. The Board discussed with the Adviser the level of the advisory and administration fees (together, the "management fee") for this Fund relative to comparable funds and/or other accounts advised by the Adviser and/or compared to its peers as prepared by Broadridge. In addition to the management fee, the Board also reviewed the Fund's total expense ratio. The Board noted that the Fund's management fee was lower than its peer group average and the Fund's total expense ratio was higher than but close to its peer group average. After discussion, the Board concluded that the Fund's (i) performance was acceptable and (ii) management fee and total expense ratio were competitive with its peer group averages.
Economies of Scale
The Board considered the size and growth prospects of the Fund and how that relates to the Fund's total expense ratio and particularly the Fund's management fee rate, which includes a breakpoint. In conjunction with its review of the Adviser's profitability, the Board discussed with the Adviser how a change in assets can affect the efficiency or effectiveness of managing the Fund and whether the management fee level is appropriate relative to current and projected asset levels and/or whether the management fee structure reflects economies of scale as asset levels change. The Board has determined that its review of the actual and/or potential economies of scale of the Fund supports its decision to approve the Management Agreement.
Profitability of the Adviser and Affiliates
The Board considered information concerning the costs incurred and profits realized by the Adviser and its affiliates during the last year from their relationship with the Fund and during the last two years from their relationship with the Morgan Stanley Fund Complex and reviewed with the Adviser the cost allocation methodology used to determine the profitability of the Adviser
27
Morgan Stanley Variable Insurance Fund, Inc.
Semi-Annual Report – June 30, 2023 (unaudited)
Investment Advisory Agreement Approval (cont'd)
and affiliates. The Board has determined that its review of the analysis of the Adviser's expenses and profitability supports its decision to approve the Management Agreement.
Other Benefits of the Relationship
The Board considered other direct and indirect benefits to the Adviser and/or its affiliates derived from their relationship with the Fund and other funds advised by the Adviser. These benefits may include, among other things, fees for trading, distribution and/or shareholder servicing and for transaction processing and reporting platforms used by securities lending agents, and research received by the Adviser generated from commission dollars spent on funds' portfolio trading. The Board reviewed with the Adviser these arrangements and the reasonableness of the Adviser's costs relative to the services performed. The Board has determined that its review of the other benefits received by the Adviser or its affiliates supports its decision to approve the Management Agreement.
Resources of the Adviser and Historical Relationship Between the Fund and the Adviser
The Board considered whether the Adviser is financially sound and has the resources necessary to perform its obligations under the Management Agreement. The Board also reviewed and considered the historical relationship between the Fund and the Adviser, including the organizational structure of the Adviser, the policies and procedures formulated and adopted by the Adviser for managing the Fund's operations and the Board's confidence in the competence and integrity of the senior managers and key personnel of the Adviser. The Board concluded that the Adviser has the financial resources necessary to fulfill its obligations under the Management Agreement and that it is beneficial for the Fund to continue its relationship with the Adviser.
Other Factors and Current Trends
The Board considered the controls and procedures adopted and implemented by the Adviser and monitored by the Fund's Chief Compliance Officer and concluded that the conduct of business by the Adviser indicates a good faith effort on its part to adhere to high ethical standards in the conduct of the Fund's business.
General Conclusion
After considering and weighing all of the above factors, with various written materials and verbal information presented by the Adviser, the Board concluded that it would be in the best interest of the Fund and its shareholders to approve renewal of the Management Agreement for another year. In reaching this conclusion the Board did not give particular weight to any single piece of information or factor referenced above. The Board considered these factors and information over the course of the year and in numerous meetings, some of which were in executive session with only the independent Board members and their counsel present. It is possible that individual Board members may have weighed these factors, and the information presented, differently in reaching their individual decisions to approve the Management Agreement.
28
Morgan Stanley Variable Insurance Fund, Inc.
Semi-Annual Report – June 30, 2023 (unaudited)
Liquidity Risk Management Program
In compliance with Rule 22e-4 under the Investment Company Act of 1940, as amended (the "Liquidity Rule"), the Fund has adopted and implemented a liquidity risk management program (the "Program"), which is reasonably designed to assess and manage the risk that the Fund could not meet requests to redeem shares issued by the Fund without significant dilution of remaining investors' interests in the Fund (i.e., liquidity risk). The Fund's Board of Directors (the "Board") previously approved the designation of the Liquidity Risk Subcommittee (the "LRS") as Program administrator. The LRS is comprised of representatives from various divisions within Morgan Stanley Investment Management.
At a meeting held on March 1-2, 2023, the Board reviewed a written report prepared by the LRS that addressed the Program's operation and assessed its adequacy, and effectiveness of implementation for the period from January 1, 2022, through December 31, 2022, as required under the Liquidity Rule. The report concluded that the Program operated effectively and was adequately and effectively implemented in all material aspects, and that the relevant controls and safeguards were appropriately designed to enable the LRS to administer the Program in compliance with the Liquidity Rule.
In accordance with the Program, the LRS assessed each Fund's liquidity risk no less frequently than annually taking into consideration certain factors, as applicable, such as (i) investment strategy and liquidity of portfolio investments, (ii) short-term and long-term cash flow projections and (iii) holdings of cash and cash equivalents and borrowing arrangements and other funding sources. Certain factors are considered under both normal and reasonably foreseeable stressed conditions.
Each Fund portfolio investment is classified into one of four liquidity categories, which classification is assessed at least monthly by the LRS. The classification is based on a determination of the number of days it is reasonably expected to take to convert the investment into cash, or sell or dispose of the investment, in current market conditions without significantly changing the market value of the investment. Liquidity classification determinations take into account various market, trading and investment-specific considerations, as well as market depth, and in some cases utilize third-party vendor data.
The Liquidity Rule limits a fund's investments in illiquid investments to 15% of its net assets and requires funds that do not primarily hold assets that are highly liquid investments to determine and maintain a minimum percentage of the fund's net assets to be invested in highly liquid investments (highly liquid investment minimum or "HLIM"). The LRS believes that the Program includes provisions reasonably designed to review, monitor and comply with the 15% limit on illiquid investments and for determining, periodically reviewing and complying with the HLIM requirement, as applicable.
There can be no assurance that the Program will achieve its objectives under all circumstances in the future. Please refer to the Fund's prospectus for more information regarding the Fund's exposure to liquidity risk and other risks to which it may be subject.
29
Morgan Stanley Variable Insurance Fund, Inc.
Semi-Annual Report – June 30, 2023 (unaudited)
Directors and Officers Information
Directors
Frank L. Bowman
Frances L. Cashman
Kathleen A. Dennis
Nancy C. Everett
Eddie A. Grier
Jakki L. Haussler
Dr. Manuel H. Johnson
Joseph J. Kearns
Michael F. Klein
Patricia A. Maleski
W. Allen Reed, Chair of the Board
Adviser and Administrator
Morgan Stanley Investment Management Inc.
522 Fifth Avenue
New York, New York 10036
Distributor
Morgan Stanley Distribution, Inc.
522 Fifth Avenue
New York, New York 10036
Dividend Disbursing and Transfer Agent
SS&C Global Investor & Distribution Solutions, Inc.
P.O. Box 219804
Kansas City, Missouri 64121-9804
Co-Transfer Agent
Eaton Vance Management
Two International Place
Boston, Massachusetts 02110
Officers
John H. Gernon
President and Principal Executive Officer
Deidre A. Downes
Chief Compliance Officer
Francis J. Smith
Treasurer and Principal Financial Officer
Mary E. Mullin
Secretary
Michael J. Key
Vice President
Custodian
State Street Bank and Trust Company
One Congress Street
Boston, Massachusetts 02114
Legal Counsel
Dechert LLP
1095 Avenue of the Americas
New York, New York 10036
Counsel to the Independent Directors
Perkins Coie LLP
1155 Avenue of the Americas,
22nd Floor
New York, New York 10036
Independent Registered Public Accounting Firm
Ernst & Young LLP
200 Clarendon Street
Boston, Massachusetts 02116
Reporting to Shareholders
Each Morgan Stanley fund provides a complete schedule of portfolio holdings in its Semi-Annual and the Annual Reports within 60 days of the end of the fund's second and fourth fiscal quarters. The Semi-Annual and Annual Reports are filed electronically with the Securities and Exchange Commission ("SEC") on Form N-CSRS and Form N-CSR, respectively. Morgan Stanley makes these reports available on its public website, www.morganstanley.com/im/shareholderreports. Each Morgan Stanley non-money market fund also files a complete schedule of portfolio holdings with the SEC for the fund's first and third fiscal quarters as an attachment to Form N-PORT. Morgan Stanley does not deliver the reports for the first and third fiscal quarters to shareholders, but makes the complete schedule of portfolio holdings for the fund's first and third fiscal quarters available on its public website. The holdings for each money market fund are also posted to the Morgan Stanley public website. You may obtain the Form N-PORT filings (as well as the Form N-CSR and N-CSRS filings) by accessing the SEC's website, www.sec.gov. You can also request copies of these materials, upon payment of a duplicating fee, by electronic request at the SEC's email address (publicinfo@sec.gov).
Proxy Voting Policies and Procedures and Proxy Voting Record
You may obtain a copy of the Company's Proxy Voting Policy and Procedures and information regarding how the Company voted proxies relating to portfolio securities during the most recent twelve-month period ended June 30, without charge, upon request, by calling toll free 1 (800) 869-6397 or by visiting our website at www.morganstanley.com/im/shareholderreports. This information is also available on the SEC's website at www.sec.gov.
This report is submitted for the general information of the shareholders of the Fund. For more detailed information about the Fund, its fees and expenses and other pertinent information, please read its Prospectus. The Company's Statement of Additional Information contains additional information about the Fund, including its Directors. It is available, without charge, by calling 1 (800) 869-6397.
Householding Notice
To reduce printing and mailing costs, the Fund attempts to eliminate duplicate mailings to the same address. The Fund delivers a single copy of certain shareholder documents, including shareholder reports, prospectuses and proxy materials, to investors with the same last name who reside at the same address. Your participation in this program will continue for an unlimited period of time unless you instruct us otherwise. You can request multiple copies of these documents by calling 1 (800) 869-6397, 8:00 a.m. to 6:00 p.m., ET. Once our Customer Service Center has received your instructions, we will begin sending individual copies for each account within 30 days.
This report is not authorized for distribution to prospective investors in the Fund unless preceded or accompanied by an effective Prospectus. Read the Prospectus carefully before investing.
UIFCPFISAN
5833208 EXP 08.31.24
Morgan Stanley Variable Insurance Fund, Inc.
Semi-Annual Report – June 30, 2023
Discovery Portfolio
The Fund is intended to be a funding vehicle for variable annuity contracts and variable life insurance policies offered by the separate accounts of certain life insurance companies.
Morgan Stanley Variable Insurance Fund, Inc.
Semi-Annual Report – June 30, 2023 (unaudited)
Table of Contents
Consolidated Expense Example | 2 | ||||||
Consolidated Portfolio of Investments | 3 | ||||||
Consolidated Statement of Assets and Liabilities | 6 | ||||||
Consolidated Statement of Operations | 7 | ||||||
Consolidated Statements of Changes in Net Assets | 8 | ||||||
Consolidated Financial Highlights | 9 | ||||||
Notes to Consolidated Financial Statements | 11 | ||||||
Investment Advisory Agreement Approval | 22 | ||||||
Liquidity Risk Management Program | 24 | ||||||
Director and Officer Information | Back Cover |
1
Morgan Stanley Variable Insurance Fund, Inc.
Semi-Annual Report – June 30, 2023 (unaudited)
Consolidated Expense Example
Discovery Portfolio
As a shareholder of the Discovery Portfolio (the "Fund"), you incur two types of costs: (1) insurance company charges; and (2) ongoing costs, which may include advisory fees, administration fees, distribution (12b-1) fees and other Fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.
This example is based on an investment of $1,000 invested at the beginning of the six-month period ended June 30, 2023 and held for the entire six-month period.
Actual Expenses
The table below provides information about actual account values and actual expenses. You may use the information in this table, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the table under the heading entitled "Actual Expenses Paid During Period" to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The table below provides information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any insurance company charges. Therefore, the table below is useful in comparing ongoing costs, but will not help you determine the relative total cost of owning different funds. In addition, if these insurance company charges were included, your costs would have been higher.
Beginning Account Value 1/1/23 | Actual Ending Account Value 6/30/23 | Hypothetical Ending Account Value | Actual Expenses Paid During Period* | Hypothetical Expenses Paid During Period* | Net Expense Ratio During Period** | ||||||||||||||||||||||
Discovery Portfolio Class I | $ | 1,000.00 | $ | 1,289.30 | $ | 1,020.13 | $ | 5.34 | $ | 4.71 | 0.94 | % | |||||||||||||||
Discovery Portfolio Class II | 1,000.00 | 1,288.30 | 1,019.64 | 5.90 | 5.21 | 1.04 |
* Expenses are calculated using each Fund Class' annualized net expense ratio (as disclosed), multiplied by the average account value over the period and multiplied by 181/365 (to reflect the most recent one-half year period).
** Annualized.
2
Morgan Stanley Variable Insurance Fund, Inc.
Semi-Annual Report – June 30, 2023 (unaudited)
Consolidated Portfolio of Investments
Discovery Portfolio
Shares | Value (000) | ||||||||||
Common Stocks (95.9%) | |||||||||||
Biotechnology (2.0%) | |||||||||||
Intellia Therapeutics, Inc. (a) | 16,207 | $ | 661 | ||||||||
ProKidney Corp. (a) | 74,674 | 836 | |||||||||
Roivant Sciences Ltd. (a) | 148,942 | 1,501 | |||||||||
2,998 | |||||||||||
Broadline Retail (8.2%) | |||||||||||
Coupang, Inc. (Korea, Republic of) (a) | 144,924 | 2,522 | |||||||||
Global-e Online Ltd. (Israel) (a) | 246,474 | 10,090 | |||||||||
12,612 | |||||||||||
Chemicals (0.4%) | |||||||||||
Ginkgo Bioworks Holdings, Inc. (a)(b) | 303,298 | 564 | |||||||||
Commercial Services & Supplies (0.4%) | |||||||||||
Aurora Innovation, Inc. (a) | 200,680 | 590 | |||||||||
Entertainment (5.1%) | |||||||||||
ROBLOX Corp., Class A (a) | 192,414 | 7,754 | |||||||||
Financial Services (10.6%) | |||||||||||
Adyen NV (Netherlands) (a) | 4,436 | 7,682 | |||||||||
Affirm Holdings, Inc. (a) | 399,620 | 6,126 | |||||||||
Toast, Inc., Class A (a) | 104,360 | 2,355 | |||||||||
16,163 | |||||||||||
Ground Transportation (1.8%) | |||||||||||
Grab Holdings Ltd., Class A (Singapore) (a) | 798,239 | 2,738 | |||||||||
Health Care Equipment & Supplies (0.3%) | |||||||||||
Penumbra, Inc. N (a) | 1,315 | 453 | |||||||||
Health Care Providers & Services (3.2%) | |||||||||||
Agilon health, Inc. (a) | 282,203 | 4,893 | |||||||||
Health Care Technology (3.7%) | |||||||||||
Doximity, Inc., Class A (a) | 168,001 | 5,715 | |||||||||
Hotels, Restaurants & Leisure (6.2%) | |||||||||||
DoorDash, Inc., Class A (a) | 124,575 | 9,520 | |||||||||
Information Technology Services (7.4%) | |||||||||||
Cloudflare, Inc., Class A (a) | 172,869 | 11,301 | |||||||||
Leisure Products (1.5%) | |||||||||||
Peloton Interactive, Inc., Class A (a) | 291,672 | 2,243 | |||||||||
Life Sciences Tools & Services (5.4%) | |||||||||||
10X Genomics, Inc., Class A (a) | 27,425 | 1,532 | |||||||||
Illumina, Inc. (a) | 36,132 | 6,774 | |||||||||
8,306 | |||||||||||
Media (8.4%) | |||||||||||
Trade Desk, Inc., Class A (a) | 166,733 | 12,875 | |||||||||
Pharmaceuticals (4.5%) | |||||||||||
Royalty Pharma PLC, Class A | 222,569 | 6,842 | |||||||||
Semiconductors & Semiconductor Equipment (0.2%) | |||||||||||
Enphase Energy, Inc. (a) | 1,565 | 262 |
Shares | Value (000) | ||||||||||
Software (16.3%) | |||||||||||
Bills Holdings, Inc. (a) | 60,790 | $ | 7,103 | ||||||||
Gitlab, Inc., Class A (a) | 82,610 | 4,222 | |||||||||
HubSpot, Inc. (a) | 4,460 | 2,373 | |||||||||
MicroStrategy, Inc., Class A (a) | 3,276 | 1,122 | |||||||||
Procore Technologies, Inc. (a) | 60,178 | 3,916 | |||||||||
Samsara, Inc., Class A (a) | 223,157 | 6,184 | |||||||||
24,920 | |||||||||||
Specialty Retail (10.3%) | |||||||||||
Carvana Co. (a) | 92,409 | 2,395 | |||||||||
Chewy, Inc., Class A (a) | 183,167 | 7,230 | |||||||||
Floor & Decor Holdings, Inc., Class A (a) | 36,332 | 3,777 | |||||||||
Wayfair, Inc., Class A (a) | 37,355 | 2,428 | |||||||||
15,830 | |||||||||||
Total Common Stocks (Cost $189,745) | 146,579 | ||||||||||
Preferred Stock (1.4%) | |||||||||||
Software (1.4%) | |||||||||||
Databricks, Inc., Series H (a)(c)(d) (acquisition cost — $2,666; acquired 8/31/21) | 36,279 | 2,085 | |||||||||
Investment Company (1.4%) | |||||||||||
Grayscale Bitcoin Trust (a) (Cost $4,221) | 116,412 | 2,234 | |||||||||
No. of Warrants | |||||||||||
Warrants (0.0%)‡ | |||||||||||
Chemicals (0.0%)‡ | |||||||||||
Ginkgo Bioworks Holdings, Inc. expires 12/31/27 (a) (Cost $55) | 16,415 | 4 | |||||||||
Shares | |||||||||||
Short-Term Investments (2.0%) | |||||||||||
Investment Company (1.6%) | |||||||||||
Morgan Stanley Institutional Liquidity Funds — Treasury Securities Portfolio — Institutional Class (See Note H) (Cost $2,505) | 2,505,494 | 2,505 | |||||||||
Securities held as Collateral on Loaned Securities (0.4%) | |||||||||||
Investment Company (0.4%) | |||||||||||
Morgan Stanley Institutional Liquidity Funds — Treasury Securities Portfolio — Institutional Class (See Note H) | 514,483 | 515 | |||||||||
Face Amount (000) | |||||||||||
Repurchase Agreements (0.0%)‡ | |||||||||||
Citigroup, Inc., (5.00%, dated 6/30/23, due 7/3/23; proceeds $9; fully collateralized by U.S. Government obligations; 0.00% due 7/27/23 - 8/10/23; valued at $9) | $ | 9 | 9 | ||||||||
HSBC Securities USA, Inc., (5.05%, dated 6/30/23, due 7/3/23; proceeds $19; fully collateralized by U.S. Government obligations; 0.00% due 8/15/23 - 11/15/25; valued at $19) | 19 | 19 |
The accompanying notes are an integral part of the consolidated financial statements.
3
Morgan Stanley Variable Insurance Fund, Inc.
Semi-Annual Report – June 30, 2023 (unaudited)
Consolidated Portfolio of Investments (cont'd)
Discovery Portfolio
Face Amount (000) | Value (000) | ||||||||||
Repurchase Agreements (cont'd) | |||||||||||
Merrill Lynch & Co., Inc., (5.05%, dated 6/30/23, due 7/3/23; proceeds $15; fully collateralized by a U.S. Government obligation; 1.63% due 10/15/27; valued at $16) | $ | 15 | $ | 15 | |||||||
43 | |||||||||||
Total Securities held as Collateral on Loaned Securities (Cost $558) | 558 | ||||||||||
Total Short-Term Investments (Cost $3,063) | 3,063 | ||||||||||
Total Investments Excluding Purchased Options (100.7%) (Cost $199,750) | 153,965 | ||||||||||
Total Purchased Options Outstanding (0.3%) (Cost $612) | 412 | ||||||||||
Total Investments (101.0%) (Cost $200,362) Including $519 of Securities Loaned (e)(f)(g) | 154,377 | ||||||||||
Liabilities in Excess of Other Assets (–1.0%) | (1,566 | ) | |||||||||
Net Assets (100.0%) | $ | 152,811 |
‡ Amount is less than 0.05%.
(a) Non-income producing security.
(b) All or a portion of this security was on loan at June 30, 2023.
(c) Security cannot be offered for public resale without first being registered under the Securities Act of 1933 and related rules ("restricted security"). Acquisition date represents the day on which an enforceable right to acquire such security is obtained and is presented along with related cost in the security description. The Fund has registration rights for certain restricted securities. Any costs related to such registration are borne by the issuer. The aggregate value of restricted securities (excluding 144A holdings) at June 30, 2023 amounts to approximately $2,085,000 and represents 1.4% of net assets.
(d) At June 30, 2023, the Fund held a fair valued security valued at approximately $2,085,000, representing 1.4% of net assets. These holdings have been fair valued as determined in good faith under procedures established by and under the general supervision of the Company's (as defined herein) Directors.
(e) Securities are available for collateral in connection with purchased options.
(f) The approximate fair value and percentage of net assets, $7,682,000 and 5.0%, respectively, represent the securities that have been fair valued under the fair valuation policy for international investments as described in Note A-1 within the Notes to Consolidated Financial Statements.
(g) At June 30, 2023, the aggregate cost for federal income tax purposes approximates the aggregate cost for book purposes. The aggregate gross unrealized appreciation is approximately $15,891,000 and the aggregate gross unrealized depreciation is approximately $61,876,000, resulting in net unrealized depreciation of approximately $45,985,000.
Call Options Purchased:
The Fund had the following call options purchased open at June 30, 2023:
Counterparty | Description | Strike Price | Expiration Date | Number of Contracts | Notional Amount (000) | Value (000) | Premiums Paid (000) | Unrealized Appreciation (Depreciation) (000) | |||||||||||||||||||||||||||
JPMorgan Chase Bank NA | USD/CNH | 7.43 | Jan-24 | 27,229,362 | $ | 27,229 | $ | 177 | $ | 128 | $ | 49 | |||||||||||||||||||||||
JPMorgan Chase Bank NA | USD/CNH | 7.53 | Jul-23 | 34,360,212 | 34,360 | 7 | 171 | (164 | ) | ||||||||||||||||||||||||||
Standard Chartered Bank | USD/CNH | 7.57 | Aug-23 | 38,083,157 | 38,083 | 27 | 170 | (143 | ) | ||||||||||||||||||||||||||
Standard Chartered Bank | USD/CNH | 7.57 | May-24 | 33,393,235 | 33,393 | 201 | 142 | 59 | |||||||||||||||||||||||||||
Goldman Sachs International | USD/CNH | 7.87 | Oct-23 | 291,150 | 291 | — | @ | 1 | (1 | ) | |||||||||||||||||||||||||
$ | 412 | $ | 612 | $ | (200 | ) |
@ Value is less than $500.
CNH — Chinese Yuan Renminbi Offshore
USD — United States Dollar
The accompanying notes are an integral part of the consolidated financial statements.
4
Morgan Stanley Variable Insurance Fund, Inc.
Semi-Annual Report – June 30, 2023 (unaudited)
Consolidated Portfolio of Investments (cont'd)
Discovery Portfolio
Portfolio Composition*
Classification | Percentage of Total Investments | ||||||
Other** | 21.4 | % | |||||
Software | 17.5 | ||||||
Financial Services | 10.5 | ||||||
Specialty Retail | 10.2 | ||||||
Media | 8.3 | ||||||
Broadline Retail | 8.2 | ||||||
Information Technology Services | 7.3 | ||||||
Hotels, Restaurants & Leisure | 6.2 | ||||||
Life Sciences Tools & Services | 5.4 | ||||||
Entertainment | 5.0 | ||||||
Total Investments | 100.0 | % |
* Percentages indicated are based upon total investments (excluding Securities held as Collateral on Loaned Securities) as of June 30, 2023.
** Industries and/or investment types representing less than 5% of total investments.
The accompanying notes are an integral part of the consolidated financial statements.
5
Morgan Stanley Variable Insurance Fund, Inc.
Semi-Annual Report – June 30, 2023 (unaudited)
Discovery Portfolio
Consolidated Statement of Assets and Liabilities | June 30, 2023 (000) | ||||||
Assets: | |||||||
Investments in Securities of Unaffiliated Issuers, at Value(1) (Cost $197,342) | $ | 151,357 | |||||
Investment in Security of Affiliated Issuer, at Value (Cost $3,020) | 3,020 | ||||||
Total Investments in Securities, at Value (Cost $200,362) | 154,377 | ||||||
Foreign Currency, at Value (Cost $1) | 1 | ||||||
Receivable from Affiliate | 14 | ||||||
Receivable for Fund Shares Sold | 8 | ||||||
Receivable from Securities Lending Income | 2 | ||||||
Other Assets | 19 | ||||||
Total Assets | 154,421 | ||||||
Liabilities: | |||||||
Collateral on Securities Loaned, at Value | 558 | ||||||
Due to Broker | 400 | ||||||
Payable for Fund Shares Redeemed | 324 | ||||||
Payable for Advisory Fees | 185 | ||||||
Payable for Professional Fees | 52 | ||||||
Payable for Servicing Fees | 35 | ||||||
Payable for Administration Fees | 10 | ||||||
Payable for Distribution Fees — Class II Shares | 10 | ||||||
Payable for Custodian Fees | 3 | ||||||
Payable for Transfer Agency Fees | 1 | ||||||
Other Liabilities | 32 | ||||||
Total Liabilities | 1,610 | ||||||
NET ASSETS | $ | 152,811 | |||||
Net Assets Consist of: | |||||||
Paid-in-Capital | $ | 313,708 | |||||
Total Accumulated Loss | (160,897 | ) | |||||
Net Assets | $ | 152,811 | |||||
CLASS I: | |||||||
Net Assets | $ | 27,541 | |||||
Net Asset Value, Offering and Redemption Price Per Share Applicable to 6,721,806 Outstanding $0.001 Par Value Shares (Authorized 500,000,000 Shares) | $ | 4.10 | |||||
CLASS II: | |||||||
Net Assets | $ | 125,270 | |||||
Net Asset Value, Offering and Redemption Price Per Share Applicable to 34,632,108 Outstanding $0.001 Par Value Shares (Authorized 500,000,000 Shares) | $ | 3.62 | |||||
(1) Including: | |||||||
Securities on Loan, at Value: | $ | 519 |
The accompanying notes are an integral part of the consolidated financial statements.
6
Morgan Stanley Variable Insurance Fund, Inc.
Semi-Annual Report – June 30, 2023 (unaudited)
Discovery Portfolio
Consolidated Statement of Operations | Six Months Ended June 30, 2023 (000) | ||||||
Investment Income: | |||||||
Dividends from Security of Affiliated Issuer (Note H) | $ | 133 | |||||
Dividends from Securities of Unaffiliated Issuers | 77 | ||||||
Income from Securities Loaned — Net | 76 | ||||||
Total Investment Income | 286 | ||||||
Expenses: | |||||||
Advisory Fees (Note B) | 521 | ||||||
Distribution Fees — Class II Shares (Note E) | 142 | ||||||
Servicing Fees (Note D) | 107 | ||||||
Professional Fees | 82 | ||||||
Administration Fees (Note C) | 56 | ||||||
Shareholder Reporting Fees | 18 | ||||||
Custodian Fees (Note G) | 9 | ||||||
Transfer Agency Fees (Note F) | 5 | ||||||
Directors' Fees and Expenses | 2 | ||||||
Pricing Fees | 2 | ||||||
Registration Fees | 1 | ||||||
Other Expenses | 9 | ||||||
Total Expenses | 954 | ||||||
Waiver of Advisory Fees (Note B) | (151 | ) | |||||
Waiver of Distribution Fees — Class II Shares (Note E) | (85 | ) | |||||
Rebate from Morgan Stanley Affiliate (Note H) | (6 | ) | |||||
Net Expenses | 712 | ||||||
Net Investment Loss | (426 | ) | |||||
Realized Gain (Loss): | |||||||
Investments Sold | (15,590 | ) | |||||
Foreign Currency Translation | 3 | ||||||
Net Realized Loss | (15,587 | ) | |||||
Change in Unrealized Appreciation (Depreciation): | |||||||
Investments | 51,392 | ||||||
Foreign Currency Translation | — | @ | |||||
Net Change in Unrealized Appreciation (Depreciation) | 51,392 | ||||||
Net Realized Loss and Change in Unrealized Appreciation (Depreciation) | 35,805 | ||||||
Net Increase in Net Assets Resulting from Operations | $ | 35,379 |
@ Amount is less than $500.
The accompanying notes are an integral part of the consolidated financial statements.
7
Morgan Stanley Variable Insurance Fund, Inc.
Semi-Annual Report – June 30, 2023
Discovery Portfolio
Consolidated Statements of Changes in Net Assets | Six Months Ended June 30, 2023 (unaudited) (000) | Year Ended December 31, 2022 (000) | |||||||||
Increase (Decrease) in Net Assets: | |||||||||||
Operations: | |||||||||||
Net Investment Loss | $ | (426 | ) | $ | (1,386 | ) | |||||
Net Realized Loss | (15,587 | ) | (97,680 | ) | |||||||
Net Change in Unrealized Appreciation (Depreciation) | 51,392 | (104,558 | ) | ||||||||
Net Increase (Decrease) in Net Assets Resulting from Operations | 35,379 | (203,624 | ) | ||||||||
Dividends and Distributions to Shareholders: | |||||||||||
Class I | — | (13,903 | ) | ||||||||
Class II | — | (69,217 | ) | ||||||||
Total Dividends and Distributions to Shareholders | — | (83,120 | ) | ||||||||
Capital Share Transactions:(1) | |||||||||||
Class I: | |||||||||||
Subscribed | 6,822 | 23,666 | |||||||||
Distributions Reinvested | — | 13,903 | |||||||||
Redeemed | (8,081 | ) | (21,791 | ) | |||||||
Class II: | |||||||||||
Subscribed | 6,133 | 21,019 | |||||||||
Distributions Reinvested | — | 69,217 | |||||||||
Redeemed | (9,369 | ) | (20,660 | ) | |||||||
Net Increase (Decrease) in Net Assets Resulting from Capital Share Transactions | (4,495 | ) | 85,354 | ||||||||
Total Increase (Decrease) in Net Assets | 30,884 | (201,390 | ) | ||||||||
Net Assets: | |||||||||||
Beginning of Period | 121,927 | 323,317 | |||||||||
End of Period | $ | 152,811 | $ | 121,927 | |||||||
(1) Capital Share Transactions: | |||||||||||
Class I: | |||||||||||
Shares Subscribed | 1,901 | 3,170 | |||||||||
Shares Issued on Distributions Reinvested | — | 3,433 | |||||||||
Shares Redeemed | (2,211 | ) | (2,867 | ) | |||||||
Net Increase (Decrease) in Class I Shares Outstanding | (310 | ) | 3,736 | ||||||||
Class II: | |||||||||||
Shares Subscribed | 1,993 | 3,325 | |||||||||
Shares Issued on Distributions Reinvested | — | 19,334 | |||||||||
Shares Redeemed | (2,867 | ) | (3,806 | ) | |||||||
Net Increase (Decrease) in Class II Shares Outstanding | (874 | ) | 18,853 |
The accompanying notes are an integral part of the consolidated financial statements.
8
Morgan Stanley Variable Insurance Fund, Inc.
Semi-Annual Report – June 30, 2023
Consolidated Financial Highlights
Discovery Portfolio
Class I | |||||||||||||||||||||||||||
Six Months Ended June 30, 2023 | Year Ended December 31, | ||||||||||||||||||||||||||
Selected Per Share Data and Ratios | (unaudited) | 2022 | 2021 | 2020(1) | 2019(1) | 2018(1) | |||||||||||||||||||||
Net Asset Value, Beginning of Period | $ | 3.18 | $ | 17.04 | $ | 29.50 | $ | 13.05 | $ | 10.71 | $ | 12.10 | |||||||||||||||
Income (Loss) from Investment Operations: | |||||||||||||||||||||||||||
Net Investment Loss(2) | (0.01 | ) | (0.04 | ) | (0.19 | ) | (0.17 | ) | (0.07 | ) | (0.08 | ) | |||||||||||||||
Net Realized and Unrealized Gain (Loss) | 0.93 | (9.83 | ) | (1.27 | ) | 18.96 | 4.45 | 1.69 | |||||||||||||||||||
Total from Investment Operations | 0.92 | (9.87 | ) | (1.46 | ) | 18.79 | 4.38 | 1.61 | |||||||||||||||||||
Distributions from and/or in Excess of: | |||||||||||||||||||||||||||
Net Realized Gain | — | (3.99 | ) | (11.00 | ) | (2.34 | ) | (2.04 | ) | (3.00 | ) | ||||||||||||||||
Net Asset Value, End of Period | $ | 4.10 | $ | 3.18 | $ | 17.04 | $ | 29.50 | $ | 13.05 | $ | 10.71 | |||||||||||||||
Total Return(3) | 28.93 | %(4) | (62.96 | )% | (11.06 | )% | 152.30 | % | 40.11 | % | 10.65 | % | |||||||||||||||
Ratios to Average Net Assets and Supplemental Data: | |||||||||||||||||||||||||||
Net Assets, End of Period (Thousands) | $ | 27,541 | $ | 22,330 | $ | 56,135 | $ | 68,299 | $ | 30,739 | $ | 27,630 | |||||||||||||||
Ratio of Expenses Before Expense Limitation | 1.17 | %(5) | 1.15 | % | 1.06 | % | 1.08 | % | 1.11 | % | 1.15 | % | |||||||||||||||
Ratio of Expenses After Expense Limitation | 0.94 | %(5)(6) | 0.94 | %(6) | 0.95 | %(6) | 0.95 | %(6) | 0.94 | %(6) | 0.94 | %(6) | |||||||||||||||
Ratio of Expenses After Expense Limitation Excluding Interest Expenses | N/A | N/A | 0.95 | %(6) | N/A | N/A | N/A | ||||||||||||||||||||
Ratio of Net Investment Loss | (0.53 | )%(5)(6) | (0.68 | )%(6) | (0.78 | )%(6) | (0.86 | )%(6) | (0.49 | )%(6) | (0.59 | )%(6) | |||||||||||||||
Ratio of Rebate from Morgan Stanley Affiliates | 0.01 | %(5) | 0.01 | % | 0.00 | %(7) | 0.00 | %(7) | 0.01 | % | 0.01 | % | |||||||||||||||
Portfolio Turnover Rate | 29 | %(4) | 49 | % | 95 | % | 112 | % | 101 | % | 89 | % |
(1) Not consolidated.
(2) Per share amount is based on average shares outstanding.
(3) Calculated based on the net asset value as of the last business day of the period. Performance does not reflect fees and expenses imposed by your insurance company's separate account. If performance information included the effect of these additional charges, the total return would be lower.
(4) Not annualized.
(5) Annualized.
(6) 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."
(7) Amount is less than 0.005%.
The accompanying notes are an integral part of the consolidated financial statements.
9
Morgan Stanley Variable Insurance Fund, Inc.
Semi-Annual Report – June 30, 2023
Consolidated Financial Highlights
Discovery Portfolio
Class II | |||||||||||||||||||||||||||
Six Months Ended June 30, 2023 | Year Ended December 31, | ||||||||||||||||||||||||||
Selected Per Share Data and Ratios | (unaudited) | 2022 | 2021 | 2020(1) | 2019(1) | 2018(1) | |||||||||||||||||||||
Net Asset Value, Beginning of Period | $ | 2.81 | $ | 16.04 | $ | 28.41 | $ | 12.63 | $ | 10.42 | $ | 11.85 | |||||||||||||||
Income (Loss) from Investment Operations: | |||||||||||||||||||||||||||
Net Investment Loss(2) | (0.01 | ) | (0.04 | ) | (0.20 | ) | (0.18 | ) | (0.08 | ) | (0.09 | ) | |||||||||||||||
Net Realized and Unrealized Gain (Loss) | 0.82 | (9.20 | ) | (1.17 | ) | 18.30 | 4.33 | 1.66 | |||||||||||||||||||
Total from Investment Operations | 0.81 | (9.24 | ) | (1.37 | ) | 18.12 | 4.25 | 1.57 | |||||||||||||||||||
Distributions from and/or in Excess of: | |||||||||||||||||||||||||||
Net Realized Gain | — | (3.99 | ) | (11.00 | ) | (2.34 | ) | (2.04 | ) | (3.00 | ) | ||||||||||||||||
Net Asset Value, End of Period | $ | 3.62 | $ | 2.81 | $ | 16.04 | $ | 28.41 | $ | 12.63 | $ | 10.42 | |||||||||||||||
Total Return(3) | 28.83 | %(4) | (62.97 | )% | (11.19 | )% | 152.04 | % | 39.97 | % | 10.53 | % | |||||||||||||||
Ratios to Average Net Assets and Supplemental Data: | |||||||||||||||||||||||||||
Net Assets, End of Period (Thousands) | $ | 125,270 | $ | 99,597 | $ | 267,182 | $ | 332,541 | $ | 133,224 | $ | 100,030 | |||||||||||||||
Ratio of Expenses Before Expense Limitation | 1.42 | %(5) | 1.40 | % | 1.31 | % | 1.33 | % | 1.36 | % | 1.40 | % | |||||||||||||||
Ratio of Expenses After Expense Limitation | 1.04 | %(5)(6) | 1.04 | %(6) | 1.05 | %(6) | 1.05 | %(6) | 1.04 | %(6) | 1.04 | %(6) | |||||||||||||||
Ratio of Expenses After Expense Limitation Excluding Interest Expenses | N/A | N/A | 1.05 | %(6) | N/A | N/A | N/A | ||||||||||||||||||||
Ratio of Net Investment Loss | (0.63 | )%(5)(6) | (0.78 | )%(6) | (0.88 | )%(6) | (0.96 | )%(6) | (0.59 | )%(6) | (0.69 | )%(6) | |||||||||||||||
Ratio of Rebate from Morgan Stanley Affiliates | 0.01 | %(5) | 0.01 | % | 0.00 | %(7) | 0.00 | %(7) | 0.01 | % | 0.01 | % | |||||||||||||||
Portfolio Turnover Rate | 29 | %(4) | 49 | % | 95 | % | 112 | % | 101 | % | 89 | % |
(1) Not consolidated.
(2) Per share amount is based on average shares outstanding.
(3) Calculated based on the net asset value as of the last business day of the period. Performance does not reflect fees and expenses imposed by your insurance company's separate account. If performance information included the effect of these additional charges, the total return would be lower.
(4) Not annualized.
(5) Annualized.
(6) 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."
(7) Amount is less than 0.005%.
The accompanying notes are an integral part of the consolidated financial statements.
10
Morgan Stanley Variable Insurance Fund, Inc.
Semi-Annual Report – June 30, 2023 (unaudited)
Notes to Consolidated Financial Statements
Morgan Stanley Variable Insurance Fund, Inc. (the "Company") is registered under the Investment Company Act of 1940, as amended (the "Act"), as an open-end management investment company. The Company is comprised of ten separate active, diversified and non-diversified funds (individually referred to as a "Fund," collectively as the "Funds"). The Company applies investment company accounting and reporting guidance Accounting Standards Codification ("ASC") Topic 946.
The accompanying consolidated financial statements relate to the Discovery Portfolio. The Fund seeks long-term capital growth by investing primarily in common stocks and other equity securities. The Fund offers two classes of shares — Class I and Class II. Both classes of shares have identical voting rights (except that shareholders of a Class have exclusive voting rights regarding any matter relating solely to that Class of shares), dividend, liquidation and other rights.
The Company is intended to be a funding vehicle for variable annuity contracts and variable life insurance policies offered by the separate accounts of certain life insurance companies.
A. Significant Accounting Policies: The following significant accounting policies are in conformity with U.S. generally accepted accounting principles ("GAAP"). Such policies are consistently followed by the Company in the preparation of its consolidated financial statements. GAAP may require management to make estimates and assumptions that affect the reported amounts and disclosures in the consolidated financial statements. Actual results may differ from those estimates.
The Fund may invest up to 25% of its total assets in a wholly-owned subsidiary of the Fund organized as a company under the laws of the Cayman Islands, VIF Discovery Cayman Portfolio, Ltd. (the "Subsidiary"). The Subsidiary may invest in bitcoin indirectly through cash settled futures or indirectly through investments in Grayscale Bitcoin Trust (BTC) ("GBTC"), a privately offered investment vehicle that invests in bitcoin. The Fund is the sole shareholder of the Subsidiary, and it is not currently expected that shares of the Subsidiary will be sold or offered to other investors. The consolidated portfolio of investments and consolidated financial statements include the positions and accounts of the Fund and the Subsidiary. All intercompany accounts and transactions of the Fund and the Subsidiary have been eliminated in consolidation and all accounting policies of the Subsidiary are consistent with those of the Fund. As of June 30, 2023, the Subsidiary represented approximately $2,421,000 or approximately 1.58% of the total net assets of the Fund.
Investments in the Subsidiary are expected to provide the Fund with exposure to bitcoin within the limitations of Subchapter M of the Code and recent Internal Revenue
Service ("IRS") revenue rulings, which require that a mutual fund receive no more than ten percent of its gross income from such investments in order to receive favorable tax treatment as a regulated investment company ("RIC"). Tax treatment of the income received from the Subsidiary may potentially be affected by changes in legislation, regulations or other legally binding authority, which could affect the character, timing and amount of the Fund's taxable income and distributions. If such changes occur, the Fund may need to significantly change its investment strategy and recognize unrealized gains in order to remain qualified for taxation as a RIC, which could adversely affect the Fund.
In June 2022, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update (ASU) No. 2022-03, Fair Value Measurement (Topic 820): Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions ("ASU 2022-03"), which clarifies the guidance in ASC Topic No. 820 on the fair value measurement of an equity security that is subject to a contractual sale restriction and introduces new disclosures related to such equity security. ASU 2022-03 clarifies that a contractual sale restriction prohibiting the sale of an equity security is a characteristic of the reporting entity holding the equity security and is not included in the equity security's unit of account. Accordingly, an entity should not consider the contractual sale restriction when measuring the equity security's fair value (i.e., the entity should not apply a discount related to the contractual sale restriction, as stated in ASC 820-10-35-36B as amended by ASU 2022-03). In addition, ASU 2022-03 prohibits an entity from recognizing a contractual sale restriction as a separate unit of account. The new guidance is effective for public companies with annual reporting periods in fiscal years beginning after December 15, 2023, and interim periods in the following year, with early adoption permitted. At this time, management is currently evaluating the impact of ASU 2022-03.
1. Security Valuation: (1) An equity portfolio security listed or traded on an exchange is valued at its latest reported sales price (or at the exchange official closing price if such exchange reports an official closing price), and if there were no sales on a given day and if there is no official exchange closing price for that day, the security is valued at the mean between the last reported bid and asked prices if such bid and asked prices are available on the relevant exchanges. If only bid prices are available then the latest bid price may be used. Listed equity securities not traded on the valuation date with no reported bid and asked prices available on the exchange are valued at the mean between the current bid and asked prices obtained from one or more reputable brokers/dealers. In cases where
11
Morgan Stanley Variable Insurance Fund, Inc.
Semi-Annual Report – June 30, 2023 (unaudited)
Notes to Consolidated Financial Statements (cont'd)
a security is traded on more than one exchange, the security is valued on the exchange designated as the primary market; (2) all other equity portfolio securities for which over-the-counter ("OTC") market quotations are readily available are valued at the latest reported sales price (or at the market official closing price if such market reports an official closing price), and if there was no trading in the security on a given day and if there is no official closing price from relevant markets for that day, the security is valued at the mean between the last reported bid and asked prices if such bid and asked prices are available on the relevant markets. An unlisted equity security that does not trade on the valuation date and for which bid and asked prices from the relevant markets are unavailable is valued at the mean between the current bid and asked prices obtained from one or more reputable brokers/dealers; (3) listed options are valued at the last reported sales price on the exchange on which they are listed (or at the exchange official closing price if such exchange reports an official closing price). If an official closing price or last reported sales price is unavailable, the listed option should be fair valued at the mean between its latest bid and ask prices. Unlisted options are valued at the mean between their latest bid and ask prices from a broker/dealer or valued by a pricing service/vendor; (4) fixed income securities may be valued by an outside pricing service/vendor approved by the Company's Board of Directors (the "Directors"). The pricing service/vendor may employ a pricing model that takes into account, among other things, bids, yield spreads and/or other market data and specific security characteristics. If Morgan Stanley Investment Management Inc. (the "Adviser"), a wholly-owned subsidiary of Morgan Stanley, determines that the price provided by the outside pricing service/vendor does not reflect the security's fair value or is unable to provide a price, prices from brokers/dealers may also be utilized. In these circumstances, the value of the security will be the mean of bid and asked prices obtained from brokers/dealers; (5) when market quotations are not readily available, as defined by Rule 2a-5 under the Act, including circumstances under which the Adviser determines that the closing price, last sale price or the mean between the last reported bid and asked prices are not reflective of a security's market value, portfolio securities are valued at their fair value as determined in good faith under procedures approved by and under the general supervision of the Directors. Occasionally,
developments affecting the closing prices of securities and other assets may occur between the times at which valuations of such securities are determined (that is, close of the foreign market on which the securities trade) and the close of business of the New York Stock Exchange ("NYSE"). If developments occur during such periods that are expected to materially affect the value of such securities, such valuations may be adjusted to reflect the estimated fair value of such securities as of the close of the NYSE, as determined in good faith by the Directors or by the Adviser using a pricing service and/or procedures approved by the Directors; and (6) investments in mutual funds, including the Morgan Stanley Institutional Liquidity Funds, are valued at the net asset value ("NAV") as of the close of each business day.
In connection with Rule 2a-5 of the Act, the Directors have designated the Company's Adviser as its valuation designee. The valuation designee has responsibility for determining fair value and to make the actual calculations pursuant to the fair valuation methodologies previously approved by the Directors. Under procedures approved by the Directors, the Company's Adviser, as valuation designee, has formed a Valuation Committee whose members are approved by the Directors. The Valuation Committee provides administration and oversight of the Company's valuation policies and procedures, which are reviewed at least annually by the Directors. These procedures allow the Company to utilize independent pricing services, quotations from securities and financial instrument dealers and other market sources to determine fair value.
2. Fair Value Measurement: FASB ASC 820, "Fair Value Measurement" ("ASC 820"), defines fair value as the price that would be received to sell an asset or pay to transfer a liability in an orderly transaction between market participants at the measurement date. ASC 820 establishes a three-tier hierarchy to distinguish between (1) inputs that reflect the assumptions market participants would use in valuing an asset or liability developed based on market data obtained from sources independent of the reporting entity (observable inputs) and (2) inputs that reflect the reporting entity's own assumptions about the assumptions market participants would use in valuing an asset or liability developed based on the best information available in the circumstances (unobservable inputs) and to establish classification of fair value measurements for disclosure purposes. Various inputs are used in
12
Morgan Stanley Variable Insurance Fund, Inc.
Semi-Annual Report – June 30, 2023 (unaudited)
Notes to Consolidated Financial Statements (cont'd)
determining the value of the Fund's investments. The inputs are summarized in the three broad levels listed below:
• Level 1 – unadjusted quoted prices in active markets for identical investments
• Level 2 – other significant observable inputs (including quoted prices for similar investments, interest rates, prepayment speeds, credit risk, etc.)
• Level 3 – significant unobservable inputs including the Fund's own assumptions in determining the fair value of investments. Factors considered in making this determination may include, but are not limited to, information obtained by contacting the issuer, analysts, or the appropriate stock exchange (for exchange-traded securities), analysis of the issuer's financial statements or other available documents and, if necessary, available information concerning other securities in similar circumstances.
The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities and the determination of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to each security.
The following is a summary of the inputs used to value each Fund's investments as of June 30, 2023:
Investment Type | Level 1 Unadjusted quoted prices (000) | Level 2 Other significant observable inputs (000) | Level 3 Significant unobservable inputs (000) | Total (000) | |||||||||||||||
Assets: | |||||||||||||||||||
Common Stocks | |||||||||||||||||||
Biotechnology | $ | 2,998 | $ | — | $ | — | $ | 2,998 | |||||||||||
Broadline Retail | 12,612 | — | — | 12,612 | |||||||||||||||
Chemicals | 564 | — | — | 564 | |||||||||||||||
Commercial Services & Supplies | 590 | — | — | 590 | |||||||||||||||
Entertainment | 7,754 | — | — | 7,754 | |||||||||||||||
Financial Services | 8,481 | 7,682 | — | 16,163 | |||||||||||||||
Ground Transportation | 2,738 | — | — | 2,738 | |||||||||||||||
Health Care Equipment & Supplies | 453 | — | — | 453 | |||||||||||||||
Health Care Providers & Services | 4,893 | — | — | 4,893 | |||||||||||||||
Health Care Technology | 5,715 | — | — | 5,715 | |||||||||||||||
Hotels, Restaurants & Leisure | 9,520 | — | — | 9,520 |
Investment Type | Level 1 Unadjusted quoted prices (000) | Level 2 Other significant observable inputs (000) | Level 3 Significant unobservable inputs (000) | Total (000) | |||||||||||||||
Common Stocks (cont'd) | |||||||||||||||||||
Information Technology Services | $ | 11,301 | $ | — | $ | — | $ | 11,301 | |||||||||||
Leisure Products | 2,243 | — | — | 2,243 | |||||||||||||||
Life Sciences Tools & Services | 8,306 | — | — | 8,306 | |||||||||||||||
Media | 12,875 | — | — | 12,875 | |||||||||||||||
Pharmaceuticals | 6,842 | — | — | 6,842 | |||||||||||||||
Semiconductors & Semiconductor Equipment | 262 | — | — | 262 | |||||||||||||||
Software | 24,920 | — | — | 24,920 | |||||||||||||||
Specialty Retail | 15,830 | — | — | 15,830 | |||||||||||||||
Total Common Stocks | 138,897 | 7,682 | — | 146,579 | |||||||||||||||
Preferred Stock | |||||||||||||||||||
Software | — | — | 2,085 | 2,085 | |||||||||||||||
Investment Company | 2,234 | — | — | 2,234 | |||||||||||||||
Warrants | 4 | — | — | 4 | |||||||||||||||
Call Options Purchased | — | 412 | — | 412 | |||||||||||||||
Short-Term Investments | |||||||||||||||||||
Investment Company | 3,020 | — | — | 3,020 | |||||||||||||||
Repurchase Agreements | — | 43 | — | 43 | |||||||||||||||
Total Short-Term Investments | 3,020 | 43 | — | 3,063 | |||||||||||||||
Total Assets | $ | 144,155 | $ | 8,137 | $ | 2,085 | $ | 154,377 |
Transfers between investment levels may occur as the markets fluctuate and/or the availability of data used in an investment's valuation changes.
Following is a reconciliation of investments in which significant unobservable inputs (Level 3) were used in determining fair value:
Preferred Stock (000) | |||||||
Beginning Balance | $ | 1,996 | |||||
Purchases | — | ||||||
Sales | — | ||||||
Amortization of discount | — | ||||||
Transfers in | — | ||||||
Transfers out | — | ||||||
Corporate actions | — | ||||||
Change in unrealized appreciation (depreciation) | 89 | ||||||
Realized gains (losses) | — | ||||||
Ending Balance | $ | 2,085 | |||||
Net change in unrealized appreciation (depreciation) from investments still held as of June 30, 2023 | $ | 89 |
13
Morgan Stanley Variable Insurance Fund, Inc.
Semi-Annual Report – June 30, 2023 (unaudited)
Notes to Consolidated Financial Statements (cont'd)
The following table presents additional information about valuation techniques and inputs used for investments that are measured at fair value and categorized within Level 3 as of June 30, 2023. Various valuation techniques were used in the valuation of certain investments and weighted based on the level of significance. The Fund calculated the weighted averages of the unobservable inputs relative to each investment's fair value as of June 30, 2023:
Fair Value at June 30, 2023 (000) | Valuation Technique | Unobservable Input | Amount* | Impact to Valuation from an Increase in Input** | |||||||||||||||||||
Preferred Stock | $ | 2,085 | Market Transaction Method | Precedent Transaction | $ | 60.00 | Increase | ||||||||||||||||
Discounted Cash Flow | Weighted Average Cost of Capital | 14.5 | % | Decrease | |||||||||||||||||||
Perpetual Growth Rate | 3.5 | % | Increase | ||||||||||||||||||||
Market Comparable Companies | Enterprise Value/Revenue | 15.8 | x | Increase | |||||||||||||||||||
Discount for Lack of Marketability | 15.0 | % | Decrease |
* Amount is indicative of the weighted average.
** Represents the expected directional change in the fair value of the Level 3 investments that would result from an increase in the corresponding input. A decrease to the unobservable input would have the opposite effect. Significant changes in these inputs could result in significantly higher or lower fair value measurements.
3. Repurchase Agreements: The Fund may enter into repurchase agreements under which the Fund lends cash and takes possession of securities with an agreement that the counterparty will repurchase such securities. In connection with transactions in repurchase agreements, a bank as custodian for the Fund takes possession of the underlying securities which are held as collateral, with a market value at least equal to the amount of the repurchase transaction, including principal and accrued interest. To the extent that any repurchase transaction exceeds one business day, the value of the collateral is marked-to-market on a daily basis to determine that the value of the collateral does not decrease below the repurchase price plus accrued interest as earned. If such a decrease occurs, additional collateral will be requested and, when received, will be added to the account to maintain full collateralization. In the event of default on the obligation to repurchase, the Fund has the right to liquidate the collateral and apply the proceeds in satisfaction of the obligation. In the event of default or bankruptcy by the counterparty to the agreement, realization of the collateral proceeds may be subject to cost and delays. The Fund, along with other affiliated investment companies, may utilize a joint trading account for the purpose of entering into repurchase agreements.
4. Foreign Currency Translation and Foreign Investments: The books and records of the Fund are maintained in U.S. dollars. Foreign currency amounts are translated into U.S. dollars as follows:
— investments, other assets and liabilities at the prevailing rate of exchange on the valuation date;
— investment transactions and investment income at the prevailing rates of exchange on the dates of such transactions.
Although the net assets of the Fund are presented at the foreign exchange rates and market values at the close of the period, the Fund does not isolate that portion of the results of operations arising as a result of changes in the foreign exchange rates from the fluctuations arising from changes in the market prices of securities held at period end. Similarly, the Fund does not isolate the effect of changes in foreign exchange rates from the fluctuations arising from changes in the market prices of securities sold during the period. Accordingly, realized and unrealized foreign currency gains (losses) on investments in securities are included in the reported net realized and unrealized gains (losses) on investment transactions and balances. However, pursuant to U.S. federal income tax regulations, gains and losses from certain foreign currency transactions and the foreign currency portion of gains and losses realized on sales and maturities of foreign denominated debt securities are treated as ordinary income for U.S. federal income tax purposes.
14
Morgan Stanley Variable Insurance Fund, Inc.
Semi-Annual Report – June 30, 2023 (unaudited)
Notes to Consolidated Financial Statements (cont'd)
Net realized gains (losses) on foreign currency transactions represent net foreign exchange gains (losses) from foreign currency forward exchange contracts, disposition of foreign currencies, currency gains (losses) realized between the trade and settlement dates on securities transactions, and the difference between the amount of investment income and foreign withholding taxes recorded on the Fund's books and the U.S. dollar equivalent amounts actually received or paid. The change in unrealized currency gains (losses) on foreign currency transactions for the period is reflected in the Consolidated Statement of Operations.
Foreign security and currency transactions may involve certain considerations and risks not typically associated with those of U.S. dollar denominated transactions as a result of, among other factors, fluctuations of exchange rates in relation to the U.S. dollar, the possibility of lower levels of governmental supervision and regulation of foreign securities markets and the possibility of political or economic instability.
Governmental approval for foreign investments may be required in advance of making an investment under certain circumstances in some countries, and the extent of foreign investments in U.S. companies may be subject to limitation in other countries. Foreign ownership limitations also may be imposed by the charters of individual companies to prevent, among other concerns, violations of foreign investment limitations. As a result, an additional class of shares (identified as "Foreign" in the Consolidated Portfolio of Investments) may be created and offered for investment. The "local" and "foreign shares" market values may differ. In the absence of trading of the foreign shares in such markets, the Fund values the foreign shares at the closing exchange price of the local shares.
5. Derivatives: The Fund may, but is not required to, use derivative instruments for a variety of purposes, including hedging, risk management, portfolio management or 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. Derivatives are financial instruments whose value is based, in part, on the value of an underlying asset, interest rate, index or financial instrument. Prevailing interest rates and volatility levels, among other things, also affect the value of derivative instruments. A derivative instrument often has risks similar to its underlying asset and may have additional risks, including imperfect correlation between
the value of the derivative and the underlying asset, risks of default by the counterparty to certain transactions, magnification of losses incurred due to changes in the market value of the securities, instruments, indices or interest rates to which the derivative instrument relates, risks that the transactions may not be liquid, 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. All of the Fund's holdings, including derivative instruments, are marked-to-market each day with the change in value reflected in unrealized appreciation (depreciation). Upon disposition, a realized gain or loss is recognized.
Certain derivative transactions may give rise to a form of leverage. Leverage magnifies the potential for gain and the risk of loss. Leverage associated with derivative trans-actions may cause the Fund to liquidate portfolio positions when it may not be advantageous to do so to satisfy its obligations 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 objectives, there is no assurance that the use of derivatives will achieve this result.
Following is a description of the derivative instruments and techniques that the Fund used during the period and their associated risks:
Options: With respect to options, the Fund is subject to equity risk, interest rate risk and foreign currency exchange risk in the normal course of pursuing its investment objectives. 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 or 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 paid by the Fund. The Fund may purchase and/or sell put and call options. Purchasing call options tends to increase the Fund's exposure to the underlying (or similar) instrument. Purchasing put options tends to decrease the Fund's exposure to the underlying (or similar) instrument. When entering into purchased option contracts, the Fund bears the risk of interest or exchange rates or securities prices moving unexpectedly, in which case, the Fund may not achieve the anticipated benefits of the
15
Morgan Stanley Variable Insurance Fund, Inc.
Semi-Annual Report – June 30, 2023 (unaudited)
Notes to Consolidated Financial Statements (cont'd)
purchased option contracts; however the risk of loss is limited to the premium paid. Purchased options are reported as part of "Total Investments in Securities" in the Consolidated Statement of Assets and Liabilities. Premiums paid for purchasing options which expired are treated as realized losses. If the Fund sells an option, it sells to another party the right to buy from or sell to the Fund a specific amount of the underlying instrument or 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.
FASB ASC 815, "Derivatives and Hedging" ("ASC 815"), is intended to improve financial reporting about derivative instruments by requiring enhanced disclosures to enable investors to better understand how and why the Fund uses derivative instruments, how these derivative instruments are accounted for and their effects on the Fund's financial position and results of operations.
The following tables set forth the fair value of the Fund's derivative contracts by primary risk exposure as of June 30, 2023:
Asset Derivatives Consolidated Statement of Assets and Liabilities Location | Primary Risk Exposure | Value (000) | |||||||||||||
Purchased Options | Investments, at Value (Purchased Options) | Currency Risk | $ | 412 | (a) |
(a) Amounts are included in Investments in Securities in the Consolidated Statement of Assets and Liabilities.
The following table sets forth by primary risk exposure the Fund's change in unrealized appreciation (depreciation) by type of derivative contract for the six months ended June 30, 2023 in accordance with ASC 815:
Change in Unrealized Appreciation (Depreciation) | |||||||||||
Primary Risk Exposure | Derivative Type | Value (000) | |||||||||
Currency Risk | Investments (Purchased Options) | $ | (76 | )(a) |
(a) Amounts are included in Change in Unrealized Appreciation (Depreciation) on Investments in the Consolidated Statement of Operations.
At June 30, 2023, the Fund's derivative assets and liabilities are as follows:
Gross Amounts of Assets and Liabilities Presented in the Consolidated Statement of Assets and Liabilities | |||||||||||
Derivatives | Assets(b) (000) | Liabilities(b) (000) | |||||||||
Purchased Options | $ | 412 | (a) | $ | — |
(a) Amounts are included in Investments in Securities in the Consolidated Statement of Assets and Liabilities.
(b) Absent an event of default or early termination, OTC derivative assets and liabilities are presented gross and not offset in the Consolidated Statement of Assets and Liabilities.
The Fund typically enters into International Swaps and Derivatives Association, Inc. Master Agreements ("ISDA Master Agreements") or similar master agreements (collectively, "Master Agreements") with its contract counterparties for certain OTC derivatives in order to, among other things, reduce its credit risk to counterparties. ISDA Master Agreements include provisions for general obligations, representations, collateral and events of default or termination. Under an ISDA Master Agreement, the Fund typically may offset with the counterparty certain OTC derivative financial instruments' payables and/or receivables with collateral held and/or posted and create one single net payment (close-out netting) in the event of default, termination and/or potential deterioration in the credit quality of the counterparty. Various Master Agreements govern the terms of certain transactions with counterparties, including transactions such as swap, forward, repurchase and reverse repurchase agreements. These Master Agreements typically attempt to reduce the counterparty risk associated with such transactions by specifying credit protection mechanisms and providing standardization that improves legal certainty. Cross-termination provisions under Master Agreements typically provide that a default in connection with one transaction between the Fund and a counterparty gives the non-defaulting party the right to terminate any
16
Morgan Stanley Variable Insurance Fund, Inc.
Semi-Annual Report – June 30, 2023 (unaudited)
Notes to Consolidated Financial Statements (cont'd)
other transactions in place with the defaulting party to create one single net payment due to/due from the defaulting party and may be a feature in certain Master Agreements. In the event the Fund exercises its right to terminate a Master Agreement after a counterparty experiences a termination event as defined in the Master Agreement, the return of collateral with market value in excess of the Fund's net liability may be delayed or denied.
The following table presents derivative financial instruments that are subject to enforceable netting arrangements as of June 30, 2023:
Gross Amounts Not Offset in the Consolidated Statement of Assets and Liabilities | |||||||||||||||||||
Counterparty | Gross Asset Derivatives Presented in the Consolidated Statement of Assets and Liabilities(a) (000) | Financial Instrument (000) | Collateral Received(b) (000) | Net Amount (not less than $0) (000) | |||||||||||||||
Goldman Sachs International | $ | — | @ | $ | — | $ | — | @ | $ | 0 | |||||||||
JPMorgan Chase Bank NA | 184 | — | (184 | ) | 0 | ||||||||||||||
Standard Chartered Bank | 228 | — | (20 | ) | 208 | ||||||||||||||
Total | $ | 412 | $ | — | $ | (204 | ) | $ | 208 |
(a) Amounts are included in Investments in Securities in the Consolidated Statement of Assets and Liabilities.
(b) In some instances, the actual collateral received may be more than the amount shown here due to overcollateralization.
For the six months ended June 30, 2023, the approximate average monthly amount outstanding for each derivative type is as follows:
Purchased Options: | |||||||
Average monthly notional amount | 111,095,000 |
6. Securities Lending: The Fund lends securities to qualified financial institutions, such as broker/dealers, to earn additional income. Any increase or decrease in the fair value of the securities loaned that might occur and any interest earned or dividends declared on those securities during the term of the loan would remain in the Fund. The Fund would receive cash or securities as collateral in an amount equal to or exceeding 100% of the current fair value of the loaned securities. The collateral is marked-to-market daily by State Street Bank and Trust Company ("State Street"), the securities lending agent, to
ensure that a minimum of 100% collateral coverage is maintained.
Based on pre-established guidelines, the securities lending agent invests any cash collateral that is received in an affiliated money market portfolio and repurchase agreements. Securities lending income is generated from the earnings on the invested collateral and borrowing fees, less any rebates owed to the borrowers and compensation to the lending agent, and is recorded as "Income from Securities Loaned — Net" in the Fund's Consolidated Statement of Operations. Risks in securities lending transactions are that a borrower may not provide additional collateral when required or return the securities when due, and that the value of the short-term investments will be less than the amount of cash collateral plus any rebate that is required to be returned to the borrower.
The Fund has the right under the securities lending agreement to recover the securities from the borrower on demand.
The following table presents financial instruments that are subject to enforceable netting arrangements as of June 30, 2023:
Gross Amounts Not Offset in the Consolidated Statement of Assets and Liabilities | |||||||||||||||
Gross Asset Amount Presented in the Consolidated Statement of Assets and Liabilities (000) | Financial Instrument (000) | Collateral Received (000) | Net Amount (not less than $0) (000) | ||||||||||||
$ | 519 | (a) | $ | — | $ | 519 | (b)(c) | $ | 0 |
(a) Represents market value of loaned securities at period end.
(b) The Fund received cash collateral of approximately $558,000, which was subsequently invested in Repurchase Agreements and Morgan Stanley Institutional Liquidity Funds as reported in the Consolidated Portfolio of Investments.
(c) The actual collateral received is greater than the amount shown here due to overcollateralization.
FASB ASC 860, "Transfers & Servicing: Repurchase-to-Maturity Transactions, Repurchase Financings, and Dis-closures", is intended to provide increased transparency about the types of collateral pledged in securities lending transactions and other similar transactions that are ac-counted for as secured borrowings.
17
Morgan Stanley Variable Insurance Fund, Inc.
Semi-Annual Report – June 30, 2023 (unaudited)
Notes to Consolidated Financial Statements (cont'd)
The following table displays a breakdown of transactions accounted for as secured borrowings, the gross obligations by class of collateral pledged and the remaining contractual maturity of those transactions as of June 30, 2023:
Remaining Contractual Maturity of the Agreements | |||||||||||||||||||||||
Overnight and Continuous (000) | <30 days (000) | Between 30 & 90 days (000) | >90 Days (000) | Total (000) | |||||||||||||||||||
Securities Lending Transactions | |||||||||||||||||||||||
Common Stocks | $ | 558 | $ | — | $ | — | $ | — | $ | 558 | |||||||||||||
Total Borrowings | $ | 558 | $ | — | $ | — | $ | — | $ | 558 | |||||||||||||
Gross amount of recognized liabilities for securities lending transactions | $ | 558 |
7. Restricted Securities: The Fund invests in unregistered or otherwise restricted securities. The term "restricted securities" refers to securities that are unregistered or are held by control persons of the issuer and securities that are subject to contractual restrictions on their resale. As a result, restricted securities may be more difficult to value and the Fund may have difficulty disposing of such assets either in a timely manner or for a reasonable price. In order to dispose of an unregistered security, the Fund, where it has contractual rights to do so, may have to cause such security to be registered. A considerable period may elapse between the time the decision is made to sell the security and the time the security is registered so that the Fund can sell it. Contractual restrictions on the resale of securities vary in length and scope and are generally the result of a negotiation between the issuer and the acquirer of the securities. The Fund would, in either case, bear market risks during that period.
Restricted securities are identified in the Consolidated Portfolio of Investments.
8. Indemnifications: The Company enters into contracts that contain a variety of indemnifications. The Company's maximum exposure under these arrangements is unknown. However, the Company has not had prior claims or losses pursuant to these contracts and expects the risk of loss to be remote.
9. Security Transactions, Income and Expenses: Security transactions are accounted for on the trade date (date the order to buy or sell is executed). Realized gains and losses on the sale of investment securities are determined on the specific identified cost method. Dividend income and other distributions are recorded on the ex-dividend date (except for certain foreign dividends
which may be recorded as soon as the Fund is informed of such dividends) net of applicable withholding taxes. Non-cash dividends received in the form of stock, if any, are recognized on the ex-dividend date and recorded as non-cash dividend income at fair value. Interest income is recognized on the accrual basis (except where collection is in doubt) net of applicable withholding taxes. Discounts are accreted and premiums are amortized over the life of the respective securities. Most expenses of the Company can be directly attributed to a particular Fund. Expenses which cannot be directly attributed are apportioned among the Funds based upon relative net assets or other appropriate methods. Income, expenses (other than class specific expenses) and realized and unrealized gains or losses are allocated to each class of shares based upon their relative net assets.
10. Dividends and Distributions to Shareholders: Dividends and distributions to shareholders are recorded on the ex-dividend date. Dividends from net investment income, if any, are declared and paid annually. Net realized capital gains, if any, are distributed at least annually.
B. Advisory Fees: The Adviser, a wholly-owned subsidiary of Morgan Stanley, provides the Fund with advisory services under the terms of an Investment Advisory Agreement, paid quarterly, at the annual rate based on the daily net assets as follows:
First $500 | Next $500 | Over $1 | |||||||||
0.75% | 0.70% | 0.65% |
For the six months ended December 31, 2022, the advisory fee rate (net of waiver/rebate) was equivalent to an annual effective rate of 0.52% of the Fund's average daily net assets.
The Adviser has agreed to reduce its advisory fee and/or reimburse the Fund so that total annual Fund operating expenses, excluding certain investment related expenses, taxes, interest and other extraordinary expenses (including litigation), will not exceed 0.95% for Class I shares and 1.05% for Class II shares. The fee waivers and/or expense reimbursements will continue for at least one year from the date of the Fund's prospectus or until such time as the Directors act to discontinue all or a portion of such waivers and/or reimbursements when they deem such action is appropriate. For the six months ended June 30, 2023, approximately $151,000 of advisory fees were waived pursuant to this arrangement.
The Adviser provides investment advisory services to the Subsidiary pursuant to the Subsidiary Investment Management Agreement (the "Agreement"). Under the Agreement, the Subsidiary will pay the Adviser at the end of each fiscal quarter, calculated by applying a quarterly rate, based on the
18
Morgan Stanley Variable Insurance Fund, Inc.
Semi-Annual Report – June 30, 2023 (unaudited)
Notes to Consolidated Financial Statements (cont'd)
annual rate of 0.05%, to the average daily net assets of the Subsidiary.
The Adviser has agreed to waive its advisory fees by the amount of advisory fees it receives from the Subsidiary.
C. Administration Fees: The Adviser also serves as Administrator to the Company and provides administrative services pursuant to an Administration Agreement for an annual fee, accrued daily and paid monthly, of 0.08% of the Fund's average daily net assets.
Under a Sub-Administration Agreement between the Administrator and State Street, State Street provides certain administrative services to the Company. For such services, the Administrator pays State Street a portion of the fee the Administrator receives from the Fund.
D. Servicing Fees: The Company accrues daily and pays quarterly a servicing fee of up to 0.17% of the average daily value of shares of the Fund held in an insurance company's account. Certain insurance companies have entered into a servicing agreement with the Company to provide administrative and other contract-owner related services on behalf of the Fund.
E. Distribution Fees: Morgan Stanley Distribution, Inc. ("MSDI" or the "Distributor"), a wholly-owned subsidiary of the Adviser and an indirect subsidiary of Morgan Stanley, serves as the Distributor of the Fund and provides the Fund's Class II shareholders with distribution services pursuant to a Distribution Plan (the "Plan") in accordance with Rule 12b-1 under the Act. Under the Plan, the Fund is authorized to pay the Distributor a distribution fee, which is accrued daily and paid monthly, at an annual rate of 0.25% of the Fund's average daily net assets attributable to Class II shares. The Distributor has agreed to waive 0.15% of the 0.25% distribution fee that it may receive. This fee waiver will continue for at least one year from the date of the Fund's prospectus or until such time as the Directors act to discontinue all or a portion of such waiver when they deem such action is appropriate. For the six months ended June 30, 2023, this waiver amounted to approximately $85,000.
F. Dividend Disbursing and Transfer/Co-Transfer Agent: The Company's dividend disbursing and transfer agent is SS&C Global Investor & Distribution Solutions, Inc. ("SS&C GIDS, Inc."). Pursuant to a Transfer Agency Agreement, the Company pays SS&C GIDS, Inc. a fee based on the number of classes, accounts and transactions relating to the Funds of the Company.
Eaton Vance Management ("EVM"), an affiliate of Morgan Stanley, provides co-transfer agency and related services to the
Fund pursuant to a Co-Transfer Agency Services Agreement. For the six months ended June 30, 2023, co-transfer agency fees and expenses incurred to EVM, included in "Transfer Agency Fees" in the Consolidated Statement of Operations, amounted to less than $500.
G. Custodian Fees: State Street (the "Custodian") also serves as Custodian for the Company in accordance with a Custodian Agreement. The Custodian holds cash, securities and other assets of the Company as required by the Act. Custody fees are payable monthly based on assets held in custody, investment purchases and sales activity and account maintenance fees, plus reimbursement for certain out-of-pocket expenses.
H. Security Transactions and Transactions with Affiliates: For the six months ended June 30, 2023, purchases and sales of investment securities for the Fund, other than long-term U.S. Government securities and short-term investments were approximately $39,053,000 and $42,306,000, respectively. There were no purchases and sales of long-term U.S. Government securities for the six months ended June 30, 2023.
The Fund invests in the Institutional Class of the Morgan Stanley Institutional Liquidity Funds — Treasury Securities Portfolio (the "Liquidity Funds"), an open-end management investment company managed by the Adviser, both directly and as a portion of the securities held as collateral on loaned securities. Advisory fees paid by the Fund are reduced by an amount equal to its pro-rata share of the advisory and administration fees paid by the Fund due to its investment in the Liquidity Funds. For the six months ended June 30, 2023, advisory fees paid were reduced by approximately $6,000 relating to the Fund's investment in the Liquidity Funds.
A summary of the Fund's transactions in shares of affiliated investments during the six months ended June 30, 2023 is as follows:
Affiliated Investment Company | Value December 31, 2022 (000) | Purchases at Cost (000) | Proceeds from Sales (000) | Dividend Income (000) | |||||||||||||||
Liquidity Funds | $ | 4,571 | $ | 24,891 | $ | (26,442 | ) | $ | 133 |
Affiliated Investment Company (cont'd) | Realized Gain (Loss) (000) | Change in Unrealized Appreciation (Depreciation) (000) | Value June 30, 2023 (000) | ||||||||||||
Liquidity Funds | $ | — | $ | — | $ | 3,020 |
The Fund is permitted to purchase and sell securities ("cross-trade") from and to other Morgan Stanley funds as well as other funds and client accounts for which the Adviser or an
19
Morgan Stanley Variable Insurance Fund, Inc.
Semi-Annual Report – June 30, 2023 (unaudited)
Notes to Consolidated Financial Statements (cont'd)
affiliate of the Adviser serves as investment adviser, pursuant to procedures approved by the Directors in compliance with Rule 17a-7 under the Act (the "Rule"). Each cross-trade is executed at the current market price in compliance with provisions of the Rule. For the six months ended June 30, 2023, the Fund did not engage in any cross-trade transactions.
The Fund has an unfunded Deferred Compensation Plan (the "Compensation Plan"), which allows each independent Director to defer payment of all, or a portion, of the fees he or she receives for serving on the Board of Directors. Each eligible Director generally may elect to have the deferred amounts credited with a return equal to the total return on one or more of the Morgan Stanley funds that are offered as investment options under the Compensation Plan. Appreciation/depreciation and distributions received from these investments are recorded with an offsetting increase/decrease in the deferred compensation obligation and do not affect the NAV of the Fund.
I. Federal Income Taxes: It is the Fund's intention to continue to qualify as a RIC and distribute all of its taxable and tax-exempt income. Accordingly, no provision for federal income taxes is required in the consolidated financial statements.
The Fund may be subject to taxes imposed by countries in which it invests. Such taxes are generally based on income and/or capital gains earned or repatriated. Taxes are accrued based on net investment income, net realized gains and net unrealized appreciation as such income and/or gains are earned. Taxes may also be based on transactions in foreign currency and are accrued based on the value of investments denominated in such currency.
FASB ASC 740-10, "Income Taxes — Overall", sets forth a minimum threshold for consolidated financial statement recognition of the benefit of a tax position taken or expected to be taken in a tax return. Management has concluded there are no significant uncertain tax positions that would require recognition in the consolidated financial statements. If applicable, the Fund recognizes interest accrued related to unrecognized tax benefits in "Interest Expense" and penalties in "Other Expenses" in the Consolidated Statement of Operations. The Fund files tax returns with the U.S. Internal Revenue Service, New York and various states. Generally, each of the tax years in the four-year period ended December 31, 2022 remains subject to examination by taxing authorities.
The tax character of distributions paid may differ from the character of distributions shown for GAAP purposes due to short-term capital gains being treated as ordinary income for
tax purposes. The tax character of distributions paid during fiscal years 2022 and 2021 was as follows:
2022 Distributions Paid From: | 2021 Distributions Paid From: | ||||||||||||||
Ordinary Income (000) | Long-Term Capital Gain (000) | Ordinary Income (000) | Long-Term Capital Gain (000) | ||||||||||||
$ | 5,485 | $ | 77,635 | $ | 32,577 | $ | 115,730 |
The amount and character of income and gains to be distributed are determined in accordance with income tax regulations which may differ from GAAP. These book/tax differences are either considered temporary or permanent in nature.
Temporary differences are attributable to differing book and tax treatments for the timing of the recognition of gains (losses) on certain investment transactions and the timing of the deductibility of certain expenses.
Permanent differences, primarily due to a net operating loss, resulted in the following reclassifications among the components of net assets at December 31, 2022:
Total | Paid-in- | ||||||
$3,131 | $(3,131) |
At December 31, 2022, the Fund had no distributable earnings on a tax basis.
At December 31, 2022, the Fund had available for federal income tax purposes unused short-term and long-term capital losses of approximately $39,808,000 and $54,246,000, respectively, that do not have an expiration date.
To the extent that capital loss carryforwards are used to offset any future capital gains realized, no capital gains tax liability will be incurred by the Fund for gains realized and not dis-tributed. To the extent that capital gains are offset, such gains will not be distributed to the shareholders.
J. Credit Facility: The Company and other Morgan Stanley funds participated in a $300,000,000 committed, unsecured revolving line of credit facility (the "Facility") with State Street. Effective April 17, 2023, the committed line amount increased to $500,000,000. This Facility is to be used for temporary emergency purposes or funding of shareholder redemption requests. The interest rate for any funds drawn will be based on the federal funds rate or overnight bank funding rate plus a spread. The Facility also has a commitment fee of 0.25% per annum based on the unused portion of the Facility, which is allocated among participating funds based on relative net assets. During the six months ended June 30, 2023, the Fund did not have any borrowings under the Facility.
20
Morgan Stanley Variable Insurance Fund, Inc.
Semi-Annual Report – June 30, 2023 (unaudited)
Notes to Consolidated Financial Statements (cont'd)
K. Other: At June 30, 2023, the Fund had record owners of 10% or greater. Investment activities of these shareholders could have a material impact on the Fund. The aggregate percentage of such owners was 81.8%.
L. Market Risk and Risks Relating to Certain Financial Instruments:
Bitcoin: The Fund may have exposure to cryptocurrencies indirectly through investments in GBTC, a privately offered investment vehicle that invests in bitcoin. Cryptocurrencies (also referred to as "virtual currencies" and "digital currencies") are digital assets designed to act as a medium of exchange. Although cryptocurrency is an emerging asset class, there are thousands of cryptocurrencies, the most well-known of which is bitcoin. Cryptocurrency facilitates decentralized, peer-to-peer financial exchange and value storage that is used like money, without the oversight of a central authority or banks. The value of cryptocurrency is not backed by any government, corporation, or other identified body. Similar to fiat currencies (i.e., a currency that is backed by a central bank or a national, supra-national or quasi-national organization), cryptocurrencies are susceptible to theft, loss and destruction. For example, the bitcoin held by GBTC (and the Fund's indirect exposure to such bitcoin) is also susceptible to these risks. The value of the GBTC investments in cryptocurrency is subject to fluctuations in the value of the cryptocurrency, which have been and may in the future be highly volatile. The value of cryptocurrencies is determined by the supply and demand for cryptocurrency in the global market for the trading of cryptocurrency, which consists primarily of transactions on electronic exchanges. The price of bitcoin could drop precipitously (including to zero) for a variety of reasons, including, but not limited to, regulatory changes, a crisis of confidence, flaw or operational issue in the bitcoin network or a change in user preference to competing cryptocurrencies. The GBTC exposure to cryptocurrency could result in substantial losses to the Fund.
Market: An investment in the Fund is based on the values of the Fund's investments, which may change due to economic and other events that affect markets generally, as well as those that affect particular regions, countries, industries, companies or governments. Social, political, economic and other conditions and events, such as war, natural disasters, health emergencies (e.g., epidemics and pandemics), terrorism, conflicts, social unrest, recessions, inflation, rapid interest rate changes and supply chain disruptions, may occur and could significantly impact issuers, industries, governments and other systems, including the financial markets and global economy. It is difficult to predict when events affecting the U.S. or global financial markets and economies may occur, the effects
that such events may have and the duration of those effects (which may last for extended periods). These events may be sudden and significant and may negatively impact broad segments of businesses and populations and have a significant and rapid negative impact on the performance of and/or income or yield from the Fund's investments and exacerbate pre-existing risks to the Fund. 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 ultimate impact of public health emergencies or other adverse economic or market developments and the extent to which the associated conditions impact the Fund and its investments will also depend on other future developments, which are highly uncertain, difficult to accurately predict and subject to change at any time. The financial performance of the Fund's investments (and, in turn, the Fund's investment results) as well as their liquidity may be adversely affected because of these and similar types of factors and developments.
21
Morgan Stanley Variable Insurance Fund, Inc.
Semi-Annual Report – June 30, 2023 (unaudited)
Investment Advisory Agreement Approval
Nature, Extent and Quality of Services
The Board reviewed and considered the nature and extent of the investment advisory services provided by the Adviser under the advisory agreement, including portfolio management, investment research and equity and fixed income securities trading. The Board also reviewed and considered the nature and extent of the non-advisory, administrative services provided by the Administrator under the administration agreement, including accounting, operations, clerical, bookkeeping, compliance, business management and planning, legal services and the provision of supplies, office space and utilities at the Adviser's expense. The Board also considered the Adviser's investment in personnel and infrastructure that benefits the Fund. (The Adviser and Administrator together are referred to as the "Adviser" and the advisory and administration agreements together are referred to as the "Management Agreement.") The Board also considered that the Adviser serves a variety of other investment advisory clients and has experience overseeing service providers. The Board also compared the nature of the services provided by the Adviser with similar services provided by non-affiliated advisers as prepared by Broadridge Financial Solutions, Inc. ("Broadridge").
The Board reviewed and considered the qualifications of the portfolio managers, the senior administrative managers and other key personnel of the Adviser who provide the advisory and administrative services to the Fund. The Board determined that the Adviser's portfolio managers and key personnel are well qualified by education and/or training and experience to perform the services in an efficient and professional manner. The Board concluded that the nature and extent of the advisory and administrative services provided were necessary and appropriate for the conduct of the business and investment activities of the Fund and supported its decision to approve the Management Agreement.
Performance, Fees and Expenses of the Fund
The Board reviewed the performance, fees and expenses of the Fund compared to its peers, as prepared by Broadridge, and to appropriate benchmarks where applicable. The Board discussed with the Adviser the performance goals and the actual results achieved in managing the Fund. When considering a fund's performance, the Board and the Adviser place emphasis on trends and longer-term returns (focusing on one-year, three-year and five-year performance, as of December 31, 2022, or since inception, as applicable). When a fund underperforms its benchmark and/or its peer group average, the Board and the Adviser discuss the causes of such underperformance and, where necessary, they discuss specific changes to investment strategy or investment personnel. The Board noted that the Fund's performance below its peer group average for the one-, three- and five-year periods. The Board discussed with the Adviser the level of the advisory and administration fees (together, the "management fee") for this Fund relative to comparable funds and/or other accounts advised by the Adviser and/or compared to its peers as prepared by Broadridge. In addition to the management fee, the Board also reviewed the Fund's total expense ratio. The Board noted that the Fund's management fee and total expense ratio were lower than its peer group averages. After discussion, the Board concluded that the Fund's (i) performance was acceptable and (ii) management fee and total expense ratio were competitive with its peer group averages.
Economies of Scale
The Board considered the size and growth prospects of the Fund and how that relates to the Fund's total expense ratio and particularly the Fund's management fee rate, which includes breakpoints. In conjunction with its review of the Adviser's profitability, the Board discussed with the Adviser how a change in assets can affect the efficiency or effectiveness of managing the Fund and whether the management fee level is appropriate relative to current and projected asset levels and/or whether the management fee structure reflects economies of scale as asset levels change. The Board has determined that its review of the actual and/or potential economies of scale of the Fund supports its decision to approve the Management Agreement.
Profitability of the Adviser and Affiliates
The Board considered information concerning the costs incurred and profits realized by the Adviser and its affiliates during the last year from their relationship with the Fund and during the last two years from their relationship with the Morgan Stanley Fund Complex and reviewed with the Adviser the cost allocation methodology used to determine the profitability of the Adviser and affiliates. The Board has determined that its review of the analysis of the Adviser's expenses and profitability supports its decision to approve the Management Agreement.
22
Morgan Stanley Variable Insurance Fund, Inc.
Semi-Annual Report – June 30, 2023 (unaudited)
Investment Advisory Agreement Approval (cont'd)
Other Benefits of the Relationship
The Board considered other direct and indirect benefits to the Adviser and/or its affiliates derived from their relationship with the Fund and other funds advised by the Adviser. These benefits may include, among other things, fees for trading, distribution and/or shareholder servicing and for transaction processing and reporting platforms used by securities lending agents, and research received by the Adviser generated from commission dollars spent on funds' portfolio trading. The Board reviewed with the Adviser these arrangements and the reasonableness of the Adviser's costs relative to the services performed. The Board has determined that its review of the other benefits received by the Adviser or its affiliates supports its decision to approve the Management Agreement.
Resources of the Adviser and Historical Relationship Between the Fund and the Adviser
The Board considered whether the Adviser is financially sound and has the resources necessary to perform its obligations under the Management Agreement. The Board also reviewed and considered the historical relationship between the Fund and the Adviser, including the organizational structure of the Adviser, the policies and procedures formulated and adopted by the Adviser for managing the Fund's operations and the Board's confidence in the competence and integrity of the senior managers and key personnel of the Adviser. The Board concluded that the Adviser has the financial resources necessary to fulfill its obligations under the Management Agreement and that it is beneficial for the Fund to continue its relationship with the Adviser.
Other Factors and Current Trends
The Board considered the controls and procedures adopted and implemented by the Adviser and monitored by the Fund's Chief Compliance Officer and concluded that the conduct of business by the Adviser indicates a good faith effort on its part to adhere to high ethical standards in the conduct of the Fund's business.
General Conclusion
After considering and weighing all of the above factors, with various written materials and verbal information presented by the Adviser, the Board concluded that it would be in the best interest of the Fund and its shareholders to approve renewal of the Management Agreement for another year. In reaching this conclusion the Board did not give particular weight to any single piece of information or factor referenced above. The Board considered these factors and information over the course of the year and in numerous meetings, some of which were in executive session with only the independent Board members and their counsel present. It is possible that individual Board members may have weighed these factors, and the information presented, differently in reaching their individual decisions to approve the Management Agreement.
23
Morgan Stanley Variable Insurance Fund, Inc.
Semi-Annual Report – June 30, 2023 (unaudited)
Liquidity Risk Management Program
In compliance with Rule 22e-4 under the Investment Company Act of 1940, as amended (the "Liquidity Rule"), the Fund has adopted and implemented a liquidity risk management program (the "Program"), which is reasonably designed to assess and manage the risk that the Fund could not meet requests to redeem shares issued by the Fund without significant dilution of remaining investors' interests in the Fund (i.e., liquidity risk). The Fund's Board of Directors (the "Board") previously approved the designation of the Liquidity Risk Subcommittee (the "LRS") as Program administrator. The LRS is comprised of representatives from various divisions within Morgan Stanley Investment Management.
At a meeting held on March 1-2, 2023, the Board reviewed a written report prepared by the LRS that addressed the Program's operation and assessed its adequacy, and effectiveness of implementation for the period from January 1, 2022, through December 31, 2022, as required under the Liquidity Rule. The report concluded that the Program operated effectively and was adequately and effectively implemented in all material aspects, and that the relevant controls and safeguards were appropriately designed to enable the LRS to administer the Program in compliance with the Liquidity Rule.
In accordance with the Program, the LRS assessed each Fund's liquidity risk no less frequently than annually taking into consideration certain factors, as applicable, such as (i) investment strategy and liquidity of portfolio investments, (ii) short-term and long-term cash flow projections and (iii) holdings of cash and cash equivalents and borrowing arrangements and other funding sources. Certain factors are considered under both normal and reasonably foreseeable stressed conditions.
Each Fund portfolio investment is classified into one of four liquidity categories, which classification is assessed at least monthly by the LRS. The classification is based on a determination of the number of days it is reasonably expected to take to convert the investment into cash, or sell or dispose of the investment, in current market conditions without significantly changing the market value of the investment. Liquidity classification determinations take into account various market, trading and investment-specific considerations, as well as market depth, and in some cases utilize third-party vendor data.
The Liquidity Rule limits a fund's investments in illiquid investments to 15% of its net assets and requires funds that do not primarily hold assets that are highly liquid investments to determine and maintain a minimum percentage of the fund's net assets to be invested in highly liquid investments (highly liquid investment minimum or "HLIM"). The LRS believes that the Program includes provisions reasonably designed to review, monitor and comply with the 15% limit on illiquid investments and for determining, periodically reviewing and complying with the HLIM requirement, as applicable.
There can be no assurance that the Program will achieve its objectives under all circumstances in the future. Please refer to the Fund's prospectus for more information regarding the Fund's exposure to liquidity risk and other risks to which it may be subject.
24
Morgan Stanley Variable Insurance Fund, Inc.
Semi-Annual Report – June 30, 2023 (unaudited)
Directors and Officers Information
Directors
Frank L. Bowman
Frances L. Cashman
Kathleen A. Dennis
Nancy C. Everett
Eddie A. Grier
Jakki L. Haussler
Dr. Manuel H. Johnson
Joseph J. Kearns
Michael F. Klein
Patricia A. Maleski
W. Allen Reed, Chair of the Board
Adviser and Administrator
Morgan Stanley Investment Management Inc.
522 Fifth Avenue
New York, New York 10036
Distributor
Morgan Stanley Distribution, Inc.
522 Fifth Avenue
New York, New York 10036
Dividend Disbursing and Transfer Agent
SS&C Global Investor & Distribution Solutions, Inc.
P.O. Box 219804
Kansas City, Missouri 64121-9804
Co-Transfer Agent
Eaton Vance Management
Two International Place
Boston, Massachusetts 02110
Officers
John H. Gernon
President and Principal Executive Officer
Deidre A. Downes
Chief Compliance Officer
Francis J. Smith
Treasurer and Principal Financial Officer
Mary E. Mullin
Secretary
Michael J. Key
Vice President
Custodian
State Street Bank and Trust Company
One Congress Street
Boston, Massachusetts 02114
Legal Counsel
Dechert LLP
1095 Avenue of the Americas
New York, New York 10036
Counsel to the Independent Directors
Perkins Coie LLP
1155 Avenue of the Americas,
22nd Floor
New York, New York 10036
Independent Registered Public Accounting Firm
Ernst & Young LLP
200 Clarendon Street
Boston, Massachusetts 02116
Reporting to Shareholders
Each Morgan Stanley fund provides a complete schedule of portfolio holdings in its Semi-Annual and the Annual Reports within 60 days of the end of the fund's second and fourth fiscal quarters. The Semi-Annual and Annual Reports are filed electronically with the Securities and Exchange Commission ("SEC") on Form N-CSRS and Form N-CSR, respectively. Morgan Stanley makes these reports available on its public website, www.morganstanley.com/im/shareholderreports. Each Morgan Stanley non-money market fund also files a complete schedule of portfolio holdings with the SEC for the fund's first and third fiscal quarters as an attachment to Form N-PORT. Morgan Stanley does not deliver the reports for the first and third fiscal quarters to shareholders, but makes the complete schedule of portfolio holdings for the fund's first and third fiscal quarters available on its public website. The holdings for each money market fund are also posted to the Morgan Stanley public website. You may obtain the Form N-PORT filings (as well as the Form N-CSR and N-CSRS filings) by accessing the SEC's website, www.sec.gov. You can also request copies of these materials, upon payment of a duplicating fee, by electronic request at the SEC's email address (publicinfo@sec.gov).
Proxy Voting Policies and Procedures and Proxy Voting Record
You may obtain a copy of the Company's Proxy Voting Policy and Procedures and information regarding how the Company voted proxies relating to portfolio securities during the most recent twelve-month period ended June 30, without charge, upon request, by calling toll free 1 (800) 869-6397 or by visiting our website at www.morganstanley.com/im/shareholderreports. This information is also available on the SEC's website at www.sec.gov.
This report is submitted for the general information of the shareholders of the Fund. For more detailed information about the Fund, its fees and expenses and other pertinent information, please read its Prospectus. The Company's Statement of Additional Information contains additional information about the Fund, including its Directors. It is available, without charge, by calling 1 (800) 869-6397.
Householding Notice
To reduce printing and mailing costs, the Fund attempts to eliminate duplicate mailings to the same address. The Fund delivers a single copy of certain shareholder documents, including shareholder reports, prospectuses and proxy materials, to investors with the same last name who reside at the same address. Your participation in this program will continue for an unlimited period of time unless you instruct us otherwise. You can request multiple copies of these documents by calling 1 (800) 869-6397, 8:00 a.m. to 6:00 p.m., ET. Once our Customer Service Center has received your instructions, we will begin sending individual copies for each account within 30 days.
This report is not authorized for distribution to prospective investors in the Fund unless preceded or accompanied by an effective Prospectus. Read the Prospectus carefully before investing.
UIFMCGSAN
5833167 EXP 08.31.24
Morgan Stanley Variable Insurance Fund, Inc.
Semi-Annual Report – June 30, 2023
Emerging Markets Debt Portfolio
The Fund is intended to be a funding vehicle for variable annuity contracts and variable life insurance policies offered by the separate accounts of certain life insurance companies.
Morgan Stanley Variable Insurance Fund, Inc.
Semi-Annual Report – June 30, 2023 (unaudited)
Table of Contents
Expense Example | 2 | ||||||
Portfolio of Investments | 3 | ||||||
Statement of Assets and Liabilities | 11 | ||||||
Statement of Operations | 12 | ||||||
Statements of Changes in Net Assets | 13 | ||||||
Financial Highlights | 14 | ||||||
Notes to Financial Statements | 16 | ||||||
Investment Advisory Agreement Approval | 27 | ||||||
Liquidity Risk Management Program | 29 | ||||||
Director and Officer Information | Back Cover |
1
Morgan Stanley Variable Insurance Fund, Inc.
Semi-Annual Report – June 30, 2023 (unaudited)
Expense Example
Emerging Markets Debt Portfolio
As a shareholder of the Emerging Markets Debt Portfolio (the "Fund"), you incur two types of costs: (1) insurance company charges; and (2) ongoing costs, which may include advisory fees, administration fees, distribution (12b-1) fees and other Fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.
This example is based on an investment of $1,000 invested at the beginning of the six-month period ended June 30, 2023 and held for the entire six-month period.
Actual Expenses
The table below provides information about actual account values and actual expenses. You may use the information in this table, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the table under the heading entitled "Actual Expenses Paid During Period" to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The table below provides information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any insurance company charges. Therefore, the table below is useful in comparing ongoing costs, but will not help you determine the relative total cost of owning different funds. In addition, if these insurance company charges were included, your costs would have been higher.
Beginning Account Value 1/1/23 | Actual Ending Account Value 6/30/23 | Hypothetical Ending Account Value | Actual Expenses Paid During Period* | Hypothetical Expenses Paid During Period* | Net Expense Ratio During Period** | ||||||||||||||||||||||
Emerging Markets Debt Portfolio Class I | $ | 1,000.00 | $ | 1,042.80 | $ | 1,019.39 | $ | 5.52 | $ | 5.46 | 1.09 | % | |||||||||||||||
Emerging Markets Debt Portfolio Class II | 1,000.00 | 1,041.30 | 1,019.14 | 5.77 | 5.71 | 1.14 |
* Expenses are calculated using each Fund Class' annualized net expense ratio (as disclosed), multiplied by the average account value over the period and multiplied by 181/365 (to reflect the most recent one-half year period).
** Annualized.
2
Morgan Stanley Variable Insurance Fund, Inc.
Semi-Annual Report – June 30, 2023 (unaudited)
Portfolio of Investments
Emerging Markets Debt Portfolio
Face Amount (000) | Value (000) | ||||||||||
Fixed Income Securities (95.5%) | |||||||||||
Albania (1.8%) | |||||||||||
Sovereign (1.8%) | |||||||||||
Albania Government International Bond, 3.50%, 10/9/25 | EUR | 210 | $ | 220 | |||||||
5.90%, 6/9/28 | 1,558 | 1,667 | |||||||||
1,887 | |||||||||||
Angola (0.7%) | |||||||||||
Sovereign (0.7%) | |||||||||||
Angolan Government International Bond, 8.75%, 4/14/32 | $ | 851 | 718 | ||||||||
Argentina (2.6%) | |||||||||||
Corporate Bond (0.5%) | |||||||||||
Provincia de Cordoba, 6.88%, 12/10/25 (a) | 746 | 563 | |||||||||
Sovereign (2.1%) | |||||||||||
Argentina Bonar Bonds, 0.50%, 7/9/30 (a) | 2,600 | 721 | |||||||||
Argentine Republic Government International Bond, 1.00%, 7/9/29 | 1,770 | 577 | |||||||||
3.50%, 7/9/41 (a) | 1,200 | 388 | |||||||||
3.88%, 1/9/38 (a) | 1,019 | 362 | |||||||||
Province of Salta Argentina, 8.50%, 12/1/27 (a) | 103 | 79 | |||||||||
Provincia del Chubut Argentina, 7.75%, 7/26/30 (a) | 123 | 100 | |||||||||
2,227 | |||||||||||
2,790 | |||||||||||
Armenia (0.2%) | |||||||||||
Corporate Bond (0.2%) | |||||||||||
Ardshinbank CJSC Via Dilijan Finance BV, 6.50%, 1/28/25 | 200 | 196 | |||||||||
Azerbaijan (0.4%) | |||||||||||
Sovereign (0.4%) | |||||||||||
Republic of Azerbaijan International Bond, 3.50%, 9/1/32 | 550 | 472 | |||||||||
Bahrain (1.7%) | |||||||||||
Sovereign (1.7%) | |||||||||||
Bahrain Government International Bond, 5.45%, 9/16/32 | 1,070 | 957 | |||||||||
5.63%, 5/18/34 | 1,000 | 873 | |||||||||
1,830 | |||||||||||
Barbados (1.4%) | |||||||||||
Sovereign (1.4%) | |||||||||||
Barbados Government International Bond, 6.50%, 10/1/29 | 1,520 | 1,435 | |||||||||
Benin (2.3%) | |||||||||||
Sovereign (2.3%) | |||||||||||
Benin Government International Bond, 4.88%, 1/19/32 | EUR | 250 | 208 | ||||||||
4.95%, 1/22/35 | 1,600 | 1,238 | |||||||||
6.88%, 1/19/52 | 1,298 | 1,006 | |||||||||
2,452 |
Face Amount (000) | Value (000) | ||||||||||
Bolivia (0.2%) | |||||||||||
Sovereign (0.2%) | |||||||||||
Bolivian Government International Bond, 5.95%, 8/22/23 | $ | 228 | $ | 212 | |||||||
Brazil (2.8%) | |||||||||||
Corporate Bonds (2.8%) | |||||||||||
Coruripe Netherlands BV, 10.00%, 2/10/27 | 1,060 | 675 | |||||||||
Guara Norte Sarl, 5.20%, 6/15/34 | 610 | 535 | |||||||||
Hidrovias International Finance Sarl, 4.95%, 2/8/31 | 580 | 465 | |||||||||
MC Brazil Downstream Trading Sarl, 7.25%, 6/30/31 | 657 | 444 | |||||||||
MV24 Capital BV, 6.75%, 6/1/34 | 578 | 522 | |||||||||
Natura &Co. Luxembourg Holdings Sarl, 6.00%, 4/19/29 (b) | 350 | 325 | |||||||||
2,966 | |||||||||||
Burkina Faso (0.7%) | |||||||||||
Corporate Bond (0.7%) | |||||||||||
Endeavour Mining PLC, 5.00%, 10/14/26 | 880 | 783 | |||||||||
Cayman Islands (0.6%) | |||||||||||
Corporate Bond (0.6%) | |||||||||||
ABRA Global Finance, 6.00% Cash, 5.50% PIK, 3/2/28 (b)(c) | 717 | 585 | |||||||||
Chile (2.4%) | |||||||||||
Corporate Bonds (1.5%) | |||||||||||
AES Andes SA, 7.13%, 3/26/79 | 400 | 370 | |||||||||
Inversiones CMPC SA, 6.13%, 6/23/33 (b) | 200 | 201 | |||||||||
Latam Airlines Group SA, 13.38%, 10/15/27 (b) | 245 | 265 | |||||||||
Liberty Latin America Ltd., 2.00%, 7/15/24 | 311 | 296 | |||||||||
VTR Comunicaciones SpA, 4.38%, 4/15/29 | 434 | 222 | |||||||||
5.13%, 1/15/28 | 400 | 209 | |||||||||
1,563 | |||||||||||
Sovereign (0.9%) | |||||||||||
Chile Government International Bond, 2.45%, 1/31/31 | 500 | 432 | |||||||||
2.55%, 7/27/33 | 200 | 164 | |||||||||
3.50%, 1/25/50 | 550 | 415 | |||||||||
1,011 | |||||||||||
2,574 | |||||||||||
China (0.7%) | |||||||||||
Corporate Bonds (0.7%) | |||||||||||
KWG Group Holdings Ltd., 7.88%, 8/30/24 (d)(e) | 450 | 49 | |||||||||
Meituan, 0.00%, 4/27/27 | 500 | 439 |
The accompanying notes are an integral part of the financial statements.
3
Morgan Stanley Variable Insurance Fund, Inc.
Semi-Annual Report – June 30, 2023 (unaudited)
Portfolio of Investments (cont'd)
Emerging Markets Debt Portfolio
Face Amount (000) | Value (000) | ||||||||||
Corporate Bonds (cont'd) | |||||||||||
Shimao Group Holdings Ltd., 5.60%, 7/15/26 | $ | 1,218 | $ | 101 | |||||||
Sunac China Holdings Ltd., 8.35%, 4/19/23 (d)(e) | 740 | 109 | |||||||||
Times China Holdings Ltd., 5.55%, 6/4/24 (d)(e) | 330 | 24 | |||||||||
6.75%, 7/16/23 (d)(e) | 280 | 67 | |||||||||
789 | |||||||||||
Colombia (1.0%) | |||||||||||
Corporate Bonds (1.0%) | |||||||||||
Aris Mining Corp., 6.88%, 8/9/26 | 830 | 611 | |||||||||
Canacol Energy Ltd., 5.75%, 11/24/28 | 552 | 472 | |||||||||
1,083 | |||||||||||
Costa Rica (0.4%) | |||||||||||
Corporate Bond (0.4%) | |||||||||||
Liberty Costa Rica Senior Secured Finance, 10.88%, 1/15/31 (b) | 430 | 426 | |||||||||
Dominican Republic (1.8%) | |||||||||||
Sovereign (1.8%) | |||||||||||
Dominican Republic International Bond, 4.88%, 9/23/32 | 400 | 341 | |||||||||
5.88%, 1/30/60 | 200 | 156 | |||||||||
6.00%, 7/19/28 (b) | 200 | 195 | |||||||||
6.85%, 1/27/45 (b) | 740 | 674 | |||||||||
7.45%, 4/30/44 (b) | 500 | 491 | |||||||||
1,857 | |||||||||||
Ecuador (0.6%) | |||||||||||
Sovereign (0.6%) | |||||||||||
Ecuador Government International Bond, 1.50%, 7/31/40 (a) | 265 | 83 | |||||||||
1.50%, 7/31/40 (a)(b) | 300 | 94 | |||||||||
2.50%, 7/31/35 (a) | 440 | 154 | |||||||||
5.50%, 7/31/30 (a) | 200 | 97 | |||||||||
5.50%, 7/31/30 (a)(b) | 500 | 243 | |||||||||
671 | |||||||||||
Egypt (1.1%) | |||||||||||
Sovereign (1.1%) | |||||||||||
Egypt Government International Bond, 5.25%, 10/6/25 (b) | 200 | 153 | |||||||||
5.75%, 5/29/24 | 300 | 272 | |||||||||
6.38%, 4/11/31 (b) | EUR | 500 | 304 | ||||||||
6.88%, 4/30/40 | $ | 104 | 57 | ||||||||
8.88%, 5/29/50 | 730 | 395 | |||||||||
1,181 | |||||||||||
El Salvador (0.8%) | |||||||||||
Sovereign (0.8%) | |||||||||||
El Salvador Government International Bond, 5.88%, 1/30/25 | 187 | 166 | |||||||||
6.38%, 1/18/27 | 933 | 656 | |||||||||
822 |
Face Amount (000) | Value (000) | ||||||||||
Ethiopia (1.0%) | |||||||||||
Sovereign (1.0%) | |||||||||||
Ethiopia International Bond, 6.63%, 12/11/24 | $ | 1,580 | $ | 1,096 | |||||||
Gabon (0.3%) | |||||||||||
Sovereign (0.3%) | |||||||||||
Gabon Government International Bond, 6.95%, 6/16/25 (b) | 300 | 283 | |||||||||
Georgia (0.3%) | |||||||||||
Corporate Bond (0.3%) | |||||||||||
TBC Bank JSC, 10.78%, 10/3/24 (f) | 370 | 360 | |||||||||
Ghana (1.4%) | |||||||||||
Corporate Bond (0.4%) | |||||||||||
Tullow Oil PLC, 10.25%, 5/15/26 | 598 | 455 | |||||||||
Sovereign (1.0%) | |||||||||||
Ghana Government International Bond, 6.38%, 2/11/27 | 200 | 87 | |||||||||
7.75%, 4/7/29 (d)(e) | 205 | 88 | |||||||||
8.63%, 4/7/34 | 417 | 180 | |||||||||
8.63%, 6/16/49 (d)(e) | 1,230 | 510 | |||||||||
8.75%, 3/11/61 (d)(e) | 200 | 83 | |||||||||
8.88%, 5/7/42 | 233 | 96 | |||||||||
1,044 | |||||||||||
1,499 | |||||||||||
Guatemala (0.5%) | |||||||||||
Sovereign (0.5%) | |||||||||||
Guatemala Government Bond, 4.65%, 10/7/41 (b) | 310 | 248 | |||||||||
6.13%, 6/1/50 (b) | 320 | 295 | |||||||||
543 | |||||||||||
Honduras (0.8%) | |||||||||||
Sovereign (0.8%) | |||||||||||
Honduras Government International Bond, 5.63%, 6/24/30 | 196 | 159 | |||||||||
6.25%, 1/19/27 | 805 | 735 | |||||||||
894 | |||||||||||
Hungary (1.5%) | |||||||||||
Corporate Bond (0.5%) | |||||||||||
OTP Bank Nyrt, 8.75%, 5/15/33 | 550 | 553 | |||||||||
Sovereign (1.0%) | |||||||||||
Hungary Government International Bond, 6.25%, 9/22/32 (b) | 1,000 | 1,027 | |||||||||
1,580 | |||||||||||
India (2.1%) | |||||||||||
Corporate Bonds (1.6%) | |||||||||||
Indiabulls Housing Finance Ltd., 4.50%, 9/28/26 | 387 | 309 | |||||||||
JSW Steel Ltd., 5.05%, 4/5/32 | 1,042 | 843 | |||||||||
Vedanta Resources Finance II PLC, 13.88%, 1/21/24 | 550 | 503 | |||||||||
1,655 |
The accompanying notes are an integral part of the financial statements.
4
Morgan Stanley Variable Insurance Fund, Inc.
Semi-Annual Report – June 30, 2023 (unaudited)
Portfolio of Investments (cont'd)
Emerging Markets Debt Portfolio
Face Amount (000) | Value (000) | ||||||||||
Sovereign (0.5%) | |||||||||||
Export-Import Bank of India, 5.50%, 1/18/33 (b) | $ | 540 | $ | 538 | |||||||
2,193 | |||||||||||
Indonesia (2.6%) | |||||||||||
Corporate Bond (1.0%) | |||||||||||
Minejesa Capital BV, 4.63%, 8/10/30 | 1,165 | 1,049 | |||||||||
Sovereign (1.6%) | |||||||||||
Indonesia Government International Bond, 3.55%, 3/31/32 | 800 | 726 | |||||||||
4.45%, 4/15/70 | 300 | 256 | |||||||||
4.65%, 9/20/32 | 780 | 765 | |||||||||
1,747 | |||||||||||
2,796 | |||||||||||
Iraq (1.6%) | |||||||||||
Sovereign (1.6%) | |||||||||||
Iraq International Bond, 5.80%, 1/15/28 | 1,803 | 1,661 | |||||||||
Ireland (0.6%) | |||||||||||
Corporate Bond (0.6%) | |||||||||||
C&W Senior Financing DAC, 6.88%, 9/15/27 | 673 | 588 | |||||||||
Ivory Coast (0.9%) | |||||||||||
Sovereign (0.9%) | |||||||||||
Ivory Coast Government International Bond, 4.88%, 1/30/32 | EUR | 600 | 511 | ||||||||
6.63%, 3/22/48 | 400 | 311 | |||||||||
6.88%, 10/17/40 | 148 | 123 | |||||||||
945 | |||||||||||
Jamaica (0.8%) | |||||||||||
Corporate Bond (0.8%) | |||||||||||
Digicel International Finance Ltd./Digicel international Holdings Ltd., 8.75%, 5/25/24 | $ | 900 | 826 | ||||||||
Jordan (0.9%) | |||||||||||
Sovereign (0.9%) | |||||||||||
Jordan Government International Bond, 7.38%, 10/10/47 (b) | 840 | 726 | |||||||||
7.75%, 1/15/28 | 200 | 204 | |||||||||
930 | |||||||||||
Kazakhstan (0.8%) | |||||||||||
Sovereign (0.8%) | |||||||||||
Kazakhstan Government International Bond, 6.50%, 7/21/45 | 800 | 847 | |||||||||
Kenya (2.5%) | |||||||||||
Sovereign (2.5%) | |||||||||||
Kenya Government International Bond, 7.25%, 2/28/28 | 370 | 322 | |||||||||
8.00%, 5/22/32 (b) | 250 | 212 |
Face Amount (000) | Value (000) | ||||||||||
Republic of Kenya Government International Bond, 6.30%, 1/23/34 | $ | 422 | $ | 320 | |||||||
7.00%, 5/22/27 | 402 | 363 | |||||||||
8.00%, 5/22/32 | 1,726 | 1,462 | |||||||||
2,679 | |||||||||||
Kuwait (0.5%) | |||||||||||
Sovereign (0.5%) | |||||||||||
Kuwait International Government Bond, 3.50%, 3/20/27 | 550 | 532 | |||||||||
Lebanon (0.2%) | |||||||||||
Sovereign (0.2%) | |||||||||||
6.85%, 3/23/27 - 5/25/29 (d)(e) | 2,940 | 199 | |||||||||
Luxembourg (1.1%) | |||||||||||
Corporate Bonds (1.1%) | |||||||||||
Cosan Luxembourg SA, 7.50%, 6/27/30 (b) | 421 | 417 | |||||||||
Natura &Co. Luxembourg Holdings Sarl, 6.00%, 4/19/29 | 810 | 752 | |||||||||
1,169 | |||||||||||
Macedonia (2.7%) | |||||||||||
Sovereign (2.7%) | |||||||||||
North Macedonia Government International Bond, 1.63%, 3/10/28 | EUR | 1,444 | 1,280 | ||||||||
6.96%, 3/13/27 | 1,449 | 1,618 | |||||||||
2,898 | |||||||||||
Mexico (9.8%) | |||||||||||
Corporate Bonds (5.5%) | |||||||||||
Banco Mercantil del Norte SA, 8.38%, 10/14/30 (f) | $ | 234 | 219 | ||||||||
BBVA Bancomer SA, 5.13%, 1/18/33 | 465 | 404 | |||||||||
5 Year CMT + 4.66%, 8.45%, 6/29/38 (b) | 289 | 290 | |||||||||
Braskem Idesa SAPI, 6.99%, 2/20/32 | 478 | 310 | |||||||||
7.45%, 11/15/29 | 515 | 346 | |||||||||
Cemex SAB de CV, 5.13%, 6/8/26 (f) | 600 | 534 | |||||||||
9.13%, 3/14/28 (b)(f) | 490 | 497 | |||||||||
Petroleos Mexicanos, 5.35%, 2/12/28 | 650 | 536 | |||||||||
6.50%, 3/13/27 - 1/23/29 | 1,240 | 1,066 | |||||||||
6.88%, 8/4/26 | 731 | 683 | |||||||||
Total Play Telecomunicaciones SA de CV, 7.50%, 11/12/25 | 1,351 | 960 | |||||||||
5,845 | |||||||||||
Sovereign (4.3%) | |||||||||||
Mexico Government International Bond, 5.00%, 4/27/51 | 300 | 261 |
The accompanying notes are an integral part of the financial statements.
5
Morgan Stanley Variable Insurance Fund, Inc.
Semi-Annual Report – June 30, 2023 (unaudited)
Portfolio of Investments (cont'd)
Emerging Markets Debt Portfolio
Face Amount (000) | Value (000) | ||||||||||
Sovereign (cont'd) | |||||||||||
Petroleos Mexicanos, 4.25%, 1/15/25 | $ | 330 | $ | 313 | |||||||
5.95%, 1/28/31 | 900 | 658 | |||||||||
6.35%, 2/12/48 | 1,056 | 640 | |||||||||
6.70%, 2/16/32 | 1,390 | 1,058 | |||||||||
6.88%, 10/16/25 | 310 | 298 | |||||||||
6.95%, 1/28/60 | 300 | 187 | |||||||||
7.69%, 1/23/50 | 1,100 | 746 | |||||||||
10.00%, 2/7/33 (b) | 413 | 379 | |||||||||
4,540 | |||||||||||
10,385 | |||||||||||
Moldova (0.3%) | |||||||||||
Corporate Bond (0.3%) | |||||||||||
Aragvi Finance International DAC, 8.45%, 4/29/26 | 450 | 306 | |||||||||
Morocco (0.4%) | |||||||||||
Sovereign (0.4%) | |||||||||||
Morocco Government International Bond, 4.00%, 12/15/50 (b) | 610 | 412 | |||||||||
Mozambique (0.1%) | |||||||||||
Sovereign (0.1%) | |||||||||||
Mozambique International Bond, 5.00%, 9/15/31 (a) | 207 | 158 | |||||||||
Netherlands (0.4%) | |||||||||||
Corporate Bond (0.4%) | |||||||||||
Petrobras Global Finance BV, 6.50%, 7/3/33 | 425 | 416 | |||||||||
Nigeria (1.4%) | |||||||||||
Corporate Bonds (0.9%) | |||||||||||
IHS Netherlands Holdco BV, 8.00%, 9/18/27 (b) | 700 | 640 | |||||||||
SEPLAT Energy PLC, 7.75%, 4/1/26 | 410 | 345 | |||||||||
985 | |||||||||||
Sovereign (0.5%) | |||||||||||
Nigeria Government International Bond, 6.38%, 7/12/23 | 270 | 270 | |||||||||
6.50%, 11/28/27 (b) | 300 | 262 | |||||||||
532 | |||||||||||
1,517 | |||||||||||
Oman (1.9%) | |||||||||||
Sovereign (1.9%) | |||||||||||
Oman Government International Bond, 6.25%, 1/25/31 (b) | 550 | 559 | |||||||||
6.25%, 1/25/31 | 1,060 | 1,078 | |||||||||
6.75%, 1/17/48 | 440 | 424 | |||||||||
2,061 |
Face Amount (000) | Value (000) | ||||||||||
Pakistan (0.3%) | |||||||||||
Sovereign (0.3%) | |||||||||||
Pakistan Government International Bond, 7.38%, 4/8/31 | $ | 345 | $ | 160 | |||||||
8.88%, 4/8/51 | 300 | 134 | |||||||||
294 | |||||||||||
Panama (1.3%) | |||||||||||
Corporate Bond (0.5%) | |||||||||||
Multibank, Inc., 7.75%, 2/3/28 (b) | 531 | 538 | |||||||||
Sovereign (0.8%) | |||||||||||
Panama Government International Bond, 2.25%, 9/29/32 | 400 | 307 | |||||||||
3.87%, 7/23/60 | 470 | 313 | |||||||||
Panama Government International Bond, 4.50%, 4/1/56 | 290 | 218 | |||||||||
838 | |||||||||||
1,376 | |||||||||||
Paraguay (1.3%) | |||||||||||
Corporate Bond (0.6%) | |||||||||||
Frigorifico Concepcion SA, 7.70%, 7/21/28 | 786 | 613 | |||||||||
Sovereign (0.7%) | |||||||||||
Paraguay Government International Bond, 3.85%, 6/28/33 | 300 | 261 | |||||||||
5.40%, 3/30/50 | 248 | 212 | |||||||||
5.40%, 3/30/50 (b) | 400 | 343 | |||||||||
816 | |||||||||||
1,429 | |||||||||||
Peru (1.8%) | |||||||||||
Corporate Bonds (1.5%) | |||||||||||
Auna SAA, 6.50%, 11/20/25 | 1,264 | 1,044 | |||||||||
Peru LNG Srl, 5.38%, 3/22/30 | 650 | 524 | |||||||||
1,568 | |||||||||||
Sovereign (0.3%) | |||||||||||
Peruvian Government International Bond, 3.55%, 3/10/51 | 400 | 301 | |||||||||
1,869 | |||||||||||
Romania (5.5%) | |||||||||||
Sovereign (5.5%) | |||||||||||
Romania Government International Bonds, 6.63%, 9/27/29 | EUR | 975 | 1,106 | ||||||||
Romanian Government International Bond, 1.75%, 7/13/30 (b) | 315 | 263 | |||||||||
1.75%, 7/13/30 | 1,704 | 1,422 | |||||||||
2.00%, 1/28/32 - 4/14/33 | 386 | 299 | |||||||||
2.12%, 7/16/31 | 749 | 621 | |||||||||
2.13%, 3/7/28 | 532 | 505 | |||||||||
3.62%, 5/26/30 | 20 | 19 | |||||||||
3.75%, 2/7/34 | 121 | 107 | |||||||||
3.75%, 2/7/34 (b) | 560 | 495 |
The accompanying notes are an integral part of the financial statements.
6
Morgan Stanley Variable Insurance Fund, Inc.
Semi-Annual Report – June 30, 2023 (unaudited)
Portfolio of Investments (cont'd)
Emerging Markets Debt Portfolio
Face Amount (000) | Value (000) | ||||||||||
Sovereign (cont'd) | |||||||||||
4.00%, 2/14/51 | $ | 830 | $ | 595 | |||||||
5.00%, 9/27/26 | EUR | 142 | 156 | ||||||||
6.13%, 1/22/44 | $ | 250 | 242 | ||||||||
5,830 | |||||||||||
Senegal (0.2%) | |||||||||||
Sovereign (0.2%) | |||||||||||
Senegal Government International Bond, 6.25%, 5/23/33 | 300 | 252 | |||||||||
Serbia (1.8%) | |||||||||||
Sovereign (1.8%) | |||||||||||
Serbia International Bond, 1.50%, 6/26/29 | EUR | 908 | 768 | ||||||||
2.05%, 9/23/36 | 270 | 181 | |||||||||
2.13%, 12/1/30 (b) | $ | 310 | 239 | ||||||||
2.13%, 12/1/30 | 720 | 555 | |||||||||
6.50%, 9/26/33 | 200 | 197 | |||||||||
1,940 | |||||||||||
Singapore (0.1%) | |||||||||||
Corporate Bond (0.1%) | |||||||||||
APL Realty Holdings Pte. Ltd., 5.95%, 6/2/24 | 200 | 101 | |||||||||
South Africa (0.9%) | |||||||||||
Corporate Bonds (0.9%) | |||||||||||
Petra Diamonds U.S. Treasury PLC, 6.59% Cash, 3.91% PIK , 3/8/26 (c) | 230 | 216 | |||||||||
Sasol Financing USA LLC, 5.50%, 3/18/31 | 870 | 686 | |||||||||
902 | |||||||||||
Sri Lanka (3.3%) | |||||||||||
Sovereign (3.3%) | |||||||||||
Sri Lanka Government International Bond, 5.75%, 4/18/23 | 200 | 91 | |||||||||
6.20%, 5/11/27 (d)(e) | 2,400 | 1,105 | |||||||||
6.35%, 6/28/24 (d)(e) | 200 | 92 | |||||||||
6.75%, 4/18/28 (d)(e) | 200 | 92 | |||||||||
6.83%, 7/18/26 | 200 | 95 | |||||||||
6.85%, 3/14/24 - 11/3/25 (d)(e) | 2,100 | 997 | |||||||||
7.55%, 3/28/30 (d)(e) | 1,600 | 737 | |||||||||
7.85%, 3/14/29 (d)(e) | 600 | 276 | |||||||||
3,485 | |||||||||||
Suriname (4.0%) | |||||||||||
Sovereign (4.0%) | |||||||||||
Suriname Government International Bond, 9.25%, 10/26/26 (d)(e) | 4,633 | 3,938 | |||||||||
12.88%, 12/30/23 (b)(d)(e) | 127 | 108 | |||||||||
12.88%, 12/30/23 | 235 | 200 | |||||||||
4,246 | |||||||||||
Tanzania, United Republic Of (0.5%) | |||||||||||
Corporate Bond (0.5%) | |||||||||||
HTA Group Ltd., 7.00%, 12/18/25 | 600 | 569 |
Face Amount (000) | Value (000) | ||||||||||
Turkey (2.8%) | |||||||||||
Corporate Bonds (1.2%) | |||||||||||
Limak Iskenderun Uluslararasi Liman Isletmeciligi AS, 9.50%, 7/10/36 | $ | 749 | $ | 659 | |||||||
Ulker Biskuvi Sanayi AS, 6.95%, 10/30/25 | 740 | 668 | |||||||||
1,327 | |||||||||||
Sovereign (1.6%) | |||||||||||
Turkey Government International Bond, 5.75%, 5/11/47 | 500 | 343 | |||||||||
6.13%, 10/24/28 | 803 | 719 | |||||||||
9.38%, 1/19/33 | 590 | 593 | |||||||||
1,655 | |||||||||||
2,982 | |||||||||||
Ukraine (0.7%) | |||||||||||
Sovereign (0.7%) | |||||||||||
Ukraine Government International Bond, 6.88%, 5/21/31 (d)(e) | 1,000 | 231 | |||||||||
7.75%, 9/1/25 (d)(e) | 1,500 | 382 | |||||||||
7.75%, 8/1/41 (d)(e)(g) | 408 | 161 | |||||||||
774 | |||||||||||
United Arab Emirates (4.2%) | |||||||||||
Corporate Bond (0.3%) | |||||||||||
Shelf Drilling Holdings Ltd., 8.88%, 11/15/24 | 339 | 339 | |||||||||
Sovereign (3.9%) | |||||||||||
Finance Department Government of Sharjah, 4.00%, 7/28/50 | 1,671 | 1,074 | |||||||||
4.38%, 3/10/51 | 2,206 | 1,515 | |||||||||
6.50%, 11/23/32 (b) | 1,430 | 1,479 | |||||||||
4,068 | |||||||||||
4,407 | |||||||||||
United States (0.6%) | |||||||||||
Corporate Bonds (0.6%) | |||||||||||
Kosmos Energy Ltd., 7.50%, 3/1/28 | 282 | 235 | |||||||||
Sasol Financing USA LLC, 8.75%, 5/3/29 | 233 | 227 | |||||||||
SierraCol Energy Andina LLC, 6.00%, 6/15/28 | 200 | 147 | |||||||||
609 | |||||||||||
Uzbekistan (1.6%) | |||||||||||
Corporate Bond (0.4%) | |||||||||||
Uzbek Industrial and Construction Bank ATB, 5.75%, 12/2/24 | 462 | 440 | |||||||||
Sovereign (1.2%) | |||||||||||
Republic of Uzbekistan International Bond, 3.70%, 11/25/30 (b) | 200 | 162 | |||||||||
3.90%, 10/19/31 | 634 | 511 | |||||||||
5.38%, 2/20/29 | 600 | 551 | |||||||||
1,224 | |||||||||||
1,664 |
The accompanying notes are an integral part of the financial statements.
7
Morgan Stanley Variable Insurance Fund, Inc.
Semi-Annual Report – June 30, 2023 (unaudited)
Portfolio of Investments (cont'd)
Emerging Markets Debt Portfolio
Face Amount (000) | Value (000) | ||||||||||
Venezuela (0.3%) | |||||||||||
Sovereign (0.3%) | |||||||||||
Petroleos de Venezuela SA, 6.00%, 11/15/26 (d)(e) | $ | 8,000 | $ | 278 | |||||||
Vietnam (1.7%) | |||||||||||
Corporate Bond (0.5%) | |||||||||||
Mong Duong Finance Holdings BV, 5.13%, 5/7/29 | 606 | 535 | |||||||||
Sovereign (1.2%) | |||||||||||
Vietnam Government International Bond, 4.80%, 11/19/24 | 1,320 | 1,299 | |||||||||
1,834 | |||||||||||
Zambia (1.0%) | |||||||||||
Sovereign (1.0%) | |||||||||||
Zambia Government International Bond, 5.38%, 9/20/22 (d)(e) | 487 | 257 | |||||||||
8.50%, 4/14/24 (d)(e) | 201 | 117 | |||||||||
8.50%, 4/14/24 | 200 | 117 | |||||||||
8.97%, 7/30/27 (d)(e) | 906 | 524 | |||||||||
1,015 | |||||||||||
Total Fixed Income Securities (Cost $116,277) | 101,358 | ||||||||||
No. of Warrants | |||||||||||
Warrants (0.0%)‡ | |||||||||||
Venezuela (0.0%)‡ | |||||||||||
Venezuela Government International Bond, Oil-Linked Payment Obligation, expires 4/15/20 (h) (Cost $—) | 3,750 | 19 | |||||||||
Face Amount (000) | |||||||||||
Short-Term Investments (2.1%) | |||||||||||
United States (0.1%) | |||||||||||
U.S. Treasury Security (0.1%) | |||||||||||
U.S. Treasury Bill, 4.47%, 11/30/23 (i) (Cost $123) | $ | 125 | 122 | ||||||||
Shares | |||||||||||
Investment Company (2.0%) | |||||||||||
Morgan Stanley Institutional Liquidity Funds — Treasury Securities Portfolio — Institutional Class (See Note H) (Cost $2,166) | 2,165,586 | 2,166 | |||||||||
Total Short-Term Investments (Cost $2,289) | 2,288 | ||||||||||
Total Investments (97.6%) (Cost $118,566) (k)(l) | 103,665 | ||||||||||
Other Assets in Excess of Liabilities (2.4%) | 2,509 | ||||||||||
Net Assets (100.0%) | $ | 106,174 |
Country assignments and aggregations are based generally on third party vendor classifications and information, and may be different from the assignments and aggregations under the policies set forth in the Fund's prospectus and/or statement of additional information relating to geographic classifications.
‡ Amount is less than 0.05%.
(a) Multi-step — Coupon rate changes in predetermined increments to maturity. Rate disclosed is as of June 30, 2023. Maturity date disclosed is the ultimate maturity date.
(b) 144A security — Certain conditions for public sale may exist. Unless otherwise noted, these securities are deemed to be liquid.
(c) Income may be paid in additional securities and/or cash at the discretion of the issuer.
(d) Issuer in bankruptcy.
(e) Non-income producing security; bond in default.
(f) Perpetual — One or more securities do not have a predetermined maturity date. Rates for these securities are fixed for a period of time after which they revert to a floating rate. Interest rates in effect are as of June 30, 2023.
(g) Floating or variable rate securities: The rates disclosed are as of June 30, 2023. For securities based on a published reference rate and spread, the reference rate and spread are indicated in the description in the Portfolio of Investments. Certain variable rate securities may not be based on a published reference rate and spread but are determined by the issuer or agent and are based on current market conditions. These securities do not indicate a reference rate and spread in their description in the Portfolio of Investments.
(h) Perpetual maturity date. Date disclosed is the last expiration date.
(i) Rate shown is the yield to maturity at June 30, 2023.
(j) All or a portion of this security was pledged to cover margin requirements for futures contracts.
(k) Securities are available for collateral in connection with foreign currency forward exchange contracts, futures contracts and swap agreements.
(l) At June 30, 2023, the aggregate cost for federal income tax purposes approximates the aggregate cost for book purposes. The aggregate gross unrealized appreciation is approximately $2,867,000 and the aggregate gross unrealized depreciation is approximately $17,910,000, resulting in net unrealized depreciation of approximately $15,043,000.
PIK Payment-in-Kind.
CMT Constant Maturity Treasury Note Rate.
The accompanying notes are an integral part of the financial statements.
8
Morgan Stanley Variable Insurance Fund, Inc.
Semi-Annual Report – June 30, 2023 (unaudited)
Portfolio of Investments (cont'd)
Emerging Markets Debt Portfolio
Foreign Currency Forward Exchange Contracts:
The Fund had the following foreign currency forward exchange contracts open at June 30, 2023:
Counterparty | Contracts to Deliver (000) | In Exchange For (000) | Delivery Date | Unrealized Appreciation (Depreciation) (000) | |||||||||||||||
Bank of America NA | EUR | 100 | $ | 109 | 7/7/23 | $ | (— | @) | |||||||||||
Citibank NA | EUR | 18 | $ | 20 | 7/7/23 | (— | @) | ||||||||||||
Citibank NA | EUR | 85 | $ | 91 | 7/7/23 | (1 | ) | ||||||||||||
Citibank NA | EUR | 72 | $ | 79 | 7/7/23 | — | @ | ||||||||||||
Citibank NA | EUR | 199 | $ | 218 | 7/7/23 | 1 | |||||||||||||
Goldman Sachs International | EUR | 72 | $ | 79 | 7/7/23 | (— | @) | ||||||||||||
HSBC Bank PLC | EUR | 1,543 | $ | 1,654 | 7/7/23 | (30 | ) | ||||||||||||
HSBC Bank PLC | EUR | 45 | $ | 48 | 7/7/23 | (— | @) | ||||||||||||
HSBC Bank PLC | EUR | 369 | $ | 399 | 7/7/23 | (4 | ) | ||||||||||||
HSBC Bank PLC | EUR | 191 | $ | 209 | 7/7/23 | 1 | |||||||||||||
HSBC Bank PLC | EUR | 15 | $ | 16 | 7/7/23 | — | @ | ||||||||||||
HSBC Bank PLC | $ | 324 | EUR | 300 | 7/7/23 | 3 | |||||||||||||
State Street Bank and Trust Co. | EUR | 89 | $ | 98 | 7/7/23 | (— | @) | ||||||||||||
UBS AG | EUR | 3,043 | $ | 3,254 | 7/7/23 | (67 | ) | ||||||||||||
UBS AG | EUR | 1,336 | $ | 1,428 | 7/7/23 | (29 | ) | ||||||||||||
UBS AG | EUR | 1,130 | $ | 1,209 | 7/7/23 | (25 | ) | ||||||||||||
UBS AG | EUR | 5,537 | $ | 5,921 | 7/7/23 | (122 | ) | ||||||||||||
$ | (273 | ) |
Futures Contracts:
The Fund had the following futures contracts open at June 30, 2023:
Number of Contracts | Expiration Date | Notional Amount (000) | Value (000) | Unrealized Appreciation (Depreciation) (000) | |||||||||||||||||||
Long: | |||||||||||||||||||||||
U.S. Treasury 10 yr. Note (United States) | 12 | Sep-23 | $ | 1,200 | $ | 1,347 | $ | (4 | ) | ||||||||||||||
U.S. Treasury 10 yr. Ultra Note (United States) | 109 | Sep-23 | 10,900 | 12,910 | (124 | ) | |||||||||||||||||
U.S. Treasury Long Bond (United States) | 24 | Sep-23 | 2,400 | 3,046 | 1 | ||||||||||||||||||
U.S. Treasury Ultra Long Bond (United States) | 87 | Sep-23 | 8,700 | 11,851 | 130 | ||||||||||||||||||
Short: | |||||||||||||||||||||||
Euro-Buxl 30 yr. Bond (Germany) | 4 | Sep-23 | EUR | (400 | ) | (609 | ) | (16 | ) | ||||||||||||||
German Euro-Bobl Index (Germany) | 40 | Sep-23 | (4,000 | ) | (5,051 | ) | 50 | ||||||||||||||||
German Euro-Bund Index (Germany) | 37 | Sep-23 | (3,700 | ) | (5,400 | ) | 23 | ||||||||||||||||
U.S. Treasury 2 yr. Note (United States) | 4 | Sep-23 | $ | (800 | ) | (813 | ) | 10 | |||||||||||||||
U.S. Treasury 5 yr. Note (United States) | 37 | Sep-23 | (3,700 | ) | (3,963 | ) | 38 | ||||||||||||||||
$ | 108 |
The accompanying notes are an integral part of the financial statements.
9
Morgan Stanley Variable Insurance Fund, Inc.
Semi-Annual Report – June 30, 2023 (unaudited)
Portfolio of Investments (cont'd)
Emerging Markets Debt Portfolio
Credit Default Swap Agreements:
The Fund had the following credit default swap agreements open at June 30, 2023:
Swap Counterparty and Reference Obligation | Credit Rating of Reference Obligation† | Buy/Sell Protection | Pay/ Received Fixed Rate | Payment Frequency | Maturity Date | Notional Amount (000) | Value (000) | Upfront Payment Paid (Received) (000) | Unrealized Appreciation (Depreciation) (000) | ||||||||||||||||||||||||||||||
Morgan Stanley & Co. LLC* Mexico Government International Bonds | NR | Buy | 1.00 | % | Quarterly | 6/20/28 | $ | 2,307 | $ | 2 | $ | 44 | $ | (42 | ) | ||||||||||||||||||||||||
Goldman Sachs International Vietnam Government International Bonds | NR | Sell | 1.00 | Quarterly | 6/20/28 | 6,200 | (40 | ) | (104 | ) | 65 | ||||||||||||||||||||||||||||
$ | (38 | ) | $ | (60 | ) | $ | 23 |
† Credit rating as issued by Standard & Poor's.
* Cleared swap agreement, the broker is Morgan Stanley & Co. LLC.
@ Value is less than $500.
NR Not Rated.
EUR — Euro
Portfolio Composition
Classification | Percentage of Total Investments | ||||||
Sovereign | 68.2 | % | |||||
Corporate Bonds | 29.6 | ||||||
Other* | 2.2 | ||||||
Total Investments | 100.0 | %** |
* Industries and/or investment types representing less than 5% of total investments.
** Does not include open long/short futures contracts with a value of approximately $44,990,000 and net unrealized appreciation of approximately $108,000. Does not include open foreign currency forward exchange contracts with net unrealized depreciation of approximately $273,000. Also does not include open swap agreements with net unrealized appreciation of approximately $23,000.
The accompanying notes are an integral part of the financial statements.
10
Morgan Stanley Variable Insurance Fund, Inc.
Semi-Annual Report – June 30, 2023 (unaudited)
Emerging Markets Debt Portfolio
Statement of Assets and Liabilities | June 30, 2023 (000) | ||||||
Assets: | |||||||
Investments in Securities of Unaffiliated Issuers, at Value (Cost $116,400) | $ | 101,499 | |||||
Investment in Security of Affiliated Issuer, at Value (Cost $2,166) | 2,166 | ||||||
Total Investments in Securities, at Value (Cost $118,566) | 103,665 | ||||||
Foreign Currency, at Value (Cost $11) | 21 | ||||||
Interest Receivable | 2,605 | ||||||
Receivable for Variation Margin on Futures Contracts | 1,541 | ||||||
Receivable for Investments Sold | 905 | ||||||
Unrealized Appreciation on Swap Agreements | 65 | ||||||
Due from Broker | 39 | ||||||
Receivable from Affiliate | 7 | ||||||
Unrealized Appreciation on Foreign Currency Forward Exchange Contracts | 5 | ||||||
Receivable for Fund Shares Sold | 4 | ||||||
Other Assets | 17 | ||||||
Total Assets | 108,874 | ||||||
Liabilities: | |||||||
Payable for Investments Purchased | 1,153 | ||||||
Deferred Capital Gain Country Tax | 446 | ||||||
Payable to bank | 285 | ||||||
Unrealized Depreciation on Foreign Currency Forward Exchange Contracts | 278 | ||||||
Payable for Fund Shares Redeemed | 138 | ||||||
Payable for Advisory Fees | 137 | ||||||
Upfront Payment Received on Open Swap Agreements | 104 | ||||||
Payable for Variation Margin on Swap Agreements | 42 | ||||||
Payable for Professional Fees | 36 | ||||||
Payable for Servicing Fees | 34 | ||||||
Payable for Administration Fees | 7 | ||||||
Payable for Custodian Fees | 3 | ||||||
Payable for Transfer Agency Fees | 1 | ||||||
Payable for Distribution Fees — Class II Shares | — | @ | |||||
Other Liabilities | 36 | ||||||
Total Liabilities | 2,700 | ||||||
NET ASSETS | $ | 106,174 | |||||
Net Assets Consist of: | |||||||
Paid-in-Capital | $ | 163,819 | |||||
Total Accumulated Loss | (57,645 | ) | |||||
Net Assets | $ | 106,174 | |||||
CLASS I: | |||||||
Net Assets | $ | 94,387 | |||||
Net Asset Value, Offering and Redemption Price Per Share Applicable to 16,835,572 Outstanding $0.001 Par Value Shares (Authorized 500,000,000 Shares) | $ | 5.61 | |||||
CLASS II: | |||||||
Net Assets | $ | 11,787 | |||||
Net Asset Value, Offering and Redemption Price Per Share Applicable to 2,122,936 Outstanding $0.001 Par Value Shares (Authorized 500,000,000 Shares) | $ | 5.55 |
@ Amount is less than $500.
The accompanying notes are an integral part of the financial statements.
11
Morgan Stanley Variable Insurance Fund, Inc.
Semi-Annual Report – June 30, 2023 (unaudited)
Emerging Markets Debt Portfolio
Statement of Operations | Six Months Ended June 30, 2023 (000) | ||||||
Investment Income: | |||||||
Interest from Securities of Unaffiliated Issuers (Net of $1 of Foreign Taxes Withheld) | $ | 4,972 | |||||
Dividends from Security of Affiliated Issuer (Note H) | 82 | ||||||
Income from Securities Loaned — Net | — | @ | |||||
Total Investment Income | 5,054 | ||||||
Expenses: | |||||||
Advisory Fees (Note B) | 396 | ||||||
Professional Fees | 92 | ||||||
Servicing Fees (Note D) | 88 | ||||||
Administration Fees (Note C) | 42 | ||||||
Custodian Fees (Note G) | 21 | ||||||
Distribution Fees — Class II Shares (Note E) | 15 | ||||||
Shareholder Reporting Fees | 11 | ||||||
Pricing Fees | 9 | ||||||
Transfer Agency Fees (Note F) | 6 | ||||||
Directors' Fees and Expenses | 2 | ||||||
Other Expenses | 8 | ||||||
Total Expenses | 690 | ||||||
Waiver of Advisory Fees (Note B) | (95 | ) | |||||
Waiver of Distribution Fees — Class II Shares (Note E) | (12 | ) | |||||
Rebate from Morgan Stanley Affiliate (Note H) | (4 | ) | |||||
Net Expenses | 579 | ||||||
Net Investment Income | 4,475 | ||||||
Realized Gain (Loss): | |||||||
Investments Sold | (13,167 | ) | |||||
Foreign Currency Forward Exchange Contracts | (26 | ) | |||||
Foreign Currency Translation | 57 | ||||||
Futures Contracts | (108 | ) | |||||
Swap Agreements | 86 | ||||||
Net Realized Loss | (13,158 | ) | |||||
Change in Unrealized Appreciation (Depreciation): | |||||||
Investments (Net of Increase in Deferred Capital Gain Country Tax of $12) | 13,152 | ||||||
Foreign Currency Forward Exchange Contracts | (98 | ) | |||||
Foreign Currency Translation | (21 | ) | |||||
Futures Contracts | (184 | ) | |||||
Swap Agreements | (17 | ) | |||||
Net Change in Unrealized Appreciation (Depreciation) | 12,832 | ||||||
Net Realized Loss and Change in Unrealized Appreciation (Depreciation) | (326 | ) | |||||
Net Increase in Net Assets Resulting from Operations | $ | 4,149 |
@ Amount is less than $500.
The accompanying notes are an integral part of the financial statements.
12
Morgan Stanley Variable Insurance Fund, Inc.
Semi-Annual Report – June 30, 2023
Emerging Markets Debt Portfolio
Statements of Changes in Net Assets | Six Months Ended June 30, 2023 (unaudited) (000) | Year Ended December 31, 2022 (000) | |||||||||
Increase (Decrease) in Net Assets: | |||||||||||
Operations: | |||||||||||
Net Investment Income | $ | 4,475 | $ | 8,050 | |||||||
Net Realized Loss | (13,158 | ) | (16,897 | ) | |||||||
Net Change in Unrealized Appreciation (Depreciation) | 12,832 | (18,304 | ) | ||||||||
Net Increase (Decrease) in Net Assets Resulting from Operations | 4,149 | (27,151 | ) | ||||||||
Dividends and Distributions to Shareholders: | |||||||||||
Class I | — | (7,558 | ) | ||||||||
Class II | — | (985 | ) | ||||||||
Total Dividends and Distributions to Shareholders | — | (8,543 | ) | ||||||||
Capital Share Transactions:(1) | |||||||||||
Class I: | |||||||||||
Subscribed | 7,117 | 4,959 | |||||||||
Distributions Reinvested | — | 7,558 | |||||||||
Redeemed | (8,222 | ) | (22,399 | ) | |||||||
Class II: | |||||||||||
Subscribed | 188 | 1,040 | |||||||||
Distributions Reinvested | — | 985 | |||||||||
Redeemed | (979 | ) | (2,122 | ) | |||||||
Net Decrease in Net Assets Resulting from Capital Share Transactions | (1,896 | ) | (9,979 | ) | |||||||
Total Increase (Decrease) in Net Assets | 2,253 | (45,673 | ) | ||||||||
Net Assets: | |||||||||||
Beginning of Period | 103,921 | 149,594 | |||||||||
End of Period | $ | 106,174 | $ | 103,921 | |||||||
(1) Capital Share Transactions: | |||||||||||
Class I: | |||||||||||
Shares Subscribed | 1,277 | 810 | |||||||||
Shares Issued on Distributions Reinvested | — | 1,459 | |||||||||
Shares Redeemed | (1,502 | ) | (3,740 | ) | |||||||
Net Decrease in Class I Shares Outstanding | (225 | ) | (1,471 | ) | |||||||
Class II: | |||||||||||
Shares Subscribed | 35 | 188 | |||||||||
Shares Issued on Distributions Reinvested | — | 192 | |||||||||
Shares Redeemed | (180 | ) | (379 | ) | |||||||
Net Increase (Decrease) in Class II Shares Outstanding | (145 | ) | 1 |
The accompanying notes are an integral part of the financial statements.
13
Morgan Stanley Variable Insurance Fund, Inc.
Semi-Annual Report – June 30, 2023
Financial Highlights
Emerging Markets Debt Portfolio
Class I | |||||||||||||||||||||||||||
Six Months Ended June 30, 2023 | Year Ended December 31, | ||||||||||||||||||||||||||
Selected Per Share Data and Ratios | (unaudited) | 2022 | 2021 | 2020 | 2019 | 2018 | |||||||||||||||||||||
Net Asset Value, Beginning of Period | $ | 5.38 | $ | 7.20 | $ | 7.74 | $ | 7.68 | $ | 7.09 | $ | 8.08 | |||||||||||||||
Income (Loss) from Investment Operations: | |||||||||||||||||||||||||||
Net Investment Income(1) | 0.23 | 0.41 | 0.34 | 0.32 | 0.38 | 0.36 | |||||||||||||||||||||
Net Realized and Unrealized Gain (Loss) | (0.00 | )(2) | (1.78 | ) | (0.49 | ) | 0.08 | 0.62 | (0.92 | ) | |||||||||||||||||
Total from Investment Operations | 0.23 | (1.37 | ) | (0.15 | ) | 0.40 | 1.00 | (0.56 | ) | ||||||||||||||||||
Distributions from and/or in Excess of: | |||||||||||||||||||||||||||
Net Investment Income | — | (0.45 | ) | (0.39 | ) | (0.34 | ) | (0.41 | ) | (0.43 | ) | ||||||||||||||||
Net Asset Value, End of Period | $ | 5.61 | $ | 5.38 | $ | 7.20 | $ | 7.74 | $ | 7.68 | $ | 7.09 | |||||||||||||||
Total Return(3) | 4.28 | %(4) | (18.74 | )% | (2.02 | )% | 5.55 | % | 14.25 | % | (6.94 | )% | |||||||||||||||
Ratios to Average Net Assets and Supplemental Data: | |||||||||||||||||||||||||||
Net Assets, End of Period (Thousands) | $ | 94,387 | $ | 91,828 | $ | 133,413 | $ | 145,312 | $ | 170,382 | $ | 165,582 | |||||||||||||||
Ratio of Expenses Before Expense Limitation | 1.28 | %(5) | 1.24 | % | 1.17 | % | N/A | N/A | N/A | ||||||||||||||||||
Ratio of Expenses After Expense Limitation | 1.09 | %(5)(6) | 1.10 | %(6) | 1.12 | %(6)(7) | 1.15 | %(6) | 1.11 | %(6) | 1.11 | %(6) | |||||||||||||||
Ratio of Expenses After Expense Limitation Excluding Interest Expenses | N/A | N/A | N/A | N/A | N/A | 1.11 | %(6) | ||||||||||||||||||||
Ratio of Net Investment Income | 8.48 | %(5)(6) | 6.96 | %(6) | 4.59 | %(6) | 4.34 | %(6) | 5.04 | %(6) | 4.83 | %(6) | |||||||||||||||
Ratio of Rebate from Morgan Stanley Affiliates | 0.01 | %(5) | 0.00 | %(8) | 0.00 | %(8) | 0.00 | %(8) | 0.01 | % | 0.00 | %(8) | |||||||||||||||
Portfolio Turnover Rate | 65 | %(4) | 75 | % | 28 | % | 40 | % | 40 | % | 32 | % |
(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. Performance does not reflect fees and expenses imposed by your insurance company's separate account. If performance information included the effect of these additional charges, the total return would be lower.
(4) Not annualized.
(5) Annualized.
(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) Effective July 1, 2021, the Adviser has agreed to limit the ratio of expenses to average net assets to the maximum ratio of 1.10% for Class I shares. Prior to July 1, 2021, the maximum ratio was 1.30% for Class I shares.
(8) Amount is less than 0.005%.
The accompanying notes are an integral part of the financial statements.
14
Morgan Stanley Variable Insurance Fund, Inc.
Semi-Annual Report – June 30, 2023
Financial Highlights
Emerging Markets Debt Portfolio
Class II | |||||||||||||||||||||||||||
Six Months Ended June 30, 2023 | Year Ended December 31, | ||||||||||||||||||||||||||
Selected Per Share Data and Ratios | (unaudited) | 2022 | 2021 | 2020 | 2019 | 2018 | |||||||||||||||||||||
Net Asset Value, Beginning of Period | $ | 5.33 | $ | 7.14 | $ | 7.67 | $ | 7.61 | $ | 7.03 | $ | 8.02 | |||||||||||||||
Income (Loss) from Investment Operations: | |||||||||||||||||||||||||||
Net Investment Income(1) | 0.23 | 0.40 | 0.34 | 0.31 | 0.37 | 0.36 | |||||||||||||||||||||
Net Realized and Unrealized Gain (Loss) | (0.01 | ) | (1.76 | ) | (0.48 | ) | 0.08 | 0.62 | (0.92 | ) | |||||||||||||||||
Total from Investment Operations | 0.22 | (1.36 | ) | (0.14 | ) | 0.39 | 0.99 | (0.56 | ) | ||||||||||||||||||
Distributions from and/or in Excess of: | |||||||||||||||||||||||||||
Net Investment Income | — | (0.45 | ) | (0.39 | ) | (0.33 | ) | (0.41 | ) | (0.43 | ) | ||||||||||||||||
Net Asset Value, End of Period | $ | 5.55 | $ | 5.33 | $ | 7.14 | $ | 7.67 | $ | 7.61 | $ | 7.03 | |||||||||||||||
Total Return(2) | 4.13 | %(3) | (18.81 | )% | (1.96 | )% | 5.53 | % | 14.17 | % | (7.04 | )% | |||||||||||||||
Ratios to Average Net Assets and Supplemental Data: | |||||||||||||||||||||||||||
Net Assets, End of Period (Thousands) | $ | 11,787 | $ | 12,093 | $ | 16,181 | $ | 17,762 | $ | 21,163 | $ | 19,502 | |||||||||||||||
Ratio of Expenses Before Expense Limitation | 1.53 | %(4) | 1.49 | % | 1.42 | % | 1.40 | % | 1.37 | % | 1.36 | % | |||||||||||||||
Ratio of Expenses After Expense Limitation | 1.14 | %(4)(5) | 1.15 | %(5) | 1.17 | %(5)(6) | 1.20 | %(5) | 1.16 | %(5) | 1.16 | %(5) | |||||||||||||||
Ratio of Expenses After Expense Limitation Excluding Interest Expenses | N/A | N/A | N/A | N/A | N/A | 1.16 | %(5) | ||||||||||||||||||||
Ratio of Net Investment Income | 8.43 | %(4)(5) | 6.91 | %(5) | 4.54 | %(5) | 4.29 | %(5) | 4.99 | %(5) | 4.78 | %(5) | |||||||||||||||
Ratio of Rebate from Morgan Stanley Affiliates | 0.01 | %(4) | 0.00 | %(7) | 0.00 | %(7) | 0.00 | %(7) | 0.01 | % | 0.00 | %(7) | |||||||||||||||
Portfolio Turnover Rate | 65 | %(3) | 75 | % | 28 | % | 40 | % | 40 | % | 32 | % |
(1) Per share amount is based on average shares outstanding.
(2) Calculated based on the net asset value as of the last business day of the period. Performance does not reflect fees and expenses imposed by your insurance company's separate account. If performance information included the effect of these additional charges, the total return would be lower.
(3) Not annualized.
(4) Annualized.
(5) 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."
(6) Effective July 1, 2021, the Adviser has agreed to limit the ratio of expenses to average net assets to the maximum ratio of 1.15% for Class II shares. Prior to July 1, 2021, the maximum ratio was 1.35% for Class II shares.
(7) Amount is less than 0.005%.
The accompanying notes are an integral part of the financial statements.
15
Morgan Stanley Variable Insurance Fund, Inc.
Semi-Annual Report – June 30, 2023 (unaudited)
Notes to Financial Statements
Morgan Stanley Variable Insurance Fund, Inc. (the "Company") is registered under the Investment Company Act of 1940, as amended (the "Act"), as an open-end management investment company. The Company is comprised of ten separate active, diversified and non-diversified funds (individually referred to as a "Fund," collectively as the "Funds"). The Company applies investment company accounting and reporting guidance Accounting Standards Codification ("ASC") Topic 946.
The accompanying financial statements relate to the Emerging Markets Debt Portfolio. The Fund seeks high total return by investing primarily in fixed income securities of government and government-related issuers and, to a lesser extent, of corporate issuers in emerging market countries. The Fund offers two classes of shares — Class I and Class II. Both classes of shares have identical voting rights (except that shareholders of a Class have exclusive voting rights regarding any matter relating solely to that Class of shares), dividend, liquidation and other rights.
The Company is intended to be a funding vehicle for variable annuity contracts and variable life insurance policies offered by the separate accounts of certain life insurance companies.
A. Significant Accounting Policies: The following significant accounting policies are in conformity with U.S. generally accepted accounting principles ("GAAP"). Such policies are consistently followed by the Company in the preparation of its financial statements. GAAP may require management to make estimates and assumptions that affect the reported amounts and disclosures in the financial statements. Actual results may differ from those estimates.
1. Security Valuation: (1) Fixed income securities may be valued by an outside pricing service/vendor approved by the Company's Board of Directors (the "Directors"). The pricing service/vendor may employ a pricing model that takes into account, among other things, bids, yield spreads and/or other market data and specific security characteristics. If Morgan Stanley Investment Management Inc. (the "Adviser") or Morgan Stanley Investment Management Limited ("MSIM Limited") (the "Sub-Adviser"), each a wholly-owned subsidiary of Morgan Stanley, determines that the price provided by the outside pricing service/vendor does not reflect the security's fair value or is unable to provide a price, prices from brokers/dealers may also be utilized. In these circumstances, the value of the security will be the mean of bid and asked prices obtained from brokers/dealers; (2) when market quotations are not readily available, as defined by Rule 2a-5 under the Act, including circumstances under which the Adviser or the Sub-Adviser determines that the
closing price, last sale price or the mean between the last reported bid and asked prices are not reflective of a security's market value, portfolio securities are valued at their fair value as determined in good faith under procedures approved by and under the general supervision of the Directors. Occasionally, developments affecting the closing prices of securities and other assets may occur between the times at which valuations of such securities are determined (that is, close of the foreign market on which the securities trade) and the close of business of the New York Stock Exchange ("NYSE"). If developments occur during such periods that are expected to materially affect the value of such securities, such valuations may be adjusted to reflect the estimated fair value of such securities as of the close of the NYSE, as determined in good faith by the Directors or by the Adviser using a pricing service and/or procedures approved by the Directors; (3) futures are valued at the settlement price on the exchange on which they trade or, if a settlement price is unavailable, at the last sale price on the exchange; (4) over-the-counter ("OTC") swaps may be valued by an outside pricing service approved by the Directors or quotes from a broker/dealer. Swaps cleared on a clearinghouse or exchange may be valued using the closing price provided by the clearinghouse or exchange; (5) foreign exchange transactions ("spot contracts") and foreign exchange forward contracts ("forward contracts") are valued daily using an independent pricing vendor at the spot and forward rates, respectively, as of the close of the NYSE; and (6) investments in mutual funds, including the Morgan Stanley Institutional Liquidity Funds, are valued at the net asset value ("NAV") as of the close of each business day.
In connection with Rule 2a-5 of the Act, the Directors have designated the Company's Adviser as its valuation designee. The valuation designee has responsibility for determining fair value and to make the actual calculations pursuant to the fair valuation methodologies previously approved by the Directors. Under procedures approved by the Directors, the Company's Adviser, as valuation designee, has formed a Valuation Committee whose members are approved by the Directors. The Valuation Committee provides administration and oversight of the Company's valuation policies and procedures, which are reviewed at least annually by the Directors. These procedures allow the Company to utilize independent pricing services, quotations from securities and financial instrument dealers and other market sources to determine fair value.
16
Morgan Stanley Variable Insurance Fund, Inc.
Semi-Annual Report – June 30, 2023 (unaudited)
Notes to Financial Statements (cont'd)
2. Fair Value Measurement: Financial Accounting Standards Board ("FASB") ASC 820, "Fair Value Measurement" ("ASC 820"), defines fair value as the price that would be received to sell an asset or pay to transfer a liability in an orderly transaction between market participants at the measurement date. ASC 820 establishes a three-tier hierarchy to distinguish between (1) inputs that reflect the assumptions market participants would use in valuing an asset or liability developed based on market data obtained from sources independent of the reporting entity (observable inputs) and (2) inputs that reflect the reporting entity's own assumptions about the assumptions market participants would use in valuing an asset or liability developed based on the best information available in the circumstances (unobservable inputs) and to establish classification of fair value measurements for disclosure purposes. Various inputs are used in determining the value of the Fund's investments. The inputs are summarized in the three broad levels listed below:
• Level 1 – unadjusted quoted prices in active markets for identical investments
• Level 2 – other significant observable inputs (including quoted prices for similar investments, interest rates, prepayment speeds, credit risk, etc.)
• Level 3 – significant unobservable inputs including the Fund's own assumptions in determining the fair value of investments. Factors considered in making this determination may include, but are not limited to, information obtained by contacting the issuer, analysts, or the appropriate stock exchange (for exchange-traded securities), analysis of the issuer's financial statements or other available documents and, if necessary, available information concerning other securities in similar circumstances.
The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities and the determination of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to each security.
The following is a summary of the inputs used to value the Fund's investments as of June 30, 2023:
Investment Type | Level 1 Unadjusted quoted prices (000) | Level 2 Other significant observable inputs (000) | Level 3 Significant unobservable inputs (000) | Total (000) | |||||||||||||||
Assets: | |||||||||||||||||||
Fixed Income Securities | |||||||||||||||||||
Corporate Bonds | $ | — | $ | 30,702 | $ | — | $ | 30,702 | |||||||||||
Sovereign | — | 70,656 | — | 70,656 | |||||||||||||||
Total Fixed Income Securities | — | 101,358 | — | 101,358 | |||||||||||||||
Warrants | — | 19 | — | 19 | |||||||||||||||
Short-Term Investments | |||||||||||||||||||
U.S. Treasury Security | — | 122 | — | 122 | |||||||||||||||
Investment Company | 2,166 | — | — | 2,166 | |||||||||||||||
Total Short-Term Investments | 2,166 | 122 | — | 2,288 | |||||||||||||||
Foreign Currency Forward Exchange Contracts | — | 5 | — | 5 | |||||||||||||||
Futures Contracts | 252 | — | — | 252 | |||||||||||||||
Credit Default Swap Agreement | — | 65 | — | 65 | |||||||||||||||
Total Assets | 2,418 | 101,569 | — | 103,987 | |||||||||||||||
Liabilities: | |||||||||||||||||||
Foreign Currency Forward Exchange Contracts | — | (278 | ) | — | (278 | ) | |||||||||||||
Futures Contracts | (144 | ) | — | — | (144 | ) | |||||||||||||
Credit Default Swap Agreement | — | (42 | ) | — | (42 | ) | |||||||||||||
Total Liabilities | (144 | ) | (320 | ) | — | (464 | ) | ||||||||||||
Total | $ | 2,274 | $ | 101,249 | $ | — | $ | 103,523 |
Transfers between investment levels may occur as the markets fluctuate and/or the availability of data used in an investment's valuation changes.
3. Repurchase Agreements: The Fund may enter into repurchase agreements under which the Fund lends cash and takes possession of securities with an agreement that the counterparty will repurchase such securities. In connection with transactions in repurchase agreements, a bank as custodian for the Fund takes possession of the underlying securities which are held as collateral, with a market value at least equal to the amount of the repurchase transaction, including principal and accrued interest. To the extent that any repurchase transaction exceeds one business day, the value of the collateral is marked-to-market on a daily basis to determine that the value of the collateral does not decrease below the repurchase price plus accrued interest as earned. If such a decrease occurs,
17
Morgan Stanley Variable Insurance Fund, Inc.
Semi-Annual Report – June 30, 2023 (unaudited)
Notes to Financial Statements (cont'd)
additional collateral will be requested and, when received, will be added to the account to maintain full collateralization. In the event of default on the obligation to repurchase, the Fund has the right to liquidate the collateral and apply the proceeds in satisfaction of the obligation. In the event of default or bankruptcy by the counterparty to the agreement, realization of the collateral proceeds may be subject to cost and delays. The Fund, along with other affiliated investment companies, may utilize a joint trading account for the purpose of entering into repurchase agreements.
4. Foreign Currency Translation and Foreign Investments: The books and records of the Fund are maintained in U.S. dollars. Foreign currency amounts are translated into U.S. dollars as follows:
— investments, other assets and liabilities at the prevailing rate of exchange on the valuation date;
— investment transactions and investment income at the prevailing rates of exchange on the dates of such transactions.
Although the net assets of the Fund are presented at the foreign exchange rates and market values at the close of the period, the Fund does not isolate that portion of the results of operations arising as a result of changes in the foreign exchange rates from the fluctuations arising from changes in the market prices of securities held at period end. Similarly, the Fund does not isolate the effect of changes in foreign exchange rates from the fluctuations arising from changes in the market prices of securities sold during the period. Accordingly, realized and unrealized foreign currency gains (losses) on investments in securities are included in the reported net realized and unrealized gains (losses) on investment transactions and balances. However, pursuant to U.S. federal income tax regulations, gains and losses from certain foreign currency transactions and the foreign currency portion of gains and losses realized on sales and maturities of foreign denominated debt securities are treated as ordinary income for U.S. federal income tax purposes.
Net realized gains (losses) on foreign currency transactions represent net foreign exchange gains (losses) from foreign currency forward exchange contracts, disposition of foreign currencies, currency gains (losses) realized between the trade and settlement dates on securities transactions, and the difference between the amount of investment income and foreign withholding taxes recorded on the Fund's books and the U.S. dollar equivalent amounts actually received or paid. The change in unrealized currency gains (losses) on foreign currency
transactions for the period is reflected in the Statement of Operations.
Foreign security and currency transactions may involve certain considerations and risks not typically associated with those of U.S. dollar denominated transactions as a result of, among other factors, fluctuations of exchange rates in relation to the U.S. dollar, the possibility of lower levels of governmental supervision and regulation of foreign securities markets and the possibility of political or economic instability.
Governmental approval for foreign investments may be required in advance of making an investment under certain circumstances in some countries, and the extent of foreign investments in U.S. companies may be subject to limitation in other countries. Foreign ownership limitations also may be imposed by the charters of individual companies to prevent, among other concerns, violations of foreign investment limitations. As a result, an additional class of shares (identified as "Foreign" in the Portfolio of Investments) may be created and offered for investment. The "local" and "foreign shares" market values may differ. In the absence of trading of the foreign shares in such markets, the Fund values the foreign shares at the closing exchange price of the local shares.
5. Structured Investments: The Fund invested a portion of its 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 time, may be unable to find qualified buyers for these securities.
18
Morgan Stanley Variable Insurance Fund, Inc.
Semi-Annual Report – June 30, 2023 (unaudited)
Notes to Financial Statements (cont'd)
6. Derivatives: The Fund may, but is not required to, use derivative instruments for a variety of purposes, including hedging, risk management, portfolio management or 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. Derivatives are financial instruments whose value is based, in part, on the value of an underlying asset, interest rate, index or financial instrument. Prevailing interest rates and volatility levels, among other things, also affect the value of derivative instruments. A derivative instrument often has risks similar to its underlying asset and may have additional risks, including imperfect correlation between the value of the derivative and the underlying asset, risks of default by the counterparty to certain transactions, magnification of losses incurred due to changes in the market value of the securities, instruments, indices or interest rates to which the derivative instrument relates, risks that the transactions may not be liquid, 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. All of the Fund's holdings, including derivative instruments, are marked-to-market each day with the change in value reflected in unrealized appreciation (depreciation). Upon disposition, a realized gain or loss is recognized.
Certain derivative transactions may give rise to a form of leverage. Leverage magnifies the potential for gain and 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 to satisfy its obligations 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 objectives, there is no assurance that the use of derivatives will achieve this result.
Following is a description of the derivative instruments and techniques that the Fund used during the period and their associated risks:
Foreign Currency Forward Exchange Contracts: In connection with its investments in foreign securities, the Fund also entered into contracts with banks, brokers/dealers to purchase or sell foreign currencies at a future date. A foreign currency forward exchange
contract ("currency contract") is a negotiated agreement between the contracting parties to exchange a specified amount of currency at a specified future time at a specified rate. The rate can be higher or lower than the spot rate between the currencies that are the subject of the contract. Currency contracts may be used to protect against uncertainty in the level of future foreign currency exchange rates or to gain or modify exposure to a particular currency. To the extent hedged by the use of currency contracts, the precise matching of the currency contract amounts and the value of the securities involved will not generally be possible because the future value of such securities in foreign currencies will change as a consequence of market movements in the value of those securities between the date on which the contract is entered into and the date it matures. Furthermore, such transactions may reduce or preclude the opportunity for gain if the value of the currency should move in the direction opposite to the position taken. There is additional risk to the extent that currency contracts create exposure to currencies in which the Fund's securities are not denominated. Unanticipated changes in currency prices may result in poorer overall performance for the Fund than if it had not entered into such contracts. The use of currency contracts involves the risk of loss from the insolvency or bankruptcy of the counterparty to the contract or the failure of the counterparty to make payments or otherwise comply with the terms of the contract. A currency contract is marked-to-market daily and the change in market value is recorded by the Fund as unrealized gain or loss. The Fund records realized gains (losses) when the currency contract is closed equal to the difference between the value of the currency contract at the time it was opened and the value at the time it was closed.
Futures: A futures contract is a standardized, exchange-traded agreement to buy or sell a specific quantity of an underlying asset, reference rate or index at a specific price at a specific future time. The value of a futures contract tends to increase and decrease in tandem with the value of the underlying instrument. Depending on the terms of the particular contract, futures contracts are settled through either physical delivery of the underlying instrument on the settlement date or by payment of a cash settlement amount on the settlement date. During the period the futures contract is open, payments are received from or made to the broker based upon changes in the value of the contract (the variation margin). A decision as to whether, when and how to use futures contracts involves the exercise of skill and judgment and even a well-conceived futures transaction may be unsuccessful
19
Morgan Stanley Variable Insurance Fund, Inc.
Semi-Annual Report – June 30, 2023 (unaudited)
Notes to Financial Statements (cont'd)
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.
Swaps: The Fund may enter into OTC swap contracts or cleared swap transactions. A swap contract is an agreement between two parties pursuant to which the parties exchange payments at specified dates on the basis of a specified notional amount, with the payments calculated by reference to specified securities, indices, reference rates, currencies or other instruments. Typically swap agreements provide that when the period payment dates for both parties are the same, the payments are made on a net basis (i.e., the two payment streams are netted out, with only the net amount paid by one party to the other). The Fund's obligations or rights under a swap contract entered into on a net basis will generally be equal only to the net amount to be paid or received under the agreement, based on the relative values of the positions held by each party. Cleared swap transactions may help reduce counterparty credit risk. In a cleared swap, the Fund's ultimate counterparty is a clearinghouse rather than a swap dealer, bank or other financial institution. OTC swap agreements are not entered into or traded on exchanges and often there is no central clearing or guaranty function for OTC swaps. These OTC swaps are often subject to credit risk or the risk of default or non-performance by the counterparty. Both OTC and cleared swaps could result in losses if interest rates, foreign currency exchange rates or other factors are not correctly anticipated by the Fund or if the reference index, security or investments do not perform as expected. During the period swap agreements are open, payments are received from or made to the counterparty or clearing-house based on changes in the value of the contract or variation margin, respectively. 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 based on the type of market participant and U.S. Commodities Futures Trading Commission ("CFTC") approval of contracts for central clearing and exchange trading.
The Fund's use of swaps during the period included those based on the credit of an underlying security commonly referred to as "credit default swaps." The Fund may be
either the buyer or seller in a credit default swap. Where the Fund is the buyer of a credit default swap contract, it would typically be entitled to receive the par (or other agreed-upon) value of a referenced debt obligation from the counterparty to the contract only in the event of a default or similar event by the issuer of the debt obligation. If no default occurs, the Fund would have paid to the counterparty a periodic stream of payments over the term of the contract and received no benefit from the contract. When the Fund is the seller of a credit default swap contract, it typically receives the stream of payments but is obligated to pay an amount equal to the par (or other agreed-upon) value of a referenced debt obligation upon the default or similar event by the issuer of the referenced debt obligation. The use of credit default swaps could result in losses to the Fund if the Adviser fails to correctly evaluate the creditworthiness of the issuer of the referenced debt obligation.
If the Fund is a seller of protection and a credit event occurs, as defined under the terms of that particular swap agreement, the Fund will either (i) pay to the buyer of protection an amount equal to the notional amount of the swap agreement and take delivery of the referenced obligation, other deliverable obligations or underlying securities comprising the referenced index or (ii) pay a net settlement amount in the form of cash or securities equal to the notional amount of the swap agreement less the recovery value of the referenced obligation or underlying securities comprising the referenced index. If the Fund is a buyer of protection and a credit event occurs, as defined under the terms of that particular swap agreement, the Fund will either (i) receive from the seller of protection an amount equal to the notional amount of the swap agreement and deliver the referenced obligation, other deliverable obligations or underlying securities comprising the referenced index or (ii) receive a net settlement amount in the form of cash or securities equal to the notional amount of the swap agreement less the recovery value of the referenced obligation or underlying securities comprising the referenced index. Recovery values are estimated by market makers considering either industry standard recovery rates or entity specific factors and considerations until a credit event occurs. If a credit event has occurred, the recovery value is determined by a facilitated auction whereby a minimum number of allowable broker bids, together with a specified valuation method, are used to calculate the settlement value. The Fund's maximum risk of loss from counterparty risk, either as the protection seller or as the protection buyer, is the fair value of the swap agreement.
20
Morgan Stanley Variable Insurance Fund, Inc.
Semi-Annual Report – June 30, 2023 (unaudited)
Notes to Financial Statements (cont'd)
When the Fund has an unrealized loss on a swap agreement, the Fund has instructed the custodian to pledge cash or liquid securities as collateral with a value approximately equal to the amount of the unrealized loss. Collateral pledges are monitored and subsequently adjusted if and when the swap valuations fluctuate. If applicable, cash collateral is included with "Due from (to) Broker" in the Statement of Assets and Liabilities.
Upfront payments paid or received by the Fund will be reflected as an asset or liability, respectively, in the Statement of Assets and Liabilities.
FASB ASC 815, "Derivatives and Hedging" ("ASC 815"), is intended to improve financial reporting about derivative instruments by requiring enhanced disclosures to enable investors to better understand how and why the Fund uses derivative instruments, how these derivative instruments are accounted for and their effects on the Fund's financial position and results of operations.
The following tables set forth the fair value of the Fund's derivative contracts by primary risk exposure as of June 30, 2023:
Asset Derivatives Statement of Assets and Liabilities Location | Primary Risk Exposure | Value (000) | |||||||||||||
Foreign Currency Forward Exchange Contracts | Unrealized Appreciation on Foreign Currency Forward Exchange Contracts | Currency Risk | $ | 5 | |||||||||||
Futures Contracts | Variation Margin on Futures Contracts | Interest Rate Risk | 252 | (a) | |||||||||||
Swap Agreements | Unrealized Appreciation on Swap Agreements | Credit Risk | 65 | ||||||||||||
Total | $ | 322 | |||||||||||||
Liability Derivatives Statement of Assets and Liabilities Location | Primary Risk Exposure | Value (000) | |||||||||||||
Foreign Currency Forward Exchange Contracts | Unrealized Depreciation on Foreign Currency Forward Exchange Contracts | Currency Risk | $ | (278 | ) | ||||||||||
Futures Contracts | Variation Margin on Futures Contracts | Interest Rate Risk | (144 | )(a) | |||||||||||
Swap Agreements | Variation Margin on Swap Agreements | Credit Risk | (42 | )(a) | |||||||||||
Total | $ | (464 | ) |
(a) This amount represents the cumulative appreciation (depreciation) as reported in the Portfolio of Investments. The Statement of Assets and Liabilities only reflects the current day's net variation margin.
The following tables set forth by primary risk exposure the Fund's realized gains (losses) and change in unrealized appreciation (depreciation) by type of derivative contract
for the six months ended June 30, 2023 in accordance with ASC 815:
Realized Gain (Loss) | |||||||||||
Primary Risk Exposure | Derivative Type | Value (000) | |||||||||
Currency Risk | Foreign Currency Forward Exchange Contracts | $ | (26 | ) | |||||||
Interest Rate Risk | Futures Contracts | (108 | ) | ||||||||
Credit Risk | Swap Agreements | 86 | |||||||||
Total | $ | (48 | ) | ||||||||
Change in Unrealized Appreciation (Depreciation) | |||||||||||
Primary Risk Exposure | Derivative Type | Value (000) | |||||||||
Currency Risk | Foreign Currency Forward Exchange Contracts | $ | (98 | ) | |||||||
Interest Rate Risk | Futures Contracts | (184 | ) | ||||||||
Credit Risk | Swap Agreements | (17 | ) | ||||||||
Total | $ | (299 | ) |
At June 30, 2023, the Fund's derivative assets and liabilities are as follows:
Gross Amounts of Assets and Liabilities Presented in the Statement of Assets and Liabilities | |||||||||||
Derivatives(a) | Assets(b) (000) | Liabilities(b) (000) | |||||||||
Foreign Currency Forward Exchange Contracts | $ | 5 | $ | (278 | ) | ||||||
Swap Agreements | 65 | — | |||||||||
Total | $ | 70 | $ | (278 | ) |
(a) Excludes exchange-traded derivatives.
(b) Absent an event of default or early termination, OTC derivative assets and liabilities are presented gross and not offset in the Statement of Assets and Liabilities.
The Fund typically enters into International Swaps and Derivatives Association, Inc. Master Agreements ("ISDA Master Agreements") or similar master agreements (collectively, "Master Agreements") with its contract counterparties for certain OTC derivatives in order to, among other things, reduce its credit risk to counterparties. ISDA Master Agreements include provisions for general obligations, representations, collateral and events of default or termination. Under an ISDA Master Agreement, the Fund typically may offset with the counterparty certain OTC derivative financial instruments' payables and/or receivables with collateral held and/or posted and create one single net payment (close-out netting) in the event of default, termination and/or potential deterioration in the credit quality of the counterparty. Various Master Agreements govern the terms of certain transactions with counterparties, including transactions such as swap, forward, repurchase and reverse repurchase
21
Morgan Stanley Variable Insurance Fund, Inc.
Semi-Annual Report – June 30, 2023 (unaudited)
Notes to Financial Statements (cont'd)
agreements. These Master Agreements typically attempt to reduce the counterparty risk associated with such transactions by specifying credit protection mechanisms and providing standardization that improves legal certainty. Cross-termination provisions under Master Agreements typically provide that a default in connection with one transaction between the Fund and a counterparty gives the non-defaulting party the right to terminate any other transactions in place with the defaulting party to create one single net payment due to/due from the defaulting party and may be a feature in certain Master Agreements. In the event the Fund exercises its right to terminate a Master Agreement after a counterparty experiences a termination event as defined in the Master Agreement, the return of collateral with market value in excess of the Fund's net liability may be delayed or denied.
The following tables present derivative financial instruments that are subject to enforceable netting arrangements as of June 30, 2023:
Gross Amounts Not Offset in the Statement of Assets and Liabilities | |||||||||||||||||||
Counterparty | Gross Asset Derivatives Presented in the Statement of Assets and Liabilities (000) | Financial Instrument (000) | Collateral Received (000) | Net Amount (not less than $0) (000) | |||||||||||||||
Citibank NA | $ | 1 | $ | (1 | ) | $ | — | $ | 0 | ||||||||||
Goldman Sachs | 65 | — | — | 65 | |||||||||||||||
HSBC Bank PLC | 4 | (4 | ) | — | 0 | ||||||||||||||
Total | $ | 70 | $ | (5 | ) | $ | — | $ | 65 | ||||||||||
Gross Amounts Not Offset in the Statement of Assets and Liabilities | |||||||||||||||||||
Counterparty | Gross Liability Derivatives Presented in the Statement of Assets and Liabilities (000) | Financial Instrument (000) | Collateral Pledged (000) | Net Amount (not less than $0) (000) | |||||||||||||||
Bank of America NA | $ | — | @ | $ | — | $ | — | $ | — | @ | |||||||||
Citibank NA | 1 | (1 | ) | — | 0 | ||||||||||||||
Goldman Sachs International | — | @ | — | — | — | @ | |||||||||||||
HSBC Bank PLC | 34 | (4 | ) | — | 30 | ||||||||||||||
State Street Bank and Trust Co. | — | @ | — | — | — | @ | |||||||||||||
UBS AG | 243 | — | — | 243 | |||||||||||||||
Total | $ | 278 | $ | (5 | ) | $ | — | $ | 273 |
@ Value is less than $500.
For the six months ended June 30, 2023, the approximate average monthly amount outstanding for each derivative type is as follows:
Foreign Currency Forward Exchange Contracts: | |||||||
Average monthly principal amount | $ | 12,702,000 | |||||
Futures Contracts: | |||||||
Average monthly notional value | $ | 50,946,000 | |||||
Swap Agreements: | |||||||
Average monthly notional amount | $ | 7,738,000 |
7. Securities Lending: The Fund lends securities to qualified financial institutions, such as broker/dealers, to earn additional income. Any increase or decrease in the fair value of the securities loaned that might occur and any interest earned or dividends declared on those securities during the term of the loan would remain in the Fund. The Fund would receive cash or securities as collateral in an amount equal to or exceeding 100% of the current fair value of the loaned securities. The collateral is marked-to-market daily by State Street Bank and Trust Company ("State Street"), the securities lending agent, to ensure that a minimum of 100% collateral coverage is maintained.
Based on pre-established guidelines, the securities lending agent invests any cash collateral that is received in an affiliated money market portfolio and repurchase agreements. Securities lending income is generated from the earnings on the invested collateral and borrowing fees, less any rebates owed to the borrowers and compensation to the lending agent, and is recorded as "Income from Securities Loaned — Net" in the Fund's Statement of Operations. Risks in securities lending transactions are that a borrower may not provide additional collateral when required or return the securities when due, and that the value of the short-term investments will be less than the amount of cash collateral plus any rebate that is required to be returned to the borrower.
The Fund has the right under the securities lending agreement to recover the securities from the borrower on demand.
At June 30, 2023, the Fund did not have any outstanding securities on loan.
8. Indemnifications: The Company enters into contracts that contain a variety of indemnifications. The Company's maximum exposure under these arrangements is unknown. However, the Company has not had prior claims or losses pursuant to these contracts and expects the risk of loss to be remote.
22
Morgan Stanley Variable Insurance Fund, Inc.
Semi-Annual Report – June 30, 2023 (unaudited)
Notes to Financial Statements (cont'd)
9. Security Transactions, Income and Expenses: Security transactions are accounted for on the trade date (date the order to buy or sell is executed). Realized gains and losses on the sale of investment securities are determined on the specific identified cost method. Dividend income and other distributions are recorded on the ex-dividend date (except for certain foreign dividends which may be recorded as soon as the Fund is informed of such dividends) net of applicable withholding taxes. Non-cash dividends received in the form of stock, if any, are recognized on the ex-dividend date and recorded as non-cash dividend income at fair value. Interest income is recognized on the accrual basis (except where collection is in doubt) net of applicable withholding taxes. Discounts are accreted and premiums are amortized over the life of the respective securities. Most expenses of the Company can be directly attributed to a particular Fund. Expenses which cannot be directly attributed are apportioned among the Funds based upon relative net assets or other appropriate methods. Income, expenses (other than class specific expenses) and realized and unrealized gains or losses are allocated to each class of shares based upon their relative net assets.
Settlement and registration of foreign securities transactions may be subject to significant risks not normally associated with investments in the United States. In certain markets, ownership of shares is defined according to entries in the issuer's share register. It is possible that a Fund holding these securities could lose its share registration through fraud, negligence or even mere oversight. In addition, shares being delivered for sales and cash being paid for purchases may be delivered before the exchange is complete. This may subject the Fund to further risk of loss in the event of a failure to complete the transaction by the counterparty.
10. Dividends and Distributions to Shareholders: Dividends and distributions to shareholders are recorded on the ex-dividend date. Dividends from net investment income, if any, are declared and paid annually. Net realized capital gains, if any, are distributed at least annually.
B. Advisory/Sub-Advisory Fees: The Adviser, a wholly-owned subsidiary of Morgan Stanley, provides the Fund with advisory services under the terms of an Investment Advisory Agreement, paid quarterly, at the annual rate based on the daily net assets as follows:
First $500 | Next $500 | Over $1 | |||||||||
0.75% | 0.70% | 0.65% |
For the six months ended June 30, 2023, the advisory fee rate (net of waiver/rebate) was equivalent to an annual effective rate of 0.56% of the Fund's average daily net assets.
The Adviser has agreed to reduce its advisory fee and/or reimburse the Fund so that total annual Fund operating expenses, excluding certain investment related expenses, taxes, interest and other extraordinary expenses (including litigation), will not exceed 1.10% for Class I shares and 1.15% for Class II shares. The fee waivers and/or expense reimbursements will continue for at least one year from the date of the Fund's prospectus or until such time as the Directors act to discontinue all or a portion of such waivers and/or reimbursements when they deem such action is appropriate. For the six months ended June 30, 2023, approximately $95,000 of advisory fees were waived pursuant to this arrangement.
The Adviser has entered into a Sub-Advisory Agreement with the Sub-Adviser, a wholly-owned subsidiary of Morgan Stanley. The Sub-Adviser provides the Fund with advisory services subject to the overall supervision of the Adviser and the Fund'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 Fund.
C. Administration Fees: The Adviser also serves as Administrator to the Company and provides administrative services pursuant to an Administration Agreement for an annual fee, accrued daily and paid monthly, of 0.08% of the Fund's average daily net assets.
Under a Sub-Administration Agreement between the Administrator and State Street, State Street provides certain administrative services to the Company. For such services, the Administrator pays State Street a portion of the fee the Administrator receives from the Fund.
D. Servicing Fees: The Company accrues daily and pays quarterly a servicing fee of up to 0.17% of the average daily value of shares of the Fund held in an insurance company's account. Certain insurance companies have entered into a servicing agreement with the Company to provide administrative and other contract-owner related services on behalf of the Fund.
E. Distribution Fees: Morgan Stanley Distribution, Inc. ("MSDI" or the "Distributor"), a wholly-owned subsidiary of the Adviser and an indirect subsidiary of Morgan Stanley, serves as the Distributor of the Fund and provides the Fund's Class II shareholders with distribution services pursuant to a Distribution Plan (the "Plan") in accordance with Rule 12b-1 under the Act. Under the Plan, the Fund is authorized to pay the Distributor a distribution fee, which is accrued daily and
23
Morgan Stanley Variable Insurance Fund, Inc.
Semi-Annual Report – June 30, 2023 (unaudited)
Notes to Financial Statements (cont'd)
paid monthly, at an annual rate of 0.25% of the Fund's average daily net assets attributable to Class II shares. The Distributor has agreed to waive 0.20% of the 0.25% distribution fee that it may receive. This fee waiver will continue for at least one year from the date of the Fund's prospectus or until such time as the Directors act to discontinue all or a portion of such waiver when they deem such action is appropriate. For the six months ended June 30, 2023, this waiver amounted to approximately $12,000.
F. Dividend Disbursing and Transfer/Co-Transfer Agent: The Company's dividend disbursing and transfer agent is SS&C Global Investor & Distribution Solutions, Inc. ("SS&C GIDS, Inc."). Pursuant to a Transfer Agency Agreement, the Company pays SS&C GIDS, Inc. a fee based on the number of classes, accounts and transactions relating to the Funds of the Company.
Eaton Vance Management ("EVM"), an affiliate of Morgan Stanley, provides co-transfer agency and related services to the Fund pursuant to a Co-Transfer Agency Services Agreement. For the six months ended June 30, 2023, co-transfer agency fees and expenses incurred to EVM, included in "Transfer Agency Fees" in the Statement of Operations, amounted to less than $500.
G. Custodian Fees: State Street (the "Custodian") also serves as Custodian for the Company in accordance with a Custodian Agreement. The Custodian holds cash, securities and other assets of the Company as required by the Act. Custody fees are payable monthly based on assets held in custody, investment purchases and sales activity and account maintenance fees, plus reimbursement for certain out-of-pocket expenses.
H. Security Transactions and Transactions with Affiliates: For the six months ended June 30, 2023, purchases and sales of investment securities for the Fund, other than long-term U.S. Government securities and short-term investments were approximately $69,493,000 and $63,601,000, respectively. There were no purchases and sales of long-term U.S. Government securities for the six months ended June 30, 2023.
The Fund invests in the Institutional Class of the Morgan Stanley Institutional Liquidity Funds — Treasury Securities Portfolio (the "Liquidity Funds"), an open-end management investment company managed by the Adviser, both directly and as a portion of the securities held as collateral on loaned securities. Advisory fees paid by the Fund are reduced by an amount equal to its pro-rata share of the advisory and administration fees paid by the Fund due to its investment in the Liquidity Funds. For the six months ended June 30, 2023, advisory fees paid were reduced by approximately $4,000 relating to the Fund's investment in the Liquidity Funds.
A summary of the Fund's transactions in shares of affiliated investments during the six months ended June 30, 2023 is as follows:
Affiliated Investment Company | Value December 31, 2022 (000) | Purchases at Cost (000) | Proceeds from Sales (000) | Dividend Income (000) | |||||||||||||||
Liquidity Funds | $ | 7,302 | $ | 37,585 | $ | 42,721 | $ | 82 |
Affiliated Investment Company (cont'd) | Realized Gain (Loss) (000) | Change in Unrealized Appreciation (Depreciation) (000) | Value June 30, 2023 (000) | ||||||||||||
Liquidity Funds | $ | — | $ | — | $ | 2,166 |
The Fund has an unfunded Deferred Compensation Plan (the "Compensation Plan"), which allows each independent Director to defer payment of all, or a portion, of the fees he or she receives for serving on the Board of Directors. Each eligible Director generally may elect to have the deferred amounts credited with a return equal to the total return on one or more of the Morgan Stanley funds that are offered as investment options under the Compensation Plan. Appreciation/depreciation and distributions received from these investments are recorded with an offsetting increase/decrease in the deferred compensation obligation and do not affect the NAV of the Fund.
I. Federal Income Taxes: It is the Fund's intention to continue to qualify as a regulated investment company and distribute all of its taxable and tax-exempt income. Accordingly, no provision for federal income taxes is required in the financial statements.
The Fund may be subject to taxes imposed by countries in which it invests. Such taxes are generally based on income and/or capital gains earned or repatriated. Taxes are accrued based on net investment income, net realized gains and net unrealized appreciation as such income and/or gains are earned. Taxes may also be based on transactions in foreign currency and are accrued based on the value of investments denominated in such currency.
FASB ASC 740-10, "Income Taxes — Overall", sets forth a minimum threshold for financial statement recognition of the benefit of a tax position taken or expected to be taken in a tax return. Management has concluded there are no significant uncertain tax positions that would require recognition in the financial statements. If applicable, the Fund recognizes interest accrued related to unrecognized tax benefits in "Interest Expense" and penalties in "Other Expenses" in the Statement of Operations. The Fund files tax returns with the U.S. Internal Revenue Service, New York and various states. Generally, each of the tax years in the four-year period ended December 31, 2022 remains subject to examination by taxing authorities.
24
Morgan Stanley Variable Insurance Fund, Inc.
Semi-Annual Report – June 30, 2023 (unaudited)
Notes to Financial Statements (cont'd)
The tax character of distributions paid may differ from the character of distributions shown for GAAP purposes due to short-term capital gains being treated as ordinary income for tax purposes. The tax character of distributions paid during fiscal years 2022 and 2021 was as follows:
2022 Distributions | 2021 Distributions | ||||||
Ordinary | Ordinary | ||||||
$8,543 | $7,967 |
The amount and character of income and gains to be distributed are determined in accordance with income tax regulations which may differ from GAAP. These book/tax differences are either considered temporary or permanent in nature.
Temporary differences are attributable to differing book and tax treatments for the timing of the recognition of gains (losses) on certain investment transactions and the timing of the deductibility of certain expenses.
The Fund had no permanent differences causing reclassifications among the components of net assets for the year ended December 31, 2022.
At December 31, 2022 , the components of distributable earnings for the Fund on a tax basis were as follows:
Undistributed | Undistributed | ||||||
$9,020 | $— |
At December 31, 2022, the Fund had available for federal income tax purposes unused short-term and long-term capital losses of approximately $5,187,000 and $32,539,000, respectively, that do not have an expiration date.
To the extent that capital loss carryforwards are used to offset any future capital gains realized, no capital gains tax liability will be incurred by the Fund for gains realized and not distributed. To the extent that capital gains are offset, such gains will not be distributed to the shareholders.
J. Credit Facility: The Company and other Morgan Stanley funds participated in a $300,000,000 committed, unsecured revolving line of credit facility (the "Facility") with State Street. Effective April 17, 2023, the committed line amount increased to $500,000,000. This Facility is to be used for temporary emergency purposes or funding of shareholder redemption requests. The interest rate for any funds drawn will be based on the federal funds rate or overnight bank funding rate plus a spread. The Facility also has a commitment fee of 0.25% per annum based on the unused portion of the Facility, which is allocated among participating funds based on rel-
ative net assets. During the six months ended June 30, 2023, the Fund did not have any borrowings under the Facility.
K. Other: At June 30, 2023, the Fund had record owners of 10% or greater. Investment activities of these shareholders could have a material impact on the Fund. The aggregate percentage of such owners was 82.2%.
L. Market Risk: An investment in the Fund is based on the values of the Fund's investments, which may change due to economic and other events that affect markets generally, as well as those that affect particular regions, countries, industries, companies or governments. Social, political, economic and other conditions and events, such as war, natural disasters, health emergencies (e.g., epidemics and pandemics), terrorism, conflicts, social unrest, recessions, inflation, rapid interest rate changes and supply chain disruptions, may occur and could significantly impact issuers, industries, governments and other systems, including the financial markets and global economy. It is difficult to predict when events affecting the U.S. or global financial markets and economies may occur, the effects that such events may have and the duration of those effects (which may last for extended periods). These events may be sudden and significant and may negatively impact broad segments of businesses and populations and have a significant and rapid negative impact on the performance of and/or income or yield from the Fund's investments and exacerbate pre-existing risks to the Fund. 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 ultimate impact of public health emergencies or other adverse economic or market developments and the extent to which the associated conditions impact the Fund and its investments will also depend on other future developments, which are highly uncertain, difficult to accurately predict and subject to change at any time. The financial performance of the Fund's investments (and, in turn, the Fund's investment results) as well as their liquidity may be adversely affected because of these and similar types of factors and developments.
The ongoing conflict between Russia and Ukraine has led many countries, including the U.S., to impose economic sanctions on Russian governmental institutions, Russian entities, and Russian individuals. These sanctions have had a negative impact on the Russian economy and currency, and on investments and companies economically tied to Russia, Ukraine and certain neighboring countries. In response, Russia imposed its own restrictions against investors and countries outside Russia. Businesses in the U.S. and globally have experienced shortages in materials and increased costs for transportation, energy and raw materials due, in part, to the
25
Morgan Stanley Variable Insurance Fund, Inc.
Semi-Annual Report – June 30, 2023 (unaudited)
Notes to Financial Statements (cont'd)
adverse effects of the conflict on the global economy. The escalation or continuation of the conflict between Russia and Ukraine or other hostilities presents heightened risks relating to, among other things, cyber-attacks, the frequency and volume of failures to settle securities transactions, supply chain disruptions, inflation, and potential increased volatility in commodity, currency and other financial markets. This conflict could continue to adversely effect global markets performance and liquidity, thereby negatively affecting the value of the Fund's investments beyond any direct exposure to Russian or Ukrainian issuers, markets or economies. The duration and extent of the economic impacts resulting from the military conflict between Russia and Ukraine and related sanctions remains uncertain at this time.
26
Morgan Stanley Variable Insurance Fund, Inc.
Semi-Annual Report – June 30, 2023 (unaudited)
Investment Advisory Agreement Approval
Nature, Extent and Quality of Services
The Board reviewed and considered the nature and extent of the investment advisory services provided by the Adviser under the advisory agreement, including portfolio management, investment research and equity and fixed income securities trading. The Board reviewed similar information and factors regarding the Sub-Adviser, to the extent applicable. The Board also reviewed and considered the nature and extent of the non-advisory, administrative services provided by the Administrator under the administration agreement, including accounting, operations, clerical, bookkeeping, compliance, business management and planning, legal services and the provision of supplies, office space and utilities at the Adviser's expense. The Board also considered the Adviser's investment in personnel and infrastructure that benefits the Fund. (The Adviser, Sub-Adviser and Administrator together are referred to as the "Adviser" and the advisory, sub-advisory and administration agreements together are referred to as the "Management Agreement.") The Board also considered that the Adviser serves a variety of other investment advisory clients and has experience overseeing service providers. The Board also compared the nature of the services provided by the Adviser with similar services provided by non-affiliated advisers as prepared by Broadridge Financial Solutions, Inc. ("Broadridge").
The Board reviewed and considered the qualifications of the portfolio managers, the senior administrative managers and other key personnel of the Adviser who provide the advisory and administrative services to the Fund. The Board determined that the Adviser's portfolio managers and key personnel are well qualified by education and/or training and experience to perform the services in an efficient and professional manner. The Board concluded that the nature and extent of the advisory and administrative services provided were necessary and appropriate for the conduct of the business and investment activities of the Fund and supported its decision to approve the Management Agreement.
Performance, Fees and Expenses of the Fund
The Board reviewed the performance, fees and expenses of the Fund compared to its peers, as prepared by Broadridge, and to appropriate benchmarks where applicable. The Board discussed with the Adviser the performance goals and the actual results achieved in managing the Fund. When considering a fund's performance, the Board and the Adviser place emphasis on trends and longer-term returns (focusing on one-year, three-year and five-year performance, as of December 31, 2022, or since inception, as applicable). When a fund underperforms its benchmark and/or its peer group average, the Board and the Adviser discuss the causes of such underperformance and, where necessary, they discuss specific changes to investment strategy or investment personnel. The Board noted that the Fund's performance was below its peer group average for the one-, three- and five-year periods. The Board discussed with the Adviser the level of the advisory and administration fees (together, the "management fee") for this Fund relative to comparable funds and/or other accounts advised by the Adviser and/or compared to its peers as prepared by Broadridge. In addition to the management fee, the Board also reviewed the Fund's total expense ratio. When a fund's management fee and/or its total expense ratio are higher than its peers, the Board and the Adviser discuss the reasons for this and, where appropriate, they discuss possible waivers and/or caps. The Board noted that the Fund's actual management fee was lower than its peer group average, contractual management fee was higher than its peer group average and total expense ratio was higher than but close to its peer group average. After discussion, the Board concluded that the Fund's (i) performance was acceptable and (ii) management fee and total expense ratio were competitive with its peer group averages.
Economies of Scale
The Board considered the size and growth prospects of the Fund and how that relates to the Fund's total expense ratio and particularly the Fund's management fee rate, which includes breakpoints. In conjunction with its review of the Adviser's profitability, the Board discussed with the Adviser how a change in assets can affect the efficiency or effectiveness of managing the Fund and whether the management fee level is appropriate relative to current and projected asset levels and/or whether the management fee structure reflects economies of scale as asset levels change. The Board has determined that its review of the actual and/or potential economies of scale of the Fund supports its decision to approve the Management Agreement.
27
Morgan Stanley Variable Insurance Fund, Inc.
Semi-Annual Report – June 30, 2023 (unaudited)
Investment Advisory Agreement Approval (cont'd)
Profitability of the Adviser and Affiliates
The Board considered information concerning the costs incurred and profits realized by the Adviser and its affiliates during the last year from their relationship with the Fund and during the last two years from their relationship with the Morgan Stanley Fund Complex and reviewed with the Adviser the cost allocation methodology used to determine the profitability of the Adviser and affiliates. The Board has determined that its review of the analysis of the Adviser's expenses and profitability supports its decision to approve the Management Agreement.
Other Benefits of the Relationship
The Board considered other direct and indirect benefits to the Adviser and/or its affiliates derived from their relationship with the Fund and other funds advised by the Adviser. These benefits may include, among other things, fees for trading, distribution and/or shareholder servicing and for transaction processing and reporting platforms used by securities lending agents, and research received by the Adviser generated from commission dollars spent on funds' portfolio trading. The Board reviewed with the Adviser these arrangements and the reasonableness of the Adviser's costs relative to the services performed. The Board has determined that its review of the other benefits received by the Adviser or its affiliates supports its decision to approve the Management Agreement.
Resources of the Adviser and Historical Relationship Between the Fund and the Adviser
The Board considered whether the Adviser is financially sound and has the resources necessary to perform its obligations under the Management Agreement. The Board also reviewed and considered the historical relationship between the Fund and the Adviser, including the organizational structure of the Adviser, the policies and procedures formulated and adopted by the Adviser for managing the Fund's operations and the Board's confidence in the competence and integrity of the senior managers and key personnel of the Adviser. The Board concluded that the Adviser has the financial resources necessary to fulfill its obligations under the Management Agreement and that it is beneficial for the Fund to continue its relationship with the Adviser.
Other Factors and Current Trends
The Board considered the controls and procedures adopted and implemented by the Adviser and monitored by the Fund's Chief Compliance Officer and concluded that the conduct of business by the Adviser indicates a good faith effort on its part to adhere to high ethical standards in the conduct of the Fund's business.
General Conclusion
After considering and weighing all of the above factors, with various written materials and verbal information presented by the Adviser, the Board concluded that it would be in the best interest of the Fund and its shareholders to approve renewal of the Management Agreement for another year. In reaching this conclusion the Board did not give particular weight to any single piece of information or factor referenced above. The Board considered these factors and information over the course of the year and in numerous meetings, some of which were in executive session with only the independent Board members and their counsel present. It is possible that individual Board members may have weighed these factors, and the information presented, differently in reaching their individual decisions to approve the Management Agreement.
28
Morgan Stanley Variable Insurance Fund, Inc.
Semi-Annual Report – June 30, 2023 (unaudited)
Liquidity Risk Management Program
In compliance with Rule 22e-4 under the Investment Company Act of 1940, as amended (the "Liquidity Rule"), the Fund has adopted and implemented a liquidity risk management program (the "Program"), which is reasonably designed to assess and manage the risk that the Fund could not meet requests to redeem shares issued by the Fund without significant dilution of remaining investors' interests in the Fund (i.e., liquidity risk). The Fund's Board of Directors (the "Board") previously approved the designation of the Liquidity Risk Subcommittee (the "LRS") as Program administrator. The LRS is comprised of representatives from various divisions within Morgan Stanley Investment Management.
At a meeting held on March 1-2, 2023, the Board reviewed a written report prepared by the LRS that addressed the Program's operation and assessed its adequacy, and effectiveness of implementation for the period from January 1, 2022, through December 31, 2022, as required under the Liquidity Rule. The report concluded that the Program operated effectively and was adequately and effectively implemented in all material aspects, and that the relevant controls and safeguards were appropriately designed to enable the LRS to administer the Program in compliance with the Liquidity Rule.
In accordance with the Program, the LRS assessed each Fund's liquidity risk no less frequently than annually taking into consideration certain factors, as applicable, such as (i) investment strategy and liquidity of portfolio investments, (ii) short-term and long-term cash flow projections and (iii) holdings of cash and cash equivalents and borrowing arrangements and other funding sources. Certain factors are considered under both normal and reasonably foreseeable stressed conditions.
Each Fund portfolio investment is classified into one of four liquidity categories, which classification is assessed at least monthly by the LRS. The classification is based on a determination of the number of days it is reasonably expected to take to convert the investment into cash, or sell or dispose of the investment, in current market conditions without significantly changing the market value of the investment. Liquidity classification determinations take into account various market, trading and investment-specific considerations, as well as market depth, and in some cases utilize third-party vendor data.
The Liquidity Rule limits a fund's investments in illiquid investments to 15% of its net assets and requires funds that do not primarily hold assets that are highly liquid investments to determine and maintain a minimum percentage of the fund's net assets to be invested in highly liquid investments (highly liquid investment minimum or "HLIM"). The LRS believes that the Program includes provisions reasonably designed to review, monitor and comply with the 15% limit on illiquid investments and for determining, periodically reviewing and complying with the HLIM requirement, as applicable.
There can be no assurance that the Program will achieve its objectives under all circumstances in the future. Please refer to the Fund's prospectus for more information regarding the Fund's exposure to liquidity risk and other risks to which it may be subject.
29
Morgan Stanley Variable Insurance Fund, Inc.
Semi-Annual Report – June 30, 2023 (unaudited)
Directors and Officers Information
Directors
Frank L. Bowman
Frances L. Cashman
Kathleen A. Dennis
Nancy C. Everett
Eddie A. Grier
Jakki L. Haussler
Dr. Manuel H. Johnson
Joseph J. Kearns
Michael F. Klein
Patricia A. Maleski
W. Allen Reed, Chair of the Board
Adviser and Administrator
Morgan Stanley Investment Management Inc.
522 Fifth Avenue
New York, New York 10036
Sub-Adviser
Morgan Stanley Investment Management Limited
25 Cabot Square, Canary Wharf
London, E14 4QA, England
Distributor
Morgan Stanley Distribution, Inc.
522 Fifth Avenue
New York, New York 10036
Dividend Disbursing and Transfer Agent
SS&C Global Investor & Distribution Solutions, Inc.
P.O. Box 219804
Kansas City, Missouri 64121-9804
Co-Transfer Agent
Eaton Vance Management
Two International Place
Boston, Massachusetts 02110
Officers
John H. Gernon
President and Principal Executive Officer
Deidre A. Downes
Chief Compliance Officer
Francis J. Smith
Treasurer and Principal Financial Officer
Mary E. Mullin
Secretary
Michael J. Key
Vice President
Custodian
State Street Bank and Trust Company
One Congress Street
Boston, Massachusetts 02114
Legal Counsel
Dechert LLP
1095 Avenue of the Americas
New York, New York 10036
Counsel to the Independent Directors
Perkins Coie LLP
1155 Avenue of the Americas,
22nd Floor
New York, New York 10036
Independent Registered Public Accounting Firm
Ernst & Young LLP
200 Clarendon Street
Boston, Massachusetts 02116
Reporting to Shareholders
Each Morgan Stanley fund provides a complete schedule of portfolio holdings in its Semi-Annual and the Annual Reports within 60 days of the end of the fund's second and fourth fiscal quarters. The Semi-Annual and Annual Reports are filed electronically with the Securities and Exchange Commission ("SEC") on Form N-CSRS and Form N-CSR, respectively. Morgan Stanley makes these reports available on its public website, www.morganstanley.com/im/shareholderreports. Each Morgan Stanley non-money market fund also files a complete schedule of portfolio holdings with the SEC for the fund's first and third fiscal quarters as an attachment to Form N-PORT. Morgan Stanley does not deliver the reports for the first and third fiscal quarters to shareholders, but makes the complete schedule of portfolio holdings for the fund's first and third fiscal quarters available on its public website. The holdings for each money market fund are also posted to the Morgan Stanley public website. You may obtain the Form N-PORT filings (as well as the Form N-CSR and N-CSRS filings) by accessing the SEC's website, www.sec.gov. You can also request copies of these materials, upon payment of a duplicating fee, by electronic request at the SEC's email address (publicinfo@sec.gov).
Proxy Voting Policies and Procedures and Proxy Voting Record
You may obtain a copy of the Company's Proxy Voting Policy and Procedures and information regarding how the Company voted proxies relating to portfolio securities during the most recent twelve-month period ended June 30, without charge, upon request, by calling toll free 1 (800) 869-6397 or by visiting our website at www.morganstanley.com/im/shareholderreports. This information is also available on the SEC's website at www.sec.gov.
This report is submitted for the general information of the shareholders of the Fund. For more detailed information about the Fund, its fees and expenses and other pertinent information, please read its Prospectus. The Company's Statement of Additional Information contains additional information about the Fund, including its Directors. It is available, without charge, by calling 1 (800) 869-6397.
Householding Notice
To reduce printing and mailing costs, the Fund attempts to eliminate duplicate mailings to the same address. The Fund delivers a single copy of certain shareholder documents, including shareholder reports, prospectuses and proxy materials, to investors with the same last name who reside at the same address. Your participation in this program will continue for an unlimited period of time unless you instruct us otherwise. You can request multiple copies of these documents by calling 1 (800) 869-6397, 8:00 a.m. to 6:00 p.m., ET. Once our Customer Service Center has received your instructions, we will begin sending individual copies for each account within 30 days.
This report is not authorized for distribution to prospective investors in the Fund unless preceded or accompanied by an effective Prospectus. Read the Prospectus carefully before investing.
UIFEMDSAN
5836763 EXP 08.31.24
Morgan Stanley Variable Insurance Fund, Inc.
Semi-Annual Report – June 30, 2023
Emerging Markets Equity Portfolio
The Fund is intended to be a funding vehicle for variable annuity contracts and variable life insurance policies offered by the separate accounts of certain life insurance companies.
Morgan Stanley Variable Insurance Fund, Inc.
Semi-Annual Report – June 30, 2023 (unaudited)
Table of Contents
Expense Example | 2 | ||||||
Portfolio of Investments | 3 | ||||||
Statement of Assets and Liabilities | 5 | ||||||
Statement of Operations | 6 | ||||||
Statements of Changes in Net Assets | 7 | ||||||
Financial Highlights | 8 | ||||||
Notes to Financial Statements | 10 | ||||||
Investment Advisory Agreement Approval | 18 | ||||||
Liquidity Risk Management Program | 20 | ||||||
Director and Officer Information | Back Cover |
1
Morgan Stanley Variable Insurance Fund, Inc.
Semi-Annual Report – June 30, 2023 (unaudited)
Expense Example
Emerging Markets Equity Portfolio
As a shareholder of the Emerging Markets Equity Portfolio (the "Fund"), you incur two types of costs: (1) insurance company charges; and (2) ongoing costs, which may include advisory fees, administration fees, distribution (12b-1) fees and other Fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.
This example is based on an investment of $1,000 invested at the beginning of the six-month period ended June 30, 2023 and held for the entire six-month period.
Actual Expenses
The table below provides information about actual account values and actual expenses. You may use the information in this table, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the table under the heading entitled "Actual Expenses Paid During Period" to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The table below provides information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any insurance company charges. Therefore, the table below is useful in comparing ongoing costs, but will not help you determine the relative total cost of owning different funds. In addition, if these insurance company charges were included, your costs would have been higher.
Beginning Account Value 1/1/23 | Actual Ending Account Value 6/30/23 | Hypothetical Ending Account Value | Actual Expenses Paid During Period* | Hypothetical Expenses Paid During Period* | Net Expense Ratio During Period** | ||||||||||||||||||||||
Emerging Markets Equity Portfolio Class I | $ | 1,000.00 | $ | 1,065.40 | $ | 1,018.60 | $ | 6.40 | $ | 6.26 | 1.25 | % | |||||||||||||||
Emerging Markets Equity Portfolio Class II | 1,000.00 | 1,065.70 | 1,018.35 | 6.66 | 6.51 | 1.30 |
* Expenses are calculated using each Fund Class' annualized net expense ratio (as disclosed), multiplied by the average account value over the period and multiplied by 181/365 (to reflect the most recent one-half year period).
** Annualized.
2
Morgan Stanley Variable Insurance Fund, Inc.
Semi-Annual Report – June 30, 2023 (unaudited)
Portfolio of Investments
Emerging Markets Equity Portfolio
Shares | Value (000) | ||||||||||
Common Stocks (99.3%) | |||||||||||
Brazil (8.5%) | |||||||||||
Banco BTG Pactual SA (Units) (a) | 294,171 | $ | 1,932 | ||||||||
Cia Brasileira de Aluminio | 17,577 | 19 | |||||||||
Itau Unibanco Holding SA (Preference) | 485,586 | 2,882 | |||||||||
Localiza Rent a Car SA | 180,637 | 2,584 | |||||||||
Lojas Renner SA | 550,015 | 2,298 | |||||||||
Petroleo Brasileiro SA (Preference) | 414,570 | 2,557 | �� | ||||||||
Raia Drogasil SA | 281,682 | 1,741 | |||||||||
14,013 | |||||||||||
China (19.4%) | |||||||||||
Alibaba Group Holding Ltd. (b)(c) | 220,500 | 2,295 | |||||||||
BYD Co. Ltd., H Shares (b) | 86,000 | 2,757 | |||||||||
China Construction Bank Corp., H Shares (b)(c) | 6,010,230 | 3,891 | |||||||||
China Mengniu Dairy Co. Ltd. (b)(c) | 481,000 | 1,818 | |||||||||
China Merchants Bank Co. Ltd., H Shares (b) | 375,500 | 1,713 | |||||||||
China Resources Beer Holdings Co. Ltd. (b) | 198,000 | 1,308 | |||||||||
China Tourism Group Duty Free Corp. Ltd. (b)(c)(d) | 39,700 | 539 | |||||||||
JD.com, Inc., Class A (b) | 33,280 | 568 | |||||||||
Jiangsu Hengrui Pharmaceuticals Co. Ltd., Class A | 165,809 | 1,095 | |||||||||
Kweichow Moutai Co. Ltd., Class A | 6,791 | 1,583 | |||||||||
Li Ning Co. Ltd. (b) | 181,000 | 977 | |||||||||
Meituan, Class B (b)(c) | 63,280 | 992 | |||||||||
NARI Technology Co. Ltd., Class A | 321,600 | 1,024 | |||||||||
Postal Savings Bank of China Co. Ltd. (b)(d) | 2,856,000 | 1,761 | |||||||||
Proya Cosmetics Co. Ltd., Class A | 67,048 | 1,039 | |||||||||
Shenzhou International Group Holdings Ltd. (b) | 220,000 | 2,113 | |||||||||
Sungrow Power Supply Co. Ltd., Class A | 81,698 | 1,316 | |||||||||
Tencent Holdings Ltd. (b) | 121,500 | 5,152 | |||||||||
31,941 | |||||||||||
India (23.1%) | |||||||||||
Axis Bank Ltd. | 98,684 | 1,191 | |||||||||
Bajaj Auto Ltd. | 38,602 | 2,212 | |||||||||
Bajaj Finance Ltd. | 19,899 | 1,743 | |||||||||
Delhivery Ltd. (c) | 193,282 | 899 | |||||||||
HDFC Asset Management Co. Ltd. | 34,048 | 955 | |||||||||
HDFC Bank Ltd. | 111,754 | 2,319 | |||||||||
Hindalco Industries Ltd. | 360,868 | 1,861 | |||||||||
Housing Development Finance Corp. Ltd. | 24,583 | 848 | |||||||||
ICICI Bank Ltd. | 343,529 | 3,933 | |||||||||
ICICI Prudential Life Insurance Co. Ltd. (c) | 187,348 | 1,310 | |||||||||
Infosys Ltd. | 114,018 | 1,857 | |||||||||
Infosys Ltd. ADR | 53,583 | 861 | |||||||||
Larsen & Toubro Ltd. | 50,151 | 1,516 | |||||||||
Macrotech Developers Ltd. (c) | 167,150 | 1,388 | |||||||||
Mahindra & Mahindra Financial Services Ltd. | 39,723 | 163 | |||||||||
Mahindra & Mahindra Ltd. | 118,993 | 2,114 | |||||||||
MakeMyTrip Ltd. (c) | 25,665 | 692 | |||||||||
Max Healthcare Institute Ltd. (c) | 372,261 | 2,724 | |||||||||
Pidilite Industries Ltd. | 34,790 | 1,104 | |||||||||
Reliance Industries Ltd. | 132,152 | 4,119 |
Shares | Value (000) | ||||||||||
Star Health & Allied Insurance Co. Ltd. (c) | 150,844 | $ | 1,078 | ||||||||
State Bank of India | 354,173 | 2,481 | |||||||||
United Breweries Ltd. | 36,547 | 675 | |||||||||
38,043 | |||||||||||
Indonesia (4.4%) | |||||||||||
Bank Central Asia Tbk PT | 3,730,000 | 2,288 | |||||||||
Bank Mandiri Persero Tbk PT | 6,801,900 | 2,367 | |||||||||
Bank Rakyat Indonesia Persero Tbk PT | 5,210,000 | 1,902 | |||||||||
Cisarua Mountain Dairy PT TBK | 2,602,700 | 728 | |||||||||
7,285 | |||||||||||
Korea, Republic of (10.1%) | |||||||||||
KB Financial Group, Inc. | 27,182 | 987 | |||||||||
Kia Corp. | 15,891 | 1,070 | |||||||||
Korea Zinc Co. Ltd. | 2,940 | 1,092 | |||||||||
LG Chem Ltd. | 849 | 432 | |||||||||
Samsung Electronics Co. Ltd. | 162,662 | 8,957 | |||||||||
Samsung SDI Co. Ltd. | 2,379 | 1,215 | |||||||||
SK Hynix, Inc. | 32,173 | 2,827 | |||||||||
16,580 | |||||||||||
Mexico (5.9%) | |||||||||||
Gruma SAB de CV , Class B | 154,704 | 2,484 | |||||||||
Grupo Financiero Banorte SAB de CV Series O | 280,074 | 2,310 | |||||||||
Qualitas Controladora SAB de CV | 211,151 | 1,562 | |||||||||
Wal-Mart de Mexico SAB de CV | 826,433 | 3,278 | |||||||||
9,634 | |||||||||||
Poland (2.0%) | |||||||||||
LPP SA (c) | 936 | 3,227 | |||||||||
Portugal (1.6%) | |||||||||||
Galp Energia SGPS SA | 228,903 | 2,675 | |||||||||
Saudi Arabia (0.9%) | |||||||||||
Alinma Bank | 152,910 | 1,374 | |||||||||
South Africa (5.5%) | |||||||||||
Anglo American Platinum Ltd. | 26,057 | 1,178 | |||||||||
Anglo American PLC | 115,542 | 3,294 | |||||||||
AVI Ltd. | 432,312 | 1,561 | |||||||||
Bidvest Group Ltd. | 87,895 | 1,223 | |||||||||
Capitec Bank Holdings Ltd. | 20,826 | 1,735 | |||||||||
8,991 | |||||||||||
Taiwan (13.9%) | |||||||||||
Airtac International Group | 33,901 | 1,120 | |||||||||
Chailease Holding Co. Ltd. (c) | 254,000 | 1,670 | |||||||||
CTBC Financial Holding Co. Ltd. | 2,000,000 | 1,599 | |||||||||
Delta Electronics, Inc. | 224,000 | 2,482 | |||||||||
MediaTek, Inc. | 49,000 | 1,085 | |||||||||
Taiwan Semiconductor Manufacturing Co. Ltd. | 523,000 | 9,662 | |||||||||
Taiwan Semiconductor Manufacturing Co. Ltd. ADR | 45,537 | 4,596 | |||||||||
Voltronic Power Technology Corp. | 10,000 | 632 | |||||||||
22,846 |
The accompanying notes are an integral part of the financial statements.
3
Morgan Stanley Variable Insurance Fund, Inc.
Semi-Annual Report – June 30, 2023 (unaudited)
Portfolio of Investments (cont'd)
Emerging Markets Equity Portfolio
Shares | Value (000) | ||||||||||
Thailand (1.1%) | |||||||||||
Kasikornbank PCL | 234,100 | $ | 857 | ||||||||
Tisco Financial Group PCL | 351,500 | 962 | |||||||||
1,819 | |||||||||||
United Kingdom (2.9%) | |||||||||||
Antofagasta PLC | 128,359 | 2,387 | |||||||||
Mondi PLC | 159,170 | 2,433 | |||||||||
4,820 | |||||||||||
Total Common Stocks (Cost $137,940) | 163,248 | ||||||||||
Short-Term Investments (1.2%) | |||||||||||
Investment Company (1.2%) | |||||||||||
Morgan Stanley Institutional Liquidity Funds — Government Portfolio — Institutional Class (See Note H) (Cost $1,965) | 1,965,034 | 1,965 | |||||||||
Securities held as Collateral on Loaned Securities (0.0%)‡ | |||||||||||
Investment Company (0.0%)‡ | |||||||||||
Morgan Stanley Institutional Liquidity Funds — Government Portfolio — Institutional Class (See Note H) (Cost $28) | 28,341 | 28 | |||||||||
Total Short-Term Investments (Cost $1,993) | 1,993 | ||||||||||
Total Investments (100.5%) (Cost $139,933) Including $2,206 of Securities Loaned (e)(f) | 165,241 | ||||||||||
Liabilities in Excess of Other Assets (–0.5%) | (784 | ) | |||||||||
Net Assets (100.0%) | $ | 164,457 |
Country assignments and aggregations are based generally on third party vendor classifications and information, and may be different from the assignments and aggregations under the policies set forth in the Fund's prospectus and/or statement of additional information relating to geographic classifications.
‡ Amount is less than 0.05%.
(a) Consists of one or more classes of securities traded together as a unit; stocks with attached warrants.
(b) Security trades on the Hong Kong exchange.
(c) Non-income producing security.
(d) All or a portion of this security was on loan at June 30, 2023.
(e) The approximate fair value and percentage of net assets, $131,633,000 and 80.0%, respectively, represent the securities that have been fair valued under the fair valuation policy for international investments as described in Note A-1 within the Notes to Financial Statements.
(f) At June 30, 2023, the aggregate cost for federal income tax purposes approximates the aggregate cost for book purposes. The aggregate gross unrealized appreciation is approximately $35,753,000 and the aggregate gross unrealized depreciation is approximately $10,465,000, resulting in net unrealized appreciation of approximately $25,288,000.
ADR American Depositary Receipt.
Futures Contract:
The Fund had the following futures contract open at June 30, 2023:
Number of Contracts | Expiration Date | Notional Amount (000) | Value (000) | Unrealized Depreciation (000) | |||||||||||||||||||
Long: | |||||||||||||||||||||||
MSCI Emerging Market Index (United States) | 33 | Sep-23 | $ | 2 | $ | 1,647 | $ | (20 | ) |
Portfolio Composition
Classification | Percentage of Total Investments | ||||||
Other* | 49.8 | % | |||||
Banks | 22.1 | ||||||
Semiconductors & Semiconductor Equipment | 11.0 | ||||||
Metals & Mining | 6.0 | ||||||
Oil, Gas & Consumable Fuels | 5.7 | ||||||
Tech Hardware, Storage & Peripherals | 5.4 | ||||||
Total Investments | 100.0 | %** |
* Industries and/or investment types representing less than 5% of total investments.
** Does not include open long futures contract with a value of approximately $1,647,000 and unrealized depreciation of approximately $20,000.
The accompanying notes are an integral part of the financial statements.
4
Morgan Stanley Variable Insurance Fund, Inc.
Semi-Annual Report – June 30, 2023 (unaudited)
Emerging Markets Equity Portfolio
Statement of Assets and Liabilities | June 30, 2023 (000) | ||||||
Assets: | |||||||
Investments in Securities of Unaffiliated Issuers, at Value(1) (Cost $137,940) | $ | 163,248 | |||||
Investment in Security of Affiliated Issuer, at Value (Cost $1,993) | 1,993 | ||||||
Total Investments in Securities, at Value (Cost $139,933) | 165,241 | ||||||
Foreign Currency, at Value (Cost $150) | 151 | ||||||
Dividends Receivable | 832 | ||||||
Receivable for Variation Margin on Futures Contracts | 72 | ||||||
Receivable for Investments Sold | 48 | ||||||
Tax Reclaim Receivable | 27 | ||||||
Receivable for Fund Shares Sold | 26 | ||||||
Receivable from Affiliate | 12 | ||||||
Receivable from Securities Lending Income | 1 | ||||||
Other Assets | 24 | ||||||
Total Assets | 166,434 | ||||||
Liabilities: | |||||||
Deferred Capital Gain Country Tax | 1,357 | ||||||
Payable for Advisory Fees | 302 | ||||||
Payable for Fund Shares Redeemed | 115 | ||||||
Payable for Professional Fees | 65 | ||||||
Payable for Servicing Fees | 56 | ||||||
Collateral on Securities Loaned, at Value | 28 | ||||||
Payable for Administration Fees | 11 | ||||||
Payable for Custodian Fees | 10 | ||||||
Payable for Transfer Agency Fees | 1 | ||||||
Payable for Investments Purchased | — | @ | |||||
Payable for Distribution Fees — Class II Shares | — | @ | |||||
Other Liabilities | 32 | ||||||
Total Liabilities | 1,977 | ||||||
NET ASSETS | $ | 164,457 | |||||
Net Assets Consist of: | |||||||
Paid-in-Capital | $ | 136,217 | |||||
Total Distributable Earnings | 28,240 | ||||||
Net Assets | $ | 164,457 | |||||
CLASS I: | |||||||
Net Assets | $ | 114,687 | |||||
Net Asset Value, Offering and Redemption Price Per Share Applicable to 9,030,134 Outstanding $0.001 Par Value Shares (Authorized 500,000,000 Shares) | $ | 12.70 | |||||
CLASS II: | |||||||
Net Assets | $ | 49,770 | |||||
Net Asset Value, Offering and Redemption Price Per Share Applicable to 3,935,521 Outstanding $0.001 Par Value Shares (Authorized 500,000,000 Shares) | $ | 12.65 | |||||
(1) Including: | |||||||
Securities on Loan, at Value: | $ | 2,206 |
@ Amount is less than $500.
The accompanying notes are an integral part of the financial statements.
5
Morgan Stanley Variable Insurance Fund, Inc.
Semi-Annual Report – June 30, 2023 (unaudited)
Emerging Markets Equity Portfolio
Statement of Operations | Six Months Ended June 30, 2023 (000) | ||||||
Investment Income: | |||||||
Dividends from Securities of Unaffiliated Issuers (Net of $310 of Foreign Taxes Withheld) | $ | 2,460 | |||||
Dividends from Security of Affiliated Issuer (Note H) | 79 | ||||||
Income from Securities Loaned — Net | 6 | ||||||
Total Investment Income | 2,545 | ||||||
Expenses: | |||||||
Advisory Fees (Note B) | 662 | ||||||
Servicing Fees (Note D) | 130 | ||||||
Professional Fees | 87 | ||||||
Administration Fees (Note C) | 65 | ||||||
Distribution Fees — Class II Shares (Note E) | 62 | ||||||
Custodian Fees (Note G) | 61 | ||||||
Shareholder Reporting Fees | 15 | ||||||
Transfer Agency Fees (Note F) | 8 | ||||||
Pricing Fees | 3 | ||||||
Directors' Fees and Expenses | 2 | ||||||
Other Expenses | 11 | ||||||
Total Expenses | 1,106 | ||||||
Waiver of Distribution Fees — Class II Shares (Note E) | (49 | ) | |||||
Waiver of Advisory Fees (Note B) | (29 | ) | |||||
Rebate from Morgan Stanley Affiliate (Note H) | (3 | ) | |||||
Net Expenses | 1,025 | ||||||
Net Investment Income | 1,520 | ||||||
Realized Gain (Loss): | |||||||
Investments Sold (Net of $118 of Capital Gain Country Tax) | (2,269 | ) | |||||
Foreign Currency Translation | (39 | ) | |||||
Futures Contracts | 229 | ||||||
Net Realized Loss | (2,079 | ) | |||||
Change in Unrealized Appreciation (Depreciation): | |||||||
Investments (Net of Increase in Deferred Capital Gain Country Tax of $505) | 10,900 | ||||||
Foreign Currency Translation | 10 | ||||||
Futures Contracts | (30 | ) | |||||
Net Change in Unrealized Appreciation (Depreciation) | 10,880 | ||||||
Net Realized Loss and Change in Unrealized Appreciation (Depreciation) | 8,801 | ||||||
Net Increase in Net Assets Resulting from Operations | $ | 10,321 |
The accompanying notes are an integral part of the financial statements.
6
Morgan Stanley Variable Insurance Fund, Inc.
Semi-Annual Report – June 30, 2023
Emerging Markets Equity Portfolio
Statements of Changes in Net Assets | Six Months Ended June 30, 2023 (unaudited) (000) | Year Ended December 31, 2022 (000) | |||||||||
Increase (Decrease) in Net Assets: | |||||||||||
Operations: | |||||||||||
Net Investment Income | $ | 1,520 | $ | 2,470 | |||||||
Net Realized Gain (Loss) | (2,079 | ) | 3,053 | ||||||||
Net Change in Unrealized Appreciation (Depreciation) | 10,880 | (62,007 | ) | ||||||||
Net Increase (Decrease) in Net Assets Resulting from Operations | 10,321 | (56,484 | ) | ||||||||
Dividends and Distributions to Shareholders: | |||||||||||
Class I | — | (13,481 | ) | ||||||||
Class II | — | (5,774 | ) | ||||||||
Total Dividends and Distributions to Shareholders | — | (19,255 | ) | ||||||||
Capital Share Transactions:(1) | |||||||||||
Class I: | |||||||||||
Subscribed | 4,970 | 7,561 | |||||||||
Distributions Reinvested | — | 13,481 | |||||||||
Redeemed | (8,509 | ) | (17,620 | ) | |||||||
Class II: | |||||||||||
Subscribed | 1,917 | 5,705 | |||||||||
Distributions Reinvested | — | 5,774 | |||||||||
Redeemed | (4,001 | ) | (7,364 | ) | |||||||
Net Increase (Decrease) in Net Assets Resulting from Capital Share Transactions | (5,623 | ) | 7,537 | ||||||||
Total Increase (Decrease) in Net Assets | 4,698 | (68,202 | ) | ||||||||
Net Assets: | |||||||||||
Beginning of Period | 159,759 | 227,961 | |||||||||
End of Period | $ | 164,457 | $ | 159,759 | |||||||
(1) Capital Share Transactions: | |||||||||||
Class I: | |||||||||||
Shares Subscribed | 398 | 543 | |||||||||
Shares Issued on Distributions Reinvested | — | 1,186 | |||||||||
Shares Redeemed | (688 | ) | (1,280 | ) | |||||||
Net Increase (Decrease) in Class I Shares Outstanding | (290 | ) | 449 | ||||||||
Class II: | |||||||||||
Shares Subscribed | 154 | 409 | |||||||||
Shares Issued on Distributions Reinvested | — | 510 | |||||||||
Shares Redeemed | (323 | ) | (545 | ) | |||||||
Net Increase (Decrease) in Class II Shares Outstanding | (169 | ) | 374 |
The accompanying notes are an integral part of the financial statements.
7
Morgan Stanley Variable Insurance Fund, Inc.
Semi-Annual Report – June 30, 2023
Financial Highlights
Emerging Markets Equity Portfolio
Class I | |||||||||||||||||||||||||||
Six Months Ended June 30, 2023 | Year Ended December 31, | ||||||||||||||||||||||||||
Selected Per Share Data and Ratios | (unaudited) | 2022 | 2021 | 2020 | 2019 | 2018 | |||||||||||||||||||||
Net Asset Value, Beginning of Period | $ | 11.92 | $ | 18.11 | $ | 17.73 | $ | 15.99 | $ | 14.48 | $ | 17.65 | |||||||||||||||
Income (Loss) from Investment Operations: | |||||||||||||||||||||||||||
Net Investment Income(1) | 0.12 | 0.19 | 0.08 | 0.05 | 0.20 | 0.14 | |||||||||||||||||||||
Net Realized and Unrealized Gain (Loss) | 0.66 | (4.81 | ) | 0.46 | 2.15 | 2.56 | (3.23 | ) | |||||||||||||||||||
Total from Investment Operations | 0.78 | (4.62 | ) | 0.54 | 2.20 | 2.76 | (3.09 | ) | |||||||||||||||||||
Distributions from and/or in Excess of: | |||||||||||||||||||||||||||
Net Investment Income | — | (0.06 | ) | (0.16 | ) | (0.21 | ) | (0.17 | ) | (0.08 | ) | ||||||||||||||||
Net Realized Gain | — | (1.51 | ) | — | (0.25 | ) | (1.08 | ) | — | ||||||||||||||||||
Total Distributions | — | (1.57 | ) | (0.16 | ) | (0.46 | ) | (1.25 | ) | (0.08 | ) | ||||||||||||||||
Net Asset Value, End of Period | $ | 12.70 | $ | 11.92 | $ | 18.11 | $ | 17.73 | $ | 15.99 | $ | 14.48 | |||||||||||||||
Total Return(2) | 6.54 | %(3) | (25.08 | )% | 2.99 | % | 14.44 | % | 19.59 | % | (17.47 | )% | |||||||||||||||
Ratios to Average Net Assets and Supplemental Data: | |||||||||||||||||||||||||||
Net Assets, End of Period (Thousands) | $ | 114,687 | $ | 111,050 | $ | 160,661 | $ | 166,989 | $ | 163,794 | $ | 175,300 | |||||||||||||||
Ratio of Expenses Before Expense Limitation | 1.29 | %(4) | 1.32 | % | 1.25 | % | 1.30 | % | 1.27 | % | N/A | ||||||||||||||||
Ratio of Expenses After Expense Limitation | 1.25 | %(4)(5) | 1.25 | %(5) | 1.25 | %(5) | 1.25 | %(5) | 1.25 | %(5) | 1.22 | %(5) | |||||||||||||||
Ratio of Expenses After Expense Limitation Excluding Interest Expenses | N/A | 1.25 | %(5) | N/A | 1.25 | %(5) | 1.25 | %(5) | 1.22 | %(5) | |||||||||||||||||
Ratio of Net Investment Income | 1.89 | %(4)(5) | 1.41 | %(5) | 0.44 | %(5) | 0.35 | %(5) | 1.33 | %(5) | 0.86 | %(5) | |||||||||||||||
Ratio of Rebate from Morgan Stanley Affiliates | 0.00 | %(4)(6) | 0.00 | %(6) | 0.00 | %(6) | 0.00 | %(6) | 0.00 | %(6) | 0.01 | % | |||||||||||||||
Portfolio Turnover Rate | 22 | %(3) | 38 | % | 39 | % | 52 | % | 36 | % | 42 | % |
(1) Per share amount is based on average shares outstanding.
(2) Calculated based on the net asset value as of the last business day of the period. Performance does not reflect fees and expenses imposed by your insurance company's separate account. If performance information included the effect of these additional charges, the total return would be lower.
(3) Not annualized.
(4) Annualized.
(5) 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."
(6) Amount is less than 0.005%.
The accompanying notes are an integral part of the financial statements.
8
Morgan Stanley Variable Insurance Fund, Inc.
Semi-Annual Report – June 30, 2023
Financial Highlights
Emerging Markets Equity Portfolio
Class II | |||||||||||||||||||||||||||
Six Months Ended June 30, 2023 | Year Ended December 31, | ||||||||||||||||||||||||||
Selected Per Share Data and Ratios | (unaudited) | 2022 | 2021 | 2020 | 2019 | 2018 | |||||||||||||||||||||
Net Asset Value, Beginning of Period | $ | 11.87 | $ | 18.04 | $ | 17.66 | $ | 15.93 | $ | 14.44 | $ | 17.59 | |||||||||||||||
Income (Loss) from Investment Operations: | |||||||||||||||||||||||||||
Net Investment Income(1) | 0.11 | 0.18 | 0.07 | 0.04 | 0.19 | 0.13 | |||||||||||||||||||||
Net Realized and Unrealized Gain (Loss) | 0.67 | (4.79 | ) | 0.46 | 2.14 | 2.54 | (3.21 | ) | |||||||||||||||||||
Total from Investment Operations | 0.78 | (4.61 | ) | 0.53 | 2.18 | 2.73 | (3.08 | ) | |||||||||||||||||||
Distributions from and/or in Excess of: | |||||||||||||||||||||||||||
Net Investment Income | — | (0.05 | ) | (0.15 | ) | (0.20 | ) | (0.16 | ) | (0.07 | ) | ||||||||||||||||
Net Realized Gain | — | (1.51 | ) | — | (0.25 | ) | (1.08 | ) | — | ||||||||||||||||||
Total Distributions | — | (1.56 | ) | (0.15 | ) | (0.45 | ) | (1.24 | ) | (0.07 | ) | ||||||||||||||||
Net Asset Value, End of Period | $ | 12.65 | $ | 11.87 | $ | 18.04 | $ | 17.66 | $ | 15.93 | $ | 14.44 | |||||||||||||||
Total Return(2) | 6.57 | %(3) | (25.13 | )% | 2.95 | % | 14.36 | % | 19.51 | % | (17.51 | )% | |||||||||||||||
Ratios to Average Net Assets and Supplemental Data: | |||||||||||||||||||||||||||
Net Assets, End of Period (Thousands) | $ | 49,770 | $ | 48,709 | $ | 67,300 | $ | 73,286 | $ | 71,662 | $ | 68,404 | |||||||||||||||
Ratio of Expenses Before Expense Limitation | 1.54 | %(4) | 1.57 | % | 1.50 | % | 1.55 | % | 1.52 | % | 1.48 | % | |||||||||||||||
Ratio of Expenses After Expense Limitation | 1.30 | %(4)(5) | 1.30 | %(5) | 1.30 | %(5) | 1.30 | %(5) | 1.30 | %(5) | 1.27 | %(5) | |||||||||||||||
Ratio of Expenses After Expense Limitation Excluding Interest Expenses | N/A | 1.30 | %(5) | N/A | 1.30 | %(5) | 1.30 | %(5) | 1.27 | %(5) | |||||||||||||||||
Ratio of Net Investment Income | 1.84 | %(4)(5) | 1.36 | %(5) | 0.39 | %(5) | 0.30 | %(5) | 1.28 | %(5) | 0.81 | %(5) | |||||||||||||||
Ratio of Rebate from Morgan Stanley Affiliates | 0.00 | %(4)(6) | 0.00 | %(6) | 0.00 | %(6) | 0.00 | %(6) | 0.00 | %(6) | 0.01 | % | |||||||||||||||
Portfolio Turnover Rate | 22 | %(3) | 38 | % | 39 | % | 52 | % | 36 | % | 42 | % |
(1) Per share amount is based on average shares outstanding.
(2) Calculated based on the net asset value as of the last business day of the period. Performance does not reflect fees and expenses imposed by your insurance company's separate account. If performance information included the effect of these additional charges, the total return would be lower.
(3) Not annualized.
(4) Annualized.
(5) 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."
(6) Amount is less than 0.005%.
The accompanying notes are an integral part of the financial statements.
9
Morgan Stanley Variable Insurance Fund, Inc.
Semi-Annual Report – June 30, 2023 (unaudited)
Notes to Financial Statements
Morgan Stanley Variable Insurance Fund, Inc. (the "Company") is registered under the Investment Company Act of 1940, as amended (the "Act"), as an open-end management investment company. The Company is comprised of ten separate active, diversified and non-diversified funds (individually referred to as a "Fund," collectively as the "Funds"). The Company applies investment company accounting and reporting guidance Accounting Standards Codification ("ASC") Topic 946.
The accompanying financial statements relate to the Emerging Markets Equity Portfolio. The Fund seeks long-term capital appreciation by investing primarily in growth-oriented equity securities of issuers in emerging market countries. The Fund offers two classes of shares — Class I and Class II. Both classes of shares have identical voting rights (except that shareholders of a Class have exclusive voting rights regarding any matter relating solely to that Class of shares), dividend, liquidation and other rights.
The Company is intended to be a funding vehicle for variable annuity contracts and variable life insurance policies offered by the separate accounts of certain life insurance companies.
A.Significant Accounting Policies: The following significant accounting policies are in conformity with U.S. generally accepted accounting principles ("GAAP"). Such policies are consistently followed by the Company in the preparation of its financial statements. GAAP may require management to make estimates and assumptions that affect the reported amounts and disclosures in the financial statements. Actual results may differ from those estimates.
1. Security Valuation: (1) An equity portfolio security listed or traded on an exchange is valued at its latest reported sales price (or at the exchange official closing price if such exchange reports an official closing price), and if there were no sales on a given day and if there is no official exchange closing price for that day, the security is valued at the mean between the last reported bid and asked prices if such bid and asked prices are available on the relevant exchanges. If only bid prices are available then the latest bid price may be used. Listed equity securities not traded on the valuation date with no reported bid and asked prices available on the exchange are valued at the mean between the current bid and asked prices obtained from one or more reputable brokers/dealers. In cases where a security is traded on more than one exchange, the security is valued on the exchange designated as the primary market; (2) all other equity portfolio securities for which over-the-counter ("OTC") market quotations are readily available are valued at the latest reported sales price (or at the market official closing price if such market reports an official
closing price), and if there was no trading in the security on a given day and if there is no official closing price from relevant markets for that day, the security is valued at the mean between the last reported bid and asked prices if such bid and asked prices are available on the relevant markets. An unlisted equity security that does not trade on the valuation date and for which bid and asked prices from the relevant markets are unavailable is valued at the mean between the current bid and asked prices obtained from one or more reputable brokers/dealers; (3) fixed income securities may be valued by an outside pricing service/vendor approved by the Company's Board of Directors (the "Directors"). The pricing service/vendor may employ a pricing model that takes into account, among other things, bids, yield spreads and/or other market data and specific security characteristics. If Morgan Stanley Investment Management Inc. (the "Adviser") or Morgan Stanley Investment Management Company ("MSIM Company") (the "Sub- Adviser"), each a wholly-owned subsidiary of Morgan Stanley, determines that the price provided by the outside pricing service/vendor does not reflect the security's fair value or is unable to provide a price, prices from brokers/dealers may also be utilized. In these circumstances, the value of the security will be the mean of bid and asked prices obtained from brokers/dealers; (4) when market quotations are not readily available, as defined by Rule 2a-5 under the Act, including circumstances under which the Adviser or the Sub-Adviser determines that the closing price, last sale price or the mean between the last reported bid and asked prices are not reflective of a security's market value, portfolio securities are valued at their fair value as determined in good faith under procedures approved by and under the general supervision of the Directors. Occasionally, developments affecting the closing prices of securities and other assets may occur between the times at which valuations of such securities are determined (that is, close of the foreign market on which the securities trade) and the close of business of the New York Stock Exchange ("NYSE"). If developments occur during such periods that are expected to materially affect the value of such securities, such valuations may be adjusted to reflect the estimated fair value of such securities as of the close of the NYSE, as determined in good faith by the Directors or by the Adviser using a pricing service and/or procedures approved by the Directors; (5) futures are valued at the settlement price on the exchange on which they trade or, if a settlement price is unavailable, at the last sale price on the exchange; (6) foreign exchange transactions ("spot contracts") and foreign exchange forward
10
Morgan Stanley Variable Insurance Fund, Inc.
Semi-Annual Report – June 30, 2023 (unaudited)
Notes to Financial Statements (cont'd)
contracts ("forward contracts") are valued daily using an independent pricing vendor at the spot and forward rates, respectively, as of the close of the NYSE; and (7) investments in mutual funds, including the Morgan Stanley Institutional Liquidity Funds, are valued at the net asset value ("NAV") as of the close of each business day.
In connection with Rule 2a-5 of the Act, the Directors have designated the Company's Adviser as its valuation designee. The valuation designee has responsibility for determining fair value and to make the actual calculations pursuant to the fair valuation methodologies previously approved by the Directors. Under procedures approved by the Directors, the Company's Adviser, as valuation designee, has formed a Valuation Committee whose members are approved by the Directors. The Valuation Committee provides administration and oversight of the Company's valuation policies and procedures, which are reviewed at least annually by the Directors. These procedures allow the Company to utilize independent pricing services, quotations from securities and financial instrument dealers and other market sources to determine fair value.
2. Fair Value Measurement: Financial Accounting Standards Board ("FASB") ASC 820, "Fair Value Measurement" ("ASC 820"), defines fair value as the price that would be received to sell an asset or pay to transfer a liability in an orderly transaction between market participants at the measurement date. ASC 820 establishes a three-tier hierarchy to distinguish between (1) inputs that reflect the assumptions market participants would use in valuing an asset or liability developed based on market data obtained from sources independent of the reporting entity (observable inputs) and (2) inputs that reflect the reporting entity's own assumptions about the assumptions market participants would use in valuing an asset or liability developed based on the best information available in the circumstances (unobservable inputs) and to establish classification of fair value measurements for disclosure purposes. Various inputs are used in determining the value of the Fund's investments. The inputs are summarized in the three broad levels listed below:
• Level 1 – unadjusted quoted prices in active markets for identical investments
• Level 2 – other significant observable inputs (including quoted prices for similar investments, interest rates, prepayment speeds, credit risk, etc.)
• Level 3 – significant unobservable inputs including the Fund's own assumptions in determining the fair value of investments. Factors considered in making
this determination may include, but are not limited to, information obtained by contacting the issuer, analysts, or the appropriate stock exchange (for exchange-traded securities), analysis of the issuer's financial statements or other available documents and, if necessary, available information concerning other securities in similar circumstances.
The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities and the determination of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to each security.
The following is a summary of the inputs used to value the Fund's investments as of June 30, 2023:
Investment Type | Level 1 Unadjusted quoted prices (000) | Level 2 Other significant observable inputs (000) | Level 3 Significant unobservable inputs (000) | Total (000) | |||||||||||||||
Assets: | |||||||||||||||||||
Common Stocks | |||||||||||||||||||
Air Freight & Logistics | $ | — | $ | 899 | $ | — | $ | 899 | |||||||||||
Automobiles | — | 8,154 | — | 8,154 | |||||||||||||||
Banks | 4,130 | 32,423 | — | 36,553 | |||||||||||||||
Beverages | — | 3,566 | — | 3,566 | |||||||||||||||
Broadline Retail | — | 2,863 | — | 2,863 | |||||||||||||||
Capital Markets | — | 2,887 | — | 2,887 | |||||||||||||||
Chemicals | — | 1,536 | — | 1,536 | |||||||||||||||
Construction & Engineering | — | 1,516 | — | 1,516 | |||||||||||||||
Consumer Finance | — | 1,906 | — | 1,906 | |||||||||||||||
Consumer Staples Distribution & Retail | 3,278 | 1,741 | — | 5,019 | |||||||||||||||
Electrical Equipment | — | 2,973 | — | 2,973 | |||||||||||||||
Electronic Equipment, Instruments & Components | — | 3,697 | — | 3,697 | |||||||||||||||
Financial Services | — | 2,518 | — | 2,518 | |||||||||||||||
Food Products | 2,484 | 4,107 | — | 6,591 | |||||||||||||||
Ground Transportation | 2,584 | — | — | 2,584 | |||||||||||||||
Health Care Providers & Services | — | 2,724 | — | 2,724 | |||||||||||||||
Hotels, Restaurants & Leisure | 693 | 992 | — | 1,685 | |||||||||||||||
Industrial Conglomerates | — | 1,223 | — | 1,223 | |||||||||||||||
Information Technology Services | 861 | 1,857 | — | 2,718 | |||||||||||||||
Insurance | 1,562 | 2,387 | — | 3,949 | |||||||||||||||
Interactive Media & Services | — | 5,152 | — | 5,152 | |||||||||||||||
Machinery | — | 1,120 | — | 1,120 | |||||||||||||||
Metals & Mining | — | 9,830 | — | 9,830 | |||||||||||||||
Oil, Gas & Consumable Fuels | — | 9,351 | — | 9,351 |
11
Morgan Stanley Variable Insurance Fund, Inc.
Semi-Annual Report – June 30, 2023 (unaudited)
Notes to Financial Statements (cont'd)
Investment Type | Level 1 Unadjusted quoted prices (000) | Level 2 Other significant observable inputs (000) | Level 3 Significant unobservable inputs (000) | Total (000) | |||||||||||||||
Common Stocks (cont'd) | |||||||||||||||||||
Paper & Forest Products | $ | — | $ | 2,433 | $ | — | $ | 2,433 | |||||||||||
Personal Care Products | — | 1,039 | — | 1,039 | |||||||||||||||
Pharmaceuticals | — | 1,095 | — | 1,095 | |||||||||||||||
Real Estate Management & Development | — | 1,388 | — | 1,388 | |||||||||||||||
Semiconductors & Semiconductor Equipment | 4,596 | 13,573 | — | 18,169 | |||||||||||||||
Specialty Retail | — | 2,836 | — | 2,836 | |||||||||||||||
Tech Hardware, Storage & Peripherals | — | 8,957 | — | 8,957 | |||||||||||||||
Textiles, Apparel & Luxury Goods | — | 6,317 | — | 6,317 | |||||||||||||||
Total Common Stocks | 20,188 | 143,060 | — | 163,248 | |||||||||||||||
Short-Term Investments | |||||||||||||||||||
Investment Company | 1,993 | — | — | 1,993 | |||||||||||||||
Total Assets | 22,181 | 143,060 | — | 165,241 | |||||||||||||||
Liabilities: | |||||||||||||||||||
Futures Contract | (20 | ) | — | — | (20 | ) | |||||||||||||
Total | $ | 22,161 | $ | 143,060 | $ | — | $ | 165,221 |
Transfers between investment levels may occur as the markets fluctuate and/or the availability of data used in an investment's valuation changes.
3. Foreign Currency Translation and Foreign Investments: The books and records of the Fund are maintained in U.S. dollars. Foreign currency amounts are translated into U.S. dollars as follows:
— investments, other assets and liabilities at the prevailing rate of exchange on the valuation date;
— investment transactions and investment income at the prevailing rates of exchange on the dates of such transactions.
Although the net assets of the Fund are presented at the foreign exchange rates and market values at the close of the period, the Fund does not isolate that portion of the results of operations arising as a result of changes in the foreign exchange rates from the fluctuations arising from changes in the market prices of securities held at period end. Similarly, the Fund does not isolate the effect of changes in foreign exchange rates from the fluctuations arising from changes in the market prices of securities sold during the period. Accordingly, realized and unrealized foreign currency gains (losses) on investments in
securities are included in the reported net realized and unrealized gains (losses) on investment transactions and balances. However, pursuant to U.S. federal income tax regulations, gains and losses from certain foreign currency transactions and the foreign currency portion of gains and losses realized on sales and maturities of foreign denominated debt securities are treated as ordinary income for U.S. federal income tax purposes.
Net realized gains (losses) on foreign currency transactions represent net foreign exchange gains (losses) from foreign currency forward exchange contracts, disposition of foreign currencies, currency gains (losses) realized between the trade and settlement dates on securities transactions, and the difference between the amount of investment income and foreign withholding taxes recorded on the Fund's books and the U.S. dollar equivalent amounts actually received or paid. The change in unrealized currency gains (losses) on foreign currency transactions for the period is reflected in the Statement of Operations.
Foreign security and currency transactions may involve certain considerations and risks not typically associated with those of U.S. dollar denominated transactions as a result of, among other factors, fluctuations of exchange rates in relation to the U.S. dollar, the possibility of lower levels of governmental supervision and regulation of foreign securities markets and the possibility of political or economic instability.
Governmental approval for foreign investments may be required in advance of making an investment under certain circumstances in some countries, and the extent of foreign investments in U.S. companies may be subject to limitation in other countries. Foreign ownership limitations also may be imposed by the charters of individual companies to prevent, among other concerns, violations of foreign investment limitations. As a result, an additional class of shares (identified as "Foreign" in the Portfolio of Investments) may be created and offered for investment. The "local" and "foreign shares" market values may differ. In the absence of trading of the foreign shares in such markets, the Fund values the foreign shares at the closing exchange price of the local shares.
4. Derivatives: The Fund may, but is not required to, use derivative instruments for a variety of purposes, including hedging, risk management, portfolio management or 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. Derivatives
12
Morgan Stanley Variable Insurance Fund, Inc.
Semi-Annual Report – June 30, 2023 (unaudited)
Notes to Financial Statements (cont'd)
are financial instruments whose value is based, in part, on the value of an underlying asset, interest rate, index or financial instrument. Prevailing interest rates and volatility levels, among other things, also affect the value of derivative instruments. A derivative instrument often has risks similar to its underlying asset and may have additional risks, including imperfect correlation between the value of the derivative and the underlying asset, risks of default by the counterparty to certain transactions, magnification of losses incurred due to changes in the market value of the securities, instruments, indices or interest rates to which the derivative instrument relates, risks that the transactions may not be liquid, 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. All of the Fund's holdings, including derivative instruments, are marked-to-market each day with the change in value reflected in unrealized appreciation (depreciation). Upon disposition, a realized gain or loss is recognized.
Certain derivative transactions may give rise to a form of leverage. Leverage magnifies the potential for gain and 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 to satisfy its obligations 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 objectives, there is no assurance that the use of derivatives will achieve this result.
Following is a description of the derivative instruments and techniques that the Fund used during the period and their associated risks:
Futures: A futures contract is a standardized, exchange-traded agreement to buy or sell a specific quantity of an underlying asset, reference rate or index at a specific price at a specific future time. The value of a futures contract tends to increase and decrease in tandem with the value of the underlying instrument. Depending on the terms of the particular contract, futures contracts are settled through either physical delivery of the underlying instrument on the settlement date or by payment of a cash settlement amount on the settlement date. During the period the futures contract is open, payments are received from or made to the broker based upon changes in the
value of the contract (the variation margin). A decision as to whether, when and how to use futures contracts involves the exercise of skill and judgment and even a well-conceived futures transaction may be unsuccessful because of market behavior or unexpected events. In addition to the derivatives risks discussed above, the prices of futures contracts can be highly volatile, using futures contracts can lower total return and the potential loss from futures contracts can exceed the Fund's initial investment in such contracts. No assurance can be given that a liquid market will exist for any particular futures contract at any particular time.
FASB ASC 815, "Derivatives and Hedging" ("ASC 815"), is intended to improve financial reporting about derivative instruments by requiring enhanced disclosures to enable investors to better understand how and why the Fund uses derivative instruments, how these derivative instruments are accounted for and their effects on the Fund's financial position and results of operations.
The following table sets forth the fair value of the Fund's derivative contracts by primary risk exposure as of June 30, 2023:
Liability Derivatives Statement of Assets and Liabilities Location | Primary Risk Exposure | Value (000) | |||||||||||||
Futures Contract | Variation Margin on Futures Contract | Equity Risk | $ | (20 | )(a) |
(a) This amount represents the cumulative appreciation (depreciation) as reported in the Portfolio of Investments. The Statement of Assets and Liabilities only reflects the current day's net variation margin.
The following tables set forth by primary risk exposure the Fund's realized gains (losses) and change in unrealized appreciation (depreciation) by type of derivative contract for the six months ended June 30, 2023 in accordance with ASC 815:
Realized Gain (Loss) | |||||||||||
Primary Risk Exposure | Derivative Type | Value (000) | |||||||||
Equity Risk | Futures Contracts | $ | 229 | ||||||||
Change in Unrealized Appreciation (Depreciation) | |||||||||||
Primary Risk Exposure | Derivative Type | Value (000) | |||||||||
Equity Risk | Futures Contracts | $ | (30 | ) |
For the six months ended June 30, 2023, the approximate average monthly amount outstanding for each derivative type is as follows:
Futures Contracts: | |||||||
Average monthly notional value | $ | 5,129,000 |
13
Morgan Stanley Variable Insurance Fund, Inc.
Semi-Annual Report – June 30, 2023 (unaudited)
Notes to Financial Statements (cont'd)
5. Securities Lending: The Fund lends securities to qualified financial institutions, such as broker/dealers, to earn additional income. Any increase or decrease in the fair value of the securities loaned that might occur and any interest earned or dividends declared on those securities during the term of the loan would remain in the Fund. The Fund would receive cash or securities as collateral in an amount equal to or exceeding 100% of the current fair value of the loaned securities. The collateral is marked-to-market daily by State Street Bank and Trust Company ("State Street"), the securities lending agent, to ensure that a minimum of 100% collateral coverage is maintained.
Based on pre-established guidelines, the securities lending agent invests any cash collateral that is received in an affiliated money market portfolio and repurchase agreements. Securities lending income is generated from the earnings on the invested collateral and borrowing fees, less any rebates owed to the borrowers and compensation to the lending agent, and is recorded as "Income from Securities Loaned — Net" in the Fund's Statement of Operations. Risks in securities lending transactions are that a borrower may not provide additional collateral when required or return the securities when due, and that the value of the short-term investments will be less than the amount of cash collateral plus any rebate that is required to be returned to the borrower.
The Fund has the right under the securities lending agreement to recover the securities from the borrower on demand.
The following table presents financial instruments that are subject to enforceable netting arrangements as of June 30, 2023:
Gross Amounts Not Offset in the Statement of Assets and Liabilities | |||||||||||||||
Gross Asset Amount Presented in the Statement of Assets and Liabilities (000) | Financial Instrument (000) | Collateral Received (000) | Net Amount (not less than $0) (000) | ||||||||||||
$ | 2,206 | (a) | $ | — | $ | (2,206 | )(b)(c) | $ | 0 |
(a) Represents market value of loaned securities at period end.
(b) The Fund received cash collateral of approximately $28,000, which was subsequently invested in Morgan Stanley Institutional Liquidity Funds as reported in the Portfolio of Investments. In addition, the Fund received non-cash collateral of approximately $2,307,000 in the form of U.S. Government obligations, which the Fund cannot sell or repledge, and accordingly are not reflected in the Portfolio of Investments.
(c) The actual collateral received is greater than the amount shown here due to overcollateralization.
FASB ASC 860, "Transfers & Servicing: Repurchase-to-Maturity Transactions, Repurchase Financings, and Disclosures", is intended to provide increased transparency about the types of collateral pledged in securities lending transactions and other similar transactions that are accounted for as secured borrowings.
The following table displays a breakdown of transactions accounted for as secured borrowings, the gross obligations by class of collateral pledged and the remaining contractual maturity of those transactions as of June 30, 2023:
Remaining Contractual Maturity of the Agreements | |||||||||||||||||||||||
Overnight and Continuous (000) | <30 days (000) | Between 30 & 90 days (000) | >90 days (000) | Total (000) | |||||||||||||||||||
Securities Lending Transactions | |||||||||||||||||||||||
Common Stocks | $ | 28 | $ | — | $ | — | $ | — | $ | 28 | |||||||||||||
Total Borrowings | $ | 28 | $ | — | $ | — | $ | — | $ | 28 | |||||||||||||
Gross amount of recognized liabilities for securities lending transactions | $ | 28 |
6. Indemnifications: The Company enters into contracts that contain a variety of indemnifications. The Company's maximum exposure under these arrangements is unknown. However, the Company has not had prior claims or losses pursuant to these contracts and expects the risk of loss to be remote.
7. Security Transactions, Income and Expenses: Security transactions are accounted for on the trade date (date the order to buy or sell is executed). Realized gains and losses on the sale of investment securities are determined on the specific identified cost method. Dividend income and other distributions are recorded on the ex-dividend date (except for certain foreign dividends which may be recorded as soon as the Fund is informed of such dividends) net of applicable withholding taxes. Non-cash dividends received in the form of stock, if any, are recognized on the ex-dividend date and recorded as non-cash dividend income at fair value. Interest income is recognized on the accrual basis (except where collection is in doubt) net of applicable withholding taxes. Discounts are accreted and premiums are amortized over the life of the respective securities. Most expenses of the Company can be directly attributed to a particular Fund. Expenses which cannot be directly attributed are apportioned among the Funds based upon relative net assets or other appropriate methods. Income, expenses (other than class specific expenses) and realized and unrealized gains or
14
Morgan Stanley Variable Insurance Fund, Inc.
Semi-Annual Report – June 30, 2023 (unaudited)
Notes to Financial Statements (cont'd)
losses are allocated to each class of shares based upon their relative net assets.
Settlement and registration of foreign securities transactions may be subject to significant risks not normally associated with investments in the United States. In certain markets, ownership of shares is defined according to entries in the issuer's share register. It is possible that a Fund holding these securities could lose its share registration through fraud, negligence or even mere oversight. In addition, shares being delivered for sales and cash being paid for purchases may be delivered before the exchange is complete. This may subject the Fund to further risk of loss in the event of a failure to complete the transaction by the counterparty.
8. Dividends and Distributions to Shareholders: Dividends and distributions to shareholders are recorded on the ex-dividend date. Dividends from net investment income, if any, are declared and paid annually. Net realized capital gains, if any, are distributed at least annually.
B. Advisory/Sub-Advisory Fees: The Adviser, a wholly-owned subsidiary of Morgan Stanley, provides the Fund with advisory services under the terms of an Investment Advisory Agreement, paid quarterly, at the annual rate based on the daily net assets as follows:
First $500 million | Next $500 million | Next $1.5 billion | Over $2.5 billion | ||||||||||||
0.85 | % | 0.75 | % | 0.70 | % | 0.65 | % |
Effective April 28, 2023, the Adviser provides the Fund with advisory services under the terms of an Investment Advisory Agreement, paid quarterly, at the annual rate based on the daily net assets as follows:
First $1 | Next $1.5 | Over $2.5 | |||||||||
0.75% | 0.70% | 0.65% |
For the six months ended June 30, 2023, the advisory fee rate (net of waiver/rebate) was equivalent to an annual effective rate of 0.78% of the Fund's average daily net assets.
The Adviser has agreed to reduce its advisory fee and/or reimburse the Fund so that total annual Fund operating expenses, excluding certain investment related expenses, taxes, interest and other extraordinary expenses (including litigation), will not exceed 1.25% for Class I shares and 1.30% for Class II shares. The fee waivers and/or expense reimbursements will continue for at least one year from the date of the Fund's prospectus or until such time as the Directors act to discontinue all or a portion of such waivers and/or reimbursements when they deem such action is appropriate. For the six months ended June 30, 2023, approximately $29,000 of advisory fees were waived pursuant to this arrangement.
The Adviser has entered into a Sub-Advisory Agreement with the Sub-Adviser, a wholly-owned subsidiary of Morgan Stanley. The Sub-Adviser provides the Fund with advisory services subject to the overall supervision of the Adviser and the Fund'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 Fund.
C. Administration Fees: The Adviser also serves as Administrator to the Company and provides administrative services pursuant to an Administration Agreement for an annual fee, accrued daily and paid monthly, of 0.08% of the Fund's average daily net assets.
Under a Sub-Administration Agreement between the Administrator and State Street, State Street provides certain administrative services to the Company. For such services, the Administrator pays State Street a portion of the fee the Administrator receives from the Fund.
D. Servicing Fees: The Company accrues daily and pays quarterly a servicing fee of up to 0.17% of the average daily value of shares of the Fund held in an insurance company's account. Certain insurance companies have entered into a servicing agreement with the Company to provide administrative and other contract-owner related services on behalf of the Fund.
E. Distribution Fees: Morgan Stanley Distribution, Inc. ("MSDI" or the "Distributor"), a wholly-owned subsidiary of the Adviser and an indirect subsidiary of Morgan Stanley, serves as the Distributor of the Fund and provides the Fund's Class II shareholders with distribution services pursuant to a Distribution Plan (the "Plan") in accordance with Rule 12b-1 under the Act. Under the Plan, the Fund is authorized to pay the Distributor a distribution fee, which is accrued daily and paid monthly, at an annual rate of 0.25% of the Fund's average daily net assets attributable to Class II shares. The Distributor has agreed to waive 0.20% of the 0.25% distribution fee that it may receive. This fee waiver will continue for at least one year from the date of the Fund's prospectus or until such time as the Directors act to discontinue all or a portion of such waiver when they deem such action is appropriate. For the six months ended June 30, 2023, this waiver amounted to approximately $49,000.
F. Dividend Disbursing and Transfer/Co-Transfer Agent: The Company's dividend disbursing and transfer agent is SS&C Global Investor & Distribution Solutions, Inc. ("SS&C GIDS, Inc."). Pursuant to a Transfer Agency Agreement, the Company pays SS&C GIDS, Inc. a fee based on the number of classes, accounts and transactions relating to the Funds of the Company.
15
Morgan Stanley Variable Insurance Fund, Inc.
Semi-Annual Report – June 30, 2023 (unaudited)
Notes to Financial Statements (cont'd)
Eaton Vance Management ("EVM"), an affiliate of Morgan Stanley, provides co-transfer agency and related services to the Fund pursuant to a Co-Transfer Agency Services Agreement. For the six months ended June 30, 2023, co-transfer agency fees and expenses incurred to EVM, included in "Transfer Agency Fees" in the Statement of Operations, amounted to less than $500.
G. Custodian Fees: State Street (the "Custodian") also serves as Custodian for the Company in accordance with a Custodian Agreement. The Custodian holds cash, securities and other assets of the Company as required by the Act. Custody fees are payable monthly based on assets held in custody, investment purchases and sales activity and account maintenance fees, plus reimbursement for certain out-of-pocket expenses.
H. Security Transactions and Transactions with Affiliates: For the six months ended June 30, 2023, purchases and sales of investment securities for the Fund, other than long-term U.S. Government securities and short-term investments were approximately $34,540,000 and $36,879,000, respectively. There were no purchases and sales of long-term U.S. Government securities for the six months ended June 30, 2023.
The Fund invests in the Institutional Class of the Morgan Stanley Institutional Liquidity Funds — Government Portfolio (the "Liquidity Funds"), an open-end management investment company managed by the Adviser, both directly and as a portion of the securities held as collateral on loaned securities. Advisory fees paid by the Fund are reduced by an amount equal to its pro-rata share of the advisory and administration fees paid by the Fund due to its investment in the Liquidity Funds. For the six months ended June 30, 2023, advisory fees paid were reduced by approximately $3,000 relating to the Fund's investment in the Liquidity Funds.
A summary of the Fund's transactions in shares of affiliated investments during the six months ended June 30, 2023 is as follows:
Affiliated Investment Company | Value December 31, 2022 (000) | Purchases at Cost (000) | Proceeds from Sales (000) | Dividend Income (000) | |||||||||||||||
Liquidity Funds | $ | 3,271 | $ | 21,013 | $ | 22,291 | $ | 79 |
Affiliated Investment Company (cont'd) | Realized Gain (Loss) (000) | Change in Unrealized Appreciation (Depreciation) (000) | Value June 30, 2023 (000) | ||||||||||||
Liquidity Funds | $ | — | $ | — | $ | 1,993 |
The Fund is permitted to purchase and sell securities ("cross-trade") from and to other Morgan Stanley funds as well as
other funds and client accounts for which the Adviser or an affiliate of the Adviser serves as investment adviser, pursuant to procedures approved by the Directors in compliance with Rule 17a-7 under the Act (the "Rule"). Each cross-trade is executed at the current market price in compliance with provisions of the Rule. For the six months ended June 30, 2023, the Fund did not engage in any cross-trade transactions.
The Fund has an unfunded Deferred Compensation Plan (the "Compensation Plan"), which allows each independent Director to defer payment of all, or a portion, of the fees he or she receives for serving on the Board of Directors. Each eligible Director generally may elect to have the deferred amounts credited with a return equal to the total return on one or more of the Morgan Stanley funds that are offered as investment options under the Compensation Plan. Appreciation/depreciation and distributions received from these investments are recorded with an offsetting increase/decrease in the deferred compensation obligation and do not affect the NAV of the Fund.
I. Federal Income Taxes: It is the Fund's intention to continue to qualify as a regulated investment company and distribute all of its taxable and tax-exempt income. Accordingly, no provision for federal income taxes is required in the financial statements.
The Fund may be subject to taxes imposed by countries in which it invests. Such taxes are generally based on income and/or capital gains earned or repatriated. Taxes are accrued based on net investment income, net realized gains and net unrealized appreciation as such income and/or gains are earned. Taxes may also be based on transactions in foreign currency and are accrued based on the value of investments denominated in such currency.
FASB ASC 740-10, "Income Taxes — Overall", sets forth a minimum threshold for financial statement recognition of the benefit of a tax position taken or expected to be taken in a tax return. Management has concluded there are no significant uncertain tax positions that would require recognition in the financial statements. If applicable, the Fund recognizes interest accrued related to unrecognized tax benefits in "Interest Expense" and penalties in "Other Expenses" in the Statement of Operations. The Fund files tax returns with the U.S. Internal Revenue Service, New York and various states. Generally, each of the tax years in the four-year period ended December 31, 2022 remains subject to examination by taxing authorities.
The tax character of distributions paid may differ from the character of distributions shown for GAAP purposes due to short-term capital gains being treated as ordinary income for
16
Morgan Stanley Variable Insurance Fund, Inc.
Semi-Annual Report – June 30, 2023 (unaudited)
Notes to Financial Statements (cont'd)
tax purposes. The tax character of distributions paid during fiscal years 2022 and 2021 was as follows:
2022 Distributions Paid From: | 2021 Distributions Paid From: | ||||||||||||||
Ordinary Income (000) | Long-Term Capital Gain (000) | Ordinary Income (000) | Long-Term Capital Gain (000) | ||||||||||||
$ | 731 | $ | 18,524 | $ | 2,003 | $ | — |
The amount and character of income and gains to be distributed are determined in accordance with income tax regulations which may differ from GAAP. These book/tax differences are either considered temporary or permanent in nature.
Temporary differences are attributable to differing book and tax treatments for the timing of the recognition of gains (losses) on certain investment transactions and the timing of the deductibility of certain expenses.
The Fund had no permanent differences causing reclassifications among the components of net assets for the year ended December 31, 2022.
At December 31, 2022, the components of distributable earnings for the Fund on a tax basis were as follows:
Undistributed | Undistributed | ||||||
$2,595 | $2,837 |
J. Credit Facility: The Company and other Morgan Stanley funds participated in a $300,000,000 committed, unsecured revolving line of credit facility (the "Facility") with State Street. Effective April 17, 2023, the committed line amount increased to $500,000,000. This Facility is to be used for temporary emergency purposes or funding of shareholder redemption requests. The interest rate for any funds drawn will be based on the federal funds rate or overnight bank funding rate plus a spread. The Facility also has a commitment fee of 0.25% per annum based on the unused portion of the Facility, which is allocated among participating funds based on relative net assets. During the six months ended June 30, 2023, the Fund did not have any borrowings under the Facility.
K. Other: At June 30, 2023, the Fund had record owners of 10% or greater. Investment activities of these shareholders could have a material impact on the Fund. The aggregate percentage of such owners was 66.5%.
L. Market Risk: An investment in the Fund is based on the values of the Fund's investments, which may change due to economic and other events that affect markets generally, as well as those that affect particular regions, countries, industries, companies or governments. Social, political, economic and other conditions and events, such as war, natural disasters,
health emergencies (e.g., epidemics and pandemics), terrorism, conflicts, social unrest, recessions, inflation, rapid interest rate changes and supply chain disruptions, may occur and could significantly impact issuers, industries, governments and other systems, including the financial markets and global economy. It is difficult to predict when events affecting the U.S. or global financial markets and economies may occur, the effects that such events may have and the duration of those effects (which may last for extended periods). These events may be sudden and significant and may negatively impact broad segments of businesses and populations and have a significant and rapid negative impact on the performance of and/or income or yield from the Fund's investments and exacerbate pre-existing risks to the Fund. 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 ultimate impact of public health emergencies or other adverse economic or market developments and the extent to which the associated conditions impact the Fund and its investments will also depend on other future developments, which are highly uncertain, difficult to accurately predict and subject to change at any time. The financial performance of the Fund's investments (and, in turn, the Fund's investment results) as well as their liquidity may be adversely affected because of these and similar types of factors and developments.
17
Morgan Stanley Variable Insurance Fund, Inc.
Semi-Annual Report – June 30, 2023 (unaudited)
Investment Advisory Agreement Approval
Nature, Extent and Quality of Services
The Board reviewed and considered the nature and extent of the investment advisory services provided by the Adviser under the advisory agreement, including portfolio management, investment research and equity and fixed income securities trading. The Board reviewed similar information and factors regarding the Sub-Adviser, to the extent applicable. The Board also reviewed and considered the nature and extent of the non-advisory, administrative services provided by the Administrator under the administration agreement, including accounting, operations, clerical, bookkeeping, compliance, business management and planning, legal services and the provision of supplies, office space and utilities at the Adviser's expense. The Board also considered the Adviser's investment in personnel and infrastructure that benefits the Fund. (The Adviser, Sub-Adviser and Administrator together are referred to as the "Adviser" and the advisory, sub-advisory and administration agreements together are referred to as the "Management Agreement.") The Board also considered that the Adviser serves a variety of other investment advisory clients and has experience overseeing service providers. The Board also compared the nature of the services provided by the Adviser with similar services provided by non-affiliated advisers as prepared by Broadridge Financial Solutions, Inc. ("Broadridge").
The Board reviewed and considered the qualifications of the portfolio managers, the senior administrative managers and other key personnel of the Adviser who provide the advisory and administrative services to the Fund. The Board determined that the Adviser's portfolio managers and key personnel are well qualified by education and/or training and experience to perform the services in an efficient and professional manner. The Board concluded that the nature and extent of the advisory and administrative services provided were necessary and appropriate for the conduct of the business and investment activities of the Fund and supported its decision to approve the Management Agreement.
Performance, Fees and Expenses of the Fund
The Board reviewed the performance, fees and expenses of the Fund compared to its peers, as prepared by Broadridge, and to appropriate benchmarks where applicable. The Board discussed with the Adviser the performance goals and the actual results achieved in managing the Fund. When considering a fund's performance, the Board and the Adviser place emphasis on trends and longer-term returns (focusing on one-year, three-year and five-year performance, as of December 31, 2022, or since inception, as applicable). When a fund underperforms its benchmark and/or its peer group average, the Board and the Adviser discuss the causes of such underperformance and, where necessary, they discuss specific changes to investment strategy or investment personnel. The Board noted that the Fund's performance was below its peer group average for the one-, three- and five-year periods. The Board discussed with the Adviser the level of the advisory and administration fees (together, the "management fee") for this Fund relative to comparable funds and/or other accounts advised by the Adviser and/or compared to its peers as prepared by Broadridge. In addition to the management fee, the Board also reviewed the Fund's total expense ratio. The Board noted that the Fund's management fee and total expense ratio were lower than its peer group averages. After discussion, the Board concluded that the Fund's (i) performance was acceptable and (ii) management fee and total expense ratio were competitive with its peer group averages.
Economies of Scale
The Board considered the size and growth prospects of the Fund and how that relates to the Fund's total expense ratio and particularly the Fund's management fee rate, which includes breakpoints. In conjunction with its review of the Adviser's profitability, the Board discussed with the Adviser how a change in assets can affect the efficiency or effectiveness of managing the Fund and whether the management fee level is appropriate relative to current and projected asset levels and/or whether the management fee structure reflects economies of scale as asset levels change. The Board has determined that its review of the actual and/or potential economies of scale of the Fund supports its decision to approve the Management Agreement.
Profitability of the Adviser and Affiliates
The Board considered information concerning the costs incurred and profits realized by the Adviser and its affiliates during the last year from their relationship with the Fund and during the last two years from their relationship with the Morgan Stanley Fund Complex and reviewed with the Adviser the cost allocation methodology used to determine the profitability of the Adviser
18
Morgan Stanley Variable Insurance Fund, Inc.
Semi-Annual Report – June 30, 2023 (unaudited)
Investment Advisory Agreement Approval (cont'd)
and affiliates. The Board has determined that its review of the analysis of the Adviser's expenses and profitability supports its decision to approve the Management Agreement.
Other Benefits of the Relationship
The Board considered other direct and indirect benefits to the Adviser and/or its affiliates derived from their relationship with the Fund and other funds advised by the Adviser. These benefits may include, among other things, fees for trading, distribution and/or shareholder servicing and for transaction processing and reporting platforms used by securities lending agents, and research received by the Adviser generated from commission dollars spent on funds' portfolio trading. The Board reviewed with the Adviser these arrangements and the reasonableness of the Adviser's costs relative to the services performed. The Board has determined that its review of the other benefits received by the Adviser or its affiliates supports its decision to approve the Management Agreement.
Resources of the Adviser and Historical Relationship Between the Fund and the Adviser
The Board considered whether the Adviser is financially sound and has the resources necessary to perform its obligations under the Management Agreement. The Board also reviewed and considered the historical relationship between the Fund and the Adviser, including the organizational structure of the Adviser, the policies and procedures formulated and adopted by the Adviser for managing the Fund's operations and the Board's confidence in the competence and integrity of the senior managers and key personnel of the Adviser. The Board concluded that the Adviser has the financial resources necessary to fulfill its obligations under the Management Agreement and that it is beneficial for the Fund to continue its relationship with the Adviser.
Other Factors and Current Trends
The Board considered the controls and procedures adopted and implemented by the Adviser and monitored by the Fund's Chief Compliance Officer and concluded that the conduct of business by the Adviser indicates a good faith effort on its part to adhere to high ethical standards in the conduct of the Fund's business.
General Conclusion
After considering and weighing all of the above factors, with various written materials and verbal information presented by the Adviser, the Board concluded that it would be in the best interest of the Fund and its shareholders to approve renewal of the Management Agreement for another year. In reaching this conclusion the Board did not give particular weight to any single piece of information or factor referenced above. The Board considered these factors and information over the course of the year and in numerous meetings, some of which were in executive session with only the independent Board members and their counsel present. It is possible that individual Board members may have weighed these factors, and the information presented, differently in reaching their individual decisions to approve the Management Agreement.
19
Morgan Stanley Variable Insurance Fund, Inc.
Semi-Annual Report – June 30, 2023 (unaudited)
Liquidity Risk Management Program
In compliance with Rule 22e-4 under the Investment Company Act of 1940, as amended (the "Liquidity Rule"), the Fund has adopted and implemented a liquidity risk management program (the "Program"), which is reasonably designed to assess and manage the risk that the Fund could not meet requests to redeem shares issued by the Fund without significant dilution of remaining investors' interests in the Fund (i.e., liquidity risk). The Fund's Board of Directors (the "Board") previously approved the designation of the Liquidity Risk Subcommittee (the "LRS") as Program administrator. The LRS is comprised of representatives from various divisions within Morgan Stanley Investment Management.
At a meeting held on March 1-2, 2023, the Board reviewed a written report prepared by the LRS that addressed the Program's operation and assessed its adequacy, and effectiveness of implementation for the period from January 1, 2022, through December 31, 2022, as required under the Liquidity Rule. The report concluded that the Program operated effectively and was adequately and effectively implemented in all material aspects, and that the relevant controls and safeguards were appropriately designed to enable the LRS to administer the Program in compliance with the Liquidity Rule.
In accordance with the Program, the LRS assessed each Fund's liquidity risk no less frequently than annually taking into consideration certain factors, as applicable, such as (i) investment strategy and liquidity of portfolio investments, (ii) short-term and long-term cash flow projections and (iii) holdings of cash and cash equivalents and borrowing arrangements and other funding sources. Certain factors are considered under both normal and reasonably foreseeable stressed conditions.
Each Fund portfolio investment is classified into one of four liquidity categories, which classification is assessed at least monthly by the LRS. The classification is based on a determination of the number of days it is reasonably expected to take to convert the investment into cash, or sell or dispose of the investment, in current market conditions without significantly changing the market value of the investment. Liquidity classification determinations take into account various market, trading and investment-specific considerations, as well as market depth, and in some cases utilize third-party vendor data.
The Liquidity Rule limits a fund's investments in illiquid investments to 15% of its net assets and requires funds that do not primarily hold assets that are highly liquid investments to determine and maintain a minimum percentage of the fund's net assets to be invested in highly liquid investments (highly liquid investment minimum or "HLIM"). The LRS believes that the Program includes provisions reasonably designed to review, monitor and comply with the 15% limit on illiquid investments and for determining, periodically reviewing and complying with the HLIM requirement, as applicable.
There can be no assurance that the Program will achieve its objectives under all circumstances in the future. Please refer to the Fund's prospectus for more information regarding the Fund's exposure to liquidity risk and other risks to which it may be subject.
20
Morgan Stanley Variable Insurance Fund, Inc.
Semi-Annual Report – June 30, 2023 (unaudited)
Directors and Officers Information
Directors
Frank L. Bowman
Frances L. Cashman
Kathleen A. Dennis
Nancy C. Everett
Eddie A. Grier
Jakki L. Haussler
Dr. Manuel H. Johnson
Joseph J. Kearns
Michael F. Klein
Patricia A. Maleski
W. Allen Reed, Chair of the Board
Adviser and Administrator
Morgan Stanley Investment Management Inc.
522 Fifth Avenue
New York, New York 10036
Sub-Adviser
Morgan Stanley Investment Management Company
23 Church Street
16-01 Capital Square, Singapore 049481
Distributor
Morgan Stanley Distribution, Inc.
522 Fifth Avenue
New York, New York 10036
Dividend Disbursing and Transfer Agent
SS&C Global Investor & Distribution Solutions, Inc.
P.O. Box 219804
Kansas City, Missouri 64121-9804
Co-Transfer Agent
Eaton Vance Management
Two International Place
Boston, Massachusetts 02110
Officers
John H. Gernon
President and Principal Executive Officer
Deidre A. Downes
Chief Compliance Officer
Francis J. Smith
Treasurer and Principal Financial Officer
Mary E. Mullin
Secretary
Michael J. Key
Vice President
Custodian
State Street Bank and Trust Company
One Congress Street
Boston, Massachusetts 02114
Legal Counsel
Dechert LLP
1095 Avenue of the Americas
New York, New York 10036
Counsel to the Independent Directors
Perkins Coie LLP
1155 Avenue of the Americas,
22nd Floor
New York, New York 10036
Independent Registered Public Accounting Firm
Ernst & Young LLP
200 Clarendon Street
Boston, Massachusetts 02116
Reporting to Shareholders
Each Morgan Stanley fund provides a complete schedule of portfolio holdings in its Semi-Annual and the Annual Reports within 60 days of the end of the fund's second and fourth fiscal quarters. The Semi-Annual and Annual Reports are filed electronically with the Securities and Exchange Commission ("SEC") on Form N-CSRS and Form N-CSR, respectively. Morgan Stanley makes these reports available on its public website, www.morganstanley.com/im/shareholderreports. Each Morgan Stanley non-money market fund also files a complete schedule of portfolio holdings with the SEC for the fund's first and third fiscal quarters as an attachment to Form N-PORT. Morgan Stanley does not deliver the reports for the first and third fiscal quarters to shareholders, but makes the complete schedule of portfolio holdings for the fund's first and third fiscal quarters available on its public website. The holdings for each money market fund are also posted to the Morgan Stanley public website. You may obtain the Form N-PORT filings (as well as the Form N-CSR and N-CSRS filings) by accessing the SEC's website, www.sec.gov. You can also request copies of these materials, upon payment of a duplicating fee, by electronic request at the SEC's email address (publicinfo@sec.gov).
Proxy Voting Policies and Procedures and Proxy Voting Record
You may obtain a copy of the Company's Proxy Voting Policy and Procedures and information regarding how the Company voted proxies relating to portfolio securities during the most recent twelve-month period ended June 30, without charge, upon request, by calling toll free 1 (800) 869-6397 or by visiting our website at www.morganstanley.com/im/shareholderreports. This information is also available on the SEC's website at www.sec.gov.
This report is submitted for the general information of the shareholders of the Fund. For more detailed information about the Fund, its fees and expenses and other pertinent information, please read its Prospectus. The Company's Statement of Additional Information contains additional information about the Fund, including its Directors. It is available, without charge, by calling 1 (800) 869-6397.
Householding Notice
To reduce printing and mailing costs, the Fund attempts to eliminate duplicate mailings to the same address. The Fund delivers a single copy of certain shareholder documents, including shareholder reports, prospectuses and proxy materials, to investors with the same last name who reside at the same address. Your participation in this program will continue for an unlimited period of time unless you instruct us otherwise. You can request multiple copies of these documents by calling 1 (800) 869-6397, 8:00 a.m. to 6:00 p.m., ET. Once our Customer Service Center has received your instructions, we will begin sending individual copies for each account within 30 days.
This report is not authorized for distribution to prospective investors in the Fund unless preceded or accompanied by an effective Prospectus. Read the Prospectus carefully before investing.
UIFEMESAN
5833151 EXP 08.31.24
Morgan Stanley Variable Insurance Fund, Inc.
Semi-Annual Report – June 30, 2023
Global Franchise Portfolio
The Fund is intended to be a funding vehicle for variable annuity contracts and variable life insurance policies offered by the separate accounts of certain life insurance companies.
Morgan Stanley Variable Insurance Fund, Inc.
Semi-Annual Report – June 30, 2023 (unaudited)
Table of Contents
Expense Example | 2 | ||||||
Portfolio of Investments | 3 | ||||||
Statement of Assets and Liabilities | 4 | ||||||
Statement of Operations | 5 | ||||||
Statements of Changes in Net Assets | 6 | ||||||
Financial Highlights | 7 | ||||||
Notes to Financial Statements | 8 | ||||||
Investment Advisory Agreement Approval | 14 | ||||||
Liquidity Risk Management Program | 16 | ||||||
Director and Officer Information | Back Cover |
1
Morgan Stanley Variable Insurance Fund, Inc.
Semi-Annual Report – June 30, 2023 (unaudited)
Expense Example
Global Franchise Portfolio
As a shareholder of the Global Franchise Portfolio (the "Fund"), you incur two types of costs: (1) insurance company charges; and (2) ongoing costs, which include advisory fees, administration fees, distribution (12b-1) fees and other Fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.
This example is based on an investment of $1,000 invested at the beginning of the six-month period ended June 30, 2023 and held for the entire six-month period.
Actual Expenses
The table below provides information about actual account values and actual expenses. You may use the information in this table, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the table under the heading entitled "Actual Expenses Paid During Period" to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The table below provides information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any insurance company charges. Therefore, the table below is useful in comparing ongoing costs, but will not help you determine the relative total cost of owning different funds. In addition, if these insurance company charges were included, your costs would have been higher.
Beginning Account Value 1/1/23 | Actual Ending Account Value 6/30/23 | Hypothetical Ending Account Value | Actual Expenses Paid During Period* | Hypothetical Expenses Paid During Period* | Net Expense Ratio During Period** | ||||||||||||||||||||||
Global Franchise Portfolio Class II | $ | 1,000.00 | $ | 1,114.80 | $ | 1,018.84 | $ | 6.29 | $ | 6.01 | 1.20 | % |
* Expenses are calculated using the Fund Class' annualized net expense ratio (as disclosed), multiplied by the average account value over the period and multiplied by 181/365 (to reflect the most recent one-half year period).
** Annualized.
2
Morgan Stanley Variable Insurance Fund, Inc.
Semi-Annual Report – June 30, 2023 (unaudited)
Portfolio of Investments
Global Franchise Portfolio
Shares | Value (000) | ||||||||||
Common Stocks (98.6%) | |||||||||||
France (7.3%) | |||||||||||
L'Oreal SA | 1,290 | $ | 601 | ||||||||
LVMH Moet Hennessy Louis Vuitton SE | 700 | 660 | |||||||||
Pernod Ricard SA | 3,832 | 847 | |||||||||
2,108 | |||||||||||
Germany (6.0%) | |||||||||||
SAP SE | 12,674 | 1,731 | |||||||||
Italy (0.5%) | |||||||||||
Davide Campari-Milano NV | 10,685 | 148 | |||||||||
Netherlands (2.8%) | |||||||||||
Heineken NV | 7,960 | 819 | |||||||||
United Kingdom (10.5%) | |||||||||||
Experian PLC | 11,701 | 449 | |||||||||
Reckitt Benckiser Group PLC | 21,838 | 1,641 | |||||||||
RELX PLC (Euronext NV) | 5,994 | 200 | |||||||||
RELX PLC (LSE) | 23,048 | 769 | |||||||||
3,059 | |||||||||||
United States (71.5%) | |||||||||||
Abbott Laboratories | 9,333 | 1,017 | |||||||||
Accenture PLC, Class A | 5,343 | 1,649 | |||||||||
Aon PLC, Class A | 2,287 | 789 | |||||||||
Arthur J Gallagher & Co. | 2,474 | 543 | |||||||||
Automatic Data Processing, Inc. | 3,060 | 673 | |||||||||
Becton Dickinson & Co. | 4,026 | 1,063 | |||||||||
Broadridge Financial Solutions, Inc. | 2,495 | 413 | |||||||||
CDW Corp. | 2,741 | 503 | |||||||||
Coca-Cola Co. | 7,800 | 470 | |||||||||
Danaher Corp. | 5,720 | 1,373 | |||||||||
Equifax, Inc. | 2,601 | 612 | |||||||||
Intercontinental Exchange, Inc. | 10,105 | 1,143 | |||||||||
Jack Henry & Associates, Inc. | 920 | 154 | |||||||||
Microsoft Corp. | 6,511 | 2,217 | |||||||||
Moody's Corp. | 1,168 | 406 | |||||||||
NIKE, Inc., Class B | 2,252 | 249 | |||||||||
Otis Worldwide Corp. | 5,779 | 514 | |||||||||
Philip Morris International, Inc. | 19,632 | 1,916 | |||||||||
Procter & Gamble Co. | 5,126 | 778 | |||||||||
Roper Technologies, Inc. | 1,503 | 723 | |||||||||
Steris PLC | 1,826 | 411 | |||||||||
Thermo Fisher Scientific, Inc. | 2,462 | 1,285 | |||||||||
Visa, Inc., Class A | 6,631 | 1,575 | |||||||||
Zoetis, Inc. | 1,768 | 304 | |||||||||
20,780 | |||||||||||
Total Common Stocks (Cost $16,901) | 28,645 |
Shares | Value (000) | ||||||||||
Short-Term Investment (1.2%) | |||||||||||
Investment Company (1.2%) | |||||||||||
Morgan Stanley Institutional Liquidity Funds — Treasury Securities Portfolio — Institutional Class (See Note H) (Cost $359) | 358,774 | $ | 359 | ||||||||
Total Investments (99.8%) (Cost $17,260) (a)(b) | 29,004 | ||||||||||
Other Assets in Excess of Liabilities (0.2%) | 63 | ||||||||||
Net Assets (100.0%) | $ | 29,067 |
Country assignments and aggregations are based generally on third party vendor classifications and information, and may be different from the assignments and aggregations under the policies set forth in the Fund's prospectus and/or statement of additional information relating to geographic classifications.
(a) The approximate fair value and percentage of net assets, $7,865,000 and 27.1%, respectively, represent the securities that have been fair valued under the fair valuation policy for international investments as described in Note A-1 within the Notes to Financial Statements.
(b) At June 30, 2023, the aggregate cost for federal income tax purposes approximates the aggregate cost for book purposes. The aggregate gross unrealized appreciation is approximately $11,767,000 and the aggregate gross unrealized depreciation is approximately $23,000, resulting in net unrealized appreciation of approximately $11,744,000.
Euronext NV Euronext Amsterdam Stock Market.
LSE London Stock Exchange.
Portfolio Composition
Classification | Percentage of Total Investments | ||||||
Software | 16.1 | % | |||||
Other* | 15.6 | ||||||
Professional Services | 10.7 | ||||||
Life Sciences Tools & Services | 9.2 | ||||||
Health Care Equipment & Supplies | 8.6 | ||||||
Household Products | 8.3 | ||||||
Beverages | 7.9 | ||||||
Tobacco | 6.6 | ||||||
Financial Services | 6.0 | ||||||
Information Technology Services | 5.7 | ||||||
Capital Markets | 5.3 | ||||||
Total Investments | 100.0 | % |
* Industries and/or investment types representing less than 5% of total investments.
The accompanying notes are an integral part of the financial statements.
3
Morgan Stanley Variable Insurance Fund, Inc.
Semi-Annual Report – June 30, 2023 (unaudited)
Global Franchise Portfolio
Statement of Assets and Liabilities | June 30, 2023 (000) | ||||||
Assets: | |||||||
Investments in Securities of Unaffiliated Issuers, at Value (Cost $16,901) | $ | 28,645 | |||||
Investment in Security of Affiliated Issuer, at Value (Cost $359) | 359 | ||||||
Total Investments in Securities, at Value (Cost $17,260) | 29,004 | ||||||
Foreign Currency, at Value (Cost $107) | 107 | ||||||
Receivable for Investments Sold | 133 | ||||||
Dividends Receivable | 42 | ||||||
Tax Reclaim Receivable | 15 | ||||||
Receivable from Affiliate | 2 | ||||||
Receivable for Fund Shares Sold | — | @ | |||||
Other Assets | 9 | ||||||
Total Assets | 29,312 | ||||||
Liabilities: | |||||||
Payable for Investments Purchased | 116 | ||||||
Payable for Fund Shares Redeemed | 41 | ||||||
Payable for Professional Fees | 28 | ||||||
Payable for Advisory Fees | 24 | ||||||
Payable for Servicing Fees | 12 | ||||||
Payable for Distribution Fees — Class II Shares | 6 | ||||||
Payable for Custodian Fees | 3 | ||||||
Payable for Administration Fees | 2 | ||||||
Payable for Transfer Agency Fees | — | @ | |||||
Other Liabilities | 13 | ||||||
Total Liabilities | 245 | ||||||
NET ASSETS | $ | 29,067 | |||||
Net Assets Consist of: | |||||||
Paid-in-Capital | $ | 14,510 | |||||
Total Distributable Earnings | 14,557 | ||||||
Net Assets | $ | 29,067 | |||||
CLASS II: | |||||||
Net Asset Value, Offering and Redemption Price Per Share Applicable to 2,601,566 Outstanding $0.001 Par Value Shares (Authorized 500,000,000 Shares) | $ | 11.17 |
@ Amount is less than $500.
The accompanying notes are an integral part of the financial statements.
4
Morgan Stanley Variable Insurance Fund, Inc.
Semi-Annual Report – June 30, 2023 (unaudited)
Global Franchise Portfolio
Statement of Operations | Six Months Ended June 30, 2023 (000) | ||||||
Investment Income: | |||||||
Dividends from Securities of Unaffiliated Issuers (Net of $8 of Foreign Taxes Withheld) | $ | 260 | |||||
Dividends from Security of Affiliated Issuer (Note H) | 10 | ||||||
Total Investment Income | 270 | ||||||
Expenses: | |||||||
Advisory Fees (Note B) | 112 | ||||||
Professional Fees | 45 | ||||||
Distribution Fees — Class II Shares (Note E) | 35 | ||||||
Servicing Fees (Note D) | 20 | ||||||
Administration Fees (Note C) | 11 | ||||||
Custodian Fees (Note G) | 9 | ||||||
Shareholder Reporting Fees | 7 | ||||||
Directors' Fees and Expenses | 2 | ||||||
Transfer Agency Fees (Note F) | 2 | ||||||
Pricing Fees | 1 | ||||||
Other Expenses | 7 | ||||||
Total Expenses | 251 | ||||||
Waiver of Advisory Fees (Note B) | (82 | ) | |||||
Rebate from Morgan Stanley Affiliate (Note H) | (— | @) | |||||
Net Expenses | 169 | ||||||
Net Investment Income | 101 | ||||||
Realized Gain: | |||||||
Investments Sold | 1,230 | ||||||
Foreign Currency Translation | 1 | ||||||
Net Realized Gain | 1,231 | ||||||
Change in Unrealized Appreciation (Depreciation): | |||||||
Investments | 1,753 | ||||||
Foreign Currency Translation | — | @ | |||||
Net Change in Unrealized Appreciation (Depreciation) | 1,753 | ||||||
Net Realized Gain and Change in Unrealized Appreciation (Depreciation) | 2,984 | ||||||
Net Increase in Net Assets Resulting from Operations | $ | 3,085 |
@ Amount is less than $500.
The accompanying notes are an integral part of the financial statements.
5
Morgan Stanley Variable Insurance Fund, Inc.
Semi-Annual Report – June 30, 2023
Global Franchise Portfolio
Statements of Changes in Net Assets | Six Months Ended June 30, 2023 (unaudited) (000) | Year Ended December 31, 2022 (000) | |||||||||
Increase (Decrease) in Net Assets: | |||||||||||
Operations: | |||||||||||
Net Investment Income | $ | 101 | $ | 159 | |||||||
Net Realized Gain | 1,231 | 1,599 | |||||||||
Net Change in Unrealized Appreciation (Depreciation) | 1,753 | (8,341 | ) | ||||||||
Net Increase (Decrease) in Net Assets Resulting from Operations | 3,085 | (6,583 | ) | ||||||||
Dividends and Distributions to Shareholders: | |||||||||||
Class II | — | (3,248 | ) | ||||||||
Capital Share Transactions:(1) | |||||||||||
Class II: | |||||||||||
Subscribed | 703 | 1,495 | |||||||||
Distributions Reinvested | — | 3,248 | |||||||||
Redeemed | (2,334 | ) | (5,433 | ) | |||||||
Net Decrease in Net Assets Resulting from Capital Share Transactions | (1,631 | ) | (690 | ) | |||||||
Total Increase (Decrease) in Net Assets | 1,454 | (10,521 | ) | ||||||||
Net Assets: | |||||||||||
Beginning of Period | 27,613 | 38,134 | |||||||||
End of Period | $ | 29,067 | $ | 27,613 | |||||||
(1) Capital Share Transactions: | |||||||||||
Class II: | |||||||||||
Shares Subscribed | 67 | 139 | |||||||||
Shares Issued on Distributions Reinvested | — | 325 | |||||||||
Shares Redeemed | (222 | ) | (499 | ) | |||||||
Net Decrease in Class II Shares Outstanding | (155 | ) | (35 | ) |
The accompanying notes are an integral part of the financial statements.
6
Morgan Stanley Variable Insurance Fund, Inc.
Semi-Annual Report – June 30, 2023
Financial Highlights
Global Franchise Portfolio
Class II | |||||||||||||||||||||||||||
Six Months Ended June 30, 2023 | Year Ended December 31, | ||||||||||||||||||||||||||
Selected Per Share Data and Ratios | (unaudited) | 2022 | 2021 | 2020 | 2019 | 2018 | |||||||||||||||||||||
Net Asset Value, Beginning of Period | $ | 10.02 | $ | 13.66 | $ | 12.56 | $ | 12.47 | $ | 11.18 | $ | 13.73 | |||||||||||||||
Income (Loss) from Investment Operations: | |||||||||||||||||||||||||||
Net Investment Income(1) | 0.04 | 0.06 | 0.07 | 0.09 | 0.10 | 0.11 | |||||||||||||||||||||
Net Realized and Unrealized Gain (Loss) | 1.11 | (2.46 | ) | 2.52 | 1.41 | 3.09 | (0.22 | ) | |||||||||||||||||||
Total from Investment Operations | 1.15 | (2.40 | ) | 2.59 | 1.50 | 3.19 | (0.11 | ) | |||||||||||||||||||
Distributions from and/or in Excess of: | |||||||||||||||||||||||||||
Net Investment Income | — | (0.07 | ) | (0.09 | ) | (0.11 | ) | (0.12 | ) | (0.15 | ) | ||||||||||||||||
Net Realized Gain | — | (1.17 | ) | (1.40 | ) | (1.30 | ) | (1.78 | ) | (2.29 | ) | ||||||||||||||||
Total Distributions | — | (1.24 | ) | (1.49 | ) | (1.41 | ) | (1.90 | ) | (2.44 | ) | ||||||||||||||||
Net Asset Value, End of Period | $ | 11.17 | $ | 10.02 | $ | 13.66 | $ | 12.56 | $ | 12.47 | $ | 11.18 | |||||||||||||||
Total Return(2) | 11.48 | %(3) | (17.57 | )% | 21.67 | % | 13.21 | % | 29.53 | % | (1.77 | )% | |||||||||||||||
Ratios to Average Net Assets and Supplemental Data: | |||||||||||||||||||||||||||
Net Assets, End of Period (Thousands) | $ | 29,067 | $ | 27,613 | $ | 38,134 | $ | 34,188 | $ | 35,293 | $ | 32,322 | |||||||||||||||
Ratio of Expenses Before Expense Limitation | 1.79 | %(4) | 1.87 | % | 1.80 | % | 1.80 | % | 1.69 | % | 1.77 | % | |||||||||||||||
Ratio of Expenses After Expense Limitation | 1.20 | %(4)(5) | 1.20 | %(5) | 1.20 | %(5) | 1.20 | %(5) | 1.20 | %(5) | 1.20 | %(5) | |||||||||||||||
Ratio of Net Investment Income | 0.72 | %(4)(5) | 0.51 | %(5) | 0.52 | %(5) | 0.74 | %(5) | 0.82 | %(5) | 0.88 | %(5) | |||||||||||||||
Ratio of Rebate from Morgan Stanley Affiliates | 0.00 | %(4)(6) | 0.00 | %(6) | 0.00 | %(6) | 0.00 | %(6) | 0.00 | %(6) | 0.00 | %(6) | |||||||||||||||
Portfolio Turnover Rate | 12 | %(3) | 14 | % | 14 | % | 17 | % | 14 | % | 27 | % |
(1) Per share amount is based on average shares outstanding.
(2) Calculated based on the net asset value as of the last business day of the period. Performance does not reflect fees and expenses imposed by your insurance company's separate account. If performance information included the effect of these additional charges, the total return would be lower.
(3) Not annualized.
(4) Annualized.
(5) 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."
(6) Amount is less than 0.005%.
The accompanying notes are an integral part of the financial statements.
7
Morgan Stanley Variable Insurance Fund, Inc.
Semi-Annual Report – June 30, 2023 (unaudited)
Notes to Financial Statements
Morgan Stanley Variable Insurance Fund, Inc. (the "Company") is registered under the Investment Company Act of 1940, as amended (the "Act"), as an open-end management investment company. The Company is comprised of ten separate active, diversified and non-diversified funds (individually referred to as a "Fund," collectively as the "Funds"). The Company applies investment company accounting and reporting guidance Accounting Standards Codification ("ASC") Topic 946.
The accompanying financial statements relate to the Global Franchise Portfolio. The Company seeks long-term capital appreciation. The Fund currently offers Class II shares only, although Class I shares may be offered in the future.
The Company is intended to be a funding vehicle for variable annuity contracts and variable life insurance policies offered by the separate accounts of certain life insurance companies.
A. Significant Accounting Policies: The following significant accounting policies are in conformity with U.S. generally accepted accounting principles ("GAAP"). Such policies are consistently followed by the Company in the preparation of its financial statements. GAAP may require management to make estimates and assumptions that affect the reported amounts and disclosures in the financial statements. Actual results may differ from those estimates.
1. Security Valuation: (1) An equity portfolio security listed or traded on an exchange is valued at its latest reported sales price (or at the exchange official closing price if such exchange reports an official closing price), and if there were no sales on a given day and if there is no official exchange closing price for that day, the security is valued at the mean between the last reported bid and asked prices if such bid and asked prices are available on the relevant exchanges. If only bid prices are available then the latest bid price may be used. Listed equity securities not traded on the valuation date with no reported bid and asked prices available on the exchange are valued at the mean between the current bid and asked prices obtained from one or more reputable brokers/dealers. In cases where a security is traded on more than one exchange, the security is valued on the exchange designated as the primary market; (2) all other equity portfolio securities for which over-the-counter ("OTC") market quotations are readily available are valued at the latest reported sales price (or at the market official closing price if such market reports an official closing price), and if there was no trading in the security on a given day and if there is no official closing price from relevant markets for that day, the security is valued at the mean between the last reported bid and asked prices if such bid and asked prices
are available on the relevant markets. An unlisted equity security that does not trade on the valuation date and for which bid and asked prices from the relevant markets are unavailable is valued at the mean between the current bid and asked prices obtained from one or more reputable brokers/dealers; (3) fixed income securities may be valued by an outside pricing service/vendor approved by the Company's Board of Directors (the "Directors"). The pricing service/vendor may employ a pricing model that takes into account, among other things, bids, yield spreads and/or other market data and specific security characteristics. If Morgan Stanley Investment Management Inc. (the "Adviser") or Morgan Stanley Investment Management Limited ("MSIM Limited") (the "Sub-Adviser"), each a wholly-owned subsidiary of Morgan Stanley, determines that the price provided by the outside pricing service/vendor does not reflect the security's fair value or is unable to provide a price, prices from brokers/dealers may also be utilized. In these circumstances, the value of the security will be the mean of bid and asked prices obtained from brokers/dealers; (4) when market quotations are not readily available, as defined by Rule 2a-5 under the Act, including circumstances under which the Adviser or the Sub-Adviser determines that the closing price, last sale price or the mean between the last reported bid and asked prices are not reflective of a security's market value, portfolio securities are valued at their fair value as determined in good faith under procedures approved by and under the general supervision of the Directors. Occasionally, developments affecting the closing prices of securities and other assets may occur between the times at which valuations of such securities are determined (that is, close of the foreign market on which the securities trade) and the close of business of the New York Stock Exchange ("NYSE"). If developments occur during such periods that are expected to materially affect the value of such securities, such valuations may be adjusted to reflect the estimated fair value of such securities as of the close of the NYSE, as determined in good faith by the Directors or by the Adviser using a pricing service and/or procedures approved by the Directors; (5) foreign exchange transactions ("spot contracts") and foreign exchange forward contracts ("forward contracts") are valued daily using an independent pricing vendor at the spot and forward rates, respectively, as of the close of the NYSE; and (6) investments in mutual funds, including the Morgan Stanley Institutional Liquidity Funds, are valued at the net asset value ("NAV") as of the close of each business day.
8
Morgan Stanley Variable Insurance Fund, Inc.
Semi-Annual Report – June 30, 2023 (unaudited)
Notes to Financial Statements (cont'd)
In connection with Rule 2a-5 of the Act, the Directors have designated the Company's Adviser as its valuation designee. The valuation designee has responsibility for determining fair value and to make the actual calculations pursuant to the fair valuation methodologies previously approved by the Directors. Under procedures approved by the Directors, the Company's Adviser, as valuation designee, has formed a Valuation Committee whose members are approved by the Directors. The Valuation Committee provides administration and oversight of the Company's valuation policies and procedures, which are reviewed at least annually by the Directors. These procedures allow the Company to utilize independent pricing services, quotations from securities and financial instrument dealers and other market sources to determine fair value.
2. Fair Value Measurement: Financial Accounting Standards Board ("FASB") ASC 820, "Fair Value Measurement" ("ASC 820"), defines fair value as the price that would be received to sell an asset or pay to transfer a liability in an orderly transaction between market participants at the measurement date. ASC 820 establishes a three-tier hierarchy to distinguish between (1) inputs that reflect the assumptions market participants would use in valuing an asset or liability developed based on market data obtained from sources independent of the reporting entity (observable inputs) and (2) inputs that reflect the reporting entity's own assumptions about the assumptions market participants would use in valuing an asset or liability developed based on the best information available in the circumstances (unobservable inputs) and to establish classification of fair value measurements for disclosure purposes. Various inputs are used in determining the value of the Fund's investments. The inputs are summarized in the three broad levels listed below:
• Level 1 – unadjusted quoted prices in active markets for identical investments
• Level 2 – other significant observable inputs (including quoted prices for similar investments, interest rates, prepayment speeds, credit risk, etc.)
• Level 3 – significant unobservable inputs including the Fund's own assumptions in determining the fair value of investments. Factors considered in making this determination may include, but are not limited to, information obtained by contacting the issuer, analysts, or the appropriate stock exchange (for exchange-traded securities), analysis of the issuer's financial statements or other available documents and,
if necessary, available information concerning other securities in similar circumstances.
The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities and the determination of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to each security.
The following is a summary of the inputs used to value the Fund's investments as of June 30, 2023:
Investment Type | Level 1 Unadjusted quoted prices (000) | Level 2 Other significant observable inputs (000) | Level 3 Significant unobservable inputs (000) | Total (000) | |||||||||||||||
Assets: | |||||||||||||||||||
Common Stocks | |||||||||||||||||||
Beverages | $ | 470 | $ | 1,813 | $ | — | $ | 2,283 | |||||||||||
Capital Markets | 1,549 | — | — | 1,549 | |||||||||||||||
Electronic Equipment, Instruments & Components | 503 | — | — | 503 | |||||||||||||||
Financial Services | 1,729 | — | — | 1,729 | |||||||||||||||
Health Care Equipment & Supplies | 2,491 | — | — | 2,491 | |||||||||||||||
Household Products | 778 | 1,641 | — | 2,419 | |||||||||||||||
Information Technology Services | 1,649 | — | — | 1,649 | |||||||||||||||
Insurance | 1,333 | — | — | 1,333 | |||||||||||||||
Life Sciences Tools & Services | 2,657 | — | — | 2,657 | |||||||||||||||
Machinery | 514 | — | — | 514 | |||||||||||||||
Personal Care Products | — | 602 | — | 602 | |||||||||||||||
Pharmaceuticals | 304 | — | — | 304 | |||||||||||||||
Professional Services | 1,698 | 1,418 | — | 3,116 | |||||||||||||||
Software | 2,940 | 1,731 | — | 4,671 | |||||||||||||||
Textiles, Apparel & Luxury Goods | 249 | 660 | — | 909 | |||||||||||||||
Tobacco | 1,916 | — | — | 1,916 | |||||||||||||||
Total Common Stocks | 20,780 | 7,865 | — | 28,645 | |||||||||||||||
Short-Term Investment | |||||||||||||||||||
Investment Company | 359 | — | — | 359 | |||||||||||||||
Total Assets | $ | 21,139 | $ | 7,865 | $ | — | $ | 29,004 |
Transfers between investment levels may occur as the markets fluctuate and/or the availability of data used in an investment's valuation changes.
3. Foreign Currency Translation and Foreign Investments: The books and records of the Fund are maintained in U.S. dollars. Foreign currency amounts are translated into U.S. dollars as follows:
— investments, other assets and liabilities at the prevailing rate of exchange on the valuation date;
9
Morgan Stanley Variable Insurance Fund, Inc.
Semi-Annual Report – June 30, 2023 (unaudited)
Notes to Financial Statements (cont'd)
— investment transactions and investment income at the prevailing rates of exchange on the dates of such transactions.
Although the net assets of the Fund are presented at the foreign exchange rates and market values at the close of the period, the Fund does not isolate that portion of the results of operations arising as a result of changes in the foreign exchange rates from the fluctuations arising from changes in the market prices of securities held at period end. Similarly, the Fund does not isolate the effect of changes in foreign exchange rates from the fluctuations arising from changes in the market prices of securities sold during the period. Accordingly, realized and unrealized foreign currency gains (losses) on investments in securities are included in the reported net realized and unrealized gains (losses) on investment transactions and balances. However, pursuant to U.S. federal income tax regulations, gains and losses from certain foreign currency transactions and the foreign currency portion of gains and losses realized on sales and maturities of foreign denominated debt securities are treated as ordinary income for U.S. federal income tax purposes.
Net realized gains (losses) on foreign currency transactions represent net foreign exchange gains (losses) from foreign currency forward exchange contracts, disposition of foreign currencies, currency gains (losses) realized between the trade and settlement dates on securities transactions, and the difference between the amount of investment income and foreign withholding taxes recorded on the Fund's books and the U.S. dollar equivalent amounts actually received or paid. The change in unrealized currency gains (losses) on foreign currency transactions for the period is reflected in the Statement of Operations.
Foreign security and currency transactions may involve certain considerations and risks not typically associated with those of U.S. dollar denominated transactions as a result of, among other factors, fluctuations of exchange rates in relation to the U.S. dollar, the possibility of lower levels of governmental supervision and regulation of foreign securities markets and the possibility of political or economic instability.
Governmental approval for foreign investments may be required in advance of making an investment under certain circumstances in some countries, and the extent of foreign investments in U.S. companies may be subject to limitation in other countries. Foreign ownership limitations also may be imposed by the charters of individual companies to prevent, among other concerns, violations
of foreign investment limitations. As a result, an additional class of shares (identified as "Foreign" in the Portfolio of Investments) may be created and offered for investment. The "local" and "foreign shares" market values may differ. In the absence of trading of the foreign shares in such markets, the Fund values the foreign shares at the closing exchange price of the local shares.
4. Indemnifications: The Company enters into contracts that contain a variety of indemnifications. The Company's maximum exposure under these arrangements is unknown. However, the Company has not had prior claims or losses pursuant to these contracts and expects the risk of loss to be remote.
5. Security Transactions, Income and Expenses: Security transactions are accounted for on the trade date (date the order to buy or sell is executed). Realized gains and losses on the sale of investment securities are determined on the specific identified cost method. Dividend income and other distributions are recorded on the ex-dividend date (except for certain foreign dividends which may be recorded as soon as the Fund is informed of such dividends) net of applicable withholding taxes. Non-cash dividends received in the form of stock, if any, are recognized on the ex-dividend date and recorded as non-cash dividend income at fair value. Interest income is recognized on the accrual basis (except where collection is in doubt) net of applicable withholding taxes. Discounts are accreted and premiums are amortized over the life of the respective securities. Most expenses of the Company can be directly attributed to a particular Fund. Expenses which cannot be directly attributed are apportioned among the Funds based upon relative net assets or other appropriate methods. Income, expenses (other than class specific expenses) and realized and unrealized gains or losses are allocated to each class of shares based upon their relative net assets.
Settlement and registration of foreign securities transactions may be subject to significant risks not normally associated with investments in the United States. In certain markets, ownership of shares is defined according to entries in the issuer's share register. It is possible that a Fund holding these securities could lose its share registration through fraud, negligence or even mere oversight. In addition, shares being delivered for sales and cash being paid for purchases may be delivered before the exchange is complete. This may subject the Fund to further risk of loss in the event of a failure to complete the transaction by the counterparty.
10
Morgan Stanley Variable Insurance Fund, Inc.
Semi-Annual Report – June 30, 2023 (unaudited)
Notes to Financial Statements (cont'd)
6. Dividends and Distributions to Shareholders: Dividends and distributions to shareholders are recorded on the ex-dividend date. Dividends from net investment income, if any, are declared and paid annually. Net realized capital gains, if any, are distributed at least annually.
B. Advisory/Sub-Advisory Fees: The Adviser, a wholly-owned subsidiary of Morgan Stanley, provides the Fund with advisory services under the terms of an Investment Advisory Agreement, paid quarterly, at the annual rate based on the daily net assets as follows:
First $500 | Next $500 | Over $1 | |||||||||
0.80% | 0.75% | 0.70% |
For the six months ended June 30, 2023, the advisory fee rate (net of waiver/rebate) was equivalent to an annual effective rate of 0.21% of the Fund's average daily net assets.
The Adviser has agreed to reduce its advisory fee and/or reimburse the Fund so that total annual Fund operating expenses, excluding certain investment related expenses, taxes, interest and other extraordinary expenses (including litigation), will not exceed 1.20% for Class II shares. The fee waivers and/or expense reimbursements will continue for at least one year from the date of the Fund's prospectus or until such time as the Directors act to discontinue all or a portion of such waivers and/or reimbursements when they deem such action is appropriate. For the six months ended June 30, 2023, approximately $82,000 of advisory fees were waived pursuant to this arrangement.
The Adviser has entered into a Sub-Advisory Agreement with the Sub-Adviser, a wholly-owned subsidiary of Morgan Stanley. The Sub-Adviser provides the Fund with advisory services subject to the overall supervision of the Adviser and the Fund'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 Fund.
C. Administration Fees: The Adviser also serves as Administrator to the Company and provides administrative services pursuant to an Administration Agreement for an annual fee, accrued daily and paid monthly, of 0.08% of the Fund's average daily net assets.
Under a Sub-Administration Agreement between the Administrator and State Street Bank and Trust Company ("State Street"), State Street provides certain administrative services to the Company. For such services, the Administrator pays State Street a portion of the fee the Administrator receives from the Fund.
D. Servicing Fees: The Company accrues daily and pays quarterly a servicing fee of up to 0.17% of the average daily value of shares of the Fund held in an insurance company's account. Certain insurance companies have entered into a servicing agreement with the Company to provide administrative and other contract-owner related services on behalf of the Fund.
E. Distribution Fees: Morgan Stanley Distribution, Inc. ("MSDI" or the "Distributor"), a wholly-owned subsidiary of the Adviser and an indirect subsidiary of Morgan Stanley, serves as the Distributor of the Fund and provides the Fund's Class II shareholders with distribution services pursuant to a Distribution Plan (the "Plan") in accordance with Rule 12b-1 under the Act. Under the Plan, the Fund is authorized to pay the Distributor a distribution fee, which is accrued daily and paid monthly, at an annual rate of 0.25% of the Fund's average daily net assets attributable to Class II shares.
F. Dividend Disbursing and Transfer/Co-Transfer Agent: The Company's dividend disbursing and transfer agent is SS&C Global Investor & Distribution Solutions, Inc. ("SS&C GIDS, Inc."). Pursuant to a Transfer Agency Agreement, the Company pays SS&C GIDS, Inc. a fee based on the number of classes, accounts and transactions relating to the Funds of the Company.
Eaton Vance Management ("EVM"), an affiliate of Morgan Stanley, provides co-transfer agency and related services to the Fund pursuant to a Co-Transfer Agency Services Agreement. For the six months ended June 30, 2023, co-transfer agency fees and expenses incurred to EVM, included in "Transfer Agency Fees" in the Statement of Operations, amounted to less than $500.
G. Custodian Fees: State Street (the "Custodian") also serves as Custodian for the Company in accordance with a Custodian Agreement. The Custodian holds cash, securities and other assets of the Company as required by the Act. Custody fees are payable monthly based on assets held in custody, investment purchases and sales activity and account maintenance fees, plus reimbursement for certain out-of-pocket expenses.
H. Security Transactions and Transactions with Affiliates: For the six months ended June 30, 2023, purchases and sales of investment securities for the Fund, other than long-term U.S. Government securities and short-term investments were approximately $3,224,000 and $4,731,000, respectively. There were no purchases and sales of long-term U.S. Government securities for the six months ended June 30, 2023.
11
Morgan Stanley Variable Insurance Fund, Inc.
Semi-Annual Report – June 30, 2023 (unaudited)
Notes to Financial Statements (cont'd)
The Fund invests in the Institutional Class of the Morgan Stanley Institutional Liquidity Funds — Treasury Securities Portfolio (the "Liquidity Funds"), an open-end management investment company managed by the Adviser. Advisory fees paid by the Fund are reduced by an amount equal to its pro-rata share of the advisory and administration fees paid by the Fund due to its investment in the Liquidity Funds. For the six months ended June 30, 2023, advisory fees paid were reduced by less than $500 relating to the Fund's investment in the Liquidity Funds.
A summary of the Fund's transactions in shares of affiliated investments during the six months ended June 30, 2023 is as follows:
Affiliated Investment Company | Value December 31, 2022 (000) | Purchases at Cost (000) | Proceeds from Sales (000) | Dividend Income (000) | |||||||||||||||
Liquidity Funds | $ | 380 | $ | 2,875 | $ | 2,896 | $ | 10 |
Affiliated Investment Company (cont'd) | Realized Gain (Loss) (000) | Change in Unrealized Appreciation (Depreciation) (000) | Value June 30, 2023 (000) | ||||||||||||
Liquidity Funds | $ | — | $ | — | $ | 359 |
The Fund is permitted to purchase and sell securities ("cross-trade") from and to other Morgan Stanley funds as well as other funds and client accounts for which the Adviser or an affiliate of the Adviser serves as investment adviser, pursuant to procedures approved by the Directors in compliance with Rule 17a-7 under the Act (the "Rule"). Each cross-trade is executed at the current market price in compliance with provisions of the Rule. For the six months ended June 30, 2023, the Fund did not engage in any cross-trade transactions.
The Fund has an unfunded Deferred Compensation Plan (the "Compensation Plan"), which allows each independent Director to defer payment of all, or a portion, of the fees he or she receives for serving on the Board of Directors. Each eligible Director generally may elect to have the deferred amounts credited with a return equal to the total return on one or more of the Morgan Stanley funds that are offered as investment options under the Compensation Plan. Appreciation/depreciation and distributions received from these investments are recorded with an offsetting increase/decrease in the deferred compensation obligation and do not affect the NAV of the Fund.
I. Federal Income Taxes: It is the Fund's intention to continue to qualify as a regulated investment company and
distribute all of its taxable and tax-exempt income. Accordingly, no provision for federal income taxes is required in the financial statements.
The Fund may be subject to taxes imposed by countries in which it invests. Such taxes are generally based on income and/or capital gains earned or repatriated. Taxes are accrued based on net investment income, net realized gains and net unrealized appreciation as such income and/or gains are earned. Taxes may also be based on transactions in foreign currency and are accrued based on the value of investments denominated in such currency.
FASB ASC 740-10, "Income Taxes — Overall", sets forth a minimum threshold for financial statement recognition of the benefit of a tax position taken or expected to be taken in a tax return. Management has concluded there are no significant uncertain tax positions that would require recognition in the financial statements. If applicable, the Fund recognizes interest accrued related to unrecognized tax benefits in "Interest Expense" and penalties in "Other Expenses" in the Statement of Operations. The Fund files tax returns with the U.S. Internal Revenue Service, New York and various states. Generally, each of the tax years in the four-year period ended December 31, 2022 remains subject to examination by taxing authorities.
The tax character of distributions paid may differ from the character of distributions shown for GAAP purposes due to short-term capital gains being treated as ordinary income for tax purposes. The tax character of distributions paid during fiscal years 2022 and 2021 was as follows:
2022 Distributions Paid From: | 2021 Distributions Paid From: | ||||||||||||||
Ordinary Income (000) | Long-Term Capital Gain (000) | Ordinary Income (000) | Long-Term Capital Gain (000) | ||||||||||||
$ | 188 | $ | 3,060 | $ | 276 | $ | 3,690 |
The amount and character of income and gains to be distributed are determined in accordance with income tax regulations which may differ from GAAP. These book/tax differences are either considered temporary or permanent in nature.
Temporary differences are attributable to differing book and tax treatments for the timing of the recognition of gains (losses) on certain investment transactions and the timing of the deductibility of certain expenses.
12
Morgan Stanley Variable Insurance Fund, Inc.
Semi-Annual Report – June 30, 2023 (unaudited)
Notes to Financial Statements (cont'd)
The Fund had no permanent differences causing reclassifications among the components of net assets for the year ended December 31, 2022.
At December 31, 2022, the components of distributable earnings for the Fund on a tax basis were as follows:
Undistributed | Undistributed | ||||||
$151 | $1,581 |
J. Credit Facility: The Company and other Morgan Stanley funds participated in a $300,000,000 committed, unsecured revolving line of credit facility (the "Facility") with State Street. Effective April 17, 2023, the committed line amount increased to $500,000,000. This Facility is to be used for temporary emergency purposes or funding of shareholder redemption requests. The interest rate for any funds drawn will be based on the federal funds rate or overnight bank funding rate plus a spread. The Facility also has a commitment fee of 0.25% per annum based on the unused portion of the Facility, which is allocated among participating funds based on relative net assets. During the six months ended June 30, 2023, the Fund did not have any borrowings under the Facility.
K. Other: At June 30, 2023, the Fund had record owners of 10% or greater. Investment activities of these shareholders could have a material impact on the Fund. The aggregate percentage of such owners was 78.3%.
L. Market Risk: An investment in the Fund is based on the values of the Fund's investments, which may change due to economic and other events that affect markets generally, as well as those that affect particular regions, countries, industries, companies or governments. Social, political, economic and other conditions and events, such as war, natural disasters, health emergencies (e.g., epidemics and pandemics), terrorism, conflicts, social unrest, recessions, inflation, rapid interest rate changes and supply chain disruptions, may occur and could significantly impact issuers, industries, governments and other systems, including the financial markets and global economy. It is difficult to predict when events affecting the U.S. or global financial markets and economies may occur, the effects that such events may have and the duration of those effects (which may last for extended periods). These events may be sudden and significant and may negatively impact broad segments of businesses and populations and have a significant and rapid negative impact on the performance of and/or income or yield from the Fund's investments and exacerbate pre-existing risks to the Fund. 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 ultimate impact of public health emergencies or other adverse economic or market developments and the extent to which the associated conditions impact the Fund and its investments will also depend on other future developments, which are highly uncertain, difficult to accurately predict and subject to change at any time. The financial performance of the Fund's investments (and, in turn, the Fund's investment results) as well as their liquidity may be adversely affected because of these and similar types of factors and developments.
M. Subsequent Event: On June 15, 2023, the Directors of the Company approved a Plan of Liquidation with respect to the Fund. The Fund will suspend the offering of its shares to all investors at the close of business on or about September 14, 2023, and the liquidation is expected to occur on or about September 18, 2023 ("Liquidation Date"). Pursuant to the Fund's Plan of Liquidation, substantially all of the assets of the Fund will be liquidated, known liabilities of the Fund will be satisfied or provided for, the remaining proceeds will be distributed to the Fund's remaining shareholders of the record (in this case insurance company separate accounts) equal to their proportionate interest in the Fund, and all of the issued and outstanding shares of the Fund will be redeemed on the Liquidation Date.
13
Morgan Stanley Variable Insurance Fund, Inc.
Semi-Annual Report – June 30, 2023 (unaudited)
Investment Advisory Agreement Approval
Nature, Extent and Quality of Services
The Board reviewed and considered the nature and extent of the investment advisory services provided by the Adviser under the advisory agreement, including portfolio management, investment research and equity and fixed income securities trading. The Board reviewed similar information and factors regarding the Sub-Adviser, to the extent applicable. The Board also reviewed and considered the nature and extent of the non-advisory, administrative services provided by the Administrator under the administration agreement, including accounting, operations, clerical, bookkeeping, compliance, business management and planning, legal services and the provision of supplies, office space and utilities at the Adviser's expense. The Board also considered the Adviser's investment in personnel and infrastructure that benefits the Fund. (The Adviser, Sub-Adviser and Administrator together are referred to as the "Adviser" and the advisory, sub-advisory and administration agreements together are referred to as the "Management Agreement.") The Board also considered that the Adviser serves a variety of other investment advisory clients and has experience overseeing service providers. The Board also compared the nature of the services provided by the Adviser with similar services provided by non-affiliated advisers as prepared by Broadridge Financial Solutions, Inc. ("Broadridge").
The Board reviewed and considered the qualifications of the portfolio managers, the senior administrative managers and other key personnel of the Adviser who provide the advisory and administrative services to the Fund. The Board determined that the Adviser's portfolio managers and key personnel are well qualified by education and/or training and experience to perform the services in an efficient and professional manner. The Board concluded that the nature and extent of the advisory and administrative services provided were necessary and appropriate for the conduct of the business and investment activities of the Fund and supported its decision to approve the Management Agreement.
Performance, Fees and Expenses of the Fund
The Board reviewed the performance, fees and expenses of the Fund compared to its peers, as prepared by Broadridge, and to appropriate benchmarks where applicable. The Board discussed with the Adviser the performance goals and the actual results achieved in managing the Fund. When considering a fund's performance, the Board and the Adviser place emphasis on trends and longer-term returns (focusing on one-year, three-year and five-year performance, as of December 31, 2022, or since inception, as applicable). When a fund underperforms its benchmark and/or its peer group average, the Board and the Adviser discuss the causes of such underperformance and, where necessary, they discuss specific changes to investment strategy or investment personnel. The Board noted that the Fund's performance was better than its peer group average for the one-, three- and five-year periods. The Board discussed with the Adviser the level of the advisory and administration fees (together, the "management fee") for this Fund relative to comparable funds and/or other accounts advised by the Adviser and/or compared to its peers as prepared by Broadridge. In addition to the management fee, the Board also reviewed the Fund's total expense ratio. When a fund's management fee and/or its total expense ratio are higher than its peers, the Board and the Adviser discuss the reasons for this and, where appropriate, they discuss possible waivers and/or caps. The Board noted that the Fund's contractual management fee was higher than but close to its peer group average, the actual management fee was lower than its peer group average and total expense ratio was higher than its peer group average. After discussion, the Board concluded that the Fund's (i) performance was competitive with its peer group average; (ii) management fee was competitive with its peer group average; and (iii) total expense ratio was acceptable.
Economies of Scale
The Board considered the size and growth prospects of the Fund and how that relates to the Fund's total expense ratio and particularly the Fund's management fee rate, which includes breakpoints. In conjunction with its review of the Adviser's profitability, the Board discussed with the Adviser how a change in assets can affect the efficiency or effectiveness of managing the Fund and whether the management fee level is appropriate relative to current and projected asset levels and/or whether the management fee structure reflects economies of scale as asset levels change. The Board has determined that its review of the actual and/or potential economies of scale of the Fund supports its decision to approve the Management Agreement.
14
Morgan Stanley Variable Insurance Fund, Inc.
Semi-Annual Report – June 30, 2023 (unaudited)
Investment Advisory Agreement Approval (cont'd)
Profitability of the Adviser and Affiliates
The Board considered information concerning the costs incurred and profits realized by the Adviser and its affiliates during the last year from their relationship with the Fund and during the last two years from their relationship with the Morgan Stanley Fund Complex and reviewed with the Adviser the cost allocation methodology used to determine the profitability of the Adviser and affiliates. The Board has determined that its review of the analysis of the Adviser's expenses and profitability supports its decision to approve the Management Agreement.
Other Benefits of the Relationship
The Board considered other direct and indirect benefits to the Adviser and/or its affiliates derived from their relationship with the Fund and other funds advised by the Adviser. These benefits may include, among other things, fees for trading, distribution and/or shareholder servicing and for transaction processing and reporting platforms used by securities lending agents, and research received by the Adviser generated from commission dollars spent on funds' portfolio trading. The Board reviewed with the Adviser these arrangements and the reasonableness of the Adviser's costs relative to the services performed. The Board has determined that its review of the other benefits received by the Adviser or its affiliates supports its decision to approve the Management Agreement.
Resources of the Adviser and Historical Relationship Between the Fund and the Adviser
The Board considered whether the Adviser is financially sound and has the resources necessary to perform its obligations under the Management Agreement. The Board also reviewed and considered the historical relationship between the Fund and the Adviser, including the organizational structure of the Adviser, the policies and procedures formulated and adopted by the Adviser for managing the Fund's operations and the Board's confidence in the competence and integrity of the senior managers and key personnel of the Adviser. The Board concluded that the Adviser has the financial resources necessary to fulfill its obligations under the Management Agreement and that it is beneficial for the Fund to continue its relationship with the Adviser.
Other Factors and Current Trends
The Board considered the controls and procedures adopted and implemented by the Adviser and monitored by the Fund's Chief Compliance Officer and concluded that the conduct of business by the Adviser indicates a good faith effort on its part to adhere to high ethical standards in the conduct of the Fund's business.
General Conclusion
After considering and weighing all of the above factors, with various written materials and verbal information presented by the Adviser, the Board concluded that it would be in the best interest of the Fund and its shareholders to approve renewal of the Management Agreement for another year. In reaching this conclusion the Board did not give particular weight to any single piece of information or factor referenced above. The Board considered these factors and information over the course of the year and in numerous meetings, some of which were in executive session with only the independent Board members and their counsel present. It is possible that individual Board members may have weighed these factors, and the information presented, differently in reaching their individual decisions to approve the Management Agreement.
15
Morgan Stanley Variable Insurance Fund, Inc.
Semi-Annual Report – June 30, 2023 (unaudited)
Liquidity Risk Management Program
In compliance with Rule 22e-4 under the Investment Company Act of 1940, as amended (the "Liquidity Rule"), the Fund has adopted and implemented a liquidity risk management program (the "Program"), which is reasonably designed to assess and manage the risk that the Fund could not meet requests to redeem shares issued by the Fund without significant dilution of remaining investors' interests in the Fund (i.e., liquidity risk). The Fund's Board of Directors (the "Board") previously approved the designation of the Liquidity Risk Subcommittee (the "LRS") as Program administrator. The LRS is comprised of representatives from various divisions within Morgan Stanley Investment Management.
At a meeting held on March 1-2, 2023, the Board reviewed a written report prepared by the LRS that addressed the Program's operation and assessed its adequacy, and effectiveness of implementation for the period from January 1, 2022, through December 31, 2022, as required under the Liquidity Rule. The report concluded that the Program operated effectively and was adequately and effectively implemented in all material aspects, and that the relevant controls and safeguards were appropriately designed to enable the LRS to administer the Program in compliance with the Liquidity Rule.
In accordance with the Program, the LRS assessed each Fund's liquidity risk no less frequently than annually taking into consideration certain factors, as applicable, such as (i) investment strategy and liquidity of portfolio investments, (ii) short-term and long-term cash flow projections and (iii) holdings of cash and cash equivalents and borrowing arrangements and other funding sources. Certain factors are considered under both normal and reasonably foreseeable stressed conditions.
Each Fund portfolio investment is classified into one of four liquidity categories, which classification is assessed at least monthly by the LRS. The classification is based on a determination of the number of days it is reasonably expected to take to convert the investment into cash, or sell or dispose of the investment, in current market conditions without significantly changing the market value of the investment. Liquidity classification determinations take into account various market, trading and investment-specific considerations, as well as market depth, and in some cases utilize third-party vendor data.
The Liquidity Rule limits a fund's investments in illiquid investments to 15% of its net assets and requires funds that do not primarily hold assets that are highly liquid investments to determine and maintain a minimum percentage of the fund's net assets to be invested in highly liquid investments (highly liquid investment minimum or "HLIM"). The LRS believes that the Program includes provisions reasonably designed to review, monitor and comply with the 15% limit on illiquid investments and for determining, periodically reviewing and complying with the HLIM requirement, as applicable.
There can be no assurance that the Program will achieve its objectives under all circumstances in the future. Please refer to the Fund's prospectus for more information regarding the Fund's exposure to liquidity risk and other risks to which it may be subject.
16
Morgan Stanley Variable Insurance Fund, Inc.
Semi-Annual Report – June 30, 2023 (unaudited)
Directors and Officers Information
Directors
Frank L. Bowman
Frances L. Cashman
Kathleen A. Dennis
Nancy C. Everett
Eddie A. Grier
Jakki L. Haussler
Dr. Manuel H. Johnson
Joseph J. Kearns
Michael F. Klein
Patricia A. Maleski
W. Allen Reed, Chair of the Board
Adviser and Administrator
Morgan Stanley Investment Management Inc.
522 Fifth Avenue
New York, New York 10036
Sub-Adviser
Morgan Stanley Investment Management Limited
25 Cabot Square, Canary Wharf
London, E14 4QA, England
Distributor
Morgan Stanley Distribution, Inc.
522 Fifth Avenue
New York, New York 10036
Dividend Disbursing and Transfer Agent
SS&C Global Investor & Distribution Solutions, Inc.
P.O. Box 219804
Kansas City, Missouri 64121-9804
Co-Transfer Agent
Eaton Vance Management
Two International Place
Boston, Massachusetts 02110
Officers
John H. Gernon
President and Principal Executive Officer
Deidre A. Downes
Chief Compliance Officer
Francis J. Smith
Treasurer and Principal Financial Officer
Mary E. Mullin
Secretary
Michael J. Key
Vice President
Custodian
State Street Bank and Trust Company
One Congress Street
Boston, Massachusetts 02114
Legal Counsel
Dechert LLP
1095 Avenue of the Americas
New York, New York 10036
Counsel to the Independent Directors
Perkins Coie LLP
1155 Avenue of the Americas,
22nd Floor
New York, New York 10036
Independent Registered Public Accounting Firm
Ernst & Young LLP
200 Clarendon Street
Boston, Massachusetts 02116
Reporting to Shareholders
Each Morgan Stanley fund provides a complete schedule of portfolio holdings in its Semi-Annual and the Annual Reports within 60 days of the end of the fund's second and fourth fiscal quarters. The Semi-Annual and Annual Reports are filed electronically with the Securities and Exchange Commission ("SEC") on Form N-CSRS and Form N-CSR, respectively. Morgan Stanley makes these reports available on its public website, www.morganstanley.com/im/shareholderreports. Each Morgan Stanley non-money market fund also files a complete schedule of portfolio holdings with the SEC for the fund's first and third fiscal quarters as an attachment to Form N-PORT. Morgan Stanley does not deliver the reports for the first and third fiscal quarters to shareholders, but makes the complete schedule of portfolio holdings for the fund's first and third fiscal quarters available on its public website. The holdings for each money market fund are also posted to the Morgan Stanley public website. You may obtain the Form N-PORT filings (as well as the Form N-CSR and N-CSRS filings) by accessing the SEC's website, www.sec.gov. You can also request copies of these materials, upon payment of a duplicating fee, by electronic request at the SEC's email address (publicinfo@sec.gov).
Proxy Voting Policies and Procedures and Proxy Voting Record
You may obtain a copy of the Company's Proxy Voting Policy and Procedures and information regarding how the Company voted proxies relating to portfolio securities during the most recent twelve-month period ended June 30, without charge, upon request, by calling toll free 1 (800) 869-6397 or by visiting our website at www.morganstanley.com/im/shareholderreports. This information is also available on the SEC's website at www.sec.gov.
This report is submitted for the general information of the shareholders of the Fund. For more detailed information about the Fund, its fees and expenses and other pertinent information, please read its Prospectus. The Company's Statement of Additional Information contains additional information about the Fund, including its Directors. It is available, without charge, by calling 1 (800) 869-6397.
Householding Notice
To reduce printing and mailing costs, the Fund attempts to eliminate duplicate mailings to the same address. The Fund delivers a single copy of certain shareholder documents, including shareholder reports, prospectuses and proxy materials, to investors with the same last name who reside at the same address. Your participation in this program will continue for an unlimited period of time unless you instruct us otherwise. You can request multiple copies of these documents by calling 1 (800) 869-6397, 8:00 a.m. to 6:00 p.m., ET. Once our Customer Service Center has received your instructions, we will begin sending individual copies for each account within 30 days.
This report is not authorized for distribution to prospective investors in the Fund unless preceded or accompanied by an effective Prospectus. Read the Prospectus carefully before investing.
UIFGFSAN
5833194 EXP 08.31.24
Morgan Stanley Variable Insurance Fund, Inc.
Semi-Annual Report – June 30, 2023
Global Infrastructure Portfolio
The Fund is intended to be a funding vehicle for variable annuity contracts and variable life insurance policies offered by the separate accounts of certain life insurance companies.
Morgan Stanley Variable Insurance Fund, Inc.
Semi-Annual Report – June 30, 2023 (unaudited)
Table of Contents
Expense Example | 2 | ||||||
Portfolio of Investments | 3 | ||||||
Statement of Assets and Liabilities | 5 | ||||||
Statement of Operations | 6 | ||||||
Statements of Changes in Net Assets | 7 | ||||||
Financial Highlights | 8 | ||||||
Notes to Financial Statements | 10 | ||||||
Investment Advisory Agreement Approval | 17 | ||||||
Liquidity Risk Management Program | 19 | ||||||
Director and Officer Information | Back Cover |
1
Morgan Stanley Variable Insurance Fund, Inc.
Semi-Annual Report – June 30, 2023 (unaudited)
Expense Example
Global Infrastructure Portfolio
As a shareholder of the Global Infrastructure Portfolio (the "Fund"), you incur two types of costs: (1) insurance company charges; and (2) ongoing costs, which may include advisory fees, administration fees, distribution (12b-1) fees and other Fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.
This example is based on an investment of $1,000 invested at the beginning of the six-month period ended June 30, 2023 and held for the entire six-month period.
Actual Expenses
The table below provides information about actual account values and actual expenses. You may use the information in this table, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the table under the heading entitled "Actual Expenses Paid During Period" to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The table below provides information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any insurance company charges. Therefore, the table below is useful in comparing ongoing costs, but will not help you determine the relative total cost of owning different funds. In addition, if these insurance company charges were included, your costs would have been higher.
Beginning Account Value 1/1/23 | Actual Ending Account Value 6/30/23 | Hypothetical Ending Account Value | Actual Expenses Paid During Period* | Hypothetical Expenses Paid During Period* | Net Expense Ratio During Period** | ||||||||||||||||||||||
Global Infrastructure Portfolio Class I | $ | 1,000.00 | $ | 1,034.30 | $ | 1,020.48 | $ | 4.39 | $ | 4.36 | 0.87 | % | |||||||||||||||
Global Infrastructure Portfolio Class II | 1,000.00 | 1,033.20 | 1,019.24 | 5.65 | 5.61 | 1.12 |
* Expenses are calculated using each Fund Class' annualized net expense ratio (as disclosed), multiplied by the average account value over the period and multiplied by 181/365 (to reflect the most recent one-half year period).
** Annualized.
2
Morgan Stanley Variable Insurance Fund, Inc.
Semi-Annual Report – June 30, 2023 (unaudited)
Portfolio of Investments
Global Infrastructure Portfolio
Shares | Value (000) | ||||||||||
Common Stocks (97.7%) | |||||||||||
Australia (2.5%) | |||||||||||
Transurban Group (Units) (a) | 199,860 | $ | 1,903 | ||||||||
Canada (15.6%) | |||||||||||
Enbridge, Inc. | 80,261 | 2,983 | |||||||||
GFL Environmental, Inc. | 127,930 | 4,964 | |||||||||
Keyera Corp. | 10,291 | 237 | |||||||||
Pembina Pipeline Corp. | 61,062 | 1,920 | |||||||||
TC Energy Corp. (b) | 41,606 | 1,682 | |||||||||
11,786 | |||||||||||
China (7.2%) | |||||||||||
China Gas Holdings Ltd. (c) | 4,725,200 | 5,419 | |||||||||
France (5.1%) | |||||||||||
Aeroports de Paris | 2,026 | 291 | |||||||||
Getlink SE | 10,581 | 180 | |||||||||
Vinci SA | 29,237 | 3,397 | |||||||||
3,868 | |||||||||||
Italy (6.2%) | |||||||||||
Infrastrutture Wireless Italiane SpA | 277,929 | 3,669 | |||||||||
Snam SpA | 14,681 | 77 | |||||||||
Terna — Rete Elettrica Nazionale | 110,477 | 942 | |||||||||
4,688 | |||||||||||
Mexico (2.1%) | |||||||||||
Grupo Aeroportuario del Pacifico SAB de CV, Class B | 51,533 | 928 | |||||||||
Grupo Aeroportuario del Sureste SAB de CV, Class B | 23,325 | 650 | |||||||||
1,578 | |||||||||||
New Zealand (0.6%) | |||||||||||
Auckland International Airport Ltd. (d) | 79,754 | 419 | |||||||||
Portugal (0.4%) | |||||||||||
EDP Renovaveis SA | 15,468 | 309 | |||||||||
Spain (7.6%) | |||||||||||
Aena SME SA | 7,572 | 1,226 | |||||||||
Cellnex Telecom SA | 50,427 | 2,037 | |||||||||
Ferrovial SE | 42,086 | 1,330 | |||||||||
Iberdrola SA | 87,007 | 1,136 | |||||||||
5,729 | |||||||||||
Switzerland (0.9%) | |||||||||||
Flughafen Zurich AG (Registered) | 3,223 | 670 | |||||||||
United Kingdom (7.3%) | |||||||||||
National Grid PLC | 266,518 | 3,534 | |||||||||
Pennon Group PLC | 69,493 | 628 | |||||||||
Severn Trent PLC | 41,627 | 1,357 | |||||||||
5,519 | |||||||||||
United States (42.2%) | |||||||||||
Ameren Corp. | 5,892 | 481 | |||||||||
American Electric Power Co., Inc. | 22,428 | 1,888 | |||||||||
American Tower Corp. REIT | 18,789 | 3,644 | |||||||||
American Water Works Co., Inc. | 11,759 | 1,679 |
Shares | Value (000) | ||||||||||
Atmos Energy Corp. | 10,246 | $ | 1,192 | ||||||||
CenterPoint Energy, Inc. | 60,276 | 1,757 | |||||||||
Cheniere Energy, Inc. | 14,475 | 2,205 | |||||||||
Crown Castle, Inc. REIT | 8,437 | 961 | |||||||||
Edison International | 20,491 | 1,423 | |||||||||
Eversource Energy | 23,156 | 1,642 | |||||||||
Exelon Corp. | 49,059 | 1,999 | |||||||||
Kinder Morgan, Inc. | 34,910 | 601 | |||||||||
NiSource, Inc. | 40,832 | 1,117 | |||||||||
ONEOK, Inc. | 16,007 | 988 | |||||||||
PG&E Corp. (d) | 88,919 | 1,537 | |||||||||
Republic Services, Inc. | 6,384 | 978 | |||||||||
SBA Communications Corp. REIT | 6,060 | 1,405 | |||||||||
Sempra Energy | 19,007 | 2,767 | |||||||||
Targa Resources Corp. | 25,321 | 1,927 | |||||||||
Williams Cos., Inc. | 50,962 | 1,663 | |||||||||
31,854 | |||||||||||
Total Common Stocks (Cost $69,882) | 73,742 | ||||||||||
Short-Term Investments (3.9%) | |||||||||||
Investment Company (1.6%) | |||||||||||
Morgan Stanley Institutional Liquidity Funds — Treasury Portfolio — Institutional Class (See Note H) (Cost $1,221) | 1,220,858 | 1,221 | |||||||||
Securities held as Collateral on Loaned Securities (2.3%) | |||||||||||
Investment Company (2.1%) | |||||||||||
Morgan Stanley Institutional Liquidity Funds — Treasury Securities Portfolio — Institutional Class (See Note H) | 1,575,886 | 1,576 | |||||||||
Face Amount (000) | |||||||||||
Repurchase Agreements (0.2%) | |||||||||||
Citigroup, Inc., (5.00%, dated 6/30/23, due 7/3/23; proceeds $27; fully collateralized by U.S. Government obligations; 0.00% due 7/27/23 - 8/10/23; valued at $28) | $ | 27 | 27 | ||||||||
HSBC Securities USA, Inc., (5.05%, dated 6/30/23, due 7/3/23; proceeds $58; fully collateralized by U.S. Government obligations; 0.00% due 8/15/23 - 11/15/25; valued at $60) | 58 | 58 | |||||||||
Merrill Lynch & Co., Inc., (5.05%, dated 6/30/23, due 7/3/23; proceeds $47; fully collateralized by a U.S. Government obligation; 1.63% due 10/15/27; valued at $48) | 47 | 47 | |||||||||
132 | |||||||||||
Total Securities held as Collateral on Loaned Securities (Cost $1,708) | 1,708 | ||||||||||
Total Short-Term Investments (Cost $2,929) | 2,929 | ||||||||||
Total Investments (101.6%) (Cost $72,811) Including $1,649 of Securities Loaned (e)(f) | 76,671 | ||||||||||
Liabilities in Excess of Other Assets (–1.6%) | (1,192 | ) | |||||||||
Net Assets (100.0%) | $ | 75,479 |
The accompanying notes are an integral part of the financial statements.
3
Morgan Stanley Variable Insurance Fund, Inc.
Semi-Annual Report – June 30, 2023 (unaudited)
Portfolio of Investments (cont'd)
Global Infrastructure Portfolio
Country assignments and aggregations are based generally on third party vendor classifications and information, and may be different from the assignments and aggregations under the policies set forth in the Fund's prospectus and/or statement of additional information relating to geographic classifications.
(a) Consists of one or more classes of securities traded together as a unit; stocks with attached warrants.
(b) All or a portion of this security was on loan at June 30, 2023.
(c) Security trades on the Hong Kong exchange.
(d) Non-income producing security.
(e) The approximate fair value and percentage of net assets, $27,194,000 and 36.0%, respectively, represent the securities that have been fair valued under the fair valuation policy for international investments as described in Note A-1 within the Notes to Financial Statements.
(f) At June 30, 2023, the aggregate cost for federal income tax purposes approximates the aggregate cost for book purposes. The aggregate gross unrealized appreciation is approximately $7,993,000 and the aggregate gross unrealized depreciation is approximately $4,133,000, resulting in net unrealized appreciation of approximately $3,860,000.
REIT Real Estate Investment Trust.
Portfolio Composition*
Classification | Percentage of Total Investments | ||||||
Oil & Gas Storage & Transportation | 33.1 | % | |||||
Communications | 15.6 | ||||||
Electricity Transmission & Distribution | 14.8 | ||||||
Diversified | 13.3 | ||||||
Other** | 9.3 | ||||||
Others | 8.3 | ||||||
Airports | 5.6 | ||||||
Total Investments | 100.0 | % |
* Percentages indicated are based upon total investments (excluding Securities held as Collateral on Loaned Securities) as of June 30, 2023.
** Industries and/or investment types representing less than 5% of total investments.
The accompanying notes are an integral part of the financial statements.
4
Morgan Stanley Variable Insurance Fund, Inc.
Semi-Annual Report – June 30, 2023 (unaudited)
Global Infrastructure Portfolio
Statement of Assets and Liabilities | June 30, 2023 (000) | ||||||
Assets: | |||||||
Investments in Securities of Unaffiliated Issuers, at Value(1) (Cost $70,014) | $ | 73,874 | |||||
Investment in Security of Affiliated Issuer, at Value (Cost $2,797) | 2,797 | ||||||
Total Investments in Securities, at Value (Cost $72,811) | 76,671 | ||||||
Foreign Currency, at Value (Cost $52) | 52 | ||||||
Receivable for Investments Sold | 536 | ||||||
Dividends Receivable | 247 | ||||||
Receivable for Fund Shares Sold | 48 | ||||||
Tax Reclaim Receivable | 11 | ||||||
Receivable from Affiliate | 5 | ||||||
Receivable from Securities Lending Income | 2 | ||||||
Other Assets | 13 | ||||||
Total Assets | 77,585 | ||||||
Liabilities: | |||||||
Collateral on Securities Loaned, at Value | 1,708 | ||||||
Payable for Investments Purchased | 102 | ||||||
Payable for Fund Shares Redeemed | 102 | ||||||
Payable for Advisory Fees | 76 | ||||||
Payable for Servicing Fees | 40 | ||||||
Payable for Professional Fees | 40 | ||||||
Payable for Custodian Fees | 11 | ||||||
Payable for Distribution Fees — Class II Shares | 10 | ||||||
Payable for Administration Fees | 5 | ||||||
Payable for Transfer Agency Fees | — | @ | |||||
Other Liabilities | 12 | ||||||
Total Liabilities | 2,106 | ||||||
NET ASSETS | $ | 75,479 | |||||
Net Assets Consist of: | |||||||
Paid-in-Capital | $ | 62,783 | |||||
Total Distributable Earnings | 12,696 | ||||||
Net Assets | $ | 75,479 | |||||
CLASS I: | |||||||
Net Assets | $ | 28,818 | |||||
Net Asset Value, Offering and Redemption Price Per Share Applicable to 3,982,403 Outstanding $0.001 Par Value Shares (Authorized 500,000,000 Shares) | $ | 7.24 | |||||
CLASS II: | |||||||
Net Assets | $ | 46,661 | |||||
Net Asset Value, Offering and Redemption Price Per Share Applicable to 6,517,712 Outstanding $0.001 Par Value Shares (Authorized 500,000,000 Shares) | $ | 7.16 | |||||
(1) Including: | |||||||
Securities on Loan, at Value: | $ | 1,649 |
@ Amount is less than $500.
The accompanying notes are an integral part of the financial statements.
5
Morgan Stanley Variable Insurance Fund, Inc.
Semi-Annual Report – June 30, 2023 (unaudited)
Global Infrastructure Portfolio
Statement of Operations | Six Months Ended June 30, 2023 (000) | ||||||
Investment Income: | |||||||
Dividends from Securities of Unaffiliated Issuers (Net of $90 of Foreign Taxes Withheld) | $ | 1,294 | |||||
Dividends from Security of Affiliated Issuer (Note H) | 29 | ||||||
Income from Securities Loaned — Net | 6 | ||||||
Total Investment Income | 1,329 | ||||||
Expenses: | |||||||
Advisory Fees (Note B) | 342 | ||||||
Professional Fees | 71 | ||||||
Distribution Fees — Class II Shares (Note E) | 63 | ||||||
Servicing Fees (Note D) | 61 | ||||||
Administration Fees (Note C) | 32 | ||||||
Custodian Fees (Note G) | 16 | ||||||
Shareholder Reporting Fees | 9 | ||||||
Transfer Agency Fees (Note F) | 3 | ||||||
Directors' Fees and Expenses | 2 | ||||||
Pricing Fees | 2 | ||||||
Other Expenses | 4 | ||||||
Total Expenses | 605 | ||||||
Waiver of Advisory Fees (Note B) | (192 | ) | |||||
Rebate from Morgan Stanley Affiliate (Note H) | (1 | ) | |||||
Net Expenses | 412 | ||||||
Net Investment Income | 917 | ||||||
Realized Loss: | |||||||
Investments Sold | (141 | ) | |||||
Foreign Currency Translation | (5 | ) | |||||
Net Realized Loss | (146 | ) | |||||
Change in Unrealized Appreciation (Depreciation): | |||||||
Investments | 1,849 | ||||||
Foreign Currency Translation | 4 | ||||||
Net Change in Unrealized Appreciation (Depreciation) | 1,853 | ||||||
Net Realized Loss and Change in Unrealized Appreciation (Depreciation) | 1,707 | ||||||
Net Increase in Net Assets Resulting from Operations | $ | 2,624 |
The accompanying notes are an integral part of the financial statements.
6
Morgan Stanley Variable Insurance Fund, Inc.
Semi-Annual Report – June 30, 2023
Global Infrastructure Portfolio
Statements of Changes in Net Assets | Six Months Ended June 30, 2023 (unaudited) (000) | Year Ended December 31, 2022 (000) | |||||||||
Increase (Decrease) in Net Assets: | |||||||||||
Operations: | |||||||||||
Net Investment Income | $ | 917 | $ | 1,878 | |||||||
Net Realized Gain (Loss) | (146 | ) | 7,968 | ||||||||
Net Change in Unrealized Appreciation (Depreciation) | 1,853 | (16,971 | ) | ||||||||
Net Increase (Decrease) in Net Assets Resulting from Operations | 2,624 | (7,125 | ) | ||||||||
Dividends and Distributions to Shareholders: | |||||||||||
Class I | — | (2,843 | ) | ||||||||
Class II | — | (4,465 | ) | ||||||||
Total Dividends and Distributions to Shareholders | — | (7,308 | ) | ||||||||
Capital Share Transactions:(1) | |||||||||||
Class I: | |||||||||||
Subscribed | 1,141 | 2,567 | |||||||||
Distributions Reinvested | — | 2,843 | |||||||||
Redeemed | (3,583 | ) | (6,055 | ) | |||||||
Class II: | |||||||||||
Subscribed | 2,971 | 34,260 | |||||||||
Distributions Reinvested | — | 4,465 | |||||||||
Redeemed | (8,073 | ) | (33,678 | ) | |||||||
Net Increase (Decrease) in Net Assets Resulting from Capital Share Transactions | (7,544 | ) | 4,402 | ||||||||
Total Decrease in Net Assets | (4,920 | ) | (10,031 | ) | |||||||
Net Assets: | |||||||||||
Beginning of Period | 80,399 | 90,430 | |||||||||
End of Period | $ | 75,479 | $ | 80,399 | |||||||
(1) Capital Share Transactions: | |||||||||||
Class I: | |||||||||||
Shares Subscribed | 156 | 325 | |||||||||
Shares Issued on Distributions Reinvested | — | 404 | |||||||||
Shares Redeemed | (492 | ) | (795 | ) | |||||||
Net Decrease in Class I Shares Outstanding | (336 | ) | (66 | ) | |||||||
Class II: | |||||||||||
Shares Subscribed | 411 | 4,640 | |||||||||
Shares Issued on Distributions Reinvested | — | 639 | |||||||||
Shares Redeemed | (1,130 | ) | (4,555 | ) | |||||||
Net Increase (Decrease) in Class II Shares Outstanding | (719 | ) | 724 |
The accompanying notes are an integral part of the financial statements.
7
Morgan Stanley Variable Insurance Fund, Inc.
Semi-Annual Report – June 30, 2023
Financial Highlights
Global Infrastructure Portfolio
Class I | |||||||||||||||||||||||||||
Six Months Ended June 30, 2023 | Year Ended December 31, | ||||||||||||||||||||||||||
Selected Per Share Data and Ratios | (unaudited) | 2022 | 2021 | 2020 | 2019 | 2018 | |||||||||||||||||||||
Net Asset Value, Beginning of Period | $ | 7.00 | $ | 8.34 | $ | 7.76 | $ | 8.12 | $ | 6.80 | $ | 7.91 | |||||||||||||||
Income (Loss) from Investment Operations: | |||||||||||||||||||||||||||
Net Investment Income(1) | 0.09 | 0.18 | 0.17 | 0.15 | 0.20 | 0.20 | |||||||||||||||||||||
Net Realized and Unrealized Gain (Loss) | 0.15 | (0.84 | ) | 0.92 | (0.26 | ) | 1.69 | (0.79 | ) | ||||||||||||||||||
Total from Investment Operations | 0.24 | (0.66 | ) | 1.09 | (0.11 | ) | 1.89 | (0.59 | ) | ||||||||||||||||||
Distributions from and/or in Excess of: | |||||||||||||||||||||||||||
Net Investment Income | — | (0.23 | ) | (0.21 | ) | (0.13 | ) | (0.22 | ) | (0.23 | ) | ||||||||||||||||
Net Realized Gain | — | (0.45 | ) | (0.30 | ) | (0.12 | ) | (0.35 | ) | (0.29 | ) | ||||||||||||||||
Total Distributions | — | (0.68 | ) | (0.51 | ) | (0.25 | ) | (0.57 | ) | (0.52 | ) | ||||||||||||||||
Net Asset Value, End of Period | $ | 7.24 | $ | 7.00 | $ | 8.34 | $ | 7.76 | $ | 8.12 | $ | 6.80 | |||||||||||||||
Total Return(2) | 3.43 | %(3) | (8.02 | )% | 14.26 | % | (1.15 | )% | 28.30 | % | (7.85 | )% | |||||||||||||||
Ratios to Average Net Assets and Supplemental Data: | |||||||||||||||||||||||||||
Net Assets, End of Period (Thousands) | $ | 28,818 | $ | 30,227 | $ | 36,573 | $ | 35,868 | $ | 42,162 | $ | 38,642 | |||||||||||||||
Ratio of Expenses Before Expense Limitation | 1.35 | %(4) | 1.41 | % | 1.38 | % | 1.36 | % | 1.33 | % | 1.34 | % | |||||||||||||||
Ratio of Expenses After Expense Limitation | 0.87 | %(4)(5) | 0.88 | %(5)(6) | 0.87 | %(5) | 0.87 | %(5) | 0.87 | %(5) | 0.87 | %(5) | |||||||||||||||
Ratio of Expenses After Expense Limitation Excluding Interest Expenses | N/A | 0.87 | %(5) | N/A | N/A | N/A | N/A | ||||||||||||||||||||
Ratio of Net Investment Income | 2.43 | %(4)(5) | 2.32 | %(5) | 2.11 | %(5) | 2.06 | %(5) | 2.58 | %(5) | 2.80 | %(5) | |||||||||||||||
Ratio of Rebate from Morgan Stanley Affiliates | 0.00 | %(4)(7) | 0.00 | %(7) | 0.00 | %(7) | 0.00 | %(7) | 0.00 | %(7) | 0.00 | %(7) | |||||||||||||||
Portfolio Turnover Rate | 12 | %(3) | 89 | % | 59 | % | 62 | % | 30 | % | 44 | % |
(1) Per share amount is based on average shares outstanding.
(2) Calculated based on the net asset value as of the last business day of the period. Performance does not reflect fees and expenses imposed by your insurance company's separate account. If performance information included the effect of these additional charges, the total return would be lower.
(3) Not annualized.
(4) Annualized.
(5) 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."
(6) Ratio is above the expense limitation due to interest expenses, which are not included in the determination of the expense limitation. Refer to Footnote B in the Notes to the Financial Statements.
(7) Amount is less than 0.005%.
The accompanying notes are an integral part of the financial statements.
8
Morgan Stanley Variable Insurance Fund, Inc.
Semi-Annual Report – June 30, 2023
Financial Highlights
Global Infrastructure Portfolio
Class II | |||||||||||||||||||||||||||
Six Months Ended June 30, 2023 | Year Ended December 31, | ||||||||||||||||||||||||||
Selected Per Share Data and Ratios | (unaudited) | 2022 | 2021 | 2020 | 2019 | 2018 | |||||||||||||||||||||
Net Asset Value, Beginning of Period | $ | 6.93 | $ | 8.27 | $ | 7.70 | $ | 8.06 | $ | 6.76 | $ | 7.85 | |||||||||||||||
Income (Loss) from Investment Operations: | |||||||||||||||||||||||||||
Net Investment Income(1) | 0.08 | 0.15 | 0.15 | 0.13 | 0.18 | 0.18 | |||||||||||||||||||||
Net Realized and Unrealized Gain (Loss) | 0.15 | (0.83 | ) | 0.92 | (0.26 | ) | 1.67 | (0.77 | ) | ||||||||||||||||||
Total from Investment Operations | 0.23 | (0.68 | ) | 1.07 | (0.13 | ) | 1.85 | (0.59 | ) | ||||||||||||||||||
Distributions from and/or in Excess of: | |||||||||||||||||||||||||||
Net Investment Income | — | (0.21 | ) | (0.20 | ) | (0.11 | ) | (0.20 | ) | (0.21 | ) | ||||||||||||||||
Net Realized Gain | — | (0.45 | ) | (0.30 | ) | (0.12 | ) | (0.35 | ) | (0.29 | ) | ||||||||||||||||
Total Distributions | — | (0.66 | ) | (0.50 | ) | (0.23 | ) | (0.55 | ) | (0.50 | ) | ||||||||||||||||
Net Asset Value, End of Period | $ | 7.16 | $ | 6.93 | $ | 8.27 | $ | 7.70 | $ | 8.06 | $ | 6.76 | |||||||||||||||
Total Return(2) | 3.32 | %(3) | (8.32 | )% | 14.00 | % | (1.43 | )% | 27.87 | % | (7.89 | )% | |||||||||||||||
Ratios to Average Net Assets and Supplemental Data: | |||||||||||||||||||||||||||
Net Assets, End of Period (Thousands) | $ | 46,661 | $ | 50,172 | $ | 53,857 | $ | 41,277 | $ | 46,055 | $ | 38,193 | |||||||||||||||
Ratio of Expenses Before Expense Limitation | 1.60 | %(4) | 1.66 | % | 1.63 | % | 1.61 | % | 1.58 | % | 1.59 | % | |||||||||||||||
Ratio of Expenses After Expense Limitation | 1.12 | %(4)(5) | 1.13 | %(5)(6) | 1.12 | %(5) | 1.12 | %(5) | 1.12 | %(5) | 1.12 | %(5) | |||||||||||||||
Ratio of Expenses After Expense Limitation Excluding Interest Expenses | N/A | 1.12 | %(5) | N/A | N/A | N/A | N/A | ||||||||||||||||||||
Ratio of Net Investment Income | 2.18 | %(4)(5) | 2.07 | %(5) | 1.86 | %(5) | 1.81 | %(5) | 2.33 | %(5) | 2.55 | %(5) | |||||||||||||||
Ratio of Rebate from Morgan Stanley Affiliates | 0.00 | %(4)(7) | 0.00 | %(7) | 0.00 | %(7) | 0.00 | %(7) | 0.00 | %(7) | 0.00 | %(7) | |||||||||||||||
Portfolio Turnover Rate | 12 | %(3) | 89 | % | 59 | % | 62 | % | 30 | % | 44 | % |
(1) Per share amount is based on average shares outstanding.
(2) Calculated based on the net asset value as of the last business day of the period. Performance does not reflect fees and expenses imposed by your insurance company's separate account. If performance information included the effect of these additional charges, the total return would be lower.
(3) Not annualized.
(4) Annualized.
(5) 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."
(6) Ratio is above the expense limitation due to interest expenses, which are not included in the determination of the expense limitation. Refer to Footnote B in the Notes to the Financial Statements.
(7) Amount is less than 0.005%.
The accompanying notes are an integral part of the financial statements.
9
Morgan Stanley Variable Insurance Fund, Inc.
Semi-Annual Report – June 30, 2023 (unaudited)
Notes to Financial Statements
Morgan Stanley Variable Insurance Fund, Inc. (the "Company") is registered under the Investment Company Act of 1940, as amended (the "Act"), as an open-end management investment company. The Company is comprised of ten separate active, diversified and non-diversified funds (individually referred to as a "Fund," collectively as the "Funds"). The Company applies investment company accounting and reporting guidance Accounting Standards Codification ("ASC") Topic 946.
The accompanying financial statements relate to the Global Infrastructure Portfolio. The Fund seeks both capital appreciation and current income. The Fund offers two classes of shares — Class I and Class II. Both classes of shares have identical voting rights (except that shareholders of a Class have exclusive voting rights regarding any matter relating solely to that Class of shares), dividend, liquidation and other rights.
The Company is intended to be a funding vehicle for variable annuity contracts and variable life insurance policies offered by the separate accounts of certain life insurance companies.
A. Significant Accounting Policies: The following significant accounting policies are in conformity with U.S. generally accepted accounting principles ("GAAP"). Such policies are consistently followed by the Company in the preparation of its financial statements. GAAP may require management to make estimates and assumptions that affect the reported amounts and disclosures in the financial statements. Actual results may differ from those estimates.
1. Security Valuation: (1) An equity portfolio security listed or traded on an exchange is valued at its latest reported sales price (or at the exchange official closing price if such exchange reports an official closing price), and if there were no sales on a given day and if there is no official exchange closing price for that day, the security is valued at the mean between the last reported bid and asked prices if such bid and asked prices are available on the relevant exchanges. If only bid prices are available then the latest bid price may be used. Listed equity securities not traded on the valuation date with no reported bid and asked prices available on the exchange are valued at the mean between the current bid and asked prices obtained from one or more reputable brokers/dealers. In cases where a security is traded on more than one exchange, the security is valued on the exchange designated as the primary market; (2) all other equity portfolio securities for which over-the-counter ("OTC") market quotations are readily available are valued at the latest reported sales price (or at the market official closing price if such market reports an official closing price), and if there was no trading in the security on a given day and if there is no official closing price from relevant markets for that day,
the security is valued at the mean between the last reported bid and asked prices if such bid and asked prices are available on the relevant markets. An unlisted equity security that does not trade on the valuation date and for which bid and asked prices from the relevant markets are unavailable is valued at the mean between the current bid and asked prices obtained from one or more reputable brokers/dealers; (3) fixed income securities may be valued by an outside pricing service/vendor approved by the Company's Board of Directors (the "Directors"). The pricing service/vendor may employ a pricing model that takes into account, among other things, bids, yield spreads and/or other market data and specific security characteristics. If Morgan Stanley Investment Management Inc. (the "Adviser") a wholly-owned subsidiary of Morgan Stanley, determines that the price provided by the outside pricing service/vendor does not reflect the security's fair value or is unable to provide a price, prices from brokers/dealers may also be utilized. In these circumstances, the value of the security will be the mean of bid and asked prices obtained from brokers/dealers; (4) when market quotations are not readily available, as defined by Rule 2a-5 under the Act, including circumstances under which the Adviser determines that the closing price, last sale price or the mean between the last reported bid and asked prices are not reflective of a security's market value, portfolio securities are valued at their fair value as determined in good faith under procedures approved by and under the general supervision of the Directors. Occasionally, developments affecting the closing prices of securities and other assets may occur between the times at which valuations of such securities are determined (that is, close of the foreign market on which the securities trade) and the close of business of the New York Stock Exchange ("NYSE"). If developments occur during such periods that are expected to materially affect the value of such securities, such valuations may be adjusted to reflect the estimated fair value of such securities as of the close of the NYSE, as determined in good faith by the Directors or by the Adviser using a pricing service and/or procedures approved by the Directors; (5) foreign exchange transactions ("spot contracts") and foreign exchange forward contracts ("forward contracts") are valued daily using an independent pricing vendor at the spot and forward rates, respectively, as of the close of the NYSE; and (6) investments in mutual funds, including the Morgan Stanley Institutional Liquidity Funds, are valued at the net asset value ("NAV") as of the close of each business day.
10
Morgan Stanley Variable Insurance Fund, Inc.
Semi-Annual Report – June 30, 2023 (unaudited)
Notes to Financial Statements (cont'd)
In connection with Rule 2a-5 of the Act, the Directors have designated the Company's Adviser as its valuation designee. The valuation designee has responsibility for determining fair value and to make the actual calculations pursuant to the fair valuation methodologies previously approved by the Directors. Under procedures approved by the Directors, the Company's Adviser, as valuation designee, has formed a Valuation Committee whose members are approved by the Directors. The Valuation Committee provides administration and oversight of the Company's valuation policies and procedures, which are reviewed at least annually by the Directors. These procedures allow the Company to utilize independent pricing services, quotations from securities and financial instrument dealers and other market sources to determine fair value.
2. Fair Value Measurement: Financial Accounting Standards Board ("FASB") ASC 820, "Fair Value Measurement" ("ASC 820"), defines fair value as the price that would be received to sell an asset or pay to transfer a liability in an orderly transaction between market participants at the measurement date. ASC 820 establishes a three-tier hierarchy to distinguish between (1) inputs that reflect the assumptions market participants would use in valuing an asset or liability developed based on market data obtained from sources independent of the reporting entity (observable inputs) and (2) inputs that reflect the reporting entity's own assumptions about the assumptions market participants would use in valuing an asset or liability developed based on the best information available in the circumstances (unobservable inputs) and to establish classification of fair value measurements for disclosure purposes. Various inputs are used in determining the value of the Fund's investments. The inputs are summarized in the three broad levels listed below:
• Level 1 – unadjusted quoted prices in active markets for identical investments
• Level 2 – other significant observable inputs (including quoted prices for similar investments, interest rates, prepayment speeds, credit risk, etc.)
• Level 3 – significant unobservable inputs including the Fund's own assumptions in determining the fair value of investments. Factors considered in making this determination may include, but are not limited to, information obtained by contacting the issuer, analysts, or the appropriate stock exchange (for exchange-traded securities), analysis of the issuer's financial statements or other available documents
and, if necessary, available information concerning other securities in similar circumstances.
The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities and the determination of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to each security.
The following is a summary of the inputs used to value the Fund's investments as of June 30, 2023:
Investment Type | Level 1 Unadjusted quoted prices (000) | Level 2 Other significant observable inputs (000) | Level 3 Significant unobservable inputs (000) | Total (000) | |||||||||||||||
Assets: | |||||||||||||||||||
Common Stocks | |||||||||||||||||||
Airports | $ | 1,578 | $ | 2,606 | $ | — | $ | 4,184 | |||||||||||
Communications | 6,010 | 5,706 | — | 11,716 | |||||||||||||||
Diversified | 5,457 | 4,533 | — | 9,990 | |||||||||||||||
Electricity Transmission & Distribution | 6,601 | 4,476 | — | 11,077 | |||||||||||||||
Oil & Gas Storage & Transportation | 19,282 | 5,496 | — | 24,778 | |||||||||||||||
Others | 5,941 | 309 | — | 6,250 | |||||||||||||||
Toll Roads | — | 2,083 | — | 2,083 | |||||||||||||||
Water | 1,679 | 1,985 | — | 3,664 | |||||||||||||||
Total Common Stocks | 46,548 | 27,194 | — | 73,742 | |||||||||||||||
Short-Term Investments | |||||||||||||||||||
Investment Companies | 2,797 | — | — | 2,797 | |||||||||||||||
Repurchase Agreements | — | 132 | — | 132 | |||||||||||||||
Total Short-Term Investments | 2,797 | 132 | — | 2,929 | |||||||||||||||
Total Assets | $ | 49,345 | $ | 27,326 | $ | — | $ | 76,671 |
Transfers between investment levels may occur as the markets fluctuate and/or the availability of data used in an investment's valuation changes.
3. Repurchase Agreements: The Fund may enter into repurchase agreements under which the Fund lends cash and takes possession of securities with an agreement that the counterparty will repurchase such securities. In connection with transactions in repurchase agreements, a bank as custodian for the Fund takes possession of the underlying securities which are held as collateral, with a market value at least equal to the amount of the repurchase transaction, including principal and accrued interest. To the extent that any repurchase transaction exceeds one business day, the value of the collateral is marked-to-market on a daily basis to determine that the value of the collateral does not decrease below the repurchase price plus accrued interest as earned. If such a decrease occurs,
11
Morgan Stanley Variable Insurance Fund, Inc.
Semi-Annual Report – June 30, 2023 (unaudited)
Notes to Financial Statements (cont'd)
additional collateral will be requested and, when received, will be added to the account to maintain full collateralization. In the event of default on the obligation to repurchase, the Fund has the right to liquidate the collateral and apply the proceeds in satisfaction of the obligation. In the event of default or bankruptcy by the counterparty to the agreement, realization of the collateral proceeds may be subject to cost and delays. The Fund, along with other affiliated investment companies, may utilize a joint trading account for the purpose of entering into repurchase agreements.
4. Foreign Currency Translation and Foreign Investments: The books and records of the Fund are maintained in U.S. dollars. Foreign currency amounts are translated into U.S. dollars as follows:
— investments, other assets and liabilities at the prevailing rate of exchange on the valuation date;
— investment transactions and investment income at the prevailing rates of exchange on the dates of such transactions.
Although the net assets of the Fund are presented at the foreign exchange rates and market values at the close of the period, the Fund does not isolate that portion of the results of operations arising as a result of changes in the foreign exchange rates from the fluctuations arising from changes in the market prices of securities held at period end. Similarly, the Fund does not isolate the effect of changes in foreign exchange rates from the fluctuations arising from changes in the market prices of securities sold during the period. Accordingly, realized and unrealized foreign currency gains (losses) on investments in securities are included in the reported net realized and unrealized gains (losses) on investment transactions and balances. However, pursuant to U.S. federal income tax regulations, gains and losses from certain foreign currency transactions and the foreign currency portion of gains and losses realized on sales and maturities of foreign denominated debt securities are treated as ordinary income for U.S. federal income tax purposes.
Net realized gains (losses) on foreign currency transactions represent net foreign exchange gains (losses) from foreign currency forward exchange contracts, disposition of foreign currencies, currency gains (losses) realized be-tween the trade and settlement dates on securities trans-actions, and the difference between the amount of investment income and foreign withholding taxes recorded on the Fund's books and the U.S. dollar equivalent amounts actually received or paid. The change in unrealized currency gains (losses) on foreign currency
transactions for the period is reflected in the Statement of Operations.
Foreign security and currency transactions may involve certain considerations and risks not typically associated with those of U.S. dollar denominated transactions as a result of, among other factors, fluctuations of exchange rates in relation to the U.S. dollar, the possibility of lower levels of governmental supervision and regulation of foreign securities markets and the possibility of political or economic instability.
Governmental approval for foreign investments may be required in advance of making an investment under certain circumstances in some countries, and the extent of foreign investments in U.S. companies may be subject to limitation in other countries. Foreign ownership limitations also may be imposed by the charters of individual companies to prevent, among other concerns, violations of foreign investment limitations. As a result, an additional class of shares (identified as "Foreign" in the Port-folio of Investments) may be created and offered for investment. The "local" and "foreign shares" market values may differ. In the absence of trading of the foreign shares in such markets, the Fund values the foreign shares at the closing exchange price of the local shares.
5. Securities Lending: The Fund lends securities to qualified financial institutions, such as broker/dealers, to earn additional income. Any increase or decrease in the fair value of the securities loaned that might occur and any interest earned or dividends declared on those securities during the term of the loan would remain in the Fund. The Fund would receive cash or securities as collateral in an amount equal to or exceeding 100% of the current fair value of the loaned securities. The collateral is marked-to-market daily by State Street Bank and Trust Company ("State Street"), the securities lending agent, to ensure that a minimum of 100% collateral coverage is maintained.
Based on pre-established guidelines, the securities lending agent invests any cash collateral that is received in an affiliated money market portfolio and repurchase agreements. Securities lending income is generated from the earnings on the invested collateral and borrowing fees, less any rebates owed to the borrowers and compensation to the lending agent, and is recorded as "Income from Securities Loaned — Net" in the Fund's Statement of Operations. Risks in securities lending transactions are that a borrower may not provide additional collateral when required or return the securities when due, and that the value of the short-term investments will be less than
12
Morgan Stanley Variable Insurance Fund, Inc.
Semi-Annual Report – June 30, 2023 (unaudited)
Notes to Financial Statements (cont'd)
the amount of cash collateral plus any rebate that is required to be returned to the borrower.
The Fund has the right under the securities lending agreement to recover the securities from the borrower on demand.
The following table presents financial instruments that are subject to enforceable netting arrangements as of June 30, 2023:
Gross Amounts Not Offset in the Statement of Assets and Liabilities | |||||||||||||||
Gross Asset Amount Presented in the Statement of Assets and Liabilities (000) | Financial Instrument (000) | Collateral Received (000) | Net Amount (not less than $0) (000) | ||||||||||||
$ | 1,649 | (a) | $ | — | $ | (1,649 | )(b)(c) | $ | 0 |
(a) Represents market value of loaned securities at period end.
(b) The Fund received cash collateral of approximately $1,708,000, which was subsequently invested in Repurchase Agreements and Morgan Stanley Institutional Liquidity Funds as reported in the Portfolio of Investments.
(c) The actual collateral received is greater than the amount shown here due to overcollateralization
FASB ASC 860, "Transfers & Servicing: Repurchase-to-Maturity Transactions, Repurchase Financings, and Disclosures", is intended to provide increased transparency about the types of collateral pledged in securities lending transactions and other similar transactions that are accounted for as secured borrowings.
The following table displays a breakdown of transactions accounted for as secured borrowings, the gross obligations by class of collateral pledged and the remaining contractual maturity of those transactions as of June 30, 2023:
Remaining Contractual Maturity of the Agreements | |||||||||||||||||||||||
Overnight and Continuous (000) | <30 days (000) | Between 30 & 90 days (000) | >90 days (000) | Total (000) | |||||||||||||||||||
Securities Lending Transactions | |||||||||||||||||||||||
Common Stocks | $ | 1,708 | $ | — | $ | — | $ | — | $ | 1,708 | |||||||||||||
Total Borrowings | $ | 1,708 | $ | — | $ | — | $ | — | $ | 1,708 | |||||||||||||
Gross amount of recognized liabilities for securities lending transactions | $ | 1,708 |
6. Indemnifications: The Company enters into contracts that contain a variety of indemnifications. The Company's maximum exposure under these arrangements is unknown. However, the Company has not had prior
claims or losses pursuant to these contracts and expects the risk of loss to be remote.
7. Security Transactions, Income and Expenses: Security transactions are accounted for on the trade date (date the order to buy or sell is executed). Realized gains and losses on the sale of investment securities are determined on the specific identified cost method. Dividend income and other distributions are recorded on the ex-dividend date (except for certain foreign dividends which may be recorded as soon as the Fund is informed of such dividends) net of applicable withholding taxes. Non-cash dividends received in the form of stock, if any, are recognized on the ex-dividend date and recorded as non-cash dividend income at fair value. Interest income is recognized on the accrual basis (except where collection is in doubt) net of applicable withholding taxes. Discounts are accreted and premiums are amortized over the life of the respective securities. Most expenses of the Company can be directly attributed to a particular Fund. Expenses which cannot be directly attributed are apportioned among the Funds based upon relative net assets or other appropriate methods. Income, expenses (other than class specific expenses) and realized and unrealized gains or losses are allocated to each class of shares based upon their relative net assets.
Settlement and registration of foreign securities transactions may be subject to significant risks not normally associated with investments in the United States. In certain markets, ownership of shares is defined according to entries in the issuer's share register. It is possible that a Fund holding these securities could lose its share registration through fraud, negligence or even mere oversight. In addition, shares being delivered for sales and cash being paid for purchases may be delivered before the exchange is complete. This may subject the Fund to further risk of loss in the event of a failure to complete the transaction by the counterparty.
8. Dividends and Distributions to Shareholders: Dividends and distributions to shareholders are recorded on the ex-dividend date. Dividends from net investment income, if any, are declared and paid annually. Net realized capital gains, if any, are distributed at least annually.
B. Advisory Fees: The Adviser, a wholly-owned subsidiary of Morgan Stanley, provides the Fund with advisory services under the terms of an Investment Advisory Agreement, paid quarterly, at an annual rate of 0.85% of the daily net assets of the Fund.
13
Morgan Stanley Variable Insurance Fund, Inc.
Semi-Annual Report – June 30, 2023 (unaudited)
Notes to Financial Statements (cont'd)
The Adviser has agreed to reduce its advisory fee and/or reimburse the Fund so that total annual Fund operating expenses, excluding certain investment related expenses, taxes, interest and other extraordinary expenses (including litigation), will not exceed 0.87% for Class I shares and 1.12% for Class II shares. The fee waivers and/or expense reimbursements will continue for at least one year from the date of the Fund's prospectus or until such time as the Directors act to discontinue all or a portion of such waivers and/or reimbursements when they deem such action is appropriate. For the six months ended June 30, 2023, approximately $192,000 of advisory fees were waived pursuant to this arrangement.
C. Administration Fees: The Adviser also serves as Administrator to the Company and provides administrative services pursuant to an Administration Agreement for an annual fee, accrued daily and paid monthly, of 0.08% of the Fund's average daily net assets.
Under a Sub-Administration Agreement between the Administrator and State Street, State Street provides certain administrative services to the Company. For such services, the Administrator pays State Street a portion of the fee the Administrator receives from the Fund.
D. Servicing Fees: The Company accrues daily and pays quarterly a servicing fee of up to 0.17% of the average daily value of shares of the Fund held in an insurance company's account. Certain insurance companies have entered into a servicing agreement with the Company to provide administrative and other contract-owner related services on behalf of the Fund.
E. Distribution Fees: Morgan Stanley Distribution, Inc. ("MSDI" or the "Distributor"), a wholly-owned subsidiary of the Adviser and an indirect subsidiary of Morgan Stanley, serves as the Distributor of the Fund and provides the Fund's Class II shareholders with distribution services pursuant to a Distribution Plan (the "Plan") in accordance with Rule 12b-1 under the Act. Under the Plan, the Fund is authorized to pay the Distributor a distribution fee, which is accrued daily and paid monthly, at an annual rate of 0.25% of the Fund's average daily net assets attributable to Class II shares.
F. Dividend Disbursing and Transfer/Co-Transfer Agent: The Company's dividend disbursing and transfer agent is SS&C Global Investor & Distribution Solutions, Inc. ("SS&C GIDS, Inc."). Pursuant to a Transfer Agency Agreement, the Company pays SS&C GIDS, Inc. a fee based on the number of classes, accounts and transactions relating to the Funds of the Company.
Eaton Vance Management ("EVM"), an affiliate of Morgan Stanley, provides co-transfer agency and related services to the
Fund pursuant to a Co-Transfer Agency Services Agreement. For the six months ended June 30, 2023, co-transfer agency fees and expenses incurred to EVM, included in "Transfer Agency Fees" in the Statement of Operations, amounted to less than $500.
G. Custodian Fees: State Street (the "Custodian") also serves as Custodian for the Company in accordance with a Custodian Agreement. The Custodian holds cash, securities and other assets of the Company as required by the Act. Custody fees are payable monthly based on assets held in custody, investment purchases and sales activity and account maintenance fees, plus reimbursement for certain out-of-pocket expenses.
H. Security Transactions and Transactions with Affiliates: For the six months ended June 30, 2023, purchases and sales of investment securities for the Fund, other than long-term U.S. Government securities and short-term investments were approximately $9,593,000 and $17,604,000, respectively. There were no purchases and sales of long-term U.S. Government securities for the six month ended June 30, 2023.
The Fund invests in the Institutional Class of the Morgan Stanley Institutional Liquidity Funds (the "Liquidity Funds"), an open-end management investment company managed by the Adviser, both directly and as a portion of the securities held as collateral on loaned securities. Advisory fees paid by the Fund are reduced by an amount equal to its pro-rata share of the advisory and administration fees paid by the Fund due to its investment in the Liquidity Funds. For the six months ended June 30, 2023, advisory fees paid were reduced by approximately $1,000 relating to the Fund's investment in the Liquidity Funds.
A summary of the Fund's transactions in shares of affiliated investments during the six months ended June 30, 2023 is as follows:
Affiliated Investment Company | Value December 31, 2022 (000) | Purchases at Cost (000) | Proceeds from Sales (000) | Dividend Income (000) | |||||||||||||||
Liquidity Funds | $ | 678 | $ | 12,054 | $ | 9,935 | $ | 29 |
Affiliated Investment Company (cont'd) | Realized Gain (Loss) (000) | Change in Unrealized Appreciation (Depreciation) (000) | Value June 30, 2023 (000) | ||||||||||||
Liquidity Funds | $ | — | $ | — | $ | 2,797 |
The Fund is permitted to purchase and sell securities ("cross-trade") from and to other Morgan Stanley funds as well as other funds and client accounts for which the Adviser or an affiliate of the Adviser serves as investment adviser,
14
Morgan Stanley Variable Insurance Fund, Inc.
Semi-Annual Report – June 30, 2023 (unaudited)
Notes to Financial Statements (cont'd)
pursuant to procedures approved by the Directors in compliance with Rule 17a-7 under the Act (the "Rule"). Each cross-trade is executed at the current market price in compliance with provisions of the Rule. For the six months ended June 30, 2023, the Fund did not engage in any cross-trade transactions.
The Fund has an unfunded Deferred Compensation Plan (the "Compensation Plan"), which allows each independent Director to defer payment of all, or a portion, of the fees he or she receives for serving on the Board of Directors. Each eligible Director generally may elect to have the deferred amounts credited with a return equal to the total return on one or more of the Morgan Stanley funds that are offered as investment options under the Compensation Plan. Appreciation/depreciation and distributions received from these investments are recorded with an offsetting increase/decrease in the deferred compensation obligation and do not affect the NAV of the Fund.
I. Federal Income Taxes: It is the Fund's intention to continue to qualify as a regulated investment company and distribute all of its taxable and tax-exempt income. Accordingly, no provision for federal income taxes is required in the financial statements.
The Fund may be subject to taxes imposed by countries in which it invests. Such taxes are generally based on income and/or capital gains earned or repatriated. Taxes are accrued based on net investment income, net realized gains and net unrealized appreciation as such income and/or gains are earned. Taxes may also be based on transactions in foreign currency and are accrued based on the value of investments denominated in such currency.
FASB ASC 740-10, "Income Taxes — Overall", sets forth a minimum threshold for financial statement recognition of the benefit of a tax position taken or expected to be taken in a tax return. Management has concluded there are no significant uncertain tax positions that would require recognition in the financial statements. If applicable, the Fund recognizes interest accrued related to unrecognized tax benefits in "Interest Expense" and penalties in "Other Expenses" in the Statement of Operations. The Fund files tax returns with the U.S. Internal Revenue Service, New York and various states. Generally, each of the tax years in the four-year period ended December 31, 2022 remains subject to examination by taxing authorities.
The tax character of distributions paid may differ from the character of distributions shown for GAAP purposes due to short-term capital gains being treated as ordinary income for
tax purposes. The tax character of distributions paid during fiscal years 2022 and 2021 was as follows:
2022 Distributions Paid From: | 2021 Distributions Paid From: | ||||||||||||||
Ordinary Income (000) | Long-Term Capital Gain (000) | Ordinary Income (000) | Long-Term Capital Gain (000) | ||||||||||||
$ | 3,242 | $ | 4,066 | $ | 2,024 | $ | 3,016 |
The amount and character of income and gains to be distributed are determined in accordance with income tax regulations which may differ from GAAP. These book/tax differences are either considered temporary or permanent in nature.
Temporary differences are attributable to differing book and tax treatments for the timing of the recognition of gains (losses) on certain investment transactions and the timing of the deductibility of certain expenses.
The Fund had no permanent differences causing reclassifications among the components of net assets for the year ended December 31, 2022.
At December 31, 2022, the components of distributable earnings for the Fund on a tax basis were as follows:
Undistributed | Undistributed | ||||||
$1,768 | $10,525 |
J. Credit Facility: The Company and other Morgan Stanley funds participated in a $300,000,000 committed, unsecured revolving line of credit facility (the "Facility") with State Street. Effective April 17, 2023, the committed line amount increased to $500,000,000. This Facility is to be used for temporary emergency purposes or funding of shareholder redemption requests. The interest rate for any funds drawn will be based on the federal funds rate or overnight bank funding rate plus a spread. The Facility also has a commitment fee of 0.25% per annum based on the unused portion of the Facility, which is allocated among participating funds based on relative net assets. During the six months ended June 30, 2023, the Fund did not have any borrowings under the Facility.
K. Other: At June 30, 2023, the Fund had record owners of 10% or greater. Investment activities of these shareholders could have a material impact on the Fund. The aggregate percentage of such owners was 80.3%.
L. Market Risk: An investment in the Fund is based on the values of the Fund's investments, which may change due to economic and other events that affect markets generally, as well as those that affect particular regions, countries,
15
Morgan Stanley Variable Insurance Fund, Inc.
Semi-Annual Report – June 30, 2023 (unaudited)
Notes to Financial Statements (cont'd)
industries, companies or governments. Social, political, economic and other conditions and events, such as war, natural disasters, health emergencies (e.g., epidemics and pandemics), terrorism, conflicts, social unrest, recessions, inflation, rapid interest rate changes and supply chain disruptions, may occur and could significantly impact issuers, industries, governments and other systems, including the financial markets and global economy. It is difficult to predict when events affecting the U.S. or global financial markets and economies may occur, the effects that such events may have and the duration of those effects (which may last for extended periods). These events may be sudden and significant and may negatively impact broad segments of businesses and populations and have a significant and rapid negative impact on the performance of and/or income or yield from the Fund's investments and exacerbate pre-existing risks to the Fund. 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 ultimate impact of public health emergencies or other adverse economic or market developments and the extent to which the associated conditions impact the Fund and its investments will also depend on other future developments, which are highly uncertain, difficult to accurately predict and subject to change at any time. The financial performance of the Fund's investments (and, in turn, the Fund's investment results) as well as their liquidity may be adversely affected because of these and similar types of factors and developments.
16
Morgan Stanley Variable Insurance Fund, Inc.
Semi-Annual Report – June 30, 2023 (unaudited)
Investment Advisory Agreement Approval
Nature, Extent and Quality of Services
The Board reviewed and considered the nature and extent of the investment advisory services provided by the Adviser under the advisory agreement, including portfolio management, investment research and equity and fixed income securities trading. The Board also reviewed and considered the nature and extent of the non-advisory, administrative services provided by the Administrator under the administration agreement, including accounting, operations, clerical, bookkeeping, compliance, business management and planning, legal services and the provision of supplies, office space and utilities at the Adviser's expense. The Board also considered the Adviser's investment in personnel and infrastructure that benefits the Fund. (The Adviser, and Administrator together are referred to as the "Adviser" and the advisory and administration agreements together are referred to as the "Management Agreement.") The Board also considered that the Adviser serves a variety of other investment advisory clients and has experience overseeing service providers. The Board also compared the nature of the services provided by the Adviser with similar services provided by non-affiliated advisers as prepared by Broadridge Financial Solutions, Inc. ("Broadridge").
The Board reviewed and considered the qualifications of the portfolio managers, the senior administrative managers and other key personnel of the Adviser who provide the advisory and administrative services to the Fund. The Board determined that the Adviser's portfolio managers and key personnel are well qualified by education and/or training and experience to perform the services in an efficient and professional manner. The Board concluded that the nature and extent of the advisory and administrative services provided were necessary and appropriate for the conduct of the business and investment activities of the Fund and supported its decision to approve the Management Agreement.
Performance, Fees and Expenses of the Fund
The Board reviewed the performance, fees and expenses of the Fund compared to its peers, as prepared by Broadridge, and to appropriate benchmarks where applicable. The Board discussed with the Adviser the performance goals and the actual results achieved in managing the Fund. When considering a fund's performance, the Board and the Adviser place emphasis on trends and longer-term returns (focusing on one-year, three-year and five-year performance, as of December 31, 2022, or since inception, as applicable). When a fund underperforms its benchmark and/or its peer group average, the Board and the Adviser discuss the causes of such underperformance and, where necessary, they discuss specific changes to investment strategy or investment personnel. The Board noted that the Fund's performance was below its peer group average for the one-, three- and five-year periods. The Board discussed with the Adviser the level of the advisory and administration fees (together, the "management fee") for this Fund relative to comparable funds and/or other accounts advised by the Adviser and/or compared to its peers as prepared by Broadridge. In addition to the management fee, the Board also reviewed the Fund's total expense ratio. When a fund's management fee and/or its total expense ratio are higher than its peers, the Board and the Adviser discuss the reasons for this and, where appropriate, they discuss possible waivers and/or caps. The Board noted that the Fund's contractual management fee was higher than its peer group average and the actual management fee and total expense ratio were lower than its peer group averages. After discussion, the Board concluded that the Fund's (i) performance was acceptable; and (ii) management fee and total expense ratio were competitive with its peer group averages.
Economies of Scale
The Board considered the size and growth prospects of the Fund and how that relates to the Fund's total expense ratio and particularly the Fund's management fee rate, which does not include breakpoints. In conjunction with its review of the Adviser's profitability, the Board discussed with the Adviser how a change in assets can affect the efficiency or effectiveness of managing the Fund and whether the management fee level is appropriate relative to current and projected asset levels and/or whether the management fee structure reflects economies of scale as asset levels change. The Board has determined that its review of the actual and/or potential economies of scale of the Fund supports its decision to approve the Management Agreement.
Profitability of the Adviser and Affiliates
The Board considered information concerning the costs incurred and profits realized by the Adviser and its affiliates during the last year from their relationship with the Fund and during the last two years from their relationship with the Morgan Stanley
17
Morgan Stanley Variable Insurance Fund, Inc.
Semi-Annual Report – June 30, 2023 (unaudited)
Investment Advisory Agreement Approval (cont'd)
Fund Complex and reviewed with the Adviser the cost allocation methodology used to determine the profitability of the Adviser and affiliates. The Board has determined that its review of the analysis of the Adviser's expenses and profitability supports its decision to approve the Management Agreement.
Other Benefits of the Relationship
The Board considered other direct and indirect benefits to the Adviser and/or its affiliates derived from their relationship with the Fund and other funds advised by the Adviser. These benefits may include, among other things, fees for trading, distribution and/or shareholder servicing and for transaction processing and reporting platforms used by securities lending agents, and research received by the Adviser generated from commission dollars spent on funds' portfolio trading. The Board reviewed with the Adviser these arrangements and the reasonableness of the Adviser's costs relative to the services performed. The Board has determined that its review of the other benefits received by the Adviser or its affiliates supports its decision to approve the Management Agreement.
Resources of the Adviser and Historical Relationship Between the Fund and the Adviser
The Board considered whether the Adviser is financially sound and has the resources necessary to perform its obligations under the Management Agreement. The Board also reviewed and considered the historical relationship between the Fund and the Adviser, including the organizational structure of the Adviser, the policies and procedures formulated and adopted by the Adviser for managing the Fund's operations and the Board's confidence in the competence and integrity of the senior managers and key personnel of the Adviser. The Board concluded that the Adviser has the financial resources necessary to fulfill its obligations under the Management Agreement and that it is beneficial for the Fund to continue its relationship with the Adviser.
Other Factors and Current Trends
The Board considered the controls and procedures adopted and implemented by the Adviser and monitored by the Fund's Chief Compliance Officer and concluded that the conduct of business by the Adviser indicates a good faith effort on its part to adhere to high ethical standards in the conduct of the Fund's business.
General Conclusion
After considering and weighing all of the above factors, with various written materials and verbal information presented by the Adviser, the Board concluded that it would be in the best interest of the Fund and its shareholders to approve renewal of the Management Agreement for another year. In reaching this conclusion the Board did not give particular weight to any single piece of information or factor referenced above. The Board considered these factors and information over the course of the year and in numerous meetings, some of which were in executive session with only the independent Board members and their counsel present. It is possible that individual Board members may have weighed these factors, and the information presented, differently in reaching their individual decisions to approve the Management Agreement.
18
Morgan Stanley Variable Insurance Fund, Inc.
Semi-Annual Report – June 30, 2023 (unaudited)
Liquidity Risk Management Program
In compliance with Rule 22e-4 under the Investment Company Act of 1940, as amended (the "Liquidity Rule"), the Fund has adopted and implemented a liquidity risk management program (the "Program"), which is reasonably designed to assess and manage the risk that the Fund could not meet requests to redeem shares issued by the Fund without significant dilution of remaining investors' interests in the Fund (i.e., liquidity risk). The Fund's Board of Directors (the "Board") previously approved the designation of the Liquidity Risk Subcommittee (the "LRS") as Program administrator. The LRS is comprised of representatives from various divisions within Morgan Stanley Investment Management.
At a meeting held on March 1-2, 2023, the Board reviewed a written report prepared by the LRS that addressed the Program's operation and assessed its adequacy, and effectiveness of implementation for the period from January 1, 2022, through December 31, 2022, as required under the Liquidity Rule. The report concluded that the Program operated effectively and was adequately and effectively implemented in all material aspects, and that the relevant controls and safeguards were appropriately designed to enable the LRS to administer the Program in compliance with the Liquidity Rule.
In accordance with the Program, the LRS assessed each Fund's liquidity risk no less frequently than annually taking into consideration certain factors, as applicable, such as (i) investment strategy and liquidity of portfolio investments, (ii) short-term and long-term cash flow projections and (iii) holdings of cash and cash equivalents and borrowing arrangements and other funding sources. Certain factors are considered under both normal and reasonably foreseeable stressed conditions.
Each Fund portfolio investment is classified into one of four liquidity categories, which classification is assessed at least monthly by the LRS. The classification is based on a determination of the number of days it is reasonably expected to take to convert the investment into cash, or sell or dispose of the investment, in current market conditions without significantly changing the market value of the investment. Liquidity classification determinations take into account various market, trading and investment-specific considerations, as well as market depth, and in some cases utilize third-party vendor data.
The Liquidity Rule limits a fund's investments in illiquid investments to 15% of its net assets and requires funds that do not primarily hold assets that are highly liquid investments to determine and maintain a minimum percentage of the fund's net assets to be invested in highly liquid investments (highly liquid investment minimum or "HLIM"). The LRS believes that the Program includes provisions reasonably designed to review, monitor and comply with the 15% limit on illiquid investments and for determining, periodically reviewing and complying with the HLIM requirement, as applicable.
There can be no assurance that the Program will achieve its objectives under all circumstances in the future. Please refer to the Fund's prospectus for more information regarding the Fund's exposure to liquidity risk and other risks to which it may be subject.
19
Morgan Stanley Variable Insurance Fund, Inc.
Semi-Annual Report – June 30, 2023 (unaudited)
Directors and Officers Information
Directors
Frank L. Bowman
Frances L. Cashman
Kathleen A. Dennis
Nancy C. Everett
Eddie A. Grier
Jakki L. Haussler
Dr. Manuel H. Johnson
Joseph J. Kearns
Michael F. Klein
Patricia A. Maleski
W. Allen Reed, Chair of the Board
Adviser and Administrator
Morgan Stanley Investment Management Inc.
522 Fifth Avenue
New York, New York 10036
Distributor
Morgan Stanley Distribution, Inc.
522 Fifth Avenue
New York, New York 10036
Dividend Disbursing and Transfer Agent
SS&C Global Investor & Distribution Solutions, Inc.
P.O. Box 219804
Kansas City, Missouri 64121-9804
Co-Transfer Agent
Eaton Vance Management
Two International Place
Boston, Massachusetts 02110
Officers
John H. Gernon
President and Principal Executive Officer
Deidre A. Downes
Chief Compliance Officer
Francis J. Smith
Treasurer and Principal Financial Officer
Mary E. Mullin
Secretary
Michael J. Key
Vice President
Custodian
State Street Bank and Trust Company
One Congress Street
Boston, Massachusetts 02114
Legal Counsel
Dechert LLP
1095 Avenue of the Americas
New York, New York 10036
Counsel to the Independent Directors
Perkins Coie LLP
1155 Avenue of the Americas,
22nd Floor
New York, New York 10036
Independent Registered Public Accounting Firm
Ernst & Young LLP
200 Clarendon Street
Boston, Massachusetts 02116
Reporting to Shareholders
Each Morgan Stanley fund provides a complete schedule of portfolio holdings in its Semi-Annual and the Annual Reports within 60 days of the end of the fund's second and fourth fiscal quarters. The Semi-Annual and Annual Reports are filed electronically with the Securities and Exchange Commission ("SEC") on Form N-CSRS and Form N-CSR, respectively. Morgan Stanley makes these reports available on its public website, www.morganstanley.com/im/shareholderreports. Each Morgan Stanley non-money market fund also files a complete schedule of portfolio holdings with the SEC for the fund's first and third fiscal quarters as an attachment to Form N-PORT. Morgan Stanley does not deliver the reports for the first and third fiscal quarters to shareholders, but makes the complete schedule of portfolio holdings for the fund's first and third fiscal quarters available on its public website. The holdings for each money market fund are also posted to the Morgan Stanley public website. You may obtain the Form N-PORT filings (as well as the Form N-CSR and N-CSRS filings) by accessing the SEC's website, www.sec.gov. You can also request copies of these materials, upon payment of a duplicating fee, by electronic request at the SEC's email address (publicinfo@sec.gov).
Proxy Voting Policies and Procedures and Proxy Voting Record
You may obtain a copy of the Company's Proxy Voting Policy and Procedures and information regarding how the Company voted proxies relating to portfolio securities during the most recent twelve-month period ended June 30, without charge, upon request, by calling toll free 1 (800) 869-6397 or by visiting our website at www.morganstanley.com/im/shareholderreports. This information is also available on the SEC's website at www.sec.gov.
This report is submitted for the general information of the shareholders of the Fund. For more detailed information about the Fund, its fees and expenses and other pertinent information, please read its Prospectus. The Company's Statement of Additional Information contains additional information about the Fund, including its Directors. It is available, without charge, by calling 1 (800) 869-6397.
Householding Notice
To reduce printing and mailing costs, the Fund attempts to eliminate duplicate mailings to the same address. The Fund delivers a single copy of certain shareholder documents, including shareholder reports, prospectuses and proxy materials, to investors with the same last name who reside at the same address. Your participation in this program will continue for an unlimited period of time unless you instruct us otherwise. You can request multiple copies of these documents by calling 1 (800) 869-6397, 8:00 a.m. to 6:00 p.m., ET. Once our Customer Service Center has received your instructions, we will begin sending individual copies for each account within 30 days.
This report is not authorized for distribution to prospective investors in the Fund unless preceded or accompanied by an effective Prospectus. Read the Prospectus carefully before investing.
UIFGINSAN
5833183 EXP 08.31.24
Morgan Stanley Variable Insurance Fund, Inc.
Semi-Annual Report – June 30, 2023
Global Real Estate Portfolio
The Fund is intended to be a funding vehicle for variable annuity contracts and variable life insurance policies offered by the separate accounts of certain life insurance companies.
Morgan Stanley Variable Insurance Fund, Inc.
Semi-Annual Report – June 30, 2023 (unaudited)
Table of Contents
Expense Example | 2 | ||||||
Portfolio of Investments | 3 | ||||||
Statement of Assets and Liabilities | 5 | ||||||
Statement of Operations | 6 | ||||||
Statements of Changes in Net Assets | 7 | ||||||
Financial Highlights | 8 | ||||||
Notes to Financial Statements | 9 | ||||||
Investment Advisory Agreement Approval | 16 | ||||||
Liquidity Risk Management Program | 18 | ||||||
Director and Officer Information | Back Cover |
1
Morgan Stanley Variable Insurance Fund, Inc.
Semi-Annual Report – June 30, 2023 (unaudited)
Expense Example
Global Real Estate Portfolio
As a shareholder of the Global Real Estate Portfolio (the "Fund"), you incur two types of costs: (1) insurance company charges; and (2) ongoing costs, which include advisory fees, administration fees, distribution (12b-1) fees and other Fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.
This example is based on an investment of $1,000 invested at the beginning of the six-month period ended June 30, 2023 and held for the entire six-month period.
Actual Expenses
The table below provides information about actual account values and actual expenses. You may use the information in this table, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the table under the heading entitled "Actual Expenses Paid During Period" to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The table below provides information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any insurance company charges. Therefore, the table below is useful in comparing ongoing costs, but will not help you determine the relative total cost of owning different funds. In addition, if these insurance company charges were included, your costs would have been higher.
Beginning Account Value 1/1/23 | Actual Ending Account Value 6/30/23 | Hypothetical Ending Account Value | Actual Expenses Paid During Period* | Hypothetical Expenses Paid During Period* | Net Expense Ratio During Period** | ||||||||||||||||||||||
Global Real Estate Portfolio Class II | $ | 1,000.00 | $ | 1,018.70 | $ | 1,018.60 | $ | 6.26 | $ | 6.26 | 1.25 | % |
* Expenses are calculated using the Fund Class' annualized net expense ratio (as disclosed), multiplied by the average account value over the period and multiplied by 181/365 (to reflect the most recent one-half year period).
** Annualized.
2
Morgan Stanley Variable Insurance Fund, Inc.
Semi-Annual Report – June 30, 2023 (unaudited)
Portfolio of Investments
Global Real Estate Portfolio
Shares | Value (000) | ||||||||||
Common Stocks (98.7%) | |||||||||||
Australia (3.3%) | |||||||||||
Goodman Group REIT | 31,972 | $ | 430 | ||||||||
National Storage REIT | 279,204 | 438 | |||||||||
Region RE Ltd. REIT | 210,371 | 319 | |||||||||
1,187 | |||||||||||
Austria (0.2%) | |||||||||||
CA Immobilien Anlagen AG | 3,030 | 88 | |||||||||
Belgium (1.9%) | |||||||||||
Aedifica SA REIT (a) | 3,122 | 200 | |||||||||
Shurgard Self Storage Ltd. REIT | 3,913 | 179 | |||||||||
Warehouses De Pauw CVA REIT | 10,364 | 285 | |||||||||
664 | |||||||||||
Canada (3.0%) | |||||||||||
Boardwalk REIT | 5,760 | 270 | |||||||||
Chartwell Retirement Residences (Units) (b) | 37,699 | 270 | |||||||||
Granite REIT | 3,704 | 219 | |||||||||
InterRent REIT | 32,459 | 314 | |||||||||
1,073 | |||||||||||
France (0.8%) | |||||||||||
Carmila SA REIT (c) | 7,926 | 123 | |||||||||
Mercialys SA REIT | 16,344 | 148 | |||||||||
271 | |||||||||||
Germany (1.8%) | |||||||||||
LEG Immobilien SE (c) | 4,549 | 262 | |||||||||
Vonovia SE | 19,485 | 381 | |||||||||
643 | |||||||||||
Hong Kong (6.5%) | |||||||||||
Link REIT | 146,994 | 818 | |||||||||
Sun Hung Kai Properties Ltd. | 71,893 | 909 | |||||||||
Wharf Real Estate Investment Co. Ltd. | 118,420 | 594 | |||||||||
2,321 | |||||||||||
Japan (9.4%) | |||||||||||
GLP J-REIT | 337 | 333 | |||||||||
Heiwa Real Estate, Inc. REIT | 149 | 151 | |||||||||
Hulic Co. Ltd. (a) | 29,800 | 255 | |||||||||
Invincible Investment Corp. REIT | 745 | 296 | |||||||||
Japan Hotel REIT Investment Corp. | 545 | 278 | |||||||||
Japan Metropolitan Fund Investment Corp. REIT | 461 | 309 | |||||||||
Japan Real Estate Investment Corp. REIT | 64 | 244 | |||||||||
Mitsui Fudosan Co. Ltd. | 38,500 | 767 | |||||||||
Nippon Building Fund, Inc. REIT (a) | 83 | 326 | |||||||||
Nomura Real Estate Master Fund, Inc. REIT | 144 | 166 | |||||||||
Sekisui House Ltd. | 11,500 | 232 | |||||||||
3,357 | |||||||||||
Singapore (2.3%) | |||||||||||
Frasers Centrepoint Trust REIT | 158,900 | 258 | |||||||||
Frasers Logistics & Commercial Trust REIT | 340,400 | 315 | |||||||||
Mapletree Pan Asia Commercial Trust REIT | 197,600 | 238 | |||||||||
811 |
Shares | Value (000) | ||||||||||
Spain (0.7%) | |||||||||||
Merlin Properties Socimi SA REIT | 30,373 | $ | 260 | ||||||||
Sweden (1.0%) | |||||||||||
Castellum AB | 12,091 | 116 | |||||||||
Fabege AB (a) | 17,736 | 128 | |||||||||
Hufvudstaden AB, Class A | 9,188 | 109 | |||||||||
353 | |||||||||||
Switzerland (0.6%) | |||||||||||
PSP Swiss Property AG (Registered) | 1,891 | 211 | |||||||||
United Kingdom (3.6%) | |||||||||||
Impact Healthcare PLC REIT | 119,840 | 137 | |||||||||
LondonMetric Property PLC REIT | 123,851 | 262 | |||||||||
Segro PLC REIT | 57,827 | 527 | |||||||||
UNITE Group PLC REIT | 18,781 | 208 | |||||||||
Workspace Group PLC REIT | 21,902 | 132 | |||||||||
1,266 | |||||||||||
United States (63.6%) | |||||||||||
Agree Realty Corp. REIT | 5,917 | 387 | |||||||||
Alexandria Real Estate Equities, Inc. REIT | 1,680 | 191 | |||||||||
American Homes 4 Rent, Class A REIT | 31,529 | 1,118 | |||||||||
Americold Realty Trust, Inc. REIT | 14,669 | 474 | |||||||||
AvalonBay Communities, Inc. REIT | 8,300 | 1,571 | |||||||||
Boyd Gaming Corp. | 3,222 | 223 | |||||||||
Brixmor Property Group, Inc. REIT | 27,635 | 608 | |||||||||
Digital Realty Trust, Inc. REIT | 8,709 | 992 | |||||||||
Equinix, Inc. REIT | 2,572 | 2,016 | |||||||||
Essex Property Trust, Inc. REIT | 2,322 | 544 | |||||||||
Host Hotels & Resorts, Inc. REIT | 30,954 | 521 | |||||||||
Iron Mountain, Inc. REIT | 3,176 | 180 | |||||||||
Kite Realty Group Trust REIT | 28,269 | 632 | |||||||||
Life Storage, Inc. REIT | 5,433 | 722 | |||||||||
Mid-America Apartment Communities, Inc. REIT | 5,176 | 786 | |||||||||
NETSTREIT Corp. REIT | 14,483 | 259 | |||||||||
Prologis, Inc. REIT | 26,135 | 3,205 | |||||||||
Public Storage REIT | 4,613 | 1,346 | |||||||||
Realty Income Corp. REIT | 17,820 | 1,065 | |||||||||
Rexford Industrial Realty, Inc. REIT | 6,853 | 358 | |||||||||
RPT Realty REIT | 24,431 | 255 | |||||||||
Simon Property Group, Inc. REIT | 8,791 | 1,015 | |||||||||
Sun Communities, Inc. REIT | 4,644 | 606 | |||||||||
Ventas, Inc. REIT | 12,683 | 600 | |||||||||
VICI Properties, Inc. REIT | 30,679 | 964 | |||||||||
Welltower, Inc. REIT | 24,609 | 1,991 | |||||||||
22,629 | |||||||||||
Total Common Stocks (Cost $34,434) | 35,134 | ||||||||||
No. of Rights | |||||||||||
Rights (0.0%)‡ | |||||||||||
Belgium (0.0%)‡ | |||||||||||
Aedifica SA, expires 7/3/23 (c) (Cost $—) | 2,820 | 3 |
The accompanying notes are an integral part of the financial statements.
3
Morgan Stanley Variable Insurance Fund, Inc.
Semi-Annual Report – June 30, 2023 (unaudited)
Portfolio of Investments (cont'd)
Global Real Estate Portfolio
Shares | Value (000) | ||||||||||
Short-Term Investments (1.4%) | |||||||||||
Investment Company (0.9%) | |||||||||||
Morgan Stanley Institutional Liquidity Funds — Treasury Portfolio — Institutional Class (See Note H) (Cost $324) | 324,307 | $ | 324 | ||||||||
Securities held as Collateral on Loaned Securities (0.5%) | |||||||||||
Investment Company (0.5%) | |||||||||||
Morgan Stanley Institutional Liquidity Funds — Treasury Securities Portfolio — Institutional Class (See Note H) | 162,821 | 163 | |||||||||
Face Amount (000) | |||||||||||
Repurchase Agreements (0.0%)‡ | |||||||||||
Citigroup, Inc., (5.00%, dated 6/30/23, due 7/3/23; proceeds $3; fully collateralized by U.S. Government obligations; 0.00% due 7/27/23 - 8/10/23; valued at $3) | $ | 3 | 3 | ||||||||
HSBC Securities USA, Inc., (5.05%, dated 6/30/23, due 7/3/23; proceeds $6; fully collateralized by U.S. Government obligations; 0.00% due 8/15/23 - 11/15/25; valued at $6) | 6 | 6 | |||||||||
Merrill Lynch & Co., Inc., (5.05%, dated 6/30/23, due 7/3/23; proceeds $5; fully collateralized by a U.S. Government obligation; 1.63% due 10/15/27; valued at $5) | 5 | 5 | |||||||||
14 | |||||||||||
Total Securities held as Collateral on Loaned Securities (Cost $177) | 177 | ||||||||||
Total Short-Term Investments (Cost $501) | 501 | ||||||||||
Total Investments (100.1%) (Cost $34,935) Including $858 of Securities Loaned (d)(e) | 35,638 | ||||||||||
Liabilities in Excess of Other Assets (–0.1%) | (45 | ) | |||||||||
Net Assets (100.0%) | $ | 35,593 |
Country assignments and aggregations are based generally on third party vendor classifications and information, and may be different from the assignments and aggregations under the policies set forth in the Fund's prospectus and/or statement of additional information relating to geographic classifications.
‡ Amount is less than 0.05%.
(a) All or a portion of this security was on loan at June 30, 2023.
(b) Consists of one or more classes of securities traded together as a unit; stocks with attached warrants.
(c) Non-income producing security.
(d) The approximate fair value and percentage of net assets, $11,432,000 and 32.1%, respectively, represent the securities that have been fair valued under the fair valuation policy for international investments as described in Note A-1 within the Notes to Financial Statements.
(e) At June 30, 2023, the aggregate cost for federal income tax purposes approximates the aggregate cost for book purposes. The aggregate gross unrealized appreciation is approximately $2,929,000 and the aggregate gross unrealized depreciation is approximately $2,226,000, resulting in net unrealized appreciation of approximately $703,000.
CVA Certificaten Van Aandelen.
REIT Real Estate Investment Trust.
Portfolio Composition*
Classification | Percentage of Total Investments | ||||||
Residential | 17.1 | % | |||||
Industrial | 16.4 | ||||||
Retail | 14.3 | ||||||
Diversified | 14.2 | ||||||
Other** | 12.9 | ||||||
Health Care | 9.0 | ||||||
Data Centers | 8.5 | ||||||
Self Storage | 7.6 | ||||||
Total Investments | 100.0 | % |
* Percentages indicated are based upon total investments (excluding Securities held as Collateral on Loaned Securities) as of June 30, 2023.
** Industries and/or investment types representing less than 5% of total investments.
The accompanying notes are an integral part of the financial statements.
4
Morgan Stanley Variable Insurance Fund, Inc.
Semi-Annual Report – June 30, 2023 (unaudited)
Global Real Estate Portfolio
Statement of Assets and Liabilities | June 30, 2023 (000) | ||||||
Assets: | |||||||
Investments in Securities of Unaffiliated Issuers, at Value(1) (Cost $34,448) | $ | 35,151 | |||||
Investment in Security of Affiliated Issuer, at Value (Cost $487) | 487 | ||||||
Total Investments in Securities, at Value (Cost $34,935) | 35,638 | ||||||
Foreign Currency, at Value (Cost $138) | 138 | ||||||
Dividends Receivable | 131 | ||||||
Tax Reclaim Receivable | 24 | ||||||
Receivable for Fund Shares Sold | 8 | ||||||
Receivable from Affiliate | 1 | ||||||
Receivable from Securities Lending Income | — | @ | |||||
Other Assets | 13 | ||||||
Total Assets | 35,953 | ||||||
Liabilities: | |||||||
Collateral on Securities Loaned, at Value | 177 | ||||||
Payable for Professional Fees | 45 | ||||||
Payable for Fund Shares Redeemed | 30 | ||||||
Deferred Capital Gain Country Tax | 30 | ||||||
Payable for Investments Purchased | 18 | ||||||
Payable for Advisory Fees | 13 | ||||||
Payable for Custodian Fees | 12 | ||||||
Payable for Servicing Fees | 9 | ||||||
Payable for Distribution Fees — Class II Shares | 7 | ||||||
Payable for Administration Fees | 2 | ||||||
Payable for Transfer Agency Fees | — | @ | |||||
Other Liabilities | 17 | ||||||
Total Liabilities | 360 | ||||||
NET ASSETS | $ | 35,593 | |||||
Net Assets Consist of: | |||||||
Paid-in-Capital | $ | 41,165 | |||||
Total Accumulated Loss | (5,572 | ) | |||||
Net Assets | $ | 35,593 | |||||
CLASS II: | |||||||
Net Asset Value, Offering and Redemption Price Per Share Applicable to 5,018,758 Outstanding $0.001 Par Value Shares (Authorized 500,000,000 Shares) | $ | 7.09 | |||||
(1) Including: | |||||||
Securities on Loan, at Value: | $ | 858 |
@ Amount is less than $500.
The accompanying notes are an integral part of the financial statements.
5
Morgan Stanley Variable Insurance Fund, Inc.
Semi-Annual Report – June 30, 2023 (unaudited)
Global Real Estate Portfolio
Statement of Operations | Six Months Ended June 30, 2023 (000) | ||||||
Investment Income: | |||||||
Dividends from Securities of Unaffiliated Issuers (Net of $30 of Foreign Taxes Withheld) | $ | 709 | |||||
Dividends from Security of Affiliated Issuer (Note H) | 6 | ||||||
Income from Securities Loaned — Net | 1 | ||||||
Total Investment Income | 716 | ||||||
Expenses: | |||||||
Advisory Fees (Note B) | 147 | ||||||
Professional Fees | 75 | ||||||
Distribution Fees — Class II Shares (Note E) | 46 | ||||||
Servicing Fees (Note D) | 31 | ||||||
Administration Fees (Note C) | 15 | ||||||
Custodian Fees (Note G) | 14 | ||||||
Shareholder Reporting Fees | 8 | ||||||
Pricing Fees | 3 | ||||||
Transfer Agency Fees (Note F) | 3 | ||||||
Directors' Fees and Expenses | 2 | ||||||
Other Expenses | 4 | ||||||
Total Expenses | 348 | ||||||
Waiver of Advisory Fees (Note B) | (119 | ) | |||||
Rebate from Morgan Stanley Affiliate (Note H) | (— | @) | |||||
Net Expenses | 229 | ||||||
Net Investment Income | 487 | ||||||
Realized Loss: | |||||||
Investments Sold | (2,585 | ) | |||||
Foreign Currency Translation | (3 | ) | |||||
Net Realized Loss | (2,588 | ) | |||||
Change in Unrealized Appreciation (Depreciation): | |||||||
Investments | 2,777 | ||||||
Foreign Currency Translation | 1 | ||||||
Net Change in Unrealized Appreciation (Depreciation) | 2,778 | ||||||
Net Realized Loss and Change in Unrealized Appreciation (Depreciation) | 190 | ||||||
Net Increase in Net Assets Resulting from Operations | $ | 677 |
@ Amount is less than $500.
The accompanying notes are an integral part of the financial statements.
6
Morgan Stanley Variable Insurance Fund, Inc.
Semi-Annual Report – June 30, 2023
Global Real Estate Portfolio
Statements of Changes in Net Assets | Six Months Ended June 30, 2023 (unaudited) (000) | Year Ended December 31, 2022 (000) | |||||||||
Increase (Decrease) in Net Assets: | |||||||||||
Operations: | |||||||||||
Net Investment Income | $ | 487 | $ | 737 | |||||||
Net Realized Loss | (2,588 | ) | (3,518 | ) | |||||||
Net Change in Unrealized Appreciation (Depreciation) | 2,778 | (11,373 | ) | ||||||||
Net Increase (Decrease) in Net Assets Resulting from Operations | 677 | (14,154 | ) | ||||||||
Dividends and Distributions to Shareholders: | |||||||||||
Class II | — | (3,736 | ) | ||||||||
Capital Share Transactions:(1) | |||||||||||
Class II: | |||||||||||
Subscribed | 1,131 | 3,822 | |||||||||
Distributions Reinvested | — | 3,736 | |||||||||
Redeemed | (3,454 | ) | (10,706 | ) | |||||||
Net Decrease in Net Assets Resulting from Capital Share Transactions | (2,323 | ) | (3,148 | ) | |||||||
Total Decrease in Net Assets | (1,646 | ) | (21,038 | ) | |||||||
Net Assets: | |||||||||||
Beginning of Period | 37,239 | 58,277 | |||||||||
End of Period | $ | 35,593 | $ | 37,239 | |||||||
(1) Capital Share Transactions: | |||||||||||
Class II: | |||||||||||
Shares Subscribed | 160 | 486 | |||||||||
Shares Issued on Distributions Reinvested | — | 503 | |||||||||
Shares Redeemed | (488 | ) | (1,264 | ) | |||||||
Net Decrease in Class II Shares Outstanding | (328 | ) | (275 | ) |
The accompanying notes are an integral part of the financial statements.
7
Morgan Stanley Variable Insurance Fund, Inc.
Semi-Annual Report – June 30, 2023
Financial Highlights
Global Real Estate Portfolio
Class II | |||||||||||||||||||||||||||
Six Months Ended June 30, 2023 | Year Ended December 31, | ||||||||||||||||||||||||||
Selected Per Share Data and Ratios | (unaudited) | 2022 | 2021 | 2020 | 2019 | 2018 | |||||||||||||||||||||
Net Asset Value, Beginning of Period | $ | 6.96 | $ | 10.36 | $ | 8.56 | $ | 10.80 | $ | 9.87 | $ | 11.09 | |||||||||||||||
Income (Loss) from Investment Operations: | |||||||||||||||||||||||||||
Net Investment Income(1) | 0.09 | 0.14 | 0.18 | 0.16 | 0.18 | 0.25 | |||||||||||||||||||||
Net Realized and Unrealized Gain (Loss) | 0.04 | (2.81 | ) | 1.85 | (1.86 | ) | 1.58 | (1.13 | ) | ||||||||||||||||||
Total from Investment Operations | 0.13 | (2.67 | ) | 2.03 | (1.70 | ) | 1.76 | (0.88 | ) | ||||||||||||||||||
Distributions from and/or in Excess of: | |||||||||||||||||||||||||||
Net Investment Income | — | (0.39 | ) | (0.23 | ) | (0.37 | ) | (0.29 | ) | (0.34 | ) | ||||||||||||||||
Net Realized Gain | — | (0.34 | ) | — | (0.17 | ) | (0.54 | ) | — | ||||||||||||||||||
Total Distributions | — | (0.73 | ) | (0.23 | ) | (0.54 | ) | (0.83 | ) | (0.34 | ) | ||||||||||||||||
Net Asset Value, End of Period | $ | 7.09 | $ | 6.96 | $ | 10.36 | $ | 8.56 | $ | 10.80 | $ | 9.87 | |||||||||||||||
Total Return(2) | 1.87 | %(3) | (26.20 | )% | 23.83 | % | (14.85 | )% | 18.06 | % | (8.20 | )% | |||||||||||||||
Ratios to Average Net Assets and Supplemental Data: | |||||||||||||||||||||||||||
Net Assets, End of Period (Thousands) | $ | 35,593 | $ | 37,239 | $ | 58,277 | $ | 53,254 | $ | 70,426 | $ | 66,751 | |||||||||||||||
Ratio of Expenses Before Expense Limitation | 1.89 | %(4) | 1.80 | % | 1.81 | % | 1.81 | % | 1.64 | % | 1.66 | % | |||||||||||||||
Ratio of Expenses After Expense Limitation | 1.25 | %(4)(5) | 1.25 | %(5) | 1.25 | %(5) | 1.25 | %(5) | 1.25 | %(5) | 1.33 | %(5)(6) | |||||||||||||||
Ratio of Net Investment Income | 2.65 | %(4)(5) | 1.65 | %(5) | 1.89 | %(5) | 1.89 | %(5) | 1.67 | %(5) | 2.37 | %(5) | |||||||||||||||
Ratio of Rebate from Morgan Stanley Affiliates | 0.00 | %(4)(7) | 0.00 | %(7) | 0.00 | %(7) | 0.00 | %(7) | 0.00 | %(7) | 0.00 | %(7) | |||||||||||||||
Portfolio Turnover Rate | 39 | %(3) | 88 | % | 123 | % | 53 | % | 24 | % | 36 | % |
(1) Per share amount is based on average shares outstanding.
(2) Calculated based on the net asset value as of the last business day of the period. Performance does not reflect fees and expenses imposed by your insurance company's separate account. If performance information included the effect of these additional charges, the total return would be lower.
(3) Not annualized.
(4) Annualized.
(5) 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."
(6) Effective July 1, 2018, the Adviser has agreed to limit the ratio of expenses to average net assets to the maximum ratio of 1.25% for Class II shares. Prior to July 1, 2018, the maximum ratio was 1.40% for Class II shares.
(7) Amount is less than 0.005%.
The accompanying notes are an integral part of the financial statements.
8
Morgan Stanley Variable Insurance Fund, Inc.
Semi-Annual Report – June 30, 2023 (unaudited)
Notes to Financial Statements
Morgan Stanley Variable Insurance Fund, Inc. (the "Company") is registered under the Investment Company Act of 1940, as amended (the "Act"), as an open-end management investment company. The Company is comprised of ten separate active, diversified and non-diversified funds (individually referred to as a "Fund," collectively as the "Funds"). The Company applies investment company accounting and reporting guidance Accounting Standards Codification ("ASC") Topic 946.
The accompanying financial statements relate to the Global Real Estate Portfolio. The Fund seeks to provide current income and capital appreciation. The Fund currently offers Class II shares only, although Class I shares may be offered in the future.
The Company is intended to be a funding vehicle for variable annuity contracts and variable life insurance policies offered by the separate accounts of certain life insurance companies.
A. Significant Accounting Policies: The following significant accounting policies are in conformity with U.S. generally accepted accounting principles ("GAAP"). Such policies are consistently followed by the Company in the preparation of its financial statements. GAAP may require management to make estimates and assumptions that affect the reported amounts and disclosures in the financial statements. Actual results may differ from those estimates.
1. Security Valuation: (1) An equity portfolio security listed or traded on an exchange is valued at its latest reported sales price (or at the exchange official closing price if such exchange reports an official closing price), and if there were no sales on a given day and if there is no official exchange closing price for that day, the security is valued at the mean between the last reported bid and asked prices if such bid and asked prices are available on the relevant exchanges. If only bid prices are available then the latest bid price may be used. Listed equity securities not traded on the valuation date with no reported bid and asked prices available on the exchange are valued at the mean between the current bid and asked prices obtained from one or more reputable brokers/dealers. In cases where a security is traded on more than one exchange, the security is valued on the exchange designated as the primary market; (2) all other equity portfolio securities for which over-the-counter ("OTC") market quotations are readily available are valued at the latest reported sales price (or at the market official closing price if such market reports an official closing price), and if there was no trading in the security on a given day and if there is no official closing price from relevant markets for that day, the security is valued at the mean between the last reported bid and asked prices if such bid and asked prices
are available on the relevant markets. An unlisted equity security that does not trade on the valuation date and for which bid and asked prices from the relevant markets are unavailable is valued at the mean between the current bid and asked prices obtained from one or more reputable brokers/dealers; (3) fixed income securities may be valued by an outside pricing service/vendor approved by the Company's Board of Directors (the "Directors"). The pricing service/vendor may employ a pricing model that takes into account, among other things, bids, yield spreads and/or other market data and specific security characteristics. If Morgan Stanley Investment Management Inc. (the "Adviser") or Morgan Stanley Investment Management Limited ("MSIM Limited") and Morgan Stanley Investment Management Company ("MSIM Company") (together, the "Sub-Advisers"), each a wholly-owned subsidiary of Morgan Stanley, determines that the price provided by the outside pricing service/vendor does not reflect the security's fair value or is unable to provide a price, prices from brokers/dealers may also be utilized. In these circumstances, the value of the security will be the mean of bid and asked prices obtained from brokers/dealers; (4) when market quotations are not readily available, as defined by Rule 2a-5 under the Act, including circumstances under which the Adviser or the Sub-Advisers determine that the closing price, last sale price or the mean between the last reported bid and asked prices are not reflective of a security's market value, portfolio securities are valued at their fair value as determined in good faith under procedures approved by and under the general supervision of the Directors. Occasionally, developments affecting the closing prices of securities and other assets may occur between the times at which valuations of such securities are determined (that is, close of the foreign market on which the securities trade) and the close of business of the New York Stock Exchange ("NYSE"). If developments occur during such periods that are expected to materially affect the value of such securities, such valuations may be adjusted to reflect the estimated fair value of such securities as of the close of the NYSE, as determined in good faith by the Directors or by the Adviser using a pricing service and/or procedures approved by the Directors; (5) foreign exchange transactions ("spot contracts") and foreign exchange forward contracts ("forward contracts") are valued daily using an independent pricing vendor at the spot and forward rates, respectively, as of the close of the NYSE; and (6) investments in mutual funds, including the Morgan Stanley Institutional Liquidity Funds, are valued at the net asset value ("NAV") as of the close of each business day.
9
Morgan Stanley Variable Insurance Fund, Inc.
Semi-Annual Report – June 30, 2023 (unaudited)
Notes to Financial Statements (cont'd)
In connection with Rule 2a-5 of the Act, the Directors have designated the Company's Adviser as its valuation designee. The valuation designee has responsibility for determining fair value and to make the actual calculations pursuant to the fair valuation methodologies previously approved by the Directors. Under procedures approved by the Directors, the Company's Adviser, as valuation designee, has formed a Valuation Committee whose members are approved by the Directors. The Valuation Committee provides administration and oversight of the Company's valuation policies and procedures, which are reviewed at least annually by the Directors. These procedures allow the Company to utilize independent pricing services, quotations from securities and financial instrument dealers and other market sources to determine fair value.
The Fund invests a significant portion of its assets in securities of REITs. The market's perception of prospective declines in private real estate values and other financial assets may result in increased volatility of market prices that can negatively impact the valuation of certain issuers held by the Fund.
2. Fair Value Measurement: Financial Accounting Standards Board ("FASB") ASC 820, "Fair Value Measurement" ("ASC 820"), defines fair value as the price that would be received to sell an asset or pay to transfer a liability in an orderly transaction between market participants at the measurement date. ASC 820 establishes a three-tier hierarchy to distinguish between (1) inputs that reflect the assumptions market participants would use in valuing an asset or liability developed based on market data obtained from sources independent of the reporting entity (observable inputs) and (2) inputs that reflect the reporting entity's own assumptions about the assumptions market participants would use in valuing an asset or liability developed based on the best information available in the circumstances (unobservable inputs) and to establish classification of fair value measurements for disclosure purposes. Various inputs are used in determining the value of the Fund's investments. The inputs are summarized in the three broad levels listed below:
• Level 1 – unadjusted quoted prices in active markets for identical investments
• Level 2 – other significant observable inputs (including quoted prices for similar investments, interest rates, prepayment speeds, credit risk, etc.)
• Level 3 – significant unobservable inputs including the Fund's own assumptions in determining the fair value of investments. Factors considered in making
this determination may include, but are not limited to, information obtained by contacting the issuer, analysts, or the appropriate stock exchange (for exchange-traded securities), analysis of the issuer's financial statements or other available documents and, if necessary, available information concerning other securities in similar circumstances.
The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities and the determination of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to each security.
The following is a summary of the inputs used to value the Fund's investments as of June 30, 2023:
Investment Type | Level 1 Unadjusted quoted prices (000) | Level 2 Other significant observable inputs (000) | Level 3 Significant unobservable inputs (000) | Total (000) | |||||||||||||||
Assets: | |||||||||||||||||||
Common Stocks | |||||||||||||||||||
Data Centers | $ | 3,008 | $ | — | $ | — | $ | 3,008 | |||||||||||
Diversified | — | 5,019 | — | 5,019 | |||||||||||||||
Health Care | 2,861 | 337 | — | 3,198 | |||||||||||||||
Industrial | 4,256 | 1,575 | — | 5,831 | |||||||||||||||
Industrial/Office Mixed | — | 693 | — | 693 | |||||||||||||||
Lodging/Resorts | 744 | 574 | — | 1,318 | |||||||||||||||
Office | 191 | 918 | — | 1,109 | |||||||||||||||
Residential | 5,209 | 851 | — | 6,060 | |||||||||||||||
Retail | 4,221 | 848 | — | 5,069 | |||||||||||||||
Self Storage | 2,068 | 617 | — | 2,685 | |||||||||||||||
Specialty | 1,144 | — | — | 1,144 | |||||||||||||||
Total Common Stocks | 23,702 | 11,432 | — | 35,134 | |||||||||||||||
Rights | |||||||||||||||||||
Health Care | 3 | — | — | 3 | |||||||||||||||
Short-Term Investments | |||||||||||||||||||
Investment Company | 487 | — | — | 487 | |||||||||||||||
Repurchase Agreements | — | 14 | — | 14 | |||||||||||||||
Total Short-Term Investments | 487 | 14 | — | 501 | |||||||||||||||
Total Assets | $ | 24,192 | $ | 11,446 | $ | — | $ | 35,638 |
Transfers between investment levels may occur as the markets fluctuate and/or the availability of data used in an investment's valuation changes.
3. Repurchase Agreements: The Fund may enter into repurchase agreements under which the Fund lends cash and takes possession of securities with an agreement that the counterparty will repurchase such securities. In connection with transactions in repurchase agreements, a
10
Morgan Stanley Variable Insurance Fund, Inc.
Semi-Annual Report – June 30, 2023 (unaudited)
Notes to Financial Statements (cont'd)
bank as custodian for the Fund takes possession of the underlying securities which are held as collateral, with a market value at least equal to the amount of the repurchase transaction, including principal and accrued interest. To the extent that any repurchase transaction exceeds one business day, the value of the collateral is marked-to-market on a daily basis to determine that the value of the collateral does not decrease below the repurchase price plus accrued interest as earned. If such a decrease occurs, additional collateral will be requested and, when received, will be added to the account to maintain full collateralization. In the event of default on the obligation to repurchase, the Fund has the right to liquidate the collateral and apply the proceeds in satisfaction of the obligation. In the event of default or bankruptcy by the counterparty to the agreement, realization of the collateral proceeds may be subject to cost and delays. The Fund, along with other affiliated investment companies, may utilize a joint trading account for the purpose of entering into repurchase agreements.
4. Foreign Currency Translation and Foreign Investments: The books and records of the Fund are maintained in U.S. dollars. Foreign currency amounts are translated into U.S. dollars as follows:
— investments, other assets and liabilities at the prevailing rate of exchange on the valuation date;
— investment transactions and investment income at the prevailing rates of exchange on the dates of such transactions.
Although the net assets of the Fund are presented at the foreign exchange rates and market values at the close of the period, the Fund does not isolate that portion of the results of operations arising as a result of changes in the foreign exchange rates from the fluctuations arising from changes in the market prices of securities held at period end. Similarly, the Fund does not isolate the effect of changes in foreign exchange rates from the fluctuations arising from changes in the market prices of securities sold during the period. Accordingly, realized and unrealized foreign currency gains (losses) on investments in securities are included in the reported net realized and unrealized gains (losses) on investment transactions and balances. However, pursuant to U.S. federal income tax regulations, gains and losses from certain foreign currency transactions and the foreign currency portion of gains and losses realized on sales and maturities of foreign denominated debt securities are treated as ordinary income for U.S. federal income tax purposes.
Net realized gains (losses) on foreign currency transactions represent net foreign exchange gains (losses) from foreign currency forward exchange contracts, disposition of foreign currencies, currency gains (losses) realized between the trade and settlement dates on securities transactions, and the difference between the amount of investment income and foreign withholding taxes recorded on the Fund's books and the U.S. dollar equivalent amounts actually received or paid. The change in unrealized currency gains (losses) on foreign currency transactions for the period is reflected in the Statement of Operations.
Foreign security and currency transactions may involve certain considerations and risks not typically associated with those of U.S. dollar denominated transactions as a result of, among other factors, fluctuations of exchange rates in relation to the U.S. dollar, the possibility of lower levels of governmental supervision and regulation of foreign securities markets and the possibility of political or economic instability.
Governmental approval for foreign investments may be required in advance of making an investment under certain circumstances in some countries, and the extent of foreign investments in U.S. companies may be subject to limitation in other countries. Foreign ownership limitations also may be imposed by the charters of individual companies to prevent, among other concerns, violations of foreign investment limitations. As a result, an additional class of shares (identified as "Foreign" in the Portfolio of Investments) may be created and offered for investment. The "local" and "foreign shares" market values may differ. In the absence of trading of the foreign shares in such markets, the Fund values the foreign shares at the closing exchange price of the local shares.
5. Securities Lending: The Fund lends securities to qualified financial institutions, such as broker/dealers, to earn additional income. Any increase or decrease in the fair value of the securities loaned that might occur and any interest earned or dividends declared on those securities during the term of the loan would remain in the Fund. The Fund would receive cash or securities as collateral in an amount equal to or exceeding 100% of the current fair value of the loaned securities. The collateral is marked-to-market daily by State Street Bank and Trust Company ("State Street"), the securities lending agent, to ensure that a minimum of 100% collateral coverage is maintained.
11
Morgan Stanley Variable Insurance Fund, Inc.
Semi-Annual Report – June 30, 2023 (unaudited)
Notes to Financial Statements (cont'd)
Based on pre-established guidelines, the securities lending agent invests any cash collateral that is received in an affiliated money market portfolio and repurchase agreements. Securities lending income is generated from the earnings on the invested collateral and borrowing fees, less any rebates owed to the borrowers and compensation to the lending agent, and is recorded as "Income from Securities Loaned — Net" in the Fund's Statement of Operations. Risks in securities lending transactions are that a borrower may not provide additional collateral when required or return the securities when due, and that the value of the short-term investments will be less than the amount of cash collateral plus any rebate that is required to be returned to the borrower.
The Fund has the right under the securities lending agreement to recover the securities from the borrower on demand.
The following table presents financial instruments that are subject to enforceable netting arrangements as of June 30, 2023:
Gross Amounts Not Offset in the Statement of Assets and Liabilities | |||||||||||||||
Gross Asset Amount Presented in the Statement of Assets and Liabilities (000) | Financial Instrument (000) | Collateral Received (000) | Net Amount (not less than $0) (000) | ||||||||||||
$ | 858 | (a) | $ | — | $ | (858 | )(b)(c) | $ | 0 |
(a) Represents market value of loaned securities at period end.
(b) The Fund received cash collateral of approximately $177,000, which was subsequently invested in Repurchase Agreements and Morgan Stanley Institutional Liquidity Funds as reported in the Portfolio of Investments. In addition, the Fund received non-cash collateral of approximately $722,000 in the form of U.S. Government obligations, which the Fund cannot sell or repledge, and accordingly are not reflected in the Portfolio of Investments.
(c) The actual collateral received is greater than the amount shown here due to overcollateralization.
FASB ASC 860, "Transfers & Servicing: Repurchase-to-Maturity Transactions, Repurchase Financings, and Disclosures", is intended to provide increased transparency about the types of collateral pledged in securities lending transactions and other similar transactions that are accounted for as secured borrowings.
The following table displays a breakdown of transactions accounted for as secured borrowings, the gross obligations by class of collateral pledged and the remaining
contractual maturity of those transactions as of June 30, 2023:
Remaining Contractual Maturity of the Agreements | |||||||||||||||||||||||
Overnight and Continuous (000) | <30 days (000) | Between 30 & 90 days (000) | >90 Days (000) | Total (000) | |||||||||||||||||||
Securities Lending Transactions | |||||||||||||||||||||||
Common Stocks | $ | 177 | $ | — | $ | — | $ | — | $ | 177 | |||||||||||||
Total Borrowings | $ | 177 | $ | — | $ | — | $ | — | $ | 177 | |||||||||||||
Gross amount of recognized liabilities for securities lending transactions | $ | 177 |
6. Indemnifications: The Company enters into contracts that contain a variety of indemnifications. The Company's maximum exposure under these arrangements is unknown. However, the Company has not had prior claims or losses pursuant to these contracts and expects the risk of loss to be remote.
7. Security Transactions, Income and Expenses: Security transactions are accounted for on the trade date (date the order to buy or sell is executed). Realized gains and losses on the sale of investment securities are determined on the specific identified cost method. Dividend income and other distributions are recorded on the ex-dividend date (except for certain foreign dividends which may be recorded as soon as the Fund is informed of such dividends) net of applicable withholding taxes. Non-cash dividends received in the form of stock, if any, are recognized on the ex-dividend date and recorded as non-cash dividend income at fair value. Interest income is recognized on the accrual basis (except where collection is in doubt) net of applicable withholding taxes. Discounts are accreted and premiums are amortized over the life of the respective securities. Most expenses of the Company can be directly attributed to a particular Fund. Expenses which cannot be directly attributed are apportioned among the Funds based upon relative net assets or other appropriate methods. Income, expenses (other than class specific expenses) and realized and unrealized gains or losses are allocated to each class of shares based upon their relative net assets.
The Fund owns shares of REITs which report information on the source of their distributions annually in the following calendar year. A portion of distributions received from REITs during the year is estimated to be a return of capital and is recorded as a reduction of their cost.
12
Morgan Stanley Variable Insurance Fund, Inc.
Semi-Annual Report – June 30, 2023 (unaudited)
Notes to Financial Statements (cont'd)
Settlement and registration of foreign securities transactions may be subject to significant risks not normally associated with investments in the United States. In certain markets, ownership of shares is defined according to entries in the issuer's share register. It is possible that a Fund holding these securities could lose its share registration through fraud, negligence or even mere oversight. In addition, shares being delivered for sales and cash being paid for purchases may be delivered before the exchange is complete. This may subject the Fund to further risk of loss in the event of a failure to complete the transaction by the counterparty.
8. Dividends and Distributions to Shareholders: Dividends and distributions to shareholders are recorded on the ex-dividend date. Dividends from net investment income, if any, are declared and paid annually. Net realized capital gains, if any, are distributed at least annually.
B. Advisory/Sub-Advisory Fees: The Adviser, a wholly-owned subsidiary of Morgan Stanley, provides the Fund with advisory services under the terms of an Investment Advisory Agreement, paid quarterly, at an annual rate of 0.80% of the daily net assets of the Fund.
The Adviser has agreed to reduce its advisory fee and/or reimburse the Fund so that the total annual Fund operating expenses, excluding certain investment related expenses, taxes, interest and other extraordinary expenses (including litigation), will not exceed 1.25% for Class II shares. The fee waivers and/or expense reimbursements will continue for at least one year from the date of the Fund's prospectus or until such time as the Directors act to discontinue all or a portion of such waivers and/or reimbursements when they deem such action is appropriate. For the six month ended June 30, 2023, approximately $119,000 of advisory fees were waived pursuant to this arrangement.
The Adviser has entered into Sub-Advisory Agreements with the Sub-Advisers, each a wholly-owned subsidiary of Morgan Stanley. The Sub-Advisers provide the Fund with advisory services subject to the overall supervision of the Adviser and the Company's Officers and Directors. The Adviser pays the Sub-Advisers on a monthly basis a portion of the net advisory fees the Adviser receives from the Fund.
C. Administration Fees: The Adviser also serves as Administrator to the Company and provides administrative services pursuant to an Administration Agreement for an annual fee, accrued daily and paid monthly, of 0.08% of the Fund's average daily net assets.
Under a Sub-Administration Agreement between the Administrator and State Street, State Street provides certain administrative services to the Company. For such services, the Administrator pays State Street a portion of the fee the Administrator receives from the Fund.
D. Servicing Fees: The Company accrues daily and pays quarterly a servicing fee of up to 0.17% of the average daily value of shares of the Fund held in an insurance company's account. Certain insurance companies have entered into a servicing agreement with the Company to provide administrative and other contract-owner related services on behalf of the Fund.
E. Distribution Fees: Morgan Stanley Distribution, Inc. ("MSDI" or the "Distributor"), a wholly-owned subsidiary of the Adviser and an indirect subsidiary of Morgan Stanley, serves as the Distributor of the Fund and provides the Fund's Class II shareholders with distribution services pursuant to a Distribution Plan (the "Plan") in accordance with Rule 12b-1 under the Act. Under the Plan, the Fund is authorized to pay the Distributor a distribution fee, which is accrued daily and paid monthly, at an annual rate of 0.25% of the Fund's average daily net assets attributable to Class II shares.
F. Dividend Disbursing and Transfer/Co-Transfer Agent: The Company's dividend disbursing and transfer agent is SS&C Global Investor & Distribution Solutions, Inc. ("SS&C GIDS, Inc."). Pursuant to a Transfer Agency Agreement, the Company pays SS&C GIDS, Inc. a fee based on the number of classes, accounts and transactions relating to the Funds of the Company.
Eaton Vance Management ("EVM"), an affiliate of Morgan Stanley, provides co-transfer agency and related services to the Fund pursuant to a Co-Transfer Agency Services Agreement. For the six months ended June 30, 2023, co-transfer agency fees and expenses incurred to EVM, included in "Transfer Agency Fees" in the Statement of Operations, amounted to less than $500.
G. Custodian Fees: State Street (the "Custodian") also serves as Custodian for the Company in accordance with a Custodian Agreement. The Custodian holds cash, securities and other assets of the Company as required by the Act. Custody fees are payable monthly based on assets held in custody, investment purchases and sales activity and account maintenance fees, plus reimbursement for certain out-of-pocket expenses.
13
Morgan Stanley Variable Insurance Fund, Inc.
Semi-Annual Report – June 30, 2023 (unaudited)
Notes to Financial Statements (cont'd)
H. Security Transactions and Transactions with Affiliates: For the six months ended June 30, 2023, purchases and sales of investment securities for the Fund, other than long-term U.S. Government securities and short-term investments were approximately $14,184,000 and $16,278,000, respectively. There were no purchases and sales of long-term U.S. Government securities for the six months ended June 30, 2023.
The Fund invests in the Institutional Class of the Morgan Stanley Institutional Liquidity Funds (the "Liquidity Funds"), an open-end management investment company managed by the Adviser, both directly and as a portion of the securities held as collateral on loaned securities. Advisory fees paid by the Fund are reduced by an amount equal to its pro-rata share of the advisory and administration fees paid by the Fund due to its investment in the Liquidity Funds. For the six months ended June 30, 2023, advisory fees paid were reduced by less than $500 relating to the Fund's investment in the Liquidity Funds.
A summary of the Fund's transactions in shares of affiliated investments during the six months ended June 30, 2023 is as follows:
Affiliated Investment Company | Value December 31, 2022 (000) | Purchases at Cost (000) | Proceeds from Sales (000) | Dividend Income (000) | |||||||||||||||
Liquidity Funds | $ | 558 | $ | 4,243 | $ | 4,314 | $ | 6 |
Affiliated Investment Company (cont'd) | Realized Gain (Loss) (000) | Change in Unrealized Appreciation (Depreciation) (000) | Value June 30, 2023 (000) | ||||||||||||
Liquidity Funds | $ | — | $ | — | $ | 487 |
The Fund is permitted to purchase and sell securities ("cross-trade") from and to other Morgan Stanley funds as well as other funds and client accounts for which the Adviser or an affiliate of the Adviser serves as investment adviser, pursuant to procedures approved by the Directors in compliance with Rule 17a-7 under the Act (the "Rule"). Each cross-trade is executed at the current market price in compliance with provisions of the Rule. For the six months ended June 30, 2023, the Fund did not engage in any cross-trade transactions.
The Fund has an unfunded Deferred Compensation Plan (the "Compensation Plan"), which allows each independent Director to defer payment of all, or a portion, of the fees he or she receives for serving on the Board of Directors. Each eligible Director generally may elect to have the deferred amounts credited with a return equal to the total return on one or more of the Morgan Stanley funds that are offered as investment options
under the Compensation Plan. Appreciation/depreciation and distributions received from these investments are recorded with an offsetting increase/decrease in the deferred compensation obligation and do not affect the NAV of the Fund.
I. Federal Income Taxes: It is the Fund's intention to continue to qualify as a regulated investment company and distribute all of its taxable and tax-exempt income. Accordingly, no provision for federal income taxes is required in the financial statements.
The Fund may be subject to taxes imposed by countries in which it invests. Such taxes are generally based on income and/or capital gains earned or repatriated. Taxes are accrued based on net investment income, net realized gains and net unrealized appreciation as such income and/or gains are earned. Taxes may also be based on transactions in foreign currency and are accrued based on the value of investments denominated in such currency.
FASB ASC 740-10, "Income Taxes — Overall", sets forth a minimum threshold for financial statement recognition of the benefit of a tax position taken or expected to be taken in a tax return. Management has concluded there are no significant uncertain tax positions that would require recognition in the financial statements. If applicable, the Fund recognizes interest accrued related to unrecognized tax benefits in "Interest Expense" and penalties in "Other Expenses" in the Statement of Operations. The Fund files tax returns with the U.S. Internal Revenue Service, New York and various states. Generally, each of the tax years in the four-year period ended December 31, 2022 remains subject to examination by taxing authorities.
The tax character of distributions paid may differ from the character of distributions shown for GAAP purposes due to short-term capital gains being treated as ordinary income for tax purposes. The tax character of distributions paid during fiscal years 2022 and 2021 was as follows:
2022 Distributions Paid From: | 2021 Distributions Paid From: | ||||||||||||||
Ordinary Income (000) | Long-Term Capital Gain (000) | Ordinary Income (000) | Long-Term Capital Gain (000) | ||||||||||||
$ | 3,531 | $ | 205 | $ | 1,323 | $ | — |
The amount and character of income and gains to be distributed are determined in accordance with income tax regulations which may differ from GAAP. These book/tax differences are either considered temporary or permanent in nature.
Temporary differences are attributable to differing book and tax treatments for the timing of the recognition of gains (losses) on certain investment transactions and the timing of the deductibility of certain expenses.
14
Morgan Stanley Variable Insurance Fund, Inc.
Semi-Annual Report – June 30, 2023 (unaudited)
Notes to Financial Statements (cont'd)
Permanent differences, due to an adjustment to prior period equalization debits, resulted in the following reclassifications among the components of net assets at December 31, 2022:
Total | Paid-in- | ||||||
$2 | $(2) |
At December 31, 2022, the components of distributable earnings for the Fund on a tax basis were as follows:
Undistributed | Undistributed | ||||||
$659 | $— |
At December 31, 2022, the Fund had available for federal income tax purposes unused short-term and long-term capital losses of approximately $3,859,000 and $230,000, respectively, that do not have an expiration date.
To the extent that capital loss carryforwards are used to offset any future capital gains realized, no capital gains tax liability will be incurred by the Fund for gains realized and not distributed. To the extent that capital gains are offset, such gains will not be distributed to the shareholders.
J. Credit Facility: The Company and other Morgan Stanley funds participated in a $300,000,000 committed, unsecured revolving line of credit facility (the "Facility") with State Street. Effective April 17, 2023, the committed line amount increased to $500,000,000. This Facility is to be used for temporary emergency purposes or funding of shareholder redemption requests. The interest rate for any funds drawn will be based on the federal funds rate or overnight bank funding rate plus a spread. The Facility also has a commitment fee of 0.25% per annum based on the unused portion of the Facility, which is allocated among participating funds based on relative net assets. During the six months ended June 30, 2023, the Fund did not have any borrowings under the Facility.
K. Other: At June 30, 2023, the Fund had record owners of 10% or greater. Investment activities of these shareholders could have a material impact on the Fund. The aggregate percentage of such owners was 96.7%.
L. Market Risk: An investment in the Fund is based on the values of the Fund's investments, which may change due to economic and other events that affect markets generally, as well as those that affect particular regions, countries, industries, companies or governments. Social, political, economic and other conditions and events, such as war, natural disasters, health emergencies (e.g., epidemics and pandemics), terrorism, conflicts, social unrest, recessions, inflation, rapid
interest rate changes and supply chain disruptions, may occur and could significantly impact issuers, industries, governments and other systems, including the financial markets and global economy. It is difficult to predict when events affecting the U.S. or global financial markets and economies may occur, the effects that such events may have and the duration of those effects (which may last for extended periods). These events may be sudden and significant and may negatively impact broad segments of businesses and populations and have a significant and rapid negative impact on the performance of and/or income or yield from the Fund's investments and exacerbate pre-existing risks to the Fund. 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 ultimate impact of public health emergencies or other adverse economic or market developments and the extent to which the associated conditions impact the Fund and its investments will also depend on other future developments, which are highly uncertain, difficult to accurately predict and subject to change at any time. The financial performance of the Fund's investments (and, in turn, the Fund's investment results) as well as their liquidity may be adversely affected because of these and similar types of factors and developments.
15
Morgan Stanley Variable Insurance Fund, Inc.
Semi-Annual Report – June 30, 2023 (unaudited)
Investment Advisory Agreement Approval
Nature, Extent and Quality of Services
The Board reviewed and considered the nature and extent of the investment advisory services provided by the Adviser under the advisory agreement, including portfolio management, investment research and equity and fixed income securities trading. The Board reviewed similar information and factors regarding the Sub-Advisers, to the extent applicable. The Board also reviewed and considered the nature and extent of the non-advisory, administrative services provided by the Administrator under the administration agreement, including accounting, operations, clerical, bookkeeping, compliance, business management and planning, legal services and the provision of supplies, office space and utilities at the Adviser's expense. The Board also considered the Adviser's investment in personnel and infrastructure that benefits the Fund. (The Adviser, Sub-Advisers and Administrator together are referred to as the "Adviser" and the advisory, sub-advisory and administration agreements together are referred to as the "Management Agreement.") The Board also considered that the Adviser serves a variety of other investment advisory clients and has experience overseeing service providers. The Board also compared the nature of the services provided by the Adviser with similar services provided by non-affiliated advisers as prepared by Broadridge Financial Solutions, Inc. ("Broadridge").
The Board reviewed and considered the qualifications of the portfolio managers, the senior administrative managers and other key personnel of the Adviser who provide the advisory and administrative services to the Fund. The Board determined that the Adviser's portfolio managers and key personnel are well qualified by education and/or training and experience to perform the services in an efficient and professional manner. The Board concluded that the nature and extent of the advisory and administrative services provided were necessary and appropriate for the conduct of the business and investment activities of the Fund and supported its decision to approve the Management Agreement.
Performance, Fees and Expenses of the Fund
The Board reviewed the performance, fees and expenses of the Fund compared to its peers, as prepared by Broadridge, and to appropriate benchmarks where applicable. The Board discussed with the Adviser the performance goals and the actual results achieved in managing the Fund. When considering a fund's performance, the Board and the Adviser place emphasis on trends and longer-term returns (focusing on one-year, three-year and five-year performance, as of December 31, 2022, or since inception, as applicable). When a fund underperforms its benchmark and/or its peer group average, the Board and the Adviser discuss the causes of such underperformance and, where necessary, they discuss specific changes to investment strategy or investment personnel. The Board noted that the Fund's performance was below its peer group average for the one-, three- and five-year periods. The Board discussed with the Adviser the level of the advisory and administration fees (together, the "management fee") for this Fund relative to comparable funds and/or other accounts advised by the Adviser and/or compared to its peers as prepared by Broadridge. In addition to the management fee, the Board also reviewed the Fund's total expense ratio. The Board noted that the Fund's management fee was lower than its peer group average and total expense ratio was higher than but close to its peer group average. After discussion, the Board concluded that the Fund's (i) performance was acceptable; and (ii) management fee and total expense ratio were competitive with its peer group averages.
Economies of Scale
The Board considered the size and growth prospects of the Fund and how that relates to the Fund's total expense ratio and particularly the Fund's management fee rate, which does not include breakpoints. In conjunction with its review of the Adviser's profitability, the Board discussed with the Adviser how a change in assets can affect the efficiency or effectiveness of managing the Fund and whether the management fee level is appropriate relative to current and projected asset levels and/or whether the management fee structure reflects economies of scale as asset levels change. The Board has determined that its review of the actual and/or potential economies of scale of the Fund supports its decision to approve the Management Agreement.
Profitability of the Adviser and Affiliates
The Board considered information concerning the costs incurred and profits realized by the Adviser and its affiliates during the last year from their relationship with the Fund and during the last two years from their relationship with the Morgan Stanley Fund Complex and reviewed with the Adviser the cost allocation methodology used to determine the profitability of the Adviser
16
Morgan Stanley Variable Insurance Fund, Inc.
Semi-Annual Report – June 30, 2023 (unaudited)
Investment Advisory Agreement Approval (cont'd)
and affiliates. The Board has determined that its review of the analysis of the Adviser's expenses and profitability supports its decision to approve the Management Agreement.
Other Benefits of the Relationship
The Board considered other direct and indirect benefits to the Adviser and/or its affiliates derived from their relationship with the Fund and other funds advised by the Adviser. These benefits may include, among other things, fees for trading, distribution and/or shareholder servicing and for transaction processing and reporting platforms used by securities lending agents, and research received by the Adviser generated from commission dollars spent on funds' portfolio trading. The Board reviewed with the Adviser these arrangements and the reasonableness of the Adviser's costs relative to the services performed. The Board has determined that its review of the other benefits received by the Adviser or its affiliates supports its decision to approve the Management Agreement.
Resources of the Adviser and Historical Relationship Between the Fund and the Adviser
The Board considered whether the Adviser is financially sound and has the resources necessary to perform its obligations under the Management Agreement. The Board also reviewed and considered the historical relationship between the Fund and the Adviser, including the organizational structure of the Adviser, the policies and procedures formulated and adopted by the Adviser for managing the Fund's operations and the Board's confidence in the competence and integrity of the senior managers and key personnel of the Adviser. The Board concluded that the Adviser has the financial resources necessary to fulfill its obligations under the Management Agreement and that it is beneficial for the Fund to continue its relationship with the Adviser.
Other Factors and Current Trends
The Board considered the controls and procedures adopted and implemented by the Adviser and monitored by the Fund's Chief Compliance Officer and concluded that the conduct of business by the Adviser indicates a good faith effort on its part to adhere to high ethical standards in the conduct of the Fund's business.
General Conclusion
After considering and weighing all of the above factors, with various written materials and verbal information presented by the Adviser, the Board concluded that it would be in the best interest of the Fund and its shareholders to approve renewal of the Management Agreement for another year. In reaching this conclusion the Board did not give particular weight to any single piece of information or factor referenced above. The Board considered these factors and information over the course of the year and in numerous meetings, some of which were in executive session with only the independent Board members and their counsel present. It is possible that individual Board members may have weighed these factors, and the information presented, differently in reaching their individual decisions to approve the Management Agreement.
17
Morgan Stanley Variable Insurance Fund, Inc.
Semi-Annual Report – June 30, 2023 (unaudited)
Liquidity Risk Management Program
In compliance with Rule 22e-4 under the Investment Company Act of 1940, as amended (the "Liquidity Rule"), the Fund has adopted and implemented a liquidity risk management program (the "Program"), which is reasonably designed to assess and manage the risk that the Fund could not meet requests to redeem shares issued by the Fund without significant dilution of remaining investors' interests in the Fund (i.e., liquidity risk). The Fund's Board of Directors (the "Board") previously approved the designation of the Liquidity Risk Subcommittee (the "LRS") as Program administrator. The LRS is comprised of representatives from various divisions within Morgan Stanley Investment Management.
At a meeting held on March 1-2, 2023, the Board reviewed a written report prepared by the LRS that addressed the Program's operation and assessed its adequacy, and effectiveness of implementation for the period from January 1, 2022, through December 31, 2022, as required under the Liquidity Rule. The report concluded that the Program operated effectively and was adequately and effectively implemented in all material aspects, and that the relevant controls and safeguards were appropriately designed to enable the LRS to administer the Program in compliance with the Liquidity Rule.
In accordance with the Program, the LRS assessed each Fund's liquidity risk no less frequently than annually taking into consideration certain factors, as applicable, such as (i) investment strategy and liquidity of portfolio investments, (ii) short-term and long-term cash flow projections and (iii) holdings of cash and cash equivalents and borrowing arrangements and other funding sources. Certain factors are considered under both normal and reasonably foreseeable stressed conditions.
Each Fund portfolio investment is classified into one of four liquidity categories, which classification is assessed at least monthly by the LRS. The classification is based on a determination of the number of days it is reasonably expected to take to convert the investment into cash, or sell or dispose of the investment, in current market conditions without significantly changing the market value of the investment. Liquidity classification determinations take into account various market, trading and investment-specific considerations, as well as market depth, and in some cases utilize third-party vendor data.
The Liquidity Rule limits a fund's investments in illiquid investments to 15% of its net assets and requires funds that do not primarily hold assets that are highly liquid investments to determine and maintain a minimum percentage of the fund's net assets to be invested in highly liquid investments (highly liquid investment minimum or "HLIM"). The LRS believes that the Program includes provisions reasonably designed to review, monitor and comply with the 15% limit on illiquid investments and for determining, periodically reviewing and complying with the HLIM requirement, as applicable.
There can be no assurance that the Program will achieve its objectives under all circumstances in the future. Please refer to the Fund's prospectus for more information regarding the Fund's exposure to liquidity risk and other risks to which it may be subject.
18
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Morgan Stanley Variable Insurance Fund, Inc.
Semi-Annual Report – June 30, 2023 (unaudited)
Directors and Officers Information
Directors
Frank L. Bowman
Frances L. Cashman
Kathleen A. Dennis
Nancy C. Everett
Eddie A. Grier
Jakki L. Haussler
Dr. Manuel H. Johnson
Joseph J. Kearns
Michael F. Klein
Patricia A. Maleski
W. Allen Reed, Chair of the Board
Adviser and Administrator
Morgan Stanley Investment Management Inc.
522 Fifth Avenue
New York, New York 10036
Sub-Advisers
Morgan Stanley Investment Management Limited
25 Cabot Square, Canary Wharf
London, E14 4QA, England
Morgan Stanley Investment Management Company
23 Church Street
16-01 Capital Square, Singapore 049481
Distributor
Morgan Stanley Distribution, Inc.
522 Fifth Avenue
New York, New York 10036
Dividend Disbursing and Transfer Agent
SS&C Global Investor & Distribution Solutions, Inc.
P.O. Box 219804
Kansas City, Missouri 64121-9804
Officers
John H. Gernon
President and Principal Executive Officer
Deidre A. Downes
Chief Compliance Officer
Francis J. Smith
Treasurer and Principal Financial Officer
Mary E. Mullin
Secretary
Michael J. Key
Vice President
Co-Transfer Agent
Eaton Vance Management
Two International Place
Boston, Massachusetts 02110
Custodian
State Street Bank and Trust Company
One Congress Street
Boston, Massachusetts 02114
Legal Counsel
Dechert LLP
1095 Avenue of the Americas
New York, New York 10036
Counsel to the Independent Directors
Perkins Coie LLP
1155 Avenue of the Americas,
22nd Floor
New York, New York 10036
Independent Registered Public Accounting Firm
Ernst & Young LLP
200 Clarendon Street
Boston, Massachusetts 02116
Reporting to Shareholders
Each Morgan Stanley fund provides a complete schedule of portfolio holdings in its Semi-Annual and the Annual Reports within 60 days of the end of the fund's second and fourth fiscal quarters. The Semi-Annual and Annual Reports are filed electronically with the Securities and Exchange Commission ("SEC") on Form N-CSRS and Form N-CSR, respectively. Morgan Stanley makes these reports available on its public website, www.morganstanley.com/im/shareholderreports. Each Morgan Stanley non-money market fund also files a complete schedule of portfolio holdings with the SEC for the fund's first and third fiscal quarters as an attachment to Form N-PORT. Morgan Stanley does not deliver the reports for the first and third fiscal quarters to shareholders, but makes the complete schedule of portfolio holdings for the fund's first and third fiscal quarters available on its public website. The holdings for each money market fund are also posted to the Morgan Stanley public website. You may obtain the Form N-PORT filings (as well as the Form N-CSR and N-CSRS filings) by accessing the SEC's website, www.sec.gov. You can also request copies of these materials, upon payment of a duplicating fee, by electronic request at the SEC's email address (publicinfo@sec.gov).
Proxy Voting Policies and Procedures and Proxy Voting Record
You may obtain a copy of the Company's Proxy Voting Policy and Procedures and information regarding how the Company voted proxies relating to portfolio securities during the most recent twelve-month period ended June 30, without charge, upon request, by calling toll free 1 (800) 869-6397 or by visiting our website at www.morganstanley.com/im/shareholderreports. This information is also available on the SEC's website at www.sec.gov .
This report is submitted for the general information of the shareholders of the Fund. For more detailed information about the Fund, its fees and expenses and other pertinent information, please read its Prospectus. The Company's Statement of Additional Information contains additional information about the Fund, including its Directors. It is available, without charge, by calling 1 (800) 869-6397.
Householding Notice
To reduce printing and mailing costs, the Fund attempts to eliminate duplicate mailings to the same address. The Fund delivers a single copy of certain shareholder documents, including shareholder reports, prospectuses and proxy materials, to investors with the same last name who reside at the same address. Your participation in this program will continue for an unlimited period of time unless you instruct us otherwise. You can request multiple copies of these documents by calling 1 (800) 869-6397, 8:00 a.m. to 6:00 p.m., ET. Once our Customer Service Center has received your instructions, we will begin sending individual copies for each account within 30 days.
This report is not authorized for distribution to prospective investors in the Fund unless preceded or accompanied by an effective Prospectus. Read the Prospectus carefully before investing.
UIFGRESAN
5831054 EXP 08.31.24
Morgan Stanley Variable Insurance Fund, Inc.
Semi-Annual Report – June 30, 2023
Global Strategist Portfolio
The Fund is intended to be a funding vehicle for variable annuity contracts and variable life insurance policies offered by the separate accounts of certain life insurance companies.
Morgan Stanley Variable Insurance Fund, Inc.
Semi-Annual Report – June 30, 2023 (unaudited)
Table of Contents
Consolidated Expense Example | 2 | ||||||
Consolidated Portfolio of Investments | 3 | ||||||
Consolidated Statement of Assets and Liabilities | 31 | ||||||
Consolidated Statement of Operations | 32 | ||||||
Consolidated Statements of Changes in Net Assets | 33 | ||||||
Consolidated Financial Highlights | 34 | ||||||
Notes to Consolidated Financial Statements | 36 | ||||||
Investment Advisory Agreement Approval | 49 | ||||||
Liquidity Risk Management Program | 51 | ||||||
Director and Officer Information | Back Cover |
1
Morgan Stanley Variable Insurance Fund, Inc.
Semi-Annual Report – June 30, 2023 (unaudited)
Consolidated Expense Example
Global Strategist Portfolio
As a shareholder of the Global Strategist Portfolio (the "Fund"), you incur two types of costs: (1) insurance company charges; and (2) ongoing costs, which may include advisory fees, administration fees, distribution (12b-1) fees and other Fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.
This example is based on an investment of $1,000 invested at the beginning of the six-month period ended June 30, 2023 and held for the entire six-month period.
Actual Expenses
The table below provides information about actual account values and actual expenses. You may use the information in this table, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the table under the heading entitled "Actual Expenses Paid During Period" to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The table below provides information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any insurance company charges. Therefore, the table below is useful in comparing ongoing costs, but will not help you determine the relative total cost of owning different funds. In addition, if these insurance company charges were included, your costs would have been higher.
Beginning Account Value 1/1/23 | Actual Ending Account Value 6/30/23 | Hypothetical Ending Account Value | Actual Expenses Paid During Period* | Hypothetical Expenses Paid During Period* | Net Expense Ratio During Period** | ||||||||||||||||||||||
Global Strategist Portfolio Class I | $ | 1,000.00 | $ | 1,074.60 | $ | 1,020.48 | $ | 4.48 | $ | 4.36 | 0.87 | % | |||||||||||||||
Global Strategist Portfolio Class II | 1,000.00 | 1,074.00 | 1,019.98 | 4.99 | 4.86 | 0.97 |
* Expenses are calculated using each Fund Class' annualized net expense ratio (as disclosed), multiplied by the average account value over the period and multiplied by 181/365 (to reflect the most recent one-half year period).
** Annualized.
2
Morgan Stanley Variable Insurance Fund, Inc.
Semi-Annual Report – June 30, 2023 (unaudited)
Consolidated Portfolio of Investments
Global Strategist Portfolio
Face Amount (000) | Value (000) | ||||||||||
Fixed Income Securities (46.9%) | |||||||||||
Agency Fixed Rate Mortgages (3.9%) | |||||||||||
United States (3.9%) | |||||||||||
Federal Home Loan Mortgage Corporation, Conventional Pools: 2.00%, 6/1/52 | $ | 639 | $ | 521 | |||||||
3.00%, 11/1/52 | 102 | 89 | |||||||||
4.50%, 1/1/49 | 12 | 12 | |||||||||
Gold Pools: 3.50%, 2/1/45 - 6/1/45 | 168 | 156 | |||||||||
4.50%, 1/1/49 | 8 | 8 | |||||||||
Federal National Mortgage Association, 6.00%, 7/13/53 | 160 | 161 | |||||||||
Conventional Pools: 2.50%, 10/1/51 | 297 | 252 | |||||||||
3.00%, 4/1/52 | 406 | 358 | |||||||||
3.50%, 1/1/51 | 434 | 399 | |||||||||
4.00%, 11/1/41 - 1/1/46 | 169 | 162 | |||||||||
4.50%, 3/1/41 - 11/1/44 | 71 | 71 | |||||||||
5.00%, 1/1/41 - 3/1/41 | 27 | 27 | |||||||||
6.00%, 1/1/38 | 5 | 5 | |||||||||
July TBA 3.00%, 7/1/53 (a) | 100 | 88 | |||||||||
4.00%, 7/1/53 (a) | 350 | 328 | |||||||||
4.50%, 7/1/53 (a) | 100 | 96 | |||||||||
5.00%, 7/1/53 (a) | 400 | 392 | |||||||||
5.50%, 7/1/53 (a) | 75 | 75 | |||||||||
Government National Mortgage Association, Various Pools: 4.00%, 7/15/44 | 11 | 11 | |||||||||
5.00%, 2/20/49 | 3 | 3 | |||||||||
Total Agency Fixed Rate Mortgages (Cost $3,361) | 3,214 | ||||||||||
Asset-Backed Securities (0.3%) | |||||||||||
Ireland (0.1%) | |||||||||||
European Residential Loan Securitisation 2019-NPL1 DAC, Class A 1 Month EURIBOR + 3.25%, 6.69%, 7/24/54 (b) | EUR | 90 | 97 | ||||||||
United States (0.2%) | |||||||||||
Renaissance Home Equity Loan Trust, 1 Month USD LIBOR + 0.76%, 5.91%, 12/25/32 (b) | $ | 82 | 75 | ||||||||
SLM Student Loan Trust, 3 Month EURIBOR + 0.55%, 3.81%, 7/25/39 (b) | EUR | 66 | 68 | ||||||||
143 | |||||||||||
Total Asset-Backed Securities (Cost $238) | 240 | ||||||||||
Commercial Mortgage-Backed Securities (0.6%) | |||||||||||
United Kingdom (0.1%) | |||||||||||
Taurus 2018-2 UK DAC, 3 Month GBP SONIA + 1.22%, 5.97%, 5/22/28 (b) | GBP | 58 | 74 | ||||||||
United States (0.5%) | |||||||||||
COMM Mortgage Trust, 3.96%, 3/10/47 | $ | 144 | 142 |
Face Amount (000) | Value (000) | ||||||||||
4.24%, 2/10/47 (b) | $ | 77 | $ | 76 | |||||||
4.89%, 7/15/47 (b)(c) | 100 | 90 | |||||||||
WFRBS Commercial Mortgage Trust, 5.16%, 9/15/46 (b)(c) | 140 | 124 | |||||||||
432 | |||||||||||
Total Commercial Mortgage-Backed Securities (Cost $530) | 506 | ||||||||||
Corporate Bonds (10.6%) | |||||||||||
Australia (0.5%) | |||||||||||
NBN Co. Ltd., 2.63%, 5/5/31 (c) | 200 | 168 | |||||||||
Transurban Finance Co. Pty Ltd., 2.00%, 8/28/25 | EUR | 100 | 104 | ||||||||
Westpac Banking Corp., 2.67%, 11/15/35 | $ | 125 | 96 | ||||||||
368 | |||||||||||
Canada (0.5%) | |||||||||||
Province of Ontario Canada, 2.30%, 6/15/26 | 190 | 177 | |||||||||
Province of Quebec Canada, 0.00%, 10/29/30 | EUR | 210 | 180 | ||||||||
Rogers Communications, Inc., 3.80%, 3/15/32 (c) | $ | 100 | 88 | ||||||||
445 | |||||||||||
France (0.8%) | |||||||||||
AXA SA, 3.25%, 5/28/49 | EUR | 100 | 98 | ||||||||
BNP Paribas SA, 1.13%, 6/11/26 | 225 | 226 | |||||||||
BPCE SA, 5.15%, 7/21/24 (c) | $ | 200 | 196 | ||||||||
Orange SA, 5.00%, 10/1/26 (d) | EUR | 100 | 109 | ||||||||
629 | |||||||||||
Germany (0.5%) | |||||||||||
Deutsche Bank AG, Series E 0.96%, 11/8/23 | $ | 150 | 147 | ||||||||
Kreditanstalt fuer Wiederaufbau, 1.13%, 9/15/32 | EUR | 190 | 178 | ||||||||
Volkswagen International Finance NV, Series 10Y 1.88%, 3/30/27 | 100 | 100 | |||||||||
425 | |||||||||||
Ireland (0.2%) | |||||||||||
AerCap Ireland Capital DAC/AerCap Global Aviation Trust, 2.45%, 10/29/26 | $ | 175 | 156 | ||||||||
Italy (0.1%) | |||||||||||
Assicurazioni Generali SpA, 5.50%, 10/27/47 | EUR | 100 | 110 | ||||||||
Japan (0.2%) | |||||||||||
NTT Finance Corp., 1.59%, 4/3/28 (c) | $ | 200 | 171 |
The accompanying notes are an integral part of the consolidated financial statements.
3
Morgan Stanley Variable Insurance Fund, Inc.
Semi-Annual Report – June 30, 2023 (unaudited)
Consolidated Portfolio of Investments (cont'd)
Global Strategist Portfolio
Face Amount (000) | Value (000) | ||||||||||
Korea, Republic of (0.7%) | |||||||||||
Korea Electric Power Corp., 2.50%, 6/24/24 (c) | $ | 200 | $ | 194 | |||||||
Korea Hydro & Nuclear Power Co. Ltd., 3.75%, 7/25/23 (c) | 200 | 200 | |||||||||
Korea Southern Power Co. Ltd., 0.75%, 1/27/26 (c) | 200 | 177 | |||||||||
571 | |||||||||||
Luxembourg (0.1%) | |||||||||||
Blackstone Property Partners Europe Holdings Sarl, 1.25%, 4/26/27 | EUR | 100 | 87 | ||||||||
Netherlands (0.1%) | |||||||||||
ASR Nederland NV, 5.00%, 9/30/24 (d) | 100 | 108 | |||||||||
Qatar (0.2%) | |||||||||||
Ooredoo International Finance Ltd., 2.63%, 4/8/31 (c) | $ | 200 | 173 | ||||||||
Spain (0.4%) | |||||||||||
Banco Santander SA, 3.13%, 1/19/27 | EUR | 100 | 104 | ||||||||
5.18%, 11/19/25 | $ | 200 | 195 | ||||||||
299 | |||||||||||
Sweden (0.1%) | |||||||||||
Akelius Residential Property Financing BV, 1.13%, 1/11/29 | EUR | 100 | 84 | ||||||||
United Arab Emirates (0.2%) | |||||||||||
Galaxy Pipeline Assets Bidco Ltd., 2.63%, 3/31/36 (c) | $ | 225 | 182 | ||||||||
United Kingdom (1.0%) | |||||||||||
BAT Capital Corp., 3.56%, 8/15/27 | 125 | 115 | |||||||||
HSBC Holdings PLC, 2.26%, 11/13/26 | GBP | 100 | 113 | ||||||||
6.16%, 3/9/29 | $ | 225 | 227 | ||||||||
Lloyds Banking Group PLC, 1.75%, 9/7/28 | EUR | 100 | 109 | ||||||||
2.25%, 10/16/24 | GBP | 100 | 120 | ||||||||
NGG Finance PLC, 5.63%, 6/18/73 | 100 | 121 | |||||||||
805 | |||||||||||
United States (5.0%) | |||||||||||
Amazon.com, Inc., 3.10%, 5/12/51 | $ | 50 | 37 | ||||||||
AT&T, Inc., 1.80%, 9/5/26 | EUR | 100 | 102 | ||||||||
2.90%, 12/4/26 | GBP | 100 | 113 | ||||||||
Bank of America Corp., 2.69%, 4/22/32 | $ | 50 | 41 | ||||||||
3.85%, 3/8/37 | 25 | 21 | |||||||||
4.38%, 4/27/28 | 100 | 96 | |||||||||
4.57%, 4/27/33 | 25 | 24 | |||||||||
CDW LLC/CDW Finance Corp., 2.67%, 12/1/26 | 25 | 22 |
Face Amount (000) | Value (000) | ||||||||||
Celanese U.S. Holdings LLC, 6.17%, 7/15/27 | $ | 50 | $ | 50 | |||||||
Centene Corp., 2.50%, 3/1/31 | 175 | 140 | |||||||||
Charles Schwab Corp., 5.85%, 5/19/34 | 65 | 66 | |||||||||
Charter Communications Operating LLC/ Charter Communications Operating Capital, 2.80%, 4/1/31 | 100 | 81 | |||||||||
3.50%, 3/1/42 | 25 | 17 | |||||||||
5.13%, 7/1/49 | 25 | 20 | |||||||||
Citigroup, Inc., 3.06%, 1/25/33 | 50 | 42 | |||||||||
3.79%, 3/17/33 | 225 | 199 | |||||||||
Comcast Corp., 1.95%, 1/15/31 | 125 | 102 | |||||||||
Deere & Co., 3.10%, 4/15/30 | 100 | 92 | |||||||||
Dick's Sporting Goods, Inc., 4.10%, 1/15/52 | 75 | 52 | |||||||||
Energy Transfer LP, 2.90%, 5/15/25 | 150 | 142 | |||||||||
Enterprise Products Operating LLC, 3.95%, 1/31/60 | 50 | 39 | |||||||||
5.35%, 1/31/33 | 25 | 25 | |||||||||
Estee Lauder Cos., Inc., 4.65%, 5/15/33 | 75 | 74 | |||||||||
Fidelity National Information Services, Inc., 1.65%, 3/1/28 | 100 | 84 | |||||||||
Georgia-Pacific LLC, 2.30%, 4/30/30 (c) | 175 | 149 | |||||||||
Goldman Sachs Group, Inc., 2.62%, 4/22/32 | 150 | 123 | |||||||||
HCA, Inc., 4.63%, 3/15/52 (c) | 75 | 62 | |||||||||
Intel Corp., 5.70%, 2/10/53 | 75 | 76 | |||||||||
JBS USA LUX SA/JBS USA Food Co./ JBS USA Finance, Inc., 2.50%, 1/15/27 (c) | 225 | 197 | |||||||||
JPMorgan Chase & Co., 2.55%, 11/8/32 | 225 | 184 | |||||||||
Level 3 Financing, Inc., 3.40%, 3/1/27 (c) | 100 | 85 | |||||||||
Lowe's Cos., Inc., 1.30%, 4/15/28 | 75 | 63 | |||||||||
1.70%, 10/15/30 | 100 | 80 | |||||||||
Marriott International, Inc., 4.90%, 4/15/29 | 25 | 24 | |||||||||
Medtronic Global Holdings SCA, 1.00%, 7/2/31 | EUR | 100 | 89 | ||||||||
Metropolitan Life Global Funding I, 2.95%, 4/9/30 (c) | $ | 150 | 130 | ||||||||
Micron Technology, Inc., 5.88%, 9/15/33 | 75 | 74 |
The accompanying notes are an integral part of the consolidated financial statements.
4
Morgan Stanley Variable Insurance Fund, Inc.
Semi-Annual Report – June 30, 2023 (unaudited)
Consolidated Portfolio of Investments (cont'd)
Global Strategist Portfolio
Face Amount (000) | Value (000) | ||||||||||
United States (cont'd) | |||||||||||
NextEra Energy Capital Holdings, Inc., 2.75%, 11/1/29 | $ | 175 | $ | 152 | |||||||
Prologis Euro Finance LLC, 1.88%, 1/5/29 | EUR | 100 | 95 | ||||||||
Republic Services, Inc., 5.00%, 4/1/34 | $ | 50 | 50 | ||||||||
Thermo Fisher Scientific, Inc., 0.88%, 10/1/31 | EUR | 100 | 88 | ||||||||
Truist Financial Corp., SOFR + 2.36%, 5.87%, 6/8/34 (b) | $ | 100 | 100 | ||||||||
U.S. Bancorp, 5.78%, 6/12/29 | 75 | 75 | |||||||||
5.84%, 6/12/34 | 75 | 76 | |||||||||
Upjohn Finance BV, 1.91%, 6/23/32 | EUR | 100 | 84 | ||||||||
Verizon Communications, Inc., 1.13%, 11/3/28 | GBP | 100 | 99 | ||||||||
3.40%, 3/22/41 | $ | 50 | 39 | ||||||||
Vontier Corp., 2.40%, 4/1/28 | 50 | 42 | |||||||||
Walt Disney Co., 2.65%, 1/13/31 | 50 | 44 | |||||||||
Warnermedia Holdings, Inc., 4.28%, 3/15/32 | 150 | 133 | |||||||||
5.05%, 3/15/42 | 25 | 21 | |||||||||
4,115 | |||||||||||
Total Corporate Bonds (Cost $9,761) | 8,728 | ||||||||||
Sovereign (25.7%) | |||||||||||
Australia (0.4%) | |||||||||||
Australia Government Bond, 1.25%, 5/21/32 | AUD | 690 | 365 | ||||||||
Austria (0.1%) | |||||||||||
Republic of Austria Government Bond, 0.00%, 2/20/30 (c) | EUR | 70 | 63 | ||||||||
Belgium (0.3%) | |||||||||||
Kingdom of Belgium Government Bond, 0.90%, 6/22/29 (c) | 30 | 29 | |||||||||
1.70%, 6/22/50 (c) | 90 | 70 | |||||||||
Series 99 | |||||||||||
3.45%, 6/22/43 (c) | 100 | 110 | |||||||||
209 | |||||||||||
Brazil (2.1%) | |||||||||||
Brazil Notas do Tesouro Nacional, 10.00%, 1/1/27 | BRL | 8,262 | 1,716 | ||||||||
Canada (1.1%) | |||||||||||
Canadian Government Bond, 1.25%, 6/1/30 | CAD | 1,020 | 670 | ||||||||
2.00%, 12/1/51 | 20 | 12 | |||||||||
2.50%, 12/1/32 | 290 | 205 | |||||||||
887 |
Face Amount (000) | Value (000) | ||||||||||
China (6.7%) | |||||||||||
Agricultural Development Bank of China, 2.25%, 4/22/25 | CNY | 770 | $ | 106 | |||||||
3.79%, 10/26/30 | 740 | 109 | |||||||||
China Development Bank, 3.07%, 3/10/30 | 1,410 | 197 | |||||||||
3.34%, 7/14/25 | 740 | 104 | |||||||||
China Government Bond, 2.37%, 1/20/27 | 3,200 | 440 | |||||||||
2.76%, 5/15/32 | 22,270 | 3,072 | |||||||||
2.80%, 11/15/32 | 1,400 | 194 | |||||||||
3.13%, 11/21/29 | 4,390 | 622 | |||||||||
3.27%, 11/19/30 | 1,540 | 222 | |||||||||
3.52%, 4/25/46 | 410 | 60 | |||||||||
3.53%, 10/18/51 | 200 | 30 | |||||||||
3.81%, 9/14/50 | 300 | 47 | |||||||||
3.86%, 7/22/49 | 1,270 | 199 | |||||||||
Export-Import Bank of China, 2.93%, 3/2/25 | 740 | 103 | |||||||||
5,505 | |||||||||||
Czech Republic (0.1%) | |||||||||||
Czech Republic Government Bond, 1.20%, 3/13/31 | CZK | 1,200 | 44 | ||||||||
Denmark (0.1%) | |||||||||||
Denmark Government Bond, 0.50%, 11/15/27 | DKK | 630 | 84 | ||||||||
Finland (0.1%) | |||||||||||
Finland Government Bond, 1.13%, 4/15/34 (c) | EUR | 70 | 63 | ||||||||
France (1.6%) | |||||||||||
Agence Francaise de Developpement EPIC, 1.50%, 10/31/34 | 100 | 91 | |||||||||
Banque Federative du Credit Mutuel SA, 1.25%, 12/5/25 | GBP | 100 | 112 | ||||||||
French Republic Government Bond OAT, 0.00%, 11/25/29 | EUR | 940 | 858 | ||||||||
2.00%, 5/25/48 (c) | 200 | 172 | |||||||||
SNCF Reseau, 1.88%, 3/30/34 | 100 | 95 | |||||||||
1,328 | |||||||||||
Germany (1.4%) | |||||||||||
Bundesrepublik Deutschland Bundesanleihe, 0.00%, 8/15/31 - 8/15/50 | 588 | 509 | |||||||||
0.25%, 2/15/29 | 190 | 183 | |||||||||
4.25%, 7/4/39 | 120 | 161 | |||||||||
Series G 1.80%, 8/15/53 | 28 | 27 | |||||||||
State of North Rhine-Westphalia Germany, 1.65%, 2/22/38 | 290 | 261 | |||||||||
1,141 | |||||||||||
Greece (2.6%) | |||||||||||
Hellenic Republic Government Bonds, 4.25%, 6/15/33 (c) | 1,903 | 2,176 |
The accompanying notes are an integral part of the consolidated financial statements.
5
Morgan Stanley Variable Insurance Fund, Inc.
Semi-Annual Report – June 30, 2023 (unaudited)
Consolidated Portfolio of Investments (cont'd)
Global Strategist Portfolio
Face Amount (000) | Value (000) | ||||||||||
Hungary (0.1%) | |||||||||||
Hungary Government Bond, Series 30/A 3.00%, 8/21/30 | HUF | 8,480 | $ | 19 | |||||||
Series 32/A | |||||||||||
4.75%, 11/24/32 | 18,110 | 45 | |||||||||
Series 32/G | |||||||||||
4.50%, 5/27/32 | 10,410 | 26 | |||||||||
90 | |||||||||||
Indonesia (0.4%) | |||||||||||
Indonesia Treasury Bond, 8.25%, 5/15/29 | IDR | 839,000 | 62 | ||||||||
8.38%, 3/15/34 | 2,481,000 | 190 | |||||||||
Series FR65 | |||||||||||
6.63%, 5/15/33 | 1,500,000 | 102 | |||||||||
354 | |||||||||||
Ireland (0.1%) | |||||||||||
Ireland Government Bond, 0.20%, 10/18/30 | EUR | 80 | 72 | ||||||||
Italy (0.8%) | |||||||||||
Italy Buoni Poliennali Del Tesoro, 0.45%, 2/15/29 | 50 | 46 | |||||||||
2.50%, 12/1/32 | 220 | 213 | |||||||||
4.45%, 9/1/43 (c) | 199 | 221 | |||||||||
Republic of Italy Government International Bond, 0.88%, 5/6/24 | $ | 200 | 191 | ||||||||
671 | |||||||||||
Japan (4.1%) | |||||||||||
Japan Government Five Year Bond, 0.10%, 6/20/24 | JPY | 90,300 | 627 | ||||||||
Japan Government Ten Year Bond, 0.10%, 6/20/26 - 6/20/31 | 148,800 | 1,025 | |||||||||
Japan Government Thirty Year Bond, 0.30%, 6/20/46 | 34,300 | 200 | |||||||||
0.40%, 9/20/49 | 21,900 | 125 | |||||||||
0.60%, 6/20/50 | 29,000 | 172 | |||||||||
1.70%, 6/20/33 | 91,300 | 712 | |||||||||
Japan Government Twenty Year Bond, 0.40%, 6/20/41 | 77,000 | 488 | |||||||||
3,349 | |||||||||||
Korea, Republic of (0.4%) | |||||||||||
Export-Import Bank of Korea, 0.63%, 2/9/26 | $ | 200 | 177 | ||||||||
Korea Development Bank, 0.80%, 7/19/26 | 200 | 174 | |||||||||
351 | |||||||||||
Malaysia (0.4%) | |||||||||||
Malaysia Government Bond, Series 0219 3.89%, 8/15/29 | MYR | 440 | 95 | ||||||||
Series 0122 3.58%, 7/15/32 | 200 | 42 |
Face Amount (000) | Value (000) | ||||||||||
Petronas Capital Ltd., 3.50%, 3/18/25 (c) | $ | 200 | $ | 193 | |||||||
330 | |||||||||||
Mexico (0.4%) | |||||||||||
Mexican Bonos, Series M 7.50%, 6/3/27 | MXN | 1,700 | 95 | ||||||||
7.75%, 5/29/31 | 3,000 | 166 | |||||||||
8.50%, 5/31/29 | 800 | 46 | |||||||||
307 | |||||||||||
Netherlands (0.2%) | |||||||||||
Netherlands Government Bond, 0.00%, 7/15/30 (c) | EUR | 190 | 172 | ||||||||
2.75%, 1/15/47 (c) | 20 | 22 | |||||||||
194 | |||||||||||
New Zealand (0.3%) | |||||||||||
New Zealand Government Bond, Series 0530 4.50%, 5/15/30 | NZD | 200 | 122 | ||||||||
Series 0534 | |||||||||||
4.25%, 5/15/34 | 200 | 119 | |||||||||
241 | |||||||||||
Norway (0.0%)‡ | |||||||||||
Norway Government Bond, 2.13%, 5/18/32 (c) | NOK | 190 | 16 | ||||||||
Saudi Arabia (0.2%) | |||||||||||
KSA Sukuk Ltd., 4.51%, 5/22/33 (c) | $ | 200 | 197 | ||||||||
Singapore (0.1%) | |||||||||||
Singapore Government Bond, 2.63%, 8/1/32 | SGD | 70 | 50 | ||||||||
Spain (0.9%) | |||||||||||
Spain Government Bond, 0.00%, 5/31/25 - 1/31/28 (c) | EUR | 360 | 364 | ||||||||
0.70%, 4/30/32 (c) | 21 | 18 | |||||||||
1.25%, 10/31/30 (c) | 289 | 275 | |||||||||
2.70%, 10/31/48 (c) | 40 | 36 | |||||||||
3.45%, 7/30/66 (c) | 21 | 21 | |||||||||
3.55%, 10/31/33 (c) | 44 | 48 | |||||||||
762 | |||||||||||
Thailand (0.1%) | |||||||||||
Thailand Government Bond, 2.00%, 12/17/31 | THB | 4,000 | 109 | ||||||||
United Kingdom (0.6%) | |||||||||||
United Kingdom Gilt, 0.63%, 10/22/50 | GBP | 180 | 93 | ||||||||
0.88%, 7/31/33 | 150 | 136 | |||||||||
1.25%, 10/22/41 | 60 | 46 | |||||||||
3.50%, 1/22/45 | 180 | 197 | |||||||||
472 | |||||||||||
Total Sovereign (Cost $23,476) | 21,146 |
The accompanying notes are an integral part of the consolidated financial statements.
6
Morgan Stanley Variable Insurance Fund, Inc.
Semi-Annual Report – June 30, 2023 (unaudited)
Consolidated Portfolio of Investments (cont'd)
Global Strategist Portfolio
Face Amount (000) | Value (000) | ||||||||||
Supranational (0.7%) | |||||||||||
Asian Development Bank, 2.13%, 5/19/31 | NZD | 60 | $ | 30 | |||||||
European Investment Bank, 0.00%, 1/14/31 | EUR | 200 | 174 | ||||||||
International Bank for Reconstruction & Development, 2.20%, 2/27/24 | AUD | 610 | 400 | ||||||||
Total Supranational (Cost $728) | 604 | ||||||||||
U.S. Treasury Securities (3.7%) | |||||||||||
United States (3.7%) | |||||||||||
U.S. Treasury Bonds, 1.13%, 5/15/40 | $ | 790 | 513 | ||||||||
1.25%, 5/15/50 | 236 | 133 | |||||||||
1.75%, 8/15/41 | 530 | 373 | |||||||||
2.50%, 2/15/45 | 590 | 457 | |||||||||
2.75%, 8/15/47 | 360 | 290 | |||||||||
U.S. Treasury Inflation-Indexed Bonds, 1.13%, 1/15/33 | 1,057 | 1,013 | |||||||||
U.S. Treasury Notes, 1.38%, 11/15/31 | 340 | 280 | |||||||||
Total U.S. Treasury Securities (Cost $3,487) | 3,059 | ||||||||||
Mortgages — Other (1.4%) | |||||||||||
Germany (0.0%)‡ | |||||||||||
Berg Finance DAC, 3 Month EURIBOR + 1.05%, 4.26%, 4/22/33 (b) | EUR | 16 | 16 | ||||||||
United Kingdom (0.1%) | |||||||||||
Landmark Mortgage Securities No. 3 PLC, 3 Month GBP SONIA + 2.22%, 6.69%, 4/17/44 (b) | GBP | 58 | 67 | ||||||||
United States (1.3%) | |||||||||||
Bayview MSR Opportunity Master Fund Trust, 3.00%, 1/25/52 (b)(c) | $ | 92 | 77 | ||||||||
BX Commercial Mortgage Trust, Class A 1 Month Term SOFR + 2.28%, 7.43%, 6/15/40 (b)(c) | 100 | 100 | |||||||||
Federal Home Loan Mortgage Corp. Whole Loan Securities Trust, 3.00%, 9/25/45 | 18 | 15 | |||||||||
3.00%, 7/25/46 | 8 | 7 | |||||||||
3.00%, 12/25/46 | 30 | 26 | |||||||||
3.00%, 5/25/47 | 37 | 32 | |||||||||
3.50%, 5/25/45 | 8 | 6 | |||||||||
3.50%, 9/25/45 | 17 | 15 | |||||||||
3.50%, 7/25/46 | 10 | 9 | |||||||||
4.00%, 5/25/45 | 2 | 2 | |||||||||
Hundred Acre Wood Trust, 2.50%, 12/25/51 (b)(c) | 90 | 72 | |||||||||
JP Morgan Mortgage Trust, 3.00%, 4/25/52 (b)(c) | 165 | 139 | |||||||||
3.00%, 9/25/52 (b)(c) | 180 | 151 | |||||||||
3.25%, 7/25/52 (b)(c) | 90 | 77 |
Face Amount (000) | Value (000) | ||||||||||
PRKCM 2023-AFC1 Trust, Class A1 6.60%, 2/25/58 (c) | $ | 93 | $ | 94 | |||||||
PRMI Securitization Trust, 2.50%, 4/25/51 (b)(c) | 85 | 68 | |||||||||
Seasoned Credit Risk Transfer Trust, 3.00%, 11/25/57 | 80 | 71 | |||||||||
3.00%, 7/25/58 | 86 | 75 | |||||||||
3.00%, 10/25/58 | 13 | 12 | |||||||||
4.00%, 10/25/58 | 13 | 12 | |||||||||
1,060 | |||||||||||
Total Mortgages — Other (Cost $1,287) | 1,143 | ||||||||||
Total Fixed Income Securities (Cost $42,868) | 38,640 | ||||||||||
Shares | |||||||||||
Common Stocks (34.7%) | |||||||||||
Australia (1.0%) | |||||||||||
Ampol Ltd. | 168 | 3 | |||||||||
ANZ Group Holdings Ltd. | 2,017 | 32 | |||||||||
APA Group | 835 | 5 | |||||||||
Aristocrat Leisure Ltd. | 403 | 10 | |||||||||
ASX Ltd. | 135 | 6 | |||||||||
Aurizon Holdings Ltd. | 1,340 | 4 | |||||||||
BHP Group Ltd. | 3,498 | 105 | |||||||||
BlueScope Steel Ltd. | 333 | 5 | |||||||||
Brambles Ltd. | 934 | 9 | |||||||||
Cochlear Ltd. | 43 | 7 | |||||||||
Coles Group Ltd. | 897 | 11 | |||||||||
Commonwealth Bank of Australia | 1,148 | 77 | |||||||||
Computershare Ltd. | 383 | 6 | |||||||||
CSL Ltd. | 325 | 60 | |||||||||
Dexus REIT | 763 | 4 | |||||||||
Endeavour Group Ltd. (Australia) | 1,015 | 4 | |||||||||
Fortescue Metals Group Ltd. | 1,151 | 17 | |||||||||
Goodman Group REIT | 1,132 | 15 | |||||||||
GPT Group REIT | 1,384 | 4 | |||||||||
IDP Education Ltd. | 148 | 2 | |||||||||
IGO Ltd. | 483 | 5 | |||||||||
Insurance Australia Group Ltd. | 1,711 | 7 | |||||||||
James Hardie Industries PLC CDI (e) | 298 | 8 | |||||||||
Lendlease Corp. Ltd. REIT | 489 | 3 | |||||||||
Lottery Corp. Ltd. | 1,555 | 5 | |||||||||
Macquarie Group Ltd. | 244 | 29 | |||||||||
Medibank Pvt Ltd. | 1,897 | 4 | |||||||||
Mineral Resources Ltd. | 122 | 6 | |||||||||
Mirvac Group REIT | 2,766 | 4 | |||||||||
National Australia Bank Ltd. | 2,117 | 37 | |||||||||
Newcrest Mining Ltd. | 586 | 10 | |||||||||
Northern Star Resources Ltd. | 785 | 6 | |||||||||
Orica Ltd. | 323 | 3 | |||||||||
Origin Energy Ltd. | 1,161 | 7 | |||||||||
Pilbara Minerals Ltd. | 1,841 | 6 | |||||||||
Qantas Airways Ltd. (e) | 654 | 3 |
The accompanying notes are an integral part of the consolidated financial statements.
7
Morgan Stanley Variable Insurance Fund, Inc.
Semi-Annual Report – June 30, 2023 (unaudited)
Consolidated Portfolio of Investments (cont'd)
Global Strategist Portfolio
Shares | Value (000) | ||||||||||
Australia (cont'd) | |||||||||||
QBE Insurance Group Ltd. | 1,013 | $ | 11 | ||||||||
Ramsay Health Care Ltd. | 126 | 5 | |||||||||
REA Group Ltd. | 37 | 4 | |||||||||
Reece Ltd. | 160 | 2 | |||||||||
Rio Tinto Ltd. | 253 | 19 | |||||||||
Santos Ltd. | 2,085 | 10 | |||||||||
Scentre Group REIT | 3,615 | 6 | |||||||||
SEEK Ltd. | 244 | 4 | |||||||||
Sonic Healthcare Ltd. | 302 | 7 | |||||||||
South32 Ltd. | 3,084 | 8 | |||||||||
Stockland REIT | 1,646 | 4 | |||||||||
Suncorp Group Ltd. | 859 | 8 | |||||||||
Telstra Group Ltd. | 2,712 | 8 | |||||||||
Transurban Group (Units) | 2,060 | 20 | |||||||||
Treasury Wine Estates Ltd. | 506 | 4 | |||||||||
Vicinity Ltd. REIT | 2,742 | 3 | |||||||||
Washington H Soul Pattinson & Co. Ltd. | 153 | 3 | |||||||||
Wesfarmers Ltd. | 761 | 25 | |||||||||
Westpac Banking Corp. | 2,374 | 34 | |||||||||
WiseTech Global Ltd. | 102 | 5 | |||||||||
Woodside Energy Group Ltd. | 1,276 | 30 | |||||||||
Woolworths Group Ltd. | 816 | 22 | |||||||||
Xero Ltd. (e) | 93 | 7 | |||||||||
778 | |||||||||||
Austria (0.1%) | |||||||||||
Erste Group Bank AG | 1,013 | 36 | |||||||||
OMV AG | 129 | 5 | |||||||||
Verbund AG | 59 | 5 | |||||||||
voestalpine AG | 103 | 4 | |||||||||
50 | |||||||||||
Belgium (0.2%) | |||||||||||
Ageas SA | 136 | 5 | |||||||||
Anheuser-Busch InBev SA | 738 | 42 | |||||||||
Argenx SE (e) | 46 | 18 | |||||||||
D'ieteren Group | 22 | 4 | |||||||||
Elia Group SA | 28 | 4 | |||||||||
Groupe Bruxelles Lambert NV | 85 | 7 | |||||||||
KBC Group NV | 738 | 51 | |||||||||
Sofina SA | 13 | 3 | |||||||||
Solvay SA | 64 | 7 | |||||||||
UCB SA | 105 | 9 | |||||||||
Umicore SA | 181 | 5 | |||||||||
Warehouses De Pauw CVA REIT | 140 | 4 | |||||||||
159 | |||||||||||
Canada (1.7%) | |||||||||||
Agnico Eagle Mines Ltd. | 408 | 20 | |||||||||
Air Canada (e) | 147 | 3 | |||||||||
Algonquin Power & Utilities Corp. | 554 | 5 | |||||||||
Alimentation Couche-Tard, Inc. | 571 | 29 | |||||||||
AltaGas Ltd. | 234 | 4 | |||||||||
ARC Resources Ltd. | 528 | 7 |
Shares | Value (000) | ||||||||||
Bank of Montreal | 568 | $ | 51 | ||||||||
Bank of Nova Scotia | 988 | 50 | |||||||||
Barrick Gold Corp. (LSE) | 1,103 | 19 | |||||||||
Barrick Gold Corp. (NYSE) | 57 | 1 | |||||||||
BCE, Inc. | 61 | 3 | |||||||||
Brookfield Asset Management Ltd., Class A | 296 | 10 | |||||||||
Brookfield Corp. | 989 | 33 | |||||||||
Brookfield Renewable Corp., Class A | 107 | 3 | |||||||||
BRP, Inc. | 31 | 3 | |||||||||
CAE, Inc. (e) | 263 | 6 | |||||||||
Cameco Corp. | 361 | 11 | |||||||||
Canadian Apartment Properties REIT | 70 | 3 | |||||||||
Canadian Imperial Bank of Commerce | 655 | 28 | |||||||||
Canadian National Railway Co. | 478 | 58 | |||||||||
Canadian Natural Resources Ltd. | 926 | 52 | |||||||||
Canadian Pacific Kansas City Ltd. | 471 | 38 | |||||||||
Canadian Tire Corp. Ltd., Class A | 46 | 6 | |||||||||
Canadian Utilities Ltd., Class A | 106 | 3 | |||||||||
CCL Industries, Inc., Class B | 125 | 6 | |||||||||
Cenovus Energy, Inc. | 1,223 | 21 | |||||||||
CGI, Inc. (e) | 176 | 19 | |||||||||
Constellation Software, Inc. | 17 | 35 | |||||||||
Descartes Systems Group, Inc. (e) | 71 | 6 | |||||||||
Dollarama, Inc. | 225 | 15 | |||||||||
Element Fleet Management Corp. | 332 | 5 | |||||||||
Emera, Inc. | 219 | 9 | |||||||||
Empire Co. Ltd., Class A | 133 | 4 | |||||||||
Enbridge, Inc. | 1,477 | 55 | |||||||||
Fairfax Financial Holdings Ltd. | 19 | 14 | |||||||||
First Quantum Minerals Ltd. | 497 | 12 | |||||||||
FirstService Corp. | 34 | 5 | |||||||||
Fortis, Inc. | 393 | 17 | |||||||||
Franco-Nevada Corp. | 162 | 23 | |||||||||
George Weston Ltd. | 59 | 7 | |||||||||
GFL Environmental, Inc. | 151 | 6 | |||||||||
Gildan Activewear, Inc. | 153 | 5 | |||||||||
Great-West Lifeco, Inc. | 233 | 7 | |||||||||
Hydro One Ltd. | 269 | 8 | |||||||||
IA Financial Corp., Inc. | 88 | 6 | |||||||||
IGM Financial, Inc. | 68 | 2 | |||||||||
Imperial Oil Ltd. | 179 | 9 | |||||||||
Intact Financial Corp. | 145 | 22 | |||||||||
Ivanhoe Mines Ltd., Class A (e) | 518 | 5 | |||||||||
Keyera Corp. | 183 | 4 | |||||||||
Kinross Gold Corp. | 1,059 | 5 | |||||||||
Loblaw Cos. Ltd. | 134 | 12 | |||||||||
Lundin Mining Corp. | 525 | 4 | |||||||||
Magna International, Inc. | 230 | 13 | |||||||||
Manulife Financial Corp. | 1,367 | 26 | |||||||||
Metro, Inc. | 195 | 11 | |||||||||
National Bank of Canada | 282 | 21 | |||||||||
Northland Power, Inc. | 203 | 4 | |||||||||
Nutrien Ltd. | 439 | 26 |
The accompanying notes are an integral part of the consolidated financial statements.
8
Morgan Stanley Variable Insurance Fund, Inc.
Semi-Annual Report – June 30, 2023 (unaudited)
Consolidated Portfolio of Investments (cont'd)
Global Strategist Portfolio
Shares | Value (000) | ||||||||||
Canada (cont'd) | |||||||||||
Nuvei Corp. (e) | 57 | $ | 2 | ||||||||
Onex Corp. | 60 | 3 | |||||||||
Open Text Corp. | 226 | 9 | |||||||||
Pan American Silver Corp. | 303 | 4 | |||||||||
Parkland Corp. | 118 | 3 | |||||||||
Pembina Pipeline Corp. | 457 | 14 | |||||||||
Power Corp. of Canada | 458 | 12 | |||||||||
Quebecor, Inc., Class B | 129 | 3 | |||||||||
RB Global, Inc. | 151 | 9 | |||||||||
Restaurant Brands International, Inc. | �� | 243 | 19 | ||||||||
RioCan Real Estate Investment Trust REIT | 123 | 2 | |||||||||
Rogers Communications, Inc., Class B | 293 | 13 | |||||||||
Royal Bank of Canada | 852 | 81 | |||||||||
Saputo, Inc. | 209 | 5 | |||||||||
Shopify, Inc., Class A (e) | 1,024 | 66 | |||||||||
Sun Life Financial, Inc. | 490 | 26 | |||||||||
Suncor Energy, Inc. | 1,133 | 33 | |||||||||
TC Energy Corp. | 634 | 26 | |||||||||
Teck Resources Ltd., Class B | 390 | 16 | |||||||||
TELUS Corp. | 388 | 8 | |||||||||
TFI International, Inc. | 66 | 8 | |||||||||
Thomson Reuters Corp. | 134 | 18 | |||||||||
TMX Group Ltd. | 230 | 5 | |||||||||
Toromont Industries Ltd. | 70 | 6 | |||||||||
Toronto-Dominion Bank | 1,355 | 84 | |||||||||
Tourmaline Oil Corp. | 270 | 13 | |||||||||
West Fraser Timber Co. Ltd. | 49 | 4 | |||||||||
Wheaton Precious Metals Corp. | 378 | 16 | |||||||||
WSP Global, Inc. | 106 | 14 | |||||||||
1,417 | |||||||||||
China (0.0%) | |||||||||||
China Common Rich Renewable Energy Investments Ltd. (e) | 18,000 | — | |||||||||
Denmark (0.5%) | |||||||||||
AP Moller — Maersk AS Series B | 7 | 12 | |||||||||
Carlsberg AS Series B | 74 | 12 | |||||||||
Chr Hansen Holding AS | 85 | 6 | |||||||||
Coloplast AS Series B | 90 | 11 | |||||||||
Danske Bank AS (e) | 536 | 13 | |||||||||
Demant AS (e) | 73 | 3 | |||||||||
DSV AS | 147 | 31 | |||||||||
Genmab AS (e) | 51 | 19 | |||||||||
Novo Nordisk AS Series B | 1,280 | 207 | |||||||||
Novozymes AS Series B | 164 | 8 | |||||||||
Orsted AS | 144 | 14 | |||||||||
Pandora AS | 73 | 6 | |||||||||
ROCKWOOL AS, Class B | 8 | 2 | |||||||||
Tryg AS | 284 | 6 | |||||||||
Vestas Wind Systems AS (e) | 788 | 21 | |||||||||
371 | |||||||||||
Finland (0.2%) | |||||||||||
Elisa Oyj | 116 | 6 |
Shares | Value (000) | ||||||||||
Fortum Oyj | 365 | $ | 5 | ||||||||
Kesko Oyj, Class B | 224 | 4 | |||||||||
Kone Oyj, Class B | 283 | 15 | |||||||||
Metso Oyj | 545 | 7 | |||||||||
Neste Oyj | 346 | 13 | |||||||||
Nokia Oyj | 4,383 | 18 | |||||||||
Orion Oyj, Class B | 88 | 4 | |||||||||
Sampo Oyj, Class A | 387 | 17 | |||||||||
Stora Enso Oyj, Class R | 454 | 5 | |||||||||
UPM-Kymmene Oyj | 434 | 13 | |||||||||
Wartsila Oyj Abp | 391 | 5 | |||||||||
112 | |||||||||||
France (2.1%) | |||||||||||
Accor SA | 135 | 5 | |||||||||
Aeroports de Paris | 23 | 3 | |||||||||
Air Liquide SA | 410 | 74 | |||||||||
Airbus SE | 461 | 67 | |||||||||
Alstom SA | 253 | 8 | |||||||||
Amundi SA | 49 | 3 | |||||||||
ArcelorMittal SA | 417 | 11 | |||||||||
Arkema SA | 48 | 5 | |||||||||
AXA SA | 1,474 | 44 | |||||||||
BioMerieux | 33 | 3 | |||||||||
BNP Paribas SA | 3,195 | 202 | |||||||||
Bollore SE | 694 | 4 | |||||||||
Bouygues SA | 177 | 6 | |||||||||
Bureau Veritas SA | 232 | 6 | |||||||||
Capgemini SE | 129 | 24 | |||||||||
Carrefour SA | 469 | 9 | |||||||||
Cie de Saint-Gobain | 399 | 24 | |||||||||
Cie Generale des Etablissements Michelin SCA | 541 | 16 | |||||||||
Covivio SA REIT | 38 | 2 | |||||||||
Credit Agricole SA | 3,480 | 41 | |||||||||
Danone SA | 497 | 30 | |||||||||
Dassault Aviation SA | 20 | 4 | |||||||||
Dassault Systemes SE | 521 | 23 | |||||||||
Edenred | 192 | 13 | |||||||||
Eiffage SA | 65 | 7 | |||||||||
Engie SA | 1,420 | 24 | |||||||||
EssilorLuxottica SA | 222 | 42 | |||||||||
Eurazeo SE | 35 | 2 | |||||||||
Eurofins Scientific SE | 105 | 7 | |||||||||
Euronext NV | 67 | 5 | |||||||||
Gecina SA REIT | 37 | 4 | |||||||||
Getlink SE | 344 | 6 | |||||||||
Hermes International | 25 | 54 | |||||||||
Ipsen SA | 29 | 3 | |||||||||
Kering SA | 61 | 34 | |||||||||
Klepierre SA REIT | 173 | 4 | |||||||||
L'Oreal SA | 190 | 89 | |||||||||
La Francaise des Jeux SAEM | 82 | 3 | |||||||||
Legrand SA | 216 | 21 | |||||||||
LVMH Moet Hennessy Louis Vuitton SE | 216 | 204 |
The accompanying notes are an integral part of the consolidated financial statements.
9
Morgan Stanley Variable Insurance Fund, Inc.
Semi-Annual Report – June 30, 2023 (unaudited)
Consolidated Portfolio of Investments (cont'd)
Global Strategist Portfolio
Shares | Value (000) | ||||||||||
France (cont'd) | |||||||||||
Orange SA | 1,538 | $ | 18 | ||||||||
Pernod Ricard SA | 161 | 36 | |||||||||
Publicis Groupe SA | 180 | 14 | |||||||||
Remy Cointreau SA | 18 | 3 | |||||||||
Renault SA | 156 | 7 | |||||||||
Safran SA | 266 | 42 | |||||||||
Sanofi | 886 | 95 | |||||||||
Sartorius Stedim Biotech | 21 | 5 | |||||||||
Schneider Electric SE | 436 | 79 | |||||||||
SEB SA | 20 | 2 | |||||||||
Societe Generale SA | 2,298 | 60 | |||||||||
Sodexo SA | 62 | 7 | |||||||||
STMicroelectronics NV | 551 | 27 | |||||||||
Teleperformance | 47 | 8 | |||||||||
Thales SA | 83 | 12 | |||||||||
TotalEnergies SE | 1,937 | 111 | |||||||||
Unibail-Rodamco-Westfield REIT (e) | 94 | 5 | |||||||||
Valeo SA | 167 | 4 | |||||||||
Veolia Environnement SA | 526 | 17 | |||||||||
Vinci SA | 414 | 48 | |||||||||
Vivendi SE | 567 | 5 | |||||||||
Wendel SE | 21 | 2 | |||||||||
Worldline SA (e) | 189 | 7 | |||||||||
1,750 | |||||||||||
Germany (1.4%) | |||||||||||
Adidas AG | 133 | 26 | |||||||||
Allianz SE (Registered) | 332 | 77 | |||||||||
Aroundtown SA (e) | 912 | 1 | |||||||||
BASF SE | 766 | 37 | |||||||||
Bayer AG (Registered) | 804 | 44 | |||||||||
Bayerische Motoren Werke AG | 276 | 34 | |||||||||
Bayerische Motoren Werke AG (Preference) | 49 | 6 | |||||||||
Bechtle AG | 70 | 3 | |||||||||
Beiersdorf AG | 82 | 11 | |||||||||
Brenntag SE | 129 | 10 | |||||||||
Carl Zeiss Meditec AG | 33 | 4 | |||||||||
Commerzbank AG | 3,127 | 35 | |||||||||
Continental AG | 94 | 7 | |||||||||
Covestro AG (e) | 164 | 8 | |||||||||
Daimler Truck Holding AG | 386 | 14 | |||||||||
Delivery Hero SE (e) | 145 | 6 | |||||||||
Deutsche Bank AG (Registered) | 1,697 | 18 | |||||||||
Deutsche Boerse AG | 155 | 29 | |||||||||
Deutsche Lufthansa AG (Registered) (e) | 493 | 5 | |||||||||
Deutsche Post AG (Registered) | 824 | 40 | |||||||||
Deutsche Telekom AG (Registered) | 2,620 | 57 | |||||||||
Dr Ing hc F Porsche AG (e) | 94 | 12 | |||||||||
E.ON SE | 1,830 | 23 | |||||||||
Evonik Industries AG | 176 | 3 | |||||||||
Fresenius Medical Care AG & Co. KGaA | 168 | 8 | |||||||||
Fresenius SE & Co. KGaA | 346 | 10 | |||||||||
GEA Group AG | 125 | 5 |
Shares | Value (000) | ||||||||||
Hannover Rueck SE (Registered) | 49 | $ | 10 | ||||||||
Heidelberg Materials AG | 121 | 10 | |||||||||
HelloFresh SE (e) | 139 | 3 | |||||||||
Henkel AG & Co. KGaA | 85 | 6 | |||||||||
Henkel AG & Co. KGaA (Preference) | 146 | 12 | |||||||||
Infineon Technologies AG | 1,094 | 45 | |||||||||
Knorr-Bremse AG | 61 | 5 | |||||||||
LEG Immobilien SE (e) | 63 | 4 | |||||||||
Mercedes-Benz Group AG (Registered) | 672 | 54 | |||||||||
Merck KGaA | 106 | 18 | |||||||||
MTU Aero Engines AG | 44 | 11 | |||||||||
Muenchener Rueckversicherungs-Gesellschaft AG in Muenchen (Registered) | 114 | 43 | |||||||||
Nemetschek SE | 48 | 4 | |||||||||
Porsche Automobil Holding SE (Preference) (e) | 127 | 8 | |||||||||
Puma SE | 88 | 5 | |||||||||
QIAGEN NV (e) | 188 | 8 | |||||||||
Rational AG | 4 | 3 | |||||||||
Rheinmetall AG | 37 | 10 | |||||||||
RWE AG | 525 | 23 | |||||||||
SAP SE | 853 | 116 | |||||||||
Sartorius AG (Preference) | 20 | 7 | |||||||||
Scout24 SE | 67 | 4 | |||||||||
Siemens AG (Registered) | 640 | 107 | |||||||||
Siemens Energy AG (e) | 431 | 8 | |||||||||
Siemens Healthineers AG | 230 | 13 | |||||||||
Symrise AG | 110 | 12 | |||||||||
Telefonica Deutschland Holding AG | 852 | 2 | |||||||||
United Internet AG (Registered) | 72 | 1 | |||||||||
Volkswagen AG | 24 | 4 | |||||||||
Volkswagen AG (Preference) | 155 | 21 | |||||||||
Vonovia SE | 608 | 12 | |||||||||
Zalando SE (e) | 188 | 5 | |||||||||
1,127 | |||||||||||
Hong Kong (0.2%) | |||||||||||
AIA Group Ltd. | 4,718 | 48 | |||||||||
BOC Hong Kong Holdings Ltd. | 1,901 | 6 | |||||||||
Budweiser Brewing Co. APAC Ltd. | 881 | 2 | |||||||||
CK Asset Holdings Ltd. | 1,026 | 6 | |||||||||
CK Hutchison Holdings Ltd. | 1,369 | 8 | |||||||||
CK Infrastructure Holdings Ltd. | 326 | 2 | |||||||||
CLP Holdings Ltd. | 843 | 7 | |||||||||
ESR Group Ltd. | 1,026 | 2 | |||||||||
Futu Holdings Ltd. ADR (e) | 31 | 1 | |||||||||
Galaxy Entertainment Group Ltd. (e) | 1,114 | 7 | |||||||||
Hang Lung Properties Ltd. | 1,046 | 2 | |||||||||
Hang Seng Bank Ltd. | 395 | 6 | |||||||||
Henderson Land Development Co. Ltd. | 749 | 2 | |||||||||
HKT Trust & HKT Ltd. | 1,955 | 2 | |||||||||
Hong Kong & China Gas Co. Ltd. | 5,786 | 5 | |||||||||
Hong Kong Exchanges & Clearing Ltd. | 530 | 20 | |||||||||
Hongkong Land Holdings Ltd. | 578 | �� | 2 | ||||||||
Jardine Matheson Holdings Ltd. | 82 | 4 |
The accompanying notes are an integral part of the consolidated financial statements.
10
Morgan Stanley Variable Insurance Fund, Inc.
Semi-Annual Report – June 30, 2023 (unaudited)
Consolidated Portfolio of Investments (cont'd)
Global Strategist Portfolio
Shares | Value (000) | ||||||||||
Hong Kong (cont'd) | |||||||||||
Link REIT | 1,011 | $ | 6 | ||||||||
MTR Corp. Ltd. | 796 | 4 | |||||||||
New World Development Co. Ltd. | 780 | 2 | |||||||||
Power Assets Holdings Ltd. | 718 | 4 | |||||||||
Sands China Ltd. (e) | 1,253 | 4 | |||||||||
Sino Land Co. Ltd. | 1,828 | 2 | |||||||||
SITC International Holdings Co. Ltd. | 684 | 1 | |||||||||
Sun Hung Kai Properties Ltd. | 745 | 9 | |||||||||
Swire Pacific Ltd., Class A | 246 | 2 | |||||||||
Swire Properties Ltd. | 602 | 1 | |||||||||
Techtronic Industries Co. Ltd. | 718 | 8 | |||||||||
WH Group Ltd. | 3,255 | 2 | |||||||||
Wharf Real Estate Investment Co. Ltd. | 875 | 4 | |||||||||
Xinyi Glass Holdings Ltd. | 987 | 2 | |||||||||
183 | |||||||||||
Ireland (0.1%) | |||||||||||
AIB Group PLC | 901 | 4 | |||||||||
Bank of Ireland Group Plc | 889 | 8 | |||||||||
CRH PLC | 644 | 36 | |||||||||
Flutter Entertainment PLC (e) | 138 | 28 | |||||||||
Kerry Group PLC, Class A | 133 | 13 | |||||||||
Kingspan Group PLC | 135 | 9 | |||||||||
Smurfit Kappa Group PLC | 207 | 7 | |||||||||
105 | |||||||||||
Israel (0.1%) | |||||||||||
Azrieli Group Ltd. | 34 | 2 | |||||||||
Bank Hapoalim BM | 1,016 | 8 | |||||||||
Bank Leumi Le-Israel BM | 1,235 | 9 | |||||||||
Bezeq The Israeli Telecommunication Corp. Ltd. | 1,659 | 2 | |||||||||
Check Point Software Technologies Ltd. (e) | 80 | 10 | |||||||||
CyberArk Software Ltd. (e) | 32 | 5 | |||||||||
Elbit Systems Ltd. | 21 | 4 | |||||||||
First International Bank Of Israel Ltd. | 44 | 2 | |||||||||
ICL Group Ltd. | 567 | 3 | |||||||||
Israel Discount Bank Ltd., Class A | 989 | 5 | |||||||||
Mizrahi Tefahot Bank Ltd. | 123 | 4 | |||||||||
Nice Ltd. (e) | 51 | 11 | |||||||||
Teva Pharmaceutical Industries Ltd. ADR (e) | 885 | 7 | |||||||||
Tower Semiconductor Ltd. (e) | 87 | 3 | |||||||||
Wix.com Ltd. (e) | 46 | 4 | |||||||||
79 | |||||||||||
Italy (0.7%) | |||||||||||
Amplifon SpA | 101 | 4 | |||||||||
Assicurazioni Generali SpA | 907 | 18 | |||||||||
CNH Industrial NV | 853 | 12 | |||||||||
Davide Campari-Milano NV | 423 | 6 | |||||||||
DiaSorin SpA | 21 | 2 | |||||||||
Enel SpA | 6,590 | 44 | |||||||||
Eni SpA | 2,035 | 29 | |||||||||
EXOR NV | 183 | 16 | |||||||||
Ferrari NV | 102 | 33 |
Shares | Value (000) | ||||||||||
FinecoBank Banca Fineco SpA | 1,759 | $ | 24 | ||||||||
Infrastrutture Wireless Italiane SpA | 275 | 4 | |||||||||
Intesa Sanpaolo SpA | 47,755 | 125 | |||||||||
Mediobanca Banca di Credito Finanziario SpA | 1,755 | 21 | |||||||||
Moncler SpA | 167 | 12 | |||||||||
Nexi SpA (e) | 487 | 4 | |||||||||
Poste Italiane SpA | 429 | 5 | |||||||||
Prysmian SpA | 215 | 9 | |||||||||
Recordati Industria Chimica e Farmaceutica SpA | 86 | 4 | |||||||||
Snam SpA | 1,609 | 8 | |||||||||
Stellantis NV | 1,866 | 33 | |||||||||
Telecom Italia SpA (Milano) (e) | 8,103 | 2 | |||||||||
Tenaris SA | 387 | 6 | |||||||||
Terna — Rete Elettrica Nazionale | 1,130 | 10 | |||||||||
UniCredit SpA | 5,926 | 138 | |||||||||
569 | |||||||||||
Netherlands (0.9%) | |||||||||||
ABN AMRO Bank NV CVA | 1,224 | 19 | |||||||||
Adyen NV (e) | 18 | 31 | |||||||||
Aegon NV | 1,489 | 8 | |||||||||
AerCap Holdings NV (e) | 137 | 9 | |||||||||
Akzo Nobel NV | 152 | 12 | |||||||||
ASM International NV | 39 | 17 | |||||||||
ASML Holding NV | 341 | 247 | |||||||||
Basic-Fit NV (e) | 788 | 30 | |||||||||
Coca-Cola Europacific Partners PLC | 170 | 11 | |||||||||
Heineken Holding NV | 95 | 8 | |||||||||
Heineken NV | 213 | 22 | |||||||||
IMCD NV | 48 | 7 | |||||||||
ING Groep NV | 11,209 | 151 | |||||||||
JDE Peet's NV | 83 | 2 | |||||||||
Just Eat Takeaway.com NV (e) | 158 | 2 | |||||||||
Koninklijke Ahold Delhaize NV | 870 | 30 | |||||||||
Koninklijke DSM NV | 148 | 15 | |||||||||
Koninklijke KPN NV | 2,729 | 10 | |||||||||
Koninklijke Philips NV (e) | 769 | 17 | |||||||||
NN Group NV | 231 | 9 | |||||||||
OCI NV (e) | 87 | 2 | |||||||||
Prosus NV (e) | 662 | 48 | |||||||||
Randstad NV | 100 | 5 | |||||||||
Universal Music Group NV | 607 | 14 | |||||||||
Wolters Kluwer NV | 210 | 27 | |||||||||
753 | |||||||||||
New Zealand (0.0%)‡ | |||||||||||
Auckland International Airport Ltd. (e) | 916 | 5 | |||||||||
EBOS Group Ltd. | 118 | 3 | |||||||||
Fisher & Paykel Healthcare Corp. Ltd. | 419 | 6 | |||||||||
Mercury NZ Ltd. | 501 | 2 | |||||||||
Meridian Energy Ltd. | 905 | 3 | |||||||||
Spark New Zealand Ltd. | 1,361 | 4 | |||||||||
23 |
The accompanying notes are an integral part of the consolidated financial statements.
11
Morgan Stanley Variable Insurance Fund, Inc.
Semi-Annual Report – June 30, 2023 (unaudited)
Consolidated Portfolio of Investments (cont'd)
Global Strategist Portfolio
Shares | Value (000) | ||||||||||
Norway (0.1%) | |||||||||||
Adevinta ASA (e) | 241 | $ | 2 | ||||||||
Aker BP ASA | 256 | 6 | |||||||||
DNB Bank ASA | 743 | 14 | |||||||||
Equinor ASA | 762 | 22 | |||||||||
Gjensidige Forsikring ASA | 161 | 3 | |||||||||
Kongsberg Gruppen ASA | 71 | 3 | |||||||||
Mowi ASA | 331 | 5 | |||||||||
Norsk Hydro ASA | 1,097 | 6 | |||||||||
Orkla ASA | 585 | 4 | |||||||||
Salmar ASA | 52 | 2 | |||||||||
Telenor ASA | 557 | 6 | |||||||||
Yara International ASA | 133 | 5 | |||||||||
78 | |||||||||||
Portugal (0.0%)‡ | |||||||||||
EDP — Energias de Portugal SA | 2,076 | 10 | |||||||||
EDP Renovaveis SA | 181 | 4 | |||||||||
Galp Energia SGPS SA | 357 | 4 | |||||||||
Jeronimo Martins SGPS SA | 208 | 6 | |||||||||
24 | |||||||||||
Singapore (0.2%) | |||||||||||
CapitaLand Ascendas REIT | 2,400 | 5 | |||||||||
CapitaLand Ascott Trust REIT | 106 | — | @ | ||||||||
CapitaLand Integrated Commercial Trust REIT | 3,773 | 5 | |||||||||
Capitaland Investment Ltd. | 1,869 | 5 | |||||||||
City Developments Ltd. | 303 | 2 | |||||||||
DBS Group Holdings Ltd. | 1,294 | 30 | |||||||||
Genting Singapore Ltd. | 4,362 | 3 | |||||||||
Grab Holdings Ltd., Class A (e) | 924 | 3 | |||||||||
Jardine Cycle & Carriage Ltd. | 71 | 2 | |||||||||
Keppel Corp. Ltd. | 1,022 | 5 | |||||||||
Mapletree Logistics Trust REIT | 2,388 | 3 | |||||||||
Mapletree Pan Asia Commercial Trust REIT | 1,691 | 2 | |||||||||
Oversea-Chinese Banking Corp. Ltd. | 2,404 | 22 | |||||||||
Sea Ltd. ADR (e) | 262 | 15 | |||||||||
Seatrium Ltd. (e) | 32,877 | 3 | |||||||||
Singapore Airlines Ltd. | 955 | 5 | |||||||||
Singapore Exchange Ltd. | 614 | 4 | |||||||||
Singapore Technologies Engineering Ltd. | 1,126 | 3 | |||||||||
Singapore Telecommunications Ltd. | 5,910 | 11 | |||||||||
United Overseas Bank Ltd. | 843 | 17 | |||||||||
UOL Group Ltd. | 335 | 2 | |||||||||
Venture Corp. Ltd. | 198 | 2 | |||||||||
Wilmar International Ltd. | 1,383 | 4 | |||||||||
153 | |||||||||||
Spain (0.6%) | |||||||||||
Acciona SA | 14 | 2 | |||||||||
ACS Actividades de Construccion y Servicios SA | 125 | 4 | |||||||||
Aena SME SA | 43 | 7 | |||||||||
Amadeus IT Group SA (e) | 263 | 20 | |||||||||
Banco Bilbao Vizcaya Argentaria SA | 17,458 | 134 | |||||||||
Banco Santander SA | 46,101 | 171 |
Shares | Value (000) | ||||||||||
CaixaBank SA | 12,083 | $ | 50 | ||||||||
Cellnex Telecom SA (e) | 322 | 13 | |||||||||
Corp. ACCIONA Energias Renovables SA | 40 | 1 | |||||||||
Enagas SA | 143 | 3 | |||||||||
Endesa SA | 184 | 4 | |||||||||
Ferrovial SE | 281 | 9 | |||||||||
Grifols SA (e) | 174 | 2 | |||||||||
Iberdrola SA | 3,504 | 46 | |||||||||
Industria de Diseno Textil SA | 626 | 24 | |||||||||
Naturgy Energy Group SA | 84 | 3 | |||||||||
Redeia Corp. SA | 234 | 4 | |||||||||
Repsol SA | 799 | 12 | |||||||||
Siemens Gamesa Renewable Energy SA (e) | 142 | 3 | |||||||||
Telefonica SA | 3,001 | 12 | |||||||||
524 | |||||||||||
Sweden (0.5%) | |||||||||||
Alfa Laval AB | 228 | 8 | |||||||||
Assa Abloy AB, Class B | 791 | 19 | |||||||||
Atlas Copco AB, Class A | 3,248 | 45 | |||||||||
Boliden AB | 218 | 6 | |||||||||
Electrolux AB, Class B | 184 | 3 | |||||||||
Embracer Group AB (e) | 552 | 1 | |||||||||
Epiroc AB, Class A | 825 | 15 | |||||||||
EQT AB | 282 | 5 | |||||||||
Essity AB, Class B | 457 | 12 | |||||||||
Evolution AB | 140 | 18 | |||||||||
Fastighets AB Balder, Class B (e) | 549 | 2 | |||||||||
Getinge AB, Class B | 187 | 3 | |||||||||
H & M Hennes & Mauritz AB, Class B | 564 | 10 | |||||||||
Hexagon AB, Class B | 1,505 | 18 | |||||||||
Holmen AB, Class B | 80 | 3 | |||||||||
Husqvarna AB, Class B | 366 | 3 | |||||||||
Industrivarden AB, Class A | 237 | 7 | |||||||||
Indutrade AB | 229 | 5 | |||||||||
Investment AB Latour, Class B | 129 | 3 | |||||||||
Investor AB, Class A | 1,767 | 36 | |||||||||
Kinnevik AB, Class B (e) | 205 | 3 | |||||||||
L E Lundbergforetagen AB, Class B | 65 | 3 | |||||||||
Lifco AB, Class B | 193 | 4 | |||||||||
Nibe Industrier AB, Class B | 1,142 | 11 | |||||||||
Nordea Bank Abp | 2,495 | 27 | |||||||||
Sagax AB, Class B | 165 | 3 | |||||||||
Sandvik AB | 824 | 16 | |||||||||
Skandinaviska Enskilda Banken AB, Class A | 1,310 | 14 | |||||||||
Skanska AB, Class B | 288 | 4 | |||||||||
SKF AB, Class B | 308 | 5 | |||||||||
Svenska Cellulosa AB SCA, Class B | 476 | 6 | |||||||||
Svenska Handelsbanken AB, Class A | 1,112 | 9 | |||||||||
Swedbank AB, Class A | 682 | 11 | |||||||||
Swedish Orphan Biovitrum AB (e) | 139 | 3 | |||||||||
Tele2 AB, Class B | 471 | 4 | |||||||||
Telefonaktiebolaget LM Ericsson, Class B | 2,183 | 12 | |||||||||
Telia Co. AB | 2,075 | 5 | |||||||||
Volvo AB, Class A | 1,431 | 30 | |||||||||
Volvo Car AB, Class B (e) | 519 | 2 | |||||||||
394 |
The accompanying notes are an integral part of the consolidated financial statements.
12
Morgan Stanley Variable Insurance Fund, Inc.
Semi-Annual Report – June 30, 2023 (unaudited)
Consolidated Portfolio of Investments (cont'd)
Global Strategist Portfolio
Shares | Value (000) | ||||||||||
Switzerland (1.5%) | |||||||||||
ABB Ltd. (Registered) | 1,269 | $ | 50 | ||||||||
Adecco Group AG (Registered) | 130 | 4 | |||||||||
Alcon, Inc. | 403 | 33 | |||||||||
Bachem Holding AG | 27 | 2 | |||||||||
Baloise Holding AG (Registered) | 37 | 5 | |||||||||
Banque Cantonale Vaudoise (Registered) | 24 | 3 | |||||||||
Barry Callebaut AG (Registered) | 3 | 6 | |||||||||
BKW AG | 17 | 3 | |||||||||
Chocoladefabriken Lindt & Sprungli AG | 1 | 13 | |||||||||
Cie Financiere Richemont SA (Registered) | 414 | 70 | |||||||||
Clariant AG (Registered) (e) | 182 | 3 | |||||||||
EMS-Chemie Holding AG (Registered) | 6 | 5 | |||||||||
Geberit AG (Registered) | 29 | 15 | |||||||||
Givaudan SA (Registered) | 8 | 27 | |||||||||
Holcim AG (Registered) (e) | 452 | 31 | |||||||||
Julius Baer Group Ltd. | 172 | 11 | |||||||||
Kuehne & Nagel International AG (Registered) | 44 | 13 | |||||||||
Logitech International SA (Registered) | 136 | 8 | |||||||||
Lonza Group AG (Registered) | 58 | 35 | |||||||||
Nestle SA (Registered) | 2,159 | 260 | |||||||||
Novartis AG (Registered) | 1,697 | 171 | |||||||||
Partners Group Holding AG | 18 | 17 | |||||||||
Roche Holding AG | 20 | 7 | |||||||||
Roche Holding AG (Genusschein) | 549 | 168 | |||||||||
Schindler Holding AG | 34 | 8 | |||||||||
Schindler Holding AG (Registered) | 19 | 4 | |||||||||
SGS SA (Registered) | 121 | 11 | |||||||||
SIG Group AG (e) | 241 | 7 | |||||||||
Sika AG (Registered) | 120 | 34 | |||||||||
Sonova Holding AG (Registered) | 42 | 11 | |||||||||
Straumann Holding AG (Registered) | 88 | 14 | |||||||||
Swatch Group AG | 22 | 6 | |||||||||
Swatch Group AG (Registered) | 43 | 2 | |||||||||
Swiss Life Holding AG (Registered) | 23 | 14 | |||||||||
Swiss Prime Site AG (Registered) | 61 | 5 | |||||||||
Swiss Re AG | 241 | 24 | |||||||||
Swisscom AG (Registered) | 19 | 12 | |||||||||
Temenos AG (Registered) | 53 | 4 | |||||||||
UBS Group AG (Registered) | 2,774 | 56 | |||||||||
VAT Group AG | 21 | 9 | |||||||||
Zurich Insurance Group AG | 119 | 57 | |||||||||
1,238 | |||||||||||
United Kingdom (2.3%) | |||||||||||
3i Group PLC | 803 | 20 | |||||||||
abrdn PLC | 1,741 | 5 | |||||||||
Admiral Group PLC | 154 | 4 | |||||||||
Anglo American PLC | 1,061 | 30 | |||||||||
Antofagasta PLC | 340 | 6 | |||||||||
Ashtead Group PLC | 373 | 26 | |||||||||
Associated British Foods PLC | 300 | 8 | |||||||||
AstraZeneca PLC | 1,254 | 180 | |||||||||
Atlassian Corp., Class A (e) | 65 | 11 |
Shares | Value (000) | ||||||||||
Auto Trader Group PLC | 808 | $ | 6 | ||||||||
Aviva PLC | 2,313 | 12 | |||||||||
BAE Systems PLC | 2,528 | 30 | |||||||||
Barclays PLC | 12,842 | 25 | |||||||||
Barratt Developments PLC | 879 | 5 | |||||||||
Berkeley Group Holdings PLC | 95 | 5 | |||||||||
BP PLC | 14,766 | 86 | |||||||||
British American Tobacco PLC | 1,755 | 58 | |||||||||
British Land Co. PLC REIT | 773 | 3 | |||||||||
BT Group PLC | 5,693 | 9 | |||||||||
Bunzl PLC | 278 | 11 | |||||||||
Burberry Group PLC | 327 | 9 | |||||||||
Coca-Cola HBC AG (e) | 170 | 5 | |||||||||
Compass Group PLC | 1,418 | 40 | |||||||||
Croda International PLC | 118 | 8 | |||||||||
DCC PLC | 84 | 5 | |||||||||
Diageo PLC | 1,855 | 80 | |||||||||
Dowlais Group PLC (e) | 1,187 | 2 | |||||||||
Entain PLC | 496 | 8 | |||||||||
Evraz PLC (e) | 464 | — | |||||||||
Experian PLC | 760 | 29 | |||||||||
G4S Ltd. (e) | 2,164 | 7 | |||||||||
Glencore PLC | 8,584 | 49 | |||||||||
GSK PLC | 3,310 | 59 | |||||||||
Haleon PLC | 4,106 | 17 | |||||||||
Halma PLC | 327 | 9 | |||||||||
Hargreaves Lansdown PLC | 313 | 3 | |||||||||
Hikma Pharmaceuticals PLC | 142 | 3 | |||||||||
HSBC Holdings PLC | 16,383 | 130 | |||||||||
Imperial Brands PLC | 738 | 16 | |||||||||
Informa PLC | 1,184 | 11 | |||||||||
InterContinental Hotels Group PLC | 145 | 10 | |||||||||
Intertek Group PLC | 138 | 7 | |||||||||
J Sainsbury PLC | 1,489 | 5 | |||||||||
JD Sports Fashion PLC | 2,266 | 4 | |||||||||
Johnson Matthey PLC | 162 | 4 | |||||||||
Kingfisher PLC | 1,699 | 5 | |||||||||
Land Securities Group PLC REIT | 603 | 4 | |||||||||
Legal & General Group PLC | 4,947 | 14 | |||||||||
Lloyds Banking Group PLC | 54,920 | 30 | |||||||||
London Stock Exchange Group PLC | 310 | 33 | |||||||||
M&G PLC | 1,893 | 5 | |||||||||
Melrose Industries PLC | 1,161 | 7 | |||||||||
Mondi PLC | 415 | 6 | |||||||||
National Grid PLC | 2,970 | 39 | |||||||||
NatWest Group PLC | 4,386 | 13 | |||||||||
Next PLC | 111 | 10 | |||||||||
Ocado Group PLC (e) | 507 | 4 | |||||||||
Paragon Offshore PLC (e)(f) | 67 | — | |||||||||
Pearson PLC | 551 | 6 | |||||||||
Persimmon PLC | 280 | 4 | |||||||||
Phoenix Group Holdings PLC | 652 | 4 | |||||||||
Prudential PLC | 2,272 | 32 |
The accompanying notes are an integral part of the consolidated financial statements.
13
Morgan Stanley Variable Insurance Fund, Inc.
Semi-Annual Report – June 30, 2023 (unaudited)
Consolidated Portfolio of Investments (cont'd)
Global Strategist Portfolio
Shares | Value (000) | ||||||||||
United Kingdom (cont'd) | |||||||||||
Reckitt Benckiser Group PLC | 587 | $ | 44 | ||||||||
RELX PLC (LSE) | 1,570 | 52 | |||||||||
Rentokil Initial PLC | 2,079 | 16 | |||||||||
Rio Tinto PLC | 938 | 60 | |||||||||
Rolls-Royce Holdings PLC (e) | 6,873 | 13 | |||||||||
Sage Group PLC | 866 | 10 | |||||||||
Schroders PLC | 775 | 4 | |||||||||
Segro PLC REIT | 1,041 | 10 | |||||||||
Severn Trent PLC | 209 | 7 | |||||||||
Shell PLC | 5,797 | 173 | |||||||||
Smith & Nephew PLC | 717 | 12 | |||||||||
Smiths Group PLC | 301 | 6 | |||||||||
Spirax-Sarco Engineering PLC | 64 | 8 | |||||||||
SSE PLC | 881 | 21 | |||||||||
St. James's Place PLC | 470 | 7 | |||||||||
Standard Chartered PLC | 2,020 | 18 | |||||||||
Taylor Wimpey PLC | 3,099 | 4 | |||||||||
Tesco PLC | 6,136 | 19 | |||||||||
Unilever PLC CVA | 2,082 | 108 | |||||||||
United Utilities Group PLC | 561 | 7 | |||||||||
Vodafone Group PLC | 21,547 | 20 | |||||||||
Whitbread PLC | 170 | 7 | |||||||||
WPP PLC | 920 | 10 | |||||||||
1,912 | |||||||||||
United States (20.3%) | |||||||||||
3M Co. | 227 | 23 | |||||||||
A O Smith Corp. | 53 | 4 | |||||||||
Abbott Laboratories | 714 | 78 | |||||||||
AbbVie, Inc. | 720 | 97 | |||||||||
Accenture PLC, Class A | 262 | 81 | |||||||||
Activision Blizzard, Inc. (e) | 321 | 27 | |||||||||
Adobe, Inc. (e) | 194 | 95 | |||||||||
Advance Auto Parts, Inc. | 25 | 2 | |||||||||
Advanced Micro Devices, Inc. (e) | 692 | 79 | |||||||||
AECOM | 54 | 5 | |||||||||
AES Corp. | 273 | 6 | |||||||||
Aflac, Inc. | 241 | 17 | |||||||||
Agilent Technologies, Inc. | 121 | 15 | |||||||||
Air Products & Chemicals, Inc. | 91 | 27 | |||||||||
Airbnb, Inc., Class A (e) | 165 | 21 | |||||||||
Akamai Technologies, Inc. (e) | 65 | 6 | |||||||||
Albemarle Corp. | 52 | 12 | |||||||||
Alcoa Corp. | 75 | 3 | |||||||||
Alexandria Real Estate Equities, Inc. REIT | 64 | 7 | |||||||||
Align Technology, Inc. (e) | 32 | 11 | |||||||||
Allegion PLC | 36 | 4 | |||||||||
Alliant Energy Corp. | 101 | 5 | |||||||||
Allstate Corp. | 108 | 12 | |||||||||
Ally Financial, Inc. | 125 | 3 | |||||||||
Alnylam Pharmaceuticals, Inc. (e) | 51 | 10 | |||||||||
Alphabet, Inc., Class A (e) | 3,939 | 474 | |||||||||
Altria Group, Inc. | 736 | 33 |
Shares | Value (000) | ||||||||||
Amazon.com, Inc. (e) | 3,285 | $ | 428 | ||||||||
Amcor PLC | 615 | 6 | |||||||||
Ameren Corp. | 104 | 9 | |||||||||
American Electric Power Co., Inc. | 205 | 17 | |||||||||
American Express Co. | 264 | 46 | |||||||||
American Financial Group, Inc. | 30 | 4 | |||||||||
American Homes 4 Rent, Class A REIT | 130 | 5 | |||||||||
American International Group, Inc. | 307 | 18 | |||||||||
American Tower Corp. REIT | 189 | 37 | |||||||||
American Water Works Co., Inc. | 78 | 11 | |||||||||
Ameriprise Financial, Inc. | 44 | 15 | |||||||||
AmerisourceBergen Corp. | 62 | 12 | |||||||||
AMETEK, Inc. | 96 | 16 | |||||||||
Amgen, Inc. | 215 | 48 | |||||||||
Amphenol Corp., Class A | 248 | 21 | |||||||||
Analog Devices, Inc. | 215 | 42 | |||||||||
Annaly Capital Management, Inc. REIT | 192 | 4 | |||||||||
ANSYS, Inc. (e) | 36 | 12 | |||||||||
Aon PLC, Class A | 84 | 29 | |||||||||
APA Corp. | 135 | 5 | |||||||||
Apollo Global Management, Inc. | 170 | 13 | |||||||||
Apple, Inc. | 5,421 | 1,052 | |||||||||
Applied Materials, Inc. | 365 | 53 | |||||||||
Aptiv PLC (e) | 114 | 12 | |||||||||
Aramark | 96 | 4 | |||||||||
Arch Capital Group Ltd. (e) | 152 | 11 | |||||||||
Archer-Daniels-Midland Co. | 226 | 17 | |||||||||
Ares Management Corp., Class A | 66 | 6 | |||||||||
Arista Networks, Inc. (e) | 102 | 17 | |||||||||
Arrow Electronics, Inc. (e) | 26 | 4 | |||||||||
Arthur J Gallagher & Co. | 86 | 19 | |||||||||
Aspen Technology, Inc. (e) | 12 | 2 | |||||||||
Assurant, Inc. | 22 | 3 | |||||||||
AT&T, Inc. | 2,410 | 38 | |||||||||
Atmos Energy Corp. | 57 | 7 | |||||||||
Autodesk, Inc. (e) | 91 | 19 | |||||||||
Automatic Data Processing, Inc. | 171 | 38 | |||||||||
AutoZone, Inc. (e) | 8 | 20 | |||||||||
AvalonBay Communities, Inc. REIT | 57 | 11 | |||||||||
Avantor, Inc. (e) | 278 | 6 | |||||||||
Avery Dennison Corp. | 33 | 6 | |||||||||
Axon Enterprise, Inc. (e) | 29 | 6 | |||||||||
Baker Hughes Co. | 414 | 13 | |||||||||
Ball Corp. | 130 | 8 | |||||||||
Bank of America Corp. | 2,419 | 69 | |||||||||
Bank of New York Mellon Corp. | 315 | 14 | |||||||||
Bath & Body Works, Inc. | 97 | 4 | |||||||||
Baxter International, Inc. | 203 | 9 | |||||||||
Becton Dickinson & Co. | 115 | 30 | |||||||||
Bentley Systems, Inc., Class B | 82 | 4 | |||||||||
Berkshire Hathaway, Inc., Class B (e) | 535 | 182 | |||||||||
Best Buy Co., Inc. | 85 | 7 | |||||||||
Bills Holdings, Inc. (e) | 42 | 5 |
The accompanying notes are an integral part of the consolidated financial statements.
14
Morgan Stanley Variable Insurance Fund, Inc.
Semi-Annual Report – June 30, 2023 (unaudited)
Consolidated Portfolio of Investments (cont'd)
Global Strategist Portfolio
Shares | Value (000) | ||||||||||
United States (cont'd) | |||||||||||
Biogen, Inc. (e) | 58 | $ | 17 | ||||||||
BioMarin Pharmaceutical, Inc. (e) | 76 | 7 | |||||||||
Bio-Rad Laboratories, Inc., Class A (e) | 9 | 3 | |||||||||
Bio-Techne Corp. | 65 | 5 | |||||||||
Black Knight, Inc. (e) | 64 | 4 | |||||||||
BlackRock, Inc. | 62 | 43 | |||||||||
Blackstone, Inc. | 294 | 27 | |||||||||
Block, Inc., Class A (e) | 226 | 15 | |||||||||
Boeing Co. (e) | 237 | 50 | |||||||||
Booking Holdings, Inc. (e) | 16 | 43 | |||||||||
Booz Allen Hamilton Holding Corp. | 54 | 6 | |||||||||
BorgWarner, Inc. | 98 | 5 | |||||||||
Boston Properties, Inc. REIT | 62 | 4 | |||||||||
Boston Scientific Corp. (e) | 582 | 31 | |||||||||
Bristol-Myers Squibb Co. | 862 | 55 | |||||||||
Broadcom, Inc. | 173 | 150 | |||||||||
Broadridge Financial Solutions, Inc. | 49 | 8 | |||||||||
Brown & Brown, Inc. | 98 | 7 | |||||||||
Brown-Forman Corp., Class B | 126 | 8 | |||||||||
Bunge Ltd. | 63 | 6 | |||||||||
Burlington Stores, Inc. (e) | 28 | 4 | |||||||||
Cadence Design Systems, Inc. (e) | 115 | 27 | |||||||||
Caesars Entertainment, Inc. (e) | 93 | 5 | |||||||||
Camden Property Trust REIT | 42 | 5 | |||||||||
Campbell Soup Co. | 85 | 4 | |||||||||
Capital One Financial Corp. | 163 | 18 | |||||||||
Cardinal Health, Inc. | 106 | 10 | |||||||||
Carlisle Cos., Inc. | 22 | 6 | |||||||||
Carlyle Group, Inc. | 84 | 3 | |||||||||
CarMax, Inc. (e) | 67 | 6 | |||||||||
Carnival Corp. (e) | 420 | 8 | |||||||||
Carrier Global Corp. | 345 | 17 | |||||||||
Catalent, Inc. (e) | 71 | 3 | |||||||||
Caterpillar, Inc. | 216 | 53 | |||||||||
Cboe Global Markets, Inc. | 44 | 6 | |||||||||
CBRE Group, Inc., Class A (e) | 132 | 11 | |||||||||
CDW Corp. | 56 | 10 | |||||||||
Celanese Corp. | 45 | 5 | |||||||||
Centene Corp. (e) | 229 | 15 | |||||||||
CenterPoint Energy, Inc. | 253 | 7 | |||||||||
Ceridian HCM Holding, Inc. (e) | 59 | 4 | |||||||||
CF Industries Holdings, Inc. | 82 | 6 | |||||||||
CH Robinson Worldwide, Inc. | 49 | 5 | |||||||||
Charles River Laboratories International, Inc. (e) | 21 | 4 | |||||||||
Charles Schwab Corp. | 614 | 35 | |||||||||
Charter Communications, Inc., Class A (e) | 45 | 17 | |||||||||
Cheniere Energy, Inc. | 92 | 14 | |||||||||
Chesapeake Energy Corp. | 47 | 4 | |||||||||
Chevron Corp. | 757 | 119 | |||||||||
Chewy, Inc., Class A (e) | 41 | 2 | |||||||||
Chipotle Mexican Grill, Inc. (e) | 12 | 26 | |||||||||
Chubb Ltd. | 170 | 33 |
Shares | Value (000) | ||||||||||
Church & Dwight Co., Inc. | 99 | $ | 10 | ||||||||
Cigna Group | 123 | 35 | |||||||||
Cincinnati Financial Corp. | 62 | 6 | |||||||||
Cintas Corp. | 37 | 18 | |||||||||
Cisco Systems, Inc. | 1,486 | 77 | |||||||||
Citigroup, Inc. | 807 | 37 | |||||||||
Citizens Financial Group, Inc. | 208 | 5 | |||||||||
Clarivate PLC (e) | 124 | 1 | |||||||||
Cleveland-Cliffs, Inc. (e) | 219 | 4 | |||||||||
Clorox Co. | 50 | 8 | |||||||||
Cloudflare, Inc., Class A (e) | 114 | 7 | |||||||||
CME Group, Inc. | 147 | 27 | |||||||||
CMS Energy Corp. | 118 | 7 | |||||||||
Coca-Cola Co. | 1,668 | 100 | |||||||||
Cognex Corp. | 72 | 4 | |||||||||
Cognizant Technology Solutions Corp., Class A | 211 | 14 | |||||||||
Coinbase Global, Inc., Class A (e) | 54 | 4 | |||||||||
Colgate-Palmolive Co. | 321 | 25 | |||||||||
Comcast Corp., Class A | 1,763 | 73 | |||||||||
Conagra Brands, Inc. | 193 | 7 | |||||||||
ConocoPhillips | 511 | 53 | |||||||||
Consolidated Edison, Inc. | 143 | 13 | |||||||||
Constellation Brands, Inc., Class A | 67 | 17 | |||||||||
Constellation Energy Corp. | 133 | 12 | |||||||||
Contra Abiomed, Inc. (e) | 14 | — | @ | ||||||||
Cooper Cos., Inc. | 20 | 8 | |||||||||
Copart, Inc. (e) | 177 | 16 | |||||||||
Corning, Inc. | 331 | 12 | |||||||||
Corteva, Inc. | 294 | 17 | |||||||||
CoStar Group, Inc. (e) | 168 | 15 | |||||||||
Costco Wholesale Corp. | 182 | 98 | |||||||||
Coterra Energy, Inc. | 326 | 8 | |||||||||
Crowdstrike Holdings, Inc., Class A (e) | 91 | 13 | |||||||||
Crown Castle, Inc. REIT | 177 | 20 | |||||||||
Crown Holdings, Inc. | 50 | 4 | |||||||||
CSX Corp. | 868 | 30 | |||||||||
Cummins, Inc. | 60 | 15 | |||||||||
CVS Health Corp. | 535 | 37 | |||||||||
Danaher Corp. | 284 | 68 | |||||||||
Darden Restaurants, Inc. | 50 | 8 | |||||||||
Darling Ingredients, Inc. (e) | 67 | 4 | |||||||||
Datadog, Inc., Class A (e) | 109 | 11 | |||||||||
DaVita, Inc. (e) | 22 | 2 | |||||||||
Deere & Co. | 122 | 49 | |||||||||
Dell Technologies, Inc., Class C | 107 | 6 | |||||||||
Delta Air Lines, Inc. (e) | 67 | 3 | |||||||||
Dentsply Sirona, Inc. | 88 | 4 | |||||||||
Devon Energy Corp. | 257 | 12 | |||||||||
Dexcom, Inc. (e) | 161 | 21 | |||||||||
Diamondback Energy, Inc. | 69 | 9 | |||||||||
Digital Realty Trust, Inc. REIT | 119 | 14 | |||||||||
Discover Financial Services | 115 | 13 | |||||||||
DISH Network Corp., Class A (e) | 103 | 1 |
The accompanying notes are an integral part of the consolidated financial statements.
15
Morgan Stanley Variable Insurance Fund, Inc.
Semi-Annual Report – June 30, 2023 (unaudited)
Consolidated Portfolio of Investments (cont'd)
Global Strategist Portfolio
Shares | Value (000) | ||||||||||
United States (cont'd) | |||||||||||
DocuSign, Inc. (e) | 86 | $ | 4 | ||||||||
Dollar General Corp. | 93 | 16 | |||||||||
Dollar Tree, Inc. (e) | 91 | 13 | |||||||||
Dominion Energy, Inc. | 336 | 17 | |||||||||
Domino's Pizza, Inc. | 15 | 5 | |||||||||
DoorDash, Inc., Class A (e) | 102 | 8 | |||||||||
Dover Corp. | 59 | 9 | |||||||||
Dow, Inc. | 291 | 16 | |||||||||
DR Horton, Inc. | 135 | 16 | |||||||||
Dropbox, Inc., Class A (e) | 114 | 3 | |||||||||
DTE Energy Co. | 78 | 9 | |||||||||
Duke Energy Corp. | 310 | 28 | |||||||||
DuPont de Nemours, Inc. | 206 | 15 | |||||||||
Dynatrace, Inc. (e) | 93 | 5 | |||||||||
Eastman Chemical Co. | 50 | 4 | |||||||||
Eaton Corp. PLC | 166 | 33 | |||||||||
eBay, Inc. | 226 | 10 | |||||||||
Ecolab, Inc. | 105 | 20 | |||||||||
Edison International | 154 | 11 | |||||||||
Edwards Lifesciences Corp. (e) | 255 | 24 | |||||||||
Elanco Animal Health, Inc. (e) | 174 | 2 | |||||||||
Electronic Arts, Inc. | 114 | 15 | |||||||||
Elevance Health, Inc. | 97 | 43 | |||||||||
Eli Lilly & Co. | 325 | 152 | |||||||||
Emerson Electric Co. | 246 | 22 | |||||||||
Enphase Energy, Inc. (e) | 59 | 10 | |||||||||
Entegris, Inc. | 63 | 7 | |||||||||
Entergy Corp. | 82 | 8 | |||||||||
EOG Resources, Inc. | 245 | 28 | |||||||||
EPAM Systems, Inc. (e) | 24 | 5 | |||||||||
EQT Corp. | 139 | 6 | |||||||||
Equifax, Inc. | 50 | 12 | |||||||||
Equinix, Inc. REIT | 38 | 30 | |||||||||
Equitable Holdings, Inc. | 155 | 4 | |||||||||
Equity Lifestyle Properties, Inc. REIT | 72 | 5 | |||||||||
Equity Residential REIT | 148 | 10 | |||||||||
Erie Indemnity Co., Class A | 10 | 2 | |||||||||
Essential Utilities, Inc. | 100 | 4 | |||||||||
Essex Property Trust, Inc. REIT | 27 | 6 | |||||||||
Estee Lauder Cos., Inc., Class A | 95 | 19 | |||||||||
Etsy, Inc. (e) | 54 | 5 | |||||||||
Everest Re Group Ltd. | 16 | 5 | |||||||||
Evergy, Inc. | 92 | 5 | |||||||||
Eversource Energy | 140 | 10 | |||||||||
Exact Sciences Corp. (e) | 75 | 7 | |||||||||
Exelon Corp. | 398 | 16 | |||||||||
Expedia Group, Inc. (e) | 64 | 7 | |||||||||
Expeditors International of Washington, Inc. | 66 | 8 | |||||||||
Extra Space Storage, Inc. REIT | 55 | 8 | |||||||||
Exxon Mobil Corp. | 1,694 | 182 | |||||||||
F5, Inc. (e) | 25 | 4 | |||||||||
Factset Research Systems, Inc. | 16 | 6 |
Shares | Value (000) | ||||||||||
Fair Isaac Corp. (e) | 10 | $ | 8 | ||||||||
Fastenal Co. | 239 | 14 | |||||||||
FedEx Corp. | 100 | 25 | |||||||||
Ferguson PLC | 87 | 14 | |||||||||
Fidelity National Financial, Inc. | 106 | 4 | |||||||||
Fidelity National Information Services, Inc. | 244 | 13 | |||||||||
Fifth Third Bancorp | 285 | 7 | |||||||||
First Citizens BancShares, Inc., Class A | 4 | 5 | |||||||||
First Horizon Corp. | 223 | 3 | |||||||||
First Republic Bank | 76 | — | @ | ||||||||
First Solar, Inc. (e) | 41 | 8 | |||||||||
FirstEnergy Corp. | 218 | 8 | |||||||||
Fiserv, Inc. (e) | 248 | 31 | |||||||||
FleetCor Technologies, Inc. (e) | 29 | 7 | |||||||||
FMC Corp. | 52 | 5 | |||||||||
Ford Motor Co. | 1,681 | 25 | |||||||||
Fortinet, Inc. (e) | 277 | 21 | |||||||||
Fortive Corp. | 139 | 10 | |||||||||
Fortune Brands Innovations, Inc. | 53 | 4 | |||||||||
Fox Corp., Class A | 186 | 6 | |||||||||
Franklin Resources, Inc. | 125 | 3 | |||||||||
Freeport-McMoRan, Inc. | 596 | 24 | |||||||||
Gaming and Leisure Properties, Inc. REIT | 106 | 5 | |||||||||
Garmin Ltd. | 64 | 7 | |||||||||
Gartner, Inc. (e) | 32 | 11 | |||||||||
GE HealthCare Technologies, Inc. | 151 | 12 | |||||||||
Gen Digital, Inc. | 241 | 4 | |||||||||
Generac Holdings, Inc. (e) | 27 | 4 | |||||||||
General Dynamics Corp. | 919 | 198 | |||||||||
General Electric Co. | 454 | 50 | |||||||||
General Mills, Inc. | 241 | 19 | |||||||||
General Motors Co. | 604 | 23 | |||||||||
Genuine Parts Co. | 59 | 10 | |||||||||
Gilead Sciences, Inc. | 507 | 39 | |||||||||
Global Payments, Inc. | 111 | 11 | |||||||||
Globe Life, Inc. | 38 | 4 | |||||||||
GoDaddy, Inc., Class A (e) | 64 | 5 | |||||||||
Goldman Sachs Group, Inc. | 140 | 45 | |||||||||
Graco, Inc. | 70 | 6 | |||||||||
Halliburton Co. | 380 | 13 | |||||||||
Hartford Financial Services Group, Inc. | 131 | 9 | |||||||||
Hasbro, Inc. | 54 | 4 | |||||||||
HCA Healthcare, Inc. | 86 | 26 | |||||||||
Healthcare Realty Trust, Inc. REIT | 158 | 3 | |||||||||
Healthpeak Properties, Inc. REIT | 223 | 4 | |||||||||
HEICO Corp. | 49 | 7 | |||||||||
Henry Schein, Inc. (e) | 55 | 4 | |||||||||
Hershey Co. | 60 | 15 | |||||||||
Hess Corp. | 115 | 16 | |||||||||
Hewlett Packard Enterprise Co. | 533 | 9 | |||||||||
HF Sinclair Corp. | 60 | 3 | |||||||||
Hilton Worldwide Holdings, Inc. | 112 | 16 | |||||||||
Hologic, Inc. (e) | 100 | 8 |
The accompanying notes are an integral part of the consolidated financial statements.
16
Morgan Stanley Variable Insurance Fund, Inc.
Semi-Annual Report – June 30, 2023 (unaudited)
Consolidated Portfolio of Investments (cont'd)
Global Strategist Portfolio
Shares | Value (000) | ||||||||||
United States (cont'd) | |||||||||||
Home Depot, Inc. | 425 | $ | 132 | ||||||||
Honeywell International, Inc. | 277 | 57 | |||||||||
Horizon Therapeutics PLC (e) | 88 | 9 | |||||||||
Hormel Foods Corp. | 124 | 5 | |||||||||
Host Hotels & Resorts, Inc. REIT | 294 | 5 | |||||||||
Howmet Aerospace, Inc. | 152 | 8 | |||||||||
HP, Inc. | 415 | 13 | |||||||||
Hubbell, Inc. | 23 | 8 | |||||||||
HubSpot, Inc. (e) | 20 | 11 | |||||||||
Humana, Inc. | 52 | 23 | |||||||||
Huntington Bancshares, Inc. | 500 | 5 | |||||||||
Huntington Ingalls Industries, Inc. | 138 | 31 | |||||||||
IDEX Corp. | 31 | 7 | |||||||||
IDEXX Laboratories, Inc. (e) | 34 | 17 | |||||||||
Illinois Tool Works, Inc. | 128 | 32 | |||||||||
Illumina, Inc. (e) | 65 | 12 | |||||||||
Incyte Corp. (e) | 76 | 5 | |||||||||
Ingersoll Rand, Inc. | 168 | 11 | |||||||||
Insulet Corp. (e) | 29 | 8 | |||||||||
Intel Corp. | 1,526 | 51 | |||||||||
Intercontinental Exchange, Inc. | 229 | 26 | |||||||||
International Business Machines Corp. | 369 | 49 | |||||||||
International Flavors & Fragrances, Inc. | 105 | 8 | |||||||||
International Paper Co. | 139 | 4 | |||||||||
Interpublic Group of Cos., Inc. | 165 | 6 | |||||||||
Intuit, Inc. | 112 | 51 | |||||||||
Intuitive Surgical, Inc. (e) | 144 | 49 | |||||||||
Invesco Ltd. | 142 | 2 | |||||||||
Invitation Homes, Inc. REIT | 251 | 9 | |||||||||
IQVIA Holdings, Inc. (e) | 77 | 17 | |||||||||
Iron Mountain, Inc. REIT | 120 | 7 | |||||||||
J M Smucker Co. | 43 | 6 | |||||||||
Jack Henry & Associates, Inc. | 30 | 5 | |||||||||
Jacobs Solutions, Inc. | 52 | 6 | |||||||||
Jazz Pharmaceuticals PLC (e) | 26 | 3 | |||||||||
JB Hunt Transport Services, Inc. | 34 | 6 | |||||||||
Johnson & Johnson | 1,041 | 172 | |||||||||
Johnson Controls International PLC | 287 | 20 | |||||||||
JPMorgan Chase & Co. | 1,118 | 163 | |||||||||
Juniper Networks, Inc. | 134 | 4 | |||||||||
Kellogg Co. | 104 | 7 | |||||||||
Keurig Dr Pepper, Inc. | 316 | 10 | |||||||||
KeyCorp | 397 | 4 | |||||||||
Keysight Technologies, Inc. (e) | 74 | 12 | |||||||||
Kimberly-Clark Corp. | 137 | 19 | |||||||||
Kimco Realty Corp. REIT | 257 | 5 | |||||||||
Kinder Morgan, Inc. | 832 | 14 | |||||||||
KKR & Co., Inc. | 238 | 13 | |||||||||
KLA Corp. | 60 | 29 | |||||||||
Knight-Swift Transportation Holdings, Inc. | 63 | 4 | |||||||||
Kraft Heinz Co. | 298 | 11 | |||||||||
Kroger Co. | 288 | 14 |
Shares | Value (000) | ||||||||||
L3Harris Technologies, Inc. | 733 | $ | 144 | ||||||||
Laboratory Corp. of America Holdings | 36 | 9 | |||||||||
Lam Research Corp. | 58 | 37 | |||||||||
Lamb Weston Holdings, Inc. | 59 | 7 | |||||||||
Las Vegas Sands Corp. (e) | 145 | 8 | |||||||||
Lear Corp. | 25 | 4 | |||||||||
Leidos Holdings, Inc. | 53 | 5 | |||||||||
Lennar Corp., Class A | 105 | 13 | |||||||||
Lennox International, Inc. | 13 | 4 | |||||||||
Liberty Broadband Corp., Class C (e) | 49 | 4 | |||||||||
Liberty Global PLC Series C (e) | 175 | 3 | |||||||||
Liberty Media Corp.-Liberty Formula One, Class C (e) | 80 | 6 | |||||||||
Liberty Media Corp.-Liberty SiriusXM, Class A (e) | 99 | 3 | |||||||||
Linde PLC | 205 | 78 | |||||||||
Live Nation Entertainment, Inc. (e) | 72 | 7 | |||||||||
LKQ Corp. | 106 | 6 | |||||||||
Lockheed Martin Corp. | 736 | 339 | |||||||||
Loews Corp. | 83 | 5 | |||||||||
Lowe's Cos., Inc. | 252 | 57 | |||||||||
LPL Financial Holdings, Inc. | 33 | 7 | |||||||||
Lucid Group, Inc. (e) | 181 | 1 | |||||||||
Lululemon Athletica, Inc. (e) | 48 | 18 | |||||||||
LyondellBasell Industries NV, Class A | 108 | 10 | |||||||||
M&T Bank Corp. | 71 | 9 | |||||||||
Marathon Oil Corp. | 265 | 6 | |||||||||
Marathon Petroleum Corp. | 187 | 22 | |||||||||
Markel Group, Inc. (e) | 6 | 8 | |||||||||
MarketAxess Holdings, Inc. | 18 | 5 | |||||||||
Marriott International, Inc., Class A | 112 | 21 | |||||||||
Marsh & McLennan Cos., Inc. | 202 | 38 | |||||||||
Martin Marietta Materials, Inc. | 26 | 12 | |||||||||
Marvell Technology, Inc. | 361 | 22 | |||||||||
Masco Corp. | 94 | 5 | |||||||||
Masimo Corp. (e) | 21 | 3 | |||||||||
Mastercard, Inc., Class A | 354 | 139 | |||||||||
Match Group, Inc. (e) | 120 | 5 | |||||||||
McCormick & Co., Inc. | 102 | 9 | |||||||||
McDonald's Corp. | 299 | 89 | |||||||||
McKesson Corp. | 57 | 24 | |||||||||
Medical Properties Trust, Inc. REIT | 247 | 2 | |||||||||
Medtronic PLC | 544 | 48 | |||||||||
MercadoLibre, Inc. (e) | 19 | 23 | |||||||||
Merck & Co., Inc. | 1,016 | 117 | |||||||||
Meta Platforms, Inc., Class A (e) | 940 | 270 | |||||||||
MetLife, Inc. | 272 | 15 | |||||||||
Mettler-Toledo International, Inc. (e) | 9 | 12 | |||||||||
MGM Resorts International | 130 | 6 | |||||||||
Microchip Technology, Inc. | 233 | 21 | |||||||||
Micron Technology, Inc. | 455 | 29 | |||||||||
Microsoft Corp. | 2,442 | 832 | |||||||||
Mid-America Apartment Communities, Inc. REIT | 47 | 7 | |||||||||
Moderna, Inc. (e) | 138 | 17 |
The accompanying notes are an integral part of the consolidated financial statements.
17
Morgan Stanley Variable Insurance Fund, Inc.
Semi-Annual Report – June 30, 2023 (unaudited)
Consolidated Portfolio of Investments (cont'd)
Global Strategist Portfolio
Shares | Value (000) | ||||||||||
United States (cont'd) | |||||||||||
Mohawk Industries, Inc. (e) | 21 | $ | 2 | ||||||||
Molina Healthcare, Inc. (e) | 23 | 7 | |||||||||
Molson Coors Beverage Co., Class B | 78 | 5 | |||||||||
Mondelez International, Inc., Class A | 554 | 40 | |||||||||
MongoDB, Inc. (e) | 31 | 13 | |||||||||
Monolithic Power Systems, Inc. | 19 | 10 | |||||||||
Monster Beverage Corp. (e) | 320 | 18 | |||||||||
Moody's Corp. | 68 | 24 | |||||||||
Mosaic Co. | 140 | 5 | |||||||||
Motorola Solutions, Inc. | 69 | 20 | |||||||||
MSCI, Inc. | 33 | 16 | |||||||||
Nasdaq, Inc. | 142 | 7 | |||||||||
NetApp, Inc. | 90 | 7 | |||||||||
Netflix, Inc. (e) | 188 | 83 | |||||||||
Neurocrine Biosciences, Inc. (e) | 39 | 4 | |||||||||
Newell Brands, Inc. | 164 | 1 | |||||||||
Newmont Corp. (TSX) | 325 | 14 | |||||||||
News Corp., Class A | 159 | 3 | |||||||||
NextEra Energy, Inc. | 804 | 60 | |||||||||
NIKE, Inc., Class B | 530 | 59 | |||||||||
NiSource, Inc. | 163 | 4 | |||||||||
Nordson Corp. | 21 | 5 | |||||||||
Norfolk Southern Corp. | 95 | 22 | |||||||||
Northern Trust Corp. | 81 | 6 | |||||||||
Northrop Grumman Corp. | 514 | 234 | |||||||||
Novocure Ltd. (e) | 39 | 2 | |||||||||
NRG Energy, Inc. | 94 | 4 | |||||||||
Nucor Corp. | 105 | 17 | |||||||||
NVIDIA Corp. | 1,048 | 443 | |||||||||
NVR, Inc. (e) | 1 | 6 | |||||||||
NXP Semiconductors NV | 109 | 22 | |||||||||
Occidental Petroleum Corp. | 303 | 18 | |||||||||
Okta, Inc. (e) | 66 | 5 | |||||||||
Old Dominion Freight Line, Inc. | 39 | 14 | |||||||||
Omnicom Group, Inc. | 86 | 8 | |||||||||
ON Semiconductor Corp. (e) | 184 | 17 | |||||||||
ONEOK, Inc. | 183 | 11 | |||||||||
Oracle Corp. | 665 | 79 | |||||||||
O'Reilly Automotive, Inc. (e) | 26 | 25 | |||||||||
Otis Worldwide Corp. | 173 | 15 | |||||||||
Ovintiv, Inc. | 104 | 4 | |||||||||
Owens Corning | 38 | 5 | |||||||||
PACCAR, Inc. | 223 | 19 | |||||||||
Packaging Corp. of America | 38 | 5 | |||||||||
Palantir Technologies, Inc., Class A (e) | 726 | 11 | |||||||||
Palo Alto Networks, Inc. (e) | 127 | 32 | |||||||||
Paramount Global, Class B | 257 | 4 | |||||||||
Parker Hannifin Corp. | 54 | 21 | |||||||||
Paychex, Inc. | 134 | 15 | |||||||||
Paycom Software, Inc. | 22 | 7 | |||||||||
Paylocity Holding Corp. (e) | 18 | 3 | |||||||||
PayPal Holdings, Inc. (e) | 457 | 31 |
Shares | Value (000) | ||||||||||
Pentair PLC | 69 | $ | 4 | ||||||||
PepsiCo, Inc. | 557 | 103 | |||||||||
Pfizer, Inc. | 1,857 | 68 | |||||||||
PG&E Corp. (e) | 609 | 11 | |||||||||
Philip Morris International, Inc. | 632 | 62 | |||||||||
Phillips 66 | 190 | 18 | |||||||||
Pinterest, Inc., Class A (e) | 245 | 7 | |||||||||
Pioneer Natural Resources Co. | 94 | 19 | |||||||||
Plug Power, Inc. (e) | 233 | 2 | |||||||||
PNC Financial Services Group, Inc. | 168 | 21 | |||||||||
Pool Corp. | 16 | 6 | |||||||||
PPG Industries, Inc. | 97 | 14 | |||||||||
PPL Corp. | 296 | 8 | |||||||||
Principal Financial Group, Inc. | 101 | 8 | |||||||||
Procter & Gamble Co. | 763 | 116 | |||||||||
Progressive Corp. | 238 | 32 | |||||||||
Prologis, Inc. REIT | 382 | 47 | |||||||||
Prudential Financial, Inc. | 152 | 13 | |||||||||
PTC, Inc. (e) | 46 | 7 | |||||||||
Public Service Enterprise Group, Inc. | 201 | 13 | |||||||||
Public Storage REIT | 65 | 19 | |||||||||
Pulte Group, Inc. | 94 | 7 | |||||||||
Qorvo, Inc. (e) | 43 | 4 | |||||||||
QUALCOMM, Inc. | 463 | 55 | |||||||||
Quanta Services, Inc. | 60 | 12 | |||||||||
Quest Diagnostics, Inc. | 46 | 6 | |||||||||
Raymond James Financial, Inc. | 81 | 8 | |||||||||
Raytheon Technologies Corp. | 4,225 | 414 | |||||||||
Realty Income Corp. REIT | 257 | 15 | |||||||||
Regency Centers Corp. REIT | 64 | 4 | |||||||||
Regeneron Pharmaceuticals, Inc. (e) | 43 | 31 | |||||||||
Regions Financial Corp. | 388 | 7 | |||||||||
Reliance Steel & Aluminum Co. | 24 | 7 | |||||||||
Repligen Corp. (e) | 22 | 3 | |||||||||
Republic Services, Inc. | 91 | 14 | |||||||||
ResMed, Inc. | 60 | 13 | |||||||||
Revvity, Inc. | 51 | 6 | |||||||||
Rivian Automotive, Inc., Class A (e) | 140 | 2 | |||||||||
Robert Half International, Inc. | 46 | 3 | |||||||||
ROBLOX Corp., Class A (e) | 152 | 6 | |||||||||
Rockwell Automation, Inc. | 48 | 16 | |||||||||
Roku, Inc. (e) | 53 | 3 | |||||||||
Rollins, Inc. | 89 | 4 | |||||||||
Roper Technologies, Inc. | 44 | 21 | |||||||||
Ross Stores, Inc. | 145 | 16 | |||||||||
Royal Caribbean Cruises Ltd. (e) | 97 | 10 | |||||||||
Royalty Pharma PLC, Class A | 144 | 4 | |||||||||
RPM International, Inc. | 54 | 5 | |||||||||
S&P Global, Inc. | 137 | 55 | |||||||||
Salesforce, Inc. (e) | 417 | 88 | |||||||||
SBA Communications Corp. REIT | 44 | 10 | |||||||||
Schlumberger NV | 587 | 29 | |||||||||
Seagate Technology Holdings PLC | 82 | 5 |
The accompanying notes are an integral part of the consolidated financial statements.
18
Morgan Stanley Variable Insurance Fund, Inc.
Semi-Annual Report – June 30, 2023 (unaudited)
Consolidated Portfolio of Investments (cont'd)
Global Strategist Portfolio
Shares | Value (000) | ||||||||||
United States (cont'd) | |||||||||||
Seagen, Inc. (e) | 57 | $ | 11 | ||||||||
Sealed Air Corp. | 60 | 2 | |||||||||
SEI Investments Co. | 47 | 3 | |||||||||
Sempra Energy | 127 | 19 | |||||||||
Sensata Technologies Holding PLC | 64 | 3 | |||||||||
ServiceNow, Inc. (e) | 86 | 48 | |||||||||
Sherwin-Williams Co. | 102 | 27 | |||||||||
Simon Property Group, Inc. REIT | 137 | 16 | |||||||||
Sirius XM Holdings, Inc. | 323 | 1 | |||||||||
Skyworks Solutions, Inc. | 67 | 7 | |||||||||
Snap, Inc., Class A (e) | 473 | 6 | |||||||||
Snap-on, Inc. | 22 | 6 | |||||||||
Snowflake, Inc., Class A (e) | 98 | 17 | |||||||||
SolarEdge Technologies, Inc. (e) | 24 | 6 | |||||||||
Southern Co. | 440 | 31 | |||||||||
Southwest Airlines Co. | 61 | 2 | |||||||||
Splunk, Inc. (e) | 69 | 7 | |||||||||
SS&C Technologies Holdings, Inc. | 94 | 6 | |||||||||
Stanley Black & Decker, Inc. | 63 | 6 | |||||||||
Starbucks Corp. | 470 | 47 | |||||||||
State Street Corp. | 151 | 11 | |||||||||
Steel Dynamics, Inc. | 72 | 8 | |||||||||
Steris PLC | 41 | 9 | |||||||||
Stryker Corp. | 139 | 42 | |||||||||
Sun Communities, Inc. REIT | 51 | 7 | |||||||||
Synchrony Financial | 190 | 6 | |||||||||
Synopsys, Inc. (e) | 64 | 28 | |||||||||
Sysco Corp. | 209 | 16 | |||||||||
T Rowe Price Group, Inc. | 93 | 10 | |||||||||
Take-Two Interactive Software, Inc. (e) | 70 | 10 | |||||||||
Targa Resources Corp. | 89 | 7 | |||||||||
Target Corp. | 191 | 25 | |||||||||
TE Connectivity Ltd. | 132 | 19 | |||||||||
Teledyne Technologies, Inc. (e) | 19 | 8 | |||||||||
Teleflex, Inc. | 19 | 5 | |||||||||
Teradyne, Inc. | 66 | 7 | |||||||||
Tesla, Inc. (e) | 1,152 | 302 | |||||||||
Texas Instruments, Inc. | 380 | 68 | |||||||||
Texas Pacific Land Corp. | 3 | 4 | |||||||||
Textron, Inc. | 87 | 6 | |||||||||
Thermo Fisher Scientific, Inc. | 161 | 84 | |||||||||
TJX Cos., Inc. | 479 | 41 | |||||||||
T-Mobile US, Inc. (e) | 252 | 35 | |||||||||
Toast, Inc., Class A (e) | 109 | 2 | |||||||||
Toro Co. | 44 | 4 | |||||||||
Tractor Supply Co. | 46 | 10 | |||||||||
Trade Desk, Inc., Class A (e) | 192 | 15 | |||||||||
Tradeweb Markets, Inc., Class A | 50 | 3 | |||||||||
Trane Technologies PLC | 96 | 18 | |||||||||
TransDigm Group, Inc. | 21 | 19 | |||||||||
TransUnion | 80 | 6 | |||||||||
Travelers Cos., Inc. | 96 | 17 |
Shares | Value (000) | ||||||||||
Trimble, Inc. (e) | 103 | $ | 5 | ||||||||
Truist Financial Corp. | 552 | 17 | |||||||||
Twilio, Inc., Class A (e) | 78 | 5 | |||||||||
Tyler Technologies, Inc. (e) | 18 | 8 | |||||||||
Tyson Foods, Inc., Class A | 118 | 6 | |||||||||
Uber Technologies, Inc. (e) | 631 | 27 | |||||||||
UDR, Inc. REIT | 135 | 6 | |||||||||
UGI Corp. | 85 | 2 | |||||||||
U-Haul Holding Co. | 36 | 2 | |||||||||
Ulta Beauty, Inc. (e) | 21 | 10 | |||||||||
Union Pacific Corp. | 254 | 52 | |||||||||
United Parcel Service, Inc., Class B | 299 | 54 | |||||||||
United Rentals, Inc. | 29 | 13 | |||||||||
United Therapeutics Corp. (e) | 18 | 4 | |||||||||
UnitedHealth Group, Inc. | 374 | 180 | |||||||||
Unity Software, Inc. (e) | 112 | 5 | |||||||||
Universal Health Services, Inc., Class B | 27 | 4 | |||||||||
US Bancorp | 584 | 19 | |||||||||
Vail Resorts, Inc. | 17 | 4 | |||||||||
Valero Energy Corp. | 152 | 18 | |||||||||
Veeva Systems, Inc., Class A (e) | 58 | 11 | |||||||||
Ventas, Inc. REIT | 164 | 8 | |||||||||
VeriSign, Inc. (e) | 39 | 9 | |||||||||
Verisk Analytics, Inc. | 64 | 14 | |||||||||
Verizon Communications, Inc. | 1,718 | 64 | |||||||||
Vertex Pharmaceuticals, Inc. (e) | 104 | 37 | |||||||||
VF Corp. | 142 | 3 | |||||||||
Viatris, Inc. | 492 | 5 | |||||||||
VICI Properties, Inc. REIT | 395 | 12 | |||||||||
Visa, Inc., Class A | 670 | 159 | |||||||||
Vistra Corp. | 146 | 4 | |||||||||
VMware, Inc., Class A (e) | 87 | 13 | |||||||||
Vulcan Materials Co. | 56 | 13 | |||||||||
W R Berkley Corp. | 87 | 5 | |||||||||
Walgreens Boots Alliance, Inc. | 301 | 9 | |||||||||
Walmart, Inc. | 607 | 95 | |||||||||
Walt Disney Co. (e) | 754 | 67 | |||||||||
Warner Bros Discovery, Inc. (e) | 973 | 12 | |||||||||
Waste Connections, Inc. | 106 | 15 | |||||||||
Waste Management, Inc. | 169 | 29 | |||||||||
Waters Corp. (e) | 24 | 6 | |||||||||
Webster Financial Corp. | 74 | 3 | |||||||||
WEC Energy Group, Inc. | 127 | 11 | |||||||||
Wells Fargo & Co. | 1,376 | 59 | |||||||||
Welltower, Inc. REIT | 192 | 16 | |||||||||
West Pharmaceutical Services, Inc. | 31 | 12 | |||||||||
Western Digital Corp. (e) | 135 | 5 | |||||||||
Westinghouse Air Brake Technologies Corp. | 72 | 8 | |||||||||
Westlake Corp. | 16 | 2 | |||||||||
WestRock Co. | 106 | 3 | |||||||||
Weyerhaeuser Co. REIT | 307 | 10 | |||||||||
Whirlpool Corp. | 23 | 3 | |||||||||
Williams Cos., Inc. | 502 | 16 |
The accompanying notes are an integral part of the consolidated financial statements.
19
Morgan Stanley Variable Insurance Fund, Inc.
Semi-Annual Report – June 30, 2023 (unaudited)
Consolidated Portfolio of Investments (cont'd)
Global Strategist Portfolio
Shares | Value (000) | ||||||||||
United States (cont'd) | |||||||||||
Willis Towers Watson PLC | 44 | $ | 10 | ||||||||
Wolfspeed, Inc. (e) | 53 | 3 | |||||||||
Workday, Inc., Class A (e) | 86 | 19 | |||||||||
WP Carey, Inc. REIT | 86 | 6 | |||||||||
WW Grainger, Inc. | 19 | 15 | |||||||||
Wynn Resorts Ltd. | 46 | 5 | |||||||||
Xcel Energy, Inc. | 219 | 14 | |||||||||
Xylem, Inc. | 75 | 8 | |||||||||
Yum! Brands, Inc. | 115 | 16 | |||||||||
Zebra Technologies Corp., Class A (e) | 22 | 7 | |||||||||
Zillow Group, Inc., Class C (e) | 65 | 3 | |||||||||
Zimmer Biomet Holdings, Inc. | 86 | 13 | |||||||||
Zoetis, Inc. | 191 | 33 | |||||||||
Zoom Video Communications, Inc., Class A (e) | 95 | 6 | |||||||||
ZoomInfo Technologies, Inc., Class A (e) | 114 | 3 | |||||||||
Zscaler, Inc. (e) | 39 | 6 | |||||||||
16,731 | |||||||||||
Total Common Stocks (Cost $23,812) | 28,530 | ||||||||||
No. of Rights | |||||||||||
Rights (0.0%)‡ | |||||||||||
Sweden (0.0%)‡ | |||||||||||
Securitas AB, expires 11/17/23 (Cost $5) | 409 | 3 | |||||||||
Face Amount (000) | |||||||||||
Short-Term Investments (16.5%) | |||||||||||
U.S. Treasury Security (0.8%) | |||||||||||
U.S. Treasury Bill, 5.01%, 11/30/23 (g)(h) (Cost $663) | $ | 676 | 662 | ||||||||
Shares | |||||||||||
Investment Company (15.7%) | |||||||||||
Morgan Stanley Institutional Liquidity Funds — Government Portfolio — Institutional Class (See Note H) (Cost $12,892) | 12,892,221 | 12,892 | |||||||||
Total Short-Term Investments (Cost $13,555) | 13,554 | ||||||||||
Total Investments (98.1%) (Cost $80,240) (i)(j)(k) | 80,727 | ||||||||||
Other Assets in Excess of Liabilities (1.9%) | 1,592 | ||||||||||
Net Assets (100.0%) | $ | 82,319 |
Country assignments and aggregations are based generally on third party ven-dor classifications and information, and may be different from the assignments and aggregations under the policies set forth in the Fund's prospectus and/or statement of additional information relating to geographic classifications.
@ Value is less than $500.
‡ Amount is less than 0.05%.
(a) Security is subject to delayed delivery.
(b) Floating or variable rate securities: The rates disclosed are as of June 30, 2023. For securities based on a published reference rate and spread, the reference rate and spread are indicated in the description in the Consolidated Portfolio of Investments. Certain variable rate securities may not be based on a published reference rate and spread but are determined by the issuer or agent and are based on current market conditions. These securities do not indicate a reference rate and spread in their description in the Consolidated Portfolio of Investments.
(c) 144A security — Certain conditions for public sale may exist. Unless otherwise noted, these securities are deemed to be liquid.
(d) Perpetual — One or more securities do not have a predetermined maturity date. Rates for these securities are fixed for a period of time after which they revert to a floating rate. Interest rates in effect are as of June 30, 2023.
(e) Non-income producing security.
(f) At June 30, 2023, the Fund held a fair valued security valued at $0, representing 0.0% of net assets. This security has been fair valued as determined in good faith under procedures established by and under the general supervision of the Company's (as defined herein) Directors.
(g) Rate shown is the yield to maturity at June 30, 2023.
(h) All or a portion of this security was pledged to cover margin requirements for swap agreements.
(i) Securities are available for collateral in connection with securities purchased on a forward commitment basis, open foreign currency forward exchange contracts, futures contracts and swap agreements.
(j) The approximate fair value and percentage of net assets, $10,275,000 and 12.5%, respectively, represent the securities that have been fair valued under the fair valuation policy for international investments as described in Note A-1 within the Notes to Consolidated Financial Statements.
(k) At June 30, 2023, the aggregate cost for federal income tax purposes approximates the aggregate cost for book purposes. The aggregate gross unrealized appreciation is approximately $8,002,000 and the aggregate gross unrealized depreciation is approximately $7,317,000, resulting in net unrealized appreciation of approximately $685,000.
ADR American Depositary Receipt.
CDI CHESS Depositary Interest.
CVA Certificaten Van Aandelen.
EURIBOR Euro Interbank Offered Rate.
LIBOR London Interbank Offered Rate.
LSE London Stock Exchange.
NYSE New York Stock Exchange.
OAT Obligations Assimilables du Trésor (French Treasury Obligation).
REIT Real Estate Investment Trust.
SOFR Secured Overnight Financing Rate.
SONIA Sterling Overnight Index Average.
TBA To Be Announced.
TSX Toronto Stock Exchange.
The accompanying notes are an integral part of the consolidated financial statements.
20
Morgan Stanley Variable Insurance Fund, Inc.
Semi-Annual Report – June 30, 2023 (unaudited)
Consolidated Portfolio of Investments (cont'd)
Global Strategist Portfolio
Foreign Currency Forward Exchange Contracts:
The Fund had the following foreign currency forward exchange contracts open at June 30, 2023:
Counterparty | Contracts to Deliver (000) | In Exchange For (000) | Delivery Date | Unrealized Appreciation (Depreciation) (000) | |||||||||||||||
Bank of America NA | CNH | 2,334 | $ | 328 | 9/14/23 | $ | 5 | ||||||||||||
Bank of America NA | PLN | 67 | $ | 16 | 9/14/23 | (— | @) | ||||||||||||
Bank of America NA | $ | 7 | ILS | 26 | 9/14/23 | (— | @) | ||||||||||||
Barclays Bank PLC | EUR | 188 | $ | 204 | 9/14/23 | (2 | ) | ||||||||||||
Barclays Bank PLC | JPY | 23,771 | $ | 172 | 8/10/23 | 7 | |||||||||||||
Barclays Bank PLC | MYR | 120 | $ | 26 | 8/10/23 | — | @ | ||||||||||||
Barclays Bank PLC | NZD | 208 | $ | 131 | 8/10/23 | 3 | |||||||||||||
Barclays Bank PLC | THB | 2,330 | $ | 68 | 8/10/23 | 2 | |||||||||||||
Barclays Bank PLC | THB | 1,995 | $ | 58 | 8/10/23 | 1 | |||||||||||||
Barclays Bank PLC | $ | 321 | JPY | 44,184 | 9/14/23 | (11 | ) | ||||||||||||
Barclays Bank PLC | $ | 12 | MXN | 216 | 8/10/23 | — | @ | ||||||||||||
Barclays Bank PLC | $ | 67 | MXN | 1,169 | 9/14/23 | 1 | |||||||||||||
Barclays Bank PLC | $ | 326 | SEK | 3,469 | 9/14/23 | (3 | ) | ||||||||||||
BNP Paribas SA | AUD | 56 | $ | 37 | 8/10/23 | — | @ | ||||||||||||
BNP Paribas SA | CAD | 120 | $ | 91 | 9/14/23 | (— | @) | ||||||||||||
BNP Paribas SA | DKK | 117 | $ | 17 | 9/14/23 | (— | @) | ||||||||||||
BNP Paribas SA | EUR | 194 | $ | 211 | 9/14/23 | (2 | ) | ||||||||||||
BNP Paribas SA | EUR | 205 | $ | 225 | 8/10/23 | 1 | |||||||||||||
BNP Paribas SA | EUR | 52 | $ | 57 | 8/10/23 | — | @ | ||||||||||||
BNP Paribas SA | GBP | 37 | $ | 47 | 9/14/23 | (— | @) | ||||||||||||
BNP Paribas SA | IDR | 1,344,170 | $ | 90 | 8/10/23 | — | @ | ||||||||||||
BNP Paribas SA | JPY | 31,649 | $ | 223 | 9/14/23 | 1 | |||||||||||||
BNP Paribas SA | JPY | 9,084 | $ | 63 | 8/10/23 | (— | @) | ||||||||||||
BNP Paribas SA | NZD | 197 | $ | 122 | 8/10/23 | 1 | |||||||||||||
BNP Paribas SA | $ | 37 | AUD | 56 | 7/5/23 | (— | @) | ||||||||||||
BNP Paribas SA | $ | 34 | AUD | 52 | 9/14/23 | — | @ | ||||||||||||
BNP Paribas SA | $ | 559 | CNY | 3,842 | 8/10/23 | (28 | ) | ||||||||||||
BNP Paribas SA | $ | 12 | COP | 50,392 | 9/14/23 | — | @ | ||||||||||||
BNP Paribas SA | $ | 35 | COP | 146,725 | 8/10/23 | — | @ | ||||||||||||
BNP Paribas SA | $ | 56 | EUR | 52 | 7/5/23 | (— | @) | ||||||||||||
BNP Paribas SA | $ | 3 | INR | 210 | 9/14/23 | — | @ | ||||||||||||
BNP Paribas SA | $ | 98 | JPY | 14,058 | 9/14/23 | — | @ | ||||||||||||
BNP Paribas SA | $ | 729 | MXN | 12,784 | 9/14/23 | 8 | |||||||||||||
Citibank NA | CNY | 580 | $ | 83 | 8/10/23 | 3 | |||||||||||||
Citibank NA | $ | 180 | CHF | 159 | 8/10/23 | (1 | ) | ||||||||||||
Citibank NA | $ | 71 | CNY | 500 | 8/10/23 | (2 | ) | ||||||||||||
Citibank NA | $ | 8 | CZK | 168 | 9/14/23 | — | @ | ||||||||||||
Citibank NA | $ | 26 | ILS | 93 | 9/14/23 | (1 | ) | ||||||||||||
Credit Agricole CIB | $ | 77 | SGD | 101 | 8/10/23 | (2 | ) | ||||||||||||
Goldman Sachs International | BRL | 17,440 | $ | 3,497 | 9/14/23 | (99 | ) | ||||||||||||
Goldman Sachs International | BRL | 303 | $ | 62 | 9/14/23 | (— | @) | ||||||||||||
Goldman Sachs International | DKK | 11 | $ | 2 | 9/14/23 | (— | @) | ||||||||||||
Goldman Sachs International | NOK | 6 | $ | 1 | 9/14/23 | — | @ | ||||||||||||
Goldman Sachs International | $ | 121 | AUD | 178 | 9/14/23 | (2 | ) | ||||||||||||
Goldman Sachs International | $ | 2,314 | BRL | 11,333 | 9/14/23 | 23 | |||||||||||||
Goldman Sachs International | $ | 241 | CHF | 216 | 9/14/23 | 2 | |||||||||||||
Goldman Sachs International | $ | 17 | CLP | 13,453 | 9/14/23 | (— | @) | ||||||||||||
Goldman Sachs International | $ | 1 | HKD | 6 | 9/14/23 | (— | @) | ||||||||||||
Goldman Sachs International | $ | 56 | JPY | 7,687 | 8/10/23 | (2 | ) |
The accompanying notes are an integral part of the consolidated financial statements.
21
Morgan Stanley Variable Insurance Fund, Inc.
Semi-Annual Report – June 30, 2023 (unaudited)
Consolidated Portfolio of Investments (cont'd)
Global Strategist Portfolio
Foreign Currency Forward Exchange Contracts (cont'd):
Counterparty | Contracts to Deliver (000) | In Exchange For (000) | Delivery Date | Unrealized Appreciation (Depreciation) (000) | |||||||||||||||
Goldman Sachs International | $ | 571 | JPY | 78,720 | 9/14/23 | $ | (20 | ) | |||||||||||
Goldman Sachs International | $ | 116 | MXN | 2,027 | 9/14/23 | 1 | |||||||||||||
Goldman Sachs International | $ | 13 | NOK | 141 | 8/10/23 | (— | @) | ||||||||||||
Goldman Sachs International | $ | — | @ | NOK | 4 | 8/10/23 | (— | @) | |||||||||||
Goldman Sachs International | $ | 36 | PEN | 135 | 8/10/23 | 1 | |||||||||||||
Goldman Sachs International | $ | 59 | PLN | 246 | 8/10/23 | 2 | |||||||||||||
Goldman Sachs International | $ | 56 | SEK | 597 | 9/14/23 | (1 | ) | ||||||||||||
HSBC Bank PLC | CHF | 77 | $ | 85 | 8/10/23 | (1 | ) | ||||||||||||
JPMorgan Chase Bank NA | CNH | 683 | $ | 96 | 9/14/23 | 2 | |||||||||||||
JPMorgan Chase Bank NA | EUR | 340 | $ | 372 | 9/14/23 | (1 | ) | ||||||||||||
JPMorgan Chase Bank NA | EUR | 428 | $ | 468 | 9/14/23 | (1 | ) | ||||||||||||
JPMorgan Chase Bank NA | EUR | 473 | $ | 517 | 9/14/23 | (1 | ) | ||||||||||||
JPMorgan Chase Bank NA | EUR | 166 | $ | 182 | 9/14/23 | — | @ | ||||||||||||
JPMorgan Chase Bank NA | GBP | 98 | $ | 124 | 9/14/23 | (1 | ) | ||||||||||||
JPMorgan Chase Bank NA | JPY | 2,261 | $ | 16 | 8/10/23 | 1 | |||||||||||||
JPMorgan Chase Bank NA | NZD | 705 | $ | 434 | 9/14/23 | 1 | |||||||||||||
JPMorgan Chase Bank NA | NZD | 69 | $ | 42 | 9/14/23 | (— | @) | ||||||||||||
JPMorgan Chase Bank NA | $ | 279 | AUD | 410 | 9/14/23 | (5 | ) | ||||||||||||
JPMorgan Chase Bank NA | $ | 162 | CHF | 146 | 9/14/23 | 1 | |||||||||||||
JPMorgan Chase Bank NA | $ | 54 | CHF | 48 | 9/14/23 | (— | @) | ||||||||||||
JPMorgan Chase Bank NA | $ | 35 | EUR | 31 | 9/14/23 | (— | @) | ||||||||||||
JPMorgan Chase Bank NA | $ | 21 | GBP | 16 | 9/14/23 | (— | @) | ||||||||||||
JPMorgan Chase Bank NA | $ | 70 | HKD | 547 | 9/14/23 | (— | @) | ||||||||||||
JPMorgan Chase Bank NA | $ | 477 | JPY | 63,440 | 8/10/23 | (35 | ) | ||||||||||||
JPMorgan Chase Bank NA | $ | 500 | JPY | 68,968 | 9/14/23 | (17 | ) | ||||||||||||
JPMorgan Chase Bank NA | $ | 7 | JPY | 980 | 8/10/23 | (— | @) | ||||||||||||
JPMorgan Chase Bank NA | $ | 124 | MXN | 2,173 | 9/14/23 | 1 | |||||||||||||
JPMorgan Chase Bank NA | $ | 25 | SEK | 274 | 9/14/23 | — | @ | ||||||||||||
JPMorgan Chase Bank NA | ZAR | 19 | $ | 1 | 9/14/23 | — | @ | ||||||||||||
State Street Bank and Trust Co. | $ | — | @ | HKD | 1 | 9/14/23 | (— | @) | |||||||||||
UBS AG | AUD | 408 | $ | 274 | 8/10/23 | 2 | |||||||||||||
UBS AG | CNY | 18,513 | $ | 2,621 | 9/14/23 | 53 | |||||||||||||
UBS AG | DKK | 141 | $ | 21 | 8/10/23 | — | @ | ||||||||||||
UBS AG | EUR | 331 | $ | 359 | 9/14/23 | (3 | ) | ||||||||||||
UBS AG | GBP | 46 | $ | 59 | 8/10/23 | — | @ | ||||||||||||
UBS AG | HUF | 6,262 | $ | 18 | 8/10/23 | (— | @) | ||||||||||||
UBS AG | HUF | 9,734 | $ | 28 | 8/10/23 | (— | @) | ||||||||||||
UBS AG | HUF | 2 | $ | — | @ | 8/10/23 | (— | @) | |||||||||||
UBS AG | HUF | 6,104 | $ | 18 | 8/10/23 | (— | @) | ||||||||||||
UBS AG | HUF | 1,682 | $ | 5 | 8/10/23 | (— | @) | ||||||||||||
UBS AG | HUF | 2,353 | $ | 7 | 8/10/23 | (— | @) | ||||||||||||
UBS AG | HUF | 4,657 | $ | 13 | 8/10/23 | (— | @) | ||||||||||||
UBS AG | IDR | 1,959,425 | $ | 133 | 8/10/23 | 2 | |||||||||||||
UBS AG | JPY | 3,873 | $ | 27 | 8/10/23 | (— | @) | ||||||||||||
UBS AG | MXN | 3,330 | $ | 184 | 8/10/23 | (9 | ) | ||||||||||||
UBS AG | NOK | 285 | $ | 27 | 9/14/23 | — | @ | ||||||||||||
UBS AG | NZD | 2,162 | $ | 1,331 | 9/14/23 | 4 | |||||||||||||
UBS AG | SGD | 69 | $ | 51 | 8/10/23 | — | @ | ||||||||||||
UBS AG | THB | 608 | $ | 18 | 9/14/23 | — | @ | ||||||||||||
UBS AG | $ | 3 | AUD | 4 | 8/10/23 | — | @ |
The accompanying notes are an integral part of the consolidated financial statements.
22
Morgan Stanley Variable Insurance Fund, Inc.
Semi-Annual Report – June 30, 2023 (unaudited)
Consolidated Portfolio of Investments (cont'd)
Global Strategist Portfolio
Foreign Currency Forward Exchange Contracts (cont'd):
Counterparty | Contracts to Deliver (000) | In Exchange For (000) | Delivery Date | Unrealized Appreciation (Depreciation) (000) | |||||||||||||||
UBS AG | $ | 120 | AUD | 176 | 9/14/23 | $ | (2 | ) | |||||||||||
UBS AG | $ | 2 | HKD | 14 | 9/14/23 | (— | @) | ||||||||||||
UBS AG | $ | 26 | HUF | 9,031 | 8/10/23 | — | @ | ||||||||||||
UBS AG | $ | 1 | HUF | 419 | 9/14/23 | — | @ | ||||||||||||
UBS AG | $ | 4 | IDR | 64,177 | 9/14/23 | (— | @) | ||||||||||||
UBS AG | $ | 27 | JPY | 3,873 | 7/5/23 | — | @ | ||||||||||||
UBS AG | $ | 302 | KRW | 398,634 | 8/10/23 | 1 | |||||||||||||
UBS AG | $ | 11 | KRW | 14,584 | 9/14/23 | (— | @) | ||||||||||||
UBS AG | $ | 24 | KRW | 31,891 | 9/14/23 | — | @ | ||||||||||||
UBS AG | $ | 276 | MXN | 4,846 | 9/14/23 | 3 | |||||||||||||
UBS AG | $ | 3 | NZD | 5 | 8/10/23 | — | @ | ||||||||||||
UBS AG | $ | 27 | RON | 122 | 8/10/23 | (— | @) | ||||||||||||
UBS AG | $ | 140 | SEK | 1,421 | 8/10/23 | (8 | ) | ||||||||||||
UBS AG | $ | 19 | SEK | 205 | 9/14/23 | (— | @) | ||||||||||||
UBS AG | $ | 120 | THB | 4,040 | 8/10/23 | (6 | ) | ||||||||||||
UBS AG | $ | 2 | TRY | 62 | 9/14/23 | (— | @) | ||||||||||||
UBS AG | $ | 14 | TWD | 419 | 9/14/23 | (— | @) | ||||||||||||
UBS AG | ZAR | 327 | $ | 17 | 9/14/23 | — | @ | ||||||||||||
Westpac Banking Corp. | $ | 685 | EUR | 618 | 8/10/23 | (9 | ) | ||||||||||||
$ | (142 | ) |
Futures Contracts:
The Fund had the following futures contracts open at June 30, 2023:
Number of Contracts | Expiration Date | Notional Amount (000) | Value (000) | Unrealized Appreciation (Depreciation) (000) | |||||||||||||||||||
Long: | |||||||||||||||||||||||
CAC 40 Index (France) | 1 | Jul-23 | EUR | — | @ | $ | 81 | $ | 2 | ||||||||||||||
FTSE MIB Index (Italy) | 1 | Sep-23 | — | @ | 155 | 5 | |||||||||||||||||
German Euro-Bobl Index (Germany) | 4 | Sep-23 | 400 | 505 | (4 | ) | |||||||||||||||||
German Euro-BTP Index (Germany) | 3 | Sep-23 | 300 | 380 | 5 | ||||||||||||||||||
German Euro-Schatz Index (Germany) | 21 | Sep-23 | 2,100 | 2,403 | (17 | ) | |||||||||||||||||
Hang Seng Index (Hong Kong) | 1 | Jul-23 | HKD | — | @ | 120 | — | @ | |||||||||||||||
IBEX 35 Index (Spain) | 1 | Jul-23 | EUR | — | @ | 104 | 3 | ||||||||||||||||
ICE Brent Crude Oil Index (United Kingdom) | 10 | Oct-23 | $ | 10 | 749 | (45 | ) | ||||||||||||||||
KFE 10 yr. Treasury Bond (Korea, Republic of) | 4 | Sep-23 | KRW | 400,000 | 337 | (1 | ) | ||||||||||||||||
Long Gilt Index (United Kingdom) | 2 | Sep-23 | GBP | 200 | 242 | (3 | ) | ||||||||||||||||
Montreal Exchange 10 yr. Canadian Bond (Canada) | 1 | Sep-23 | CAD | 100 | 93 | 1 | |||||||||||||||||
SFE 10 yr. Australian Bond (Australia) | 25 | Sep-23 | AUD | 2,500 | 1,935 | (17 | ) | ||||||||||||||||
SFE S&P ASX Share Price Index 200 (Australia) | 1 | Sep-23 | — | @ | 119 | 1 | |||||||||||||||||
SGX MSCI Singapore Index (Singapore) | 1 | Jul-23 | SGD | — | @ | 21 | — | @ | |||||||||||||||
TSE TOPIX Index (Japan) | 4 | Sep-23 | JPY | 40 | 634 | 19 | |||||||||||||||||
U.S. Treasury 10 yr. Note (United States) | 9 | Sep-23 | $ | 900 | 1,010 | (5 | ) | ||||||||||||||||
U.S. Treasury 2 yr. Note (United States) | 1 | Sep-23 | 200 | 203 | (3 | ) | |||||||||||||||||
U.S. Treasury 5 yr. Note (United States) | 10 | Sep-23 | 1,000 | 1,071 | (24 | ) | |||||||||||||||||
Short: | |||||||||||||||||||||||
Euro Stoxx 50 Index (Germany) | 12 | Sep-23 | EUR | (— | @) | (580 | ) | (7 | ) | ||||||||||||||
FTSE 100 Index (United Kingdom) | 1 | Sep-23 | GBP | (— | @) | (96 | ) | 1 | |||||||||||||||
German Euro-BTP Index (Germany) | 18 | Sep-23 | EUR | (1,800 | ) | (2,280 | ) | (12 | ) |
The accompanying notes are an integral part of the consolidated financial statements.
23
Morgan Stanley Variable Insurance Fund, Inc.
Semi-Annual Report – June 30, 2023 (unaudited)
Consolidated Portfolio of Investments (cont'd)
Global Strategist Portfolio
Futures Contracts (cont'd):
Number of Contracts | Expiration Date | Notional Amount (000) | Value (000) | Unrealized Appreciation (Depreciation) (000) | |||||||||||||||||||
German Euro-Bund Index (Germany) | 9 | Sep-23 | EUR | (900 | ) | $ | (1,313 | ) | $ | 3 | |||||||||||||
German Short Euro-BTP Index (Germany) | 9 | Sep-23 | (900 | ) | (1,028 | ) | 7 | ||||||||||||||||
MSCI Emerging Market Index (United States) | 2 | Sep-23 | $ | (— | @) | (100 | ) | (1 | ) | ||||||||||||||
S&P 500 E Mini Index (United States) | 14 | Sep-23 | (1 | ) | (3,142 | ) | (83 | ) | |||||||||||||||
TSE Japanese 10 Yr. Bond index (Japan) | 9 | Sep-23 | JPY | (900,000 | ) | (9,265 | ) | (35 | ) | ||||||||||||||
U.S. Treasury 10 yr. Ultra Note (United States) | 6 | Sep-23 | $ | (600 | ) | (711 | ) | 5 | |||||||||||||||
U.S. Treasury 5 yr. Note (United States) | 32 | Sep-23 | (3,200 | ) | (3,427 | ) | 68 | ||||||||||||||||
U.S. Treasury Ultra Long Bond (United States) | 1 | Sep-23 | (100 | ) | (136 | ) | (2 | ) | |||||||||||||||
$ | (139 | ) |
Interest Rate Swap Agreements:
The Fund had the following interest rate swap agreements open at June 30, 2023:
Swap Counterparty | Floating Rate Index | Pay/ Receive Floating Rate | Fixed Rate | Payment Frequency Paid/ Received | Maturity Date | Notional Amount (000) | Value (000) | Upfront Payment Paid (Received) (000) | Unrealized Appreciation (Depreciation) (000) | ||||||||||||||||||||||||||||||
Morgan Stanley & Co. LLC* | 1 Week CNY | Pay | 2.56 | % | Quarterly/ Quarterly | 5/16/28 | CNY | 11,796 | $ | 13 | $ | — | $ | 13 | |||||||||||||||||||||||||
Morgan Stanley & Co. LLC* | 1 Week CNY | Pay | 2.56 | Quarterly/ Quarterly | 5/16/28 | 11,796 | 13 | — | 13 | ||||||||||||||||||||||||||||||
Morgan Stanley & Co. LLC* | 1 Month TIIE | Pay | 6.66 | Monthly/Monthly | 7/1/26 | MXN | 6,814 | (24 | ) | — | (24 | ) | |||||||||||||||||||||||||||
Morgan Stanley & Co. LLC* | 1 Month TIIE | Pay | 6.68 | Monthly/Monthly | 6/29/26 | 6,814 | (24 | ) | — | (24 | ) | ||||||||||||||||||||||||||||
Morgan Stanley & Co. LLC* | 1 Month TIIE | Pay | 6.68 | Monthly/Monthly | 6/29/26 | 6,814 | (24 | ) | — | (24 | ) | ||||||||||||||||||||||||||||
Morgan Stanley & Co. LLC* | 1 Month TIIE | Pay | 7.36 | Monthly/Monthly | 12/22/26 | 10,395 | (24 | ) | — | (24 | ) | ||||||||||||||||||||||||||||
Morgan Stanley & Co. LLC* | 1 Month TIIE | Pay | 7.38 | Monthly/Monthly | 12/22/26 | 10,395 | (25 | ) | — | (25 | ) | ||||||||||||||||||||||||||||
Morgan Stanley & Co. LLC* | 1 Month TIIE | Pay | 9.96 | Monthly/Monthly | 2/26/26 | 18,273 | 20 | — | 20 | ||||||||||||||||||||||||||||||
Morgan Stanley & Co. LLC* | 1 Month TIIE | Pay | 9.96 | Monthly/Monthly | 2/26/26 | 18,273 | 19 | — | 19 | ||||||||||||||||||||||||||||||
Morgan Stanley & Co. LLC* | 1 Month TIIE | Pay | 10.02 | Monthly/Monthly | 2/26/26 | 18,001 | 21 | — | 21 | ||||||||||||||||||||||||||||||
$ | (35 | ) | $ | — | $ | (35 | ) |
Total Return Swap Agreements:
The Fund had the following total return swap agreements open at June 30, 2023:
Swap Counterparty | Index | Pay/ Receive Total Return of Reference Index | Floating Rate | Payment Frequency | Maturity Date | Notional Amount (000) | Value (000) | Upfront Payment Paid (Received) (000) | Unrealized Appreciation (Depreciation) (000) | ||||||||||||||||||||||||||||||
Barclays Bank PLC | E&P Index | Pay | SOFR + 0.20% | Quarterly | 4/10/24 | $ | 152 | $ | 2 | $ | — | $ | 2 | ||||||||||||||||||||||||||
Barclays Bank PLC | E&P Index | Pay | SOFR + 0.20% | Quarterly | 4/10/24 | 354 | 5 | — | 5 | ||||||||||||||||||||||||||||||
Barclays Bank PLC | MSCI Daily Total Return World Gross Consumer Staples Index | Receive | SOFR + 0.10% | Quarterly | 5/20/24 | 872 | 23 | — | 23 | ||||||||||||||||||||||||||||||
Barclays Bank PLC | MSCI World Tobacco | Pay | SOFR + 0.25% | Quarterly | 5/20/24 | 878 | (4 | ) | — | (4 | ) | ||||||||||||||||||||||||||||
BNP Paribas SA | BNP EU Luxury Index†† | Receive | SOFR + 0.24% | Quarterly | 5/30/24 | 457 | (19 | ) | — | (19 | ) | ||||||||||||||||||||||||||||
BNP Paribas SA | BNP EU Luxury Index†† | Receive | SOFR + 0.24% | Quarterly | 5/30/24 | 821 | (52 | ) | — | (52 | ) | ||||||||||||||||||||||||||||
BNP Paribas SA | EMU IMI Anti-Value Index†† | Receive | SOFR + 0.04% | Quarterly | 9/28/23 | 592 | (15 | ) | — | (15 | ) | ||||||||||||||||||||||||||||
BNP Paribas SA | EMU IMI Anti-Value Index†† | Receive | SOFR + 0.04% | Quarterly | 9/28/23 | 590 | (15 | ) | — | (15 | ) | ||||||||||||||||||||||||||||
BNP Paribas SA | EMU IMI Anti-Value Index†† | Receive | SOFR + 0.04% | Quarterly | 9/28/23 | 592 | (15 | ) | — | (15 | ) | ||||||||||||||||||||||||||||
BNP Paribas SA | EMU IMI Anti-Value Index†† | Receive | SOFR + 0.04% | Quarterly | 9/28/23 | 591 | (15 | ) | — | (15 | ) | ||||||||||||||||||||||||||||
BNP Paribas SA | EMU IMI Anti-Value Index†† | Receive | SOFR + 0.04% | Quarterly | 9/28/23 | 610 | (16 | ) | — | (16 | ) | ||||||||||||||||||||||||||||
BNP Paribas SA | EMU IMI Value Index†† | Pay | SOFR + 0.42% | Quarterly | 9/28/23 | 601 | 10 | — | 10 |
The accompanying notes are an integral part of the consolidated financial statements.
24
Morgan Stanley Variable Insurance Fund, Inc.
Semi-Annual Report – June 30, 2023 (unaudited)
Consolidated Portfolio of Investments (cont'd)
Global Strategist Portfolio
Total Return Swap Agreements (cont'd):
Swap Counterparty | Index | Pay/ Receive Total Return of Reference Index | Floating Rate | Payment Frequency | Maturity Date | Notional Amount (000) | Value (000) | Upfront Payment Paid (Received) (000) | Unrealized Appreciation (Depreciation) (000) | ||||||||||||||||||||||||||||||
BNP Paribas SA | EMU IMI Value Index†† | Pay | SOFR + 0.42% | Quarterly | 9/28/23 | $ | 595 | $ | 10 | $ | — | $ | 10 | ||||||||||||||||||||||||||
BNP Paribas SA | EMU IMI Value Index†† | Pay | SOFR + 0.42% | Quarterly | 9/28/23 | 591 | 10 | — | 10 | ||||||||||||||||||||||||||||||
BNP Paribas SA | EMU IMI Value Index†† | Pay | SOFR + 0.42% | Quarterly | 9/28/23 | 587 | 9 | — | 9 | ||||||||||||||||||||||||||||||
BNP Paribas SA | EMU IMI Value Index†† | Pay | SOFR + 0.42% | Quarterly | 9/28/23 | 584 | 9 | — | 9 | ||||||||||||||||||||||||||||||
BNP Paribas SA | MSCI Japan Net Total Return Index | Pay | SOFR + 0.01% | Quarterly | 2/12/24 | 2,785 | 101 | — | 101 | ||||||||||||||||||||||||||||||
BNP Paribas SA | MSCI USA Index | Pay | SOFR + 0.35% | Quarterly | 7/14/23 | 2,551 | 209 | — | 209 | ||||||||||||||||||||||||||||||
Goldman Sachs International | MSCI Emerging Markets Net Total Return Index | Pay | SOFR + 0.21% | Quarterly | 1/26/24 | 5,410 | 64 | — | 64 | ||||||||||||||||||||||||||||||
Goldman Sachs International | MSCI USA Index | Pay | SOFR + 0.30% | Quarterly | 9/22/23 | 13,127 | 211 | — | 211 | ||||||||||||||||||||||||||||||
JPMorgan Chase Bank NA | Japan Growth Index†† | Receive | SOFR + 0.19% | Quarterly | 6/26/24 | 1,291 | 39 | — | 39 | ||||||||||||||||||||||||||||||
JPMorgan Chase Bank NA | Japan Value Index†† | Pay | SOFR + 0.00% | Quarterly | 6/26/24 | 1,297 | (30 | ) | — | (30 | ) | ||||||||||||||||||||||||||||
JPMorgan Chase Bank NA | JPM SPX 1500 Growth†† | Receive | SOFR + 0.05% | Quarterly | 6/12/24 | 590 | (12 | ) | — | (12 | ) | ||||||||||||||||||||||||||||
JPMorgan Chase Bank NA | JPM SPX 1500 Growth†† | Receive | SOFR + 0.05% | Quarterly | 6/12/24 | 896 | (14 | ) | — | (14 | ) | ||||||||||||||||||||||||||||
JPMorgan Chase Bank NA | JPM SPX 1500 Value†† | Pay | SOFR + 0.05% | Quarterly | 6/12/24 | 588 | 10 | — | 10 | ||||||||||||||||||||||||||||||
JPMorgan Chase Bank NA | JPM SPX 1500 Value†† | Pay | SOFR + 0.05% | Quarterly | 6/12/24 | 897 | 11 | — | 11 | ||||||||||||||||||||||||||||||
JPMorgan Chase Bank NA | JPM SPX Broad Growth†† | Receive | SOFR + 0.05% | Quarterly | 6/12/24 | 550 | (12 | ) | — | (12 | ) | ||||||||||||||||||||||||||||
JPMorgan Chase Bank NA | JPM SPX Broad Growth†† | Receive | SOFR + 0.05% | Quarterly | 6/12/24 | 837 | (13 | ) | — | (13 | ) | ||||||||||||||||||||||||||||
JPMorgan Chase Bank NA | JPM SPX Broad Value†† | Pay | SOFR + 0.05% | Quarterly | 6/12/24 | 548 | 9 | — | 9 | ||||||||||||||||||||||||||||||
JPMorgan Chase Bank NA | JPM SPX Broad Value†† | Pay | SOFR + 0.05% | Quarterly | 6/12/24 | 836 | 10 | — | 10 | ||||||||||||||||||||||||||||||
JPMorgan Chase Bank NA | Korea Growth Index | Receive | SOFR + 0.30% | Quarterly | 6/25/24 | 321 | 15 | — | 15 | ||||||||||||||||||||||||||||||
JPMorgan Chase Bank NA | Korea Value Index | Pay | SOFR + 0.16% | Quarterly | 6/25/24 | 322 | (11 | ) | — | (11 | ) | ||||||||||||||||||||||||||||
$ | 514 | $ | — | $ | 514 |
†† See tables below for details of the equity basket holdings underlying the swaps.
The following table represents the equity basket holdings underlying the total return swap with BNP EU Luxury Index as of June 30, 2023:
Security Description | Shares | Value (000) | Index Weight | ||||||||||||
BNP EU Luxury Index | |||||||||||||||
Brunello Cucinelli SpA | 199 | $ | 18 | 1.73 | % | ||||||||||
Burberry Group PLC | 1,109 | 31 | 2.96 | ||||||||||||
Cie Financiere Richemo — Class A Reg | 1,319 | 218 | 21.14 | ||||||||||||
Hermes International | 93 | 194 | 18.86 | ||||||||||||
Hugo Boss AG | 210 | 16 | 1.55 | ||||||||||||
Kering | 342 | 192 | 18.65 | ||||||||||||
Lvmh Moet Hennessy Louis Vuitton | 239 | 220 | 21.30 | ||||||||||||
Moncler SpA | 813 | 57 | 5.49 | ||||||||||||
Salvatore Ferragamo SpA | 530 | 9 | 0.84 | ||||||||||||
Swatch Group AG | 150 | 43 | 4.18 | ||||||||||||
Tapestry, Inc. | 693 | 30 | 2.89 | ||||||||||||
Tod's SpA | 104 | 4 | 0.42 |
The following table represents the equity basket holdings underlying the total return swap with EMU IMI Anti-Value Index as of June 30, 2023:
Security Description | Shares | Value (000) | Index Weight | ||||||||||||
EMU IMI Anti-Value Index | |||||||||||||||
Adidas AG | 46 | $ | 8 | 0.86 | % | ||||||||||
Adyen NV | 7 | 10 | 1.07 | ||||||||||||
AIB Group PLC | 2,274 | 9 | 0.93 | ||||||||||||
Air Liquide SA | 51 | 8 | 0.85 | ||||||||||||
Airbus SE | 61 | 8 | 0.81 | ||||||||||||
Akzo Nobel NV | 111 | 8 | 0.82 | ||||||||||||
Allfunds Group PLC | 1,483 | 9 | 0.89 | ||||||||||||
Amplifon SpA | 234 | 8 | 0.81 | ||||||||||||
Arcelormittal | 1,003 | 30 | 2.20 | ||||||||||||
Arkema | 304 | 30 | 2.17 | ||||||||||||
ASM International NV | 23 | 9 | 0.90 | ||||||||||||
ASML Holding NV | 14 | 9 | 0.92 | ||||||||||||
Auto1 Group SE | 1,089 | 8 | 0.87 | ||||||||||||
Banca Generali SpA | 307 | 9 | 0.97 | ||||||||||||
Banco Bilbao Vizcaya Argentaria SA | 4,076 | 29 | 2.11 | ||||||||||||
Barco NV | 339 | 8 | 0.81 | ||||||||||||
Bawag Group AG | 194 | 8 | 0.87 |
The accompanying notes are an integral part of the consolidated financial statements.
25
Morgan Stanley Variable Insurance Fund, Inc.
Semi-Annual Report – June 30, 2023 (unaudited)
Consolidated Portfolio of Investments (cont'd)
Global Strategist Portfolio
Security Description | Shares | Value (000) | Index Weight | ||||||||||||
EMU IMI Anti-Value Index (cont'd) | |||||||||||||||
CA Immobilien Anlagen AG | 349 | $ | 9 | 0.92 | % | ||||||||||
Credit Agricole SA | 782 | 8 | 0.86 | ||||||||||||
CTS Eventim AG & Co. KGaA | 140 | 8 | 0.82 | ||||||||||||
Dassault Systemes SE | 257 | 10 | 1.06 | ||||||||||||
Davide Campari-Milano NV | 650 | 8 | 0.82 | ||||||||||||
Delivery Hero SE | 236 | 8 | 0.87 | ||||||||||||
Deutsche Boerse AG | 49 | 8 | 0.85 | ||||||||||||
Edenred | 171 | 10 | 1.06 | ||||||||||||
Evotec SE | 383 | 8 | 0.81 | ||||||||||||
Ferrari NV | 29 | 8 | 0.85 | ||||||||||||
Flutter Entertainment PLC | 44 | 8 | 0.82 | ||||||||||||
Galapagos NV | 211 | 8 | 0.81 | ||||||||||||
Gecina SA | 90 | 9 | 0.89 | ||||||||||||
Getlink SE | 498 | 8 | 0.81 | ||||||||||||
Groupe Bruxelles Lambert NV | 114 | 8 | 0.85 | ||||||||||||
Hannover Rueck SE | 43 | 8 | 0.84 | ||||||||||||
Industrie De Nora SpA | 452 | 9 | 0.91 | ||||||||||||
ING Groep NV | 723 | 9 | 0.90 | ||||||||||||
Inmobiliaria Colonial Socimi | 1,487 | 8 | 0.85 | ||||||||||||
Inpost SA | 826 | 8 | 0.83 | ||||||||||||
Interparfums SA | 109 | 8 | 0.81 | ||||||||||||
MARR SpA | 551 | 8 | 0.81 | ||||||||||||
Nemetschek SE | 148 | 10 | 1.06 | ||||||||||||
Redcare Pharmacy NV | 84 | 8 | 0.81 | ||||||||||||
Safran SA | 56 | 8 | 0.81 | ||||||||||||
Salcef Group SpA | 364 | 8 | 0.87 | ||||||||||||
Schneider Electric SE | 52 | 8 | 0.85 | ||||||||||||
Scout24 SE | 146 | 9 | 0.88 | ||||||||||||
SES Imagotag | 84 | 14 | 1.45 | ||||||||||||
Siemens AG-Reg | 53 | 9 | 0.88 | ||||||||||||
Siemens Energy AG | 362 | 8 | 0.87 | ||||||||||||
Tomtom NV | 1,281 | 9 | 0.91 | ||||||||||||
Verbio Vereinigte Bioenergie AG | 201 | 8 | 0.80 | ||||||||||||
Voltalia SA- Reg | 528 | 8 | 0.83 | ||||||||||||
Vonovia SE | 468 | 8 | 0.85 | ||||||||||||
Warehouses De Pauw SA | 311 | 8 | 0.80 |
The following table represents the equity basket holdings underlying the total return swap with EMU IMI Value Index as of June 30, 2023:
Security Description | Shares | Value (000) | Index Weight | ||||||||||||
EMU IMI Value Index | |||||||||||||||
Acerinox SA | 892 | $ | 9 | 0.92 | % | ||||||||||
Air France-KLM | 5,105 | 9 | 0.95 | ||||||||||||
Aperam | 261 | 8 | 0.86 | ||||||||||||
Applus Services SA | 1,080 | 10 | 1.02 | ||||||||||||
Asahi Intecc Co. Ltd. | 12,702 | 1 | 2.25 | ||||||||||||
Atos SE | 830 | 11 | 1.14 | ||||||||||||
Banca Monte dei Paschi di Siena | 3,640 | 8 | 0.88 | ||||||||||||
Baycurrent Consulting, Inc. | 5,219 | 1 | 2.17 |
Security Description | Shares | Value (000) | Index Weight | ||||||||||||
EMU IMI Value Index (cont'd) | |||||||||||||||
Bayerische Motoren Werke AG | 73 | $ | 8 | 0.83 | % | ||||||||||
Bekaert NV | 204 | 8 | 0.87 | ||||||||||||
Beneteau | 587 | 9 | 0.92 | ||||||||||||
Bouygues SA | 305 | 9 | 0.94 | ||||||||||||
Bper Banca | 3,112 | 9 | 0.89 | ||||||||||||
Cancom SE | 312 | 9 | 0.93 | ||||||||||||
Capcom Co. Ltd. | 5,938 | 1 | 2.14 | ||||||||||||
Casino Guichard Perrachon | 1,176 | 9 | 0.98 | ||||||||||||
Clariane SE | 1,241 | 8 | 0.88 | ||||||||||||
Compagnie De Saint Gobain | 190 | 10 | 1.07 | ||||||||||||
Construcc Y Aux De Ferrocarr | 364 | 11 | 1.17 | ||||||||||||
Daimler Truck Holding AG | 322 | 10 | 1.03 | ||||||||||||
Dalata Hotel Group PLC | 1,736 | 8 | 0.84 | ||||||||||||
Dermapharm Holding SE | 207 | 9 | 0.96 | ||||||||||||
Deutz AG | 1,654 | 9 | 0.89 | ||||||||||||
Eiffage | 94 | 9 | 0.94 | ||||||||||||
Fresenius Medical Care AG | 215 | 9 | 0.97 | ||||||||||||
Fresenius Se & Co KGaA | 346 | 9 | 0.90 | ||||||||||||
Fugro NV | 761 | 11 | 1.12 | ||||||||||||
Glanbia PLC | 729 | 10 | 1.03 | ||||||||||||
Grifols SA | 900 | 11 | 1.10 | ||||||||||||
Indra Sistemas SA | 740 | 8 | 0.87 | ||||||||||||
Ipsen | 81 | 9 | 0.90 | ||||||||||||
Iveco Group NV | 1,214 | 10 | 1.03 | ||||||||||||
Koninklijke Bam Groep NV | 4,565 | 8 | 0.88 | ||||||||||||
Leonardo SpA | 825 | 9 | 0.91 | ||||||||||||
Melia Hotels International | 1,272 | 8 | 0.84 | ||||||||||||
Nexi SpA | 1,260 | 9 | 0.93 | ||||||||||||
Outokumpu Oyj | 1,662 | 9 | 0.91 | ||||||||||||
Ovs SpA | 3,497 | 9 | 0.89 | ||||||||||||
Rexel SA | 489 | 11 | 1.11 | ||||||||||||
Sanofi | 85 | 8 | 0.86 | ||||||||||||
Signify NV | 339 | 9 | 0.89 | ||||||||||||
Siltronic AG | 125 | 9 | 0.93 | ||||||||||||
Sopra Steria Group | 48 | 9 | 0.90 | ||||||||||||
Stmicroelectronics NV | 186 | 8 | 0.85 | ||||||||||||
Suedzucker AG | 634 | 11 | 1.09 | ||||||||||||
Tag Immobilien AG | 1,291 | 11 | 1.11 | ||||||||||||
Telenet Group Holding NV | 412 | 9 | 0.89 | ||||||||||||
Thyssenkrupp AG | 1,184 | 8 | 0.84 | ||||||||||||
Tietoevry Oyj | 315 | 8 | 0.82 | ||||||||||||
Unibail-Rodamco-Westfield | 188 | 9 | 0.90 | ||||||||||||
Unicredit SpA | 397 | 8 | 0.84 | ||||||||||||
Voestalpine AG | 265 | 9 | 0.89 | ||||||||||||
Xior Student Housing NV | 320 | 9 | 0.95 |
The accompanying notes are an integral part of the consolidated financial statements.
26
Morgan Stanley Variable Insurance Fund, Inc.
Semi-Annual Report – June 30, 2023 (unaudited)
Consolidated Portfolio of Investments (cont'd)
Global Strategist Portfolio
The following table represents the equity basket holdings underlying the total return swap with Japan Growth Index as of June 30, 2023:
Security Description | Shares | Value (000) | Index Weight | ||||||||||||
Japan Growth Index | |||||||||||||||
Advantest Corp. | 1,522 | $ | 197 | 1.99 | % | ||||||||||
Asahi Intecc Co. Ltd. | 10,810 | 212 | 2.14 | ||||||||||||
Bandai Namco Holdings, Inc. | 8,850 | 211 | 2.13 | ||||||||||||
Baycurrent Consulting, Inc. | 5,221 | 211 | 2.13 | ||||||||||||
Capcom Co. Ltd. | 5,453 | 212 | 2.13 | ||||||||||||
Chubu Electric Power Co., Inc. | 17,970 | 215 | 2.16 | ||||||||||||
Daifuku Co. Ltd. | 9,865 | 208 | 2.09 | ||||||||||||
Daiichi Sankyo Co. Ltd. | 6,437 | 209 | 2.11 | ||||||||||||
Daikin Industries Ltd. | 1,038 | 213 | 2.14 | ||||||||||||
Daiwa House Reit Investment | 109 | 213 | 2.14 | ||||||||||||
Disco Corp. | 1,294 | 202 | 2.04 | ||||||||||||
Fanuc Corp. | 5,795 | 209 | 2.11 | ||||||||||||
Fast Retailing Co. Ltd. | 822 | 212 | 2.14 | ||||||||||||
GLP J-REIT | 208 | 212 | 2.14 | ||||||||||||
Gmo Payment Gateway, Inc. | 2,598 | 209 | 2.11 | ||||||||||||
Hoshizaki Corp. | 5,756 | 214 | 2.16 | ||||||||||||
Japan Exchange Group, Inc. | 11,970 | 218 | 2.20 | ||||||||||||
JSR Corp. | 9,241 | 212 | 2.14 | ||||||||||||
Keio Corp. | 6,452 | 214 | 2.15 | ||||||||||||
Keisei Electric Railway Co. | 5,140 | 213 | 2.14 | ||||||||||||
Keyence Corp. | 443 | 213 | 2.15 | ||||||||||||
Kobe Bussan Co. Ltd. | 8,186 | 214 | 2.16 | ||||||||||||
Koei Tecmo Holdings Co. Ltd. | 12,420 | 212 | 2.14 | ||||||||||||
Kose Corp. | 2,086 | 206 | 2.08 | ||||||||||||
Lasertec Corp. | 1,395 | 202 | 2.04 | ||||||||||||
M3, Inc. | 9,326 | 208 | 2.10 | ||||||||||||
Mcdonald'S Holdings Co. Japan | 5,221 | 211 | 2.13 | ||||||||||||
Monotaro Co. Ltd. | 15,931 | 209 | 2.11 | ||||||||||||
Nidec Corp. | 3,778 | 207 | 2.09 | ||||||||||||
Nippon Paint Holdings Co. Ltd. | 25,417 | 213 | 2.15 | ||||||||||||
Nippon Prologis REIT, Inc. | 104 | 211 | 2.13 | ||||||||||||
Nissan Chemical Corp. | 4,882 | 212 | 2.14 | ||||||||||||
Obic Co. Ltd. | 1,301 | 214 | 2.15 | ||||||||||||
Oracle Corp. Japan | 2,581 | 215 | 2.17 | ||||||||||||
Oriental Land Co. Ltd. | 5,718 | 212 | 2.14 | ||||||||||||
Rakuten Group, Inc. | 61,125 | 213 | 2.15 | ||||||||||||
Recruit Holdings Co. Ltd. | 6,490 | 209 | 2.11 | ||||||||||||
Shiseido Co. Ltd. | 4,326 | 204 | 2.06 | ||||||||||||
SMC Corp. | 369 | 207 | 2.09 | ||||||||||||
Sompo Holdings, Inc. | 4,810 | 221 | 2.23 | ||||||||||||
T&D Holdings, Inc. | 14,362 | 212 | 2.14 | ||||||||||||
Toho Co. Ltd. | 5,512 | 211 | 2.12 | ||||||||||||
Tokio Marine Holdings, Inc. | 9,185 | 216 | 2.18 | ||||||||||||
Trend Micro, Inc. | 4,207 | 211 | 2.12 | ||||||||||||
Unicharm Corp. | 5,666 | 216 | 2.17 | ||||||||||||
Yaskawa Electric Corp. | 4,511 | 209 | 2.10 | ||||||||||||
Zozo, Inc. | 10,120 | 216 | 2.17 |
The following table represents the equity basket holdings underlying the total return swap with Japan Value Index as of June 30, 2023:
Security Description | Shares | Value (000) | Index Weight | ||||||||||||
Japan Value Index | |||||||||||||||
Agc, Inc. | 6,399 | $ | 235 | 2.13 | % | ||||||||||
Asahi Group Holdings Ltd. | 5,896 | 233 | 2.12 | ||||||||||||
Brother Industries Ltd. | 15,041 | 233 | 2.11 | ||||||||||||
Canon, Inc. | 8,669 | 234 | 2.13 | ||||||||||||
Daiwa House Industry Co. Ltd. | 8,781 | 236 | 2.14 | ||||||||||||
Dentsu Group, Inc. | 7,145 | 239 | 2.16 | ||||||||||||
Hitachi Construction Machinery Co. Ltd. | 8,395 | 236 | 2.14 | ||||||||||||
Honda Motor Co. Ltd. | 7,550 | 233 | 2.12 | ||||||||||||
Iida Group Holdings Co. Ltd. | 13,955 | 238 | 2.16 | ||||||||||||
Isuzu Motors Ltd. | 18,952 | 232 | 2.10 | ||||||||||||
Japan Post Holdings Co. Ltd. | 32,564 | 233 | 2.12 | ||||||||||||
Japan Post Insurance Co. Ltd. | 15,524 | 233 | 2.11 | ||||||||||||
JFE Holdings, Inc. | 16,533 | 234 | 2.12 | ||||||||||||
Kajima Corp. | 16,096 | 239 | 2.17 | ||||||||||||
Kawasaki Kisen Kaisha Ltd. | 10,350 | 237 | 2.15 | ||||||||||||
Kirin Holdings Co. Ltd. | 15,377 | 234 | 2.13 | ||||||||||||
Mazda Motor Corp. | 24,189 | 233 | 2.11 | ||||||||||||
Meiji Holdings Co. Ltd. | 10,320 | 233 | 2.12 | ||||||||||||
Mitsubishi Chemical Group Co. | 40,306 | 234 | 2.12 | ||||||||||||
Mitsubishi Corp. | 4,627 | 237 | 2.15 | ||||||||||||
Mitsui & Co. Ltd. | 5,807 | 236 | 2.14 | ||||||||||||
Mitsui Osk Lines Ltd. | 10,151 | 236 | 2.14 | ||||||||||||
Mizuho Financial Group, Inc. | 15,786 | 238 | 2.16 | ||||||||||||
NEC Corp. | 4,831 | 233 | 2.11 | ||||||||||||
NGK Insulators Ltd. | 18,658 | 232 | 2.11 | ||||||||||||
Nippon Express Holdings, Inc. | 4,015 | 237 | 2.16 | ||||||||||||
Nippon Telegraph & Telephone Corp. | 8,103 | 234 | 2.13 | ||||||||||||
Nippon Yusen Kabushiki Kaisha | 10,988 | 235 | 2.13 | ||||||||||||
Nissan Motor Co. Ltd. | 62,173 | 234 | 2.12 | ||||||||||||
Nomura Real Estate Holdings, Inc. | 9,525 | 238 | 2.16 | ||||||||||||
Oji Holdings Corp. | 59,754 | 235 | 2.14 | ||||||||||||
Ono Pharmaceutical Co. Ltd. | 12,059 | 234 | 2.12 | ||||||||||||
Orix Corp. | 13,246 | 241 | 2.18 | ||||||||||||
Otsuka Holdings Co. Ltd. | 6,007 | 233 | 2.12 | ||||||||||||
Ricoh Co. Ltd. | 27,630 | 234 | 2.13 | ||||||||||||
SBI Holdings, Inc. | 12,002 | 234 | 2.12 | ||||||||||||
Seiko Epson Corp. | 14,848 | 234 | 2.12 | ||||||||||||
Seven & I Holdings Co. Ltd. | 5,443 | 228 | 2.07 | ||||||||||||
Shionogi & Co. Ltd. | 5,390 | 234 | 2.12 | ||||||||||||
Softbank Corp. | 21,833 | 232 | 2.11 | ||||||||||||
Subaru Corp. | 12,436 | 233 | 2.11 | ||||||||||||
Sumco Corp. | 16,138 | 227 | 2.06 | ||||||||||||
Sumitomo Corp. | 10,775 | 238 | 2.16 | ||||||||||||
Sumitomo Realty & Development Co. Ltd. | 8,992 | 234 | 2.12 | ||||||||||||
TDK Corp. | 5,985 | 228 | 2.07 | ||||||||||||
Tokyo Gas Co. Ltd. | 10,586 | 236 | 2.14 | ||||||||||||
Toyota Tsusho Corp. | 4,681 | 235 | 2.13 |
The accompanying notes are an integral part of the consolidated financial statements.
27
Morgan Stanley Variable Insurance Fund, Inc.
Semi-Annual Report – June 30, 2023 (unaudited)
Consolidated Portfolio of Investments (cont'd)
Global Strategist Portfolio
The following table represents the equity basket holdings underlying the total return swap with JPM SPX 1500 Growth Index as of June 30, 2023:
Security Description | Shares | Value (000) | Index Weight | ||||||||||||
JPM SPX 1500 Growth Index | |||||||||||||||
Amazon.Com, Inc. | 391 | $ | 51 | 0.51 | % | ||||||||||
Aon PLC — Class A | 155 | 52 | 0.52 | ||||||||||||
Apple, Inc. | 269 | 50 | 0.51 | ||||||||||||
Arthur J Gallagher & Co. | 237 | 50 | 0.51 | ||||||||||||
Celsius Holdings, Inc. | 344 | 51 | 0.51 | ||||||||||||
Cogent Communications Holdings, Inc. | 773 | 50 | 0.50 | ||||||||||||
Copart, Inc. | 560 | 50 | 0.50 | ||||||||||||
Dexcom, Inc. | 401 | 51 | 0.51 | ||||||||||||
Elf Beauty, Inc. | 457 | 52 | 0.52 | ||||||||||||
Fastenal Co. | 891 | 51 | 0.51 | ||||||||||||
Five Below | 258 | 51 | 0.51 | ||||||||||||
Hawaiian Holdings, Inc. | 5,382 | 53 | 0.53 | ||||||||||||
Hci Group, Inc. | 828 | 50 | 0.51 | ||||||||||||
Installed Building Products | 409 | 53 | 0.53 | ||||||||||||
Insulet Corp. | 173 | 50 | 0.51 | ||||||||||||
Intuitive Surgical, Inc. | 156 | 51 | 0.52 | ||||||||||||
Jack Henry & Associates, Inc. | 311 | 51 | 0.51 | ||||||||||||
Lattice Semiconductor Corp. | 598 | 53 | 0.53 | ||||||||||||
Linde PLC | 134 | 50 | 0.50 | ||||||||||||
Marsh & Mclennan Cos | 275 | 50 | 0.51 | ||||||||||||
Mccormick & Co-Non Vtg Shrs | 539 | 50 | 0.51 | ||||||||||||
Mercury General Corp. | 1,582 | 50 | 0.51 | ||||||||||||
Meta Platforms, Inc. — Class A | 183 | 52 | 0.53 | ||||||||||||
Monolithic Power Systems, Inc. | 98 | 50 | 0.50 | ||||||||||||
Monster Beverage Corp. | 844 | 50 | 0.51 | ||||||||||||
Msa Safety, Inc. | 328 | 54 | 0.54 | ||||||||||||
Nike, Inc. — Class B | 457 | 50 | 0.51 | ||||||||||||
Novanta, Inc. | 288 | 51 | 0.51 | ||||||||||||
Nvidia Corp. | 126 | 54 | 0.55 | ||||||||||||
Old Dominion Freight Line | 153 | 51 | 0.51 | ||||||||||||
Payoneer Global, Inc. | 10,860 | 52 | 0.52 | ||||||||||||
Penumbra, Inc. | 154 | 52 | 0.53 | ||||||||||||
Quanta Services, Inc. | 265 | 50 | 0.50 | ||||||||||||
R1 RCM, Inc. | 2,895 | 50 | 0.51 | ||||||||||||
Rockwell Automation, Inc. | 160 | 50 | 0.51 | ||||||||||||
Ross Stores, Inc. | 470 | 51 | 0.51 | ||||||||||||
Saia, Inc. | 159 | 50 | 0.50 | ||||||||||||
Shake Shack, Inc. — Class A | 703 | 53 | 0.53 | ||||||||||||
Sitime Corp. | 443 | 53 | 0.54 | ||||||||||||
SPS Commerce, Inc. | 285 | 52 | 0.53 | ||||||||||||
Take-Two Interactive Software | 365 | 51 | 0.52 | ||||||||||||
TJX Companies, Inc. | 624 | 51 | 0.51 | ||||||||||||
Transdigm Group, Inc. | 60 | 51 | 0.52 | ||||||||||||
Vericel Corp. | 1,434 | 51 | 0.52 | ||||||||||||
Verisk Analytics, Inc. | 221 | 50 | 0.51 | ||||||||||||
Watsco, Inc. | 139 | 50 | 0.51 | ||||||||||||
World Acceptance Corp. | 385 | 51 | 0.51 | ||||||||||||
Xpel, Inc. | 636 | 52 | 0.52 | ||||||||||||
Xylem, Inc. | 445 | 50 | 0.50 | ||||||||||||
Zoetis, Inc. | 295 | 50 | 0.51 |
The following table represents the equity basket holdings underlying the total return swap with JPM SPX 1500 Value Index as of June 30, 2023:
Security Description | Shares | Value (000) | Index Weight | ||||||||||||
JPM SPX 1500 Value Index | |||||||||||||||
Agco Corp. | 395 | $ | 53 | 0.54 | % | ||||||||||
Alpha & Omega Semiconductor | 1,645 | 51 | 0.52 | ||||||||||||
American Airlines Group, Inc. | 3,173 | 52 | 0.53 | ||||||||||||
American Axle & Manufacturing, Inc. | 6,371 | 51 | 0.51 | ||||||||||||
American Woodmark Corp. | 708 | 51 | 0.51 | ||||||||||||
Andersons, Inc. | 1,106 | 50 | 0.50 | ||||||||||||
Arrow Electronics, Inc. | 362 | 50 | 0.50 | ||||||||||||
B&G Foods, Inc. | 3,609 | 51 | 0.52 | ||||||||||||
Baxter International, Inc. | 1,174 | 53 | 0.54 | ||||||||||||
Benchmark Electronics, Inc. | 1,965 | 50 | 0.50 | ||||||||||||
Boise Cascade Co. | 618 | 50 | 0.51 | ||||||||||||
Bunge Ltd. | 532 | 50 | 0.50 | ||||||||||||
Caleres, Inc. | 2,093 | 52 | 0.53 | ||||||||||||
Catalyst Pharmaceuticals, Inc. | 4,093 | 54 | 0.55 | ||||||||||||
CF Industries Holdings, Inc. | 721 | 51 | 0.52 | ||||||||||||
Clearfield, Inc. | 1,088 | 51 | 0.52 | ||||||||||||
Designer Brands, Inc. — Class A | 5,612 | 53 | 0.53 | ||||||||||||
Dynavax Technologies Corp. | 4,110 | 53 | 0.54 | ||||||||||||
Eagle Pharmaceuticals, Inc. | 2,574 | 51 | 0.52 | ||||||||||||
Ebix, Inc. | 2,202 | 50 | 0.51 | ||||||||||||
Enovis Corp. | 844 | 51 | 0.52 | ||||||||||||
Genesco, Inc. | 2,246 | 55 | 0.56 | ||||||||||||
Greenbrier Companies, Inc. | 1,581 | 51 | 0.52 | ||||||||||||
Hewlett Packard Enterprise | 3,072 | 52 | 0.52 | ||||||||||||
Ichor Holdings Ltd. | 1,403 | 51 | 0.51 | ||||||||||||
Interface, Inc. | 6,076 | 51 | 0.52 | ||||||||||||
Iqvia Holdings, Inc. | 235 | 50 | 0.51 | ||||||||||||
KB Home | 1,007 | 52 | 0.53 | ||||||||||||
Lithia Motors, Inc. | 188 | 53 | 0.54 | ||||||||||||
M/I Homes, Inc. | 644 | 53 | 0.54 | ||||||||||||
Manpowergroup, Inc. | 634 | 50 | 0.50 | ||||||||||||
Masterbrand, Inc. | 4,486 | 51 | 0.52 | ||||||||||||
Medifast, Inc. | 592 | 52 | 0.53 | ||||||||||||
Organon & Co. | 2,426 | 51 | 0.51 | ||||||||||||
Par Pacific Holdings, Inc. | 2,040 | 51 | 0.51 | ||||||||||||
Photronics, Inc. | 2,107 | 51 | 0.51 | ||||||||||||
Preferred Bank | 920 | 50 | 0.50 | ||||||||||||
Pr, Inc.ipal Financial Group | 685 | 50 | 0.50 | ||||||||||||
Revvity, Inc. | 436 | 50 | 0.51 | ||||||||||||
Suncoke Energy, Inc. | 6,362 | 51 | 0.52 | ||||||||||||
TD Synnex Corp. | 518 | 50 | 0.50 | ||||||||||||
Terex Corp. | 872 | 50 | 0.50 | ||||||||||||
The Cigna Group | 184 | 51 | 0.51 | ||||||||||||
Timken Co. | 579 | 50 | 0.51 | ||||||||||||
Titan International, Inc. | 4,369 | 51 | 0.52 | ||||||||||||
United States Steel Corp. | 2,136 | 50 | 0.51 | ||||||||||||
Veritiv Corp. | 415 | 51 | 0.52 | ||||||||||||
Viatris, Inc. | 5,099 | 51 | 0.52 | ||||||||||||
Wabash National Corp. | 1,823 | 50 | 0.51 | ||||||||||||
Warrior Met Coal, Inc. | 1,360 | 51 | 0.52 |
The accompanying notes are an integral part of the consolidated financial statements.
28
Morgan Stanley Variable Insurance Fund, Inc.
Semi-Annual Report – June 30, 2023 (unaudited)
Consolidated Portfolio of Investments (cont'd)
Global Strategist Portfolio
The following table represents the equity basket holdings underlying the total return swap with JPM SPX Broad Growth Index as of June 30, 2023:
Security Description | Shares | Value (000) | Index Weight | ||||||||||||
JPM SPX Broad Growth Index | |||||||||||||||
Alnylam Pharmaceuticals, Inc. | 215 | $ | 43 | 0.43 | % | ||||||||||
Amazon.Com, Inc. | 330 | 43 | 0.43 | ||||||||||||
Arthur J Gallagher & Co. | 200 | 43 | 0.43 | ||||||||||||
Burlington Stores, Inc. | 278 | 43 | 0.43 | ||||||||||||
Celsius Holdings, Inc. | 291 | 43 | 0.43 | ||||||||||||
Coinbase Global, Inc. — Class A | 747 | 43 | 0.43 | ||||||||||||
Costar Group, Inc. | 506 | 44 | 0.44 | ||||||||||||
Dexcom, Inc. | 338 | 43 | 0.43 | ||||||||||||
Doordash, Inc. — Class A | 586 | 43 | 0.43 | ||||||||||||
Elf Beauty, Inc. | 386 | 44 | 0.44 | ||||||||||||
Fastenal Co. | 752 | 43 | 0.43 | ||||||||||||
Five Below | 217 | 43 | 0.43 | ||||||||||||
Guardant Health, Inc. | 1,258 | 47 | 0.47 | ||||||||||||
Hawaiian Holdings, Inc. | 4,544 | 45 | 0.45 | ||||||||||||
HCI Group, Inc. | 699 | 42 | 0.43 | ||||||||||||
Heico Corp. | 249 | 43 | 0.43 | ||||||||||||
Installed Building Products | 345 | 45 | 0.45 | ||||||||||||
Insulet Corp. | 146 | 42 | 0.43 | ||||||||||||
Intuitive Surgical, Inc. | 132 | 43 | 0.43 | ||||||||||||
Lattice Semiconductor Corp. | 505 | 45 | 0.45 | ||||||||||||
Lululemon Athletica, Inc. | 115 | 44 | 0.44 | ||||||||||||
Marsh & Mclennan Cos | 232 | 42 | 0.43 | ||||||||||||
Mccormick & Co.-Non Vtg Shrs | 455 | 43 | 0.43 | ||||||||||||
Mongodb, Inc. | 109 | 42 | 0.43 | ||||||||||||
Msa Safety, Inc. | 277 | 46 | 0.46 | ||||||||||||
Nike, Inc. — Class B | 386 | 43 | 0.43 | ||||||||||||
Novanta, Inc. | 244 | 43 | 0.43 | ||||||||||||
Nvidia Corp. | 106 | 46 | 0.46 | ||||||||||||
Old Dominion Freight Line | 129 | 43 | 0.43 | ||||||||||||
Opendoor Technologies, Inc. | 16,459 | 52 | 0.52 | ||||||||||||
Penumbra, Inc. | 130 | 44 | 0.44 | ||||||||||||
Pinterest, Inc. — Class A | 1,712 | 45 | 0.45 | ||||||||||||
Pure Storage, Inc. — Class A | 1,186 | 43 | 0.44 | ||||||||||||
R1 Rcm, Inc. | 2,444 | 42 | 0.43 | ||||||||||||
Rockwell Automation, Inc. | 135 | 43 | 0.43 | ||||||||||||
Ross Stores, Inc. | 397 | 43 | 0.43 | ||||||||||||
Shake Shack, Inc. — Class A | 594 | 45 | 0.45 | ||||||||||||
Siteone Landscape Supply, Inc. | 273 | 43 | 0.44 | ||||||||||||
Sitime Corp. | 374 | 45 | 0.45 | ||||||||||||
Sofi Technologies, Inc. | 5,047 | 43 | 0.43 | ||||||||||||
Southwest Airlines Co. | 1,340 | 46 | 0.46 | ||||||||||||
Tesla, Inc. | 175 | 46 | 0.46 | ||||||||||||
TJX Companies, Inc. | 527 | 43 | 0.43 | ||||||||||||
Transdigm Group, Inc. | 51 | 43 | 0.43 | ||||||||||||
Uber Technologies, Inc. | 1,018 | 44 | 0.44 | ||||||||||||
Verisk Analytics, Inc. | 186 | 42 | 0.43 | ||||||||||||
Wayfair, Inc. — Class A | 774 | 44 | 0.44 | ||||||||||||
World Acceptance Corp. | 325 | 43 | 0.43 | ||||||||||||
Xpel, Inc. | 537 | 44 | 0.44 | ||||||||||||
Zoetis, Inc. | 249 | 42 | 0.43 |
The following table represents the equity basket holdings underlying the total return swap with JPM SPX Broad Value Index as of June 30, 2023:
Security Description | Shares | Value (000) | Index Weight | ||||||||||||
JPM SPX Broad Value Index | |||||||||||||||
Agco Corp. | 334 | $ | 45 | 0.45 | % | ||||||||||
Alpha & Omega Semiconductor | 1,389 | 43 | 0.44 | ||||||||||||
American Airlines Group, Inc. | 2,679 | 44 | 0.44 | ||||||||||||
American Axle & Manufacturing Holdings, Inc. | 5,378 | 43 | 0.43 | ||||||||||||
Andersons, Inc. | 934 | 42 | 0.43 | ||||||||||||
Applovin Corp. — Class A | 1,822 | 43 | 0.44 | ||||||||||||
Arrow Electronics, Inc. | 306 | 42 | 0.43 | ||||||||||||
B&G Foods, Inc. | 3,047 | 43 | 0.44 | ||||||||||||
Baxter International, Inc. | 991 | 45 | 0.46 | ||||||||||||
Boise Cascade Co. | 522 | 42 | 0.43 | ||||||||||||
Caleres, Inc. | 1,767 | 44 | 0.45 | ||||||||||||
Catalyst Pharmaceuticals, Inc. | 3,456 | 45 | 0.46 | ||||||||||||
Cf Industries Holdings, Inc. | 608 | 43 | 0.44 | ||||||||||||
Clearfield, Inc. | 919 | 43 | 0.44 | ||||||||||||
Delta Air Lines, Inc. | 1,048 | 45 | 0.46 | ||||||||||||
Designer Brands, Inc. — Class A | 4,738 | 44 | 0.45 | ||||||||||||
Dropbox, Inc. — Class A | 1,734 | 46 | 0.47 | ||||||||||||
Dynavax Technologies Corp. | 3,470 | 45 | 0.46 | ||||||||||||
Eagle Pharmaceuticals, Inc. | 2,173 | 43 | 0.44 | ||||||||||||
Ebix, Inc. | 1,859 | 43 | 0.43 | ||||||||||||
Elanco Animal Health, Inc. | 4,383 | 44 | 0.44 | ||||||||||||
Enovis Corp. | 713 | 43 | 0.44 | ||||||||||||
Genesco, Inc. | 1,897 | 46 | 0.47 | ||||||||||||
Greenbrier Companies, Inc. | 1,335 | 43 | 0.44 | ||||||||||||
Hewlett Packard Enterprise | 2,594 | 44 | 0.44 | ||||||||||||
Ichor Holdings Ltd. | 1,184 | 43 | 0.43 | ||||||||||||
Interface, Inc. | 5,129 | 43 | 0.44 | ||||||||||||
KB Home | 850 | 44 | 0.45 | ||||||||||||
Kyndryl Holdings, Inc. | 3,321 | 44 | 0.45 | ||||||||||||
Lithia Motors, Inc. | 158 | 45 | 0.45 | ||||||||||||
M/I Homes, Inc. | 544 | 45 | 0.45 | ||||||||||||
Masterbrand, Inc. | 3,788 | 43 | 0.44 | ||||||||||||
Maxlinear, Inc. | 1,430 | 43 | 0.43 | ||||||||||||
Medifast, Inc. | 500 | 44 | 0.45 | ||||||||||||
Organon & Co. | 2,048 | 43 | 0.43 | ||||||||||||
Par Pacific Holdings, Inc. | 1,722 | 43 | 0.43 | ||||||||||||
Photronics, Inc. | 1,779 | 43 | 0.43 | ||||||||||||
Playtika Holding Corp. | 3,781 | 43 | 0.43 | ||||||||||||
Revvity, Inc. | 368 | 42 | 0.43 | ||||||||||||
Rithm Capital Corp. | 4,595 | 42 | 0.43 | ||||||||||||
Sanmina Corp. | 741 | 43 | 0.44 | ||||||||||||
Suncoke Energy, Inc. | 5,371 | 43 | 0.44 | ||||||||||||
Td Synnex Corp. | 438 | 42 | 0.43 | ||||||||||||
The Cigna Group | 155 | 43 | 0.43 | ||||||||||||
Titan International, Inc. | 3,689 | 43 | 0.44 | ||||||||||||
Universal Health Services — Class B | 297 | 45 | 0.45 | ||||||||||||
Veritiv Corp. | 350 | 43 | 0.44 | ||||||||||||
Viatris, Inc. | 4,305 | 43 | 0.44 | ||||||||||||
Wabash National Corp. | 1,539 | 42 | 0.43 | ||||||||||||
Warrior Met Coal, Inc. | 1,148 | 43 | 0.44 |
The accompanying notes are an integral part of the consolidated financial statements.
29
Morgan Stanley Variable Insurance Fund, Inc.
Semi-Annual Report – June 30, 2023 (unaudited)
Consolidated Portfolio of Investments (cont'd)
Global Strategist Portfolio
@ Value/Notional amount is less than $500.
* Cleared swap agreement, the broker is Morgan Stanley & Co. LLC.
CAC Cotation Assistée en Continu.
FTSE Financial Times Stock Exchange.
IBEX Índice Bursátil Español.
ICE Intercontinental Exchange.
MIB Milano Indice di Borsa.
MSCI Morgan Stanley Capital International.
SGX Singapore Exchange Ltd.
TSE Toronto Stock Exchange.
TIIE Interbank Equilibrium Interest Rate.
SOFR Secured Overnight Financing Rate.
REIT Real Estate Investment Trust.
AUD — Australian Dollar
BRL — Brazilian Real
CAD — Canadian Dollar
CNY — Chinese Yuan Renminbi
CZK — Czech Koruna
DKK — Danish Krone
EUR — Euro
GBP — British Pound
HUF — Hungarian Forint
IDR — Indonesian Rupiah
JPY — Japanese Yen
MXN — Mexican Peso
MYR — Malaysian Ringgit
NOK — Norwegian Krone
NZD — New Zealand Dollar
SGD — Singapore Dollar
THB — Thai Baht
USD — United States Dollar
HKD — Hong Kong Dollar
KRW — South Korean Won
Portfolio Composition
Classification | Percentage of Total Investments | ||||||
Fixed Income Securities | 47.9 | % | |||||
Common Stocks | 35.3 | ||||||
Short-Term Investments | 16.8 | ||||||
Total Investments | 100.0 | %** |
** Does not include open long/short futures contracts with a value of approximately $32,240,000 and net unrealized depreciation of approximately $139,000. Does not include open foreign currency forward exchange contracts with net unrealized depreciation of approximately $142,000. Also does not include open swap agreements with net unrealized appreciation of approximately $479,000.
The accompanying notes are an integral part of the consolidated financial statements.
30
Morgan Stanley Variable Insurance Fund, Inc.
Semi-Annual Report – June 30, 2023 (unaudited)
Global Strategist Portfolio
Consolidated Statement of Assets and Liabilities | June 30, 2023 (000) | ||||||
Assets: | |||||||
Investments in Securities of Unaffiliated Issuers, at Value (Cost $67,348) | $ | 67,835 | |||||
Investment in Security of Affiliated Issuer, at Value (Cost $12,892) | 12,892 | ||||||
Total Investments in Securities, at Value (Cost $80,240) | 80,727 | ||||||
Foreign Currency, at Value (Cost $385) | 288 | ||||||
Receivable for Investments Sold | 2,888 | ||||||
Unrealized Appreciation on Swap Agreements | 757 | ||||||
Receivable for Variation Margin on Futures Contracts | 665 | ||||||
Due from Broker | 404 | ||||||
Interest Receivable | 275 | ||||||
Unrealized Appreciation on Foreign Currency Forward Exchange Contracts | 133 | ||||||
Receivable from Affiliate | 51 | ||||||
Receivable for Variation Margin on Swap Agreements | 47 | ||||||
Tax Reclaim Receivable | 43 | ||||||
Dividends Receivable | 29 | ||||||
Receivable for Fund Shares Sold | 8 | ||||||
Due from Adviser | 4 | ||||||
Other Assets | 15 | ||||||
Total Assets | 86,334 | ||||||
Liabilities: | |||||||
Payable for Investments Purchased | 1,515 | ||||||
Due to Broker | 1,470 | ||||||
Unrealized Depreciation on Foreign Currency Forward Exchange Contracts | 275 | ||||||
Unrealized Depreciation on Swap Agreements | 243 | ||||||
Payable to Bank | 159 | ||||||
Payable for Professional Fees | 91 | ||||||
Payable for Servicing Fees | 28 | ||||||
Payable for Fund Shares Redeemed | 27 | ||||||
Payable for Custodian Fees | 25 | ||||||
Payable for Administration Fees | 5 | ||||||
Payable for Transfer Agency Fees | 1 | ||||||
Payable for Distribution Fees — Class II Shares | 1 | ||||||
Deferred Capital Gain Country Tax | 1 | ||||||
Other Liabilities | 174 | ||||||
Total Liabilities | 4,015 | ||||||
NET ASSETS | $ | 82,319 | |||||
Net Assets Consist of: | |||||||
Paid-in-Capital | $ | 86,486 | |||||
Total Accumulated Loss | (4,167 | ) | |||||
Net Assets | $ | 82,319 | |||||
CLASS I: | |||||||
Net Assets | $ | 68,548 | |||||
Net Asset Value, Offering and Redemption Price Per Share Applicable to 8,352,611 Outstanding $0.001 Par Value Shares (Authorized 500,000,000 Shares) | $ | 8.21 | |||||
CLASS II: | |||||||
Net Assets | $ | 13,771 | |||||
Net Asset Value, Offering and Redemption Price Per Share Applicable to 1,693,541 Outstanding $0.001 Par Value Shares (Authorized 500,000,000 Shares) | $ | 8.13 |
The accompanying notes are an integral part of the consolidated financial statements.
31
Morgan Stanley Variable Insurance Fund, Inc.
Semi-Annual Report – June 30, 2023 (unaudited)
Global Strategist Portfolio
Consolidated Statement of Operations | Six Months Ended June 30, 2023 (000) | ||||||
Investment Income: | |||||||
Interest from Securities of Unaffiliated Issuers (Net of $4 of Foreign Taxes Withheld) | $ | 437 | |||||
Dividends from Securities of Unaffiliated Issuers (Net of $39 of Foreign Taxes Withheld) | 397 | ||||||
Dividends from Security of Affiliated Issuer (Note H) | 289 | ||||||
Total Investment Income | 1,123 | ||||||
Expenses: | |||||||
Advisory Fees (Note B) | 304 | ||||||
Custodian Fees (Note G) | 105 | ||||||
Professional Fees | 88 | ||||||
Pricing Fees | 63 | ||||||
Servicing Fees (Note D) | 63 | ||||||
Administration Fees (Note C) | 32 | ||||||
Distribution Fees — Class II Shares (Note E) | 17 | ||||||
Shareholder Reporting Fees | 11 | ||||||
Transfer Agency Fees (Note F) | 6 | ||||||
Directors' Fees and Expenses | 2 | ||||||
Other Expenses | 6 | ||||||
Total Expenses | 697 | ||||||
Waiver of Advisory Fees (Note B) | (304 | ) | |||||
Rebate from Morgan Stanley Affiliate (Note H) | (11 | ) | |||||
Expenses Reimbursed by Adviser | (11 | ) | |||||
Waiver of Distribution Fees — Class II Shares (Note E) | (10 | ) | |||||
Net Expenses | 361 | ||||||
Net Investment Income | 762 | ||||||
Realized Gain (Loss): | |||||||
Investments Sold | (1,597) | ||||||
Foreign Currency Forward Exchange Contracts | (371 | ) | |||||
Foreign Currency Translation | (7 | ) | |||||
Futures Contracts | (279 | ) | |||||
Swap Agreements | 3,121 | ||||||
Net Realized Gain | 867 | ||||||
Change in Unrealized Appreciation (Depreciation): | |||||||
Investments (Net of Increase in Deferred Capital Gain Country Tax of $1) | 5,484 | ||||||
Foreign Currency Forward Exchange Contracts | (283 | ) | |||||
Foreign Currency Translation | (85 | ) | |||||
Futures Contracts | (304 | ) | |||||
Swap Agreements | (664 | ) | |||||
Net Change in Unrealized Appreciation (Depreciation) | 4,148 | ||||||
Net Realized Gain and Change in Unrealized Appreciation (Depreciation) | 5,015 | ||||||
Net Increase in Net Assets Resulting from Operations | $ | 5,777 |
The accompanying notes are an integral part of the consolidated financial statements.
32
Morgan Stanley Variable Insurance Fund, Inc.
Semi-Annual Report – June 30, 2023
Global Strategist Portfolio
Consolidated Statements of Changes in Net Assets | Six Months Ended June 30, 2023 (unaudited) (000) | Year Ended December 31, 2022 (000) | |||||||||
Increase (Decrease) in Net Assets: | |||||||||||
Operations: | |||||||||||
Net Investment Income | $ | 762 | $ | 1,384 | |||||||
Net Realized Gain (Loss) | 867 | (6,319 | ) | ||||||||
Net Change in Unrealized Appreciation (Depreciation) | 4,148 | (12,479 | ) | ||||||||
Net Increase (Decrease) in Net Assets Resulting from Operations | 5,777 | (17,414 | ) | ||||||||
Dividends and Distributions to Shareholders: | |||||||||||
Class I | — | (12,686 | ) | ||||||||
Class II | — | (2,529 | ) | ||||||||
Total Dividends and Distributions to Shareholders | — | (15,215 | ) | ||||||||
Capital Share Transactions:(1) | |||||||||||
Class I: | |||||||||||
Subscribed | 1,520 | 2,407 | |||||||||
Distributions Reinvested | — | 12,686 | |||||||||
Redeemed | (3,841 | ) | (10,441 | ) | |||||||
Class II: | |||||||||||
Subscribed | 487 | 1,579 | |||||||||
Distributions Reinvested | — | 2,529 | |||||||||
Redeemed | (1,244 | ) | (2,000 | ) | |||||||
Net Increase (Decrease) in Net Assets Resulting from Capital Share Transactions | (3,078 | ) | 6,760 | ||||||||
Total Increase (Decrease) in Net Assets | 2,699 | (25,869 | ) | ||||||||
Net Assets: | |||||||||||
Beginning of Period | 79,620 | 105,489 | |||||||||
End of Period | $ | 82,319 | $ | 79,620 | |||||||
(1) Capital Share Transactions: | |||||||||||
Class I: | |||||||||||
Shares Subscribed | 188 | 240 | |||||||||
Shares Issued on Distributions Reinvested | — | 1,680 | |||||||||
Shares Redeemed | (482 | ) | (1,122 | ) | |||||||
Net Increase (Decrease) in Class I Shares Outstanding | (294 | ) | 798 | ||||||||
Class II: | |||||||||||
Shares Subscribed | 62 | 178 | |||||||||
Shares Issued on Distributions Reinvested | — | 338 | |||||||||
Shares Redeemed | (157 | ) | (222 | ) | |||||||
Net Increase (Decrease) in Class II Shares Outstanding | (95 | ) | 294 |
The accompanying notes are an integral part of the consolidated financial statements.
33
Morgan Stanley Variable Insurance Fund, Inc.
Semi-Annual Report – June 30, 2023
Consolidated Financial Highlights
Global Strategist Portfolio
Class I | |||||||||||||||||||||||||||
Six Months Ended June 30, 2023 | Year Ended December 31, | ||||||||||||||||||||||||||
Selected Per Share Data and Ratios | (unaudited) | 2022 | 2021 | 2020 | 2019 | 2018 | |||||||||||||||||||||
Net Asset Value, Beginning of Period | $ | 7.64 | $ | 11.30 | $ | 10.99 | $ | 10.91 | $ | 9.85 | $ | 11.17 | |||||||||||||||
Income (Loss) from Investment Operations: | |||||||||||||||||||||||||||
Net Investment Income(1) | 0.08 | 0.14 | 0.10 | 0.09 | 0.16 | 0.16 | |||||||||||||||||||||
Net Realized and Unrealized Gain (Loss) | 0.49 | (2.07 | ) | 0.81 | 0.95 | 1.56 | (0.86 | ) | |||||||||||||||||||
Total from Investment Operations | 0.57 | (1.93 | ) | 0.91 | 1.04 | 1.72 | (0.70 | ) | |||||||||||||||||||
Distributions from and/or in Excess of: | |||||||||||||||||||||||||||
Net Investment Income | — | — | (0.21 | ) | (0.16 | ) | (0.20 | ) | (0.13 | ) | |||||||||||||||||
Net Realized Gain | — | (1.73 | ) | (0.39 | ) | (0.80 | ) | (0.46 | ) | (0.49 | ) | ||||||||||||||||
Total Distributions | — | (1.73 | ) | (0.60 | ) | (0.96 | ) | (0.66 | ) | (0.62 | ) | ||||||||||||||||
Net Asset Value, End of Period | $ | 8.21 | $ | 7.64 | $ | 11.30 | $ | 10.99 | $ | 10.91 | $ | 9.85 | |||||||||||||||
Total Return(2) | 7.46 | %(3) | (16.94 | )% | 8.37 | % | 10.92 | % | 17.77 | % | (6.50 | )% | |||||||||||||||
Ratios to Average Net Assets and Supplemental Data: | |||||||||||||||||||||||||||
Net Assets, End of Period (Thousands) | $ | 68,548 | $ | 66,072 | $ | 88,704 | $ | 88,563 | $ | 89,575 | $ | 87,675 | |||||||||||||||
Ratio of Expenses Before Expense Limitation | 1.68 | %(4) | 1.77 | % | 1.52 | % | 1.59 | % | 1.49 | % | 1.44 | % | |||||||||||||||
Ratio of Expenses After Expense Limitation | 0.87 | %(4)(5) | 0.88 | %(5) | 0.90 | %(5) | 0.88 | %(5) | 0.88 | %(5) | 0.89 | %(5) | |||||||||||||||
Ratio of Net Investment Income | 1.89 | %(4)(5) | 1.59 | %(5) | 0.89 | %(5) | 0.89 | %(5) | 1.55 | %(5) | 1.48 | %(5) | |||||||||||||||
Ratio of Rebate from Morgan Stanley Affiliates | 0.03 | %(4) | 0.02 | % | 0.00 | %(6) | 0.02 | % | 0.02 | % | 0.01 | % | |||||||||||||||
Portfolio Turnover Rate | 46 | %(3) | 99 | % | 111 | % | 114 | % | 124 | % | 85 | % |
(1) Per share amount is based on average shares outstanding.
(2) Calculated based on the net asset value as of the last business day of the period. Performance does not reflect fees and expenses imposed by your insurance company's separate account. If performance information included the effect of these additional charges, the total return would be lower.
(3) Not annualized.
(4) Annualized.
(5) 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."
(6) Amount is less than 0.005%.
The accompanying notes are an integral part of the consolidated financial statements.
34
Morgan Stanley Variable Insurance Fund, Inc.
Semi-Annual Report – June 30, 2023
Consolidated Financial Highlights
Global Strategist Portfolio
Class II | |||||||||||||||||||||||||||
Six Months Ended June 30, 2023 | Year Ended December 31, | ||||||||||||||||||||||||||
Selected Per Share Data and Ratios | (unaudited) | 2022 | 2021 | 2020 | 2019 | 2018 | |||||||||||||||||||||
Net Asset Value, Beginning of Period | $ | 7.58 | $ | 11.23 | $ | 10.93 | $ | 10.85 | $ | 9.79 | $ | 11.11 | |||||||||||||||
Income (Loss) from Investment Operations: | |||||||||||||||||||||||||||
Net Investment Income(1) | 0.07 | 0.13 | 0.09 | 0.08 | 0.15 | 0.15 | |||||||||||||||||||||
Net Realized and Unrealized Gain (Loss) | 0.48 | (2.05 | ) | 0.80 | 0.94 | 1.56 | (0.86 | ) | |||||||||||||||||||
Total from Investment Operations | 0.55 | (1.92 | ) | 0.89 | 1.02 | 1.71 | (0.71 | ) | |||||||||||||||||||
Distributions from and/or in Excess of: | |||||||||||||||||||||||||||
Net Investment Income | — | — | (0.20 | ) | (0.14 | ) | (0.19 | ) | (0.12 | ) | |||||||||||||||||
Net Realized Gain | — | (1.73 | ) | (0.39 | ) | (0.80 | ) | (0.46 | ) | (0.49 | ) | ||||||||||||||||
Total Distributions | — | (1.73 | ) | (0.59 | ) | (0.94 | ) | (0.65 | ) | (0.61 | ) | ||||||||||||||||
Net Asset Value, End of Period | $ | 8.13 | $ | 7.58 | $ | 11.23 | $ | 10.93 | $ | 10.85 | $ | 9.79 | |||||||||||||||
Total Return(2) | 7.40 | %(3) | (17.07 | )% | 8.22 | % | 10.85 | % | 17.74 | % | (6.65 | )% | |||||||||||||||
Ratios to Average Net Assets and Supplemental Data: | |||||||||||||||||||||||||||
Net Assets, End of Period (Thousands) | $ | 13,771 | $ | 13,548 | $ | 16,785 | $ | 16,204 | $ | 16,589 | $ | 16,906 | |||||||||||||||
Ratio of Expenses Before Expense Limitation | 1.93 | %(4) | 2.02 | % | 1.77 | % | 1.84 | % | 1.74 | % | 1.69 | % | |||||||||||||||
Ratio of Expenses After Expense Limitation | 0.97 | %(4)(5) | 0.98 | %(5) | 1.00 | %(5) | 0.98 | %(5) | 0.98 | %(5) | 0.99 | %(5) | |||||||||||||||
Ratio of Net Investment Income | 1.79 | %(4)(5) | 1.49 | %(5) | 0.79 | %(5) | 0.79 | %(5) | 1.45 | %(5) | 1.38 | %(5) | |||||||||||||||
Ratio of Rebate from Morgan Stanley Affiliates | 0.03 | %(4) | 0.02 | % | 0.00 | %(6) | 0.02 | % | 0.02 | % | 0.01 | % | |||||||||||||||
Portfolio Turnover Rate | 46 | %(3) | 99 | % | 111 | % | 114 | % | 124 | % | 85 | % |
(1) Per share amount is based on average shares outstanding.
(2) Calculated based on the net asset value as of the last business day of the period. Performance does not reflect fees and expenses imposed by your insurance company's separate account. If performance information included the effect of these additional charges, the total return would be lower.
(3) Not annualized.
(4) Annualized.
(5) 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."
(6) Amount is less than 0.005%.
The accompanying notes are an integral part of the consolidated financial statements.
35
Morgan Stanley Variable Insurance Fund, Inc.
Semi-Annual Report – June 30, 2023 (unaudited)
Notes to Consolidated Financial Statements
Morgan Stanley Variable Insurance Fund, Inc. (the "Company") is registered under the Investment Company Act of 1940, as amended (the "Act"), as an open-end management investment company. The Company is comprised of ten separate active, diversified and non-diversified funds (individually referred to as a "Fund," collectively as the "Funds"). The Company applies investment company accounting and reporting guidance Accounting Standards Codification ("ASC") Topic 946.
The accompanying consolidated financial statements relate to the Global Strategist Portfolio. The Fund seeks total return and offers two classes of shares — Class I and Class II. Both classes of shares have identical voting rights (except that shareholders of a Class have exclusive voting rights regarding any matter relating solely to that Class of shares), dividend, liquidation and other rights.
The Company is intended to be a funding vehicle for variable annuity contracts and variable life insurance policies offered by the separate accounts of certain life insurance companies.
A. Significant Accounting Policies: The following significant accounting policies are in conformity with U.S. generally accepted accounting principles ("GAAP"). Such policies are consistently followed by the Company in the preparation of its consolidated financial statements. GAAP may require management to make estimates and assumptions that affect the reported amounts and disclosures in the consolidated financial statements. Actual results may differ from those estimates.
The Fund may invest up to 25% of its total assets in a wholly-owned subsidiary of the Fund organized as a company under the laws of the Cayman Islands, VIF Global Strategist Cayman Portfolio, Ltd. (the "Subsidiary"). The Subsidiary may invest, directly or indirectly through the use of derivatives, in securities, commodities, commodity-related instruments and other investments, primarily futures, swaps and notes. The Fund is the sole shareholder of the Subsidiary, and it is not currently expected that shares of the Subsidiary will be sold or offered to other investors. The consolidated portfolio of investments and consolidated financial statements include the positions and accounts of the Fund and the Subsidiary. All intercompany accounts and transactions of the Fund and the Subsidiary have been eliminated in consolidation and all accounting policies of the Subsidiary are consistent with those of the Fund. As of June 30, 2023, the Subsidiary represented approximately $8,720,000 or approximately 10.59% of the total net assets of the Fund.
Investments in the Subsidiary are expected to provide the Fund with exposure to the commodity markets within the limitations of Subchapter M of the Code and recent Internal
Revenue Service ("IRS") revenue rulings, which require that a mutual fund receive no more than ten percent of its gross income from such investments in order to receive favorable tax treatment as a regulated investment company ("RIC"). Tax treatment of the income received from the Subsidiary may potentially be affected by changes in legislation, regulations or other legally binding authority, which could affect the character, timing and amount of the Fund's taxable income and distributions. If such changes occur, the Fund may need to significantly change its investment strategy and recognize unrealized gains in order to remain qualified for taxation as a RIC, which could adversely affect the Fund.
1. Security Valuation: (1) An equity portfolio security listed or traded on an exchange is valued at its latest reported sales price (or at the exchange official closing price if such exchange reports an official closing price), and if there were no sales on a given day and if there is no official exchange closing price for that day, the security is valued at the mean between the last reported bid and asked prices if such bid and asked prices are available on the relevant exchanges. If only bid prices are available then the latest bid price may be used. Listed equity securities not traded on the valuation date with no reported bid and asked prices available on the exchange are valued at the mean between the current bid and asked prices obtained from one or more reputable brokers/dealers. In cases where a security is traded on more than one exchange, the security is valued on the exchange designated as the primary market; (2) all other equity portfolio securities for which over-the-counter ("OTC") market quotations are readily available are valued at the latest reported sales price (or at the market official closing price if such market reports an official closing price), and if there was no trading in the security on a given day and if there is no official closing price from relevant markets for that day, the security is valued at the mean between the last reported bid and asked prices if such bid and asked prices are available on the relevant markets. An unlisted equity security that does not trade on the valuation date and for which bid and asked prices from the relevant markets are unavailable is valued at the mean between the current bid and asked prices obtained from one or more reputable brokers/dealers; (3) fixed income securities may be valued by an outside pricing service/vendor approved by the Company's Board of Directors (the "Directors"). The pricing service/vendor may employ a pricing model that takes into account, among other things, bids, yield spreads and/or other market data and specific security characteristics. If Morgan Stanley Investment Management Inc. (the "Adviser") or Morgan Stanley
36
Morgan Stanley Variable Insurance Fund, Inc.
Semi-Annual Report – June 30, 2023 (unaudited)
Notes to Consolidated Financial Statements (cont'd)
Investment Management Limited ("MSIM Limited") (the "Sub-Adviser"), each a wholly-owned subsidiary of Morgan Stanley, determines that the price provided by the outside pricing service/vendor does not reflect the security's fair value or is unable to provide a price, prices from brokers/dealers may also be utilized. In these circumstances, the value of the security will be the mean of bid and asked prices obtained from brokers/dealers; (4) futures are valued at the settlement price on the exchange on which they trade or, if a settlement price is unavailable, at the last sale price on the exchange; (5) OTC swaps may be valued by an outside pricing service approved by the Directors or quotes from a broker/dealer. Swaps cleared on a clearinghouse or exchange may be valued using the closing price provided by the clearinghouse or exchange. Total return swaps may also be fair valued using direct accrual/return calculations if prices on the reference asset on the total return leg of the swap are available from a pricing service/vendor for such instrument. In the event that the reference asset on the total return leg of the swap is a benchmark index, then price of such reference asset may be obtained from a pricing service provider or from the benchmark index sponsor; (6) when market quotations are not readily available, as defined by Rule 2a-5 under the Act, including circumstances under which the Adviser or the Sub-Adviser determines that the closing price, last sale price or the mean between the last reported bid and asked prices are not reflective of a security's market value, portfolio securities are valued at their fair value as determined in good faith under procedures approved by and under the general supervision of the Directors. Occasionally, developments affecting the closing prices of securities and other assets may occur between the times at which valuations of such securities are determined (that is, close of the foreign market on which the securities trade) and the close of business of the New York Stock Exchange ("NYSE"). If developments occur during such periods that are expected to materially affect the value of such securities, such valuations may be adjusted to reflect the estimated fair value of such securities as of the close of the NYSE, as determined in good faith by the Directors or by the Adviser using a pricing service and/or procedures approved by the Directors; (7) foreign exchange transactions ("spot contracts") and foreign exchange forward contracts ("forward contracts") are valued daily using an independent pricing vendor at the spot and forward rates, respectively, as of the close of the NYSE; and (8) investments in mutual funds, including the Morgan Stanley Institutional Liquidity Funds, are valued at the net asset value ("NAV") as of the close of each business day.
In connection with Rule 2a-5 of the Act, the Directors have designated the Company's Adviser as its valuation designee. The valuation designee has responsibility for determining fair value and to make the actual calculations pursuant to the fair valuation methodologies previously approved by the Directors. Under procedures approved by the Directors, the Company's Adviser, as valuation designee, has formed a Valuation Committee whose members are approved by the Directors. The Valuation Committee provides administration and oversight of the Company's valuation policies and procedures, which are reviewed at least annually by the Directors. These procedures allow the Company to utilize independent pricing services, quotations from securities and financial instrument dealers and other market sources to determine fair value.
2. Fair Value Measurement: Financial Accounting Standards Board ("FASB") ASC 820, "Fair Value Measurement" ("ASC 820"), defines fair value as the price that would be received to sell an asset or pay to transfer a liability in an orderly transaction between market participants at the measurement date. ASC 820 establishes a three-tier hierarchy to distinguish between (1) inputs that reflect the assumptions market participants would use in valuing an asset or liability developed based on market data obtained from sources independent of the reporting entity (observable inputs) and (2) inputs that reflect the reporting entity's own assumptions about the assumptions market participants would use in valuing an asset or liability developed based on the best information available in the circumstances (unobservable inputs) and to establish classification of fair value measurements for disclosure purposes. Various inputs are used in determining the value of the Fund's investments. The inputs are summarized in the three broad levels listed below:
• Level 1 – unadjusted quoted prices in active markets for identical investments
• Level 2 – other significant observable inputs (including quoted prices for similar investments, interest rates, prepayment speeds, credit risk, etc.)
• Level 3 – significant unobservable inputs including the Fund's own assumptions in determining the fair value of investments. Factors considered in making this determination may include, but are not limited to, information obtained by contacting the issuer, analysts, or the appropriate stock exchange (for exchange-traded securities), analysis of the issuer's financial statements or other available documents and, if necessary, available information concerning other securities in similar circumstances.
37
Morgan Stanley Variable Insurance Fund, Inc.
Semi-Annual Report – June 30, 2023 (unaudited)
Notes to Consolidated Financial Statements (cont'd)
The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities and the determination of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to each security.
The following is a summary of the inputs used to value the Fund's investments as of June 30, 2023:
Investment Type | Level 1 Unadjusted quoted prices (000) | Level 2 Other significant observable inputs (000) | Level 3 Significant unobservable inputs (000) | Total (000) | |||||||||||||||
Assets: | |||||||||||||||||||
Fixed Income Securities | |||||||||||||||||||
Agency Fixed Rate Mortgages | $ | — | $ | 3,214 | $ | — | $ | 3,214 | |||||||||||
Asset-Backed Securities | — | 240 | — | 240 | |||||||||||||||
Commercial Mortgage- Backed Securities | — | 506 | — | 506 | |||||||||||||||
Corporate Bonds | — | 8,728 | — | 8,728 | |||||||||||||||
Mortgages - Other | — | 1,143 | — | 1,143 | |||||||||||||||
Sovereign | — | 21,146 | — | 21,146 | |||||||||||||||
Supranational | — | 604 | — | 604 | |||||||||||||||
U.S. Treasury Securities | — | 3,059 | — | 3,059 | |||||||||||||||
Total Fixed Income Securities | — | 38,640 | — | 38,640 | |||||||||||||||
Common Stocks | |||||||||||||||||||
Aerospace & Defense | 1,462 | 206 | — | 1,668 | |||||||||||||||
Air Freight & Logistics | 92 | 71 | — | 163 | |||||||||||||||
Automobile Components | 36 | 27 | — | 63 | |||||||||||||||
Automobiles | 353 | 214 | — | 567 | |||||||||||||||
Banks | 748 | 1,866 | — | 2,614 | |||||||||||||||
Beverages | 272 | 220 | — | 492 | |||||||||||||||
Biotechnology | 343 | 102 | — | 445 | |||||||||||||||
Broadline Retail | 487 | 83 | — | 570 | |||||||||||||||
Building Products | 87 | 82 | — | 169 | |||||||||||||||
Capital Markets | 484 | 275 | — | 759 | |||||||||||||||
Chemicals | 302 | 286 | — | 588 | |||||||||||||||
Commercial Services & Supplies | 111 | 32 | — | 143 | |||||||||||||||
Communications Equipment | 122 | 30 | — | 152 | |||||||||||||||
Construction & Engineering | 40 | 69 | — | 109 | |||||||||||||||
Construction Materials | 25 | 85 | — | 110 | |||||||||||||||
Consumer Finance | 86 | — | — | 86 | |||||||||||||||
Consumer Staples Distribution & Retail | 349 | 117 | — | 466 | |||||||||||||||
Containers & Packaging | 44 | 14 | — | 58 | |||||||||||||||
Distributors | 22 | 4 | — | 26 | |||||||||||||||
Diversified | 6 | 19 | — | 25 | |||||||||||||||
Diversified Consumer Services | — | 8 | — | 8 | |||||||||||||||
Diversified Telecommunication Services | 116 | 184 | — | 300 |
Investment Type | Level 1 Unadjusted quoted prices (000) | Level 2 Other significant observable inputs (000) | Level 3 Significant unobservable inputs (000) | Total (000) | |||||||||||||||
Common Stocks (cont'd) | |||||||||||||||||||
Electric Utilities | $ | 282 | $ | 194 | $ | — | $ | 476 | |||||||||||
Electrical Equipment | 104 | 191 | — | 295 | |||||||||||||||
Electronic Equipment, Instruments & Components | 102 | 29 | — | 131 | |||||||||||||||
Energy Equipment & Services | 55 | 6 | — | † | 61 | † | |||||||||||||
Entertainment | 251 | 19 | — | 270 | |||||||||||||||
Financial Services | 623 | 142 | — | 765 | |||||||||||||||
Food Products | 168 | 349 | — | 517 | |||||||||||||||
Gas Utilities | 13 | 24 | — | 37 | |||||||||||||||
Ground Transportation | 264 | 8 | — | 272 | |||||||||||||||
Health Care | 33 | — | — | 33 | |||||||||||||||
Health Care Equipment & Supplies | 445 | 181 | — | 626 | |||||||||||||||
Health Care Providers & Services | 437 | 37 | — | 474 | |||||||||||||||
Health Care Technology | 11 | — | — | 11 | |||||||||||||||
Hotel & Resort | 5 | — | — | 5 | |||||||||||||||
Hotels, Restaurants & Leisure | 376 | 213 | — | 589 | |||||||||||||||
Household Durables | 55 | 23 | — | 78 | |||||||||||||||
Household Products | 178 | 74 | — | 252 | |||||||||||||||
Independent Power & Renewable Electricity Producers | 17 | 30 | — | 47 | |||||||||||||||
Independent Power Producers & Energy Traders | — | 1 | — | 1 | |||||||||||||||
Industrial | 47 | 37 | — | 84 | |||||||||||||||
Industrial Conglomerates | 130 | 144 | — | 274 | |||||||||||||||
Information Technology Services | 316 | 27 | — | 343 | |||||||||||||||
Insurance | 447 | 489 | — | 936 | |||||||||||||||
Interactive Media & Services | 765 | 20 | — | 785 | |||||||||||||||
Investment Companies | — | — | † | — | — | † | |||||||||||||
Leisure Products | 7 | — | — | 7 | |||||||||||||||
Life Sciences Tools & Services | 253 | 64 | — | 317 | |||||||||||||||
Machinery | 288 | 241 | — | 529 | |||||||||||||||
Marine Transportation | — | 26 | — | 26 | |||||||||||||||
Media | 144 | 40 | — | 184 | |||||||||||||||
Metals & Mining | 201 | 360 | — | 561 | |||||||||||||||
Multi-Utilities | 117 | 103 | — | 220 | |||||||||||||||
Office | 11 | 10 | — | 21 | |||||||||||||||
Oil, Gas & Consumable Fuels | 864 | 504 | — | 1,368 | |||||||||||||||
Paper & Forest Products | 4 | 33 | — | 37 | |||||||||||||||
Passenger Airlines | 8 | 13 | — | 21 | |||||||||||||||
Personal Care Products | 19 | 225 | — | 244 | |||||||||||||||
Pharmaceuticals | 621 | 972 | — | 1,593 |
38
Morgan Stanley Variable Insurance Fund, Inc.
Semi-Annual Report – June 30, 2023 (unaudited)
Notes to Consolidated Financial Statements (cont'd)
Investment Type | Level 1 Unadjusted quoted prices (000) | Level 2 Other significant observable inputs (000) | Level 3 Significant unobservable inputs (000) | Total (000) | |||||||||||||||
Common Stocks (cont'd) | |||||||||||||||||||
Professional Services | $ | 164 | $ | 155 | $ | — | $ | 319 | |||||||||||
Real Estate Management & Development | 19 | 75 | — | 94 | |||||||||||||||
Residential | 74 | — | — | 74 | |||||||||||||||
Retail | 42 | 31 | — | 73 | |||||||||||||||
Semiconductors & Semiconductor Equipment | 1,180 | 339 | — | 1,519 | |||||||||||||||
Software | 1,588 | 180 | † | — | 1,768 | † | |||||||||||||
Specialized | 153 | — | — | 153 | |||||||||||||||
Specialty Retail | 355 | 48 | — | 403 | |||||||||||||||
Tech Hardware, Storage & Peripherals | 1,097 | 8 | — | 1,105 | |||||||||||||||
Textiles, Apparel & Luxury Goods | 85 | 428 | — | 513 | |||||||||||||||
Tobacco | 95 | 74 | — | 169 | |||||||||||||||
Trading Companies & Distributors | 71 | 56 | — | 127 | |||||||||||||||
Transportation Infrastructure | — | 41 | — | 41 | |||||||||||||||
Water Utilities | 15 | 14 | — | 29 | |||||||||||||||
Wireless Telecommunication Services | 48 | 24 | — | 72 | |||||||||||||||
Total Common Stocks | 18,234 | 10,296 | † | — | † | 28,530 | † | ||||||||||||
Rights | — | 3 | — | 3 | |||||||||||||||
Short-Term Investments | |||||||||||||||||||
Investment Company | 12,892 | — | — | 12,892 | |||||||||||||||
U.S. Treasury Security | — | 662 | — | 662 | |||||||||||||||
Total Short-Term Investments | 12,892 | 662 | — | 13,554 | |||||||||||||||
Foreign Currency Forward Exchange Contracts | — | 133 | — | 133 | |||||||||||||||
Futures Contracts | 120 | — | — | 120 | |||||||||||||||
Interest Rate Swap Agreements | — | 86 | — | 86 | |||||||||||||||
Total Return Swap Agreements | — | 757 | — | 757 | |||||||||||||||
Total Assets | 31,246 | 50,577 | † | — | † | 81,823 | † | ||||||||||||
Liabilities: | |||||||||||||||||||
Foreign Currency Forward Exchange Contracts | — | (275 | ) | — | (275 | ) | |||||||||||||
Futures Contracts | (259 | ) | — | — | (259 | ) | |||||||||||||
Interest Rate Swap Agreements | — | (121 | ) | — | (121 | ) | |||||||||||||
Total Return Swap Agreements | — | (243 | ) | — | (243 | ) | |||||||||||||
Total Liabilities | (259 | ) | (639 | ) | — | (898 | ) | ||||||||||||
Total | $ | 30,987 | $ | 49,938 | † | $ | — | † | $ | 80,925 | † |
† Includes one or more securities valued at zero.
Transfers between investment levels may occur as the markets fluctuate and/or the availability of data used in an investment's valuation changes.
Following is a reconciliation of investments in which significant unobservable inputs (Level 3) were used in determining fair value:
Common Stock (000) | |||||||
Beginning Balance | $ | — | †† | ||||
Purchases | — | ||||||
Sales | — | ||||||
Amortization of discount | — | ||||||
Transfers in | — | ||||||
Transfers out | — | ||||||
Corporate actions | — | ||||||
Change in unrealized appreciation (depreciation) | — | ||||||
Realized gains (losses) | — | ||||||
Ending Balance | $ | — | †† | ||||
Net change in unrealized appreciation (depreciation) from investments still held as of June 30, 2023 | $ | — |
†† Includes a security valued at zero.
3. Foreign Currency Translation and Foreign Investments: The books and records of the Fund are maintained in U.S. dollars. Foreign currency amounts are translated into U.S. dollars as follows:
— investments, other assets and liabilities at the prevailing rate of exchange on the valuation date;
— investment transactions and investment income at the prevailing rates of exchange on the dates of such transactions.
Although the net assets of the Fund are presented at the foreign exchange rates and market values at the close of the period, the Fund does not isolate that portion of the results of operations arising as a result of changes in the foreign exchange rates from the fluctuations arising from changes in the market prices of securities held at period end. Similarly, the Fund does not isolate the effect of changes in foreign exchange rates from the fluctuations arising from changes in the market prices of securities sold during the period. Accordingly, realized and unrealized foreign currency gains (losses) on investments in securities are included in the reported net realized and unrealized gains (losses) on investment transactions and balances. However, pursuant to U.S. federal income tax regulations, gains and losses from certain foreign currency transactions and the foreign currency portion of gains and losses realized on sales and maturities of foreign
39
Morgan Stanley Variable Insurance Fund, Inc.
Semi-Annual Report – June 30, 2023 (unaudited)
Notes to Consolidated Financial Statements (cont'd)
denominated debt securities are treated as ordinary income for U.S. federal income tax purposes.
Net realized gains (losses) on foreign currency transactions represent net foreign exchange gains (losses) from foreign currency forward exchange contracts, disposition of foreign currencies, currency gains (losses) realized between the trade and settlement dates on securities transactions, and the difference between the amount of investment income and foreign withholding taxes recorded on the Fund's books and the U.S. dollar equivalent amounts actually received or paid. The change in unrealized currency gains (losses) on foreign currency transactions for the period is reflected in the Consolidated Statement of Operations.
Foreign security and currency transactions may involve certain considerations and risks not typically associated with those of U.S. dollar denominated transactions as a result of, among other factors, fluctuations of exchange rates in relation to the U.S. dollar, the possibility of lower levels of governmental supervision and regulation of foreign securities markets and the possibility of political or economic instability.
Governmental approval for foreign investments may be required in advance of making an investment under certain circumstances in some countries, and the extent of foreign investments in U.S. companies may be subject to limitation in other countries. Foreign ownership limitations also may be imposed by the charters of individual companies to prevent, among other concerns, violations of foreign investment limitations. As a result, an additional class of shares (identified as "Foreign" in the Consolidated Portfolio of Investments) may be created and offered for investment. The "local" and "foreign shares" market values may differ. In the absence of trading of the foreign shares in such markets, the Fund values the foreign shares at the closing exchange price of the local shares.
4. Derivatives: The Fund may, but is not required to, use derivative instruments for a variety of purposes, including hedging, risk management, portfolio management or 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. Derivatives are financial instruments whose value is based, in part, on the value of an underlying asset, interest rate, index or financial instrument. Prevailing interest rates and volatility levels, among other things, also affect the value of derivative instruments. A derivative instrument often
has risks similar to its underlying asset and may have additional risks, including imperfect correlation between the value of the derivative and the underlying asset, risks of default by the counterparty to certain transactions, magnification of losses incurred due to changes in the market value of the securities, instruments, indices or interest rates to which the derivative instrument relates, risks that the transactions may not be liquid, 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. All of the Fund's holdings, including derivative instruments, are marked-to-market each day with the change in value reflected in unrealized appreciation (depreciation). Upon disposition, a realized gain or loss is recognized.
Certain derivative transactions may give rise to a form of leverage. Leverage magnifies the potential for gain and 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 to satisfy its obligations or may cause the Fund to be more volatile than if the Fund had not been leveraged. Although the Adviser and/or Sub-Adviser seek to use derivatives to further the Fund's investment objectives, there is no assurance that the use of derivatives will achieve this result.
Following is a description of the derivative instruments and techniques that the Fund used during the period and their associated risks:
Foreign Currency Forward Exchange Contracts: In connection with its investments in foreign securities, the Fund also entered into contracts with banks, brokers/dealers to purchase or sell foreign currencies at a future date. A foreign currency forward exchange contract ("currency contract") is a negotiated agreement between the contracting parties to exchange a specified amount of currency at a specified future time at a specified rate. The rate can be higher or lower than the spot rate between the currencies that are the subject of the contract. Currency contracts may be used to protect against uncertainty in the level of future foreign currency exchange rates or to gain or modify exposure to a particular currency. In addition, the Fund may use cross currency hedging or proxy hedging with respect to currencies in which the Fund has or expects to have portfolio or currency exposure. Cross currency hedges involve
40
Morgan Stanley Variable Insurance Fund, Inc.
Semi-Annual Report – June 30, 2023 (unaudited)
Notes to Consolidated Financial Statements (cont'd)
the sale of one currency against the positive exposure to a different currency and may be used for hedging purposes or to establish an active exposure to the exchange rate between any two currencies. To the extent hedged by the use of currency contracts, the precise matching of the currency contract amounts and the value of the securities involved will not generally be possible because the future value of such securities in foreign currencies will change as a consequence of market movements in the value of those securities between the date on which the contract is entered into and the date it matures. Furthermore, such transactions may reduce or preclude the opportunity for gain if the value of the currency should move in the direction opposite to the position taken. There is additional risk to the extent that currency contracts create exposure to currencies in which the Fund's securities are not denominated. Unanticipated changes in currency prices may result in poorer overall performance for the Fund than if it had not entered into such contracts. The use of currency contracts involves the risk of loss from the insolvency or bankruptcy of the counterparty to the contract or the failure of the counterparty to make payments or otherwise comply with the terms of the contract. A currency contract is marked-to-market daily and the change in market value is recorded by the Fund as unrealized gain or loss. The Fund records realized gains (losses) when the currency contract is closed equal to the difference between the value of the currency contract at the time it was opened and the value at the time it was closed.
Futures: A futures contract is a standardized, exchange-traded agreement to buy or sell a specific quantity of an underlying asset, reference rate or index at a specific price at a specific future time. The value of a futures contract tends to increase and decrease in tandem with the value of the underlying instrument. Depending on the terms of the particular contract, futures contracts are settled through either physical delivery of the underlying instrument on the settlement date or by payment of a cash settlement amount on the settlement date. During the period the futures contract is open, payments are received from or made to the broker based upon changes in the value of the contract (the variation margin). A decision as to whether, when and how to use futures contracts involves the exercise of skill and judgment and even a well-conceived futures transaction may be unsuccessful because of market behavior or unexpected events. In addition to the derivatives risks discussed above, the prices of futures contracts can be highly volatile, using futures contracts can lower total return and the potential loss
from futures contracts can exceed the Fund's initial investment in such contracts. No assurance can be given that a liquid market will exist for any particular futures contract at any particular time.
Swaps: The Fund may enter into OTC swap contracts or cleared swap transactions. A swap contract is an agreement between two parties pursuant to which the parties exchange payments at specified dates on the basis of a specified notional amount, with the payments calculated by reference to specified securities, indices, reference rates, currencies or other instruments. Typically swap agreements provide that when the period payment dates for both parties are the same, the payments are made on a net basis (i.e., the two payment streams are netted out, with only the net amount paid by one party to the other). The Fund's obligations or rights under a swap contract entered into on a net basis will generally be equal only to the net amount to be paid or received under the agreement, based on the relative values of the positions held by each party. Cleared swap transactions may help reduce counterparty credit risk. In a cleared swap, the Fund's ultimate counterparty is a clearinghouse rather than a swap dealer, bank or other financial institution. OTC swap agreements are not entered into or traded on exchanges and often there is no central clearing or guaranty function for OTC swaps. These OTC swaps are often subject to credit risk or the risk of default or non-performance by the counterparty. Both OTC and cleared swaps could result in losses if interest rates, foreign currency exchange rates or other factors are not correctly anticipated by the Fund or if the reference index, security or investments do not perform as expected. During the period swap agreements are open, payments are received from or made to the counterparty or clearing-house based on changes in the value of the contract or variation margin, respectively. 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 based on the type of market participant and U.S. Commodities Futures Trading Commission ("CFTC") approval of contracts for central clearing and exchange trading.
The Fund may enter into total return swaps in which one party agrees to make periodic payments to another party based on the change in market value of the assets underlying the contract, which may include, but not be limited to, a specified security, basket of securities or securities
41
Morgan Stanley Variable Insurance Fund, Inc.
Semi-Annual Report – June 30, 2023 (unaudited)
Notes to Consolidated Financial Statements (cont'd)
indices during the specified period, in return for periodic payments based on a fixed or variable interest rate or the total return from other underlying assets. Total return swaps may be used to obtain long or short exposure to a security or market without owning or taking physical custody of such security or investing directly in such market. Total return swaps may effectively add leverage to the Fund's portfolio because, in addition to its total net assets, the Fund would be subject to investment exposure on the notional amount of the swap. Total return swaps are subject to the risk that a counterparty will default on its payment obligations to the Fund thereunder, and conversely, that the Fund will not be able to meet its obligation to the counterparty.
The Fund may enter into interest rate swaps which is an agreement between two parties to exchange their respective commitments to pay or receive interest. Interest rate swaps are generally entered into on a net basis. Interest rate swaps do not involve the delivery of securities, other underlying assets, or principal. Accordingly, the risk of market loss with respect to interest rate swaps is typically limited to the net amount of interest payments that the Fund is contractually obligated to make.
When the Fund has an unrealized loss on a swap agreement, the Fund has instructed the custodian to pledge cash or liquid securities as collateral with a value approximately equal to the amount of the unrealized loss. Collateral pledges are monitored and subsequently adjusted if and when the swap valuations fluctuate. If applicable, cash collateral is included with "Due from (to) Broker" in the Consolidated Statement of Assets and Liabilities.
Upfront payments paid or received by the Fund will be reflected as an asset or liability, respectively, in the Consolidated Statement of Assets and Liabilities.
FASB ASC 815, "Derivatives and Hedging" ("ASC 815"), is intended to improve financial reporting about derivative instruments by requiring enhanced disclosures to enable investors to better understand how and why the Fund uses derivative instruments, how these derivative instruments are accounted for and their effects on the Fund's financial position and results of operations.
The following tables set forth the fair value of the Fund's derivative contracts by primary risk exposure as of June 30, 2023:
Asset Derivatives Consolidated Statement of Assets and Liabilities Location | Primary Risk Exposure | Value (000) | |||||||||||||
Foreign Currency Forward Exchange Contracts | Unrealized Appreciation on Foreign Currency Forward Exchange Contracts | Currency Risk | $ | 133 | |||||||||||
Futures Contracts | Variation Margin on Futures Contracts | Equity Risk | 31 | (a) | |||||||||||
Futures Contracts | Variation Margin on Futures Contracts | Interest Rate Risk | 89 | (a) | |||||||||||
Swap Agreements | Variation Margin on Swap Agreements | Interest Rate Risk | 86 | (a) | |||||||||||
Swap Agreements | Unrealized Appreciation on Swap Agreements | Equity Risk | 757 | ||||||||||||
Total | $ | 1,096 | |||||||||||||
Liability Derivatives Consolidated Statement of Assets and Liabilities Location | Primary Risk Exposure | Value (000) | |||||||||||||
Foreign Currency Forward Exchange Contracts | Unrealized Depreciation on Foreign Currency Forward Exchange Contracts | Currency Risk | $ | (275 | ) | ||||||||||
Futures Contracts | Variation Margin on Futures Contracts | Commodity Risk | (45 | )(a) | |||||||||||
Futures Contracts | Variation Margin on Futures Contracts | Equity Risk | (91 | )(a) | |||||||||||
Futures Contracts | Variation Margin on Futures Contracts | Interest Rate Risk | (123 | )(a) | |||||||||||
Swap Agreements | Variation Margin on Swap Agreements | Interest Rate Risk | (121 | )(a) | |||||||||||
Swap Agreements | Unrealized Depreciation on Swap Agreements | Equity Risk | (243 | ) | |||||||||||
Total | $ | (898 | ) |
(a) This amount represents the cumulative appreciation (depreciation) as reported in the Consolidated Portfolio of Investments. The Consolidated Statement of Assets and Liabilities only reflects the current day's net variation margin.
42
Morgan Stanley Variable Insurance Fund, Inc.
Semi-Annual Report – June 30, 2023 (unaudited)
Notes to Consolidated Financial Statements (cont'd)
The following tables set forth by primary risk exposure the Fund's realized gains (losses) and change in unrealized appreciation (depreciation) by type of derivative contract for the six months ended June 30, 2023 in accordance with ASC 815:
Realized Gain (Loss) | |||||||||||
Primary Risk Exposure | Derivative Type | Value (000) | |||||||||
Currency Risk | Foreign Currency Forward Exchange Contracts | $(371) | |||||||||
Commodity Risk | Futures Contracts | (18 | ) | ||||||||
Equity Risk | Futures Contracts | (22 | ) | ||||||||
Interest Rate Risk | Futures Contracts | (207 | ) | ||||||||
Currency Risk | Futures Contracts | (32 | ) | ||||||||
Equity Risk | Swap Agreements | 3,825 | |||||||||
Interest Rate Risk | Swap Agreements | (704 | ) | ||||||||
Total | $ | 2,471 | |||||||||
Change in Unrealized Appreciation (Depreciation) | |||||||||||
Primary Risk Exposure | Derivative Type | Value (000) | |||||||||
Currency Risk | Foreign Currency Forward Exchange Contracts | $(283) | |||||||||
Commodity Risk | Futures Contracts | (49 | ) | ||||||||
Equity Risk | Futures Contracts | (93 | ) | ||||||||
Interest Rate Risk | Futures Contracts | (162 | ) | ||||||||
Equity Risk | Swap Agreements | (772 | ) | ||||||||
Interest Rate Risk | Swap Agreements | 108 | |||||||||
Total | $ | (1,251 | ) |
At June 30, 2023, the Fund's derivative assets and liabilities are as follows:
Gross Amounts of Assets and Liabilities Presented in the Consolidated Statement of Assets and Liabilities | |||||||||||
Derivatives(a) | Assets(b) (000) | Liabilities(b) (000) | |||||||||
Foreign Currency Forward Exchange Contracts | $ | 133 | $ | (275 | ) | ||||||
Swaps | 757 | (243 | ) | ||||||||
Total | $ | 890 | $ | (518 | ) |
(a) Excludes exchange-traded derivatives.
(b) Absent an event of default or early termination, OTC derivative assets and liabilities are presented gross and not offset in the Consolidated Statement of Assets and Liabilities.
The Fund typically enters into International Swaps and Derivatives Association, Inc. Master Agreements ("ISDA Master Agreements") or similar master agreements (collectively, "Master Agreements") with its contract counterparties for certain OTC derivatives in order to, among other things, reduce its credit risk to counterparties. ISDA Master Agreements include provisions for general obligations, representations, collateral and events of default or termination. Under an ISDA Master Agreement, the Fund typically may offset with the counterparty certain OTC derivative financial instruments' payables and/or receivables with collateral held and/or posted and
create one single net payment (close-out netting) in the event of default, termination and/or potential deterioration in the credit quality of the counterparty. Various Master Agreements govern the terms of certain transactions with counterparties, including transactions such as swap, forward, repurchase and reverse repurchase agreements. These Master Agreements typically attempt to reduce the counterparty risk associated with such transactions by specifying credit protection mechanisms and providing standardization that improves legal certainty. Cross-termination provisions under Master Agreements typically provide that a default in connection with one transaction between the Fund and a counterparty gives the non-defaulting party the right to terminate any other transactions in place with the defaulting party to create one single net payment due to/due from the defaulting party and may be a feature in certain Master Agreements. In the event the Fund exercises its right to terminate a Master Agreement after a counterparty experiences a termination event as defined in the Master Agreement, the return of collateral with market value in excess of the Fund's net liability may be delayed or denied.
The following tables present derivative financial instruments that are subject to enforceable netting arrangements as of June 30, 2023:
Gross Amounts Not Offset in the Consolidated Statement of Assets and Liabilities | |||||||||||||||||||
Counterparty | Gross Asset Derivatives Presented in the Consolidated Statement of Assets and Liabilities (000) | Financial Instrument (000) | Collateral Received(a) (000) | Net Amount (not less than $0) (000) | |||||||||||||||
Bank of America NA | $ | 5 | $ | (— | @) | $ | — | $ | 5 | ||||||||||
Barclays Bank PLC | 44 | (18 | ) | — | 26 | ||||||||||||||
BNP Paribas SA | 369 | (158 | ) | (211 | ) | 0 | |||||||||||||
Citibank NA | 3 | (3 | ) | — | 0 | ||||||||||||||
Goldman Sachs International | 304 | (29 | ) | (275 | ) | 0 | |||||||||||||
JPMorgan Chase Bank NA | 100 | (98 | ) | — | 2 | ||||||||||||||
UBS AG | 65 | (28 | ) | — | 37 | ||||||||||||||
Total | $ | 890 | $ | (334 | ) | $ | (486 | ) | $ | 70 |
43
Morgan Stanley Variable Insurance Fund, Inc.
Semi-Annual Report – June 30, 2023 (unaudited)
Notes to Consolidated Financial Statements (cont'd)
Gross Amounts Not Offset in the Consolidated Statement of Assets and Liabilities | |||||||||||||||||||
Counterparty | Gross Liability Derivatives Presented in the Consolidated Statement of Assets and Liabilities (000) | Financial Instrument (000) | Collateral Pledged(a) (000) | Net Amount (not less than $0) (000) | |||||||||||||||
Bank of America NA | $ | — | @ | $ | (— | @) | $ | — | $ | 0 | |||||||||
Barclays Bank PLC | 20 | (18 | ) | — | 2 | ||||||||||||||
BNP Paribas SA | 177 | (158 | ) | — | 19 | ||||||||||||||
Citibank NA | 4 | (3 | ) | — | 1 | ||||||||||||||
Credit Agricole CIB | 2 | — | — | 2 | |||||||||||||||
Goldman Sachs International | 124 | (29 | ) | (95 | ) | 0 | |||||||||||||
HSBC Bank PLC | 1 | — | — | 1 | |||||||||||||||
JPMorgan Chase Bank NA | 153 | (98 | ) | — | 55 | ||||||||||||||
State Street Bank and Trust Co. | — | @ | — | — | — | @ | |||||||||||||
UBS AG | 28 | (28 | ) | — | 0 | ||||||||||||||
Westpac Banking Corp. | 9 | — | — | 9 | |||||||||||||||
Total | $ | 518 | $ | (334 | ) | $ | (95 | ) | $ | 89 |
@ Value is less than $500.
(a) In some instances, the actual collateral received/pledged may be more than the amount shown here due to overcollateralization.
For the six months ended June 30, 2023, the approximate average monthly amount outstanding for each derivative type is as follows:
Foreign Currency Forward Exchange Contracts: | |||||||
Average monthly principal amount | $ | 34,652,000 | |||||
Futures Contracts: | |||||||
Average monthly notional value | $ | 37,714,000 | |||||
Swap Agreements: | |||||||
Average monthly notional amount | $ | 22,644,000 |
5. When-Issued/Delayed Delivery Securities: The Fund purchases and sells when-issued and delayed delivery securities. Securities purchased on a when-issued or delayed delivery basis are purchased for delivery beyond the normal settlement date at a stated price and yield, and no income accrues to the Fund on such securities prior to delivery date. Payment and delivery for when-issued and delayed delivery securities can take place a month or more after the date of the transaction. When the Fund enters into a purchase transaction on a when-issued or delayed delivery basis, securities are available for collateral in an amount at least equal in value to the
Fund's commitments to purchase such securities. Purchasing securities on a when-issued or delayed delivery basis may involve a risk that the market price at the time of delivery may be lower than the agreed upon purchase price, in which case there could be an unrealized loss at the time of delivery. Purchasing investments on a when-issued or delayed delivery basis may be considered a form of leverage which may increase the impact that gains (losses) may have on the Fund.
6. Indemnifications: The Company enters into contracts that contain a variety of indemnifications. The Company's maximum exposure under these arrangements is unknown. However, the Company has not had prior claims or losses pursuant to these contracts and expects the risk of loss to be remote.
7. Security Transactions, Income and Expenses: Security transactions are accounted for on the trade date (date the order to buy or sell is executed). Realized gains and losses on the sale of investment securities are determined on the specific identified cost method. Dividend income and other distributions are recorded on the ex-dividend date (except for certain foreign dividends which may be recorded as soon as the Fund is informed of such dividends) net of applicable withholding taxes. Non-cash dividends received in the form of stock, if any, are recognized on the ex-dividend date and recorded as non-cash dividend income at fair value. Interest income is recognized on the accrual basis (except where collection is in doubt) net of applicable withholding taxes. Discounts are accreted and premiums are amortized over the life of the respective securities. Most expenses of the Company can be directly attributed to a particular Fund. Expenses which cannot be directly attributed are apportioned among the Funds based upon relative net assets or other appropriate methods. Income, expenses (other than class specific expenses) and realized and unrealized gains or losses are allocated to each class of shares based upon their relative net assets.
Settlement and registration of foreign securities transactions may be subject to significant risks not normally associated with investments in the United States. In certain markets, ownership of shares is defined according to entries in the issuer's share register. It is possible that a Fund holding these securities could lose its share registration through fraud, negligence or even mere oversight. In addition, shares being delivered for sales and cash being paid for purchases may be delivered before the exchange is complete. This may subject the Fund to further risk of
44
Morgan Stanley Variable Insurance Fund, Inc.
Semi-Annual Report – June 30, 2023 (unaudited)
Notes to Consolidated Financial Statements (cont'd)
loss in the event of a failure to complete the transaction by the counterparty.
8. Dividends and Distributions to Shareholders: Dividends and distributions to shareholders are recorded on the ex-dividend date. Dividends from net investment income, if any, are declared and paid annually. Net realized capital gains, if any, are distributed at least annually.
B. Advisory/Sub-Advisory Fees: The Adviser, a wholly-owned subsidiary of Morgan Stanley, provides the Fund with advisory services under the terms of an Investment Advisory Agreement, paid quarterly, at the annual rate based on the daily net assets as follows:
First $500 | Next $500 | Over $1 | |||||||||
0.75% | 0.70% | 0.65% |
For the six months ended June 30, 2023, the advisory fee rate (net of waiver/rebate) was equivalent to an annual effective rate of 0.00% of the Fund's average daily net assets.
The Adviser has agreed to reduce its advisory fee and/or reimburse the Fund so that total annual Fund operating expenses, excluding certain investment related expenses, taxes, interest and other extraordinary expenses (including litigation), will not exceed 0.90% for Class I shares and 1.00% for Class II shares. The fee waivers and/or expense reimbursements will continue for at least one year from the date of the Fund's prospectus or until such time as the Directors act to discontinue all or a portion of such waivers and/or reimbursements when they deem such action is appropriate. For the six months ended June 30, 2023, approximately $304,000 of advisory fees were waived and approximately $11,000 of other expenses were reimbursed by the Adviser pursuant to this arrangement.
The Adviser has entered into a Sub-Advisory Agreement with the Sub-Adviser, a wholly-owned subsidiary of Morgan Stanley. The Sub-Adviser provides the Fund with advisory services subject to the overall supervision of the Adviser and the Fund'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 Fund.
The Adviser provides investment advisory services to the Subsidiary pursuant to the Subsidiary Investment Management Agreement (the "Agreement"). Under the Agreement, the Subsidiary will pay the Adviser at the end of each fiscal quarter, calculated by applying a quarterly rate, based on the annual rate of 0.05%, to the average daily net assets of the Subsidiary.
The Adviser has agreed to waive its advisory fees by the amount of advisory fees it receives from the Subsidiary.
C. Administration Fees: The Adviser also serves as Administrator to the Company and provides administrative services pursuant to an Administration Agreement for an annual fee, accrued daily and paid monthly, of 0.08% of the Fund's average daily net assets.
Under a Sub-Administration Agreement between the Administrator and State Street Bank and Trust Company ("State Street"), State Street provides certain administrative services to the Company. For such services, the Administrator pays State Street a portion of the fee the Administrator receives from the Fund.
D. Servicing Fees: The Company accrues daily and pays quarterly a servicing fee of up to 0.17% of the average daily value of shares of the Fund held in an insurance company's account. Certain insurance companies have entered into a servicing agreement with the Company to provide administrative and other contract-owner related services on behalf of the Fund.
E. Distribution Fees: Morgan Stanley Distribution, Inc. ("MSDI" or the "Distributor"), a wholly-owned subsidiary of the Adviser and an indirect subsidiary of Morgan Stanley, serves as the Distributor of the Fund and provides the Fund's Class II shareholders with distribution services pursuant to a Distribution Plan (the "Plan") in accordance with Rule 12b-1 under the Act. Under the Plan, the Fund is authorized to pay the Distributor a distribution fee, which is accrued daily and paid monthly, at an annual rate of 0.25% of the Fund's average daily net assets attributable to Class II shares. The Distributor has agreed to waive 0.15% of the 0.25% distribution fee that it may receive. This fee waiver will continue for at least one year from the date of the Fund's prospectus or until such time as the Directors act to discontinue all or a portion of such waiver when they deem such action is appropriate. For the six months ended June 30, 2023, this waiver amounted to approximately $10,000.
F. Dividend Disbursing and Transfer/Co-Transfer Agent: The Company's dividend disbursing and transfer agent is SS&C Global Investor & Distribution Solutions, Inc. ("SS&C GIDS, Inc."). Pursuant to a Transfer Agency Agreement, the Company pays SS&C GIDS, Inc. a fee based on the number of classes, accounts and transactions relating to the Funds of the Company.
Eaton Vance Management ("EVM"), an affiliate of Morgan Stanley, provides co-transfer agency and related services to the Fund pursuant to a Co-Transfer Agency Services Agreement. For the six months ended June 30, 2023, co-transfer agency fees and expenses incurred to EVM, included in "Transfer Agency Fees" in the Consolidated Statement of Operations, amounted to less than $500.
45
Morgan Stanley Variable Insurance Fund, Inc.
Semi-Annual Report – June 30, 2023 (unaudited)
Notes to Consolidated Financial Statements (cont'd)
G. Custodian Fees: State Street (the "Custodian") also serves as Custodian for the Company in accordance with a Custodian Agreement. The Custodian holds cash, securities and other assets of the Company as required by the Act. Custody fees are payable monthly based on assets held in custody, investment purchases and sales activity and account maintenance fees, plus reimbursement for certain out-of-pocket expenses.
H. Security Transactions and Transactions with Affiliates: For the six months ended June 30, 2023, purchases and sales of investment securities for the Fund, other than long-term U.S. Government securities and short-term investments were approximately $15,116,000 and $18,406,000, respectively. For the six months ended June 30, 2023, purchases and sales of long-term U.S. Government securities were approximately $15,109,000 and $14,938,000, respectively.
The Fund invests in the Institutional Class of the Morgan Stanley Institutional Liquidity Funds — Government Portfolio (the "Liquidity Funds"), an open-end management investment company managed by the Adviser. Advisory fees paid by the Fund are reduced by an amount equal to its pro-rata share of the advisory and administration fees paid by the Fund due to its investment in the Liquidity Funds. For the six months ended June 30, 2023, advisory fees paid were reduced by approximately $11,000 relating to the Fund's investment in the Liquidity Funds.
A summary of the Fund's transactions in shares of affiliated investments during the six months ended June 30, 2023 is as follows:
Affiliated Investment Company | Value December 31, 2022 (000) | Purchases at Cost (000) | Proceeds from Sales (000) | Dividend Income (000) | |||||||||||||||
Liquidity Funds | $ | 12,170 | $ | 21,398 | $ | 20,676 | $ | 289 |
Affiliated Investment Company (cont'd) | Realized Gain (Loss) (000) | Change in Unrealized Appreciation (Depreciation) (000) | Value June 30, 2023 (000) | ||||||||||||
Liquidity Funds | $ | — | $ | — | $ | 12,892 |
The Fund is permitted to purchase and sell securities ("cross-trade") from and to other Morgan Stanley funds as well as other funds and client accounts for which the Adviser or an affiliate of the Adviser serves as investment adviser, pursuant to procedures approved by the Directors in compliance with Rule 17a-7 under the Act (the "Rule"). Each cross-trade is executed at the current market price in compliance with provisions of the Rule. For the six months ended June 30, 2023, the Fund did not engage in any cross-trade transactions.
The Fund has an unfunded Deferred Compensation Plan (the "Compensation Plan"), which allows each independent Director to defer payment of all, or a portion, of the fees he or she receives for serving on the Board of Directors. Each eligible Director generally may elect to have the deferred amounts credited with a return equal to the total return on one or more of the Morgan Stanley funds that are offered as investment options under the Compensation Plan. Appreciation/depreciation and distributions received from these investments are recorded with an offsetting increase/decrease in the deferred compensation obligation and do not affect the NAV of the Fund.
I. Federal Income Taxes: It is the Fund's intention to continue to qualify as a RIC and distribute all of its taxable and tax-exempt income. Accordingly, no provision for federal income taxes is required in the consolidated financial statements.
The Fund may be subject to taxes imposed by countries in which it invests. Such taxes are generally based on income and/or capital gains earned or repatriated. Taxes are accrued based on net investment income, net realized gains and net unrealized appreciation as such income and/or gains are earned. Taxes may also be based on transactions in foreign currency and are accrued based on the value of investments denominated in such currency.
FASB ASC 740-10, "Income Taxes — Overall", sets forth a minimum threshold for consolidated financial statement recognition of the benefit of a tax position taken or expected to be taken in a tax return. Management has concluded there are no significant uncertain tax positions that would require recognition in the consolidated financial statements. If applicable, the Fund recognizes interest accrued related to unrecognized tax benefits in "Interest Expense" and penalties in "Other Expenses" in the Consolidated Statement of Operations. The Fund files tax returns with the U.S. Internal Revenue Service, New York and various states. Generally, each of the tax years in the four-year period ended December 31, 2022 remains subject to examination by taxing authorities.
The tax character of distributions paid may differ from the character of distributions shown for GAAP purposes due to short-term capital gains being treated as ordinary income for tax purposes. The tax character of distributions paid during fiscal years 2022 and 2021 was as follows:
2022 Distributions Paid From: | 2021 Distributions Paid From: | ||||||||||||||
Ordinary Income (000) | Long-Term Capital Gain (000) | Ordinary Income (000) | Long-Term Capital Gain (000) | ||||||||||||
$ | 5,286 | $ | 9,929 | $ | 4,054 | $ | 1,510 |
46
Morgan Stanley Variable Insurance Fund, Inc.
Semi-Annual Report – June 30, 2023 (unaudited)
Notes to Consolidated Financial Statements (cont'd)
The amount and character of income and gains to be distributed are determined in accordance with income tax regulations which may differ from GAAP. These book/tax differences are either considered temporary or permanent in nature.
Temporary differences are attributable to differing book and tax treatments for the timing of the recognition of gains (losses) on certain investment transactions and the timing of the deductibility of certain expenses.
The Fund had no permanent differences causing reclassifications among the components of net assets for the year ended December 31, 2022.
At December 31, 2022, the components of distributable earnings for the Fund on a tax basis were as follows:
Undistributed | Undistributed | ||||||
$1,337 | $— |
At December 31, 2022, the Fund had available for federal income tax purposes unused short-term capital losses of approximately $4,874,000 that do not have an expiration date.
To the extent that capital loss carryforwards are used to offset any future capital gains realized, no capital gains tax liability will be incurred by the Fund for gains realized and not distributed. To the extent that capital gains are offset, such gains will not be distributed to the shareholders.
J. Credit Facility: The Company and other Morgan Stanley funds participated in a $300,000,000 committed, unsecured revolving line of credit facility (the "Facility") with State Street. Effective April 17, 2023, the committed line amount increased to $500,000,000. This Facility is to be used for temporary emergency purposes or funding of shareholder redemption requests. The interest rate for any funds drawn will be based on the federal funds rate or overnight bank funding rate plus a spread. The Facility also has a commitment fee of 0.25% per annum based on the unused portion of the Facility, which is allocated among participating funds based on relative net assets. During the six months ended June 30, 2023, the Fund did not have any borrowings under the Facility.
K. Other: At June 30, 2023, the Fund had record owners of 10% or greater. Investment activities of these shareholders could have a material impact on the Fund. The aggregate percentage of such owners was 80.4%.
L. Market Risk: An investment in the Fund is based on the values of the Fund's investments, which may change due to economic and other events that affect markets generally, as well as those that affect particular regions, countries, industries, companies or governments. Social, political, economic
and other conditions and events, such as war, natural disasters, health emergencies (e.g., epidemics and pandemics), terrorism, conflicts, social unrest, recessions, inflation, rapid interest rate changes and supply chain disruptions, may occur and could significantly impact issuers, industries, governments and other systems, including the financial markets and global economy. It is difficult to predict when events affecting the U.S. or global financial markets and economies may occur, the effects that such events may have and the duration of those effects (which may last for extended periods). These events may be sudden and significant and may negatively impact broad segments of businesses and populations and have a significant and rapid negative impact on the performance of and/or income or yield from the Fund's investments and exacerbate pre-existing risks to the Fund. 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 ultimate impact of public health emergencies or other adverse economic or market developments and the extent to which the associated conditions impact the Fund and its investments will also depend on other future developments, which are highly uncertain, difficult to accurately predict and subject to change at any time. The financial performance of the Fund's investments (and, in turn, the Fund's investment results) as well as their liquidity may be adversely affected because of these and similar types of factors and developments.
M. LIBOR Discontinuance or Unavailability Risk: The London Interbank Offering Rate ("LIBOR") was a leading floating rate benchmark used in loans, notes, derivatives and other instruments or investments. As a result of benchmark reforms, publication of most LIBOR settings has ceased. Some LIBOR settings continue to be published but only on a temporary, synthetic and non-representative basis. Regulated entities have generally ceased entering into new LIBOR contracts in connection with regulatory guidance or prohibitions. Public and private sector actors have worked to establish new or alternative reference rates to be used in place of LIBOR. There is no assurance that the composition or characteristics of any such new or alternative reference rate will be similar to or produce the same value or economic equivalence as LIBOR or that it will have the same volume or liquidity as did LIBOR , which may affect the value or liquidity or return on certain of the Fund's investments and result in costs incurred in connection with closing out positions and entering into new trades.
Neither the effect of the LIBOR transition process nor its ultimate success can yet be known. The transition process might lead to increased volatility and illiquidity in markets for, and reduce the effectiveness of hedges placed against, instruments
47
Morgan Stanley Variable Insurance Fund, Inc.
Semi-Annual Report – June 30, 2023 (unaudited)
Notes to Consolidated Financial Statements (cont'd)
whose terms currently include (or previously included) LIBOR. While some LIBOR-based instruments contemplated a scenario where LIBOR is no longer available by providing for an alternative rate-setting methodology, there may be significant uncertainty regarding the effectiveness of any such alternative methodologies to replicate or replace LIBOR. Some of the Fund's investments may be so-called "tough legacy" LIBOR instruments which may not have effective alternative rate-setting provisions or may involve counterparties who are unwilling to add or exercise rights under alternative rate-setting provisions in such instruments. On March 15, 2022, the Adjustable Interest Rate (LIBOR) Act was signed into law. This law provides a statutory fallback mechanism on a nationwide basis to replace U.S. Dollar LIBOR with a benchmark rate that is selected by the Board of Governors of the Federal Reserve System based on the Secured Overnight Financing Rate ("SOFR") for tough legacy contracts. On February 27, 2023, the final rule in connection with this law became effective, establishing benchmark replacements based on SOFR and Term SOFR (a forward-looking measurement of market expectations of SOFR implied from certain derivatives markets) for applicable tough legacy contracts governed by U.S. law. In addition, the FCA has announced that it will require the publication of the one-month, three-month and six-month U.S. Dollar LIBOR settings on the basis of a changed methodology (known as "synthetic LIBOR"), after June 30, 2023 through at least September 30, 2024, addressing non-U.S. law governed U.S. Dollar LIBOR instruments, but this synthetic LIBOR will be designated by the FCA as unrepresentative of the underlying market that it seeks to measure and will be solely available for use in legacy transactions. The transition of investments from LIBOR to a new or replacement rate as a result of amendment, application of existing fallbacks, statutory requirements, the application of synthetic LIBOR or otherwise may also result in a reduction in the value of certain instruments held by the Fund or a reduction in the effectiveness of related Fund transactions such as hedges. In addition, a liquid market for newly-issued instruments that use a reference rate other than LIBOR is still developing. There may also be challenges for the Fund to enter into hedging transactions against such newly-issued instruments until a market for such hedging transactions more fully develops. All of the aforementioned may adversely affect the Fund's investments (including their volatility, value and liquidity) and, as a result, the performance or NAV.
48
Morgan Stanley Variable Insurance Fund, Inc.
Semi-Annual Report – June 30, 2023 (unaudited)
Investment Advisory Agreement Approval
Nature, Extent and Quality of Services
The Board reviewed and considered the nature and extent of the investment advisory services provided by the Adviser under the advisory agreement, including portfolio management, investment research and equity and fixed income securities trading. The Board reviewed similar information and factors regarding the Sub-Adviser, to the extent applicable. The Board also reviewed and considered the nature and extent of the non-advisory, administrative services provided by the Administrator under the administration agreement, including accounting, operations, clerical, bookkeeping, compliance, business management and planning, legal services and the provision of supplies, office space and utilities at the Adviser's expense. The Board also considered the Adviser's investment in personnel and infrastructure that benefits the Fund. (The Adviser, Sub-Adviser and Administrator together are referred to as the "Adviser" and the advisory, sub-advisory and administration agreements together are referred to as the "Management Agreement.") The Board also considered that the Adviser serves a variety of other investment advisory clients and has experience overseeing service providers. The Board also compared the nature of the services provided by the Adviser with similar services provided by non-affiliated advisers as prepared by Broadridge Financial Solutions, Inc. ("Broadridge").
The Board reviewed and considered the qualifications of the portfolio managers, the senior administrative managers and other key personnel of the Adviser who provide the advisory and administrative services to the Fund. The Board determined that the Adviser's portfolio managers and key personnel are well qualified by education and/or training and experience to perform the services in an efficient and professional manner. The Board concluded that the nature and extent of the advisory and administrative services provided were necessary and appropriate for the conduct of the business and investment activities of the Fund and supported its decision to approve the Management Agreement.
Performance, Fees and Expenses of the Fund
The Board reviewed the performance, fees and expenses of the Fund compared to its peers, as prepared by Broadridge, and to appropriate benchmarks where applicable. The Board discussed with the Adviser the performance goals and the actual results achieved in managing the Fund. When considering a fund's performance, the Board and the Adviser place emphasis on trends and longer-term returns (focusing on one-year, three-year and five-year performance, as of December 31, 2022, or since inception, as applicable). When a fund underperforms its benchmark and/or its peer group average, the Board and the Adviser discuss the causes of such underperformance and, where necessary, they discuss specific changes to investment strategy or investment personnel. The Board noted that the Fund's performance was below its peer group average for the one-, three- and five-year periods. The Board discussed with the Adviser the level of the advisory and administration fees (together, the "management fee") for this Fund relative to comparable funds and/or other accounts advised by the Adviser and/or compared to its peers as prepared by Broadridge. In addition to the management fee, the Board also reviewed the Fund's total expense ratio. When a fund's management fee and/or its total expense ratio are higher than its peers, the Board and the Adviser discuss the reasons for this and, where appropriate, they discuss possible waivers and/or caps. The Board noted that the Fund's contractual management fee was higher than its peer group average and the actual management fee and total expense ratio were lower than its peer group averages. After discussion, the Board concluded that the Fund's (i) performance was acceptable; and (ii) management fee and total expense ratio were competitive with its peer group averages.
Economies of Scale
The Board considered the size and growth prospects of the Fund and how that relates to the Fund's total expense ratio and particularly the Fund's management fee rate, which includes breakpoints. In conjunction with its review of the Adviser's profitability, the Board discussed with the Adviser how a change in assets can affect the efficiency or effectiveness of managing the Fund and whether the management fee level is appropriate relative to current and projected asset levels and/or whether the management fee structure reflects economies of scale as asset levels change. The Board has determined that its review of the actual and/or potential economies of scale of the Fund supports its decision to approve the Management Agreement.
49
Morgan Stanley Variable Insurance Fund, Inc.
Semi-Annual Report – June 30, 2023 (unaudited)
Investment Advisory Agreement Approval (cont'd)
Profitability of the Adviser and Affiliates
The Board considered information concerning the costs incurred and profits realized by the Adviser and its affiliates during the last year from their relationship with the Fund and during the last two years from their relationship with the Morgan Stanley Fund Complex and reviewed with the Adviser the cost allocation methodology used to determine the profitability of the Adviser and affiliates. The Board has determined that its review of the analysis of the Adviser's expenses and profitability supports its decision to approve the Management Agreement.
Other Benefits of the Relationship
The Board considered other direct and indirect benefits to the Adviser and/or its affiliates derived from their relationship with the Fund and other funds advised by the Adviser. These benefits may include, among other things, fees for trading, distribution and/or shareholder servicing and for transaction processing and reporting platforms used by securities lending agents, and research received by the Adviser generated from commission dollars spent on funds' portfolio trading. The Board reviewed with the Adviser these arrangements and the reasonableness of the Adviser's costs relative to the services performed. The Board has determined that its review of the other benefits received by the Adviser or its affiliates supports its decision to approve the Management Agreement.
Resources of the Adviser and Historical Relationship Between the Fund and the Adviser
The Board considered whether the Adviser is financially sound and has the resources necessary to perform its obligations under the Management Agreement. The Board also reviewed and considered the historical relationship between the Fund and the Adviser, including the organizational structure of the Adviser, the policies and procedures formulated and adopted by the Adviser for managing the Fund's operations and the Board's confidence in the competence and integrity of the senior managers and key personnel of the Adviser. The Board concluded that the Adviser has the financial resources necessary to fulfill its obligations under the Management Agreement and that it is beneficial for the Fund to continue its relationship with the Adviser.
Other Factors and Current Trends
The Board considered the controls and procedures adopted and implemented by the Adviser and monitored by the Fund's Chief Compliance Officer and concluded that the conduct of business by the Adviser indicates a good faith effort on its part to adhere to high ethical standards in the conduct of the Fund's business.
General Conclusion
After considering and weighing all of the above factors, with various written materials and verbal information presented by the Adviser, the Board concluded that it would be in the best interest of the Fund and its shareholders to approve renewal of the Management Agreement for another year. In reaching this conclusion the Board did not give particular weight to any single piece of information or factor referenced above. The Board considered these factors and information over the course of the year and in numerous meetings, some of which were in executive session with only the independent Board members and their counsel present. It is possible that individual Board members may have weighed these factors, and the information presented, differently in reaching their individual decisions to approve the Management Agreement.
50
Morgan Stanley Variable Insurance Fund, Inc.
Semi-Annual Report – June 30, 2023 (unaudited)
Liquidity Risk Management Program
In compliance with Rule 22e-4 under the Investment Company Act of 1940, as amended (the "Liquidity Rule"), the Fund has adopted and implemented a liquidity risk management program (the "Program"), which is reasonably designed to assess and manage the risk that the Fund could not meet requests to redeem shares issued by the Fund without significant dilution of remaining investors' interests in the Fund (i.e., liquidity risk). The Fund's Board of Directors (the "Board") previously approved the designation of the Liquidity Risk Subcommittee (the "LRS") as Program administrator. The LRS is comprised of representatives from various divisions within Morgan Stanley Investment Management.
At a meeting held on March 1-2, 2023, the Board reviewed a written report prepared by the LRS that addressed the Program's operation and assessed its adequacy, and effectiveness of implementation for the period from January 1, 2022, through December 31, 2022, as required under the Liquidity Rule. The report concluded that the Program operated effectively and was adequately and effectively implemented in all material aspects, and that the relevant controls and safeguards were appropriately designed to enable the LRS to administer the Program in compliance with the Liquidity Rule.
In accordance with the Program, the LRS assessed each Fund's liquidity risk no less frequently than annually taking into consideration certain factors, as applicable, such as (i) investment strategy and liquidity of portfolio investments, (ii) short-term and long-term cash flow projections and (iii) holdings of cash and cash equivalents and borrowing arrangements and other funding sources. Certain factors are considered under both normal and reasonably foreseeable stressed conditions.
Each Fund portfolio investment is classified into one of four liquidity categories, which classification is assessed at least monthly by the LRS. The classification is based on a determination of the number of days it is reasonably expected to take to convert the investment into cash, or sell or dispose of the investment, in current market conditions without significantly changing the market value of the investment. Liquidity classification determinations take into account various market, trading and investment-specific considerations, as well as market depth, and in some cases utilize third-party vendor data.
The Liquidity Rule limits a fund's investments in illiquid investments to 15% of its net assets and requires funds that do not primarily hold assets that are highly liquid investments to determine and maintain a minimum percentage of the fund's net assets to be invested in highly liquid investments (highly liquid investment minimum or "HLIM"). The LRS believes that the Program includes provisions reasonably designed to review, monitor and comply with the 15% limit on illiquid investments and for determining, periodically reviewing and complying with the HLIM requirement, as applicable.
There can be no assurance that the Program will achieve its objectives under all circumstances in the future. Please refer to the Fund's prospectus for more information regarding the Fund's exposure to liquidity risk and other risks to which it may be subject.
51
Morgan Stanley Variable Insurance Fund, Inc.
Semi-Annual Report – June 30, 2023 (unaudited)
Directors and Officers Information
Directors
Frank L. Bowman
Frances L. Cashman
Kathleen A. Dennis
Nancy C. Everett
Eddie A. Grier
Jakki L. Haussler
Dr. Manuel H. Johnson
Joseph J. Kearns
Michael F. Klein
Patricia A. Maleski
W. Allen Reed, Chair of the Board
Adviser and Administrator
Morgan Stanley Investment Management Inc.
522 Fifth Avenue
New York, New York 10036
Sub-Adviser
Morgan Stanley Investment Management Limited
25 Cabot Square, Canary Wharf
London, E14 4QA, England
Distributor
Morgan Stanley Distribution, Inc.
522 Fifth Avenue
New York, New York 10036
Dividend Disbursing and Transfer Agent
SS&C Global Investor & Distribution Solutions, Inc.
P.O. Box 219804
Kansas City, Missouri 64121-9804
Co-Transfer Agent
Eaton Vance Management
Two International Place
Boston, Massachusetts 02110
Officers
John H. Gernon
President and Principal Executive Officer
Deidre A. Downes
Chief Compliance Officer
Francis J. Smith
Treasurer and Principal Financial Officer
Mary E. Mullin
Secretary
Michael J. Key
Vice President
Custodian
State Street Bank and Trust Company
One Congress Street
Boston, Massachusetts 02114
Legal Counsel
Dechert LLP
1095 Avenue of the Americas
New York, New York 10036
Counsel to the Independent Directors
Perkins Coie LLP
1155 Avenue of the Americas,
22nd Floor
New York, New York 10036
Independent Registered Public Accounting Firm
Ernst & Young LLP
200 Clarendon Street
Boston, Massachusetts 02116
Reporting to Shareholders
Each Morgan Stanley fund provides a complete schedule of portfolio holdings in its Semi-Annual and the Annual Reports within 60 days of the end of the fund's second and fourth fiscal quarters. The Semi-Annual and Annual Reports are filed electronically with the Securities and Exchange Commission ("SEC") on Form N-CSRS and Form N-CSR, respectively. Morgan Stanley makes these reports available on its public website, www.morganstanley.com/im/shareholderreports. Each Morgan Stanley non-money market fund also files a complete schedule of portfolio holdings with the SEC for the fund's first and third fiscal quarters as an attachment to Form N-PORT. Morgan Stanley does not deliver the reports for the first and third fiscal quarters to shareholders, but makes the complete schedule of portfolio holdings for the fund's first and third fiscal quarters available on its public website. The holdings for each money market fund are also posted to the Morgan Stanley public website. You may obtain the Form N-PORT filings (as well as the Form N-CSR and N-CSRS filings) by accessing the SEC's website, www.sec.gov. You can also request copies of these materials, upon payment of a duplicating fee, by electronic request at the SEC's email address (publicinfo@sec.gov).
Proxy Voting Policies and Procedures and Proxy Voting Record
You may obtain a copy of the Company's Proxy Voting Policy and Procedures and information regarding how the Company voted proxies relating to portfolio securities during the most recent twelve-month period ended June 30, without charge, upon request, by calling toll free 1 (800) 869-6397 or by visiting our website at www.morganstanley.com/im/shareholderreports. This information is also available on the SEC's website at www.sec.gov.
This report is submitted for the general information of the shareholders of the Fund. For more detailed information about the Fund, its fees and expenses and other pertinent information, please read its Prospectus. The Company's Statement of Additional Information contains additional information about the Fund, including its Directors. It is available, without charge, by calling 1 (800) 869-6397.
Householding Notice
To reduce printing and mailing costs, the Fund attempts to eliminate duplicate mailings to the same address. The Fund delivers a single copy of certain shareholder documents, including shareholder reports, prospectuses and proxy materials, to investors with the same last name who reside at the same address. Your participation in this program will continue for an unlimited period of time unless you instruct us otherwise. You can request multiple copies of these documents by calling 1 (800) 869-6397, 8:00 a.m. to 6:00 p.m., ET. Once our Customer Service Center has received your instructions, we will begin sending individual copies for each account within 30 days.
This report is not authorized for distribution to prospective investors in the Fund unless preceded or accompanied by an effective Prospectus. Read the Prospectus carefully before investing.
UIFIMSAN
5833219 EXP 08.31.24
Morgan Stanley Variable Insurance Fund, Inc.
Semi-Annual Report – June 30, 2023
Growth Portfolio
The Fund is intended to be a funding vehicle for variable annuity contracts and variable life insurance policies offered by the separate accounts of certain life insurance companies.
Morgan Stanley Variable Insurance Fund, Inc.
Semi-Annual Report – June 30, 2023 (unaudited)
Table of Contents
Consolidated Expense Example | 2 | ||||||
Consolidated Portfolio of Investments | 3 | ||||||
Consolidated Statement of Assets and Liabilities | 6 | ||||||
Consolidated Statement of Operations | 7 | ||||||
Consolidated Statements of Changes in Net Assets | 8 | ||||||
Consolidated Financial Highlights | 9 | ||||||
Notes to Consolidated Financial Statements | 11 | ||||||
Investment Advisory Agreement Approval | 22 | ||||||
Liquidity Risk Management Program | 24 | ||||||
Director and Officer Information | Back Cover |
1
Morgan Stanley Variable Insurance Fund, Inc.
Semi-Annual Report – June 30, 2023 (unaudited)
Consolidated Expense Example
Growth Portfolio
As a shareholder of the Growth Portfolio (the "Fund"), you incur two types of costs: (1) insurance company charges; and (2) ongoing costs, which may include advisory fees, administration fees, distribution (12b-1) fees and other Fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.
This example is based on an investment of $1,000 invested at the beginning of the six-month period ended June 30, 2023 and held for the entire six-month period.
Actual Expenses
The table below provides information about actual account values and actual expenses. You may use the information in this table, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the table under the heading entitled "Actual Expenses Paid During Period" to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The table below provides information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any insurance company charges. Therefore, the table below is useful in comparing ongoing costs, but will not help you determine the relative total cost of owning different funds. In addition, if these insurance company charges were included, your costs would have been higher.
Beginning Account Value 1/1/23 | Actual Ending Account Value 6/30/23 | Hypothetical Ending Account Value | Actual Expenses Paid During Period* | Hypothetical Expenses Paid During Period* | Net Expense Ratio During Period** | ||||||||||||||||||||||
Growth Portfolio Class I | $ | 1,000.00 | $ | 1,316.30 | $ | 1,022.02 | $ | 3.22 | $ | 2.81 | 0.56 | % | |||||||||||||||
Growth Portfolio Class II | 1,000.00 | 1,314.80 | 1,020.78 | 4.65 | 4.06 | 0.81 |
* Expenses are calculated using each Fund Class' annualized net expense ratio (as disclosed), multiplied by the average account value over the period and multiplied by 181/365 (to reflect the most recent one-half year period).
** Annualized.
2
Morgan Stanley Variable Insurance Fund, Inc.
Semi-Annual Report – June 30, 2023 (unaudited)
Consolidated Portfolio of Investments
Growth Portfolio
Shares | Value (000) | ||||||||||
Common Stocks (95.7%) | |||||||||||
Automobiles (5.0%) | |||||||||||
Rivian Automotive, Inc., Class A (a) | 48,118 | $ | 802 | ||||||||
Tesla, Inc. (a) | 89,067 | 23,315 | |||||||||
24,117 | |||||||||||
Biotechnology (1.4%) | |||||||||||
Alnylam Pharmaceuticals, Inc. (a) | 3,392 | 644 | |||||||||
Intellia Therapeutics, Inc. (a) | 38,556 | 1,572 | |||||||||
Moderna, Inc. (a) | 3,644 | 443 | |||||||||
ProKidney Corp. (a) | 225,480 | 2,523 | |||||||||
Roivant Sciences Ltd. (a) | 165,446 | 1,668 | |||||||||
6,850 | |||||||||||
Broadline Retail (4.3%) | |||||||||||
Coupang, Inc. (Korea, Republic of) (a) | 451,349 | 7,853 | |||||||||
Global-e Online Ltd. (Israel) (a) | 139,856 | 5,726 | |||||||||
MercadoLibre, Inc. (a) | 5,956 | 7,056 | |||||||||
20,635 | |||||||||||
Capital Markets (0.3%) | |||||||||||
Coinbase Global, Inc., Class A (a)(b) | 19,601 | 1,402 | |||||||||
Chemicals (0.3%) | |||||||||||
Ginkgo Bioworks Holdings, Inc. (a)(b) | 851,540 | 1,584 | |||||||||
Commercial Services & Supplies (0.2%) | |||||||||||
Aurora Innovation, Inc. (a) | 371,870 | 1,093 | |||||||||
Electronic Equipment, Instruments & Components (0.0%) | |||||||||||
Magic Leap, Inc., Class A (a)(c)(d) (acquisition cost — $1,526; acquired 12/22/15) | 3,138 | — | |||||||||
Entertainment (4.9%) | |||||||||||
ROBLOX Corp., Class A (a) | 585,093 | 23,579 | |||||||||
Financial Services (6.5%) | |||||||||||
Adyen NV (Netherlands) (a) | 11,779 | 20,397 | |||||||||
Affirm Holdings, Inc. (a) | 368,522 | 5,650 | |||||||||
Block, Inc., Class A (a) | 74,379 | 4,951 | |||||||||
30,998 | |||||||||||
Ground Transportation (10.4%) | |||||||||||
Grab Holdings Ltd., Class A (Singapore) (a) | 2,210,355 | 7,581 | |||||||||
Uber Technologies, Inc. (a) | 984,827 | 42,515 | |||||||||
50,096 | |||||||||||
Health Care Providers & Services (3.3%) | |||||||||||
Agilon health, Inc. (a) | 911,781 | 15,810 | |||||||||
Health Care Technology (1.1%) | |||||||||||
Doximity, Inc., Class A (a) | 151,834 | 5,165 | |||||||||
Hotels, Restaurants & Leisure (5.5%) | |||||||||||
DoorDash, Inc., Class A (a) | 345,452 | 26,399 |
Shares | Value (000) | ||||||||||
Information Technology Services (22.7%) | |||||||||||
Cloudflare, Inc., Class A (a) | 512,965 | $ | 33,533 | ||||||||
Shopify, Inc., Class A (Canada) (a) | 617,775 | 39,908 | |||||||||
Snowflake, Inc., Class A (a) | 200,773 | 35,332 | |||||||||
108,773 | |||||||||||
Leisure Products (0.6%) | |||||||||||
Peloton Interactive, Inc., Class A (a) | 353,203 | 2,716 | |||||||||
Life Sciences Tools & Services (4.3%) | |||||||||||
10X Genomics, Inc., Class A (a) | 87,634 | 4,894 | |||||||||
Illumina, Inc. (a) | 82,779 | 15,520 | |||||||||
20,414 | |||||||||||
Media (8.1%) | |||||||||||
Trade Desk, Inc., Class A (a) | 504,686 | 38,972 | |||||||||
Pharmaceuticals (4.3%) | |||||||||||
Royalty Pharma PLC, Class A | 673,895 | 20,716 | |||||||||
Software (8.8%) | |||||||||||
Bills Holdings, Inc. (a) | 192,841 | 22,534 | |||||||||
Gitlab, Inc., Class A (a) | 162,674 | 8,314 | |||||||||
Procore Technologies, Inc. (a) | 72,762 | 4,735 | |||||||||
Samsara, Inc., Class A (a) | 238,084 | 6,597 | |||||||||
42,180 | |||||||||||
Specialty Retail (3.7%) | |||||||||||
Carvana Co. (a) | 250,476 | 6,492 | |||||||||
Chewy, Inc., Class A (a) | 181,088 | 7,148 | |||||||||
Wayfair, Inc., Class A (a) | 62,496 | 4,063 | |||||||||
17,703 | |||||||||||
Total Common Stocks (Cost $511,178) | 459,202 | ||||||||||
Preferred Stocks (1.7%) | |||||||||||
Financial Services (0.2%) | |||||||||||
Stripe, Inc., Series H (a)(c)(d) (acquisition cost — $1,061; acquired 3/17/23) | 52,681 | 1,093 | |||||||||
Software (1.5%) | |||||||||||
Databricks, Inc., Series H (a)(c)(d) (acquisition cost — $8,310; acquired 8/31/21) | 113,088 | 6,498 | |||||||||
Lookout, Inc., Series F (a)(c)(d) (acquisition cost — $1,618; acquired 6/17/14) | 141,612 | 493 | |||||||||
6,991 | |||||||||||
Total Preferred Stocks (Cost $10,989) | 8,084 | ||||||||||
Investment Company (1.4%) | |||||||||||
Grayscale Bitcoin Trust (a) (Cost $12,825) | 360,224 | 6,913 | |||||||||
Short-Term Investments (2.1%) | |||||||||||
Investment Company (1.5%) | |||||||||||
Morgan Stanley Institutional Liquidity Funds — Treasury Securities Portfolio — Institutional Class (See Note H) (Cost $7,166) | 7,165,961 | 7,166 |
The accompanying notes are an integral part of the consolidated financial statements.
3
Morgan Stanley Variable Insurance Fund, Inc.
Semi-Annual Report – June 30, 2023 (unaudited)
Consolidated Portfolio of Investments (cont'd)
Growth Portfolio
Shares | Value (000) | ||||||||||
Securities held as Collateral on Loaned Securities (0.6%) | |||||||||||
Investment Company (0.5%) | |||||||||||
Morgan Stanley Institutional Liquidity Funds — Treasury Securities Portfolio — Institutional Class (See Note H) | 2,566,091 | $ | 2,566 | ||||||||
Face Amount (000) | |||||||||||
Repurchase Agreements (0.1%) | |||||||||||
Citigroup, Inc., (5.00%, dated 6/30/23, due 7/3/23; proceeds $45; fully collateralized by U.S. Government obligations; 0.00% due 7/27/23 — 8/10/23; valued at $46) | $ | 45 | 45 | ||||||||
HSBC Securities USA, Inc., (5.05%, dated 6/30/23, due 7/3/23; proceeds $95; fully collateralized by U.S. Government obligations; 0.00% due 8/15/23 — 11/15/25; valued at $97) | 95 | 95 | |||||||||
Merrill Lynch & Co., Inc., (5.05%, dated 6/30/23, due 7/3/23; proceeds $76; fully collateralized by a U.S. Government obligation; 1.63% due 10/15/27; valued at $78) | 76 | 76 | |||||||||
216 | |||||||||||
Total Securities held as Collateral on Loaned Securities (Cost $2,782) | 2,782 | ||||||||||
Total Short-Term Investments (Cost $9,948) | 9,948 | ||||||||||
Total Investments Excluding Purchased Options (100.9%) (Cost $544,939) | 484,147 | ||||||||||
Total Purchased Options Outstanding (0.2%) (Cost $1,852) | 1,298 | ||||||||||
Total Investments (101.1%) (Cost $546,791) Including $2,627 of Securities Loaned (e)(f)(g) | 485,445 | ||||||||||
Liabilities in Excess of Other Assets (–1.1%) | (5,398 | ) | |||||||||
Net Assets (100.0%) | $ | 480,047 |
(a) Non-income producing security.
(b) All or a portion of this security was on loan at June 30, 2023.
(c) Security cannot be offered for public resale without first being registered under the Securities Act of 1933 and related rules ("restricted security"). Acquisition date represents the day on which an enforceable right to acquire such security is obtained and is presented along with related cost in the security description. The Fund has registration rights for certain restricted securities. Any costs related to such registration are borne by the issuer. The aggregate value of restricted securities (excluding 144A holdings) at June 30, 2023 amounts to approximately $8,084,000 and represents 1.7% of net assets.
(d) At June 30, 2023, the Fund held fair valued securities valued at approximately $8,084,000, representing 1.7% of net assets. These securities have been fair valued as determined in good faith under procedures established by and under the general supervision of the Company's (as defined herein) Directors.
(e) Securities are available for collateral in connection with purchased options.
(f) The approximate fair value and percentage of net assets, $20,397,000 and 4.2%, respectively, represent the securities that have been fair valued under the fair valuation policy for international investments as described in the Notes A-1 within the Notes to Consolidated Financial Statements.
(g) At June 30, 2023, the aggregate cost for federal income tax purposes approximates the aggregate cost for book purposes. The aggregate gross unrealized appreciation is approximately $67,779,000 and the aggregate gross unrealized depreciation is approximately $129,125,000, resulting in net unrealized depreciation of approximately $61,346,000.
Call Options Purchased:
The Fund had the following call options purchased open at June 30, 2023:
Counterparty | Description | Strike Price | Expiration Date | Number of Contracts | Notional Amount (000) | Value (000) | Premiums Paid (000) | Unrealized Appreciation (Depreciation) (000) | |||||||||||||||||||||||||||
JPMorgan Chase Bank NA | USD/CNH | CNH | 7.43 | Jan-24 | 83,529,990 | $ | 83,530 | $ | 544 | $ | 393 | $ | 151 | ||||||||||||||||||||||
JPMorgan Chase Bank NA | USD/CNH | CNH | 7.53 | Jul-23 | 99,573,866 | 99,574 | 19 | 494 | (475 | ) | |||||||||||||||||||||||||
Standard Chartered Bank | USD/CNH | CNH | 7.57 | Aug-23 | 111,754,020 | 111,754 | 79 | 499 | (420 | ) | |||||||||||||||||||||||||
Standard Chartered Bank | USD/CNH | CNH | 7.57 | May-24 | 109,090,159 | 109,090 | 656 | 462 | 194 | ||||||||||||||||||||||||||
Goldman Sachs International | USD/CNH | CNH | 7.87 | Oct-23 | 880,149 | 880 | — | @ | 4 | (4 | ) | ||||||||||||||||||||||||
$ | 1,298 | $ | 1,852 | $ | (554 | ) |
CNH — Chinese Yuan Renminbi Offshore
USD — United States Dollar
@ Value is less than $500.
The accompanying notes are an integral part of the consolidated financial statements.
4
Morgan Stanley Variable Insurance Fund, Inc.
Semi-Annual Report – June 30, 2023 (unaudited)
Consolidated Portfolio of Investments (cont'd)
Growth Portfolio
Portfolio Composition*
Classification | Percentage of Total Investments | ||||||
Other** | 31.5 | % | |||||
Information Technology Services | 22.6 | ||||||
Ground Transportation | 10.4 | ||||||
Software | 10.2 | ||||||
Media | 8.1 | ||||||
Financial Services | 6.7 | ||||||
Hotels, Restaurants & Leisure | 5.5 | ||||||
Automobiles | 5.0 | ||||||
Total Investments | 100.0 | % |
* Percentages indicated are based upon total investments (excluding Securities held as Collateral on Loaned Securities) as of June 30, 2023.
** Industries and/or investment types representing less than 5% of total investments.
The accompanying notes are an integral part of the consolidated financial statements.
5
Morgan Stanley Variable Insurance Fund, Inc.
Semi-Annual Report – June 30, 2023 (unaudited)
Growth Portfolio
Consolidated Statement of Assets and Liabilities | June 30, 2023 (000) | ||||||
Assets: | |||||||
Investments in Securities of Unaffiliated Issuers, at Value(1) (Cost $537,059) | $ | 475,713 | |||||
Investment in Security of Affiliated Issuer, at Value (Cost $9,732) | 9,732 | ||||||
Total Investments in Securities, at Value (Cost $546,791) | 485,445 | ||||||
Foreign Currency, at Value (Cost $1) | 1 | ||||||
Receivable for Fund Shares Sold | 119 | ||||||
Receivable from Affiliate | 56 | ||||||
Receivable from Securities Lending Income | 2 | ||||||
Other Assets | 44 | ||||||
Total Assets | 485,667 | ||||||
Liabilities: | |||||||
Collateral on Securities Loaned, at Value | 2,782 | ||||||
Due to Broker | 1,090 | ||||||
Payable for Fund Shares Redeemed | 1,076 | ||||||
Payable for Advisory Fees | 318 | ||||||
Payable for Servicing Fees | 163 | ||||||
Payable for Professional Fees | 52 | ||||||
Payable for Distribution Fees — Class II Shares | 43 | ||||||
Payable for Administration Fees | 32 | ||||||
Payable for Directors' Fees and Expenses | 10 | ||||||
Payable for Custodian Fees | 5 | ||||||
Payable for Transfer Agency Fees | 1 | ||||||
Other Liabilities | 48 | ||||||
Total Liabilities | 5,620 | ||||||
NET ASSETS | $ | 480,047 | |||||
Net Assets Consist of: | |||||||
Paid-in-Capital | $ | 711,454 | |||||
Total Accumulated Loss | (231,407 | ) | |||||
Net Assets | $ | 480,047 | |||||
CLASS I: | |||||||
Net Assets | $ | 277,371 | |||||
Net Asset Value, Offering and Redemption Price Per Share Applicable to 23,468,126 Outstanding $0.001 Par Value Shares (Authorized 500,000,000 Shares) | $ | 11.82 | |||||
CLASS II: | |||||||
Net Assets | $ | 202,676 | |||||
Net Asset Value, Offering and Redemption Price Per Share Applicable to 22,574,209 Outstanding $0.001 Par Value Shares (Authorized 500,000,000 Shares) | $ | 8.98 | |||||
(1) Including: | |||||||
Securities on Loan, at Value: | $ | 2,627 |
The accompanying notes are an integral part of the consolidated financial statements.
6
Morgan Stanley Variable Insurance Fund, Inc.
Semi-Annual Report – June 30, 2023 (unaudited)
Growth Portfolio
Consolidated Statement of Operations | Six Months Ended June 30, 2023 (000) | ||||||
Investment Income: | |||||||
Dividends from Security of Affiliated Issuer (Note H) | $ | 306 | |||||
Dividends from Securities of Unaffiliated Issuers (Net of $3 of Foreign Taxes Withheld) | 269 | ||||||
Income from Securities Loaned — Net | 88 | ||||||
Total Investment Income | 663 | ||||||
Expenses: | |||||||
Advisory Fees (Note B) | 1,085 | ||||||
Servicing Fees (Note D) | 299 | ||||||
Distribution Fees — Class II Shares (Note E) | 233 | ||||||
Administration Fees (Note C) | 174 | ||||||
Professional Fees | 82 | ||||||
Shareholder Reporting Fees | 15 | ||||||
Custodian Fees (Note G) | 13 | ||||||
Transfer Agency Fees (Note F) | 7 | ||||||
Directors' Fees and Expenses | 5 | ||||||
Pricing Fees | 2 | ||||||
Registration Fees | 1 | ||||||
Other Expenses | 15 | ||||||
Total Expenses | 1,931 | ||||||
Waiver of Advisory Fees (Note B) | (461 | ) | |||||
Rebate from Morgan Stanley Affiliate (Note H) | (13 | ) | |||||
Net Expenses | 1,457 | ||||||
Net Investment Income | (794 | ) | |||||
Realized Loss: | |||||||
Investments Sold | (75,146 | ) | |||||
Foreign Currency Translation | (— | @) | |||||
Net Realized Loss | (75,146 | ) | |||||
Change in Unrealized Appreciation (Depreciation): | |||||||
Investments | 194,537 | ||||||
Foreign Currency Translation | (— | @) | |||||
Net Change in Unrealized Appreciation (Depreciation) | 194,537 | ||||||
Net Realized Loss and Change in Unrealized Appreciation (Depreciation) | 119,391 | ||||||
Net Increase in Net Assets Resulting from Operations | $ | 118,597 |
@ Amount is less than $500.
The accompanying notes are an integral part of the consolidated financial statements.
7
Morgan Stanley Variable Insurance Fund, Inc.
Semi-Annual Report – June 30, 2023
Growth Portfolio
Consolidated Statements of Changes in Net Assets | Six Months Ended June 30, 2023 (unaudited) (000) | Year Ended December 31, 2022 (000) | |||||||||
Increase (Decrease) in Net Assets: | |||||||||||
Operations: | |||||||||||
Net Investment Loss | $ | (794 | ) | $ | (2,659 | ) | |||||
Net Realized Loss | (75,146 | ) | (94,624 | ) | |||||||
Net Change in Unrealized Appreciation (Depreciation) | 194,537 | (494,828 | ) | ||||||||
Net Increase (Decrease) in Net Assets Resulting from Operations | 118,597 | (592,111 | ) | ||||||||
Dividends and Distributions to Shareholders: | |||||||||||
Class I | — | (161,329 | ) | ||||||||
Class II | — | (120,205 | ) | ||||||||
Total Dividends and Distributions to Shareholders | — | (281,534 | ) | ||||||||
Capital Share Transactions:(1) | |||||||||||
Class I: | |||||||||||
Subscribed | 9,271 | 21,161 | |||||||||
Distributions Reinvested | — | 161,329 | |||||||||
Redeemed | (20,358 | ) | (73,166 | ) | |||||||
Class II: | |||||||||||
Subscribed | 40,332 | 84,262 | |||||||||
Distributions Reinvested | — | 120,205 | |||||||||
Redeemed | (42,410 | ) | (70,611 | ) | |||||||
Net Increase (Decrease) in Net Assets Resulting from Capital Share Transactions | (13,165 | ) | 243,180 | ||||||||
Total Increase (Decrease) in Net Assets | 105,432 | (630,465 | ) | ||||||||
Net Assets: | |||||||||||
Beginning of Period | 374,615 | 1,005,080 | |||||||||
End of Period | $ | 480,047 | $ | 374,615 | |||||||
(1) Capital Share Transactions: | |||||||||||
Class I: | |||||||||||
Shares Subscribed | 883 | 1,087 | |||||||||
Shares Issued on Distributions Reinvested | — | 15,277 | |||||||||
Shares Redeemed | (1,944 | ) | (3,850 | ) | |||||||
Net Increase (Decrease) in Class I Shares Outstanding | (1,061 | ) | 12,514 | ||||||||
Class II: | |||||||||||
Shares Subscribed | 5,108 | 5,157 | |||||||||
Shares Issued on Distributions Reinvested | — | 14,951 | |||||||||
Shares Redeemed | (5,159 | ) | (4,909 | ) | |||||||
Net Increase (Decrease) in Class II Shares Outstanding | (51 | ) | 15,199 |
The accompanying notes are an integral part of the consolidated financial statements.
8
Morgan Stanley Variable Insurance Fund, Inc.
Semi-Annual Report – June 30, 2023
Consolidated Financial Highlights
Growth Portfolio
Class I | |||||||||||||||||||||||||||
Six Months Ended June 30, 2023 | Year Ended December 31, | ||||||||||||||||||||||||||
Selected Per Share Data and Ratios | (unaudited) | 2022 | 2021 | 2020(1) | 2019(1) | 2018(1) | |||||||||||||||||||||
Net Asset Value, Beginning of Period | $ | 8.98 | $ | 53.72 | $ | 70.24 | $ | 35.80 | $ | 28.62 | $ | 32.38 | |||||||||||||||
Income (Loss) from Investment Operations: | |||||||||||||||||||||||||||
Net Investment Loss(2) | (0.01 | ) | (0.07 | ) | (0.35 | ) | (0.28 | ) | (0.14 | ) | (0.14 | ) | |||||||||||||||
Net Realized and Unrealized Gain (Loss) | 2.85 | (30.00 | ) | 2.53 | 40.32 | 9.23 | 3.34 | ||||||||||||||||||||
Total from Investment Operations | 2.84 | (30.07 | ) | 2.18 | 40.04 | 9.09 | 3.20 | ||||||||||||||||||||
Distributions from and/or in Excess of: | |||||||||||||||||||||||||||
Net Realized Gain | — | (14.67 | ) | (18.70 | ) | (5.60 | ) | (1.91 | ) | (6.96 | ) | ||||||||||||||||
Net Asset Value, End of Period | $ | 11.82 | $ | 8.98 | $ | 53.72 | $ | 70.24 | $ | 35.80 | $ | 28.62 | |||||||||||||||
Total Return(3) | 31.63 | %(4) | (60.07 | )% | 0.10 | % | 117.31 | % | 31.81 | % | 7.54 | % | |||||||||||||||
Ratios to Average Net Assets and Supplemental Data: | |||||||||||||||||||||||||||
Net Assets, End of Period (Thousands) | $ | 277,371 | $ | 220,167 | $ | 645,473 | $ | 737,155 | $ | 386,720 | $ | 126,941 | |||||||||||||||
Ratio of Expenses Before Expense Limitation | 0.78 | %(5) | 0.78 | % | 0.74 | % | 0.74 | % | 0.78 | % | N/A | ||||||||||||||||
Ratio of Expenses After Expense Limitation | 0.56 | %(5)(6) | 0.57 | %(6) | 0.57 | %(6) | 0.56 | %(6) | 0.61 | %(6)(7) | 0.79 | %(6) | |||||||||||||||
Ratio of Net Investment Loss | (0.26 | )%(5)(6) | (0.39 | )%(6) | (0.52 | )%(6) | (0.55 | )%(6) | (0.41 | )%(6) | (0.39 | )%(6) | |||||||||||||||
Ratio of Rebate from Morgan Stanley Affiliates | 0.01 | %(5)(8) | 0.00 | %(8) | 0.00 | %(8) | 0.01 | % | 0.01 | % | 0.00 | %(8) | |||||||||||||||
Portfolio Turnover Rate | 17 | %(4) | 41 | % | 59 | % | 55 | % | 95 | % | 56 | % |
(1) Not consolidated.
(2) Per share amount is based on average shares outstanding.
(3) Calculated based on the net asset value as of the last business day of the period. Performance does not reflect fees and expenses imposed by your insurance company's separate account. If performance information included the effect of these additional charges, the total return would be lower.
(4) Not annualized.
(5) Annualized.
(6) 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."
(7) Effective April 29, 2019, the Adviser has agreed to limit the ratio of expenses to average net assets to the maximum ratio of 0.57% for Class I shares. Prior to April 29, 2019, the maximum ratio was 0.80% for Class I shares.
(8) Amount is less than 0.005%.
The accompanying notes are an integral part of the consolidated financial statements.
9
Morgan Stanley Variable Insurance Fund, Inc.
Semi-Annual Report – June 30, 2023
Consolidated Financial Highlights
Growth Portfolio
Class II | |||||||||||||||||||||||||||
Six Months Ended June 30, 2023 | Year Ended December 31, | ||||||||||||||||||||||||||
Selected Per Share Data and Ratios | (unaudited) | 2022 | 2021 | 2020(1) | 2019(1) | 2018(1) | |||||||||||||||||||||
Net Asset Value, Beginning of Period | $ | 6.83 | $ | 48.42 | $ | 65.09 | $ | 33.51 | $ | 26.95 | $ | 30.89 | |||||||||||||||
Income (Loss) from Investment Operations: | |||||||||||||||||||||||||||
Net Investment Loss(2) | (0.02 | ) | (0.09 | ) | (0.46 | ) | (0.38 | ) | (0.21 | ) | (0.21 | ) | |||||||||||||||
Net Realized and Unrealized Gain (Loss) | 2.17 | (26.83 | ) | 2.49 | 37.56 | 8.68 | 3.23 | ||||||||||||||||||||
Total from Investment Operations | 2.15 | (26.92 | ) | 2.03 | 37.18 | 8.47 | 3.02 | ||||||||||||||||||||
Distributions from and/or in Excess of: | |||||||||||||||||||||||||||
Net Realized Gain | — | (14.67 | ) | (18.70 | ) | (5.60 | ) | (1.91 | ) | (6.96 | ) | ||||||||||||||||
Net Asset Value, End of Period | $ | 8.98 | $ | 6.83 | $ | 48.42 | $ | 65.09 | $ | 33.51 | $ | 26.95 | |||||||||||||||
Total Return(3) | 31.48 | %(4) | (60.16 | )% | (0.15 | )% | 116.76 | % | 31.47 | % | 7.30 | % | |||||||||||||||
Ratios to Average Net Assets and Supplemental Data: | |||||||||||||||||||||||||||
Net Assets, End of Period (Thousands) | $ | 202,676 | $ | 154,448 | $ | 359,607 | $ | 388,580 | $ | 213,760 | $ | 139,300 | |||||||||||||||
Ratio of Expenses Before Expense Limitation | 1.03 | %(5) | 1.03 | % | 0.99 | % | 0.99 | % | 1.03 | % | N/A | ||||||||||||||||
Ratio of Expenses After Expense Limitation | 0.81 | %(5)(6) | 0.82 | %(6) | 0.82 | %(6) | 0.81 | %(6) | 0.86 | %(6)(7) | 1.04 | %(6) | |||||||||||||||
Ratio of Net Investment Loss | (0.51 | )%(5)(6) | (0.64 | )%(6) | (0.77 | )%(6) | (0.80 | )%(6) | (0.66 | )%(6) | (0.64 | )%(6) | |||||||||||||||
Ratio of Rebate from Morgan Stanley Affiliates | 0.01 | %(5)(8) | 0.00 | %(8) | 0.00 | %(8) | 0.01 | % | 0.01 | % | 0.00 | %(8) | |||||||||||||||
Portfolio Turnover Rate | 17 | %(4) | 41 | % | 59 | % | 55 | % | 95 | % | 56 | % |
(1) Not consolidated.
(2) Per share amount is based on average shares outstanding.
(3) Calculated based on the net asset value as of the last business day of the period. Performance does not reflect fees and expenses imposed by your insurance company's separate account. If performance information included the effect of these additional charges, the total return would be lower.
(4) Not annualized.
(5) Annualized.
(6) 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."
(7) Effective April 29, 2019, the Adviser has agreed to limit the ratio of expenses to average net assets to the maximum ratio of 0.82% for Class II shares. Prior to April 29, 2019, the maximum ratio was 1.05% for Class II shares.
(8) Amount is less than 0.005%.
The accompanying notes are an integral part of the consolidated financial statements.
10
Morgan Stanley Variable Insurance Fund, Inc.
Semi-Annual Report – June 30, 2023 (unaudited)
Notes to Consolidated Financial Statements
Morgan Stanley Variable Insurance Fund, Inc. (the "Company") is registered under the Investment Company Act of 1940, as amended (the "Act"), as an open-end management investment company. The Company is comprised of ten separate active, diversified and non-diversified funds (individually referred to as a "Fund," collectively as the "Funds"). The Company applies investment company accounting and reporting guidance Accounting Standards Codification ("ASC") Topic 946.
The accompanying consolidated financial statements relate to the Growth Portfolio. The Fund seeks long-term capital appreciation by investing primarily in growth-oriented equity securities of large capitalization companies. The Fund offers two classes of shares — Class I and Class II. Both classes of shares have identical voting rights (except that shareholders of a Class have exclusive voting rights regarding any matter relating solely to that Class of shares), dividend, liquidation and other rights.
The Company is intended to be a funding vehicle for variable annuity contracts and variable life insurance policies offered by the separate accounts of certain life insurance companies.
A. Significant Accounting Policies: The following significant accounting policies are in conformity with U.S. generally accepted accounting principles ("GAAP"). Such policies are consistently followed by the Company in the preparation of its consolidated financial statements. GAAP may require management to make estimates and assumptions that affect the reported amounts and disclosures in the consolidated financial statements. Actual results may differ from those estimates.
The Fund may invest up to 25% of its total assets in a wholly-owned subsidiary of the Fund organized as a company under the laws of the Cayman Islands, VIF Growth Cayman Portfolio, Ltd. (the "Subsidiary"). The Subsidiary may invest in bitcoin indirectly through cash settled futures or indirectly through investments in Grayscale Bitcoin Trust (BTC) ("GBTC"), a privately offered investment vehicle that invests in bitcoin. The Fund is the sole shareholder of the Subsidiary, and it is not currently expected that shares of the Subsidiary will be sold or offered to other investors. The consolidated portfolio of investments and consolidated financial statements include the positions and accounts of the Fund and the Subsidiary. All intercompany accounts and transactions of the Fund and the Subsidiary have been eliminated in consolidation and all accounting policies of the Subsidiary are consistent with those of the Fund. As of June 30, 2023, the Subsidiary represented approximately $7,350,000 or approximately 1.53% of the total net assets of the Fund.
Investments in the Subsidiary are expected to provide the Fund with exposure to bitcoin within the limitations of Subchapter M of the Code and recent Internal Revenue
Service ("IRS") revenue rulings, which require that a mutual fund receive no more than ten percent of its gross income from such investments in order to receive favorable tax treatment as a regulated investment company ("RIC"). Tax treatment of the income received from the Subsidiary may potentially be affected by changes in legislation, regulations or other legally binding authority, which could affect the character, timing and amount of the Fund's taxable income and distributions. If such changes occur, the Fund may need to significantly change its investment strategy and recognize unrealized gains in order to remain qualified for taxation as a RIC, which could adversely affect the Fund.
In June 2022, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update (ASU) No. 2022-03, Fair Value Measurement (Topic 820): Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions ("ASU 2022-03"), which clarifies the guidance in ASC Topic No. 820 on the fair value measurement of an equity security that is subject to a contractual sale restriction and introduces new disclosures related to such equity security. ASU 2022-03 clarifies that a contractual sale restriction prohibiting the sale of an equity security is a characteristic of the reporting entity holding the equity security and is not included in the equity security's unit of account. Accordingly, an entity should not consider the contractual sale restriction when measuring the equity security's fair value (i.e., the entity should not apply a discount related to the contractual sale restriction, as stated in ASC 820-10-35-36B as amended by ASU 2022-03). In addition, ASU 2022-03 prohibits an entity from recognizing a contractual sale restriction as a separate unit of account. The new guidance is effective for public companies with annual reporting periods in fiscal years beginning after December 15, 2023, and interim periods in the following year, with early adoption permitted. At this time, management is currently evaluating the impact of ASU 2022-03.
1. Security Valuation: (1) An equity portfolio security listed or traded on an exchange is valued at its latest reported sales price (or at the exchange official closing price if such exchange reports an official closing price), and if there were no sales on a given day and if there is no official exchange closing price for that day, the security is valued at the mean between the last reported bid and asked prices if such bid and asked prices are available on the relevant exchanges. If only bid prices are available then the latest bid price may be used. Listed equity securities not traded on the valuation date with no reported bid and asked prices available on the exchange are valued at the mean between the current bid and asked prices obtained from one or more reputable brokers/dealers. In cases where a security is traded on
11
Morgan Stanley Variable Insurance Fund, Inc.
Semi-Annual Report – June 30, 2023 (unaudited)
Notes to Consolidated Financial Statements (cont'd)
more than one exchange, the security is valued on the exchange designated as the primary market; (2) all other equity portfolio securities for which over-the-counter ("OTC") market quotations are readily available are valued at the latest reported sales price (or at the market official closing price if such market reports an official closing price), and if there was no trading in the security on a given day and if there is no official closing price from relevant markets for that day, the security is valued at the mean between the last reported bid and asked prices if such bid and asked prices are available on the relevant markets. An unlisted equity security that does not trade on the valuation date and for which bid and asked prices from the relevant markets are unavailable is valued at the mean between the current bid and asked prices obtained from one or more reputable brokers/dealers; (3) listed options are valued at the last reported sales price on the exchange on which they are listed (or at the exchange official closing price if such exchange reports an official closing price). If an official closing price or last reported sales price is unavailable, the listed option should be fair valued at the mean between its latest bid and ask prices. Unlisted options are valued at the mean between their latest bid and ask prices from a broker/dealer or valued by a pricing service/vendor; (4) fixed income securities may be valued by an outside pricing service/vendor approved by the Company's Board of Directors (the "Directors"). The pricing service/vendor may employ a pricing model that takes into account, among other things, bids, yield spreads and/or other market data and specific security characteristics. If Morgan Stanley Investment Management Inc. (the "Adviser"), a wholly-owned subsidiary of Morgan Stanley, determines that the price provided by the outside pricing service/vendor does not reflect the security's fair value or is unable to provide a price, prices from brokers/dealers may also be utilized. In these circumstances, the value of the security will be the mean of bid and asked prices obtained from brokers/dealers; (5) when market quotations are not readily available, as defined by Rule 2a-5 under the Act, including circumstances under which the Adviser determines that the closing price, last sale price or the mean between the last reported bid and asked prices are not reflective of a security's market value, portfolio securities are valued at their fair value as determined in good faith under procedures approved by and under the general supervision of the Directors. Occasionally, developments affecting the closing prices of securities and other assets may occur between the times at which valuations of such securities are determined (that is, close of the foreign
market on which the securities trade) and the close of business of the New York Stock Exchange ("NYSE"). If developments occur during such periods that are expected to materially affect the value of such securities, such valuations may be adjusted to reflect the estimated fair value of such securities as of the close of the NYSE, as determined in good faith by the Directors or by the Adviser using a pricing service and/or procedures approved by the Directors; (6) foreign exchange transactions ("spot contracts") and foreign exchange forward contracts ("forward contracts") are valued daily using an independent pricing vendor at the spot and forward rates, respectively, as of the close of the NYSE; and (7) investments in mutual funds, including the Morgan Stanley Institutional Liquidity Funds, are valued at the net asset value ("NAV") as of the close of each business day.
In connection with Rule 2a-5 of the Act, the Directors have designated the Company's Adviser as its valuation designee. The valuation designee has responsibility for determining fair value and to make the actual calculations pursuant to the fair valuation methodologies previously approved by the Directors. Under procedures approved by the Directors, the Company's Adviser, as valuation designee, has formed a Valuation Committee whose members are approved by the Directors. The Valuation Committee provides administration and oversight of the Company's valuation policies and procedures, which are reviewed at least annually by the Directors. These procedures allow the Company to utilize independent pricing services, quotations from securities and financial instrument dealers and other market sources to determine fair value.
2. Fair Value Measurement: FASB ASC 820, "Fair Value Measurement" ("ASC 820"), defines fair value as the price that would be received to sell an asset or pay to transfer a liability in an orderly transaction between market participants at the measurement date. ASC 820 establishes a three-tier hierarchy to distinguish between (1) inputs that reflect the assumptions market participants would use in valuing an asset or liability developed based on market data obtained from sources independent of the reporting entity (observable inputs) and (2) inputs that reflect the reporting entity's own assumptions about the assumptions market participants would use in valuing an asset or liability developed based on the best information available in the circumstances (unobservable inputs) and to establish classification of fair value measurements for disclosure purposes. Various inputs are used in
12
Morgan Stanley Variable Insurance Fund, Inc.
Semi-Annual Report – June 30, 2023 (unaudited)
Notes to Consolidated Financial Statements (cont'd)
determining the value of the Fund's investments. The inputs are summarized in the three broad levels listed below:
• Level 1 – unadjusted quoted prices in active markets for identical investments
• Level 2 – other significant observable inputs (including quoted prices for similar investments, interest rates, prepayment speeds, credit risk, etc.)
• Level 3 – significant unobservable inputs including the Fund's own assumptions in determining the fair value of investments. Factors considered in making this determination may include, but are not limited to, information obtained by contacting the issuer, analysts, or the appropriate stock exchange (for exchange-traded securities), analysis of the issuer's financial statements or other available documents and, if necessary, available information concerning other securities in similar circumstances.
The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities and the determination of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to each security.
The following is a summary of the inputs used to value each Fund's investments as of June 30, 2023:
Investment Type | Level 1 Unadjusted quoted prices (000) | Level 2 Other significant observable inputs (000) | Level 3 Significant unobservable inputs (000) | Total (000) | |||||||||||||||
Assets: | |||||||||||||||||||
Common Stocks | |||||||||||||||||||
Automobiles | $ | 24,117 | $ | — | $ | — | $ | 24,117 | |||||||||||
Biotechnology | 6,850 | — | — | 6,850 | |||||||||||||||
Broadline Retail | 20,635 | — | — | 20,635 | |||||||||||||||
Capital Markets | 1,402 | — | — | 1,402 | |||||||||||||||
Chemicals | 1,584 | — | — | 1,584 | |||||||||||||||
Commercial Services & Supplies | 1,093 | — | — | 1,093 | |||||||||||||||
Electronic Equipment, Instruments & Components | — | — | — | † | — | † | |||||||||||||
Entertainment | 23,579 | — | — | 23,579 | |||||||||||||||
Financial Services | 10,601 | 20,397 | — | 30,998 | |||||||||||||||
Ground Transportation | 50,096 | — | — | 50,096 | |||||||||||||||
Health Care Providers & Services | 15,810 | — | — | 15,810 | |||||||||||||||
Health Care Technology | 5,165 | — | — | 5,165 | |||||||||||||||
Hotels, Restaurants & Leisure | 26,399 | — | — | 26,399 | |||||||||||||||
Information Technology Services | 108,773 | — | — | 108,773 |
Investment Type | Level 1 Unadjusted quoted prices (000) | Level 2 Other significant observable inputs (000) | Level 3 Significant unobservable inputs (000) | Total (000) | |||||||||||||||
Common Stocks (cont'd) | |||||||||||||||||||
Leisure Products | $ | 2,716 | $ | — | $ | — | $ | 2,716 | |||||||||||
Life Sciences Tools & Services | 20,414 | — | — | 20,414 | |||||||||||||||
Media | 38,972 | — | — | 38,972 | |||||||||||||||
Pharmaceuticals | 20,716 | — | — | 20,716 | |||||||||||||||
Software | 42,180 | — | — | 42,180 | |||||||||||||||
Specialty Retail | 17,703 | — | — | 17,703 | |||||||||||||||
Total Common Stocks | 438,805 | 20,397 | — | † | 459,202 | † | |||||||||||||
Preferred Stocks | |||||||||||||||||||
Financial Services | — | — | 1,093 | 1,093 | |||||||||||||||
Software | — | — | 6,991 | 6,991 | |||||||||||||||
Total Preferred Stocks | — | — | 8,084 | 8,084 | |||||||||||||||
Investment Company | 6,913 | — | — | 6,913 | |||||||||||||||
Call Options Purchased | — | 1,298 | — | 1,298 | |||||||||||||||
Short-Term Investments | |||||||||||||||||||
Investment Company | 9,732 | — | — | 9,732 | |||||||||||||||
Repurchase Agreements | — | 216 | — | 216 | |||||||||||||||
Total Short-Term Investments | 9,732 | 216 | — | 9,948 | |||||||||||||||
Total Assets | $ | 455,450 | $ | 21,911 | $ | 8,084 | † | $ | 485,445 | † |
† Includes one or more securities valued at zero.
Transfers between investment levels may occur as the markets fluctuate and/or the availability of data used in an investment's valuation changes.
Following is a reconciliation of investments in which significant unobservable inputs (Level 3) were used in determining fair value:
Common Stock (000) | Preferred Stocks (000) | ||||||||||
Beginning Balance | $ | — | † | $ | 6,887 | ||||||
Purchases | — | 1,061 | |||||||||
Sales | — | — | |||||||||
Amortization of discount | — | — | |||||||||
Transfers in | — | — | |||||||||
Transfers out | — | — | |||||||||
Corporate actions | — | — | |||||||||
Change in unrealized appreciation (depreciation) | — | 136 | |||||||||
Realized gains (losses) | — | — | |||||||||
Ending Balance | $ | — | † | $ | 8,084 | ||||||
Net change in unrealized appreciation (depreciation) from investments still held as of June 30, 2023 | $ | — | $ | 136 |
† Includes a security valued at zero.
13
Morgan Stanley Variable Insurance Fund, Inc.
Semi-Annual Report – June 30, 2023 (unaudited)
Notes to Consolidated Financial Statements (cont'd)
The following table presents additional information about valuation techniques and inputs used for investments that are measured at fair value and categorized within Level 3 as of June 30, 2023. Various valuation techniques were used in the valuation of certain investments and weighted based on the level of significance. The Fund calculated the weighted averages of the unobservable inputs relative to each investment's fair value as of June 30, 2023:
Fair Value at June 30, 2023 (000) | Valuation Technique | Unobservable Input | Amount or Range/ Weighted Average* | Impact to Valuation from an Increase in Input** | |||||||||||||||||||
Preferred Stocks | $ | 8,084 | Market Transaction Method | Precedent Transaction | $ | 20.13–$60.00/$54.26 | Increase | ||||||||||||||||
Discounted Cash Flow | Weighted Average Cost of Capital Perpetual Growth Rate | 13.5%–17.5%/14.8% 3.0%–4.0%/3.5% | Decrease Increase | ||||||||||||||||||||
Market Comparable Companies | Enterprise Value/ Revenue | 1.0x–19.0x/13.6x | Increase | ||||||||||||||||||||
Discount for Lack of Marketability | 15.0%–16.0%/15.1% | Decrease | |||||||||||||||||||||
Comparable Transactions | Enterprise Value/ Revenue | 9.3 | x | Increase |
* Amount is indicative of the weighted average.
** Represents the expected directional change in the fair value of the Level 3 investments that would result from an increase in the corresponding input. A decrease to the unobservable input would have the opposite effect. Significant changes in these inputs could result in significantly higher or lower fair value measurements.
3. Repurchase Agreements: The Fund may enter into repurchase agreements under which the Fund lends cash and takes possession of securities with an agreement that the counterparty will repurchase such securities. In connection with transactions in repurchase agreements, a bank as custodian for the Fund takes possession of the underlying securities which are held as collateral, with a market value at least equal to the amount of the repurchase transaction, including principal and accrued interest. To the extent that any repurchase transaction exceeds one business day, the value of the collateral is marked-to-market on a daily basis to determine that the value of the collateral does not decrease below the repurchase price plus accrued interest as earned. If such a decrease occurs, additional collateral will be requested and, when received, will be added to the account to maintain full collateralization. In the event of default on the obligation to repurchase, the Fund has the right to liquidate the collateral and apply the proceeds in satisfaction of the obligation. In the event of default or bankruptcy by the counterparty to the agreement, realization of the collateral proceeds may be subject to cost and delays. The Fund, along with other affiliated investment companies, may utilize a joint trading account for the purpose of entering into repurchase agreements.
4. Foreign Currency Translation and Foreign Investments: The books and records of the Fund are
maintained in U.S. dollars. Foreign currency amounts are translated into U.S. dollars as follows:
— investments, other assets and liabilities at the prevailing rate of exchange on the valuation date;
— investment transactions and investment income at the prevailing rates of exchange on the dates of such transactions.
Although the net assets of the Fund are presented at the foreign exchange rates and market values at the close of the period, the Fund does not isolate that portion of the results of operations arising as a result of changes in the foreign exchange rates from the fluctuations arising from changes in the market prices of securities held at period end. Similarly, the Fund does not isolate the effect of changes in foreign exchange rates from the fluctuations arising from changes in the market prices of securities sold during the period. Accordingly, realized and unrealized foreign currency gains (losses) on investments in securities are included in the reported net realized and unrealized gains (losses) on investment transactions and balances. However, pursuant to U.S. federal income tax regulations, gains and losses from certain foreign currency transactions and the foreign currency portion of gains and losses realized on sales and maturities of foreign denominated debt securities are treated as ordinary income for U.S. federal income tax purposes.
14
Morgan Stanley Variable Insurance Fund, Inc.
Semi-Annual Report – June 30, 2023 (unaudited)
Notes to Consolidated Financial Statements (cont'd)
Net realized gains (losses) on foreign currency transactions represent net foreign exchange gains (losses) from foreign currency forward exchange contracts, disposition of foreign currencies, currency gains (losses) realized between the trade and settlement dates on securities transactions, and the difference between the amount of investment income and foreign withholding taxes recorded on the Fund's books and the U.S. dollar equivalent amounts actually received or paid. The change in unrealized currency gains (losses) on foreign currency transactions for the period is reflected in the Consolidated Statement of Operations.
Foreign security and currency transactions may involve certain considerations and risks not typically associated with those of U.S. dollar denominated transactions as a result of, among other factors, fluctuations of exchange rates in relation to the U.S. dollar, the possibility of lower levels of governmental supervision and regulation of foreign securities markets and the possibility of political or economic instability.
Governmental approval for foreign investments may be required in advance of making an investment under certain circumstances in some countries, and the extent of foreign investments in U.S. companies may be subject to limitation in other countries. Foreign ownership limitations also may be imposed by the charters of individual companies to prevent, among other concerns, violations of foreign investment limitations. As a result, an additional class of shares (identified as "Foreign" in the Consolidated Portfolio of Investments) may be created and offered for investment. The "local" and "foreign shares" market values may differ. In the absence of trading of the foreign shares in such markets, the Fund values the foreign shares at the closing exchange price of the local shares.
5. Derivatives: The Fund may, but is not required to, use derivative instruments for a variety of purposes, including hedging, risk management, portfolio management or 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. Derivatives are financial instruments whose value is based, in part, on the value of an underlying asset, interest rate, index or financial instrument. Prevailing interest rates and volatility levels, among other things, also affect the value of derivative instruments. A derivative instrument often has risks similar to its underlying asset and may have additional risks, including imperfect correlation between the value of the derivative and the underlying asset, risks
of default by the counterparty to certain transactions, magnification of losses incurred due to changes in the market value of the securities, instruments, indices or interest rates to which the derivative instrument relates, risks that the transactions may not be liquid, 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. All of the Fund's holdings, including derivative instruments, are marked-to-market each day with the change in value reflected in unrealized appreciation (depreciation). Upon disposition, a realized gain or loss is recognized.
Certain derivative transactions may give rise to a form of leverage. Leverage magnifies the potential for gain and 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 to satisfy its obligations 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 objectives, there is no assurance that the use of derivatives will achieve this result.
Following is a description of the derivative instruments and techniques that the Fund used during the period and their associated risks:
Options: With respect to options, the Fund is subject to equity risk, interest rate risk and foreign currency exchange risk in the normal course of pursuing its investment objectives. 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 or 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 premiums paid by the Fund. The Fund may purchase and/or sell put and call options. Purchasing call options tends to increase the Fund's exposure to the underlying (or similar) instrument. Purchasing put options tends to decrease the Fund's exposure to the underlying (or similar) instrument. When entering into purchased option contracts, the Fund bears the risk of interest or exchange rates or securities prices moving unexpectedly, in which case, the Fund may not achieve the anticipated benefits of the purchased option contracts; however the risk of loss is limited to the premium paid. Purchased options are reported as part of
15
Morgan Stanley Variable Insurance Fund, Inc.
Semi-Annual Report – June 30, 2023 (unaudited)
Notes to Consolidated Financial Statements (cont'd)
"Total Investments in Securities" in the Consolidated Statement of Assets and Liabilities. Premiums paid for purchasing options which expired are treated as realized losses. If the Fund sells an option, it sells to another party the right to buy from or sell to the Fund a specific amount of the underlying instrument or 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.
FASB ASC 815, "Derivatives and Hedging" ("ASC 815"), is intended to improve financial reporting about derivative instruments by requiring enhanced disclosures to enable investors to better understand how and why the Fund uses derivative instruments, how these derivative instruments are accounted for and their effects on the Fund's financial position and results of operations.
The following table sets forth the fair value of the Fund's derivative contracts by primary risk exposure as of June 30, 2023:
Asset Derivatives Consolidated Statement of Assets and Liabilities Location | Primary Risk Exposure | Value (000) | |||||||||||||
Purchased Options | Investments, at Value (Purchased Options) | Currency Risk | $ | 1,298 | (a) |
(a) Amounts are included in Investments in Securities in the Consolidated Statement of Assets and Liabilities.
The following table sets forth by primary risk exposure the Fund's change in unrealized appreciation (depreciation) by type of derivative contract for the six months ended June 30, 2023 in accordance with ASC 815:
Change in Unrealized Appreciation (Depreciation) | |||||||||||
Primary Risk Exposure | Derivative Type | Value (000) | |||||||||
Currency Risk | Investments (Purchased Options) | $ | (193 | )(a) |
(a) Amounts are included in Change in Unrealized Appreciation (Depreciation) on Investments in the Consolidated Statement of Operations.
At June 30, 2023, the Fund's derivative assets and liabilities are as follows:
Gross Amounts of Assets and Liabilities Presented in the Consolidated Statement of Assets and Liabilities | |||||||||||
Derivatives | Assets(b) (000) | Liabilities(b) (000) | |||||||||
Purchased Options | $ | 1,298 | (a) | $ | — |
(a) Amounts are included in Investments in Securities in the Consolidated Statement of Assets and Liabilities.
(b) Absent an event of default or early termination, OTC derivative assets and liabilities are presented gross and not offset in the Consolidated Statement of Assets and Liabilities.
The Fund typically enters into International Swaps and Derivatives Association, Inc. Master Agreements ("ISDA Master Agreements") or similar master agreements (collectively, "Master Agreements") with its contract counterparties for certain OTC derivatives in order to, among other things, reduce its credit risk to counterparties. ISDA Master Agreements include provisions for general obligations, representations, collateral and events of default or termination. Under an ISDA Master Agreement, the Fund typically may offset with the counterparty certain OTC derivative financial instruments' payables and/or receivables with collateral held and/or posted and create one single net payment (close-out netting) in the event of default, termination and/or potential deterioration in the credit quality of the counterparty. Various Master Agreements govern the terms of certain transactions with counterparties, including transactions such as swap, forward, repurchase and reverse repurchase agreements. These Master Agreements typically attempt to reduce the counterparty risk associated with such transactions by specifying credit protection mechanisms and providing standardization that improves legal certainty. Cross-termination provisions under Master Agreements typically provide that a default in connection with one transaction between the Fund and a counterparty gives the non-defaulting party the right to terminate any other transactions in place with the defaulting party to create one single net payment due to/due from the defaulting party and may be a feature in certain Master Agreements. In the event the Fund exercises its right to terminate a Master Agreement after a counterparty experiences a termination event as defined in the Master Agreement, the return of collateral with market value in excess of the Fund's net liability may be delayed or denied.
16
Morgan Stanley Variable Insurance Fund, Inc.
Semi-Annual Report – June 30, 2023 (unaudited)
Notes to Consolidated Financial Statements (cont'd)
The following table presents derivative financial instruments that are subject to enforceable netting arrangements as of June 30, 2023:
Gross Amounts Not Offset in the Consolidated Statement of Assets and Liabilities | |||||||||||||||||||
Counterparty | Gross Asset Derivatives Presented in the Consolidated Statement of Assets and Liabilities(a) (000) | Financial Instrument (000) | Collateral Received(b) (000) | Net Amount (not less than $0) (000) | |||||||||||||||
Goldman Sachs International | $ | — | @ | $ | — | $ | — | $ | — | @ | |||||||||
JPMorgan Chase Bank NA | 563 | — | (500 | ) | 63 | ||||||||||||||
Standard Chartered Bank | 735 | — | (550 | ) | 185 | ||||||||||||||
Total | $ | 1,298 | $ | — | $ | (1,050 | ) | $ | 248 |
@ Value is less than $500.
(a) Amounts are included in Investments in Securities in the Consolidated Statement of Assets and Liabilities.
(b) In some instances, the actual collateral received may be more than the amount shown here due to overcollateralization.
For the six months ended June 30, 2023, the approximate average monthly amount outstanding for each derivative type is as follows:
Purchased Options: | |||||||
Average monthly notional amount | 332,101,000 |
6. Securities Lending: The Fund lends securities to qualified financial institutions, such as broker/dealers, to earn additional income. Any increase or decrease in the fair value of the securities loaned that might occur and any interest earned or dividends declared on those securities during the term of the loan would remain in the Fund. The Fund would receive cash or securities as collateral in an amount equal to or exceeding 100% of the current fair value of the loaned securities. The collateral is marked-to-market daily by State Street Bank and Trust Company ("State Street"), the securities lending agent, to ensure that a minimum of 100% collateral coverage is maintained.
Based on pre-established guidelines, the securities lending agent invests any cash collateral that is received in an affiliated money market portfolio and repurchase agreements. Securities lending income is generated from the earnings on the invested collateral and borrowing fees, less any rebates owed to the borrowers and compensation to the lending agent, and is recorded as "Income from Securities Loaned — Net" in the Fund's Consolidated Statement of Operations. Risks in securities lending transactions are that a borrower may not provide addi-
tional collateral when required or return the securities when due, and that the value of the short-term investments will be less than the amount of cash collateral plus any rebate that is required to be returned to the borrower.
The Fund has the right under the securities lending agreement to recover the securities from the borrower on demand.
The following table presents financial instruments that are subject to enforceable netting arrangements as of June 30, 2023:
Gross Amounts Not Offset in the Consolidated Statement of Assets and Liabilities | |||||||||||||||
Gross Asset Amounts Presented in the Consolidated Statement of Assets and Liabilities (000) | Financial Instrument (000) | Collateral Received (000) | Net Amount (not less than $0) (000) | ||||||||||||
$ | 2,627 | (a) | $ | — | $ | (2,627 | )(b)(c) | $ | 0 |
(a) Represents market value of loaned securities at period end.
(b) The Fund received cash collateral of approximately $2,782,000, which was subsequently invested in Repurchase Agreements and Morgan Stanley Institutional Liquidity Funds as reported in the Consolidated Portfolio of Investments.
(c) The actual collateral received is greater than the amount shown here due to overcollateralization.
FASB ASC 860, "Transfers & Servicing: Repurchase-to-Maturity Transactions, Repurchase Financings, and Disclosures", is intended to provide increased transparency about the types of collateral pledged in securities lending transactions and other similar transactions that are accounted for as secured borrowings.
The following table displays a breakdown of transactions accounted for as secured borrowings, the gross obligations by class of collateral pledged and the remaining contractual maturity of those transactions as of June 30, 2023:
Remaining Contractual Maturity of the Agreements | |||||||||||||||||||||||
Overnight and Continuous (000) | <30 days (000) | Between 30 & 90 days (000) | >90 days (000) | Total (000) | |||||||||||||||||||
Securities Lending Transactions | |||||||||||||||||||||||
Common Stocks | $ | 2,782 | $ | — | $ | — | $ | — | $ | 2,782 | |||||||||||||
Total Borrowings | $ | 2,782 | $ | — | $ | — | $ | — | $ | 2,782 | |||||||||||||
Gross amount of recognized liabilities for securities lending transactions | $ | 2,782 |
17
Morgan Stanley Variable Insurance Fund, Inc.
Semi-Annual Report – June 30, 2023 (unaudited)
Notes to Consolidated Financial Statements (cont'd)
7. Restricted Securities: The Fund invests in unregistered or otherwise restricted securities. The term "restricted securities" refers to securities that are unregistered or are held by control persons of the issuer and securities that are subject to contractual restrictions on their resale. As a result, restricted securities may be more difficult to value and the Fund may have difficulty disposing of such assets either in a timely manner or for a reasonable price. In order to dispose of an unregistered security, the Fund, where it has contractual rights to do so, may have to cause such security to be registered. A considerable period may elapse between the time the decision is made to sell the security and the time the security is registered so that the Fund can sell it. Contractual restrictions on the resale of securities vary in length and scope and are generally the result of a negotiation between the issuer and the acquirer of the securities. The Fund would, in either case, bear market risks during that period.
Restricted securities are identified in the Consolidated Portfolio of Investments.
8. Indemnifications: The Company enters into contracts that contain a variety of indemnifications. The Company's maximum exposure under these arrangements is unknown. However, the Company has not had prior claims or losses pursuant to these contracts and expects the risk of loss to be remote.
9. Security Transactions, Income and Expenses: Security transactions are accounted for on the trade date (date the order to buy or sell is executed). Realized gains and losses on the sale of investment securities are determined on the specific identified cost method. Dividend income and other distributions are recorded on the ex-dividend date (except for certain foreign dividends which may be recorded as soon as the Fund is informed of such dividends) net of applicable withholding taxes. Non-cash dividends received in the form of stock, if any, are recognized on the ex-dividend date and recorded as non-cash dividend income at fair value. Interest income is recognized on the accrual basis (except where collection is in doubt) net of applicable withholding taxes. Discounts are accreted and premiums are amortized over the life of the respective securities. Most expenses of the Company can be directly attributed to a particular Fund. Expenses which cannot be directly attributed are apportioned among the Funds based upon relative net assets or other appropriate methods. Income, expenses (other than class specific expenses) and realized and unrealized gains or losses are allocated to each class of shares based upon their relative net assets.
10. Dividends and Distributions to Shareholders: Dividends and distributions to shareholders are recorded on the ex-dividend date. Dividends from net investment income, if any, are declared and paid annually. Net realized capital gains, if any, are distributed at least annually.
B. Advisory Fees: The Adviser, a wholly-owned subsidiary of Morgan Stanley, provides the Fund with advisory services under the terms of an Investment Advisory Agreement, paid quarterly, at the annual rate based on the daily net assets as follows:
First $1 | Next $1 | Next $1 | Over $3 | ||||||||||||
0.50% | 0.45% | 0.40% | 0.35% |
For the six months ended June 30, 2023, the advisory fee rate (net of waiver/rebate) was equivalent to an annual effective rate of 0.28% of the Fund's average daily net assets.
The Adviser has agreed to reduce its advisory fee and/or reimburse the Fund so that total annual Fund operating expenses, excluding certain investment related expenses, taxes, interest and other extraordinary expenses (including litigation), will not exceed 0.57% for Class I shares and 0.82% for Class II shares. The fee waivers and/or expense reimbursements will continue for at least one year from the date of the Fund's prospectus or until such time as the Directors act to discontinue all or a portion of such waivers and/or reimbursements when they deem such action is appropriate. For the six months ended June 30, 2023, approximately $461,000 of advisory fees were waived pursuant to this arrangement.
The Adviser provides investment advisory services to the Subsidiary pursuant to the Subsidiary Investment Management Agreement (the "Agreement"). Under the Agreement, the Subsidiary will pay the Adviser at the end of each fiscal quarter, calculated by applying a quarterly rate, based on the annual rate of 0.05%, to the average daily net assets of the Subsidiary.
The Adviser has agreed to waive its advisory fees by the amount of advisory fees it receives from the Subsidiary.
C. Administration Fees: The Adviser also serves as Administrator to the Company and provides administrative services pursuant to an Administration Agreement for an annual fee, accrued daily and paid monthly, of 0.08% of the Fund's average daily net assets.
Under a Sub-Administration Agreement between the Administrator and State Street, State Street provides certain administrative services to the Company. For such services, the Administrator pays State Street a portion of the fee the Administrator receives from the Fund.
18
Morgan Stanley Variable Insurance Fund, Inc.
Semi-Annual Report – June 30, 2023 (unaudited)
Notes to Consolidated Financial Statements (cont'd)
D. Servicing Fees: The Company accrues daily and pays quarterly a servicing fee of up to 0.17% of the average daily value of shares of the Fund held in an insurance company's account. Certain insurance companies have entered into a servicing agreement with the Company to provide administrative and other contract-owner related services on behalf of the Fund.
E. Distribution Fees: Morgan Stanley Distribution, Inc. ("MSDI" or the "Distributor"), a wholly-owned subsidiary of the Adviser and an indirect subsidiary of Morgan Stanley, serves as the Distributor of the Fund and provides the Fund's Class II shareholders with distribution services pursuant to a Distribution Plan (the "Plan") in accordance with Rule 12b-1 under the Act. Under the Plan, the Fund is authorized to pay the Distributor a distribution fee, which is accrued daily and paid monthly, at an annual rate of 0.25% of the Fund's average daily net assets attributable to Class II shares.
F. Dividend Disbursing and Transfer/Co-Transfer Agent: The Company's dividend disbursing and transfer agent is SS&C Global Investor & Distribution Solutions, Inc. ("SS&C GIDS, Inc."). Pursuant to a Transfer Agency Agreement, the Company pays SS&C GIDS, Inc. a fee based on the number of classes, accounts and transactions relating to the Funds of the Company.
Eaton Vance Management ("EVM"), an affiliate of Morgan Stanley, provides co-transfer agency and related services to the Fund pursuant to a Co-Transfer Agency Services Agreement. For the six months ended June 30, 2023, co-transfer agency fees and expenses incurred to EVM, included in "Transfer Agency Fees" in the Consolidated Statement of Operations, amounted to less than $500.
G. Custodian Fees: State Street (the "Custodian") also serves as Custodian for the Company in accordance with a Custodian Agreement. The Custodian holds cash, securities and other assets of the Company as required by the Act. Custody fees are payable monthly based on assets held in custody, investment purchases and sales activity and account maintenance fees, plus reimbursement for certain out-of-pocket expenses.
H. Security Transactions and Transactions with Affiliates: For the six months ended June 30, 2023, purchases and sales of investment securities for the Fund, other than long-term U.S. Government securities and short-term investments were approximately $73,612,000 and $88,632,000, respectively. There were no purchases and sales of long-term U.S. Government securities for the six months ended June 30, 2023.
The Fund invests in the Institutional Class of the Morgan Stanley Institutional Liquidity Funds — Treasury Securities
Portfolio (the "Liquidity Funds"), an open-end management investment company managed by the Adviser, both directly and as a portion of the securities held as collateral on loaned securities. Advisory fees paid by the Fund are reduced by an amount equal to its pro-rata share of the advisory and administration fees paid by the Fund due to its investment in the Liquidity Funds. For the six months ended June 30, 2023, advisory fees paid were reduced by approximately $13,000 relating to the Fund's investment in the Liquidity Funds.
A summary of the Fund's transactions in shares of affiliated investments during the six months ended June 30, 2023 is as follows:
Affiliated Investment Company | Value December 31, 2022 (000) | Purchases at Cost (000) | Proceeds from Sales (000) | Dividend Income (000) | |||||||||||||||
Liquidity Funds | $ | 4,714 | $ | 65,124 | $ | 60,106 | $ | 306 |
Affiliated Investment Company (cont'd) | Realized Gain (Loss) (000) | Change in Unrealized Appreciation (Depreciation) (000) | Value June 30, 2023 (000) | ||||||||||||
Liquidity Funds | $ | — | $ | — | $ | 9,732 |
The Fund is permitted to purchase and sell securities ("cross-trade") from and to other Morgan Stanley funds as well as other funds and client accounts for which the Adviser or an affiliate of the Adviser serves as investment adviser, pursuant to procedures approved by the Directors in compliance with Rule 17a-7 under the Act (the "Rule"). Each cross-trade is executed at the current market price in compliance with provisions of the Rule. For the six months ended June 30, 2023, the Fund did not engage in any cross-trade transactions.
The Fund has an unfunded Deferred Compensation Plan (the "Compensation Plan"), which allows each independent Director to defer payment of all, or a portion, of the fees he or she receives for serving on the Board of Directors. Each eligible Director generally may elect to have the deferred amounts credited with a return equal to the total return on one or more of the Morgan Stanley funds that are offered as investment options under the Compensation Plan. Appreciation/depreciation and distributions received from these investments are recorded with an offsetting increase/decrease in the deferred compensation obligation and do not affect the NAV of the Fund.
I. Federal Income Taxes: It is the Fund's intention to continue to qualify as a RIC and distribute all of its taxable and tax-exempt income. Accordingly, no provision for federal income taxes is required in the consolidated financial statements.
19
Morgan Stanley Variable Insurance Fund, Inc.
Semi-Annual Report – June 30, 2023 (unaudited)
Notes to Consolidated Financial Statements (cont'd)
The Fund may be subject to taxes imposed by countries in which it invests. Such taxes are generally based on income and/or capital gains earned or repatriated. Taxes are accrued based on net investment income, net realized gains and net unrealized appreciation as such income and/or gains are earned. Taxes may also be based on transactions in foreign currency and are accrued based on the value of investments denominated in such currency.
FASB ASC 740-10, "Income Taxes — Overall", sets forth a minimum threshold for consolidated financial statement recognition of the benefit of a tax position taken or expected to be taken in a tax return. Management has concluded there are no significant uncertain tax positions that would require recognition in the consolidated financial statements. If applicable, the Fund recognizes interest accrued related to unrecognized tax benefits in "Interest Expense" and penalties in "Other Expenses" in the Consolidated Statement of Operations. The Fund files tax returns with the U.S. Internal Revenue Service, New York and various states. Generally, each of the tax years in the four-year period ended December 31, 2022 remains subject to examination by taxing authorities.
The tax character of distributions paid may differ from the character of distributions shown for GAAP purposes due to short-term capital gains being treated as ordinary income for tax purposes. The tax character of distributions paid during fiscal years 2022 and 2021 was as follows:
2022 Distributions Paid From: | 2021 Distributions Paid From: | ||||||||||||||
Ordinary Income (000) | Long-Term Capital Gain (000) | Ordinary Income (000) | Long-Term Capital Gain (000) | ||||||||||||
$ | 9,134 | $ | 272,400 | $ | 34,650 | $ | 250,363 |
The amount and character of income and gains to be distributed are determined in accordance with income tax regulations which may differ from GAAP. These book/tax differences are either considered temporary or permanent in nature.
Temporary differences are attributable to differing book and tax treatments for the timing of the recognition of gains (losses) on certain investment transactions and the timing of the deductibility of certain expenses.
Permanent differences, primarily due to a net operating loss, resulted in the following reclassifications among the components of net assets at December 31, 2022:
Total | Paid-in- | ||||||
$7,803 | $(7,803) |
At December 31, 2022, the Fund had no distributable earnings on a tax basis.
At December 31, 2022, the Fund had available for federal income tax purposes unused short-term and long-term capital losses of approximately $38,794,000 and $44,965,000, respectively, that do not have an expiration date.
To the extent that capital loss carryforwards are used to offset any future capital gains realized, no capital gains tax liability will be incurred by the Fund for gains realized and not distributed. To the extent that capital gains are offset, such gains will not be distributed to the shareholders.
J. Credit Facility: The Company and other Morgan Stanley funds participated in a $300,000,000 committed, unsecured revolving line of credit facility (the "Facility") with State Street. Effective April 17, 2023, the committed line amount increased to $500,000,000. This Facility is to be used for temporary emergency purposes or funding of shareholder redemption requests. The interest rate for any funds drawn will be based on the federal funds rate or overnight bank funding rate plus a spread. The Facility also has a commitment fee of 0.25% per annum based on the unused portion of the Facility, which is allocated among participating funds based on relative net assets. During the six months ended June 30, 2023, the Fund did not have any borrowings under the Facility.
K. Other: At June 30, 2023, the Fund had record owners of 10% or greater. Investment activities of these shareholders could have a material impact on the Fund. The aggregate percentage of such owners was 84.9%.
L. Market Risk and Risks Relating to Certain Financial Instruments:
Bitcoin: The Fund may have exposure to cryptocurrencies indirectly through investments in GBTC, a privately offered investment vehicle that invests in bitcoin. Cryptocurrencies (also referred to as "virtual currencies" and "digital currencies") are digital assets designed to act as a medium of exchange. Although cryptocurrency is an emerging asset class, there are thousands of cryptocurrencies, the most well-known of which is bitcoin. Cryptocurrency facilitates decentralized, peer-to-peer financial exchange and value storage that is used like money, without the oversight of a central authority or banks. The value of cryptocurrency is not backed by any government, corporation, or other identified body. Similar to fiat currencies (i.e., a currency that is backed by a central bank or a national, supra-national or quasi-national organization), cryptocurrencies are susceptible to theft, loss and destruction. For example, the bitcoin held by GBTC (and the Fund's indirect exposure to such bitcoin) is also susceptible to these risks. The value of the GBTC investments in cryptocurrency is subject to fluctuations in the value of the cryptocurrency, which
20
Morgan Stanley Variable Insurance Fund, Inc.
Semi-Annual Report – June 30, 2023 (unaudited)
Notes to Consolidated Financial Statements (cont'd)
have been and may in the future be highly volatile. The value of cryptocurrencies is determined by the supply and demand for cryptocurrency in the global market for the trading of cryptocurrency, which consists primarily of transactions on electronic exchanges. The price of bitcoin could drop precipitously (including to zero) for a variety of reasons, including, but not limited to, regulatory changes, a crisis of confidence, flaw or operational issue in the bitcoin network or a change in user preference to competing cryptocurrencies. The GBTC exposure to cryptocurrency could result in substantial losses to the Fund.
Market: An investment in the Fund is based on the values of the Fund's investments, which may change due to economic and other events that affect markets generally, as well as those that affect particular regions, countries, industries, companies or governments. Social, political, economic and other conditions and events, such as war, natural disasters, health emergencies (e.g., epidemics and pandemics), terrorism, conflicts, social unrest, recessions, inflation, rapid interest rate changes and supply chain disruptions, may occur and could significantly impact issuers, industries, governments and other systems, including the financial markets and global economy. It is difficult to predict when events affecting the U.S. or global financial markets and economies may occur, the effects that such events may have and the duration of those effects (which may last for extended periods). These events may be sudden and significant and may negatively impact broad segments of businesses and populations and have a significant and rapid negative impact on the performance of and/or income or yield from the Fund's investments and exacerbate pre-existing risks to the Fund. 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 ultimate impact of public health emergencies or other adverse economic or market developments and the extent to which the associated conditions impact the Fund and its investments will also depend on other future developments, which are highly uncertain, difficult to accurately predict and subject to change at any time. The financial performance of the Fund's investments (and, in turn, the Fund's investment results) as well as their liquidity may be adversely affected because of these and similar types of factors and developments.
21
Morgan Stanley Variable Insurance Fund, Inc.
Semi-Annual Report – June 30, 2023 (unaudited)
Investment Advisory Agreement Approval
Nature, Extent and Quality of Services
The Board reviewed and considered the nature and extent of the investment advisory services provided by the Adviser under the advisory agreement, including portfolio management, investment research and equity and fixed income securities trading. The Board also reviewed and considered the nature and extent of the non-advisory, administrative services provided by the Administrator under the administration agreement, including accounting, operations, clerical, bookkeeping, compliance, business management and planning, legal services and the provision of supplies, office space and utilities at the Adviser's expense. The Board also considered the Adviser's investment in personnel and infrastructure that benefits the Fund. (The Adviser and Administrator together are referred to as the "Adviser" and the advisory and administration agreements together are referred to as the "Management Agreement.") The Board also considered that the Adviser serves a variety of other investment advisory clients and has experience overseeing service providers. The Board also compared the nature of the services provided by the Adviser with similar services provided by non-affiliated advisers as prepared by Broadridge Financial Solutions, Inc. ("Broadridge").
The Board reviewed and considered the qualifications of the portfolio managers, the senior administrative managers and other key personnel of the Adviser who provide the advisory and administrative services to the Fund. The Board determined that the Adviser's portfolio managers and key personnel are well qualified by education and/or training and experience to perform the services in an efficient and professional manner. The Board concluded that the nature and extent of the advisory and administrative services provided were necessary and appropriate for the conduct of the business and investment activities of the Fund and supported its decision to approve the Management Agreement.
Performance, Fees and Expenses of the Fund
The Board reviewed the performance, fees and expenses of the Fund compared to its peers, as prepared by Broadridge, and to appropriate benchmarks where applicable. The Board discussed with the Adviser the performance goals and the actual results achieved in managing the Fund. When considering a fund's performance, the Board and the Adviser place emphasis on trends and longer-term returns (focusing on one-year, three-year and five-year performance, as of December 31, 2022, or since inception, as applicable). When a fund underperforms its benchmark and/or its peer group average, the Board and the Adviser discuss the causes of such underperformance and, where necessary, they discuss specific changes to investment strategy or investment personnel. The Board noted that the Fund's performance was below its peer group average for the one-, three- and five-year periods. The Board discussed with the Adviser the level of the advisory and administration fees (together, the "management fee") for this Fund relative to comparable funds and/or other accounts advised by the Adviser and/or compared to its peers as prepared by Broadridge. In addition to the management fee, the Board also reviewed the Fund's total expense ratio. The Board noted that the Fund's management fee and total expense ratio were lower than its peer group averages. After discussion, the Board concluded that the Fund's (i) performance was acceptable; and (ii) management fee and total expense ratio were competitive with its peer group averages.
Economies of Scale
The Board considered the size and growth prospects of the Fund and how that relates to the Fund's total expense ratio and particularly the Fund's management fee rate, which includes breakpoints. In conjunction with its review of the Adviser's profitability, the Board discussed with the Adviser how a change in assets can affect the efficiency or effectiveness of managing the Fund and whether the management fee level is appropriate relative to current and projected asset levels and/or whether the management fee structure reflects economies of scale as asset levels change. The Board has determined that its review of the actual and/or potential economies of scale of the Fund supports its decision to approve the Management Agreement.
Profitability of the Adviser and Affiliates
The Board considered information concerning the costs incurred and profits realized by the Adviser and its affiliates during the last year from their relationship with the Fund and during the last two years from their relationship with the Morgan Stanley Fund Complex and reviewed with the Adviser the cost allocation methodology used to determine the profitability of the Adviser and affiliates. The Board has determined that its review of the analysis of the Adviser's expenses and profitability supports its decision to approve the Management Agreement.
22
Morgan Stanley Variable Insurance Fund, Inc.
Semi-Annual Report – June 30, 2023 (unaudited)
Investment Advisory Agreement Approval (cont'd)
Other Benefits of the Relationship
The Board considered other direct and indirect benefits to the Adviser and/or its affiliates derived from their relationship with the Fund and other funds advised by the Adviser. These benefits may include, among other things, fees for trading, distribution and/or shareholder servicing and for transaction processing and reporting platforms used by securities lending agents, and research received by the Adviser generated from commission dollars spent on funds' portfolio trading. The Board reviewed with the Adviser these arrangements and the reasonableness of the Adviser's costs relative to the services performed. The Board has determined that its review of the other benefits received by the Adviser or its affiliates supports its decision to approve the Management Agreement.
Resources of the Adviser and Historical Relationship Between the Fund and the Adviser
The Board considered whether the Adviser is financially sound and has the resources necessary to perform its obligations under the Management Agreement. The Board also reviewed and considered the historical relationship between the Fund and the Adviser, including the organizational structure of the Adviser, the policies and procedures formulated and adopted by the Adviser for managing the Fund's operations and the Board's confidence in the competence and integrity of the senior managers and key personnel of the Adviser. The Board concluded that the Adviser has the financial resources necessary to fulfill its obligations under the Management Agreement and that it is beneficial for the Fund to continue its relationship with the Adviser.
Other Factors and Current Trends
The Board considered the controls and procedures adopted and implemented by the Adviser and monitored by the Fund's Chief Compliance Officer and concluded that the conduct of business by the Adviser indicates a good faith effort on its part to adhere to high ethical standards in the conduct of the Fund's business.
General Conclusion
After considering and weighing all of the above factors, with various written materials and verbal information presented by the Adviser, the Board concluded that it would be in the best interest of the Fund and its shareholders to approve renewal of the Management Agreement for another year. In reaching this conclusion the Board did not give particular weight to any single piece of information or factor referenced above. The Board considered these factors and information over the course of the year and in numerous meetings, some of which were in executive session with only the independent Board members and their counsel present. It is possible that individual Board members may have weighed these factors, and the information presented, differently in reaching their individual decisions to approve the Management Agreement.
23
Morgan Stanley Variable Insurance Fund, Inc.
Semi-Annual Report – June 30, 2023 (unaudited)
Liquidity Risk Management Program
In compliance with Rule 22e-4 under the Investment Company Act of 1940, as amended (the "Liquidity Rule"), the Fund has adopted and implemented a liquidity risk management program (the "Program"), which is reasonably designed to assess and manage the risk that the Fund could not meet requests to redeem shares issued by the Fund without significant dilution of remaining investors' interests in the Fund (i.e., liquidity risk). The Fund's Board of Directors (the "Board") previously approved the designation of the Liquidity Risk Subcommittee (the "LRS") as Program administrator. The LRS is comprised of representatives from various divisions within Morgan Stanley Investment Management.
At a meeting held on March 1-2, 2023, the Board reviewed a written report prepared by the LRS that addressed the Program's operation and assessed its adequacy, and effectiveness of implementation for the period from January 1, 2022, through December 31, 2022, as required under the Liquidity Rule. The report concluded that the Program operated effectively and was adequately and effectively implemented in all material aspects, and that the relevant controls and safeguards were appropriately designed to enable the LRS to administer the Program in compliance with the Liquidity Rule.
In accordance with the Program, the LRS assessed each Fund's liquidity risk no less frequently than annually taking into consideration certain factors, as applicable, such as (i) investment strategy and liquidity of portfolio investments, (ii) short-term and long-term cash flow projections and (iii) holdings of cash and cash equivalents and borrowing arrangements and other funding sources. Certain factors are considered under both normal and reasonably foreseeable stressed conditions.
Each Fund portfolio investment is classified into one of four liquidity categories, which classification is assessed at least monthly by the LRS. The classification is based on a determination of the number of days it is reasonably expected to take to convert the investment into cash, or sell or dispose of the investment, in current market conditions without significantly changing the market value of the investment. Liquidity classification determinations take into account various market, trading and investment-specific considerations, as well as market depth, and in some cases utilize third-party vendor data.
The Liquidity Rule limits a fund's investments in illiquid investments to 15% of its net assets and requires funds that do not primarily hold assets that are highly liquid investments to determine and maintain a minimum percentage of the fund's net assets to be invested in highly liquid investments (highly liquid investment minimum or "HLIM"). The LRS believes that the Program includes provisions reasonably designed to review, monitor and comply with the 15% limit on illiquid investments and for determining, periodically reviewing and complying with the HLIM requirement, as applicable.
There can be no assurance that the Program will achieve its objectives under all circumstances in the future. Please refer to the Fund's prospectus for more information regarding the Fund's exposure to liquidity risk and other risks to which it may be subject.
24
Morgan Stanley Variable Insurance Fund, Inc.
Semi-Annual Report – June 30, 2023 (unaudited)
Directors and Officers Information
Directors
Frank L. Bowman
Frances L. Cashman
Kathleen A. Dennis
Nancy C. Everett
Eddie A. Grier
Jakki L. Haussler
Dr. Manuel H. Johnson
Joseph J. Kearns
Michael F. Klein
Patricia A. Maleski
W. Allen Reed, Chair of the Board
Adviser and Administrator
Morgan Stanley Investment Management Inc.
522 Fifth Avenue
New York, New York 10036
Distributor
Morgan Stanley Distribution, Inc.
522 Fifth Avenue
New York, New York 10036
Dividend Disbursing and Transfer Agent
SS&C Global Investor & Distribution Solutions, Inc.
P.O. Box 219804
Kansas City, Missouri 64121-9804
Co-Transfer Agent
Eaton Vance Management
Two International Place
Boston, Massachusetts 02110
Officers
John H. Gernon
President and Principal Executive Officer
Deidre A. Downes
Chief Compliance Officer
Francis J. Smith
Treasurer and Principal Financial Officer
Mary E. Mullin
Secretary
Michael J. Key
Vice President
Custodian
State Street Bank and Trust Company
One Congress Street
Boston, Massachusetts 02114
Legal Counsel
Dechert LLP
1095 Avenue of the Americas
New York, New York 10036
Counsel to the Independent Directors
Perkins Coie LLP
1155 Avenue of the Americas,
22nd Floor
New York, New York 10036
Independent Registered Public Accounting Firm
Ernst & Young LLP
200 Clarendon Street
Boston, Massachusetts 02116
Reporting to Shareholders
Each Morgan Stanley fund provides a complete schedule of portfolio holdings in its Semi-Annual and the Annual Reports within 60 days of the end of the fund's second and fourth fiscal quarters. The Semi-Annual and Annual Reports are filed electronically with the Securities and Exchange Commission ("SEC") on Form N-CSRS and Form N-CSR, respectively. Morgan Stanley makes these reports available on its public website, www.morganstanley.com/im/shareholderreports. Each Morgan Stanley non-money market fund also files a complete schedule of portfolio holdings with the SEC for the fund's first and third fiscal quarters as an attachment to Form N-PORT. Morgan Stanley does not deliver the reports for the first and third fiscal quarters to shareholders, but makes the complete schedule of portfolio holdings for the fund's first and third fiscal quarters available on its public website. The holdings for each money market fund are also posted to the Morgan Stanley public website. You may obtain the Form N-PORT filings (as well as the Form N-CSR and N-CSRS filings) by accessing the SEC's website, www.sec.gov. You can also request copies of these materials, upon payment of a duplicating fee, by electronic request at the SEC's email address (publicinfo@sec.gov).
Proxy Voting Policies and Procedures and Proxy Voting Record
You may obtain a copy of the Company's Proxy Voting Policy and Procedures and information regarding how the Company voted proxies relating to portfolio securities during the most recent twelve-month period ended June 30, without charge, upon request, by calling toll free 1 (800) 869-6397 or by visiting our website at www.morganstanley.com/im/shareholderreports. This information is also available on the SEC's website at www.sec.gov.
This report is submitted for the general information of the shareholders of the Fund. For more detailed information about the Fund, its fees and expenses and other pertinent information, please read its Prospectus. The Company's Statement of Additional Information contains additional information about the Fund, including its Directors. It is available, without charge, by calling 1 (800) 869-6397.
Householding Notice
To reduce printing and mailing costs, the Fund attempts to eliminate duplicate mailings to the same address. The Fund delivers a single copy of certain shareholder documents, including shareholder reports, prospectuses and proxy materials, to investors with the same last name who reside at the same address. Your participation in this program will continue for an unlimited period of time unless you instruct us otherwise. You can request multiple copies of these documents by calling 1 (800) 869-6397, 8:00 a.m. to 6:00 p.m., ET. Once our Customer Service Center has received your instructions, we will begin sending individual copies for each account within 30 days.
This report is not authorized for distribution to prospective investors in the Fund unless preceded or accompanied by an effective Prospectus. Read the Prospectus carefully before investing.
UIFCGSAN
5836785 EXP 08.31.24
Morgan Stanley Variable Insurance Fund, Inc.
Semi-Annual Report – June 30, 2023
U.S. Real Estate Portfolio
The Fund is intended to be a funding vehicle for variable annuity contracts and variable life insurance policies offered by the separate accounts of certain life insurance companies.
Morgan Stanley Variable Insurance Fund, Inc.
Semi-Annual Report – June 30, 2023 (unaudited)
Table of Contents
Expense Example | 2 | ||||||
Portfolio of Investments | 3 | ||||||
Statement of Assets and Liabilities | 4 | ||||||
Statement of Operations | 5 | ||||||
Statements of Changes in Net Assets | 6 | ||||||
Financial Highlights | 7 | ||||||
Notes to Financial Statements | 9 | ||||||
Investment Advisory Agreement Approval | 15 | ||||||
Liquidity Risk Management Program | 17 | ||||||
Director and Officer Information | Back Cover |
1
Morgan Stanley Variable Insurance Fund, Inc.
Semi-Annual Report – June 30, 2023 (unaudited)
Expense Example
U.S. Real Estate Portfolio
As a shareholder of the U.S. Real Estate Portfolio (the "Fund"), you incur two types of costs: (1) insurance company charges; and (2) ongoing costs, which may include advisory fees, administration fees, distribution (12b-1) fees and other Fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.
This example is based on an investment of $1,000 invested at the beginning of the six-month period ended June 30, 2023 and held for the entire six-month period.
Actual Expenses
The table below provides information about actual account values and actual expenses. You may use the information in this table, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the table under the heading entitled "Actual Expenses Paid During Period" to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The table below provides information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any insurance company charges. Therefore, the table below is useful in comparing ongoing costs, but will not help you determine the relative total cost of owning different funds. In addition, if these insurance company charges were included, your costs would have been higher.
Beginning Account Value 1/1/23 | Actual Ending Account Value 6/30/23 | Hypothetical Ending Account Value | Actual Expenses Paid During Period* | Hypothetical Expenses Paid During Period* | Net Expense Ratio During Period** | ||||||||||||||||||||||
U.S. Real Estate Portfolio Class I | $ | 1,000.00 | $ | 1,072.40 | $ | 1,020.73 | $ | 4.21 | $ | 4.11 | 0.82 | % | |||||||||||||||
U.S. Real Estate Portfolio Class II | 1,000.00 | 1,070.60 | 1,019.49 | 5.49 | 5.36 | 1.07 |
* Expenses are calculated using each Fund Class' annualized net expense ratio (as disclosed), multiplied by the average account value over the period and multiplied by 181/365 (to reflect the most recent one-half year period).
** Annualized.
2
Morgan Stanley Variable Insurance Fund, Inc.
Semi-Annual Report – June 30, 2023 (unaudited)
Portfolio of Investments
U.S. Real Estate Portfolio
Shares | Value (000) | ||||||||||
Common Stocks (98.9%) | |||||||||||
Apartments (12.2%) | |||||||||||
AvalonBay Communities, Inc. REIT | 107,653 | $ | 20,375 | ||||||||
Essex Property Trust, Inc. REIT | 31,843 | 7,461 | |||||||||
Mid-America Apartment Communities, Inc. REIT | 55,829 | 8,478 | |||||||||
36,314 | |||||||||||
Data Centers (12.9%) | |||||||||||
Digital Realty Trust, Inc. REIT | 118,686 | 13,515 | |||||||||
Equinix, Inc. REIT | 31,987 | 25,076 | |||||||||
38,591 | |||||||||||
Free Standing (8.0%) | |||||||||||
Agree Realty Corp. REIT | 87,823 | 5,743 | |||||||||
NETSTREIT Corp. REIT | 182,501 | 3,261 | |||||||||
Realty Income Corp. REIT | 247,243 | 14,783 | |||||||||
23,787 | |||||||||||
Gaming REITs (4.5%) | |||||||||||
VICI Properties, Inc. REIT | 428,819 | 13,478 | |||||||||
Health Care (10.0%) | |||||||||||
Ventas, Inc. REIT | 186,545 | 8,818 | |||||||||
Welltower, Inc. REIT | 261,867 | 21,182 | |||||||||
30,000 | |||||||||||
Industrial (17.5%) | |||||||||||
Americold Realty Trust, Inc. REIT | 193,196 | 6,240 | |||||||||
Prologis Inc. REIT | 338,123 | 41,464 | |||||||||
Rexford Industrial Realty, Inc. REIT | 84,625 | 4,419 | |||||||||
52,123 | |||||||||||
Lodging/Resorts (3.1%) | |||||||||||
Boyd Gaming Corp. | 31,502 | 2,185 | |||||||||
Host Hotels & Resorts, Inc. REIT | 425,008 | 7,153 | |||||||||
9,338 | |||||||||||
Manufactured Homes (2.8%) | |||||||||||
Sun Communities, Inc. REIT | 63,599 | 8,297 | |||||||||
Office (1.1%) | |||||||||||
Alexandria Real Estate Equities, Inc. REIT | 30,016 | 3,407 | |||||||||
Regional Malls (4.3%) | |||||||||||
Simon Property Group, Inc. REIT | 110,942 | 12,812 | |||||||||
Self Storage (8.9%) | |||||||||||
Life Storage, Inc. REIT | 68,977 | 9,171 | |||||||||
Public Storage REIT | 59,424 | 17,345 | |||||||||
26,516 | |||||||||||
Shopping Centers (6.3%) | |||||||||||
Brixmor Property Group, Inc. REIT | 358,623 | 7,890 | |||||||||
Kite Realty Group Trust REIT | 363,935 | 8,130 | |||||||||
RPT Realty REIT | 279,742 | 2,923 | |||||||||
18,943 | |||||||||||
Single Family Homes (4.7%) | |||||||||||
American Homes 4 Rent, Class A REIT | 394,466 | 13,984 |
Shares | Value (000) | ||||||||||
Specialty (2.6%) | |||||||||||
Iron Mountain, Inc. REIT | 138,498 | $ | 7,869 | ||||||||
Total Common Stocks (Cost $276,445) | 295,459 | ||||||||||
Short-Term Investment (1.0%) | |||||||||||
Investment Company (1.0%) | |||||||||||
Morgan Stanley Institutional Liquidity Funds — Treasury Portfolio — Institutional Class (See Note H) (Cost $2,888) | 2,888,212 | 2,888 | |||||||||
Total Investments (99.9%) (Cost $279,333) (a) | 298,347 | ||||||||||
Other Assets in Excess of Liabilities (0.1%) | 410 | ||||||||||
Net Assets (100.0%) | $ | 298,757 |
(a) At June 30, 2023, the aggregate cost for federal income tax purposes approximates the aggregate cost for book purposes. The aggregate gross unrealized appreciation is approximately $32,288,000 and the aggregate gross unrealized depreciation is approximately $13,274,000, resulting in net unrealized appreciation of approximately $19,014,000.
REIT Real Estate Investment Trust.
Portfolio Composition
Classification | Percentage of Total Investments | ||||||
Other* | 24.1 | % | |||||
Industrial | 17.5 | ||||||
Data Centers | 12.9 | ||||||
Apartments | 12.2 | ||||||
Health Care | 10.1 | ||||||
Self Storage | 8.9 | ||||||
Free Standing | 8.0 | ||||||
Shopping Centers | 6.3 | ||||||
Total Investments | 100.0 | % |
* Industries and/or investment types representing less than 5% of total investments.
The accompanying notes are an integral part of the financial statements.
3
Morgan Stanley Variable Insurance Fund, Inc.
Semi-Annual Report – June 30, 2023 (unaudited)
U.S. Real Estate Portfolio
Statement of Assets and Liabilities | June 30, 2023 (000) | ||||||
Assets: | |||||||
Investments in Securities of Unaffiliated Issuers, at Value (Cost $276,445) | $ | 295,459 | |||||
Investment in Security of Affiliated Issuer, at Value (Cost $2,888) | 2,888 | ||||||
Total Investments in Securities, at Value (Cost $279,333) | 298,347 | ||||||
Foreign Currency, at Value (Cost $21) | 20 | ||||||
Dividends Receivable | 952 | ||||||
Receivable for Fund Shares Sold | 239 | ||||||
Receivable from Affiliate | 12 | ||||||
Other Assets | 26 | ||||||
Total Assets | 299,596 | ||||||
Liabilities: | |||||||
Payable for Advisory Fees | 368 | ||||||
Payable for Fund Shares Redeemed | 238 | ||||||
Payable for Servicing Fees | 113 | ||||||
Payable for Professional Fees | 35 | ||||||
Payable for Distribution Fees — Class II Shares | 32 | ||||||
Payable for Administration Fees | 19 | ||||||
Payable for Custodian Fees | 2 | ||||||
Payable for Transfer Agency Fees | 1 | ||||||
Other Liabilities | 31 | ||||||
Total Liabilities | 839 | ||||||
NET ASSETS | $ | 298,757 | |||||
Net Assets Consist of: | |||||||
Paid-in-Capital | $ | 298,765 | |||||
Total Accumulated Loss | (8 | ) | |||||
Net Assets | $ | 298,757 | |||||
CLASS I: | |||||||
Net Assets | $ | 139,409 | |||||
Net Asset Value, Offering and Redemption Price Per Share Applicable to 10,016,677 Outstanding $0.001 Par Value Shares (Authorized 500,000,000 Shares) | $ | 13.92 | |||||
CLASS II: | |||||||
Net Assets | $ | 159,348 | |||||
Net Asset Value, Offering and Redemption Price Per Share Applicable to 11,543,582 Outstanding $0.001 Par Value Shares (Authorized 500,000,000 Shares) | $ | 13.80 |
The accompanying notes are an integral part of the financial statements.
4
Morgan Stanley Variable Insurance Fund, Inc.
Semi-Annual Report – June 30, 2023 (unaudited)
U.S. Real Estate Portfolio
Statement of Operations | Six Months Ended June 30, 2023 (000) | ||||||
Investment Income: | |||||||
Dividends from Securities of Unaffiliated Issuers | $ | 5,688 | |||||
Dividends from Security of Affiliated Issuer (Note H) | 74 | ||||||
Total Investment Income | 5,762 | ||||||
Expenses: | |||||||
Advisory Fees (Note B) | 1,031 | ||||||
Servicing Fees (Note D) | 217 | ||||||
Distribution Fees — Class II Shares (Note E) | 197 | ||||||
Administration Fees (Note C) | 118 | ||||||
Professional Fees | 67 | ||||||
Shareholder Reporting Fees | 12 | ||||||
Transfer Agency Fees (Note F) | 8 | ||||||
Custodian Fees (Note G) | 6 | ||||||
Directors' Fees and Expenses | 4 | ||||||
Pricing Fees | 1 | ||||||
Other Expenses | 7 | ||||||
Total Expenses | 1,668 | ||||||
Waiver of Advisory Fees (Note B) | (264 | ) | |||||
Rebate from Morgan Stanley Affiliate (Note H) | (3 | ) | |||||
Net Expenses | 1,401 | ||||||
Net Investment Income | 4,361 | ||||||
Realized Loss: | |||||||
Investments Sold | (11,335 | ) | |||||
Foreign Currency Translation | — | @ | |||||
Net Realized Loss | (11,335 | ) | |||||
Change in Unrealized Appreciation (Depreciation): | |||||||
Investments | 27,540 | ||||||
Foreign Currency Translation | — | @ | |||||
Net Change in Unrealized Appreciation (Depreciation) | 27,540 | ||||||
Net Realized Loss and Change in Unrealized Appreciation (Depreciation) | 16,205 | ||||||
Net Increase in Net Assets Resulting from Operations | $ | 20,566 |
@ Amount is less than $500.
The accompanying notes are an integral part of the financial statements.
5
Morgan Stanley Variable Insurance Fund, Inc.
Semi-Annual Report – June 30, 2023
U.S. Real Estate Portfolio
Statements of Changes in Net Assets | Six Months Ended June 30, 2023 (unaudited) (000) | Year Ended December 31, 2022 (000) | |||||||||
Increase (Decrease) in Net Assets: | |||||||||||
Operations: | |||||||||||
Net Investment Income | $ | 4,361 | $ | 4,437 | |||||||
Net Realized Loss | (11,335 | ) | (16,988 | ) | |||||||
Net Change in Unrealized Appreciation (Depreciation) | 27,540 | (95,351 | ) | ||||||||
Net Increase (Decrease) in Net Assets Resulting from Operations | 20,566 | (107,902 | ) | ||||||||
Dividends and Distributions to Shareholders: | |||||||||||
Class I | — | (35,265 | ) | ||||||||
Class II | — | (40,499 | ) | ||||||||
Total Dividends and Distributions to Shareholders | — | (75,764 | ) | ||||||||
Capital Share Transactions:(1) | |||||||||||
Class I: | |||||||||||
Subscribed | 4,472 | 16,407 | |||||||||
Distributions Reinvested | — | 35,265 | |||||||||
Redeemed | (10,272 | ) | (24,802 | ) | |||||||
Class II: | |||||||||||
Subscribed | 4,146 | 16,156 | |||||||||
Distributions Reinvested | — | 40,499 | |||||||||
Redeemed | (10,763 | ) | (25,646 | ) | |||||||
Net Increase (Decrease) in Net Assets Resulting from Capital Share Transactions | (12,417 | ) | 57,879 | ||||||||
Total Increase (Decrease) in Net Assets | 8,149 | (125,787 | ) | ||||||||
Net Assets: | |||||||||||
Beginning of Period | 290,608 | 416,395 | |||||||||
End of Period | $ | 298,757 | $ | 290,608 | |||||||
(1) Capital Share Transactions: | |||||||||||
Class I: | |||||||||||
Shares Subscribed | 332 | 1,005 | |||||||||
Shares Issued on Distributions Reinvested | — | 2,499 | |||||||||
Shares Redeemed | (762 | ) | (1,324 | ) | |||||||
Net Increase (Decrease) in Class I Shares Outstanding | (430 | ) | 2,180 | ||||||||
Class II: | |||||||||||
Shares Subscribed | 312 | 1,021 | |||||||||
Shares Issued on Distributions Reinvested | — | 2,887 | |||||||||
Shares Redeemed | (797 | ) | (1,414 | ) | |||||||
Net Increase (Decrease) in Class II Shares Outstanding | (485 | ) | 2,494 |
The accompanying notes are an integral part of the financial statements.
6
Morgan Stanley Variable Insurance Fund, Inc.
Semi-Annual Report – June 30, 2023
Financial Highlights
U.S. Real Estate Portfolio
Class I | |||||||||||||||||||||||||||
Six Months Ended June 30, 2023 | Year Ended December 31, | ||||||||||||||||||||||||||
Selected Per Share Data and Ratios | (unaudited) | 2022 | 2021 | 2020 | 2019 | 2018 | |||||||||||||||||||||
Net Asset Value, Beginning of Period | $ | 12.98 | $ | 23.47 | $ | 17.13 | $ | 21.93 | $ | 19.52 | $ | 21.72 | |||||||||||||||
Income (Loss) from Investment Operations: | |||||||||||||||||||||||||||
Net Investment Income(1) | 0.21 | 0.25 | 0.27 | 0.35 | 0.51 | 0.51 | |||||||||||||||||||||
Net Realized and Unrealized Gain (Loss) | 0.73 | (6.24 | ) | 6.49 | (4.20 | ) | 3.15 | (2.13 | ) | ||||||||||||||||||
Total from Investment Operations | 0.94 | (5.99 | ) | 6.76 | (3.85 | ) | 3.66 | (1.62 | ) | ||||||||||||||||||
Distributions from and/or in Excess of: | |||||||||||||||||||||||||||
Net Investment Income | — | (0.24 | ) | (0.42 | ) | (0.48 | ) | (0.42 | ) | (0.58 | ) | ||||||||||||||||
Net Realized Gain | — | (4.26 | ) | — | (0.47 | ) | (0.83 | ) | — | ||||||||||||||||||
Total Distributions | — | (4.50 | ) | (0.42 | ) | (0.95 | ) | (1.25 | ) | (0.58 | ) | ||||||||||||||||
Net Asset Value, End of Period | $ | 13.92 | $ | 12.98 | $ | 23.47 | $ | 17.13 | $ | 21.93 | $ | 19.52 | |||||||||||||||
Total Return(2) | 7.24 | %(3) | (27.05 | )% | 39.80 | % | (16.85 | )% | 18.94 | % | (7.71 | )% | |||||||||||||||
Ratios to Average Net Assets and Supplemental Data: | |||||||||||||||||||||||||||
Net Assets, End of Period (Thousands) | $ | 139,409 | $ | 135,581 | $ | 194,007 | $ | 169,291 | $ | 200,635 | $ | 185,191 | |||||||||||||||
Ratio of Expenses Before Expense Limitation | 1.00 | %(4) | 1.01 | % | 0.98 | % | 0.99 | % | 0.97 | % | 1.03 | % | |||||||||||||||
Ratio of Expenses After Expense Limitation | 0.82 | %(4)(5) | 0.82 | %(5) | 0.82 | %(5) | 0.82 | %(5) | 0.82 | %(5) | 0.86 | %(5)(6) | |||||||||||||||
Ratio of Net Investment Income | 3.10 | %(4)(5) | 1.46 | %(5) | 1.36 | %(5) | 2.07 | %(5) | 2.36 | %(5) | 2.47 | %(5) | |||||||||||||||
Ratio of Rebate from Morgan Stanley Affiliates | 0.00 | %(4)(7) | 0.00 | %(7) | 0.00 | %(7) | 0.00 | %(7) | 0.00 | %(7) | 0.00 | %(7) | |||||||||||||||
Portfolio Turnover Rate | 29 | %(3) | 61 | % | 129 | % | 50 | % | 20 | % | 40 | % |
(1) Per share amount is based on average shares outstanding.
(2) Calculated based on the net asset value as of the last business day of the period. Performance does not reflect fees and expenses imposed by your insurance company's separate account. If performance information included the effect of these additional charges, the total return would be lower.
(3) Not annualized.
(4) Annualized.
(5) 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."
(6) Effective July 1, 2018, the Adviser has agreed to limit the ratio of expenses to average net assets to the maximum ratio of 0.82% for Class I shares. Prior to July 1, 2018, the maximum ratio was 0.90% for Class I shares.
(7) Amount is less than 0.005%.
The accompanying notes are an integral part of the financial statements.
7
Morgan Stanley Variable Insurance Fund, Inc.
Semi-Annual Report – June 30, 2023
Financial Highlights
U.S. Real Estate Portfolio
Class II | |||||||||||||||||||||||||||
Six Months Ended June 30, 2023 | Year Ended December 31, | ||||||||||||||||||||||||||
Selected Per Share Data and Ratios | (unaudited) | 2022 | 2021 | 2020 | 2019 | 2018 | |||||||||||||||||||||
Net Asset Value, Beginning of Period | $ | 12.89 | $ | 23.32 | $ | 17.03 | $ | 21.80 | $ | 19.40 | $ | 21.59 | |||||||||||||||
Income (Loss) from Investment Operations: | |||||||||||||||||||||||||||
Net Investment Income(1) | 0.19 | 0.20 | 0.22 | 0.30 | 0.45 | 0.46 | |||||||||||||||||||||
Net Realized and Unrealized Gain (Loss) | 0.72 | (6.18 | ) | 6.44 | (4.17 | ) | 3.14 | (2.13 | ) | ||||||||||||||||||
Total from Investment Operations | 0.91 | (5.98 | ) | 6.66 | (3.87 | ) | 3.59 | (1.67 | ) | ||||||||||||||||||
Distributions from and/or in Excess of: | |||||||||||||||||||||||||||
Net Investment Income | — | (0.19 | ) | (0.37 | ) | (0.43 | ) | (0.36 | ) | (0.52 | ) | ||||||||||||||||
Net Realized Gain | — | (4.26 | ) | — | (0.47 | ) | (0.83 | ) | — | ||||||||||||||||||
Total Distributions | — | (4.45 | ) | (0.37 | ) | (0.90 | ) | (1.19 | ) | (0.52 | ) | ||||||||||||||||
Net Asset Value, End of Period | $ | 13.80 | $ | 12.89 | $ | 23.32 | $ | 17.03 | $ | 21.80 | $ | 19.40 | |||||||||||||||
Total Return(2) | 7.06 | %(3) | (27.22 | )% | 39.44 | % | (17.10 | )% | 18.68 | % | (7.97 | )% | |||||||||||||||
Ratios to Average Net Assets and Supplemental Data: | |||||||||||||||||||||||||||
Net Assets, End of Period (Thousands) | $ | 159,348 | $ | 155,027 | $ | 222,388 | $ | 190,554 | $ | 228,085 | $ | 218,290 | |||||||||||||||
Ratio of Expenses Before Expense Limitation | 1.25 | %(4) | 1.26 | % | 1.23 | % | 1.24 | % | 1.22 | % | 1.28 | % | |||||||||||||||
Ratio of Expenses After Expense Limitation | 1.07 | %(4)(5) | 1.07 | %(5) | 1.07 | %(5) | 1.07 | %(5) | 1.07 | %(5) | 1.11 | %(5)(6) | |||||||||||||||
Ratio of Net Investment Income | 2.85 | %(4)(5) | 1.21 | %(5) | 1.11 | %(5) | 1.82 | %(5) | 2.11 | %(5) | 2.22 | %(5) | |||||||||||||||
Ratio of Rebate from Morgan Stanley Affiliates | 0.00 | %(4)(7) | 0.00 | %(7) | 0.00 | %(7) | 0.00 | %(7) | 0.00 | %(7) | 0.00 | %(7) | |||||||||||||||
Portfolio Turnover Rate | 29 | %(3) | 61 | % | 129 | % | 50 | % | 20 | % | 40 | % |
(1) Per share amount is based on average shares outstanding.
(2) Calculated based on the net asset value as of the last business day of the period. Performance does not reflect fees and expenses imposed by your insurance company's separate account. If performance information included the effect of these additional charges, the total return would be lower.
(3) Not annualized.
(4) Annualized.
(5) 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."
(6) Effective July 1, 2018, the Adviser has agreed to limit the ratio of expenses to average net assets to the maximum ratio of 1.07% for Class II shares. Prior to July 1, 2018, the maximum ratio was 1.15% for Class II shares.
(7) Amount is less than 0.005%.
The accompanying notes are an integral part of the financial statements.
8
Morgan Stanley Variable Insurance Fund, Inc.
Semi-Annual Report – June 30, 2023 (unaudited)
Notes to Financial Statements
Morgan Stanley Variable Insurance Fund, Inc. (the "Company") is registered under the Investment Company Act of 1940, as amended (the "Act"), as an open-end management investment company. The Company is comprised of ten separate active, diversified and non-diversified funds (individually referred to as a "Fund," collectively as the "Funds"). The Company applies investment company accounting and reporting guidance Accounting Standards Codification ("ASC") Topic 946.
The accompanying financial statements relate to the U.S. Real Estate Portfolio. The Fund seeks to provide above average current income and long-term capital appreciation by investing primarily in equity securities of companies in the U.S. real estate industry, including real estate investment trusts ("REITs"). The Fund offers two classes of shares — Class I and Class II. Both classes of shares have identical voting rights (except that shareholders of a Class have exclusive voting rights regarding any matter relating solely to that Class of shares), dividend, liquidation and other rights.
The Company is intended to be a funding vehicle for variable annuity contracts and variable life insurance policies offered by the separate accounts of certain life insurance companies.
A. Significant Accounting Policies: The following significant accounting policies are in conformity with U.S. generally accepted accounting principles ("GAAP"). Such policies are consistently followed by the Company in the preparation of its financial statements. GAAP may require management to make estimates and assumptions that affect the reported amounts and disclosures in the financial statements. Actual results may differ from those estimates.
1. Security Valuation: (1) An equity portfolio security listed or traded on an exchange is valued at its latest reported sales price (or at the exchange official closing price if such exchange reports an official closing price), and if there were no sales on a given day and if there is no official exchange closing price for that day, the security is valued at the mean between the last reported bid and asked prices if such bid and asked prices are available on the relevant exchanges. If only bid prices are available then the latest bid price may be used. Listed equity securities not traded on the valuation date with no reported bid and asked prices available on the exchange are valued at the mean between the current bid and asked prices obtained from one or more reputable brokers/dealers. In cases where a security is traded on more than one exchange, the security is valued on the exchange designated as the primary market; (2) all other equity portfolio securities for which over-the-counter ("OTC") market quotations are readily available are valued at the latest reported sales price (or at the market official closing price
if such market reports an official closing price), and if there was no trading in the security on a given day and if there is no official closing price from relevant markets for that day, the security is valued at the mean between the last reported bid and asked prices if such bid and asked prices are available on the relevant markets. An unlisted equity security that does not trade on the valuation date and for which bid and asked prices from the relevant markets are unavailable is valued at the mean between the current bid and asked prices obtained from one or more reputable brokers/dealers; (3) fixed income securities may be valued by an outside pricing service/vendor approved by the Company's Board of Directors (the "Directors"). The pricing service/vendor may employ a pricing model that takes into account, among other things, bids, yield spreads and/or other market data and specific security characteristics. If Morgan Stanley Investment Management Inc. (the "Adviser"), a wholly-owned subsidiary of Morgan Stanley, determines that the price provided by the outside pricing service/vendor does not reflect the security's fair value or is unable to provide a price, prices from brokers/dealers may also be utilized. In these circumstances, the value of the security will be the mean of bid and asked prices obtained from brokers/dealers; (4) when market quotations are not readily available, as defined by Rule 2a-5 under the Act, including circumstances under which the Adviser determines that the closing price, last sale price or the mean between the last reported bid and asked prices are not reflective of a security's market value, portfolio securities are valued at their fair value as determined in good faith under procedures approved by and under the general supervision of the Directors. Occasionally, developments affecting the closing prices of securities and other assets may occur between the times at which valuations of such securities are determined (that is, close of the foreign market on which the securities trade) and the close of business of the New York Stock Exchange ("NYSE"). If developments occur during such periods that are expected to materially affect the value of such securities, such valuations may be adjusted to reflect the estimated fair value of such securities as of the close of the NYSE, as determined in good faith by the Directors or by the Adviser using a pricing service and/or procedures approved by the Directors; and (5) investments in mutual funds, including the Morgan Stanley Institutional Liquidity Funds, are valued at the net asset value ("NAV") as of the close of each business day.
In connection with Rule 2a-5 of the Act, the Directors have designated the Company's Adviser as its valuation designee. The valuation designee has responsibility for
9
Morgan Stanley Variable Insurance Fund, Inc.
Semi-Annual Report – June 30, 2023 (unaudited)
Notes to Financial Statements (cont'd)
determining fair value and to make the actual calculations pursuant to the fair valuation methodologies previously approved by the Directors. Under procedures approved by the Directors, the Company's Adviser, as valuation designee, has formed a Valuation Committee whose members are approved by the Directors. The Valuation Committee provides administration and oversight of the Company's valuation policies and procedures, which are reviewed at least annually by the Directors. These procedures allow the Company to utilize independent pricing services, quotations from securities and financial instrument dealers and other market sources to determine fair value.
The Fund invests a significant portion of its assets in securities of REITs. The market's perception of prospective declines in private real estate values and other financial assets may result in increased volatility of market prices that can negatively impact the valuation of certain issuers held by the Fund.
2. Fair Value Measurement: Financial Accounting Standards Board ("FASB") ASC 820, "Fair Value Measurement" ("ASC 820"), defines fair value as the price that would be received to sell an asset or pay to transfer a liability in an orderly transaction between market participants at the measurement date. ASC 820 establishes a three-tier hierarchy to distinguish between (1) inputs that reflect the assumptions market participants would use in valuing an asset or liability developed based on market data obtained from sources independent of the reporting entity (observable inputs) and (2) inputs that reflect the reporting entity's own assumptions about the assumptions market participants would use in valuing an asset or liability developed based on the best information available in the circumstances (unobservable inputs) and to establish classification of fair value measurements for disclosure purposes. Various inputs are used in determining the value of the Fund's investments. The inputs are summarized in the three broad levels listed below:
• Level 1 – unadjusted quoted prices in active markets for identical investments
• Level 2 – other significant observable inputs (including quoted prices for similar investments, interest rates, prepayment speeds, credit risk, etc.)
• Level 3 – significant unobservable inputs including the Fund's own assumptions in determining the fair value of investments. Factors considered in making this determination may include, but are not limited to, information obtained by contacting the issuer, analysts, or the appropriate stock exchange (for
exchange-traded securities), analysis of the issuer's financial statements or other available documents and, if necessary, available information concerning other securities in similar circumstances.
The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities and the determination of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to each security.
The following is a summary of the inputs used to value the Fund's investments as of June 30, 2023:
Investment Type | Level 1 Unadjusted quoted prices (000) | Level 2 Other significant observable inputs (000) | Level 3 Significant unobservable inputs (000) | Total (000) | |||||||||||||||
Assets: | |||||||||||||||||||
Common Stocks | |||||||||||||||||||
Apartments | $ | 36,314 | $ | — | $ | — | $ | 36,314 | |||||||||||
Data Centers | 38,591 | — | — | 38,591 | |||||||||||||||
Free Standing | 23,787 | — | — | 23,787 | |||||||||||||||
Gaming REITs | 13,478 | — | — | 13,478 | |||||||||||||||
Health Care | 30,000 | — | — | 30,000 | |||||||||||||||
Industrial | 52,123 | — | — | 52,123 | |||||||||||||||
Lodging/Resorts | 9,338 | — | — | 9,338 | |||||||||||||||
Manufactured Homes | 8,297 | — | — | 8,297 | |||||||||||||||
Office | 3,407 | — | — | 3,407 | |||||||||||||||
Regional Malls | 12,812 | — | — | 12,812 | |||||||||||||||
Self Storage | 26,516 | — | — | 26,516 | |||||||||||||||
Shopping Centers | 18,943 | — | — | 18,943 | |||||||||||||||
Single Family Homes | 13,984 | — | — | 13,984 | |||||||||||||||
Specialty | 7,869 | — | — | 7,869 | |||||||||||||||
Total Common Stocks | 295,459 | — | — | 295,459 | |||||||||||||||
Short-Term Investment | |||||||||||||||||||
Investment Company | 2,888 | — | — | 2,888 | |||||||||||||||
Total Assets | $ | 298,347 | $ | — | $ | — | $ | 298,347 |
Transfers between investment levels may occur as the markets fluctuate and/or the availability of data used in an investment's valuation changes.
3. Foreign Currency Translation and Foreign Investments: The books and records of the Fund are maintained in U.S. dollars. Foreign currency amounts are translated into U.S. dollars as follows:
— investments, other assets and liabilities at the prevailing rate of exchange on the valuation date;
— investment transactions and investment income at the prevailing rates of exchange on the dates of such transactions.
10
Morgan Stanley Variable Insurance Fund, Inc.
Semi-Annual Report – June 30, 2023 (unaudited)
Notes to Financial Statements (cont'd)
Although the net assets of the Fund are presented at the foreign exchange rates and market values at the close of the period, the Fund does not isolate that portion of the results of operations arising as a result of changes in the foreign exchange rates from the fluctuations arising from changes in the market prices of securities held at period end. Similarly, the Fund does not isolate the effect of changes in foreign exchange rates from the fluctuations arising from changes in the market prices of securities sold during the period. Accordingly, realized and unrealized foreign currency gains (losses) on investments in securities are included in the reported net realized and unrealized gains (losses) on investment transactions and balances. However, pursuant to U.S. federal income tax regulations, gains and losses from certain foreign currency transactions and the foreign currency portion of gains and losses realized on sales and maturities of foreign denominated debt securities are treated as ordinary income for U.S. federal income tax purposes.
Net realized gains (losses) on foreign currency transactions represent net foreign exchange gains (losses) from foreign currency forward exchange contracts, disposition of foreign currencies, currency gains (losses) realized between the trade and settlement dates on securities transactions, and the difference between the amount of investment income and foreign withholding taxes recorded on the Fund's books and the U.S. dollar equivalent amounts actually received or paid. The change in unrealized currency gains (losses) on foreign currency transactions for the period is reflected in the Statement of Operations.
Foreign security and currency transactions may involve certain considerations and risks not typically associated with those of U.S. dollar denominated transactions as a result of, among other factors, fluctuations of exchange rates in relation to the U.S. dollar, the possibility of lower levels of governmental supervision and regulation of foreign securities markets and the possibility of political or economic instability.
Governmental approval for foreign investments may be required in advance of making an investment under certain circumstances in some countries, and the extent of foreign investments in U.S. companies may be subject to limitation in other countries. Foreign ownership limitations also may be imposed by the charters of individual companies to prevent, among other concerns, violations of foreign investment limitations. As a result, an additional class of shares (identified as "Foreign" in the Portfolio of Investments) may be created and offered for investment. The "local" and "foreign shares" market
values may differ. In the absence of trading of the foreign shares in such markets, the Fund values the foreign shares at the closing exchange price of the local shares.
4. Indemnifications: The Company enters into contracts that contain a variety of indemnifications. The Company's maximum exposure under these arrangements is unknown. However, the Company has not had prior claims or losses pursuant to these contracts and expects the risk of loss to be remote.
5. Security Transactions, Income and Expenses: Security transactions are accounted for on the trade date (date the order to buy or sell is executed). Realized gains and losses on the sale of investment securities are determined on the specific identified cost method. Dividend income and other distributions are recorded on the ex-dividend date (except for certain foreign dividends which may be recorded as soon as the Fund is informed of such dividends) net of applicable withholding taxes. Interest income is recognized on the accrual basis (except where collection is in doubt) net of applicable withholding taxes. Discounts are accreted and premiums are amortized over the life of the respective securities. Most expenses of the Company can be directly attributed to a particular Fund. Expenses which cannot be directly attributed are apportioned among the Funds based upon relative net assets or other appropriate methods. Income, expenses (other than class specific expenses) and realized and unrealized gains or losses are allocated to each class of shares based upon their relative net assets.
The Fund owns shares of REITs which report information on the source of their distributions annually in the following calendar year. A portion of distributions received from REITs during the year is estimated to be a return of capital and is recorded as a reduction of their cost.
6. Dividends and Distributions to Shareholders: Dividends and distributions to shareholders are recorded on the ex-dividend date. Dividends from net investment income, if any, are declared and paid annually. Net realized capital gains, if any, are distributed at least annually.
B. Advisory Fees: The Adviser, a wholly-owned subsidiary of Morgan Stanley, provides the Fund with advisory services under the terms of an Investment Advisory Agreement, paid quarterly, at the annual rate based on the daily net assets as follows:
First $500 million | Next $500 million | Over $1 billion | |||||||||
0.70 | % | 0.65 | % | 0.60 | % |
11
Morgan Stanley Variable Insurance Fund, Inc.
Semi-Annual Report – June 30, 2023 (unaudited)
Notes to Financial Statements (cont'd)
For the six months ended June 30, 2023, the advisory fee rate (net of waiver/rebate) was equivalent to an annual effective rate of 0.52% of the Fund's average daily net assets.
The Adviser has agreed to reduce its advisory fee and/or reimburse the Fund so that total annual Fund operating expenses, excluding certain investment related expenses, taxes, interest and other extraordinary expenses (including litigation), will not exceed 0.82% for Class I shares and 1.07% for Class II shares. The fee waivers and/or expense reimbursements will continue for at least one year from the date of the Fund's prospectus or until such time as the Directors act to discontinue all or a portion of such waivers and/or reimbursements when they deem such action is appropriate. For the six months ended June 30, 2023, approximately $264,000 of advisory fees were waived pursuant to this arrangement.
C. Administration Fees: The Adviser also serves as Administrator to the Company and provides administrative services pursuant to an Administration Agreement for an annual fee, accrued daily and paid monthly, of 0.08% of the Fund's average daily net assets.
Under a Sub-Administration Agreement between the Administrator and State Street Bank and Trust Company ("State Street"), State Street provides certain administrative services to the Company. For such services, the Administrator pays State Street a portion of the fee the Administrator receives from the Fund.
D. Servicing Fees: The Company accrues daily and pays quarterly a servicing fee of up to 0.17% of the average daily value of shares of the Fund held in an insurance company's account. Certain insurance companies have entered into a servicing agreement with the Company to provide administrative and other contract-owner related services on behalf of the Fund.
E. Distribution Fees: Morgan Stanley Distribution, Inc. ("MSDI" or the "Distributor"), a wholly-owned subsidiary of the Adviser and an indirect subsidiary of Morgan Stanley, serves as the Distributor of the Fund and provides the Fund's Class II shareholders with distribution services pursuant to a Distribution Plan (the "Plan") in accordance with Rule 12b-1 under the Act. Under the Plan, the Fund is authorized to pay the Distributor a distribution fee, which is accrued daily and paid monthly, at an annual rate of 0.25% of the Fund's average daily net assets attributable to Class II shares.
F. Dividend Disbursing and Transfer/Co-Transfer Agent: The Company's dividend disbursing and transfer agent is SS&C Global Investor & Distribution Solutions, Inc. ("SS&C GIDS, Inc."). Pursuant to a Transfer Agency Agreement, the Company pays SS&C GIDS, Inc. a fee based on
the number of classes, accounts and transactions relating to the Funds of the Company.
Eaton Vance Management ("EVM"), an affiliate of Morgan Stanley, provides co-transfer agency and related services to the Fund pursuant to a Co-Transfer Agency Services Agreement. For the six months ended June 30, 2023, co-transfer agency fees and expenses incurred to EVM, included in "Transfer Agency Fees" in the Statement of Operations, amounted to less than $500.
G. Custodian Fees: State Street (the "Custodian") also serves as Custodian for the Company in accordance with a Custodian Agreement. The Custodian holds cash, securities and other assets of the Company as required by the Act. Custody fees are payable monthly based on assets held in custody, investment purchases and sales activity and account maintenance fees, plus reimbursement for certain out-of-pocket expenses.
H. Security Transactions and Transactions with Affiliates: For the six months ended June 30, 2023, purchases and sales of investment securities for the Fund, other than long-term U.S. Government securities and short-term investments were approximately $86,883,000 and $92,155,000, respectively. There were no purchases and sales of long-term U.S. Government securities for the six months ended June 30, 2023.
The Fund invests in the Institutional Class of the Morgan Stanley Institutional Liquidity Funds — Treasury Portfolio (the "Liquidity Funds"), an open-end management investment company managed by the Adviser. Advisory fees paid by the Fund are reduced by an amount equal to its pro-rata share of the advisory and administration fees paid by the Fund due to its investment in the Liquidity Funds. For the six months ended June 30, 2023, advisory fees paid were reduced by approximately $3,000 relating to the Fund's investment in the Liquidity Funds.
A summary of the Fund's transactions in shares of affiliated investments during the six months ended June 30, 2023 is as follows:
Affiliated Investment Company | Value December 31, 2022 (000) | Purchases at Cost (000) | Proceeds from Sales (000) | Dividend Income (000) | |||||||||||||||
Liquidity Funds | $ | 5,503 | $ | 24,912 | $ | 27,527 | $ | 74 |
Affiliated Investment Company (cont'd) | Realized Gain (Loss) (000) | Change in Unrealized Appreciation (Depreciation) (000) | Value June 30, 2023 (000) | ||||||||||||
Liquidity Funds | $ | — | $ | — | $ | 2,888 |
12
Morgan Stanley Variable Insurance Fund, Inc.
Semi-Annual Report – June 30, 2023 (unaudited)
Notes to Financial Statements (cont'd)
The Fund is permitted to purchase and sell securities ("cross-trade") from and to other Morgan Stanley funds as well as other funds and client accounts for which the Adviser or an affiliate of the Adviser serves as investment adviser, pursuant to procedures approved by the Directors in compliance with Rule 17a-7 under the Act (the "Rule"). Each cross-trade is executed at the current market price in compliance with provisions of the Rule. For the six months ended June 30, 2023, the Fund did not engage in any cross-trade transactions.
The Fund has an unfunded Deferred Compensation Plan (the "Compensation Plan"), which allows each independent Director to defer payment of all, or a portion, of the fees he or she receives for serving on the Board of Directors. Each eligible Director generally may elect to have the deferred amounts credited with a return equal to the total return on one or more of the Morgan Stanley funds that are offered as investment options under the Compensation Plan. Appreciation/depreciation and distributions received from these investments are recorded with an offsetting increase/decrease in the deferred compensation obligation and do not affect the NAV of the Fund.
I. Federal Income Taxes: It is the Fund's intention to continue to qualify as a regulated investment company and distribute all of its taxable and tax-exempt income. Accordingly, no provision for federal income taxes is required in the financial statements.
The Fund may be subject to taxes imposed by countries in which it invests. Such taxes are generally based on income and/or capital gains earned or repatriated. Taxes are accrued based on net investment income, net realized gains and net unrealized appreciation as such income and/or gains are earned. Taxes may also be based on transactions in foreign currency and are accrued based on the value of investments denominated in such currency.
FASB ASC 740-10, "Income Taxes — Overall", sets forth a minimum threshold for financial statement recognition of the benefit of a tax position taken or expected to be taken in a tax return. Management has concluded there are no significant uncertain tax positions that would require recognition in the financial statements. If applicable, the Fund recognizes interest accrued related to unrecognized tax benefits in "Interest Expense" and penalties in "Other Expenses" in the Statement of Operations. The Fund files tax returns with the U.S. Internal Revenue Service, New York and various states. Generally, each of the tax years in the four-year period ended December 31, 2022 remains subject to examination by taxing authorities.
The tax character of distributions paid may differ from the character of distributions shown for GAAP purposes due to short-term capital gains being treated as ordinary income for tax purposes. The tax character of distributions paid during fiscal years 2022 and 2021 was as follows:
2022 Distributions Paid From: | 2021 Distributions Paid From: | ||||||||||||||
Ordinary Income (000) | Long-Term Capital Gain (000) | Ordinary Income (000) | Long-Term Capital Gain (000) | ||||||||||||
$ | 32,241 | $ | 43,523 | $ | 7,396 | $ | — |
The amount and character of income and gains to be distributed are determined in accordance with income tax regulations which may differ from GAAP. These book/tax differences are either considered temporary or permanent in nature.
Temporary differences are attributable to differing book and tax treatments for the timing of the recognition of gains (losses) on certain investment transactions and the timing of the deductibility of certain expenses.
The Fund had no permanent differences causing reclassifications among the components of net assets for the year ended December 31, 2022.
At December 31, 2022, the components of distributable earnings for the Fund on a tax basis were as follows:
Undistributed | Undistributed | ||||||
$5,900 | $— |
At December 31, 2022, the Fund had available for federal income tax purposes unused short-term capital losses of approximately $16,245,000, that do not have an expiration date.
To the extent that capital loss carryforwards are used to offset any future capital gains realized, no capital gains tax liability will be incurred by the Fund for gains realized and not distributed. To the extent that capital gains are offset, such gains will not be distributed to the shareholders.
J. Credit Facility: The Company and other Morgan Stanley funds participated in a $300,000,000 committed, unsecured revolving line of credit facility (the "Facility") with State Street. Effective April 17, 2023, the committed line amount increased to $500,000,000. This Facility is to be used for temporary emergency purposes or funding of shareholder redemption requests. The interest rate for any funds drawn will be based on the federal funds rate or overnight bank
13
Morgan Stanley Variable Insurance Fund, Inc.
Semi-Annual Report – June 30, 2023 (unaudited)
Notes to Financial Statements (cont'd)
funding rate plus a spread. The Facility also has a commitment fee of 0.25% per annum based on the unused portion of the Facility, which is allocated among participating funds based on relative net assets. During the six months ended June 30, 2023, the Fund did not have any borrowings under the Facility.
K. Other: At June 30, 2023, the Fund had record owners of 10% or greater. Investment activities of these shareholders could have a material impact on the Fund. The aggregate percentage of such owners was 77.9%.
L. Market Risk: An investment in the Fund is based on the values of the Fund's investments, which may change due to economic and other events that affect markets generally, as well as those that affect particular regions, countries, industries, companies or governments. Social, political, economic and other conditions and events, such as war, natural disasters, health emergencies (e.g., epidemics and pandemics), terrorism, conflicts, social unrest, recessions, inflation, rapid interest rate changes and supply chain disruptions, may occur and could significantly impact issuers, industries, governments and other systems, including the financial markets and global economy. It is difficult to predict when events affecting the U.S. or global financial markets and economies may occur, the effects that such events may have and the duration of those effects (which may last for extended periods). These events may be sudden and significant and may negatively impact broad segments of businesses and populations and have a significant and rapid negative impact on the performance of and/or income or yield from the Fund's investments and exacerbate pre-existing risks to the Fund. 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 ultimate impact of public health emergencies or other adverse economic or market developments and the extent to which the associated conditions impact the Fund and its investments will also depend on other future developments, which are highly uncertain, difficult to accurately predict and subject to change at any time. The financial performance of the Fund's investments (and, in turn, the Fund's investment results) as well as their liquidity may be adversely affected because of these and similar types of factors and developments.
14
Morgan Stanley Variable Insurance Fund, Inc.
Semi-Annual Report – June 30, 2023 (unaudited)
Investment Advisory Agreement Approval
Nature, Extent and Quality of Services
The Board reviewed and considered the nature and extent of the investment advisory services provided by the Adviser under the advisory agreement, including portfolio management, investment research and equity and fixed income securities trading. The Board also reviewed and considered the nature and extent of the non-advisory, administrative services provided by the Administrator under the administration agreement, including accounting, operations, clerical, bookkeeping, compliance, business management and planning, legal services and the provision of supplies, office space and utilities at the Adviser's expense. The Board also considered the Adviser's investment in personnel and infrastructure that benefits the Fund. (The Adviser and Administrator together are referred to as the "Adviser" and the advisory and administration agreements together are referred to as the "Management Agreement.") The Board also considered that the Adviser serves a variety of other investment advisory clients and has experience overseeing service providers. The Board also compared the nature of the services provided by the Adviser with similar services provided by non-affiliated advisers as prepared by Broadridge Financial Solutions, Inc. ("Broadridge").
The Board reviewed and considered the qualifications of the portfolio managers, the senior administrative managers and other key personnel of the Adviser who provide the advisory and administrative services to the Fund. The Board determined that the Adviser's portfolio managers and key personnel are well qualified by education and/or training and experience to perform the services in an efficient and professional manner. The Board concluded that the nature and extent of the advisory and administrative services provided were necessary and appropriate for the conduct of the business and investment activities of the Fund and supported its decision to approve the Management Agreement.
Performance, Fees and Expenses of the Fund
The Board reviewed the performance, fees and expenses of the Fund compared to its peers, as prepared by Broadridge, and to appropriate benchmarks where applicable. The Board discussed with the Adviser the performance goals and the actual results achieved in managing the Fund. When considering a fund's performance, the Board and the Adviser place emphasis on trends and longer-term returns (focusing on one-year, three-year and five-year performance, as of December 31, 2022, or since inception, as applicable). When a fund underperforms its benchmark and/or its peer group average, the Board and the Adviser discuss the causes of such underperformance and, where necessary, they discuss specific changes to investment strategy or investment personnel. The Board noted that the Fund's performance was below its peer group average for the one-, three- and five-year periods. The Board discussed with the Adviser the level of the advisory and administration fees (together, the "management fee") for this Fund relative to comparable funds and/or other accounts advised by the Adviser and/or compared to its peers as prepared by Broadridge. In addition to the management fee, the Board also reviewed the Fund's total expense ratio. The Board noted that the Fund's actual management fee was lower than its peer group average, and contractual management fee and total expense ratio were higher than but close to its peer group averages. After discussion, the Board concluded that the Fund's (i) performance was acceptable; and (ii) management fee and total expense ratio were competitive with its peer group averages.
Economies of Scale
The Board considered the size and growth prospects of the Fund and how that relates to the Fund's total expense ratio and particularly the Fund's management fee rate, which includes breakpoints. In conjunction with its review of the Adviser's profitability, the Board discussed with the Adviser how a change in assets can affect the efficiency or effectiveness of managing the Fund and whether the management fee level is appropriate relative to current and projected asset levels and/or whether the management fee structure reflects economies of scale as asset levels change. The Board has determined that its review of the actual and/or potential economies of scale of the Fund supports its decision to approve the Management Agreement.
Profitability of the Adviser and Affiliates
The Board considered information concerning the costs incurred and profits realized by the Adviser and its affiliates during the last year from their relationship with the Fund and during the last two years from their relationship with the Morgan Stanley Fund Complex and reviewed with the Adviser the cost allocation methodology used to determine the profitability of the Adviser
15
Morgan Stanley Variable Insurance Fund, Inc.
Semi-Annual Report – June 30, 2023 (unaudited)
Investment Advisory Agreement Approval (cont'd)
and affiliates. The Board has determined that its review of the analysis of the Adviser's expenses and profitability supports its decision to approve the Management Agreement.
Other Benefits of the Relationship
The Board considered other direct and indirect benefits to the Adviser and/or its affiliates derived from their relationship with the Fund and other funds advised by the Adviser. These benefits may include, among other things, fees for trading, distribution and/or shareholder servicing and for transaction processing and reporting platforms used by securities lending agents, and research received by the Adviser generated from commission dollars spent on funds' portfolio trading. The Board reviewed with the Adviser these arrangements and the reasonableness of the Adviser's costs relative to the services performed. The Board has determined that its review of the other benefits received by the Adviser or its affiliates supports its decision to approve the Management Agreement.
Resources of the Adviser and Historical Relationship Between the Fund and the Adviser
The Board considered whether the Adviser is financially sound and has the resources necessary to perform its obligations under the Management Agreement. The Board also reviewed and considered the historical relationship between the Fund and the Adviser, including the organizational structure of the Adviser, the policies and procedures formulated and adopted by the Adviser for managing the Fund's operations and the Board's confidence in the competence and integrity of the senior managers and key personnel of the Adviser. The Board concluded that the Adviser has the financial resources necessary to fulfill its obligations under the Management Agreement and that it is beneficial for the Fund to continue its relationship with the Adviser.
Other Factors and Current Trends
The Board considered the controls and procedures adopted and implemented by the Adviser and monitored by the Fund's Chief Compliance Officer and concluded that the conduct of business by the Adviser indicates a good faith effort on its part to adhere to high ethical standards in the conduct of the Fund's business.
General Conclusion
After considering and weighing all of the above factors, with various written materials and verbal information presented by the Adviser, the Board concluded that it would be in the best interest of the Fund and its shareholders to approve renewal of the Management Agreement for another year. In reaching this conclusion the Board did not give particular weight to any single piece of information or factor referenced above. The Board considered these factors and information over the course of the year and in numerous meetings, some of which were in executive session with only the independent Board members and their counsel present. It is possible that individual Board members may have weighed these factors, and the information presented, differently in reaching their individual decisions to approve the Management Agreement.
16
Morgan Stanley Variable Insurance Fund, Inc.
Semi-Annual Report – June 30, 2023 (unaudited)
Liquidity Risk Management Program
In compliance with Rule 22e-4 under the Investment Company Act of 1940, as amended (the "Liquidity Rule"), the Fund has adopted and implemented a liquidity risk management program (the "Program"), which is reasonably designed to assess and manage the risk that the Fund could not meet requests to redeem shares issued by the Fund without significant dilution of remaining investors' interests in the Fund (i.e., liquidity risk). The Fund's Board of Directors (the "Board") previously approved the designation of the Liquidity Risk Subcommittee (the "LRS") as Program administrator. The LRS is comprised of representatives from various divisions within Morgan Stanley Investment Management.
At a meeting held on March 1-2, 2023, the Board reviewed a written report prepared by the LRS that addressed the Program's operation and assessed its adequacy, and effectiveness of implementation for the period from January 1, 2022, through December 31, 2022, as required under the Liquidity Rule. The report concluded that the Program operated effectively and was adequately and effectively implemented in all material aspects, and that the relevant controls and safeguards were appropriately designed to enable the LRS to administer the Program in compliance with the Liquidity Rule.
In accordance with the Program, the LRS assessed each Fund's liquidity risk no less frequently than annually taking into consideration certain factors, as applicable, such as (i) investment strategy and liquidity of portfolio investments, (ii) short-term and long-term cash flow projections and (iii) holdings of cash and cash equivalents and borrowing arrangements and other funding sources. Certain factors are considered under both normal and reasonably foreseeable stressed conditions.
Each Fund portfolio investment is classified into one of four liquidity categories, which classification is assessed at least monthly by the LRS. The classification is based on a determination of the number of days it is reasonably expected to take to convert the investment into cash, or sell or dispose of the investment, in current market conditions without significantly changing the market value of the investment. Liquidity classification determinations take into account various market, trading and investment-specific considerations, as well as market depth, and in some cases utilize third-party vendor data.
The Liquidity Rule limits a fund's investments in illiquid investments to 15% of its net assets and requires funds that do not primarily hold assets that are highly liquid investments to determine and maintain a minimum percentage of the fund's net assets to be invested in highly liquid investments (highly liquid investment minimum or "HLIM"). The LRS believes that the Program includes provisions reasonably designed to review, monitor and comply with the 15% limit on illiquid investments and for determining, periodically reviewing and complying with the HLIM requirement, as applicable.
There can be no assurance that the Program will achieve its objectives under all circumstances in the future. Please refer to the Fund's prospectus for more information regarding the Fund's exposure to liquidity risk and other risks to which it may be subject.
17
Morgan Stanley Variable Insurance Fund, Inc.
Semi-Annual Report – June 30, 2023 (unaudited)
Directors and Officers Information
Directors
Frank L. Bowman
Frances L. Cashman
Kathleen A. Dennis
Nancy C. Everett
Eddie A. Grier
Jakki L. Haussler
Dr. Manuel H. Johnson
Joseph J. Kearns
Michael F. Klein
Patricia A. Maleski
W. Allen Reed, Chair of the Board
Adviser and Administrator
Morgan Stanley Investment Management Inc.
522 Fifth Avenue
New York, New York 10036
Distributor
Morgan Stanley Distribution, Inc.
522 Fifth Avenue
New York, New York 10036
Dividend Disbursing and Transfer Agent
SS&C Global Investor & Distribution Solutions, Inc.
P.O. Box 219804
Kansas City, Missouri 64121-9804
Co-Transfer Agent
Eaton Vance Management
Two International Place
Boston, Massachusetts 02110
Officers
John H. Gernon
President and Principal Executive Officer
Deidre A. Downes
Chief Compliance Officer
Francis J. Smith
Treasurer and Principal Financial Officer
Mary E. Mullin
Secretary
Michael J. Key
Vice President
Custodian
State Street Bank and Trust Company
One Congress Street
Boston, Massachusetts 02114
Legal Counsel
Dechert LLP
1095 Avenue of the Americas
New York, New York 10036
Counsel to the Independent Directors
Perkins Coie LLP
1155 Avenue of the Americas,
22nd Floor
New York, New York 10036
Independent Registered Public Accounting Firm
Ernst & Young LLP
200 Clarendon Street
Boston, Massachusetts 02116
Reporting to Shareholders
Each Morgan Stanley fund provides a complete schedule of portfolio holdings in its Semi-Annual and the Annual Reports within 60 days of the end of the fund's second and fourth fiscal quarters. The Semi-Annual and Annual Reports are filed electronically with the Securities and Exchange Commission ("SEC") on Form N-CSRS and Form N-CSR, respectively. Morgan Stanley makes these reports available on its public website, www.morganstanley.com/im/shareholderreports. Each Morgan Stanley non-money market fund also files a complete schedule of portfolio holdings with the SEC for the fund's first and third fiscal quarters as an attachment to Form N-PORT. Morgan Stanley does not deliver the reports for the first and third fiscal quarters to shareholders, but makes the complete schedule of portfolio holdings for the fund's first and third fiscal quarters available on its public website. The holdings for each money market fund are also posted to the Morgan Stanley public website. You may obtain the Form N-PORT filings (as well as the Form N-CSR and N-CSRS filings) by accessing the SEC's website, www.sec.gov. You can also request copies of these materials, upon payment of a duplicating fee, by electronic request at the SEC's email address (publicinfo@sec.gov).
Proxy Voting Policies and Procedures and Proxy Voting Record
You may obtain a copy of the Company's Proxy Voting Policy and Procedures and information regarding how the Company voted proxies relating to portfolio securities during the most recent twelve-month period ended June 30, without charge, upon request, by calling toll free 1 (800) 869-6397 or by visiting our website at www.morganstanley.com/im/shareholderreports. This information is also available on the SEC's website at www.sec.gov.
This report is submitted for the general information of the shareholders of the Fund. For more detailed information about the Fund, its fees and expenses and other pertinent information, please read its Prospectus. The Company's Statement of Additional Information contains additional information about the Fund, including its Directors. It is available, without charge, by calling 1 (800) 869-6397.
Householding Notice
To reduce printing and mailing costs, the Fund attempts to eliminate duplicate mailings to the same address. The Fund delivers a single copy of certain shareholder documents, including shareholder reports, prospectuses and proxy materials, to investors with the same last name who reside at the same address. Your participation in this program will continue for an unlimited period of time unless you instruct us otherwise. You can request multiple copies of these documents by calling 1 (800) 869-6397, 8:00 a.m. to 6:00 p.m., ET. Once our Customer Service Center has received your instructions, we will begin sending individual copies for each account within 30 days.
This report is not authorized for distribution to prospective investors in the Fund unless preceded or accompanied by an effective Prospectus. Read the Prospectus carefully before investing.
UIFREISAN
5836797 EXP 08.31.24
Item 2. Code of Ethics.
Not applicable for semiannual reports.
Item 3. Audit Committee Financial Expert.
Not applicable for semiannual reports.
Item 4. Principal Accountant Fees and Services.
Not applicable for semiannual reports.
Item 5. Audit Committee of Listed Registrants.
Not applicable for semiannual reports.
Item 6.
(a) See Item 1.
(b) Not applicable.
Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies.
Not applicable.
Item 8. Portfolio Managers of Closed-End Management Investment Companies
Applicable only to annual reports filed by closed-end funds.
Item 9. Closed-End Fund Repurchases
Applicable only to reports filed by closed-end funds.
Item 10. Submission of Matters to a Vote of Security Holders
There have been no material changes to the procedures by which shareholders may recommend nominee to the Fund’s Board of Directors since the Fund last provided disclosure in response to this item.
Item 11. Controls and Procedures
(a) The registrant’s principal executive officer and principal financial officer have concluded that the registrant’s disclosure controls and procedures are sufficient to ensure that information required to be disclosed by the registrant in this Form N-CSR was recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and forms, based upon such officers' evaluation of these controls and procedures as of a date within 90 days of the filing date of the report.
(b) There were no changes in the registrant's internal control over financial reporting that occurred during the period covered by this report that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting.
Item 12. Disclosure of Securities Lending Activities for Closed-End Management Investment Companies.
Not Applicable
Item 13. Exhibits
(a) Code of Ethics – Not applicable for semiannual reports.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Morgan Stanley Variable Insurance Fund, Inc.
/s/ John H. Gernon | |
John H. Gernon Principal Executive Officer August 17, 2023 |
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
/s/ John H. Gernon | |
John H. Gernon Principal Executive Officer August 17, 2023 | |
/s/ Francis J. Smith | |
Francis J. Smith Principal Financial Officer August 17, 2023 |