GLOBAL REAL ESTATE PORTFOLIO - RIVERSOURCE
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Morgan Stanley Variable Insurance Fund, Inc.
Semi-Annual Report – June 30, 2021
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, 2021
Table of Contents
Expense Example...................................................................................................................................................................... 2
Portfolio of Investments............................................................................................................................................................ 3
Statement of Assets and Liabilities ............................................................................................................................................ 6
Statement of Operations........................................................................................................................................................... 7
Statements of Changes in Net Assets......................................................................................................................................... 8
Financial Highlights ................................................................................................................................................................. 9
Notes to Financial Statements................................................................................................................................................... 10
Investment Advisory Agreement Approval ................................................................................................................................ 18
Liquidity Risk Management Program ....................................................................................................................................... 20
Director and Officer Information ............................................................................................................................... Back Cover
1Morgan Stanley Variable Insurance Fund, Inc.
Semi-Annual Report – June 30, 2021 (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, 2021 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 Actual Ending Hypothetical Actual Hypothetical Net Expense
Account Value Account Value Ending Expenses Paid Expenses Paid Ratio During
1/1/21 6/30/21 Account Value During Period* During Period* Period**
Global Real Estate Portfolio Class II $1,000.00 $1,158.90 $1,018.60 $6.69 $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.
2Morgan Stanley Variable Insurance Fund, Inc.
Semi-Annual Report – June 30, 2021 (unaudited)
Portfolio of Investments
Global Real Estate Portfolio
Value Value
Shares (000) Shares (000)
Common Stocks (99.8%) Japan (9.4%)
Australia (3.8%) Activia Properties, Inc. REIT 76 $ 360
Charter Hall Group REIT 40,876 $ 476 Frontier Real Estate Investment Corp. REIT 15 70
Goodman Group REIT 30,919 491 GLP J-REIT 218 376
Mirvac Group REIT 223,703 490 Japan Hotel Investment Corp. REIT 401 240
National Storage REIT 48,218 71 Japan Metropolitan Fund Investment Corp. REIT 367 398
Scentre Group REIT 65,965 135 Japan Real Estate Investment Corp. REIT 76 467
Stockland REIT 152,438 533 Mitsubishi Estate Co., Ltd. 20,600 333
2,196 Mitsui Fudosan Co., Ltd. 39,100 906
Nippon Building Fund, Inc. REIT (c) 76 474
Austria (0.3%)
Nippon Prologis, Inc. REIT 113 360
CA Immobilien Anlagen AG 4,702 196
Nomura Real Estate Master Fund, Inc. REIT 269 431
Canada (1.7%)
NTT UD REIT Investment Corp. REIT 156 230
Granite REIT 9,105 606
Orix, Inc. J-REIT 161 310
RioCan REIT 20,149 359
Sumitomo Realty & Development Co., Ltd. 12,900 461
965
5,416
China (2.4%)
Malta (0.0%) (d)
China Resources Land Ltd. (a) 76,000 308
BGP Holdings PLC (e) 5,886,464 8
Country Garden Services Holdings Co. Ltd. (a) 35,000 378
Netherlands (1.3%)
GDS Holdings Ltd. ADR (b) 3,881 304
Eurocommercial Properties N.V. CVA REIT 15,528 386
Longfor Group Holdings Ltd. (a) 71,000 398
NSI N.V. REIT 9,423 364
1,388
750
Finland (0.5%)
Singapore (2.2%)
Kojamo Oyj 11,815 270
City Developments Ltd. 44,400 241
France (2.7%)
Frasers Logistics & Commercial Trust REIT 188,000 202
Gecina SA REIT (c) 3,993 612
Keppel REIT 199,700 175
ICADE REIT 3,519 304
Keppel DC REIT 182,100 337
Klepierre SA REIT 6,013 155
Mapletree Industrial Trust REIT 141,257 297
Mercialys SA REIT 39,606 479
1,252
1,550
Spain (1.4%)
Germany (4.4%)
Inmobiliaria Colonial Socimi SA REIT 22,741 230
Alstria Office AG REIT 14,653 271
Merlin Properties Socimi SA REIT 56,003 580
Deutsche EuroShop AG 3,131 74
810
Deutsche Wohnen SE 12,219 747
LEG Immobilien SE 3,471 500 Sweden (1.3%)
Vonovia SE 14,579 943 Atrium Ljungberg AB, Class B 2,453 56
Fabege AB 26,142 419
2,535
Hufvudstaden AB, Class A 17,855 304
Hong Kong (5.5%)
779
ESR Cayman Ltd. (b) 212,800 718
Link REIT 59,975 581 Switzerland (0.4%)
New World Development Co. Ltd. 80,146 416 PSP Swiss Property AG (Registered) 1,889 240
SJM Holdings Ltd. (b) 153,000 167 United Kingdom (4.1%)
Sun Hung Kai Properties Ltd. 31,393 468 British Land Co., PLC (The) REIT 84,045 575
Swire Properties Ltd. 6,900 21 Derwent London PLC REIT 2,937 135
Wharf Real Estate Investment Co., Ltd. 137,420 799 Grainger PLC 74,036 292
3,170 Hammerson PLC REIT (c) 378,140 195
Helical PLC 10,737 65
Ireland (0.9%)
Land Securities Group PLC REIT 74,899 700
Hibernia REIT PLC 346,852 510
Segro PLC REIT 21,449 325
St. Modwen Properties PLC 6,778 52
Workspace Group PLC REIT 2,216 25
2,364
The accompanying notes are an integral part of the financial statements. 3Morgan Stanley Variable Insurance Fund, Inc.
Semi-Annual Report – June 30, 2021 (unaudited)
Portfolio of Investments (cont’d)
Global Real Estate Portfolio
Value Face Amount Value
Shares (000) (000) (000)
United States (57.5%) Repurchase Agreements (0.2%)
Agree Realty Corp. REIT 6,141 $ 433 HSBC Securities USA, Inc. (0.05%, dated
Alexandria Real Estate Equities, Inc. REIT 6,195 1,127 6/30/21, due 7/1/21; proceeds $29;
fully collateralized by a U.S. Government
American Campus Communities, Inc. REIT 23,454 1,096
obligation; 0.00% due 2/15/23;
AvalonBay Communities, Inc. REIT 7,485 1,562 valued at $29) $ 29 $ 29
Boyd Gaming Corp. (b) 6,327 389 Merrill Lynch & Co., Inc. (0.05%, dated
Brixmor Property Group, Inc. REIT 52,071 1,192 6/30/21, due 7/1/21; proceeds $80;
Caesars Entertainment, Inc. (b) 2,807 291 fully collateralized by U.S. Government
Columbia Property Trust, Inc. REIT 22,940 399 obligations; 0.00% - 3.63% due
12/30/21 - 8/15/43; valued at $81) 80 80
CyrusOne, Inc. REIT 8,660 619
Empire State Realty Trust, Inc., Class A REIT 57,444 689 109
Equinix, Inc. REIT 2,129 1,709 Total Securities held as Collateral on Loaned
Healthcare Trust of America, Inc., Class A REIT 18,165 485 Securities (Cost $715) 715
Healthpeak Properties, Inc. REIT 57,293 1,907
Host Hotels & Resorts, Inc. REIT (b) 34,543 590 Shares
Invitation Homes, Inc. REIT 37,157 1,386 Investment Company (0.4%)
Kilroy Realty Corp. REIT 8,801 613 Morgan Stanley Institutional Liquidity Funds —
Kimco Realty Corp. REIT 30,759 641 Treasury Securities Portfolio — Institutional
Life Storage, Inc. REIT 6,339 681 Class (See Note H) (Cost $211) 210,929 211
Medical Properties Trust, Inc. REIT 26,826 539 Total Short-Term Investments (Cost $926) 926
NETSTREIT Corp. REIT 39,004 900
Total Investments (101.4%) (Cost $48,309)
Prologis, Inc. REIT 27,535 3,291 Including $1,256 of Securities Loaned (f) 58,507
Public Storage REIT 9,145 2,750
Liabilities in Excess of Other Assets (–1.4%) (830)
Retail Properties of America, Inc., Class A REIT 53,009 607
RLJ Lodging Trust REIT 18,189 277 Net Assets (100.0%) $57,677
RPT Realty REIT 49,070 637 Country assignments and aggregations are based generally on third party
Simon Property Group, Inc. REIT 12,163 1,587 vendor classifications and information, and may be different from the
assignments and aggregations under the policies set forth in the Fund’s
UDR, Inc. REIT 35,342 1,731
prospectus and/or statement of additional information relating to geographic
Ventas, Inc. REIT 18,133 1,035 classifications.
VICI Properties, Inc. REIT 47,168 1,463
(a) Security trades on the Hong Kong exchange.
Welltower, Inc. REIT 30,759 2,556
(b) Non-income producing security.
33,182
(c) All or a portion of this security was on loan at June 30, 2021.
Total Common Stocks (Cost $47,383) 57,581 (d) Amount is less than 0.05%.
Short-Term Investments (1.6%) (e) At June 30, 2021, the Fund held a fair valued security valued at
Securities held as Collateral on Loaned Securities (1.2%) approximately $8,000, representing less than 0.05% of net assets.
This security has been fair valued as determined in good faith under
Investment Company (1.0%)
procedures established by and under the general supervision of the
Morgan Stanley Institutional Liquidity Company’s (as defined herein) Directors.
Funds — Treasury Securities Portfolio —
(f) At June 30, 2021, the aggregate cost for federal income tax purposes
Institutional Class (See Note H) 605,930 606
approximates the aggregate cost book purposes. The aggregate
gross unrealized appreciation is approximately $10,438,000 and the
aggregate gross unrealized depreciation is approximately $240,000,
resulting in net unrealized appreciation of approximately $10,198,000.
ADR American Depositary Receipt.
CVA Certificaten Van Aandelen.
REIT Real Estate Investment Trust.
4 The accompanying notes are an integral part of the financial statements.Morgan Stanley Variable Insurance Fund, Inc.
Semi-Annual Report – June 30, 2021 (unaudited)
Portfolio of Investments (cont’d)
Global Real Estate Portfolio
Portfolio Composition*
Percentage of
Classification Total Investments
Diversified 22.4%
Residential 15.4
Retail 15.3
Office 11.7
Health Care 11.3
Industrial 10.7
Other** 7.1
Self Storage 6.1
Total Investments 100.0%
* Percentage indicated are based upon total investments (excluding Securities held
as Collateral on Loaned Securities) as of June 30, 2021.
** Industries and/or investment types representing less than 5% of total investments.
The accompanying notes are an integral part of the financial statements. 5Morgan Stanley Variable Insurance Fund, Inc.
Semi-Annual Report – June 30, 2021 (unaudited)
Global Real Estate Portfolio
June 30, 2021
Statement of Assets and Liabilities (000)
Assets:
Investments in Securities of Unaffiliated Issuers, at Value(1) (Cost $47,492) $57,690
Investment in Security of Affiliated Issuer, at Value (Cost $817) 817
Total Investments in Securities, at Value (Cost $48,309) 58,507
Foreign Currency, at Value (Cost $103) 103
Cash from Securities Lending 20
Receivable for Investments Sold 1,152
Dividends Receivable 177
Receivable for Fund Shares Sold 25
Tax Reclaim Receivable 15
Receivable from Securities Lending Income 1
Receivable from Affiliate —@
Other Assets 18
Total Assets 60,018
Liabilities:
Payable for Investments Purchased 1,352
Collateral on Securities Loaned, at Value 735
Payable for Fund Shares Redeemed 71
Payable for Advisory Fees 37
Payable for Custodian Fees 35
Payable for Professional Fees 35
Deferred Capital Gain Country Tax 26
Payable for Servicing Fees 17
Payable for Distribution Fees — Class II Shares 12
Payable for Administration Fees 4
Payable for Transfer Agency Fees 1
Other Liabilities 16
Total Liabilities 2,341
NET ASSETS $57,677
Net Assets Consist of:
Paid-in-Capital $48,211
Total Distributable Earnings 9,466
Net Assets $57,677
CLASS II:
Net Asset Value, Offering and Redemption Price Per Share Applicable to 5,816,961 Outstanding
$0.001 Par Value Shares (Authorized 500,000,000 Shares) $ 9.92
(1)
Including:
Securities on Loan, at Value: $ 1,256
@ Amount is less than $500.
6 The accompanying notes are an integral part of the financial statements.Morgan Stanley Variable Insurance Fund, Inc.
Semi-Annual Report – June 30, 2021 (unaudited)
Global Real Estate Portfolio
Six Months Ended
June 30, 2021
Statement of Operations (000)
Investment Income:
Dividends from Securities of Unaffiliated Issuers (Net of $39 of Foreign Taxes Withheld) $ 797
Income from Securities Loaned — Net 2
Non-Cash Dividends from Securities of Unaffiliated Issuers 90
Dividends from Security of Affiliated Issuer (Note H) —@
Total Investment Income 889
Expenses:
Advisory Fees (Note B) 219
Distribution Fees — Class II Shares (Note E) 68
Professional Fees 62
Servicing Fees (Note D) 46
Custodian Fees (Note G) 45
Administration Fees (Note C) 22
Shareholder Reporting Fees 12
Pricing Fees 5
Transfer Agency Fees (Note F) 2
Directors’ Fees and Expenses 2
Other Expenses 5
Total Expenses 488
Waiver of Advisory Fees (Note B) (146)
Rebate from Morgan Stanley Affiliate (Note H) (—@)
Net Expenses 342
Net Investment Income 547
Realized Gain (Loss):
Investments Sold (Net of $3 of Capital Gain Country Tax) 7,860
Foreign Currency Translation (5)
Net Realized Gain 7,855
Change in Unrealized Appreciation (Depreciation):
Investments (Net of Increase in Deferred Capital Gain Country Tax of $4) (273)
Foreign Currency Translation (4)
Net Change in Unrealized Appreciation (Depreciation) (277)
Net Realized Gain and Change in Unrealized Appreciation (Depreciation) 7,578
Net Increase in Net Assets Resulting from Operations $ 8,125
@ Amount is less than $500.
The accompanying notes are an integral part of the financial statements. 7Morgan Stanley Variable Insurance Fund, Inc.
Semi-Annual Report – June 30, 2021
Global Real Estate Portfolio
Six Months Ended
June 30, 2021 Year Ended
(unaudited) December 31, 2020
Statements of Changes in Net Assets (000) (000)
Increase (Decrease) in Net Assets:
Operations:
Net Investment Income $ 547 $ 999
Net Realized Gain (Loss) 7,855 (5,615)
Net Change in Unrealized Appreciation (Depreciation) (277) (5,997)
Net Increase (Decrease) in Net Assets Resulting from Operations 8,125 (10,613)
Dividends and Distributions to Shareholders:
Class II — (3,403)
Capital Share Transactions:(1)
Class II:
Subscribed 2,011 7,643
Distributions Reinvested — 3,403
Redeemed (5,713) (14,202)
Net Decrease in Net Assets Resulting from Capital Share Transactions (3,702) (3,156)
Total Increase (Decrease) in Net Assets 4,423 (17,172)
Net Assets:
Beginning of Period 53,254 70,426
End of Period $57,677 $ 53,254
(1)
Capital Share Transactions:
Class II:
Shares Subscribed 220 974
Shares Issued on Distributions Reinvested — 464
Shares Redeemed (625) (1,735)
Net Decrease in Class II Shares Outstanding (405) (297)
8 The accompanying notes are an integral part of the financial statements.Morgan Stanley Variable Insurance Fund, Inc.
Semi-Annual Report – June 30, 2021
Financial Highlights
Global Real Estate Portfolio
Class II
Six Months Ended
June 30, 2021 Year Ended December 31,
Selected Per Share Data and Ratios (unaudited) 2020 2019 2018 2017 2016(1)
Net Asset Value, Beginning of Period $8.56 $10.80 $9.87 $11.09 $10.36 $10.18
Income (Loss) from Investment Operations:
Net Investment Income(2) 0.09 0.16 0.18 0.25 0.24 0.16
Net Realized and Unrealized Gain (Loss) 1.27 (1.86) 1.58 (1.13) 0.75 0.16
Total from Investment Operations 1.36 (1.70) 1.76 (0.88) 0.99 0.32
Distributions from and/or in Excess of:
Net Investment Income — (0.37) (0.29) (0.34) (0.26) (0.14)
Net Realized Gain — (0.17) (0.54) — — —
Total Distributions — (0.54) (0.83) (0.34) (0.26) (0.14)
Net Asset Value, End of Period $9.92 $8.56 $10.80 $9.87 $11.09 $10.36
Total Return(3) 15.89%(7) (14.85)% 18.06% (8.20)% 9.71% 3.12%
Ratios to Average Net Assets and Supplemental Data:
Net Assets, End of Period (Thousands) $57,677 $53,254 $70,426 $66,751 $83,625 $86,247
Ratio of Expenses Before Expense Limitation 1.78%(8) 1.81% 1.64% 1.66% 1.69% 1.60%
Ratio of Expenses After Expense Limitation 1.25%(4)(8) 1.25%(4) 1.25%(4) 1.33%(4)(5) 1.40%(4) 1.40%(4)
Ratio of Net Investment Income 1.99%(4)(8) 1.89%(4) 1.67%(4) 2.37%(4) 2.26%(4) 1.54%(4)
Ratio of Rebate from Morgan Stanley Affiliates 0.00%(6)(8) 0.00%(6) 0.00%(6) 0.00%(6) 0.00%(6) 0.00%(6)
Portfolio Turnover Rate 71%(7) 53% 24% 36% 34% 24%
(1) Reflects prior period custodian out-of-pocket expenses that were reimbursed in September 2016. The amount of the reimbursement was immaterial on a per
share basis and did not impact the total return of Class II shares. The Ratio of Expenses After Expense Limitation and the Ratio of Net Investment Income would
be unchanged as the reimbursement of custodian fees was offset against expense waivers/reimbursements with no impact to net expenses or net investment
income.
(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) 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.”
(5) 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.
(6) Amount is less than 0.005%.
(7) Not annualized.
(8) Annualized.
The accompanying notes are an integral part of the financial statements. 9Morgan Stanley Variable Insurance Fund, Inc.
Semi-Annual Report – June 30, 2021 (unaudited)
Notes to Financial Statements
Morgan Stanley Variable Insurance Fund, Inc. (the “Com- are available on the relevant markets. An unlisted equity
pany”) is registered under the Investment Company Act security that does not trade on the valuation date and for
of 1940, as amended (the “Act”), as an open-end management which bid and asked prices from the relevant markets are
investment company. The Company is comprised of ten sepa- unavailable is valued at the mean between the current bid
rate active, diversified and non-diversified funds (individually and asked prices obtained from one or more reputable
referred to as a “Fund,” collectively as the “Funds”). The brokers or dealers; (3) certain portfolio securities may be
Company applies investment company accounting and re- valued by an outside pricing service/vendor approved by
porting guidance. the Company’s Board of Directors (the “Directors”). The
The accompanying financial statements relate to the Global pricing service/vendor may employ a pricing model that
Real Estate Portfolio. The Fund seeks to provide current in- takes into account, among other things, bids, yield
come and capital appreciation. The Fund currently offers spreads and/or other market data and specific security
Class II shares only, although Class I shares may be offered in characteristics. Alternatively, if a valuation is not available
the future. from an outside pricing service/vendor, and the security
trades on an exchange, the security may be valued at its
The Company is intended to be a funding vehicle for variable latest reported sale price (or at the exchange official clos-
annuity contracts and variable life insurance policies offered ing price if such exchange reports an official closing
by the separate accounts of certain life insurance companies. price), prior to the time when assets are valued. If there
A. Significant Accounting Policies: The following sig- are no sales on a given day and if there is no official ex-
nificant accounting policies are in conformity with U.S. gen- change closing price for that day, the security is valued at
erally accepted accounting principles (“GAAP”). Such policies the mean between the last reported bid and asked prices
are consistently followed by the Company in the preparation if such bid and asked prices are available in the relevant
of its financial statements. GAAP may require management to exchanges. If only bid prices are available then the latest
make estimates and assumptions that affect the reported bid price may be used. If Morgan Stanley Investment
amounts and disclosures in the financial statements. Actual Management Inc. (the “Adviser”) or Morgan Stanley In-
results may differ from those estimates. vestment Management Limited (“MSIM Limited”) and
1. Security Valuation: (1) An equity portfolio security Morgan Stanley Investment Management Company
listed or traded on an exchange is valued at its latest re- (“MSIM Company”) (together, the “Sub-Advisers”), each
ported sales price (or at the exchange official closing price a wholly-owned subsidiary of Morgan Stanley, deter-
if such exchange reports an official closing price), and if mines that the price provided by the outside pricing
there were no sales on a given day and if there is no offi- service/vendor or exchange does not reflect the security’s
cial exchange closing price for that day, the security is val- fair value or is unable to provide a price, prices from bro-
ued at the mean between the last reported bid and asked kers or dealers may also be utilized. In these circum-
prices if such bid and asked prices are available on the rel- stances, the value of the security will be the mean of bid
evant exchanges. If only bid prices are available then the and asked prices obtained from brokers or dealers;
latest bid price may be used. Listed equity securities not (4) when market quotations are not readily available, in-
traded on the valuation date with no reported bid and cluding circumstances under which the Adviser or the
asked prices available on the exchange are valued at the Sub-Advisers determine that the closing price, last sale
mean between the current bid and asked prices obtained price or the mean between the last reported bid and
from one or more reputable brokers or dealers. In cases asked prices are not reflective of a security’s market value,
where a security is traded on more than one exchange, portfolio securities are valued at their fair value as deter-
the security is valued on the exchange designated as the mined in good faith under procedures established by and
primary market; (2) all other equity portfolio securities under the general supervision of the Directors. Occasion-
for which over-the-counter (“OTC”) market quotations ally, developments affecting the closing prices of securities
are readily available are valued at the latest reported sales and other assets may occur between the times at which
price (or at the market official closing price if such mar- valuations of such securities are determined (that is, close
ket reports an official closing price), and if there was no of the foreign market on which the securities trade) and
trading in the security on a given day and if there is no the close of business of the New York Stock Exchange
official closing price from relevant markets for that day, (“NYSE”). If developments occur during such periods
the security is valued at the mean between the last re- that are expected to materially affect the value of such se-
ported bid and asked prices if such bid and asked prices curities, such valuations may be adjusted to reflect the
10Morgan Stanley Variable Insurance Fund, Inc.
Semi-Annual Report – June 30, 2021 (unaudited)
Notes to Financial Statements (cont’d)
estimated fair value of such securities as of the close of based on the best information available in the circum-
the NYSE, as determined in good faith by the Directors stances (unobservable inputs) and to establish classifica-
or by the Adviser using a pricing service and/or proce- tion of fair value measurements for disclosure purposes.
dures approved by the Directors; (5) quotations of for- Various inputs are used in determining the value of the
eign portfolio securities, other assets and liabilities and Fund’s investments. The inputs are summarized in the
forward contracts stated in foreign currency are translated three broad levels listed below:
into U.S. dollar equivalents at the prevailing market rates • Level 1 – unadjusted quoted prices in active markets
prior to the close of the NYSE; and (6) investments in for identical investments
mutual funds, including the Morgan Stanley Institutional
Liquidity Funds, are valued at the net asset value • Level 2 – other significant observable inputs (includ-
(“NAV”) as of the close of each business day. ing quoted prices for similar investments, interest
rates, prepayment speeds, credit risk, etc.)
The Directors have responsibility for determining in
good faith the fair value of the investments, and the Di- • Level 3 – significant unobservable inputs including
rectors may appoint others, such as the Company’s Ad- the Fund’s own assumptions in determining the fair
viser or a valuation committee, to assist the Directors in value of investments. Factors considered in making
determining fair value and to make the actual calcula- this determination may include, but are not limited
tions pursuant to the fair valuation methodologies previ- to, information obtained by contacting the issuer,
ously approved by the Directors. Under procedures analysts, or the appropriate stock exchange (for
approved by the Directors, the Company’s Adviser has exchange-traded securities), analysis of the issuer’s fi-
formed a Valuation Committee whose members are ap- nancial statements or other available documents and,
proved by the Directors. The Valuation Committee pro- if necessary, available information concerning other
vides administration and oversight of the Company’s securities in similar circumstances.
valuation policies and procedures, which are reviewed at The inputs or methodology used for valuing securities are
least annually by the Directors. These procedures allow not necessarily an indication of the risk associated with
the Company to utilize independent pricing services, investing in those securities and the determination of the
quotations from securities and financial instrument deal- significance of a particular input to the fair value meas-
ers and other market sources to determine fair value. urement in its entirety requires judgment and considers
The Fund invests a significant portion of its assets in se- factors specific to each security.
curities of REITs. The market’s perception of prospective The following is a summary of the inputs used to value
declines in private real estate values and other financial the Fund’s investments as of June 30, 2021:
assets may result in increased volatility of market prices Level 2
that can negatively impact the valuation of certain issuers Level 1 Other Level 3
held by the Fund. Unadjusted significant Significant
quoted observable unobservable
2. Fair Value Measurement: Financial Accounting prices inputs inputs Total
Investment Type (000) (000) (000) (000)
Standards Board (“FASB”) Accounting Standards
Assets:
CodificationTM (“ASC”) 820, “Fair Value Measurement”
Common Stocks
(“ASC 820”), defines fair value as the value that the Fund Diversified $ 12,961 $ — $— $ 12,961
would receive to sell an investment or pay to transfer a li- Health Care 6,522 — — 6,522
ability in a timely transaction with an independent buyer Industrial 6,167 — — 6,167
in the principal market, or in the absence of a principal Industrial/Office Mixed 499 — — 499
market, the most advantageous market for the investment Lodging/Resorts 1,954 — — 1,954
or liability. ASC 820 establishes a three-tier hierarchy to Office 6,771 — — 6,771
distinguish between (1) inputs that reflect the assump- Residential 8,905 — 8 8,913
tions market participants would use in valuing an asset or Retail 8,829 — — 8,829
liability developed based on market data obtained from Self Storage 3,502 — — 3,502
Specialty 1,463 — — 1,463
sources independent of the reporting entity (observable
inputs) and (2) inputs that reflect the reporting entity’s Total Common Stocks 57,573 — 8 57,581
own assumptions about the assumptions market partici-
pants would use in valuing an asset or liability developed
11Morgan Stanley Variable Insurance Fund, Inc.
Semi-Annual Report – June 30, 2021 (unaudited)
Notes to Financial Statements (cont’d)
Level 2 Following is a reconciliation of investments in which sig-
Level 1 Other Level 3
Unadjusted significant Significant
nificant unobservable inputs (Level 3) were used in deter-
quoted observable unobservable mining fair value:
prices inputs inputs Total
Investment Type (000) (000) (000) (000) Common
Stock
Assets: (cont’d)
(000)
Short-Term Investments
Investment Company $ 817 $ — $— $ 817 Beginning Balance $ 9
Repurchase Agreements — 109 — 109 Purchases —
Sales —
Total Short-Term
Investments 817 109 — 926 Amortization of discount —
Transfers in —
Total Assets $58,390 $109 $ 8 $58,507
Transfers out —
Transfers between investment levels may occur as the Corporate actions —
markets fluctuate and/or the availability of data used in Change in unrealized appreciation (depreciation) (1)
an investment’s valuation changes. Realized gains (losses) —
Ending Balance $ 8
Net change in unrealized appreciation (depreciation)
from investments still held as of June 30, 2021 $ (1)
The following table presents additional information about valuation techniques and inputs used for investments that are meas-
ured at fair value and categorized within Level 3 as of June 30, 2021:
Fair Value at Impact to
June 30, 2021 Valuation Unobservable Valuation from an
(000) Technique Input Amount* Increase in Input**
Common Stock $8 Market Transaction
Method Transaction Valuation $0.001 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: Fund may enter into re- proceedings. The Fund, along with other affiliated invest-
purchase agreements under which a Fund lends excess ment companies, may utilize a joint trading account for
cash and takes possession of securities with an agreement the purpose of entering into repurchase agreements.
that the counterparty will repurchase such securities. In 4. Foreign Currency Translation and Foreign
connection with transactions in repurchase agreements, a Investments: The books and records of the Fund are
bank as custodian for the Fund takes possession of the maintained in U.S. dollars. Foreign currency amounts are
underlying securities which are held as collateral, with a translated into U.S. dollars as follows:
market value at least equal to the amount of the repur-
chase transaction, including principal and accrued inter- — investments, other assets and liabilities at the pre-
est. To the extent that any repurchase transaction exceeds vailing rate of exchange on the valuation date;
one business day, the value of the collateral is marked-to- — investment transactions and investment income at
market on a daily basis to determine the adequacy of the the prevailing rates of exchange on the dates of
collateral. In the event of default on the obligation to re- such transactions.
purchase, the Fund has the right to liquidate the collat- Although the net assets of the Fund are presented at the
eral and apply the proceeds in satisfaction of the foreign exchange rates and market values at the close of
obligation. In the event of default or bankruptcy by the the period, the Fund does not isolate that portion of the
counterparty to the agreement, realization and/or reten- results of operations arising as a result of changes in the
tion of the collateral or proceeds may be subject to legal foreign exchange rates from the fluctuations arising from
12Morgan Stanley Variable Insurance Fund, Inc.
Semi-Annual Report – June 30, 2021 (unaudited)
Notes to Financial Statements (cont’d)
changes in the market prices of securities held at period shares in such markets, the Fund values the foreign shares
end. Similarly, the Fund does not isolate the effect of at the closing exchange price of the local shares.
changes in foreign exchange rates from the fluctuations 5. Securities Lending: The Fund lends securities to
arising from changes in the market prices of securities qualified financial institutions, such as broker-dealers, to
sold during the period. Accordingly, realized and unreal- earn additional income. Any increase or decrease in the
ized foreign currency gains (losses) on investments in se- fair value of the securities loaned that might occur and
curities are included in the reported net realized and any interest earned or dividends declared on those securi-
unrealized gains (losses) on investment transactions and ties during the term of the loan would remain in the
balances. However, pursuant to U.S. federal income tax Fund. The Fund would receive cash or securities as collat-
regulations, gains and losses from certain foreign currency eral in an amount equal to or exceeding 100% of the cur-
transactions and the foreign currency portion of gains rent fair value of the loaned securities. The collateral is
and losses realized on sales and maturities of foreign de- marked-to-market daily by State Street Bank and Trust
nominated debt securities are treated as ordinary income Company (“State Street”), the securities lending agent, to
for U.S. federal income tax purposes. ensure that a minimum of 100% collateral coverage is
Net realized gains (losses) on foreign currency transac- maintained.
tions represent net foreign exchange gains (losses) from Based on pre-established guidelines, the securities lending
foreign currency forward exchange contracts, disposition agent invests any cash collateral that is received in an af-
of foreign currencies, currency gains (losses) realized be- filiated money market portfolio and repurchase agree-
tween the trade and settlement dates on securities trans- ments. Securities lending income is generated from the
actions, and the difference between the amount of earnings on the invested collateral and borrowing fees,
investment income and foreign withholding taxes less any rebates owed to the borrowers and compensation
recorded on the Fund’s books and the U.S. dollar equiva- to the lending agent, and is recorded as “Income from Se-
lent amounts actually received or paid. The change in un- curities Loaned — Net” in the Fund’s Statement of Op-
realized currency gains (losses) on foreign currency erations. Risks in securities lending transactions are that a
transactions for the period is reflected in the Statement of borrower may not provide additional collateral when re-
Operations. quired or return the securities when due, and that the
Foreign security and currency transactions may involve value of the short-term investments will be less than the
certain considerations and risks not typically associated amount of cash collateral plus any rebate that is required
with those of U.S. dollar denominated transactions as a to be returned to the borrower.
result of, among other factors, fluctuations of exchange The Fund has the right under the securities lending
rates in relation to the U.S. dollar, the possibility of lower agreement to recover the securities from the borrower on
levels of governmental supervision and regulation of for- demand.
eign securities markets and the possibility of political or
economic instability. The following table presents financial instruments that
are subject to enforceable netting arrangements as of
Governmental approval for foreign investments may be June 30, 2021:
required in advance of making an investment under cer-
tain circumstances in some countries, and the extent of Gross Amounts Not Offset in the Statement of Assets and Liabilities
Gross Asset
foreign investments in domestic companies may be sub- Amounts
ject to limitation in other countries. Foreign ownership Presented in
limitations also may be imposed by the charters of indi- the Statement Net Amount
of Assets and Financial Collateral (not less
vidual companies to prevent, among other concerns, vio- Liabilities Instrument Received than $0)
lations of foreign investment limitations. As a result, an (000) (000) (000) (000)
additional class of shares (identified as “Foreign” in the $1,256(a) $— $(1,256)(b)(c) $0
Portfolio of Investments) may be created and offered for (a) Represents market value of loaned securities at period end.
investment. The “local” and “foreign shares” market val-
ues may differ. In the absence of trading of the foreign
13Morgan Stanley Variable Insurance Fund, Inc.
Semi-Annual Report – June 30, 2021 (unaudited)
Notes to Financial Statements (cont’d)
(b) The Fund received cash collateral of approximately $735,000, of recognized on the accrual basis except where collection is
which approximately $715,000 was subsequently invested in
Repurchase Agreements and Morgan Stanley Institutional Liquidity
in doubt. Discounts are accreted and premiums are
Funds as reported in the Portfolio of Investments. As of June 30, amortized over the life of the respective securities. Most
2021, there was uninvested cash of approximately $20,000, which expenses of the Company can be directly attributed to a
is not reflected in the Portfolio of Investments. In addition, the Fund
received non-cash collateral of approximately $596,000 in the form
particular Fund. Expenses which cannot be directly at-
of U.S. Government obligations, which the Fund cannot sell or tributed are apportioned among the Funds based upon
repledge, and accordingly are not reflected in the Portfolio of relative net assets or other appropriate methods. Income,
Investments.
expenses (other than class specific expenses) and realized
(c) The actual collateral received is greater than the amount shown and unrealized gains or losses are allocated to each class of
here due to overcollateralization.
shares based upon their relative net assets.
FASB ASC 860, “Transfers & Servicing: Repurchase-to-
The Fund owns shares of REITs which report informa-
Maturity Transactions, Repurchase Financings, and Dis-
tion on the source of their distributions annually in the
closures”, is intended to provide increased transparency
following calendar year. A portion of distributions re-
about the types of collateral pledged in securities lending
ceived from REITs during the year is estimated to be a re-
transactions and other similar transactions that are ac-
turn of capital and is recorded as a reduction of their cost.
counted for as secured borrowing.
Settlement and registration of foreign securities transac-
The following table displays a breakdown of transactions
tions may be subject to significant risks not normally as-
accounted for as secured borrowings, the gross obliga-
sociated with investments in the United States. In certain
tions by class of collateral pledged and the remaining
markets, ownership of shares is defined according to en-
contractual maturity of those transactions as of
tries in the issuer’s share register. It is possible that a Fund
June 30, 2021:
holding these securities could lose its share registration
Remaining Contractual Maturity of the Agreements
Between
through fraud, negligence or even mere oversight. In ad-
Overnight and 30 & dition, shares being delivered for sales and cash being
Continuous 90 days Total paid for purchases may be delivered before the exchange
(000) (000) (000) (000) (000)
is complete. This may subject the Fund to further risk of
Securities Lending
Transactions loss in the event of a failure to complete the transaction
Common Stocks $ 735 $— $— $— $ 735 by the counterparty.
Total Borrowings $735 $— $— $— $735 8. Dividends and Distributions to Shareholders:
Gross amount of
Dividends and distributions to shareholders are recorded
recognized liabilities
for securities lending on the ex-dividend date. Dividends from net investment
transactions $735 income, if any, are declared and paid annually. Net real-
ized capital gains, if any, are distributed at least annually.
6. Indemnifications: The Company enters into contracts
that contain a variety of indemnifications. The Com- B. Advisory/Sub-Advisory Fees: The Adviser, a wholly-
pany’s maximum exposure under these arrangements is owned subsidiary of Morgan Stanley, provides the Fund with
unknown. However, the Company has not had prior advisory services under the terms of an Investment Advisory
claims or losses pursuant to these contracts and expects Agreement, paid quarterly, at an annual rate of 0.80% of the
the risk of loss to be remote. daily net assets of the Fund.
7. Security Transactions, Income and Expenses: The Adviser has agreed to reduce its advisory fee and/or reim-
Security transactions are accounted for on the trade date burse the Fund so that the total annual Fund operating ex-
(date the order to buy or sell is executed). Realized gains penses, excluding certain investment related expenses, taxes,
and losses on the sale of investment securities are deter- interest and other extraordinary expenses (including litiga-
mined on the specific identified cost method. Dividend tion), will not exceed 1.25% for Class II shares. The fee
income and other distributions are recorded on the ex- waivers and/or expense reimbursements will continue for at
dividend date (except for certain foreign dividends which least one year from the date of the Fund’s prospectus or until
may be recorded as soon as the Fund is informed of such such time as the Directors act to discontinue all or a portion
dividends) net of applicable withholding taxes. Non-cash of such waivers and/or reimbursements when they deem such
dividends received in the form of stock, if any, are recog- action is appropriate. For the six months ended June 30,
nized on the ex-dividend date and recorded as non-cash 2021, approximately $146,000 of advisory fees were waived
dividend income at fair value. Interest income is pursuant to this arrangement.
14Morgan Stanley Variable Insurance Fund, Inc.
Semi-Annual Report – June 30, 2021 (unaudited)
Notes to Financial Statements (cont’d)
The Adviser has entered into Sub-Advisory Agreements with H. Security Transactions and Transactions with
the Sub-Advisers, each a wholly-owned subsidiary of Morgan Affiliates: For the six months ended June 30, 2021, pur-
Stanley. The Sub-Advisers provide the Fund with advisory chases and sales of investment securities for the Fund, other
services subject to the overall supervision of the Adviser and than long-term U.S. Government securities and short-term
the Company’s Officers and Directors. The Adviser pays the investments were approximately $38,740,000 and
Sub-Advisers on a monthly basis a portion of the net advisory $41,587,000, respectively. There were no purchases and sales
fees the Adviser receives from the Fund. of long-term U.S. Government securities for the six months
C. Administration Fees: The Adviser also serves as Ad- ended June 30, 2021.
ministrator to the Company and provides administrative serv- The Fund invests in the Institutional Class of the Morgan
ices pursuant to an Administration Agreement for an annual Stanley Institutional Liquidity Funds — Treasury Portfolio
fee, accrued daily and paid monthly, of 0.08% of the Fund’s (the “Liquidity Funds”), an open-end management invest-
average daily net assets. ment company managed by the Adviser, both directly and as a
Under a Sub-Administration Agreement between the Admin- portion of the securities held as collateral on loaned securities.
istrator and State Street, State Street provides certain adminis- Advisory fees paid by the Fund are reduced by an amount
trative services to the Company. For such services, the equal to its pro-rata share of the advisory and administration
Administrator pays State Street a portion of the fee the Ad- fees paid by the Fund due to its investment in the Liquidity
ministrator receives from the Fund. Funds. For the six months ended June 30, 2021, advisory fees
paid were reduced by less than $500 relating to the Fund’s in-
D. Servicing Fees: The Company accrues daily and pays vestment in the Liquidity Funds.
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 A summary of the Fund’s transactions in shares of affiliated
account. Certain insurance companies have entered into a investments during the six months ended June 30, 2021 is as
servicing agreement with the Company to provide adminis- follows:
trative and other contract-owner related services on behalf of Value
the Fund. Affiliated December 31, Purchases Proceeds Dividend
Investment 2020 at Cost from Sales Income
E. Distribution Fees: Morgan Stanley Distribution, Inc. Company (000) (000) (000) (000)
(“MSDI” or the “Distributor”), a wholly-owned subsidiary of Liquidity Funds $618 $7,989 $7,790 $—@
the Adviser and an indirect subsidiary of Morgan Stanley,
Change in
serves as the Distributor of the Fund and provides the Fund’s
Unrealized Value
Class II shareholders with distribution services pursuant to a Affiliated Realized Appreciation June 30,
Distribution Plan (the “Plan”) in accordance with Rule 12b-1 Investment Gain (Loss) (Depreciation) 2021
under the Act. Under the Plan, the Fund is authorized to pay Company (cont’d) (000) (000) (000)
the Distributor a distribution fee, which is accrued daily and Liquidity Funds $— $— $817
paid monthly, at an annual rate of 0.25% of the Fund’s aver- @ Amount is less than $500.
age daily net assets attributable to Class II shares.
The Fund is permitted to purchase and sell securities (“cross-
F. Dividend Disbursing and Transfer Agent: The trade”) from and to other Morgan Stanley funds as well as
Company’s dividend disbursing and transfer agent is DST As- other funds and client accounts for which the Adviser or an
set Manager Solutions, Inc. (“DST”). Pursuant to a Transfer affiliate of the Adviser serves as investment adviser, pursuant
Agency Agreement, the Company pays DST a fee based on to procedures approved by the Directors in compliance with
the number of classes, accounts and transactions relating to Rule 17a-7 under the Act (the “Rule”). Each cross-trade is ex-
the Funds of the Company. ecuted at the current market price in compliance with provi-
G. Custodian Fees: State Street (the “Custodian”) also sions of the Rule. For the six months ended June 30, 2021,
serves as Custodian for the Company in accordance with a the Fund did not engage in any cross-trade transactions.
Custodian Agreement. The Custodian holds cash, securities The Fund has an unfunded Deferred Compensation Plan (the
and other assets of the Company as required by the Act. Cus- “Compensation Plan”), which allows each independent Direc-
tody fees are payable monthly based on assets held in custody, tor to defer payment of all, or a portion, of the fees he or she
investment purchases and sales activity and account mainte- receives for serving on the Board of Directors. Each eligible
nance fees, plus reimbursement for certain out-of-pocket Director generally may elect to have the deferred amounts
expenses. credited with a return equal to the total return on one or
15Morgan Stanley Variable Insurance Fund, Inc.
Semi-Annual Report – June 30, 2021 (unaudited)
Notes to Financial Statements (cont’d)
more of the Morgan Stanley funds that are offered as invest- Temporary differences are attributable to differing book and
ment options under the Compensation Plan. Appreciation/ tax treatments for the timing of the recognition of gains
depreciation and distributions received from these invest- (losses) on certain investment transactions and the timing of
ments are recorded with an offsetting increase/decrease in the the deductibility of certain expenses.
deferred compensation obligation and do not affect the NAV Permanent differences, due to an adjustment to prior period
of the Fund. equalization debits, resulted in the following reclassifications
I. Federal Income Taxes: It is the Fund’s intention to among the components of net assets at December 31, 2020:
continue to qualify as a regulated investment company and Total
distribute all of its taxable and tax-exempt income. Accord- Distributable Paid-in-
Earnings Capital
ingly, no provision for federal income taxes is required in the (000) (000)
financial statements. $5 $(5)
The Fund may be subject to taxes imposed by countries in At December 31, 2020, the components of distributable earn-
which it invests. Such taxes are generally based on income ings for the Fund on a tax basis were as follows:
and/or capital gains earned or repatriated. Taxes are accrued Undistributed Undistributed
based on net investment income, net realized gains and net Ordinary Long-Term
unrealized appreciation as such income and/or gains are Income Capital Gain
(000) (000)
earned. Taxes may also be based on transactions in foreign
$1,434 $—
currency and are accrued based on the value of investments
denominated in such currency. At December 31, 2020, the Fund had available for federal in-
FASB ASC 740-10, “Income Taxes — Overall”, sets forth a come tax purposes unused short-term and long-term capital
minimum threshold for financial statement recognition of the losses of approximately $520,000 and $6,086,000, respec-
benefit of a tax position taken or expected to be taken in a tax tively, that do not have an expiration date.
return. Management has concluded there are no significant To the extent that capital loss carryforwards are used to offset
uncertain tax positions that would require recognition in the any future capital gains realized, no capital gains tax liability
financial statements. If applicable, the Fund recognizes inter- will be incurred by the Fund for gains realized and not dis-
est accrued related to unrecognized tax benefits in “Interest tributed. To the extent that capital gains are offset, such gains
Expense” and penalties in “Other Expenses” in the Statement will not be distributed to the shareholders.
of Operations. The Fund files tax returns with the U.S. Inter- J. Credit Facility: The Company and other Morgan Stan-
nal Revenue Service, New York and various states. Generally, ley funds participated in a $300,000,000 committed, unse-
each of the tax years in the four-year period ended Decem- cured revolving line of credit facility (the “Facility”) with State
ber 31, 2020 remains subject to examination by taxing Street. This Facility is to be used for temporary emergency
authorities. purposes or funding of shareholder redemption requests. The
The tax character of distributions paid may differ from the interest rate on borrowings is based on the federal funds rate
character of distributions shown for GAAP purposes due to or 1 month LIBOR rate plus a spread. Effective April 19,
short-term capital gains being treated as ordinary income for 2021, the interest rate on borrowings is based on the federal
tax purposes. The tax character of distributions paid during funds effective rate or overnight bank funding rate plus a
fiscal years 2020 and 2019 was as follows: spread. The Facility also has a commitment fee of 0.25% per
2020 Distributions 2019 Distributions annum based on the unused portion of the Facility. During
Paid From: Paid From: the six months ended June 30, 2021, the Fund did not have
Ordinary Long-Term Ordinary Long-Term any borrowings under the Facility.
Income Capital Gain Income Capital Gain
(000) (000) (000) (000) K. Other: At June 30, 2021, the Fund had record owners of
$2,346 $1,057 $1,979 $3,259 10% or greater. Investment activities of these shareholders
The amount and character of income and gains to be distrib- could have a material impact on the Fund. The aggregate per-
uted are determined in accordance with income tax regula- centage of such owners was 84.9%.
tions which may differ from GAAP. These book/tax L. Market Risk: Certain impacts to public health condi-
differences are either considered temporary or permanent in tions particular to the coronavirus (“COVID-19”) outbreak
nature. could impact the operations and financial performance of cer-
tain of the Fund’s investments. The extent of the impact to
16Morgan Stanley Variable Insurance Fund, Inc.
Semi-Annual Report – June 30, 2021 (unaudited)
Notes to Financial Statements (cont’d)
the financial performance of the Fund’s investments will de-
pend on future developments, including (i) the duration and
spread of the outbreak, (ii) the restrictions and advisories,
(iii) the effects on the financial markets, and (iv) the effects on
the economy overall, all of which are highly uncertain and
cannot be predicted. If the financial performance of the
Fund’s investments is impacted because of these factors for an
extended period, the Fund’s investment results may be ad-
versely affected.
17Morgan Stanley Variable Insurance Fund, Inc. Semi-Annual Report – June 30, 2021 (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, 2020, 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 contractual management fee and total expense ratio were higher than but close to its peer group averages and the actual management fee was lower than 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 18
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