Morgan Stanley
Pathway Funds
Pathway Funds
Emerging Markets Equity Fund | Ticker:
TEMUX
January 1, 2024
Summary Prospectus
Before you invest, you may want to review the Fund’s prospectus, which contains more information about the Fund and
its risks. The Fund’s prospectus, dated January 1, 2024, and Statement of Additional Information, dated January 1, 2024, are incorporated by reference into the summary prospectus, making them legally part of the summary prospectus. You can find the Fund’s prospectus and
other information about the Fund online at www.morganstanley.com/wealth-investmentsolutions/cgcm. You can also get this information at no cost by calling 1-800-869-3326 or by sending an
e-mail request to client.field.services@morganstanley.com.
Investment objective
Long-term capital appreciation.
Fund Fees and Expenses
This table
describes the fees and expenses you may pay if you buy and hold shares of the Fund.
Annual Advisory Program Fees
(fees paid directly from
your investment in the applicable Morgan Stanley-sponsored investment advisory
program)
| Maximum annual fees in the Consulting Group Advisor, Select UMA, or Portfolio Management investment advisory programs (as a percentage of average prior quarter-end net assets)* |
2.00% |
Annual Fund Operating Expenses
(expenses that you pay
each year as a percentage of the value of your investment in the Fund)
| Management Fees* |
0.90% |
| Distribution (12b-1) Fees |
None |
| Other Expenses |
0.25% |
| Total Annual Fund Operating Expenses |
1.15% |
| Waiver* |
(0.33)% |
| Net Annual Fund Operating Expenses* |
0.82% |
* CGAS (defined herein) has contractually agreed to waive fees and reimburse expenses in order to keep the Fund’s management fees from exceeding the total amount of sub-advisory fees paid by CGAS
plus 0.20% based on average net assets. This contractual waiver will only apply if the Fund’s total management fees exceed the total amount of sub-advisory fees paid by CGAS plus 0.20% and will not affect the Fund’s total
management fees if they are less than such amount. This fee waiver and/or reimbursement will continue for at least one year from the date of this prospectus or until such time as the Board of Trustees acts to discontinue all or a portion of such
waiver and/or reimbursement when they deem such action is appropriate.
Examples
These examples are intended
to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds. The
examples assume that you invest $10,000 in the Fund for the time periods indicated. The examples also assume that
your investment has a 5% return each year and that the Fund’s operating expenses remain the same. The
effect of the Fund’s contractual fee waiver is only reflected in the first year of the example. The figures
are calculated based upon total annual Fund operating expenses and a maximum annual fee of 2.00% for the
applicable Morgan Stanley-sponsored investment advisory program through which you invest. Although your actual
costs may be higher or lower, based on these assumptions your costs would be:
| AFTER
1 YEAR |
AFTER
3 YEARS |
AFTER
5 YEARS |
AFTER
10 YEARS |
| $285 |
$941 |
$1,621 |
$3,435 |
Portfolio turnover
The Fund pays transaction costs, such as commissions, when it buys and sells securities (or “turns over” its portfolio). A higher portfolio turnover rate may indicate higher
transaction costs and may result in higher taxes when Fund shares are held in a taxable account. These costs,
which are not reflected in annual fund operating expenses or in the above examples, affect the Fund’s
performance. During the most recent fiscal year, the Fund’s portfolio turnover rate was 12% of the average
value of its portfolio.
Principal investment strategies
The Fund will invest, under normal market conditions, at least 80% of its net assets (plus the amount of any borrowing for investment purposes) in equity securities of issuers organized,
domiciled or with substantial operations in emerging markets countries, which are defined as countries included
in an emerging markets index by a recognized index provider, such as the MSCI Emerging Markets Index (Net), or
characterized as developing or emerging by any of the World Bank, the United Nations, the International Finance
Corporation, or the European Bank for Reconstruction and Development. Certain emerging market countries may also
be classified as “frontier” market countries, which are a subset of emerging countries with even
smaller national economies. To diversify its investments, the Fund invests primarily in securities of issuers
located in at least three foreign countries. The Fund also may invest a portion of its assets in closed-end
investment companies that invest in emerging markets. The Fund may attempt to hedge against unfavorable changes
in currency exchange rates by engaging in forward currency transactions and trading currency futures contracts
and options on these futures; however, a Sub-adviser (as defined below) may choose not to, or may be unable to,
hedge the Fund’s currency exposure. The Fund may also lend portfolio securities to earn additional income.
Any income realized through securities lending may help Fund performance.
The Fund employs a “multi-manager” strategy whereby portions of the Fund are allocated to professional money
managers (each, a “Sub-adviser,” collectively, the “Sub-advisers”) who are responsible
for investing the assets of the Fund.
Principal risks of investing in the Fund
Loss of money is a risk of investing in the Fund.
The
Fund’s principal risks include:
•
Market Risk, which is the risk that stock prices decline overall. Markets are volatile and can decline significantly in response to real or perceived adverse issuer, political,
regulatory, market or economic developments in the U.S. and in other countries. Similarly, environmental and
public health risks, such as natural disasters, epidemics, pandemics or widespread fear that such events may
occur, may impact markets adversely and cause market volatility in both the short and long-term. Market risk may
affect a single company, sector of the economy or the market as a whole.
2 MORGAN STANLEY | 2024
•
Equity
Risk, which is the risk that prices of equity securities rise and fall daily due to factors affecting individual
companies, particular industries or the equity market as a whole.
•
Foreign Investment Risk, which means risks unique to foreign securities, including less information about foreign issuers, less liquid securities markets, political instability
and unfavorable changes in currency exchange rates.
•
Emerging Markets and Frontier Markets Risk, emerging markets countries, which are generally defined as countries that may be represented in a market index such as the MSCI Emerging Markets Index (Net) or having per capita income in the low to middle ranges, as determined by the World Bank. Certain emerging market countries may also be classified as “frontier” market countries, which are a subset of emerging countries with even smaller national economies. In
addition to foreign investment and currency risks, emerging markets may experience rising interest rates, or,
more significantly, rapid inflation or hyperinflation. Emerging market securities may present market, credit,
liquidity, legal, political and other risks different from, or greater than, the risks of investing in developed
foreign countries. The Fund also could experience a loss from settlement and custody practices in some emerging
markets. These risks tend to be even more prevalent in frontier market countries. The economies of frontier
market countries tend to be less correlated to global economic cycles than the economies of more developed
countries and their markets have lower trading volumes and may exhibit greater price volatility and illiquidity.
A small number of large investments in these markets may affect these markets more than more developed markets.
Frontier market countries may also be more affected by government activities than more developed countries. For
example, the governments of frontier market countries may exercise substantial influence within the private
sector or subject investments to government approval, and governments of other countries may impose or negotiate
trade barriers, exchange controls, adjustments to relative currency values and other measures that adversely
affect a frontier market country. Governments of other countries may also impose sanctions or embargoes on
frontier market countries. Although all of these risks are generally heightened with respect to frontier market
countries, they also apply to emerging market countries.
•
Currency
Risk, which refers to the risk that as a result of the Fund’s investments in securities denominated in,
and/or receiving revenues in, foreign currencies, those currencies will decline in value relative to the U.S.
dollar or, in the case of hedged positions, the U.S. dollar will decline in value relative to the currency
hedged.
•
Forwards, Futures and Options Risk, which means that the Fund’s use of forwards, futures and options to enhance returns or hedge against market declines subjects the Fund
to potentially greater volatility and/or losses. Even a small investment in forwards, futures or options can have
a large impact on the Fund’s Interest rate, securities market and currency exposure. Therefore, using
forwards, futures or options can disproportionately increase losses and reduce
opportunities for gains when
interest rates, stock prices or currency rates are changing. The Fund may not fully benefit from or may lose
money on its investment in forwards, futures or options if changes in their value do not correspond accurately to
changes in the value of the Fund’s holdings. Investing in forwards, futures or options can also make the
Fund’s assets less liquid and harder to value, especially in declining markets. The Fund may hold illiquid
securities that may be difficult to sell and may be required to be fair valued.
•
Closed-End Investment Company Risk, which means that since closed-end investment companies issue a fixed number of shares they typically trade on a stock exchange or over-the-counter at a premium or discount to their net asset value per share. The Fund will also bear its pro rata portion
of any costs of a closed-end fund in which it invests.
•
Securities Lending Risk, which includes the potential insolvency of a borrower and losses due to the re-investment of collateral received on loaned securities in investments that default or do not perform well.
•
Strategy Risk, the Fund invests a portion of its assets in stocks believed by a Sub-adviser to be undervalued, but that may not realize their perceived value for extended periods of
time or may never realize their perceived value. The Fund also invests a portion of its assets in stocks
believed by a Sub-adviser to have the potential for growth, but that may not realize such perceived growth
potential for extended periods of time or may never realize such perceived growth potential. Such stocks
may be more volatile than other stocks because they can be more sensitive to investor perceptions of the issuing
company’s growth potential. The stocks in which the Fund invests may respond differently to market
and other developments than other types of stocks.
•
Manager Risk, which is the risk that poor security selection by a Sub-adviser will cause the Fund to underperform. This risk is common for all actively managed funds.
•
Multi-Manager Risk, which is the risk that the investment styles of the Sub-advisers may not complement each other as expected by the Manager. The Fund may experience a higher portfolio turnover rate, which can increase the Fund’s transaction costs and result in more taxable short-term
gains for shareholders.
•
Issuer Risk, which is the risk that the value of a security may decline for reasons directly related to the issuer, such as management performance, financial leverage and reduced demand for the issuer’s goods or services.
•
LIBOR Transition Risk, refers to the fact that the elimination of the London Inter-Bank Offered Rate (“LIBOR”) rate may adversely affect the interest rates on, and value of,
certain Fund investments that are tied to LIBOR. The U.K. Financial Conduct Authority ceased publishing all LIBOR
settings on a representative basis after June 30, 2023, although some USD LIBOR settings will continue to be
published under a synthetic methodology until September 30, 2024 for certain legacy contracts. Alternatives to
LIBOR are established or in development in most major currencies and markets are slowly responding to these new
rates. It is difficult to predict the full impact of the transition away from LIBOR on the Fund.
3 MORGAN STANLEY | 2024
•
Sector
Risk, which is the risk that the value of securities in a particular industry or sector will decline because of
changing expectations for the performance of that industry or sector. From time to time, based on market or
economic conditions, the Fund may have significant positions in one or more sectors of the market. To the extent
the Fund invests more heavily in particular sectors, its performance will be especially sensitive to developments
that significantly affect those sectors. Individual sectors may be more volatile, and may perform differently,
than the broader market. The industries that constitute a sector may all react in the same way to economic,
political or regulatory events.
An investment
in the Fund is not a deposit of a bank and is not insured or guaranteed by the Federal Deposit Insurance
Corporation or any other government agency. For more information on the risks of investing in the Fund please see
the Fund details section of this Prospectus.
Performance
The bar chart below shows how the Fund’s investment results have varied from year to year, and the following table shows how the Fund’s annual total returns for various periods
compare to those of the Fund’s benchmark index and Lipper peer group. This information provides some
indication of the risks of investing in the Fund. The Fund is available only to investors participating in Morgan
Stanley-sponsored investment advisory programs. These programs charge an annual fee (see Annual Advisory Program
Fees above). The performance information in the bar chart and table below
does not reflect this fee, which would reduce your return. The Fund’s past performance, before and after taxes, does not necessarily indicate how the Fund will perform in the
future. For current performance information please see
www.morganstanley.com/wealth-investmentsolutions/cgcm.
Annual total returns (%) calendar years
Emerging Markets Equity Fund
Fund’s best and worst
calendar quarters
Best: 19.72% in 4th quarter 2020
Worst: (26.64)% in 1st quarter 2020
Year-to-date: 1.99% (through 3rd quarter 2023)
Worst: (26.64)% in 1st quarter 2020
Year-to-date: 1.99% (through 3rd quarter 2023)
Average Annual Total Returns
(for the periods ended December 31,
2022)
| INCEPTION DATE: 4/21/1994 |
1 YEAR |
5 YEARS |
10 YEARS |
| Fund (without advisory program fee) | |||
| Return Before Taxes |
(21.74)% |
(3.54)% |
0.16% |
| Return After Taxes on Distributions |
(23.32)% |
(5.45)% |
(1.81)% |
| Return After Taxes on Distributions and Sale of Fund Shares |
(12.43)% |
(2.46)% |
0.27% |
| MSCI Emerging Markets Index (Net) (reflects no deduction for fees, expenses or taxes) |
(20.09)% |
(1.40)% |
1.44% |
| Lipper Emerging Markets Funds Average |
(22.92)% |
(2.04)% |
0.93% |
The after-tax returns are calculated using the highest historical
individual federal marginal income tax rates and do not reflect the impact of state and local taxes. Actual
after-tax returns depend on an individual investor’s tax situation and may differ from those shown, and
after-tax returns shown are not relevant to investors who hold their Fund shares through tax-deferred
arrangements, such as 401(k) plans or individual retirement accounts. In some cases, the return after taxes may
exceed the return before taxes due to an assumed tax benefit from any losses on a sale of Fund shares at the end
of the measurement period.
The
Fund’s benchmark is the MSCI Emerging Markets Index (Net). The benchmark is composed of equity total returns of countries with low to middle per capita incomes, as determined by the World Bank. Unlike the Fund, the benchmark is unmanaged and does not include any fees or expenses. An investor cannot invest directly in an index.
The Fund also compares its performance with the Lipper
Emerging Markets Funds Average. The Lipper Emerging Markets Funds Average is composed of funds that, by fund
practice, seek long-term capital appreciation by investing at least 65% of their total assets in emerging market
equity
4 MORGAN STANLEY | 2024
securities, where “emerging market” is
defined by a country’s gross national product per capita or other economic measures.
Investment adviser
Consulting Group
Advisory Services LLC (“CGAS” or the “Manager”), a business of Morgan Stanley Wealth
Management (“MSWM”), serves as the investment adviser for the Fund. Subject to Board review, the
Manager selects and oversees professional money managers (each a “Sub-adviser,” collectively, the
“Sub-advisers”) who are responsible for investing the assets of the Fund. The Sub-advisers are
selected based primarily upon the research and recommendation of the Manager, which includes a quantitative
and qualitative evaluation of a Sub-adviser’s skills and investment results in managing assets for specific
asset classes, investment styles and strategies. The Manager
allocates and, when appropriate, reallocates the Fund’s assets
among one or more Sub-advisers, continuously monitors and evaluates Sub-adviser performance (including trade
execution), performs other due diligence functions (such as an assessment of changes in personnel or other
developments at the Sub-advisers), and oversees Sub-adviser compliance with the Fund’s investment
objectives, policies and guidelines. The Manager also monitors changes in market conditions and considers
whether changes in the allocation of Fund assets or the lineup of Sub-advisers should be made in response to such
changes in market conditions. Sub-advisers may also periodically recommend changes or enhancements to the
Fund’s investment objectives, policies and guidelines, which are subject to the approval of the Manager and
may also be subject to the approval of the Board.
Sub-advisers and portfolio
managers
BlackRock Financial Management, Inc. (“BlackRock”)
Lazard Asset Management LLC (“Lazard”)
Martin Currie Inc. (“Martin Currie”)
Van Eck Associates Corporation (“VanEck”)
Lazard Asset Management LLC (“Lazard”)
Martin Currie Inc. (“Martin Currie”)
Van Eck Associates Corporation (“VanEck”)
| PORTFOLIO MANAGERS |
SUB-ADVISER OR ADVISER |
FUND’S PORTFOLIO
MANAGER SINCE |
| Jennifer Hsui, CFA® Managing Director and Senior Portfolio Engineer |
BlackRock |
2018 |
| Paul Whitehead, Managing Director, Co-Head of Index Equity |
BlackRock |
2022 |
| Peter Sietsema, CFA® Director and Senior Portfolio Manager |
BlackRock |
2022 |
| James M. Donald, CFA®, Managing Director, Portfolio Manager/Analyst and Head of Emerging Markets |
Lazard |
2009 |
| Rohit Chopra, Managing Director and Portfolio Manager Analyst
|
Lazard |
2009 |
| Monika Shrestha, Managing Director and Portfolio Manager Analyst |
Lazard |
2015 |
| Ganesh Ramachandran, Managing Director and Portfolio Manager Analyst |
Lazard |
2020 |
| Alastair Reynolds, Portfolio Manager |
Martin Currie |
2021 |
| Andrew Mathewson, Portfolio Manager |
Martin Currie |
2021 |
| Colin Dishington, Portfolio Manager |
Martin Currie |
2021 |
| Divya Mathur, Portfolio Manager |
Martin Currie |
2021 |
| Paul Desoisa, Portfolio Manager |
Martin Currie |
2021 |
| Paul Sloane, Portfolio Manager |
Martin Currie |
2021 |
| Aimee Truesdale, Portfolio Manager |
Martin Currie |
2022 |
| David Semple, Portfolio Manager |
VanEck |
2016 |
| Angus Shillington, Deputy Portfolio Manager |
VanEck |
2016 |
| Ola El-Shawarby, Deputy Portfolio Manager |
VanEck |
2023 |
Purchase and sale of Fund
shares
Purchases of shares of the Fund must be made through an investment advisory program with Morgan Stanley. You may purchase or sell shares of the Fund at net asset value on any day the New York Stock Exchange (“NYSE”) is open by contacting your Morgan Stanley Financial Advisor.
•
The minimum initial aggregate investment in the Morgan Stanley-sponsored investment advisory programs is $1,000.
•
There is no minimum
on additional investments in the Fund or the applicable investment advisory program through which you
invest.
•
Each of the Fund and
the Morgan Stanley-sponsored investment advisory programs through which investments in the Fund are offered may
vary or waive these investment minimums at any time.
5 MORGAN STANLEY | 2024
For more information about the Morgan
Stanley-sponsored investment advisory programs, see the About the Funds section of this Prospectus.
Tax information
The Fund’s distributions are generally taxable to you as ordinary income, capital gains, or a combination of the
two.
Payments to financial intermediaries
If you purchase shares of the Fund through a broker-dealer or other financial intermediary (such as a bank), the Fund and its related companies may pay the intermediary for the sale of
Fund shares and related services. These payments may create a conflict of interest by influencing the
broker-dealer or other intermediary and your sales person to recommend the Fund over another investment. Ask your
salesperson or visit your financial intermediary’s website for more information.
6 MORGAN STANLEY | 2024