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Capabilities Overview
The Cresfort Investment Group at
Morgan Stanley
1
I. The Cresfort Investment Group Overview
II. Equity Management Overview
III. Fixed Income Management Overview
IV. Resource Summary
V. Biographies
VI. Recommended Portfolio
VII. Important Information
Table of Contents
The Cresfort Investment Group Overview
3
Portfolio Management Program
Established in 1979 to provide individual investors with a level of personalized portfolio management typically
reserved for major institutional investors
All portfolios are managed individually on a fully discretionary basis by Financial Advisors at Morgan Stanley who
have been qualified by the firm to independently manage client assets based on training, experience and
commitment to service
As your Portfolio Manager, I and my team can offer you:
Direct access to the investment professionals managing your portfolio
Personalized service
A disciplined, multipart investment process
Ongoing client communications and reporting
Access to the intellectual capital and global resources of Morgan Stanley
4
Your Financial Advisor will
Identify each client’s specific financial profile
Review each client’s tolerance for risk
Work with the Portfolio Manager in outlining an appropriate investment strategy
Communicate changes in needs or objectives to the Cresfort team
Your Portfolio Manager will
The Cresfort Investment Group: What We Do
Our Mission
To provide a high level of service for the high net worth client by tailoring
portfolios to meet unique needs, goals, and objectives. We accomplish this by
forging a relationship between the client, a Morgan Stanley Financial Advisor,
and The Cresfort Investment Group.
Design, construct, and manage a diversified, risk controlled investment portfolio designed to meet each client’s goals and objectives
Tailor the portfolio to fit circumstances surrounding client-specific situations
Monitor the portfolio and modify accordingly
5
Client
Financial
Advisor
Portfolio
Manager
The Cresfort Investment Group: A Relationship
The key to this relationship is ongoing communication between parties.
Source: Global Wealth Management Investments (GWMI).
6
Each client’s specific tax situation is considered when managing the
investment portfolio, including tax bracket, gains, carry forward, etc.
The Cresfort Investment Group: Our Value Added
Profiling of Clients
Tailored Portfolio
Management
Tax – Efficient Management
Breadth and Depth of
Investment Experience
The Cresfort Investment Group provides value through our:
Source: Global Wealth Management Investments (GWMI).
Manager Access
Collaborate with Financial Advisor to create an in-depth financial profile of
the client’s needs, goals, and objectives.
Build and manage an investment portfolio tailored to meet each client’s
unique requirements.
Leverage the Cresfort Investment Group’s breadth and depth of experience
for equity, fixed income, and balanced portfolio management.
Ongoing communication can help strengthen and maintain relationships while
providing a higher level of service.
7
Traditional Equity Portfolio
Cresfort Customized Multi-Cap Equity Portfolio
Traditional Balanced Portfolio
Combination of Traditional Equity
and Fixed Income Portfolio
Fixed Income Portfolio
Cresfort Customized Fixed Income Portfolio
The Cresfort Investment Group: Portfolio Management Options
The Cresfort Investment Group Equity Management Overview
9
The Cresfort Investment Group: Our Investment Philosophy
Source: Global Wealth Management Investments (GWMI).
Great Companies Good Valuations Opportunity for
Long-term
Investment Success High returns on capital
Strong, motivated
management
Consistent growth
Price / Cash flow
Price / Earnings
P/E / Growth
P/E / ROE
OR
Solid market position
History of earnings
growth
Strong Balance Sheet
Good Companies Great Valuations Opportunity for
Long-term
Investment Success Attractive relative
P/E & P/CF
+ =
+ =
10
The Cresfort Investment Group: Our Assessment of Intrinsic Value
Discount Rate
(Cost of Capital)
1. Increase 1. Increase CFROI® 1. Increase CFROI®
or hold CFROI®
2. Grow Assets 2. Then Grow 2. Contract Assets
Positive
Spread
Neutral
Neg.
Spread
Strategy Options
for
Wealth Creation
Source: Credit Suisse HOLT. HOLT, a division of Credit Suisse, offers corporate performance, valuation, and strategic analysis frameworks. A provider of valuation software and independent research, HOLT
services clients throughout North America, Europe and Asia Pacific. The company provides a “state-of-the-art” valuation platform and database covering approximately 18,000 companies in 28 countries. HOLT
is known in the marketplace for its strong client servicing and objective valuation work.
© 2008 Credit Suisse and its subsidiaries and affiliates. Used by permission. All rights reserved. CFROI® is a registered trademark of Credit Suisse or its affiliates in the United States and other countries.
CFROI – Cash Flow Return on Investment
CFROI® (%)
11 Source: Global Wealth Management Investments (GWMI).
The Cresfort Investment Group: Our Portfolio Construction Process
1.) Start with a…
1,600+ Stock Universe
2.) Screen for…
Return on invested capital
Cost of capital
This results in…
750 Stocks 3.) Apply fundamental analysis…
Strength of Management
Industry Competitive Positioning
Opportunities for Growth
Determine downside risk potential
Producing a...
375 Stock Focus List
4.) Perform valuation…
Discount future cash flows/earnings
Create price targets
Rank by expected total return
Review for direction of earnings
dddrevisions
Arriving at...
100 Stocks
5.) Construct the portfolio…
Tailored to meet client’s individual objectives
Investment goals
Specified market cap
Income Needs
Diversified by economic sectors
Resulting in a ...
35-50 Name Portfolio
1,600+ Stock Universe
750 Stocks
375 Stocks
100 Stocks
12
The Cresfort Investment Group: Our Ongoing Review/Sell Discipline
This can occur when:
• The stock has a high relative valuation and deteriorating sentiment
• Alternative purchase idea provides better risk/return characteristics
Factors affecting a company’s fundamentals could include:
• Deteriorating business position (loss of market share, reduced industry growth, shrinking margins)
• Erosion of intrinsic value (increased leverage, dilutive acquisition or stock issuance, etc.)
Tax considerations include:
• Client’s individual tax bracket
• Short-term and long-term gains and losses
• Harvesting gains and losses throughout the year
A position will be reviewed for sale in a client’s portfolio when its after-tax expected risk-
return contribution has become less favorable relative to other investment opportunities.
Source: Global Wealth Management Investments (GWMI).
13
The Cresfort Investment Group: Our Continuous Cycle of Management
Portfolio
Management
Stock
Universe
Screening
Review
Individual
Client Profile
Apply
Fundamental
Investment
Research
Objectives,
Risk Tolerance,
Tax Requirements
Utilize
Proprietary
Resources and
Tools
Database and
System
Overlays
The Cresfort Investment Group Fixed Income Management Overview
15
The Cresfort Investment Group: Fixed Income Management Overview
Fixed Income Management includes:
Source: Global Wealth Management Investments (GWMI).
Regular analysis of credit, interest-rate, and liquidity risk
Finding appropriately valued securities that fit your risk profile and income goals
Investing to capitalize on values consistent with the fundamental realities of the marketplace and your goals
Comprehensive management of individual bond issues over time
16
Determine interest
rate risk
appropriate to
achieve client
objectives.
Level of Interest
Rate Risk
Allocate according to
tax status and relative
value.
Sector Allocation 1 2
Client Investment
Objectives
Identify objectives and constraints.
Define guidelines and benchmark.
Build initial portfolio
and manage to
market opportunities.
Security Selection 3
The Cresfort Investment Group: Fixed Income Investment Process The Portfolio Manager works with the Financial Advisor to develop guidelines for the three
key decisions made during the ongoing management of fixed income portfolios.
Source: Global Wealth Management Investments (GWMI).
17
Client sensitivity to price volatility
Need for principal and/or interest cash flows
The Cresfort Investment Group: Fixed Income Investment Process
Interest Rate Risk
Appropriate interest rate risk is determined based on individual client objectives:
Source: Global Wealth Management Investments (GWMI).
18
Federal/local tax bracket
AMT status
Loss carry forward
Gain/loss constraints
Client’s Tax Circumstances
Minimum credit rating allowed
Price volatility
Allowed sectors
Liquidity requirements
Client’s Constraints
Valuation of muni vs. taxables
Relative valuation across taxable
ddsectors
Technical supply and demand
ddfactors
Market Valuation
Asset Allocation Decision
The Cresfort Investment Group: Fixed Income Investment Process
Sector Allocation
19
Credit Analysis Market Access Trading
Evaluate financial and dfundamental strength of dissuer
Balance sheet analysis
Industry insights
Direct access to large dnumber of broker dealers
Participation in both dprimary and secondary dmarkets
Ongoing flow of market dinformation
Relative Value
Best execution
The Cresfort Investment Group: Fixed Income Investment Process
Security Selection & Trading
The Cresfort Investment Group Resource Summary
21 Source: Global Wealth Management Investments (GWMI).
The Cresfort Investment Group: Resource Summary
Breadth and
Depth of
Investment
Experience
Dedicated Team
Approach to
Fully Utilize
Resources
Proprietary
Models and
Screening Tools
Research from
Top Research
Teams on Wall
Street
Information
System and
Database
Overlays
Equity and
Fixed Income
Perspectives
Client and FA
Communication
Our Client-
Centric
Approach
Research from
one of the Top
Research Teams
on Wall Street
Proprietary
Models and
Screening Tools
Dedicated Team
Approach to
Fully Utilize
Resources
Breadth and
Depth of
Investment
Experience
Client and FA
Communication
Equity and Fixed
Income
Perspectives
Information
System and
Database
Overlays
The Cresfort Investment Group Biographies
23
Mark H. Felder, CFA Senior Portfolio Management Director
Executive Director – Wealth Management
The Cresfort Investment Group at Morgan Stanley
Began career in the investment industry in 1981
Investment industry experience as an Analyst, Director of Research and Portfolio Manager
Experienced in managing personal, retirement, foundation, and pension/profit sharing accounts
Former Director of Research at The Rothschild Company, 1992-1995
Former Research Analyst at Legg Mason Wood Walker, 1984-1992
Former Research Analyst at National Bank of Detroit 1981-1984
M.M. - J.L. Kellogg Graduate School of Mgmt. (Northwestern University) – 1981; B.S. - Drexel University with highest honors – 1980
Former President and current member of Baltimore CFA Society
Achieved Chartered Financial Analyst (CFA®) designation in 1984 Address: 650 South Exeter Street Suite 1100 Baltimore, MD 21202 Tel. No.: (410)736-5512 Fax. No.: (443)874-1557 Email: [email protected]
24
Eric S. Williams, CFA Senior Portfolio Management Director
Senior Vice President – Wealth Management
The Cresfort Investment Group at Morgan Stanley
Began career in the investment industry in 1981
Investment industry experience as an Analyst and Portfolio Manager
Former Director of Equity Products at TradeStreet Investment Associates, an institutional client advisor wholly owned by Bank of America, employed also at its predecessors, 1986-1998
Former Research Analyst and Portfolio Manager at what is now JP Morgan & Chase Co., 1981-1986
MBA - Indiana University - Kelley School of Business – 1981 and summa cum laude graduate from East Carolina University – 1979
Achieved Chartered Financial Analyst (CFA®) designation in 1984
Holds FINRA Series 7, 63 & 65 licenses
Address: 17505 West Catawba Avenue Suite 300 Cornelius, NC 28031 Tel. No.: (704)896-9102 Fax. No.: (704)625-9329 Email: [email protected]
25
Michael J. Walker, CFA Portfolio Management Director
Senior Vice President – Wealth Management
The Cresfort Investment Group at Morgan Stanley
Began career in the investment industry in 1981
Investment industry experience as an Analyst and Portfolio Manager
Former Chief Investment Officer and Senior Portfolio Manager for Oak Tree Portfolio Management, 1992-1999
Former Director of Research - Chapin, Davis, Inc., 1991-1996
Former Research Analyst at Legg Mason Wood Walker, 1984-1991
MBA - Kenan-Flagler Business School (University of North Carolina) – 1981 ; B.A. - Middlebury College – 1976
Achieved Chartered Financial Analyst (CFA®) designation in 1986
Holds FINRA Series 7, 27 & 63 licenses
Address: 650 South Exeter Street Suite 1100 Baltimore, MD 21202 Tel. No.: (410)736-5503 Fax. No.: (443)874-1557 Email: [email protected]
26
Mark N. McCall, CFA Portfolio Management Director
First Vice President – Wealth Management
The Cresfort Investment Group at Morgan Stanley
Began career in the investment industry in 1987
Investment industry experience as an Analyst, Director of Research and Portfolio Manager
Former Senior Portfolio Manager - Paladin Investment Associates, 2000-2002
Former Senior Portfolio Manager - TradeStreet Investment Associates, 1997-1999
Former Director of Equity Research at TradeStreet Investment Associates, an institutional client advisor wholly owned by Bank of America, 1996
Former Equity Analyst - Bank of America (and predecessor organizations), 1987-1990, 1993-1995
Former Manager of Investor Relations - NationsBank, 1990-1993
MBA - University of North Carolina - 1983 and B.S. – Wake Forest University - 1981
Achieved Chartered Financial Analyst (CFA®) designation in 1990
Holds FINRA Series 7 & 63 licenses Address: 17505 West Catawba Avenue Suite 300 Cornelius, NC 28031 Tel. No.: (704)896-9101 Fax. No.: (704)625-9330 Email: [email protected]
27
Eric S. Franz, CFA Portfolio Management Director First Vice President – Wealth Management The Cresfort Investment Group at Morgan Stanley
Began career in the investment industry in 1993
Investment industry experience as an Analyst and Portfolio Manager
Re-joined Legg Mason Portfolio Management as a Portfolio Manager in 2004
Former Portfolio Specialist with Legg Mason Institutional Funds, 2002-2004
Former Associate Portfolio Manager and Equity Analyst with Legg Mason Portfolio Management, 1999-2001, and Carroll Financial Associates, 1996-1998
Former Account Executive with T. Rowe Price, 1993-1996
M.S. – Loyola University Maryland – 1998; B.S. – Towson University – 1992
Serves as an active member of the CFA® Institute and the Baltimore CFA Society
Achieved Chartered Financial Analyst (CFA®) designation in 2003
Holds FINRA Series 6, 7 & 65 licenses Address: 650 South Exeter Street Suite 1100 Baltimore, MD 21202 Tel. No.: (410)736-5504 Fax. No.: (443)874-1557 Email: [email protected]
28
Russell A. Phelps, CFA Portfolio Management Director
First Vice President – Wealth Management
The Cresfort Investment Group at Morgan Stanley
Began career in the investment industry in 2000
Investment industry experience as an Analyst, Director of Research and Portfolio Manager
Portfolio Manager for the TechSelect and Total Return model portfolios
15 years of prior work experience as an Engineer and Sales Engineer in the semiconductor and electronics industries
MBA – Robert H. Smith School of Business, University of Maryland (concentration in Finance and Accounting) – 1995
B.S. in Engineering from Loyola University Maryland – 1986
Serves as an active member of the CFA® Institute and the Baltimore CFA Society
Achieved Chartered Financial Analyst (CFA®) designation in 2006
Holds FINRA Series 7 & 66 licenses Address: 650 South Exeter Street Suite 1100 Baltimore, MD 21202 Tel. No.: (410)736-5506 Fax. No.: (443)874-1557 Email: [email protected]
29
Beth Bartz Portfolio Management Director
First Vice President – Wealth Management
The Cresfort Investment Group at Morgan Stanley
Began career in the investment industry in 1992
Investment industry experience as a Portfolio Manager and Trader
Joined Legg Mason Portfolio Management as Vice President, Fixed Income Portfolio Manager in 2004
Former Vice President and Portfolio Manager at Vanderbilt Capital Advisors, LLC in New York, NY, 1997-2004
Former Mortgage and Asset Backed Trader for Alex Brown and Sons, Inc. for retail and institutional clients, 1992-1997
B.B.A. in Finance from Loyola University Maryland – 1991
Holds FINRA Series 7 & 66 licenses
Address: 650 South Exeter Street Suite 1100 Baltimore, MD 21202 Tel. No.: (410)736-5505 Fax. No.: (443)874-1557 Email: [email protected]
30
Janice M. Wade Senior Client Service Associate
The Cresfort Investment Group at Morgan Stanley
Began career in the investment industry in 1995
Joined Cresfort in 1997 as Senior Executive Assistant to CIO
Responsible for marketing, proposals, administrative duties and internal operations for Cresfort team
Provides client services to Morgan Stanley Portfolio Managers, Financial Advisors and support staff
Former Office Manager for Investment Management Services – Legg Mason, Inc. 1995-1997
B.S. in Education from Northeastern University in Boston, MA - 1993
Address: 650 South Exeter Street Suite 1100 Baltimore, MD 21202 Tel. No.: (410)736-5511 Fax. No.: (443)874-1557 Email: [email protected]
31
Eric S. Sappington Portfolio Management Associate
The Cresfort Investment Group at Morgan Stanley
Began career in the investment industry in 2010
Responsible for marketing efforts, internal operations and constructing proposals for Cresfort team
Provides client services to Morgan Stanley Portfolio Managers, Financial Advisors and support staff
Former Operations Analyst and Associate within the Shared Services and Banking Operations group at Morgan Stanley, focusing on Fixed Income Derivatives. 2010 – 2013
B.B.A. in International Business from Loyola University Maryland – 2010.
Holds FINRA Series 7 & 66 licenses
Address: 650 South Exeter Street Suite 1100 Baltimore, MD 21202 Tel. No.: (410)736-5507 Fax. No.: (443)874-1557 Email: [email protected]
32
Dean A. Boughner Wealth Management Associate
The Cresfort Investment Group at Morgan Stanley
Began career in the investment industry in 1985
Joined Cresfort in 2014
Responsible for marketing, administrative duties and internal operations for Cresfort team
Provides client services to Morgan Stanley Portfolio Managers, Financial Advisors and support staff
Previous position within Morgan Stanley as a Senior Registered Client Service associate within an FA team
Prior experience in Operations, Management and Sales
Holds FINRA Series 7, 63 & 65 licenses
Address: 17505 West Catawba Avenue Suite 300 Cornelius, NC 28031 Tel. No.: (704)896-9121 Fax. No.: (704)892-0012 Email: [email protected]
33
Important Information
Investment Products: Not FDIC Insured – No Bank Guarantee – May Lose Value
This material is intended for use only in Morgan Stanley Smith Barney’s Advisory Program.
Portfolio Management is an advisory program in which the client's Financial Advisor invests the client's assets on a discretionary basis in a wide range
of securities.
Interest in municipal bonds is generally exempt from federal income tax. However, some bonds may be subject to the alternative minimum tax (AMT).
Typically, state tax exemption applies if securities are issued within one’s state of residence and, local tax exemption typically applies if securities are
issued within one’s city of residence.
Bonds are affected by a number of risks, including fluctuations in interest rates, credit risk and prepayment risk. In general, as prevailing interest rates
rise, fixed income securities prices will fall. Bonds face credit risk if a decline in an issuer's credit rating, or creditworthiness, causes a bond's price to
decline. Finally, bonds can be subject to prepayment risk. When interest rates fall, an issuer may choose to borrow money at a lower interest rate,
while paying off its previously issued bonds. As a consequence, underlying bonds will lose the interest payments from the investment and will be
forced to reinvest in a market where prevailing interest rates are lower than when the initial investment was made. NOTE: High yield bonds are
subject to additional risks such as increased risk of default and greater volatility because of the lower credit quality of the issues.
Common stocks generally provide an opportunity for more capital appreciation than fixed income investments but are also subject to greater market
fluctuations.
Tax laws are complex and subject to change. Morgan Stanley Smith Barney LLC, its affiliates and Morgan Stanley Smith Barney Financial Advisors
do not provide tax or legal advice. This material was not intended or written to be used for the purpose of avoiding tax penalties that may be imposed
on the taxpayer. Individuals are urged to consult their personal tax or legal advisors to understand the tax and related consequences of any actions or
investments described herein.
Morgan Stanley Smith Barney LLC. Member SIPC.
34
Important Information
Investment Products: Not FDIC Insured – No Bank Guarantee – May Lose Value
This material is intended only for clients and prospective clients of the Portfolio Management program. It has been prepared solely for informational
purposes only and is not an offer to buy or sell or a solicitation of any offer to buy or sell any security or other financial instrument, or to
participate in any trading strategy.
The individuals mentioned as the Portfolio Management Team are Financial Advisors with Morgan Stanley participating in the Morgan Stanley
Portfolio Management program. The Portfolio Management program is an investment advisory program in which the client’s Financial Advisor invests
the client’s assets on a discretionary basis in a range of securities. The Portfolio Management program is described in the applicable Morgan Stanley
ADV Part 2, available at www.morganstanley.com/ADV or from your Financial Advisor.
Past performance of any security is not a guarantee of future performance. There is no guarantee that this investment strategy will work under all
market conditions.