Wealth Management Capabilities - Morgan Stanley Locator · Wealth Management Capabilities THE AISTEAR GROUP 601 Union Street , Suite 5200 Seattle, WA 98101 (206) 344-5024 Bareq A

Wealth Management Capabilities THE AISTEAR GROUP 601 Union Street , Suite 5200

Seattle, WA 98101

(206) 344-5024

Bareq A. Peshtaz James R. Carney, CFP®

Vice President / Financial Advisor Vice President / Financial Advisor

[email protected] [email protected]

mailto:[email protected]

mailto:[email protected]

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Introduction to Morgan Stanley

WEALTH MANAGEMENT CAPABILITIES

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Morgan Stanley: A Pure Investment Firm

Institutional Securities Group

Note: All information for Morgan Stanley’s Wealth Management business as of July, 2014

1 Barron’s “Top 100 Financial Advisors,” April 15, 2013

2 Barron’s “Top 100 Women Financial Advisors,” June 10, 2013

3 Forrester Research, Customer Experience Index, 2012

4 Citibank, Morgan Stanley Bank NA, Morgan Stanley Private Bank National Association

NEARLY

17,000

FINANCIAL ADVISORS

EXTENSIVE KNOWLEDGE BASE

built on diverse skills and experience

6.1 Million

CLIENT ACCOUNTS

$2.0 Trillion IN CLIENT ASSETS

$132 Billion IN BANK DEPOSITS 4

Recognition of

Morgan Stanley Excellence

Led Barron's 2013 "Top 100

Financial Advisors" list, earning

27 spots, including five in the

top 10, and half of top 20 1

Earned 17 spots on Barron's

2013 "Top 100 Women

Financial Advisors” 2

Received third highest score

in client service experience out

of 10 investment firms 3


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The Strength of Morgan Stanley

Institutional Securities Group

Since 1935, Morgan Stanley has been a reliable partner for high net worth individuals,

families, businesses and institutions around the globe.

1,200 GLOBAL LOCATIONS

OVER

78 Years OF EXPERIENCE

$980 Million IN EARNINGS

Three core lines of business

Institutional Securities

Wealth Management

Investment Management

NEARLY

$65 Billion IN EQUITY CAPITAL

Wealth Management:

An Essential Business

• Wealth management is not a

small division within a large

bank as it is for a number of

competitors; with $2.0 trillion in

client assets, it accounts for

more than 50% of revenues

• The Firm has made significant

investment in this business

• CEO and senior management

have deep wealth management

experience, so clients are

ensured commitment from

the top

Note: All information for Morgan Stanley as of July 18, 2013


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Within a world-class firm, Morgan Stanley’s Consulting Group is well positioned to serve high net worth & ultra-high net worth individuals, families and their foundations around the world.

Consulting

Group

Putting Clients First With Objective Advice

Notes: Source – Consulting Group Capabilities • *Cerulli Associates. 2Q 2014 Summary, Managed Accounts Research. Please see the disclosures at the end of this presentation for additional information • ** As of August 20, 2013

Retail Brokerage Private Banks (Proprietary Product-Driven)

Consultant & Small Independents

• Broad range of sophistication and client experience

• Access to some franchise and institutional resources may be limited to valued clients

• Standard product and service offerings; typically limited customization

• Retail pricing

• Service-oriented approach • Centralized investment advice

• Offering focused on proprietary products – specifically lending

• High turnover of advisors

• Emphasis on trust administration and sales over investment expertise

• High touch, low content

• Objective, consultative approach

• Open architecture: product offering primarily from third-party providers

• Customized but limited risk management assessment

• Structured investments, trust & estate, cash management functions typically outsourced

• Limited global reach

• One of the nation’s most experienced investment consultants • Provides consulting to more than $760.3 billion in client assets in advisory programs*

• Family offices, Private individuals, Foundations and Endowments • Retirement plans, State and local government funds

• Proprietary manager research process • Research and evaluate investment managers and products using both quantitative and qualitative criteria • Proprietary database with over 7,700 investment products screened (representing more than 1,100 monitored on an

ongoing basis) including quarterly performance attribution on selected investment products • Provide ongoing performance and portfolio analysis

• 280+ Consulting Group professional staff**


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Working With Clients: Team Approach

Your Family

Investing Strategies Global Investment Committee (GIC)

Consulting Group

Alternative Investment Partners

Wealth Planning Strategies

Dedicated professionals, including experienced estate attorneys, tax

attorneys and former IRS professionals working in concert to help meet your

financial objectives.*

Comprehensive In-House Services Balance Sheet Management

Risk Management Corporate Services

Financial Advisor

James R. Carney, CFP® Vice President

Bareq A. Peshtaz Vice President

Client Servicing Team

Jo-Ann Loo Sr. Registered Associate

Carol Linthicum Registered Associate

Seattle Complex Manager

D. Alex Burlingame Managing Director

Aistear Group Presentation CRC 789325 01/2014

* Although they may be admitted attorneys, planning directors and other wealth planning center personnel holding legal degrees are acting purely in a non-representative capacity. Neither they nor Morgan Stanley provide tax or legal advice to clients or to Morgan Stanley.


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Why Professional Investment Management?

• Investment decisions made today could shape the rest of an investor’s life

• Long-term investing is one of the keys to financial success

• Today’s financial markets are both highly complex and fast-paced, with tens of thousands of investment options available – uncertainty rules

• Investors can be their own worst enemies when making investment decisions

Benefits of Professional Investment Management


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The Investor Experience

2.4%

5.0%

2.8%

5.7%

9.2%

Inflation EquityMutual

FundInvestors

T-Bills Long-TermBonds

Stocks

Indexes are unmanaged and not available for direct investment. Index returns consist of income and capital appreciation (or depreciation) and do not take into account fees, taxes or other charges. Such fees and charges would reduce performance. See the Index Glossary at the end of this presentation for index definitions and other information. Past performance is no guarantee of future results. Source: Dalbar Associates 2013 Quantitative Analysis of Investor Behavior and Consulting Group

• Equity Mutual Fund Investors = Dalbar Associates Estimate

• Bonds = BC Aggregate Bond Index

• Inflation = Consumer Price Index

• T-Bills = 90-Day Treasury Bill

• Stocks = S&P 500 Index

Investing without professional advice may not lead to the investment returns that individual investors hope to achieve.

Annual Returns (1994 – 2013)


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Sources of Common Investment Errors

OVERCONFIDENCE Investor assumes that he or she knows more than he or she does; can lead to aggressive trading

MENTAL ACCOUNTING Investor divides wealth into arbitrary, uncoordinated “pots” and makes decisions accordingly

ANCHORING Investor fixates on certain price levels – such as the price paid for a particular stock

FRAMING Investor makes decisions based on how choices are presented to him or her

EXCESSIVE LOSS AVERSION Investor puts more importance on avoiding losses than the potential for making gains


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Wealth Planning


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A Formal Yet Flexible Approach

ADJUST Achieving your goals requires vigilance and flexibility. We help you monitor your progress and make adjustments as life evolves, markets and tax laws shift, and priorities change.

ACT Next, we can help you implement investment, retirement, trust services1, cash management2 and insurance3 solutions suited to your needs.

DISCOVER Our relationship begins with a thorough understanding of you – your needs, your lifestyle and family, and your goals for the future.

CREATE We work with you to develop a roadmap to help you achieve and protect the outcomes you envision.


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DISCOVER: Beginning With The Basics The process of formulating a personalized investment strategy typically begins with the collection of all relevant data about your financial needs and objectives. • Basic financial data. These include your annual income, current investments, tax status, age and anticipated

retirement date. • Broad investment objectives. Conservative investors may wish to emphasize the preservation of capital. Others may

stress the need for current income. More aggressive investors may focus on future capital appreciation as their primary goal.

• Target rates of return. These may be expressed in either absolute or relative terms. Some investors may wish to meet

or exceed the return on a particular market benchmark, such as the S&P 500 Index. Others may specify a rate of return needed to meet a specific financial goal.

• Expected future cash flows. You should try to estimate both your spending needs and your future resources—such as

the amounts you expect to be able to contribute to retirement or college tuition funds. • Investment time horizon. Investors aiming for long-term life goals, such as retirement, typically will have a longer

horizon than those with more immediate needs. This, in turn, can influence how much risk they are able to tolerate. Generally, the longer the horizon, the more short-term portfolio volatility you should be able to accept.

• Investment constraints. Some investors may want to avoid certain specific asset classes that they believe are

unacceptably risky or morally offensive. Others may wish to maintain larger than normal cash reserves or restrict their holdings of assets that cannot be easily sold.


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Your wealth strategy doesn’t just consider your investment objectives. Rather, it is tailored to address the personal life goals you’ve identified and prioritized.

Using our suite of tools — our LifeView® platform — we can create your personal roadmap to help achieve and protect your goals — a framework that makes the connection between your life goals and your financial resources, and provides a baseline for future discussions.

ADDRESSING ALL OF YOUR GOALS

LifeView helps us to:

– Analyze your current investments and financial situation

– Review and prioritize your goals with you, such as

• Retirement

• Education funding

• Major purchases and philanthropic goals

– Protect your goals

– Develop wealth transfer strategies

CREATE: A Personalized Plan to Address Your Goals


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Over time, your needs and priorities evolve. Meanwhile, markets shift,

interest rates fluctuate and tax laws change. That’s why building and

monitoring your wealth strategy should be a continual process, adjusting and

adapting to your changing circumstances.

Adjust: Helping to Keep You On Track As Life Changes

LifeView Monitor™ makes it easy for us to periodically monitor your progress toward your goals and evaluate whether your financial strategy is on track or needs adjustment. For example, we can take the current value of your portfolio and illustrate whether you are in your Portfolio "Confidence Zone," the range of values that would support your retirement and other goals.


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Consulting Group

CONSULTING GROUP CAPABILITIES

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One of the nation’s most experienced investment consultants

Provides investment consulting to over $760.3 billion in client assets in advisory programs1

• Foundations and endowments

• Family offices and private individuals

• Retirement plans

• State and local government funds

Proprietary manager research process

• Research and evaluate investment managers and products

• Evaluate using both quantitative and qualitative criteria

• Proprietary database with over 7,700 investment products screened, representing more than 1,100 monitored on an ongoing basis

• Quarterly performance attribution on selected investment products

• Provide ongoing performance and portfolio analysis

Consulting Group

1.Cerulli Associates. 2Q2014 Summary, Managed Account Research. Please see the disclosures at the end of this presentation for additional information.


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Consulting Group Leads the Pack

TOP MANAGED ACCOUNT PROGRAM SPONSORS ACROSS ALL INDUSTRY SEGMENTS 2nd quarter 2014

Bank of America/ Merrill Lynch

15.0%

Wells Fargo Advisors

10.7% UBS 8.7%

Fidelity Investments

5.3%

Charles Schwab 4.6%

Ameriprise Financial

4.4%

LPL Financial 4.4%

Raymond James 3.5%

Edward Jones 3.4%

Other

Source: Consulting Group, based on Cerulli Associates 2Q 2014 Summary, Managed Account Research. Please see Important Disclosures at the end of this presentation for additional information about the Cerulli Associates report.

The managed account programs at Morgan Stanley’s Consulting Group leads the industry in assets under management.

Morgan Stanley Wealth Management

20% 20.%


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Why Consulting Group?

EXPERIENCE Consulting Group has been assisting individual and institutional investors since 1973

COLLABORATION We strive to be academically inquisitive and share our intellectual capital with our colleagues and clients

INTEGRITY We commit to the highest standards of ethical behavior and seek to avoid potential conflicts of interest

TRANSPARENCY We use asset-based fees to cover our consulting services

RESOURCES We maintain individual competence through training, education and by leveraging the resources of Morgan Stanley

A leading presence for investment advice

• #1 Managed Account Program by Assets

• #1 Separate Account Program Sponsor Assets

• #1 Open Separate Account Programs

• #1 Rep-as-Portfolio-Manager Programs

• #2 Rep-as-Advisor Programs

• #1 Unified Managed Account Programs

1.Cerulli Associates, 2Q 2014 Summary, Managed Account Research. Please see the Important Disclosures at the end of this presentation for additional information.


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ASSET ALLOCATION The work of the Morgan Stanley Wealth Management Global Investment Committee acts as the basis for Consulting Group’s wide range of asset allocation models.

• In addition to customized asset allocation, Consulting Group offers tactical and strategic asset allocation models diversified across asset classes and investment styles, from conservative to aggressive, for both taxable and nontaxable investors

INVESTMENT PRODUCTS Consulting Group Investment Advisor Research provides comprehensive evaluation and due diligence on more than 1,100 investment products. • Separately managed accounts • Mutual funds • Exchange-traded funds • Alternative investments1

PORTFOLIO CONSTRUCTION Guidance on portfolio construction, risk management, overlay portfolio management, asset transitions, tax management and other subjects is available.

INVESTMENT ADVISORY PROGRAMS Consulting Group’s programs cover a broad range of discretionary and non-discretionary options and many types of investment products.

Consulting Group Cornerstones

1. Alternative investments are not suitable for all investors. Please see the Important Disclosures at the end of this presentation for more information on the alternative strategies available in Consulting Group programs.


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Importance of Asset Allocation

1. Roger G. Ibbotson. “Does Asset Allocation Policy Explain 10, 90 or 100 Percent of Performance?” Financial Analyst Journal, January/February 2000; Brinson, Singer and Beebower. “Determination of Performance II: An Update,” Financial Analyst Journal, May/June 1991. Based on US pension-fund data from 1977 to 1987.

Note: Studies that employ different statistical interpretations produce different results. Real results may vary. Asset allocation does not assure a profit or protect against loss.

Asset Allocation Strategy

91%

Security Selection

5%

Market Timing 2%

Other Factors 2%

SOURCES OF PORTFOLIO PERFORMANCE1 Asset allocation strategy is one of the most important factors affecting the variability of investment returns.


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Effective Diversification

• Covers a range of major asset classes

• Bases model allocations on expected risks and returns

• Combines asset classes that have different risk and return characteristics

• Looks at both past performance and the outlook for future market conditions


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Asset Class Performance From 2003–2013

It is hard to predict which asset classes will outperform from year to year. Asset allocation and diversification may help investors take advantage of asset classes that are doing well and help diminish the effects of those that are per- forming poorly. An appropriately diversified portfolio has the potential to increase overall returns while reducing volatility.

Indexes are unmanaged and are not available for direct investment. Index returns consist of income and capital appreciation (or depreciation) and do not take into account fees, taxes or other charges. Such fees and charges would reduce performance. Diversification does not assure a profit or protect against loss. Past performance is no guarantee of future results. Source: Consulting Group

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013

Emerging Markets 56.3%





Non-US Bonds 10.1%


Small Cap Growth 29.1%

Investment Grade Bonds 7.8%

Mid Cap Value 18.5%



Mid Cap Value 23.7%

International Equity 13.5%


Large Cap Growth 11.8%


High Yield 58.2%

Mid Cap Growth 26.4%

High Yield 5.0%



Small Cap Value 46.0%


Mid Cap Value 12.6%



Treasury Bills 1.3%


Mid Cap Value 24.8%

Non-US Bonds 4.1%






Large Cap Value 22.3%


High Yield -26.2%









Mid Cap Value 20.2%


Small Cap Value -28.9%

Mid Cap Value 34.2%


Large Cap Core 2.1%


Mid Cap Value 33.5%

Mid Cap Value 38.1%



Large Cap Core 15.8%


Large Cap Value -36.9%








Large Cap Core 4.9%


Large Cap Core 5.5%

Large Cap Core -37.0%



Treasury Bills 0.1%

High Yield 15.8%



Non-US Bonds 12.1%


High Yield 11.9%

Non-US Bonds 4.9%

Large Cap Growth -38.4%


High Yield 15.5%

Mid Cap Value -1.4%



High Yield 29.0%

High Yield 11.1%



Treasury Bills 4.4%

Mid Cap Value -38.4%



Mid Cap Growth -1.7%


High Yield 7.4%



Treasury Bills 3.3%


High Yield 1.9%

Small Cap Growth -38.5%



Small Cap Growth -2.9%


Non-US Bond 1.4%

Non-US Bonds 18.5%


High Yield 2.7%

Treasury Bills 4.7%

Large Cap Value -0.2%

International Equity -43.4%




Non-US Bond 5.5%

Treasury Bills 0.05%





Mid Cap Value -1.4%

Mid Cap Growth -44.3%

Non-US Bonds 4.4%

Non-US Bonds 3.4%

International Equity -13.8%


Investment Grade Bonds -2.0%

Treasury Bills 1.0%

Treasury Bills 1.4%

Non-US Bonds -9.2%

Non-US Bonds 3.1%


Emerging Markets -53.2%

Treasury Bills 0.2%

Treasury Bills 0.1%


Treasury Bills 0.1%


HIG

HE

R P

ER

FO

RM

ING

LO

WE

R P

ER

FO

RM

ING

As this “quilt chart” shows, asset class performance can vary significantly from year to year.

Russell Midcap Value

MSCI Emerging Markets

Russell 2000 Value

Russell 1000 Value

MSCI EAFE

S&P 500 Index

BC US High Yield

Russell Midcap Growth

Russell 1000 Growth

Russell 2000 Growth

Citigroup Non-US Gov’t

BC Aggregate Bond

90-Day Treasury Bills


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Risk and Return

Various asset classes tend to have different risk and return characteristics relative to one another. Typically, the higher the expected risk, the higher the expected return for an asset class, and the lower the risk, the lower the expected return.

The above is presented for illustration purposes only and in no way is intended to predict or guarantee the future performance of any particular asset class. Past performance is no guarantee of future results. Source: Consulting Group

Increasing Risk

Small Cap US Stocks International Stocks

Large Cap US Stocks

High Yield Bonds

Intermediate Bonds

T Bills

Incr

easi

ng

Ret

urn


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Correlation and Volatility (SAMPLE)

For illustration purposes only. The above charts do not represent any specific index or asset class. Actual results will vary. Diversification does not assure a profit or protect against loss. Source: Consulting Group

(20)

(10)

0

10

20

30

Year 1 Year 2 Year 3 Year 4 Year 5

Per

cen

tage

(%

)

ANNUAL RETURNS – ASSET CLASS A

Performance for asset classes A and B are volatile

but uncorrelated (20)

(10)

0

10

20

30


Per

cen

tage

(%

)

ANNUAL RETURNS – ASSET CLASS B

(20)

(10)

0

10

20

30


Per

cen

tage

(%

)

ANNUAL RETURNS


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Correlation and Volatility (SAMPLE)

For illustration purposes only. The above charts do not represent any specific index or asset class. Actual results will vary. Diversification does not assure a profit or protect against loss. Source: Consulting Group

Combining asset classes with lower correlations may reduce volatility over time.

(20)

(10)

0

10

20

30


Per

cen

tage

(%)

ANNUAL RETURNS

Asset Class A Asset Class B Combined Asset Classes


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Consists of seasoned investment professionals from Morgan Stanley with deep levels of expertise spanning the global spectrum of asset classes, instruments and investment techniques.

Dynamic asset allocation analysis from the Global Investment Committee may provide:

• Ability to take advantage of the best investment ideas from one of the world’s preeminent investment organizations

• Stability of a long-term investment strategy coupled with the potential to benefit from compelling near-term opportunities

• Cutting-edge, proprietary approach to incorporating alternative investments in qualifying portfolios

• Published monthly investment strategy newsletters, quarterly capital markets materials and ongoing thematic reports

The Global Investment Committee (GIC)


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• Global Investment Committee: 6 senior investment professionals

1

• Strategic and tactical asset allocation models for clients with different levels of investable assets

• Regular review of asset allocation recommendations, with periodic adjustments as needed

• Ability to tailor recommendations to meet clients’ needs

The Global Investment Committee

1. As of May 8, 2014


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Historical relationships between asset classes help determine the relative weights with what we believe to have the most potential to maximize returns for given levels of portfolio risk

Typically Reviewed Annually Time Horizon: 7 years

Strategic vs. Tactical: Asset Allocation Advice

Strategic Allocation Advice

For illustration purposes only. Actual results may differ from forecast returns. When an asset class is over-weighted, other asset classes are underweighted by a compensating percentage so that the total allocation remains 100%. Change in market risk can also result in strategic and tactical changes. Source: Consulting Group

The Global Investment Committee at Morgan Stanley formulates short- and long-term economic forecasts, financial and real-asset market outlooks, and recommends asset allocations. This work acts as the basis of a series of strategic and tactical asset allocation models from Consulting Group.

Tactical Allocation Advice

Further adjustments are made based on short-term insights from the Global Investment Committee

Reviewed Continuously Time Horizon: 6 - 12 months

Tactical Underweight Strategic

Overweight


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• We seek to offer clients a diverse selection of independent, third-party investment managers and products who meet or exceed our quality standards

• We seek to provide practical, actionable advice that will enable clients to select appropriate managers and effectively monitor their on-going performance

• Where appropriate, we seek to help clients take advantage of shorter-term market trends that may favor specific managers or strategies

Consulting Group Investment Advisor Research

INFORMATION

ANALYSIS

RECOMMENDATIONS

ADVICE


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Manager Research Fundamentals

• Assets under management

• Growth or stability of personnel

• Legal or regulatory issues

• Other business and management results and strategies

• Idea generation • Portfolio construction

methodology • Sector and / or

industry concentration or exposure

• Volatility guidelines and other constraints

• Style consistency

• Depth of research analysts

• Industry expertise • Databases, technology

and analytical tools • Number of companies

covered

• Credentials and expertise of key professionals

• Ownership Structure • Compensation and / or

incentives for key professionals

• Personnel turnover • Depth of experience

and history of success

INVESTMENT PROCESS AND

IMPLEMENTATION

RESEARCH CAPABILITIES

PERSONNEL AND FIRM

BUSINESS OPERATIONS

Consulting Group Investment Advisor Research evaluates asset managers and investment products on a number of key characteristics.


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FOCUS LIST Higher level of research conviction. Based on expected long-term performance.

Three Robust Manager Research Lists

APPROVED LIST Meets Qualitative and Quantitative Standards.

TACTICAL OPPORTUNITIES LIST Based on expected short-term performance.


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Key Benefits of Our Manager Research Lists

APPROVED LIST

• Responsive to client needs and industry trends

• Information on a broad universe of investment managers and products

• Gives Financial Advisors and clients greater flexibility in portfolio construction

FOCUS LIST

• Higher advice content

• Explicit focus on identifying potential to add value over time

• Intensive due diligence process, generally including on-site visits, business reviews, etc.

• Detailed reporting, including portfolio and performance analysis

TACTICAL LIST

• Draws from both the Approved and Focus lists

• Leverages manager research capabilities, as well as capital markets analysis by the Global Investment Committee (GIC)

• Enables Financial Advisors to provide clients with actionable short-term advice


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• Recommendations focused primarily on investment management firms unaffiliated with Morgan Stanley

• Research and evaluation process that is disciplined and consistently applied

• Access to one of the industry’s largest databases of manager analytics and statistics

• Compensation of manager research analysts is not tied to the client assets placed in the investment firms they examine

• Our manager research is published solely for the use of our clients and is not available or sold to any other source

• Investment firms may be removed from our programs, regardless of asset levels, if they have strayed from their original mandate or experienced significant changes to their management or operations

What Sets Our Investment Advisor Research Apart


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Disciplined Institutional Advisory Process

1. As of December 31, 2013 2. Tax analysis for family offices is provided by Consulting Group’s Private Portfolio Group

Consulting Group delivers advice to more than $240 billion1 in institutional assets for clients that include corporations, health care entities, insurance funds, nonprofit organizations, state and local governments, multi-family offices and other institutional entities.

ORGANIZATIONAL ASSESSMENT

• Mission and objectives

• Asset/liability structure, cash flow analysis

• Tax analysis for family offices

• Fiduciary and documentation review

1 ASSET ALLOCATION STUDY

• Dynamic portfolio construction recommendations and probability analysis

• Policy adherence evaluation

• Customized tactical recommendations and strategic advice

3 INVESTMENT POLICY STATEMENT

• Asset/liability analysis

• Spending policy guidelines

• Customized investment policy statements

2 4 INVESTMENT MANAGER STRATEGIES

• Open architecture manager searches

• Published manager research reports

• Trade and execution services

5 REPORTING AND COMMUNICATIONS

• Custody services

• Performance measurement and monitoring

• Ongoing trustee education

6 ONGOING REVIEW AND MONITORING

• Portfolio rebalancing

• Investment policy review

• Assisting with other service providers, attorneys, accountants


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• Personalized asset allocation advice

• A disciplined process that helps prevent behavioral bias

• A wide range of innovative discretionary and non-discretionary investment advisory programs

• Extensive investment manager research and ongoing evaluation

• Comprehensive performance reporting

• Regular economic and market analysis and advice

• Rebalancing advice and other portfolio optimization strategies

• Access to the global range of resources and experienced investment professionals available at Morgan Stanley

• Personalized local service and support from your Financial Advisor

Consulting Group Advantages


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Building Client Portfolios


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Depending on the type of advisory program in which you choose to invest, Consulting Group’s Private Portfolio Group and Portfolio Advisory Services teams provide a suite of specialized services that may include one or more of the following:

• Firm-discretionary asset allocation advice, investment product selection and ongoing portfolio monitoring

• Overlay portfolio management for unified managed accounts (UMAs)

• Disciplined portfolio rebalancing

• Optional tax-management services1 for certain advisory programs

• Portfolio reviews, transition analyses and client conference calls and meetings

Portfolio Construction

1. Tax management is an optional service from Private Portfolio Group for Select UMA accounts over $500,000. Tax-management services may adversely impact account performance and do not constitute tax advice or a complete tax-sensitive investment management program. There is no guarantee that tax-management services will produce the desired results.


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Investment Advisory Programs

CLIENT COLLABORATION (NON-DISCRETIONARY)

• Separately Managed Account (SMA) Programs

• Non-Discretionary Advisory

• Mutual Fund Advisory Programs

• Unified Managed Account (UMA) Program

All investment decisions made by the client with advice and input from us as Financial Advisors

FINANCIAL ADVISOR (FA-DISCRETIONARY)

• Portfolio Management/FA Discretionary Program


All investment decisions are delegated by the client to us as the Financial Advisors

CONSULTING GROUP (FIRM-DISCRETIONARY)

• Consulting Group Capital Markets (CGCM) Funds

• Customized Investment Outsourcing Program


• Global Investment Solutions

All investment decisions are delegated by the client to Consulting Group professionals


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Overlay Portfolio Management: One Account, One Relationship

For illustrative purposes only. Actual client allocations will vary and not all asset classes will be available in each Select UMA account.

An overlay portfolio manager coordinates all activity in a unified managed account:

Portfolio construction and implementation

Disciplined rebalancing1

Tax-loss harvesting2

Optional tax management2

Consolidated reporting

Client communications

For clients, a UMA may make life simpler:

One account

One integrated asset allocation plan

One contract

One monthly statement

One comprehensive performance report

One consolidated year-end tax summary

Overlay Portfolio Manager

UNIFIED MANAGED ACCOUNT

Mutual Fund

Alternative Investments

Exchange Traded

Fund

Separately Managed Account 1

Separately Managed Account 2

1.There may be tax implications with a rebalancing strategy. 2.See the Important Disclosures at the end of this presentation for more information on tax-management services


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SEPARATELY MANAGED ACCOUNTS (SMAS)

EXCHANGE-TRADED FUNDS (ETFS)

Investment Options1

•Industry regulation

•Low investment minimums

•Liquidity

•Limited leverage

In Select UMA, alternative investments are limited to US-registered mutual funds and exchange-traded funds (ETFs) and separate account managers that seek to pursue alternative investment strategies or returns utilizing publicly traded securities. Particularly for individual investors, these structures offer a number of key features that differ from the more common limited partnership (LP) structures seen in most hedge funds.

1.Not all investment products available in the Select UMA program are covered by the manager research and evaluation process. Please see the Important Disclosures at the end of this presentation for additional information. 2.Please see the Important Disclosures at the end of this presentation for additional information about alternative investments available in Select UMA.

MUTUAL FUNDS

ALTERNATIVE INVESTMENTS2


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Customized Asset Allocation1

1. If the client selects a “custom” model for the client’s unified managed account, unless the client has elected Financial Advisor Discretion, the client (not Morgan Stanley)—will determine the initial asset allocation for the model and will be responsible thereafter for any adjustments to the asset allocation of the model. Please see the Important Disclosures at the end of this presentation for additional information.

Some examples include:

• Completion strategies

• Income-generating strategies

• Active-passive investment strategies

In addition to the Consulting Group strategic and tactical asset allocation models which leverage the work of the Morgan Stanley Wealth Management Global Investment Committee, Financial Advisors and clients may create customized asset allocation models for use in a UMA to better implement the client’s overall investment strategy.


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Select UMA’s rebalancing feature automatically corrects for sizeable allocation shifts:

• For strategic asset allocation models, asset classes are rebalanced if they deviate from the target allocation by a predetermined percentage amount or if the strategic models change as a result of new recommendations from Consulting Group or the Global Investment Committee

• For tactical asset allocation models, asset allocation changes implemented by Consulting Group rebalance the account to the new asset allocation model

• For customized asset allocation models, investment products are rebalanced if they deviate from the target allocation by a predetermined percentage amount

• For Firm Discretionary UMA Model Portfolios, asset allocation changes implemented by Consulting Group or investment product changes from Portfolio Advisory Services rebalance the account to the new model portfolio

Disciplined Rebalancing1

Market forces may cause asset allocations to shift over time, increasing portfolio volatility or leaving investors exposed to more risk than they were originally prepared to accept


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Tax management may help clients with:

• High income tax rates

• High portfolio turnover

• The Alternative Minimum Tax (AMT)

• Large legacy asset transfers

• Portfolios with deep embedded gains

Tax Management1 Overview

Tax-management services are an optional feature of Select UMA that utilize tax-loss harvesting and other techniques to help manage tax liabilities at the portfolio level.1 Optional tax management is available in Select UMA accounts over $500,000 for no additional fee. Tax-managed accounts may utilize either customized or strategic asset allocation advice in Select UMA models 2 – 8. (Optional tax management is not available for the Firm Discretionary UMA Model Portfolios.)

1.Tax Management Services may adversely impact account performance, and do not constitute tax advice or a complete tax-sensitive management program. There is no guarantee that Tax Management Services will produce the desired tax results. Morgan Stanley Smith Barney LLC, its affiliates, and its employees are not in the business of providing tax or legal advice. See the Important Disclosures at the end of this presentation for additional information.

Tax Management Features

• Client customization using tax mandates

• Wash sale avoidance

• Loss harvesting

• External tax event considerations

• Legacy asset transitions


44

Tax Management: Portfolio Management Process

Investment Manager Instructions • Daily model portfolios

• Daily buys

• Daily sells

• Trade instructions

– Price targets

– Percentage targets

– Trade limits (volume, price, timing)

Client Information/ Instructions • Existing client holdings

• Gain/tax realization limits

• External tax events

• Target asset allocation

• Manager/product/allocation changes

• Regular cash flow needs

• Ad hoc client requests

Tax Management Process

• Daily manager trade execution

• Client gain/tax mandate adherence

• Actual vs. target allocation comparison

• Tax-sensitive rebalancing

• Purchase and sale opportunities

• Efficient tax lot selection

• Wash sale avoidance

• Quarterly loss harvesting

• Loss/gain matching

• Regular account servicing

UNITED MANAGED ACCOUNT

PPG

Overlay Portfolio Manager


45

• Diversification

• Experienced investment professionals

• Flexibility

• In-depth investment manager research*

• Account consolidation

• Strategic and tactical asset allocation advice

• Alternative investment opportunities

• Account monitoring and portfolio rebalancing

• Optional tax management

• Comprehensive portfolio performance reporting

Select UMA Benefits

1.Not all investment products available in the Select UMA program are covered by the manager research and evaluation process. Please see the Important Disclosures at the end of this presentation for additional information.


46

Consulting Group clients may receive a variety of materials designed to help them develop effective strategies and stay focused on their long-term goals.

As your Advisor, we can provide such publications as:

• Quarterly performance reports

• Research bulletins and profiles

• Market commentaries

• Educational primers

• Client newsletters

• Online reports

• Presentations

A Wealth of Information


47

Why Choose The Aistear Group


48

Our Commitment To Our Clients

• Financial Planning: A disciplined process that helps prevent behavioral bias and strives to positions you to meet your financial objectives.

• Advice: Personalized wealth management advice, reflecting the firms best

thinking and access to resources, across your entire personal balance sheet.

• Transparency: Monthly calls and semi-annual reviews to review your wealth management strategy.

• Legacy: Engage your children and family as resource to help discuss ongoing

financial planning needs

• Access: Invitations to Morgan Stanley client events and speaker engagements as well as access to a global range of resources and experienced investment professionals.


49

Professional Biography James R. Carney CFP® Vice President – Financial Advisor Morgan Stanley

Mr. Carney is a Vice President and Financial Advisor in the Seattle branch of Morgan Stanley. He is responsible for advising high net worth and

ultra-high net worth families and institutions, as well as their respective trusts, estates, foundations, endowments and pension plans. Mr.

Carney, in conjunction with Morgan Stanley’s Wealth Management Group, works closely with his client’s trusted tax and legal advisors on

all matters, including tax and estate planning, philanthropic planning, concentrated stock positions, the sale of privately held businesses, and pension plan sponsorship.

Before joining Morgan Stanley Mr. Carney was a Vice President and Financial Advisor for Bernstein Global Wealth Management Jim’s practice focused on providing advice to high net worth families as well as advising companies on corporate retirement plans. Before that he was a vice president at KeyCorp assisting clients with structuring of complex financing and capital strategies. Mr. Carney has over 30 years of experience in the financial services industries.

Jim graduated from the University of Washington, Seattle, WA - B.A. Business Administration, Finance and Marketing, Seattle University, Seattle, WA - M.B.A. – Business Administration, Finance

University of Washington, Foster School of Business – Certificate in Financial Planning

Jim is also a CERTIFIED FINANCIAL PLANNER™ certificant.

Memberships & Affiliations:

Leave 10 – Board Member

Seattle Philanthropic Advisor Network (SPAN)

Seattle Children’s Legacy Advisors – Council Member

Northwest Family Business Advisors – Board Member

Jim lives on Whidbey Island with his wife Melody. Getting out of doors is a key pastime sailing, fishing or golfing. At home cooking and working with wood are likely activities. Volunteering is one of Jim’s passions and he enjoys using his skills and experience to help make this a better place for all of us.


50

Professional Biography Bareq A. Peshtaz Vice President – Financial Advisor Morgan Stanley

Mr. Peshtaz is a Vice President and Financial Advisor in the Seattle office of Morgan Stanley. He is responsible for advising high net worth and ultra high net worth families and institutions, as well as their respective trusts, estates, foundations, endowments and pension plans. Mr. Peshtaz, in conjunction with Morgan Stanley’s Wealth Management Group, works closely with his client’s trusted tax and legal advisors on all matters, including tax and estate planning, concentrated stock positions, the sale of privately held businesses, and pension plan sponsorship. Before joining Morgan Stanley Mr. Peshtaz was a vice president and financial advisor for Bernstein Global Wealth Management. Before that he was a vice president of franchise sales and development for Desert Sun Franchising/Palm Beach Tan, Inc., responsible for recruiting investors/operators as well as strategy-driven commercial real estate and market development. Prior to Desert Sun, he was a national sales executive and product manager for TR International, a chemical distribution and manufacturing firm.

Education - University of Washington, Seattle, WA - B.S., Cell & Molecular Biology

Memberships & Affiliations:

Childhaven – Member, Board of Trustees Associates in Cultural Exchange – Member, Board of Directors Seattle Rotary #4 - Member East King County Estate Planning Council – Member Seattle Philanthropic Advisors Network – Member Northwest Family Business Advisors – Member Seattle Children’s Legacy Advisor Bareq lives in the Somerset neighborhood of Bellevue with his family. He enjoys spending time with family, vacationing and enjoying the outdoors. An avid athlete, Bareq has climbed many of the local Cascade peaks including Mt. Rainier, Mt. Adams and Mt. St. Helens. He enjoys competing in local triathlons and cycling events, including the Seattle to Portland Bicycle Classic.


51

"Success in investing does not correlate with I.Q… once you have ordinary intelligence, what you need is the

temperament to control the urges that get other people into trouble in investing” – Warren Buffett


52

Additional Resources


53

Being able to access and afford quality health care is a

common concern. Morgan Stanley can help you

understand health care costs and how to incorporate

them into your wealth plan.

Planning for Health Care

MORGAN STANLEY FINANCIAL ADVISORS CAN:

More than

80% of clients are concerned

about being able to afford quality

health care.1

Refer you to a private health care advisor who can help with important health care decisions.*

Help you plan for health care expenses and long term care.2

Provide advice on how to talk with your adult children and elderly parents about your family’s health needs and wealth plans.

1. MS Investor Pulse Poll among general investors (January 2013). 2. Insurance products are offered in conjunction with Morgan Stanley's licensed insurance agency affiliates. *Please see the Disclosures at the end of this presentation.


54

Designed specifically for high net worth clients,1 Morgan Stanley Wealth Planning

Centers provide valuable ideas and tailored solutions to help you preserve wealth.

Our experienced Planning Directors—many of whom are former trust and estate

attorneys2—and analysts work closely with Financial Advisors to bring your

personal, financial and community goals into sharp focus.

Wealth Planning Centers

29+ Years

The average years of experience of our Planning

Directors at our seven Wealth Planning Centers

across the country.

1. A minimum of $5 million investable assets or $10 million net worth. 2. Although they may be admitted attorneys, Planning Directors and other Wealth Planning Center personnel holding legal

degrees are acting purely in a non-representative capacity. Neither they nor Morgan Stanley provides tax or legal advice to clients or to Morgan Stanley.

Whatever your concerns – investing wisely, transferring wealth

to descendants, providing for family business succession,

supporting an important cause, or helping your children learn

about investing and social responsibility – our Wealth Planning

Center professionals are ready to assist.

They can also work closely with your tax, legal and

other professional advisors to help you design strategic

and tactical strategies to help reach both your short- and

long-term goals.


55

For clients of significant wealth, our family wealth advisory services offer an integrated approach to planning – helping you create and perpetuate a legacy that should last for generations. Our services help to ease your administrative burden, from consolidating your financial reports to managing some of the most complex aspects of your life.

Family Wealth Advisory Services1

Philanthropy Management Helps individuals and families to translate their legacies and personal values into results-oriented, strategic, philanthropic goals.

Lifestyle Advisory Provides access to a referral network that can offer an array of specialty services, such as art financing, college and admissions counseling, aircraft advisory, entertainment and experiences, and personal and home security.

Family Governance and Dynamics Helps clients manage the impact of their financial capital on their human capital.

1. Services are available for clients with a minimum of $10M to $100M, depending on the specific offering. Please see the Disclosures at the end of the presentation.


56

Appendix


57

Managed Account Program Definitions Unified Managed Accounts: Vehicle-neutral platforms that simplify the delivery of multiple investment vehicles such as separate accounts, mutual funds, exchange-traded funds, and individual securities through their integration within a single environment. Programs achieve UMA status when all managed account attributes can be applied across multiple investment products.

Separate Account Programs: Programs by which asset managers manage investors’ assets in discretionary separate accounts. A bundled asset-based fee (often 2.5% to 3% before breakpoints and discounts from negotiation) covers money management, trading, and custody. Subadvisory programs are single-contract arrangements in which a sanctioned roster of 40 to 60 asset managers is listed on the platform and in which sponsors determine minimums and management fees. Programs categorized as open include both dual-contract and proprietary programs (both of which are systematically unaddressable by third-party asset managers). Dual-contract programs involve a virtually unlimited number of managers. Investors in the program typically have two contracts, one with the asset management firm and one with the program sponsor and investors in dual-contract relationships typically have the ability to negotiate these parameters. Proprietary programs are "closed architecture" offerings where an asset manager affiliated with the sponsor provides asset management for the client.

Mutual Fund Advisory Programs: Discretionary and nondiscretionary programs designed to systematically allocate investors’ assets across a wide range of mutual funds. Services include client profiling, account monitoring, and portfolio rebalancing. An asset-based fee of 1.25%, for example, is charged instead of commission. There are three types of mutual fund advisory programs, differentiated by an advisor’s ability to influence final portfolio construction: packaged, hybrid, and open.

ETF Advisory Programs: Discretionary and nondiscretionary programs designed to systematically allocate investors’ assets across various ETFs. Services include client profiling, account monitoring, and portfolio rebalancing. An asset-based fee is charged instead of commission. There are three types of ETF advisory programs, differentiated by an advisor's ability to influence final portfolio construction: packaged, hybrid, and open.

Rep as Portfolio Manager: A discretionary advisory account in which advice is an essential element; planning is undertaken or advice ist reated as a separate service from brokerage. An advisor has discretion (has been preapproved by the client—through a discretionary disclosure signed at the opening of the account—to buy and sell securities without the client’s ongoing consent) over these fee-based accounts (either an asset-based fee or alternative fee structure). Advisors who oversee these accounts (and their firms) must be registered with the NASD and the SEC. They assume a fiduciary responsibility for the account.

Rep as Advisor: In these nondiscretionary advisory accounts, the advisor has not been given discretion by the client, and must obtain approval each time a change is made to the account or its investments. However, as with rep-as-portfolio-manager accounts, advice is an essential element of this type of account and advisors and firms must be registered with the NASD and SEC and assume a fiduciary responsibility.

Fee-based brokerage: In these nondiscretionary non advisory accounts, advice is only incidental to brokerage services. Here, the advisor does not have discretion, or it is on a temporary or limited basis. Clients are charged a fee in lieu of commissions, but there cannot be a separate fee charged for advice. Advisors who offer these accounts (and their firms) need to register only with the NASD and have only a suitability responsibility to the client. Prior to opening this type of account, it must be disclosed to potential clients that their interests and the advisor’s may not be the same. As of Oct. 1, 2007 these programs may no longer charge an asset-based fee. Therefore, Cerulli will no longer report assets for fee-based brokerage.

Source: Cerulli Associates


58

Important Disclosures Investing in the markets entails the risk of market volatility. The value of all

types of investments may increase or decrease over varying time periods. To the

extent the investments depicted herein represent international securities, you

should be aware that there may be additional risks associated with international

investing, including foreign economic, political, monetary and/or legal factors,

changing currency exchange rates, foreign taxes, and differences in financial and

accounting standards. International investing may not be for everyone. These

risks may be magnified in emerging markets. Small- and mid-capitalization

companies may lack the financial resources, product diversification and

competitive strengths of larger companies. In addition, the securities of small-

and mid-capitalization companies may not trade as readily as, and be subject to

higher volatility than, those of larger, more established companies. Bonds are

subject to interest rate risk. When interest rates rise, bond prices fall; generally

the longer a bond’s maturity, the more sensitive it is to this risk. Bonds may also

be subject to call risk, which allows the issuer to retain the right to redeem the

debt, fully or partially, before the scheduled maturity date. Proceeds from sales

prior to maturity may be more or less than originally invested due to changes in

market conditions or changes in the credit quality of the issuer. 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.

In Consulting Group’s advisory programs, alternative investments are limited to

US-registered mutual funds, separate account strategies and exchange-traded

funds (ETFs) that seek to pursue alternative investment strategies or returns

utilizing publicly traded securities. Investment products in this category may

employ various investment strategies and techniques for both hedging and more

speculative purposes such as short-selling, leverage, derivatives and options,

which can increase volatility and the risk of investment loss. Alternative

investments are not suitable for all investors. There may be tax implications with

a rebalancing strategy.

Morgan Stanley Smith Barney LLC, its affiliates, and its employees are not in the

business of providing tax or legal advice. These materials and any tax-related

statements are not intended or written to be used, and cannot be used or relied

upon, by any taxpayer for the purpose of avoiding tax penalties. Tax-related

statements, if any, may have been written in connection with the "promotion or

marketing" of the transaction(s) or matters(s) addressed by these materials, to

the extent allowed by applicable law. Any taxpayer should seek advice based on

the taxpayer's particular circumstances from an independent tax advisor. The

performance of tax-managed accounts is likely to vary from that of non-tax

managed accounts.

Rebalancing does not protect against a loss in declining financial markets. There may be a potential tax implication with a rebalancing strategy.

Diversification does not assure a profit or protect against loss in declining financial markets.

Equity securities’ prices may fluctuate in response to specific situations for each company, industry, market conditions and general economic environment. Companies paying dividends can reduce or cut payouts at any time.

Morgan Stanley Smith Barney LLC, its affiliates and Morgan Stanley Financial Advisors do not provide tax or legal advice. This material was not intended or written to be used, and it cannot be used, for the purpose of avoiding penalties that may be imposed on the taxpayer. Clients should consult their tax advisor for matters involving taxation and tax planning and their attorney for matters involving trust and estate planning and other legal matters.


59

Important Disclosures All mutual funds and exchange traded funds (ETFs) are sold by prospectus, which contains more complete information about the fund. Please contact your Financial Advisor for copies. Please read the prospectus and consider the fund’s objectives, risks, charges and expenses carefully before investing. The prospectus contains this and other information about the fund.

Investing in the markets entails the risk of market volatility. The value of all

types of investments may increase or decrease over varying time periods. To

the extent the investments depicted herein represent international securities,

you should be aware that there may be additional risks associated with

international investing, including foreign economic, political, monetary and/or

legal factors, changing currency exchange rates, foreign taxes, and differences

in financial and accounting standards. These risks may be magnified in

emerging markets. Small- and mid-capitalization companies may lack the

financial resources, product diversification and competitive strengths of larger

companies. In addition, the securities of small- and mid-capitalization

companies may not trade as readily as, and be subject to higher volatility than,

those of larger, more established companies. Bonds are subject to interest rate

risk. When interest rates rise, bond prices fall; generally the longer a bond’s

maturity, the more sensitive it is to this risk. Bonds may also be subject to call

risk, which allows the issuer to retain the right to redeem the debt, fully or

partially, before the scheduled maturity date. Proceeds from sales prior to

maturity may be more or less than originally invested due to changes in market

conditions or changes in the credit quality of the issuer. 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. REITs' investing risks are similar

to those associated with direct investments in real estate: lack of liquidity,

limited diversification, and sensitivity to economic factors such as interest rate

changes and market recessions.

Investing in commodities entails significant risks. Commodity prices may be

affected by a variety of factors at any time, including but not limited to, (i)

changes in supply and demand relationships, (ii) governmental programs and

policies, (iii) national and international political and economic events, war and

terrorist events, (iv) changes in interest and exchange rates, (v) trading activities

in commodities and related contracts, (vi) pestilence, technological change and

weather, and (vii) the price volatility of a commodity. In addition, the

commodities markets are subject to temporary distortions or other disruptions

due to various factors, including lack of liquidity, participation of speculators and

government intervention.

In Morgan Stanley unified managed accounts, alternative investments are

limited to US-registered mutual funds, exchange-traded funds (ETFs) and

separate account managers that seek to pursue alternative investment strategies

or returns utilizing publicly traded securities. Alternative investments are not

suitable for all investors. Investment products in this category may employ

various investment strategies and techniques, for both hedging and more

speculative purposes, such as short selling, leverage, derivatives and options,

which can increase volatility and the risk of investment loss.

Managed futures investments are speculative, involve a high degree of risk, use

significant leverage, are generally illiquid, have substantial charges, subject

investors to conflicts of interest, and are suitable only for the risk capital portion

of an investor’s portfolio. Managed futures investments do not replace equities

or bonds but rather may act as a complement in a well-diversified portfolio.

Managed Futures are not appropriate for all investors.


60

Important Disclosures Cerulli Associates, 2Q2014 Summary Report. Cerulli Associates’ data are

based on data submitted by firms participating in Cerulli’s survey. Morgan

Stanley Wealth Management was ranked No. 1 in terms of assets under

management out of the firms listed in the industry for the quarter with respect to

Top Managed Account Program Sponsors Across All Industry Segments. This

category includes separate account consultant programs, mutual fund advisory

programs, ETF advisory programs, rep as portfolio manager programs, rep as

advisor programs and unified managed account programs. Separate account

consultant programs are programs in which asset managers manage investors’

assets in discretionary separate accounts. Mutual fund advisory programs and

ETF advisory programs are discretionary and nondiscretionary programs

designed to systematically allocate investors’ assets across a wide range of

mutual funds or ETFs. Rep as portfolio manager programs are discretionary

programs in which advice is an essential element; planning is undertaken or

advice is treated as a separate service from brokerage. Rep as advisor programs

are nondiscretionary programs where the advisor has not been given discretion

by the client and must obtain approval each time a change is made to the

account or its investments. Unified managed accounts are vehicle-neutral

platforms that simplify the delivery of multiple investment vehicles, such as

separate accounts, mutual funds, exchange-traded funds and individual

securities through their integration within a single environment. Rankings are

subject to change. Some historical figures may be revised due to newly

identified programs, firm restatements, etc.

DALBAR 2013 Quantitative Analysis of Investor Behavior. The average equity

mutual fund investor performance results are calculated using data supplied by

the Investment Company Institute. Investor returns are represented by the

change in total mutual fund assets after excluding sales, redemptions and

exchanges. This method of calculation captures realized and unrealized capital

gains, dividends, interest, trading costs, sales charges, fees, expenses and any

other costs.

The information herein has been obtained from sources that we believe to be

reliable, but we do not guarantee its accuracy or completeness. All opinions

included in this material constitute the Firm’s judgment as of the date of this

material and are subject to change without notice. This material is provided for

informational purposes only and is not intended as an offer or solicitation with

respect to the purchase or sale of any security.

Morgan Stanley Smith Barney LLC offers investment program services through a

variety of investment programs, which are opened pursuant to written client

agreements. Each program offers investment managers, funds and features that

are not available in other programs; conversely, some investment managers,

funds or investment strategies may be available in more than one program.

Morgan Stanley’s investment advisory programs may require a minimum asset

level and, depending on your specific investment objectives and financial

position, may not be suitable for you.


61

Important Disclosures INDEX DEFINITIONS

S&P 500 Index: S&P 500 index covers 400 industrial, 40 utility, 20

transportation, and 40 financial companies of the U.S. markets (mostly NYSE

issues). The index represents about 75% of NYSE market cap and 30% of NYSE

issues. It is a capitalization-weighted index calculated on a total return basis with

dividends reinvested.

90-DAY T-BILLS: Equal dollar amounts of three-month Treasury bills are

purchased at the beginning of each of three consecutive months. As each bill

matures, all proceeds are rolled over or reinvested in a new three-month bill. The

income used to calculate the monthly return is derived by subtracting the

original amount invested from the maturity value. The yield curve average is the

basis for calculating the return on the index. The index is rebalanced monthly by

market capitalization.

Consumer Price Index: Consumer Price Index for all urban consumers. Measure

of change in price of goods and services purchased by all urban consumers.

Approximately 400 items make up the basket of goods and services measured.

Returns prior to 1947 are not seasonally adjusted. Returns from 1947 forward are

seasonally adjusted. By using seasonally adjusted data, economic analysts and

the media find it easier to see the underlying trend in short-term price change. It

is often difficult to tell from raw (unadjusted) statistics whether developments

between and 2 months reflect changing economic conditions or only normal

seasonal patterns. Therefore, many economic series, including the CPI, are

seasonally adjusted to remove the effect of seasonal influences. Seasonal

influences are those that occur at the same time and in about the same

magnitude every year. They include price movements resulting from changing

climatic conditions, production cycles, model changeovers, and holidays.

CITIGROUP NON-US WORLD GOVT BOND H: This index includes all the

components of the World Government Bond Index (listed below) except the

United States. The index includes all fixed-rate bonds with a remaining maturity

of one year or longer and with amounts outstanding of at least the equivalent of

$25 million US Dollars. Those government securities that are excluded from the

indexes typically fall into three categories: floating- or variable-rate bonds

(including index-linked bonds); securities aimed principally at non-institutional

investors such as savings bonds in the United States and Canada; and private

placement-type securities, where liquidity may be poor and where accurate

information on outstanding, market coupon, and maturity structure may be

difficult or impossible to obtain. This index is designed to directly address the

growing interest in and implementation of currency-hedged bond investments

by global investors as a means of achieving low-risk interest rate diversification in

their portfolios. Currency-hedged returns are also reported for the overall non-

base on a monthly basis.

BC AGGREGATE BOND INDEX: The US Aggregate Index covers the dollar-

denominated investment-grade fixed-rate taxable bond market, including

Treasuries, government-related and corporate securities, MBS pass through

securities, asset-backed securities, and commercial mortgage-based securities.

These major sectors are subdivided into more specific subindexes that are

calculated and published on an ongoing basis.


62

Important Disclosures INDEX DEFINITIONS continued…

BC US HIGH YIELD: The Barclays Capital US High Yield Index covers the

universe of fixed rate, non-investment grade debt. Eurobonds and debt issues

from countries designated as emerging markets (e.g., Argentina, Brazil,

Venezuela, etc.) are excluded, but Canadian and global bonds (SEC registered) of

issuers in non-EMG countries are included. Original issue zeroes, step-up coupon

structures, 144-As and pay-in-kind bonds (PIKs, as of October 1, 2009) are also

included.

BC CREDIT INDEX: Publicly issued U.S. corporate and specified foreign

debentures and secured notes that meet the specified maturity, liquidity, and

quality requirements. Must be rated investment-grade (Baa3/BBB- or higher) by

at least two of the following ratings agencies: Moody's, S&P, Fitch. If only two of

the three agencies rate the security, the lower rating is used to determine index

eligibility. If only one of the three agencies rates a security, the rating must be

investment-grade. Must be fixed rate, although it can carry a coupon that steps

up or changes according to a predetermined schedule. Must be dollar-

denominated and non-convertible. Must be publicly issued. Must be an

investment grade credit security.

MSCI EAFE (NET): The MSCI EAFE Index (Europe, Australasia, Far East) (net) is a

free float-adjusted market capitalization index that is designed to measure

developed market equity performance, excluding the US & Canada. As of

December 2003 the MSCI EAFE Index consisted of the following 21 developed

market country indices: Australia, Austria, Belgium, Denmark, Finland, France,

Germany, Greece, Hong Kong, Ireland, Italy, Japan, the Netherlands, New

Zealand, Norway, Portugal, Singapore, Spain, Sweden, Switzerland and the

United Kingdom. This series approximates the minimum possible dividend

reinvestment. The dividend is reinvested after deduction of withholding tax,

applying the rate to non-resident individuals who do not benefit from double

taxation treaties. MSCI uses withholding tax rates applicable to Luxembourg

holding companies, as Luxembourg applies the highest rates.

MSCI EM (GROSS): The MSCI EAFE Index (Europe, Australasia, Far East) is a free

float-adjusted market capitalization index that is designed to measure developed

market equity performance, excluding the US & Canada. This series

approximates the maximum possible dividend reinvestment. The amount

reinvested is the dividend distributed to individuals resident in the country of the

company, but does not include tax credits.

RUSSELL 1000: Russell 1000 Index measures the performance of the 1,000

largest companies in the Russell 3000 Index, which represents approximately

92% of the US market. As of the latest reconstitution, the average market

capitalization was approximately $9.3 billion; the median market capitalization

was approximately $5.2 billion. The smallest company in the index had an

approximate market capitalization of $1.4 billion.

RUSSELL 1000 GROWTH: Russell 1000 Growth Index measures the

performance of those Russell 1000 companies with higher price-to-book ratios

and higher forecasted growth values.

RUSSELL 1000 VALUE: Russell 1000 Value Index measures the performance of

those Russell 1000 companies with lower price-to-book ratios and lower

forecasted growth values.


63

Important Disclosures INDEX DEFINITIONS continued…

RUSSELL 2000: Russell 2000 Index measures the performance of approximately

2,000 of the smallest companies in the Russell 3000 Index, which represents

approximately 10% of the total market capitalization of the Russell 3000 Index.

As of the latest reconstitution, the average market capitalization was

approximately $1.1 billion; the median market capitalization was approximately

$460 million. The largest company in the index had an approximate market

capitalization of $2.6 billion.

RUSSELL 2000 GROWTH: Russell 2000 Growth Index measures the

performance of those Russell 2000 companies with higher price-to-book ratios

and higher forecasted growth values.

RUSSELL 2000 VALUE: Russell 2000 Value Index measures the performance of

those Russell 2000 companies with lower price-to-book ratios and lower

forecasted growth values.

RUSSELL 3000: Russell 3000 Index measures the performance of the 3,000

largest US companies based on total market capitalization, which represents

approximately 98% of the investable US equity market. As of the latest

reconstitution, the average market capitalization was approximately $86.4

billion; the median market capitalization was approximately $923 million. The

index had a total market capitalization range of approximately $540 billion to

$101 million.

RUSSELL MIDCAP: Russell Midcap Index measures the performance of

approximately 800 of the smallest companies in the Russell 1000 Index, which

represent approximately 31% of the total market capitalization of the Russell

1000 Index. As of the latest reconstitution, the average market capitalization was

approximately $4.1 billion; the median market capitalization was approximately

$8.1 billion. The largest company in the index had an approximate market

capitalization of $17.4 billion.

RUSSELL MIDCAP VALUE - Russell Midcap Value Index measures the

performance of those Russell Midcap companies with lower price-to-book ratios

and lower forecasted growth values. The stocks are also members of the Russell

1000 Value index.

RUSSELL MIDCAP GROWTH - Russell Midcap Growth Index measures the

performance of those Russell Midcap companies with higher price-to-book ratios

and higher forecasted growth values. The stocks are also members of the Russell

1000 Value index.

© 2014 Morgan Stanley Smith Barney LLC, member SIPC. Consulting Group is a

business of Morgan Stanley Smith Barney LLC.


64

Important Disclosures

Life, Long-Term Care and Disability insurance products are offered

through Morgan Stanley’s licensed insurance agency affiliates.

Morgan Stanley offers a wide array of brokerage and advisory services to

its clients, each of which may create a different type of relationship with

different obligations to you. Please consult with your Financial Advisor

to understand these differences.

Important information about your relationship with your Financial

Advisor and Morgan Stanley when using a Financial Planning tool.

When your Financial Advisor prepares a Financial Plan, they will be

acting in an investment advisory capacity with respect to the preparation

of your Financial Plan. To understand the differences between brokerage

and advisory relationships, you should consult your Financial Advisor.

You have sole responsibility for making all investment decisions with

respect to the implementation of a Financial Plan. You may implement

the Financial Plan at MSSB or at another firm. If you engage or have

engaged MSSB, it will act as your broker, unless you ask it, in writing, to

act as your investment adviser on any particular account.

Morgan Stanley Smith Barney LLC (“Morgan Stanley”) is a registered

broker-dealer, not a bank. Where appropriate, Morgan Stanley has

entered into arrangements with licensed banks and other third parties to

assist in offering such banking-related services. Unless otherwise

specifically disclosed to you in writing, investments and services are

offered through Morgan Stanley Smith Barney LLC, member SIPC, and

such investments and services are not insured by the FDIC, are not

deposits or other obligations of, or guaranteed by, the Banks and involve

investment risks, including possible loss of principal amount invested

Morgan Stanley Smith Barney LLC, its affiliates, and Morgan Stanley

Financial Advisors and employees are not in the business of providing tax

and legal advice, and these materials and any statements contained

herein should not be construed as tax or legal advice. Individuals are

urged to consult their personal tax advisor or attorney for matters

involving taxation and tax planning and their personal attorney for

matters involving trust and estate planning and other legal matters.


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Disclosures This material is provided for general informational and educational purposes only. The information contained in this material is subject to change without notice. Morgan Stanley Smith Barney LLC undertakes no obligation to update this material. This material does not take into account your personal circumstances and we do not represent that this information is complete or applicable to your situation.

1Morgan Stanley Smith Barney LLC, its affiliates, and Morgan Stanley Financial Advisors and employees are not in the business of providing tax or legal advice, and these materials and any statements contained herein should not be construed as tax or legal advice. Individuals are urged to consult their personal tax advisor or attorney for matters involving taxation and tax planning and their personal attorney for matters involving trust and estate planning and other legal matters.

2Morgan Stanley Smith Barney LLC is a registered Broker/Dealer, a member SIPC, and not a bank. Where appropriate, Morgan Stanley Smith Barney LLC has entered into arrangements with banks and other third parties to assist in offering certain banking related products and services. Investment services are offered through Morgan Stanley Smith Barney LLC. Unless specifically disclosed in writing, investments and services offered through Morgan Stanley Smith Barney LLC are not insured by the FDIC, are not deposits or other obligations of, or guaranteed by, a bank and involve investment risks, including possible loss of principal amount invested.

3Insurance products are offered in conjunction with Morgan Stanley Smith Barney LLC’s licensed insurance agency affiliates.

When your Financial Advisor prepares a financial plan, he or she will be acting in an investment advisory capacity with respect to the

preparation of your financial plan. To understand the differences between brokerage and advisory relationships, you should consult with your Financial Advisor or review our Understanding Your Relationship With Morgan Stanley brochure, available at www.morganstanley.com/ourcommitment/.

LifeView Monitor is a brokerage tool. It is not a financial plan or financial planning service and it does not create an advisory relationship between you and your Financial Advisor.

Morgan Stanley and its Financial Advisors do not provide tax or legal advice. Individuals should consult their personal tax advisor or attorney for matters involving taxation and tax planning and their attorney for matters involving personal trusts and estate planning.

Note about our family wealth advisory services: Morgan Stanley Smith Barney LLC or its affiliates (the “Firm”) do not currently offer the services provided by third party service providers (the “Service Provider”). The Service Provider is not an affiliate of the Firm. Any review of a Service Provider performed by the Firm was based on information from sources that we believe are reliable, but we cannot guarantee its accuracy or completeness. A referral should in no way be considered to be a solicitation by the Firm for business on behalf of a Service Provider, or an endorsement of the Service Provider by the Firm. The Firm makes no representations regarding the suitability or otherwise of the products or services provided by a Service Provider.


http://www.morganstanley.com/ourcommitment/

http://www.morganstanley.com/ourcommitment/

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Disclosures continued DALBAR 2013 Quantitative Analysis of Investor Behavior. The average equity mutual fund investor performance results are calculated using data supplied by the Investment Company Institute. Investor returns are represented by the change in total mutual fund assets after excluding sales, redemptions and exchanges. This method of calculation captures realized and unrealized capital gains, dividends, interest, trading costs, sales charges, fees, expenses and any other costs.

The information herein has been obtained from sources that we believe to be reliable, but we do not guarantee its accuracy or completeness. All opinions included in this material constitute the Firm’s judgment as of the date of this material and are subject to change without notice. This material is provided for informational purposes only and is not intended as an offer or solicitation with respect to the purchase or sale of any security.

Morgan Stanley Smith Barney LLC offers investment program services through a variety of investment programs, which are opened pursuant to written client agreements. Each program offers investment managers, funds and features that are not available in other programs; conversely, some investment managers, funds or investment strategies may be available in more than one program.

Morgan Stanley’s investment advisory programs may require a minimum asset level and, depending on your specific investment objectives and financial position, may not be suitable for you.

There may be additional service providers for comparative purposes. If you choose to contact a Service Provider, we recommend that you interview such Service Provider, do thorough due diligence, and make your own independent decision. The Firm will not receive a referral fee for referring you to a Service Provider.

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© 2014 Morgan Stanley Smith Barney LLC. Member SIPC


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