M O R G A N S TA N L E Y P R I VAT E W E A LT H M A N A G E M E N T O V E R V I E W THE MYERS TREMAINE GROUP
AGENDA MORGAN STANLEY PRIVATE WEALTH MANAGEMENT
• Our Mission • Client Principles • Why Wealthy Families Choose Morgan Stanley Private Wealth Management MORGAN STANLEY FRANCHISE
• Overview • A Heritage of Confidence • Morgan Stanley Global Footprint • Comprehensive Capabilities CUSTOMIZED WEALTH MANAGEMENT PROCESS
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MORGAN STANLEY P R I VAT E W E A LT H M A N A G E M E N T
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OUR MISSION Morgan Stanley Private Wealth Management is dedicated to ultra high net worth individuals, their families and foundations. By providing advice founded on a culture of excellence and driven by global insight, Morgan Stanley Private Wealth Management is devoted to helping our clients preserve and grow their financial, family, and social capital.
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CLIENT PRINCIPLES PRIVATE WEALTH ADVISOR COMMITMENT TO CLIENTS
CLIENT PRINCIPLES
Manage investments with an unwavering focus on your financial strategy and personal goals
• CONFIDENCE in a business that has navigated over 75 years of market cycles • ACCESS to Morgan Stanley’s brightest people and best resources
Structure wealth and customize solutions based solely on an objective view of your needs Simplify financial complexity to help you achieve clarity and control
Align your strategy with the values that have shaped your life and constitute the core of your legacy
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• An exclusive FOCUS on wealthy individuals, families and foundations • Objective solutions for your family’s needs that reflect our INSIGHT into the complex financial world • The highest levels of PERSONAL SERVICE by serving a limited number of clients per advisor
We are committed to maintaining the principles that have placed Morgan Stanley at the forefront of the financial markets since 1935, and we look forward to continuing to share our legacy with you as you are building yours.
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W H Y W E A LT H Y F A M I L I E S C H O O S E M O R G A N S T A N L E Y P R I V A T E W E A LT H M A N A G E M E N T Characteristics that you may find at some alternative firms: RETAIL BROKERAGE Broad range of sophistication and client experience Access to some franchise and institutional resources may be limited to valued clients
PRIVATE BANKS (PROPRIETARY PRODUCT-DRIVEN) Service-oriented approach Centralized investment advice Offering focused on proprietary products
Standard product and service offerings; typically limited customization
High turnover of advisors
Retail pricing
Emphasis on trust administration and sales over investment expertise
Specialized services and solutions tailored to the needs and complexities of each client
CONSULTANT AND SMALL INDEPENDENTS Objective, consultative approach Open architecture: product offering primarily from third-party providers Ability to perform research, asset allocation, manager search & selection, due diligence Customized but limited risk management assessment
As a boutique group within a world-class firm, Morgan Stanley Private Wealth Management is well positioned to serve ultra high-net-worth individuals, families and their foundations around the world. MORGAN STANLEY PRIVATE WEALTH MANAGEMENT • Over 350 Private Wealth Advisors located in 40 offices across the U.S1 • Special focus on individuals and families with $20mm+ in investable assets • Boutique division providing highly customized solutions and tailored wealth strategies • Team coverage with intensive client service • Direct firm wide access to analysts, strategists, traders and investment bankers
Structured investments, trust & estate, cash management functions typically outsourced
• Objective and consultative approach with one of the largest third party platforms as well as an extensive Morgan Stanley proprietary platform; Holistic wealth management approach with an expertise in complex financial structuring, tax/estate strategies and family office services like philanthropy and family governance
Limited global reach
• Exclusive client events and educational programs for small groups of ultra-high-net-worth individuals
High touch, low content
1 PWM Headcount as of July 2014. Morgan Stanley Smith Barney LLC ("Morgan Stanley"), its affiliates, Financial Advisors and Private Wealth Advisors do not provide tax or legal advice. 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.
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MORGAN STANLEY FRANCHISE
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MORGAN STANLEY FRANCHISE As a result of the integrated leadership between PWM and the other divisions of the Firm, PWM is uniquely positioned to deliver the Firm’s expansive resources to each client.
MORGAN STANLEY FRANCHISE POWER1 • $2Tn in AUM2
• The Tier 1 Capital Ratio under Basel I was approximately 15.6% and leverage of 7.6%
• Total Deposits $112Bn • Morgan Stanley reported revenues of $32.4Bn • Global employees approximately
56,1422
• $202Bn in liquidity reserve • Investment Banking No. 2 in Global Announced M&A and No. 3 in Global Equity and Global IPO’s2
MORGAN STANLEY WEALTH MANAGEMENT
INSTITUTIONAL SECURITIES GROUP
INVESTMENT MANAGEMENT
Clients
Investment Banking
Global Asset Management
• Individuals
• Capital raising
• Equity and Fixed Income
• UHNW Individuals, Families and their Foundations (Morgan Stanley Private Wealth Management)
• Corporate lending
• Merchant Banking
• Financial advisory services, including advice on mergers, and acquisitions, restructurings, real estate and project finance
• Alternative Investment Partners
• Small- to medium-size businesses and institutions Products and Services
Sales, Trading, Financing and Market-Making Activities
• Brokerage and investment advisory services
• Equity securities and related products
• Financial and wealth planning services
• Fixed income securities and related products, including foreign exchange and commodities
• Annuity and insurance products • Access to Banking and Lending products and services
• Research
• Retirement plan services
• Prime brokerage
• Mortgage servicing
• Trust services access
• Liquidity Management Three Principal Distribution Channels • A proprietary channel consisting of Morgan Stanley’s representatives • A non-proprietary channel consisting of third-party broker-dealers, banks, financial planners and other intermediaries • An institutional channel that provides advisory services and global portfolio solutions to corporations, central banks, sovereign wealth funds, endowments and foundations, public pensions, insurance general accounts and financial institutions
1 As of 31 December 2013. At Morgan Stanley Wealth Management. 2 As of 30 June 2014. At Morgan Stanley Wealth Management.
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HERITAGE OF CONFIDENCE 1935 Morgan Stanley founded
1953 Manages General Motors $300 million debt issue
1942 Becomes member of New York Stock Exchange
1952 Co-manages the World Bank’s $50 million triple bond offering to help finance European reconstruction
1935 Debuts with a $19 million bond offering for Consumers Powers Company
1966 Manages underwriting syndicate for $100 million bond offering for New York Telephone Company
1973 Launches research department
1961 Launches Morgan Stanley Foundation
1974 Represents INCO (International Nickel Company) in its hostile bid for ESB (Electric Storage Battery)
1977 Launches Morgan Stanley Private Wealth Management
1980 Leads the Apple Computer IPO
1975 Launches asset management business
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1985 Launches Fixed Income division
1997 Morgan Stanley Group, Inc. merges with Dean Witter, Discover & Co.
1995 Manages the Netscape IPO, sparking the rapid growth of the internet
1986 Morgan Stanley is publicly listed on the New York Stock Exchange
1999 Lead underwriter for the UPS $5.47 billion IPO
2000 Acts as the joint global coordinator and book runner for $5.65 billion IPO of China Unicom Limited, the largest Chinese IPO to date
2008 Becomes a bank holding company
Advises the U.S. Treasury on crisis at Fannie Mae and Freddie Mac
2004 Co-manages $1.9 billion auction for Google in the largest Internet IPO to date and largest auction-based IPO in U.S. history 1998 Advises the Brazilian government on the $18.3 billion sale of telecommunications provider Telebra
2009 Morgan Stanley and Smith Barney join to create a new leader in wealth management
2010 Co-leads the General Motors IPO, the largest in U.S. history
2008 Enters into global strategic alliance with Mitsubishi UFJ Financial Group
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MORGAN STANLEY GLOBAL FOOTPRINT Germany
Sweden
Netherlands Ireland EUROPE
Canada Poland
United Kingdom NORTH AMERICA
Switzerland United States
ASIA Hungary
France Spain
Turkey
China
Italy Israel
Mexico
Japan South Korea
United Arab Emirates India
Taiwan Hong Kong
AFRICA Singapore
Saudi Arabia
Peru
SOUTH AMERICA
Brazil
South Africa
AUSTRALIA Australia
Argentina
Global Footprint — MS Today Has Approximately 55,700 Employees in 31 Countries
MORGAN STANLEY PRIVATE WEALTH MANAGEMENT HIGHLIGHTS • Over 349 Private Wealth Advisors in more than 52 regional offices • Over $185Bn in assets under management1 • Focus on families with $20MM+ in investable assets
• Generally co-located in the same offices as other Morgan Stanley businesses such as Investment Banking, Equities, Fixed Income and Investment Management, which provides strong linkage to other parts of the firm
• US PWM dedicated offices include: Atlanta, Boston, Chicago, Dallas, Houston, Los Angeles, Menlo Park, Miami, New York, Philadelphia, San Francisco, and Washington
1 As of June 2014
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C O M P R E H E N S I V E C A PA B I L I T I E S
ACCESS TO BANKING AND LENDING PRODUCTS AND SERVICES
TRUST, ESTATE & LEGACY PLANNING • Wealth Transfer and Trust Strategies
• Securities Based Lending
• Cash Management Services
• Current Will, Trust and Insurance
• Residential Mortgage Lending
• Financing of Aircraft, Sports Teams, Yachts and Art available through third party lenders
• Foundation and Other Charitable Giving Strategies
• Tailored Lending
INVESTMENT MANAGEMENT
CORPORATE SERVICES • Directed Shares, Stock Plans, 10b5-(1) Programs
• Morgan Stanley Proprietary Investment Opportunities
• Hedging Strategies
• Tax Effective Asset Allocation
• Exclusive Co-investment Opportunities
• Interest Rate Risk Management
• Money Manager Due Diligence Research
• Portfolio Protection Solutions
• Concentrated / Restricted Stock Advice • Currency Exposure Strategies • Insurance Solutions
• Alternative Investments
FINANCIAL PLANNING
FAMILY OFFICE SERVICES
• Goals-Based Planning
• Family Governance and Dynamics
• Coordination with Outside Legal and Tax Advisors
RISK MANAGEMENT
• Assistance with your Investment Policy Statement
• Open Architecture Platform
• Pre-liquidity Planning
• Stock Option Analysis
• Commercial Lending
• Portfolio Construction and Management
Review1
• Capital Markets and Investment Banking Interaction • Cash Management Services • Retirement and Pension Plans
ONLINE & MOBILE APP CAPABILITIES • Performance Management Advisory1
• Manage Accounts Online
• Cash Flow Planning
• Philanthropy Management
• Retirement Planning
• Educational Programs
• Lifestyle
Advisory1
• OneView
• Custody
• Personal Security1
• eDelivery
• Health
• Trade Securities, Transfer Funds, and Pay Bills Online
• Mobile App available for iPhone® 1 Services provided by third parties and affiliates not Morgan Stanley Wealth Management
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C U S T O M I Z E D W E A LT H MANAGEMENT PROCESS
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A CUSTOMIZED APPROACH
1
Your family’s dynamics, goals and risk tolerance are unique. We will tailor our process to meet your personal and financial needs and objectives.
2
1
Discovery Process While every client situation is unique, we begin by learning about you, your family and your financial complexities. What we learn helps us to formulate specific strategies and, of equal importance, it helps us customize the entire relationship to your preferences and requirements.
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Formulation of Tax, Trust and Estate Strategy with Appropriate Advisors After reviewing your balance sheet and existing estate plan, we help analyze your income and estate tax circumstances to identify planning techniques that may be effectively tailored to your personal and financial objectives. We will work with your tax and legal advisors in this effort.
Creation of a Customized Strategic Asset Allocation Managing significant wealth often involves developing a customized asset allocation mix that reflects risk, opportunities and taxation across multiple entities, while integrating your investing and estate plans. This asset allocation1 becomes the basis for a long-term strategy formalized in your investment policy.
Assessment of a 6 Ongoing Family’s Portfolio and Wealth Management Needs
5 4 Integration of Tactical Asset Allocation
These short-term adjustments in asset allocations1 seek to take advantage of opportunities created by temporary market distortions. Before adjustments are made, we can analyze the impact of any taxes or trading costs on potential returns.
Implementation of a Customized Wealth Strategy After comprehensive due diligence and extensive analysis of expected results across a range of market scenarios, investment strategies from our global investment platform can be leveraged to create your portfolio. This process can help to create the most efficient balance of risk and return for your specific strategy.
Coordinating with you and your other advisors, we can conduct ongoing reviews and comprehensive reporting to ensure that your strategy adapts to changing financial and family needs.
1 Asset allocation does not ensure a profit or protect against a loss
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STEP 1 OF 6: THE DISCOVERY PROCESS
A D I A L O G U E T O I D E N T I F Y Y O U R U N I Q U E F A M I LY P O S I T I O N
Risk Appetite
Taxability
Liquidity Needs
MultiGenerational Family Goals
Long Term Goals
Restrictions
Special Situations
Charitable Giving
Time Horizon
Concentrated Positions
Anticipated Wealth Transfers
Short Term Goals
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S T E P 2 O F 6 : F O R M U L AT I O N O F TA X , T R U S T, A N D E S TAT E S T R AT E G Y
A COLLABORATIVE APPROACH PROCESS FOR FORMULATING YOUR TAX, TRUST AND ESTATE STRATEGY
1
2 3 4 5
Conduct preliminary due diligence (review of balance sheet and existing documents) Collaboratively discuss income tax and estate planning needs with the client
Tax, Trust & Estate Legacy Planning Professionals2
Analyze available planning techniques in relation to client’s financial goals
Your Current External Tax Advisors
Customized Tax, Trust & Estate Strategy
Assist clients and their tax and legal advisors in the implementation of a financially integrated estate plan Integrate investment and estate plans (combining “asset location” with “asset allocation”1)
Your Current External Legal Advisors
Your Morgan Stanley Private Wealth Advisor
1 Asset allocation does not ensure a profit or protect against a loss. 2 Morgan Stanley Smith Barney LLC ("Morgan Stanley"), its affiliates, Financial Advisors and Private Wealth Advisors do not provide tax or legal advice. 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. .
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S T E P 3 O F 6 : C R E AT I O N O F A C U S TO M I Z E D, S T R AT E G I C A S S E T A L LO C AT I O N
THE PWM ASSET ALLOCATION FRAMEWORK
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Starting with the Morgan Stanley Wealth Management Global Investment Committee’s strategic frameworks, PWM utilizes rigorous analytical tools and models to customize based on the complex needs of each family, endowment or foundation. Formulated Tax, Trust & Estate Strategy Analysis of Strategic Asset Allocation
Concentrated Stock Analysis Model
• Employs quantitative analysis to identify the most appropriate customized solution for each client compared to various asset allocations
• Shows comparable performance and valuation metrics for a stock over the past 10 years
• Utilizes Monte Carlo Analysis, Factor Analysis and Time Period Analysis
Integrate Strategic Asset Allocation and Trust, Tax & Estate Planning • Demonstrates how the integration of strategic asset allocation and appropriate estate planning can lead to a potentially more efficient transfer of wealth from an individual to charitable and/or noncharitable beneficiaries • Utilizes Monte Carlo Analysis
• Shows the risk/return tradeoff of transitioning into a diversified portfolio from a concentrated stock position • Provides insight into potentially favorable liquidation and diversification strategies
Options Analysis Model • Shows the valuation of ISOs and NQSOs for an individual stock and decomposes their total value into intrinsic value and time value • Calculates the estimated tax cost of diversification as well as hurdle rates necessary for breakeven after exercising • Provides insight into potentially favorable liquidation and diversification strategies
By creating an investment policy statement, you will have a formalized document that specifies your investment needs and considerations. YOUR INDIVIDUAL INVESTMENT POLICY STATEMENT WILL:
• Clearly and concisely define your investment considerations and goals • Ensure that all of your investment needs are fully and appropriately considered • Provide a foundation upon which to build and implement a customized wealth plan
Your Customized Strategic Asset Allocation and Investment Strategy Asset allocation does not ensure a profit or protect against a loss
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S T E P 5 O F 6 : I M P L E M E N TAT I O N O F T H E C U S TO M I Z E D W E A LT H S T R AT E G Y
A COMPREHENSIVE SUITE OF SOLUTIONS OPEN ARCHITECTURE INVESTMENT PLATFORM & ADVISORY SERVICES1 ADVISORY PLATFORM Asset-Based Fee TRADITIONAL INVESTMENTS: Equity, Cash Alternatives, Fixed Income
ALTERNATIVE INVESTMENTS
Morgan Stanley Wealth Management Separate Account Managers
Morgan Stanley/External Managers
• Global Investment Solutions
• Hedge Funds
• PWM Advisor Managed
Fund of Funds
• Morgan Stanley Investment Management
BROKERAGE PLATFORM Transaction-Based Fee
EQUITY-RELATED
Research Calls
• Private Equity
FIXED INCOME RELATED
ALTERNATIVES
• Private Equity
Syndicate Calendar
Research and Credit Analyst Calls
Derivatives
Interest Rates
• Real Estate
Strategic Equity
Corporate Credit Products
• Real Assets
Municipal Bonds
• Commodities
Foreign Exchange
• Exchange Funds
Commodities/Futures
• Fund of Funds
Portfolios (STEPs)
• Managed Futures
External Separate Account Managers
• Venture Capital
• Managed Futures
• Hedge Funds
• Hedging Strategies and Risk Management Solutions • Structured Investments and Derivatives
• Nationally recognized investment management firms • Niche Strategies
CASH MANAGEMENT
BALANCE SHEET & LIABILITY MANAGEMENT FAMILY OFFICE SERVICES 1 Services may be provided by a third-party or through an affiliate of Morgan Stanley Smith Barney LLC
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S T E P 5 O F 6 : I M P L E M E N TAT I O N O F T H E C U S TO M I Z E D W E A LT H S T R AT E G Y
U T I L I Z I N G T H I R D - PA R T Y E Q U I T Y , A LT E R N A T I V E INVESTMENTS, AND FIXED INCOME ASSET MANAGERS Providing clients with access to both affiliated and third party actively managed investment solutions
EQUITY AND FIXED INCOME ASSET MANAGEMENT PLATFORM
• Open architecture platform featuring both proprietary and third party capabilities • Solutions across a variety of asset classes and strategies
Morgan Stanley Investment Management (“MSIM”)
Morgan Stanley Wealth Management Proprietary Resources
• With over $382 Bn in assets under management1, MSIM offers individuals comprehensive, multi-asset class investment solutions
• Global Investment Solutions Group
• Morgan Stanley Alternative Investment Partners (“AIP”) manages portfolios of proprietary hedge fund of funds, funds of private equity funds, and funds of real estate funds, targeted at meeting a range of client objectives
‐ Professional asset managers dedicated to constructing and managing discretionary portfolios across various fixed income and equity strategies • Strategic Equity Portfolios (“STEP”) ‐ Highly flexible, investment model portfolios leveraging Morgan Stanley Equity Research
Third-Party Asset Managers • Consulting Group Investment Advisor Research (“CG IAR”), uses a rigorous due diligence process to screen a vast universe of equity, fixed income and some alternative strategy managers • AIP is responsible for performing due diligence on single manager hedge funds • Morgan Stanley Wealth Management Alternative Investments Research sources and performs due diligence on affiliated and unaffiliated fund of hedge funds, single manager hedge funds, Private Equity and Real Estate Funds
1 As of March 2014
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S T E P 5 O F 6 : I M P L E M E N TAT I O N O F T H E C U S TO M I Z E D W E A LT H S T R AT E G Y
ACCESS TO INDUSTRY -LEADING CAPITAL M A R K E T S C A PA B I L I T I E S Through our multiproduct trading desks, we provide you with a robust fixed income offering, institutional level equity trading, research and market intelligence and the opportunity to invest in newly issued debt and equity securities.
Fixed Income
Syndicate
Intellectual Capital
Extensive inventory including U.S. Treasury, agency and mortgage-backed securities; certificates of deposit; municipal, corporate and convertible bonds; and preferred securities.
Morgan Stanley Wealth Management leverages Morgan Stanley & Co.’s position as a leading debt and equity underwriter to provide access to newissue and secondary offerings.
Access, through the Financial Advisor, to the intellectual capital of Morgan Stanley & Co. and Morgan Stanley Wealth Management’s research analysts and strategists, respectively.
Equities
Global Reach and Execution
Leading edge equity trading strategies that attempt to maximize efficiency and enhance profitability.
Execution in financial markets in more than 25 countries across the globe.
Portfolio Review and Account Evaluator
Structured Investments An evolving asset class, structured investments can be designed to meet a range of risk-return objectives.
Fixed Income Portfolio Reviews provide a detailed analysis of taxable and taxexempt fixed income holdings; subject to portfolio size minimums. Account evaluator, a Financial Advisor tool, analyzes current asset allocation broadly.
1 As of Jan 1 2014
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S T E P 5 O F 6 : I M P L E M E N TAT I O N O F T H E C U S TO M I Z E D W E A LT H S T R AT E G Y
S E P A R A T E LY M A N A G E D P O R T F O L I O S OBJECTIVE: Leverage the extensive resources, talent and reach of the Morgan Stanley Wealth Management
franchise to provide clients with professionally managed discretionary portfolios, reflecting each client’s specific financial goals, income requirements and risk tolerances GLOBAL INVESTMENT SOLUTIONS:
Rigorous Investment Process
Portfolio Diversification
Extensive Quantitative & Qualitative Inputs
Applied Equity Advisors Portfolio Strategies
Attention to Valuation
Tax Efficiency
• Global Concentrated Equity
Fundamental Equity Advisors Portfolio Strategies
• Global Core Equity
• Fundamental All-Cap Equity Portfolio
• U.S. Core Equity
• Fundamental All-Cap Equity Portfolio ex-MLPs
• Tax Enhanced Customized Solutions
• Small/Mid-Cap Equity
‐ MSCI World
- Russell 3000
Systematic Risk Management
Benchmark Aware, Not Benchmark Driven
Opportunistic Equity Strategy • U.S. Opportunistic Equity Strategy
• Fundamental MLP Portfolio
‐ Russell 1000
For important disclosures, please see the end of this presentation.
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S T E P 5 O F 6 : I M P L E M E N TAT I O N O F T H E C U S TO M I Z E D W E A LT H S T R AT E G Y
PWM ASSISTS WITH MANAGER SELECTION ACROSS ASSET CLASSES BY LEVERAGING INVESTMENT ADVISOR RESEARCH CONSULTING GROUP INVESTMENT ADVISOR RESEARCH (“CG IAR”) Third Party Asset Manager Research
CG IAR Manager Research Team
Open architecture platform dedicated to offering clients a wide variety of separate account and mutual fund asset classes, including:
• Team of 29 manager research professionals
• Balanced
• Fixed Income
• Convertible
• Global Equity
• Emerging Markets
• International Equity
• Equity
• Municipals
• Real Estate
• Socially Responsible
• Analysts average over 10 years of investment analysis • Specialized knowledge and skills derived from a diverse range of experiences
7,100
Mutual Funds
7,700
Strategies
CG IAR’s Rigorous Due Diligence Process ANALYSIS OF THIRD-PARTY MANAGERS Quantitative Analysis
Quantitative Analysis • Portfolio Strategy Performance
• Risk Statistics
• Personnel Turnover
• Quartile Rankings
• Asset Manager History
• Risk/Reward Profile
• Asset Growth Statistics
• Organizational Credibility
• Portfolio Characteristics
• Sound Investment Process
• Adherence to Investment Strategy • On-site Interviews with Portfolio Managers
1,100 CG IAR Approved Strategies
MORGAN STANLEY WEALTH MANAGEMENT APPROVED STRATEGIES These materials do not constitute an offer to either buy or sell securities or to participate in any trading strategy.
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S T E P 5 O F 6 : I M P L E M E N TAT I O N O F T H E C U S TO M I Z E D W E A LT H S T R AT E G Y
STRENGTH OF THE MORGAN STANLEY A LT E R N A T I V E I N V E S T M E N T S P L A T F O R M
Morgan Stanley Alternative Investments Group
MSIM Alternative Investment Partners2
1
HEDGE FUNDS
PRIVATE EQUITY
REAL ESTATE
MANAGED FUTURES
EXCHANGE FUNDS
Single Manager • HedgePremier (Feeder) • Direct (Third Party)
Single Manager • Feeder (Third Party) • Direct (Third Party)
Single Manager • Feeder (Third Party) • Direct (Third Party)
Single Manager • Managed Futures Premier (Proprietary)
Single Manager • (Third Party)
Fund of Funds • Registered & LPs (Third Party)
Fund of Funds • Third Party
Multi-Manager (Proprietary)
Single Manager • Direct (Third Party)
Fund of Funds • Registered & LPs (Proprietary)
Fund of Funds (Proprietary) • Co-Investment • Secondaries
Fund of Funds (Proprietary) • Co-Investment • Secondaries
Single Manager (Proprietary) • Global PE • Asia PE • Infrastructure • Mezzanine Lending
Single Manager (Proprietary) • MS Real Estate Funds
Custom Portfolios • Discretionary & Non-Discretionary
MSIM Merchant Bank & Real Estate Investing2,3
1 Alternative investments mentioned above refers to unregistered products as well as those products registered with the Securities Act of 1933 and Investment Company Act of 1940. 2 Alternative Investment Partners (AIP) and Merchant Bank are each a division of Morgan Stanley Investment Management. Morgan Stanley Investment Management also offers other, more traditional products such as equity, fixed income and liquidity mutual funds which are not distributed by Morgan Stanley AIG. 3 MSIM also offers a global macro strategy hedge fund on the Morgan Stanley Alternative Investments Platform through their Long Only group. For illustrative purposes only. Not complete in depiction — MS AIG offers a wider range of alternative investments. For Qualified Investor and Financial Professional Use Only. May not be used with general public. Please see important disclosures at the end of this material.
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S T E P 5 O F 6 : I M P L E M E N TAT I O N O F T H E C U S TO M I Z E D W E A LT H S T R AT E G Y
HEDGE
FUND SOLUTIONS (“HFS”)
1
Hedge Fund Solutions focuses on offering clients a single source for hedge fund portfolio management, research, advice, education, execution and risk monitoring. HFS is structured as a full-service hedge fund provider with a range of solutions to meet clients’ investment objectives and profiles. IDENTIFICATION, SELECTION & MONITORING PROCESS
Identification and Sourcing of Prospective Funds
Quantitative Analysis
Qualitative Analysis
Operational & Business Risk Assessment
Approval by Investment Committee
Ongoing Due Diligence
HFS PLATFORM DESCRIPTION:
MINIMUM INVESTMENT
• The HFS Platform focuses on offering clients a single source for hedge fund portfolio management, research, advice, education, execution and risk monitoring
• Single Fund Investments: $1M+
• Currently has over $8.7 billion in assets under management and assets under advisement1
CUSTOMIZED PORTFOLIOS
• Offers access to 80+ non-proprietary hedge fund managers2 • Implements single fund investments and customized portfolios on an advisory and discretionary basis ELIGIBILITY
Single Fund Investments: Accredited Investor and Qualified Purchaser (generally $5M net investment assets for an individual, $25M for an entity; net worth must be at least 20x investment) Custom Hedge Fund Portfolios: Accredited Investor and Qualified Purchaser
• Custom Hedge Fund Portfolios: $25M+
• Custom hedge funds portfolios are created to meet client-specific investment goals as a stand alone portfolio or as a complement to a broader portfolio of assets • Construction of the portfolio includes: ‐ Identifying client’s investment objectives ‐ Selecting managers from HFS approved hedge funds ‐ Monitoring portfolio’s performance on an ongoing basis
1 As of March 31, 2014. 2 Morgan Stanley AIP is not responsible for sourcing and performing due diligence on single manager hedge funds that are affiliated with Morgan Stanley and its affiliates. For Qualified Investor and Financial Professional Use Only. May not be used with general public. Please see important disclosures at the end of this material.
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S T E P 5 O F 6 : I M P L E M E N TAT I O N O F T H E C U S TO M I Z E D W E A LT H S T R AT E G Y
ACCESS TO BANKING & LENDING PRODUCTS & SERVICES
Securities Based Lending
Purpose (Margin) and Non-Purpose
Morgan Stanley Residential Mortgage Loans
Tailored Lending
3rd Party Lenders1
Cash Management
Access to Cash Management Services
Products
Collateral
• Commercial Lending
• Conforming, Non-Conforming
• U.S. and International Eligible securities
• Aviation
• ARMs
• Commercial Real Estate
• HELOCs
• Yacht/RV
• Certain Hedge Fund Interests • REIT Operating Units • Fine Art
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S T E P 5 O F 6 : I M P L E M E N TAT I O N O F T H E C U S TO M I Z E D W E A LT H S T R AT E G Y
F A M I LY O F F I C E S E R V I C E S
FAMILY OFFICE OVERVIEW
Solutions to help ease administration burdens—from consolidating your financial reports to managing some of the most complex aspects of your life
An integrated approach to planning that includes family issues, wealth transfer, and business succession planning
Helps you maintain family unity across generations by focusing on family mission, governance, conflict management and family endowments
Management of wealth that is focused on your family’s interests over the long term
Helping to preserve and maximize what you will transfer to the next generation— your values as well as financial assets Access to a range of resources and solutions tailored specifically to you and your family 8 6 LIFESTYLE ADVISORY1
WEALTH STRATEGIES GROUP
EDUCATIONAL PROGRAMS
4
2 1
7
PRIVATE HEALTH CARE ADVISORY1
TAX, TRUST & ESTATE PLANNING
3 ACCESS TO BANKING & LENDING PRODUCTS & SOLUTIONS
FAMILY GOVERNANCE & DYNAMICS
5 PHILANTHROPY MANAGEMENT
1 Services may be provided by a third-party or through an affiliate of Morgan Stanley Smith Barney LLC. Morgan Stanley Smith Barney LLC ("Morgan Stanley"), its affiliates, Financial Advisors and Private Wealth Advisors do not provide tax or legal advice. 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.
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STEP 6 OF 6: ONGOING ASSESSMENT OF MANAGEMENT NEEDS
ONGOING ASSESSMENT TO HELP MEET YOUR CHANGING F I N A N C I A L & F A M I LY N E E D S
Review of Strategic Asset Allocation1
Review of Investment Policy
Your individualized investment policy statement is reviewed to ensure that your investment objectives evolve with your current personal and financial needs
Your strategic asset allocation is analyzed quantitatively and qualitatively in relation to your investment policy statement to confirm that your specific needs are being addressed
Review of Portfolio Performance
Execution or Tactical Adjustments
The appropriateness of each holding, based upon performance and your investment objectives, is assessed
Leverage the Firm’s intellectual capital and investment platform to integrate tactical changes to your asset allocation framework
Breadth of Experience to Adapt to Changing Client Needs
1 Asset allocation does not ensure a profit or protect against a loss.
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DEFINING YOUR LEGACY Working in conjunction with your external advisors, we will help develop a framework for integrated planning and strategic decision making across your entire family.
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Family Entity
Family Entity
Family Entity
Tax Entity
Advisor Family Attorney And CPA
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5 investment accounts Private equity Private business Real estate Executive stock options Deferred compensation Life insurance
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5 investment accounts Private equity Private business Real estate
Household Family Entity Tax Entity
Family Name
Tax Entity
Tax Entity
Private Wealth Advisor Family Attorney / CPA
Tax Entity
Tax Entity
Tax Entity
Tax Entity
• 2 IRAs • 401(k) • Pension plan
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1 investment account 96% family LP Artwork Primary home Vacation home 1 IRA 401(k)
Tax Entity
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5 investment accounts Private equity Private business Real estate
• 2 IRAs • 401(k) • Pension plan
• • • • • • •
1 investment account 96% family LP Artwork Primary home Vacation home 1 IRA 401(k)
• Family controlled non-profit
Tax Entity
Tax Entity
• 2 IRAs • 401(k) • Pension plan
• • • • • • •
1 investment account 96% family LP Artwork Primary home Vacation home 1 IRA 401(k)
Tax Entity
• Family controlled non-profit
Tax Entity
• Family controlled non-profit
Tax Entity
• Family controlled non-profit
Morgan Stanley Smith Barney LLC ("Morgan Stanley"), its affiliates, Financial Advisors and Private Wealth Advisors do not provide tax or legal advice. 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.
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M O R G A N S TA N L E Y O N L I N E C A PA B I L I T I E S Morgan Stanley Online delivers secure, convenient, online access to your Morgan Stanley accounts. It helps you stay informed so you and your Private Wealth Advisor can work together to make decisions. View and Manage Your Accounts Online • Easily navigate between your Account Summary, Activity, Holdings, Gain/Loss, and Account Documents
Morgan Stanley Online Features
• Customize your Account Summary Home Page and online experience based on your priorities, preferences and interests
Trade Securities, Transfer Funds, and Pay Bills Online (For Eligible Accounts) • Trade stocks, ETFs and options online, manage your orders, and collaborate with your Private Wealth Advisor on your investment goals • Transfer money online between your Morgan Stanley accounts and your accounts at other financial institutions
Stay Current with the Latest Research and News
Get eDelivery of Account Documents Instead of Paper • View and download research reports Documents by Mail from Morgan Stanley and Standard & Poor’s • Get quotes, charts, SEC filing documents, mutual fund prospectuses, and investment reports for most publicly traded companies • Use Watchlists to track up to 250 securities you own or want to watch
• Get your statements, tax forms, trade confirmations, and other important account documents online from one convenient place • Receive an email notification when your online documents are available for viewing • Reduce waste and clutter by no longer receiving paper documents by mail
Simplify Your Financial Life with OneView • Organize all of your account information in one location, regardless of where your accounts are held • Get a current, comprehensive understanding of your overall financial situation • Automatically share your account data with your Private Wealth Advisor
Give Family Members and Personal Advisor Access to Your Account • Securely grant family members and trusted professionals access to view your accounts • Access your accounts held at different branches with a single user name and password
MOBILE APPLICATION The Morgan Stanley Mobile App, currently available for iPhone® , is the only mobile solution designed exclusively for the needs of Morgan Stanley Wealth Management clients and: • Connects you to a full suite of cash management functions • Allows you to scan and deposit checks drawn on a U.S. bank 1 with some of the highest deposit limits in the industry 2 • Provides secure access to your investment portfolio, allowing you to check asset allocations and holdings • Gives you access to up-to-date news, company profiles and quotes Available for download from the App Store sm for iPhone®
1 Subject to certain terms and conditions. 2 Up to a daily limit of $100,000 for existing Reserved customers. Morgan Stanley Smith Barney LLC, member SIPC reserves the right to change or terminate the Reserved program at any time and without notice. Reserved program participants’ accounts and activity are reviewed periodically to confirm that they continue to qualify for Reserved.
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DISCLOSURES: SECURITY TYPE INVESTING RISKS SMALL/MID CAPS U.S. EQUITY Investing in smaller companies involves greater risks not associated with investing in more established companies, such as business risk, significant stock price fluctuations and illiquidity. INTERNATIONAL/EMERGING MARKETS International investing entails greater risk, as well as greater potential rewards compared to U.S. investing. These risks include potential and economic uncertainties of foreign countries as well as the risk of currency fluctuations. These risks are magnified in countries with emerging markets, since these countries may have relatively unstable governments and less established markets and economics. FIXED INCOME Fixed Income Securities are subject to interest rate risk, credit risk, prepayment risk, market risk, and reinvestment risk. Fixed Income Securities, if held to maturity, may provide a fixed rate of return and a fixed principal value. Fixed Income Securities prices fluctuate and when redeemed, may be worth more or less than their original cost. REITS REITs investing risks are similar to these associated with direct investments in real estate; lack of liquidity, limited diversification, and sensitivity to economic factors such as interest rate charges and market recessions. PRIVATE EQUITY Private equity interests may be highly illiquid, involve a high degree of risk and be subject to transfer restrictions.
MANAGED FUTURES 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. Before investing in any partnership and in order to make an informed decision, investors should read the applicable prospectus and/or offering documents carefully for additional information, including charges, expenses and risks. Investors should read the prospectus and/or offering documents carefully for additional information, including charges, expenses and risks. Managed futures investments do not replace equities or bonds but rather may act as a complement in a well diversified portfolio. REAL ASSETS The prices of real assets – precious metals tend to fluctuate widely and in a unpredictable manner, and have historically experienced periods of flat or declining prices. Their prices are affected by several factors, including global supply and demand, investors expectations with respect to the rate of inflation, currency exchange rates, interest rates, investment and trading activities of hedge funds and commodity funds, and global or regional political, economic or financial events and situations. COMMODITIES 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. I. MASTER LIMITED PARTNERSHIPS Master Limited Partnerships (MLPs) are (rolled-up) limited partnerships or limited liability companies that are taxed as partnerships and whose interests (limited partnership units or limited liability company units) are traded on securities exchanges like shares of common stock.
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DISCLOSURES: SECURITY TYPE INVESTING RISKS CONT’D STRUCTURED PRODUCTS An investment in Structured Investments involves risks. These risks can include, but are not limited, to: fluctuations in the price, level or yield of underlying instruments, interest rates, currency values and credit quality; substantial loss of principal; limits on participation in appreciation of underlying instrument; limited liquidity; credit risk of the issuer; and, conflicts of interest.
Any allocation containing alternative investments should note that they are highly illiquid and are only suitable for investors willing to put capital at risk for an indefinite period of time. Alternative investments often engage in leverage and other speculative investment practices, may involve complex tax structures, typically have higher fees, and generally are not subject to the same regulatory requirements as traditional asset classes.
These materials are provided for general informational and educational purposes based upon publically available information from sources believed to be reliable. These materials do not take into account your personal circumstances and we do not represent that this material is complete or applicable to your situation. These materials do not constitute an offer to either buy or sell securities or to participate in any trading strategy. These materials may change at any time without notice to you.
An investment in alternative investments can be highly illiquid, is speculative and not suitable for all investors. Investing in alternative investments is only intended for experienced and sophisticated investors who are willing to bear the high economic risks associated with such an investment. Investors should carefully review and consider potential risks before investing. Some of these risks may include:
Indices are unmanaged. An investor cannot invest directly in an index. Global Investment Solutions is an initiative dedicated to transforming compelling ideas — from wherever they arise — into innovative investments for the firm’s clients.. The Global Investment Solutions initiative includes an investment management business within the global Morgan Stanley Smith Barney LLC (Morgan Stanley Wealth Management) group of companies that draws on the collective thinking of four experienced portfolio management teams. These teams share a singular vision: to deliver professional investment advice centered on a culture of investment excellence. Each portfolio team within Global Investment Solutions specializes in particular asset classes and investment styles. Possessing extensive knowledge within their respective disciplines, the teams also have the ability to draw on the capital markets analytics and world-wide investment expertise of the Morgan Stanley family of companies and extensive non-proprietary resources.
All services of Global Investment Solutions are delivered to clients in the United States only by Morgan Stanley Wealth Management. These materials are intended only for clients and prospective clients in the United States.
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• loss of all or a substantial portion of the investment due to leveraging, short-selling, or other speculative practices; • lack of liquidity in that there may be no secondary market for the fund and none is expected to develop; • volatility of returns; • restrictions on transferring interests in a fund; • potential lack of diversification and resulting higher risk due to concentration of trading authority when a single advisor is utilized; • absence of information regarding valuations and pricing; • complex tax structures and delays in tax reporting; • less regulation and higher fees than mutual funds; and • Risks associated with the operations, personnel, and processes of the manager. Consulting Group is a business of Morgan Stanley Smith Barney LLC.
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DISCLOSURES Borrowing against securities may not be suitable for everyone. You should be aware that securities-based loans involve a high degree of risk and that market conditions can magnify any potential for loss. Most importantly, you need to understand that: 1. Sufficient collateral must be maintained to support your loan(s) and to take future advances; 2. You may have to deposit additional cash or eligible securities on short notice;
3. Some or all of your securities may be sold without prior notice in order to maintain account equity at required maintenance levels. You will not be entitled to choose the securities that will be sold. These actions may interrupt your long-term investment strategy and may result in adverse tax consequences or in additional fees being assessed; 4. Morgan Stanley Bank, N.A., Morgan Stanley Private Bank, National Association or Morgan Stanley Smith Barney LLC (collectively referred to as “Morgan Stanley”) reserves the right not to fund any advance request due to insufficient collateral or for any other reason except for any portion of a securities based loan that is identified as a committed facility; 5. Morgan Stanley reserves the right to increase your collateral maintenance requirements at any time without notice; and 6. Morgan Stanley reserves the right to call securities based loans at any time and for any reason. The proceeds from certain securities based loan products may not be used to purchase, trade, or carry margin stock (or securities, with respect to Express CreditLine); repay margin debt that was used to purchase, trade or carry margin stock (or securities, with respect to Express CreditLine); and cannot be deposited into a Morgan Stanley Smith Barney LLC or other brokerage account. To be eligible for a securities based loan, a client must have a brokerage account at Morgan Stanley Smith Barney LLC that contains eligible securities, which shall serve as collateral for the securities based loan.
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Residential mortgage loans are offered by Morgan Stanley Private Bank, National Association, an affiliate of Morgan Stanley Smith Barney LLC. With the exception of the pledged‐asset feature, an investment relationship with Morgan Stanley Smith Barney LLC does not have to be established or maintained to obtain the residential mortgage products offered by Morgan Stanley Private Bank, National Association. All residential mortgage loans are subject to the underwriting standards and independent approval of Morgan Stanley Private Bank, National Association. Rates, terms, and programs are subject to change without notice. Residential mortgage loans may not be available in all states; not available in Guam, Puerto Rico and the U.S. Virgin Islands. Other restrictions may apply. This document should not be construed as a commitment to lend. Morgan Stanley Private Bank, National Association is an Equal Housing Lender and member FDIC that is primarily regulated by the Office of the Comptroller of the Currency. Nationwide Mortgage Licensing System Unique Identifier #663185. The proceeds from a residential mortgage loan (including draws and advances from a home equity line of credit) are not permitted to be used to purchase, trade or carry eligible margin stock; repay margin debt that was used to purchase, trade or carry margin stock; or to make payments on any amounts owed under the note, loan agreement, or loan security agreement; and cannot be deposited into a Morgan Stanley Smith Barney LLC or other brokerage account. Morgan Stanley Smith Barney LLC. 2000 Westchester Avenue, Purchase, NY 10577. Tel: 800‐869‐3326. Nationwide Mortgage Licensing System Unique Identifier No. 171760. Arizona Mortgage Broker License No. 0910887. California Department of Corporations Finance Lenders Law License No. 603H431. Georgia Residential Mortgage Licensee No. 23976. Kansas Licensed Mortgage Company No. MC.0025024. Massachusetts Mortgage Broker License No. MB5439. Montana Mortgage Broker License No. 171760. Licensed by the New Hampshire Banking Department. Licensed by the New Jersey Department of Banking and Insurance. Registered Mortgage Broker—NYS Banking Department. Mortgage brokers may not make loans. Ohio Mortgage Broker Act Certificate of Registration No. MB.804039.000. Rhode Island Licensed Loan Broker.
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DISCLOSURES CONT’D Tailored Lending is a loan/line of credit product offered by Morgan Stanley Private Bank, National Association, an affiliate of Morgan Stanley Smith Barney LLC. A Tailored Lending credit facility may be a committed or demand loan/line of credit. All Tailored Lending loans/lines of credit are subject to the underwriting standards and independent approval of Morgan Stanley Private Bank, National Association. Tailored Lending loans/lines of credit may not be available in all locations. Rates, terms, and programs are subject to change without notice. The ongoing availability of a secured Tailored Lending loan/line of credit is contingent, among other things, on the client maintaining sufficient eligible collateral. Other restrictions may apply. This document should not be construed as a commitment to lend. Morgan Stanley Private Bank, National Association is a member FDIC that is primarily regulated by the Office of the Comptroller of the Currency. The proceeds from a Tailored Lending loan/line of credit (including draws and other advances) may not be used to purchase, trade, or carry margin stock; repay margin debt that was used to purchase, trade or carry margin stock; and cannot be deposited into a Morgan Stanley Smith Barney LLC or other brokerage account. Margin Loans are investment products offered through Morgan Stanley Smith Barney LLC. Margin Loans are securities‐based loans, which can be risky, and are not suitable for all investors. Tax laws are complex and subject to change. This information is based on current law s in effect at the time this was written. Morgan Stanley Smith Barney LLC, its affiliates, employees and Private Wealth Advisors are not in the business of providing tax or legal advice, and these Individuals should consult their personal tax advisor for matters involving taxation and tax planning and their attorney for matters involving personal trusts and estates planning.
Investment and services offered through Morgan Stanley Private Wealth Management, a division of Morgan Stanley Smith Barney LLC. Member SIPC. Forex transactions have inherent risk, including the potential loss of principal, and are not suitable for all investors. Forex transactions may be subject to exchange (or currency) risk or, the risk that an investor will have to close out a long or short position in a foreign currency at a loss due to an adverse movement in exchange rate. Before undertaking Forex transactions, you should understand the associated risks. Engaging in foreign currency transactions entails more varied risks than normally associated with transactions in the domestic securities markets. Attention should be paid to market, credit, sovereign and liquidity risks. Cash or forward positions in foreign currencies are volatile and involve inherent risks including the effect of leverage. The potential of loss is a significant consideration. Because of the effect of leverage, a relatively small market movement will have a proportionately large impact on the funds deposited. This loss can be equal to or, in some instances, greater than the full amount of the initial investment. Certain Forex transactions may only be entered into by clients who qualify as Eligible Contract Participants (ECP) as defined by the Commodity Exchange Act. Over-the-counter transactions require investors to be classified as an Eligible Contract Participant, and in certain instances transactions may be executed with a counterparty that is an affiliate of Morgan Stanley Wealth Management. Apple, the Apple logo and iPhone are trademarks of Apple Inc., registered in the U.S. and other countries. App Store is a service mark of Apple Inc. CRC 988775 10/2014
Morgan Stanley Smith Barney LLC does business as Morgan Stanley Private Wealth Management. Morgan Stanley Smith Barney LLC is a registered Broker/Dealer, 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.
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