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Global Investment Manager Analysis (GIMA)

At A Glance

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All information as of May 2015 and subject to change.

Global Investment Manager Analysis (GIMA) At A Glance:

The Global Investment Manager Analysis (GIMA) team was formed to allow Morgan Stanley to centralize its due diligence efforts. The Firm maintains an open architecture advisory platform which includes a wide variety of investment products including alternatives, separately managed accounts, mutual funds and exchange-traded funds (ETFs) across most asset classes.

Dedicated professionals with an average industry experience of 17 years within traditional long-only and alternative investment products

The Global Investment Manager Analysis team consists of:

Within the traditional product group, 30 invest-ment analysts, specialized by asset class, review and monitor a broad universe of investment products that are offered through the firm’s various investment advisory programs

The alternative invest-ment team consists of 16 investment and operational due diligence professionals who cover a variety of different structures to ensure product agnostic advice

In addition, GIMA works closely with an affiliated group within Morgan Stanley Investment Management whose focus includes single manager hedge funds. This team includes 32 investment, operational and quantitative professionals dedicated to hedge fund manager selection. These analysts are responsible for initial due diligence, manager selection and ongoing monitoring of firms and funds in the investment universe.

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All information as of May 2015 and subject to change.1 Source: Prequin- December 2014. Survey of over 100 hedge fund managers.

GIMA’s Breadth of Resources

The team, with 42 years of delivering investment manager analysis, applies a common framework in its review of all investment products under consideration:

ResourcesAbility to leverage the Firm’s Global Investment Committee to integrate asset allocation and thought leadership into advisory programs. In addition, GIMA utilizes the resources of Morgan Stanley & Co.’s Global Research organization with over 400 analysts.

BreadthWe cover a wide range of investment products that we make available to advisory clients.

Dedication to Client ServiceA focus on client needs, including reporting and implementation.

AccessThe size and industry status of Morgan Stanley, with $2.2 trillion in firmwide assets, a top position in prime brokerage1, and among the top firms in institutional equity trading provide us with exceptional access to primary decision makers. It also allows direct contact with business leaders at investment management firms throughout the industry.

LeadershipWe are among the first to market in many investment advisory platforms and products and we’re a leader in manager analysis.

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All information as of May 2015 and subject to change.1 Advisory Platforms and Solutions is a business of Morgan Stanley Smith Barney LLC.2 Includes Private Equity.

An Industry Leader in Manager Analysis

AnALySTS DeDICATeD To MAnAGeR AnALySIS42

Year History InveSTMenT ADvISoRy1 ASSeTS unDeR MAnAGeMenT

1,300+ STRATeGIeS MonIToReD/yeAR

100+New Products Launched Per Year

ETF Strategies

450+ onSITe vISITS / yeAR

500+ Separately Managed Accounts

MuTuAL funDS

150+2ALTeRnATIve STRATeGIeS

45+ ANALYSTS DEDICATED TO MANAGER ANALYSIS

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ongoing MonitoringInvestment products undergo continual review. In addition, the team continues to have multiple points of contact with investment managers, at periodic intervals to reaffirm conviction in the manager.

Patented MethodologyThe team developed and implemented the proprietary Adverse Active AlphaSM screening and scoring methodology into the overall manager selection process to improve our odds of adding alpha to client portfolios. This patented screening and scoring tool helps identify products with characteristics that may lead to future outperformance relative to indexes and peers.

A Comprehensive Process for Manager Analysis

Strong GovernanceGIMA adheres to a formal governance process on all investment decisions for all products that are made available on the advisory platform. Decisions are highly governed by an experienced eight-member committee which meets at least twice weekly to review each investment decision.

Rigorous AnalysisOur thorough process includes a detailed review of a firm and its investment capabilities and resources, investment process and philosophy, personnel and business structure. Alternative strategies include an operational risk review which evaluates a firm’s business processes, infrastructure and controls.

extensive universe Engage with a broad array of investment managers from both large and boutique firms. From a universe of over 14,000 options (separately managed accounts, mutual funds and ETFs), the universe is narrowed down to approximately 1,300 investment strategies from over 300 investment firms.

Library of AnalysisThe team maintains an extensive library of written manager analysis that is available to Financial Advisors and clients.

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*Does not reflect advisory fees.Source: Performance analytics, Morgan Stanley Wealth Management as of March 31, 2015. Includes only equity mutual funds and separately managed account (SMA) strategies on the GIMA Focus List that also rank in the top two quintiles according to the Adverse Active Alpha ranking process. The number of products meeting the criteria is currently approximately 130 out of the approximately 1,300 products covered by GIMA and is subject to change. Includes mutual fund performance net of expense ratio but gross of advisory fee and gross of advisory fee SMA performance. Please note that the ranking analysis is derived from back testing which has the benefit of hindsight. The performance that the ranking analysis is based on would have been lower if advisory fees were included and would have had a different outcome. Past performance is not a guarantee of future results. Indices are unmanaged and not available for direct investment.1 Performance is relative to each product’s appropriate style benchmark. 2 Performance is relative to funds in the Morningstar equity universe.

A Patented Ranking Process Seeks to Identify Strong Managers

An exclusive approach…In 2014, Morgan Stanley Wealth Management received a patent grant on the “Adverse Active Alpha” manager ranking process.

…that is compelling in our viewHighly-ranked strategies outperformed benchmarks and peers since implementation, despite difficult environment for active management.

1.6 %

3.6 %

Excess return vs. benchmark indexes1

Excess return vs. peer managers2

outperformance of “Adverse Active Alpha” Strategies* Annualized performance since implementation December 31,2012 – March 31, 2015

AdverseHistoric outperformance in market environments when conditions were difficult for active managers

+ActiveHigh active share — conviction-based portfolios that look different from index

=AlphaDifference between expected and actual returns — i.e., the value added by active management

Adverse Active AlphaSM Characteristics

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Traditional Manager Analysis: Three Levels of Conviction

Approved List• Responsive to client needs and industry trends• Information on a broad universe of investment managers

and products• Meets GIMA’s qualitative and quantitative standards

focus List• Higher level of conviction• 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 opportunities List• Draws from both the Focus and Approved Lists• Leverages manager analysis capabilities, as well as capital

markets analysis by the Global Investment Committee (GIC)• Based on potential short-term performance

The team conducts rigorous qualitative and quantitative evaluations to develop opinion-based analysis that is substantiated by conviction level.

TACTICAL oPPoRTunITIeS LIST

foCuS LIST

APPRoveD LIST

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Alternative Investment Types

Real estatePrivate investments in real

estate through single manager or fund of funds investment

vehicles that may offer diversifi-cation and risk-adjusted returns,

while potentially serving as a hedge against inflation.

Managed futuresProfessionally managed

investments in global currencies, interest rates, equities, metals, energy and agricultural markets

directed by a professional trading manager known as a Commodity Trading Advisor.

Single Manager Hedge funds

Professionally managed invest-ment funds that use sophisticated

strategies to potentially offset losses during a market downturn, often seeking to generate returns

higher than traditional stock and bond investments.

fund of Hedge funds

Professionally managed portfolio of individual hedge

funds or other alternative investments that may offer

diversification across managers, strategies, styles

and/or sectors.

Private equityUnique investment

opportunities in privately held companies through single manager or fund of funds

investment vehicles that may offer diversification and

attractive long-term return potential

To complement traditional investment portfolios, the team evaluates a wide array of funds and strategies from the top names in the industry and specialty boutique firms to offer qualified investors with access to vehicles across the alternative investment landscape:

In-depth experience with Hedge equity, Credit, Global Macro, Arbitrage, Infrastructure, Distressed Debt, Corporate Buyout, Impact / Social Investing, Commodities, energy exploration and services, Asset-backed Securities, Real estate, venture Capital

• Client-appropriate strategies across the liquidity landscape

• Hedge fund strategies in daily liquid mutual funds

• Hedge fund and fund of hedge funds with semi-liquid themes

• Longer-dated private commitments in equity, debt and real estate

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Meet the Global Investment Analysis TeamGlobal Investment Manager Analysis leverages quantitative, qualitative and operational due diligence conducted by 45+ dedicated analysts on more than 14,000 investment managers.

Lisa ShalettLisa Shalett is head of Investment & Portfolio Strategies and a managing director for Morgan Stanley Wealth Management and a member of both the Global Investment Committee and the Investment Products & Services Executive Committee. In her current role, she works to develop portfolio solutions that leverage the Firm’s strategic and tactical asset allocation advice to meet client goals. In addition, Lisa is responsible for Morgan Stanley Wealth Management’s thought leadership agenda and publishes white papers on topical themes for practitioners and clients.

Alper Daglioglu, CAIA® Alper Daglioglu is co-head of Global Investment Manager Analysis and a managing director for Morgan Stanley Wealth Management. He currently leads the analysis and due diligence efforts on liquid alternative strategies which include hedge funds, fund of hedge funds, managed futures and alternative mutual funds. Previously, Alper was the chief investment officer for Managed Futures within Morgan Stanley Wealth Management. He is also a CAIA® charterholder.

Govind KilambiGovind Kilambi is co-head of Global Investment Manager Analysis and a managing director for Morgan Stanley Wealth Management. He currently leads the analysis and due diligence efforts on illiquid alternative strate-gies which include private equity, private real estate, and real assets. Additionally, he serves as chief investment officer for the Alternative Investments Group.

Paul Ricciardelli, CfA®Paul Ricciardelli is co-head of Global Investment Manager Analysis and a managing director for Morgan Stanley Wealth Management. He currently leads the analysis and evaluation process for traditional investment management strategies across Morgan Stanley Wealth Management Consulting Group’s investment advisory programs. He is also a CFA® charterholder.

MAnAGeMenT

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Meet the Global Investment Analysis Team

Grant Badura, CfA®, CAIA®Grant Badura is an executive director and senior operational due diligence analyst within the Global Investment Manager Analysis team at Morgan Stanley Wealth Management. He current-ly leads the team is responsible for providing operational due diligence analysis on alternative investments. He is also both a CFA® and CAIA® charterholder.

THe TeAM

Jeffrey frederick, CfA®, CAIA®Jeff Frederick is an executive director and senior analyst within the Global Investment Manager Analysis team at Morgan Stanley Wealth Management. He cur-rently focuses on due diligence for illiquid strategies, which includes private equity, private debt and real estate. He is also both a CFA® and CAIA® charterholder.

eric Kim Eric Kim is an executive director and senior analyst within the Global Investment Manager Analysis team at Morgan Stanley Wealth Management. He is responsible for analysis, due diligence and vetting external investment managers with a focus on credit, fixed-income and macro strategies.

Thomas LeedsThomas Leeds is an executive director within the Global Invest-ment Manager Analysis team at Morgan Stanley Wealth Manage-ment. He currently manages the team of analysts responsible for evaluating traditional investment products that are offered in investment advisory programs at Morgan Stanley.

Daniel MaccarroneDan Maccarrone is an executive director and investment officer for single manager strategies within the Global Investment Manager Analysis team at Morgan Stanley Wealth Manage-ment. He is responsible for the evaluation and selection of managers and funds across mul-tiple strategies with an emphasis on single-manager funds.

Michelle MorrisMichelle Morris is an executive director and senior analyst within the Global Investment Manager Analysis team at Morgan Stanley Wealth Management. She is responsible for investment due diligence of illiquid investment strategies, including private equity, real estate, private debt and infrastructure.

Matthew RizzoMatthew Rizzo is an executive director and head of investment strategy and content within the Global Investment Manager Analysis team at Morgan Stanley Wealth Management. He is responsible for publishing timely thought-leadership content and for leading analysis and investment-related strategic initiatives within the group.

Drew SofferDrew Soffer is an executive director and provides oversight of the decision-making process across traditional strategies within the Global Investment Manager Analysis team at Morgan Stanley Wealth Management. He is also responsible for the Tactical Opportunities List that implements tactical, opportunistic recommendations intended to enhance investment performance by focusing on the timeliness of investment options given current and projected market conditions.

Laura ThomasLaura Thomas is an executive director and head of operations within the Global Investment Manager Analysis team at Morgan Stanley Wealth Manage-ment. Laura is an investment officer and team leader who currently manages the team of investment analysts focused on evaluation of non-US invest-ment management firms and strategies. She is also responsible for business operations within the team, working closely with various business leaders.

Al Troianello, CfA®Al Troianello is an executive director and investment officer for Multi-Manager Strategies within the Global Investment Manager Analysis team at Morgan Stanley Wealth Manage-ment. He is responsible for investment analysis and manager selection with an emphasis on alternative multi-manager funds. He is also a CFA® charterholder.


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Joanna Berg, CfA®Joanna Berg is a vice president and investment analyst within the Global Investment Manager Analysis team at Morgan Stanley Wealth Management. She is responsible for manager selection and due diligence across illiquid strategies, including private equity and private real estate. She is also a CFA® charterholder.

THe TeAM (Continued)

Diptee BorkarDiptee Borkar is a vice president and senior investment analyst within the Global Investment Manager Analysis team at Morgan Stanley Wealth Manage-ment. She is currently responsible for analyzing and evaluating value equity investment products.

Jeffrey ChaprackiJeffrey Chapracki is a vice president and senior investment analyst within the Global Investment Manager Analysis team at Morgan Stanley Wealth Management. He currently focuses on the analysis and evaluation of US growth equity investment managers. Previously, he covered domestic equity managers across a variety of investment styles.

Mary Beth Cheloha, CfA®Mary Beth Cheloha is a vice president and investment officer within the Global Investment Manager Analysis team. Mary Beth oversees the investment analysts responsible for evaluating fixed income, real estate, commodity, natural resource, quantitative, and tactical asset allocation investment products. She is also a CFA® charterholder.

Jose CruzJose (Jay) Cruz is a vice president and senior investment analyst within the Global Investment Manager Analysis team at Morgan Stanley Wealth Management. He is currently responsible for reviewing and evaluating core equity, growth equity and convertible bond strategies for investment advisory programs.

Daniel DeBonisDaniel DeBonis is a vice president and a member of the Global Investment Manager Analytics team at Morgan Stanley Wealth Management. He currently focuses on hedge fund manager and alternative mutual fund coverage for both single- and multi-manager strategies.

Rafique DeCastro Rafique DeCastro is a vice president and investment analyst within the Global Investment Manager Analysis team at Morgan Stanley Wealth Management. He is currently responsible for manager selection and due diligence across illiquid strategies, including private equity and private real estate.

Michael Delli PaoliMichael Delli Paoli is a vice president within the Global Investment Manager Analysis team at Morgan Stanley Wealth Management. Michael is an investment officer and team leader focused on domestic growth equity investment products. He is also responsible for the analysis and evaluation of energy infrastructure/Master Limited Partnership (MLP) and other alternative investments.

Keith fortmillerKeith Fortmiller is a vice president and operational due diligence analyst within the Global Investment Manager Analysis team at Morgan Stanley Wealth Management. He is currently responsible for as-sisting in the operational due diligence analysis of alternative investments.

niloy GangulyNiloy Ganguly is a vice president and senior manager investment analyst within the Global Investment Manager Analysis team at Morgan Stanley Wealth Management. He is responsible for the analysis and evaluation of liquid alternative managers across multiple asset classes. Additionally, he is responsible for the review of exchange-traded funds.


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vipul GautamVipul Gautam is a vice president and senior investment analyst within the Global Investment Manager Analysis team at Morgan Stanley Wealth Management. He currently covers Investing with Impact investments.


Aloke GhoshAloke Ghosh is a vice president and operational analyst within the Global Investment Manager Analysis team at Morgan Stanley Wealth Management. He is currently responsible for operational due diligence for the alternative investments platform for both new and existing products.

Brian Glanz Brian Glanz is vice president and senior investment analyst within the Global Investment Manager Analysis team at Morgan Stanley Wealth Management. He is currently responsible for the analysis and evaluation of separately managed accounts and mutual funds that utilize quantitative, commodity-related, REIT, or tactical asset allocation investment strategies.

Charles HahnCharles Hahn is a vice president and investment analyst within the Global Investment Manager Analysis team at Morgan Stanley Wealth Management. He is currently focused on evaluating investment strategies and products for Global Investment Solutions (GIS), a firm-wide initiative that seeks to harness the collective resources of Morgan Stanley to deliver innovative investment programs to our wealth management clients.

Bill BridgeBill Bridge is a vice president and senior investment analyst within the Global Investment Manager Analysis team at Morgan Stanley Wealth Management. He currently focuses on the review and evaluation of growth equity strategies. He is a CIMA® certification holder.

Rafael Kilayko, Jr.Rafael Kilayko is a vice president and investment analyst within the Global Investment Manager Analysis team at Morgan Stanley Wealth Management. He currently focuses on reviewing and evaluating fixed income investment managers.

Anita KharwadkarAnita Kharwadkar is a vice president and senior investment analyst within the Global Investment Manager Analysis team at Morgan Stanley Wealth Management. She currently focuses on the analysis and evaluation of asset management firms and funds in international and emerging markets strategies.

Douglas KimDouglas Kim is an assistant vice president and due diligence analyst within the Global Investment Manager Analysis team at Morgan Stanley Wealth Management. He is currently responsible for analysis and due diligence for fund of fund hedge funds and liquid alternative products.

Steven Lee, CfA®Steve Lee is a vice president and senior investment analyst within the Global Investment Manager Analysis team at Morgan Stanley Wealth Management. He currently focuses on reviewing and evaluating fixed income managers. He is also a CFA® charterholder.

Susan McDowell, CPA®Susan McDowell is a vice president and senior analyst within the Global Investment Manager Analysis team at Morgan Stanley Wealth Management. She currently focuses on the evaluation of fixed income strategies and products. She is also a CPA®.


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Jeffrey MekulskiJeffrey Mekulski is a vice president and senior investment analyst within the Global Investment Manager Analysis team at Morgan Stanley Wealth Management. He currently focuses on the review and evaluation of US value equity investment strategies.


John MeyerJohn Meyer is a vice president and senior investment analyst within the Global Investment Manager Analysis team at Morgan Stanley Wealth Management. He currently focuses on the analysis and evaluation of US growth equity investment managers.

Anthony natale, CfA®Anthony Natale is a vice president within the Global Investment Manager Analysis team at Morgan Stanley Wealth Management. Anthony is an investment officer and team leader who currently manages the team of investment analysts focused on value equity investment products. He is also a CFA® charterholder.

Adriane n. Parris, CfA®, CAIA®Adriane Parris is a vice president and senior investment analyst within the Global Investment Manager Analysis team at Morgan Stanley Wealth Management. She specializes in the evaluation and selection of non-US equity strategies. She is also both a CFA® and CAIA® charterholder.

olga Pujara, CfA®Olga Pujara is a vice president and senior investment analyst within the Global Investment Manager Analysis team at Morgan Stanley Wealth Manage-ment. She currently focuses on the evaluation of investment managers and funds for fixed income strategies. She is also a CFA® charterholder.

Ann Marie RoganAnn Marie Rogan is a vice president and senior investment analyst within the Global Investment Manager Analysis team at Morgan Stanley Wealth Management. She is currently responsible for reviewing and evaluating US core equity and convertible managers. Previously, she covered various asset classes including international/global fixed income and global equity strategies.

William RyanWilliam Ryan is a vice president and investment analyst within the Global Investment Manager Analysis team at Morgan Stanley Wealth Management. He currently focuses on the review and evaluation of international equity strategies.

Adnan Sabih, CAIA®Adnan Sabih is a vice president within the Global Investment Manager Analysis team at Morgan Stanley Wealth Management. He is currently a manager analyst and is responsible for analysis and due diligence for alternative investments strategies. He is also a CAIA® charterholder.

Christina ShortsChristina Shorts is a vice president within the Global Investment Manager Analysis team at Morgan Stanley Wealth Management. She currently manages communications and is responsible for disseminating manager analysis materials throughout Morgan Stanley. Previously, she held various roles within the manager analysis and relationship management teams.

Jeffrey Stein, CfA®Jeffrey Stein is a vice president and senior investment analyst within the Global Investment Manager Analysis team at Morgan Stanley Wealth Management. He currently focuses on the evaluation of investment managers and funds for the stable value asset class. He is a CFA® charterholder.


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Michael Suchanick, CIMA®Michael Suchanick is a vice president and senior investment analyst within the Global Investment Manager Analysis team at Morgan Stanley Wealth Management. He currently focuses on the evaluation of international equity strategies. He also holds a CIMA® certification.


James SzestowickiJames Szestowicki is a vice president and senior investment analyst within the Global Investment Manager Analysis team at Morgan Stanley Wealth Management. He currently focuses on fixed-income managers.

Lori villatoroLori Villatoro is vice president and senior investment analyst within the Global Investment Manager Analysis team at Morgan Stanley Wealth Management. She is currently responsible for the analysis and evaluation of US value equity strategies.


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This material was not prepared by the research departments of Morgan Stanley & Co. LLC or Morgan Stanley Smith Barney LLC.

The sole purpose of this material is to inform, and it in no way is intended to be an offer or solicitation to purchase or sell any security, other investment or service, or to attract any funds or deposits. Investments mentioned may not be suitable for all clients. Any product discussed herein may be purchased only after a client has carefully reviewed the offering memorandum and executed the subscription documents. Morgan Stanley Wealth Management has not considered the actual or desired investment objectives, goals, strategies, guidelines, or factual circumstances of any investor in any fund(s). Before making any investment, each investor should carefully consider the risks associated with the investment, as discussed in the applicable offering memorandum, and make a determination based upon their own particular circumstances, that the investment is consistent with their investment objectives and risk tolerance.

Sources of DataInformation in this material in this report has been obtained from sources that we believe to be reliable, but we do not guarantee its accuracy, completeness or timeliness.

Third-party data providers make no warranties or representations relating to the accuracy, completeness or timeliness of the data they provide and are not liable for any damages relating to this data.

Asset Class and other RisksInvesting in stocks, mutual funds and exchange-traded funds (“eTfs”) entails the risks of market volatility. The value of all types of investments may increase or decrease over varying time periods.

Alternative investments often are speculative and include a high degree of risk. Investors could lose all or a substantial amount of their investment. Alternative investments are suitable only for eligible, long-term investors who are willing to forgo liquidity and put capital at risk for an indefinite period of time. They may be highly illiquid and can engage in leverage and other speculative practices that may increase the volatility and risk of loss. Alternative Investments typically have higher fees than traditional investments. Investors should carefully review and consider potential risks before investing. Certain of these risks may include but are not limited to:

• 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 a fund;

• 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.

Interests in alternative investment products are offered pursuant to the terms of the applicable offering memorandum, are distributed by Morgan Stanley Smith Barney LLC and certain of its affiliates, and (1) are not FDIC-insured, (2) are not deposits or other obligations of Morgan Stanley or any of its affiliates, (3) are not guaranteed by Morgan Stanley and its affiliates, and (4) involve investment risks, including possible loss of principal. Morgan Stanley Smith Barney LLC is a registered broker-dealer, not a bank.

The Securities Investor Protection Corporation (“SIPC”) provides certain protection for customers’ cash and securities in the event of a brokerage firm’s bankruptcy, other financial difficulties, or if customers’ assets are missing. SIPC insurance does not apply to precious metals, other commodities, or traditional alternative investments.

Diversification does not assure a profit or protect against loss in a declining market. Indexes are unmanaged, and it is not possible to invest directly in an index. Past performance is no guarantee of future results. Actual results may vary.

Global Investment Manager Analysis (GIMA) defines Adverse Active Alpha (AAA) as follows:Adverse refers to the demonstrated ability to outperform in a variety of market environments and when conditions were difficult for active manager relative performance. “Difficult” periods were times when active management did not perform well relative to the index, as opposed to down market periods. At various times, active management has experienced difficult relative performance periods in up, down, and flat markets. We developed a set of factors to help discern which periods were more difficult for active managers that we utilize to identify managers that were able to overcome these headwinds and outperformed in the face of adversity.

Important Disclosures Morgan Stanley Smith Barney LLC (“Morgan Stanley Wealth Management”)

Active refers to managers with high active share – i.e., managers whose portfolios looked different from the index – and had moderate to low tracking error. In this way, the ranking seeks to find managers that were active, but not taking outsized factor bets, such as large sector or industry bets and that had some degree of style consistency. The combination of high active share and low tracking error is fairly uncommon among active managers, but we believe these traits may point toward managers with strong stock picking skills.

Alpha refers to the demonstrated ability to add value relative to an index and/or peers. Back tests indicate that highly ranked managers as a group outperformed the index and style peer group over subsequent periods and relative to active share alone. By combining the “adverse” component with the “active” component, we believe we increase the odds of finding some of the most proficient stock pickers.

Important Considerations Regarding the Adverse Active Alpha Ranking Process:Global Investment Manager Analysis, formerly Consulting Group Investment Advisor Research (CG IAR), provides comprehensive manager analysis for Morgan Stanley’s investment advisory platforms on a wide range of investment products, including separately managed accounts, mutual funds and exchange-traded funds in the equity, fixed income and alternative investment categories.

In our view, the Adverse Active Alpha manager ranking model is an important part of evaluating managers for consideration. However, we do recognize that AAA cannot, in and of itself, tell us which managers’ strategies to invest in or when to buy or sell the strategies. While highly ranked managers historically performed well as a group in our analysis, past performance is not a guarantee of future results for any manager or strategy. Index returns assume reinvestment of dividends and, unlike fund or strategy returns, do not reflect any fees or expenses. Indices are unmanaged and not available for direct investment.

It is also important to keep in mind that just because a manager has high active share, a portfolio that looks different than the index (benchmark) doesn’t necessarily mean the portfolio had or will have better performance than the index. Being different than the index does not consider factors such as: the timeliness of data provided by the manager, the appropriateness of the benchmark used for comparison to the portfolio, the relevancy

of the period(s) being analyzed between the portfolio and the benchmark, knowing the difference between the securities and their concentration in a manager’s portfolio vs. the benchmark and the potential that the data provided by the manager looked significantly different in periods before and after the performance snapshot(s) used for analysis. While the preceding considerations are not part of the AAA ranking model, GIMA’s strives to evaluate other material and forward looking factors as part of the overall manager evaluation process. Factors such as but not limited to manager turnover and changes to investment process can partially or fully negate a positive Adverse Active Alpha ranking. Additionally, highly ranked managers can have differing risk profiles that might not be suitable for all investors. For more information on AAA, please see the Adverse Active Alpha Ranking Model and Selecting Managers with Adverse Active Alpha whitepapers. The whitepaper are available from your Financial Advisor or Private Wealth Advisor.

ADVERSE ACTIVE ALPHA is a registered service mark of Morgan Stanley and/or its affiliates. U.S. Pat. No. 8,756,098 applies to the Adverse Active Alpha system and/or methodology.

The Global Investment Manager Analysis (GIMA) Services only Apply to Certain Investment Advisory ProgramsGIMA evaluates certain investment products for the purposes of some – but not all – of Morgan Stanley Smith Barney LLC’s investment advisory programs (as described in more detail in the applicable Form ADV Disclosure Document for Morgan Stanley Wealth Management). If you do not invest through one of these investment advisory programs, Morgan Stanley Wealth Management is not obligated to provide you notice of any GIMA status changes even though it may give notice to clients in other programs.

focus List, Approved List and Tactical opportunities List; Watch PolicyGIMA uses two methods to evaluate investment products in applicable advisory programs: Focus (and investment products meeting this standard are described as being on the Focus List) and Approved (and investment products meeting this standard are described as being on the Approved List). In general, Focus entails a more thorough evaluation of an investment product than Approved. Sometimes an investment product may be evaluated using the Focus List process but then placed on the Approved List instead of the Focus List.

Important Disclosures Morgan Stanley Smith Barney LLC (“Morgan Stanley Wealth Management”)

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(Continued)

© 2015 Morgan Stanley Smith Barney LLC. Member SIPC. CRC 1137192 06/15 v1 CS 8162503 06/15

Investment products may move from the Focus List to the Approved List, or vice versa. GIMA may also determine that an investment product no longer meets the criteria under either process and will no longer be recommended in investment advisory programs (in which case the investment product is given a “Not Approved” status).

GIMA has a “Watch” policy and may describe a Focus List or Approved List investment product as being on “Watch” if GIMA identifies specific areas that (a) merit further evaluation by GIMA and (b) may, but are not certain to, result in the investment product becoming “Not Approved.” The Watch period depends on the length of time needed for GIMA to conduct its evaluation and for the investment manager or fund to address any concerns. GIMA may, but is not obligated to, note the Watch status in this report with a “W” or “Watch” next to the “Status” on the cover page.

Certain investment products on either the Focus List or Approved List may also be recommended for the Tactical Opportunities List based in part on tactical opportunities existing at a given time. The investment products on the Tactical Opportunities List change over time.

For more information on the Focus List, Approved List, Tactical Opportunities List and Watch processes, please see the applicable Form ADV Disclosure Document for Morgan Stanley Wealth Management. Your Financial Advisor or Private Wealth Advisor can also provide upon request a copy of a publication entitled “Manager Selection Process.”

Strategy May Be Available as a Separately Managed Account or Mutual fundStrategies are sometimes available in Morgan Stanley Wealth Management investment advisory programs both in the form of a separately managed account (“SMA”) and a mutual fund. These may have different expenses and investment minimums. Your Financial Advisor or Private Wealth Advisor can provide more information on whether any particular strategy is available in more than one form in a particular investment advisory program.

The Securities Investor Protection Corporation (“SIPC”) provides certain protection for customer’s cash and securities in the event of a brokerage firm’s bankruptcy, other financial difficulties, or if customers’ assets are missing.

In most Morgan Stanley Wealth Management investment advisory accounts, fees are deducted quarterly and have a compounding effect on performance. For example, on an advisory account with a 3% annual fee, if the gross annual performance is 6.00%, the compounding effect of the fees will result in a net performance of approximately 3.93% after one year, 12.25% after three years, and 21.23% after five years.

Conflicts of InterestGIMA’s goal is to provide professional, objective evaluations in support of the Morgan Stanley Wealth Management investment advisory programs. We have policies and procedures to help us meet this goal. However, our business is subject to various conflicts of interest. For example, ideas and suggestions for which investment products should be evaluated by GIMA come from a variety of sources, including our Morgan Stanley Wealth Management Financial Advisors and their direct or indirect managers, and other business persons within Morgan Stanley Wealth Management or its affiliates. Such persons may have an ongoing business relationship with certain investment managers or mutual fund companies whereby they, Morgan Stanley Wealth Management or its affiliates receive compensation from, or otherwise related to, those investment managers or mutual funds. For example, a Financial Advisor may suggest that GIMA evaluates an investment manager or fund in which a portion of his or her clients’ assets are already invested. While such a recommendation is permissible, GIMA is responsible for the opinions expressed by GIMA. See the conflicts of interest section in the applicable Form ADV Disclosure Document for Morgan Stanley Wealth Management for a discussion of other types of conflicts that may be relevant to GIMA’s evaluation of managers and funds. In addition, Morgan Stanley Wealth Management, MS&Co., managers and their affiliates provide a variety of services (including research, brokerage, asset management, trading, lending and investment banking services) for each other and for various clients, including issuers of securities that may be recommended for purchase or sale by clients or are otherwise held in client accounts, and managers in various advisory programs. Morgan Stanley Wealth Management, managers, MS&Co., and their affiliates receive compensation and fees in connection with these services. Morgan Stanley Wealth Management believes that the nature and range of clients to which such services are rendered is such that it would be inadvisable to exclude categorically all of these companies from an account.

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