T h e co r p o r at e e x ec u t i v e
As a corporate executive, you fulfill responsibilities to a broad range of constituencies: your colleagues, employees, board of directors, and most importantly, your shareholders for whom you are charged with creating wealth. Faced with the demands and expectations of others, your own finances, which probably have become increasingly complex at each stage of your career, often take second place. As a result, you are likely spending far more time reviewing your company s quarterly performance than your personal financial strategy. Morgan Stanley Private Wealth Management focuses on the needs of the world s most prominent executives and their families. We bring together a unique combination of experience, expertise and insight to develop tailored solutions that address both your financial needs and family goals. You also gain access to the intellectual capital and financial resources of one of the world s preeminent financial institutions, delivered with the highest level of personal service and attention. 1
The Private Wealth Management Relationship A relationship with Morgan Stanley Private Wealth Management is organized to be broader in scope and much higher in sophistication than relationships you may have with other institutions. It is based on a concept familiar to almost all successful executives: surrounding yourself with great talent, professionals who seek out and create opportunity and who focus on helping you achieve your objectives. Just as you delegate responsibility to carefully chosen managers and highly qualified teams within your company, you can benefit from a similar approach to the administration of your personal finances and investments. 2
The role of your Private Wealth Advisor At Morgan Stanley Private Wealth Management, your relationship will be overseen by a senior Morgan Stanley professional your Private Wealth Advisor. Just as a corporate CFO has thorough knowledge of a company s opportunities, risks, capital structure and financial objectives, your Private Wealth Advisor begins by developing a similar understanding of you and your family. Translating this knowledge into strategy and process, your Private Wealth Advisor takes responsibility for helping you manage not only your investments but also your balance sheet and liquidity needs, analyzing and assessing your financial status and investment performance on an ongoing basis and reporting to you regularly. A team of specialists to simplify complexity At the beginning of your relationship, your Private Wealth Advisor will assess the specialized skills required to address your needs and objectives and assemble a team to focus on your goals. Drawn from the global resources of the Morgan Stanley Franchise and in coordination with your outside advisors, your team is likely to include specialists in executive compensation and securities law, risk management, customized liquidity strategies and income and estate taxation. As your needs evolve, your team may encompass specialists in investment banking, corporate finance, capital markets transactions and venture investing. The flexibility and focus of a family office In addition to addressing the purely financial and investment related aspects of your life, your Private Wealth Advisor, supported by a highly qualified team, can help address family dynamics and personal concerns. Depending on your needs, we can help you coordinate the many dimensions of your personal finances, manage your family balance sheet and provide financial flexibility and liquidity. Of equal importance to many families, specialized professionals can assist you with potentially complex issues related to values and legacy: family mission development and governance, wealth transfer planning, trust guidance and meeting multigenerational charitable goals. 3
Managing Equity Concentration For many executives, financial success is closely tied to the company s success, and rewards are often in the form of restricted and control stock and stock options. The result: a concentrated stock position representing a significant portion of personal net worth and a high level of complexity. Helping executives, Section 16 officers, and corporate directors balance risk and return objectives with tax and regulatory concerns was a principal reason for the creation of Morgan Stanley Private Wealth Management more than three decades ago. Addressing complexity. In addition to cash compensation, you may have received a significant amount of stock in your company through restricted stock and option awards and you may have accumulated more through employee stock purchase programs. The value of your portfolio may be substantial, but your holdings likely tie your future financial security to the success of your company and can represent significant risk. Moreover, if you participate in an unfunded deferred-compensation program, you may be essentially an unsecured creditor of your company. Your Private Wealth Advisor can help you enhance security and liquidity through tailoring, hedging and diversification strategies, which are consistent with your insider status and corporate disclosure requirements and take into account any potential impact on investor relations. Strategies for managing concentrated equities. Managing a concentrated equity position can be accomplished in several ways, each of which must be evaluated in light of your financial objectives, overall risk profile, tax situation and time horizon. Because required disclosure of any sales or hedges could send inaccurate and unintended signals to your board or the public, the decision on how to manage your position whether through sale 4
and diversification, custom hedging and monetization strategies, Rule 144 sales or a 10b5-1 plan will require careful analysis and the balancing of multiple factors. Your Morgan Stanley Private Wealth Management team, in coordination with corporate counsel, can help you weigh your alternatives and then implement the strategy you elect. Tailored employee stock options strategies. If you have been granted employee stock options as part of your compensation package, you will eventually be faced with the decision of how and when to exercise these options. The rules governing the taxation, exercise and transfer of non-qualified stock options (NQSOs) and incentive stock options (ISOs) differ significantly. Working with analysts and strategists within the Morgan Stanley Franchise, your Private Wealth Advisor can help value your options and analyze the potential financial and tax impact of multiple strategies, including liquidation exercise, hold and leveraged hold and leveraged exercise approaches. The value of your portfolio may be substantial, but your holdings likely tie your future financial security to the success of your company, representing a significant balance of risk and reward. 5
managing a concentrated position Maintain Long Exposure Stock holdings Valuation Risk Analysis Asset Allocation Systematic Selling Over Time Block Sale Gifting Exchange Fund 10b5-1 Rule 144 Philanthropy Trust Accounts Ratio Call Spread Derivative-Based/ Premium Sales Reduce Exposure Planned future sale 6
Enhance Yield Potential future sale Covered Call Writing 1 Hedge Exposure Potential future sale Stock Position Put Purchases 1 Zero Premium Collar Prepaid Forward 7
Liquidity and Your Personal Balance Sheet E xecutives may find themselves with a substantial net worth on paper that can be difficult to temporarily access and enjoy because it is effectively illiquid. Your Private Wealth Advisor has extensive experience creating the balance sheet flexibility you may need to pursue personal and family goals. Through your relationship, you gain access to a broad and sophisticated lending platform with resources that can be tailored to your unique requirements. Optimized liquidity through securities-based lending. Your qualifying securities in your brokerage account may offer substantial flexibility in leveraging these assets for income and cash flow purposes, portfolio diversification or even intergenerational wealth transfer or charitable goals through our non-purpose or purpose loan products. We can help you structure securities-based lending solutions using these securities within the context of your overall wealth management strategy and in compliance with trading regulations. Customized financing for real estate and personal acquisitions. Because of your success, you are likely to have greater flexibility in borrowing than you may expect. Backed by a skilled lending team, your Private Wealth Advisor will take a strategic approach to lending that allows you to take advantage of significant opportunities as they arise. Tailored lending solutions, available through Morgan Stanley Private Bank, National Association, can leverage marketable securities, investor real estate and private business assets. Your Private Wealth Advisor can provide access to fine art, aircraft and yacht financing through preferred third-party providers. 2 Managing balance sheet cash. High levels of liquidity also require careful management in order to avoid concentrating risk in one or more financial institutions. Morgan Stanley Private Bank, National Association can tailor a program that carefully balances safety, timing and yield. Your Private Wealth Advisor will structure, monitor and report on your overall cash position across multiple accounts and entities. 8
Balance sheet and liability management Access to Banking & Lending Capabilities3 Tailored Lending 6 Securities-Based Lending 4 Purpose (margin) Loans Non-Purpose Loans Collateral Marketable Securities, Investor and Owner-Occupied Commercial Real Estate, Unsecured Referrals to external providers with preferred programs: Aircraft, Yacht / RV, Fine Art Home Loans 5 Products Conforming, Jumbo, ARMS, HELOCs Referrals to internal and external providers with preferred programs 9
Comprehensive Family Office Capabilities O ne of the most significant benefits of a relationship with Morgan Stanley Private Wealth Management is the increased control, organization and discipline you can achieve over personal and family finances. Through your Private Wealth Advisor, you are connected to a comprehensive suite of family office services a unique combination of resources and experience. A focus on detail. While your net worth has been increasing and your personal balance sheet growing more complex, the demands on your time have made it more difficult to manage the details of your personal financial life. Your Private Wealth Advisor can undertake many of these tasks for you, from overseeing your personal financial affairs to cash flow planning to maintaining records of your financial transactions. For example, specialists can work with your corporate counsel to help ensure compliance with personal reporting requirements for stock sales. At tax time, we can assemble important documents like your Form 1099s and work with your accountant to answer key questions that will shape your tax return. Strategic and focused resources. We begin with careful analysis of your finances and objectives, integrating and reviewing tax, trust and legacy planning strategies that could affect short-term returns and long-term security. You can access sophisticated banking and lending capabilities to meet immediate needs as well as to implement liquidity and other strategies. Specialists in family governance and dynamics as well as philanthropy can help address issues related to differing values and priorities, in addition to charitable goals. Educational programs and events can connect you not only with the resources of the firm but with other clients with similar goals. And you gain access to one of the world s most complete private health care advisory services, a valuable resource for global travelers from a third-party provider. 2 A complement of concierge services. Your Private Wealth Advisor can also simplify access to the amenities of success, from entertainment to travel to more complex needs, such as shared ownership of a private jet or managing residences. There is a wide spectrum of services available to you and your family, and a program can be created to precisely meet your needs, schedules and expectations. 10
Comprehensive family office capabilities 1 Wealth strategies group By providing deep analytical support, our Wealth Strategies Group helps your Private Wealth Advisor develop an investment strategy that is personalized for you based on your unique situation. The group supports three critical facets of the process: strategic asset allocation, integrated and coordinated across legal entities; tactical asset allocation that results in short-term adjustments in response to market risks and opportunities; and portfolio construction. 2 Tax, trust & estate planning 7 Our professionals take a collaborative approach to income tax and estate planning that incorporates the knowledge and capabilities of your current legal and tax advisors. The result is a fully integrated analysis of your balance sheet, estate plan and investment strategy one that can result in a more integrated approach to your long-term needs and goals while enhancing after-tax investment returns. 3 Access to banking & lending 3 Your Private Wealth Advisor can help develop sophisticated approaches to cash flow and liquidity management while working to enhance yield on shortterm assets. In addition, you can work with experienced professionals with the skills and resources to customize a broad range of credit structures: personal real estate loans; tailored personal loans, including unsecured loans and credit collateralized by marketable securities; owner-occupied commercial real estate and complex assets. 11
Comprehensive family office capabilities 5 4 Family governance & dynamics Family members, particularly those in multigenerational families, may have divergent points of view and differing priorities. Specialists are available to you to help address sensitive family issues, facilitate communication, manage conflict and achieve a shared sense of common direction. These professionals can help you draft a family mission and shape a governance structure, work through legacy and wealth transfer issues, implement wealth preservation strategies and manage the complexities of business succession. Philanthropic services Collaborating with your legal and tax advisors, we can help integrate philanthropy into your wealth management plan, enhancing the impact of giving and its benefits to your family. Our professionals work at each stage of philanthropic activity, from focusing your interests and defining a mission, to translating your interests and values into effective grantmaking. You can also work with specialists in the creation, operation and governance of private foundations, and we can support you with comprehensive foundation management services. 12
6 Lifestyle advisory 2 These capabilities are designed to enhance your lifestyle and the enjoyment of leisure and personal opportunities available to you. They range from yacht and aircraft charter resources, luxury travel companies and ticket agents for special events, to practical but complex concerns such as services to meet administration and household staffing requirements of multiple residences. In many cases, a single phone call is all it takes to gain admission to a sold out entertainment or sports event or to book a unique travel experience. 7 Educational programs To help broaden your access to our firm s expertise and resources and to create opportunities to meet with and share experience with other Private Wealth Management clients, we offer an array of programs and events. These include family legacy programs and programs for the next generation, women s retreats, family office forums and senior management roundtables. 8 Private health care advisory 8 PinnacleCare Private Health Care Advisory Services are designed to help ensure access to objective information, expert consultation and centers of excellence on a global basis. Available 24/7, professionals can help coordinate resources for you and your family wherever you are in the world, guiding you to the care you need and providing updated medical histories to caregivers to help facilitate treatment. 13
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. Private Wealth Advisor Greene Family M any executives believe the most valuable legacy they can leave to their children is their drive for accomplishment. Specialists at Morgan Stanley Private Wealth Management can work with you and your attorneys to ensure that your estate plan is aligned with your values and your aspirations for the next generation. Giving back. Philanthropic giving can be one of the most satisfying aspects of success as well as a demonstration of your personal values. Working with our charitable giving specialists, you can take a strategic and disciplined approach to philanthropy by developing a program that incorporates the most appropriate charitable vehicles to achieve your objectives. Whether your plan makes use of charitable trusts or you decide to focus your giving through a private foundation that involves the next generation in management and decision making, we can help define and implement your vision. A holistic approach. Legacy planning is not confined to what happens to your assets and estate. It can also involve the strengthening of family bonds and the focusing of family goals today. Your Private Wealth Advisor can introduce you to Morgan Stanley professionals with extensive experience in the dynamics of successful families specialists who can guide you through the creation of a family mission and family governance structure and help conduct family meetings. Our ability to help address the non-financial issues of legacy planning and wealth transfer can be precisely focused on your objectives and the needs of your family. Greene Family Attorney and CPA 14
Defining your legacy Advisor Family Attorney and CPA Family Entity Tax Entity Household 1 2 3 4 5 Edward greene (husband) Elizabeth greene (wife) Edward greene, jr. (son) Greene family estate planning vehicles Greene family charitable interests Personal Personal Personal GRAT Foundation Greene Family LP 2% own Greene Family LP 2% own Retirement Family Trust Charitable Trust Retirement Retirement Life Insurance Trust MSSB GIFT *For illustrative purposes only 15
Aligning Our Resources With Evolving Needs A relationship with Morgan Stanley Private Wealth Management is both comprehensive and dynamic. Because your Private Wealth Advisor helps you manage and tackle the priorities of your personal financial life, we strive to anticipate your needs, refine your strategy and realign your assets to keep pace with changes in your career and your life. A process defined by your needs. Each client situation is unique. The process shown here outlines one shape that your relationship can take. Your Private Wealth Advisor will work closely with you to tailor and refine this process with an eye to your specific needs and objectives. Our goal is to combine our understanding of the global financial marketplace with insight into your financial needs and situation. The financial world changes continually and families redefine themselves over generations. Our approach enables your Private Wealth Advisor working in conjunction with your legal and tax advisors to realign your financial strategy as needed. Worldwide resources for global families. Morgan Stanley understands the world of interconnected opportunities, borderless capital flows and C-suite personal networks that span companies and continents. Today, many executives conduct business in, and their families frequently inhabit, multiple geographies simultaneously. As a leading financial institution, Morgan Stanley is prepared to meet your most complex and globally dispersed business and personal financial needs. Access to the resources of Morgan Stanley. Through your relationship, you have access to the strategists, investment bankers, market makers and traders of the Morgan Stanley Franchise. Your Private Wealth Advisor can arrange for you to work directly with other senior Morgan Stanley professionals who are relevant to your strategies and important to your ongoing success. 16
Customized approach 1 Discovery process We begin by learning about you, your family and your financial complexities. What we learn helps us to formulate specific solutions, and of equal importance, it helps us customize the entire relationship to your preferences and requirements. 2 Formulation of tax, trust and estate strategy After reviewing your balance sheet and existing estate plan, we analyze your income and estate tax circumstances, identifying planning techniques most appropriate for your personal and financial objectives. 3 Creation of a customized strategic asset allocation Our goal is to develop an asset allocation that reflects risk, opportunities and taxation across all ownership entities while integrating your investing and estate plans. This asset allocation becomes the basis for a long-term strategy formalized in your investment policy. 4 Integration of tactical asset allocation These short-term adjustments seek to take advantage of opportunities created by temporary market distortions. Before adjustments are made, we carefully analyze the impact of any taxes or trading costs on potential returns. 5 Implementation of a customized investment strategy After comprehensive due diligence and extensive analysis of expected results across a range of market scenarios, investment strategies from our global investment platform are combined to create your portfolio. Our platform includes proven proprietary strategies developed using Morgan Stanley s worldwide resources and expertise as well as open architecture solutions by many of the world s most respected managers. 6 Ongoing assessment of wealth management needs Coordinating with you and your other advisors, we conduct ongoing reviews and comprehensive reporting to ensure that your strategy adapts to changing financial and family needs. 17
Case study: addressing the complexities of executive wealth While your objectives, financial and tax circumstances and investment objectives are unique, this diagram illustrates how we might address the challenges that may be similar to your own. 18
The client Founder and CEO of a public company, 45 years old, married with two children. Financial profile $45 million net worth, 70% in company stock with a history of high volatility. Range of stock in past 8 years has ranged from $12 to $42 with an average volatility measure much higher than the average market volatility over the same time frame $16 million in long shares and through exercise of prior incentive stock options $4 million in incentive stock options (very low strike price; some approaching expiration) and $6 million in restricted stock Objectives Purchase new primary residence Explore purchase of vacation home Diversify concentrated position Refine wealth transfer and estate plan, including philanthropic component Simplify life $5.5 million non-qualified stock options (very low strike price; some approaching expiration) *The situation portrayed is not based on a real client situation and is for illustration purposes only. 19
Our approach Quantified specific objectives, such as target risk levels and liquidity requirements, and worked with Morgan Stanley specialists to execute the plan. Define diversification plan objectives Generate cash for home purchase Manage risk through diversification and provide margin of liquidity Execute diversification plan Established 10b5-1 plan to diversify determined amount of concentrated holdings Solutions for extensive blackout periods Focused on NQSOs comprised largest percentage of equity value included grants approaching expiration Used a graduated selling price strategy Consulted closely with client s CPA to calculate ISO exercise strategy Established conservative asset allocation plan Emphasized assets with low correlation to concentrated equity position Established grantor retained annuity trust (grat) Recommended transferring asset out of estate to children with little or no gift tax obligation Conducted analysis to determine number of shares and duration Worked closely with estate attorney to structure trust Suggested updates to estate plan to better utilize tax allowances Used income from NQSOs to exercise ISOs Carefully exercised throughout year closely monitoring AMT threshold Started clock on ISO shares exercised to attain long-term capital gains status 20
Results Reduced risk of concentrated position while supporting charitable goals and generating liquidity for real estate acquisition. Diversified equity position Reduced overall concentrated exposure Improved liquidity via sales of RSUs ongoing through 10b5-1 plan Avoided AMT tax liability by working in coordination with the tax advisor Achieved advantageous and desired level of concentrated equity holdings (client still bullish) Created sufficient liquidity to establish a conservative, globally diversified investment portfolio Real estate By working with banking and lending partners, we re able to: Create sufficient liquidity for real estate purchase Provide mortgage at competitive rate, with terms to meet anticipated payoff plan Charitable goals Make tax-advantaged gift with low basis shares to charitable trust Next step: Invest in a Donor Advised Fund to pursue future charitable goals and offset large expected taxable income 21
Morgan Stanley Private Wealth Management: Our Promise To You Your corporate responsibilities can make it difficult to focus on what matters most to you: pursuing personal goals and family aspirations, exploring opportunities and living the life you envision. At Morgan Stanley Private Wealth Management, we will help you address the challenges and complexities of wealth so you can accomplish the things in life that are essential to you. We couple three decades of experience exclusively serving the world s most prominent executives, entrepreneurs, families and foundations with the strength and stature of the Morgan Stanley Franchise. Drawing on this experience and insight, and on a deep understanding of you, your family and the dynamics of your financial life, your Private Wealth Advisor will: Manage investments with an unwavering focus on your financial strategy and personal goals Structure your 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 To learn specifically what this may mean to you and your family, please contact your Morgan Stanley Private Wealth Advisor. 24 CS 7524609 04/13
Disclosures 1 Options are not suitable for all investors. Investors should enter into option transactions until they have read and understood the Option Disclosure Document (ODD), titled Characteristics and Risks of Standardized Options. Before engaging in the purchase or sale of options, investors should understand the nature of and extent of their rights and obligations and be aware of the risks involved, including, without limitation, the risks pertaining to the business and financial condition of the issuer of the underlying security or instrument. Options investing, like other forms of investing, involves tax considerations, and transaction costs that can significantly affect the profit and loss of buying and writing options. The transaction costs of options investing primarily of commissions (which are imposed in the opening, closing, exercise and assignment transactions), but may also include exchange fees in particular transactions. Transaction costs are especially significant in option strategies calling for multiple purchase and sales of options, such as multiple leg strategies, including spreads (including rolling), straddles and collars. 2 Products and services are provided by third parties, not Morgan Stanley Smith Barney LLC or its affiliates. 3 Morgan Stanley Smith Barney LLC is a registered broker-dealer, 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. Investments and services offered through Morgan Stanley Private Wealth Management, a division of Morgan Stanley Smith Barney LLC, member SIPC. Banking and credit products and services are provided by Morgan Stanley Private Bank, National Association, Morgan Stanley Bank, N.A. or other affiliates. 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. 4 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: The loan can be called at any time and for any reason. Sufficient collateral must be maintained to support your loan(s) and to take future advances. You may have to deposit additional eligible securities or funds for investment on short notice. 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. Morgan Stanley Smith Barney LLC or its affiliates (the Firm) reserves the right not to fund any advance request due to insufficient collateral or for any other reason. Your collateral maintenance requirements can be increased at any time without notice. Funds drawn may not be used to purchase, carry or trade marketable securities, or to repay margin debt. 5 Home Loans are made by Morgan Stanley Private Bank, National Association, an Equal Housing Lender, or other affiliated lenders, not Morgan Stanley Smith Barney LLC. The loans referenced herein are made by Morgan Stanley Private Bank, National Association. A Morgan Stanley Smith Barney LLC investment relationship does not have to be established or maintained to obtain the products or services offered as part of the Home Loans program. Proceeds from mortgage loan transactions, including initial draws and advances from HELOCs, are not permitted to be used to purchase trade or carry marginable securities, repay margin debt or to make payments on any amounts owed under the Note or HELOC loan agreement. These products may not be available in all states and are limited to US citizens and permanent resident aliens only. Residential loans are not available in Guam, Puerto Rico and the Virgin Islands. Other restrictions may apply. Morgan Stanley Private Bank, National Association underwriting guidelines will apply. Loans are subject to credit application and loan approval. Rates, terms and programs are subject to change without notice. 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. Ohio Mortgage Broker Act Certificate of Registration No. MB.804039.000. Rhode Island Licensed Loan Broker. Mortgage brokers may not make loans. Home Loans are made by Morgan Stanley Private Bank, National Association or other affiliated lenders, not Morgan Stanley Smith Barney LLC.
6 Tailored Lending is provided by Morgan Stanley Private Bank, National Association, an affiliate of Morgan Stanley Smith Barney LLC. All credit facilities are subject to the independent approval of Morgan Stanley Private Bank, National Association. Loans may not be available in all areas. Other restrictions and conditions may apply. Rates, terms and programs are subject to change without notice. Morgan Stanley Private Bank, National Association is an Equal Housing Lender. 7 Tax laws are complex and subject to change. Morgan Stanley Smith Barney LLC, its affiliates and Morgan Stanley Financial Advisors and Private Wealth Advisors do not provide tax or legal advice and are not fiduciaries (under ERISA, the Internal Revenue Code or otherwise) with respect to the services or activities described herein except as otherwise agreed to in writing by Morgan Stanley Smith Barney. This material was not intended or written to be used for the purpose of avoiding tax penalties that may be imposed on the taxpayer. Individuals are urged to consult their tax or legal advisors before establishing a retirement plan or to understand the tax, ERISA and related consequences of any investments made under such plan. 8 Morgan Stanley Smith Barney LLC, its Private Wealth Management division, and its affiliates ( Firm ) do not offer the health care advisory services discussed in this piece. If you request additional information, your Private Wealth Advisor may refer you to one or more third-party health care advisory firm(s) (the Service Provider(s) ). No health care advisory Service Provider(s) is an affiliate of the Firm. Any referral should in no way be considered to be a solicitation by the Firm for business on behalf of any Service Provider(s), or an endorsement of any Service Provider(s) by the Firm. The Firm makes no representations regarding the suitability or otherwise of the products or services provided by any Service Provider(s). There may be additional service providers who offer this service, and you may wish to identify such other providers for comparative purposes. If you choose to contact a health care advisory Service Provider(s), we recommend that you interview such Service Provider(s), do thorough due diligence and make your own independent decision. The Firm will not receive a referral fee for referring you to health care advisory Service Provider(s). The Firm is a diversified financial services company with millions of individual clients, and corporations, institutions and governmental clients in several countries around the world. The Firm routinely enters into a variety of business relationships for which either the Firm receives compensation, or pays for services, and such business relationships may include health care advisory Service Provider(s), employees or agents, or companies affiliated with such Service Provider(s). Additional Important Disclosures Unless otherwise noted, information contained in this document is dated as of August 1, 2011. Morgan Stanley Smith Barney LLC ( Morgan Stanley ) offers a wide array of brokerage and advisory services to its clients, each of which may create a different type of relationship with different obligations to you. Please consult with your Private Wealth Advisor to understand these differences. Life insurance, disability income insurance, and long-term care insurance are offered through Morgan Stanley Smith Barney LLC s licensed insurance agency affiliates. This material does not provide individually tailored investment advice. It has been prepared without regard to the individual financial circumstances and objectives of persons who receive it. The strategies and/or investments discussed in this material may not be suitable for all investors. The appropriateness of a particular investment or strategy will depend on an investor s individual circumstances and objectives. Asset Allocation, Diversification or Rebalancing do not guarantee a profit or protect against a loss. Actual results may vary and past performance is no guarantee of future results. 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: Loss of all or a substantial portion of the investment due to leveraging, shortselling 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 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 Manager risk 2013 Morgan Stanley Private Wealth Management, a division of Morgan Stanley Smith Barney LLC. 2011-PS-3365 CS 7339683 03/13