THE FASCIANO GROUP. Bernard J. Fasciano Senior Vice President Portfolio Management Director, Wealth Advisor Senior Investment Management Consultant

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1 THE FASCIANO GROUP Bernard J. Fasciano Senior Vice President Portfolio Management Director, Wealth Advisor Senior Investment Management Consultant Traci M. Tabback Portfolio Associate Morgan Stanley Smith Barney 1200 E. Ridgewood Ave., 3 rd Fl., E. Wing Ridgewood, NJ Direct Toll Free Fax Investments and services are offered through Morgan Stanley Smith Barney, member SIPC.

2 Table of Contents Section 1 Advisor Overview Section 2 Morgan Stanley Smith Barney Section 3 Asset Allocation Section 4 Your Portfolio Section 5 Current Cash Flow Section 6 Definition of Assets Section 7 Investment Products Section 8 Current Asset Allocation Section 9 Performance Section 10 Change in Asset Value Section 11 Outlook Section 12 Talking Points

3 Morgan Stanley Smith Barney The Fasciano Group Typical Client Profiles: High Net Worth families $1MM account minimum Retirement Plans Focus Services: Portfolio Management Retirement Planning Estate Planning Related Services Our Mission & Philosophy We manage assets for high-net-worth individuals and institutions through a fullservice team approach that helps clients to create, grow and preserve wealth. We use proprietary asset allocation strategies that serve both passive and active investors with a unique blend of investment vehicles that range from ETFs to professionally managed separate accounts, alternative investments for qualified investors, and taxable and tax-free fixed income investments. We believe long-term financial objectives are best achieved through asset allocation and diversification. We manage your wealth and risk in ways that are consistent with your needs, goals and unique investor profile. Our Client Commitment Keep all matters confidential and operate discreetly. Understand each client's investment needs, goals and personal style. Deliver personalized service and first class attention to each client. Offer the best possible long-term investment opportunities. Provide access to the widest array of financial services.

4 Your Wealth Management Team The Fasciano Group Putting Our Experience and Morgan Stanley Smith Barney s Resources to Work for You 1200 E. Ridgewood Avenue 3 rd Floor, E Wing Ridgewood, NJ (800) Toll Free (201) Fax bernard.fasciano@mssb.com traci.tabback@mssb.com (201) (201)

5 Morgan Stanley Smith Barney The Fasciano Group Investment Allocation Approach We use a variety of firm and analytical resources to design customized asset allocation strategies that can help you capitalize on long-term investment plans and short-term market opportunities. Using our experience, we examine macro and micro economic factors that include: corporate earnings, employment data, interest rate environment, and infrastructure activity. We weight equities by capitalization and style. Fixed income selection is based on one s tax rate, the yield curve, interest rates and individual risk profile. The result is a tactical asset allocation model that has been created in the context of the current business cycle. Wealth Management Services Custom portfolio management Professional money manager selection and management Mutual fund portfolios Alternative investments for qualified investors Residential, Commercial and business lending Fixed income and cash management Long term care, life, health and disability insurance Initial Public Offerings, Secondary Offerings and structured products Retirement planning services Estate planning related services College funding

6 Morgan Stanley Smith Barney Team Overview Our Competitive Advantage What separates us from the competition is our intense focus on one priority: putting the client first. Here are a few of the things you can expect: Client Service We provide quick, comprehensive, and responsive service We answer your calls and address your concerns immediately We provide same day turn around for paperwork We ensure you are set up for checking, debit cards and bill payment You can view your account online 24/7 We meet with you on a regular basis to update you on your portfolio We execute wire transfers and electronic funds transfers We work directly with your tax and legal advisors Portfolio Management We discuss the risk tolerance in your portfolio We find out the cash flows and cash needs unique to your situation We analyze your current asset allocation and holdings We design an asset allocation that aligns the portfolio with your goals We create a portfolio that limits the amount of risk to achieve your financial goals We continuously monitor your portfolio and modify it as the markets, business cycle or your circumstances change

7 Team Roles The Fasciano Group BERNARD J. FASCIANO Senior Vice President Portfolio Management Director, Wealth Advisor Senior Investment Management Consultant Focus Roles Works with ultra-high net worth clients and their advisors to customize wealth management solutions Directs asset allocation Directs portfolio and money manager selection Directs financial planning services Conducts portfolio reviews and advises clients on tactical changes TRACI M. TABBACK Portfolio Associate Focus Roles First line for client communication and team collaboration Directs all account administration and day-to-day operations Handles services requests including account transfers and paperwork, distributions, quotes, and tax/legal advisor paperwork coordination Fully licensed; places trades Financial planning is one of many products and services offered by Morgan Stanley Smith Barney. Please consult your Financial Advisor for more information about any of our products and services.

8 The Fasciano Group The Team Approach BERNARD J. FASCIANO Senior Vice President Portfolio Management Director, Wealth Advisor Senior Investment Management Consultant Bernard J. Fasciano, Senior Vice President, Portfolio Management Director, Wealth Advisor, Senior Investment Management Consultant with Morgan Stanley Smith Barney, has over 19 years experience in the financial services industry. Mr. Fasciano won the National Sales Director Award in 2000 and has been ranked among MSSB Advisors in the first quartile consistently from 2004 to the present. Bernard Fasciano s club achievements are as follows: Director s 2002, Rising Star 2004, Pace Setters 2005, Paramus 2006, 2007 and 2008, and President s Mr. Fasciano was also presented with the Culture of Excellence awards from Paramus in 2005 and Ridgewood in In addition to his financial advisor responsibilities, Bernard Fasciano is the Consulting Services Group Coordinator for the Ridgewood, NJ branch. He has served as Vice President of Tanaka Capital Management, Inc. where he was responsible for portfolio management, marketing, and client servicing. Prior to joining Tanaka Capital, Bernard was Associate Vice President/Generalist of Systematic Financial Management, Inc. While at Systematic, he strongly influenced asset growth from $160 million to $1 billion under management. His duties at Systematic included portfolio management (analyzing market and portfolio performance), marketing, client servicing and compliance. While obtaining his undergraduate degree and after graduation, he served as Vice President-Director of Marketing for a large family enterprise. Bernard received a B.S. in Marketing with a concentration in Finance from Rutgers University, Newark College of Arts and Sciences. He is an Investment Consultant through the University of Pennsylvania, The Wharton School, and completed the Certified Financial Planning I and II Designations. Mr. Fasciano is Series 7 (General Securities Representative), Series 9/10 (General Sales Supervisor), Series 66 (Combined Uniform State Law/Investment Advisor), Series 31 (Futures Managed Funds), and Life/Health Insurance Licensed. Since 2007, Bernard Fasciano has been donating his time as a Board Member for Habitat for Humanity of Bergen County

9 The Fasciano Group The Team Approach TRACI M. TABBACK Portfolio Associate Traci Tabback, Portfolio Associate with Morgan Stanley Smith Barney, has over 10 years experience in the financial services industry. Prior to joining Morgan Stanley Smith Barney in 2002, Traci worked for Lilli Financial Services, a private financial consulting practice that focused on mutual fund investing and insurance. Traci earned a B.S. in Business Administration with a concentration in Marketing from Montclair State University. Traci holds the Series 7 license (General Securities Representative), Series 66 (Combined Uniform State Law/Investment Advisor), and Series 31 (Futures Managed Funds), and Life/Health Insurance licensed.

10 Morgan Stanley Smith Barney at a Glance Client TEAM DELIVERY The Fasciano Group Asset Allocation David M. Darst Managing Director Head of Asset Allocation Strategy Resources Investment Consulting Services Jim Tracy Managing Director Head of Consulting Services Banking and Lending Fixed Income Will Howle Managing Director Head of Banking and Lending Alternative Investments Structured Products John H. Dillon Managing Director Fixed Income Portfolio Strategist Jacques Chappuis Managing Director Head of Alternative Investments Joe D Agostino Managing Director Head of Investment Products

11 Client Service 5-Step Process Together, we ll develop a thorough understanding of your financial goals and conduct a Financial Physical, looking at all aspects statement data, equity, debt, disposable income, investment experience, goals and needs. 1 Develop Understanding 2 Conduct Analysis We review and analyze your current financial situation. We examine your current allocation, ask additional questions and develop an executive summary of conclusions. We monitor your accounts, rebalance as needed and update your profile, making changes in step with your life. We customize your personal communication to keep you informed and stay in touch with your needs. 5 Ongoing Commitment 4 Implement and Deliver 3 Tailor and Present Solutions We meet to present recommendations and begin the appropriate planning processes (estate, debt, insurance, etc.) and coordinate as needed with your tax and legal advisors. We draw upon the intellectual strength and global resources of Morgan Stanley Smith Barney to help you create individually tailored investment solutions. We implement your customized asset allocation strategy, fulfill the investment plan and complete the planning-based projects.

12 Bringing Home the World s Best Investment Ideas With a global presence in 32 countries and a powerful understanding of the investing world, we have the intelligence and the resources to take advantage of opportunities wherever they arise.

13 Rankings by Survey Euromoney s 2007 Awards for Excellence Best Investment Bank Spain, Luxembourg and Taiwan Best M&A House in UK, Denmark, Singapore and Hong Kong Best Debt House China, Singapore and Columbia Best Project Finance House in Latin America Asia Hedge Study 2007 Best European Prime Broker Best Global Prime Broker Banker Magazine, 2006 Commodities House of the Year Alpha Magazine Hedge Fund Survey, 2007 #1 Prime Broker Overall #1 in Client Service, Capital Introductions, Business Consulting and Financing Structured Products Daily, 2007 #1 in Structured Investments for Stock, Stock Basket and Equity Index Offerings International Finance Review, 2007 Best Latin American Bond House North American Securitization House of the Year Risk Magazine, 2007 Commodities Derivatives House of the Year Conjuntura Economica, 2007 Banco Morgan Stanley Fastest Growing Financial House in Brazil Investment Dealers Digest Deal of the Year GMAC Cerberus M&A Deal of the Year - HCA Tech Deal of the Year Royal Phillips Global Investor FX Survey, 2007 #1 in Foreign Exchange Overall #1 in Foreign Exchange Service Overall #1 Most Improved; Research - Developed Markets; Advice on Spot; American Real Money Overall; Real Money - Most Improved; Economic Research Greenwich Associates Survey 2006 Ranked #1 in U.S. Equity Analyst Research Share by buy-side U.S. equity analysts 71% of Portfolio Managers cite Morgan Stanley for Superior Citations for Quality of Research Product 2 Euromoney Real Estate 2007 Best Real Estate Equity House Best Real Estate Investment Management US and China Best Real Estate Investment Banking Western Europe, UK, Spain, Ireland,

14 Morgan Stanley Smith Barney at a Glance Global Wealth Management Group Financial Global Wealth Advisor Management Network Investment solutions for individuals, families and businesses. Dedicated Investments Representatives Offices in U.S., Europe, and Asia Sophisticated solutions to high net worth investors Institutional Securities Investment Banking Underwriting and distribution of debt and equity offerings Strategic advisory services Selective financing services Sales, Trading, Financing & Market-Making Stocks, bonds, derivatives, foreign exchange and commodities Prime brokerage & financing Morgan Stanley Smith Barney Capital International Thousands of country, industry and regional equity and fixed income benchmark indices Investment Management World Class affiliated and non-affiliated alternative investments Equity and debt derivatives Separately managed accounts Institutional and private equity opportunities Affiliated and non-affiliated fixed income management Morgan Stanley Smith Barney private real estate investments (MSREF) Credit Services Mortgage lending BusinesScape lending Securities lending Structured lending Collateral based lending Investment banking, research, sales and trading services for domestic and international clients.

15 Historical Analysis: Asset Allocation

16 Assets Take Turn as Top Performers

17 Strategic Asset Allocation I. The Role of Efficient Frontier Analysis in Strategic Allocation Efficient Frontier Analysis is not used to create specific strategic allocations for clients nor is it used to generate expected/forecast risk and return data. Rather, among other purposes, it is used to: Reflect the long term, historical relationship between risk (return volatility) and return of a well diversified portfolio; To provide perspective and to illustrate the range of returns and risk that have been experienced historically for a well diversified portfolio; To provide us with base case or reference points when developing customized strategic allocations for clients; and Reflect specific asset class risk and return relationships within and across asset classes. II. Global Wealth Management Model Portfolios The GWM Model Portfolios do not necessarily fall on the Efficient Frontier because of the risk (i.e., diversification) constraints GWM has assigned to the asset classes. If left totally unconstrained, the optimization would allocate a significantly higher percentage to those asset classes with higher Sharpe ratios, not taking into account qualitative factors such as liquidity.

18 Your Portfolio

19 Possible Ways to Implement Your Asset Allocation Morgan Stanley Smith Barney offers a diverse range of products that include but are not limited to: Individual Stocks and Bonds A large selection of Mutual Fund families Exchange Traded Funds (ETFs) Closed-End Funds Professional Money Managers (Separately Managed Accounts / PPA) Hedge Funds, Fund of Funds, Private Equity, Venture Capital International Investments Structured Products IPOs and Secondary Offerings Managed Futures Commodities Options and Covered Call Trading Note: The above products represent investment vehicles to satisfy a sound asset allocation. Sound asset allocations employ a number of products, which may include some of those listed above, to produce a portfolio aligned with your goals and needs.

20 Manager Selection Criteria Diversification A well constructed portfolio is diversified across a variety of asset classes and managers Long-Term Performance We seek a proven track record of superior performance in their area of expertise. From a universe of equity managers that meet Morgan Stanley Smith Barney s stringent due diligence requirements, we review 10, 7, 5 and 3 year performance, eliminating managers who have not outperformed the S&P 500 over each of these periods. Risk Characteristics Risk can be measured several ways. We look for managers with historical standard deviation (a measure of return volatility risk) below the S&P 500 over 10, 7, 5 and 3 year periods, eliminating managers who do not satisfy this requirement Proprietary Screening & Analysis We then cross-reference our preliminary performance and risk results against our team s proprietary screening tools. This recalculates manager performance, factoring in their risk level, coming up with a risk-adjusted return for every period. Our final statistical screen over-weights long-term vs. short-term risk management abilities and produces a basis for comparison between managers

21 Manager Selection Criteria (continued) Subjective Analysis From our short list of managers, we apply more subjective screening overlays to evaluate risk management through specific market cycles We then compare portfolio compositions with attractive traditional & alternative managers to evaluate blended relative historical risk-adjusted return scenarios Importance of Dividend Yield Dividend paying stocks have historically outperformed, are less volatile and have longer holding periods than non-dividend paying stocks. New tax laws make these stocks even more attractive. Therefore, we seek equity managers who recognize the importance of dividend yield to the long term performance of their portfolios Correlation Analysis & Capture Ratios A critical and often overlooked means of managing risk within a portfolio is correlation. We seek low correlation between assets classes, managers and individual assets. Among non-correlated managers, we seek those with superior capture ratios. The use of hedge funds, managed futures, real estate & international equities is vital to our ability to develop portfolios with low risk profiles Investment Objectives: Each investor has unique investment objectives, tax implications and income needs. We manage portfolios to achieve absolute returns with these needs in mind. We expect our portfolios to outperform the S&P 500 over a 5+ year period with a standard deviation well below that of the S&P 500. Ongoing monitoring & rebalancing is essential to ensure that objectives are being met.

22 The Strengths of an Investment Powerhouse Focused on the Individual Investor Morgan Stanley Smith Barney s global leadership creates powerful investment opportunities across multiple asset classes, often exclusively for our clients. Access to Global Capital Markets Leading Equity & Fixed Income Trading Our extensive experience translates into first-class execution of your trading strategy. Equity Syndicate 18 U.S. IPOs, with over $3 billion in market capitalization, in the first 6 months of Structured Investments We are continually translating our market insights into new ways for you to pursue your specific investment objectives through Structured Investments, which can offer principal protection, leveraged exposure and yield enhancement. Selecting Outstanding Money Managers Comprehensive Array of Managed Accounts Including Traditional Money Managers, Universal Managed Accounts, Financial Advisor Managed Accounts, Mutual Funds and Variable Annuities. Real Estate With over $53 billion in real estate assets under management in 21 cities around the world, we provide global real estate access and expertise to institutional investors, as well as private placement funds for wealthy individuals. Alternative Investments We are expert in diverse forms of non-traditional investment such as Hedge Funds, Hedge Funds of Funds, Managed Futures Funds, International Real Estate Private Partnerships and Diversified Private Equity Funds.

23 Solutions for Immediate and Future Financial Needs We have financial solutions to address everything from your most pressing daily financial needs to multi-generational wealth preservation and transfer goals. Managing Your Day-to-Day Finances We provide a broad range of products and services to help you pay bills, finance purchases, and otherwise manage both sides of your balance sheet, including: Morgan Stanley Smith Barney World and World Elite MasterCard Checking, Direct Deposit and Online Bill Pay Securities-Based Portfolio Loans and Margin 1 Flexible Mortgages and Home Equity Loans 2 Preparing for the Future and Leaving a Legacy We can assist you in securing the financial resources for your retirement lifestyle, while helping you and your family implement effective and efficient strategies to preserve and transfer wealth: Retirement Financial Planning Wealth Planning Wealth Preservation Wealth Transfer and Philanthropy Personal Trusts 1. Available through our affiliate Morgan Stanley Bank. 2. Available through our affiliate Morgan Stanley Credit Corporation.

24 Financial Services for Business Owners Through our broad and deep set of products and services, we have financial solutions to address your professional needs as well as your personal needs. Preparing for the Future of Your Business and Its Employees We have a broad range of products and services to help you manage your cash flow, finance your operations and prepare for the future of your employees. Cash Management Accounts Commercial Lending Corporate Retirement Plans Company Stock Plans Business Succession Plans

25 Tailoring Your Solution: Brokerage Solutions for Individuals

26 Tailoring Your Solution: Brokerage Solutions for Individuals Alternative Investments Alternative investments are speculative and involve a high degree of risk. They are not suitable for all investors. Only investors with substantial assets, the ability to withstand a total loss of their investment, a long investment time horizon, and who do not need immediate liquidity should consider investing in alternative investments. Managed Futures With managed futures funds, professional money managers direct investments in the global currency, interest rate, equity, metals, energy and agricultural markets using futures, forwards and options. Managed futures can provide: Access to approximately 80 global markets Professional portfolio management Portfolio diversification Since 1977, Morgan Stanley Smith Barney has been and continues to be an industry leader and innovator. Depth of technological and professional resources Investment origination Exclusive due diligence process Ongoing research and development Investment and market performance analysis Operations and trading Investment administration Other Alternative Investments Available at Morgan Stanley Smith Barney Hedge Funds are investment vehicles that utilize a broad range of strategies such as selling short, leverage, swaps, arbitrage, and derivatives. Most aim for attractive riskadjusted returns and low to moderate correlation to traditional markets Private Equity Funds contain equity investments acquired in privately negotiated transactions. They tend to take several years to mature and are illiquid Real Estate Funds may invest in equity or mortgages, residential or commercial, domestic or international properties. They may be highly leveraged and require a longer-term investment horizon Exchange Funds enable investors who have significant holdings in a single stock to diversify without incurring upfront capital gains taxes, by letting them exchange their stock for shares in a fund of other contributed securities

27 Tailoring Your Solution: Brokerage Solutions for Individuals Equities Most of Morgan Stanley Smith Barney s equity research is prepared by the Institutional Securities Group, which is separate and distinct from the Global Wealth Management Group. Wide Range of Solutions Stocks: About 2,000 companies covered; fundamental research, plus quantitative and technical analysis Exchange-Traded Funds (1) : Research coverage of nearly 200 index-linked passively managed funds typically with low management fees and tax efficiencies Closed-End Funds (2) : Buy and sell recommendations on 100+ actively managed equity and fixed-income funds Options (3) : A dedicated team of specialists can help eligible investors seeking to generate income and manage risk Public Offerings: One of the leaders in initial and follow-on public stock offerings, we provide our clients unique investment opportunities Structured Products: Highly skilled specialists create customized investments to help investors meet needs, including principal protection and yield enhancement Strategic Equity Portfolios: Portfolios of Research-recommended stocks that may be purchased in a single transaction, but each component stock is owned individually and can be traded at any time Notes 1. Exchange-Traded Funds ( ETFs ) are investment companies registered under the Investment Company Act of 1940 that offer shares that trade in the secondary market, including national securities exchanges. Currently, all ETFs invest in a portfolio of securities that closely tracks a specific index. Some ETFs are structured as open-end management investment companies and some are structured as unit investment trusts ( UITs ). Investors may purchase and redeem shares from the ETF only in large quantities (creation units), which are priced at the ETF s net asset value ( NAV ). Because ETFs are listed on exchanges, individual ETF shares can be bought and sold throughout the trading day at the current market price. Furthermore, ETF shares can be sold short and bought on margin. An investment in an exchange-traded fund involves risks similar to those of investing in a broadly based portfolio of securities traded on an exchange in the relevant securities market, such as market fluctuations caused by such factors as economic and political developments, changes in interest rates, and perceived trends in stock prices. ETFs are redeemable only in Creation Unit size through an Authorized Participant and are not individually redeemable from a fund. The investment return and principal value of ETF investments will fluctuate, so will an investor s ETF shares. Accordingly, you can lose money in Exchange-Traded Funds 2. Closed-End Funds, unlike open-end funds, are not continuously offered. There is a one-time public offering and once issued, shares of closed-end funds are sold in the open market through a stock exchange. Net Asset Value ( NAV ) is total assets less total liabilities divided by the number of shares outstanding. At the time of sale, your shares may have a market price that is above or below NAV. There is no assurance that the fund will achieve its investment objective. The fund is subject to risks, including possible loss of principal invested 3. If you are considering options as part of your investment plan, your Morgan Stanley Smith Barney Financial Advisor is required to provide you with the Characteristics and Risks of Standardized Options booklet from the Options Clearing Corporation. Clients should not enter into options transactions until they have read and understood the Disclosure Document, as options are not for everyone. Please ask your Morgan Stanley Smith Barney Financial Advisor for a copy of the booklet

28 Tailoring Your Solution: Brokerage Solutions for Individuals (1) (2) Fixed Income The Morgan Stanley Smith Barney family of companies has been a leader in fixed income trading for over 75 years. Morgan Stanley Smith Barney s extensive inventory of bonds generally represents more than 20,000 different positions daily, and several billion dollars in capital committed. We have 175 bond professionals dedicated to helping clients meet their fixed income needs. Investment Opportunities We provide investors with a full array of fixed income investments, ranging from money market eligible securities to derivatives and long-term bonds. Credit Sensitive Corporate Bonds Foreign Bonds $25 Par Preferred Securities Convertibles High-Yield Corporate Bonds Direct Securities Interest Rate Sensitive Municipal Bonds Certificates of Deposit Federal Agency Securities Mortgage Backed Securities Treasury Bonds Zero Coupon (STRIPS/FICOS) Cash Management Securities Foreign corporate and sovereign debt Specialized Services Supported by our Fixed Income Division, we can help you evaluate your needs and assist you in developing a fixed income investment strategy. Fixed Income Portfolio Reviews, including portfolio summary analysis, detailed bond holding analysis, maturity distribution display, cash flow analysis, horizon analysis, and more Bond Swap Analysis to help identify opportunities by taking advantage of market aberrations Cash Management Strategies to provide highquality, liquid, taxable and tax-free investment alternatives Tailored Investments Structured Notes Saturns Notes 1. Morgan Stanley Smith Barney fixed income strategy is provided by the Institutional Securities Group, which is separate and distinct from the Global Wealth Management Group. 2. This material is not a solicitation of any offer to buy or sell any security or other financial instrument or to participate in any trading strategy. This material was not prepared by the Morgan Stanley Smith Barney research department. Please refer to important information and qualifications at the end of this material

29 Tailoring Your Solution: Brokerage Solutions for Individuals Mutual Funds The Morgan Stanley Smith Barney Mutual Fund Network currently includes more than 2,200 mutual funds from more than 100 fund families for your consideration. Key Advantages Available Fund Categories Morgan Stanley Smith Barney s Mutual Fund Bill of Rights Mutual funds offer several key advantages to investors, including the ability to invest in new or lessaccessible asset classes. Other benefits include: Professional management by mutual fund portfolio managers with specialized knowledge and access to extensive research and market information Diversification to help investors manage risk Liquidity, as mutual fund shares can be redeemed and converted to cash within a short period of time Convenience, with a range of services that make investing easier Global: Invest in both domestic and international stocks International (1) : Invest in companies located outside the United States Growth: Invest in stocks whose issuers are believed to be fast growing. They can be considered risky Growth and Income: Invest in both stocks and bonds to provide a degree of safety plus potential stock price appreciation Income: Invest in debt securities to produce income. Typically, the longer the maturity the greater the risk Tax-Free Income: Invest in taxexempt bonds issued by state and local governments If you invest in mutual funds, the Morgan Stanley Smith Barney Bill of Rights for Mutual Fund Investors will help you understand these investments, the costs associated with investing in mutual funds, how your Financial Advisor is compensated when you buy mutual funds and how Morgan Stanley Smith Barney is compensated by fund families to sell their mutual funds. To read our Mutual Fund Bill of Rights, please visit the Morgan Stanley Smith Barney web site at: Please consider the investment objectives, risks, charges and expenses of any fund carefully before investing. The prospectus contains this and other important information about the fund. To obtain a prospectus, contact your Morgan Stanley Smith Barney Financial Advisor. Please read the prospectus carefully before investing. There is no assurance that any fund will meet its investment objective(s). Mutual funds are subject to market risk which is the possibility that the market values of securities owned by the fund will decline and, therefore, the value of fund shares may be less than what you paid for them. Accordingly, you can lose money investing in any fund. Note 1. International investing should be considered one component of a complete and diversified investment program. Investing in foreign markets generally entails greater risks than those normally associated with domestic markets, such as political, currency, economic and market risks

30 Tailoring Your Solution: Brokerage Solutions for Individuals Unit Investment Trusts Morgan Stanley Smith Barney is a leading underwriter and distributor of Unit Investment Trusts, offering a broad selection of investment opportunities from a variety of sponsors. A Unit Investment Trust follows a Buy and Hold strategy and typically consists of a portfolio of stocks or bonds. Portfolios, which generally remain fixed for a predetermined period of time, offer you the ability to choose investment options covering a wide variety of asset classes and investment styles. Diversification Discipline Convenience and Flexibility Defined portfolios of equities or fixed income investments Further equity diversification through sectors, indexes, international markets, investment themes and market capitalizations Fixed income strategies, including tax-free and taxable bonds Depending on trust objectives, portfolios generally range from five to 50 securities Potential to reduce portfolio risk through diversification Buy and hold strategy Professional selection performed by a team of experienced financial professionals Advanced quantitative research techniques Traditional disciplines of fundamental securities selection Identification of securities with the greatest potential to achieve objective of each trust Low minimum purchase price Liquidity (1) One-stop shopping: single investment offers access to many securities Potentially reduces time, expense and difficulty for an average investor using individual securities to achieve same diversification and goals There is no assurance that a unit investment trust will achieve its investment objective. An investment in a unit trust is subject to market risk, which is the possibility that the market values of the securities owned by the trust will decline and that the value of the trust units may therefore be less than what you paid for them. Accordingly, you can lose money investing in a trust. Note 1. Investment return and principal value will fluctuate and units, when redeemed, may be worth more or less than their original cost. Not all trusts will necessarily have all the abovementioned characteristics. Unit Investment Trusts should be considered as part of a long-term investment strategy and you should consider your ability to pursue it by investing in successive trusts, if available. You will encounter tax consequences associated with reinvesting from one trust to another

31 Tailoring Your Solution: Brokerage Solutions for Individuals 529 College Savings Plans Named for Section 529 of the Internal Revenue Code, 529 plans are statesponsored, tax-advantaged education savings vehicles used for qualified higher education expenses. The plans may offer an attractive solution for investors seeking a taxadvantaged way to save for the increasing costs of higher education. Features and Benefits of 529 Plans Flexibility. Any U.S. citizen or legal U.S. resident can establish a 529 Plan. When a student is ready for college, the money can be withdrawn to pay for qualified higher education expenses (1) Tax Deferred Growth. Earnings in a 529 Plan grow tax deferred. Qualified withdrawals are federal-tax free until 2010 (1) (2) State Tax Advantages. Some states or localities offer tax benefits to account owners or beneficiaries who reside in-state (3) Gift Tax Benefits. A contribution to a 529 Plan is treated as a completed gift from the donor to the designated account beneficiary and qualifies for the annual gift tax exclusion Estate Tax Benefits. Subject to special rules, 529 Plan investors can contribute five times the annual gift amount all at once without incurring federal gift taxes. The gift is generally excluded from the donor s estate for estate tax purposes. (Special rules apply if the donor dies during the five-year period from the date of contribution) High Contribution Limits of $200,000+ in most states Asset Control. If the student elects not to pursue higher education, the account owner can change the beneficiary, gift the investment or liquidate the account. (Liquidating the account will generally be a nonqualified withdrawal) (1) Morgan Stanley Smith Barney s 529 Plan Services Morgan Stanley Smith Barney offers a variety of 529 college savings plans National plans are available to investors in the state that sponsors them and outside the state sponsoring them Although investors residing in any state can buy the national plans, state-tax benefits may only be available to investors who reside in the sponsoring state. It is important for an investor to first consider his/her in-state plan and its benefits before considering a national plan We can provide a list of available in-state plans and national plans Please consider the investment objectives, risks, charges and expenses of any fund or investment carefully before investing. The prospectus and/or plan disclosure statement contains this and other important information about the fund, and you can obtain a prospectus or plan disclosure statement by contacting your financial advisor. Notes 1. For nonqualified withdrawals, earnings are subject to federal and state income taxes and may be subject to additional tax penalties 2. The Federal tax treatment of 529 plans under the Economic and Tax Reconciliation Act of 2001 is scheduled to expire on 31 Dec ember 2010 unless re-enacted by Congress 3. Investors should understand the plans offered by their home state before investing in another. Investments in a home state program may be eligible for state and local tax incentives to residents of that state that may not be available to 529 plan investments of programs of other states. Investors should consult their tax and/or legal advisor for such guidance

32 Tailoring Your Solution: Brokerage Solutions for Individuals Mortgages and Home Equity Lending Services Morgan Stanley Smith Barney offers both nontraditional and traditional home loans, including options not offered by many other lenders. About Our Borrowing Solutions Our borrowing solutions are designed to complement a wide array of strategies and can help: Lower borrowing costs Avoid unnecessary asset liquidation by helping you keep your investments working for you Maximize tax advantages Our residential lending services are provided through Morgan Stanley Smith Barney Home Loans. Traditional Mortgages and Lines of Credit Fixed-Rate Mortgages: Get the security and stability of fixed-rate loans with predictable monthly payments for both new purchases and refinancing SourceLine Home-Equity Lines of Credit: Meet cash needs without liquidating assets by leveraging the equity in your home. Funds are available as you need them by simply writing a check SourceLoan Home-Equity Loans: Providing a fixed rate and fixed term, a home-equity loan provides the predictability of fixed monthly payments and a predetermined loan payoff date Non-Traditional Mortgages SelectSource (1) Plus one and Six Month Adjustable Rate Mortgages: Lower monthly mortgage payments and increase liquidity with interest-only payments for 10 years, allowing you to prepay principal without penalty SelectSource (1) Fixed-to- Adjustable Rate Mortgages: Reduce monthly payments to free up cash by making interest-only payments for the first 3, 5, 7, or 10 years of the loan Construction-to-Permanent Loan: Build your customized home with one loan. Once your house is complete, the construction loan rolls into a permanent loan with no additional closing costs FlexSource : Keep your investments intact and working for you by pledging eligible securities as collateral in lieu of a cash down payment (2) Notes 1. When considering an interest-only or variable rate loan, borrowers should carefully review the terms, rates, and total interest payable of the various loans available in the context of their financial circumstances 2. If the value of the pledged securities in your account drops below the agreed-upon level stated in your loan documents, you will be required to deposit additional securities or other collateral (such as cash) to stay in compliance with the terms of your mortgage. Thus, in deciding whether the Flex Source feature is right for you, you should consider the degree to which you are comfortable subjecting your investment in a home to the fluctuations of the securities markets. Morgan Stanley Smith Barney Incorporated is not the lender. We arrange, but do not make, loans. Morgan Stanley Smith Barney Home Loans are offered and made by Morgan Stanley Credit Corporation.

33 Tailoring Your Solution: Brokerage Solutions for Individuals Financial Assessment Tools Morgan Stanley Smith Barney s proprietary financial tools and calculators are designed to help you evaluate your financial situation and assist you in developing a strategy to reach your financial goals. Financial Needs Assessment The Morgan Stanley Smith Barney Financial Needs Assessment provides a snapshot of an investor s financial picture that can help develop a solid understanding of the investor s broader financial situation. It enables us to get to know you better and helps us make appropriate recommendations. The 30+ page Financial Needs Assessment helps to organize and diagnose your financial situation, including: Risk tolerance Cash flow Retirement funding Education funding Long-term care needs Life insurance needs Disability insurance needs Estate planning considerations Financial Calculators Morgan Stanley Smith Barney s Financial Calculators help estimate whether you are on target to meet a specific financial goal. The Financial Calculators include: Retirement Estimate the net payout comparison between a Traditional IRA and Roth IRA or estimate how much more you will need to save to meet your retirement goals. Education Estimate the monthly savings required to attain a desired amount for education expenses or estimate annual amounts that will be available for education expenses, based upon available savings. Major Purchase Estimate the monthly savings required for purchases such as a vacation home or boat, or estimate the amount that will be available for a major purchase, based upon available savings. Debt Management Compare loan payment alternatives or mortgage payment alternatives by payment frequency, interest rate, amortization and more.

34 Tailoring Your Solution: Advisory Solutions for Individuals

35 Tailoring Your Solution: Advisory Solutions for Individuals Financial Planning With Morgan Stanley Smith Barney s Financial Planning System, we can help investors evaluate their individual objectives, develop an investment strategy, or conduct a quick diagnosis of their financial needs. Comprehensive Planning Services Morgan Stanley Smith Barney s comprehensive financial planning services encompass the full spectrum of investor objectives, including such sophisticated areas of concentration as executive stock options and estate planning. The comprehensive plan analyzes your finances in depth and contains specific recommendations that are compared to current strategies in order to determine their potential effectiveness. Financial planning is one of many products and services offered by Morgan Stanley Smith Barney. Please consult your Financial Advisor for more information about any of our products and services.

36 Tailoring Your Solution: Advisory Solutions for Individuals Mutual Fund Advisory Group Programs Mutual Fund Advisory Group programs can help you build a diversified portfolio of mutual funds. About Mutual Fund Advisory Group Programs Morgan Stanley Smith Barney s Mutual Fund Advisory Group programs help individual investors develop a mutual fund investment strategy, from the initial planning process through mutual fund selection to performance reporting and account maintenance all for a single, quarterly fee The programs are built upon the concept of asset allocation, perhaps the most critical element of financial planning and investment management Programs Available Through Morgan Stanley Smith Barney Morgan Stanley Smith Barney Fund Solution SM Clients select funds not affiliated with Morgan Stanley Smith Barney (1) Morgan Stanley Smith Barney Funds Portfolio Architect SM Clients select funds affiliated with Morgan Stanley Smith Barney (2) Steps in the Process Questionnaire The questionnaire will help us understand your needs Asset Allocation Based on your overall profile, how you structure your portfolio can be directly supported by the tenets of asset allocation Mutual Fund Selection You select funds for each asset category Rebalancing and Reporting The program will monitor your portfolio on a regular basis and determine its suitability in relation to your investment strategy Please carefully consider the investment objectives, risks, charges and expenses of the funds available in the program you have selected before investing. The prospectuses contain this and other information about the funds. To obtain a prospectus, ask your Financial Advisor. Read the prospectus carefully before investing. Notes 1. Morgan Stanley Smith Barney Fund Solution is a Mutual Fund Advisory Group program that allows you to build and maintain a diversified portfolio of mutual funds. A Morgan Stanley Smith Barney Fund Solution account is opened pursuant to a written client agreement. More information about the Fund Solution program and other Morgan Stanley Smith Barney programs can be found in the Disclosure Document for Morgan Stanley Smith Barney Incorporated. Ask your Morgan Stanley Smith Barney Financial Advisor for a copy and read it carefully before you decide to open a program account. Morgan Stanley Smith Barney Fund Solution offers mutual funds form various fund families not affiliated with Morgan Stanley Smith Barney except for the money market funds which are managed by Morgan Stanley Smith Barney affiliates 2. A Morgan Stanley Smith Barney Funds Portfolio Architect account is opened pursuant to a written client agreement. More information can be found in the Morgan Stanley Smith Barney Funds Portfolio Architect Program Disclosure Document, and information about other Morgan Stanley Smith Barney programs is in the Disclosure Document for Morgan Stanley Smith Barney Incorporated. Ask your Morgan Stanley Smith Barney Financial Advisor for copies and read them carefully before you decide to open a program account. Morgan Stanley Smith Barney and its employees have a conflict of interest when assisting clients in selecting investment managers because Morgan Stanley Smith Barney and its affiliates typically will receive more aggregate fees if you select an investment manager that is affiliated with Morgan Stanley Smith Barney

37 Tailoring Your Solution: Advisory Solutions for Individuals Separately Managed Accounts Separately managed account programs (1) can offer investors a variety of advantages: Institutional-quality managers Direct ownership of securities Tax harvesting capabilities Quarterly performance reports Ability to track performance daily About SMA Programs Separately Managed Accounts ( SMAs ) are a convenient way for individual investors to choose to receive ongoing professional investment management of the assets in the account. Traditional SMAs allow investors to choose an investment manager within a particular investment discipline or style to manage the account Multiple Manager SMA accounts permit an investor to choose more than one manager, style and discipline in one account Morgan Stanley Smith Barney Custom Portfolio SM accounts allow investors to hire qualified Morgan Stanley Smith Barney Financial Advisors to manage the account SMA Programs Available at Morgan Stanley Smith Barney Morgan Stanley Smith Barney Access SM : Clients select from investment managers who are either unaffiliated or affiliated with Morgan Stanley Smith Barney Morgan Stanley Smith Barney Managed Portfolios SM : Clients select from investment managers affiliated with Morgan Stanley Smith Barney Morgan Stanley Smith Barney Vision SM : Clients select and contract directly with outside managers Morgan Stanley Smith Barney Personal Portfolio SM : Clients can select multiple investment managers and multiple disciplines within one account Morgan Stanley Smith Barney Custom Portfolio SM : Certain eligible Morgan Stanley Smith Barney Financial Advisors manage account assets directly Comprehensive Due Diligence (2) for SMAs Due diligence is the process of reviewing managers, with the goal of assembling a group of high-quality managers from which SMA clients may select. Through extensive due diligence, Morgan Stanley Smith Barney has identified a core group of about 130 managers, which are reviewed on an ongoing basis. Our in-depth performance and manager analyses encompass: On-site visits to examine quality of research, personnel and facilities Review of financial stability, client communications and service capabilities Investment process evaluation to determine how well the manager has adhered to its stated investment discipline Notes 1. Morgan Stanley Smith Barney offers consulting services through a variety of investment program accounts, which are opened pursuant to written client agreements. Each program offers investment managers and features that are not necessarily available in the other programs. For further information, please refer to the Morgan Stanley Smith Barney Disclosure Document, available from your Morgan Stanley Smith Barney Financial Advisor. It is your responsibility to choose the program and the investment managers within that program to manage your assets, and to weigh any investment decision carefully. The programs and investments discussed in this material provide the opportunity to invest with investment managers both independent of, and affiliated with, Morgan Stanley Smith Barney. Morgan Stanley Smith Barney and its employees have a conflict of interest when assisting clients in selecting investment managers because Morgan Stanley Smith Barney and its affiliates typically will receive more aggregate fees if you select an i nvestment manager that is affiliated with Morgan Stanley Smith Barney. The programs and investments discussed in this material may require a minimum asset level and, depending on your specific investment objectives and financial position, may not be suitable for you 2. The due diligence process described above applies to the Approved List of investment managers available for selection by clients with the following accounts: Morgan Stanley Smith Barney Access, Morgan Stanley Smith Barney Vision, and Morgan Stanley Smith Barney Personal Portfolio. The due diligence process described above does not apply to Morgan Stanley Managed Portfolios or Morgan Stanley Smith Barney Custom Portfolio

38 Tailoring Your Solution: Life-Cycle Solutions for Individuals

39 Tailoring Your Solution: Life-Cycle Solutions for Individuals Annuities Morgan Stanley Smith Barney works closely with some of the leading annuity and insurance carriers in the country to provide a range of products that can help investors meet long-term goals. An annuity is a contract between you and an insurance company you agree to make at least one payment to the insurance company and the insurance company agrees to make a series of payments to you at a later date. Your payment(s) becomes your annuity principal. This principal, plus any earnings (minus any withdrawals) are then paid to you at a time you designate, usually at retirement. Payments can be made for a specific length of time or for life. The individual who purchases the annuity is called the owner, or contract holder The individual whose life expectancy is measured to establish the basis of the annuity payment is called the annuitant (often, one and the same as the owner/contract holder) The individual designated by the owner to receive the contract s benefits in the event of the annuitant s death is the beneficiary Annuity Products Available at Morgan Stanley Smith Barney Variable Annuities (1) Provide growth potential, flexibility and diversification, as well as tax deferral. Transfers among investment portfolios are generally free of current taxation; includes income and death benefit guarantees Fixed Annuities Pay a fixed percentage rate of return guaranteed by an insurance company for a specified time period (usually between 1 10 years) Immediate Annuities Used to provide immediate, consistent, periodic income payments, guaranteed by the claims-paying ability of the insurance company Withdrawals or surrenders may be subject to surrender charges. Amounts withdrawn may be subject to ordinary income tax and, if taken prior to age 591/2, a 10% penalty apply. Withdrawals have the effect of reducing the death benefit and cash surrender value. There are risks involved when investing i n a variable annuity, including the possible loss of principal. The investment value of an investment in the sub accounts will fluctuate so that investors shares may be worth more or less than their original cost when redeemed Notes 1. Variable annuities are long-term investment vehicles designed for retirement purposes and are sold by prospectus only. Current and prospective clients should read the prospectus carefully prior to investing. Because qualified retirement plans, IRAs and variable annuities all offer a tax-deferral feature, clients should carefully consider the other features, benefits, risks, and costs associated with a variable annuity before purchasing one in either a qualified plan or IRA. Before purchasing a variable annuity clients should take full advantage of their 401(k) and other qualified plans. All guarantees are subject to the claims-paying ability of the issuing insurance company. Special suitability considerations may apply to older age clients

40 Tailoring Your Solution: Life-Cycle Solutions for Individuals Insurance Coverage Recognizing a need for life insurance is an important first step in protecting the long-term financial security of your family or business. Morgan Stanley Smith Barney can help you decide what type of policy is best. Traditional Life Insurance Offerings (1) Life insurance products may help you meet longterm goals, such as supplementing a retirement income derived from other sources or fulfilling liquidity needs associated with estate planning. Morgan Stanley Smith Barney offers a range of insurance products addressing a broad spectrum of today s needs, including: Term Life Whole Life Universal Life Variable Universal Life Other Insurance Offerings (1) We can also provide: Long-Term Care Insurance Protect and preserve assets Cover costs of nursing home care, assisted living facilities and home health care that Medicare does not cover Should be obtained while you are still healthy and able to qualify for coverage Disability Income Insurance Pays you a monthly benefit to replace a portion of your income if you become injured or ill and are unable to work Allows you to choose how long you will wait after becoming disabled for the payments to start and how long those payments will last Nonqualified Deferred Compensation Structured Settlements Note 1. Most insurance policies contain exclusions, limitations, reductions of benefits and terms for keeping them in force. Various fees and expenses, including contingent deferred sales charges, mortality and expense risk charges, administrative fees and annual contract fees, may be associated with these products

41 Tailoring Your Solution: Life-Cycle Solutions for Individuals Personal Trust (Morgan Stanley Smith Barney Trust, NA) (1) Morgan Stanley Smith Barney Trust, NA can help you implement an effective and efficient wealth preservation and transition strategy. About Personal Trusts A trust is a legal arrangement under which an individual transfers assets to a trustee who holds legal title and is under a fiduciary duty to manage, invest and administer those assets for the benefit of designated beneficiaries as directed by the trust instrument. Trusts usually involve three parties: a grantor, a trustee and a beneficiary. Trusts can be a vital part of your complete financial strategy. They can play a role in managing tax liability and diversifying your assets. And they can also help you provide for future generations. Morgan Stanley Smith Barney Trust, NA As a wholly owned subsidiary of Morgan Stanley Smith Barney, Morgan Stanley Trust, NA offers: Delaware Trustee Services, which include dynasty trusts and multi-generational trusts Philanthropic Services, including charitable trusts and private family foundations Sophisticated Investment Management of trust assets using proprietary and nonproprietary money managers and alternative investments, offered through Morgan Stanley Smith Barney. The Ability to Administer special assets such as real estate held in trusts Trust Services Morgan Stanley Smith Barney offers trustee services for a wide variety of personal trusts including: Revocable and Irrevocable Living Trusts Testamentary Trusts Credit Shelter Trusts Marital and QTIP Trusts Grantor Retained Trusts Generation-skipping Trusts Dynasty and Multigenerational Trusts Morgan Stanley Smith Barney can serve as: Trustee Cotrustee Administrative Agent Tax laws are complex and subject to change. This information is based upon current federal tax rules in effect at the time this was written. Morgan Stanley Smith Barney and its Financial Advisors do not provide tax or legal advice. Clients should always check with their tax or legal advisor before engaging in any transaction involving IRAs or other tax-advantaged investments. Note 1. This material was not intended or written to be used, and it cannot be used by any taxpayer, for the purpose of avoiding penalties that may be imposed on the taxpayer under U.S. federal tax laws

42 Tailoring Your Solution: Life-Cycle Solutions for Individuals Wealth Planning Services (1) Morgan Stanley Smith Barney s Wealth Planning Services group can help you and your family implement effective and efficient wealth preservation and transition strategies. Wealth Planning Services Overview Available to individual clients with a net worth of $3MM-plus and to married couples with a net worth of $5MM-plus Designed to help you develop detailed planning concepts that can help you and your advisors secure and perpetuate your longterm financial well-being An experienced staff of professionals remains current with tax rules, regulations, and practices, and offers clients strategies for working towards their wealth management goals and objectives Holistic Viewpoint Addresses high net worth client concerns and needs including: Wealth transfer strategies Stock option exercise strategies Diversification strategies for concentrated stock positions Monetization strategies for small business owners seeking to facilitate a Section 1042 exchange of business ownership to employees Retirement planning strategies Succession planning strategies Exit strategies for business owners Charitable giving Use of trusts in wealth transfer planning Estate Plan Analysis A team of experienced professionals can provide specialized and sophisticated solutions through a customized Estate Plan Analysis, which includes: An assessment of your current plan Ideas and suggestions that can help address your planning concerns Descriptions of trusts and wealth management strategies Tax laws are complex and subject to change. This information is based upon current federal tax rules in effect at the time this was written. Morgan Stanley Smith Barney and its Financial Advisors do not provide tax or legal advice. Clients should always check with their tax or legal advisor before engaging in any transaction involving IRAs or other tax-advantaged investments. Note 1. This material was not intended or written to be used, and it cannot be used by any taxpayer, for the purpose of avoiding penalties that may be imposed on the taxpayer under U.S. federal tax laws

43 Tailoring Your Solution: Business and Executive Services