Maximize Your Impact Morgan Stanley Global Impact Funding Trust (GIFT): Impact Pools CRC1527771 (7/2016) Expiration (7/2017)
Global Impact Funding Trust (GIFT) Introduction Morgan Stanley GIFT is an independent section 501(c)(3) organization. Key facts about Morgan Stanley GIFT Over 15 years of operation and experience; established in August 2000 More than 3,400 accounts, collectively valued over $850 million as of 12/31/2015 Total grants to charities have exceeded over $1 Billion in assets since inception Led by a Board of Directors including seasoned professionals from both within Morgan Stanley and outside Morgan Stanley Investment platform professionally managed by Morgan Stanley Wealth Management Back office administration provided by Drinker Biddle & Reath LLP, an unaffiliated international law firm recognized as a leader in philanthropy and non-profit organizations 2 INVESTING WITH IMPACT
Global Impact Funding Trust (GIFT) Introduction Contributions to Morgan Stanley GIFT are invested in the Select UMA investment advisory platform. The unified managed account combines separately managed accounts, mutual funds and exchange-traded funds in a diversified, cost-effective portfolio. You have a choice of four traditional risk-based portfolios, two Investing with Impact portfolios, as well as a money market fund. You may also split the money among the various investment options. PLATFORM FEATURES INCLUDE LEVERAGING: INVESTMENT MANAGERS AND PRODUCTS ANALYZED BY MORGAN STANLEY ASSET ALLOCATION WEALTH MANAGEMENT S STRATEGIES DEVELOPED GLOBAL INVESTMENT PROFESSIONALLY MANAGED BY THE MORGAN STANLEY MANAGER ANALYSIS (GIMA) DISCIPLINED PORTFOLIO INVESTMENT STRATEGIES WEALTH MANAGEMENT TEAM FOR POSSIBLE CONSTRUCTION PROVIDED FEATURING BROAD GLOBAL INVESTMENT INCLUSION IN THE SELECT BY THE CUSTOM SOLUTIONS DIVERSIFICATION AND COMMITTEE UMA PROGRAM TEAM AUTOMATIC REBALANCING 3 INVESTING WITH IMPACT
What Is Investing with Impact? Morgan Stanley defines Investing with Impact as an approach that aims to generate marketrate financial returns while demonstrating positive environmental and/or social impact. Financial Goals Financial performance driven by economic fundamentals Investing with Impact Impact Goals Positive social and/or environmental outcomes driven by values and mission Delivering innovative solutions for our clients that align their personal values with their financial goals is an important focus for Morgan Stanley, and I believe we are uniquely suited to do this. James Gorman Morgan Stanley Chairman and CEO 4 INVESTING WITH IMPACT
Evolving Approach to Investing with Impact SOCIALLY RESPONSIBLE INVESTING & VALUES ALIGNMENT 1970s on ESG INTEGRATION 1990s on IMPACT INVESTING 2000s on Investing with Impact Investing with Impact incorporates a variety of terms and investment approaches that have evolved significantly in the past few years. Sustainably invested assets now account for more than one out of every six dollars under professional management in the U.S. 1 Sustainable, Responsible and Impact Investing in U.S. 1995 2014 2 ($ Trillion) 7,000 6,000 5,000 4,000 3,000 2,000 1,000 0 0.63 1.19 2.16 2.32 2.16 2.29 2.71 3.07 3.74 $6.57 1995 1997 1999 2001 2003 2005 2007 2010 2012 2014 Market Share 18% Sustainable 82% All Other 5 INVESTING WITH IMPACT 1 Morgan Stanley Institute for Sustainable Investing Sustainable Reality, February 2015. 2 Report on the Sustainable and Responsible Investing Trends in the United States, 2014. US SIF Foundation, 2014
Investment Performance The MSCI KLD 400 Index invests in companies that meet best-in-class environmental, social and governance (ESG) criteria and have delivered favorable performance with comparable risk relative to the S&P 500 Index. July 1990 December 2015 (Single Computation) 1 (Cumulative Return) Annualized Return (%) (Jul 1990 Dec 2015) $1,300 $1,100 $900 $700 $500 9.78 9.35 $300 $100 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 MSCI KLD 400 Social Index S&P 500 Index S&P 500 Total Return (Left Axis) KLD 400 Total Return (Left Axis) 6 INVESTING WITH IMPACT 1 Morgan Stanley Institute for Sustainable Investing Sustainable Reality, February 2015. Note: Past performance is no guarantee of future results. The index returns are illustrative and shown for comparative purposes only. They do not represent the performance of any specific investments. An investor cannot invest directly in an index.
Investment Process is Systematic and Risk-aware The impact pools are constructed utilizing an institutional, multi-factor approach to build riskaware portfolios that seek to generate positive environmental and social impact.. Identify active risks in the portfolio Seek to allocate risk efficiently Analyze variations in risk, managers and their strategies Risk Management Asset Allocation Market analysis and model portfolio allocation guidance based on the Morgan Stanley Wealth Management Global Investment Committee Establish strategic framework Opportunistically over- and underweight asset classes Utilize multi-factor analysis to determine optimal weightings Emphasize high-conviction, complementary independent, thirdparty managers Dedicated portfolio construction team Portfolio Construction Manager Analysis Due diligence conducted across separately managed accounts, mutual funds, ETFs and alternative strategies Dedicated third-party manager assessments with opinion-based manager analysis Evaluate managers approach using the Investing with Impact Framework 7 INVESTING WITH IMPACT
Managers Undergo Extensive Analysis Prior to Inclusion The impact pools leverage multiple professional teams to determine the third-party asset managers and investment products appropriate for inclusion. MANAGER UNIVERSE Morgan Stanley s Global Investment Manager Analysis team leverages quantitative, qualitative and operational due diligence conducted by over 45 dedicated analysts on more than 1,300 products, including separately managed accounts, mutual funds and ETFs that are available on our advisory platform. Identify managers with a clear approach to Investing with Impact Filter for Asset Class and Investment Style Working List BEST FIT MANAGERS DETERMINED BY PORTFOLIO CONSTRUCTION TEAM Presents tactical opportunity Complements other holdings QUANTITATIVE FILTER Peer analysis Rolling period returnsbased style analysis Modern Portfolio Theory statistics Holdings-based attribution Risk-based analysis QUALITATIVE TEST Firm/People Organizational structure Competitive advantage Investment philosophy Process and strategy Performance expectations Exhibits consistent process and contribution to overall portfolio risk Expresses impact view 8 INVESTING WITH IMPACT
INVESTMENT EXAMPLES IMPACT INVESTMENT CHARACTERISTICS DEFINITION Investing with Impact Framework Morgan Stanley s Investing with Impact Framework enables clients to align investment decisions with impact priorities across their portfolio. Minimize Objectionable Impact VALUES ALIGNMENT Managing exposures by intentionally avoiding investments based on specific criteria ENVIRONMENTAL, SOCIAL AND GOVERNANCE (ESG) INTEGRATION THEMATIC EXPOSURE IMPACT INVESTING Proactively considering ESG criteria alongside financial analysis to identify opportunities and risks during investment process Focusing on themes and sectors dedicated to solving sustainability-related domestic and global challenges Targeted Impact Allocating to investment funds focused on private enterprises structured to deliver specific positive social and/or environmental impacts Differentiated by restriction criteria and degree of shareholder advocacy Not proactively seeking environmental and social impact Differentiated by ESG integration process and degree of shareholder advocacy May also include screens Differentiated by macroanalysis, sustainability research and sector focus Differentiated by impact approach, regional focus, liquidity and impact reporting May have investor restrictions Investment strategies that exclude companies from buy universe (e.g. tobacco, firearms, coal mining companies) Investment strategies that incorporate analysis of ESG performance into stock selection process Investment strategies tracking index of renewable energy companies Private investment strategies focused on emerging consumers or project level renewable energy investment. PUBLIC MARKETS PRIVATE MARKETS 9 INVESTING WITH IMPACT
GIFT: Impact Pools Portfolio Construction Values-Alignment Exclude companies and/or sectors that are in opposition to values. For example: tobacco, alcohol, weapons. ESG-Integrated Examples of Environmental, Social and Governance criteria include the corporate carbon footprint, employee health and safety, workforce diversity policies, business ethics. Thematic Exposure Invest in themes and sectors creating solutions to targeted ESG issues. For example: resource scarcity, community development including affordable housing. No Direct Mission Alignment Values Alignment ESG- Integration Thematic Exposure 10 INVESTING WITH IMPACT
GIFT: Impact Pools Overview. The Investing with Impact Pools in the GIFT donor advised fund employ highly regarded third-party investment managers with demonstrated experience in generating positive environmental and social impact to construct welldiversified portfolios across the continuum of Investing with Impact approaches. Eligible investments include separately managed accounts, mutual funds and exchange-traded funds (ETFs). INVESTING WITH IMPACT POOL - AGGRESSIVE 1 Account Minimum: $25,000 US Short-Term Fixed Income, 5% International Equity, 40% US Core US Multi Fixed Cap Income, Growth, 11% 11% US Multi Cap Core, 12% US Large Cap Value, 14% US Mid Cap Value, 4% US Small Cap Growth, 3% INVESTING WITH IMPACT POOL BALANCED 2 Account Minimum: $25,000 US Core Fixed Income, 25% US Short-Term Fixed Income, 22% US Multi Cap Growth, 7% International Equity, 25% US Multi Cap Core, 8% US Large Cap Value, 7% US Mid Cap Value, 4% US Small Cap Growth, 2% The above allocations are as of June 13, 2016 and are subject to change. 1 Inception date: February 6, 2015 2 Inception date: January 30, 2015 11 INVESTING WITH IMPACT
GIFT: Investing with Impact Pool - Aggressive Manager Name Strategy Asset Class Allocation (%) Investing with Impact Focus ClearBridge Investments ClearBridge Multi-Cap Growth ESG SMA US Multi Cap Growth 6.0 Riverbridge Partners Riverbridge ECO Leaders SMA US Multi Cap Growth 5.0 ESG-Integrated Neuberger Berman Neuberger Berman Socially Responsive SMA US Multi Cap Core 7.0 Blackrock ishares KLD 400 Social ETF (DSI) US Multi Cap Core 5.0 ClearBridge Investments Ariel Investments ClearBridge Socially Aware Large Value SMA Ariel Appreciation Mutual Fund (CAAPX) US Large Cap Value 14.0 US Mid Cap Value 4.0 Values Alignment Pax World Investments Pax World Small Cap Fund (PXSIX) US Small Cap Growth 3.0 ClearBridge Investments ClearBridge International Growth ADR ESG SMA Domini Social Investments Domini International Social Equity Fund (DOMIX) Vanguard Vanguard Short Term Bond ETF (BSV) Community Capital CRA Qualified Investment Mutual Fund (CRANX) Breckinridge Capital Breckinridge Intermediate Taxable SMA International Equity 20.0 International Equity 20.0 US Short-Term Fixed Income 5.0 - - US Core Fixed Income 4.0 ESG-Integrated, Thematic Exposure US Core Fixed Income 7.0 ESG-Integrated TOTAL GLOBAL EQUITIES 84.0 Notes: As of June 13, 2016. SMA = Separately Managed Account ETF = Exchange-Traded Fund TOTAL GLOBAL FIXED INCOME 16.0 The sample portfolio is provided for informational purposes only and should not be deemed to be a recommendation to purchase or sell the securities mentioned. There is no guarantee that any securities mentioned will be held in a client account. It should not be assumed that the securities transactions or holdings discussed were or will be profitable. Information subject to change at any time without notice. 12 INVESTING WITH IMPACT
GIFT: Investing with Impact Pool - Balanced Manager Name Strategy Asset Class Allocation (%) Investing with Impact Focus ClearBridge Investments ClearBridge Multi-Cap Growth ESG SMA US Multi Cap Growth 3.5 Riverbridge Partners Riverbridge ECO Leaders SMA US Multi Cap Growth 3.5 ESG-Integrated Neuberger Berman Neuberger Berman Socially Responsive SMA US Multi Cap Core 4.0 Blackrock ishares KLD 400 Social ETF (DSI) US Multi Cap Core 4.0 ClearBridge Investments Ariel Investments ClearBridge Socially Aware Large Value SMA Ariel Appreciation Mutual Fund (CAAPX) US Large Cap Value 7.0 US Mid Cap Value 4.0 Values Alignment Pax World Investments Pax World Small Cap Fund (PXSIX) US Small Cap Growth 2.0 ClearBridge Investments ClearBridge International Growth ADR ESG SMA Domini Social Investments Domini International Social Equity Fund (DOMIX) Vanguard Vanguard Short Term Bond ETF (BSV) Community Capital CRA Qualified Investment Mutual Fund (CRANX) Breckinridge Capital Breckinridge Intermediate Taxable SMA International Equity 13.0 International Equity 12.0 US Short-Term Fixed Income 22.0 - - US Core Fixed Income 9.5 ESG-Integrated, Thematic Exposure US Core Fixed Income 15.5 ESG-Integrated TOTAL GLOBAL EQUITIES 53.0 Notes: TOTAL GLOBAL FIXED INCOME 47.0 As of June 13, 2016. SMA = Separately Managed Account ETF = Exchange-Traded Fund The sample portfolio is provided for informational purposes only and should not be deemed to be a recommendation to purchase or sell the securities mentioned. There is no guarantee that any securities mentioned will be held in a client account. It should not be assumed that the securities transactions or holdings discussed were or will be profitable. Information subject to change at any time without notice. 13 INVESTING WITH IMPACT
Disclosures Although the statements of fact and data in this presentation have been obtained from, and are based upon, sources that Morgan Stanley believes to be reliable, we do not guarantee their accuracy, and any such information may be incomplete or condensed. All opinions are as of the date of this presentation and are subject to change without notice. This presentation is for informational purposes only and is not intended as an offer or solicitation with respect to the purchase or sale of any security. 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 securities discussed in this material may not be suitable for all investors. Morgan Stanley recommends that investors independently evaluate particular investments and strategies, and encourages investors to seek the advice of a financial adviser. The appropriateness of a particular investment or strategy will depend on an investor s individual circumstances and objectives. Past performance is not a guarantee of future results. Diversification and asset allocation do not ensure a profit or protect against a loss. Investing in the markets entails the risk of market volatility. The value of all types of securities, including mutual funds and exchange-traded funds (ETFs), may increase or decrease over varying time periods. An investment in an exchange-traded fund involves risks similar to those of investing in a broadly based portfolio of equity securities traded on 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. The investment return and principal value of ETF investments will fluctuate, so that an investor's ETF shares, if or when sold, may be worth more or less than the original cost. To the extent the investments depicted herein represent international securities; you should be aware that there may be additional risks associated with international investing, including foreign economic, political, monetary and/or legal factors, changing currency exchange rates, foreign taxes, and differences in financial and accounting standards. These risks may be magnified in emerging markets. International investing may not be suitable for everyone. Equity securities prices may fluctuate in response to specific situations for each company, industry, market conditions and general economic environment. Companies paying dividends can reduce or cut payouts at any time. Fixed income securities are subject to interest rate risk, credit risk, prepayment risk, market risk, and reinvestment risk. Fixed income securities, if held to maturity, may provide a fixed rate of return and a fixed principal value. Fixed income securities prices fluctuate and if sold prior to maturity, may be worth more or less than their original cost. The companies identified and investment examples are for illustrative purposes only and should not be deemed a recommendation to purchase, hold or sell any securities or investment products. They are intended to demonstrate the approaches taken by managers who focus on ESG criteria in their investment strategy. There can be no guarantee that a client's account will be managed as described herein. The returns on a portfolio consisting primarily of ESG-aware investments may be lower or higher than a portfolio that is more diversified or where decisions are based solely on investment considerations. Because ESG criteria exclude some investments, investors may not be able to take advantage of the same opportunities or market trends as investors that do not use such criteria. 14 INVESTING WITH IMPACT
Disclosures (continued) In Consulting Group s advisory programs, alternative investments are limited to US-registered mutual funds, separate account strategies and exchange-traded funds (ETFs) that seek to pursue alternative investment strategies or returns utilizing publicly traded securities. Investment products in this category may employ various investment strategies and techniques for both hedging and more speculative purposes such as short-selling, leverage, derivatives and options, which can increase volatility and the risk of investment loss. Alternative investments are not suitable for all investors. Investors should carefully consider the investment objectives, risks and charges and expenses of a mutual fund or exchange-traded fund before investing. The prospectus contains this and other information about the mutual fund or exchange-traded fund. To obtain a prospectus, contact your Financial Advisor or Private Wealth Advisor. Please read the prospectus carefully before investing. An investment in a money market fund is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. Although the Fund seeks to preserve the value of your investment at $1.00 per share, it is possible to lose money by investing in the fund. INDEX DEFINITIONS S&P 500 Index Regarded as the best single gauge of the US equities market, this capitalization-weighted index includes a representative sample of 500 leading companies in leading industries of the US economy. MSCI KLD 400 Social Index The MSCI KLD 400 Social Index is a market capitalization-weighted Common Stock Index, consisting of 400 corporations that have passed multiple, broad-based social screens. The index is maintained by Kinder, Lydenberg, Domini & Co., Inc. and is intended to serve as a proxy and benchmark for the universe of stocks from which social investors might choose. The index was set at a value of 100 as of May 1, 1990. Since its inception, fewer than one change per month has been made in the index, primarily due to takeovers and acquisitions. Morgan Stanley GIFT, Inc. is an organization described in Section 501(c)(3) of the Internal Revenue Code of 1986, as amended, and Morgan Stanley Global Impact Fund Trust is a donor advised fund. Various divisions of Morgan Stanley Smith Barney LLC (the Firm) provide investment management and administrative services to Morgan Stanley GIFT. Morgan Stanley Smith Barney LLC, its affiliates, and its employees are not in the business of providing tax or legal advice. Investors should seek advice based on their particular circumstances from an independent tax advisor. For more information about GIFT, please contact your Morgan Stanley Financial Advisor. For more information about GIFT, please contact your Morgan Stanley Financial Advisor or Private Wealth Advisor. CRC1527771 (7/2016) Expiration (7/2017) 2016 Morgan Stanley Smith Barney LLC. Member SIPC. Consulting Group is a business of Morgan Stanley Smith Barney LLC. 15 INVESTING WITH IMPACT