Msim european equities sept12 gstaad

1Page

European Equities Alpha Funds

Switzerland, September 2012

Morgan Stanley Investment Funds (“MS INVF”)

2Page119165

Experienced and stable investment Team

Jonathan DayPortfolio Manager

Experience: 15 years, MSIM, SocGen,MS QuilterBias: Oil & Gas,Industrials and Utilities

Riccardo BindiPortfolio Manager

Experience: 18 years,MSIM, SocGen,Lombard OdierBias: Technology,Media and Telecommunications

Jaymeen PatelPortfolio Manager

Experience: 15 years, MSIM, State Street,Salomon Brothers, FidelityBias: Telecommunications and Consumers

Luca ArmandolaPortfolio Specialist

Experience: 10 years, MSIM sales, Invesco Italy

Matthew LeemanLead Portfolio Manager

Experience: 18 years, MSIM, SocGen, MontBlanc, Lombard OdierBias: Financials and Pharmaceuticals

Experience, trust and alignment of interest

Team has been together for over 8 years

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High quality investment team with a time-tested inv estment process

• An experienced, stable and well-resourced team • Style agnostic, active, bottom up, fundamental stock picking• Efficient risk / return profile

Consistent Performance

• Stable and strong outperformance• Top quartile peer group ranking

Excellent Working Relationship

• Best in class client service• Part of Morgan Stanley, one of the world’s leading financial institutions

Why invest with the MSIM European Equity team?

Experience, trust and alignment of interest

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Our goal and philosophy

Objective

• Provide long term stable and consistent outperformance

Philosophy

• Exploit market inefficiencies

• Style agnostic, active, bottom up, fundamental stock picking

Differentiated portfolios

• Concentrated (30–50 holdings)

• Conviction (active position between 100 and 300bps)

• Invest for the long term (annual turnover between 25-35%)

• Efficient risk / return profile (high information ratio and low volatility)

What we do

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Consistent long term out-performance

MS European Equity Alpha Representative Account 3,4

11.1

17.7

8.09.7

2.7

-2.1

7.2

11.4

15.9

6.17.1

1.0

-3.8

7.1

-5

0

5

10

15

20

YTD 1 Year 2 Year Ann 3 Year Ann 4 Year Ann 5 Year Ann Since InceptionAnn

%

MS INVF European Equity Alpha Fund MSCI Europe Net Index

Fund performance compared to its benchmark 1,2 at 31st August 2012

1.MSIM, Net of fees2.This fund received a windfall compensation payment in connection with Prudential Equity Group's settlement with the US SEC relating to market timing

charges. Consequently, the net cash injection received in March 2010 and the related withholding tax, accrued in September 2010, have increased the fund’s AUM by €5,437,850 and €2,455,464 , respectively, enhancing the 2010 fund’s performance by 297bps in total. The inception of the fund is March 1991

3.Mercer, SocGen Pan European Concentrated Composite performance is provided for informational purposes only. The European Equity team joined MSIM in December 2006. Performance information is provided as an indication of the European Equity team’s actual track record in managing various pan-European equity portfolios when working together with Société Générale Asset Management and may not be an indication of how MSIM’s European Equity portfolios may perform in the future

4.Ranking: Mercer MPA. Data as of December 2011. This is a representative account of the European Equity Alpha Strategy. Each portfolio may differ due to specific investment restrictions and guidelines. Past performance is not a reliable indicator of future performance. Inception date for the representative account is March 1991

Consistency of long term performance in different market conditions

1

38/154

2010

4

137/156

2009

1

26/146

2008

MSIM Track Record

1

35/160

2007

2111Quartile

SocGen Track Record

18/125

2005

27/125

2006 (until June)

37/129

20112004

Rank 10/124

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-55%

-45%

-35%

-25%

-15%

-5%

5%

15%

25%

35%

45%

55%

-55% -45% -35% -25% -15% -5% 5% 15% 25% 35% 45% 55%

MSCI Europe Net Index Returns

Eur

opea

n E

quity

Alp

ha C

ompo

site

Ret

urns

Rolling 1 Year Periods Since August 2008 through Ju ne 30, 2012

Monthly Data

Rolling 1 Year Returns vs. MSCI Europe Morgan Stanley European Equity Alpha Composite1 – Euro

Source: Morgan Stanley Investment Management Limited. Returns are shown gross of figures

Feb 2010Portfolio 37.84

Index 45.89

Jan 10Portfolio 24.56

Index 32.48

Mar 2010Portfolio 48.98

Index 53.17

Dec 2009Portfolio 25.76

Index 31.60

Nov 09Portfolio 15.52

Index 19.03

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Efficient risk / return profile

Source Mercer MPA, GROSS of fees. Period June 2007 – June 2012

Despite the concentrated nature of our portfolios, risk is well diversified and our portfolios are characterised by low and stable tracking errors and volatility which is no higher than the market

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YTD performance attribution

YTD as of June 30, 2012 1

Top Five Contributors:

• Amadeus +43 bps

• Rolls-Royce +31 bps

• Accor +29 bps

• MAN +28 bps

• Prudential +28 bps

Top Five Detractors:

• Wm Morrison -31 bps

• Xstrata -28 bps

• GDF Suez -27 bps

• BBVA -25 bps

• Anheuser-Busch (no exposure) -20 bps

(0.19)0.04(0.23)8.6014.237.1515.47Consumer Staples

0.70(0.03)0.746.0718.5010.7517.48Financials

(0.24)0.00(0.23)3.174.68(18.81)1.24Utilities

0.700.030.675.3310.7911.0312.85Industrials

(0.01)(0.15)0.14(3.01)11.99(2.17)14.08Energy

0.530.030.502.082.9534.651.72Information Technology

0.490.270.22(0.81)6.484.894.36Telecommunication Services

(0.44)0.06(0.50)1.449.89(5.91)7.89Materials

(0.25)(0.01)(0.24)12.258.669.358.13Consumer Discretionary

0.210.080.138.1711.838.9614.66Health Care

0.93(0.27)1.204.75100.005.67100.00Total

(0.24)(0.24)0.000.000.001.302.16Cash

(0.34)(0.34)0.000.000.00(1.72)(0.04)Currency Forward

TotalAllocation

Attribution Analysis - %

SelectionTotal

ReturnAverageweight

MSCI Europe - %

TotalReturn

Average weight

MS European Equity Alpha Rep Account - %

1. In Euro, gross of fees

MS INVF European Equity Alpha Fund

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YTD 2012 main transactions

GalpPortugalEnergy

ArcelorMittalNetherlands

MANGermany

BBVASpain

MetroGermany

SESFrance

Consumer Discretionary

NovartisSwitzerlandPharmaceuticals

RocheSwitzerland

GDF SuezFranceUtilities

Millicom IntlSwedenTelecommunications

Anglo AmericanUnited KingdomMaterials

CarphoneWarehouse

United Kingdom

SiemensGermany

ExperianUnited KingdomIndustrials

BarclaysUnited Kingdom

Financials SocGenSocGenFrance

Final SalesDecreaseIncreaseInitial PurchaseCountrySector

MS INVF European Equity Alpha Fund1

1. Data as of June 30, 2012. Subject to change daily. Provided for informational purposes only and should not be deemed as a recommendation to buy the securities mentioned or securities in the industries shown above. Morgan Stanley is a full-service securities firm engaged in securities trading and brokerage activities, investment banking, research and analysis, financing and financial advisory services.

Companies in bold and italic represent activitiesin 2Q2012

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What are we looking for

We look for:

• A strong track record of cash generation

• Better than average ROE / ROCE

• High earnings visibility and predictability

• Strong balance sheets

• Dominant or differentiated market positioning

• Proven management teams

We look for:

• Valuation and pricing anomalies

• Stocks trading at a discount to fair value

• Catalysts to unlock a company’s value

• Favourable risk / reward profile

ValuationQuality

We look for opportunities to

deliver high returns over the long term

We look for low risk companies

with strong track records

We also evaluate the market environment to identify factors

driving long term structural change

Macro context

European Equity Alpha/Eurozone Equity Alpha

Concentrated: 30 – 50 holdingsConviction: minimum 100bps active weightLong term: average turnover 25-35%Efficient risk / reward profile: high information ratio, low volatility

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Quality and Valuation: examples

Nestle

• Low cyclicality and good pricing power

• Solid growth from developed markets and increasing EM penetration

• High returns

• Low net debt / equity

• Double digit dividend growth over the last 10 years

KONE

• Third biggest global producer of lifts and escalator

• Strong position in emerging markets (30% earnings)

• Strong and stable cash flow generation thanks to maintenance (60% earnings)

• Consistent track record of margin progression

• Robust balance sheet

Provided for informational purposes only and should not be deemed as a recommendation to buy the securities mentioned or securities in the industries shown above. Morgan Stanley is a full-service securities firm engaged in securities trading and brokerage activities, investment banking, research and analysis, financing and financial advisory services.

12Page

Case Study: Imperial Tobacco GroupInvestment process in action

Provided for informational purposes only and should not be deemed as a recommendation to buy the securities mentioned or securities in the industries shown above. Morgan Stanley is a full-service securities firm engaged in securities trading and brokerage activities, investment banking, research and analysis, financing and financial advisory services.

222583

Ongoing contactContinuous reassessment

High and stable margins, good free cash flowHistorically strong return on capital employedAttractive on P/E and FCF yield

Management meetingsMaterial discount to intrinsic valueFavourable risk / reward profile

Portfolio Construction

European Universe:

600 Stocks

Attractive Ideas:

300 Stocks

Best Ideas:

100 Stocks

Final Portfolio:

30–50Stocks

Fundamental Analysis

Filtering and Screening

Research

Imperial Tobacco screens well on valuationIn a consolidated industry with pricing power

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Portfolio Construction

• Stocks with attractive individual risk reward profiles are combined

• Awareness of broader macro context

• Consideration to both the consolidated risk profile of the portfolio and risk relative to the benchmark

Characteristics

• Active position between 100 and 300bps

• Sector weight: unconstrained (ordinarily up to 7% active)

• Country weight: unconstrained (ordinarily up to 10% active)

• Diversified and well balanced portfolio (30 – 50 holdings)

• Invest for the long term (annual turnover between 25-35%)

• Portfolio fully invested

14Page

Selling is as important as buying

We continuously review our investments and aren’t afraid to adjust our holdings if our conviction changes or new ideas emerge

• We believe that successful investing is as much about being good at selling as it is being good at buying

• We will typically sell or trim our position in a stock if:

– Original prospects deteriorate

– Valuation relative to peers / sector becomes less attractive

– Risk management parameters are challenged

– We identify more compelling alternatives

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Managing the risks that matter

Stock Level

• Management risk

• Financial risk

• Business risk

• Valuation risk

Portfolio Level

• Stock weightings

• Inter-correlations

• Historical scenario analysis

• Diversification

• Stable tracking error

Also monitored by:Global Risk and Analysis team

Equity CIO function Compliance department

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3 years 1 - 12m Rolling Standard Deviation - MS INVF European Equity Alpha Fund vs. MSCI Europe

3 years 1 - 12m Rolling Tracking Error - MS INVF European Equity Alpha Fund

5

10

15

20

25

30

Jul-09 Jan-10 Jul-10 Jan-11 Jul-11 Jan-12MS INVF European Equity Alpha FundMSCI Europe Net Index

1

2

3

4

5

6

Jul-09 Jan-10 Jul-10 Jan-11 Jul-11 Jan-12


1. Data as of June 2012

16Page

15.6

14.0

12.6

16.0

17.6

5.7

2.0

6.9

6.9

0.0

12.4

11.7

10.7

15.0

18.3

6.5

2.8

8.6

9.4

4.6

Health Care

Energy

Industrials

Consumer Staples

Financials

Telecommunication Services

Information Technology


Materials

Utilities

MS INVF European Equity Alpha Fund MSCI Europe Index

Largest Portfolio Holdings Within Each Sector (%) 1

Sector Weightings

1. Data as of June 30, 2012. Subject to change daily. Provided for informational purposes only and should not be deemed as a recommendation to buy the securities mentioned or securities in the industries shown above. Morgan Stanley is a full-service securities firm engaged in securities trading and brokerage activities, investment banking, research and analysis, financing and financial advisory services. Applications for shares in any Morgan Stanley Investment Fund should not be made without first consulting the current Prospectus, Simplified Prospectus, Annual Report and Semi-Annual Report or other documents available in your local jurisdiction which are available free of charge from MSIM.

Source: Morgan Stanley Investment Management Limited

Morgan Stanley INVF European Equity Alpha Fund

Daimler, Reed Elsevier

HSBC, Zurich Financial Services, Prudential

Siemens, Rolls-Royce Holdings, Experian

Royal Dutch Shell, BG, BP

Anglo American, Umicore, Xstrata

Novartis, GlaxoSmithKline

Vodafone, Millicom International Cellular

Nestlé, British American Tobacco, Imperial Tobacco

Amadeus IT

17Page

This is why MSIM

• Part of Morgan Stanley, one of the world leading financial institutions

• An experienced and stable investment team built on trust and respect

• High conviction and concentrated portfolios

• Efficient risk / return profile

• Compelling and steady performance versus benchmark and peers

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Our MS INVF European Equity Alpha FundSection 2

19Page

(1.0)(1.0)(1.0)(1.0)(1.0)(1.0)(1.0)

(1.5)(1.5)

(1.6)1.91.9

2.12.12.12.12.1

2.22.2

2.5

-3 -2 -1 0 1 2 3

DiageoBASF

Rio TintoAnheuser-Busch

BSCHBhp Billiton

Novo NordiskRoyal Dutch Shell

Sanofi-AventisTotal

Amadeus It HoldingPrudential

BGNestle

Royal Dutch Shell Fresenius Vodafone

Imperial TobaccoBritish American Tobacco

Rolls-Royce

Difference to MSCI Europe (%)

We believe that to deliver long term outperformance, our holdings should be different to the benchmark with no neutral weightings and no long tail of stocks with low conviction

As a result, we only invest in our highest conviction stocks and seek to maintain a minimum active weight of 1% in each

The only reason we are underweight in any stock is because we don’t hold it

This creates a highly efficient portfolio


A high conviction approachMS INVF European Equity Alpha Fund


222585

Top Ten Over and Underweights 1

We typically maintain a minimum active weight of 1%

in each of our holdings

We have zero exposure to these stocks and therefore

by definition are underweight relative to the benchmark

Top 10 underweights

Top 10 overweights

20Page


1. Data as of June 30, 2012. All information is provided for informational purposes only and should not be deemed as a recommendation to buy or sell the securities mentioned or any securities from the Industries mentioned above. Applications for shares in any Morgan Stanley Investment Fund should not be made without first consulting the current Prospectus, Simplified Prospectus, Annual Report and Semi-Annual Report or other documents available in your local jurisdiction which are available free of charge from MSIM.

2. Relative to the MSCI Europe Net Index.


222590

2.0 4.1 United KingdomOil, Gas & Consumable FuelsRoyal Dutch Shell

3.2 5.3 SwitzerlandFood ProductsNestle

1.1 3.3 United KingdomOil, Gas & Consumable FuelsBG

1.6 3.8 United KingdomTobaccoBritish American Tobacco

0.6 2.8 United KingdomTobaccoImperial Tobacco

0.4 2.9 United KingdomAerospace & DefenceRolls-Royce

2.3 4.4 United KingdomWireless Telecommunication ServicesVodafone

0.2 2.3 GermanyHealth Care Providers & ServicesFresenius

0.1 2.0 SpainIt ServicesAmadeus It Holding

0.5 2.4 United KingdomInsurancePrudential

Index 2

(%)


(%)CountryIndustrySecurity

1.0 0.0SpainCommercial BanksBSCH

1.0 0.0BelgiumBeveragesAnheuser-Busch

1.0 0.0 United KingdomMetals & MiningRio Tinto

1.0 0.0 GermanyChemicalsBASF

1.0 0.0 United KingdomBeveragesDiageo

1.5 0.0 FrancePharmaceuticalsSanofi-Aventis

1.5 0.0United KingdomOil, Gas & Consumable FuelsRoyal Dutch Shell

1.0 0.0United KingdomMetals & MiningBhp Billiton

1.6 0.0 FranceOil, Gas & Consumable FuelsTotal

1.0 0.0DenmarkPharmaceuticalsNovo Nordisk

Index 2

(%)


(%)CountryIndustrySecurity

A high conviction approach

21Page

1. Data as of June 30, 2012. Subject to change daily. Provided for informational purposes only and should not be deemed as a recommendation to buy the securities mentioned or securities in the industries shown above. Morgan Stanley is a full-service securities firm engaged in securities trading and brokerage activities, investment banking, research and analysis, financing and financial advisory services. Applications for shares in any Morgan Stanley Investment Fund should not be made without first consulting the current Prospectus, Simplified Prospectus, Annual Report and Semi-Annual Report or other documents available in your local jurisdiction which are available free of charge from MSIM

2. Société Générale Equity Research. December 2008

Our investment process and philosophy results in a highly concentrated, yet diversified portfolio

Our portfolio typically averages between 30–50 stocks, whereas the average European Equitymutual fund typically has over 80 holdings2

Our portfolio is concentrated, with the top ten stocks accounting for 40% of assets

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3.5 SwitzerlandPharmaceuticalsRoche

3.5 United KingdomOil, Gas & Consumable FuelsBP

3.6 United KingdomPharmaceuticalsGlaxosmithkline

3.8 SwitzerlandPharmaceuticalsNovartis

4.4 United KingdomCommercial BanksHSBC

3.8 United KingdomTobaccoBritish American Tobacco

4.4 United KingdomWireless Telecommunication ServicesVodafone

3.3 United KingdomOil, Gas & Consumable FuelsBG

4.1 United KingdomOil, Gas & Consumable FuelsRoyal Dutch Shell

5.3 SwitzerlandFood ProductsNestle

39.7Total


(%)CountryIndustrySecurity Name

Top Ten Holdings 1

A well balanced and diversified portfolioMS INVF European Equity Alpha Fund

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(4.6)

(2.5)

(1.7)

(0.8)

(0.8)

(0.7)

1.0

1.9

2.3

3.2

-5 -4 -3 -2 -1 0 1 2 3 4 5

Utilities

Materials




Financials

Consumer Staples

Industrials

Energy

Health Care

Difference to MSCI Europe (%)

Different from the benchmarkMS INVF European Equity Alpha Fund

We are not constrained by sector weightings – we make investment decisions based on the attractiveness and value of individual companies

1. Data as of June 30, 2012. Subject to change daily. Provided informational purposes only and should not be deemed as a recommendation to buy the securities mentioned or securities in the industries shown above. Morgan Stanley is a full-service securities firm engaged in securities trading and brokerage activities, investment banking, research and analysis, financing and financial advisory services. Applications for shares in any Morgan Stanley Investment Fund should not be made without first consulting the current Prospectus, Simplified Prospectus, Annual Report and Semi-Annual Report or other documents available in your local jurisdiction which are available free of charge from MSIM


OverweightUnderweight

Sector weighting compared to benchmark 1

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Portfolio Characteristics1

Market Capitalisation Weights

1.Data as of June 30, 2012. Figures are from the Morgan Stanley INVF European Equity Alpha Fund. Applications for shares in any Morgan Stanley Investment Fund should not be made without first consulting the current Prospectus, Simplified Prospectus, Annual Report and Semi-Annual Report or other documents available in your local jurisdiction which are available free of charge from MSIM. Past performance is no guarantee of future performance and 5 years data is available upon request


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4046Mega Cap > $50 bn

5050Large Cap $5-50 bn

104Mid Cap $1-5 bn

00Small Cap <$1bn

$52.3$68.9Weighted Average Market Cap $bn

Source: Morgan Stanley Investment Management Limited, MSCI and FactSet

MSCI Europe Index(%)

MS INVF European Equity Alpha Fund(%)

Valuation RatiosQuality Ratios

7.2

13.9

1.3

4.3

9.4

7.4

13.5

1.4

4.1

11.5

Dividend Yield (%)

Price/Book (x)

Price/Earnings (x)

Price/Free Cash Flow

Free Cash Flow Yield (%)

22.3

24.6

3.9

20.1

20.1

4.0

ROCE

ROE

Past 5 yrsearnings growth

MS INVF European Equity Alpha Fund MSCI Europe Index

24Page

MS INVF European Equity Alpha FundGeographic allocations1

1. Data as of June 30, 2012. Subject to change daily. Provided informational purposes only and should not be deemed as a recommendation to buy the securities mentioned or securities in the industries shown above. Morgan Stanley is a full-service securities firm engaged in securities trading and brokerage activities, investment banking, research and analysis, financing and financial advisory services. Applications for shares in any Morgan Stanley Investment Fund should not be made without first consulting the current Prospectus, Simplified Prospectus, Annual Report and Semi-Annual Report or other documents available in your local jurisdiction which are available free of charge from MSIM. Source: Morgan Stanley Investment Management

1.120.271.39Societe Generale

1.200.051.25Galp Energia SGPS

1.380.551.93Banco Bilbao Vizcaya Argentaria S.A.1.920.112.03Amadeus IT Holdings S.A.

(0.27)4.223.96Spain

1.460.411.87Muenchener Rueckversicherungs-Gesellschaft AG

1.510.972.48Bayer AG

1.581.122.70Siemens AG

2.090.212.30Fresenius SE

1.730.131.85Reed Elsevier N.V.1.100.231.34ArcelorMittal S.A.

1.300.071.37MAN SE

1.250.601.85BNP Paribas S.A.

1.310.081.38Accor S.A.

1.380.471.85Schneider Electric S.A.

1.490.662.15Daimler AG

1.000.251.25Portugal(1.45)1.450.00Norway

1.630.151.78Kone Oyj

1.420.111.53SES S.A.

(0.47)0.470.00Ireland

0.661.131.78Finland(1.79)1.790.00Denmark

(0.08)0.080.00Greece

(0.77)3.963.19Netherlands(3.39)3.390.00Italy

0.3712.5112.88Germany

(6.09)14.108.00France

1.660.091.75Umicore S.A.0.001.751.75Belgium

(0.43)Active

0.43Benchmark

0.00Portfolio

AustriaCompany

1.280.101.38Millicom International Cellular S.A.

1.400.161.56Wm. Morrison Supermarkets plc

1.430.712.14Anglo American plc

1.472.043.51BP plc

1.711.863.58GlaxoSmithKline plc

1.840.572.40Reckitt Benckiser Group plc

2.092.284.37Vodafone Group plc

2.141.133.26BG Group plc

2.161.633.79British American Tobacco plc

2.210.632.84Imperial Tobacco Group plc

2.480.412.89Rolls-Royce Group plc

1.702.093.79Novartis AG

1.770.232.00Experian plc

1.832.584.41HSBC Holdings plc

1.900.482.38Prudential plc

1.660.542.20Zurich Financial Services AG

2.102.014.11Royal Dutch Shell plc (CL A)

1.550.341.89Tullow Oil plc

ActiveBenchmarkPortfolioCompany

2.123.215.32Nestlé S.A.

1.491.973.46Roche Holdings AG

1.270.421.69Xstrata plc

1.090.481.57Barclays plc2.660.002.66Cash

(3.51)4.881.38Sweden

12.1036.2948.39UK

0.00100.00100.00TOTAL

1.4513.3214.77Switzerland

25Page

Our MS INVF Eurozone Equity Alpha FundSection 3

26Page

12.414.4

4.7 5.3

0.2

(4.4)(1.7)

10.1 9.6

1.2 0.9

(3.9)

(7.5)

(2.2)

-10

-5

0

5

10

15

20

YTD 1 Year 2 Year Ann 3 Year Ann 4 Year Ann 5 Year Ann Since Inception

%

MS INVF Eurozone Equity Alpha Fund MSCI EMU/ MSCI Europe

Consistent long-term performanceMS INVF Eurozone Equity Alpha Fund

Fund performance compared to its benchmark 1, 2 at 31st August 2012

1. MSIM, Net of fees2. This fund received a windfall compensation payment in connection with Prudential Equity Group's settlement with the US SEC relating to market timing charges. Consequently, the net cash injection received in March 2010 and the related withholding tax, accrued in September 2010, have increased the fund’s AUM by €2,106,232 and €947,197, respectively, enhancing the overall 2010 fund’s performance by 458bps. The inception date of the fund is March 20003. Mercer, SocGen Pan European Concentrated Composite performance is provided for informational purposes only. The European Equity team joinedMSIM in December 2006. Performance information is provided as an indication of the European Equity team’s actual track record in managing various pan-European equity portfolios when working together with Société Générale Asset Management and may not be an indication of how MSIM’s European Equity portfolios may perform in the future4. Ranking: Mercer MPA. Data as of December 2011. This is a representative account of the European Equity Alpha Strategy. Each portfolio may differ due to specific investment restrictions and guidelines. Past performance is not a reliable indicator of future performance. Inception date for the representative account is March 1991

MS European Equity Alpha Representative Account 3,4

1

38/154

2010

4

137/156

2009

1

26/146

2008

MSIM Track Record

1

35/160

2007

2111Quartile

SocGen Track Record

18/125

2005

27/125

2006 (until June)

37/129

20112004

Rank 10/124

27Page

-60%

-50%

-40%

-30%

-20%

-10%

0%

10%

20%

30%

40%

50%

60%

-60% -50% -40% -30% -20% -10% 0% 10% 20% 30% 40% 50% 60%

MSCI EMU Index Returns

Eur

ozon

e E

quity

Alp

ha R

etur

ns

Rolling 1 Year Periods Since August 2008 through Ju ne 30, 2012Monthly Data

Rolling 1 Year Returns vs. MSCI EMUMorgan Stanley Eurozone Equity Alpha Composite1 – Euro

Source: Morgan Stanley Investment Management Limited. Returns are shown gross of figures

Feb 10Portfolio 38.03

Index 43.44

Mar 10Portfolio 53.43

Index 48.78

Jan 10Portfolio 26.10

Index 30.19

28Page

Our risk / return profile

Source Mercer MPA, GROSS of fees. Period June 2007 – June 2012

Despite the concentrated nature of our portfolios, risk is well diversified and our portfolios are characterised by low and stable tracking errors and volatility which is no higher than the market

29Page

YTD performance attribution

Top Five Contributors:

• Amadeus +66 bps

• Azimut +64 bps

• Safran +54 bps

• MAN +47 bps

• Total (no exposure) +44 bps

Top Five Detractors:

• Anheuser-Busch (no exposure) -51 bps

• Ansaldo -50 bps

• Faurecia -37 bps

• GDF Suez -36 bps

• BBVA -34 bps

YTD as of June 30, 2012 1

0.53(0.06)0.58(5.87)8.380.569.05Energy

0.040.19(0.15)(3.71)7.17(18.81)2.22Utilities

0.65(0.02)0.675.195.0234.652.54Information Technology

0.300.070.234.1912.885.6718.83Industrials

0.13(0.10)0.2314.077.8217.436.88Health Care

0.130.42(0.29)(8.91)7.11(17.57)3.50Telecommunication Services

2.02(0.01)2.03(0.66)18.989.8920.57Financials

(0.28)0.13(0.41)9.8711.147.0715.78Consumer Staples

(0.08)0.04(0.12)4.219.622.087.37Materials

(0.38)(0.18)(0.19)11.0911.879.2010.83Consumer Discretionary

3.070.492.582.85100.005.93100.00Total

0.010.010.000.000.000.272.43Cash

TotalAllocation

Attribution Analysis - %

SelectionTotal

ReturnAverageweight

MSCI EMU - %

TotalReturn

Average weight

MS Eurozone Equity Alpha Rep Account - %

1. In Euro, gross of fees

MS INVF Eurozone Equity Alpha Fund

30Page

(1.4)

(1.4)

(1.5)

(1.5)

(2.1)

(2.4)

(2.4)

(2.5)

(3.5)

(3.7)

2.4

2.4

2.4

2.5

2.5

2.6

2.7

2.7

2.7

2.7

-5 -4 -3 -2 -1 0 1 2 3 4 5

Groupe Danone

Air Liquide

E.ON

Lvmh

SAP

Anheuser-Busch Inbev

BSCH

BASF

Sanofi-Aventis

Total

Royal Ahold

ENI

Siemens

Imperial Tobacco

Kone

Royal Dutch Shell

Unilever

Pernod Ricard

Safran

Fresenius

Difference to MSCI EMU (%)


Top 10 Overweight

Top 10 Underweight

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We have zero exposure to these stocks and

therefore by definition are underweight relative to

the benchmark

We typically maintain a minimum active weight of 1% in each of our holdings

We believe that to deliver long term outperformance, our holdings should be different to the benchmark with no neutral weightings and no long tail of stocks with low conviction

As a result, we only invest in our highest conviction stocks and seek to maintain a minimum active weight of 1% in each

The only reason we are underweight in any stock is because we don’t hold it

This creates a highly efficient portfolio

Top Ten Over and Underweights 1


A high conviction approachMorgan Stanley INVF Eurozone Equity Alpha Fund1

31Page144116

1. Data as of June 30, 2012. Morgan Stanley INVF Eurozone Equity Alpha Fund. All information is provided for informational purposes only and should not be deemed as a recommendation to buy or sell the securities mentioned or any securities from the Industries mentioned above. Applications for shares in any Morgan Stanley Investment Fund should not be made without first consulting the current Prospectus, Simplified Prospectus, Annual Report and Semi-Annual Report or other documents available in your local jurisdiction which are available free of charge from MSIM.2. Relative to the MSCI EMU Index.

2.0 4.4 ItalyOil, Gas & Consumable FuelsENI

2.7 5.0 GermanyIndustrial ConglomeratesSiemens

0.4 2.8 FinlandMachineryKone

0.9 3.6 FranceBeveragesPernod Ricard

0.3 3.0 FranceAerospace & DefenceSafran

0.5 3.2 GermanyHealth Care Providers & ServicesFresenius

0.5 2.9 NetherlandsFood & Staples RetailingRoyal Ahold

0.0 2.6 United KingdomOil, Gas & Consumable FuelsRoyal Dutch Shell

0.0 2.5 United KingdomTobaccoImperial Tobacco

2.1 4.8 NetherlandsFood ProductsUnilever

Index 2

(%)MS INVF Eurozone Equity

Alpha Fund (%)CountryIndustrySecurity

1.4 0.0 FranceChemicalsAir Liquide

1.5 0.0 FranceTextiles, Apparel & Luxury GoodsLvmh

2.4 0.0 SpainCommercial BanksBSCH

1.4 0.0 FranceFood ProductsGroupe Danone

3.7 0.0 FranceOil, Gas & Consumable FuelsTotal

3.5 0.0 FrancePharmaceuticalsSanofi-Aventis

2.1 0.0 GermanySoftware SAP

1.5 0.0 GermanyElectric UtilitiesE.ON

2.4 0.0 BelgiumBeveragesAnheuser-Busch Inbev

Index 2

(%)MS INVF Eurozone Equity

Alpha Fund (%)CountryIndustrySecurity

2.5 0.0 GermanyChemicalsBASF

A high conviction approachTop Ten Over and Underweights 1

32Page

Our investment process and philosophy results in a highly concentrated, yet diversified portfolio

Our portfolio typically averages between 30–50 stocks, whereas the average European Equitymutual fund typically has over 80 holdings2

Our portfolio is concentrated, with the top ten stocks accounting for 40% of assets

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1. Data as of June 30, 2012. Subject to change daily. Provided for informational purposes only and should not be deemed as a recommendation to buy the securities mentioned or securities in the industries shown above. Morgan Stanley is a full-service securities firm engaged in securities trading and brokerage activities, investment banking, research and analysis, financing and financial advisory services. Applications for shares in any Morgan Stanley Investment Fund should not be made without first consulting the current Prospectus, Simplified Prospectus, Annual Report and Semi-Annual Report or other documents available in your local jurisdiction which are available free of charge from MSIM2. Société Générale Equity Research. December 2008

Morgan Stanley INVF Eurozone Equity Alpha Fund1

3.5 SpainCommercial BanksBanco Bilbao Vizcaya Argentaria

3.6 FranceBeveragesPernod Ricard

3.7 GermanyInsuranceAllianz

4.4 ItalyOil, Gas & Consumable FuelsENI

4.8 NetherlandsFood ProductsUnilever

4.4 GermanyPharmaceuticalsBayer

3.4 FranceCommercial BanksBNP Paribas

3.5 GermanyAutomobilesDaimlerchrysler

5.0 GermanyIndustrial ConglomeratesSiemens

3.3 GermanyInsuranceMuenchener Reuckversicherungsem

39.6Total


(%)CountryIndustrySecurity Name

A well balanced and diversified portfolio

Top Ten Holdings 1

33Page

19.2

16.6

21.0

9.0

11.7

7.5

6.9

2.5

3.2

0.0

12.9

11.9

18.6

8.0

11.6

8.8

9.2

4.9

7.0

7.1

Industrials

Consumer Staples

Financials

Energy


Health Care

Materials



Utilities

MS INVF Eurozone Equity Alpha Fund MSCI EMU Index

Largest Portfolio Holdings Within Each Sector (%) 1

Source: Morgan Stanley Investment Management

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Sector WeightingsMorgan Stanley INVF Eurozone Equity Alpha Fund


BNP Paribas, BBVA, Allianz

ArcelorMittal, Umicore, CRH

Royal Dutch Shell, ENI, Galp Energia

Amadeus IT

Siemens, Schneider Electric, Safran

Unilever, Ahold, Pernod Ricard

Bayer, Fresenius

Telefonica

Daimler, SES, Reed Elsevier

34Page

(7.1)

(3.8)

(2.4)

(2.3)

(1.3)

0.1

1.0

2.4

4.7

6.3

-8 -6 -4 -2 0 2 4 6 8

Utilities



Materials

Health Care


Energy

Financials

Consumer Staples

Industrials

Difference to MSCI EMU (%)

We are not constrained by sector weightings – we make investment decisions based on the attractiveness and value of individual companies


OverweightUnderweight

Sector weighting compared to benchmark 1

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1. Data as of June 30, 2012. Subject to change daily. Provided informational purposes only and should not be deemed as a recommendation to buy the securities mentioned or securities in the industries shown above. Morgan Stanley is a full-service securities firm engaged in securities trading and brokerage activities, investment banking, research and analysis, financing and financial advisory services. Applications for shares in any Morgan Stanley Investment Fund should not be made without first consulting the current Prospectus, Simplified Prospectus, Annual Report and Semi-Annual Report or other documents available in your local jurisdiction which are available free of charge from MSIMSee benchmark weightings in the appendix.

Morgan Stanley INVF Eurozone Equity Alpha FundDifferent from the benchmark

35Page 144113

Portfolio Characteristics

Market Cap Weights 1

Morgan Stanley INVF Eurozone Equity Alpha Fund

1.Data as of June 30, 2012. Figures are from the Morgan Stanley INVF Eurozone Equity Alpha Fund. Applications for shares in any Morgan Stanley Investment Fund should not be made without first consulting the current Prospectus, Simplified Prospectus, Annual Report and Semi-Annual Report or other documents available in your local jurisdiction which are available free of charge from MSIM. Past performance is no guarantee of future performance and 5 years data is available upon request

05Small Cap < 1 bn

2823Mega Cap > $50 bn

5863Large Cap $5–50 bn

149Mid Cap $1–5 bn

$31.7bn$27.4bnWeighted Average Market Cap $bn

Source: Morgan Stanley Investment Management, MSCI and FactSet

MSCI EMU Index(%)

MS INVF Eurozone Equity Alpha Fund(%)

Valuation RatiosQuality Ratios

8.1

7.3

1.3

4.2

11.5

8.2

5.8

1.1

4.6

11.6

Dividend Yield (%)

Price/Book (x)

Price/Earnings (x)

Price/Free Cash Flow

Free Cash Flow Yield (%)

16.1

20.8

11.5

13.2

15.6

11.6

ROCE

ROE

Past 5 yrsearnings growth

MS INVF Eurozone Equity Alpha Fund MSCI EMU Index

36Page

Geographic Allocations1

Morgan Stanley INVF Eurozone Equity Alpha Fund


1. Data as of June 30, 2012. Subject to change daily. Provided informational purposes only and should not be deemed as a recommendation to buy the securities mentioned or securities in the industries shown above. Morgan Stanley is a full-service securities firm engaged in securities trading and brokerage activities, investment banking, research and analysis, financing and financial advisory services. Applications for shares in any Morgan Stanley Investment Fund should not be made without first consulting the current Prospectus, Simplified Prospectus, Annual Report and Semi-Annual Report or other documents available in your local jurisdiction which are available free of charge from MSIM.

2.30.32.6SES S.A.

1.50.01.5Faurecia

2.12.34.4Bayer AG

2.70.63.2Fresenius SE

1.91.83.7Allianz SE

2.01.63.5Daimler AG

2.30.52.7Henkel AG

2.01.13.1Schneider Electric S.A.

1.60.01.6Hamburger Hafen und Ligistik AG

2.41.03.3Muenchener Rueckversicherungs-Gesellschaft AG

1.80.22.0Accor S.A.

1.91.43.4BNP Paribas S.A.

2.70.33.0Safran S.A.

2.42.75.0Siemens AG

2.70.93.6Pernod Ricard S.A.

2.10.93.0AXA S.A.

1.90.22.0MAN SE

1.10.61.8Societe Generale S.A.

2.50.42.8Kone Oyj0.12.72.8Finland

(0.1)29.629.5Germany

(9.5)33.323.8France

1.90.22.1Umicore S.A.(2.0)4.12.1Belgium(1.0)

Active1.0

Benchmark0.00

PortfolioAustriaCompany

2.60.02.6Royal Dutch Shell Plc (CL A)

2.40.52.9Royal Ahold N.V.

1.90.32.2Reed Elsevier N.V.

2.30.32.5Amadeus IT Holdings

2.50.02.5Imperial Tobacco Group Plc

1.60.62.1ArcelorMittal S.A.

2.30.02.3Azimut Holding

2.21.33.5Banco Bilbao Vizcaya Argentaria S.A.

1.60.01.6Ansaldo STS

1.12.13.2Telefonica S.A.

2.42.04.4ENI S.p.A.

2.72.14.8Unilever N.V.

1.80.11.9Galp Energia SGPS

(0.2)0.20.00Greece1.61.12.7Ireland2.20.52.7CRH Plc0.38.08.3Italy

2,79.412.1Netherlands

1.30.61.9Portugal

2.40.002.4Cash

5.20.005.2UK

0.00100.00100.00TOTAL

(0.8)

Active

10.0

Benchmark

9.2

Portfolio

Spain

Company

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Additional informationAppendix 1

38Page

Key characteristics1

We look for strong cash flows and better than average ROE / ROCE

Our investment process is designed to identify European companies which meet our clear quality and value criteria

We believe that companies which are able to deliver superior ROE and are generating high free cash flows are able to deliver superior returns over the long term

• We look for better than average ROE / ROCE among th e companies we invest in

• We invest in companies which typically generate a h igh level of free cash flow

Valuation

We look for opportunities

to deliver high returns

over the long term

Quality

We look for low risk companies

with strong track records

1.Period April 2007 – June 2012. Past performance is no guarantee of future performance and 5 years data is available upon request.


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Return on Capital Employed Free Cash Flow Yield

13

17

21

25

Apr-07 Jan-08 Oct-08 Jul-09 Apr-10 Jan-11 Oct-11

Per

cent

(%

)

MS INVF European Equity FundMSCI Europe Net Index

2

4

6

8

10

Apr-07 Jan-08 Oct-08 Jul-09 Apr-10 Jan-11 Oct-11

Per

cent

(%

)


MSCI Europe Net Index

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Filtering and ScreeningOur high level financial analysis seeks to identify potentially attractive investment ideas

We perform initial filtering and screening to identify potentially attractive investment ideas worthy of more detailed analysis

We focus on high level financial analysis to evaluate the performance and characteristics of individual stocks

• From the European universe, identify quality stocks with pricing and valuation anomalies which could present attractive investment ideas

Objective

• We employ a series of high level financial filters, using a range of external screens

– At this stage, our analysis focuses on valuation and earnings trends, revisions and inflexion points

• We also complement this by bringing to bear the team’s experience and knowledge of the European landscape

Approach

• 300 potentially attractive investment ideas

• Typical characteristics include:

– Attractive valuations

– Track record of performance

– Strong cash flow generation

– High returns on investment

– Strong balance sheet

– High and sustainable margins vs peers in the sector

Output

European Universe

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ResearchTo identify our best ideas we perform deeper research and qualitative analysis

During the research stage, we perform more detailed financial analysis on the 300 potentially attractive investment ideas identified during our filtering and screening process

We also leverage our experience of the European market to perform more qualitative analysis, taking into account broader macro drivers which could influence a stock’s long term value potential

• Narrow down our 300 attractive investment ideas to the best 100 ideasObjective

• Perform broader and deeper research and qualitative analysis, leveraging MSIM equity and fixed income teams, external research and Morgan Stanley resources

• Analysis typically includes:

– Performing financial analysis

– Conducting key value driver analysis

– Enhancing our understanding of the company’s business model

– Evaluating corporate risk profiles

– Building an understanding of the management team’s vision, strategy and execution track record

– Leveraging our extensive network of local brokers and contacts cultivated over many years to obtain primary insights

• We also evaluate stocks in light of their market and competitive position and any sector trends or emerging structural themes which could impact attractiveness

Approach

• A watch list of the team’s view on the 100 best stock ideas

• The fundamental analysis requiredOutput

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41Page

Fundamental analysisThe final stage of the process is focused on identifying our highest conviction stocks

Finally, we conduct rigorous fundamental analysis on our 100 best ideas to identify the few stocks which we believe present the best long term opportunitiesto add value

We will only invest if we have high conviction and confidence in a stock’s upside potential

• Select the stocks to create the final portfolioObjective

• Recommendations including:

– Rationale for selection and anticipated upside potential

– Risk / return analysis

– Fit with, or implications on, the existing portfolio and client guidelines

– A funding strategy and trade timeline

• Final portfolio which:

– Is concentrated and comprised of our highest conviction stocks (typically 30–50 stocks)

– Has no benchmark neutral weightings (minimum active stock weight typically +1%)

– Does not have a long tail

– Is typically fully invested

Output

• During this stage we conduct detailed scenario and sensitivity analysis oneach stock’s financials

• We conduct:

– Rigorous analysis on the company’s forecasts (e.g. sales, margins, capital expenditures and cash flow)

– Discounted cash flow and sum of the parts analysis to determine fair value(other techniques are also used)

– Focused meetings with the management team to better challenge its strategy and forecasts, validate our assumptions and gain true insight into their capability

• We develop concise research notes with recommendations for each stock

• We then conduct a relative assessment of the recommendations at theteam’s weekly investment meeting

Approach

European Universe

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42Page

The top chart shows how many equally weighted stocks are required to achieve a market return profile

The lower chart illustrates how non-market risk is eliminated as the number of stocks increases

30-40 stocks is the threshold above which portfolios become diversified

Diversification – How Many Stocks ?Evidence suggests that diversification is achieved by holding around 30-40 stocks

43Page

Non-investment grade rallies Rallies are sharp but short

We prefer to invest in quality stocks for the long term

Non-Investment Grade Stocks Based on S&P Senior Deb t Rating: Relative Annual ReturnsCap Weighted Returns

As of Month-End, December 2011

(40%)

(30%)

(20%)

(10%)

0%

10%

20%

30%

40%

50%

96 97 98 99 0 1 2 3 4 5 6 7 8 9 10 11

44Page

Market OutlookSection 4

45Page

• Austerity programmes continue and are working slowly and painfully

• The European summit in early July represents important steps in the right direction

• Draghi will do ‘whatever it takes’ to support the Euro

• Following the ECB meeting this has substance

• Objective: “…to repair monetary policy transmission channels which today are hampered and to recreate a single monetary policy framework”

• The ECB remains open to further non standard monetary measures

• Sovereigns will be able to fund themselves at sustainable rates

• More visibility on policy front should sustain a re-rating of European Equities

Europe is making progress…

European Summit:

- Work towards closer financial /banking union, ECB the single regulator-Breaking the link between banks and sovereigns (EFSF/ESM funding for banking sector bail-outs)

ECB:

Outright Monetary Transactions programme with guidance about terms, conditionality, maturity, and seniority (pari passu)

46Page

… supporting already attractive European Equities

• Euro weakness favours European exporters

• Europe is leveraged to global recovery

• European company finances are healthy

• Expectations for European Equities are at historical lows

• European earnings are at historically depressed levels vs. US

• Europe is cheap and investors are underweight

47Page

Europe is moving in the right direction

Spread to German 2 years Government Bond Yield (bps )

Source: DataStream, MSCI, JP Morgan Research September 2012

48Page

Source: 2012 April WEO, International Monetary Fund

Outlook improving in the years ahead

Debt ratio to peak earlier and at lower levels than other economies

Fiscal consolidation is largely frontloaded

49Page

Source: Ecofin 2012, Spring Forecast, June 2012

Improving fiscal position for Euro Area

External rebalancing is moving on

50Page

Strengthening USD has implied better European Equities

MSCI Europe vs. US and EUR/USD

Source: MSCI, Bloomberg, JP Morgan, September 2012

51Page

Source: Bloomberg, JP Morgan, September 2012

EURO provides a boost …

Trade-weighted Euro

The trade-weighted Euro is at the lowest level since 2003

52Page

… for the Eurozone economy

Eurozone export share of GDP

Source: Eurostat, JP Morgan, August 2012

A weaker Euro could boost European exports and competitiveness, positively impacting GDP growth

53Page

Strong international exposure by EU companies

Source: Morgan Stanley Research estimates, September 2012

MS GDP forecasts weighted by geographical revenue e xposure

54Page

Lower economic growth does not necessarily mean weaker equity markets

European Equities can outperform US Equities when EUR weakens vs the USD

Source: JP Morgan Research, Datastream, MSCI, January 2012

Periods of European Equities outperformance over US Equities

0.7

0.8

0.9

1.0

1.1

1.2

1.3

1.4

1.5

1.6

1.7

72 74 76 78 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 12

MSCI Europe relativ e to US MSCI Europe relativ e to US

-11%-2.0%Dec 04 to Mar 06

-7%0.3%Jun 99 to Feb 00

-26%-3.5%Aug 92 to Jan 94

-10%0.0%Jan 88 to Mar 89

-30%-8.9%Dec 80 to Apr 86

-2%-3.1%Oct 76 to Oct 77

EUR/USDEuropean relative to US GDP growthPeriod

55Page

European corporates remain healthy …

Source: IBES, MSCI, Datastream, Morgan Stanley Research, September 2012. Note: data excludes financials sector.

e = IBES estimates

European companies – EBITDA Margins %

European non-financials at cycle low debt ratios - %

56Page

Eurozone non financials Dividend Yield is above its Credit Yield

Source: Datastream, STOXX, IBOXX, Morgan Stanley Research, September 2012

Euro Stoxx ex Financials Dividend Yield vs. IBoxx Eur Non-Financials Credit Yield

57Page

Equities attractive vs. Bonds

Source: MSCI, Global Financial Data, Morgan Stanley Research, September 2012

MSCI Europe – Dividend Yield to Bond Yield

58Page

Market implies negative real earnings growth annual ly for 20 yearsAssuming a 3.5% ERP

The demise of growth expectations

Source: Goldman Sachs Research, August 2012

59Page

Market-wide undervaluation in Europe

Source: MSCI, DataStream, Morgan Stanley Research, September 2012

Upside to fair value for sectors based on 20-yrs av erage ROE and P/E assumptions

60Page

Trough valuationsEuropean Trend P/E

Source: MSCI, Morgan Stanley Research, Mirabaud Securities, September 2012

MSCI Europe – P/BV

61Page

Europe looks cheap relative to global markets

Source: Thomson Reuters, Credit Suisse Research, August 2012

European Shiller P/E relative to global

Continental Europe non-financials P/B relative to W orld

62Page

MSCI Europe TR Index vs MSCI USA

Europe at 30-yr total return low vs US

Source: Morgan Stanley Research, July 2012

63Page

What are the chances of that? odds of particular return when Buying European market in the current P/E band (since 1973)

0

5

10

15

20

25

30

35

40

45

50

< -20% -20% to -10% -10% to 0% 0% to +10% +10% to +20% > +20%

1-year 3-year 5-yearSubsequent compound return, by returns band

% of months that saw a particular return

Source: Absolute Return Strategies, June 2012

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Investment Team BiographiesAppendix 2

65Page

The Team

Matthew LeemanManaging Director

Riccardo Bindi

[email protected] is a portfolio manager for the European Equity team. He joined Morgan Stanley in 2006 and has 18 years investment experience. Prior to joining the firm, Riccardo was a European equity portfolio manager at Société GénéraleAsset Management. Prior to that, Riccardo was at Lombard Odier DarierHentsch where he was responsible for European small/mid cap equities. Riccardo received a B.Sc. in economics from University of Bath and an M.Sc. in economics from University of London. He also holds the Chartered Financial Analyst designation and is a member of UKSIP and the CFA Institute.

Executive Director Executive Director

Jonathan Day

[email protected] is a portfolio manager for the European Equity team. He joined Morgan Stanley in 2006 and has 15 years of investment experience. Prior to joining the firm, Jonathan was a European equity portfolio manager at Société GénéraleAsset Management. Prior to that, he was a fund manager on the European desk at Morgan Stanley Quilter, responsible for Europe ex-U.K. and U.K. balanced accounts. Jonathan holds the ASIP designation and is an associate member of the CFA Institute.

105780

[email protected] is head of the European Equity team. He joined Morgan Stanley in 2006 and has 18 years investment experience. Prior to joining the firm, Matthew was a director at Société Générale Asset Management where he managed Pan European, Europe Ex-U.K. and Eurozoneequity strategies. Previously, Matthew was a partner in Mont Blanc, a European hedge fund. Before that, he was a senior fund manager on the European desk at Lombard Odier Darier Hentsch where he was responsible for their largest institutional clients. Matthew received a B.A. in modern languages (French and German) from King’s College, London, and an M.A. in European Management from Cranfield Business School.

66Page

The Team

Jaymeen PatelExecutive Director

[email protected] is a portfolio manager for the European Equity team. He joined Morgan Stanley in 1998 and has 15 years of industry experience. Prior to joining the firm, he held positions at Fidelity Investments, State Street Bank and Trust Company and Salomon Brothers Asset Management. Jaymeen received a double honors B.Eng. and B.Comm. with language from the University of Birmingham, and an M.B.A. from the University of Warwick.

142502

Luca ArmandolaVice President

[email protected] is a portfolio specialist for the European Equity team. He joined Morgan Stanley in 2003 and has 10 years industry experience. Prior to this, Luca was a member of the Italian sales team at MSIM. Prior to joining the firm, Luca worked in sales at INVESCO Italia. Luca received a Laurea in business administration from Universita degli Studi di Pavia, Italy and a M.A. in corporate finance at University California Berkeley. Luca holds the Investment Management Certificate (IMC) and he is member of the CFA UK Institute

67Page

Compliance Disclosure

For Business and Professional Investors Only and Not To Be Used With The General Public

This financial promotion was issued and approved in the UK by Morgan Stanley Investment Management Limited, 25 Cabot Square, Canary Wharf, London E14 4QA, authorized and regulated by the Financial Services Authority, for distribution to Professional Clients or Eligible Counterparties only and must not be relied upon or acted upon by Retail Clients (each as defined in the UK Financial Services Authority’s rules). This communication is only intended for and will be only distributed to persons resident in jurisdictions where such distribution or availability would not be contrary to local laws or regulations. Applications for shares in any Morgan Stanley INVF fund should not be made without first consulting the current Prospectus, Simplified Prospectus, Annual Report and Semi-Annual Report (“Offering Documents”), or other documents available in your local jurisdiction which are available free of charge at the address above. The document has been prepared solely for information purposes and does not constitute an offer or a recommendation to buy or sell any particular security or to adopt any specific investment strategy. The material contained herein has not been based on a consideration of any individual client circumstances and is not investment advice, nor should it be construed in any way as tax, accounting, legal or regulatory advice. To that end, investors should seek independent legal and financial advice, including advice as to tax consequences, before making any investment decision. Except as otherwise indicated herein, the views and opinions expressed herein are those of Morgan Stanley Investment Management Growth Team, are based on matters as they exist as of the date of preparation and not as of any future date, and will not be updated or otherwise revised to reflect information that subsequently becomes available or circumstances existing, or changes occurring, after the date hereof. This communication is a marketing communication. It is not a product of Morgan Stanley’s Research Department and should not be regarded as a research recommendation.

Any index referred to herein is the intellectual property (including registered trademarks) of the applicable licensor. Any product based on an index is in no way sponsored, endorsed, sold or promoted by the applicable licensor and it shall not have any liability with respect thereto. All information contained herein is proprietary and is protected under copyright law.

Risk Considerations:

There is no assurance that a portfolio will achieve its investment objective. Portfolios are subject to market risk, which is the possibility that the market values of securities owned by the portfolio will decline and that the value of portfolio shares may therefore be less than what you paid for them. Accordingly, you can lose money investing in this portfolio. Please be aware that this portfolio is subject to certain additional risks. Equity. In general equity securities values also fluctuate in response to activities specific to a company. Foreign and emerging markets. Investments in foreign markets entail special risks such as currency, political, economic, and market risks. The risks of investing in emerging-market countries are greater than the risks generally associated with foreign investments. Small- and mid-cap stocks. Stocks of small- and medium-sized companies entail special risks, such as limited product lines, markets, and financial resources, and greater market volatility than securities of larger, more- established companies. Nondiversification. Nondiversified Portfolios often invest in a more limited number of issuers. Assuch, changes in the financial condition or market value of a single issuer may cause greater volatility.

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Msim european equities sept12 gstaad

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