the cresfort investment group at morgan stanley ... · the cresfort investment group: ......

Capabilities Overview

The Cresfort Investment Group at

Morgan Stanley

1

I. The Cresfort Investment Group Overview

II. Equity Management Overview

III. Fixed Income Management Overview

IV. Resource Summary

V. Biographies

VI. Recommended Portfolio

VII. Important Information

Table of Contents

The Cresfort Investment Group Overview

3

Portfolio Management Program

Established in 1979 to provide individual investors with a level of personalized portfolio management typically

reserved for major institutional investors

All portfolios are managed individually on a fully discretionary basis by Financial Advisors at Morgan Stanley who

have been qualified by the firm to independently manage client assets based on training, experience and

commitment to service

As your Portfolio Manager, I and my team can offer you:

Direct access to the investment professionals managing your portfolio

Personalized service

A disciplined, multipart investment process

Ongoing client communications and reporting

Access to the intellectual capital and global resources of Morgan Stanley

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Your Financial Advisor will

Identify each client’s specific financial profile

Review each client’s tolerance for risk

Work with the Portfolio Manager in outlining an appropriate investment strategy

Communicate changes in needs or objectives to the Cresfort team

Your Portfolio Manager will

The Cresfort Investment Group: What We Do

Our Mission

To provide a high level of service for the high net worth client by tailoring

portfolios to meet unique needs, goals, and objectives. We accomplish this by

forging a relationship between the client, a Morgan Stanley Financial Advisor,

and The Cresfort Investment Group.

Design, construct, and manage a diversified, risk controlled investment portfolio designed to meet each client’s goals and objectives

Tailor the portfolio to fit circumstances surrounding client-specific situations

Monitor the portfolio and modify accordingly

5

Client

Financial

Advisor

Portfolio

Manager

The Cresfort Investment Group: A Relationship

The key to this relationship is ongoing communication between parties.

Source: Global Wealth Management Investments (GWMI).

6

Each client’s specific tax situation is considered when managing the

investment portfolio, including tax bracket, gains, carry forward, etc.

The Cresfort Investment Group: Our Value Added

Profiling of Clients

Tailored Portfolio

Management

Tax – Efficient Management

Breadth and Depth of

Investment Experience

The Cresfort Investment Group provides value through our:


Manager Access

Collaborate with Financial Advisor to create an in-depth financial profile of

the client’s needs, goals, and objectives.

Build and manage an investment portfolio tailored to meet each client’s

unique requirements.

Leverage the Cresfort Investment Group’s breadth and depth of experience

for equity, fixed income, and balanced portfolio management.

Ongoing communication can help strengthen and maintain relationships while

providing a higher level of service.

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Traditional Equity Portfolio

Cresfort Customized Multi-Cap Equity Portfolio

Traditional Balanced Portfolio

Combination of Traditional Equity

and Fixed Income Portfolio

Fixed Income Portfolio

Cresfort Customized Fixed Income Portfolio

The Cresfort Investment Group: Portfolio Management Options

The Cresfort Investment Group Equity Management Overview

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The Cresfort Investment Group: Our Investment Philosophy


Great Companies Good Valuations Opportunity for

Long-term

Investment Success High returns on capital

Strong, motivated

management

Consistent growth

Price / Cash flow

Price / Earnings

P/E / Growth

P/E / ROE

OR

Solid market position

History of earnings

growth

Strong Balance Sheet

Good Companies Great Valuations Opportunity for

Long-term

Investment Success Attractive relative

P/E & P/CF

+ =

+ =

10

The Cresfort Investment Group: Our Assessment of Intrinsic Value

Discount Rate

(Cost of Capital)

1. Increase 1. Increase CFROI® 1. Increase CFROI®

or hold CFROI®

2. Grow Assets 2. Then Grow 2. Contract Assets

Positive

Spread

Neutral

Neg.

Spread

Strategy Options

for

Wealth Creation

Source: Credit Suisse HOLT. HOLT, a division of Credit Suisse, offers corporate performance, valuation, and strategic analysis frameworks. A provider of valuation software and independent research, HOLT

services clients throughout North America, Europe and Asia Pacific. The company provides a “state-of-the-art” valuation platform and database covering approximately 18,000 companies in 28 countries. HOLT

is known in the marketplace for its strong client servicing and objective valuation work.

© 2008 Credit Suisse and its subsidiaries and affiliates. Used by permission. All rights reserved. CFROI® is a registered trademark of Credit Suisse or its affiliates in the United States and other countries.

CFROI – Cash Flow Return on Investment

CFROI® (%)

11 Source: Global Wealth Management Investments (GWMI).

The Cresfort Investment Group: Our Portfolio Construction Process

1.) Start with a…

1,600+ Stock Universe

2.) Screen for…

Return on invested capital

Cost of capital

This results in…

750 Stocks 3.) Apply fundamental analysis…

Strength of Management

Industry Competitive Positioning

Opportunities for Growth

Determine downside risk potential

Producing a...

375 Stock Focus List

4.) Perform valuation…

Discount future cash flows/earnings

Create price targets

Rank by expected total return

Review for direction of earnings

dddrevisions

Arriving at...

100 Stocks

5.) Construct the portfolio…

Tailored to meet client’s individual objectives

Investment goals

Specified market cap

Income Needs

Diversified by economic sectors

Resulting in a ...

35-50 Name Portfolio

1,600+ Stock Universe

750 Stocks

375 Stocks

100 Stocks

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The Cresfort Investment Group: Our Ongoing Review/Sell Discipline

This can occur when:

• The stock has a high relative valuation and deteriorating sentiment

• Alternative purchase idea provides better risk/return characteristics

Factors affecting a company’s fundamentals could include:

• Deteriorating business position (loss of market share, reduced industry growth, shrinking margins)

• Erosion of intrinsic value (increased leverage, dilutive acquisition or stock issuance, etc.)

Tax considerations include:

• Client’s individual tax bracket

• Short-term and long-term gains and losses

• Harvesting gains and losses throughout the year

A position will be reviewed for sale in a client’s portfolio when its after-tax expected risk-

return contribution has become less favorable relative to other investment opportunities.


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The Cresfort Investment Group: Our Continuous Cycle of Management

Portfolio

Management

Stock

Universe

Screening

Review

Individual

Client Profile

Apply

Fundamental

Investment

Research

Objectives,

Risk Tolerance,

Tax Requirements

Utilize

Proprietary

Resources and

Tools

Database and

System

Overlays

The Cresfort Investment Group Fixed Income Management Overview

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The Cresfort Investment Group: Fixed Income Management Overview

Fixed Income Management includes:


Regular analysis of credit, interest-rate, and liquidity risk

Finding appropriately valued securities that fit your risk profile and income goals

Investing to capitalize on values consistent with the fundamental realities of the marketplace and your goals

Comprehensive management of individual bond issues over time

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Determine interest

rate risk

appropriate to

achieve client

objectives.

Level of Interest

Rate Risk

Allocate according to

tax status and relative

value.

Sector Allocation 1 2

Client Investment

Objectives

Identify objectives and constraints.

Define guidelines and benchmark.

Build initial portfolio

and manage to

market opportunities.

Security Selection 3

The Cresfort Investment Group: Fixed Income Investment Process The Portfolio Manager works with the Financial Advisor to develop guidelines for the three

key decisions made during the ongoing management of fixed income portfolios.


17

Client sensitivity to price volatility

Need for principal and/or interest cash flows

The Cresfort Investment Group: Fixed Income Investment Process

Interest Rate Risk

Appropriate interest rate risk is determined based on individual client objectives:


18

Federal/local tax bracket

AMT status

Loss carry forward

Gain/loss constraints

Client’s Tax Circumstances

Minimum credit rating allowed

Price volatility

Allowed sectors

Liquidity requirements

Client’s Constraints

Valuation of muni vs. taxables

Relative valuation across taxable

ddsectors

Technical supply and demand

ddfactors

Market Valuation

Asset Allocation Decision


Sector Allocation

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Credit Analysis Market Access Trading

Evaluate financial and dfundamental strength of dissuer

Balance sheet analysis

Industry insights

Direct access to large dnumber of broker dealers

Participation in both dprimary and secondary dmarkets

Ongoing flow of market dinformation

Relative Value

Best execution


Security Selection & Trading

The Cresfort Investment Group Resource Summary

21 Source: Global Wealth Management Investments (GWMI).

The Cresfort Investment Group: Resource Summary

Breadth and

Depth of

Investment

Experience

Dedicated Team

Approach to

Fully Utilize

Resources

Proprietary

Models and

Screening Tools

Research from

Top Research

Teams on Wall

Street

Information

System and

Database

Overlays

Equity and

Fixed Income

Perspectives

Client and FA

Communication

Our Client-

Centric

Approach

Research from

one of the Top

Research Teams

on Wall Street

Proprietary

Models and

Screening Tools

Dedicated Team

Approach to

Fully Utilize

Resources

Breadth and

Depth of

Investment

Experience

Client and FA

Communication

Equity and Fixed

Income

Perspectives

Information

System and

Database

Overlays

The Cresfort Investment Group Biographies

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Mark H. Felder, CFA Senior Portfolio Management Director

Executive Director – Wealth Management

The Cresfort Investment Group at Morgan Stanley

Began career in the investment industry in 1981

Investment industry experience as an Analyst, Director of Research and Portfolio Manager

Experienced in managing personal, retirement, foundation, and pension/profit sharing accounts

Former Director of Research at The Rothschild Company, 1992-1995

Former Research Analyst at Legg Mason Wood Walker, 1984-1992

Former Research Analyst at National Bank of Detroit 1981-1984

M.M. - J.L. Kellogg Graduate School of Mgmt. (Northwestern University) – 1981; B.S. - Drexel University with highest honors – 1980

Former President and current member of Baltimore CFA Society

Achieved Chartered Financial Analyst (CFA®) designation in 1984 Address: 650 South Exeter Street Suite 1100 Baltimore, MD 21202 Tel. No.: (410)736-5512 Fax. No.: (443)874-1557 Email: [email protected]

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Eric S. Williams, CFA Senior Portfolio Management Director

Senior Vice President – Wealth Management



Investment industry experience as an Analyst and Portfolio Manager

Former Director of Equity Products at TradeStreet Investment Associates, an institutional client advisor wholly owned by Bank of America, employed also at its predecessors, 1986-1998

Former Research Analyst and Portfolio Manager at what is now JP Morgan & Chase Co., 1981-1986

MBA - Indiana University - Kelley School of Business – 1981 and summa cum laude graduate from East Carolina University – 1979

Achieved Chartered Financial Analyst (CFA®) designation in 1984

Holds FINRA Series 7, 63 & 65 licenses

Address: 17505 West Catawba Avenue Suite 300 Cornelius, NC 28031 Tel. No.: (704)896-9102 Fax. No.: (704)625-9329 Email: [email protected]

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Michael J. Walker, CFA Portfolio Management Director

Senior Vice President – Wealth Management




Former Chief Investment Officer and Senior Portfolio Manager for Oak Tree Portfolio Management, 1992-1999

Former Director of Research - Chapin, Davis, Inc., 1991-1996

Former Research Analyst at Legg Mason Wood Walker, 1984-1991

MBA - Kenan-Flagler Business School (University of North Carolina) – 1981 ; B.A. - Middlebury College – 1976



Address: 650 South Exeter Street Suite 1100 Baltimore, MD 21202 Tel. No.: (410)736-5503 Fax. No.: (443)874-1557 Email: [email protected]

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Mark N. McCall, CFA Portfolio Management Director

First Vice President – Wealth Management




Former Senior Portfolio Manager - Paladin Investment Associates, 2000-2002

Former Senior Portfolio Manager - TradeStreet Investment Associates, 1997-1999

Former Director of Equity Research at TradeStreet Investment Associates, an institutional client advisor wholly owned by Bank of America, 1996

Former Equity Analyst - Bank of America (and predecessor organizations), 1987-1990, 1993-1995

Former Manager of Investor Relations - NationsBank, 1990-1993

MBA - University of North Carolina - 1983 and B.S. – Wake Forest University - 1981


Holds FINRA Series 7 & 63 licenses Address: 17505 West Catawba Avenue Suite 300 Cornelius, NC 28031 Tel. No.: (704)896-9101 Fax. No.: (704)625-9330 Email: [email protected]

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Eric S. Franz, CFA Portfolio Management Director First Vice President – Wealth Management The Cresfort Investment Group at Morgan Stanley



Re-joined Legg Mason Portfolio Management as a Portfolio Manager in 2004

Former Portfolio Specialist with Legg Mason Institutional Funds, 2002-2004

Former Associate Portfolio Manager and Equity Analyst with Legg Mason Portfolio Management, 1999-2001, and Carroll Financial Associates, 1996-1998

Former Account Executive with T. Rowe Price, 1993-1996

M.S. – Loyola University Maryland – 1998; B.S. – Towson University – 1992

Serves as an active member of the CFA® Institute and the Baltimore CFA Society


Holds FINRA Series 6, 7 & 65 licenses Address: 650 South Exeter Street Suite 1100 Baltimore, MD 21202 Tel. No.: (410)736-5504 Fax. No.: (443)874-1557 Email: [email protected]

28

Russell A. Phelps, CFA Portfolio Management Director





Portfolio Manager for the TechSelect and Total Return model portfolios

15 years of prior work experience as an Engineer and Sales Engineer in the semiconductor and electronics industries

MBA – Robert H. Smith School of Business, University of Maryland (concentration in Finance and Accounting) – 1995

B.S. in Engineering from Loyola University Maryland – 1986

Serves as an active member of the CFA® Institute and the Baltimore CFA Society


Holds FINRA Series 7 & 66 licenses Address: 650 South Exeter Street Suite 1100 Baltimore, MD 21202 Tel. No.: (410)736-5506 Fax. No.: (443)874-1557 Email: [email protected]

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Beth Bartz Portfolio Management Director




Investment industry experience as a Portfolio Manager and Trader

Joined Legg Mason Portfolio Management as Vice President, Fixed Income Portfolio Manager in 2004

Former Vice President and Portfolio Manager at Vanderbilt Capital Advisors, LLC in New York, NY, 1997-2004

Former Mortgage and Asset Backed Trader for Alex Brown and Sons, Inc. for retail and institutional clients, 1992-1997

B.B.A. in Finance from Loyola University Maryland – 1991

Holds FINRA Series 7 & 66 licenses


30

Janice M. Wade Senior Client Service Associate



Joined Cresfort in 1997 as Senior Executive Assistant to CIO

Responsible for marketing, proposals, administrative duties and internal operations for Cresfort team

Provides client services to Morgan Stanley Portfolio Managers, Financial Advisors and support staff

Former Office Manager for Investment Management Services – Legg Mason, Inc. 1995-1997

B.S. in Education from Northeastern University in Boston, MA - 1993


31

Eric S. Sappington Portfolio Management Associate



Responsible for marketing efforts, internal operations and constructing proposals for Cresfort team


Former Operations Analyst and Associate within the Shared Services and Banking Operations group at Morgan Stanley, focusing on Fixed Income Derivatives. 2010 – 2013

B.B.A. in International Business from Loyola University Maryland – 2010.

Holds FINRA Series 7 & 66 licenses


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Dean A. Boughner Wealth Management Associate



Joined Cresfort in 2014

Responsible for marketing, administrative duties and internal operations for Cresfort team


Previous position within Morgan Stanley as a Senior Registered Client Service associate within an FA team

Prior experience in Operations, Management and Sales


Address: 17505 West Catawba Avenue Suite 300 Cornelius, NC 28031 Tel. No.: (704)896-9121 Fax. No.: (704)892-0012 Email: [email protected]

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Important Information

Investment Products: Not FDIC Insured – No Bank Guarantee – May Lose Value

This material is intended for use only in Morgan Stanley Smith Barney’s Advisory Program.

Portfolio Management is an advisory program in which the client's Financial Advisor invests the client's assets on a discretionary basis in a wide range

of securities.

Interest in municipal bonds is generally exempt from federal income tax. However, some bonds may be subject to the alternative minimum tax (AMT).

Typically, state tax exemption applies if securities are issued within one’s state of residence and, local tax exemption typically applies if securities are

issued within one’s city of residence.

Bonds are affected by a number of risks, including fluctuations in interest rates, credit risk and prepayment risk. In general, as prevailing interest rates

rise, fixed income securities prices will fall. Bonds face credit risk if a decline in an issuer's credit rating, or creditworthiness, causes a bond's price to

decline. Finally, bonds can be subject to prepayment risk. When interest rates fall, an issuer may choose to borrow money at a lower interest rate,

while paying off its previously issued bonds. As a consequence, underlying bonds will lose the interest payments from the investment and will be

forced to reinvest in a market where prevailing interest rates are lower than when the initial investment was made. NOTE: High yield bonds are

subject to additional risks such as increased risk of default and greater volatility because of the lower credit quality of the issues.

Common stocks generally provide an opportunity for more capital appreciation than fixed income investments but are also subject to greater market

fluctuations.

Tax laws are complex and subject to change. Morgan Stanley Smith Barney LLC, its affiliates and Morgan Stanley Smith Barney Financial Advisors

do not provide tax or legal advice. This material was not intended or written to be used for the purpose of avoiding tax penalties that may be imposed

on the taxpayer. Individuals are urged to consult their personal tax or legal advisors to understand the tax and related consequences of any actions or

investments described herein.

Morgan Stanley Smith Barney LLC. Member SIPC.

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Important Information

Investment Products: Not FDIC Insured – No Bank Guarantee – May Lose Value

This material is intended only for clients and prospective clients of the Portfolio Management program. It has been prepared solely for informational

purposes only and is not an offer to buy or sell or a solicitation of any offer to buy or sell any security or other financial instrument, or to

participate in any trading strategy.

The individuals mentioned as the Portfolio Management Team are Financial Advisors with Morgan Stanley participating in the Morgan Stanley

Portfolio Management program. The Portfolio Management program is an investment advisory program in which the client’s Financial Advisor invests

the client’s assets on a discretionary basis in a range of securities. The Portfolio Management program is described in the applicable Morgan Stanley

ADV Part 2, available at www.morganstanley.com/ADV or from your Financial Advisor.

Past performance of any security is not a guarantee of future performance. There is no guarantee that this investment strategy will work under all

market conditions.

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