Pamria Pacific Asset Fall 2011 Client Portfolio Selection

Pacific Asset Management
Pacific Asset Management Pamria

Overview
Shawn A. Mesaros, Principal
Pacific Asset Management, LLC
Two Union Square
601 Union Street, Suite #4200
Seattle, WA 98101
(206 933-1600 Voice
(206) 600-3175 Fax
(877) 637-2767 Toll Free 182-2156-3221
182-2156-3221
Table of Contents
Section 1 Partnership
Section 2 Relationship Overview
Section 3 Pre-IPO or M&A and Estate Planning Considerations
Section 4 Our Approach to Investing
Section 1
Partnership
Mission, Value Proposition, Capabilities
Value Proposition

Leveraging PAMRIAs global resources and our teams network, we are uniquely positioned to
provide your Family more sophisticated and precise investment advice. We focus our education,
training and experience on select clients so we can develop intimate and comprehensive
understanding of your needs, goals and overall relationship expectations.

Mission Statement

We seek to be the Strategic Chief Investment Officer for families and select institutions with
significant financial resources. For those unique families and individuals, we commit to provide
highly customized advice and investment solutions with a standard-setting level of service and
investment expertise.

Capabilities
Financial Advice for Complex Situations

Direct Core Asset Management
Asset Allocation & Risk Management

Access to Third Party Specialty Managers
Proprietary Investment Ideas

Alternative Investment Consulting & Access
On-Line Access

Institutional access to Pacific Asset Management
When we design a wealth management, investment and lifestyle management solution that helps
families achieve whats important to them-- safety, simplicity, security and support-- we believe thats
the basis for working together in partnership.
Mission Statement:
To become the Strategic
Investment Officer for our
clients, providing highly
customized advice and
investment solutions with a
standard-setting level of service
and investment expertise.
Partnership at a Glance
Multiple Professionals: Investment Advisors, Client Representatives, Local Analysts,
and Full-time Trading Capability
Pacific Northwest Based Team
Focus on Providing Asset Management and Investment Advisory Services
Tax-Efficient Equity and Fixed Income Portfolio Management
Extensive Pacific Asset Management Relationships:
Research: Equity, Fixed Income, Foreign Exchange and Global Economics/Strategy
Investment Banking and Alternative Investment Groups e.g. MSREF
Sales & Trading: Equity, Fixed Income, Derivatives, etc.
Extensive External Relationships:
Entrepreneurs and Family Business Owners
Hedge Fund and Traditional Investment Managers
Securities Research (Multiple Sources)
Private Equity Investors and Venture Capitalists
Other Pacific Asset Management Resources Employed
Tax and Estate Planning Group
Global Asset Allocation Team
Mission Statement:
standard-setting level of service
and investment expertise.
Dual Shore USA and Asia Pacific Advisory Services
Section 2
Relationship Overview
Client Experience
Optimize
risk/reward
trade-off
Tailor asset
allocation
Diversification
strategy
Optimize global
Risk adjusted
returns
Risk tolerance
and investment
experience
Cash flow
needs
Tax & estate
planning needs
Performance
objectives
Time horizon
Real assets
Financial
assets
Liquid assets
Liabilities
Unrealized
gains
Concentrated/
restricted
positions
Investment
manager
selection
Opportunistic
investment
Allocation of
funds
Custody
Tracking and
reporting
Performance
attribution
Portfolio
rebalancing
On-going
review of
objectives and
strategies
Altered client
circumstances
Altered
financial
market
conditions
Strategic and
tactical
adjustments
Understand
your
Balance Sheet
Determine
Investment
Parameters
Define
Investment
Strategy
Implement
Investment
Allocation
Performance
Measurement
Continuous
Monitoring
& Adjustment
These materials are solely informational, based upon publicly available information believed to be reliable, and may change without notice. Pacific Asset Management shall not in any way be
liable for claims relating to them, and makes no express or implied representations or warranties as to their accuracy or completeness or for statements or errors contained in, or omissions
from, them. Legal, accounting and tax restrictions, transaction costs and changes to any assumptions may significantly affect the economics of any transaction. The information and analyses
contained herein are not intended as tax, legal or investment advice and may not be suitable for your specific circumstances; accordingly, you should consult your own tax, legal, investment
or other advisors, at both the outset of any transaction and on an ongoing basis, to determine such suitability. Any investment returns, past, hypothetical or otherwise, are not indicative of
future performance. These materials do not constitute an offer to buy or sell any financial instrument or participate in any trading strategy.
Pacific Asset Management & Co. Incorporated
Our team will provide seamless integration and delivery of a
comprehensive Wealth Management Service.
Our focus includes:
Institutional level of insight,
access and service
Highly tailored solutions to
complex situations
Trust and Estate Planning
Dynamic oversight,
monitoring and reporting
Complete confidentiality
Ongoing Client Experience
Pamria has set the standard
for ongoing personal service.
Beyond frequent meetings
with clients to discuss
performance, market
developments and stay
abreast of any changes in
personal or financial
circumstances, our client
coverage teams provide a
broad range of
administrative and other
services to help meet our
clients wealth management
needs.
Outsourced Family
Office Services
(2)
Administrative services (e.g., bookkeeping, bill payment, tax return preparation)
Basic lifestyle management and concierge services (e.g., travel planning)
Provide referrals for outsourced advisory services (e.g., attorneys, family governance counseling)
Setting up a new family office (e.g., consulting help)
Trust Services
Recommendations of trustees in connection with trust and estate planning, including Pacific Asset
Management Trust Company and third party providers
Trust tax preparation, record-keeping, check disbursements
Access to Estate Planning Services Group for functional, objective expertise
Custody Services
SIPC and excess SIPC protection
(1)
Securities safekeeping and client protection
Collection of incomeinterest and dividends
Fund wires and transfers
Gifts and distribution of cash or securities
Foreign exchange services
Short-term investments for cash reserves
Internet Access
Online account access via ClientLink web application
Access to research reports, video broadcasts and other resources
Aggregate portfolio information and account details (updated daily)
Ability to export account details into Microsoft Excel or Quicken
Reporting Services
Comprehensive, customized portfolio statements for certain eligible investors
Timely written confirmation of transactions executed for each account
Comprehensive monthly statement detailing all activity and investment values
Upon request, duplicate statements and/or confirmations sent to designated parties
Dedicated Team
Service tailored to each familys needs
Performance measurement and analysis
Assistance with tactical adjustments to structures or investments to meet changing aspirations
Review of risk parameters and profile
Careful attention to special situations and strategies driven by tax, market and other factors
Notes
1. Coverage may change at any time. The asset protection does not protect against losses of value due to market fluctuations. Multiple
accounts with a single beneficiary are treated as a single account for purposes of coverage. Additional information regarding SIPC
may be obtained through the SIPC website at www.sipc.org. Excess coverage is provided by Customer Asset Protection Company
(CAPCO). Information regarding CAPCO may be obtained through CAPCOs website at www.capcoexcess.com.
2. Smart will provide contact names and arrange for information sharing with the goal of ensuring seamless representation. This is a
referral service only. Smart does not provide any of these services. These services are offered by third parties over which we have
no control. Therefore, we take no responsibility for whether the services will be provided in accordance with your needs or
expectations. Additionally, we do not receive any compensation from the service providers we may recommend.
Please see important disclosures at the end of this material.
Section 3
Pre-IPO/M&A Overview
Personal Wealth Management Timeline
Security Safe
Keeping
Record Keeping
Insurance
Splitting/Gifting
Online Access Via
ClientLink
Custody
Services
Stock Option
Exercise
NQSO
ISO
Outright Gifts
Tax Free
Taxable
Leveraged Gifts
GRAT
CLAT
Sale to Grantor
Trust
Control
Tax Issues &
Estate Planning
Restricted Stock
Regulatory
Rule 144
Section 16
Corporate
Blackout Period
Contractual
Lock Up
Cleaning/ Processing
Administrative
Support
Risk Analysis &
Solutions
Type of Risk
Market
Industry
Company Specific
Sales
Open Market
Block
Private Placement
Secondary
Hedging
Protective Put
Collar
Prepaid Forward
Exchange Fund
Monetization &
Diversification
Monetization
Sales
Margin Loan
Covered Call
Writing
Collar Plus Loan
Prepaid Forward
Diversification
Asset Class
Investment Style
Implementation
Vehicles
Estate Planning
& Tax Issues
Estate Planning
Outright Gifts
Leveraged Gifts
Philanthropy
Manner of Gift
Outright
Split Interest
Recipient of Gift
Public Charity
Private
Foundation
Hybrid
Control
Ongoing Service
& Monitoring
Performance
Measurement &
Analysis
Assistance with
asset allocation
rebalancing and
tactical
adjustments to
structures or
investment
Technology &
Reporting
Online Access
Consolidated
Reporting
Performance
Measurement
Risk Measurement
Post IPO/M&A Pre IPO/M&A
FOCUS FOR
TODAYS DISCUSSION
Tax/Estate Planning Overview
Important tax savings
strategies can be
implemented prior to the
IPO/M&A
While certain contingencies
arising after (or in
connection with) the
transaction may produce
some tax advantages, such
savings may not put the
business owner in the same
position as if the owner acted
prior to the transaction
Upon exercise, spread is not taxed but treated as an adjustment item for
alternative minimum tax (AMT) purposes, possibly triggering AMT.
After exercise, if stock is held for one year from the exercise date and two
years from option grant date, all appreciation over the strike price will be
considered capital gain when stock is sold.
Exercise of an ISO prior to IPO/M&A (assuming price increases) can
minimize or even eliminate AMT exposure and starts executives holding
period.
Incentive Stock Options
Upon exercise, the difference between the fair market value of the stock and
the exercise price (the spread) is taxed as compensation.
After exercise, all future appreciation in the stock is taxed as capital gain.
Exercise of an NQSO prior to IPO/M&A can save an executive the difference
between the maximum ordinary income tax rate and the preferential long term
capital gains tax rate on all future appreciation if stock is held longer than one
year at time of sale.
Non-Qualified Stock Options
A number of tools allow the individual rather than
the state to control his or her person and property
when he or she is unable to do so because of death
or incapacity, e.g., will, revocable living trust,
power of attorney, health care proxy and living
will.
Estate Planning: Gifting
Estate Planning: Leveraged Gifting
Income Tax Planning: Executive Stock Options
Control
Estate Planning: Necessities
Assets can be sold to a trust for the
benefit of ones family. The trust can
purchase the property by giving the
donor a note bearing a market interest
rate.
When the trust terminates, the
property will pass to the
remaindermen of the trust with all
appreciation over the interest rate on
the note, in effect, passing free of
additional gift tax.
Sale to Defective Grantor Trust
Asset placed in trust with donor
retaining an annuity and making a gift
of the remainder to family members.
Remainder is valued using an IRS
benchmark rate.
Upon termination of trust, the
appreciation over the benchmark rate,
in effect, passing free of additional
gift tax.
Grantor Retained Annuity Trust
(GRAT)
Asset placed in trust with donor
making tax-free gift of an income
interest to a charity and a taxable gift
of the remainder to family.
Upon termination of trust, the
appreciation over the benchmark rate,
in effect, passing free of additional
gift tax.
Charitable Lead Annuity Trust
(CLAT)
An individual interested in keeping
control of the gifted property away
from the donee can gift in trust.
Individuals interested in keeping
control of the assets themselves can
transfer assets to an FLP or LLC and
make gifts of non-controlling
interests outright or in trust.
Individuals can give property away,
change the title of property or
change the character of property to
possibly protect assets from
creditors.
In 2007 and 2008, $2.0M (increasing to $3.5M in
2009) can be passed free of estate tax and $1M
can be passed free of gift tax.
Applicable Credit/Exempt Amounts
Each person can make gifts of a
present interest in property worth
$12,000 per year, per donee, tax free
(married couples can gift $24,000 per
year, per donee).
Annual Exclusion
Asset Protection
Custody Services and Benefits
Security Safe Keeping
Private/Public stock certificates housed in
Pacific Asset Managements vault
Avoid risk of loss and fees/deposits required
to replace certificates
Record Keeping
Property registered and reported in
shareholders name
Positions included on monthly statements
Insured
SIPC Insurance protection
Unlimited coverage through Pacific Asset
Management
Splitting/Gifting
Process and record all splits
Handle gifting and other transfers
Prepare Restricted Share Transactions
Interface with issuers counsel to review
proposed transactions and help ensure
compliance with regulatory or contractual
restrictions
Cleaning/Processing
Work behind scenes with Transfer Agent
and legal counsel
Clean restricted shares as per SEC
regulations to settle restricted trades
Administrative Support
Preparation and processing of required
documentation:
Form 144
Brokers Rep letters
Sellers Rep letters, etc.
Hedging/Borrow
Securities must be custodied at Pacific
Asset Management in order to borrow,
pledge, hedge or monetize
Pre-IPO/M&A
Online Access (Client Link)
Track positions
Access MS resources
Transacting in restricted
shares can be a complicated
legal and regulatory process.
Pamria offers a team of
experienced specialists in
this area to guide you
through this complex and
time consuming procedure.
Post-IPO/M&A
Section 4
Our Approach to Investing
Our Fundamental Philosophy
Eliminate Debt
Asset Rich Families rarely should borrow funds, and instead become lenders. Leverage can be used to
increase the risk/return of an investment, but is not optimally used for tax efficiency, long term liquidity,
or to fund expenses. Leverage provides for short term liquidity, but dramatically increases the chances of
wealth destruction.
Insure Lifestyle with Income Producing Asset
Our experience is that families who have financed their lifestyle with income producing assets (bonds,
income real estate, etc) are able to weather volatility and illiquidity in other investments. By
segmenting risk, we are able to create a more efficient risk/return profile. We believe this allocation
should be a dollar allocation as opposed to a percentage allocation, for historically income producing
assets do not outpace inflation, and the returns are meant for consumption.
Invest the Balance of Assets for Growth
With your primary residences and income stream provided for, the balance of your assets should be
invested in growth assets with returns in the form of capital gains. Investors have been compensated
through history for tolerating volatility and illiquidity with superior after-tax compounding returns.
Mission Statement:
standard-setting level of
service and investment
expertise.
Needs Drive Investment Parameters
Level One
Level Two
Level Three
Wealth
Level
Time
Higher
Wealth
Level
Lower
Wealth
Level
Wealth Seeding Phase Wealth Building Phase Wealth Realization Phase
Basic Needs
1. Housing
2. Healthcare
3. Sustenance
Intermediate Needs
1. Education
2. Retirement
3. Lifestyle enhancement
Advanced Needs
1. Philanthropy
2. Multiple estates
3. Capital intensive pursuits
Venture Capital
Absolute Return Investments
Private Equity
Private Real Estate
International Equities
International Fixed Income
Real Estate and REITS
Commodities
Domestic Fixed Income
Domestic Equities
Mutual Funds
Cash Equivalents
Asset Classes
With Generally Greater
Liquidity and Pricing
Frequency, and Lesser
Complexity
Asset Classes
With Generally Lesser
Liquidity and Pricing
Frequency, and Greater
Complexity
Matching Asset Classes with Wealth Levels and Investor Needs
We believe these two words
asset allocation - are the most
overused and abused words in
our business. We have four
general statements concerning
asset allocation:
1. The more equity (stocks
and related assets)
exposure you choose, the
more risk you accept and
the more return you should
expect.
2. Emotions will not be your
friend.
3. Long term actions should
produce better results than
short term reactions.
4. There are no investment
short cuts.
Asset Allocation Over Time
U.S. Stocks
60%
U.S. Bonds
30%
Cash
10%
Historical Strategy:
Cash, Stocks, and Bonds
%
Traditionally, most U.S. private clients'
portfolios were invested almost
completely in domestic stocks, bonds,
and cash, with an asset mix that
averaged about 60% in stocks, 30% in
bonds, and 10% in cash over time.
U.S. Stocks
30%
EM
Debt
2%
EM
Equity
10% Int'l Debt
(Developed)
5%
Int'l Equity
(Developed)
18%
Private Equity
(VC, LBOs, O&G)
5%
Real Estate
5%
Cash
10%
U.S. Bonds
15%
1980s:
Alternative and International Assets
%
Beginning in the mid- to late 1980s,
some institutional and a smaller
proportion of private client investors
began to shift some assets into venture
capital, real estate, LBOs, oil and gas
investments, and, more recently, into
international and emerging markets
equity and debt.
In the 1990s and after the turn of the
Millennium, institutional and private
client investors have pursued various
market-neutral strategies based on
equities (including warrant and
convertible arbitrage, hedged closed-
end fund strategies, hedged balance
sheet or cross ownership arbitrage,
paired shares arbitrage, synthetic
security arbitrage, and other techniques
involving derivative instruments)
and/or fixed-income securities
(including futures, swap arrangements,
and mispricings of credit risk, yield
curve shape, and embedded and
explicit option features).
U.S. Stocks
26%
Absolute
Return
8%
EM
Debt
2%
EM
Equity
10%
Int'l Debt
(Developed)
5%
Int'l Equity
(Developed)
18%
Private Equity
(VC, LBOs,
O&G) 5%
Real
Estate
5%
Cash
9%
U.S. Bonds
12%
1990s and post-2000:
Absolute Return Strategy
%
See attached disclaimer
Understanding investment
alternatives is paramount to
making prudent allocation
decisions
Different asset classes
present very different
risk/reward characteristics
Our clients input, in
conjunction with our
investment outlook, ultimate
drives the allocation decision
Open Architecture Approach
Our teams clients can select from a range of investment vehicles and managers from within or outside of Pacific Asset
Management. The appropriately timed funding of investments is critical and depends on many factors, such as market
environment and tax considerations.
Traditional Investments:
Equity, Cash, Fixed Income
(Fee Based)
Pacific Asset
Management
Third-Party
Separate Account
Smart Investment
Representative
Managed
Smart Investment
Group
Pacific Asset
Management
Investments
Structured Products
Separate Account
Investment
Consulting Services
Funds
Investment
Consulting Services
Exchange Funds
Opportunistic Strategies:
Representative Ideas
(Brokerage Based)
Equity
Related
Fixed Income
Related
Other
Research calls
Underwriting
calendar
Yield
enhancement
(covered call
writing)
Exchange
traded funds
Research calls
Bond credit
swaps
Underwriting
calendar
Leveraged
strategies
Exchange
traded funds
Commodities
Foreign
exchange
Structured
credit-linked or
equity-linked
notes
Open Architecture
Alternative Investments
(Fee Based)
Pacific Asset
Management
Third-Party
Funds
Private Equity
Venture Capital
Real Estate
Managed Futures
Commodities
Funds of Funds
Hedge Funds (AIP)
Funds
Hedge Funds
Private Equity
Fund of Funds
Hedge Funds
Private Equity
These materials are solely informational, based upon publicly available information believed to be reliable, and may change without notice. Pacific Asset Management shall not in any way be
liable for claims relating to them, and makes no express or implied representations or warranties as to their accuracy or completeness or for statements or errors contained in, or omissions
from, them. Legal, accounting and tax restrictions, transaction costs and changes to any assumptions may significantly affect the economics of any transaction. The information and analyses
contained herein are not intended as tax, legal or investment advice and may not be suitable for your specific circumstances; accordingly, you should consult your own tax, legal, investment
or other advisors, at both the outset of any transaction and on an ongoing basis, to determine such suitability. Any investment returns, past, hypothetical or otherwise, are not indicative of
future performance. These materials do not constitute an offer to buy or sell any financial instrument or participate in any trading strategy.
Pacific Asset Management & Co.
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80
U.8. 0omest|c R|sk and Reward Ana|ys|s
Ro|||ng 0ne-Year Returns(1}(2}(3}
(19.9)
(13.1) (12.0) (14.3)
8.8 7.8 6.9 5.9
(60.7)
(53.9)
(47.1)
(40.3)
(33.5)
(26.7)
11.3 10.7 10.0 9.4 8.8 8.2
5.7 6.3 6.9 7.5
48.1
46.4
55.0
146.6
131.4
116.1
100.8
85.6
70.3
49.7
5.0 4.3
11.7
10.8
10.4
9.7
(80)
(40)
0
40
80
120
160
Worst One-Year Return
Average of One-Year Returns
Best One-Year Return
Median One-Year Return
January 1926March 2011
Returns Expressed in Percentage Terms
Note: (1) Rolling one-year returns data are calculated using 1011 sample time periods. (2) Indexes used for this analysis include: (i) Stocks: S&P 500 Index Total Return; (ii) Bonds: Ibbotson U.S. Long-Term 20-Year Government Index
Total Return; and (iii) Cash: U.S. 30-Day T-Bill Index Total Return. (3) Historical data shown represent past performance and do not guarantee comparable future results. The indexes are unmanaged. An investor cannot invest
directly in an index. They are shown for illustrative purposes only and do not represent the performance of any specific investment. Index returns do not include any expenses, fees or sales charges, which would lower
performance.
Source: Morgan Stanley Smith Barney LLC
Portfolio Mix
90%
0%
10%
Stocks
Bonds
Cash
80%
10%
10%
Stocks
Bonds
Cash
70%
20%
10%
Stocks
Bonds
Cash
60%
30%
10%
Stocks
Bonds
Cash
50%
40%
10%
Stocks
Bonds
Cash
40%
50%
10%
Stocks
Bonds
Cash
30%
60%
10%
Stocks
Bonds
Cash
20%
70%
10%
Stocks
Bonds
Cash
10%
80%
10%
Stocks
Bonds
Cash
0%
90%
10%
Stocks
Bonds
Cash
Year Ending March 2011
Average of One-Year Losses
Average of One-Year Gains
% One-Year Negative Returns
% One-Year Positive Returns
18.8 %
(60.7)
(12.8)
11.3
(53.9)
(11.2)
10.7
73.8
11.7
19.8
146.6
26.2 24.3
74.7
16.2 %
(47.1)
(9.6)
10.8
18.1
131.4
25.3
17.5 %
10.0
10.4
16.3
116.1
15.0 %
(40.3)
(7.9)
9.4
9.7
14.8
100.8
23.7
76.3
13.7 %
(33.5)
(6.4)
8.8
8.8
13.2
85.6
22.5
77.5
12.4 %
75.7
(26.7)
(5.2)
8.2
7.8
11.6
70.3
20.4
79.6
11.1 %
(19.9)
(4.2)
7.5
6.9
10.0
55.0
17.5
82.5
9.8 %
(13.1)
(3.5)
6.9
5.9
8.8
46.4
15.7
84.3
8.5 %
(12.0)
(3.1)
6.3
5.0
8.1
48.1
16.6
83.4
7.2 %
(14.3)
(3.3)
5.7
4.3
7.9
49.7
20.4
79.6
81
6ompound Annua| Crowth Rate of Ro|||ng F|ve-Year Returns(1}(2}(3}
(15.5)
(13.2)
(11.5)
(9.2)
(7.2)
(5.2)
(3.2)
(1.7) (2.1) (2.4)
6.7 6.3 5.8 5.4
22.0 22.4 22.7 23.1
8.2 7.8
7.1
6.4 5.7 5.3
4.7 4.4
7.2 7.6 8.1 8.1
9.0 9.4
22.1
22.7
23.9
26.4
29.5
32.5
9.3 9.9
(20)
(10)
0
10
20
30
40
Worst Five-Year Return
Average Five-Year Return
Best Five-Year Return
Median Five-Year Return
Note: (1) Rolling five-year returns data are calculated using 963 sample time periods. (2) Indexes used for this analysis include: (i) Stocks: S&P 500 Index Total Return; (ii) Bonds: Ibbotson U.S. Long-Term 20-Year Government Index
performance.
Portfolio Mix
90%
0%
10%
Stocks
Bonds
Cash
80%
10%
10%
Stocks
Bonds
Cash
70%
20%
10%
Stocks
Bonds
Cash
60%
30%
10%
Stocks
Bonds
Cash
50%
40%
10%
Stocks
Bonds
Cash
40%
50%
10%
Stocks
Bonds
Cash
30%
60%
10%
Stocks
Bonds
Cash
20%
70%
10%
Stocks
Bonds
Cash
10%
80%
10%
Stocks
Bonds
Cash
0%
90%
10%
Stocks
Bonds
Cash
Average of Five-Year Losses
Average of Five-Year Returns
Average of Five-Year Gains
% Five-Year Negative Returns
% Five-Year Positive Returns
3.4 % 3.7 % 3.8 % 4.4 % 4.7 % 5.0 % 5.3 % 5.6 % 6.0 % 6.3 %
(15.5) (13.2) (11.5) (9.2) (7.2) (5.2) (3.2) (1.7) (2.1) (2.4)
(5.2) (4.8) (4.4) (3.9) (3.2) (1.8) (0.9) (0.7) (0.7) (0.8)
9.4 9.0 8.1 8.1 7.6 7.2 6.7 6.3 5.8 5.4
9.9 9.3 8.2 7.8 7.1 6.4 5.7 5.3 4.7 4.4
11.5 10.6 9.4 9.0 8.3 7.7 7.1 6.4 5.9 5.6
32.5
12.3
26.4
9.0
22.7
6.1
22.0
4.3
87.7
29.5
10.5
89.5 91.0
23.9
7.4
92.6 93.9
22.1
6.0
94.0 95.7
22.4
1.3
98.7
22.7
1.6
98.4
23.1
3.9
96.1
82
6ompound Annua| Crowth Rate of Ro|||ng Ten-Year Returns(1}(2}(3}
1.5 1.6 1.4
0.1
6.9
6.4
5.9
5.4
15.8 15.7 15.6 15.5
(4.4)
(3.4)
(2.3)
(1.3)
(0.3)
0.6
10.0
9.5
8.9
8.4
7.9
7.4
19.5
17.6
17.1
16.7
16.2 15.9
4.2
4.8
5.7
6.8
7.6
8.3
8.9
4.2
9.4 10.1
(10)
(5)
0
5
10
15
20
25
Worst Ten-Year Return
Average Ten-Year Return
Best Ten-Year Return
Median Ten-Year Return
N/A = Not Applicable. For these rolling ten-year time periods during January 1926-March 2011, there were no periods of negative returns.
Note: (1) Rolling ten-year returns data are calculated using 903 sample time periods. (2) Indexes used for this analysis include: (i) Stocks: S&P 500 Index Total Return; (ii) Bonds: Ibbotson U.S. Long-Term 20-Year Government Index
performance.
Portfolio Mix
90%
0%
10%
Stocks
Bonds
Cash
80%
10%
10%
Stocks
Bonds
Cash
70%
20%
10%
Stocks
Bonds
Cash
60%
30%
10%
Stocks
Bonds
Cash
50%
40%
10%
Stocks
Bonds
Cash
40%
50%
10%
Stocks
Bonds
Cash
30%
60%
10%
Stocks
Bonds
Cash
20%
70%
10%
Stocks
Bonds
Cash
10%
80%
10%
Stocks
Bonds
Cash
0%
90%
10%
Stocks
Bonds
Cash
Average of Ten-Year Losses
Average of Ten-Year Returns
Average of Ten-Year Gains
% Ten-Year Negative Returns
% Ten-Year Positive Returns
3.6 %
(4.4)
(1.4)
10.0
10.1
10.6
19.5
5.2
94.8
3.9 %
(3.4)
(1.2)
9.5
9.4
9.8
17.6
3.4
96.6
4.2 %
(2.3)
(0.7)
8.9
8.9
9.2
17.1
2.3
97.7
4.4 %
(1.3)
(0.6)
8.4
8.3
8.5
16.7
0.9
99.1
4.7 %
(0.3)
(0.3)
7.9
7.6
7.9
16.2
0.2
99.8
5.0 %
0.6
N/A
7.4
6.8
7.4
15.9
0.0
100.0
5.3 %
1.5
N/A
6.9
5.7
6.9
15.8
0.0
100.0
5.6 %
1.6
N/A
6.4
4.8
6.4
15.7
0.0
100.0
5.9 %
1.4
N/A
5.9
4.2
5.9
15.6
0.0
100.0
6.2 %
0.1
N/A
5.4
4.2
5.4
15.5
0.0
100.0
83
8&P 500 |ndex and 0|str|but|on of 8&P 500 |ndex Ro|||ng 3 Year Returns
Best and Worst Returns Generated by Different Holding Periods
S&P 500 Index (January 1926 March 2011)
Rolling 1-Year, 5-Year, 10-Year, 20-Year Compounded Annual Growth Rates (%)
Distribution of S&P 500 Index Rolling 3 Year Returns
S&P 500 Index 3-Year Compound Annual Growth Rate Distribution January 1926 December 2010
Number of Observations
Note: The indexes are unmanaged. An investor cannot invest directly in an index. They are shown for illustrative purposes only and do not represent the performance of any specific investment. All returns are total returns in U.S. Dollars. Past performance does not
guarantee future results. Index returns do not include any expenses, fees or sales charges, which would lower performance.
Source: Ibbotson Associates, Morgan Stanley Smith Barney LLC. Data as of March 2011.
Note: The indexes are unmanaged. An investor cannot invest directly in an index. They are shown for illustrative purposes only and do not represent the performance of any specific investment. All returns are total returns in U.S. Dollars. Past performance does not guarantee future
results. Index returns do not include any expenses, fees or sales charges, which would lower performance. The Compound Annual Growth Rate is the year-over-year growth rate of an investment over a specified period of time. Please note no 10-Year CAGR is available for the
period after 3Q2001 and 2Q2002.
Source: Ibbotson Associates; Morgan Stanley Smith Barney LLC. Data as of December 2010.
4 5
8
2 5
25
58
8
88
173
20
152
87
7
27
10
0
50
100
150
200
250
<
-
3
5
-
3
5

l
o

-
3
0
-
3
0

l
o

-
2
5
-
2
5

l
o

-
2
0
-
2
0

l
o

-
1
5
-
1
5

l
o

-
1
0
-
1
0

l
o

-
5
-
5

l
o

0
0

l
o

5
5

l
o

1
0
1
0

l
o

1
5
1
5

l
o

2
0
2
0

l
o

2
5
2
5

l
o

3
0
3
0

l
o

3
5
>
3
5
(Apr 80-Var 00)

18.25
(Jur 1Z-Vay 5Z)
21.13
(Jur 32-Vay 3Z)
3.12
(Ju| 32-Jur 33)
12.89
(Sep 29-Aug 49)
1.89%
(3ep 29-Au 39)
-1.95
(3ep 29-Au 31)
-1Z.3
(Ju| 31-Jur 32)
-Z.5
-1.0
-0.5
0.0
0.5
1.0
1.5
2.0
1 Year 5 Year 10 Year 20 Year
est Return worst Return
84
C|oba| R|sk and Reward Ana|ys|s
Ro|||ng 0ne-Year Returns
(1}(2}(3}
(9.2)
(5.5)
(7.0)
(10.9)
8.6 8.6 8.5 8.5
27.6 28.2 27.8 28.0
(42.1)
(36.8)
(31.3)
(25.7)
(20.2)
(14.7)
8.7 8.6
8.6
8.6 8.6 8.6
51.9
46.6
41.1
35.4
29.9
26.9
8.6
8.8 9.1 9.5
10.3
11.1
8.7 8.2
12.5 11.8
(60)
(40)
(20)
0
20
40
60
Average One-Year
Return
Median One-Year
Returns
Note: (1) Rolling one-year returns data are calculated using 243 sample time periods. (2) Indexes used for this analysis include: (i) U.S. Stocks: S&P 500 Index Total Return; (ii) Non-U.S. Stocks: MSCI All Country World ex US Index Total
Return ($US); (iii) U.S. Bonds: Ibbotson U.S. Long-Term 20-Year Government Index; (iv) Non-U.S. Bonds: JPMorgan Global ex-U.S. Government Bond Index Total Return ($US); and (v) Cash: U.S. 30-Day T-Bill Index Total Return.
(3) Historical data shown represent past performance and do not guarantee comparable future results. The indexes are unmanaged. An investor cannot invest directly in an index. They are shown for illustrative purposes only and
do not represent the performance of any specific investment. Index returns do not include any expenses, fees or sales charges, which would lower performance.
Source: Morgan Stanley Smith Barney LLC.
Portfolio Mix
50%
40%
0%
0%
10%
U.S. Stocks
Non-U.S. Stocks
U.S. Bonds
Non-U.S. Bonds
Cash
45%
35%
8%
2%
10%
U.S. Stocks
Non-U.S. Stocks
U.S. Bonds
Non-U.S. Bonds
Cash
40%
30%
17%
3%
10%
U.S. Stocks
Non-U.S. Stocks
U.S. Bonds
Non-U.S. Bonds
Cash
35%
25%
27%
3%
10%
U.S. Stocks
Non-U.S. Stocks
U.S. Bonds
Non-U.S. Bonds
Cash
30%
20%
36%
4%
10%
U.S. Stocks
Non-U.S. Stocks
U.S. Bonds
Non-U.S. Bonds
Cash
25%
15%
45%
5%
10%
U.S. Stocks
Non-U.S. Stocks
U.S. Bonds
Non-U.S. Bonds
Cash
20%
10%
54%
6%
10%
U.S. Stocks
Non-U.S. Stocks
U.S. Bonds
Non-U.S. Bonds
Cash
15%
5%
63%
7%
10%
U.S. Stocks
Non-U.S. Stocks
U.S. Bonds
Non-U.S. Bonds
Cash
6%
4%
72%
8%
10%
U.S. Stocks
Non-U.S. Stocks
U.S. Bonds
Non-U.S. Bonds
Cash
0%
0%
80%
10%
10%
U.S. Stocks
Non-U.S. Stocks
U.S. Bonds
Non-U.S. Bonds
Cash
Average of One-Year Losses
Average of One-Year Gains
% One-Year Negative Returns
% One-Year Positive Returns
0.5 %
(42.1)
(15.3)
8.7
12.5
15.7
51.9
22.6
77.4
1.6 %
(36.8)
(13.8)
8.6
11.8
14.4
46.6
20.6
79.4
2.9 %
(31.3)
(11.6)
8.6
11.1
13.5
41.1
19.3
80.7
4.4 %
(25.7)
(9.1)
8.6
10.3
12.6
35.4
18.1
81.9
5.7 %
(20.2)
(6.3)
8.6
9.5
11.9
29.9
17.7
82.3
7.0 %
(14.7)
(4.0)
8.6
9.1
11.0
26.9
15.6
84.4
8.3 %
(9.2)
(3.2)
8.6
8.8
9.9
27.6
9.9
90.1
9.6 %
(5.5)
(2.3)
8.6
8.6
9.7
28.2
8.6
91.4
10.4 %
(7.0)
(3.1)
8.5
8.2
9.6
27.8
8.6
91.4
11.4 %
(10.9)
(4.7)
8.5
8.7
10.0
28.0
10.3
89.7
85
6ompound Annua| Crowth Rate of Ro|||ng F|ve-Year Returns
(1}(2}(3}
2.7
3.8
4.7
4.0
7.9 7.9 7.8 7.8
12.9 12.7
12.3 12.2
(4.0)
(2.8) (1.7)
(0.6)
0.5 1.6
8.0 7.9
7.9
7.9 7.9 7.9
20.0
18.8
17.6
16.5
15.3
14.1
8.7
8.3 7.8
7.5
7.3 7.5
8.0
9.0 9.0 9.1
(10)
(5)
0
5
10
15
20
25
Worst Five-Year Rtn
Average Five-Year Rtn
Best Five-Year Rtn
Median Five-Year Rtn
N/A = Not Applicable. For these rolling five-year time periods during January 1990-March 2011, there were no periods of negative returns.
Note: (1) Rolling five-year returns data are calculated using 195 sample time periods. (2) Indexes used for this analysis include: (i) U.S. Stocks: S&P 500 Index Total Return; (ii) Non-U.S. Stocks: MSCI All Country World ex US Index Total
Return ($US); (iii) U.S. Bonds: Ibbotson U.S. Long-Term 20-Year Government Index Total Return; (iv) Non-U.S. Bonds: JPMorgan Global ex-U.S. Government Bond Index Total Return ($US); and (v) Cash: U.S. 30-Day T-Bill Index
Total Return. (3) Historical data shown represent past performance and do not guarantee comparable future results. The indexes are unmanaged. An investor cannot invest directly in an index. They are shown for illustrative
purposes only and do not represent the performance of any specific investment. Index returns do not include any expenses, fees or sales charges, which would lower performance.
Portfolio Mix
50%
40%
0%
0%
10%
U.S. Stocks
Non-U.S. Stocks
U.S. Bonds
Non-U.S. Bonds
Cash
45%
35%
8%
2%
10%
U.S. Stocks
Non-U.S. Stocks
U.S. Bonds
Non-U.S. Bonds
Cash
40%
30%
17%
3%
10%
U.S. Stocks
Non-U.S. Stocks
U.S. Bonds
Non-U.S. Bonds
Cash
35%
25%
27%
3%
10%
U.S. Stocks
Non-U.S. Stocks
U.S. Bonds
Non-U.S. Bonds
Cash
30%
20%
36%
4%
10%
U.S. Stocks
Non-U.S. Stocks
U.S. Bonds
Non-U.S. Bonds
Cash
25%
15%
45%
5%
10%
U.S. Stocks
Non-U.S. Stocks
U.S. Bonds
Non-U.S. Bonds
Cash
20%
10%
54%
6%
10%
U.S. Stocks
Non-U.S. Stocks
U.S. Bonds
Non-U.S. Bonds
Cash
15%
5%
63%
7%
10%
U.S. Stocks
Non-U.S. Stocks
U.S. Bonds
Non-U.S. Bonds
Cash
6%
4%
72%
8%
10%
U.S. Stocks
Non-U.S. Stocks
U.S. Bonds
Non-U.S. Bonds
Cash
0%
0%
80%
10%
10%
U.S. Stocks
Non-U.S. Stocks
U.S. Bonds
Non-U.S. Bonds
Cash
Average of Five-Year Losses
Average of Five-Year Returns
Average of Five-Year Gains
% Five-Year Negative Returns
% Five-Year Positive Returns
1.1 %
(4.0)
(1.2)
8.0
9.1
9.6
20.0
14.9
85.1
1.6 % 2.2 % 2.7 %
(1.7)
(0.9)
7.9
9.0
8.2
17.6
3.3 % 3.8 % 4.4 % 4.9 % 5.5 % 6.1 %
4.0
N/A
4.7
N/A
7.8
7.8
7.8
12.2
0.0
100.0
(2.8)
(1.2)
7.9
9.0
8.5
18.8
6.2
93.8
8.0
16.5
0.5
99.5
(0.6)
(0.6)
7.9
8.7
0.5
N/A
7.9
8.3
7.9
15.3
0.0
100.0
1.6
N/A
7.9
8.0
7.9
14.1
0.0
100.0
2.7
N/A
7.9
7.5
7.9
12.9
0.0
100.0
3.8
N/A
7.9
7.3
7.9
12.7
0.0
100.0
7.8
7.5
7.8
12.3
0.0
100.0
2.6
97.4
86
6ompound Annua| Crowth Rate of Ro|||ng Ten-Year Returns
(1}(2}(3}
3.9
4.6
5.1
5.5
7.5 7.6 7.7 7.7
11.4
11.0
10.2
9.7
7.7 7.6 7.6 7.7 7.6 7.6 7.6 7.6 7.5 7.5
(1.3)
(0.4)
0.4
1.3
2.2
3.1
6.7 6.8 7.0
7.1 7.2
7.4
14.1
13.6
13.2
12.7
12.3
11.8
(4)
0
4
8
12
16
Worst Ten-Year Rtn
Average Ten-Year Rtn
Best Ten-Year Rtn
Median Ten-Year Rtn
N/A = Not Applicable. For these rolling ten-year time periods during January 1990-March 2011, there were no periods of negative returns.
Note: (1) Rolling ten-year returns data are calculated using 135 sample time periods. (2) Indexes used for this analysis include: (i) U.S. Stocks: S&P 500 Index Total Return; (ii) Non-U.S. Stocks: MSCI All Country World ex US Index Total
Return ($US); (iii) U.S. Bonds: Ibbotson U.S. Long-Term 20-Year Government Index Total Return; (iv) Non-U.S. Bonds: JPMorgan Global ex-U.S. Government Bond Index Total Return ($US); and (v) Cash: U.S. 30-Day T-Bill Index
Total Return. (3) Historical data shown represent past performance and do not guarantee comparable future results. The indexes are unmanaged. An investor cannot invest directly in an index. They are shown for illustrative purposes
only and do not represent the performance of any specific investment. Index returns do not include any expenses, fees or sales charges, which would lower performance.
Portfolio Mix
50%
40%
0%
0%
10%
U.S. Stocks
Non-U.S. Stocks
U.S. Bonds
Non-U.S. Bonds
Cash
45%
35%
8%
2%
10%
U.S. Stocks
Non-U.S. Stocks
U.S. Bonds
Non-U.S. Bonds
Cash
40%
30%
17%
3%
10%
U.S. Stocks
Non-U.S. Stocks
U.S. Bonds
Non-U.S. Bonds
Cash
35%
25%
27%
3%
10%
U.S. Stocks
Non-U.S. Stocks
U.S. Bonds
Non-U.S. Bonds
Cash
30%
20%
36%
4%
10%
U.S. Stocks
Non-U.S. Stocks
U.S. Bonds
Non-U.S. Bonds
Cash
25%
15%
45%
5%
10%
U.S. Stocks
Non-U.S. Stocks
U.S. Bonds
Non-U.S. Bonds
Cash
20%
10%
54%
6%
10%
U.S. Stocks
Non-U.S. Stocks
U.S. Bonds
Non-U.S. Bonds
Cash
15%
5%
63%
7%
10%
U.S. Stocks
Non-U.S. Stocks
U.S. Bonds
Non-U.S. Bonds
Cash
6%
4%
72%
8%
10%
U.S. Stocks
Non-U.S. Stocks
U.S. Bonds
Non-U.S. Bonds
Cash
0%
0%
80%
10%
10%
U.S. Stocks
Non-U.S. Stocks
U.S. Bonds
Non-U.S. Bonds
Cash
Average of Ten-Year Losses
Average of Ten-Year Returns
Average of Ten-Year Gains
% Ten-Year Negative Returns
% Ten-Year Positive Returns
2.0 %
(1.3)
3.9 %
2.2
6.0 %
5.1
(0.8)
6.7
7.7
7.0
14.1
3.0
97.0
2.5 %
(0.4)
(0.3)
6.8
7.6
6.9
13.6
1.5
98.5
3.0 %
0.4
N/A
7.0
7.6
7.0
13.2
0.0
100.0
3.5 %
1.3
N/A
7.1
7.6
7.1
12.7
0.0
100.0
N/A
7.2
7.6
7.2
12.3
0.0
100.0
4.4 %
3.1
N/A
7.4
7.6
7.4
11.8
0.0
100.0
4.9 %
3.9
N/A
7.5
7.6
7.5
11.4
0.0
100.0
5.4 %
4.6
N/A
7.6
7.6
7.6
11.0
0.0
100.0
7.5
7.7
9.7
N/A
7.7
7.5
7.7
6.5 %
5.5
N/A
7.7
0.0
100.0
10.2
0.0
100.0
87
U8 8tocks: Longer ho|d|ng Per|ods |ncrease the Probab|||ty of Pos|t|ve Returns
0%
20%
40%
60%
80%
100%
1 Month 1 Year 5 Year 10 Year 20 Year
Nominal Real
S&P 500 Frequency of Positive Returns (%)
(1926 Present)
Source: Standard & Poors, Morgan Stanley Smith Barney LLC, Ibbotson Associates. Data as of October 2010.
88
8&P 500 |ndex Annua| Tota| Return by Year
Source: Ibbotson Associates, Morgan Stanley Smith Barney LLC. Data as of March 2011.
Tota| Return 7
-50 to -40 -40 to -30 -30 to -20 -20 to -10 -10 to 0 0 to 10 10 to 20 20 to 30 30 to 40 40 to 50 50 to 0
1931 1937
2008
1930
1974
2002
1941
1957
19
1973
2001
1929
1932
1934
1939
1940
194
1953
192
199
1977
1981
1990
2000
1947
1948
195
190
1970
1978
1984
1987
1992
1993
1994
2005
2007
192
1944
1949
1952
1959
194
195
198
1971
1972
1979
198
1988
2004
200
1942
1943
1951
191
193
197
197
1982
1983
199
1998
1999
2003
1927
193
1938
1945
1950
1955
1975
1980
1985
1989
1991
1995
1997
1928
1935
1958
1933
1954
0
2
4
8
10
12
14
1
Great
Depression
"Mid-30S"
Recession
Tightening of
bank reserve
requirements
Smoot-Hawley
Tariff
"Nifty-Fifty"
Bear Market
OPEC Oil
Embargo
Enron Bankruptcy
and Terrorist
Attacks on U.S. Soil
Iraq Invades
Kuwait
Initial rally
after the
2000-2002
Bear Market
End of the
1980-
1991
recession
End of the
Vietnam
War
End of WW II
Bear
Market
Rally
2009
2010
18
89
Frequency of eat|ng |nf|at|on by 07, 37, and 57: 192 - Present
S&P 500
Index
Intermed
Govt
Bonds
Lg Corp
Bonds
Blend: S&P 500 / Intermediate Govt Blend: S&P 500 / Long Corp
10/90 20/80 30/70 40/60 50/50 60/40 70/30 80/20 90/10 10/90 20/80 30/70 40/60 50/50 60/40 70/30 80/20 90/10
Average Annualized Return 6.56% 2.16% 2.79% 2.77% 3.34% 3.87% 4.37% 4.83% 5.25% 5.64% 5.99% 6.30% 3.33% 3.83% 4.30% 4.74% 5.13% 5.50% 5.82% 6.11% 6.35%
Rolling 1 Year
% of Returns > 0% 67.7% 63.7% 65.3% 71.2% 71.5% 70.7% 68.9% 68.0% 67.5% 67.0% 67.6% 67.6% 68.4% 70.0% 69.2% 67.6% 66.8% 66.3% 66.1% 66.6% 67.2%
% of Returns > 3% 61.0% 39.5% 47.7% 45.8% 51.6% 53.4% 55.9% 57.8% 59.0% 59.7% 59.6% 60.2% 53.3% 55.7% 56.2% 56.3% 57.9% 59.5% 59.9% 60.0% 60.1%
% of Returns > 5% 56.6% 29.0% 37.7% 31.3% 35.0% 41.9% 46.8% 50.2% 53.7% 54.5% 55.8% 56.3% 39.3% 44.1% 46.6% 49.0% 51.4% 53.3% 54.9% 56.3% 56.4%
Rolling 3 Year
% of Returns > 0% 73.8% 67.7% 67.1% 77.2% 81.4% 80.6% 77.7% 77.0% 76.2% 76.3% 75.7% 74.4% 70.8% 74.1% 76.0% 75.8% 75.2% 75.4% 75.7% 75.1% 73.9%
% of Returns > 3% 66.3% 41.5% 50.2% 49.0% 53.4% 55.4% 58.9% 61.5% 63.5% 64.3% 65.6% 65.8% 55.2% 58.1% 59.4% 60.2% 61.3% 62.5% 63.2% 63.9% 64.8%
% of Returns > 5% 59.3% 22.8% 33.7% 27.0% 31.0% 38.9% 45.0% 50.2% 52.5% 53.3% 56.2% 57.9% 37.5% 40.9% 45.5% 50.9% 51.4% 54.1% 55.0% 56.2% 57.7%
Rolling 5 Year
% of Returns > 0% 75.7% 71.0% 60.8% 76.4% 77.7% 79.5% 80.8% 81.1% 80.3% 78.6% 77.9% 77.1% 68.4% 74.0% 76.8% 78.7% 81.4% 81.3% 78.7% 77.1% 76.6%
% of Returns > 3% 65.3% 38.3% 45.0% 43.1% 50.8% 55.3% 59.2% 60.6% 61.2% 61.5% 62.3% 63.6% 47.9% 53.7% 57.5% 58.2% 61.2% 61.0% 61.1% 62.6% 63.9%
% of Returns > 5% 57.1% 21.2% 34.5% 24.8% 31.8% 39.1% 44.7% 48.2% 52.1% 54.9% 56.0% 56.7% 35.4% 37.1% 42.8% 46.9% 48.8% 50.7% 53.6% 55.8% 56.9%
Rolling 10 Year
% of Returns > 0% 85.0% 71.4% 61.6% 77.2% 79.9% 83.7% 85.8% 86.7% 86.8% 87.2% 87.2% 86.6% 69.7% 77.6% 82.4% 84.8% 86.5% 87.1% 86.6% 86.6% 86.5%
% of Returns > 3% 74.6% 39.0% 40.2% 39.6% 51.2% 59.2% 65.2% 71.6% 74.7% 75.6% 75.4% 74.9% 42.1% 51.2% 60.0% 66.0% 70.5% 73.0% 75.2% 75.1% 75.1%
% of Returns > 5% 65.7% 17.3% 32.8% 25.6% 31.0% 37.5% 47.1% 50.2% 56.4% 59.3% 62.4% 64.5% 33.4% 35.2% 39.3% 49.8% 54.6% 59.5% 61.4% 61.9% 64.8%
Rolling 20 Year
% of Returns > 0% 100.0% 73.1% 59.7% 85.3% 98.1% 99.4% 99.9% 100.0% 100.0% 100.0% 100.0% 100.0% 80.9% 91.2% 92.4% 95.9% 97.4% 98.7% 99.5% 100.0% 100.0%
% of Returns > 3% 83.3% 28.9% 33.9% 33.1% 37.2% 53.6% 68.0% 77.3% 79.2% 81.7% 83.2% 84.1% 38.6% 41.9% 58.9% 72.9% 76.6% 77.8% 78.9% 81.5% 83.1%
% of Returns > 5% 65.6% 9.9% 19.5% 12.4% 16.9% 22.9% 28.2% 43.9% 56.3% 61.0% 64.2% 65.0% 23.3% 25.6% 26.9% 30.6% 45.1% 59.6% 63.4% 65.1% 65.5%
Source: FactSet, Standard & Poor's, Ibbotson Associates, Morgan Stanley Smith Barney LLC. Data as of October 2010.
90
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Cash 1.00 0.08 -0.01 0.09 0.16 -0.08 -0.12 0.18 0.23 -0.04 0.04 0.11
USD Investment-Grade Bonds 0.08 1.00 0.08 0.75 -0.07 -0.09 -0.27 0.04 -0.10 0.45 -0.16 -0.18
USD High-Yield Bonds -0.01 0.08 1.00 0.07 0.66 0.52 0.59 0.81 0.62 0.16 0.31 0.05
Non-US Bonds (ccy-hedged to USD) 0.09 0.75 0.07 1.00 0.04 -0.05 -0.15 0.02 -0.03 0.33 -0.33 -0.36
US Large-cap Stocks 0.16 -0.07 0.66 0.04 1.00 0.80 0.64 0.71 0.78 0.14 0.09 -0.08
Developed non-US Stocks -0.08 -0.09 0.52 -0.05 0.80 1.00 0.66 0.64 0.67 0.20 0.28 -0.00
Emerging Market Stocks -0.12 -0.27 0.59 -0.15 0.64 0.66 1.00 0.62 0.70 0.20 0.23 0.02
Relative Value & Event Driven 0.18 0.04 0.81 0.02 0.71 0.64 0.62 1.00 0.78 0.24 0.36 0.09
Equity Long/Short 0.23 -0.10 0.62 -0.03 0.78 0.67 0.70 0.78 1.00 0.30 0.23 0.14
Global Macro & Managed Futures -0.04 0.45 0.16 0.33 0.14 0.20 0.20 0.24 0.30 1.00 0.04 -0.03
Commodities (DJ-AIG Index) 0.04 -0.16 0.31 -0.33 0.09 0.28 0.23 0.36 0.23 0.04 1.00 0.93
Commodities (GSCI Index) 0.11 -0.18 0.05 -0.36 -0.08 -0.00 0.02 0.09 0.14 -0.03 0.93 1.00
Source: CIRA, Morgan Stanley Smith Barney LLC. Bloomberg, Barclays, Hedge Fund Research, Inc. Data as of October 2010.
Important Disclosures
The information and opinions contained herein were prepared by Pacific Asset Management & Co. Incorporated which is registered with the
State of Washington and (pend) SEC registration. (Pacific Asset Management). Pacific Asset Management has no obligation to tell you
when opinions or information in these materials change. Pacific Asset Management and its affiliates are involved in many businesses that
may relate to companies mentioned herein and may lead to conflicts of interest. These businesses may include market making and
specialized trading, risk arbitrage and other proprietary trading, fund management, prime brokerage activities, investment services and
investment banking.
This report is based on public information. Pacific Asset Management makes every effort to use reliable, comprehensive information, but we
make no representation that it is accurate or complete. We are not offering to buy or sell the securities mentioned or soliciting an offer to buy
or sell them.
Pacific Asset Management & Co. Incorporated and/or its affiliate companies, and/or their employees may have an investment in securities
and derivatives of securities mentioned herein. The securities/investment strategies discussed herein may not be suitable for all investors.
Investors must make their own investment decisions based on their own investment objectives and financial position. Pacific Asset
Management recommends that investors independently evaluate each issuer, security, instrument, or strategy discussed, and use any
independent advisers they believe necessary. The value of and income from your investment may vary because of changes in interest rates or
foreign exchange rates, changes in the price of securities or other indexes in the securities markets, changes in operational or financial
conditions of companies and other factors. Past performance is not necessarily a guide to future performance. This may refer to a research
analyst/research report. For additional information, research reports and important disclosures, contact me or see https://www.pamria.com.
Unless indicated, these views are the authors and may differ from those of Pacific Asset Management research or others in the Firm.
Pacific Asset Management does not render advice on tax and tax accounting matters to clients. This material was not intended or written to
be used, and it cannot be used by any taxpayer, for the purpose of avoiding penalties that may be imposed on the taxpayer under U.S. federal
tax laws.
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