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Please refer to important information, disclosures and qualifications at the end of this material.
Global Investment CommitteeGlobal Investment CommitteeChart BookChart Book
October 2011October 2011
GIC Chart Book| October 2011
Please refer to important information, disclosures and qualifications at the end of this material.
Past performance is no guarantee of future results. Estimates of future performance are based on assumptions that may not be realized. This material is not a solicitation of any offer to buy or sell any security or other financial instrument or to participate in any trading strategy.
1
Table of Contents
Section Page
Forecasts 2
Performance 5
Equities, Valuation 10
Net EPS Revision 15
Volatility 17
Sentiment 19
Equities - General 20
Style and Capitalization 31
Supply/Demand 42
Fixed Income 45
Currencies 51
Economics 52
Real Asset Prices 66
Secular 72
Asset Allocation 76
GIC Chart Book| October 2011
Please refer to important information, disclosures and qualifications at the end of this material.
Past performance is no guarantee of future results. Estimates of future performance are based on assumptions that may not be realized. This material is not a solicitation of any offer to buy or sell any security or other financial instrument or to participate in any trading strategy.
2
Economic Forecasts
Source: Morgan Stanley & Co. LLC, Citi Investment Research & Analysis (CIRA), Morgan Stanley Smith Barney. Japan’s GDP forecasts for 2011 & 2012 are post 3/10/11 natural disaster. Data as of October 2011
2011F 2012F 2011F 2012F
Global GDP 3.9 3.8 Global GDP 3.0 2.9
Developed Economies 1.4 1.5 21 Developed Economies 1.4 1.3 33U.S. 1.7 2.0 11 U.S. 1.7 1.9 18Euro Area 1.7 0.5 2 Euro Area 1.6 -0.2 -2U.K. 1.0 1.1 1 U.K. 1.0 0.7 1Japan -0.6 1.3 2 Japan -0.4 2.1 7
Developing Economies 6.4 6.1 79 Developing Economies 6.1 5.6 67Brazil 3.7 3.5 3 Brazil 3.7 4.0 4Russia 4.7 5.2 4 Russia 4.0 2.5 2India 7.3 7.4 11 India 7.6 8.2 7China 9.0 8.7 31 China 9.0 8.7 31
Global Inflation 4.3 3.4 Global Inflation 4.0 3.2Developed Economies 2.6 1.7 Developed Economies 2.6 1.7Developing Economies 6.0 5.0 Developing Economies 6.5 5.7U.S. Core 1.6 2.2 U.S. Core 1.7 1.9U.S. CPI 3.2 2.1 U.S. CPI 3.2 1.9
Global Consumer Prices Global Consumer Prices
2012F 2012F
Morgan Stanley & Co.
(Year-over-Year % Change)
Citi Investment Research & Analysis % Contribution to 2012 Growth(Year-over-Year % Change)
% Contribution to 2012 Growth
GIC Chart Book| October 2011
Please refer to important information, disclosures and qualifications at the end of this material.
Past performance is no guarantee of future results. Estimates of future performance are based on assumptions that may not be realized. This material is not a solicitation of any offer to buy or sell any security or other financial instrument or to participate in any trading strategy.
3
Earnings Per Share
Note: CIRA estimates are pre-write-offs.Source: CIRA, Thomson Financial, Standard & Poor’s, FactSet, Morgan Stanley Smith Barney LLC. Data as of October 2011
Operating EPS ($)
YOY Change
(%)Operating
EPS ($)
YOY Change
(%)Operating
EPS ($)
YOY Change
(%)Operating
EPS ($)
YOY Change
(%)Operating
EPS ($)
YOY Change
(%)
85.00 37 85.49 38 85.28 40 23.34 41 83.69 37
96.00 13 97.00 13 97.80 15 26.34 13 92.96 11
103.00 7 101.00 4 110.53 13 29.75 13 105.17 13
52 Week Forward 107.56 29.18 103.23
Consensus
MSCI AC World MSCI EMS&P 500
Morgan Stanley & Co.
2010E
2012E
2011E
S&P 500
Citi Investment Research& Analysis
GIC Chart Book| October 2011
Please refer to important information, disclosures and qualifications at the end of this material.
Past performance is no guarantee of future results. Estimates of future performance are based on assumptions that may not be realized. This material is not a solicitation of any offer to buy or sell any security or other financial instrument or to participate in any trading strategy.
4
Interest Rate Forecasts
*Morgan Stanley’s current and forecast policy rate for China uses the 1 year lending rate;**CIRA’s current and forecast policy rate for China uses the 1 year deposit rate.
Source: Morgan Stanley & Co. LLC, CIRA, Bloomberg, Morgan Stanley Smith Barney LLC. Data as of October 2011
Current Rate 4Q11F 4Q12F 4Q11F 4Q12F
0.00 – 0.25 0.20 0.20 US 0.00 - 0.25 0.25 0.251.50 1.25 1.00 Eurozone 1.50 1.00 1.000.10 0.05 0.05 Japan 0.10 0.10 0.100.50 0.50 0.50 UK 0.50 0.50 0.506.56* 6.56* 6.56* China 3.50** 3.50** 3.50**
US 2.16 2.10 2.25 US 2.16 2.35 2.75Eurozone 2.09 2.00 2.75 Eurozone 2.09 1.50 1.50Japan 0.77 1.50 1.40 Japan 0.77 1.20 1.05UK 2.23 2.40 3.40 UK 2.23 2.00 1.80
10-Year Government Bond Yields (%) 10-Year Government Bond Yields (%)
JapanUKChina
Morgan Stanley & Co. Inc. Citi Investment Research & AnalysisCurrent Rate
Policy Rates (%) Policy Rates (%)USEurozone
GIC Chart Book| October 2011
Please refer to important information, disclosures and qualifications at the end of this material.
Past performance is no guarantee of future results. Estimates of future performance are based on assumptions that may not be realized. This material is not a solicitation of any offer to buy or sell any security or other financial instrument or to participate in any trading strategy.
5
Global Asset Class Investment Performance
Note: (1) The Barclays Capital U.S. Aggregate Index represents securities that are U.S. domestic, taxable, and dollar denominated, and which cover the U.S. investment-grade, fixed-rate bond market. (2) JPMorgan EMBI+ is used from 1994 to present; JPMorgan EMBI is used for prior periods. (3) Returns for the Cambridge Associates U.S. Private Equity Index for 2010 are revised numbers for January 2010-December 2010. Returns for the Cambridge Associates U.S. Venture Capital Index for 2010 are revised numbers for January 2010-December 2010. (4) The synthetically constructed Bridgewater Strategic Benchmark U.S. TIPS 8-year duration Index is used for the March 1991 through March 1997 time period; the Barclays Capital TIPS Index is used after March 1997. All indices are expressed in total return terms unless otherwise noted in the description. “Gross” denotes total returns inclusive of gross dividends, “Net” denotes total returns inclusive of dividends net of foreign withholding taxes, and “Price Return” indicates that dividends are not included in the percentage return data. "Free" denotes that portion of the relevant underlying market whose equity securities are freely tradable by non-domestic investors. Standard deviations of annual returns are shown in this table. Past performance is not a guarantee of future results. The indexes are unmanaged. An investor cannot invest directly in an index. The indices are shown for illustrative purposes only and do not represent the performance of any specific investment.Source: Cambridge Associates LLC; Russell Investments, Hedge Fund Research; Barclay Trading Group; U.S. Department of Agriculture; Morgan Stanley & Co. LLC Research; MSCI Barra; Bloomberg; FactSet; Morgan Stanley Smith Barney LLC.
Asset Class Rolling 10-Year Compound Annual Growth Rate, Standard Deviations of Returns, and Correlations of Returns Nominal Total Returns Expressed in U.S. Dollars
Rolling 10-Year Annual Correlation of Returns with the S&P500On 12/31/06 On 12/31/07 On 12/31/08 On 12/31/09 On 12/31/10 On 12/31/06 On 12/31/07 On 12/31/08 On 12/31/09 On 12/31/10(1997-2006) (1998-2007) (1999-2008) (2000-2009) (2001-2010) (1997-2006) (1998-2007) (1999-2008) (2000-2009) (2001-2010)
Asset Class Indices CAGR Std Dev CAGR Std Dev CAGR Std Dev CAGR Std Dev CAGR Std Dev 10 Years 10 Years 10 Years 10 Years 10 YearsU.S. Equity IndicesStandard & Poor's 500 Index 8.4% 19.1% 5.9% 17.3% -1.4% 20.5% -1.0% 21.1% 1.4% 21.2% 1.00 1.00 1.00 1.00 1.00Standard & Poor's 500 Equal-Weighted Index 11.6 15.6 8.9 14.8 2.4 21.5 5.1 25.2 6.3 25.6 0.84 0.80 0.92 0.95 0.97Standard & Poor's 100 Index 7.8 20.9 5.8 19.9 -1.5 21.8 -2.3 20.3 0.1 20.2 0.97 0.97 0.98 0.99 0.99Russell 1000 Index 8.6 18.8 6.2 17.1 -1.1 20.7 -0.5 21.6 1.8 21.8 1.00 1.00 1.00 1.00 1.00Russell 1000 Growth Index 5.4 24.9 3.8 23.7 -4.3 24.6 -4.0 25.2 0.0 24.5 0.97 0.96 0.96 0.97 0.98Russell 1000 Value Index 11.0 15.4 7.7 13.4 1.4 19.3 2.5 20.0 3.3 20.3 0.88 0.84 0.92 0.95 0.97Russell 2000 Index 9.4 18.7 7.1 18.6 3.0 22.8 3.5 23.3 6.3 23.9 0.73 0.72 0.95 0.95 0.95Russell 2000 Growth Index 4.9 25.2 4.3 25.1 -0.8 29.0 -1.4 27.8 3.8 27.5 0.78 0.83 0.96 0.97 0.98Russell 2000 Value Index 13.3 18.2 9.1 18.5 6.1 21.9 8.3 21.9 8.4 22.0 0.39 0.28 0.69 0.79 0.86Russell 3000 Index 8.6 18.4 6.2 16.8 -0.8 20.8 -0.2 21.7 2.2 21.8 1.00 0.99 1.00 1.00 1.00Russell 3000 Growth Index 5.3 24.4 3.8 23.3 -4.0 24.8 -3.8 25.3 0.3 24.7 0.97 0.97 0.96 0.97 0.98Russell 3000 Value Index 11.1 15.3 7.7 13.4 1.7 19.3 2.9 20.0 3.6 20.3 0.86 0.81 0.91 0.94 0.97Non-U.S. Equity IndicesMSCI EAFE Net Index 7.7% 20.8% 8.7% 20.6% 0.8% 26.3% 1.2% 26.9% 3.5% 26.0% 0.78 0.93 0.98 0.98 0.97MSCI Europe Free Net Index 10.5 21.2 9.5 20.8 0.4 26.7 2.0 28.3 3.3 27.9 0.91 0.93 0.96 0.98 0.96MSCI Pacific (Developed Asia) Net Index 3.2 28.7 6.8 26.5 1.9 30.2 -0.5 25.3 4.0 23.5 0.43 0.72 0.88 0.90 0.92MSCI Japan Net Index 2.2 29.9 4.5 28.3 0.5 30.7 -3.7 23.3 1.0 21.7 0.45 0.71 0.81 0.79 0.81MSCI Emerging Markets Free Gross Index 9.4 33.8 14.5 33.4 9.3 38.3 10.1 40.3 16.2 36.6 0.33 0.49 0.92 0.92 0.93MSCI Emerging Global Free Latin America Gross Index 16.4 37.9 18.0 38.9 14.7 41.8 17.6 48.2 21.4 46.0 0.49 0.48 0.96 0.95 0.92MSCI Emerging Markets Europe, Middle East, and Africa Gross Index 14.5 33.6 15.5 33.8 9.8 39.1 9.6 38.6 14.6 36.2 0.40 0.44 0.90 0.91 0.91MSCI Emerging Markets Asia Gross Index 3.1 37.7 14.0 32.8 7.0 39.1 7.3 39.8 15.3 34.5 0.20 0.53 0.87 0.88 0.91Fixed Income IndicesBarclays U.S. Capital Aggregate (Taxable) Bond Index1 6.2% 4.0% 6.0% 3.8% 5.6% 3.7% 6.3% 2.9% 5.8% 2.3% -0.39 -0.59 -0.58 -0.47 -0.44Barclays Capital U.S. 7-Year Municipal Bond Index 5.2 3.2 5.0 3.1 4.8 3.1 5.6 2.7 5.1 2.4 -0.37 -0.55 -0.50 -0.24 -0.19Credit Suisse High Yield (Upper/Middle Tier) Index 7.1 9.2 6.1 9.1 2.9 13.8 7.1 21.1 9.1 20.5 0.51 0.48 0.82 0.84 0.8310-Year U.S. Treasury Note Index 5.6 7.4 5.5 7.3 6.1 8.4 6.0 8.7 5.4 8.3 -0.31 -0.48 -0.84 -0.86 -0.82JPMorgan Global ex-U.S. Bond Index 3.9 10.6 5.5 10.3 4.8 9.6 5.7 9.0 6.7 8.5 0.21 0.36 0.01 0.11 0.05
JPMorgan Emerging Markets Bond Index2 11.0 12.3 10.4 12.4 10.9 11.4 10.9 11.4 10.6 11.3 0.06 0.06 0.76 0.78 0.81Alternative Investments IndicesNAREIT (Real Estate Investment Trusts) 14.5% 17.9% 10.5% 20.4% 7.4% 24.3% 10.6% 24.3% 10.8% 24.4% 0.01 -0.01 0.60 0.74 0.81
Cambridge Associates U.S. Private Equity Index3 15.8 16.4 15.0 15.9 10.6 19.9 8.5 18.1 10.2 18.2 0.81 0.79 0.93 0.86 0.86
Cambridge Associates U.S. Venture Capital Index3 16.7 90.2 14.7 90.3 10.0 91.6 -3.4 21.6 -4.2 20.7 0.38 0.42 0.46 0.52 0.65HFRI Fund Weighted Composite Hedge Fund Index 10.6 9.6 9.9 9.4 7.4 13.1 6.4 11.2 6.9 11.3 0.63 0.61 0.91 0.96 0.96HFRI Fund of Funds Index 7.9 8.8 7.3 8.4 5.3 11.9 4.0 9.8 4.1 9.8 0.43 0.33 0.86 0.86 0.87Commodity Research Bureau Total Return Index 8.5 22.7 11.0 22.5 9.7 24.1 9.0 23.5 7.8 22.6 -0.28 -0.22 0.49 0.47 0.56Barclay CTA (Commodity Trading Advisors) Index 5.4 4.5 5.1 4.2 5.8 5.0 5.9 4.9 5.8 4.9 -0.02 -0.25 -0.59 -0.60 -0.57Handy & Harman Spot Gold Price 5.6 14.7 11.2 12.8 11.8 12.3 14.3 11.9 18.0 10.3 -0.33 -0.08 0.18 0.42 0.44
Barclays Capital TIPS Index/Bridgewater Index4 6.5 5.1 7.5 5.0 6.8 5.9 7.7 5.8 7.0 5.5 -0.69 -0.63 -0.02 0.17 0.22U.S. Cash/Cash Equivalent IndicesCitigroup U.S. Treasury Bill (90-Day) Index 3.7% 1.8% 3.6% 1.8% 3.3% 1.8% 2.9% 2.0% 2.3% 1.8% 0.14 0.00 0.08 -0.22 -0.21
Rolling 10-Year Compound Annual Growth Rates and Standard Deviation
GIC Chart Book| October 2011
Please refer to important information, disclosures and qualifications at the end of this material.
Past performance is no guarantee of future results. Estimates of future performance are based on assumptions that may not be realized. This material is not a solicitation of any offer to buy or sell any security or other financial instrument or to participate in any trading strategy.
6
Global Asset Class Investment Performance
Note: (1) The Cambridge Associates U.S. Private Equity and U.S. Venture Capital Index returns are reported on a quarterly basis. Returns for the Cambridge Associates U.S. Private Equity Index and Cambridge Associates U.S. Venture Capital Index 1-, 3-, 5-, and 10- year periods are for June 2010-June 2011, June 2008-June 2011, June 2006-June 2011, and June 2001-June 2011 respectively. N/A = Not Available.(2) The Barclay CTA Index 1-Month return is based on preliminary estimates by the Morgan Stanley Smith Barney Managed Futures Group. Data are as of September, 2011. All indices are expressed in U.S. Dollar total return terms unless otherwise noted in the description. “Gross” denotes total returns inclusive of gross dividends, “Net” denotes total returns inclusive of dividends net of foreign withholding taxes, and “Price Return” indicates that dividends are not included in the percentage return data. "Free" denotes that portion of the relevant underlying equity market whose securities are freely tradable by non-domestic investors. CAGR stands for Compound Annual Growth Rate. Past performance is not a guarantee of future results. The indexes are unmanaged. An investor cannot invest directly in an index. The indices are shown for illustrative purposes only and do not represent the performance of any specific investment.Source: Cambridge Associates LLC, Russell Investments, Hedge Fund Research, Barclay Trading Group, U.S. Department of Agriculture, Morgan Stanley & Co. LLC Research, MSCI Barra, FactSet, Morgan Stanley Smith Barney LLC.
September 2011, YTD 2011, and Multi-Year Time PeriodsTotal Return %
1-Month YTD 2011 1-Year 3-Year 5-Year 10-YearReturn Return Return CAGR CAGR CAGR
Asset Class Indices (Sep. 2011) (Dec. 10-Sep. 11) (Sep. 10-Sep. 11) (Sep. 08-Sep. 11) (Sep. 06-Sep. 11) (Sep. 01-Sep. 11)U.S. Equity IndicesStandard & Poor's 500 Index -7.0% -8.7% 1.1% 1.2% -1.2% 2.8%Standard & Poor's 500 Equal-Weighted Index -9.0 -11.2 -0.5 5.2 0.8 6.6Standard & Poor's 100 Index -6.2 -7.8 1.9 0.5 -1.4 1.8Russell 1000 Index -7.5 -9.2 0.9 1.6 -0.9 3.3Russell 1000 Growth Index -7.4 -7.2 3.8 4.7 1.6 3.0Russell 1000 Value Index -7.6 -11.2 -1.9 -1.5 -3.5 3.4Russell 2000 Index -4.1 -17.0 -3.5 -0.4 -1.0 6.1Russell 2000 Growth Index -11.5 -15.6 -1.1 2.1 1.0 5.5Russell 2000 Value Index -10.9 -18.5 -6.0 -2.8 -3.1 6.5Russell 3000 Index -7.8 -9.9 0.5 1.5 -0.9 3.5Russell 3000 Growth Index -7.7 -7.9 3.4 4.5 1.6 3.2Russell 3000 Value Index -7.8 -11.8 -2.2 -1.6 -3.5 3.6Non-U.S. Equity IndicesMSCI EAFE Net Index -9.5% -15.0% -9.4% -1.1% -3.5% 5.0%MSCI Europe Free Net Index -11.0 -15.6 -11.8 -2.8 -4.1 4.8MSCI Pacific (Developed Asia) Net Index -6.8 -13.5 -4.3 2.4 -2.1 5.5MSCI Japan Net Index -1.6 -10.9 -0.1 -0.2 -4.9 2.8MSCI Emerging Markets Free Gross Index -14.6 -21.7 -15.9 6.6 5.2 16.4MSCI Emerging Markets Global Free Latin America Free Net Index -17.4 -25.7 -21.2 4.8 9.3 20.3MSCI Emerging Markets Europe, Middle East, and Africa Gross Index -16.9 -22.4 -14.5 2.3 1.9 15.9MSCI Emerging Markets Asia Gross Index -12.6 -19.8 -14.2 9.4 5.1 15.4Fixed Income IndicesBarclays Capital U.S. Aggregate (Taxable) Bond Index 0.7% 6.6% 5.3% 8.0% 6.5% 5.7%Barclays Capital U.S. 7-Year Municipal Bond Index 0.1 7.2 4.7 7.8 N/A N/A Credit Suisse High Yield (Upper/Middle Tier) Index -2.8 -0.5 2.6 12.5 6.8 9.010-Year U.S. Treasury Note Index 2.9 15.7 9.3 9.0 8.4 6.2JPMorgan Global Non-U.S. Bond Index -2.9 6.2 4.7 9.0 8.3 8.2JPMorgan Emerging Markets Bond Index -4.1 3.7 1.4 11.6 7.9 11.0Alternative Investments IndicesNAREIT (Real Estate Investment Trusts) Index -11.0% -6.0% 0.9% -2.0% -2.4% 9.2%Cambridge Associates U.S. Private Equity Index1 N/A 5.4 24.7 5.8 10.5 18.6Cambridge Associates U.S. Venture Capital Index1 N/A 5.0 26.3 3.7 7.3 -1.6HFRI Fund Weighted Composite Hedge Fund Index -2.8 -4.7 0.4 4.6 3.4 6.5HFRI Fund of Funds Index -2.6 -5.0 -1.6 0.2 0.4 3.6Barclay CTA (Commodity Trading Advisors) Index2 0.0 0.0 0.0 1.3 4.3 4.6Spot Gold Price -11.1 14.3 24.1 23.1 22.1 18.7Barclays Capital TIPS Index -0.2 10.6 9.9 8.1 7.1 7.2U.S. Cash/Cash Equivalent IndicesCitigroup U.S. Treasury Bill (90-Day) Index 0.0% 0.1% 0.1% 0.2% 1.6% 1.9%
GIC Chart Book| October 2011
Please refer to important information, disclosures and qualifications at the end of this material.
Past performance is no guarantee of future results. Estimates of future performance are based on assumptions that may not be realized. This material is not a solicitation of any offer to buy or sell any security or other financial instrument or to participate in any trading strategy.
7
Source: MSCI, Standard & Poor’s, Russell Investments, FactSet, Bloomberg. Data as of January 2011.
Annual Returns for Major Indices (1990 – 2010)Ranked in order of performance (as of 1/4/2011)
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
40.7 MSCI EM
118.1 MSCI EM
64.8 MSCI EM
184.9 MSCI EM
27.7 MSCI EM
38.4 Russell
1000 Value
23.1 Russell
1000 Growth
35.2 Russell
1000 Value
38.7 Russell
1000 Growth
77.5 MSCI EM
22.8 Russell
2000 Value
14.0 Russell
2000 Value
11.5 BC
Govt/Cr.
47.6 Russell
2000 Growth
22.2 Russell
2000 Value
35.8 MSCI EM
28.9 MSCI EM
33.5 MSCI EM
10.4 BC Int.
Govt/Cr.
62.8 MSCI EM
28.3 Russell
2000 Growth
9.6 BC Int.
Govt/Cr.
49.6 Russell
2000 Growth
29.1 Russell
2000 Value
29.6 MSCI EAFE
2.6 Russell
1000 Growth
37.8 Russell
1000
23.0 S&P 500
33.4 S&P 500
28.6 S&P 500
42.5 Russell
2000 Growth
12.4 BC
Govt/Cr.
8.4 BC Int.
Govt/Cr.
9.6 BC Int.
Govt/Cr.
47.3 Russell
2000
18.3 Russell
2000
29.5 MSCI EAFE
23.5 Russell
2000 Value
11.8 Russell
1000 Growth
8.0 BC
Govt/Cr.
37.2 Russell
1000 Growth
26.9 Russell
2000
8.5 BC
Govt/Cr.
46.0 Russell
2000
18.4 Russell
2000
23.8 Russell
2000 Value
1.3 S&P 500
37.6 S&P 500
22.4 Russell
1000
32.9 Russell
1000
27.0 Russell
1000
33.8 MSCI EAFE
10.5 BC Int.
Govt/Cr.
8.3 BC
Govt/Cr.
-7.1 MSCI EM
46.7 MSCI EM
16.5 Russell
1000 Value
7.1 Russell
1000 Value
22.2 Russell
1000 Value
8.5 BC Int.
Govt/Cr.
-28.9 Russell
2000 Value
33.5 Russell
2000 Growth
24.5 Russell
2000 Value
-0.3 Russell
1000 Growth
41.7 Russell
2000 Value
13.6 Russell
1000 Value
18.9 Russell
2000
0.4 Russell
1000
37.2 Russell
1000 Growth
21.6 Russell
1000 Value
31.8 Russell
2000 Value
15.6 Russell
1000 Value
33.2 Russell
1000 Growth
7.0 Russell
1000 Value
7.9 MSCI EM
-11.4 Russell
2000 Value
46.0 Russell
2000 Value
16.4 MSCI EM
6.3 Russell
1000
18.4 Russell
2000
7.6 BC
Govt/Cr.
-33.8 Russell
2000
28.4 Russell
1000
16.7 Russell
1000 Growth
-3.1 S&P 500
41.3 Russell
1000 Growth
8.9 Russell
1000
18.1 Russell
1000 Value
-1.5 Russell
2000 Value
30.1 Russell
2000 Growth
21.4 Russell
2000 Value
30.5 Russell
1000 Growth
12.6 MSCI EAFE
21.3 Russell
2000
-3.0 Russell
2000
2.5 Russell
2000
-15.5 Russell
1000 Value
30.0 Russell
1000 Value
13.8 Russell
2000 Growth
5.3 Russell
1000 Growth
16.9 MSCI EAFE
6.5 Russell
2000 Growth
-36.8 Russell
1000 Value
27.2 Russell
2000
16.1 Russell
1000
-4.2 Russell
1000
33.0 Russell
1000
7.6 S&P 500
12.5 Russell
2000 Growth
-1.7 BC Int.
Govt/Cr.
28.5 Russell
2000
16.5 Russell
2000
22.4 Russell
2000
9.7 BC
Govt/Cr.
21.0 S&P 500
-7.1 MSCI EAFE
-5.6 Russell
1000 Value
-20.5 Russell
2000
29.9 Russell
1000
13.1 MSCI EAFE
4.9 S&P 500
15.8 S&P 500
5.8 Russell
1000
-37.0 S&P 500
26.5 S&P 500
15.5 Russell
1000 Value
-8.1 Russell
1000 Value
30.5 S&P 500
7.5 BC
Govt/Cr.
10.9 BC
Govt/Cr.
-1.8 MSCI EAFE
25.7 Russell
2000 Value
13.5 MSCI EM
13.8 MSCI EAFE
8.5 BC Int.
Govt/Cr.
20.9 Russell
1000
-7.8 Russell
1000
-9.6 Russell
2000 Growth
-21.7 Russell
1000
29.7 Russell
1000 Growth
11.4 Russell
1000
4.7 Russell
2000 Value
15.5 Russell
1000
5.5 S&P 500
-37.6 Russell
1000
25.4 MSCI EAFE
15.1 S&P 500
-18.5 Russell
2000 Growth
24.6 Russell
1000 Value
6.9 BC Int.
Govt/Cr.
10.2 Russell
1000
-1.8 Russell
2000
19.0 BC
Govt/Cr.
11.6 MSCI EAFE
12.5 Russell
2000 Growth
0.8 Russell
2000 Growth
7.3 Russell
1000 Value
-9.1 S&P 500
-11.9 S&P 500
-22.1 S&P 500
28.7 S&P 500
10.9 S&P 500
4.6 Russell
2000
12.8 Russell
2000 Growth
4.0 MSCI EAFE
-38.4 Russell
1000 Growth
20.6 Russell
2000 Value
14.4 MSCI EM
-19.5 Russell
2000
15.9 BC
Govt/Cr.
6.8 Russell
2000 Growth
10.1 S&P 500
-2.0 Russell
1000 Value
14.4 BC Int.
Govt/Cr.
10.7 Russell
2000 Growth
9.7 BC
Govt/Cr.
-2.5 Russell
2000
0.5 BC Int.
Govt/Cr.
-22.4 Russell
1000 Growth
-12.4 Russell
1000
-25.8 MSCI EAFE
20.8 MSCI EAFE
6.3 Russell
1000 Growth
3.6 Russell
2000 Growth
9.1 Russell
1000 Growth
-0.2 Russell
1000 Value
-39.0 Russell
2000 Growth
19.7 Russell
1000 Value
6.1 BC
Govt/Cr.
-21.8 Russell
2000 Value
14.1 BC Int.
Govt/Cr.
5.0 Russell
1000 Growth
8.2 BC Int.
Govt/Cr.
-3.1 Russell
2000 Growth
9.8 MSCI EAFE
4.1 BC Int.
Govt/Cr.
7.7 BC Int.
Govt/Cr.
-6.5 Russell
2000 Value
-1.5 Russell
2000 Value
-22.7 Russell
2000 Growth
-16.0 MSCI EAFE
-27.9 Russell
1000 Growth
3.4 BC
Govt/Cr.
3.8 BC
Govt/Cr.
2.6 BC
Govt/Cr.
3.8 BC Int.
Govt/Cr.
-1.6 Russell
2000
-39.9 MSCI EAFE
1.6 BC
Govt/Cr.
5.3 MSCI EAFE
-29.6 MSCI EAFE
9.1 MSCI EAFE
-5.8 MSCI EAFE
2.9 Russell
1000 Growth
-3.5 BC
Govt/Cr.
0.8 MSCI EM
2.8 BC
Govt/Cr.
4.8 MSCI EM
-19.6 MSCI EM
-2.3 BC
Govt/Cr.
-25.3 MSCI EM
-20.4 Russell
1000 Growth
-30.7 Russell
2000 Growth
2.3 BC Int.
Govt/Cr.
2.3 BC Int.
Govt/Cr.
1.7 BC Int.
Govt/Cr.
3.7 BC
Govt/Cr.
-9.8 Russell
2000 Value
-45.7 MSCI EM
-0.3 BC Int.
Govt/Cr.
5.0 BC Int.
Govt/Cr.
GIC Chart Book| October 2011
Please refer to important information, disclosures and qualifications at the end of this material.
Past performance is no guarantee of future results. Estimates of future performance are based on assumptions that may not be realized. This material is not a solicitation of any offer to buy or sell any security or other financial instrument or to participate in any trading strategy.
8
Annual Returns for Fixed Income Segments
Ranked in order of performance (as of 3Q 2011)
Source: MSCI, Standard & Poor’s, Russell Investments, FactSet. Data as of September 2011.
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 YTD
10.0 US Trsy
24.3 Emerging Markets
13.5 Emerging Markets
11.0 US Corp
16.7 US TIPS
30.6 US High
Yield
11.7 Emerging Markets
11.2 Emerging Markets
11.8 US High
Yield 11.6
US TIPS 13.9
US Trsy 58.2
Barclays US Agg.
15.1 Barclays US Agg.
11.0 US TIPS
8.6 US Corp
2.4 Barclays US Agg.
13.5 US Trsy
8.2 MBS
13.6 Emerging Markets
29.0 Barclays US Agg.
11.1 Barclays US Agg.
3.5 US Muni
11.8 Barclays US Agg.
9.2 Barclays
Multi- verse
8.5 MBS
55.2 US High
Yield
14.3 US High
Yield 8.7
US Trsy
7.0 MBS
2.4 US TIPS
13.1 US TIPS
7.9 US TIPS
11.6 US Trsy
27.3 Emerging Markets
10.8 US High
Yield 2.9
US TIPS 10.5
Emerging Markets
9.0 US Trsy
3.8 Barclays
Multi- verse
27.5 Emerging Markets
12.0 Emerging Markets
8.4 US Muni
6.5 US Muni
1.8 MBS
11.7 US Muni
6.7 US Trsy
9.8 US Corp
13.2 Barclays
Multi- verse
9.4 Barclays
Multi- verse
2.8 US Trsy
6.9 Barclays
Multi- verse
7.0 MBS
-1.2 US TIPS
16.1 US Corp
8.6 US Corp
6.0 US Corp
3.9 US TIPS
1.7 US High
Yield 11.3 MBS
5.4 US High
Yield 9.6
US Muni 8.3
US Corp 8.4
US TIPS 2.7
Barclays US Agg.
5.2 MBS
6.2 Emerging Markets
-2.5 US Muni
12.9 US Muni
6.5 US TIPS
5.4 MBS
3.6 US High
Yield -1.6
US Corp 9.3
US Corp 5.3
Barclays US Agg.
8.9 MBS
8.3 US TIPS
5.5 US Corp
2.7 MBS
4.8 US Muni
5.2 US Corp
-2.9 US Corp
10.1 US TIPS
5.8 Barclays
Multi- verse
5.1 Barclays
Multi- verse
1.9 Barclays US Agg.
-2.1 US Muni
-5.7 US High
Yield 5.1
US Muni -1.4
Barclays US Agg.
5.3 US Muni
4.8 MBS
2.2 US Corp
4.5 US Corp
3.4 US Muni
-10.5 Emerging Markets
8.0 Barclays
Multi- verse
5.8 US Trsy
3.4 Emerging Markets
-8.7 Emerging Markets
-2.4 US Trsy
-5.9 Barclays US Agg.
1.1 Emerging Markets
-1.5 US High
Yield 3.1
MBS 4.5
US Muni 2.1
US High Yield
3.1 US Trsy
1.9 Barclays US Agg.
-25.9 US High
Yield 5.8
MBS 5.5
MBS -0.8
US High Yield
2.3
US Trsy 3.5
US Trsy
-4.1 Barclays
Multi- verse
0.4 US TIPS
1.8 US High
Yield
-26.2 Barclays US Agg.
-3.7 US Trsy
2.4 US Muni
-1.4 Barclays US Agg.
GIC Chart Book| October 2011
Please refer to important information, disclosures and qualifications at the end of this material.
Past performance is no guarantee of future results. Estimates of future performance are based on assumptions that may not be realized. This material is not a solicitation of any offer to buy or sell any security or other financial instrument or to participate in any trading strategy.
9
Annual Returns for Global Equity Market Segments
Ranked in order of performance (as of 3Q11)
Source: MSCI, Standard & Poor’s, Russell Investments, FactSet. Data as of September 2011.
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 YTD
33.9 Europe ex-UK
66.4 MSCI
Emerging Markets
-7.1 Europe ex-UK
-2.4 MSCI
Emerging Markets
-5.8 MSCI Pacific
Ex-Japan
56.3 MSCI
Emerging Markets
29.6 MSCI Pacific
Ex-Japan
34.5 MSCI
Emerging Markets
36.4 Europe ex-UK
39.8 MSCI
Emerging Markets
-29.1 MSCI Japan
79.0 MSCI
Emerging Markets
19.2 MSCI
Emerging Markets
-8.7 S&P 500
28.6 S&P 500
61.8 MSCI Japan
-9.1 S&P 500
-9.4 MSCI Pacific
Ex-Japan
-6.0 MSCI
Emerging Markets
47.0 MSCI Pacific
Ex-Japan
26.0 MSCI
Emerging Markets
25.6 MSCI Japan
33.2 MSCI Pacific
Ex-Japan
31.7 MSCI Pacific
Ex-Japan
-37.0 S&P 500
73.0 MSCI Pacific
Ex-Japan
17.1 MSCI Pacific
Ex-Japan
-10.7 MSCI UK
22.0 MSCI AC
World
43.2 MSCI Pacific
Ex-Japan
-11.5 MSCI UK
-11.9 S&P 500
-10.1 MSCI Japan
43.6 Europe ex-UK
22.4 Europe ex-UK
14.8 MSCI Pacific
Ex-Japan
32.6 MSCI
Emerging Markets
17.5 Europe ex-UK
-41.8 MSCI AC
World
43.4 MSCI UK
15.6 MSCI Japan
-10.8 MSCI Japan
17.8 MSCI UK
26.8 MSCI AC
World
-13.9 MSCI AC
World
-14.0 MSCI UK
-15.2 MSCI UK
36.2 MSCI Japan
19.6 MSCI UK
11.4 MSCI AC
World
30.7 MSCI UK
12.2 MSCI AC
World
-45.0 Europe ex-UK
35.4 MSCI AC
World
15.1 S&P 500
-13.2 MSCI AC
World
5.2 MSCI Japan
21.0 S&P 500
-15.2 MSCI Pacific
Ex-Japan
-15.9 MSCI AC
World
-19.0 MSCI AC
World
34.6 MSCI AC
World
16.0 MSCI Japan
11.3 Europe ex-UK
21.5 MSCI AC
World
8.4 MSCI UK
-48.3 MSCI UK
33.9 Europe ex-UK
13.2 MSCI AC
World
-17.4 Europe ex-UK
-6.2 MSCI Pacific
Ex-Japan
17.8 Europe ex-UK
-28.1 MSCI Japan
-22.0 Europe ex-UK
-19.9 Europe ex-UK
32.1 MSCI UK
15.8 MSCI AC
World
7.4 MSCI UK
15.8 S&P 500
5.5 S&P 500
-50.0 MSCI Pacific
Ex-Japan
26.5 S&P 500
8.8 MSCI UK
-17.6 MSCI Pacific
Ex-Japan -25.3 MSCI
Emerging Markets
12.5 MSCI UK
-30.6 MSCI
Emerging Markets
-29.3 MSCI Japan
-22.1 S&P 500
28.7 S&P 500
10.9 S&P 500
4.9 S&P 500
6.3 MSCI Japan
-4.1 MSCI Japan
-53.2 MSCI
Emerging Markets
6.4 MSCI Japan
2.4 Europe ex-UK
-21.7 MSCI
Emerging Markets
GIC Chart Book| October 2011
Please refer to important information, disclosures and qualifications at the end of this material.
Past performance is no guarantee of future results. Estimates of future performance are based on assumptions that may not be realized. This material is not a solicitation of any offer to buy or sell any security or other financial instrument or to participate in any trading strategy.
10
Global Equity Valuation
Source: MSCI, Thomson Financial, FactSet. Data as of September 2011.
Note: The volatility adjusted yield gap is calculated as the residual from the regression of the Global Earnings Yield Gap on relative Global Stock/Bond volatility. Volatility is calculated as the 60-month rolling standard deviation of the monthly total returns for stocks and bonds.
Global Dividend Yield Versus Cash, Corporate and Government Bond Yields
Global Risk-Adjusted Earnings Yield Gap and 12-Month Forward Excess Equity Returns (%)
'88 '90 '92 '94 '96 '98 '00 '02 '04 '06 '08 '10-60
-40
-20
0
20
40
60
-12-10-8-6-4-202468
12M Fwd Rtns (%) Yield Gap (%)
Forward Excess Equity Returns Vol. Adjusted Yield Gap
'70 '72 '74 '76 '78 '80 '82 '84 '86 '88 '90 '92 '94 '96 '98 '00 '02 '04 '06 '08 '10-3
-2
-1
0
1
2
3
4
-3
-2
-1
0
1
2
3Equities Relatively Expensive
Equities Relatively Cheap
Standard Deviations From Average
Cash Rate/Div idend YieldBond Yield/Div idend Yield
GIC Chart Book| October 2011
Please refer to important information, disclosures and qualifications at the end of this material.
Past performance is no guarantee of future results. Estimates of future performance are based on assumptions that may not be realized. This material is not a solicitation of any offer to buy or sell any security or other financial instrument or to participate in any trading strategy.
11
Global Equity Valuation
Source: MSCI, Thomson Financial, FactSet. Data as of September 2011.
Correlation: US & Non-US Equities
Global ex-Japan and US Equity Risk Premium
'98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11ERP=Equity Risk Premium
-4%
-2%
0%
2%
4%
6%
8%
10%
-4%
-2%
0%
2%
4%
6%
8%
MSCI AC World ex-Japan ERP US ERP
US: Equity Risk Premium (Right)Global ex-Japan: Equity Risk Premium (Left)
'76 '78 '80 '82 '84 '86 '88 '90 '92 '94 '96 '98 '00 '02 '04 '06 '08 '100.20.2
0.30.3
0.40.4
0.50.5
0.60.6
0.70.7
0.80.8
0.90.9
1.01.0
Trailing 5 Yr Monthly Correlation (Local and USD Currency)S&P vs EAFE USD S&P vs EAFE LOCAL
GIC Chart Book| October 2011
Please refer to important information, disclosures and qualifications at the end of this material.
Past performance is no guarantee of future results. Estimates of future performance are based on assumptions that may not be realized. This material is not a solicitation of any offer to buy or sell any security or other financial instrument or to participate in any trading strategy.
12
Global Equity Valuation
U.S. Corporations' Domestic and Foreign Investment
Source: Bureau of Economic Analysis, FactSet, Thomson Financials, CIRA, Morgan Stanley Smith Barney LLC. Data as of 2Q11.
COV Model in Negative Territory
'84 '85 '86 '87 '88 '89 '90 '91 '92 '93 '94 '95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11-80%-80%
-60%-60%
-40%-40%
-20%-20%
0%0%
20%20%
40%40%
60%60%
80%80%
+1 Standard Deviation44%
-1 Standard Deviation 6%
Inexpensive
Expensive
As of 9/30/2011,
-61.86
'02 '03 '04 '05 '06 '07 '08 '09 '101,4001,400
1,6001,600
1,8001,800
2,0002,000
2,2002,200
2,4002,400
2,6002,600
2,8002,800
Billions of $s SAAR, 4Q MA
GIC Chart Book| October 2011
Please refer to important information, disclosures and qualifications at the end of this material.
Past performance is no guarantee of future results. Estimates of future performance are based on assumptions that may not be realized. This material is not a solicitation of any offer to buy or sell any security or other financial instrument or to participate in any trading strategy.
13
US Equity Valuation
Source: Federal Reserve Bank, Bureau of Economic Analysis, FactSet, Morgan Stanley Smith Barney LLC. Data as of September 2011.
S&P 500 Fair Value Model and Actual PE
U.S. Earnings Yield Gap and Forward Excess Equity Return
'90 '91 '92 '93 '94 '95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11-100
-67
-33
0
33
67
100
-8
-4
0
4
8
U.S. Excess Equity Returns (6 Mos. Fwd Anualized %) Yield Gap (%)
US Excess ReturnsUS Yield Gap
Source: Bloomberg, Morgan Stanley Smith Barney LLC
'84 '85 '86 '87 '88 '89 '90 '91 '92 '93 '94 '95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '1105
101520253035404550
5
10
15
20
25
30
35Std Dev .
F rom Fair ValueMax
Ov er: +2.3 in 4Q99(Max)
Under: -4.3 in 4Q09
Forward P/E Ratio
Actual Fwd P/E: 10.51S&P 500 Model P/E: 45.63
GIC Chart Book| October 2011
Please refer to important information, disclosures and qualifications at the end of this material.
Past performance is no guarantee of future results. Estimates of future performance are based on assumptions that may not be realized. This material is not a solicitation of any offer to buy or sell any security or other financial instrument or to participate in any trading strategy.
14
US Stocks: Tobin’s Q Ratio
Source: Bloomberg, Haver, US Federal Reserve, Morgan Stanley Smith Barney LLC. Data as of January 2011.
Tobin’s Q Ratio Versus Subsequent 10-Year S&P 500 Annualized Returns(1952 to 2000)
Tobin’s Q Ratio
-5
0
5
10
15
20
30 50 70 90 110 130 150
Total Return (%)
'52 '54 '56 '58 '60 '62 '64 '66 '68 '70 '72 '74 '76 '78 '80 '82 '84 '86 '88 '90 '92 '94 '96 '98 '00 '02 '04 '06 '08 '102020
4040
6060
8080
100100
120120
140140
160160
180180
200200
GIC Chart Book| October 2011
Please refer to important information, disclosures and qualifications at the end of this material.
Past performance is no guarantee of future results. Estimates of future performance are based on assumptions that may not be realized. This material is not a solicitation of any offer to buy or sell any security or other financial instrument or to participate in any trading strategy.
15
Earnings Revisions
Note: Net earnings revisions are based on individual company analysts forecasts for the next calendar year and are calculated as the number of upgrades minus the number of downgrade divided by the total number of revisions using a three-month sliding window.Source: FactSet, Morgan Stanley Smith Barney LLC. Data as of September 2011.
S&P 500 Net Earnings Revisions and S&P 500 Total Return (YoY%)
'89 '90 '91 '92 '93 '94 '95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11-60
-40
-20
0
20
40
60
-80
-60
-40
-20
0
20
40
60
S&P 500 Net Earnings Revisions (%) S&P 500 Total Return (YoY %)
S&P 500 Net Earnings RevisionsTotal Return
MSCI EAFE Net Earnings Revisions and MSCI EAFE Total Return (YoY%)
'95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11-60-50-40-30-20-10
010203040
-50-40-30-20-1001020304050
MSCI EAFE Net Earnings Revisions (%) MSCI EAFE Total Return (YoY%)
Total ReturnMSCI EAFE Net Earnings Revisions
GIC Chart Book| October 2011
Please refer to important information, disclosures and qualifications at the end of this material.
Past performance is no guarantee of future results. Estimates of future performance are based on assumptions that may not be realized. This material is not a solicitation of any offer to buy or sell any security or other financial instrument or to participate in any trading strategy.
16
MSCI EM Net Earnings Revisions and MSCI EM Total Return (YoY%)
'95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11-50
-40
-30
-20
-10
0
10
20
30
-60
-40
-20
0
20
40
60
80
100
MSCI EM Net Earnings Revisions (%) MSCI EM Total Return (YoY%)
MSCI EM Net Earnings RevisionsTotal Return
Global Net Earnings Revisions
'89 '90 '91 '92 '93 '94 '95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11-75-75
-50-50
-25-25
00
2525
5050
World, EAFE, Emerging MarketsNet Earnings Revisions (%) MSCI EAFE MSCI AC World MSCI Emerging Markets
Earnings Revisions
Note: Net earnings revisions are based on individual company analysts forecasts for the next calendar year and are calculated as the number of upgrades minus the number of downgrade divided by the total number of revisions using a three-month sliding window.Source: FactSet, Morgan Stanley Smith Barney LLC. Data as of September 2011.
GIC Chart Book| October 2011
Please refer to important information, disclosures and qualifications at the end of this material.
Past performance is no guarantee of future results. Estimates of future performance are based on assumptions that may not be realized. This material is not a solicitation of any offer to buy or sell any security or other financial instrument or to participate in any trading strategy.
17
Emerging Market Equity/Developed Market Equity and Equity Volatility
Note: MSCI EM and MSCI World are in USD.Source: The Chicago Board Options Exchange Standard and Poor’s 500 Volatility Index, Bloomberg, FactSet, Morgan Stanley Smith Barney LLC. Data as of September 2011. The yield curve is shown 30 months forward to illustrate its properties as a leading indicator of the VIX Index.
Volatility
'90 '91 '92 '93 '94 '95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '110
10
20
30
40
50
60
70
0.2
0.3
0.4
0.5
0.6
0.7
0.8
0.9
1.0
VIX Emerging Market Equity/Developed Market Equity
VIXMSCI EM/MSCI World
GIC Chart Book| October 2011
Please refer to important information, disclosures and qualifications at the end of this material.
Past performance is no guarantee of future results. Estimates of future performance are based on assumptions that may not be realized. This material is not a solicitation of any offer to buy or sell any security or other financial instrument or to participate in any trading strategy.
18
Note: VIX is shown with 3 month moving avg. Yield curve is 10Y Treasury rate minus overnight Fed Funds rate. Source: The Chicago Board Options Exchange Standard and Poor’s 500 Volatility Index, Bloomberg, FactSet, Morgan Stanley Smith Barney LLC. Data as of September 2011. The yield curve is shown 30 months forward to illustrate its properties as a leading indicator of the VIX Index.
Yield Curve Shown as a Leading Indicator of the VIX
Volatility
'92 '94 '96 '98 '00 '02 '04 '06 '08 '10 '125
10152025303540455055 -2
-1
0
1
2
3
4
5
VIX Yield Curve % (Inverted)
VIX (3M MA) Yield Curve
Stock Market Volatility and Forward One Year S&P 500 Returns
VIX IndexForward 1 Year S&P 500 Returns from Peak
'90 '92 '94 '96 '98 '00 '02 '04 '06 '08 '1000
1010
2020
3030
4040
5050
6060
7070
8080
909012.44
22.0121.28
37.96 -27.54
GIC Chart Book| October 2011
Please refer to important information, disclosures and qualifications at the end of this material.
Past performance is no guarantee of future results. Estimates of future performance are based on assumptions that may not be realized. This material is not a solicitation of any offer to buy or sell any security or other financial instrument or to participate in any trading strategy.
19
'95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11-1.5-1.2-0.9-0.6-0.30.00.30.60.91.21.51.8
-40
-20
0
20
40
60Euphoria
Panic
The Other PES&P 500
(12-Month Fw d Return)
Forward (Right)The Other PE (Lef t)
Contrarian Equity Market Signals
Consumer Confidence based on data from February 1967 - August 2008 (periods for which consumer confidence and 12-month forward returns are available).Source: The Conference Board, CIRA – US Equity Strategy, FactSet, Morgan Stanley Smith Barney LLC. Data as of September 2011.
Consumer Confidence and S&P 500 Index 12-Month Forward Returns
The Panic/Euphoria Model(Other P/E)
Consumer S&P 500 Index
Confidence 12 Month Fwd Returns % of Forward
Level Average Median Highest Lowest # of Instances Returns Positive
<60 22.0% 24.1% 61.0% -32.6% 57 93%<70 18.9% 20.8% 61.0% -38.1% 90 89%<80 15.8% 15.2% 61.0% -43.3% 130 88%
Average: 18.9% 20.0% 90%
>130 2.2% 6.3% 39.8% -26.6% 63 56%>140 -7.8% -9.1% 14.4% -26.6% 11 18%
Average: -2.8% -1.4% 37%
GIC Chart Book| October 2011
Please refer to important information, disclosures and qualifications at the end of this material.
Past performance is no guarantee of future results. Estimates of future performance are based on assumptions that may not be realized. This material is not a solicitation of any offer to buy or sell any security or other financial instrument or to participate in any trading strategy.
20
Global Recessions and Equity Returns
*Using Total Return (%) Index. Price Index peaked Oct 31, 2007 at 1,682.4.
MSCI World Stock Market Returns and Earnings Recessions
Source: MSCI Barra, FactSet, Morgan Stanley Smith Barney LLC. Data as of September 2011Note: MSCI World Trailing Earnings.
Global Earnings Recession (Previous Peak = 100)
Average
40
50
60
70
80
90
100
110
5 11 17 23 29 35 41 47Months since peak in earnings
Mid 70s Early 80s Early 90s Late 90s Mid 00s Current Average
MSCI World Peak
MSCI World Trough
MSCI World Peak to Trough Returns (%)
MSCI World Return (%) Fwd 1 Yr From Trough
Days from MSCI World Trough During Recession to Pre-Recession Peak
1/29/1970 7/30/1970 -20% 28% 182
1/30/1973 10/30/1974 -45% 26% 638
8/13/1981 8/12/1982 -20% 50% 364
8/25/1987 12/4/1987 -27% 23% 101
1/3/1990 9/28/1990 -29% 23% 268
7/20/1998 10/8/1998 -24% 40% 80
3/24/2000 3/12/2003 -52% 40% 1083
Average: -31% 33% 388
*Current Cycle Comparison
10/31/2007 3/9/2009 -57% 75% ?
GIC Chart Book| October 2011
Please refer to important information, disclosures and qualifications at the end of this material.
Past performance is no guarantee of future results. Estimates of future performance are based on assumptions that may not be realized. This material is not a solicitation of any offer to buy or sell any security or other financial instrument or to participate in any trading strategy.
21
US Recessions and Equity ReturnsU.S. Economic Cycles and Equity Market Returns (%) Since 1902
Equity Trough to Prior Recession
PeakDuration (Days)
1 Month 6 Months 12 Months
Sep-1902 - Aug-1904 09-Nov-1903 23 10 -43 12 16 57 603
May-1907 - Jun-1908 15-Nov-1907 13 8 -49 8 40 67 461
Jan-1910 - Jan-1912 25-Sep-1911 24 4 -27 7 21 28 465
Jan-1913 - Dec-1914 24-Dec-1914 23 0 -44 9 31 85 471
Aug-1918 - Mar-1919 07-Feb-1919 7 2 -25 9 27 21 549
Jan-1920 - Jul-1921 24-Aug-1921 18 -1 -46 11 34 56 454
May-1923 - Jul-1924 30-Oct-1923 14 9 -18 7 5 19 149
Oct-1926 - Nov-1927 01-Nov-1926 13 13 -12 5 9 21 59
Aug-1929 - Mar-1933 08-Jul-1932 43 9 -85 68 64 171 742
May-1937 - Jun-1938 31-Mar-1938 13 3 -54 15 44 29 268
Feb-1945 - Oct-1945 26-Mar-1945 8 7 -2 9 19 35 52
Nov-1948 - Oct-1949 13-Jun-1949 11 5 -21 9 23 42 251
Jul-1953 - May-1954 14-Sep-1953 10 9 -15 4 18 38 177
Aug-1957 - Apr-1958 22-Oct-1957 8 6 -21 5 10 31 71
Apr-1960 - Feb-1961 25-Oct-1960 10 4 -13 7 25 31 207
Dec-1969 - Nov-1970 26-May-1970 11 6 -35 6 23 44 261
Nov-1973 - Mar-1975 03-Oct-1974 16 6 -48 19 31 38 437
Jan-1980 - Jul-1980 27-Mar-1980 6 4 -11 7 29 37 120
Jul-1981 - Nov-1982 12-Aug-1982 16 4 -27 18 44 58 431
Jul-1990 - Mar-1991 11-Oct-1990 8 6 -20 6 28 29 92
Mar-2001 - Nov-2001 09-Oct-2002 8 -11 -49 15 11 34 526
Dec-2007 - Jun-2009 09-Mar-09 18 4 -56 27 31 69 ??
Apr-2011 - ? ? ? ? ? ? ? ? ?
Mean 11 4 -26 11 24 40 239
Median 10 5 -21 8 24 37 207
Peak to Trough
Economic Cycle U.S. Equity Mkt Trough
U.S. Equity Market % Decline U.S. Equity Market % Gain After Trough
Recession Duration (Months)
Market Lead to Cycle Trough
(Months)
Source: Bloomberg, NBER, Morgan Stanley Smith Barney LLC. Data as of October 2011.Note: Mean and Median calculated using data from 1945 through 2009.
GIC Chart Book| October 2011
Please refer to important information, disclosures and qualifications at the end of this material.
Past performance is no guarantee of future results. Estimates of future performance are based on assumptions that may not be realized. This material is not a solicitation of any offer to buy or sell any security or other financial instrument or to participate in any trading strategy.
22
S&P 500 Bear Markets and Recoveries
Note: Due to the limitations of index data, price return is used before 1990 and total return is used for returns after 1990. 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 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. All returns are in U.S. Dollars. The Compound Annual Growth Rate is the year-over-year growth rate of an investment over a specified period of time. Data are as of December 31, 2008. (1) Price Return data are used before 1987 and Total Return data are used after 1987. For the 1987 bear market, the decline is expressed in price return terms and the recovery is expressed in total return terms. (2) The valuation analysis on the S&P 500 Index peak and trough price/earnings ratio is based on monthly operating earnings.
Source: Ibbotson Associates, Morgan Stanley Smith Barney LLC and Investment Strategy Group. Standard & Poor’s; Bloomberg; Morgan Stanley Smith Barney LLC and Investment Strategy Group. Data as of September 2011.
The following disclosure pertains to Ibbotson Associates’ data on slides 22-26, 47, 74, 75, 77-90:
(c) 2011 Morningstar, Inc. All Rights Reserved. The information contained herein: (1) is proprietary to Morningstar and/or its content providers; (2) may not be copied or distributed; and (3) is not warranted to be accurate, complete or timely. Neither Morningstar nor its content providers are responsible for any damages or losses arising from any use of this information. Past performance is no guarantee of future results.
Source: Calculated by Morgan Stanley Smith Barney LLC using data provided by Morningstar. (c) 2011 Morningstar, Inc. All rights reserved. Used with permission. This information contained herein: (1) is proprietary to Morningstar and/or its content providers; (2) may not be copied or distributed; and (3) is not warranted to be accurate, complete or timely. Neither Morningstar nor its content providers are responsible for any damages or losses arising from any use of this information.
S&P 500 Index Bear Market Downturns and Recoveries
3 Months 6 Months 12 Months Peak Trough Peak TroughSep 1929 - Jun 1932 -86.2 33 92.5 53.0 121.4 20.7 8.5 4.0 0.4 Jun 1932 - Sep 1954 267Jul 1933 - Mar 1935 -33.9 20 26.8 46.4 76.7 25.7 13.4 1.1 1.0 Mar 1935 - Oct 1935 7
Mar 1937 - Apr 1942 -60.0 62 15.4 24.6 53.7 16.8 7.7 2.1 0.9 Aug 1942 - Jan 1946 45May 1946 - Jun 1949 -29.6 37 16.2 22.8 42.1 21.3 5.9 1.7 1.0 Jun 1949 - Jun 1950 12Aug 1956 - Oct 1957 -21.6 15 5.7 9.8 31.0 13.9 12.2 2.0 1.6 Oct 1957 - Sep 1958 11Dec 1961 - Jun 1962 -28.0 6 7.3 20.5 32.7 22.7 17.4 2.1 1.7 Jul 1962 - Sep 1963 14Feb 1966 - Oct 1966 -22.2 8 12.3 22.1 32.9 17.7 13.9 2.1 1.8 Oct 1966 - May 1967 7Nov 1968 May 1970 -36.1 18 17.2 22.8 43.7 18.2 14.6 2.2 1.6 May 1970 Mar 1972 21Jan 1973 - Oct 1974 -48.2 21 13.5 30.9 38.0 18.2 6.9 2.0 1.0 Oct 1974 - Jul 1980 69Dec 1976 - Mar 1978 -19.1 14 15.4 21.3 12.6 10.9 7.9 1.4 1.1 Mar 1978 - Aug 1979 17Nov 1980 - Aug 1982 -27.1 21 36.2 44.1 58.3 8.7 7.7 1.3 1.0 Aug 1982 - Nov 1982 3Aug 1987 - Dec 1987 -33.5 5 20.5 21.3 26.0 20.2 13.1 2.2 1.6 Dec 1987 - Jul 1989 20Jul 1990 - Oct 1990 -19.2 3 7.7 30.1 33.6 15.5 13.0 2.1 1.7 Nov 1990 - Feb 1991 4Jul 1998 - Aug 1998 -19.2 2 22.0 30.3 39.8 25.4 21.6 4.5 3.8 Sep 1998 - Nov 1998 3
Mar 2000 - Oct 2002 -47.4 31 20.0 12.5 36.2 25.7 17.6 5.0 2.5 Oct 2002 - May 2007 56Oct 2007 - Mar 2009 -56.8 17 39.3 52.7 68.6 17.5 10.2 3.0 1.5 Mar 2009 - Apr 2011 25Apr 2011 - ? ? ? ? ? ? ? ? ? Apr 2011 - ? ?
Average: -36.7 19.6 23.0 29.1 46.7 18.7 12.0 2.4 1.5 36.3
Date of Recovery
Price/Earnings Ratio *
Price/Book Ratio * Duration
(Months)Decline
(%)Duration(Months)
Subsequent Return (%)Downturn from Peak S&P 500
Peak to Trough
Recover to Peak S&P 500
GIC Chart Book| October 2011
Please refer to important information, disclosures and qualifications at the end of this material.
Past performance is no guarantee of future results. Estimates of future performance are based on assumptions that may not be realized. This material is not a solicitation of any offer to buy or sell any security or other financial instrument or to participate in any trading strategy.
23
S&P 500 IndexPrice/Earnings Ratio and Price/Book Ratio: Subsequent 10 Year Compound Returns
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. Analysis are based on monthly data of the S&P 500 Index 12-month trailing Price/Operating Earnings and S&P 500 total return, from January 1926 through June 2011.
Source: Ibbotson Associates, FactSet, Morgan Stanley Smith Barney LLC. Data as of September 2011.
16.9%
14.5%13.5%
12.4%
10.2%
6.7% 6.3%
11.8%
14.4%
10.2%
7.7%6.8%
4.0%
1.3%
0.0%2.0%4.0%6.0%8.0%
10.0%12.0%14.0%16.0%18.0%
< 9x 9x - 10x 10x - 12x 12x - 14x 14x - 16x 16x - 18x > 18x < 1x 1x - 1.5x 1.5x - 2.0x 2.0x - 2.5x 2.5x - 3.0x 3.0x - 3.5x > 3.5x
Price/Operating-Earnings Ratio Price/Book Ratio
P/E Ratio Range P/B Ratio Range<9x 9x-10x 10x-12x 12x-14x 14x-16x 16x-18x >18x <1.0x 1.0x-1.5x 1.5x-2.0x 2.0x-2.5x 2.5x-3.0x 3.0x-3.5x >3.5x
Number of Obs 122 66 117 109 129 150 216 45 351 247 118 46 26 53Number of Pos Obs 122 66 117 107 123 138 183 45 351 245 113 35 18 26Min 7.9% 6.5% 5.2% -1.0% -4.2% -3.3% -4.9% 2.7% 0.4% -0.4% -4.2% -2.9% -3.3% -4.9%Max 21.4% 18.2% 19.2% 19.5% 19.4% 17.7% 17.3% 21.4% 21.4% 19.5% 18.8% 11.8% 9.0% 8.1%
GIC Chart Book| October 2011
Please refer to important information, disclosures and qualifications at the end of this material.
Past performance is no guarantee of future results. Estimates of future performance are based on assumptions that may not be realized. This material is not a solicitation of any offer to buy or sell any security or other financial instrument or to participate in any trading strategy.
24
S&P 500 Index Periods of Negative 10-Year Returns and Subsequent 5-Year and 10-Year Returns
Note: NA = Not ApplicableSource: Ibbotson Associates, Morgan Stanley Smith Barney LLC. Data as of September 2011.CAGR = Compound Annual Growth Rate
P er io d s o f R o ll in g N eg ati v e 10 -Y e ar R e tu r n s1 0-Y ear R etu rn (% ) Su b se q u en t 5-Y ear C AG R (% ) S u bs eq u en t 1 0-Ye ar C AG R (% )
Aug us t 193 9 -4.9 5% 9.34 % 9 .21%M ay 1 940 -4.1 6% 16.95 % 13 .79%J une 1 939 -3.9 4% 10.26 % 8 .70%F ebru ary 20 09 -3.4 3% N /A N /AJ uly 193 9 -3.3 7% 7.55 % 8 .25%Apr il 193 9 -3.3 2% 8.19 % 9 .06%M arc h 19 39 -3.1 3% 8.35 % 9 .22%M arc h 20 09 -3.0 0% N /A N /ASep tem be r 193 9 -3.0 0% 6.00 % 7 .82%M arc h 19 38 -2.8 8% 13.03 % 11 .87%J anu ary 200 9 -2.6 5% N /A N /AApr il 200 9 -2.4 8% N /A N /AM ay 1 938 -2.4 1% 12.04 % 12 .00%M ay 1 939 -2.2 8% 7.73 % 8 .00%J une 2 009 -2.2 2% N /A N /AJ anu ary 193 9 -2.1 3% 5.59 % 8 .05%Apr il 193 8 -1.8 9% 10.10 % 10 .69%Aug us t 201 0 -1.8 1% N /A N /AM arc h 19 40 -1.7 8% 8.65 % 9 .77%F ebru ary 19 39 -1.7 4% 4.88 % 7 .32%Apr il 194 0 -1.7 3% 10.60 % 10 .32%J uly 194 0 -1.7 2% 13.95 % 12 .03%M ay 2 009 -1.7 1% N /A N /AJ une 1 940 -1.6 8% 15.13 % 12 .27%J une 2 010 -1.5 9% N /A N /AAug us t 194 0 -1.5 2% 14.58 % 12 .13%D ec em b er 20 08 -1.3 8% N /A N /AN ov em b er 19 38 -1.2 3% 3.35 % 7 .32%J uly 200 9 -1.2 0% N /A N /AF ebru ary 19 40 -1.1 3% 9.91 % 9 .83%J anu ary 194 0 -1.0 1% 8.75 % 9 .76%O c tobe r 193 9 -0.9 6% 6.31 % 8 .31%O c tobe r 200 9 -0.9 5% N /A N /AD ec em b er 20 09 -0.9 5% N /A N /AN ov em b er 20 08 -0.9 3% N /A N /AD ec em b er 19 38 -0.8 9% 3.78 % 7 .26%M ay 2 010 -0.8 2% N /A N /AJ anu ary 201 0 -0.8 0% N /A N /AAug us t 200 9 -0.7 9% N /A N /AJ uly 201 0 -0.7 6% N /A N /AM arc h 20 10 -0.6 6% N /A N /AN ov em b er 20 09 -0.5 7% N /A N /ASep tem be r 201 0 -0.4 3% N /A N /AF ebru ary 19 41 -0.3 7% 18.28 % 14 .87%M arc h 19 38 -0.3 2% 5.98 % 8 .17%F ebru ary 20 10 -0.3 1% N /A N /AAug us t 193 8 -0.2 3% 5.78 % 8 .66%Apr il 201 0 -0.2 0% N /A N /ASep tem be r 200 9 -0.1 5% N /A N /AD ec em b er 19 39 -0.0 6% 7.67 % 9 .17%N ov em b er 19 39 -0.0 4% 7.46 % 8 .94%Sep tem be r 194 0 -0.0 4% 15.28 % 12 .64%O c tobe r 201 0 -0.0 2% N /A N /AAve rag e -1 .5 8% 9.5 0% 9.84%
GIC Chart Book| October 2011
Please refer to important information, disclosures and qualifications at the end of this material.
Past performance is no guarantee of future results. Estimates of future performance are based on assumptions that may not be realized. This material is not a solicitation of any offer to buy or sell any security or other financial instrument or to participate in any trading strategy.
25
S&P 500 Recuperative Properties After 10% Plus Quarterly Corrections
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 5-Year CAGR is available for the period after 4Q2008 and no 10-Year CAGR is available for the period after 3Q2001, 2Q2002 and 4Q2008.
Source: Ibbotson Associates; Morgan Stanley Global Wealth Management Asset Allocation and Investment Strategy Group. Data as of September 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.
Source: Ibbotson Associates, Morgan Stanley Global Wealth Management Asset Allocation and Investment Strategy Group. Data as of September 2011.
Minus 10% Quarter Performance and Subsequent 1 Year, 5 Year, and 10 Year Compound Annual Growth Rates
S&P 500 Index (%)
Effect of Market-TimingThe Effect of Missing the Best One Month’s Return During a Calendar Year Time Period
-30%
-20%
-10%
0%
10%
20%
30%
40%
50%
3Q1974 4Q1987 4Q2008 2Q1962 3Q1946 2Q1970 3Q2002 2Q1940 3Q2001 3Q2011
S&P 500 Index Annual TR1940 - 2011* Worst Quarters Return 1 YR CAGR 5 YR CAGR 10 YR CAGR
-50%
-30%
-10%
10%
30%
1970 1972 1974 1976 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010
S&P 500 Index Annual TR 1970 - 2011* Annualized Return Excluding the Best One Month within the Calendar Year Time Period Annual Return
GIC Chart Book| October 2011
Please refer to important information, disclosures and qualifications at the end of this material.
Past performance is no guarantee of future results. Estimates of future performance are based on assumptions that may not be realized. This material is not a solicitation of any offer to buy or sell any security or other financial instrument or to participate in any trading strategy.
26
S&P 500 Index Rolling 3 Year Compound Annual Growth Rate Distribution1926 – 2011 YTD
Note: This analysis is based on 982 Rolling-Three Periods from January 1926 – December 2010. The indexes are unmanaged. An investor cannot invest directly in an index. Indices used for this analysis include: (i) U.S. Large-Cap Stocks: Standard & Poor’s 500 Index Total Return; (ii) U.S. Small-Cap Stocks: Ibbotson Small Company Stocks Index Total Return; (iii) U.S. Bonds: Ibbotson U.S. Long-Term 20-Year Government Bond Index Total Return; Barclay Capital U.S. Aggregate Government Bond Index (Long) and (iv) Treasury Bills: 30-Day U.S. Treasury Bills Index Total Return. 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. All returns are total returns in U.S. Dollars. Past performance does not guarantee future results. The Rolling 3-Year Compound Annual Growth Rate of monthly returns was used for this analysis. The Compound Annual Growth Rate is the year-over-year growth rate of an investment over a specified period of time. Index returns do not include any expenses, fees or sales charges, which would lower performance.
Source: Ibbotson Associates; Morgan Stanley Smith Barney LLC and Investment Strategy Group. Data as of September 2011
Importance of Long-Term Returns Compounding1926 – 2011
$32,718
$14,235
$118
$12
$21
$0
$1
$10
$100
$1,000
$10,000
$100,000
1932 1938 1945 1951 1958 1964 1971 1977 1984 1990 1997 2003 2010
Logarithmic Scale
S&P 500 TR (%Total Return) U.S. Small Stk TR (%Total Return) U.S. LT Gvt TR (%Total Return) U.S. Inflation (%Price Return) U.S. 30 Day TBill TR (%Total Return)
Value of $1 invested in U.S. Large-Cap Stocks, U.S. Small-Cap Stocks, U.S. Bonds, and U.S. Treasury Bills
4 5 8 2 525
5869
96
173
206
152
8767
2710
0
50
100
150
200
250
<-35% -35 t o -30%
-30 t o -25%
-25 t o -20%
-20 t o -15%-15 t o -10% -10 t o -5% -5 t o 0% 0 t o 5% 5 t o 10% 10 t o 15% 15 t o 20% 20 t o 25% 25 t o 30% 30 t o 35% >35%
GIC Chart Book| October 2011
Please refer to important information, disclosures and qualifications at the end of this material.
Past performance is no guarantee of future results. Estimates of future performance are based on assumptions that may not be realized. This material is not a solicitation of any offer to buy or sell any security or other financial instrument or to participate in any trading strategy.
27
Global Debt and Equity Regional Market Share
United Kingdom, 8%
Europe ex-UK, 15%
Japan, 9%
EM (Emerging Markets), 12% All Other, 9%
United States, 46%
Note: May not add to 100% due to rounding.
Source: FactSet, Bank of International Settlements. Data as of September 2011.
Global Market Cap by Region: $27 trillion
United Kingdom, 6%
Europe ex-UK, 23%
Japan, 17%
Emerging Markets, 11% All Other, 4%
United States, 40%
Global Debt Securities by Region: $81.1 trillion
GIC Chart Book| October 2011
Please refer to important information, disclosures and qualifications at the end of this material.
Past performance is no guarantee of future results. Estimates of future performance are based on assumptions that may not be realized. This material is not a solicitation of any offer to buy or sell any security or other financial instrument or to participate in any trading strategy.
28
US Stock Market Foreign Exposure
Non-US Sales by Sector (%)Consumer Discretionary 30 Industrials 39
Consumer Staples 43 Information Technology 56
Energy 53 Materials 52
Financials 15 Telecommunications 2
Health Care 39 Utilities 3
S&P 500 38
Note: Rest of World profits are NIPA (Economic Profits)
Source: Standard & Poor’s, FactSet, Bureau of Economic Analysis. Data as of September 2011.
US Corporate Profits
Total Profits Earned Profits Earned Profits Earned
Profits In The U.S. Abroad Abroad
(Annual Percent Change) (% of Total)
1999 7.7 5.4 20.4 17.1
2000 -1.1 -4.3 14.5 19.8
2001 -5.4 -4.3 -9.8 18.9
2002 11.4 11.2 11.9 19.0
2003 14.0 12.1 21.9 20.3
2004 28.4 27.5 31.7 20.8
2005 16.8 16.8 17.0 20.9
2006 11.0 10.5 13.1 21.3
2007 -1.1 -6.1 17.5 25.3
2008 -9.4 -17.4 14.0 31.8
2009 1.2 9.1 -15.7 26.5
2010 27.9 32.2 16.2 24.0
2Q11 9.8 8.3 14.5 25.1
GIC Chart Book| October 2011
Please refer to important information, disclosures and qualifications at the end of this material.
Past performance is no guarantee of future results. Estimates of future performance are based on assumptions that may not be realized. This material is not a solicitation of any offer to buy or sell any security or other financial instrument or to participate in any trading strategy.
29
Global Equity Sector and Factor CharacteristicsMSCI World Sector and Factor Characteristics by Quintile
Note: All computations are bottom-up MSCI World data. See Note for Characteristics By Equity Index above. Source: FactSet, Morgan Stanley Smith Barney LLC. Data as of September 2011.
Sector
Consumer Discretionary 10% 13% 33% 12% 17%Consumer Staples 11% 11% 9% 7% 3%Energy 14% 36% 7% 46% 6% 70% 6% 50% 4% 62%Financials 18% Cyclicals 21% Cyclicals 20% Cyclicals 25% Cyclicals 19% CyclicalsHealth care 9% 7% 5% 5% 5%Industrials 7% 13% 18% 14% 21%Information Technology 12% 8% 9% 9% 10%Materials 7% 32% 10% 26% 10% 25% 14% 19% 14% 15%Telecommunications 8% Non Cyclicals 3% Non Cyclicals 4% Non Cyclicals 3% Non Cyclicals 3% Non CyclicalsUtilties 4% 5% 8% 5% 4%
Foreign Sales % - Annual 49% 36% 39% 34% 31%St. Dev. Month TR (3yrs) 6.77 7.97 7.89 8.70 9.43
Effective Tax Rate - QTR -LTM 32% 30% 35% 31% 0%Pre- Tax Profit Margin - QTR 14% 12% 13% 12% 5%Return on Equity - QTR _LTM 24% 18% 21% 22% 14%
Dividend Yield - MONTH 3.13 2.55 2.67 2.89 3.54Payout Ratio - QTR - LTM 32.50 30.58 27.75 26.11 28.69
Price/Earnings -NTM 12.9x 53.5x 342.1x 212.0x 14.4xIBES LTG 11.9% 13.6% 13.8% 14.9% 17.3%PE/G 5.8% 14.0% 17.4% 6.6% 6.5%
Market Cap as a % of Total 65% 17% 9% 6% 3%
Bottom Cap QuintileTop cap Quintile Quintile II Quintile III Quintile IV
GIC Chart Book| October 2011
Please refer to important information, disclosures and qualifications at the end of this material.
Past performance is no guarantee of future results. Estimates of future performance are based on assumptions that may not be realized. This material is not a solicitation of any offer to buy or sell any security or other financial instrument or to participate in any trading strategy.
30
US Equity Sector and Factor Characteristics
Note: All computations are bottom-up S&P 500 data. See Note for Characteristics By Equity Index above
S&P
Supe
r Com
posi
te a
nd R
usse
ll 10
00
Gro
wth
, Sec
tor,
and
Fact
or C
hara
cter
istic
s
Note: All computations are bottom-up. Earnings stability is the mean absolute percentage deviation of the actual reported earnings from the five-year historical EPS growth trend. Earnings predictability is the standard deviation of the current year's consensus estimates of EPS over the mean estimate, the higher the number, the less stable or predictable the earnings. The effective tax rate is total income taxes/annual pre-tax income. Price/Earnings Ratio is forward-12-month consensus estimates. Thomson Financial LTG EPS growth is forward five years. PE/G is forward 1 year.
S&P
500
Sect
oran
d Fa
ctor
Cha
ract
eris
tics
by Q
uint
ile
Source: FactSet, Morgan Stanley Smith Barney LLC. Data as of September 2011.
Consumer Discretionary 16% 14% 11% 12% 12%Consumer Staples 5% 5% 12% 14% 11%Energy 4% 54% 7% 51% 12% 44% 8% 54% 11% 45%Financials 20% Cyclical 19% Cyclical 14% Cyclical 9% Cyclical 15% CyclicalHealth Care 12% 11% 11% 14% 11%Industrials 15% 15% 10% 11% 11%Information Technology 18% 16% 20% 27% 19%Materials 5% 22% 7% 23% 3% 30% 4% 30% 4% 29%Telecommunications 1% Non-Cyclical 0% Non-Cyclical 3% Non-Cyclical 1% Non-Cyclical 3% Non-CyclicalUtilties 4% 6% 4% 1% 4%
Foreign Sales % - Annual 18% 23% 39% 42% 37%
St. Dev. Month TR (3yrs) 9.57 8.86 6.84 7.00 7.10Effective Tax Rate - QTR -LTM 0.2% 23.8% 25.9% 26.2% 25.5%After Tax Profit Margin - QTR 6.0% 8.8% 13.9% 15.0% 13.2%Return on Equity - QTR _LTM 11.6% 15.6% 27.0% 29.0% 25.5%
Dividend Yield - MONTH 1.22 1.42 2.14 1.85 2.05Payout Ratio - QTR - LTM 37.38 57.82 34.27 30.84 36.26
Price/Earnings -NTM 14.5x 19.9x 14.2x 15.0x 15.0xIBES LTG 0.1x 0.1x 0.1x 0.1x 0.1xPE/G 2.1x 2.8x 1.1x 1.3x 1.3xMarket Cap as a % of Total 4% 8% 88% 65% 100%
S&P CompositeS&P SmallCap 600 S&P MidCap 400 S&P 500 Russell 1000 Growth
Consumer Discretionary 9% 14% 16% 15% 20%Consumer Staples 14% 9% 7% 10% 2%Energy 12% 44% 10% 40% 10% 50% 7% 45% 9% 59%Financials 12% Cyclical 18% Cyclical 16% Cyclical 14% Cyclical 18% CyclicalHealth Care 12% 12% 10% 12% 5%Industrials 8% 14% 14% 9% 13%Information Technology 24% 10% 13% 17% 16%Materials 3% 31% 2% 31% 8% 24% 4% 34% 10% 14%Telecommunications 4% Non-Cyclical 2% Non-Cyclical 1% Non-Cyclical 2% Non-Cyclical 1% Non-CyclicalUtilties 2% 8% 6% 10% 6%
Foreign Sales % - Annual 45% 27% 26% 30% 24%
St. Dev. Month TR (3yrs) 6.50 7.47 8.47 8.44 9.21Effective Tax Rate - QTR -LTM 25.9% 28.2% 22.7% 27.5% 0.2%After Tax Profit Margin - QTR 14.9% 12.3% 10.7% 11.9% 6.6%Return on Equity - QTR _LTM 31.7% 18.5% 21.2% 17.7% 11.2%
Dividend Yield - MONTH 2.42 2.29 1.99 1.77 2.06Payout Ratio - QTR - LTM 30.32 31.99 50.71 61.76 29.23
Price/Earnings -NTM 12.7x 14.3x 15.5x 15.3x 11.4xIBES LTG 11.2% 12.9% 12.9% 13.1% 12.5%PE/G 8.5 4.7 1.4 1.6 1.0Market Cap as a % of Total 65% 16% 9% 6% 3%
Bottom Cap QuintileTop Cap Quintile Quintile II Quintile III Quintile IV
GIC Chart Book| October 2011
Please refer to important information, disclosures and qualifications at the end of this material.
Past performance is no guarantee of future results. Estimates of future performance are based on assumptions that may not be realized. This material is not a solicitation of any offer to buy or sell any security or other financial instrument or to participate in any trading strategy.
31
US Valuation by Style
Note: Percent rank indicates the share of historical observations at or below current P/E ratio levels
Source: Russell Investments, FactSet, Morgan Stanley Smith Barney LLC. Data as of September 2011.
Current and Historical P/Es by Style
Small Value
Small Blend
Small Growth
Mid Value
Mid Blend
Mid Growth
Large Value
Large Blend
Large Growth
Historical Quartiles(20 Yrs)
Min 8.5 9.9 10.8 8.3 9.2 9.9 10.4 11.1 11.7
25% 15.4 19.4 23.7 14.8 17.7 21.6 15.0 17.4 20.1
50% 18.5 23.4 29.8 17.3 20.3 24.6 16.6 19.6 22.2
75% 20.6 25.9 37.1 19.0 22.6 29.9 20.0 23.0 28.5
Max 33.1 42.7 128.2 25.1 30.5 89.4 45.2 32.5 67.3
Current P/E 11.6 13.7 16.5 11.3 13.4 16.3 11.7 13.2 15.0
Average P/E (20 yrs) 18.1 22.8 33.1 17.0 20.2 29.1 17.8 20.8 26.3
Current/Average (%) 64.1 60.0 50.0 66.5 66.1 56.0 65.5 63.2 57.1
Percent Rank (%) 9.2 9.2 9.2 3.2 4.0 4.4 1.2 2.0 2.4
GIC Chart Book| October 2011
Please refer to important information, disclosures and qualifications at the end of this material.
Past performance is no guarantee of future results. Estimates of future performance are based on assumptions that may not be realized. This material is not a solicitation of any offer to buy or sell any security or other financial instrument or to participate in any trading strategy.
32
US Valuation by Style
Source: Russell Investments, FactSet, Morgan Stanley Smith Barney LLC. Data as of September 2011.
Russell 1000 Value/Growth Trailing PE
Russell 2000/1000 Trailing PE
'89 '90 '91 '92 '93 '94 '95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '110.20.2
0.40.4
0.60.6
0.80.8
1.01.0
1.21.2
1.41.4
1.61.6
1.81.8
2.02.0
20 Year Avg. = 0.73
'89 '90 '91 '92 '93 '94 '95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '110.00.0
1.01.0
2.02.0
3.03.0
4.04.0
5.05.0
6.06.0
7.07.0
8.08.0
9.09.0
10.010.0
20 Year Avg. = 1.37
GIC Chart Book| October 2011
Please refer to important information, disclosures and qualifications at the end of this material.
Past performance is no guarantee of future results. Estimates of future performance are based on assumptions that may not be realized. This material is not a solicitation of any offer to buy or sell any security or other financial instrument or to participate in any trading strategy.
33
MSCI EAFE and All Country World Growth and ValueMSCI EAFE Value/ Growth Relative Return
MSCI All-Country World Value/ Growth Relative Return
Note: MSCI All Country World represents developed markets.
Source: MSCI Barra, Thomson Reuters, Morgan Stanley Smith Barney LLC. Data as of September 2011.
'76 '78 '80 '82 '84 '86 '88 '90 '92 '94 '96 '98 '00 '02 '04 '06 '08 '100.50.5
1.01.0
1.51.5
2.02.0
2.52.5
3.03.0
3.53.5
4.04.0
'01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11
1.01.0
1.11.1
1.21.2
1.31.3
1.41.4
GIC Chart Book| October 2011
Please refer to important information, disclosures and qualifications at the end of this material.
Past performance is no guarantee of future results. Estimates of future performance are based on assumptions that may not be realized. This material is not a solicitation of any offer to buy or sell any security or other financial instrument or to participate in any trading strategy.
34
Regional Equity Valuations
Note: MSCI All Country World represents developed markets.
Source: MSCI Barra, Thomson Reuters, Morgan Stanley Smith Barney LLC. Data as of September 2011.
MSCI All Country World, EAFE and Emerging Market Forward PE Ratios
MSCI Emerging Markets Index to MSCI World Index Forward PE Ratio
'88 '89 '90 '91 '92 '93 '94 '95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '110.00.0
0.50.5
1.01.0
1.51.5
2.02.0
2.52.5
Average
'88 '89 '90 '91 '92 '93 '94 '95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '1100
55
1010
1515
2020
2525
3030
MSCI ACW IDX Forward PE Ratio MSCI EAFE IDX Forward PE Ratio MSCI Emerging Markets IDX Forward PE Ratio
GIC Chart Book| October 2011
Please refer to important information, disclosures and qualifications at the end of this material.
Past performance is no guarantee of future results. Estimates of future performance are based on assumptions that may not be realized. This material is not a solicitation of any offer to buy or sell any security or other financial instrument or to participate in any trading strategy.
35
Russell Large-Cap Growth and Value
Source: Russell Investments, FactSet, Morgan Stanley Smith Barney LLC. Data as of September 2011.
Russell Top 200 Value/Russell Top 200 Growth Relative Return
Russell Large Value PE/Large Growth Forward PE
'79 '80 '81 '82 '83 '84 '85 '86 '87 '88 '89 '90 '91 '92 '93 '94 '95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '110.20.2
0.30.3
0.40.4
0.50.5
0.60.6
0.70.7
0.80.8
0.90.9
1.01.0
Average
+1 Std Dev
- 1 Std Dev
'86 '87 '88 '89 '90 '91 '92 '93 '94 '95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '110.40.4
0.60.6
0.80.8
1.01.0
1.21.2
1.41.4
1.61.6
1.81.8
GIC Chart Book| October 2011
Please refer to important information, disclosures and qualifications at the end of this material.
Past performance is no guarantee of future results. Estimates of future performance are based on assumptions that may not be realized. This material is not a solicitation of any offer to buy or sell any security or other financial instrument or to participate in any trading strategy.
36
Russell Mid-Cap Growth and Value
Source: Russell Investments, FactSet, Morgan Stanley Smith Barney LLC. Data as of September 2011.
Russell Mid-Cap Value / Mid-Cap Growth Relative Return
Russell Mid-Cap Value PE/Mid-Cap Growth Forward PE
'86 '87 '88 '89 '90 '91 '92 '93 '94 '95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '110.20.20.40.40.60.60.80.81.01.01.21.21.41.41.61.61.81.82.02.0
'86 '87 '88 '89 '90 '91 '92 '93 '94 '95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '110.10.1
0.20.2
0.30.3
0.40.4
0.50.5
0.60.6
0.70.7
0.80.8
0.90.9
1.01.0
Average
+ 1 SD
- 1 SD
GIC Chart Book| October 2011
Please refer to important information, disclosures and qualifications at the end of this material.
Past performance is no guarantee of future results. Estimates of future performance are based on assumptions that may not be realized. This material is not a solicitation of any offer to buy or sell any security or other financial instrument or to participate in any trading strategy.
37
Russell Small-Cap Growth and Value
Source: Russell Investments, FactSet, Morgan Stanley Smith Barney LLC. Data as of September 2011.
Russell Small-Cap Value/Small-Cap Growth Relative Return
Russell Small-Cap Value PE/Small-Cap Growth Forward PE
'79 '80 '81 '82 '83 '84 '85 '86 '87 '88 '89 '90 '91 '92 '93 '94 '95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '110.10.1
0.20.2
0.30.3
0.40.4
0.50.5
0.60.6
0.70.7
0.80.8
0.90.9
1.01.0
Average
+ 1 SD
- 1 SD
'79 '80 '81 '82 '83 '84 '85 '86 '87 '88 '89 '90 '91 '92 '93 '94 '95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '110.00.0
0.50.5
1.01.0
1.51.5
2.02.0
2.52.5
3.03.0
3.53.5
4.04.0
GIC Chart Book| October 2011
Please refer to important information, disclosures and qualifications at the end of this material.
Past performance is no guarantee of future results. Estimates of future performance are based on assumptions that may not be realized. This material is not a solicitation of any offer to buy or sell any security or other financial instrument or to participate in any trading strategy.
38
Russell Small-Cap and Large-Cap
Source: Russell Investments, Kenneth French Data Library, FactSet, Morgan Stanley Smith Barney LLC. Data as of September 2011.
Russell: Small-Cap/Top 200 Relative Return
Russell 2000 PE/Russell Top 200 Forward PE
'79 '80 '81 '82 '83 '84 '85 '86 '87 '88 '89 '90 '91 '92 '93 '94 '95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '110.60.6
0.70.7
0.80.8
0.90.9
1.01.0
1.11.1
1.21.2
1.31.3
1.41.4
Average
+ 1 Std Dev
- 1 Std Dev
'52 '54 '56 '58 '60 '62 '64 '66 '68 '70 '72 '74 '76 '78 '80 '82 '84 '86 '88 '90 '92 '94 '96 '98 '00 '02 '04 '06 '08 '10-1-1
00
11
22
33
44
55
GIC Chart Book| October 2011
Please refer to important information, disclosures and qualifications at the end of this material.
Past performance is no guarantee of future results. Estimates of future performance are based on assumptions that may not be realized. This material is not a solicitation of any offer to buy or sell any security or other financial instrument or to participate in any trading strategy.
39
Russell Mid-Cap and Large-Cap
Source: Russell Investments, Kenneth French Data Library, FactSet, Morgan Stanley Smith Barney LLC. Data as of September 2011.
Russell Mid-Cap/Top 200 Relative Return
Russell Mid-Cap PE/Russell Top 200 Forward PE
'79 '80 '81 '82 '83 '84 '85 '86 '87 '88 '89 '90 '91 '92 '93 '94 '95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '110.70.7
0.80.8
0.90.9
1.01.0
1.11.1
1.21.2
Average
+ 1 Std Dev
- 1 Std Dev
'52 '54 '56 '58 '60 '62 '64 '66 '68 '70 '72 '74 '76 '78 '80 '82 '84 '86 '88 '90 '92 '94 '96 '98 '00 '02 '04 '06 '08 '10-1.0-1.0
0.00.0
1.01.0
2.02.0
3.03.0
4.04.0
5.05.0
GIC Chart Book| October 2011
Please refer to important information, disclosures and qualifications at the end of this material.
Past performance is no guarantee of future results. Estimates of future performance are based on assumptions that may not be realized. This material is not a solicitation of any offer to buy or sell any security or other financial instrument or to participate in any trading strategy.
40
Russell Mid-Cap and Small-Cap
Source: Russell Investments, Kenneth French Data Library, FactSet, Morgan Stanley Smith Barney LLC. Data as of September 2011.
Russell Mid-Cap/Small-Cap Relative Return
Russell Mid-Cap PE/Russell Small-Cap Forward PE
'79 '80 '81 '82 '83 '84 '85 '86 '87 '88 '89 '90 '91 '92 '93 '94 '95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '110.70.7
0.80.8
0.90.9
1.01.0
1.11.1
1.21.2
Av erage
+ 1 Std Dev
- 1 Std Dev
'52 '54 '56 '58 '60 '62 '64 '66 '68 '70 '72 '74 '76 '78 '80 '82 '84 '86 '88 '90 '92 '94 '96 '98 '00 '02 '04 '06 '08 '100.50.5
0.60.6
0.70.7
0.80.8
0.90.9
1.01.0
1.11.1
1.21.2
1.31.3
1.41.4
GIC Chart Book| October 2011
Please refer to important information, disclosures and qualifications at the end of this material.
Past performance is no guarantee of future results. Estimates of future performance are based on assumptions that may not be realized. This material is not a solicitation of any offer to buy or sell any security or other financial instrument or to participate in any trading strategy.
41
'00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '110.5
1.0
1.5
2.0
0.92
Ratio
Global and Regional Large-Cap and Mid-Cap
Source: I/B/E/S, Nomura European Strategy. Data as of September 2011.
Note: Chart shows the 12M Fwd P/E multiple on the Nomura Global Size Style Index. This is defined as the relative P/E of the largest and smallest stocks in the FTSE World Index rebalanced quarterly.
Note: Chart shows the 12M Fwd P/E multiple on the Nomura Global Size Style Index. This is defined as the relative P/E of the largest and smallest stocks in the FTSE World Index rebalancing quarterly.
Relative PE Valuation of Large and Mid-Cap Stocks Globally
Relative 12-Month Forward PE of Large-Cap to Mid-Cap Stocks: U.S., Japan and Europe
'90 '91 '92 '93 '94 '95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '110.0
0.5
1.0
1.5
2.0
2.5
3.0
Ratio
US Median Fwd PE: 0.95Japan Median Fwd PE: 1.00Euro Median Fwd PE: 0.99
GIC Chart Book| October 2011
Please refer to important information, disclosures and qualifications at the end of this material.
Past performance is no guarantee of future results. Estimates of future performance are based on assumptions that may not be realized. This material is not a solicitation of any offer to buy or sell any security or other financial instrument or to participate in any trading strategy.
42
US Stock and Bond Supply/Demand
Source: Bureau of Economic Analysis, ITG, FactSet, Morgan Stanley Smith Barney LLC. Data as of June 2011.
1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007
Household Demand (Billion $) -4 53 10 -48 18 36 -51 -144 -21 -445 -381 -157 51 -111 -326 -570 -582
S&P 500 Total Return (%) 30.5% 7.6% 10.1% 1.3% 37.6% 23.0% 33.4% 28.6% 21.0% -9.1% -11.9% -22.1% 28.7% 10.9% 4.9% 15.8% 5.5%
% Households Owning Equities 25.5 25.8 27.0 27.6 28.4 32.6 35.3 41.9 43.4 47.4 51.7 47.7 47.2 47.8 48.7 49.9 50.6
% Equities Owned By Top 10% By Wealth n/a 81 n/a n/a 84 n/a n/a 61.3 n/a n/a 65.4 n/a n/a 78.8 n/a n/a n/a
Minsky Modified Taylor Rule Calls For Negative Fed Funds;That is Why Extraordinary Policies Need to be Used.
Equities: US Household Demand & Ownership
'91 '92 '93 '94 '95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10-6-6
-4-4
-2-2
00
22
44
66
88
1010
Source: Mount Lucas Management Corporation
Percent (%)
Minsky Fed Funds Rule, -1.64Federal Funds Rate (Ef f ectiv e), Nsa - United States, 0.09
GIC Chart Book| October 2011
Please refer to important information, disclosures and qualifications at the end of this material.
Past performance is no guarantee of future results. Estimates of future performance are based on assumptions that may not be realized. This material is not a solicitation of any offer to buy or sell any security or other financial instrument or to participate in any trading strategy.
43
US Stock and Bond Supply/Demand
Source: Bureau of Economic Analysis, FactSet, Morgan Stanley Smith Barney LLC. Data as of 2Q 2011.
Non-U.S. Ownership of U.S. Stocks and Bonds As Share of U.S. Stock and Bond Market Value
U.S. Ownership of Non-U.S. Stocks and Bonds As Share of U.S. Stock and Bond Market Value
54 56 58 60 62 64 66 68 70 72 74 76 78 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 100
10
20
30
40
50
60
0
2
4
6
8
1
1
1
1Non-Local Share Ownership of U.S. BondsNon-Local Share Ownership of U.S. Stocks
1955 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 20100.50.5
4.64.6
8.78.7
12.812.816.816.820.920.925.025.0
Log Scale
U.S. Share Ownership of Non-local Stocks 19.09U.S. Share Ownership of Non-local Bonds 15.28
GIC Chart Book| October 2011
Please refer to important information, disclosures and qualifications at the end of this material.
Past performance is no guarantee of future results. Estimates of future performance are based on assumptions that may not be realized. This material is not a solicitation of any offer to buy or sell any security or other financial instrument or to participate in any trading strategy.
44
U.S. Stock and Bond Supply/Demand
Source: Federal Reserve Bank, Morgan Stanley Smith Barney LLC. Data as of 2Q 2011.
Net Equity Issuance
Net Bond Issuance1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010
-8.0-8.0
-6.0-6.0
-4.0-4.0
-2.0-2.0
0.00.0
2.02.0
4.04.0
Percentage of New Equity Issuance (%)
1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010-1.0-1.00.00.01.01.02.02.03.03.04.04.05.05.06.06.07.07.0
Percentage of New Bond Issuance (%)
GIC Chart Book| October 2011
Please refer to important information, disclosures and qualifications at the end of this material.
Past performance is no guarantee of future results. Estimates of future performance are based on assumptions that may not be realized. This material is not a solicitation of any offer to buy or sell any security or other financial instrument or to participate in any trading strategy.
45
Global Yield Curves and Policy Rates
US EZ UKJN
Source: FactSet, Morgan Stanley Smith Barney LLC. Data as of September 2011.
Global Yield Curves Global Policy Rates
'99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '110%0%
1%1%
2%2%
3%3%
4%4%
5%5%
6%6%
7%7%
GIC Chart Book| October 2011
Please refer to important information, disclosures and qualifications at the end of this material.
Past performance is no guarantee of future results. Estimates of future performance are based on assumptions that may not be realized. This material is not a solicitation of any offer to buy or sell any security or other financial instrument or to participate in any trading strategy.
46
US Breakeven Inflation Rates, Treasury Yields, and TIPS Yields
5-Year Yields: Treasuries, TIPS, Breakevens
10-Year Yields: Treasuries, TIPS, Breakevens
Source: FactSet, Morgan Stanley Smith Barney LLC. Data as of October 2011.
'03 '04 '05 '06 '07 '08 '09 '10 '11-2-2
-1-1
00
11
22
33
44
55
5-Year Yields: Treasuries, TIPS, Breakevens
BE Inflation 5Y TIPS 5Y TSY
'03 '04 '05 '06 '07 '08 '09 '10 '1100
11
22
33
44
55
10-Year Yields: Treasuries, TIPS, Breakevens
10Y TSY BE Inflation 10Y TIPS
GIC Chart Book| October 2011
Please refer to important information, disclosures and qualifications at the end of this material.
Past performance is no guarantee of future results. Estimates of future performance are based on assumptions that may not be realized. This material is not a solicitation of any offer to buy or sell any security or other financial instrument or to participate in any trading strategy.
47
US Real Yields
Note: Stock returns are S&P 500; bond returns are Ibbotson long-term government. Cash returns assume one-year Treasury held to maturity. Real yield based on headline CPI prior to 1963 and core CPI post.
Source: Bloomberg, FactSet, Ibbotson Associates, Morgan Stanley Smith Barney LLC. Data as of September 2011.
U.S. Real Bond Yield and Forward One-Year Asset Class Return (%)
(1950-2011)
Real YieldEquity Return
Bond Return
Cash Return
(%) (%) (%) (%)Under 3 12.9 5.3 2.93 to 4 12.6 8.5 4.24 to 5 17.4 12.4 6.75 to 6 4.7 5.0 7.1Over 6 8.5 3.3 7.3
Real Fed Funds, Yield Curve Slope and Corporate Profits
'74 '76 '78 '80 '82 '84 '86 '88 '90 '92 '94 '96 '98 '00 '02 '04 '06 '08 '10 '12-30
-20
-10
0
10
20
30
40
50 NIPA Corporate Profits: 8.50
-6
-3
0
3
6
9
12-1,000
-800
-600
-400
-200
0
200
400
600
Note: Real Fed Funds is Fed Funds Target Rate minus US Personal Consumption Expenditures Core
Price; Yield curve Slope is the 30-Year US Treasury minus the
90-Day Treasury Bill
Real Fed Funds Rate (%) Yield curve (Basis Points Inverted)
Real Fed Funds Rate: -1.1Yield Curve Slope: 262.78
GIC Chart Book| October 2011
Please refer to important information, disclosures and qualifications at the end of this material.
Past performance is no guarantee of future results. Estimates of future performance are based on assumptions that may not be realized. This material is not a solicitation of any offer to buy or sell any security or other financial instrument or to participate in any trading strategy.
48
US High Yield and High Grade Corporate Bond Spreads
Source: DataStream, Federal Reserve Bank of St. Louis, Bloomberg, Morgan Stanley Smith Barney LLC. Data as of September 2011
US HY Spread and Moody's Speculative Default Rate (%)
Moody's Baa Corporate Bond vs. 10 Year US Treasury Spread
'97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '110
200400600800
1,0001,2001,4001,6001,8002,000
0
2
4
6
8
10
12
14
US Hight Yield Spread Moody's Speculative % Default Rate
US Hight Yield Spread (Left) Moody's Speculative % Default Rate (Right)
'26 '30 '34 '38 '42 '46 '50 '54 '58 '62 '66 '70 '74 '78 '82 '86 '90 '94 '98 '02 '06 '100.0.
100.100.
200.200.
300.300.
400.400.
500.500.
600.600.
700.700.
800.800.
+2 Std Dev
-2 Std Dev
Average
GIC Chart Book| October 2011
Please refer to important information, disclosures and qualifications at the end of this material.
Past performance is no guarantee of future results. Estimates of future performance are based on assumptions that may not be realized. This material is not a solicitation of any offer to buy or sell any security or other financial instrument or to participate in any trading strategy.
49
US 6-Month CD Rate: Real and Nominal
Source: Federal Reserve Bank, FactSet, Morgan Stanley Smith Barney LLC. Data as of October 2011.
Real 6-Month Certificate of Deposit Nominal 6-Month Certificate of Deposit
'90 '92 '94 '96 '98 '00 '02 '04 '06 '08 '100%0%
2%2%
4%4%
6%6%
8%8%
10%10%
12%12%
'90 '92 '94 '96 '98 '00 '02 '04 '06 '08 '10-3%-3%
-2%-2%
-1%-1%
0%0%
1%1%
2%2%
3%3%
4%4%
5%5%
6%6%
7%7%
GIC Chart Book| October 2011
Please refer to important information, disclosures and qualifications at the end of this material.
Past performance is no guarantee of future results. Estimates of future performance are based on assumptions that may not be realized. This material is not a solicitation of any offer to buy or sell any security or other financial instrument or to participate in any trading strategy.
50
Corporate Bond and Equity Issuance in Emerging Markets by Year
Source: Dealogic, Bloomberg, Morgan Stanley Smith Barney LLC. Data as of September 2011.
'03 '04 '05 '06 '07 '08 '09 '10 '110
10
20
30
40
50
60 100
200
300
400
500
600
700
800
EMDebt
SpreadsTightening EM Debt
Spreads Widening EM Debt
Spreads Tightening
JPMorgan EMBI Plus Sovereign Spreads (Left Scale) (Right) iShares MSCI Emerging Markets Index (Right Scale)
Corporate Bond and Emerging Markets Debt Spreads and Emerging Markets Equity Performance
Emerging Market Debt
'95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11005050100100150150200200250250300300350350400400
Note: 2011 represents data as of October 2011
$ Bil $ Bil
Total Corporate Bond IssuanceTotal Equity Issuance
GIC Chart Book| October 2011
Please refer to important information, disclosures and qualifications at the end of this material.
Past performance is no guarantee of future results. Estimates of future performance are based on assumptions that may not be realized. This material is not a solicitation of any offer to buy or sell any security or other financial instrument or to participate in any trading strategy.
Dec 05 Oct 06 Aug 07 Jun 08 Apr 09 Feb 10 Dec 10 Oct 117070
8080
9090
100100
110110
120120
130130
Yen per US Dollar
51
Currencies
Source: FactSet, Morgan Stanley Smith Barney LLC. Data as of October 2011.
US Dollar Euro
Japanese Yen British Pound
Dec 05 Oct 06 Aug 07 Jun 08 Apr 09 Feb 10 Dec 10 Oct 111.31.3
1.41.4
1.51.5
1.61.6
1.71.7
1.81.8
1.91.9
2.02.0
2.12.12.22.2
US Dollar per British Pound
Dec 05 Oct 06 Aug 07 Jun 08 Apr 09 Feb 10 Dec 10 Oct 111.11.1
1.21.2
1.31.3
1.41.4
1.51.5
1.61.6
1.71.7
US Dollar per Euro
Jan-06 Jan-07 Jan-08 Jan-09 Jan-10 Jan-117070
7575
8080
8585
9090
9595
U.S. Dollar Index
GIC Chart Book| October 2011
Please refer to important information, disclosures and qualifications at the end of this material.
Past performance is no guarantee of future results. Estimates of future performance are based on assumptions that may not be realized. This material is not a solicitation of any offer to buy or sell any security or other financial instrument or to participate in any trading strategy.
52
'88 '89 '90 '91 '92 '93 '94 '95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '1000
55
1010
1515
2020
2525
3030
Exports as a Percentage of World GDP(%) (%)
Global Trade and GDP Correlations
Source: IMF, World Economic Outlook Database, June 2011.
Exports as a Percentage of World GDP
Correlation Between Regional and World GDP Growth Rates
0.00.0
0.20.2
0.40.4
0.60.6
0.80.8
1.01.0
1.21.2Correlation Between Regional and World GDP Growth Rates
1980-1994 1995-2010
G7 EM Central & Eastern Europe Developing Asia LATAM
GIC Chart Book| October 2011
Please refer to important information, disclosures and qualifications at the end of this material.
Past performance is no guarantee of future results. Estimates of future performance are based on assumptions that may not be realized. This material is not a solicitation of any offer to buy or sell any security or other financial instrument or to participate in any trading strategy.
53
US GDP MetricsS&P 500 and Economic Performance Year-over-Year % Change Since 1941
Source: Bloomberg, Morgan Stanley Smith Barney LLC. Data as of January 2011.
Note: Deflation years of 1949 and 1954 had negative CPI (shaded gray). Near-deflation years of 1959, 1963, 1986, 1997 and 2001 had negative PPI and CPI less than 2% (shaded yellow).
S&P 500 Prices CPI Core
CPI PPI Core PPI
Real GDP Growth
Productivity Growth
1941 -17.9 9.9 17.11942 12.4 9.0 18.51943 19.4 3.0 16.41944 13.8 2.3 8.11945 30.7 2.2 -1.11946 -11.9 18.1 -11.01947 0.0 8.8 -0.91948 -0.7 3.0 2.9 4.2 1.11949 10.5 -2.1 -4.6 -1.7 3.81950 21.7 5.9 10.3 13.4 7.21951 16.3 6.0 3.0 5.2 2.41952 11.8 0.8 -2.3 5.1 1.71953 -6.6 0.7 0.3 0.4 1.21954 45.0 -0.7 0.0 2.7 3.81955 26.4 0.4 1.0 6.5 2.21956 2.6 3.0 4.2 1.8 0.11957 -14.3 2.9 3.4 0.3 2.61958 38.1 1.8 1.7 0.3 2.4 3.91959 8.5 1.7 2.0 -0.3 4.9 1.31960 -3.0 1.4 1.0 1.8 0.6 -0.21961 23.1 0.7 1.3 -0.6 6.3 6.51962 -11.8 1.3 1.3 0.3 4.1 3.51963 18.9 1.6 1.6 -0.3 5.3 3.71964 13.0 1.0 1.2 0.6 5.1 1.51965 9.1 1.9 1.5 3.3 8.5 5.81966 -13.1 3.5 3.3 2.0 4.3 1.51967 20.1 3.0 3.8 1.7 2.5 1.81968 7.7 4.7 5.1 3.1 4.9 2.91969 -11.4 6.2 6.2 4.9 2.0 -0.41970 0.1 5.6 6.6 2.1 -0.2 2.61971 10.8 3.3 3.1 3.3 4.5 3.41972 15.6 3.4 3.0 3.9 6.9 4.91973 -17.4 8.7 4.7 11.7 4.2 0.81974 -7.5 12.3 11.1 18.3 17.7 -1.9 -0.41975 -24.0 6.9 6.7 6.6 6.0 2.5 3.6
S&P 500 Prices CPI Core
CPI PPI Core PPI
Real GDP Growth
Productivity Growth
1976 19.1 4.9 6.1 3.8 5.7 4.3 2.81977 -11.5 6.7 6.5 6.7 6.2 5.0 0.71978 1.1 9.0 8.5 9.3 8.4 6.7 2.61979 12.3 13.3 11.3 12.8 9.4 1.3 -1.51980 25.8 12.5 12.2 11.8 10.8 -0.1 0.71981 -9.7 8.9 9.5 7.1 7.7 1.2 -0.21982 14.8 3.8 4.5 3.6 4.9 -1.4 0.61983 17.3 3.8 4.8 0.6 1.9 7.7 5.01984 1.4 3.9 4.7 1.7 2.0 5.6 1.11985 26.3 3.8 4.3 1.8 2.7 4.2 2.21986 14.6 1.1 3.8 -2.3 2.7 2.8 2.21987 2.0 4.4 4.2 2.2 2.1 4.3 0.91988 12.4 4.4 4.7 4.0 4.3 3.7 1.41989 27.3 4.6 4.4 4.9 4.2 2.7 0.61990 -6.6 6.1 5.2 5.7 3.5 0.6 1.11991 26.3 3.1 4.4 -0.1 3.1 1.0 2.81992 4.5 2.9 3.3 1.6 2.0 4.3 4.21993 7.1 2.7 3.2 0.2 0.4 2.7 -0.11994 -1.5 2.7 2.6 1.7 1.6 4.2 0.81995 34.1 2.5 3.0 2.3 2.6 2.0 0.71996 20.3 3.3 2.6 2.8 0.6 4.4 2.41997 31.0 1.7 2.2 -1.2 0.0 4.3 2.11998 26.7 1.6 2.4 0.0 2.5 5.0 3.41999 19.5 2.7 1.9 2.9 0.9 4.8 3.62000 -10.1 3.4 2.6 3.6 1.3 2.9 2.92001 -13.0 1.6 2.7 -1.6 0.9 0.4 3.52002 -23.4 2.4 1.9 1.2 -0.5 1.9 3.12003 26.4 1.9 1.1 4.0 1.0 3.8 5.02004 9.0 3.3 2.2 4.2 2.3 3.1 1.52005 3.0 3.4 2.2 5.4 1.4 2.7 1.42006 13.6 2.5 2.6 1.1 2.0 2.4 0.92007 3.5 4.1 2.4 6.2 2.0 2.3 2.62008 -38.5 0.1 1.8 -0.9 4.5 -2.8 -0.42009 23.5 2.7 1.8 4.3 0.9 0.2 6.22010 12.8 1.5 0.8 4 1.3 3.2 2.5
GIC Chart Book| October 2011
Please refer to important information, disclosures and qualifications at the end of this material.
Past performance is no guarantee of future results. Estimates of future performance are based on assumptions that may not be realized. This material is not a solicitation of any offer to buy or sell any security or other financial instrument or to participate in any trading strategy.
54
US GDP
Peak (Quarter) Trough (Quarter)GDP % Change Rank
August 1929(III) March 1933 (I) -26.4 1
May 1937(II) August 1938 (II) -3.4 3
February 1945(I) October 1945 (IV) -1.1 12
November 1948(IV) October 1949 (IV) -1.8 8
July 1953(II) May 1954 (II) -2.7 6
August 1957(III) April 1958 (II) -3.7 2
April 1960(II) February 1961 (I) -1.6 11
December 1969(IV) November 1970 (IV) -0.6 14
November 1973(IV) March 1975 (I) -3.1 4
January 1980(I) July 1980 (III) -2.2 7
July 1981(III) November 1982 (IV) -2.9 5
July 1990(III) March 1991(I) -1.3 11
March 2001(I) November 2001 (IV) -0.7 13
December 2007(IV) August 2009 (IV) ? ?
US Recessions Since 1929
Note: Annual GDP figures used before 1947. GDP peaks and troughs near the recession dates were used to measure the deepest peak to trough GDP loss. GDP through 4Q08.
Source: National Bureau of Economic Research, Bureau of Economic Analysis, and Morgan Stanley Smith Barney LLC. Data as of December 2009.
Note: The ratio is a 3-cycle moving average of the duration of contractions relative to expansions since 1900. Ends with last recorded recession in 2001.
Source: NBER, and FactSet. Data as of December 2009.
Ratio of U.S. Economic Contractions to Expansions Since 1900
1900 1907 1915 1923 1931 1939 1947 1954 1962 1970 1978 1986 1994 20010.1
0.2
0.3
0.4
0.5
0.6
0.70.80.91.0
2.0
Ratio of U.S. Economic Contractions to Expansions Since 1900Log Scale
GIC Chart Book| October 2011
Please refer to important information, disclosures and qualifications at the end of this material.
Past performance is no guarantee of future results. Estimates of future performance are based on assumptions that may not be realized. This material is not a solicitation of any offer to buy or sell any security or other financial instrument or to participate in any trading strategy.
55
US GDP
1970
2001-1991
-1980
-1973
198219531960
-1957
0
2
4
6
8
10
-4.0-3.5-3.0-2.5-2.0-1.5-1.0-0.50.0
Recessionary Decline in GDP (%)
First Year GDP Recovery (%)
US Contractions and Recoveries: 80 Percent Correlation in Magnitudes
Source: Bloomberg, Morgan Stanley Smith Barney LLC. Data as of December 2010.
GIC Chart Book| October 2011
Please refer to important information, disclosures and qualifications at the end of this material.
Past performance is no guarantee of future results. Estimates of future performance are based on assumptions that may not be realized. This material is not a solicitation of any offer to buy or sell any security or other financial instrument or to participate in any trading strategy.
56
Real Estate21%
Tangible Assets 6%
Cash8%
Bonds5%Equities
34%
Other Equities26%
US Household Consumption and Assets
Note: Other Tangible Assets includes consumer durable goods and equipment & software. Other Equities includes security credit, life insurance reserves, pension fund reserves and non-corporate business equity. Numbers may not add up to 100, due to rounding.
Source: Federal Reserve Board, Morgan Stanley Smith Barney LLC. Data as of October 2011.
U.S. Household Assets, 2Q11U.S. Household Income Quintile Share of ConsumptionIncome Quintile % of Consumption
1st 39
2nd 23
3rd 17
4th 13
5th 8Source: Bureau of Labor Statistics Consumer Expenditure Survey, 2007, Morgan Stanley Smith Barney LLC. Data as of October 2009.
GIC Chart Book| October 2011
Please refer to important information, disclosures and qualifications at the end of this material.
Past performance is no guarantee of future results. Estimates of future performance are based on assumptions that may not be realized. This material is not a solicitation of any offer to buy or sell any security or other financial instrument or to participate in any trading strategy.
57
US Net Worth, Savings, and Financial Obligations to Income
Source: Bureau of Economic Analysis, Federal Reserve Bank, Morgan Stanley Smith Barney LLC. Data as of 2Q 2011.
The Ratio of Household Net Worth to Disposable Income and Saving Rate
Debt Service and Financial Obligation Ratio to Disposable Income
Note: Financial Obligations Ratio (FOR) adds automobile lease payments, rental payments on tenant-occupied property, homeowners' insurance, and property tax payments to the debt service ratio. US Consensus is for home ownership is through 4Q10.
'52 '54 '56 '58 '60 '62 '64 '66 '68 '70 '72 '74 '76 '78 '80 '82 '84 '86 '88 '90 '92 '94 '96 '98 '00 '02 '04 '06 '08 '103.5
4.0
4.5
5.0
5.5
6.0
6.5 0
2
4
6
8
10
12
14
Ratio of Household Net Worth to Disposable Income Savings Rate % (Inverted)
Household Net Worth to Disposable Income (Left)Personal Savings Rate (Inverted) (Right)HH Net Worth to Disosable Income Avg: 4.9
'80 '81 '82 '83 '84 '85 '86 '87 '88 '89 '90 '91 '92 '93 '94 '95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '101011121314151617181920
Home ownership up
from 68% from 65% in the
1990s
Debt Servie/DI (%)Financial Obligation Ratio/DI (%)
Financial Obligation Ratio, C urrent: 16.09Debt Service/Disposable Income, Current: 11.09
GIC Chart Book| October 2011
Please refer to important information, disclosures and qualifications at the end of this material.
Past performance is no guarantee of future results. Estimates of future performance are based on assumptions that may not be realized. This material is not a solicitation of any offer to buy or sell any security or other financial instrument or to participate in any trading strategy.
58
US Income, Spending, and Leverage
Source: Haver, Citigroup, Morgan Stanley Smith Barney LLC
Corporate and Household Leverage
Source: Federal Reserve, Morgan Stanley Smith Barney LLC. Data as of 2Q11.
Real Consumer Spending vs. Real Disposable Income (YoY%)
'55 '60 '65 '70 '75 '80 '85 '90 '95 '00 '05 '1020
25
30
35
40
45
50
55
0.60.81.01.21.41.61.82.02.22.4
Corporate (%) Household (%)
Corporate Liabilities/AssetsHousehold Liabilities/Assets
Recession Periods - United States
'66 '68 '70 '72 '74 '76 '78 '80 '82 '84 '86 '88 '90 '92 '94 '96 '98 '00 '02 '04 '06 '08 '10-4-4
-2-2
00
22
44
66
88
1010
Real Consumer Spending: 2.24Real Disposable Personal Income: 1.27
GIC Chart Book| October 2011
Please refer to important information, disclosures and qualifications at the end of this material.
Past performance is no guarantee of future results. Estimates of future performance are based on assumptions that may not be realized. This material is not a solicitation of any offer to buy or sell any security or other financial instrument or to participate in any trading strategy.
59
US Real Wages and Initial Unemployment Claims
Source: Bloomberg, Morgan Stanley Smith Barney LLC. Data as of September 2011.
Growth in Real US Hourly Wages (YoY%)
Initial Jobless Claims (4-week moving average)
Jan 90 Jan 92 Jan 94 Jan 96 Jan 98 Jan 00 Jan 02 Jan 04 Jan 06 Jan 08 Jan 10200200250250300300350350400400450450500500550550600600650650700700
Thousands
Jan' 88 Jan' 90 Jan' 92 Jan' 94 Jan' 96 Jan' 98 Jan' 00 Jan' 02 Jan' 04 Jan' 06 Jan' 08 Jan' 10-3-3
-2-2
-1-1
00
11
22
33
44
55
66
GIC Chart Book| October 2011
Please refer to important information, disclosures and qualifications at the end of this material.
Past performance is no guarantee of future results. Estimates of future performance are based on assumptions that may not be realized. This material is not a solicitation of any offer to buy or sell any security or other financial instrument or to participate in any trading strategy.
60
1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010-10%-10%-8%-8%-6%-6%-4%-4%-2%-2%0%0%2%2%4%4%6%6%8%8%10%10%
Average2.6
Percent Change at Annual Rate
Real GDP Average
Personal Consumption,
65.9%
Business Investment, 10.5%
Residential Investment, 2.4%
Government, 21.3%
US Real GDP and Composition
Source: Bureau of Economic Analysis, Morgan Stanley Smith Barney LLC. Data as of 2Q11.
Composition of US Spending
Real GDP
GIC Chart Book| October 2011
Please refer to important information, disclosures and qualifications at the end of this material.
Past performance is no guarantee of future results. Estimates of future performance are based on assumptions that may not be realized. This material is not a solicitation of any offer to buy or sell any security or other financial instrument or to participate in any trading strategy.
61
1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010
-10
-8
-6
-4
-2
0
2 -15
-10
-5
0
5
10
15
20
25
30
Capital and Labor Cost Spread (% Inverterd) IT Growth YOY% ChangeIT Spending YOY 7.10%Spread -2.10%
US Exports and IT Capex Incentives
Source: Federal Reserve Board, Bureau of Economic Analysis, Morgan Stanley Smith Barney LLC. Data as of September 2011.
Exports Share of GDP and Trade Weighted Dollar
Capital Goods/Labor Cost Spread and Info Tech Spending
1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010
6
7
8
9
10
11
12
13
14
15 60
70
80
90
100
110
120
130
140
150
160
Exports/GDP (% Inverted) TW $
Exports/GDP: 13.9TW$: 72.81
GIC Chart Book| October 2011
Please refer to important information, disclosures and qualifications at the end of this material.
Past performance is no guarantee of future results. Estimates of future performance are based on assumptions that may not be realized. This material is not a solicitation of any offer to buy or sell any security or other financial instrument or to participate in any trading strategy.
'91 '92 '93 '94 '95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11101020203030404050506060707080809090100100
Earnings Per Share ($)
62
US Profits
Source: Bureau of Economic Analysis, Morgan Stanley Smith Barney LLC. Data as of 2Q11.
NIPA After-Tax Corporate Profits
S&P 500 Earnings(Rolling 4 Quarters)
'62 '64 '66 '68 '70 '72 '74 '76 '78 '80 '82 '84 '86 '88 '90 '92 '94 '96 '98 '00 '02 '04 '06 '08 '1000
200200
400400
600600
800800
1,0001,000
1,2001,200
($ Billion)
Source: Standard and Poor's, Morgan Stanley smith Barney LLC. Data as of 3Q11.
GIC Chart Book| October 2011
Please refer to important information, disclosures and qualifications at the end of this material.
Past performance is no guarantee of future results. Estimates of future performance are based on assumptions that may not be realized. This material is not a solicitation of any offer to buy or sell any security or other financial instrument or to participate in any trading strategy.
63
3.8%
3.2%2.9%
3.7%3.3%3.3%
2.2%
0.8%
2.9%3.3%
1.2%1.6%
1.2%1.8% 1.9%
2.5% 2.5%
0%
1%
2%
3%
4%
5%
1961-69 1982-90 1991-01 2001-07 2009-??
Note: Current cycle begins 3Q09 - 1Q11.Data as o f M ay 2011.
F irst 2 Years Years 3 and 4 Years 5 and 6 Years 7 and A bo ve
US Labor Costs, Profits, and Productivity
Source: Bureau of Labor Statistics, Morgan Stanley Smith Barney LLC. Data as of 2Q11.
Labor & Corporate Profits Shares of U.S. National Income
Business Cycle U.S. Labor Productivity'54 '56 '58 '60 '62 '64 '66 '68 '70 '72 '74 '76 '78 '80 '82 '84 '86 '88 '90 '92 '94 '96 '98 '00 '02 '04 '06 '08 '104
6
8
10
12
14
16 60
61
6263
64
6566
67
6869
Profits (%) Labor (%) Iinverted
Labor: 62.Corp Profi ts: 14.
GIC Chart Book| October 2011
Please refer to important information, disclosures and qualifications at the end of this material.
Past performance is no guarantee of future results. Estimates of future performance are based on assumptions that may not be realized. This material is not a solicitation of any offer to buy or sell any security or other financial instrument or to participate in any trading strategy.
64
US Employment and Leading Economic Indicators
Source: Bureau of Labor Statistics, Conference Board, Morgan Stanley Smith Barney LLC. Data as of September 2011.
U.S. Leading Economic Indicator, 6 Month % Change Annualized (1969 - Present)
Private-Sector Employment(Three-month moving average; monthly change; thousands)
'90 '92 '94 '96 '98 '00 '02 '04 '06 '08 '10-10-10
-5-5
00
55
1010
1515
6 Month Chg (Annualized)
Oct-10 Nov-10 Dec-10 Jan-11 Feb-11 Mar-11 Apr-11 May-11 Jun-11 Jul-11 Aug-11 Sep-118080
100100
120120
140140
160160
180180
200200
220220
240240
GIC Chart Book| October 2011
Please refer to important information, disclosures and qualifications at the end of this material.
Past performance is no guarantee of future results. Estimates of future performance are based on assumptions that may not be realized. This material is not a solicitation of any offer to buy or sell any security or other financial instrument or to participate in any trading strategy.
65
'01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11-25-20-15-10
-505
10152025
-3
-2
-1
0
1
2
3
U.S. Import Price Index and CPI Core Goods(Year-over-Year Percent Change)
Import Price Index (Left Scale) CPI Core Goods (Right Scale)
US Import Prices and Inflation
Source: Bureau of Labor Statistics, FactSet, Morgan Stanley Smith Barney LLC. Data as of August 2011.
U.S. Import Price Index and CPI Core Goods(Year-over-Year Percent Change)
U. S. Inflation
'65 '70 '75 '80 '85 '90 '95 '00 '05 '10-4-4-2-200224466881010121214141616
YoY (%)
Core PCECPI
GIC Chart Book| October 2011
Please refer to important information, disclosures and qualifications at the end of this material.
Past performance is no guarantee of future results. Estimates of future performance are based on assumptions that may not be realized. This material is not a solicitation of any offer to buy or sell any security or other financial instrument or to participate in any trading strategy.
66
Commodity Prices and Recessions
Source: Commodity Research Bureau/Reuters US Spot Raw Industrials
Peak Date Peak Level Trough Date Trough LevelPeak to Trough
Decline (%)
11/29/74 528.2 08/31/77 333.6 -37
10/31/80 835.6 12/31/81 587.2 -30
10/30/87 1100.1 12/31/87 1069.3 -3
10/31/90 2665.6 12/31/93 2098.2 -21
01/31/97 3507.8 02/26/99 1883.3 -46
11/30/00 4235.2 01/31/02 2735.3 -35
07/03/08 10898.1 2/18/2009 3116.7 -71
Average -34
Note: Last trough as of March 9, 2011.
Source: Bloomberg, GSCI, Morgan Stanley Smith Barney LLC
Commodities Performance in Global Earnings Recessions
Recessions Peak to Trough % Change1953 - 1954 -421957 - 1958 -221960 - 1961 -131969 - 1970 -131980 - 1982 -301973 - 1975 -331980 - 1991 -301996 - 2001 -382007 - 2009 -40
Mean -29Median -30
Commodity Prices in U.S. Recessions
Source: Bloomberg, FactSet. Data as of September 2011.
Crude Oil and Gold Prices
'92 '93 '94 '95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '110
25
50
75
100
125
150
200
400
600
800
1,000
1,200
1,400
1,600
1,800
2,000
Crude: $79.20
Gold: $1620.00
Crude Oil $/bbl Gold (US$/Troy oz)
Gold YoY%: 23.1Crude YoY%: -2.9
GIC Chart Book| October 2011
Please refer to important information, disclosures and qualifications at the end of this material.
Past performance is no guarantee of future results. Estimates of future performance are based on assumptions that may not be realized. This material is not a solicitation of any offer to buy or sell any security or other financial instrument or to participate in any trading strategy.
67
Commodity Price Metrics
Source: Institute for Supply Management, The Economist, Morgan Stanley Smith Barney LLC. Data as of September 2011.
Source: Reuters, FactSet, Morgan Stanley Smith Barney LLC. Data as of September 2011
ISM Prices Paid and The Economist Global Commodity Indices
CRB Futures and Raw Industrials
'92 '93 '94 '95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '112,000
4,000
6,000
8,000
10,000
12,000
14,000
16,000
200
250
300
350
400
450
500
550
600
650
© FactSe t Re search Syst ems
CRB Futures CRB Raw Industrials
Crb: Raw Industrials Index: 1.5%CRB Futures: 18.9%
'92 '93 '94 '95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '1150
100
150
200
250
300
15
30
45
60
75
90
105
Economist Commodities ISM Prices Paid
ISM Prices Paid Index YoY%: 22.4 Economist Commodity Price Index YoY%: 9.0
GIC Chart Book| October 2011
Please refer to important information, disclosures and qualifications at the end of this material.
Past performance is no guarantee of future results. Estimates of future performance are based on assumptions that may not be realized. This material is not a solicitation of any offer to buy or sell any security or other financial instrument or to participate in any trading strategy.
68
Oil, Gold and Real Estate
Source: National Council of Real Estate Investment Fiduciaries, Office of Federal Housing Enterprise Oversight, Morgan Stanley Smith Barney LLC. Data as of 2Q11.
US Residential and Commercial Real Estate
Jan'09 Mar'09 May'09 Jul '09 Sep'09 Nov'09 Jan'10 Mar'10 May'10 Jul '10 Sep'10 Nov'10 Jan'11 Mar'11 May'11 Jul '11 Sep'11-40-40
-30-30
-20-20
-10-10
00
1010
2020
3030
4040
5050
Mortgage Bankers Association Weekly Refi Index
Note: This index is a measure of mortgage loan applications for purchases and refinancings. Data as of September 2011Source: Bloomberg, Morgan Stanley Smith Barney LLC.
80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10-25-25-20-20-15-15-10-10-5-500551010151520202525
US Residental and Commercial Real Estate
Residential YoY%: -4.48Commercial TR 4Q Mov Avg: 3.95
GIC Chart Book| October 2011
Please refer to important information, disclosures and qualifications at the end of this material.
Past performance is no guarantee of future results. Estimates of future performance are based on assumptions that may not be realized. This material is not a solicitation of any offer to buy or sell any security or other financial instrument or to participate in any trading strategy.
69
Crude Oil
Source: Thomson Financial, Bloomberg, Morgan Stanley Smith Barney LLC. Data as of October 2011.
Crude Oil: Inventories vs. Spot Price (WTI)
Analysts' Consensus Crude Oil Price Forecast versus Spot WTI Crude oil Prices
'92 '93 '94 '95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11
260
280
300
320
340
360
38020
40
60
80
100
120
140
160
In Mil. of Barrels (Inverted) $s/BBL
Inventories Price (Right)
'98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '1300
2020
4040
6060
8080
100100
120120
140140
160160
As of 10/5/2011:$83.21
FC Est2011: $94.682012: $92.942013: $95.42
Estimate
Crude Oil Prices ($) Oil Prices (Consensus $)
ActualAnalyst Estimates
GIC Chart Book| October 2011
Please refer to important information, disclosures and qualifications at the end of this material.
Past performance is no guarantee of future results. Estimates of future performance are based on assumptions that may not be realized. This material is not a solicitation of any offer to buy or sell any security or other financial instrument or to participate in any trading strategy.
70
US Real Estate Prices
1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011
-30-30
-20-20-10-1000101020203030
Source: MIT Center for Real Estate and the U.S. Treasury, HaverNote:Commercial Real Estate: Transaction-Based Price Index: All Properties (Q1-84=100)
Annual % Change Annual % Change
U.S. Home Price Inflation
U.S. Commercial Real Estate Inflation
Data as of 1Q11.
'85 '86 '87 '88 '89 '90 '91 '92 '93 '94 '95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11-20-20
-15-15
-10-10
-5-5
00
55
1010
1515
2020
Data as of August 2011.
GIC Chart Book| October 2011
Please refer to important information, disclosures and qualifications at the end of this material.
Past performance is no guarantee of future results. Estimates of future performance are based on assumptions that may not be realized. This material is not a solicitation of any offer to buy or sell any security or other financial instrument or to participate in any trading strategy.
71
US Housing Affordability
Housing Affordability Index
Median House Price to Disposable Income per Capital
Source: National Association of Realtors, Bureau of Economic Analysis, FactSet, Morgan Stanley Smith Barney LLC. Data as of August 2011.
'72 '73 '74 '75 '76 '77 '78 '79 '80 '81 '82 '83 '84 '85 '86 '87 '88 '89 '90 '91 '92 '93 '94 '95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '114040
6060
8080
100100
120120
140140
160160
180180
200200
Affordability
Average
Non-Affordable
Housing Affordability Index
'68 '70 '72 '74 '76 '78 '80 '82 '84 '86 '88 '90 '92 '94 '96 '98 '00 '02 '04 '06 '08 '104.04.0
4.54.5
5.05.0
5.55.5
6.06.0
6.56.5
7.07.0
7.57.5
8.08.0
GIC Chart Book| October 2011
Please refer to important information, disclosures and qualifications at the end of this material.
Past performance is no guarantee of future results. Estimates of future performance are based on assumptions that may not be realized. This material is not a solicitation of any offer to buy or sell any security or other financial instrument or to participate in any trading strategy.
72
'60 '62 '64 '66 '68 '70 '72 '74 '76 '78 '80 '82 '84 '86 '88 '90 '92 '94 '96 '98 '00 '02 '04 '06 '08 '10-202
468
101214
16
-6-4-202468101214
CPI (YoY%) Unit Labor Costs (YoY%)
CPI YoY % ChgUnit Labor Cost (Right)
Trends in Inflation Drivers
US Inflation and Unit Labor Costs
OECD CPI: Energy and Core
Note: Latest data as of 3/08. Correlation between CPI and ULC is 87%.
Source: OECD, BEA, FactSet, Morgan Stanley Smith Barney LLC. Data as of August 2011.
'82 '84 '86 '88 '90 '92 '94 '96 '98 '00 '02 '04 '06 '08 '10-30
-20
-10
0
10
20
30
40
0
2
4
6
8
10
12
14
16
18
20Fall of the Berlin Wall
North AmericanFree Trade Agreement
(NAFTA)Approv ed
World Trade Organization(WTO)Created
Energy (YoY%) Core (YoY%)
OECD Core CPI 1.76OECD Energy 18.97
GIC Chart Book| October 2011
Please refer to important information, disclosures and qualifications at the end of this material.
Past performance is no guarantee of future results. Estimates of future performance are based on assumptions that may not be realized. This material is not a solicitation of any offer to buy or sell any security or other financial instrument or to participate in any trading strategy.
73
Global Equity Bull MarketsBased on Last 15 Years, Investors Should Buy Equities When Bond Yields are Below Nominal GDP Growth and Sell When They are Above…
The Bond Yield Has Been Consistently Above Nominal GDP Growthin Japan for the Last 20 Years
Source: Bloomberg, Bureau of Economic Analysis, Standard & Poor's, Morgan Stanley & Co. LLC Research. Data as of September 2011.
'95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11-6
-4
-2
0
2
4
6
8
200
400
600
800
1,000
1,200
1,400
1,600
1,800
2,000
Percent (%) S&P 500 Price Index
S&P 500 (Right)US Nominal GDP (YoY) (Lef t)10-y ear US Treasury Bond Yield (Lef t)
'85 '86 '87 '88 '89 '90 '91 '92 '93 '94 '95 '96 '97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11-10
-5
0
5
10
15
5,000
10,000
15,000
20,000
25,000
30,000
35,000
40,000
45,000
Percent (YoY%) Nikkei 225 Index
Nikkei 225 Index (Right)Nominal GDP GrowthJapan Gov ernment Bond 10-Year Yield
GIC Chart Book| October 2011
Please refer to important information, disclosures and qualifications at the end of this material.
Past performance is no guarantee of future results. Estimates of future performance are based on assumptions that may not be realized. This material is not a solicitation of any offer to buy or sell any security or other financial instrument or to participate in any trading strategy.
74
Bear and Bull Markets & Inflation
US Secular Bond Bear and Bull Markets and Inflation Since 1946
Note: Core Inflation is a 5-year moving average; headline inflation prior to 1963.Source: Morgan Stanley Smith Barney, Bloomberg, Ibbotson Associates, and FactSet. Data as of September 2011.
US Secular Stock Bear and Bull Markets and Inflation Since 1946
'46 '48 '50 '52 '54 '56 '58 '60 '62 '64 '66 '68 '70 '72 '74 '76 '78 '80 '82 '84 '86 '88 '90 '92 '94 '96 '98 '00 '02 '04 '06 '08 '10
203040
100
200300400
1,000
2,000
0%
1%
2%
3%
4%
5%
6%
7%
8%
9%
10%
Dec. 1968
Aug
.1982
Mar 2000
Mar. 2009
Bull 1946 - 1968Average Annual
Total ReturnNominal = 14%
Real = 11%
Bear 1968 - 1982Average Annual
Total ReturnNominal = 6%Real = (2)%
Bull 1982 - 2000Average Annual
Total ReturnNominal = 18%
Real = 15%
Bear 3/2000 -3/2009Average Annual
Total ReturnNominal = (5)%
Real = (7)%
CyclicalB
ull
S&P 500 (log scale) Core CPI (%)
Core CPIS&P 500 Price
48 50 52 54 56 58 60 62 64 66 68 70 72 74 76 78 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 100
2
4
6
8
10
12
14
16S
ept 1981Average Annual
Total ReturnNominal = 2%
Real = (2)%
Average Annual Total ReturnNominal = 12%
Real = 9%
Bull 1981 - PresentBear 1946 - 1981
©FactSet Research SystemsSource: Citi Global Weatlh Management, Bloomberg, Ibbotson and Factset.Note: Core CPI 5 YEAR ma; headline CPI prior to 1963.
LT Bond Yield (YoY%)Core CPI (YoY%)
Long Bond YieldCore CPI
GIC Chart Book| October 2011
Please refer to important information, disclosures and qualifications at the end of this material.
Past performance is no guarantee of future results. Estimates of future performance are based on assumptions that may not be realized. This material is not a solicitation of any offer to buy or sell any security or other financial instrument or to participate in any trading strategy.
75
Trends in Volatility and Dividend Yields
Note: Stock and bond volatility is the standard deviation of rolling 5-year monthly returns. Earnings volatility is the standard deviation of 5-year quarterly operating EPS.Source: Morgan Stanley Smith Barney LLC, Ibbotson Associates, and Standard & Poor’s.
US Stock to Bond Market and S&P 500 EPS Volatility
Source: Morgan Stanley Smith Barney LLC, Ibbotson Associates. Data as of September 2011.
US Dividend/Bond Yield Ratio
'40 '45 '50 '55 '60 '65 '70 '75 '80 '85 '90 '95 '00 '05 '100
1
2
3
4
5
6
7
8
9
0.00
0.05
0.10
0.15
0.20
0.25
0.30
0.35
0.40
Stock/Bond Volatility Earnings Volatility
Earnings Volatilit Correlation: 63%Stock/Bond Volatility (Left)
'10 '15 '20 '25 '30 '35 '40 '45 '50 '55 '60 '65 '71 '76 '81 '86 '91 '96 '01 '06 '110.1
0.2
0.30.40.50.6
1.0
2.0
3.04.0
Dividend /Bond Yield Ratio
as of September 2011: 0.70
Div idend Yield to Bond (Log Scale)
GIC Chart Book| October 2011
Please refer to important information, disclosures and qualifications at the end of this material.
Past performance is no guarantee of future results. Estimates of future performance are based on assumptions that may not be realized. This material is not a solicitation of any offer to buy or sell any security or other financial instrument or to participate in any trading strategy.
76
Asset Allocation at US Endowments
Source: National Association of College and University Business Officers (NACUBO). Data as of September 2011.
Note: All data are dollar-weighted otherwise specified. Alternative Strategies are categorized in the NCSE as follows: Private equity (LBOs, mezzanine, M&A funds, and international private equity); Marketable alternative strategies (hedge funds, absolute return, market neutral, long/short, 130/30, and event-driven and derivatives); Venture capital; Private equity real estate (non-campus); Energy and natural resources (oil, gas, timber, commodities and managed futures); and Distressed debt. All data are dollar-weighted otherwise specified
Size of Fund Domestic Equities %
Fixed Income %
International Equities %
Alternative Strategies* %
Short-term Securities / Cash /
Other %
Over $1 Billion 14 10 12 61 3$501 Million - $1 Billlion 20 14 17 43 6
$101 Million - $500 Million 26 17 17 33 7
$51 Million - $100 Million 34 21 17 22 6
$25 Million to $50 Million 37 23 15 18 7
Under $25 Million 38 27 13 13 9
All Public 22 16 16 41 5
Public Institutions Only 20 14 16 46 4
Insitution-Related Foundations 25 18 16 35 6
Combined Endowment/Foundation 26 16 18 36 4
Private 16 11 13 55 5
Dollar-weighted Average 18 13 14 51 4Equal-weighted average 31 21 15 25 8
GIC Chart Book| October 2011
Please refer to important information, disclosures and qualifications at the end of this material.
Past performance is no guarantee of future results. Estimates of future performance are based on assumptions that may not be realized. This material is not a solicitation of any offer to buy or sell any security or other financial instrument or to participate in any trading strategy.
77
US Stocks vs. 50-50 Blended Stock-Bond Portfolios During Bear Markets and Recoveries
Note: Monthly data was used through February 2009. S&P 500 recently trough on March 9, 2009.Source Standard & Poor's, Ibbotson Associates, Morgan Stanley Smith Barney LLC. Data as of September 2011.
Peak to Trough S&P 500
Decline (%)
Blend IntGov Decline
(%)
Blend Long Gov
Decline (%)
Blend Corp
Decline (%)
S&P vs Blends' Performance fromS&P 500
Index Peak to RecoveryPeak Trough Recovery Int Gov Long Gov CorpAug-29 Jun-32 Jan-45 -83.4% -53.8% -53.4% -54.7% 63.9% 72.4% 87.2%Aug-00 Sep-02 Oct-06 -44.7% -14.8% -14.2% -12.7% 21.5% 29.2% 34.5%Dec-72 Sep-74 Jun-76 -42.6% -21.8% -26.0% -27.7% 13.8% 10.6% 10.6%Oct-07 Feb-09 Na -50.9% -23.7% -18.8% -30.4% Na Na NaAug-87 Nov-87 May-89 -29.5% -14.2% -13.9% -14.3% 10.8% 14.3% 14.7%Nov-68 Jun-70 Mar-71 -29.2% -14.4% -18.9% -19.7% 10.6% 6.4% 5.8%Dec-61 Jun-62 Apr-63 -22.3% -10.5% -9.9% -9.8% 4.5% 5.0% 5.8%May-46 Nov-46 Oct-49 -21.8% -11.2% -11.7% -11.9% 4.6% 5.3% 4.9%Nov-80 Jul-82 Oct-82 -16.9% 1.4% -0.5% -2.6% 22.0% 23.7% 22.1%Jan-66 Sep-66 Mar-67 -15.6% -7.4% -8.1% -10.1% 4.6% 3.8% 2.5%Mean -35.7% -17.0% -17.5% -19.4% 17.4% 19.0% 20.9%
Median -29.4% -14.3% -14.0% -13.5% 10.8% 10.6% 10.6%
GIC Chart Book| October 2011
Please refer to important information, disclosures and qualifications at the end of this material.
Past performance is no guarantee of future results. Estimates of future performance are based on assumptions that may not be realized. This material is not a solicitation of any offer to buy or sell any security or other financial instrument or to participate in any trading strategy.
78
US Asset Class Nominal and Real Performance: 1926 – Present
Source: Standard & Poors, Ibbotson, Morgan Stanley Smith Barney LLC. Data as of September 2011
Note: *Annualized Returns
Ibbotson IbbotsonS&P 500 Index Intermediate Govt Long Corporate
Nominal Real Nominal Real Nominal Real
Average Return (%) 9.7% 6.5% 5.3% 2.2% 6.0% 2.9%
1 Month* Standard Deviation 19.1% 19.2% 4.5% 4.9% 7.4% 7.7%
Percent > 0 61.6% 59.1% 70.7% 56.5% 66.6% 57.1%
1 Year Standard Deviation 21.9% 22.1% 5.6% 6.7% 8.7% 9.8%
Percent > 0 73.6% 68.4% 90.7% 65.1% 81.0% 66.3%
5 Year* Standard Deviation 8.8% 8.4% 3.4% 4.0% 4.4% 5.4%
Percent > 0 86.9% 75.6% 100.0% 71.3% 96.1% 61.1%
10 Year* Standard Deviation 5.7% 5.6% 3.1% 3.2% 3.7% 4.2%
Percent > 0 94.2% 84.6% 100.0% 72.1% 100.0% 62.1%
20 Year* Standard Deviation 3.4% 3.6% 2.9% 2.3% 3.3% 3.0%
Percent > 0 100.0% 100.0% 100.0% 73.9% 100.0% 60.8%
GIC Chart Book| October 2011
Please refer to important information, disclosures and qualifications at the end of this material.
Past performance is no guarantee of future results. Estimates of future performance are based on assumptions that may not be realized. This material is not a solicitation of any offer to buy or sell any security or other financial instrument or to participate in any trading strategy.
79
US Stock and Bond 50/50 Blended Nominal and Real Performance: 1926 - Present
Source: Standard & Poors, Ibbotson, Morgan Stanley Smith Barney LLC. Data as of September 2011
Note: *Annualized Returns
S&P 500 Index / Ibbotson Intermediate Gov't
S&P 500 Index / Ibbotson Long Corporate
Nominal Real Nominal Real
Average Return (%) 8.0% 4.8% 8.3% 5.2%
1 Month* Standard Deviation 10.0% 10.2% 10.9% 11.1%
Percent > 0 64.2% 58.7% 62.9% 58.4%
1 Year Standard Deviation 11.3% 11.8% 12.6% 13.2%
Percent > 0 80.6% 69.0% 78.3% 67.6%
5 Year* Standard Deviation 4.7% 4.7% 5.0% 5.3%
Percent > 0 95.1% 82.3% 95.1% 81.9%
10 Year* Standard Deviation 3.2% 3.5% 3.5% 3.9%
Percent > 0 100.0% 86.9% 100.0% 86.6%
20 Year* Standard Deviation 2.3% 2.1% 2.5% 2.6%
Percent > 0 100.0% 100.0% 100.0% 97.3%
GIC Chart Book| October 2011
Please refer to important information, disclosures and qualifications at the end of this material.
Past performance is no guarantee of future results. Estimates of future performance are based on assumptions that may not be realized. This material is not a solicitation of any offer to buy or sell any security or other financial instrument or to participate in any trading strategy.
80
Asset Class Nominal and Real Performance: September 1956 – Present
*Annualized returnNote: CRB Continuous Commodity Index, adjusted to Total ReturnSource: Standard & Poor's, Ibbotson Associates, Commodity Research Bureau, Morgan Stanley Smith Barney LLC. Data as of September 2011.
Ibbotson Ibbotson
S&P 500 Index Intermediate Govt Long Corporate Commodities**Nominal Real Nominal Real Nominal Real Nominal Real
Average Return (%) 9.3% 5.2% 6.7% 2.6% 7.2% 3.1% 11.1% 6.9%1 Month* Standard Deviation 14.8% 14.9% 5.3% 5.4% 8.9% 9.1% 12.9% 12.8%
Percent > 0 62.0% 58.4% 69.0% 56.3% 61.7% 56.1% 58.9% 54.8%1 Year Standard Deviation 17.0% 17.0% 6.3% 6.7% 10.0% 10.7% 29.3% 28.0%
Percent > 0 75.2% 68.5% 90.2% 67.2% 77.8% 63.5% 74.8% 61.3%5 Year* Standard Deviation 7.3% 7.6% 3.3% 3.5% 4.8% 5.3% 6.9% 5.9%
Percent > 0 90.5% 72.3% 100.0% 82.6% 95.3% 68.6% 99.5% 85.9%
10 Year* Standard Deviation 5.4% 5.6% 2.6% 2.6% 3.7% 4.1% 4.8% 3.7%
Percent > 0 95.6% 77.3% 100.0% 84.3% 100.0% 67.0%100.0% 98.3%
20 Year* Standard Deviation 3.2% 3.5% 1.7% 2.0% 2.7% 3.2% 2.5% 1.8%Percent > 0 100.0% 100.0% 100.0% 93.1% 100.0% 77.7% 100.0% 100.0%
GIC Chart Book| October 2011
Please refer to important information, disclosures and qualifications at the end of this material.
Past performance is no guarantee of future results. Estimates of future performance are based on assumptions that may not be realized. This material is not a solicitation of any offer to buy or sell any security or other financial instrument or to participate in any trading strategy.
(19.9) (13.1) (12.0) (14.3)
8.9 7.8 6.9 5.9
(60.7) (53.9) (47.1) (40.3) (33.5)(26.7)
11.3 10.7 10.1 9.4 8.8 8.2 5.76.36.97.5
48.146.455.0
146.6 131.4116.1
100.885.6
70.349.7
5.1 4.311.8 11.0 10.6 9.8
(80)
(40)
0
40
80
120
160Worst One-Year Return
Average of One-Year Returns
Best One-Year Return
Median One-Year Return
Portfolio Mix
90%0%
10%
StocksBondsCash
80%10%10%
StocksBondsCash
70%20%10%
StocksBondsCash
60%30%10%
StocksBondsCash
50%40%10%
StocksBondsCash
40%50%10%
StocksBondsCash
30%60%10%
StocksBondsCash
20%70%10%
StocksBondsCash
10%80%10%
StocksBondsCash
0%90%10%
StocksBondsCash
Year Ending September 2011
Worst One-Year Return
Average of One-Year Losses
Average of One-Year Returns
Median One-Year Return
Average of One-Year Gains
Best One-Year Return
% One-Year Negative Returns
% One-Year Positive Returns
1.0 %
(60.7)
(12.8)
11.3
(53.9)
(11.2)
10.7
74.0
11.8
19.8
146.6
26.0 24.2
74.9
3.7 %
(47.1)
(9.6)
11.0
18.0
131.4
25.1
2.3 %
10.1
10.6
16.3
116.1
5.0 %
(40.3)
(7.9)
9.4
9.8
14.8
100.8
23.6
76.4
6.3 %
(33.5)
(6.4)
8.8
8.9
13.2
85.6
22.4
77.6
7.6 %
75.8
(26.7)
(5.2)
8.2
7.8
11.6
70.3
20.2
79.8
9.0 %
(19.9)
(4.2)
7.5
6.9
10.0
55.0
17.4
82.6
10.3 %
(13.1)
(3.5)
6.9
5.9
8.8
46.4
15.6
84.4
11.6 %
(12.0)
(3.1)
6.3
5.1
8.1
48.1
16.5
83.5
12.9 %
(14.3)
(3.3)
5.7
4.3
7.9
49.7
20.2
79.8
81
U.S. Domestic Risk and Reward AnalysisRolling One-Year Returns(1)(2)(3)
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, Ibbotson Associates
January 1926–September 2011Returns Expressed in Percentage Terms
GIC Chart Book| October 2011
Please refer to important information, disclosures and qualifications at the end of this material.
Past performance is no guarantee of future results. Estimates of future performance are based on assumptions that may not be realized. This material is not a solicitation of any offer to buy or sell any security or other financial instrument or to participate in any trading strategy.
(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 4.47.27.68.08.18.99.4
22.122.723.926.429.5
32.5
9.39.9
(20)
(10)
0
10
20
30
40Worst Five-Year Return
Average Five-Year Return
Best Five-Year Return
M edian Five-Year Return
Portfolio Mix
90%0%
10%
StocksBondsCash
80%10%10%
StocksBondsCash
70%20%10%
StocksBondsCash
60%30%10%
StocksBondsCash
50%40%10%
StocksBondsCash
40%50%10%
StocksBondsCash
30%60%10%
StocksBondsCash
20%70%10%
StocksBondsCash
10%80%10%
StocksBondsCash
0%90%10%
StocksBondsCash
Year Ending September 2011
Worst Five-Year Return
Average of Five-Year Losses
Average of Five-Year Returns
Median Five-Year Return
Average of Five-Year Gains
Best Five-Year Return
% Five-Year Negative Returns
% Five-Year Positive Returns
(0.9)% 0.3 % 1.3 % 2.6 % 3.8 % 5.0 % 6.2 % 7.3 % 8.5 % 9.7 %
(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 8.9 8.1 8.0 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
11.4 10.5 9.4 9.0 8.3 7.7 7.1 6.4 5.9 5.6
32.5
12.4
26.4
9.0
22.7
6.1
22.0
4.2
87.6
29.5
10.4
89.6 91.0
23.9
7.3
92.7 93.9
22.1
6.0
94.0 95.8
22.4
1.3
98.7
22.7
1.5
98.5
23.1
3.9
96.1
82
U.S. Domestic Risk and Reward AnalysisCompound Annual Growth Rate of Rolling Five-Year Returns(1)(2)(3)
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 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, Ibbotson Associates
January 1926–September 2011Returns Expressed in Percentage Terms
GIC Chart Book| October 2011
Please refer to important information, disclosures and qualifications at the end of this material.
Past performance is no guarantee of future results. Estimates of future performance are based on assumptions that may not be realized. This material is not a solicitation of any offer to buy or sell any security or other financial instrument or to participate in any trading strategy.
1.5 1.6 1.4 0.16.9 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 9.4 8.9 8.4 7.9 7.4
19.5 17.6 17.1 16.7 16.2 15.9
4.24.85.76.87.68.38.94.2
9.410.0
(10)
0
10
20Worst Ten-Year Return
Average Ten-Year Return
Best Ten-Year Return
Portfolio Mix
90%0%
10%
StocksBondsCash
80%10%10%
StocksBondsCash
70%20%10%
StocksBondsCash
60%30%10%
StocksBondsCash
50%40%10%
StocksBondsCash
40%50%10%
StocksBondsCash
30%60%10%
StocksBondsCash
20%70%10%
StocksBondsCash
10%80%10%
StocksBondsCash
0%90%10%
StocksBondsCash
Year Ending September 2011
Worst Ten-Year Return
Average of Ten-Year Losses
Average of Ten-Year Returns
Median Ten-Year Return
Average of Ten-Year Gains
Best Ten-Year Return
% Ten-Year Negative Returns
% Ten-Year Positive Returns
2.7 %
(4.4)
(1.4)
9.9
10.0
10.5
19.5
5.2
94.8
3.3 %
(3.4)
(1.2)
9.4
9.4
9.8
17.6
3.4
96.6
3.9 %
(2.3)
(0.7)
8.9
8.9
9.1
17.1
2.3
97.7
4.5 %
(1.3)
(0.6)
8.4
8.3
8.5
16.7
0.9
99.1
5.0 %
(0.3)
(0.3)
7.9
7.5
7.9
16.2
0.2
99.8
5.6 %
0.6
N/A
7.4
6.8
7.4
15.9
0.0
100.0
6.2 %
1.5
N/A
6.9
5.7
6.9
15.8
0.0
100.0
6.8 %
1.6
N/A
6.4
4.8
6.4
15.7
0.0
100.0
7.3 %
1.4
N/A
5.9
4.2
5.9
15.6
0.0
100.0
7.9 %
0.1
N/A
5.4
4.2
5.4
15.5
0.0
100.0
83
U.S. Domestic Risk and Reward AnalysisCompound Annual Growth Rate of Rolling Ten-Year Returns(1)(2)(3)
N/A = Not Applicable. For these rolling ten-year time periods during January 1926 – September 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 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, Ibbotson Associates
January 1926–September 2011Returns Expressed in Percentage Terms
GIC Chart Book| October 2011
Please refer to important information, disclosures and qualifications at the end of this material.
Past performance is no guarantee of future results. Estimates of future performance are based on assumptions that may not be realized. This material is not a solicitation of any offer to buy or sell any security or other financial instrument or to participate in any trading strategy.
84
S&P 500 Index and Distribution of S&P 500 Index Rolling 3 Year Returns
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 September 2011.
Best and Worst Returns Generated by Different Holding PeriodsS&P 500 Index (January 1926 – September 2011)
Rolling 1-Year, 5-Year, 10-Year, 20-Year Compounded Annual Growth Rates (%)
Distribution of S&P 500 Index Rolling 3 Year ReturnsS&P 500 Index 3-Year Compound Annual Growth Rate Distribution January 1926 – September 2011
Number of Observation
4 5 8 2 5 2558 69
96
173206
152
87 6727 10
050
100150200250
<-35%-35 to -30%
-30 to -25%
-25 to -20%
-20 to -15%
-15 to -10%
-10 to -5%
-5 to 0%0 to 5%
5 to 10%10 to 15%
15 to 20%
20 to 25%
25 to 30%
30 to 35%
>35%
(Apr 80-Mar 00)18.25%
(Jun 47-May 57)21.43%
(Jun 32-May 37)36.12%
(Jul 32-Jun 33)162.89%
(Sep 29-Aug 49)1.89%
(Sep 29-Aug 39)-4.95%
(Sep 29-Aug 34)-17.36%
(Jul 31-Jun 32)-67.56%
-1.0
-0.5
0.0
0.5
1.0
1.5
2.0
1 Year 5 Year 10 Year 20 Year
Best Return Worst Return
GIC Chart Book| October 2011
Please refer to important information, disclosures and qualifications at the end of this material.
Past performance is no guarantee of future results. Estimates of future performance are based on assumptions that may not be realized. This material is not a solicitation of any offer to buy or sell any security or other financial instrument or to participate in any trading strategy.
(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)
8.6 8.6 8.6 8.6 8.6 8.6
51.946.6
41.135.4
29.9 26.9
8.68.89.19.510.311.0 8.78.112.5 11.6
(60)
(40)
(20)
0
20
40
60Worst One-Year Return
Average One-Year Return
Best One-Year Return
M edian One-Year Returns
Portfolio Mix
50%40%0%0%
10%
U.S. StocksNon-U.S. StocksU.S. BondsNon-U.S. BondsCash
45%35%8%2%
10%
U.S. StocksNon-U.S. StocksU.S. BondsNon-U.S. BondsCash
40%30%17%3%
10%
U.S. StocksNon-U.S. StocksU.S. BondsNon-U.S. BondsCash
35%25%27%3%
10%
U.S. StocksNon-U.S. StocksU.S. BondsNon-U.S. BondsCash
30%20%36%4%
10%
U.S. StocksNon-U.S. StocksU.S. BondsNon-U.S. BondsCash
25%15%45%5%
10%
U.S. StocksNon-U.S. StocksU.S. BondsNon-U.S. BondsCash
20%10%54%6%
10%
U.S. StocksNon-U.S. StocksU.S. BondsNon-U.S. BondsCash
15%5%
63%7%
10%
U.S. StocksNon-U.S. StocksU.S. BondsNon-U.S. BondsCash
6%4%
72%8%
10%
U.S. StocksNon-U.S. StocksU.S. BondsNon-U.S. BondsCash
0%0%
80%10%10%
U.S. StocksNon-U.S. StocksU.S. BondsNon-U.S. BondsCash
Year Ending September 2011
Worst One-Year Return
Average of One-Year Losses
Average of One-Year Returns
Median One-Year Return
Average of One-Year Gains
Best One-Year Return
% One-Year Negative Returns
% One-Year Positive Returns
2.9 %
(42.1)
(14.8)
8.5
12.1
15.5
51.9
23.3
76.7
2.8 %
(36.8)
(13.5)
8.5
11.5
14.3
46.6
20.9
79.1
2.7 %
(31.3)
(11.5)
8.5
10.9
13.3
41.1
19.3
80.7
2.6 %
(25.7)
(8.8)
8.5
10.2
12.5
35.4
18.5
81.5
2.5 %
(20.2)
(6.1)
8.5
9.4
11.7
29.9
17.7
82.3
2.5 %
(14.7)
(4.0)
8.6
9.0
10.8
26.9
15.3
84.7
2.4 %
(9.2)
(3.2)
8.6
8.8
9.8
27.6
9.6
90.4
2.3 %
(5.5)
(2.3)
8.6
8.6
9.6
28.2
8.4
91.6
1.7 %
(7.0)
(3.1)
8.5
8.2
9.6
27.8
8.4
91.6
1.5 %
(10.9)
(4.7)
8.5
8.7
10.0
28.0
10.0
90.0
85
Global Risk and Reward AnalysisRolling One-Year Returns(1)(2)(3)
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, Ibbotson Associates
January 1990 – September 2011Returns Expressed in Percentage Terms
GIC Chart Book| October 2011
Please refer to important information, disclosures and qualifications at the end of this material.
Past performance is no guarantee of future results. Estimates of future performance are based on assumptions that may not be realized. This material is not a solicitation of any offer to buy or sell any security or other financial instrument or to participate in any trading strategy.
2.7 3.8 4.7 4.0
7.9 7.9 7.8 7.7
12.9 12.7 12.3 12.2
(4.0) (2.8) (1.7) (0.6)
0.5 1.6
7.8 7.8 7.87.8 7.9 7.9
20.0 18.8 17.6 16.5 15.3 14.1
8.6 8.3 7.87.57.27.57.89.08.88.5
(10)
(5)
0
5
10
15
20
25
Worst Five-Year Rtn
Average Five-Year Rtn
Best Five-Year Rtn
M edian Five-Year Rtn
Portfolio Mix
50%40%0%0%
10%
U.S. StocksNon-U.S. StocksU.S. BondsNon-U.S. BondsCash
45%35%8%2%
10%
U.S. StocksNon-U.S. StocksU.S. BondsNon-U.S. BondsCash
40%30%17%3%
10%
U.S. StocksNon-U.S. StocksU.S. BondsNon-U.S. BondsCash
35%25%27%3%
10%
U.S. StocksNon-U.S. StocksU.S. BondsNon-U.S. BondsCash
30%20%36%4%
10%
U.S. StocksNon-U.S. StocksU.S. BondsNon-U.S. BondsCash
25%15%45%5%
10%
U.S. StocksNon-U.S. StocksU.S. BondsNon-U.S. BondsCash
20%10%54%6%
10%
U.S. StocksNon-U.S. StocksU.S. BondsNon-U.S. BondsCash
15%5%
63%7%
10%
U.S. StocksNon-U.S. StocksU.S. BondsNon-U.S. BondsCash
6%4%
72%8%
10%
U.S. StocksNon-U.S. StocksU.S. BondsNon-U.S. BondsCash
0%0%
80%10%10%
U.S. StocksNon-U.S. StocksU.S. BondsNon-U.S. BondsCash
Year Ending September 2011
Worst Five-Year Return
Average of Five-Year Losses
Average of Five-Year Returns
Median Five-Year Return
Average of Five-Year Gains
Best Five-Year Return
% Five-Year Negative Returns
% Five-Year Positive Returns
(1.1)%
(4.0)
(1.2)
7.7
8.3
9.5
20.0
16.4
83.6
(0.2)% 0.8 % 1.8 %
(1.7)
(0.9)
7.7
8.9
7.9
17.6
2.7 % 3.7 % 4.7 % 5.6 % 6.6 % 7.5 %
4.0
N/A
4.7
N/A
7.8
7.8
7.8
12.2
0.0
100.0
(2.8)
(1.0)
7.7
8.5
8.4
18.8
7.5
92.5
7.8
16.5
0.5
99.5
(0.6)
(0.6)
7.8
8.6
0.5
N/A
7.8
8.2
7.8
15.3
0.0
100.0
1.6
N/A
7.8
7.8
7.8
14.1
0.0
100.0
2.7
N/A
7.8
7.4
7.8
12.9
0.0
100.0
3.8
N/A
7.8
7.2
7.8
12.7
0.0
100.0
7.8
7.5
7.8
12.3
0.0
100.0
2.5
97.5
86
Global Risk and Reward AnalysisCompound Annual Growth Rate of Rolling Five-Year Returns(1)(2)(3)
N/A = Not Applicable. For these rolling five-year time periods during January 1990 - September 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.
Source: Morgan Stanley Smith Barney LLC, Ibbotson Associates
January 1990–September 2011Returns Expressed in Percentage Terms
GIC Chart Book| October 2011
Please refer to important information, disclosures and qualifications at the end of this material.
Past performance is no guarantee of future results. Estimates of future performance are based on assumptions that may not be realized. This material is not a solicitation of any offer to buy or sell any security or other financial instrument or to participate in any trading strategy.
3.9 4.6 5.1 5.57.4 7.6 7.6 7.7
11.4 11.010.2 9.7
7.7 7.6 7.6 7.6 7.6 7.5 7.5 7.5 7.4 7.4
(1.3) (0.4)
0.41.3
2.2 3.1
6.5 6.7 6.87.0 7.1 7.3
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
M edian Ten-Year Rtn
Portfolio Mix
50%40%0%0%
10%
U.S. StocksNon-U.S. StocksU.S. BondsNon-U.S. BondsCash
45%35%
8%2%
10%
U.S. StocksNon-U.S. StocksU.S. BondsNon-U.S. BondsCash
40%30%17%3%
10%
U.S. StocksNon-U.S. StocksU.S. BondsNon-U.S. BondsCash
35%25%27%
3%10%
U.S. StocksNon-U.S. StocksU.S. BondsNon-U.S. BondsCash
30%20%36%4%
10%
U.S. StocksNon-U.S. StocksU.S. BondsNon-U.S. BondsCash
25%15%45%
5%10%
U.S. StocksNon-U.S. StocksU.S. BondsNon-U.S. BondsCash
20%10%54%
6%10%
U.S. StocksNon-U.S. StocksU.S. BondsNon-U.S. BondsCash
15%5%
63%7%
10%
U.S. StocksNon-U.S. StocksU.S. BondsNon-U.S. BondsCash
6%4%
72%8%
10%
U.S. StocksNon-U.S. StocksU.S. BondsNon-U.S. BondsCash
0%0%
80%10%10%
U.S. StocksNon-U.S. StocksU.S. BondsNon-U.S. BondsCash
Year Ending September 2011
Worst Ten-Year Return
Average of Ten-Year Losses
Average of Ten-Year Returns
Median Ten-Year Return
Average of Ten-Year Gains
Best Ten-Year Return
% Ten-Year Negative Returns
% Ten-Year Positive Returns
2.4 %
(1.3)
4.3 %
2.2
6.4 %
5.1
(0.8)
6.5
7.7
6.8
14.1
2.8
97.2
2.8 %
(0.4)
(0.3)
6.7
7.6
6.8
13.6
1.4
98.6
3.3 %
0.4
N/A
6.8
7.6
6.8
13.2
0.0
100.0
3.8 %
1.3
N/A
7.0
7.6
7.0
12.7
0.0
100.0
N/A
7.1
7.6
7.1
12.3
0.0
100.0
4.8 %
3.1
N/A
7.3
7.5
7.3
11.8
0.0
100.0
5.3 %
3.9
N/A
7.4
7.5
7.4
11.4
0.0
100.0
5.7 %
4.6
N/A
7.6
7.5
7.6
11.0
0.0
100.0
7.4
7.7
9.7
N/A
7.6
7.4
7.6
6.9 %
5.5
N/A
7.7
0.0
100.0
10.2
0.0
100.0
87
Global Risk and Reward AnalysisCompound Annual Growth Rate of Rolling Ten-Year Returns(1)(2)(3)
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.
Source: Morgan Stanley Smith Barney LLC, Ibbotson Associates
January 1990–September 2011Returns Expressed in Percentage Terms
GIC Chart Book| October 2011
Please refer to important information, disclosures and qualifications at the end of this material.
Past performance is no guarantee of future results. Estimates of future performance are based on assumptions that may not be realized. This material is not a solicitation of any offer to buy or sell any security or other financial instrument or to participate in any trading strategy.
88
US Stocks: Longer Holding Periods Increase the Probability of Positive 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 & Poor’s, Morgan Stanley Smith Barney LLC, Ibbotson Associates. Data as of June 2011.
GIC Chart Book| October 2011
Please refer to important information, disclosures and qualifications at the end of this material.
Past performance is no guarantee of future results. Estimates of future performance are based on assumptions that may not be realized. This material is not a solicitation of any offer to buy or sell any security or other financial instrument or to participate in any trading strategy.
89
S&P 500 Index Annual Total Return by Year
Source: Ibbotson Associates, Morgan Stanley Smith Barney LLC. Data as of September 2011.
Total Return %-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 60
1931 1937
2008
1930
1974
2002
1941
1957
1966
1973
2001
1929
1932
1934
1939
1940
1946
1953
1962
1969
1977
1981
1990
2000
1947
1948
1956
1960
1970
1978
1984
1987
1992
1993
1994
2005
2007
1926
1944
1949
1952
1959
1964
1965
1968
1971
1972
1979
1986
1988
2004
2006
1942
1943
1951
1961
1963
1967
1976
1982
1983
1996
1998
1999
2003
1927
1936
1938
1945
1950
1955
1975
1980
1985
1989
1991
1995
1997
1928
1935
1958
1933
1954
0
2
4
6
8
10
12
14
16
Great Depression
"Mid-30S" Recession
Tightening of bank reserve requirements
Smoot-Hawley Tariff
"Nifty-Fifty"Bear Market
OPEC Oil Embargo
Enron Bankruptcyand TerroristAttacks on U.S. Soil
Iraq Invades Kuwait
Initial rally after the
2000-2002 Bear Market
End of the1980-1991
recession
End of theVietnam
War
End of WW II
Bear Market
Rally
2009
2010
18
GIC Chart Book| October 2011
Please refer to important information, disclosures and qualifications at the end of this material.
Past performance is no guarantee of future results. Estimates of future performance are based on assumptions that may not be realized. This material is not a solicitation of any offer to buy or sell any security or other financial instrument or to participate in any trading strategy.
90
Frequency of Beating Inflation by 0%, 3%, and 5%: 1926 - Present
S&P 500Index
IntermedGovt
BondsLg CorpBonds
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 90/10Average 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 June 2011.
GIC Chart Book| October 2011
Please refer to important information, disclosures and qualifications at the end of this material.
Past performance is no guarantee of future results. Estimates of future performance are based on assumptions that may not be realized. This material is not a solicitation of any offer to buy or sell any security or other financial instrument or to participate in any trading strategy.
91
Asset Class Correlation Matrix (1990 – 2010)
Source: CIRA, Morgan Stanley Smith Barney LLC. Bloomberg, Barclays, Hedge Fund Research, Inc. Data as of 2Q11.
Cas
h
US
D In
vest
men
t-G
rade
Bon
ds
UD
S H
igh-
Yie
ld
Bon
ds
Non
-US
Bon
ds
(ccy
-hed
ged
to
US
D)
US
D L
arge
-cap
S
tock
s
Dev
elop
ed n
on-
US
Sto
cks
Em
ergi
ng M
arke
t S
tock
s
Man
aged
Fut
ures
Hed
ge F
unds
Com
mod
ites
(DJU
BS
Inde
x)
Com
mod
ities
(G
SC
I Ind
ex)
Cash 1.00 0.08 -0.07 0.13 0.06 -0.06 -0.09 0.05 0.15 0.02 0.06USD Investment-Grade Bonds 0.08 1.00 0.24 0.67 0.15 0.11 0.01 0.22 0.09 0.04 0.00
UDS High-Yield Bonds -0.07 0.24 1.00 0.05 0.60 0.54 0.59 -0.14 0.46 0.29 0.14Non-US Bonds (ccy-hedged to USD) 0.13 0.67 0.05 1.00 0.07 0.04 -0.04 0.19 0.03 -0.11 -0.17
USD Large-cap Stocks 0.06 0.15 0.60 0.07 1.00 0.73 0.69 -0.13 0.49 0.29 0.14Developed non-US Stocks -0.06 0.11 0.54 0.04 0.73 1.00 0.73 -0.05 0.52 0.44 0.24
Emerging Market Stocks -0.09 0.01 0.59 -0.04 0.69 0.73 1.00 -0.08 0.65 0.39 0.22Managed Futures 0.05 0.22 -0.14 0.19 -0.13 -0.05 -0.08 1.00 0.21 0.16 0.14
Hedge Funds 0.15 0.09 0.46 0.03 0.49 0.52 0.65 0.21 1.00 0.38 0.31Commodites (DJUBS Index) 0.02 0.04 0.29 -0.11 0.29 0.44 0.39 0.16 0.38 1.00 0.90
Commodities (GSCI Index) 0.06 0.00 0.14 -0.17 0.14 0.24 0.22 0.14 0.31 0.90 1.00
GIC Chart Book| October 2011
Please refer to important information, disclosures and qualifications at the end of this material.
Past performance is no guarantee of future results. Estimates of future performance are based on assumptions that may not be realized. This material is not a solicitation of any offer to buy or sell any security or other financial instrument or to participate in any trading strategy.
92
0%
10%
20%
30%
40%
50%
60%
70%
80%
1952 1955 1958 1961 1964 1967 1970 1973 1976 1979 1982 1985 1988 1991 1994 1997 2000 2003 2006 2009
Equities
Bonds
Global Pension Asset Allocation
Note: Mutual fund weightings in-line with equity/bond allocation across the rest of the fund was pro-rated
US Private Sector Pension Asset Weights (%)
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
1963 1965 1967 1969 1971 1973 1975 1977 1979 1981 1983 1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009
Equities
Bonds
UK Pension Asset Weights (%)
Source: Towers Watson: 2010 Global Pension Asset Study, Morgan Stanley Smith Barney LLC. Data as of June 2011.
GIC Chart Book| October 2011
Please refer to important information, disclosures and qualifications at the end of this material.
Past performance is no guarantee of future results. Estimates of future performance are based on assumptions that may not be realized. This material is not a solicitation of any offer to buy or sell any security or other financial instrument or to participate in any trading strategy.
93
2010 Pension Fund Asset Weights (%)
Pension Fund Equity Weights (%)
Source: Towers Watson: 2010 Global Pension Asset Study. Data as of June 2011.
Global Pension Asset Allocation
0%10%20%30%40%50%60%70%80%
UK US Australia Canada World/Global Japan Netherlands Switzerland
Equity Bonds Alternative
0%20%40%60%80%
100%120%140%160%
UK US Australia Canada Japan Netherlands Switzerland Total
2000 2010
GIC Chart Book| October 2011
Please refer to important information, disclosures and qualifications at the end of this material.
Past performance is no guarantee of future results. Estimates of future performance are based on assumptions that may not be realized. This material is not a solicitation of any offer to buy or sell any security or other financial instrument or to participate in any trading strategy.
94
Note: 20 years ended 12/31/2008Source: Russell Investments, FactSet, Morgan Stanley Smith Barney LLC. Data as of March 2011.
Actual Versus Theoretical Risk and ReturnsActual Relationship
Russell 1000Russell 1000 Value
Russell Midcap Value
Russell 2000 Value Russell Midcap
Russell 1000 Growth
Russell 2000
Russell Midcap Growth
Russell 2000 Growth
5%
6%
7%
8%
9%
10%
11%
12%
12% 14% 16% 18% 20% 22% 24% 26%
Risk
Ret
urn
Theoretical Relationship
Russell 2000 Growth
Russell Midcap Growth
Russell 2000
Russell 1000 Growth
Russell Midcap
Russell 2000 Value
Russell Midcap Value
Russell 1000 Value
Russell 1000
9.0%
9.2%
9.4%
9.6%
9.8%
10.0%
10.2%
10.4%
12.0% 14.0% 16.0% 18.0% 20.0% 22.0% 24.0% 26.0%
Risk
Ret
urn
GIC Chart Book| October 2011
Please refer to important information, disclosures and qualifications at the end of this material.
Past performance is no guarantee of future results. Estimates of future performance are based on assumptions that may not be realized. This material is not a solicitation of any offer to buy or sell any security or other financial instrument or to participate in any trading strategy.
95
Glossary of Indices
90-Day T-Bill
Short-term obligations issued by the United States government. T-Bills are purchased at a discount to the full face value, and the investor receives the full value when they mature. The difference or "discount" is the interest earned. T-Bills are issued in denominations of $10,000 (auction) and $1,000 increments thereafter.
AMEX
Covers approximately 850 American stock exchange companies and represents less than 5% of the market value of all U.S. stocks. The AMEX is a value-weighted index calculated on price change only and does not include income.
Baltic Exchange Dry Index
The Baltic Exchange Dry Index is a daily index made up of 26 key dry bulk routes. This index is calculated by Baltic Exchange Information Services, Ltd.
Barclays Capital Municipal Index
The composite measure of the total return performance of the municipal bond market. The municipal market contains over 2 million different bond issues. The market is divided into 7 major sectors: state general obligation debt, prerefunded bonds, revenue debt..
Barclays Capital Long Municipal Index
The municipal bond index began in January 1980. The indices are broad market performance benchmarks for the long-term tax-exempt bond market. The Municipal Indices are rules-based and market-value weighted. The Municipal Index has four main sectors: state and local general obligation bonds, revenue bonds, insured bonds (including all insured bonds with a Aaa/AAA rating) and prerefunded bonds. Comprised of all bonds covered in the Municipal index with maturities of 10 years or longer.
Barclays Capital Government/Credit Index
Created in 1979, the U.S. Government/Credit Index is the oldest macro index published by Barclays Capital. It is the combination of the U.S. Treasury, U.S. Government-Related, and U.S. Corporates Indices and is equivalent to the union of the U.S. Government and U.S. Credit Indices.
Barclays Capital Long Government/Credit Index
Created in 1979, the U.S. Government/Credit Index is the oldest macro index published by Barclays Capital. It is the combination of the U.S. Treasury, U.S. Government-Related, and U.S. Corporates Indices and is equivalent to the union of the U.S. Government and U.S. Credit Indices. Comprised of all bonds covered in the Government/Credit index with maturities of 10 years or longer.
Barclays Capital U.S Corporate High Yield Index
2% Issuer Cap Index: The Barclays Capital High Yield 2% Issuer Constrained Index is an unmanaged, market value-weighted index that tracks the performance of non-investment grade, fixed rate, publicly placed, dollar-denominated, and non-convertible debt registered with the SEC. The index limits the maximum exposure to any one issuer to 2%. Consumer Price IndexNote: Investors cannot invest directly in an index. The performance of unmanaged indices reflects no deductions for fees, expenses or taxes which would affect performance of actively managed assets.
GIC Chart Book| October 2011
Please refer to important information, disclosures and qualifications at the end of this material.
Past performance is no guarantee of future results. Estimates of future performance are based on assumptions that may not be realized. This material is not a solicitation of any offer to buy or sell any security or other financial instrument or to participate in any trading strategy.
96
Glossary of Indices
Note: Investors cannot invest directly in an index. The performance of unmanaged indices reflects no deductions for fees, expenses or taxes which would affect performance of actively managed assets.
CPIIn economics, a Consumer Price Index (CPI, also retail price index) is a statistical measure of a weighted average of prices of a specified set of goods and
services purchased by wage earners in urban areas. It is a price index which tracks the prices of a specified set of consumer goods and services, providing a measure of inflation. The CPI is a fixed quantity price index and a sort of cost-of-living index. The CPI can be used to track changes in prices of all goods and services purchased for consumption by urban households. User fees (such as water and sewer service) and sales and excise taxes paid by the consumer are also included. Income taxes and investment items (like stocks, bonds, life insurance, and homes) are not included.
Dow Jones AIG Commodity Total Return IndexThe Dow Jones - AIG Commodity Total Return Index is based on the Dow Jones AIG Commodity Index, which is composed of futures contracts on 19 physical commodities. The commodities in the index are traded on U.S. exchanges, with the exception of aluminum, nickel and zinc, which trade on the London Metal Exchange (LME). The Total Return Index reflects the return on fully collateralized positions in the underlying commodity future.
Dow Jones Industrial Average
The most widely used indicator of the overall condition of the stock market, a price-weighted average of 30 actively traded blue chip stocks, primarily industrials. The 30 stocks are chosen by the editors of the Wall Street Journal (which is published by Dow Jones & Company), a practice that dates back to the beginning of the century. The Dow was officially started by Charles Dow in 1896, at which time it consisted of only 11 stocks. The Dow is computed using a price-weighted indexing system, rather than the more common market cap-weighted indexing system. Simply put, the editors at WSJ add up the prices of all the stocks and then divide by the number of stocks in the index. (in actuality, the divisor is much higher today in order to account for stock splits that have occurred in the past.)
Dow Jones Wilshire 5000
Consists of nearly 5000 common equity securities, covering all stocks in the U.S. for which daily pricing is available. The value-weighted total return index is adjusted for cash dividends which are reinvested at the end of each month. The Wilshire 5000 total market index measures the performance of all U.S. headquartered equity securities with readily available price data. Over 7,000 capitalization-weighted security returns are used to adjust the index.
Dow Jones Wilshire Small Value
Measures small cap stocks that exhibit value characteristics. This is a float adjusted, market cap-weighted index including a selection of securities from the Dow Jones Wilshire U.S. Small-Cap index that meet the Dow Jones Wilshire criteria for value. The index is an excellent way to evaluate this sector of the market and to gauge the performance of managers focusing on this particular style. An equal weighting of this index, along with the Dow Jones Wilshire U.S. Small-Cap Growth index, results in approximately the same return as the Dow Jones Wilshire U.S. Small-Cap index.
Dow Jones Wilshire Large Growth
Measures large cap stocks that exhibit growth characteristics. This is a float adjusted, market cap weighted index including a selection of securities from the Dow Jones Wilshire U.S. Large-Cap index that meet the Dow Jones Wilshire criteria for growth. The index is an excellent way to evaluate this sector of the market and to gauge the performance of managers focusing on this particular style. An equal weighting of this index, along with the Dow Jones Wilshire U.S. Large-Cap Value Index, results in approximately the same return as the Dow Jones Wilshire U.S. Large-Cap Index.
GIC Chart Book| October 2011
Please refer to important information, disclosures and qualifications at the end of this material.
Past performance is no guarantee of future results. Estimates of future performance are based on assumptions that may not be realized. This material is not a solicitation of any offer to buy or sell any security or other financial instrument or to participate in any trading strategy.
97
Glossary of Indices
Note: Investors cannot invest directly in an index. The performance of unmanaged indices reflects no deductions for fees, expenses or taxes which would affect performance of actively managed assets.
Dow Jones Wilshire Large Value
Measures large cap stocks that exhibit value characteristics. This is a float adjusted, market cap-weighted index including a selection of securities from the Dow Jones Wilshire U.S. Large-Cap Index that meet the Dow Jones Wilshire criteria for value.
Dow Jones Wilshire Small Growth
Measures small cap stocks that exhibit growth characteristics. This is a float adjusted, market cap weighted index including a selection of securities from the Dow Jones Wilshire U.S. Small-Cap Index that meet the Dow Jones Wilshire criteria for growth. The index is an excellent way to evaluate this sector of the market and to gauge the performance of managers focusing on this particular style. An equal weighting of this index, along with the Dow Jones Wilshire U.S. Small-Cap Value Index, results in approximately the same return as the Dow Jones Wilshire U.S. Small-Cap Index
Hedge Fund Research Index – Equity Hedge Index (Hfri)
HFRI Equity Hedge Index represents performance of a universe of hedge funds that employ core holding strategies of long equities hedged at all times with short sales of stocks and/or stock index options. The hedge funds in this index commonly employ a variety of strategies and some employ leverage. Relatively conservative funds mitigate market risk by maintaining market exposure from zero to 100 percent. Relatively aggressive funds may magnify market risk by exceeding 100 percent exposure and, in some instances, maintain a short exposure. In addition to equities, some funds in this index may have limited assets invested in other types of securities
Ibbotson Long Government
The total returns from 1977-present are constructed with data from The Wall Street Journal. The data from 1926-1976 are obtained from the Government Bond File at the Center for Research in Security Prices (CRSP) at the University of Chicago Graduate School of Business. To the greatest extent possible, a one bond portfolio with a term of approximately 20 years and a reasonably current coupon-whose returns did not reflect potential tax benefits, impaired negotiability, or special redemption or call privileges-was used each year. Where "flower" bonds (tenderable to the Treasury at par in payment of estate taxes) had to be used, the term of the bond was assumed to be a simple average of the maturity and the first call dates minus the current date. The bond was "held" for the calendar year and returns were computed.
"Source: ©2011 Morningstar, Inc. All rights reserved. Used with permission. This information contained herein: (1) is proprietary to Morningstar and/or its content providers; (2) may not be copied or distributed; and (3) is not warranted to be accurate, complete or timely. Neither Morningstar nor its content providers are responsible for any damages or losses arising from any use of this information.“ "Source: Calculated by Morgan Stanley Smith Barney group Global Markets Inc. using data provided by Morningstar. ©2011 Morningstar, Inc. All rights reserved. Used with permission. This information contained herein: (1) is proprietary to Morningstar and/or its content providers; (2) may not be copied or distributed; and (3) is not warranted to be accurate, complete or timely. Neither Morningstar nor its content providers are responsible for any damages or losses arising from any use of this information."
GIC Chart Book| October 2011
Please refer to important information, disclosures and qualifications at the end of this material.
Past performance is no guarantee of future results. Estimates of future performance are based on assumptions that may not be realized. This material is not a solicitation of any offer to buy or sell any security or other financial instrument or to participate in any trading strategy.
98
Glossary of Indices
Note: Investors cannot invest directly in an index. The performance of unmanaged indices reflects no deductions for fees, expenses or taxes which would affect performance of actively managed assets.
Ibbotson Small Company
The Small Company Stock return series is the total return achieved by the Dimensional Fund Advisors (DFA) Small Company 9/10 (for ninth and tenth deciles) Fund. The Fund invests in a broadly diversified cross section of small companies. Portfolios are fully invested: Dimensional keeps cash levels below 5%, and generally under 2%. Portfolio turnover averages 20-25% annually.
"Source: ©2011 Morningstar, Inc. All rights reserved. Used with permission. This information contained herein: (1) is proprietary to Morningstar and/or its content providers; (2) may not be copied or distributed; and (3) is not warranted to be accurate, complete or timely. Neither Morningstar nor its content providers are responsible for any damages or losses arising from any use of this information.“ "Source: Calculated by Morgan Stanley Smith Barney group Global Markets Inc. using data provided by Morningstar. ©2011 Morningstar, Inc. All rights reserved. Used with permission. This information contained herein: (1) is proprietary to Morningstar and/or its content providers; (2) may not be copied or distributed; and (3) is not warranted to be accurate, complete or timely. Neither Morningstar nor its content providers are responsible for any damages or losses arising from any use of this information.“
Lipper Growth
Funds that invest at least 75% of their equity assets in companies with market capitalizations (on a three-year weighted basis) greater than 300% of the dollar-weighted median market capitalization of the middle 1,000 securities of the S&P Super Composite 1500 Index. Large-cap growth funds typically have an above-average price-to-earnings ratio, price-to-book ratio, and three-year sales-per-share growth value, compared to the S&P 500 Index.
MSCI EAFE
The MSCI EAFE Index (Europe, Australasia, Far East) is a free float-adjusted market capitalization index that is designed to measure developed market equity performance, excluding the US & Canada.
MSCI World Index
The MSCI World Index is a free float-adjusted market capitalization index that is designed to measure global developed market equity performance. As of May 2005 the MSCI World Index consisted of the following 23 developed market country indices: Australia, Austria, Belgium, Canada, Denmark, Finland, France, Germany, Greece, Hong Kong, Ireland, Italy, Japan, Netherlands, New Zealand, Norway, Portugal, Singapore, Spain, Sweden, Switzerland, the United Kingdom and the United States. An investment cannot be made directly in a market index.
Nasdaq Composite
The NASDAQ Composite Index measures all NASDAQ domestic and non-U.S. based common stocks listed on the NASDAQ Stock Market. The Index is market-value weighted. This means that each company's security affects the Index in proportion to it's market value. The market value, the last sale price multiplied by total shares outstanding, is calculated throughout the trading day, and is related to the total value of the Index. Today the NASDAQ Composite includes over 5,000 companies, more than most other stock market indexes. Because it is so broad-based, the Composite is one of the most widely followed and quoted major market indexes.
GIC Chart Book| October 2011
Please refer to important information, disclosures and qualifications at the end of this material.
Past performance is no guarantee of future results. Estimates of future performance are based on assumptions that may not be realized. This material is not a solicitation of any offer to buy or sell any security or other financial instrument or to participate in any trading strategy.
99
Glossary of Indices
Note: Investors cannot invest directly in an index. The performance of unmanaged indices reflects no deductions for fees, expenses or taxes which would affect performance of actively managed assets.
Russell 1000
Russell 1000 Index measures the performance of the 1,000 largest companies in the Russell 3000 Index, which represents approximately 89% of the total capitalization of the Russell 3000 Index.
Russell 1000 Growth
Measures the performance of those Russell 1000 companies with higher price-to-book ratios and higher forecasted growth values.
Russell 1000 Value
Measures the performance of those Russell 1000 companies with lower price-to-book ratios and lower forecasted growth values.
Russell 2000
Measures the performance of the 2,000 smallest companies in the Russell 3000 Index, which represents approximately 11% of the total market capitalization of the Russell 3000 Index.
Russell 2000 Growth
Measures the performance of those Russell 2000 companies with higher price-to-book ratios and higher forecasted growth values.
Russell 2000 Value
Measures the performance of those Russell 2000 companies with lower price-to-book ratios and lower forecasted growth values.
S&P 500
Widely regarded as the best single gauge of the U.S. equities market, this world-renowned index includes a representative sample of 500 leading companies in leading industries of the U.S. economy. Although the S&P 500 focuses on the large-cap segment of the market, with over 80% coverage of U.S. equities, it is also an ideal proxy for the total market.
S&P 500 Principle
Widely regarded as the best single gauge of the U.S. equities market, this world-renowned index includes a representative sample of 500 leading companies in leading industries of the U.S. economy. Although the S&P 500 focuses on the large-cap segment of the market, with over 80% coverage of U.S. equities, it is also an ideal proxy for the total market. This index does not include income.
GIC Chart Book| October 2011
Please refer to important information, disclosures and qualifications at the end of this material.
Past performance is no guarantee of future results. Estimates of future performance are based on assumptions that may not be realized. This material is not a solicitation of any offer to buy or sell any security or other financial instrument or to participate in any trading strategy.
100
Important DisclosuresThis material has been prepared 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. This is not a research report and was not prepared by the Research Departments of Morgan Stanley & Co. LLC or Citigroup Global Markets Inc. The views and opinions contained in this material are those of the author(s) and may differ materially from the views and opinions of others at Morgan Stanley Smith Barney LLC or any of its affiliate companies. Past performance is not necessarily a guide to future performance.
The author(s) (if any authors are noted) principally responsible for the preparation of this material receive compensation based upon various factors, including quality and accuracy of their work, firm revenues (including trading and capital markets revenues), client feedback and competitive factors. Morgan Stanley Smith Barney is involved in many businesses that may relate to companies, securities or instruments mentioned in this material.
This material has been prepared 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/instrument, or to participate in any trading strategy. Any such offer would be made only after a prospective investor had completed its own independent investigation of the securities, instruments or transactions, and received all information it required to make its own investment decision, including, where applicable, a review of any offering circular or memorandum describing such security or instrument. That information would contain material information not contained herein and to which prospective participants are referred. This material is based on public information as of the specified date, and may be stale thereafter. We have no obligation to tell you when information herein may change. We make no representation or warranty with respect to the accuracy or completeness of this material. Morgan Stanley Smith Barney has no obligation to provide updated information on the securities/instruments mentioned herein.
The securities/instruments discussed in this material may not be suitable for all investors. The appropriateness of a particular investment or strategy will depend on an investor’s individual circumstances and objectives. Morgan Stanley Smith Barney recommends that investors independently evaluate specific investments and strategies, and encourages investors to seek the advice of a financial advisor. The value of and income from investments may vary because of changes in interest rates, foreign exchange rates, default rates, prepayment rates, securities/instruments prices, market indexes, operational or financial conditions of companies and other issuers or other factors. Estimates of future performance are based on assumptions that may not be realized. Actualevents may differ from those assumed and changes to any assumptions may have a material impact on any projections or estimates. Other events not taken into account may occur and may significantly affect the projections or estimates. Certain assumptions may have been made for modeling purposes only to simplify the presentation and/or calculation of any projections or estimates, and Morgan Stanley Smith Barney does not represent that any such assumptions will reflect actual future events. Accordingly, there can be no assurance that estimated returns or projections will be realized or that actual returns or performance results will not materially differ from those estimated herein.
This material should not be viewed as advice or recommendations with respect to asset allocation or any particular investment. This information is not intended to, and should not, form a primary basis for any investment decisions that you may make. Morgan Stanley Smith Barney is not acting as a fiduciary under either the Employee Retirement Income Security Act of 1974, as amended or under section 4975 of the Internal Revenue Code of 1986 as amended in providing this material.
Morgan Stanley Smith Barney and its affiliates do 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 or relied upon by any recipient, for any purpose, including the purpose of avoiding penalties that may be imposed on the taxpayer under U.S. federal tax laws. Each client should consult his/her personal tax and/or legal advisor to learn about any potential tax or other implications that may result from acting on a particular recommendation.
International investing entails greater risk, as well as greater potential rewards compared to U.S. investing. These risks include political and economic uncertainties of foreign countries as well as the risk of currency fluctuations. These risks are magnified in countries with emerging markets, since these countries may have relatively unstable governments and less established markets and economies.
Alternative investments which may be referenced in this report, including private equity funds, real estate funds, hedge funds, managed futures funds, and funds of hedge funds, private equity, and managed futures funds, are speculative and entail significant risks that can include losses due to leveraging or other speculative investment practices, lack of liquidity, volatility of returns, restrictions on transferring interests in a fund, potential lack of diversification, absence and/or delay of information regarding valuations and pricing, complex tax structures and delays in tax reporting, less regulation and higher fees than mutual funds and risks associated with the operations, personnel and processes of the advisor.
Investing in commodities entails significant risks. Commodity prices may be affected by a variety of factors at any time, including but not limited to, (i) changes in supply and demand relationships, (ii) governmental programs and policies, (iii) national and international political and economic events, war and terrorist events, (iv) changes in interest and exchange rates, (v) trading activities in commodities and related contracts, (vi) pestilence, technological change and weather, and (vii) the price volatility of a commodity. In addition, the commodities markets are subject to temporary distortions or other disruptions due to various factors, including lack of liquidity, participation of speculators and government intervention.
GIC Chart Book| October 2011
Please refer to important information, disclosures and qualifications at the end of this material.
Past performance is no guarantee of future results. Estimates of future performance are based on assumptions that may not be realized. This material is not a solicitation of any offer to buy or sell any security or other financial instrument or to participate in any trading strategy.
101
Physical precious metals are non-regulated products. Precious metals are speculative investments, which may experience short-term and long term price volatility. The value of precious metals investments may fluctuate and may appreciate or decline, depending on market conditions. If sold in a declining market, the price you receive may be less than your original investment. Unlike bonds and stocks, precious metals do not make interest or dividend payments. Therefore, precious metals may not be suitable for investors who require current income. Precious metals are commodities that should be safely stored, which may impose additional costs on the investor. The Securities Investor Protection Corporation (“SIPC”) provides certain protection for customers’ cash and securities in the event of a brokerage firm’s bankruptcy, other financial difficulties, or if customers’ assets are missing. SIPC insurance does not apply to precious metals or other commodities.
Bonds are subject to interest rate risk. When interest rates rise, bond prices fall; generally the longer a bond's maturity, the more sensitive it is to this risk. Bonds may also be subject to call risk, which is the risk that the issuer will redeem the debt at its option, fully or partially, before the scheduled maturity date. The market value of debt instruments may fluctuate, and proceeds from sales prior to maturity may be more or less than the amount originally invested or the maturity value due to changes in market conditions or changes in the credit quality of the issuer. Bonds are subject to the credit risk of the issuer. This is the risk that the issuer might be unable to make interest and/or principal payments on a timely basis. Bonds are also subject to reinvestment risk, which is the risk that principal and/or interest payments from a given investment may be reinvested at a lower interest rate.
Bonds rated below investment grade may have speculative characteristics and present significant risks beyond those of other securities, including greater credit risk and price volatility in the secondary market. Investors should be careful to consider these risks alongside their individual circumstances, objectives and risk tolerance before investing in high-yield bonds. High yield bonds should comprise only a limited portion of a balanced portfolio.
Interest on 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, if applicable, local tax-exemption applies if securities are issued within one's city of residence.
Treasury Inflation Protection Securities’ (TIPS) coupon payments and underlying principal are automatically increased to compensate for inflation by tracking the consumer price index (CPI). While the real rate of return is guaranteed, TIPS tend to offer a low return. Because the return of TIPS is linked to inflation, TIPS may significantly underperform versus conventional U.S. Treasuries in times of low inflation.
Equity securities may fluctuate in response to news on companies, industries, market conditions and general economic environment.
Investing in smaller companies involves greater risks not associated with investing in more established companies, such as business risk, significant stock price fluctuations and illiquidity.
Asset allocation and diversification do not assure a profit or protect against loss in declining financial markets.
The indices 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.
REITs investing risks are similar to those associated with direct investments in real estate: property value fluctuations, lack of liquidity, limited diversification and sensitivity to economic factors such as interest rate changes and market recessions.
Because of their narrow focus, sector investments tend to be more volatile than investments that diversify across many sectors and companies.
CDs are insured by the FDIC, an independent agency of the U.S. Government, up to a maximum amount of $250,000 (including principal and interest) for all deposits held in the same insurable capacity (e.g. individual account, joint account) per CD depository, through December 31, 2013. On January 1, 2014, the maximum insurable amount will return to $100,000 (including principal and interest) for all insurable capacities except IRAs and certain self-directed retirement accounts, which will remain at $250,000 per depository. Investors are responsible for monitoring the total amount held with each CD depository. All deposits at a single depository held in the same insurable capacity will be aggregated for purposes of the applicable FDIC insurance limit, including deposits (such as bank accounts) maintained directly with the depository and CDs of the depository held through Morgan Stanley Smith Barney. A secondary market in CDs may be limited. CDs sold prior to maturity are subject to market risk and therefore investors may receive more or less than the amount invested or the face value. Callable CDs are callable at the sole discretion of the issuer. For more information about FDIC insurance, please visit the FDIC website at www.fdic.gov.
Contingent return (e.g. index-linked) CDs are treated as having original issue discount (OID) for tax purposes. Although interest is not received until maturity, the CD is assumed to pay a pre-determined interest rate that will be treated as current income for tax purposes if held in a taxable account. Investors should be made aware that contingent return CDs generally feature an “averaging” method of return calculation, which averages the changes in value of the relevant index as measured on predetermined dates over the life of the CD. Therefore, the CD’s return will not
Important Disclosures
GIC Chart Book| October 2011
Please refer to important information, disclosures and qualifications at the end of this material.
Past performance is no guarantee of future results. Estimates of future performance are based on assumptions that may not be realized. This material is not a solicitation of any offer to buy or sell any security or other financial instrument or to participate in any trading strategy.
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Important Disclosuresmirror the actual index value or return. If the measured index return using the averaging method is zero or negative, the investor receives no interest. Some contingent return CDs also have a participation rate (the degree to which an investor participates in the measured return of the index) that is less than 100%. Interest on contingent return CDs is not eligible for FDIC insurance before the final valuation date.
Principal is returned on a monthly basis over the life of the security. Principal prepayment can significantly affect the monthly income stream and the maturity of any type of MBS, including standard MBS, CMOs and Lottery Bonds. Yields and average lives are estimated based on prepayment assumptions and are subject to change based on actual prepayment of the mortgages in the underlying pools. The level of predictability of an MBS/CMO’s average life, and its market price, depends on the type of MBS/CMO class purchased and interest rate movements. In general, as interest rates fall, prepayment speeds are likely to increase, thus shortening the MBS/CMO’s average life and likely causing its market price to rise. Conversely, as interest rates rise, prepayment speeds are likely to decrease, thus lengthening average life and likely causing the MBS/CMO’s market price to fall. Some MBS/CMOs may have “original issue discount” (OID). OID occurs if the MBS/CMO’s original issue price is below its stated redemption price at maturity, and results in “imputed interest” that must be reported annually for tax purposes, resulting in a tax liability even though interest was not received. Investors are urged to consult their tax advisors for more information.
Investing in foreign emerging markets entails greater risks than those normally associated with domestic markets, such as political, currency, economic and market risks.
Investing in foreign markets entails greater risks than those normally associated with domestic markets, such as political, currency, economic and market risks.
Growth investing does not guarantee a profit or eliminate risk. The stocks of these companies can have relatively high valuations. Because of these high valuations, an investment in a growth stock can be more risky than an investment in a company with more modest growth expectations.
Value investing does not guarantee a profit or eliminate risk. Not all companies whose stocks are considered to be value stocks are able to turn their business around or successfully employ corrective strategies which would result in stock prices that do not rise as initially expected.
Certain securities referred to in this material may not have been registered under the U.S. Securities Act of 1933, as amended, and, if not, may not be offered or sold absent an exemption therefrom. Recipients are required to comply with any legal or contractual restrictions on their purchase, holding, sale, exercise of rights or performance of obligations under any securities/instruments transaction.
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