Morgan Stanley Investment Funds (“MS INVF”)         European Equities Alpha Funds         Switzerland, September 2012Page 1
Experienced and stable investment TeamTeam has been together for over    Matthew Leeman                                 Ri...
Why invest with the MSIM European Equity team?         High quality investment team with a time-tested investment process ...
Our goal and philosophy             ObjectiveWhat we do             •   Provide long term stable and consistent outperform...
Consistent long term out-performance                                  Fund performance compared to its benchmark1,2 at 31s...
Rolling 1 Year Returns vs. MSCI Europe         Morgan Stanley European Equity Alpha Composite1 – Euro          Rolling 1 Y...
Efficient risk / return profileDespite the concentrated natureof our portfolios, risk is welldiversified and our portfolio...
YTD performance attribution                                           MS INVF European Equity Alpha Fund                  ...
YTD 2012 main transactions                                                   MS INVF European Equity Alpha Fund1          ...
What are we looking for          We look for:                                                                             ...
Quality and Valuation: examples          Nestle          •        Low cyclicality and good pricing power          •       ...
Investment process in action          Case Study: Imperial Tobacco Group                                     European Univ...
Portfolio Construction          •   Stocks with attractive individual risk reward profiles are combined          •   Aware...
Selling is as important as buyingWe continuously review ourinvestments and aren’t afraid   • We believe that successful in...
Managing the risks that matter                                     • Management risk                                     •...
Sector Weightings          Morgan Stanley INVF European Equity Alpha Fund           Largest Portfolio Holdings Within Each...
This is why MSIM           • Part of Morgan Stanley, one of the world leading financial institutions           • An experi...
Section 2   Our MS INVF European Equity Alpha FundPage 18
A high conviction approach                                      MS INVF European Equity Alpha FundWe believe that to deliv...
A high conviction approach          MS INVF European Equity Alpha Fund                                                    ...
A well balanced and diversified portfolio                                      MS INVF European Equity Alpha FundOur inves...
Different from the benchmark                                    MS INVF European Equity Alpha FundWe are not constrained b...
Portfolio Characteristics1           MS INVF European Equity Alpha Fund             Quality Ratios                        ...
Geographic allocations1                                                        MS INVF European Equity Alpha Fund  Company...
Section 3   Our MS INVF Eurozone Equity Alpha FundPage 25
Consistent long-term performance          MS INVF Eurozone Equity Alpha Fund          Fund performance compared to its ben...
Rolling 1 Year Returns vs. MSCI EMU          Morgan Stanley Eurozone Equity Alpha Composite1 – Euro          Rolling 1 Yea...
Our risk / return profileDespite the concentrated natureof our portfolios, risk is welldiversified and our portfolios arec...
YTD performance attribution                                           MS INVF Eurozone Equity Alpha Fund                  ...
A high conviction approach                                      Morgan Stanley INVF Eurozone Equity Alpha Fund1           ...
A high conviction approach          Top Ten Over and Underweights1                                                        ...
A well balanced and diversified portfolio                                      Morgan Stanley INVF Eurozone Equity Alpha F...
Sector Weightings          Morgan Stanley INVF Eurozone Equity Alpha Fund          Largest Portfolio Holdings Within Each ...
Different from the benchmark                                   Morgan Stanley INVF Eurozone Equity Alpha FundWe are not co...
Msim european equities sept12   gstaad
Msim european equities sept12   gstaad
Msim european equities sept12   gstaad
Msim european equities sept12   gstaad
Msim european equities sept12   gstaad
Msim european equities sept12   gstaad
Msim european equities sept12   gstaad
Msim european equities sept12   gstaad
Msim european equities sept12   gstaad
Msim european equities sept12   gstaad
Msim european equities sept12   gstaad
Msim european equities sept12   gstaad
Msim european equities sept12   gstaad
Msim european equities sept12   gstaad
Msim european equities sept12   gstaad
Msim european equities sept12   gstaad
Msim european equities sept12   gstaad
Msim european equities sept12   gstaad
Msim european equities sept12   gstaad
Msim european equities sept12   gstaad
Msim european equities sept12   gstaad
Msim european equities sept12   gstaad
Msim european equities sept12   gstaad
Msim european equities sept12   gstaad
Msim european equities sept12   gstaad
Msim european equities sept12   gstaad
Msim european equities sept12   gstaad
Msim european equities sept12   gstaad
Msim european equities sept12   gstaad
Msim european equities sept12   gstaad
Msim european equities sept12   gstaad
Msim european equities sept12   gstaad
Msim european equities sept12   gstaad
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Msim european equities sept12 gstaad

  1. 1. Morgan Stanley Investment Funds (“MS INVF”) European Equities Alpha Funds Switzerland, September 2012Page 1
  2. 2. Experienced and stable investment TeamTeam has been together for over Matthew Leeman Riccardo Bindi Jonathan Day8 years Lead Portfolio Manager Portfolio Manager Portfolio Manager Experience: 18 years, Experience: 18 years, Experience: 15 years, MSIM, SocGen, Mont MSIM, SocGen, MSIM, SocGen, Blanc, Lombard Odier Lombard Odier Bias: Financials and MS Quilter Pharmaceuticals Bias: Technology, Bias: Oil & Gas, Media and Telecommunications Industrials and Utilities Jaymeen Patel Luca Armandola Portfolio Manager Portfolio Specialist Experience: 15 years, Experience: 10 years, MSIM, State Street, Salomon Brothers, Fidelity MSIM sales, Bias: Telecommunications Invesco Italy and Consumers Experience, trust and alignment of interestPage 2 119165
  3. 3. Why invest with the MSIM European Equity team? High quality investment team with a time-tested investment process • An experienced, stable and well-resourced team • Style agnostic, active, bottom up, fundamental stock picking • Efficient risk / return profile Consistent Performance • Stable and strong outperformance • Top quartile peer group ranking Excellent Working Relationship • Best in class client service • Part of Morgan Stanley, one of the world’s leading financial institutions Experience, trust and alignment of interestPage 3
  4. 4. Our goal and philosophy ObjectiveWhat we do • Provide long term stable and consistent outperformance Philosophy • Exploit market inefficiencies • Style agnostic, active, bottom up, fundamental stock picking Differentiated portfolios • Concentrated (30–50 holdings) • Conviction (active position between 100 and 300bps) • Invest for the long term (annual turnover between 25-35%) • Efficient risk / return profile (high information ratio and low volatility)Page 4
  5. 5. Consistent long term out-performance Fund performance compared to its benchmark1,2 at 31st August 2012 20 17.7 15.9Consistency of long term 15performance in different market 11.1 11.4conditions 9.7 10 8.0 7.1 7.2 7.1 % 6.1 5 2.7 1.0 0 -2.1 -5 -3.8 YTD 1 Year 2 Year Ann 3 Year Ann 4 Year Ann 5 Year Ann Since Inception Ann MS INVF European Equity Alpha Fund MSCI Europe Net Index MS European Equity Alpha Representative Account3,4 2004 2005 2006 (until June) 2007 2008 2009 2010 2011 Rank 10/124 18/125 27/125 35/160 26/146 137/156 38/154 37/129 Quartile 1 1 1 1 1 4 1 2 SocGen Track Record MSIM Track Record 1.MSIM, Net of fees 2.This fund received a windfall compensation payment in connection with Prudential Equity Groups settlement with the US SEC relating to market timing charges. Consequently, the net cash injection received in March 2010 and the related withholding tax, accrued in September 2010, have increased the fund’s AUM by €5,437,850 and €2,455,464 , respectively, enhancing the 2010 fund’s performance by 297bps in total. The inception of the fund is March 1991 3.Mercer, SocGen Pan European Concentrated Composite performance is provided for informational purposes only. The European Equity team joined MSIM in December 2006. Performance information is provided as an indication of the European Equity team’s actual track record in managing various pan- European equity portfolios when working together with Société Générale Asset Management and may not be an indication of how MSIM’s European Equity portfolios may perform in the future 4.Ranking: Mercer MPA. Data as of December 2011. This is a representative account of the European Equity Alpha Strategy. Each portfolio may differ duePage 5 to specific investment restrictions and guidelines. Past performance is not a reliable indicator of future performance. Inception date for the representative account is March 1991
  6. 6. Rolling 1 Year Returns vs. MSCI Europe Morgan Stanley European Equity Alpha Composite1 – Euro Rolling 1 Year Periods Since August 2008 through June 30, 2012 Monthly Data 55% 45% Dec 2009 Portfolio 25.76 Index 31.60 European Equity Alpha Composite Returns 35% Mar 2010 25% Portfolio 48.98 Index 53.17 15% Feb 2010 Portfolio 37.84 5% Index 45.89 Jan 10 Portfolio 24.56 -5% Index 32.48 Nov 09 Portfolio 15.52 -15% Index 19.03 -25% -35% -45% -55% -55% -45% -35% -25% -15% -5% 5% 15% 25% 35% 45% 55% MSCI Europe Net Index Returns Source: Morgan Stanley Investment Management Limited. Returns are shown gross of figuresPage 6
  7. 7. Efficient risk / return profileDespite the concentrated natureof our portfolios, risk is welldiversified and our portfolios arecharacterised by low and stabletracking errors and volatility whichis no higher than the market Source Mercer MPA, GROSS of fees. Period June 2007 – June 2012Page 7
  8. 8. YTD performance attribution MS INVF European Equity Alpha Fund 1 YTD as of June 30, 2012 MS European Equity Alpha MSCI Europe - % Attribution Analysis - % Rep Account - %Top Five Contributors: Average Total Average Total • Amadeus +43 bps Selection Allocation Total weight Return weight Return • Rolls-Royce +31 bps Financials 17.48 10.75 18.50 6.07 0.74 (0.03) 0.70 • Accor +29 bps Industrials 12.85 11.03 10.79 5.33 0.67 0.03 0.70 • MAN +28 bps Information Technology 1.72 34.65 2.95 2.08 0.50 0.03 0.53 • Prudential +28 bps Telecommunication Services 4.36 4.89 6.48 (0.81) 0.22 0.27 0.49 Health Care 14.66 8.96 11.83 8.17 0.13 0.08 0.21Top Five Detractors: Energy 14.08 (2.17) 11.99 (3.01) 0.14 (0.15) (0.01) • Wm Morrison -31 bps Consumer Staples 15.47 7.15 14.23 8.60 (0.23) 0.04 (0.19) • Xstrata -28 bps Utilities 1.24 (18.81) 4.68 3.17 (0.23) 0.00 (0.24) • GDF Suez -27 bps Consumer Discretionary 8.13 9.35 8.66 12.25 (0.24) (0.01) (0.25) • BBVA -25 bps Materials 7.89 (5.91) 9.89 1.44 (0.50) 0.06 (0.44) • Anheuser-Busch (no exposure) -20 bps Currency Forward (0.04) (1.72) 0.00 0.00 0.00 (0.34) (0.34) Cash 2.16 1.30 0.00 0.00 0.00 (0.24) (0.24) Total 100.00 5.67 100.00 4.75 1.20 (0.27) 0.93 1. In Euro, gross of fees Page 8
  9. 9. YTD 2012 main transactions MS INVF European Equity Alpha Fund1 Sector Country Initial Purchase Increase Decrease Final Sales Companies in bold and France SES italic represent activities Consumer Discretionary Germany Metro in 2Q2012 United Kingdom Carphone Warehouse Energy Portugal Galp Spain BBVA Financials France SocGen SocGen United Kingdom Barclays Germany MAN Industrials United Kingdom Experian Germany Siemens Netherlands ArcelorMittal Materials United Kingdom Anglo American Switzerland Novartis Pharmaceuticals Switzerland Roche Telecommunications Sweden Millicom Intl1. Data as of June 30, 2012. Subject to change daily. Provided for informational purposes only and should not be deemed as a Utilities France GDF Suez recommendation to buy the securities mentioned or securities in the industries shown above. Morgan Stanley is a full- service securities firm engaged in securities trading and brokerage activities, investment banking, research and analysis, financing and financial advisory services. Page 9
  10. 10. What are we looking for We look for: We look for: • A strong track record of • Valuation and pricing cash generation anomalies Quality Valuation • Better than average • Stocks trading at a ROE / ROCE We look for low We look for discount to fair value • High earnings visibility risk companies opportunities to • Catalysts to unlock a and predictability with strong track deliver high returns company’s value records over the long term • Strong balance sheets • Favourable risk / reward • Dominant or profile differentiated market positioning • Proven management teams Macro context We also evaluate the market environment to identify factors driving long term structural change European Equity Alpha/Eurozone Equity Alpha Concentrated: 30 – 50 holdings Conviction: minimum 100bps active weight Long term: average turnover 25-35% Efficient risk / reward profile: high information ratio, low volatilityPage 10
  11. 11. Quality and Valuation: examples Nestle • Low cyclicality and good pricing power • Solid growth from developed markets and increasing EM penetration • High returns • Low net debt / equity • Double digit dividend growth over the last 10 years KONE • Third biggest global producer of lifts and escalator • Strong position in emerging markets (30% earnings) • Strong and stable cash flow generation thanks to maintenance (60% earnings) • Consistent track record of margin progression • Robust balance sheet Provided for informational purposes only and should not be deemed as a recommendation to buy the securities mentioned or securities in the industries shown above. Morgan Stanley is a full-service securities firm engaged in securities trading and brokerage activities, investment banking, research and analysis, financing and financial advisory services.Page 11
  12. 12. Investment process in action Case Study: Imperial Tobacco Group European Universe: 600 Stocks Imperial Tobacco screens well on valuation Filtering and Screening In a consolidated industry with pricing power Attractive Ideas: 300 Stocks High and stable margins, good free cash flow Research Historically strong return on capital employed Attractive on P/E and FCF yield Best Ideas: 100 Stocks Management meetings Fundamental Analysis Material discount to intrinsic value Final Favourable risk / reward profile Portfolio: 30–50 Stocks Ongoing contact Portfolio Construction Continuous reassessment Provided for informational purposes only and should not be deemed as a recommendation to buy the securities mentioned or securities in the industries shown above. Morgan Stanley is a full-service securities firm engaged in securities trading and brokerage activities, investment banking, research and analysis, financing and financial advisory services.Page 12 222583
  13. 13. Portfolio Construction • Stocks with attractive individual risk reward profiles are combined • Awareness of broader macro context • Consideration to both the consolidated risk profile of the portfolio and risk relative to the benchmark Characteristics • Active position between 100 and 300bps • Sector weight: unconstrained (ordinarily up to 7% active) • Country weight: unconstrained (ordinarily up to 10% active) • Diversified and well balanced portfolio (30 – 50 holdings) • Invest for the long term (annual turnover between 25-35%) • Portfolio fully investedPage 13
  14. 14. Selling is as important as buyingWe continuously review ourinvestments and aren’t afraid • We believe that successful investing is as much about being good at selling as it isto adjust our holdings if our being good at buyingconviction changes or newideas emerge • We will typically sell or trim our position in a stock if: – Original prospects deteriorate – Valuation relative to peers / sector becomes less attractive – Risk management parameters are challenged – We identify more compelling alternativesPage 14 222584
  15. 15. Managing the risks that matter • Management risk • Financial risk Stock Level • Business risk • Valuation risk Also monitored by: Global Risk and Analysis team Equity CIO function • Stock weightings Compliance department • Inter-correlations Portfolio Level • Historical scenario analysis • Diversification • Stable tracking error 3 years1 - 12m Rolling Standard Deviation - MS 3 years1 - 12m Rolling Tracking Error - MS INVF INVF European Equity Alpha Fund vs. MSCI European Equity Alpha Fund Europe 30 6 25 5 20 4 15 3 10 2 5 1 Jul-09 Jan-10 Jul-10 Jan-11 Jul-11 Jan-12 Jul-09 Jan-10 Jul-10 Jan-11 Jul-11 Jan-12 MS INVF European Equity Alpha Fund MS INVF European Equity Alpha Fund MSCI Europe Net Index 1. Data as of June 2012Page 15 222577
  16. 16. Sector Weightings Morgan Stanley INVF European Equity Alpha Fund Largest Portfolio Holdings Within Each Sector (%)1 15.6 Health Care Novartis, GlaxoSmithKline 12.4 14.0 Energy Royal Dutch Shell, BG, BP 11.7 12.6 Industrials Siemens, Rolls-Royce Holdings, Experian 10.7 16.0 Nestlé, British American Tobacco, Imperial Tobacco Consumer Staples 15.0 17.6 HSBC, Zurich Financial Services, Prudential Financials 18.3 5.7 Vodafone, Millicom International Cellular Telecommunication Services 6.5 2.0 Amadeus IT Information Technology 2.8 6.9 Consumer Discretionary Daimler, Reed Elsevier 8.6 6.9 Materials Anglo American, Umicore, Xstrata 9.4 0.0 Utilities 4.6 MS INVF European Equity Alpha Fund MSCI Europe Index Source: Morgan Stanley Investment Management Limited 1. Data as of June 30, 2012. Subject to change daily. Provided for informational purposes only and should not be deemed as a recommendation to buy the securities mentioned or securities in the industries shown above. Morgan Stanley is a full-service securities firm engaged in securities trading and brokerage activities, investment banking, research and analysis, financing and financial advisory services. Applications for shares in any Morgan StanleyPage 16 Investment Fund should not be made without first consulting the current Prospectus, Simplified Prospectus, Annual Report and Semi-Annual Report or other documents available in your local jurisdiction which are available free of charge from MSIM.
  17. 17. This is why MSIM • Part of Morgan Stanley, one of the world leading financial institutions • An experienced and stable investment team built on trust and respect • High conviction and concentrated portfolios • Efficient risk / return profile • Compelling and steady performance versus benchmark and peersPage 17
  18. 18. Section 2 Our MS INVF European Equity Alpha FundPage 18
  19. 19. A high conviction approach MS INVF European Equity Alpha FundWe believe that to deliver Top Ten Over and Underweights1long term outperformance, ourholdings should be different to thebenchmark with no neutral Top 10 overweightsweightings and no long tail ofstocks with low conviction Rolls-Royce 2.5 British American Tobacco 2.2 Imperial Tobacco 2.2 Vodafone We typically maintain a 2.1As a result, we only invest in our Fresenius minimum active weight of 1% 2.1highest conviction stocks and Royal Dutch Shell in each of our holdings 2.1 Nestle 2.1seek to maintain a minimum BG 2.1active weight of 1% in each Prudential 1.9 Amadeus It Holding Top 10 underweights 1.9 Total (1.6) Sanofi-Aventis (1.5)The only reason we are Royal Dutch Shell (1.5)underweight in any stock is Novo Nordisk (1.0) We have zero exposure to these stocks and thereforebecause we don’t hold it Bhp Billiton (1.0) by definition are underweight BSCH (1.0) Anheuser-Busch (1.0) relative to the benchmarkThis creates a highly efficient Rio Tinto (1.0) BASF (1.0)portfolio Diageo (1.0) -3 -2 -1 0 1 2 3 Difference to MSCI Europe (%) Source: Morgan Stanley Investment Management Limited 1. Data as of June 30, 2012. Subject to change daily. Provided for informational purposes only and should not be deemed as a recommendation to buy the securities mentioned or securities in the industries shown above. Morgan Stanley is a full-service securities firm engaged in securities trading and brokerage activities, investment banking, research and analysis, financing and financial advisory services. Applications for shares in any Morgan Stanley Investment Fund should not be made without first consulting the current Prospectus, Simplified Prospectus, Annual Report and Semi-Annual Report orPage 19 other documents available in your local jurisdiction which are available free of charge from MSIM. 222585
  20. 20. A high conviction approach MS INVF European Equity Alpha Fund MS INVF European Equity Alpha Fund Index2 Security Industry Country (%) (%) Rolls-Royce Aerospace & Defence United Kingdom 2.9 0.4 Imperial Tobacco Tobacco United Kingdom 2.8 0.6 British American Tobacco Tobacco United Kingdom 3.8 1.6 BG Oil, Gas & Consumable Fuels United Kingdom 3.3 1.1 Nestle Food Products Switzerland 5.3 3.2 Royal Dutch Shell Oil, Gas & Consumable Fuels United Kingdom 4.1 2.0 Fresenius Health Care Providers & Services Germany 2.3 0.2 Vodafone Wireless Telecommunication Services United Kingdom 4.4 2.3 Amadeus It Holding It Services Spain 2.0 0.1 Prudential Insurance United Kingdom 2.4 0.5 MS INVF European Equity Alpha Fund Index2 Security Industry Country (%) (%) Total Oil, Gas & Consumable Fuels France 0.0 1.6 Royal Dutch Shell Oil, Gas & Consumable Fuels United Kingdom 0.0 1.5 Sanofi-Aventis Pharmaceuticals France 0.0 1.5 Diageo Beverages United Kingdom 0.0 1.0 BASF Chemicals Germany 0.0 1.0 Rio Tinto Metals & Mining United Kingdom 0.0 1.0 Anheuser-Busch Beverages Belgium 0.0 1.0 BSCH Commercial Banks Spain 0.0 1.0 Bhp Billiton Metals & Mining United Kingdom 0.0 1.0 Novo Nordisk Pharmaceuticals Denmark 0.0 1.0 Source: Morgan Stanley Investment Management Limited 1. Data as of June 30, 2012. All information is provided for informational purposes only and should not be deemed as a recommendation to buy or sell the securities mentioned or any securities from the Industries mentioned above. Applications for shares in any Morgan Stanley Investment Fund should not be made without first consulting the current Prospectus, Simplified Prospectus, Annual Report and Semi-Annual Report or other documents available in your local jurisdiction which are available free of charge from MSIM.Page 20 2. Relative to the MSCI Europe Net Index. 222590
  21. 21. A well balanced and diversified portfolio MS INVF European Equity Alpha FundOur investment process and Top Ten Holdings1philosophy results in a highlyconcentrated, yet diversified Security Name Industry Country (%)portfolio Nestle Food Products Switzerland 5.3 HSBC Commercial Banks United Kingdom 4.4Our portfolio typically averagesbetween 30–50 stocks, whereas Vodafone Wireless Telecommunication Services United Kingdom 4.4the average European Equity Royal Dutch Shell Oil, Gas & Consumable Fuels United Kingdom 4.1mutual fund typically has over80 holdings2 British American Tobacco Tobacco United Kingdom 3.8 Novartis Pharmaceuticals Switzerland 3.8Our portfolio is concentrated, with Glaxosmithkline Pharmaceuticals United Kingdom 3.6the top ten stocks accounting for BP Oil, Gas & Consumable Fuels United Kingdom 3.540% of assets Roche Pharmaceuticals Switzerland 3.5 BG Oil, Gas & Consumable Fuels United Kingdom 3.3 Total 39.7 Source: Morgan Stanley Investment Management Limited 1. Data as of June 30, 2012. Subject to change daily. Provided for informational purposes only and should not be deemed as a recommendation to buy the securities mentioned or securities in the industries shown above. Morgan Stanley is a full-service securities firm engaged in securities trading and brokerage activities, investment banking, research and analysis, financing and financial advisory services. Applications for shares in any Morgan Stanley Investment Fund should not be made without first consulting the current Prospectus, Simplified Prospectus, Annual Report and Semi-Annual Report or other documents available in your local jurisdiction which are available free of charge from MSIM 2. Société Générale Equity Research. December 2008Page 21 222586
  22. 22. Different from the benchmark MS INVF European Equity Alpha FundWe are not constrained by sector Sector weighting compared to benchmark1weightings – we make investmentdecisions based on the Underweight Overweightattractiveness and value ofindividual companies Health Care 3.2 Energy 2.3 Industrials 1.9 Consumer Staples 1.0 Financials (0.7) Information Technology (0.8) Telecommunication Services (0.8) Consumer Discretionary (1.7) Materials (2.5) Utilities (4.6) -5 -4 -3 -2 -1 0 1 2 3 4 5 Difference to MSCI Europe (%) Source: Morgan Stanley Investment Management Limited 1. Data as of June 30, 2012. Subject to change daily. Provided informational purposes only and should not be deemed as a recommendation to buy the securities mentioned or securities in the industries shown above. Morgan Stanley is a full-service securities firm engaged in securities trading and brokerage activities, investment banking, research and analysis, financing and financial advisory services. Applications for shares in any Morgan Stanley Investment Fund should not be made without first consulting the current Prospectus, Simplified Prospectus, Annual Report and Semi-Annual Report or other documents available in your local jurisdiction which are available free of charge from MSIMPage 22 222587
  23. 23. Portfolio Characteristics1 MS INVF European Equity Alpha Fund Quality Ratios Valuation Ratios 24.6 4.3 Dividend Yield (%) ROCE 4.1 20.1 1.3 Price/Book (x) 1.4 22.3 9.4 ROE Price/Earnings (x) 11.5 20.1 13.9 Price/Free Cash Flow 13.5 Past 5 yrs 3.9 7.2 Free Cash Flow Yield (%) earnings growth 7.4 4.0 MS INVF European Equity Alpha Fund MSCI Europe Index Market Capitalisation Weights MS INVF European Equity Alpha Fund MSCI Europe Index (%) (%) Mega Cap > $50 bn 46 40 Large Cap $5-50 bn 50 50 Mid Cap $1-5 bn 4 10 Small Cap <$1bn 0 0 Weighted Average Market Cap $bn $68.9 $52.3 Source: Morgan Stanley Investment Management Limited, MSCI and FactSet 1. Data as of June 30, 2012. Figures are from the Morgan Stanley INVF European Equity Alpha Fund. Applications for shares in any Morgan Stanley Investment Fund should not be made without first consulting the current Prospectus, Simplified Prospectus, Annual Report and Semi-Annual Report or other documents available in your local jurisdiction which are available free of charge from MSIM. Past performance is no guarantee of future performance and 5 years data is available upon requestPage 23 222591
  24. 24. Geographic allocations1 MS INVF European Equity Alpha Fund Company Portfolio Benchmark Active Company Portfolio Benchmark Active Austria 0.00 0.43 (0.43) Sweden 1.38 4.88 (3.51) Belgium 1.75 1.75 0.00 Millicom International Cellular S.A. 1.38 0.10 1.28 Umicore S.A. 1.75 0.09 1.66 Switzerland 14.77 13.32 1.45 Denmark 0.00 1.79 (1.79) Nestlé S.A. 5.32 3.21 2.12 Finland 1.78 1.13 0.66 Novartis AG 3.79 2.09 1.70 Kone Oyj 1.78 0.15 1.63 Zurich Financial Services AG 2.20 0.54 1.66 France 8.00 14.10 (6.09) Roche Holdings AG 3.46 1.97 1.49 SES S.A. 1.53 0.11 1.42 UK 48.39 36.29 12.10 Schneider Electric S.A. 1.85 0.47 1.38 Rolls-Royce Group plc 2.89 0.41 2.48 Accor S.A. 1.38 0.08 1.31 Imperial Tobacco Group plc 2.84 0.63 2.21 BNP Paribas S.A. 1.85 0.60 1.25 British American Tobacco plc 3.79 1.63 2.16 Societe Generale 1.39 0.27 1.12 BG Group plc 3.26 1.13 2.14 Germany 12.88 12.51 0.37 Royal Dutch Shell plc (CL A) 4.11 2.01 2.10 Fresenius SE 2.30 0.21 2.09 Vodafone Group plc 4.37 2.28 2.09 Siemens AG 2.70 1.12 1.58 Prudential plc 2.38 0.48 1.90 Bayer AG 2.48 0.97 1.51 Reckitt Benckiser Group plc 2.40 0.57 1.84 Daimler AG 2.15 0.66 1.49 HSBC Holdings plc 4.41 2.58 1.83 Muenchener Rueckversicherungs-Gesellschaft AG 1.87 0.41 1.46 Experian plc 2.00 0.23 1.77 MAN SE 1.37 0.07 1.30 Greece 0.00 0.08 (0.08) GlaxoSmithKline plc 3.58 1.86 1.71 Ireland 0.00 0.47 (0.47) Tullow Oil plc 1.89 0.34 1.55 Italy 0.00 3.39 (3.39) BP plc 3.51 2.04 1.47 Netherlands 3.19 3.96 (0.77) Anglo American plc 2.14 0.71 1.43 Reed Elsevier N.V. 1.85 0.13 1.73 Wm. Morrison Supermarkets plc 1.56 0.16 1.40 ArcelorMittal S.A. 1.34 0.23 1.10 Xstrata plc 1.69 0.42 1.27 Norway 0.00 1.45 (1.45) Barclays plc 1.57 0.48 1.09 Portugal 1.25 0.25 1.00 Cash 2.66 0.00 2.66 Galp Energia SGPS 1.25 0.05 1.20 TOTAL 100.00 100.00 0.00 Spain 3.96 4.22 (0.27) Amadeus IT Holdings S.A. 2.03 0.11 1.92 Banco Bilbao Vizcaya Argentaria S.A. 1.93 0.55 1.38 1. Data as of June 30, 2012. Subject to change daily. Provided informational purposes only and should not be deemed as a recommendation to buy the securities mentioned or securities in the industries shown above. Morgan Stanley is a full-service securities firm engaged in securities trading and brokerage activities, investment banking, research and analysis, financing and financial advisory services. Applications for shares in anyPage 24 Morgan Stanley Investment Fund should not be made without first consulting the current Prospectus, Simplified Prospectus, Annual Report and Semi-Annual Report or other documents available in your local jurisdiction which are available free of charge from MSIM. Source: Morgan Stanley Investment Management
  25. 25. Section 3 Our MS INVF Eurozone Equity Alpha FundPage 25
  26. 26. Consistent long-term performance MS INVF Eurozone Equity Alpha Fund Fund performance compared to its benchmark1, 2 at 31st August 2012 20 14.4 15 12.4 10.1 9.6 10 4.7 5.3 % 5 1.2 0.9 0.2 0 (1.7) (2.2) -5 (3.9) (4.4) -10 (7.5) YTD 1 Year 2 Year Ann 3 Year Ann 4 Year Ann 5 Year Ann Since Inception MS INVF Eurozone Equity Alpha Fund MSCI EMU/ MSCI Europe MS European Equity Alpha Representative Account3,4 2004 2005 2006 (until June) 2007 2008 2009 2010 2011 Rank 10/124 18/125 27/125 35/160 26/146 137/156 38/154 37/129 Quartile 1 1 1 1 1 4 1 2 SocGen Track Record MSIM Track Record 1. MSIM, Net of fees 2. This fund received a windfall compensation payment in connection with Prudential Equity Groups settlement with the US SEC relating to market timing charges. Consequently, the net cash injection received in March 2010 and the related withholding tax, accrued in September 2010, have increased the fund’s AUM by €2,106,232 and €947,197, respectively, enhancing the overall 2010 fund’s performance by 458bps. The inception date of the fund is March 2000 3. Mercer, SocGen Pan European Concentrated Composite performance is provided for informational purposes only. The European Equity team joined MSIM in December 2006. Performance information is provided as an indication of the European Equity team’s actual track record in managing various pan- European equity portfolios when working together with Société Générale Asset Management and may not be an indication of how MSIM’s European Equity portfolios may perform in the future 4. Ranking: Mercer MPA. Data as of December 2011. This is a representative account of the European Equity Alpha Strategy. Each portfolio may differ duePage 26 to specific investment restrictions and guidelines. Past performance is not a reliable indicator of future performance. Inception date for the representative account is March 1991
  27. 27. Rolling 1 Year Returns vs. MSCI EMU Morgan Stanley Eurozone Equity Alpha Composite1 – Euro Rolling 1 Year Periods Since August 2008 through June 30, 2012 Monthly Data 60% Mar 10 Portfolio 53.43 50% Index 48.78 40% 30% Eurozone Equity Alpha Returns 20% Feb 10 10% Portfolio 38.03 Index 43.44 0% Jan 10 Portfolio 26.10 -10% Index 30.19 -20% -30% -40% -50% -60% -60% -50% -40% -30% -20% -10% 0% 10% 20% 30% 40% 50% 60% MSCI EMU Index Returns Source: Morgan Stanley Investment Management Limited. Returns are shown gross of figuresPage 27
  28. 28. Our risk / return profileDespite the concentrated natureof our portfolios, risk is welldiversified and our portfolios arecharacterised by low and stabletracking errors and volatility whichis no higher than the market Source Mercer MPA, GROSS of fees. Period June 2007 – June 2012Page 28
  29. 29. YTD performance attribution MS INVF Eurozone Equity Alpha Fund 1 YTD as of June 30, 2012 MS Eurozone Equity Alpha MSCI EMU - % Attribution Analysis - % Rep Account - %Top Five Contributors: Average Total Average Total • Amadeus +66 bps Selection Allocation Total weight Return weight Return • Azimut +64 bps Financials 20.57 9.89 18.98 (0.66) 2.03 (0.01) 2.02 • Safran +54 bps Information Technology 2.54 34.65 5.02 5.19 0.67 (0.02) 0.65 • MAN +47 bps Energy 9.05 0.56 8.38 (5.87) 0.58 (0.06) 0.53 • Total (no exposure) +44 bps Industrials 18.83 5.67 12.88 4.19 0.23 0.07 0.30 Health Care 6.88 17.43 7.82 14.07 0.23 (0.10) 0.13Top Five Detractors: Telecommunication Services 3.50 (17.57) 7.11 (8.91) (0.29) 0.42 0.13 • Anheuser-Busch (no exposure) -51 bps Utilities 2.22 (18.81) 7.17 (3.71) (0.15) 0.19 0.04 • Ansaldo -50 bps Materials 7.37 2.08 9.62 4.21 (0.12) 0.04 (0.08) • Faurecia -37 bps Consumer Staples 15.78 7.07 11.14 9.87 (0.41) 0.13 (0.28) • GDF Suez -36 bps Consumer Discretionary 10.83 9.20 11.87 11.09 (0.19) (0.18) (0.38) • BBVA -34 bps Cash 2.43 0.27 0.00 0.00 0.00 0.01 0.01 Total 100.00 5.93 100.00 2.85 2.58 0.49 3.07 1. In Euro, gross of fees Page 29
  30. 30. A high conviction approach Morgan Stanley INVF Eurozone Equity Alpha Fund1 Top Ten Over and Underweights1We believe that to deliver Top 10 Overweightlong term outperformance, ourholdings should be different to the Fresenius 2.7benchmark with no neutral Safran 2.7weightings and no long tail of Pernod Ricard 2.7stocks with low conviction Unilever We typically maintain a 2.7 Royal Dutch Shell minimum active weight of 2.6 Kone 1% in each of our holdings 2.5As a result, we only invest in our Imperial Tobacco 2.5highest conviction stocks and Siemens 2.4seek to maintain a minimum ENI 2.4active weight of 1% in each Top 10 Underweight Royal Ahold 2.4 Total (3.7) Sanofi-Aventis (3.5)The only reason we are BASF (2.5)underweight in any stock is BSCH (2.4) We have zero exposure tobecause we don’t hold it these stocks and Anheuser-Busch Inbev (2.4) therefore by definition are SAP (2.1) underweight relative to Lvmh (1.5) the benchmarkThis creates a highly efficient E.ON (1.5)portfolio Air Liquide (1.4) Groupe Danone (1.4) -5 -4 -3 -2 -1 0 1 2 3 4 5 Difference to MSCI EMU (%) Source: Morgan Stanley Investment Management Limited 1. Data as of June 30, 2012. Subject to change daily. Provided for informational purposes only and should not be deemed as a recommendation to buy the securities mentioned or securities in the industries shown above. Morgan Stanley is a full-service securities firm engaged in securities trading and brokerage activities, investment banking, research and analysis, financing and financial advisory services. Applications for shares in any Morgan Stanley Investment Fund should not be made without first consulting the current Prospectus, Simplified Prospectus, Annual Report and Semi-Annual Report or other documents available in your local jurisdiction which are available free of charge from MSIM.Page 30 222674
  31. 31. A high conviction approach Top Ten Over and Underweights1 MS INVF Eurozone Equity Index2 Security Industry Country Alpha Fund (%) (%) Fresenius Health Care Providers & Services Germany 3.2 0.5 Safran Aerospace & Defence France 3.0 0.3 Pernod Ricard Beverages France 3.6 0.9 Unilever Food Products Netherlands 4.8 2.1 Royal Dutch Shell Oil, Gas & Consumable Fuels United Kingdom 2.6 0.0 Kone Machinery Finland 2.8 0.4 Imperial Tobacco Tobacco United Kingdom 2.5 0.0 Siemens Industrial Conglomerates Germany 5.0 2.7 ENI Oil, Gas & Consumable Fuels Italy 4.4 2.0 Royal Ahold Food & Staples Retailing Netherlands 2.9 0.5 MS INVF Eurozone Equity Index2 Security Industry Country Alpha Fund (%) (%) Total Oil, Gas & Consumable Fuels France 0.0 3.7 Sanofi-Aventis Pharmaceuticals France 0.0 3.5 BASF Chemicals Germany 0.0 2.5 BSCH Commercial Banks Spain 0.0 2.4 Anheuser-Busch Inbev Beverages Belgium 0.0 2.4 SAP Software Germany 0.0 2.1 Lvmh Textiles, Apparel & Luxury Goods France 0.0 1.5 E.ON Electric Utilities Germany 0.0 1.5 Air Liquide Chemicals France 0.0 1.4 Groupe Danone Food Products France 0.0 1.4 1. Data as of June 30, 2012. Morgan Stanley INVF Eurozone Equity Alpha Fund. All information is provided for informational purposes only and should not be deemed as a recommendation to buy or sell the securities mentioned or any securities from the Industries mentioned above. Applications for shares in any Morgan Stanley Investment Fund should not be made without first consulting the current Prospectus, Simplified Prospectus, Annual Report and Semi-AnnualPage 31 Report or other documents available in your local jurisdiction which are available free of charge from MSIM. 2. Relative to the MSCI EMU Index. 144116
  32. 32. A well balanced and diversified portfolio Morgan Stanley INVF Eurozone Equity Alpha Fund1Our investment process and Top Ten Holdings1philosophy results in a highlyconcentrated, yet diversified Security Name Industry Country (%)portfolio Siemens Industrial Conglomerates Germany 5.0 Unilever Food Products Netherlands 4.8Our portfolio typically averagesbetween 30–50 stocks, whereas ENI Oil, Gas & Consumable Fuels Italy 4.4the average European Equity Bayer Pharmaceuticals Germany 4.4mutual fund typically has over80 holdings2 Allianz Insurance Germany 3.7 Pernod Ricard Beverages France 3.6Our portfolio is concentrated, with Daimlerchrysler Automobiles Germany 3.5the top ten stocks accounting for Banco Bilbao Vizcaya Argentaria Commercial Banks Spain 3.540% of assets BNP Paribas Commercial Banks France 3.4 Muenchener Reuckversicherungsem Insurance Germany 3.3 Total 39.6 Source: Morgan Stanley Investment Management Limited 1. Data as of June 30, 2012. Subject to change daily. Provided for informational purposes only and should not be deemed as a recommendation to buy the securities mentioned or securities in the industries shown above. Morgan Stanley is a full-service securities firm engaged in securities trading and brokerage activities, investment banking, research and analysis, financing and financial advisory services. Applications for shares in any Morgan Stanley Investment Fund should not be made without first consulting the current Prospectus, Simplified Prospectus, Annual Report and Semi-Annual Report or other documents available in your local jurisdiction which are available free of charge from MSIM 2. Société Générale Equity Research. December 2008Page 32 222673
  33. 33. Sector Weightings Morgan Stanley INVF Eurozone Equity Alpha Fund Largest Portfolio Holdings Within Each Sector (%)1 19.2 Industrials 12.9 Siemens, Schneider Electric, Safran 16.6 Consumer Staples Unilever, Ahold, Pernod Ricard 11.9 21.0 Financials BNP Paribas, BBVA, Allianz 18.6 9.0 Energy Royal Dutch Shell, ENI, Galp Energia 8.0 11.7 Consumer Discretionary Daimler, SES, Reed Elsevier 11.6 7.5 Health Care Bayer, Fresenius 8.8 6.9 Materials ArcelorMittal, Umicore, CRH 9.2 2.5 Information Technology Amadeus IT 4.9 3.2 Telefonica Telecommunication Services 7.0 0.0 Utilities 7.1 MS INVF Eurozone Equity Alpha Fund MSCI EMU Index Source: Morgan Stanley Investment Management 1. Data as of June 30, 2012. Subject to change daily. Provided for informational purposes only and should not be deemed as a recommendation to buy the securities mentioned or securities in the industries shown above. Morgan Stanley is a full-service securities firm engaged in securities trading and brokerage activities, investment banking, research and analysis, financing and financial advisory services. Applications for shares in any Morgan Stanley Investment Fund should not be made without first consulting the current Prospectus, Simplified Prospectus, Annual Report and Semi-Annual Report or other documents available in your local jurisdiction which are available free of charge from MSIM.Page 33 144114
  34. 34. Different from the benchmark Morgan Stanley INVF Eurozone Equity Alpha FundWe are not constrained by sector Sector weighting compared to benchmark1weightings – we make investmentdecisions based on the Underweight Overweightattractiveness and value ofindividual companies Industrials 6.3 Consumer Staples 4.7 Financials 2.4 Energy 1.0 Consumer Discretionary 0.1 Health Care (1.3) Materials (2.3) Information Technology (2.4) Telecommunication Services (3.8) Utilities (7.1) -8 -6 -4 -2 0 2 4 6 8 Difference to MSCI EMU (%) Source: Morgan Stanley Investment Management Limited 1. Data as of June 30, 2012. Subject to change daily. Provided informational purposes only and should not be deemed as a recommendation to buy the securities mentioned or securities in the industries shown above. Morgan Stanley is a full-service securities firm engaged in securities trading and brokerage activities, investment banking, research and analysis, financing and financial advisory services. Applications for shares in any Morgan Stanley Investment Fund should not be made without first consulting the current Prospectus, Simplified Prospectus, Annual Report and Semi-Annual Report or other documents available in your local jurisdiction which are available free of charge from MSIMPage 34 See benchmark weightings in the appendix. 222674

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