1. Investment management
The Case for Diversification: equity securities Indexes
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
Highest
Large-Cap Large-Cap Large-Cap Large-Cap Large-Cap
Mid-Cap Small-Cap Small-Cap International International International Small-Cap
Value Growth Growth Value Growth
8.25 2.49 47.25 20.25 13.54 26.34 -33.79
35.18 38.71 33.16 –15.52 11.81
Large-Cap Large-Cap Large-Cap Large-Cap
S&P 500 S&P 500 International International Mid-Cap Mid-Cap Mid-Cap International
Value Value Value Value
33.36 28.57 26.96 –15.94 40.06 20.22 12.65 11.17
7.02 –5.59 22.25 -36.85
Large-Cap Large-Cap
International Small-Cap Small-Cap Mid-Cap Mid-Cap International Small-Cap Small-Cap Mid-Cap S&P 500
Performance %
Growth Value
20.00 21.26 –3.02 –5.62 –16.19 38.59 18.33 18.37 5.60 -37.00
30.49 7.05
Large-Cap Large-Cap Large-Cap Large-Cap Large-Cap
Mid-Cap S&P 500 S&P 500 S&P 500 Small-Cap S&P 500 S&P 500
Value Value Value Growth Growth
29.01 21.04 –9.12 –11.88 –20.48 15.79 5.49
15.63 30.03 16.49 5.26 -38.44
Large-Cap Large-Cap Large-Cap
Small-Cap Mid-Cap Mid-Cap International S&P 500 S&P 500 S&P 500 Mid-Cap Mid-Cap
Growth Growth Value
22.36 10.09 18.23 –14.17 –22.09 10.88 4.91 15.26 -41.46
–20.42 29.75 –0.17
Large-Cap Large-Cap Large-Cap Large-Cap Large-Cap
International Small-Cap International S&P 500 Small-Cap Small-Cap International
Lowest
Value Growth Growth Growth Growth
1.78 –2.55 –21.44 28.68 4.55 –1.57 -43.38
7.35 –22.42 –27.88 6.30 9.07
n Large-Cap Value n Large-Cap Growth n Small-Cap n Mid-Cap n International n S&P 500
Source: Lipper Inc. The above table is presented for information purposes only and is not meant to depict past performance or predict future performance of any particular Morgan Stanley investment. Performance
of all cited indexes is calculated on a total return basis with dividends reinvested. The indexes do not include any expenses, fees or charges and are unmanaged and should not be considered investments. Past
performance is no guarantee of future results. Foreign securities investments involve risks in addition to those associated with domestic securities, including currency, political, economic and market risks.
Investing in small- and mid-size companies involves risks in addition to those associated with large-size companies. International is represented by the Morgan Stanley Capital International (MSCI) EAFE Index, which
measures the performance for a diverse range of global stock markets within Europe, Australasia and the Far East. The performance of the index is listed in U.S. dollars and assumes reinvestment of net dividends.
“Net dividends” reflects a reduction in dividends after taking into account withholding of taxes by certain foreign countries represented in the index. The Standard and Poor’s 500 Index (S&P 500®) is a broad-
based index, the performance of which is based on the performance of 500 widely held common stocks chosen for market size, liquidity and industry group representation. Small-Cap is represented by the Russell
2000® Index, a capitalization-weighted index, which is comprised of the 2,000 smallest stocks included in the Russell 3000® Index. Mid-Cap is represented by the Russell Midcap® Index, a capitalization-weighted
index, which is comprised of the 800 smallest stocks included in the Russell 1000® Index, representing approximately 24 percent of the total market capitalization of the Russell 1000® Index. Large-Cap Growth
is represented by the Russell 1000® Growth Index, which measures the performance of those Russell 1000 companies with higher price-to-book ratios and higher forecasted growth values. Large-Cap Value is
represented by the Russell 1000® Value Index, which measures the performance of those Russell 1000 companies with lower price-to-book ratios and lower forecasted growth values.
NOT FDIC INSURED OFFER NO BANK GUARANTEE MAY LOSE VALUE NOT INSURED BY ANY FEDERAL GOVERNMENT AGENCY NOT A DEPOSIT

2. The Case for Diversification: Fixed Income securities Indexes
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
Highest
Government Government Corporate Government Government Government
High Yield Senior Loan High Yield High Yield Senior Loan High Yield
Bond Bond Bond Bond Bond Bond
12.76 6.35 28.97 11.13 5.45 11.85
9.85 13.24 10.31 11.50 8.66 12.39
Corporate Corporate Short-Term Municipal Short-Term Corporate Municipal Short-Term
Senior Loan Senior Loan Senior Loan Mortgage
Bond Bond Treasury Bond Treasury Bond Bond Treasury
14.94 6.70 7.95 8.34
10.23 8.57 3.06 11.68 8.30 10.12 3.51 7.32
Government Short-Term Municipal Corporate Corporate Short-Term
High Yield Mortgage Mortgage High Yield Mortgage Mortgage
Bond Treasury Bond Bond Bond Treasury
2.39 11.16 8.22 2.74 5.22 6.90
9.59 7.00 9.60 8.24 5.39 6.59
Performance %
Corporate Government Municipal Government Municipal Corporate Municipal
Mortgage Mortgage Mortgage Mortgage Mortgage
Bond Bond Bond Bond Bond Bond Bond
9.49 6.96 1.86 8.75 4.70
9.08 7.23 5.31 2.65 4.84 4.56 -2.47
Municipal Corporate Short-Term Short-Term Municipal Corporate Municipal Corporate
Senior Loan High Yield Mortgage Mortgage
Bond Bond Treasury Treasury Bond Bond Bond Bond
6.76 5.28 3.07 2.61
9.19 –1.96 8.00 5.76 4.48 4.30 3.36 -4.94
Municipal Municipal Municipal Government Government Corporate Short-Term
Senior Loan Senior Loan Senior Loan High Yield High Yield
Bond Bond Bond Bond Bond Bond Treasury
7.73 4.85 0.13 1.87 -26.16
6.48 –2.06 5.13 2.36 3.48 1.68 3.96
Short-Term Government Short-Term Short-Term Short-Term Government
High Yield High Yield Senior Loan High Yield Senior Loan Senior Loan
Lowest
Treasury Bond Treasury Treasury Treasury Bond
1.87 –5.86 0.34 –1.41 0.02 -43.32
6.66 –2.23 1.90 0.91 1.67 3.48
n Senior Loan n Short-Term Treasury n High Yield n Mortgage n Corporate Bond n Government Bond n Municipal Bond
Source: Lipper Inc. This example is for illustrative purposes only and does not represent the performance of any Morgan Stanley investment. Past performance is no guarantee of future results. The securities
represented in each category involve investment risks, including default and loss of principal. Only U.S. Treasury securities and certain securities issued by the U.S. government are guaranteed by the full faith and credit
of the United States. As interest rates rise, bond prices fall. Corporate Bond is represented by Barclays Capital U.S. Corporate Index, which includes publicly issued U.S. corporate and specified foreign debentures and
secured notes that meet the specified maturity, liquidity and quality requirements; Government Bond is represented by Barclays Capital U.S. Government Index, which is composed of the Barclays Capital Treasury Bond
IU09-00730P-Y12/08
Index (all public obligations of the U.S. Treasury, except flower bonds and foreign-targeted issues) and the Lehman Agency Bond Index (all publicly issued debt of U.S. government agencies, quasi-federal corporations, and
corporate debt issued or guaranteed by the U.S. government); High Yield is represented by Barclays Capital Corporate High-Yield Index, which includes noninvestment-grade securities which have at least $150 million
in outstanding issuance, a maturity greater than one year and are issued in fixed-rate U.S. dollar denominations; Municipal Bond is represented by Barclays Capital Municipal Bond Index, which includes municipal bonds
with a credit rating of at least Baa and have a maturity of at least two years; Mortgage is represented by Barclays Capital Fixed Rate MBS Index, which is composed of fixed-rate securities backed by mortgage pools
of Ginnie Mae, Freddie Mac and Fannie Mae. Senior Loan is represented by the average of fund returns in the Lipper Loan Participation category, which includes funds that invest primarily in participation interests in
collateralized senior corporate loans that have floating or variable rates. As of December 31, 2008, there were 45 funds in the Loan Participation category. Short-Term Treasury is represented by Merrill Lynch 1-3 Year
5942347
U.S. Treasury Index, which represents all U.S. Treasury notes and bonds with maturities greater than or equal to one year and less than three years. Indexes are unmanaged and do not include sales charges or fees that
would be paid by an investor purchasing the securities they represent. Such costs would lower performance. It is not possible to invest directly in an index.
When comparing asset-allocation strategies to your personal financial situation, you should consider your time frame and all of your personal savings and investments, in addition to your retirement assets and risk
Lit-link: CASEFORDIV 12/08
tolerance level. Your financial advisor can help you assess your individual situation before you make any decisions. Diversification does not protect against a loss.
© 2009 Morgan Stanley. Morgan Stanley Distributors Inc.
www.morganstanley.com/msim