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Spectrum Tax Advantage SMA Select UMA Principal Global Investors

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Spectrum Tax Advantage SMA Select UMA Principal Global Investors Spectrum Tax Advantage SMA Select UMA Principal Global Investors Style: Preferred Securities Year Founded: 1983 Sub-Style: Preferred Securities GIMA Status: Approved 888 7th Ave; 25th Flr Firm AUM: $28.5 billion Firm Ownership: Principal Financial Group New York, New York 10019 Firm Strategy AUM: $1.5 billion Professional-Staff: 23 PRODUCT OVERVIEW TARGET PORTFOLIO CHARACTERISTICS PORTFOLIO STATISTICS Principal Global Investor, LLC's (Principal Global) investment Number of bond holdings: 80 to 100 ---------------06/21------ 12/20 philosophy is based on the belief that preferred securities have the ---------- Average maturity: 17.0 to 100.0 years Principal Index*** Principal potential to provide investors with the opportunity to receive relatively Global Global 5.0 to 10.0 years high current income and enhanced diversification. While Preferred Average duration: Number of bond holdings 105 — 116 Security strategy is classified as fixed income for allocation purposes, Average coupon: 4.0 to 9.0% the preferred securities in the strategy may be equity preferred Yield 4.6 — 4.8 securities (an equity position in the issuer, pay dividends at the Average turnover rate: 10 to 30% Distribution Rate — — — discretion of the issuer's board, and usually has no set maturity date) or debt preferred securities (a debt obligation of the issuer, pay Avg maturity 87 yrs. — 86.7 yrs. monthly or quarterly interest income, and may have fixed, long-term maturities), have other equity-like and/or debt-like features depending Avg duration 2.49 yrs. — 2.66 yrs. on terms of issue, and may be shown in account statements and on Avg coupon 5.0% — 5.2% trade confirmations as either equity or fixed income. Terms of individual preferred securities vary. Some have a mix of debt-like and equity-like features and attributes. Preferred securities may have higher yields than traditional fixed income securities, making them an attractive complement to traditional quality and debt instruments. The Preferred Securities strategy generates interest income and dividend income that may, depending on the investor's tax considerations, receive preferential tax treatment as Qualified Dividend Income (QDI) under current tax legislation. The Tax Advantaged strategy is mainly comprised of these issues. Besides the Tax Advantaged strategy, FIXED INCOME SECTOR DISTRIBUTION (%) ⁺ Principal Global offers a general Preferred Securities version of this 06/21 03/21 12/20 09/20 strategy which focuses on pre-tax yield and, in most cases, would be more appropriate for qualified and/or tax-deferred accounts. As Preferreds 93.43 95.18 94.53 95.44 individual circumstances may vary, please consult your tax Cash/Cash Equivalents 6.57 4.82 5.47 4.56 professional for guidance. ⁺Total may not equal 100% due to rounding. ***Index : ML Pref Stock Fixed Rate - P0P1 If this profile shows related performance, see the section titled "Related Performance" in the disclosures for important information about the performance shown prior to the inception of the Morgan Stanley Select UMA Program. The subsequent pages contain important disclosures and a glossary of terms. Information as of June 30, 2021, unless otherwise noted and is subject to change. Page 1 of 7 Spectrum Tax Advantage SMA Select UMA MANAGER'S INVESTMENT PROCESS RISK CONSIDERATIONS PORTFOLIO'S MATURITY STRUCTURE (%) ⁺ • Overall portfolio strategy is created through a collaboration of a small This strategy expects to hold a concentrated portfolio of a 06/21 03/21 12/20 09/20 team of well experienced senior management professionals, purely limited number of securities, a decline in the value of these 0 to 2 Years 0.00 0.00 0.00 0.00 focused on the preferred securities market. investments would cause the portfolio's overall value to decline • Spectrum’s process seeks to create value through bottom up security to a greater degree than that of a less concentrated portfolio. 2 to 4 Years 0.00 0.00 0.00 0.00 selection predominately in investment grade preferred securities The majority of preferred securities are 'callable' meaning that 4 to 6 Years 0.00 0.00 0.00 0.00 the issuer may retire the securities at specific prices and dates • All securities in the portfolio will be issued by companies with (or 6 to 8 Years 0.00 0.00 0.00 0.00 whose companies have) senior unsecured debt that is rated investment prior to maturity. Interest/dividend payments on certain grade by at least two of Moody's, S&P or Fitch. Investment grade rated preferred issues may be deferred by the issuer for periods of 8 to 12 Years 0.00 0.00 0.00 0.00 up to 5 to 10 years, depending on the particular issue. The debt issuers may also have issued below investment grade rated 12 to 17 Years 0.00 0.00 0.00 0.00 preferred securities (or have outstanding preferred securities where the investor would still have income tax liability even though credit rating has fallen below investment grade credit quality), which payments would not have been received. The initial interest Over 17 Years 93.43 95.18 94.53 95.44 rate on a floating rate or index-linked preferred security is often could be included in the portfolio. 6.57 4.82 5.47 4.56 lower than that of a fixed-rate security of the same maturity Cash/Cash Equivalents • Key drivers in the security selection process are credit strength and because the issuer may be required to pay a higher rate of yield. The security yield must be enticing, given the credit rating and interest over time, due to increases in the floating/linked index. credit trend relative to other preferred securities. In addition, the However, there can be no assurance that increases in the PORTFOLIO'S CREDIT QUALITY STRUCTURE (%) ⁺ preferred issue is analyzed relative to the real or theoretical level of the floating/linked index will occur. Some floating/linked indexes * same issuer’s corporate debt. Features such as call protection (i.e. the may be subject to call risk. Investing in securities entails risks, Investment Grade issuer cannot buy back the security until after a specified date), including: Fixed Income securities may be sensitive to changes subordination, and option-adjusted spreads are assessed to ensure a in prevailing interest rates. When rates rise the value generally 06/21 03/21 12/20 09/20 given issue provides a yield premium to justify its inclusion in the declines. There is no assurance that the private guarantors or AAA 6.57 4.82 5.47 4.56 portfolio. insurers will meet their obligations. U.S. Treasuries are AA 0.00 0.00 0.00 0.00 guaranteed by the U.S. government and, if held to maturity, offer a fixed rate of return and fixed principal value. Growth A 1.82 1.87 1.95 0.47 investing does not guarantee a profit or eliminate risk. The BBB 58.23 60.82 64.26 62.82 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. Bonds rated below investment grade may have Below Investment Grade speculative characteristics and present significant risks beyond BB 33.37 32.48 28.33 30.65 those of other securities, including greater credit risk and price volatility in the secondary market. Investors should be careful B 0.00 0.00 0.00 0.00 to consider these risks alongside their individual Below B 0.00 0.00 0.00 0.00 circumstances, objectives and risk tolerance before investing in high-yield bonds. If a strategy expects to hold a Not Rated 0.00 0.00 0.00 0.00 concentrated portfolio of a limited number of securities, it Cash/Cash Equivalents 0.00 0.00 0.00 0.00 should be noted that a decline in the value of these investments would cause the portfolio’s overall value to decline to a greater degree than that of a less concentrated portfolio. ⁺Total may not equal 100% due to rounding. ***Index : ML Pref Stock Fixed Rate - P0P1 If this profile shows related performance, see the section titled "Related Performance" in the disclosures for important information about the performance shown prior to the inception of the Morgan Stanley Select UMA Program. The subsequent pages contain important disclosures and a glossary of terms. Information as of June 30, 2021, unless otherwise noted and is subject to change. Page 2 of 7 Spectrum Tax Advantage SMA Select UMA RISK/RETURN ANALYSIS - 5 YEARS ENDING 06/30/21 AVERAGE ANNUAL TOTAL RETURN (%) - PERIODS ENDING 06/30/21 R R a a t t e e o o f f R R e e t t u u r r n n s s Standard Deviation (%) STD ROR INVESTMENT RESULTS Annual Rates of Return (%) 10 Year - Ending 06/30/21 Principal Global (Gross) 8.88 5.45 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Annual Std. Dev. Principal Global (Net) 8.85 3.06 Principal Global (Gross) 1.14 17.87 -4.90 16.26 9.67 0.17 11.48 -4.80 17.57 7.58 6.55 8.13 ML Pref Stock Fixed Rate - P0P1 8.13 5.75 Principal Global (Net) -1.17 15.22 -7.07 13.63 7.19 -2.13 8.95 -7.02 14.93 5.19 4.13 8.10 90-Day T-Bills 0.44 1.14 ML Pref Stock Fixed 4.11 13.59 -3.65 15.44 7.58 2.32 10.58 -4.34 17.71 6.95 6.43 7.04 Rate - P0P1 RISK VOLATALITY (%) PORTFOLIO'S QUARTERLY RETURNS (%) PORTFOLIO'S RISK STATISTICS -€“ PERIODS ENDING 06/30/21 ¹ ² R Quarter1 Quarter2 Quarter3 Quarter4 3 Year 5 Year a Gross Net Gross Net Gross Net Gross Net Standard Deviation 10.24% 8.88% t 2011 3.37
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