An MVA Fixed Annuity is a contract between you and an insurance company to provide future income. The insurance company pays a fixed rate of return for a specified time period known as a "guarantee period."

However, should you decide to withdraw your money outside of the permitted window provided by the contract, you may get more or less than what you invested. If current interest rates are higher than the contract guaranteed rate, you get less. If current rates are lower, you get more. The increase or decrease is called a "market value adjustment."

Learning about MVA fixed annuities

In order to be an informed investor in MVA fixed annuities, you should do several things. Typically, an MVA fixed annuity that Morgan Stanley Smith Barney sells provides an informational document known as a "prospectus." You should read the prospectus carefully. Since the guarantees in each annuity depend solely on the financial strength of the insurance carrier, you should evaluate the insurance company's financial condition. The prospectus includes a summary of the insurance company's financial information. You may also want to consult public rating agencies such as Moody’s, Standard and Poor's, or A. M. Best that evaluates insurance company financial strength. Finally, you should also discuss your investment goals with your Financial Advisor.

General information on annuities can be obtained from The American Council of Life Insurers Web site at http://www.acli.com/ACLI/Consumer/Annuities/Default.htm and Morgan Stanley's Web site www.morganstanleyindividual.com/investmentproducts/annuities provides specific information on our annuity offerings.

Costs associated with investing in MVA fixed annuities

Typically MVA fixed annuities do not have upfront sales loads or ongoing expenses. The insurance company's costs are built into the interest rate paid on the contract. In addition to the market value adjustment described above, your contract may be subject to an early withdrawal charge (also called a contingent deferred sales charge) in the first 5 - 10 years of the contract. You should consult the prospectus for the MVA fixed annuity that you are considering for the specific early withdrawal charge schedule and the market value adjustment calculation.

Compensation to Morgan Stanley Smith Barney on MVA Fixed annuities is paid by the issuing insurance company and does not represent an additional charge to you. The insurance company pays compensation out of their general revenues. Morgan Stanley Smith Barney receives commissions on the initial sale that are a percentage of your annuity contributions and may be paid an additional commission if you decide to renew your annuity at the end of a guarantee period. Commissions generally do not exceed 4% of contributions. The maximum commission is currently 3% of contributions.

A portion of the payment received by Morgan Stanley Smith Barney is paid to your Financial Advisor which typically does not exceed 3%. Morgan Stanley Smith Barney generally pays your Financial Advisor the same commission rate for a given guarantee period. However, not all MVA fixed annuities pay a renewal commission.

In addition to commissions, the insurance companies may reimburse Morgan Stanley Smith Barney for the cost of client seminars and Financial Advisor educational conferences.

To compensate Morgan Stanley Smith Barney for the costs of distribution, insurance licensing, insurance company due diligence and other home office services, the insurance carriers pay Morgan Stanley Smith Barney an additional percentage of assets not exceeding 0.10%. Morgan Stanley Smith Barney currently offers MVA fixed annuities issued by a variety of carriers. Contact your Financial Advisor to review the current offerings.