Investing in the Capital Markets

Investing in the Capital Markets

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Investing in the Capital Markets with Morgan Stanley Wealth Management. The capital markets can seem daunting for even the most sophisticated individual investor. Amid daily news of mergers and acquisitions, leveraged buyouts, initial public offerings, state and local government bond issuances and budget deficits, it’s only natural to feel uneasy about making investment decisions in a financial environment characterized by so much complexity.

At Morgan Stanley Wealth Management, individual investors are a priority. We are the only U.S. wealth management firm with dedicated fixed income and equity trading platforms focused on individual investors. Our 200-plus capital markets professionals partner with you and your Financial Advisor to present you with actionable investment ideas to help you navigate a constantly evolving financial landscape, all the while providing the highest standards of client service and responsiveness.

In the next few pages, we invite you to learn more about why you should choose Morgan Stanley Wealth Management to help you invest in today’s capital markets.

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 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, Morgan Stanley Smith Barney LLC or Citigroup Global Markets Inc. It was prepared by Morgan Stanley Wealth Management sales, trading or other non-research personnel. Past performance is not necessarily a guide to future performance. Please see additional important information and qualifications at the end of this material.

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capital markets overview / 03 /Your experienced guide to global investment opportunities.

access & intelligence / 04 /Products, research and services for informed investing.

overview oF Fixed income securities / 06 / A robust, taxable and tax-exempt off ering.

overview oF equity securities / 08 / Institutional level trading for individual investors.

overview oF structured investments / 10 / Flexible and strategic tools to manage risk.

overview oF physical precious metals / 12 /A multifaceted investment opportunity.

overview oF Foreign exchange / 13 /Access to more than 25 currencies.

a program centered on you / 14 /Focused on helping grow your wealth.

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Access

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Capital Markets Overviewaccess / meeting yoUr needs

On any given day, the fi nancial news is likely to include any or all of the following capital markets activities: a Silicon Valley company sells shares to the public for the fi rst time; a city issues municipal bonds to fi nance the construction of a new school; a South American-based corporation borrows funds in the United States to refi nance local, higher interest rate debt; or a developing country’s central bank increases its gold holdings as a means of diversifying its foreign currency reserves. All of these transactions represent an investment opportunity for sophisticated individuals, but with fi erce competition from institutions armed with market intelligence, you could be at a disadvantage without help from an experienced and knowledgeable partner.

At Morgan Stanley Wealth Management Capital Markets, individual investors are a major focus, and we will provide you with access to market insight, risk management resources and analytical tools to help you with your investment decisions.

This material is not a solicitation of any offer to buy or sell any security or other fi nancial instrument or to participate in any trading strategy. This material was not prepared by the research departments of Morgan Stanley & Co. LLC, Morgan Stanley Smith Barney LLC or Citigroup Global Markets Inc. Please refer to important information and qualifi cations at the end of this material.

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Access & Intelligenceintelligence / informed investing

Through our multiproduct trading desks, we provide you with a robust fixed income offering, institutional level equity trading, research and market intelligence and the opportunity to invest in newly issued debt and equity securities.

Fixed income. Morgan Stanley Wealth Management’s fixed income trading desk uses an open architecture system that gives you access to both proprietary and third-party offerings. Our extensive inventory of fixed income securities typically represents more than 15,000 different positions daily and includes U.S. Treasury, agency and mortgage-backed securities; certificates of deposit; municipal, corporate and foreign bonds; convertibles; and preferred securities.

equities. Through Morgan Stanley Wealth Management, our traders pro-vide you with access to equity markets via trading systems which may utilize proprietary trading algorithms. These systems can give you access to leading-edge equity trading strategies that at-tempt to maximize efficiency and enhance profitability.

syndicate oFFerings. Capital Markets leverages Morgan Stanley & Co.’s and

Citigroup Global Markets’ positions as leading underwriters in the debt and equity capital markets to provide you with access to new-issue corporate and agency bonds; initial, secondary and international equity offerings; and structured investments.

intellectual capital. As a Morgan Stanley Wealth Management client, you have access to the intellectual capital from the research analysts and strategists of our

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. This material was not prepared by the research departments of Morgan Stanley & Co. LLC, Morgan Stanley Smith Barney LLC or Citigroup Global Markets Inc. Please refer to important information and qualifications at the end of this material.

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intelligence / informed investing

parent companies—more than 300 professionals covering in excess of 3,000 companies. Morgan Stanley Wealth Management’s Global Invest-ment Committee distills the best advice from Morgan Stanley’s and Citigroup’s research teams and de-velops model investment portfolios, generates tactical insights that serve as the basis of our investment ideas and formulates strategies that guide the management of Morgan Stanley

advisory accounts.Utilizing all these resources, our capital

markets professionals partner with you and your Financial Advisor to provide actionable investment ideas to help you meet your financial goals.

In addition, our library of educational materials on the product areas we offer is another service that we provide. If you want to learn more about a particu-lar investment product, your Financial Advisor can obtain a copy of the relevant

brochure for you.

portFolio reviews. All of these offerings and services would be worth-less if there was no way to assess your current situation and develop a plan to help you meet your investment objec-tives. As a free service, Capital Markets provides reviews of your existing fixed income and equity portfolios.1

1 Reviews are subject to portfolio size minimums.


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This material is not a solicitation of any offer to buy or sell any security or other fi nancial instrument or to participate in any trading strategy. This material was not prepared by the research departments of Morgan Stanley & Co. LLC, Morgan Stanley Smith Barney LLC or Citigroup Global Markets Inc. Please refer to important information and qualifi cations at the end of this material.

Overview of Fixed Income SecuritiesBonds / fleXibility and diversity

Bonds are debt obligations of governments, agencies, municipalities and corporations. The issuer is obligated to pay the investor interest at a specifi ed rate over the life of the bond and to return principal at maturity.

A fl exible and diverse asset class, fi xed income securities will likely have a place in your portfolio whether your invest-ment objective is income, growth or preservation of capital. Investment grade bonds—those with the highest credit quality—typically serve as an integral part of a diversifi ed portfolio.2

2 Diversifi cation does not guarantee a profi t or protect against a loss in a declining fi nan-cial market.

Taxable Tax-Exempt

Interest Sensitive Credit Sensitive Municipal

Treasury Securities Corporate Bonds General Obligation Bonds

Agency Securities High Yield Bonds Revenue Bonds

Mortgage-Backed Securities Preferred Securities Pre-refunded Bonds

Certifi cates of Deposit Convertible Bonds High Yield Municipal Bonds

Short-Term Debt Foreign Denominated Bonds and Emerging Market Debt

Non-Traditional Municipal Bonds

Capital Markets’ Fixed Income Securities Offering

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Flexibility

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Overview of Equity Securitiesstocks / long-term growth potential

Equities, commonly referred to as stocks, are securities that represent proportional ownership in a corporation and carry a claim to part of the corporation’s assets and earnings. If you are looking for capital appreciation, long-term growth and portfolio diversification, a portion of your portfolio should be allocated to stocks.

equity perFormance over the years. Since 1990, equities’ average annual return is almost twice that of long-term government bonds and more than three times the inflation rate. For example, a $100,000 investment in equities (as represented by the S&P 500 Index) made over that time period would have grown to $557,377 (assuming reinvestment of dividends), while the same investment in 10-year U.S. Treasury bonds would have resulted in a total of $304,174.3

capital markets’ equity oFFerings• U.S. Equities (exchange-traded and over-the-counter)• Closed-End Funds• American Depositary Receipts (ADR)• Options and Futures• Initial Public Offerings (IPOs)4

• Model Portfolios• Exchange-Traded Funds• Exchange-Traded Notes


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S&P 500

Long-Term Govt.Bonds

Inflation

‘10‘90 ‘91 ‘92 ‘93 ‘94 ‘95 ‘96 ‘97 ‘98 ‘99 ‘00 ‘01 ‘02 ‘03 ‘04 ‘05 ‘06 ‘07 ‘08 ‘090

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700 Thousand

stocks / long-term growth potential

3 Past performance is no guarantee of future results. Yields will vary.4 IPOs are subject to suitability requirements and availability.5 This chart is for illustrative purposes only and does not represent the performance of any specific investment. Source: Federal Reserve Release 10-yr U.S. Treasury bond average annual nominal yields, S&P 500 average annual total return and inflation, as measured by the Consumer Price Index Bureau of Labor Statistics (CPI-U), as of September 2011. The CPI-U is compiled by the Bureau of Labor

Statistics. It represents the average change in consumer prices for a fixed market basket of goods and services purchased for consumption by urban wage earners, clerical workers, professional, managerial and technical workers, the self employed, short-term workers, the unemployed, retirees and others not in the labor force. The S&P 500 Index is an unmanaged index of common stocks that is generally representative of the U.S. stock market as a whole. One cannot invest directly in an index.


U.S. Dollar Return on U.S. Capital Markets Indices5

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Overview of Structured Investmentsstructured investments / managing volatility

Structured investments are securities that provide you with access to a particular asset or asset class without requiring a direct investment in the underlying securities. Their performance, however, is linked to the market segment to which they are associated, and they are subject to the credit risk of the issuer.

An evolving segment of the capital markets, investors use structured investments to express a market view (bullish, bearish or market neutral), amend an investment objective (income or capital appreciation), hedge an exposure or gain access to a variety of asset classes and markets (stocks, bonds, currencies and commodities).

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Structure

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Overview of Physical Precious Metalsprecious metals / a new dimension

Physical precious metals—gold, silver, platinum and palladium—are well known for their historical use as a medium of exchange, a component in jewelry and for their application in several industries, including the electronic, automotive, photographic and evolving nanotechnology sectors.

As an investment, physical precious metals usually play a defensive role in a diversified portfolio. They historically display low correlation with stocks and bonds over the long term, and they have traditionally been used to hedge inflation or a decline in the dollar. All four major physical precious metals can be purchased at Morgan Stanley Wealth Management, and ownership options include bullion coins and bullion bars.

Gold Silver Platinum Palladium

Bars

Coins • American Eagle

• American Buffalo

• Canadian Maple Leaf

• South African Kruggerand

• Austrian Philharmonic

Capital Markets’ Physical Precious Metals Offering

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Overview of Foreign ExchangeForeign exchange / tools for global investing

The foreign exchange market (also known as ‘FX’ or ‘Forex’) is the place where currency transactions occur.6 The market facilitates payments across national borders, as well as allows participants to hedge currency risks that may arise during international business activities.

Morgan Stanley Wealth Management provides foreign currency spot and forward conversion services that can be used for a number of purposes, including:• Large purchases that must be paid

for in a foreign currency• Paying salaries in a currency other

than the U.S. dollar• Converting payments received in

a foreign currency to U.S. dollars• Converting investments made/

held abroad

Australian Dollar AUD Icelandic Krona ISK Saudi Dinar SARBritish Pound GBP Israeli Shekel ILS Singapore Dollar SGDBulgarian Lev BGN Japanese Yen JPY South African Rand ZARCanadian Dollar CAD Kuwaiti Dinar KWD Swedish Krona SEKCzech Koruna CZK Mexican Peso MXN Swiss Franc CHFDanish Krone DKK New Zealand Dollar NZD Thai Bat THBEuro EUR Norwegian Krone NOK Turkish Lira TRYHong Kong Dollar HKD Polish Zloty PLN U.S. Dollar USDHungarian Forint HUF Romania Lei RON

Our foreign exchange desk can provide you with access to the following currencies:

6 Certain foreign exchange transactions may only be entered into by clients who qualify as Eligible Contract Participants (ECP) as defined by the Commodity Exchange Act.

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A Program Centered on You. Morgan Stanley Wealth Management is focused on providing you with diverse product offerings, objective advice and a high level of service to help you protect, manage and grow your wealth.This material is not a solicitation of any offer to buy or sell any security or other fi nancial instrument or to participatein any trading strategy. This material was not prepared by the research departments of Morgan Stanley & Co. LLC, Morgan Stanley Smith Barney LLC or Citigroup Global Markets Inc. Please refer to important information andqualifi cations at the end of this material.

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The value of fixed income securities will fluctuate and, upon a sale, may be worth more or less than their original cost or maturity value.

Equity securities may fluctuate in response to news on companies, industries, market conditions and general economic environment.

An investment in Structured Investments involves risks. These risks can include but are not limited to: substantial loss of principal, fluctuations in the price, level or yield of underlying instruments, interest rates, currency values and credit quality, limited liquidity, credit risk of the issuer, and conflicts of interest.

Physical precious metals are non-regulated products. Precious metals are speculative investments, which may experience short-tem 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.

Before undertaking foreign exchange transactions, you should understand the associated risks. Engaging in foreign currency transactions entails more varied risks than normally associated with transactions in the domestic securities markets. Attention should be paid to market, credit, sovereign and liquidity risks.

Important Information and QualificationsThis material was prepared by sales, trading or other non-research personnel of Morgan Stanley Smith Barney LLC (together with its affiliates, hereinafter “Morgan Stanley Wealth Management” or “the firm”). Morgan Stanley Wealth Management was formed pursuant to a Joint Venture between Citigroup Inc. and Morgan Stanley & Co. LLC (“Morgan Stanley & Co.”). This material was not produced by a research analyst of Morgan Stanley & Co., Citigroup Global Markets Inc., (“Citigroup”) or

Morgan Stanley Wealth Management, although it may refer to a Morgan Stanley & Co., Citigroup, or Morgan Stanley Wealth Management research analyst or report. Unless otherwise indicated, these views (if any) are the author’s and may differ from those of the aforementioned research departments or others in the firms.

The securities/instruments discussed in this material may not be suitable or appropriate for all investors. The appropriateness of a particular investment or strategy will depend on an investor’s individual circumstances and objectives. This material does not provide individually tailored investment advice or offer tax, regulatory, accounting or legal advice. By submitting this document to you, Morgan Stanley Wealth Management is not advising you to take any particular action based on the information, opinions or views contained in this document. Prior to entering into any proposed transaction, recipients should determine, in consultation with their own investment, legal, tax, regulatory and accounting advisors, the economic risks and merits, as well as the legal, tax, regulatory and accounting characteristics and consequences, of the transaction. This information is not intended to, and should not, form a primary basis for any investment decision. You should consider this material among other factors in making an investment decision. Unless stated otherwise, the material contained herein has not been based on a consideration of any individual client circumstances and as such should not be considered to be a personal recommendation. This material was not intended or written to be used, and it cannot be used by any taxpayer, for the purpose of avoiding penalties that may be imposed on the taxpayer under U.S. federal tax laws. Each taxpayer should seek advice based on the taxpayer’s particular circumstances from an independent tax advisor. The firm is not acting as a fiduciary under either the Employee Retirement Income Security Act of 1974, as amended (“ERISA”) or under section 4975 of the Internal Revenue Code of 1986 as amended (“Code”) in providing this material. Morgan Stanley Wealth Management is not acting as a municipal advisor and the opinions or views contained herein are not intended to be, and do not constitute, advice within the meaning of Section 975 of the Dodd-Frank Wall Street Reform and Consumer Protection Act.

This material was prepared by or in conjunction with Morgan Stanley Wealth Management trading desks that may deal as principal in or own or act as market maker or liquidity provider for the securities/instruments (or related derivatives)

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mentioned herein and may trade them in ways different from those discussed in this material. Morgan Stanley Wealth Management and its affiliates may act in a principal or agency capacity, and will charge a markup or commission. The trading desk may have accumulated a position in the subject securities/instruments based on the information contained herein. Trading desk materials are not independent of the proprietary interests of the firm, which may conflict with your interests. We may also perform or seek to perform investment banking services for the issuers of the securities/instruments mentioned herein.

The author(s) 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 Wealth Management is involved in many businesses that may relate to companies, securities or instruments mentioned in this material. These businesses include market-making and specialized trading, risk arbitrage and other proprietary trading, fund management, investment services and investment banking.

This material has been prepared for informational purposes only and is not an offer to buy or a solicitation of any offer to sell any security/instrument, or to participate in any trading strategy. Any such offer would be made only after an investor had completed an independent investigation of the securities, instruments or transactions, and received all information required to make his/her own investment decision, including, where applicable, a review of any prospectus, prospectus supplement, offering circular or memorandum describing such security or instrument. That information would supersede this material and 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 is stale or may change. We make no express or implied representation or warranty with respect to the accuracy or completeness of this material, nor are we obligated to provide updated information on the securities/instruments mentioned herein.

A secondary market may not exist for certain of the instruments referenced herein.Any 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 security/instrument or otherwise applicable to any transaction.

The value of and income from investments may vary because of changes in interest rates, foreign exchange rates, default rates, prepayment rates, prices of securities/instruments, market indexes, operational or financial conditions of companies or other factors. There may be time limitations on the exercise of options or other rights in securities/instruments transactions. Past performance is not necessarily a guide to future performance. Estimates of future performance are based on assumptions that may not be realized. Actual events 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 Wealth Management does not represent that any such assumptions will reflect actual future events or that all assumptions have been considered or stated. 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.

The trademarks and service marks contained herein are the property of their respective owners. Third-party data providers make no warranties or representations, express or implied, relating to the accuracy, completeness or timeliness of the data they provide and shall not have liability for any damages of any kind relating to such data. Unless otherwise specifically indicated, all information in these materials with respect to any third party not affiliated with Morgan Stanley Wealth Management has been provided by, and is the sole responsibility of, such third party and has not been independently verified by Morgan Stanley Wealth Management, its affiliates or any other independent third party.

This material may not be sold or redistributed without the prior written consent of Morgan Stanley Wealth Management. This material is not for distribution outside the United States of America.

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Investing in the Capital Markets