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S T R U C T U R E D I N V E S T M E N T S
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Client Strategy Guide: December 2012 Offerings
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Free Writing Prospectus
Dated December 11, 2012
Registration Statement No. 333-172554
and 333-172554-01
Filed Pursuant to Rule 433
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This material was not prepared by the Research Departments of Morgan Stanley Smith Barney LLC, Morgan
Stanley & Co. LLC, or Citigroup Global Markets Inc., and you should not regard it as a research report. Please see the offering materials for complete product disclosure including tax disclosure and related risks.
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Client Strategy Guide: December 2012
Offerings
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Page
2
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Table of Contents
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Tactical Offerings
Offerings with terms of 18 months or less
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Leveraged Performance
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page 7
page
8
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Strategic Offerings
Offerings with terms of more than 18 months
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Enhanced Yield
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page 9
page 10
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Market-Linked Notes
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page 14
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Market-Linked Deposits -
FDIC Insured
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.
page 15
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This material was not prepared by the Research Departments of Morgan Stanley Smith Barney LLC, Morgan Stanley & Co. LLC, or Citigroup Global Markets
Inc. and you should not regard it as a research report. Please see the offering materials for complete product disclosure including tax disclosure and related risks.
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December 2012
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Client Strategy Guide: December 2012
Offerings
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Page
3
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Important Information Regarding Offering Documents
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The products set forth in the following pages are intended as a general indication only of the Structured
Investments offerings available through Morgan Stanley Wealth Management through the date when the ticketing closes for each offering. Morgan Stanley Wealth Management or the applicable issuer reserves the right to terminate any offering prior to
its trade date, to postpone the trade date, or to close ticketing early on any offering. The information set forth herein provides only a summary of terms and does not contain the complete terms and conditions for any offering of an SEC Registered
Offering or a Market-Linked Certificate of Deposit. You should read the complete offering materials referenced below before you invest in any product.
Additional Information for SEC Registered (Public) Offerings
Each issuer has separately filed
a registration statement (including a prospectus) with the Securities & Exchange Commission (or SEC), for the offerings by that issuer to which this Strategy Guide relates. Before you invest in any of the offerings identified in this
Strategy Guide, you should read the prospectus and the applicable registration statement, the applicable pricing supplement, prospectus supplements and any other documents relating to the offering that the applicable issuer has filed with the SEC
for more complete information about the applicable issuer and the offering. You may get these documents without cost by visiting EDGAR on the SEC web site at
www.sec.gov
.
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—
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For Registered Offerings Issued by Citigroup Funding Inc.:
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Citigroup Funding Inc.’s CIK on the SEC web site is 0001318281
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Alternatively, Morgan Stanley Wealth Management will arrange to send you the prospectus and any other documents
related to the offering electronically or hard copy if you so request by calling the toll-free number 1-800-584-6837 or emailing
prospectus@morganstanley.com
or by calling your Financial Advisor.
The securities described herein (other than the market-linked certificates of deposit) are not bank deposits and are not insured by the Federal
Deposit Insurance Corporation or any other governmental agency, nor are they obligations of, or guaranteed by, a bank.
Additional Information for Market-Linked Certificates of Deposit (MLDs)
MLDs are not SEC registered offerings. Before you invest in any MLD, you should read the complete offering materials applicable to such MLD. For
indicative terms and conditions on any Market-Linked Certificate of Deposit, please contact your Morgan Stanley Financial Advisor or call the toll-free number 1-800-584-6837.
Each issuer listed above is the issuer for offerings only where expressly identified. None of the issuers are responsible for the filings made with the SEC by the other issuers identified in this document.
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This material was not prepared by the Research Departments of Morgan Stanley Smith Barney LLC, Morgan Stanley & Co. LLC, or Citigroup Global Markets
Inc. and you should not regard it as a research report. Please see the offering materials for complete product disclosure including tax disclosure and related risks.
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December 2012
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Client Strategy Guide: December 2012
Offerings
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Page
4
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Selected Features & Risk Disclosures
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Features
Structured
Investments offer investors choices in terms of underlying asset, market view, time horizon, potential returns and risk tolerance.
Such features may
include:
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o
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Varying levels of exposure to potential capital appreciation or depreciation
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o
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Returns based on a defined formula
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o
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Variety of underlying assets, including equities, commodities, currencies and interest rates
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o
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Minimum investment of $1,000, unless otherwise noted
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Key Risks
An investment in Structured Investments involves a variety of risks. The following are some of the significant risks related to
Structured Investments. Please refer to the “Selected Risks & Considerations” section at the end of this brochure for a fuller description of these risk factors.
The market price of Structured Investments may be influenced by a variety of unpredictable factors.
Several factors may influence the value
of a particular Structured Investment in the secondary market, including, but not limited to, the value and volatility of the underlying asset, interest rates, credit spreads charged by the market for taking the applicable issuer’s credit risk,
dividend rates on any equity underlying asset, and time remaining to maturity. In addition, we expect that the secondary market price of a Structured Investment will be adversely affected by the fact that the issue price of the Structured Investment
includes the agent’s commissions and expected profit.
Issuer credit risk.
All payments on Structured Investments are
dependent on the applicable issuer’s ability to pay all amounts due and therefore investors are subject to the credit risk of the applicable issuer.
Secondary trading may be limited.
There may be little or no secondary market for a particular Structured Investment. If the applicable pricing supplement so specifies, we may apply to list a Structured
Investment on a securities exchange, but it is not possible to predict whether any Structured Investment will meet the listing requirements of that particular exchange, or if listed, whether any secondary market will exist.
Appreciation potential or participation in the underlying asset may be limited.
The terms of a Structured Investment may limit the maximum
payment at maturity or the extent to which the return reflects the performance of the underlying asset.
Potential loss of
principal
.
The terms of a Structured Investment may not provide for the return of principal and an investment may result in a loss of some or all of your principal. Even where repayment of principal is provided for by the terms of the
Structured Investment, it is still subject to the credit risk of the applicable issuer and the applicable issuer’s ability to repay its obligations. In addition, you may receive less, and possibly significantly less, than the stated principal
amount if you sell your investment prior to maturity.
Structured Investments that provide for repayment of principal typically do not
make periodic interest payments.
Unlike ordinary debt securities, Structured Investments that provide for repayment of principal typically do not pay interest. Instead, at maturity, the investor receives the principal amount plus a supplemental
redemption amount, if any, based on the performance of the underlying asset, in each case, subject to the credit risk of the applicable issuer.
You may receive only the principal amount at maturity for Structured Investments that provide for repayment of principal.
Because the supplemental redemption amount due at maturity on these Structured
Investments may equal zero, the return on your investment (i.e., the effective yield to maturity) may be less than the amount that would be paid on an ordinary debt security. The return of only the principal amount at maturity may not compensate you
for the effects of inflation or other factors relating to the value of money over time.
Potential conflicts.
The issuer of a Structured Investment and its affiliates may play a variety of roles in connection with the Structured Investment, including acting as calculation agent and hedging the
issuer’s obligations under the Structured Investment. Such activity could adversely affect the payouts to investors on Structured Investments.
The aforementioned risks are not intended to be an exhaustive list of the risks associated with a particular Structured Investment offering. Before you invest in any Structured Investment, you should thoroughly
review the particular investment’s prospectus and related offering materials for a comprehensive description of the risks and considerations associated with the offering.
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This material was not prepared by the Research Departments of Morgan Stanley Smith Barney LLC, Morgan Stanley & Co. LLC, or Citigroup Global Markets
Inc. and you should not regard it as a research report. Please see the offering materials for complete product disclosure including tax disclosure and related risks.
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December 2012
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Client Strategy Guide: December 2012
Offerings
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Page
5
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Structured Investments Spectrum
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Structured Investments can be divided into six broad categories, each aimed at offering structural characteristics designed to help
investors pursue specific financial objectives –
Market-Linked Deposits – FDIC Insured, Market-Linked Notes,
Partial Principal at Risk Securities,
Enhanced Yield,
Leveraged Performance
and
Access
.
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Market-Linked Deposits – FDIC
Insured
combine the repayment of all principal at maturity, subject to applicable FDIC insurance limits and issuer credit risk, with the potential for capital appreciation based on the performance
of an underlying asset.
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u
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May be appropriate for investors who do not require periodic interest payments, are concerned about principal at risk, and who are willing to forgo some upside in exchange for the repayment
of all principal at maturity, subject to applicable FDIC insurance limits and issuer credit risk.
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Market-Linked Notes
combine the repayment
of all principal at maturity subject to issuer credit risk, with the potential for capital appreciation based on the performance of an underlying asset. Market-Linked Notes do not have the benefit of FDIC insurance.
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u
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May be appropriate for investors who do not require periodic interest payments, are concerned about principal at risk, do not require FDIC insurance on their investment, and who are
willing to forgo some upside in exchange for the repayment of all principal at maturity, subject to issuer credit risk.
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Partial Principal at Risk Securities
combine the repayment of some principal at maturity, subject to issuer credit risk, with the potential for capital appreciation based on the performance of an underlying asset.
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u
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May be appropriate for investors who do not require periodic interest payments, are concerned about principal at risk, do not require FDIC insurance on their investment, and who are willing
to risk a portion of their principal and forgo some upside return in exchange for the issuer’s obligation to repay some principal at maturity.
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Enhanced Yield Investments
seek to
potentially generate current income greater than that of a direct investment in an underlying asset with the investor accepting full exposure to the downside with limited or no opportunity for capital appreciation.
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u
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May be appropriate for investors who are willing to forgo some or all of the appreciation in the underlying asset and assume full downside exposure to the underlying asset in exchange for
enhanced yield in the form of above-market interest payments.
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Leveraged Performance Investments
allow investors the possibility of capturing enhanced returns relative to an underlying asset’s actual performance within a given range of performance in exchange for giving up returns above the specified cap,
in addition to accepting full downside exposure to the underlying asset.
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u
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May be appropriate for investors who expect only modest changes in the value of the underlying asset and who are willing to give up appreciation on the underlying asset that is beyond the
performance range, and bear the same or similar downside risk associated with owning the underlying asset.
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Access Investments
provide exposure to a
market sector, asset class, theme or investment strategy that may not be easily accessible to an individual investor by means of traditional investments.
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u
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May be appropriate for investors interested in diversification of, and exposure to, difficult to access underlying asset classes, market sectors or investment strategies.
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This material was not prepared by the Research Departments of Morgan Stanley Smith Barney LLC, Morgan Stanley & Co. LLC, or Citigroup Global Markets
Inc. and you should not regard it as a research report. Please see the offering materials for complete product disclosure including tax disclosure and related risks.
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December 2012
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Client Strategy Guide: December 2012
Offerings
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Page
6
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Opportunities in U.S. Equities
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Enhanced Yield
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O Single Observation
ELKS
®
based on Apple Inc. (AAPL)
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Strategy
Overview
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—
Short-term yield enhancement strategy that offers above-market, fixed
monthly coupons in exchange for full downside exposure to the underlying equity and
no appreciation potential
on the underlying equity
—
Single Observation ELKS offer
limited protection against a decline in the price of the underlying equity at maturity but only if the closing price of the underlying equity is greater than or equal to the predetermined downside threshold closing price
on the valuation
date
—
Monthly coupon is paid regardless of the performance of the underlying equity
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Risk
Considerations
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ü
All principal is at risk under the terms of the Single Observation
ELKS
ü
Full downside exposure to the underlying equity if the underlying equity closes below the downside threshold closing price
on the valuation date
ü
No participation in any appreciation of the underlying equity
ü
If the underlying equity closes
below the downside threshold closing price
on the valuation date
, the Single Observation ELKS will redeem for shares of the underlying equity, or the equivalent cash value, which will be less than the initial investment
|
These Single Observation Equity LinKed Securities (ELKS
®
), which the issuer refers to as the “securities,” offer a monthly coupon payment at a per annum rate that is generally higher than the rate Citigroup
Funding Inc. would pay on conventional debt securities of the same maturity. In exchange for this higher coupon, you will be exposed to the risk that, if a downside event (as described below) occurs, you will not receive the stated principal amount
of your securities at maturity and, instead, will receive shares of common stock of Apple Inc.. (or, if you elect, cash based on the value of those shares) that are worth significantly less than the stated principal amount and may be worth nothing.
The securities are unsecured senior debt securities issued by Citigroup Funding Inc. All payments due on the securities are fully and unconditionally guaranteed by Citigroup Inc., Citigroup Funding Inc.’s parent company.
All payments on the
securities are subject to the credit risk of Citigroup Inc. If Citigroup Funding Inc. and Citigroup Inc. were to default on their obligations, you may not receive any amounts owed to you under the securities.
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Issuer
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Citigroup Funding Inc.
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Underlying Shares
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Shares of common stock of Apple
Inc. (AAPL)
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Maturity Date
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Expected to be June 20, 2013
(approximately 6 months)
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Coupon
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6.00% to 8.00% per annum
(approximately 3.00% to 4.00% for the term of the securities). The actual coupon rate will be determined on the Pricing Date.
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Coupon Payment Dates
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Expected to be on the 20th day of
each month, commencing January 20, 2013 and ending on the Maturity Date
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What you will receive at Maturity
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For each $10 security you hold at maturity, the final coupon payment
plus
:
• If a Downside Event occurs: a number of Underlying Shares equal to the Equity
Ratio (or, if you elect, cash in an amount equal to the Equity Ratio
multiplied by
the closing price of the Underlying Shares on the Valuation Date)
• If a Downside Event does
not
occur: $10 in cash
You may lose some or all of your investment in the securities. Although you will be subject to the risk of a decline in the price of the
Underlying Shares, you will not participate in any appreciation of the Underlying Shares over the term of the securities.
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Downside Event
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A Downside Event will occur if the
closing price of the Underlying Shares on the Valuation Date is less than the Downside Threshold Price.
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Valuation Date
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Expected to be June 17, 2013,
subject to postponement if such date is not a scheduled trading day or certain market disruption events occur
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Downside Threshold Price
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80% of the Initial Share
Price
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Initial Share Price
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The closing price of the
Underlying Shares on the Pricing Date
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Equity Ratio
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The Stated Principal Amount
divided by the Initial Share Price
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Stated Principal Amount
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$10 per security
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No listing
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The securities will not be listed
on any securities exchange.
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Expected Pricing Date
1
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This offering is expected to close
for ticketing on Monday, December 17, 2012
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1
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Expected Pricing Dates are subject to change. Due to market conditions, Morgan Stanley Wealth Management or the
applicable issuer may close the deal prior to, or postpone, the Expected Pricing Date. Some terms are subject to change. Terms will be fixed on the pricing date for the investment.
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This material was not prepared by the Research Departments of Morgan Stanley Smith Barney LLC, Morgan Stanley & Co. LLC, or Citigroup Global Markets
Inc. and you should not regard it as a research report. Please see the offering materials for complete product disclosure including tax disclosure and related risks.
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December 2012
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Client Strategy Guide: December 2012
Offerings
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Page
7
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[Information related to offerings to be issued by issuers that are not affliliated with Citigroup
Funding Inc. has been redacted.]
[This page intentionally left blank]
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This material was not prepared by the Research Departments of Morgan Stanley Smith Barney LLC, Morgan Stanley & Co. LLC, or Citigroup Global Markets
Inc. and you should not regard it as a research report. Please see the offering materials for complete product disclosure including tax disclosure and related risks.
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December 2012
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Client Strategy Guide: December 2012
Offerings
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Page
8
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[This page intentionally left blank]
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This material was not prepared by the Research Departments of Morgan Stanley Smith Barney LLC, Morgan Stanley & Co. LLC, or Citigroup Global Markets
Inc. and you should not regard it as a research report. Please see the offering materials for complete product disclosure including tax disclosure and related risks.
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December 2012
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Client Strategy Guide: December 2012
Offerings
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Page
9
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[This page intentionally left blank]
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This material was not prepared by the Research Departments of Morgan Stanley Smith Barney LLC, Morgan Stanley & Co. LLC, or Citigroup Global Markets
Inc. and you should not regard it as a research report. Please see the offering materials for complete product disclosure including tax disclosure and related risks.
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December 2012
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Client Strategy Guide: December 2012
Offerings
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Page
10
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[This page intentionally left blank]
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This material was not prepared by the Research Departments of Morgan Stanley Smith Barney LLC, Morgan Stanley & Co. LLC, or Citigroup Global Markets
Inc. and you should not regard it as a research report. Please see the offering materials for complete product disclosure including tax disclosure and related risks.
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December 2012
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Client Strategy Guide: December 2012
Offerings
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Page
11
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Opportunities in U.S. Equities
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Leveraged
Performance
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O Dual Directional Trigger PLUS
SM
based on the S&P 500
®
Index (SPX)
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Strategy
Overview
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—
Capped leveraged exposure to and limited protection against negative
performance of the underlying index
—
Leverage feature only applies if the underlying index appreciates
—
Unleveraged positive return for a certain range of negative performance of the underlying index from the pricing date to the valuation date only if the underlying index closes at or above
the specified trigger level on the valuation date
—
May be appropriate for investors who wish to outperform the underlying
index in a moderately bullish or moderately bearish scenario
|
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Risk
Considerations
|
|
ü
All principal is at risk under the terms of the Dual Directional Trigger
PLUS
ü
Full downside exposure to the underlying index without buffer if the underlying index closes below the trigger level on the valuation date
ü
Appreciation potential is Iimited by the maximum payment at maturity
ü
Does not provide for current
income; no interest payments
|
The securities are unsecured senior debt securities issued by Citigroup Funding Inc. and guaranteed by
Citigroup Inc. Unlike conventional debt securities, the securities do not pay interest and do not repay a fixed amount of principal at maturity. Instead, the securities offer a payment at maturity that may be greater than, equal to or less than the
stated principal amount, depending on the performance of the S&P 500
®
Index (the “index”). The securities
offer the potential for a positive return at maturity based on the absolute value, within a limited range, of the percentage change in the level of the index from its initial index level to its final index level. If the index appreciates, the
securities provide leveraged positive exposure to a limited range of that appreciation, and if the index depreciates, the securities provide unleveraged positive exposure to a limited range of that depreciation. In exchange for the upside leverage
and the potential for a positive return at maturity even if the index depreciates, investors in the securities must be willing to forgo (i) positive participation in the appreciation or depreciation of the index outside of the limited range
offered by the securities and (ii) dividends on the stocks included in the index. Investors in the securities must also be willing to accept full downside exposure to the index if it depreciates by more than 20%.
If the final index level is
less than the trigger level, you will lose 1% of the stated principal amount of your securities for every 1% by which the final index level is less than the initial index level. There is no minimum payment at maturity.
In order to obtain the
modified exposure to the index that the securities provide, investors must be willing to accept (i) an investment that may have limited or no liquidity and (ii) the risk of not receiving any amount due under the securities if Citigroup
Funding Inc. and Citigroup Inc. default on their obligations.
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Issuer
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Citigroup Funding Inc.
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Underlying Index
|
|
S&P 500
®
Index (SPX)
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|
Maturity Date
|
|
Expected to be June 22, 2015
(approximately 2.5 years)
|
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Leverage Factor
|
|
150%
|
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Trigger Level
|
|
80% of the Initial Index
Level
|
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Payment at Maturity
|
|
For each $10 security you hold at maturity:
• If the Final Index Level is
greater than or equal to
the Initial Index
Level:
$10 + Leveraged Upside Payment, subject to the Maximum
Return at Maturity
• If the Final Index Level is
less than
the Initial Index Level but
greater than or equal to
the Trigger Level:
$10 + ($10 × the Absolute Index Return)
• If the Final Index Level is
less than
the Trigger Level:
$10 × Index Performance Factor
If the Final Index Level is less than the Trigger Level, your Payment at Maturity will be less, and possibly significantly less, than $8.00
per security. You should not invest in the securities unless you are willing and able to bear the risk of losing a significant portion and up to all of your investment.
|
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Leveraged Upside Payment
|
|
$10 x Leverage Factor x Absolute
Index Return
|
|
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|
Index Percent Change
|
|
(Final Index Level – Initial
Index Level) / Initial Index Level
|
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Absolute Index Return
|
|
The absolute value of the Index
Percent Change
|
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|
Initial Index Level
|
|
The closing value of the
Underlying Index on the Pricing Date
|
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Final Index Level
|
|
The closing value of the
Underlying Index on the Valuation Date
|
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|
Valuation Date
|
|
Expected to be June 17, 2015,
subject to postponement if such date is not a schedule trading day or if certain market disruption events occur
|
|
|
|
Index Performance Factor
|
|
Final Index Level / Initial Index
Level
|
|
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|
Maximum Return at Maturity
|
|
21.50% to 24.50% (to be determined
on the Pricing Date), applicable when the Final Index Level is greater than the Initial Index Level. Because the Trigger Level is 80% of the Initial Index Level, any positive return on the securities resulting from the depreciation of the index will
not exceed 20%.
|
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Issue Price/Stated Principal Amount
|
|
$10 per Trigger PLUS
|
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|
No listing
|
|
The Trigger PLUS will not be
listed on any securities exchange.
|
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|
|
Expected Pricing Date
1
|
|
This offering is expected to close
for ticketing on Monday, December 17, 2012
|
|
1
|
Expected Pricing Dates are subject to change. Due to market conditions, Morgan Stanley Wealth Management or the
applicable issuer may close the deal prior to, or postpone, the Expected Pricing Date. Some terms are subject to change. Terms will be fixed on the pricing date for the investment.
|
|
|
|
|
|
This material was not prepared by the Research Departments of Morgan Stanley Smith Barney LLC, Morgan Stanley & Co. LLC, or Citigroup Global Markets
Inc. and you should not regard it as a research report. Please see the offering materials for complete product disclosure including tax disclosure and related risks.
|
|
December 2012
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Client Strategy Guide: December 2012
Offerings
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12
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This material was not prepared by the Research Departments of Morgan Stanley Smith Barney LLC, Morgan Stanley & Co. LLC, or Citigroup Global Markets
Inc. and you should not regard it as a research report. Please see the offering materials for complete product disclosure including tax disclosure and related risks.
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December 2012
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Client Strategy Guide: December 2012
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This material was not prepared by the Research Departments of Morgan Stanley Smith Barney LLC, Morgan Stanley & Co. LLC, or Citigroup Global Markets
Inc. and you should not regard it as a research report. Please see the offering materials for complete product disclosure including tax disclosure and related risks.
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This material was not prepared by the Research Departments of Morgan Stanley Smith Barney LLC, Morgan Stanley & Co. LLC, or Citigroup Global Markets
Inc. and you should not regard it as a research report. Please see the offering materials for complete product disclosure including tax disclosure and related risks.
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December 2012
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This material was not prepared by the Research Departments of Morgan Stanley Smith Barney LLC, Morgan Stanley & Co. LLC, or Citigroup Global Markets
Inc. and you should not regard it as a research report. Please see the offering materials for complete product disclosure including tax disclosure and related risks.
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December 2012
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Client Strategy Guide: December 2012
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Selected Risks & Considerations
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An investment in Structured Investments involves a variety of risks. Structured Investments may be linked to a wide
variety of underlying assets, and each underlying asset will have its own unique set of risks and considerations. For example, some underlying assets have significantly higher volatility than others. Before you invest in any Structured
Investment, you should thoroughly review the relevant prospectus and related offering materials for a comprehensive description of the risks associated with the Structured Investment, including the risks related to the underlying asset(s) to which
the Structured Investment is linked.
The following are general risks applicable to most types of Structured Investments:
Issuer Credit Risk
All payments on
Structured Investments are subject to the credit risk of the applicable issuer. Any payments of interest or payments at maturity on a Structured Investment are subject to the credit risk of the applicable issuer and the issuer’s credit ratings
and credit spreads may adversely affect the market value of the Structured Investment. Investors are dependent on the applicable issuer’s ability to pay periodic interest payments, if any, and all amounts due on the Structured Investment at
maturity and therefore investors are subject to the credit risk of the applicable issuer and to changes in the market’s view of the applicable issuer’s credit risk. If the applicable issuer defaults on its obligations under the Structured
Investment, the investor’s investment would be at risk and an investor could lose some or all of its investment. Any decline in the applicable issuer’s credit ratings or increase in the credit spreads charged by the market for taking
credit risk of the issuer is likely to adversely affect the value of the Structured Investment. Furthermore, unless issued as market-linked certificate of deposit, Structured Investments are not bank deposits and are not insured by the Federal
Deposit Insurance Corporation or any other governmental agency, nor are they obligations of, or guaranteed by, a bank.
Market Risk
The price at which a particular Structured Investment may be sold prior to maturity will depend on a number of factors and may be substantially less
than the amount for which they were originally purchased. Some of these factors include, but are not limited to: (i) changes in the level of the underlying asset or reference index, (ii) volatility of the underlying asset or reference
index, (iii) changes in interest rates, (iv) any actual or anticipated changes in the credit ratings of the applicable issuer or credit spreads charged by the market for taking the issuer’s credit risk and (v) the time remaining
to maturity. In addition, we expect that the secondary market prices of a Structured Investment will be adversely affected by the fact that the issue price of the securities includes the agent’s commissions and expected profit. You may receive
less, and possibly significantly less, than the stated principal amount if you sell your investments prior to maturity.
Liquidity Risk
There may be little or no secondary market for a particular Structured Investment and you should be prepared to hold your
investments until maturity. If the applicable pricing supplement so specifies, we may apply to list a particular Structured Investment on a securities exchange, but it is not possible to predict whether any Structured Investment will meet the
listing requirements of that particular exchange, or if listed, whether any secondary market will exist. Therefore, there may be little or no secondary market for Structured Investments. Issuers may, but are not obligated to, make a market in the
Structured Investments. Even if there is a secondary market for a particular Structured Investment, it may not provide enough liquidity to allow you to trade or sell your Structured Investment easily. Because it is not expected that other
broker-dealers will participate significantly in the secondary market for Structured Investments, the price at which you may be able to trade a Structured Investment is likely to depend on the price, if any, at which Morgan Stanley Wealth Management
or another broker-dealer affiliated with the particular issuer of the security is willing to transact. If at any time Morgan Stanley Wealth Management or any other broker dealer were not to make a market in Structured Investments, it is likely that
there would be no secondary market for Structured Investments.
Past Performance Not Indicative of Future Results
The historical performance of an underlying asset or reference index is not an indication of future performance. Historical performance of an
underlying asset or reference index to which a specific Structured Investment is linked should not be taken as an indication of the future performance of the underlying asset or reference index during the term of the Structured Investment. Changes
in the levels of the underlying asset or reference index will affect the trading price of the Structured Investment, but it is impossible to predict whether such levels will rise or fall.
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This material was not prepared by the Research Departments of Morgan Stanley Smith Barney LLC, Morgan Stanley & Co. LLC, or Citigroup Global Markets
Inc. and you should not regard it as a research report. Please see the offering materials for complete product disclosure including tax disclosure and related risks.
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Conflicts of Interest
The applicable issuer, its affiliates, Morgan Stanley Wealth Management and/or its affiliates may be market participants. The applicable issuer, one or more of its affiliates or Morgan Stanley Wealth Management or
its affiliates may, currently or in the future, publish research reports with respect to movements in the underlying asset to which any specific Structured Investment is linked. Such research is modified from time to time without notice and may
express opinions or provide recommendations that are inconsistent with purchasing or holding a specific Structured Investment or Structured Investments generally. Any of these activities could affect the market value of a specific Structured
Investment or Structured Investments generally.
In most Structured Investments, an affiliate of Morgan Stanley or the applicable issuer
is designated to act as calculation agent to calculate the periodic interest or payment at maturity due on the Structured Investment. Any determinations made by the calculation agent may affect the payout to investors.
Hedging & Trading Activity
Hedging and trading activity by the issuer and its subsidiaries and affiliates could potentially adversely affect the value of the Structured Investments. We expect that the calculation agent and its affiliates for
a particular Structured Investment will carry out hedging activities related to that Structured Investment, including trading in the underlying asset, as well as in other instruments related to the underlying asset. The issuer’s subsidiaries
and affiliates may also trade in the underlying asset and other instruments related to the underlying asset on a regular basis as part of their general broker-dealer and other businesses. Any of these hedging or trading activities on or prior to the
pricing date and during the term of the Structured Investment could adversely affect the value of the underlying asset, and, accordingly, the payout to investors.
Commissions & Hedging Profits
The inclusion of commissions and projected profit from
hedging in the original issue price is likely to adversely affect secondary market prices of Structured Investments. Assuming no change in market conditions or any other relevant factors, the price, if any, at which any dealer is willing to purchase
Structured Investments in secondary market transactions will likely be lower than the original issue price, since the original issue price includes, and secondary market prices are likely to exclude, commissions paid with respect to the Structured
Investments, as well as the cost of hedging the applicable issuer’s obligations under the Structured Investments. The cost of hedging includes the projected profit that the calculation agent and its affiliates may realize in consideration for
assuming the risks inherent in managing the hedging transactions. In addition, any secondary market prices may differ from values determined by pricing models used by the dealer as a result of dealer discounts, mark-ups or other transaction costs.
With respect to any MLD offering, you can only count on FDIC insurance to cover the principal amount of each MLD and, if applicable,
the minimum index interest.
In the event that FDIC insurance payments become necessary for the MLDs prior to the maturity date, the
FDIC is only required to pay the Principal Amount of the MLDs together with any accrued minimum index interest, if any, as prescribed by law, and subject to the applicable FDIC insurance limits. FDIC insurance is not available for any index interest
if the applicable issuer fails prior to the maturity date, in the case of the MLDs. FDIC insurance is also not available for any secondary market premium paid by a depositor above the principal amount of an MLD. Except to the extent insured by the
FDIC, the MLDs are not otherwise insured by any governmental agency or instrumentality or any other person.
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This material was not prepared by the Research Departments of Morgan Stanley Smith Barney LLC, Morgan Stanley & Co. LLC, or Citigroup Global Markets
Inc. and you should not regard it as a research report. Please see the offering materials for complete product disclosure including tax disclosure and related risks.
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IMPORTANT INFORMATION AND QUALIFICATIONS:
This 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.
We remind investors that these investments are subject to market risk and will fluctuate in value. The investments discussed or recommended in this communication may be unsuitable for investors depending upon their
specific investment objectives and financial position. No representation or warranty is made that any returns indicated will be achieved. Potential investors should be aware that certain legal, accounting and tax restrictions, margin requirements,
commissions and other transaction costs may significantly affect the economic consequences of the transactions discussed herein. The information and analyses contained herein are not intended as tax, legal or investment advice and may not be
suitable for your specific circumstances.
These materials may not be distributed in any jurisdiction where it is unlawful to do so. The products
described in this communication may not be marketed or sold or be available for offer or sale in a number of jurisdictions where it is unlawful to do so. This publication is disseminated in Japan by Morgan Stanley Japan Limited; in Hong Kong by
Morgan Stanley Asia Limited; in Singapore by Morgan Stanley Asia (Singapore) Pte., regulated by the Monetary Authority of Singapore, which accepts responsibility for its contents; in Australia by Morgan Stanley Australia Limited A.B.N. 67 003 734
576, a licensed dealer, which accepts responsibility for its contents; in Canada by Morgan Stanley Canada Limited, which has approved of, and has agreed to take responsibility for, the contents of this publication in Canada; in Spain by Morgan
Stanley, S.V., S.A., a Morgan Stanley group company, which is supervised by the Spanish Securities Markets Commission (CNMV) and states that this document has been written and distributed in accordance with the rules of conduct applicable to
financial research as established under Spanish regulations; in the United States by Morgan Stanley & Co. LLC, which accepts responsibility for its contents; and in the United Kingdom, this publication is approved by Morgan
Stanley & Co. International PLC, solely for the purposes of section 21 of the Financial Services and Markets Act 2000 and is distributed in the European Union by Morgan Stanley & Co. International PLC, except as provided above.
Private U.K. investors should obtain the advice of their Morgan Stanley & Co. International PLC representative about the investments concerned. In Australia, this publication, and any access to it, is intended only for “wholesale
clients” within the meaning of the Australian Corporations Act. Third-party data providers make no warranties or representations of any kind 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.
Any estimates, projections or predictions (including in tabular form) given in this
communication are intended to be forward-looking statements. Although Morgan Stanley believes that the expectations in such forward-looking statement are reasonable, it can give no assurance that any forward-looking statements will prove to be
correct. Such estimates are subject to actual known and unknown risks, uncertainties and other factors that could cause actual results to differ materially from those projected. These forward-looking statements speak only as of the date of this
communication. Morgan Stanley expressly disclaims any obligation or undertaking to update or revise any forward-looking statement contained herein to reflect any change in its expectations or any change in circumstances upon which such statement is
based. Prices indicated are Morgan Stanley offer prices at the close of the date indicated. Actual transactions at these prices may not have been effected.
The trademarks and service marks contained herein are the property of their respective owners. Additional information on recommended securities discussed herein is available on request. This communication or any
portion hereof, may not be reprinted, resold or redistributed without the prior written consent of Morgan Stanley.
“PLUS
SM
” is a service mark of Morgan Stanley.
“Standard & Poor’s
®
,” “S&P
®
” and “S&P 500
®
” are
trademarks of Standard & Poor’s Financial Services LLC (“S&P”) and have been licensed for use. The securities are not sponsored, endorsed, sold or promoted by S&P, and S&P makes no representation regarding the
advisability of investing in the securities.
“EURO STOXX 50
®
” and “STOXX
®
” are
registered trademarks of STOXX Limited and have been licensed for use for certain purposes by Morgan Stanley.
“iShares
®
” is a registered mark of BlackRock Institutional Trust Company, N.A.
“PHLX Housing Service Sector
SM
” and “HGX
SM
” are registered service marks of the NASDAQ OMX Group, Inc. and have been licensed for use.
“ELKS
®
”
is a registered service mark of Citigroup Global Markets Inc. and has been licensed for use.
© 2012 Morgan Stanley Smith Barney LLC. Member SIPC.
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This material was not prepared by the Research Departments of Morgan Stanley Smith Barney LLC, Morgan Stanley & Co. LLC, or Citigroup Global Markets
Inc. and you should not regard it as a research report. Please see the offering materials for complete product disclosure including tax disclosure and related risks.
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December 2012
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