Understanding Your Forms 1099/Year-End Summary

A Guide to Your Statement

We are pleased to provide you with consolidated information returns on Forms 1099 and Year-End Summary for calendar year 2010. This document contains certain tax information which Citigroup Global Markets Inc. (“Our Clearing Broker”) is required to report to both you and the Internal Revenue Service (IRS). Review the enclosed tax document carefully; retain it for reference when preparing your federal income tax return for 2010. The Forms 1099 generally contain aggregate information about payments made to your account in 2010. These figures have been derived from the detailed information that appears on your Year-End Summary, which is provided for your convenience. Neither Morgan Stanley Smith Barney LLC. nor Our Clearing Broker are in the business of giving tax advice. If you have any tax questions, please consult your tax advisor. Your Forms 1099 and Year-End Summary This pamphlet is provided to help you better understand your 2010 Form 1099 and Year-End Summary. The official IRS instructions are also provided on the enclosed “Instructions for Recipients of Forms 1099.” Other IRS publications referred to in the instructions are available through your local IRS office and on the Internet at www.irs.gov. We suggest that you read this pamphlet carefully. It explains tax reporting requirements, the methods used to determine the reported income from your investments and the way the IRS treats certain investments. If your account is in the name of a corporation or other entity similarly exempt from Form 1099 reporting, or if you had no reportable income for 2010, the enclosed document consists of only a Year-End Summary. The sections of this pamphlet that discuss Forms 1099 may therefore not be relevant to you. After you have reviewed this pamphlet, compare your Forms 1099 alongside your Year-End Summary. The total figures shown in each Box of your Forms 1099 are reported in detail elsewhere. For example, the amount reported in Box 1 (Form 1099-INT Interest Income) comprises earnings on securities identified in “Details of Form 1099 Reported Interest Income.” The Year-End Summary will not be filed with the IRS. For your convenience, the Year-End Summary can be differentiated from the Forms 1099 by a border that reads “2010 Year-End Summary.” If you have questions, please call your Financial Advisor or our Client Service Representatives at the toll-free number listed on the front page of the enclosed document. The enclosed Forms 1099 include the following reportable amounts, if applicable to your account. • Dividends and distributions, including qualified dividends and long-term capital gain distributions • Interest income, including accrued interest received on the sale of certain debt instruments • Interest on U.S. Treasury obligations • Foreign tax paid • Investment expense/organizational expense • Accrued Original Issue Discount income • Gross proceeds from any sales, including short sales, redemptions and tenders • Federal income tax withheld • Royalty trust payments

• Payments in lieu of dividends • Contract adjustment payments, consent payments and other miscellaneous income Please Note: The information on your Forms 1099/Year-End Summary reflects your personal investment activity. As a result, some parts of this pamphlet may not apply to your account. To find information about your investments, please refer to the section headings. Note that each section is presented in the same order as in your Forms 1099/Year-End Summary.

Important Notes About Your Forms 1099 and Year-End Summary Reporting on Tax-Exempt Interest The Tax Increase Prevention and Reconciliation Act of 2005 (“TIPRA”), enacted May 17, 2006, contained a requirement that payors report tax-exempt interest on Form 1099 to you and the IRS. Tax-exempt interest is reported in the same manner as interest paid on taxable debt obligations. The aggregate amount reported for the calendar year includes periodic payments of tax-exempt interest, accrued interest on the sale of a tax-exempt bond and exempt-interest dividends from mutual funds. This amount is reported in Box 8 on the Form 1099-INT. In addition, Box 9 is used to report the portion of the tax-exempt interest that is derived from private activity bonds. This interest is subject to the alternative minimum tax (AMT). Our Clearing Broker has used their best efforts to determine the amount of tax-exempt interest that is subject to AMT. While this information has been obtained from sources considered reliable, no guarantee can be made as to its completeness or accuracy. At present, tax-exempt original issue discount (OID) income is not required to be reported on Form 1099. However, to the extent Our Clearing Broker was able to obtain rate information on bonds issued with tax-exempt OID, it is shown in the Year-End Summary under the heading “Details of Tax-Exempt OID 2010.” Lastly, backup withholding applies to tax-exempt interest paid unless you have provided your taxpayer identification number (TIN) in the manner required. If you are unsure about whether you need to provide your TIN on a Form W-9, please contact your Financial Advisor. Note to holders of REMICs, Mortgage strips, CMOs and other Collateralized Debt Obligations: Please read this prior to filing your 2010 income tax return. The IRS has issued regulations concerning Form 1099 reporting of interest and Original Issue Discount (OID) income from regular interests in Real

Estate Mortgage Investment Conduits (“REMICs”) and other Collateralized Debt Obligations, such as CMOs. To allow issuers and nominees sufficient time to prepare Forms 1099-OID and statements of additional information, the regulations extend the date for furnishing such statements to holders until March 15, 2011. If you hold these types of securities in your account, you will be receiving an amended Form 1099, which we will mail to you on or before March 15, 2011 with the required information. Note to holders of Widely Held Fixed Income Trusts: Please read this prior to filing your 2010 income tax return. The IRS has issued regulations concerning the Form 1099 reporting of income, expenses, and credits and other information from widely held fixed income trusts (“WHFITS”). A WHFIT is a U.S. investment trust that holds a fixed pool of assets and is classified as a grantor trust for federal income tax purposes. Each investor owns an undivided pro-rata interest in each asset in a grantor trust. The tax character and source of the income, expenses and credits received/paid by the trust passes through the investors. To allow nominees sufficient time to collect the required information from issuers and to prepare Forms 1099 along with a written tax statement of additional information, the regulations extend the date for furnishing such statements to holders until March 15, 2011. If you hold these types of securities in your account, you will be receiving an amended Form 1099, which we will mail to you on or before March 15, 2011 with the necessary information.

The figures on the Forms 1099/Year-End Summary may differ from your monthly statements. IRS requirements and the nature of our reporting responsibilities can result in certain unavoidable differences between your Forms 1099 and your monthly statements. For example, some taxable income distributions, such as those from mutual funds, are declared in 2010 but paid to you in January 2011. These distributions have been reported, as required, with your 2010 income. To identify these securities, refer to “Details of 1099 Reported Dividends and Distributions” on your Year- End Summary.

Citigroup Global Markets Inc. as Payer When you file your tax return, list Citigroup Global Markets Inc. as payer on Schedule B of IRS Form 1040 for all dividends and/or interest received through your Morgan Stanley Smith Barney LLC. account.

Special Messages Please note any messages that may appear on the first page of your Forms 1099/Year-End Summary.

Determining Original Cost The Forms 1099 do not provide the original cost information for the transactions reported to the IRS. IMPORTANT: The original cost of a security is not always your tax basis for use in calculating gain or loss resulting from the sale of the security. Tax treatment of items such as bond premiums, return of capital distributions, returns of principal or accrued OID will affect the calculation of your tax basis on certain securities. Seek the advice of your tax advisor on these matters.

Federal Income Tax Withheld Clients who have not furnished a taxpayer identification number (usually a Social Security number) or proper certification to the payer of dividends or interest become subject to backup withholding at the rate of 28% on certain payments. This amount is charged to your account and paid to the IRS as required by law. Backup withholding is also required if the IRS notifies us that a taxpayer has under-reported dividends or interest on a prior-year federal income tax return.

State Reporting — Municipal Income Under state tax laws, Our Clearing Broker is required to report certain investment Information for any client whose primary address is in the state of California, Connecticut, Minnesota, Montana, New York or Rhode 2

Island. If you reside primarily in one of those states, you may be required to report income derived from municipal bonds outside your state. Please check with your tax advisor. Additionally, you should be aware that most states require that we file certain information returns, and therefore much of the information reported to the IRS on Forms 1099 is also reported to the taxing authorities of the relevant states either directly by Our Clearing Broker, or indirectly by IRS through its Combined Federal/State Filing Program.

Important Tax Information Regarding Your Mutual Funds You can find tax information for the mutual funds you own at the following web address: https://www.smithbarney.com/tools/taxcenter/

Understanding Your Forms 1099 Form 1099-INT — Interest Income 2010 This section contains your total reportable interest income, including any accrued interest received. This information is derived from figures that can be found in “Details of 1099 Reported Interest Income” on your Year-End Summary. Interest on U.S. Treasury obligations is reported in Box 3. All other taxable interest received is included in Box 1. Any amount shown in Box 5 represents your share of investment expenses that are included in Box 1.

Tax-Exempt Interest Federally tax-exempt interest (including exempt-interest dividends from mutual funds) is reported in Box 8. You should include this amount on line 8b of Form 1040 or Form 1040A. The portion of the amount in Box 8 that is attributable to certain private activity bonds is reported in Box 9 of Form 1099-INT. This portion is subject to the alternative minimum tax (AMT). See IRS Instructions for Form 6251 (Alternative Minimum Tax — Individuals) for information on how to report and calculate AMT.

To Holders of Unit Investment Trusts Organized as Taxable Grantor Trusts If you own an interest in a Unit Investment Trust that is organized as a Taxable Grantor Trust, the IRS requires that your allocable share of all income received by the Trust during the year be reported to you. The amount reported on your Forms 1099-INT or Form 1099- DIV (depending on whether the Trust generates interest or dividend income) may be greater or less than the amount actually distributed to you during the year. Due to both the allocation of investment expense/ organizational expense and year-end income adjustments made by the Trust, actual cash distributed will vary from reported taxable income. Income is reportable in the year it is received by the Trust, not in the year it is distributed to unit holders. Our Clearing Broker must also include as a part of taxable income your allocable share of the amount used to pay Trust expenses; expenses of the Trust are deducted from the overall Trust income prior to the distribution of income to unit holders. In order to report taxable income to you correctly, your reported income was increased by an amount representing your share of Trust expenses. In addition, if your Trust consists of Original Issue Discount (OID) securities (such as zero-coupon bonds) which defer payment of income, the accrued OID is reported on Form 1099-OID. Please note that investment expenses may be deductible if you choose to itemize your deductions on Schedule A (Form 1040). However, to claim this deduction, your total miscellaneous expenses (Line 24 on Schedule A) must exceed 2% of your adjusted gross income. Amounts reported to you as Organizational Expenses are not deductible in this manner. These amounts, instead, result in an adjustment to your basis in the units. See IRS Publication 550 for more information on investment expenses.

Treasury Bills and Other Short-Term Discount Securities Income from short-term original-issue discount securities — for example, Treasury bills with a maturity of one year or less that were redeemed in

2010 — is reported as interest on your Form 1099-INT. The interest amount is calculated as the difference between your cost and the redemption value of the security. If your purchase price was not on our records, the cost was calculated in accordance with IRS Publication 1212. If this amount differs from your records, you may adjust this figure on Schedule B of IRS Form 1040. Form 1099-DIV — Dividends and Distributions 2010 This section of your Forms 1099 reflects your total taxable dividends and other distribution information that is being reported to the IRS. It was derived from figures that can be found in the “Details of 1099 Reported Dividends and Distributions 2010” section of your Year-End Summary. The Jobs and Growth Tax Relief Reconciliation Act of 2003 (“JGTRRA”) reduced the maximum rate of federal income tax for individuals with net long-term capital gains. The maximum rate of federal income tax for individuals with net long-term capital gains is 15, and 5 percent. Note, in tax years beginning after 2007, the 5 percent maximum rate on net long-term capital gains is reduced to 0 (zero) percent. Therefore, net capital gains are not taxed if your regular tax rate that would apply is lower than 25 percent. The one-year holding period requirement for long-term capital gains remains unchanged. In addition, the lower capital gains rate also applies to qualified dividends received by individuals on or after January 1, 2004. Qualified dividends means dividends paid by domestic corporations and qualified foreign corporations. To qualify for the maximum 15 percent tax rate, the taxpayer must hold the stock to which the dividend relates for a period of more than 60 days. The 61-day holding period must be within the 121-day period that begins 60 days before the ex-dividend date. Further, the taxpayer’s holding period is suspended for any day the taxpayer’s risk of loss is diminished (i.e., hedged). If the taxpayer is under an obligation to make a related payment on the stock (e.g., when the taxpayer has entered into a short sale on the same stock), the dividend income is not a qualified dividend. Please also note that if you treat income as a qualified dividend, it may not be treated as investment income for purposes of determining the amount of deductible investment interest. This may limit an individual’s ability to deduct margin interest. A foreign corporation is a qualified foreign corporation if it meets one of the following tests: (1) it is incorporated in a U.S. possession, (2) it is eligible for benefits of a comprehensive income tax treaty with the United States that the Treasury and IRS determine is satisfactory for this purpose and that includes an exchange of information program, or (3) the stock with respect to which the dividend is paid is readily tradable on an established securities market in the United States. The list of satisfactory treaties was published in Notice 2003-69. An established securities market in the United States includes any national stock exchange that is registered with the Securities and Exchange Commission and the Nasdaq Stock Market. It does not include the OTC Bulletin Board or the Pink Sheets. Finally, dividends are not qualified dividends if they are paid by a passive foreign investment company. The total amount of ordinary dividends paid (or deemed paid) to your account in 2010 is shown in Box 1a of Form 1099-DIV. This total includes both qualified and nonqualified dividends. The portion of the dividends shown in Box 1a that may be eligible for the maximum 15 percent rate for qualified dividends is reported in Box 1b. The amount shown in Box 1b relates to securities we believe are equities that pay qualified dividends. In preparing your income tax return, you or your tax advisor will need to determine whether the holding period and other requirements are met to qualify the income for the maximum 15 percent tax rate. See the instructions to Form 1040/1040A for more information on how to determine the amount of qualified dividends.

REIT’s net capital gains, and are taxable at the rates applicable to long-term capital gains, regardless of the length of time that you have held your shares in the fund or REIT. Any Unrecaptured Section 1250 Gains, which may be distributed by REITs, are reflected in Box 2b of Form 1099-DIV. Box 2c shows the portion of the amount in Box 2a that is section 1202 gain from certain small business stock that may be subject to a 50 percent exclusion. Box 2d shows the amount of distributions of gains subject to the 28 percent maximum tax rate. Such gains generally arise from the sale or exchange of collectibles. Distributions of short-term capital gains are included in Box 1a of Form 1099-DIV, and are usually taxable as ordinary income rather than as qualified dividends. However, our “Details of 1099 Reported Dividends and Distributions 2010” does separately identify short-term capital gain distributions and dividends for informational purposes. Note: Our Clearing Broker is required to report on Forms 1099-DIV all distributions of capital gains, including those from mutual funds which normally distribute tax-free income.

How to Report Capital Gains Distributions from Mutual Funds Long-term capital gains that are reported to you in Boxes 2a, 2b, 2c or 2d of your Form 1099-DIV should be reported on Form 1040, Schedule D. But, if no amount is shown in Boxes 2c-2d and your only capital gains and losses are capital gains distributions, you may be able to report the amounts in Box 2a on line 13 of Form 1040 (line 10 of Form 1040A), rather than on Schedule D (Form 1040). See the Form 1040 or 1040A instructions. The amount in Box 2a on Form 1099-DIV should be reported on Form 1040, Schedule D, line 13. Report the amount shown in Box 2b on the Unrecaptured Section 1250 Gain Worksheet — Line 19 in the Schedule D instructions (Form 1040). If required, use the amount shown in Box 2d when completing the 28 percent Rate Gain Worksheet — Line 18 in the instructions for Schedule D (Form 1040). Any amounts in Boxes 2b, 2c or 2d require special calculations or treatment. Please refer to the IRS’s “Instructions for Schedule D, Capital Gains and Losses” or your tax advisor.

Income from Some Dividends May Be Reclassified The sufficiency of earnings and profits that determine the tax character of dividends is sometimes not finalized until well after the close of the company’s tax year and after the time Forms 1099 must be mailed to you. Distributions initially reported as taxable dividends may later be reclassified as nondividend distributions (Box 3) or capital gains (Box 2a). For example, certain mutual funds, real estate investment trusts and public utilities may change the tax nature of their distributions. Therefore, the security issuer or Our Clearing Broker may, at a later date, notify you of such a reclassification. Our Clearing Broker makes its best effort to report up-to-date information on your Forms 1099. However, they cannot be held responsible for any cost incurred due to the late reclassification of income by the issuer or its paying agent. If your account contains any securities of any fund or REIT that Our Clearing Broker believes will reclassify the tax character of the distributions, they have enclosed a notice identifying those securities.

Exempt-Interest Dividends Please note that exempt-interest dividends paid by mutual funds are not reported on Form 1099-DIV. Rather, they are shown in Box 8 of Form 1099-INT.

Dividends on Foreign Securities

Mutual Funds and REITs

Dividends received by U.S. residents from foreign corporations are reported to the IRS in the gross amount, that is, before deduction of any foreign taxes withheld by the foreign payer.

Total capital gain distributions (long-term) are reported in Box 2a of Form 1099-DIV. These distributions reflect your share of a mutual fund’s or a

Generally, taxpayers have the option to claim foreign income tax withheld as either a deduction or a credit against their federal income tax. A tax 3

credit is often more advantageous. In either case, the gross amount of ordinary dividends must be reported on Schedule B of your 2010 federal income tax return, even though a net payment was received. Form 1099-DIV shows the aggregate amount of your gross foreign source dividends in Box 1a and the corresponding foreign taxes paid in Box 6. Please note that the amount of foreign tax paid shown in Box 6 represents the amount actually withheld by the foreign payer. This amount may be more than the foreign tax credit you are eligible to claim on your federal income tax return (Form 1040). Please note that foreign withholding taxes in excess of 15 percent on qualified dividends may not be creditable. Consult your tax advisor and/or IRS Publication 514 for information on claiming foreign tax credits or deductions.

To Holders of Unit Investment Trusts Organized as Taxable Grantor Trusts Please see section Form 1099-INT — Interest Income 2010, page 2, column 2 for explanation.

Taxable Spin-offs and Other Distributions Our Clearing Broker is required to report the following distributions as taxable dividends: • Stock dividends on preferred stock • Taxable stock rights • Optional stock dividends (dividends that can be paid in cash or, on your election, in stock) • Certain taxable corporate actions (mergers, spin-offs, etc.) These distributions are priced at market value on the date of distribution as declared by the distributing company and then included in your total dividend amount in Box 1a, Box 2a or Box 3. For details of the amounts, the market price and the name of the distributing company, refer to “Details of 1099 Reported Dividends and Distributions 2010” in your Year-End Summary.

Liquidating Distributions Liquidating distributions are listed in Boxes 8 and 9 of your Form 1099-DIV. IRS regulations require us to report Liquidating Distributions in excess of $600 (as a total of Boxes 8 and 9) on Form 1099-DIV. However, you may have to report distributions less than $600 on IRS Form 1040. Generally, noncash liquidating distributions were priced at market value on the date of distribution.

Nondividend Distributions Once you have received an amount equal to your cost, or other basis, return of capital distributions may be taxable to you as capital gain even if it is shown in Box 3 of Form 1099-DIV. For more information, see IRS Publication 550, Investment Income and Expenses. Form 1099-OID — Original Issue Discount 2010 Original Issue Discount (OID) is the difference between the stated redemption price at maturity and the original issue price of a bond, debenture, note or other debt instrument. This also applies to certificates of deposit and other deposit arrangements having a term in excess of one year, provided the payment of interest is deferred until maturity. Holders of certain preferred securities such as MIDS, QUIDS and TOPRS may also receive Form 1099-OID. While these issues are traded in share denominations and on equity exchanges, they are in fact debt securities. As the distributions may not meet the definition of Qualified Stated Interest, all income may be reported as OID. Please Note: Distributions from securities of this type with an issue date on or after August 13, 1996, are likely to constitute Qualified Stated Interest and be reported on Form 1099-INT. Other investments which are classified under the tax law as “contingent payment debt obligations” may also give rise to reportable OID. When examining your Form 1099-OID, please remember that Original Issue

Discount is taxable over the life of the obligation as it accrues. If you are the holder of one of these obligations, you must include the amount of the accrued discount in your gross income over the period you hold the obligation. The amount of accrued OID income, which is reflected in Box 1 of Form 1099-OID, is calculated based upon the number of days during the year that you actually held the security. For more information, please refer to the detailed information provided on the enclosed “Instructions for Recipients of Forms 1099.” Original Issue Discount on U.S. Treasury obligations for the part of the year that you owned the security will be reported separately in Box 6. Investment Expenses from unit investment trusts (grantor trusts) and single-class REMICS will be included in Box 7, Investment Expenses. The amount reported in Box 7, Investment Expenses is your share of investment expenses that are included in Box 1. If you file a federal tax return on Form 1040, you may deduct these expenses on the “Other Expenses” line of Schedule A, Form 1040, subject to the 2% adjusted gross income limitation. For guidance in computing your actual OID income, consult your tax advisor or IRS Publication 1212. You may need to adjust reported amounts if your investments include stripped bonds or coupons, or you did not acquire the obligation as an original purchaser when the obligation was issued. OID calculations may differ for these investments. Adjustments to the calculations of OID can be made on Schedule B of IRS Form 1040. Tax-exempt OID Income is not required to be reported on Form 1099-OID at present. However, to the extent that Our Clearing Broker has been able to obtain the relevant information, they have reported the amount of tax-exempt OID that accrued on your holdings in the Year-End Summary. This information is shown under the header “Details of Tax-Exempt OID 2010.” For further information, please refer to that section of this brochure. Form 1099-B — Proceeds from Broker and Barter Exchange Transactions 2010 Gross proceeds are reported to the IRS on Form 1099-B, on a transactional basis, after deduction of commissions and accrued interest received. Please refer to the instructions for IRS Form 1040 for information about the treatment of gross proceeds.

What We Report Our Clearing Broker reports to the IRS on Form 1099-B all transactions involving sales, redemptions, taxable exchanges, tenders, called bonds, mutual fund exchanges, cash mergers, short sales, fractional share sales exceeding $19.99, and return of principal payments. All of these transactions with a trade or effective date in 2010 are reportable in 2010. The amount reported, unless otherwise indicated, represents the net proceeds after commissions and other selling expenses. Options are excluded from Form 1099-B reporting requirements. IRS regulations require Our Clearing Broker to report municipal bond sales, redemptions and return of principal on Form 1099-B, even though interest from these securities is generally tax-exempt. Short-Term Original Issue Discount Securities sold prior to maturity must be reported by the broker effecting the transaction on Form 1099-B as a sale. In these cases, the “accrued” discount to the date of prematurity sales of the short-term obligation will not be reported on either Form 1099-INT or Form 1099-OID. You should consult your tax advisor concerning how this impacts the preparation of your tax return.

Reporting of Taxable Mergers and Acquisitions An information return is required to be filed when there is either a gain or loss recognized (in whole or in part), by shareholders as a result of a corporation’s stock or assets being acquired by another corporation. In transaction subject to the special rules under Internal Revenue Code

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section 367(a), the acquiring corporation (or the acquired corporation, if so required by the regulations) must report the following: • A description of the transaction; • The name and address of each shareholder of the acquired corporation that recognizes gain as a result of the transaction (or would recognize gain, if there was a built-in gain on the shareholder’s shares); and • The amount of money and the value of stock or other consideration paid to each shareholder. Our Clearing Broker is required to report such transactions on Form 1099-B. Box 5 reports the number of shares exchanged. Box 6 reports the class of stock exchanged, and Box 12 is checked if the taxpayer cannot deduct a loss with respect to the gross proceeds received. The corporation’s name is required to be reported on Form 1099-B in addition to the other information.

How to Report Your Short Sales If you sold stock short in 2010, you will receive a Form 1099-B reporting the sale, although you may not have closed the position. You should report the transaction on IRS Schedule D (Form 1040), line 1, even though the position is still open, and attach a statement explaining that the transaction represents a short position that has not yet been covered. Form 1099 MISC — Miscellaneous Income 2010 If you have received income from a royalty trust, substitute payments in lieu of dividends, contract adjustment payments, consent payments, or other miscellaneous income, the totals can be found in this section of your Forms 1099. The details can be found in “Details of Additional Summary Information 2010” on your Year-End Summary. Box 2 contains distributions from royalty trusts. Report this amount on Schedule E (Form 1040). For royalties on timber, coal and iron ore, see IRS Publication 544, Sales and Other Disposition of Assets. Box 3 contains contract fees or other income paid to you as an investor in certain types of units composed of a debt obligation and a forward purchase contract or option. Box 3 also is used to report consent payments, Settlements and Debt Write-offs in excess of $600. Box 8 contains substitute payments in lieu of dividends or tax-exempt interest received on your behalf by Our Clearing Broker. This may occur when you maintain a Portfolio CreditLine®, as described in the Account Application and Client Agreement. Payments in lieu of dividends are taxed at ordinary income tax rates and are not eligible for the reduced rates that apply to qualified dividends. You may rely on your Forms 1099 for determining whether you have received a payment in lieu of dividends and the amount thereof, unless you have actual knowledge to the contrary.

Understanding Your Year-End Summary The information in your Year-End Summary is provided for your convenience and is not reported to the IRS. The Summary has been prepared specifically for your account, so only the sections relevant to your investments will appear on your statement. The following is an explanation of each section as it may appear in your Year-End Summary.

Value of Your Portfolio This section of your Summary provides an overview of your investments at year-end. The value of your account is shown as of the close of business on December 31, 2010. Certain positions may not be shown at their current market values. The best information available is provided to you.

Interest You Paid 2010 This section includes total amounts charged to you for margin and other loans during the year. Also listed is the total taxable and nontaxable accrued interest you paid when you purchased bonds. Certain types of interest paid may be used to reduce your tax liability, but cannot be offset against interest reported to you on Forms 1099. For specific details refer to “Details of Accrued Income 2010.”

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Earnings Summary 2010 This summary provides an overview of your earnings for 2010. It includes reportable and tax-exempt amounts.

Details of Tax-Exempt OID Income Tax-exempt OID income is not required to be reported on Form 1099OID at present. However, to the extent Our Clearing Broker has been able to identify bonds issued with tax-exempt OID and to obtain the relevant rate information, they have calculated the amount of tax-exempt OID income that accrued on each of your holdings in 2010, including OID that is subject to AMT. These amounts are shown on your Year-End Summary under the header “Details of Tax-Exempt OID 2010.” Please understand that the same assumptions used in calculating accrued taxable OID income on Form 1099-OID were used in calculating accrued tax-exempt OID income. The OID rates applied assume that you purchased the tax-exempt bond on the date of its original issuance and at its original issue price. If your actual purchase date or price is different, the reported amount of tax-exempt OID may need to be adjusted. Tax-exempt OID income should be reported to the IRS on your federal income tax return. Please consult your tax advisor for further information.

Adjustment to OID for Contingent Payment Debt Obligations 2010: In general, a contingent payment debt instrument provides for one or more payments that are contingent as to timing or amount. If you hold a contingent payment bond or note, you must report OID as it accrues each year. If, during any taxable year, you receive actual payments that in the aggregate either exceed the total amount of projected payments for that taxable year, or are less than the amount of projected payments for that taxable year, you will incur either a “net positive” or “net negative” adjustment under the Contingent Debt Regulations, equal to the amount of such excess or deficit. You will treat a “net positive” adjustment as additional interest income, which will increase the total amount of OID for that taxable year. Alternatively, a “net negative” adjustment will reduce your interest income for that taxable year, which will decrease the total amount of OID. Accordingly, the amount of taxable income that you may be required to report for a particular year may differ significantly both from the amount of OID and the actual cash payments received. There is no formal mechanism to report these adjustments. Nevertheless, you are required to account for these adjustments when preparing your federal income tax return. For your convenience Our Clearing Broker has provided the requisite adjustments for 2010, and reported these amounts in this section. The amount reported on Form 1099-OID together with applicable positive or negative adjustments should be reported on Schedule B, Form 1040, of your individual tax return. Each amount should be reflected on a separate line of the Schedule B. [Note, details of these types of adjustments are provided only with respect to a limited number of CGMI proprietary issues.]

Additional Summary Information 2010 This section is an overview of the income generated from: • Royalty trusts and substitute payments in lieu of dividends (reported on Form 1099-MISC) • Limited partnerships and other securities (reported on Schedule K-1) • Settlements and adjustments (reported on Form 1099-MISC) • Contract adjustment payments, consent payments (reported on Form 1099-MISC)

Summary of Miscellaneous Tax Withheld 2010 This section contains an overview of taxes withheld from both domestic and foreign sources.

Limited Partnerships Although your monthly statement reflects distributions received from limited partnerships and other securities during 2010, this data, shown in

“Other Income,” is for your information only. In preparing your tax returns, you should utilize the information that will be provided by general partners on IRS Schedule K-1 (Form 1065) “Partner’s Share of Income, Credits, Deductions, etc.” Clients should expect to receive a K-1 for all partnerships they hold within their account whether or not they have distributed income. The Schedule K-1 will be sent directly from the partnership.

Details of Option Activity 2010 This section shows detail of your 2010 option transactions, including Purchases, Sales and Expirations. At present, a broker is not required to report activity relating to equity options to the IRS. However, taxpayers are required to include this information in their federal income tax return.

• Checks written with expense codes • FMA Card Activity. The total amount is shown for payments from your FMA account for debit card expenses

FMA Card Activity — Summary 2010 This section gives you a recap of all purchases made in 2010 by month and by industry classification. For better organization, purchases have been designated as either Travel, Restaurants, Entertainment, Merchandise or Other. Cash Withdrawals reported reflect total ATM withdrawals and cash advances made in 2010.

FMA Card Purchase Activity — Detail Report

The Details of Accrued Income section includes:

To simplify tax preparation and to provide you with a single source of all 2010 activity for your records, this section provides details of each purchase made with your FMA Card, arranged by industry classification and month in which the payment was reported on your FMA monthly statement. A column is provided that allows you to distinguish between your personal and business expenses to assist you in tax preparation.

• Accrued interest paid as a result of purchases

Q&A About Your Forms 1099/Year-End Summary

• Accrued interest received as a result of sales

Q: The earnings on some of my investments are reinvested in additional shares (e.g., mutual funds). Why is income on these earnings reported when I receive no cash? What is the cost basis of my reinvested dividends?

Details of Investment Activity 2010 The Investment Activity Section shows activity with trade dates in 2010, including: Purchases; Dividend Reinvestment; Sales; Certain other activity.

Details of Accrued Income 2010

• Accrued dividends received • A reference number for identification purposes, should you have an inquiry • The Date of the Transaction, meaning the trade date If you purchased a bond at any time during the year, the amount of accrued interest paid was not included in the cost basis of the security. The gross amount of interest received has been reported to the IRS on Form 1099-INT. Payments of accrued interest have not been reported by Our Clearing Broker to the IRS, nor have they been netted against the gross amount of interest received during 2010. Under current tax law, both corporate and individual taxpayers are permitted to offset accrued taxable interest paid against the next coupon payment. The Year-End Summary displays a separate entry for each accrued interest payment you made on a bond purchase, since you may only deduct accrued interest paid from the next coupon received from that security. This offset to interest income is only allowed in the tax year in which the income is reported. Accrued dividends are dividends received upon the sale of a mutual fund that accrues these dividends daily, or upon the redemption of preferred stock shares. This amount is included in the amount reported on your Form 1099-DIV. The following sections outline the activity for Financial Management Accounts (FMA®).

Details of Deposits and Withdrawals 2010 This section provides details of miscellaneous deposits, credits and debits charged to your account in 2010.

Summary of Expenses 2010 FMA checking and debit card activity is recapped in this section. Additional information may be provided directly by the FMA Card issuer. The section contains:

A: Even if your dividend income is reinvested in additional shares, these dividends are taxable and are included in the income amounts shown on your Form 1099-DIV. Your basis in the additional shares is the amount of the dividend reinvested. When selling shares, the basis allocable to the shares sold is determined using one of the three methods. Unless a different method is elected, the shares sold are deemed to be those shares which were acquired first (first-in/first-out or FIFO). Alternatively, you may elect at the time of the sale the “specific identification” method, in which you designate the specific shares sold (by acquisition date and basis). The third method is the “average cost” method — available only for shares of mutual funds. Consult your tax advisor to help you determine the method that is right for you.. Q: Are tax-exempt earnings that are subject to the Alternative Minimum Tax (AMT) reported to the IRS on Forms 1099? A: Yes, all tax-exempt interest is now reported in Box 8 on Form 1099INT, and Box 9 on the Form 1099-INT is used to report interest from private activity bonds that is subject to alternative minimum tax (AMT). We have used our best efforts to identify private activity bonds and to obtain information from mutual funds and unit investment trusts on the portion of distributions that are subject to AMT. While we have obtained this information from sources we consider reliable, we cannot guarantee its completeness or accuracy. Q: The Social Security number, name or address on my Forms 1099 is incorrect. How can I have it adjusted? A: Contact your Financial Advisor at the number listed on your statement and ask to have the information corrected. You may be required to complete paperwork detailing the nature of the change.

FMA, Financial Management Account and Portfolio CreditLine are service marks of Morgan Stanley Smith Barney LLC. © 2011 Morgan Stanley Smith Barney LLC, accounts carried by Citigroup Global Markets Inc., members SIPC.

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Morgan Stanley Smith Barney LLC, its affiliates and Citigroup Global Markets, Inc. do not provide tax or legal advice. To the extent that this material or any attachment concerns tax matters, it is not intended to be used and cannot be used by a taxpayer for the purpose of avoiding penalties that may be imposed by law. Any such taxpayer should seek advice based on the taxpayer’s particular circumstances from an independent tax advisor.