REX: Calculation of Payment or Delivery at Maturity

For purposes of this example, assume a one-year REX, with a principal amount of $1,000, a 12.00% (per annum) coupon payable quarterly, linked to the price performance of an underlying stock that is traded on the New York Stock Exchange with a closing price of $28.50 on the date the securities were priced.*

Given these assumptions, an investor in this hypothetical REX will receive $30 on each quarterly interest payment date, totaling $120 over the term of the securities, and the payment at maturity will be calculated on the determination date as follows:

Step 1: Determine the closing price of the underlying stock on the determination date, which is typically three trading days prior to the maturity date.

Step 2: Determine the type of payment or delivery at maturity.

Compare the closing price of the underlying stock on the determination date to the closing price of the underlying stock on the date the securities were priced. If the closing price of the underlying stock on the determination date is equal to or greater than the closing price of the underlying stock on the date the securities were priced, the payment at maturity will be the return of the original principal amount, or $1,000. If the closing price of the underlying stock on the determination date is less than the closing price of the underlying stock on the date the securities were priced, investors will receive a number of shares of the underlying stock equal to the stock redemption amount.

Step 3: Determine the stock redemption amount.

The stock redemption amount is equal to $1,000 (the original principal amount of the REX) divided by the closing price of the underlying stock on the date the securities were priced (i.e., $1,000 / $28.50 = 35.088). Any fractional shares will be paid in cash in an amount equal to the amount of fractional shares times the closing price of the underlying stock on the determination date.

Step 4: Determine the value of the payment or delivery at maturity.

If the payment at maturity is the return of the original principal amount, the value of such payment will equal $1,000. If the delivery at maturity is the stock redemption amount, investors will receive a number of shares of the underlying stock equal to the stock redemption amount. The cash value of such shares will not be determined until investors sell the shares in the market. However, if an investor were to sell such shares on the determination date, the cash value would be equal to the stock redemption amount times the closing price of the underlying stock on the determination date, which would be less than the original investment of $1,000.

Investors do not participate in any price appreciation in the underlying stock. The total return on the securities will be limited to the aggregate fi xed coupon payments plus the cash value of the payment at maturity. The maximum total return of this hypothetical REX will be the original principal amount plus the aggregate fi xed coupon payments or 12%. The minimum total return of the securities will be the aggregate fi xed coupon payments or $120, which will be the case if the closing price of the underlying stock is zero on the determination date.

* These assumptions are for illustrative purposes only. The actual notes offered may have different terms. You should review the prospectus for the particular offering for a description of the actual terms of any notes.

Hypothetical Payments or Deliveries at Maturity

In the accompanying table and graph, we have indicated several hypothetical payments or deliveries at maturity for a hypothetical REX, based on the assumptions set forth below. For comparative purposes only, we have also indicated the total return on the hypothetical underlying stock. However, investors in the REX do not participate in any price appreciation in the underlying stock.

[ Table: Assumptions ]

[ Table: Step1,2,3,4,5 ]

[ Chart: REX Performance vs. Underlying Stock performance ]