Yield Magnet Notes: Example of Coupon Calculations

For purposes of this example, assume a five-year Yield Magnet Note with annual coupon periods, a fixed coupon payment of 5.25% for the first year, variable coupon payments in years two through five, an upper boundary of 8.00% and a lower boundary of -12.50%.*

Given these assumptions, the variable coupon payment will never be more than 8.00% or less than 0% in any variable coupon period. In years two through five, the variable coupon will be determined on each annual valuation date.

[ Chart; Fixed and Variable Coupons ]

The variable coupon will be calculated by averaging the performance of the individual stocks in the underlying portfolio on each valuation date relative to their individual closing prices on the day the notes are priced. No stock may contribute more than an 8.00% positive return or a -12.50% negative return to the average return across the underlying portfolio.

Magnet Features at Work
If an individual stock has an 8.00% positive return on any annual valuation date, the performance for such stock on each subsequent valuation date will be ‘locked in’ at 8.00% for each subsequent year when a variable coupon payment is calculated. Also, starting in year three, the annual variable coupon payment will be no lower than the prior year’s variable coupon payment.

* 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.