REVERSE CONVERTIBLES

Reverse Convertibles are linked to common stocks, American Depository Receipts (ADRs), baskets of stocks, stock market indices, commodities and other asset classes. The primary features of a Reverse Convertible are its enhanced yield and downside protection. A Reverse Convertible is intended to pay a coupon that is higher than the coupon the investor would receive on an underlying security. In addition to possibly providing a higher yield, a Reverse Convertible provides a protection level that is intended to protect an investor’s principal from a predetermined percentage decrease in the value of the underlying asset.

Reverse Convertibles usually, but not always, have maturities of three, six or twelve months. Investor should be willing to hold them until maturity.

If sold prior to maturity the value may be more or less than the amount originally invested depending upon the level, value, or price of the reference asset at the time of the sale.

Reverse Convertibles are senior unsecured debt obligations of the issuer and are not, either directly or indirectly, an obligation of any third party. Any payment to be made, including any partial principal protection feature, depends on the ability of the underlying bank to satisfy its obligations as they come due. As a result, the actual and perceived creditworthiness may affect market value. In the event the issuing bank were to default on its obligations, the investor may not receive the amounts owed to them.

Changes in the levels, values, or prices will determine the payment at maturity. Values and prices are based upon numerous factors; the referenced assets and their respective components are unpredictable and are subject to change. They are influenced by complex and interrelated political, economic, financial, regulatory, geographic, judicial and other factors. As a result, it is impossible to predict whether the referenced assets will rise or fall during the term of the Reverse Convertible. Therefore, these changes may result in a loss or gain in the invested principal. As the notes are linked to reference assets that may be unpredictable and volatile, we cannot guarantee that these changes will be beneficial to the investor, and therefore the investor may receive less than the amount he or she initially invested in the notes.