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Yield Magnet Notes: How are the Coupons Calculated?

For a specified initial period, Yield Magnet Notes will pay a fixed coupon payment.

Thereafter, coupon payments will vary based on the price performance of the individual stocks in the underlying portfolio.

The variable coupons will be calculated in each coupon period by determining the price return of each stock in the underlying portfolio on a fixed valuation date as compared to that on the day the notes are priced and then determining the average price return across the underlying portfolio. The contribution of each stock to the average price return across the underlying portfolio can be no less than a predetermined lower boundary and no higher than a predetermined upper boundary. In addition, the Magnet features apply as follows:

Magnet Feature #1
If the return of any individual stock in the underlying portfolio exceeds the upper boundary on any valuation date, the upper boundary level will be used for that stock for purposes of calculating the variable coupon payment for each subsequent period. This means that even if the actual price return of such stock decreases in subsequent valuation periods, the upper boundary return will be used to calculate the variable coupon payment.

Magnet Feature #2
After payment of the first variable coupon, each subsequent variable coupon payment will be no lower than the prior variable coupon payment.