Investment Risks and Considerations

Suitability
Reverse convertibles may not be suitable for all investors due to the potential for loss of principal.

Reverse convertibles consist of a debt instrument and a put option. By purchasing a reverse convertible, the investor sells the issuer the right to deliver the underlying asset to the investor at some point in the future. At maturity, the investor could receive either cash or shares of stock. Reverse convertible investors should have the knowledge and experience in financial matters necessary to be capable of evaluating the risks of such a transaction, and be financially able to bear the risk of a loss of principal.

In addition, because there can be no assurance that a secondary market will develop or be maintained, they are most suitable for investors who intend to purchase and hold them until maturity.

Principal Risk
Reverse convertibles are not principal protected, thus there is no guaranteed return of principal. If the price of the underlying asset decreases, the investor may receive shares, whose value will be less than the original amount invested. However, an increase in the value of the underlying asset will not increase the return on the reverse convertible.

Credit Risk
The creditworthiness of the issuer is an important consideration when evaluating any debt instrument. A purchaser of a reverse convertible must rely upon the issuer's ability to meet its obligations to make payments of principal and interest. However, it should be noted that because reverse convertibles are not principal protected, the credit quality of the issuer on its own is not a sufficient measure of the safety of the principal invested.

Secondary Market Risk
There is no guarantee that a secondary market will be available to investors who need to sell their securities. If an investor needs to sell a reverse convertible prior to maturity in the secondary market, it will be subject to many unpredictable factors including prevailing market conditions and may be worth less or more than its original cost.

Taxes
Because reverse convertibles consist of two components, a debt instrument and an option, they are subject to special tax treatment. Investors should read the relevant section of the prospectus or offering circular carefully and should consult their tax advisor prior to any purchase.

Issuer Call
Some reverse convertibles may be issued with a call feature, which means that the notes may be redeemed prior to maturity at the option of the issuer only.