1 Assumes Credit, Interest Rate, and Implied Volatility Curves Remain Unchanged

Structured Investment Market Colour

I n d i c a t i v e F a c t s h e e t - F o r P r o f e s s i o n a l I n t e r m e d i a r i e s O n l y – 1 s t A p r i l 2 0 1 4

Indicative 6 Year Pricing Grid – assuming AA- Issuer

REFERENCE POINTS (1st April 2014) FTSE 100 S&P 500 Euro Stoxx 50

Strike 6,624 1,872 3,175

60% 3,974 1,123 1,905

130% 8,611 2,433 4,127

1. PARTICIPATION STRUCTURES (pricing as of 5th March is given in brackets)

Page | 1 UNCAPPED PARTICPIATION – ‘Accelerators’ FTSE 100 S&P 500 Euro Stoxx 50*

. Uncapped upside gearing

. Local currency 200% (198%) . 6 year term 236% (229%) 164% (164%) See note below* . Soft protection at 60% at maturity

. Averaging in the final year for the upside gearing

* These pricings are in local currency. Most investors choose to remove EUR GBP FX risk via ‘quanto’ accelerators. This ‘quanto’ pricing currently results in roughly a 20% pickup to accelerator headline rates on European indices. The most recent European accelerator that traded using this method is HSBC 602 MSCI Europe ex UK Accelerator (210%) EIS

CAPPED PARTICIPATION – ‘Boosters’ * FTSE 100 S&P 500 Euro Stoxx 50

. Participation from 85% starting level up to 125% of starting level

. Local currency 188% (186%) 158% (159%) 177% (177%) . 6 year term

. Soft protection at 60% at maturity

. All optionality European

* Structure named ‘Call Spreads’ when participation begins from 100% of starting level

CAPITAL PROTECTED UNCAPPED PARTICIPATION FTSE 100 S&P 500 Euro Stoxx 50

. Uncapped upside gearing

. Local currency

. 6 year term 125% (114%) 80% (74%) 66% (63%)

. Capital protected

CAPITAL PROTECTED CAPPED PARTICIPATION FTSE 100 S&P 500 Euro Stoxx 50

. Participation from 100% starting level up to 150% of starting level (‘Call Spread’)

. Local currency 147% (138%) 100% (95%) 82% (79%) . 6 year term

. Capital protected

2. AUTOCALLS (pricing as of 5th March is given in brackets) FTSE 100 / FTSE 100 / Euro AUTOCALLABLES FTSE 100 S&P 500 Stoxx 50 Page | 2 0 Sensitivity Heat-map of Popular Structures0 1 0 0 10 1 1 1 1 1 1 1 1 1 21 2 2 2 2 2 2 2 2 2 32 3 3 3 3 3

Key: Sensitivity to underlying, e.g. 1 = moves with market spot moves

FTSE 100 Accelerator: 236% Uncapped upside gearing / Soft Protection at 60%

Spot FTSE -35% -30% -25% -20% -15% -10% -5% 0% 5% 10% 15% 20% 25% 30% 35% 40% Shift

time (months) 3 53p 59p 65p 71p 78p 85p 92p 100p 108p 116p 125p 134p 143p 153p 163p 173p

6 54p 60p 66p 72p 79p 86p 93p 101p 108p 117p 126p 135p 144p 154p 164p 175p

100 60 78p 84p 88p 91p 93p 96p 105p 112p 122p 132p 143p 155p 166p 178p 190p p

1Assumes credit, interest rate, and implied volatility curves remain unchanged. Autocall (Flat and Defensive versions): Path of underlying assumed to have not caused a previous autocall event when calculating path dependency Daily Range Accrual: Path of underlying assumed to be linear from strike when calculating path dependency Please call through if you wish to discuss the methodology of this analysis. Page | 3 Page | 4 2 Autocall Flat Barriers : 8.10% Snowballing Coupon / Soft Protection at 60%

Spot FTS -35% -30% -25% -20% -15% -10% -5% 0% 5% 10% 15% 20% 25% 30% 35% 40% Shift E

time (month 3 64p 71p 78p 84p 89p 95p 97p 100p 101p 104p 104p 105p 106p 106p 106p 106p s)

Autocall: 5% Dropping Barriers: 5.85% Snowballing Coupon / Soft Protection at 60%

Spot FTSE -35% -30% -25% -20% -15% -10% -5% 0% 5% 10% 15% 20% 25% 30% 35% 40% Shift

time (month 3 65p 73p 80p 86p 92p 95p 99p 101p 103p 105p 105p 105p 105p 105p 105p 105p s)

2 Page | 5 Appendix – Rates, Credit, Volatility & Correlation

Current Yields of Different Asset Classes (Annual Yield%)

Putting autocall coupons returns in perspective with where base yields and high yields are.

Falling Yields and their impact on Structures

Sterling Interest Rates Grinding lower, 10% autocall coupon equates to 15% in 2007 (ceteris paribus)

Source: Bloomberg

Credit

 Clients continue to chase quality

Source: Bloomberg

* Royal Bank of Canada Equivalent taken from bond yield for illustrative purposes (duration may be less than 5yrs)

Page | 6 Volatility in a bit more detail

In our regular market colour piece we always include the graph below.

 The red line shows the 5 year “at-the-money Implied vol”. Why?: this is a good rough proxy measure to use when following volatility levels in relation to how many structures such as autocall price. Briefly, autocalls are ‘short’ volatility, meaning that one would expect an increase in the headline rate of an autocall when these volatility levels are higher.

 The “knock-in put” premiums are plotted as well to show a bit more detail on the above point. The soft protection element of structures is made up of the premium gained by selling the “knock-in put”, again as a proxy we also show how this premium pickup changes over time. As expected it is highly correlated to the volatility level.

Source: Catley Lakeman, JP Morgan Derivatives and Delta One Strategy, Bloomberg

Knock-in Put prices prior to January 2011 are retrospectively priced using prevailing market data, including but not limited to interest rates, dividend yields and implied volatility curves.

Correlation

The correlations shown are realized correlationsi between main equity indices. These are shown as a proxy for implied correlations relevant for the pricing of dual index/worst-of derivatives. The pick up in coupon over the period for UK/US has been 1.0-2.5%

Page | 7 i Rolling 6 month realized correlation, weekly observations.