FINAL DISCLOSURE SUPPLEMENT Dated January 28, 2014 To the Disclosure Statement dated January 30, 2013

Transcription

1 FINAL DISCLOSURE SUPPLEMENT Dated January 28, 2014 To the Disclosure Statement dated January 30, 2013 Union Bank, N.A. Market-Linked Certificates of Deposit, due October 31, 2019 (MLCD No. 335) Return Linked to the S&P 500 Daily Risk Control 5% Excess Return Index Set forth below are the terms and conditions of the above specified Union Bank, N.A. (the Bank ) Market-Linked Certificates of Deposit (the MLCDs ). You should carefully review this Disclosure Supplement (the Supplement ), as well as the attached Disclosure Statement, before deciding if an investment in an MLCD is appropriate for you. In the event of any inconsistency between the Disclosure Statement and this Supplement, the terms of this Supplement will control. In general, the MLCDs are designed for investors who seek return of principal along with participation in the performance of the Investment Benchmark and who are prepared to hold the MLCD until the Maturity Date. All capitalized terms used but not defined herein have the meanings set forth in the Disclosure Statement. MLCD Description Each MLCD is a certificate of deposit that offers a potential return based on the performance of the S&P 500 Daily Risk Control 5% Excess Return Index (the Investment Benchmark ), subject to a minimum return, if applicable and held to maturity. This return is therefore not a fixed coupon and no Periodic Interest Payments will be made on the MLCDs. Return Potential: The interest payment to the depositor is equal to the greater of the return of the Investment Benchmark or the Minimum Indexed Interest Amount (as defined below). Return of Principal: At maturity, you will receive repayment of your Deposit Amount and an amount no less than the Minimum Indexed Interest Amount, regardless of the performance of the Investment Benchmark. Investors who redeem all or a portion of their MLCD early may lose a portion of their Deposit Amount. FDIC Insurance: The MLCDs are deposit obligations of the Bank and are therefore eligible for FDIC coverage up to applicable limits set by federal law and regulation. The FDIC insures all deposits maintained by a depositor in the same ownership capacity (i.e., individual or joint) at the same insured depository institution up to an aggregate amount of $250,000. Further, with respect to the MLCDs, the FDIC insurance covers only the Deposit Amount and does not include any Indexed Interest Amount, Minimum Indexed Interest Amount or secondary market premium. You are responsible for determining and monitoring the FDIC insurance coverage limit available to you in purchasing any MLCD. The Bank has no obligation to monitor the FDIC insurance coverage that is available to you. IRA Eligible: MLCDs are eligible investments for individual retirement accounts ( IRAs ). Risks and Considerations Purchasing an MLCD involves a number of risks, including risks not typically associated with fixed-rate or floating-rate certificates of deposit or debt instruments. The Bank recommends that prospective investors carefully consider, together with their financial, legal, accounting, tax and other advisors, those risks in determining the suitability of an MLCD in light of their financial circumstances. Please see Risk Factors beginning on page 5 below and refer to the accompanying Disclosure Statement for a more detailed discussion of these risks which include, but are not limited to: You are not guaranteed the return of the Deposit Amount if your MLCD is not held to maturity. In addition, if you choose to exercise the Early Redemption feature, you are not guaranteed the return of the Deposit Amount. If you hold more in deposits with the Bank than applicable FDIC insurance limits (including the MLCDs you purchase), you will not receive the benefit of FDIC insurance for any balance in excess of that amount. In this instance, the return of principal is subject to the credit risk of the Bank. Neither the Bank nor any Offering Broker is required to, nor does the Bank or any of its affiliates intend to, make a secondary market in the MLCDs. There is no assurance that a secondary market will develop. Funds needed prior to maturity should not be invested in MLCDs. The MLCDs may yield a return that is less than that of a traditional certificate of deposit or debt instrument of a comparable maturity. Interest on the MLCDs will be subject to annual income taxes based upon a comparable yield for the issuance, even though no payments will be made on the MLCDs until the Maturity Date, absent early redemption. You may incur a tax liability without any offsetting income from the MLCDs. See United States Federal Income Tax Considerations herein and in the Disclosure Statement. The Indexed Interest Amount (as defined below) may not reflect the full upside performance of the Investment Benchmark, and the performance of the Investment Benchmark may result in the investor receiving only the Minimum Indexed Interest Amount at maturity. Although the return on the MLCD is linked to the performance of the Investment Benchmark, you will not have any rights in or to the shares, currencies or commodities, as the case may be, comprising or referenced in the Investment Benchmark, including, where applicable, beneficial ownership rights such as dividends, distributions or voting. Investment Benchmark Summary Description The Investment Benchmark tracks the return of the S&P 500 Total Return Index ( SPXTR ) over and above a short-term money market investment. The Investment Benchmark is rebalanced and reweighted daily between the SPXTR and a borrowing cost component, in order to seek to maintain a target volatility of 5%. Please see the section below, The Investment Benchmark, for a more detailed description of the Investment Benchmark. The MLCDs are made available through UnionBanc Investment Services LLC ( UBIS ), a subsidiary of the Bank, and/or other Offering Brokers. The MLCDs are time deposit obligations of the Bank, a national banking association, and are not obligations of UnionBanCal Corporation, the Offering Brokers, or any other company affiliated with the Bank. None of UnionBanCal Corporation, UBIS or any other affiliate of the Bank guarantees the financial condition of the Bank. 1 The S&P 500 Index is a product of S&P Dow Jones Indices LLC ( SPDJI ), and has been licensed for use by Union Bank, N.A. Standard & Poor s, S&P and S&P 500 are registered trademarks of Standard & Poor s Financial Services LLC ( S&P ); Dow Jones is a registered trademark of Dow Jones Trademark Holdings LLC ( Dow Jones ); and these trademarks have been licensed for use by SPDJI and sublicensed for certain purposes by Union Bank, N.A. Union Bank, N.A.'s MLCDs are not sponsored, endorsed, sold or promoted by SPDJI, Dow Jones, S&P, their respective affiliates, and none of such parties make any representation regarding the advisability of investing in such product(s) nor do they have any liability for any errors, omissions, or interruptions of the S&P 500 Index.

2 Key Terms Issuer... Union Bank, N.A. Investment Benchmark... S&P 500 Daily Risk Control 5% Excess Return Index (ticker: SPXT5UE). Currency... USD. Minimum Deposit Amount... $1,000 principal amount (except that each Offering Broker may, in its discretion, impose a higher minimum deposit amount with respect to MLCD sales to its customers) and multiples of $1,000 principal amount in excess of such amount. Pricing Date... January 28, Issue Date (Settlement Date)... January 31, Maturity Date... October 31, Payment at Maturity... The Deposit Amount plus the greater of (i) the Indexed Interest Amount or (ii) the Minimum Indexed Interest Amount. Indexed Interest Amount... The product of the Investment Benchmark Return Percentage and the Participation Rate (each as defined below) multiplied by the Deposit Amount. Investment Benchmark Return Percentage... The Calculation Agent will determine the Investment Benchmark Return Percentage by applying the following formula: (Final Closing Value Initial Closing Value) Initial Closing Value Where: The Final Closing Value will be the Closing Value of the Investment Benchmark on the Final Observation Date. The Initial Closing Value will be , the Closing Value of the Investment Benchmark on the Pricing Date. The Final Observation Date will be October 28, The Closing Value on any scheduled trading day will be determined by the Calculation Agent based upon the value of the Investment Benchmark at the regular official weekday close of trading on such day. Changes in the value of the Investment Benchmark from the Final Observation Date to the Maturity Date will not affect the Indexed Interest Amount or the return on the MLCD. Participation Rate: %. Minimum Indexed Interest Amount % (if the Final Closing Value of the Investment Benchmark does not exceed the Initial Closing Value, so that only the outstanding Deposit Amount and the Minimum Indexed Interest Amount is payable on the MLCDs). Annual Percentage Yield ( APY )... None. Periodic Interest Payments... None. Call Feature... None. Early Redemption Dates... The 15th of each March, June, September, and December, beginning December 15, The amount you receive upon an early redemption (the Early Redemption Amount ) is described in the section of the Disclosure Statement entitled General Description of the MLCDs - Early Redemption." Upon an Early Redemption, the 2 The S&P 500 Index is a product of S&P Dow Jones Indices LLC ( SPDJI ), and has been licensed for use by Union Bank, N.A. Standard & Poor s, S&P and S&P 500 are registered trademarks of Standard & Poor s Financial Services LLC ( S&P ); Dow Jones is a registered trademark of Dow Jones Trademark Holdings LLC ( Dow Jones ); and these trademarks have been licensed for use by SPDJI and sublicensed for certain purposes by Union Bank, N.A. Union Bank, N.A.'s MLCDs are not sponsored, endorsed, sold or promoted by SPDJI, Dow Jones, S&P, their respective affiliates, and none of such parties make any representation regarding the advisability of investing in such product(s) nor do they have any liability for any errors, omissions, or interruptions of the S&P 500 Index.

3 value of your MLCD may be less than if held to maturity and will be impacted by the factors described under "Risk Factors - Value of the MLCDs Prior to Maturity May Be Substantially Less Than Your Deposit Amount and Fees and Hedging in the Disclosure Statement. Survivor s Option... Upon the death or adjudication of incompetence of the beneficial owner of the MLCD, the estate will be entitled to the return of the full Deposit Amount. The estate will not be entitled to additional payments associated with the performance of the Investment Benchmark or any secondary market premiums that may have been paid. Survivor s Option Payment Dates... The 10th of each month, beginning March 10, Calculation Agent... Union Bank, N.A. Scheduled Trading Day... CUSIP... Selling Concession & Fees... Any day on which all of the Relevant Exchanges and Related Exchanges are scheduled to be open for trading for each security then included in the Investment Benchmark AQH4 The MLCDs will be distributed through Participating Brokers. Participating Brokers will receive a Placement Fee from the Bank of up to 3.50% of the aggregate Deposit Amount of the MLCDs sold. 3 The S&P 500 Index is a product of S&P Dow Jones Indices LLC ( SPDJI ), and has been licensed for use by Union Bank, N.A. Standard & Poor s, S&P and S&P 500 are registered trademarks of Standard & Poor s Financial Services LLC ( S&P ); Dow Jones is a registered trademark of Dow Jones Trademark Holdings LLC ( Dow Jones ); and these trademarks have been licensed for use by SPDJI and sublicensed for certain purposes by Union Bank, N.A. Union Bank, N.A.'s MLCDs are not sponsored, endorsed, sold or promoted by SPDJI, Dow Jones, S&P, their respective affiliates, and none of such parties make any representation regarding the advisability of investing in such product(s) nor do they have any liability for any errors, omissions, or interruptions of the S&P 500 Index.

4 Additional Risk Factors Purchasing the MLCDs is not equivalent to investing directly in the Investment Benchmark or the constituent stocks thereof. It is suggested that prospective depositors considering purchasing MLCDs reach a decision to purchase only after carefully considering, with their financial, legal, tax, accounting and other advisors, the suitability of the MLCDs in light of their particular circumstances and the risk factors set forth below and other information set forth in this Final Disclosure Supplement and the accompanying Disclosure Statement. You will be subject to certain risks not associated with conventional fixed-rate or floating-rate CDs or debt securities. You are not guaranteed the return of the Deposit Amount if your MLCDs are not held to maturity. In addition, if you choose to exercise the Early Redemption feature, you are not guaranteed the return of the Deposit Amount. If you hold more in deposits with the Bank than applicable FDIC insurance limits (including the MLCDs you purchase), you will not receive the benefit of FDIC insurance for any balance in excess of that amount. In this instance, the return of principal is subject to the credit risk of the Bank. Neither the Bank nor any Offering Broker is required to, nor does the Bank or any of its affiliates intend to, make a secondary market in the MLCDs. There is no assurance that a secondary market will develop. Funds needed prior to maturity should not be invested in MLCDs. The MLCDs may yield a return that is less than that of a traditional certificate of deposit or debt instrument of a comparable maturity. Interest on the MLCDs will be subject to annual income taxes based upon a comparable yield for the issuance, even though no payments will be made on the MLCDs until the Maturity Date, absent early redemption. You may incur a tax liability without any offsetting income from the MLCDs. See United States Federal Income Tax Considerations herein and in the Disclosure Statement. The return on the MLCDs will be based solely on the Closing Value of the Investment Benchmark on the Final Observation Date. If the value of the Investment Benchmark increases during the term of the MLCDs, but then declines before the Final Observation Date, the Investment Benchmark Return Percentage will not reflect the highest value of the Investment Benchmark during the term of the MLCDs and may result in the investor receiving only the Minimum Indexed Interest Amount at maturity. Although the return on the MLCDs is linked to the performance of the Investment Benchmark, you will not have any ownership interest or rights in any stocks included in the Investment Benchmark, such as voting rights, dividend payments or other distributions. In addition, the sponsor of the Investment Benchmark (the Investment Benchmark Sponsor ) will not have any obligation to consider your interests as a holder of the MLCDs in taking any action that might affect the value of the Investment Benchmark and the MLCDs. We or our affiliates are not affiliated with the Investment Benchmark Sponsor. We assume no responsibility for, and make no representation regarding, the adequacy or completeness of the information about the Investment Benchmark contained herein. You should make your own investigation into the Investment Benchmark Sponsor and the Investment Benchmark. Low volatility in the Investment Benchmark is not synonymous with low risk in the MLCDs, despite the fact that the title of the Investment Benchmark includes risk control. For example, even if the Investment Benchmark achieved its goal of reducing the risk of large fluctuations as compared to the SPXTR, the value of the SPXTR, and thus the value of the Investment Benchmark, may remain stable or steadily decrease over time, which would result in the return on the MLCDs being limited to the Minimum Indexed Interest Amount at maturity. The Investment Benchmark employs a mathematical algorithm intended to control the level of risk of the SPXTR by establishing a specific volatility target, and dynamically adjusting the exposure to the SPXTR, based on its observed historical volatility. No assurance can be given that the volatility strategy will be successful or that the Investment Benchmark will outperform the SPXTR or any alternative strategy that might be employed to reduce the level of risk of the SPXTR. We also can give you no assurance that the Investment Benchmark will achieve its target volatility. The Investment Benchmark dynamically adjusts exposure to the SPXTR based on observed volatility, which may lead to an under-exposure of the MLCDs to the performance of the SPXTR. The Investment Benchmark represents a portfolio consisting of the SPXTR and a borrowing cost component accruing interest based on the overnight U.S. LIBOR rate. The Investment Benchmark dynamically adjusts its exposure to the SPXTR based that index s observed volatility. The Investment Benchmark s exposure to the SPXTR will decrease, or deleverage, when historical volatility causes the risk level of the SPXTR to reach a high threshold. If, at any time, the Investment Benchmark exhibits low exposure to the SPXTR, and the SPXTR subsequently appreciates significantly, the Investment Benchmark will not participate fully in this appreciation. Under these circumstances, the Indexed Interest Amount payable on the MLCDs may be less than the amount you would have received by investing the same principal amount directly in the SPXTR or in the underlying securities composing the SPXTR. 4 The S&P 500 Index is a product of S&P Dow Jones Indices LLC ( SPDJI ), and has been licensed for use by Union Bank, N.A. Standard & Poor s, S&P and S&P 500 are registered trademarks of Standard & Poor s Financial Services LLC ( S&P ); Dow Jones is a registered trademark of Dow Jones Trademark Holdings LLC ( Dow Jones ); and these trademarks have been licensed for use by SPDJI and sublicensed for certain purposes by Union Bank, N.A. Union Bank, N.A.'s MLCDs are not sponsored, endorsed, sold or promoted by SPDJI, Dow Jones, S&P, their respective affiliates, and none of such parties make any representation regarding the advisability of investing in such product(s) nor do they have any liability for any errors, omissions, or interruptions of the S&P 500 Index.

5 The Investment Benchmark is designed to track an unfunded investment in the SPXTR, with a leveraged or deleveraged position according to the applicable target volatility. As an excess return index, the Investment Benchmark calculates the return on a leveraged or deleveraged investment with an increased or decreased exposure to the SPXTR, where the investment was made through the use of borrowed funds. As a result, the return of the Investment Benchmark will be equal to the leveraged or deleveraged return of the SPXTR, less the associated borrowing costs. Because this excess return index represents an unfunded position in the SPXTR, the performance of the Investment Benchmark will be subject to short-term money market fund borrowing costs and will not include any total return feature or cash component of a total return index, which represents a funded position in the SPXTR. Because the Investment Benchmark was created in September 2009, it has limited actual historical information. The Investment Benchmark Sponsor has published limited actual information about how the Investment Benchmark would have performed had it been calculated in the past. Because the Investment Benchmark is of recent origin and limited actual historical performance data exists with respect to it, your investment in the MLCDs may involve a greater risk than investing in CDs linked to one or more indices with a more established record of performance. The value of the MLCDs is subject to several factors along with the performance of the Investment Benchmark. These factors include but not are not limited to: the actual and expected volatility of the Investment Benchmark, the time to maturity of the MLCDs, the dividend rates on the equity securities underlying the Investment Benchmark, interest and yield rates in the market generally, a variety of economic, financial, political, regulatory and judicial events, and our creditworthiness, including actual or anticipated downgrades in the Bank s credit ratings. 5 The S&P 500 Index is a product of S&P Dow Jones Indices LLC ( SPDJI ), and has been licensed for use by Union Bank, N.A. Standard & Poor s, S&P and S&P 500 are registered trademarks of Standard & Poor s Financial Services LLC ( S&P ); Dow Jones is a registered trademark of Dow Jones Trademark Holdings LLC ( Dow Jones ); and these trademarks have been licensed for use by SPDJI and sublicensed for certain purposes by Union Bank, N.A. Union Bank, N.A.'s MLCDs are not sponsored, endorsed, sold or promoted by SPDJI, Dow Jones, S&P, their respective affiliates, and none of such parties make any representation regarding the advisability of investing in such product(s) nor do they have any liability for any errors, omissions, or interruptions of the S&P 500 Index.

6 Illustrative Examples The following examples are provided for illustration purposes only and are hypothetical. They are not representative of every possible scenario concerning increases or decreases in the Closing Values of the Investment Benchmark relative to the Initial Closing Value. The Bank cannot predict the Closing Value of the Investment Benchmark on any Scheduled Trading Day. The assumptions the Bank has made in connection with the illustrations set forth below may not reflect actual events. You should not take these examples as an indication or assurance of the expected performance of the Investment Benchmark or of the return on the MLCDs. The following examples indicate how and whether the Indexed Interest Amount would be calculated and paid with respect to a hypothetical $1,000 Deposit Amount in the MLCDs. These examples assume that there is no early redemption, and that the MLCDs are held to maturity, and the following: Indexed Interest Amount: The product of the following: a) Deposit Amount b) Participation Rate c) Investment Benchmark Return Percentage Participation Rate: 100% Investment Benchmark Return Percentage: Minimum Indexed Interest Amount Payment at Maturity: 0.00%. (Final Closing Value Initial Closing Value) Initial Closing Value The Deposit Amount plus the greater of (i) the Minimum Indexed Interest Amount, and (ii) the Indexed Interest Amount. 6 The S&P 500 Index is a product of S&P Dow Jones Indices LLC ( SPDJI ), and has been licensed for use by Union Bank, N.A. Standard & Poor s, S&P and S&P 500 are registered trademarks of Standard & Poor s Financial Services LLC ( S&P ); Dow Jones is a registered trademark of Dow Jones Trademark Holdings LLC ( Dow Jones ); and these trademarks have been licensed for use by SPDJI and sublicensed for certain purposes by Union Bank, N.A. Union Bank, N.A.'s MLCDs are not sponsored, endorsed, sold or promoted by SPDJI, Dow Jones, S&P, their respective affiliates, and none of such parties make any representation regarding the advisability of investing in such product(s) nor do they have any liability for any errors, omissions, or interruptions of the S&P 500 Index.

7 Hypothetical Scenarios The following table shows hypothetical closing values of the Investment Benchmark for several different scenarios over the term of the MLCDs. Because the closing value of the Investment Benchmark may be subject to significant fluctuations over the term of the MLCDs, we cannot show the range of all possible returns that would result from given changes in the closing values of the Investment Benchmark. These hypothetical examples are for purposes of illustration only. The actual Payment at Maturity will depend on the actual Closing Value of the Investment Benchmark on the Final Observation Date. Initial Final (Final Closing Value - Initial Closing Value) Interest Payable APY Payment at Scenarios Closing Value Closing Value (Initial Closing Value) at Maturity Maturity A % 0.00% 0.00% $ 1, B % 0.00% 0.00% $ 1, C % 0.00% 0.00% $ 1, D % 0.00% 0.00% $ 1, E % 10.00% 1.67% $ 1, F % 20.00% 3.22% $ 1, G % 30.00% 4.67% $ 1, H % 50.00% 7.31% $ 1, I % 75.00% 10.22% $ 1, Hypothetical Scenario A In this scenario, because the Final Closing Value finished below the Initial Closing Value, the investor would receive the Deposit Amount plus the Minimum Indexed Interest Amount, for a total Payment at Maturity of $1,000 + ($1,000 * 0.00%) = $1, Hypothetical Scenario E In this scenario, the Indexed Interest Amount is equal to the Minimum Indexed Interest Amount so the investor would receive the Deposit Amount plus the Indexed Interest Amount, for a total Payment at Maturity of $1,000 + ($1,000 * 10.00%) = $1, Hypothetical Scenario F In this scenario, the Indexed Interest Amount is greater than the Minimum Indexed Interest Amount so the investor would receive the Deposit Amount plus the Indexed Interest Amount, for a total Payment at Maturity of $1,000 + ($1,000 * 20.00%) = $1, The S&P 500 Index is a product of S&P Dow Jones Indices LLC ( SPDJI ), and has been licensed for use by Union Bank, N.A. Standard & Poor s, S&P and S&P 500 are registered trademarks of Standard & Poor s Financial Services LLC ( S&P ); Dow Jones is a registered trademark of Dow Jones Trademark Holdings LLC ( Dow Jones ); and these trademarks have been licensed for use by SPDJI and sublicensed for certain purposes by Union Bank, N.A. Union Bank, N.A.'s MLCDs are not sponsored, endorsed, sold or promoted by SPDJI, Dow Jones, S&P, their respective affiliates, and none of such parties make any representation regarding the advisability of investing in such product(s) nor do they have any liability for any errors, omissions, or interruptions of the S&P 500 Index.

8 UNITED STATES FEDERAL INCOME TAX CONSIDERATIONS To ensure compliance with Treasury Department Circular 230, you are hereby notified that (a) any discussion of United States federal tax issues in this Disclosure Supplement is not intended or written to be relied upon, and cannot be relied upon by you for the purpose of avoiding penalties that may be imposed on you under the Internal Revenue Code of 1986, as amended (the Code ), (b) this discussion is included herein by the Bank in connection with the promotion or marketing (within the meaning of Circular 230) by the Bank, UBIS and the Offering Brokers of the transactions or matters addressed in this Disclosure Supplement, and (c) you should seek advice based on your particular circumstances from an independent tax advisor. The following discussion supplements (and, to the extent inconsistent with, supersedes) and should be read in conjunction with the discussion in the attached Disclosure Statement under United States Federal Income Tax Considerations. For purposes of that discussion, the MLCDs are long-term MLCDs. The table below sets forth the following information with respect to each $1,000 principal amount of the MLCDs for each of the indicated accrual periods through the maturity dates of the MLCDs: the adjusted issue price at the beginning of the accrual period; the amount of interest deemed to have accrued during the accrual period; and the total amount of interest deemed to have accrued from the original issue date through the end of the accrual period. The table is based upon a projected payment schedule (including a comparable yield equal to 2.61% per annum (compounded annually)) that the Bank established for the MLCDs. The comparable yield will not be less than the applicable federal rate based on the overall maturity of the MLCD. The table reflects the expected issuance of the MLCDs on January 31, 2014 and the scheduled maturity date of October 31, The table also assumes that the MLCDs will not be withdrawn prior to maturity under the Survivor s Option or pursuant to an early redemption. The projected payment schedule consists of a single payment at maturity, which includes the principal amount and a projection for tax purposes of the Indexed Interest Amount. The Bank has determined that the projected payment schedule for each $1,000 principal amount of the MLCDs would consist of the payment on the maturity date of the principal amount of $1,000 and a projected Indexed Interest Amount of $159.77, for a total of $1, This information is provided solely for tax purposes, and the Bank makes no representations or predictions as to what the actual Indexed Interest Amount will be. Total Interest Deemed Accrual Period Adjusted Issue Price at Beginning of Accrual Period Interest Deemed to Accrue on the MLCDs During the Accrual Period (1) to Have Accrued from Original Issue Date as of End of Accrual Period January 31, 2014 to December 31, , January 1, 2015 to December 31, January 1, 2016 to December 31, January 1, 2017 to December 31, January 1, 2018 to December 31, January 1, 2019 to October 31, January 0, 1900 January 0, (1) Represents the adjusted issue price at the beginning of the accrual period multiplied by the hypothetical comparable yield for the accrual period. Final Adjusted Issue Price = $1, per $1,000 principal amount of MLCDs. Upon payment at maturity, you will be required to adjust the income accrued pursuant to the projected payment schedule, upward or downward, to reflect the difference, if any, between the actual and projected amount of the maturity payment. You generally will treat any such gain as ordinary income and any such loss as ordinary loss to the extent of previous income inclusions. All prospective investors in the MLCDs should consult their own tax advisors concerning the taxation of the MLCDs. 8 The S&P 500 Index is a product of S&P Dow Jones Indices LLC ( SPDJI ), and has been licensed for use by Union Bank, N.A. Standard & Poor s, S&P and S&P 500 are registered trademarks of Standard & Poor s Financial Services LLC ( S&P ); Dow Jones is a registered trademark of Dow Jones Trademark Holdings LLC ( Dow Jones ); and these trademarks have been licensed for use by SPDJI and sublicensed for certain purposes by Union Bank, N.A. Union Bank, N.A.'s MLCDs are not sponsored, endorsed, sold or promoted by SPDJI, Dow Jones, S&P, their respective affiliates, and none of such parties make any representation regarding the advisability of investing in such product(s) nor do they have any liability for any errors, omissions, or interruptions of the S&P 500 Index.

9 The Investment Benchmark The Bank has obtained all information regarding the Investment Benchmark contained in this document from publicly-available information. That information reflects the policies of, and is subject to change by the Investment Benchmark Sponsor. The Investment Benchmark Sponsor has no obligation to continue to publish, and may discontinue publication of, the Investment Benchmark. The consequences of the Investment Benchmark Sponsor discontinuing publication of the Investment Benchmark are described in the section entitled General Description of the MLCDs Discontinuance or Modification of an Investment Benchmark in the Disclosure Statement. The Bank does not assume any responsibility for the accuracy or completeness of any information relating to the Investment Benchmark. The S&P 500 Daily Risk Control 5% Excess Return Index The Investment Benchmark tracks the return of the SPXTR over and above a short-term money market investment. The Investment Benchmark is rebalanced and reweighted daily between the SPXTR and a borrowing cost component, in order to seek to maintain a target volatility of 5%. The Investment Benchmark is intended to provide a performance benchmark for the U.S. equity markets, while seeking greater stability and a reduction in the overall risk level relative to the SPXTR. The Investment Benchmark utilizes the existing SPX methodology, plus an overlying mathematical algorithm designed to control the level of risk of the SPXTR by establishing a specific volatility target and dynamically adjusting the exposure to the SPXTR based on its observed historical volatility. If the risk level reaches a higher threshold, the cash level is increased in order to maintain the target volatility. If the risk level is lower, then the Investment Benchmark will employ leverage to maintain the target volatility. The Investment Benchmark tracks the return of the SPXTR over and above a short-term money market investment. In other words, the Investment Benchmark calculates the return on an investment in the SPXTR where the investment was made through the use of borrowed funds. Thus, the return of the Investment Benchmark will be equal to that of the SPXTR less the associated borrowing costs. The Investment Benchmark represents a portfolio consisting of the SPXTR and a borrowing cost component accruing interest based on the U.S. overnight LIBOR rate. The Investment Benchmark is rebalanced and reweighted daily between the SPXTR and a borrowing cost component, in order to seek to maintain the target volatility of 5%. There are no guarantees that the Investment Benchmark will achieve its stated targets. For information related to the criteria for inclusion in the SPXTR and information on how the SPXTR is calculated, please refer to The S&P 500 Total Return Index and The S&P 500 Index below. The return of the Investment Benchmark consists of two components: (1) the return on the position in the SPXTR and (2) the associated borrowing costs of the investment funds, depending upon whether the position is leveraged or deleveraged. For example, if the exposure to the SPXTR is 80%, the remaining 20% will not accumulate borrowing costs in the Investment Benchmark. If the leverage factor is greater than 100%, the full exposure will be charged borrowing costs, which are deducted from the Investment Benchmark. As an excess return index, the Investment Benchmark represents an unfunded position in the SPXTR. The borrowing rate is generally based on the overnight U.S. LIBOR rate. The Investment Benchmark Sponsor may use other successor interest rates if the overnight U.S. LIBOR rate cannot be obtained. A 360-day year is assumed for the interest calculations in accordance with U.S. banking practices. The Investment Benchmark is dynamically adjusted to target a 5% level of volatility. Volatility is calculated as a function of historical returns, that uses exponential weightings to give more significance to recent observations. Shortand long-term measures of volatility are used to cause the Investment Benchmark to deleverage quickly, but increase exposure more gradually on a relative basis. The short-term and long-term decay factors, which are numbers greater than zero and less than one that determine the weight of each daily return in the calculation of historical variance, are 0.94 (94%) and 0.97 (97%), respectively. If the risk level reaches a higher threshold, the cash level is increased in order to maintain the target volatility. If the risk level is lower, then the Investment Benchmark will employ leverage to maintain the targeted level of volatility. The Investment Benchmark includes a leverage factor that changes based on realized historical volatility. A leverage factor greater than 1 represents a leveraged position and a leverage factor less than 1 represents a deleveraged position. The maximum leverage factor the Investment Benchmark may have is 1.50 (150%). The leverage factor will not change at the close of any Investment Benchmark calculation day in which stocks representing 15% or more of the total weight of the SPXTR are not trading due to an exchange holiday. 9 The S&P 500 Index is a product of S&P Dow Jones Indices LLC ( SPDJI ), and has been licensed for use by Union Bank, N.A. Standard & Poor s, S&P and S&P 500 are registered trademarks of Standard & Poor s Financial Services LLC ( S&P ); Dow Jones is a registered trademark of Dow Jones Trademark Holdings LLC ( Dow Jones ); and these trademarks have been licensed for use by SPDJI and sublicensed for certain purposes by Union Bank, N.A. Union Bank, N.A.'s MLCDs are not sponsored, endorsed, sold or promoted by SPDJI, Dow Jones, S&P, their respective affiliates, and none of such parties make any representation regarding the advisability of investing in such product(s) nor do they have any liability for any errors, omissions, or interruptions of the S&P 500 Index.

10 Calculation of Investment Benchmark Return The formula for calculating the return of the Investment Benchmark is as follows: The Index Value at time t can then be calculated as: Substituting the first equation above into the second equation and expanding yields: Where: Calculation of Volatility Interest Rate i-1 = the interest rate set for the Investment Benchmark. The interest rate is the overnight U.S. LIBOR rate. A 360-day year is assumed for the interest calculations in accordance with U.S. banking practices. D i-1, i = the number of calendar days between day i-1 and day i rb = the last Investment Benchmark rebalancing date K rb = the leverage factor, calculated as: Min(Max K, Target Volatility/Realized Volatility rb-d ) Underlying Index t = the level of the SPXTR on day t Underlying Index rb = the level of the SPXTR as of the previous rebalancing date Max K = the maximum leverage factor allowed in the Investment Benchmark (150%) Target Volatility = the target level of volatility set for the Investment Benchmark (5%) Realized Volatility rb-d = The historical realized volatility of the SPXTR as of the close of d trading days prior to the previous rebalancing date rb, where a trading day is defined as a day on which the SPXTR is calculated. d = three (3), the number of days between when volatility is observed and the rebalancing date. The historical volatility of the SPXTR as of the close three days prior to the rebalancing date will be used to calculate the leverage factor K rb. The realized volatility is calculated as the maximum of two exponentially weighted moving averages, one measuring short-term and one measuring long-term volatility. Realized Volatility t = Max (Realized Volatility S,t, Realized Volatility L,t ) 10 The S&P 500 Index is a product of S&P Dow Jones Indices LLC ( SPDJI ), and has been licensed for use by Union Bank, N.A. Standard & Poor s, S&P and S&P 500 are registered trademarks of Standard & Poor s Financial Services LLC ( S&P ); Dow Jones is a registered trademark of Dow Jones Trademark Holdings LLC ( Dow Jones ); and these trademarks have been licensed for use by SPDJI and sublicensed for certain purposes by Union Bank, N.A. Union Bank, N.A.'s MLCDs are not sponsored, endorsed, sold or promoted by SPDJI, Dow Jones, S&P, their respective affiliates, and none of such parties make any representation regarding the advisability of investing in such product(s) nor do they have any liability for any errors, omissions, or interruptions of the S&P 500 Index.

11 Where: S,t = The short-term volatility measure at time t, calculated as: L,t = The long-term volatility measure at time t, calculated as: Where: T 0 = the start date for the Investment Benchmark n = one (1), the number of days inherent in the return calculation used for determining volatility. If n = 1 daily returns are used, while if n = 2 two day returns are used, and so forth. m = the N th trading date prior to T 0 N = the number of trading days observed for calculating initial variance as of the start date of the Investment Benchmark. λ S = The short-term decay factor used for exponential weighting. A decay factor is a number greater than zero and less than one that determines the weight of each daily return in the calculation of historical variance. The short-term decay factor for the Investment Benchmark is 94%. Λ L = The long-term decay factor used for exponential weighting. A decay factor is a number greater than zero and less than one that determines the weight of each daily return in the calculation of historical variance. The long-term decay factor for the Investment Benchmark is 97%. α S,m,i = Weight of date i in the short-term volatility calculation, as calculated based on the following formula: 11 The S&P 500 Index is a product of S&P Dow Jones Indices LLC ( SPDJI ), and has been licensed for use by Union Bank, N.A. Standard & Poor s, S&P and S&P 500 are registered trademarks of Standard & Poor s Financial Services LLC ( S&P ); Dow Jones is a registered trademark of Dow Jones Trademark Holdings LLC ( Dow Jones ); and these trademarks have been licensed for use by SPDJI and sublicensed for certain purposes by Union Bank, N.A. Union Bank, N.A.'s MLCDs are not sponsored, endorsed, sold or promoted by SPDJI, Dow Jones, S&P, their respective affiliates, and none of such parties make any representation regarding the advisability of investing in such product(s) nor do they have any liability for any errors, omissions, or interruptions of the S&P 500 Index.

12 α L,m,i = Weight of date i in the long-term volatility calculation, as calculated based on the following formula: The interest rate, maximum leverage, target volatility and decay factors are defined in relation to the Investment Benchmark and are generally held constant throughout the life of the Investment Benchmark. The leverage position changes at each rebalancing based on changes in realized volatility. There is a three-day lag between the calculation of the leverage factor, based on the ratio of target volatility to realized volatility, and the implementation of that leverage factor in the Investment Benchmark. The S&P 500 Total Return Index We have derived all information contained in this document regarding the SPXTR, including, without limitation, its make-up, method of calculation and changes in its components, from publicly available information, without independent verification. This information reflects the policies of, and is subject to change by, the Investment Benchmark Sponsor. The SPXTR was developed by the Investment Benchmark Sponsor and is calculated, maintained and published by the Investment Benchmark Sponsor. The Investment Benchmark Sponsor has no obligation to continue to publish, and may discontinue the publication of, the SPXTR. The SPXTR represents the total return earned on a portfolio that tracks the SPX, and reinvests dividend income in the SPX, not in the specific stock paying the dividend. In the SPX, changes in the index level reflect changes in stock prices. In the SPXTR, changes in the index level reflect both movements in stock prices and the reinvestment of dividend income. The SPXTR is calculated from the SPX and daily total dividend returns. The first step is to calculate the total dividend paid on a given day and convert this figure into points of the SPX: where Dividend is the dividend per share paid for stock i and Shares are the shares of the stocks composing the SPX. This is done for each trading day. Dividend i is generally zero, except for four times a year when it goes exdividend for the quarterly dividend payment. Some stocks do not pay a dividend and Dividend is always zero. Total Daily Dividend is measured in dollars. This is converted to index points by dividing by the divisor for the SPX: INDEX DIVIDEND= TOTAL DAILY DIVIDEND DIVISOR The next step is to apply the usual definition of a total return from a financial instrument to the SPX. The first equation below gives the definition. The second equation below applies it to the SPX: 12 The S&P 500 Index is a product of S&P Dow Jones Indices LLC ( SPDJI ), and has been licensed for use by Union Bank, N.A. Standard & Poor s, S&P and S&P 500 are registered trademarks of Standard & Poor s Financial Services LLC ( S&P ); Dow Jones is a registered trademark of Dow Jones Trademark Holdings LLC ( Dow Jones ); and these trademarks have been licensed for use by SPDJI and sublicensed for certain purposes by Union Bank, N.A. Union Bank, N.A.'s MLCDs are not sponsored, endorsed, sold or promoted by SPDJI, Dow Jones, S&P, their respective affiliates, and none of such parties make any representation regarding the advisability of investing in such product(s) nor do they have any liability for any errors, omissions, or interruptions of the S&P 500 Index.

13 where the Total Return and the daily total return for the index (DTR) is stated as a decimal. The DTR is used to update the SPXTR from one day to the next: The SPXTR reflects both ordinary and special dividends. Ordinary cash dividends are applied on the ex-date in calculating the SPXTR. Special dividends are those dividends that are outside of the normal payment pattern established historically by the issuer of the relevant stocks. These may be described by the issuer as special, extra, year-end, or return of capital. Whether a dividend is funded from operating earnings or from other sources of cash does not affect the determination of whether it is ordinary or special. Special dividends are treated as corporate actions with offsetting price and divisor adjustments. The S&P 500 Index The SPX is intended to provide an indication of the pattern of common stock price movement. The calculation of the level of the SPX, discussed below in further detail, is based on the relative value of the aggregate Market Value (as defined below) of the common stocks of 500 companies as of a particular time compared to the aggregate average Market Value of the common stocks of 500 similar companies during the base period of the years 1941 through The Investment Benchmark Sponsor chooses companies for inclusion in the SPX with the aim of achieving a distribution by broad industry groupings that approximates the distribution of these groupings in the common stock population of the Standard & Poor s Stock Guide Database, which the Investment Benchmark Sponsor uses as an assumed model for the composition of the total market. The Investment Benchmark Sponsor may from time to time in its sole discretion, add companies to or delete companies from, the SPX to achieve these objectives. Relevant criteria employed by the Investment Benchmark Sponsor include the viability of the particular company, the extent to which that company represents the industry group to which it is assigned, the extent to which the market price of that company s common stock is generally responsive to changes in the affairs of the respective industry and the market value and trading activity of the common stock of that company. Ten main industry groups comprise the SPX: Information Technology, Financials, Consumer Staples, Health Care, Energy, Industrials, Consumer Discretionary, Utilities, Materials and Telecommunication Services. Changes in the SPX are reported daily in the financial pages of many major newspapers, on Bloomberg Professional service under the symbol SPX and on the Investment Benchmark Sponsor website. Information contained in the Investment Benchmark Sponsor s website is not incorporated by reference in, and should not be considered a part of, this document. The Investment Benchmark does not reflect the payment of dividends on the stocks included in the SPX and therefore the payment on the CDs will not produce the same return you would receive if you were able to purchase such underlying stocks and hold them until the Maturity Date. Computation of the SPX Prior to March 2005, the Market Value of a component stock was calculated as the product of the market price per share and the total number of outstanding shares of the component stock. In March 2004, the Investment Benchmark Sponsor announced that it would transition the SPX to float adjusted market capitalization weights. The transition began in March 2005 and was completed in September The Investment Benchmark Sponsor s criteria for selecting stocks for the SPX was not changed by the shift to float adjustment. However, the adjustment affects each company s weight in the SPX (i.e., its Market Value). Under float adjustment, the share counts used in calculating the SPX reflect only those shares that are available to investors, not all of a company s outstanding shares. Float adjustment excludes shares that are closely held by control groups, other publicly traded companies or government agencies. In September 2012, all shareholdings representing more than 5% of a stock s outstanding shares, other than holdings by block owners, were removed from the float for purposes of calculating the SPX. Generally, these control holders will include officers and directors, private equity, venture capital and special equity firms, other publicly traded companies that hold shares for control, strategic partners, holders of restricted shares, ESOPs, employee and family trusts, foundations associated with the company, holders of unlisted share classes of stock, government entities at all levels (other than government retirement/pension funds) and any individual person who controls a 5% or greater stake in a company as reported in regulatory filings. However, holdings by block owners, such as depositary banks, pension funds, mutual funds and ETF providers, 401(k) plans of the company, government retirement/pension funds, investment funds of insurance companies, asset managers and investment funds, independent foundations and savings and investment plans, will ordinarily be considered part of the float. 13 The S&P 500 Index is a product of S&P Dow Jones Indices LLC ( SPDJI ), and has been licensed for use by Union Bank, N.A. Standard & Poor s, S&P and S&P 500 are registered trademarks of Standard & Poor s Financial Services LLC ( S&P ); Dow Jones is a registered trademark of Dow Jones Trademark Holdings LLC ( Dow Jones ); and these trademarks have been licensed for use by SPDJI and sublicensed for certain purposes by Union Bank, N.A. Union Bank, N.A.'s MLCDs are not sponsored, endorsed, sold or promoted by SPDJI, Dow Jones, S&P, their respective affiliates, and none of such parties make any representation regarding the advisability of investing in such product(s) nor do they have any liability for any errors, omissions, or interruptions of the S&P 500 Index.