Wells Fargo Bank, N.A. Barrier Return Rebate Certificates of Deposit linked to an Equity Basket Indicative Terms as of February 19, 2009

Transcription

1 Wells Fargo Bank, N.A. Barrier Return Rebate Certificates of Deposit linked to an Equity Basket Indicative Terms as of February 19, 2009 CUSIP: Issuer / Bank: Rating: Maturity: Basket Components: Deposit Amount: Payment at Maturity: FDIC Insurance: Initial Basket Level: Threshold Basket Level: Rebate: Basket Level: Component Return: Final Basket Level: Basket Interest: NW3 Wells Fargo Bank, N.A. Moody s Aa1 / S&P AA+ (as of January 6, 2009 Moody s outlook on the Bank s rating is negative and as of December 19, 2008 the Bank was placed on credit watch negative by S&P). A rating is not a recommendation to buy, sell or hold CDs and may be subject to revision or withdrawal at any time 3 Years S&P 500 Index (33.34%), Russell 2000 Index (33.33%), ishares MSCI EAFE Index Fund (33.33%) Amount deposited with a minimum amount of $1,000 (the Minimum Deposit ) On the Stated Maturity Date, you will receive the Deposit Amount of your CD plus the Basket Interest, if any The Deposit Amount of your CDs is insured by the FDIC up to applicable FDIC insurance limits The Initial Basket Level is equal to 100 The Threshold Basket Level will be The Rebate will be determined on the Pricing Date and will be within the range of 3% to 5% of the Deposit Amount of the CD (i.e., $30 to $50 for each $1,000 Deposit Amount of a CD) The Basket Level on any trading day will be based on the Closing Levels of the Basket Components and will be equal to the product of (i) 100 and (ii) an amount equal to 1 plus the sum of: (A) 33.34% of the Component Return of the S&P 500 Index as of such trading day; (B) 33.33% of the Component Return of the Russell 2000 Index as of such trading day; and (C) 33.33% of the Component Return of the ishares MSCI EAFE Index Fund as of such trading day The Component Return of a Basket Component on any trading day will be equal to: Current Component Level Initial Component Level Initial Component Level where, the Initial Component Level is the Closing Level of such Basket Component on the Pricing Date, and the Current Component Level is the Closing Level of such Basket Component on such trading day. The Basket Level on the Valuation Date If the Basket Level never increases above the Threshold Basket Level on any trading day during the period commencing on the Pricing Date and ending on and including the Valuation Date, the Basket Interest will be equal to the greater of (i) zero and (ii) the product of: (a) Deposit Amount of the CD; and Description This CD provides you with the ability to participate in moderately positive performance of a Basket comprised of three Basket Components representing different equity segments so long as the Basket Level (based on the Closing Levels of the Basket Components) does not increase above the Threshold Basket Level during the term of the CD. If the Basket Level never increases above the Threshold Basket Level, at stated maturity you will receive the Deposit Amount of your CD plus a return based on the point to point percentage increase, if any, in the Basket Level. If the Basket Level increases above the Threshold Basket Level at any time during the term of the CDs, at stated maturity you will receive the Deposit Amount of your CD plus the Rebate, regardless of the Basket Level on the Valuation Date. Best Case Scenario at Maturity If the Basket Level never increases above the Threshold Basket Level on any trading day during the period commencing on the Pricing Date and ending on and including the Valuation Date, on the Stated Maturity Date you will receive the Deposit Amount of your CDs plus a return equal to the point to point percentage change in the Basket Level. Worst Case Scenario at Maturity If the Basket Level never increases above the Threshold Basket Level on any trading day during the period commencing on the Pricing Date and ending on and including the Valuation Date and the Final Basket Level is below the Initial Basket Level you will receive the Deposit Amount of your CDs. Consequently, you will not receive any interest on your CDs. Important Dates Offering Period:...February 19 March 24, 2009 Pricing Date 1 :. On or about March 24, 2009 Issue Date 1 :.... On or about March 31, 2009 Valuation Date 2 :... March 23, 2012 Stated Maturity Date March 30, If any change is made by the Bank to the expected Pricing Date or expected Issue Date, the Stated Maturity Date and Valuation Date may also be changed to ensure that the stated term of the CDs remains the same. 2 Subject to postponement if such day is not a trading day or if a market disruption event occurs. 3 Subject to postponement if a market disruption event occurs. (b) Final Basket Level Initial Basket Level Initial Basket Level If the Basket Level increases above the Threshold Basket Level on any trading day during the period commencing on the Pricing Date and ending on and including the Valuation Date, the amount of Basket Interest will be equal to the Rebate, regardless of the Basket Level on the Valuation Date This offering summary represents a summary of the terms and conditions of the CDs. Important information regarding the CDs is also contained in the accompanying Terms Supplement and Disclosure Statement and this offering summary must be read in conjunction with the accompanying Terms Supplement and Disclosure Statement. R (10/08) DWS Structured Products

2 Wells Fargo Bank N.A. CD Fact Sheet DWS Structured Products Return Scenarios at Maturity (Assumes a Rebate of 4.00%, the midpoint of the range) If the Basket Level did not Increase above the Threshold Basket Level If the Basket Level did increase above the Threshold Basket Level Basket Return (%) CD Return (%) Payment at Maturity (per $1,000 invested) Basket Return (%) CD Return (%) Payment at Maturity (per $1,000 invested) % 0.00% $1, % 4.00% $1, % 0.00% $1, % 4.00% $1, % 0.00% $1, % 4.00% $1, % 0.00% $1, % 4.00% $1, % 10.00% $1, % 4.00% $1, % 15.00% $1, % 4.00% $1, % 25.00% $1, % 4.00% $1, % 35.00% $1, % 4.00% $1, % 43.00% $1, % 4.00% $1, % 4.00% $1, The above figures are for purposes of illustration only. The actual amount that you will receive and the resulting total and pre-tax rate of return and annualized percentage yield will depend entirely on the actual Final Basket Level, the Rebate and the Basket Level during the term of the CDs. Your return on the CDs will not reflect the return you would have realized if you had actually owned the common stocks included in the Basket Components because the return is based on the Final Basket Level and because the Basket Level does not reflect the value of the dividends paid on the securities included in the Basket Components. Global equity exposure Benefits Participation in moderately positive performance of the Basket and full protection of the Deposit Amount of the CD if the performance of the Basket is negative and the CD is held to maturity. Appropriate for investors that are moderately bullish. Characteristics Principal Protection. The CDs provide for protection of 100% of the Deposit Amount at maturity. FDIC Insurance. The Deposit Amount of the CDs is insured by the FDIC up to applicable FDIC insurance limits, generally a maximum amount of $100,000 per depositor and $250,000 for certain retirement accounts, aggregated with other deposits held by the depositor at the Bank in the same legal ownership category. Pursuant to the Emergency Economic Stabilization Act of 2008, the general FDIC insurance limit has been temporarily increased from $100,000 to $250,000 per depositor through December 31, 2009, at which time the general FDIC insurance limit is scheduled to revert back to $100,000. More information may be found in the Deposit Insurance section of the accompanying Disclosure Statement. Estate Feature. In the event of the death or adjudication of incompetence of the depositor, early withdrawal of the full Deposit Amount of the CD is permitted, without penalty. The amount payable upon withdrawal will be equal to the Deposit Amount of the withdrawn CD. Partial withdrawals are not permitted. Investor Suitability This Certificate of Deposit may be a suitable investment for you if: You seek a 3 year investment with a return linked to the performance of the Basket over the term of the CDs, provided that if the Basket Level increases over the Threshold Basket Level you will receive the Rebate amount. You seek an investment that offers full principal protection when held to maturity. You are willing to hold the CD to maturity. You do not seek current income from this investment. You are willing to invest in the CDs based on the range for the Rebate indicated herein. This Certificate of Deposit may not be suitable for you if: You do not seek an investment with exposure to the Basket Components. You are unable or unwilling to hold the CD to maturity. You seek current income from your investments. You seek an investment for which there will be an active secondary market. You do not want to include imputed interest income on the CDs in your taxable income and recognize ordinary income on any disposition of the CDs. You want to take physical possession of a certificate evidencing your CDs. DWS Structured Products

3 Wells Fargo Bank N.A. CD Fact Sheet DWS Structured Products Key Risks If the Basket Level increases above the Threshold Basket Level during the term of the CDs, the amount of interest on your CDs will be limited to the Rebate regardless of the Basket Level on the Valuation Date. If the Basket Level increases above the Threshold Basket Level, the amount of interest on your CDs will be limited the Rebate and the value of your CDs will thereafter reflect that limit on the amount of interest payable at stated maturity. The Basket Components have recently experienced significant volatility and if such volatility continues during the term of the CDs, the amount of interest on your CDs may be limited to the Rebate. The CDs are subject to the credit risk of the Bank. Insolvency of the Bank may result in early payment of your CDs. You may not have the right to withdraw the Deposit Amount of your CDs prior to the Stated Maturity Date. The inclusion of placement fees and hedging costs in the issue price of the CDs is likely to adversely affect the price at which you can sell your CDs. You may be unable to sell your CDs prior to the Stated Maturity Date and the value of the CDs prior to their Stated Maturity Date will be affected by numerous factors, some of which are related in complex ways. The Bank may postpone the Stated Maturity Date if a market disruption event occurs. Your return on the CDs may be less than if you owned the common stocks that are included in the Basket Components. Historical values of the Basket Components should not be taken as an indication of the future performance of the Basket Components during the term of the CDs. The Bank cannot control actions by the companies whose securities are included in the Basket Components. Adjustments to the Basket Components may adversely affect the value of the CDs. Potential conflicts of interest exist between you and the Bank. The Bank and its affiliates have no affiliation with Standard and Poor s, Frank Russell Company or Barclays Global Investors and are not responsible for their public disclosure of information. Changes in the value of one or more of the Basket Components may offset each other. Trading and other transactions by the Bank or its affiliates could affect the prices of the securities or other assets included in a Basket Component, the level of a Basket Component or the value of the CDs. Research reports and other transactions may create conflicts of interest between you and the Bank. For tax purposes, you will be required to include original issue discount in income and to recognize ordinary income on any disposition of the CDs. An investment linked to the shares of the ishares MSCI EAFE Index Fund is different from an investment linked to the underlying index. You will not have any shareholder rights with respect to the shares of the ishares MSCI EAFE Index Fund. Anti-dilution adjustments relating to the shares of the ishares MSCI EAFE Index Fund do not address every event that could affect such shares. An investment in the CDs will be subject to the risks associated with foreign securities markets. The Closing Level Of The ishares MSCI EAFE Index Fund and the value of the CDs may be affected by currency exchange fluctuations. Investors should review the Risk Factors section in the accompanying Terms Supplement and Disclosure Statement relating to this offering for a more detailed description of the risks related to an investment in the CDs. The returns on Wells Fargo Market Linked Certificates of Deposit are linked to the performance of the relevant underlying asset or index. Investing in a Market Linked Certificate of Deposit is not equivalent to investing directly in the underlying asset or index. Before investing, investors should carefully read the detailed explanation of the risks, together with other information in the relevant offering materials discussed herein, including but not limited to information concerning the tax treatment of the investment. Before you invest, you should read the accompanying Terms Supplement and Disclosure Statement. You may obtain additional copies of these documents without cost from any dealer participating in this offering or by calling toll-free Additional Disclosure You may revoke your offer to purchase the CDs at any time prior to the time at which we accept such offer by notifying the applicable broker. We reserve the right to change the terms of, or reject any offer to purchase, the CDs prior to their issuance. We will notify you in the event of any changes to the terms of the CDs, and you will be asked to accept such changes in connection with your purchase of any CDs. You may also choose to reject such changes, in which case we may reject your offer to purchase the CDs. The CDs will initially be distributed through Deutsche Bank Securities Inc. ("DBSI"), its affiliates and/or certain other affiliated or unaffiliated brokers (collectively, the "Brokers"). DBSI will receive a selling concession of 1.25% of the aggregate Deposit Amount of the CDs sold. DBSI or its affiliates may pay fees of up to 0.75% of the aggregate Deposit Amount of the CDs to certain other Brokers. Wells Fargo Bank N.A. is neither sponsored by nor affiliated with DWS Investments Distributors, Inc, Deutsche Investment Management Americas, Inc., or any of its affiliates. This material is not intended as an offer or solicitation for the purchase or sale of any Wells Fargo Bank N.A. financial instrument. The CDs, financial instruments or strategies mentioned herein may not be suitable for all investors. This material does not take into account your particular investment objectives, financial situations or needs and is not intended as a recommendation of particular financial instruments or strategies to you. Before acting on any investment recommendations, you should consider whether it is suitable for your particular circumstances and speak with your financial advisor. Standard & Poor s, S&P, S&P 500, Standard & Poor s 500 and 500 are trademarks of The McGraw-Hill Companies, Inc. and have been licensed for use by an affiliate of the Bank. The CDs based upon the performance of the S&P 500 Index are not sponsored, endorsed, sold or promoted by Standard & Poor s and Standard & Poor s makes no representation regarding the advisability of investing in the CDs. Russell 2000 is a trademark of Frank Russell Company, doing business as Russell Investment Group ( Russell ), and has been licensed for use by Wells Fargo & Company and its affiliates, including the Bank. The CDs, based on the performance of the Russell 2000 Index, are not sponsored, endorsed, sold or promoted by Russell and Russell makes no representation regarding the advisability of investing in the CDs. ishares is a registered mark of Barclays Global Investors, N.A. ( BGI ). The CDs are not sponsored, endorsed, sold or promoted by BGI, its affiliate, Barclays Global Fund Advisors ( BGFA ), or the ishares Funds. None of BGI, BGFA, or the ishares Funds will have any obligation or liability in connection with the registration, operation, marketing, trading or sale of the CDs or in connection with the Bank s use of information about the ishares Funds. DWS Structured Products

4 Barrier Return Rebate Certificates of Deposit Linked to an Equity Basket Wells Fargo Bank, N.A. Subject to Completion Preliminary Terms Supplement dated February 19, 2009 Terms Supplement dated, 2009 to Disclosure Statement dated January 1, 2009 The final terms of the CDs will be determined on the Pricing Date and will be set forth in the final Terms Supplement which will be delivered to you after the Pricing Date. The certificates of deposit of Wells Fargo Bank, N.A. (the Bank ) described in this Terms Supplement (the CDs ) are made available through the Broker who sent you this Terms Supplement and the accompanying Disclosure Statement. This Terms Supplement should be read together with the accompanying Disclosure Statement. If the description of the terms of the CDs set forth in this Terms Supplement differs in any way from the description of the general terms of the CDs contained in the accompanying Disclosure Statement, the description of the terms of the CDs in this Terms Supplement shall control. Capitalized terms not defined in this Terms Supplement are defined in the accompanying Disclosure Statement. The CDs may not be appropriate for every investor. See Additional Risk Factors on page 4 of this Terms Supplement and Risk Factors on page 3 of the accompanying Disclosure Statement for a discussion of the risks involved with an investment in the CDs. Early withdrawal of a CD will only be available in the event of death or adjudication of incompetence of a beneficial owner of a CD. See Description of the Certificates of Deposit Additions or Withdrawals in the accompanying Disclosure Statement. PRODUCT DESCRIPTION This CD provides you with the ability to participate in moderately positive performance of a Basket comprised of three Basket Components representing different equity segments so long as the Basket Level (based on the Closing Levels of the Basket Components) does not increase above the Threshold Basket Level during the term of the CD. If the Basket Level never increases above the Threshold Basket Level, at stated maturity you will receive the Deposit Amount of your CD plus a return based on the point to point percentage increase, if any, in the Basket Level. If the Basket Level increases above the Threshold Basket Level at any time during the term of the CDs, at stated maturity you will receive the Deposit Amount of your CD plus the Rebate, regardless of the Basket Level on the Valuation Date. TERMS Instrument: Certificates of Deposit linked to an Equity Basket comprised of the following three Basket Components, with the weightings in the Basket noted parenthetically: S&P 500 Index (33.34%); Russell 2000 Index (33.33%) and ishares MSCI EAFE Index Fund (33.33%). The Basket is not a recognized market measure and was created solely for the purpose of offering the CDs. Issuer: Wells Fargo Bank, N.A. Pricing Date: On or about March 24, 2009.* Issue Date: On or about March 31, 2009.* Denominations: Integral multiples of $1,000. Minimum Deposit: $1,000. CUSIP: NW3 Stated Maturity Date: March 30, 2012 (the Initial Stated Maturity Date ), subject to postponement if a Market Disruption Event occurs. If a Market Disruption Event occurs or is continuing on the scheduled Valuation Date, the Stated Maturity Date will be the later of (i) three Business Days after the postponed Valuation Date and (ii) the Initial Stated Maturity Date. *In the event the Bank makes any change to the expected Pricing Date or expected Issue Date, the Stated Maturity Date and the Valuation Date may also be changed to ensure that the stated term of the CDs remains the same. Standard & Poor s, S&P, S&P 500, Standard & Poor s 500, and 500, are trademarks of The McGraw-Hill Companies, Inc. and have been licensed for use by an affiliate of the Bank. The CDs, based on the performance of the S&P 500 Index, are not sponsored, endorsed, sold or promoted by Standard & Poor s and Standard & Poor s makes no representation regarding the advisability of investing in the CDs. Russell 2000 is a trademark of Frank Russell Company, doing business as Russell Investment Group ( Russell ), and has been licensed for use by Wells Fargo & Company and its affiliates, including the Bank. The CDs, based on the performance of the Russell 2000 Index, are not sponsored, endorsed, sold or promoted by Russell and Russell makes no representation regarding the advisability of investing in the CDs. ishares is a registered mark of Barclays Global Investors, N.A. ( BGI ). The CDs are not sponsored, endorsed, sold or promoted by BGI, its affiliate, Barclays Global Fund Advisors ( BGFA ), or the ishares Funds. None of BGI, BGFA, or the ishares Funds make any representations or warranties to the owner of the CDs or any member of the public regarding the advisability of investing in the CDs. None of BGI, BGFA or the ishares Funds will have any obligation or liability in connection with the registration, operation, marketing, trading or sale of the CDs or in connection with the Bank s use of information about the ishares Funds.

5 Payment at Stated Maturity: On the Stated Maturity Date, you will receive the Deposit Amount of your CD plus the Basket Interest, if any. The CDs will not earn interest prior to stated maturity. If the Basket Level never increases above the Threshold Basket Level on any Trading Day during the period commencing on the Pricing Date and ending on and including the Valuation Date, the Basket Interest will be equal to the greater of (i) zero and (ii) the product of: Basket Interest: Deposit Amount of the CD; and Final Basket Level Initial Basket Level Initial Basket Level If the Basket Level increases above the Threshold Basket Level on any Trading Day during the period commencing on the Pricing Date and ending on and including the Valuation Date, the Basket Interest will be equal to the Rebate Return, regardless of the Basket Level on the Valuation Date. Basket Level: Threshold Basket Level: Initial Basket Level: Final Basket Level: Rebate: The Basket Level on any Trading Day will be based on the Closing Levels of the Basket Components and will be equal to the product of (i) 100 and (ii) an amount equal to 1 plus the sum of: (A) 33.34% of the Component Return of the S&P 500 Index as of such Trading Day; (B) 33.33% of the Component Return of the Russell 2000 Index as of such Trading Day; and (C) 33.33% of the Component Return of the ishares MSCI EAFE Index Fund as of such Trading Day. The Threshold Basket Level will be The Initial Basket Level is equal to 100. The Final Basket Level will be equal to the Basket Level as determined on the Valuation Date. The Rebate will be determined on the Pricing Date and will be within the range of 3% to 5% of the Deposit Amount of the CD (i.e., $30 to $50 for each $1,000 Deposit Amount of a CD). The Component Return of a Basket Component on any Trading Day will be equal to: Component Return: Valuation Date: Current Component Level Initial Component Level Initial Component Level where, the Initial Component Level is the Closing Level of such Basket Component on the Pricing Date, and the Current Component Level is the Closing Level of such Basket Component on such Trading Day. The Valuation Date will be March 23, 2012; provided, however, if such day is not a Trading Day, the Valuation Date will be postponed until the next succeeding Trading Day. If a Market Disruption Event occurs or is continuing with respect to a Basket Component on the Valuation Date, (or, as provided in the preceding sentence, a postponed Valuation Date) the Valuation Date will be postponed to the first succeeding Trading Day on which there is not a Market Disruption Event for any Basket Component. If the Valuation Date has been postponed for eight Business Days after the Valuation Date and such eighth Business Day is not a Trading Day, or if a Market Disruption Event occurs or is continuing on such eighth Business Day with respect to a Basket Component, the Bank will determine the Closing Level of any Basket Component subject to a Market Disruption Event on such eighth Business Day in accordance with the formula for and method of calculating the Closing Level of such Basket Component last in effect prior to commencement of the Market Disruption Event using its good faith estimate of the Closing Level on that eighth Trading Day. See Additional Terms of the CDs Market Disruption Events. A Trading Day means any day on which (i) the S&P 500 Index and Russell 2000 Index are published by Standard & Poor s and Russell, and (ii) the primary exchange, trading system or market for the ishares MSCI EAFE Index Fund is open for trading. 2

6 FDIC Insurance: The Deposit Amount of a CD is insured by the FDIC, subject to applicable FDIC insurance limits. The accompanying Disclosure Statement indicates that the maximum deposit insurance amount (the MDIA ) is $100,000 generally and $250,000 for certain retirement accounts. The MDIA refers to all deposits held by a depositor at the Bank in the same legal ownership category. Pursuant to the Emergency Economic Stabilization Act of 2008, the MDIA has been temporarily increased from $100,000 to $250,000 per depositor through December 31, The FDIC has taken the position that any Basket Interest and any market premium paid by you above the Deposit Amount of the CD is not insured by the FDIC. See Deposit Insurance in the accompanying Disclosure Statement for important information about FDIC coverage, but note that all references to the $100,000 MDIA refer to $250,000 through December 31, 2009, at which time such MDIA is scheduled to revert back to $100,000. In the opinion of Faegre & Benson LLP, the Bank s special tax counsel, the CDs will be subject to U.S. Treasury regulations that apply to contingent payment debt instruments. See United States Federal Income Tax Consequences in the accompanying Disclosure Statement. As of the date hereof, the Bank has estimated that the comparable yield on the CDs is an annual rate of %, compounded semi-annually. Based on the comparable yield, the projected payment schedule for each $1,000 Deposit Amount of a CD is estimated to be $ due at stated maturity. Based on the estimated comparable yield, if you are an initial holder that holds the CDs until the Stated Maturity Date and you pay your taxes on a calendar year basis, you will be generally required to include the following amount of ordinary income for each $1,000 Deposit Amount of a CD each year: $ in 2009, $ in 2010, $ in 2011 and $ in However, in 2012, the amount of ordinary income that you will be required to pay taxes on from owning each $1,000 Deposit Amount of a CD may be greater or less than $, depending upon the interest you receive at stated maturity. Also, if the interest you receive on the Stated Maturity Date were less than $ for each $1,000 Deposit Amount of a CD, you may have an ordinary loss in Tax Consequences: If the Basket Level increases above the Threshold Basket Level on any Trading Day during the period commencing on the Pricing Date and ending on and including the Valuation Date, the amount of interest payable on the CDs will be equal to the Rebate. Should this occur within six months of the Stated Maturity Date, the tax consequences should be as described above. Should this occur outside of six months of the Stated Maturity Date, special tax rules will apply. You should consult your tax adviser concerning application of these special tax rules. Among other things, you may be entitled to an adjustment (positive or negative, as the case may be) equal to the difference between the originally projected payment at stated maturity and the fixed payment at stated maturity (but, if a negative adjustment, not more than the amount taken into ordinary income with respect to the CDs). You would be required to account for this negative adjustment in a reasonable manner over the period to which the difference relates. In addition, you would be required to make adjustments to, among other things, your accrual periods and your adjusted basis in the CDs. The character of any gain or loss on a sale or exchange of your CDs could also be affected. See United States Federal Income Tax Consequences on page 14 of the accompanying Disclosure Statement. Notwithstanding the foregoing, if the Basket Level increases above the Threshold Basket Level during the period commencing on the Pricing Date and ending on the Issue Date, the CDs will not be treated as contingent payment debt instruments. In such event, the CDs will be considered issued with original issue discount ( OID ) equal to the Rebate, and you will be required to accrue income on a constant yield basis in advance of the receipt of the cash attributable to such OID. Gain or loss realized on the sale or exchange of a CD issued with OID generally will be capital gain or loss and will be long-term capital gain or loss if such CD has been held for more than one year. The tax discussion contained herein and in the accompanying Disclosure Statement has been prepared to support the marketing of the CDs. Nothing herein or therein may be used by any taxpayer for the purpose of avoiding any penalties that may be imposed under the Internal Revenue Code of 1986, as amended. Each taxpayer should seek advice based on the taxpayer s particular circumstance from an independent tax advisor. 3

7 ADDITIONAL RISK FACTORS You should carefully consider the risk factors set forth below as well as the risk factors discussed under Risk Factors on page 3 of the accompanying Disclosure Statement and the other information contained in this Terms Supplement and the accompanying Disclosure Statement. You should reach an investment decision only after you have carefully considered with your advisors the suitability of an investment in the CDs in light of your particular circumstances. The S&P 500 Index, the Russell 2000 Index and the MSCI EAFE Index (the index underlying the ishares MSCI EAFE Index Fund) are sometimes referred to herein collectively as the Indices and individually as an Index. The ishares MSCI EAFE Index Fund is sometimes referred to herein as the ishares Fund. References to the Underlying Index in the context of the ishares Fund refers to the MSCI EAFE Index. The Threshold Basket Level Limits Your Return On The CDs. Risks Relating To The Basket If the Basket Level increases above the Threshold Basket Level during the term of the CDs, the amount of interest on your CDs will be limited to the Rebate regardless of the Basket Level on the Valuation Date. As a result, the CDs are not an appropriate investment for an investor who seeks a return based solely on an increase in the Basket Level. In addition, since the interest payable on your CDs will be based upon an increase in the Basket Level only if the Basket Level does not exceed the Threshold Basket Level, the maximum return on your CDs will be limited to 43% of their Deposit Amount. Your ability to participate in any increase in the Basket Level during the term of the CDs is therefore limited by the Threshold Basket Level. The Value Of The CDs Prior To The Stated Maturity Date Will Be Affected By The Threshold Basket Level. In addition to the numerous factors affecting the value of the CDs discussed in the accompanying Disclosure Statement, the value of the CDs prior to the Stated Maturity Date will be affected by the existence of the Threshold Basket Level. If the Basket Level increases above the Threshold Basket Level, the amount of interest on your CDs will be limited the Rebate and the value of your CDs will thereafter reflect that limit on the amount of interest payable at stated maturity. Even if the Basket Level remains below the Threshold Basket Level, the value of your CDs prior to stated maturity will be affected by the Threshold Basket Level. When the Basket Level increases from the Initial Basket Level and approaches the Threshold Basket Level, the value of your CDs will likely decline at a greater rate than the increase in the Basket Level of the Basket. Risks Relating To The Basket Components Your Return On The CDs Could Be Less Than If You Owned The Securities Included In The Basket Components. Your return on the CDs will not reflect the return you would realize if you actually owned the securities included in the S&P 500 Index, the Russell 2000 Index or the shares of the ishares Fund. This is because the interest on the CDs will be determined by reference to the Closing Levels of the Basket Components and the Final Basket Level, which are calculated by reference to the prices of the securities underlying the Basket Components without taking into consideration the value of dividends and other payments paid on those securities. Historical Values Of The Basket Components Should Not Be Taken As An Indication Of The Future Performance Of The Basket Components During The Term Of The CDs. The actual performance of the Basket Components over the term of the CDs may bear little relation to the historical performance of the Basket Components. The prices of the securities included in the Basket Components will determine the Closing Level of the Basket Components. As a result, it is impossible to predict whether the Basket Level will rise or fall. Prices of the securities included in the Basket Components will be influenced by complex and interrelated political, economic, financial, military and other factors that can affect the markets in which those securities are traded and the values of those securities themselves. The Bank And Its Affiliates Have No Affiliation With Any Of The Sponsors And Are Not Responsible For Their Public Disclosure Of Information. The Bank and its affiliates are not affiliated in any way with the sponsor of any of the Indices or the ishares Fund (individually, a Sponsor and collectively, the Sponsors ) and have no ability to control or predict their actions, including any errors in or discontinuation of disclosure regarding their methods or policies relating to the management or calculation of the Indices or the ishares Fund, as the case may be. Neither the Bank nor any of its affiliates assumes any responsibility for the 4

8 adequacy or accuracy of the information about any of the Indices or the ishares Fund or any of the Sponsors contained herein. You, as an investor in the CDs, should make your own investigation into the Indices and the ishares Fund and the Sponsors. None of the Sponsors will be involved in the offering of the CDs made pursuant hereto in any way and no Sponsor has any obligation to consider your interests as an owner of CDs in taking any actions that might affect the value of the CDs. The Bank Cannot Control Actions By The Companies Whose Securities Are Included In An Index Or In The ishares Fund. Actions by any company whose security is included in an Index or the ishares Fund may have an adverse effect on the level of the applicable Basket Component and the value of the CDs. Although the securities of Wells Fargo & Company, an affiliate of the Bank, are currently included in the S&P 500 Index, the Bank is not affiliated with any other company whose security is represented in an Index or the ishares Fund. These companies are not involved in the offering of the CDs and have no obligations with respect to the CDs, including any obligation to take the Bank s interests or your interests into consideration for any reason. These companies will not receive any of the proceeds of the offering of the CDs made hereby and are not responsible for, and have not participated in, the determination of the timing of, prices for, or quantities of, the CDs to be issued. These companies are not involved with the administration, marketing or trading of the CDs and have no obligations with respect to the amount to be paid to you at stated maturity. Changes That Affect An Index Or The ishares Fund May Affect The Value Of The CDs And The Amount You Will Receive At Stated Maturity. The policies of a Sponsor concerning the calculation of the applicable Index and the addition, deletion or substitution of securities comprising such Index and the manner in which the Sponsor takes account of certain changes affecting such securities may affect the value of such Index and, therefore, may affect the value of the CDs and the amount payable at stated maturity. In addition, a Sponsor may discontinue or suspend calculation or dissemination of the applicable Index or materially alter the methodology by which it calculates the applicable Index. Similarly, the policies of the Sponsor of the ishares Fund concerning the calculation of the ishares Fund s net asset value, additions, deletions or substitutions of securities in the ishares Fund and the manner in which changes in the Underlying Index are reflected in the ishares Fund, and changes in those policies, could affect the Closing Level of the ishares Fund and therefore the Basket Level. Any such actions could affect the value of the CDs. Potential Conflicts Of Interest Exist Between You And The Bank. The Bank will determine whether a Market Disruption Event has occurred. In addition, if the Closing Level of a Basket Component is no longer published, the Bank will select a successor for such Basket Component or, if no successor is available, the Bank will calculate the Closing Level of such Basket Component. The Bank may also make adjustments to the Closing Level of a Basket Component if the method of calculating such Basket Component is changed in a material respect. See Additional Terms of the CDs Market Disruption Events and Discontinuance of the S&P 500 Index or the Russell 2000 Index; Alteration of Method of Calculation and Anti-dilution Adjustments Relating to the ishares Fund; Discontinuance of the ishares Fund; Alternate Calculation. As a result, potential conflicts of interests may exist between you and the Bank. The Basket Components Have Recently Experienced Significant Volatility And If Such Volatility Continues During The Term Of The CDs, You May Not Receive Any Basket Interest. The Basket Components have recently experienced significant volatility. If such volatility continues during the term of the CDs, it is more likely that the Basket Level will increase above the Threshold Basket Level. It is impossible to predict whether the recent level of volatility of the Basket Components will continue. Risks Relating To The ishares Fund An Investment Linked To The Shares Of The ishares Fund Is Different From An Investment Linked to The Underlying Index. The performance of the shares of the ishares Fund may not exactly replicate the performance of the Underlying Index because the ishares Fund may not invest in all of the securities included in the Underlying Index and because the ishares Fund will reflect transaction costs and fees that are not included in the calculation of the Underlying Index. The ishares Fund may also hold securities not included in the Underlying Index. It is also possible that the ishares Fund may not fully replicate the performance of the Underlying Index due to the temporary unavailability of certain securities in the secondary market or due to other extraordinary circumstances. In addition, because the shares of the ishares Fund are traded on a securities exchange and are subject to market supply and investor demand, the value of a share of the ishares Fund may differ from the net asset value per share of the ishares Fund. As a result, the performance of the ishares Fund may not correlate perfectly with the performance of 5

9 the Underlying Index, and the return on the CDs based on the performance of the ishares Fund will not be the same as the return on CDs based on the performance of the Underlying Index. You Will Not Have Any Shareholder Rights With Respect To The Shares Of The ishares Fund. You will not become a holder of shares of the ishares Fund or a holder of securities included in the Underlying Index as a result of owning a CD. You will not have any voting rights, any right to receive dividends or other distributions or any other rights with respect to such shares or securities. At stated maturity, you will receive the Deposit Amount of your CD, together with Basket Interest, if any, in cash and you will have no right to receive delivery of any shares or securities. Anti-dilution Adjustments Relating To The Shares Of The ishares Fund Do Not Address Every Event That Could Affect Such Shares. The Adjustment Factor used to determine the Closing Level of the ishares Fund will be adjusted by the Bank for certain events affecting the shares of the ishares Fund. However, the Bank will not make an adjustment for every event that could affect such shares. If an event occurs that does not require the Bank to adjust the Adjustment Factor, the value of the CDs may be adversely affected. An Investment In The CDs Will Be Subject To Risks Associated With Foreign Securities Markets. The ishares Fund and the Underlying Index include the stocks of non-u.s. companies. You should be aware that investments in securities linked to the value of foreign equity securities involve particular risks. Foreign securities markets may have less liquidity and may be more volatile than U.S. markets, and market developments may affect foreign markets differently from U.S. markets. Direct or indirect government intervention to stabilize a foreign securities market, as well as crossshareholdings in foreign companies, may affect trading prices and volumes in those markets. Also, there is generally less publicly available information about non-u.s. companies that are not subject to the reporting requirements of the Securities and Exchange Commission, and non-u.s. companies are subject to accounting, auditing and financial reporting standards and requirements that differ from those applicable to U.S. reporting companies. The prices and performance of securities of non-u.s. companies are subject to political, economic, financial, military and social factors which could negatively affect foreign securities markets, including the possibility of recent or future changes in a foreign government s economic, monetary and fiscal policies, the possible imposition of, or changes in, currency exchange laws or other laws or restrictions applicable to foreign companies or investments in foreign equity securities, the possibility of imposition of withholding taxes on dividend income, the possibility of fluctuations in the rate of exchange between currencies, the possibility of outbreaks of hostility or political instability and the possibility of natural disaster or adverse public health developments. Moreover, the relevant non-u.s. economies may differ favorably or unfavorably from the U.S. economy in important respects, such as growth of gross national product, rate of inflation, trade surpluses or deficits, capital reinvestment, resources and self-sufficiency. Certain of the stocks included in the ishares Fund and/or the Underlying Index may be listed on foreign stock exchanges. Such foreign stock exchanges may impose trading limitations intended to prevent extreme fluctuations in individual stock prices and may suspend trading in certain circumstances. These actions could limit variations in the Closing Level of the ishares Fund which could, in turn, adversely affect the value of the CDs. In addition, because foreign stock exchanges may be open when shares of the ishares Fund are not traded, the value of the securities included in the ishares Fund and/or the Underlying Index may change on days when investors will not be able to purchase or sell shares of the ishares Fund. The Closing Level Of The ishare Fund And The Value Of The CDs May Be Affected By Currency Exchange Fluctuations. Since the ishares Fund and the Underlying Index include the stocks of non-u.s. companies, the Closing Level of the ishares Fund will be calculated based on the trading prices of such stocks converted into U.S. dollars. Such Closing Level will therefore reflect variations in the exchange rates of various foreign currencies into U.S. dollars. As a result, the Closing Level of the ishares Fund and an investment in the CDs may be adversely affected by changes in exchange rates between the U.S. dollar and the relevant foreign currencies and the imposition or modification of exchange controls by either the U.S. or foreign governments. In recent years, rates of exchange between the U.S. dollar and various foreign currencies have been highly volatile and this volatility may continue in the future. However, fluctuations in any particular exchange rate that have occurred in the past are not necessarily indicative of fluctuations that may occur during the term of the CDs. 6

10 ADDITIONAL TERMS OF THE CDs The general terms of the CDs are described under Description of the Certificates of Deposit in the accompanying Disclosure Statement. The following are additional terms that will apply to the CDs. Closing Levels S&P 500 Index and Russell 2000 Index The Closing Level of the S&P 500 Index or the Russell 2000 Index on any Trading Day is the closing level of such Index as reported by the Sponsor of such Index on such Trading Day. ishares Fund The Closing Level of the ishares Fund on any Trading Day will equal the product of (i) the Closing Price of one share of the ishares Fund on such Trading Day and (ii) the Adjustment Factor on such Trading Day. The Closing Price with respect to a share of the ishares Fund (or one unit of any other security for which a Closing Price must be determined) on any Trading Day means: if the share (or any such other security) is listed or admitted to trading on a national securities exchange, the last reported sale price, regular way, of the principal trading session on such day on the principal United States securities exchange registered under the Securities Exchange Act of 1934, as amended (the Exchange Act ), on which the share (or any such other security) is listed or admitted to trading; if the share (or any such other security) is a security of the Nasdaq National Market (and provided that the Nasdaq National Market is not then a national securities exchange), the Nasdaq official closing price published by The Nasdaq Stock Market, Inc. on such day; or if the share (or any such other security) is neither listed or admitted to trading on any national securities exchange nor a security of the Nasdaq National Market but is included in the OTC Bulletin Board Service (the OTC Bulletin Board ) operated by the National Association of Securities Dealers, Inc., the last reported sale price of the principal trading session on the OTC Bulletin Board on such day. If the shares of the ishares Fund (or any such other security) are listed or admitted to trading on any national securities exchange or are securities of the Nasdaq National Market but the last reported sale price or Nasdaq official closing price, as applicable, is not available pursuant to the preceding sentence, then the Closing Price for one share (or one unit of any such other security) on any Trading Day will mean the last reported sale price of the principal trading session on the over-the-counter market as reported on the Nasdaq National Market or the OTC Bulletin Board on such day. If, because of a Market Disruption Event or otherwise, the last reported sale price or closing price, as applicable, for the share (or any such other security) is not available pursuant to either of the two preceding sentences, then the Closing Price for any Trading Day will be the mean, as determined by the Bank, of the bid prices for the share (or any such other security) obtained from as many recognized dealers in such security, but not exceeding three, as will make such bid prices available to the Bank. Bids of affiliates of the Bank may be included in the calculation of such mean, but only to the extent that any such bid is the highest of the bids obtained. The term security of the Nasdaq National Market will include a security included in any successor to such system, and the term OTC Bulletin Board Service will include any successor service thereto. See Anti-dilution Adjustments relating to the ishares Fund; Discontinuance of the ishares Fund; Alternate Calculation below. The Adjustment Factor means, with respect to a share of the ishares Fund, 1.0, subject to adjustment in the event of certain events affecting the shares of the ishares Fund. See Anti-dilution Adjustments relating to the ishares Fund; Discontinuance of the ishares Fund; Alternate Calculation below. 7

11 Market Disruption Events S&P 500 Index and Russell 2000 Index A Market Disruption Event with respect to the S&P 500 Index or the Russell 2000 Index (referred to in this section as an Index ) will occur on any day if the Bank determines any of the following: A material suspension or material limitation of trading in 20% or more of the underlying stocks which then comprise such Index or any Successor Index (as defined below) has occurred on that day, in each case, during the one-hour period preceding the close of trading on the primary organized U.S. exchange or trading system on which those stocks are traded or, if in the case of a common stock not listed or quoted in the United States, on the primary non-u.s. exchange, trading system or market for that security. Limitations on trading during significant market fluctuations imposed pursuant to New York Stock Exchange Rule 80B or any applicable rule or regulation enacted or promulgated by The New York Stock Exchange, any other exchange, trading system or market, any other self regulatory organization or the Securities and Exchange Commission of similar scope or as a replacement for Rule 80B, may be considered material. For purposes of this Disclosure Statement, trading system includes bulletin board services. A material suspension or material limitation has occurred on that day, in each case during the one-hour period preceding the close of trading in options or futures contracts related to such Index or any Successor Index, whether by reason of movements in price exceeding levels permitted by an exchange, trading system or market on which those options or futures contracts are traded or otherwise. Any event, other than an early closure, that materially disrupts or impairs the ability of market participants in general to effect transactions in, or obtain market values for, the securities that then comprise 20% or more of such Index or any Successor Index, at any time during the one-hour period preceding the close of trading on that day. Any event, other than an early closure, that materially disrupts or impairs the ability of market participants in general to effect transactions in, or obtain market values for, the futures or options contracts relating to such Index or any Successor Index on the primary exchange or quotation system on which those futures or options contracts are traded, at any time during the one-hour period preceding the close of trading on that day. The closure of an exchange, trading system or market on which the securities that then comprise 20% or more of such Index or any Successor Index are traded on or which futures or options contracts relating to such Index or any Successor Index are traded on any Trading Day prior to its scheduled closing time unless the earlier closing time is announced by such exchange, trading system or market at least one hour prior to the earlier of (i) the actual closing time for the regular trading session of the exchange, trading system or market and (ii) the submission deadline for orders to be entered in the exchange, trading system or market for execution on such Trading Day. For the purpose of determining whether a Market Disruption Event has occurred: the relevant percentage contribution of a security to the level of such Index or any Successor Index will be based on a comparison of (x) the portion of the level of such Index attributable to that security and (y) the overall level of such Index, in each case immediately before the occurrence of the Market Disruption Event; and close of trading means 4:00 p.m., New York City time. 8