Exchange-Traded Notes

Exchange-traded notes (“ETNs”) are senior unsecured debt obligations of an underwriting bank or other financial institution. ETNs are different from traditional bonds and typically do not make interest payments to investors. They are not, either directly or indirectly, an obligation of or guaranteed by any third party. Any payment to be made on ETNs, including any payment at maturity or upon redemption, depends on the ability of the issuer to satisfy its obligations as they come due. As a result, the actual and perceived creditworthiness of the issuer will affect the market value, if any, of ETNs prior to maturity or redemption. In addition, if the ETN issuer defaults on its obligations, you may not receive any amounts owed to you under the terms of the ETN. ETNs, unlike exchange traded funds (“ETFs”), are not registered under or regulated by the Investment Company Act of 1940, which includes many investor protections.

Many ETNs offer investors access to returns intended to track the performance of a reference index or benchmark, minus fees. Investing in ETNs is not equivalent to a direct investment in an index or index components. Purchasing an ETN may involve a high degree of risk. Risks of investing in ETNs include, among others, index or benchmark complexity, price volatility, market risk associated with the index or benchmark, uncertain principal repayment based on the issuing financial institution and potential illiquidity. ETNs may seek to replicate the performance of indices that are linked to non-traditional or complex investment strategies, including, but not limited to, commodities, currencies, precious metals, managed futures, volatility, real estate, distressed debt, leveraged, inverse or inverse leveraged indices, and other traditional alternatives.

Please refer to the ETN’s prospectus for a description of the specific index or benchmark that it seeks to track, as well as a description of the risks of investing in the ETN and any of the non-traditional or complex investment strategies that the ETN follows or seeks to replicate. Investors should carefully consider the ETN’s investment objective, detailed risk disclosures, and charges and fees described in the prospectus before investing.

Leveraged and Inverse ETNs

Some ETNs seek leveraged exposure to the index or benchmark they seek to track (“Leveraged/Inverse ETNs”). Leveraged ETNs seek to provide a multiple of the performance of the underlying index or benchmark. For example, an ETN that offers two times leverage is designed to provide twice the performance of the index it tracks. Inverse ETNs are designed to provide the opposite of the performance of the index or benchmark they track. Leveraged inverse ETNs are designed to provide a multiple of the opposite of the performance of the index or benchmark they track.

Please keep in mind that Leveraged/Inverse ETNs typically seek to achieve their investment objectives on a daily basis (i.e., over one trading session).  When held for longer than one day, the performance of such Leveraged/Inverse ETNs can differ significantly from the performance (or the inverse of the performance) of their underlying index or benchmark over the same time period.  This effect can compound the longer the ETN is held and result in large and unexpected losses, particularly in volatile markets.

Additional regulatory information about these products: | nvestor Bulletin: Exchange Traded Notes (ETNs)