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This lowering of the call price continues as more dividends are paid, until it finally 
reaches the final call price at maturity. The PERCS holder should not be confused 
this sliding scale of call prices. The sliding call feature is designed to ensure that 
PERC S holder is compensated for not receiving all his "promised" dividends if the 
PERCS should be called prior to maturity. 
Example: As before, XYZ issues a PERCS when the common is at 35. The PERCS 
pays an annual dividend of $2.50 per share as compared to $1 per share on the com­
mon stock. The PERCS has a final call price of 39 dollars per share in three years. 
If XYZ stock should undergo a sudden price advance and rise dramatically in a 
very short period of time, it is possible that the PERCS could be called before any 
dividends are paid at all. In order to compensate the PERCS holder for such an 
c>ecurrence, the initial call price would be set at 43.50 per share. That is, the PERCS 
can't be called unless XYZ trades to a price over 43.50 dollars per share. Notice that 
the difference between the eventual call price of 39 and the initial call price of 43.50 
is 4.50 points, which is also the amount of additional dividends that the PERCS 
would pay over the three-year period. The PER CS pays $2.50 per year and the com­
mon $1 per year, so the difference is $1.50 per year, or $4.50 over three years. 
Once the PERCS dividends begin to be paid, the call price will be reduced to 
reflect that fact. For example, after one year, the call price would be 42, reflecting 
the fact that if the PERCS were not called until a year had passed, the PERCS hold­
er would be losing $3 of additional dividends as compared to the common stock 
($1.50 per year for the remaining two years). Thus, the call price after one year is set 
at the eventual call price, 39, plus the $3 of potential dividend loss, for a total call 
price of 42. 
This example shows how the company uses the sliding call price to compensate 
the PERCS holder for potential dividend loss if the PERCS is called before the 
three-year time to maturity has elapsed. Thus, the PER CS holder will make the same 
dollars of profit - dividends and price appreciation combined - no matter when the 
PERCS is called. In the case of the XYZ PERCS in the example, that total dollar 
profit is $11.50 (see the prior example). Notice that the investor's annualized rate of 
return would be much higher if he were called prior to the eventual maturity date. 
One final point: The call price §lides on a scale as set forth in the prospectus for 
the PERCS. It may be every time a dividend is paid, but more likely it will be daily! 
That is, the present worth of the remaining dividends is added to the final call price 
to calculate the sliding call price daily. Do not be overwhelmed by this feature. 
Remember that it is just a means of giving the PERCS holder his entire "dividend 
premium" if the PERCS is called before maturity.