©2008 Discover Financial Services 29 This material is not a solicitation or offer to buy or sell any security or other financial instrument or to participate in any trading strategy Fixed Method of Allocation of Finance Charges Traditional Structures • In most credit card master trusts, finance charge collections are allocated pro rata on each payment date between the investor interest in receivables and the seller interest. As the investor certificates begin to amortize, certificateholders are entitled to a smaller percentage of finance charge collections Methodology • Before early redemption, the investor interest in receivables and seller interest receive their pro rata share of finance charge collections • During early redemption, as the invested amount decreases, investors continue to be allocated finance charge collections as at the beginning of the early redemption cycle – Investor credit protection enhanced by “fixing” the finance charge allocation percentage between investors and the seller at the time of an early redemption event • The result is an over-allocation of finance charge collections Benefits • Feature permits a larger percentage of finance charge collections to be allocated to investors after an early redemption event During Amortization Periods • Allocation Percentage generally equals – Investor Interest in receivables at time of Early Redemption Event / Current Principal Receivables – Aggregate investor allocation can not exceed 100% • Numerator is “fixed” to amount of investor interest in receivables at time of early redemption; denominator reflects current level of principal receivables • DiscoverSeries structure retains ability to change allocation method, but Rating Agency Confirmation is required | 
