SUMMARY INFORMATION

Payment of Principal at Maturity

Subject to modification as provided in the applicable pricing supplement, on the stated maturity date, we will exchange each of your notes for the cash settlement amount, if any, subject to any adjustments or modifications as described below.

Cash Settlement Amount

Whether the notes are linked to a single underlier or a weighted basket of underliers, if a trigger event occurs (i.e., the level of the underlier, the closing level of the underlier, the basket closing level, the final underlier level or the final basket level, as applicable, has declined, as compared to the initial underlier or basket level, as applicable, by more than the trigger buffer amount during the measurement period, if applicable), you will receive a cash settlement amount at maturity that will reflect the performance of the underlier or basket of underliers, as applicable. In such a case, if the final underlier or basket level is greater than the initial underlier or basket level, the cash settlement amount will equal the face amount of each of your notes plus an additional amount equal to the product of the face amount of each of your notes times the upside participation rate (as described below) times the underlier or basket return plus a supplemental amount, if any, subject to the cap level (as described below) if one is specified in the applicable pricing supplement. In this case, because the underlier or basket return is a positive percentage, the cash settlement amount will be greater than the face amount of each of your notes. If, on the other hand, the final underlier or basket level is less than or equal to the initial underlier or basket level, the cash settlement amount will equal the face amount of each of your notes plus the product of the face amount of each of your notes times the underlier or basket return plus a supplemental amount, if any. In this case, because the underlier or basket return is zero or a negative percentage, the cash settlement amount will be equal to or less than the face amount of each of your notes (unless the supplemental amount causes a positive return) and the cash settlement amount could even be zero.

If a trigger event does not occur (i.e., the level of the underlier, the closing level of the underlier, the basket closing level, the final underlier level or the final basket level, as applicable, has not declined, as compared to the initial underlier or basket level, as applicable, by more than the trigger buffer amount during the measurement period, if applicable), you will receive a cash settlement amount at maturity that will reflect the performance of the underlier or basket of underliers, as applicable, subject to the contingent minimum return. In such a case, the cash settlement amount will equal the face amount of each of your notes plus an additional amount equal to the greater of the product of (i) the face amount of each of your notes times the upside participation rate times the underlier or basket return, or (ii) the face amount of each of your notes times the contingent minimum return, which will be a percentage specified in the applicable pricing supplement, subject to the cap level (as described below) if one is specified in the applicable pricing supplement.

The trigger buffer amount will be a positive percentage and will be specified in the applicable pricing supplement. If the level of the underlier, the closing level of the underlier, the basket closing level, the final underlier level or the final basket level, as applicable, declines below the initial underlier level or basket level by more than the trigger buffer amount during the measurement period, if applicable, a trigger event will occur and you will be fully exposed at maturity to any depreciation of the underlier or basket of underliers during the life of your notes.

The upside participation rate will be a positive percentage but may be less than 100%. The upside participation rate indicates the extent to which you will participate in any positive return in the applicable underlier or basket of underliers. For example, if the upside participation rate for your notes were set at 85% and the underlier or basket return were 10%, the cash settlement amount for each of your notes would equal the product of the face amount of each of your notes times 108.5% (assuming a cap level is not applicable). If the applicable pricing supplement specifies an upside participation rate that is less than 100%, you will participate in less than the full return of the applicable underlier or basket of underliers over the life of your notes. If the applicable pricing supplement specifies an upside participation rate that equals 100%, you will participate in the full positive return of the applicable underlier or basket of underliers. If the upside participation rate is greater than 100%, you will participate in the return of the

 

applicable underlier or basket of underliers to a greater extent than as measured by such return alone, or in other words, on a leveraged basis.

The return of the applicable underlier or basket of underliers, which we refer to as the underlier return or the basket return, is equal to the percentage, if any, by which the final level of the applicable underlier or basket of underliers (which we refer to as the final underlier level or final basket level) differs from the initial level of such underlier or basket of underliers (which we refer to as the initial underlier level or initial basket level). The underlier or basket return measures the performance of the applicable underlier or basket of underliers over the life of the notes by measuring the change in the final underlier or basket level (as determined on the determination date or the averaging dates, as applicable, for the notes) over the initial underlier or basket level (as determined on the original trade date for the notes).

If specified in the applicable pricing supplement, the supplemental amount will be a positive percentage less than 100% and will be added to the underlier or basket return if a trigger event occurs. For example, if the underlier or basket return equals -15% and the supplemental amount equals 5%, the cash settlement amount for each of your notes would equal the product of the face amount of each of your notes times 90% (assuming a cap level is not applicable). If the underlier or basket return equals 10% and the supplemental amount equals 2%, the cash settlement amount for each of your notes would equal the product of the face amount of each of your notes times 112% (assuming an upside participation rate of 100% and that a cap level is not applicable).

Calculation of Cash Settlement Amount for Notes Linked to a Single Underlier

For notes linked to a single underlier, if a trigger event occurs and the final underlier level is greater than the initial underlier level , the cash settlement amount will be calculated as follows:

    cash settlement amount  =  face amount  +  (face amount  ×  upside participation rate  ×  (underlier return

plus supplemental amount, if any))

, provided that the cash settlement amount will be subject to the cap level , as described under “— Cash Settlement Amount for Notes Subject to a Cap Level” below, if one is specified in the applicable pricing supplement, and

if a trigger event occurs and the final underlier level is less than the initial underlier level , the cash settlement amount will be calculated as follows:

cash settlement amount  =  face amount  +  (face amount  ×  (underlier return plus

supplemental amount, if any))

and if a trigger event does not occur, the cash settlement amount will be calculated as follows :

cash settlement amount = the greater of:

(a) face amount  +  (face amount  ×  upside participation rate  ×  underlier return), or

(b) face amount  +  (face amount  ×  contingent minimum return)

, provided that the cash settlement amount will be subject to the cap level , as described under “— Cash Settlement Amount for Notes Subject to a Cap Level” below, if one is specified in the applicable pricing supplement,

where ,

 

face amount		=		unless otherwise specified in the applicable pricing supplement, each note will have a face amount equal to $1,000, or integral multiples thereof in excess of $1,000
upside participation rate		=		a positive percentage specified in the applicable pricing supplement, which could be greater than, equal to or less than 100%

underlier return		=		final underlier level – initial underlier level				, expressed as a percentage
				initial underlier level

 

Calculation of Cash Settlement Amount for Notes Linked to a Basket of Underliers

For notes linked to a basket of underliers, if a trigger event occurs and the final basket level is greater than the initial basket level, the cash settlement amount will be calculated as follows:

    cash settlement amount  =  face amount  +  (face amount  ×  upside participation rate  ×  (basket return plus

supplemental amount, if any))

, provided that the cash settlement amount will be subject to the cap level , as described under “— Cash Settlement Amount for Notes Subject to a Cap Level” below, if one is specified in the applicable pricing supplement, and

if a trigger event occurs and the final basket level is less than or equal to the initial basket level, the cash settlement amount will be calculated as follows:

    cash settlement amount  =  face amount  +  (face amount  ×  (basket return plus supplemental amount, if any))

and if a trigger event does not occur, the cash settlement amount will be calculated as follows :

cash settlement amount  =  the greater of:

(a) face amount  +  (face amount  ×  upside participation rate  ×  basket return), or

(b) face amount  +  (face amount  ×  contingent minimum return)

, provided that the cash settlement amount will be subject to the cap level , as described under “— Cash Settlement Amount for Notes Subject to a Cap Level” below, if one is specified in the applicable pricing supplement,

 

where,
initial basket level		=		a positive amount specified in the applicable pricing supplement, which is expected to equal 100
weighting percentage		=		for each basket underlier, the applicable percentage weight of such basket underlier within the basket of underliers, as set forth in the applicable pricing supplement for your notes; the sum of the weighting percentages of all basket underliers will equal 100%
weighting multiplier		=		for each basket underlier, a positive amount specified in the applicable pricing supplement, which is expected to equal the quotient of (i) the product of the initial basket level times the weighting percentage for such basket underlier divided by (ii) the initial underlier level for such basket underlier; the weighting multipliers will remain constant for the life of the notes, except in limited circumstances as described in the applicable general terms supplement
basket closing level		=		unless otherwise specified in the applicable pricing supplement, for any given trading day, the sum of the products , as calculated for each basket underlier, of the closing level for each basket underlier on such trading day multiplied by the weighting multiplier for each such basket underlier, subject to adjustment, if applicable, as described below under “— Cash Settlement Amount for Notes
				With Underliers Denominated in Non-U.S. Dollars and That Are Adjusted to Reflect Their U.S. Dollar Value” below

 

for example, in the case of notes linked to the value of a basket of three underliers, A, B and C, the basket closing level on a given trading day will be calculated as follows:

 

Closing Level of Basket Underlier		Weighting Multiplier
( closing level of Underlier A on such trading day		×		weighting multiplier for Underlier A )
+
( closing level of Underlier B on such trading day		×		weighting multiplier for Underlier B )
+
( closing level of Underlier C on such trading day		×		weighting multiplier for Underlier C )

 

final basket level		=		the basket closing level on the determination date or, if the applicable pricing supplement specifies multiple averaging dates, the arithmetic average of the basket closing levels on each of the specified averaging dates, in each case except in limited circumstances described in the applicable general terms supplement and subject to adjustment as provided in the applicable general terms supplement
basket return		=		final basket level – initial basket level		, expressed as a percentage
				initial basket level
trigger event		=		unless otherwise specified in the applicable pricing supplement, the basket closing level or final basket level, as applicable, has declined, as compared to the initial basket level, by more than the trigger buffer amount during the measurement period, if applicable

and where ,

“face amount”, “upside participation rate”, “closing level”, “supplemental amount”, “contingent minimum return”, “trigger buffer amount”, “measurement period”, “stated maturity date”, “determination date” and “averaging dates” are as defined under “— Calculation of Cash Settlement Amount for Notes Linked to a Single Underlier” above.

Cash Settlement Amount for Notes Subject to a Cap Level

The applicable pricing supplement may specify a cap level for your notes. If the applicable pricing supplement so provides, the cap level will be a specified percentage (which will be greater than 100%) of the initial underlier level or the initial basket level, as applicable.

Calculation of Cash Settlement Amount for Notes Linked to a Single Underlier

The cash settlement amount will equal the lesser of the following:

 

•

the cash settlement amount calculated as described under “— Cash Settlement Amount — Calculation of Cash Settlement Amount for Notes Linked to a Single Underlier”; and

 

•

the maximum settlement amount

where ,

 

maximum settlement amount		=		an amount greater than the face amount of each of your notes, as specified in the applicable pricing supplement, and which is expected to equal the following:

 

face amount

+

(face amount  ×  upside participation rate

×

cap level – initial underlier level

)

initial underlier level

Calculation of Cash Settlement Amount for Notes Linked to a Basket of Underliers

The cash settlement amount will equal the lesser of the following:

 

•

the cash settlement amount calculated as described under “— Cash Settlement Amount — Calculation of Cash Settlement Amount for Notes Linked to a Basket of Underliers”; and

 

•

the maximum settlement amount

where ,

 

maximum settlement         amount		=		an amount greater than the face amount of each of your notes, as specified in the applicable pricing supplement, and which is expected to equal the following:

 

Cash Settlement Amount for Notes With Underliers Denominated in Non-U.S. Dollars and That Are

Adjusted to Reflect Their U.S. Dollar Value

The applicable pricing supplement may specify underliers that are not denominated in U.S. dollars and that are adjusted to reflect their U.S. dollar value. If the applicable pricing supplement so specifies, for the underlier or each applicable underlier in the basket, the closing level of the underlier or each applicable basket underlier will be adjusted to reflect the U.S. dollar value of the underlier or each applicable basket underlier using the applicable exchange rate specified in the applicable pricing supplement.

In such case, the cash settlement amount will be calculated as described under “— Cash Settlement Amount — Calculation of Cash Settlement Amount for Notes Linked to a Single Underlier” and “— Cash Settlement Amount — Calculation of Cash Settlement Amount for Notes Linked to a Basket of Underliers” above and the following definitions may apply to your notes if specified in the applicable pricing supplement:

 

adjusted closing level		=		with respect to the underlier or each basket underlier on any trading day, the closing level of the underlier on such trading day converted into U.S. dollars using the exchange rate with respect to such underlier on such trading day, as determined by the calculation agent
exchange rate		=		with respect to the underlier or each basket underlier on any trading day, as specified in the applicable pricing supplement
initial underlier level		=		with respect to the underlier or each basket underlier, as specified in the applicable pricing supplement
final underlier level		=		with respect to the underlier or each basket underlier, the adjusted closing level of such underlier or basket underlier on the determination date, or, if the applicable pricing supplement specifies multiple averaging dates, the arithmetic average of the adjusted closing level of the underlier on each of the specified averaging

 

				dates, except in limited circumstances described in the applicable general terms supplement and subject to adjustment as provided in the applicable general terms supplement
basket closing level		=		for any given trading day, the sum of the products, as calculated for each basket underlier, of the adjusted closing level of such basket underlier on such trading day multiplied by the weighting multiplier for such basket underlier

Averaging Dates

If specified in the applicable pricing supplement, the final underlier or basket level will be based on the arithmetic average of the closing levels (or the adjusted closing levels, if applicable) of the relevant underlier or the basket closing levels on each of the specified averaging dates, except in limited circumstances described in the applicable general terms supplement and subject to adjustment as provided in the applicable general terms supplement.

Underliers

For a description of certain underliers to which the notes may be linked, see the applicable general terms supplement. Any other underlier or underliers to which the notes may be linked will be described in the applicable pricing supplement.

Interest

The notes may pay interest, if any, at a fixed rate or a floating rate, which will be specified in the applicable pricing supplement. If the notes pay interest, such interest will be paid on the interest payment dates specified in the applicable pricing supplement.

Other Terms of the Notes

 

•

The notes will not be listed on any securities exchange or interdealer quotation system, unless specified otherwise in the applicable pricing supplement.

 

•

You will not have the right to present the notes to us for repayment prior to maturity, unless specified otherwise in the applicable pricing supplement.

 

•

The notes may be issued at a discount or a premium to their stated principal amount.

 

•

We may sell additional notes after the date of the applicable pricing supplement at issue prices, underwriting discounts and net proceeds that differ from the amounts specified in the applicable pricing supplement.

 

•

We may from time to time, without your consent, issue additional underlier-linked trigger notes having the same terms as certain underlier-linked trigger notes previously issued.

Our Redemption Right

If so specified in the applicable pricing supplement, we will have the option to redeem all or part of your notes on the redemption date(s) or under the circumstances specified in the applicable pricing supplement. If we decide to redeem your notes, we will:

 

•

send a notice of redemption to the holder of your notes and the trustee announcing that we have decided to redeem the notes;

 

•

specify in the notice of redemption the redemption price that we will pay you in exchange for each of your notes, which will be set forth in the applicable pricing supplement; and

 

•

specify in the notice of redemption the redemption date when your notes will be so redeemed; the redemption date will be on or after the initial redemption date specified in the applicable pricing supplement and, unless otherwise specified in the applicable pricing supplement, at least 30 but no more than 60 calendar days after the date the notice of redemption is given.

 

In addition, if so specified in the applicable pricing supplement, our option to redeem your notes may be conditioned upon the closing level (or the adjusted closing level, if applicable) of the applicable underlier or the basket closing level being higher or lower than the trigger buffer amount specified in the applicable pricing supplement. For more detail on such price dependent redemption right, see the applicable general terms supplement.

Calculation Agent

GS&Co. is appointed as the initial calculation agent for the underlier-linked trigger notes as of the date of this product supplement no. 1,740. We may appoint a different entity as the calculation agent for your notes or change the calculation agent for your notes without notice to the holders, and GS&Co. may resign as calculation agent at any time upon 60 days’ written notice to GS Finance Corp. The calculation agent will make all determinations regarding the interest payments, if applicable; the final underlier or basket level; the underlier or basket return; whether a trigger event has occurred; market disruption events; successor underliers; exchange rates, if applicable; stated maturity date; determination date; averaging dates, if applicable; business days; trading days; the cash settlement amount and the amount payable on your notes at maturity or upon redemption; and any other determination as applicable or specified in the applicable pricing supplement. Absent manifest error, all determinations of the calculation agent will be final and binding, without any liability on the part of the calculation agent.

What About Taxes?

The U.S. federal income tax consequences of an investment in your notes are uncertain, both as to the timing and character of any inclusion in income in respect of your notes. Some of these tax consequences are summarized below, but we urge you to read the more detailed discussion in “Supplemental Discussion of Federal Income Tax Consequences” on page S-43.

Pursuant to the terms of the notes, GS Finance Corp. and you agree (in the absence of a change in law, an administrative determination or a judicial ruling to the contrary) to characterize each of your notes for all purposes as a pre-paid forward contract or a pre-paid derivative contract (which is an income-bearing pre-paid forward contract or pre-paid derivative contract if the notes bear interest) in respect of the underlier or basket of underliers, as specified in the applicable pricing supplement. If your notes are so treated, it would be reasonable for you to treat any gain or loss recognized upon the sale, exchange, redemption or maturity of your notes (excluding amounts attributable to interest) as capital gain or loss in an amount equal to the difference between the amount you receive upon the sale, exchange or redemption of your notes or on the stated maturity date and the amount you paid for your notes. Such gain or loss generally would be long-term capital gain or loss if you held your notes for more than one year. If you are a U.S. alien holder (as defined in “Supplemental Discussion of Federal Income Tax Consequences” below), and your notes bear interest, we intend to withhold on the interest payments on your notes at a 30% rate.

The Internal Revenue Service announced on December 7, 2007 that it is actively considering the proper federal tax treatment of financial instruments such as your notes and it is possible that any future guidance could adversely affect the tax treatment and the value of your notes. Except to the extent otherwise provided by law, GS Finance Corp. intends to continue treating the notes for U.S. federal income tax purposes in accordance with the treatment set forth above and in “Supplemental Discussion of Federal Income Tax Consequences” on page S-43 unless and until such time as Congress, the Treasury Department or the Internal Revenue Service determine that some other treatment is more appropriate.

In addition, legislation was introduced in Congress in 2007 that, if enacted, would have required holders that acquired instruments such as your notes after the bill is enacted to accrue interest income over the term of such instruments even if there may be no interest payments over the term of such instruments. It is not possible to predict whether a similar or an identical bill will be enacted in the future and whether any such bill would affect the tax treatment of your notes.

 

The tax discussion herein addresses certain tax consequences that are generally expected to be applicable to the notes issued off of this product supplement no. 1,740 but it does not address the tax treatment of any particular note. Accordingly, tax consequences different than those described herein may be applicable to any particular note. The tax consequences for a particular note will be discussed in the applicable pricing supplement.

You should consult your tax advisor regarding the U.S. federal, state and local and other tax consequences of owning and disposing of the notes in your particular circumstances.

 

 

 

 

 

HYPOTHETICAL RETURNS ON THE UNDERLIER-LINKED TRIGGER NOTES

The following examples, tables and charts are provided for purposes of illustration only. They should not be taken as an indication or prediction of future investment results and are intended merely to illustrate hypothetical cash settlement amounts at maturity, assuming all other variables described below remain constant, for a range of underlier or basket performances as they relate to hypothetical issuances of notes linked to a single underlier and notes linked to a basket of underliers.

The information in the examples, tables and charts below reflects hypothetical rates of return on the notes assuming that they are purchased on the original issue date and held to the stated maturity date. If you sell your notes prior to the stated maturity date, your return will depend upon the market value of your notes at the time of sale, which may be affected by a number of factors that are not reflected in the examples, tables and charts below such as prevailing interest rates and the volatility of the underlier or basket of underliers, as applicable. For more information on the value of your notes in the secondary market; see “Additional Risk Factors Specific to the Underlier-Linked Trigger Notes — The Market Value of Your Notes May Be Influenced by Many Unpredictable Factors” below.

No one can predict what the level of the applicable underlier or basket of underliers will be during the measurement period or on the determination date or any of the averaging dates, as applicable, for your notes. The underliers described in the applicable general terms supplement have been highly volatile — meaning that their levels have changed substantially in relatively short periods — in the past and their performance cannot be predicted for the future. In addition, any rate of return you may earn on your investment in the notes may be lower than that which you could earn on a comparable investment in the underlier stocks of the underlier or underliers to which your notes are linked. Among other things, the return on your notes will not reflect any dividends that may be paid on the underlier stocks, as applicable. Also, the hypothetical examples shown below do not take into account the effects of applicable taxes, see “Additional Risk Factors Specific to the Underlier-Linked Trigger Notes — The Tax Consequences of an Investment in Your Notes Are Uncertain” below.

The following examples, tables and charts do not reflect interest payments, if any, that may be payable on your notes. We have assumed for the purposes of these examples, tables and charts below that there is no change in or affecting the composition of any underlier or the method by which the relevant underlier is calculated, that there is no change in the relative weighting of any underlier stock for a particular underlier, and that no market disruption event occurs with respect to any underlier (including any applicable exchange rate). In addition, except as specified below, we have assumed for the purposes of these examples, tables and charts below that there are no foreign currency adjustments affecting the closing level of the underlier for any underlier.

For these reasons, the actual performance of the applicable underlier or basket of underliers over the life of your notes, as well as the amount payable at maturity, may bear little relation to the hypothetical examples shown below.

The initial underlier or basket level, the upside participation rate, the trigger buffer amount, the cap level, the maximum settlement amount, the contingent minimum return, the supplemental amount, the exchange rates, the stated maturity date, the determination date, the averaging dates and the weighting multipliers, as applicable, that will apply to your notes will be set forth in a pricing supplement prepared specifically for the notes you purchase.

Notes Linked to a Single Underlier Without Averaging Dates

Examples for the Case Where a Trigger Event Occurs

If a trigger event occurs , the cash settlement amount will depend on whether the final underlier level is greater than, equal to or less than the initial underlier level. If the final underlier level is greater

 

than the initial underlier level, the cash settlement amount will be calculated on the determination date (examples of which are provided below) and will equal the sum of the face amount of each of your notes plus the product of (i) the face amount of each of your notes times (ii) the upside participation rate times (iii) the underlier return plus the supplemental amount, if any, subject to the cap level, if applicable. The underlier return is the percentage, if any, by which the final underlier level exceeds the initial underlier level. Accordingly, if a trigger event occurs and the final underlier level is greater than the initial underlier level, the amount payable at maturity per each note will be as follows:

face amount of a note + (face amount of a note × upside participation rate × (underlier return plus supplemental amount, if any))

However, if the applicable pricing supplement specifies a cap level for your notes, the amount payable at maturity per each note will be limited to the lesser of (i) the cash settlement amount calculated as described in the immediately preceding paragraph and (ii) the maximum settlement amount, calculated as follows:

 

face amount of a note  +  (face amount of a note × upside participation rate ×

		cap level – initial underlier level		)
		initial underlier level

If a trigger event occurs and the final underlier level is less than or equal to the initial underlier level, the cash settlement amount will be calculated on the determination date (examples of which are provided below) and will equal the sum of the face amount of each of your notes plus the product of (i) the face amount of each of your notes times (ii) the underlier return plus the supplemental amount, if any. Accordingly, if a trigger event occurs and the final underlier level is less than or equal to the initial underlier level, the amount payable at maturity per each note will be as follows:

face amount of a note  +  (face amount of a note × (underlier return plus supplemental amount, if any))

The hypothetical examples presented below show how the amount payable on the notes is calculated when a trigger event occurs , based on key terms and assumptions set forth below. In all cases where a trigger event occurs, the contingent minimum amount will not be applicable.

Example 1: The final underlier level is greater than the initial underlier level and there is no supplemental amount.

 

Key Terms and Assumptions
Face amount of a note:		$	1,000
Hypothetical initial underlier level:			1,000
Hypothetical final underlier level:			1,500
Hypothetical upside participation rate:			130%
Hypothetical supplemental amount:			0%
Hypothetical trigger buffer amount:			15%
Hypothetical contingent minimum return:			n/a
Hypothetical cap level:			n/a
Hypothetical maximum settlement amount:			n/a

 

 

Cash settlement amount           =  $1,000  +		(		$1,000  ×  130%		×		1,500  –  1,000		)		=		$1,650
								1,000

In the example above, the amount payable at maturity per $1,000 face amount will equal the cash settlement amount, or $1,650. Because the upside participation rate is greater than 100%, the return on your notes is greater than the rate of increase in the underlier level from the trade date to the determination date.

The table below illustrates the hypothetical return on each note for the specified final underlier levels that are greater than the initial underlier level. However, the table below does not cover the complete range of possible amounts payable on the stated maturity date. The hypothetical percentage return on a note is greater than the hypothetical percentage return on the underlier by 30% due to the upside participation rate of 130%.

 

Hypothetical Percentage Return on Underlier		Hypothetical Final Underlier Level		Face Amount		Hypothetical Cash Settlement Amount		Hypothetical Percentage Return on $1,000 Note
300%		4,000		$1,000		$4,900		390.00%
200%		3,000		$1,000		$3,600		260.00%
150%		2,500		$1,000		$2,950		195.00%
100%		2,000		$1,000		$2,300		130.00%
75%		1,750		$1,000		$1,975		97.50%
50%		1,500		$1,000		$1,650		65.00%
25%		1,250		$1,000		$1,325		32.50%
20%		1,200		$1,000		$1,260		26.00%
10%		1,100		$1,000		$1,130		13.00%

Example 2: The final underlier level is less than the initial underlier level and there is a supplemental amount.

 

Key Terms and Assumptions
Face amount of a note:		$1,000
Hypothetical initial underlier level:		1,000
Hypothetical final underlier level:		800
Hypothetical upside participation rate:		130%
Hypothetical supplemental amount:		2%
Hypothetical trigger buffer amount:		15%
Hypothetical contingent minimum return:		n/a
Hypothetical cap level:		n/a
Hypothetical maximum settlement amount:		n/a

 

Cash settlement amount           =  $1,000  +		(		$1,000  ×  (		800  –  1,000		+  .02  )		)		=		$820
						1,000

 

In the example above, the amount payable at maturity per $1,000 face amount will equal the cash settlement amount, or $820. Because the final underlier level is less than the initial underlier level, the upside participation rate will not apply and your return on the notes will be less than the amount you invested.

The table below illustrates the hypothetical return on each note for the specified final underlier levels that are less than the initial underlier level. However, the table below does not cover the complete range of possible amounts payable on the stated maturity date.

 

Hypothetical     Percentage Return on Underlier		Hypothetical Final     Underlier Level		Face Amount		Hypothetical     Cash Settlement     Amount		Hypothetical     Percentage Return on $1,000 Note
-10%		900		$1,000		$920		-8.00%
-20%		800		$1,000		$820		-18.00%
-30%		700		$1,000		$720		-28.00%
-40%		600		$1,000		$620		-38.00%
-50%		500		$1,000		$520		-48.00%
-60%		400		$1,000		$420		-58.00%
-70%		300		$1,000		$320		-68.00%
-80%		200		$1,000		$220		-78.00%
-90%		100		$1,000		$120		-88.00%
-100%		0		$1,000		$20		-98.00%

Example 3: The final underlier level is greater than the initial underlier level, the cap level is applicable and there is no supplemental amount.

 

Key Terms and Assumptions
Face amount of a note:		$	1,000
Hypothetical initial underlier level:			1,000
Hypothetical final underlier level:			1,200
Hypothetical upside participation rate:			130%
Hypothetical supplemental amount:			n/a
Hypothetical trigger buffer amount:			15%
Hypothetical contingent minimum return:			n/a
Hypothetical cap level:			130%
Hypothetical maximum settlement amount:		$	1,390

 

Cash settlement amount calculated without regard to the         cap level		=  $1,000  +		(		$1,000  ×  130%		×		1,200  –  1,000		)		=		$1,260
										1,000

 

Maximum settlement amount		=  $1,000  +		(		$1,000  ×  130%		×		1,300  –  1,000		)		=		$1,390
										1,000

In the example above, the cash settlement amount calculated without regard to the cap level is less than the maximum settlement amount. Therefore, the cash settlement amount will equal the cash settlement amount calculated without regard to the cap level, or $1,260. Because the final underlier level is less than the cap level, the return on your notes is not limited by the cap level.

 

Key Terms and Assumptions
Face amount of a note:		$	1,000
Hypothetical initial underlier level:			1,000
Hypothetical final underlier level:			1,500
Hypothetical upside participation rate:			130%
Hypothetical supplemental amount:			n/a
Hypothetical trigger buffer amount:			15%
Hypothetical contingent minimum return:			n/a
Hypothetical cap level:			130%
Hypothetical maximum settlement amount:		$	1,390

 

Cash settlement amount calculated without regard to the         cap level		=  $1,000  +		(		$1,000  ×  130%		×		1,500  –  1,000		)		=		$1,650
										1,000

 

Maximum settlement amount		=  $1,000  +		(		$1,000  ×  130%		×		1,300  –  1,000		)		=		$1,390
										1,000

In the example above, the cash settlement amount calculated without regard to the cap level is greater than the maximum settlement amount. Therefore, the cash settlement amount will equal the maximum settlement amount, or $1,390. Because the final underlier level is greater than the cap level, the return on your notes is capped based on the maximum settlement amount.

 

Key Terms and Assumptions
Face amount of a note:		$	1,000
Hypothetical initial underlier level:			1,000
Hypothetical upside participation rate:			130%
Hypothetical supplemental amount:			n/a
Hypothetical trigger buffer amount:			15%
Hypothetical contingent minimum return:			n/a
Hypothetical cap level:			130%
Hypothetical maximum settlement amount:		$	1,390

The table below illustrates the effect of the assumed cap level of 130%, the assumed maximum settlement amount of $1,390 and the assumed upside participation rate of 130% on the hypothetical return on each note for the specified final underlier levels that are greater than the initial underlier level. However, the table below does not cover the complete range of possible amounts payable on the stated maturity date. The hypothetical percentage return on a note is capped at 39% regardless of the hypothetical percentage returns on the underlier that exceed 39%, due to the cap level of 130%, the maximum settlement amount of $1,390 and the upside participation rate of 130%.

 

Hypothetical Percentage Return on Underlier		Hypothetical Final Underlier Level		Face Amount		Hypothetical Cash Settlement Amount		Hypothetical Percentage Return on $1,000 Note
300%		4,000		$1,000		$1,390		39.00%
200%		3,000		$1,000		$1,390		39.00%
150%		2,500		$1,000		$1,390		39.00%
100%		2,000		$1,000		$1,390		39.00%
75%		1,750		$1,000		$1,390		39.00%
50%		1,500		$1,000		$1,390		39.00%
30%		1,300		$1,000		$1,390		39.00%
25%		1,250		$1,000		$1,325		32.50%
20%		1,200		$1,000		$1,260		26.00%
10%		1,100		$1,000		$1,130		13.00%

If a cap level applies to your notes, the appreciation potential of the notes will be limited by the maximum settlement amount even if the final underlier level would otherwise imply a much higher return on your notes. Therefore, your return may be less than the return you would have otherwise received if you had invested directly in the underlier or the underlier stocks of the underlier.

Examples for the Case Where a Trigger Event Does Not Occur

If a trigger event does not occur , on the stated maturity date for each of your notes you will receive a cash settlement amount equal to the greater of (a) the sum of the face amount of each of your notes plus the product of (i) the face amount of each of your notes times (ii) the upside participation rate times (iii) the underlier return, subject to the cap level, if applicable or (b) the sum of the face amount of each of your notes plus the product of (i) the face amount of each of your notes times (ii) the contingent minimum return, which will be a percentage specified in the applicable pricing supplement. Thus, even if the final underlier level is equal to or less than the initial underlier level, you will receive a return on your notes equal to the contingent minimum return. Accordingly, if a trigger event does not occur, the amount payable at maturity per each note will be the greater of:

face amount of a note + (face amount of a note × upside participation rate × underlier return), or

face amount of a note + (face amount of a note × contingent minimum return)

Example 4: The underlier return is less than the contingent minimum return.

 

Key Terms and Assumptions
Face amount of a note:		$	1,000
Hypothetical initial underlier level:			1,000
Hypothetical final underlier level:			900
Hypothetical upside participation rate:			130%
Hypothetical supplemental amount:			n/a
Hypothetical trigger buffer amount:			15%
Hypothetical contingent minimum return:			3%
Hypothetical cap level:			n/a
Hypothetical maximum settlement amount:			n/a

 

Cash settlement amount calculated without regard to the contingent minimum    return

=  $1,000 +

(

$1,000    ×

900 – 1,000 1,000

)

=    $900

 

Cash settlement amount           calculated using the contingent minimum return		=		$1,000 + ($1,000 × 3%)		=    $1,030

In the example above, since the underlier return of -10% is less than the contingent minimum return of 3%, the amount payable at maturity per $1,000 face amount will equal the cash settlement amount, which will in turn equal $1,030.

Example 5: The underlier return is greater than the contingent minimum return.

 

Key Terms and Assumptions
Face amount of a note:			$1,000
Hypothetical initial underlier level:			1,000
Hypothetical final underlier level:			1,200
Hypothetical upside participation rate:			130%
Hypothetical supplemental amount:			n/a
Hypothetical trigger buffer amount:			15%
Hypothetical contingent minimum return:			3%
Hypothetical cap level:			n/a
Hypothetical maximum settlement amount:			n/a

 

Cash settlement amount

=  $1,000 +

(

$1,000 × 130% ×

1,200 – 1,000 1,000

)

=    $1,260

In the example above, since the underlier return is greater than the contingent minimum return of 3%, the amount payable at maturity per $1,000 face amount will equal the cash settlement amount, which will in turn equal $1,260.

Example 6: The underlier return is greater than the contingent minimum return and a cap level applies.

 

Key Terms and Assumptions
Face amount of a note:			$1,000
Hypothetical initial underlier level:			1,000
Hypothetical final underlier level:			1,500
Hypothetical upside participation rate:			130%
Hypothetical supplemental amount:			n/a
Hypothetical trigger buffer amount:			15%
Hypothetical contingent minimum return:			3%
Hypothetical cap level:			130%
Hypothetical maximum settlement amount:		$	1,390

 

Cash settlement amount calculated without regard to the cap level		=  $1,000  +		(		$1,000  ×  130%		×		1,500  –  1,000		)		=		$1,650
										1,000

 

Maximum settlement amount		=  $1,000  +		(		$1,000  ×  130%		×		1,300  –  1,000		)		=		$1,390
										1,000

In the example above, the cash settlement amount calculated without regard to the cap level is greater than the maximum settlement amount. Therefore, the cash settlement amount will equal the maximum settlement amount, or $1,390. Because the final underlier level is greater than the cap level, the return on your notes is capped based on the maximum settlement amount.

Charts Illustrating the Relationship of the Hypothetical Cash Settlement Amounts and the Hypothetical Final Underlier Levels When a Trigger Event Occurs or Does Not Occur

The following charts are graphical illustrations of hypothetical cash settlement amounts (expressed as a percentage of the face amount of a note) that we would deliver to the holder of your notes on the stated maturity date, if the final underlier level (expressed as a percentage of the initial underlier level) were any of the hypothetical levels shown on the horizontal axis and whether a trigger event occurs, based on the assumptions noted below. However, the charts below do not cover the complete range of the relationships between possible cash settlement amounts and final underlier levels on the stated maturity date.

Chart 1:   A trigger event occurs, the upside participation rate is greater than 100% and no cap level is specified.

 

The chart above shows that any hypothetical final underlier level that is less than the initial underlier level (the section left of the 100% marker on the horizontal axis) would result in a hypothetical cash settlement amount that is less than 100% of the face amount of a note (the section below the 100% marker on the vertical axis) and, accordingly, in a loss of principal to the holder of the notes. On the other hand, any hypothetical final underlier level that is greater than the initial underlier level (the section right of the 100% marker on the horizontal axis) would result in a hypothetical cash settlement amount that is greater than 100% of the face amount of a note on a leveraged basis (the section above the 100% marker on the vertical axis).

Chart 2: A trigger event occurs; the upside participation rate is 100% and a cap level is specified.

 

The chart above shows that any hypothetical final underlier level that is less than the initial underlier level (the section left of the 100% marker on the horizontal axis) would result in a hypothetical cash settlement amount that is less than 100% of the face amount of a note (the section below the 100% marker on the vertical axis) and, accordingly, in a loss of principal to the holder of the notes. On the other hand, any hypothetical final underlier level that is greater than the initial underlier level (the section right of the 100% marker on the horizontal axis) but less than the cap level (the section left of the “Cap Level” marker on the horizontal axis) would result in a hypothetical cash settlement amount that is greater than 100% of the face amount of a note (the section above the 100% marker on the vertical axis). Since the upside participation rate equals 100%, the rate of increase in the hypothetical cash settlement amounts equals the rate of increase in the final underlier levels when the final underlier level is between the initial underlier level and the cap level. In addition, any hypothetical final underlier level that is greater than or equal to the cap level (the section on or right of the “Cap Level” marker on the horizontal axis) would result in a capped hypothetical cash settlement amount that is greater than 100% of the face amount of a note (the line perpendicular to the horizontal axis that is right of the “Cap Level” marker on the horizontal axis).

 

Chart 3:

A trigger event does not occur; the upside participation rate is less than 100%, no cap level is specified and the contingent minimum return is 3%.

 

The chart above shows that any hypothetical final underlier level that is less than 103% of the initial underlier level (the section left of the 100% marker on the horizontal axis) would result in a hypothetical cash settlement amount that is equal to the face amount of a note plus the face amount of a note multiplied by the contingent minimum return of 3% (the line perpendicular to the horizontal axis that is left of the 103% marker on the horizontal axis). On the other hand, any hypothetical final underlier level that is greater than or equal to 103% of the initial underlier level (the section on and right of the 103% marker on the horizontal axis) would result in a hypothetical cash settlement amount that is greater than or equal to 103% of the face amount of a note (the section on or above the 103% marker on the vertical axis). Since the upside participation rate is less than 100%, the rate of increase in the hypothetical cash settlement amounts will be less than the rate of increase in the final underlier levels.

 

Chart 4:

A trigger event does not occur; the upside participation rate is equal to 100%, no cap level is specified and the contingent minimum return is 0% .

 

 

The chart above shows that any hypothetical final underlier level that is less than the initial underlier level (the section left of the 100% marker on the horizontal axis) would result in a hypothetical cash settlement amount that is equal to the face amount of a note (the horizontal line to the left of the 100% marker on the horizontal axis). On the other hand, any hypothetical final underlier level that is greater than the initial underlier level (the section right of the 100% marker on the horizontal axis) would result in a hypothetical cash settlement amount that is greater than 100% of the face amount of a note (the section above the 100% marker on the vertical axis). Since the upside participation rate equals 100%, the rate of increase in the hypothetical cash settlement amounts equals the rate of increase in the final underlier levels.

 

Notes Linked to a Basket of Underliers Without Averaging Dates

If a trigger event occurs and the final basket level is greater than the initial basket level, on the stated maturity date for each of your notes you will receive a cash settlement amount equal to the sum of the face amount of each of your notes plus the product of (i) the face amount of each of your notes times (ii) the upside participation rate times (iii) the basket return plus the supplemental amount, if any, subject to the cap level if applicable. If a trigger event occurs and the final underlier level is less than or equal to the initial underlier level, on the stated maturity date for each of your notes you will receive a cash settlement amount equal to the sum of the face amount of each of your notes plus the product of (i) the face amount of each of your notes times (ii) the basket return plus the supplemental amount, if any. The basket return is the percentage, if any, by which the final basket level exceeds the initial basket level. If the final basket level is less than or equal to the initial basket level, on the stated maturity date for each of your notes you will receive a cash settlement amount that is less than or equal to the face amount of each of your notes.

If a trigger event does not occur , on the stated maturity date for each note you will receive a cash settlement amount equal to the greater of (a)  sum of the face amount of each of your notes plus the product of (i) the face amount of each of your notes times (ii) the upside participation rate times (iii) the basket return, subject to the cap level, if applicable or (b) the sum of the face amount of each of your notes plus the product of (i) the face amount of each of your notes times (ii) the contingent minimum return, which will be a percentage specified in the applicable pricing supplement. Accordingly, even if the final basket level is equal to or less than the initial basket level, you will receive a return on your notes equal to the contingent minimum return.

The tables under “— Notes Linked to a Single Underlier Without Averaging Dates” can also be used to illustrate the hypothetical amount payable at maturity on each note for a range of hypothetical percentage changes in the closing levels of the basket underliers. However, it is important to understand that the basket returns are based on the weighted returns of each underlier included in the basket, which can offset one another. The following examples assume an initial basket level of 100.

Example 7: A trigger event occurs and all basket underliers have a positive return.

 

Key Terms and Assumptions
Face amount of a note:		$	1,000
Hypothetical initial basket level:			100
Hypothetical upside participation rate:			130%
Hypothetical trigger buffer amount:			15%
Hypothetical supplemental amount:			n/a
Hypothetical contingent minimum return:			n/a
Hypothetical cap level:			n/a
Hypothetical maximum settlement amount:			n/a

 

Basket Underlier		Hypothetical   Initial Basket   Underlier   Level				Hypothetical Weighting Percentage				Hypothetical Weighting Multiplier				Hypothetical Final Basket Underlier Level				Hypothetical Basket Underlier Return				Final Basket Underlier Level × Weighting Multiplier
Underlier A			200				33.34%				0.1667				220				10%				36.674
Underlier B			800				33.36%				0.0417				880				10%				36.696
Underlier C			1,500				33.30%				0.0222				1,650				10%				36.630
																			Final Basket Level:				110
																			Basket Return:				10%

The final basket level is the sum of the products , as calculated for each basket underlier, of the applicable final underlier level times the corresponding weighting multiplier. The basket return is the quotient of (i) the final basket level minus the initial basket level divided by (ii) the initial basket level, expressed as a percentage. Assuming that no cap level or supplemental amount is specified and that a hypothetical upside participation rate of 130% is applicable, the cash settlement amount is calculated as follows:

 

Cash settlement amount = $1,000 + ($1,000 × 130% × 10%) = $1,130

Therefore, in this example, the hypothetical amount payable at maturity per note will equal the cash settlement amount, $1,130. Because the upside participation rate is greater than 100%, the return on your notes is greater than the rate of increase in the basket closing level from the trade date to the determination date.

Example 8: A trigger event occurs and mixed returns of basket underliers are applicable.

 

		Key Terms and Assumptions
		Face amount of a note:		$	1,000
		Hypothetical initial basket level:			100
		Hypothetical trigger buffer amount:			15%
		Hypothetical upside participation rate:			100%
		Hypothetical supplemental amount:			2%
		Hypothetical contingent minimum return:			n/a
		Hypothetical cap level:			n/a
		Hypothetical maximum settlement amount:			n/a

In the table below, two of the three basket underliers have a positive underlier return, but these positive returns are offset by a negative return of the basket underlier with the greatest weighting percentage in the basket.

 

Basket   Underlier		Hypothetical     Initial Basket Underlier Level		Hypothetical     Weighting Percentage		Hypothetical     Weighting Multiplier		Hypothetical Final Basket Underlier Level		Hypothetical     Basket Underlier Return		Final Basket Underlier Level × Weighting Multiplier
Underlier A		200		50%		0.25000		120		-40.00%		30.00
Underlier B		800		25%		0.03125		840		5.00%		26.25
Underlier C		1,500		25%		0.01667		1,600		6.67%		26.67
										Final Basket     Level:		82.92
										Basket Return:		-17.08%

The basket return in this example is -17.08%. Assuming a supplemental amount of 2%, the amount payable at maturity per $1,000 face amount of your notes will be the cash settlement amount, which will be calculated as follows:

 

Cash settlement amount		=     $1,000 + ($1,000 × ( –  17.08% + 2%))    =    $849.20

In the example above, since the final basket level of 82.92 is less than the initial basket level of 100, the amount payable at maturity per $1,000 face amount will equal the cash settlement amount, which will be less than the $1,000 face amount.

Example 9: A trigger event does not occur and mixed returns of basket underliers are applicable.

 

Key Terms and Assumptions
Face amount of a note:		$	1,000
Hypothetical initial basket level:			100
Hypothetical supplemental amount:			2%
Hypothetical trigger buffer amount:			20%
Hypothetical upside participation rate:			100%
Hypothetical contingent minimum return:			3%
Hypothetical cap level:			n/a
Hypothetical maximum settlement amount:			n/a

In the table below, two of the three basket underliers have a positive underlier return, but these positive returns are offset by a negative return of the basket underlier with the greatest weighting percentage in the basket.

 

Basket underlier		Hypothetical Initial Underlier Level				Hypothetical Weighting Percentage				Hypothetical Weighting Multiplier				Hypothetical Final Underlier level				Hypothetical Underlier Return				Final Underlier level × Weighting Multiplier
Underlier A			200				50%				0.25000				120				-40.00%				30.00
Underlier B			800				25%				0.03125				840				5.00%				26.25
Underlier C			1,500				25%				0.01667				1,600				6.67%				26.67
																			Final Basket     Level:				82.92
																			Basket Return:				-17.08%

 

Cash settlement amount calculated without regard to contingent minimum return		=   $1,000  +  ($1,000 × ( –  17.08% + 2%))   =    $849.20

Cash settlement amount calculated using contingent minimum return		=   $1,000  +  ($1,000 × 3%)   =   $1,030

In the example above, even though the final basket level of 82.92 is less than the initial basket level of 100, since a trigger event did not occur, the amount payable at maturity per $1,000 face amount will equal the $1,000 face amount plus the $1,000 face amount multiplied by the contingent minimum return, which is an amount equal to $1,030.

To see how a cap level or averaging dates affects the calculation of the amount payable at maturity for notes linked to a basket of underliers, please refer to the relevant examples described in “— Notes Linked to a Single Underlier Without Averaging Dates” above and “— Notes With Averaging Dates” below, respectively, which would also apply to notes linked to a basket of underliers.

Notes Linked to Underliers Denominated in Non-U.S. Dollars

If your notes are linked to an underlier or basket underlier denominated in non-U.S. dollars and if specified in the applicable pricing supplement, the closing level of such underlier or basket underlier will be converted into U.S. dollars using the exchange rate specified in the applicable pricing supplement.

 

Example 10: A trigger event occurs; all basket underliers have positive returns and all underlying currencies remain constant versus the U.S. dollar.

 

Key Terms and Assumptions
Face amount of a note:		$	1,000
Hypothetical supplemental amount:			n/a
Hypothetical trigger buffer amount:			20%
Hypothetical upside participation rate:			130%
Hypothetical contingent minimum return:			3%
Hypothetical cap level:			n/a
Hypothetical maximum settlement amount:			n/a

 

In the table below, the closing level of each basket underlier on the determination date is greater than the closing level of such basket underlier on the trade date. Because the exchange rates for each basket underlier on the trade date and the determination date are equal, these positive returns are not adjusted to reflect any change in the underlying currencies. All exchange rates are expressed as the U.S. dollar value of one unit of the non-U.S. dollar currency of the applicable basket underlier.

 

Basket       Underlier		Hypothetical   Closing Level of the Basket Underlier on the Trade Date		Hypothetical   Exchange Rate for Basket Underlier on the Trade Date		Hypothetical   Weighting Percentage of Basket Underlier		Hypothetical   Weighting Multiplier		Hypothetical   Closing Level of the Basket Underlier on the Determination   Date		Hypothetical   Exchange Rate for Basket Underlier on the Determination   Date		Hypothetical   Final Basket Underlier Level		Hypothetical   Basket Underlier Return		Final Basket Underlier Level × Weighting Multiplier
Underlier A		200		1		20.00%		0.10		400		1		400		100%		40
Underlier B		800		1		40.00%		0.05		1,600		1		1,600		100%		80
Underlier C		1,600		1		40.00%		0.025		3,200		1		3,200		100%		80
																Initial Basket Level		100
																Final Basket Level		200
																Basket Return		100%

The final basket underlier level of each basket underlier will be determined by calculating the adjusted closing level of each basket underlier on the determination date. The adjusted closing level of each basket underlier will be calculated by the calculation agent as the closing level of such basket underlier converted into U.S. dollars using the exchange rate for such basket underlier on the determination date. Because the exchange rate for each basket underlier on the trade date and the determination date are equal, the return on the notes will not be affected by converting the basket underlier level into U.S. dollars.

The final basket level will be calculated as the sum of the products , as calculated for each basket underlier, of the final basket underlier level for such basket underlier multiplied by the weighting multiplier for such basket underlier. The final basket level in this example is 200. The basket return will be calculated as the quotient of (i) the final basket level minus the initial basket level divided by (ii) the initial basket level. The basket return in this example is 100%. Assuming that there is no cap level and that the upside participation rate is 130%, the amount payable at maturity per $1,000 face amount of your notes will be the cash settlement amount, which will be calculated as follows:

 

Cash settlement amount		=     $1,000 + ($1,000 × 130% × 100%)    =    $2,300

Therefore, in this example, the hypothetical amount payable at maturity per note will equal the cash settlement amount, $2,300. Because the upside participation rate is greater than 100%, the return on your notes is greater than the rate of increase in the basket closing level from the trade date to the determination date.

 

Example 11:		A trigger event occurs; all basket underliers have positive returns but are offset by declines in the U.S. dollar value of the underlying currencies.

 

Key Terms and Assumptions
Face amount of a note:		$	1,000
Hypothetical supplemental amount:			n/a
Hypothetical trigger buffer amount:			20%
Hypothetical upside participation rate:			130%
Hypothetical contingent minimum return:			3%
Hypothetical cap level:			n/a
Hypothetical maximum settlement amount:			n/a

In the table below, the closing level of each basket underlier on the determination date is greater than its closing level on the trade date, but these positive returns are offset by a decline in the U.S. dollar value of the applicable underlying currencies. All exchange rates are expressed as the U.S. dollar value of one unit of the non-U.S. dollar currency of the applicable basket underlier.

 

Basket       Underlier		Hypothetical   Closing Level of the Basket Underlier on the Trade Date		Hypothetical   Exchange Rate for Basket Underlier on the Trade Date		Hypothetical   Weighting Percentage of Basket Underlier		Hypothetical   Weighting Multiplier		Hypothetical   Closing Level of the Basket Underlier on the Determination   Date		Hypothetical   Exchange Rate for Basket Underlier on the Determination   Date		Hypothetical   Final Basket Underlier Level		Hypothetical   Basket Underlier Return		Final Basket Underlier Level × Weighting Multiplier
Underlier A		200		1		20.00%		0.10		400		0.5		200		0%		20
Underlier B		800		1		40.00%		0.05		1,600		0.5		800		0%		40
Underlier C		1,600		1		40.00%		0.025		3,200		0.5		1,600		0%		40
																Initial Basket Level		100
																Final Basket Level		100
																Basket Return		0%

The final basket underlier level of each basket underlier will be determined by calculating the adjusted closing level of each basket underlier on the determination date. The adjusted closing level of each basket underlier will be calculated by the calculation agent as the closing level of such basket underlier converted into U.S. dollars using the exchange rate for such basket underlier. Because the decline in the value of the currencies in which the basket underliers are denominated against the U.S. dollar offsets the increase in the closing levels of the basket underliers, the cash settlement amount will be equal to the face amount of the note.

The final basket level will be calculated as the sum of the products , as calculated for each basket underlier, of the final basket underlier level for such basket underlier multiplied by the weighting multiplier for such basket underlier. The final basket level in this example is 100. The basket return will be calculated as the quotient of (i) the final basket level of 100 minus the initial basket level of 100, divided by (ii) the initial basket level of 100, as follows:

 

Basket return    =		100  –  100		=    0
		100

The 0% basket return will then be used to calculate the cash settlement amount as follows:

 

Cash settlement amount		=     $1,000 + ($1,000 × 130% × 0%)     =     $1,000

Therefore, in this example, the hypothetical amount payable at maturity per note will equal the face amount of your notes, or $1,000, even though the level of each basket underlier increased greatly over the life of the notes.

Example 12: A trigger event does not occur; all basket underliers have negative returns and are not offset by increases in the U.S. dollar value of the underlying currencies.

 

Key Terms and Assumptions
Face amount of a note:		$1,000
Hypothetical supplemental amount:		n/a
Hypothetical trigger buffer amount:		20%
Hypothetical upside participation rate:		130%
Hypothetical contingent minimum return:		3%
Hypothetical cap level:		n/a
Hypothetical maximum settlement amount:		n/a

In the table below, the closing level of each basket underlier on the determination date is less than its closing level on the trade date, and these negative returns are not offset by an increase in the U.S. dollar value of the applicable underlying currencies. All exchange rates are expressed as the U.S. dollar value of one unit of the non-U.S. dollar currency of the applicable basket underlier.

 

Basket       Underlier		Hypothetical   Closing Level of the Basket Underlier on the Trade Date		Hypothetical   Exchange Rate for Basket Underlier on the Trade Date		Hypothetical   Weighting Percentage of Basket Underlier		Hypothetical   Weighting Multiplier		Hypothetical   Closing Level of the Basket Underlier on the Determination   Date		Hypothetical   Exchange Rate for Basket Underlier on the Determination   Date		Hypothetical   Final Basket Underlier Level		Hypothetical   Basket Underlier Return		Final Basket Underlier Level × Weighting Multiplier
Underlier A		200		1		20.00%		0.10		175		1.1		192.5		-3.75%		19.25
Underlier B		800		1		40.00%		0.05		700		1.15		805		0.63%		40.25
Underlier C		1,600		1		40.00%		0.025		1,250		1.2		1,500		-6.25%		37.50
																Initial Basket Level		100
																Final Basket Level		97
																Basket Return		-3%

 

The final basket underlier level of each basket underlier will be determined by calculating the adjusted closing level of each basket underlier on the determination date. The adjusted closing level of each basket underlier will be calculated by the calculation agent as the closing level of such basket underlier converted into U.S. dollars using the exchange rate for such basket underlier. Because the increases in the value of the currencies in which the basket underliers are denominated against the U.S. dollar do not offset the decreases in the closing levels of the basket underliers, the amount payable at maturity per $1,000 face amount will equal the $1,000 face amount plus the $1,000 face amount multiplied by the contingent minimum return.

The final basket level will be calculated as the sum of the products , as calculated for each basket underlier, of the final basket underlier level for such basket underlier multiplied by the weighting multiplier for such basket underlier. In this example, because the increases in the value of the currencies in which the basket underliers are denominated against the U.S. dollar do not offset the decreases in the closing levels of the basket underliers, the final basket level is less than the initial basket level. The final basket level in this example is 97. The basket return will be calculated as the quotient of (i) the final basket level of 97 minus the initial basket level of 100, divided by (ii) the initial basket level of 100, as follows:

 

Basket return    =		97  –  100		=     –  3%
		100

Since the basket return of -3% is less than the contingent minimum return of 3%, the cash settlement amount will be calculated as follows:

 

Cash settlement amount     =     $1,000 + ($1,000 × 3%)  =  $1,030

Therefore, in this example, the hypothetical amount payable at maturity per note will equal $1,030.

Notes With Averaging Dates

In the case of notes with averaging dates, the cash settlement amount, if any, will be based on the final underlier or basket level, which will equal the arithmetic average of the closing levels (or adjusted closing levels, if applicable) of the underlier or the basket closing levels on each of the averaging dates (four in the examples below) specified in the applicable pricing supplement. Because the value of the underlier or basket of underliers may be subject to significant fluctuations over the period covered by the averaging dates, it is not possible to present a chart or table illustrating the complete range of possible cash settlement amounts on the stated maturity date. The examples of the hypothetical cash settlement amount calculations that follow are intended to illustrate the effect of general trends in the closing levels of the underlier or the basket closing levels over such period on the amount payable to you at maturity. However, the underlier or basket of underliers may not increase or decrease over such period in accordance with any of the trends depicted by the hypothetical examples below.

Example 13: A trigger event occurs and four averaging dates are specified.

 

Key Terms and Assumptions
Face amount of a note:		$1,000
Hypothetical initial underlier/basket level:		100
Hypothetical upside participation rate:		110%
Hypothetical trigger buffer amount:		30%
Hypothetical supplemental amount:		n/a
Hypothetical contingent minimum return:		n/a
Hypothetical cap level:		n/a
Hypothetical maximum settlement amount:		n/a

 

The following four cases illustrate the amount payable at maturity on each note for a range of closing levels of an underlier or basket closing levels in a hypothetical issuance with four averaging dates and demonstrate the impact of basing the calculation of the cash settlement amount on the final underlier or basket level as determined over the averaging dates, assuming a face amount of $1,000, a hypothetical initial underlier or basket level of 100, and a hypothetical upside participation rate of 110%.

 

		Case 1				Case 2		Case 3		Case 4
		Closing Level				Closing Level		Closing Level		Closing Level
1st Averaging Date			130			110		130		95
2nd Averaging Date			140			100		140		90
3rd Averaging Date			150			90		120		85
Last Averaging Date			160			80		100		125
Hypothetical Final Underlier/Basket Level			145.00			95.00		122.50		98.75
Hypothetical Upside Participation Rate			110.00%			110.00%		110.00%		110.00%
Amount Payable at Maturity on a $1,000 Face Amount			$1,495.00			$950.00		$1,247.50		$987.50

 

•

In Case 1, the underlier or basket closing levels increase on each averaging date but, due to the averaging of the closing levels over the averaging dates, the final underlier or basket level of 145 is lower than the closing level of 160 on the last averaging date. At maturity, for each note, the investor receives a cash settlement amount of $1,495.00. The return on the notes at maturity represents a 49.50% increase above the $1,000 face amount, which is less than the simple underlier or basket return of 60% over the life of the notes.

 

•

In Case 2, the underlier or basket closing levels decrease on each averaging date. The averaging of the closing levels over the averaging dates results in a final underlier or basket level of 95, which is higher than the closing level of 80 on the last averaging date. Because the final underlier or basket level is less than the initial underlier/basket level of 100, the investor receives a cash settlement amount of approximately $950.00.

 

•

In Case 3, the underlier or basket closing levels reach a high of 140 on the second averaging date and decline on subsequent averaging dates. At maturity, the final underlier or basket level of 122.50 is higher than the closing level of 100 on the last averaging date. At maturity, for each note, the investor receives a cash settlement amount of $1,247.50. The return on the notes at maturity represents a 24.75% increase above the $1,000 face amount, even though the simple underlier or basket return over the life of the notes is 0%.

 

•

In Case 4, the underlier or basket closing levels decline on each of the first three averaging dates to a low of 85 and increase on the last averaging date. The final underlier or basket level of 98.75 is less than the closing level of 125.00 on the last averaging date. Because the final underlier or basket level is less than the initial underlier or basket level, the cash settlement amount equals $987.50. Although the simple underlier or basket return over the life of the notes is 25%, the investor will receive less than the $1,000 face amount for each note at maturity.