An investment in the Notes involves significant risks. Investing
in the Notes is not equivalent to investing in either or both of the Underlyings or the securities composing the Underlyings. Some
of the risks that apply to an investment in the Notes are summarized below, but we urge you to read the more detailed explanation
of risks relating to the Notes generally in the “Risk Factors” section of the prospectus supplement. You should reach
an investment decision only after you have carefully considered with your advisors the suitability of an investment in the Notes
in light of your particular circumstances.
It
is impossible to predict what the correlation between the Underlyings will be over the term of the Notes. The Underlyings represent
different equity markets. The Russell 2000
®
Index represents the small-capitalization segment of the United States
equity market and the S&P 500
®
Index represents the large-capitalization segment of the United States equity
market. These different equity markets may not perform similarly over the term of the Notes.
Although
the correlation of the Underlyings’ performance may change over the term of the Notes, the Contingent Coupon Rate is determined,
in part, based on the correlation of the Underlyings’ performance calculated using our internal models at the time when
the terms of the Notes are finalized. A higher Contingent Coupon Rate is generally associated with lower correlation of the Underlyings,
which reflects a greater potential for missed Contingent Coupons and for a loss of principal at maturity. The correlation referenced
in setting the terms of the Notes is calculated using our internal models and is not derived from the returns of the Underlyings
over the period set forth under “Correlation of the Underlyings” below. In addition, other factors and inputs other
than correlation may impact how the terms of the Notes are set and the performance of the Notes.
In
connection with our normal business activities and in connection with hedging our obligations under the Notes, we and our affiliates
make markets in and trade various financial instruments or products for our accounts and for the account of our clients and otherwise
provide investment banking and other financial services with respect to these financial instruments and products. These financial
instruments and products may include securities, derivative instruments or assets that may relate to the Underlyings or their
components. In any such market making, trading and hedging activity, investment banking and other financial services, we or our
affiliates may take positions or take actions that are inconsistent with, or adverse to, the investment objectives of the holders
of the Notes. We and our affiliates have no obligation to take the needs of any buyer, seller or holder of the Notes into account
in conducting these activities. Such market making, trading and hedging activity, investment banking and other financial services
may negatively impact the value of the Notes.
In
addition, the role played by Barclays Capital Inc., as the agent for the Notes, could present significant conflicts of interest
with the role of Barclays Bank PLC, as issuer of the Notes. For example, Barclays Capital Inc. or its representatives may derive
compensation or financial benefit from the distribution of the Notes and such compensation or financial benefit may serve as an
incentive to sell the Notes instead of other investments. Furthermore, we and our affiliates establish the offering price of the
Notes for initial sale to the public, and the offering price is not based upon any independent verification or valuation.
In
addition to the activities described above, we will also act as the Calculation Agent for the Notes. As Calculation Agent, we
will determine any values of the Underlyings and make any other determinations necessary to calculate any payments on the Notes.
In making these determinations, we may be required to make discretionary judgments, including determining whether a market disruption
event has occurred on any date that the value of an Underlying is to be determined; if an Underlying is discontinued or if the
sponsor of an Underlying fails to publish that Underlying, selecting a successor underlying or, if no successor underlying is
available, determining any value necessary to calculate any payments on the Notes; and calculating the value of an Underlying
on any date of determination in the event of certain changes in or modifications to an Underlying. In making these discretionary
judgments, our economic interests are potentially adverse to your interests as an investor in the Notes, and any of these determinations
may adversely affect any payments on the Notes.
The examples below illustrate the payment upon a call or at maturity
for a $10 principal amount Note on a hypothetical offering of the Notes under various scenarios, with the assumptions set forth
below.* You should not take these examples as an indication or assurance of the expected performance of the Notes. The examples
below do not take into account any tax consequences from investing in the Notes. Numbers appearing in the examples below have been
rounded for ease of analysis. In these examples, we refer to the Russell 2000
®
Index and the S&P 500
®
Index as the “RTY Index” and the “SPX Index,” respectively.
The examples below are purely hypothetical. These examples are
intended to illustrate (a) under what circumstances the Notes will be subject to an automatic call, (b) how the payment of a Contingent
Coupon with respect to any Observation Date will depend on whether the Closing Level of either Underlying on that Observation Date
is less than its Coupon Barrier, (c) how the value of the payment at maturity on the Notes will depend on whether the Final Underlying
Level of either Underlying is less than its Downside Threshold and (d) how the total return on the Notes may be less than the total
return on a direct investment in either or both Underlyings in certain scenarios. The “total return” as used in this
pricing supplement is the number, expressed as a percentage, that results from comparing the total payments per Note over the term
of the Notes to the $10 principal amount.
Example 1 — Notes Are Automatically Called on the Fourth
Observation Date
Date
|
|
Closing Level
|
|
Payment (per Note)
|
First Observation Date
|
|
RTY Index: 105.000
SPX Index: 110.00
|
|
Closing Level of each Underlying at or above its Initial Underlying Level; Notes NOT automatically callable because Observation Date is prior to the fourth Observation Date. Closing Level of each Underlying at or above its Coupon Barrier; Issuer pays Contingent Coupon of $0.1725 on first Coupon Payment Date.
|
Second Observation Date
|
|
RTY Index: 80.000
SPX Index: 45.00
|
|
Closing Level of each Underlying below its Initial Underlying Level; Notes NOT automatically callable because Observation Date is prior to the fourth Observation Date. Closing Level of SPX Index below its Coupon Barrier; Issuer DOES NOT pay Contingent Coupon on second Coupon Payment Date.
|
Third Observation Date
|
|
RTY Index: 60.000
SPX Index: 80.00
|
|
Closing Level of each Underlying below its Initial Underlying Level; Notes NOT automatically callable because Observation Date is prior to the fourth Observation Date. Closing Level of RTY Index below its Coupon Barrier; Issuer DOES NOT pay Contingent Coupon on third Coupon Payment Date.
|
Fourth Observation Date
|
|
RTY Index: 110.000
SPX Index: 115.00
|
|
Closing Level of each Underlying at or above its Initial Underlying Level; Notes are automatically called; Issuer pays principal
plus
Contingent Coupon of $0.1725 on Call Settlement Date.
|
Total Payments (per Note):
|
|
Payment on Call Settlement Date:
|
$10.1725 ($10.00 + $0.1725)
|
|
|
Prior Contingent Coupons:
|
$0.1725 ($0.1725 × 1)
|
|
|
Total:
|
$10.345
|
|
|
Total Return:
|
3.45%
|
Because the Closing Level of each Underlying is greater than
or equal to its Initial Underlying Level on the fourth Observation Date (which is approximately one year after the Trade Date and
is the first Observation Date on which the Notes are callable), the Notes are automatically called on that Observation Date. The
Issuer will pay you on the Call Settlement Date $10.1725 per Note, which is equal to your principal amount
plus
the Contingent
Coupon due on the Coupon Payment Date that is also the Call Settlement Date. No further amounts will be owed to you under the Notes.
In addition, because the Closing Level of each Underlying was
greater than or equal to its Coupon Barrier on the first Observation Date, the Issuer will pay the Contingent Coupon of $0.1725
on the first Coupon Payment Date. However, because the Closing Level of at least one Underlying was less than its Coupon Barrier
on the second and third Observation Dates, the Issuer will not pay any Contingent Coupon on the Coupon Payment Dates following
those Observation Dates. Accordingly, the Issuer will have paid a total of $10.345 per Note for a total return of 3.45% on the
Notes.
Example 2 — Notes Are NOT Automatically Called and the
Final Underlying Level of Each Underlying Is At Or Above Its Downside Threshold
Date
|
|
Closing Level
|
|
Payment (per Note)
|
First Observation Date
|
|
RTY Index: 115.000
SPX Index: 110.00
|
|
Closing Level of each Underlying at or above its Initial Underlying Level; Notes NOT automatically callable because Observation Date is prior to the fourth Observation Date. Closing Level of each Underlying at or above its Coupon Barrier; Issuer pays Contingent Coupon of $0.1725 on first Coupon Payment Date.
|
Second Observation Date
|
|
RTY Index: 80.000
SPX Index: 75.00
|
|
Closing Level of each Underlying below its Initial Underlying Level; Notes NOT automatically callable because Observation Date is prior to the fourth Observation Date. Closing Level of each Underlying at or above its Coupon Barrier; Issuer pays Contingent Coupon of $0.1725 on second Coupon Payment Date.
|
Third Observation Date
|
|
RTY Index: 85.000
SPX Index: 60.00
|
|
Closing Level of each Underlying below its Initial Underlying Level; Notes NOT automatically callable because Observation Date is prior to the fourth Observation Date. Closing Level of SPX Index below its Coupon Barrier; Issuer DOES NOT pay Contingent Coupon on third Coupon Payment Date.
|
Fourth to Nineteenth Observation Dates
|
|
Various (below Coupon Barrier)
|
|
Closing Level of each Underlying below its Initial Underlying Level; Notes NOT automatically called. Closing Level of each Underlying below its Coupon Barrier; Issuer DOES NOT pay Contingent Coupon on any of the fourth to nineteenth Coupon Payment Dates.
|
Twentieth Observation Date (the Final Valuation Date)
|
|
RTY Index: 110.000
SPX Index: 80.00
|
|
Closing Level of SPX Index below its Initial Underlying Level; Notes NOT automatically called. Final Underlying Level of each Underlying at or above its Downside Threshold and Coupon Barrier; Issuer pays principal
plus
Contingent Coupon of $0.1725 on Maturity Date.
|
Total Payments (per Note):
|
|
Payment at Maturity:
|
$10.1725 ($10.00 + $0.1725)
|
|
|
Prior Contingent Coupons:
|
$0.345 ($0.1725 × 2)
|
|
|
Total:
|
$10.5175
|
|
|
Total Return:
|
5.175%
|
Because the Closing Level of either Underlying was less than
its Initial Underlying Level on each Observation Date on and after the fourth Observation Date (which is approximately one year
after the Trade Date and is the first Observation Date on which the Notes are callable), the Notes are not automatically called.
Because the Final Underlying Level of each Underlying is greater than or equal to its Downside Threshold and Coupon Barrier, the
Issuer will pay you on the Maturity Date $10.1725 per Note, which is equal to your principal amount
plus
the Contingent
Coupon due on the Coupon Payment Date that is also the Maturity Date.
In addition, because the Closing Level of each Underlying was
greater than or equal to its Coupon Barrier on the first and second Observation Dates, the Issuer will pay the Contingent Coupon
of $0.1725 on each of the first and second Coupon Payment Dates. However, because the Closing Level of at least one Underlying
was less than its Coupon Barrier on the third through nineteenth Observation Dates, the Issuer will not pay any Contingent Coupon
on the Coupon Payment Dates following those Observation Dates. Accordingly, the Issuer will have paid a total of $10.5175 per Note
for a total return of 5.175% on the Notes.
Example 3 — Notes Are NOT Automatically Called and the
Final Underlying Level of At Least One Underlying Is Below Its Downside Threshold
Date
|
|
Closing Level
|
|
Payment (per Note)
|
First Observation Date
|
|
RTY Index: 55.000
SPX Index: 60.00
|
|
Closing Level of each Underlying below its Initial Underlying Level; Notes NOT automatically callable because Observation Date is prior to the fourth Observation Date. Closing Level of each Underlying below its Coupon Barrier; Issuer DOES NOT pay Contingent Coupon on first Coupon Payment Date.
|
Second Observation Date
|
|
RTY Index: 105.000
SPX Index: 55.00
|
|
Closing Level of the SPX Index below its Initial Underlying Level; Notes NOT automatically callable because Observation Date is prior to the fourth Observation Date. Closing Level of SPX Index below its Coupon Barrier; Issuer DOES NOT pay Contingent Coupon on second Coupon Payment Date.
|
Third Observation Date
|
|
RTY Index: 90.000
SPX Index: 50.00
|
|
Closing Level of each Underlying below its Initial Underlying Level; Notes NOT automatically callable because Observation Date is prior to the fourth Observation Date. Closing Level of SPX Index below its Coupon Barrier; Issuer DOES NOT pay Contingent Coupon on third Coupon Payment Date.
|
Fourth to Nineteenth Observation Dates
|
|
Various (below Coupon Barrier)
|
|
Closing Level of each Underlying below its Initial Underlying Level; Notes NOT automatically called. Closing Level of each Underlying below its Coupon Barrier; Issuer DOES NOT pay Contingent Coupon on any of the fourth to nineteenth Coupon Payment Dates.
|
Twentieth Observation Date (the Final Valuation Date)
|
|
RTY Index: 45.000
SPX Index: 110.00
|
|
Closing Level of RTY Index below its Initial Underlying Level; Notes NOT automatically called. Closing Level of RTY Index below its Coupon Barrier and Downside Threshold; Issuer DOES NOT pay Contingent Coupon on Maturity Date; Issuer repays less than the principal amount resulting in a percentage loss of principal equal to the decline of the Lesser Performing Underlying.
|
Total Payments (per Note):
|
|
Payment at Maturity:
|
$4.50
|
|
|
Prior Contingent Coupons:
|
$0.00
|
|
|
Total:
|
$4.50
|
|
|
Total Return:
|
-55.00%
|
|
|
|
Because the Closing Level of at least one Underlying is less
than its Initial Underlying Level on each Observation Date on and after the fourth Observation Date (which is approximately one
year after the Trade Date and is the first Observation Date on which the Notes are callable), the Notes are not automatically called.
Because the Final Underlying Level of at least one Underlying is less than its Downside Threshold on the Final Valuation Date,
at maturity, the Issuer will pay you a total of $4.50 per
Note
, for a total return
of -55.00% on the Notes, calculated as follows:
$10 × (1 + Underlying Return of the
Lesser Performing Underlying)
Step 1: Calculate the Underlying Return of each Underlying:
Underlying Return of the RTY Index:
Final Underlying Level – Initial Underlying Level
|
=
|
45.000 – 100.000
|
= -55.00%
|
Initial Underlying Level
|
100.000
|
Underlying Return of the SPX Index:
Final Underlying Level – Initial Underlying Level
|
=
|
110.00 – 100.00
|
= 10.00%
|
Initial Underlying Level
|
100.00
|
Step 2: Determine the Lesser Performing Underlying:
The
RTY Index is the Underlying with the lower Underlying Return.
Step 3: Calculate the Payment at Maturity:
$10 × (1 + Underlying Return of the
Lesser Performing Underlying) = $10 × (1 + -55.00%) = $4.50
In addition, because the Closing Level of at least one Underlying
is less than its Coupon Barrier on each Observation Date, the Issuer will not pay any Contingent Coupons over the term of the Notes.
What Are the Tax Consequences of an Investment in the Notes?
|
You should review carefully the sections entitled “Material
U.S. Federal Income Tax Consequences—Tax Consequences to U.S. Holders—Notes Treated as Prepaid Forward or Derivative
Contracts with Associated (Contingent) Coupons” and, if you are a non-U.S. holder, “—Tax Consequences to Non-U.S.
Holders,” in the accompanying prospectus supplement. The following discussion supersedes the discussion in the accompanying
prospectus supplement to the extent it is inconsistent therewith.
In determining our reporting responsibilities, if any, we intend
to treat (i) the Notes for U.S. federal income tax purposes as prepaid forward contracts with associated contingent coupons and
(ii) any Contingent Coupons as ordinary income, as described in the section entitled “Material U.S. Federal Income Tax Consequences—Tax
Consequences to U.S. Holders—Notes Treated as Prepaid Forward or Derivative Contracts with Associated (Contingent) Coupons”
in the accompanying prospectus supplement. Our special tax counsel, Davis Polk & Wardwell LLP, has advised that it believes
this treatment to be reasonable, but that there are other reasonable treatments that the Internal Revenue Service (the “IRS”)
or a court may adopt.
Sale, Exchange or Redemption of a Note.
Assuming the treatment
described above is respected, upon a sale or exchange of the Notes (including redemption upon an automatic call or at maturity),
you should recognize capital gain or loss equal to the difference between the amount realized on the sale or exchange and your
tax basis in the Notes, which should equal the amount you paid to acquire the Notes (assuming Contingent Coupons are properly treated
as ordinary income, consistent with the position referred to above). This gain or loss should be short-term capital gain or loss
unless you hold the Notes for more than one year, in which case the gain or loss should be long-term capital gain or loss, whether
or not you are an initial purchaser of the Notes at the issue price. The deductibility of capital losses is subject to limitations.
If you sell your Notes between the time your right to a Contingent Coupon is fixed and the time it is paid, it is likely that you
will be treated as receiving ordinary income equal to the Contingent Coupon. Although uncertain, it is possible that proceeds received
from the sale or exchange of your Notes prior to an Observation Date but that can be attributed to an expected Contingent Coupon
payment could be treated as ordinary income. You should consult your tax advisor regarding this issue.
As noted above, there are other reasonable treatments that the
IRS or a court may adopt, in which case the timing and character of any income or loss on the Notes could be materially affected.
In addition, in 2007 the U.S. Treasury Department and the IRS released a notice requesting comments on the U.S. federal income
tax treatment of “prepaid forward contracts” and similar instruments. The notice focuses in particular on whether to
require investors in these instruments to accrue income over the term of their investment. It also asks for comments on a number
of related topics, including the character of income or loss with respect to these instruments and the relevance of factors such
as the nature of the underlying property to which the instruments are linked. While the notice requests comments on appropriate
transition rules and effective dates, any Treasury regulations or other guidance promulgated after consideration of these issues
could materially affect the tax consequences of an investment in the Notes, possibly with retroactive effect. You should consult
your tax advisor regarding the U.S. federal income tax consequences of an investment in the Notes, including possible alternative
treatments and the issues presented by this notice.
Non-U.S. Holders.
Insofar as we have responsibility as
a withholding agent, we do not currently intend to treat Contingent Coupon payments to non-U.S. holders (as defined in the accompanying
prospectus supplement) as subject to U.S. withholding tax. However, non-U.S. holders should in any event expect to be required
to provide appropriate Forms W-8 or other documentation in order to establish an exemption from backup withholding, as described
under the heading “—Information Reporting and Backup Withholding” in the accompanying prospectus supplement.
If any withholding is required, we will not be required to pay any additional amounts with respect to amounts withheld.
Treasury regulations under Section 871(m) imposing a withholding
tax on certain “dividend equivalents” under certain “equity linked instruments” exclude from their scope
instruments issued in 2017 that do not have a “delta of one” with respect to underlying securities that could pay U.S.-source
dividends for U.S. federal income tax purposes (each an “Underlying Security”). Based on our determination that the
Notes do not have a “delta of one” within the meaning of the regulations, we expect that these regulations should not
apply to the Notes with regard to non-U.S. holders. Our determination is not binding on the IRS, and the IRS may disagree with
this determination. Section 871(m) is complex and its application may depend on your particular circumstances, including whether
you enter into other transactions with respect to an Underlying Security. If necessary, further information regarding the potential
application of Section 871(m) will be provided in the pricing supplement for the Notes. You should consult your tax advisor regarding
the potential application of Section 871(m) to the Notes.
The Russell 2000
®
Index (the “RTY Index”)
is calculated, maintained and published by FTSE Russell. The RTY Index measures the capitalization-weighted price performance of
2,000 small-capitalization stocks and is designed to track the performance of the small capitalization segment of the U.S. equity
market. For more information about the RTY Index, see “Indices—The Russell Indices” in the accompanying index
supplement, as supplemented by the following updated information. As of August 2017, to be eligible for inclusion in the RTY Index,
each company is required to have more than 5% of its voting rights (aggregated across all of its equity securities) in the hands
of unrestricted shareholders. Companies already included in the RTY Index have a 5 year grandfathering period to comply or they
will be removed from the RTY Index in September 2022.
Historical Information
The following graph sets forth the historical performance of
the RTY Index from January 2, 2008 through October 17, 2017, based on the daily Closing Levels of the RTY Index. The Closing Level
of the RTY Index on October 17, 2017 was 1,497.499. The dotted line represents a hypothetical Coupon Barrier and a hypothetical
Downside Threshold of 1,048.249, which is equal to 70.00% of the Closing Level of the RTY Index on October 17, 2017. The actual
Coupon Barrier and Downside Threshold for the RTY Index will be determined on the Trade Date and will be based on the Initial Underlying
Level of the RTY Index.
We obtained the Closing Levels of the RTY Index from Bloomberg
Professional
®
service (“Bloomberg”), without independent verification. Currently, whereas the RTY Index
sponsor publishes the official Closing Level of the RTY Index to six decimal places, Bloomberg reports the Closing Level to fewer
decimal places. As a result, the Closing Level of the RTY Index reported by Bloomberg may be lower or higher than the official
Closing Level of the RTY Index published by the RTY Index sponsor. Historical performance of the RTY Index should not be taken
as an indication of future performance. Future performance of the RTY Index may differ significantly from historical performance,
and no assurance can be given as to the Closing Level of the RTY Index during the term of the Notes, including on any Observation
Date. We cannot give you assurance that the performance of the RTY Index will result in the return of any of your principal amount.
PAST PERFORMANCE IS NOT INDICATIVE
OF FUTURE RESULTS.
The S&P 500
®
Index (the “SPX Index”)
consists of stocks of 500 companies selected to provide a performance benchmark for the U.S. equity markets. For more information
about the SPX Index, see “Indices—The S&P U.S. Indices” in the accompanying index supplement, as supplemented
by the following updated information. Beginning in June 2016 (or July 2017, in the case of IEX), U.S. common equities listed on
Bats BZX, Bats BYX, Bats EDGA, Bats EDGX or IEX were added to the universe of securities that are eligible for inclusion in the
SPX Index and, effective March 10, 2017, the minimum unadjusted company market capitalization for potential additions to the SPX
Index was increased to $6.1 billion from $5.3 billion. In addition, as of July 31, 2017, the securities of companies with multiple
share class structures are no longer eligible to be added to the SPX Index, but securities already included in the SPX Index have
been grandfathered and are not affected by this change.
Historical Information
The following graph sets forth the historical performance of
the SPX Index from January 2, 2008 through October 17, 2017, based on the daily Closing Levels of the SPX Index. The Closing Level
of the SPX Index on October 17, 2017 was 2,559.36. The dotted line represents a hypothetical Coupon Barrier and a hypothetical
Downside Threshold of 1,791.55, which is equal to 70.00% of the Closing Level of the SPX Index on October 17, 2017. The actual
Coupon Barrier and Downside Threshold for the SPX Index will be determined on the Trade Date and will be based on the Initial Underlying
Level of the SPX Index.
We obtained the Closing Levels of the SPX Index from Bloomberg,
without independent verification. Historical performance of the SPX Index should not be taken as an indication of future performance.
Future performance of the SPX Index may differ significantly from historical performance, and no assurance can be given as to the
Closing Level of the SPX Index during the term of the Notes, including on any Observation Date. We cannot give you assurance that
the performance of the SPX Index will result in the return of any of your principal amount.
PAST PERFORMANCE IS NOT INDICATIVE
OF FUTURE RESULTS.
Correlation of the Underlyings
|
The following graph sets forth the historical performances of
the Russell 2000
®
Index and the S&P 500
®
Index from January 2, 2008 through October 17, 2017,
based on the daily Closing Levels of the Underlyings. For comparison purposes, each Underlying has been normalized to have a Closing
Level of 100.00 on January 2, 2008 by dividing the Closing Level of that Underlying on each day by the Closing Level of that Underlying
on January 2, 2008 and multiplying by 100.00.
We obtained the Closing Levels used to determine the normalized
Closing Levels set forth below from Bloomberg, without independent verification. Historical performance of the Underlyings should
not be taken as an indication of future performance. Future performance of the Underlyings may differ significantly from historical
performance, and no assurance can be given as to the Closing Levels of the Underlyings during the term of the Notes, including
on any Observation Date. We cannot give you assurance that the performances of the Underlyings will result in the return of any
of your principal amount.
PAST PERFORMANCE AND CORRELATION OF
THE UNDERLYINGS ARE NOT INDICATIVE OF FUTURE PERFORMANCE OR CORRELATION.
The correlation of a pair of Underlyings represents a statistical
measurement of the degree to which the returns of those Underlyings were similar to each other over a given period in terms of
timing and direction. The correlation between a pair of Underlyings is scaled from 1.0 to -1.0, with 1.0 indicating perfect positive
correlation (i.e., the value of both Underlyings are increasing together or decreasing together and the ratio of their returns
has been constant), 0 indicating no correlation (i.e., there is no statistical relationship between the returns of that pair of
Underlyings) and -1.0 indicating perfect negative correlation (i.e., as the value of one Underlying increases, the value of the
other Underlying decreases and the ratio of their returns has been constant).
The closer the relationship of the returns of a pair of Underlyings
over a given period, the more positively correlated those Underlyings are. The graph above illustrates the historical performance
of each Underlying relative to each other over the time period shown and provides an indication of how close the relative performance
of each Underlying has historically been to the other Underlying. However, the graph does not provide a precise measurement of
the correlation of the Underlyings. Moreover, any historical correlation of the Underlyings is not indicative of the degree of
correlation of the Underlyings, if any, that will be experienced over the term of the Notes.
The lower (or more negative) the correlation between the Underlyings,
the less likely it is that the Underlyings will move in the same direction at the same time and, therefore, the greater the potential
for one of the Underlyings to close below its Coupon Barrier or Downside Threshold on any Observation Date or the Final Valuation
Date, respectively. This is because the less positively correlated the Underlyings are, the greater the likelihood that at least
one of the Underlyings will decrease in value. However, even if the Underlyings have a higher positive correlation, one or both
of the Underlyings might close below its Coupon Barrier or Downside Threshold on any Observation Date or the Final Valuation Date,
respectively, as both of the Underlyings may decrease in value together.
Although the correlation of the Underlyings’ performance
may change over the term of the Notes, the Contingent Coupon Rate is determined, in part, based on the correlation of the Underlyings’
performance calculated using our internal models at the time when the terms of the Notes are finalized. A higher Contingent Coupon
Rate is generally associated with lower correlation of the Underlyings, which reflects a greater potential for missed Contingent
Coupons and for a loss of principal at maturity. The correlation referenced in setting the terms of the Notes is calculated using
our internal models and is not derived from the returns of the Underlyings over the period set forth above. In addition, other
factors and inputs other than correlation may impact how the terms of the Notes are set and the performance of the Notes.