FWP 1 v064907_fwp.htm
HSBC USA INC.
Reverse Convertible Notes
Filed Pursuant to Rule 433
Registration No. 333-133007
February 7, 2007
 
FREE WRITING PROSPECTUS
(To the Prospectus dated April 5, 2006,
Prospectus Supplement dated July 3, 2006 and the
Product Supplement dated July 31, 2006)
 
Terms used in this free writing prospectus are described or defined in the product supplement, prospectus supplement and prospectus. The notes offered will have the terms described in the product supplement, prospectus supplement and the prospectus. The notes are not principal protected, and you may lose some or all of your principal.
 
This free writing prospectus relates to seven separate note offerings; each reference asset identified below represents a separate note offering. The purchaser of a note will acquire a security linked to a single reference asset (not a basket or index of reference assets). Although each offering relates to a reference asset, you should not construe that fact as a recommendation as to the merits of acquiring an investment linked to that reference asset or as to the suitability of an investment in the related notes. The following key terms relate to each separate notes offering:
 
·     Offering Period End Date: [February 23, 2007 at 2:00 pm, New York City time]
·     Initial Public Offering Price: 100 per cent
·     Initial Valuation Date: February 23, 2007
·     Issue Date: February 28, 2007
·     Maturity Date: 3 business days after the final valuation date
  
·     Interest Payment Dates: Each monthly anniversary of the issue date (or if that day is not a business day, the following business day), commencing on March 28, 2007 and ending on the maturity date.
·     Initial Price: Market price of the reference asset on the initial valuation date
·     Barrier Price: The product of the barrier level multiplied by the initial price
·     Listing: The notes will not be listed on any U.S. securities exchange or quotation system
                   
Reference Asset/ Reference Issuer (TICKER)
Page Number
Interest Rate (per Annum)
Barrier Level
Barrier Price
Principal Amount
Agent’s Discount or Commission Per Note /
Total (1)
Proceeds to Us Per Note / Total
CUSIP / ISIN
Final valuation date
OMNIVISION TECHNOLOGIES, INC. (OVTI)
FWP-5
22.60%
75%
TBD
TBD
TBD
TBD
40428HHD7 / US40428HHD70
August 23, 2007
RAMBUS INC. (RMBS)
FWP-6
20.50%
70%
TBD
TBD
TBD
TBD
40428HHE5 / US40428HHE53
May 23, 2007
JDS UNIPHASE CORPORATION (JDSU)
FWP-7
13.00%
80%
TBD
TBD
TBD
TBD
40428HHF2 / US40428HHF29
May 23, 2007
United States Steel Corporation (X)
FWP-8
11.75%
80%
TBD
TBD
TBD
TBD
40428HHG0 / US40428HHG02
February 25, 2008
CONSOL ENERGY INC. (CNX)
FWP-9
10.00%
75%
TBD
TBD
TBD
TBD
40428HHH8 / US40428HHH84
February 25, 2008
LG.Philips LCD Co., Ltd. - ADS (LPL)
FWP-10
9.00%
80%
TBD
TBD
TBD
TBD
40428HHJ4 / US40428HHJ41
August 23, 2007
CISCO SYSTEMS, INC. (CSCO)
FWP-11
8.40%
85%
TBD
TBD
TBD
TBD
40428HHK1 / US40428HHK14
February 25, 2008
 
(1) Agent's discount may vary but will be no more than the amount listed in “Agent's Discount or Commission per Note / Total,” above.
 
See “Risk Factors” in this free writing prospectus beginning on page FWP-2, in the product supplement beginning on page PS-3 and in the prospectus supplement beginning on page S-3 for a description of risks relating to an investment in the notes.
 
Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these notes or determined that this free writing prospectus is truthful or complete. Any representation to the contrary is a criminal offense.
 
The notes are not deposit liabilities of a bank and are not insured by the Federal Deposit Insurance Corporation or any other governmental agency of the United States or any other jurisdiction.

HSBC SECURITIES (USA) INC.
February 7, 2007

GENERAL TERMS
 
This free writing prospectus relates to seven separate note offerings; each reference asset identified on the cover page represents a separate note offering. The purchaser of a note will acquire a security linked to a single reference asset (not to a basket or index of reference assets). You may participate in any one of the notes offerings or, at your election, in more than one. We reserve the right to withdraw, cancel or modify any offering and to reject orders in whole or in part. Although each note offering relates only to a single reference asset identified on the cover page, you should not construe that fact as a recommendation of the merits of acquiring an investment linked to any of those reference assets or as to the suitability of an investment in the notes.
 
You should read this document together with the prospectus dated April 5, 2006, the prospectus supplement dated July 3, 2006 and the product supplement dated July 31, 2006. You should carefully consider, among other things, the matters set forth in ”Risk Factors” beginning on page FWP-2 of this document, PS-3 of the product supplement and page S-3 of the prospectus supplement, as the notes involve risks not associated with conventional debt securities. We urge you to consult your investment, legal, tax, accounting and other advisers before you invest in the notes.
 
HSBC USA Inc. has filed a registration statement (including a prospectus, prospectus supplement and product supplement) with the U.S. Securities and Exchange Commission (“SEC”) for the offering to which this free writing prospectus relates. Before you invest, you should read the prospectus, prospectus supplement and product supplement in that registration statement and other documents HSBC USA Inc. has filed with the SEC for more complete information about HSBC USA Inc. and this offering. You may get these documents for free by visiting EDGAR on the SEC Web site at www.sec.gov. Alternatively, HSBC USA Inc., the agent or any dealer participating in this offering will arrange to send you the prospectus, prospectus supplement and product supplement if you request them by calling toll-free 1 888 800 4722.
 
You may also obtain:
 
 
 
 
RISK FACTORS
 
The following highlights some, but not all, of the risk considerations relevant to investing in a note. Investing in the notes is not equivalent to investing directly in the reference assets. We urge you to read the section “Risk Factors” beginning on page PS-3 of the product supplement and page S-3 of the prospectus supplement. As you review ”Risk Factors” in the prospectus supplement, you should pay particular attention to the following sections:
 
·
“— Risks Relating to All Note Issuances”
 
·
"— Additional Risks Relating to Notes with an Equity Security or Equity Index as the Reference Asset"
 
1.
The notes are not principal protected and you may lose some or all of your principal.
 
The principal amount of your investment is not protected and you may receive less, and possibly significantly less, than the amount you invested. You will lose some or all of your principal if both of the following are true: (a) between the initial valuation date and the final valuation date, inclusive, the market price (as defined below) of the reference asset on any day is below the barrier price and (b) the final price of the reference asset is lower than the initial price of the reference asset. A USD1,000 investment in the notes will pay USD1,000 at maturity if, and only if, either of the following is true: (a) between the initial valuation date and the final valuation date, inclusive, the market price of the reference asset falls below the barrier price on any day, but the final price of the reference asset is equal to or greater than the initial price of the reference asset or (b) between the initial valuation date and the final valuation date, inclusive, the market price of the reference asset never falls below the barrier price on any day. If you receive the physical delivery amount at maturity, the market value of the shares of the reference asset you receive will be less than the principal amount of your notes and may be zero. Accordingly, you may lose the entire principal amount of your notes.
 
We cannot predict the final price of any reference asset on the final valuation date.
 
2.
You will not participate in any appreciation in the value of the reference asset.
 
You will not participate in any appreciation in the value of the reference asset. If the final price of the reference asset is greater than the initial price of the reference asset, the sum of any interest payments you receive during the term of the notes and the principal payment you receive at maturity will not reflect the performance of the reference asset. Under no circumstances, regardless of the extent to which the value of the reference asset appreciates, will your return exceed the applicable interest rate. Therefore, you may earn significantly less by investing in the notes than you would have earned by investing directly in the reference asset.
 
3.
Because the tax treatment of the notes is uncertain, the material U.S. federal income tax consequences of an investment in the notes are uncertain.
 
There is no direct legal authority as to the proper tax treatment of the notes, and therefore significant aspects of the tax treatment of the notes are uncertain, as to both the timing and character of any inclusion in income in respect of your note. Because of this uncertainty, we urge you to consult your tax advisor as to the tax consequences of your investment in a note. For a more complete discussion of the U.S. federal income tax consequences of your investment in a note, please see the discussion under “Certain U.S. Federal Income Tax Considerations” beginning on page FWP-3 of this free writing prospectus and “Certain U.S. Federal Income Tax Considerations - Certain Equity-Linked Notes - Certain Notes Treated as a Put Option and a Deposit” in the prospectus supplement.
 
Please note that the prospectus, prospectus supplement, product supplement and this free writing prospectus do not describe all the risks of an investment in the notes. We urge you to consult your own financial and legal advisors as to the risks entailed by an investment in the notes.
FWP-2
 
SUMMARY
 
Principal Payment at Maturity
 
Your payment at maturity for each note you hold will depend on the performance of the reference asset between the initial valuation date and the final valuation date, inclusive. A USD1,000 investment in the notes will pay USD1,000 at maturity unless: (a) the final price of the reference asset is lower than the initial price of the reference asset and (b) between the initial valuation date and the final valuation date, inclusive, the market price of the reference asset on any day is below the barrier price. If the conditions described in (a) and (b) are both true, at maturity you will receive the physical delivery amount (with any fractional shares to be paid in cash in an amount equal to the fractional shares multiplied by the final price). Under some circumstances to be determined by and at the sole option of HSBC USA Inc., we may pay investors, in lieu of the physical delivery amount, the cash equivalent of such shares with a per share price equal to the final price. However, we currently expect to deliver the physical delivery amount and not cash in lieu of the physical delivery amount in the event the conditions described above occur.
 
As described in the product supplement, on any scheduled trading day on which the value of the reference asset must be calculated by the calculation agent, (i) if the relevant exchange is the NASDAQ Stock Market (“NASDAQ”), the market price of the reference asset will be the NASDAQ official closing price (NOCP) or (ii) if the NASDAQ is not the relevant exchange, the market price of the reference asset will be the official closing price of the relevant exchange, in each case as of the close of the regular trading session of such exchange and as reported in the official price determination mechanism for such exchange. If the reference asset is not listed or traded as described above for any reason other than a market disruption event, then the market price for the reference asset on any scheduled trading day will be the average, as determined by the calculation agent, of the bid prices for the reference asset obtained from as many dealers in the reference asset selected by the calculation agent as will make those bid prices available to the calculation agent. The number of dealers need not exceed three and may include the calculation agent or any of its or our affiliates.
 
To the extent a market disruption event exists on a day on which the final price is to be determined, the market price of the reference asset will be determined on the first following scheduled trading day on which a market disruption event does not exist with respect to the reference asset; provided that if a market disruption event exists on five consecutive scheduled trading days, that fifth scheduled trading day shall be the final valuation date, and the calculation agent shall determine the final price on such date.
 
In the event that the maturity date is postponed or extended as described under ”Specific Terms of the Notes - Maturity Date” in the product supplement, the related payment of principal will be made on the postponed or extended maturity date.
 
You may lose some or all of your principal if you invest in the notes.
 
Physical Delivery Amount
 
If the payment at maturity is in physical shares of the reference asset, you will receive a number of shares referred to as the ”physical delivery amount” (with any fractional shares to be paid in cash). The physical delivery amount will be calculated by the calculation agent by dividing the principal amount of your notes by the initial price of the reference asset. The physical delivery amount, the initial price of the reference asset and other amounts may change due to corporate actions.
 
Interest
 
The notes will pay interest at the interest rate specified on the front cover of this free writing prospectus, and interest payments will be made on the interest payment dates specified on the front cover of this free writing prospectus. However, if the first interest payment date is less than 15 days after the date of issuance, interest will not be paid on the first interest payment date, but will be paid on the second interest payment date. Interest will be computed on the basis of a 360-day year of twelve 30-day months. For more information, see ”Description of the Notes - Fixed Rate Notes” in the prospectus supplement.
 
CERTAIN U.S. FEDERAL INCOME TAX CONSIDERATIONS
 
You should carefully consider, among other things, the matters set forth in “Certain U.S. Federal Income Tax Considerations” in the prospectus supplement. In the opinion of Cadwalader, Wickersham & Taft LLP, special U.S. tax counsel to us, the following discussion summarizes certain of the material U.S. federal income tax consequences of the purchase, beneficial ownership, and disposition of each of the notes.
 
There are no regulations, published rulings or judicial decisions addressing the characterization for U.S. federal income tax purposes of securities with terms that are substantially the same as those of the notes. Under one approach, each note should be treated for federal income tax purposes as a put option written by you (the “Put Option”) that permits us to (1) sell the reference asset to you at the maturity date for an amount equal to the Deposit (as defined below), or (2) “cash settle” the Put Option (i.e., require you to pay us at the maturity date the difference between the Deposit and the value of the reference asset at such time), and a deposit with us of cash in an amount equal to the principal amount you invested (the “Deposit”) to secure your potential obligation under the Put Option. We intend to treat the notes consistent with this approach. Pursuant to the terms of the notes, you agree to treat the notes as cash deposits and put options with respect to the reference asset for all U.S. federal income tax purposes. We also intend to treat the Deposits as “short-term obligations” for U.S. federal income tax purposes. Please see the discussion under the heading “Certain U.S. Federal Income Tax Considerations — U.S. Federal Income Tax Treatment of the Notes as Indebtedness for U.S. Federal Income Tax Purposes-Short-Term Debt Instruments” in the prospectus supplement for certain U.S. federal income tax considerations applicable to short-term obligations. However, because under certain circumstances Notes with an initial maturity of one year may be outstanding for more than one year, it is possible that the Deposits associated with these Notes may not be treated as short-term obligations. In that event, Notes with an initial maturity of one year would be described in “Certain U.S. Federal Income Tax Considerations - U.S. Federal Income Tax Treatment of the Notes as Indebtedness for U.S. Federal Income Tax Purposes - Payments of Interest” in the prospectus supplement.
 
The description below of each reference asset includes a chart that indicates the yield on the Deposit and the Put Premium, as described in the prospectus supplement under the heading “Certain U.S. Federal Income Tax Considerations — Certain Equity-Linked Notes— Certain Notes Treated as a Put Option and a Deposit.” If the Internal Revenue Service (the “IRS”) were successful in asserting an alternative characterization for the notes, the timing and character of income on the notes might differ. We do not plan to request a ruling from the IRS regarding the tax treatment of the notes, and the IRS or a court may not agree with the tax treatment described in this free writing prospectus.

FWP-3
 
REFERENCE ISSUER AND REFERENCE ASSET INFORMATION
 
All information on the reference assets and the reference issuers is derived from publicly available information. Companies with securities registered under the Securities Exchange Act of 1934 (the ”Exchange Act”) are required to file periodically certain financial and other information specified by the SEC. Information provided to or filed with the SEC electronically can be accessed through a website maintained by the SEC. The address of the SEC’s website is http://www.sec.gov. Information provided to or filed with the SEC pursuant to the Exchange Act by a company issuing a reference asset can be located by reference to the SEC file number specified in the description of the relevant reference asset below. We make no representation that these publicly available documents are accurate or complete. For more information, we urge you to read the section ”Information Regarding the Reference Asset and the Reference Asset Issuer” in the product supplement.
 
Historical Performance of the Reference Assets
 
The description below of each reference asset includes a table that sets forth (to the extent available) the quarterly high and low intraday prices, as well as end-of-quarter closing prices, of that reference asset for each quarter in the period from January 1, 2002 through December 29, 2006 and for the period from January 3, 2007 through February 6, 2007. We obtained the data in these tables from Bloomberg Financial Service, without independent verification by us. All historical prices are denominated in USD and rounded to the nearest penny. Historical prices of the reference assets should not be taken as an indication of future performance of the reference assets.
 
HYPOTHETICAL EXAMPLES
The description below of each reference asset includes a table of hypothetical returns that is based on the assumptions outlined for each reference asset. Each table illustrates the hypothetical returns you would have earned from (i) a USD1,000 investment in the notes compared to (ii) a direct investment in the relevant reference asset (prior to the deduction of any applicable brokerage fees or charges). The following is a general description of how the hypothetical returns in each table were determined:
 
· If the final price of the reference asset is greater than or equal to the initial price of the reference asset, you would receive USD1,000 at maturity, regardless of whether the market price of the reference asset on any day was below the barrier price;
· If the final price of the reference asset is lower than the initial price of the reference asset but the market price of the reference asset was not below the barrier price on any day between the initial valuation date and the final valuation date, inclusive, you would receive USD1,000 at maturity; or
· If the final price of the reference asset is lower than the initial price of the reference asset and the market price of the reference asset was below the barrier price on any day between the initial valuation date and the final valuation date, inclusive, you would receive the physical delivery amount (with any fractional shares to be paid in cash).
 
Each table of hypothetical returns is provided for illustration purposes only and is hypothetical. None purports to be representative of every possible scenario concerning increases or decreases in the price of the reference asset and the payment at maturity of the notes. We cannot predict the final price of the reference assets on the final valuation date. The assumptions we have made in connection with the illustrations set forth below may not reflect actual events. In addition, the examples assume that the reference asset has no dividend yield. You should not take these examples as an indication or assurance of the expected performance of the reference asset.
 

FWP-4

OMNIVISION TECHNOLOGIES, INC. (OVTI)
 
Description of OMNIVISION TECHNOLOGIES, INC.
 
According to publicly available information, OMNIVISION TECHNOLOGIES, INC. (“OmniVision”) engages in the design, development, and marketing of semiconductor image sensor devices. OmniVision’s image-sensing devices, referred under the name CameraChips, are used to capture an image and used in various commercial and consumer mass-market applications. The CameraChips are used in various consumer applications, such as camera cell phones, digital still and video cameras, personal computer camera applications, and interactive video and digital toy cameras. In addition, CameraChips are integrated into security and surveillance products and analog toy cameras, automotive products, and medical imaging devices. Further, OmniVision designs and develops software drivers for various computer operating systems, as well as embedded operating systems. OmniVision sells its products directly to original equipment manufacturers and value added resellers, and indirectly through distributors.
 
Omnivision’s SEC file number is 000-29939.
 
Historical Performance of Omnivision
 
QUARTER ENDING
QUARTER HIGH
QUARTER LOW
QUARTER CLOSE
March 29, 2002
6.23
2.96
5.52
June 28, 2002
7.35
4.75
7.12
September 30, 2002
7.30
2.96
3.30
December 31, 2002
9.77
2.70
6.79
March 31, 2003
12.32
6.33
10.36
June 30, 2003
18.74
10.37
15.57
September 30, 2003
25.74
15.26
21.11
December 31, 2003
33.83
20.94
27.63
March 31, 2004
33.46
22.24
27.31
June 30, 2004
29.65
14.78
15.95
September 30, 2004
16.00
8.96
14.15
December 31, 2004
20.34
13.75
18.35
March 31, 2005
20.91
15.06
15.15
June 30, 2005
16.65
13.00
13.59
September 30, 2005
15.53
11.94
12.62
December 30, 2005
22.49
11.74
19.96
March 31, 2006
30.98
20.19
30.20
June 30, 2006
34.49
19.86
21.12
September 29, 2006
21.50
13.85
14.27
December 29, 2006
18.90
13.45
13.65
January 3, 2007 to February 6, 2007
13.77
11.00
11.95
 
Deposit and Put Premium
 
As described in the prospectus supplement under ”Certain U.S. Federal Income Tax Considerations - Certain Notes Treated as a Put Option and a Deposit,“ for purposes of dividing the 22.60 per cent per annum interest rate on the notes among interest on the Deposit and Put Premium, [●] per cent constitutes interest on the Deposit and [●] per cent constitutes Put Premium.
 
Hypothetical Examples
 
The table below demonstrates hypothetical returns at maturity based on the assumptions outlined below. See “- Hypothetical Examples” above for more information.
 
Reference Asset:
Omnivision
Initial Price:
USD[●]
Barrier Price:
USD[●]
Interest Rate:
22.60 per cent per annum
Physical Delivery Amount:
[●] shares (fractional shares paid in cash)
Term of Notes:
6 months
Reinvestment Rate for Note Interest:
0 per cent
 
Table of Hypothetical Returns
 
FINAL PRICE
(% CHANGE)
INVESTMENT IN THE NOTES
INVESTMENT IN THE REFERENCE ASSET
+
100%
11.30%
100.00%
+
90%
11.30%
90.00%
+
80%
11.30%
80.00%
+
70%
11.30%
70.00%
+
60%
11.30%
60.00%
+
50%
11.30%
50.00%
+
40%
11.30%
40.00%
+
30%
11.30%
30.00%
+
20%
11.30%
20.00%
+
10%
11.30%
10.00%
 
0%
11.30%
0.00%
   
Barrier Price Ever Breached?
  
   
YES
NO
  
-
10%
1.30%
11.30%
-10.00%
-
20%
-8.70%
11.30%
-20.00%
-
30%
-18.70%
N/A
-30.00%
-
40%
-28.70%
N/A
-40.00%
-
50%
-38.70%
N/A
-50.00%
-
60%
-48.70%
N/A
-60.00%
-
70%
-58.70%
N/A
-70.00%
-
80%
-68.70%
N/A
-80.00%
-
90%
-78.70%
N/A
-90.00%
-
100%
-88.70%
N/A
-100.00%
 
FWP-5
 
RAMBUS INC. (RMBS)
 
Description of RAMBUS INC.
 
According to publicly available information, RAMBUS INC. (“Rambus”) engages in the invention and license of chip interface technologies in California. Rambus’ memory interface products include DDR interface solution, which provides a comprehensive suite of interface cells and services; RDRAM memory interface, which enables exceptional system bandwidth-to-cost ratios for a broad range of consumer electronic, networking, and computing applications; and XDR DRAM technology, a total memory system solution, which is used for graphics processing, consumer electronics, network, and server applications. Rambus’ logic interfaces products include PCI express interface products, which support applications in computing, communications, and consumer electronics systems, including graphics, core electronics chip sets, switch, and bridge chips; high-speed input/output interfaces; networking interfaces; and interface solutions for high speed backplane application. Rambus’ licensed products are used in a range of computing, consumer electronics, and communications applications.
 
Rambus’s SEC file number is 000-22339.
 
Historical Performance of Rambus
 
QUARTER ENDING
QUARTER HIGH
QUARTER LOW
QUARTER CLOSE
March 29, 2002
9.58
5.35
7.79
June 28, 2002
8.10
3.08
4.09
September 30, 2002
6.75
3.75
4.34
December 31, 2002
9.75
3.90
6.71
March 31, 2003
16.97
6.75
13.21
June 30, 2003
20.17
12.78
16.52
September 30, 2003
21.00
15.20
16.84
December 31, 2003
32.65
16.60
30.70
March 31, 2004
36.56
23.59
28.02
June 30, 2004
29.69
15.55
17.73
September 30, 2004
18.25
12.34
15.69
December 31, 2004
27.85
14.87
23.00
March 31, 2005
23.79
12.95
15.07
June 30, 2005
16.14
13.16
13.38
September 30, 2005
14.65
10.22
12.10
December 30, 2005
18.00
10.75
16.19
March 31, 2006
40.22
17.50
39.34
June 30, 2006
46.99
19.79
22.81
September 29, 2006
25.38
10.25
17.44
December 29, 2006
23.83
15.87
18.93
January 3, 2007 to February 6, 2007
23.55
17.31
22.30
 
Deposit and Put Premium
 
As described in the prospectus supplement under ”Certain U.S. Federal Income Tax Considerations - Certain Notes Treated as a Put Option and a Deposit,“ for purposes of dividing the 20.50 per cent per annum interest rate on the notes among interest on the Deposit and Put Premium, [●] per cent constitutes interest on the Deposit and [●] per cent constitutes Put Premium.
 
Hypothetical Examples
 
The table below demonstrates hypothetical returns at maturity based on the assumptions outlined below. See “- Hypothetical Examples” above for more information.
 
Reference Asset:
Rambus
Initial Price:
USD[●]
Barrier Price:
USD[●]
Interest Rate:
20.50 per cent per annum
Physical Delivery Amount:
[●] shares (fractional shares paid in cash)
Term of Notes:
3 months
Reinvestment Rate for Note Interest:
0 per cent
 
Table of Hypothetical Returns
 
FINAL PRICE
(% CHANGE)
INVESTMENT IN THE NOTES
INVESTMENT IN THE REFERENCE ASSET
+
100%
5.125%
100.00%
+
90%
5.125%
90.00%
+
80%
5.125%
80.00%
+
70%
5.125%
70.00%
+
60%
5.125%
60.00%
+
50%
5.125%
50.00%
+
40%
5.125%
40.00%
+
30%
5.125%
30.00%
+
20%
5.125%
20.00%
+
10%
5.125%
10.00%
 
0%
5.125%
0.00%
   
Barrier Price Ever Breached?
  
   
YES
NO
  
-
10%
-4.875%
5.125%
-10.00%
-
20%
-14.875%
5.125%
-20.00%
-
30%
-24.875%
5.125%
-30.00%
-
40%
-34.875%
N/A
-40.00%
-
50%
-44.875%
N/A
-50.00%
-
60%
-54.875%
N/A
-60.00%
-
70%
-64.875%
N/A
-70.00%
-
80%
-74.875%
N/A
-80.00%
-
90%
-84.875%
N/A
-90.00%
-
100%
-94.875%
N/A
-100.00%
 
FWP-6
 
JDS UNIPHASE CORPORATION (JDSU)
 
Description of JDS UNIPHASE CORPORATION
 
According to publicly available information, JDS UNIPHASE CORPORATION (“JDSU”) provides communications test and measurement solutions, and optical products. JDSU operates in three segments: Optical Communications, Communications Test and Measurement, and Advanced Optical Technologies. The Optical Communications segment provides components, modules, and subsystems used by communications equipment providers for telecommunications, data communications, and cable television networks. Its products include transmitters, receivers, amplifiers, multiplexers and demultiplexers, add/drop modules, switches, optical performance monitors and couplers. The Communications Test and Measurement segment provides a portfolio of equipment, systems, and services used to enable the design, deployment, and maintenance of communication equipment and networks. The Advanced Optical Technologies segment provides coated optics document authentication, brand protection, and product differentiation solutions for a range of public and private sector markets. Its specific product applications include computer monitors and flat panel displays, projection systems, photocopiers, facsimile machines, scanners, security products, and decorative surface treatments.
 
JDSU’s SEC file number is 000-22874.
 
Historical Performance of JDSU
 
QUARTER ENDING
QUARTER HIGH
QUARTER LOW
QUARTER CLOSE
March 29, 2002
82.72
37.92
47.12
June 28, 2002
49.60
17.92
21.36
September 30, 2002
32.56
14.56
15.58
December 31, 2002
28.82
12.64
19.76
March 31, 2003
28.16
19.84
22.80
June 30, 2003
37.68
22.70
27.98
September 30, 2003
35.20
20.80
28.80
December 31, 2003
32.56
24.48
29.12
March 31, 2004
47.08
29.36
32.56
June 30, 2004
36.24
23.52
30.32
September 30, 2004
30.40
22.72
26.96
December 31, 2004
28.69
23.76
25.36
March 31, 2005
26.08
12.48
13.36
June 30, 2005
13.92
10.56
12.16
September 30, 2005
17.84
11.68
17.76
December 30, 2005
22.40
13.92
18.88
March 31, 2006
34.40
18.54
33.36
June 30, 2006
33.44
18.08
20.24
September 29, 2006
21.60
16.00
17.52
December 29, 2006
19.66
13.93
16.66
January 3, 2007 to February 6, 2007
17.99
15.69
16.26
 
Deposit and Put Premium
 
As described in the prospectus supplement under ”Certain U.S. Federal Income Tax Considerations - Certain Notes Treated as a Put Option and a Deposit,“ for purposes of dividing the 13.00 per cent per annum interest rate on the notes among interest on the Deposit and Put Premium, [●] per cent constitutes interest on the Deposit and [●] per cent constitutes Put Premium.
 
Hypothetical Examples
 
The table below demonstrates hypothetical returns at maturity based on the assumptions outlined below. See “- Hypothetical Examples” above for more information.
 
Reference Asset:
JDSU
Initial Price:
USD[●]
Barrier Price:
USD[●]
Interest Rate:
13.00 per cent per annum
Physical Delivery Amount:
[●] shares (fractional shares paid in cash)
Term of Notes:
3 months
Reinvestment Rate for Note Interest:
0 per cent
 
Table of Hypothetical Returns
 
FINAL PRICE
(% CHANGE)
INVESTMENT IN THE NOTES
INVESTMENT IN THE REFERENCE ASSET
+
100%
3.25%
100.00%
+
90%
3.25%
90.00%
+
80%
3.25%
80.00%
+
70%
3.25%
70.00%
+
60%
3.25%
60.00%
+
50%
3.25%
50.00%
+
40%
3.25%
40.00%
+
30%
3.25%
30.00%
+
20%
3.25%
20.00%
+
10%
3.25%
10.00%
 
0%
3.25%
0.00%
   
Barrier Price Ever Breached?
  
   
YES
NO
  
-
10%
-6.75%
3.25%
-10.00%
-
20%
-16.75%
3.25%
-20.00%
-
30%
-26.75%
N/A
-30.00%
-
40%
-36.75%
N/A
-40.00%
-
50%
-46.75%
N/A
-50.00%
-
60%
-56.75%
N/A
-60.00%
-
70%
-66.75%
N/A
-70.00%
-
80%
-76.75%
N/A
-80.00%
-
90%
-86.75%
N/A
-90.00%
-
100%
-96.75%
N/A
-100.00%
 
FWP-7

UNITED STATES STEEL CORPORATION (X)
 
Description of United States Steel Corporation
 
According to publicly available information, United States Steel Corporation (“US Steel”) produces integrated steel products in the United States and central Europe. US Steel operates in three segments: Flat-rolled Products, U.S. Steel Europe, and Tubular Products. The Flat-rolled Products segment produces sheet, tin mill products, and strip mill plate, as well as domestic coke. This segment primarily serves customers in the service center, conversion, transportation, container, construction, and appliance markets in the United States. The U.S. Steel Europe segment produces and sells sheet, strip mill plate, tin mill, tubular, precision tube, and specialty steel products. The Tubular Products segment produces and sells seamless and electric resistance weld tubular products. US Steel also engages in the production and sale of iron ore pellets. In addition, US Steel provides rail and barge transportation services to the US Steel’s facilities, as well as customers in the steel, coal, chemicals, oil refining, and forest production industries. Further, US Steel owns and develops various real estate assets, which include approximately 200,000 acres of surface rights primarily in Alabama, Maryland, Michigan, Minnesota, and Pennsylvania.
 
US Steel’s SEC file number is 001-16811.
 
Historical Performance of US Steel
 
QUARTER ENDING
QUARTER HIGH
QUARTER LOW
QUARTER CLOSE
March 29, 2002
19.99
16.36
18.15
June 28, 2002
22.00
17.22
19.89
September 30, 2002
19.99
10.66
11.61
December 31, 2002
14.90
10.87
13.12
March 31, 2003
17.73
9.61
9.83
June 30, 2003
17.88
9.72
16.37
September 30, 2003
20.05
15.10
18.38
December 31, 2003
37.05
18.54
35.02
March 31, 2004
40.15
31.40
37.27
June 30, 2004
39.98
25.22
35.12
September 30, 2004
39.98
32.95
37.62
December 31, 2004
54.06
32.12
51.25
March 31, 2005
63.90
45.20
50.85
June 30, 2005
52.18
34.05
34.37
September 30, 2005
45.95
34.09
42.35
December 30, 2005
51.63
33.59
48.07
March 31, 2006
64.47
48.05
60.68
June 30, 2006
77.77
56.15
70.12
September 29, 2006
70.66
53.63
57.68
December 29, 2006
79.01
54.18
73.14
January 3, 2007 to February 6, 2007
87.48
68.83
87.10
 
Deposit and Put Premium
 
As described in the prospectus supplement under ”Certain U.S. Federal Income Tax Considerations - Certain Notes Treated as a Put Option and a Deposit,“ for purposes of dividing the 11.75 per cent per annum interest rate on the notes among interest on the Deposit and Put Premium, [●] per cent constitutes interest on the Deposit and [●] per cent constitutes Put Premium.
 
Hypothetical Examples
 
The table below demonstrates hypothetical returns at maturity based on the assumptions outlined below. See “- Hypothetical Examples” above for more information.
 
Reference Asset:
US Steel
Initial Price:
USD[●]
Barrier Price:
USD[●]
Interest Rate:
11.75 per cent per annum
Physical Delivery Amount:
[●] shares (fractional shares paid in cash)
Term of Notes:
1 year
Reinvestment Rate for Note Interest:
0 per cent
 
Table of Hypothetical Returns
 
FINAL PRICE
(% CHANGE)
INVESTMENT IN THE NOTES
INVESTMENT IN THE REFERENCE ASSET
+
100%
11.75%
100.00%
+
90%
11.75%
90.00%
+
80%
11.75%
80.00%
+
70%
11.75%
70.00%
+
60%
11.75%
60.00%
+
50%
11.75%
50.00%
+
40%
11.75%
40.00%
+
30%
11.75%
30.00%
+
20%
11.75%
20.00%
+
10%
11.75%
10.00%
 
0%
11.75%
0.00%
   
Barrier Price Ever Breached?
  
   
YES
NO
  
-
10%
1.75%
11.75%
-10.00%
-
20%
-8.25%
11.75%
-20.00%
-
30%
-18.25%
N/A
-30.00%
-
40%
-28.25%
N/A
-40.00%
-
50%
-38.25%
N/A
-50.00%
-
60%
-48.25%
N/A
-60.00%
-
70%
-58.25%
N/A
-70.00%
-
80%
-68.25%
N/A
-80.00%
-
90%
-78.25%
N/A
-90.00%
-
100%
-88.25%
N/A
-100.00%
 
FWP-8
 
CONSOL ENERGY INC. (CNX)
 
Description of CONSOL ENERGY INC.
 
According to publicly available information, CONSOL ENERGY INC. (“Consol”) engages in the production of multifuel energy and provision of energy services primarily to electric power generation industry in the United States. Consol is involved in the mining, preparation, and marketing of steam coal, primarily to power generators, as well as metallurgical coal to metal and coke producers. Consol also engages in the production and sale of coalbed methane gas primarily to gas wholesalers. Consol was founded in 1991 and is based in Pittsburgh, Pennsylvania
 
Consol’s SEC file number is 001-14901.
 
Historical Performance of Consol
 
QUARTER ENDING
QUARTER HIGH
QUARTER LOW
QUARTER CLOSE
March 29, 2002
13.75
10.60
13.13
June 28, 2002
14.16
10.63
10.63
September 30, 2002
10.77
4.90
6.33
December 31, 2002
8.95
5.33
8.64
March 31, 2003
9.01
7.28
8.27
June 30, 2003
12.31
7.83
11.37
September 30, 2003
11.48
9.09
9.29
December 31, 2003
13.40
9.34
12.95
March 31, 2004
15.01
10.12
13.40
June 30, 2004
18.37
12.43
18.00
September 30, 2004
19.63
14.90
17.45
December 31, 2004
21.95
16.06
20.53
March 31, 2005
24.63
18.58
23.51
June 30, 2005
27.50
20.78
26.79
September 30, 2005
38.73
26.85
38.14
December 30, 2005
39.91
26.80
32.59
March 31, 2006
37.71
30.00
37.08
June 30, 2006
49.09
35.12
46.72
September 29, 2006
48.90
28.07
31.73
December 29, 2006
38.71
28.69
32.13
January 3, 2007 to February 6, 2007
36.77
29.15
35.89
 
Deposit and Put Premium
 
As described in the prospectus supplement under ”Certain U.S. Federal Income Tax Considerations - Certain Notes Treated as a Put Option and a Deposit,“ for purposes of dividing the 10.00 per cent per annum interest rate on the notes among interest on the Deposit and Put Premium, [●] per cent constitutes interest on the Deposit and [●] per cent constitutes Put Premium.
 
Hypothetical Examples
 
The table below demonstrates hypothetical returns at maturity based on the assumptions outlined below. See “- Hypothetical Examples” above for more information.
 
Reference Asset:
Consol
Initial Price:
USD[●]
Barrier Price:
USD[●]
Interest Rate:
10.00 per cent per annum
Physical Delivery Amount:
[●] shares (fractional shares paid in cash)
Term of Notes:
1 year
Reinvestment Rate for Note Interest:
0 per cent
 
Table of Hypothetical Returns
 
FINAL PRICE
(% CHANGE)
INVESTMENT IN THE NOTES
INVESTMENT IN THE REFERENCE ASSET
+
100%
10.00%
100.00%
+
90%
10.00%
90.00%
+
80%
10.00%
80.00%
+
70%
10.00%
70.00%
+
60%
10.00%
60.00%
+
50%
10.00%
50.00%
+
40%
10.00%
40.00%
+
30%
10.00%
30.00%
+
20%
10.00%
20.00%
+
10%
10.00%
10.00%
 
0%
10.00%
0.00%
   
Barrier Price Ever Breached?
  
   
YES
NO
  
-
10%
0.00%
10.00%
-10.00%
-
20%
-10.00%
10.00%
-20.00%
-
30%
-20.00%
N/A
-30.00%
-
40%
-30.00%
N/A
-40.00%
-
50%
-40.00%
N/A
-50.00%
-
60%
-50.00%
N/A
-60.00%
-
70%
-60.00%
N/A
-70.00%
-
80%
-70.00%
N/A
-80.00%
-
90%
-80.00%
N/A
-90.00%
-
100%
-90.00%
N/A
-100.00%
 
FWP-9

LG.PHILIPS LCD CO., LTD. (LPL)
 
Description of LG.Philips LCD Co., Ltd.
 
According to publicly available information, LG.Philips LCD Co., Ltd. (“LPL”) engages in the manufacture and supply of thin film transistor liquid crystal displays (TFT-LCD) to original equipment manufacturers and multinational corporations. LPL manufactures TFT-LCD panels in various sizes and specifications primarily for use in notebook computers, desktop monitors, televisions, and industrial and other applications. LPL also manufactures its products for handheld application products, such as mobile phones and personal digital assistants, as well as for industrial and other applications, which include entertainment systems, automobile navigation systems, aircraft instrumentation, and medical diagnostic equipment. In addition, LPL supplies high-definition television panels. LPL sells its products primarily in the United States, Korea, Asia, and Europe. The American Depositary Shares of LPL started trading on the New York Stock Exchange on July 16, 2004; therefore, the historical prices of LPL commenced on and from July 16, 2004.
 
LPL’s SEC file number is 001-32238.
 
Historical Performance of LPL
 
QUARTER ENDING
QUARTER HIGH
QUARTER LOW
QUARTER CLOSE
March 29, 2002
N/A
N/A
N/A
June 28, 2002
N/A
N/A
N/A
September 30, 2002
N/A
N/A
N/A
December 31, 2002
N/A
N/A
N/A
March 31, 2003
N/A
N/A
N/A
June 30, 2003
N/A
N/A
N/A
September 30, 2003
N/A
N/A
N/A
December 31, 2003
N/A
N/A
N/A
March 31, 2004
N/A
N/A
N/A
June 30, 2004
N/A
N/A
N/A
September 30, 2004
16.02
13.55
15.15
December 31, 2004
18.56
13.22
17.99
March 31, 2005
22.13
16.75
21.55
June 30, 2005
26.60
21.11
22.86
September 30, 2005
24.81
19.84
20.56
December 30, 2005
23.01
18.01
21.46
March 31, 2006
24.49
19.46
22.70
June 30, 2006
23.54
14.83
18.12
September 29, 2006
20.05
15.95
16.59
December 29, 2006
17.09
13.73
15.07
January 3, 2007 to February 6, 2007
16.16
13.83
15.97
 
Deposit and Put Premium
 
As described in the prospectus supplement under ”Certain U.S. Federal Income Tax Considerations - Certain Notes Treated as a Put Option and a Deposit,“ for purposes of dividing the 9.00 per cent per annum interest rate on the notes among interest on the Deposit and Put Premium, [●] per cent constitutes interest on the Deposit and [●] per cent constitutes Put Premium.
 
Hypothetical Examples
 
The table below demonstrates hypothetical returns at maturity based on the assumptions outlined below. See “- Hypothetical Examples” above for more information.
 
Reference Asset:
LPL
Initial Price:
USD[●]
Barrier Price:
USD[●]
Interest Rate:
9.00 per cent per annum
Physical Delivery Amount:
[●] shares (fractional shares paid in cash)
Term of Notes:
6 months
Reinvestment Rate for Note Interest:
0 per cent
 
Table of Hypothetical Returns
 
FINAL PRICE
(% CHANGE)
INVESTMENT IN THE NOTES
INVESTMENT IN THE REFERENCE ASSET
+
100%
4.50%
100.00%
+
90%
4.50%
90.00%
+
80%
4.50%
80.00%
+
70%
4.50%
70.00%
+
60%
4.50%
60.00%
+
50%
4.50%
50.00%
+
40%
4.50%
40.00%
+
30%
4.50%
30.00%
+
20%
4.50%
20.00%
+
10%
4.50%
10.00%
 
0%
4.50%
0.00%
   
Barrier Price Ever Breached?
  
   
YES
NO
  
-
10%
-5.50%
4.50%
-10.00%
-
20%
-15.50%
4.50%
-20.00%
-
30%
-25.50%
N/A
-30.00%
-
40%
-35.50%
N/A
-40.00%
-
50%
-45.50%
N/A
-50.00%
-
60%
-55.50%
N/A
-60.00%
-
70%
-65.50%
N/A
-70.00%
-
80%
-75.50%
N/A
-80.00%
-
90%
-85.50%
N/A
-90.00%
-
100%
-95.50%
N/A
-100.00%
 
FWP-10
 
CISCO SYSTEMS, INC. (CSCO)
 
Description of CISCO SYSTEMS, INC.
 
According to publicly available information, CISCO SYSTEMS, INC. (“Cisco”) designs, manufactures, and sells IP-based networking and other products relating to the communications and information technology industry worldwide. Cisco provides products for transporting data, voice, and video within buildings, across campuses, and around the world. Cisco offers routers, which interconnect computer networks; and switching systems, which offer connectivity to end users, workstations, and servers. Cisco also offers application networking services products; home networking products, such as voice and data modems, network cards, media adapters, Internet video cameras, and USB adapters; and hosted small-business systems, including integrated voice and data products. In addition, Cisco provides optical networking products; network security products and services; storage area networking products; Unified Communications, an integrated system that provides voice, video, data, and Web services; and video systems.
 
Cisco’s SEC file number is 000-18225.
 
Historical Performance of Cisco
 
QUARTER ENDING
QUARTER HIGH
QUARTER LOW
QUARTER CLOSE
March 29, 2002
21.84
14.15
16.93
June 28, 2002
17.55
12.28
13.95
September 30, 2002
15.29
10.39
10.48
December 31, 2002
15.48
8.12
13.10
March 31, 2003
15.63
12.33
12.98
June 30, 2003
19.10
12.80
16.79
September 30, 2003
21.56
16.57
19.59
December 31, 2003
24.60
19.24
24.23
March 31, 2004
29.39
21.94
23.57
June 30, 2004
24.83
20.68
23.70
September 30, 2004
23.68
17.53
18.10
December 31, 2004
20.35
17.80
19.32
March 31, 2005
19.61
17.13
17.89
June 30, 2005
20.25
17.01
19.08
September 30, 2005
20.23
17.30
17.92
December 30, 2005
18.12
16.83
17.12
March 31, 2006
22.00
17.18
21.67
June 30, 2006
22.00
19.08
19.53
September 29, 2006
23.53
17.10
22.98
December 29, 2006
27.96
22.80
27.33
January 3, 2007 to February 6, 2007
28.99
25.76
27.28
 
Deposit and Put Premium
 
As described in the prospectus supplement under ”Certain U.S. Federal Income Tax Considerations - Certain Notes Treated as a Put Option and a Deposit,“ for purposes of dividing the 8.40 per cent per annum interest rate on the notes among interest on the Deposit and Put Premium, [●] per cent constitutes interest on the Deposit and [●] per cent constitutes Put Premium.
 
Hypothetical Examples
 
The table below demonstrates hypothetical returns at maturity based on the assumptions outlined below. See “- Hypothetical Examples” above for more information.
 
Reference Asset:
Cisco
Initial Price:
USD[●]
Barrier Price:
USD[●]
Interest Rate:
8.40 per cent per annum
Physical Delivery Amount:
[●] shares (fractional shares paid in cash)
Term of Notes:
1 year
Reinvestment Rate for Note Interest:
0 per cent
 
Table of Hypothetical Returns
 
FINAL PRICE
(% CHANGE)
INVESTMENT IN THE NOTES
INVESTMENT IN THE REFERENCE ASSET
+
100%
8.40%
100.00%
+
90%
8.40%
90.00%
+
80%
8.40%
80.00%
+
70%
8.40%
70.00%
+
60%
8.40%
60.00%
+
50%
8.40%
50.00%
+
40%
8.40%
40.00%
+
30%
8.40%
30.00%
+
20%
8.40%
20.00%
+
10%
8.40%
10.00%
 
0%
8.40%
0.00%
   
Barrier Price Ever Breached?
  
   
YES
NO
  
-
10%
-1.60%
8.40%
-10.00%
-
20%
-11.60%
N/A
-20.00%
-
30%
-21.60%
N/A
-30.00%
-
40%
-31.60%
N/A
-40.00%
-
50%
-41.60%
N/A
-50.00%
-
60%
-51.60%
N/A
-60.00%
-
70%
-61.60%
N/A
-70.00%
-
80%
-71.60%
N/A
-80.00%
-
90%
-81.60%
N/A
-90.00%
-
100%
-91.60%
N/A
-100.00%
 
FWP-11