Free Writing Prospectus - Filing Under Securities Act Rules 163/433 (fwp)
December 27 2012 - 6:00AM
Edgar (US Regulatory)
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December 2012
Preliminary Terms No. 78
Registration Statement No. 333-169119
Dated December 26, 2012
Filed pursuant to Rule 433
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STRUCTURED INVESTMENTS
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Opportunities in U.S. Equities
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Contingent Income Auto-Callable Securities due January 4, 2016
Based on the Performance of the Common Stock of Starbucks Corporation
Contingent Income Auto-Callable
Securities offer the opportunity for investors to earn a contingent quarterly
payment equal to between 2.25% and 3.00% of the stated principal amount (the
actual contingent quarterly payment will be determined on the pricing date)
with respect to each quarterly determination date on which the closing price
of the underlying stock is greater than or equal to 75% of the initial share
price, which we refer to as the downside threshold level. In addition, if
the closing price of the underlying stock is greater than or equal to the
initial share price on any determination date, the securities will be automatically
redeemed for an amount per security equal to the stated principal amount plus
the contingent quarterly payment. However, if on any determination date the
closing price of the underlying stock is less than the initial share price,
the securities will not be redeemed and if that closing price is less than
the downside threshold level, you will not receive any contingent quarterly
payment for that quarterly period. If the securities are not redeemed prior
to maturity the payment at maturity due on the securities will be either
(i) the started principal amount and the contingent quarterly payment or
(ii) a number of shares of the underlying stock, or at our option the cash
value thereof, that will be significantly less than the stated principal
amount of the securities if the closing price of the underlying stock is
below the downside threshold level on the final determination date. As a
result, investors must be willing to accept the risk of not receiving a contingent
quarterly payment and also the risk of receiving shares of the underlying
stock, or the cash value thereof, that would be worth significantly less than
the stated principal amount of the securities and could be zero.
Accordingly, the securities do not guarantee any return of principal at maturity
and investors could lose their entire investment in the securities.
Investors
will not participate in any appreciation of the underlying stock. The securities
are senior notes issued as part of Barclays Bank PLCs Global Medium-Term
Notes Program. The securities are not, either directly or indirectly, an obligation
of any third party, and any payment to be made on the securities depends on the
ability of Barclays Bank PLC to satisfy its obligations as they come due.
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SUMMARY TERMS
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Issuer:
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Barclays Bank PLC
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Underlying stock:
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Starbucks Corporation common stock
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Aggregate principal amount:
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$
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Stated principal amount:
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$10 per security
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Issue price:
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$10 per security (See
Commissions and Issue Price below)
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Pricing date
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December 28, 2012 (or if such day is not a scheduled trading day, the next succeeding scheduled trading day).
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Original issue date
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January 3, 2013 (3 business days after the pricing date)
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Maturity date
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January 4, 2016
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Early redemption:
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If, on any of the first eleven determination dates, the determination closing price of the underlying stock is greater than or equal
to the initial share price, the securities will be automatically redeemed for an early redemption payment on the third business day
following the related determination date.
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Early redemption payment:
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The early redemption payment will be an amount equal to (i) the stated principal amount
plus
(ii) the contingent quarterly payment
with respect to the related determination date.
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Determination closing price:
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The closing price of the underlying stock on any determination date other than the final determination date
times
the adjustment
factor on such determination date.
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Contingent quarterly payment:
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If, on any determination date, the determination closing price or the final share price, as applicable, is greater than or equal to
the downside threshold level, we will pay a contingent quarterly payment of $0.225 to $0.300 (2.25% to 3.00% of the stated principal
amount) per security on the related contingent payment date. The actual contingent quarterly payment will be determined on the
pricing date.
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If, on any determination date, the determination closing price or the final share price, as applicable, is less than the downside
threshold level, no contingent quarterly payment will be made with respect to that determination date.
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Determination dates
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April 1, 2013, July 1, 2013, September 30, 2013, December 30, 2013, March 31, 2014, June 30, 2014, September 29, 2014 December 29,
2014, March 30, 2015, June 29, 2015, September 29, 2015 and December 29, 2015 (subject to postponement if a market disruption event
occurs or is continuing with respect to the underlying stock on any determination date). We also refer to December 29, 2015 as the
final determination date.
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Contingent payment dates:
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With respect to each determination date other than the final determination date, the third business day after the related
determination date. The payment of the contingent quarterly payment, if any, with respect to the final determination date will be
made on the maturity date.
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Payment at maturity:
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If the final share price is
greater than or equal to
the downside threshold level:
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(i) the stated principal amount
plus
(ii)
the contingent quarterly payment with respect to the final determination
date
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If the final share price is
less than
the downside threshold level:
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at our option
(i) a number of shares of the underlying stock equal to the product of the
exchange ratio times the adjustment factor, each as of the final determination
date (the
physical delivery amount
)*, or (ii) the cash
value of such shares as of the final determination date determined as follows:
the exchange ratio
times
the adjustment factor
times
the final
share price.
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Exchange ratio:
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The stated principal amount
divided by the initial share price
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Adjustment factor:
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1.0*
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Downside threshold level:
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$[],
which is equal to 75% of the initial share price
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Initial share price:
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The closing price of the
underlying stock on the pricing date*
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Final share price:
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The closing price of the
underlying stock on the final determination date*
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CUSIP:
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06742A271
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ISIN:
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US06742A2713
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Listing:
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The securities will not be listed
on any securities exchange.
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Selected Dealer:
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Morgan Stanley Smith Barney LLC
(
MSSB
)
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Commissions and Issue Price:
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Price to Public
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Agents Commissions
(1)
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Proceeds to Issuer
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Per security
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$10.00
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$0.225
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$9.775
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Total
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$
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$
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$
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Expected. In the event that we make any
change to the pricing date and the issue date, the determination dates and the
maturity date will be changed so that the stated term of the securities remains
the same.
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Contingent Income Auto-Callable Securities due January 4, 2016
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Based on the Performance of the Common Stock of Starbucks Corporation
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* The physical delivery amount, the initial share of the underlying stock and other
amounts may change due to stock splits or other corporate actions. See Reference AssetsEquity
SecuritiesShare Adjustments Relating to Securities with an Equity Security as the Reference Asset in
the accompanying prospectus supplement.
(1) MSSB and its financial advisors will collectively receive from the
Agent, Barclays Capital Inc., a fixed sales commission of $0.225
for each security they sell. See Supplemental Plan of Distribution.
Investing in the Securities involves risks not associated with an investment in conventional debt securities. See Risk Factors
beginning on page 9. You should read this document together with the related prospectus and prospectus supplement, each of which can
be accessed via the hyperlinks below before you make an investment decision.
Barclays
Bank PLC has filed a registration statement (including a prospectus) with the
U.S. Securities and Exchange Commission (SEC) for the offering to which these
preliminary terms relate. Before you invest, you should read the prospectus
dated August 31, 2010, the prospectus supplement dated May 27, 2011 and other
documents Barclays Bank PLC has filed with the SEC for more complete
information about Barclays Bank PLC and this offering. Buyers should rely upon
the prospectus, prospectus supplement and any relevant preliminary pricing
supplement or pricing supplement for complete details. You may get these
documents and other documents Barclays Bank PLC has filed for free by visiting
EDGAR on the SEC website at www.sec.gov. Alternatively, Barclays Bank PLC or
any agent or dealer participating in this offering will arrange to send you the
prospectus, prospectus supplement, preliminary pricing supplement, if any, and
final pricing supplement (when completed) and these preliminary terms if you
request it by calling your Barclays Bank PLC sales representative, such dealer
or 1-888-227-2275 (Extension 2-3430). A copy of each of these documents may be
obtained from Barclays Capital Inc., 745 Seventh AvenueAttn: US InvSol
Support, New York, NY 10019.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of the securities or determined that
these preliminary terms are truthful or complete. Any representation to the
contrary is a criminal offense.
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Morgan Stanley Smith Barney LLC
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Barclays
Capital Inc
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Contingent Income Auto-Callable Securities due January 4, 2016
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Based on the Performance of the Common Stock of Starbucks Corporation
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Additional Terms of the Securities
You should read these preliminary terms together with the prospectus dated August 31, 2010, as supplemented by the prospectus
supplement dated May 27, 2011 relating to our Global Medium-Term Notes, Series A, of which the securities are a part. These
preliminary terms, together with the documents listed below, contain the terms of the securities and supersede all prior or
contemporaneous oral statements as well as any other written materials including preliminary or indicative pricing terms,
correspondence, trade ideas, structures for implementation, sample structures, brochures or other educational materials of ours. You
should carefully consider, among other things, the matters set forth in Risk Factors in the prospectus supplement as the securities
involve risks not associated with conventional debt securities. We urge you to consult your investment, legal, tax, accounting and
other advisors before you invest in the securities.
You may access these documents on the SEC website at www.sec.gov as follows (or if such address has changed, by reviewing our filings
for the relevant date on the SEC website):
Our SEC file number is 1-10257 and our Central Index Key, or CIK, on the SEC website is 0000312070. As used in these preliminary
terms, the Company, we, us, or our refers to Barclays Bank PLC.
The securities constitute Barclays Bank PLCs direct, unconditional, unsecured and unsubordinated obligations and are not deposit
liabilities and are not insured by the U.S. Federal Deposit Insurance Corporation or any other governmental agency of the United
States, the United Kingdom or any other jurisdiction. In addition, the securities will not be guaranteed by the Federal Deposit
Insurance Corporation under the FDICs temporary liquidity guarantee program.
In connection with this offering, Morgan Stanley Smith Barney LLC is acting in its capacity as a selected dealer.
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Contingent Income Auto-Callable Securities due January 4, 2016
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Based on the Performance of the Common Stock of Starbucks Corporation
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Investment Summary
The Contingent Income Auto-Callable Securities due January 4, 2016 Based on the Performance of the Common Stock of Starbucks
Corporation, which we refer to as the securities, provide an opportunity for investors to earn a contingent quarterly payment, which
is an amount equal to $0.225 to $0.300 (2.25% to 3.00% of the stated principal amount per security), with respect to each quarterly
determination date on which the determination closing price or the final share price, as applicable, is greater than or equal to 75%
of the initial share price, which we refer to as the downside threshold level. The actual contingent quarterly payment will be
determined on the pricing date. The contingent quarterly payment, if any, will be payable quarterly on the contingent payment date,
which is the third business day after the related determination date. It is possible that the closing price of the underlying stock
could remain below the downside threshold level for extended periods of time or even throughout the term of the securities so that
you may receive a lower amount of or no contingent quarterly payments.
If the determination closing price is greater than or equal to the initial share price on any of the first eleven determination
dates, the securities will be automatically redeemed for an early redemption payment equal to the stated principal amount
plus
the
contingent quarterly payment with respect to the related determination date. If the securities have not previously been redeemed and
the final share price is greater than or equal to the downside threshold level, the payment at maturity will also be the sum of the
stated principal amount and the contingent quarterly payment with respect to the final determination date. However, if the securities
have not previously been redeemed and the final share price is less than the downside threshold level, investors will be exposed to
the decline in the closing price of the underlying stock, as compared to the initial share price, on a 1 to 1 basis and receive at
our option (i) a number of shares of the underlying stock equal to the product of the exchange ratio times the adjustment factor or
(ii) the cash value of such shares as of the final determination date determined as follows: the exchange ratio
times
the adjustment
factor
times
the final share price. The value of such shares (or that cash) will be less than 75% of the stated principal amount of
the securities and could be zero. Investors in the securities must be willing to accept the risk of losing their entire principal and
also the risk of not receiving any contingent quarterly payment. In addition, investors will not participate in any appreciation of
the underlying stock.
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Contingent Income Auto-Callable Securities due January 4, 2016
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Based on the Performance of the Common Stock of Starbucks Corporation
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Key Investment Rationale
The securities offer investors an opportunity to earn a contingent quarterly payment between 2.25% and 3.00% (the actual contingent
coupon payment will be determined on the pricing date) of the stated principal amount with respect to each determination date on
which the determination closing price or the final share price, as applicable, is greater than or equal to 75% of the initial share
price, which we refer to as the downside threshold level. The actual contingent quarterly payment will be determined on the pricing
date. If, on any of the first eleven determination dates, the determination closing price of the underlying stock is greater than or
equal to the initial share price, the securities will be automatically redeemed prior to maturity for the stated principal amount per
security
plus
the applicable contingent quarterly payment. The following scenarios reflect the potential payments, if any, on the
securities:
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Scenario 1
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On any of the first eleven determination dates, the determination closing price is
greater than or equal to
the initial share price.
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§
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The securities will be automatically redeemed for (i) the stated principal amount
plus
(ii) the contingent quarterly payment with
respect to the related determination date.
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Investors will not participate in any appreciation of the underlying stock from the
initial share price.
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Scenario 2
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The securities are not automatically redeemed prior to maturity and the final
share price is
greater than or equal to
the downside threshold level.
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§
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The payment due at maturity will be (i) the stated
principal amount
plus
(ii) the contingent quarterly payment with respect to the
final determination date.
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§
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Investors will not participate in any appreciation
of the underlying stock from the initial share price.
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Scenario 3
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The securities are not automatically redeemed
prior to maturity and the final share price is
less than
the downside threshold level.
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§
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The payment due at maturity will be at our option (i) a number of shares of the underlying stock equal to the product of the exchange
ratio and the adjustment factor, each as of the final determination date, or (ii) the cash value of those shares as of the final
determination date determined as follows: the exchange ratio
times
the adjustment factor
times
the final share price.
Investors will lose some and may lose all of their principal in this scenario.
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Contingent Income Auto-Callable Securities due January 4, 2016
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Based on the Performance of the Common Stock of Starbucks Corporation
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How the
Securities Work
The
following diagrams illustrate the potential outcomes for the securities
depending on (1) the determination closing price and (2) the final share price.
Diagram #1: First Eleven Determination Dates
Diagram #2: Payment at Maturity if No Automatic Early Redemption Occurs
For more information about the payout upon an early redemption or at
maturity in different hypothetical scenarios, see Hypothetical Examples
beginning on page 7.
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Contingent Income Auto-Callable Securities due January 4, 2016
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Based on the Performance of the Common Stock of Starbucks Corporation
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Hypothetical
Examples
The below
examples are based on the following terms:
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Hypothetical Initial Share Price:
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$54.27
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Hypothetical Downside Threshold
Level:
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$40.70, which is 75% of the
initial share price
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Hypothetical Exchange Ratio:
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0.18, which is the stated principal
amount divided by the hypothetical initial share price
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Hypothetical Adjustment Factor:
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1.0
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Hypothetical Contingent Quarterly
Payment:
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$0.263 (2.63% of the stated
principal amount). The actual contingent quarterly payment will be set on the
pricing date and will be between 2.25% and 3.00% of the stated principal
amount.
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Stated Principal Amount:
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$10 per security
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In Examples
1 and 2, the closing price of the underlying stock fluctuates over the term of
the securities and the determination closing price of the underlying stock is
greater than or equal to the hypothetical initial share price of $54.27 on one
of the first eleven determination dates. Because the determination closing
price is greater than or equal to the initial share price on one of the first
eleven determination dates, the securities are automatically redeemed following
the relevant determination date. In Examples 3 and 4, the determination closing
price on the first eleven determination dates is less than the initial share
price, and, consequently, the securities are not automatically redeemed prior
to, and remain outstanding until, maturity.
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Example 1
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Example 2
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Determination
Dates
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Hypothetical
Determination
Closing Price
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Contingent
Quarterly
Payment
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Early
Redemption
Payment*
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Hypothetical
Determination
Closing Price
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Contingent
Quarterly
Payment
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Early
Redemption
Payment
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#1
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$39.00
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$0.00
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N/A
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$42.00
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$0.263
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N/A
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#2
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$54.27
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*
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$10.263
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$30.00
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$0.00
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N/A
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#3
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N/A
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N/A
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N/A
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$25.00
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$0.00
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N/A
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#4
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N/A
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N/A
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N/A
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$29.00
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$0.00
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N/A
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#5
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N/A
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N/A
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N/A
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$45.00
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$0.263
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N/A
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#6
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N/A
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N/A
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N/A
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$43.00
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$0.263
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N/A
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#7
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N/A
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N/A
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N/A
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$33.00
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$0.00
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N/A
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#8
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N/A
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N/A
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N/A
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$47.00
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$0.263
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N/A
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#9
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N/A
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N/A
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N/A
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$50.00
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$0.263
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N/A
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#10
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N/A
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N/A
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N/A
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$67.84
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*
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$10.263
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#11
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N/A
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N/A
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N/A
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N/A
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N/A
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N/A
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Final
Determination
Date
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N/A
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N/A
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N/A
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N/A
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N/A
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N/A
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Payment at
Maturity
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N/A
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N/A
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* The Early
Redemption Payment includes the unpaid contingent quarterly payment with
respect to the determination date on which the determination closing price is
greater than or equal to the initial share price and the securities are
redeemed as a result.
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§
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In
Example 1
, the securities are automatically redeemed
following the second determination date as the determination closing price on
the second determination date is equal to the initial share price. You
receive the early redemption payment, calculated as follows:
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Contingent Income Auto-Callable Securities due January 4, 2016
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Based on the Performance of the Common Stock of Starbucks Corporation
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stated principal amount +
contingent quarterly payment = $10 + $0.263 = $10.263
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In this example, the early redemption feature limits the term of your
investment to approximately 6 months and you may not be able to reinvest at
comparable terms or returns. If the securities are redeemed early, you will
stop receiving contingent payments.
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§
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In
Example 2
, the securities are automatically redeemed
following the tenth determination date as the determination closing price on
the tenth determination date is greater than the initial share price. As the
determination closing prices on the first, fifth, sixth, eight and ninth
determination dates are greater than the downside threshold level, you
receive the contingent payment of $0.263 with respect to such determination
dates. Following the tenth determination date, you receive an early
redemption payment of $10.263, which includes the contingent quarterly
payment with respect to the tenth determination date.
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In this example, the early redemption feature limits the term of your
investment to approximately 30 months and you may not be able to reinvest at
comparable terms or returns. If the securities are redeemed early, you will
stop receiving contingent payments. Further, although the underlying stock has
appreciated by 25% from its initial share price on the third determination
date, you only receive $10.263 per security and do not benefit from such
appreciation.
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Example 3
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Example 4
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Determination
Dates
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Hypothetical
Determination
Closing Price
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Contingent
Quarterly
Payment
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Early
Redemption
Payment
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Hypothetical
Determination
Closing Price
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Contingent
Quarterly
Payment
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Early
Redemption
Payment
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#1
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$32.56
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$0
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N/A
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$32.56
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$0
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N/A
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#2
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$27.14
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$0
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N/A
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$27.14
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$0
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N/A
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#3
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$21.71
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$0
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N/A
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$21.71
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$0
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N/A
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#4
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$37.99
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$0
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N/A
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$37.99
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$0
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N/A
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#5
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$29.85
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$0
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N/A
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$29.85
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$0
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N/A
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#6
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$16.28
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$0
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N/A
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$16.28
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$0
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N/A
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#7
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$35.28
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$0
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N/A
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$35.28
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$0
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N/A
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#8
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$10.85
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$0
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N/A
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$10.85
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$0
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N/A
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#9
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$13.57
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$0
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N/A
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$13.57
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$0
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N/A
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#10
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$24.42
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$0
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N/A
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$24.42
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$0
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N/A
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#11
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$18.99
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$0
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N/A
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$18.99
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$0
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N/A
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Final
Determination
Date
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$27.14
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$0
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N/A
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$48.84
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*
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N/A
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Payment at
Maturity
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$4.89
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$10.263
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* The final contingent
quarterly payment, if any, will be paid at maturity.
Examples 3
and 4 illustrate the payment at maturity per security based on the final share
price.
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§
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In
Example 3
, the closing price of the underlying stock remains
below the downside threshold level throughout the term of the securities. As
a result, you do not receive any contingent payments during the term of the
securities and, at maturity, you are fully exposed to the decline in the
closing price of the underlying stock. As the final share price is less than
the downside threshold level, investors will receive a number of shares of
the underlying stock equal to the product of the exchange ratio and the
adjustment factor or the cash value thereof, calculated as follows:
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the cash value of 0.18 shares of the underlying stock = the
exchange ratio
times
the
adjustment factor
times
the final
share price = 0.18 x 1.0 x $27.14 = $4.89
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Contingent Income Auto-Callable Securities due January 4, 2016
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Based on the Performance of the Common Stock of Starbucks Corporation
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In this example, the
value of shares you receive at maturity is significantly less than the stated
principal amount.
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§
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In
Example 4
, the
closing price of the underlying stock decreases to a final share price of
$41.31. Although the final share price is less than the initial share price,
because the final share price is still not less than the downside threshold
level, you receive the stated principal amount plus a contingent quarterly
payment with respect to the final determination date. Your payment at
maturity is calculated as follows:
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$10 + $0.263 = $10.263
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In this example, although the final share
price represents approximately a 10% decline from the initial share price, you
receive the stated principal amount per security plus the contingent quarterly
payment, equal to a total payment of $10.263 per security at maturity.
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Contingent Income Auto-Callable Securities due January 4, 2016
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Based on the Performance of the Common Stock of Starbucks Corporation
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Risk Factors
An investment in the Securities involves
significant risks. We also urge you to consult your investment, legal, tax,
accounting and other advisors before you invest in the Securities. Investing in
the Securities is not equivalent to investing directly in the common stock of
Starbucks Corporation. The following is a non-exhaustive list of certain key
risk factors for investors in the Securities. For further discussion of these
and other risks, you should read the sections entitled Risk Factors in the
prospectus supplement, including the risk factors discussed under the following
headings:
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Risk FactorsRisks
Relating to All Securities;
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Risk
FactorsAdditional Risks Relating to Notes Which Are Not Characterized as
Being Fully Principal Protected or Are Characterized as Being Partially
Protected or Contingently Protected;
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Risk FactorsAdditional Risks Relating to Notes Which Pay No
Interest;
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Risk FactorsAdditional Risks Relating to Securities with a
Barrier Percentage or a Barrier Level;
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Risk FactorsAdditional Risks Relating to Securities Which We
May Call or Redeem (Automatically or Otherwise); and
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Risk FactorsAdditional Risks Relating to Securities with
Reference Assets That Are Equity Securities or Shares or Other Interests in
Exchange-Traded Funds, That Contain Equity Securities or Shares or Other
Interests in Exchange-Traded Funds or That Are Based in Part on Equity
Securities or Shares or Other Interests in Exchange-Traded Funds.
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§
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The securities do not guarantee the
return of any principal.
The terms of
the securities differ from those of ordinary debt securities in that the
securities do not guarantee the payment of regular interest or the return of
any of the principal amount at maturity. Instead, if the securities have not
been automatically redeemed prior to maturity and if the final share price is
less than the downside threshold level, you will be exposed to the decline in
the closing price of the underlying stock, as compared to the initial share
price, on a 1 to 1 basis and you will receive for each security that you hold
at maturity a number of shares of the underlying stock equal to the exchange
ratio
times
the adjustment
factor (or, at our option, the cash value of such shares). The value of those
shares (or that cash) will be less than 75% of the stated principal amount
and could be zero.
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§
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The contingent quarterly payment is based
solely on the determination closing price or the final share price, as
applicable.
Whether the
contingent quarterly payment will be made with respect to a determination
date will be based on the determination closing price or the final share
price, as applicable. As a result, you will not know whether you will receive
the contingent quarterly payment until the related determination date.
Moreover, because the contingent quarterly payment is based solely on the
determination closing price on a specific determination date or the final
share price, as applicable, if such determination closing price or final
share price is less than the downside threshold level, you will not receive
any contingent quarterly payment with respect to such determination date,
even if the closing price of the underlying stock was higher on other days
during the term of the securities.
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§
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You will not receive any contingent
quarterly payment for any quarterly period where the determination closing
price is less than the downside threshold level.
A contingent quarterly payment will be made with respect
to a quarterly period only if the determination closing price is greater than
or equal to the downside threshold level. If the determination closing price
remains below the downside threshold level on each determination date over
the term of the securities, you will not receive any contingent quarterly
payments.
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§
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Investors will not participate in any
appreciation in the price of the underlying stock.
Investors will not participate in any appreciation in the
price of the underlying stock from the initial share price, and the return on
the securities will be limited to the contingent quarterly payment that is
paid with respect to each determination date on which the determination
closing price or the final share price, as applicable, is greater than or
equal to the downside threshold level. It is possible that the closing price
of the underlying stock could be below the downside threshold level on most
or all of the determination dates so that you will receive little or no
contingent quarterly payments. If you do not earn sufficient contingent
quarterly payments over the term of the securities, the overall return on the
securities may be less than the amount that would be paid on a conventional
debt security of the issuer of comparable maturity.
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§
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Contingent repayment of principal applies
only at maturity
. You should
be willing to hold the securities to maturity. If you sell the securities
prior to maturity in the secondary market, if any, you may have to sell the
securities at a loss relative to your initial investment even if the price of
the underlying stock is above the downside threshold level.
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Contingent Income Auto-Callable Securities due January 4, 2016
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Based on the Performance of the Common Stock of Starbucks Corporation
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§
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Early redemption risk.
The term of your
investment in the securities may be limited to as short as approximately three months by the automatic early redemption
feature of the securities. If the securities are redeemed prior to maturity, you will receive no more contingent quarterly
payments and may be forced to invest in a lower interest rate environment there is no guarantee that you would be able to
reinvest the proceeds from an investment in the securities in a comparable investment with a similar level of
risk in the event the securities are called prior to the maturity date.
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§
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Market price influenced by many unpredictable
factors
. Several factors will influence the
value of the securities in the secondary market and the price at which
Barclays Bank PLC may be willing to purchase or sell the securities in the
secondary market. Although we expect that generally the closing price of the
underlying stock on any day will affect the value of the securities more than
any other single factor, other factors that may influence the value of the
securities include:
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o
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the trading price and volatility (frequency and magnitude of
changes in value) of the underlying stock,
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o
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whether the determination closing price has been below the
downside threshold level on any determination date,
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o
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dividend rates on the underlying stock,
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o
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interest and yield rates in the market,
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o
|
time remaining until the securities mature,
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o
|
geopolitical conditions and economic, financial, political,
regulatory or judicial events that affect the underlying stock and which may
affect the final share price of the underlying stock,
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o
|
the occurrence of certain events affecting the underlying stock
that may or may not require an adjustment to the adjustment factor, and
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o
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any actual or anticipated
changes in our credit ratings or credit spreads.
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The price of the underlying stock may be, and has recently been,
volatile, and we can give you no assurance that the volatility will lessen.
See Starbucks Corporation Overview below. You may receive less, and
possibly significantly less, than the stated principal amount per security if
you try to sell your securities prior to maturity.
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§
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The securities are subject to the credit risk
of the Issuer, Barclays Bank PLC.
The securities are senior unsecured debt obligations of the
Issuer, Barclays Bank PLC, and are not, either directly or indirectly, an
obligation of any third party. Any payment to be made on the securities
depends on the ability of Barclays Bank PLC to satisfy its obligations as
they come due and are not guaranteed by a third party. As a result, the
actual and perceived creditworthiness of Barclays Bank PLC may affect the market
value of the securities and, in the event Barclays Bank PLC were to default
on its obligations, you may not receive the amounts owed to you under the
terms of the securities.
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§
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Investing in the securities is not equivalent
to investing in the common stock of Starbucks Corporation.
Investors in the securities will not own the underlying
stock or have voting rights or rights to receive dividends or other
distributions or any other rights with respect to the underlying stock.
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§
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No affiliation with Starbucks Corporation.
Starbucks Corporation is not an affiliate of ours, is not
involved with this offering in any way, and has no obligation to consider
your interests in taking any corporate actions that might affect the value of
the securities. We have not made any due diligence inquiry with respect to
Starbucks Corporation in connection with this offering.
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§
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Single equity risk.
The price of the underlying stock can rise or fall
sharply due to factors specific to the underlying stock and its issuer, such
as stock price volatility, earnings, financial conditions, corporate,
industry and regulatory developments, management changes and decisions and
other events, as well as general market factors, such as general stock market
volatility and levels, interest rates and economic and political conditions.
We urge you to review financial and other information filed periodically with
the SEC by the issuer of the underlying stock.
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Contingent Income Auto-Callable Securities due January 4, 2016
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Based on the Performance of the Common Stock of Starbucks Corporation
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§
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We may engage in business with or involving
Starbucks Corporation without regard to your interests.
We or our affiliates may presently or from time to time
engage in business with Starbucks Corporation without regard to your
interests and thus may acquire non-public information about Starbucks
Corporation. Neither we nor any of our affiliates undertakes to disclose any
such information to you. In addition, we or our affiliates from time to time
have published and in the future may publish research reports with respect to
Starbucks Corporation, which may or may not recommend that investors buy or
hold the underlying stock.
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§
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The antidilution adjustments the calculation
agent is required to make do not cover every corporate event that could
affect the underlying stock.
Barclays Bank
PLC, as calculation agent, will adjust the amount payable at maturity for
certain corporate events affecting the underlying stock, such as stock splits
and stock dividends, and certain other corporate actions involving the issuer
of the underlying stock, such as mergers. However, the calculation agent will
not make an adjustment for every corporate event that can affect the
underlying stock. For example, the calculation agent is not required to make
any adjustments if the issuer of the underlying stock or anyone else makes a
partial tender or partial exchange offer for the underlying stock, nor will
adjustments be made following the final determination date. If an event
occurs that does not require the calculation agent to adjust the amount
payable at maturity, the market price of the securities may be materially and
adversely affected.
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§
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The securities will not be listed on any
securities exchange and secondary trading may be limited.
There may be
little or no secondary market for the securities. We do not intend to list
the securities on any securities exchange. Barclays Capital Inc. and other affiliates
of Barclays Bank PLC intend to offer to purchase the securities in the
secondary market but are not required to do so and may cease any such market
making activities at any time. Even if a secondary market develops, it may
not provide enough liquidity to allow you to trade or sell the securities
easily. Because other dealers are not likely to make a secondary market for
the securities, the price, if any, at which you may be able to trade your
securities is likely to depend on the price, if any, at which Barclays
Capital Inc. and other affiliates of Barclays Bank PLC are willing to buy the
securities. Accordingly, you should be willing to hold your securities to
maturity.
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§
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The inclusion of commissions and projected
profit from hedging in the original issue price is likely to adversely affect
secondary market prices.
Assuming no
change in market conditions or any other relevant factors, the price, if any,
at which Barclays Capital Inc. and other affiliates of Barclays Bank PLC is
willing to purchase the securities in any secondary market transactions will
likely be lower than the original issue price since the original issue price
includes, and secondary market prices are likely to exclude, commissions paid
with respect to the securities, as well as the projected profit included in
the cost of hedging the issuers obligations under the securities. In
addition, any such prices may differ from values determined by pricing models
used by Barclays Bank PLC, as a result of dealer discounts, mark-ups or other
transaction costs and the price, if any, at which Barclays Capital Inc. and
other affiliates of Barclays Bank PLC will be willing to purchase the
securities from you in secondary market transactions will likely be lower
than the price you paid for the securities, and any sale prior to the
maturity date could result in a substantial loss to you.
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§
|
Hedging and trading activity by the calculation
agent and its affiliates could potentially affect the value of the
securities.
Hedging or
trading activities of the issuers affiliates and of any other hedging
counterparty with respect to the securities on or prior to the pricing date
and prior to maturity could adversely affect the value of the underlying
stock and, as a result, could decrease the amount an investor may receive on
the securities at maturity. Any of these hedging or trading activities on or
prior to the pricing date could potentially increase the initial share price
and, as a result, the downside threshold level which is the price at or above
which the underlying stock must close on each determination date in order for
you to earn a contingent quarterly payment or, if the securities are not
called prior to maturity, in order for you to avoid being exposed to the
negative price performance of the underlying stock at maturity. Additionally,
such hedging or trading activities during the term of the securities could
potentially affect the price of the underlying stock on the determination
dates and, accordingly, whether the securities are automatically called prior
to maturity and, if the securities are not called prior to maturity, the
payout to you at maturity.
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§
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The calculation agent will make determinations
with respect to the securities.
As calculation agent, Barclays Bank PLC will determine the
initial share price, the downside threshold level, the final share price,
whether the contingent quarterly payment will be paid on each contingent
payment date, whether the securities will be redeemed following any
determination date, whether a market disruption event has occurred, whether
to make any adjustments to the adjustment factor and the payment that you
will receive upon an automatic early redemption or at maturity, if any.
Determinations made by Barclays Bank PLC, in its capacity as calculation
agent, including with respect to the occurrence or nonoccurrence of market
disruption events, may affect the payout to you upon an automatic early
redemption or at maturity.
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|
Contingent Income Auto-Callable Securities due January 4, 2016
|
|
Based on the Performance of the Common Stock of Starbucks Corporation
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§
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Potential conflicts.
We and our affiliates play a variety of roles in
connection with the issuance of the securities, including acting as
calculation agent and hedging our obligations under the securities. In
performing these duties, the economic interests of the calculation agent and
other affiliates of ours are potentially adverse to your interests as an
investor in the securities.
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§
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Higher contingent quarterly payments are
generally associated with a greater risk of loss.
Greater expected volatility with respect to the underlying
stock reflects a higher expectation as of the pricing date that the price of
the underlying stock could close below the downside threshold level on the
valuation date of the securities. This greater expected risk will generally
be reflected in a higher contingent quarterly payment for that security.
However, while the contingent quarterly payment is set on the pricing date,
the underlying stocks volatility may change significantly over the term of
the securities. The price of the underlying stock for your securities could
fall sharply, which could result in a significant loss of principal.
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§
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Suitability of the securities for investment
. You should reach a decision to invest in the securities
after carefully considering, with your advisors, the suitability of the
securities in light of your investment objectives and the specific
information set out in these preliminary terms, the prospectus supplement,
and the prospectus. Neither the Issuer nor Barclays Capital Inc. makes any
recommendation as to the suitability of the securities for investment.
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§
|
In some circumstances, the payment you receive
on the securities may be based on the stock of another company and not the
underlying stock
. Following
certain corporate events relating to the issuer of the underlying stock where
the issuer is not the surviving entity, your return on the securities paid by
Barclays Bank PLC may be based on the shares of a successor to the respective
underlying stock issuer or any cash or any other assets distributed to
holders of the underlying stock in such corporate event. The occurrence of
these corporate events and the consequent adjustments may materially and
adversely affect the value of the securities. For more information, see the
section Reference AssetsEquity SecuritiesShare Adjustments Relating to
Securities with an Equity Security as the Reference Asset of the prospectus
supplement.
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§
|
The U.S. federal income tax treatment of an
investment in the securities is uncertain
. The U.S. federal income tax treatment of the securities is
uncertain and the Internal Revenue Service could assert that the securities
should be taxed in a manner that is different than described below. As
discussed further in the accompanying prospectus supplement, the Internal
Revenue Service issued a notice in 2007 indicating that it and the Treasury
Department are actively considering whether, among other issues, you should
be required to accrue interest over the term of an instrument such as the
securities at a rate that may exceed the contingent quarterly payments (if
any) that you receive on the securities and whether all or part of the gain
you may recognize upon the sale, exchange, early redemption or maturity of an
instrument such as the securities could be treated as ordinary income.
Similarly, the Internal Revenue Service and the Treasury Department have
current projects open with regard to the tax treatment of pre-paid forward
contracts, contingent notional principal contracts and other derivative
contracts. While it is impossible to anticipate how any ultimate guidance
would affect the tax treatment of instruments such as the securities (and
while any such guidance may be issued on a prospective basis only), such
guidance could be applied retroactively and could in any case (i) increase
the likelihood that you will be required to accrue income even if you do not
receive any payments with respect to the securities until early redemption or
maturity and (ii) require you to accrue income in excess of any contingent
quarterly payments you receive on the securities. The outcome of this process
is uncertain. In addition, any character mismatch arising from your inclusion
of ordinary income in respect of the contingent quarterly payments and
capital loss (if any) upon the sale, exchange, early redemption or maturity
of your securities may result in adverse tax consequences to you because an
investors ability to deduct capital losses is subject to significant
limitations. You should consult your tax advisor as to the possible
alternative treatments in respect of the securities.
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Contingent Income Auto-Callable Securities
due January 4, 2016
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|
Based on the Performance of the Common Stock
of Starbucks Corporation
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Starbucks Corporation Overview
According
to publicly available information, Starbucks Corporation and its subsidiaries
(collectively, the Company) purchases and roasts high-quality whole bean
coffees that are sold, along with handcrafted coffee and tea beverages and a
variety of fresh food items, through company-operated stores. The Company also
sells a variety of coffee and tea products and licenses their trademarks
through other channels such as licensed stores, grocery and national
foodservice accounts.
Information
filed by the Company with the SEC under the Exchange Act can be located by
reference to its SEC file number: 000-20322, or its CIK Code: 0000829224. The
underlying stock is listed on NASDAQ under the ticker symbol SBUX. You are
urged to read the following section in the accompanying prospectus supplement:
Reference AssetsEquity SecuritiesReference Asset Issuer and Reference Asset
Information. Companies with securities registered under the Securities
Exchange Act of 1934, as amended, which is commonly referred to as the
Exchange Act, and the Investment Company Act of 1940, as amended, which is
commonly referred to as the 40 Act, are required to periodically file
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 SECs website is
http://www.sec.gov. Information provided to or filed with the SEC pursuant to
the Exchange Act or the 40 Act by the company issuing the underlying stock can
be located by reference to the underlying stock SEC file number specified
below.
We have not
undertaken any independent review or due diligence of the issuer of the
underlying stocks SEC filings or of any other publicly available information
regarding the Company. You are urged to refer to the SEC filings made by the
issuer of the underlying stock and to other publicly available information
(such as the issuer of the underlying stocks annual report) to obtain an
understanding of the issuer of the underlying stocks business and financial
prospects. The summary information contained above is not designed to be, and
should not be interpreted as, an effort to present information regarding the
financial prospects of any issuer or any trends, events or other factors that
may have a positive or negative influence on those prospects or as an
endorsement of any particular issuer.
Information
from outside sources is not incorporated by reference in, and should not be
considered part of, these preliminary terms or any accompanying prospectus or
prospectus supplement. We have not independently verified the accuracy or
completeness of the information obtained from outside sources.
Information
as of market close on December 19, 2012:
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Bloomberg Ticker Symbol:
|
SBUX
|
52 Week High (on 08/02/2012):
|
$43.16
|
|
|
Current Stock Price:
|
$54.27
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52 Week Low (on 04/13/2012):
|
$61.67
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52 Weeks Ago:
|
$43.63
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The
following table sets forth the published high, low and period end closing
prices of the underlying stock for each quarter in the same period for the
period of January 1, 2006 through December 19, 2012. The associated graph shows
the closing prices of the underlying stock for each day in the same period. The
closing price of the underlying stock on December 19, 2012 was $54.27. We
obtained the information in the table and graph below from Bloomberg Financial
Markets, without independent verification. The historical performance of the
underlying stock should not be taken as an indication of its future
performance, and no assurance can be given as to the price of the underlying
stock at any time, including the determination dates.
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Shares of Starbucks Corporation
(CUSIP 0008552441)
|
|
High ($)
|
|
Low ($)
|
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Period End ($)
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2006
|
|
|
|
|
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First Quarter
|
|
37.64
|
|
30.24
|
|
37.64
|
Second Quarter
|
|
39.63
|
|
34.93
|
|
37.76
|
Third Quarter
|
|
38.02
|
|
29.55
|
|
34.05
|
Fourth Quarter
|
|
39.49
|
|
33.62
|
|
35.42
|
2007
|
|
|
|
|
|
|
First Quarter
|
|
36.29
|
|
29.32
|
|
31.36
|
Second Quarter
|
|
31.84
|
|
25.51
|
|
26.24
|
Third Quarter
|
|
28.25
|
|
25.87
|
|
26.20
|
Fourth Quarter
|
|
26.84
|
|
20.03
|
|
20.47
|
|
|
|
|
|
|
|
Contingent Income Auto-Callable Securities
due January 4, 2016
|
|
Based on the Performance of the Common Stock
of Starbucks Corporation
|
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|
Shares of Starbucks Corporation
(CUSIP 0008552441)
|
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High ($)
|
|
Low ($)
|
|
Period End ($)
|
2008
|
|
|
|
|
|
|
First Quarter
|
|
20.45
|
|
16.80
|
|
17.50
|
Second Quarter
|
|
18.60
|
|
15.66
|
|
15.74
|
Third Quarter
|
|
16.93
|
|
13.58
|
|
14.87
|
Fourth Quarter
|
|
14.80
|
|
7.17
|
|
9.46
|
2009
|
|
|
|
|
|
|
First Quarter
|
|
12.39
|
|
8.27
|
|
11.11
|
Second Quarter
|
|
15.30
|
|
11.17
|
|
13.89
|
Third Quarter
|
|
20.76
|
|
12.97
|
|
20.65
|
Fourth Quarter
|
|
23.80
|
|
18.75
|
|
23.06
|
2010
|
|
|
|
|
|
|
First Quarter
|
|
25.56
|
|
21.70
|
|
24.27
|
Second Quarter
|
|
28.12
|
|
24.24
|
|
24.30
|
Third Quarter
|
|
26.28
|
|
22.86
|
|
25.58
|
Fourth Quarter
|
|
32.93
|
|
25.69
|
|
32.13
|
2011
|
|
|
|
|
|
|
First Quarter
|
|
37.97
|
|
31.53
|
|
36.95
|
Second Quarter
|
|
39.49
|
|
34.86
|
|
39.49
|
Third Quarter
|
|
41.16
|
|
34.05
|
|
41.08
|
Fourth Quarter
|
|
46.45
|
|
36.20
|
|
46.01
|
2012
|
|
|
|
|
|
|
First Quarter
|
|
56.26
|
|
45.34
|
|
55.89
|
Second Quarter
|
|
61.67
|
|
51.27
|
|
53.32
|
Third Quarter
|
|
54.20
|
|
43.16
|
|
50.75
|
Fourth Quarter (through December
19, 2012)
|
|
54.58
|
|
44.98
|
|
54.27
|
PAST PERFORMANCE IS NOT
INDICATIVE OF FUTURE RESULTS
We make no
representation as to the amount of dividends, if any, that Starbucks
Corporation may pay in the future. As an investor in the securities, you will
not be entitled to receive dividends, if any, that may be payable on the common
stock of Starbucks Corporation.
|
|
|
|
|
|
|
Contingent Income Auto-Callable Securities due January 4, 2016
|
|
Based on the Performance of the Common Stock of Starbucks Corporation
|
|
|
|
Starbucks Corporation common stock Daily Closing Prices
January 3, 2006 to December 19, 2012
|
PAST PERFORMANCE IS NOT
INDICATIVE OF FUTURE RESULTS.
This document relates only to the securities offered hereby and does not
relate to the underlying stock or other securities of Starbucks Corporation. We
have derived all disclosures contained in this document regarding Starbucks
Corporation stock from the publicly available documents described in the
preceding paragraph. In connection with the offering of the securities, neither
we nor the agent have undertaken any independent review or due diligence of the
SEC filings of Starbucks Corporation or of any other publicly available
information regarding Starbucks Corporation. Furthermore, we cannot give any
assurance that all events occurring prior to the date hereof (including events
that would affect the accuracy or completeness of the publicly available
documents described in the preceding paragraph) that would affect the trading
price of the underlying stock (and therefore the price of the underlying stock
at the time we price the securities) have been publicly disclosed. Subsequent
disclosure of any such events or the disclosure of or failure to disclose
material future events concerning Starbucks Corporation could affect the value
received at maturity with respect to the securities and therefore the trading
prices of the securities. Neither the issuer nor any of its affiliates makes
any representation to you as to the performance of the underlying stock.
|
|
|
|
|
|
|
Contingent Income Auto-Callable Securities due January 4, 2016
|
|
Based on the Performance of the Common Stock of Starbucks Corporation
|
|
|
Additional Information About the Securities
Please read this information in conjunction with the
summary terms on the front cover of this document.
|
|
|
|
Additional
Provisions:
|
|
|
|
Record
date:
|
|
One business day prior
to the related contingent payment date.
|
No
fractional shares:
|
|
At maturity, if the payment
on the securities, if any, is to be made in shares of the underlying
stock, we will deliver the number of shares of the underlying stock
due with respect to the securities, as described above, but we will
pay cash in lieu of delivering any fractional share of the underlying
stock in an amount equal to the corresponding fractional closing price
of such fraction of a share of the underlying stock, as determined
by the calculation agent as of the final determination date.
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Postponement
of maturity date and coupon payment dates:
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The maturity date and
any coupon payment date will be postponed if the final relevant determination
date is postponed due to the occurrence or continuance of a market
disruption event with respect to the underlying stock on such relevant
determination date. In such a case, the coupon payment date or maturity
date, as the case may be, will be postponed by the same number of business
days from but excluding the originally scheduled determination date;
provided that the relevant determination date may not be postponed
to a date later than the originally scheduled coupon payment date or
maturity date, as the case may be, or if the originally scheduled coupon
payment date or maturity date, as the case may be, is not a business
day, later than the first business day after the originally scheduled
coupon pay date or maturity date, as the case may be. See Terms
of the Notes Maturity Date and Reference AssetsEquity
SecuritiesMarket Disruption Events Relating to Securities with
an Equity Security as the Reference Asset in the accompanying
prospectus supplement.
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Market
disruption events and antidilution adjustments:
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The calculation
agent may adjust any variable described in these preliminary terms,
including but not limited to the final determination date, the initial
share price, the final share price, the physical delivery amount and
any combination thereof as described in the following sections of the
accompanying prospectus supplement.
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For a description
of what constitutes a market disruption event and the consequences
thereof, see Reference AssetsEquity SecuritiesMarket
Disruption Events Relating to Securities with an Equity Security as
the Reference Asset; and
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For a description
of further adjustments that may affect the linked share, see Reference
AssetsEquity SecuritiesShare Adjustments Relating to Securities
with an Equity Security as the Reference Asset.
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Listing:
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The securities will not
be listed on any securities exchange.
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Minimum
ticketing size:
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100 securities
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Tax
considerations:
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The material tax consequences
of your investment in the securities are summarized below. The discussion
below supplements the discussion under Certain U.S. Federal Income
Tax Considerations in the accompanying prospectus supplement.
Except as noted under Non-U.S. Holders
below, this section applies to you only if you are a U.S. holder (as defined
in the accompanying prospectus supplement) and you hold your securities
as capital assets for tax purposes and does not apply to you if you are
a member of a class of holders subject to special rules or are otherwise
excluded from the discussion in the prospectus supplement (for example,
if you did not purchase your securities in the initial issuance of the
securities). In addition, this discussion does not apply to you if you
purchase your securities for less than the principal amount of the securities.
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The United States federal
income tax consequences of your investment in the securities are uncertain
and the Internal Revenue Service could assert that the securities should
be taxed in a manner that is different than described below. Pursuant
to the terms of the securities, Barclays Bank PLC and you agree, in
the absence of a change in law or an administrative or judicial ruling
to the contrary, to characterize your securities as a contingent income-bearing
executory contract with respect to the underlying stock.
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If your securities are
properly treated as a contingent income-bearing executory contract,
it would be reasonable (i) to treat any contingent quarterly payments
you receive on the securities as items of ordinary income taxable in
accordance with your regular method of accounting for U.S. federal
income tax purposes and (ii) to recognize capital gain or loss upon
the sale, exchange, early redemption or maturity of your securities
(subject to the discussion below regarding the receipt of shares of
the underlying stock at maturity) in an amount equal to the difference
(if any) between the amount you receive at such time (other than amounts
attributable to a contingent quarterly payment) and your basis in the
securities for U.S. federal income tax purposes. Such gain or loss
should generally be long-term capital gain or loss if you have held
your securities for more than one year, and otherwise should generally
be short-term capital gain or loss. Short-term capital gains are generally
subject to tax at the marginal tax rates applicable to ordinary income.
Any character mismatch arising from your inclusion of ordinary income
in respect of the contingent quarterly payments and capital loss (if
any) upon the sale, exchange, early redemption or maturity of your
securities may result in adverse tax
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Contingent Income Auto-Callable Securities due January 4, 2016
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Based on the
Performance of the Common Stock of Starbucks Corporation
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consequences to you because
an investors ability to deduct capital losses is subject to significant
limitations. Moreover, in the event you receive shares of the underlying
stock upon the maturity of the securities, such loss may be deferred
(as described in the following paragraph).
If you receive shares of the underlying stock upon the maturity of your
securities, it is not clear whether the receipt of shares of the underlying
stock should be treated as (i) a taxable settlement of the securities followed
by a purchase of the shares or (ii) a tax-free purchase of the shares pursuant
to the original terms of the securities. Accordingly, you should consult
your tax advisor about the tax consequences to you of receiving shares
of the underlying stock upon the maturity of your securities. If the receipt
of the shares is treated as a taxable settlement of the securities followed
by a purchase of the shares, you should (i) recognize capital loss in an
amount equal to the difference between the fair market value of the shares
you receive at such time plus the cash received in lieu of a fractional
share, if any, and your tax basis in the securities, and (ii) take a basis
in such shares in an amount equal to their fair market value at such time.
If, alternatively, the receipt of shares of the underlying stock upon the
maturity of your securities is treated as a tax-free purchase of the shares,
(i) the receipt of shares of the underlying stock upon maturity of your
securities should not give rise to the current recognition of loss at such
time, (ii) you should take a carryover basis in such shares equal to the
basis you had in your securities (determined as described below, less the
basis attributable to a fractional share, if any), and (iii) if you receive
cash in lieu of a fractional share upon the stock settlement of such securities,
you should recognize short-term capital loss equal to the difference between
the amount of cash you receive and your tax basis in the fractional share.
In general, your tax basis in your securities will be equal to the price
you paid for the securities. Your holding period in the shares you receive
upon the maturity of your securities will begin on the day after you receive
such shares.
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In the opinion of our
special tax counsel, Sullivan & Cromwell LLP, it would be reasonable
to treat your securities in the manner described above. This opinion
assumes that the description of the terms of the securities in these
preliminary terms is materially correct.
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NO STATUTORY, JUDICIAL
OR ADMINISTRATIVE AUTHORITY DIRECTLY DISCUSSES HOW YOUR SECURITIES
SHOULD BE TREATED FOR U.S. FEDERAL INCOME TAX PURPOSES. AS A RESULT,
THE U.S. FEDERAL INCOME TAX CONSEQUENCES OF YOUR INVESTMENT IN THE
SECURITIES ARE UNCERTAIN. ACCORDINGLY, WE URGE YOU TO CONSULT YOUR
TAX ADVISOR AS TO THE TAX CONSEQUENCES OF INVESTING IN THE SECURITIES.
Alternative Treatments
. As discussed further in the accompanying
prospectus supplement, the Treasury Department and the Internal Revenue
Service are actively considering various alternative treatments that may
apply to instruments such as the securities, possibly with retroactive
effect. Other alternative treatments for your securities may also be possible
under current law. For example, it is possible that the securities could
be treated as debt instruments subject to the special tax rules governing
contingent payment debt instruments. Under the contingent payment debt
instrument rules, you generally would be required to accrue interest on
a current basis in respect of the securities over their term based on the
comparable yield and projected payment schedule for the securities and
pay tax accordingly, even though these amounts may exceed the contingent
quarterly payments (if any) that are made on the securities. You would
also be required to make adjustments to your accruals if the actual amounts
that you receive in any taxable year differ from the amounts shown on the
projected payment schedule. In addition, any gain you may recognize on
the sale, exchange, early redemption or maturity of the securities would
be taxed as ordinary interest income and any loss you may recognize on
the sale, exchange, early redemption or maturity of the securities would
generally be ordinary loss to the extent of the interest you previously
included as income without an offsetting negative adjustment and thereafter
would be capital loss. You should consult your tax advisor as to the special
rules that govern contingent payment debt instruments.
It is also possible that your securities could be treated as an investment
unit consisting of (i) a debt instrument that is issued to you by us and
(ii) a put option in respect of the underlying stock that is issued by
you to us. You should consult your tax advisor as to the possible consequences
of this alternative treatment.
In addition, it is possible that (i) you should not include the contingent
quarterly payments in income as you receive them and instead you should
reduce your basis in your securities by the amount of the contingent quarterly
payments that you receive; (ii) you should not include the contingent quarterly
payments in income as you receive them and instead, upon the sale, exchange,
early redemption or maturity of your securities, you should recognize short-term
capital gain or loss in an amount equal to the difference between (a) the
amount of the contingent quarterly payments paid to you over the term of
the securities (including the contingent quarterly payment received at
early redemption or maturity or the amount of cash that you receive upon
a sale or exchange that is attributable to the contingent quarterly payments
to be paid on the securities) and (b) the excess (if any) of (1) the amount
you paid for your securities over (2) the amount of cash you receive upon
the sale, exchange, early redemption or maturity (excluding the contingent
quarterly payment received at early redemption or maturity or the amount
of cash that you receive upon a sale or exchange that is attributable to
the contingent quarterly
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Contingent Income Auto-Callable Securities due January 4, 2016
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Based on the
Performance of the Common Stock of Starbucks Corporation
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payments to be paid on the securities);
or (iii) if a contingent quarterly payment is made at early redemption
or maturity, such contingent quarterly payment should not separately
be taken into account as ordinary income but instead should increase
the amount of capital gain or decrease the amount of capital loss that
you recognize at early redemption or maturity.
You should consult your tax advisor with respect to these possible alternative
treatments.
For a further discussion of the tax treatment of your securities as well
as other possible alternative characterizations, please see the discussion
under the heading Certain U.S. Federal Income Tax ConsiderationsCertain
Notes Treated as Forward Contracts or Executory Contracts in the
accompanying prospectus supplement. You should consult your tax advisor
as to the possible alternative treatments in respect of the securities.
For additional, important considerations related to tax risks associated
with investing in the securities, you should also examine the discussion
in Risk ConsiderationsThe U.S. federal income tax treatment
of an investment in the securities is uncertain, in these preliminary
terms.
Specified Foreign Financial Asset Reporting.
Under legislation
enacted in 2010, owners of specified foreign financial assets with
an aggregate value in excess of $50,000 (and in some circumstances, a higher
threshold) may be required to file an information report with respect to
such assets with their tax returns. Specified foreign financial assets generally
include any financial accounts maintained by foreign financial institutions,
as well as any of the following (which may include your securities), but
only if they are not held in accounts maintained by financial institutions:
(i) stocks and securities issued by non-U.S. persons, (ii) financial instruments
and contracts held for investment that have non-U.S. issuers or counterparties
and (iii) interests in foreign entities. Holders are urged to consult their
tax advisors regarding the application of this legislation to their ownership
of the securities.
Non-U.S.
Holders
. Barclays currently does not withhold on payments to non-U.S.
holders in respect of instruments such as the securities. However, if
Barclays determines that there is a material risk that it will be required
to withhold on any such payments, Barclays may withhold on any contingent
quarterly payments at a 30% rate, unless you have provided to Barclays
(i) a valid Internal Revenue Service Form W-8ECI or (ii) a valid Internal
Revenue Service Form W-8BEN claiming tax treaty benefits that reduce
or eliminate withholding. If Barclays elects to withhold and you have
provided Barclays with a valid Internal Revenue Service Form W-8BEN claiming
tax treaty benefits that reduce or eliminate withholding, Barclays may
nevertheless withhold up to 30% on contingent quarterly payments it makes
to you if there is any possible characterization of the contingent quarterly
payments that would not be exempt from withholding under the treaty.
In addition, non-U.S. holders will be subject to the general rules regarding
information reporting and backup withholding as described under the heading Certain
U.S. Federal Income Tax ConsiderationsInformation Reporting and
Backup Withholding in the accompanying prospectus supplement.
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In addition, the Treasury Department
has issued proposed regulations under Section 871(m) of the Internal
Revenue Code of 1986, as amended, which could ultimately require us
to treat all or a portion of any payment in respect of your securities
as a dividend equivalent payment that is subject to withholding
tax at a rate of 30% (or a lower rate if a treaty applies). However,
such withholding would potentially apply only to payments made after
December 31, 2013. You could also be required to make certain certifications
in order to avoid or minimize such withholding obligations, and you
could be subject to withholding (subject to your potential right to
claim a refund from the Internal Revenue Service) if such certifications
were not received or were not satisfactory. You should consult your
tax advisor concerning the potential application of these regulations
to payments you receive with respect to the securities when these regulations
are finalized.
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Trustee:
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The Bank of New York Mellon
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Calculation
agent:
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Barclays Bank
PLC
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Use of proceeds
and hedging:
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The net proceeds we receive from
the sale of the securities will be used for various corporate purposes
as set forth in the prospectus and prospectus supplement and, in part,
in connection with hedging our obligations under the securities through
one or more of our subsidiaries.
We, through our subsidiaries or others, expect to hedge our anticipated
exposure in connection with the securities by taking positions in futures
and options contracts on the underlying stock and any other securities
or instruments we may wish to use in connection with such hedging. Trading
and other transactions by us or our affiliates could affect the level,
value or price of reference assets and their components, the market value
of the securities or any amounts payable on the securities. For further
information on our use of proceeds and hedging, see Use of Proceeds
and Hedging in the prospectus supplement.
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ERISA:
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See Employee
Retirement Income Security Act starting on page S-120 in the
accompanying prospectus supplement.
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Contact:
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Morgan Stanley Smith Barney LLC
(Morgan Stanley Wealth Management (MSWM)) clients
may contact their MSWM sales representative or MSWMs principal
executive offices at 2000 Westchester Avenue, Purchase, New York 10577
(telephone number 800-869-3326). A copy of each of these documents
may be obtained from Barclays Bank PLC or the agent Barclays, at 1-888-227-2275
(Extension 2-3430) or 745 Seventh AvenueAttn: US InvSol Support,
New York, NY 10019.
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These preliminary terms represent a summary of the terms and conditions
of the securities. We encourage you to read the accompanying prospectus and
prospectus supplement for this offering, which can be accessed via the
hyperlinks on the front page of this document.
Supplemental Plan of Distribution
MSSB and
its financial advisors will collectively receive from the Agent, Barclays
Capital Inc., a fixed sales commission of $0.225
for each
security they sell.
We expect
that delivery of the securities will be made against payment for the securities
on or about the issue date indicated on the cover of these preliminary terms,
which will be the third business day following the expected pricing date (this
settlement cycle being referred to as T+3). See Plan of Distribution in the
prospectus supplement.