RISK FACTORS
The Securities are unsecured promises of Barclays Bank PLC and are not secured debt. The Securities are riskier than ordinary unsecured debt securities.
The return on a series of Securities is linked to the performance of the Index underlying those Securities. Investing in a series of Securities is not equivalent to investing directly in underlying index components or the relevant Index itself. See
the section entitled The IndicesGeneral Information, as well as the Index-specific sections, in this pricing supplement for more information.
This section describes the most significant risks relating to an investment in the Securities.
We urge you to read the following information about these risks, together with the other
information in this pricing supplement and the accompanying prospectus and prospectus supplement, before investing in the Securities.
Even If the Value of the Underlying Index at Maturity or upon Redemption Exceeds its Initial Level, You May Receive Less Than the Principal Amount of
Your Securities
Because the investor fee reduces the amount of your return at maturity or upon redemption, the value of the Index
underlying your Securities must increase significantly in order for you to receive at least the principal amount of your investment at maturity or upon redemption of your Securities. If the value of the Index underlying your Securities decreases or
does not increase sufficiently to offset the investor fee, you will receive less than the principal amount of your investment at maturity or upon redemption of your Securities.
You Will Not Benefit from Any Increase in the Value of the Underlying Index If Such Increase Is Not Reflected in the Value of the Index on the Applicable Valuation Date
If the Index underlying your Securities does not increase by an amount sufficient to offset the investor fee between the inception date and the
applicable valuation date (including the final valuation date), we will pay you less than the principal amount of your Securities at maturity or upon redemption. This will be true even if the value of the Index underlying your Securities as of some
date or dates prior to the applicable valuation date would have been sufficiently high to offset the investor fee.
There Are Restrictions
on the Minimum Number of Securities You May Redeem and on the Dates on Which You May Redeem Them
You must redeem at least 50,000
Securities of the same series at one time in order to exercise your right to redeem your Securities on any redemption date. You may only redeem your Securities on a redemption date if we receive a notice of redemption from you by no later than 4:00
p.m., New York City time, and a confirmation of redemption by no later than 5:00 p.m., New York City time, on the business day prior to the applicable valuation date. If we do not receive your notice of redemption by 4:00 p.m., New York City time,
or your confirmation of redemption by 5:00 p.m., New York City time, on the business day prior to the applicable valuation date, your notice will not be effective and we will not redeem your Securities on the applicable redemption date. Your notice
of redemption and confirmation of redemption will not be effective until we confirm receipt. See Specific Terms of the SecuritiesRedemption Procedures for more information.
The Market Value of Each Series of Securities May Be Influenced by Many Unpredictable Factors, Including Volatile Commodities Prices
The market value of your Securities may fluctuate between the date you purchase them and the applicable valuation date. You may also sustain a significant loss if you sell the Securities in the secondary
market. Several factors, many of which are beyond our control, will influence the market value of the Securities. We expect that generally the value of the index components (which, for the Oil Index, currently includes only the WTI crude oil futures
contract traded on the New York Mercantile Exchange) and of the Index underlying your Securities will affect the market value of those Securities more than any other factor. Other factors that may influence the market value of a series of Securities
include:
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the time remaining to the maturity of the Securities;
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supply and demand for the Securities, including inventory positions with Barclays Capital Inc. or any market maker;
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economic, financial, political, regulatory, geographical, biological, or judicial events that affect the level of the underlying Index or the market
price of the index components included in that Index; or
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the creditworthiness of Barclays Bank PLC.
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These factors interrelate in complex ways, and the effect of one factor on the market value of your Securities may offset or enhance the effect of another factor.
Suspension or Disruptions of Market Trading in Commodities and Related Futures May Adversely Affect the Value of Your Securities
The commodity futures markets are subject to temporary distortions or other disruptions due to various factors, including the lack of liquidity in the
markets, the participation of speculators and government regulation and intervention. In addition, U.S. futures exchanges (including the New York Mercantile Exchange) and some foreign exchanges have regulations that limit the amount of fluctuation
in some futures contract prices that may occur during a single business day. These limits are generally referred to as daily price fluctuation limits and the maximum or minimum price of a contract on any given day as a result of these
limits is referred to as a limit price. Once the limit price has been reached in a particular contract, no trades may be made at a price beyond the limit, or trading may be limited for a set period of time. Limit prices have the effect
of precluding trading in a particular contract or forcing the liquidation of contracts at potentially disadvantageous times or prices. These circumstances could adversely affect the value of the Index underlying your Securities and, therefore, the
value of your Securities.
In making its calculations of the Index underlying your Securities, if the relevant trading
facility does not publish a settlement price as scheduled, or publishes a settlement price that, in the reasonable judgment of the Index Sponsor, is manifestly incorrect, the Index Sponsor may determine the settlement price in its reasonable
judgment. In addition, if any day on which the Index Sponsor calculates the Index underlying your Securities is a day on which a relevant trading facility for a futures contract included on the relevant Index is not open, then the Index Sponsor will
use the settlement price for such contract as of the last day on which such trading facility was open. In the circumstances described above, the value of the Index underlying your Securities and, therefore, the value of your Securities may be
adversely affected.
Future Prices of the Index Components That Are Different Relative to Their Current Prices May Result in a Reduced
Amount Payable at Maturity or Upon Redemption
Each Index is composed of commodity futures contracts rather than
physical commodities. Unlike equities, which typically entitle the holder to a continuing stake in a corporation, commodity futures contracts normally specify a certain date for delivery of the underlying physical commodity. As the exchange-traded
futures contracts that comprise the relevant Index approach expiration, they are replaced by similar contracts that have a later expiration. Thus, for example, a futures contract purchased and held in August may specify an October expiration. As
time passes, the contract expiring in October may be replaced by a contract for delivery in November. This process is referred to as rolling. If the market for these contracts is (putting aside other considerations) in
backwardation, which means that the prices are lower in the distant delivery months than in the nearer delivery months, the sale of the October contract would take place at a price that is higher than the price of the November contract,
thereby creating a roll yield. The actual realization of a potential roll yield will be dependent upon the level of the related spot price relative to the unwind price of the commodity futures contract at the time of sale of the
contract. Many of the contracts included in the Commodity Index have historically exhibited consistent periods of backwardation, and WTI crude oil included in the Oil Index has historically traded in backwardation markets. However, certain of the
commodities reflected in the Commodity Index, such as gold, have historically traded in contango markets, and the WTI crude oil futures contract included in the Oil Index has also historically exhibited consistent periods of contango.
Contango markets are those in which the prices of
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contracts are higher in the distant delivery months than in the nearer delivery months. The absence of backwardation in the commodity markets could result in negative roll yields, which could
adversely affect the value of the Index underlying your Securities and, accordingly, decrease the payment you receive at maturity or upon early redemption.
Historical Values of the Indices or Any Index Component Should Not Be Taken as an Indication of the Future Performance of the Indices During the Term of the Securities
The actual performance of the Index underlying your Securities or any index component over the term of the Securities, as well as the amount payable at
maturity or upon redemption, may bear little relation to the historical values of that Index or the index components, which in most cases have been highly volatile.
Commodity Prices May Change Unpredictably, Affecting the Value of the Indices and the Value of Your Securities in Unforeseeable Ways
Trading in futures contracts on physical commodities, including trading in the index components is speculative and can be extremely volatile. Market prices of the index components may fluctuate rapidly
based on numerous factors, including: changes in supply and demand relationships (whether actual, perceived, anticipated, unanticipated or unrealized); weather; agriculture; trade; fiscal, monetary and exchange control programs; domestic and foreign
political and economic events and policies; disease; pestilence; technological developments; changes in interest rates, whether through governmental action or market movements; and monetary and other governmental policies, action and inaction. The
current or spot prices of the underlying physical commodities may also affect, in a volatile and inconsistent manner, the prices of futures contracts in respect of the relevant commodity. These factors may affect the value of the Index
underlying your Securities and the value of your Securities in varying ways, and different factors may cause the prices of the index components, and the volatilities of their prices, to move in inconsistent directions at inconsistent rates.
Supply of and Demand for Physical Commodities Tends to be Particularly Concentrated, So Prices Are Likely to Be Volatile
The prices of physical commodities, including the commodities underlying the index components, can fluctuate widely due to supply and demand disruptions
in major producing or consuming regions. In particular, recent growth in industrial production and gross domestic product has made China an oversized user of commodities and has increased the extent to which certain commodities rely on the Chinese
markets. Political, economic and other developments that affect China may affect the value of the commodities underlying the index components and, thus, the value of the Securities linked to that Index. Because certain of the commodities underlying
the index components may be produced in a limited number of countries and may be controlled by a small number of producers, political, economic and supply related events in such countries could have a disproportionate impact on the prices of such
commodities and the value of your Securities.
Changes in the Treasury Bill Rate of Interest May Affect the Value of the Indices and Your
Securities
Because the value of each of the Indices is linked, in part, to the Treasury Bill rate of interest that could be earned on
cash collateral invested in specified Treasury Bills, changes in the Treasury Bill rate of interest may affect the amount payable on your Securities at maturity or upon redemption and, therefore, the market value of your Securities. Assuming the
trading prices of the index components included in the Index to which your Securities are linked remain constant, an increase in the Treasury Bill rate of interest will increase the value of the Index and, therefore, the value of your Securities. A
decrease in the Treasury Bill rate of interest will adversely impact the value of the Index and, therefore, the value of your Securities.
Changes in Our Credit Ratings May Affect the Market Value of Your Securities
Our credit ratings are an assessment of our ability to pay our obligations, including those on the Securities. Consequently, actual or
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anticipated changes in our credit ratings may affect the market value of your Securities. However, because the return on your Securities is dependent upon certain factors in addition to our
ability to pay our obligations on your Securities, an improvement in our credit ratings will not reduce the other investment risks related to your Securities.
You Will Not Receive Interest Payments on the Securities or Have Rights in the Exchange-Traded Futures Contracts Constituting the Index Components
You will not receive any periodic interest payments on your Securities. As an owner of a series of Securities, you will not have rights that investors in
the index components included in the Index underlying those Securities may have. Your Securities will be paid in cash, and you will have no right to receive delivery of any index components or commodities underlying the index components.
There May Not Be an Active Trading Market in the Securities; Sales in the Secondary Market May Result in Significant Losses
Although we have listed the Securities on NYSE Arca, there can be no assurance that a secondary market for any series of the Securities will exist at any
time. In addition, if the Oil Index ceases in whole or in part to be based on the WTI crude oil futures contract traded on the New York Mercantile Exchange, NYSE Arca may be required to de-list the Oil Securities. Certain affiliates of Barclays Bank
PLC may engage in limited purchase and resale transactions in the Securities, although they are not required to do so. If they decide to engage in such transactions, they may stop at any time. We are not required to maintain any listing of the
Securities on NYSE Arca or any other exchange.
Trading and Other Transactions by Barclays Bank PLC or Its Affiliates in Instruments Linked
to the Indices or Index Components May Impair the Market Value of the Securities
As described below under Use of Proceeds and
Hedging in this pricing supplement, we or one or more of our affiliates may hedge our obligations under any series of Securities by purchasing index components (including the underlying physical commodities), futures or options on index
components or the Indices, or other derivative instruments with returns linked to the performance of index components or the Indices, and we may adjust these hedges by, among other things, purchasing or selling any of the foregoing. Although they
are not expected to, any of these hedging activities may adversely affect the market price of index components and the value of the Indices and, therefore, the market value of the Securities. It is possible that we or one or more of our affiliates
could receive substantial returns from these hedging activities while the market value of the Securities declines.
We or one or more of our
affiliates may also engage in trading in index components, futures or options on index components, the physical commodities underlying the index components or the Indices, and other investments relating to index components or the Indices on a
regular basis as part of our general broker-dealer and other businesses, for proprietary accounts, for other accounts under management or to facilitate transactions for customers. Any of these activities could adversely affect the market price of
the index components or the value of the Indices and, therefore, the market value of the Securities. We or one or more of our affiliates may also issue or underwrite other securities or financial or derivative instruments with returns linked or
related to changes in the performance of any of the foregoing. By introducing competing products into the marketplace in this manner, we or one or more of our affiliates could adversely affect the market value of the Securities. With respect to any
of the activities described above, neither Barclays Bank PLC nor its affiliates has any obligation to take the needs of any buyer, seller or holder of the Securities into consideration at any time.
The Liquidity of the Market for the Securities May Vary Materially Over Time
As stated on the cover of this pricing supplement, we sold a portion of the Securities on the inception date, and the remainder of the Securities will be offered and sold from time to time through
Barclays Capital Inc., our affiliate, as agent. Also, the number of Securities of any series outstanding or held by persons other than
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our affiliates could be reduced at any time due to early redemptions of the Securities. Accordingly, the liquidity of the market for a series of Securities could vary materially over the term of
the Securities. While you may elect to redeem your Securities prior to maturity, early redemption is subject to the conditions and procedures described elsewhere in this pricing supplement, including the condition that you must redeem at least
50,000 Securities of the same series at one time in order to exercise your right to redeem your Securities on any redemption date.
Our
Business Activities May Create Conflicts of Interest
We and our affiliates expect to play a variety of roles in connection with the
issuance of the Securities. As noted above, we and our affiliates expect to engage in trading activities related to the index components (including the underlying physical commodities), futures or options on index components or the Indices, or other
derivative instruments with returns linked to the performance of index components or the Indices that are not for the account of holders of the Securities or on their behalf. These trading activities may present a conflict between the holders
interest in the Securities and the interests that we and our affiliates will have in our and our affiliates proprietary accounts, in facilitating transactions, including options and other derivatives transactions, for our and our
affiliates customers and in accounts under our and our affiliates management. These trading activities, if they influence the value of the Indices, could be adverse to the interests of the holders of the Securities. Moreover, we and our
affiliates have published and in the future expect to publish research reports with respect to some or all of the physical commodities underlying the index components and physical commodities generally. This research is modified from time to time
without notice and may express opinions or provide recommendations that are inconsistent with purchasing or holding the Securities. The research should not be viewed as a recommendation or endorsement of the Securities in any way and investors must
make their own independent investigation of the merits of this investment. Any of these activities by us, Barclays Capital Inc. or our other affiliates may affect the market price of the index components and the value of the Indices and, therefore,
the market value of the Securities. With respect to any of the activities described above, neither Barclays Bank PLC nor its affiliates has any obligation to take the needs of any buyer, seller or holder of the Securities into consideration at any
time.
Barclays Bank PLC and Its Affiliates Have No Affiliation with S&P and Are Not Responsible for Its Public Disclosure of
Information, Which May Change Over Time
We and our affiliates are not affiliated with S&P in any way and have no ability to control
or predict its actions, including any errors in, or discontinuation of disclosure regarding S&Ps methods or policies relating to the calculation of the Indices in its capacity as Index Sponsor. The Index Sponsor is not under any obligation
to continue to calculate the Indices or required to calculate any successor indices. If the Index Sponsor discontinues or suspends the calculation of an Index, it may become difficult to determine the market value of the Securities linked to that
Index or the amount payable at maturity or upon redemption. The calculation agent may designate a successor index selected in its sole discretion. If the calculation agent determines in its sole discretion that no successor index comparable to the
discontinued or suspended Index exists, the amount you receive at maturity or upon redemption of the Securities linked to that Index will be determined by the calculation agent in its sole discretion. See Specific Terms of the
SecuritiesMarket Disruption Event and Discontinuance or Modification of the Index in this pricing supplement.
Substantially all of the disclosure in this pricing supplement regarding the Indices, including their make-up, method of calculation and changes in their
components, is derived from publicly available information. We have not independently verified this information. You, as an investor in the Securities, should make your own investigation into the Indices and the Index Sponsor. The Index Sponsor has
no obligation to consider your interests as a holder of the Securities.
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The Policies of the Index Sponsor and Changes That Affect the Composition and Valuation of the Indices or
the Index Components Could Affect the Amount Payable on Your Securities and Their Market Value
The policies of the Index Sponsor
concerning the calculation of the level of the Indices, additions, deletions or substitutions of index components and the manner in which changes affecting the index components are reflected in any Index could affect the value of the Indices and,
therefore, the amount payable on your Securities at maturity or upon redemption and the market value of your Securities prior to maturity.
Additional commodity futures contracts may satisfy the eligibility criteria for inclusion in the relevant Index, and the commodity futures contract or
contracts currently included in the relevant Index may fail to satisfy such criteria. The weighting factors applied to each futures contract included in the S&P GSCI or the Oil Index may change annually, based on changes in commodity production
and volume statistics. In addition, the Index Sponsor may modify the methodology for determining the composition and weighting of the relevant Index, for calculating its value in order to assure that the relevant Index represents an adequate measure
of market performance or for other reasons, or for calculating the value of that Index. With respect to the Commodity Index, a number of modifications to the methodology for determining the contracts to be included in the S&P GSCI and the
Commodity Index, and for valuing the S&P GSCI and thus the Commodity Index, have been made in the past several years and further modifications may be made in the future. The Index Sponsor may also discontinue or suspend calculation or
publication of an Index, in which case it may become difficult to determine the market value of that Index. Any such changes could adversely affect the value of your Securities.
If events such as these occur, or if the value of an Index is not available or cannot be calculated because of a market disruption event or for any other reason, the calculation agent may be required to
make a good faith estimate in its sole discretion of the value of such Index. The circumstances in which the calculation agent will be required to make such a determination are described more fully under Specific Terms of the
SecuritiesMarket Disruption Event, Discontinuance or Modification of an Index and Role of Calculation Agent.
The Relevant Indices May in the Future Include Contracts That Are Not Traded on Regulated Futures Exchanges
The Commodity Index was originally based solely on futures contracts traded on regulated futures exchanges (referred to in the United States as designated contract markets). At present, the
Commodity Index continues to be composed exclusively of regulated futures contracts, and the Oil Index is composed of a single futures contract traded on the New York Mercantile Exchange, which is a regulated futures exchange. As described below,
however, the Indices may in the future include over-the-counter contracts (such as swaps and forward contracts) traded on trading facilities that are subject to lesser degrees of regulation or, in some cases, no substantive regulation. As a result,
trading in such contracts, and the manner in which prices and volumes are reported by the relevant trading facilities, may not be subject to the provisions of, and the protections afforded by, the U.S. Commodity Exchange Act of 1936, or other
applicable statutes and related regulations, that govern trading on regulated U.S. futures exchanges, or similar statutes and regulations that govern trading on regulated foreign exchanges. In addition, many electronic trading facilities have only
recently initiated trading and do not have significant trading histories. As a result, the trading of contracts on such facilities, and the inclusion of such contracts in the relevant Indices, may be subject to certain risks not presented by most
exchange-traded futures contracts, including risks related to the liquidity and price histories of the relevant contracts.
There Are
Potential Conflicts of Interest Between You and the Calculation Agent
Currently, Barclays Bank PLC serves as the calculation agent. We
will, among other things, decide the amount of the return paid out to you on the Securities at maturity or upon redemption. For a more detailed description of the calculation agents role, see Specific Terms of the SecuritiesRole of
Calculation Agent in this pricing supplement.
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If the Index Sponsor were to discontinue or suspend calculation or publication of an Index, it may become
difficult to determine the market value of the Securities linked to that Index. If events such as these occur, or if the value of the Index underlying your Securities is not available or cannot be calculated because of a market disruption event or
for any other reason, the calculation agent may be required to make a good faith estimate in its sole discretion of the value of that Index. The circumstances in which the calculation agent will be required to make such a determination are described
more fully under Specific Terms of the SecuritiesRole of Calculation Agent in this pricing supplement.
The calculation
agent will exercise its judgment when performing its functions. For example, the calculation agent may have to determine whether a market disruption event affecting an Index has occurred or is continuing on a valuation date, including the final
valuation date. This determination may, in turn, depend on the calculation agents judgment as to whether the event has materially interfered with our ability to unwind our or our affiliates hedge positions. Since these determinations by
the calculation agent may affect the market value of the Securities, the calculation agent may have a conflict of interest if it needs to make any such decision.
If a Market Disruption Event Has Occurred or Exists on a Valuation Date, the Calculation Agent Can Postpone the Determination of the Value of the Relevant Index or the Maturity Date or a Redemption
Date
The determination of the value of an Index on a valuation date, including the final valuation date, may be postponed if the
calculation agent determines that a market disruption event with respect to that Index has occurred or is continuing on such valuation date. If such a postponement occurs, the index components unaffected by the market disruption event shall be
determined on the scheduled valuation date and the value of the affected index component shall be determined using the closing value of the affected index component on the first trading day after that day on which no market disruption event occurs
or is continuing. In no event, however, will a valuation date for any series of Securities be postponed by more than five trading days. As a result, the maturity date or a redemption date for a series of Securities could also be postponed, although
not by more than five trading days. If a valuation date is postponed until the fifth trading day following the scheduled valuation date but a market disruption event occurs or is continuing on such day, that day will nevertheless be the valuation
date and the calculation agent will make a good faith estimate in its sole discretion of the value of the relevant Index for such day. See Specific Terms of the SecuritiesMarket Disruption Event in this pricing supplement.
Postponement of a Valuation Date May Result in a Reduced Amount Payable at Maturity or Upon Redemption
As the payment at maturity or upon redemption is a function of, among other things, the applicable index factor on the final valuation date or applicable
valuation date, as the case may be, the postponement of any valuation date may result in the application of a different applicable index factor and, accordingly, decrease the payment you receive at maturity or upon redemption.
Changes in Law or Regulation Relating to Commodities Futures Contracts May Adversely Affect the Market Value of the Securities and the Amounts Payable
on Your Securities
The commodities futures contracts that underlie the Indices are subject to legal and regulatory regimes that are in
the process of changing in the United States and, in some cases, in other countries. For example, the United States Congress has enacted legislation that is, among other things, intended to limit speculation and increase transparency in the
commodity markets and regulate the over-the-counter derivatives markets. The legislation requires the Commodity Futures Trading Commission (the CFTC) to adopt rules on a variety of issues and many provisions of the legislation will not
become effective until such rules are adopted.
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Among other things, the legislation requires that most over-the-counter transactions be executed on
organized exchanges or facilities and be cleared through regulated clearing houses, and requires registration of, and imposes regulations on, swap dealers and major swap participants. The legislation also authorizes the CFTC to adopt rules with
respect to the establishment of limits on futures positions that are not entered into or maintained for bona fide hedging purposes, as defined in the legislation. The legislation also requires the CFTC to apply its position limits on
physical commodities across the futures positions held by a market participant on any exchange or trading facility, together with its positions in swaps that are economically equivalent to the specified exchange-traded futures that are
subject to position limits. The enactment of the legislation, and the CFTCs adoption of rules on position limits, which have been adopted but have not yet become effective, could limit the extent to which entities can enter into transactions
in exchange-traded futures contracts as well as related swaps and could make participation in the markets more burdensome and expensive. Any such limitations could restrict or prevent our ability to hedge our obligations under the Securities. If
they are imposed, those restrictions on effecting transactions in the futures markets could substantially reduce liquidity in the commodity futures contracts that underlie the Indices, which could adversely affect the prices of such contracts and,
in turn, the market value of the Securities and the amounts payable on the Securities at maturity or upon redemption. In addition, other parts of the legislation, by increasing regulation of, and imposing additional costs on, swap transactions,
could reduce trading in the swap market and therefore in the futures markets, which would further restrict liquidity and adversely affect prices.
Data Sourcing, Calculation and Concentration Risks Associated with the Indices May Adversely Affect the Market Price of the Securities
Because the Securities are linked to an Index, which is composed of a basket of exchange-traded futures contracts on commodities (in the case of the Oil Index, currently only the WTI crude oil futures
contract traded on the New York Mercantile Exchange), the relevant Index will be less diversified than other funds or investment portfolios investing in a broader range of products and, therefore, could experience greater volatility. Additionally,
the annual composition of each Index will be recalculated in reliance upon historic price, liquidity and production data that are subject to potential errors in data sources or other errors that may affect the weighting of the index components. Any
discrepancies that require revision are not applied retroactively but will be reflected in the weighting calculations of the relevant Index for the following period. Additionally, the Index Sponsor may not discover every discrepancy. Furthermore,
the weightings for the Indices are determined by the Index Sponsor, in consultation with the Index Committee. The Index Sponsor, has sole discretion in making decisions with respect to each Index and has no obligation to take the needs of any
parties to transactions involving the Indices into consideration when reweighting or making any other changes to the Indices. Finally, the exchange-traded commodities underlying the futures contracts included in the Indices from time to time are
concentrated in a limited number of sectors (in the case of the Commodity Securities) or in one sector (in the case of the Oil Securities). An investment in the Securities may therefore carry risks similar to a concentrated securities investment in
a limited number of industries or sectors (in the case of the Commodity Securities) or in one industry or sector (in the case of the Oil Securities).
The Index Sponsor May be Required to Replace a Designated Contract if the Existing Futures Contract Is Terminated or Replaced
A futures contract known as a designated contract has been selected as the reference contract for the physical commodity underlying each index component (which, for the Oil Index, currently
includes only the WTI crude oil futures contract traded on the New York Mercantile Exchange). Data concerning this designated contract will be used to calculate each Index that includes that index component. If a designated contract were to be
terminated or replaced in accordance with the rules described under The IndicesGeneral Information in this pricing supplement, a comparable futures contract would be selected by the Index Sponsor, if available, to replace that
designated contract. The termination or replacement of any designated contract may have an adverse impact on the value of any Index in which the relevant index component is included.
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The Tax Consequences Are Uncertain
The U.S. federal income tax treatment of each series of Securities is uncertain and the Internal Revenue Service could assert that any series of Securities should be taxed in a manner that is different
than described in this pricing supplement. As discussed further below, 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 and whether all or part of the gain you may recognize upon the sale, 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 increase the likelihood that you will be required to accrue income over the term of an instrument such as the Securities even though you will not receive any payments with respect to the Securities until early redemption or maturity. The
outcome of this process is uncertain . Similarly, in 2007, legislation was introduced in Congress that, if enacted, would have required holders that acquired instruments such as the Securities after the bill was enacted to accrue interest income on
a current basis. It is not possible to predict whether a similar or identical bill will be enacted in the future, or whether any such bill would affect the tax treatment of your Securities.
Moreover, it is possible that the Internal Revenue Service could seek to tax your Securities by reference to your deemed ownership of the relevant index components. In such a case, it is possible that
Section 1256 of the Internal Revenue Code could apply to your Securities, in which case any gain or loss that you recognize with respect to the Securities that is attributable to the regulated futures contracts represented in the Index
underlying your Securities could be treated as 60% long-term capital gain or loss and 40% short-term capital gain or loss, without regard to your holding period in the Securities. Under this approach, you could also be required to mark such portion
of the Securities to market at the end of each taxable year (i.e., recognize gain, and possibly recognize loss, as if the relevant portion of your Securities had been sold for fair market value). Under this alternative treatment, you could also be
required to (i) recognize gain or loss, at least some of which could be short-term capital gain or loss, each time the relevant Index rebalances or each time a futures contract tracked by the relevant Index rolls, and (ii) currently accrue
ordinary interest income in respect of the notional interest component of the relevant Index.
For a discussion of the U.S. federal income tax
treatment applicable to your Securities as well as other potential alternative characterizations for your Securities, please see the discussion under Material U.S. Federal Income Tax Considerations below. You should consult your tax
advisor as to the possible alternative treatments in respect of the Securities.
THE
INDICESGENERAL INFORMATION
The following is a description of the S&P GSCI, the Commodity Index and the Oil Index. We have
derived substantially all of the information contained in this pricing supplement regarding each Index, including its make-up, method of calculation, changes in its components and historical performance, from publicly available information. We have
not independently verified this information. You, as an investor in the Securities, should make your own investigation into the Index and the Index Sponsor.
The information contained herein with respect to the S&P GSCI and the Indices reflects the policies of the Index Sponsor at the date of this pricing supplement. The S&P GSCI, the Indices and the
policies of the Index Sponsor are subject to change by the Index Sponsor at any time. The Index Sponsor owns the copyright and all other rights to the S&P GSCI and the Indices. The Index Sponsor is not involved in the offer of the Securities in
any way, has no obligation to
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consider your interests as a holder of the Securities, and the Index Sponsor has no obligation to continue to publish, and may discontinue publication of, the Indices. The consequences of the
Indices are described below in the section entitled Specific Terms of the SecuritiesDiscontinuance or Modification of the Indices.
Current information regarding the market value of the Indices is available from the Index Sponsor and numerous public sources. Neither we nor any of our affiliates make any representation that publicly
available information about the Indices is accurate or complete. In addition, neither we nor any of our affiliates accepts any responsibility for the calculation, maintenance or publication of, or for any error, omission or disruption in, the
Indices.
Since their inception, the Indices have experienced significant fluctuations. Any historical upward or downward trend in the closing
value of the Indices is not an indication that the Indices are more or less likely to increase or decrease at any time during the term of your Securities. It is impossible to predict whether the price of the index components will rise or fall and
you should not take the historical values of the Indices as an indication of future performance. We cannot give you any assurance that the future performance of the Indices or any index component will result in you receiving an amount greater than
the principal amount of your Securities at maturity or upon early redemption. Neither we nor any of our affiliates makes any representation to you as to the performance of the Indices.
Information contained on certain websites mentioned below is not incorporated by reference in, and should not be considered part of, this pricing supplement or the accompanying prospectus supplement and
prospectus.
Because the Commodity Index is a related index of the S&P GSCI and the Oil Index is a sub-index of the S&P GSCI,
disclosure in this pricing supplement relating to the S&P GSCI accordingly relates to the Indices as well and should be read in conjunction with the individual descriptions of the Indices.
Commodity Futures Markets
As discussed in the descriptions of the individual Indices below, each of the Indices is composed of one or more futures contracts on physical
commodities. Futures contracts on physical commodities and commodity indices are traded on regulated futures exchanges, and physical commodities and other derivatives on physical commodities and commodity indices are traded in the over-the-counter
market and on various types of physical and electronic trading facilities and markets. At present, all of the contracts included in the S&P GSCI and thus the Indices are exchange-traded futures contracts. An exchange-traded futures contract
provides for the purchase and sale of a specified type and quantity of a commodity or financial instrument during a stated delivery month for a fixed price. A futures contract on an index of commodities provides for the payment and receipt of cash
based on the level of the index at settlement or liquidation of the contract. A futures contract provides for a specified settlement month in which the cash settlement is made or in which the commodity or financial instrument is to be delivered by
the seller (whose position is therefore described as short) and acquired by the purchaser (whose position is therefore described as long).
There is no purchase price paid or received on the purchase or sale of a futures contract. Instead, an amount of cash or cash equivalents must be deposited with the broker as initial margin.
This amount varies based on the requirements imposed by the exchange clearing houses, but may be lower than 5% of the notional value of the contract. This margin deposit provides collateral for the obligations of the parties to the futures contract.
By depositing margin, which may vary in form depending on the exchange, with the clearing house or broker involved, a market participant may
be able to earn interest on its margin funds, thereby increasing the total return that it may realize from an investment in futures contracts. The market participant normally makes to, and receives from, the broker subsequent daily payments as the
price of the futures contract fluctuates. These payments are called variation margin and are made as the existing positions in the futures contract become more or less valuable, a process known as marking to the market.
PS-19
Futures contracts are traded on organized exchanges, known as designated contract markets in the
United States. At any time prior to the expiration of a futures contract, subject to the availability of a liquid secondary market, a trader may elect to close out its position by taking an opposite position on the exchange on which the trader
obtained the position. This operates to terminate the position and fix the traders profit or loss. Futures contracts are cleared through the facilities of a centralized clearing house and a brokerage firm, referred to as a futures
commission merchant, which is a member of the clearing house. The clearing house guarantees the performance of each clearing member that is a party to a futures contract by, in effect, taking the opposite side of the transaction. Clearing
houses do not guarantee the performance by clearing members of their obligations to their customers.
Unlike equity securities, futures
contracts, by their terms, have stated expirations and, at a specified point in time prior to expiration, trading in a futures contract for the current delivery month will cease. As a result, a market participant wishing to maintain its exposure to
a futures contract on a particular commodity with the nearest expiration must close out its position in the expiring contract and establish a new position in the contract for the next delivery month, a process referred to as rolling. For
example, a market participant with a long position in November crude oil futures that wishes to maintain a position in the nearest delivery month will, as the November contract nears expiration, sell November futures, which serves to close out the
existing long position, and buy December futures. This will roll the November position into a December position, and, when the November contract expires, the market participant will still have a long position in the nearest delivery
month.
Futures exchanges and clearing houses in the United States are subject to regulation by the Commodities Futures Trading Commission.
Exchanges may adopt rules and take other actions that affect trading, including imposing speculative position limits, maximum price fluctuations and trading halts and suspensions and requiring liquidation of contracts in certain circumstances.
Futures markets outside the United States are generally subject to regulation by comparable regulatory authorities. The structure and nature of trading on non-U.S. exchanges, however, may differ from this description.
The S&P GSCI
The
Commodity Index is a related index of the S&P GSCI and the Oil Index is a sub-index of the S&P GSCI. Disclosure in this section relating to the methodology for compiling the S&P GSCI accordingly relates as well to the methodology of
compiling each Index. The next sections, The Commodity Index and The Oil Index describe the features of each Index that differ from the S&P GSCI.
The S&P GSCI is an index on a production-weighted basket of futures contracts on physical commodities traded on trading facilities in countries that are members of the Organization for Economic
Cooperation and Development (
OECD
). The S&P GSCI is designed to be a measure of the performance over time of the markets for these commodities. The only commodities represented in the S&P GSCI are those physical
commodities on which active and liquid contracts are traded on trading facilities in countries that are members of the OECD. The commodities represented in the S&P GSCI are weighted, on a production basis, to reflect their relative significance
(in the view of S&P, in consultation with the Index Committee, which is described below) to the world economy. The fluctuations in the value of the S&P GSCI are intended generally to correlate with changes in the prices of such physical
commodities in global markets. The value of the S&P GSCI has been normalized such that its hypothetical level on January 2, 1970 was 100.
The contracts to be included in the S&P GSCI at any given time must satisfy several sets of eligibility criteria established by S&P. First, S&P identifies those contracts that meet the general
criteria for eligibility. Second, the contract volume and weight requirements are applied and the number of contracts is determined, which serves to reduce the list of eligible contracts. At that point, the list of designated contracts for the
relevant period is complete. The composition of the S&P GSCI is also reviewed on a monthly basis by S&P.
PS-20
Set forth below is a summary of the composition of and the methodology used to calculate the S&P GSCI.
The methodology for determining the composition and weighting of the S&P GSCI and for calculating its value is subject to modification in a manner consistent with the purposes of the S&P GSCI. S&P makes the official calculations of the
S&P GSCI.
The Index Committee and the Index Advisory Panel
S&P has established an index committee (the Index Committee) to oversee the daily management and operations of the S&P GSCI, and is responsible for all analytical methods and
calculation in the indices. At each meeting, the Index Committee reviews any issues that may affect the components of the S&P GSCI, statistics comparing its composition to the market, commodities being considered for addition and any significant
market events. In addition, the Index Committee may revise index policy covering rules for selecting commodities, or other matters. S&P considers information about changes to the indices and related matters to be potentially market moving and
material. Therefore, all Index Committee discussions are confidential.
S&P has also established an index advisory panel (the Index
Advisory Panel) to assist it in connection with the operation of the S&P GSCI. The Index Advisory Panel meets on an annual basis and at other times at the request of the Index Committee. The principal purpose of the Index Advisory Panel is
to advise the Index Committee with respect to, among other things, the calculation of the S&P GSCI, the effectiveness of the S&P GSCI as a measure of commodity futures market performance and the need for changes in the composition or
methodology of the S&P GSCI. The Index Advisory Panel acts solely in an advisory and consultative capacity; all decisions with respect to the composition, calculation and operation of the S&P GSCI are made by the Index Committee. Certain of
the members of the Index Advisory Panel may be affiliated with clients of S&P. Also, certain of the members of the Index Advisory Panel may be affiliated with entities which from time to time may have investments linked to the S&P GSCI,
either through transactions in the contracts included in the S&P GSCI, futures contracts on the S&P GSCI or derivative products linked to the S&P GSCI.
Composition of the S&P GSCI
In order to be included in the S&P GSCI, a contract
must satisfy the following eligibility criteria:
|
(a)
|
be in respect of a physical commodity (rather than a financial commodity);
|
|
(b)
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have a specified expiration or term, or provide in some other manner for delivery or settlement at a specified time, or within a specified period, in the future; and
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(c)
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at any given point in time, be available for trading at least five months prior to its expiration or such other date or time period specified for delivery or
settlement.
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(2)
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The commodity must be the subject of a contract that:
|
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(a)
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is denominated in U.S. dollars;
|
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(b)
|
is traded on or through an exchange, facility or other platform (referred to as a trading facility) that has its principal place of business or operations
in a country that is a member of the OECD and:
|
|
|
|
makes price quotations generally available to its members or participants (and, if S&P is not such a member or participant, to S&P) in a manner
and with a frequency that is sufficient to provide reasonably reliable indications of the level of the relevant market at any given point in time;
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makes reliable trading volume information available to S&P with at least the frequency required by S&P to make the monthly determinations;
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accepts bids and offers from multiple participants or price providers; and
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|
is accessible by a sufficiently broad range of participants; and
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(c)
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is traded on a trading facility which allows market participants to execute spread transactions through a single order entry between pairs of contract expirations
included in the S&P GSCI that, at any given point in time, will be involved in the rolls to be effected in the next three roll periods.
|
PS-21
(3)
|
The price of the relevant contract that is used as a reference or benchmark by market participants (referred to as the daily contract reference price)
generally must have been available on a continuous basis for at least two years prior to the proposed date of inclusion in the S&P GSCI. In appropriate circumstances, however, S&P, in consultation with the Index Committee, may determine that
a shorter time period is sufficient or that historical daily contract reference prices for such contract may be derived from daily contract reference prices for a similar or related contract. The daily contract reference price may be (but is not
required to be) the settlement price or other similar price published by the relevant trading facility for purposes of margining transactions or for other purposes.
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(4)
|
At and after the time a contract is included in the S&P GSCI, the daily contract reference price for such contract must be published between 10:00 a.m. and 4:00
p.m., New York City time on each contract business day by the trading facility on or through which it is traded and must generally be available to all members of, or participants in, such facility (and S&P) on the same day from the trading
facility or through a recognized third-party data vendor. Such publication must include, at all times, daily contract reference prices for at least one expiration or settlement date that is five months or more from the date the determination is
made, as well as for all expiration or settlement dates during such five-month period.
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(5)
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Volume data with respect to such contract must be available for at least the three months immediately preceding the date on which the determination is made.
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(6)
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A contract that is not included in the S&P GSCI at the time of determination and that is based on a commodity that is not represented in the S&P GSCI at such
time must, in order to be added to the S&P GSCI at such time, have a total dollar value traded, over the relevant period, as the case may be and annualized, of at least US$15 billion. The total dollar value traded is the dollar value of the
total quantity of the commodity underlying transactions in the relevant contract over the period for which the calculation is made, based on the average of the daily contract reference prices on the last day of each month during the period.
|
(7)
|
A contract that is already included in the S&P GSCI at the time of determination and that is the only contract on the relevant commodity included in the S&P
GSCI must, in order to continue to be included in the S&P GSCI after such time, have a total dollar value traded, over the relevant period, as the case may be and annualized, of at least US$5 billion and at least US$10 billion during at least
one of the three most recent annual periods used in making the determination.
|
(8)
|
A contract that is not included in the S&P GSCI at the time of determination and that is based on a commodity on which there are one or more contracts already
included in the S&P GSCI at such time must, in order to be added to the S&P GSCI at such time, have a total dollar value traded, over the relevant period, as the case may be and annualized, of at least US$30 billion.
|
(9)
|
A contract that is already included in the S&P GSCI at the time of determination and that is based on a commodity on which there are one or more contracts already
included in the S&P GSCI at such time must, in order to continue to be included in the S&P GSCI after such time, have a total dollar value traded, over the relevant period, as the case may be and annualized, of at least US$10 billion and at
least US$20 billion during at least one of the three most recent annual periods used in making the determination.
|
(10)
|
A contract that is already included in the S&P GSCI at the time of determination must, in order to continue to be included after such time, have a reference
percentage dollar weight of at least 0.10%. The reference percentage dollar weight of a contract is determined by multiplying the CPW (defined below) of a contract by the average of its daily contract reference prices on the last day of each month
during the relevant period. These amounts are summed for all contracts included in the S&P GSCI and each contracts percentage of the total is then determined.
|
(11)
|
A contract that is not included in the S&P
|
PS-22
|
GSCI at the time of determination must, in order to be added to the S&P GSCI at such time, have a reference percentage dollar weight of at least 1.00%.
|
(12)
|
In the event that two or more contracts on the same commodity satisfy the eligibility criteria,
|
|
(a)
|
such contracts will be included in the S&P GSCI in the order of their respective total quantity traded during the relevant period (determined as the total quantity
of the commodity underlying transactions in the relevant contract), with the contract having the highest total quantity traded being included first, provided that no further contracts will be included if such inclusion would result in the portion of
the S&P GSCI attributable to such commodity exceeding a particular level; and
|
|
(b)
|
if additional contracts could be included with respect to several commodities at the same time, the procedure in paragraph 12(a) above is first applied with respect to
the commodity that has the smallest portion of the S&P GSCI attributable to it at the time of determination. Subject to the other eligibility criteria set forth above, the contract with the highest total quantity traded on such commodity will be
included. Before any additional contracts on the same commodity or on any other commodity are included, the portion of the S&P GSCI attributable to all commodities is recalculated. The selection procedure described above is then repeated with
respect to the contracts on the commodity that then has the smallest portion of the S&P GSCI attributable to it.
|
Currently,
24 contracts meet the requirements for inclusion in the S&P GSCI.
PS-23
Contracts Included in the S&P GSCI for 2012
|
|
|
|
|
|
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|
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|
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|
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Trading
Facility
|
|
Commodity
(Contract)
|
|
Ticker
(1)
|
|
2011
Contract
Production
Weight
|
|
|
2012
Contract
Production
Weight
|
|
|
2012
Average
Contract
Reference
Price ($)
|
|
|
2011
Percentage
Dollar
Weight
(2)
|
|
|
2012
Reference
Price
Dollar
Weight
|
|
|
2012 Total
Dollar
Value
Traded
(USD bn)
|
|
|
2012
Trading
Volume
Multiple
|
|
CBT
|
|
Wheat (Chicago)
|
|
W
|
|
|
18,188.56
|
|
|
|
18,217.58
|
|
|
|
7.466 BU
|
|
|
|
3.28
|
%
|
|
|
3.23
|
%
|
|
|
919.4
|
|
|
|
124
|
|
KBT
|
|
Wheat (Kansas City)
|
|
KW
|
|
|
4,134.2
|
|
|
|
5,004.071
|
|
|
|
8.333 BU
|
|
|
|
0.83
|
%
|
|
|
0.99
|
%
|
|
|
281.9
|
|
|
|
124
|
|
CBT
|
|
Corn
|
|
C
|
|
|
28,210.87
|
|
|
|
29,648.15
|
|
|
|
6.600 BU
|
|
|
|
4.50
|
%
|
|
|
4.64
|
%
|
|
|
2,771.1
|
|
|
|
259.7
|
|
CBT
|
|
Soybeans
|
|
S
|
|
|
7,708.699
|
|
|
|
8,037.317
|
|
|
|
13.380 BU
|
|
|
|
2.49
|
%
|
|
|
2.55
|
%
|
|
|
2,913.6
|
|
|
|
496.8
|
|
ICE - US
|
|
Coffee C
|
|
KC
|
|
|
16,710
|
|
|
|
17,406.22
|
|
|
|
2.472 lbs
|
|
|
|
1.00
|
%
|
|
|
1.02
|
%
|
|
|
474.9
|
|
|
|
202.3
|
|
ICE - US
|
|
Sugar #11
|
|
SB
|
|
|
340,773.4
|
|
|
|
344,724.8
|
|
|
|
0.278 lbs
|
|
|
|
2.29
|
%
|
|
|
2.28
|
%
|
|
|
870.6
|
|
|
|
166.3
|
|
ICE - US
|
|
Cocoa
|
|
CC
|
|
|
4.015306
|
|
|
|
4.116321
|
|
|
|
3085.750 MT
|
|
|
|
0.30
|
%
|
|
|
0.30
|
%
|
|
|
139.3
|
|
|
|
201
|
|
ICE - US
|
|
Cotton #2
|
|
CT
|
|
|
51,632.55
|
|
|
|
53,411.21
|
|
|
|
1.410 lbs
|
|
|
|
1.76
|
%
|
|
|
1.79
|
%
|
|
|
435
|
|
|
|
105.9
|
|
CME
|
|
Lean Hogs
|
|
LH
|
|
|
70,271.76
|
|
|
|
72,823.44
|
|
|
|
0.865 lbs
|
|
|
|
1.47
|
%
|
|
|
1.49
|
%
|
|
|
325.3
|
|
|
|
94.7
|
|
CME
|
|
Cattle (Live)
|
|
LC
|
|
|
91,458.23
|
|
|
|
92,591.82
|
|
|
|
1.102 lbs
|
|
|
|
2.44
|
%
|
|
|
2.42
|
%
|
|
|
571.2
|
|
|
|
102.7
|
|
CME
|
|
Cattle (Feeder)
|
|
FC
|
|
|
13,417.1
|
|
|
|
13,596.46
|
|
|
|
1.279 lbs
|
|
|
|
0.42
|
%
|
|
|
0.41
|
%
|
|
|
97.4
|
|
|
|
102.7
|
|
NYM/ICE
|
|
Oil (WTI Crude)
|
|
CL
|
|
|
14,314
|
|
|
|
13,557.23
|
|
|
|
94.111 bbl
|
|
|
|
32.59
|
%
|
|
|
30.49
|
%
|
|
|
22,038.9
|
|
|
|
316.7
|
|
NYM
|
|
Oil (#2 Heating)
|
|
HO
|
|
|
72,571.85
|
|
|
|
71,569.8
|
|
|
|
2.802 gal
|
|
|
|
4.92
|
%
|
|
|
4.80
|
%
|
|
|
3,463.8
|
|
|
|
316.7
|
|
NYM
|
|
Oil (RBOB)
|
|
RB
|
|
|
72,504.78
|
|
|
|
73,694.1
|
|
|
|
2.714 gal
|
|
|
|
4.76
|
%
|
|
|
4.78
|
%
|
|
|
3,454.5
|
|
|
|
316.7
|
|
ICE UK
|
|
Oil (Brent Crude)
|
|
LCO
|
|
|
6,262.977
|
|
|
|
6,959.701
|
|
|
|
105.134 bbl
|
|
|
|
15.93
|
%
|
|
|
17.14
|
%
|
|
|
12,639
|
|
|
|
316.7
|
|
ICE - UK
|
|
Oil (Gasoil)
|
|
LGO
|
|
|
313.6761
|
|
|
|
359.2745
|
|
|
|
879.063 MT
|
|
|
|
6.67
|
%
|
|
|
7.36
|
%
|
|
|
5,455.4
|
|
|
|
316.7
|
|
NYM/ICE
|
|
Natural Gas
|
|
NG
|
|
|
28,797.24
|
|
|
|
28,984.31
|
|
|
|
4.273 mmBtu
|
|
|
|
2.98
|
%
|
|
|
2.94
|
%
|
|
|
5,275.1
|
|
|
|
781
|
|
LME
|
|
Aluminum (High Gd. Prim.)
|
|
MAL
|
|
|
41.288
|
|
|
|
42.53
|
|
|
|
2512.938 MT
|
|
|
|
2.51
|
%
|
|
|
2.53
|
%
|
|
|
3,351.3
|
|
|
|
575
|
|
LME
|
|
Copper (Grade A)
|
|
MCU
|
|
|
16.62
|
|
|
|
17.14
|
|
|
|
9194.146 MT
|
|
|
|
3.70
|
%
|
|
|
3.74
|
%
|
|
|
7,477.9
|
|
|
|
870.1
|
|
LME
|
|
Standard Lead
|
|
MPB
|
|
|
7.574
|
|
|
|
7.872
|
|
|
|
2514.708 MT
|
|
|
|
0.46
|
%
|
|
|
0.47
|
%
|
|
|
631.7
|
|
|
|
585.1
|
|
LME
|
|
Primary Nickel
|
|
MNI
|
|
|
1.286
|
|
|
|
1.352
|
|
|
|
24796.583 MT
|
|
|
|
0.77
|
%
|
|
|
0.80
|
%
|
|
|
1,138.6
|
|
|
|
622.8
|
|
LME
|
|
Zinc (Spl. High Grade)
|
|
MZN
|
|
|
10.68
|
|
|
|
11.04
|
|
|
|
2,336.917 MT
|
|
|
|
0.60
|
%
|
|
|
0.61
|
%
|
|
|
1,174.7
|
|
|
|
834.9
|
|
CMX
|
|
Gold
|
|
GC
|
|
|
78.12632
|
|
|
|
76.58309
|
|
|
|
1,476.492 oz
|
|
|
|
2.79
|
%
|
|
|
2.68
|
%
|
|
|
7,224.8
|
|
|
|
1,171.6
|
|
CMX
|
|
Silver
|
|
SI
|
|
|
649.4452
|
|
|
|
665.5205
|
|
|
|
34.085 oz
|
|
|
|
0.54
|
%
|
|
|
0.54
|
%
|
|
|
3,573.1
|
|
|
|
2,888.3
|
|
(1)
|
Tickers are Reuters RIC Codes.
|
(2)
|
Using the ARCPs for the 2011 Annual Calculation Period.
|
PS-24
The quantity of each of the contracts included in the S&P GSCI is determined on the basis of a five-year
average (referred to as the world production average) of the production quantity of the underlying commodity as published by sources of information determined by S&P, including the United Nations Statistical Yearbook, the United
Nations Industrial Commodity Statistics Yearbook and other official sources. However, if a commodity is primarily a regional commodity, based on its production, use, pricing, transportation or other factors, S&P may calculate the weight of such
commodity based on regional, rather than world, production data.
The five-year moving average is updated annually for each commodity included
in the S&P GSCI, based on the most recent five-year period (ending approximately one-and-one-half years prior to the date of calculation and moving backwards) for which complete data for all commodities is available. The contract production
weights (CPWs) used in calculating the S&P GSCI are derived from world or regional production averages, as applicable, of the relevant commodities, and are calculated based on the total quantity traded for the relevant contract and
the world or regional production average, as applicable, of the underlying commodity.
However, if the volume of trading in the relevant
contract, as a multiple of the production levels of the commodity, is below specified thresholds, the CPW of the contract is reduced until the threshold is satisfied. This is designed to ensure that trading in each such contract is sufficiently
liquid relative to the production of the commodity.
In addition, S&P performs this calculation on a monthly basis and, if the multiple of
any contract is below the prescribed threshold, the composition of the S&P GSCI is reevaluated, based on the criteria and weighting procedure described above. This procedure is undertaken to allow the S&P GSCI to shift from contracts that
have lost substantial liquidity into more liquid contracts during the course of a given year. As a result, it is possible that the composition or weighting of the S&P GSCI will change on one or more of these monthly valuation dates. In addition,
regardless of whether any changes have occurred during the year, S&P reevaluates the composition of the S&P GSCI at the conclusion of each year, based on the above criteria. Other commodities that satisfy such criteria, if any, will be added
to the S&P GSCI. Commodities included in the S&P GSCI which no longer satisfy such criteria, if any, will be deleted.
S&P also
determines whether modifications in the selection criteria or the methodology for determining the composition and weights of and for calculating the S&P GSCI are necessary or appropriate in order to assure that the S&P GSCI represents a
measure of commodity market performance and to preserve and enhance S&P GSCIs tradability. S&P has the discretion to make any such modifications. We do not have any obligation to notify you if S&P changes the composition of the
S&P GSCI, the methodology of calculating the value of the S&P GSCI or any other policies of S&P relevant to the S&P GSCI.
PS-25
The following table illustrates the changes in the year-end percentage dollar weights of each subsector
included in the S&P GSCI from December 31, 1991 until December 30, 2011:
Historical Composition of the S&P GSCI
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Energy
|
|
|
Industrial Metals
|
|
|
Precious Metals
|
|
|
Agriculture
|
|
|
Livestock
|
|
December 31, 1991
|
|
|
48.0
|
%
|
|
|
5.9
|
%
|
|
|
2.4
|
%
|
|
|
21.1
|
%
|
|
|
22.7
|
%
|
December 31, 1992
|
|
|
48.9
|
%
|
|
|
6.1
|
%
|
|
|
2.4
|
%
|
|
|
18.6
|
%
|
|
|
24.0
|
%
|
December 31, 1993
|
|
|
39.6
|
%
|
|
|
6.3
|
%
|
|
|
3.0
|
%
|
|
|
24.7
|
%
|
|
|
26.4
|
%
|
December 31, 1994
|
|
|
48.8
|
%
|
|
|
8.2
|
%
|
|
|
2.6
|
%
|
|
|
20.8
|
%
|
|
|
19.6
|
%
|
December 31, 1995
|
|
|
53.5
|
%
|
|
|
7.9
|
%
|
|
|
2.6
|
%
|
|
|
25.3
|
%
|
|
|
10.6
|
%
|
December 31, 1996
|
|
|
61.5
|
%
|
|
|
6.4
|
%
|
|
|
2.4
|
%
|
|
|
19.6
|
%
|
|
|
10.1
|
%
|
December 31, 1997
|
|
|
55.3
|
%
|
|
|
7.2
|
%
|
|
|
2.4
|
%
|
|
|
24.0
|
%
|
|
|
11.1
|
%
|
December 31, 1998
|
|
|
46.9
|
%
|
|
|
9.2
|
%
|
|
|
3.8
|
%
|
|
|
28.1
|
%
|
|
|
12.0
|
%
|
December 31, 1999
|
|
|
60.3
|
%
|
|
|
8.5
|
%
|
|
|
2.6
|
%
|
|
|
18.1
|
%
|
|
|
10.5
|
%
|
December 31, 2000
|
|
|
66.8
|
%
|
|
|
6.4
|
%
|
|
|
2.0
|
%
|
|
|
16.1
|
%
|
|
|
8.7
|
%
|
December 31, 2001
|
|
|
58.6
|
%
|
|
|
7.8
|
%
|
|
|
2.8
|
%
|
|
|
19.6
|
%
|
|
|
11.2
|
%
|
December 31, 2002
|
|
|
67.3
|
%
|
|
|
5.6
|
%
|
|
|
2.5
|
%
|
|
|
16.9
|
%
|
|
|
7.7
|
%
|
December 31, 2003
|
|
|
66.8
|
%
|
|
|
7.4
|
%
|
|
|
2.5
|
%
|
|
|
17.0
|
%
|
|
|
6.3
|
%
|
December 31, 2004
|
|
|
71.1
|
%
|
|
|
7.8
|
%
|
|
|
2.2
|
%
|
|
|
12.2
|
%
|
|
|
6.6
|
%
|
December 31, 2005
|
|
|
74.9
|
%
|
|
|
6.8
|
%
|
|
|
1.9
|
%
|
|
|
10.9
|
%
|
|
|
5.6
|
%
|
December 31, 2006
|
|
|
68.4
|
%
|
|
|
11.1
|
%
|
|
|
2.5
|
%
|
|
|
13.4
|
%
|
|
|
4.7
|
%
|
December 31, 2007
|
|
|
73.8
|
%
|
|
|
7.1
|
%
|
|
|
2.2
|
%
|
|
|
13.3
|
%
|
|
|
3.6
|
%
|
December 31, 2008
|
|
|
74.7
|
%
|
|
|
7.3
|
%
|
|
|
2.0
|
%
|
|
|
12.7
|
%
|
|
|
3.4
|
%
|
December 31, 2009
|
|
|
69.3
|
%
|
|
|
6.8
|
%
|
|
|
3.2
|
%
|
|
|
15.7
|
%
|
|
|
5.1
|
%
|
December 31, 2010
|
|
|
66.5
|
%
|
|
|
8.3
|
%
|
|
|
3.4
|
%
|
|
|
17.4
|
%
|
|
|
4.3
|
%
|
December 30, 2011
|
|
|
70.5
|
%
|
|
|
6.6
|
%
|
|
|
3.5
|
%
|
|
|
14.7
|
%
|
|
|
4.7
|
%
|
Copyright S&P Dow Jones Indices LLC. Used by permission
Contract Expirations
Because the S&P GSCI is comprised of actively traded contracts
with scheduled expirations, it can only be calculated by reference to the prices of contracts for specified expiration, delivery or settlement periods, referred to as contract expirations. The contract expirations included in the S&P
GSCI for each commodity during a given year are designated by S&P, provided that each such contract must be an active contract. An active contract for this purpose is a liquid, actively traded contract expiration, as
defined or identified by the relevant trading facility or, if no such definition or identification is provided by the relevant trading facility, as defined by standard custom and practice in the industry. The relative liquidity of the various active
contracts is one of the factors that may be taken into consideration in determining which of them S&P includes in the S&P GSCI.
If a
trading facility deletes one or more contract expirations, the S&P GSCI will be calculated during the remainder of the year in which such deletion occurs on the basis of the remaining contract expirations designated by S&P. If a trading
facility ceases trading in all contract expirations relating to a particular contract, S&P may designate a replacement contract on the commodity. The replacement contract must satisfy the eligibility criteria for inclusion in the S&P GSCI.
To the extent practicable, the replacement will be effected during the next monthly review of the composition of the S&P GSCI. If that timing is not practicable, S&P will determine the date of the replacement and will consider a number of
factors, including the differences between the existing contract and the replacement contract with respect to contractual specifications, contract expirations and other matters.
Value of the S&P GSCI
The value of the S&P GSCI on any given day is equal to the
total dollar weight of the S&P GSCI
divided by
a normalizing constant that assures the continuity of the S&P GSCI over time. The total dollar weights of the S&P GSCI is the sum of the dollar weight of each of the components of the
S&P GSCI. The dollar weight of each such Index Component on any S&P GSCI business day is equal to:
|
|
|
the daily contract reference price,
|
PS-26
|
|
|
multiplied by
the appropriate CPW, and
|
|
|
|
during a roll period, the appropriate roll weight (discussed below).
|
Daily Contract Reference Price
The
daily contract reference price used in calculating the dollar weight of each component of the S&P GSCI on any given day is the most recent daily contract reference price made available by the relevant trading facility, except that if the
exchange is closed or otherwise fails to publish a daily contract reference price on that day or if the trading facility fails to make a daily contract reference price available or publishes a daily contract reference price that, in the reasonable
judgment of S&P, reflects manifest error, the relevant calculation will be delayed until the price is made available or corrected. However, if the price is not made available or corrected by 4:00 p.m., New York City time, S&P, if it deems
such action to be appropriate under the circumstances, will determine the appropriate daily contract reference price for the applicable futures contract in its reasonable judgment for purposes of the relevant S&P GSCI Index calculation. The
initial value of the S&P GSCI was normalized such that its hypothetical level on January 2, 1970 was 100.
Roll Weights and Roll
Periods
The roll weight of a commodity reflects the fact that the positions in futures contracts must be liquidated or rolled
forward into more distant contract expirations as they approach expiration. If actual positions in the relevant markets were rolled forward, the roll would likely need to take place over a period of days. Since the S&P GSCI is designed to
replicate the performance of actual investments in the underlying contracts, the rolling process incorporated in the S&P GSCI takes place over a number of business days during each month (referred to as a roll period). On each day of
the roll period, the roll weights of the current contract expirations and the next contract expiration (the next contract as designated by the index rules) into which it is rolled are adjusted, so that the hypothetical position in the
contract on the commodity that is included in the index is gradually shifted from the current contract expiration to the next contract expiration (the next contract as so designated). The roll period applicable to the S&P GSCI occurs from the
fifth to ninth S&P GSCI business days of each month which are days on which the indices are calculated, as determined by NYSE Euronext Holiday & Hours schedule.
If on any day during a roll period any of the following conditions exists, the portion of the roll that would have taken place on that day is deferred until the next day on which such conditions do not
exist:
|
|
|
if, with respect to any current contract expiration and the next contract expiration, the S&P GSCI business day on which the roll is intended to
occur is not a day on which the trading facility on or through which the given contract expirations are traded is scheduled to be open for trading for at least three hours, these contract expirations are not available for trading during these hours
or no daily contract reference price is published by the trading facility for a given contract expiration;
|
|
|
|
any such price represents the maximum or minimum price for such contract month, based on exchange price limits (referred to as a Limit
Price);
|
|
|
|
the daily contract reference price published by the relevant trading facility, in the reasonable judgment of S&P, reflects manifest error and such
error is not corrected by the S&P GSCI settlement time or such price is not published by 4:00 p.m., New York City time. In that event, S&P may, but is not required to, determine a daily contract reference price and complete the relevant
portion of the roll based on such price;
provided
,
that
, if the trading facility publishes a price or a corrected price before the opening of trading on the next day, S&P will revise the portion of the roll accordingly; or
|
PS-27
|
|
|
trading in the relevant contract terminates prior to its scheduled closing time and does not resume at least ten minutes prior to, and continue until,
the scheduled closing time.
|
The Commodity Index
Contract Daily Return
Whereas the
S&P GSCI is based on price levels of the contracts it comprises, the Commodity Index depends for its calculation on the contract daily return. The contract daily return is defined as the percentage change in the total dollar weight of the
S&P GSCI from one S&P GSCI business day to the next. The contract daily return on any given day is equal to the amount obtained on such day from an investment in the S&P GSCI on the immediately preceding S&P GSCI business day of the
total dollar weight of the S&P GSCI on the immediately preceding S&P GSCI business day, divided by the total dollar weight of the S&P GSCI on the immediately preceding S&P GSCI business day, minus one.
Value of the Index
The Commodity Index
incorporates the returns of the S&P GSCI, the discount or premium obtained by rolling hypothetical positions in those contracts forward as they approach delivery and the interest earned on hypothetical fully collateralized contract positions on
the commodities included in the S&P GSCI.
The value of the Commodity Index on any S&P GSCI business day is equal to the product of
(1) the value of the Commodity Index on the immediately preceding S&P GSCI business day multiplied by (2) one plus the sum of the contract daily return and the Treasury Bill return on the S&P GSCI business day on which the
calculation is made multiplied by (3) one plus the Treasury Bill return for each non-S&P GSCI business day since the immediately preceding S&P GSCI business day. The Treasury Bill return is the return on a hypothetical investment in the
S&P GSCI at a rate equal to the interest rate on a specified U.S. Treasury Bill.
The initial value of the Commodity Index was normalized
such that its hypothetical level on January 2, 1970 was 100.
Historical Performance
While the following historical performance table is based on the selection criteria and methodology described in this pricing supplement, the Commodity
Index was not actually calculated and published prior to May 1, 1991. Accordingly, the following table illustrates:
(i)
|
on a hypothetical basis, how the Commodity Index would have performed from January 2, 1970 to January 2, 1991 based on the selection criteria and methodology
described above; and
|
(ii)
|
on an actual basis, how the Commodity Index has performed from January 2, 1992 onwards.
|
|
|
|
|
|
January 2, 1970
|
|
|
100.00
|
|
January 4, 1971
|
|
|
115.78
|
|
January 3, 1972
|
|
|
138.90
|
|
January 2, 1973
|
|
|
198.45
|
|
January 2, 1974
|
|
|
354.32
|
|
January 2, 1975
|
|
|
478.50
|
|
January 2, 1976
|
|
|
400.02
|
|
January 3, 1977
|
|
|
351.05
|
|
January 3, 1978
|
|
|
390.02
|
|
January 2, 1979
|
|
|
515.25
|
|
January 2, 1980
|
|
|
692.40
|
|
January 2, 1981
|
|
|
764.66
|
|
January 4, 1982
|
|
|
593.61
|
|
January 3, 1983
|
|
|
657.98
|
|
January 3, 1984
|
|
|
747.23
|
|
January 3, 1985
|
|
|
760.67
|
|
January 2, 1986
|
|
|
833.67
|
|
January 2, 1987
|
|
|
868.83
|
|
January 4, 1988
|
|
|
1,105.18
|
|
January 3, 1989
|
|
|
1,371.33
|
|
January 2, 1990
|
|
|
1,937.46
|
|
January 2, 1991
|
|
|
2,346.03
|
|
January 2, 1992
|
|
|
2,304.20
|
|
January 4, 1993
|
|
|
2,371.27
|
|
January 3, 1994
|
|
|
2,111.22
|
|
January 3, 1995
|
|
|
2,185.21
|
|
January 2, 1996
|
|
|
2,711.25
|
|
January 2, 1997
|
|
|
3,591.15
|
|
January 2, 1998
|
|
|
3,019.39
|
|
January 4, 1999
|
|
|
1,992.32
|
|
January 3, 2000
|
|
|
2,766.77
|
|
January 2, 2001
|
|
|
4,022.43
|
|
January 2, 2002
|
|
|
2,891.27
|
|
January 2, 2003
|
|
|
3,819.38
|
|
January 2, 2004
|
|
|
4,520.70
|
|
January 3, 2005
|
|
|
5,173.25
|
|
January 3, 2006
|
|
|
6,729.99
|
|
January 2, 2007
|
|
|
5,611.07
|
|
January 2, 2008
|
|
|
7,710.14
|
|
January 2, 2009
|
|
|
4,109.70
|
|
January 1, 2010
|
|
|
4,534.20
|
|
January 3, 2011
|
|
|
4,961.40
|
|
January 3, 2012
|
|
|
5,049.29
|
|
September 28, 2012
|
|
|
5,054.81
|
|
PS-28
The historical performance of the Commodity Index should not be taken as an indication of future
performance, and no assurance can be given that the value of the Commodity Index will increase sufficiently to cause holders of the Securities to receive a payment at maturity or upon early redemption equal to or in excess of the principal amount of
such Securities.
PAST PERFORMANCE IS NOT INDICATIVE OF FUTURE RESULTS.
PAST PERFORMANCE IS NOT INDICATIVE OF FUTURE RESULTS.
PS-29
The Oil Index
As presently constituted, the only contract in the S&P GSCI used to calculate the Oil Index is the WTI crude oil futures contract traded on the New York Mercantile Exchange. The WTI crude oil futures
contract included in the Oil Index changes each month because the contract included in the Oil Index at any given time is currently required to be the WTI crude oil futures contract traded on the New York Mercantile Exchange with the closest
expiration date (the front-month contract). The front-month contract expires each month on the third business day prior to the 25th calendar day of the month. The Oil Index incorporates a methodology for rolling into the contract with
the next closest expiration date (the next-month contract) each month. The Oil Index gradually reduces the weighting of the front-month contract and increases the weighting of the next-month contract over a five business day period
commencing on the fifth business day of the month, so that on the first day of the roll-over the front-month contract represents 80% and the next-month contract represents 20% of the Oil Index, and on the fifth day of the roll-over period (i.e., the
ninth business day of the month) the next-month contract represents 100% of the Oil Index. Over time, this monthly roll-over leads to the inclusion of many different individual WTI crude oil futures contracts in the Oil Index. The commodities
industry utilizes single-component indices because the purpose of a commodities index is generally to reflect the current market price of the index components by including the front-month futures contract with respect to each component,
necessitating a continuous monthly roll-over to a new front-month contract. As the underlying commodity is not static but rather is represented by constantly changing contracts, a single commodity index actually contains a changing series of
individual contracts and is regarded by commodities industry professionals as a valuable tool in tracking the change in the value of the underlying commodity over time.
Value of the Index
The Oil Index incorporates the returns of those contracts in the
S&P GSCI that comprise the Oil Index (currently only the WTI crude oil futures contract traded on the New York Mercantile Exchange), the discount or premium obtained by rolling hypothetical positions in those contracts forward as they approach
delivery and the interest earned on hypothetical fully collateralized contract positions on the commodities included in the Oil Index.
The
value of the Oil Index on any S&P GSCI Business Day is equal to the product of (1) the value of the Oil Index on the immediately preceding S&P GSCI business day multiplied by (2) one plus the sum of the contract daily return and
the Treasury Bill return on the S&P GSCI business day on which the calculation is made multiplied by (3) one plus the Treasury Bill return for each non-S&P GSCI business day since the immediately preceding S&P GSCI business day. The
contract daily return on any given day is equal to the sum, for each of the commodities included in the Oil Index, of the applicable daily contract reference price on the relevant contract (currently only the WTI crude oil futures contract traded on
the New York Mercantile Exchange) multiplied by the appropriate CPW and the appropriate roll weight, divided by the total dollar weight of the Oil Index on the preceding day, minus one. The Treasury Bill return is the return on a hypothetical
investment in the Oil Index at a rate equal to the interest rate on a specified U.S. Treasury Bill.
The initial value of the Oil Index was
normalized such that its hypothetical level on December 31, 1986 was 100.
Historical Performance
While the following historical performance table is based on the selection criteria and methodology described in this pricing supplement, the Oil Index
was not actually calculated and published prior to May 1, 1991. Accordingly, the following table illustrates:
(i)
|
on a hypothetical basis, how the Oil Index would have performed from December 31, 1986 to December 31, 1990 based on the selection criteria and methodology
described above; and
|
(ii)
|
on an actual basis, how the Oil Index has performed from December 31, 1991 onwards.
|
PS-30
|
|
|
|
|
December 31, 1986
|
|
|
100.00
|
|
December 31, 1987
|
|
|
111.26
|
|
December 30, 1988
|
|
|
128.86
|
|
December 29, 1989
|
|
|
250.34
|
|
December 31, 1990
|
|
|
366.73
|
|
December 31, 1991
|
|
|
305.95
|
|
December 31, 1992
|
|
|
317.11
|
|
December 31, 1993
|
|
|
205.34
|
|
December 30, 1994
|
|
|
285.04
|
|
December 29, 1995
|
|
|
380.84
|
|
December 31, 1996
|
|
|
793.33
|
|
December 31, 1997
|
|
|
546.93
|
|
December 31, 1998
|
|
|
286.55
|
|
December 31, 1999
|
|
|
638.13
|
|
December 29, 2000
|
|
|
961.62
|
|
December 31, 2001
|
|
|
716.96
|
|
December 31, 2002
|
|
|
1134.98
|
|
December 31, 2003
|
|
|
1446.80
|
|
December 31, 2004
|
|
|
2094.82
|
|
December 30, 2005
|
|
|
2538.80
|
|
December 29, 2006
|
|
|
2108.48
|
|
December 31, 2007
|
|
|
3108.99
|
|
December 31, 2008
|
|
|
1384.47
|
|
December 31, 2009
|
|
|
1483.50
|
|
December 31, 2010
|
|
|
1,481.89
|
|
December 30, 2011
|
|
|
1,462.50
|
|
September 28, 2012
|
|
|
1,320.17
|
|
The historical performance of the Oil Index should not be taken as an indication of future performance, and no assurance
can be given that the value of the Oil Index will increase sufficiently to cause holders of the Securities to receive a payment at maturity or upon early redemption equal to or in excess of the principal amount of such Securities.
PAST PERFORMANCE IS NOT INDICATIVE OF FUTURE RESULTS
PAST PERFORMANCE IS NOT INDICATIVE OF FUTURE RESULTS
PS-31
License Agreement
Standard & Poors
®
and
S&P
®
are registered trademarks of Standard & Poors Financial Services LLC
(SPFS); Dow Jones
®
is a registered trademark of Dow Jones Trademark Holdings LLC (Dow
Jones); and these trademarks have been licensed for use by S&P Dow Jones Indices LLC (S&P Indices). S&P GSCI
®
, S&P GSCI
®
Index, S&P GSCI
®
Total Return Index, S&P GSCI
®
Crude Oil Total Return Index and S&P GSCI
®
Commodity Index are trademarks of SPFS and have been licensed for use by S&P Indices and its affiliates and sublicensed for certain purposes by Barclays
Bank PLC. S&P Indices, Dow Jones, SPFS, or any of their respective subsidiaries or affiliates (collectively, S&P Dow Jones Indices) make no representation, condition or warranty, express or implied, to the owners of the
Securities or any member of the public regarding the advisability of investing in securities generally or in the Securities particularly or the ability of the S&P GSCI or any of its sub-indices to track general stock market performance.
S&P Indices only relationship to Barclays Bank PLC is the licensing of certain trademarks and trade names of S&P and of the
Indices, which are determined, composed and calculated by S&P Indices without regard to Barclays Bank PLC or the Securities. S&P Indices has no obligation to take the needs of Barclays Bank PLC or the owners of the Securities into
consideration in determining, composing or calculating the Indices. S&P Indices is not responsible for and has not participated in the determination of the timing of, prices at, or quantities of the Securities to be issued or in the
determination or calculation of the equation by which the Securities are to be converted into cash. S&P Indices has no obligation or liability in connection with the administration, marketing or trading of the Securities.
S&P INDICES DOES NOT GUARANTEE THE ACCURACY AND/OR THE COMPLETENESS OF THE INDICES OR ANY DATA INCLUDED THEREIN AND S&P INDICES SHALL HAVE NO
LIABILITY FOR ANY ERRORS, OMISSIONS, OR INTERRUPTIONS THEREIN. S&P INDICES MAKES NO WARRANTY, EXPRESS OR IMPLIED, AS TO RESULTS TO BE OBTAINED BY BARCLAYS BANK PLC, OWNERS OF THE SECURITIES OR ANY OTHER PERSON OR ENTITY FROM THE USE OF THE
INDICES OR ANY DATA INCLUDED THEREIN. S&P INDICES MAKES NO EXPRESS OR IMPLIED WARRANTIES, AND EXPRESSLY DISCLAIMS ALL WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE WITH RESPECT TO THE INDICES OR ANY DATA INCLUDED
THEREIN. WITHOUT LIMITING ANY OF THE FOREGOING, IN NO EVENT SHALL S&P INDICES HAVE ANY LIABILITY FOR ANY SPECIAL, PUNITIVE, INDIRECT, OR CONSEQUENTIAL DAMAGES (INCLUDING LOST PROFITS), EVEN IF NOTIFIED OF THE POSSIBILITY OF SUCH DAMAGES.
VALUATION OF THE SECURITIES
The market value of each series of the Securities will be affected by several factors, many of which are beyond our control. We expect that generally the level of the Index underlying the Securities on
any day will affect the market value of the Securities more than any other factors. Other factors that may influence the market value of a series of Securities include, but are not limited to, supply and demand for the series of Securities, the
volatility of the Index underlying the Securities, the market price of the index components included in that Index, the Treasury Bill rate of interest, the volatility of commodities prices, economic, financial, political, regulatory, or judicial
events that affect the value of the Index underlying the Securities or the market price of the index components included in that Index, the general interest rate environment, as well as the perceived creditworthiness of Barclays Bank PLC. See
Risk Factors in this pricing supplement for a discussion of the factors that may influence the market value of the Securities prior to maturity.
Indicative Value
An intraday indicative value meant to approximate
the intrinsic economic value of each series of Securities will be calculated and published by Bloomberg L.P. or a successor via the facilities of the Consolidated Tape Association. The ticker symbols for the intraday indicative value of each
series of Securities are as follows:
Commodity Securities: GSP.IV
PS-32
Oil Securities: OIL.IV
In connection with any series of Securities, we use the term indicative value to refer to the value at a given time determined based on the following equation:
Indicative Value = Principal Amount per Security × (Current Index Level/Initial Index Level) - Current Investor Fee
where:
Principal Amount per Security = $50;
Current Index Level = The most recent published level of the Index underlying the Securities as reported by the Index Sponsor;
Initial Index Level = The level of the Index underlying the Securities on the inception date; and
Current Investor Fee = The most recent daily calculation of the investor fee with respect to the Securities, determined as described above (which, during
any trading day, will be the investor fee determined on the preceding calendar day).
Bloomberg L.P. is not affiliated with Barclays Bank
PLC and does not approve, endorse, review or recommend Barclays Bank PLC or any series of Securities.
The indicative value will be derived
from sources deemed reliable, but Bloomberg L.P. and its suppliers do not guarantee the correctness or completeness of the indicative value or other information furnished in connection with any series of Securities. Bloomberg L.P. makes no warranty,
express or implied, as to results to be obtained by Barclays Bank PLC, Barclays Bank PLCs customers, holders of the Securities, or any other person or entity from the use of the indicative value or any data included therein. Bloomberg L.P.
makes no express or implied warranties, and expressly disclaims all warranties of merchantability or fitness for a particular purpose with respect to the indicative value or any data included therein.
Bloomberg L.P., its employees, subcontractors, agents, suppliers and vendors shall have no liability or responsibility, contingent or otherwise, for any
injury or damages, whether caused by the negligence of Bloomberg L.P., its employees, subcontractors, agents, suppliers or vendors or otherwise, arising in connection with the indicative value or any series of Securities, and shall not be liable for
any lost profits, losses, punitive, incidental or consequential damages. Bloomberg L.P. shall not be responsible for or have any liability for any injuries or damages caused by errors, inaccuracies, omissions or any other failure in, or delays or
interruptions of, the indicative value, from whatever cause. Bloomberg L.P. is not responsible for the selection of or use of any Index or any series of Securities, the accuracy and adequacy of any Index or information used by Barclays Bank PLC and
the resultant output thereof.
The indicative value calculation will be provided for reference purposes only. It is not intended as a price or
quotation, or as an offer or solicitation for the purchase, sale, redemption or termination of your Securities, nor will it reflect hedging or transaction costs, credit considerations, market liquidity or bid-offer spreads. Published Index levels
from the Index Sponsor may occasionally be subject to delay or postponement. Any such delays or postponements will affect the current Index level and therefore the indicative value of a series of Securities. Index levels provided by
the Index Sponsor will not necessarily reflect the depth and liquidity of the underlying commodities markets. For this reason and others, the actual trading price of any series of Securities may be different from their indicative value.
As discussed in Specific Terms of the SecuritiesPayment Upon Redemption, you may, subject to certain restrictions, choose to redeem
your Securities on any redemption date during the term of the Securities. If you redeem your Securities on a particular redemption date, you will receive a cash payment in U.S. dollars on such date in an amount equal to the daily redemption value,
which is (1) the principal amount of your Securities
times
(2) the applicable index factor on the applicable valuation date
minus
(3) the investor fee on the applicable valuation date. You must redeem at least 50,000
Securities of the same series at one time in order to exercise your right to redeem your Securities on any redemption date. The daily redemption feature is intended to induce arbitrageurs to counteract any trading of the Securities at a discount to
their indicative value, though there can be no assurance that arbitrageurs will employ the redemption feature in this manner.
PS-33
SPECIFIC TERMS OF THE SECURITIES
In this section, references to holders mean those who own Securities registered in their own names, on the books that we or the trustee
maintain for this purpose, and not those who own beneficial interests in Securities registered in street name or in Securities issued in book-entry form through DTC or another depositary. Owners of beneficial interests in the Securities should read
the section entitled Description of Debt SecuritiesLegal Ownership; Form of Debt Securities in the accompanying prospectus.
Each series of Securities is part of a series of debt securities entitled Global Medium-Term Notes, Series A (the medium-term
notes) that we may issue under the indenture, dated September 16, 2004, between Barclays Bank PLC and The Bank of New York Mellon, as trustee, from time to time. This pricing supplement summarizes specific financial and other terms that
apply to each series of Securities. Terms that apply generally to all medium-term notes are described in Description of Medium-Term Notes and Terms of the Notes in the accompanying prospectus supplement, and terms that apply
generally to all index-linked notes are described in Reference AssetsIndices in the accompanying prospectus supplement. The terms described here (
i.e.
, in this pricing supplement) supplement those described in the
accompanying prospectus, prospectus supplement and any related free writing prospectuses and, if the terms described here are inconsistent with those described in those documents, the terms described here are controlling.
Please note that the information about the price to the public and the proceeds to Barclays Bank PLC on the front cover of this pricing supplement
relates only to the initial sale of the Securities. If you have purchased the Securities in a market-making transaction after the initial sale, information about the price and date of sale to you will be provided in a separate confirmation of sale.
We describe the terms of each series of Securities in more detail below.
Coupon
We will not pay
you interest during the term of the Securities.
Denomination
We will offer the Securities in denominations of $50.
Payment at Maturity
If you hold your Securities to maturity, you will receive a cash payment in U.S. dollars at maturity that is linked to percentage change
in the value of the Index underlying the Securities between the inception date and the final valuation date. The cash payment in U.S. dollars at maturity for a series of Securities will be an amount equal to (1) the principal amount of your
Securities
times
(2) the index factor for that series on the final valuation date
minus
(3) the investor fee for that series on the final valuation date.
The index factor for a series of Securities on the final valuation date will be equal to the final index level
divided by
the initial index level. The initial index level is the closing value of
the Index to which those Securities are linked on the inception date and the final index level is the closing value of the Index to which those Securities are linked on the final valuation date.
The investor fee for a series of Securities on the final valuation date will be equal to 0.75% per year
times
the principal amount of your
Securities
times
the applicable index factor, calculated on a daily basis in the following manner: The investor fee on the inception date will equal zero. On each subsequent calendar day until maturity or early redemption, the investor fee
will increase by an amount equal to (1) 0.75%
times
(2) the principal amount of your Securities
times
(3) the applicable index factor on that day (or, if such day is not a trading day, the index factor on the immediately
preceding trading day)
divided by
(4) 365.
Inception, Issuance and Maturity
The Commodity Securities were first sold on June sold on June 6, 2006, were first issued on June 9, 2006 and are due on June 12, 2306.
PS-34
The Oil Securities were first sold on August 15, 2006, were first issued on August 18, 2006 and
are due on August 14, 2036.
If the maturity date stated on the cover of this pricing supplement for a series of Securities is not a
business day, the maturity date will be the next following business day. If the fifth business day before this day does not qualify as a valuation date (as described below), then the maturity date will be the fifth business day following the final
valuation date. The calculation agent may postpone the final valuation dateand therefore the maturity dateif a market disruption event occurs or is continuing on a day that would otherwise be the final valuation date. We describe market
disruption events under Market Disruption Event below.
In the event that payment at maturity is deferred beyond the stated
maturity date, penalty interest will not accrue or be payable with respect to that deferred payment.
Payment Upon
Redemption
Prior to maturity, you may, subject to certain restrictions, redeem your Securities on any redemption date during the term of
the Securities, provided that you present at least 50,000 Securities of the same series for redemption, or your broker or other financial intermediary (such as a bank or other financial institution not required to register as a broker-dealer to
engage in securities transactions) bundles your Securities for redemption with those of other investors to reach this minimum. If you choose to redeem your Securities on a redemption date, you will receive a cash payment in U.S. dollars on such date
in an amount equal to the daily redemption value, which is (1) the principal amount of your Securities
times
(2) the applicable index factor on the applicable valuation date
minus
(3) the applicable investor fee on the
applicable valuation date. You must redeem at least 50,000 Securities of the same series at one time in order to exercise your right to redeem your Securities on any redemption date. We may from time to time in our sole discretion reduce, in part or
in whole, the minimum redemption amount of 50,000 Securities. Any such reduction will be applied on a consistent basis for all holders of the relevant Securities at the time the reduction becomes effective.
The index factor for a series of Securities on the relevant valuation date is the closing value of the Index linked to those Securities on that day
divided by
the initial index level. The initial index level is the closing value of the Index linked to those Securities on the inception date.
The investor fee for a series of Securities on any valuation date will be equal to 0.75% per year
times
the principal amount of your Securities
times
the index factor, calculated on a
daily basis in the following manner: The investor fee on the inception date will equal zero. On each subsequent calendar day until maturity or early redemption, the investor fee will increase by an amount equal to (1) 0.75%
times
(2) the principal amount of your Securities
times
(3) the applicable index factor on that day (or, if such day is not a trading day, the index factor on the immediately preceding trading day)
divided by
(4) 365.
A redemption date is the third business day following each valuation date (other than the final valuation date). The final redemption date
will be the third business day following the valuation date that is immediately prior to the final valuation date.
In the event that payment
upon redemption is deferred beyond the original redemption date, penalty interest will not accrue or be payable with respect to that deferred payment.
Valuation Date
A valuation date is:
|
|
with respect to the Commodity Securities, each business day from June 15, 2006 to June 5, 2036, inclusive (subject to the occurrence of a
market disruption event), or, if such date is not a trading day, the next succeeding trading day, not to exceed five business days We refer to Thursday, June 5, 2036, as the final valuation date for the Commodity Securities; and
|
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with respect to the Oil Securities, each business day from August 24, 2006 to August 7, 2036, inclusive (subject to the occurrence of a
market disruption event) or, if such date is not a trading day, the next succeeding trading day, not to exceed five business days. We refer to Thursday, August 7, 2036, as the final valuation date for the Oil Securities.
|
PS-35
Redemption Procedures
You may, subject to the minimum redemption amount described above, elect to redeem your Securities on any redemption date. To redeem your Securities, you must instruct your broker or other person with
whom you hold your Securities to take the following steps:
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|
deliver a notice of redemption, which is attached as Annex A, to us via email by no later than 4:00 p.m., New York City time, on the business day prior
to the applicable valuation date. If we receive your notice by the time specified in the preceding sentence, we will respond by sending you a form of confirmation of redemption, which is attached as Annex B;
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deliver the signed confirmation of redemption to us via facsimile in the specified form by 5:00 p.m., New York City time, on the same day. We or our
affiliate must acknowledge receipt in order for your confirmation to be effective;
|
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instruct your DTC custodian to book a delivery vs. payment trade with respect to your Securities on the valuation date at a price equal to the
applicable daily redemption value, facing Barclays DTC 5101; and
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|
cause your DTC custodian to deliver the trade as booked for settlement via DTC at or prior to 10:00 a.m., New York City time, on the applicable
redemption date (the third business day following the valuation date).
|
Different brokerage firms may have different
deadlines for accepting instructions from their customers. Accordingly, you should consult the brokerage firm through which you own your interest in the Securities in respect of such deadlines. If we do not receive your notice of redemption by 4:00
p.m., New York City time, or your confirmation of redemption by 5:00 p.m., New York City time, on the business day prior to the applicable valuation date, your notice will not be effective and we will not redeem your Securities on the applicable
redemption date. Any redemption instructions for which we (or our affiliate) receive a valid confirmation in accordance with the procedures described above will be irrevocable.
Market Disruption Event
As set forth under Payment at Maturity and
Payment Upon Redemption above, the calculation agent will determine the value of the relevant Index on each valuation date, including the final valuation date. As described above, a valuation date for any series of Securities may
be postponed and thus the determination of the value of the relevant Index may be postponed if the calculation agent determines that, on a valuation date, a market disruption event has occurred or is continuing in respect of any index component. If
such a postponement occurs, the index components unaffected by the market disruption event shall be determined on the scheduled valuation date and the value of the affected index component shall be determined using the closing value of the affected
index component on the first trading day after that day on which no market disruption event occurs or is continuing. In no event, however, will a valuation date for a series of Securities be postponed by more than five trading days.
If a valuation date is postponed until the fifth trading day following the scheduled valuation date, but a market disruption event occurs or is
continuing on such day, that day will nevertheless be the valuation date and the calculation agent will make a good faith estimate in its sole discretion of the value of the relevant Index for such day.
Any of the following will be a market disruption event:
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|
a material limitation, suspension or disruption in the trading of any index component which results in a failure by the trading facility on which the
relevant contract is traded to report a daily contract reference price (the price of the relevant contract that is used as a reference or benchmark by market participants);
|
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the daily contract reference price for any index component is a limit price, which means that the daily contract reference price for such
contract has increased or decreased from the previous days daily contract reference price by the maximum amount permitted under the applicable rules or procedures of the relevant trading facility;
|
PS-36
|
|
failure by the Index Sponsor to publish the closing value of the relevant Index or of the applicable trading facility or other price source to announce
or publish the daily contract reference price for one or more index components; or
|
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|
any other event, if the calculation agent determines in its sole discretion that the event materially interferes with our ability or the ability of any
of our affiliates to unwind all or a material portion of a hedge with respect to the Securities that we or our affiliates have effected or may effect as described below under Use of Proceeds and Hedging in this pricing supplement.
|
The following events will not be market disruption events:
|
|
a limitation on the hours or numbers of days of trading on a trading facility on which any index component is traded, but only if the limitation
results from an announced change in the regular business hours of the relevant market; or
|
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|
a decision by a trading facility to permanently discontinue trading in any index component.
|
Default Amount on Acceleration
If an event of default occurs and the maturity of a series of Securities is accelerated, we will pay the default amount in respect of the principal of that series of Securities at maturity. We describe
the default amount below under Default Amount.
For the purpose of determining whether the holders of our medium-term notes,
of which each series of Securities is a part, are entitled to take any action under the indenture, we will treat the stated principal amount of each Security outstanding as the principal amount of that Security. Although the terms of the Securities
may differ from those of the other medium-term notes, holders of specified percentages in principal amount of all medium-term notes, together in some cases with other series of our debt securities, will be able to take action affecting all the
medium-term notes, including the Securities. This action may involve changing some of the terms that apply to the medium-term notes, accelerating the maturity of the medium-term notes after a default or waiving some of our obligations under the
indenture. We discuss these matters in the attached prospectus under Description of Debt SecuritiesModification and Waiver and Senior Events of Default; Subordinated Events of Default and Defaults; Limitations of
Remedies.
Default Amount
The default amount for a series of Securities on any day will be an amount, determined by the calculation agent in its sole discretion, equal to the cost of having a qualified financial institution, of
the kind and selected as described below, expressly assume all our payment and other obligations with respect to that series of Securities as of that day and as if no default or acceleration had occurred, or to undertake other obligations providing
substantially equivalent economic value to you with respect to such Securities. That cost will equal:
|
|
the lowest amount that a qualified financial institution would charge to effect this assumption or undertaking, plus
|
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|
the reasonable expenses, including reasonable attorneys fees, incurred by the holders of such Securities in preparing any documentation necessary
for this assumption or undertaking.
|
During the default quotation period for a series of Securities, which we describe
below, the holders of such Securities and/or we may request a qualified financial institution to provide a quotation of the amount it would charge to effect this assumption or undertaking. If either party obtains a quotation, it must notify the
other party in writing of the quotation. The amount referred to in the first bullet point above will equal the lowestor, if there is only one, the onlyquotation obtained, and as to which notice is so given, during the default quotation
period. With respect to any quotation, however, the party not obtaining the quotation may object, on reasonable and significant grounds, to the assumption or undertaking by the qualified financial institution providing the quotation and notify the
other party in writing of those grounds within two business days after the last day of the default quotation period, in which case that quotation will be disregarded in determining the default amount.
PS-37
Default Quotation Period
The default quotation period is the period beginning on the day the default amount first becomes due and ending on the third business day after that day, unless:
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|
no quotation of the kind referred to above is obtained, or
|
|
|
every quotation of that kind obtained is objected to within five business days after the due date as described above.
|
If either of these two events occurs, the default quotation period will continue until the third business day after the first business day on which
prompt notice of a quotation is given as described above. If that quotation is objected to as described above within five business days after that first business day, however, the default quotation period will continue as described in the prior
sentence and this sentence.
In any event, if the default quotation period and the subsequent two business day objection period have not ended
before the final valuation date, then the default amount will equal the principal amount of the series of Securities.
Qualified Financial
Institutions
For the purpose of determining the default amount at any time, a qualified financial institution must be a financial
institution organized under the laws of any jurisdiction in the United States of America or Europe, which at that time has outstanding debt obligations with a stated maturity of one year or less from the date of issue and rated either:
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|
A-1 or higher by Standard & Poors Ratings Services, or any successor, or any other comparable rating then used by that rating agency, or
|
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|
P-1 or higher by Moodys Investors Service, or any successor, or any other comparable rating then used by that rating agency.
|
Further Issuances
We may, without your consent, create and issue additional securities having the same terms and conditions as any series of Securities. If there is substantial demand for a series of Securities, we may
issue additional Securities frequently. We may consolidate the additional securities to form a single class with the outstanding Securities.
Discontinuance or Modification of an Index
If the Index Sponsor discontinues publication
of an Index and it or any other person or entity publishes an index that the calculation agent determines is comparable to the discontinued Index and approves as a successor index, then the calculation agent will determine the value of the relevant
Index on the applicable valuation date and the amount payable at maturity or upon redemption by reference to such successor index.
If the
calculation agent determines that the publication of an Index is discontinued and that there is no successor index, or that the closing level of an Index is not available because of a market disruption event or for any other reason, on the date on
which the value of that Index is required to be determined, or if for any other reason an Index is not available to us or the calculation agent on the relevant date, the calculation agent will determine the amount payable by a computation
methodology that the calculation agent determines will as closely as reasonably possible replicate the relevant Index.
If the calculation
agent determines that an Index, the index components of an Index or the method of calculating an Index has been changed at any time in any respectincluding any addition, deletion or substitution and any reweighting or rebalancing of index
components, and whether the change is made by the Index Sponsor under its existing policies or following a modification of those policies, is due to the publication of a successor index, is due to events affecting one or more of the index
components, or is due to any other reasonthen the calculation agent will be permitted (but not required) to make such adjustments to that Index or method of calculating that Index as it believes are appropriate to ensure that the value of the
Index used to determine the amount payable on the maturity date or upon redemption is equitable.
All determinations and adjustments to be
made by the calculation agent with respect to the value of an Index and the amount payable at maturity or upon redemption or otherwise relating to the value of an Index may be made in the
PS-38
calculation agents sole discretion. See Risk Factors in this pricing supplement for a discussion of certain conflicts of interest which may arise with respect to the calculation
agent.
Manner of Payment and Delivery
Any payment on or delivery of a series of Securities at maturity will be made to accounts designated by you and approved by us, or at the office of the trustee in New York City, but only when the
Securities are surrendered to the trustee at that office. We also may make any payment or delivery in accordance with the applicable procedures of the depositary.