|
|
|
|
|
|
|
|
|
Contingent Income Auto-Callable Securities due March 5, 2020, With 3-Year Initial Non-Call Period
|
|
With Contingent Quarterly Payments and Payment at Maturity Subject to the Performance of the S&P 500
®
Index
|
|
|
Hypothetical
Examples
The below
examples are based on the following terms:
|
|
|
|
Hypothetical Initial Index Value:
|
1,511.95
|
|
Hypothetical Downside Threshold
Level:
|
755.975, which is 50% of the
initial index value
|
|
Hypothetical Coupon Barrier
Level:
|
1,133.9625, which is 75% of the
initial index value
|
|
Hypothetical Contingent Quarterly
Payment:
|
$0.125 (1.25% of the stated
principal amount, which represents the midpoint of the range). The actual
contingent quarterly payment will be set on the pricing date and will be
between 1.125% to 1.375% ($0.1125 to $0.1375) of the stated principal amount.
|
|
Stated Principal Amount:
|
$10 per security
|
In Example
1, the index closing level is greater than or equal to the initial index value
on one of the determination dates on or after the twelfth determination date (a
“redemption determination date”). Because the index closing level is greater
than or equal to the initial index value on such a date, the securities are
automatically redeemed on the related early redemption date. In Examples 2, 3,
and 4, the index closing level is less than the initial index value on all of
the redemption determination dates, and, consequently, the securities are not
automatically redeemed prior to, and remain outstanding until, maturity.
Example 1
—The securities are automatically redeemed following
the 18th determination date (the redemption determination date occurring on
August 28, 2017), as the index closing level is equal to the initial index
value on such determination date. The underlying index declines substantially
and the index closing level is at or above the coupon barrier level on only 8
of the17 determination dates prior to (and excluding) the 18
th
determination date. Therefore, you would receive the contingent quarterly
payments with respect to 8 determination dates (the 1
st
, 2
nd
,
3
rd
, 4
th
, 5
th
, 6
th
, 12
th
and 13
th
determination dates) and the early redemption payment as
illustrated by the table below:
|
|
|
|
|
|
Determination Date(s)
|
Index Closing Level
on Determination
Date(s)
|
Total Contingent
Quarterly Payment (s)
|
Early Redemption
Payment
|
|
1 to 6
|
1200-1400
|
$0.125 x 6 = $0.75
|
N/A
|
|
7 to 11
|
800-1000
|
-
-
|
N/A
|
|
12* to 13
|
1250-1500
|
$0.125 x 2 = $0.25
|
N/A
|
|
14-17
|
700-1100
|
-
-
|
N/A
|
|
18
|
1,511.950
|
--**
|
$10.125
|
*Securities are subject to automatic
redemption on or after the 12
th
determination date of February 29,
2016. Each determination date on or after the 12
th
determination
date is also a redemption determination date.
**The early redemption payment includes
the unpaid contingent quarterly payment with respect to the contingent payment
date.
The total
payment over the 4.5 year term of the securities is $0.75 + $0.25 + $10.125 =
$11.125
Example 2
—The securities are not redeemed prior to maturity, as
the index closing level is less than the initial index value on all
determination dates on or after the 12
th
determination date
*
.
The index closing level is at or above the coupon barrier level on all 28
determination dates including the final determination date. Therefore, you
would receive (i) the contingent quarterly payments with respect to the 27
determination dates prior to (and excluding) the final determination date and
(ii) the payment at maturity calculated as $10.00 + $.125 = $10.125, as
illustrated by the table below:
|
|
|
|
|
|
Determination Date(s)
|
Index Closing Level
on Determination
Date(s)
|
Total Contingent
Quarterly Payment (s)
|
Payment at
Maturity
|
|
1 to 6
|
1400-1500
|
$0.125
x 6 = $0.75
|
N/A
|
|
7 to 11
|
1300-1500
|
$0.125
x 5 = $0.625
|
N/A
|
|
12* to 17
|
1200-1500
|
$0.125
x 6 = $0.75
|
N/A
|
|
18 to 23
|
1150-1350
|
$0.125
x 6 = $0.75
|
N/A
|
|
24 to 27
|
1300-1500
|
$0.125
x 4 = $0.50
|
N/A
|
|
Final Determination Date
|
1,360.755
|
-**
|
$10.125
|
*Securities are subject to automatic
redemption on or after the 12
th
determination date of February 29,
2016. Each determination date on or after the 12
th
determination
date is also a redemption determination date.
|
|
|
|
|
|
|
|
|
Contingent Income Auto-Callable Securities due March 5, 2020, With 3-Year Initial Non-Call Period
|
|
With Contingent Quarterly Payments and Payment at Maturity Subject to the Performance of the S&P 500
®
Index
|
|
|
**The payment at maturity includes the
unpaid contingent quarterly payment with respect to the final determination
date.
The total
payment over the term of the securities is $0.75 + $0.625 + $0.75 + $0.75 +
$0.50 + $10.125 = $13.50
This
example illustrates the scenario where you receive a contingent quarterly
payment on every contingent payment date throughout the term of the securities
and receive your principal back at maturity. This example illustrates the
maximum payments you can receive with respect to the securities.
Example 3
—The securities are not redeemed prior to maturity, as
the index closing level s less than the initial index value on all
determination dates on or after the 12
th
determination date
*
.
The index closing level is at or above the coupon barrier level on only 10 out
of the 27 determination dates prior to (and excluding) the final determination
date. On the final determination date, the underlying index closes below the
coupon barrier level but above the downside threshold level. Therefore, you
would receive (i) the contingent quarterly payments with respect to 10
determination dates (the 3
rd
, 4
th
, 12
th
, 13
th
,
14
th
, 18
th
, 19
th
, 20
th
, 21
st
and 27
th
determination dates and excluding the final determination
date) and (ii) the payment at maturity equal to $10.00, as illustrated by the
table below:
|
|
|
|
|
|
Determination Date(s)
|
Index Closing Level
on Determination
Date(s)
|
Total Contingent
Quarterly Payment (s)
|
Payment at
Maturity
|
|
1 to 2
|
800-1000
|
-
-
|
N/A
|
|
3 to 4
|
1200-1300
|
$0.125
x 2 = $0.25
|
N/A
|
|
5 to 11
|
750-950
|
-
-
|
N/A
|
|
12* to 14
|
1150-1400
|
$0.125
x 3 = $0.375
|
N/A
|
|
15 to 17
|
750-950
|
-
-
|
N/A
|
|
18 to 21
|
1200-1250
|
$0.125
x 4 = $0.50
|
N/A
|
|
22 to 26
|
800-1000
|
-
-
|
N/A
|
|
27
|
1450
|
$0.125
x 1 = $0.125
|
N/A
|
|
Final Determination Date
|
1,058.365
|
-
|
$10.00
|
*Securities are subject to automatic
redemption on or after the 12
th
determination date of February 29,
2016. Each determination date on or after the 12
th
determination date
is also a redemption determination date.
The total
payment over the term of the securities is $0.25 + $0.375 + $0.50 + $0.125 +
$10.00 = $11.25.
Example 4
—The securities are not redeemed prior to maturity, as
the index closing level is less than the initial index value on all determination
dates on or after the 12
th
determination date*. The index closing
level is below the coupon barrier level on all of the determination dates and
is also below the downside threshold level on the final determination date.
Therefore, you would receive (i) no contingent quarterly payments and (ii) as
the final index value is not only below the coupon barrier level but also below
the downside threshold level, the payment at maturity calculated as $10.00 x
604.780/1,511.95 = $4.00, as
illustrated by the table below:
|
|
|
|
|
|
Determination Date(s)
|
Index Closing Level
on Determination
Date(s)
|
Total Contingent
Quarterly Payment (s)
|
Payment at
Maturity
|
|
1 to 6
|
750-950
|
—
|
N/A
|
|
7 to 11
|
800-1000
|
—
|
N/A
|
|
12* to 17
|
760-980
|
—
|
N/A
|
|
18 to 23
|
900-1100
|
—
|
N/A
|
|
24 to 27
|
750-1000
|
—
|
N/A
|
|
Final Determination Date
|
604.780
|
—
|
$4.00
|
*Securities are subject to automatic
redemption on or after the 12
th
determination date of February 29,
2016. Each determination date on or after the 12
th
determination
date is also a redemption determination date.
The total
payment over the 7-year term of the securities is $0 + $4.00 = $4.00.
Example 5
—The securities are not redeemed prior to maturity, as
the index closing level is less than the initial index value on all
determination dates on or after the 12
th
determination date*. The
index closing level is below the coupon barrier level on all of the
determination dates and is also below the downside threshold level on the final
determination date Therefore, you would receive (i) no contingent quarterly
payments and (ii) as the final index value is not only below the coupon barrier
level but also below the downside threshold level, the payment at maturity is
calculated as $10.00 x 0/1,511.95=
$0, as illustrated by the table below:
|
|
|
|
|
|
Determination Date(s)
|
Index Closing Level
on Determination
Date(s)
|
Total Contingent
Quarterly Payment (s)
|
Payment at
Maturity
|
|
1 to 6
|
690-890
|
—
|
N/A
|
|
7 to 11
|
800-1000
|
—
|
N/A
|
|
12* to 17
|
750-950
|
—
|
N/A
|
|
18 to 23
|
770-850
|
—
|
N/A
|
|
24 to 27
|
900-1100
|
—
|
N/A
|
|
Final Determination Date
|
0
|
—
|
$0
|
*Securities are subject to automatic
redemption on or after the 12
th
determination date of February 29,
2016. Each determination date on or after the 12
th
determination
date is also a redemption determination date.
The total payment
over the 7-year term of the securities is $0 + $0 = $0.
|
|
|
|
|
|
|
|
|
Contingent Income Auto-Callable Securities due March 5, 2020, With
3-Year Initial Non-Call Period
|
|
With Contingent Quarterly Payments and Payment at Maturity Subject to the
Performance of the S&P 500
®
Index
|
|
|
Risk
Factors
An investment in the Securities involves significant risks. We also
urge you to consult your investment, legal, tax, accounting and other advisors
before you invest in the Securities. Investing in the Securities is not
equivalent to investing directly in the S&P 500
®
Index. The
following is a non-exhaustive list of certain key risk factors for investors in
the Securities. For further discussion of these and other risks, you should
read the sections entitled “Risk Factors” in the prospectus supplement and the
index supplement, including the risk factors discussed under the following
headings:
|
|
|
|
|
|
•
|
“Risk Factors—Risks Relating to
All Securities”;
|
|
|
•
|
“Risk Factors—Additional Risks
Relating to Notes Which Are Not Characterized as Being Fully Principal
Protected or Are Characterized as Being Partially Protected or Contingently
Protected”;
|
|
|
•
|
“Risk Factors—Additional Risks
Relating to Notes Which Pay No Interest”;
|
|
|
•
|
“Risk Factors—Additional Risks
Relating to Securities Which We May Call or Redeem (Automatically or
Otherwise);
|
|
|
•
|
“Risk Factors—Additional Risks
Relating to Securities with a Maximum Return, Maximum Rate, Ceiling or Cap”
|
|
|
•
|
“Risk Factors—Additional Risks
Relating to Securities with a Barrier Percentage or a Barrier Level; and
|
|
|
•
|
“Risk Factors—Additional Risks
Relating to Securities with Reference Assets That Are Equity Securities or
Shares or Other Interests in Exchange-Traded Funds, That Contain Equity
Securities or Shares or Other Interests in Exchange-Traded Funds or That Are
Based in Part on Equity Securities or Shares or Other Interests in
Exchange-Traded Funds.”
|
|
|
|
|
■
|
The securities
do not guarantee the return of any principal.
The
terms of the securities differ from those of ordinary debt securities in that
the securities do not guarantee the payment of regular interest or the return
of any of the principal amount at maturity. Instead, if the securities have
not been automatically redeemed prior to maturity and if the final index
value is less than the downside threshold level, you will be exposed to the
decline in the index closing level, as compared to the initial index value,
on a 1 to 1 basis and you will receive an amount equal to the stated
principal amount multiplied by the index performance factor, which will be
less than 50% of the stated principal amount and could be zero.
|
|
|
|
|
■
|
You will not
receive any contingent quarterly payment for any quarterly period where the
index closing level for the relevant determination date is less than the
coupon barrier level.
A contingent quarterly
payment will be made with respect to a quarterly period only if the index
closing level on the relevant determination date is greater than or equal to
the coupon barrier level. If the index closing level is lower than the coupon
barrier level on the relevant determination date, you will not receive a
contingent quarterly payment on the relevant contingent payment date. If the
index closing level remains below the coupon barrier level for extended
periods of time or even throughout the entire 7-year term of the securities,
you will receive few or no contingent quarterly payments.
|
|
|
|
|
■
|
Each contingent
quarterly payment is based solely on the index closing level on the relevant
determination date and the payment at maturity is based solely on the final
index value.
Whether the contingent quarterly payment will be
made with respect to a determination date will be based on the index closing
level on the relevant determination date. The payment at maturity depends
solely on the final index value. As a result, you will not know whether you will
receive the contingent quarterly payment until the related determination
date. Moreover, because the contingent quarterly payment is based solely on
the index closing level on a specific determination date, as applicable, if
such index closing level is less than the coupon barrier level, you will not
receive any contingent quarterly payment with respect to such determination
date, even if the index closing level was higher on other days during the
term of the securities. Because the payment at maturity is based solely on
the final index value, if the final index value is less than the downside
threshold level, you will receive less than 50% of the stated principal
amount of your securities and could be zero.
|
|
|
|
|
■
|
Not equivalent
to investing in the underlying index.
Investing in the
securities is not equivalent to investing in the underlying index or its
component stocks. Investors in the securities will not have voting rights or
rights to receive dividends or other distributions or any other rights with
respect to stocks that constitute the underlying index.
|
|
|
|
|
■
|
Adjustments to
the underlying index could adversely affect the value of the securities.
The
underlying index publisher may discontinue or suspend calculation or
publication of the underlying index at any time. In these circumstances, the
calculation agent will have the sole discretion to substitute a successor
index that is comparable to the discontinued underlying index and is not
precluded from considering indices that are calculated and published by the
calculation agent or any of its affiliates.
|
|
|
|
|
■
|
Investors will
not participate in any appreciation in level of the underlying index.
Investors
will not participate in any appreciation in the level of the underlying index
from the initial index value, and the return on the securities will be
limited to the contingent quarterly payment that is paid with respect to each
determination date on which the index closing level or the final index value,
as applicable, is greater than or equal to the coupon barrier level. It is
possible that the index closing level could be below the coupon barrier level
on most or all of the determination dates so that you will receive few or no
contingent quarterly payments.
|
|
|
|
|
|
|
|
|
|
Contingent Income Auto-Callable Securities due March 5, 2020, With
3-Year Initial Non-Call Period
|
|
With Contingent Quarterly Payments and Payment at Maturity Subject to the
Performance of the S&P 500
®
Index
|
|
|
|
|
|
|
|
If you do not earn sufficient
contingent quarterly payments over the term of the securities, the overall
return on the securities may be less than the amount that would be paid on a
conventional debt security of the issuer of comparable maturity.
|
|
|
|
|
■
|
You
should be willing to hold the securities to maturity.
If you
sell the securities prior to maturity in the secondary market, if any, you
may have to sell the securities at a loss relative to your initial investment
even if the price of the underlying index is above the downside threshold
level.
|
|
|
|
|
■
|
Reinvestment
risk.
The term of your investment in the securities may
shortened due to the automatic early redemption feature of the securities. If
the securities are redeemed prior to maturity, you will receive no more
contingent quarterly payments and may be forced to invest in a lower interest
rate environment. There is no guarantee that you would be able to reinvest
the proceeds from an investment in the securities in a comparable investment
with a similar level of risk in the event the securities are called prior to
the maturity date. However, under no circumstances will the securities be
redeemed in the first three years of the term of the securities.
|
|
|
|
|
■
|
Market price
influenced by many unpredictable factors.
Several factors will
influence the value of the securities in the secondary market and the price
at which Barclays Capital Inc. and other affiliates of Barclays Bank PLC may
be willing to purchase or sell the securities in the secondary market, including:
|
|
|
|
|
|
|
○
|
the volatility (frequency and
magnitude of changes in value) of the S&P 500
®
Index,
|
|
|
|
|
|
|
○
|
whether the index closing level
of the S&P 500
®
Index has been below the coupon barrier level
on any determination date,
|
|
|
|
|
|
|
○
|
geopolitical conditions and
economic, financial, political, regulatory or judicial events that affect the
component stocks of the underlying index or securities markets generally and
which may affect the value of the underlying index,
|
|
|
|
|
|
|
○
|
dividend rates on the securities
underlying the S&P 500
®
Index,
|
|
|
|
|
|
|
○
|
the time remaining until the
securities mature,
|
|
|
|
|
|
|
○
|
interest and yield rates in the
market,
|
|
|
|
|
|
|
○
|
the availability of comparable
instruments,
|
|
|
|
|
|
|
○
|
the composition of the S&P
500
®
Index and changes in the constituent stocks of such index,
and
|
|
|
|
|
|
|
○
|
any
actual or anticipated changes in our credit ratings or credit spreads.
|
|
|
|
|
|
You may receive less or possibly
significantly less, than the stated principal amount per securities if you
try to sell your securities prior to maturity.
|
|
|
|
|
■
|
The securities
are subject to the credit risk of the Issuer, Barclays Bank PLC.
The
securities are senior unsecured debt obligations of the Issuer, Barclays Bank
PLC, and are not, either directly or indirectly, an obligation of any third
party. Any payment to be made on the securities depends on the ability of
Barclays Bank PLC to satisfy its obligations as they come due and are not
guaranteed by a third party. As a result, the actual and perceived
creditworthiness of Barclays Bank PLC may affect the market value of the
securities and, in the event Barclays Bank PLC were to default on its
obligations, you may not receive the amounts owed to you under the terms of
the securities.
|
|
|
|
|
■
|
The securities
will not be listed on any securities exchange and secondary trading may be
limited.
There may be little or no secondary market for the
securities. We do not intend to list the securities on any securities
exchange. Barclays Capital Inc. and other affiliates of Barclays Bank PLC intend
to offer to purchase the securities in the secondary market but are not
required to do so and may cease any such market making activities at any
time. Even if a secondary market develops, it may not provide enough
liquidity to allow you to trade or sell the securities easily. Because other
dealers are not likely to make a secondary market for the securities, the
price, if any, at which you may be able to trade your securities is likely to
depend on the price, if any, at which Barclays Capital Inc. and other
affiliates of Barclays Bank PLC are willing to buy the securities.
Accordingly, you should be willing to hold your securities to maturity.
|
|
|
|
|
■
|
The inclusion of
commissions and projected profit from hedging in the issue price is likely to
adversely affect secondary market prices.
Assuming no change in
market conditions or any other relevant factors, the price, if any, at which
Barclays Capital Inc. and other affiliates of Barclays Bank PLC is willing to
purchase the securities in any secondary market transactions will likely be
lower than the issue price since the issue price includes, and secondary
market prices are likely to exclude, commissions paid
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contingent Income Auto-Callable Securities due March 5, 2020, With
3-Year Initial Non-Call Period
|
|
With Contingent Quarterly Payments and Payment at Maturity Subject to the
Performance of the S&P 500
®
Index
|
|
|
|
|
|
|
|
with respect to the securities,
as well as the projected profit included in the cost of hedging the issuer’s
obligations under the securities. In addition, any such prices may differ
from values determined by pricing models used by Barclays Bank PLC, as a
result of dealer discounts, mark-ups or other transaction costs and the
price, if any, at which Barclays Capital Inc. and other affiliates of
Barclays Bank PLC will be willing to purchase the securities from you in
secondary market transactions will likely be lower than the price you paid
for the securities, and any sale prior to the maturity date could result in a
substantial loss to you.
|
|
|
|
|
■
|
Hedging and
trading activity by the calculation agent and its affiliates could
potentially affect the value of the securities.
Hedging
or trading activities of the issuer’s affiliates and of any other hedging
counterparty with respect to the securities (and to other instruments linked
to the underlying index or its component stocks) on or prior to the pricing
date and prior to maturity could adversely affect the value of the underlying
index and, as a result, could decrease the amount an investor may receive on
the securities at maturity. Any of these hedging or trading activities on or
prior to the pricing date could potentially increase the initial index value
and, therefore, could increase (i) the value at which the underlying index
must close on any redemption determination dates so that the securities are
redeemed prior to maturity for the early redemption payment, (ii) the coupon
barrier level, which is the value at which the underlying index must close on
any determination date so that you receive a contingent quarterly payment on
the securities and (iii) the downside threshold level, which is the value at
which the underlying index must close on the final determination date so that
you are not exposed to the negative performance of the underlying index at
maturity. Additionally, such hedging or trading activities during the term of
the securities could potentially affect the value of the underlying index on
the redemption determination dates and the determination dates and,
accordingly, whether we redeem the securities prior to maturity, pay a
contingent quarterly payment on the securities and the amount of cash you
will receive at maturity, if any.
|
|
|
|
|
■
|
The calculation
agent will make determinations with respect to the securities.
As
calculation agent, Barclays Bank PLC will determine the initial index value,
the downside threshold level, the coupon barrier level the final index value,
the payment at maturity, whether the contingent quarterly payment will be
paid on each contingent payment date, whether the securities will be redeemed
following any determination date, whether a market disruption event has
occurred, whether to make any adjustments to the initial index value or other
variables and the payment that you will receive upon an automatic early
redemption or at maturity, if any. Determinations made by Barclays Bank PLC,
in its capacity as calculation agent, including with respect to the
occurrence or nonoccurrence of market disruption events, may affect the payout
to you upon an automatic early redemption or at maturity.
|
|
|
|
|
■
|
Potential
conflicts.
We and our affiliates play a variety of roles in
connection with the issuance of the securities, including acting as
calculation agent and hedging our obligations under the securities. In
performing these duties, the economic interests of the calculation agent and
other affiliates of ours are potentially adverse to your interests as an
investor in the securities.
|
|
|
|
|
■
|
Higher
contingent quarterly payments are generally associated with a greater risk of
loss.
Greater expected volatility with respect to the
underlying index reflects a higher expectation as of the pricing date that
the price of the underlying index could close below the downside threshold
level on the final determination date of the securities. This greater
expected risk will generally be reflected in a higher contingent quarterly
payment for that security. However, while the contingent quarterly payment is
set on the pricing date, the underlying index’s volatility may change
significantly over the term of the securities. The price of the underlying
index for your securities could fall sharply, which could result in a
significant loss of principal.
|
|
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Suitability of
the securities for investment
. You should reach a
decision to invest in the securities after carefully considering, with your
advisors, the suitability of the securities in light of your investment
objectives and the specific information set out in these preliminary terms,
the prospectus supplement, and the prospectus. Neither the Issuer nor
Barclays Capital Inc. makes any recommendation as to the suitability of the
securities for investment.
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The U.S. federal
income tax treatment of an investment in the securities is uncertain
. The
U.S. federal income tax treatment of the securities is uncertain and the Internal
Revenue Service could assert that the securities should be taxed in a manner
that is different than described below. As discussed further in the
accompanying prospectus supplement, the Internal Revenue Service issued a
notice in 2007 indicating that it and the Treasury Department are actively
considering whether, among other issues, you should be required to accrue
interest over the term of an instrument such as the securities at a rate that
may exceed the contingent quarterly payments (if any) that you receive on the
securities and whether all or part of the gain you may recognize upon the
sale, exchange, early redemption or maturity of an
instrument such as the securities should 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 and contingent notional principal contracts. While it is impossible to anticipate how any ultimate guidance would
affect the tax treatment of instruments such as the securities (and while any such guidance may be issued on a prospective basis
only), such guidance could be applied retroactively and could in any case (i) increase the likelihood that you will be required to
accrue income in respect of the securities even if you do not receive any payments with respect to the securities until early
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Contingent Income Auto-Callable Securities due March 5, 2020, With
3-Year Initial Non-Call Period
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With Contingent Quarterly Payments and Payment at Maturity Subject to the
Performance of the S&P 500
®
Index
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redemption or maturity and (ii) require you to accrue income in respect of the securities in excess of any contingent quarterly
payments you receive on the securities. The outcome of this process is uncertain. In addition, any character mismatch arising from
your inclusion of ordinary income in respect of the contingent quarterly payments and capital loss (if any) upon the sale, exchange,
early redemption or maturity of your securities may result in adverse tax consequences to you because an investor’s ability to deduct
capital losses is subject to significant limitations. You should consult your tax advisor as to the possible alternative treatments
in respect of the securities.
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Contingent Income Auto-Callable Securities due March 5, 2020, With
3-Year Initial Non-Call Period
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With Contingent Quarterly Payments and Payment at Maturity Subject to the
Performance of the S&P 500
®
Index
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S&P 500
®
Index
Overview
The S&P
500
®
Index (the “S&P 500 Index”, the “Index” or the “underlying
index”) is published by Standard & Poor’s Financial Services LLC (“S&P”).
The S&P 500 Index is intended to provide an indication of the pattern of
stock price movement in the U.S. equities market. The daily calculation of the
index closing level of the S&P 500 Index, discussed below in further
detail, is based on the aggregate market value of the common stocks of 500
companies as of a particular time compared to the aggregate average market
value of the common stocks of 500 similar companies during the base period of
the years 1941 through 1943. The underlying index does not reflect the payment
of dividends on the component stocks included in the index. Because of this,
the calculation of the final index value will not reflect the payment of
dividends on these stocks that investors would receive if they were to purchase
these stocks and hold them for a period equal to the term of the securities.
The S&P 500 Index is reported by Bloomberg under the ticker symbol “SPX”.
The information on the S&P 500
®
Index provided in these
preliminary terms should be read with the discussion under the heading
“Non—Proprietary Indices—Equity Indices—S&P 500
®
Index” in the
index supplement.
Information
on the S&P 500
®
Index as of market close on February 20, 2013:
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SPX
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Bloomberg Ticker
Symbol:
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Index closing
level on February 20, 2013:
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1,511.95
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52 Weeks Ago:
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1,362.21
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52 Week High :
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1,530.94
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52 Week Low:
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1,278.04
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The
following graph sets forth the historical performance of the S&P 500 Index
based on the weekly closing levels of the S&P 500 Index from January 2,
2004 through February 20, 2013. The related table sets forth the published high
and low index closing levels as well as the end-of-quarter closing levels of
the underlying index for each quarter from January 2, 2007 through February 20,
2013. The index closing level on February 20, 2013 was 1,511.95.
We obtained
the index closing levels of the S&P 500 Index below from Bloomberg, L.P. We
make no representation or warranty as to the accuracy or completeness of the
information obtained from Bloomberg, L.P. The historical levels of the S&P
500 Index should not be taken as an indication of future performance, and no
assurance can be given as to the index closing level on any determination date.
We cannot give you assurance that the performance of the S&P 500 Index will
result in the return of any of your initial investment.
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Underlying Index Historical Performance—
January 3, 2006 to February 20, 2013
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Past performance is not
indicative of future results
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Contingent Income Auto-Callable Securities due March 5, 2020, With
3-Year Initial Non-Call Period
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With Contingent Quarterly Payments and Payment at Maturity Subject to the
Performance of the S&P 500
®
Index
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S&P 500
®
Index
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High
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Low
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Period End
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2007
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First Quarter
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1,459.68
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1,374.12
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1,420.86
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Second Quarter
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1,539.18
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1,424.55
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1,503.35
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Third Quarter
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1,553.08
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1,406.70
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1,526.75
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Fourth Quarter
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1,565.15
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1,407.22
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1,468.36
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2008
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First Quarter
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1,447.16
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1,273.37
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1,322.70
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Second Quarter
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1,426.63
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1,278.38
|
1,280.00
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Third Quarter
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1,305.32
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1,106.39
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1,166.36
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Fourth Quarter
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1,161.06
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752.44
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903.25
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2009
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First Quarter
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934.70
|
676.53
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797.87
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Second Quarter
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946.21
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811.08
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919.32
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Third Quarter
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1,071.66
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879.13
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1,057.08
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Fourth Quarter
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1,127.78
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1,025.21
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1,115.10
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2010
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First Quarter
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1,174.17
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1,056.74
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1,169.43
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Second Quarter
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1,217.28
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1,030.71
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1,030.71
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Third Quarter
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1,148.67
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1,022.58
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1,141.20
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Fourth Quarter
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1,259.78
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1,137.03
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1,257.64
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2011
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First Quarter
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1,343.01
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1,256.88
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1,328.26
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Second Quarter
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1,363.61
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1,265.42
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1,320.64
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Third Quarter
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1,353.22
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1,119.46
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1,131.42
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Fourth Quarter
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1,285.09
|
1,099.23
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1,257.60
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2012
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First Quarter
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1,416.51
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1,277.06
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1,408.47
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Second Quarter
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1,419.04
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1,278.04
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1,362.16
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Third Quarter
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1,465.77
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1,334.76
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1,440.67
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Fourth Quarter
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1,461.40
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1,353.33
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1,402.43
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2013
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First Quarter (through February
20, 2013)
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1,530.94
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1,457.15
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1,511.95
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Past performance is not
indicative of future results
Disclaimer
Standard
& Poor’s
®
, S&P 500
®
and S&P
®
are
registered trademarks of Standard & Poor’s Financial Services LLC
(“S&P”) and Dow Jones
®
is a registered trademark of Dow Jones
Trademark Holdings LLC (“Dow Jones”). These trademarks have been licensed for
use by S&P Dow Jones Indices LLC and its affiliates and sublicensed for
certain purposes by Barclays Bank PLC. The S&P 500
®
Index (the
“Index”) is a product of S&P Dow Jones Indices LLC, and has been licensed
for use by Barclays Bank PLC.
The
securities are not sponsored, endorsed, sold or promoted by S&P Dow Jones
Indices LLC, Dow Jones, S&P, any of their respective affiliates
(collectively, “S&P Dow Jones Indices”). S&P Dow Jones Indices makes no
representation 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
Index to track general market performance. S&P Dow Jones Indices’ only
relationship to Barclays Bank PLC with respect to the Index is the licensing of
the Index and certain trademarks, service marks and/or trade names of S&P
Dow Jones Indices and/or its third party licensors. The Index is determined,
composed and calculated by S&P Dow Jones Indices and/or its third party
licensor(s) without regard to Barclays Bank PLC or the securities. S&P Dow
Jones 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 Index. S&P Dow Jones Indices is not responsible for and has
not participated in the determination of the prices, and amount of the
securities or the timing of the issuance or sale of the securities or in the
determination or calculation of the equation by which the securities are to be
converted into cash. S&P Dow Jones Indices has no obligation or liability
in connection with the administration, marketing or trading of the securities.
There is no assurance that investment products based on the Index will
accurately track index performance or provide positive investment returns.
S&P Dow Jones Indices LLC is not an investment advisor. Inclusion of a security
within the Index is not a recommendation by S&P Dow Jones Indices to buy,
sell, or hold such security, nor is it considered to be investment advice. In
addition, CME Group Inc. and its affiliates may trade financial products which
are linked to the performance of the Index. It is possible that this trading
activity will affect the value of the Index and the securities.
S&P DOW
JONES INDICES DOES NOT GUARANTEE THE ADEQUACY, ACCURACY, TIMELINESS AND/OR THE
COMPLETENESS OF THE INDEX OR ANY DATA RELATED THERETO OR ANY COMMUNICATION,
INCLUDING BUT NOT LIMITED TO, ORAL OR WRITTEN COMMUNICATION (INCLUDING
ELECTRONIC COMMUNICATIONS) WITH RESPECT THERETO. S&P DOW JONES INDICES
SHALL NOT BE SUBJECT TO ANY DAMAGES OR LIABILITY FOR ANY ERRORS, OMISSIONS, OR
DELAYS THEREIN. S&P DOW JONES INDICES MAKES NO EXPRESS OR IMPLIED
WARRANTIES, AND
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Contingent Income Auto-Callable Securities due March 5, 2020, With
3-Year Initial Non-Call Period
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With Contingent Quarterly Payments and Payment at Maturity Subject to the
Performance of the S&P 500
®
Index
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EXPRESSLY
DISCLAIMS ALL WARRANTIES, OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR
PURPOSE OR USE OR 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 INDEX OR WITH
RESPECT TO ANY DATA RELATED THERETO. WITHOUT LIMITING ANY OF THE FOREGOING, IN
NO EVENT WHATSOEVER SHALL S&P DOW JONES INDICES BE LIABLE FOR ANY INDIRECT,
SPECIAL, INCIDENTAL, PUNITIVE, OR CONSEQUENTIAL DAMAGES INCLUDING BUT NOT
LIMITED TO, LOSS OF PROFITS, TRADING LOSSES, LOST TIME OR GOODWILL, EVEN IF
THEY HAVE BEEN ADVISED OF THE POSSIBLITY OF SUCH DAMAGES, WHETHER IN CONTRACT,
TORT, STRICT LIABILITY, OR OTHERWISE. THERE ARE NO THIRD PARTY BENEFICIARIES OF
ANY AGREEMENTS OR ARRANGEMENTS BETWEEN S&P DOW JONES INDICES AND BARCLAYS
BANK PLC, OTHER THAN THE LICENSORS OF S&P DOW JONES INDICES.
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Contingent Income Auto-Callable Securities due March 5, 2020, With 3-Year Initial Non-Call Period
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With Contingent Quarterly Payments and Payment at Maturity Subject to the Performance of the S&P 500
®
Index
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Additional Information About the Securities
Please read this information in conjunction with the summary terms on
the front cover of this document.
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Additional Provisions:
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Record date:
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One business day prior to the related contingent payment date.
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Index business day:
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A day, as determined by the calculation agent, on which trading is
generally conducted on each of the relevant exchange(s) for the underlying
index, other than a day on which trading on such exchange(s) is scheduled to close prior to the time of the posting of
its regular final weekday closing.
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Postponement of maturity
date and contingent
payment dates:
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The maturity date
and any contingent payment date will be postponed if the relevant
determination date is postponed due to the occurrence or continuance of a
market disruption event with respect to the underlying index on such relevant
determination date. In such a case,
the contingent payment date or maturity date, as the case may be, will be
postponed by the same number of business days from but excluding the
originally scheduled determination date; provided that the relevant
determination date may not be postponed to a date later than the originally
scheduled contingent payment date or maturity date, as the case may be, or if
the originally scheduled contingent payment date or maturity date, as the
case may be, is not a business day, later than the first business day after
the originally scheduled contingent payment date or maturity date, as the
case may be. See “Terms of the Notes
— Maturity Date” and “Reference Assets—Equity Securities—Market Disruption
Events Relating to Securities with an Equity Security as the Reference Asset”
in the accompanying prospectus supplement.
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Market Disruption Events
and Adjustments:
|
|
The determination dates, the maturity date and the payment at maturity are subject to adjustment as described in the following
sections of the prospectus supplement:
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•
|
For a description
of what constitutes a market disruption event with respect to the Index as
well as the consequences of that market disruption event, see
“
Reference
Assets—Indices—Market Disruption Events for Securities with the Reference
Asset Comprised of an Index or Indices of Equity Securities; and
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•
|
For a description
of further adjustments that may affect the Index, see “Reference
Assets—Indices—Adjustments Relating to Securities with the Reference Asset
Comprised of an Index”.
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Listing:
|
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The securities will not be listed on any securities exchange.
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Minimum ticketing size:
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100 securities
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Tax considerations:
|
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The material tax consequences of your investment in the securities are
summarized below. The discussion below supplements the discussion under “Certain U.S.
Federal Income Tax Considerations” in the accompanying prospectus supplement. Except
as noted under “Non-U.S. Holders” below, this section applies to you only if you
are a U.S. holder (as defined in the accompanying prospectus supplement) and you hold your
securities as capital assets for tax purposes and does not apply to you if you are a
member of a class of holders subject to special rules or are otherwise excluded from the
discussion in the prospectus supplement (for example, if you did not purchase your
securities in the initial issuance of the securities). In addition, this discussion does
not apply to you if you purchase your securities for less than the principal amount of the
securities.
The U.S. federal income tax consequences
of your investment in the securities are uncertain and the Internal Revenue
Service could assert that the securities should be taxed in a manner that is
different than described below. Pursuant to the terms of the
securities, Barclays Bank PLC and you agree, in the absence of a change in
law or an administrative or judicial ruling to the contrary, to characterize
your securities as a contingent income-bearing executory contract with
respect to the underlying index.
If your securities are properly treated
as a contingent
income-bearing executory contract, it would be reasonable (i)
to treat any contingent quarterly payments you receive on the securities as
items of ordinary income taxable in accordance with your regular method of
accounting for U.S. federal income tax purposes and (ii) to recognize capital gain or loss upon the sale, exchange, early redemption or maturity of
your securities in an amount equal to the difference (if any) between the
amount you receive at such time (other than amounts attributable to a contingent quarterly payment) and your basis in the securities for U.S. federal
income tax purposes. Such gain or
loss should generally be long-term capital gain or loss if you have held your
securities for more than one year, and otherwise should generally be
short-term capital gain or loss. Short-term capital gains are generally
subject to tax at the marginal tax rates applicable to ordinary income. Any character mismatch arising
from your inclusion of ordinary income in respect of the contingent quarterly
payments and capital loss (if any) upon the sale, exchange, early redemption or
maturity of your securities may
result in adverse tax consequences to you because an investor’s ability to
deduct capital losses is subject to significant limitations.
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Contingent Income Auto-Callable Securities due March 5, 2020, With 3-Year Initial Non-Call Period
|
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With Contingent Quarterly Payments and Payment at Maturity Subject to the Performance of the S&P 500
®
Index
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In the opinion of our special tax counsel,
Sullivan & Cromwell LLP, it would be reasonable to treat your securities
in the manner described above. This
opinion assumes that the description of the terms of the securities in these
preliminary terms is materially correct.
NO STATUTORY, JUDICIAL OR ADMINISTRATIVE
AUTHORITY DIRECTLY DISCUSSES HOW YOUR SECURITIES SHOULD BE TREATED FOR U.S.
FEDERAL INCOME TAX PURPOSES. AS A
RESULT, THE U.S. FEDERAL INCOME TAX CONSEQUENCES OF YOUR INVESTMENT IN THE
SECURITIES ARE UNCERTAIN.
ACCORDINGLY, WE URGE YOU TO CONSULT YOUR TAX ADVISOR AS TO THE TAX
CONSEQUENCES OF INVESTING IN THE SECURITIES.
Alternative Treatments
. As discussed further in the accompanying
prospectus supplement, the Treasury Department and the Internal Revenue
Service are actively considering various alternative treatments that may
apply to instruments such as the securities, possibly with retroactive
effect. Other alternative treatments
for your securities may also be possible under current law. For example, it is possible that the
securities could be treated as a debt instrument that is subject to the
special tax rules governing contingent payment debt instruments. Under the contingent payment debt
instrument rules, you generally would be required to accrue interest on a
current basis in respect of the securities over their term based on the
comparable yield and projected payment schedule for the securities and pay
tax accordingly, even though these amounts may exceed the contingent
quarterly payments (if any) that are made on the securities. You would also be required to make
adjustments to your accruals if the actual amounts that you receive in any
taxable year differ from the amounts shown on the projected payment
schedule. In addition, any gain you
may recognize on the sale, exchange, early redemption or maturity of the
securities would be taxed as ordinary interest income and any loss you may
recognize on the sale, exchange, early redemption or maturity of the
securities would generally be ordinary loss to the extent of the interest you
previously included as income without an offsetting negative adjustment and
thereafter would be capital loss. You
should consult your tax advisor as to the special rules that govern
contingent payment debt instruments.
It is also possible that your securities could
be treated as an investment unit consisting of (i) a debt instrument that is
issued to you by us and (ii) a put option in respect of the underlying index
that is issued by you to us. You should consult your
tax advisor as to the possible consequences of this alternative treatment.
In addition, it is possible that (i) you should
not include the contingent quarterly payments in income as you receive them
and instead you should reduce your basis in your securities by the amount of
the contingent quarterly payments that you receive; (ii) you should not
include the contingent quarterly payments in income as you receive them and
instead, upon the sale, exchange, early redemption or maturity of your
securities, you should recognize short-term capital gain or loss in an amount
equal to the difference between (a) the amount of the contingent quarterly
payments made to you over the term of the securities (including any
contingent quarterly payment received at early redemption or maturity or the
amount of cash that you receive upon a sale or exchange that is attributable
to the contingent quarterly payments to be made on the securities) and (b)
the excess (if any) of (1) the amount you paid for your securities over (2)
the amount of cash you receive upon the sale, exchange, early redemption or
maturity (excluding any contingent quarterly payment received at early
redemption or maturity or the amount of cash that you receive upon a sale or
exchange that is attributable to the contingent quarterly payments to be made
on the securities); or (iii) if a contingent quarterly payment is made at
early redemption or maturity, such contingent quarterly payment should not
separately be taken into account as ordinary income but instead should
increase the amount of capital gain or decrease the amount of capital loss
that you recognize at such time.
You should consult your tax advisor with
respect to these possible alternative treatments.
For a further
discussion of the tax treatment of your securities as well as other possible
alternative characterizations, please see the discussion under the heading
“Certain U.S. Federal Income Tax Considerations—Certain Notes Treated as
Forward Contracts or Executory Contracts” in the accompanying prospectus
supplement. You should consult your
tax advisor as to the possible alternative treatments in respect of the
securities. For additional, important
considerations related to tax risks
associated with investing in the securities, you should also examine the
discussion in “Risk Considerations—The U.S. federal income tax treatment of
an investment in the securities is uncertain”, in these preliminary
terms.
Medicare Tax
. As discussed under “Certain U.S. Federal Income Tax
Considerations—Medicare Tax” in the accompanying prospectus supplement,
certain U.S. holders will be subject to a 3.8% Medicare tax on their “net
investment income” if their modified adjusted gross income for the taxable
year is over a certain threshold. Net
investment income will include any gain that a U.S. holder recognizes upon
the sale, exchange, early redemption or maturity of the securities, unless
such income is derived in the ordinary course of the conduct of a trade or
business (other than a trade or business that consists of certain passive or
trading activities). It is not clear,
however, whether the Medicare tax would apply to
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Contingent Income Auto-Callable Securities due March 5, 2020, With 3-Year Initial Non-Call Period
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With Contingent Quarterly Payments and Payment at Maturity Subject to the Performance of the S&P 500
®
Index
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any contingent quarterly
payments that you receive on the securities, unless such contingent quarterly
payments are derived in the ordinary course of the conduct of a trade or
business (in which case the contingent quarterly payments should be treated
as net investment income if they are derived in a trade or business that
consists of certain trading or passive activities and should otherwise not be
treated as net investment income).
Accordingly, U.S. holders that do not hold the securities in the
ordinary conduct of a trade or business should consult their tax advisors
regarding the application of the Medicare tax to the contingent quarterly payments.
“Specified Foreign Financial
Asset” Reporting.
Under legislation enacted in
2010, owners of “specified foreign financial assets” with an aggregate value
in excess of $50,000 (and in some circumstances, a higher threshold) may be
required to file an information report with respect to such assets with their
tax returns. “Specified foreign
financial assets” generally include any financial accounts maintained by
foreign financial institutions, as well as any of the following (which may
include your securities), but only if they are not held in accounts
maintained by financial institutions: (i) stocks and securities issued by
non-U.S. persons, (ii) financial instruments and contracts held for
investment that have non-U.S. issuers or counterparties and (iii) interests
in foreign entities. Holders are
urged to consult their tax advisors regarding the application of this
legislation to their ownership of the securities.
Non-U.S. Holders
.
Barclays currently does not withhold on payments to non-U.S. holders. However, if Barclays determines that there
is a material risk that it will be required to withhold on any such payments,
Barclays may withhold on any contingent quarterly payments at a 30% rate,
unless you have provided to Barclays (i) a valid Internal Revenue Service
Form W-8ECI or (ii) a valid Internal Revenue Service Form W-8BEN claiming tax
treaty benefits that reduce or eliminate withholding. If Barclays elects to withhold and you
have provided Barclays with a valid Internal Revenue Service Form W-8BEN
claiming tax treaty benefits that reduce or eliminate withholding, Barclays
may nevertheless withhold up to 30% on any contingent quarterly payments it
makes to you if there is any possible characterization of the contingent
quarterly payments that would not be exempt from withholding under the
treaty.
In addition, the
Treasury Department has issued proposed regulations under Section 871(m) of
the Internal Revenue Code, which could ultimately require us to treat all or
a portion of any payment in respect of your securities, to the extent
attributable to U.S.–source dividends, as a “dividend equivalent” payment
that is subject to withholding tax at a rate of 30% (or a lower rate under an
applicable treaty). However, such
withholding would potentially apply only to payments made after December 31,
2013. You could also be required to
make certain certifications in order to avoid or minimize such withholding
obligations, and you could be subject to withholding (subject to your
potential right to claim a refund from the Internal Revenue Service) if such
certifications were not received or were not satisfactory. You should consult your tax advisor
concerning the potential application of these regulations to payments you
receive with respect to the securities when these regulations are finalized.
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Trustee:
|
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The Bank of New York Mellon
|
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Calculation agent:
|
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Barclays Bank PLC
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Use of proceeds and
hedging:
|
|
The net proceeds we receive from the sale of the securities
will be used for various corporate purposes as set forth in the prospectus and prospectus
supplement and, in part, in connection with hedging our
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obligations under the securities
through one or more of our subsidiaries.
We, through our
subsidiaries or others, expect to hedge our anticipated exposure in
connection with the securities by taking positions in futures and options
contracts on the underlying index and any other securities or
instruments we may wish to use in connection with such
hedging. Trading and other transactions by us or our affiliates
could affect the level, value or price of reference assets and their
components, the market value of the securities or any amounts payable on the
securities. For further information on our use of proceeds and hedging,
see “Use of Proceeds and Hedging” in the prospectus supplement.
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ERISA:
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See
“Employee Retirement Income Security Act” starting on page S-120 in the
accompanying prospectus supplement.
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Contact:
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Morgan Stanley Smith Barney LLC (“Morgan Stanley Wealth Management”
(“MSWM”)) clients may contact their MSWM sales representative or MSWM’s
principal executive offices at 2000 Westchester Avenue, Purchase, New York 10577
(telephone number 800-869-3326). A copy of each of these documents may be obtained from
Barclays Bank PLC or the agent Barclays, at 1-888-227-2275 (Extension 2-3430) or 745
Seventh Avenue—Attn: US InvSol Support, New York, NY 10019.
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Contingent Income Auto-Callable Securities due March 5, 2020, With 3-Year Initial Non-Call Period
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With Contingent Quarterly Payments and Payment at Maturity Subject to the Performance of the S&P 500
®
Index
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These preliminary terms represent a
summary of the terms and conditions of the securities. We encourage you to read
the accompanying prospectus and prospectus supplement for this offering, which can be
accessed via the hyperlinks on the front page of this document.
Supplemental Plan of
Distribution
MSSB and its financial advisors will
collectively receive from the Agent, Barclays Capital Inc., a fixed sales commission of
$0.350 for each security they sell. We expect that delivery of the
securities will be made against payment for the securities on or about the issue date
indicated on the cover of these preliminary terms, which will be the third business day
following the expected pricing date (this settlement cycle being referred to as
“T+3”). See “Plan of Distribution” in the prospectus supplement.