Free Writing Prospectus - Filing Under Securities Act Rules 163/433 (fwp)
March 20 2013 - 11:57AM
Edgar (US Regulatory)
|
|
|
March 2013
|
Preliminary Terms No. 89
|
Registration Statement No. 333-169119
|
Dated March 20, 2013
|
Filed pursuant to Rule 433
|
STRUCTURED INVESTMENTS
Opportunities in U.S. Equities
Contingent Income Auto-Callable Securities due April 4, 2016
Based on the Performance of the Common Stock of Transocean Ltd.
Contingent Income Auto-Callable Securities offer
the opportunity for investors to earn a contingent quarterly payment equal to
between 2.58% and 3.08% of the stated principal amount (the actual contingent
quarterly payment will be determined on the pricing date) with respect to each
quarterly determination date on which the closing price of the underlying stock
is greater than or equal to 70% of the initial share price, which we refer to as
the downside threshold level. In addition, if the closing price of the
underlying stock is greater than or equal to the initial share price on any
determination date, the securities will be automatically redeemed for an amount
per security equal to the stated principal amount plus the contingent quarterly
payment. However, if on any determination date the closing price of the
underlying stock is less than the initial share price, the securities will not
be redeemed and if that closing price is less than the downside threshold level,
you will not receive any contingent quarterly payment for that quarterly period.
If the securities are not redeemed prior to maturity the payment at maturity due
on the securities will be either (i) the stated principal amount and the
contingent quarterly payment or (ii) a number of shares of the underlying stock,
or at our option the cash value thereof, that will be significantly less than
the stated principal amount of the securities if the closing price of the
underlying stock is below the downside threshold level on the final
determination date. As a result, investors must be willing to accept the risk of
not receiving a contingent quarterly payment and also the risk of receiving
shares of the underlying stock, or the cash value therof, that would be worth
significantly less than the stated principal amount of the securities and could
be zero.
Accordingly, the securities do not guarantee any return of principal at
maturity and investors could lose their entire investment in the securities.
Investors will not participate in any appreciation of the underlying stock. The
securities are senior notes issued as part of Barclays Bank PLCs Global
Medium-Term Notes Program. The securities are not, either directly or
indirectly, an obligation of any third party, and any payment to be made on the
securities depends on the ability of Barclays Bank PLC to satisfy its
obligations as they come due.
|
|
|
|
SUMMARY TERMS
|
|
|
|
Issuer:
|
Barclays Bank PLC
|
Underlying stock:
|
Transocean Ltd. common stock
|
Aggregate principal amount:
|
$
|
Stated principal amount:
|
$10 per security
|
Issue price:
|
$10 per security (See Commissions and Issue Price below)
|
Pricing date
:
|
March 28, 2013 (or if such day is not a scheduled trading day, the next succeeding scheduled trading day).
|
Original issue date
:
|
April 3, 2013 (3 business days after the pricing date)
|
Maturity date
:
|
April 4, 2016
|
Early redemption:
|
If, on any of the first eleven determination dates, the determination closing price of the underlying stock is greater than or equal
to the initial share price, the securities will be automatically redeemed for an early redemption payment on the third business day
following the related determination date.
|
Early redemption payment:
|
The early redemption payment will be an amount equal to (i) the stated principal amount
plus
(ii) the contingent quarterly payment
with respect to the related determination date.
|
Determination closing price:
|
The closing price of the underlying stock on any determination date other than the final determination date.
|
Contingent quarterly payment:
|
|
If, on any determination date, the determination
closing price or the final share price, as applicable, is greater than or equal
to the downside threshold level, we will pay a contingent quarterly payment
(rounded to the nearest thousandths) of $0.258 to $0.308 (2.58% to 3.08% of the
stated principal amount) per security on the related contingent payment date.
The actual contingent quarterly payment will be determined on the pricing
date.
|
|
|
If, on any determination date, the determination
closing price or the final share price, as applicable, is less than the downside
threshold level, no contingent quarterly payment will be made with respect to
that determination date.
|
Determination dates
:
|
June 28, 2013, September 30, 2013, December 30, 2013,
March 28, 2014, June 30, 2014, September 29, 2014, December 29, 2014, March 30,
2015, June 29, 2015, September 28, 2015, December 28, 2015 and March 30, 2016
(subject to postponement if a market disruption event occurs or is continuing
with respect to the underlying stock on any determination date). We also refer
to March 30, 2016 as the final determination date.
|
Contingent payment dates:
|
With respect to each determination date other than
the final determination date, the third business day after the related
determination date. The payment of the contingent quarterly payment, if any,
with respect to the final determination date will be made on the maturity
date.
|
Payment at maturity:
|
|
If the final share price is
greater than or equal to
the downside threshold level:
|
(i) the stated principal amount
plus
(ii) the
contingent quarterly payment with respect to the final determination
date.
|
|
|
|
|
|
|
If the final share price is
less than
the downside
threshold level:
|
at our option (i) a number of shares of the
underlying stock multiplied by the exchange ratio, each as of the final
determination date (the
physical delivery amount
)*, or (ii) the cash value of
such shares as of the final determination date determined as follows: the
exchange ratio times the final share price.
|
Exchange ratio:
|
The stated principal amount divided by the initial share price (rounded to the nearest hundredth thousandths)
|
Downside threshold level:
|
$[], which is equal to 70% of the initial share price*
|
Initial share price:
|
The closing price of the underlying stock on the pricing date*
|
Final share price:
|
The closing price of the underlying stock on the final determination date*
|
CUSIP:
|
06742C582
|
ISIN:
|
US06742C5821
|
Listing:
|
The securities will not be listed on any securities exchange.
|
Selected Dealer:
|
Morgan Stanley Smith Barney LLC (
Morgan Stanley Wealth Management (MSWM
))
|
|
|
|
|
Commissions and Issue Price:
|
Price to Public
|
Agents Commissions
(1)
|
Proceeds to Issuer
|
Per
security
|
$10.00
|
$0.225
|
$9.775
|
Total
|
$
|
$
|
$
|
|
|
Expected. In the event that we make any change to the pricing date and the issue date, the determination dates and the maturity
date will be changed so that the stated term of the securities remains the same.
|
|
|
|
Contingent Income Auto-Callable Securities due April 4, 2016
|
Based on the Performance of the Common Stock of Transocean Ltd.
|
|
|
* The physical delivery amount, the initial
share price of the underlying stock and other amounts may change due to stock
splits or other corporate actions. See Reference AssetsEquity
SecuritiesShare Adjustments Relating to Securities with an Equity Security
as the Reference Asset in the accompanying prospectus
supplement.
|
(1) MSSB and its financial advisors will collectively receive from the Agent, Barclays Capital Inc.,
a fixed sales commission of $0.225 for each security they sell. See Supplemental Plan of Distribution.
Investing in the Securities involves risks not associated
with an investment in conventional debt securities. See Risk Factors beginning
on page 10. You should read this document together with the related prospectus
and prospectus supplement, each of which can be accessed via the hyperlinks
below before you make an investment decision.
Any payment on the Notes, including any repayment of
principal, is subject to the creditworthiness of the Issuer and is not
guaranteed by any third party. For a description of risks with respect to the
ability of Barclays Bank PLC to satisfy its obligations as they come due, see
Risk Factors - The Securities are Subject to the Credit Risk of the Issuer,
Barclays Bank PLC in this free writing prospectus.
Barclays Bank PLC has filed a registration statement
(including a prospectus) with the U.S. Securities and Exchange Commission
(SEC) for the offering to which these preliminary terms relate. Before you
invest, you should read the prospectus dated August 31, 2010, the prospectus
supplement dated May 27, 2011 and other documents Barclays Bank PLC has filed
with the SEC for more complete information about Barclays Bank PLC and this
offering. Buyers should rely upon the prospectus, prospectus supplement and any
relevant preliminary pricing supplement or pricing supplement for complete
details. You may get these documents and other documents Barclays Bank PLC has
filed for free by visiting EDGAR on the SEC website at www.sec.gov.
Alternatively, Barclays Bank PLC or any agent or dealer participating in this
offering will arrange to send you the prospectus, prospectus supplement,
preliminary pricing supplement, if any, and final pricing supplement (when
completed) and these preliminary terms if you request it by calling your
Barclays Bank PLC sales representative, such dealer or 1-888-227-2275 (Extension
2-3430). A copy of each of these documents may be obtained from Barclays Capital
Inc., 745 Seventh AvenueAttn: US InvSol Support, New York, NY 10019.
Neither the Securities and Exchange Commission nor
any state securities commission has approved or disapproved of the securities or
determined that these preliminary terms are truthful or complete. Any
representation to the contrary is a criminal offense.
|
|
Morgan Stanley Smith Barney LLC
|
Barclays Capital Inc.
|
|
March 2013
|
Page 2
|
|
|
|
Contingent Income Auto-Callable Securities due April 4, 2016
|
Based on the Performance of the Common Stock of Transocean Ltd.
|
|
Additional Terms of the Securities
You should read these preliminary
terms together with the prospectus dated August 31, 2010, as supplemented by the
prospectus supplement dated May 27, 2011 relating to our Global Medium-Term
Notes, Series A, of which the securities are a part. These preliminary terms,
together with the documents listed below, contain the terms of the securities
and supersede all prior or contemporaneous oral statements as well as any other
written materials including preliminary or indicative pricing terms,
correspondence, trade ideas, structures for implementation, sample structures,
brochures or other educational materials of ours. You should carefully consider,
among other things, the matters set forth in Risk Factors in the prospectus
supplement as the securities involve risks not associated with conventional debt
securities. We urge you to consult your investment, legal, tax, accounting and
other advisors before you invest in the securities.
You may access these documents on the
SEC website at www.sec.gov as follows (or if such address has changed, by
reviewing our filings for the relevant date on the SEC website):
Our SEC file number is 1-10257 and our
Central Index Key, or CIK, on the SEC website is 0000312070. As used in these
preliminary terms, the Company, we, us, or
our refers to Barclays Bank PLC.
The securities constitute Barclays Bank PLCs direct, unconditional, unsecured and unsubordinated obligations and are not deposit
liabilities and are not insured by the U.S. Federal Deposit Insurance Corporation or any other governmental agency of the United
States, the United Kingdom or any other jurisdiction. In addition, the securities will not be guaranteed by the Federal Deposit
Insurance Corporation under the FDICs temporary liquidity guarantee program.
In connection with this offering, Morgan Stanley Smith Barney LLC is acting in its capacity as a selected dealer.
|
|
|
Contingent Income Auto-Callable Securities due April 4, 2016
|
Based on the Performance of the Common Stock of Transocean Ltd.
|
|
Investment
Summary
The Contingent Income Auto-Callable Securities
due April 4, 2016 Based on the Performance of the Common Stock of Transocean
Ltd., which we refer to as the securities, provide an opportunity for investors
to earn a contingent quarterly payment, which is an amount equal to $0.258 to
$0.308 (2.58% to 3.08% of the stated principal amount per security), with
respect to each quarterly determination date on which the determination closing
price or the final share price, as applicable, is greater than or equal to 70%
of the initial share price, which we refer to as the downside threshold level.
The actual contingent quarterly payment will be determined on the pricing date.
The contingent quarterly payment, if any, will be payable quarterly on the
contingent payment date, which is the third business day after the related
determination date. It is possible that the closing price of the underlying
stock could remain below the downside threshold level for extended periods of
time or even throughout the term of the securities so that you may receive no
contingent quarterly payments on certain contingent payment dates or potentially
no contingent quarterly payments at all over the term of the securities.
If the determination closing price is greater
than or equal to the initial share price on any of the first eleven
determination dates, the securities will be automatically redeemed for an early
redemption payment equal to the stated principal amount
plus
the
contingent quarterly payment with respect to the related determination date. If
the securities have not previously been redeemed and the final share price is
greater than or equal to the downside threshold level, the payment at maturity
will also be the sum of the stated principal amount and the contingent quarterly
payment with respect to the final determination date. However, if the securities
have not previously been redeemed and the final share price is less than the
downside threshold level, investors will be exposed to the decline in the
closing price of the underlying stock, as compared to the initial share price,
on a 1 to 1 basis and receive at our option (i) a number of shares of the
underlying stock multiplied by the exchange ratio or (ii) the cash value of such
shares as of the final determination date determined as follows: the exchange
ratio
times
the final share price. The value of such
shares (or that cash) will be less than 70% of the stated principal amount
of the securities and could be zero. Investors in the securities must be
willing to accept the risk of losing their entire principal and also the risk
of not receiving any contingent quarterly payment. In addition, investors will
not participate in any appreciation of the underlying stock.
|
|
|
Contingent Income Auto-Callable Securities due April 4, 2016
|
Based on the Performance of the Common Stock of Transocean Ltd.
|
|
Key
Investment Rationale
The
securities offer investors an opportunity to earn
a contingent quarterly payment between 2.58
% and 3.08%
(the actual contingent
quarterly payment will be determined on the pricing date) of the stated
principal amount with respect to each determination date on which the determination
closing price or the final share price, as applicable, is greater than or equal
to 70% of the initial share price, which we refer to as the downside threshold
level. The actual contingent quarterly payment will be determined on the
pricing date. If, on any of the first eleven determination dates, the
determination closing price of the underlying stock is greater than or equal to
the initial share price, the securities will be automatically redeemed prior to
maturity for the stated principal amount per security
plus
the applicable contingent quarterly
payment. The following scenarios reflect the potential payments, if any, on the
securities:
|
|
|
|
|
|
|
|
Scenario 1
|
|
On any of the
first eleven determination dates, the determination closing price is
greater than or equal to
the initial
share price.
|
|
|
|
|
|
|
■
|
The securities will be
automatically redeemed for (i) the stated principal amount
plus
(ii) the contingent quarterly payment with respect to the related
determination date.
|
|
|
|
|
|
|
■
|
Investors will not participate in
any appreciation of the underlying stock from the initial share price.
|
|
|
|
|
|
|
|
|
|
|
|
|
Scenario 2
|
|
The securities
are not automatically redeemed prior to maturity and the final share price is
greater than or equal to
the
downside threshold level.
|
|
|
|
|
|
|
■
|
The payment due at maturity will
be (i) the stated principal amount
plus
(ii) the contingent quarterly
payment with respect to the final determination date.
|
|
|
|
|
|
|
■
|
Investors will not participate in any appreciation of the underlying stock
from the initial share price.
|
|
|
|
|
|
|
|
|
|
|
|
|
Scenario 3
|
|
The securities
are not automatically redeemed prior to maturity and the final share price is
less than
the downside
threshold level.
|
|
|
|
|
|
|
■
|
The payment due at maturity will
be at our option (i) a number of shares of the underlying stock multiplied by
the exchange ratio, each as of the final determination date, or (ii)
the cash value of those shares as of the final determination date determined
as follows: the exchange ratio
times
the final share
price.
Investors will lose some and may
lose all of their principal in this scenario.
|
|
|
|
|
|
|
|
Contingent Income
Auto-Callable Securities due April 4, 2016
|
Based on the Performance of the Common Stock of
Transocean Ltd.
|
|
How the Securities Work
The following diagrams illustrate the potential outcomes for the
securities depending on (1) the determination closing price and (2) the final
share price.
Diagram #1: First
Eleven Determination Dates
Diagram #2: Payment
at Maturity if No Automatic Early Redemption Occurs
For more information about the payout upon an early redemption or at
maturity in different hypothetical scenarios, see Hypothetical Examples
beginning on page 7.
|
|
|
Contingent Income
Auto-Callable Securities due April 4, 2016
|
Based on the Performance of the Common Stock of
Transocean Ltd.
|
|
Hypothetical Examples
The below examples are based on the following terms:
|
|
Hypothetical
Initial Share Price:
|
$53.76
|
Hypothetical
Downside Threshold Level:
|
$37.63, which is
70% of the initial share price
|
Hypothetical
Exchange Ratio:
|
0.18601, which is
the stated principal amount per security divided by the hypothetical initial
share price
|
Hypothetical
Contingent Quarterly Payment:
|
$
0.283
(2.83% of the stated principal
amount). The actual contingent quarterly payment will be set on the pricing
date and will be between 2.58% and 3.08% of the stated principal amount.
|
Stated Principal
Amount:
|
$10 per security
|
In Examples 1 and 2, the closing price of the underlying stock
fluctuates over the term of the securities and the determination closing price
of the underlying stock is greater than or equal to the hypothetical initial
share price of $53.76 on one of the first eleven determination dates (the actual
initial share price will be determined on the Trade Date). Because the
determination closing price is greater than or equal to the initial share price
on one of the first eleven determination dates, the securities are
automatically redeemed following the relevant determination date. In Examples 3
and 4, the determination closing price on the first eleven determination dates
is less than the initial share price, and, consequently, the securities are not
automatically redeemed prior to, and remain outstanding until, maturity. The
examples below assume that the securities will be held until maturity and do
not take into account the tax consequences of an investment in the securities.
|
|
|
|
|
|
|
|
Example 1
|
Example 2
|
Determination
Dates
|
Hypothetical
Determination
Closing Price
|
Contingent
Quarterly
Payment (per
$10.00 security)
|
Early
Redemption
Payment (per
$10.00
security)*
|
Hypothetical
Determination
Closing Price
|
Contingent
Quarterly
Payment(per
$10.00 security)
|
Early
Redemption
Payment(per
$10.00
security)
|
#1
|
$32.25
|
$0.00
|
N/A
|
$43.55
|
$0.283
|
N/A
|
#2
|
$53.76
|
*
|
$10.283
|
$28.19
|
$0.00
|
N/A
|
#3
|
N/A
|
N/A
|
N/A
|
$23.16
|
$0.00
|
N/A
|
#4
|
N/A
|
N/A
|
N/A
|
$30.09
|
$0.00
|
N/A
|
#5
|
N/A
|
N/A
|
N/A
|
$51.07
|
$0.283
|
N/A
|
#6
|
N/A
|
N/A
|
N/A
|
$45.70
|
$0.283
|
N/A
|
#7
|
N/A
|
N/A
|
N/A
|
$24.69
|
$0.00
|
N/A
|
#8
|
N/A
|
N/A
|
N/A
|
$42.15
|
$0.283
|
N/A
|
#9
|
N/A
|
N/A
|
N/A
|
$50.47
|
$0.283
|
N/A
|
#10
|
N/A
|
N/A
|
N/A
|
$67.20
|
*
|
$10.283
|
#11
|
N/A
|
N/A
|
N/A
|
N/A
|
N/A
|
N/A
|
Final
Determination
Date
|
N/A
|
N/A
|
N/A
|
N/A
|
N/A
|
N/A
|
Payment at
Maturity
|
N/A
|
N/A
|
* The Early Redemption Payment
includes the unpaid contingent quarterly payment with respect to the
determination date on which the determination closing price is greater than or
equal to the initial share price and the securities are redeemed as a result.
|
|
|
Contingent Income
Auto-Callable Securities due April 4, 2016
|
Based on the Performance of the Common Stock of
Transocean Ltd.
|
|
|
|
■
|
In
Example 1
,
the securities are automatically redeemed following the second determination
date as the determination closing price on the second determination date is
equal to the initial share price. You receive the early redemption payment, calculated
as follows:
|
|
|
|
stated
principal amount + contingent quarterly payment = $10 + $0.283 = $10.283
|
In this example, the early redemption feature limits the term of your
investment to approximately 6 months and you may not be able to reinvest at
comparable terms or returns. If the securities are redeemed early, you will
stop receiving contingent payments.
|
|
■
|
In
Example 2
,
the securities are automatically redeemed following the tenth determination
date as the determination closing price on the tenth determination date is
greater than the initial share price. As the determination closing prices on
the first, fifth, sixth, eighth and ninth determination dates are greater
than the downside threshold level, you receive the contingent payment of $0.283
with respect to such determination dates. Following the tenth determination
date, you receive an early redemption payment of $10.283, which includes the
contingent quarterly payment with respect to the tenth determination date.
|
In this example, the early redemption feature limits the term of your
investment to approximately 30 months and you may not be able to reinvest at
comparable terms or returns. If the securities are redeemed early, you will
stop receiving contingent payments. Further, although the underlying stock has
appreciated by 25% from its initial share price on the tenth determination
date, you only receive $10.283 per security and do not benefit from such
appreciation.
|
|
|
|
|
|
|
|
Example 3
|
Example 4
|
Determination
Dates
|
Hypothetical
Determination
Closing Price
|
Contingent
Quarterly
Payment(per
$10.00 security)
|
Early
Redemption
Payment(per
$10.00 security)
|
Hypothetical
Determination
Closing Price
|
Contingent
Quarterly
Payment(per
$10.00 security)
|
Early
Redemption
Payment(per
$10.00
security)
|
#1
|
$32.26
|
$0
|
N/A
|
$32.26
|
$0
|
N/A
|
#2
|
$26.88
|
$0
|
N/A
|
$26.88
|
$0
|
N/A
|
#3
|
$21.50
|
$0
|
N/A
|
$21.50
|
$0
|
N/A
|
#4
|
$37.03
|
$0
|
N/A
|
$37.03
|
$0
|
N/A
|
#5
|
$29.57
|
$0
|
N/A
|
$29.57
|
$0
|
N/A
|
#6
|
$16.13
|
$0
|
N/A
|
$16.13
|
$0
|
N/A
|
#7
|
$34.94
|
$0
|
N/A
|
$34.94
|
$0
|
N/A
|
#8
|
$10.75
|
$0
|
N/A
|
$10.75
|
$0
|
N/A
|
#9
|
$13.44
|
$0
|
N/A
|
$13.44
|
$0
|
N/A
|
#10
|
$24.19
|
$0
|
N/A
|
$24.19
|
$0
|
N/A
|
#11
|
$18.82
|
$0
|
N/A
|
$18.82
|
$0
|
N/A
|
Final
Determination
Date
|
$26.88
|
$0
|
N/A
|
$48.38
|
$0.283*
|
N/A
|
Payment at
Maturity
|
$5.00
|
$10.283
|
* The final contingent quarterly
payment, if any, will be paid at maturity.
Examples 3 and 4 illustrate the payment at maturity per security based
on the final share price.
|
|
■
|
In
Example 3
,
the closing price of the underlying stock remains below the downside
threshold level throughout the term of the securities. As a result, you do
not receive any contingent payments during the term of the securities and,
|
|
|
|
Contingent Income
Auto-Callable Securities due April 4, 2016
|
Based on the Performance of the Common Stock of
Transocean Ltd.
|
|
|
|
|
at maturity, you
are fully exposed to the decline in the closing price of the underlying
stock. As the final share price is less than the downside threshold level,
investors will receive a number of shares of the underlying stock multiplied
by the exchange ratio or the cash value thereof, calculated as follows:
|
the cash value of 0.18601 shares of the
underlying stock =
the exchange ratio
times
the final share price = 0.18601 x
$26.88 = $5.00
In this example, the value of shares you
receive at maturity is significantly less than the stated principal amount.
|
|
■
|
In
Example 4
,
the closing price of the underlying stock decreases to a final share price of
$48.38. Although the final share price is less than the initial share price,
because the final share price is still not less than the downside threshold
level, you receive the stated principal amount plus a contingent quarterly
payment with respect to the final determination date. Your payment at
maturity is calculated as follows:
|
$10 + $0.283 = $10.283
In this example,
although the final share price represents approximately a 10% decline from the
initial share price, you receive the stated principal amount per security plus
the contingent quarterly payment, equal to a total payment of $10.283 per
security at maturity.
|
|
|
Contingent Income Auto-Callable Securities due April 4, 2016
|
Based on the Performance of the Common Stock of Transocean Ltd.
|
|
Risk Factors
An
investment in the Securities involves significant risks.
We also urge you to consult your investment, legal, tax, accounting and
other advisors before you invest in the Securities.
Investing in the Securities is not equivalent to investing
directly in the common stock of Transocean Ltd. The following is a
non-exhaustive list of certain key risk factors for investors in the
Securities. For further discussion of
these and
other risks, you should read the sections entitled Risk Factors in
the prospectus supplement, including the risk factors
discussed under the following headings:
|
|
|
|
|
Risk FactorsRisks Relating to
All Securities;
|
|
|
Risk FactorsAdditional Risks
Relating to Notes Which Are Not Characterized as Being Fully Principal Protected
or Are Characterized as Being Partially Protected or Contingently Protected;
|
|
|
Risk FactorsAdditional Risks
Relating to Notes Which Pay No Interest;
|
|
|
Risk FactorsAdditional Risks
Relating to Securities with a Barrier Percentage or a Barrier Level;
|
|
|
Risk
Factors
Additional Risks
Relating to Securities Which We May Call or Redeem (Automatically or
Otherwise); and
|
|
|
Risk FactorsAdditional Risks
Relating to Securities with Reference Assets That Are Equity Securities or
Shares or Other Interests in Exchange-Traded Funds, That Contain Equity
Securities or Shares or Other Interests in Exchange-Traded Funds or That Are
Based in Part on Equity Securities or Shares or Other Interests in
Exchange-Traded Funds.
|
|
|
|
■
|
The securities do not guarantee the return
of any principal.
The terms of the securities differ from those of
ordinary debt securities in that the securities do not guarantee the payment
of regular interest or the return of any of the principal amount at maturity.
Instead, if the securities have not been automatically redeemed prior to
maturity and if the final share price is less than the downside threshold
level,
you will be exposed to the decline in the closing
price of the underlying stock, as compared to the initial share price, on a 1
to 1 basis and you will receive for each security that you hold at maturity a
number of shares of the underlying stock multiplied by the exchange ratio
(or, at our option, the cash value of such shares). The value of those shares
(or that cash) will be less than 70% of the stated principal amount and could
be zero.
|
|
|
■
|
The
contingent quarterly payment is based solely on the determination closing price
or the final share price, as applicable.
Whether the contingent quarterly payment will be made
with respect to a determination date will be based on the determination closing price or the final share price, as
applicable. As
a result, you will not know whether you will receive the contingent quarterly payment until the related determination
date. Moreover, because
the contingent quarterly payment is based solely on the determination closing
price on a specific determination date or the final share price, as
applicable, if such determination closing price or final share price is less
than the downside threshold level, you will not receive any contingent
quarterly payment with respect to such determination date, even if the closing
price of the underlying stock was higher on other days during the term of the
securities.
|
|
|
■
|
You
will not receive any contingent quarterly payment for any quarterly period
where the determination closing price is less than the downside threshold
level.
A contingent quarterly payment will be made with respect to a
quarterly period only if the determination closing price is greater than or
equal to the downside threshold level. If the determination closing price
remains below the downside threshold level on each determination date over
the term of the securities, you will not receive any contingent quarterly
payments.
|
|
|
■
|
Investors
will not participate in any appreciation in the price of the underlying
stock.
I
nvestors will not participate in any appreciation
in the price of the underlying stock from the initial share price, and the
return on the securities will be limited to the contingent quarterly payment
that is paid with respect to each determination date on which the
determination closing price or the final share price, as applicable, is
greater than or equal to the downside threshold level.
It is
possible that the closing price of the underlying stock could be below the
downside threshold level on most or all of the determination dates so that
you will receive little or no contingent quarterly payments.
If you do not earn
sufficient contingent quarterly payments over the term of the securities, the
overall return on the securities may be less than the amount that would be
paid on a conventional debt security of the issuer of comparable maturity.
|
|
|
■
|
Contingent
repayment of principal applies only at maturity
.
You should be willing to hold the
securities to maturity.
If you sell the securities prior to
maturity in the secondary market, if any, you may have to sell the securities
at a loss relative to your initial investment even if the price of the
underlying stock is above the downside threshold level.
|
|
|
|
Contingent Income Auto-Callable Securities due April 4, 2016
|
Based on the Performance of the Common Stock of Transocean Ltd.
|
|
|
|
|
■
|
Early redemption
risk.
The term of your
investment in the securities may be limited to as short as approximately
three months by the automatic early redemption feature of the securities. If
the securities are redeemed prior to maturity, you will receive no more
contingent quarterly payments and may be forced to invest in a lower interest
rate environment. There is no guarantee that you would be able
to reinvest the proceeds from an investment in the securities in a comparable
investment with a similar level of risk in the event the securities are
called prior to the maturity date.
|
|
|
■
|
Market price influenced by many
unpredictable factors
. Several
factors will influence the value of the securities in the secondary market
and the price at which Barclays Bank PLC may be willing to purchase or sell
the securities in the secondary market. Although we expect that generally the
closing price of the underlying stock on any day will affect the value of the
securities more than any other single factor, other factors that may
influence the value of the securities include:
|
|
|
|
|
○
|
the trading price
and volatility (frequency and magnitude of changes in value) of the
underlying stock,
|
|
|
|
|
○
|
whether the
determination closing price has been below the downside threshold level on
any determination date,
|
|
|
|
|
○
|
dividend rates on
the underlying stock,
|
|
|
|
|
○
|
interest and yield
rates in the market,
|
|
|
|
|
○
|
time remaining
until the securities mature,
|
|
|
|
|
○
|
geopolitical
conditions and economic, financial, political, regulatory or judicial events
that affect the underlying stock and which may affect the final share price
of the underlying stock,
|
|
|
|
|
○
|
the occurrence of
certain events affecting the underlying stock that may or may not require an
adjustment of the initial share price or other variables, and
|
|
|
|
|
○
|
any actual or anticipated changes in our
credit ratings or credit spreads.
|
|
|
|
The price of the underlying stock may be, and has recently been,
volatile, and we can give you no assurance that the volatility will lessen. See
Transocean Ltd.
Overview below. You may
receive less, and possibly significantly less, than the stated principal amount
per security if you try to sell your securities prior to maturity.
|
|
|
■
|
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.
|
|
|
■
|
Investing in the
securities is not equivalent to investing in the common stock of
Transocean Ltd.
Investors in the securities will not own the underlying stock or have voting
rights or rights to receive dividends or other distributions or any other
rights with respect to the underlying stock.
|
|
|
■
|
No affiliation with Transocean Ltd.
Transocean Ltd. is not an affiliate of ours, is not
involved with this offering in any way, and has no obligation to consider
your interests in taking any corporate actions that might affect the value of
the securities. We have not made any due diligence inquiry with respect to
Transocean Ltd. in connection with this offering.
|
|
|
■
|
Single
equity risk
.
The price of the underlying stock
can rise or fall sharply due to factors specific to the underlying stock and
its issuer, such as stock price volatility, earnings, financial conditions,
corporate, industry and regulatory developments, management changes and
decisions and other events, as well as general market factors, such as general
stock market volatility and levels, interest rates and economic and political
conditions. We urge you to review financial and other information filed
periodically with the SEC by the issuer of the underlying stock.
|
|
|
■
|
We may engage in business with or involving
Transocean Ltd. without regard to your interests.
We or our affiliates may presently
or from time to time engage in business with Transocean Ltd. without regard
to your interests and thus may acquire non-public information about
Transocean Ltd. Neither we nor any of our affiliates undertakes
|
|
|
|
Contingent Income Auto-Callable Securities due April 4, 2016
|
Based on the Performance of the Common Stock of Transocean Ltd.
|
|
|
|
|
to disclose any
such information to you. In addition, we or our affiliates from time to time
have published and in the future may publish research reports with respect to
Transocean Ltd., which may or may not recommend that investors buy or hold
the underlying stock.
|
|
|
■
|
The antidilution adjustments the
calculation agent is required to make do not cover every corporate event that
could affect the underlying stock.
Barclays Bank PLC, as calculation agent, will
adjust the amount payable at maturity for certain corporate events affecting
the underlying stock, such as stock splits and stock dividends, and certain
other corporate actions involving the issuer of the underlying stock, such as
mergers. However, the calculation agent will not make an adjustment for every
corporate event that can affect the underlying stock. For example, the
calculation agent is not required to make any adjustments if the issuer of
the underlying stock or anyone else makes a partial tender or partial
exchange offer for the underlying stock, nor will adjustments be made
following the final determination date. If an event occurs that does not
require the calculation agent to adjust the amount payable at maturity, the
market price of the
securities
may be materially and adversely
affected.
|
|
|
■
|
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 original issue price is likely to adversely affect secondary
market prices.
Assuming no change in market conditions or any
other relevant factors, the price, if any, at which Barclays Capital
Inc. and other affiliates of Barclays Bank PLC is willing to purchase the
securities in any secondary market transactions will likely be lower than the
original issue price since the original issue price includes, and secondary
market prices are likely to exclude, commissions paid with respect to the
securities, as well as the projected profit included in the cost of hedging
the issuers obligations under the securities. In addition, any such prices
may differ from values determined by pricing models used by Barclays Bank
PLC, as a result of dealer discounts, mark-ups or other transaction costs and
the price, if any, at which Barclays Capital Inc. and other affiliates of
Barclays Bank PLC will be willing to purchase the securities from you in
secondary market transactions will likely be lower than the price you paid
for the securities, and any sale prior to the maturity date could result in a
substantial loss to you.
|
|
|
■
|
Hedging and trading activity by the
calculation agent and its affiliates could potentially affect the value of
the securities.
Hedging or trading activities of the issuers
affiliates and of any other hedging counterparty with respect to the
securities on or prior to the pricing date and prior to maturity could
adversely affect the value of the underlying stock and, as a result, could
decrease the amount an investor may receive on the securities at maturity.
Any of these hedging or trading activities on or prior to the pricing date
could potentially increase the initial share price and, as a
result, the downside threshold level which is the price at or above which the
underlying stock must close on each determination date in order for you to
earn a contingent quarterly payment or, if the securities are not called
prior to maturity, in order for you to avoid being exposed to the negative
price performance of the underlying stock at maturity. Additionally, such
hedging or trading activities during the term of the securities could
potentially affect the price of the underlying stock on the determination
dates and, accordingly, whether the securities are automatically called prior
to maturity and, if the securities are not called prior to maturity, the
payout to you at maturity.
|
|
|
■
|
The calculation agent will make
determinations with respect to the securities
.
As calculation agent, Barclays
Bank PLC will determine
the
initial
share price, the downside threshold level, the final share price, whether the
contingent quarterly payment will be paid on each contingent payment date,
whether the securities will be redeemed following any determination date,
whether a market disruption event has occurred, whether to make any
adjustments to the initial share price 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,
|
|
|
|
Contingent Income Auto-Callable Securities due April 4, 2016
|
Based on the Performance of the Common Stock of Transocean Ltd.
|
|
|
|
|
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 stock reflects a higher expectation as of the pricing date that
the price of the underlying stock could close below the downside threshold
level on the valuation date of the securities. This greater expected risk
will generally be reflected in a higher contingent quarterly payment for that
security. However, while the
contingent
quarterly payment is
set on the pricing date, the underlying stocks volatility may change
significantly over the term of the securities. The price of the underlying
stock for your securities could fall sharply, which could result in a
significant loss of principal.
|
|
|
■
|
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.
|
|
|
■
|
In some circumstances, the payment you
receive on the securities may be based on the stock of another company and
not the underlying stock
. Following certain corporate events relating to
the issuer of the underlying stock where the issuer is not the surviving
entity, your return on the securities paid by Barclays Bank PLC may be based
on the shares of a successor to the respective underlying stock issuer or any
cash or any other assets distributed to holders of the underlying stock in
such corporate event. The occurrence of these corporate events and the
consequent adjustments may materially and adversely affect the value of the
securities. For more information, see the section Reference AssetsEquity
SecuritiesShare Adjustments Relating to Securities with an Equity Security
as the Reference Asset of the prospectus supplement.
|
|
|
■
|
The U.S. federal income tax treatment of an
investment in the securities is uncertain
. The U.S. federal income tax
treatment of the securities is uncertain and the Internal Revenue Service
could assert that the securities should be taxed in a manner that is
different than described below. As discussed further in the accompanying
prospectus supplement, the Internal Revenue Service issued a notice in 2007
indicating that it and the Treasury Department are actively considering
whether, among other issues, you should be required to accrue interest over
the term of an instrument such as the securities at a rate that may exceed
the contingent quarterly payments (if any) that you receive on the securities
and whether all or part of the gain you may recognize upon the sale,
exchange, early redemption or maturity of an instrument such as the
securities could be treated as ordinary income. Similarly, the Internal
Revenue Service and the Treasury Department have current projects open with
regard to the tax treatment of pre-paid forward contracts 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 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 investors ability to deduct capital losses is subject to
significant limitations
.
You should consult your tax advisor as to the
possible alternative treatments in respect of the securities.
|
|
|
|
Contingent Income Auto-Callable Securities due April 4, 2016
|
Based on the Performance of the Common Stock of Transocean Ltd.
|
|
Transocean Ltd. Overview
According to publicly available information,
Transocean Ltd. (the Company) is an international provider of offshore
contract drilling services for oil and gas wells.
Information filed by the Company with the SEC under the Exchange Act can be located by reference to its SEC file number: 000-53533,
or its CIK Code: 0001451505. The underlying stock is listed on the New York
Stock Exchange under the ticker symbol RIG. You are urged to read
the following section in the accompanying prospectus supplement: Reference
AssetsEquity SecuritiesReference Asset Issuer and Reference Asset
Information. Companies with securities registered under the Securities
Exchange Act of 1934, as amended, which is commonly referred to as the
Exchange Act, and the Investment Company Act of 1940, as amended,
which is commonly referred to as the 40 Act, are required to
periodically file certain financial and other information specified by the SEC.
Information provided to or filed with the SEC electronically can be accessed
through a website maintained by the SEC. The address of the SECs website
is http://www.sec.gov. Information provided to or filed with the SEC pursuant to
the Exchange Act or the 40 Act by the company issuing the underlying stock
can be located by reference to the underlying stock SEC file number specified
below.
We have not undertaken any
independent review or due diligence of the issuer of the underlying stocks SEC
filings or of any other publicly available information regarding the Company.
You are urged to refer to the SEC filings made by the issuer of the underlying
stock and to other publicly available information (such as the issuer of the
underlying stocks annual report) to obtain an understanding of the issuer of
the underlying stocks business and financial prospects. The summary information
contained above is not designed to be, and should not be interpreted as, an
effort to present information regarding the financial prospects of any issuer or
any trends, events or other factors that may have a positive or negative
influence on those prospects or as an endorsement of any particular
issuer.
Information from outside sources is not incorporated
by reference in, and should not be considered part of, these preliminary terms
or any accompanying prospectus or prospectus supplement. We have not
independently verified the accuracy or completeness of the information obtained
from outside sources.
Information as of market close on March 14, 2013:
|
|
|
|
|
|
|
Bloomberg Ticker Symbol:
|
RIG
|
|
52 Week High (on 03/19/2012):
|
$
|
|
Current Stock Price:
|
$
|
|
52 Week Low (on 11/15/2012):
|
$
|
|
52 Weeks Ago:
|
$
|
|
|
|
The following table sets forth the published high,
low and period end closing prices of the underlying stock for each quarter in
the same period for the period of January 2, 2007 through March 14, 2013. The
associated graph shows the closing prices of the underlying stock for each day
in the same period. The closing price of the underlying stock on March 14, 2013
was $53.76. We obtained the information in the table and graph below from
Bloomberg Financial Markets, without independent verification. The historical
performance of the underlying stock should not be taken as an indication of its
future performance, and no assurance can be given as to the price of the
underlying stock at any time, including the determination dates.
|
|
|
|
Shares of Transocean Ltd.
|
High
($)
|
Low
($)
|
Period
End ($)
|
2007
|
|
|
|
First Quarter
|
118.28
|
103.99
|
116.78
|
Second Quarter
|
156.09
|
115.57
|
151.49
|
Third Quarter
|
165.75
|
136.86
|
161.59
|
Fourth Quarter
|
185.31
|
127.25
|
143.15
|
2008
|
|
|
|
First Quarter
|
145.95
|
121.14
|
135.20
|
Second Quarter
|
161.40
|
136.50
|
152.39
|
Third Quarter
|
152.17
|
107.26
|
109.84
|
Fourth Quarter
|
106.10
|
42.24
|
47.25
|
2009
|
|
|
|
First Quarter
|
64.87
|
46.39
|
58.84
|
Second Quarter
|
84.65
|
59.32
|
74.29
|
|
|
|
Contingent Income Auto-Callable Securities due April 4, 2016
|
Based on the Performance of the Common Stock of Transocean Ltd.
|
|
|
|
|
|
Shares of Transocean Ltd.
|
High
($)
|
Low
($)
|
Period
End ($)
|
Third Quarter
|
87.11
|
67.31
|
85.53
|
Fourth Quarter
|
92.75
|
79.15
|
82.80
|
2010
|
|
|
|
First Quarter
|
93.02
|
79.24
|
86.38
|
Second Quarter
|
92.03
|
42.58
|
46.33
|
Third Quarter
|
65.13
|
45.26
|
64.29
|
Fourth Quarter
|
72.80
|
61.91
|
69.51
|
2011
|
|
|
|
First Quarter
|
85.47
|
69.44
|
77.95
|
Second Quarter
|
80.99
|
59.81
|
64.56
|
Third Quarter
|
65.05
|
49.24
|
57.86
|
Fourth Quarter
|
59.99
|
38.39
|
38.39
|
2012
|
|
|
|
First Quarter
|
58.70
|
38.97
|
54.70
|
Second Quarter
|
55.21
|
40.17
|
44.73
|
Third Quarter
|
50.11
|
43.30
|
44.89
|
Fourth Quarter
|
49.35
|
44.20
|
44.20
|
2013
|
|
|
|
First Quarter
(through March 14, 2013)
|
59.30
|
46.24
|
53.76
|
PAST PERFORMANCE IS NOT
INDICATIVE OF FUTURE RESULTS
We make no representation as to the amount of
dividends, if any, that Transocean Ltd. may pay in the future. As an investor in
the securities, you will not be entitled to receive dividends, if any, that may
be payable on the common stock of Transocean Ltd.
|
Transocean Ltd. common stock Daily Closing Prices
January 3, 2006 to March 14, 2013
|
|
PAST PERFORMANCE IS NOT INDICATIVE OF FUTURE RESULTS.
This document relates only to the securities
offered hereby and does not relate to the underlying stock or other securities
of Transocean Ltd. We have derived all disclosures contained in this document
regarding Transocean Ltd. stock from the publicly available documents described
in the preceding paragraph. In connection with the offering of the securities,
neither we nor the agent has undertaken any independent review or due diligence
of the SEC filings of Transocean Ltd. or of any
|
|
|
Contingent Income Auto-Callable Securities due April 4, 2016
|
Based on the Performance of the Common Stock of Transocean Ltd.
|
|
other publicly available
information regarding Transocean Ltd. Furthermore, we have not undertaken any
independent review or due diligence to confirm that all events occurring prior
to the date hereof (including events that would affect the accuracy or
completeness of the publicly available documents described in the preceding
paragraph) that would affect the trading price of the underlying stock (and
therefore the price of the underlying stock at the time we price the securities)
have been publicly disclosed. Subsequent disclosure of any such events or the
disclosure of or failure to disclose material future events concerning
Transocean Ltd. could affect the value received at maturity with respect to the
securities and therefore the trading prices of the securities. Neither the
issuer nor any of its affiliates makes any representation to you as to the
future performance of the underlying stock.
|
|
|
Contingent Income Auto-Callable Securities due April 4, 2016
|
Based on the Performance of the Common Stock of Transocean Ltd.
|
|
Additional Information About the Securities
Please read this information in conjunction with the summary terms on the front cover of this document.
|
|
|
|
|
Additional Provisions:
|
|
|
|
Record date:
|
|
One business day prior to the related contingent payment date.
|
No fractional shares:
|
|
At maturity, if the payment on the securities, if
any, is to be made in shares of the underlying stock, we will deliver the number
of shares of the underlying stock due with respect to the securities, as
described above, but we will pay cash in lieu of delivering any fractional share
of the underlying stock in an amount equal to the corresponding fractional
closing price of such fraction of a share of the underlying stock, as determined
by the calculation agent as of the final determination date.
|
Postponement of maturity
date and contingent
payment dates:
|
|
The maturity date and any contingent payment date
will be postponed if the final relevant determination date is postponed due to
the occurrence or continuance of a market disruption event with respect to the
underlying stock on such relevant determination date. In such a case, the
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 coupon
payment date or maturity date, as the case may be, is not a business day, later
than the first business day after the originally scheduled contingent payment
date or maturity date, as the case may be. See Terms of the Notes Maturity
Date and Reference AssetsEquity SecuritiesMarket Disruption Events Relating
to Securities with an Equity Security as the Reference Asset in the
accompanying prospectus supplement.
|
Market disruption events
and antidilution
adjustments:
|
|
The calculation agent may adjust any
variable described in these preliminary terms, including but not limited to the
final determination date, the initial share price, the final share price, the
physical delivery amount and any combination thereof as described in the
following sections of the accompanying prospectus supplement.
|
|
|
|
|
For a description of what constitutes a market
disruption event and the consequences thereof, see Reference AssetsEquity
SecuritiesMarket Disruption Events Relating to Securities with an Equity
Security as the Reference Asset; and
|
|
|
|
|
For a description of further adjustments that may
affect the linked share, see Reference AssetsEquity SecuritiesShare
Adjustments Relating to Securities with an Equity Security as the Reference
Asset.
|
Listing:
|
|
The securities will not be listed on any securities exchange.
|
Minimum ticketing size:
|
|
100 securities
|
Tax considerations:
|
|
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 stock.
If your securities are properly treated as a contingent
income-bearing executory contract, it would be reasonable (i) to treat any
contingent quarterly payments you receive on the securities as items of ordinary
income taxable in accordance with your regular method of accounting for U.S.
federal income tax purposes and (ii) to recognize capital gain or loss upon the
sale, exchange, early redemption or maturity of your securities (subject to the
discussion below regarding the receipt of shares of the underlying stock at
maturity) in an amount equal to the difference (if any) between the amount you
receive at such time (other than amounts attributable to a contingent quarterly
payment) and your basis in the securities for U.S. federal income tax purposes.
Such gain or loss should generally be long-term capital gain or loss if you have
held your securities for more than one year, and otherwise should generally be
short-term capital gain or loss. Short-term capital gains are generally subject
to tax at the marginal tax rates applicable to ordinary income. Any character
mismatch arising from your inclusion of ordinary income in respect of the
contingent quarterly payments and capital loss (if any) upon the sale, exchange,
early redemption or maturity of your securities may result in adverse tax
|
|
|
|
Contingent Income Auto-Callable Securities due April 4, 2016
|
Based on the Performance of the Common Stock of Transocean Ltd.
|
|
|
|
|
|
|
|
|
consequences to you because an investors
ability to deduct capital losses is subject to significant limitations.
Moreover, in the event you receive shares of the underlying stock upon the
maturity of the securities, such loss may be deferred (as described in the
following paragraph).
If you receive shares of the underlying stock upon the maturity of your
securities, it is not clear whether the receipt of shares of the underlying
stock should be treated as (i) a taxable settlement of the securities followed
by a purchase of the shares or (ii) a tax-free purchase of the shares pursuant
to the original terms of the securities. Accordingly, you should consult your
tax advisor about the tax consequences to you of receiving shares of the
underlying stock upon the maturity of your securities. If the receipt of the
shares is treated as a taxable settlement of the securities followed by a
purchase of the shares, you should (i) recognize capital loss in an amount equal
to the difference between the fair market value of the shares you receive at
such time plus the cash received in lieu of a fractional share, if any, and your
tax basis in the securities, and (ii) take a basis in such shares in an amount
equal to their fair market value at such time. If, alternatively, the receipt of
shares of the underlying stock upon the maturity of your securities is treated
as a tax-free purchase of the shares, (i) the receipt of shares of the
underlying stock upon maturity of your securities should not give rise to the
current recognition of loss at such time, (ii) you should take a carryover basis
in such shares equal to the basis you had in your securities (determined as
described below, less the basis attributable to a fractional share, if any), and
(iii) if you receive cash in lieu of a fractional share upon the stock
settlement of such securities, you should recognize short-term capital loss
equal to the difference between the amount of cash you receive and your tax
basis in the fractional share. In general, your tax basis in your securities
will be equal to the price you paid for the securities. Your holding period in
the shares you receive upon the maturity of your securities will begin on the
day after you receive such shares.
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 stock that is issued by you to us. You
should consult your tax advisor as to the possible consequences of this
alternative treatment.
In addition, it is possible that (i) you should not include the contingent
quarterly payments (if any) 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 (if any) 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
|
|
|
|
Contingent Income Auto-Callable Securities due April 4, 2016
|
Based on the Performance of the Common Stock of Transocean Ltd.
|
|
|
|
|
|
|
|
|
(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.
Furthermore, it is also possible that the securities could be
treated as notional principal contracts that are comprised of a swap component
and a loan component. If the securities were treated as notional principal
contracts, you could be required to accrue income over the term of your
securities in respect of the loan component (which may exceed the contingent
quarterly payments, if any, that are paid on the securities), and any gain or
loss that you recognize upon the maturity of your securities would likely be
treated as ordinary income or loss.
You should consult your tax advisor
with respect to these possible alternative treatments.
For a further discussion of the tax treatment of your securities as well as
other possible alternative characterizations, please see the discussion under
the heading Certain U.S. Federal Income Tax ConsiderationsCertain
Notes Treated as Forward Contracts or Executory Contracts in the
accompanying prospectus supplement. You should consult your tax advisor as to
the possible alternative treatments in respect of the securities. For
additional, important considerations related to tax risks associated with
investing in the securities, you should also examine the discussion in
Risk ConsiderationsThe U.S. federal income tax treatment of an
investment in the securities is uncertain, in these preliminary terms.
Medicare Tax
. As discussed under Certain U.S. Federal Income Tax
ConsiderationsMedicare 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 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. Non-U.S. holders will also be
subject to the general rules regarding information reporting and backup
withholding as described under the heading Certain U.S. Federal Income Tax
ConsiderationsInformation Reporting and Backup Withholding in the
accompanying prospectus supplement.
|
Trustee:
|
|
The Bank of New York Mellon
|
Calculation agent:
|
|
Barclays Bank PLC
|
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 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
|
|
|
|
Contingent Income Auto-Callable Securities due April 4, 2016
|
Based on the Performance of the Common Stock of Transocean Ltd.
|
|
|
|
|
|
|
|
|
the securities by taking positions
in futures and options contracts on the underlying stock and any other
securities or instruments we may wish to use in connection with such
hedging. Trading and other transactions by us or our affiliates could affect
the level, value or price of reference assets and their components, the market
value of the securities or any amounts payable on the securities. For further
information on our use of proceeds and hedging, see Use of Proceeds and
Hedging in the prospectus supplement.
|
ERISA:
|
|
See
Employee Retirement Income Security Act starting on page S-120 in the
accompanying prospectus supplement.
|
Contact:
|
|
Morgan Stanley Smith Barney LLC (Morgan Stanley Wealth Management
(MSWM)) clients may
|
|
|
contact their MSWM sales representative or MSWMs
principal executive offices at 2000 Westchester Avenue, Purchase, New York 10577
(telephone number 800-869-3326). A copy of each of these documents may be obtained from
Barclays Bank PLC or the agent Barclays, at 1-888-227-2275 (Extension 2-3430) or 745
Seventh AvenueAttn: US InvSol Support, New York, NY 10019.
|
These preliminary terms represent a summary of the
terms and conditions of the securities. We encourage you to read the
accompanying prospectus and prospectus supplement for this offering, which can
be accessed via the hyperlinks on the front page of this
document.
Supplemental Plan of
Distribution
MSSB and its financial advisors will collectively
receive from the Agent, Barclays Capital Inc., a fixed sales commission of
$0.225 for each security they sell. We expect that delivery of the securities
will be made against payment for the securities on or about the issue date
indicated on the cover of these preliminary terms, which will be the third
business day following the expected pricing date (this settlement cycle being
referred to as T+3). See Plan of Distribution in the prospectus
supplement.