Preliminary Pricing Supplement No. G72/A*
To the Product Supplement No. G-I dated April 9, 2012,
Prospectus Supplement dated March 23, 2012 and
Prospectus dated March 23, 2012
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Filed Pursuant to Rule 424(b)(2)
Registration Statement No. 333-180300-03
July 5, 2012
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Financial
Products
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Annual Coupon CS Notes due July 20, 2017
Linked to the Performance of a Weighted Basket of 10 Reference Shares
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General
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The securities are designed for investors who seek variable annual coupon payments that are linked to the performance of an equally weighted basket of 10 reference shares (each a “Basket Component”), subject to the Minimum Coupon Percentage, with the Component Return of each Basket Component on each Valuation Date individually subject to the Fixed Component Percentage and the Component Return Floor. Investors should be willing to forgo dividend payments on the Basket Components and any return on their investment beyond the coupon payments on the securities. Any payment on the securities is subject to our ability to pay our obligations as they become due.
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Senior unsecured obligations of Credit Suisse AG, acting through its Nassau Branch, maturing July 20, 2017.†
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Minimum purchase of $1,000. Minimum denominations of $1,000 and integral multiples of $1,000 in excess thereof.
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The securities are expected to price on or about July 17, 2012 (the “Trade Date”) and are expected to settle on or about July 20, 2012. Delivery of the securities in book-entry form only will be made through The Depository Trust Company.
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Key Terms
Issuer:
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Credit Suisse AG (“Credit Suisse”), acting through its Nassau Branch
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Basket:
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The securities are linked to an equally weighted basket consisting of 10 reference shares (the “Basket Components”). Each Basket Component is identified in the table below, together with its Bloomberg ticker symbol, Initial Share Price and Component Weighting:
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Common Stock of Altria Group, Inc.
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MO
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NYSE
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1/10
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Common Stock of Amazon.com, Inc.
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AMZN
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NASDAQ GS
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1/10
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Common Stock of Archer-Daniels-Midland Company
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ADM
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NYSE
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1/10
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Common Stock of Avon Products, Inc.
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AVP
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NYSE
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1/10
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Common Stock of Eli Lilly and Company
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LLY
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NYSE
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1/10
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Common Stock of The Charles Schwab Corporation
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SCHW
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NYSE
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1/10
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American Depositary Shares of Vale S.A., each representing one common share of Vale S.A. (the “Vale ADSs”)
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VALE
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NYSE
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1/10
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Common Stock of Intel Corporation
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INTC
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NASDAQ GS
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1/10
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Common Stock of Valero Energy Corporation
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VLO
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NYSE
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1/10
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Common Stock of Verizon Communications Inc.
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VZ
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NYSE
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1/10
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**
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The Initial Share Price of each Basket Component will be the closing price of one share of such Basket Component on the Trade Date. In the event that the closing price for any Basket Component is not available on the Trade Date, the Initial Share Price for such Basket Component will be determined on the immediately following trading day on which a closing price is available.
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Redemption Amount:
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At maturity, you will be entitled to receive a Redemption Amount in cash that will equal the principal amount of the securities you hold. Any payment on the securities is subject to our ability to pay our obligations as they become due.
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Coupon Payment:
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On each Coupon Payment Date (including the Maturity Date), you will be entitled to receive an amount in cash that will equal the principal amount of the securities you hold multiplied by the greater of (a) the Basket Return as of the Valuation Date immediately preceding such Coupon Payment Date and (b) the Minimum Coupon Percentage.
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Basket Return:
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The Basket Return on each Valuation Date will be determined as follows:
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Final Basket Level – Initial Basket Level
Initial Basket Level
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The maximum coupon payment on each Coupon Payment Date is expected to be $50.00 per $1,000 principal amount of securities. If the Basket Return is less than or equal to the Minimum Coupon Percentage on any Valuation Date, the Coupon Payment for the relevant Coupon Payment Date will be $5.00 per $1,000 principal amount of securities. Any payment on the securities is subject to our ability to pay our obligations as they become due.
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Initial Basket Level:
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Set equal to 100 on the Trade Date.
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Final Basket Level:
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On any Valuation Date, the Basket Level on such Valuation Date.
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Basket Level:
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On any Valuation Date, the level of the Basket calculated as follows:
100 × [1 + (the sum of the Component Returns of each Basket Component on such Valuation Date × 1/10)].
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Component Return:
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The Component Return for each Basket Component on each Valuation Date will be determined as follows:
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If the Final Share Price of such Basket Component on such Valuation Date is greater than or equal to its Initial Share Price, the Component Return for such Basket Component on such Valuation Date will equal the Fixed Component Percentage.
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If the Final Share Price of such Basket Component on such Valuation Date is less than its Initial Share Price, the Component Return for such Basket Component on such Valuation Date will be calculated as follows:
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Final Share Price – Initial Share Price
Initial Share Price
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; subject to the Component Return Floor
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Minimum Coupon Percentage
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0.50% per annum
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Fixed Component Percentage:
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For each Basket Component, expected to be 5.0% (to be determined on the Trade Date).
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Component Return Floor:
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For each Basket Component, expected to be -30.0% (to be determined on the Trade Date).
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Final Share Price:
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For each Basket Component on each Valuation Date, the closing price of such Basket Component on such Valuation Date.
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Valuation Dates:†
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July 17, 2013, July 16, 2014, July 15, 2015, July 15, 2016 and July 17, 2017 (the “Final Valuation Date”).
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Coupon Payment Dates:†
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July 22, 2013, July 21, 2014, July 20, 2015, July 20, 2016 and the Maturity Date.
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Maturity Date:†
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July 20, 2017
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Listing:
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The securities will not be listed on any securities exchange.
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CUSIP:
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22546TVE8
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* This amended and restated pricing supplement amends, restates and supersedes Preliminary Pricing Supplement No. G72 dated June 13, 2012 in its entirety. We refer to this amended and restated pricing supplement as the “pricing supplement.”
† Each scheduled Valuation Date is subject to postponement in respect of each Basket Component if such date is not an underlying business day for such Basket Component or as a result of a market disruption event in respect of such Basket Component, and each Coupon Payment Date and the Maturity Date are subject to postponement if such date is not a business day or if the preceding Valuation Date is postponed, as described in the accompanying product supplement under “Description of the Securities—Market Disruption Events” and under “Market Disruption Events” herein, as applicable.
Investing in the securities involves a number of risks. See “Selected Risk Considerations” beginning on page 6 of this pricing supplement and “Risk Factors” beginning on page PS-3 of the accompanying product supplement.
Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of the securities or passed upon the accuracy or the adequacy of this pricing supplement or the accompanying product supplement, the prospectus supplement and the prospectus. Any representation to the contrary is a criminal offense.
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Price to Public
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Underwriting Discounts and Commissions(1)
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Proceeds to Issuer
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Per security
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$1,000.00
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$
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$
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Total
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$
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$
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$
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(1) We or one of our affiliates may pay discounts and commissions of up to $30.00 per $1,000 principal amount of securities For more detailed information, please see “Supplemental Plan of Distribution (Conflicts of Interest)” on the last page of this pricing supplement. In addition, an affiliate of ours may pay referral fees of up to $10.00 per $1,000 principal amount of securities.
The agent for this offering, Credit Suisse Securities (USA) LLC (“CSSU”), is our affiliate. For more information, see “Supplemental Plan of Distribution (Conflicts of Interest)” on the last page of this pricing supplement.
The securities are not deposit liabilities and are not insured or guaranteed by the Federal Deposit Insurance Corporation or any other governmental agency of the United States, Switzerland or any other jurisdiction.
Credit Suisse
July , 2012
You may revoke your offer to purchase the securities at any time prior to the time at which we accept such offer on the date the securities are priced. We reserve the right to change the terms of, or reject any offer to purchase the securities prior to their issuance. In the event of any changes to the terms of the securities, we will notify you and you will be asked to accept such changes in connection with your purchase. You may also choose to reject such changes in which case we may reject your offer to purchase.
Additional Terms Specific to the Securities
You should read this pricing supplement together with the product supplement dated April 9, 2012, the prospectus supplement dated March 23, 2012 and the prospectus dated March 23, 2012, relating to our Medium-Term Notes of which these securities are a part. This pricing supplement amends, restates and supersedes Preliminary Pricing Supplement No. G72 dated June 13, 2012 in its entirety. You should rely on the information contained in this Preliminary Pricing Supplement No. G72/A and in the documents listed below in making your decision to 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):
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Product supplement No. G-I dated April 9, 2012:
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Prospectus supplement dated March 23, 2012 and Prospectus dated March 23, 2012:
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Our Central Index Key, or CIK, on the SEC website is 1053092. As used in this pricing supplement, the “Company,” “we,” “us,” or “our” refers to Credit Suisse.
This pricing supplement, together with the documents listed above, contains the terms of the securities and supersedes all other prior or contemporaneous oral statements as well as any other written materials including preliminary or indicative pricing terms, fact sheets, 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 “Selected Risk Considerations” in this pricing supplement and “Risk Factors” in the accompanying product supplement, as the securities involve risks not associated with conventional debt securities. You should consult your investment, legal, tax, accounting and other advisors before deciding to invest in the securities.
Hypothetical Amounts Payable on the Securities for one Coupon Payment Date for Each $1,000 Principal Amount
The following examples illustrate hypothetical Coupon Payments for one Coupon Payment Date for $1,000 principal amount of the securities. The hypothetical amounts payable on the securities set forth below assume (i) an Initial Basket Level of 100, (ii) the Initial Share Prices, Final Share Prices and the Component Weightings for each Basket Component as set forth in the tables below, (iii) a Fixed Component Percentage of 5.0%, (iv) a Component Return Floor of -30.0% and (v) a Minimum Coupon Percentage of 0.50% per annum. The actual Initial Share Price for each Basket Component, Fixed Component Percentage, Component Return Floor and Minimum Coupon Percentage will be determined on the Trade Date. The hypothetical Coupon Payments set forth below are for illustrative purposes only. The actual Coupon Payments applicable to a purchaser of the securities will be based on the Final Basket Level on each Valuation Date. Any payment on the securities is subject to our ability to pay our obligations as they become due. The numbers appearing in the tables and the examples below have been rounded for ease of analysis.
Example 1:
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Percentage Change
in Level of the
Basket Component
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Altria Group, Inc.
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$35.00
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$42.00
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20.0%
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5.0%
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1/10
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Amazon.com, Inc.
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$229.00
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$274.80
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20.0%
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5.0%
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1/10
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Archer-Daniels-Midland Company
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$29.00
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$34.80
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20.0%
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5.0%
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1/10
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Avon Products, Inc.
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$16.00
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$19.20
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20.0%
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5.0%
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1/10
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Eli Lilly and Company
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$43.00
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$51.60
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20.0%
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5.0%
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1/10
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The Charles Schwab Corporation
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$13.00
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$15.60
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20.0%
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5.0%
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1/10
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Vale S.A.
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$20.00
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$24.00
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20.0%
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5.0%
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1/10
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Intel Corporation
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$27.00
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$32.40
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20.0%
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5.0%
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1/10
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Valero Energy Corporation
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$24.00
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$28.80
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20.0%
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5.0%
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1/10
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Verizon Communications Inc.
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$45.00
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$54.00
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20.0%
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5.0%
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1/10
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The equation below illustrates how the hypothetical Final Basket Level would be calculated on a Valuation Date.
Final Basket Level = 100 × [1 + (the sum of the Component Returns of each Basket Component
on the relevant Valuation Date × 1/10)]
Final Basket Level = 100 × [1 + (50% × 1/10)]
Final Basket Level = 100 × 1.05
Final Basket Level = 105.00
The Coupon Payment on the Coupon Payment Date corresponding to such Valuation Date is calculated as follows:
Basket Return = (105.00 - 100) / 100 = 5.0%
Coupon Payment = $1,000 × the greater of (i) the Basket Return and (ii) the Minimum Coupon Percentage
Coupon Payment = $1,000 × the greater of (i) 5.0% and (ii) 0.50%
Coupon Payment = $1,000 × 0.050
Coupon Payment = $50.00
As illustrated above, even though each Basket Component has appreciated by 20.0% from its Initial Share Price to its Final Share Price on the relevant Valuation Date, the Component Return for each Basket Component is limited by the Fixed Component Percentage of 5.0%. Consequently, the Basket Return is equal to 5.0%. In this example, you would be entitled to receive the maximum Coupon Payment on the applicable Coupon Payment Date of $50.00 per $1,000 principal amount of securities.
Example 2:
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Percentage Change
in Level of the
Basket Component
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Altria Group, Inc.
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$35.00
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$36.75
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5.0%
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5.0%
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1/10
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Amazon.com, Inc.
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$229.00
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$240.45
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5.0%
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5.0%
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1/10
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Archer-Daniels-Midland Company
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$29.00
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$30.45
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5.0%
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5.0%
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1/10
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Avon Products, Inc.
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$16.00
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$16.80
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5.0%
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5.0%
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1/10
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Eli Lilly and Company
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$43.00
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$45.15
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5.0%
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5.0%
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1/10
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The Charles Schwab Corporation
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$13.00
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$13.65
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5.0%
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5.0%
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1/10
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Vale S.A.
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$20.00
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$20.00
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0.0%
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5.0%
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1/10
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Intel Corporation
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$27.00
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$27.00
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0.0%
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5.0%
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1/10
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Valero Energy Corporation
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$24.00
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$21.60
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−10.0%
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−10.0%
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1/10
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Verizon Communications Inc.
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$45.00
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$40.50
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−10.0%
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−10.0%
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1/10
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The equation below illustrates how the hypothetical Final Basket Level would be calculated on a Valuation Date.
Final Basket Level = 100 × [1 + (the sum of the Component Returns of each Basket Component
on the relevant Valuation Date × 1/10)]
Final Basket Level = 100 × [1 + (20.00% × 1/10)]
Final Basket Level = 100 × 1.020
Final Basket Level = 102.00
The Coupon Payment on the Coupon Payment Date corresponding to such Valuation Date is calculated as follows:
Basket Return = (102.00 - 100) / 100 = 2.0%
Coupon Payment = $1,000 × the greater of (i) the Basket Return and (ii) the Minimum Coupon Percentage
Coupon Payment = $1,000 × the greater of (i) 2.0% and (ii) 0.50%
Coupon Payment = $1,000 × 0.020
Coupon Payment = $20.00
As illustrated above, even though 6 of the 10 Basket Components have appreciated by 5% from their Initial Share Price to their Final Share Price and the Final Share Prices of 2 of the 10 Basket Components are equal to their Initial Share Price on the relevant Valuation Date, the Component Return for each such Basket Component is equal to the Fixed Component Percentage of 5.0%. The Component Return for each Basket Component that has depreciated is not affected by the Component Return Floor of -30.0%, since none of such Basket Components depreciated by more than 30.0%. Consequently, the Basket Return is equal to 2.0%. In this example, you would be entitled to receive a Coupon Payment on the applicable Coupon Payment Date of $20.00 per $1,000 principal amount of securities.
Example 3:
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Percentage Change
in Level of the
Basket Component
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Altria Group, Inc.
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$35.00
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$42.00
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20.0%
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5.0%
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1/10
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Amazon.com, Inc.
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$229.00
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$274.80
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20.0%
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5.0%
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1/10
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Archer-Daniels-Midland Company
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$29.00
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$34.80
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20.0%
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5.0%
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1/10
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Avon Products, Inc.
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$16.00
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$19.20
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20.0%
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5.0%
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1/10
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Eli Lilly and Company
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$43.00
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$51.60
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20.0%
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5.0%
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1/10
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The Charles Schwab Corporation
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$13.00
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$11.70
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−10.0%
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−10.0%
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1/10
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Vale S.A.
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$20.00
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$18.00
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−10.0%
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−10.0%
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1/10
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Intel Corporation
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$27.00
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$24.30
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−10.0%
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−10.0%
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1/10
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Valero Energy Corporation
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$24.00
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$21.60
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−10.0%
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−10.0%
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1/10
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Verizon Communications Inc.
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$45.00
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$40.50
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−10.0%
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−10.0%
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1/10
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The equation below illustrates how the hypothetical Final Basket Level would be calculated on a Valuation Date.
Final Basket Level = 100 × [1 + (the sum of the Component Returns of each Basket Component
on the relevant Valuation Date × 1/10)]
Final Basket Level = 100 × [1 + (−25.0% × 1/10)]
Final Basket Level = 100 × 0.975
Final Basket Level = 97.50
The Coupon Payment on the Coupon Payment Date corresponding to such Valuation Date is calculated as follows:
Basket Return = (97.5 - 100) / 100 = −2.5%
Coupon Payment = $1,000 × the greater of (i) the Basket Return and (ii) the Minimum Coupon Percentage
Coupon Payment = $1,000 × the greater of (i) −2.5% and (ii) 0.50%
Coupon Payment = $1,000 × 0.005
Coupon Payment = $5.00
As illustrated above, 5 of the Basket Components have appreciated by 20.0% and 5 have depreciated by 10.0% from their Initial Share Price to their Final Share Price on the relevant Valuation Date. The Component Return for each Basket Component that has appreciated is limited by the Fixed Component Percentage of 5.0%. The Component Return for each Basket Component that has depreciated is not affected by the Component Return Floor of -30.0% since none of such Basket Components depreciated by more than 30.0%. Consequently, the Basket Return is equal to −2.5%. In this example, because the Basket Return is negative, you would receive a Coupon Payment reflecting the Minimum Coupon Percentage on the applicable Coupon Payment Date.
Example 4:
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Percentage Change
in Level of the
Basket Component
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Altria Group, Inc.
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$35.00
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$22.75
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−35.0%
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−30.0%
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1/10
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Amazon.com, Inc.
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$229.00
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$148.85
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−35.0%
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−30.0%
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1/10
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Archer-Daniels-Midland Company
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$29.00
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$18.85
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−35.0%
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−30.0%
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1/10
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Avon Products, Inc.
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$16.00
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$10.40
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−35.0%
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−30.0%
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1/10
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Eli Lilly and Company
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$43.00
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$27.95
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−35.0%
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−30.0%
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1/10
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The Charles Schwab Corporation
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$13.00
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$8.45
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−35.0%
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−30.0%
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1/10
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Vale S.A.
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$20.00
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$13.00
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−35.0%
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−30.0%
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1/10
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Intel Corporation
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$27.00
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$17.55
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−35.0%
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−30.0%
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1/10
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Valero Energy Corporation
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$24.00
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$15.60
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−35.0%
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−30.0%
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1/10
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Verizon Communications Inc.
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$45.00
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$29.25
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−35.0%
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−30.0%
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1/10
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The equation below illustrates how the hypothetical Final Basket Level would be calculated on a Valuation Date.
Final Basket Level = 100 × [1 + (the sum of the Component Returns of each Basket Component
on the relevant Valuation Date × 1/10)]
Final Basket Level = 100 × [1 + (−300.0% × 1/10)]
Final Basket Level = 100 × 0.70
Final Basket Level = 70
The Coupon Payment on the Coupon Payment Date corresponding to such Valuation Date is calculated as follows:
Basket Return = (70 - 100) / 100 = −30.0%
Coupon Payment = $1,000 × the greater of (i) the Basket Return and (ii) the Minimum Coupon Percentage
Coupon Payment = Principal × the greater of (i) −30.0% and (ii) 0.50%
Coupon Payment = $1,000 × 0.005
Coupon Payment = $5.00
As illustrated above, each of the Basket Components has depreciated by 35.0% from its Initial Share Price to its Final Share Price on the relevant Valuation Date. However, each of the Component Returns are subject to the Component Return Floor of -30.0%. Consequently, the Basket Return is equal to −30.0%. In this example, because the Basket Return is negative, you would receive a Coupon Payment reflecting the Minimum Coupon Percentage on the applicable Coupon Payment Date.
Selected Risk Considerations
An investment in the securities involves significant risks. Investing in the securities is not equivalent to investing directly in the Basket Components. In addition to the risk considerations set forth below, you should also carefully consider the matters set forth in the “Risk Factors” section of the accompanying product supplement.
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THE SECURITIES MAY NOT PAY MORE THAN THE MINIMUM COUPON PERCENTAGE — You may receive less over the term of the securities than you could have earned on ordinary interest-bearing debt securities with similar maturities, including other of our debt securities. Each Coupon Payment is based on the weighted performance of the Basket Components from the Trade Date to the relevant Valuation Date, subject to the Minimum Coupon Percentage. On any Valuation Date, each Basket Component is individually subject to the Fixed Component Percentage with respect to any positive returns and the Component Return Floor with respect to any negative returns. If the Basket Return for such Valuation Date is less than or equal to the Minimum Coupon Percentage, the Coupon Payment for the corresponding Coupon Payment Date will reflect the Minimum Coupon Percentage, which is expected to be 0.50% per annum (to be determined on the Trade Date). If the Basket Return is less than or equal to the Minimum Coupon Percentage on all of the Valuation Dates, every Coupon Payment will reflect the Minimum Coupon Percentage. Assuming the securities are held to maturity, the minimum amount payable with respect to the securities, including the Redemption Amount, is expected to be $1,025.00 (to be determined on the Trade Date) for each $1,000 principal amount of the securities. The return on the securities may not be enough to compensate you for any loss in value due to inflation and other factors relating to the value of money over time. Any payment on the securities is subject to our ability to pay our obligations as they become due.
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CAPPED APPRECIATION POTENTIAL — On each Valuation Date, each Basket Component is individually subject to the Fixed Component Percentage with respect to any positive returns and the Component Return Floor with respect to any negative returns. On each Valuation Date, the Basket Return will equal the combined performance of the Basket Components from the Trade Date to the relevant Valuation Date and thus cannot exceed the Fixed Component Percentage, which is expected to be 5.0% (to be determined on the Trade Date), regardless of the appreciation of the Basket Components, which may be significant. Accordingly, the maximum payment on each Coupon Payment Date is expected to be $50.00 per $1,000 principal amount of securities. Assuming the securities are held to maturity, the maximum amount payable with respect to the securities, including the Redemption Amount, is expected to be $1,250.00 (to be determined on the Trade Date) for each $1,000 principal amount of securities.
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THE SECURITIES ARE SUBJECT TO THE CREDIT RISK OF CREDIT SUISSE — Although the return on the securities will be based on the performance of the Basket, the payment of any amount due on the securities, including any applicable Coupon Payment and payment at maturity, is subject to the credit risk of Credit Suisse. Investors are dependent on our ability to pay all amounts due on the securities, and therefore, investors are subject to our credit risk. In addition, any decline in our credit ratings, any adverse changes in the market’s view of our creditworthiness or any increase in our credit spreads is likely to adversely affect the value of the securities prior to maturity.
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CHANGES IN THE VALUES OF THE BASKET COMPONENTS MAY OFFSET EACH OTHER —Movements in the prices of the Basket Components may not correlate with each other. At a time when the price of one or more of the Basket Components increases, the prices of the other Basket Components may not increase as much or may even decline. Therefore, in calculating the Basket Return for any Valuation Date, a positive Component Return for one or more of the Basket Components may be moderated, or more than offset, by a decline in the price of another Basket Component. In addition, participation in any increase in the price of a Basket Component is limited by the Fixed Component Percentage. There can be no assurance that you will receive a Coupon Payment in excess of the Minimum Coupon Percentage on any Coupon Payment Date.
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NO OWNERSHIP RIGHTS IN THE BASKET COMPONENTS — As a holder of the securities, you will not have voting rights or rights to receive cash dividends or other distributions or other rights with respect to the Basket Components. In addition, the issuers of the Basket Components will not have any obligation to consider your interests as a holder of the securities in taking any corporate action that might affect the value of the relevant Basket Components and the securities.
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NO AFFILIATION WITH THE BASKET COMPONENT ISSUERS — We are not affiliated with the issuers of the Basket Components. We assume no responsibility for the adequacy of the information about the Basket Component issuers contained in this pricing supplement. You should make your own investigation into the Basket Components and their issuers. We are not responsible for the Basket Component issuers’ public disclosure of information, whether contained in SEC filings or otherwise.
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ANTI-DILUTION PROTECTION IS LIMITED — The calculation agent will make anti-dilution adjustments for a Basket Component for certain events affecting such Basket Component. However, an adjustment will not be required in response to all events that could affect a Basket Component. If an event occurs that does not require the calculation agent to make an adjustment, or if an adjustment is made but such adjustment does not fully reflect the economics of such an event, the value of the securities may be materially and adversely affected. See “Description of the Securities—Adjustments—For equity securities of a reference share issuer” in the accompanying product supplement.
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THERE ARE IMPORTANT DIFFERENCES BETWEEN THE RIGHTS OF HOLDERS OF VALE ADSs, AND THE RIGHTS OF HOLDERS OF THE COMMON STOCK OF VALE— Because the securities are linked, in part, to the performance of Vale ADSs, each representing one common share of Vale, S.A. (which we refer to as “Vale Underlying Stock”), you should be aware that your securities are linked, in part, to the price of Vale ADSs and not the Vale Underlying Stock. There are important differences between the rights of holders of Vale ADSs and holders of the Vale Underlying Stock. An ADS is a security evidenced by American Depositary Receipts that represents the Vale Underlying Stock. Vale ADSs are issued under a deposit agreement which sets forth the rights and responsibilities of Vale or, as applicable, the relevant ADS depositary and holders of Vale ADSs. The rights of holders of Vale ADSs may be different from the rights of holders of the Vale Underlying Stock. Any such differences between the rights of holders of Vale ADSs and holders of Vale Underlying Stock may be significant and may materially and adversely affect the value of the securities. For example, Vale may make distributions in respect of the Vale Underlying Stock that are not passed on to the holders of Vale ADSs.
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RISKS ASSOCIATED WITH NON-U.S. SECURITIES— An investment in the securities is linked, in part, to the value of Vale ADSs, which represent interests in the Vale Underlying Stock. The Vale Underlying Stock is issued by a Brazilian issuer, and involves risks associated with investments in Brazil. Vale ADSs are quoted and traded in U.S. dollars on the New York Stock Exchange, and may trade differently from the Vale Underlying Stock, which is quoted in Brazilian reais and traded on both the São Paulo Stock Exchange and the Mercado de Valores Latinoamericanos en Euros (Market for Latin-American Stocks in Euros), or LATIBEX. Non-U.S. companies are generally subject to accounting, auditing and financial reporting standards and requirements, and securities trading rules different from those applicable to U.S. reporting companies. The prices of non-U.S. equity securities may be affected by political, economic, financial and social factors in Brazil, including changes in Brazil’s government, economic and fiscal policies, currency exchange laws or other laws or restrictions. Moreover, the economy of Brazil may differ favorably or unfavorably from the economy of the United States in such respects as growth of gross national product, rate of inflation, capital reinvestment, resources and self sufficiency. Brazil may be subjected to different and, in some cases, more adverse economic environment.
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EMERGING MARKETS RISK — Vale ADSs are exposed to the political and economic risks of emerging market countries. In recent years, some emerging markets have undergone significant political, economic and social upheaval. Such far-reaching changes have resulted in constitutional and social tensions and, in some cases, instability and reaction against market reforms has occurred. With respect to any emerging market nation, there is the possibility of nationalization, expropriation or confiscation, political changes, government regulation and social instability. There can be no
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assurance that future political changes will not adversely affect the economic conditions of an emerging market nation. Political or economic instability could have an adverse effect on the performance of the securities.
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THE SECURITIES ARE SUBJECT TO CURRENCY EXCHANGE RATE RISK— Because Vale ADSs are quoted and traded in U.S. dollars on the New York Stock Exchange, whereas the Vale Underlying Stock is quoted in Brazilian reais and traded on both the São Paulo Stock Exchange and the LATIBEX, fluctuations in the exchange rate between the Brazilian real and the U.S. dollar will likely affect the relative value of Vale ADSs and the Vale Underlying Stock and, as a result, will likely affect the market price of Vale ADSs trading on the New York Stock Exchange. These trading differences and currency exchange rates may affect the market value of the securities and whether the Final Share Price of Vale ADSs will be greater than, equal to or less than their Initial Share Price. The Brazilian real has been subject to fluctuations against the U.S. dollar in the past, and may be subject to significant fluctuations in the future. Previous fluctuations or periods of relative stability in the exchange rate of the Brazilian real and the U.S. dollar are not necessarily indicative of fluctuations or periods of relative stability in those rates that may occur over the term of the securities. The exchange rate between the Brazilian real and the U.S. dollar is the result of the supply of, and the demand for, those currencies. Changes in the exchange rate result over time from the interaction of many factors directly or indirectly affecting economic and political conditions in Brazil and the United States, including economic and political developments in other countries. Of particular importance are rates of inflation, interest rate levels, the balance of payments and the extent of governmental surpluses or deficits in Brazil and the United States, all of which are in turn sensitive to the monetary, fiscal and trade policies pursued by Brazil and the United States and other jurisdictions important to international trade and finance.
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CERTAIN BUILT-IN COSTS ARE LIKELY TO ADVERSELY AFFECT THE VALUE OF THE SECURITIES PRIOR TO MATURITY — While the payment at maturity described in this pricing supplement is based on the full principal amount of your securities, the original issue price of the securities includes the agent’s commission and the cost of hedging our obligations under the securities through one or more of our affiliates. As a result, the price, if any, at which Credit Suisse (or its affiliates), will be willing to purchase securities from you in secondary market transactions, if at all, will likely be lower than the original issue price, and any sale prior to the Maturity Date could result in a substantial loss to you. The securities are not designed to be short-term trading instruments. Accordingly, you should be able and willing to hold your securities to maturity.
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LACK OF LIQUIDITY — The securities will not be listed on any securities exchange. Credit Suisse (or its affiliates) intends to offer to purchase the securities in the secondary market but is not required to do so. Even if there is a secondary market, it may not provide enough liquidity to allow you to trade or sell the securities when you wish to do so. Because other dealers are not likely to make a secondary market for the securities, the price at which you may be able to trade your securities is likely to depend on the price, if any, at which Credit Suisse (or its affiliates) is willing to buy the securities. If you have to sell your securities prior to maturity, you may not be able to do so or you may have to sell them at a substantial loss.
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POTENTIAL CONFLICTS — We and our affiliates play a variety of roles in connection with the issuance of the securities, including acting as calculation agent and hedging our obligations under the securities. In performing these duties, the economic interests of the calculation agent and other affiliates of ours are potentially adverse to your interests as an investor in the securities. In addition, we and/or our affiliates may also currently or from time to time engage in business with any of the Basket Component issuers, including extending loans to, or making equity investments in, such Basket Component issuer(s) or providing advisory services to such Basket Component issuer(s). In addition, one or more of our affiliates may publish research reports or otherwise express opinions with respect to the Basket Component issuers and these reports may or may not recommend that investors buy or hold the Basket Component(s). As a prospective purchaser of the securities, you should undertake an independent investigation of the Basket Component issuers that in your judgment is appropriate to make an informed decision with respect to an investment in the securities.
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MANY ECONOMIC AND MARKET FACTORS WILL AFFECT THE VALUE OF THE SECURITIES — In addition to the level of the Basket on any day, the value of the securities will be affected by a number of economic and market factors that may either offset or magnify each other, including:
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the expected volatility of the Basket Components;
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the time to maturity of the securities;
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the dividend rates paid on the Basket Components;
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interest and yield rates in the market generally;
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the occurrence of certain events to any Basket Component that may or may not require an anti-dilution adjustment for such Basket Component;
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investors’ expectations with respect to the rate of inflation;
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geopolitical conditions and a variety of economic, financial, political, regulatory or judicial events that affect the Basket Components or stock markets generally and which may affect the prices of the Basket Components;
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the exchange rate and volatility of the exchange rates between the U.S. dollar and the Brazilian real; and
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our creditworthiness, including actual or anticipated downgrades in our credit ratings.
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Some or all of these factors may influence the price that you will receive if you choose to sell your securities prior to maturity. The impact of any of the factors set forth above may enhance or offset some or all of any change resulting from another factor or factors.
Supplemental Use of Proceeds and Hedging
We intend to use the proceeds of this offering for our general corporate purposes, which may include the refinancing of existing debt outside Switzerland. Some or all of the proceeds we receive from the sale of the securities may be used in connection with hedging our obligations under the securities through one or more of our affiliates. Such hedging or trading activities on or prior to the Trade Date and during the term of the securities (including on the Valuation Dates) could adversely affect the value of the Basket and, as a result, could decrease the amount you may receive on the securities at maturity. For further information, please refer to “Supplemental Use of Proceeds and Hedging” in the accompanying product supplement.
The Basket Components
All information contained herein with respect to the Basket Components and the Basket Component issuers is derived from publicly available sources and is provided for informational purposes only. Companies with securities registered under the Securities Exchange Act of 1934, as amended, which we refer to as the Exchange Act, are required to periodically file certain financial and other information specified by the SEC. Information provided to or filed with the SEC by a Basket Component issuer pursuant to the Exchange Act can be located by reference to the SEC file number provided below and can be accessed through www.sec.gov. We have not participated in the preparation of, or verified, such publicly available information.
Historical Information of the Basket Components
The following graphs set forth the historical performance of the Basket Components based on the closing prices (in U.S. dollars) of the Basket Components from January 1, 2007 through July 2, 2012. We obtained the closing prices of the Basket Components below from Bloomberg, without independent verification. We make no representation or warranty as to the accuracy or completeness of the information obtained from Bloomberg. The closing prices may be adjusted by Bloomberg for corporate actions such as public offerings, mergers and acquisitions, spin-offs, delistings and bankruptcy.
Since the commencement of trading of each Basket Component, the price of such Basket Component has experienced significant fluctuations. The historical performance of each Basket Component should not be taken as an indication of future performance, and no assurance can be given as to the closing prices of any Basket Component during the term of the securities. We cannot give you assurance that the performance of the Basket Components will result in any Coupon Payments on the securities in excess of a Coupon Payment reflecting the Minimum Coupon Percentage. We make no representation as to the amount of dividends, if any, that each Basket Component issuer will pay in the future. Any payment on the securities is subject to our ability to pay our obligations as they become due. In any event, as an investor in the securities, you will not be entitled to receive dividends, if any, that may be payable on each Basket Component.
Altria Group, Inc. (“Altria Group”)
According to its publicly available filings with the SEC, Altria Group is a holding company whose subsidiaries include Phillip Morris USA Inc., UST LLC, and John Middleton Co. These subsidiaries are engaged in the manufacture and sale of cigarettes, cigars, pipe tobacco, smokeless products and wine. The common stock of Altria Group, par value $0.33 1/3 share, is listed on the New York Stock Exchange, which we refer to as the Relevant Exchange for purposes of Kraft in the accompanying product supplement. Altria Group’s SEC file number is 1-08940.
Historical Information of the Common Stock of Altria Group
The following graph sets forth the historical performance of the common stock of Altria Group based on its daily closing prices (in U.S. dollars) from January 1, 2007 through July 2, 2012. The closing price of the common stock of Altria Group on July 2, 2012 was $34.96.
Amazon.com, Inc. (“Amazon.com”)
According to its publicly available filings with the SEC, Amazon.com serves its customers through its retail websites that enable products to be sold by Amazon.com, Inc. and by third parties across various product categories. Amazon.com also manufactures and sells Kindle devices. The common stock of Amazon.com, par value $0.01 per share, is listed on The NASDAQ Global Select Market. Amazon.com’s SEC file number is 000-22513.
Historical Information of the Common Stock of Amazon.com
The following graph sets forth the historical performance of the common stock of Amazon.com based on its daily closing prices (in U.S. dollars) from January 1, 2007 through July 2, 2012. The closing price of the common stock of Amazon.com on July 2, 2012 was $229.32.
Archer-Daniels-Midland Company (“Archer-Daniels-Midland”)
According to its publicly available filings with the SEC, Archer-Daniels-Midland is a processor of oilseeds, corn, wheat cocoa and other agricultural commodities and manufacturer of vegetable oil, protein meal, corn sweeteners, flour, biodiesel, ethanol and other food and feed ingredients. The common stock of Archer-Daniels-Midland, no par value, is listed on the New York Stock Exchange, which we refer to as the Relevant Exchange for purposes of Archer-Daniels-Midland in the accompanying product supplement. Archer-Daniels-Midland’s SEC file number is 1-44.
Historical Information of the Common Stock of Archer-Daniels-Midland
The following graph sets forth the historical performance of the common stock of Archer-Daniels-Midland based on its daily closing prices (in U.S. dollars) from January 1, 2007 through July 2, 2012. The closing price of the common stock of Archer-Daniels-Midland on July 2, 2012 was $29.04.
Avon Products, Inc. (“Avon Products”)
According to its publicly available filings with the SEC, Avon Products is a global manufacturer and marketer of beauty and related products. The common stock of Avon Products, par value $0.25 per share, is listed on the
New York Stock Exchange, which we refer to as the Relevant Exchange for purposes of Avon Products in the accompanying product supplement. Avon Products’ SEC file number is 1-4881.
Historical Information of the Common Stock of Avon Products
The following graph sets forth the historical performance of the common stock of Avon Products based on its daily closing prices (in U.S. dollars) from January 1, 2007 through July 2, 2012. The closing price of the common stock of Avon Products on July 2, 2012 was $15.75.
Eli Lilly and Company (“Eli Lilly”)
According to its publicly available filings with the SEC, Eli Lilly discovers, develops, manufactures, and sells pharmaceutical products. The common stock of Eli Lilly, no par value, is listed on the New York Stock Exchange, which we refer to as the Relevant Exchange for purposes of Eli Lilly in the accompanying product supplement. Eli Lilly’s SEC file number is 001-06351.
Historical Information of the Common Stock of Eli Lilly & Co
The following graph sets forth the historical performance of the common stock of Eli Lilly based on its daily closing prices (in U.S. dollars) from January 1, 2007 through July 2, 2012. The closing price of the common stock of Eli Lilly on July 2, 2012 was $42.99.
The Charles Schwab Corporation (“Charles Schwab”)
According to its publicly available filings with the SEC, Charles Schwab provides financial services to individuals and institutional clients. The common stock of Charles Schwab, par value $0.01 per share, is listed on the New York Stock Exchange, which we refer to as the Relevant Exchange for purposes of Charles Schwab in the accompanying product supplement. Charles Schwab’s file number is 1-9700.
Historical Information of the Common Stock of Charles Schwab
The following graph sets forth the historical performance of the common stock of Charles Schwab based on its daily closing prices (in U.S. dollars) from January 1, 2007 through July 2, 2012. The closing price of the common stock of Charles Schwab on July 2, 2012 was $12.93.
Vale S.A. (“Vale”)
According to its publicly available filings with the SEC, Vale produces iron ore, iron ore pellets, nickel, kaolin, manganese ore, ferroalloys, bauxite, alumina, aluminum, copper, coal, cobalt, precious metals, potash and other products. The ADSs, each representing one common share of Vale, no par value, are listed on the New York Stock Exchange, which we refer to as the Relevant Exchange for purposes of Vale in the accompanying product supplement. Vale’s SEC file number is 001-15030.
Historical Information of Vale ADSs
The following graph sets forth the historical performance of Vale ADSs, no par value, based on their daily closing prices (in U.S. dollars) from January 1, 2007 through July 2, 2012. The closing price of Vale ADSs on July 2, 2012 was $20.10.
Intel Corporation (“Intel”)
According to its publicly available filings with the SEC, Intel develops advanced integrated digital technology, primarily integrated circuits, for industries such as computing and communications. The common stock of Intel, par value $0.001 per share, is listed on the NASDAQ Global Select Market, which we refer to as the Relevant Exchange for purposes of Intel in the accompanying product supplement. Intel’s SEC file number is 000-06217.
Historical Information of the Common Stock of Intel
The following graph sets forth the historical performance of the common stock of Intel based on its daily closing prices (in U.S. dollars) from January 1, 2007 through July 2, 2012. The closing price of the common stock of Intel on July 2, 2012 was $26.66.
Valero Energy Corporation (“Valero”)
According to its publicly available filings with the SEC, Valero operates as a petroleum refining and marketing company. Valero markets branded and unbranded refined products on a wholesale basis through a bulk and rack marketing network and sells refined products through retail and wholesale branded outlets. The common stock of Valero, par value $0.01 per share, is listed on the New York Stock Exchange, which we refer to as the Relevant Exchange for purposes of Valero in the accompanying product supplement. Valero’s SEC file number is 1-13175.
Historical Information of the Common Stock of Valero
The following graph sets forth the historical performance of the common stock of Valero based on its daily closing prices (in U.S. dollars) from January 1, 2007 through July 2, 2012. The closing price of the common stock of Valero on July 2, 2012 was $24.19.
Verizon Communications Inc. (“Verizon”)
According to its publicly available filings with the SEC, Verizon is an international provider of landline and wireless communication services. The common stock of Verizon, par value $0.10 per share, is listed on the New York Stock Exchange, which we refer to as the Relevant Exchange for purposes of Verizon in the accompanying product supplement. Verizon’s SEC file number is 1-8606.
Historical Information of the Common Stock of Verizon
The following graph sets forth the historical performance of the common stock of Verizon based on its daily closing prices (in US Dollars) from January 1, 2007 through July 2, 2012. The closing price of the common stock of Verizon on July 2, 2012 was $44.93.
Market Disruption Events
In the event that a market disruption event exists in respect of a Basket Component on a Valuation Date, the corresponding Coupon Payment Date or the Maturity Date, as applicable, will be postponed to the fifth business day following the day on which the Final Share Price for each Basket Component for such Valuation Date has been calculated.
Material U.S. Federal Income Tax Considerations
The following discussion summarizes material U.S. federal income tax consequences of owning and disposing of securities that may be relevant to holders of securities that acquire their securities from us as part of the original issuance of the securities. This discussion applies only to holders that hold their securities as capital assets within the meaning of the Internal Revenue Code of 1986, as amended (the “Code”). Further, this discussion does not address all of the U.S. federal income tax consequences that may be relevant to you in light of your individual circumstances or if you are subject to special rules, such as if you are:
· a financial institution,
· a mutual fund,
· a tax-exempt organization,
· a grantor trust,
· certain U.S. expatriates,
· an insurance company,
· a dealer or trader in securities or foreign currencies,
· a person (including traders in securities) using a mark-to-market method of accounting,
· a person who holds a security as a hedge or as part of a straddle with another position, constructive sale, conversion transaction or other integrated transaction, or
· an entity that is treated as a partnership for U.S. federal income tax purposes.
The discussion is based upon the Code, law, regulations, rulings and decisions, in each case, as available and in effect as of the date hereof, all of which are subject to change, possibly with retroactive effect. Tax consequences under state, local and foreign laws are not addressed herein. No ruling from the U.S. Internal Revenue Service (the “IRS”) has been or will be sought as to the U.S. federal income tax consequences of the ownership and disposition of securities, and the following discussion is not binding on the IRS.
You should consult your tax advisor as to the specific tax consequences to you of owning and disposing of the securities, including the application of federal, state, local and foreign income and other tax laws based on your particular facts and circumstances.
IRS CIRCULAR 230 REQUIRES THAT WE INFORM YOU THAT ANY TAX STATEMENT HEREIN REGARDING ANY U.S. FEDERAL TAX IS NOT INTENDED OR WRITTEN TO BE USED, AND CANNOT BE USED, BY ANY TAXPAYER FOR THE PURPOSE OF AVOIDING ANY PENALTIES. ANY SUCH STATEMENT HEREIN WAS WRITTEN TO SUPPORT THE MARKETING OR PROMOTION OF THE TRANSACTION(S) OR MATTER(S) TO WHICH THE STATEMENT RELATES. A PROSPECTIVE INVESTOR (INCLUDING A TAX-EXEMPT INVESTOR) IN THE SECURITIES SHOULD CONSULT ITS OWN TAX ADVISOR IN DETERMINING THE TAX CONSEQUENCES OF AN INVESTMENT IN THE SECURITIES, INCLUDING THE APPLICATION OF STATE, LOCAL OR OTHER TAX LAWS AND THE POSSIBLE EFFECTS OF CHANGES IN FEDERAL OR OTHER TAX LAWS.
Characterization of the Securities
There are no statutory provisions, regulations, published rulings or judicial decisions addressing the characterization for U.S. federal income tax purposes of securities with terms that are substantially the same as those of your securities. Thus, the characterization of the securities is not certain. Our special tax counsel, Orrick, Herrington & Sutcliffe LLP, has advised that the securities should be treated, for U.S. federal income tax purposes, as “variable rate debt instrument,” as described below. In the absence of an administrative or judicial ruling to the contrary, we and, by acceptance of a security, each holder agree to treat a security as a variable rate debt instrument for all U.S. federal income tax purposes. The balance of this discussion assumes that the securities will be so treated.
You should be aware that the characterization of the securities as described above is not certain, nor is it binding on the IRS or the courts. Thus, it is possible that the IRS would seek to characterize your securities in a manner that results in tax consequences to you that are different from those described below. For example, the IRS might assert that the securities constitute debt instruments that are “contingent payment debt instruments” that are
subject to special tax rules governing the recognition of income over the term of your securities under the applicable Treasury regulations. If the securities were to be treated as contingent payment debt instruments, you would be required to include in income on an economic accrual basis over the term of the securities an amount of interest that is based upon the yield at which we would issue a non-contingent fixed-rate debt instrument with other terms and conditions similar to your securities, or the comparable yield. The characterization of the securities as contingent payment debt instruments under these rules is likely to be adverse. We are not responsible for any adverse consequences that you may experience as a result of any alternative characterization of the securities for U.S. federal income tax or other tax purposes.
You should consult your tax advisor regarding the possible tax consequences of characterization of the securities as contingent payment debt instruments and any possible alternative characterizations of your securities for U.S. federal income tax purposes, and the tax treatment of holding the securities.
U.S. Holders
For purposes of this discussion, the term “U.S. Holder,” for U.S. federal income tax purposes, means a beneficial owner of securities that is (1) a citizen or resident of the United States, (2) a corporation (or an entity treated as a corporation for U.S. federal income tax purposes) created or organized in or under the laws of the United States or any state thereof or the District of Columbia, (3) an estate, the income of which is subject to U.S. federal income taxation regardless of its source, or (4) a trust, if (a) a court within the United States is able to exercise primary supervision over the administration of such trust and one or more U.S. persons have the authority to control all substantial decisions of the trust or (b) such trust has in effect a valid election to be treated as a domestic trust for U.S. federal income tax purposes. If a partnership (or an entity treated as a partnership for U.S. federal income tax purposes) holds securities, the U.S. federal income tax treatment of such partnership and a partner in such partnership will generally depend upon the status of the partner and the activities of the partnership. If you are a partnership, or a partner of a partnership, holding securities, you should consult your tax advisor regarding the tax consequences to you from the partnership's purchase, ownership and disposition of the securities.
As noted above, we will treat the securities as variable rate debt instruments. The securities are not expected to be treated as issued with original issue discount or premium for U.S. federal income tax purposes because the stated redemption price at maturity of the securities is expected to equal their issue price, or because any such difference is expected to only be a de minimis amount (as determined for U.S. federal income tax purposes). Accordingly, payments of interest on the securities should be taxable to you as ordinary interest income at the time that you receive or accrue such amounts (in accordance with your regular method of tax accounting for U.S. federal income tax purposes). You should consult your tax advisor regarding possible tax consequences of the securities being treated as issued with original issue discount or premium for U.S. federal income tax purposes.
Sale, Exchange, Redemption, Retirement or Other Taxable Dispositions of Securities
Upon the sale, exchange, redemption, retirement or other taxable disposition of a security, you generally will recognize gain or loss equal to the difference between the amount you realize on the transaction (less any accrued qualified stated interest, which will be taxable to you as ordinary interest income) and your tax basis in the security. The gain or loss that you recognize on the sale, exchange, redemption, retirement or other taxable disposition of a security generally will be capital gain or loss. The gain or loss on the sale, exchange or retirement of a debt security will be long-term capital gain or loss if you have held the debt security for more than one year on the date of such disposition.
Securities Held Through Foreign Entities
Under the “Hiring Incentives to Restore Employment Act” (the “Act”) and recently proposed regulations, a 30% withholding tax is imposed on “withholdable payments” and certain “passthru payments” made to foreign financial institutions (and their more than 50% affiliates) unless the payee foreign financial institution agrees, among other things, to disclose the identity of any U.S. individual with an account at the institution (or the institution’s affiliates) and to annually report certain information about such account. “Withholdable payments” include (1) payments of interest (including original issue discount), dividends, and other items of fixed or determinable annual or periodical gains, profits, and income (“FDAP”), in each case, from sources within the United States, and (2) gross proceeds
from the sale of any property of a type which can produce interest or dividends from sources within the United States. “Passthru payments” generally are certain payments attributable to withholdable payments. The Act also requires withholding agents making withholdable payments to certain foreign entities that do not disclose the name, address, and taxpayer identification number of any substantial U.S. owners (or certify that they do not have any substantial United States owners) to withhold tax at a rate of 30%. We will treat payments on the securities as withholdable payments for these purposes.
Withholding under the Act described above will apply to all withholdable payments and certain passthru payments without regard to whether the beneficial owner of the payment is a U.S. person, or would otherwise be entitled to an exemption from the imposition of withholding tax pursuant to an applicable tax treaty with the United States or pursuant to U.S. domestic law. Unless a foreign financial institution is the beneficial owner of a payment, it will be subject to refund or credit in accordance with the same procedures and limitations applicable to other taxes withheld on FDAP payments provided that the beneficial owner of the payment furnishes such information as the IRS determines is necessary to determine whether such beneficial owner is a United States owned foreign entity and the identity of any substantial United States owners of such entity. Pursuant to the proposed regulations, the Act’s withholding regime generally will apply to (i) withholdable payments (other than gross proceeds of the type described above) made after December 31, 2013, (ii) payments of gross proceeds of the type described above with respect to a sale or disposition occurring after December 31, 2014, and (iii) passthru payments made after December 31, 2016. Additionally, the provisions of the Act discussed above generally will not apply to obligations (other than an instrument that is treated as equity for U.S. tax purposes or that lacks a stated expiration or term) that are outstanding on January 1, 2013. For this purpose, the term “obligation” includes instruments treated as indebtedness for U.S. federal income tax purposes. Thus, if you hold your securities through a foreign financial institution or foreign corporation or trust, and the IRS does not respect the characterization of the securities as indebtedness for U.S. federal income tax purposes, a portion of any of your payments made after December 31, 2013 may be subject to 30% withholding.
Non-U.S. Holders Generally
A holder of the securities that is not a U.S. Holder (a “Non-U.S. Holder”) and has no connection with the United States other than holding its securities will not be subject to U.S. withholding tax on payments made with respect to the securities, provided that such Non-U.S. Holder complies with applicable certification requirements. Any gain realized upon the sale or other disposition of the securities by a Non-U.S. Holder generally will not be subject to U.S. federal income tax unless (1) such gain is effectively connected with a U.S. trade or business of such Non-U.S. Holder or (2) in the case of an individual, such individual is present in the United States for 183 days or more in the taxable year of the sale or other disposition and certain other conditions are met. Any effectively connected gains described in clause (1) above realized by a Non-U.S. Holder that is, or is taxable as, a corporation for U.S. federal income tax purposes may also, under certain circumstances, be subject to an additional branch profits tax at a 30% rate or such lower rate as may be specified by an applicable income tax treaty.
Non-U.S. Holders that are subject to U.S. federal income taxation on a net income basis with respect to their investment in the securities should refer to the discussion above relating to U.S. Holders.
Substitute Dividend and Dividend Equivalent Payments
The Act and recently proposed and temporary regulations treat a “dividend equivalent” payment as a dividend from sources within the United States. Under the Act, unless reduced by an applicable tax treaty with the United States, such payments generally will be subject to U.S. withholding tax. A “dividend equivalent” payment is (i) a substitute dividend payment made pursuant to a securities lending or a sale-repurchase transaction that (directly or indirectly) is contingent upon, or determined by reference to, the payment of a dividend from sources within the United States, (ii) a payment made pursuant to a “specified notional principal contract” that (directly or indirectly) is contingent upon, or determined by reference to, the payment of a dividend from sources within the United States, and (iii) any other payment determined by the IRS to be substantially similar to a payment described in the preceding clauses (i) and (ii). Proposed regulations provide criteria for determining whether a notional principal contract will be a specified notional principal contract, effective for payments made after December 31, 2012.
Proposed regulations address whether a payment is a dividend equivalent. The proposed regulations provide that an equity-linked instrument that provides for a payment that is a substantially similar payment is treated as a notional principal contract for these purposes. An equity-linked instrument is a financial instrument or combination of financial instruments that references one or more underlying securities to determine its value, including a
futures contract, forward contract, option, or other contractual arrangement. Although it is not certain, an equity-linked instrument could include instruments treated as indebtedness for U.S. federal income tax purposes. The proposed regulations consider any payment, including the payment of the purchase price or an adjustment to the purchase price, to be a substantially similar payment (and, therefore, a dividend equivalent payment) if made pursuant to an equity-linked instrument that is contingent upon or determined by reference to a dividend (including payments pursuant to a redemption of stock that gives rise to a dividend) from sources within the United States. The rules for equity-linked instruments under the proposed regulations will be effective for payments made after the rules are finalized. Where the securities reference an interest in a fixed basket of securities or a “customized index,” each security or component of such basket or customized index is treated as an underlying security in a separate notional principal contract for purposes of determining whether such notional principal contract is a specified notional principal contract or an amount received is a substantially similar payment.
We will treat any portion of a payment on a security that is substantially similar to a dividend as a dividend equivalent payment, which will be subject to U.S. withholding tax, unless reduced by an applicable tax treaty and a properly executed IRS Form W-8 (or other qualifying documentation) is provided. Investors should consult their tax advisors regarding whether payments on the securities constitute dividend equivalent payments.
U.S. Federal Estate Tax Treatment of Non-U.S. Holders
The securities may be subject to U.S. federal estate tax if an individual Non-U.S. Holder holds a security at the time of his or her death. The gross estate of a Non-U.S. Holder domiciled outside the United States includes only property situated in the United States. Individual Non-U.S. Holders should consult their tax advisors regarding the U.S. federal estate tax consequences of holding a security at death.
Information Reporting Regarding Specified Foreign Financial Assets
The Act and temporary and proposed regulations generally require individual U.S. Holders (“specified individuals”) and “specified domestic entities” with an interest in any “specified foreign financial asset” to file an annual report on new IRS Form 8938 with information relating to the asset, including the maximum value thereof, for any taxable year in which the aggregate value of all such assets is greater than $50,000 on the last day of the taxable year or $75,000 at any time during the taxable year. Certain individuals are permitted to have an interest in a higher aggregate value of such assets before being required to file a report. The proposed regulations relating to specified domestic entities apply to taxable years beginning after December 31, 2011. Under the proposed regulations, “specified domestic entities” are domestic entities that are formed or used for the purposes of holding, directly or indirectly, specified foreign financial assets. Generally, specified domestic entities are certain closely held corporations and partnerships that meet passive income or passive asset tests and, with certain exceptions, domestic trusts that have a specified individual as a current beneficiary and exceed the reporting threshold. Specified foreign financial assets include any depository or custodial account held at a foreign financial institution; any debt or equity interest in a foreign financial institution if such interest is not regularly traded on an established securities market; and, if not held at a financial institution, (1) any stock or security issued by a non-U.S. person, (2) any financial instrument or contract held for investment where the issuer or counterparty is a non-U.S. person, and (3) any interest in an entity which is a non-U.S. person.
Depending on the aggregate value of your investment in specified foreign financial assets, you may be obligated to file an IRS Form 8938 under this provision if you are an individual U.S. Holder. Specified domestic entities are not required to file Form 8938 until the proposed regulations are final. Penalties apply to any failure to file IRS Form 8938. Additionally, in the event a U.S. Holder (either a specified individual or specified domestic entity) does not file such form, the statute of limitations on the assessment and collection of U.S. federal income taxes of such U.S. Holder for the related tax year may not close before the date which is three years after the date such information is filed. You should consult your own tax advisor as to the possible application to you of this information reporting requirement and related statute of limitations tolling provision.
Backup Withholding and Information Reporting
A holder of the securities (whether a U.S. Holder or a Non-U.S. Holder) may be subject to backup withholding with respect to certain amounts paid to such holder unless it provides a correct taxpayer identification number, complies with certain certification procedures establishing that it is not a U.S. Holder or establishes proof of another applicable exemption, and otherwise complies with applicable requirements of the backup withholding rules. Backup withholding is not an additional tax. You can claim a credit against your U.S. federal income tax
liability for amounts withheld under the backup withholding rules, and amounts in excess of your liability are refundable if you provide the required information to the IRS in a timely fashion. A holder of the securities may also be subject to information reporting to the IRS with respect to certain amounts paid to such holder unless it (1) is a Non-U.S. Holder and provides a properly executed IRS Form W-8 (or other qualifying documentation) or (2) otherwise establishes a basis for exemption.
Supplemental Plan of Distribution (Conflicts of Interest)
Under the terms and subject to the conditions contained in a distribution agreement dated May 7, 2007, as amended, which we refer to as the distribution agreement, we have agreed to sell the securities to CSSU.
The distribution agreement provides that CSSU is obligated to purchase all of the securities if any are purchased.
CSSU proposes to offer the securities at the offering price set forth on the cover page of this pricing supplement and may receive underwriting discounts and commissions of up to $30.00 per $1,000 principal amount of securities. CSSU may re-allow some or all of the discount on the principal amount per security on sales of such securities by other brokers or dealers. If all of the securities are not sold at the initial offering price, CSSU may change the public offering price and other selling terms.
In addition, Credit Suisse International, an affiliate of Credit Suisse, may pay referral fees of up to $10.00 per $1,000 principal amount of securities in connection with the distribution of the securities. An affiliate of Credit Suisse has paid or may pay in the future a fixed amount to broker-dealers in connection with the costs of implementing systems to support these securities.
The agent for this offering, CSSU, is our affiliate. In accordance with FINRA Rule 5121, CSSU may not make sales in this offering to any of its discretionary accounts without the prior written approval of the customer. A portion of the net proceeds from the sale of the securities will be used by CSSU or one of its affiliates in connection with hedging our obligations under the securities.
For further information, please refer to “Underwriting (Conflicts of Interest)” in the accompanying product supplement.
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