CALCULATION OF REGISTRATION FEE
Title of Each Class of Securities Offered |
Maximum Aggregate Offering Price |
Amount of Registration Fee(1) | ||
Global Medium-Term Notes, Series A |
$375,000 | $26.74 |
(1) | Calculated in accordance with Rule 457(r) of the Securities Act of 1933. |
Pricing Supplement dated June 11, 2010 (To the Prospectus dated February 10, 2009, the Prospectus Supplement dated March 1, 2010 and Index Supplement dated March 1, 2010) |
Filed Pursuant to Rule 424(b)(2) Registration No. 333-145845 |
$375,000
Buffered Return Enhanced Notes due July 1, 2011 Linked to the Dow Jones-UBS Crude Oil 3 Month Forward Sub-IndexSM
Medium-Term Notes, Series A |
General
• | The Notes are designed for investors who seek a return of 1.625 times the appreciation of the Dow Jones-UBS Crude Oil 3 Month Forward Sub-IndexSM up to a maximum total return on the Notes of 24.375% at maturity. Investors should be willing to forgo interest payments and, if the Index declines by more than 10%, be willing to lose some or all of their principal. |
• | Senior unsecured obligations of Barclays Bank PLC maturing July 1, 2011†. |
• | Minimum denominations of $10,000 and integral multiples of $1,000 in excess thereof. |
• | The Notes priced on June 11, 2010 (the “pricing date”) and are expected to issue on or about June 18, 2010 (the “issue date”). |
Key Terms | Terms used in this pricing supplement, but not defined herein, shall have the meanings ascribed to them in the prospectus supplement. | |
Issuer: | Barclays Bank PLC | |
Reference Asset: | Dow Jones-UBS Crude Oil 3 Month Forward Sub-IndexSM (Bloomberg ticker symbol “DJUBSCL3<Index>”) (the “Index”). For a description of the Index, see the information set forth under “The Index” in this pricing supplement. | |
Upside Leverage Factor: | 1.625 | |
Maximum Return: | 24.375% | |
Payment at Maturity: | If the final level is greater than or equal to the initial level, you will receive a cash payment that provides you with a return per $1,000 principal amount Note equal to the index return multiplied by the upside leverage factor, subject to a maximum return on the Notes of 24.375%. For example, if the index return is 15.00% or more, you will receive the maximum return on the Note of 24.375%, which entitles you to the maximum payment of $1,243.75 for every $1,000 principal amount Note that you hold. Accordingly, if the index return is positive, your payment per $1,000 principal amount Note will be calculated as follows, subject to the maximum return:
$1,000 + [$1,000 × (Index Return × Upside Leverage Factor )]
Your principal is protected against up to a 10% decline of the Index at maturity. If the final level declines from the initial level by up to 10%, you will receive the principal amount of your Notes at maturity.
If the final level declines from the initial level by more than 10%, you will lose 1.1111% of the principal amount of your Notes for every 1% that the Index declines beyond 10%. Accordingly, your payment per $1,000 principal amount Note will be calculated as follows:
$1,000 + [($1,000 × (Index Return + 10%) × 1.1111]
You will lose some or all of your investment at maturity if the final level declines from the initial level by more than 10%. | |
Buffer Percentage: | 10% | |
Downside Leverage Factor: | 1.1111 | |
Index Return: | The performance of the Index from the initial level to the final level, calculated as follows:
Final Level – Initial Level Initial Level | |
Initial Level: | 668.5219, the closing level of the Index on the pricing date. | |
Final Level: | The arithmetic average of the Index closing levels on each of the five averaging dates. | |
Averaging Dates: | June 20, 2011†, June 21, 2011†, June 22, 2011†, June 23, 2011† and June 24, 2011† (the “final averaging date”) | |
Change in Law Redemption Event: | Upon the occurrence of a Change in Law (as defined below) that, in our sole determination, would, or is reasonably likely to: (i) have an adverse effect upon, or otherwise require us or our affiliates to unwind or terminate, in whole or in part, any of the positions, transactions or contractual arrangements pursuant to which we or our affiliates have hedged, individually or on a portfolio basis, our obligations under the Notes; or (ii) restrict our ability, or make it reasonably impracticable, to maintain existing hedging positions, enter into future transactions or contractual arrangements, or to establish or modify positions, to hedge, individually or on a portfolio basis, our obligations under the Notes, we may, but are not obligated to, redeem the Notes in whole (but not in part) in accordance with the provisions set forth herein at the redemption amount on the redemption date. See “Change in Law Redemption Event” in this pricing supplement. | |
Hedging Disruption Redemption Event: | Upon the occurrence of a Hedging Disruption Event (as defined below), we may, but are not obligated to, redeem the Notes in whole (but not in part) at the redemption amount on the redemption date. See “Hedging Disruption Redemption Event” in this pricing supplement. | |
Redemption Date†: | The fifth business day following the date on which we provide written notice to the Depository Trust Company (“DTC”) of our election to redeem the Notes pursuant to a Change in Law Redemption Event or Hedging Disruption Redemption Event (the “Notice Date”). | |
Redemption Amount: | In the case of a Change in Law Redemption Event or a Hedging Disruption Redemption Event, the redemption amount will be equal to an amount determined in good faith in a commercially reasonable manner by the Calculation Agent, in its sole discretion, taking into account the latest available quotations for the Index, the futures contracts comprising the Index and any other information that it deems relevant. | |
Maturity Date: | July 1, 2011† | |
Calculation Agent: | Barclays Bank PLC | |
Scheduled Trading Day: | Any day when the calculation agent is open for business in London and New York. | |
CUSIP/ISIN: | 06740L7E9 and US06740L7E91 |
† | Subject to postponement in the event of a market disruption event and as described under “Reference Assets—Indices—Market Disruption Events for Securities with the Reference Asset Comprised of an Index or Indices of Commodities” in the prospectus supplement. If any averaging date is not a scheduled trading day, then such averaging date will be the next succeeding scheduled trading day, and any subsequent averaging dates will be postponed to occur on the next following scheduled trading days. If the final averaging date is postponed because it or any other averaging date was not a scheduled trading day, then the maturity date will be postponed so that the number of business days between the final averaging date (as postponed) and the maturity date (as postponed) remains the same. |
Investing in the Notes involves a number of risks. See “Risk Factors” beginning on page S-5 of the prospectus supplement, “Risk Factors” beginning on page IS-2 of the index supplement and “Selected Risk Considerations” beginning on page PS-5 of this pricing supplement.
We may use this pricing supplement in the initial sale of Notes. In addition, Barclays Capital Inc. or another of our affiliates may use this pricing supplement in market resale transactions in any Notes after their initial sale. Unless we or our agent informs you otherwise in the confirmation of sale, this pricing supplement is being used in a market resale transaction.
The Notes will not be listed on any U.S. securities exchange or quotation system. Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined that this pricing supplement is truthful or complete. Any representation to the contrary is a criminal offense.
The Notes are not bank deposits and are not insured by the U.S. Federal Deposit Insurance Corporation or any other governmental agency, nor are they obligations of, or guaranteed by, a bank. The Notes are not guaranteed under the Federal Deposit Insurance Corporation’s Temporary Liquidity Guarantee Program.
Price to Public1 |
Agent’s Commission |
Proceeds to Barclays Bank PLC | ||||
Per Note |
100% | 1% | 99% | |||
Total |
$375,000 | $3,750 | $371,250 |
1 | The price to the public for any single purchase by an investor in certain trust accounts, who is not being charged the full selling concession or fee by other dealers of approximately 1%, is 99%. The price to the public for all other purchases of Notes is 100%. |
ADDITIONAL TERMS SPECIFIC TO THE NOTES
You should read this pricing supplement together with the prospectus dated February 10, 2009, as supplemented by the prospectus supplement dated March 1, 2010 and the index supplement dated March 1, 2010 relating to our Global Medium-Term Notes, Series A, of which these Notes are a part. This pricing supplement, together with the documents listed below, contains the terms of the Notes and supersedes 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 under “Risk Factors” in the prospectus supplement and the index supplement, as the Notes 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 Notes.
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):
• | Prospectus dated February 10, 2009: |
http://www.sec.gov/Archives/edgar/data/312070/000119312509023285/dposasr.htm
• | Prospectus Supplement dated March 1, 2010: |
http://www.sec.gov/Archives/edgar/data/312070/000119312510043357/d424b3.htm
• | Index supplement dated March 1, 2010: |
http://www.sec.gov/Archives/edgar/data/312070/000119312510043717/d424b3.htm
Our SEC file number is 1-10257. As used in this pricing supplement, the “Company,” “we,” “us,” or “our” refers to Barclays Bank PLC.
What is the Total Return on the Notes at Maturity Assuming a Range of Performance for the Index?
The following table illustrates the hypothetical total return at maturity on the Notes. The “total return” as used in this pricing supplement is the number, expressed as a percentage, that results from comparing the payment at maturity per $1,000 principal amount Note to $1,000. The hypothetical total returns set forth below are based on the initial level of 668.5219 and a maximum return on the Notes of 24.375%. The hypothetical total returns set forth below are for illustrative purposes only and may not be the actual total returns applicable to a purchaser of the Notes. The numbers appearing in the following table and examples have been rounded for ease of analysis.
Final Level |
Index Return |
Payment at Maturity |
Total Return on the Notes | |||
1,036.2089 |
55.00% | $1,243.75 | 24.38% | |||
969.3568 |
45.00% | $1,243.75 | 24.38% | |||
902.5046 |
35.00% | $1,243.75 | 24.38% | |||
835.6524 |
25.00% | $1,243.75 | 24.38% | |||
768.8002 |
15.00% | $1,243.75 | 24.38% | |||
758.7724 |
13.50% | $1,219.38 | 21.94% | |||
735.3741 |
10.00% | $1,162.50 | 16.25% | |||
718.6610 |
7.50% | $1,121.88 | 12.19% | |||
701.9480 |
5.00% | $1,081.25 | 8.13% | |||
685.2349 |
2.50% | $1,040.63 | 4.06% | |||
668.5219 |
0.00% | $1,000.00 | 0.00% | |||
635.0958 |
-5.00% | $1,000.00 | 0.00% | |||
601.6697 |
-10.00% | $1,000.00 | 0.00% | |||
568.2436 |
-15.00% | $944.44 | -5.56% | |||
534.8175 |
-20.00% | $888.89 | -11.11% | |||
467.9653 |
-30.00% | $777.78 | -22.22% | |||
401.1131 |
-40.00% | $666.67 | -33.33% | |||
334.2610 |
-50.00% | $555.56 | -44.44% | |||
267.4088 |
-60.00% | $444.44 | -55.56% | |||
200.5566 |
-70.00% | $333.33 | -66.67% | |||
133.7044 |
-80.00% | $222.22 | -77.78% | |||
66.8522 |
-90.00% | $111.11 | -88.89% | |||
0.0000 |
-100.00% | $0.00 | -100.00% |
PS–2
Hypothetical Examples of Amounts Payable at Maturity
The following examples illustrate how the total returns set forth in the table above are calculated.
Example 1: The level of the Index increases from an initial level of 668.5219 to a final level of 701.9480.
Because the final level of 701.9480 is greater than the initial level of 668.5219 and the index return of 5.00% multiplied by 1.625 does not exceed the maximum return of 24.375%, the investor receives a payment at maturity of $1,081.25 per $1,000 principal amount Note calculated as follows:
$1,000 + [$1,000 × (5.00% × 1.625)] = $1,081.25
Example 2: The level of the Index decreases from the initial level of 668.5219 to a final level of 635.0958.
Because the final level of 635.0958 is less than the initial level of 668.5219 by not more than the buffer percentage of 10%, the investor will receive a payment at maturity of $1,000 per $1,000 principal amount Note.
Example 3: The level of the Index increases from an initial level of 668.5219 to a final level of 835.6524.
Because the index return of 25.00% multiplied by 1.625 exceeds the maximum return of 24.375%, the investor receives a payment at maturity of $1,243.75 per $1,000 principal amount Note, the maximum payment on the Notes.
Example 4: The level of the Index decreases from the initial level of 668.5219 to a final level of 534.8175.
Because the final level of 534.8175 is less than the initial level of 668.5219 by more than the buffer percentage of 10%, the index return is negative and the investor will receive a payment at maturity of $888.89 per $1,000.00 principal amount Note calculated as follows:
$1,000 + [$1,000 × (-20% + 10%) × 1.1111] = $888.89
Selected Purchase Considerations
• | We May, But Are Not Obligated to, Redeem the Notes Upon the Occurrence of a Change in Law Redemption Event or Hedging Disruption Event—We have the right to redeem or “call” your Notes without your consent upon the occurrence of a Change in Law Redemption Event or a Hedging Disruption Event (both events as described below). |
The commodity futures contracts that underlie the Index are subject to legal and regulatory regimes that may change in the United States and, in some cases, in other countries. For example, the United States Congress is currently considering legislation, and legislation was passed by the House of Representatives in December 2009 and by the Senate in May 2010, intended to limit speculation and increase transparency in the commodity markets and regulate the over-the-counter derivatives markets. There are significant differences between the legislation passed by the House and the Senate, and those differences will need to be reconciled before actual changes in law can be enacted. In addition, the legislation would require the Commodity Futures Trading Commission (the “CFTC”) to adopt rules on a variety of issues and many provisions of the legislation could not become effective until such rules are adopted.
Among other things, the legislation would require that most over-the-counter transactions be executed on organized exchanges or facilities and be cleared through regulated clearing houses, and would require registration of, and impose regulations on, swap dealers and major swap participants. The legislation would also require the CFTC to apply existing rules, or modify its application of such rules, with respect to the establishment of limits on futures positions that are not entered into or maintained for “bona fide” or “legitimate” hedging purposes, as defined in the proposed legislation. Under certain of the legislative proposals, the CFTC would also have the authority to impose limits on the over-the-counter positions. In addition, the CFTC recently issued proposed rules that, if adopted in the form proposed, would establish “hard” position limits on futures on energy commodities and would restrict the availability of hedge exemptions. The proposal requested comments from the public over a 90 day period that ended in April 2010. It is unclear whether the proposed rules will be adopted, and whether they will be modified prior to their adoption. The adoption of the proposed rules by the CFTC or any revised or additional proposals, or legislative action by the Congress, could limit the extent to which entities can enter into transactions in exchange-traded futures contracts. Any such limitations could restrict or prevent our ability to hedge our obligations under the Notes. If they are imposed, those restrictions on effecting transactions in the futures markets could substantially reduce liquidity in the commodity futures contracts that underlie the Index, which could adversely affect the prices of such contracts and, in turn, the market value of the Notes and the amounts payable on the Notes. In addition, other parts of the legislation, by increasing regulation of, and imposing additional costs on, over-the-counter transactions, could reduce trading in the over-the-counter market and therefore in the futures markets, which would further restrict liquidity and adversely affect prices. Any such restrictions could restrict or prevent our ability to hedge our obligations under the Notes. If such restrictions are imposed on market participants, we or our affiliates may be unable to effect, or may be required to unwind, in whole or in part, transactions necessary to hedge our obligations under the Notes, in which case we will have the right, but not the obligation, to redeem your Notes.
If we exercise our right to redeem the Notes upon the occurrence of a Change in Law Redemption Event or Hedging Disruption Event, the payment you receive may be less than the payment that you would have otherwise been entitled to receive at maturity, and you may not be able to reinvest any amounts received on the Redemption Date in a comparable
PS–3
investment. Our right to redeem the Notes upon the occurrence of a Change in Law Redemption Event or Hedging Disruption Event may also adversely impact your ability to sell your Notes, and/or the price at which you may be able to sell your Notes, following the occurrence of such Change in Law Redemption Event or Hedging Disruption Event.
Moreover, even if such legislative, regulatory or other market changes do not result in a Change in Law Redemption Event or Hedging Disruption Event, or we do not exercise our right to redeem the Notes, the restrictions on effecting transactions in the futures markets could substantially reduce liquidity in the contracts underlying the Index, which could adversely affect the prices of such contracts and, in turn, the return on and the value of the Notes.
Our right to redeem the Notes does not mean that you have any right to require us to repay your Notes prior to maturity.
• | Appreciation Potential—The Notes provide the opportunity to enhance returns by multiplying a positive index return by the upside leverage factor, up to the maximum return on the Notes of 24.375%, or $1,243.75 for every $1,000 principal amount Note. Because the Notes are our senior unsecured obligations, payment of any amount at maturity or upon redemption is subject to our ability to pay our obligations as they become due. |
• | Limited Protection Against Loss—Payment at maturity of the principal amount of the Notes is protected against a decline in the final level, as compared to the initial level, of up to 10%. If the final level declines by more than 10%, you will lose an amount equal to 1.1111% of the principal amount of your Notes for every 1% that the Index declines beyond 10%. |
• | Certain U.S. Federal Income Tax Considerations—Some of the tax consequences of your investment in the Notes are summarized below. The discussion below supplements the discussion under “Certain U.S. Federal Income Tax Considerations” in the accompanying prospectus supplement. As described in the prospectus supplement, this section applies to you only if you are a U.S. holder (as defined in the accompanying prospectus supplement) and you hold your Notes 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. |
The United States federal income tax consequences of your investment in the Notes are uncertain and the Internal Revenue Service could assert that the Notes should be taxed in a manner that is different than described below. Pursuant to the terms of the Notes, 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 Notes as a pre-paid cash-settled executory contract with respect to the Index. If your Notes are so treated, you should generally recognize capital gain or loss upon the sale, redemption or maturity of your Notes in an amount equal to the difference between the amount you receive at such time and the amount you paid for your Notes. Such gain or loss should generally be long-term capital gain or loss if you have held your Notes for more than one year.
In the opinion of our special tax counsel, Sullivan & Cromwell LLP, it would be reasonable to treat your Notes in the manner described above. This opinion assumes that the description of the terms of the Notes in this pricing supplement is materially correct.
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 Notes, possibly with retroactive effect. Other alternative treatments for your Notes may also be possible under current law. For example, it is possible that the Internal Revenue Service could assert that Section 1256 of the Internal Revenue Code should apply to your Notes. If Section 1256 were to apply to your Notes, gain or loss recognized with respect to your Notes (or the relevant portion of your Notes) would be treated as 60% long-term capital gain or loss and 40% short-term capital gain or loss, without regard to your holding period in the Notes. You would also be required to mark your Notes (or a portion of your Notes) to market at the end of each year (i.e., recognize gain or loss as if the Notes or the relevant portion of the Notes had been sold for fair market value). Additionally, it is also possible that you could be required to recognize gain or loss each time a contract tracked by the Index rolls.
For a further discussion of the tax treatment of your Notes as well as other possible alternative characterizations, please see the discussion under the heading “Certain U.S. Federal Income Tax Considerations—Certain Notes Treated as Forward Contracts or Executory Contracts” in the accompanying prospectus supplement. You should consult your tax advisor as to the possible alternative treatments in respect of the Notes. For additional, important considerations related to tax risks associated with investing in the Notes, you should also examine the discussion in “Selected Risk Considerations—Taxes”, in this pricing supplement.
Recently Enacted Legislation. Under recently enacted legislation, individuals that own “specified foreign financial assets” with an aggregate value in excess of $50,000 in taxable years beginning after March 18, 2010 will generally be required to file an information report with respect to such assets with their tax returns. “Specified foreign financial assets” include any financial accounts maintained by foreign financial institutions, as well as any of the following (which may include your Notes), 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. Individuals are urged to consult their tax advisors regarding the application of this legislation to their ownership of the Notes.
PS–4
An investment in the Notes involves significant risks. Investing in the Notes is not equivalent to investing directly in the Index or any of the futures contracts comprising the Index. These risks are explained in more detail in the “Risk Factors” sections of the prospectus supplement and the index supplement, including but not limited to the risk factors discussed under the following headings:
• | “Risk Factors—Risks Relating to All Securities”; |
• | “Risk Factors—Additional Risks Relating to Notes Which Pay No Interest”; |
• | “Risk Factors—Additional Risks Relating to Securities with a Maximum Return, Maximum Rate, Ceiling or Cap”; |
• | “Risk Factors—Additional Risks Relating to Notes Which Are Not Fully Principal Protected or Are Partially Protected or Contingently Protected”; |
• | “Risk Factors—Additional Risks Relating to Securities Which We May Call or Redeem (Automatically or Otherwise)”; and |
• | “Risk Factors—Additional Risks Relating to Securities with Reference Assets That Are Commodities, an Index Containing Commodities, Shares or Other Interests in an Exchange-Traded Fund Invested in Commodities or Based in Part on Commodities”. |
In addition to the risks discussed under the headings above, you should consider the following:
• | Your Investment in the Notes May Result in a Loss—The Notes do not guarantee any return of principal. The return on the Notes at maturity or upon redemption is linked to the performance of the Index and will depend on whether, and the extent to which, the index return is positive or negative. Your investment will be exposed on a leveraged basis to any decline in the final level beyond the 10% buffer percentage as compared to the initial level. |
• | Your Maximum Gain on the Notes Is Limited to the Maximum Return—If the final level is greater than the initial level, for each $1,000 principal amount Note, you will receive at maturity $1,000 plus an additional amount that will not exceed a predetermined percentage of the principal amount, regardless of the appreciation in the Index, which may be significant. We refer to this percentage as the maximum return, which is 24.375%. |
• | No Interest Payments—As a holder of the Notes, you will not receive interest payments. |
• | Certain Built-In Costs Are Likely to Adversely Affect the Value of the Notes Prior to Maturity—While the payment at maturity described in this pricing supplement is based on the full principal amount of your Notes, the original issue price of the Notes includes the agent’s commission and the cost of hedging our obligations under the Notes through one or more of our affiliates. As a result, the price, if any, at which Barclays Capital Inc. and other affiliates of Barclays Bank PLC will be willing to purchase Notes from you in secondary market transactions 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 Notes are not designed to be short-term trading instruments. Accordingly, you should be able and willing to hold your Notes to maturity. |
• | Lack of Liquidity—The Notes will not be listed on any securities exchange. Barclays Capital Inc. and other affiliates of Barclays Bank PLC intend to offer to purchase the Notes in the secondary market but are 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 Notes easily. Because other dealers are not likely to make a secondary market for the Notes, the price at which you may be able to trade your Notes 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 Notes. |
• | Credit of Issuer—The Notes 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 Notes, including any principal protection provided at maturity, depends on the ability of Barclays Bank PLC to satisfy its obligations as they come due. In the event Barclays Bank PLC were to default on its obligations, you may not receive any amounts owed to you under the terms of the Notes. |
• | Potential Conflicts—We and our affiliates play a variety of roles in connection with the issuance of the Notes, including acting as calculation agent and hedging our obligations under the Notes. 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 Notes. |
• | Taxes—The U.S. federal income tax treatment of the Notes is uncertain and the Internal Revenue Service could assert that the Notes should be taxed in a manner that is different than described above. As discussed further in the accompanying prospectus supplement, on December 7, 2007, the Internal Revenue Service issued a notice 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 Notes even though you will not receive any payments with respect to the Notes until redemption or maturity and whether all or part of the gain you may recognize upon the sale, redemption or maturity of an instrument such as the Notes could be treated as ordinary income. The outcome of this process is uncertain and could apply on a retroactive basis. You should consult your tax advisor as to the possible alternative treatments in respect of the Notes. |
PS–5
• | Many Economic and Market Factors Will Impact the Value of the Notes—In addition to the level of the Index on any day, the value of the Notes will be affected by a number of economic and market factors that may either offset or magnify each other, including: |
• | the expected volatility of the Index; |
• | the time to maturity of the Notes; |
• | interest rates in the market generally; |
• | a variety of economic, financial, political, regulatory or judicial events; |
• | our creditworthiness, including actual or anticipated downgrades in our credit ratings |
• | Prices of Commodities are Highly Volatile and May Change Unpredictably—Commodities prices are highly volatile and, in many sectors, experienced in the months following September 2008 unprecedented historical volatility. Commodity prices are affected by numerous factors including: changes in supply and demand relationships (whether actual, perceived, anticipated, unanticipated or unrealized); weather; agriculture; trade; fiscal, monetary and exchange control programs; domestic and foreign political and economic events and policies; disease; pestilence; technological developments; changes in interest rates, whether through governmental action or market movements; and monetary and other governmental policies, action and inaction. Those events tend to affect prices worldwide, regardless of the location of the event. Market expectations about these events and speculative activity also cause prices to fluctuate. These factors may adversely affect the performance of the Index or its components and, as a result, the market value of the Notes, and the amount you will receive at maturity or upon redemption. |
• | Future Prices of the Components of the Index That are Different Relative to Their Current Prices May Result in a Lower Level for the Index on the Averaging Dates—The Index is composed of commodity futures contracts rather than physical commodities. Unlike equities, which typically entitle the holder to a continuing stake in a corporation, commodity futures contracts normally specify a certain date for delivery of the underlying physical commodity. As the exchange-traded futures contracts that comprise the Index approach expiration, they are replaced by similar contracts that have a later expiration. Thus, for example, a futures contract purchased and held in August may specify an October expiration. As time passes, the contract expiring in October may be replaced by a contract for delivery in November. This process is referred to as “rolling”. If the market for these contracts is (putting aside other considerations) in “backwardation”, which means that the prices are lower in the distant delivery months than in the nearer delivery months, the sale of the October contract would take place at a price that is higher than the price of the November contract, thereby creating a “roll yield”. The actual realization of a potential roll yield will be dependent upon the level of the related spot price relative to the unwind price of the commodity futures contract at the time of sale of the contract. While many of the contracts included in the Index have historically exhibited consistent periods of backwardation, backwardation will most likely not exist at all times. Moreover, certain of the commodities reflected in the Index have historically traded in “contango” markets. Contango markets are those in which the prices of contracts are higher in the distant delivery months than in the nearer delivery months. The absence of backwardation in the commodity markets could result in negative “roll yields”, which could adversely affect the level of the Index and, accordingly, and the payment you receive at maturity or upon redemption. |
• | Suspension or Disruptions of Market Trading in Commodities and Related Futures May Adversely Affect the Value of the Notes—The commodity futures markets are subject to temporary distortions or other disruptions due to various factors, including the lack of liquidity in the markets, the participation of speculators and government regulation and intervention. In addition, U.S. futures exchanges and some foreign exchanges have regulations that limit the amount of fluctuation in some futures contract prices that may occur during a single business day. These limits are generally referred to as “daily price fluctuation limits” and the maximum or minimum price of a contract on any given day as a result of these limits is referred to as a “limit price”. Once the limit price has been reached in a particular contract, no trades may be made at a price beyond the limit, or trading may be limited for a set period of time. Limit prices have the effect of precluding trading in a particular contract or forcing the liquidation of contracts at potentially disadvantageous times or prices. These circumstances could adversely affect the value of the Index, therefore, the value of the Notes. |
• | The Notes May Be Subject to Certain Risks Specific to Crude Oil as a Commodity—Crude oil is an energy-related commodity. Consequently, in addition to factors affecting commodities generally that are described above, the Index may be subject to a number of additional factors specific to energy-related commodities, and in particular crude oil, that might cause price volatility. These may include, among others: |
• | changes in the level of industrial and commercial activity with high levels of energy demand; |
• | disruptions in the supply chain or in the production or supply of other energy sources; |
• | price changes in alternative sources of energy; |
• | adjustments to inventory; |
• | variations in production and shipping costs; |
• | costs associated with regulatory compliance, including environmental regulations; and |
• | changes in industrial, government and consumer demand, both in individual consuming nations and internationally. |
These factors interrelate in complex ways, and the effect of one factor on the level of the Index, and the market value of the Notes, may offset or enhance the effect of another factor.
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Change in Law Redemption Event
Upon the occurrence of a Change in Law that, in our sole determination, would, or is reasonably likely to: (i) have an adverse effect upon, or otherwise require us or our affiliates to unwind or terminate, in whole or in part, any of the positions, transactions or contractual arrangements pursuant to which we or our affiliates have hedged, individually or on a portfolio basis, our obligations under the Notes; or (ii) restrict our ability, or make it reasonably impracticable, to maintain existing hedging positions, enter into future transactions or contractual arrangements, or to establish or modify positions, to hedge, individually or on a portfolio basis, our obligations under the Notes, we may, but are not obligated to, redeem the Notes in whole (but not in part) in accordance with the provisions set forth herein.
For purposes of the above, “Change in Law” means (i) the adoption of, or change in, any applicable law, rule, regulation, or order by any court, tribunal, regulatory authority or exchange, or (ii) the promulgation or withdrawal of, or any change in, the interpretation by any court, tribunal, regulatory authority or exchange, or the issuance, revocation or modification of any applicable law, rule, regulation, order, exemption, position limit or “no-action” position of any regulatory authority or exchange, with competent jurisdiction of any applicable law, rule or regulation, interpretation, order or position occurring, in each case as set forth in (i) and (ii) above, after the pricing date. For the avoidance of doubt, if a Change in Law becomes effective only after a specified transition period, the occurrence of a Change in Law is not the date on which such Change in Law becomes effective but rather the date on which the Change in Law was officially adopted or enacted by the relevant body.
Hedging Disruption Redemption Event
We may, but are not obligated to, redeem the Notes in whole (but not in part) upon the occurrence of a Hedging Disruption Event. A “Hedging Disruption Event” means that we determine that we or our affiliates are unable or will become unable, after using commercially reasonable efforts, to either: (a) acquire, establish, re-establish, substitute, maintain, unwind or dispose of any (i) positions or contracts in securities, options, futures, derivatives or foreign exchange, (ii) loans of stock or other securities or (iii) (without limiting the generality of the foregoing) any other instruments or arrangements, in each case of (i) through (iii), the purpose of which is to hedge, individually or on a portfolio basis, our obligations under the Notes (each, a “Hedge Position” and collectively, the “Hedge Positions”), including, without limitation, where such Hedge Positions would contribute to the breach of applicable position limits set by any regulatory or self-regulatory body, including any exchange or trading facility, whether on a standalone basis or as a result of any adjustment(s) to the commodity exposure incurred by us under the Notes; or (b) freely realize, recover, receive, repatriate, remit or transfer the proceeds of the Hedge Positions or the Notes.
Redemption Notice
If we elect to redeem the Notes following a Change in Law Redemption Event or a Hedging Disruption Event, we will deliver written notice as promptly as possible of such election to redeem to the Depository Trust Company (“DTC”) and to The Bank of New York Mellon, the trustee under the Senior Debt Indenture dated September 16, 2004 (the “Trustee”) (the date of such delivery being the “Notice Date”). In this scenario, the final valuation date will be deemed to be the Notice Date, and the Notes will be redeemed on the fifth business day following such deemed final valuation date, subject to market disruption events, at an amount equal to the redemption amount.
The Index
The Dow Jones-UBS Crude Oil 3 Month Forward Sub-IndexSM
The Index is a single-component sub-index version of the Dow Jones-UBS Commodity Index 3 Month ForwardSM that is designed to be a benchmark for crude oil as an asset class. It is composed of the futures contract on crude oil that is included or eligible to be included in the Dow Jones-UBS Commodity Index 3 Month ForwardSM and is intended to reflect the returns that are potentially available through an unleveraged investment in that contract.
The Index is calculated using the same methodology as the Dow Jones-UBS Commodity Index 3 Month ForwardSM but with reference only to the contract included in the Index (which, for purposes of the calculation, has a weighting of 100%). The Index is reported by Bloomberg under the ticker symbol “DJUBSCL3<Index>”.
The Dow Jones-UBS Commodity Index 3 Month Forward IndexSM
CME Group Index Services LLC in conjunction with UBS Securities LLC calculates forward month versions of the Dow Jones-UBS Commodity IndexSM, which index is described under “Commodity Indices—the Dow Jones-UBS Commodity IndexSM” in the index supplement. The Dow Jones-UBS Commodity Index 3 Month ForwardSM tracks exposure to longer-dated commodity futures contracts. The Dow Jones-UBS Commodity Index 3 Month ForwardSM follows the methodology of the Dow Jones-UBS Commodity IndexSM as described in the index supplement, except that the futures contracts used for calculating the Dow Jones-UBS Commodity
PS–7
Index 3 Month ForwardSM are advanced, as compared to the Dow Jones-UBS Commodity IndexSM, such that the delivery months for the reference contracts are three months later than those of the corresponding reference contracts used for the Dow Jones-UBS Commodity IndexSM. The Dow Jones-UBS Commodity Index 3 Month Forward SM is reported by Bloomberg under the ticker symbol “DJUBSF3 <Index>”.
*According to publicly available information, as of March 18, 2010, CME Group Inc. (Nasdaq: CME) and Dow Jones & Company announced the launch of the new joint venture company, CME Group Index Services LLC. CME Group Inc. has a 90 percent ownership interest and Dow Jones & Company has a 10 percent ownership interest in the new company.
CME Group Index Services LLC will be responsible for calculating the Index. More information relating to the joint venture will be available publicly at a later date.
License Agreement
We entered into a non-exclusive license agreement with Dow Jones & Company Inc. and UBS Securities LLC (“UBS Securities”), whereby we, in exchange for a fee, are permitted to use the Dow Jones-UBS Crude Oil 3 Month Forward Sub-IndexSM. The rights and obligations of Dow Jones & Company, Inc. under the non-exclusive license agreement have been assigned to CME Group Index Services LLC. The Dow Jones-UBS Crude Oil 3 Month Forward Sub-IndexSM is published by CME Group Index Services LLC (“CME Indexes”) in connection with certain securities, including the Notes. We are not affiliated with Dow Jones & Company Inc. or UBS AG (“UBS AG”); the only relationship between Dow Jones & Company Inc. and UBS AG, on the one hand, and us is any licensing of the use of their indices and trademarks or service marks relating to them.
Pursuant to licensing arrangements with Dow Jones, UBS AG and CME Group Index Services LLC, the following language must be set forth herein:
The Dow Jones-UBS Commodity IndexesSM are a joint product of Dow Jones Indexes, a licensed trademark of CME Group Index Services LLC (“CME Indexes”), and UBS Securities LLC (“UBS Securities”), and have been licensed for use. “Dow Jones®”, “DJ”, “Dow Jones Indexes”, “UBS”, “Dow Jones-UBS Commodity IndexSM,” “Dow Jones-UBS Crude Oil 3 Month Forward Sub-IndexSM” and “DJ-UBSCISM” are service marks of Dow Jones Trademark Holdings, LLC (“Dow Jones”) and UBS AG (“UBS AG”), as the case may be, have been licensed to CME Group Index Services LLC (“CME Indexes”) and have been sublicensed for use for certain purposes by Barclays Bank PLC.
The Notes are not sponsored, endorsed, sold or promoted by Dow Jones, UBS AG, UBS Securities LLC (“UBS Securities”), CME Indexes or any of their subsidiaries or affiliates. None of Dow Jones, UBS AG, UBS Securities, CME Indexes or any of their subsidiaries or affiliates makes any representation or warranty, express or implied, to the owners of or counterparts to the Notes or any member of the public regarding the advisability of investing in securities or commodities generally or in the Notes particularly. The only relationship of Dow Jones, UBS AG, UBS Securities, CME Indexes or any of their subsidiaries or affiliates to Barclays Bank PLC is the licensing of certain trademarks, trade names and service marks and of the Dow Jones-UBS Crude Oil 3 Month Forward Sub-IndexSM, which is determined, composed and calculated by CME Indexes in conjunction with UBS Securities without regard to Barclays Bank PLC or the Notes. Dow Jones, UBS Securities and CME Indexes have no obligation to take the needs of Barclays Bank PLC or the owners of the Notes into consideration in determining, composing or calculating the Dow Jones-UBS Crude Oil 3 Month Forward Sub-IndexSM. None of Dow Jones, UBS AG, UBS Securities, CME Indexes or any of their respective subsidiaries or affiliates is responsible for or has participated in the determination of the timing of, prices at, or quantities of the Notes to be issued or in the determination or calculation of the equation by which the Notes are to be converted into cash. None of Dow Jones, UBS AG, UBS Securities, CME Indexes or any of their subsidiaries or affiliates shall have any obligation or liability, including, without limitation, to Notes customers, in connection with the administration, marketing or trading of the Notes. Notwithstanding the foregoing, UBS AG, UBS Securities, CME Group Inc. and their respective subsidiaries and affiliates may independently issue and/or sponsor financial products unrelated to the Notes currently being issued by Barclays Bank PLC, but which may be similar to and competitive with the Notes. In addition, UBS AG, UBS Securities, CME Group Inc. and their subsidiaries and affiliates actively trade commodities, commodity indexes and commodity futures (including the Dow Jones-UBS Commodity IndexSM and Dow Jones-UBS Commodity Index Total Return SM), as well as swaps, options and derivatives which are linked to the performance of such commodities, commodity indexes and commodity futures. It is possible that this trading activity will affect the value of the Dow Jones-UBS Crude Oil 3 Month Forward Sub-IndexSM and the Notes.
Purchasers of the Notes should not conclude that the inclusion of a futures contract in the Dow Jones-UBS Crude Oil 3 Month Forward Sub-IndexSM is any form of investment recommendation of the futures contract or the underlying exchange-traded physical commodity by Dow Jones, UBS AG, UBS Securities, CME Indexes or any of their subsidiaries or affiliates. The information in the pricing supplement regarding the Dow Jones-UBS Commodity IndexSM components has been derived solely from publicly available documents. None of Dow Jones, UBS AG, UBS Securities, CME Indexes or any of their subsidiaries or affiliates has made any due diligence inquiries with respect to the Dow Jones-UBS Commodity IndexSM components in connection with the Notes. None of Dow Jones, UBS AG, UBS Securities, CME Indexes or any of their subsidiaries or affiliates makes any representation that these publicly available documents or any other publicly available information regarding the Dow Jones-UBS Commodity IndexSM components, including without limitation a description of factors that affect the prices of such components, are accurate or complete.
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NONE OF DOW JONES, UBS AG, UBS SECURITIES, CME INDEXES OR ANY OF THEIR SUBSIDIARIES OR AFFILIATES GUARANTEES THE ACCURACY AND/OR THE COMPLETENESS OF THE DOW JONES-UBS COMMODITY INDEXSM, THE DOW JONES-UBS CRUDE OIL 3 MONTH FORWARD SUB-INDEXSM OR ANY DATA RELATED THERETO AND NONE OF DOW JONES, UBS AG, UBS SECURITIES, CME INDEXES OR ANY OF THEIR SUBSIDIARIES OR AFFILIATES SHALL HAVE ANY LIABILITY FOR ANY ERRORS, OMISSIONS OR INTERRUPTIONS THEREIN. NONE OF DOW JONES, UBS AG, UBS SECURITIES, CME INDEXES OR ANY OF THEIR SUBSIDIARIES OR AFFILIATES MAKES ANY WARRANTY, EXPRESS OR IMPLIED, AS TO RESULTS TO BE OBTAINED BY BARCLAYS BANK PLC, OWNERS OF THE NOTES OR ANY OTHER PERSON OR ENTITY FROM THE USE OF THE DOW JONES-UBS COMMODITY INDEXSM, THE DOW JONES-UBS CRUDE OIL 3 MONTH FORWARD SUB-INDEXSM OR ANY DATA RELATED THERETO. NONE OF DOW JONES, UBS AG, UBS SECURITIES, CME INDEXES OR ANY OF THEIR SUBSIDIARIES OR AFFILIATES MAKES ANY EXPRESS OR IMPLIED WARRANTIES AND EXPRESSLY DISCLAIMS ALL WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE WITH RESPECT TO THE DOW JONES-UBS COMMODITY INDEXSM, THE DOW JONES-UBS CRUDE OIL 3 MONTH FORWARD SUB-INDEXSM OR ANY DATA RELATED THERETO. WITHOUT LIMITING ANY OF THE FOREGOING, IN NO EVENT SHALL DOW JONES, UBS AG, UBS SECURITIES, CME INDEXES OR ANY OF THEIR SUBSIDIARIES OR AFFILIATES HAVE ANY LIABILITY FOR ANY LOST PROFITS OR INDIRECT, PUNITIVE, SPECIAL OR CONSEQUENTIAL DAMAGES OR LOSSES, EVEN IF NOTIFIED OF THE POSSIBILITY THEREOF. THERE ARE NO THIRD PARTY BENEFICIARIES OF ANY AGREEMENTS OR ARRANGEMENTS AMONG UBS SECURITIES, CME INDEXES AND BARCLAYS BANK PLC, OTHER THAN UBS AG AND THE LICENSORS OF CME INDEXES.
Historical Information
The following graph sets forth the historical performance of the Index based on the daily Index closing level from January 7, 2002 through June 11, 2010. The Index closing level on June 11, 2010 was 668.5219.
We obtained the Index closing levels below from Bloomberg, L.P. We make no representation or warranty as to the accuracy or completeness of the information obtained from Bloomberg, L.P. The Index was first published on September 27, 2008. Therefore, the historical information for the period from January 7, 2002 until September 27, 2008 is hypothetical and provided as an illustration of how the Index would have performed during such period had the index sponsors calculated the Index using the current index methodology. This back-tested performance does not represent actual performance and should not be interpreted as an indication of actual performance. The historical levels of the Index should not be taken as an indication of future performance, and no assurance can be given as to the Index closing level on any of the averaging dates. We cannot give you assurance that the performance of the Index will result in the return of any of your initial investment.
PAST PERFORMANCE IS NOT INDICATIVE OF FUTURE RESULTS.
PS–9
Certain Employee Retirement Income Security Act Considerations
Your purchase of a Note in an Individual Retirement Account (an “IRA”), will be deemed to be a representation and warranty by you, as a fiduciary of the IRA and also on behalf of the IRA, that (i) neither the issuer, the placement agent nor any of their respective affiliates has or exercises any discretionary authority or control or acts in a fiduciary capacity with respect to the IRA assets used to purchase the Note or renders investment advice (within the meaning of Section 3(21)(A)(ii) of the Employee Retirement Income Security Act (“ERISA”)) with respect to any such IRA assets and (ii) in connection with the purchase of the Note, the IRA will pay no more than “adequate consideration” (within the meaning of Section 408(b)(17) of ERISA) and in connection with any redemption of the Note pursuant to its terms will receive at least adequate consideration, and, in making the foregoing representations and warranties, you have (x) applied sound business principles in determining whether fair market value will be paid, and (y) made such determination acting in good faith.
Supplemental Plan of Distribution
JPMorgan Chase Bank, N.A. and JPMorgan Securities Inc. will act as placement agents for the Notes and will receive a fee from the Company that would not exceed $10 per $1,000 principal amount Note.
We expect that delivery of the Notes will be made against payment for the Notes on or about the issue date indicated on the cover of this pricing supplement, which is the 5th business day following the expected pricing date (this settlement cycle being referred to as “T+5”). See “Plan of Distribution” in the prospectus supplement.
PS–10