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Preliminary Pricing Supplement
(To the Prospectus dated August 31, 2010,
the Prospectus Supplement dated May 27, 2011
and Index Supplement dated May 31, 2011)
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Filed Pursuant to Rule 424(b)(2)
Registration No. 333-169119
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The information in this preliminary pricing supplement is not complete and may be changed. This
preliminary pricing supplement and the accompanying prospectus, prospectus supplement and index supplement do not constitute an offer to sell these securities, and we are not soliciting an offer to buy these securities in any state
where the offer or sale is not permitted.
Subject to Completion
Preliminary Pricing Supplement dated February 11, 2013
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$[
]
AutoCallable Yield Notes due February 20,
2014
Linked to the Lesser Performing Reference Asset of the Russell
2000
®
Index and Market Vectors
®
Gold Miners ETF
Global Medium-Term Notes, Series A, No.
E-7751
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Terms used in this preliminary pricing supplement, but not defined herein, shall have the meanings ascribed to them in
the prospectus supplement.
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Issuer:
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Barclays Bank PLC
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Initial Valuation Date:
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February 20, 2013
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Issue Date:
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February 25, 2013
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Final Valuation Date*:
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February 14, 2014 (or if such date is not a Reference Asset Business Day, the next following Reference Asset Business Day)
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Maturity Date*:
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February 20, 2014 (or, if the Final Valuation Date is postponed, the third Business Day following the Final Valuation Date as postponed)
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Reference Assets:
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The Russell
2000
®
Index (the Index) (Bloomberg ticker symbol RTY <Index>) and the Market
Vectors
®
Gold Miners ETF (the ETF) (Bloomberg ticker symbol: GDX UP
<Equity>).
The Index and the ETF are each referred to in this
preliminary pricing supplement as a Reference Asset and collectively as the Reference Assets.
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Denominations:
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Minimum denomination of $1,000, and integral multiples of $1,000 in excess thereof
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Interest Rate:
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[8.00% - 10.00%] per annum**
** The actual interest rate per annum will be set on the Initial Valuation
Date and will not be less than 8.00% per annum.
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Interest Payment Dates:
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Monthly, payable in arrears on each of the following days: March 25, 2013, April 25, 2013, May 23, 2013, June 25, 2013, July 25, 2013, August 23, 2013, September 25, 2013,
October 24, 2013, November 25, 2013, December 26, 2013, January 24, 2014 and the Maturity Date.
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Day Count Convention:
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30/360
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Tax Allocation of the Monthly Payments on the Notes:
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Deposit Income: [
]% of the amount of the monthly interest payment
Put Premium: [
]% of the amount of
the monthly interest payment
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Automatic Call:
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On any Call Valuation Date, if the Closing Value of each Reference Asset on such Call Valuation Date is greater than or equal to its respective Initial Value, the Notes will be
automatically called on the applicable Early Redemption Date and you will receive on the Early Redemption Date a cash payment equal to 100% of the principal amount of your Notes together with any accrued but unpaid interest to, but excluding, the
relevant scheduled Interest Payment Date immediately following such Call Valuation Date.
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Call Valuation Dates:
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May 23, 2013, August 23, 2013, November 25, 2013; provided, however, that if (i) a day that would otherwise be a Call Valuation Date (the scheduled date) is not a
Reference Asset Business Day or (ii) a Market Disruption Event occurs or is continuing with respect to either Reference Asset on a scheduled date, the relevant Call Valuation Date shall be the first Reference Asset Business Day preceding the
scheduled date on which no Market Disruption Event occurs or is continuing with respect to either Reference Asset.
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Reference Asset Business Day:
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A day that is both (i) an Index Business Day with respect to the Index and (ii) a Trading Day with respect to the ETF.
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Early Redemption Date:
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With respect to a Call Valuation Date, the Interest Payment Date immediately following such Call Valuation Date.
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Business Day Convention:
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Following; Unadjusted
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Business Days:
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New York and London
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Payment at Maturity:
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If your Notes are not called pursuant to the Automatic Call provisions prior to maturity, you will receive (subject to
our credit risk) on the Maturity Date, in addition to the final interest payment, a cash payment determined as follows:
If a Knock-In Event does not occur, $1,000 per $1,000
principal amount Note;
If a Knock-In Event occurs and the Reference Asset
Return of the Lesser Performing Reference Asset is equal to or greater than 0%, $1,000 per $1,000 principal amount Note;
If a Knock-In Event occurs and the Reference Asset
Return of the Lesser Performing Reference Asset is less than 0%, an amount calculated per $1,000 principal amount Note as follows:
$1,000 + [$1,000 × Reference Asset Return of the Lesser Performing Reference Asset]
You may lose some or all of your principal if you
invest in the Notes. If a Knock-In Event occurs and the Reference Asset Return of the Lesser Performing Reference Asset is less than 0%, your Notes will be fully exposed to any decline of the Lesser Performing Reference Asset from its Initial Value
to its Final Value and you will lose some or all of your principal. If a Knock-In Event occurs and the Reference Asset Return of the Lesser Performing Reference Asset is less than 0%, the payment at maturity will be based solely on the Reference
Asset Return of the Lesser Performing Reference Asset and the performance of the Reference Asset that is not the Lesser Performing Reference Asset will not be taken into account for purposes of calculating any payment at maturity under the Notes.
Any payment on the Notes, including any payment due at maturity, is subject to the creditworthiness of the Issuer and is not guaranteed by any third party. For a description of risks with respect to the ability of Barclays Bank PLC to satisfy its
obligations as they come due, see Credit of Issuer in this preliminary pricing supplement.
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Knock-In Event:
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A Knock-In Event occurs if, as determined by the Calculation Agent, the Closing Value of either Reference Asset is less than the
Knock-In Barrier applicable to such Reference Asset on any Index Business Day or Trading Day, as applicable to such Reference Asset, during the Observation Period; provided, however, that, if a Market Disruption Event occurs with respect to a
Reference Asset on an Index Business Day or Trading Day, as applicable to such Reference Asset, during the Observation Period, the Closing Value of such Reference Asset on such Index Business Day or Trading Day, as the case may be, will be
disregarded for purposes of determining whether a Knock-In Event occurs.
For a description of Market Disruption Events that are applicable to the Index, please see Reference AssetsIndicesMarket Disruption
Events for Securities with the Reference Asset Comprised of an Index or Indices of Equity Securities in the accompanying prospectus supplement.
For a description of Market Disruption Events that are applicable to the ETF, please see Reference AssetsExchange-Traded FundsMarket
Disruption Events for Securities with the Reference Asset Comprised of Shares or Other Interests in an Exchange-Traded Fund or Exchange-Traded Funds Comprised of Equity Securities in the accompanying prospectus supplement.
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Closing Value:
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With respect to the Index, for any applicable Index Business Day, the closing value of the Index published at the regular weekday
close of trading on that Index Business Day as displayed on Bloomberg Professional
®
service page RTY
<Index> or any successor page on Bloomberg Professional
®
service or any successor service, as
applicable.
With respect to the ETF, for any Trading Day, the official
closing price per share of the ETF on that Trading Day as determined by the Calculation Agent and displayed on Bloomberg Professional
®
service page GDX UP <Equity> or any successor page on Bloomberg Professional
®
service or any successor service, as applicable.
In certain circumstances, the Closing Value of a Reference Asset will be based on the alternate calculation of the Reference Asset as described in
Reference AssetsAdjustments Relating to Securities with the Reference Asset Comprised of an Index or Indices or Reference AssetAdjustments Relating to Securities with the Reference Asset Comprised of an Exchange-Traded
Fund or Exchange-Traded Funds, as applicable, in the accompanying prospectus supplement.
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Knock-In Barrier:
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With respect to the Index, [
], the Initial Value of the Index multiplied by 70%,
rounded to the nearest hundredth.
With respect to the ETF, $[
], the Initial Value of the ETF multiplied by 70%, rounded to the nearest hundredth.
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Observation Period:
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The period from but excluding the Initial Valuation Date to and including the Final Valuation Date. If the scheduled Final Valuation Date is postponed, the Observation Period
will be extended to, and include, the Final Valuation Date as postponed.
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Index Business Day:
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With respect to the Index, a day, as determined by the Calculation Agent, on which each of the relevant exchanges on which each Index component is traded is scheduled to be open
for trading and trading is generally conducted on each such relevant exchange.
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Trading Day:
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With respect to the ETF, a day, as determined by the Calculation Agent, on which the primary exchange or market of trading for shares or other interests in the ETF or the shares
of any successor fund is scheduled to be open for trading and trading is generally conducted on such market or exchange.
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Lesser Performing Reference Asset:
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The Reference Asset with the lower Reference Asset Return, as calculated in the manner set forth below.
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Reference Asset Return:
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With respect to a Reference Asset, the performance of such Reference Asset from its Initial Value to its Final Value, calculated as
follows:
Final Value Initial Value
Initial Value
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Initial Value:
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With respect to the Index, [
]
,
the Closing Value of the Index on the
Initial Valuation Date.
With respect to the ETF, $[
]
,
the Closing Value of the ETF on the Initial Valuation Date.
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Final Value:
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With respect to a Reference Asset, the Closing Value of such Reference Asset on the Final Valuation Date.
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Calculation Agent:
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Barclays Bank PLC
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CUSIP/ISIN:
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06741TNW3 and US06741TNW35
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*
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Subject to postponement in the event of a market disruption event with respect to either Reference Asset, as described under Selected Purchase
ConsiderationsMarket Disruption Events in this preliminary pricing supplement
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Investing in the Notes
involves a number of risks. See Risk Factors beginning on page S-6 of the prospectus supplement and
Selected Risk Considerations
beginning on page PPS-8 of this preliminary pricing supplement.
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 preliminary pricing supplement is truthful or complete. Any representation to the contrary is a criminal offense.
The Notes constitute our direct, unconditional, unsecured and unsubordinated obligations and are not deposit liabilities of Barclays Bank PLC and are
not insured by the U.S. Federal Deposit Insurance Corporation or any other governmental agency of the United States, the United Kingdom or any other jurisdiction.
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Price to Public
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Agents Commission
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Proceeds to Barclays Bank PLC
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Per Note
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100%
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2.35%
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97.65%
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Total
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$
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$
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$
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Barclays Capital Inc. will receive commissions from the Issuer equal to 2.35% of the principal amount of the Notes, or $23.50 per $1,000 principal amount, and may
retain all or a portion of these commissions or use all or a portion of these commissions to pay selling concessions or fees to other dealers. Accordingly, the percentage and total proceeds to Issuer listed herein is the minimum amount of proceeds
that Issuer receives.
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You may revoke your offer to purchase the Notes at any time prior to the pricing as described on the
cover of this preliminary pricing supplement. We reserve the right to change the terms of, or reject any offer to purchase the Notes prior to their issuance. In the event of any changes to the terms of the Notes, 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 NOTES
You should read this preliminary pricing supplement
together with the prospectus dated August 31, 2010, as supplemented by the prospectus supplement dated May 27, 2011 and the index supplement dated May 31, 2011 relating to our Global Medium-Term Notes, Series A, of which these Notes
are a part. This preliminary 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):
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Prospectus dated August 31, 2010:
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http://www.sec.gov/Archives/edgar/data/312070/000119312510201448/df3asr.htm
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Prospectus Supplement dated May 27, 2011:
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http://www.sec.gov/Archives/edgar/data/312070/000119312511152766/d424b3.htm
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Index Supplement dated May 31, 2011:
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http://www.sec.gov/Archives/edgar/data/312070/000119312511154632/d424b3.htm
Our SEC file number is 1-10257. As used in this preliminary pricing supplement, the Company, we, us, or
our refers to Barclays Bank PLC.
Hypothetical Payment at Maturity Calculations
The following steps illustrate the hypothetical payment at maturity calculations. The hypothetical payment at maturity calculations set forth below are
for illustrative purposes only and may not be the actual payment at maturity applicable to a purchaser of the Notes. The numbers appearing in the following table have been rounded for ease of analysis. Note that, for purposes of the hypothetical
payment at maturity calculations set forth below, we are assuming that (i) the Initial Value of the Index is 911.26, (ii) the Initial Value of the ETF is $42.54, (iii) the Knock-In Barrier with respect to the Index is 637.90 (the
Initial Value of the Index multiplied by 70.00%, rounded to the nearest hundredth), (iv) the Knock-In Barrier with respect to the ETF is $29.78 (the Initial Value of the ETF multiplied by 70.00%, rounded to the nearest hundredth), (v) no
Market Disruption Event occurs with respect to either Reference Asset during the Observation Period, and (vi) the Notes are not called prior to maturity pursuant to the Automatic Call provisions as described above. The calculations
set forth below do not take into account any tax consequences from investing in the Notes.
Step 1: Determine Whether a Knock-In Event
Occurs.
A Knock-In Event occurs if, as determined by the Calculation Agent, any of the following events occur: (i) the Closing Level
of the Index on any Index Business Day with respect to the Index during the Observation Period is less than its Knock-In Barrier (i.e., 637.90, given the assumed Initial Level set forth above)
or
(ii) the Closing Value of the ETF
on any Trading Day during the Observation Period is less than its Knock-In Barrier (i.e., $29.78, given the assumed Initial Value set forth above). If a Knock-In Event occurs, the payment at maturity will depend on whether the Reference Asset Return
of the Lesser Performing Reference Asset is less than 0%, as described below.
If a Knock-In Event does not occur, you will receive, in
addition to the final interest payment, a payment at maturity equal to the principal amount of your Notes.
PPS-2
Step 2: Determine the Reference Asset Return of the Lesser Performing Reference Asset.
To determine the Reference Asset Return of the Lesser Performing Reference Asset, the Calculation Agent will first calculate the Reference Asset Return of
each Reference Asset and determine which one is lower. The Reference Asset with the lower Reference Asset Return will be the Lesser Performing Reference Asset and its Reference Asset Return will be the Reference Asset Return of the Lesser Performing
Reference Asset. The Reference Asset Return of a Reference Asset is calculated by the Calculation Agent equal to the performance of such Reference Asset from its Initial Value to its Final Value, calculated as follows:
Final Value Initial Value
Initial Value
Step 3: Calculate the Payment at Maturity.
If a Knock-In Event occurs, you will receive a payment at maturity equal to the principal amount of your Notes only if the Reference Asset Return of the
Lesser Performing Reference Asset, determined by the Calculation Agent as described above, is equal to or greater than 0%.
If a Knock-In
Event occurs and the Reference Asset Return of the Lesser Performing Reference Asset is less than 0%, you will receive a payment at maturity that is less, and possibly significantly less, than the principal amount of your Notes, calculated by the
Calculation Agent as the sum of the (i) principal amount of your Notes, plus (ii) product of (a) principal amount of your Notes multiplied by (b) the Reference Asset Return of the Lesser Performing Reference Asset. The following
table illustrates the hypothetical payments at maturity if a Knock-In Event occurs, assuming a range of performances for the Reference Assets:
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Index
Final Value
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ETF
Final Value
($)
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Reference
Asset Return of
the Index
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Reference
Asset Return
of the ETF
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Reference Asset
Return of The
Lesser Performing
Reference Asset
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Payment at
Maturity*
(Not including any
interest payment)
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1,868.14
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85.08
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105.00%
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100.00%
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100.00%
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$1,000
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1,731.45
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82.95
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90.00%
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95.00%
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90.00%
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$1,000
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1,685.89
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76.57
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85.00%
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80.00%
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80.00%
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$1,000
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1,549.19
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74.45
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70.00%
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75.00%
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70.00%
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$1,000
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1,503.63
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68.06
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65.00%
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60.00%
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60.00%
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$1,000
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1,366.94
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65.94
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50.00%
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55.00%
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50.00%
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$1,000
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1,321.37
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59.56
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45.00%
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40.00%
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40.00%
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$1,000
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1,184.68
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57.43
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30.00%
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35.00%
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30.00%
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$1,000
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1,139.11
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51.05
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25.00%
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20.00%
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20.00%
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$1,000
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1,002.42
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47.64
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10.00%
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12.00%
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10.00%
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$1,000
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911.29
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42.54
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0.00%
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0.00%
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0.00%
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$1,000
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1,002.42
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40.41
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10.00%
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-5.00%
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-5.00%
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$950.00
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820.16
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40.41
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-10.00%
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-5.00%
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-10.00%
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$900.00
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929.52
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34.03
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2.00%
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-20.00%
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-20.00%
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$800.00
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683.47
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36.16
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-25.00%
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-15.00%
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-25.00%
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$750.00
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729.03
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29.78
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-20.00%
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-30.00%
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-30.00%
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$700.00
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546.77
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29.78
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-40.00%
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-30.00%
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-40.00%
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$600.00
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501.21
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21.27
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-45.00%
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-50.00%
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-50.00%
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$500.00
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455.65
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17.02
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-50.00%
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-60.00%
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-60.00%
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$400.00
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273.39
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14.89
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-70.00%
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-65.00%
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-70.00%
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$300.00
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227.82
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8.51
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-75.00%
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-80.00%
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-80.00%
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$200.00
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91.13
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6.38
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-90.00%
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-85.00%
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-90.00%
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$100.00
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45.56
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0.00
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-95.00%
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-100.00%
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-100.00%
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$0.00
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*
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per $1,000 principal amount Note
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PPS-3
The following examples illustrate how the payments at maturity set forth in the table above are calculated
(assuming that a Knock-In Event occurs):
Example 1: The Index increases from an Initial Value of 911.29 to a Final Value of 1,139.11, and
the ETF increases from an Initial Value of $42.54 to a Final Value of $51.05.
Because the Reference Asset Returns of both of the Reference
Assets are positive, the Reference Asset Return of the Lesser Performing Reference Asset is positive and the investor receives a payment at maturity of $1,000 per $1,000 principal amount Note.
Example 2: The Index increases from an Initial Value of 911.29 to a Final Value of 1,000.42 and the ETF decreases from an Initial Value of $42.54 to a
Final Value of $40.41.
Because the Reference Asset Return of the Index is positive and the Reference Asset Return of the ETF is negative,
the ETF is the Lesser Performing Reference Asset and the Reference Asset Return of the Lesser Performing Reference Asset is equal to -5.00%. The investor receives a payment at maturity of $950.00 per $1,000 principal amount Note, calculated as
follows:
$1,000 + [$1,000 × Reference Asset Return of the Lesser Performing Reference Asset]
$1,000 + [$1,000 × -5.00%] = $950.00
Example 3: The Index decreases from an Initial Value of 911.29 to a Final Value of 546.77 and the ETF decreases from an Initial Value of $42.54 to a Final Value of $29.78.
Because the Reference Asset Return of the Index of -40.00% is lower, compared with the Reference Asset Return of the ETF of -30.00%, the
Index is the Lesser Performing Reference Asset and the Reference Asset Return of the Lesser Performing Reference Asset is equal to -40.00%. The investor receives a payment at maturity of $600.00 per $1,000 principal amount Note, calculated as
follows:
$1,000 + [$1,000 × Reference Asset Return of the Lesser Performing Reference Asset]
$1,000 + [$1,000 × -40.00%] = $600.00
Selected Purchase Considerations
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Market Disruption Events
The Final Valuation Date, the Observation Period, the Maturity Date and the payment at maturity are subject to
adjustment in the event of a Market Disruption Event with respect to either Reference Asset. If the Calculation Agent determines that on the Final Valuation Date, a Market Disruption Event occurs or is continuing in respect of either Reference
Asset, the Final Valuation Date will be postponed. If such postponement occurs, the Final Values of the Reference Assets shall be determined using the Closing Values of the Reference Assets on the first following Reference Asset Business Day on
which no Market Disruption Event occurs or is continuing in respect of either Reference Asset. In no event, however, will the Final Valuation Date be postponed by more than five Reference Asset Business Days. If the Calculation Agent determines that
a Market Disruption Event occurs or is continuing in respect of either Reference Asset on such fifth day, the Calculation Agent will determine the Final Value of either Reference Asset unaffected by such Market Disruption Event using the Closing
Value of such Reference Asset on such fifth day, and will make an estimate of the Closing Value of either Reference Asset affected by such Market Disruption Event that would have prevailed on such fifth day in the absence of such Market Disruption
Event. As the Observation Period ends on and includes the Final Valuation Date, if the scheduled Final Valuation Date is postponed, the Observation Period will be extended to, and includes, the Final Valuation Date as postponed. In the event that
the Final Valuation Date is postponed, the Maturity Date will be the third Business Day following the Final Valuation Date, as postponed.
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For a description of what constitutes a Market Disruption Event with respect to the Index, see Reference AssetsIndicesMarket
Disruption Events for Securities with the Reference Asset Comprised of an Index or Indices of Equity Securities in the prospectus supplement;
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For a description of what constitutes a Market Disruption Event with respect to the ETF, see Reference AssetsExchange-Traded
FundsMarket Disruption Events for Securities with the Reference Asset Comprised of Shares or Other Interests in an Exchange-Traded Fund or Exchange-Traded Funds Comprised of Equity Securities in the prospectus supplement;
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PPS-4
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Adjustments to the Reference Assets
For a description of adjustments that may affect either of the Reference Assets, see the following
sections of the prospectus supplement:
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For a description of further adjustments that may affect the Index, see Reference AssetsIndicesAdjustments Relating to Securities
with the Reference Asset Comprised of an Index of the prospectus supplement; and
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For a description of further adjustments that may affect the ETF, see Reference AssetsExchange-Traded FundsAdjustments Relating to
Securities with the Reference Asset Comprised of an Exchange-Traded Fund or Exchange-Traded Funds of the prospectus supplement.
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If on or prior to the Final Valuation Date, the shares or other interests in the ETF (or any successor fund) are de-listed or any the ETF is (or any successor fund) are liquidated or otherwise terminated
and the Calculation Agent determines that no successor fund is available, then Calculation Agent may, in its sole discretion, elect to make an adjustment to the Initial Value or Final Value of the ETF or to the method of determining the Reference
Asset Return of the ETF, or any other terms of the Notes as the Calculation Agent, in its sole discretion, determines appropriate to account for the de-listing, liquidation or termination, as applicable, would have had if the Notes represented an
actual interest in the ETF equivalent to the notional interest of the Notes in the ETF.
If the Calculation Agent elects not to
make an adjustment as described in the preceding paragraph or determines that no adjustment that it could make will produce a commercially reasonable result, then the Calculation Agent shall cause the Maturity Date to be accelerated to the fourth
business day following the date of that determination and the payment at maturity that you will receive on the Notes will be calculated as though the date of early repayment were the stated Maturity Date of the Notes and as though the Final
Valuation Date were the date of de-listing, liquidation or termination, as applicable (or, if such day is not a Reference Asset Business Day or a Market Disruption Event occurs or is continuing on such day, the immediately preceding day that is a
Reference Asset Business Day on which no Market Disruption Event occurs or is continuing).
As used above, the terms
successor fund has the meanings set forth under Reference AssetsExchange-Traded FundsAdjustments Relating to Securities with the Reference Asset Comprised of an Exchange-Traded Fund or Exchange-Traded Funds in the
accompanying prospectus supplement
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Downside Exposure to U.S. Equities of the Index and to the ETF
The payment at maturity, if any, is linked to the performance of the Index
and the ETF. The Index is designed to track the performance of the small capitalization segment of the U.S. equity market. The ETF is designed to track, before fees and expenses, the performance of the NYSE Arca Gold Miners Index (the ETF
Underlying Index). For additional information about the Index and the ETF, see the information set forth under Description of the Index and Description of the ETF, respectively, in this preliminary pricing supplement.
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Material U.S. Federal Income Tax Considerations
The material 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. Except as noted under Non-U.S. Holders below, this section applies to you only if you
are a U.S. holder (as defined in the accompanying prospectus supplement) and you hold your 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 (for example, if you did not purchase your Notes in the initial issuance of the Notes). In addition, this discussion does not apply to you if you purchase your Notes for more or less than the
principal amount of the Notes.
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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 treat your Notes as an investment unit consisting of (i) a fixed rate short-term debt obligation that we issued to you for an amount equal to the principal amount of the Notes (the
Deposit) and (ii) a put option in respect of the Reference Assets (the Put Option) which you sold to us in exchange for a portion of the stated interest on the Notes (the Put Premium). On the cover page of
this preliminary pricing supplement, we have determined the amount of each interest payment that represents interest on the Deposit (this amount is denoted as Deposit Income) and the amount that represents Put Premium (this amount is
denoted as Put Premium). The terms of your Notes require you and us to allocate the interest payments as set forth on the cover page, but this allocation is not binding on the Internal Revenue Service. Except as otherwise noted below,
the discussion below assumes that your Notes will be treated in the manner described above.
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 preliminary pricing supplement is materially correct.
PPS-5
NO STATUTORY, JUDICIAL OR ADMINISTRATIVE AUTHORITY DIRECTLY DISCUSSES HOW YOUR NOTES SHOULD
BE TREATED FOR U.S. FEDERAL INCOME TAX PURPOSES. AS A RESULT, THE U.S. FEDERAL INCOME TAX CONSEQUENCES OF YOUR INVESTMENT IN THE NOTES ARE UNCERTAIN. ACCORDINGLY, WE URGE YOU TO CONSULT YOUR TAX ADVISOR AS TO THE TAX CONSEQUENCES OF INVESTING IN THE
NOTES.
It would generally be reasonable to account for amounts treated as interest on the Deposit as subject to tax as
ordinary income at the time you receive or accrue such payments, depending on your method of accounting for tax purposes. The rules governing short-term debt obligations are complex, however, and you should consult your tax advisor in this regard.
For a further discussion of the tax considerations applicable to short-term debt obligations, please see the discussion under the heading Certain U.S. Federal Income Tax ConsiderationsU.S. Federal Income Tax Treatment of the Notes as
Indebtedness for U.S. Federal Income Tax PurposesShort-Term Obligations in the accompanying prospectus supplement. Amounts treated as Put Premium should generally be deferred and accounted for upon the sale, redemption or maturity of the
Notes, as discussed below.
The receipt of cash upon the redemption or maturity of your Notes (excluding cash attributable to
the final monthly payment on the Notes) would likely be treated as (i) payment in full of the principal amount of the Deposit, which would likely not result in the recognition of gain or loss, and (ii) the lapse (if you receive the
principal amount of the Notes) or the cash settlement (if you receive less than the principal amount of the Notes) of the Put Option. Under such characterization, you should generally recognize short-term capital gain or loss in an amount equal to
the difference between (i) the amount of Put Premium paid to you over the term of the Notes (including the Put Premium received at redemption or maturity) and (ii) the excess (if any) of (a) the principal amount of your Notes over
(b) the amount of cash you receive at redemption or maturity (excluding cash attributable to the final monthly interest payment on the Notes).
Upon a sale of your Notes, you should generally recognize short-term capital gain or loss in an amount equal to the difference between (i) the sum of (a) the amount you receive at such time
(excluding amounts attributable to accrued or unpaid interest on the Deposit) and (b) any amount of Put Premium previously received and deferred as described above and (ii) the amount you paid for your Notes. Short-term capital gains are
generally subject to tax at the marginal tax rates applicable to ordinary income.
Any character mismatch arising from your
inclusion of ordinary income in respect of the interest on the Deposit and capital loss (if any) upon the sale, redemption or maturity of your Notes may result in adverse tax consequences to you because an investors ability to deduct capital
losses is subject to significant limitations.
Alternative Treatments
. There are no regulations, published rulings or
judicial decisions addressing the treatment for U.S. federal income tax purposes of instruments with terms that are substantially the same as the Notes, and the Internal Revenue Service could assert that the Notes should be taxed differently than in
the manner described above. For example, it is possible that the Notes could be treated as a contingent short-term debt obligation. If your Notes are so treated, you may be required to include as ordinary income the entire monthly interest payment
on the Notes (and not just the interest on the Deposit). However, no specific rules govern contingent short-term debt obligations, and accordingly you should consult your tax advisor regarding this alternative characterization of the Notes.
It is also possible that the Notes could be treated as a pre-paid income-bearing executory contract in respect of the
Reference Assets, in which case you may be required to include the entire monthly interest payment on the Notes in ordinary income (and not just the interest on the Deposit).
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
ConsiderationsCertain Notes Treated as Deposits and Put Options 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 ConsiderationsTaxes, in this preliminary pricing supplement.
Specified Foreign Financial Asset Reporting
. Under legislation enacted in 2010, owners of specified foreign
financial assets (which may include your Notes) with an aggregate value in excess of $50,000 (and in some circumstances, a higher threshold) may be required to file an information report with respect to such assets with their tax returns.
Specified foreign financial assets generally include any financial accounts maintained by foreign financial institutions, as well as any of the following, but only if they are not held in accounts maintained by financial institutions:
(i) stocks and securities issued by non-U.S. persons, (ii) financial instruments and contracts held for investment that have non-U.S. issuers or counterparties and (iii) interests in foreign entities. Holders are urged to consult
their tax advisors regarding the application of this legislation to their ownership of the Notes.
PPS-6
Non-U.S. Holders
. Barclays currently does not withhold on payments to non-U.S.
holders. However, if Barclays determines that there is a material risk that it will be required to withhold on any such payments, Barclays may withhold on any interest payments at a 30% rate, unless you have provided to Barclays (i) a valid
Internal Revenue Service Form W-8ECI or (ii) a valid Internal Revenue Service Form W-8BEN claiming tax treaty benefits that reduce or eliminate withholding. If Barclays elects to withhold and you have provided Barclays with a valid Internal
Revenue Service Form W-8BEN claiming tax treaty benefits that reduce or eliminate withholding, Barclays may nevertheless withhold up to 30% on any interest payments it makes to you if there is any possible characterization of the payments that would
not be exempt from withholding under the treaty.
In addition, the Treasury Department has issued proposed regulations under
Section 871(m) of the Internal Revenue Code which could ultimately require us to treat all or a portion of any payment in respect of your Notes as a dividend equivalent payment that is subject to withholding tax at a rate of 30% (or
a lower rate under an applicable treaty). However, such withholding would potentially apply only to payments made after December 31, 2013. You could also be required to make certain certifications in order to avoid or minimize such withholding
obligations, and you could be subject to withholding (subject to your potential right to claim a refund from the Internal Revenue Service) if such certifications were not received or were not satisfactory. You should consult your tax advisor
concerning the potential application of these regulations to payments you receive with respect to the Notes when these regulations are finalized.
PPS-7
Selected Risk Considerations
An investment in the Notes involves significant risks. Investing in the Notes is not equivalent to investing directly in the Index and/or the ETF. These
risks are explained in more detail in the Risk Factors sections of the prospectus supplement, including the risk factors discussed under the following headings:
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Risk FactorsRisks Relating to All Securities;
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Risk FactorsAdditional Risks Relating to Securities with Reference Assets That Are Equity Securities or Shares or Other Interests in
Exchange-Traded Funds, That Contain Equity Securities or Shares or Other Interests in Exchange-Traded Funds or That Are Based in Part on Equity Securities or Shares or Other Interests in Exchange-Traded Funds;
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Risk FactorsAdditional Risks Relating to Securities with More Than One Reference Asset, Where the Performance of the Security Is Based on
the Performance of Only One Reference Asset;
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Risk FactorsAdditional Risks Relating to Notes Which Are Not Characterized as Being Fully Principal Protected or Are Characterized as Being
Partially Protected or Contingently Protected; and
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Risk FactorsAdditional Risks Relating to Notes with a Barrier Percentage or a Barrier Level.
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In addition to the risks described above, you should consider the following:
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Your Investment in the Notes May Result in Significant Loss; You May Lose up to 100% of Your Principal
The Notes do not guarantee any
return of principal. The payment at maturity depends on whether a Knock-In Event occurs and whether, and the extent to which, the Reference Asset Return of the Lesser Performing Reference Asset falls below 0%. If a Knock-In Event occurs and the
Reference Asset Return of the Lesser Performing Reference Asset is less than 0%, your Notes will be fully exposed to any decline of the Lesser Performing Reference Asset from its Initial Value to its Final Value and you will lose some or all of your
principal.
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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 depends on the ability of Barclays Bank PLC to satisfy its obligations as they come due and is not guaranteed by any third party. 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.
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Potential Early Exit
While the original term of the Notes is as indicated on the cover page of this preliminary pricing supplement, if on
any Call Valuation Date the Closing Value of each Reference Asset is greater than or equal to its respective Initial Value, the Notes will be automatically called on the applicable Early Redemption Date and you will receive on the Early Redemption
Date 100% of the principal amount of your Notes together with any accrued but unpaid interest to but excluding the relevant Early Redemption Date. You may not be able to reinvest any amounts received on the Early Redemption Date in a comparable
investment with similar risk and yield. No more interest will accrue after the relevant Early Redemption Date. The automatic call feature may also adversely impact your ability to sell your Notes and the price at which they may be sold.
It may further limit your ability to sell your Notes and realize any market appreciation of the value of your Notes
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Return Limited to the Monthly Interest Payments
Your return is limited to the monthly interest payments. You will not participate in any
appreciation in the level of the Index or the price of the ETF.
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You Will Not Receive More Than the Principal Amount of Your Notes (Plus the Final Interest Payment) at Maturity
At maturity (assuming that
the Notes have not been called prior to maturity), in addition to the final interest payment, you will not receive more than the principal amount of your Notes, even if the Reference Asset Returns of either or both of the Index and the ETF are
positive. The total payment you receive over the term of the Notes will never exceed the principal amount of your Notes plus the interest payments paid during the term of the Notes.
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If A Knock-In Event Occurs, the Amount Payable at Maturity (Other Than the Final Interest Payment) is Solely Linked to the Reference Asset Return of
the Lesser Performing Reference Asset
If a Knock-In Event occurs, any payment at maturity (other than the final interest payment) due on your Notes will be linked solely to the Reference Asset Return of the Lesser Performing Reference
Asset. The payment at maturity, if any, will not reflect the performance of the Reference Asset that is not the Lesser Performing Reference Asset. Accordingly, your investment in the Notes will result in a return that is less, and may be
substantially less, than an investment that is linked to the Reference Asset that is not the Lesser Performing Reference Asset.
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If a Knock-In Event Occurs, The Payment at Maturity of Your Notes is Not Based on the Values of the Reference Assets at Any Time Other than the
Final Values of each Reference Asset on the Final Valuation Date
If a Knock-In Event occurs, the determination of the Reference Asset Return of the Lesser Performing Reference Asset and the payment at maturity will not be based on any value
of the Reference Assets other than the Final Value of each Reference Asset on the Final Valuation Date. Therefore, if a Knock-In Event occurs and the Final Value of the Reference Asset that is the Lesser Performing Reference Asset drops on the Final
Valuation Date to a value lower than its Initial Value, your Notes will be fully exposed to any decline of the Lesser Performing Reference Asset from its Initial Value to its Final Value and you will lose some or all of your principal. The payment
at maturity, if any, that you will receive for your Notes will be significantly less than it would otherwise have been had such payment been linked to the values of the Reference Assets prior to such drop.
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PPS-8
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The Determination of Whether a Knock-In Event Occurs on any Trading Day is Not Based On Any Values of the Reference Assets Other Than the Closing
Values of the Reference Assets on such Trading Day
A Knock-In Event occurs if, as determined by the Calculation Agent, the Closing Value of either Reference Asset is less than the Knock-In Barrier applicable to such Reference Asset on any
Index Business Day or Trading Day, as applicable to such Reference Asset, during the Observation Period. The determination of whether a Knock-In Event occurs is therefore not based on any values of the Reference Assets at any time other than the
Closing Values of the Reference Assets on any applicable Index Business Day or Trading Day, as applicable, during the Observation Period. For example, if on an applicable day the value of a Reference Asset drops precipitously shortly before the
close of business on such day and such drop causes the Closing Value of such Reference Asset to fall below its Knock-In Barrier, assuming that no Market Disruption Event has occurred or existed with respect to such Reference Asset on such day, a
Knock-In Event occurs regardless of whether the value of the Reference Asset is greater than or equal to its Knock-In Barrier at any other time during such day. The payment at maturity, if any, that you will receive for your Notes may be
significantly less than it would otherwise have been had the determination of whether a Knock-In Event occurs been based on the value of a Reference Asset prior to such drop at a time when the value of such Reference Asset was at or above its
Knock-In Barrier. The occurrence of a Knock-In Event may significantly and adversely affect the market value of your Notes, the payment at maturity of the Notes, if any, and your ability to sell your Notes.
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Whether or Not the Notes Will be Called Automatically Prior to Maturity is Not Based on the Level of the Index or the Price of the ETF at any Time
Other Than the Closing Level of the Index and the Official Closing Price of the ETF, Respectively, on the Call Valuation Dates
Whether or not the Notes will be automatically called prior to maturity pursuant to the Automatic
Call provisions described above will not be based on any level or price of the Index or the ETF, respectively, other than the Closing Value of each Reference Asset on the Call Valuation Dates. Therefore, if on a Call Valuation Date the Closing
Value of each Reference Asset increases to a level or price, as the case may be, greater than its respective Initial Value, your Notes will be called automatically and you may not be able to reinvest any amounts received on the applicable Early
Redemption Date in a comparable investment with similar risk and yield and your ability to sell your Notes and realize any market appreciation of the value of your Notes may be substantially limited. The Notes would not have been called prior to
maturity had such automatic call feature been based on the values of the Reference Assets prior to such increase at a time when the value of either Reference Asset was below its Initial Value on the Initial Valuation Date.
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If a Knock-In Event Occurs, the Reference Asset Return of the Lesser Performing Reference Asset (and the Payment at Maturity) is Not Based on the
Level of the Index or the Price of the ETF at Any Time Other than the Closing Value of each Reference Asset on the Final Valuation Date
If a Knock-In Event occurs, the determination of the Reference Asset Return of the Lesser Performing
Reference Asset and therefore the payment at maturity will not be made based on any value of the Reference Assets other than the Final Values of the Reference Assets (subject to adjustments as described in the prospectus supplement). Therefore, if a
Knock-In Event occurs and the Final Value of the Reference Asset that is the Lesser Performing Reference Asset drops on the Final Valuation Date to a level or price, as the case may be, lower than its Initial Value, your Notes will be fully exposed
to any decline of the Lesser Performing Reference Asset from its Initial Value to its Final Value and you may lose some or all of your investment in the Notes. The payment at maturity, if any, that you will receive for your Notes will be
significantly less than it would otherwise have been had such payment been linked to the values of the Reference Assets prior to such drop at a time when the values of the Reference Assets were at or above their respective Initial Values.
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No Dividend Payments or Voting Rights
As a holder of the Notes, you will not have voting rights or rights to receive cash dividends or
other distributions or other rights that holders of the ETF or of securities comprising the Index would have.
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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 make a secondary market for the Notes but are not required to do so, and may discontinue any such secondary market making at any time, without notice. Barclays Capital Inc. may at any time hold unsold inventory, which may inhibit the
development of a secondary market for the Notes. 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. The Notes are not designed to be short-term
trading instruments. Accordingly, you should be able and willing to hold your Notes to maturity.
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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 preliminary pricing supplement is based on the full principal amount of your Notes, the original issue price of the Notes includes the agents 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 price you paid for your
Notes, and any sale prior to the Maturity Date could result in a substantial loss to you.
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PPS-9
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Certain Features of Exchange-Traded Funds Will Impact the Value of the Notes
The value of the ETF is subject to:
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The ETF May Underperform the ETF Underlying Index.
The performance of the ETF may not replicate the performance of, and may underperform, the
ETF Underlying Index. Unlike the ETF Underlying Index, the ETF will reflect transaction costs and fees that will reduce its relative performance. Moreover, it is also possible that the ETF may not fully replicate or may, in certain circumstances,
diverge significantly from the performance of the ETF Underlying Index; for example, due to the temporary unavailability of certain securities in the secondary market, the performance of any derivative instruments contained in the ETF, differences
in trading hours between the ETF and the ETF Underlying Index or due to other circumstances. Because the return on your Notes is linked to the performance of the ETF and not the ETF Underlying Index, the return on your securities may be less than
that of an alternative investment linked directly to the ETF Underlying Index
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Management risk
. This is the risk that the investment strategy for the ETF, the implementation of which is subject to a number of constraints,
may not produce the intended results.
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Derivatives risk
. The ETF may invest in futures contracts, options on futures contracts, other types of options and swaps and other derivatives.
A derivative is a financial contract, the value of which depends on, or is derived from, the value of an underlying asset such as commodities. Compared to conventional securities, derivatives can be more sensitive to changes in interest rates or to
sudden fluctuations in market prices, and thus the ETFs losses, and, as a consequence, the losses of your Notes, may be greater than if the ETF invested only in conventional securities.
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The Stocks in Which the ETF Generally Invests are Concentrated in One Industry
As described below under Description of the ETF,
the ETF is designed to replicate, as closely as possible, before fees and expenses, the ETF Underyling Index. In order to achieve its objective, under normal market conditions, the ETF generally invests at least 80% of its assets in securities
comprising the ETF Underyling Index. All of the stocks included in the ETF Underyling Index are issued by companies involved primarily in the mining for gold. As a result, the stocks that will, under normal market conditions, determine the
performance of the ETF are concentrated in one sector. Although an investment in the Notes will not give holders any ownership or other direct interests in the stocks comprising the ETF Underyling Index, the return on an investment in the Notes will
be subject to certain risks associated with a direct equity investment in companies in the gold mining industry. Accordingly, by investing in the Notes, holders will not benefit from the diversification that could result from an investment linked to
companies that operate in multiple sectors.
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The Performance of the ETF is Generally Linked to the Performance of the Gold Mining Industry, and Adverse Conditions in the Gold Mining Industry
May Adversely Affect the Value of Your Notes
Under normal market conditions, the ETF invests at least 80% of its assets in companies in the gold mining industry. The profitability of these companies depends on many complex and interrelated
factors, including, among others, fluctuations in the market price of gold. Any adverse developments in the metals and mining industry resulting from such factors may have a negative effect on the value of your Notes
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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.
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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, the Internal Revenue Service issued a notice in 2007 indicating that it and the Treasury Department are actively considering
whether, among other issues, you should be required to accrue interest over the term of an instrument such as the Notes at a rate that exceeds the portion of the monthly payments treated as interest on the Deposit for U.S. federal income tax
purposes and whether all or part of the gain or loss you may recognize upon the sale, redemption or maturity of an instrument such as the Notes could be treated as ordinary income or loss. Similarly, the Internal Revenue Service and Treasury
Department have current projects open with regard to the tax treatment of pre-paid forward contracts and contingent notional principal contracts. While it is impossible to anticipate how any ultimate guidance would affect the tax treatment of
instruments such as the Notes (and while any such guidance may be issued on a prospective basis only), such guidance could be applied retroactively and could in any case increase the likelihood that you will be required to accrue income at a rate
that exceeds the portion of the monthly payments treated as interest on the Deposit for U.S. federal income tax purposes. The outcome of this process is uncertain. You should consult your tax advisor as to the possible alternative treatments in
respect of the Notes.
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Many Economic and Market Factors Will Impact the Value of the Notes
In addition to the level of the Index and the price of the ETF on any
Index Business Day or any Trading Day, respectively, 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:
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the expected volatility of the Reference Assets;
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the time to maturity of the Notes;
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the dividend rate underlying the ETF;
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the market price and dividend rate on the common stocks underlying the Index;
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interest and yield rates in the market generally;
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a variety of economic, financial, political, regulatory or judicial events;
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supply and demand for the Notes; and
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our creditworthiness, including actual or anticipated downgrades in our credit ratings.
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PPS-10
Description of the Index
All information regarding the Index set forth in this preliminary pricing supplement reflects the policies of, and is subject to change by, Russell Investments (Russell). The Index was
developed by Russell and is calculated, maintained and published by Russell. The Index is reported by Bloomberg under the ticker symbol RTY <Index>.
The Index is designed to track the performance of the small capitalization segment of the U.S. equity market. As a subset of the Russell 3000
®
Index (the Russell 3000), it consists of approximately 2,000 of the smallest companies (based on a combination of their market capitalization and the
current index membership) included in the Russell 3000 and represented, as of January 31, 2013, approximately 10% of the total market capitalization of the Russell 3000. The Russell 3000, in turn, comprises the 3,000 largest U.S. companies as
measured by total market capitalization, which together represented, as of January 31, 2013, approximately 98% of the investable U.S. equity market.
Selection of Stocks Underlying the Index
Security Inclusion Criteria
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U.S. company
. All companies eligible for inclusion in the Index must be classified as a U.S. company under Russells country-assignment
methodology. If a company is incorporated, has a stated headquarters location, and company stock trades in the same country (American Depositary Receipts and American Depositary Shares are not eligible for this purpose), then the company is assigned
to its country of incorporation. If any of the three factors are not the same, Russell defines three Home Country Indicators (HCIs): country of incorporation, country of headquarters, and country of the most liquid exchange as defined by
a two-year average daily dollar trading volume (ADDTV) from all exchanges within a country. After the HCIs are defined, the next step in the country assignment involves an analysis of assets by location. Russell cross-compares the
primary location of the companys assets with the three HCIs. If the primary location of its assets matches any of the HCIs, then the company is assigned to the primary location of its assets. If there is insufficient information to determine
the country in which the companys assets are primarily located, Russell will use the primary location of the companys revenues to cross-compare with the three HCIs and assign a country in a similar manner. Beginning in 2011, Russell will
use the average of two years of assets or revenues data, in order to reduce potential turnover. Assets and revenues data are retrieved from each companys annual report as of the last trading day in May. If conclusive country details cannot be
derived from assets or revenues data, Russell will assign the company to the country of its headquarters, which is defined as the address of the companys principal executive offices, unless that country is a Benefit Driven Incorporation
BDI country, in which case the company will be assigned to the country of its most liquid stock exchange. BDI countries include: Anguilla, Antigua and Barbuda, Bahamas, Barbados, Belize, Bermuda, British Virgin Islands, Cayman Islands,
Channel Islands, Cook Islands, Faroe Islands, Gibraltar, Isle of Man, Liberia, Marshall Islands, Netherlands Antilles, Panama and Turks and Caicos Islands. For any companies incorporated or headquartered in a U.S. territory, including countries such
as Puerto Rico, Guam and U.S. Virgin Islands, a U.S. HCI is assigned.
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Trading requirements
. All securities eligible for inclusion in the Russell 3000 must trade on a major U.S. exchange. Bulletin Board, pink-sheet
or over-the-counter traded securities are not eligible for inclusion.
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Minimum closing price
. Stock must trade at or above US$1.00 on their primary exchange on the last trading day in May to be considered eligible
for inclusion in the Russell 3000 during annual reconstitution or during initial public offering (IPO) eligibility. If a stocks closing price is less than US$1.00 on the last day of May, it will be considered eligible if the average of the
daily closing prices (from its primary exchange) during the month of May is equal to or greater than US$1.00. Nonetheless, a stocks closing price (on its primary exchange) on the last trading day in May will be used to calculate market
capitalization and index membership. Initial public offerings are added each quarter and must have a closing price at or above US$1.00 on the last day of their eligibility period in order to qualify for index inclusion.
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Primary exchange pricing.
If a stock, new or existing, does not have a closing price at or above US$1.00 (on its primary exchange) on the last
trading day in May, but does have a closing price at or above US$1.00 on another major U.S. exchange, that stock will be eligible for inclusion.
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Minimum total market capitalization.
Companies with a total market capitalization of less than US$30 million are not eligible for the Index.
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Minimum available shares/float requirement.
Companies with only a small portion of their shares available in the marketplace are not eligible
for the Russell Indices. Companies with 5% or less will be removed from eligibility.
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Company structure
. Royalty trusts, limited liability companies, closed-end investment companies, blank check companies, special purpose
acquisition companies (SPACs) and limited partnerships are excluded from inclusion in the Russell 3000. Business development companies (BDCs) are eligible.
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PPS-11
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Shares excluded
. Preferred stock, convertible preferred stock, redeemable shares, participating preferred stock, warrant rights and trust
receipts are not eligible for inclusion.
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Deadline for inclusion
. Stocks must be listed on the last trading day in May and Russell must have access to documentation on that date
supporting the companys eligibility for inclusion. This information includes corporate description, verification of incorporation, number of shares outstanding and other information needed to determine eligibility. IPOs will be considered for
inclusion on a quarterly basis.
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All Russell indices, including the Index, are reconstituted annually to reflect changes in
the marketplace. The companies that meet the eligibility criteria are ranked on the last trading day of May of every year based on market capitalization using data available at that time, with the reconstitution taking effect as of the first trading
day following the last Friday of June of that year. If the last Friday in June is the 28th, 29th or 30th day of June, reconstitution will occur the Friday prior.
Market Capitalization
The primary criteria used to determine the initial list of common
stocks eligible for inclusion in the Russell 3000, and thus the Index, is total market capitalization, which is calculated by multiplying the total outstanding shares by the market price as of the last trading day in May for those securities being
considered for the purposes of the annual reconstitution. IPO eligibility is determined each quarter.
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Determining total shares outstanding
. Only common stock is used to determine market capitalization for a company. Any other form of shares,
including preferred stock, convertible preferred stock, redeemable shares, participating preferred stock, warrants and rights or trust receipts, are excluded from the calculation. If multiple share classes of common stock exist, they are combined.
In cases where the common stock share classes act independently of each other (e.g., tracking stocks), each class is considered for inclusion separately.
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Determining price
. During each annual reconstitution, the last traded price on the last trading day in May of that year from the primary
exchange is used to determine market capitalization. If a security does not trade on its primary exchange, the lowest price from another major U.S. exchange is used. In the case where multiple share classes exist, the primary trading vehicle is
identified and used to determine price. For new members, the common share class with the highest trading volume will be considered the primary trading vehicle, and its associated price and trading symbol will be included in the Index.
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Capitalization Adjustments
A securitys shares are adjusted to include only those shares available to the public, often referred to as free float. The purpose of this adjustment is to exclude from market
calculations the capitalization that is not available for purchase and is not part of the investable opportunity set. Stocks are weighted in all Russell indices, including the Index, by their float-adjusted market capitalization, which is calculated
by multiplying the primary closing price by the available shares.
The following types of shares are removed from total market capitalization
to arrive at free float or available market capitalization:
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Cross ownership. Shares held by another member of a Russell index are considered cross-owned and all such shares will be adjusted regardless of
percentage held.
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Large corporate and private holdings
. Shares held by another listed company (non-member) or private individuals will be adjusted if greater than
10% of shares outstanding. Share percentage is determined either by those shares held by an individual or a group of individuals acting together. For example, officers and directors holdings would be summed together to determine if they exceed 10%.
However, not included in this class are institutional holdings, including investment companies, partnerships, insurance companies, mutual funds, banks or venture capital funds.
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Employee stock ownership plan shares
. Corporations that have employee stock ownership plans that comprise 10% or more of the shares outstanding
are adjusted.
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Unlisted share classes
. Classes of common stock that are not traded on a U.S. exchange are adjusted.
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IPO lock-ups
. Shares locked-up during an IPO are not available to the public and are thus excluded from the market value at the time the IPO
enters the Russell indices.
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Government holdings
. Holdings listed as government of are considered unavailable and will be removed entirely from available shares.
Shares held by government investment boards and/or investment arms will be treated similar to large private holdings and removed if the holding is greater than 10%. Any holding by a government pension fund is considered institutional holdings and
will not be removed from available shares.
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PPS-12
Corporate Actions Affecting the Index
Changes to all Russell U.S. indices, including the Index, are made when an action is final.
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No replacement rule
. Securities that leave the Index, between reconstitution dates, for any reason (e.g., mergers, acquisitions or
other similar corporate activity) are not replaced. Thus, the number of securities in the Index over a year may fluctuate according to corporate activity.
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Mergers and acquisitions
. Merger and acquisition activity results in changes to the membership and weighting of members within the Index.
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Re-incorporations
. Members of the Index that are re-incorporated to another country are analyzed for country assignment the following year
during reconstitution, as long as they continue to trade in the U.S. Companies that re-incorporate and no longer trade in the U.S. are immediately deleted from the Index and placed in the appropriate country within the Russell Global Index. Those
that re-incorporate to the U.S. during the year will be assessed during reconstitution for membership.
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Re-classifications of shares (primary vehicles)
. Primary vehicles will not be assessed or change outside of a reconstitution period unless the
existing class ceases to exist. In the event of extenuating circumstances signaling a necessary primary vehicle change, proper notification will be made.
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Rights offerings
. Rights offered to shareholders are reflected in the Index the date the offer expires for nontransferable rights and on the
ex-date for transferable rights. In both cases, the price is adjusted to account for the value of the right on the ex-date, and shares are increased according to the terms of the offering on that day. Rights issued in anticipation of a takeover
event, or poison pill rights are excluded from this treatment and no price adjustment is made for their issuance or redemption.
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Changes to shares outstanding
. Changes to shares outstanding due to buyback (including Dutch Auctions), secondary offerings, merger activity
with a non- Index member and other potential changes are updated at the end of the month (with the sole exception of June) which the change is reflected in vendor supplied updates and verified by Russell using an SEC filing. For a change in shares
to occur, the cumulative change to available shares must be greater than 5%.
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Spin-offs
. The only additions between reconstitution dates are as a result of spin-offs, reincorporations and IPOs. Spin-off companies are added
to the Index if warranted by the market capitalization of the spin-off company.
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Tender offers
. A company acquired as the result of a tender offer is removed when the tender offer has fully expired and it is determined the
company will finalize the process with a short form merger. Shares of the acquiring company, if a member of the Index, will be increased simultaneously.
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Delisting
. Only companies listed on U.S. exchanges are included in the Index. Therefore, when a company is delisted from a U.S. exchange and
moved to over-the-counter trading, the company is removed from the Index.
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Bankruptcy and voluntary liquidations
. Companies that file for Chapter 7 liquidation bankruptcy or file any other liquidation plan will be
removed from the Index at the time of the filing. Companies filing for a Chapter 11 re-organization bankruptcy will remain a member of the Index, unless delisted from their primary exchange. In that case, normal delisting rules will apply.
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Stock distributions
. Stock distributions can take two forms: (1) a stated amount of stock distributed on the ex-date or (2) an
undetermined amount of stock based on earnings and profits on a future date. In both cases, a price adjustment is made on the ex-date of the distribution. Shares are increased on the ex-date for category (1) and on the pay-date for category
(2).
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Dividends
. Gross dividends are included in the daily total return calculation of the Index based on their ex-dates. The ex-date is used rather
than the pay-date because the market place price adjustment for the dividend occurs on the ex-date. Monthly, quarterly and annual total returns are calculated by compounding the reinvestment of dividends daily. The reinvestment and compounding is at
the total index level, not at the security level. Stock prices are adjusted to reflect special cash dividends on the ex-date. If a dividend is payable in stock and cash and the stock rate cannot be determined by the ex-date, the dividend is treated
as cash.
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Halted securities
. Halted securities are not removed from the Index until the time they are actually delisted from the exchange. If a security
is halted, it remains in the Index at the last traded price from the primary exchange until the time the security resumes trading or is officially delisted.
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Additional information on the Index is available on the following website: http://www.russell.com. No information on the website shall be deemed to be included or incorporated by reference in this
preliminary pricing supplement.
License Agreement
Barclays Bank PLC has entered into a non-exclusive license agreement with the Russell Investments (
Russell
) whereby we, in exchange for a fee, are permitted to use the Index and its
related trademarks in connection with certain Notes, including the Notes. We are not affiliated with Russell; the only relationship between Russell and us is any licensing of the use of Russells indices and trademarks relating to them.
PPS-13
The license agreement between Russell and Barclays Bank PLC provides that the following language must be set
forth in the preliminary pricing supplement:
The Notes are not sponsored, endorsed, sold, or promoted by Russell
Investments (
Russell
). Russell makes no representation or warranty, express or implied, to the owners of the Notes or any member of the public regarding the advisability of investing in Notes generally or in the Notes particularly
or the ability of the Russell 2000
®
Index (the
Russell 2000 Index
) to track general stock
market performance or a segment of the same. Russells publication of the Russell 2000 Index in no way suggests or implies an opinion by Russell as to the advisability of investment in any or all of the Notes upon which the Russell 2000 Index
is based. Russells only relationship to Barclays Bank PLC and its affiliates is the licensing of certain trademarks and trade names of Russell and of the Russell 2000 Index which is determined, composed and calculated by Russell without regard
to Barclays Bank PLC and its affiliates or the Notes. Russell is not responsible for and has not reviewed the Notes nor any associated literature or publications and Russell makes no representation or warranty, express or implied, as to their
accuracy or completeness, or otherwise. Russell reserves the right, at any time and without notice, to alter, amend, terminate or in any way change the Russell 2000 Index. Russell has no obligation or liability in connection with the administration,
marketing or trading of the Notes.
RUSSELL DOES NOT GUARANTEE THE ACCURACY AND/OR THE COMPLETENESS OF THE RUSSELL 2000 INDEX OR ANY DATA
INCLUDED THEREIN AND RUSSELL SHALL HAVE NO LIABILITY FOR ANY OMISSIONS, OR INTERRUPTIONS THEREIN. RUSSELL MAKES NO WARRANTY, EXPRESS OR IMPLIED, AS TO RESULTS TO BE OBTAINED BY BARCLAYS BANK PLC AND/OR ITS AFFILIATES, INVESTORS, OWNERS OF THE NOTES,
OR ANY OTHER PERSON OR ENTITY FROM THE USE OF THE RUSSELL 2000 INDEX OR ANY DATA INCLUDED THEREIN. RUSSELL MAKES NO EXPRESS OR IMPLIED WARRANTIES, AND EXPRESSLY DISCLAIMS ALL WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE
WITH RESPECT TO THE RUSSELL 2000 INDEX OR ANY DATA INCLUDED THEREIN. WITHOUT LIMITING ANY OF THE FOREGOING, IN NO EVENT SHALL RUSSELL HAVE ANY LIABILITY FOR ANY SPECIAL, PUNITIVE, INDIRECT, OR CONSEQUENTIAL DAMAGES (INCLUDING LOST PROFITS), EVEN IF
NOTIFIED OF THE POSSIBILITY OF SUCH DAMAGES.
Russell 2000
®
Index and Russell
3000
®
Index are trademarks of Russell Investments and have been licensed for use by Barclays Bank PLC. The
Notes are not sponsored, endorsed, sold, or promoted by Russell Investments and Russell Investments makes no representation regarding the advisability of investing in the Notes.
PPS-14
Description of the ETF
General
We have derived all information contained in this pricing supplement regarding the
ETF, including, without limitation, its make-up, method of calculation and changes in its components, from the ETFs prospectus, dated May 1, 2012, and other publicly available information. Such information reflects the policies of, and is
subject to change by, Van Eck Associates Corporation (Van Eck), the adviser to the ETF. The ETF is an exchange-traded fund that seeks to replicate as closely as possible, before fees and expenses, the price and yield performance of the
ETF Underyling Index. Shares of the ETF trade on the NYSE Arca, Inc. under the ticker symbol GDX.
Market Vectors ETF Trust (the
Trust) is a registered investment company that consists of numerous separate investment portfolios, including the ETF. Information provided to or filed with the SEC by the Trust pursuant to the Securities Act of 1933, as amended, and the
Investment Company Act of 1940, as amended, can be located by reference to SEC file number 333-123257 or CIK number 0001137360. In addition, information about the Trust and the ETF may be obtained from other sources, including, but not limited to,
press releases, newspaper articles and other publicly disseminated documents and Van Ecks website at www.vaneck.com. We have not undertaken any independent review or due diligence of the SEC filings related to the ETF, any information
contained on Van Ecks website, or of any other publicly available information about the ETF. Information contained in outside sources is not incorporated by reference in, and should not be considered a part of, this pricing supplement.
Investment Objective and Strategy
The ETF is an exchange-traded fund that seeks to replicate as closely as possible, before fees and expenses, the price and yield performance of the ETF Underyling Index, which includes the common stocks
and American Depositary Receipts of companies involved in the gold mining industry. For more information about the ETF Underyling Index, see ETF Underlying Index below.
The ETF uses a passive or indexing investment approach where it attempts to approximate the investment performance of the ETF Underyling Index by investing in a portfolio of securities that
generally replicates the ETF Underyling Index. The ETF normally invests at least 80% of its total assets in securities that comprise the ETF Underyling Index. The ETF may also utilize convertible securities and participation notes to seek
performance that corresponds to the ETF Underyling Index.
Correlation
The ETF Underyling Index is a theoretical financial calculation while the ETF is an actual investment portfolio. The performance of the ETF and the ETF Underyling Index may vary due to transaction costs,
non-U.S. currency valuation, asset valuations, corporate actions (such as mergers and spin-offs), timing variances and differences between the ETFs portfolio and the ETF Underyling Index resulting from legal restrictions (such as
diversification requirements) that apply to the ETF but not to the ETF Underyling Index or to the use of passive indexing. Tracking error is the difference between the performance (return) of the ETFs portfolio and that of the ETF
Underyling Index. Van Eck expects that, over time, the correlation between the ETFs portfolio and that of the ETF Underyling Index before fees and expenses will be 95% or better.
Industry Concentration Policy
The ETF may concentrate its investments in a particular
industry or group of industries to the extent that the ETF Underyling Index concentrates on an industry or group of industries.
Holdings
Information
The holding information for the ETF is updated on a daily basis. As of February 8, 2013, the ETFs top holdings by
weight were the stocks of Barrick Gold Corporation (12.32%), Goldcorp Inc. (11.10%), Newmont Mining Corp. (8.43%), Silver Wheaton Corp. (5.39%), AngloGold Ashanti Ltd. (5.19%), Yamana Gold Inc. (5.15%), Gold Fields Ltd. (4.96%), Randgold Resources
Limited (4.61%), Kinross Gold Corp. (4.52%) and Agnico-Eagle Mines Ltd. (4.15%) . For more information about the ETFs holdings, please consult the ETFs prospectus and other publicly available information regarding the ETF.
The ETF Underyling Index
All disclosures contained in this pricing supplement regarding the ETF Underyling Index, including, without limitation, its make up, method of
calculation, and changes in its components, have been derived from publicly available sources. The information reflects the policies of, and is subject to change by, NYSE Arca, the sponsor of the ETF Underyling Index. NYSE Arca, which owns the
copyright and all other rights to the ETF Underyling Index, has no obligation to continue to publish, and may discontinue publication of, the ETF Underyling Index.
PPS-15
The ETF Underyling Index is a modified market capitalization weighted index comprised of securities issued
by publicly traded companies involved primarily in the mining of gold or silver. The ETF Underyling Index was initially launched and published in October 2004.
Eligibility Criteria for Index Components
The ETF Underyling Index includes common stocks
or ADRs of selected companies that are involved in mining for gold and silver and that are listed for trading on the New York Stock Exchange, the NYSE Amex Stock Exchange or quoted on the NASDAQ Global Market. Only companies with a market
capitalization of greater than $100 million that have an average daily trading volume of at least 50,000 shares or ADRs over the past six months are eligible for inclusion in the ETF Underyling Index. NYSE Arca has the discretion to not include all
companies that meet the minimum criteria for inclusion.
Calculation of the ETF Underyling Index
The ETF Underyling Index is calculated by NYSE Arca on a price return basis. The calculation is based on the current modified market capitalization
divided by a divisor. The divisor was determined on the initial capitalization base of the ETF Underyling Index and the base level and may be adjusted as a result of corporate actions and composition changes, as described below. The level of the ETF
Underyling Index was set at 500.00 on December 20, 2002, which is the index base date. The ETF Underyling Index is calculated using the following formula:
Where:
t = day of calculation;
N = number of constituent equities in the ETF Underyling Index;
Qi,t = number of shares of
equity i on day t;
Mi,t = multiplier of equity i;
Ci,t = price of equity i on day t; and
DIV = current index divisor on day t.
Index Maintenance
The ETF Underyling
Index is reviewed quarterly to ensure that at least 90% of the ETF Underyling Index weight is accounted for by Index components that continue to meet the initial eligibility requirements. NYSE Arca may at any time and from time to time change the
number of securities comprising the group by adding or deleting one or more securities, or replacing one or more securities contained in the group with one or more substitute securities of its choice, if in NYSE Arcas discretion such addition,
deletion or substitution is necessary or appropriate to maintain the quality and/or character of the ETF Underyling Index. Components will be removed from the ETF Underyling Index during the quarterly review if the market capitalization falls below
$50 million or the traded average daily shares for the previous six months is lower than 25,000 shares.
At the time of the quarterly
rebalance, the component security weights (also referred to as the multiplier or share weight of each component security) will be modified to conform to the following asset diversification requirements:
(1) the weight of any single component security may not account for more than 20% of the total value of the ETF Underyling Index;
(2) the component securities are split into two subgroupslarge and small, which are ranked by market capitalization weight in the ETF Underyling
Index. Large securities are defined as having a starting Index weight greater than or equal to 5%. Small securities are defined as having a starting Index weight below 5%; and
(3) the aggregate weight of those component securities which individually represent more than 4.5% of the total value of the ETF Underyling Index may not account for more than 50% of the total Index
value.
The weights of the components securities (taking into account expected component changes and share adjustments) are modified in
accordance with the ETF Underyling Indexs diversification rules.
Diversification Rule 1: If any component stock exceeds 20% of the
total value of the ETF Underyling Index, then all stocks greater than 20% of the ETF Underyling Index are reduced to represent 20% of the value of the ETF Underyling Index. The aggregate amount by which all component stocks are reduced is
redistributed proportionately across the remaining stocks that represent less than 20% of the ETF Underyling Index value. After this redistribution, if any other stock then exceeds 20%, the stock is set to 20% of the ETF Underyling Index value and
the redistribution is repeated.
PPS-16
Diversification Rule 2: The components are sorted into two groups, large are components with a starting
index weight of 5% or greater and small are those that are under 5% (after any adjustments for Diversification Rule 1). Each group in aggregate will represent 50% of the final index weight. The weight of each of the large stocks will be scaled down
proportionately (with a floor of 5%) so that the aggregate weight of the large components will be reduced to represent 50% of the ETF Underyling Index. If any large component stock falls below a weight equal to the product of 5% and the proportion
by which the stocks were scaled down following this distribution, then the weight of the stock is set equal to 5% and the components with weights greater than 5% will be reduced proportionately. The weight of each of the small components will be
scaled up proportionately from the redistribution of the large components. If any small component stock exceeds a weight equal to the product of 4.5% and the proportion by which the stocks were scaled down following this distribution, then the
weight of the stock is set equal to 4.5%. The redistribution of weight to the remaining stocks is repeated until the entire amount has been redistributed.
Changes to the ETF Underyling Index composition and/or the component security weights in the ETF Underyling Index are determined and announced prior to taking effect, which typically occurs after the
close of trading on the third Friday of each calendar quarter month in connection with the quarterly Index rebalance. The share weight of each component security in the ETF Underyling Index portfolio remains fixed between quarterly reviews except in
the event of certain types of corporate actions such as stock splits, reverse stock splits, stock dividends, or similar events. The share weights used in the ETF Underyling Index calculation are not typically adjusted for shares issued or
repurchased between quarterly reviews. However, in the event of a merger between two components, the share weight of the surviving entity may be adjusted to account for any stock issued in the acquisition. NYSE Arca may substitute securities or
change the number of securities included in the ETF Underyling Index, based on changing conditions in the industry or in the event of certain types of corporate actions, including mergers, acquisitions, spin-offs, and reorganizations. In the event
of component or share weight changes to the ETF Underyling Index portfolio, the payment of dividends other than ordinary cash dividends, spin-offs, rights offerings, re-capitalization, or other corporate actions affecting a component security of the
ETF Underyling Index, the ETF Underyling Index divisor may be adjusted to ensure that there are no changes to the ETF Underyling Index level as a result of nonmarket forces.
PPS-17
Historical Information Regarding the Index
The following graph sets forth the historical performance of the Index based on the daily Index closing levels from January 2, 2008 through February 6, 2013. The closing level of the Index on
February 6, 2013 was 911.29.
We obtained the Index closing levels below from Bloomberg, L.P. We have not independently verified the
accuracy or completeness of the information obtained from Bloomberg, L.P. 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 Closing Value of the Index on any Call
Valuation Date or the Final Valuation Date. 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.
PPS-18
Historical Information Regarding the ETF
We obtained the historical trading price information in the chart and the graph below from Bloomberg, L.P. We have not independently verified the accuracy or completeness of the information obtained from
Bloomberg, L.P.
The historical prices of the ETF should not be taken as an indication of future performance, and no assurance can be given as
to the Closing Price of the ETF on the Final Valuation Date. We cannot give you assurance that the performance of the ETF will result in the return of any of your initial investment.
The following table sets forth the high and low closing prices of the ETF, as well as end-of-quarter closing prices, during the periods indicated below.
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Quarter / Period Ending
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Quarterly
High ($)
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Quarterly
Low ($)
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Quarterly
Close ($)
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March 31, 2008
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56.87
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44.85
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47.70
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June 30, 2008
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51.45
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41.61
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48.59
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September 30, 2008
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51.84
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27.35
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33.79
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December 31, 2008
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35.49
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15.83
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33.88
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March 31, 2009
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38.93
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27.15
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36.88
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June 30, 2009
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45.10
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30.80
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37.82
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September 30, 2009
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48.40
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34.05
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45.29
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December 31, 2009
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55.40
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40.92
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46.21
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March 31, 2010
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51.16
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39.48
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44.41
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June 30, 2010
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54.83
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45.36
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51.96
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September 30, 2010
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56.86
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46.80
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55.93
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December 31, 2010
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64.62
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53.67
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61.47
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March 31, 2011
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62.02
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52.46
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60.10
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June 30, 2011
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64.14
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51.10
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54.59
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September 30, 2011
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66.98
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53.02
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55.19
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December 31, 2011
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63.70
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49.22
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51.43
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March 31, 2012
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57.94
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48.05
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49.54
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June 30, 2012
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50.76
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39.08
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44.77
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September 30, 2012
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55.25
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40.40
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53.69
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December 31, 2012
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54.64
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44.16
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46.39
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February 6, 2013*
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47.53
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41.39
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42.54
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*
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High, low and closing prices are for the period starting January 1, 2013 and ending February 6, 2013
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PAST PERFORMANCE IS NOT INDICATIVE OF FUTURE RESULTS
PPS-19
The following graph sets forth the historical performance of the ETF based on daily closing prices from
January 2, 2008 through February 6, 2013. The closing price per share of the ETF on February 6, 2013 was $42.54.
PAST PERFORMANCE IS NOT INDICATIVE OF FUTURE RESULTS.
SUPPLEMENTAL PLAN OF DISTRIBUTION
We
will agree to sell to Barclays Capital Inc. (the
Agent
), and the Agent will agree to purchase from us, the principal amount of the Notes, and at the price, specified on the cover of the related pricing supplement, the document
that will be filed pursuant to Rule 424(b) containing the final pricing terms of the Notes. The Agent will commit to take and pay for all of the Notes, if any are taken.
PPS-20
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