424B2 1 a13-25516_27424b2.htm 424B2 - [BARC-AMER.FID572798] WTI CBEN W_LEVERAGE

 

CALCULATION OF REGISTRATION FEE

 

Title of Each Class of Securities Offered

 

 

Maximum Aggregate Offering Price

 

Amount of Registration Fee(1)

 

 

 

 

 

Global Medium-Term Notes, Series A

 

$2,700,000

 

$347.76

 

(1)            Calculated in accordance with Rule 457(r) of the Securities Act of 1933.

 



 

Pricing Supplement dated December 13, 2013

(To the Prospectus dated July 19, 2013 and

the Prospectus Supplement dated July 19, 2013)

Filed Pursuant to Rule 424(b)(2)

Registration No. 333-190038

 

GRAPHIC

$2,700,000

 

Leveraged Contingent Buffer Enhanced Notes due January 2, 2015

 

Linked to the Performance of WTI Crude

 

Global Medium-Term Notes, Series A

 

General

·                   Senior unsecured obligations of Barclays Bank PLC maturing January 2, 2015.

·                   Minimum denominations of $5,000 and integral multiples of $1,000 in excess thereof.

·                   The Notes priced on December 13, 2013 (the “pricing date”) and are expected to issue on or about December 19, 2013 * (the “issue date”).

 

Key Terms

Terms used in this pricing supplement, but not defined herein, shall have the meanings ascribed to them in the prospectus supplement.

Issuer:

Barclays Bank PLC

Reference Asset:

The settlement price of WTI crude oil (“WTI Crude”), as described under “Reference Assets—Commodities—Settlement Price” in the prospectus supplement. 

Contingent Minimum Return:

0.00%

Maximum Return:

22.05%, for a maximum payment at maturity of $1,220.50 per $1,000 principal amount Note

Barrier Level:

$77.28/barrel, which is 80.00% of the initial price

Upside Leverage Factor:

3.0

Payment at Maturity:

 

If the final price of WTI Crude is equal to or greater than the barrier level, you will receive at maturity a cash payment equal to the principal amount of your Notes plus the product of (i) 100% of your principal amount and (ii) the greater of (a) the contingent minimum return and (b) the reference asset return multiplied by the upside leverage factor, subject to the maximum return on the Notes. For example, if the reference asset return is 7.35% or more, you will receive the maximum return on the Notes of 22.05%, which entitles you to the maximum payment of $1,220.50 for every $1,000 principal amount Note that you hold.  Accordingly, if the final price of WTI Crude is equal to or greater than the barrier level, your payment per $1,000 principal amount Note will be calculated as follows, subject to the maximum return:

 

$1,000 + [$1,000 × the greater of (a) Contingent Minimum Return and (b) Reference Asset Return × Upside Leverage Factor]

 

If the final price of WTI Crude is below the barrier level, you will receive at maturity a cash payment equal to the principal amount of your Notes plus the product of (i) 100% of your principal amount and (ii) the reference asset return. Accordingly, if the final price of WTI Crude is below the barrier level, your payment per $1,000 principal amount Note will be calculated as follows:

 

$1,000 + [$1,000 × Reference Asset Return]

 

You may lose some or all of your principal if you invest in the Notes. If the final price of WTI Crude is below the barrier level, your Notes will be fully exposed to any declines in the reference asset from the initial price and you will lose some or all of your investment at maturity.

 

Any payment on the Notes, including any repayment of principal, is subject to the creditworthiness of Barclays Bank PLC and is not guaranteed by 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.  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.

Reference Asset Return:

The performance of the reference asset from the initial price to the final price, calculated as follows:

Final Price – Initial Price
Initial Price

Initial Price:

$96.60/barrel, the settlement price of WTI Crude on the pricing date.

Final Price:

The arithmetic average of the settlement price of WTI Crude on each of the five averaging dates (rounded to two decimal places).

Averaging Dates:

December 22, 2014, December 23, 2014, December 24, 2014, December 26, 2014, and December 29, 2014 (December 29, 2014, the “final averaging date”)

Maturity Date:

January 2, 2015

Calculation Agent:

Barclays Bank PLC

CUSIP/ISIN:

06741T3P0 / US06741T3P02

 

                    Subject to postponement in the event of a market disruption event as described under “Reference Assets— Commodities —Market Disruption Events Relating to Securities with a Commodity as the Reference Asset” in the prospectus supplement.

*                    We expect to deliver the Notes against payment on or about the fourth business day following the pricing date. Under Rule 15c6-1 under the Exchange Act, trades in the secondary market generally are required to settle in three business days, unless the parties to a trade expressly agree otherwise. Accordingly, purchasers who wish to trade the Notes on the pricing date will be required, by virtue of the fact that the Notes initially will settle in four business days (T+4), to specify alternative settlement arrangements to prevent a failed settlement.

 

 

Initial Issue Price1

Price to Public2

Agent’s Commission

Proceeds to Barclays Bank PLC

Per Note

$1,000

100%

1.00%

99.00%

Total

$2,700,000

$2,700,000

$27,000

$2,673,000

 

1                     Our estimated value of the Notes on the pricing date, based on our internal pricing models, is $984.20 per Note.  The estimated value is less than the initial issue price of the Notes.  See “Additional Information Regarding Our Estimated Value of the Notes” on page PS-8 of this pricing supplement.

2                     The price to the public for any single purchase by an investor in certain trust accounts, who is not being charged the full selling concession or fee by other dealers of approximately 1.00%, is 99.00%.  The price to the public for all other purchases of Notes is 100%.

 

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 PS-3 of this pricing supplement.

 

We may use this pricing supplement in the initial sale of Notes.  In addition, Barclays Capital Inc. or another of our affiliates may use this pricing supplement in market resale transactions in any Notes after their initial sale. Unless we or our agent informs you otherwise in the confirmation of sale, this pricing supplement is being used in a market resale transaction.

 

The Notes will not be listed on any U.S. securities exchange or quotation system. Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined that this pricing supplement is truthful or complete. Any representation to the contrary is a criminal offense.

 

The Notes are not bank deposits and are not insured by the U.S. Federal Deposit Insurance Corporation or any other governmental agency, nor are they obligations of, or guaranteed by, a bank.  The Notes are not guaranteed under the Federal Deposit Insurance Corporation’s Temporary Liquidity Guarantee Program.

 

GRAPHIC

 

JPMorgan

 

Placement Agent

 



 

ADDITIONAL TERMS SPECIFIC TO THE NOTES

 

You should read this pricing supplement together with the prospectus dated July 19, 2013, as supplemented by the prospectus supplement dated July 19, 2013 relating to our Global Medium-Term Notes, Series A, of which these Notes are a part.  This pricing supplement, together with the documents listed below, contains the terms of the Notes and supersedes all prior or contemporaneous oral statements as well as any other written materials including preliminary or indicative pricing terms, correspondence, trade ideas, structures for implementation, sample structures, brochures or other educational materials of ours.  You should carefully consider, among other things, the matters set forth under “Risk Factors” in the prospectus supplement, as the Notes involve risks not associated with conventional debt securities.  We urge you to consult your investment, legal, tax, accounting and other advisors before you invest in the Notes.

 

You may access these documents on the SEC website at www.sec.gov as follows (or if such address has changed, by reviewing our filings for the relevant date on the SEC website):

 

·                  Prospectus dated July 19, 2013

http://www.sec.gov/Archives/edgar/data/312070/000119312513295636/d570220df3asr.htm

 

·                  Prospectus Supplement dated July 19, 2013

http://www.sec.gov/Archives/edgar/data/312070/000119312513295715/d570220d424b3.htm

 

Our SEC file number is 1-10257.  As used in this pricing supplement, the “Company,” “we,” “us,” or “our” refers to Barclays Bank PLC.

 



 

What is the Total Return on the Notes at Maturity Assuming a Range of Performance for the Reference Asset?

 

The following table illustrates the hypothetical total return at maturity on the Notes.  The “total return” as used in this pricing supplement is the number, expressed as a percentage, that results from comparing the payment at maturity per $1,000 principal amount Note to $1,000.  The hypothetical total returns and examples set forth below reflect the initial price of USD 96.60/barrel and assume the final prices as set forth below.  The actual final price will be determined based on the settlement price of WTI Crude on each of the five averaging dates.  The hypothetical total returns set forth below are for illustrative purposes only and may not be the actual total returns applicable to a purchaser of the Notes.  The numbers appearing in the following table and examples have been rounded for ease of analysis.  The examples below do not take into account any tax consequences from investing in the Notes.

 

Final Price
(USD/barrel)
1

Reference
Asset Return

Payment at
Maturity

Total Return on
Notes

164.22

70.00%

$1,220.50

22.05%

154.56

60.00%

$1,220.50

22.05%

144.90

50.00%

$1,220.50

22.05%

135.24

40.00%

$1,220.50

22.05%

125.58

30.00%

$1,220.50

22.05%

115.92

20.00%

$1,220.50

22.05%

111.09

15.00%

$1,220.50

22.05%

106.26

10.00%

$1,220.50

22.05%

103.70

7.35%

$1,220.50

22.05%

101.43

5.00%

$1,150.00

15.00%

99.02

2.50%

$1,075.00

7.50%

96.60

0.00%

$1,000.00

0.00%

91.77

-5.00%

$1,000.00

0.00%

86.94

-10.00%

$1,000.00

0.00%

82.11

-15.00%

$1,000.00

0.00%

77.28

-20.00%

$1,000.00

0.00%

67.62

-30.00%

$700.00

-30.00%

57.96

-40.00%

$600.00

-40.00%

48.30

-50.00%

$500.00

-50.00%

38.64

-60.00%

$400.00

-60.00%

28.98

-70.00%

$300.00

-70.00%

19.32

-80.00%

$200.00

-80.00%

9.66

-90.00%

$100.00

-90.00%

0.00

-100.00%

$0.00

-100.00%

 

1  The final price will be the arithmetic average of the settlement price of WTI Crude on each of the five averaging dates.

 

Hypothetical Examples of Amounts Payable at Maturity

 

The following examples illustrate how the total returns set forth in the table above are calculated.

 

Example 1: The price of the reference asset increases from an initial price of USD 96.60/barrel to a final price of USD 99.02/barrel, resulting in a reference asset return of 2.50%.

 

Because the final price of WTI Crude was equal to or greater than the barrier level, and the reference asset return of 2.50% multiplied by the upside leverage factor is greater than the contingent minimum return, the investor receives a payment at maturity of $1,075.00 per $1,000 principal amount Note, calculated as follows:

 

$1,000 + [$1,000 x Reference Asset Return x Upside Leverage Factor]

 

$1,000 + [$1,000 x 2.50% x 3.0] = $1,075.00

 

Example 2: The price of the reference asset decreases from the initial price of USD 96.60/barrel to a final price of USD 86.94/barrel, resulting in a reference asset return of -10.00%.

 

Because the final price of WTI Crude was equal to or greater than the barrier level, and the reference asset return of -10.00% is less than the contingent minimum return, the investor receives a payment at maturity of $1,000.00 per $1,000 principal amount Note, calculated as follows:

 

$1,000 + [$1,000 x Contingent Minimum Return]

 

$1,000 + [$1,000 x 0.00%] = $1,000.00

 

PS-1



 

Example 3: The price of the reference asset increases from an initial price of USD 96.60/barrel to a final price of USD 111.09/barrel, resulting in a reference asset return of 15.00%.

 

Because the final price of WTI Crude was equal to or greater than the barrier level, and the reference asset return of 15.00% multiplied by the upside leverage factor is greater than the contingent minimum return and also greater than the maximum return on the Notes, the investor receives a payment at maturity of $1,220.50 per $1,000 principal amount Note (the maximum payment on the Notes), calculated as follows:

 

$1,000 + [$1,000 x Maximum Return]

 

$1,000 + [$1,000 x 22.05%] = $1,220.50

 

Example 4: The price of the reference asset decreases from the initial price of USD 96.60/barrel to a final price of USD 57.96/barrel, resulting in a reference asset return of -40.00%.

 

Because the final price of WTI Crude was below the barrier level, the investor receives a payment at maturity of $600.00 per $1,000 principal amount Note, calculated as follows:

 

$1,000 + [$1,000 x Reference Asset Return]

 

$1,000 + [$1,000 x -40.00%] = $600.00

 

Selected Purchase Considerations

 

·                  Market Disruption Events and Adjustments—The payment at maturity, the averaging dates, the maturity date, and the settlement price of the reference asset are subject to adjustment as described in the following sections of the prospectus supplement:

o                 For a description of what constitutes a market disruption event as well as the consequences of that market disruption event, see “Reference Assets—Commodities—Market Disruption Events Relating to Securities with a Commodity as the Reference Asset”; and

o                 For a description of further adjustments that may affect the reference asset, see “Reference Assets—Commodities—Discontinuation of Trading; Alteration of Method of Calculation”.

·                  Appreciation Potential—The Notes provide the opportunity to enhance returns, to the extent the final price of WTI Crude is greater than the initial price, by entitling you to a return equal to the product of the reference asset return and upside leverage factor, subject to the maximum return on the Notes.

·                  Limited Protection Against Loss—Payment at maturity of the principal amount of the Notes is protected against a decline in the reference asset return but only to the extent that the final price of WTI Crude does not fall below the barrier level.  Because the Notes are our senior unsecured obligations, payment of any amount at maturity is subject to our ability to pay our obligations as they become due 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 “Selected Risk Considerations—Credit of Issuer” in this pricing supplement.

·                  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.  As described in the prospectus supplement, this section applies to you only if you are a U.S. holder (as defined in the accompanying prospectus supplement) and you hold your Notes as capital assets for tax purposes and does not apply to you if you are a member of a class of holders subject to special rules or are otherwise excluded from the discussion in the prospectus supplement (for example, if you did not purchase your Notes in the initial issuance of the Notes).

 

The U.S. federal income tax consequences of your investment in the Notes are uncertain and the Internal Revenue Service could assert that the Notes should be taxed in a manner that is different than described below.  Pursuant to the terms of the Notes, Barclays Bank PLC and you agree, in the absence of a change in law or an administrative or judicial ruling to the contrary, to characterize your Notes as a pre-paid cash-settled derivative contract with respect to the reference asset.  If your Notes are so treated, you should generally recognize capital gain or loss upon the sale or maturity of your Notes in an amount equal to the difference between the amount you receive at such time and the amount you paid for your Notes.  Such gain or loss should generally be long-term capital gain or loss if you have held your Notes for more than one year.

 

In the opinion of our special tax counsel, Sullivan & Cromwell LLP, it would be reasonable to treat your Notes in the manner described above.  This opinion assumes that the description of the terms of the Notes in this pricing supplement is materially correct.

 

As discussed further in the accompanying prospectus supplement, the Treasury Department and the Internal Revenue Service are actively considering various alternative treatments that may apply to instruments such as the Notes, possibly with retroactive effect.  Other alternative treatments for your Notes may also be possible under current law.  For example, it is possible that the Notes could be treated as a debt instrument that is subject to the special tax rules governing contingent

 

PS-2



 

payment debt instruments.  If your Notes are so treated, you would be required to accrue interest income over the term of your Notes and you would recognize gain or loss upon the sale or maturity of your Notes in an amount equal to the difference, if any, between the amount you receive at such time and your adjusted basis in your Notes.  Any gain you recognize upon the sale or maturity of your Notes would be ordinary income and any loss recognized by you at such time would generally be ordinary loss to the extent of interest you included in income in the current or previous taxable years with respect to your Notes, and thereafter would be capital loss.

 

Furthermore, because each of the averaging dates occurs in 2014, it is possible that you will be treated as having disposed of your Notes for tax purposes in 2014 even though you will not receive any proceeds from the Notes until 2015. If your Notes are so treated and you are a calendar year taxpayer, you may be subject to tax in the 2014 taxable year at 2014 tax rates in respect of any gain that you realize in respect of the Notes even though the Maturity Date for the Notes is in 2015.

 

For a further discussion of the tax treatment of your Notes as well as other possible alternative characterizations, please see the discussion under the heading “Certain U.S. Federal Income Tax Considerations—Certain Notes Treated as Forward Contracts or Derivative Contracts” in the accompanying prospectus supplement.  You should consult your tax advisor as to the possible alternative treatments in respect of the Notes.  For additional, important considerations related to tax risks associated with investing in the Notes, you should also examine the discussion in “Selected Risk Considerations—Taxes”, in this pricing supplement.

 

Selected Risk Considerations

 

An investment in the Notes involves significant risks. Investing in the Notes is not equivalent to investing directly in the reference asset or any futures contracts relating to the reference asset.  These risks are explained in more detail in the “Risk Factors” sections of the prospectus supplement, including but not limited to the risk factors discussed under the following headings:

 

o                 “Risk Factors—Risks Relating to All Securities”;

o                 “Risk Factors—Additional Risks Relating to Notes Which Pay No Interest”;

o                 “Risk Factors—Additional Risks Relating to Securities with a Maximum Return, Maximum Rate, Ceiling or Cap”;

o                 “Risk Factors—Additional Risks Relating to Notes Which Are Not Characterized as Being Fully Principal Protected or Are Characterized as Being Partially Protected or Contingently Protected”;

o                 “Risk Factors—Additional Risks Relating to Securities with a Barrier Percentage or a Barrier Level”; and

o                 “Risk Factors—Additional Risks Relating to Securities with Reference Assets That Are Commodities, an Index Containing Commodities, Shares or Other Interests in an Exchange-Traded Fund Invested in Commodities or Based in Part on Commodities”.

 

In addition to the risks discussed under the headings above, you should consider the following:

 

·                  Your Investment in the Notes May Result in a Loss—The Notes do not guarantee any return of principal.  The return on the Notes at maturity is linked to the performance of the reference asset and will depend on whether, and the extent to which, the reference asset return is positive or negative.  If the final price of WTI Crude declines below the barrier level, your investment will be fully exposed to any decline in the reference asset from the initial price and you may lose up to 100% of your initial investment

·                  No Interest Payments—As a holder of the Notes, you will not receive interest payments.

·                  Your Maximum Gain on the Notes Is Limited to the Maximum Return—If the final price of WTI Crude is greater than the initial price, for each $1,000 principal amount Note, you will receive at maturity $1,000 plus an additional amount that will not exceed a predetermined percentage of the principal amount, regardless of the appreciation in the reference asset, which may be significant.  We refer to this percentage as the maximum return on the Notes, which is set to equal 22.05%.

·                  Lack of LiquidityThe 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.

·                  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.  In the event Barclays Bank PLC were to default on its obligations, you may not receive any amounts owed to you under the terms of the Notes.

·                  Potential Conflicts— We and our affiliates play a variety of roles in connection with the issuance of the Notes, including acting as calculation agent and hedging our obligations under the Notes.  In performing these duties, the economic interests of the calculation agent and other affiliates of ours are potentially adverse to your interests as an investor in the Notes.

 

PS-3



 

·                  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 and whether all or part of the gain you may recognize upon the sale or maturity of an instrument such as the Notes should be treated as ordinary income.  Similarly, the Internal Revenue Service and the Treasury Department have current projects open with regard to the tax treatment of pre-paid forward contracts and contingent notional principal contracts.  While it is impossible to anticipate how any ultimate guidance would affect the tax treatment of instruments such as the 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 over the term of an instrument such as the Notes even though you will not receive any payments with respect to the Notes until maturity.  The outcome of this process is uncertain.  You should consult your tax advisor as to the possible alternative treatments in respect of the Notes.

·                  The Payment at Maturity on Your Notes is Not Based on the Price of WTI Crude at Any Time Other than the Averaging Dates —Whether the barrier level has been breached and the reference asset return will be based solely on the settlement price of WTI Crude on the five averaging dates (subject to adjustments as described in the prospectus supplement). Therefore, if the price of WTI Crude drops precipitously on one or more of the averaging dates, 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 payment at maturity been linked to the price of WTI Crude at a time prior to such drop. Although the price of WTI Crude on the maturity date or at other times during the life of your Notes may be higher than the settlement price of WTI Crude on the averaging dates, you will not benefit from the price of WTI Crude at any time other than on the averaging dates.

·                  Suitability of the Notes for Investment—You should reach a decision to invest in the Notes after carefully considering, with your advisors, the suitability of the Notes in light of your investment objectives and the specific information set out in this pricing supplement, the prospectus supplement, and the prospectus. Neither the Issuer nor Barclays Capital Inc. makes any recommendation as to the suitability of the Notes for investment.

·                  The Notes May be Subject to Certain Risks Specific to WTI CrudeAs an energy-related commodity, WTI Crude may be subject to a number of risks specific to energy-related commodities, and in particular to WTI Crude that may adversely affect its price or result in price volatility. These may include, among others:

 

o                 changes in the level of industrial and commercial activity with high levels of energy  demand;

o                 disruptions in the supply chain or in the production or supply of other energy sources;

o                 technological advances or the discovery of new oil reserves leading to increases in the worldwide production of crude oil;

o                 further development and commercial exploitation of alternative energy sources, including solar, wind or geothermal energy;

o                 adjustments to inventory;

o                 variations in production and shipping costs;

o                 geopolitical events; and

o                 costs associated with regulatory compliance, including environmental regulations; and changes in industrial, government and consumer demand, both in individual consuming nations and internationally.

 

These factors interrelate in complex ways, and the effect of one factor may offset or enhance the effect of another factor and may adversely affect the market value of the Notes.

·                  The Notes May Be Subject to Certain Risks Specific to WTI Crude Prices—Trading in commodity futures contracts, including futures contracts for WTI Crude, is speculative and can be extremely volatile.  It is expected that generally the market value of the Notes will depend primarily on the market price of crude oil. Crude oil prices are subject to volatile price movements over short periods of time and are affected by numerous factors and events, as described herein. Crude oil prices are generally more volatile and subject to greater dislocation than prices of other commodities.  Crude oil prices may change rapidly over a short period of time as a result of supply disruptions stemming from world events, or domestic problems such as refinery or pipeline outages.  These events tend to effect prices worldwide, regardless of the location of the event.  Market expectations about these events and speculative activity also cause prices to fluctuate.  Over the past few years, crude oil prices have experienced unprecedented volatility and have reached historically high levels followed by precipitous declines. There can be no assurance that crude oil prices will reach their historic highs again or that such volatility will subside. It is possible that lower prices, or increased volatility, will adversely affect the price of WTI Crude, and as a result, the market value of your Notes and the amount you receive at maturity, if any.

 

In addition, crude oil prices are determined with significant influence by the Organization of Petroleum Exporting Countries (“OPEC”). OPEC has the potential to influence oil prices world-wide because its members possess a significant portion of the world’s oil supply. Further, if oil demand rises quickly or supply declines unexpectedly due to refinery production problems or lagging imports, stocks of oil may decline rapidly. When stocks are low and falling, some wholesalers may become concerned that supplies may not be adequate over the short term and bid higher for the available product, leading to further price increases. It is impossible to predict the aggregate effect of all or any combination of these factors on the price of crude

 

PS-4



 

oil.  Sudden and dramatic changes in the futures market may also occur, for example, upon commencement of hostilities, or cessation of existing hostilities, that may exist in countries or regions producing oil, the introduction of new or previously withheld supplies into the market or the introduction of substitute products or commodities.  Any such changes in the supply and demand of crude oil may result in significant volatility in the price of the reference asset and accordingly, may adversely affect the market value of your Notes and the payment you receive at maturity, if any.

·                  Many Economic and Market Factors Will Impact the Value of the Notes— In addition to the settlement price of the reference asset on any trading day, the value of the Notes will be affected by a number of economic and market factors that may either offset or magnify each other, including:

 

o                 the expected volatility of the price of WTI Crude, and of the prices of exchange-traded futures contracts for the purchase or delivery of WTI Crude;

o                 the time to maturity of the Notes;

o                 interest and yield rates in the market generally;

o                 a variety of economic, financial, political, regulatory or judicial events;

o                 global supply and demand for WTI Crude, and supply and demand for exchange-traded futures contracts for the purchase or delivery of WTI Crude;

o                 supply and demand for the Notes; and

o                 our creditworthiness, including actual or anticipated downgrades in our credit ratings.

 

·                  Owning the Notes is not the Same as Owning WTI Crude, Futures Contracts for WTI Crude or Certain Other Commodity Related Contracts Directly — The return on your Notes will not reflect the return you would realize if you had actually purchased WTI Crude directly, futures contracts for WTI Crude, or any exchange-traded or over-the-counter instruments based on the price of WTI Crude.  You will not have any rights that holders of such assets or instruments have.

·                  Prices of Commodities and Commodity Futures Contracts are Highly Volatile and May Change Unpredictably — Commodity prices are highly volatile and, in many sectors, have experienced increased volatility in recent periods. Commodity prices are affected by numerous factors including: changes in supply and demand relationships (whether actual, perceived, anticipated, unanticipated or unrealized); weather; agriculture; trade; fiscal, monetary and exchange control programs; domestic and foreign political and economic events and policies; disease; pestilence; technological developments; changes in interest rates, whether through governmental action or market movements; monetary and other governmental policies, action and inaction; macroeconomic or geopolitical and military events, including political instability in some oil-producing countries; and natural or nuclear disasters. Those events tend to affect prices worldwide, regardless of the location of the event. Market expectations about these events and speculative activity also cause prices to fluctuate. These factors may adversely affect the performance of the reference asset and, as a result, the market value of the Notes, and the payment you will receive on the Notes, if any.

·                  Suspension or Disruptions of Market Trading in Commodities and Related Futures May Adversely Affect the Value of the Notes — The commodity futures markets are subject to temporary distortions or other disruptions due to various factors, including the lack of liquidity in the markets, the participation of speculators and potential government regulation and intervention.  Certain exchanges, or the U.S. Commodity Futures Trading Commission, commonly referred to as the “CFTC”, could suspend or terminate trading in a particular futures contract or contracts in order to address market emergencies.  In addition, U.S. futures exchanges and some foreign exchanges have regulations that limit the amount of fluctuation in some futures contract prices that may occur during a single business day.  These limits are generally referred to as “daily price fluctuation limits” and the maximum or minimum price of a contract on any given day as a result of these limits is referred to as a “limit price”.  Once the limit price has been reached in a particular contract, no trades may be made at a price beyond the limit, or trading may be limited for a set period of time.  Limit prices have the effect of precluding trading in a particular contract or forcing the liquidation of contracts at potentially disadvantageous times or prices.  These circumstances could adversely affect the value of the reference asset, therefore, the value of the Notes.

·                  The Notes Offer Exposure to Futures Contracts and Not Direct Exposure to Physical Commodities — The Notes will reflect a return based on the performance of the relevant nearby NYMEX-traded WTI crude oil contract and do not provide exposure to crude oil spot prices.  The price of a commodity futures contract reflects the expected value of the commodity upon delivery in the future, whereas the spot price of a commodity reflects the immediate delivery value of the commodity.  A variety of factors can lead to a disparity between the expected future price of a commodity and the spot price at a given point in time, such as the cost of storing the commodity for the term of the futures contract, interest charges incurred to finance the purchase of the commodity and expectations concerning supply and demand for the commodity.  The price movement of a futures contract is typically correlated with the movements of the spot price of the reference commodity, but the correlation is generally imperfect and price movements in the spot market may not be reflected in the futures market (and vice versa).  Accordingly, the Notes may underperform a similar investment that reflects the return on the physical commodity.

·                  Changes in Law or Regulation Relating to Commodity Futures Contracts May Adversely Affect the Market Value of the Notes and the Amounts Payable on Your Notes Commodity futures contracts, such as the reference asset, are subject to legal and regulatory regimes that are in the process of changing in the United States and, in some cases, in other

 

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countries. The Dodd-Frank Wall Street Reform and Consumer Protection Act, commonly known as the “Dodd-Frank Act”, provides for substantial changes in the regulation of the futures and over-the-counter derivatives markets. Among other things, the Dodd-Frank Act is intended to limit speculation and increase transparency in the commodity derivatives markets and regulate the over-the-counter derivatives markets. The legislation requires regulators, including the CFTC, to adopt rules on a variety of issues, many of which have been adopted and have become effective. In addition, certain significant components of the Dodd-Frank Act regulatory scheme, including registration and reporting requirements, as well as centralized clearing requirements for certain products and market participants, have been implemented. However, the Dodd-Frank Act regulatory scheme has not yet been fully implemented, and the ultimate impact of the regulations on the markets and market participants cannot yet be determined.

 

Among other things, the legislation requires that most over-the-counter transactions be executed on organized exchanges or facilities and be cleared through regulated clearing houses, and requires registration of, and imposes regulations on, swap dealers and major swap participants. The legislation also requires the CFTC to adopt rules with respect to the establishment of limits on futures and swap positions that are not entered into or maintained for “bona fide” hedging purposes, as defined in the legislation, and the CFTC has adopted such rules. In addition, the legislation requires the CFTC to apply its position limits across the futures positions held by a market participant on any exchange or trading facility, together with its positions in swaps that are “economically equivalent” to the specified exchange-traded futures that are subject to the position limits.  The enactment of the Dodd-Frank Act, and the CFTC’s adoption of rules on position limits, could limit the extent to which entities can enter into transactions in exchange-traded futures contracts as well as related swaps and could make participation in the markets more burdensome and expensive.  Any such limitations could restrict or prevent our ability to hedge our obligations under the Notes.  Industry trade groups filed a lawsuit against the CFTC challenging the rules adopted by the CFTC on position limits. On September 28, 2012, the U.S. District Court for the District of Columbia granted a summary judgment motion in favor of the industry trade groups that vacated and remanded the position limit rules adopted by the CFTC. However, the CFTC may contest this ruling.  If the ruling is reversed, the proposed position limits may become effective in the future.  In addition, if the ruling is not reversed, the CFTC will promulgate further rules, which may be similar to the rules previously adopted.  The rules ultimately adopted by the CFTC will likely limit transactions in the futures and over-the-counter derivative markets and could substantially reduce liquidity and increase commodity market volatility. This could in turn adversely affect the prices of such contracts and, in turn, the market value of the Notes and the amounts payable on the Notes.  In addition, other parts of the legislation, by increasing regulation of, and imposing additional costs on, swap transactions, could reduce trading in the swap market and therefore in the futures markets, which would further restrict liquidity, increase volatility and adversely affect prices, which could in turn adversely affect the value of the reference asset.

 

Other regulatory organizations have proposed, and in the future may propose, further reforms similar to those enacted by the Dodd-Frank Act or other legislation which could have an adverse impact on the liquidity and depth of the commodities, futures and derivatives markets.  For example, the European Commission recently published a proposal developed by the European Securities and Markets Authority (“ESMA)”, which updates the Markets in Financial Instruments Directive, commonly known as “MiFID II,” and the Markets in Financial Instruments Regulation, commonly known as “MiFIR.”  The scope of the final regulations and the degree to which member states will be allowed discretion in implementing the directive is yet to be seen.  If these regulations are adopted, including, for example, regulations requiring position limits, they could substantially reduce liquidity and increase volatility in the commodities futures contracts such as the reference asset, which could adversely affect the prices of such contracts and, in turn, the market value of the Notes and the amounts payable on the Notes at maturity.   The European Commission has also adopted the European Market Infrastructure Regulation (“EMIR”), which requires many over-the-counter derivatives to be centrally cleared and, together with technical standards published and to be published by ESMA, will establish margin and capital requirements for non-centrally cleared over-the-counter derivatives.   There exists potential for inconsistency between regulations issued by the CFTC and technical standards adopted under EMIR, which could lead to market fragmentation.

·                  The Estimated Value of Your Notes Might be Lower if Such Estimated Value Were Based on the Levels at Which Our Debt Securities Trade in the Secondary Market—The estimated value of your Notes on the pricing date is based on a number of variables, including our internal funding rates.  Our internal funding rates may vary from the levels at which our benchmark debt securities trade in the secondary market.  As a result of this difference, the estimated value referenced above may be lower if such estimated value were based on the levels at which our benchmark debt securities trade in the secondary market.

·                  The Estimated Value of Your Notes is Lower Than the Initial Issue Price of Your Notes—The estimated value of your Notes on the pricing date is lower than the initial issue price of your Notes.  The difference between the initial issue price of your Notes and the estimated value of the Notes is a result of certain factors, such as any sales commissions paid to Barclays Capital Inc. or another affiliate of ours, any selling concessions, discounts, commissions or fees allowed or paid to non-affiliated intermediaries, the estimated profit that we or any of our affiliates expect to earn in connection with structuring the Notes, the estimated cost which we may incur in hedging our obligations under the Notes, and estimated development and other costs which we may incur in connection with the Notes.

·                  The Estimated Value of the Notes is Based on Our Internal Pricing Models, Which May Prove to be Inaccurate and May be Different from the Pricing Models of Other Financial Institutions—The estimated value of your Notes on the

 

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pricing date is based on our internal pricing models, which take into account a number of variables and are based on a number of subjective assumptions, which may or may not materialize.  These variables and assumptions are not evaluated or verified on an independent basis. Further, our pricing models may be different from other financial institutions’ pricing models and the methodologies used by us to estimate the value of the Notes may not be consistent with those of other financial institutions which may be purchasers or sellers of Notes in the secondary market.  As a result, the secondary market price of your Notes may be materially different from the estimated value of the Notes determined by reference to our internal pricing models.

·                  The Estimated Value of Your Notes Is Not a Prediction of the Prices at Which You May Sell Your Notes in the Secondary Market, if any, and Such Secondary Market Prices, If Any, Will Likely be Lower Than the Initial Issue Price of Your Notes and Maybe Lower Than the Estimated Value of Your Notes—The estimated value of the Notes will not be a prediction of the prices at which Barclays Capital Inc., other affiliates of ours or third parties may be willing to purchase the Notes from you in secondary market transactions (if they are willing to purchase, which they are not obligated to do).  The price at which you may be able to sell your Notes in the secondary market at any time will be influenced by many factors that cannot be predicted, such as market conditions, and any bid and ask spread for similar sized trades, and may be substantially less than our estimated value of the Notes.  Further, as secondary market prices of your Notes take into account the levels at which our debt securities trade in the secondary market, and do not take into account our various costs related to the Notes such as fees, commissions, discounts, and the costs of hedging our obligations under the Notes, secondary market prices of your Notes will likely be lower than the initial issue price of your Notes.  As a result, the price, at which Barclays Capital Inc., other affiliates of ours or third parties may be willing to purchase the Notes from you in secondary market transactions, if any, 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.

·                  The Temporary Price at Which We May Initially Buy The Notes in the Secondary Market And the Value We May Initially Use for Customer Account Statements, If We Provide Any Customer Account Statements At All, May Not Be Indicative of Future Prices of Your Notes—Assuming that all relevant factors remain constant after the pricing date, the price at which Barclays Capital Inc. may initially buy or sell the Notes in the secondary market (if Barclays Capital Inc. makes a market in the Notes, which it is not obligated to do) and the value that we may initially use for customer account statements, if we provide any customer account statements at all, may exceed our estimated value of the Notes on the pricing date, as well as the secondary market value of the Notes, for a temporary period after the initial issue date of the Notes.  The price at which Barclays Capital Inc. may initially buy or sell the Notes in the secondary market and the value that we may initially use for customer account statements may not be indicative of future prices of your Notes.

·                  We and Our Affiliates May Engage in Various Activities or Make Determinations That Could Materially Affect Your Notes in Various Ways and Create Conflicts of Interest—We and our affiliates establish the offering price of the Notes for initial sale to the public, and the offering price is not based upon any independent verification or valuation.  Additionally, the role played by Barclays Capital Inc., as a dealer in the Notes, could present it with significant conflicts of interest with the role of Barclays Bank PLC, as issuer of the Notes. For example, Barclays Capital Inc. or its representatives may derive compensation or financial benefit from the distribution of the Notes and such compensation or financial benefit may serve as an incentive to sell these Notes instead of other investments.  We may pay dealer compensation to any of our affiliates acting as agents or dealers in connection with the distribution of the Notes.  Furthermore, we and our affiliates make markets in and trade various financial instruments or products for their own accounts and for the account of their clients and otherwise provide investment banking and other financial services with respect to these financial instruments and products. These financial instruments and products may include securities, instruments or assets that may serve as the underliers, basket underliers or constituents of the underliers of the Notes.  Such market making, trading activities, other investment banking and financial services may negatively impact the value of the Notes.  Furthermore, in any such market making, trading activities, and other services, we or our affiliates may take positions or take actions that are inconsistent with, or adverse to, the investment objectives of the holders of the Notes.  We and our affiliates have no obligation to take the needs of any buyer, seller or holder of the Notes into account in conducting these activities.

 

Historical Information

 

The following graph sets forth the historical performance of the reference asset based on the daily settlement price from January 2, 2002 through December 13, 2013.  The settlement price of the reference asset on December 13, 2013 was $96.60/barrel.

 

We obtained the information 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 reference asset should not be taken as an indication of future performance, and no assurance can be given as to the settlement price of the reference asset on any day during the term of the Notes, including the averaging dates.  We cannot give you assurance that the performance of the reference asset will result in the return of any of your initial investment.

 

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PAST PERFORMANCE IS NOT INDICATIVE OF FUTURE RESULTS.

 

Certain Employee Retirement Income Security Act Considerations

 

Your purchase of a Note in an Individual Retirement Account (an “IRA”), will be deemed to be a representation and warranty by you, as a fiduciary of the IRA and also on behalf of the IRA, that (i) neither the issuer, the placement agent nor any of their respective affiliates has or exercises any discretionary authority or control or acts in a fiduciary capacity with respect to the IRA assets used to purchase the Note or renders investment advice (within the meaning of Section 3(21)(A)(ii) of the Employee Retirement Income Security Act (“ERISA”)) with respect to any such IRA assets and (ii) in connection with the purchase of the Note, the IRA will pay no more than “adequate consideration” (within the meaning of Section 408(b)(17) of ERISA) and in connection with any redemption of the Note pursuant to its terms will receive at least adequate consideration, and, in making the foregoing representations and warranties, you have (x) applied sound business principles in determining whether fair market value will be paid, and (y) made such determination acting in good faith.

 

Additional Information Regarding Our Estimated Value of the Notes

 

Our internal pricing models take into account a number of variables and are based on a number of subjective assumptions, which may or may not materialize, typically including volatility, interest rates, and our internal funding rates.  Our internal funding rates (which are our internally published borrowing rates based on variables such as market benchmarks, our appetite for borrowing, and our existing obligations coming to maturity) may vary from the levels at which our benchmark debt securities trade in the secondary market.  Our estimated value on the pricing date is based on our internal funding rates.  Our estimated value of the Notes may be lower if such valuation were based on the levels at which our benchmark debt securities trade in the secondary market.

 

Our estimated value of the Notes on the pricing date is less than the initial issue price of the Notes.  The difference between the initial issue price of the Notes and our estimated value of the Notes results from several factors, including any sales commissions paid to Barclays Capital Inc. or another affiliate of ours, any selling concessions, discounts, commissions or fees allowed or paid to non-affiliated intermediaries, the estimated profit that we or any of our affiliates expect to earn in connection with structuring the Notes, the estimated cost which we may incur in hedging our obligations under the Notes, and estimated development and other costs which we may incur in connection with the Notes.

 

Our estimated value on the pricing date is not a prediction of the price at which the Notes may trade in the secondary market, nor will it be the price at which Barclays Capital Inc. may buy or sell the Notes in the secondary market. Subject to normal market and funding conditions, Barclays Capital Inc. or another affiliate of ours intends to offer to purchase the Notes in the secondary market but it is not obligated to do so.

 

Assuming that all relevant factors remain constant after pricing date, the price at which Barclays Capital Inc. may initially buy or sell the Notes in the secondary market, if any, and the value that we may initially use for customer account statements, if we provide any customer account statements at all, may exceed our estimated value on the pricing date for a temporary period expected to be approximately three months after the initial issue date of the Notes because, in our discretion, we may elect to effectively reimburse to

 

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investors a portion of the estimated cost of hedging our obligations under the Notes and other costs in connection with the Notes which we will no longer expect to incur over the term of the Notes.  We made such discretionary election and determined this temporary reimbursement period on the basis of a number of factors, including the tenor of the Notes and any agreement we may have with the distributors of the Notes.  The amount of our estimated costs which we effectively reimburse to investors in this way may not be allocated ratably throughout the reimbursement period, and we may discontinue such reimbursement at any time or revise the duration of the reimbursement period after the initial issue date of the Notes based on changes in market conditions and other factors that cannot be predicted.

 

We urge you to read the “Selected Risk Considerations” beginning on page PS-3 of this pricing supplement.

 

Supplemental Plan of Distribution

 

JPMorgan Chase Bank, N.A. and JPMorgan Securities LLC will act as placement agents for the Notes pursuant to separate placement agency agreements with the issuer and will receive a fee pursuant to its agreement that will not exceed $10.00 per $1,000 principal amount Note. JPMorgan Securities LLC may act on behalf of an affiliate and may reallow all or a portion of fees received in connection with the distribution of the Notes to such affiliate.

 

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