Free Writing Prospectus (To the Prospectus dated July 19, 2013, the |
Subject to Completion Preliminary Term Sheet dated April 23, 2015 |
Filed Pursuant to Rule 433 Registration Statement No. 333-190038 |
The notes are being issued by Barclays Bank PLC (Barclays). There are important differences between the notes and a conventional debt security, including different investment risks. See Risk Factors and Additional Risk Factors beginning on page TS-7 of this term sheet and Risk Factors beginning on page PS-6 of product supplement EQUITY INDICES ARN-1.
Our initial estimated value of the notes, based on our internal pricing models, is expected to be between $9.25 and $9.58 per unit on the pricing date, which is less than the public offering price listed below. See Summary on the following page, Risk Factors beginning on page TS-7 of this term sheet and Structuring the Notes on page TS-12 of this term sheet.
By acquiring the notes, you acknowledge, agree to be bound by, and consent to the exercise of any U.K. Bail-In Power by the relevant U.K. resolution authority. All payments are subject to the exercise of any U.K. Bail-in Power by the relevant U.K. resolution authority. See Consent to U.K. Bail-in Power on page TS-3 and Risk Factors on page TS-7 of this term sheet.
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None of the Securities and Exchange Commission (the SEC), any state securities commission, or any other regulatory body has approved or disapproved of these securities or determined if this Note Prospectus (as defined below) is truthful or complete. Any representation to the contrary is a criminal offense.
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Per Unit |
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Total |
Public offering price(1)(2) |
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$ 10.00 |
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$ |
Underwriting discount(1)(2) |
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$ 0.20 |
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$ |
Proceeds, before expenses, to Barclays |
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$ 9.80 |
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$ |
(1) For any purchase of 500,000 units or more in a single transaction by an individual investor, the public offering price and the underwriting discount will be $9.95 per unit and $0.15 per unit, respectively.
(2) For any purchase by certain fee-based trusts and discretionary accounts managed by U.S. Trust operating through Bank of America, N.A., the public offering price and underwriting discount will be $9.80 per unit and $0.00 per unit, respectively.
The notes:
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Are Not FDIC Insured |
Are Not Bank Guaranteed |
May Lose Value |
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Merrill Lynch & Co.
May , 2015
Accelerated Return Notes® Linked to the JPX-Nikkei Index 400, due July , 2016 |
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The Accelerated Return Notes® Linked to the JPX-Nikkei Index 400, due July , 2016 (the notes) are our senior unsecured debt securities. The notes are not guaranteed or insured by the Federal Deposit Insurance Corporation or any other governmental agency of the United States, the United Kingdom or any other jurisdiction or secured by collateral. The notes will rank equally with all of our other unsecured and unsubordinated debt. Any payments due on the notes, including any repayment of principal, will be subject to the credit risk of Barclays and to the exercise of any U.K. Bail-in Power (as described herein) or any other resolution measure by any relevant U.K. resolution authority. The notes provide you a leveraged return, subject to a cap, if the Ending Value of the Market Measure, which is the JPX-Nikkei Index 400 (the Index), is greater than its Starting Value. If the Ending Value is less than the Starting Value, you will lose all or a portion of the principal amount of your notes. Payments on the notes, including the amount you receive at maturity, will be calculated based on the $10 principal amount per unit and will depend on the performance of the Index, subject to our credit risk. See Terms of the Notes below.
On the cover page of this term sheet, we have provided the estimated value range for the notes. This range of estimated values was determined based on our internal pricing models, which take into account a number of variables, including our internal funding rates, which are our internally published borrowing rates we use to issue market-linked investments, and the economic terms of certain related hedging arrangements. This range of estimated values may not correlate on a linear basis with the range of Capped Value for the notes. The estimated value of the notes calculated on the pricing date is expected to be less than the public offering price and will be set forth in the final term sheet made available to investors in the notes.
The economic terms of the notes (including the Capped Value) are based on our internal funding rates, which may vary from the rates at which our benchmark debt securities trade in the secondary market, and the economic terms of certain related hedging arrangements. The difference between these rates, as well as the underwriting discount, the hedging-related charge and other amounts described below, will reduce the economic terms of the notes. For more information about the estimated value and structuring the notes, see Structuring the Notes on page TS-12.
Terms of the Notes
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Redemption Amount Determination
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Issuer: |
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Barclays Bank PLC (Barclays) |
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On the maturity date, you will receive a cash payment per unit determined as follows:
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Principal Amount: |
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$10.00 per unit |
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Term: |
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Approximately 14 months |
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Market Measure: |
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JPX-Nikkei Index 400 (Bloomberg symbol: JPNK400), a price return index. |
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Starting Value: |
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The closing level of the Market Measure on the pricing date |
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Ending Value: |
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The average of the closing levels of the Market Measure on each scheduled calculation day occurring during the maturity valuation period. The calculation days are subject to postponement in the event of Market Disruption Events, as described beginning on page PS-18 of product supplement EQUITY INDICES ARN-1. |
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Participation Rate: |
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300% |
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Capped Value: |
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[$11.20 to $11.60] per unit, which represents a return of [12% to 16%] over the principal amount. The actual Capped Value will be determined on the pricing date. |
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Maturity Valuation Period: |
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Five scheduled calculation days shortly before the maturity date. |
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Fees Charged: |
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The public offering price of the notes includes the underwriting discount of $0.20 per unit as listed on the cover page and an additional charge of $0.075 per unit more fully described on page TS-12. |
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Calculation Agents: |
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Barclays and Merrill Lynch, Pierce, Fenner & Smith Incorporated (MLPF&S). |
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Accelerated Return Notes® |
Accelerated Return Notes® Linked to the JPX-Nikkei Index 400, due July , 2016 |
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The terms and risks of the notes are contained in this term sheet and the documents listed below (together, the Note Prospectus). The documents have been filed as part of a registration statement with the SEC, which may, without cost, be accessed on the SEC website as indicated below or obtained from MLPF&S by calling 1-800-294-1322:
¡ Product supplement EQUITY INDICES ARN-1 dated July 31, 2013:
http://www.sec.gov/Archives/edgar/data/312070/000119312513311888/d576655d424b2.htm
¡ Series A MTN prospectus supplement dated July 19, 2013:
http://www.sec.gov/Archives/edgar/data/312070/000119312513295715/d570220d424b3.htm
¡ Prospectus addendum dated February 3, 2015:
http://www.sec.gov/Archives/edgar/data/312070/000119312515031134/d864437d424b3.htm
¡ Prospectus dated July 19, 2013:
http://www.sec.gov/Archives/edgar/data/312070/000119312513295636/d570220df3asr.htm
Before you invest, you should read the Note Prospectus, including this term sheet, for information about us and this offering. Any prior or contemporaneous oral statements and any other written materials you may have received are superseded by the Note Prospectus. Capitalized terms used but not defined in this term sheet have the meanings set forth in product supplement EQUITY INDICES ARN-1. Unless otherwise indicated or unless the context requires otherwise, all references in this document to we, us, our, or similar references are to Barclays.
Consent to U.K. Bail-in Power
Under the U.K. Banking Act 2009, as recently amended, the relevant U.K. resolution authority may exercise a U.K. Bail-in Power under certain conditions which, in summary, include that such authority determines that: (i) a relevant entity (such as Barclays) is failing or is likely to fail, (ii) it is not reasonably likely that (ignoring the other stabilization powers under the U.K. Banking Act) any other action will be taken to avoid the entitys failure, (iii) the exercise of the stabilization powers are necessary taking into account certain public interest considerations such as the stability of the U.K. financial system, public confidence in the U.K. banking system and the protection of depositors and (iv) the objectives of the resolution measures would not be met to the same extent by the winding up of the entity. Notwithstanding these conditions, there remains uncertainty regarding how the relevant U.K. resolution authority would assess these conditions in deciding whether to exercise any U.K. Bail-in Power. The U.K. Bail-in Power includes any statutory write-down and conversion power, which allows for the cancellation of all, or a portion, of any amounts payable on the notes, including any repayment of principal and/or the conversion of all, or a portion, of any amounts payable on the notes, including the repayment of principal, into shares or other securities or other obligations of ours or another person, including by means of a variation to the terms of the notes. Accordingly, if any U.K. Bail-in Power is exercised you may lose all or a part of the value of your investment in the notes or receive a different security, which may be worth significantly less than the notes and which may have significantly fewer protections than those typically afforded to debt securities. Moreover, the relevant U.K. resolution authority may exercise its authority to implement the U.K. Bail-in Power without providing any advance notice to the holders of the notes.
By your acquisition of the notes, you acknowledge, agree to be bound by, and consent to the exercise of any U.K. Bail-in Power by the relevant U.K. resolution authority.
This is only a summary. For more information, please see Risk Factors in this term sheet, and please see the accompanying prospectus addendum, including the full definition of U.K. Bail-in Power as well as the risk factors therein.
Accelerated Return Notes® |
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Accelerated Return Notes® Linked to the JPX-Nikkei Index 400, due July , 2016 |
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Investor Considerations
You may wish to consider an investment in the notes if: |
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The notes may not be an appropriate investment for you if: |
¡ You anticipate that the Index will increase moderately from the Starting Value to the Ending Value. ¡ You are willing to risk a loss of principal and return if the Index decreases from the Starting Value to the Ending Value. ¡ You accept that the return on the notes will be capped. ¡ You are willing to forgo the interest payments that are paid on traditional interest bearing debt securities. ¡ You are willing to forgo dividends or other benefits of owning the stocks included in the Index. ¡ You are willing to accept a limited market for sales prior to maturity, and understand that the market prices for the notes, if any, will be affected by various factors, including our actual and perceived creditworthiness, the inclusion in the public offering price of the underwriting discount, the hedging-related charge and other amounts, as described on page TS-2. ¡ You are willing to assume our credit risk, as issuer of the notes, for all payments under the notes, including the Redemption Amount. ¡ You are willing to consent to the exercise of any U.K. Bail-in Power by U.K. resolution authorities. |
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¡ You believe that the Index will decrease from the Starting Value to the Ending Value or that it will not increase sufficiently over the term of the notes to provide you with your desired return. ¡ You seek principal repayment or preservation of capital. ¡ You seek an uncapped return on your investment. ¡ You seek interest payments or other current income on your investment. ¡ You want to receive dividends or other distributions paid on the stocks included in the Index. ¡ You seek an investment for which there will be a liquid secondary market. ¡ You are unwilling or are unable to take market risk on the notes or to take our credit risk as issuer of the notes. ¡ You are unwilling to consent to the exercise of any U.K. Bail-in Power by U.K. resolution authorities. |
We urge you to consult your investment, legal, tax, accounting, and other advisors before you invest in the notes.
Accelerated Return Notes® |
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Accelerated Return Notes® Linked to the JPX-Nikkei Index 400, due July , 2016 |
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Hypothetical Payout Profile
The below graph is based on hypothetical numbers and values.
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Accelerated Return Notes® |
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This graph reflects the returns on the notes, based on the Participation Rate of 300% and a Capped Value of $11.40 per unit (the midpoint of the Capped Value range of [$11.20 to $11.60]). The green line reflects the returns on the notes, while the dotted gray line reflects the returns of a direct investment in the stocks included in the Index, excluding dividends.
This graph has been prepared for purposes of illustration only. |
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Hypothetical Payments at Maturity
The following table and examples are for purposes of illustration only. They are based on hypothetical values and show hypothetical returns on the notes. The actual amount you receive and the resulting total rate of return will depend on the actual Starting Value, Ending Value, Capped Value, and term of your investment.
The following table is based on a Starting Value of 100, the Participation Rate of 300% and a Capped Value of $11.40 per unit. It illustrates the effect of a range of Ending Values on the Redemption Amount per unit of the notes and the total rate of return to holders of the notes. The following examples do not take into account any tax consequences from investing in the notes.
Ending Value |
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Percentage Change from the |
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Redemption Amount per |
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Total Rate of Return on the |
0.00 |
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-100.00% |
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$0.00 |
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-100.00% |
50.00 |
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-50.00% |
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$5.00 |
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-50.00% |
80.00 |
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-20.00% |
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$8.00 |
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-20.00% |
90.00 |
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-10.00% |
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$9.00 |
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-10.00% |
94.00 |
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-6.00% |
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$9.40 |
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-6.00% |
97.00 |
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-3.00% |
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$9.70 |
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-3.00% |
100.00(1) |
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0.00% |
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$10.00 |
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0.00% |
102.00 |
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2.00% |
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$10.60 |
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6.00% |
105.00 |
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5.00% |
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$11.40(2) |
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14.00% |
110.00 |
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10.00% |
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$11.40 |
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14.00% |
120.00 |
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20.00% |
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$11.40 |
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14.00% |
130.00 |
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30.00% |
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$11.40 |
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14.00% |
140.00 |
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40.00% |
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$11.40 |
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14.00% |
150.00 |
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50.00% |
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$11.40 |
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14.00% |
160.00 |
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60.00% |
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$11.40 |
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14.00% |
(1) The hypothetical Starting Value of 100 used in these examples has been chosen for illustrative purposes only, and does not represent a likely actual Starting Value for the Market Measure.
(2) The Redemption Amount per unit cannot exceed the hypothetical Capped Value.
For recent actual levels of the Market Measure, see The Index section below. The Index is a price return index and as such the Ending Value will not include any income generated by dividends paid on the stocks included in the Index, which you would otherwise be entitled to receive if you invested in those stocks directly. In addition, all payments on the notes are subject to issuer credit risk.
Accelerated Return Notes® |
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Accelerated Return Notes® Linked to the JPX-Nikkei Index 400, due July , 2016 |
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Redemption Amount Calculation Examples
Example 1 | |
The Ending Value is 80.00, or 80.00% of the Starting Value: | |
Starting Value: 100.00 | |
Ending Value: 80.00 | |
= $8.00 Redemption Amount per unit |
Example 2 | |
The Ending Value is 102.00, or 102.00% of the Starting Value: | |
Starting Value: 100.00 | |
Ending Value: 102.00 | |
= $10.60 Redemption Amount per unit |
Example 3 | |
The Ending Value is 130.00, or 130.00% of the Starting Value: | |
Starting Value: 100.00 | |
Ending Value: 130.00 | |
= $19.00, however, because the Redemption Amount for the notes cannot exceed the Capped Value, the Redemption Amount will be $11.40 per unit |
Accelerated Return Notes® |
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Accelerated Return Notes® Linked to the JPX-Nikkei Index 400, due July , 2016 |
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There are important differences between the notes and a conventional debt security. An investment in the notes involves significant risks, including those listed below. You should carefully review the more detailed explanation of risks relating to the notes in the Risk Factors sections beginning on page PS-6 of product supplement EQUITY INDICES ARN-1, page S-6 of the Series A MTN prospectus supplement and page PA-1 of the Series A MTN prospectus addendum identified above. We also urge you to consult your investment, legal, tax, accounting, and other advisors before you invest in the notes.
§ Depending on the performance of the Index as measured shortly before the maturity date, your investment may result in a loss; there is no guaranteed return of principal.
§ Your return on the notes may be less than the yield you could earn by owning a conventional fixed or floating rate debt security of comparable maturity.
§ Payments on the notes are subject to our credit risk, and actual or perceived changes in our creditworthiness are expected to affect the value of the notes. If we become insolvent or are unable to pay our obligations, you may lose your entire investment.
§ As described above under Consent to U.K. Bail-In Power, the relevant U.K. resolution authority may exercise any U.K. Bail-in Power under the conditions described in such section of this term sheet. If any U.K. Bail-in Power is exercised you may lose all or a part of the value of your investment in the notes or receive a different security, which may be worth significantly less than the notes and which may have significantly fewer protections than those typically afforded to debt securities. The U.K. Bail-in Power includes write-down and conversion power which allows for the cancellation of any amounts payable on the notes, including principal, and/or the conversion of any amounts payable on the notes into shares or other securities or other obligations of ours or another person, including by means of a variation to the terms of the notes. Moreover, the relevant U.K. resolution authority may exercise its authority to implement the U.K. Bail-in Power without providing any advance notice to the holders of the notes. By your acquisition of the notes, you acknowledge, agree to be bound by, and consent to the exercise of any U.K. Bail-in Power by the relevant U.K. resolution authority. The exercise of any U.K. Bail-in Power with respect to the notes will not be a default or an Event of Default (as each term is defined in the indenture relating to the notes). The trustee will not be liable for any action that the trustee takes, or abstains from taking, in either case, in accordance with the exercise of the U.K. Bail-in Power with respect to the notes. Your rights as a holder of the notes are subject to, and will be varied, if necessary, so as to give effect to the exercise of any U.K. Bail-in Power by the relevant U.K. resolution authority. See Consent to U.K. Bail-in Power above and the risk factors in the accompanying prospectus addendum for more information.
§ Your investment return is limited to the return represented by the Capped Value and may be less than a comparable investment directly in the stocks included in the Index.
§ The estimated value of your notes is based on our internal pricing models. 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. These variables and assumptions are not evaluated or verified on an independent basis and may prove to be inaccurate. Different pricing models and assumptions of different financial institutions could provide valuations for the notes that are different from our estimated value.
§ The estimated value 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 in this term sheet may be lower if such estimated value was based on the levels at which our benchmark debt securities trade in the secondary market.
§ The estimated value of your notes is expected to be lower than the public offering price of your notes. This difference is expected as a result of certain factors, such as the inclusion in the public offering price of the underwriting discount, the hedging-related charge, the estimated profit, if any, that we or any of our affiliates expect to earn in connection with structuring the notes, and the estimated cost which we may incur in hedging our obligations under the notes, as further described in Structuring the Notes on page TS-12. If you attempt to sell the notes prior to maturity, their market value may be lower than the price you paid for the notes and lower than the estimated value because the secondary market prices do not include such fees, charges and other amounts, and take into consideration the levels at which our debt securities trade in the secondary market.
§ The estimated value of the notes will not be a prediction of the prices at which MLPF&S or its affiliates, or any of our affiliates or any other third parties may be willing to purchase the notes from you in secondary market transactions. 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 trading commissions, and may be substantially less than our estimated value of the notes. Any sale prior to the maturity date could result in a substantial loss to you.
§ A trading market is not expected to develop for the notes. We, MLPF&S and our respective affiliates are not obligated to make a market for, or to repurchase, the notes. There is no assurance that any party will be willing to purchase your notes at any price in any secondary market.
Accelerated Return Notes® |
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Accelerated Return Notes® Linked to the JPX-Nikkei Index 400, due July , 2016 |
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§ Your return on the notes and the value of the notes may be affected by exchange rate movements and factors affecting the international securities markets.
§ Our business, hedging and trading activities, and those of MLPF&S and our respective affiliates (including trading in shares of companies included in the Index), and any hedging and trading activities we, MLPF&S or our respective affiliates engage in for our clients accounts, may affect the market value and return of the notes and may create conflicts of interest with you.
§ The Index sponsor may adjust the Index in a way that affects its level, and has no obligation to consider your interests.
§ You will have no rights of a holder of the securities represented by the Index, and you will not be entitled to receive securities or dividends or other distributions by the issuers of those securities.
§ While we, MLPF&S or our respective affiliates may from time to time own securities of companies included in the Index, we, MLPF&S and our respective affiliates do not control any company included in the Index, and are not responsible for any disclosure made by any other company, except to the extent that the common stock of Barclays PLC, which is our parent company, is included in the FTSE® 100 Index.
§ There may be potential conflicts of interest involving the calculation agents, including the calculation agents roles in establishing the economic terms of the notes and determining the estimated value of the notes. We have the right to appoint and remove the calculation agents.
§ The U.S. federal income tax consequences of the notes are uncertain, and may be adverse to a holder of the notes. See Material U.S. Federal Income Tax Considerations below and Material U.S. Federal Income Tax Considerations beginning on page PS-25 of product supplement EQUITY INDICES ARN-1.
Additional Risk Factors
There are uncertainties regarding the Index because of its extremely limited performance history
The Index was first published in January 2014. Accordingly, there is extremely limited trading history available for the Index upon which you can evaluate its prior performance, and it may perform in unexpected ways. Because the Indexs past historical performance is extremely limited, your investment in the notes may involve a greater risk than investing in securities linked to one or more indices with an established record of performance. A longer history of actual performance may be helpful in providing more reliable information on which to assess the validity of the methodology that the Index uses to select its components, as described below under The Index. The historical Index levels should not be taken as an indication of future performance, and no assurance can be given as to the Index closing level on any given date.
There is no assurance that the investment view implicit in the Index will be successful.
The Index constituents will be selected from time to time during the term of the notes in the manner described in The IndexStandards for Listing and Maintenance. The criteria used for selecting the Index stocks may not result in stocks that outperform Japanese stocks generally, or the stocks that may be included in other indices that track Japanese securities markets. Although the Index stocks may satisfy the quantitative and qualitative criteria of the Index at the time they are selected, there can be no assurance that they will continue to do so thereafter, which may reduce the level of the Index. There can be no assurance that the future performance of the Index will result in your receiving an amount greater than or equal to the principal amount of your notes. The performance of the Index may be worse than the performance of the equity markets generally, and worse than the performance of specific sectors of the equity markets (including Japanese equities in particular), or other securities in which you may choose to invest.
Other Terms of the Notes
The following definition shall supersede and replace the definition of a Market Measure Business Day set forth in product supplement EQUITY INDICES ARN-1.
Market Measure Business Day
A Market Measure Business Day means a day on which:
(A) the Tokyo Stock Exchange (or any successor) is open for trading; and
(B) the Index or any successor thereto is calculated and published.
Accelerated Return Notes® |
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Accelerated Return Notes® Linked to the JPX-Nikkei Index 400, due July , 2016 |
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The Index
We have derived all information regarding the Index contained in this document, including, without limitation, its make-up, method of calculation and changes in its components, from publicly available information. This information reflects the policies of, and is subject to change by Japan Exchange Group, Inc. (JPX), Tokyo Stock Exchange, Inc. (TSE, and together with JPX, the JPX Group) and Nikkei Inc. (the Nikkei, and together with the JPX Group, the Index sponsor). The Index was developed by the Index sponsor and is calculated, maintained and published by the Index sponsor. We have not independently investigated the accuracy or completeness of this information. The Index sponsor has no obligation to continue to publish, and may discontinue publication of, the Index. The consequences of any discontinuance of the Index are discussed in the section entitled Description of ARNsDiscontinuance of an Index on page PS-20 of product supplement EQUITY INDICES ARN-1. None of us, the calculation agent, or MLPF&S accepts any responsibility for the calculation, maintenance, or publication of the Index or any successor index.
The Index is composed of stocks listed on the TSEs First Section (large companies), Second Section (mid-size companies), Mothers (Market Of The High-growth and EmeRging Stocks for startups) and JASDAQ market. Stocks included in the Index are selected based on market capitalization, trading value, return on equity, and other factors, as described in more detail below. The Index was first calculated and published on January 6, 2014. The inception value of the Index was 10,000 on August 30, 2013 (the calculation base date). The index is calculated every one second during the trading hours of the TSE.
Ten main groups of companies constitute the Index, with the approximate percentage of the market capitalization of the Index included in each group as of December 30, 2014 indicated in parentheses: Electric Appliances & Precision Instruments (15.04%); Automobiles & Transportation Equipment (11.07%); IT & Services (10.3%); Banks (8.01%); Raw Materials & Chemicals (7.34%); Machinery (5.93%); Pharmaceutical (5.79%); Financials (excluding banks) (5.55%); Transportation & Logistics (5.54%); and Commercial & Wholesale Trade (4.63%). As of that date, more than 388 of the securities included in the Index were listed on the TSEs First Section.
The Index is calculated in both price return and total return versions and is calculated in yen. The notes are linked to the price return version of the Index, which means (as noted above) that the Ending Value will not include any income generated by dividends paid on the stocks included in the Index.
Additional information relating to the composition and calculation of the Index is available on the Index sponsors website: www.tse.or.jp/english/market/topix/jpx_nikkei.html. However, information included in that website shall not be deemed to be included or incorporated by reference in this document.
Standards for Listing and Maintenance
The Index components are reviewed annually based on the selection criteria applied as of the final business day of June (the base selection date). The calculation of the Index using the new constituents will begin at the end of August. The selection process and criteria are as follows:
(1) 1,000 stocks are selected based on their trading value over the past three years and the market value on the base selection date. Stocks are excluded from selection if they fall under any of the following criteria:
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listed for less than three years; |
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the companys liabilities are in excess of its assets during any of the past three fiscal years; |
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the company has an operating loss in each of the past three fiscal years; |
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the company has a net loss in each of the past three fiscal years; |
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the companys financials have disclosed doubt regarding its ability to continue as a going concern; |
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disclosure of insufficient financials controls; |
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the stock has been designated as a security to be delisted or security on alert; or |
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certain listing violations have occurred over the past year. |
(2) Each stock is scored by (a) three-year average return on equity (weighted 40%), (b) three-year cumulative operating profit (weighted 40%) and (c) market capitalization on the selection base date (weighted 20%), determined as follows:
Three-year average return on equity is calculated as follows:
Three-year cumulative operating profit is the sum of reported operating profit over the past three years.
The market capitalization of a stock is calculated based on the number of listed shares multiplied by its closing share price as of the annual selection base date.
(3) 400 stocks are selected by the final ranking with the scores calculated above in (2) and qualitative factors from the perspectives of corporate governance and disclosure. These factors are applied as of the selection base date and include the appointment of at least two independent outside directors, releasing the most recent earnings report according to international financial reporting standards and
Accelerated Return Notes® |
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Accelerated Return Notes® Linked to the JPX-Nikkei Index 400, due July , 2016 |
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the release of English language earnings information via TDnet. The final score for each stock equals the sum of the score calculated above in (2) plus the score from the qualitative factors. Stocks are ranked from highest to lowest based on their final scores, with the exception that stocks with negative three-year average return on equity and most recent return on equity are negative or that have negative three-year cumulative operating profit are moved to the bottom of the ranking. In the event of a tie in final scores, the stock with the higher market capitalization is ranked higher.
Calculation of the Index
The Index is calculated using free-float adjusted market value weighting and is calculated to two decimal places. The level of the Index equals the current total free float adjusted market value divided by the base market value. The market value is the sum of the number of shares of each constituent stock multiplied by its stock price. The base market value is adjusted to maintain continuity in the Index when the market value of constituents changes for non-market reasons. The weight of each Index component is capped at 1.5% of the Index, and if any component exceeds that weight, it is adjusted downwards at the time of the annual review. In case of delisting of the components due to a merger, bankruptcy, or other corporate event, new stocks are not added until the next annual review.
The free-float adjustment market value is determined by excluding the estimated number of listed shares that are deemed not to be available for trading in the market, using publicly available documents. Among the shares that are not treated as available are, among others, shares held by specified types of major shareholders, and shares held by board members and other representatives. The free-float weights are reviewed annually for each index stock, with the announcement and effective date for each index constituent occurring on a quarterly basis, depending upon the relevant companys earnings release schedule. In addition to this annual review, the Index sponsor may also adjust a companys free-float weight to reflect extraordinary events.
The index components can be updated from time to reflect, for example, the establishment of a new company as a result of a corporate consolidation, or the delisting of a company. A variety of corporate events will result in the change of the number of shares used to calculate the index, including securities offerings, exercises of warrants and share dividends.
Accelerated Return Notes® |
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Accelerated Return Notes® Linked to the JPX-Nikkei Index 400, due July , 2016 |
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The following graph shows the monthly historical performance of the Index in the period from January 2014 through March 2015. The Index was first published on January 6, 2014 and, accordingly, only limited historical information exists with respect to the Index. We obtained this historical data from Bloomberg L.P. We have not independently verified the accuracy or completeness of the information obtained from Bloomberg L.P. On April 20, 2015, the closing level of the Index was 14,351.90.
Historical Performance of the Index
This historical data on the Index is not necessarily indicative of the future performance of the Index or what the value of the notes may be. Any historical upward or downward trend in the level of the Index during any period set forth above is not an indication that the level of the Index is more or less likely to increase or decrease at any time over the term of the notes.
Before investing in the notes, you should consult publicly available sources for the levels and trading pattern of the Index.
License Agreement
We expect to enter into an agreement with the Index sponsor providing us with a non-exclusive license with the right to use the Index in exchange for a fee. The Index is the intellectual property of the Index sponsor.
The Index is a copyrighted material using a methodology independently developed and created by the Index sponsor, and the Index sponsor owns the copyrights and other intellectual property rights subsisting in the Index itself and the methodology used to calculate the Index. Ownership of trademarks and any other intellectual property rights with respect to the markets to indicate the Index belong to the Index sponsor. The notes are arranged, managed and sold exclusively at the risk of Barclays Bank PLC, and the Index sponsor does not guarantee the notes and shall assume no obligation or responsibility with respect to the notes.
The Index sponsor shall not be obligated to continuously publish the Index and shall not be liable for any errors, delays, or suspensions of the publication of the Index. The Index sponsor shall have the right to change the composition of the stocks included in the Index, the calculation methodology of the Index or any other details of the Index and shall have the right to discontinue the publication of the Index at any time.
Accelerated Return Notes® |
Accelerated Return Notes® Linked to the JPX-Nikkei Index 400, due July , 2016 |
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Supplement to the Plan of Distribution
Under our distribution agreement with MLPF&S, MLPF&S will purchase the notes from us as principal at the public offering price indicated on the cover of this term sheet, less the indicated underwriting discount.
We may deliver the notes against payment therefor in New York, New York on a date that is greater than three business days following the pricing date. Under Rule 15c6-1 of the Securities Exchange Act of 1934, trades in the secondary market generally are required to settle in three business days, unless the parties to any such trade expressly agree otherwise. Accordingly, if the initial settlement of the notes occurs more than three business days from the pricing date, purchasers who wish to trade the notes more than three business days prior to the original issue date will be required to specify alternative settlement arrangements to prevent a failed settlement.
The notes will not be listed on any securities exchange. In the original offering of the notes, the notes will be sold in minimum investment amounts of 100 units. If you place an order to purchase the notes, you are consenting to MLPF&S acting as a principal in effecting the transaction for your account.
MLPF&S will not receive an underwriting discount for notes sold to certain fee-based trusts and fee-based discretionary accounts managed by U.S. Trust operating through Bank of America, N.A.
MLPF&S may repurchase and resell the notes, with repurchases and resales being made at prices related to then-prevailing market prices or at negotiated prices, and these will include MLPF&Ss trading commissions and mark-ups. MLPF&S may act as principal or agent in these market-making transactions; however, it is not obligated to engage in any such transactions. MLPF&S has advised us that, at its discretion, for a short, undetermined initial period after the issuance of the notes, MLPF&S may offer to buy the notes in the secondary market at a price that may exceed the initial estimated value of the notes. Any price offered by MLPF&S for the notes will be based on then-prevailing market conditions and other considerations, including the performance of the Index and the remaining term of the notes. However, neither we nor any of our affiliates is obligated to purchase your notes at any price, or at any time, and we cannot assure you that we, MLPF&S or our respective affiliates will purchase your notes at a price that equals or exceeds the initial estimated value of the notes.
The value of the notes shown on your account statement produced by MLPF&S will be based on MLPF&Ss estimate of the value of the notes if MLPF&S or another of its affiliates were to make a market in the notes, which it is not obligated to do. That estimate will be based upon the price that MLPF&S may pay for the notes in light of then-prevailing market conditions, and other considerations, as mentioned above, and will include transaction costs. At certain times, this price may be higher than or lower than the initial estimated value of the notes.
The distribution of the Note Prospectus in connection with these offers or sales will be solely for the purpose of providing investors with the description of the terms of the notes that was made available to investors in connection with their initial offering. Secondary market investors should not, and will not be authorized to, rely on the Note Prospectus for information regarding Barclays or for any purpose other than that described in the immediately preceding sentence.
The notes are our debt securities, the return on which is linked to the performance of the Index. As is the case for all of our debt securities, including our market-linked notes, the economic terms of the notes reflect our actual or perceived creditworthiness at the time of pricing. The economic terms of the notes are based on 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. Our internal funding rates may vary from the levels at which our benchmark debt securities trade in the secondary market. Our estimated value on the pricing date will be 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.
Payments on the notes, including the amount you receive at maturity, will be calculated based on the $10 principal amount per unit and will depend on the performance of the Index. In order to meet these payment obligations, at the time we issue the notes, we may choose to enter into certain hedging arrangements (which may include call options, put options or other derivatives) with MLPF&S or one of its affiliates. The terms of these hedging arrangements are determined by seeking bids from market participants, including MLPF&S and its affiliates or our affiliates, and take into account a number of factors, including our creditworthiness, interest rate movements, the volatility of the Index, the tenor of the notes and the tenor of the hedging arrangements. The economic terms of the notes and their estimated value depend in part on the terms of these hedging arrangements, any estimated profit that we or any of our affiliates expect to earn in connection with structuring the notes, and estimated costs which we may incur in hedging our obligations under the notes.
MLPF&S has advised us that the hedging arrangements will include a hedging related charge of approximately $0.075 per unit, reflecting an estimated profit to be credited to MLPF&S from these transactions. Since hedging entails risk and may be influenced by unpredictable market forces, additional profits and losses from these hedging arrangements may be realized by MLPF&S or any third party hedge providers.
For further information, see Risk FactorsGeneral Risks Relating to ARNs beginning on page PS-6 and Use of Proceeds and Hedging on page PS-16 of product supplement EQUITY INDICES ARN-1.
Accelerated Return Notes® |
Accelerated Return Notes® Linked to the JPX-Nikkei Index 400, due July , 2016 |
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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 and the discussion under Material U.S. Federal Income Tax Considerations in the accompanying product supplement EQUITY INDICES ARN-1. This section applies to you only if you are a U.S. holder (as defined in product supplement EQUITY INDICES ARN-1) 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 product supplement EQUITY INDICES ARN-1 (for example, if you did not purchase your notes in the initial issuance of the notes).
There is no judicial or administrative authority discussing how your notes should be treated for U.S. federal income tax purposes. Pursuant to the terms of the notes, you agree with us, 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 Index. 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, your notes should be treated in the manner described above. No assurance can be given that the Internal Revenue Service or any court will agree with this characterization and tax treatment. There are other possible treatments that are described in a detailed discussion of tax considerations under the section entitled Material U.S. Federal Income Tax Considerations beginning on page PS-25 of product supplement EQUITY INDICES ARN-1 and one or more of these might ultimately govern the tax treatment of the notes.
You should consult your tax advisor concerning the U.S. federal income tax and other tax consequences of your investment in the notes in your particular circumstances, including the application of state, local or other tax laws and the possible effects of changes in federal or other tax laws.
Where You Can Find More Information
We have filed a registration statement (including a product supplement, a prospectus supplement, and a prospectus) with the SEC for the offering to which this term sheet relates. Before you invest, you should read the Note Prospectus, including this term sheet, and the other documents that we have filed with the SEC, for more complete information about us and this offering. You may get these documents without cost by visiting EDGAR on the SEC website at www.sec.gov. Alternatively, we, any agent, or any dealer participating in this offering will arrange to send you these documents if you so request by calling MLPF&S toll-free at 1-800-294-1322.
Market-Linked Investments Classification
MLPF&S classifies certain market-linked investments (the Market-Linked Investments) into categories, each with different investment characteristics. The following description is meant solely for informational purposes and is not intended to represent any particular Enhanced Return Market-Linked Investment or guarantee any performance.
Enhanced Return Market-Linked Investments are short- to medium-term investments that offer you a way to enhance exposure to a particular market view without taking on a similarly enhanced level of market downside risk. They can be especially effective in a flat to moderately positive market (or, in the case of bearish investments, a flat to moderately negative market). In exchange for the potential to receive better-than market returns on the linked asset, you must generally accept market downside risk and capped upside potential. As these investments are not market downside protected, and do not assure full repayment of principal at maturity, you need to be prepared for the possibility that you may lose all or part of your investment.
Accelerated Return Notes® and ARNs® are registered service marks of Bank of America Corporation, the parent company of MLPF&S.
Accelerated Return Notes® |
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