424B2 1 a18-7805_26424b2.htm 424B2 - ETN+ FIYY ETN

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GRAPHIC

Pricing Supplement to the Prospectus

dated February 22, 2018

and the Prospectus Supplement

 dated July 18, 2016

 

$800,000,000

Barclays ETN+ FI Enhanced Europe 50 Exchange Traded Notes Series C

Linked to the STOXX Europe 50® USD (Gross Return) Index

 

This pricing supplement relates to the Barclays ETN+ FI Enhanced Europe 50 Exchange Traded Notes Series C (the “ETNs”) that Barclays Bank PLC may issue from time to time.  The ETNs are linked to a quarterly rebalanced leveraged participation in the performance of the STOXX Europe 50® USD (Gross Return) Index (the “Index”). The ETNs do not pay any interest during their term and do not guarantee any return of principal at maturity, upon redemption or upon an automatic termination event. Unless an automatic termination event (as defined below) occurs, you will receive a cash payment at maturity or upon redemption based on a quarterly rebalanced leveraged participation in the performance of the Index (calculated as described below) less applicable fees and charges.

 

At inception the ETN is designed to target two times the performance of the Index. A quarterly rebalancing event or a loss rebalancing event will aim to reset the leveraged exposure to the Index to approximately two. The return on the ETNs, however, can, and most likely will, differ significantly from two times the return on a direct investment in the Index. The ETNs are very sensitive to changes in the performance of the Index, and returns on the ETNs may be negatively impacted in complex ways by volatility of the Index on a quarterly basis. In addition, the performance of the ETNs for a period greater than a single quarter will be the result of each quarter’s returns compounded over the period, which is likely to be either better or worse than two times the Index performance during that period, before accounting for applicable fees and charges.  Particularly during periods of higher Index volatility, compounding will cause results for periods longer than a single quarter to vary from two times the return of the Index.

 

The ETNs should be purchased only by knowledgeable investors who understand the potential consequences of investing in the Index and of seeking quarterly rebalanced leveraged investment results. Investors should actively and frequently monitor their investment in the ETNs.

 

You may lose some or all of your principal if you invest in the ETNs.  Any payment on the ETNs at or prior to maturity is not guaranteed by any third party and is subject to both the creditworthiness of Barclays Bank PLC and to the exercise of any U.K. Bail-in Power by the relevant U.K. resolution authority.  If Barclays Bank PLC were to default on its payment obligations or become subject to the exercise of any U.K. Bail-in Power (or any other resolution measure) by the relevant U.K. resolution authority, you might not receive any amounts owed to you under the ETNs.  See “Consent to U.K. Bail-in Power” and “Risk Factors” in this pricing supplement and “Risk Factors” in the accompanying prospectus supplement for more information.

 

Our estimated value of the ETNs as of the inception date is $100 per ETN.  See “Risk Factors” beginning on page PS-23 of this pricing supplement for risks relating to an investment in the ETNs.

 

The principal terms of the ETNs are as follows:

 

Issuer: Barclays Bank PLC

 

Series:  Global Medium-Term Notes, Series A

 

Principal Amount per ETN: $100

 

Issuance and Maturity: The ETNs were first issued on March 17, 2018; and are each due on March 17, 2033.

 

Inception Date: March 15, 2018

 

Secondary Market:  We have applied to list the ETNs on the NYSE Arca exchange (“NYSE Arca”) under the ticker symbol “FFEU”.  If our application is approved, to the extent that the ETNs are listed and an active secondary market in the ETNs exists, we expect that investors will purchase and sell the ETNs primarily in this secondary market.  We are not required to maintain any listing of the ETNs on the NYSE Arca or on any other securities exchange.

 

CUSIP number: 06746Q256

 

ISIN: US06746Q2562

 

Index: The return on the ETNs is linked to a quarterly rebalanced leveraged participation in the performance of the Index.  The Index is composed of 50 European blue-chip companies (the “Index Constituents”) selected from within the STOXX Europe 600 Index (the “Parent Index”).  The Parent Index contains the 600 largest stocks traded on the major exchanges of 17 European countries: Austria, Belgium, Czech Republic, Denmark, Finland, France, Germany, Ireland, Italy, Luxembourg, the Netherlands, Norway, Portugal, Spain, Sweden, Switzerland and the United Kingdom.  The Index is calculated, maintained and published by STOXX Limited (the “index sponsor”), which launched the Index on March 27, 2012.  The intraday level and the official closing level of the Index are reported by the index sponsor on Bloomberg page “SX5PGV <Index>“.

 

Consent to U.K. Bail-in Power: Notwithstanding any other agreements, arrangements or understandings between Barclays Bank PLC and any holder of the ETNs, by acquiring the ETNs, each holder of the ETNs acknowledges, accepts, agrees to be bound by, and consents 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 PS-37 of this pricing supplement.

 

Payment at Maturity: If you hold your ETNs to maturity, you will receive a cash payment per ETN at maturity in U.S. dollars in an amount equal to (a) the closing indicative note value on the final valuation date minus (b) the settlement charge on the final valuation date.

 



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Closing Indicative Note Value

 

Closing Indicative Note Value: On the initial valuation date, the closing indicative note value was $100. The closing indicative note value for each ETN on any subsequent valuation date will equal (a) the long index amount on such valuation date minus (b) the financing level on such valuation date, provided that if such calculation results in a negative value, the closing indicative note value will be $0.

 

Long Index Amount: On the initial valuation date, the long index amount for each ETN was $200, which is equal to the initial leverage factor of 2 times the principal amount per ETN.  On any subsequent valuation date, the long index amount for each ETN will equal the product of (a) the long index amount on the immediately preceding valuation date times (b) the index performance factor on such valuation date minus (c) the rebalancing amount (if any) on such valuation date.  The long index amount will be published on each valuation date under the ticker symbol “FFEU.LIA”.

 

Initial Leverage Factor:  The initial leverage factor will equal 2.

 

Leverage Factor: On any valuation date, the leverage factor will equal (a) the long index amount on such valuation date divided by (b) the closing indicative note value on such valuation date. The leverage factor will be published under the ticker symbol “FFEU.LF”.

 

Index Performance Factor: The index performance factor on the initial valuation date will equal 1.  On any subsequent valuation date, the index performance factor will equal (a) the closing level of the Index on such valuation date divided by (b) the closing level of the Index on the immediately preceding valuation date.

 

Financing Level:  On the initial valuation date, the financing level for each ETN was $100. On any subsequent valuation date, the financing level for each ETN will equal (a) the financing level on the immediately preceding valuation date plus (b) the daily investor fee on such valuation date plus (c) the loss rebalancing fee (if any) on such valuation date minus (d) the rebalancing amount (if any) on such valuation date.  The financing level will be published on each valuation date under the ticker symbol “FFEU.FL”.

 

Daily Investor Fee: On the initial valuation date, the daily investor fee for each ETN was $0.  On any subsequent valuation date, the daily investor fee for each ETN will equal (a) the sum of (i) the financing rate times the financing level on the immediately preceding valuation date plus (ii) the fee rate times the closing indicative note value on the immediately preceding valuation date times (b) the number of calendar days from, but excluding, the immediately preceding valuation date to, and including, the current valuation date divided by (c) 360.

 

Fee Rate: The fee rate will equal 1.05%.

 

Financing Rate: The financing rate will equal the sum of (a) 1.00% plus (b) the 3-month LIBOR rate as of the preceding rebalancing date in respect of which a quarterly rebalancing event has occurred (a “quarterly rebalancing date”).  For purposes of the ETNs, “3-month LIBOR rate” on any quarterly rebalancing date shall mean the rate for deposits in U.S. dollars for a period of three months as of approximately 11:00 am London time on that quarterly rebalancing date which appears on Bloomberg screen “US0003M” or any successor screen or comparable publication service (the “Designated Screen”), provided that, if no such rate appears on the Designated Screen on that quarterly rebalancing date at approximately 11:00 am London time, or if the calculation agent determines in its sole discretion on or prior to that quarterly rebalancing date that the relevant LIBOR rate has been discontinued or has ceased to be published permanently or indefinitely, then the calculation agent will determine 3-month LIBOR for that quarterly rebalancing date in accordance with the alternative procedures set forth under “Specific Terms of the ETNs—3-month LIBOR rate” in this pricing supplement.

 

Index Exposure Rebalancing

 

Loss Rebalancing Event:  If, on any valuation date, the closing level of the Index is less than or equal to the loss rebalancing trigger calculated on the immediately preceding valuation date, a loss rebalancing event is deemed to have occurred on such valuation date.  A loss rebalancing event will have the effect of deleveraging your ETNs with the aim of resetting the then-current leverage factor back to approximately 2. This means that after a loss rebalancing event a constant percentage increase in the closing level of the Index will have less of a positive effect on the value of your ETNs relative to before the occurrence of the loss rebalancing event.

 

Loss Rebalancing Trigger:  On any valuation date, the loss rebalancing trigger will equal (a) 1.6 times (b) the closing level of the Index on such valuation date times (c) the financing level on such valuation date divided by (d) the long index amount on such valuation date.  The loss rebalancing trigger will be published under the ticker symbol “FFEU.RT”.

 

Quarterly Rebalancing Event: A quarterly rebalancing event occurs on the valuation date immediately preceding the first valuation date of each calendar quarter beginning on April 1, 2018 and ending on January 1, 2033. The quarterly rebalancing event will aim to reset the then-current leverage factor back to approximately 2. This means that after a quarterly rebalancing event a constant percentage increase in the closing level of the Index may have more or less of a positive effect on the value of your ETNs relative to before the occurrence of the quarterly rebalancing event.

 

Rebalancing Event Date: The rebalancing event date means any valuation date on which a loss rebalancing event or a quarterly rebalancing event (together, a “rebalancing event”) occurs. In the event that a loss rebalancing event occurs on the same valuation date as a quarterly rebalancing event, the loss rebalancing event will be deemed to have occurred in precedence over the quarterly rebalancing event and the applicable loss rebalancing fee will be charged on the related rebalancing date.

 

Rebalancing Date: A rebalancing date is the first valuation date immediately following a rebalancing event date on which all the Index Exchanges are open for trading.

 

Rebalancing Amount: On any valuation date that is not a rebalancing date, the rebalancing amount will be equal to zero. On any valuation date that is a rebalancing date, the rebalancing amount for each ETN will equal the product of (a) the long index amount on the immediately preceding valuation date times (b) the index performance factor on the rebalancing date minus (c) the product of (i) the initial leverage factor times (ii) the closing indicative note value on the immediately preceding valuation date.

 



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Loss Rebalancing Fee: On any valuation date that is not a rebalancing date, the loss rebalancing fee will be equal to zero.  On any valuation date that is a rebalancing date following the occurrence of a loss rebalancing event, the loss rebalancing fee for each ETN will be equal to the product of (a) the loss rebalancing fee rate multiplied by (b) the absolute value of the rebalancing amount on such valuation date. In no case will the loss rebalancing fee be negative.

 

Loss Rebalancing Fee Rate: The loss rebalancing fee rate will equal 0.05%.

 

Early Redemption

 

Holder Redemption: Subject to the notification requirements under “Specific Terms of the ETNs—Holder Redemption Procedures” in this pricing supplement, if we have not exercised our right to redeem the ETNs and no automatic termination event has occurred, you may redeem your ETNs on any redemption date during the term of the ETNs. If you redeem your ETNs, you will receive a cash payment in U.S. dollars per ETN on such date in an amount equal to the closing indicative note value minus the settlement charge on the applicable valuation date. You must redeem at least 10,000 ETNs at one time in order to exercise your right to redeem your ETNs on any redemption date.  If you hold fewer than 10,000 ETNs or fewer than 10,000 ETNs are outstanding, you will not be able to exercise your right to redeem your ETNs.  We may from time to time, in our sole discretion, reduce this minimum redemption amount on a consistent basis for all holders of the ETNs.

 

Issuer Redemption: Prior to maturity, we may redeem the ETNs (in whole only, but not in part) at our sole discretion on any business day from and including issuance to and including maturity. To exercise our right to redeem, we must deliver notice to the holders of the ETNs not less than ten calendar days prior to the valuation date specified by us in such notice. If we redeem the ETNs, you will receive a cash payment in U.S. dollars per ETN on the corresponding redemption date in an amount equal to the closing indicative note value on the valuation date specified in such notice.

 

Redemption Date: In the case of holder redemption, the redemption date is the second business day following the applicable valuation date (which must be earlier than the final valuation date) specified in your notice of holder redemption.  Accordingly, the final redemption date will be the second business day following the valuation date that is immediately prior to the final valuation date. In case of issuer redemption, the redemption date is the third business day following the valuation date specified by us in the issuer redemption notice, which will in no event be later than the maturity date. In case of an automatic termination event, the redemption date will be the fifth business day following the automatic termination date; provided that if calculation of the automatic redemption value is postponed as a result of a market disruption event, the redemption date will be the fifth business day after the automatic redemption value is calculated.

 

Automatic Termination Event: We will automatically redeem your ETNs (in whole only, but not in part) if, on any index business day prior to or on the final valuation date, the intraday index level is less than or equal to the automatic termination trigger calculated on the valuation date immediately preceding the beginning of such index business day.  We will redeem your ETNs on the relevant redemption date and will deliver a notice of redemption to the Depositary Trust Company (“DTC”) in the form attached as Annex C that will specify such date.  Upon such redemption, you will receive a cash payment equal to the automatic redemption value.

 

If a rebalancing event has occurred and then an automatic termination event occurs after the occurrence of the rebalancing event but prior to the end of the trading day on the corresponding rebalancing date, then the ETNs will be automatically redeemed pursuant to the automatic termination event without giving regard to the rebalancing event.  Additionally, if we provide notice of an issuer redemption of the ETNs and then an automatic termination event occurs prior to the end of the trading day on the corresponding valuation date for the issuer redemption, our notice of issuer redemption will be deemed ineffective and your ETNs will be automatically redeemed on the relevant redemption date at an amount equal to the automatic redemption value.

 

Intraday Index Level: The intraday index level is the most recent intraday level of the Index reported by the index sponsor.

 

Automatic Termination Trigger:  On any valuation date, the automatic termination trigger will equal (a) 1.4 times (b) the closing level of the Index on such valuation date times (c) the financing level on such valuation date divided by (d) the long index amount on such valuation date.  The automatic termination trigger will be published under the ticker symbol “FFEU.ATT”.

 

Automatic Termination Date: An automatic termination date is any index business day on which an automatic termination event occurs.

 

Automatic Redemption Value: The automatic redemption value will be determined by the calculation agent, in its sole discretion, acting in good faith and in a commercially reasonable manner, using the latest publicly available quotations for the intraday prices of the relevant Index Constituents that are available as soon as practicable following the occurrence of an automatic termination event.  The calculation agent will approximate the intraday index performance factor on the basis of such quotations and calculate, in the manner described under “Intraday Indicative Note Value”, a corresponding intraday indicative note value, which shall be deemed to be the automatic redemption value.

 

Other Principal Terms

 

Settlement Charge: The settlement charge is a charge imposed upon holder redemption and the payment at maturity, and is equal to 0.05% times the long index amount on the applicable valuation date. The settlement charge is intended to allow us to recoup the brokerage and other transaction costs that we will incur in connection with making a payment on the ETNs. The proceeds we receive from the settlement charge may be more or less than such costs.

 

Business Day: A business day means a Monday, Tuesday, Wednesday, Thursday or Friday that is neither a day on which banking institutions in New York City generally are authorized or obligated by law, regulation, or executive order to close.

 

Valuation Date: A valuation date means each trading day from March 15, 2018 to March 14, 2033, subject to postponement as a result of market disruption events, such postponement not to exceed five scheduled trading days.  We refer to March 15, 2018 as the “initial valuation date” and March 14, 2033 as the “final valuation date”.

 

Trading Day: A trading day with respect to the ETNs is a day on which (a) it is an index business day, (b) trading is generally conducted on NYSE Arca, and (c) is a business day in New York City.

 



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Index Business Day: An index business day means each continuous period during which the index sponsor publishes an intraday index level.  As of the date of this pricing supplement, an index business day typically begins at 3:00 a.m. New York City time and ends at 11:35 a.m. New York City time on a particular calendar date, without adjustment for daylight savings time in any jurisdiction.

 

Index Exchanges: An Index Exchange means each exchange on which any of the Index Constituents are traded.

 

Because your investment in the ETNs is leveraged, any decrease in the level of the Index will result in a significantly greater decrease in the repayment amount, and you may receive less than the amount for which you purchased your ETNs at maturity or upon redemption or an automatic termination event.  Moreover, because the daily investor fee, the loss rebalancing fee and the settlement charge may substantially reduce the amount of your return at maturity or upon redemption or an automatic termination event, the level of the Index must increase significantly in order for you to receive at least the amount for which you purchased your ETNs at maturity or upon redemption or an automatic termination event.  If the level of the Index decreases or does not increase sufficiently to offset the negative effect of the daily investor fee, the loss rebalancing fee and the settlement charge you will receive less than the amount for which you purchased your ETNs at maturity or upon redemption or an automatic termination event.

 

If the level of the Index decreases sufficiently to trigger an automatic termination event, your ETNs will be automatically redeemed at the automatic redemption value.  Following the calculation of the automatic redemption value, you will not benefit from any subsequent increase in the Index level.

 

Sale to Public: We sold a portion of the ETNs on the inception date at 100% of the principal amount through Barclays Capital Inc., our affiliate, as principal in the initial distribution.  The remainder of the ETNs will be offered and sold from time to time through Barclays Capital Inc., as agent.  Sales of the ETNs by us after the inception date will be made at market prices prevailing at the time of sale, at prices related to market prices or at negotiated prices.  Barclays Capital Inc. will not receive an agent’s commission in connection with sales of the ETNs. Please see “Supplemental Plan of Distribution” in this pricing supplement for more information.

 

We may use this pricing supplement in the initial sale of the ETNs.  In addition, Barclays Capital Inc. or another of our affiliates may use this pricing supplement in market-making transactions in any ETNs after their initial sale.  Unless we or our agent informs you otherwise in the confirmation of sale or in a notice delivered at the same time as the confirmation of sale, this pricing supplement is being used in a market-making transaction.

 

The ETNs are not deposit liabilities of Barclays Bank PLC and are not insured by the United States Federal Deposit Insurance Corporation or any other governmental agency of the United States, the United Kingdom or any other jurisdiction.  In addition, the ETNs are not expected to be treated as indebtedness for U.S. federal income tax purposes.

 

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these ETNs or determined that this pricing supplement is truthful or complete.  Any representation to the contrary is a criminal offense.

 

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Pricing Supplement dated March 15, 2018

Issued in denominations of $100

 



Table of Contents

 

TABLE OF CONTENTS

 

PRICING SUPPLEMENT

 

PRICING SUPPLEMENT SUMMARY

1

RISK FACTORS

24

CONSENT TO U.K. BAIL-IN POWER

38

THE INDEX

39

VALUATION OF THE ETNs

43

SPECIFIC TERMS OF THE ETNs

45

CLEARANCE AND SETTLEMENT

53

USE OF PROCEEDS AND HEDGING

53

MATERIAL U.S. FEDERAL INCOME TAX CONSIDERATIONS

53

SUPPLEMENTAL PLAN OF DISTRIBUTION

57

VALIDITY OF THE ETNS

58

NOTICE OF HOLDER REDEMPTION

A-1

CONFIRMATION OF HOLDER REDEMPTION

B-1

REDEMPTION NOTICE FOR AUTOMATIC TERMINATION EVENT

C-1

 

 

PROSPECTUS SUPPLEMENT

SUMMARY

S-1

RISK FACTORS

S-7

U.K. BAIL-IN POWER

S-36

TERMS OF THE NOTES

S-39

INTEREST MECHANICS

S-48

TERMS OF THE WARRANTS

S-51

REFERENCE ASSETS

S-58

BENEFIT PLAN INVESTOR CONSIDERATIONS

S-99

PLAN OF DISTRIBUTION (CONFLICTS OF INTEREST)

S-101

USE OF PROCEEDS AND HEDGING

S-110

MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES

S-111

VALIDITY OF SECURITIES

S-131

 

 

PROSPECTUS

FORWARD-LOOKING STATEMENTS

1

INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE

2

THE BARCLAYS BANK GROUP

3

USE OF PROCEEDS

3

DESCRIPTION OF DEBT SECURITIES

4

DESCRIPTION OF WARRANTS

23

GLOBAL SECURITIES

35

CLEARANCE AND SETTLEMENT

36

DESCRIPTION OF PREFERENCE SHARES

43

DESCRIPTION OF AMERICAN DEPOSITARY SHARES

49

DESCRIPTION OF SHARE CAPITAL

55

TAX CONSIDERATIONS

57

EMPLOYEE RETIREMENT INCOME SECURITY ACT

81

PLAN OF DISTRIBUTION

83

SERVICE OF PROCESS AND ENFORCEMENT OF LIABILITIES

86

WHERE YOU CAN FIND MORE INFORMATION

86

FURTHER INFORMATION

87

VALIDITY OF SECURITIES

87

EXPERTS

87

EXPENSES OF ISSUANCE AND DISTRIBUTION

88

 




PRICING SUPPLEMENT SUMMARY

 

The following is a summary of terms of the Barclays ETN+ FI Enhanced Europe 50 Exchange Traded Notes Series C (the “ETNs”) that Barclays Bank PLC may issue from time to time, which are linked to a quarterly rebalanced leveraged participation in the performance of the STOXX Europe 50® USD (Gross Return) Index (the “Index”), as well as a discussion of risks and other considerations you should take into account when deciding whether to invest in the ETNs.  The information in this section is qualified in its entirety by the more detailed explanations set forth elsewhere in this pricing supplement and the accompanying prospectus and prospectus supplement.  References to the “prospectus” mean our accompanying prospectus, dated February 22, 2018, and references to the “prospectus supplement” mean our accompanying prospectus supplement, dated July 18, 2016, which supplements the prospectus.  When you read the prospectus supplement, note that all references to the prospectus dated July 18, 2016, or to any sections therein, should refer instead to the accompanying prospectus dated February 22, 2018, or to the corresponding sections of that prospectus.

 

We may, without your consent, create and issue additional securities having the same terms and conditions as the ETNs.  We may consolidate the additional securities to form a single class with the outstanding ETNs.  However, we are under no obligation to sell additional ETNs at any time, and if we do sell additional ETNs, we may limit such sales and stop selling additional ETNs at any time.

 

Any limitation or suspension on the issuance or sale of the ETNs may materially and adversely affect the price and liquidity of the ETNs in the secondary market.  Alternatively, the decrease in supply may cause an imbalance in the market supply and demand, which may cause the ETNs to trade at a premium over their indicative value.  Any premium may be reduced or eliminated at any time.  Paying a premium purchase price over the indicative value of the ETNs could lead to significant losses in the event you sell your ETNs at a time when such premium is no longer present in the marketplace or if we redeem the ETNs at are upon or automatically.  Investors should consult their financial advisors before purchasing or selling the ETNs, especially ETNs trading at a premium over their indicative value.

This section summarizes the following aspects of the ETNs:

 

·                       What are the ETNs and how do they work?

 

·                       How do you redeem your ETNs?

 

·                       What are some of the risks of the ETNs?

 

·                       Is this the right investment for you?

 

·                       What are the tax consequences?

 

What Are the ETNs and How Do They Work?

 

The ETNs are medium-term notes that are senior, unsecured debt obligations of Barclays Bank PLC (the “Issuer”) and are linked to a quarterly rebalanced leveraged participation in the performance of the Index over the term of the ETNs.  Accordingly, the ETNs generally appreciate in value as the level of the Index increases, provided such increase is sufficient to offset the negative effect of the daily investor fee and any applicable loss rebalancing fee and settlement charge.

 

At inception the ETN is designed to target two times the performance of the Index. A quarterly rebalancing event or a loss rebalancing event will aim to reset the leveraged exposure to the Index to two. The ETNs are very sensitive to changes in the performance of the Index, and returns on the ETNs may be negatively impacted in complex ways by volatility of the Index on a quarterly basis.

 

The ETNs seek to approximate the returns that might be available to investors through a leveraged “long” investment in the Index (for example, through a leveraged “long” position in the Index Constituents). A leveraged “long” investment strategy involves the practice of borrowing money from a third party lender at an agreed-upon rate of interest and using the borrowed money together with investor capital to purchase assets.  A leveraged long investment strategy terminates with the sale of the underlying assets and repayment of borrowed money to the third party lender, provided that the proceeds of the sale of underlying assets are sufficient to repay the loan. By implementing a leveraged strategy, the leveraged investor seeks to benefit from an anticipated increase in the value of the assets between the purchase and sale of such assets, and assumes that the increase in value of the underlying assets will exceed the cumulative interest due to the third party lender over the term of the loan. A leveraged investor will incur a loss if the value of the assets decreases or does not


 

PS-1




increase sufficiently to cover payment of the interest charges and other costs.

 

In order to seek to replicate a leveraged “long” investment strategy in the Index, the terms of the ETNs provide that, on each valuation date following the initial valuation date, an amount equal to the closing indicative note value on the immediately preceding valuation date (“$x”) is leveraged through a notional loan of an amount equal to the financing level on the immediately preceding valuation date (“$y”).  Investors are thus considered to have notionally borrowed $y, which, together with the initial $x investment, represents a notional investment of $x + $y (represented by the long index amount) in the Index before the start of trading on the relevant valuation date.  During the term of your ETNs, the leveraged portion of the notional investment, $y (represented by the financing level), accrues a daily investor fee for the benefit of the Issuer, the cumulative effect of which is reflected, together with any loss rebalancing fee deducted in connection with a loss rebalancing event, in the “financing level”.  The daily investor fee seeks to compensate the Issuer for providing the long leveraged exposure to the Index and reflects, among other things, the amount of interest that leveraged investors might incur if they sought to borrow funds at a similar rate from a third party lender and a charge equal to the fee rate applied to the closing indicative note value on the immediately preceding valuation date. A quarterly rebalancing event or a loss rebalancing event will aim to reset the leveraged exposure to the Index to approximately two.

 

Upon maturity or redemption, the investment in the Index is notionally sold at the then current value of the Index, and the investor then notionally repays the Issuer an amount equal to the principal of the notional loan plus the applicable daily investor fee, as well as a settlement charge intended to allow the Issuer to recoup the brokerage and other transaction costs that might be incurred in connection with making a payment on the ETNs.  The payment at maturity or redemption under the ETNs, therefore, generally represents the profit or loss that the investor would receive by applying a leveraged “long” investment strategy, after taking into account, and making assumptions for, effects of periodic rebalancing, financing costs, fees and charges.

 

As a result of compounding, the performance of the ETNs for a period greater than one quarter is likely to be either greater than or less than two

times the performance of the Index during that period, before accounting for applicable fees and charges. In addition, the net negative effect of the daily investor fee and loss rebalancing fees, if applicable, accumulates over time, and the absolute level of these fees are dependent on the path taken by the level of the Index over the term of the ETNs.

 

Because the long index amount is reset each quarter and upon any loss rebalancing, the ETNs do not offer a return based on the simple performance of the Index from the inception date to the maturity date. Instead, the amount you receive at maturity or upon redemption or an automatic termination event, will be contingent upon the leveraged long performance of the Index adjusted for the impact of the quarterly rebalancing or any loss rebalancing during the term of the ETNs, and additionally subject to the negative effect of applicable fees and charges. Accordingly, even if over the term of the ETNs, the level of the Index has increased, there is no guarantee that you will receive at maturity or upon redemption or an automatic termination event, your initial investment back or any return on that investment. This is because the amount you receive at maturity or upon redemption or an automatic termination event depends on how the Index has performed on a periodically rebalanced leveraged basis prior to maturity, redemption or automatic termination event, and consequently, how the long index amount has been reset in each quarter. In particular, significant adverse quarterly performances for your ETNs may not be offset by any beneficial quarterly performances of the same magnitude.

 

The long index amount may be reset more frequently than quarterly upon the occurrence of a loss rebalancing event. The loss rebalancing feature will have the effect of deleveraging the exposure of the ETNs to the Index if a loss rebalancing event occurs, meaning that, on any valuation date, the closing level of the Index is less than or equal to the loss rebalancing trigger calculated on the immediately preceding valuation date.  This feature acts to reset the leveraged exposure to the Index to approximately two on the relevant rebalancing date (without accounting for changes in the Index level on the rebalancing date).  This means that as of the rebalancing date after the loss rebalancing event, a constant percentage increase in the Index level will have a lesser positive effect on the value of the ETNs relative to an increase occurring before the loss rebalancing event.  In addition, each time a loss rebalancing event occurs, a loss


 

PS-2




rebalancing fee equal to 0.05% of the relevant rebalancing amount (which represents the change in the notional exposure to the Index as a result of a rebalancing event) will be charged.

 

Loss rebalancing events can occur multiple times. In addition, each time a loss rebalancing event occurs, you will incur a loss rebalancing fee. This means both that (i) the long index amount may be reset more frequently than quarterly and (ii) the cumulative effect of compounding and fees will increase as a result of loss rebalancing events. This fee will reduce the amount of your return (or increase your loss) on the maturity date or upon redemption or an early termination event.

 

Additionally, in order to mitigate the risk to the Issuer that the value of the ETNs equals a negative value, an automatic early termination of the ETNs is provided for under the automatic termination event provisions hereunder.

 

Comparison with Daily “Reset” Exchange-Traded Funds

 

Your ETNs operate differently than certain leveraged exchange traded funds (“ETFs”) that have a daily “reset” mechanism that seeks to provide investors in such ETFs a return based on a fixed multiple of the performance of an underlying reference asset on a given day. The “reset” mechanism of such ETFs is applied so that the return on investments in such ETFs will correspond to a fixed multiple of the daily return on the underlying reference asset on any given day, before fees and expenses.

 

Your ETNs do not operate in this manner, as they do not have a daily reset mechanism. Instead, the ETNs rebalance their theoretical exposure on a quarterly basis, increasing exposure in response to that quarter’s gains or reducing exposure in response to that quarter’s losses.  As a consequence, the returns on the performance of the Index are compounded on a quarterly basis.

 

The Index

 

The Index is composed of 50 European blue-chip companies (the “Index Constituents”) selected from within the STOXX Europe 600 Index (the “Parent Index”).  The Parent Index contains the 600 largest stocks traded on the major exchanges of 17 European countries: Austria, Belgium, Czech Republic, Denmark, Finland, France, Germany, Ireland, Italy, Luxembourg, the Netherlands, Norway, Portugal, Spain, Sweden,

Switzerland and the United Kingdom.  The Index is calculated, maintained and published by STOXX Limited (the “index sponsor”), which launched the Index on March 27, 2012.  The intraday level and the official closing level of the Index are reported by the index sponsor on Bloomberg page “SX5PGV <Index>“.

 

Understanding the Value of the ETNs

 

The “principal amount” is $100.00 per ETN, which is the initial offering price at which the ETNs were sold on the inception date.

 

The “closing indicative note value” is the value of the ETNs per ETN calculated by us on a daily basis and is used to determine the payment at maturity or upon early redemption.  The closing indicative note value differs from the intraday indicative note value or the trading price of the ETNs.  The closing indicative note value per ETN on the initial valuation date was $100.  The closing indicative note value for each ETN on any subsequent valuation date will equal (a) the long index amount on such valuation date minus (b) the financing level on such valuation date, provided that if such calculation results in a negative value, the closing indicative note value will be $0.  The closing indicative note value will be published on each valuation date under the ticker symbol “FFEU.RDNV”.

 

The “intraday indicative note value” is intended to provide investors with an approximation of the effect that changes in the level of the Index during the current trading day would have on the closing indicative note value of the ETNs from the previous day.  In addition, the automatic redemption value payable following an automatic termination of the ETNs is calculated using the formula for the intraday indicative note value.  Intraday indicative note value differs from closing indicative note value in two important respects: First, intraday indicative note value is based on the most recent Index level published by the index sponsor, which reflects the most recent reported sales prices for the Index Constituents, rather than the long index amount (which reflects the index performance factor) and the financing level for the immediately preceding calendar day.  Second, the intraday indicative note value only reflects the accrued daily investor fee and any loss rebalancing fee at the close of business on the preceding valuation date, but does not include any adjustment for the daily investor fee or any loss rebalancing fee that may have accrued during the course of the current day, nor any applicable settlement charge.


 

PS-3




During the hours on which trading is generally conducted on NYSE Arca, the intraday indicative note value will be published by ICE Data Indices, LLC every 15 seconds under the ticker symbol FFEU.IV.  During any such hours, however, when none of the exchanges on which the Index Constituents trade are open and the intraday index level does not change, the intraday indicative note value is expected to remain static.

 

If you sell your ETNs on the secondary market, you will receive the “trading price” for your ETNs, which may be substantially above or below the principal amount, closing indicative note value and/or intraday indicative note value because the trading price reflects investor supply and demand for the ETNs.  In addition, if you purchase your ETNs at a price which reflects a premium over the closing indicative note value, you may experience a significant loss if you sell or redeem your ETNs at a time when such premium is no longer present in the market place.

 

The performance of the ETNs is linked to the quarterly rebalanced leveraged participation in the performance of the Index. There is no minimum limit to the level of the Index.  Moreover, the ETNs are not principal protected.  Therefore, a decrease in the level of the Index could cause you to lose up to your entire investment in the ETNs.

 

Furthermore, because your investment in the ETNs is leveraged, any decrease in the level of the Index will result in a significantly greater decrease in the repayment amount, and you may receive less than the amount for which you purchased your ETNs at maturity or upon redemption or an automatic termination event.  Moreover, because the daily investor fee, the loss rebalancing fee and the settlement charge may substantially reduce the amount of your return at maturity or upon redemption or an automatic termination event, the level of the Index must increase significantly in order for you to receive at least the amount for which you purchased your ETNs at maturity or upon redemption or an automatic termination event.  If the level of the Index decreases or does not increase sufficiently to offset the negative effect of the daily investor fee and any applicable loss rebalancing fee and settlement charge you will receive less than the amount for which you purchased your ETNs at maturity or upon redemption or an automatic termination event.

If the level of the Index decreases sufficiently to trigger an automatic termination event, your ETNs will be automatically redeemed at the automatic redemption value.  Following the calculation of the automatic redemption value, you will not benefit from any subsequent increase in the Index level.

 

How Do You Redeem Your ETNs?

 

To redeem your ETNs, you must instruct your broker or other person through whom you hold your ETNs to take the following steps:

 

·     deliver a notice of holder redemption, which is attached as Annex A, to us via facsimile or email by no later than 4:00 p.m., New York City time, on the business day prior to the valuation date that you specify in such notice.  If we receive your notice by the time specified in the preceding sentence, we will respond by sending you a form of confirmation of holder redemption, which is attached as Annex B;

 

·      deliver the signed confirmation of holder redemption to us via facsimile or email in the specified form by 5:00 p.m., New York City time, on the same day.  We or our affiliate must acknowledge receipt in order for your confirmation to be effective;

 

·      instruct your DTC custodian to book a delivery vs. payment trade with respect to your ETNs on the applicable valuation date at a price equal to the closing indicative note value per ETN on the applicable valuation date minus the settlement charge on the applicable valuation date, facing Barclays DTC 5101; and

 

·      cause your DTC custodian to deliver the trade as booked for settlement via DTC at or prior to 10:00 a.m., New York City time, on the applicable redemption date (the second business day following the applicable valuation date).

 

Different brokerage firms may have different deadlines for accepting instructions from their customers.  Accordingly, you should consult the brokerage firm through which you own your interest in the ETNs in respect of such deadlines.  If we do not receive your notice of holder redemption by 4:00 p.m., New York City time, or your confirmation of holder redemption by 5:00 p.m., New York City time, on the business day prior to the applicable valuation date, your notice will not be effective, and we will not redeem


 

PS-4




your ETNs on the applicable redemption date.  Any redemption instructions for which we (or our affiliate) receive a valid confirmation in accordance with the procedures described above will be irrevocable.  Additionally, if we exercise our right to redeem the ETNs or an automatic termination event occurs prior to the close of business on the applicable valuation date, any notice of redemption will be deemed ineffective and your ETNs will be automatically redeemed on the relevant redemption date at an amount equal to the automatic redemption value.

 

The redemption value is determined according to a formula which relies upon the closing indicative note value and will be calculated on a valuation date that will occur after the redemption notice is submitted.  It is not possible to publicly disclose, or for you to determine, the precise redemption value prior to your election to redeem.  The redemption value may be below, perhaps significantly below, the most recent intraday indicative note value or closing indicative note value of your ETNs at the time when you submit your redemption notice.

 

For more information regarding the intraday indicative note value, see “Valuation of the ETNs—Intraday Indicative Note Value” in this pricing supplement.

 

What Are Some of the Risks of the ETNs?

 

An investment in the ETNs involves risks.  Some of these risks are summarized here, but we urge you to read the more detailed explanation of risks in “Risk Factors” in this pricing supplement.

 

·      Potential Loss of Principal and Potential Negative Effects of Leverage Because your investment in the ETNs is leveraged, any decrease in the level of the Index will result in a significantly greater decrease in the repayment amount and may result in a payment at maturity or upon redemption or an automatic termination event at an amount that is less than your original investment.  Moreover, if the level of the Index decreases or does not increase sufficiently to offset the negative effect of the daily investor fee, the loss rebalancing fee (if any) and the settlement charge (if any), you may receive less than your original investment in the ETNs at maturity or upon redemption or an automatic termination event.

 

·      Credit of IssuerThe ETNs are unsecured and unsubordinated 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 ETNs, including any repayment of principal, is subject to the ability of Barclays Bank PLC to satisfy its obligations as they come due and is not guaranteed by any third party. As a result, the actual and perceived creditworthiness of Barclays Bank PLC may affect the market value of the ETNs and, in the event Barclays Bank PLC were to default on its obligations, you might not receive any amount owed to you under the terms of the ETNs.

 

·      Correlation and Compounding Risk — A number of factors may affect the ETN’s ability to achieve a high degree of correlation with the performance of the Index, and investors may be unable to be exposed to two times the performance of the Index. Because the long index amount is reset quarterly, you will be exposed to compounding of quarterly returns. As a result, the performance of the ETNs for a period greater than one quarter is likely to be either greater than or less than the Index performance during that period times the initial leverage factor of two, before accounting for applicable fees and charges. In particular, significant adverse quarterly performances of your ETNs may not be offset by subsequent beneficial quarterly performances of equal magnitude. Each time a loss rebalancing event occurs, the cumulative effect of compounding and fees will increase as a result of the loss rebalancing event(s). This means that your ETNs will entitle you to less of a positive gain in the value relative to before the occurrence of the loss rebalancing event. See “Specific Terms of the ETNs—Index Exposure Rebalancing,” “Risk Factors—The Ratio Between the Value of Your ETNs and the Notional Exposure of Each ETN to the Index Will Fluctuate During the Term of Your ETNs” and “Risk Factors—Upon the Occurrence of a Loss Rebalancing Event, the Leveraged Exposure of the ETNs to the Quarterly Performance of the Index Will Be Reduced” for more information.

 

·      Market RiskThe return on the ETNs is linked to a quarterly rebalanced leveraged participation in the performance of the Index, which is linked to equity securities.  Equity security prices may change unpredictably,


 

PS-5




affecting the level of the Index and, consequently, the value of your ETNs in unforeseeable ways.

 

·      No Interest Payments You will not receive any periodic interest payments on the ETNs.

 

·      A Trading Market for the ETNs May Not Exist We have applied to list the ETNs on NYSE Arca, but there is no guarantee that our application will be approved.  Even if our application is approved, a trading market in the ETNs may not exist at any time.  Even if there is a secondary market for the ETNs, whether as a result of any listing of the ETNs or on an over-the-counter basis, it may not provide enough liquidity to trade or sell your ETNs easily.  Although certain affiliates of Barclays Bank PLC may engage in limited purchase and resale transactions in the ETNs, they are not required to do so, and if they decide to engage in such transactions, they may stop at any time.  We are not required to maintain any listing of the ETNs on NYSE Arca or on any other securities exchange and may cause the ETNs to be de-listed at our discretion.

 

·      Issuer Redemption Subject to the procedures described in this pricing supplement, we have the right to redeem or “call” the ETNs (in whole only, but not in part) at our sole discretion without your consent on any trading day on or after the inception date until and including maturity.

 

·      Automatic Redemption If, on any index business day prior to or on the final valuation date, the intraday index level is less than or equal to the automatic termination trigger calculated on the valuation date immediately preceding the beginning of such index business day, an automatic termination event will be deemed to have occurred and the ETNs will be automatically redeemed (in whole only, but not in part) in an amount equal to the automatic redemption value.  The automatic redemption value will be significantly less than the principal amount of your ETNs and, if the level of the Index continues to decrease precipitously from the occurrence of the automatic termination event to the time at which the calculation agent determines the automatic redemption value, may equal $0.  Following the calculation of the automatic redemption value, you will not benefit from any

subsequent increase in the level of the Index.

 

Is This the Right Investment for You?

 

The ETNs may be a suitable investment for you if:

 

·      You are willing to accept the risk of a leveraged investment in general and of a leveraged investment linked to the quarterly performance of the Index in particular;

 

·      You are willing to accept the risk of an investment that features an automatic termination event that results in an automatic redemption of the ETNs if the intraday index level is less than or equal to the applicable automatic termination trigger;

 

·      You believe the level of the Index will increase by an amount sufficient to offset the daily investor fee, any applicable loss rebalancing fees and settlement charges during the term of the ETNs;

 

·      You do not seek current income from this investment;

 

·      You do not seek a guaranteed return of principal; and

 

·      You are willing or able to assume the credit risk of Barclays Bank PLC, as issuer of the ETNs, for all payments under the ETNs and you are willing to be exposed to the risk that if Barclays Bank PLC were to default on its payment obligations or become subject to the exercise of any U.K. Bail-in Power, you might not receive any amounts due to you under the ETNs, including any repayment of principal.

 

The ETNs may not be a suitable investment for you if:

 

·      You are not willing to be exposed to a leveraged investment in general or to a leveraged investment linked to the quarterly performance of the Index in particular;

 

·      You are not willing to accept the risk of an investment that features an automatic termination event that results in an automatic redemption of the ETNs if the intraday index level is less than or equal to the applicable automatic termination trigger;

 

·      You believe the level of the Index will decrease or will not increase by an amount sufficient to offset the daily investor fee, any


 

PS-6




applicable loss rebalancing fees and settlement charges during the term of the ETNs;

 

·      You prefer the lower risk and therefore accept the potentially lower returns of fixed income investments with comparable maturities and credit ratings;

 

·      You seek current income from this investment;

 

·      You seek a guaranteed return of principal; or

 

·      You are unwilling or unable to assume the credit risk of Barclays Bank PLC, as issuer of the ETNs, for all payments under the ETNs or you are not willing to be exposed to the risk that if Barclays Bank PLC were to default on its payment obligations or become subject to the exercise of any U.K. Bail-in Power, you might not receive any amounts due to you under the ETNs, including any repayment of principal.

 

What Are the Tax Consequences?

 

You should review carefully the section below entitled “Material U.S. Federal Income Tax Consequences.”  As discussed further in that section, based on current market conditions, in the opinion of our special tax counsel, the ETNs should be treated for U.S. federal income tax purposes as prepaid forward contracts with respect to the Index.  Assuming this treatment is respected, gain or loss on your ETNs should be treated as long-term capital gain or loss if you are treated as holding your ETNs for more than a year, whether or not you are an initial purchaser of ETNs at the original issue price.  However, the Internal Revenue Service (the “IRS”) or a court might not respect this treatment, in which case the timing and character of any income or loss on the ETNs could be materially and adversely affected.

 

Even if the ETNs are treated as prepaid forward contracts, due to the lack of controlling authority, there remain substantial uncertainties regarding the tax consequences of an investment in the ETNs.  For example, the IRS could assert that a “deemed” taxable exchange has occurred on one or more index rebalancings under certain circumstances.  If the IRS were successful in asserting that a taxable exchange has occurred, you could be required to recognize gain (but probably not loss) prior to a taxable disposition of your ETNs.  Additionally, because the Index is a total return index, the level of which reflects the

notional reinvestment of the cash dividends distributed by its constituent stocks, it is possible that the IRS could seek to treat you as accruing income during the term of your ETNs.  In addition, in 2007 the U.S. Treasury Department and the IRS released a notice requesting comments on the U.S. federal income tax treatment of “prepaid forward contracts” and similar instruments.  The notice focuses in particular on whether to require investors in these instruments to accrue income over the term of their investment.  It also asks for comments on a number of related topics, including the character of income or loss with respect to these instruments; the relevance of factors such as the exchange-traded status of the instruments and the nature of the underlying property to which the instruments are linked; the degree, if any, to which income (including any mandated accruals) realized by non-U.S. investors should be subject to withholding tax; and whether these instruments are or should be subject to the “constructive ownership” regime, which very generally can operate to recharacterize certain long-term capital gain as ordinary income and impose a notional interest charge.  While the notice requests comments on appropriate transition rules and effective dates, any Treasury regulations or other guidance promulgated after consideration of these issues could materially and adversely affect the tax consequences of an investment in the ETNs, possibly with retroactive effect.

 

You should consult your tax advisor regarding the U.S. federal income tax consequences of an investment in the ETNs (including possible alternative treatments, the possible consequences of index rebalancings, the risk that you could be required to accrue income prior to the taxable disposition of your ETNs, and the issues presented by the 2007 notice), as well as the tax consequences arising under the laws of any state, local or non-U.S. taxing jurisdiction.

 

Conflicts of Interest

 

Barclays Capital Inc. is an affiliate of Barclays Bank PLC and, as such, has a “conflict of interest” in this offering within the meaning of Rule 5121 of the Financial Industry Regulatory Authority, Inc. (“FINRA”).  Consequently, this offering is being conducted in compliance with the provisions of FINRA Rule 5121 (or any successor rule thereto).  In addition, Barclays Capital Inc. will not sell the ETNs to a discretionary account without specific written approval from the account holder.  For more information, please refer to “Plan of Distribution (Conflicts of Interest)—Conflict of Interest” in the accompanying prospectus supplement.


 

PS-7



Table of Contents

 

Hypothetical Examples

 

The following hypothetical examples show how the ETNs might have performed based on the quarterly performance of the Index as applied to a hypothetical period of 60 quarters, or fifteen years in total, presented on a quarterly basis.  The hypothetical examples are calculated using weekly performance data, and each quarter is assumed to be composed of 13 weeks.  The hypothetical examples illustrate the effect of a quarterly rebalanced leveraged investment in the Index and the impact, on a quarterly accrued basis, of the daily investor fee, the settlement charge and, if applicable, the loss rebalancing fee on the payment at maturity or upon redemption.  The figures presented in these hypothetical examples are intended to reflect the prevailing value of each relevant ETN term as of the relevant numbered quarterly date of the ETNs following the initial valuation date (indicated in Column A of each hypothetical example as “Quarter 0”).

 

The hypothetical examples in this section do not take into account the effects of applicable taxes.  The after-tax return you receive on your ETNs will depend on the U.S. tax treatment of your ETNs and on your particular circumstances.  Accordingly, the after-tax rate of return of your ETNs could be different than the after-tax return of a direct investment in the components of the Index or the Index.

 

These hypothetical examples are provided for illustrative purposes only.  Past performance of the Index and the hypothetical performance of the ETNs are not indicative of the future results of the Index or the ETNs.

 

PS-8



Table of Contents

 

Hypothetical Examples

 

Example 1:

 

In this example, we assume a principal amount per ETN of $100, an initial leverage factor of 2 and a financing rate of 3.00% throughout the term of the ETNs.

 

In the following hypothetical example, the Index level increased by 1.00% per quarter from a level of 1,000.00 (the initial Index level for purposes of this example) to a final Index level of 1,800.94 at the hypothetical ETN maturity.

 

A

 

B

 

C

 

D

 

E

 

F

 

G

Quarter

 

Index
Level

 

Long Index
Amount

 

Accrued
Daily

Investor
Fees

 

Financing
Level

 

Closing
Indicative
Note Value

 

Payment
Including
Settlement
Charge

A

 

B

 

C

 

Quarterly
Total

 

Running
Total

 

C - E

 

 

F – (0.05% x
C)

 

0

 

1,000.00

 

$200.00

 

 

 

$100.00

 

$100.00

 

$99.90

1

 

1,009.85

 

$201.97

 

$1.02

 

$101.13

 

$100.84

 

$100.74

2

 

1,019.80

 

$203.51

 

$1.02

 

$101.71

 

$101.80

 

$101.70

3

 

1,029.85

 

$205.45

 

$1.03

 

$102.68

 

$102.77

 

$102.67

4

 

1,040.00

 

$207.41

 

$1.04

 

$103.66

 

$103.75

 

$103.65

5

 

1,050.25

 

$209.38

 

$1.05

 

$104.65

 

$104.74

 

$104.63

6

 

1,060.60

 

$211.38

 

$1.06

 

$105.64

 

$105.74

 

$105.63

7

 

1,071.05

 

$213.39

 

$1.07

 

$106.65

 

$106.74

 

$106.64

8

 

1,081.60

 

$215.43

 

$1.08

 

$107.67

 

$107.76

 

$107.65

9

 

1,092.26

 

$217.48

 

$1.09

 

$108.69

 

$108.79

 

$108.68

10

 

1,103.02

 

$219.56

 

$1.11

 

$109.73

 

$109.83

 

$109.72

11

 

1,113.89

 

$221.65

 

$1.12

 

$110.78

 

$110.87

 

$110.76

12

 

1,124.86

 

$223.76

 

$1.13

 

$111.83

 

$111.93

 

$111.82

13

 

1,135.95

 

$225.89

 

$1.14

 

$112.90

 

$113.00

 

$112.88

14

 

1,147.14

 

$228.05

 

$1.15

 

$113.97

 

$114.07

 

$113.96

15

 

1,158.44

 

$230.22

 

$1.16

 

$115.06

 

$115.16

 

$115.05

16

 

1,169.86

 

$232.41

 

$1.17

 

$116.16

 

$116.26

 

$116.14

17

 

1,181.39

 

$234.63

 

$1.18

 

$117.26

 

$117.37

 

$117.25

18

 

1,193.03

 

$236.87

 

$1.19

 

$118.38

 

$118.48

 

$118.37

19

 

1,204.78

 

$239.12

 

$1.20

 

$119.51

 

$119.61

 

$119.49

20

 

1,216.65

 

$241.40

 

$1.22

 

$120.65

 

$120.75

 

$120.63

21

 

1,228.64

 

$243.70

 

$1.23

 

$121.80

 

$121.91

 

$121.78

22

 

1,240.75

 

$246.03

 

$1.24

 

$122.96

 

$123.07

 

$122.94

23

 

1,252.97

 

$248.37

 

$1.25

 

$124.13

 

$124.24

 

$124.12

24

 

1,265.32

 

$250.74

 

$1.26

 

$125.32

 

$125.42

 

$125.30

25

 

1,277.79

 

$253.13

 

$1.27

 

$126.51

 

$126.62

 

$126.49

26

 

1,290.38

 

$255.54

 

$1.29

 

$127.72

 

$127.83

 

$127.70

27

 

1,303.09

 

$257.98

 

$1.30

 

$128.93

 

$129.05

 

$128.92

28

 

1,315.93

 

$260.44

 

$1.31

 

$130.16

 

$130.28

 

$130.15

29

 

1,328.90

 

$262.92

 

$1.32

 

$131.40

 

$131.52

 

$131.39

30

 

1,341.99

 

$265.43

 

$1.34

 

$132.66

 

$132.77

 

$132.64

31

 

1,355.22

 

$267.96

 

$1.35

 

$133.92

 

$134.04

 

$133.90

32

 

1,368.57

 

$270.51

 

$1.36

 

$135.20

 

$135.31

 

$135.18

 

PS-9



Table of Contents

 

A

 

B

 

C

 

D

 

E

 

F

 

G

Quarter

 

Index
Level

 

Long Index
Amount

 

Accrued
Daily

Investor
Fees

 

Financing
Level

 

Closing
Indicative
Note Value

 

Payment
Including
Settlement
Charge

A

 

B

 

C

 

Quarterly
Total

 

Running
Total

 

C - E

 

 

F – (0.05% x
C)

 

33

 

1,382.05

 

$273.09

 

$1.37

 

$136.48

 

$136.60

 

$136.47

34

 

1,395.67

 

$275.69

 

$1.39

 

$137.79

 

$137.91

 

$137.77

35

 

1,409.42

 

$278.32

 

$1.40

 

$139.10

 

$139.22

 

$139.08

36

 

1,423.31

 

$280.97

 

$1.41

 

$140.42

 

$140.55

 

$140.41

37

 

1,437.34

 

$283.65

 

$1.43

 

$141.76

 

$141.89

 

$141.75

38

 

1,451.50

 

$286.35

 

$1.44

 

$143.11

 

$143.24

 

$143.10

39

 

1,465.80

 

$289.08

 

$1.46

 

$144.48

 

$144.60

 

$144.46

40

 

1,480.24

 

$291.84

 

$1.47

 

$145.86

 

$145.98

 

$145.84

41

 

1,494.83

 

$294.62

 

$1.48

 

$147.25

 

$147.37

 

$147.23

42

 

1,509.56

 

$297.43

 

$1.50

 

$148.65

 

$148.78

 

$148.63

43

 

1,524.43

 

$300.26

 

$1.51

 

$150.07

 

$150.20

 

$150.05

44

 

1,539.45

 

$303.13

 

$1.53

 

$151.50

 

$151.63

 

$151.48

45

 

1,554.62

 

$306.02

 

$1.54

 

$152.94

 

$153.07

 

$152.92

46

 

1,569.94

 

$308.93

 

$1.56

 

$154.40

 

$154.53

 

$154.38

47

 

1,585.41

 

$311.88

 

$1.57

 

$155.87

 

$156.01

 

$155.85

48

 

1,601.03

 

$314.85

 

$1.59

 

$157.36

 

$157.49

 

$157.34

49

 

1,616.81

 

$317.85

 

$1.60

 

$158.86

 

$158.99

 

$158.84

50

 

1,632.74

 

$320.88

 

$1.62

 

$160.37

 

$160.51

 

$160.35

51

 

1,648.83

 

$323.94

 

$1.63

 

$161.90

 

$162.04

 

$161.88

52

 

1,665.07

 

$327.03

 

$1.65

 

$163.44

 

$163.58

 

$163.42

53

 

1,681.48

 

$330.14

 

$1.66

 

$165.00

 

$165.14

 

$164.98

54

 

1,698.05

 

$333.29

 

$1.68

 

$166.57

 

$166.72

 

$166.55

55

 

1,714.78

 

$336.47

 

$1.69

 

$168.16

 

$168.31

 

$168.14

56

 

1,731.68

 

$339.67

 

$1.71

 

$169.76

 

$169.91

 

$169.74

57

 

1,748.74

 

$342.91

 

$1.73

 

$171.38

 

$171.53

 

$171.36

58

 

1,765.97

 

$346.18

 

$1.74

 

$173.01

 

$173.17

 

$172.99

59

 

1,783.37

 

$349.48

 

$1.76

 

$174.66

 

$174.82

 

$174.64

60

 

1,800.94

 

$352.81

 

$1.78

 

$176.33

 

$176.48

 

$176.31

Quarterly Index Return

 

 

 

1.00%

 

Index Total Return

 

80.09%

Quarterly Return on the ETNs

 

 

 

0.95%

 

Total Return on the ETNs

 

76.48%

 

PS-10



Table of Contents

 

Hypothetical Examples

 

Example 2:

 

In this example, we assume a principal amount per ETN of $100, an initial leverage factor of 2 and a financing rate of 6.00% throughout the term of the ETNs.

 

In the following hypothetical example, the Index level increased by 1.00% per quarter from a level of 1,000.00 (the initial Index level for purposes of this example) to a final Index level of 1,800.94 at the hypothetical ETN maturity.

 

Example 2 shows the effect of a different financing rate on the closing indicative note value, as compared to Example 1.  This example highlights that even if the Index increases, the aggregate effect of the daily investor fee, which is variable, and the settlement charge may result in a closing indicative note value at maturity or upon redemption that is less than the principal amount per ETN.

 

A

 

B

 

C

 

D

 

E

 

F

 

G

Quarter

 

Index
Level

 

Long Index
Amount

 

Accrued
Daily

Investor
Fees

 

Financing
Level

 

Closing
Indicative
Note Value

 

Payment
Including
Settlement
Charge

A

 

B

 

C

 

Quarterly
Total

 

Running
Total

 

C - E

 

 

F – (0.05% x
C)

 

0

 

1,000.00

 

$200.00

 

 

 

$100.00

 

$100.00

 

$99.90

1

 

1,009.85

 

$201.97

 

$1.77

 

$101.77

 

$100.20

 

$100.09

2

 

1,019.80

 

$202.21

 

$1.78

 

$101.82

 

$100.39

 

$100.29

3

 

1,029.85

 

$202.61

 

$1.78

 

$102.02

 

$100.59

 

$100.49

4

 

1,040.00

 

$203.01

 

$1.78

 

$102.22

 

$100.79

 

$100.68

5

 

1,050.25

 

$203.40

 

$1.79

 

$102.42

 

$100.98

 

$100.88

6

 

1,060.60

 

$203.80

 

$1.79

 

$102.62

 

$101.18

 

$101.08

7

 

1,071.05

 

$204.20

 

$1.80

 

$102.82

 

$101.38

 

$101.28

8

 

1,081.60

 

$204.60

 

$1.80

 

$103.02

 

$101.58

 

$101.48

9

 

1,092.26

 

$205.00

 

$1.80

 

$103.23

 

$101.78

 

$101.67

10

 

1,103.02

 

$205.40

 

$1.81

 

$103.43

 

$101.98

 

$101.87

11

 

1,113.89

 

$205.81

 

$1.81

 

$103.63

 

$102.18

 

$102.07

12

 

1,124.86

 

$206.21

 

$1.81

 

$103.83

 

$102.38

 

$102.27

13

 

1,135.95

 

$206.61

 

$1.82

 

$104.04

 

$102.58

 

$102.47

14

 

1,147.14

 

$207.02

 

$1.82

 

$104.24

 

$102.78

 

$102.67

15

 

1,158.44

 

$207.42

 

$1.82

 

$104.44

 

$102.98

 

$102.87

16

 

1,169.86

 

$207.83

 

$1.83

 

$104.65

 

$103.18

 

$103.08

17

 

1,181.39

 

$208.24

 

$1.83

 

$104.85

 

$103.38

 

$103.28

18

 

1,193.03

 

$208.64

 

$1.83

 

$105.06

 

$103.58

 

$103.48

19

 

1,204.78

 

$209.05

 

$1.84

 

$105.26

 

$103.79

 

$103.68

20

 

1,216.65

 

$209.46

 

$1.84

 

$105.47

 

$103.99

 

$103.89

21

 

1,228.64

 

$209.87

 

$1.85

 

$105.68

 

$104.19

 

$104.09

22

 

1,240.75

 

$210.28

 

$1.85

 

$105.88

 

$104.40

 

$104.29

23

 

1,252.97

 

$210.69

 

$1.85

 

$106.09

 

$104.60

 

$104.50

24

 

1,265.32

 

$211.11

 

$1.86

 

$106.30

 

$104.81

 

$104.70

25

 

1,277.79

 

$211.52

 

$1.86

 

$106.51

 

$105.01

 

$104.91

26

 

1,290.38

 

$211.93

 

$1.86

 

$106.72

 

$105.22

 

$105.11

27

 

1,303.09

 

$212.35

 

$1.87

 

$106.93

 

$105.42

 

$105.32

28

 

1,315.93

 

$212.77

 

$1.87

 

$107.13

 

$105.63

 

$105.52

 

PS-11



Table of Contents

 

A

 

B

 

C

 

D

 

E

 

F

 

G

Quarter

 

Index
Level

 

Long Index
Amount

 

Accrued
Daily

Investor
Fees

 

Financing
Level

 

Closing
Indicative
Note Value

 

Payment
Including
Settlement
Charge

A

 

B

 

C

 

Quarterly
Total

 

Running
Total

 

C - E

 

 

F – (0.05% x
C)

 

29

 

1,328.90

 

$213.18

 

$1.87

 

$107.34

 

$105.84

 

$105.73

30

 

1,341.99

 

$213.60

 

$1.88

 

$107.55

 

$106.04

 

$105.94

31

 

1,355.22

 

$214.02

 

$1.88

 

$107.77

 

$106.25

 

$106.15

32

 

1,368.57

 

$214.44

 

$1.89

 

$107.98

 

$106.46

 

$106.35

33

 

1,382.05

 

$214.86

 

$1.89

 

$108.19

 

$106.67

 

$106.56

34

 

1,395.67

 

$215.28

 

$1.89

 

$108.40

 

$106.88

 

$106.77

35

 

1,409.42

 

$215.70

 

$1.90

 

$108.61

 

$107.09

 

$106.98

36

 

1,423.31

 

$216.12

 

$1.90

 

$108.83

 

$107.30

 

$107.19

37

 

1,437.34

 

$216.55

 

$1.90

 

$109.04

 

$107.51

 

$107.40

38

 

1,451.50

 

$216.97

 

$1.91

 

$109.25

 

$107.72

 

$107.61

39

 

1,465.80

 

$217.39

 

$1.91

 

$109.47

 

$107.93

 

$107.82

40

 

1,480.24

 

$217.82

 

$1.92

 

$109.68

 

$108.14

 

$108.03

41

 

1,494.83

 

$218.25

 

$1.92

 

$109.89

 

$108.35

 

$108.24

42

 

1,509.56

 

$218.67

 

$1.92

 

$110.11

 

$108.56

 

$108.45

43

 

1,524.43

 

$219.10

 

$1.93

 

$110.33

 

$108.78

 

$108.67

44

 

1,539.45

 

$219.53

 

$1.93

 

$110.54

 

$108.99

 

$108.88

45

 

1,554.62

 

$219.96

 

$1.93

 

$110.76

 

$109.20

 

$109.09

46

 

1,569.94

 

$220.39

 

$1.94

 

$110.98

 

$109.42

 

$109.31

47

 

1,585.41

 

$220.82

 

$1.94

 

$111.19

 

$109.63

 

$109.52

48

 

1,601.03

 

$221.26

 

$1.95

 

$111.41

 

$109.85

 

$109.74

49

 

1,616.81

 

$221.69

 

$1.95

 

$111.63

 

$110.06

 

$109.95

50

 

1,632.74

 

$222.12

 

$1.95

 

$111.85

 

$110.28

 

$110.17

51

 

1,648.83

 

$222.56

 

$1.96

 

$112.07

 

$110.49

 

$110.38

52

 

1,665.07

 

$222.99

 

$1.96

 

$112.29

 

$110.71

 

$110.60

53

 

1,681.48

 

$223.43

 

$1.96

 

$112.51

 

$110.93

 

$110.81

54

 

1,698.05

 

$223.87

 

$1.97

 

$112.73

 

$111.14

 

$111.03

55

 

1,714.78

 

$224.31

 

$1.97

 

$112.95

 

$111.36

 

$111.25

56

 

1,731.68

 

$224.75

 

$1.98

 

$113.17

 

$111.58

 

$111.47

57

 

1,748.74

 

$225.19

 

$1.98

 

$113.39

 

$111.80

 

$111.68

58

 

1,765.97

 

$225.63

 

$1.98

 

$113.61

 

$112.02

 

$111.90

59

 

1,783.37

 

$226.07

 

$1.99

 

$113.83

 

$112.24

 

$112.12

60

 

1,800.94

 

$226.51

 

$1.99

 

$114.06

 

$112.46

 

$112.34

Quarterly Index Return

 

 

 

1.00%

 

Index Total Return

 

80.09%

Quarterly Return on the ETNs

 

 

 

0.20%

 

Total Return on the ETNs

 

12.46%

 

PS-12



Table of Contents

 

Hypothetical Examples

 

Example 3:

 

In this example, we assume a principal amount per ETN of $100, an initial leverage factor of 2 and a financing rate of 3.00% throughout the term of the ETNs.

 

In the following hypothetical example, the Index level decreased by 0.50% per quarter from a level of 1,000.00 (the initial Index level for purposes of this example) to a final Index level of 738.57 at the hypothetical ETN maturity.  In this example, no loss rebalancing event has occurred during the term of the ETNs.

 

A

 

B

 

C

 

D

 

E

 

F

 

G

Quarter

 

Index
Level

 

Long Index
Amount

 

Accrued
Daily

Investor
Fees

 

Financing
Level

 

Closing
Indicative
Note Value

 

Payment
Including
Settlement
Charge

A

 

B

 

C

 

Quarterly
Total

 

Running
Total

 

C - E

 

 

F – (0.05% x
C)

 

0

 

1,000.00

 

$200.00

 

 

 

$100.00

 

$100.00

 

$99.90

1

 

994.96

 

$198.99

 

$1.01

 

$101.01

 

$97.98

 

$97.88

2

 

989.95

 

$195.05

 

$1.00

 

$99.05

 

$95.99

 

$95.90

3

 

984.96

 

$191.10

 

$0.98

 

$97.05

 

$94.05

 

$93.96

4

 

980.00

 

$187.23

 

$0.96

 

$95.08

 

$92.15

 

$92.05

5

 

975.06

 

$183.43

 

$0.94

 

$93.15

 

$90.28

 

$90.19

6

 

970.15

 

$179.72

 

$0.92

 

$91.27

 

$88.45

 

$88.36

7

 

965.26

 

$176.08

 

$0.90

 

$89.42

 

$86.66

 

$86.57

8

 

960.40

 

$172.51

 

$0.88

 

$87.61

 

$84.91

 

$84.82

9

 

955.56

 

$169.02

 

$0.86

 

$85.84

 

$83.19

 

$83.10

10

 

950.75

 

$165.60

 

$0.85

 

$84.10

 

$81.50

 

$81.42

11

 

945.96

 

$162.24

 

$0.83

 

$82.39

 

$79.85

 

$79.77

12

 

941.19

 

$158.96

 

$0.81

 

$80.73

 

$78.23

 

$78.15

13

 

936.45

 

$155.74

 

$0.79

 

$79.09

 

$76.65

 

$76.57

14

 

931.73

 

$152.59

 

$0.78

 

$77.49

 

$75.10

 

$75.02

15

 

927.04

 

$149.50

 

$0.76

 

$75.92

 

$73.58

 

$73.50

16

 

922.37

 

$146.47

 

$0.75

 

$74.38

 

$72.09

 

$72.01

17

 

917.72

 

$143.50

 

$0.73

 

$72.88

 

$70.63

 

$70.55

18

 

913.10

 

$140.60

 

$0.72

 

$71.40

 

$69.20

 

$69.13

19

 

908.50

 

$137.75

 

$0.70

 

$69.95

 

$67.79

 

$67.73

20

 

903.92

 

$134.96

 

$0.69

 

$68.54

 

$66.42

 

$66.35

21

 

899.37

 

$132.23

 

$0.67

 

$67.15

 

$65.08

 

$65.01

22

 

894.84

 

$129.55

 

$0.66

 

$65.79

 

$63.76

 

$63.69

23

 

890.33

 

$126.92

 

$0.65

 

$64.46

 

$62.47

 

$62.40

24

 

885.84

 

$124.35

 

$0.63

 

$63.15

 

$61.20

 

$61.14

25

 

881.38

 

$121.84

 

$0.62

 

$61.87

 

$59.96

 

$59.90

26

 

876.94

 

$119.37

 

$0.61

 

$60.62

 

$58.75

 

$58.69

27

 

872.52

 

$116.95

 

$0.60

 

$59.39

 

$57.56

 

$57.50

28

 

868.13

 

$114.58

 

$0.58

 

$58.19

 

$56.39

 

$56.34

29

 

863.75

 

$112.26

 

$0.57

 

$57.01

 

$55.25

 

$55.20

30

 

859.40

 

$109.99

 

$0.56

 

$55.86

 

$54.13

 

$54.08

31

 

855.07

 

$107.76

 

$0.55

 

$54.73

 

$53.04

 

$52.98

 

PS-13



Table of Contents

 

A

 

B

 

C

 

D

 

E

 

F

 

G

Quarter

 

Index
Level

 

Long Index
Amount

 

Accrued
Daily

Investor
Fees

 

Financing
Level

 

Closing
Indicative
Note Value

 

Payment
Including
Settlement
Charge

A

 

B

 

C

 

Quarterly
Total

 

Running
Total

 

C - E

 

 

F — (0.05% x
C)

 

32

 

850.76

 

$105.58

 

$0.54

 

$53.62

 

$51.96

 

$51.91

33

 

846.48

 

$103.44

 

$0.53

 

$52.53

 

$50.91

 

$50.86

34

 

842.21

 

$101.35

 

$0.52

 

$51.47

 

$49.88

 

$49.83

35

 

837.97

 

$99.29

 

$0.51

 

$50.43

 

$48.87

 

$48.82

36

 

833.75

 

$97.28

 

$0.50

 

$49.40

 

$47.88

 

$47.83

37

 

829.55

 

$95.31

 

$0.49

 

$48.40

 

$46.91

 

$46.86

38

 

825.37

 

$93.38

 

$0.48

 

$47.42

 

$45.96

 

$45.91

39

 

821.21

 

$91.49

 

$0.47

 

$46.46

 

$45.03

 

$44.98

40

 

817.07

 

$89.64

 

$0.46

 

$45.52

 

$44.12

 

$44.07

41

 

812.96

 

$87.82

 

$0.45

 

$44.60

 

$43.22

 

$43.18

42

 

808.86

 

$86.04

 

$0.44

 

$43.70

 

$42.35

 

$42.31

43

 

804.79

 

$84.30

 

$0.43

 

$42.81

 

$41.49

 

$41.45

44

 

800.73

 

$82.60

 

$0.42

 

$41.94

 

$40.65

 

$40.61

45

 

796.70

 

$80.92

 

$0.41

 

$41.10

 

$39.83

 

$39.79

46

 

792.68

 

$79.28

 

$0.40

 

$40.26

 

$39.02

 

$38.98

47

 

788.69

 

$77.68

 

$0.40

 

$39.45

 

$38.23

 

$38.19

48

 

784.72

 

$76.10

 

$0.39

 

$38.65

 

$37.46

 

$37.42

49

 

780.76

 

$74.56

 

$0.38

 

$37.87

 

$36.70

 

$36.66

50

 

776.83

 

$73.05

 

$0.37

 

$37.10

 

$35.95

 

$35.92

51

 

772.92

 

$71.57

 

$0.37

 

$36.35

 

$35.23

 

$35.19

52

 

769.02

 

$70.12

 

$0.36

 

$35.61

 

$34.51

 

$34.48

53

 

765.15

 

$68.70

 

$0.35

 

$34.89

 

$33.81

 

$33.78

54

 

761.29

 

$67.31

 

$0.34

 

$34.18

 

$33.13

 

$33.10

55

 

757.46

 

$65.95

 

$0.34

 

$33.49

 

$32.46

 

$32.43

56

 

753.64

 

$64.61

 

$0.33

 

$32.81

 

$31.80

 

$31.77

57

 

749.85

 

$63.31

 

$0.32

 

$32.15

 

$31.16

 

$31.13

58

 

746.07

 

$62.02

 

$0.32

 

$31.50

 

$30.53

 

$30.49

59

 

742.31

 

$60.77

 

$0.31

 

$30.86

 

$29.91

 

$29.88

60

 

738.57

 

$59.54

 

$0.30

 

$30.24

 

$29.30

 

$29.27

Quarterly Index Return

 

 

 

-0.50%

 

Index Total Return

 

-26.14%

Quarterly Return on the ETNs

 

 

 

-2.03%

 

Total Return on the ETNs

 

-70.70%

 

PS-14



Table of Contents

 

Hypothetical Examples

 

Example 4:

 

In this example, we assume a principal amount per ETN of $100, an initial leverage factor of 2 and a financing rate of 6.00% throughout the term of the ETNs.

 

In the following hypothetical example, the Index level decreased by 0.50% per quarter from a level of 1,000.00 (the initial Index level for purposes of this example) to a final Index level of 738.57 at the hypothetical ETN maturity.  In this example, no loss rebalancing event has occurred during the term of the ETNs.

 

A

B

C

D

E

F

G

Quarter

Index
Level

Long Index
Amount

Accrued
Daily
Investor
Fees

Financing
Level

Closing
Indicative
Note Value

Payment
Including
Settlement
Charge

A

B

C

Quarterly
Total

Running
Total

C - E

F – (0.05% x
C)

0

1,000.00

$200.00

 

$100.00

$100.00

$99.90

1

994.96

$198.99

$1.77

$101.77

$97.22

$97.12

2

989.95

$193.54

$1.73

$99.03

$94.51

$94.41

3

984.96

$188.14

$1.68

$96.27

$91.88

$91.78

4

980.00

$182.90

$1.63

$93.58

$89.31

$89.22

5

975.06

$177.80

$1.59

$90.97

$86.82

$86.74

6

970.15

$172.84

$1.54

$88.44

$84.40

$84.32

7

965.26

$168.02

$1.50

$85.97

$82.05

$81.97

8

960.40

$163.34

$1.46

$83.58

$79.76

$79.68

9

955.56

$158.79

$1.42

$81.25

$77.54

$77.46

10

950.75

$154.36

$1.38

$78.98

$75.38

$75.30

11

945.96

$150.06

$1.34

$76.78

$73.28

$73.20

12

941.19

$145.87

$1.30

$74.64

$71.23

$71.16

13

936.45

$141.81

$1.27

$72.56

$69.25

$69.18

14

931.73

$137.85

$1.23

$70.53

$67.32

$67.25

15

927.04

$134.01

$1.20

$68.57

$65.44

$65.37

16

922.37

$130.27

$1.16

$66.66

$63.62

$63.55

17

917.72

$126.64

$1.13

$64.80

$61.84

$61.78

18

913.10

$123.11

$1.10

$62.99

$60.12

$60.06

19

908.50

$119.68

$1.07

$61.24

$58.44

$58.38

20

903.92

$116.34

$1.04

$59.53

$56.81

$56.76

21

899.37

$113.10

$1.01

$57.87

$55.23

$55.17

22

894.84

$109.95

$0.98

$56.26

$53.69

$53.63

23

890.33

$106.88

$0.95

$54.69

$52.19

$52.14

24

885.84

$103.90

$0.93

$53.16

$50.74

$50.69

25

881.38

$101.00

$0.90

$51.68

$49.32

$49.27

26

876.94

$98.19

$0.88

$50.24

$47.95

$47.90

27

872.52

$95.45

$0.85

$48.84

$46.61

$46.56

28

868.13

$92.79

$0.83

$47.48

$45.31

$45.27

29

863.75

$90.20

$0.81

$46.15

$44.05

$44.00

30

859.40

$87.69

$0.78

$44.87

$42.82

$42.78

31

855.07

$85.24

$0.76

$43.62

$41.63

$41.58

 

PS-15



Table of Contents

 

A

B

C

D

E

F

G

Quarter

Index
Level

Long Index
Amount

Accrued
Daily
Investor
Fees

Financing
Level

Closing
Indicative
Note Value

Payment
Including
Settlement
Charge

A

B

C

Quarterly
Total

Running
Total

C - E

F – (0.05% x
C)

32

850.76

$82.87

$0.74

$42.40

$40.47

$40.43

33

846.48

$80.56

$0.72

$41.22

$39.34

$39.30

34

842.21

$78.31

$0.70

$40.07

$38.24

$38.20

35

837.97

$76.13

$0.68

$38.95

$37.18

$37.14

36

833.75

$74.01

$0.66

$37.87

$36.14

$36.10

37

829.55

$71.94

$0.64

$36.81

$35.13

$35.10

38

825.37

$69.94

$0.62

$35.78

$34.15

$34.12

39

821.21

$67.99

$0.61

$34.79

$33.20

$33.17

40

817.07

$66.09

$0.59

$33.82

$32.27

$32.24

41

812.96

$64.25

$0.57

$32.87

$31.37

$31.34

42

808.86

$62.46

$0.56

$31.96

$30.50

$30.47

43

804.79

$60.72

$0.54

$31.07

$29.65

$29.62

44

800.73

$59.02

$0.53

$30.20

$28.82

$28.79

45

796.70

$57.38

$0.51

$29.36

$28.02

$27.99

46

792.68

$55.78

$0.50

$28.54

$27.24

$27.21

47

788.69

$54.22

$0.48

$27.74

$26.48

$26.45

48

784.72

$52.71

$0.47

$26.97

$25.74

$25.71

49

780.76

$51.24

$0.46

$26.22

$25.02

$25.00

50

776.83

$49.81

$0.44

$25.49

$24.33

$24.30

51

772.92

$48.43

$0.43

$24.78

$23.65

$23.62

52

769.02

$47.08

$0.42

$24.09

$22.99

$22.96

53

765.15

$45.76

$0.41

$23.42

$22.35

$22.32

54

761.29

$44.49

$0.40

$22.76

$21.72

$21.70

55

757.46

$43.25

$0.39

$22.13

$21.12

$21.10

56

753.64

$42.04

$0.38

$21.51

$20.53

$20.51

57

749.85

$40.87

$0.37

$20.91

$19.96

$19.94

58

746.07

$39.73

$0.35

$20.33

$19.40

$19.38

59

742.31

$38.62

$0.34

$19.76

$18.86

$18.84

60

738.57

$37.55

$0.34

$19.21

$18.33

$18.32

Quarterly Index Return

-0.50%

Index Total Return

-26.14%

Quarterly Return on the ETNs

-2.79%

Total Return on the ETNs

-81.67%

 

PS-16



Table of Contents

 

Hypothetical Examples

 

Example 5:

 

In this example, we assume a principal amount per ETN of $100, an initial leverage factor of 2 and a financing rate of 3.00% throughout the term of the ETNs.

 

In the following hypothetical example, the Index level decreased from a level of 1,000.00 (the initial Index level for purposes of this example) by 1.50% per quarter for the first seven quarters, 17% in the 8th quarter and 1.50% per quarter from the 8th quarter onwards to a final Index level of 333.86 at the hypothetical ETN maturity.  In this example, the effect of one loss rebalancing event, reflected by an adjustment to the long index amount and the financing level, is shown during the 8th quarter.

 

Example 5 shows the effect of a greater decrease in the Index level on a per annum basis on the closing indicative note value, as compared to Example 3.

 

A

B

C

D

E

F

G

Quarter

Index
Level

Long Index
Amount

Accrued
Daily
Investor
Fees

Financing
Level

Closing
Indicative
Note Value

Payment
Including
Settlement
Charge

A

B

C

Quarterly
Total

Running
Total

C - E

F – (0.05% x
C)

0

1,000.00

$200.00

 

$100.00

$100.00

$99.90

1

984.65

$196.93

$1.01

$101.01

$95.92

$95.82

2

969.54

$189.12

$0.97

$97.13

$91.99

$91.90

3

954.65

$181.37

$0.93

$93.15

$88.22

$88.13

4

940.00

$173.94

$0.90

$89.33

$84.61

$84.52

5

925.57

$166.82

$0.86

$85.68

$81.14

$81.06

6

911.36

$159.99

$0.82

$82.17

$77.82

$77.74

7

897.37

$153.43

$0.79

$78.80

$74.63

$74.56

8

883.60

$147.15

$0.76

$75.57

$71.58

$71.50

9

734.83

$79.89

$0.65

$47.41

$32.49

$32.45

10

723.55

$64.05

$0.34

$32.92

$31.13

$31.10

11

712.44

$61.38

$0.32

$31.52

$29.86

$29.83

12

701.51

$58.87

$0.30

$30.23

$28.63

$28.60

13

690.74

$56.45

$0.29

$28.99

$27.46

$27.43

14

680.14

$54.14

$0.28

$27.81

$26.34

$26.31

15

669.70

$51.92

$0.27

$26.67

$25.26

$25.23

16

659.42

$49.80

$0.26

$25.58

$24.22

$24.20

17

649.30

$47.76

$0.25

$24.53

$23.23

$23.21

18

639.33

$45.80

$0.24

$23.52

$22.28

$22.26

19

629.52

$43.93

$0.23

$22.56

$21.37

$21.34

20

619.85

$42.13

$0.22

$21.64

$20.49

$20.47

21

610.34

$40.40

$0.21

$20.75

$19.65

$19.63

22

600.97

$38.75

$0.20

$19.90

$18.85

$18.83

23

591.75

$37.16

$0.19

$19.08

$18.07

$18.06

24

582.66

$35.64

$0.18

$18.30

$17.33

$17.32

25

573.72

$34.18

$0.18

$17.55

$16.62

$16.61

26

564.91

$32.78

$0.17

$16.83

$15.94

$15.93

27

556.24

$31.44

$0.16

$16.14

$15.29

$15.27

28

547.70

$30.15

$0.16

$15.48

$14.66

$14.65

 

PS-17



Table of Contents

 

A

B

C

D

E

F

G

Quarter

Index
Level

Long Index
Amount

Accrued
Daily
Investor
Fees

Financing
Level

Closing
Indicative
Note Value

Payment
Including
Settlement
Charge

A

B

C

Quarterly
Total

Running
Total

C - E

F – (0.05% x
C)

29

539.30

$28.91

$0.15

$14.85

$14.06

$14.05

30

531.02

$27.73

$0.14

$14.24

$13.49

$13.47

31

522.87

$26.59

$0.14

$13.66

$12.94

$12.92

32

514.84

$25.50

$0.13

$13.10

$12.41

$12.39

33

506.94

$24.46

$0.13

$12.56

$11.90

$11.89

34

499.16

$23.46

$0.12

$12.05

$11.41

$11.40

35

491.49

$22.50

$0.12

$11.55

$10.94

$10.93

36

483.95

$21.57

$0.11

$11.08

$10.49

$10.48

37

476.52

$20.69

$0.11

$10.63

$10.06

$10.05

38

469.21

$19.84

$0.10

$10.19

$9.65

$9.64

39

462.00

$19.03

$0.10

$9.77

$9.26

$9.25

40

454.91

$18.25

$0.09

$9.37

$8.88

$8.87

41

447.93

$17.50

$0.09

$8.99

$8.51

$8.51

42

441.05

$16.79

$0.09

$8.62

$8.17

$8.16

43

434.28

$16.10

$0.08

$8.27

$7.83

$7.82

44

427.62

$15.44

$0.08

$7.93

$7.51

$7.50

45

421.05

$14.81

$0.08

$7.60

$7.20

$7.20

46

414.59

$14.20

$0.07

$7.29

$6.91

$6.90

47

408.23

$13.62

$0.07

$6.99

$6.62

$6.62

48

401.96

$13.06

$0.07

$6.71

$6.35

$6.35

49

395.79

$12.53

$0.06

$6.43

$6.09

$6.09

50

389.72

$12.01

$0.06

$6.17

$5.84

$5.84

51

383.73

$11.52

$0.06

$5.92

$5.60

$5.60

52

377.84

$11.05

$0.06

$5.67

$5.37

$5.37

53

372.04

$10.60

$0.05

$5.44

$5.15

$5.15

54

366.33

$10.16

$0.05

$5.22

$4.94

$4.94

55

360.71

$9.75

$0.05

$5.01

$4.74

$4.74

56

355.17

$9.35

$0.05

$4.80

$4.55

$4.54

57

349.72

$8.96

$0.05

$4.60

$4.36

$4.36

58

344.35

$8.60

$0.04

$4.42

$4.18

$4.18

59

339.07

$8.25

$0.04

$4.23

$4.01

$4.01

60

333.86

$7.91

$0.04

$4.06

$3.85

$3.84

Quarterly Index Return

-1.80%

Index Total Return

-66.61%

Quarterly Return on the ETNs

-5.29%

Total Return on the ETNs

-96.15%

 

PS-18



Table of Contents

 

Hypothetical Examples

 

Example 6:

 

In this example, we assume a principal amount per ETN of $100, an initial leverage factor of 2 and a financing rate of 3.00% throughout the term of the ETNs.

 

In the following hypothetical example, the Index level decreased by 1.50% per quarter from a level of 1,000.00 (the initial Index level for purposes of this example) to an Index level of 843.53 as of the end of the 11th quarter following the initial valuation date. The Index level subsequently continued to decrease by such an extent that an automatic termination event occurred on the 1st calendar day of the 12th quarter following the initial valuation date.  At the time of such hypothetical automatic termination event, the intraday index level had decreased to 598.91, which was less than the automatic termination trigger of 606.51 calculated on the valuation date immediately preceding the beginning of the index business day on which the automatic termination event shown here occurred.

 

A

B

C

D

E

F

G

Quarter

Index
Level

Long Index
Amount

Accrued
Daily
Investor
Fees

Financing
Level

Closing
Indicative
Note Value

Payment
Including
Settlement
Charge

A

B

C

Quarterly
Total

Running
Total

C - E