424B3 1 d570220d424b3.htm 424B3 424B3
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Filed Pursuant to Rule 424(b)(3)
Registration No. 333-190038

 

Index Supplement to the Prospectus dated July 19, 2013,

and the Prospectus Supplement dated July 19, 2013

 

LOGO   BARCLAYS BANK PLC  

GLOBAL MEDIUM-TERM NOTES, SERIES A

UNIVERSAL WARRANTS

Barclays Bank PLC from time to time may offer and sell certain debt securities (the “notes”), as part of our Global Medium-Term Notes, Series A, and our universal warrants (the “warrants” and together with the notes, the “securities”), linked to an index, a basket of indices or a basket of reference assets that includes indices. This prospectus supplement, which we refer to as an “index supplement”, describes some of the potential indices to which the securities may be linked, as well as related matters concerning the relationship, if any, between Barclays Bank PLC and the sponsor(s) or publisher of each such index. We will give you the specific terms of the securities we are offering in pricing supplements.

You should read this index supplement, the related prospectus supplement dated July 19, 2013, the related prospectus dated July 19, 2013, any other applicable prospectus supplements, which we refer to as “product supplements”, any applicable free writing prospectus and the applicable pricing supplement carefully before you invest. If the terms described in the applicable pricing supplement are different from or inconsistent with those described herein (or with those described in the prospectus supplement, prospectus, any applicable product supplement or any applicable free writing prospectus), the terms described in the applicable pricing supplement will supersede. Information that we indicate will or may be provided in a pricing supplement may instead be provided in a product supplement.

This index supplement describes only select indices to which the applicable securities may be linked. We do not guarantee that we will offer securities linked to any of the indices described herein. In addition, we may offer securities linked to one or more indices that are not described herein. In such an event, we will describe any such additional index or indices in the applicable pricing supplement or in an applicable product supplement.

 

Reference Assets

The reference assets described in this index supplement are as follows:

  Non-Proprietary Indices

 

   

Equity Indices

 

   

CBOE S&P 500 BuyWrite IndexSM

 

   

Dow Jones Industrial AverageSM

 

   

EURO STOXX 50® Index

 

   

FTSE® 100 Index

 

   

FTSE® China 25 Index

 

   

Hang Seng Index

 

   

Hang Seng China Enterprises Index

 

   

KOSPI 200

 

   

MSCI Indices (including the MSCI Singapore Index, MSCI Taiwan Index, MSCI Thailand Index, MSCI EAFE Index and MSCI Emerging Markets Index)

 

   

NASDAQ-100 Index®

   

Nikkei Stock Average (Nikkei 225)

 

   

NYSE Arca Hong Kong 30 IndexSM

 

   

Russell 2000® Index

 

   

S&P 500® Index

 

   

S&P 500® Dynamic VEQTORTM Index

 

   

S&P/ASX 200 Index

 

   

SET50 Index

 

   

SMI® Index

 

   

TOPIX® Index

 

   

Commodity Indices

 

   

Dow Jones-UBS Commodity IndexSM

 

   

Rogers International Commodity Index®

 

   

S&P GSCI® Commodity Indices

  Proprietary Indices

 

   

Barclays 10Y Treasury Futures Index™

 

   

Barclays Long-Bond Treasury Futures Index™

 

   

Barclays Q-BES Large Cap US Excess Return Index

 

 

See “Risk Factors” beginning on page IS-2 of this index supplement and on page S-6 of the accompanying prospectus supplement for risks relating to an investment in the securities.

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

The securities are not deposit liabilities of Barclays Bank PLC and are not insured by the U.S. Federal Deposit Insurance Corporation or any other governmental agency of the United States, the United Kingdom or any other jurisdiction.

Barclays Capital Inc. and other entities disclosed in the applicable pricing supplement may solicit offers to subscribe for the securities as our agent. We may also issue securities to any agent as principal for its own account at prices to be agreed upon at the time of subscription. The agents may resell any securities they subscribe for as principal for their own accounts at prevailing market prices, or at other prices, as the agents determine. The applicable pricing supplement will disclose the agent’s discounts and commissions, if any. Unless we or our agent informs you otherwise in the confirmation of sale, the agents may use this index supplement, the prospectus, the prospectus supplement, the applicable pricing supplement, any applicable product supplement and any applicable free writing prospectus in connection with offers and sales of the securities in market-making.

Barclays and Barclays’ eagle logo are service marks, trademarks or registered trademarks of Barclays Bank PLC.

Patent Pending

 

LOGO   BofA Merrill Lynch

July 19, 2013


Table of Contents

TABLE OF CONTENTS

INDEX SUPPLEMENT

 

THE SECURITIES

     IS-1   

RISK FACTORS

     IS-2   

NON-PROPRIETARY INDICES

     IS-3   

EQUITY INDICES

     IS-3   

CBOE S&P 500 BuyWrite IndexSM

     IS-3   

Dow Jones Industrial AverageSM

     IS-6   

EURO STOXX 50® Index

     IS-8   

FTSE® 100 Index

     IS-9   

FTSE® China 25 Index

     IS-11   

Hang Seng Index

     IS-14   

Hang Seng China Enterprises Index

     IS-16   

KOSPI 200

     IS-18   

MSCI Indices

     IS-20   

NASDAQ-100 Index®

     IS-24   

Nikkei Stock Average (Nikkei 225)

     IS-27   

NYSE Arca Hong Kong 30 IndexSM

     IS-29   

Russell 2000® Index

     IS-31   

S&P 500® Index

     IS-36   

S&P 500® Dynamic VEQTOR™ Index

     IS-39   

S&P/ASX 200 Index

     IS-49   

SET50 Index

     IS-51   

SMI® Index

     IS-52   

TOPIX® Index

     IS-54   

COMMODITY INDICES

     IS-57   

Dow Jones-UBS Commodity IndexSM

     IS-57   

Rogers International Commodity Index®

     IS-64   

S&P GSCI® Commodity Indices

     IS-69   

PROPRIETARY INDICES

     IS-77   

Barclays 10Y Treasury Futures Index™

     IS-77   

Barclays Long-Bond Treasury Futures Index™

     IS-80   

Barclays Q-BES Large Cap US Excess Return Index

     IS-82   

PROSPECTUS SUPPLEMENT

 

SUMMARY

     S-1   

RISK FACTORS

     S-6   

DESCRIPTION OF MEDIUM-TERM NOTES

     S-35   

TERMS OF THE NOTES

     S-40   

INTEREST MECHANICS

     S-46   

CERTAIN FEATURES OF THE NOTES

     S-49   

DESCRIPTION OF UNIVERSAL WARRANTS

     S-57   

TERMS OF THE WARRANTS

     S-61   

CERTAIN FEATURES OF THE WARRANTS

     S-65   

REFERENCE ASSETS

     S-71   

CLEARANCE AND SETTLEMENT

     S-109   

EMPLOYEE RETIREMENT INCOME SECURITY ACT

     S-114   

PLAN OF DISTRIBUTION

     S-116   

USE OF PROCEEDS AND HEDGING

     S-125   

CERTAIN U.S. FEDERAL INCOME TAX CONSIDERATIONS

     S-126   

VALIDITY OF SECURITIES

     S-142   

 

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PROSPECTUS

 

FORWARD-LOOKING STATEMENTS

     1   

INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE

     2   

THE BARCLAYS BANK GROUP

     2   

USE OF PROCEEDS

     3   

DESCRIPTION OF DEBT SECURITIES

     4   

DESCRIPTION OF WARRANTS

     18   

GLOBAL SECURITIES

     28   

CLEARANCE AND SETTLEMENT

     29   

DESCRIPTION OF PREFERENCE SHARES

     33   

DESCRIPTION OF AMERICAN DEPOSITARY RECEIPTS

     38   

DESCRIPTION OF SHARE CAPITAL

     43   

TAX CONSIDERATIONS

     45   

EMPLOYEE RETIREMENT INCOME SECURITY ACT

     62   

PLAN OF DISTRIBUTION

     64   

SERVICE OF PROCESS AND ENFORCEMENT OF LIABILITIES

     67   

WHERE YOU CAN FIND MORE INFORMATION

     67   

FURTHER INFORMATION

     67   

VALIDITY OF SECURITIES

     67   

EXPERTS

     68   

EXPENSES OF ISSUANCE AND DISTRIBUTION

     69   

 

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Offers and sales of the securities are subject to restrictions in certain jurisdictions. The distribution of this index supplement, the prospectus supplement, the prospectus, any pricing supplement, any applicable product supplement and any applicable free writing prospectus and the offer or sale of the securities in certain other jurisdictions may be restricted by law. Persons who come into possession of this index supplement, the prospectus supplement, the prospectus, any pricing supplement, any applicable product supplement and any applicable free writing prospectus or any security must inform themselves about and observe any applicable restrictions on the distribution of these materials and the offer and sale of the securities.

THE SECURITIES

The notes are part of a series of debt securities entitled “Global Medium-Term Notes, Series A” (the “medium-term notes”) that we may issue under the senior debt indenture, dated September 16, 2004, between Barclays Bank PLC and The Bank of New York Mellon, as trustee, from time to time. Terms that apply generally to all medium-term notes are described in the sections titled “Description of Medium-Term Notes” and “Terms of the Notes” in the accompanying prospectus supplement, and terms that apply generally to all index-linked notes are described in “Reference Assets—Indices” in the accompanying prospectus supplement.

The warrants are part of a series of warrants entitled “Universal Warrants” (the “universal warrants”) that we may issue under either the warrant indenture to be entered into between Barclays Bank PLC and The Bank of New York Mellon, as trustee, or a warrant agreement to be entered into between Barclays Bank PLC and the applicable warrant agent, from time to time. Terms that apply generally to all universal warrants are described in the sections titled “Description of Universal Warrants” and “Terms of the Warrants” in the accompanying prospectus supplement, and terms that apply generally to all index-linked warrants are described in “Reference Assets—Indices” in the accompanying prospectus supplement.

The reference assets described in this index supplement are in addition to those described in the accompanying prospectus supplement. If the descriptions of the reference assets set forth in this index supplement are inconsistent with the descriptions of the reference assets in that document, the terms described here are controlling. We will give you the specific terms of the securities we are offering in pricing supplements. If the terms described in the applicable pricing supplement are different or inconsistent with those described herein

(or with those described in the prospectus supplement, prospectus, any applicable product supplement or any applicable free writing prospectus), the terms described in the applicable pricing supplement will supersede.

Reference Assets

Historical performance of the indices described in this index supplement is not an indication of future performance. Future performance of the indices may differ significantly from historical performance, either positively or negatively.

The information in this index supplement is intended to be a summary of the significant features of each index and is not a complete description.

Non-Proprietary Indices

We have derived substantially all of the information contained in this index supplement regarding each index other than the Barclays 10Y Treasury Futures Index™, the Barclays Long-Bond Treasury Futures Index™ and the Barclays Q-BES Large Cap US Excess Return Index (each such index, a “Non-Proprietary Index” and collectively, the “Non-Proprietary Indices”), including, without limitation, its make up, its method of calculation and changes in its components and its historical closing values, from publicly available information. Such information reflects the policies of, and is subject to change by, the sponsor(s) or publisher of each such index. For more detailed explanations of the Non-Proprietary Indices, please refer to the websites referred to in each index summary. Information contained on the websites maintained by index sponsors and publishers is not incorporated by reference in, and should not be considered part of, this index supplement or the accompanying prospectus supplement and prospectus.

Each Non-Proprietary Index is developed, calculated and maintained by its respective sponsor(s) and/or publisher. In connection with the offering of the securities, neither we nor any of our agents have participated in the preparation of the information described in the preceding paragraphs or made any due diligence inquiry with respect to any Non-Proprietary Index or any of their respective sponsors or publishers. Neither we nor any of our agents makes any representation or warranty as to the accuracy or completeness of such information or any other publicly available information regarding any Non-Proprietary Index or any of their respective sponsors or publishers. Furthermore, we cannot give any assurance that all events occurring prior to the date of the applicable pricing supplement (including events that would affect the accuracy or completeness of the publicly available information

 

 

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described in the preceding paragraphs) that would affect the level of any such index (and therefore the level of any such index at the time we price the securities) have been publicly disclosed. Subsequent disclosure of any such events or the disclosure of or failure to disclose material future events concerning the sponsor of any index could affect the interest, payments at maturity or any other amounts payable on your notes, or any amount of money or warrant property payable or deliverable in respect of your warrants, and therefore the market value of the securities in the secondary market, if any.

You, as an investor in the securities, should make your own investigation into any Non-Proprietary Index and its respective sponsor(s) or publisher. These sponsors and publishers are not involved in the offer of the securities in any way and have no obligation to consider your interests as a holder of the securities. The sponsors and/or publishers have no obligation to continue to publish the indices, and may discontinue or suspend publication of any index at any time in their sole discretion.

License Agreements

Unless otherwise specified in the applicable pricing supplement, Barclays Bank PLC has entered into license agreements with the sponsor(s) or publisher of the Non-Proprietary Index to which your securities may be linked for the rights to use such index and certain associated trademarks or service marks for such index. We generally obtain these licenses either on an individual basis for a particular offering of securities or for a term of years. Although we anticipate that we will continue to enter into and renew such licenses, any such license could be terminated upon the occurrence of certain events in the future.

Proprietary Indices

We have derived all information contained in this index supplement regarding the Barclays 10Y Treasury Futures Index™, the Barclays Long-Bond Treasury Futures Index™ and the Barclays Q-BES Large Cap US Excess Return Index (the “Proprietary Indices”) including, without limitation, their make up, their method of calculation and changes in their components and their historical closing values, from Barclays proprietary methodology documents. Such information reflects the policies of, and is subject to change by, the index sponsor, Barclays Bank PLC.

The index sponsor does not guarantee the accuracy and/or completeness of the Proprietary Indices, any data included therein, or any data from which they are based, and the index sponsor shall have no liability for any errors, omissions, or interruptions therein.

The index sponsor makes no warranty, express or implied, as to the results to be obtained from the use of the Proprietary Indices. The index sponsor makes no express or implied warranties, and expressly disclaims all warranties of merchantability or fitness for a particular purpose or use with respect to the Proprietary Indices or any data included therein. Without limiting any of the foregoing, in no event shall the index sponsor have liability for any special, punitive, indirect or consequential damages, lost profits, loss of opportunity or other financial loss, even if notified of the possibility of such damages.

Neither the index sponsor nor any of its affiliates or subsidiaries or any of their respective directors, officers, employees, representatives, delegates or agents shall have any responsibility to any person (whether as a result of negligence or otherwise) for any determination made or anything done (or omitted to be determined or done) in respect of the Proprietary Indices or publication of the index level of any of the Proprietary Indices (or failure to publish such value) and any use to which any person may put the Proprietary Indices or the index level of any of the Proprietary Indices. In addition, although the index sponsor reserves the right to make adjustments to correct previously incorrectly published information, including but not limited to the index level, the index sponsor is under no obligation to do so and shall have no liability in respect of any errors or omissions.

Nothing in this disclaimer shall exclude or limit liability to the extent such exclusion or limitation is not permitted by law.

RISK FACTORS

You should understand the risks of investing in the securities and should reach an investment decision only after careful consideration with your advisors of the suitability of the securities in light of your particular financial circumstances, the following risk factors and the other information included or incorporated by reference in the applicable pricing supplement, this index supplement, the prospectus supplement, the prospectus, any applicable product supplement or any applicable free writing prospectus. You should also refer to the “Risk Factors” on page S-6 of the accompanying prospectus supplement for additional risks relating to investment in the securities generally. The risk factors set forth below, as well as those discussed in numbered paragraphs (23) and (25)-(28) under the heading “Risk Factors—Risks Relating to All Securities” in the accompanying prospectus supplement are applicable to securities linked to indices.

Additionally, for securities linked to equity indices, see the risk factors discussed under the heading “Risk

 

 

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Factors—Additional Risks Relating to Securities with Reference Assets That Are Equity Securities or Shares or Other Interests in Exchange-Traded Funds, That Contain Equity Securities or Shares or Other Interests in Exchange-Traded Funds or That Are Based in Part on Equity Securities or Shares or Other Interests in Exchange-Traded Funds” and for securities linked to commodity indices, see the risk factors discussed under the heading “Risk Factors—Additional Risks Relating to Securities with Reference Assets That Are Commodities, an Index Containing Commodities, Shares or Other Interests in an Exchange-Traded Fund Invested in Commodities or Based in Part on Commodities” in the accompanying prospectus supplement. We have no current intention to offer warrants linked to commodities due to regulatory restrictions, and we may also limit the percentage of commodities included in a basket underlying a warrant in order to comply with regulatory restrictions, where applicable.

Our Right to Use Any Non-Proprietary Index May Be Suspended or Terminated.

We have been granted, or will be granted, a non-exclusive right to use the Non-Proprietary Indices described in this index supplement and related trademarks or service marks in connection with the securities. If we breach our obligations under any license, the sponsors with respect to the index or indices to which such license relates may have the right to terminate the license. If the sponsor chooses to terminate a license agreement, we may no longer have the right under the terms of the license agreement to use the index and related trademarks or service marks in connection with the securities until their maturity or until the relevant exercise date or period, as applicable. If our right to use any index to which your securities are linked is suspended or terminated for any reason, it may become difficult for us to determine the level of the index and consequently the interest, payments at maturity or any other amounts payable on your notes, or the amount of money or warrant property payable or deliverable in respect of your warrants. The calculation agent in this case will determine, in its sole discretion, the index level or the amount payable in respect of your notes and the amount of money payable or warrant property deliverable in respect of your warrants, as applicable.

As Index Sponsor of the Proprietary Indices, Barclays Bank PLC, Will Have the Authority to Make Determinations That Could Materially Affect Your Security in Various Ways and Create Conflicts of Interest.

Barclays Bank PLC is the index sponsor of the Proprietary Indices. The index sponsor is responsible for the composition, calculation and maintenance of

the Proprietary Indices. As discussed in the section entitled “Proprietary Indices” in this index supplement, the index sponsor has the discretion in a number of circumstances to make judgments and take actions in connection with the composition, calculation and maintenance of the Proprietary Indices, and any such judgments or actions may adversely affect the value of your securities.

The role played by Barclays Bank PLC, as index sponsor, and the exercise of the kinds of discretion described above and in the section entitled “Proprietary Indices” in this index supplement could present it with significant conflicts of interest in light of the fact that Barclays Bank PLC is the issuer of the securities. The index sponsor has no obligation to take the needs of any buyer, seller or holder of the securities into consideration at any time.

NON-PROPRIETARY INDICES

EQUITY INDICES

CBOE S&P 500 BuyWrite IndexSM

All information regarding the CBOE S&P 500 BuyWrite IndexSM (the “BXM Index”) set forth in this index supplement, including, without limitation, its make-up, method of calculation and changes in its components, reflects the policies of, and is subject to change by, the Chicago Board Options Exchange, Incorporated (“CBOE”). The BXM Index is calculated, maintained and published by CBOE. The BXM Index is reported by CBOE on Bloomberg page “BXM <Index>”.

Announced in April 2002, the BXM Index was developed by CBOE in cooperation with Standard & Poor’s (“S&P”). The BXM Index measures the total rate of return of a hypothetical “covered call” strategy (also referred to as a “buy-write” strategy) on the S&P 500® Index (the “S&P 500 Index”). The S&P 500 Index is a product of S&P Dow Jones Indices LLC, and is used by CBOE with permission from S&P Dow Jones Indices LLC. This strategy, referred to as a “BXM covered call strategy”, consists of a hypothetical portfolio consisting of a “long” position indexed to the S&P 500 Index (i.e., a position in which the common stocks, as defined below, of the S&P 500 Index are held) and the deemed sale of a succession of one-month, at-the-money S&P 500 Index call options that are listed on the Chicago Board Options Exchange. This hypothetical portfolio is referred to as the “covered S&P 500 Index portfolio”. The long position in the S&P 500 Index and the “short” call options are held in equal notional amounts (i.e., the short position in each call option is “covered” by the long position in the S&P 500 Index).

 

 

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This strategy is designed to provide option premiums that can, to a limited extent, offset losses from downside market performance in an equity portfolio on which the covered call option is sold. However, the strategy also limits participation in the appreciation of the equity portfolio on which the option is sold beyond the option’s strike price. The strike price for each option included in the BXM Index will be equal to or slightly above the S&P 500 Index level at the time the option is sold.

The BXM Index measures the total return performance of the covered S&P 500 Index portfolio by incorporating the value of the ordinary cash dividends paid on the common stocks of the S&P 500 Index and the option premiums deemed received from writing call options on the S&P 500 Index. Because the method of calculating the BXM Index effectively reinvests the dividends and the option premiums into the S&P 500 Index on the day they are paid (in the case of dividends) or deemed to be received (in the case of option premiums), the BXM Index is subject to fluctuations in the value of the S&P 500 Index.

Call Options

The call options included in the value of the BXM Index have successive terms of approximately one month. Each call option on the S&P 500 Index in the hypothetical portfolio must be held to maturity, which is generally the third Friday of each month. At expiration, the call options are settled against the “Special Opening Quotations”, a special calculation of the S&P 500 Index. The Special Opening Quotation is compiled from the opening prices of the common stocks of the S&P 500 Index and is generally determined before 11:00 a.m., New York City time. The final settlement price of each call option at expiration is equal to the difference between the Special Opening Quotation and the strike price of the expired call option, or zero, whichever is greater, and is removed from the value of the BXM Index at that time. In other words, if the Special Opening Quotation is greater than each call option’s strike price, the final settlement price is greater than zero and the value of the BXM Index is effectively decreased upon settlement of each call option. If the Special Opening Quotation is less than each call option’s strike price, each call option is worthless and the value of the BXM Index remains unchanged upon settlement of the call options.

Subsequent to the settlement of the expired call options, new at-the-money call options are deemed written or sold and included in the value of the BXM Index. Like the expired call options, the new call options will expire approximately one month after the date of sale. The date on which one call option expires and another call option is written is referred

to as the “roll date” and the process of replacing the expired options with the new options is referred to as the “roll”. The strike price of each new call option is equal to the strike price of the listed call option on the S&P 500 Index that is closest to and greater than the last value of the S&P 500 Index reported before 11:00 a.m., New York City time. For example, if the last value of the S&P 500 Index reported before 11:00 a.m., New York City time, is 901.10 and the closest listed option strike price above 901.10 is 905, then 905 is selected as the new strike price for the new call option to be incorporated into the BXM Index.

Once the strike price for each new call option has been determined, each new call option is deemed sold at a price equal to the volume-weighted average price (the “VWAP”) of the corresponding new call option during the two hour period between 11:30 a.m., New York City time, and 1:30 p.m., New York City time, on the day the strike price is determined. CBOE calculates the VWAP in a two-step process by (1) excluding trades in the new call option between 11:30 a.m., New York City time, and 1:30 p.m., New York City time, that are identified as having been executed as part of a spread (i.e., a position taken in two or more options in order to profit through changes in the relative prices of those options); and (2) calculating the volume-weighted average of all remaining transaction prices of each new call option during this two-hour period. The weights are equal to the fraction of the total volume, excluding spread transactions, transacted at each price during this period, as indicated by the CBOE’s Market Data Retrieval System. If no transactions occur between 11:30 a.m., New York City time, and 1:30 p.m., New York City time, each new call option is deemed sold at the last bid price reported before 1:30 p.m. The value of the option premium deemed received from each new call option is functionally “reinvested” in the portfolio.

Calculation of the BXM Index

The BXM Index is a “chained index”, meaning its value depends on the cumulative product of the gross daily rates of return on the covered S&P 500 Index portfolio since June 1, 1988, when the initial value of the BXM Index was first calculated and set at 100.00.

The value of the BXM Index on any given date is calculated according to the following formula:

Indext = Indext-1 (1+Rt)

where:

Indext-1 is the value of the BXM Index on the previous day; and

Rt is the gross daily rate of return of the covered S&P 500 Index portfolio on that day.

 

 

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On each trading day that is not a roll date, the gross daily rate of return equals the change in value of the components of the covered S&P 500 Index portfolio (including the value of ordinary cash dividends paid on the common stocks underlying the S&P 500 Index that trade “ex-dividend” on that day), as measured from the close of trading on the preceding trading day. On each roll date, the gross daily rate of return will be equal to the product of three gross rates of return: (1) the gross rate of return from the previous close to the time the Special Opening Quotation is determined and the expiring call option is settled; (2) the gross rate of return from the Special Opening Quotation to the initiation of the new call position; and (3) the gross rate of return from the time the new call option is deemed sold to the close of trading on the roll date.

Neither Barclays Bank PLC nor any of its affiliates accepts any responsibility for the calculation, maintenance or publication of, or for any error, omission or disruption in, the BXM Index or any successor index. CBOE does not guarantee the accuracy or the completeness of the BXM Index or any data included in the BXM Index. CBOE assumes no liability for any errors, omissions or disruption in the calculation and dissemination of the BXM Index. CBOE disclaims all responsibility for any errors or omissions in the calculation and dissemination of the BXM Index or the manner in which the BXM Index is applied in determining the amount payable at maturity for any applicable note or the amount of money or warrant property payable or deliverable at the payment or settlement date for any applicable warrant.

Comparison of the Returns of the BXM Index and S&P 500 Index

The following two examples illustrate how the BXM Index return is derived from the S&P 500 Index return using actual information from the quarters ending December 31, 2003 and September 30, 2004, respectively. The applicable pricing supplement will contain a chart or graph of historical information.

Example 1: Quarter ending December 31, 2003 (the BXM Index underperforms the S&P 500 Index):

 

S&P 500 Index

  

S&P 500 Index

     11.64

Dividend Yield on the S&P 500 Index

     0.54

Total S&P 500 Index return

     12.18

BXM Index

  

Total S&P 500 Index return

     12.18

Loss on short options sold during the quarter*

     -4.46

The BXM Index return

     7.72

Example 2: Quarter ending September 30, 2004 (the BXM Index outperforms the total S&P 500 Index return):

 

S&P 500 Index

  

S&P 500 Index

     -2.29

Dividend Yield on the S&P 500 Index

     0.42

Total S&P 500 Index return

     -1.87

BXM Index

  

Total S&P 500 Index return

     -1.87

Gain on short options sold during the quarter*

     1.99

The BXM Index return

     0.12

 

* The gain and loss on options sold during the quarter are expressed as a percentage of the level of the S&P 500 Index at the end of each month during the relevant quarter.

A description of the S&P 500 Index can be found in this index supplement under “NON-PROPRIETARY INDICES—EQUITY INDICES—S&P 500® Index”.

Additional information on the BXM Index is available on the following website:

http://www.cboe.com/micro/bxm.

License Agreement

The BXM Index is a product of Chicago Board Options Exchange, Incorporated (“CBOE”). CBOE® and BuyWrite™ are trademarks of CBOE. S&P® and S&P 500® are trademarks of Standard & Poor’s Financial Services LLC (“SPFS”). The BXM Index and the related trademarks have been licensed to S&P Dow Jones Indices LLC (“SPDJI”) and its affiliates, and sublicensed to Barclays Bank PLC for certain purposes.

The securities are not sponsored, endorsed, sold or promoted by SPDJI, SPFS, CBOE, or any of their respective affiliates (collectively, “S&P Dow Jones Indices and CBOE”). S&P Dow Jones Indices and CBOE do not make any representation or warranty, express or implied, to the owners of the securities or any member of the public regarding the advisability of investing in securities generally or in the securities particularly or the ability of the BXM Index to track general market performance. S&P Dow Jones Indices’ and CBOE’s only relationship to Barclays Bank PLC with respect to the BXM Index is the licensing of the BXM Index and certain trademarks, service marks and/or trade names of S&P Dow Jones Indices and CBOE and/or their licensors. The BXM Index is determined, composed and calculated by CBOE without regard to Barclays Bank PLC or the securities. CBOE has no obligation to take the needs of Barclays Bank PLC or the owners of the securities into consideration in determining, composing or calculating the BXM Index. S&P Dow Jones Indices

 

 

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and CBOE are not responsible for and have not participated in the determination of the prices, and amount of the securities or the timing of the issuance or sale of the securities or in the determination or calculation of the equation by which the securities are to be converted into cash, surrendered or redeemed, as the case may be. S&P Dow Jones Indices and CBOE have no obligation or liability in connection with the administration, marketing or trading of the securities. There is no assurance that investment products based on the BXM Index will accurately track the performance of the index or provide positive investment returns. SPDJI is not an investment advisor. Inclusion of a security within the BXM Index is not a recommendation by S&P Dow Jones Indices or CBOE to buy, sell, or hold such security, nor is it considered to be investment advice.

S&P DOW JONES INDICES AND CBOE DO NOT GUARANTEE THE ADEQUACY, ACCURACY, TIMELINESS AND/OR THE COMPLETENESS OF THE BXM INDEX OR ANY DATA RELATED THERETO OR ANY COMMUNICATION (INCLUDING BUT NOT LIMITED TO, ORAL OR WRITTEN COMMUNICATION (INCLUDING ELECTRONIC COMMUNICATIONS)) WITH RESPECT THERETO. S&P DOW JONES INDICES AND CBOE SHALL NOT BE SUBJECT TO ANY DAMAGES OR LIABILITY FOR ANY ERRORS, OMISSIONS, OR DELAYS THEREIN. S&P DOW JONES INDICES AND CBOE MAKE NO EXPRESS OR IMPLIED WARRANTIES, AND EXPRESSLY DISCLAIM ALL WARRANTIES, OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE OR AS TO RESULTS TO BE OBTAINED BY BARCLAYS BANK PLC, OWNERS OF THE SECURITIES, OR ANY OTHER PERSON OR ENTITY FROM THE USE OF THE BXM INDEX OR WITH RESPECT TO ANY DATA RELATED THERETO. WITHOUT LIMITING ANY OF THE FOREGOING, IN NO EVENT WHATSOEVER SHALL S&P DOW JONES INDICES OR CBOE BE LIABLE FOR ANY INDIRECT, SPECIAL, INCIDENTAL, PUNITIVE, OR CONSEQUENTIAL DAMAGES INCLUDING BUT NOT LIMITED TO, LOSS OF PROFITS, TRADING LOSSES, LOST TIME OR GOODWILL, EVEN IF THEY HAVE BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES, WHETHER IN CONTRACT, TORT, STRICT LIABILITY, OR OTHERWISE. THERE ARE NO THIRD PARTY BENEFICIARIES OF ANY AGREEMENTS OR ARRANGEMENTS BETWEEN S&P DOW JONES INDICES AND BARCLAYS BANK PLC, OTHER THAN THE LICENSORS OF S&P DOW JONES INDICES.

Dow Jones Industrial AverageSM

The Dow Jones Industrial AverageSM (the “DJIA Index”) is a price-weighted index comprised of 30 common stocks, which is published by S&P Dow Jones Indices LLC. The DJIA Index universe is defined as all U.S.-listed stocks of companies that produce non-transportation and non-utility goods and services. The DJIA Index is maintained by an Averages Committee comprised of the Managing Editor of The Wall Street Journal (“WSJ”), Managing Director & Chairman of the Index Committee, Head of Index Maintenance and Production Group, and Director of the U.S. Indices. The Averages Committee, also responsible for component changes, was created in March 2010. The DJIA Index is reported by S&P Dow Jones Indices on Bloomberg page “INDU<Index>”.

There are no pre-determined criteria for selection of a component stock except that component companies represented by the DJIA Index should be established U.S. companies that are leaders in their industries, are widely held by investors and have long records of sustained growth; however, companies considered for inclusion in the DJIA Index are subject to rigorous analysis before a decision is made. The DJIA Index serves as a measure of the entire U.S. market, including such sectors as financial services, technology, retail, entertainment and consumer goods, and is not limited to traditionally defined industrial stocks. Maintaining adequate sector representation within the DJIA Index is also a consideration in the selection process. The composition of the DJIA Index is reviewed on an as-needed basis. In order to maintain continuity, changes to the component stocks included in the DJIA Index are rare and infrequent and generally occur only after corporate acquisitions or other dramatic shifts in a component company’s core business. When such an event necessitates that one component stock be replaced, the entire index is reviewed. As a result, several component changes are often implemented simultaneously. The component stocks of the DJIA Index may be changed at any time for any reason.

The DJIA Index is price-weighted rather than market capitalization-weighted. Therefore, the component stock weightings are affected only by changes in the stocks’ prices, in contrast with the weightings of other indices that are affected by both price changes and changes in the number of shares outstanding. The value of the DJIA Index is the sum of the primary exchange prices of each of the 30 common stocks included in the DJIA Index, divided by a divisor. The

 

 

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divisor is changed in accordance with a mathematical formula to adjust for large dividend distributions, stock splits, spin-offs and other corporate actions. Regular cash dividends are not taken into account in the calculation of the DJIA Index. The current divisor of the DJIA Index is published daily in the WSJ and other publications. While this methodology reflects current practice in calculating the DJIA Index, no assurance can be given that S&P Dow Jones Indices will not modify or change this methodology in a manner that may affect the securities.

The current formula used to calculate divisor adjustments is as follows: the new divisor (i.e., the divisor on the next trading session) is equal to (1) the divisor on the current trading session, times (2) the quotient of (a) the sum of the adjusted (for stock dividends, splits, spin-offs and other applicable corporate actions) closing prices of the DJIA components on the current trading session and (b) the sum of the unadjusted closing prices of the DJIA components on the current trading session.

Additional information on the DJIA Index is available on the following website:

http://www.djindexes.com/averages/.

License Agreement

The DJIA Index is a product of S&P Dow Jones Indices LLC (“SPDJI”), and has been licensed for use by Barclays Bank PLC. Dow Jones®, DJIA®, Dow Jones Industrial AverageSM, and The Dow® are trademarks of Dow Jones Trademark Holdings LLC (“Dow Jones”). These trademarks have been licensed to SPDJI and its affiliates and sublicensed to Barclays Bank PLC for certain purposes.

The securities are not sponsored, endorsed, sold or promoted by SPDJI, Dow Jones, or any of their respective affiliates (collectively, “S&P Dow Jones Indices”). S&P Dow Jones Indices does not make any representation or warranty, express or implied, to the owners of the securities or any member of the public regarding the advisability of investing in securities generally or in the securities particularly or the ability of the DJIA Index to track general market performance. S&P Dow Jones Indices’ only relationship to Barclays Bank PLC with respect to the DJIA Index is the licensing of the DJIA Index and certain trademarks, service marks and/or trade names of S&P Dow Jones Indices and/or its licensors. The DJIA Index is determined, composed and calculated by S&P Dow Jones Indices without regard to Barclays Bank PLC or the securities. S&P Dow Jones Indices has no obligation to take the needs of Barclays Bank PLC or the owners of the securities into consideration in determining, composing or calculating the DJIA Index. S&P Dow Jones Indices is not responsible for and has not participated in the

determination of the prices, and amount of the securities or the timing of the issuance or sale of the securities or in the determination or calculation of the equation by which the securities are to be converted into cash, surrendered or redeemed, as the case may be. S&P Dow Jones Indices has no obligation or liability in connection with the administration, marketing or trading of the securities. There is no assurance that investment products based on the DJIA Index will accurately track the performance of the index or provide positive investment returns. SPDJI is not an investment advisor. Inclusion of a security within the DJIA Index is not a recommendation by S&P Dow Jones Indices to buy, sell, or hold such security, nor is it considered to be investment advice. In addition, CME Group Inc. and its affiliates may trade financial products which are linked to the performance of the DJIA Index. It is possible that this trading activity will affect the value of the DJIA Index and the securities.

S&P DOW JONES INDICES DOES NOT GUARANTEE THE ADEQUACY, ACCURACY, TIMELINESS AND/OR THE COMPLETENESS OF THE DJIA INDEX OR ANY DATA RELATED THERETO OR ANY COMMUNICATION (INCLUDING BUT NOT LIMITED TO, ORAL OR WRITTEN COMMUNICATION (INCLUDING ELECTRONIC COMMUNICATIONS)) WITH RESPECT THERETO. S&P DOW JONES INDICES SHALL NOT BE SUBJECT TO ANY DAMAGES OR LIABILITY FOR ANY ERRORS, OMISSIONS, OR DELAYS THEREIN. S&P DOW JONES INDICES MAKES NO EXPRESS OR IMPLIED WARRANTIES, AND EXPRESSLY DISCLAIMS ALL WARRANTIES, OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE OR AS TO RESULTS TO BE OBTAINED BY BARCLAYS BANK PLC, OWNERS OF THE SECURITIES, OR ANY OTHER PERSON OR ENTITY FROM THE USE OF THE DJIA INDEX OR WITH RESPECT TO ANY DATA RELATED THERETO. WITHOUT LIMITING ANY OF THE FOREGOING, IN NO EVENT WHATSOEVER SHALL S&P DOW JONES INDICES BE LIABLE FOR ANY INDIRECT, SPECIAL, INCIDENTAL, PUNITIVE, OR CONSEQUENTIAL DAMAGES INCLUDING BUT NOT LIMITED TO, LOSS OF PROFITS, TRADING LOSSES, LOST TIME OR GOODWILL, EVEN IF THEY HAVE BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES, WHETHER IN CONTRACT, TORT, STRICT LIABILITY, OR OTHERWISE. THERE ARE NO THIRD PARTY BENEFICIARIES OF ANY AGREEMENTS OR ARRANGEMENTS BETWEEN S&P DOW JONES INDICES AND BARCLAYS BANK PLC, OTHER THAN THE LICENSORS OF S&P DOW JONES INDICES.

 

 

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EURO STOXX 50® Index

All information regarding the EURO STOXX 50® Index (the “EURO STOXX 50 Index”) set forth in this index supplement reflects the policies of, and is subject to change by, STOXX Limited (“STOXX”), a company owned by Deutsche Börse AG and SIX Group AG. The EURO STOXX 50 Index is calculated, maintained and published by STOXX. The EURO STOXX 50 Index is reported by STOXX on Bloomberg page “SX5E <Index>”. It is also published in The Wall Street Journal and disseminated on the STOXX website, www.stoxx.com.

The EURO STOXX 50 Index provides a blue-chip representation of supersector leaders in the Eurozone. The EURO STOXX 50 Index represents supersector leaders in the Eurozone in terms of free-float market capitalization and covers 50 stocks from 12 Eurozone countries: Austria, Belgium, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, the Netherlands, Portugal and Spain.

Publication of the EURO STOXX 50 Index was introduced on February 26, 1998, with a base value of 1,000 as of December 31, 1991.

The EURO STOXX 50 Index is compiled and calculated as follows. It is calculated with the “Laspeyres formula”, which measures price changes against a fixed base quantity weight. The EURO STOXX 50 Index is weighted by free float market capitalization. Each component’s weight is capped at 10% of the EURO STOXX 50 Index’s total free float market capitalization. Free float weights are reviewed quarterly and the EURO STOXX 50 Index composition is reviewed annually in September. The review cut-off date is the last trading day in August.

For each of the 19 EURO STOXX regional Supersector indices, the component stocks are ranked in terms of free-float market capitalization. The largest stocks are added to the selection list until the coverage is close to, but still less than, 60% of the free-float market capitalization of the corresponding EURO STOXX Regional TMI Supersector Index. If the next highest-ranked stock brings the coverage closer to 60% in absolute terms, then it is also added to the selection list. All current EURO STOXX 50 Index component stocks are then added to the selection list. All the stocks on the selection list are then ranked in terms of free-float market capitalization to produce the final index selection list. In exceptional cases, the STOXX Limited Supervisory Board may make additions and deletions to the selection list.

The 40 largest stocks on the selection list are chosen as components. Any remaining current components of the EURO STOXX 50 Index ranked between 41

and 60 are added as index components. If the component number is still below 50, then the largest remaining stocks on the selection list are added until the EURO STOXX 50 Index contains 50 stocks.

Components are capped at a maximum weight of 10% quarterly. The weighting cap factors are published on Wednesday two trading days prior to quarterly review implementation using Tuesday’s closing prices.

The EURO STOXX 50 Index has an index divisor, which is adjusted to maintain the continuity of the EURO STOXX 50 Index’s value across changes due to corporate actions such as:

 

   

the issuance of dividends;

 

   

the occurrence of stock splits;

 

   

the stock repurchase by the issuer; and

 

   

other reasons.

Additional information on the EURO STOXX 50 Index is available on the following website: http://www.stoxx.com.

License Agreement

We have entered into a non-exclusive license agreement with STOXX whereby we, in exchange for a fee, are permitted to use the EURO STOXX 50 Index in connection with certain securities, including the notes. We are not affiliated with STOXX; the only relationship between STOXX and us is any licensing of the use of STOXX’s indices and trademarks relating to them.

The license agreement between STOXX and us provides that the following language must be set forth herein:

“STOXX and its licensors (the ‘Licensors’) have no relationship to Barclays Bank PLC, other than the licensing of the EURO STOXX 50® Index and the related trademarks for use in connection with the securities.

STOXX and its Licensors do not:

 

   

Sponsor, endorse, sell or promote the securities.

 

   

Recommend that any person invest in the securities or any other securities.

 

   

Have any responsibility or liability for or make any decisions about the timing, amount or pricing of securities.

 

   

Have any responsibility or liability for the administration, management or marketing of the securities.

 

 

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Consider the needs of the securities or the owners of the securities in determining, composing or calculating the EURO STOXX 50® Index or have any obligation to do so.

STOXX and its Licensors will not have any liability in connection with the securities. Specifically,

 

   

STOXX and its Licensors do not make any warranty, express or implied and disclaim any and all warranty about:

 

   

The results to be obtained by the securities, the owner of the securities or any other person in connection with the use of the EURO STOXX 50® Index and the data included in the EURO STOXX 50® Index;

 

   

The accuracy or completeness of the EURO STOXX 50® Index and its data;

 

   

The merchantability and the fitness for a particular purpose or use of the EURO STOXX 50® Index and its data;

 

   

STOXX and its Licensors will have no liability for any errors, omissions or interruptions in the EURO STOXX 50® Index or its data;

 

   

Under no circumstances will STOXX or its Licensors be liable for any lost profits or indirect, punitive, special or consequential damages or losses, even if STOXX or its Licensors knows that they might occur.

The licensing agreement between Barclays Bank PLC and STOXX is solely for their benefit and not for the benefit of the owners of the securities or any other third parties”.

FTSE® 100 Index

All information regarding the FTSE® 100 Index (the “FTSE 100 Index”) set forth in this index supplement reflects the policies of, and is subject to change by, FTSE International Limited (“FTSE”). The FTSE 100 Index is calculated, maintained and published by FTSE. The FTSE 100 Index is reported by FTSE on Bloomberg page “UKX <Index>”.

The FTSE 100 Index is a market-capitalization weighted index of the 100 largest U.K. blue-chip companies (with nationality determined by FTSE) traded on the London Stock Exchange that pass screening for size and liquidity. The FTSE 100 Index was developed with a base level of 1,000 on December 30, 1983 and was launched on January 3, 1984.

Composition of the FTSE 100 Index

In order to be eligible for inclusion in the FTSE 100 Index, a company must have a free float (as described below) greater than 5%.

Only “Premium Listed Equity Shares” as defined by the UK Financial Services Authority in its Listing Sources Rulebook with a listing on the London Stock Exchange are eligible for inclusion in the FTSE 100 Index.

Stocks must also be sufficiently liquid to trade. The following criteria, among others, are used to exclude illiquid stocks from the FTSE 100 Index:

 

   

Price. The FTSE Europe, Middle East & Africa Regional Committee must be satisfied that an accurate and reliable price for the purposes of determining the market value of a company exists. This requires a Sterling denominated price on SETS, which is the London Stock Exchange’s electronic order book trading service for U.K. blue-chip securities.

 

   

Liquidity. Stocks which do not turn over at least 0.035% of their shares in issue, after the application of any investability weightings, based on their median daily trade per month for ten of the twelve months prior to the FTSE Europe, Middle East & Africa Regional Committee’s annual June review will not be eligible for inclusion in the reference group until the next annual review. Existing constituents which do not turn over at least 0.025% of their shares in issue, after the application of any investability weightings, based on their median daily trade per month for eight of the twelve months prior to the annual review, will be removed and will not be eligible for inclusion in the reference group until the next annual review. Companies that are large enough to be components of the FTSE 100 Index but do not pass the liquidity test are not included.

 

   

New Issues. New issues generally must have a minimum trading record of at least 20 days prior to the date of a review and turnover of a minimum of 0.035% of their shares in issue, after the application of any investability weightings, based on their median daily trade per month in each month since their listing.

At the discretion of the FTSE Europe, Middle East & Africa Regional Committee, the liquidity percentage requirements discussed above may be adjusted by up to 0.01% in order for the FTSE 100 Index to reflect more accurately the liquid investable market.

The FTSE Europe, Middle East & Africa Regional Committee meets quarterly to review the components of the FTSE 100 Index. This review is then presented

 

 

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to the FTSE Europe, Middle East & Africa Regional Committee for approval. The meetings to review the constituents are held on the Wednesday after the first Friday in March, June, September and December. Any constituent changes will be implemented on the next trading day following the expiry of the London International Financial Futures Exchange futures and options contracts that normally takes place on the third Friday of the same month.

To maintain stability, a stock will be added at the quarterly review if it has risen to 90th place or above, and a stock will be deleted at the quarterly review if it has fallen to 111th place or below, with rankings determined in each case on the basis of full market capitalization. A constant number of components is maintained for the FTSE 100 Index. When a greater number of companies qualify to be inserted in the FTSE 100 Index than those qualifying to be deleted, the lowest ranking constituents included in the FTSE 100 Index will be deleted to ensure that an equal number of companies are inserted and deleted at the periodic review. Likewise, where a greater number of companies qualify to be deleted than those qualifying to be inserted, the stocks of the highest ranking companies that are then not included in the FTSE 100 Index will be inserted to match the number of companies being deleted at the periodic review.

Changes to the constituents of the FTSE 100 Index may also be prompted outside of the FTSE Europe, Middle East & Africa Regional Committee’s periodic review procedure for certain new issues where omission to promptly include such new issue in the FTSE 100 Index would compromise the effectiveness of the FTSE 100 Index as a market indicator, for certain corporate actions (e.g., mergers and acquisitions) or in the case of delisting.

Computation of the FTSE 100 Index

The value of the FTSE 100 Index will be equal to (1) the sum of the products of (a) the last trade price of each FTSE 100 Index component, (b) the exchange rate for each such component, if any, (c) shares in issue for each such component and (d) a free float factor for each such component that allows amendments to each such component’s weighting to reflect the free float restrictions described below, divided by (2) a divisor which represents the total issued share capital of the FTSE 100 Index at the base date, which may be adjusted as necessary to allow for changes in issued share capital of individual stocks without distorting the FTSE 100 Index.

Under this formula, the investable market capitalization, not the full market capitalization, of each FTSE 100 Index constituent is used to determine the value of the FTSE 100 Index. This reflects the “float-adjusted” aspect of the FTSE 100 Index because, whereas full market capitalization depends on shares in issue, investable market capitalization depends on free float. The following are excluded from free float: shares held by state, regional, municipal and local governments (excluding shares held by independently managed pension schemes for governments); shares held by sovereign wealth funds where each holding is 10% or greater (if the holding subsequently decreases below 10%, the shares will remain restricted until the holding falls below 7%); shares held by directors, senior executives and managers of the company, and by their family and direct relations, and by companies with which they are affiliated; shares held within employee share plans; shares held by public companies or by non-listed subsidiaries of public companies; shares held by founders, promoters, former directors, founding venture capital and private equity firms, private companies and individuals (including employees) where the holding is 10% or greater (if the holding subsequently decreases below 10%, the shares will remain restricted until the holding falls below 7%); all shares where the holder is subject to a lock-in clause (for the duration of that clause)1; shares held for publicly announced strategic reasons, including shares held by several holders acting in concert and shares that are subject to on-going contractual agreements (such as swaps) where they would ordinarily be treated as restricted.

Free float restrictions are calculated using available published information. Companies with a free float of 5% or below are not eligible for inclusion in the FTSE 100 Index. For companies with a free float greater than 5%, the actual free float will be rounded up to the next highest whole percentage number.

A FTSE 100 Index component’s free float will only be changed if its actual free float is more than 3 percentage points above or below the existing rounded free float. Where a company’s actual free float moves to above 99%, it will not be subject to the 3 percentage points threshold and will be rounded to 100%. Similarly, a FTSE 100 Index component with a free float of 15% or below will not be subject to the 3 percentage points threshold.

 

1 Free Float changes resulting from the expiry of a lock-in will be implemented at the next quarterly review subsequent to there being a minimum of 20 business days between the lock-in expiry date and the index review date.
 

 

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If a company is UK incorporated, FTSE will allocate the company UK nationality provided: the company has its sole listing in the UK; the company has a minimum free float of 25%.2

If a company is not incorporated in the UK, the company must meet the following conditions in order to be considered eligible for assignment of UK nationality: the company must publicly acknowledge adherence to the principles of the UK Corporate Governance Code, pre-emption rights and the UK Takeover Code as far as practicable; the company must have a free float greater than 50%.2

The FTSE 100 Index is periodically reviewed for changes in free float. These reviews coincide with the quarterly reviews undertaken of the FTSE 100 Index. A stock’s free float is also reviewed and adjusted if necessary following certain corporate events. If the corporate event affects the FTSE 100 Index, any change in free float is implemented at the same time as the corporate event. If there is no corporate event, the change in free float will be applied at the next quarterly review.

Additional information on the FTSE 100 Index is available on the following website:

http://www.ftse.com.

License Agreement

We have entered into a non-exclusive license agreement with FTSE whereby we, in exchange for a fee, are permitted to use the FTSE 100 Index in connection with certain securities, including the notes and warrants. We are not affiliated with FTSE®; the only relationship between FTSE and us is any licensing of the use of FTSE’s indices and trademarks relating to them.

The license agreement between FTSE and us provides that the following language must be set forth herein:

“The securities are not in any way sponsored, endorsed, sold or promoted by FTSE International Limited (‘FTSE’) or by the London Stock Exchange Group companies (‘LSEG’) (together the ‘Licensor Parties’) and none of the Licensor Parties make any claim, prediction, warranty or representation whatsoever, expressly or impliedly, either as (i) to the results to be obtained from the use of the FTSE 100 Index (the ‘Index’), (ii) the figure at which the said Index stands at any particular time on the particular

 

2 For the purposes of the two paragraphs above, the calculation of the minimum free float will be based on the ordinary share capital issued by the company and may include shares that would otherwise be excluded solely because they are subject to a lock-in clause of twelve months or less from their first day of trading, but that would in all other respects be considered part of a company’s free float.

day or otherwise, or (iii) the suitability of the Index

for the purpose to which it is being put in connection with the securities. None of the Licensor Parties have provided or will provide any financial or investment advice or recommendation in relation to the Index to Barclays Bank PLC or to its clients. The Index is calculated by FTSE or its agent. None of the Licensor Parties shall be (a) liable (whether in negligence or otherwise) to any person for any error in the Index or (b) be under any obligation to advise any person of any error therein”.

“‘FTSE®’, ‘FT-SE®’ and ‘Footsie®’ are trademarks of LSEG and are used by FTSE under license. ‘All-World’, ‘All-Share’ and ‘All-Small’ are trademarks of FTSE”.

FTSE® China 25 Index

All information regarding the FTSE® China 25 Index (the “FTSE China 25 Index”) set forth in this index supplement reflects the policies of, and is subject to change by, FTSE® International Limited (“FTSE”). The FTSE China 25 Index is calculated, published and disseminated by FTSE. The FTSE China 25 Index is reported by FTSE on Bloomberg page “XIN0I <Index>”.

The FTSE China 25 Index is a real-time, tradable index designed to represent the performance of the mainland Chinese market that is available to international investors. The FTSE China 25 Index is quoted in Hong Kong dollars and currently is based on the 25 largest and most liquid “H-Shares”, “Red Chips” and “P Chips” listed and trading on the SEHK. H-Shares are Hong Kong listed shares of companies incorporated in the People’s Republic of China and nominated by the Chinese government for listing and trading on the SEHK. Red Chips are stocks of companies incorporated outside of the People’s Republic of China that trade on the SEHK, are more than 35% owned, directly or indirectly, by Chinese state-owned enterprises and derive over 55% of revenue or operating assets from the People’s Republic of China. P Chips are stocks of companies controlled by mainland China individuals, with the establishment and origin of the company in mainland China. P Chip companies must be incorporated outside of the People’s Republic of China, trade on the SEHK, be controlled, directly or indirectly, by mainland individuals and derive over 55% of revenue or operating assets from the People’s Republic of China. H-Shares, Red Chips and P Chips are quoted and traded in Hong Kong dollars. They are available only to Chinese investors approved by the government of the People’s Republic of China; however, there are no restrictions on international investors.

 

 

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Composition of the FTSE China 25 Index

In order to be eligible for inclusion in the FTSE China 25 Index, a company must generally have a free float (as described below) greater than 5%.

Stocks must also be sufficiently liquid to trade. The following criteria, among others, are used to exclude illiquid stocks from the FTSE China 25 Index:

 

   

Price. The FTSE Asia Pacific Regional Committee, a committee of the FTSE Policy Group, must be satisfied that an accurate and reliable price for the purposes of determining the market value of a company exists.

 

   

Liquidity. Each stock is tested for liquidity on an annual basis in March by calculating its median daily trading volume per month. The median daily trading volume is determined by ranking the total trading volume for each day and selecting the middle ranking day. Daily totals with a zero trading volume are included in the ranking; therefore a stock that fails to trade for more than half of the days in a month will have a zero median trading volume.

A) Stocks which do not turnover at least 0.05% of their free float adjusted shares based on their median daily trading volume per month in ten of the twelve months prior to any annual review, are not eligible for inclusion in the FTSE China 25 Index.

B) Existing constituents which do not turn over at least 0.04% of their free float adjusted shares based on their median daily trading volume per month for eight of the twelve months prior to the annual review are not eligible for inclusion in the FTSE China 25 Index.

C) New issues that do not have a twelve month trading record must have a minimum three month trading record when reviewed. They must turnover at least 0.05% of their free float adjusted shares based on their median daily trading volume per month in each month since their listing.

The FTSE Asia Pacific Regional Committee meets quarterly to review the components of the FTSE China 25 Index. The FTSE Asia Pacific Regional Committee reviews the constituents and recommends companies to be included or excluded from the FTSE China 25 Index using the close of business data from the next trading day following the third Friday in February, May, August and November. Any constituent changes will be implemented on the next trading day following the third Friday of the same month.

To maintain stability, a stock will be added at the quarterly review if it has risen to 15th place or above,

ranked on the basis of full market capitalization (before the application of any investability weightings), and a stock will be deleted if at the quarterly review it has fallen to 36th place or below, ranked on the basis of full market value (before the application of any investability weightings), in each case using all share classes, not simply H-Shares, Red Chips and P Chips. A constant number of components is maintained for the FTSE China 25 Index. Where a greater number of companies qualify to be inserted in the FTSE China 25 Index than those qualifying to be deleted, the lowest ranking constituents presently included in the FTSE China 25 Index will be deleted to ensure that an equal number of companies are inserted and deleted at the periodic review. Likewise, where a greater number of companies qualify to be deleted than those qualifying to be inserted the stocks of the highest ranking companies that are presently not included in the FTSE China 25 Index will be inserted to match the number of companies being deleted at the periodic review.

Changes to the constituents of the FTSE China 25 Index may also be prompted outside of the FTSE Asia Pacific Regional Committee’s periodic review procedure for certain new issues where omission to promptly include would compromise the effectiveness of the FTSE China 25 Index as a market indicator, for certain corporate actions (e.g., mergers and acquisitions) or in the case of delisting.

Computation of the FTSE China 25 Index

The value of the FTSE China 25 Index will be equal to (1) the sum of the products of (a) the latest trade price of each FTSE China 25 Index component, (b) the exchange rate for each such component, if any, (c) shares in issue for each such component, (d) the free float factor for each such component, which allows amendments to the weighting of each such component to reflect the free float restrictions described below and (e) the capping factor for each such component, if any, divided by (2) a divisor which represents the total issued share capital of the FTSE China 25 Index at the base date, which may be adjusted as necessary to allow for changes in issued share capital of individual stocks without distorting the FTSE China 25 Index.

The FTSE China 25 Index is calculated using trade prices from the SEHK for all components. Because the FTSE China 25 Index is denominated in Hong Kong dollars, those stocks denominated in a currency other than Hong Kong Dollars will be converted to Hong Kong dollars in order to calculate the Index. Reuters real-time spot currency rates will be used for this purpose.

 

 

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Under the formula described above, the investable market capitalization, not the full market capitalization, of each FTSE China 25 Index constituent is used to determine the value of the FTSE China 25 Index. This reflects the “float-adjusted” aspect of the FTSE China 25 Index because, whereas full market capitalization depends on shares in issue, investable market capitalization depends on free float. The following are excluded from free float: shares held by state, regional, municipal and local governments (excluding shares held by independently managed pension schemes for governments); shares held by sovereign wealth funds where each holding is 10% or greater (if the holding subsequently decreases below 10%, the shares will remain restricted until the holding falls below 7%); shares held by directors, senior executives and managers of the company, and by their family and direct relations, and by companies with which they are affiliated; shares held within employee share plans; shares held by public companies or by non-listed subsidiaries of public companies; shares held by founders, promoters, former directors, founding venture capital and private equity firms, private companies and individuals (including employees) where the holding is 10% or greater (if the holding subsequently decreases below 10%, the shares will remain restricted until the holding falls below 7%); all shares where the holder is subject to a lock-in clause (for the duration of that clause)3; shares held for publicly announced strategic reasons, including shares held by several holders acting in concert and shares that are subject to on-going contractual agreements (such as swaps) where they would ordinarily be treated as restricted.

Free float restrictions are calculated using available published information. Companies with a free float of 5% or below are not eligible for inclusion in the FTSE China 25 Index. For companies with a free float greater than 5%, the actual free float will be rounded up to the next highest whole percentage number.

A FTSE China 25 Index stock’s free float will only be changed if its actual free float is more than 3 percentage points above or below the existing rounded free float. Where a company’s actual free float moves to above 99%, it will not be subject to the 3 percentage points threshold and will be rounded to 100%. Similarly, a constituent with a free float of 15% or below will not be subject to the 3 percentage points threshold.

Foreign ownership limits, if any, are applied after calculating the actual free float restriction. If the

 

3  Free Float changes resulting from the expiry of a lock-in will be implemented at the next quarterly review subsequent to there being a minimum of 20 business days between the lock-in expiry date and the index review date.

foreign ownership limit is more restrictive than the free float restriction, the precise foreign ownership limit is applied. If the foreign ownership limit is less restrictive or equal to the free float restriction, the free float restriction is applied.

The FTSE China 25 Index is periodically reviewed for changes in free float. These reviews coincide with the quarterly reviews undertaken of the FTSE China 25 Index. A stock’s free float is also reviewed and adjusted if necessary: by identifying information which requires a change in free float weighting; following a corporate event; or expiry of a lock-in clause. If the corporate event includes a corporate action which affects the FTSE China 25 Index, any change in free float is implemented at the same time as the corporate action.

The FTSE China 25 Index is also subject to a capping mechanism at each quarterly review. The weight of each FTSE China 25 Index component (i.e., the investable market capitalization of such component as a proportion of the investable market capitalization of the FTSE China 25 Index) will be capped, as needed, at such time by means of a four-stage process that aims to ensure that the aggregate weight of index components that individually weigh more than 5% do not, together, exceed 40% (the “5%-40% target”). In the first stage, FTSE China 25 Index components whose weights exceed 10% are capped at 10%, and all lower weighted index components are increased as a consequence of reducing the weights of the bigger stocks (with further caps at 10% and corresponding increases if the initial (or subsequent) increases cause any component to rise above a 10% weighting). In the second stage, a determination is made: if the 5%-40% target has not been achieved, the procedure moves to a third stage; otherwise, no further action is taken. In the third stage, the weights of each index component in descending order of weight are capped in a sequential manner (and lower-ranking index components increased) in the following manner, but only until the 5%-40% target is achieved: first, if the second-highest weighted index component has a weight above 9%, it will be capped at 9% (and all lower ranking index components increased); then, if further capping is necessary and the third-highest weighted index component has a weight above 8%, it will be capped at 8% (and all lower ranking index components increased); then, if further capping is necessary and the fourth-highest weighted index component has a weight above 7%, it will be capped at 7% (and all lower ranking index components increased); then, if further capping is necessary and the fifth-highest weighted index component has a weight above 6%, it will be capped at 6% (and all lower ranking index components increased); and finally, if, following this, the 5%-40% target has still not been achieved, then

 

 

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the sixth-highest weighted index component (as well as all other index components ranked below it) will be capped at 4%. The fourth stage will repeat the first and third stages as necessary, until such time as the 5%-40% target is achieved.

Additional information on the FTSE China 25 Index is available on the following website:

http://www.ftse.com/Indices/FTSE_China_Index_Series/index.jsp.

The Stock Exchange of Hong Kong Limited

For a description of the SEHK, see the section entitled “NYSE Arca Hong Kong 30 IndexSM—The Stock Exchange of Hong Kong Limited” below.

License Agreement

We have entered into a non-exclusive license agreement with FTSE whereby we, in exchange for a fee, are permitted to use the FTSE China 25 Index in connection with certain securities, including the notes and warrants. We are not affiliated with FTSE; the only relationship between FTSE and us is any licensing of the use of FTSE’s indices and trademarks relating to them.

The license agreement between FTSE and Barclays Bank PLC provides that the following disclaimer must be set forth herein:

“The securities are not in any way sponsored, endorsed, sold or promoted by FTSE International Limited (‘FTSE’) or by the London Stock Exchange Group companies (‘LSEG’) (together the ‘Licensor Parties’) and none of the Licensor Parties make any claim, prediction, warranty or representation whatsoever, expressly or impliedly, either as to (i) the results to be obtained from the use of the FTSE China 25 Index (the ‘Index’), (ii) the figure at which the said Index stands at any particular time on any particular day or otherwise, or (iii) the suitability of the Index for the purpose to which it is being put in connection with the securities. None of the Licensor Parties have provided or will provide any financial or investment advice or recommendation in relation to the Index to Barclays Bank PLC or to its clients. The Index is calculated by FTSE or its agent. None of the Licensor Parties shall be (a) liable (whether in negligence or otherwise) to any person for any error in the Index or (b) be under any obligation to advise any person of any error therein”.

“All rights in the Index vest in FTSE. ‘FTSE®’ is a trademark of LSEG and is used by FTSE under license”.

Hang Seng Index

All information regarding the Hang Seng Index (the “Hang Seng Index”) set forth in this index supplement reflects the policies of, and is subject to change by, Hang Seng Indexes Company Limited, a wholly-owned subsidiary of Hang Seng Bank. The Hang Seng Index is compiled, published and maintained by Hang Seng Indexes Company Limited and was launched on November 24, 1969. The Hang Seng Index is reported by Hang Seng Indexes Company Limited on Bloomberg page “HSI <Index>”.

The Hang Seng Index is a free float-adjusted market capitalization weighted stock market index in the Stock Exchange of Hong Kong Limited (the “SEHK”) and purports to reflect the overall movement of the Hong Kong stock market. For more information about the SEHK, see the section entitled “NYSE Arca Hong Kong 30 IndexSM—The Stock Exchange of Hong Kong Limited” below. Constituent stocks of the Hang Seng Index are selected by a rigorous process of detailed analysis, supported by extensive external consultations. The Hang Seng Index is reviewed quarterly.

Only companies with a primary listing on the Main Board of the SEHK are eligible as constituents of the Hang Seng Index. Mainland China enterprises that have an H-Share listing in Hong Kong are eligible for inclusion in the Hang Seng Index when they meet any one of the following conditions: (1) the H-Share company has 100% of its ordinary share capital in the form of H-Shares which are listed on the SEHK; (2) the H-Share company has completed the process of Share Reform, with the result that there is no unlisted share capital in the company; or (3) for new H-Share initial public offerings, the company has no unlisted share capital. For any H-Share company included in the Hang Seng Index, only the H-Share portion of the share capital of the company will be used for index calculation, subject to free float adjustment. H-Shares are Hong Kong listed shares, traded in Hong Kong dollars, of companies incorporated in mainland China and nominated by the Chinese government for listing and trading on the SEHK.

To be eligible for selection, a company: (1) must be among those companies that constitute the top 90% of the total market value of all primary listed shares on the SEHK (market value is expressed as an average of the past 12 months); (2) must be among those companies that constitute the top 90% of the total turnover of all eligible shares listed on the SEHK (turnover is aggregated and individually assessed for eight quarterly sub-periods for the past 24 months); and (3) should normally have a listing history of 24 months or meet the requirements set out below.

 

 

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For large-cap stocks that have been listed for less than 24 months, the minimum listing time required for inclusion in the Hang Seng Index is as follows:

 

Average Market Capitalization

Ranking at Time of Review

   Minimum
Listing History
 

Top 5

     3 months   

6 – 15

     6 months   

16 – 20

     12 months   

21 – 25

     18 months   

Below 25

     24 months   

From the many eligible candidates, final selections are based on the following: (1) the market capitalization and turnover rankings of the companies; (2) the representation of the sub-sectors within the Hang Seng Index directly reflecting that of the market; and (3) the financial performance of the companies.

Calculation methodology. The calculation methodology of the Hang Seng Index is a free float-adjusted market capitalization weighting. Under this calculation methodology, shares held by any entities (excluding custodians, trustees, mutual funds and investment companies) which control more than 5% of shares are considered non-free float and excluded from the index calculation. Non-free float investor classes may include:

 

   

Strategic holdings (governments and affiliated entities or any other entities which hold substantial shares in the company would be considered as non-free float unless otherwise proved);

 

   

Directors’ and management holdings (directors, members of the board committee, principal officers or founding members);

 

   

Corporate cross holdings (publicly traded companies or private firms / institutions); and

 

   

Lock-up shares (shareholdings with a publicly disclosed lock-up arrangement).

A free float-adjusted factor, representing the proportion of shares that is free floated as a percentage of the issued shares, is rounded up to the nearest 1% where the free float is below 10% and otherwise it is rounded up to the nearest 5% for the calculation of the Hang Seng Index and is updated quarterly.

A cap of 15% on individual stock weightings is applied, and a cap factor calculated quarterly to ensure no individual constituent is weighted in excess of the cap on a given index capping date.

Additional information on the Hang Seng Index is available on the following website:

http://www.hsi.com.hk/.

License Agreement

We have entered into a non-exclusive license agreement with Hang Seng Indexes Company Limited and Hang Seng Data Services Limited whereby we, in exchange for a fee, are permitted to use the Hang Seng Index in connection with certain securities, including the notes and warrants. We are not affiliated with Hang Seng Indexes Company Limited or Hang Seng Data Services Limited; the only relationship between Hang Seng Indexes Company Limited and Hang Seng Data Services Limited, on the one hand, and us, on the other hand, is any licensing of the use of their indices and trademarks relating to them.

The license agreement provides that the following language must be set forth herein:

“THE HANG SENG INDEX (THE ‘HANG SENG INDEX’) IS PUBLISHED AND COMPILED BY HANG SENG INDEXES COMPANY LIMITED PURSUANT TO A LICENSE FROM HANG SENG DATA SERVICES LIMITED. THE MARK AND NAME ‘HANG SENG INDEX’ ARE PROPRIETARY TO HANG SENG DATA SERVICES LIMITED. HANG SENG INDEXES COMPANY LIMITED AND HANG SENG DATA SERVICES LIMITED HAVE AGREED TO THE USE OF, AND REFERENCE TO, THE HANG SENG INDEX BY BARCLAYS BANK PLC IN CONNECTION WITH THE SECURITIES, BUT NEITHER HANG SENG INDEXES COMPANY LIMITED NOR HANG SENG DATA SERVICES LIMITED WARRANTS OR REPRESENTS OR GUARANTEES TO ANY BROKER OR HOLDER OF THE SECURITIES OR ANY OTHER PERSON (i) THE ACCURACY OR COMPLETENESS OF THE HANG SENG INDEX AND ITS COMPUTATION OR ANY INFORMATION RELATED THERETO; OR (ii) THE FITNESS OR SUITABILITY FOR ANY PURPOSE OF THE HANG SENG INDEX OR ANY COMPONENT OR DATA COMPRISED IN IT; OR (iii) THE RESULTS WHICH MAY BE OBTAINED BY ANY PERSON FROM THE USE OF THE HANG SENG INDEX OR ANY COMPONENT OR DATA COMPRISED IN IT FOR ANY PURPOSE, AND NO WARRANTY OR REPRESENTATION OR GUARANTEE OF ANY KIND WHATSOEVER RELATING TO THE HANG SENG INDEX IS GIVEN OR MAY BE IMPLIED. THE PROCESS AND BASIS OF COMPUTATION AND COMPILATION OF THE HANG SENG INDEX AND ANY OF THE RELATED FORMULA OR FORMULAE, CONSTITUENT STOCKS AND FACTORS MAY AT ANY TIME BE CHANGED OR ALTERED BY HANG SENG INDEXES

 

 

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COMPANY LIMITED WITHOUT NOTICE. TO THE EXTENT PERMITTED BY APPLICABLE LAW, NO RESPONSIBILITY OR LIABILITY IS ACCEPTED BY HANG SENG INDEXES COMPANY LIMITED OR HANG SENG DATA SERVICES LIMITED (i) IN RESPECT OF THE USE OF AND/OR REFERENCE TO THE HANG SENG INDEX BY BARCLAYS BANK PLC IN CONNECTION WITH THE SECURITIES; OR (ii) FOR ANY INACCURACIES, OMISSIONS, MISTAKES OR ERRORS OF HANG SENG INDEXES COMPANY LIMITED IN THE COMPUTATION OF THE HANG SENG INDEX; OR (iii) FOR ANY INACCURACIES, OMISSIONS, MISTAKES, ERRORS OR INCOMPLETENESS OF ANY INFORMATION USED IN CONNECTION WITH THE COMPUTATION OF THE HANG SENG INDEX WHICH IS SUPPLIED BY ANY OTHER PERSON; OR (iv) FOR ANY ECONOMIC OR OTHER LOSS WHICH MAY BE DIRECTLY OR INDIRECTLY SUSTAINED BY ANY BROKER OR HOLDER OF THE SECURITIES OR ANY OTHER PERSON DEALING WITH THE SECURITIES AS A RESULT OF ANY OF THE AFORESAID, AND NO CLAIMS, ACTIONS OR LEGAL PROCEEDINGS MAY BE BROUGHT AGAINST HANG SENG INDEXES COMPANY LIMITED AND/OR HANG SENG DATA SERVICES LIMITED IN CONNECTION WITH THE SECURITIES IN ANY MANNER WHATSOEVER BY ANY BROKER, HOLDER OR OTHER PERSON DEALING WITH THE SECURITIES. ANY BROKER, HOLDER OR OTHER PERSON DEALING WITH THE SECURITIES DOES SO THEREFORE IN FULL KNOWLEDGE OF THIS DISCLAIMER AND CAN PLACE NO RELIANCE WHATSOEVER ON HANG SENG INDEXES COMPANY LIMITED AND HANG SENG DATA SERVICES LIMITED. FOR THE AVOIDANCE OF DOUBT, THIS DISCLAIMER DOES NOT CREATE ANY CONTRACTUAL OR QUASI-CONTRACTUAL RELATIONSHIP BETWEEN ANY BROKER, HOLDER OR OTHER PERSON AND HANG SENG INDEXES COMPANY LIMITED AND/OR HANG SENG DATA SERVICES LIMITED AND MUST NOT BE CONSTRUED TO HAVE CREATED SUCH RELATIONSHIP”.

Hang Seng China Enterprises Index

All information relating to the Hang Seng China Enterprises Index (the “H-Shares Index”) set forth in this index supplement reflects the policies of, and is subject to change by, Hang Seng Indexes Company Limited, a wholly-owned subsidiary of Hang Seng Bank. The H-Shares Index is compiled, published and managed by Hang Seng Indexes Company

Limited and was first calculated and published on August 8, 1994, one year after the first H-Share company was listed on the Stock Exchange of Hong Kong Limited (the “SEHK”). The H-Shares Index is reported by Hang Seng Indexes Company Limited on Bloomberg page “HSCEI <Index>”.

The H-Shares Index is intended to track the performance of all the Hong Kong listed H-Shares of Chinese enterprises. For more information about the SEHK, see the section entitled “NYSE Arca Hong Kong 30 IndexSM—The Stock Exchange of Hong Kong Limited” below. H-Shares are Hong Kong listed shares, traded in Hong Kong dollars, of companies incorporated in mainland China. The H-Shares Index had a base index value of 1,000 at launch, but was rebased with a value of 2,000 as at January 3, 2000 to align with the Hang Seng Composite Index Series on October 3, 2001. The H-Shares Index is reviewed quarterly.

To be eligible for inclusion in the H-Shares Index, a stock must have a primary listing on the Main Board of the SEHK.

A component stock is selected or removed from the H-Shares Index in the quarterly review process based on the following selection criteria:

 

   

Listing history requirement. Stocks should be listed for at least one month prior to the review cut-off date.

 

   

Turnover screening. Stocks must have 0.1% turnover velocity for at least 10 out of the latest 12 months to maintain their inclusion or to be newly included in the H-Shares Index. Existing H-Shares Index constituents that fail to meet the test in the preceding sentence can instead satisfy a supplementary test for the months in which they did not have 0.1% turnover velocity and can instead rely on their monthly aggregate turnover being among the top 90% of the Main Board of the SEHK. New entrants must also have 0.1% turnover velocity in each of the latest three months. Turnover velocity for a calendar month is calculated as the median of shares traded daily over that calendar month divided by the total free float-adjusted issued shares at month end.

 

   

Ranking by combined market capitalization. Of the stocks satisfying the listing history requirement and turnover screening test, the 40 eligible stocks with the highest combined market capitalization will be selected as constituents of the H-Shares Index. Combined market capitalization is calculated for each stock by adding 50% of full market capitalization to 50% of free float-adjusted market capitalization.

 

 

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Calculation methodology. The H-Shares Index is calculated using a free float-adjusted market capitalization weighting. Under this calculation methodology, shares held by any entities (excluding custodians, trustees, mutual funds and investment companies) which control more than 5% of shares are considered non-free float and excluded from the index calculation. Non-free float investor classes may include:

 

   

Strategic holdings (governments and affiliated entities or any other entities which hold substantial shares in the company would be considered as non-free float unless otherwise proved);

 

   

Directors’ and management holdings (directors, members of the board committee, principal officers or founding members);

 

   

Corporate cross holdings (publicly traded companies or private firms / institutions); and

 

   

Lock-up shares (shareholdings with a publicly disclosed lock-up arrangement).

A free float-adjusted factor, representing the proportion of shares that is free floated as a percentage of the issued shares, is rounded up to the nearest 1% where the free float is below 10% and otherwise rounded up to the nearest 5% for the calculation of the H-Shares Index and is updated quarterly.

A cap of 10% on individual stock weightings is applied and a cap factor calculated quarterly to ensure no individual constituent is weighted in excess of the cap on a given index capping date.

Additional information on the H-Shares Index is available on the following website:

http://www.hsi.com.hk/.

License Agreement

We have entered into a non-exclusive license agreement with Hang Seng Indexes Company Limited and Hang Seng Data Services Limited whereby we, in exchange for a fee, are permitted to use the H-Shares Index in connection with certain securities, including the notes and warrants. We are not affiliated with Hang Seng Indexes Company Limited or Hang Seng Data Services Limited; the only relationship between Hang Seng Indexes Company Limited and Hang Seng Data Services Limited, on the one hand, and us, on the other hand, is any licensing of the use of their indices and trademarks relating to those indices.

The license agreement provides that the following language must be set forth herein:

“The Hang Seng China Enterprises Index (the ‘H-Shares Index’) is published and compiled by Hang Seng Indexes Company Limited pursuant to a license

from Hang Seng Data Services Limited. The mark and name ‘Hang Seng China Enterprises Index’ are proprietary to Hang Seng Data Services Limited. Hang Seng Indexes Company Limited and Hang Seng Data Services Limited have agreed to the use of, and reference to, the H-Shares Index by Barclays Bank PLC in connection with the securities, BUT NEITHER HANG SENG INDEXES COMPANY LIMITED NOR HANG SENG DATA SERVICES LIMITED WARRANTS OR REPRESENTS OR GUARANTEES TO ANY BROKER OR HOLDER OF THE SECURITIES OR ANY OTHER PERSON (i) THE ACCURACY OR COMPLETENESS OF THE H-SHARES INDEX AND ITS COMPUTATION OR ANY INFORMATION RELATED THERETO; OR (ii) THE FITNESS OR SUITABILITY FOR ANY PURPOSE OF THE H-SHARES INDEX OR ANY COMPONENT OR DATA COMPRISED IN IT; OR (iii) THE RESULTS WHICH MAY BE OBTAINED BY ANY PERSON FROM THE USE OF THE H-SHARES INDEX OR ANY COMPONENT OR DATA COMPRISED IN IT FOR ANY PURPOSE, AND NO WARRANTY OR REPRESENTATION OR GUARANTEE OF ANY KIND WHATSOEVER RELATING TO THE H-SHARES INDEX IS GIVEN OR MAY BE IMPLIED. THE PROCESS AND BASIS OF COMPUTATION AND COMPILATION OF THE H-SHARES INDEX AND ANY OF THE RELATED FORMULA OR FORMULAE, CONSTITUENT STOCKS AND FACTORS MAY AT ANY TIME BE CHANGED OR ALTERED BY HANG SENG INDEXES COMPANY LIMITED WITHOUT NOTICE. TO THE EXTENT PERMITTED BY APPLICABLE LAW, NO RESPONSIBILITY OR LIABILITY IS ACCEPTED BY HANG SENG INDEXES COMPANY LIMITED OR HANG SENG DATA SERVICES LIMITED (i) IN RESPECT OF THE USE OF AND/OR REFERENCE TO THE H-SHARES INDEX BY BARCLAYS BANK PLC IN CONNECTION WITH THE SECURITIES; OR (ii) FOR ANY INACCURACIES, OMISSIONS, MISTAKES OR ERRORS OF HANG SENG INDEXES COMPANY LIMITED IN THE COMPUTATION OF THE H-SHARES INDEX; OR (iii) FOR ANY INACCURACIES, OMISSIONS, MISTAKES, ERRORS OR INCOMPLETENESS OF ANY INFORMATION USED IN CONNECTION WITH THE COMPUTATION OF THE H-SHARES INDEX WHICH IS SUPPLIED BY ANY OTHER PERSON; OR (iv) FOR ANY ECONOMIC OR OTHER LOSS WHICH MAY BE DIRECTLY OR INDIRECTLY SUSTAINED BY ANY BROKER OR HOLDER OF THE SECURITIES OR ANY OTHER PERSON DEALING WITH THE SECURITIES AS A RESULT OF ANY OF THE AFORESAID, AND NO CLAIMS,

 

 

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ACTIONS OR LEGAL PROCEEDINGS MAY BE BROUGHT AGAINST HANG SENG INDEXES COMPANY LIMITED AND/OR HANG SENG DATA SERVICES LIMITED IN CONNECTION WITH THE SECURITIES IN ANY MANNER WHATSOEVER BY ANY BROKER, HOLDER OR OTHER PERSON DEALING WITH THE SECURITIES. ANY BROKER, HOLDER OR OTHER PERSON DEALING WITH THE SECURITIES DOES SO THEREFORE IN FULL KNOWLEDGE OF THIS DISCLAIMER AND CAN PLACE NO RELIANCE WHATSOEVER ON HANG SENG INDEXES COMPANY LIMITED AND HANG SENG DATA SERVICES LIMITED. FOR THE AVOIDANCE OF DOUBT, THIS DISCLAIMER DOES NOT CREATE ANY CONTRACTUAL OR QUASI-CONTRACTUAL RELATIONSHIP BETWEEN ANY BROKER, HOLDER OR OTHER PERSON AND HANG SENG INDEXES COMPANY LIMITED AND/OR HANG SENG DATA SERVICES LIMITED AND MUST NOT BE CONSTRUED TO HAVE CREATED SUCH RELATIONSHIP”.

KOSPI 200

All information regarding the Korea Composite Stock Price Index 200 or KOSPI 200 (the “KOSPI 200”) set forth in this index supplement reflects the policies of, and is subject to change by, the Korea Exchange (the “KRX”), which was established on January 27, 2005 by the consolidation of three domestic exchanges: the Korea Stock Exchange, KOSDAQ and the Korea Futures Exchange. The KOSPI 200 is determined, composed and calculated by the KRX. The KOSPI 200 is reported by the KRX on Bloomberg page “KOSPI2 <Index>”.

The KOSPI 200 is a market capitalization-weighted index of 200 Korean blue-chip stocks, covering approximately 90% of the market capitalization of the Korean Exchange-Stock Market (the “KRX-Stock Market”). The constituent stocks are selected on a basis of the market value of the individual stocks, liquidity and their relative positions in their respective industry groups.

Composition of the KOSPI 200

Index universe

All common stocks listed on the KRX-Stock Market will be included in the selection process, except for the stocks which fall into one of the following categories:

 

   

stocks initially listed or relisted after May 1 of the year preceding the year of a regular realignment review date (as described below), subject to certain exceptions;

   

stocks issued by securities investment companies;

 

   

stocks designated as administrative issues;

 

   

stocks issued during a liquidation sale; and

 

   

stocks otherwise deemed unsuitable to be constituents of the index.

However, if the market capitalization of any newly issued stock of a company that belongs to one of the industry sectors indicated below under “—Selection criteria” exceeds 1% of the total market capitalization of the KRX-Stock Market, the stock will be included in the KOSPI 200 universe even if one year has not elapsed since listing.

Selection criteria

The stocks in the KOSPI 200 universe are first classified into the following eight industry sectors and the stocks in each industry sector are ranked according to market capitalization in descending order, from largest to smallest: fisheries; mining; manufacturing; construction; electricity and gas; services; post and communication; and finance.

The constituents from each of the non-manufacturing industry sectors are selected first as constituent stocks of KOSPI 200 in descending order of market capitalization until the accumulated market capitalization of the selected stocks reaches 70% of the total market capitalization of each industry sector. However, stocks whose annual trading volume is below 85% of the stocks within the same industry group are excluded and a stock that is next in market capitalization ranking, but which satisfies the trading volume criteria, is chosen instead. After making selections from the non-manufacturing industry sectors, the remaining constituent stocks are selected from the manufacturing industry sector in descending order of market capitalization, while excluding stocks whose ranking of trading volume in descending order is below 85% of all stocks within the manufacturing sector.

Notwithstanding the above, a stock whose market capitalization is within the top 50 in terms of market capitalization may be included in the KOSPI 200 following a review by the KOSPI Maintenance Committee of, among other things, the influence that the industry group in which such stock is classified has on the KOSPI 200 and the liquidity of the relevant stock.

The constituents of the KOSPI 200 are realigned on regular realignment review dates which occur annually in June, based on predetermined rules that seek to maintain the consistency of the index. The regular realignment date is the trading day following the last trading day for June contracts in the futures

 

 

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and options markets. In addition to regular realignment, special realignment is possible between regular realignment dates in response to delisting, designation of an existing constituent of the KOSPI 200 as an administrative issue, certain corporate actions (e.g., mergers) and in certain other instances. When this occurs, stocks will be selected in ranking order from a replacement list by industry group chosen beforehand during regular realignment. In the event that the replacement list includes no stock for a specific industry, a stock is replenished from the manufacturing industry group.

Calculation Methodology

The KOSPI 200 is computed by multiplying (1) the quotient of (a) the market capitalization as of the calculation time divided by (b) the market capitalization as of the base date, by (2) 100. The base date of the KOSPI 200 is January 3, 1990 with a base index of 100. Market capitalization is obtained by multiplying the number of listed common shares of a constituent stock by the price of the common shares.

Free Float Adjustments

The calculation of the KOSPI 200 is based on a free float methodology. Under the free float methodology, the following shareholdings are viewed as “non-free” and excluded for calculation:

 

   

shares owned by the government when the holding is greater than or equal to 5% of total shares;

 

   

shares owned by the largest shareholders and affiliated persons;

 

   

shares owned by employees (i.e., through the employees’ stock ownership plan);

 

   

treasury stocks; and

 

   

shares construed as non-free float by KRX.

Additional information on the KOSPI 200 is available on the following website:

http://eng.krx.co.kr.

Korea Exchange-Stock Market

The KRX-Stock Market’s predecessor, the Daehan Stock Exchange, was established in 1956. The KRX-Stock Market is a typical order-driven market, where buy and sell orders compete for best prices. The KRX-Stock Market seeks to maintain a fair and orderly market for trading and regulates and supervises its member firms.

Throughout the trading hours, orders are matched at a price satisfactory to both buy and sell sides, according to price and time priorities. The opening

and closing prices, however, are determined by call auctions: at the market opening and closing, orders received for a certain period of time are pooled and matched at the price at which the most number of shares can be executed. The KRX-Stock Market uses electronic trading procedures, from order placement to trade confirmation. The KRX-Stock Market is open from 9:00 a.m. to 3:00 p.m., Korean time, during weekdays. Investors can submit their orders from 8:00 a.m., one hour before the market opening. Orders delivered to the market during the period from 8:00 a.m. to 9:00 a.m. are queued in the order book and matched by call auction method at 9:00 a.m. to determine opening prices. After opening prices are determined, the trades are conducted by continuous auctions until 2:50 p.m. (10 minutes before the market closing). Besides the regular session, the KRX-Stock Market conducts pre-hours and after-hours sessions for block trading and basket trading.

The KRX-Stock Market sets a limit on the range that the price of individual stocks can change during a day. In addition, when the price and/or trading activities of a stock are expected to show an abnormal movement in response to an unidentified rumor or news, or when an abnormal movement is observed in the market, the KRX-Stock Market may halt the trading of the stock. In such cases, the KRX-Stock Market requests the company concerned to make a disclosure regarding the matter. If the disclosure is determined to be satisfactory, trading can resume after 30 minutes if the disclosure is received by 2:00 p.m., or in the next session if received after 2:00 p.m.; however, if the KRX-Stock Market deems that the situation was not fully resolved by the disclosure, trading resumption may be delayed.

The KRX-Stock Market introduced circuit breakers in December 1998. The trading in the equity markets is halted for 20 minutes when the KOSPI 200 falls by 10% or more from the previous day’s closing and the situation lasts for one minute or longer. The trading resumes by call auction where the orders submitted during the 10 minutes after the trading halt ended are matched at a single price.

As a result of the foregoing, variations in the KOSPI 200 may be limited by suspension of trading of the constituent stocks of the KOSPI 200, individually or in the aggregate, which may in turn adversely affect the value of the securities.

Additional information on the KRX-Stock Market is available on the following website:

http://eng.krx.co.kr.

License Agreement

We have entered into a non-exclusive license agreement with KRX whereby we, in exchange for a

 

 

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fee, are permitted to use the KOSPI 200 in connection with certain securities, including the notes and warrants. We are not affiliated with KRX; the only relationship between KRX and us is any licensing of the use of KRX’s indices and trademarks relating to them.

The license agreement provides that the following language must be set forth herein:

“‘KOSPI’, ‘KOSPI 200’ and ‘KOSDAQ’ are trademarks/servicemarks of the Korea Exchange (the ‘KRX’) and have been licensed for use by Barclays Bank PLC.

The securities are not sponsored, endorsed, sold or promoted by KRX. KRX makes no representation or warranty, express or implied, to the owners of the securities or any member of the public regarding the advisability of investing in securities generally or in the securities particularly or the ability of the KOSPI 200 to track general stock market performance. KRX’s only relationship to Barclays Bank PLC is the licensing of certain trademarks and trade names of KRX and of the KOSPI 200 which is determined, composed and calculated by KRX without regard to Barclays Bank PLC or the securities. KRX has no obligation to take the needs of Barclays Bank PLC or the owners of the securities into consideration in determining, composing or calculating the KOSPI 200. KRX is not responsible for and has not participated in the determination of the prices and amount of the securities or the timing of the issuance or sale of the securities or in the determination or calculation of the equation by which the securities are to be converted into cash. KRX has no obligation or liability in connection with the administration, marketing or trading of the securities.

KRX DOES NOT GUARANTEE THE ACCURACY AND/OR THE COMPLETENESS OF THE KOSPI 200 OR ANY DATA INCLUDED THEREIN AND KRX SHALL HAVE NO LIABILITY FOR ANY ERRORS, OMISSIONS, OR INTERRUPTIONS THEREIN. KRX MAKES NO WARRANTY, EXPRESS OR IMPLIED, AS TO RESULTS TO BE OBTAINED BY BARCLAYS BANK PLC, OWNERS OF THE SECURITIES, OR ANY OTHER PERSON OR ENTITY FROM THE USE OF THE KOSPI 200 OR ANY DATA INCLUDED THEREIN. KRX MAKES NO EXPRESS OR IMPLIED WARRANTIES, AND EXPRESSLY DISCLAIMS ALL WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE WITH RESPECT TO THE KOSPI 200 OR ANY DATA INCLUDED THEREIN. WITHOUT LIMITING ANY OF THE FOREGOING, IN NO EVENT SHALL KRX HAVE ANY LIABILITY FOR ANY SPECIAL, PUNITIVE, INDIRECT, OR CONSEQUENTIAL DAMAGES (INCLUDING

LOST PROFITS), EVEN IF NOTIFIED OF THE POSSIBILITY OF SUCH DAMAGES”.

MSCI Indices

We may offer notes linked to one or more indices that are part of the “MSCI Global Investable Market Indices” calculated and maintained by MSCI, Inc. (“MSCI”) (the “MSCI Indices”), including the MSCI Singapore Index (the “MSCI Singapore Index”), the MSCI Taiwan Index (the “MSCI Taiwan Index”), the MSCI Thailand Index (the “MSCI Thailand Index”), the MSCI EAFE Index (the “MSCI EAFE Index”) and the MSCI Emerging Markets Index (the “MSCI EM Index”).

The MSCI Indices were founded in 1969 by Capital International as the first international performance benchmarks constructed to facilitate accurate comparison of world markets. Morgan Stanley acquired the rights to license the MSCI Indices in 1986. In November 1998, Morgan Stanley transferred all rights to the MSCI Indices to MSCI, a Delaware corporation of which Morgan Stanley is the controlling shareholder. In 2004, MSCI acquired Barra, Inc., a provider of risk analytics, performance measurement and attribution systems and services to managers of portfolio and firm-wide investment risk and merged this with MSCI. In 2010, MSCI acquired RiskMetrics Group, Inc. and its subsidiary Institutional Shareholder Services, Inc., providers of risk management and corporate governance products and services. Later that year MSCI acquired Measurisk LLC, a provider of independent risk transparency and risk measurement tools for hedge fund investors. The MSCI single country standard equity indices have covered the world’s developed markets since 1969, and in 1988, MSCI commenced coverage of the emerging markets.

All information regarding the MSCI Indices contained in this index supplement reflects the policies of, and is subject to change by, MSCI. For a detailed explanation of methodology underlying the MSCI Indices and other information about how the MSCI Indices are maintained, see the “MSCI Global Investable Market Indices Methodology”, which is available at www.msci.com. MSCI is under no obligation to continue to publish the MSCI Indices and may discontinue publication of the MSCI Indices at any time.

Description of the Indices

MSCI Singapore Index

The MSCI Singapore Index is designed to measure the performance of the large and mid-cap segments of the Singapore market. The MSCI Singapore Index is intended to cover approximately 85% of the free

 

 

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float-adjusted market capitalization of the Singapore investable equity universe, subject to certain investability criteria (as described below). It is based on the Global Investable Market Indices methodology. The intraday level of the MSCI Singapore Price Index in SGD is reported by MSCI on Bloomberg page “MXSG <Index>”. The official closing level of the MSCI Daily TR Net Singapore Free USD Index is reported by MSCI on Bloomberg page “MSDUSGF <Index>”.

MSCI Taiwan Index

The MSCI Taiwan Index is designed to measure the performance of the large and mid-cap segments of the Taiwan market. The MSCI Taiwan Index is intended to cover approximately 85% of the free float-adjusted market capitalization of the Taiwan investable equity universe, subject to certain investability criteria (as described below). It is based on the Global Investable Market Indices methodology. The intraday level of the MSCI Taiwan Price Index in TWD is reported by MSCI on Bloomberg page “TAMSCI <Index>”. The official closing level of the MSCI Daily TR Net Emerging Markets Taiwan USD is reported by MSCI on Bloomberg page “NDEUSTW <Index>”.

MSCI Thailand Index

The MSCI Thailand Index is designed to measure the performance of the large and mid-cap segments of the Thailand market. The MSCI Thailand Index is intended to cover approximately 85% of the free float-adjusted market capitalization of the Thailand investable equity universe, subject to a certain investability criteria (as described below). It is based on the Global Investable Market Indices methodology. The intraday trading level of the MSCI Thailand Price Index in THB is reported by MSCI on Bloomberg page “MXTH <Index>”. The official closing level of MSCI Daily TR Net Emerging Markets Thailand USD Index is reported by MSCI on Bloomberg page “NDEUTHF <Index>”.

MSCI EAFE Index

The MSCI EAFE Index is designed to capture large and mid-cap representation across developed markets (Australia, Austria, Belgium, Denmark, Finland, France, Germany, Greece, Hong Kong, Ireland, Israel, Italy, Japan, the Netherlands, New Zealand, Norway, Portugal, Singapore, Spain, Sweden, Switzerland and the United Kingdom) (each, an “MSCI EAFE Constituent Country Index”). The MSCI EAFE Index is intended to cover approximately 85% of the free float-adjusted market capitalization in each country by targeting all companies with a market capitalization within the top 85% of their investable equity universe, subject to

certain investability criteria (as described below). It is based on the Global Investable Market Indices methodology. The intraday level of the MSCI EAFE Price Index in USD is reported by MSCI on Bloomberg page “MXEA <Index>”. The official closing level of the MSCI Daily TR Net EAFE USD Index is reported by MSCI on Bloomberg page “NDDUEAFE <Index>”.

MSCI EM Index

The MSCI EM Index is designed to capture large and mid-cap representation across 21 emerging markets countries (Brazil, Chile, China, Colombia, Czech Republic, Egypt, Hungary, India, Indonesia, Korea, Malaysia, Mexico, Morocco, Peru, Philippines, Poland, Russia, South Africa, Taiwan, Thailand and Turkey). The MSCI EM Index is intended to cover approximately 85% of the free float-adjusted market capitalization in each country by targeting all companies with a market capitalization within the top 85% of their investable equity universe, subject to certain investability criteria (as described below) (each, an “MSCI EM Constituent Country Index”). It is based on the Global Investable Market Indices methodology.

The intraday level of the MSCI EM Price Index in USD is reported by MSCI on Bloomberg page “MXEF <Index>”. The official closing level of the MSCI Daily TR Net Emerging Markets USD Index is reported by MSCI on Bloomberg page “NDUEEGF <Index>”.

The Country Indices

The MSCI Singapore Index, MSCI Taiwan Index, MSCI Thailand Index, each MSCI EAFE Constituent Country Index and each MSCI EM Constituent Country Index are referred to individually as a “Country Index” and collectively as the “Country Indices”. Under the MSCI methodology, each Country Index is an “MSCI Global Standard Index”.

The components of each Country Index used to be selected by MSCI from among the universe of securities eligible for inclusion in the Country Index so as to target an 85% free float-adjusted market representation level within each of a number of industry groups, subject to investability criteria in respect of (i) minimum market capitalizations, (ii) minimum free float-adjusted market capitalizations, (iii) minimum liquidity, (iv) foreign investment restrictions (only those securities that can be held by non-residents of the country corresponding to the relevant Country Index are included), (v) length of trading and (vi) proportion of shares available to foreign investors (as noted above, for a more detailed discussion of such investability criteria (as described below), see the “MSCI Global

 

 

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Investable Market Indices Methodology”, which is available at www.msci.com). Following a change in MSCI’s methodology implemented in May 2008, the 85% target is now measured at the level of the country universe of eligible securities rather than the industry group level—so each Country Index will seek to include the securities that represent 85% of the free float-adjusted market capitalization of all securities eligible for inclusion—but will still be subject to liquidity, foreign investment restrictions and other investability adjustments. MSCI defines “free float” as the proportion of shares outstanding that is deemed to be available for purchase in the public equity markets by international investors, and generally excludes shares held by strategic and other non-free float investors whose investment objectives or other characteristics suggest that those holdings are not likely to be available in the markets, shares subject to foreign ownership restrictions and shares subject to other investment restrictions. For additional information on defining and calculating “free float” see the “MSCI Global Investable Market Indices Methodology”, which is available at www.msci.com.

Calculation of the Indices

Calculation of the Country Indices

Each Country Index is a free float-adjusted market capitalization index that is designed to measure the market performance, including price performance of the equity securities in that country (such equity securities are referred to individually as an “Index Component” and collectively as “Index Components”). Each Country Index is calculated in the relevant local currency as well as in U.S. dollars, with price, gross and net returns.

MSCI’s “price indices” measure market performance, including price performance, whereas MSCI’s “total return indices” measure market performance, including price performance, as well as income from dividend payments. For a more detailed discussion of how the country indices are calculated, see the “MSCI Index Calculation Methodology”, which is available at www.msci.com.

Each Index Component is included in the relevant Country Index at a weight that reflects the ratio of its free float-adjusted market capitalization (i.e., free public float multiplied by price) to the free float-adjusted market capitalization of all the Index Components in that Country Index.

Calculation of the MSCI EAFE Index and MSCI EM Index

The performance of the MSCI EAFE Index on any given day represents the weighted performance of all of the Index Components included in all of the MSCI

EAFE Constituent Country Indices. Each Index Component in the MSCI EAFE Index is included at a weight that reflects the ratio of its free float-adjusted market capitalization (i.e., free public float multiplied by price) to the free float-adjusted market capitalization of all the Index Components included in all of the MSCI EAFE Constituent Country Indices.

Similarly, the performance of the MSCI EM Index on any given day represents the weighted performance of all of the Index Components included in all of the MSCI EM Constituent Country Indices. Each Index Component in the MSCI EM Index is included at a weight that reflects the ratio of its free float-adjusted market capitalization (i.e., free public float multiplied by price) to the free float-adjusted market capitalization of all the Index Components included in all of the MSCI EM Constituent Country Indices.

Maintenance of and Changes to the MSCI Indices

MSCI maintains the MSCI Indices with the objective of reflecting, on a timely basis, the evolution of the underlying equity markets and segments. In maintaining the MSCI Indices, emphasis is also placed on continuity, continuous investability of constituents, replicability, index stability and minimizing turnover in the indices.

As part of the changes to MSCI’s methodology which became effective in May 2008, maintenance of the indices falls into three broad categories:

 

   

semi-annual reviews, which will occur each May and November and will involve a comprehensive reevaluation of the market, the universe of eligible securities and other factors involved in composing the indices;

 

   

quarterly reviews, which will occur each February and August and will focus on significant changes in the market since the last semi-annual review; and

 

   

ongoing event-related changes, which will generally be reflected in the indices at the time of the event and will include changes resulting from mergers, acquisitions, spin-offs, bankruptcies, reorganizations, issuances and other extraordinary transactions, corporate actions and events.

Based on these reviews, additional components may be added, and current components may be removed, at any time. MSCI generally announces all changes resulting from semi-annual reviews, quarterly reviews and ongoing events in advance of their implementation, although in exceptional cases they may be announced during market hours for same or next day implementation. For a detailed explanation

 

 

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of maintenance of and changes to the MSCI Indices, see the “MSCI Global Investable Market Indices Methodology”, which is available at

http://www.msci.com.

Prices and Exchange Rates

Prices

The prices used to calculate the MSCI Indices are the official exchange closing prices or those figures accepted as such. MSCI reserves the right to use an alternative pricing source on any given day.

Exchange rates

MSCI uses the foreign exchange rates published by WM / Reuters at 4:00 p.m., London time. MSCI uses WM / Reuters rates for all developed and emerging markets.

In case WM/Reuters does not provide rates for specific markets on given days (for example Christmas Day and New Year Day), the previous business day’s rates are normally used.

MSCI continues to monitor exchange rates independently and may, under exceptional circumstances, elect to use an alternative exchange rate if the WM / Reuters rates are not available, or if MSCI determines that the WM / Reuters rates are not reflective of market circumstances for a given currency on a particular day. In such circumstances, an announcement would be sent to clients with the related information. If appropriate, MSCI may conduct a consultation with the investment community to gather feedback on the most relevant exchange rate.

Additional information on the MSCI Indices, including the MSCI Singapore Index, MSCI Taiwan Index, MSCI Thailand Index, MSCI EAFE Index and MSCI EM Index, is available on the following website: http://www.msci.com.

License Agreement

We have entered into a non-exclusive license agreement with MSCI whereby we, in exchange for a fee, are permitted to use the MSCI Indices in connection with certain securities, including the notes. We are not affiliated with MSCI; the only relationship between MSCI and us is any licensing of the use of MSCI’s indices and trademarks relating to them.

The license agreement provides that the following language must be set forth herein:

“THE NOTES ARE NOT SPONSORED OR ENDORSED BY MSCI, ANY AFFILIATE OF MSCI OR ANY OTHER PARTY INVOLVED IN,

OR RELATED TO, MAKING OR COMPILING ANY MSCI INDEX. THE NOTES ARE NOT SOLD OR PROMOTED BY MSCI, ANY AFFILIATE OF MSCI OR ANY OTHER PARTY INVOLVED IN, OR RELATED TO, MAKING OR COMPILING ANY MSCI INDEX. THE MSCI INDICES ARE THE EXCLUSIVE PROPERTY OF MSCI. MSCI AND THE MSCI INDEX NAMES ARE SERVICE MARKS OF MSCI OR ITS AFFILIATES AND HAVE BEEN LICENSED FOR USE FOR CERTAIN PURPOSES BY BARCLAYS BANK PLC. NEITHER MSCI, ANY OF ITS AFFILIATES NOR ANY OTHER PARTY INVOLVED IN, OR RELATED TO, MAKING OR COMPILING ANY MSCI INDEX MAKES ANY REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, TO THE OWNERS OF THE NOTES OR ANY MEMBER OF THE PUBLIC REGARDING THE ADVISABILITY OF INVESTING IN FINANCIAL SECURITIES GENERALLY OR IN THE NOTES PARTICULARLY OR THE ABILITY OF ANY MSCI INDEX TO TRACK CORRESPONDING STOCK MARKET PERFORMANCE. MSCI OR ITS AFFILIATES ARE THE LICENSORS OF CERTAIN TRADEMARKS, SERVICE MARKS AND TRADE NAMES AND OF THE MSCI INDICES WHICH ARE DETERMINED, COMPOSED AND CALCULATED BY MSCI WITHOUT REGARD TO THE NOTES OR TO BARCLAYS BANK PLC OR ANY OWNER OF THE NOTES. NEITHER MSCI, ANY OF ITS AFFILIATES NOR ANY OTHER PARTY INVOLVED IN, OR RELATED TO, MAKING OR COMPILING ANY MSCI INDEX HAS ANY OBLIGATION TO TAKE THE NEEDS OF BARCLAYS BANK PLC OR OWNERS OF THE NOTES INTO CONSIDERATION IN DETERMINING, COMPOSING OR CALCULATING THE MSCI INDICES. NEITHER MSCI, ITS AFFILIATES NOR ANY OTHER PARTY INVOLVED IN, OR RELATED TO, MAKING OR COMPILING ANY MSCI INDEX IS RESPONSIBLE FOR OR HAS PARTICIPATED IN THE DETERMINATION OF THE TIMING OF, PRICES AT, OR QUANTITIES OF THE NOTES TO BE ISSUED OR IN THE DETERMINATION OR CALCULATION OF THE EQUATION BY WHICH THE NOTES ARE REDEEMABLE FOR CASH. NEITHER MSCI, ANY OF ITS AFFILIATES NOR ANY OTHER PARTY INVOLVED IN, OR RELATED TO, THE MAKING OR COMPILING ANY MSCI INDEX HAS ANY OBLIGATION OR LIABILITY TO THE OWNERS OF THE NOTES IN CONNECTION WITH THE ADMINISTRATION, MARKETING OR OFFERING OF THIS FINANCIAL PRODUCT.

 

 

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NOTWITHSTANDING THE FOREGOING, CERTAIN AFFILIATES OF MSCI MAY ACT AS DEALERS IN CONNECTION WITH THE SALE OF THE NOTES AND, AS SUCH, MAY SELL OR PROMOTE THE NOTES OR MAY BE INVOLVED IN THE ADMINISTRATION, MARKETING OR OFFERING OF THIS FINANCIAL PRODUCT.

ALTHOUGH MSCI SHALL OBTAIN INFORMATION FOR INCLUSION IN OR FOR USE IN THE CALCULATION OF THE MSCI INDICES FROM SOURCES WHICH MSCI CONSIDERS RELIABLE, NEITHER MSCI, ANY OF ITS AFFILIATES NOR ANY OTHER PARTY INVOLVED IN, OR RELATED TO, MAKING OR COMPILING ANY MSCI INDEX WARRANTS OR GUARANTEES THE ORIGINALITY, ACCURACY AND/OR THE COMPLETENESS OF ANY MSCI INDEX OR ANY DATA INCLUDED THEREIN. NEITHER MSCI, ANY OF ITS AFFILIATES NOR ANY OTHER PARTY INVOLVED IN, OR RELATED TO, MAKING OR COMPILING ANY MSCI INDEX MAKES ANY WARRANTY, EXPRESS OR IMPLIED, AS TO RESULTS TO BE OBTAINED BY BARCLAYS BANK PLC, BARCLAYS BANK PLC’S CUSTOMERS OR COUNTERPARTIES, OWNERS OF THE NOTES, OR ANY OTHER PERSON OR ENTITY, FROM THE USE OF ANY MSCI INDEX OR ANY DATA INCLUDED THEREIN IN CONNECTION WITH THE RIGHTS LICENSED HEREUNDER OR FOR ANY OTHER USE. NEITHER MSCI, ANY OF ITS AFFILIATES NOR ANY OTHER PARTY INVOLVED IN, OR RELATED TO, MAKING OR COMPILING ANY MSCI INDEX SHALL HAVE ANY LIABILITY FOR ANY ERRORS, OMISSIONS OR INTERRUPTIONS OF OR IN CONNECTION WITH ANY MSCI INDEX OR ANY DATA INCLUDED THEREIN. FURTHER, NEITHER MSCI, ANY OF ITS AFFILIATES NOR ANY OTHER PARTY INVOLVED IN, OR RELATED TO, MAKING OR COMPILING ANY MSCI INDEX MAKES ANY EXPRESS OR IMPLIED WARRANTIES OF ANY KIND, AND MSCI, ANY OF ITS AFFILIATES AND ANY OTHER PARTY INVOLVED IN, OR RELATED TO, MAKING OR COMPILING ANY MSCI INDEX HEREBY EXPRESSLY DISCLAIM ALL WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE, WITH RESPECT TO ANY MSCI INDEX AND ANY DATA INCLUDED THEREIN. WITHOUT LIMITING ANY OF THE FOREGOING, IN NO EVENT SHALL MSCI, ANY OF ITS AFFILIATES OR ANY OTHER PARTY INVOLVED IN, OR RELATED TO, MAKING OR COMPILING ANY MSCI INDEX HAVE

ANY LIABILITY FOR ANY DIRECT, INDIRECT, SPECIAL, PUNITIVE, CONSEQUENTIAL OR ANY OTHER DAMAGES (INCLUDING LOST PROFITS) EVEN IF NOTIFIED OF THE POSSIBILITY OF SUCH DAMAGES.

No purchaser, seller or holder of the Notes, nor any other person or entity, should use or refer to any MSCI trade name, trademark or service mark to sponsor, endorse, market or promote the notes without first contacting MSCI to determine whether MSCI’s permission is required. Under no circumstances may any person or entity claim any affiliation with MSCI without the prior written permission of MSCI”.

NASDAQ-100 Index®

All information regarding the NASDAQ-100 Index® (the “NASDAQ-100 Index”) set forth in this index supplement reflects the policies of, and is subject to change by, The NASDAQ OMX Group, Inc. (“NASDAQ OMX”). The NASDAQ-100 Index was developed by NASDAQ OMX and is calculated, maintained and published by NASDAQ OMX. The NASDAQ-100 Index is reported by NASDAQ OMX on Bloomberg page “NDX <Index>”.

First published in January 1985, the NASDAQ-100 Index is a modified capitalization-weighted index of 100 of the largest equity stocks of non-financial companies listed on The NASDAQ Stock Market (“NASDAQ”). The NASDAQ-100 Index includes companies across a variety of major industry groups.

Composition of the NASDAQ-100 Index

To be eligible for initial inclusion in the NASDAQ-100 Index, a stock must be listed on NASDAQ and meet the following eligibility criteria, which may be revised by NASDAQ OMX from time to time:

 

   

the stock’s U.S. listing must be exclusively on the NASDAQ Global Select Market or the NASDAQ Global Market (unless the stock was dually listed on another U.S. market prior to January 1, 2004 and has continuously maintained such listing);

 

   

the stock must be issued by a non-financial company;

 

   

the stock may not be issued by an issuer currently in bankruptcy proceedings;

 

   

the stock must have average daily trading volume of at least 200,000 shares;

 

 

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if the issuer of the stock is organized under the laws of a jurisdiction outside the United States, then such stock must have listed options on a recognized options market in the United States or be eligible for listed-options trading on a recognized options market in the United States;

 

   

only one class of stock per issuer may be included in the NASDAQ-100 Index;

 

   

the issuer of the stock may not have entered into a definitive agreement or other arrangement which would likely result in the stock no longer being eligible for inclusion in the NASDAQ-100 Index;

 

   

the annual financial statements of the issuer of the stock may not be subject to an audit opinion that is currently withdrawn;

 

   

the issuer of the stock must be “seasoned” on NASDAQ or another recognized market (generally, a company is considered to be seasoned if it has been listed on a market for at least two years; in the case of spin-offs, the operating history of the spin-off will be considered); and

 

   

if the stock would otherwise qualify to be in the top 25% of the stocks included in the NASDAQ-100 Index by market capitalization for the six prior consecutive month-ends, then a one-year “seasoning” criterion would apply.

In addition, to be eligible for continued inclusion, a stock must meet the following criteria:

 

   

the stock’s U.S. listing must be exclusively on the NASDAQ Global Select Market or the NASDAQ Global Market (unless the stock was dually listed on another U.S. market prior to January 1, 2004 and has continuously maintained such listing);

 

   

the stock must be issued by a non-financial company;

 

   

the stock may not be issued by an issuer currently in bankruptcy proceedings;

 

   

the stock must have average daily trading volume of at least 200,000 shares (measured annually during the ranking review process);

 

   

if the issuer of the stock is organized under the laws of a jurisdiction outside the United States, then such stock must have listed options on a recognized options market in the United States or be eligible for listed-options trading on a recognized options market in the United States (measured annually during the ranking review process);

 

   

the stock must have an adjusted market capitalization equal to or exceeding 0.10% of the aggregate adjusted market capitalization of

   

the NASDAQ-100 Index at each month-end. In the event a company does not meet this criterion for two consecutive month-ends, it will be removed from the NASDAQ-100 Index effective after the close of trading on the third Friday of the following month; and

 

   

the annual financial statements of the issuer of the stock may not be subject to an audit opinion that is currently withdrawn.

In administering the NASDAQ-100 Index, NASDAQ OMX will exercise reasonable discretion as it deems appropriate.

The composition of the stocks underlying the NASDAQ-100 Index is, save under extraordinary circumstances that may result in an interim evaluation, reviewed on an annual basis (the “annual ranking review”). Stocks which meet the eligibility criteria discussed above are ranked by market value using their closing prices as of the end of October and publicly available statements of total shares outstanding submitted through to the end of November. Index-eligible stocks that are already in the NASDAQ-100 Index and that remain ranked in the top 100 eligible stocks based on market capitalization are retained in the NASDAQ-100 Index. Stocks that rank between 101 and 125 are also retained, provided that such stocks were ranked in the top 100 eligible stocks as of the previous annual ranking review or were added to the NASDAQ-100 Index subsequent to the previous ranking review. Stocks not meeting such criteria are replaced with stocks that are eligible but not currently included in the NASDAQ-100 Index in order of largest market capitalization. Generally, the list of deletions and additions to be made pursuant to annual ranking reviews is publicly announced by NASDAQ OMX by means of a press release in early December, with such replacements made effective after the close of trading on the third Friday in December. Moreover, if at any time during the year other than a ranking review, a stock fails to meet the criteria for continued inclusion, or is otherwise determined to have become ineligible for continued inclusion, such stock will be replaced with the largest market capitalization stock not currently included in the NASDAQ-100 Index.

Calculation of the NASDAQ-100 Index

On January 31, 1985, the NASDAQ-100 Index began with a base of 250.00. On January 1, 1994, the base was reset by division of a factor of 2.00 to 125.00. At any given point in time, the value of the NASDAQ-100 Index is equal to the aggregate value of the share weights of each of the stocks underlying the NASDAQ-100 Index, multiplied by each such stock’s last sale price on the NASDAQ, and then divided by a divisor which serves to scale such aggregate value (otherwise in the trillions) to a lower

 

 

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order of magnitude. Share weights are based on the total number of outstanding shares, subject to rebalancing in certain cases (as described in further detail below) to meet minimum pre-established requirements for a diversified portfolio.

The equity stocks underlying the NASDAQ-100 Index are monitored daily by NASDAQ OMX with respect to changes in total shares outstanding arising from secondary offerings, stock repurchases, conversions, or other corporate actions. NASDAQ OMX has adopted the following weight adjustment procedures with respect to such changes. Changes in total shares outstanding arising from stock splits, stock dividends, and certain spin-offs and rights issuances are generally made to the NASDAQ-100 Index on the evening prior to the effective date of such corporate action. If the change in total shares outstanding arises from other corporate actions, then: (1) if such change is greater than or equal to 10% of total shares outstanding, the change will be made as soon as practicable, normally within ten days of such action; and (2) if such change is less than 10% of total shares outstanding, then all such changes are accumulated and made effective at one time on a quarterly basis after the close of trading on the third Friday in each of March, June, September, and December. In either case, the NASDAQ-100 Index share weights for such underlying stock are adjusted by the same percentage amount by which their total shares outstanding have changed.

Ordinarily, whenever there is a change in NASDAQ-100 Index share weights or a change in a stock underlying the NASDAQ-100 Index, NASDAQ OMX adjusts the divisor to assure continuity in the value of the NASDAQ-100 Index following such change.

As of the close of trading on December 18, 1998, the NASDAQ-100 Index has been calculated under a “modified capitalization-weighted” methodology. Modified-capitalization weighting is a hybrid between equal weighting and conventional capitalization weighting that is expected to retain in general the economic attributes of capitalization-weighting while providing enhanced diversification. Under this methodology, the equity stocks underlying the NASDAQ-100 Index are categorized on a quarterly basis as either “Large Stocks” or “Small Stocks” based on whether their current percentage weights in the NASDAQ-100 Index (after taking into account any scheduled weight adjustments due to stock repurchases, secondary offerings, or other corporate actions) are greater than or less than the average percentage weight of the 100 stocks underlying the NASDAQ-100 Index (i.e., greater than or less than 1% of the market capitalization of the NASDAQ-100 Index as a whole). Such quarterly examination will result in rebalancing if it is determined that either (1) the current share weight of

the single largest stock underlying the NASDAQ-100 Index in terms of market capitalization is greater than 24% of the market capitalization of the NASDAQ-100 Index as a whole or (2) the aggregate weight of those stocks whose individual weights exceed 4.5% exceeds 48% of the market capitalization of the NASDAQ-100 Index as a whole.

If either one or both of these weight distribution thresholds is crossed upon quarterly review, a weight rebalancing will be performed in accordance with the following plan. If weight distribution requirement (1) is crossed, then the weights of all Large Stocks will be scaled down proportionately towards 1% by enough for the adjusted weight of the single largest stock to be set to 20%. If weight distribution requirement (2) is crossed, then the weights of all Large Stocks will be scaled down proportionately towards 1% by enough for the “collective weight”, so adjusted, to be set to 40%.

The aggregate weight reduction among the Large Stocks resulting from either or both of the above rescaling procedures will then be distributed to the Small Stocks in the following iterative manner. In the first iteration, the weight of the largest Small Stock will be scaled upwards by a factor that sets it equal to the average NASDAQ-100 Index weight of 1%. The weights of each of the smaller remaining Small Stocks will be scaled up by the same factor reduced in relation to each stock’s relative ranking among the Small Stocks such that the smaller the underlying stock in the ranking, the less the scale-up of its weight. This is intended to reduce the market impact of the weight rebalancing on the smallest component stocks in the NASDAQ-100 Index.

In the second iteration, the weight of the second largest Small Stock, already adjusted in the first iteration, will be scaled upwards by a factor that sets it equal to the average index weight of 1%. The weights of each of the smaller remaining Small Stocks will be scaled up by this same factor reduced in relation to each stock’s relative ranking among the Small Stocks such that, once again, the smaller the stock in the ranking, the less the scale-up of its weight.

Additional iterations will be performed until the accumulated increase in weight among the Small Stocks exactly equals the aggregate weight reduction among the Large Stocks from the rebalancing.

To complete the rebalancing procedure, once the final percent weights of each stock underlying the NASDAQ-100 Index are set, the NASDAQ-100 Index share weights will be determined anew based upon the last sale prices and aggregate capitalization of the NASDAQ-100 Index at the close of trading on the last day in February, May, August and November. Changes to the NASDAQ-100 Index

 

 

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share weights will be made effective after the close of trading on the third Friday in March, June, September and December and an adjustment to the NASDAQ-100 Index divisor will be made to ensure continuity of the NASDAQ-100 Index.

In addition to the above, a special rebalancing of the NASDAQ-100 Index may be conducted by NASDAQ OMX at any time if it is determined necessary to maintain the integrity of the NASDAQ-100 Index.

Additional information on the NASDAQ-100 Index is available on the following website: http://www.nasdaq.com/markets/indices/nasdaq-100.aspx.

License Agreement

For any specific issuance of securities, we will enter into a non-exclusive license agreement with NASDAQ OMX whereby we, in exchange for a fee, will be permitted to use the NASDAQ-100 Index in connection with such securities. We are not affiliated with NASDAQ OMX; the only relationship between NASDAQ OMX and us is any licensing of the use of NASDAQ OMX’s indices and trademarks relating to them.

We expect that the license agreement will provide that the following language must be set forth herein:

“The securities are not sponsored, endorsed, sold or promoted by The NASDAQ OMX GROUP, Inc. (The ‘NASDAQ OMX’) (including its affiliates) (NASDAQ OMX, with its affiliates, are referred to as The ‘Corporations’). The Corporations have not passed on the legality or suitability of, or the accuracy or adequacy of descriptions and disclosures relating to, the securities. The Corporations make no representations or warranty, express or implied to the owners of the securities or any member of the public regarding the advisability of investing in securities generally or in the securities particularly, or the ability of The NASDAQ-100 INDEX® (The ‘NASDAQ-100 INDEX’) to track general stock market performance. The Corporations’ only relationship to Barclays Bank PLC is in the licensing of The NASDAQ®, OMX®, NASDAQ OMX®, NASDAQ-100® and NASDAQ-100 INDEX® Trademarks or Service marks, and certain trade names of the Corporations and the use of the NASDAQ-100 INDEX which is determined, composed and calculated by NASDAQ OMX without regard to Barclays Bank PLC or The Securities. NASDAQ OMX has no obligation to take the needs of Barclays Bank PLC or the owners of the securities into consideration in determining, composing and calculating The NASDAQ-100 INDEX. The corporations are not responsible for and have not participated in the determination of the

timing of, prices at, or quantities of the securities to be issued or in the determination or calculation of the equation by which the securities is to be converted into cash. The corporations have no liability in connection with the administration, marketing or trading of the securities.

THE CORPORATIONS DO NOT GUARANTEE THE ACCURACY AND/OR UNINTERRUPTED CALCULATION OF THE NASDAQ-100 INDEX® OR ANY DATA INCLUDED THEREIN. THE CORPORATIONS MAKE NO WARRANTY, EXPRESS OR IMPLIED, AS TO RESULTS TO BE OBTAINED BY BARCLAYS BANK PLC, OWNERS OF THE SECURITIES, OR ANY OTHER PERSON OR ENTITY FROM THE USE OF THE NASDAQ-100 INDEX® OR ANY DATA INCLUDED THEREIN. THE CORPORATIONS MAKE NO EXPRESS OR IMPLIED WARRANTIES, AND EXPRESSLY DISCLAIM ALL WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE WITH RESPECT TO THE NASDAQ-100 INDEX® OR ANY DATA INCLUDED THEREIN. WITHOUT LIMITING ANY OF THE FOREGOING, IN NO EVENT SHALL THE CORPORATIONS HAVE ANY LIABILITY FOR ANY LOST PROFITS OR SPECIAL, INCIDENTAL, PUNITIVE OR CONSEQUENTIAL DAMAGES, EVEN IF NOTIFIED OF THE POSSIBILITY OF SUCH DAMAGES”.

Nikkei Stock Average (Nikkei 225)

All information regarding the Nikkei Stock Average or the Nikki 225 (the “Nikkei Stock Average”) set forth in this index supplement reflects the policies of, and is subject to change by, Nikkei Inc. Nikkei Inc. calculates and publishes the Nikkei Stock Average. Nikkei Inc. is the “Nikkei Index Sponsor” which owns the copyright and any intellectual properties of the index, and the trademarks of “Nikkei Stock Average” and “Nikkei 225” have been registered in major countries. The Nikkei Stock Average owned by the Nikkei Index Sponsor is provided on Bloomberg page “NKY <Index>”.

The Nikkei Stock Average is a modified price-weighted stock index that measures the composite price performance of 225 underlying stocks (the “Underlying Stocks”) trading on the First Section of the Tokyo Stock Exchange (“TSE”), representing a broad cross-section of Japanese industries. Stocks listed in the First Section of the TSE are among the most actively traded stocks on the TSE. For more information about the TSE, see “Equity Indices — TOPIX Index — The Tokyo Stock Exchange”. The Nikkei Stock Average’s composition rules require

 

 

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that the 75 most liquid issues (one-third of the component count of the Nikkei Stock Average) be included in the Nikkei Stock Average.

The 225 companies included in the Nikkei Stock Average are divided into six sector categories: Technology, Financials, Consumer Goods, Materials, Capital Goods/Others and Transportation and Utilities. These six sector categories are further divided into 36 industrial classifications as follows:

 

   

Technology — Pharmaceuticals, Electric Machinery, Automobiles and Auto Parts, Precision Instruments, Communications;

 

   

Financials — Banking, Other Financial Services, Securities, Insurance;

 

   

Consumer Goods — Fishery, Food, Retail, Services;

 

   

Materials — Mining, Textiles and Apparel, Pulp and Paper, Chemicals, Petroleum, Rubber, Glass and Ceramics, Steel, Nonferrous Metals, Trading Companies;

 

   

Capital Goods / Others — Construction, Machinery, Shipbuilding, Transportation Equipment, Other Manufacturing, Real Estate; and

 

   

Transportation and Utilities — Railway and Bus, Land Transport, Marine Transport, Air Transport, Warehousing, Electric Power, Gas.

The Nikkei Stock Average is a modified, price-weighted index (i.e., an Underlying Stock’s weight in the index is based on its price per share rather than the total market capitalization of the issuer) which is calculated by (1) multiplying the per share price of each Underlying Stock by the corresponding weighting factor for such Underlying Stock (a “Weight Factor”), (2) calculating the sum of all these products and (3) dividing such sum by a divisor (the “Divisor”). The Divisor was initially set at the number of Underlying Stocks for the date of May 16, 1949 using historical numbers from May 16, 1949, the date on which the TSE was reopened. The Divisor was 24.975 as of July 1, 2013 and is subject to periodic adjustments as set forth below. Each Weight Factor is computed by dividing ¥50 by the presumed par value of the relevant Underlying Stock, so that the share price of each Underlying Stock, when multiplied by its Weight Factor, corresponds to a share price based on a uniform presumed par value of ¥50.

In order to maintain continuity in the Nikkei Stock Average in the event of certain changes due to non-market factors affecting the Underlying Stocks, such as the addition or deletion of stocks, substitution of stocks, stock splits etc., the Divisor used in calculating the Nikkei Stock Average is adjusted in a

manner designed to prevent any instantaneous change or discontinuity in the level of the Nikkei Stock Average. Thereafter, the Divisor remains at the new value until a further adjustment is necessary as the result of another change.

An Underlying Stock may be deleted or added by the Nikkei Index Sponsor. Any stock becoming ineligible for listing in the First Section of the TSE due to any of the following reasons will be deleted from the Underlying Stocks: (1) bankruptcy of the issuer, (2) merger of the issuer with, or acquisition of the issuer by, another company, (3) delisting of such stock, (4) designation of such stock to the “securities to be delisted”, i.e., “Seiri-Meigara” because of excess debt of the issuer or because of any other reason or (5) transfer of such stock to the Second Section or Mothers, etc. In addition, a component stock designated to the “Kanri-Meigara” (securities under supervision) is in principle a candidate for deletion and any decision to delete such candidates will be made by examining the sustainability and the profitability of delisting for each individual case. Upon deletion of a stock from the Underlying Stocks, the Nikkei Index Sponsor will select a replacement for such deleted Underlying Stock in accordance with certain criteria.

Additional information concerning the Nikkei Stock Average may be obtained on the following website: http://indexes.nikkei.co.jp/en/nkave.

License Agreement

For any specific issuance of securities, we will enter into a non-exclusive license agreement with Nikkei Inc., whereby we, in exchange for a fee, will be permitted to use the Nikkei Stock Average in connection with such securities. We are not affiliated with the Nikkei Index Sponsor; the only relationship between the Nikkei Index Sponsor and us is any licensing of the use of the Nikkei Index Sponsor’s indices and trademarks relating to them.

We expect that the license agreement will provide that the following language must be set forth herein:

“The copyright relating to the Nikkei Stock Average and intellectual property rights as to the indications for ‘Nikkei’, ‘Nikkei Stock Average’ and ‘Nikkei 225’ and any other rights shall belong to Nikkei Inc. Nikkei Inc. shall be entitled to change the details of the Nikkei Stock Average and to suspend the announcement thereof. All the businesses and implementation relating to this Agreement shall be conducted exclusively at the risk of the Licensee and the Issuing Parties, and Nikkei Inc. and the Licensor shall assume no obligation or responsibility therefor”.

 

 

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NYSE Arca Hong Kong 30 IndexSM

All information on the NYSE Arca Hong Kong 30 IndexSM (the “HK Index”) set forth in this index supplement reflects the policies of, and is subject to change by, NYSE Euronext. The HK Index is reported by NYSE Arca on Bloomberg page “HKX <Index>”.

The HK Index is a broad-market index that measures the composite price performance of 30 stocks actively traded on the SEHK. The HK Index aims to reflect the movement of the SEHK as a whole. Business sector representation of the stocks comprising the HK Index generally consists of finance, energy, property development, utilities, conglomerates, hotel/leisure, property investment, airlines, telecommunications, transportation and publishing.

Composition and Maintenance of the HK Index

The HK Index is maintained by NYSE Arca and will contain at least 30 component stocks at all times. NYSE Arca selects stocks comprising the HK Index on the basis of their market weight, trading liquidity and representation of the business industries reflected on the SEHK. Each stock in the HK Index must meet certain listing and maintenance standards, as discussed below. NYSE Arca requires that each stock be issued by an entity with major business interests in Hong Kong, be listed for trading on the SEHK and have its primary trading market located in a country with which NYSE Arca has an effective surveillance sharing agreement. NYSE Arca will remove any stock failing to meet the above listing and maintenance criteria within 30 days after such failure occurs.

In addition, in order to ensure that the HK Index does not contain a large number of thinly capitalized, low-priced securities with small public floats and low trading volumes, NYSE Arca has also established additional qualification criteria for the listing and maintenance of stocks, based on the following standards: all stocks selected for inclusion in the HK Index must have, and thereafter maintain, (1) an average daily capitalization, as calculated by the total number of shares outstanding times the latest price per share (in Hong Kong dollars), measured over the prior 6-month period, of at least HK$3,000,000,000; (2) an average daily closing price, measured over the prior 6-month period, not lower than HK$2.50; (3) an average daily trading volume, measured over the prior 6-month period, of more than 1,000,000 shares per day, although up to, but no more than, three stocks may have an average daily trading volume, measured over the prior 6-month period, of less than 1,000,000 shares per day, but in no event less than 500,000 shares per day; and (4) a minimum “free

float” value (total freely tradable outstanding shares minus insider holdings), based on a monthly average measured over the prior 3-month period, of $238,000,000, although up to, but no more than, three stocks may have a free float value of less than $238,000,000 but in no event less than $150,000,000, measured over the same period.

NYSE Arca reviews and applies the above qualification criteria relating to the stocks comprising the HK Index on a quarterly basis, conducted on the last business day in January, April, July and October. Any stock failing to meet the above listing and maintenance criteria will be reviewed on the second Friday of the second month following the quarterly review to again determine compliance with the above criteria. Any stock failing this second review will be replaced by a “qualified” stock effective upon the close of business on the following Friday, provided, however, that if such Friday is not a New York business day, the replacement will be effective at the close of business on the first preceding New York business day. NYSE Arca will notify its membership immediately after it determines that a stock is to be replaced.

NYSE Arca may change the composition of the HK Index at any time in order to more accurately reflect the composition and track the movement of the Hong Kong stock market. Any replacement stock must also meet the stock listing and maintenance standards discussed above. Further, NYSE Arca may replace stocks in the event of certain corporate events, such as takeovers or mergers, that change the nature of the stock.

HK Index Calculation

The HK Index is a capitalization-weighted index. A company’s market capitalization is calculated by multiplying the number of shares outstanding by the company’s current share price (in Hong Kong dollars). For valuation purposes, one HK Index unit is assigned a fixed value of one U.S. dollar. The HK Index measures the average changes in price of the stocks comprising the HK Index, weighted according to their respective market capitalizations so that the effect of a percentage price change in a stock will be greater the larger the stock’s market capitalization. The HK Index was established by the American Stock Exchange (“AMEX”) on June 25, 1993 with a benchmark value of 350.00. The daily calculation and public dissemination by AMEX of the HK Index value commenced on September 1, 1993. The data relating to the HK Index was back-calculated by AMEX from January 2, 1989 to August 31, 1993. Following the completion of the acquisition of AMEX by NYSE Euronext on October 1, 2008, NYSE Arca, Inc. (“NYSE Arca”), an indirect wholly-owned subsidiary of NYSE Euronext, now publishes, calculates and disseminates the HK Index.

 

 

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The HK Index is calculated by (1) aggregating the market capitalization of each stock comprising the HK Index and (2) dividing such sum by an adjusted base market capitalization or divisor. On June 25, 1993, the market value of the stocks underlying the HK Index was approximately HK$1,152,829,149,500 and the divisor used to calculate the HK Index was 3,293,797,570. AMEX selected that particular divisor in order, among other things, to ensure that the HK Index was set at a general price level consistent with other well recognized stock market indices. The divisor is subject to periodic adjustments as set forth below. The HK Index is calculated once each day by NYSE Arca based on the most recent official closing prices of each of the stocks comprising the HK Index reported by the SEHK. Pricing of the HK Index is disseminated before the opening of trading via the Consolidated Tape Authority Network-B and continuously during each New York business day. The dissemination value, however, remains the same throughout the New York trading day because the trading hours of the SEHK do not overlap with New York trading hours. Accordingly, updated price information is unavailable during New York trading hours.

In order to maintain continuity in the level of the HK Index in the event of certain changes due to non-market factors affecting the stocks comprising the HK Index, such as the addition or deletion of stocks, substitution of stocks, stock dividends, stock splits, distributions of assets to stockholders or other capitalization events, the divisor used in calculating the HK Index is adjusted in a manner designed to prevent any instantaneous change or discontinuity in the level of the HK Index and in order that the value of the HK Index immediately after such change will equal the level of the HK Index immediately prior to the change. Thereafter, the divisor remains at its new value until a further adjustment is necessary as the result of another change. Nevertheless, changes in the identities and characteristics of the stocks comprising the HK Index may significantly affect the behavior of the HK Index over time.

The Stock Exchange of Hong Kong Limited

Trading on the SEHK is fully electronic through an Automatic Order Matching and Execution System. The system is an electronic order book in which orders are matched and executed instantaneously if there are matching orders in the book and on the basis of time/price priority. On-line real-time order entry and execution have eliminated the previous limitations of telephone-based trading. Trading takes place through trading terminals on the trading floor of the SEHK or through the off-floor trading devices at exchange participants’ offices. Trading is generally undertaken from 10:00 a.m. to 4:00 p.m., Hong Kong time, every Hong Kong day except Saturdays,

Sundays and other days on which the SEHK is closed. Hong Kong time is 12 hours ahead of Eastern Daylight Savings Time and 13 hours ahead of Eastern Standard Time. Settlement of trades is required within 48 hours and is conducted by electronic book-entry delivery through the Central Clearing and Settlement System.

Due to the time differences between New York City and Hong Kong, on any normal trading day, trading on the SEHK currently will cease at 4:00 a.m., Eastern Daylight Savings Time, or 3:00 a.m., Eastern Standard Time. Using the last reported closing prices of the stocks underlying the HK Index on the SEHK, the closing level of the HK Index on any such trading day generally will be calculated, published and disseminated in the United States by the opening of business in New York on the same business day.

The SEHK has adopted certain measures intended to prevent any extreme short-term price fluctuations resulting from order imbalances or market volatility. Where the SEHK considers it necessary for the protection of the investor or the maintenance of an orderly market, it may at any time suspend dealings in any securities or cancel the listing of any securities in such circumstances and subject to such conditions as it thinks fit, whether requested by the listed issuer or not. The SEHK may also do so where: (1) an issuer fails, in a manner which the SEHK considers material, to comply with the SEHK Listing Rules; (2) the SEHK considers there are insufficient securities in the hands of the public; (3) the SEHK considers that the listed issuer does not have a sufficient level of operations or sufficient assets to warrant the continued listing of the issuer’s securities; or (4) the SEHK considers that the issuer or its business is no longer suitable for listing. Investors should also be aware that the SEHK may suspend the trading of individual stocks in certain limited and extraordinary circumstances until certain price-sensitive information has been disclosed to the public. Trading will not be resumed until a formal announcement has been made. Trading of a company’s shares may also be suspended if there is unusual trading activity in such shares.

An issuer may apply for suspension of its own accord. A suspension request will normally only be acceded to in the following circumstances: (1) where, for a reason acceptable to the SEHK, price-sensitive information cannot at that time be disclosed; (2) where the issuer is subject to an offer, but only where terms have been agreed in principle and require discussion with, and agreement by, one or more major shareholders (suspensions in such cases will normally only be appropriate where no previous announcement has been made); (3) to maintain an orderly market; (4) where there is an occurrence of certain levels of notifiable transactions, such as

 

 

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substantial changes in the nature, control or structure of the issuer, where publication of full details is necessary to permit a realistic valuation to be made of the securities concerned, or the approval of shareholders is required; (5) where the issuer is no longer suitable for listing, or becomes a “cash” company; (6) for issuers going into receivership or liquidation; or (7) where the issuer confirms that it will be unable to meet its obligations to disclose periodic financial information in accordance with the SEHK Listing Rules. As a result of the foregoing, variations in the HK Index may be limited by suspension of trading of individual stocks which comprise the HK Index which may, in turn, adversely affect the value of any applicable securities.

Additional information on the HK Index is available on the following website:

http://www.amex.com/othProd/prodInf/OpPiIndMain.jsp?Product_Symbol=HKX.

License Agreement

For any specific issuance of securities we will enter into a non-exclusive license agreement with NYSE Arca whereby we, in exchange for a fee, will be permitted to use the HK Index in connection with such securities. We are not affiliated with NYSE Arca; the only relationship between NYSE Arca and us is any licensing of the use of the HK Index and trademarks or service marks relating to it.

We expect that the license agreement will provide that the following language must be set forth herein:

“The NYSE Arca Hong Kong 30 IndexSM (‘HKX’) (‘Index’) is sponsored by, and is a service mark of, NYSE Euronext or its affiliates (‘NYSE Euronext’). The Index is being used with the permission of the NYSE Euronext.

NYSE Euronext in no way sponsors, endorses or is otherwise involved in the transactions specified and described in this document (‘Transaction’) and NYSE Euronext disclaims any liability to any party for any inaccuracy in the data on which the HKX is based, for any mistakes, errors, or omissions in the calculation and/or dissemination of the Index, or for the manner in which it is applied in connection with the Transaction”.

Russell 2000® Index

All information regarding the Russell 2000® Index (the “Russell 2000 Index”) set forth in this index supplement reflects the policies of, and is subject to change by, Russell Investments (“Russell”), the index sponsor. The Russell 2000 Index was

developed by Russell and is calculated, maintained and published by Russell. The Russell 2000 Index is reported by Russell on Bloomberg page “RTY <Index>”.

The Russell 2000 Index is designed to track the performance of the small capitalization segment of the U.S. equity market. As a subset of the Russell 3000® Index (the “Russell 3000”), it consists of approximately 2,000 of the smallest companies (based on a combination of their market capitalization and the current index membership) included in the Russell 3000 and represented, as of March 28, 2013, approximately 10% of the total market capitalization of the Russell 3000. The Russell 3000, in turn, comprises the 3,000 largest U.S. companies as measured by total market capitalization, which together represented, as of March 28, 2013, approximately 98% of the investable U.S. equity market. All Russell U.S. equity indexes (together, the “Russell U.S. Indexes” or “Russell Indexes”) are subsets of the Russell 3000ETM Index (the “Russell 3000E Index”) which is the broadest U.S. index, containing the largest 4,000 U.S. companies. The members of the Russell 3000E Index and its subsets are determined each year during annual reconstitution and enhanced quarterly with the addition of initial public offerings (“IPOs”).

Annual Reconstitution

Annual reconstitution is the process by which all Russell Indexes are completely rebuilt. All Russell Indexes, including the Russell 2000 Index, are reconstituted annually to reflect changes in the marketplace. On the last trading day in May each year, all eligible stocks are ranked by their total market capitalization. The largest 4,000 become the Russell 3000E Index, and the other Russell U.S. Indexes are determined from that set of stocks. If there are not 4,000 eligible stocks in the U.S. market, the entire eligible set is included. Reconstitution occurs on the last Friday in June. However, at times this date is too proximal to exchange closures and abbreviated exchange trading schedules when market liquidity is exceptionally low. In order to ensure proper liquidity in the markets, when the last Friday in June falls on the 29th or 30th, reconstitution will occur on the preceding Friday. A full calendar for reconstitution is made available each spring. The companies that meet the eligibility criteria are ranked on the last trading day of May of every year based on market capitalization using data available at that time, with the reconstitution taking effect as of the first trading day following the last Friday of June of that year. If the last Friday in June is the 29th or 30th day of June, reconstitution will occur the Friday prior.

 

 

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Selection of Stocks Underlying the Russell 2000 Index

Stock inclusion criteria

Below are the requirements to be eligible for inclusion in the Russell 3000, and, consequently, the Russell 2000 Index:

 

   

U.S. company. All companies eligible for inclusion in the Russell 2000 Index must be classified as a U.S. company under Russell’s country-assignment methodology. If a company is incorporated in, has a stated headquarters location in, and also trades in the same country (American Depositary Receipts and American Depositary Shares are not eligible for this purpose), the company is assigned to its country of incorporation. If any of the three criteria do not match, Russell then defines three Home Country Indicators (“HCIs”). The HCIs are as follows: (1) Country of incorporation; (2) Country of headquarters; and (3) Country of the most liquid exchange (as defined by a two-year average daily dollar trading volume (“ADDTV”) from all exchanges within a country). After the HCIs are defined, the next step in the country assignment involves an analysis of assets by location. Russell cross-compares the primary location of the company’s assets with the three HCIs. If the primary location of its assets matches any of the HCIs, then the company is assigned to the primary location of its assets. If there is insufficient information to determine the country in which the company’s assets are primarily located, Russell will use the primary location of the company’s revenues to cross-compare with the three HCIs and assign a country in a similar manner. Beginning in 2011, Russell will use the average of two years of assets or revenues data, in order to reduce potential turnover. Assets and revenues data are retrieved from each company’s annual report as of the last trading day in May. If conclusive country details cannot be derived from assets or revenues data, Russell will assign the company to the country of its headquarters, which is defined as the address of the company’s principal executive offices, unless that country is a Benefit Driven Incorporation (“BDI”) country, in which case the company will be assigned to the country of its most liquid stock exchange. BDI countries include: Anguilla, Antigua and Barbuda, Aruba, Bahamas, Barbados, Belize, Bermuda, Bonaire, British Virgin Islands, Cayman Islands, Channel Islands, Cook Islands, Curacao, Faroe Islands, Gibraltar, Isle of Man, Liberia, Marshall Islands, Panama, Saba, Saint Eustatius, Saint Maarten and Turks and Caicos Islands. A U.S. HCI is assigned for any company incorporated or

   

headquartered in a U.S. territory. This includes countries such as Puerto Rico, Guam, and U.S. Virgin Islands.

 

   

Trading requirements. All stocks eligible for inclusion in the Russell U.S. Indexes must trade on a major U.S. exchange. Bulletin Board, pink-sheet or over-the-counter (OTC) traded securities are not eligible for inclusion.

 

   

Minimum closing price. A stock must have a close price at or above $1.00 (on its primary exchange) on the last trading day in May to be eligible for inclusion. In order to reduce unnecessary turnover, if an existing member’s closing price is less than $1.00 on the last trading day in May, it will be considered eligible if the average of the daily closing prices (from its primary exchange) during the month of May is equal to or greater than $1.00. Quarterly Initial Public Offerings (IPO) additions must have a close price at or above $1.00 on the last day of their eligibility period in order to qualify for index inclusion.

 

   

Primary exchange pricing. If a stock, new or existing, does not have a close price at or above $1.00 (on its primary exchange) on the last trading day in May, but does have a close price at or above $1.00 on another major U.S. exchange, the stock will be eligible for index inclusion.

 

   

Minimum total market capitalization. Companies with a total market capitalization less than $30 million are not eligible for inclusion in Russell U.S. indexes.

 

   

Minimum available shares / float requirement. Companies with only a small portion of their shares available in the marketplace are not eligible for the Russell Indexes. Companies with 5% or less will be removed from eligibility.

 

   

Company structure. Companies structured in the following ways are excluded from inclusion in Russell Indexes: royalty trusts, U.S. limited liability companies, closed-end investment companies (Business Development Companies (“BDCs”) are eligible), blank-check companies, special purpose acquisition companies (“SPACs”) and limited partnerships .

 

   

UBTI screening. Companies that produce Unrelated Business Taxable Income (“UBTI”) are restricted from ownership for tax-exempt investors. In recognition of this, the index sponsor screens all REITs and PTPs, removing any stock from eligibility that generates or has historically generated UBTI and has not taken steps to block UBTI to equity holders. The research process is conducted as part of the index sponsor’s annual rebalance effort.

 

 

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Additional screening will not be assessed or changed outside of the reconstitution For UBTI to be passed to a stock holder, the UBTI must be produced by the company directly. UBTI incurred by a subsidiary will not be realized by the holder of the parent entity and would not require removal of the parent company from eligibility. If a company restructured to block UBTI, they will remain eligible for inclusion in the Russell Indices. Acceptable form of restructure are as follows: (1) formal creation of a shell entity or offshore vehicle ensuring that any dividend payment is void of UBTI; and (2) if within a public filing (SEC filing, dividend disclosure, press release) the company declares that any UBTI producing assets have been sold and no future intent to purchase UBTI producing assets exists. This declaration of intent must clearly state that the company’s past investment strategy has changed and the intent is to remove the exposure of UBTI to the end holder.

 

   

Shares excluded. Because Russell Indexes are built to capture performance of each country’s primary equity vehicle, the following share types are not eligible for inclusion: preferred stock, convertible preferred stock, redeemable shares, participating preferred stock, warrants, rights and trust receipts.

 

   

Deadline for inclusion. Stocks must be listed on the last trading day in May and Russell must have access to documentation on that date supporting the company’s eligibility for index inclusion. This includes corporate description, verification of incorporation, number of shares outstanding and other information needed to determine eligibility. IPOs will be considered for inclusion on a quarterly basis.

Market capitalization

The primary criteria used to determine the initial list of common stocks eligible for inclusion in the Russell Indexes, and thus the Russell 2000, is total market capitalization, which is calculated by multiplying the total outstanding shares by the market price as of the last trading day in May for those stocks being considered for the purposes of the annual reconstitution. IPO eligibility is determined each quarter.

 

   

Determining total shares outstanding. Common stock, non-restricted exchangeable shares, and partnership units/membership units (in certain cases) are used to determine market capitalization for a company. Any other form of shares, including preferred stock, convertible preferred stock, redeemable shares, participating preferred stock, warrants and rights or trust

   

receipts, are excluded from the calculation. If multiple share classes of common stock exist, they are combined. In cases where the common stock share classes act independently of each other (e.g., tracking stocks), each class is considered for inclusion separately.

 

   

Determining price. During each annual reconstitution, the last traded price on the last trading day in May of that year from the primary exchange is used to determine market capitalization. If a stock does not trade on its primary exchange, the lowest price from another major U.S. exchange is used. In the case where multiple share classes exist, a primary trading vehicle is determined, and the price of that primary trading vehicle (usually the most liquid) is used to determine price.

 

   

Primary trading vehicle. Primary trading vehicles are determined by the last two years’ average trading volume, as of the last trading day in May. For new members, the common share class with the highest trading volume will be considered the primary trading vehicle, and its associated price and trading symbol will be included in the Russell U.S. Indexes. If the volume of each share class is close, within 20%, the one with the largest available shares is used. For share classes without two years of history, all available volume data is used. At least 100 day trading volume is necessary to consider the class as a primary vehicle for existing members. New members will be analyzed on all available data, even if that data is for less than 100 days. If applicable, shares held across different share classes will be represented on a mathematically equivalent basis.

 

   

Initial public offerings (IPOs). IPOs are added to Russell U.S. Indexes on the basis of total market capitalization ranking within the market-adjusted capitalization breaks established during the most recent reconstitution. Country assignment determination is made using data provided in prospectuses or other filings. Market adjustments to the capitalization breaks are made using the returns of the broad market Russell 3000E Index. In order to be added during a quarter outside of reconstitution, an IPO must meet all Russell U.S. Index eligibility requirements. Additionally, the IPO must meet the following criteria on the final trading day of the month prior to quarter-end: (1) it is priced and traded; and (2) it ranks larger in total market capitalization than the market-adjusted smallest company in the Russell 3000E Index as of the latest June reconstitution.

 

 

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Capitalization Adjustments

After membership is determined, a stock’s shares are adjusted to include only those shares available to the public. This is often referred to as “free float”. The purpose of this adjustment is to exclude from market calculations the capitalization that is not available for purchase and is not part of the investable opportunity set. Stocks in the Russell U.S. Indexes, including the Russell 2000 Index, are weighted by their available (also called float-adjusted) market capitalization, which is calculated by multiplying the primary closing price by the available shares. Adjustments to shares are reviewed at reconstitution and for major corporate actions such as mergers.

Adjustments are based on information recorded in SEC corporate filings, including DEF 14, 424B, and 10K filings, or other reliable sources in the event of missing or questionable data. Please note that 13F filings are not reviewed. The following types of shares are removed from total market capitalization to arrive at free float or available market capitalization:

 

   

Cross ownership by another Russell 3000E Index or Russell Global Index member. Shares held by another member of a Russell index (including Russell global indexes) are considered cross-owned and all such shares will be adjusted regardless of percentage held.

 

   

Large corporate and private holdings. Shares held by another listed company (non-member) or by private individuals will be adjusted if they exceed 10% of shares outstanding. Share percentage is determined by those shares held either by an individual or by a group of individuals acting together. For example, officers’ and directors’ holdings would be summed together to determine if they exceed 10%. However, not included in this class are institutional holdings, including investment companies, partnerships, insurance companies, mutual funds, banks or venture capital firms unless these firms have a direct relationship to the company, such as board representation. In such cases, they are considered strategic holdings and are included with the officers/directors group.

 

   

Employee stock ownership plan (ESOP) or Leveraged employee stock ownership plan (LESOP) shares. Corporations that have ESOP or LESOP shares that comprise 10% or more of the shares outstanding are adjusted.

 

   

Unlisted share classes. Classes of common stock that are not traded on a U.S. exchange are adjusted.

   

IPO lock-ups. Shares locked-up during an IPO are not available to the public and are thus excluded from the market value at the time the IPO enters the index.

 

   

Government holdings.

 

   

Direct government holders: Those holdings listed as “government of” are considered unavailable and will be removed entirely from available shares.

 

   

Indirect government holders: Shares held by government investment boards and/or investment arms will be treated similar to large private holdings and removed if the holding is greater than 10%.

 

   

Government pensions: Any holding by a government pension plan is considered an institutional holding and will not be removed from available shares.

Corporate Action-driven Changes

Russell applies corporate actions to the its indexes on a daily basis, both to reflect the evolution of stocks and to assure that the indexes remain highly representative of the U.S. equity market. A company’s index membership and its weight in the index can be impacted by these corporate actions. Depending upon the time an action is determined to be final, Russell either (1) applies the action before the open on the ex-date or (2) applies the action providing appropriate notice, referred to as a “delayed action”. For the purpose of index calculation, Russell generally applies the most recently available market prices for corporate action adjustments. There are many types of corporate actions, but the most common are described below, along with their treatment within all Russell U.S. Indexes, including the Russell 2000 Index.

 

   

No replacement” rule. Stocks that leave the Russell 2000 Index, between reconstitution dates, for any reason (e.g., mergers, acquisitions or other similar corporate activity) are not replaced. Thus, the number of stocks in the Russell 2000 Index over a year may fluctuate according to corporate activity.

 

   

Mergers and acquisitions. Merger and acquisition activity results in changes to the membership and weighting of members within the Russell 2000 Index.

 

   

Re-incorporations. Members of the Russell 2000 Index that are re-incorporated to another country are analyzed for country assignment the following year during reconstitution, as long as they continue to trade in the U.S. Companies that re-incorporate and no longer trade in the U.S. are

 

 

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immediately deleted from the Russell 2000 Index and placed in the appropriate country within the Russell Global Index. Those that re-incorporate to the U.S. during the year will be assessed during reconstitution for membership.

 

   

Re-classifications of shares (primary vehicles). Primary vehicles will not be assessed or change outside of a reconstitution period unless the existing class ceases to exist. In the event of extenuating circumstances signaling a necessary primary vehicle change, proper notification will be made.

 

   

Rights offerings. Rights offered to shareholders are reflected in the Russell 2000 Index the date the offer expires for non-transferable rights and on the ex-date for transferable rights. In both cases, the price is adjusted to account for the value of the right on the ex-date, and shares are increased according to the terms of the offering on that day. Rights issued in anticipation of a takeover event, or “poison pill” rights are excluded from this treatment and no price adjustment is made for their issuance or redemption.

 

   

Changes to shares outstanding. Changes to shares outstanding due to buyback (including Dutch Auctions), secondary offerings, merger activity with a non-Russell 2000 Index member and other potential changes are updated at the end of the month (with the sole exception of June) which the change is reflected in vendor supplied updates and verified by Russell using an SEC filing. For a change in shares to occur, the cumulative change to available shares must be greater than 5%.

 

   

Spin-offs. The only additions between reconstitution dates are as a result of spin-offs, reincorporations and IPOs. Spin-off companies are added to the Russell 2000 Index if warranted by the market capitalization of the spin-off company.

 

   

Tender offers. A company acquired as the result of a tender offer is removed when the tender offer has fully expired and it is determined that the company will finalize the process with a short form merger. Shares of the acquiring company, if a member of the Russell 2000 Index, will be increased simultaneously.

 

   

Delisting. Only companies listed on U.S. exchanges are included in the Russell 2000 Index. Therefore, when a company is delisted from a U.S. exchange and moved to over-the-counter trading, the company is removed from the Russell 2000 Index.

 

   

Bankruptcy and voluntary liquidations. Companies who file for Chapter 7 liquidation

   

bankruptcy or file any other liquidation plan will be removed from the Russell 2000 Index at the time of the filing. Companies filing for a Chapter 11 re-organization bankruptcy will remain a member of the Russell 2000 Index, unless delisted from their primary exchange. In that case, normal delisting rules will apply.

 

   

Stock distributions. Stock distributions can take two forms: (1) a stated amount of stock distributed on the ex-date or (2) an undetermined amount of stock based on earnings and profits on a future date. In both cases, a price adjustment is made on the ex-date of the distribution. Shares are increased on the ex-date for category (1) and on the pay-date for category (2).

 

   

Dividends. Gross dividends are included in the daily total return calculation of the Russell 2000 Index based on their ex-dates. The ex-date is used rather than the pay-date because the market place price adjustment for the dividend occurs on the ex-date. Monthly, quarterly and annual total returns are calculated by compounding the reinvestment of dividends daily. The reinvestment and compounding is at the total index level, not at the stock level. Stock prices are adjusted to reflect special cash dividends on the ex-date. If a dividend is payable in stock and cash and the stock rate cannot be determined by the ex-date, the dividend is treated as all cash. If the number of shares to be issued as a stock dividend is announced subsequently, Russell will give effect to the share change with appropriate notice.

 

   

Halted stocks. Halted stocks are not removed from the Russell 2000 Index until the time they are actually delisted from the exchange. If a stock is halted, it remains in the Russell 2000 Index at the last traded price from the primary exchange until the time the stock resumes trading or is officially delisted.

Additional information on the Russell 2000 Index is available on the following website:

http://www.russell.com. No information on the website shall be deemed to be included or incorporated by reference in this index supplement.

License Agreement

Barclays Bank PLC has entered into a non-exclusive license agreement with Russell Investments (“Russell”) whereby we, in exchange for a fee, are permitted to use the Russell 2000 Index and its related trademarks in connection with certain securities, including the Securities. We are not affiliated with Russell; the only relationship between Russell and us is any licensing of the use of Russell’s indices and trademarks relating to them.

 

 

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The license agreement between Russell and Barclays Bank PLC provides that the following language must be set forth when referring to any Russell Indexes or the Russell trademarks in this index supplement:

“‘Russell 2000® Index’ and ‘Russell 3000® Index’ are trademarks of Russell Investments and have been licensed for use by Barclays Bank PLC. The securities are not sponsored, endorsed, sold, or promoted by Russell Investments and Russell Investments makes no representation regarding the advisability of investing in the securities.

The securities are not sponsored, endorsed, sold, or promoted by Russell Investments (‘Russell’). Russell makes no representation or warranty, express or implied, to the owners of the securities or any member of the public regarding the advisability of investing in securities generally or in the securities particularly or the ability of the Russell 2000® Index (the ‘Russell 2000 Index’) to track general stock market performance or a segment of the same. Russell’s publication of the Russell 2000 Index in no way suggests or implies an opinion by Russell as to the advisability of investment in any or all of the securities upon which the Russell 2000 Index is based. Russell’s only relationship to Barclays Bank PLC and its affiliates is the licensing of certain trademarks and trade names of Russell and of the Russell 2000 Index which is determined, composed and calculated by Russell without regard to Barclays Bank PLC and its affiliates or the securities. Russell is not responsible for and has not reviewed the securities nor any associated literature or publications and Russell makes no representation or warranty, express or implied, as to their accuracy or completeness, or otherwise. Russell reserves the right, at any time and without notice, to alter, amend, terminate or in any way change the Russell 2000 Index. Russell has no obligation or liability in connection with the administration, marketing or trading of the securities.

RUSSELL DOES NOT GUARANTEE THE ACCURACY AND/OR THE COMPLETENESS OF THE RUSSELL 2000 INDEX OR ANY DATA INCLUDED THEREIN AND RUSSELL SHALL HAVE NO LIABILITY FOR ANY OMISSIONS, OR INTERRUPTIONS THEREIN. RUSSELL MAKES NO WARRANTY, EXPRESS OR IMPLIED, AS TO RESULTS TO BE OBTAINED BY BARCLAYS BANK PLC AND/OR ITS AFFILIATES, INVESTORS, OWNERS OF THE SECURITIES, OR ANY OTHER PERSON OR ENTITY FROM THE USE OF THE RUSSELL 2000 INDEX OR ANY DATA INCLUDED THEREIN. RUSSELL MAKES NO EXPRESS OR IMPLIED WARRANTIES, AND EXPRESSLY DISCLAIMS ALL WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A

PARTICULAR PURPOSE OR USE WITH RESPECT TO THE RUSSELL 2000 INDEX OR ANY DATA INCLUDED THEREIN. WITHOUT LIMITING ANY OF THE FOREGOING, IN NO EVENT SHALL RUSSELL HAVE ANY LIABILITY FOR ANY SPECIAL, PUNITIVE, INDIRECT, OR CONSEQUENTIAL DAMAGES (INCLUDING LOST PROFITS), EVEN IF NOTIFIED OF THE POSSIBILITY OF SUCH DAMAGES”.

S&P 500® Index

All information regarding the S&P 500® Index (the “S&P 500 Index”) set forth in this index supplement reflects the policies of, and is subject to change by, S&P Dow Jones Indices LLC (“S&P Dow Jones Indices”). The S&P 500 Index is calculated, maintained and published by S&P Dow Jones Indices. The S&P 500 Index is reported by S&P Dow Jones Indices on Bloomberg page “SPX <Index>”.

The S&P 500 Index is intended to provide an indication of the pattern of stock price movement in the U.S. equities market. The daily calculation of the level of the S&P 500 Index, discussed below in further detail, is based on the aggregate market value of the common stocks of 500 companies as of a particular time compared to the aggregate average market value of the common stocks of 500 similar companies during the base period of the years 1941 through 1943.

Composition of the S&P 500 Index

S&P Dow Jones Indices chooses companies for inclusion in the S&P 500 Index with the aim of achieving a distribution by broad industry groupings that approximates the distribution of these groupings in the common stock population of the U.S. equities market. Relevant criteria employed by S&P Dow Jones Indices for new additions include the financial viability of the particular company, the extent to which that company represents the industry group to which it is assigned, adequate liquidity and reasonable price, an unadjusted market capitalization of $4.6 billion or more, U.S. domicile, a public float of at least 50% and company classification (i.e. U.S. common equities listed on the New York Stock Exchange (“NYSE”) and the NASDAQ stock market and not closed-end funds, holding companies, tracking stocks, partnerships, investment vehicles, royalty trusts, preferred shares, unit trusts, equity warrants, convertible bonds or investment trusts). The ten main groups of companies that comprise the S&P 500 Index include: Consumer Discretionary, Consumer Staples, Energy, Financials, Health Care, Industrials, Information Technology, Materials, Telecommunication Services and Utilities. S&P Dow

 

 

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Jones Indices may from time to time, in its sole discretion, add companies to, or delete companies from, the S&P 500 Index to achieve the objectives stated above.

The S&P 500 Index does not reflect the payment of dividends on the stocks included in the S&P 500 Index. Because of this the return on the securities will not be the same as the return you would receive if you were to purchase those stocks and hold them for a period equal to the term of the securities.

Computation of the S&P 500 Index

As of September 16, 2005, S&P Dow Jones Indices has used a full float-adjusted formula to calculate the S&P 500 Index. With a float-adjusted index, the share counts used in calculating the S&P 500 Index will reflect only those shares that are available to investors, not all of a company’s outstanding shares.

The float-adjusted S&P 500 Index is calculated as the quotient of (1) the sum of the products of (a) the price of each common stock, (b) the total shares outstanding of each common stock and (c) the investable weight factor (“IWF”) and (2) the index divisor.

The investable weight factor is calculated by dividing (1) the available float shares by (2) the total shares outstanding. Available float shares reflect float adjustments made to the total shares outstanding. Float adjustments seek to distinguish strategic shareholders (whose holdings depend on concerns such as maintaining control rather than the economic fortunes of the company) from those holders whose investments depend on the stock’s price and their evaluation of the company’s future prospects.

Float adjustment excludes shares that are closely held by control groups, other publicly traded companies or government agencies. These “control holders” generally will include officers and directors, private equity, venture capital and special equity firms, other publicly traded companies that hold shares for control, strategic partners, holders of restricted shares, employee stock option plans, employee and family trusts, foundations associated with the company, holders of unlisted share classes of stock, government entities at all levels (other than government retirement/pension funds) and any individual person who controls a 5% or greater stake in a company as reported in regulatory filings. However, holdings by certain asset managers, such as depositary banks, pension funds, mutual funds and ETF providers, 401(k) plans of the company, government retirement/pension funds, investment funds of insurance companies, asset managers and investment funds, independent foundations and savings and investment plans, will ordinarily be

considered part of the float. Effective as of September 2012, all shareholdings representing more than 5% of a stock’s outstanding shares, other than holdings by these asset managers, were removed from the float for purposes of calculating the S&P 500 Index.

Treasury stock, stock options, restricted shares, equity participation units, warrants, preferred stock, convertible stock, and rights are not part of the float. Shares held in a trust to allow investors in countries outside the country of domicile, such as depositary shares and Canadian exchangeable shares are normally part of the float unless those shares form a control block. If a company has multiple classes of stock outstanding, shares in an unlisted or non-traded class are treated as a control block.

For each stock, the IWF is calculated by dividing the available float shares by the total shares outstanding. Available float shares are defined as the total shares outstanding less shares held by control holders. This calculation is subject to a 5% minimum threshold for control blocks. For example, if a company’s officers and directors hold 3% of the company’s shares, and no other control group holds 5% of the company’s shares, S&P Dow Jones Indices would assign that company an IWF of 1.00, as no control group meets the 5% threshold. However, if a company’s officers and directors hold 3% of the company’s shares and another control group holds 20% of the company’s shares, S&P Dow Jones Indices would assign an IWF of 0.77, reflecting the fact that 23% of the company’s outstanding shares are considered to be held for control. For companies with multiple classes of stock, the multiple classes are combined into one class with an adjusted share count. In these cases, the stock price is based on one class, usually the most liquid class, and the share count is based on the total shares outstanding.

Changes in a company’s total shares outstanding of 5.0% or more due to public offerings, tender offers, Dutch auctions, or exchange offers are made as soon as reasonably possible. Other changes of 5.0% or more (for example, due to company stock repurchases, private placements, an acquisition of a privately held company, redemptions, exercise of options, warrants, conversion of preferred stock, notes, debt, equity participations, or other recapitalizations) are made weekly and are announced on Fridays for implementation after the close of trading on the following Friday (one week later). Changes of less than 5.0% are accumulated and made quarterly on the third Friday of March, June, September, and December. Changes due to mergers or acquisitions of publicly held companies are made as soon as reasonably possible, regardless of the size of the change, although de minimis merger and acquisition share changes may be accumulated

 

 

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and implemented with the quarterly share rebalancing. Corporate actions such as stock splits, stock dividends, spinoffs and rights offerings are generally applied after the close of trading on the day prior to the ex-date. Share changes resulting from exchange offers are made on the ex-date. Changes in investable weight factors of more than five percentage points caused by corporate actions will be made as soon as possible. Changes in investable weight factors of less than five percentage points will be made annually, in September when revised investable weight factors are reviewed. A share freeze is implemented the week of the rebalancing effective date, the third Friday of the last month of each quarter, during which shares are not changed except for certain corporate actions (merger activity, stock splits, rights offerings and certain dividend payable events).

As discussed above, the value of the S&P 500 Index is the quotient of (1) the total float-adjusted market capitalization of the S&P 500 Index’s constituents (i.e., the sum of the products of (a) the price of each common stock, (b) the total shares outstanding of each common stock and (c) the investable weight factor) and (2) the index divisor. Continuity in index values is maintained by adjusting the divisor for all changes in the constituents’ share capital after the base date, which is the period from 1941 to 1943. This includes additions and deletions to the index, rights issues, share buybacks and issuances, and spin-offs. The index divisor’s time series is, in effect, a chronological summary of all changes affecting the base capital of the S&P 500 Index since the base date. The index divisor is adjusted such that the index value at an instant just prior to a change in base capital equals the index value at an instant immediately following that change. Some corporate actions, such as stock splits require simple changes in the common shares outstanding and the stock prices of the companies in the S&P 500 Index and do not require adjustments to the index divisor.

Additional information on the S&P 500 Index is available on the following website:

http://us.spindices.com. Information included on this website is not part of, or incorporated by reference in this index supplement.

License Agreement

The S&P 500 Index is a product of S&P Dow Jones Indices LLC (“SPDJI”), and has been licensed for use by Barclays Bank PLC. S&P® and S&P 500® are registered trademarks of Standard & Poor’s Financial Services LLC (“SPFS”). These trademarks have been licensed to SPDJI and its affiliates and sublicensed to Barclays Bank PLC for certain purposes.

The securities are not sponsored, endorsed, sold or promoted by SPDJI, SPFS, or any of their respective affiliates (collectively, “S&P Dow Jones Indices”). S&P Dow Jones Indices does not make any representation or warranty, express or implied, to the owners of the securities or any member of the public regarding the advisability of investing in securities generally or in the securities particularly or the ability of the S&P 500 Index to track general market performance. S&P Dow Jones Indices’ only relationship to Barclays Bank PLC with respect to the S&P 500 Index is the licensing of the S&P 500 Index and certain trademarks, service marks and/or trade names of S&P Dow Jones Indices and/or its licensors. The S&P 500 Index is determined, composed and calculated by S&P Dow Jones Indices without regard to Barclays Bank PLC or the securities. S&P Dow Jones Indices has no obligation to take the needs of Barclays Bank PLC or the owners of the securities into consideration in determining, composing or calculating the S&P 500 Index. S&P Dow Jones Indices is not responsible for and has not participated in the determination of the prices, and amount of the securities or the timing of the issuance or sale of the securities or in the determination or calculation of the equation by which the securities are to be converted into cash, surrendered or redeemed, as the case may be. S&P Dow Jones Indices has no obligation or liability in connection with the administration, marketing or trading of the securities. There is no assurance that investment products based on the S&P 500 Index will accurately track the performance of the index or provide positive investment returns. SPDJI is not an investment advisor. Inclusion of a security within the S&P 500 Index is not a recommendation by S&P Dow Jones Indices to buy, sell, or hold such security, nor is it considered to be investment advice. In addition, CME Group Inc. and its affiliates may trade financial products which are linked to the performance of the S&P 500 Index. It is possible that this trading activity will affect the value of the S&P 500 Index and the securities.

S&P DOW JONES INDICES DOES NOT GUARANTEE THE ADEQUACY, ACCURACY, TIMELINESS AND/OR THE COMPLETENESS OF THE S&P 500 INDEX OR ANY DATA RELATED THERETO OR ANY COMMUNICATION (INCLUDING BUT NOT LIMITED TO, ORAL OR WRITTEN COMMUNICATION (INCLUDING ELECTRONIC COMMUNICATIONS)) WITH RESPECT THERETO. S&P DOW JONES INDICES SHALL NOT BE SUBJECT TO ANY DAMAGES OR LIABILITY FOR ANY ERRORS, OMISSIONS, OR DELAYS THEREIN. S&P DOW JONES INDICES MAKES NO EXPRESS OR IMPLIED WARRANTIES, AND EXPRESSLY DISCLAIMS

 

 

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ALL WARRANTIES, OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE OR AS TO RESULTS TO BE OBTAINED BY BARCLAYS BANK PLC, OWNERS OF THE SECURITIES, OR ANY OTHER PERSON OR ENTITY FROM THE USE OF THE S&P 500 INDEX OR WITH RESPECT TO ANY DATA RELATED THERETO. WITHOUT LIMITING ANY OF THE FOREGOING, IN NO EVENT WHATSOEVER SHALL S&P DOW JONES INDICES BE LIABLE FOR ANY INDIRECT, SPECIAL, INCIDENTAL, PUNITIVE, OR CONSEQUENTIAL DAMAGES INCLUDING BUT NOT LIMITED TO, LOSS OF PROFITS, TRADING LOSSES, LOST TIME OR GOODWILL, EVEN IF THEY HAVE BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES, WHETHER IN CONTRACT, TORT, STRICT LIABILITY, OR OTHERWISE. THERE ARE NO THIRD PARTY BENEFICIARIES OF ANY AGREEMENTS OR ARRANGEMENTS BETWEEN S&P DOW JONES INDICES AND BARCLAYS BANK PLC, OTHER THAN THE LICENSORS OF S&P DOW JONES INDICES.

S&P 500® Dynamic VEQTOR™ Index

Substantially all information regarding the S&P 500® Dynamic VEQTORTM Index set forth in this index supplement has been taken from publicly available sources. Such information reflects the policies of, and is subject to change by, S&P Dow Jones Indices LLC (“S&P Dow Jones Indices”). The S&P 500® Dynamic VEQTORTM Index is calculated, maintained and published by S&P Dow Jones Indices.

We may offer notes that are linked either to the excess return version or the total return version of the S&P 500® Dynamic VEQTORTM Index, and we refer herein to such indices collectively as the “VEQTOR Indices” or each individually as a “VEQTOR Index”.

The S&P 500® Dynamic VEQTORTM Excess Return Index (the “VEQTOR ER Index”) is reported by S&P Dow Jones Indices on Bloomberg page “SPVQDER<Index>”. The S&P 500® Dynamic VEQTORTM Total Return Index (the “VEQTOR TR Index”) is reported by S&P Dow Jones Indices on Bloomberg page “SPVQDTR<Index>”.

The VEQTOR Indices seek to provide broad equity market exposure with an implied volatility hedge by dynamically allocating long-only exposure among three components: equity, volatility and cash. The so-called “volatility hedge” component of the VEQTOR

Indices is premised on the observation that historically (1) volatility in the equity markets tends to correlate negatively to the performance of U.S. equity markets (i.e., volatility increases in periods of negative market returns, and vice versa) and (2) rapid declines in the performance of the U.S. equity markets generally tend to be associated with particularly high volatility in such markets. The VEQTOR Indices, therefore, seek to reflect such historically-observed trends by allocating a greater proportion of their notional value to investments in the U.S. equity markets during periods of low market volatility with the ability to allocate a greater proportion of their notional value to investments in a reference asset that tracks implied volatility during periods of high market volatility (but in no case will the weighting of the volatility component exceed a 40% allocation of the relevant VEQTOR Index). The VEQTOR Indices also incorporate a “stop loss” mechanic, whereby each VEQTOR Index will allocate into a 100% cash position if the value of the VEQTOR ER Index has fallen by an amount greater than or equal to 2% over the immediately preceding five index business days. An “index business day” is any day on which the applicable S&P 500 Index (as defined below) and Short-Term VIX Index (as defined below) are calculated.

The equity component of the VEQTOR Indices is represented by the S&P 500® Excess Return Index (the “S&P 500 ER”) in the case of the VEQTOR ER Index and the S&P 500® Total Return Index (the “S&P 500 TR”) in the case of the VEQTOR TR Index. The volatility component of the VEQTOR Indices is represented by the S&P 500 VIX Short-Term Futures™ Index ER (the “Short-Term VIX ER”) in the case of the VEQTOR ER Index and the S&P 500 VIX Short-Term Futures™ Index TR (the “Short-Term VIX TR”) in the case of the VEQTOR TR Index.

We refer herein to (i) the S&P 500 ER and the S&P 500 TR collectively as the “S&P 500 Indices” and each individually as a “S&P 500 Index”; (ii) the Short-Term VIX ER and the Short-Term VIX TR collectively as the “Short-Term VIX Indices” and each individually as a “Short-Term VIX Index”; and (iii) the S&P 500 Indices and the Short-Term VIX Indices collectively as the “Constituent Indices”.

The S&P 500 Indices are intended to provide a performance benchmark for the U.S. equity markets, and the Short-Term VIX Indices seek to model the return from a daily rolling long position in the first and second month CBOE Volatility Index® (the “VIX Index”) futures contracts. Each of the equity and volatility components is discussed in further detail below.

 

 

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The VEQTOR ER Index is calculated on an excess return basis because its constituent indices are excess return indices, specifically the S&P 500 ER and the Short-Term VIX ER, and because there is no interest accrual on the Short-Term VIX ER or the allocation to cash and no reinvestment of dividend income from the stocks underlying the S&P 500 ER. The VEQTOR TR Index is calculated on a total return basis because its constituent indices are total return indices, specifically the S&P 500 TR and the Short-Term VIX TR, and because the Index is based upon interest accrual on the Short-Term VIX TR at the most recent weekly high discount rate for 91-day US Treasury bills effective on the preceding business day, interest accrual on the allocation to cash at the overnight LIBOR rate and reinvestment of dividend income from the stocks underlying the S&P 500 TR. For more information on the S&P 500 Indices and the Short-Term VIX Indices, see “—The Constituent Indices” below.

Subject to the occurrence of a stop loss event (as described below), the VEQTOR Indices allocate weightings to the equity and volatility components based on a combination of realized volatility levels and implied volatility trends in accordance with the rules described herein. These allocations are evaluated on a daily basis, although changes in allocation may occur less frequently.

Overview of Volatility

Volatility is a statistical measure of the degree of movement of the price of an asset over a period of time and is considered the market standard for expressing the riskiness of an asset. Volatility is generally calculated based on the natural logarithm of the return of an asset over a specified period of time.

Realized volatility is an historical calculation of this degree of movement based on prices or values of the asset observed periodically in the market over a specified period. The realized volatility of an asset is characterized by the frequency of the observations of the asset price used in the calculation and the period over which observations are made. For example, one-month daily realized volatility denotes realized volatility calculated from daily closing asset prices over a one-month period.

Implied volatility is a market estimate of the volatility an asset will realize over a future period of time. The implied volatility of an asset is calculated by reference to the market prices of listed options on the asset. Implied volatility has generally had a strongly negative correlation to equity market returns.

Composition of the VEQTOR Indices

Each VEQTOR Index is comprised of three components:

 

  1. Equity, represented by the S&P 500 ER, in the case of the VEQTOR ER Index, or the S&P 500 TR, in the case of the VEQTOR TR Index;

 

  2. Volatility, represented by the Short-Term VIX ER, in the case of the VEQTOR ER Index, or the Short-Term VIX TR, in the case of the VEQTOR TR Index; and

 

  3. Cash, represented by the Overnight LIBOR.

Equity and Volatility Component Allocations

On any index business day, t, each VEQTOR Index allocates weightings to the equity and volatility components based on a combination of realized and implied volatility trend decision variables as described below. While the allocations are reviewed at the close of each index business day, they may change on a less frequent basis.

Subject to the occurrence of a stop loss event (as described below), the equity and volatility components make up 100% of the notional portfolio included in the VEQTOR Indices.

Stop Loss Feature

As described in further detail below, each VEQTOR Index will allocate into a 100% cash position if the value of the VEQTOR ER Index has fallen by an amount greater than or equal to 2% over the immediately preceding five index business days.

Calculation of the VEQTOR Indices

Step 1: Determine the Realized Volatility

On any index business day, t, each VEQTOR Index uses the annualized one-month realized volatility level of the S&P 500® Index (the “S&P 500”) as the indicator of the realized volatility environment, calculated as of the immediately preceding index business day as follows:

 

LOGO

 

 

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where:

 

RVt-1 =    the annualized one-month realized volatility, calculated as of the immediately preceding index business day; and
SPX =    the S&P 500.

Step 2: Determine the Implied Volatility Trend

Each VEQTOR Index aims to anticipate changes in the volatility environment by observing 5-day and 20-day moving averages of one-month implied volatility. Implied volatility is calculated by reference to the VIX Index.

Determining the implied volatility trend involves three steps: (a) first, calculating the 5-day implied volatility average and the 20-day implied volatility average (each, as defined below), (b) next, evaluating the applicable daily implied volatility trend indicators (as defined below) and (c) finally, using the daily implied volatility trend indicators to determine the implied volatility trend (as defined below).

Part (a): Calculate the 5-day and 20-day implied volatility averages

On any index business day, t,

the “5-day implied volatility average” is equal to:

 

LOGO

and the “20-day implied volatility average” is equal to:

 

LOGO

where:

 

5IVt-1 =    the 5-day implied volatility average, calculated as of the immediately preceding index business day;
20IVt-1 =    the 20-day implied volatility average, calculated as of the immediately preceding index business day; and
VIX =    the CBOE Volatility Index®.(VIX). For a description of the CBOE Volatility Index®, please see “—The Constituent Indices—The S&P 500 Short-Term VIX Futures™ Index ER and the S&P 500 Short-Term VIX Futures™ Index TR—CBOE Volatility Index® (VIX)”.

Part (b): Evaluate the applicable daily implied volatility trend indicators

For any index business day, t, the “daily implied volatility trend indicator” is deemed to be “up” (+1) if the 5-day implied volatility average on the immediately preceding index business day is greater than or equal to the 20-day implied volatility average on the immediately preceding index business day, and is deemed to be “down” (-1) if the 5-day implied volatility average on the immediately preceding index business day is less than the 20-day implied volatility average on the immediately preceding index business day. This concept is expressed as follows:

 

LOGO

where:

 

DIVTt-1 =    the daily implied volatility trend indicator as of the immediately preceding index business day.

Part (c): Determine the implied volatility trend

An “implied volatility trend” is established if the daily implied volatility trend indicators remain constant for at least 10 consecutive index business days. Therefore, on any index business day, t, the implied volatility trend (IVTt) will exhibit:

 

LOGO

 

 

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Step 3: Determine the Target Weightings of the Equity Component and Volatility Component

On each index business day, t, once the realized volatility and the implied volatility trend have been determined for that day, the weightings of each of the equity and volatility components for purposes of calculating the VEQTOR Indices will be allocated in accordance with the pre-defined weightings set forth below:

 

      Target Equity Component / Volatility
Component Allocation (wteq / wtvol)

Realized

Volatility

(RVt-1)

   Implied
Volatility
Downtrend
(IVTt-1  = -1)
   No
Implied
Volatility
Trend
(IVTt-1 = 0)
   Implied
Volatility
Uptrend
(IVTt-1 = +1)

Less than

10%

   97.5% /
2.5%
   97.5% /
2.5%
   90% /
10%

10% <

RVt-1 <

20%

   97.5% /
2.5%
   90% /
10%
   85% /
15%

20% <

RVt-1 <

35%

   90% /
10%
   85% /
15%
   75% /
25%

35% <

RVt-1 <

45%

   85% /
15%
   75% /
25%
   60% /
40%

More

than 45%

   75% /
25%
   60% /
40%
   60% /
40%

where:

 

wteq =    in the case of the VEQTOR ER Index, the weight of the S&P 500 ER within the VEQTOR ER Index, and in the case of the VEQTOR TR Index, the weight of the S&P 500 TR within the VEQTOR TR Index;

 

wtvol  =    in the case of the VEQTOR ER Index, the weight of the Short-Term VIX ER within the VEQTOR ER Index, and in the case of the VEQTOR TR Index, the weight of the Short-Term VIX TR within the VEQTOR TR Index; and
wteq +  wtvol = 100%.

Although the allocations to the equity and volatility components of the VEQTOR Indices are evaluated daily, changes in allocation may occur less frequently if the realized volatility and/or implied volatility trend on any given index business day, calculated in accordance with Steps 1 and 2, have not changed sufficiently from the prior index business day to require a change in allocation in accordance with the table above.

Step 4: Evaluate Whether a Stop Loss Event Has Occurred

On each index business day, t, the performance of each of the VEQTOR ER Index over the immediately preceding five index business days (the “5-day return”) is evaluated. If the 5-day return for the VEQTOR ER Index is equal to or less than -2.0%, as calculated in accordance with the formula set forth below, each VEQTOR Index will be deemed to have experienced a “stop loss event”. Following the occurrence of a stop loss event, 100% of each VEQTOR Index will be shifted into a cash position at the close of that index business day, t, meaning that the weightings of each of the equity and volatility components will equal 0%. Such cash position is non-interest bearing, in the case of the VEQTOR ER Index, and interest bearing in the case of the VEQTOR TR Index.

On each index business day, t, the 5-day return, expressed as a percentage, is calculated as follows:

 

LOGO

where:

 

Indext-1 =    the closing value of the VEQTOR ER Index on the immediately preceding index business day; and
Indext-6 =    the closing value of the VEQTOR ER Index on the sixth index business day preceding the day on which the 5-day return is calculated.

The 5-day return for purposes of determining whether a stop-loss event has occurred is based on the closing values of the VEQTOR ER Index because unlike the VEQTOR TR Index, which is calculated on a total return basis, the VEQTOR ER Index does not reflect the impact of interest accruals.

The stop loss event will terminate once the 5-day return is greater than -2.0% (e.g., -1.9%). The period during which the VEQTOR Indices will be in a stop loss position can be as short as one (1) index business day (e.g., if on the following index business day, the 5-day return is greater than -2.0% (e.g., -1.9%)) and no longer than five (5) consecutive index business days (given that five consecutive index business days in a cash position will necessarily result in a 5-day return of 0%). Following the termination of a stop loss event, 100% of each VEQTOR Index will be allocated back into its respective equity and volatility components at the close of that index business day, t, in accordance with Steps 1 through 3 above.

 

 

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Step 5: Calculate the Values of the VEQTOR Indices

Part (a): Calculation of the values of the VEQTOR Indices assuming no stop loss event

On any index business day, t, on which no stop loss event has occurred, the values of the VEQTOR Indices are calculated, respectively, as follows:

VEQTOR ER Index:

 

LOGO

VEQTOR TR Index:

 

LOGO

where:

 

Indext =    the closing value of the applicable VEQTOR Index on day t;
Indext-1 =    the closing value of the applicable VEQTOR Index on the immediately preceding index business day, t-1, defined as any day on which the index was calculated;
EquityDRt =    the weighted daily return of the equity component, as determined by the following formulas:

in the case of the VEQTOR ER Index:

 

LOGO

in the case of the VEQTOR TR Index:

 

LOGO

where:

 

LOGO    weight of the equity component on the immediately preceding index business day (determined in accordance with Step 3 above); and
SPXE =    the closing level of the S&P 500 ER. Please see the section entitled “—The Constituent Indices—S&P 500® Index, S&P 500® Total Return Index™ and S&P 500® Excess Return Index™—S&P 500® Excess Return Index™” below for a description of the calculation of the S&P 500 ER;
SPXT =    the closing level of the S&P 500 TR. Please see the section entitled “—The Constituent Indices—S&P 500® Index, S&P 500® Total Return Index™ and S&P 500® Excess Return Index™—S&P 500® Total Return Index™” below for a description of the calculation of the S&P 500 TR;

 

VolDRt =    the weighted daily return of the volatility component, as determined by the following formulas:

in the case of the VEQTOR ER Index:

 

LOGO

in the case of the VEQTOR TR Index:

 

LOGO

where:

 

LOGO    weight of the volatility component on the immediately preceding index business day (determined in accordance with Step 3 above);
SPVXSP =    the closing value of the Short-Term VIX ER; and
SPVXSTR =    the closing value of the Short-Term VIX TR;

and; in the case of the VEQTOR TR Index:

 

CashDR=    Cash Daily Return, calculated based on an overnight deposit rate.

 

LOGO

where:

LOGO

where:

 

LOGO    the valuation date;
LOGO    the immediately preceding valuation date; and
LOGO    the previous day value of the USD Overnight London Interbank Offered Rate, expressed as a percentage.
 

 

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The “USD Overnight London Interbank Offered Rate” is the daily measure of the rate at which large banks will lend U.S. dollars to each other in the London market as calculated and published by the British Bankers’ Association. The USD Overnight London Interbank Offered Rate is published on Bloomberg page “US00O/N <Index>”.

Part (b): Calculation of the values of the VEQTOR Indices assuming the occurrence of a stop loss event

Following the occurrence of a stop loss event on any index business day, t, the daily return of both the equity component (EquityDRt) and the volatility component (VolDRt) will equal zero. This is because, as described in Step 4 above, following the occurrence of a stop loss event, 100% of the applicable VEQTOR Index will be shifted into a cash position at the close of that index business day, t, meaning that the weightings of each of the equity component LOGO and the volatility component LOGO will equal zero.

Therefore, if S&P Dow Jones Indices has determined that a stop loss event has occurred on the current index business day, t, the closing values of the VEQTOR Indices on the immediately following index business day, t+1, will be calculated, respectively, as follows:

VEQTOR ER Index:

 

LOGO

VEQTOR TR Index:

 

LOGO

As described in Step 4 above, following the termination of a stop loss event, 100% of the applicable VEQTOR Index will be allocated back into the equity and volatility components at the close of that index business day, t.

The Constituent Indices

S&P 500® Index, S&P 500® Total Return Index™ and S&P 500® Excess Return Index™

S&P 500® Index

For a description of the S&P 500, see “Non-Proprietary Indices—Equity Indices—S&P 500® Index”. The S&P 500 TR and the S&P 500 ER are versions of the S&P 500.

S&P 500® Total Return Index

The level of the S&P 500 TR is reported by S&P Dow Jones Indices on Bloomberg page “SPXT <Index>”.

The total return version of the S&P 500, the S&P 500 TR, is calculated in the same manner as the S&P 500 referenced above; however, the difference between the S&P 500 and the S&P 500 TR is that the S&P 500 reflects changes in the prices of its underlying stocks, while the S&P 500 TR reflects both changes in stock prices and the reinvestment of the dividend income from its underlying stocks.

Specifically, in calculating the S&P 500 TR, ordinary cash dividends are applied on the ex-dividend date. “Special dividends” are those dividends that are outside of the normal payment pattern established historically by the issuing corporation. These may be described by the corporation as “special”, “extra”, “year-end”, or “return of capital”. Whether a dividend is funded from operating earnings or from other sources of cash does not affect the determination of whether it is ordinary or special. “Special dividends” are treated as corporate actions with offsetting price and divisor adjustments; the S&P 500 TR reflects both ordinary and special dividends.

S&P 500® Excess Return Index

The excess return version of the S&P 500, the S&P 500 ER, is calculated in the same manner as the S&P 500 TR described above; however, the difference between the S&P 500 ER and the S&P 500 TR is that the S&P 500 ER is designed to track an unfunded investment in the S&P 500.

Specifically, the S&P 500 ER calculates the return on an investment in the S&P 500 TR where the investment was made through the use of borrowed funds. Therefore, the return of the S&P 500 ER will be equal to that of the S&P 500 TR minus the associated borrowing costs, which are represented by the overnight LIBOR.

The level of the S&P 500 ER is not currently published.

The S&P 500 Short-Term VIX Futures™ Index ER and the S&P 500 Short-Term VIX Futures™ Index TR

All information regarding the Short-Term VIX Indices set forth in this index supplement reflects the policies of, and is subject to change by, S&P Dow Jones Indices. The Short-Term VIX Indices are calculated, maintained and published by S&P Dow Jones Indices. The level of the Short-Term VIX ER is reported by S&P Dow Jones Indices on Bloomberg

 

 

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page “SPVXSP <Index>”. The level of the Short-Term VIX TR is reported by S&P Dow Jones Indices on Bloomberg page “SPVXSTR <Index>”.

The Short-Term VIX Indices seek to provide investors with exposure to one or more maturities of futures contracts on the VIX Index, which reflects forward implied volatility of the S&P 500 at various points along the volatility forward curve. The VIX Index is calculated based on the prices of put and call options on the S&P 500.

The Short-Term VIX Indices are indices composed of futures contracts on the VIX Index with a daily rolling long position in contracts of specified maturities and is intended to reflect the returns that are potentially available through an unleveraged investment in those contracts, plus, in the case of the Short-Term VIX TR, the rate of interest that could be earned on the return on the notional value of the Short-Term VIX TR at the specified US Treasury Bills rate, which is then reinvested in the Short-Term VIX TR.

The Short-Term VIX Indices are rolling indices, which roll on a daily basis. One of the effects of daily rolling is to maintain a constant weighted average maturity for the underlying futures contracts. The Short-Term VIX Indices are composed of futures contracts on the VIX Index. Unlike equities, which typically entitle the holder to a continuing stake in a corporation, futures contracts normally specify a certain date for the delivery of the underlying asset or financial instrument or, in the case of futures contracts relating to indices such as the VIX Index, a certain date for payment in cash of an amount determined by the level of the underlying index. As described in more detail below, the Short-Term VIX Indices operate by selling futures contracts on the VIX Index on a daily basis, specifying cash settlement on a nearby date and purchasing futures contracts on the VIX Index on a daily basis specifying cash settlement on a later date. The roll for each contract occurs on each Short-Term VIX index business day (as defined below) according to a pre-determined schedule that has the effect of keeping constant the weighted average maturity of the relevant futures contracts. This process is known as “rolling” a futures position, and each Short-Term VIX Index is a “rolling index”. The constant weighted average maturity for the futures underlying the Short-Term VIX Indices is one month.

A “Short-Term VIX index business day” is a day on which (1) it is a business day in New York and (2) the CBOE is open.

CBOE Volatility Index® (VIX)

All information regarding the VIX Index set forth in this index supplement reflects the policies of, and is

subject to change by, the Chicago Board Options Exchange® (the “CBOE”). The VIX Index is calculated, maintained and published by the CBOE. The level of the VIX Index is reported by the CBOE on Bloomberg page “VIX <Index>”.

The VIX Index is a benchmark index designed to measure the market price of volatility in large cap U.S. stocks over 30 days in the future, and calculated based on the prices of certain put and call options on the S&P 500. The VIX Index measures the premium paid by investors for certain options linked to the level of the S&P 500. During periods of market instability, the implied level of volatility of the S&P 500 typically increases and, consequently, the prices of options linked to the S&P 500 typically increase (assuming all other relevant factors remain constant or have negligible changes). This, in turn, causes the level of the VIX Index to increase. Because the VIX Index may increase in times of uncertainty, The VIX Index is known as the “fear gauge” of the broad U.S. equities market. The VIX Index has historically had negative correlations to the S&P 500.

The calculation of the VIX Index involves a formula that uses the prices of a weighted series of out-of-the money put and call options on the level of the S&P 500 (“SPX Options”) with two adjacent expiry terms to derive a constant 30-day forward measure of market volatility. The VIX Index is calculated independently of any particular option pricing model and in doing so seeks to eliminate any biases which may otherwise be included in using options pricing methodology based on certain assumptions.

Although the VIX Index measures the 30-day forward volatility of the S&P 500 as implied by the SPX Options, 30-day options are only available once a month. To arrive at the VIX Index level, a broad range of out-of-the money SPX Options expiring on the two closest nearby months (“near term options” and “next term options”, respectively) are selected in order to bracket a 30-day calendar period. SPX Options having a maturity of less than eight days are excluded at the outset and, when the near term options have eight days or less left to expiration, the VIX Index rolls to the second and third contract months in order to minimize pricing anomalies that occur close to expiration. The model-free implied volatility using prices of the near term options and next term options are then calculated on a strike price weighted average basis in order to arrive at a single average implied volatility value for each month. The results of each of the two months are then interpolated to arrive at a single value with a constant maturity of 30 days to expiration.

Futures on the VIX Index were first launched for trading by the CBOE in 2004. The VIX Index futures have expirations ranging from the front month consecutively

 

 

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out to the tenth month. Futures on the VIX Index allow investors the ability to invest in forward market volatility based on their view of the future direction or movement of the VIX Index. Investors that believe the implied volatility of the S&P 500 will increase may buy futures on the VIX Index, expecting that the level of the VIX Index will increase. Conversely, investors that believe that the implied volatility of the S&P 500 will decline may sell futures on the VIX Index, expecting that the level of the VIX Index will fall.

Calculation of the Short-Term VIX Indices

The Short-Term VIX Indices measure the return from a rolling long position in the first and second month VIX Index futures contracts. The Short-Term VIX Indices roll continuously throughout each month from the first month VIX Index futures contract into the second month VIX Index futures contract. The Short-Term VIX Indices are intended to reflect the returns that are potentially available through an unleveraged investment in certain futures contracts on the VIX Index, plus, in the case of the Short-Term VIX TR, the specified US Treasury Bill rate that could be earned on the return on the notional value of the Short-Term VIX TR, which would then be reinvested at that rate in the Short-Term VIX TR. On any Short-Term VIX index business day, t, the Short-Term VIX Indices are calculated as follows:

Short-Term VIX ER:

Indext = Indext-1 * (1+ CDRt); and

Short-Term VIX TR:

Indext = Indext-1 * (1+ CDRt + TBRt)

where:

 

Indext-1 =

  

in the case of the Short-Term VIX ER, the level of the Short-Term VIX ER on the preceding Short-Term VIX index business day, and in the

case of the Short-Term VIX TR, the level of the Short-Term VIX TR on the preceding Short-Term VIX index business day;

  
  

CDRt =

   Contract Daily Return, as determined by the following formula:

 

LOGO

where:

 

t-1  =

   the preceding Short-Term VIX index business day;

TWDOt Total Dollar Weight Obtained on t, as determined by the following formula for the Short-Term VIX Indices:

 

LOGO

TWDIt-1 Total Dollar Weight Obtained on t-1, as determined by the following formula for the Short-Term VIX Indices:

 

LOGO

where:

 

CRWi,t  =    Contract Roll Weight of the ith VIX Futures Contract on date t; and
DCRPi,t  =    Daily Contract Reference Price of the ith VIX Futures Contract on date t;

and; in the case of the Short-Term VIX TR:

 

TBRt =    Treasury Bill Return, as determined by the following formula:

 

LOGO

where:

 

Deltat =    the number of calendar days between the current and previous business days; and

TBARt-1 =

   the most recent weekly high discount rate for 91-day US Treasury bills effective on the preceding business day. Generally the rates are announced by the US Treasury on each Monday. On Mondays that are bank holidays, Friday’s rates will apply. The rate is published on Bloomberg page “USB3MTA <Index>”.

Contract Rebalancing

The roll period starts on the Tuesday prior to the monthly CBOE VIX Futures Settlement Date (the Wednesday falling 30 calendar days before the S&P 500 option expiration for the following month), and

 

 

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runs through the Tuesday prior to the subsequent month’s CBOE VIX Futures Settlement Date (“roll period”). Thus, the Short-Term VIX Indices are rolling on a continual basis. On the Short-Term VIX index business day after the current roll period ends the following roll period will begin. In calculating each of the Short-Term VIX ER and Short-Term VIX TR, the Contract Roll Weights (CRWi,t) of each of the contracts in the Short-Term VIX Indices, on a given Short-Term VIX index business day, t, are determined as follows:

 

LOGO

where:

 

  dt = The total number of business days in the current roll period beginning with and including, the starting CBOE VIX Futures Settlement Date and ending with, but excluding, the following CBOE VIX Futures Settlement Date. The number of business days stays constant in cases of a new holiday introduced intra-month or an unscheduled market closure; and

 

  dr = The total number of business days within a roll period beginning with, and including the following business day and ending with, but excluding, the following CBOE VIX Futures Settlement Date. The number of business days includes a new holiday introduced intra-month up to the business day preceding such a holiday.

At the close on the Tuesday, corresponding to the start of the roll period, all of the weight is allocated to the first month contract. Then on each subsequent business day a fraction of the first month VIX Index futures holding is sold and an equal notional amount of the second month VIX Index futures is bought. The fraction, or quantity, is proportional to the number of first month VIX Index futures contracts as of the previous index roll day, and inversely proportional to the length of the current roll period. In this way the initial position in the first month contract is progressively moved to the second month contract over the course of the month, until the following roll period starts when the old second month VIX Index futures contract becomes the new first month VIX Index futures contract.

In addition to the transactions described above, the weight of each index component of each of the Short-Term VIX Indices is also adjusted every day to ensure that the change in total dollar exposure for each Short-Term VIX Index is only due to the price change of each contract and not due to using a different weight for a contract trading at a higher price.

Base Date and Launch Date of the VEQTOR Indices

The base date for each VEQTOR Index is December 20, 2005 at a base value of 100,000. The launch date for each VEQTOR Index was November 18, 2009 at a value of 177,795.625 for the VEQTOR ER Index and a value of 201,932.3 for the VEQTOR TR Index.

Index Governance

The S&P U.S. Index Committee maintains the VEQTOR Indices. There are eight members of the committee; all are full-time professional members of the S&P Dow Jones Indices’ staff. The committee meets monthly. At each meeting, the committee reviews pending corporate actions that may affect index constituents, statistics comparing the composition of the indices to the market, companies that are being considered as candidates for addition to an index, and any significant market events. In addition, the committee may revise index policy covering rules for selecting companies, treatment of dividends, share counts or other matters.

S&P Dow Jones Indices considers information about changes to its U.S. indices and related matters to be potentially market moving and material. Therefore, all committee discussions are confidential.

Modifications to the VEQTOR Indices

S&P Dow Jones Indices may revise index policy covering rules for selecting companies, treatment of dividends, share counts or other matters as described above under “—Index Governance”. S&P Dow Jones Indices may also make determinations relating to market disruption and force majeure events as described below.

If S&P Dow Jones Indices determines, in its sole discretion, that an exchange is forced to close early due to unforeseen events, such as computer or electric power failures, weather conditions or other events, S&P Dow Jones Indices will calculate the value of (1) the S&P 500, S&P 500 TR and S&P 500 ER based on (a) the closing prices published by the exchange, or (b) if no closing price is available, the last regular trade reported for each stock before the exchange closed, and (2) each Short-Term VIX Index based on the most recent prior closing futures prices published by the CBOE, and the roll of each Short-Term VIX Index for that day will be carried to the next Short-

Term VIX index business day as described above under “—The Constituent Indices—The S&P 500 Short-Term VIX Futures™ Index ER and the S&P 500 Short-Term VIX Futures™ Index TR—Contract Rebalancing”. In the case of the S&P 500, S&P 500 TR and S&P 500 ER, if an exchange fails to open due to unforeseen circumstances, S&P Dow Jones

 

 

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Indices will use the prior day’s closing prices. If all exchanges fail to open, S&P Dow Jones Indices may determine not to publish the S&P 500 and/or S&P 500 TR, or calculate the S&P 500 ER, for that day. In the case of the Short-Term VIX Indices, if an exchange fails to open due to unforeseen circumstances, S&P Dow Jones Indices may determine not to publish the Short-Term VIX TR and/or the Short-Term VIX ER for that day.

In the case of the Short-Term VIX Indices, if an exchange introduces a holiday during the month of a calculation of a Short-Term VIX Index, that Short-Term VIX Index will not be published on that holiday and the roll for that day will be carried to the next Short-Term VIX index business day as described above under “—The Constituent Indices—The S&P 500 Short-Term VIX Futures™ Index ER and the S&P 500 Short-Term VIX Futures™ Index TR—Contract Rebalancing”.

If S&P Dow Jones Indices does not publish the Short-Term VIX TR, Short-Term VIX ER, S&P 500 and/or S&P 500 TR, and/or does not calculate the S&P 500 ER, S&P Dow Jones Indices may determine not to publish the VEQTOR Indices for that day.

License Agreement

The VEQTOR Indices are products of S&P Dow Jones Indices LLC (“SPDJI”). S&P®, S&P 500®, and VEQTOR are trademarks of Standard & Poor’s Financial Services LLC (“SPFS”). CBOE has granted SPDJI a license to use the VIX methodology to create the VEQTOR Indices. CBOE® and VIX® are registered trademarks of Chicago Board Options Exchange, Incorporated (“CBOE”). These trademarks have been licensed to S&P Dow Jones Indices LLC (“SPDJI”) and its affiliates, and sublicensed to Barclays Bank PLC for certain purposes.

The securities are not sponsored, endorsed, sold or promoted by SPDJI, SPFS, CBOE, or any of their respective affiliates (collectively, “S&P Dow Jones Indices”). S&P Dow Jones Indices does not make any representation or warranty, express or implied, to the owners of the securities or any member of the public regarding the advisability of investing in securities generally or in the securities particularly or the ability of the VEQTOR Indices to track general market performance. S&P Dow Jones Indices’ only relationship to Barclays Bank PLC with respect to the VEQTOR Indices are the licensing of the VEQTOR Indices and certain trademarks, service marks and/or trade names of S&P Dow Jones Indices and/or its licensors. The VEQTOR Indices are determined, composed and calculated by SPDJI without regard to Barclays Bank PLC or the securities. SPDJI has no obligation to take the needs of Barclays Bank PLC or the owners of the securities into consideration in

determining, composing or calculating the VEQTOR Indices. S&P Dow Jones Indices is not responsible for and has not participated in the determination of the prices, and amount of the securities or the timing of the issuance or sale of the securities or in the determination or calculation of the equation by which the securities are to be converted into cash, surrendered or redeemed, as the case may be. S&P Dow Jones Indices has no obligation or liability in connection with the administration, marketing or trading of the securities. There is no assurance that investment products based on the VEQTOR Indices will accurately track the performance of the index or provide positive investment returns. SPDJI is not an investment advisor. Inclusion of a security within the VEQTOR Indices are not a recommendation by S&P Dow Jones Indices to buy, sell, or hold such security, nor is it considered to be investment advice. In addition, CME Group Inc. and its affiliates may trade financial products which are linked to the performance of the VEQTOR Indices. It is possible that this trading activity will affect the value of the VEQTOR Indices and the securities.

S&P DOW JONES INDICES DOES NOT GUARANTEE THE ADEQUACY, ACCURACY, TIMELINESS AND/OR THE COMPLETENESS OF THE VEQTOR INDICES OR ANY DATA RELATED THERETO OR ANY COMMUNICATION (INCLUDING BUT NOT LIMITED TO, ORAL OR WRITTEN COMMUNICATION (INCLUDING ELECTRONIC COMMUNICATIONS)) WITH RESPECT THERETO. S&P DOW JONES INDICES SHALL NOT BE SUBJECT TO ANY DAMAGES OR LIABILITY FOR ANY ERRORS, OMISSIONS, OR DELAYS THEREIN. S&P DOW JONES INDICES MAKES NO EXPRESS OR IMPLIED WARRANTIES, AND EXPRESSLY DISCLAIMS ALL WARRANTIES, OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE OR AS TO RESULTS TO BE OBTAINED BY BARCLAYS BANK PLC, OWNERS OF THE SECURITIES, OR ANY OTHER PERSON OR ENTITY FROM THE USE OF THE VEQTOR INDICES OR WITH RESPECT TO ANY DATA RELATED THERETO. WITHOUT LIMITING ANY OF THE FOREGOING, IN NO EVENT WHATSOEVER SHALL S&P DOW JONES INDICES BE LIABLE FOR ANY INDIRECT, SPECIAL, INCIDENTAL, PUNITIVE, OR CONSEQUENTIAL DAMAGES INCLUDING BUT NOT LIMITED TO, LOSS OF PROFITS, TRADING LOSSES, LOST TIME OR GOODWILL, EVEN IF THEY HAVE BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES, WHETHER IN CONTRACT, TORT, STRICT LIABILITY, OR OTHERWISE. THERE ARE NO THIRD PARTY BENEFICIARIES OF ANY AGREEMENTS OR ARRANGEMENTS BETWEEN S&P DOW JONES

 

 

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INDICES AND BARCLAYS BANK PLC, OTHER THAN THE LICENSORS OF S&P DOW JONES INDICES.

S&P/ASX 200 Index

All information regarding the S&P/ASX 200 Index (the “S&P/ASX 200 Index”) set forth in this index supplement reflects the policies of, and is subject to change by, S&P Dow Jones Indices LLC (“S&P Dow Jones Indices”). The S&P/ASX 200 Index is maintained by the S&P/ASX Index Committee, which is made up of representatives of the Australian Securities Exchange (“ASX”) and S&P Dow Jones Indices. The S&P/ASX 200 Index is reported by S&P Dow Jones Indices on Bloomberg page “AS51 <Index>”.

The S&P/ASX 200 Index is a real-time, market-capitalization-weighted index that includes the largest and most liquid stocks in the Australian market. The S&P/ASX 200 Index covers approximately 80% of the Australian equity market by capitalization, with a constituency that is highly liquid and tradable. Such characteristics ensure that the S&P/ASX 200 Index is representative of the Australian market while maintaining a limited number of eligible stocks.

Upon its introduction in April 2000, the S&P/ASX 200 Index replaced the All Ordinaries index as the primary gauge for the Australian equity market. The S&P/ASX 200 Index measures the performance of the 200 largest index-eligible stocks listed on the ASX by float-adjusted market capitalization. The index is float-adjusted, covering approximately 80% of Australian equity market capitalization.

Only stocks listed on the Australian Securities Exchange are considered for inclusion in the S&P/ASX 200 Index. The S&P/ASX 200 Index only includes stocks that are considered to be institutionally investable, and market capitalization is a key criterion for stock selection. Stocks are included if they are large enough to meet the minimum ranking requirements for the representative indices within the Australian market.

The S&P/ASX index series is calculated using a base-weighted aggregate methodology. That means the level of an index reflects the total market value of all the component stocks relative to a particular base period. The total market value of a company is determined by multiplying the price of its stock by the number of shares available after float (investable weight factor) adjustment. An indexed number is used to represent the result of this calculation in order to make the value easier to work with and track over time.

The investable weight factor is an adjustment factor that accounts for the publicly available shares of a company. A company must have a minimum investable weight factor of 0.3 to be eligible for index inclusion. The investable weight factor equals: 1 minus the sum of the percent holdings of total shares held by strategic shareholders who possess 5% or more of issued shares. For this purpose, S&P Dow Jones Indices identifies the following shareholders whose holdings are considered to be control blocks and are subject to float adjustments: government and government agencies; controlling and strategic shareholders/partners; any other entities or individuals which hold more than 5% (excluding insurance companies, securities companies and investment funds) and holders of other restricted portions such as treasury stocks.

On any given day, the index value is the quotient of the total available market capitalization of the index’s constituents and its divisor. Continuity in the index value is maintained by adjusting the divisor for all changes in the constituents’ share capital after the base date. This includes additions and deletions to the index, rights issues, share buybacks and issuances, spin-offs and adjustments in availability. The divisor’s time series is, in effect, a chronological summary of all changes affecting the base capital of the index. The divisor is adjusted such that the index value at an instant just prior to a change in base capital equals the index value at an instant immediately following that change.

Changes in the index level reflect changes in the total market capitalization of the index that are caused by price movements in the market. They do not reflect changes in the market capitalization of the index, or of the individual stocks, that are caused by corporate actions such as dividend payments, stock splits, distributions to shareholders, mergers, or acquisitions. When a corporate action affects the price of a stock – such as when the price drops on a special distribution ex-date – the price of the stock is adjusted to reflect the ex-date and the index divisor is adjusted to offset any change in the total market value of the index.

When a stock is replaced by another stock, the index divisor is adjusted so that the change in index market value that results from the addition or deletion does not change the index level.

Rebalancing

The S&P/ASX 200 Index constituents are rebalanced quarterly to ensure adequate market capitalization and liquidity. Quarterly rebalancing changes take effect on the third Friday of March, June, September and December. Both market capitalization and liquidity are assessed using the previous six months’

 

 

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worth of data to determine index eligibility. Shares and investable weight factors updates are also applied regularly.

Maintaining the S&P/ASX 200 Index includes monitoring and completing the adjustments for company additions and deletions, share changes, stock splits, stock dividends, and stock price adjustments due to restructurings or spin-offs. Some corporate actions, such as stock splits and stock dividends, require simple changes in the common shares outstanding and the stock prices of the companies in the index. Other corporate actions, such as share issuances, change the market value of an index and require an index divisor adjustment to prevent the value of the index from changing.

Adjusting the index divisor for a change in market value leaves the value of the index unaffected by the corporate action. This helps keep the value of the index accurate as a barometer of stock market performance, and ensures that the movement of the index does not reflect the corporate actions of the companies in it. Divisor adjustments are made after the close of trading and after the calculation of the closing value of the index. Any change in the index divisor also affects the corresponding sub-indices and divisors. Each sub-index is maintained in the same manner as the headline index.

Corporate actions such as splits, stock dividends, spin-offs, rights offerings and share changes are normally applied on the ex-date.

Additional information on the S&P/ASX 200 Index is available on the following website: www.standardandpoors.com.

License Agreement

The S&P/ASX 200 Index is a product of S&P Dow Jones Indices LLC (“SPDJI”). S&P® is a registered trademark of Standard & Poor’s Financial Services LLC (“SPFS”). ASX is a registered trademark of ASX Operations Pty Limited (“ASX”). These trademarks have been licensed to S&P Dow Jones Indices LLC (“SPDJI”) and its affiliates, and sublicensed to Barclays Bank PLC for certain purposes.

The securities are not sponsored, endorsed, sold or promoted by SPDJI, SPFS, ASX, or any of their respective affiliates (collectively, “S&P Dow Jones Indices and ASX”). S&P Dow Jones Indices and ASX do not make any representation or warranty, express or implied, to the owners of the securities or any member of the public regarding the advisability of investing in securities generally or in the securities particularly or the ability of the S&P/ASX 200 Index to track general market performance. S&P Dow

Jones Indices’ and ASX’s only relationship to Barclays Bank PLC with respect to the S&P/ASX 200 Index is the licensing of the S&P/ASX 200 Index and certain trademarks, service marks and/or trade names of S&P Dow Jones Indices and ASX and/or their licensors. The S&P/ASX 200 Index is determined, composed and calculated by SPDJI without regard to Barclays Bank PLC or the securities. SPDJI has no obligation to take the needs of Barclays Bank PLC or the owners of the securities into consideration in determining, composing or calculating the S&P/ASX 200 Index. S&P Dow Jones Indices and ASX are not responsible for and has not participated in the determination of the prices, and amount of the securities or the timing of the issuance or sale of the securities or in the determination or calculation of the equation by which the securities are to be converted into cash, surrendered or redeemed, as the case may be. S&P Dow Jones Indices and ASX have no obligation or liability in connection with the administration, marketing or trading of the securities. There is no assurance that investment products based on the S&P/ASX 200 Index will accurately track the performance of the index or provide positive investment returns. SPDJI is not an investment advisor. Inclusion of a security within the S&P/ASX 200 Index is not a recommendation by S&P Dow Jones Indices or ASX to buy, sell, or hold such security, nor is it considered to be investment advice.

S&P DOW JONES INDICES AND ASX DO NOT GUARANTEE THE ADEQUACY, ACCURACY, TIMELINESS AND/OR THE COMPLETENESS OF THE S&P/ASX 200 INDEX OR ANY DATA RELATED THERETO OR ANY COMMUNICATION (INCLUDING BUT NOT LIMITED TO, ORAL OR WRITTEN COMMUNICATION (INCLUDING ELECTRONIC COMMUNICATIONS)) WITH RESPECT THERETO. S&P DOW JONES INDICES AND ASX SHALL NOT BE SUBJECT TO ANY DAMAGES OR LIABILITY FOR ANY ERRORS, OMISSIONS, OR DELAYS THEREIN. S&P DOW JONES INDICES AND ASX MAKE NO EXPRESS OR IMPLIED WARRANTIES, AND EXPRESSLY DISCLAIMS ALL WARRANTIES, OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE OR AS TO RESULTS TO BE OBTAINED BY BARCLAYS BANK PLC, OWNERS OF THE SECURITIES, OR ANY OTHER PERSON OR ENTITY FROM THE USE OF THE S&P/ASX 200 INDEX OR WITH RESPECT TO ANY DATA RELATED THERETO. WITHOUT LIMITING ANY OF THE FOREGOING, IN NO EVENT WHATSOEVER SHALL S&P DOW JONES INDICES OR ASX BE LIABLE FOR ANY INDIRECT, SPECIAL, INCIDENTAL, PUNITIVE, OR CONSEQUENTIAL DAMAGES INCLUDING BUT NOT LIMITED TO,

 

 

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LOSS OF PROFITS, TRADING LOSSES, LOST TIME OR GOODWILL, EVEN IF THEY HAVE BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES, WHETHER IN CONTRACT, TORT, STRICT LIABILITY, OR OTHERWISE. THERE ARE NO THIRD PARTY BENEFICIARIES OF ANY AGREEMENTS OR ARRANGEMENTS BETWEEN S&P DOW JONES INDICES AND BARCLAYS BANK PLC, OTHER THAN THE LICENSORS OF S&P DOW JONES INDICES.

SET50 Index

The SET50 Index (the “SET50 Index”) is calculated by The Stock Exchange of Thailand (“SET”). To accommodate the issuing of index futures and options in the future, and to provide a benchmark of investment in SET, the SET50 Index was launched in 1995. The SET50 Index is calculated from the stock prices of the top 50 companies listed on SET in terms of large market capitalization, high liquidity and compliance with requirements regarding the distribution of shares to minor shareholders. The calculation methodology used for the SET50 Index is a market capitalization-weighted price index. The base date used for the SET50 Index is August 16, 1995, and the base value was set at 1,000 points. The base market value is continually adjusted to correspond to changes in the values of stocks that result from changes in the number of stocks due to various events such as public offerings, exercised warrants and conversions of preferred to common shares. The SET50 Index is reported by SET on Bloomberg page “SET50 <Index>”.

The lists of component stocks in the SET50 Index are reviewed every six months in order to adjust for any changes that have occurred in the stock market, such as new listings or public offerings. After the review, stocks that meet the necessary qualifications are then selected to become part of the SET50 Index and others are removed. Stocks that have been suspended for at least 20 trading days are excluded. Stock selection is conducted semi-annually in June and December. During these two periods, SET will select stocks based on its pre-stipulated criteria. Ongoing event-related changes to the SET50 Index that are the result of newly-listed stocks and other corporate events such as mergers, acquisitions, takeovers and complex restructurings are reflected in changes to the components of the SET50 Index at the time of the event, according to pre-stipulated rules. An index committee is responsible for considering corporate events not identified above, as well as the interpretation or possible exceptions to these rules.

The revised stock lists for the SET50 Index will be announced to the general public as soon as the lists become available. The new SET50 Index will take effect on the first trading day in January and July of

each year. Whenever a stock is removed from the SET50 Index, a new stock will be added to replace it and to ensure the continuity of the SET50 Index. Also, adjustments will be made whenever the market value of a component stock changes including due to the conversion of convertible bonds, the exercising of warrants, or issuing of new shares for capital increase of the component stock.

Additional information on the SET50 Index is available on the following website: http://www.set.or.th/en/.

License Agreement

For any specific issuance of securities, we will enter into a non-exclusive license agreement with SET, whereby we, in exchange for a fee, will be permitted to use the SET50 Index in connection with such securities. We are not affiliated with the SET50 Index sponsor; the only relationship between the SET50 Index sponsor and us is any licensing of the use of the SET50 Index sponsor’s indices and trademarks relating to them. The securities are not sponsored, endorsed, sold or promoted by SET. The trademarks, service marks or registered trademarks of the index sponsor are the property of their respective owners. SET does not: (i) make any representation or warranty, express or implied, to the owners of the securities or any member of the public regarding the advisability of investing in the securities, (ii) have any obligation to take the needs of Barclays Bank PLC or the owners of the securities into consideration in determining, composing or calculating the SET50 Index, (iii) take responsibility for nor has it participated in the determination of the timing of, prices at, or quantities of the securities to be issued or in the determination or calculation of the equation by which the securities may be converted if applicable, into cash, nor (iv) have any obligation or liability in connection with the administration, operation, marketing, sale or trading of the securities.

SET DOES NOT GUARANTEE THE ACCURACY AND/OR THE COMPLETENESS OF THE SET50 INDEX OR ANY DATA INCLUDED THEREIN AND SET SHALL HAVE NO LIABILITY FOR ANY ERRORS, OMISSIONS, OR INTERRUPTIONS THEREIN. SET MAKES NO WARRANTY, EXPRESS OR IMPLIED, AS TO RESULTS TO BE OBTAINED BY BARCLAYS BANK PLC, OWNERS OF THE SECURITIES, OR ANY OTHER PERSON OR ENTITY FROM THE USE OF THE SET50 INDEX OR ANY DATA INCLUDED THEREIN. SET MAKES NO EXPRESS OR IMPLIED WARRANTIES, AND EXPRESSLY DISCLAIMS ALL WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE WITH RESPECT TO THE SET50 INDEX OR ANY DATA

 

 

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INCLUDED THEREIN. WITHOUT LIMITING ANY OF THE FOREGOING, IN NO EVENT SHALL SET HAVE ANY LIABILITY FOR ANY SPECIAL, PUNITIVE, INDIRECT, OR CONSEQUENTIAL DAMAGES (INCLUDING LOST PROFITS), EVEN IF NOTIFIED OF THE POSSIBILITY OF SUCH DAMAGES.

SMI® Index

All information regarding the SMI® Index (the “SMI”) set forth in this index supplement reflects the policies of, and is subject to change by, the SIX Swiss Exchange (the “SIX Swiss Exchange”). The SMI Index is calculated, maintained and published by the SIX Swiss Exchange. The SMI Index is reported by the SIX Swiss Exchange on Bloomberg page “SMI <Index>”.

As a blue-chip index, the SMI is Switzerland’s key equity index. It represents about 85% of the free-float capitalization of the Swiss equity market. The SMI comprises the 20 largest and most liquid equities of the Swiss Performance Index or SPI® (the “SPI”). As a price index, the SMI is not adjusted for dividends; however, a separate performance index that takes account of such distributions is available.

Because the SMI represents the Swiss equity market, it is used as an underlying index for many financial products such as options, futures, structured products and exchange-traded funds.

The SMI was standardized on June 30, 1988 with an initial baseline value of 1,500 points. Its composition is reviewed once a year. Calculation takes place in real-time, i.e. each new transaction involving a stock included in the SMI causes the index to be recalculated.

The SMI is calculated according to the Laspeyres method using a weighted arithmetic mean over a defined selection of securities. The current index level can be calculated by dividing the sum of the market capitalizations of the securities contained in the SMI by the divisor.

The divisor is a technical number used to calculate the index. If the market capitalization changes due to a corporate event, the divisor changes while the index value remains the same. The new divisor is calculated on the evening of the day before the corporate event takes effect.

The securities included in the SMI are weighted according to their free float. This means that large share packages that reach or exceed the threshold of 5% are subtracted from the total market capitalization.

The free float is calculated on the basis of outstanding shares. Issued and outstanding equity capital is, as a rule, the total amount of equity capital that has been fully subscribed and wholly or partially paid in and documented in the Commercial Register. Neither conditional nor approved capital is counted as issued and outstanding equity capital.

The free float is calculated on the basis of listed shares only. Where a company has different categories of listed participation rights, these are considered separately for the purposes of calculating the SMI.

In principle, shares that have been reported to the SIX Swiss Exchange by a person or group of persons whose shareholding has exceeded the relevant threshold values under Article 20 of the Swiss Federal Act on Stock Exchanges and Securities Trading (“SESTA”) are deemed to be shares in fixed ownership.

Shares of persons and groups of persons who are subject to a shareholder agreement which is binding for more than 5% of the listed shares or who, according to publicly known facts, have a long-term interest in a company are also deemed to be in fixed ownership.

The SIX Swiss Exchange may use sources in addition to the reports pursuant to SESTA to calculate shares in fixed ownership. In particular, the SIX Swiss Exchange may use data gained from issuer surveys that it conducts itself.

Exceptions

In principle, shares held by the following groups are deemed free-floating regardless of whether a report has been made pursuant to the above:

 

   

Custodian nominees

 

   

Trustee companies

 

   

Investment funds

 

   

Pension funds

 

   

Investment companies

The SIX Swiss Exchange classifies at its own discretion persons and groups of persons who, because of their area of activity or the absence of important information, cannot be clearly assigned.

The free-float rule applies only to bearer shares and registered shares. Capital issued in the form of participation certificates (“Partizipationsscheine”) and bonus certificates (“Genussscheine”) is taken into full account in calculating the SMI because it does not confer voting rights.

 

 

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Calculation Interval and Publication

The SMI is calculated in real time. The SMI is recalculated immediately upon any changes in the price of any stock. The shortest calculation interval is one second.

All index data is distributed by SIX Exfeed Ltd (subsidiary of SIX Group Ltd) via information service providers (e.g. Reuters and Bloomberg).

Prices Used

In calculating the SMI, the last-paid price is taken into account. If no price has been paid on the day of calculation, the previous day’s price is used. Only the prices achieved via the electronic order book of the SIX Swiss Exchange are used.

Trading Hours

The trading hours for Swiss equities, participation certificates and bonus certificates are determined by the SIX Swiss Exchange.

Since the opening phase usually causes strong price fluctuations, the SMI is first calculated two minutes after the start of on order book trading. This index level is called the “open”.

A closing auction takes place ten minutes before close of trading. At the close of trading, the final closing prices used in calculating the closing level of the SMI are established.

Determination of Rankings and Identification of Candidates

A selection list in which all SPI stocks are ranked and which forms the basis for the rankings can be downloaded from the SIX Swiss Exchange website. The position of each stock is determined by a combination of the following criteria:

 

   

Average free-float capitalization (compared to the capitalization of the entire SPI).

 

   

Cumulated on order book turnover (compared to the total turnover of the SPI).

The average market capitalization in per cent and the turnover in per cent are each given a weighting of 50% and yield the so-called weighted market share.

The time period used for making the calculation is July 1 through June 30 of the following year. For shares that have been listed after July 1 of the relevant current year, the cumulated on order book turnover will be extrapolated, whereby generally the first 5 trading days for those shares will not be included in the calculation.

The current selection list is available on the following website: www.six-swiss-exchange.com/index_info/online/share_indices/equity_index_selectionlist.xls

A provisional interim selection list is published following the end of the quarter on September 30, December 31 and March 31.

Ordinary Adjustment Dates

The number of stocks and free-float shares are adjusted on four ordinary adjustment dates a year:

 

   

The third Friday in March (after close of trading)

 

   

The third Friday in June (after close of trading)

 

   

The third Friday in September (after close of trading)

 

   

The third Friday in December (after close of trading)

The SIX Swiss Exchange may conduct a capital survey among issuers in order to obtain the required data.

The announcement of the provisional new stocks occurs at least one month before the adjustment date. The SIX Swiss Exchange reserves the right to take account of recent changes before the adjustment date, so the definite new stocks are announced only five trading days before the adjustment date.

Extraordinary Adjustment of the Number of Shares

In order to avoid frequent slight changes to the weighting and to maintain the stability of the index, any extraordinary change of the total number of outstanding stocks or the free float will only result in an extraordinary adjustment if it exceeds 10% and 5%, respectively, and is in conjunction with a corporate action. After a takeover, the SIX Swiss Exchange may, in exceptional cases, adjust the free float of the company in question upon publication of the end result. A five-day notification period applies. At the same time, the SIX Swiss Exchange may exclude the stock from the relevant index family.

Where an insolvency has been announced, an extraordinary adjustment will be made and an exclusion from the indices, taking into account a notification period of 5 trading days.

The foregoing notwithstanding, the SIX Swiss Exchange reserves the right to make the adjustments described above without observing the relevant notification periods.

 

 

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If the free float changes as a result of an extraordinary adjustment of the number of shares, the free float is adjusted at the same time as the number of shares even if the free float changes by less than ten percentage points.

Dividend Payments

Regular cash dividend payments do not result in adjustments to the divisors of price indices. Dividends are, however, fully taken account of in performance indices.

Repayments of capital through the reduction of a share’s par value, which can take the place of a regular cash dividend or constitute a component of the regular distribution, are treated in the same way as a normal dividend payment (i.e., no adjustment to the price index divisor). However, distributions (e.g., special dividends and anniversary bonuses) that, contrary to the company’s usual dividend policy, are paid out or declared extraordinary dividends, are not deemed dividends in the above sense. These distributions are considered corporate events and also result in adjustments to the divisors of price indices.

At variance to the treatment of dividends and other distributions in extraordinary situations, SIX Swiss Exchange reserves the right in justifiable instances to diverge from those provisions.

Dividend payments are always treated as gross amounts, including the withholding tax portion.

Information on Corporate Events

Any relevant forthcoming extraordinary corporate events that result in an adjustment to the indices are published by e-mail via Investor Service Equity. This service is offered free of charge by the SIX Swiss Exchange Indices department.

The registration form is available on the SIX Swiss Exchange website. The SIX Swiss Exchange accepts no liability for Investor Service Equity.

Additional information on the SMI is available on the following website: http: //www.six-swiss-exchange.com/indices/shares/smi_en.html.

Licensing

SIX Swiss Exchange has had the names of all the indices created by it protected under trademark law. They have been registered in Switzerland as well as in key markets both in Europe and overseas. Under certain conditions, SIX Swiss Exchange permits third parties to use the trademarks of its index family for commercial purposes. It has levied a license fee for such use since 1999.

We have entered into a non-exclusive license agreement with the SIX Swiss Exchange whereby we, in exchange for a fee, are permitted to use the SMI in connection with certain securities, including the notes and warrants. We are not affiliated with the SIX Swiss Exchange; the only relationship between the SIX Swiss Exchange and us is any licensing of the use of the SMI and trademarks relating to them.

Any transactions specified or described in this index supplement or the applicable pricing supplement are not in any way sponsored, endorsed, sold or promoted by the SIX Swiss Exchange and the SIX Swiss Exchange makes no warranty or representation whatsoever, express or implied, either as to the results to be obtained from the use of the SMI and/or the figure at which the SMI stands at any particular day or otherwise. However, the SIX Swiss Exchange shall not be liable (whether in negligence or otherwise) to any person for any error in the SMI and the SIX Swiss Exchange shall not be under any obligation to advise any person of any error therein.

SIX Group, SIX Swiss Exchange, SPI, Swiss Performance Index (SPI), SPI EXTRA, SPI ex SLI, SMI, Swiss Market Index (SMI), SMI MID (SMIM), SMI Expanded, SXI, SXI Real Estate, SXI Swiss Real Estate, SXI Life Sciences, SXI Bio+Medtech, SLI, SLI Swiss Leader Index, SBI, SBI Swiss Bond Index, SAR, SAR SWISS AVERAGE RATE, SARON, SCR, SCR SWISS CURRENT RATE, SCRON, SAION, SCION, VSMI and SWX Immobilienfonds Index are trademarks that have been registered in Switzerland and/or abroad by SIX Group Ltd respectively SIX Swiss Exchange Ltd. Their use is subject to a license.

TOPIX® Index

All information regarding the Tokyo Stock Price Index or TOPIX® Index (the “TOPIX Index”) set forth in this index supplement reflects the policies of, and is subject to change by, the Tokyo Stock Exchange, Inc. (the “TSE”). The TOPIX Index is calculated, maintained and published by the TSE. The TOPIX Index is reported by the TSE on Bloomberg page “TPX <Index>”.

The TOPIX Index was developed by the TSE. The TSE can add, delete or substitute the stocks underlying the TOPIX Index or make other methodological changes that could change the value of the TOPIX Index. Publication of the TOPIX Index began on July 1, 1969, with a base value of 100 points as of the base date of January 4, 1968.

 

 

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Composition and Maintenance of the TOPIX Index

The TOPIX Index is a free float-adjusted market-capitalization weighted index comprised of all domestic common stocks listed on the TSE First Section.

Additions to the component stocks can occur (1) as a result of assignments from the TSE Second Section and alteration of listing markets from the Mothers market of the TSE, with such changes taking effect one business day before the last business day of the month after such assignment or alternation, as applicable; (2) through the initial listing of a company (directly or via another stock exchange), with such changes taking effect one business day before the last business day of the month after such initial listing; or (3) through the initial listing of a new company created through, among other things, a stock swap, stock transfer, merger or spinoff, with such changes taking effect one business day before the listing date.

Deletions of constituents are conducted due to (1) de-listing due to a stock-swap, stock transfer, merger or spinoff, when the surviving company re-lists with the TSE, with such changes taking effect one business day before the initial listing date of the new company (normally two business days after the de-listing date); (2) de-listing of a company for reasons other than a stock-swap stock transfer, merger or spinoff, with such changes taking effect one business day before the de-listing date; (3) designation of stocks to be de-listed, with such changes taking effect three business days after such designation; or (4) reassignment of the listing to the TSE Second Section from the TSE First Section, with such changes taking effect one business day before such reassignment.

Calculation of the TOPIX Index

The TOPIX Index is not expressed in Japanese yen, but is indicated in terms of points (as a decimal figure) rounded off to the second decimal place. The TOPIX Index is calculated as (1) the quotient of (a) the current free float-adjusted market value, which is the sum of the products of the price of each component stock and the number of free float-adjusted shares of each such component stock (the “TOPIX Current Market Value”) divided by (b) the base market value (the “TOPIX Base Market Value”), times (2) the base point of 100. If trading in a TOPIX Index component is suspended, for the purposes of index calculation, it is regarded as having no change in its share price.

The number of free float-adjusted shares at the time of the index calculation is the number of common shares listed on the TSE First Section at multiplied by

the free float weight. The free float weight reflects the weight of listed shares deemed to be available for trading in the market and is calculated by the TSE for each listed company for purposes of index calculation. The free float weight is determined on the basis of securities reports and statutory documents required by the Financial Instruments and Exchange Act of Japan and publicly available documents issued by the listed companies themselves to estimate the amount of non-free float shares. In determining the free float weight, the TSE deems the following shares as non-free float shares: shares held by the top 10 major shareholders (subject to certain exceptions), treasury stocks (including certain cross-shareholdings), shares held by board members of the relevant company and other shares TSE deems not available for trading in the market. The free float weight is equal to 1 minus the number of non-free float shares divided by the number of listed shares. In the case of some companies with low liquidity, the TSE may adjust their free float downwards by applying a “liquidity factor”.

The free float weight assigned to each listed company is reviewed annually, with timings that vary according to the settlement terms of each such listed company. Free float weights may also be subject to extraordinary review in the case of certain corporate actions (e.g., allocation of new shares, conversion of preferred shares or exercise of subscription warrants, spin-offs, mergers, stock swaps, take-overs) and for other reasons the TSE believes appropriate.

In order to maintain continuity, the TOPIX Base Market Value is adjusted from time to time to ensure that it reflects only price movements resulting from fluctuations in the stock market, and to eliminate the effects of other factors in the level of the TOPIX Index. Such factors include, without limitation: new listings; delistings; new share issues either through public offerings or through rights offerings to shareholders; issuance of shares as a consequence of exercise of convertible bonds or warrants; and assignment of listed stocks to the TSE First Section from the TSE Second Section, alteration of listing markets to the TSE First Section from Mothers or reassignment to the TSE Second Section from the TSE First Section.

Following any such adjustments, the new TOPIX Base Market Value will be equal to the product of (1) the old TOPIX Base Market Value, times (2) the quotient of (a) the sum of (i) the free-float adjusted market value on the business day before the adjustment date plus (ii) the adjustment amount divided by (b) the free-float adjusted market value on the business day before the adjustment date. The adjustment amount is the amount (whether positive or negative) that is equal to the product of the change (whether positive or negative) in the number of shares for index calculation times the appropriate price used for adjustment.

 

 

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The TOPIX Base Market Value remains at the new value until a further adjustment is necessary as a result of another change. As a result of such change affecting the TOPIX Current Market Value or any stock underlying the TOPIX Index, the TOPIX Base Market Value is adjusted in such a way that the new value of the TOPIX Index will equal the value of the TOPIX Index immediately prior to such change.

No adjustment is made to the TOPIX Base Market Value in the case of events such as stock splits and decreases in paid in capital which theoretically do not affect market value. In such cases, the new stock price multiplied by the increased (or decreased) number of shares is the same as the old stock price multiplied by the old number of shares and no adjustment is thought necessary.

Additional information on the TOPIX Index is available on the following website: http://www.tse.or.jp/english.

The Tokyo Stock Exchange

The TSE is one of the world’s largest securities exchanges in terms of market capitalization. There are three separate sections within the TSE: the First Section, the Second Section and Mothers. Listings of stocks on the TSE are divided between these three sections, with the TSE First Section typically limited to larger, longer established and more actively traded issues, the Second Section to smaller and newly listed companies and Mothers, which was established in 1999, to newer, innovative venture enterprises, both in Japan and overseas. Trading hours for most products listed on the TSE are currently from 9:00 a.m. to 11:30 a.m. and from 12:30 p.m. to 3:00 p.m., Tokyo time, Monday through Friday.

Due to the time zone difference, on any normal trading day the TSE will close prior to the opening of business in New York City on the same calendar day. Therefore, the closing level of the Nikkei Index on a trading day will generally be available in the United States by the opening of business on the same calendar day.

The TSE has adopted certain measures, including daily price floors and ceilings on individual stocks, intended to prevent any extreme short-term price fluctuations resulting from order imbalances. In general, any stock listed on the TSE cannot be traded at a price lower than the applicable price floor or higher than the applicable price ceiling. These price floors and ceilings are expressed in absolute Japanese yen, rather than percentage limits and are based on the closing price of the stock on the previous trading day, the last special quote price or last sequential trade quote price. In addition, when there is a major order imbalance in a listed stock and the stock would

trade above or below the permissible range, the TSE posts a “special bid quote” or a “special offer quote” for that stock at a specified higher or lower price level than the stock’s last sale price in order to solicit counter-orders and balance supply and demand for the stock. Prospective investors should also be aware that the TSE may suspend the trading of individual stocks in certain limited and extraordinary circumstances, including, for example, unusual trading activity in that stock. As a result, changes in the Nikkei Index may be limited by price limitations or special quotes, or by suspension of trading, on individual stocks that make up the Nikkei Index, and these limitations, in turn, may adversely affect the value of the securities.

Additional information concerning the Tokyo Stock Exchange may be obtained on the following website: http://www.tse.or.jp/english/.

License Agreement

We have entered into a non-exclusive license agreement with the Tokyo Stock Exchange, Inc. whereby we, in exchange for a fee, are permitted to use the TOPIX Index in connection with certain securities, including the notes and warrants. We are not affiliated with the Tokyo Stock Exchange, Inc.; the only relationship between the Tokyo Stock Exchange, Inc. and us is any licensing of the use of the TOPIX indices and trademarks relating to them.

The license agreement between the Tokyo Stock Exchange, Inc. and Barclays Bank PLC provides that the following disclaimer must be set forth herein:

“(i) The TOPIX Index Value and the TOPIX Index Marks are subject to the rights owned by the Tokyo Stock Exchange, Inc. and the Tokyo Stock Exchange, Inc. owns all rights relating to the TOPIX Index such as calculation, publication and use of the TOPIX Index Value and relating to the TOPIX Index Marks.

(ii) The Tokyo Stock Exchange, Inc. shall reserve the rights to change the methods of calculation or publication, to cease the calculation or publication of the TOPIX Index Value or to change the TOPIX Index Marks or cease the use thereof.

(iii) The Tokyo Stock Exchange, Inc. makes no warranty or representation whatsoever, either as to the results stemmed from the use of the TOPIX Index Value and the TOPIX Index Marks or as to the figure at which the TOPIX Index Value stands on any particular day.

(iv) The Tokyo Stock Exchange, Inc. gives no assurance regarding accuracy or completeness of the TOPIX Index Value and data contained therein. Further, the Tokyo Stock Exchange, Inc. shall not be liable for the miscalculation, incorrect publication, delayed or interrupted publication of the TOPIX Index Value.

 

 

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(v) No securities are in any way sponsored, endorsed or promoted by the Tokyo Stock Exchange, Inc.

(vi) The Tokyo Stock Exchange, Inc. shall not bear any obligation to give an explanation of the securities or an advice on investments to any purchaser of the securities or to the public.

(vii) The Tokyo Stock Exchange, Inc. neither selects specific stocks or groups thereof nor takes into account any needs of the issuing company or any purchaser of the securities for calculation of the TOPIX Index Value.

(viii) Including but not limited to the foregoing, the Tokyo Stock Exchange, Inc. shall not be responsible for any damage resulting from the issue and sale of the securities”.

COMMODITY INDICES

We may offer notes linked to the following commodity indices. We have no current intention to offer warrants linked to such commodity indices due to regulatory restrictions. Accordingly, this section “Commodity Indices” is limited in its applicability to notes, unless otherwise specified in the applicable pricing supplement.

Dow Jones-UBS Commodity IndexSM

We have derived all information regarding the Dow Jones-UBS Commodity IndexSM (the “Dow Jones-UBS Commodity Index”) set forth in this index supplement, including, without limitation, its make up, its method of calculation and changes in its components, from publicly available information. The Dow Jones-UBS Commodity Index is calculated and published by DJI Opco, LLC, a subsidiary of S&P Dow Jones Indices LLC (“DJI Opco”) and UBS Securities LLC (“UBS”) (together, the “index sponsors”). The Dow Jones-UBS Commodity Index is reported by the index sponsors on Bloomberg page “DJUBS <Index>” or “DJUBSTR <Index>”.

UBS acquired AIG Financial Product Corp.’s commodity business as of May 6, 2009. As such, the Dow Jones-AIG Commodity Indexes were re-branded as the Dow Jones-UBS Commodity Indexes as of May 7, 2009. The Dow Jones-UBS Commodity Indexes have an identical methodology to the Dow Jones-AIG Commodity Indexes and take the identical form and format of the Dow Jones-AIG Commodity Indexes. In addition to changing the index names to reflect the Dow Jones-UBS brand, the suggested ticker symbols were modified.

In addition, according to publicly available information, as of March 18, 2010, CME Group Inc. and Dow Jones & Company, Inc. announced the launch of a new joint venture company, CME Group Index Services LLC (“CME Indexes”). CME Group Inc. has a 90% ownership interest and Dow Jones & Company, Inc. has a 10% ownership interest in CME Indexes. More information relating to the joint venture will be available publicly at a later date.

According to publicly available information, on July 2, 2012, McGraw Hill Financial, Inc. (formerly known as The McGraw Hill Companies, Inc.) (“McGraw Hill”) and the CME Group announced the launch of S&P Dow Jones Indices LLC (“S&P Dow Jones Indices”), a joint venture that combines the two index brands, S&P Indices and Dow Jones Indexes. Under the terms of the joint venture, McGraw Hill owns 73% of S&P Dow Jones Indices, CME Group owns 24.4% through its affiliates, and Dow Jones & Company, Inc. indirectly owns 2.6%.

In connection with any offering of securities, neither we nor any of our agents or dealers have participated in the preparation of the information described in the first paragraph of this section or made any due diligence inquiry with respect to the index sponsors. Neither we nor any of our agents or dealers makes any representation or warranty as to the accuracy or completeness of such information or any other publicly available information regarding the Dow Jones-UBS Commodity Index or the index sponsors.

You, as an investor in the securities, should make your own investigation into any Index and the index sponsors. The index sponsors are not involved in any offer of securities in any way and have no obligation to consider your interests as a holder of the securities. The index sponsors have no obligation to continue to publish any of the Dow Jones-UBS Commodity Index and may discontinue or suspend publication of any Index at any time in their sole discretion.

One or more of UBS and its affiliates may engage in trading in futures contracts and options on futures contracts on the commodities that underlie the Dow Jones-UBS Commodity Index, as well as commodities, including commodities included in the Dow Jones-UBS Commodity Index and other investments relating to commodities included in the Dow Jones-UBS Commodity Index on a regular basis as part of its general business, for proprietary accounts, for other accounts under management, to facilitate transactions for customers or to hedge obligations under products linked to the Dow Jones-UBS Commodity Index. Although they are not intended to, any of these activities could adversely affect the market price of the index components or the value of the Dow Jones-UBS Commodity Index. It is possible that one or more of UBS and its affiliates could receive substantial returns from these

 

 

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hedging activities while the market value of the commodities that underlie the Dow Jones-UBS Commodity Index and the value of the Dow Jones-UBS Commodity Index decline.

With respect to any of the activities described above, neither UBS nor its affiliates has any obligation to take into consideration at any time the needs of any buyer, seller, holder, issuer, of the securities.

UBS or its affiliates may also issue or underwrite securities or financial or derivative instruments with returns linked or related to changes in the performance of any of the foregoing.

Historical performance of the Dow Jones-UBS Commodity Index is not an indication of future performance. Future performance of the Dow Jones-UBS Commodity Index may differ significantly from historical performance, either positively or negatively.

Information contained on certain websites mentioned below is not incorporated by reference in, and should not be considered part of, this index supplement or the accompanying prospectus supplement and prospectus.

Commodity Futures Markets

As discussed below, the Dow Jones-UBS Commodity Index is composed of futures contracts on physical commodities. Futures contracts on physical commodities and commodity indices are traded on regulated futures exchanges, and physical commodities and other derivatives on physical commodities and commodity indices are traded in the over-the-counter market and on various types of physical and electronic trading facilities and markets. At present, all of the contracts included in the Dow Jones-UBS Commodity Index are exchange-traded futures contracts. An exchange-traded futures contract provides for the purchase and sale of a specified type and quantity of a commodity or financial instrument during a stated delivery month for a fixed price. A futures contract on an index of commodities provides for the payment and receipt of cash based on the level of the index at settlement or liquidation of the contract. A futures contract provides for a specified settlement month in which the cash settlement is made or in which the commodity or financial instrument is to be delivered by the seller (whose position is therefore described as “short”) and acquired by the purchaser (whose position is therefore described as “long”).

There is no purchase price paid or received on the purchase or sale of a futures contract. Instead, an amount of cash or cash equivalents must be deposited

with the broker as “initial margin”. This amount varies based on the requirements imposed by the exchange clearing houses, but may be lower than 5% of the notional value of the contract. This margin deposit provides collateral for the obligations of the parties to the futures contract.

By depositing margin, which may vary in form depending on the exchange, with the clearing house or broker involved, a market participant may be able to earn interest on its margin funds, thereby increasing the total return that it may realize from an investment in futures contracts. The market participant normally makes to, and receives from, the broker subsequent daily payments as the price of the futures contract fluctuates. These payments are called “variation margin” and are made as the existing positions in the futures contract become more or less valuable, a process known as “marking to the market”.

Futures contracts are traded on organized exchanges, known as “designated contract markets” in the United States. At any time prior to the expiration of a futures contract, subject to the availability of a liquid secondary market, a trader may elect to close out its position by taking an opposite position on the exchange on which the trader obtained the position. This operates to terminate the position and fix the trader’s profit or loss. Futures contracts are cleared through the facilities of a centralized clearing house and a brokerage firm, referred to as a “futures commission merchant”, which is a member of the clearing house. The clearing house guarantees the performance of each clearing member that is a party to a futures contract by, in effect, taking the opposite side of the transaction. Clearing houses do not guarantee the performance by clearing members of their obligations to their customers.

Unlike equity securities, futures contracts, by their terms, have stated expirations and, at a specified point in time prior to expiration, trading in a futures contract for the current delivery month will cease. As a result, a market participant wishing to maintain its exposure to a futures contract on a particular commodity with the nearest expiration must close out its position in the expiring contract and establish a new position in the contract for the next delivery month, a process referred to as “rolling”. For example, a market participant with a long position in November crude oil futures that wishes to maintain a position in the nearest delivery month will, as the November contract nears expiration, sell November futures, which serves to close out the existing long position, and buy December futures. This will “roll” the November position into a December position, and, when the November contract expires, the market participant will still have a long position in the nearest delivery month.

 

 

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Futures exchanges and clearing houses in the United States are subject to regulation by the Commodities Futures Trading Commission. Exchanges may adopt rules and take other actions that affect trading, including imposing speculative position limits, maximum price fluctuations and trading halts and suspensions and requiring liquidation of contracts in certain circumstances. Futures markets outside the United States are generally subject to regulation by comparable regulatory authorities. The structure and nature of trading on non-U.S. exchanges, however, may differ from this description.

The Dow Jones-UBS Commodity Index Overview

The Dow Jones-UBS Commodity Index is a proprietary index that is designed to be a benchmark for commodities as an asset class. It is composed of futures contracts on physical commodities and is intended to reflect the returns that are potentially available through (1) an unleveraged investment in those contracts plus (2) the rate of interest that could be earned on cash collateral invested in specified Treasury Bills.

Four Main Principles Guiding the Creation of the Dow Jones-UBS Commodity Index

The Dow Jones-UBS Commodity Index was created using the following four main principles:

 

   

Economic significance. A commodity index should fairly represent the importance of a diversified group of commodities to the world economy. To achieve a fair representation, the Dow Jones-UBS Commodity Index uses both liquidity data and U.S. dollar-weighted production data in determining the relative quantities of included commodities. The Dow Jones-UBS Commodity Index primarily relies on liquidity data, or the relative amount of trading activity of a particular commodity, as an important indicator of the value placed on that commodity by financial and physical market participants. The Dow Jones-UBS Commodity Index also relies on production data as a useful measure of the importance of a commodity to the world economy. Production data alone, however, may underestimate the economic significance of storable commodities (e.g., gold) relative to non-storable commodities (e.g., live cattle). Production data alone also may underestimate the investment value that financial market participants place on certain commodities, and/or the amount of commercial activity that is centered around various commodities. Accordingly, production statistics alone do not necessarily provide as accurate a blueprint of economic importance as the pronouncements of the markets themselves. The

   

Dow Jones-UBS Commodity Index thus relies on data that is both endogenous to the futures market (liquidity) and exogenous to the futures market (production) in determining relative weightings.

 

   

Diversification. A second major goal of the Dow Jones-UBS Commodity Index is to provide diversified exposure to commodities as an asset class. Disproportionate weightings of any particular commodity or sector increase volatility and negate the concept of a broad-based commodity index. Instead of diversified commodities exposure, the investor is unduly subjected to micro-economic shocks in one commodity or sector. As described further below, diversification rules have been established and are applied annually. Additionally, the Dow Jones-UBS Commodity Index is rebalanced annually on a price-percentage basis in order to maintain diversified commodities exposure over time.

 

   

Continuity. A third goal of the Dow Jones-UBS Commodity Index is to be responsive to the changing nature of commodity markets in a manner that does not completely reshape the character of the Dow Jones-UBS Commodity Index from year to year. The Dow Jones-UBS Commodity Index is intended to provide a stable benchmark, so that end-users may be reasonably confident that historical performance data (including such diverse measures as correlation, spot yield, roll yield and volatility) is based on a structure that bears some resemblance to both the current and future composition of the Dow Jones-UBS Commodity Index.

 

   

Liquidity. Another goal of the Dow Jones-UBS Commodity Index is to provide a highly liquid index. The explicit inclusion of liquidity as a weighting factor helps to ensure that the Dow Jones-UBS Commodity Index can accommodate substantial investment flows. The liquidity of an index affects transaction costs associated with current investments. It also may affect the reliability of historical price performance data.

These principles represent goals of the Dow Jones-UBS Commodity Index, its creators and owners and there can be no assurance that these goals will be reached by the index sponsors.

Oversight of the Dow Jones-UBS Commodity Index

The index sponsors use a two-tier structure, comprised of a Supervisory Committee and an Advisory Committee, to oversee the Dow Jones-UBS Commodity Index. The purpose of the two-tier structure is to expand the breadth of input into the

 

 

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decision-making process in respect of the Dow Jones-UBS Commodity Index, while also providing a mechanism for more rapid reaction in the event of any market disruptions or extraordinary change in market conditions that may affect the Dow Jones-UBS Commodity Index.

The Supervisory Committee is comprised of three members, two of whom are appointed by UBS and one of whom is appointed by DJI Opco. The Supervisory Committee will make all final decisions relating to the Dow Jones-UBS Commodity Index, given any advice and recommendations from the Advisory Committee. The Advisory Committee consists of six to twelve members drawn from the financial and academic communities. Both the Supervisory Committee and the Advisory Committee meet annually to consider any changes to be made to the Dow Jones-UBS Commodity Index for the coming year. These committees may also meet at other times as may be necessary for purposes of their respective responsibilities in connection with the oversight of the Dow Jones-UBS Commodity Index.

As described in more detail below, the Dow Jones-UBS Commodity Index is reweighted and rebalanced each year in January on a price-percentage basis. The annual weightings for the Dow Jones-UBS Commodity Index are determined each year by UBS under the supervision of the Supervisory Committee, announced after approval by the Supervisory Committee and implemented the following January. The composition of the Dow Jones-UBS Commodity Index for 2013 was approved by the Supervisory Committee and announced in October 2012.

Composition of the Dow Jones-UBS Commodity Index

Commodities available for inclusion in the Dow Jones-UBS Commodity Index

A number of commodities have been selected that are believed to be sufficiently significant to the world economy to merit consideration for inclusion in the Dow Jones-UBS Commodity Index and which are tradable through a qualifying related futures contract. With the exception of several metals contracts (aluminum, lead, tin, nickel and zinc) that trade on the London Metal Exchange (“LME”) and the contract for Brent Crude Oil, each of the potential commodities is the subject of a futures contract that trades on a U.S. exchange. The 24 commodities currently eligible for inclusion in the Dow Jones-UBS Commodity Index are as follows: aluminum, cocoa, coffee, copper, corn, cotton, crude oil (WTI and Brent), gold, heating oil, lead, lean hogs, live cattle, natural gas, nickel, platinum, silver, soybean meal, soybean oil, soybeans, sugar, tin, unleaded gasoline, wheat (Soft (Chicago) and Hard Red Winter (Kansas City)) and zinc.

The 20 Dow Jones-UBS Commodity Index commodities selected for 2013 are as follows: aluminum, coffee, copper, corn, cotton, crude oil (WTI and Brent), gold, heating oil, lean hogs, live cattle, natural gas, nickel, silver, soybeans, soybean meal, soybean oil, sugar, unleaded gasoline, wheat (Soft (Chicago) and Hard Red Winter (Kansas City)), and zinc.

Designated contracts for each commodity

A futures contract known as a designated contract is selected for each commodity. Where UBS, believes that there exists more than one futures contract with sufficient liquidity to be chosen as a designated contract for a commodity, UBS has historically selected the futures contract that is traded in North America and denominated in dollars (except in the case of the commodities for which LME contracts have been selected). When more than one such contract has existed, UBS has selected the most actively traded contract. Although there is no current intention to do so, UBS may in the future select contracts that are traded outside of the United States or are traded in currencies other than the U.S. dollar. The process is reviewed by the Supervisory Committee and the Advisory Committee. Data concerning this designated contract will be used to calculate the Dow Jones-UBS Commodity Index. The termination or replacement of a futures contract on an established exchange occurs infrequently; if a designated contract were to be terminated or replaced, a comparable futures contract would be selected, if available, to replace that designated contract.

The Dow Jones-UBS Commodity Index is a rolling index

The Dow Jones-UBS Commodity Index is composed of futures contracts on physical commodities. Unlike equities, which typically entitle the holder to a continuing stake in a corporation, commodity futures contracts normally specify a certain date for the delivery of the underlying physical commodity. In order to avoid delivering the underlying physical commodities and to maintain exposure to the underlying physical commodities, periodically futures contracts on physical commodities specifying delivery on a nearby date must be sold and futures contracts on physical commodities that have not yet reached the delivery period must be purchased. The roll for each contract occurs over a period of five DJ-UBS Business Days each month according to a pre-determined schedule. This process is known as “rolling” a futures position, and the Dow Jones-UBS Commodity Index is a “rolling index”.

A “DJ-UBS Business Day” is a day on which the sum of the Dow Jones-UBS Commodity Index Percentages (as defined in the section entitled “—Determination of Composition and Weightings of the

 

 

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Dow Jones-UBS Commodity Index” below) for the Dow Jones-UBS Commodity Index commodities that are open for trading is greater than 50%. For example, based on the weighting of the Dow Jones-UBS Commodity Index commodities for 2011, if the CME Group which, following CME’s merger with the CBOT in July 2007, now includes the CBOT and the New York Mercantile Exchange (“NYMEX”) are closed for trading on the same day, a DJ-UBS Business Day will not exist.

Determination of composition and weightings of the Dow Jones-UBS Commodity Index

The composition and weighting of the Dow Jones-UBS Commodity Index is determined by UBS, under the supervision of the Supervisory Committee and is approved by the Supervisory Committee in consultation with the Advisory Committee, each year.

In determining which commodities will be included in the Dow Jones-UBS Commodity Index and their relative weightings for a given year, UBS looks to both liquidity and U.S. dollar-adjusted production data in 2/3 and 1/3 shares, respectively. For each of the 24 commodities designated for potential inclusion in the Dow Jones-UBS Commodity Index, liquidity is measured by the Commodity Liquidity Percentage (“CLP”) and production by the Commodity Production Percentage (“CPP”). The CLP for each commodity is determined by taking a five-year average of the product of trading volume and the historic U.S. dollar value of the designated contract for that commodity, and dividing the result by the sum of such products for all commodities which were designated for potential inclusion in the Dow Jones-UBS Commodity Index. The CPP is determined for each commodity by taking a five-year average of world production figures, adjusted by the historic U.S. dollar value of the designated contract, and dividing the result by the sum of such production figures for all commodities which were designated for potential inclusion in the Dow Jones-UBS Commodity Index.

The CLP and the CPP are then combined (using a ratio of 2:1) to establish the Dow Jones-UBS Commodity Index Percentage (“CIP”) for each commodity. This CIP is then adjusted in accordance with certain diversification rules in order to determine the commodities which will be included in the Dow Jones-UBS Commodity Index and their respective percentage weights. The diversification rules are as follows:

 

   

No related group of commodities designated as a “Commodity Group” may constitute more than 33% of the Dow Jones-UBS Commodity Index. The Commodity Groups are:

 

   

Energy (currently including crude oil (WTI and Brent), heating oil, natural gas and unleaded gasoline)

   

Grains (currently including corn, soybeans, soybean oil, soybean meal and wheat (Chicago and Kansas))

 

   

Industrial Metals (currently including aluminum, copper, lead, nickel, tin and zinc)

 

   

Livestock (currently including lean hogs and live cattle)

 

   

Precious Metals (currently including gold, platinum and silver)

 

   

Softs (currently including cocoa, coffee, cotton and sugar)

 

   

No single commodity may constitute more than 15% of the Dow Jones-UBS Commodity Index.

 

   

No single commodity, together with its derivatives (e.g., crude oil, together with heating oil and unleaded gasoline), may constitute more than 25% of the Dow Jones-UBS Commodity Index.

 

   

No single commodity may constitute less than 2% of the Dow Jones-UBS Commodity Index, as liquidity allows.

Following the annual reweighting and rebalancing of the Dow Jones-UBS Commodity Index in January, the percentage of any single commodity or commodity group at any time prior to the next reweighting or rebalancing will fluctuate and may exceed or be less than the percentages set forth above.

Annual reweightings and rebalancings of the Dow Jones-UBS Commodity Index

The Dow Jones-UBS Commodity Index is reweighted and rebalanced each year in January on a price-percentage basis. The annual weightings for the Dow Jones-UBS Commodity Index are determined each year by UBS under the supervision of the Supervisory Committee, after approval by the Supervisory Committee in consultation with the Advisory Committee and implemented the following January. The composition of the Dow Jones-UBS Commodity Index for 2013 was approved by the Supervisory Committee and announced in October 2012.

2013 designated contracts and target weightings

The 20 Dow Jones-UBS Commodity Index commodities selected for 2013 are as follows: aluminum, coffee, copper, corn, cotton, crude oil (WTI and Brent), gold, heating oil, lean hogs, live cattle, natural gas, nickel, silver, soybeans, soybean meal, soybean oil, sugar, unleaded gasoline, wheat (Soft (Chicago) and Hard Red Winter (Kansas City)), and zinc. The designated contracts for those commodities, and their target weights, are as follows:

 

 

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2013 Dow Jones-UBS Commodity Index Breakdown by Commodity

 

Commodity

  Designated Contract   Exchange   Units   Quote   Target
Weighting (%)
 

Aluminum

  High Grade Primary Aluminum   LME   25 metric tons   USD/metric ton     4.91

Coffee

  Coffee “C”   NYBOT*   37,500 lbs   U.S. cents/pound     2.44

Copper

  Copper**   COMEX   25,000 lbs   U.S. cents/pound     7.28

Corn

  Corn   CBOT***   5,000 bushels   U.S. cents/bushel     7.05

Cotton

  Cotton   NYBOT*   50,000 lbs   U.S. cents/pound     1.77

Crude (WTI)

  Light, Sweet Crude Oil   NYMEX   1,000 barrels   USD/barrel     9.21

Crude (Brent)

  Brent Crude Oil   ICE   1,000 barrels   USD/barrel     5.79

Gold

  Gold   COMEX   100 troy oz.   USD/troy oz.     10.82

Heating Oil

  Heating Oil   NYMEX   42,000 gallons   U.S. cents/gallon     3.52

Lean Hogs

  Lean Hogs   CME   40,000 lbs   U.S. cents/pound     1.90

Live Cattle

  Live Cattle   CME   40,000 lbs   U.S. cents/pound     3.28

Natural Gas

  Henry Hub Natural Gas   NYMEX   10,000 mmbtu   USD/mmbtu     10.42

Nickel

  Primary Nickel   LME   6 metric tons   USD/metric ton     2.24

Silver

  Silver   COMEX   5,000 troy oz.   U.S. cents/troy oz.     3.90

Soybeans

  Soybeans   CBOT***   5,000 bushels   U.S. cents/bushel     5.49

Soybean Meal

  Soybean Meal   CBOT***   100 short tons   USD/short ton     2.61

Soybean Oil

  Soybean Oil   CBOT***   60,000 lbs   U.S. cents/pound     2.74

Sugar

  World Sugar No. 11   NYBOT*   112,000 lbs   U.S. cents/pound     3.88

Unleaded Gasoline

  Reformulated Blendstock for
Oxygen Blending
  NYMEX   42,000 gal   U.S. cents/gallon     3.46

Wheat (Chicago)

  Soft Wheat   CBOT***   5,000 bushels   U.S. cents/bushel     3.43

Wheat (Kansas)

  Hard Red Winter Wheat   KCBOT   5,000 bushels   U.S. cents/bushel     1.32

Zinc

  Special High Grade Zinc   LME   25 metric tons   USD/metric ton     2.52

 

* The New York Board of Trade (NYBOT) was renamed ICE Futures U.S. in September 2007.
** The Dow Jones-UBS Commodity Index uses the High Grade Copper contract traded on the COMEX division of the New York Mercantile Exchange for copper contract prices and LME volume data in determining the weighting of the Dow Jones-UBS Commodity Index.
*** Following its merger with CME in July 2007, the new entity name for the CBOT is CME Indexes.

 

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Calculation and Publication of the Dow Jones-UBS Commodity Index

The Dow Jones-UBS Commodity Index is calculated by DJI Opco, in conjunction with UBS, by applying the impact of the changes to the prices of index components (based on their relative weightings) and the Treasury Bill rate of interest.

The first step in calculating the Dow Jones-UBS Commodity Index is to calculate the applicable “commodity index multipliers” or “CIMs”. Following application of the diversification rules discussed in the section entitled “—Composition of the Dow Jones-UBS Commodity Index—Determination of Composition and Weightings of the Dow Jones-UBS Commodity Index” above, CIPs are incorporated into the Dow Jones-UBS Commodity Index by calculating the new unit weights for each index component. On a date near the beginning of each new calendar year, the CIPs, along with the settlement prices on that date for designated contracts included in the Dow Jones-UBS Commodity Index, are used to determine a CIM for each index component. This CIM is used to achieve the percentage weightings of the index components, in U.S. dollar terms, indicated by their respective CIPs. After the CIMs are calculated, they remain fixed throughout the year. As a result, the observed price percentage of each index component will float throughout the year, until the CIMs are reset the following year based on new CIPs.

Once the CIMs are determined, the calculation of the value of the Dow Jones-UBS Commodity Index is a mathematical process that reflects the performance of each index component and the rate of interest that could be earned on cash collateral invested in three-month U.S. Treasury Bills.

At present, DJI Opco disseminates the Dow Jones-UBS Commodity Index value approximately every 15 seconds (assuming the Dow Jones-UBS Commodity Index value has changed within such 15-second interval) from 8:00 a.m. to 3:30 p.m., New York City time, and publishes a daily Dow Jones-UBS Commodity Index value at approximately 5:00 p.m., New York City time, on each DJ-UBS Business Day on http://www.djindexes.com, on Reuters page DJUBSTR and on Bloomberg page “DJUBSTR”.

Dow Jones-UBS Commodity Index calculation disruption events

From time to time, disruptions can occur in trading futures contracts on various commodity exchanges. The daily calculation of the Dow Jones-UBS Commodity Index may be adjusted in the event that UBS determines that any of the following index calculation disruption events exists:

 

   

the termination or suspension of, or material limitation or disruption in the trading of any

   

futures contract used in the calculation of the Dow Jones-UBS Commodity Index on that day;

 

   

the settlement price of any futures contract used in the calculation of the Dow Jones-UBS Commodity Index reflects the maximum permitted price change from the previous day’s settlement price;

 

   

the failure of an exchange to publish official settlement prices for any futures contract used in the calculation of the Dow Jones-UBS Commodity Index; or

 

   

with respect to any futures contract used in the calculation of the Dow Jones-UBS Commodity Index that trades on the LME, a DJ-UBS Business Day on which the LME is not open for trading.

Additional information on the Dow Jones-UBS Commodity Index is available on the following website: http://www.djindexes.com.

License Agreement

The Dow Jones-UBS Commodity IndexesSM are a joint product of DJI Opco, LLC (“DJI Opco”), a subsidiary of S&P Dow Jones Indices LLC (“SPDJI”), and UBS Securities LLC (“UBS Securities”). Dow Jones® is a registered trademark of Dow Jones Trademark Holdings LLC (“Dow Jones”) and “UBS” is a registered trademark of UBS AG (“UBS AG”). These trademarks have been licensed to DJI Opco and sublicensed to Barclays Bank PLC for certain purposes. The Dow Jones-UBS Commodity Indexes have been licensed to Barclays Bank PLC for certain purposes.

The securities are not sponsored, endorsed, sold or promoted by Dow Jones, UBS AG, UBS Securities, DJI Opco or any of their subsidiaries or affiliates. None of Dow Jones, UBS AG, UBS Securities, DJI Opco or any of their subsidiaries or affiliates makes any representation or warranty, express or implied, to the owners of or counterparts to the securities or any member of the public regarding the advisability of investing in securities or commodities generally or in the securities particularly. The only relationship of Dow Jones, UBS AG, UBS Securities, DJI Opco or any of their subsidiaries or affiliates to the Licensee with respect to The Dow Jones-UBS Commodity Indexes is the licensing of The Dow Jones-UBS Commodity Indexes and certain trademarks, trade names and service marks. The Dow Jones-UBS Commodity Indexes are determined, composed and calculated by DJI Opco in conjunction with UBS Securities without regard to Barclays Bank PLC or the securities. UBS Securities and DJI Opco have no obligation to take the needs of Barclays Bank PLC or the owners of the securities into consideration in

 

 

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determining, composing or calculating The Dow Jones-UBS Commodity Indexes. None of Dow Jones, UBS AG, UBS Securities, DJI Opco or any of their respective subsidiaries or affiliates is responsible for or has participated in the determination of the timing of, prices at, or quantities of the securities to be issued or in the determination or calculation of the equation by which the securities are to be converted into cash, surrendered or redeemed, as the case may be. None of Dow Jones, UBS AG, UBS Securities, DJI Opco or any of their subsidiaries or affiliates shall have any obligation or liability in connection with the administration, marketing or trading of the securities. Notwithstanding the foregoing, UBS AG, UBS Securities, CME Group Inc., an affiliate of SPDJI, and their respective subsidiaries and affiliates may independently issue and/or sponsor financial products unrelated to the securities currently being issued by Barclays Bank PLC, but which may be similar to and competitive with the securities. In addition, UBS AG, UBS Securities, CME Group Inc. and their subsidiaries and affiliates actively trade commodities, commodity indexes and commodity futures (including The Dow Jones-UBS Commodity Indexes), as well as swaps, options and derivatives which are linked to the performance of such commodities, commodity indexes and commodity futures. It is possible that this trading activity will affect the value of The Dow Jones-UBS Commodity Indexes and securities.

Purchasers of the securities should not conclude that the inclusion of a futures contract in The Dow Jones-UBS Commodity Indexes is any form of investment recommendation of the futures contract or the underlying exchange-traded physical commodity by Dow Jones, UBS AG, UBS Securities, DJI Opco or any of their subsidiaries or affiliates. The information in the Index Supplement regarding The Dow Jones-UBS Commodity Indexes has been derived solely from publicly available documents. None of Dow Jones, UBS AG, UBS Securities, DJI Opco or any of their subsidiaries or affiliates has made any due diligence inquiries with respect to the securities. None of Dow Jones, UBS AG, UBS Securities, DJI Opco or any of their subsidiaries or affiliates makes any representation that these publicly available documents or any other publicly available information regarding The Dow Jones-UBS Commodity Indexes are accurate or complete.

NONE OF DOW JONES, UBS AG, UBS SECURITIES, DJI OPCO OR ANY OF THEIR SUBSIDIARIES OR AFFILIATES GUARANTEES THE ACCURACY AND/OR THE COMPLETENESS OF THE DOW JONES-UBS COMMODITY INDEXES OR ANY DATA RELATED THERETO AND NONE OF DOW JONES, UBS AG, UBS SECURITIES, DJI OPCO OR ANY OF THEIR SUBSIDIARIES OR

AFFILIATES SHALL HAVE ANY LIABILITY FOR ANY ERRORS, OMISSIONS OR INTERRUPTIONS THEREIN. NONE OF DOW JONES, UBS AG, UBS SECURITIES, DJI OPCO OR ANY OF THEIR SUBSIDIARIES OR AFFILIATES MAKES ANY WARRANTY, EXPRESS OR IMPLIED, AS TO RESULTS TO BE OBTAINED BY BARCLAYS BANK PLC, OWNERS OF THE SECURITIES OR ANY OTHER PERSON OR ENTITY FROM THE USE OF THE DOW JONES-UBS COMMODITY INDEXES OR ANY DATA RELATED THERETO. NONE OF DOW JONES, UBS AG, UBS SECURITIES, DJI OPCO OR ANY OF THEIR SUBSIDIARIES OR AFFILIATES MAKES ANY EXPRESS OR IMPLIED WARRANTIES AND EXPRESSLY DISCLAIMS ALL WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE WITH RESPECT TO THE DOW JONES-UBS COMMODITY INDEXES OR ANY DATA RELATED THERETO. WITHOUT LIMITING ANY OF THE FOREGOING, IN NO EVENT SHALL DOW JONES, UBS AG, UBS SECURITIES, DJI OPCO OR ANY OF THEIR SUBSIDIARIES OR AFFILIATES HAVE ANY LIABILITY FOR ANY LOST PROFITS OR INDIRECT, PUNITIVE, SPECIAL OR CONSEQUENTIAL DAMAGES OR LOSSES, EVEN IF NOTIFIED OF THE POSSIBILITY THEREOF. THERE ARE NO THIRD PARTY BENEFICIARIES OF ANY AGREEMENTS OR ARRANGEMENTS AMONG UBS SECURITIES, DJI OPCO AND BARCLAYS BANK PLC, OTHER THAN UBS AG AND THE LICENSORS OF DJI OPCO.

Rogers International Commodity Index®

Substantially all of the information regarding the Rogers International Commodity Index® set forth in this index supplement has been taken from publicly available sources, including the Rogers International Commodity Index® Handbook, which is available on the website of Beeland Interests, Inc. (“Beeland Interests”) at

http://beelandinterests.com/RICI%20Handbook.html. Such information reflects the policies of, and is subject to change at any time by James B. Rogers, Jr. (“Rogers”) and the Index Committee (as defined below). Neither Rogers, Beeland Interests, which is owned and controlled by Rogers, the Index Committee, nor members of the Index Committee in their capacity as such is involved in the offer of the notes in any way and has no obligation to consider your interests as a holder of the notes. Notwithstanding the foregoing sentence, certain members of the Index Committee (other than in their capacity as such) and their affiliate may act as

 

 

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selected dealers in connection with the sale of the notes and, as such, may sell or promote the notes or may be involved in the administration, marketing or offering of the notes. Beeland Interests has no obligation to continue to publish the Rogers International Commodity Index®, and may discontinue publication of the Rogers International Commodity Index® at any time in its sole discretion.

The Rogers International Commodity Index® is calculated as both an excess return and a total return index and we refer herein to such indices collectively as the “Rogers Indices”.

The Rogers International Commodity Index®—Excess ReturnSM is reported on behalf of the index sponsor on Bloomberg page “ROGRER <Index>”. The Rogers International Commodity Index®—Total ReturnSM is reported on behalf of the index sponsor on Bloomberg page “ROGRTR <Index>”.

Overview

The Rogers Indices are composite U.S. dollar-based indices created by Rogers in the late 1990s. The Rogers Indices represent the value of a basket of commodities consumed in the global economy, ranging from agricultural to energy to metals products. The value of this basket is tracked via 37 futures contracts on exchange-traded physical commodities quoted in four different currencies and listed on eleven exchanges in four countries.

The Rogers Indices aim to be an effective measure of the price action of raw materials not just in the United States but also around the world. The Rogers Indices’ weights attempt to balance consumption patterns worldwide (in developed and developing countries) and specific contract liquidity.

The Index Committee

The Rogers Indices are maintained and reviewed by their owner, Beeland Interests, who is advised by members of the Rogers International Commodity Index® Committee (the “Index Committee”). The Index Committee formulates and enacts all business assessments and decisions regarding the calculation, composition and management of the Rogers Indices. Rogers, as the founder of the Rogers Indices and sole owner of Beeland Interests, chairs the Index Committee and is the final arbiter of its decisions. In addition to Rogers, representatives of the following parties are members of the Index Committee: (1) Beeland Management Company, (2) CQG, (3) Daiwa Asset Management, (4) Diapason Commodities Management S.A., (5) Merrill Lynch, (6) RBS and (7) UBS AG. Rogers, as chairman of the Index Committee, is exclusively authorized to designate new members of the committee, if necessary.

The Index Committee usually meets once a year during the month of December to consider changes in the components and weights of the Rogers Indices for the following calendar year. However, the Index Committee may assemble additionally on any other day of the year to deal with exceptional circumstances as described below.

Rogers Index composition

The process

The contracts chosen for the basket of commodities that constitute the Rogers Indices are required to fulfill various conditions described below. The selection and weights of the items in the Rogers Indices generally are reviewed annually by the Index Committee, and weights for the next year are assigned every December.

The Rogers Indices’ composition is modified only on rare occasions. The composition of the Rogers Indices generally will not be changed unless exceptional circumstances in fact occur. Such “exceptional circumstances” include (but are not restricted to):

 

   

continuous adverse trading conditions for a single contract (e.g., trading volume collapses), or

 

   

critical changes in the global consumption pattern (e.g., a scientific breakthrough that fundamentally alters consumption of a commodity).

Exchanges and non-traded items

All commodities included in the Rogers Indices must be publicly traded on recognized exchanges to ensure ease of tracking and verification. Additionally, the Rogers Indices do not and will not include non-traded items such as hides or tallow. The 11 international exchanges recognized by the Index Committee are:

 

1. Chicago Mercantile Exchange (USA)

 

2. Chicago Board of Trade (USA)

 

3. ICE Futures US (USA)

 

4. NYMEX (USA)

 

5. ICE Futures Europe (UK)

 

6. London Metal Exchange (UK)

 

7. COMEX (USA)

 

8. The Tokyo Commodity Exchange (Japan)

 

9. NYSE Liffe (EU-Paris market)

 

10. Kansas City Board of Trade (USA)

 

11. NYSE Liffe (EU-London market)
 

 

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General commodity eligibility

In order for a commodity to be considered fit for inclusion in the Rogers Indices, it must play a significant role in worldwide (developed and developing economies) consumption. “Worldwide consumption” is measured by tracking international import and export patterns and the domestic consumption environments of the world’s prime commodity consumers. Only raw materials that reflect the current state of international trade and commerce are eligible for inclusion. Commodities that are merely linked to national consumption patterns will not be considered. The Rogers Indices are not related to any commodities production data.

Commodity screening process

Data of private and governmental providers concerning the world’s top consumed commodities is monitored and considered by members of the Index Committee throughout the year. In order to obtain a fair representation of international commodities consumption, a wide range of sources on commodities demand and supply is consulted. The findings of this undertaking are then condensed into the different commodities contracts and weights within the Rogers Indices. Sources on global commodity consumption data include:

 

   

Industrial Commodity Statistics Yearbook, United Nations (New York)

 

   

Commodity Trade Statistics Database, United Nations Statistic Division (New York)

 

   

Copper Bulletin Yearbook, International Copper Study Group (Lisbon)

 

   

Foreign Agricultural Service’s Production, Supply and Distribution Database, U.S. Department of Agriculture (Washington, DC)

 

   

Manufactured Fiber Review, Fiber Economics Bureau, Inc. (Arlington, VA)

 

   

Monthly Bulletin, International Lead and Zinc Study Group (London)

 

   

Quarterly Bulletin of Cocoa Statistics, International Cocoa Organization (London)

   

Rubber Statistical Bulletin, International Rubber Study Group (London)

 

   

Statistical Bulletin Volumes, Arab Gulf Cooperation Council (GCC) (Saudi Arabia)

 

   

Sugar Yearbook, International Sugar Organization (ISO) (London)

 

   

World Agriculture Assessments of Intergovernmental Groups, Food & Agriculture Organization of the United Nations (Rome)

 

   

World Commodity Forecasts, Economist Intelligence Unit (London)

 

   

World Cotton Statistics, International Cotton Advisory Committee (Washington, DC)

 

   

World Metals Statistics, World Bureau of Metal Statistics (London)

Contract characteristics

In order to decide whether a specific commodity contract is actually investable, the Index Committee screens volume and liquidity data of international exchanges, which is published on a regular basis by the Futures Industry Association (Washington, DC, United States) or by the individual exchanges on which the contracts trade.

If a commodity contract trades on more than one exchange, generally the most liquid contract globally, in terms of volume and open interest combined, is then aimed to be selected for inclusion in the Rogers Indices, taking legal considerations into account. Beyond liquidity, the Index Committee generally seeks to include the contract representing the highest quality grade of a specific commodity.

Futures contracts and weights

The table below lists the futures contracts that comprise the Rogers Indices following the February 2013 roll period occurring at the end of February 2013, together with their respective codes, exchanges, currencies and initial weights (the “Initial Weights”). The Initial Weights may be amended from time to time, as described below.

 

 

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Commodity

  

Code

  

Exchange

   Currency      Initial Weight  

Crude Oil

   CL    NYMEX      USD         21.00

Brent

   BRN    ICE* EU      USD         14.00

Corn

   C    CBOT      USD         4.75

Wheat

   W    CBOT      USD         4.75

Cotton

   CT    ICE US      USD         4.20

Aluminum

   AH    LME**      USD         4.00

Copper

   CA    LME      USD         4.00

Soybeans

   S    CBOT      USD         3.50

Gold

   GC    COMEX      USD         3.00

Natural Gas

   NG    NYMEX      USD         3.00

RBOB Gasoline

   RB    NYMEX      USD         3.00

Coffee

   RC    NYSE Liffe      USD         2.00

Lead

   PB    LME      USD         2.00

Live Cattle

   LC    CME      USD         2.00

Silver

   SI    COMEX      USD         2.00

Soybean Oil

   BO    CBOT      USD         2.00

Zinc

   ZS    LME      USD         2.00

Heating Oil

   HO    NYMEX      USD         1.80

Platinum

   PL    NYMEX      USD         1.80

Gas Oil

   GAS    ICE EU      USD         1.20

Cocoa

   C    NYSE Liffe      GBP         1.00

Lean Hogs

   LH    CME      USD         1.00

Lumber

   LB    CME      USD         1.00

Milling Wheat

   EBM    NYSE Liffe      EUR         1.00

Nickel

   NI    LME      USD         1.00

Rapeseed

   ECO    NYSE Liffe      EUR         1.00

Rubber

   81    TOCOM      JPY         1.00

Sugar

   SB    ICE US      USD         1.00

Tin

   SN    LME      USD         1.00

Wheat

   KW    KCBT***      USD         1.00

White Sugar

   W    NYSE Liffe      USD         1.00

Rice

   RR    CBOT      USD         0.75

Soybean Meal

   SM    CBOT      USD         0.75

Orange Juice

   OJ    ICE US      USD         0.60

Oats

   O    CBOT      USD         0.50

Palladium

   PA    NYMEX      USD         0.30

Milk Class III

   DA    CME      USD         0.10

 

*

The RICI® is based in part on the ICE Cotton, ICE Coffee “C”, ICE Cocoa, ICE Canola, ICE Sugar No.11, ICE FCOJ-A (Orange Juice), ICE Brent Crude Oil and ICE Gas Oil commodity futures contracts owned by ICE Data, LLP and its affiliates, and are used by Beeland Interests with permission under license by ICE Data, LLP.

     The trademarks ICE, ICE DATA, ICE FUTURES, ICE FUTURES EUROPE, ICE FUTURES U.S., COFFEE “C”, COTTON NO2 and SUGAR NO.11 are owned by ICE Data, LLP and its affiliates, and are used by Beeland Interests with permission under license by ICE Data, LLP.
     NEITHER THE INDICATION THAT SECURITIES OR OTHER FINANCIAL PRODUCTS OFFERED HEREIN ARE BASED ON DATA PROVIDED BY ICE DATA LLP, NOR THE USE OF THE TRADEMARKS OF ICE DATA LLP IN CONNECTION WITH SECURITIES OR OTHER FINANCIAL PRODUCTS DERIVED FROM SUCH DATA IN ANY WAY SUGGESTS OR IMPLIES A REPRESENTATION OR OPINION BY ICE DATA OR ANY OF ITS AFFILIATES AS TO THE ATTRACTIVENESS OF INVESTMENT IN ANY SECURITIES OR OTHER FINANCIAL PRODUCTS BASED UPON OR DERIVED FROM SUCH DATA. ICE DATA IS NOT THE ISSUER OF ANY SUCH SECURITIES OR OTHER FINANCIAL PRODUCTS AND MAKES NO EXPRESS OR IMPLIED WARRANTIES WHATSOEVER, INCLUDING BUT NOT LIMITED TO, WARRANTIES OF MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE WITH RESPECT TO SUCH DATA INCLUDED OR REFLECTED THEREIN, NOR AS TO RESULTS TO BE OBTAINED BY ANY PERSON OR ANY ENTITY FROM THE USE OF THE DATA INCLUDED OR REFLECTED THEREIN.
**

The London Metal Exchange Limited provides the pricing data for the LME components of the Rogers International Commodity Index®. All references to the LME pricing data are used with the permission of the LME, and the LME has no involvement with and accepts no responsibility for any Rogers International Commodity Index® product or any part of the Rogers International Commodity Index®, Rogers International Commodity Index® - Metals, Rogers International Commodity Index® - Industrial Metals, their suitability as the basis for an investment, or their future performance.

***

The Board of Trade of Kansas City, Missouri, Inc. (“KCBT”) is neither an issuer, manager, operator nor guarantor of products based on the Rogers International Commodity Index® or any sub-index thereof, or a partner, affiliate or joint venture of any of the foregoing. KCBT has not approved such products or their terms. KCBT may from time to time change its rules or bylaws, including those relating to the specifications of futures contracts on which the value of the Rogers International Commodity Index® or any sub-index thereof and/or such products are derived and the manner in which KCBT settlement prices are determined or disseminated. KCBT may from time to time take emergency action under its rules which could affect KCBT settlement prices. KCBT is not responsible for any calculations involving the Rogers International Commodity Index® or any sub-index thereof or such products.

 

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Changes in weights and/or index composition

The Index Committee generally reviews the selection and weights of the futures contracts in the Rogers Indices annually. Thus, weights are potentially reassigned during each month of December for the following year.

Monthly rolling of contracts

The Rogers Indices usually roll over three days, from the day prior to the last RICI® business day of the month to the first RICI® business day of the following month, following certain rules defined by the Index Committee. A RICI® business day is a day on which all U.S.-based exchanges that list futures contracts included in the Rogers Indices are open for business, including half-day openings.

Generally, if the next calendar month of a futures contract includes a first notice day, a delivery day or historical evidence that liquidity migrates to a next contract month during this period, then the next contract month is intended to be applied to calculate the Rogers Indices, taking legal constraints into account. For example, during the November roll period, the January Crude Oil contract is replaced by the February Crude Oil contract.

Rebalancing of the Rogers Index components

The Rogers Indices are rebalanced monthly during each roll period using the Initial Weights.

Data source

The Rogers Indices’ calculation is based on the official commodity exchanges’ prices of the futures contracts used.

Exceptional committee meetings

If, for any reason, one of the components included in the Rogers Indices ceases to exist or its liquidity collapses to abnormal levels, or any other similar event with similar consequences, as determined at the discretion of the Index Committee, occurs, the Index Committee will call an exceptional meeting to assess the situation. As an example of an exceptional circumstance, following the fall of the Malaysian ringgit in 1998, the liquidity of the Palm Oil futures contract on the Kuala Lumpur Commodity Exchange collapsed to a point where it became impossible to trade it. In that case, the Palm Oil futures contract was replaced by the Soybean Oil contract that trades on the Chicago Board of Trade, United States.

Excess return vs. total return

As noted above, the Rogers International Commodity Index® is calculated as both an excess return and a total return index. The Rogers International Commodity Index®—Excess ReturnSM reflects the

uncollateralized returns on the futures contracts on physical commodities included in the Rogers International Commodity Index®. The Rogers International Commodity Index®—Total ReturnSM, in turn reflects those same returns on an uncollateralized basis, as well as any interest that could be earned on cash collateral invested in 3-month U.S. treasury bills.

License Agreement

We have assumed as a matter of law from the debtor estate of Lehman Brothers Holdings Inc. a non-exclusive license agreement with Beeland Interests, pursuant to which we, in exchange for a fee, use the Rogers Indices in connection with the notes. We are not affiliated with Beeland Interests; the only relationship between Beeland Interests and us is any licensing of the use of the Rogers Indices and trademarks and service marks relating to them.

Pursuant to that license agreement the following language is set forth herein:

“‘Jim Rogers’, ‘James Beeland Rogers, Jr.’, ‘Rogers’ ‘Rogers International Commodity Index—Excess Return’ and ‘Rogers International Commodity Index—Total Return’ are trademarks and service marks of, and ‘Rogers International Commodity Index’ and ‘RICI’ are registered service marks of, Beeland Interests, Inc., which is owned and controlled by James Beeland Rogers, Jr., and are used subject to license. The personal names and likeness of Jim Rogers/James Beeland Rogers, Jr. are owned and licensed by James Beeland Rogers, Jr.

The notes linked to the Rogers International Commodity Index or any sub-index thereof are not sponsored, endorsed, sold or promoted by Beeland Interests, Inc. (‘Beeland Interests’) or James Beeland Rogers, Jr. Neither Beeland Interests nor James Beeland Rogers, Jr. makes any representation or warranty, express or implied, nor accepts any responsibility, regarding the accuracy or completeness of this index supplement and any other document that incorporates by reference this index supplement therein, or the advisability of investing in securities or commodities generally, or in the notes linked to the Rogers International Commodity Index or any sub-index thereof, or in futures particularly.

BEELAND INTERESTS DOES NOT, NOR DOES ANY OF ITS AFFILIATES OR AGENTS, GUARANTEE THE ACCURACY AND/OR THE COMPLETENESS OF THE ROGERS INTERNATIONAL COMMODITY INDEX (“RICI”), ANY SUB-INDEX THEREOF OR ANY DATA INCLUDED THEREIN. SUCH PERSON SHALL NOT HAVE ANY LIABILITY FOR ANY ERRORS, OMISSIONS, OR INTERRUPTIONS THEREIN AND MAKES NO WARRANTY,

 

 

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EXPRESS OR IMPLIED, AS TO RESULTS TO BE OBTAINED BY OWNERS OF THE NOTES LINKED TO THE RICI OR ANY SUB-INDEX THEREOF, OR ANY OTHER PERSON OR ENTITY FROM THE USE OF THE RICI, ANY SUB-INDEX THEREOF, ANY DATA INCLUDED THEREIN OR THE NOTES LINKED TO THE RICI OR ANY SUB-INDEX THEREOF. BEELAND INTERESTS DOES NOT, NOR DOES ANY OF ITS AFFILIATES OR AGENTS, MAKE ANY EXPRESS OR IMPLIED WARRANTIES, AND EACH EXPRESSLY DISCLAIMS ALL WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE WITH RESPECT TO THE RICI, ANY SUB-INDEX THEREOF, AND ANY DATA INCLUDED THEREIN. WITHOUT LIMITING ANY OF THE FOREGOING, IN NO EVENT SHALL BEELAND INTERESTS OR ITS AFFILIATES OR AGENTS HAVE ANY LIABILITY FOR ANY LOST PROFITS OR INDIRECT, PUNITIVE, SPECIAL OR CONSEQUENTIAL DAMAGES OR LOSSES, EVEN IF NOTIFIED OF THE POSSIBILITY THEREOF”.

S&P GSCI® Commodity Indices

We may offer notes that are linked to one or more of the S&P GSCI® Commodity Indices, including the S&P GSCI® Spot Index (the “S&P GSCI”), the S&P GSCI® Excess Return Index and the S&P GSCI® Total Return Index, each of which is described further in “—The S&P GSCI® Excess Return and Total Return Indices” below.

All information regarding the S&P GSCI® Commodity Indices set forth in this index supplement reflects the policies of, and is subject to change by, S&P Dow Jones Indices LLC (“S&P Dow Jones Indices”). The S&P GSCI® Commodity Indices are calculated, maintained and published by S&P Dow Jones Indices.

The S&P GSCI was established in May 1991, and is designed as a benchmark for investment in the commodity markets and as a measure of commodity market performance over time.

The S&P GSCI® Total Return Index is reported by S&P Dow Jones Indices on Bloomberg page “SPGSCITR <Index>”. The S&P GSCI® Spot Index is reported by S&P Dow Jones Indices on Bloomberg page “SPGSCI <Index>”. The S&P GSCI® Excess Return Index is reported by S&P Dow Jones Indices on Bloomberg page “SPGSCIP <Index>”.

Although the following discussion is largely framed in terms of the S&P GSCI it is, except as otherwise noted, equally applicable to the related S&P GSCI® Excess Return and Total Return Indices.

The S&P GSCI is an index based on a production-weighted basket of futures contracts on physical commodities traded on trading facilities in countries that are members of the Organization for Economic Cooperation and Development (“OECD”). The S&P GSCI Index is designed to be a measure of the performance over time of the markets for these commodities. The only commodities represented in the S&P GSCI are those physical commodities on which active and liquid contracts are traded on trading facilities in countries that are members of the OECD. The commodities represented in the S&P GSCI are weighted, on a production basis, to reflect their relative significance (in the view of S&P Dow Jones Indices, in consultation with the Index Committee, which is described below) to the world economy. The fluctuations in the value of the S&P GSCI are intended generally to correlate with changes in the prices of such physical commodities in global markets. The value of the S&P GSCI has been normalized such that its hypothetical level on January 2, 1970 was 100.

The contracts to be included in the S&P GSCI at any given time must satisfy several sets of eligibility criteria established by S&P Dow Jones Indices. First, S&P Dow Jones Indices identifies those contracts that meet the general criteria for eligibility. Second, the contract volume and weight requirements are applied and the number of contracts is determined, which serves to reduce the list of eligible contracts. At that point, the list of designated contracts for the relevant period is complete. The composition of the S&P GSCI is also reviewed on a monthly basis by S&P Dow Jones Indices.

Set forth below is a summary of the composition of and the methodology used to calculate the S&P GSCI. The methodology for determining the composition and weighting of the S&P GSCI and for calculating its value is subject to modification in a manner consistent with the purposes of the S&P GSCI. S&P Dow Jones Indices makes the official calculations of the S&P GSCI.

The Index Committee and the Index Advisory Panel

S&P Dow Jones Indices has established an Index Committee to oversee the daily management and operations of the S&P GSCI, and is responsible for all analytical methods and calculation in the indices. At each meeting, the Index Committee reviews any issues that may affect the components of the S&P GSCI, statistics comparing its composition to the market, commodities being considered for addition and any significant market events. In addition, the Index Committee may revise index policy covering rules for selecting commodities, or other matters. S&P Dow Jones Indices considers information about

 

 

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changes to its indices and related matters to be potentially market moving and material. Therefore, all Index Committee discussions are confidential. All references to methodology-related decisions made by S&P Dow Jones Indices in this index supplement represent decisions made by the Index Committee.

S&P Dow Jones Indices has also established an S&P GSCI Index Advisory Panel (the “Panel”) to assist it in connection with the operation of the S&P GSCI. The Panel meets on an annual basis and at other times at the request of the Index Committee. The principal purpose of the Panel is to advise the Index Committee with respect to, among other things, the calculation of the S&P GSCI, the effectiveness of the S&P GSCI as a measure of commodity futures market performance and the need for changes in the composition or methodology of the S&P GSCI. The Panel acts solely in an advisory and consultative capacity; the Index Committee makes all decisions with respect to the composition, calculation and operation of the S&P GSCI. Certain members of the Panel may be affiliated with clients of S&P Dow Jones Indices. Also, certain of the members of the Panel may be affiliated with entities which, from time to time, may have investments linked to the S&P GSCI, either through transactions in the contracts included in the S&P GSCI, futures contracts on the S&P GSCI or derivative products linked to the S&P GSCI.

Composition of the S&P GSCI

In order to be included in the S&P GSCI, a contract must satisfy the following general eligibility criteria:

 

(1) The contract must:

 

  (a) be in respect of a physical commodity (rather than a financial commodity);

 

  (b) have a specified expiration or term, or provide in some other manner for delivery or settlement at a specified time, or within a specified period, in the future; and

 

  (c) at any given point in time, be available for trading at least five months prior to its expiration or such other date or time period specified for delivery or settlement.

 

(2) The commodity must be the subject of a contract that:

 

  (a) is denominated in U.S. dollars;

 

  (b) is traded on or through an exchange, facility or other platform (referred to as a “trading facility”) that has its principal place of business or operations in a country that is a member of the OECD and:

 

   

makes price quotations generally available to its members or participants (and, if S&P Dow Jones

   

Indices is not such a member or participant, to S&P Dow Jones Indices) in a manner and with a frequency that is sufficient to provide reasonably reliable indications of the level of the relevant market at any given point in time;

 

   

makes reliable trading volume information available to S&P Dow Jones Indices with at least the frequency required by S&P Dow Jones Indices to make the monthly determinations;

 

   

accepts bids and offers from multiple participants or price providers; and

 

   

is accessible by a sufficiently broad range of participants; and

 

  (c) is traded on a trading facility which allows market participants to execute spread transactions through a single order entry between pairs of contract expirations included in the S&P GSCI that, at any given point in time, will be involved in the rolls to be effected in the next three roll periods.

 

(3) The price of the relevant contract that is used as a reference or benchmark by market participants (referred to as the “daily contract reference price”) generally must have been available on a continuous basis for at least two years prior to the proposed date of inclusion in the S&P GSCI. In appropriate circumstances, however, S&P Dow Jones Indices may determine that a shorter time period is sufficient or that historical daily contract reference prices for such contract may be derived from daily contract reference prices for a similar or related contract. The daily contract reference price may be (but is not required to be) the settlement price or other similar price published by the relevant trading facility for purposes of margining transactions or for other purposes.

 

(4) At and after the time a contract is included in the S&P GSCI, the daily contract reference price for such contract must be published between 10:00 a.m. and 4:00 p.m., New York City time on each contract business day by the trading facility on or through which it is traded and must generally be available to all members of, or participants in, such facility (and S&P Dow Jones Indices) on the same day from the trading facility or through a recognized third-party data vendor. Such publication must include, at all times, daily contract reference prices for at least one expiration or settlement date that is five months or more from the date the determination is made, as well as for all expiration or settlement dates during such five-month period.
 

 

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(5) Volume data with respect to such contract must be available for at least the three months immediately preceding the date on which the determination is made.

 

(6) In order to be added to the S&P GSCI, a contract that is not included in the S&P GSCI at the time of determination, and that is based on a commodity that is not represented in the S&P GSCI at such time, must, have an annualized total dollar value traded, over the relevant period of at least $15 billion. The total dollar value traded is the dollar value of the total annualized quantity of the commodity underlying transactions in the relevant contract over the period for which the calculation is made, based on the average of the daily contract reference prices on the last day of each month during the period.

 

(7) In order to continue to be included in the S&P GSCI, a contract already in the S&P GSCI at the time of determination, and that is the only contract on the relevant commodity included in the S&P GSCI must have an annualized total dollar value traded over the relevant period of at least $5 billion and of at least $10 billion during at least one of the three most recent annual periods used in making the determination.

 

(8) In order to be added to the S&P GSCI, a contract that is not in the S&P GSCI at the time of determination, and is based on a commodity on which there are one or more contracts already included in the S&P GSCI at such time must have an annualized total dollar value traded over the relevant period of at least $30 billion.

 

(9) In order to continue to be included in the S&P GSCI, a contract that is already in the S&P GSCI at the time of determination, and is based on a commodity on which there are one or more contracts already in the S&P GSCI at such time, must have an annualized total dollar value traded of at least $10 billion over the relevant period and of at least $20 billion during at least one of the three most recent annual periods used in making the determination.

 

(10) In order to continue to be included in the S&P GSCI at the time of determination, a contract must have a reference percentage dollar weight of at least 0.10%. The reference dollar weight of
  a contract is determined by multiplying the CPW (defined below) of a contract by the average of its daily contract reference prices on the last day of each month during the relevant period. The reference percentage dollar weight is determined by taking the sum of the reference dollar weights for all contracts included in the S&P GSCI and then determining each contract’s percentage of the total of such sum.

 

(11) In order to be added to the S&P GSCI, a contract must have a reference percentage dollar weight of at least 1.00% at the time of determination.

 

(12) In the event that two or more contracts on the same commodity satisfy the eligibility criteria,

 

  (a) such contracts are included in the S&P GSCI in the order of their respective total quantity traded during the relevant period (determined as the total quantity of the commodity underlying transactions in the relevant contract), with the contract having the highest total quantity traded being included first. No further contracts are included if such inclusion results in the portion of the S&P GSCI attributable to such commodity exceeding a particular level; and

 

  (b) if additional contracts could be included with respect to several commodities at the same time, the procedure in paragraph (12)(a) above is first applied to the commodity that has the smallest portion of the S&P GSCI attributable to it at the time of determination. Subject to the other eligibility criteria the contract with the highest total quantity traded on such commodity is included. Before any additional contracts on any commodity are included, the portion of the S&P GSCI attributable to all commodities is recalculated. The selection procedure described above is then repeated with respect to the contracts on the commodity that then has the smallest portion of the S&P GSCI attributable to it.

Currently, 24 contracts meet the requirements for inclusion in the S&P GSCI.

 

 

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Contracts Included in the S&P GSCI for 2013

 

Trading
Facility
  Commodity
(Contract)
  Ticker(1)     2012
Contract
Production
Weight
    2013
Contract
Production
Weight
    2013 
Average
Contract
Reference
Price ($)
    2012
Percentage
Dollar
Weight(2)
    2013
Reference
Price 
Dollar
Weight
    2013 Total
Dollar
Value
Traded
(USD bn)
    2013
Trading
Volume
Multiple
 

CBT

  Wheat (Chicago)     W        18,217.58        19,699.65        6.944bu        3.04     3.22     913.8        123.3   

KBT

  Wheat (Kansas)     KW        5,004.071        3,922.031        7.342bu        0.88     0.68     192.4        123.3   

CBT

  Corn     C        29,648.15        30,371.03        6.549bu        4.66     4.69     2,540.2        235.7   

CBT

  Soybeans     S        8,037.317        8,163.838        13.607bu        2.63     2.62     3,553        590.4   

ICE - US

  Coffee “C”     KC        17,406.22        17,554.97        1.975lbs        0.83     0.82     434.8        231.4   

ICE - US

  Sugar #11     SB        344,724.8        341,991.6        0.229lbs        1.90     1.85     662        155.7   

ICE - US

  Cocoa     CC        4.116321        4.100944        2345.083MT        0.23     0.23     137.2        263.4   

ICE - US

  Cotton #2     CT        53,411.21        52,490.38        0.869lbs        1.12     1.07     249.9        101.1   

CME

  Lean Hogs     LH        72,823.44        76,883.59        0.872lbs        1.52     1.58     394.1        108.5   

CME

  Cattle (Live)     LC        92,591.82        91,280.08        1.221lbs        2.71     2.62     692        114.6   

CME

  Cattle (Feeder)     FC        13,596.46        14,819.78        1.497lbs        0.49     0.52     137.8        114.6   

NYM/ICE

  Oil (WTI Crude)     CL        13,557.23        11,033.01        95.087bbl        30.96     24.71     17,858.9        314.2   

NYM

  Oil (#2 Heating)     HO        71,569.8        87,775.28        2.986gal        5.13     6.17     4,461.4        314.2   

NYM

  Oil (RBOB)     RB        73,694.1        88,342.87        2.837gal        5.02     5.90     4,266.2        314.2   

ICE - UK

  Oil (Brent Crude)     LCO        6,959.701        8,638.79        109.773bbl        18.35     22.34     16,143.1        314.2   

ICE - UK

  Oil (Gasoil)     LGO        359.2745        386.9597        939.521MT        8.11     8.56     6,188.9        314.2   

NYM/ICE

  Natural Gas     NG        28,984.31        29,450.21        2.910MMBtu        2.03     2.02     4,275.2        920.7   

LME

  Aluminum (High Gd. Prim.)     MAL        42.53        43.64        2071.229MT        2.12     2.13     3,200.5        653.5   

LME

  Copper (Grade A)     MCU        17.14        17.7        7873.938MT        3.24     3.28     7,305.5        967.5   

LME

  Standard Lead     MPB        7.872        8.28        2031.708MT        0.38     0.40     650.2        713.3   

LME

  Primary Nickel     MNI        1.352        1.376        17810.750MT        0.58     0.58     1,053.2        793.2   

LME

  Zinc (Spl. High Grade)     MZN        11.04        11.12        1952.000MT        0.52     0.51     1,299.4        1,104.9   

CMX

  Gold     GC        76.58309        76.77599        1660.250oz        3.05     3.00     7,571.1        1,096.3   

CMX

  Silver     SI        665.5205        676.4518        30.940oz        0.49     0.49     2,072.6        1,827.7   

 

(1) Tickers are Reuters RIC Codes.
(2) Using the ARCP’s for the 2012 Annual Calculation Period.

 

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The quantity of each of the contracts included in the S&P GSCI is determined on the basis of a five-year average (referred to as the “world production average”) of the production quantity of the underlying commodity as published by sources of information determined by S&P Dow Jones Indices, including the United Nations Statistical Yearbook and other official sources. However, if a commodity is primarily a regional commodity, based on its production, use, pricing, transportation or other factors, S&P Dow Jones Indices may calculate the weight of such commodity based on regional, rather than world, production data.

The five-year moving average is updated annually for each commodity included in the S&P GSCI, based on the most recent five-year period (ending approximately one-and-one half years prior to the date of calculation and moving backwards) for which complete data for all commodities is available. The contract production weights (“CPWs”) used in calculating the S&P GSCI are derived from world or regional production averages, as applicable, of the relevant commodities, and are calculated based on the total quantity traded for the relevant contract and the world or regional production average, as applicable, of the underlying commodity.

However, if the volume of trading in the relevant contract, as a multiple of the production levels of the commodity, is below specified thresholds, the CPW of the contract is reduced until the threshold is satisfied. This is designed to ensure that trading in each such contract is sufficiently liquid relative to the production of the commodity.

In addition, S&P Dow Jones Indices performs this calculation on a monthly basis and, if the multiple of any contract is below the prescribed threshold, the composition of the S&P GSCI is reevaluated, based on the criteria and weighting procedure described above. This procedure is undertaken to allow the S&P GSCI to shift from contracts that have lost substantial liquidity into more liquid contracts during the course of a given year. As a result, it is possible that the composition or weighting of the S&P GSCI will change on one or more of these monthly valuation dates. In addition, regardless of whether any changes have occurred during the year, S&P Dow Jones Indices reevaluates the composition of the S&P GSCI at the conclusion of each year, based on the above criteria. Other commodities that satisfy such criteria, if any, will be added to the S&P GSCI. Commodities included in the S&P GSCI which no longer satisfy such criteria, if any, will be deleted.

S&P Dow Jones Indices also determines whether modifications in the selection criteria or the methodology for determining the composition and weights of and for calculating the S&P GSCI are necessary or appropriate in order to assure that the S&P GSCI represents a measure of commodity market performance and to preserve and enhance S&P GSCI’s tradability. S&P Dow Jones Indices has the discretion to make any such modifications.

 

 

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The following table illustrates the changes in the year-end percentage dollar weights of each subsector included in the S&P GSCI from December 31, 1991 until December 31, 2012:

Historical Composition of the S&P GSCI

 

     Energy     Industrial Metals     Precious Metals     Agriculture     Livestock  

December 31, 1991

     48.0     5.9     2.4     21.1     22.7

December 31, 1992

     48.9     6.1     2.4     18.6     24.0

December 31, 1993

     39.6     6.3     3.0     24.7     26.4

December 31, 1994

     48.8     8.2     2.6     20.8     19.6

December 31, 1995

     53.5     7.9     2.6     25.3     10.6

December 31, 1996

     61.5     6.4     2.4     19.6     10.1

December 31, 1997

     55.3     7.2     2.4     24.0     11.1

December 31, 1998

     46.9     9.2     3.8     28.1     12.0

December 31, 1999

     60.3     8.5     2.6     18.1     10.5

December 31, 2000

     66.8     6.4     2.0     16.1     8.7

December 31, 2001

     58.6     7.8     2.8     19.6     11.2

December 31, 2002

     67.4     5.6     2.5     16.9     7.7

December 31, 2003

     66.8     7.4     2.5     17.0     6.3

December 31, 2004

     71.1     7.8     2.2     12.2     6.6

December 31, 2005

     75.7     7.2     2.0     10.3     5.0

December 31, 2006

     68.4     11.1     2.5     13.4     4.7

December 31, 2007

     73.8     7.1     2.2     13.3     3.6

December 31, 2008

     65.2     6.4     3.8     18.8     5.8

December 31, 2009

     70.2     8.2     3.1     14.4     4.1

December 31, 2010

     66.5     8.3     3.4     17.4     4.3

December 30, 2011

     70.5     6.6     3.5     14.7     4.7

December 31, 2012

     69.7     6.9     3.5     15.2     4.7

Copyright S&P Dow Jones Indices LLC. Used by permission.

 

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Contract Expirations

Because the S&P GSCI is comprised of actively traded contracts with scheduled expirations, it can only be calculated by reference to the prices of contracts for specified expiration, delivery or settlement periods, referred to as “contract expirations”. The contract expirations included in the S&P GSCI for each commodity during a given year are designated by S&P Dow Jones Indices, provided that each such contract must be an “active contract”. An “active contract” for this purpose is a liquid, actively traded contract expiration, as defined or identified by the relevant trading facility or, if no such definition or identification is provided by the relevant trading facility, as defined by standard custom and practice in the industry. The relative liquidity of the various active contracts is one of the factors that may be taken into consideration in determining which of them S&P Dow Jones Indices includes in the S&P GSCI.

If a trading facility deletes one or more contract expirations, the S&P GSCI will be calculated during the remainder of the year in which such deletion occurs on the basis of the remaining contract expirations designated by S&P Dow Jones Indices. If a trading facility ceases trading in all contract expirations relating to a particular contract, S&P Dow Jones Indices may designate a replacement contract on the commodity. The replacement contract must satisfy the eligibility criteria for inclusion in the S&P GSCI. To the extent practicable, the replacement will be effected during the next monthly review of the composition of the S&P GSCI. If that timing is not practicable, S&P Dow Jones Indices will determine the date of the replacement and will consider a number of factors, including the differences between the existing contract and the replacement contract with respect to contractual specifications, contract expirations and other matters.

Value of the S&P GSCI

The value of the S&P GSCI (though not the related S&P GSCI® Excess Return and Total Return Indices) on any given day is equal to the total dollar weight of the S&P GSCI divided by a normalizing constant that assures the continuity of the S&P GSCI over time. The total dollar weights of the S&P GSCI is the sum of the dollar weight of each of the components of the S&P GSCI. The dollar weight of each such Index Component on any S&P GSCI Business Day is equal to:

 

   

the daily contract reference price,

 

   

multiplied by the appropriate CPW, and

 

   

during a roll period, the appropriate “roll weight” (discussed below).

Daily Contract Reference Price

The daily contract reference price used in calculating the dollar weight of each component of the S&P GSCI on any given day is the most recent daily contract reference price made available by the relevant trading facility, except that if the exchange is closed or otherwise fails to publish a daily contract reference price on that day or if the trading facility fails to make a daily contract reference price available or publishes a daily contract reference price that reflects manifest error, the relevant calculation will be delayed until the price is made available or corrected. However, if the price is not made available or corrected by 4:00 p.m., New York City time, S&P Dow Jones Indices may determine the appropriate daily contract reference price for the applicable futures contract for purposes of the relevant S&P GSCI Index calculation. The initial value of the S&P GSCI was normalized such that its hypothetical level on January 2, 1970 was 100.

Roll Weights and Roll Periods

The “roll weight” of a commodity reflects the fact that the positions in futures contracts must be liquidated or rolled forward into more distant contract expirations as they approach expiration. If actual positions in the relevant markets were rolled forward, the roll would likely need to take place over a period of days. Since the S&P GSCI is designed to replicate the performance of actual investments in the underlying contracts, the rolling process incorporated in the S&P GSCI takes place over a number of business days during each month (referred to as a “roll period”). On each day of the roll period, the “roll weights” of the current contract expirations and the next contract expiration (the next contract as designated by the index rules) into which it is rolled are adjusted, so that the hypothetical position in the contract on the commodity that is included in the index is gradually shifted from the current contract expiration to the next contract expiration (the next contract as so designated). The roll period applicable to the S&P GSCI occurs from the fifth to ninth S&P GSCI business days of each month, which are days on which the indices are calculated, as determined by NYSE Euronext Holiday & Hours schedule.

If on any day during a roll period any of the following conditions exists, the portion of the roll that would have taken place on that day is deferred until the next day on which such conditions do not exist:

 

   

if, with respect to any current contract expiration and the next contract expiration, the S&P GSCI business day on which the roll is intended to occur is not a day on which the trading facility on or through which the given contract expirations are traded is scheduled to be open

 

 

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for trading for at least three hours, these contract expirations are not available for trading during these hours or no daily contract reference price is published by the trading facility for a given contract expiration;

 

   

any such price represents the maximum or minimum price for such contract month, based on exchange price limits (referred to as a “Limit Price”);

 

   

the daily contract reference price published by the relevant trading facility reflects manifest error and such error is not corrected by the S&P GSCI settlement time or such price is not published by 4:00 p.m., New York City time. In that event, S&P Dow Jones Indices may, but is not required to, determine a daily contract reference price and complete the relevant portion of the roll based on such price. If the trading facility publishes a price or a corrected price before the opening of trading on the next day, S&P Dow Jones Indices will revise the portion of the roll accordingly; or

 

   

trading in the relevant contract terminates prior to its scheduled closing time and does not resume at least ten minutes prior to, and continue until, the scheduled closing time.

The S&P GSCI® Excess Return and Total Return Indices

Contract daily return

Whereas the S&P GSCI is based on price levels of the contracts it comprises, both the S&P GSCI® Excess Return and Total Return Indices depend for their calculation on the contract daily return. The contract daily return is defined as the percentage change in the total dollar weight of the S&P GSCI from one S&P GSCI business day to the next. The contract daily return on any given S&P GSCI business day is equal to the amount obtained from an investment in the S&P GSCI on the preceding S&P GSCI business day of the total dollar weight of the S&P GSCI on the preceding S&P GSCI business day, divided by the total dollar weight of the S&P GSCI on the preceding S&P GSCI business day, minus one.

Value of the S&P GSCI® Excess Return Index

The S&P GSCI tracks the price of the nearby futures contracts, not returns available to investors. The S&P GSCI® Excess Return Index, in contrast, incorporates both the returns of the S&P GSCI (reflecting price levels) as well as the discount or premium obtained by rolling hypothetical positions in those contracts forward as they approach delivery. The S&P GSCI® Excess Return Index does not reflect the return above cash (unlike the S&P Excess Return). The value of the S&P GSCI® Excess Return Index on any S&P

GSCI business day is equal to the product of (1) the value of the S&P GSCI® Excess Return Index on the immediately preceding S&P GSCI business day and (2) one plus the contract daily return on the S&P GSCI business day on which the calculation is made. The initial value of the S&P GSCI® Excess Return Index was normalized such that its hypothetical level on January 2, 1970 was 100.

Value of the S&P GSCI® Total Return Index

The S&P GSCI® Total Return Index incorporates the returns of the S&P GSCI® Excess Return Index (i.e., the returns of the S&P GSCI as well as the discount or premium obtained by rolling hypothetical positions in those contracts forward as they approach delivery) and the interest earned on hypothetical fully collateralized contract positions on the commodities included in the S&P GSCI. The value of the S&P GSCI® Total Return Index on any S&P GSCI business day is equal to the product of (1) the value of the S&P GSCI® Total Return Index on the immediately preceding S&P GSCI business day and (2) one plus the sum of the contract daily return and the Treasury Bill return on the S&P GSCI business day on which the calculation is made and (3) one plus the Treasury Bill return for each non-S&P GSCI business day since the preceding S&P GSCI business day. The Treasury Bill return is the return on a hypothetical investment in the S&P GSCI at a rate equal to the interest rate on a specified U.S. Treasury Bill. The initial value of the S&P GSCI® Total Return Index was normalized such that its hypothetical level on January 2, 1970 was 100.

Additional information on the S&P GSCI and its related indices, including the S&P GSCI® Excess Return Index and the S&P GSCI® Total Return Index, and sub-indices is available on the following website: http://www.standardandpoors.com.

License Agreement

The S&P GSCI Index is a product of S&P Dow Jones Indices LLC (“SPDJI”), and has been licensed for use by Barclays Bank PLC. S&P® and GSCI® are registered trademarks of Standard & Poor’s Financial Services LLC (“SPFS”). These trademarks have been licensed to SPDJI and its affiliates and sublicensed to Barclays Bank PLC for certain purposes. The S&P GSCI Index is not owned, endorsed, or approved by or associated with Goldman, Sachs & Co. or its affiliated companies.

The securities are not sponsored, endorsed, sold or promoted by SPDJI, SPFS, or any of their respective affiliates (collectively, “S&P Dow Jones Indices”). S&P Dow Jones Indices does not make any representation or warranty, express or implied, to the owners of the securities or any member of the public

 

 

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regarding the advisability of investing in securities generally or in the securities particularly or the ability of the S&P GSCI Index to track general market performance. S&P Dow Jones Indices’ only relationship to Barclays Bank PLC with respect to the S&P GSCI Index is the licensing of the S&P GSCI Index and certain trademarks, service marks and/or trade names of S&P Dow Jones Indices and/or its licensors. The S&P GSCI Index is determined, composed and calculated by S&P Dow Jones Indices without regard to Barclays Bank PLC or the securities. S&P Dow Jones Indices has no obligation to take the needs of Barclays Bank PLC or the owners of the securities into consideration in determining, composing or calculating the S&P GSCI Index. S&P Dow Jones Indices is not responsible for and has not participated in the determination of the prices, and amount of the securities or the timing of the issuance or sale of the securities or in the determination or calculation of the equation by which the securities are to be converted into cash, surrendered or redeemed, as the case may be. S&P Dow Jones Indices has no obligation or liability in connection with the administration, marketing or trading of the securities. There is no assurance that investment products based on the S&P GSCI Index will accurately track the performance of the index or provide positive investment returns. SPDJI is not an investment advisor. Inclusion of a security within the S&P GSCI Index is not a recommendation by S&P Dow Jones Indices to buy, sell, or hold such security, nor is it considered to be investment advice. In addition, CME Group Inc. and its affiliates may trade financial products which are linked to the performance of the S&P GSCI Index. It is possible that this trading activity will affect the value of the S&P GSCI Index and the securities.

S&P DOW JONES INDICES DOES NOT GUARANTEE THE ADEQUACY, ACCURACY, TIMELINESS AND/OR THE COMPLETENESS OF THE S&P GSCI INDEX OR ANY DATA RELATED THERETO OR ANY COMMUNICATION (INCLUDING BUT NOT LIMITED TO, ORAL OR WRITTEN COMMUNICATION (INCLUDING ELECTRONIC COMMUNICATIONS)) WITH RESPECT THERETO. S&P DOW JONES INDICES SHALL NOT BE SUBJECT TO ANY DAMAGES OR LIABILITY FOR ANY ERRORS, OMISSIONS, OR DELAYS THEREIN. S&P DOW JONES INDICES MAKES NO EXPRESS OR IMPLIED WARRANTIES, AND EXPRESSLY DISCLAIMS ALL WARRANTIES, OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE OR AS TO RESULTS TO BE OBTAINED BY BARCLAYS BANK PLC, OWNERS OF THE SECURITIES, OR ANY OTHER PERSON OR ENTITY FROM THE USE OF THE S&P GSCI INDEX OR WITH RESPECT TO ANY DATA

RELATED THERETO. WITHOUT LIMITING ANY OF THE FOREGOING, IN NO EVENT WHATSOEVER SHALL S&P DOW JONES INDICES BE LIABLE FOR ANY INDIRECT, SPECIAL, INCIDENTAL, PUNITIVE, OR CONSEQUENTIAL DAMAGES INCLUDING BUT NOT LIMITED TO, LOSS OF PROFITS, TRADING LOSSES, LOST TIME OR GOODWILL, EVEN IF THEY HAVE BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES, WHETHER IN CONTRACT, TORT, STRICT LIABILITY, OR OTHERWISE. THERE ARE NO THIRD PARTY BENEFICIARIES OF ANY AGREEMENTS OR ARRANGEMENTS BETWEEN S&P DOW JONES INDICES AND BARCLAYS BANK PLC, OTHER THAN THE LICENSORS OF S&P DOW JONES INDICES.

PROPRIETARY INDICES

Barclays 10Y Treasury Futures Index™

The Barclays 10Y Treasury Futures Index™ (the “10Y Treasury Index”) reflects the returns available by maintaining a rolling position in 10-Year U.S. Treasury futures contracts (the “10Y Treasury futures” and each, a “10Y Treasury futures contract”). 10Y Treasury futures are legally binding agreements for the buying or selling of U.S. Treasury notes at a fixed price for physical settlement on a future date. Each 10Y Treasury futures contract has a face value of $100,000 and requires the delivery of a U.S. Treasury note with a remaining maturity or term of no more than 10 years and no less than 6 years and 6 months. 10Y Treasury futures are traded on the Chicago Board of Trade (“CBOT”). The closing prices of 10Y Treasury futures are calculated by CBOT and reported by CBOT on Bloomberg page “TY <Index>”. As used herein, an “index business day” means any day that CBOT is scheduled to be open for trading.

At any given time, the 10Y Treasury Index is comprised of a single 10Y Treasury futures contract that is either the contract closest to expiration, which is known as the “front 10Y Treasury futures contract”, or the next 10Y Treasury futures contract scheduled to expire immediately following the front 10Y Treasury futures contract. The 10Y Treasury Index maintains its exposure to 10Y Treasury futures by closing out its position in the expiring front 10Y Treasury futures contract and establishing a new position in the next 10Y Treasury futures contract scheduled to expire immediately following the front 10Y Treasury futures contract, a process referred to as “rolling”. The Index rolls into the next 10Y Treasury futures contract three index business days before the end of the month immediately preceding the upcoming delivery month for the front 10Y futures contract (each such date, a “roll date”). The

 

 

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“delivery months” of 10Y Treasury futures are March, June, September and December, and their corresponding roll dates fall in the months of February, May, August and November.

The 10Y Treasury Index is maintained and calculated by Barclays Bank PLC (the “index sponsor”), and is denominated in U.S. dollars. The index sponsor calculates the level of the 10Y Treasury Index at the close of business, London time, on each index business day with respect to the prior index business day and publishes it on http://www.barcap.com/indices shortly thereafter. The level of the 10Y Treasury Index is also reported on Bloomberg page “BXIIUS10 <Index>”.

Calculation of the 10Y Treasury Index

The level of the 10Y Treasury Index is deemed to have been 100 on January 15, 1997, which we refer to as the “index commencement date”. On any given index business day (for purposes of this section, a “valuation date”), the level of the 10Y Treasury Index is equal to:

 

LOGO

where:

It” means the level of the 10Y Treasury Index on the valuation date;

It-1 ” means the level of the 10Y Treasury Index on the index business day that immediately precedes the valuation date;

Ft ” means the closing price of the relevant 10Y Treasury futures contract on the valuation date. On the roll date, Ft is calculated using the front 10Y Treasury futures contract. On the day following the roll date and thereafter, Ft is calculated using the next futures contract that is scheduled to expire (which becomes the front 10Y Treasury futures contract after the current front 10Y Treasury futures contract expires); and

Ft-1 ” means the closing price of the relevant 10Y Treasury futures contract on the index business day that immediately precedes the valuation date. On the roll date, Ft-1 is calculated using the front 10Y Treasury futures contract. On the day following the roll date and thereafter, Ft-1 is calculated using the next futures contract that is scheduled to expire (which becomes the front 10Y Treasury futures contract after the current front 10Y Treasury futures contract expires).

The 10Y Treasury Index is calculated at the close of business, London time, on each index business day with respect to the prior index business day.

Modifications to the 10Y Treasury Index

The index sponsor does not presently intend to modify the method of calculating the 10Y Treasury Index as described above. However, under certain circumstances described in this section, the index sponsor may, in its sole discretion, make modifications to the 10Y Treasury Index. The index sponsor will promptly publish any such modifications on http://www.barcap.com/indices/.

Changes in 10Y Treasury futures

If, in the sole discretion of the index sponsor, a “potential adjustment event” occurs with respect to the 10Y Treasury futures, the index sponsor may replace the 10Y Treasury futures with other futures contracts that it determines, in its sole discretion, are comparable for purposes of the 10Y Treasury Index to the 10Y Treasury futures being replaced.

A “potential adjustment event” includes any of the following:

 

   

a change to the calculation methodology of the daily closing prices of 10Y Treasury futures;

 

   

the occurrence of an event that causes CBOT not to calculate the daily closing prices of 10Y Treasury futures; and

 

   

any event that the index sponsor determines may lead to any of the foregoing events.

Upon any replacement by the index sponsor of 10Y Treasury futures following a potential adjustment event, the index sponsor may make any adjustments to the 10Y Treasury Index as may, in its sole discretion, be required to render the 10Y Treasury Index comparable to the 10Y Treasury Index prior to the occurrence of the potential adjustment event.

Index market disruption and force majeure events

If an “index market disruption event” or a “force majeure” event occurs or is continuing on any index business day that, in the index sponsor’s sole discretion, affects the 10Y Treasury Index or the 10Y Treasury futures, the index sponsor may:

 

   

make such determinations and/or adjustments to the terms of the 10Y Treasury Index as it deems appropriate in order to determine the level of the 10Y Treasury Index on such day (if such day is an index business day);

 

   

defer publication of information relating to the 10Y Treasury Index until the next index business day on which such index market disruption or force majeure event, as applicable, is not continuing; and

 

 

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if such index business day is a roll date, postpone such roll date to the next index business day on which such index market disruption or force majeure event, as applicable, is not continuing.

Any of the following will constitute an “index market disruption event”:

 

   

the occurrence or existence, on any index business day at or during the one-hour period before the index valuation time, in relation to the 10Y Treasury futures (1) a suspension of, or limitation imposed on, trading on CBOT, or (2) any event that disrupts or impairs (as determined by the index sponsor in its sole discretion) the ability of market participants in general to effect transactions in relation to, or to obtain market values of, 10Y Treasury futures;

 

   

the declaration of a general moratorium in respect of CBOT activities;

 

   

on any index business day, the failure of CBOT to publish the values of 10Y Treasury futures; or

 

   

on any index business day, the occurrence or existence of a lack of, or a material decline in, the liquidity in the market for trading in 10Y Treasury futures.

A “force majeure event” is an event or circumstance (including without limitation, a systems failure, natural or man-made disaster, act of God, armed conflict, act of terrorism, riot or labor disruption or any similar intervening circumstance) that is beyond the reasonable control of the index sponsor and that the index sponsor (in its sole discretion) determines affects the 10Y Treasury Index or the 10Y Treasury futures.

Taxation

If at any time the index sponsor determines that, as a result of a change in taxation (including, but not limited to, any tax imposed on the index sponsor or its affiliates), it is necessary to change the 10Y Treasury futures or the method of calculating the 10Y Treasury Index, in order to offset the effect of such taxation, the index sponsor may make such change or changes in its sole discretion.

Cessation of trading and other termination events

The index sponsor may, in its sole discretion, discontinue calculating the 10Y Treasury Index if any of the following events occurs:

 

   

If 10Y Treasury futures cease (or will cease) to be publicly quoted for any reason and are not immediately re-listed on a quotation system in a manner acceptable to the index sponsor; or

   

if, after the occurrence of a potential adjustment event, an adjustment in the determination of the index sponsor is not possible or not reasonably practical for any reason.

Change in methodology

While the index sponsor currently employs the methodology described in this free writing prospectus to rebalance and calculate the 10Y Treasury Index, it is possible that market, regulatory, juridical, financial, fiscal or other circumstances (including, but not limited to, any changes to or any suspension or termination of or any other events affecting 10Y Treasury futures) will arise that would, in the view of the index sponsor, necessitate a modification or change of such methodology.

Trademark

The Barclays 10Y Treasury Futures Index™ is a trademark of Barclays Bank PLC.

Disclaimer

The index sponsor does not guarantee the accuracy and/or completeness of the 10Y Treasury Index, any data included therein, or any data from which it is based, and the index sponsor shall have no liability for any errors, omissions, or interruptions therein.

The index sponsor makes no warranty, express or implied, as to the results to be obtained from the use of the 10Y Treasury Index. The index sponsor makes no express or implied warranties, and expressly disclaims all warranties of merchantability or fitness for a particular purpose or use with respect to the 10Y Treasury Index or any data included therein. Without limiting any of the foregoing, in no event shall the index sponsor have liability for any special, punitive, indirect or consequential damages, lost profits, loss of opportunity or other financial loss, even if notified of the possibility of such damages.

Neither the index sponsor nor any of its affiliates or subsidiaries or any of their respective directors, officers, employees, representatives, delegates or agents shall have any responsibility to any person (whether as a result of negligence or otherwise) for any determination made or anything done (or omitted to be determined or done) in respect of the 10Y Treasury Index or publication of the level of the 10Y Treasury Index (or failure to publish such value) and any use to which any person may put the 10Y Treasury Index or the level of the 10Y Treasury Index. In addition, although the index sponsor reserves the right to make adjustments to correct previously incorrectly published information, including but not limited to the level of the 10Y Treasury Index, the index sponsor is under no obligation to do so and shall have no liability in respect of any errors or omissions.

 

 

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Nothing in this disclaimer shall exclude or limit liability to the extent such exclusion or limitation is not permitted by law.

Barclays Long-Bond Treasury Futures Index™

The Barclays Long-bond Treasury Futures Index™ (the “Long-bond Treasury Index”) reflects the returns available by maintaining a rolling position in Long-bond U.S. Treasury futures contracts (the “Long-bond Treasury futures” and each, a “Long-bond Treasury futures contract”). Long-bond Treasury futures are legally binding agreements for the buying or selling of U.S. Treasury bonds at a fixed price for physical settlement on a future date. Each Long-bond Treasury futures contract has a face value of $100,000 and requires the delivery of a U.S. Treasury bond with a remaining term until maturity or first call of no less than 15 years. From and including the March 2011 Long-bond Treasury futures contract, each Long-bond Treasury futures contract requires the delivery of a U.S. Treasury bond with a remaining term until maturity or first call of no less than 15 years, but less than 25 years. Long-bond Treasury futures are traded on the Chicago Board of Trade (“CBOT”). The closing prices of Long-bond Treasury futures are calculated by CBOT and reported by CBOT on Bloomberg page “US <Index>”. As used herein, an “index business day” means any day that CBOT is scheduled to be open for trading.

At any given time, the Long-bond Treasury Index is comprised of a single Long-bond Treasury futures contract that is either the contract closest to expiration, which is known as the “front Long-bond Treasury futures contract”, or the next Long-bond Treasury futures contract scheduled to expire immediately following the front Long-bond Treasury futures contract. The Long-bond Treasury Index maintains its exposure to Long-bond Treasury futures by closing out its position in the expiring front Long-bond Treasury futures contract and establishing a new position in the next Long-bond Treasury futures contract scheduled to expire immediately following the front Long-bond Treasury futures contract, a process referred to as “rolling”. The Long-bond Treasury Index rolls into the next Long-bond Treasury futures contract three index business days before the end of the month immediately preceding the upcoming delivery month for the front Long-bond futures contract (each such date, a “roll date”). The “delivery months” of Long-bond Treasury futures are March, June, September and December, and their corresponding roll dates fall in the months of February, May, August and November.

The Long-bond Treasury Index is maintained and calculated by Barclays Bank PLC (the “index sponsor”) and is denominated in U.S. dollars. The index sponsor calculates the level of the Long-bond

Treasury Index at the close of business, London time, on each index business day with respect to the prior index business day and publishes it on http://www.barcap.com/indices shortly thereafter. The level of the Long-bond Treasury Index is also reported on Bloomberg page “BXIIUS30 <Index>”.

Calculation of the Index

The level of the Long-bond Treasury Index is deemed to have been 100 on January 15, 1997, which we refer to as the “index commencement date”. On any given index business day (for purposes of this section, a “valuation date”), the level of the Long-bond Treasury Index is equal to:

 

LOGO

where:

It” means the level of the Long-bond Treasury Index on the valuation date;

It-1 ” means the level of the Long-bond Treasury Index on the index business day that immediately precedes the valuation date;

Ft ” means the closing price of the relevant Long-bond Treasury futures contract on the valuation date. On the roll date, Ft is calculated using the front Long-bond Treasury futures contract. On the day following the roll date and thereafter, Ft is calculated using the next futures contract that is scheduled to expire (which becomes the front Long-bond Treasury futures contract after the current front Long-bond Treasury futures contract expires); and

Ft-1 ” means the closing price of the relevant Long-bond Treasury futures contract on the index business day that immediately precedes the valuation date. On the roll date, Ft-1 is calculated using the front Long-bond Treasury futures contract. On the day following the roll date and thereafter, Ft-1 is calculated using the next futures contract that is scheduled to expire (which becomes the front Long-bond Treasury futures contract after the current front Long-bond Treasury futures contract expires).

The Long-bond Treasury Index is calculated at the close of business, London time, on each index business day with respect to the prior index business day.

Modifications to the Long-bond Treasury Index

The index sponsor does not presently intend to modify the method of calculating the Long-bond Treasury Index as described above. However, under certain circumstances described in this section, the index sponsor may, in its sole discretion, make modifications to the Long-bond Treasury Index. The index sponsor will promptly publish any such modifications on http://www.barcap.com/indices/.

 

 

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Changes in Long-bond Treasury futures

If, in the sole discretion of the index sponsor, a “potential adjustment event” occurs with respect to the Long-bond Treasury futures, the index sponsor may replace the Long-bond Treasury futures with other futures contracts that it determines, in its sole discretion, are comparable for purposes of the Long-bond Treasury Index to the Long-bond Treasury futures being replaced.

A “potential adjustment event” includes any of the following:

 

   

a change to the calculation methodology of the daily closing prices of Long-bond Treasury futures;

 

   

the occurrence of an event that causes CBOT not to calculate the daily closing prices of Long-bond Treasury futures; and

 

   

any event that the index sponsor determines may lead to any of the foregoing events.

Upon any replacement by the index sponsor of Long-bond Treasury futures following a potential adjustment event, the index sponsor may make any adjustments to the Long-bond Treasury Index as may, in its sole discretion, be required to render the Long-bond Treasury Index comparable to the Long-bond Treasury Index prior to the occurrence of the potential adjustment event.

Index market disruption and force majeure events

If an “index market disruption event” or a “force majeure” event occurs or is continuing on any index business day that, in the index sponsor’s sole discretion, affects the Long-bond Treasury Index or the Long-bond Treasury futures, the index sponsor may:

 

   

make such determinations and/or adjustments to the terms of the Long-bond Treasury Index as it deems appropriate in order to determine the level of the Long-bond Treasury Index on such day (if such day is an index business day);

 

   

defer publication of information relating to the Long-bond Treasury Index until the next index business day on which such index market disruption or force majeure event, as applicable, is not continuing; and

 

   

if such index business day is a roll date, postpone such roll date to the next index business day on which such index market disruption or force majeure event, as applicable, is not continuing.

Any of the following will constitute an “index market disruption event”:

 

   

the occurrence or existence, on any index business day at or during the one-hour period before the index valuation time, in relation to the Long-bond Treasury futures (1) a suspension of, or limitation imposed on, trading on CBOT, or (2) any event that disrupts or impairs (as determined by the index sponsor in its sole discretion) the ability of market participants in general to effect transactions in relation to, or to obtain market values of, Long-bond Treasury futures;

 

   

the declaration of a general moratorium in respect of CBOT activities;

 

   

on any index business day, the failure of CBOT to publish the values of Long-bond Treasury futures; or

 

   

on any index business day, the occurrence or existence of a lack of, or a material decline in, the liquidity in the market for trading in Long-bond Treasury futures.

A “force majeure event” is an event or circumstance (including without limitation, a systems failure, natural or man-made disaster, act of God, armed conflict, act of terrorism, riot or labor disruption or any similar intervening circumstance) that is beyond the reasonable control of the index sponsor and that the index sponsor (in its sole discretion) determines affects the Long-bond Treasury Index or the Long-bond Treasury futures.

Taxation

If at any time the index sponsor determines that, as a result of a change in taxation (including, but not limited to, any tax imposed on the index sponsor or its affiliates), it is necessary to change the Long-bond Treasury futures or the method of calculating the Long-bond Treasury Index, in order to offset the effect of such taxation, the index sponsor may make such change or changes in its sole discretion.

Cessation of trading and other termination events

The index sponsor may, in its sole discretion, discontinue calculating the Long-bond Treasury Index if any of the following events occurs:

 

   

If Long-bond Treasury futures cease (or will cease) to be publicly quoted for any reason and are not immediately re-listed on a quotation system in a manner acceptable to the index sponsor; or

 

   

if, after the occurrence of a potential adjustment event, an adjustment in the

 

 

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determination of the index sponsor is not possible or not reasonably practical for any reason.

Change in methodology

While the index sponsor currently employs the methodology described in this free writing prospectus to rebalance and calculate the Long-bond Treasury Index, it is possible that market, regulatory, juridical, financial, fiscal or other circumstances (including, but not limited to, any changes to or any suspension or termination of or any other events affecting Long-bond Treasury futures) will arise that would, in the view of the index sponsor, necessitate a modification or change of such methodology.

Trademark

The Barclays Long-bond Treasury Futures Index™ is a trademark of Barclays Bank PLC.

Disclaimer

The index sponsor does not guarantee the accuracy and/or completeness of the Long-bond Treasury Index, any data included therein, or any data from which it is based, and the index sponsor shall have no liability for any errors, omissions, or interruptions therein.

The index sponsor makes no warranty, express or implied, as to the results to be obtained from the use of the Long-bond Treasury Index. The index sponsor makes no express or implied warranties, and expressly disclaims all warranties of merchantability or fitness for a particular purpose or use with respect to the Long-bond Treasury Index or any data included therein. Without limiting any of the foregoing, in no event shall the index sponsor have liability for any special, punitive, indirect or consequential damages, lost profits, loss of opportunity or other financial loss, even if notified of the possibility of such damages.

Neither the index sponsor nor any of its affiliates or subsidiaries or any of their respective directors, officers, employees, representatives, delegates or agents shall have any responsibility to any person (whether as a result of negligence or otherwise) for any determination made or anything done (or omitted to be determined or done) in respect of the Long-bond Treasury Index or publication of the level of the Long-bond Treasury Index (or failure to publish such value) and any use to which any person may put the Long-bond Treasury Index or the level of the Long-bond Treasury Index. In addition, although the index sponsor reserves the right to make adjustments to correct previously incorrectly published information, including but not limited to the level of

the Long-bond Treasury Index, the index sponsor is under no obligation to do so and shall have no liability in respect of any errors or omissions.

Nothing in this disclaimer shall exclude or limit liability to the extent such exclusion or limitation is not permitted by law.

Barclays Q-BES Large Cap US Excess Return Index

The Barclays Q-BES Large Cap US Excess Return Index (the “Barclays Q-BES Index”) seeks to take advantage of the market’s reaction to earnings surprises, or earnings reports which exceed consensus estimates, for selected companies included in the S&P 500 Index. The premise of the Barclays Q-BES Index is that historically such companies have outperformed the market following an earnings surprise. The Barclays Q-BES Index reflects the excess performance of companies experiencing earnings surprises by taking long positions in a basket of up to 25 companies meeting specific criteria which report the largest earnings surprises each month (the “basket”), and taking a short position in the S&P 500 Total Return Index (the “benchmark”). With the short position in the benchmark, the Barclays Q-BES Index is intended to be market neutral overall.

The Barclays Q-BES Index is maintained and calculated by Barclays Bank PLC (the “index sponsor”). The index sponsor calculates the level of the Barclays Q-BES Index at or around close of business London time on each “index business day” (as defined below) with respect to the prior index business day and publishes it on the Q-BES index page at http://www.barcap.com/indices shortly thereafter. The level of the Barclays Q-BES Index is also reported on Bloomberg page “BXIIQUER <Index>”.

Composition of the Barclays Q-BES Index Basket

At the close of business on the next-to-last day of each month (the “rebalancing day”) on which (1) trading is conducted on the New York Stock Exchange (including NYSE Arca), the NASDAQ Stock Market and the Chicago Mercantile Exchange and (2) commercial banks are open for general business in London (together, an “index business day”), a new basket of stocks from the S&P 500 Index is selected according to the following six criteria. If a company has more than one class of shares included in the S&P 500 Index, only the class of shares with the higher average daily traded value during the previous 20 days on which the shares are traded on the relevant securities exchange (each, a “trading day”) will be considered in the following analysis.

 

 

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First, any company is excluded from further analysis which does not have both (1) a market capitalization of over five billion US dollars at the close of the rebalancing day and (2) an average daily traded value of 50 million US dollars during the previous 20 trading days.

Second, each company is ranked according to (1) net operating cash flow per share divided by share price, (2) book value per share to price ratio, and (3) earnings yield, each as reported in its most recent publicly available quarterly report. Companies falling in the lowest third of one or more of these rankings are excluded from further analysis.

Third, companies which have not made an announcement reporting their earnings per share during the previous 20 trading days are excluded from further analysis.

Fourth, each company is ranked according to the extent by which its reported earnings per share exceed the market consensus estimate as reported in the most recent Compustat Quarterly Estimate of Earnings Per Share Report. This ranking of earnings surprise is calculated as (1) the reported earnings per share minus the market consensus estimate, divided by (2) the absolute value of the market consensus estimate. Companies with a negative or no earnings surprise are excluded from further analysis.

Fifth, if there are more than 25 companies remaining, then companies not ranked in the top 25 according to earnings surprise are excluded from further analysis.

Sixth, any company which the index sponsor is restricted from trading due to regulatory reasons will be excluded; all other remaining companies are included in the basket.

Each company in the basket will be weighted equally by value. However, in order to limit volatility and basket concentration, no company in the basket may be weighted more than 5%. Should there be fewer than 20 companies in the basket, units of the benchmark will be included in the basket to the extent necessary for the total basket weight to equal 100% (the “benchmark supplement”). For example, if the above selection criteria yields only 16 companies, each company will be weighted 5% (for a total of 80%) and the benchmark will be weighted 20%, as if four virtual companies were added to the basket, the share performance of each matching the benchmark.

Rebalancing of the Barclays Q-BES Index Basket

Once the constituents of the new basket have been selected, the transition from the old basket to the new basket is carried out over the next four index business

days, commencing with the last Index Business Day of each month (each, a “transition day”). At the close of each transition day, the old basket will be reduced by one quarter of its adjusted market value pro rata across each basket constituent, and the corresponding amount apportioned equally across each constituent in the new basket. For example, at the close of the second transition day, the Barclays Q-BES Index will reflect, by value, 50% of the old basket and 50% of the new basket. At the close of the fourth transition day, the transition to the new basket will be complete. Any allocation of shares or benchmark units to the basket will be notional holdings, and the number of shares or units held will be adjusted to reflect, net of any applicable withholding tax, in a manner consistent with major stock indexes including the S&P 500 Index and Dow Jones Industrial Average, any split, reverse split, rights offering, stock distribution, special dividend, return of capital, spin-off or share repurchase which becomes effective in relation to any basket constituent subsequent to the previous rebalancing day.

The “adjusted market value” of the basket on any index business day is equal to the market value of the basket constituents at the close of the index business day plus a dollar amount reflecting the aggregate of ordinary dividends (net of any applicable withholding tax) in respect of any basket constituent for which the applicable ex-dividend date has occurred subsequent to the previous rebalancing day.

Calculation of the Barclays Q-BES Index

The level of the Barclays Q-BES Index is deemed to have been 100 on December 31, 1999. On any given index business day, the level of the Barclays Q-BES Index is equal to (1) the level of the Barclays Q-BES Index on the previous transition day times (2) the excess return of the Barclays Q-BES Index times (3) one minus the aggregate fees.

The “excess return” of the Barclays Q-BES Index is equal to the basket return minus the benchmark return.

The “basket return” is equal to the adjusted market value of the basket at the close of the index business day divided by the adjusted market value of the basket at the close of the previous transition day.

The “benchmark return” is equal to the level of the benchmark at the close of the index business day divided by the level of the benchmark at the close of the previous transition day, each as reported on Bloomberg page “SPTR <Index>”.

The “aggregate fees” is equal to (1) the number of calendar days since the previous transition day date divided by 360 times the aggregate of (2) a 1% annual

 

 

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index management fee plus a 0.18% annual index execution cost plus (3) a 0.15% annual shorting cost in connection with the shorting of the benchmark times, where there are fewer than 20 companies included in the basket (excluding the benchmark supplement), the number of companies including the basket (excluding the benchmark supplement) divided by 20.

The level of the Barclays Q-BES Index will be published at or around close of business London time on each index business day with respect to the prior index business day on the Q-BES index page at http://www.barcap.com/indices and on Bloomberg page “BXIIQUER <Index>”.

Modifications to the Barclays Q-BES Index

The index sponsor does not presently intend to modify the methodology used to compose or calculate the Barclays Q-BES Index as described above. However, under certain circumstances described in this section, the index sponsor may, in its sole discretion, make modifications to the Barclays Q-BES Index composition or methodology. Notwithstanding any such modifications, the Barclays Q-BES Index is not an actively-managed index, and the performance of the Barclays Q-BES Index may differ significantly from a similar index or strategy whose sponsor is permitted to make modifications under different sets of circumstances. The index sponsor will promptly publish any modifications that it makes on the Q-BES index page at http://www.barcap.com/indices.

Market disruption and force majeure events

If an “index market disruption event” or a “force majeure event” occurs or is continuing on any calendar day that, in the index sponsor’s sole discretion, affects the Barclays Q-BES Index or any of the Barclays Q-BES Index components, the index sponsor may:

 

   

make such determinations and/or adjustments to the terms of the Barclays Q-BES Index as it deems appropriate in order to determine the level of the Barclays Q-BES Index on such day (if such day is an index business day);

 

   

defer publication of information relating to the Barclays Q-BES Index until the next index business day on which such index market disruption or force majeure event, as applicable, is not continuing; and

 

   

if such calendar day is a rebalancing day or transition day, to postpone such rebalancing or transition to the next calendar day on which such index market disruption or force majeure event, as applicable, is not continuing.

Any of the following will constitute an “index market disruption event”:

 

   

the declaration of a general moratorium in respect of banking activities in London or New York;

 

   

on any index business day, the occurrence or existence of a lack of, or a material decline in, the liquidity in the market for trading in any component of the Barclays Q-BES Index;

 

   

on any index business day, the failure of a source from which the index sponsor obtains information necessary to calculate the level of the Barclays Q-BES Index;

 

   

on any index business day, the closure of any securities exchange on which any component of the Barclays Q-BES Index is traded prior to its scheduled closing time, unless such earlier closing time is announced by such exchange at least one hour prior to the earlier of the actual closing time for the regular trading session on such exchange, and the submission deadline for trading orders to be executed on that index business day; and

 

   

on any rebalancing day, the failure of a source from which the index sponsor obtains information necessary to determine the constituents of the new basket.

A “force majeure event” is an event or circumstance (including without limitation, a systems failure, natural or man-made disaster, act of God, armed conflict, act of terrorism, riot or labor disruption or any similar intervening circumstance) that is beyond the reasonable control of the Index sponsor and that the index sponsor determines affects the Barclays Q-BES Index, any of the Barclays Q-BES Index components or the methodology on which the Barclays Q-BES Index is based.

Taxation

If at any time the index sponsor determines that, as a result of a change in taxation (including, but not limited to, any tax imposed on the index sponsor or its affiliates), it is necessary to change the Barclays Q-BES Index components or the methodology used to compose or calculate the Barclays Q-BES Index, in order to offset the effect of such taxation, the index sponsor may make such change or changes in its sole discretion.

Cessation of trading and other termination Events

The index sponsor may, in its sole discretion, discontinue calculating the Barclays Q-BES Index if any of the following events occurs:

 

   

if the benchmark ceases (or will cease) to be calculated or publicly quoted for any reason and

 

 

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is not immediately reinstated or replaced in a manner acceptable to the index sponsor; and

 

   

the index sponsor or its successor terminates or alters its business operations, is declared insolvent or is subject to winding-up proceedings.

Changes to the Barclays Q-BES Index Components

If, after the occurrence of circumstances described in this section, the index sponsor deems it necessary to replace an index component, including the benchmark, with an appropriate successor for that index component, then the index sponsor will calculate the level of the Barclays Q-BES Index by adjusting accordingly the formula used for the calculation of the level of the Barclays Q-BES Index to take account of such replacement index component.

Stop-loss trigger event

If the Barclays Q-BES Index value on any index business day falls to less than 80.00% of the Barclays Q-BES Index value on the immediately preceding rebalancing day, then the basket constituents will be liquidated at the closing prices for each basket constituent on the following index business day and the notional basket value invested in the benchmark until after the next rebalancing day, when a new basket is selected and incorporated into the Barclays Q-BES Index over the subsequent four transition days.

Change in methodology

While the index sponsor currently employs the methodology described in this index supplement to compose and calculate the Barclays Q-BES Index, it is possible that market, regulatory, juridical, financial, fiscal or other circumstances (including, but not limited to, any changes to or any suspension or termination of or any other events affecting any index components) will arise that would, in the view of the index sponsor, necessitate a modification or change of such methodology.

Other changes

In addition to the foregoing circumstances, the index sponsor reserves the right to make any other changes to the methodology used to compose or calculate the Barclays Q-BES Index as the index sponsor may, in its sole discretion, determine to be necessary as a result of market, regulatory, judicial, financial, fiscal or other circumstances.

In the event that ambiguities arise in the composition or calculation of the Barclays Q-BES Index, the index sponsor will resolve such ambiguities and, if necessary for resolution, make changes to the methodology used to compose or calculate the Barclays Q-BES Index.

Trademark

Barclays Q-BES Large Cap US Excess Return Index is a trademark of Barclays Bank PLC.

Disclaimer

The index sponsor does not guarantee the accuracy and/or completeness of the Barclays Q-BES Index, any data included therein, or any data from which it is based, and the index sponsor shall have no liability for any errors, omissions, or interruptions therein.

The index sponsor makes no warranty, express or implied, as to the results to be obtained from the use of the Barclays Q-BES Index. The index sponsor makes no express or implied warranties, and expressly disclaims all warranties of merchantability or fitness for a particular purpose or use with respect to the Barclays Q-BES Index or any data included therein. Without limiting any of the foregoing, in no event shall the index sponsor have liability for any special, punitive, indirect or consequential damages, lost profits, loss of opportunity or other financial loss, even if notified of the possibility of such damages.

Neither the index sponsor nor any of its affiliates or subsidiaries or any of their respective directors, officers, employees, representatives, delegates or agents shall have any responsibility to any person (whether as a result of negligence or otherwise) for any determination made or anything done (or omitted to be determined or done) in respect of the Barclays Q-BES Index or publication of the level of the Barclays Q-BES Index (or failure to publish such value) and any use to which any person may put the Barclays Q-BES Index or the level of the Barclays Q-BES Index. In addition, although the index sponsor reserves the right to make adjustments to correct previously incorrectly published information, including but not limited to the level of the Barclays Q-BES Index, the index sponsor is under no obligation to do so and shall have no liability in respect of any errors or omissions.

Nothing in this disclaimer shall exclude or limit liability to the extent such exclusion or limitation is not permitted by law.

 

 

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LOGO

BARCLAYS BANK PLC

GLOBAL MEDIUM-TERM NOTES, SERIES A

UNIVERSAL WARRANTS

 

 

Index Supplement

Prospectus Supplement

Prospectus

 

 

Patent Pending

 

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BofA Merrill Lynch

July 19, 2013

 

 


Table of Contents

Filed Pursuant to Rule 424(b)(3)

Registration No. 333-190038

Prospectus Supplement to the Prospectus dated July 19, 2013

 

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BARCLAYS BANK PLC

GLOBAL MEDIUM-TERM NOTES, SERIES A

UNIVERSAL WARRANTS

All Asset Classes and Structures Under One RoofSM

We will give you the specific terms of the notes and warrants (each, a “security” and together, the “securities”) we are offering in pricing supplements. In some cases, we may also set forth additional terms of the securities in product supplements, and we may also describe certain of the potential indices to which the securities are linked in a prospectus supplement, which we refer to as an “index supplement”. You should read this prospectus supplement, the related prospectus dated July 19, 2013, the applicable product supplement(s), if any, the applicable index supplement and the applicable pricing supplement carefully before you invest. If the terms described in the applicable product supplement are different or inconsistent with those described herein, in the prospectus or in the index supplement, the terms described in the applicable product supplement will supersede. If the terms described in the applicable pricing supplement are different or inconsistent with those described herein, in the prospectus, in the index supplement or in the applicable product supplement, if any, the terms described in the applicable pricing supplement will supersede. Information that we indicate will or may be provided in a pricing supplement may instead be provided in a product supplement.

The Securities

Reference Asset

The principal, interest or any other amounts payable on the notes, and the amount of money or warrant property payable or deliverable in respect of the warrants, may be based on, as applicable, one or more of the following or on movements in the level, value or price or other events relating to one or more of the following: indices of equity securities, equity securities, shares or other interests in exchange-traded funds, exchange-traded notes, indices of commodities, commodities, indices of foreign currencies, foreign currencies, indices of interest rates, interest rates, indices of consumer prices or other asset classes. In addition, the principal, interest or any other amounts payable on the notes, and the amount of money or warrant property payable or deliverable in respect of the warrants, may be based on measures, formulas or instruments, including those related to macroeconomic events or indicators or the occurrence or non-occurrence of any event or circumstance, or baskets comprised of any instruments or measures, as specified in the applicable pricing supplement.

Ranking

The securities constitute our direct, unconditional, unsecured and unsubordinated obligations ranking pari passu, without any preference among themselves, with all our other outstanding unsecured and unsubordinated obligations, present and future, except those obligations as are preferred by operation of law.

Listing

Unless otherwise specified in the applicable pricing supplement, the securities will not be listed on any U.S. securities exchange or quotation system.

Global Medium-Term Notes, Series A

Principal Protection

The applicable pricing supplement may specify whether your principal investment in the notes is characterized as being fully protected, partially protected, contingently protected or not protected. Any feature characterized as principal protection that may be applicable to your notes relates solely to the final level, value or price of the reference asset, and your return on your investment remains subject to the creditworthiness of Barclays Bank PLC and is not guaranteed by any third party.

Principal Payment at Maturity

If you hold your notes to maturity, for each note you will receive a cash payment that may be more or less than the principal amount of each note based upon the value of the reference asset and as described in the applicable pricing supplement.


Table of Contents

Interest Rates and Interest Payments

The notes may have a rate of interest based on (1) one or more reference assets, (2) a fixed amount or rate or (3) movements in the level, value or price or other events relating to one or more reference assets.

In the case of any notes that do not bear interest at a fixed rate, any return on the notes that may be deemed to be interest will in no event be higher than the maximum rate permitted by New York law, as it may be modified by U.S. law of general application. Under current New York law, the maximum rate of interest, with some exceptions, for any loan in an amount less than $250,000 is 16% and for any loan in the amount of $250,000 or more but less than $2,500,000 is 25%, per year on a simple interest basis. These limits do not apply to loans of $2,500,000 or more.

Maturity Date

The applicable pricing supplement will specify the maturity date.

Denominations

Unless otherwise specified in the applicable pricing supplement, the notes will be issued in minimum denominations of $1,000 (or the specified currency equivalent), increased in multiples of $1,000 (or the specified currency equivalent).

Redemption, Repayment, Repurchase or Exchange

Terms of specific notes may permit or require redemption for cash or one or more reference assets at our option or at your option. The notes may permit or require repayment or repurchase at our option or at your option. The notes may be optionally or mandatorily exchangeable for cash or one or more reference assets.

Universal Warrants

Type of Warrant

The applicable pricing supplement will specify whether the warrants are call warrants, put warrants or any other type of warrant, and whether the warrants may be settled by means of net cash settlement or cashless exercise.

Payment or Delivery upon Exercise

If you exercise your warrants on the exercise date or during the exercise period, as applicable, for each warrant you will receive a cash payment or warrant property that may be worth more or less than the issue price of your warrant based upon the value of the reference asset and as described in the applicable pricing supplement.

Exercise Date or Exercise Period

The applicable pricing supplement will specify the exercise date or exercise period, as applicable.

Denominations

U