Prospectus Filed Pursuant to Rule 424(b)(2) (424b2)

Date : 07/17/2017 @ 3:46PM
Source : Edgar (US Regulatory)

Prospectus Filed Pursuant to Rule 424(b)(2) (424b2)

 

Preliminary Pricing Supplement
(To the Prospectus dated July 18, 2016, the Prospectus Supplement dated July 18, 2016 and the Product Supplement EQUITY INDICES STR-1 dated October 31, 2016)

Subject to Completion

Preliminary Pricing Supplement

dated July 17, 2017

Filed Pursuant to Rule 424(b)(2)
Registration Statement No. 333-212571

 


    Units
$10 principal amount per unit
CUSIP No.   
GRAPHIC


Pricing Date*
Settlement Date*
Maturity Date*


July  , 2017
July  , 2017
July  , 2022

*Subject to change based on the actual date the notes are priced for initial sale to the public (the “pricing date”)

 

 

 

 

 

 

Strategic Accelerated Redemption Securities ® Linked to the EURO STOXX 50 ® Index

§                   Automatically callable if the closing level of the Index on any Observation Date, occurring approximately one, two, three, four and five years after the pricing date, is at or above the Starting Value

§                   In the event of an automatic call, the amount payable per unit will be:

§                   [$ 11.10 to $ 11.20 ] if called on the first Observation Date

§                   [$ 12.20 to $ 12.40 ] if called on the second Observation Date

§                   [$ 13.30 to $ 13.60 ] if called on the third Observation Date

§                   [$ 14.40 to $ 14.80 ] if called on the fourth Observation Date

§                   [$ 15.50 to $ 16.00 ] if called on the final Observation Date

§                   If not called on the first, second, third or fourth Observation Dates, a maturity of approximately five years

§                   If not called, 1-to-1 downside exposure to decreases in the Index, with up to 100% of your principal at risk

§                   All payments are subject to the credit risk of Barclays Bank PLC

§                   No periodic interest payments

§                   In addition to the underwriting discount set forth below, the notes include a hedging-related charge of $0.075 per unit. See “Structuring the Notes”

§                   Limited secondary market liquidity, with no exchange listing

§                   The notes are senior unsecured debt securities and are not deposit liabilities of Barclays Bank PLC.  The notes 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

 

 

 

The notes are being issued by Barclays Bank PLC (“Barclays”). There are important differences between the notes and a conventional debt security, including different investment risks. See “ Risk Factors ” beginning on page TS-7 of this term sheet and beginning on page PS-7 of product supplement EQUITY INDICES STR-1.

 

Our initial estimated value of the notes, based on our internal pricing models, is expected to be between $9.50 and $9.61 per unit on the pricing date, which is less than the public offering price listed below. See “ Summary ” on the following page, “ Risk Factors ” beginning on page TS-7 of this term sheet and “ Structuring the Notes ” on page TS-14 of this term sheet.

 

Notwithstanding any other agreements, arrangements or understandings between Barclays and any holder of the notes, by acquiring the notes, each holder of the notes acknowledges, accepts, agrees to be bound by, and consents to the exercise of, any U.K. Bail-in Power by the relevant U.K. resolution authority. All payments are subject to the exercise of any U.K. Bail-in Power by the relevant U.K. resolution authority. See “ Consent to U.K. Bail-in Power ” on page TS-3 and “ Risk Factors ” on page TS-7 of this term sheet.

 

_________________________

 

None of the Securities and Exchange Commission (the “SEC”), any state securities commission, or any other regulatory body has approved or disapproved of these securities or determined if this Note Prospectus (as defined below) is truthful or complete. Any representation to the contrary is a criminal offense.

 

_________________________

 

 

 

Per Unit

 

   Total

 

Public offering price (1)

 

$

10.00

 

$

 

Underwriting discount (1)

 

$

0.20

 

$

 

Proceeds, before expenses, to Barclays

 

$

9.80

 

$

 

 

(1)                For any purchase of 500,000 units or more in a single transaction by an individual investor or in combined transactions with the investor’s household in this offering, the public offering price and the underwriting discount will be $9.95 per unit and $0.15 per unit, respectively. See “Supplement to the Plan of Distribution” below.

 

The notes:

 

Are Not FDIC Insured

Are Not Bank Guaranteed

May Lose Value

 

Merrill Lynch & Co.

 

July     , 2017

 



 

Strategic Accelerated Redemption Securities ®  
Linked to the EURO STOXX 50 ®  Index, due July  , 2022

 

 

Summary

 

The Strategic Accelerated Redemption Securities ® Linked to the EURO STOXX 50 ® Index, due July  , 2022 (the “notes”) are our direct, unconditional, unsecured and unsubordinated debt securities and are not deposit liabilities of either Barclays PLC or Barclays. The notes are not covered by the U.K. Financial Services Compensation Scheme or insured or guaranteed by the U.S. Federal Deposit Insurance Corporation or any other governmental agency of the United States, the United Kingdom or any other jurisdiction. The notes will rank equally with all of our other unsecured and unsubordinated debt. Any payments due on the notes, including any repayment of principal, will be subject to the credit risk of Barclays and to the exercise of any U.K. Bail-in Power (as described herein) or any other resolution measure by any relevant U.K. resolution authority. The notes will be automatically called at the applicable Call Amount if the closing level of the Market Measure, which is the EURO STOXX 50 ® Index (the “Index”) on any Observation Date is equal to or greater than the Starting Value. If your notes are not called, you will lose all or a portion of the principal amount of your notes. Payments on the notes, including the amount you receive at maturity or upon an automatic call, will be calculated based on the $10 principal amount per unit and will depend on the performance of the Index, subject to our credit risk. See “Terms of the Notes” below.

 

On the cover page of this term sheet, we have provided the estimated value range for the notes. This range of estimated values was determined based on our internal pricing models, which take into account a number of variables, including our internal funding rates, which are our internally published borrowing rates we use to issue market-linked investments, and the economic terms of certain related hedging arrangements.  The notes are subject to an automatic call, and the initial estimated value is based on an assumed tenor of the notes. This range of estimated values may not correlate on a linear basis with the range of Call Amounts and Call Premiums for the notes.  The estimated value of the notes calculated on the pricing date is expected to be less than the public offering price and will be set forth in the final term sheet made available to investors in the notes.

 

The economic terms of the notes (including the Call Amounts and Call Premiums) are based on our internal funding rates, which may vary from the rates at which our benchmark debt securities trade in the secondary market, and the economic terms of certain related hedging arrangements.  The difference between these rates, as well as the underwriting discount, the hedging-related charge and other amounts described below, will reduce the economic terms of the notes. For more information about the estimated value and structuring the notes, see “Structuring the Notes” on page TS-14.

 

Terms of the Notes

Payment Determination

Issuer:

Barclays Bank PLC (“Barclays”)

Automatic Call Provision:

 

Redemption Amount Determination:

If the notes are not called you will receive the Redemption Amount per unit on the maturity date, determined as follows:

 

 

Because the Threshold Value for the notes is equal to the Starting Value, you will lose all or a portion of your investment if the Ending Value is less than the Starting Value.

Principal Amount :

$10.00 per unit

Term:

Approximately five years, if not called on the first, second, third or fourth Observation Dates

Market Measure:

The EURO STOXX 50 ® Index (Bloomberg symbol: “SX5E”), a price return index

Starting Value:

The closing level of the Market Measure on the pricing date

Ending Value:

The Observation Level of the Market Measure on the final Observation Date.

Observation Level:

The closing level of the  Market Measure on any Observation Date

Observation Dates:

On or about July  , 2018, July  , 2019, July  , 2020, July  , 2021, and July  , 2022 (the final Observation Date), approximately one, two, three, four and five years after the pricing date.

The Observation Dates are subject to postponement in the event of Market Disruption Events, as described beginning on page PS-18 of product supplement EQUITY INDICES STR-1.

Call Level:

100% of the Starting Value

Call Amounts (per Unit) and Call Premiums:

[$11.10 to $11.20], representing a Call Premium of [11.00% to 12.00%] of the principal amount, if called on the first Observation Date;

[$12.20 to $12.40] , representing a Call Premium of [22.00% to 24.00%] of the principal amount, if called on the second Observation Date;

[$13.30 to $13.60] , representing a Call Premium of [33.00% to 36.00%] of the principal amount, if called on the third Observation Date;

[$14.40 to $14.80] , representing a Call Premium of [44.00% to 48.00%] of the principal amount, if called on the fourth Observation Date; and

[$15.50 to $16.00] , representing a Call Premium of [55.00% to 60.00%] of the principal amount, if called on the final Observation Date.

The actual Call Amounts and Call Premiums will be determined on the pricing date.

Call Settlement Dates:

Approximately the fifth business day following the applicable Observation Date, subject to postponement as described on page PS-19 of product supplement EQUITY INDICES STR-1; provided however, that the Call Settlement Date related to the final Observation Date will be the maturity date.

Threshold Value:

100% of the Starting Value.

Fees Charged:

The public offering price of the notes includes the underwriting discount of $0.20 per unit as listed on the cover page and an additional charge of $0.075 per unit more fully described on page TS-14.

Calculation Agents:

Barclays and Merrill Lynch, Pierce, Fenner & Smith Incorporated (“MLPF&S”).

 

Strategic Accelerated Redemption Securities ®

TS- 2

 



 

Strategic Accelerated Redemption Securities ®  
Linked to the EURO STOXX 50 ®  Index, due July  , 2022

 

 

The terms and risks of the notes are contained in this term sheet and the documents listed below (together, the “Note Prospectus”).  The documents have been filed as part of a registration statement with the SEC, which may, without cost, be accessed on the SEC website as indicated below or obtained from MLPF&S by calling 1-800-294-1322:

 

§       Product supplement EQUITY INDICES STR-1 dated October 31, 2016:
https://www.sec.gov/Archives/edgar/data/312070/000110465916153368/a16-19381_64424b3.htm

 

§       Series A MTN prospectus supplement dated July 18, 2016:
https://www.sec.gov/Archives/edgar/data/312070/000110465916132999/a16-14463_21424b3.htm

 

§       Prospectus dated July 18, 2016:
https://www.sec.gov/Archives/edgar/data/312070/000119312516650074/d219304df3asr.htm

 

Before you invest, you should read the Note Prospectus, including this term sheet, for information about us and this offering.  Any prior or contemporaneous oral statements and any other written materials you may have received are superseded by the Note Prospectus. Capitalized terms used but not defined in this term sheet have the meanings set forth in product supplement EQUITY INDICES STR-1. Unless otherwise indicated or unless the context requires otherwise, all references in this document to “we,” “us,” “our,” or similar references are to Barclays.

 

Consent to U.K. Bail-in Power

 

Notwithstanding any other agreements, arrangements or understandings between us and any holder of the notes, by acquiring the notes, each holder of the notes acknowledges, accepts, agrees to be bound by, and consents to the exercise of, any U.K. Bail-in Power by the relevant U.K. resolution authority.

 

Under the U.K. Banking Act 2009, as amended, the relevant U.K. resolution authority may exercise a U.K. Bail-in Power in circumstances in which the relevant U.K. resolution authority is satisfied that the resolution conditions are met. These conditions include that a U.K. bank or investment firm is failing or is likely to fail to satisfy the Financial Services and Markets Act 2000 (the “FSMA”) threshold conditions for authorization to carry on certain regulated activities (within the meaning of section 55B FSMA) or, in the case of a U.K. banking group company that is a European Economic Area (“EEA”) or third country institution or investment firm, that the relevant EEA or third country relevant authority is satisfied that the resolution conditions are met in the respect of that entity.

 

The U.K. Bail-in Power includes any write-down, conversion, transfer, modification and/or suspension power, which allows for (i) the reduction or cancellation of all, or a portion, of the principal amount of, any interest on, or any other amounts payable on, the notes; (ii) the conversion of all, or a portion, of the principal amount of, any interest on, or any other amounts payable on, the notes into shares or other securities or other obligations of Barclays or another person (and the issue to, or conferral on, the holder of the notes such shares, securities or obligations); and/or (iii) the amendment or alteration of the maturity of the notes, or amendment of the amount of any interest or any other amounts due on the notes, or the dates on which any interest or any other amounts become payable, including by suspending payment for a temporary period; which U.K. Bail-in Power may be exercised by means of a variation of the terms of the notes solely to give effect to the exercise by the relevant U.K. resolution authority of such U.K. Bail-in Power. Each holder of the notes further acknowledges and agrees that the rights of the holders of the notes are subject to, and will be varied, if necessary, solely to give effect to, the exercise of any U.K. Bail-in Power by the relevant U.K. resolution authority. For the avoidance of doubt, this consent and acknowledgment is not a waiver of any rights holders of the notes may have at law if and to the extent that any U.K. Bail-in Power is exercised by the relevant U.K. resolution authority in breach of laws applicable in England.

 

For more information, please see “Risk Factors” below as well as “U.K. Bail-in Power,” “Risk Factors—Risks Relating to the Securities Generally—Regulatory action in the event a bank or investment firm in the Group is failing or likely to fail could materially adversely affect the value of the securities” and “—Under the terms of the securities, you have agreed to be bound by the exercise of any U.K. Bail-in Power by the relevant U.K. resolution authority” in the accompanying prospectus supplement .

 

Strategic Accelerated Redemption Securities ®

TS- 3

 



 

Strategic Accelerated Redemption Securities ®  
Linked to the EURO STOXX 50 ®  Index, due July  , 2022

 

 

Investor Considerations

 

You may wish to consider an investment in the notes if:

 

The notes may not be an appropriate investment for you if:

§                   You anticipate that the closing level of the Index on any of the Observation Dates will be equal to or greater than the Starting Value and, in that case, you accept an early exit from your investment.

§                   You accept that the return on the notes will be limited to the return represented by the applicable Call Premium even if the percentage change in the level of the Index is significantly greater than the applicable Call Premium.

§                   If the notes are not called, you accept that your investment will result in a loss, which could be significant, if the Ending Value is below the Threshold Value.

§                   You are willing to forgo the interest payments that are paid on traditional interest bearing debt securities.

§                   You are willing to forgo dividends or other benefits of owning the stocks included in the Index.

§                   You are willing to accept a limited or no market for sales prior to maturity, and understand that the market prices for the notes, if any, will be affected by various factors, including our  actual and perceived creditworthiness, the inclusion in the public offering price of the underwriting discount, the hedging-related charge and other amounts, as described on page TS-2.

§                   You are willing to assume our credit risk, as issuer of the notes  for all payments under the notes, including the Call Amounts and the Redemption Amount.

§                   You are willing to consent to the exercise of any U.K. Bail-in Power by U.K. resolution authorities.

 

§                   You wish to make an investment that cannot be automatically called prior to maturity.

§                   You believe that the level of the Index will decrease from the Starting Value to the Ending Value.

§                   You anticipate that the Observation Level will be less than the Call Level on each Observation Date.

§                   You seek an uncapped return on your investment

§                   You seek principal repayment or preservation of capital.

§                   You seek interest payments or other current income on your investment.

§                   You want to receive dividends or other distributions paid on the stocks included in the Index.

§                   You seek an investment for which there will be a liquid secondary market.

§                   You are unwilling or are unable to take market risk on the notes or to take our credit risk as issuer of the notes.

§                   You are unwilling to consent to the exercise of any U.K. Bail-in Power by U.K. resolution authorities.

 

We urge you to consult your investment, legal, tax, accounting, and other advisors before you invest in the notes.

 

Strategic Accelerated Redemption Securities ®

TS- 4

 



 

Strategic Accelerated Redemption Securities ®  
Linked to the EURO STOXX 50 ®  Index, due July  , 2022

 

 

Examples of Hypothetical Payments

 

The following examples are for purposes of illustration only. They are based on hypothetical values and show hypothetical returns on the notes. They illustrate the calculation of the Call Amount or Redemption Amount, as applicable, based on the hypothetical terms set forth below. The actual amount you receive and the resulting return will depend on the actual Starting Value, Threshold Value, Call Level, Observation Levels, Call Premiums, and the term of your investment. The following examples do not take into account any tax consequences from investing in the notes. These examples are based on:

 

1)                          a Starting Value of 100.00;

2)                          a Threshold Value of 100.00;

3)                          a Call Level of 100.00;

4)                          an expected term of the notes of approximately five years, if the notes are not called on the first, second, third or fourth Observation Dates;

5)                          a Call Premium of 11.50% of the principal amount if the notes are called on the first Observation Date, 23.00% if called on the second Observation Date, 34.50% if called on the third Observation Date, 46.00% if called on the fourth Observation Date and 57.50% if called on the final Observation Date (the midpoint of the applicable Call Premium ranges); and

6)                          Observation Dates occurring approximately one, two, three, four and five years after the pricing date.

 

The hypothetical Starting Value of 100.00 used in these examples has been chosen for illustrative purposes only, and does not represent a likely actual Starting Value of the Market Measure. For recent actual levels of the Market Measure, see “The Index” section below. The Index is a price return index and as such the level of the Index will not include any income generated by dividends paid on the stocks included in the Index, which you would otherwise be entitled to receive if you invested in those stocks directly. In addition, all payments on the notes are subject to issuer credit risk.

 

Notes Are Called on an Observation Date

 

The notes will be called at $10.00 plus the applicable Call Premium on one of the Observation Dates if the Observation Level is equal to or greater than the Call Level.

 

Example 1 - The Observation Level on the first Observation Date is 110.00. Therefore, the notes will be called at $10.00 plus the Call Premium of $1.15 = $11.15 per unit. After the notes are called, they will no longer remain outstanding and there will not be any further payments on the notes.

 

Example 2 - The Observation Level on the first Observation Date is below the Call Level, but the Observation Level on the second Observation Date is 105.00. Therefore, the notes will be called at $10.00 plus the Call Premium of $2.30 = $12.30 per unit. After the notes are called, they will no longer remain outstanding and there will not be any further payments on the notes.

 

Example 3 - The Observation Levels on the first, second, third and fourth Observation Dates are below the Call Level, but the Observation Level on the fifth and final Observation Date is 105.00. Therefore, the notes will be called at $10.00 plus the Call Premium of $5.75 = $15.75 per unit.

 

Strategic Accelerated Redemption Securities ®

TS- 5

 



 

Strategic Accelerated Redemption Securities ®  
Linked to the EURO STOXX 50 ®  Index, due July  , 2022

 

 

Notes Are Not Called on Any Observation Date

 

Example 4 - The notes are not called on any Observation Date and the Ending Value is less than the Threshold Value. The Redemption Amount will be less, and possibly significantly less, than the principal amount. For example, if the Ending Value is 85.00, the Redemption Amount per unit will be:

 

 

Summary of the Hypothetical Examples

 

 

Notes Are Called on an Observation Date

Notes Are Not Called on
Any
Observation Date

 

Example 1

Example 2

Example 3

Example 4

Starting Value

100.00

100.00

100.00

100.00

Call Level

100.00

100.00

100.00

100.00

Threshold Value

100.00

100.00

100.00

100.00

Observation Level on the First Observation Date

110.00

90.00

90.00

88 .00

Observation Level on the Second Observation Date

N/A

105.00

83.00

78.00

Observation Level on the Third Observation Date

N/A

N/A

80.00

80.00

Observation Level on the Fourth Observation Date

N/A

N/A

95.00

95.00

Observation Level on the Final Observation Date

N/A

N/A

105.00

85.00

Return of the Index

10.00%

5.00%

5.00%

-15.00%

Return of the Notes

11.50%

23.00%

57.50%

-15.00%

Call Amount /

Redemption Amount per Unit

$11.15

$12.30

$15.75

$8.50

 

Strategic Accelerated Redemption Securities ®

TS- 6

 



 

Strategic Accelerated Redemption Securities ®  
Linked to the EURO STOXX 50 ®  Index, due July  , 2022

 

 

Risk Factors

 

There are important differences between the notes and a conventional debt security.  An investment in the notes involves significant risks, including those listed below. You should carefully review the more detailed explanation of risks relating to the notes in the “Risk Factors” sections beginning on page PS-7 of product supplement EQUITY INDICES STR-1 and page S-7 of the Series A MTN prospectus supplement identified above. We also urge you to consult your investment, legal, tax, accounting, and other advisors before you invest in the notes.

 

§                   If the notes are not called, your investment will result in a loss, there is no guaranteed return of principal.

 

§                   Your return on the notes may be less than the yield you could earn by owning a conventional fixed or floating rate debt security of comparable maturity.

 

§                   Payments on the notes are subject to our credit risk, and any actual or perceived changes in our  creditworthiness are expected to affect the value of the notes. If we become insolvent or are unable to pay our obligations, you may lose your entire investment.

 

§                   Payments on the notes are subject to the exercise of U.K. Bail-in Power by the relevant U.K. resolution authority. As described above under “Consent to U.K. Bail-in Power,” the relevant U.K. resolution authority may exercise any U.K. Bail-in Power under the conditions described in such section of this term sheet. If any U.K. Bail-in Power is exercised, you may lose all or a part of the value of your investment in the notes or receive a different security, which may be worth significantly less than the notes and which may have significantly fewer protections than those typically afforded to debt securities. Moreover, the relevant U.K. resolution authority may exercise its authority to implement the U.K. Bail-in Power without providing any advance notice to the holders of the notes. By your acquisition of the notes, you acknowledge, accept, agree to be bound by, and consent to the exercise of any U.K. Bail-in Power by the relevant U.K. resolution authority. The exercise of any U.K. Bail-in Power with respect to the notes will not be a default or an Event of Default (as each term is defined in the indenture relating to the notes). The trustee will not be liable for any action that the trustee takes, or abstains from taking, in either case, in accordance with the exercise of the U.K. Bail-in Power with respect to the notes. Your rights as a holder of the notes are subject to, and will be varied, if necessary, so as to give effect to the exercise of any U.K. Bail-in Power by the relevant U.K. resolution authority. See “Consent to U.K. Bail-in Power” above as well as “U.K. Bail-in Power,” “Risk Factors—Risks Relating to the Securities Generally—Regulatory action in the event a bank or investment firm in the Group is failing or likely to fail could materially adversely affect the value of the securities” and “—Under the terms of the securities, you have agreed to be bound by the exercise of any U.K. Bail-in Power by the relevant U.K. resolution authority” in the accompanying prospectus supplement for more information.

 

§                   Your investment return is limited to the return represented by the applicable Call Premium and may be less than a comparable investment directly in the stocks included in the Index.

 

§                   The estimated value of your notes is based on our internal pricing models. Our internal pricing models take into account a number of variables and are based on a number of subjective assumptions, which may or may not materialize, typically including volatility, interest rates, and our internal funding rates. These variables and assumptions are not evaluated or verified on an independent basis and may prove to be inaccurate. Different pricing models and assumptions of different financial institutions could provide valuations for the notes that are different from our estimated value.

 

§                   The estimated value is based on a number of variables, including our internal funding rates. Our internal funding rates may vary from the levels at which our benchmark debt securities trade in the secondary market. As a result of this difference, the estimated value referenced in this term sheet may be lower if such estimated value was based on the levels at which our benchmark debt securities trade in the secondary market.

 

§                   The estimated value of your notes is expected to be lower than the public offering price of your notes. This difference is expected as a result of certain factors, such as the inclusion in the public offering price of the underwriting discount, the hedging-related charge, the estimated profit, if any, that we or any of our affiliates expect to earn in connection with structuring the notes, and the estimated cost which we may incur in hedging our obligations under the notes, as further described in “Structuring the Notes” on page TS-14. If you attempt to sell the notes prior to maturity, their market value may be lower than the price you paid for the notes and lower than the estimated value because the secondary market prices do not include such fees, charges and other amounts, and take into consideration the levels at which our debt securities trade in the secondary market.

 

§                   The estimated value of the notes will not be a prediction of the prices at which MLPF&S or its affiliates, or any of our affiliates or any other third parties may be willing to purchase the notes from you in secondary market transactions. The price at which you may be able to sell your notes in the secondary market at any time will be influenced by many factors that cannot be predicted, such as market conditions, and any trading commissions, and may be substantially less than our estimated value of the notes. Any sale prior to the maturity date could result in a substantial loss to you.

 

§                   A trading market is not expected to develop for the notes. We, MLPF&S and our respective affiliates are not obligated to make a market for, or to repurchase, the notes. There is no assurance that any party will be willing to purchase your notes at any price in any secondary market.

 

Strategic Accelerated Redemption Securities ®

TS- 7

 



 

Strategic Accelerated Redemption Securities ®  
Linked to the EURO STOXX 50 ®  Index, due July  , 2022

 

 

§                   Your return on the notes may be affected by factors affecting the international securities markets, specifically changes within the Eurozone. The Eurozone is and has been undergoing severe financial stress, and the political, legal and regulatory ramifications are impossible to predict. Changes within the Eurozone could adversely affect the performance of the Index and, consequently, the value of the notes. In addition, you will not obtain the benefit of any increase in the value of the euro against the U.S. dollar, which you would have received if you had owned the securities in the Index during the term of your notes, although the level of the Index may be adversely affected by general exchange rate movements in the market .

 

§                   Our business, hedging and trading activities, and those of MLPF&S and our respective affiliates (including trading in shares of companies included in the Index), and any hedging and trading activities we, MLPF&S or our respective affiliates engage in for our clients’ accounts, may affect the market value and return of the notes and may create conflicts of interest with you.

 

§                   The Index sponsor may adjust the Index in a way that affects its level, and has no obligation to consider your interests.

 

§                   You will have no rights of a holder of the securities represented by the Index, and you will not be entitled to receive securities or dividends or other distributions by the issuers of those securities.

 

§                   While we, MLPF&S or our respective affiliates may from time to time own securities of companies included in the Index, we, MLPF&S and our respective affiliates do not control any company included in the Index, and have not verified any disclosure made by any other company.

 

§                   There may be potential conflicts of interest involving the calculation agents, one of which is us and one of which is MLPF&S.  These potential conflicts of interest include the calculation agents’ roles in establishing the economic terms of the notes and determining the estimated value of the notes.  We have the right to appoint and remove the calculation agents.

 

§                   The U.S. federal income tax consequences of the notes are uncertain, and may be adverse to a holder of the notes.  See “Material U.S. Federal Income Tax Considerations” below and “Material U.S. Federal Income Tax Considerations” beginning on page PS-27 of product supplement EQUITY INDICES STR-1.

 

Other Terms of the Notes

 

The provisions of this section supersede and replace the definition of “Market Measure Business Day” set forth in product supplement EQUITY INDICES STR-1 .

 

Market Measure Business Day

 

A “Market Measure Business Day” means a day on which:

 

(A) the Eurex (or any successor) is open for trading; and

 

(B) the Index or any successor thereto is calculated and published.

 

Strategic Accelerated Redemption Securities ®

TS- 8

 



 

Strategic Accelerated Redemption Securities ®  
Linked to the EURO STOXX 50 ®  Index, due July  , 2022

 

 

The Index

 

All disclosures contained in this term sheet regarding the Index, including, without limitation, its make-up, method of calculation, and changes in its components, have been derived from publicly available sources. The information reflects the policies of, and is subject to change by STOXX Limited (the “Index sponsor”). The Index sponsor, which licenses the copyright and all other rights to the Index, has no obligation to continue to publish, and may discontinue publication of, the Index. The consequences of the Index sponsor discontinuing publication of the Index are discussed in the section entitled “Description of the Notes Discontinuance of an Index” beginning on page PS-21 of product supplement EQUITY INDICES STR-1 .  None of us, the calculation agents, or MLPF&S accepts any responsibility for the calculation, maintenance, or publication of the Index or any successor index.

 

The Index was created by STOXX Limited, a wholly owned subsidiary of Deutsche Börse AG.  Publication of the Index began on February 26, 1998, based on an initial index value of 1,000 on December 31, 1991.  The Index is disseminated on the STOXX Limited website: http:// www .stoxx.com, which sets forth, among other things, the country and industrial sector weightings of the securities included in the Index.  Information contained in the STOXX Limited website is not incorporated by reference in, and should not be considered a part of, this index supplement, the prospectus supplement, the prospectus or any applicable pricing supplement.

 

Index Composition and Maintenance

 

The Index is composed of 50 component stocks of market sector leaders in terms of free-float market capitalization from within the 19 EURO STOXX ®  Supersector indices, which includes stocks selected from 11 Eurozone countries: Austria, Belgium, Finland, France, Germany, Ireland, Italy, Luxembourg, the Netherlands, Portugal and Spain. The component stocks have a high degree of liquidity and represent the largest companies across all supersectors as defined by the Industry Classification Benchmark.

 

The composition of the Index is reviewed annually, based on the closing stock data on the last trading day in August.  The component stocks are announced on the first trading day in September.  Changes to the component stocks are implemented on the third Friday in September and are effective the following trading day.  The composition of the Index is also reviewed monthly to ensure that component stocks still remain eligible for inclusion.  Any resulting changes from the monthly review are implemented on the close of the fifth trading day following the monthly review and are effective the next trading day.  Changes in the composition of the Index are made to ensure that the Index includes the 50 market sector leaders from within the EURO STOXX ®  Index.

 

The free float factors for each component stock used to calculate the Index, as described below, are reviewed, calculated and implemented on a quarterly basis and are fixed until the next quarterly review.

 

The Index is also reviewed on an ongoing basis.  Corporate actions (including initial public offerings, mergers and takeovers, spin-offs, delistings, bankruptcy, and price and share adjustments) that affect the index composition are immediately reviewed.  Any changes are announced, implemented and effective in line with the type of corporate action and the magnitude of the effect.

 

Index Calculation

 

The Index is calculated with the “Laspeyres formula,” which measures the aggregate price changes in the component stocks against a fixed base quantity weight. The formula for calculating the index value can be expressed as follows:

 

Index =

free float market capitalization of the Index

Divisor

 

The “free float market capitalization of the Index” is equal to the sum of the products of the closing price, number of shares, free float factor and weighting cap factor for each component stock as of the time the Index is being calculated. The weighting cap factor limits the weight of each component stock within the Index to a maximum of 10%.

 

The Index is also subject to a divisor, which is adjusted to maintain the continuity of the index values across changes due to corporate actions.  The following is a summary of the adjustments to any component stock made for corporate actions and the effect of such adjustment on the divisor, where shareholders of the component stock will receive “B” number of shares for every “A” share held (where applicable).

 

(1)  Special cash dividend:

Cash distributions that are outside the scope of the regular dividend policy or that the company defines as an extraordinary distribution

Adjusted price = closing price – dividend announced by the company × (1 – withholding tax if applicable)

Divisor: decreases

(2)  Split and reverse split:

Adjusted price = closing price × A / B

New number of shares = old number of shares × B / A

Divisor: unchanged

 

Strategic Accelerated Redemption Securities ®

TS- 9

 



 

Strategic Accelerated Redemption Securities ®  
Linked to the EURO STOXX 50 ®  Index, due July  , 2022

 

 

(3)  Rights offering:

If the subscription price is not available or if the subscription price is equal to or greater than the closing price on the day before the effective date, then no adjustment is made.

In case the share increase is greater than or equal to 100% (B / A > 1), the adjustment of the shares and weight factors are delayed until the new shares are listed.

Adjusted price = (closing price × A + subscription price × B) / (A + B)

New number of shares = old number of shares × (A + B)/ A

Divisor: increases

 

(4)  Stock dividend:

Adjusted price = closing price × A / (A + B)

New number of shares = old number of shares × (A + B) / A

Divisor: unchanged

 

(5) S tock dividend (from treasury stock):

Adjusted only if treated as extraordinary dividend.

Adjusted close = close – close × B / (A + B)

Divisor: decreases

(6) S tock dividend of another company:

Adjusted price = (closing price × A – price of other company × B) / A

Divisor: decreases

 

(7)  Return of capital and share consolidation:

Adjusted price = (closing price – capital return announced by company × (1-withholding tax)) × A / B

New number of shares = old number of shares × B / A

Divisor: decreases

(8) R epurchase of shares / self-tender:

Adjusted price = ((price before tender × old number of shares) – (tender price × number of tendered shares)) / (old number of shares – number of tendered shares)

New number of shares = old number of shares – number of tendered shares

Divisor: decreases

 

(9)  Spin-off:

Adjusted price = (closing price × A – price of spun-off shares × B) / A

Divisor: decreases

 

(10)  Combination stock distribution (dividend or split) and rights offering:

For this corporate action, the following additional assumptions apply:

Shareholders receive B new shares from the distribution and C new shares from the rights offering for every A share held.

If A is not equal to one share, all the following “new number of shares” formulae need to be divided by A:

 

- If rights are applicable after stock distribution (one action applicable to other):

Adjusted price = (closing price × A + subscription price × C × (1 + B / A)) / ((A + B) × ( 1 + C / A))

New number of shares = old number of shares × ((A + B) × (1 + C / A)) / A

Divisor: increases

 

- If stock distribution is applicable after rights (one action applicable to other):

Adjusted price = (closing price × A + subscription price × C) /((A + C) × (1 + B / A))

New number of shares = old number of shares × ((A + C) × (1 + B / A))

Divisor: increases

 

- Stock distribution and rights (neither action is applicable to the other):

Adjusted price = (closing price × A + subscription price × C) / (A + B + C)

New number of shares = old number of shares × (A + B + C) / A

Divisor: increases

 

(11) Addition / deletion of a company:

No price adjustments are made.  The net change in market capitalization determines the divisor adjustment.

 

(12) Free float and shares changes:

No price adjustments are made.  The net change in market capitalization determines the divisor adjustment.

 

Strategic Accelerated Redemption Securities ®

TS- 10

 


 


 

Strategic Accelerated Redemption Securities ®  
Linked to the EURO STOXX 50 ®  Index, due July  , 2022

 

 

The following graph shows the daily historical performance of the Index in the period from January 1, 2008 through July 13, 2017.  We obtained this historical data from Bloomberg L.P.  We have not independently verified the accuracy or completeness of the information obtained from Bloomberg L.P. On July 13, 2017, the closing level of the Index was 3,527.83.

 

Historical Performance of the Index

 

 

This historical data on the Index is not necessarily indicative of the future performance of the Index or what the value of the notes may be. Any historical upward or downward trend in the level of the Index during any period set forth above is not an indication that the level of the Index is more or less likely to increase or decrease at any time over the term of the notes.

 

Before investing in the notes, you should consult publicly available sources for the levels of the Index.

 

License Agreement

 

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

 

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

 

The Index sponsor and its licensors (the “Licensors”) have no relationship to us, other than the licensing of the Index and the related trademarks for use in connection with the notes.

 

The Index sponsors and its Licensors do not :

 

§                   Sponsor, endorse, sell or promote the notes.

 

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

 

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

 

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

 

§                   Consider the needs of the notes or the owners of the notes in determining, composing or calculating the Index or have any obligation to do so.

 

The Index sponsor and its Licensors will not have any liability in connection with the notes. Specifically,

 

§                   The Index sponsor 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 notes, the owner of the notes or any other person in connection with the use of the Index and the data included in the Index;

 

§                   The accuracy or completeness of the Index and its data; and

 

§                   The merchantability and the fitness for a particular purpose or use of the Index and its data.

 

The Index sponsor and its Licensors will have no liability for any errors, omissions or interruptions in the Index or its data.

 

Strategic Accelerated Redemption Securities ®

TS- 11

 

 



 

Strategic Accelerated Redemption Securities ®  
Linked to the EURO STOXX 50 ®  Index, due July  , 2022

 

 

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

 

The licensing agreement between us and the Index sponsor is solely for our respective benefit and not for the benefit of the owners of the notes or any other third parties.

 

Strategic Accelerated Redemption Securities ®

TS- 12

 

 



 

Strategic Accelerated Redemption Securities ®  
Linked to the EURO STOXX 50 ®  Index, due July  , 2022

 

 

Supplement to the Plan of Distribution

 

Under our distribution agreement with MLPF&S, MLPF&S will purchase the notes from us as principal at the public offering price indicated on the cover of this term sheet, less the indicated underwriting discount.

 

We may deliver the notes against payment therefor in New York, New York on a date that is greater than three business days following the pricing date. Under Rule 15c6-1 of the Securities Exchange Act of 1934, trades in the secondary market generally are required to settle in three business days, unless the parties to any such trade expressly agree otherwise. Accordingly, if the initial settlement of the notes occurs more than three business days from the pricing date, purchasers who wish to trade the notes more than three business days prior to the original issue date will be required to specify alternative settlement arrangements to prevent a failed settlement.

 

The notes will not be listed on any securities exchange. In the original offering of the notes, the notes will be sold in minimum investment amounts of 100 units. If you place an order to purchase the notes, you are consenting to MLPF&S acting as a principal in effecting the transaction for your account.

 

MLPF&S may repurchase and resell the notes, with repurchases and resales being made at prices related to then-prevailing market prices or at negotiated prices, and these will include MLPF&S’s trading commissions and mark-ups. MLPF&S may act as principal or agent in these market-making transactions; however, it is not obligated to engage in any such transactions. MLPF&S has advised us that, at its discretion, for a short, undetermined initial period after the issuance of the notes, MLPF&S may offer to buy the notes in the secondary market at a price that may exceed the initial estimated value of the notes. Any price offered by MLPF&S for the notes will be based on then-prevailing market conditions and other considerations, including the performance of the Index and the remaining term of the notes. However, neither we nor any of our affiliates is obligated to purchase your notes at any price, or at any time, and we cannot assure you that we, MLPF&S or our respective affiliates will purchase your notes at a price that equals or exceeds the initial estimated value of the notes.

 

The value of the notes shown on your account statement produced by MLPF&S will be based on MLPF&S’s estimate of the value of the notes if MLPF&S or another of its affiliates were to make a market in the notes, which it is not obligated to do. That estimate will be based upon the price that MLPF&S may pay for the notes in light of then-prevailing market conditions, and other considerations, as mentioned above, and will include transaction costs. At certain times, this price may be higher than or lower than the initial estimated value of the notes.

 

The distribution of the Note Prospectus in connection with these offers or sales will be solely for the purpose of providing investors with the description of the terms of the notes that was made available to investors in connection with their initial offering. Secondary market investors should not, and will not be authorized to, rely on the Note Prospectus for information regarding Barclays or for any purpose other than that described in the immediately preceding sentence.

 

An investor’s household, as referenced on the cover of this term sheet, will generally include accounts held by any of the following, as determined by MLPF&S in its discretion and acting in good faith based upon information then available to MLPF&S:

 

·                the investor’s spouse (including a domestic partner), siblings, parents, grandparents, spouse’s parents, children and grandchildren, but excluding accounts held by aunts, uncles, cousins, nieces, nephews or any other family relationship not directly above or below the individual investor;

 

·                a family investment vehicle, including foundations, limited partnerships and personal holding companies, but only if the beneficial owners of the vehicle consist solely of the investor or members of the investor’s household as described above; and

 

·                a trust where the grantors and/or beneficiaries of the trust consist solely of the investor or members of the investor’s household as described above; provided that, purchases of the notes by a trust generally cannot be aggregated together with any purchases made by a trustee’s personal account.

 

Purchases in retirement accounts will not be considered part of the same household as an individual investor’s personal or other non-retirement account, except for individual retirement accounts (“IRAs”), simplified employee pension plans (“SEPs”), savings incentive match plan for employees (“SIMPLEs”), and single-participant or owners only accounts (i.e., retirement accounts held by self-employed individuals, business owners or partners with no employees other than their spouses).

 

Please contact your Merrill Lynch financial advisor if you have any questions about the application of these provisions to your specific circumstances or think you are eligible.

 

Strategic Accelerated Redemption Securities ®

TS- 13

 

 



 

Strategic Accelerated Redemption Securities ®  
Linked to the EURO STOXX 50 ®  Index, due July  , 2022

 

 

Structuring the Notes

 

The notes are our debt securities, the return on which is linked to the performance of the Index.  As is the case for all of our debt securities, including our market-linked notes, the economic terms of the notes reflect our actual or perceived creditworthiness at the time of pricing.  The economic terms of the notes are based on our internal funding rates, which are our internally published borrowing rates based on variables such as market benchmarks, our appetite for borrowing, and our existing obligations coming to maturity.  Our internal funding rates may vary from the levels at which our benchmark debt securities trade in the secondary market.  Our estimated value on the pricing date will be based on our internal funding rates.  Our estimated value of the notes may be lower if such valuation were based on the levels at which our benchmark debt securities trade in the secondary market.

 

Payments on the notes, including the amount you receive at maturity or upon an automatic call, will be calculated based on the $10 principal amount per unit and will depend on the performance of the Index. In order to meet these payment obligations, at the time we issue the notes, we may choose to enter into certain hedging arrangements (which may include call options, put options or other derivatives) with MLPF&S or one of its affiliates.  The terms of these hedging arrangements are determined by seeking bids from market participants, including MLPF&S and its affiliates or our affiliates, and take into account a number of factors, including our creditworthiness, interest rate movements, the volatility of the Index, the tenor of the notes and the tenor of the hedging arrangements.  The economic terms of the notes and their estimated value depend in part on the terms of these hedging arrangements, any estimated profit that we or any of our affiliates expect to earn in connection with structuring the notes, and estimated costs which we may incur in hedging our obligations under the notes.

 

MLPF&S has advised us that the hedging arrangements will include a hedging related charge of approximately $0.075 per unit, reflecting an estimated profit to be credited to MLPF&S from these transactions.  Since hedging entails risk and may be influenced by unpredictable market forces, additional profits and losses from these hedging arrangements may be realized by MLPF&S or any third party hedge providers.

 

For further information, see “Risk Factors—General Risks Relating to the Notes” beginning on page PS-6 and “Use of Proceeds and Hedging” on page PS-17 of product supplement EQUITY INDICES STR-1.

 

Strategic Accelerated Redemption Securities ®

TS- 14

 

 



 

Strategic Accelerated Redemption Securities ®  
Linked to the EURO STOXX 50 ®  Index, due July  , 2022

 

 

Material U.S. Federal Income Tax Considerations

 

The material tax consequences of your investment in the notes are summarized below. The discussion below supplements the discussion under “Material U.S. Federal Income Tax Consequences” in the accompanying prospectus supplement and the discussion under “Material U.S. Federal Income Tax Considerations” in the accompanying product supplement EQUITY INDICES STR-1. This section applies to you only if you are a U.S. holder (as defined in product supplement EQUITY INDICES STR-1) and you hold your notes as capital assets for tax purposes and does not apply to you if you are a member of a class of holders subject to special rules or are otherwise excluded from the discussion in product supplement EQUITY INDICES STR-1 (for example, if you did not purchase your notes in the initial issuance of the notes).

 

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

 

In the opinion of our special tax counsel, Sullivan & Cromwell LLP, your notes should be treated in the manner described above. This opinion assumes that the description of the terms of the notes in this free writing prospectus is materially correct.

 

As discussed further in product supplement EQUITY INDICES STR-1, the Treasury Department and the Internal Revenue Service are actively considering various alternative treatments that may apply to instruments such as the notes, possibly with retroactive effect. Other alternative treatments for your notes may also be possible under current law. For example, it is possible that the notes could be treated as a debt instrument that is subject to the special tax rules governing contingent payment debt instruments. If your notes are so treated, you would be required to accrue interest income over the term of your notes and you would recognize gain or loss upon the sale, redemption or maturity of your notes in an amount equal to the difference, if any, between the amount you receive at such time and your adjusted basis in your notes. Any gain you recognize upon the sale, redemption or maturity of your notes would be ordinary income and any loss recognized by you at such time would generally be ordinary loss to the extent of interest you included in income in the current or previous taxable years with respect to your notes, and thereafter would be capital loss.

 

It is also possible that your notes could be treated as an investment unit consisting of (i) a debt instrument that is issued to you by us and (ii) a put option in respect of the Index that is issued by you to us.  You should consult your tax advisor as to the possible consequences of this alternative treatment.

 

In addition, it is possible that the Call Premium, if received, might be treated as ordinary income, rather than as resulting in capital gain.

 

For a further discussion of the tax treatment of your notes as well as other possible alternative characterizations, please see the discussions under “Material U.S. Federal Income Tax Considerations” beginning on page PS-27 of product supplement EQUITY INDICES STR-1, and “Material U.S. Federal Income Tax Consequences — Notes Treated as Prepaid Forward or Derivative Contracts” in the Series A MTN prospectus supplement. For additional, important considerations related to tax risks associated with investing in the notes, you should also examine the discussion in “Risk Factors — General Risks Relating to the Notes — Significant aspects of the U.S. federal income tax treatment of the notes are uncertain” beginning on page PS-13 of product supplement EQUITY INDICES STR-1, You should consult your tax advisor as to the possible alternative treatments in respect of the notes.

 

Strategic Accelerated Redemption Securities ®

TS- 15

 

 



 

Strategic Accelerated Redemption Securities ®  
Linked to the EURO STOXX 50 ®  Index, due July  , 2022

 

 

Where You Can Find More Information

 

We have filed a registration statement (including a product supplement, a prospectus supplement, and a prospectus) with the SEC for the offering to which this term sheet relates.  Before you invest, you should read the Note Prospectus, including this term sheet, and the other documents that we have filed with the SEC, for more complete information about us and this offering.  You may get these documents without cost by visiting EDGAR on the SEC website at www.sec.gov.  Alternatively, we, any agent, or any dealer participating in this offering will arrange to send you these documents if you so request by calling MLPF&S toll-free at 1-800-294-1322.

 

Market-Linked Investments Classification

 

 

MLPF&S classifies certain market-linked investments (the “Market-Linked Investments”) into categories, each with different investment characteristics. The following description is meant solely for informational purposes and is not intended to represent any particular Enhanced Return Market-Linked Investment or guarantee any performance.

 

Enhanced Return Market-Linked Investments are short- to medium-term investments that offer you a way to enhance exposure to a particular market view without taking on a similarly enhanced level of market downside risk. They can be especially effective in a flat to moderately positive market (or, in the case of bearish investments, a flat to moderately negative market). In exchange for the potential to receive better-than market returns on the linked asset, you must generally accept market downside risk and capped upside potential.  As these investments are not market downside protected, and do not assure full repayment of principal at maturity, you need to be prepared for the possibility that you may lose all or part of your investment.

 

“Strategic Accelerated Redemption Securities ® ” is a registered service mark of Bank of America Corporation, the parent company of MLPF&S.

 

Strategic Accelerated Redemption Securities ®

TS- 16

 

 




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