Example 3
The Ending Value
is 130.00, or 130.00% of the Starting Value:
Starting Value: 100.00
Ending Value: 130.00
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$10 +
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[
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$10 × 300% ×
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(
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130 100
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)
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]
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= $19.00, however, because the Redemption Amount for the notes cannot exceed the Capped Value, the Redemption Amount will be $11.30 per unit
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100
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Accelerated Return Notes
®
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TS-4
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Accelerated Return Notes
®
Linked to the MSCI Emerging Markets Index, due March ,
2014
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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 S-10 of product supplement ARN-1 and page S-6 of the Series A MTN prospectus supplement identified above under Summary. We
also urge you to consult your investment, legal, tax, accounting, and other advisors before you invest in the notes.
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§
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Depending on the performance of the Index as measured shortly before the maturity date, your investment may result in a loss; there is no guaranteed return of
principal.
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§
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Your yield may be less than the yield you could earn by owning a conventional debt security of comparable maturity.
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§
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Payments on the notes are subject to our credit risk, and actual or perceived changes in our creditworthiness are expected to affect the value of the notes. If
we become insolvent or are unable to pay our obligations, you may lose your entire investment.
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§
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Your investment return, if any, is limited to the return represented by the Capped Value and may be less than a comparable investment directly in the stocks
included in the Index.
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§
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If you attempt to sell the notes prior to maturity, their market value may be lower than the price you paid for the notes due to, among other things, the
inclusion of fees charged for developing, hedging and distributing the notes, as described on page TS-12 and various credit, market and economic factors that interrelate in complex and unpredictable ways.
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§
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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.
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§
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Your return on the notes and the value of the notes may be affected by exchange rate movements and factors affecting the international securities markets.
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§
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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.
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§
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The Index sponsor may adjust the Index in a way that affects its level, and has no obligation to consider your interests.
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§
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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.
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§
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While we, MLPF&S or our respective affiliates may from time to time own shares of companies included in the Index we, MLPF&S and our respective
affiliates do not control any company included in the Index, and are not responsible for any disclosure made by any other company.
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§
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There may be potential conflicts of interest involving the calculation agent. We have the right to appoint and remove the calculation agent.
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§
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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
Consequences below and U.S. Federal Income Tax Summary beginning on page S-35 of product supplement ARN-1.
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Accelerated Return Notes
®
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TS-5
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Accelerated Return Notes
®
Linked to the MSCI Emerging Markets Index, due March , 2014
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Additional Risk Factor
An investment in the notes will involve risks that are associated with investments that are linked to the equity securities of issuers from emerging markets.
Many of the issuers included in the Index are based in nations that are undergoing rapid institutional change, including the restructuring of economic, political,
financial, and legal systems. The regulatory and tax environments in these nations may be subject to change without review or appeal, and many emerging markets suffer from underdevelopment of their capital markets and their tax systems. In addition,
in some of these nations, issuers of the relevant securities face the threat of expropriation their assets, and/or nationalization of their businesses. It may be more difficult for an investor in these markets to monitor investments in these
companies, because these companies may be subject to fewer disclosure requirements than companies in developed markets, and economic and financial data about some of these countries may be unreliable. See Risk Factors Risk Factors
Relating to Equity-Based Market Measures If the Market Measure to which your notes are linked includes stocks traded on foreign exchanges, your return may be affected by factors affecting international securities markets on page S-17 of
product supplement ARN-1.
Other Terms of the Notes
Market Measure Business Day
The following definition shall supersede and replace the definition of a
Market Measure Business Day set forth in product supplement ARN-1.
A Market Measure Business Day means a day on which:
the London Stock Exchange, the Hong Kong Stock Exchange, the São Paulo Stock Exchange, and the Korea Stock Exchange (or any
successor to the foregoing exchanges) are open for trading; and
the Index or any successor thereto is calculated and published.
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Accelerated Return Notes
®
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TS-6
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Accelerated Return Notes
®
Linked to the MSCI Emerging Markets Index, due March , 2014
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The Index
All disclosures in this term sheet regarding the Index have been derived from publicly available sources, which we have not independently verified. The information summarizes the current index methodology as
published by MSCI Inc. (MSCI) and may be changed by MSCI at any time. Additional information on the Index is available at the following website: http://www.msci.com. No information on that website is deemed to be included or incorporated
by reference in this term sheet.
The Index is intended to measure equity market performance in the global emerging markets. The Index is a free
float-adjusted market capitalization index with a base date of December 31, 1987 and an initial value of 100. The Index is calculated daily in U.S. dollars and published in real time every 60 seconds during market trading hours. The Index
currently consists of the following 21 emerging market country indices: Brazil, Chile, China, Colombia, Czech Republic, Egypt, Hungary, India, Indonesia, Malaysia, Mexico, Morocco, Peru, Philippines, Poland, Russia, South Africa, South Korea,
Taiwan, Thailand, and Turkey. As of December 31, 2012, the five largest country weights were China (18.3%), South Korea (15.3%), Brazil (12.6%), Taiwan (10.6%), and South Africa (7.7%) and the five largest sector weights were Financials
(26.5%), Information Technology (13.8%), Energy (12.5%), Materials (11.7%), and Consumer Staples (8.8%).
The Index is part of the MSCI Regional Equity
Indices series and is an MSCI Global Investable Market Index, which is a family within the MSCI International Equity Indices.
General MSCI
Indices
MSCI provides global equity indices intended to measure equity performance in international markets and the MSCI International Equity
Indices are designed to serve as global equity performance benchmarks. In constructing these indices, MSCI applies its index construction and maintenance methodology across developed, emerging and frontier markets.
MSCI enhanced the methodology used in its MSCI International Equity Indices. The MSCI Standard and MSCI Small Cap Indices, along with the other MSCI equity indices
based on them, transitioned to the global investable market indices methodology described below. The transition was completed at the end of May 2008. The Enhanced MSCI Standard Indices are composed of the MSCI Large Cap and Mid Cap Indices. The MSCI
Global Small Cap Index transitioned to the MSCI Small Cap Index resulting from the Global Investable Market Indices methodology and contains no overlap with constituents of the transitioned MSCI Standard Indices. Together, the relevant MSCI Large
Cap, Mid Cap, and Small Cap Indices will make up the MSCI investable market index for each country, composite, sector, and style index that MSCI offers.
Constructing the MSCI Global Investable Market Indices.
MSCI undertakes an index construction process, which involves:
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§
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defining the equity universe;
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§
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determining the market investable equity universe for each market;
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§
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determining market capitalization size segments for each market;
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§
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applying index continuity rules for the MSCI Standard Index;
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§
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creating style segments within each size segment within each market; and
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§
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classifying securities under the Global Industry Classification Standard (the GICS).
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Defining the Equity Universe.
The equity universe is defined by:
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§
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Identifying Eligible Equity Securities
: the equity universe initially looks at securities listed in any of the countries in the MSCI Global Index Series,
which will be classified as either Developed Markets (DM) or Emerging Markets (EM). All listed equity securities, or listed securities that exhibit characteristics of equity securities, except mutual funds, ETFs, equity
derivatives, limited partnerships, and most investment trusts, are eligible for inclusion in the equity universe. Real Estate Investment Trusts (REITs) in some countries and certain income trusts in Canada are also eligible for
inclusion.
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§
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Classifying Eligible Securities into the Appropriate Country
: each company and its securities (i.e., share classes) are classified in only one country.
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Determining the Market Investable Equity Universes.
A market investable equity universe for a market is derived by applying
investability screens to individual companies and securities in the equity universe that are classified in that
market. A market is equivalent to a single country, except in DM
Europe, where all DM countries in Europe are aggregated
into a single market for index construction purposes. Subsequently, individual DM Europe country indices within the MSCI Europe Index are derived from the constituents of the MSCI Europe Index under the global investable market indices
methodology.
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Accelerated Return Notes
®
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TS-7
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Accelerated Return Notes
®
Linked to the MSCI Emerging Markets Index, due March , 2014
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The investability screens used to determine the investable equity universe in each market are as follows:
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§
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Equity Universe Minimum Size Requirement:
this investability screen is applied at the company level. In order to be included in a market investable equity
universe, a company must have the required minimum full market capitalization.
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§
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Equity Universe Minimum Free Float-Adjusted Market Capitalization Requirement
: this investability screen is applied at the individual security level. To
be eligible for inclusion in a market investable equity universe, a security must have a free float-adjusted market capitalization equal to or higher than 50% of the equity universe minimum size requirement.
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§
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DM and EM Minimum Liquidity Requirement
: this investability screen is applied at the individual security level. To be eligible for inclusion in a market
investable equity universe, a security must have adequate liquidity. The twelve-month and three-month Annual Traded Value Ratio (ATVR), a measure that screens out extreme daily trading volumes and takes into account the free
float-adjusted market capitalization size of securities, together with the three-month frequency of trading are used to measure liquidity. In the calculation of the ATVR, the trading volumes in depository receipts associated with that security, such
as ADRs or GDRs, are also considered. A minimum liquidity level of 20% of three- and twelve-month ATVR and 90% of three-month frequency of trading over the last four consecutive quarters are required for inclusion of a security in a market
investable equity universe of a DM, and a minimum liquidity level of 15% of three- and twelve-month ATVR and 80% of three-month frequency of trading over the last four consecutive quarters are required for inclusion of a security in a market
investable equity universe of an EM.
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§
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Global Minimum Foreign Inclusion Factor Requirement
: this investability screen is applied at the individual security level. To be eligible for inclusion
in a market investable equity universe, a securitys Foreign Inclusion Factor (FIF) must reach a certain threshold. The FIF of a security is defined as the proportion of shares outstanding that is available for purchase in the
public equity markets by international investors. This proportion accounts for the available free float of and/or the foreign ownership limits applicable to a specific security (or company). In general, a security must have an FIF equal to or larger
than 0.15 to be eligible for inclusion in a market investable equity universe.
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§
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Minimum Length of Trading Requirement
: this investability screen is applied at the individual security level. For an initial public offering
(IPO) to be eligible for inclusion in a market investable equity universe, the new issue must have started trading at least four months before the implementation of the initial construction of the index or at least three months before
the implementation of a semi-annual index review (as described below). This requirement is applicable to small new issues in all markets. Large IPOs are not subject to the minimum length of trading requirement and may be included in a market
investable equity universe and the Standard Index outside of a Quarterly or Semi-Annual Index Review.
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Defining Market
Capitalization Size Segments for Each Market.
Once a market investable equity universe is defined, it is segmented into the following size-based indices:
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§
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Investable Market Index (Large + Mid + Small);
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§
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Standard Index (Large + Mid);
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Accelerated Return Notes
®
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TS-8
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Accelerated Return Notes
®
Linked to the MSCI Emerging Markets Index, due March , 2014
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Creating the size segment indices in each market involves the following steps:
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§
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defining the market coverage target range for each size segment;
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§
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determining the global minimum size range for each size segment;
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§
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determining the market size-segment cutoffs and associated segment number of companies;
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§
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assigning companies to the size segments; and
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§
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applying final size-segment investability requirements.
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Index Continuity Rules for the Standard Indices
. In order to achieve index continuity, as well as to provide some basic level of diversification within a market index, and notwithstanding the effect of other
index construction rules described in this section, a minimum number of five constituents will be maintained for a DM Standard Index and a minimum number of three constituents will be maintained for an EM Standard Index.
Creating Style Indices within Each Size Segment
. All securities in the investable equity universe are classified into value or growth segments using the
MSCI Global Value and Growth methodology.
Classifying Securities under the Global Industry Classification Standard
. All securities in the global
investable equity universe are assigned to the industry that best describes their business activities. To this end, MSCI has designed, in conjunction with Standard & Poors, the GICS. Under the GICS, each company is assigned to one
sub-industry according to its principal business activity. Therefore, a company can belong to only one industry grouping at each of the four levels of the GICS.
Index Maintenance
The MSCI global investable market indices are maintained with the objective of reflecting
the evolution of the underlying equity markets and segments on a timely basis, while seeking to achieve index continuity, continuous investability of constituents and replicability of the indices, and index stability, and low index turnover. In
particular, index maintenance involves:
(i) Semi-Annual Index Reviews (SAIRs) in May and November of the Size Segment and
Global Value and Growth Indices which include:
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§
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updating the indices on the basis of a fully refreshed equity universe;
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§
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taking buffer rules into consideration for migration of securities across size and style segments; and
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§
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updating FIFs and Number of Shares (NOS).
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(ii) Quarterly Index Reviews (QIRs) in February and August of the Size Segment Indices aimed at:
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§
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including significant new eligible securities (such as IPOs that were not eligible for earlier inclusion) in the index;
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§
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allowing for significant moves of companies within the Size Segment Indices, using wider buffers than in the SAIR; and
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§
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reflecting the impact of significant market events on FIFs and updating NOS.
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(iii) Ongoing Event-Related Changes: changes of this type are generally implemented in the indices as they occur. Significantly large IPOs are included in the indices after the close of the companys tenth day
of trading.
Neither we nor any of our affiliates, or MLPF&S, accepts any responsibility for the calculation, maintenance, or publication of, or for
any error, omission, or disruption in, the Index. MSCI does not guarantee the accuracy or the completeness of the Index or any data included in the Index. MSCI assumes no liability for any errors, omissions, or disruption in the calculation and
dissemination of the Index. MSCI disclaims all responsibility for any errors or omissions in the calculation and dissemination of the Index or the manner in which the Index is applied in determining the amount payable on the notes at maturity.
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Accelerated Return Notes
®
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TS-9
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Accelerated Return Notes
®
Linked to the MSCI Emerging Markets Index, due March , 2014
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The following graph shows the monthly historical performance of the Index in the period from January 2007
through December 2012. 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 December 31, 2012, the closing level of the Index was
1,055.20.
This historical data on the Index is not necessarily indicative of the future performance of the Index or what the value
of the notes may be. Any historical upward or downward trend in the level of the Index during any period set forth above is not an indication that the level of the Index is more or less likely to increase or decrease at any time over the term of the
notes.
Before investing in the notes, you should consult publicly available sources for the levels and trading pattern of the Index.
License Agreement
MSCI Emerging Markets Index
SM
is a service mark of MSCI and has been licensed for use for certain purposes by us. Notes based on the Index are not
sponsored, endorsed, sold, or promoted by MSCI, and MSCI makes no representation regarding the advisability of investing in the notes.
We have entered
into a non-exclusive license agreement with MSCI whereby we, in exchange for a fee, are permitted to use the Index 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 MSCIs indices and trademarks relating to them.
The license agreement between MSCI and Barclays Bank PLC provides
that the following disclaimer 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
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Accelerated Return Notes
®
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TS-10
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Accelerated Return Notes
®
Linked to the MSCI Emerging Markets Index, due March , 2014
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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 THE NOTES. 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 THE NOTES.
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 PLCS 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, or 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 MSCIs permission is required. Under no circumstances may any person or entity claim any affiliation with MSCI without the prior written
permission of MSCI.
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Accelerated Return Notes
®
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TS-11
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Accelerated Return Notes
®
Linked to the MSCI Emerging Markets Index, due March , 2014
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Supplement to the Plan of Distribution
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.
MLPF&S will not receive an underwriting discount for notes sold to certain fee-based trusts and fee-based discretionary accounts managed by U.S.
Trust operating through Bank of America, N.A.
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. MLPF&S may act as principal or agent in these market-making transactions; however it is not obligated to engage in any such transactions.
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.
Role of MLPF&S
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. The public offering price includes, in addition to the underwriting discount, a charge of approximately $0.075 per unit, reflecting an estimated profit earned by MLPF&S from transactions
through which the notes are structured and resulting obligations hedged. Actual profits or losses from these hedging transactions may be more or less than this amount. In entering into the hedging arrangements for the notes, we seek competitive
terms and may enter into hedging transactions with MLPF&S or one of its subsidiaries or affiliates.
All charges related to the notes, including the
underwriting discount and the hedging related costs and charges, reduce the economic terms of the notes. For further information regarding these charges, our trading and hedging activities and conflicts of interest, see Risk Factors
General Risks Relating to ARNs beginning on page S-10 and Use of Proceeds on page S-21 of product supplement ARN-1.
Material U.S. Federal Income Tax Consequences
This
section applies to you only if you are a U.S. holder (as defined in product supplement ARN-1) and you hold your notes as capital assets for tax purposes and does not apply to you if you are a member of a class of holders subject to special rules or
are otherwise excluded from the discussion in product supplement ARN-1 (for example, if you did not purchase your notes in the initial issuance of the notes).
There is no judicial or administrative authority discussing how your notes should be treated for U.S. federal income tax purposes. Pursuant to the terms of the notes, you agree with us, in the absence of a change
in law or an administrative or judicial ruling to the contrary, to characterize your notes as a pre-paid cash-settled executory contract with respect to the Index. If your notes are so treated, you should generally recognize capital gain or loss
upon the sale or maturity of your notes in an amount equal to the difference between the amount you receive at such time and the amount you paid for your notes. Such gain or loss should generally be long-term capital gain or loss if you have held
your notes for more than one year.
In the opinion of our special tax counsel, Sullivan & Cromwell LLP, the notes should be treated in the
manner described above. No assurance can be given that the IRS or any court will agree with this characterization and tax treatment. There are other possible treatments that are described in a detailed discussion of tax considerations under the
section entitled U.S. Federal Income Tax Summary beginning on page S-35 of product supplement ARN-1 and one or more of these might ultimately govern the tax treatment of the notes.
You should consult your tax advisor concerning the U.S. federal income tax and other tax consequences of your investment in the notes in your particular
circumstances, including the application of state, local or other tax laws and the possible effects of changes in federal or other tax laws.
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Accelerated Return Notes
®
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TS-12
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Accelerated Return Notes
®
Linked to the MSCI Emerging Markets Index, due March , 2014
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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 1-866-500-5408.
Market-Linked Investments Classification
MLPF&S classifies certain market-linked investments (the Market-Linked Investments) into categories, each
with different investment characteristics. The following description is meant solely for informational purposes and is not intended to represent any particular Enhanced Return Market-Linked Investment or guarantee any performance.
Enhanced Return Market-Linked Investments are short- to medium-term investments that offer you a way to enhance exposure to a particular market view without taking
on a similarly enhanced level of market downside risk. They can be especially effective in a flat to moderately positive market (or, in the case of bearish investments, a flat to moderately negative market). In exchange for the potential to receive
better-than market returns on the linked asset, you must generally accept market downside risk and capped upside potential. As these investments are not market downside protected, and do not assure full repayment of principal at maturity, you need
to be prepared for the possibility that you may lose all or part of your investment.
Accelerated Return Notes
®
and ARNs
®
are registered service marks of Bank of America Corporation, the parent company of MLPF&S.
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Accelerated Return Notes
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TS-13
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