Free Writing Prospectus
(To the Prospectus dated August 31, 2010,
the Prospectus Supplement dated May 27, 2011
and Index Supplement dated May 31, 2011)
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Filed Pursuant to Rule 433
Registration No. 333-169119
June 4, 2013
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$
Notes due June 25, 2014
Linked to the MSCI EAFE Index
Global Medium-Term Notes, Series A
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General
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Senior unsecured obligations of Barclays Bank PLC maturing June 25, 2014
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Minimum denominations of $5,000 and integral multiples of $1,000 in excess thereof.
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The Notes are expected to price on or about June 7, 2013
(the pricing date) and are expected to issue on or about June 12, 2013
(the issue date).
Key Terms
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Terms used in this free writing prospectus, but not defined herein, shall have the meanings ascribed to them in the prospectus supplement.
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Issuer:
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Barclays Bank PLC
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Reference Asset:
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MSCI EAFE Index (the Index) (Bloomberg ticker symbol MXEA <Index>)
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Contingent Minimum Return:
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0.00%
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Maximum Return:
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17.50%, for a maximum payment at maturity of $1,175.00 per $1,000 principal amount Note.
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Barrier Level:
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[
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], which is 90% x initial level
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Upside Leverage Factor:
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2
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Payment at Maturity:
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If the final level of the Index is equal to or greater than the barrier level, you will receive at maturity a cash payment equal to the sum of (a) the principal amount of your Notes and (b) the product of (i) 100% of your principal amount and (ii) the greater of (x) the contingent minimum return and (y) the index return multiplied by the upside leverage factor, subject to the maximum return. For example, if the index return is 8.75% or more, you will receive the maximum return on the Notes of 17.50%, which entitles you to the maximum payment of $1,175.00 for every $1,000 principal amount Note that you hold. Accordingly, if the final level of the Index is equal to or greater than the barrier level, your payment per $1,000 principal amount Note would be calculated as follows, subject to the maximum return:
$1,000 + [$1,000 x the greater of (x) Contingent Minimum Return and (y) Index Return x Upside Leverage Factor]
If the final level of the Index is below the barrier level, you will receive at maturity a cash payment equal to the sum of (a) the principal amount of your Notes and (b) the product of (i) 100% of your principal amount and (ii) the index return, calculated as follows per $1,000 principal amount Note:
$1,000 + [$1,000 x Index Return]
If the final level of the Index is below the barrier level , your Notes will be fully exposed to the decline in the Index from the initial level, and you will lose some or all of your investment at maturity.
Any payment on the Notes, including any repayment of principal, is subject to the creditworthiness of Barclays Bank PLC and is not guaranteed by any third party. Any payment to be made on the Notes depends on the ability of Barclays Bank PLC to satisfy its obligations as they come due. In the event Barclays Bank PLC were to default on its obligations, you may not receive any amounts owed to you under the terms of the Notes.
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(Key Terms continued on the next page)
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Proceeds to Barclays Bank PLC
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Per Note
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$1,000
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100%
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1%
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99%
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Total
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$[
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]
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$[
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]
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$[
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]
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$[
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]
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1
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Our estimated value of the Notes on the pricing date, based on our internal pricing models, is expected to be between $987.40 and $990.90 per Note. The estimated value is expected to be less than the initial issue price of the Notes. See Additional Information Regarding Our Estimated Value of the Notes on page FWP-10 of this free writing prospectus.
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2
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The price to the public for any single purchase by an investor in certain trust accounts, who is not being charged the full selling concession or fee by other dealers of approximately 1%, is 99%. The price to the public for all other purchases of Notes is 100%.
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Investing in the Notes involves a number of risks. See Risk Factors beginning on page S-6 of the prospectus supplement and
Selected Risk Considerations
beginning on page FWP-4 of this free writing prospectus.
The Notes will not be listed on any U.S. securities exchange or quotation system. Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined that this free writing prospectus is truthful or complete. Any representation to the contrary is a criminal offense.
The Notes are not bank deposits and are not insured by the U.S. Federal Deposit Insurance Corporation or any other governmental agency, nor are they obligations of, or guaranteed by, a bank. The Notes are not guaranteed under the Federal Deposit Insurance Corporations Temporary Liquidity Guarantee Program.
Index Return:
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The performance of the Index from the initial level to the final level, calculated as follows:
Final Level Initial Level
Initial Level
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Initial Level:
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[
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]
, which is the closing level of the Index on the pricing date.
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Final Level:
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The closing level of the Index on the final valuation date.
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Final Valuation Date:
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June 20, 2014
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Maturity Date:
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June 25, 2014
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Calculation Agent:
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Barclays Bank PLC
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CUSIP/ISIN:
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06741J2Q1/US06741J2Q11
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Subject to postponement in the event of a market disruption event as described under Reference AssetsIndicesMarket Disruption Events for Securities with the Reference Asset Comprised of an Index or Indices of Equity Securities in the prospectus supplement.
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Expected. In the event we make any change to the expected pricing date and issue date, final valuation date and maturity date will be changed so that the stated term of the Notes remains the same.
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JPMorgan
Placement Agent
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Barclays Bank PLC has filed a registration statement (including a prospectus) with the U.S. Securities and Exchange Commission (SEC) for the offering to which this free writing prospectus relates. Before you invest, you should read the prospectus dated August 31, 2010, the prospectus supplement dated May 27, 2011, the index supplement dated May 31, 2011, and other documents Barclays Bank PLC has filed with the SEC for more complete information about Barclays Bank PLC and this offering. Buyers should rely upon the prospectus, prospectus supplement, index supplement and any relevant free writing prospectus or pricing supplement for complete details. You may get these documents and other documents Barclays Bank PLC has filed for free by visiting EDGAR on the SEC website at www.sec.gov. Alternatively, Barclays Bank PLC or any agent or dealer participating in this offering will arrange to send you the prospectus, prospectus supplement, index supplement, preliminary pricing supplement, if any, and final pricing supplement (when completed) and this free writing prospectus if you request it by calling your Barclays Bank PLC sales representative, such dealer or 1-888-227-2275 (Extension 2-3430). A copy of the prospectus may be obtained from
Barclays Capital Inc.,
745 Seventh Avenue
Attn: US InvSol Support, New York, NY 10019
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You may revoke your offer to purchase the Notes at any time prior to the pricing as described on the cover of this free writing prospectus. We reserve the right to change the terms of, or reject any offer to purchase the Notes prior to their issuance. In the event of any changes to the terms of the Notes, we will notify you and you will be asked to accept such changes in connection with your purchase. You may also choose to reject such changes in which case we may reject your offer to purchase.
ADDITIONAL TERMS SPECIFIC TO THE NOTES
You should read this free writing prospectus together with the prospectus dated August 31, 2010, as supplemented by the prospectus supplement dated May 27, 2011 and the index supplement dated May 31, 2011 relating to our Global Medium-Term Notes, Series A, of which these Notes are a part. This free writing prospectus, together with the documents listed below, contains the terms of the Notes and supersedes all prior or contemporaneous oral statements as well as any other written materials including preliminary or indicative pricing terms, correspondence, trade ideas, structures for implementation, sample structures, brochures or other educational materials of ours. You should carefully consider, among other things, the matters set forth under Risk Factors in the prospectus supplement and the index supplement, as the Notes involve risks not associated with conventional debt securities. We urge you to consult your investment, legal, tax, accounting and other advisors before you invest in the Notes.
You may access these documents on the SEC website at www.sec.gov as follows (or if such address has changed, by reviewing our filings for the relevant date on the SEC website):
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Prospectus dated August 31, 2010:
http://www.sec.gov/Archives/edgar/data/312070/000119312510201448/df3asr.htm
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Prospectus Supplement dated May 27, 2011:
http://www.sec.gov/Archives/edgar/data/312070/000119312511152766/d424b3.htm
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Index Supplement dated May 31, 2011:
http://www.sec.gov/Archives/edgar/data/312070/000119312511154632/d424b3.htm
Our SEC file number is 1-10257. As used in this free writing prospectus, the Company, we, us, or our refers to Barclays Bank PLC.
What is the Total Return on the Notes at Maturity Assuming a Range of Performance for the Index?
The following table illustrates the hypothetical total return at maturity on the Notes. The total return as used in this free writing prospectus is the number, expressed as a percentage, that results from comparing the payment at maturity per $1,000 principal amount Note to $1,000. The hypothetical total returns and examples set forth below assume the initial level of 1,702.25 and final levels as set forth below. The actual initial level will be determined on the pricing date, and the actual final level will be determined on the final valuation date. The hypothetical total returns set forth below are for illustrative purposes only and may not be the actual total returns applicable to a purchaser of the Notes. The numbers appearing in the following table and examples have been rounded for ease of analysis. The examples below do not take into account any tax consequences from investing in the Notes.
Final Level
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Index Return
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Payment at
Maturity
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Total Return on
Notes
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2,212.93
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30.00%
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$1,175.00
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17.50%
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2,042.70
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20.00%
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$1,175.00
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17.50%
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1,957.59
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15.00%
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$1,175.00
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17.50%
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1,872.48
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10.00%
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$1,175.00
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17.50%
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1,851.20
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8.75%
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$1,175.00
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17.50%
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1,787.36
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5.00%
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$1,100.00
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10.00%
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1,753.32
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3.00%
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$1,060.00
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6.00%
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1,736.30
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2.00%
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$1,040.00
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4.00%
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1,702.25
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0.00%
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$1,000.00
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0.00%
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1,617.14
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-5.00%
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$1,000.00
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0.00%
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1,532.03
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-10.00%
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$1,000.00
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0.00%
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1,361.80
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-20.00%
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$800.00
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-20.00%
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1,191.58
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-30.00%
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$700.00
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-30.00%
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1,021.35
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-40.00%
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$600.00
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-40.00%
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851.13
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-50.00%
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$500.00
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-50.00%
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680.90
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-60.00%
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$400.00
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-60.00%
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510.68
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-70.00%
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$300.00
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-70.00%
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340.45
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-80.00%
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$200.00
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-80.00%
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170.23
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-90.00%
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$100.00
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-90.00%
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0.00
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-100.00%
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$0.00
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-100.00%
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FWP-1
Hypothetical Examples of Amounts Payable at Maturity
The following examples illustrate how the total returns set forth in the table above are calculated.
Example 1: The final level of the Index is equal to or greater than the barrier level, and the level of the Index increases from an initial level of 1,702.25 to a final level of 1,787.36, resulting in an index return of 5.00%.
Because the final level of the Index is equal to or greater than the barrier level, and the index return of 5.00% multiplied by the upside leverage factor is greater than the contingent minimum return, the investor receives a payment at maturity of $1,100.00 per $1,000 principal amount Note, calculated as follows:
$1,000 + [$1,000 x Index Return x Upside Leverage Factor]
$1,000 + [$1,000 x 5.00% x 2.0] = $1,100.00
The total return on the investment of the Notes is 10.00%.
Example 2: The final level of the Index is equal to or greater than the barrier level, and the level of the Index increases from an initial level of 1,702.25 to a final level of 2,042.70, resulting in an index return of 20.00%.
Because the final level of the Index is equal to or greater than the barrier level, and the index return of 20.00% multiplied by the upside leverage factor is greater than the contingent minimum return and the greater than the maximum return, the investor receives a payment at maturity of $1,175.00 per $1,000 principal amount Note calculated as follows:
$1,000 + [$1,000 x Maximum Return]
$1,000 + [$1,000 x 17.50%] = $1,175.00
The total return on the investment of the Notes is 17.50% and subject to the maximum return.
Example 3: The final level of the Index is equal to or greater than the barrier level, and the level of the Index decreases from the initial level of 1,702.25 to a final level of 1,617.14, resulting in an index return of -5.00%.
Because the final level of the Index is equal to or greater than the barrier level, and the index return of -5.00% multiplied by the upside leverage factor is less than the contingent minimum return, the investor will receive a payment at maturity of $1,000.00 per $1,000 principal amount Note, calculated as follows:
$1,000 + [$1,000 x Contingent Minimum Return]
$1,000 + [$1,000 x 0.00%] = $1,000.00
The total return of the investment of the Notes is 0.00%.
Example 4: The final level of the Index is below the barrier level, and the level of the Index decreases from the initial level of 1,702.25 to a final level of 851.13, resulting in an index return of -50.00%.
Because the final level of the Index is below the barrier level, the investor will receive a payment at maturity of $500.00 per $1,000 principal amount Note, calculated as follows:
$1,000 + [$1,000 x Index Return]
$1,000 + [$1,000 x -50.00%] = $500.00
The total return on the investment of the Notes is -50.00%.
FWP-2
Selected Purchase Considerations
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Market Disruption Events and Adjustments
The final valuation date, maturity date, payment at maturity and the reference asset are subject to adjustment as described in the following sections of the prospectus supplement:
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For a description of what constitutes a market disruption event as well as the consequences of that market disruption event, see Reference AssetsIndicesMarket Disruption Events for Securities with the Reference Asset Comprised of an Index or Indices of Equity Securities with respect to the reference asset; and
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For a description of further adjustments that may affect the reference asset, see Reference AssetsIndicesAdjustments Relating to Securities with the Reference Asset Comprised of an Index or Indices.
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Limited Protection Against Loss
Payment at maturity of the principal amount of the Notes is protected against a decline in the index return but only to the extent that the closing level of the Index on the final valuation date is at or above the barrier level, which is equal to 90% of the closing level of the Index on the pricing date. Because the Notes are our senior unsecured obligations, payment of any amount at maturity is subject to our ability to pay our obligations as they become due and is not guaranteed by any third party. For a description of risks with respect to the ability of Barclays Bank PLC to satisfy its obligations as they come due, see Selected Risk ConsiderationsCredit of Issuer in this free writing prospectus.
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Appreciation Potential
The Notes provide the opportunity to enhance equity returns by multiplying a positive index return by the upside leverage factor, up to the maximum return on the Notes of 17.50%, or $1,175.00 for every $1,000 principal amount Note.
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Exposure to Equities of the MSCI EAFE Index
The return on the Notes is linked to the MSCI EAFE Index. The MSCI Index consists of 907 component stocks (as of April 30, 2013) selected to capture large and mid cap representation across developed markets around the world (excluding the United States and Canada). Developed markets countries in the MSCI EAFE Index include: Australia, Austria, Belgium, Denmark, Finland, France, Germany, Greece, Hong Kong, Ireland, Israel, Italy, Japan, the Netherlands, New Zealand, Norway, Portugal, Singapore, Spain, Sweden, Switzerland and the UK. The Index covers approximately 85% of the free float-adjusted market capitalization in each country included in the Index. For additional information about the Index, see the information set forth under Equity Indices MSCI Indices in the index supplement.
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Material U.S. Federal Income Tax Considerations
The material tax consequences of your investment in the Notes are summarized below. The discussion below supplements the discussion under Certain U.S. Federal Income Tax Considerations in the accompanying prospectus supplement. As described in the prospectus supplement, this section applies to you only if you are a U.S. holder (as defined in the accompanying prospectus supplement) 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 the prospectus supplement (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, Barclays Bank PLC and you agree, 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
FWP-3
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, it would be reasonable to treat your Notes 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 the accompanying prospectus supplement, 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.
For a further discussion of the tax treatment of your Notes as well as possible alternative characterizations, please see the discussion under the heading Certain U.S. Federal Income Tax ConsiderationsCertain Notes Treated as Forward Contracts or Executory Contracts in the accompanying prospectus supplement. You should consult your tax advisor as to the possible alternative treatments in respect of the Notes. For additional, important considerations related to tax risks associated with investing in the Notes, you should also examine the discussion in Selected Risk ConsiderationsTaxes, in this free writing prospectus.
Specified Foreign Financial Asset Reporting.
Under legislation enacted in 2010, owners of specified foreign financial assets with an aggregate value in excess of $50,000 (and in some circumstances, a higher threshold) may be required to file an information report with respect to such assets with their tax returns. Specified foreign financial assets generally include any financial accounts maintained by foreign financial institutions, as well as any of the following (which may include your Notes), but only if they are not held in accounts maintained by financial institutions: (i) stocks and securities issued by non-U.S. persons, (ii) financial instruments and contracts held for investment that have non-U.S. issuers or counterparties and (iii) interests in foreign entities.
Holders
are urged to consult their tax advisors regarding the application of this legislation to their ownership of the Notes.
Selected Risk Considerations
An investment in the Notes involves significant risks. Investing in the Notes is not equivalent to investing directly in the Index or any component stocks of the Index. These risks are explained in more detail in the Risk Factors sections of the prospectus supplement and the index supplement, including but not limited to the risk factors discussed under the following headings:
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Risk FactorsRisks Relating to All Securities;
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Risk FactorsAdditional Risks Relating to Notes Which Pay No Interest;
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Risk FactorsAdditional Risks Relating to Securities with a Maximum Return, Maximum Rate, Ceiling or Cap;
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Risk FactorsAdditional Risks Relating to Notes Which Are Not Characterized as Being Fully Principal Protected or Are Characterized as Being Partially Protected or Contingently Protected;
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Risk FactorsAdditional Risks Relating to Securities with a Barrier Percentage or a Barrier Level; and
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Risk FactorsAdditional Risks Relating to Securities with Reference Assets That Are Equity Securities or Shares or Other Interests in Exchange-Traded Funds, That Contain Equity Securities or Shares or Other Interests in Exchange-Traded Funds or That Are Based in Part on Equity Securities or Shares or Other Interests in Exchange-Traded Funds.
In addition to the risks discussed under the headings above, you should consider the following:
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Your Investment in the Notes May Result in a Loss
The Notes do not guarantee any return of principal. The return on the Notes at maturity is linked to the performance of the Index and will depend on whether, and the extent to which, the index return is positive or negative. If the closing level of the Index declines below the barrier level on the final valuation date, your investment will be fully exposed to the decline in the Index from the initial level, and you may lose up to 100% of your initial investment.
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Credit of Issuer
The Notes are senior unsecured debt obligations of the issuer, Barclays Bank PLC and are not, either directly or indirectly, an obligation of any third party. Any payment to be made on the Notes depends on the ability of Barclays Bank PLC to satisfy its obligations as they come due. In the event Barclays Bank PLC were to default on its obligations, you may not receive any amounts owed to you under the terms of the Notes.
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Your Maximum Gain on the Notes Is Limited to the Maximum Return
If the final level is greater than the initial level, for each $1,000 principal amount Note, you will receive at maturity $1,000 plus an additional amount that will not exceed a predetermined percentage of the principal amount, regardless of the appreciation in the Index, which may be significant. We refer to this percentage as the maximum return, which is set to equal 17.50%.
FWP-4
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No Interest or Dividend Payments or Voting Rights
As a holder of the Notes, you will not receive interest payments, and you will not have voting rights or rights to receive cash dividends or other distributions or other rights that holders of securities composing the Index would have.
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Lack of Liquidity
The Notes will not be listed on any securities exchange. Barclays Capital Inc. and other affiliates of Barclays Bank PLC intend to make a secondary market for the Notes but are not required to do so, and may discontinue any such secondary market making at any time, without notice. Barclays Capital Inc. may at any time hold unsold inventory, which may inhibit the development of a secondary market for the Notes. Even if there is a secondary market, it may not provide enough liquidity to allow you to trade or sell the Notes easily. Because other dealers are not likely to make a secondary market for the Notes, the price at which you may be able to trade your Notes is likely to depend on the price, if any, at which Barclays Capital Inc. and other affiliates of Barclays Bank PLC are willing to buy the Notes. The Notes are not designed to be short-term trading instruments. Accordingly, you should be able and willing to hold your Notes to maturity.
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Potential Conflicts
We and our affiliates play a variety of roles in connection with the issuance of the Notes, including acting as calculation agent and hedging our obligations under the Notes. In performing these duties, the economic interests of the calculation agent and other affiliates of ours are potentially adverse to your interests as an investor in the Notes.
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Taxes
The U.S. federal income tax treatment of the Notes is uncertain and the Internal Revenue Service could assert that the Notes should be taxed in a manner that is different than described above. As discussed further in the accompanying prospectus supplement, the Internal Revenue Service issued a notice in 2007 indicating that it and the Treasury Department are actively considering whether, among other issues, you should be required to accrue interest over the term of an instrument such as the Notes and whether all or part of the gain you may recognize upon the sale or maturity of an instrument such as the Notes should be treated as ordinary income. Similarly, the Internal Revenue Service and the Treasury Department have current projects open with regard to the tax treatment of pre-paid forward contracts and contingent notional principal contracts. While it is impossible to anticipate how any ultimate guidance would affect the tax treatment of instruments such as the Notes (and while any such guidance may be issued on a prospective basis only), such guidance could be applied retroactively and could in any case increase the likelihood that you will be required to accrue income over the term of an instrument such as the Notes even though you will not receive any payments with respect to the Notes until maturity. The outcome of this process is uncertain. You should consult your tax advisor as to the possible alternative treatments in respect of the Notes.
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Suitability of the Notes for Investment
You should reach a decision to invest in the Notes after carefully considering, with your advisors, the suitability of the Notes in light of your investment objectives and the specific information set out in this free writing prospectus, the prospectus supplement, the index supplement and the prospectus. Neither the Issuer nor Barclays Capital Inc. makes any recommendation as to the suitability of the Notes for investment.
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Currency Exchange Rate Risk
Because the prices of the component securities of the country indices that compose the Index are converted into U.S. dollars for purposes of calculating the value of the component country indices and the Index, your Notes will be exposed to currency exchange rate risk with respect to each of the currencies in which the component securities of the Index trade. Your net exposure will depend on the extent to which those currencies strengthen or weaken against the U.S. dollar and the relative weight of the component securities in the Index denominated in those currencies. If, taking into account the relevant weighting, the U.S. dollar strengthens against those currencies, the value of the Index will be adversely affected and the payment at maturity, if any, may be reduced. Of particular importance to potential currency exchange risk are: existing and expected rates of inflation; existing and expected interest rate levels; the balance of payments in the component countries of the Index and the United States and between each country and its major trading partners; political, civil or military unrest in the component countries of the Index and the United States; and the extent of governmental surplus or deficit in the component countries of the Index and the United States. All of these factors are, in turn, sensitive to the monetary, fiscal and trade policies pursued by the component countries of the Index, the United States and those of other countries important to international trade and finance.
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Non-U.S. Securities Markets Risks
The component stocks of the Index are issued by foreign companies in foreign securities markets. These stocks may be more volatile and may be subject to different political, market, economic, exchange rate, regulatory and other risks which may have a negative impact on the performance of the financial products linked to the Index, which may have an adverse effect on the Notes. Also, the public availability of information concerning the issuers of the component stocks of the Index will vary depending on their home jurisdiction and the reporting requirements imposed by their respective regulators. In addition, the issuers of such component stocks may be subject to accounting, auditing and financial reporting standards and requirement that differ from those applicable to United States reporting companies.
·
The Pa
yment at Maturity on Your Notes is Not Based on the Level of the Index at Any Time Other than the Final Valuation Date
The final level and the index return will be based solely on the closing level of the Index on the final valuation date relative to the initial level (subject to adjustments as described in the prospectus supplement). Therefore, if the level of the Index drops precipitously on the final valuation date, the payment at maturity, if any, that you will receive for your Notes may be significantly less than it would otherwise have been had the payment at maturity been linked to the level of the Index at a time prior to such drop. Although the level of Index on the maturity date or at other times during the life of your Notes may be higher than the closing level on the final valuation date, you will not benefit from the level of the Index at any time other than the final valuation date.
FWP-5
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Many Economic and Market Factors Will Impact the Value of the Notes
In addition to the level of the Index on any day, the value of the Notes will be affected by a number of economic and market factors that may either offset or magnify each other, including:
o
the expected volatility of the Index;
o
the time to maturity of the Notes;
o
the dividend rate on the common stocks underlying the Index;
o
interest rates in the market generally;
o
a variety of economic, financial, political, regulatory or judicial events;
o
our creditworthiness, including actual or anticipated downgrades in our credit ratings.
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The Estimated Value of Your Notes Might be Lower if Such Estimated Value Were Based on the Levels at Which Our Debt Securities Trade in the Secondary Market
The estimated value of your Notes on the pricing date 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 values referenced above may be lower if such estimated values were based on the levels at which our benchmark debt securities trade in the secondary market.
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The Estimated Value of Your Notes is Expected to be Lower Than the Initial Issue Price of Your Notes
The estimated value of your Notes on the pricing date is expected to be lower, and may be significantly lower, than the initial issue price of your Notes. The difference between the initial issue price of your Notes and the estimated value of the Notes is expected as a result of certain factors, such as any sales commissions expected to be paid to Barclays Capital Inc. or another affiliate of ours, any selling concessions, discounts, commissions or fees expected to be allowed or paid to non-affiliated intermediaries, the estimated profit that we or any of our affiliates expect to earn in connection with structuring the Notes, the estimated cost which we may incur in hedging our obligations under the Notes, and estimated development and other costs which we may incur in connection with the Notes.
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The Estimated Value of the Notes is Based on Our Internal Pricing Models, Which May Prove to be Inaccurate and May be Different from the Pricing Models of Other Financial Institutions
The estimated value of your Notes on the pricing date is based on our internal pricing models, which take into account a number of variables and are based on a number of subjective assumptions, which may or may not materialize. These variables and assumptions are not evaluated or verified on an independent basis. Further, our pricing models may be different from other financial institutions pricing models and the methodologies used by us to estimate the value of the Notes may not be consistent with those of other financial institutions which may be purchasers or sellers of Notes in the secondary market. As a result, the secondary market price of your Notes may be materially different from the estimated value of the Notes determined by reference to our internal pricing models.
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The Estimated Value of Your Notes Is Not a Prediction of the Prices at Which You May Sell Your Notes in the Secondary Market, if any, and Such Secondary Market Prices, If Any, Will Likely be Lower Than the Initial Issue Price of Your Notes and Maybe Lower Than the Estimated Value of Your Notes
The estimated value of the Notes will not be a prediction of the prices at which Barclays Capital Inc., other affiliates of ours or third parties may be willing to purchase the Notes from you in secondary market transactions (if they are willing to purchase, which they are not obligated to do). 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 bid and ask spread for similar sized trades, and may be substantially less than our estimated value of the Notes. Further, as secondary market prices of your Notes take into account the levels at which our debt securities trade in the secondary market, and do not take into account our various costs related to the Notes such as fees, commissions, discounts, and the costs of hedging our obligations under the Notes, secondary market prices of your Notes will likely be lower than the initial issue price of your Notes. As a result, the price, at which Barclays Capital Inc., other affiliates of ours or third parties may be willing to purchase the Notes from you in secondary market transactions, if any, will likely be lower than the price you paid for your Notes, and any sale prior to the maturity date could result in a substantial loss to you.
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The Temporary Price at Which We May Initially Buy The Notes in the Secondary Market And the Value We May Initially Use for Customer Account Statements, If We Provide Any Customer Account Statements At All, May Not Be Indicative of Future Prices of Your Notes
Assuming that all relevant factors remain constant after the pricing date, the price at which Barclays Capital Inc. may initially buy or sell the Notes in the secondary market (if Barclays Capital Inc. makes a market in the Notes, which it is not obligated to do) and the value that we may initially use for customer account statements, if we provide any customer account statements at all, may exceed our estimated value of the Notes on the pricing date, as well as the secondary market value of the Notes, for a temporary period after the initial issue date of the Notes. The price at which Barclays Capital Inc. may initially buy or sell the Notes in the secondary market and the value that we may initially use for customer account statements may not be indicative of future prices of your Notes.
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We and Our Affiliates May Engage in Various Activities or Make Determinations That Could Materially Affect Your Notes in Various Ways and Create Conflicts of Interest
We and our affiliates establish the offering price of the Notes for initial sale to the public, and the offering price is not based upon any independent verification or valuation. Additionally, the role played by Barclays Capital Inc., as a dealer in the Notes, could present it with significant conflicts of interest with the role of Barclays Bank PLC, as issuer of the Notes. For example, Barclays Capital Inc. or its representatives may derive
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compensation or financial benefit from the distribution of the Notes and such compensation or financial benefit may serve as an incentive to sell these Notes instead of other investments. We may pay dealer compensation to any of our affiliates acting as agents or dealers in connection with the distribution of the Notes. Furthermore, we and our affiliates make markets in and trade various financial instruments or products for their own accounts and for the account of their clients and otherwise provide investment banking and other financial services with respect to these financial instruments and products. These financial instruments and products may include securities, instruments or assets that may serve as the underliers, basket underliers or constituents of the underliers of the Notes. Such market making, trading activities, other investment banking and financial services may negatively impact the value of the Notes. Furthermore, in any such market making, trading activities, and other services, we or our affiliates may take positions or take actions that are inconsistent with, or adverse to, the investment objectives of the holders of the Notes. We and our affiliates have no obligation to take the needs of any buyer, seller or holder of the Notes into account in conducting these activities.
Historical Information
The following graph sets forth the historical performance of the Index based on the daily closing level of the Index from January 2, 2002 through May 31, 2013. The closing level of the Index on May 31, 2013 was 1,702.25.
We obtained the closing levels of the Index below from Bloomberg, L.P. We have not independently verified the accuracy or completeness of the information obtained from Bloomberg, L.P. The historical levels of the Index should not be taken as an indication of future performance, and no assurance can be given as to the closing level of the Index on any day between the pricing date and the final valuation date. We cannot give you assurance that the performance of the Index will result in the return of any of your initial investment.
PAST PERFORMANCE IS NOT INDICATIVE OF FUTURE RESULTS.
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Certain Employee Retirement Income Security Act Considerations
Your purchase of a Note in an Individual Retirement Account (an IRA), will be deemed to be a representation and warranty by you, as a fiduciary of the IRA and also on behalf of the IRA, that (i) neither the issuer, the placement agent nor any of their respective affiliates has or exercises any discretionary authority or control or acts in a fiduciary capacity with respect to the IRA assets used to purchase the Note or renders investment advice (within the meaning of Section 3(21)(A)(ii) of the Employee Retirement Income Security Act (ERISA)) with respect to any such IRA assets and (ii) in connection with the purchase of the Note, the IRA will pay no more than adequate consideration (within the meaning of Section 408(b)(17) of ERISA) and in connection with any redemption of the Note pursuant to its terms will receive at least adequate consideration, and, in making the foregoing representations and warranties, you have (x) applied sound business principles in determining whether fair market value will be paid, and (y) made such determination acting in good faith.
Supplemental Plan of Distribution
JPMorgan Chase Bank, N.A. and JPMorgan Securities LLC will act as placement agents for the Notes pursuant to separate placement agency agreements with the issuer and will receive a fee pursuant to its agreement that will not exceed $10.00 per $1,000 principal amount Note. JPMorgan Securities LLC may act on behalf of an affiliate and may reallow all or a portion of fees received in connection with the distribution of the Notes to such affiliate.
Additional Information Regarding Our Estimated Value of the Notes
The final terms for the Notes will be determined on the date the Notes are initially priced for sale to the public (the pricing date) based on prevailing market conditions on the pricing date, and will be communicated to investors either orally or in a final pricing supplement.
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. 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) may vary from the levels at which our benchmark debt securities trade in the secondary market. Our estimated value on the pricing date is 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.
Our estimated value of the Notes on the pricing date is expected to be less than the initial issue price of the Notes. The difference between the initial issue price of the Notes and our estimated value of the Notes is expected to result from several factors, including any sales commissions expected to be paid to Barclays Capital Inc. or another affiliate of ours, any selling concessions, discounts, commissions or fees expected to be allowed or paid to non-affiliated intermediaries, the estimated profit that we or any of our affiliates expect to earn in connection with structuring the Notes, the estimated cost which we may incur in hedging our obligations under the Notes, and estimated development and other costs which we may incur in connection with the Notes.
Our estimated value on the pricing date is not a prediction of the price at which the Notes may trade in the secondary market, nor will it be the price at which Barclays Capital Inc. may buy or sell the Notes in the secondary market. Subject to normal market and funding conditions, Barclays Capital Inc. or another affiliate of ours intends to offer to purchase the Notes in the secondary market but it is not obligated to do so.
Assuming that all relevant factors remain constant after pricing date, the price at which Barclays Capital Inc. may initially buy or sell the Notes in the secondary market, if any, and the value that we may initially use for customer account statements, if we provide any customer account statements at all, may exceed our estimated value on the pricing date for a temporary period expected to be approximately three months after the initial issue date of the Notes because, in our discretion, we may elect to effectively reimburse to investors a portion of the estimated cost of hedging our obligations under the Notes and other costs in connection with the Notes which we will no longer expect to incur over the term of the Notes. We made such discretionary election and determined this temporary reimbursement period on the basis of a number of factors, including the tenor of the Notes and any agreement we may have with the distributors of the Notes. The amount of our estimated costs which we effectively reimburse to investors in this way may not be allocated ratably throughout the reimbursement period, and we may discontinue such reimbursement at any time or revise the duration of the reimbursement period after the initial issue date of the Notes based on changes in market conditions and other factors that cannot be predicted.
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We urge you to read the Selected Risk Considerations beginning on page FWP-6 of this free writing prospectus.
You may revoke your offer to purchase the Notes at any time prior to the pricing date. We reserve the right to change the terms of, or reject any offer to purchase, the Notes prior to their pricing date. In the event of any changes to the terms of the Notes, we will notify you and you will be asked to accept such changes in connection with your purchase. You may also choose to reject such changes in which case we may reject your offer to purchase.
ADDITIONAL INFORMATION
If the reference asset is (a) a security or other financial instrument admitted to trading on a trading venue in the European Union (other than a security or other financial instrument whose principal trading venue is located outside the European Union), (b) a derivative relating to such a security or financial instrument (or to the issuer of such a security or financial instrument) or (c) a debt instrument issued by the European Union or any of its member states or any sovereign issuer that is an instrumentality or political sub-division of the European Union or any of its member states, or any derivative relating thereto (any of (a), (b) or (c) being a European Financial Instrument), or if the Reference Asset is an index, basket of securities or interest in an exchange traded fund or similar entity which includes one or more European Financial Instruments, then as a holder of the Notes, you may be deemed to have an indirect interest in those underlying European Financial Instruments for purposes of EU Regulation No 26/2012 of 14 March 2012 on short selling and certain aspects of credit default swaps (the EU Short Selling Regulation). Subject to certain exceptions, the EU Short Selling Regulation prohibits investors, wherever located, from directly or indirectly making uncovered short sales of European Financial Instruments or European sovereign credit default swaps. The EU Short Selling Regulation also requires investors, wherever located, who hold directly or indirectly a net short position in European Financial Instruments to comply with certain notification and disclosure obligations depending on the size of their net short position. You should consult with your own legal advisers regarding any investment in the Notes, as you may need to consider your investment in the Notes for purposes of compliance with the EU Short Selling Regulation.
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