ADDITIONAL INFORMATION REGARDING OUR ESTIMATED VALUE OF THE NOTES
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 Initial Valuation 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 Initial Valuation Date is 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 results from several factors, including any sales commissions to be paid to Barclays Capital Inc. or another affiliate of ours, any selling concessions, discounts, commissions or fees 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 Initial Valuation 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 the Initial Valuation 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 Initial Valuation Date for a temporary period expected to be approximately six months after the Issue Date 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, which may include the tenor of the Notes and/or 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.
We urge you to read the
Selected Risk Considerations
beginning on page PS
10
of this pricing supplement
.
PS-
3
SELECTED PURCHASE CONSIDERATIONS
The Notes are not suitable for all investors. The Notes may be a suitable investment for you if all of the following statements are true:
·
You do not seek an investment that produces fixed periodic interest or coupon payments or other non-contingent sources of current income, and you can tolerate receiving few or no Contingent Coupons over the term of the Notes in the event the Closing Value of any Reference Asset falls below its Coupon Barrier Value on one or more of the specified Observation Dates.
·
You understand and accept that you will not participate in any appreciation of any Reference Asset, which may be significant, and that your return potential on the Notes is limited to the Contingent Coupons, if any, paid on the Notes.
·
You can tolerate a loss of a significant portion or all of your principal amount, and you are willing and able to make an investment that may have the full downside market risk of an investment in the Least Performing Reference Asset.
·
You do not anticipate that the Closing Value of
any
Reference Asset will fall below its Coupon Barrier Value on any Observation Date or that the Reference Asset Return of any Reference Asset will be less than -25.00%.
·
You are willing and able to accept the individual market risk of each Reference Asset and understand that any decline in the value of one Reference Asset will not be offset or mitigated by a lesser decline or any potential increase in the value of any other Reference Asset.
·
You understand and accept the risks that (a) you will not receive a Contingent Coupon if the Closing Value of
only one
Reference Asset is less than its Coupon Barrier Value on an Observation Date and (b) you will lose some or all of your principal at maturity if the Reference Asset Return of
only one
Reference Asset is less than -25.00%.
·
You understand and accept the risk that, if the Notes are not automatically called prior to scheduled maturity, the payment at maturity, if any, will be based
solely
on the Reference Asset Return of the Least Performing Reference Asset.
·
You understand and are willing and able to accept the risks associated with an investment linked to the performance of the Reference Assets.
·
You are willing and able to accept the risk that the Notes may be automatically called prior to scheduled maturity and that you may not be able to reinvest your money in an alternative investment with comparable risk and yield.
·
You can tolerate fluctuations in the price of the Notes prior to scheduled maturity that may be similar to or exceed the downside fluctuations in the values of the Reference Assets.
·
You do not seek an investment for which there will be an active secondary market, and you are willing and able to hold the Notes to maturity if the Notes are not automatically called.
·
You are willing to assume our credit risk for all payments on the Notes.
·
You are willing to consent to the exercise of any U.K. Bail-in Power by any relevant U.K. resolution authority.
The Notes may
not
be a suitable investment for you if
any
of the following statements are true:
·
You seek an investment that produces fixed periodic interest or coupon payments or other non-contingent sources of current income, and/or you cannot tolerate receiving few or no Contingent Coupons over the term of the Notes in the event the Closing Value of any Reference Asset falls below its Coupon Barrier Value on one or more of the specified Observation Dates.
·
You seek an investment that participates in the full appreciation of any or all of the Reference Assets rather than an investment with a return that is limited to Contingent Coupons, if any, paid on the Notes.
·
You seek an investment that provides for the full repayment of principal at maturity, and/or you are unwilling or unable to accept the risk that you may lose some or all of the principal amount of your Notes in the event that the Final Value of the Least Performing Reference Asset falls below -25.00%.
·
You anticipate that the Closing Value of
at least one
Reference Asset will decline during the term of the Notes such that the Closing Value of
at least one
Reference Asset will fall below its Coupon Barrier Value on one or more Observation Dates and/or the Reference Asset Return of
at least one
Reference Asset is less than -25.00%.
·
You are unwilling or unable to accept the individual market risk of each Reference Asset and/or do not understand that any decline in the value of one Reference Asset will not be offset or mitigated by a lesser decline or any potential increase in the value of any other Reference Asset.
·
You do not understand and/or are unwilling or unable to accept the risks associated with an investment linked to the performance of the Reference Assets.
·
You are unwilling or unable to accept the risk that the negative performance of
only one
Reference Asset may cause you to not receive Contingent Coupons and/or suffer a loss of principal at maturity, regardless of the performance of any other Reference Asset.
·
You are unwilling or unable to accept the risk that the Notes may be automatically called prior to scheduled maturity.
·
You cannot tolerate fluctuations in the price of the Notes prior to scheduled maturity that may be similar to or exceed the downside fluctuations in the values of the Reference Assets.
·
You seek an investment for which there will be an active secondary market, and/or you are unwilling or unable to hold the Notes to maturity if they are not automatically called.
·
You prefer the lower risk, and therefore accept the potentially lower returns, of fixed income investments with comparable maturities and credit ratings.
·
You are unwilling or unable to assume our credit risk for all payments on the Notes.
·
You are unwilling or unable to consent to the exercise of any U.K. Bail-in Power by any relevant U.K. resolution authority.
PS-
4
You must rely on your own evaluation of the merits of an investment in the Notes
. You should reach a decision whether 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 pricing supplement, the prospectus supplement, the prospectus and the index supplement. Neither the Issuer nor Barclays Capital Inc. makes any recommendation as to the suitability of the Notes for investment.
ADDITIONAL TERMS OF THE NOTES
The Observation Dates (including the Final Valuation Date), the Contingent Coupon Payment Dates, any Call Settlement Date and the Maturity Date are subject to postponement in certain circumstances, as described under Reference AssetsLeast or Best Performing Reference AssetScheduled Trading Days and Market Disruption Events for Securities Linked to the Reference Asset with the Lowest or Highest Return in a Group of Two or More Equity Securities, Exchange-Traded Funds and/or Indices of Equity Securities and Terms of the NotesPayment Dates in the accompanying prospectus supplement.
In addition, the Reference Assets and the Notes are subject to adjustment by the Calculation Agent under certain circumstances, as described under Reference AssetsIndicesAdjustments Relating to Securities with an Index as a Reference Asset in the accompanying prospectus supplement
.
PS-
5
HYPOTHETICAL EXAMPLES OF AMOUNTS PAYABLE ON A SINGLE CONTINGENT COUPON PAYMENT DATE
The following examples demonstrate the circumstances under which you may receive a Contingent Coupon on a hypothetical Contingent Coupon Payment Date. The numbers appearing in these tables are purely hypothetical and are provided for illustrative purposes only. These examples do not take into account any tax consequences from investing in the Notes and make the following key assumptions:
§
Hypothetical
Initial Value of each Reference Asset: 100.00*
§
Hypothetical
Coupon Barrier Value for each Reference Asset: 75.00 (75.00% of the hypothetical Initial Value set forth above)*
*
The
hypothetical
Initial Value of 100.00 and the
hypothetical
Coupon Barrier Value of 75.00 for each Reference Asset have been chosen for illustrative purposes only. The actual Initial Value and Coupon Barrier Value for each Reference Asset are as set forth on the cover of this pricing supplement.
Example 1
: The Closing Value of each Reference Asset is greater than its Coupon Barrier Value on the relevant Observation Date.
Reference Asset
|
Closing Value on Relevant
Observation Date
|
S&P 500 Index
|
95.00
|
Russell 2000 Index
|
105.00
|
Because the Closing Value of each Reference Asset is greater than its respective Coupon Barrier Value, you will receive a Contingent Coupon of $6.75 (0.675% of the principal amount per Note) on the related Contingent Coupon Payment Date.
Example 2
: The Closing Value of one Reference Asset is greater than its Coupon Barrier Value on the relevant Observation Date and the Closing Value of at least one Reference Asset is less than its Coupon Barrier Value on the relevant Observation Date.
Reference Asset
|
Closing Value on Relevant
Observation Date
|
S&P 500 Index
|
135.00
|
Russell 2000 Index
|
55.00
|
Because the Closing Value of at least one Reference Asset is less than its Coupon Barrier Value, you will not receive a Contingent Coupon on the related Contingent Coupon Payment Date.
Example 3
: The Closing Value of each Reference Asset is less than its Coupon Barrier Value on the relevant Observation Date.
Reference Asset
|
Closing Value on Relevant
Observation Date
|
S&P 500 Index
|
50.00
|
Russell 2000 Index
|
45.00
|
Because the Closing Value of at least one Reference Asset is less than its Coupon Barrier Value, you will not receive a Contingent Coupon on the related Contingent Coupon Payment Date.
Examples 2 and 3 demonstrate that you may not receive a Contingent Coupon on a Contingent Coupon Payment Date
.
If the Closing Value of any Reference Asset is below its Coupon Barrier Value on each Observation Date
,
you will not receive any Contingent Coupons during the term of the Notes
.
In each of the examples above
,
because the Closing Value of at least one Reference Asset is below its Initial Value on the relevant Observation Date
,
the Notes will not be automatically called on such date if such date were a Call Valuation Date
.
The Notes will be automatically called only if the Closing Value of each Reference Asset on any Call Valuation Date is greater than or equal to its respective Initial Value
.
PS-
6
HYPOTHETICAL EXAMPLES OF AMOUNTS PAYABLE UPON AUTOMATIC CALL
The following table illustrates the hypothetical total return upon an Automatic Call under various circumstances. The total return as used in these examples is the number, expressed as a percentage, that results from comparing the aggregate payments per $1,000 principal amount Note to $1,000. 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 tables and examples have been rounded for ease of analysis. The hypothetical examples below do not take into account any tax consequences from investing in the Notes.
Example 1
:
The Notes are automatically called on the first Call Valuation Date
.
Observation
Date
|
Is the Closing Value of
Any
Reference Asset Less Than
its Coupon Barrier Value?
|
Is the Closing Value of
Any
Reference Asset Less Than its
Initial Value?
|
Payment on Contingent Coupon Payment Date
(per $1,000 principal amount Note)
|
1
|
Yes
|
The Notes may
not
be called with respect to any of the first eleven Observation Dates
|
$0.00
|
2
|
Yes
|
$0.00
|
3
|
Yes
|
$0.00
|
4
|
Yes
|
$0.00
|
5
|
Yes
|
$0.00
|
6
|
Yes
|
$0.00
|
7
|
Yes
|
$0.00
|
8
|
No
|
$6.75
|
9
|
Yes
|
$0.00
|
10
|
Yes
|
$0.00
|
11
|
Yes
|
$0.00
|
12 (First Call Valuation Date)
|
No
|
No
|
$1,006.75
|
Because the Closing Value of each Reference Asset on the first Call Valuation Date is greater than or equal to its Initial Value, the Notes are automatically called and you will receive the Redemption Price on the related Call Settlement Date.
The Notes will cease to be outstanding after the Call Settlement Date, and you will not receive any further payments on the Notes.
The total return on investment of the Notes is 1.35%.
Example 2
:
The Notes are automatically called on the second Call Valuation Date
.
Observation
Date
|
Is the Closing Value of
Any
Reference Asset Less Than
its Coupon Barrier Value?
|
Is the Closing Value of
Any
Reference Asset Less Than its
Initial Value?
|
Payment on Contingent Coupon Payment Date
(per $1,000 principal amount Note)
|
1
|
No
|
The Notes may
not
be called with respect to any of the first eleven Observation Dates
|
$6.75
|
2
|
Yes
|
$0.00
|
3
|
Yes
|
$0.00
|
4
|
Yes
|
$0.00
|
5
|
Yes
|
$0.00
|
6
|
Yes
|
$0.00
|
7
|
Yes
|
$0.00
|
8
|
Yes
|
$0.00
|
9
|
Yes
|
$0.00
|
10
|
Yes
|
$0.00
|
11
|
No
|
$6.75
|
12 (First Call Valuation Date)
|
Yes
|
Yes
|
$0.00
|
13
|
Yes
|
Yes
|
$0.00
|
14
|
No
|
Yes
|
$6.75
|
15
|
Yes
|
Yes
|
$0.00
|
16 (Second Call Valuation Date)
|
No
|
No
|
$1,006.75
|
Because the Closing Value of each Reference Asset on the second Call Valuation Date is greater than or equal to its Initial Value, the Notes are automatically called and you will receive the Redemption Price on the related Call Settlement Date.
The Notes will cease to be outstanding after the Call Settlement Date, and you will not receive any further payments on the Notes.
The total return on investment of the Notes is 2.70%.
Each of the examples demonstrate that the return on the Notes will be limited to the Contingent Coupons that may be payable on the Notes. Each of these examples also demonstrates that, if the Closing Value of at least one Reference Asset is less than its Coupon Barrier Value on an Observation Date, you will not receive a Contingent Coupon on the related Contingent Coupon Payment Date. If the Closing Value of at least one Reference Asset is less than its Coupon Barrier Value on each Observation Date, you will not receive any Contingent Coupons during the term of the Notes.
PS-
7
HYPOTHETICAL EXAMPLES OF AMOUNTS PAYABLE AT MATURITY
The following table illustrates the hypothetical range of payments that you may receive at maturity (excluding the final Contingent Coupon payment that may be payable on the Notes) under various circumstances. The examples set forth below are purely hypothetical and are provided for illustrative purposes only. The numbers appearing in the following table and examples have been rounded for ease of analysis. The hypothetical examples below do not take into account any tax consequences from investing in the Notes and make the following key assumptions
:
§
Hypothetical
Initial Value of each Reference Asset: 100.00*
§
Hypothetical
Coupon Barrier Value for each Reference Asset: 75.00 (75.00% of the hypothetical Initial Value set forth above)*
§
You hold the Notes to maturity, and the Notes are
NOT
automatically called prior to scheduled maturity.
*
The
hypothetical
Initial Value of 100.00 and the
hypothetical
Coupon Barrier Value of 75.00 for each Reference Asset have been chosen for illustrative purposes only. The actual Initial Value and Coupon Barrier Value for each Reference Asset are as set forth on the cover of this pricing supplement.
Final Value
|
|
Reference Asset Return
|
|
|
S&P 500 Index
|
Russell 2000
Index
|
|
S&P 500 Index
|
Russell 2000
Index
|
|
Reference Asset Return
of the Least Performing
Reference Asset
|
Payment at Maturity
**
|
150.00
|
175.00
|
|
50.00%
|
75.00%
|
|
50.00%
|
$1,000.00
|
145.00
|
140.00
|
|
45.00%
|
40.00%
|
|
40.00%
|
$1,000.00
|
130.00
|
150.00
|
|
30.00%
|
50.00%
|
|
30.00%
|
$1,000.00
|
125.00
|
120.00
|
|
25.00%
|
20.00%
|
|
20.00%
|
$1,000.00
|
110.00
|
120.00
|
|
10.00%
|
20.00%
|
|
10.00%
|
$1,000.00
|
110.00
|
100.00
|
|
10.00%
|
0.00%
|
|
0.00%
|
$1,000.00
|
90.00
|
102.50
|
|
-10.00%
|
2.50%
|
|
-10.00%
|
$1,000.00
|
102.00
|
80.00
|
|
2.00%
|
-20.00%
|
|
-20.00%
|
$1,000.00
|
100.00
|
75.00
|
|
0.00%
|
-25.00%
|
|
-25.00%
|
$1,000.00
|
95.00
|
70.00
|
|
-5.00%
|
-30.00%
|
|
-30.00%
|
$933.33
|
60.00
|
85.00
|
|
-40.00%
|
-15.00%
|
|
-40.00%
|
$800.00
|
50.00
|
90.00
|
|
-50.00%
|
-10.00%
|
|
-50.00%
|
$666.67
|
150.00
|
40.00
|
|
50.00%
|
-60.00%
|
|
-60.00%
|
$533.33
|
30.00
|
45.00
|
|
-70.00%
|
-55.00%
|
|
-70.00%
|
$400.00
|
40.00
|
20.00
|
|
-60.00%
|
-80.00%
|
|
-80.00%
|
$266.67
|
10.00
|
95.00
|
|
-90.00%
|
-5.00%
|
|
-90.00%
|
$133.33
|
102.00
|
0.00
|
|
2.00%
|
-100.00%
|
|
-100.00%
|
$0.00
|
** per $1,000 principal amount Note, excluding the final Contingent Coupon that may be payable on the Maturity Date
|
The following examples illustrate how the payments at maturity set forth in the table above are calculated:
Example 1
:
The Final Value of the
S&P 500 Index
is 110
.
00 and the Final Value of the
Russell 2000 Index
is 120
.
00
.
Because the
S&P 500 Index has the lowest Reference Asset Return, the S&P 500 Index is the Least Performing Reference Asset. Because the Reference Asset Return of the Least Performing Reference Asset is greater than or equal to -25.00%, you will receive a payment at maturity of $1,000 per $1,000 principal amount Note that you hold (
plus
the Contingent Coupon that will otherwise be payable on the Maturity Date).
Example 2
:
The Final Value of the
S&P 500 Index
is 102
.
00 and the Final Value of the
Russell 2000 Index
is 80
.
00
.
Because the Russell 2000 Index has the lowest Reference Asset Return, the Russell 2000 Index is the Least Performing Reference Asset.
Because the Reference Asset Return of the Least Performing Reference Asset is greater than or equal to -25.00%
, you will receive a payment at maturity of $1,000 per $1,000 principal amount Note that you hold (
plus
the Contingent Coupon that will otherwise be payable on the Maturity Date).
Example 3
:
The Final Value of the
S&P 500 Index
is 150
.
00 and the Final Value of the
Russell 2000 Index
is 40
.
00
.
Because the Russell 2000 Index has the lowest Reference Asset Return, the Russell 2000 Index is the Least Performing Reference Asset.
Because the Reference Asset Return of the Least Performing Reference Asset is less than -25.00%
, you will receive a payment at maturity of $533.33 per $1,000 principal amount Note that you hold, calculated as follows:
$1,000 + [$1,000 × (Reference Asset Return of the Least Performing Reference Asset + Buffer Percentage)
×
Downside Leverage Factor]
$1,000 + [$1,000 × (-60.00% + 25.00%) × 1.33] = $533.33
In addition, because the Final Value of at least one Reference Asset is less than its Coupon Barrier Value, you will not receive a Contingent Coupon on the Maturity Date.
PS-
8
Example 4
:
The Final Value of the
S&P 500
Index is 30
.
00 and the Final Value of the
Russell 2000 Index
is 45
.
00
.
Because the
S&P 500 Index has the lowest Reference Asset Return, the S&P 500 Index is the Least Performing Reference Asset. Because the Reference Asset Return of the Least Performing Reference Asset is less than -25.00%, you will receive a payment at maturity of $400.00 per $1,000 principal amount Note that you hold, calculated as follows:
$1,000 + [$1,000 × (Reference Asset Return of the Least Performing Reference Asset + Buffer Percentage)
×
Downside Leverage Factor]
$1,000 + [$1,000 × (-70.00% + 25.00%) × 1.33] = $400.00
In addition, because the Final Value of at least one Reference Asset is less than its Coupon Barrier Value, you will not receive a Contingent Coupon on the Maturity Date.
Examples 3 and 4 demonstrate that, if the Notes are not automatically called prior to scheduled maturity, and if the Reference Asset Return of the Least Performing Reference Asset is less than -25.00%, you will lose 1.33% of the principal amount of your Notes for every 1.00% that the Reference Asset Return of such Reference Asset falls below -25.00%. You will not benefit in any way from the Reference Asset Return of any other Reference Asset being higher than the Reference Asset Return of the Least Performing Reference Asset.
If the Notes are not automatically called prior to scheduled maturity
,
you may lose up to 100
.
00% of the principal amount of your Notes
.
Any payment on the Notes, including the repayment of principal, is subject to the credit risk of Barclays Bank PLC.
PS-
9
SELECTED RISK CONSIDERATIONS
An investment in the Notes involves significant risks. Investing in the Notes is not equivalent to investing directly in the Reference Assets or their components. These risks are explained in more detail in the Risk Factors section of the prospectus supplement, including the risk factors discussed under the following headings of the prospectus supplement:
·
Risk FactorsRisks Relating to the Securities Generally; and
·
Risk FactorsAdditional Risks Relating to Securities with Reference Assets That Are Equity Securities, Indices of Equity Securities or Exchange-Traded Funds that Hold Equity Securities.
In addition to the risks described above, you should consider the following:
·
Your Investment in the Notes May Result in a Significant Loss
The Notes differ from ordinary debt securities in that the Issuer will not necessarily repay the full principal amount of the Notes at maturity. If the Notes are not automatically called prior to scheduled maturity, and if the Reference Asset Return of the Least Performing Reference Asset is less than -25.00%, will lose 1.33% of the principal amount of your Notes for every 1.00% that the Reference Asset Return of the Least Performing Reference Asset falls below -25.00%.
You may lose up to 100.00% of the principal amount of your Notes
. Any payment on the Notes, including the repayment of principal, is subject to the credit risk of Barclays Bank PLC.
·
Potential Return Limited to the Contingent Coupons, If Any, and You Will Not Participate in Any Appreciation of Any Reference Asset
The potential positive return on the Notes is limited to the Contingent Coupons, if any, that may be payable during the term of the Notes. You will not participate in any appreciation in the value of any Reference Asset, which may be significant. If the Notes are automatically called prior to scheduled maturity, you will not receive more than the principal amount of your Notes, plus the Contingent Coupon that will otherwise be payable on the related Call Settlement Date. If the Notes are not automatically called prior to scheduled maturity and the Final Value of the Least Performing Reference Asset is greater than or equal to -25.00%, you will not receive more than the principal amount of your Notes at maturity (
plus
a Contingent Coupon if one is payable in respect of the Final Valuation Date), even if one or more of the Reference Assets have appreciated over the term of the Notes.
·
You May Not Receive Any Contingent Coupon Payments on the Notes
The Issuer will not necessarily make periodic coupon payments on the Notes. You will receive a Contingent Coupon on a Contingent Coupon Payment Date
only if
the Closing Value of each Reference Asset on the related Observation Date is greater than or equal to its respective Coupon Barrier Value. If the Closing Value of any Reference Asset on an Observation Date is less than its Coupon Barrier Value, you will not receive a Contingent Coupon on the related Contingent Coupon Payment Date. If the Closing Value of at least one Reference Asset is less than its respective Coupon Barrier Value on each Observation Date, you will not receive any Contingent Coupons during the term of the Notes.
·
Because the Notes Are Linked to the Least Performing Reference Asset, You Are Exposed to Greater Risks of No Contingent Coupons and Sustaining a Significant Loss of Principal at Maturity Than If the Notes Were Linked to a Single Reference Asset
The risk that you will not receive any Contingent Coupons and lose a significant portion or all of your principal amount in the Notes at maturity is greater if you invest in the Notes as opposed to substantially similar securities that are linked to the performance of a single Reference Asset. With multiple Reference Assets, it is more likely that the Closing Value of at least one Reference Asset will be less than its Coupon Barrier Value on the specified Observation Dates or less than -25.00% on the Final Valuation Date, and therefore, it is more likely that you will not receive any Contingent Coupons and that you will suffer a significant loss of principal at maturity. Further, the performance of the Reference Assets may not be correlated or may be negatively correlated. The lower the correlation between multiple Reference Assets, the greater the potential for one of those Reference Assets to close below its Coupon Barrier Value or Barrier Value on an Observation Date or the Final Valuation Date, respectively.
It is impossible to predict the correlation among the Reference Assets over the term of the Notes. The Reference Assets represent different equity markets. These different equity markets may not perform similarly over the term of the Notes.
Although the correlation of the Reference Assets performance may change over the term of the Notes, the Contingent Coupon rate is determined, in part, based on the correlation of the Reference Assets performance calculated using our internal models at the time when the terms of the Notes are finalized. A higher Contingent Coupon is generally associated with lower correlation of the Reference Assets, which reflects a greater potential for missed Contingent Coupons and for a loss of principal at maturity.
·
You Are Exposed to the Market Risk of Each Reference Asset
Your return on the Notes is not linked to a basket consisting of the Reference Assets. Rather, it will be contingent upon the independent performance of each Reference Asset. Unlike an instrument with a return linked to a basket of underlying assets in which risk is mitigated and diversified among all the components of the basket, you will be exposed to the risks related to each Reference Asset. Poor performance by any Reference Asset over the term of the Notes may negatively affect your return and will not be offset or mitigated by any increases or lesser declines in the value of any other Reference Asset. To receive a Contingent Coupon, the Closing Value of each Reference Asset must be greater than or equal to its Coupon Barrier Value on the applicable Observation Date. In addition, if the Notes have not been automatically called prior to scheduled maturity, and if the Final Value of any Reference Asset is less than -25.00%, you will lose 1.33% of the principal amount of your Notes for every 1.00% that the Reference Asset Return of the Least Performing Reference Asset falls below -25.00%. Accordingly, your investment is subject to the market risk of each Reference Asset.
PS-
10
·
The Notes Are Subject to Volatility Risk
Volatility is a measure of the magnitude of the movements of the price of an asset (or level of an index) over a period of time. The Contingent Coupon is based on a number of factors, including the expected volatility of the Reference Assets. The Contingent Coupon is higher than the fixed rate that we would pay on a conventional debt security of the same tenor and is higher than it otherwise would have been had the expected volatility of the Reference Assets been lower. As volatility of a Reference Asset increases, there will typically be a greater likelihood that (a) the Closing Value of that Reference Asset on one or more Observation Dates will be less than its Coupon Barrier Value and (b) the Reference Asset Return of that Reference Asset will be less than -25.00%.
Accordingly, you should understand that the Contingent Coupon reflects, among other things, an indication of a greater likelihood that you will (a) not receive Contingent Coupons with respect to one or more Observation Dates and/or (b) incur a loss of principal at maturity than would have been the case had the Contingent Coupon been lower. In addition, actual volatility over the term of the Notes may be significantly higher than expected volatility at the time the terms of the Notes were determined. If actual volatility is higher than expected, you will face an even greater risk that you will not receive Contingent Coupons and/or that you will lose some or all of your principal at maturity for the reasons described above.
·
Potential Early Exit
While the original term of the Notes is as indicated on the cover page of this pricing supplement, the Notes will be automatically called if the Closing Value of
each
Reference Asset on any Call Valuation Date is greater than or equal to its Initial Value. Accordingly, the term of the Notes may be as short as approximately one year.
The Redemption Price that you receive on a Call Settlement Date, together with any Contingent Coupons that you may have received on prior Contingent Coupon Payment Dates, may be less than the aggregate amount of payments that you would have received had the Notes not been automatically called. You may not be able to reinvest any amounts received on the Call Settlement Date in a comparable investment with similar risk and yield. No additional payments will be due after the relevant Call Settlement Date. The automatic call feature may also adversely impact your ability to sell your Notes and the price at which they may be sold.
·
I
f the Notes are not Automatically Called Prior to Scheduled Maturity
,
the Payment at Maturity, If Any, is Based Solely on the Closing Value of the Least Performing Reference Asset on the Final Valuation Date
If the Notes are not automatically called prior to scheduled maturity, the Final Values (and resulting Reference Asset Returns) will be based solely on the Closing Values of the Reference Assets on the Final Valuation Date and your payment at maturity, if any, will be determined based solely on the performance of the Least Performing Reference Asset. Accordingly, if the value of the Least Performing Reference Asset drops on the Final Valuation Date, the payment at maturity on the Notes, if any, may be significantly less than it would have been had it been linked to the value of the Reference Asset at any time prior to such drop.
If the Final Value of the Least Performing Reference Asset is less than -25.00%, you will lose some or all of the principal amount of your Notes. Your losses will not be
offset in any way by virtue of the Reference Asset Return of any other Reference Asset being higher than the Reference Asset Return of the Least Performing Reference Asset.
·
Whether or Not the Notes Will be Automatically Called Prior to Scheduled Maturity Will be Based Solely on the Closing Values of the Reference Assets on the Applicable Call Valuation Date
Whether or not the Notes are automatically called prior to scheduled maturity will be based
solely
on the Closing Values of the Reference Assets on each Call Valuation Date. Accordingly, if the value of any Reference Asset drops on any Call Valuation Date such that the Closing Value falls below the Initial Value, your Notes will not be automatically called on such date.
·
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, including any Contingent Coupons and any payment upon an Automatic Call or at maturity, is subject to the ability of Barclays Bank PLC to satisfy its obligations as they come due and is not guaranteed by any third party. As a result, the actual and perceived creditworthiness of Barclays Bank PLC may affect the market value of the Notes, and 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.
·
You May Lose Some or All of Your Investment If Any U
.
K
.
Bail-in Power Is Exercised by the Relevant U
.
K
.
Resolution Authority
Notwithstanding any other agreements, arrangements or understandings between Barclays Bank PLC and any holder of the Notes, by acquiring the Notes, each holder of the Notes acknowledges, accepts, agrees to be bound by, and consents to the exercise of, any U.K. Bail-in Power by the relevant U.K. resolution authority as set forth under Consent to U.K. Bail-in Power in this pricing supplement. Accordingly, any U.K. Bail-in Power may be exercised in such a manner as to result in you and other holders of the Notes losing all or a part of the value of your investment in the Notes or receiving a different security from the Notes, which may be worth significantly less than the Notes and which may have significantly fewer protections than those typically afforded to debt securities. Moreover, the relevant U.K. resolution authority may exercise the U.K. Bail-in Power without providing any advance notice to, or requiring the consent of, the holders of the Notes. The exercise of any U.K. Bail-in Power by the relevant U.K. resolution authority with respect to the Notes will not be a default or an Event of Default (as each term is defined in the indenture) and the trustee will not be liable for any action that the trustee takes, or abstains from taking, in either case, in accordance with the exercise of the U.K. Bail-in Power by the relevant U.K. resolution authority with respect to the Notes. See Consent to U.K. Bail-in Power in this pricing supplement as well as U.K. Bail-in Power, Risk FactorsRisks Relating to the Securities GenerallyRegulatory action in the event a bank or investment firm in the Group is failing or likely to fail could materially adversely affect the value of the securities and Risk FactorsRisks Relating to the Securities GenerallyUnder the terms of the securities, you have agreed to be bound by the exercise of any U.K. Bail-in Power by the relevant U.K. resolution authority in the accompanying prospectus supplement.
PS-
11
·
Owning the Notes is Not the Same as Owning the Securities Composing the Reference Assets
The return on the Notes may not reflect the return you would realize if you actually owned the securities composing the Reference Assets. As a holder of the Notes, you will not have voting rights or rights to receive dividends or other distributions or other rights that holders of the securities underlying the Reference Assets would have.
·
Historical Performance of the Reference Assets Should Not Be Taken as Any Indication of the Future Performance of the Reference Assets Over the Term of the Notes
The value of each Reference Asset has fluctuated in the past and may, in the future, experience significant fluctuations. The historical performance of a Reference Asset is not an indication of the future performance of that Reference Asset over the term of the Notes. The historical correlation between the Reference Assets is not an indication of the future correlation between them over the term of the Notes. Therefore, the performance of the Reference Assets individually or in comparison to each other over the term of the Notes may bear no relation or resemblance to the historical performance of any Reference Asset.
·
The Notes Are Subject to Risks Associated with Small Capitalization Stocks
The Russell 2000 Index tracks companies that are considered small-capitalization companies. These companies often have greater stock price volatility, lower trading volume and less liquidity than large-capitalization companies, and therefore securities linked to the Russell 2000 Index may be more volatile than an investment linked to an index with component stocks issued by large-capitalization companies. Stock prices of small-capitalization companies are also more vulnerable than those of large-capitalization companies to adverse business and economic developments. In addition, small-capitalization companies are typically less stable financially than large-capitalization companies and may depend on a small number of key personnel, making them more vulnerable to loss of personnel. Small-capitalization companies are often subject to less analyst coverage and may be in early, and less predictable, periods of their corporate existences. Such companies tend to have smaller revenues, less diverse product lines, smaller shares of their product or service markets, fewer financial resources and less competitive strengths than large-capitalization companies and are more susceptible to adverse developments related to their products.
·
The Estimated Value of Your Notes is Lower Than the Initial Issue Price of Your Notes
The estimated value of your Notes on the Initial Valuation Date is 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 a result of certain factors, such as any sales commissions to be paid to Barclays Capital Inc. or another affiliate of ours, any selling concessions, discounts, commissions or fees 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.
·
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 Initial Valuation 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 value referenced above might be lower if such estimated value was based on the levels at which our benchmark debt securities trade in the secondary market.
·
T
he 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 Initial Valuation 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.
·
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 May be 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.
PS-
12
·
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 Initial Valuation 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
v
alue 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 Initial Valuation Date, as well as the secondary market value of the Notes, for a temporary period after the
i
nitial 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.
·
We and Our Affili
ates May Engage in Various Activities or Make Determinations That Could Materially Affect the N
otes in Various Ways and Create Conflicts of Interest
We and our affiliates play a variety of roles in connection with the issuance of the Notes, as described below. In performing these roles, our and our affiliates economic interests are potentially adverse to your interests as an investor in the Notes.
In connection with our normal business activities and in connection with hedging our obligations under the Notes, we
and our affiliates make markets in and trade various financial instruments or products for our accounts and for the account of our 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, derivative instruments or assets that may relate to the Reference Assets or their components. In any such market making, trading and hedging activity, and other services, we or our affiliates may take positions or take actions that are inconsistent with, or adverse to, the investment objectives of 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. Such market making, trading and hedging activity, investment banking and other financial services may negatively impact the value of the Notes.
In addition, the role played by Barclays Capital Inc., as the agent for the Notes, could present 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 der
ive compensation or financial benefit from the distribution of the Notes. Furthermore, 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.
In addition to the activities described above, we will also act as the Calculation Agent for the Notes. As Calculation Agent, we will determine any values of the Reference Assets and make any other determinations necessary to calculate any payments on the Notes. In making these determinations, we may be required to make certain discretionary judgments relating to the Reference Assets and the Notes. In making these discretionary judgments, our economic interests are potentially adverse to your interests as an investor in the Notes, and any of these determinations may adversely affect any payments on the Notes.
·
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.
·
Tax Treatment
Significant aspects of the tax treatment of the Notes are uncertain. You should consult your tax advisor about your tax situation. See Tax Considerations below.
·
Many Economic and Market Factors Will Impact the Value of the Notes
The value of the Notes will be affected by a number of economic and market factors that interact in complex and unpredictable ways and that may either offset or magnify each other, including:
o
the market prices of, dividend rate on and expected volatility of the Reference Assets and the components of each Reference Asset;
o
correlation (or lack of correlation) of the Reference Assets;
o
the time to maturity of the Notes;
o
interest and yield rates in the market generally;
o
a variety of economic, financial, political, regulatory or judicial events;
o
supply and demand for the Notes; and
o
our creditworthiness, including actual or anticipated downgrades in our credit ratings.
PS-
13
INFORMATION REGARDING THE REFERENCE ASSETS
S&P 500
®
Index
The S&P 500 Index consists of stocks of 500 companies selected to provide a performance benchmark for the U.S. equity markets.
Beginning in June 2016, U.S. common equities listed on Bats BZX, Bats BYX, Bats EDGA or Bats EDGX were added to the universe of securities that are eligible for inclusion in the S&P 500 Index and, effective March 10, 2017, the minimum unadjusted company market capitalization for potential additions to the S&P 500 Index was increased to $6.1 billion from $5.3 billion. As of July 31, 2017, the securities of companies with multiple share class structures are no longer eligible to be added to the S&P 500 Index, but securities already included in the S&P 500 Index have been grandfathered and are not affected by this change. For more information about the S&P 500 Index, please see IndicesThe S&P U.S. Indices in the accompanying index supplement.
Historical Performance of the S&P 500 Index
The table below shows the high, low and final Closing Values of the S&P 500 Index for each of the periods noted below. The graph below
sets forth the historical performance of the S&P 500 Index based on the daily Closing Values from January 1, 2013 through October 15, 2018. We obtained the Closing Values listed in the table below and shown in the graph below from Bloomberg Professional
®
service (Bloomberg). We have not independently verified the accuracy or completeness of the information obtained from Bloomberg.
Period
/
Quarter Ended
|
Quarterly High
|
Quarterly Low
|
Quarterly Close
|
March 31, 2013
|
1,569.19
|
1,457.15
|
1,569.19
|
June 30, 2013
|
1,669.16
|
1,541.61
|
1,606.28
|
September 30, 2013
|
1,725.52
|
1,614.08
|
1,681.55
|
December 31, 2013
|
1,848.36
|
1,655.45
|
1,848.36
|
March 31, 2014
|
1,878.04
|
1,741.89
|
1,872.34
|
June 30, 2014
|
1,962.87
|
1,815.69
|
1,960.23
|
September 30, 2014
|
2,011.36
|
1,909.57
|
1,972.29
|
December 31, 2014
|
2,090.57
|
1,862.49
|
2,058.90
|
March 31, 2015
|
2,117.39
|
1,992.67
|
2,067.89
|
June 30, 2015
|
2,130.82
|
2,057.64
|
2,063.11
|
September 30, 2015
|
2,128.28
|
1,867.61
|
1,920.03
|
December 31, 2015
|
2,109.79
|
1,923.82
|
2,043.94
|
March 31, 2016
|
2,063.95
|
1,829.08
|
2,059.74
|
June 30, 2016
|
2,119.12
|
2,000.54
|
2,098.86
|
September 30, 2016
|
2,190.15
|
2,088.55
|
2,168.27
|
December 31, 2016
|
2,271.72
|
2,085.18
|
2,238.83
|
March 31, 2017
|
2,395.96
|
2,257.83
|
2,362.72
|
June 30, 2017
|
2,453.46
|
2,328.95
|
2,423.41
|
September 30, 2017
|
2,519.36
|
2,409.75
|
2,519.36
|
December 31, 2017
|
2,690.16
|
2,529.12
|
2,673.61
|
March 31, 2018
|
2,872.87
|
2,581.00
|
2,640.87
|
June 30, 2018
|
2,786.85
|
2,581.88
|
2,718.37
|
September 30, 2018
|
2,930.75
|
2,713.22
|
2,913.98
|
October 15, 2018*
|
2,925.51
|
2,728.37
|
2,750.79
|
*
For the period beginning on October 1, 2018 and ending on October 15, 2018
|
Historical Performance of the S&P 500
®
Index
PAST PERFORMANCE IS NOT INDICATIVE OF FUTURE RESULTS
PS-
14
Russell 2000
®
Index
The Russell 2000 Index is calculated, maintained and published by FTSE Russell. The Russell 2000 Index measures the capitalization-weighted price performance of 2,000 small-capitalization stocks and is designed to track the performance of the small capitalization segment of the U.S. equity market. For more information about the Russell 2000 Index, see IndicesThe Russell Indices in the accompanying index supplement, as supplemented by the following updated information. As of August 2017, to be eligible for inclusion in the Russell 2000 Index, each company is required to have more than 5.00% of its voting rights (aggregated across all of its equity securities) in the hands of unrestricted shareholders. Companies already included in the Russell 2000 Index have a 5 year grandfathering period to comply or they will be removed from the Russell 2000 Index in September 2022.
Historical Performance of the Russell 2000 Index
The table below shows the high, low and final Closing Values of the
Russell 2000 Index
for each of the periods noted below. The graph below sets forth the historical performance of the
Russell 2000 Index
based on the daily Closing Values from January 1, 2013 through October 15, 2018. We obtained the Closing Values listed in the table below and shown in the graph below from Bloomberg. We have not independently verified the accuracy or completeness of the information obtained from Bloomberg.
Period
/
Quarter Ended
|
Quarterly High
|
Quarterly Low
|
Quarterly Close
|
March 31, 2013
|
953.07
|
872.60
|
951.54
|
June 30, 2013
|
999.99
|
901.51
|
977.48
|
September 30, 2013
|
1,078.41
|
989.54
|
1,073.79
|
December 31, 2013
|
1,163.64
|
1,043.46
|
1,163.64
|
March 31, 2014
|
1,208.65
|
1,093.59
|
1,173.04
|
June 30, 2014
|
1,192.96
|
1,095.99
|
1,192.96
|
September 30, 2014
|
1,208.15
|
1,101.68
|
1,101.68
|
December 31, 2014
|
1,219.11
|
1,049.30
|
1,204.70
|
March 31, 2015
|
1,266.37
|
1,154.71
|
1,252.77
|
June 30, 2015
|
1,295.80
|
1,215.42
|
1,253.95
|
September 30, 2015
|
1,273.33
|
1,083.91
|
1,100.69
|
December 31, 2015
|
1,204.16
|
1,097.55
|
1,135.89
|
March 31, 2016
|
1,114.03
|
953.72
|
1,114.03
|
June 30, 2016
|
1,188.95
|
1,089.65
|
1,151.92
|
September 30, 2016
|
1,263.44
|
1,139.45
|
1,251.65
|
December 31, 2016
|
1,388.07
|
1,156.89
|
1,357.13
|
March 31, 2017
|
1,413.64
|
1,345.60
|
1,385.92
|
June 30, 2017
|
1,425.99
|
1,345.24
|
1,415.36
|
September 30, 2017
|
1,490.86
|
1,356.91
|
1,490.86
|
December 31, 2017
|
1,548.93
|
1,464.10
|
1,535.51
|
March 31, 2018
|
1,610.71
|
1,463.79
|
1,529.43
|
June 30, 2018
|
1,706.99
|
1,492.53
|
1,643.07
|
September 30, 2018
|
1,740.75
|
1,653.13
|
1,696.57
|
October 15, 2018*
|
1,672.99
|
1,545.38
|
1,553.10
|
* For the period beginning on October 1, 2018 and ending on October 15, 2018
|
Historical Performance of the Russell 2000
®
Index
PAST PERFORMANCE IS NOT INDICATIVE OF FUTURE RESULTS
PS-
15
TAX CONSIDERATIONS
You should review carefully the sections entitled Material U.S. Federal Income Tax ConsequencesTax Consequences to U.S. HoldersNotes Treated as Prepaid Forward or Derivative Contracts with Associated (Contingent) Coupons and, if you are a non-U.S. holder, Tax Consequences to Non-U.S. Holders, in the accompanying prospectus supplement. The following discussion supersedes the discussion in the accompanying prospectus supplement to the extent it is inconsistent therewith.
In determining our reporting responsibilities, if any, we intend to treat (i) the Notes for U.S. federal income tax purposes as prepaid forward contracts with associated contingent coupons and (ii) any contingent coupon payments as ordinary income, as described in the section entitled Material U.S. Federal Income Tax ConsequencesTax Consequences to U.S. HoldersNotes Treated as Prepaid Forward or Derivative Contracts with Associated (Contingent) Coupons in the accompanying prospectus supplement. Our special tax counsel, Davis Polk & Wardwell LLP, has advised that it believes this treatment to be reasonable, but that there are other reasonable treatments that the Internal Revenue Service (the IRS) or a court may adopt.
Sale
,
exchange or redemption of a Note
. Assuming the treatment described above is respected, upon a sale or exchange of the Notes (including redemption upon an automatic call or at maturity), you should recognize capital gain or loss equal to the difference between the amount realized on the sale or exchange and your tax basis in the Notes, which should equal the amount you paid to acquire the Notes (assuming contingent coupon payments are properly treated as ordinary income, consistent with the position referred to above). This gain or loss should be long-term capital gain or loss if you hold the Notes for more than one year, whether or not you are an initial purchaser of the Notes at the issue price. The deductibility of capital losses is subject to limitations. If you sell your Notes between the time your right to a contingent coupon payment is fixed and the time it is paid, it is likely that you will be treated as receiving ordinary income equal to the contingent coupon payment. Although uncertain, it is possible that proceeds received from the sale or exchange of your Notes prior to a determination date but that can be attributed to an expected contingent coupon payment could be treated as ordinary income. You should consult your tax advisor regarding this issue.
As noted above, there are other reasonable treatments that the IRS or a court may adopt, in which case the timing and character of any income or loss on the Notes could be materially affected. In addition, in 2007 the U.S. Treasury Department and the IRS released a notice requesting comments on the U.S. federal income tax treatment of prepaid forward contracts and similar instruments. The notice focuses in particular on whether to require investors in these instruments to accrue income over the term of their investment. It also asks for comments on a number of related topics, including the character of income or loss with respect to these instruments and the relevance of factors such as the nature of the underlying property to which the instruments are linked. While the notice requests comments on appropriate transition rules and effective dates, any Treasury regulations or other guidance promulgated after consideration of these issues could materially affect the tax consequences of an investment in the Notes, possibly with retroactive effect. You should consult your tax advisor regarding the U.S. federal income tax consequences of an investment in the Notes, including possible alternative treatments and the issues presented by this notice.
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. Insofar as we have responsibility as a withholding agent, we do not currently intend to treat contingent coupon payments to non-U.S. holders (as defined in the accompanying prospectus supplement) as subject to U.S. withholding tax. However, non-U.S. holders should in any event expect to be required to provide appropriate Forms W-8 or other documentation in order to establish an exemption from backup withholding, as described under the heading Information Reporting and Backup Withholding in the accompanying prospectus supplement. If any withholding is required, we will not be required to pay any additional amounts with respect to amounts withheld.
Treasury regulations under Section 871(m) generally impose a withholding tax on certain dividend equivalents under certain equity linked instruments. A recent IRS notice excludes from the scope of Section 871(m) instruments issued prior to January 1, 2021 that do not have a delta of one with respect to underlying securities that could pay U.S.-source dividends for U.S. federal income tax purposes (each an Underlying Security). Based on our determination that the Notes do not have a delta of one within the meaning of the regulations, our special tax counsel is of the opinion that these regulations should not apply to the Notes with regard to non-U.S. holders. Our determination is not binding on the IRS, and the IRS may disagree with this determination. Section 871(m) is complex and its application may depend on your particular circumstances, including whether you enter into other transactions with respect to an Underlying Security. You should consult your tax advisor regarding the potential application of Section 871(m) to the Notes.
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