ADDITIONAL INFORMATION REGARDING OUR ESTIMATED VALUE OF THE NOTES
The range of the estimated values of the Notes referenced above may not correlate on a linear basis with the Upside Leverage Factor range set forth in this preliminary pricing supplement. We determined the size of such range based on prevailing market conditions, as well as the anticipated duration of the marketing period for the Notes. The final terms for the Notes will be determined on the date the Notes are initially priced for sale to the public, which we refer to as the Initial Valuation Date, based on prevailing market conditions on or prior to the Initial Valuation 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 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 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 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
8
of this pricing supplement
.
You may revoke your offer to purchase the Notes at any time prior to the Initial Valuation Date
.
We reserve the right to change the terms of
,
or reject any offer to purchase
,
the Notes prior to the Initial Valuation 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
.
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 periodic interest or coupon payments or other sources of current income.
·
You anticipate that the Reference Asset Return of
each
Reference Asset will be greater than 0.00%.
·
You are willing and able to accept that, if the Reference Asset Return of the Least Performing Reference Asset is less than -15.00%, you may lose up to 5.00% of the principal amount of your Notes.
·
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 risk that the payment at maturity 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 understand and accept that you will not be entitled to receive dividends or distributions that may be paid to holders of the Reference Assets or the securities held by the Reference Assets, nor will you have any voting rights with respect to the Reference Assets or the securities held by the Reference Assets.
·
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 value 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.
·
You are willing and able to assume our credit risk for all payments on the Notes.
·
You are willing and able 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 periodic interest or coupon payments or other sources of current income.
·
You seek an investment that provides for the full repayment of principal at maturity.
·
You anticipate that the Reference Asset Return of the Least Performing Reference Asset will be less than -15.00%, and/or you are unwilling or unable to accept the risk that, if it is, you may lose up to 5.00% of the principal amount of your Notes.
·
You are unwilling or unable to accept the risk that the negative performance of
only one
Reference Asset may cause you to earn no positive return or to suffer a loss of principal at maturity, regardless of the performance of the other Reference Asset.
·
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 seek an investment that entitles you to dividends or distributions on, or voting rights related to, the Reference Assets or the securities held by the Reference Assets.
·
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 value 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.
·
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.
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.
PS-
4
ADDITIONAL TERMS OF THE NOTES
The Final Valuation Date and the Maturity Date are subject to postponement in certain circumstances, as described under
Reference AssetsExchange-Traded FundsMarket Disruption Events for Securities with an Exchange-Traded Fund that Holds Equity Securities as a Reference Asset, 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 AssetsExchange-Traded FundsAdjustments Relating to Securities with an Exchange-Traded Fund as a Reference Asset in the accompanying prospectus supplement.
PS-
5
HYPOTHETICAL EXAMPLES OF AMOUNTS PAYABLE AT MATURITY
The following examples demonstrate the hypothetical payment at maturity under various circumstances. The total return as used in these examples 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 examples set forth below are purely hypothetical and are provided 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 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*
§
Upside Leverage Factor: 1.05
*
The
hypothetical
Initial Value of 100.00 for each Reference Asset have been chosen for illustrative purposes only and do not represent likely Initial Values for any Reference Asset. The actual Initial Value for each Reference Asset will be equal to its Closing Value on the Initial Valuation Date.
For information regarding recent values of the Reference Assets, please see Information Regarding the Reference Assets in this pricing supplement.
Final Value
|
|
Reference Asset Return
|
|
|
Emerging
Markets
ETF
|
EAFE ETF
|
|
Emerging
Markets
ETF
|
EAFE ETF
|
|
Reference Asset Return
of the Least Performing
Reference Asset
|
Payment at
Maturity
**
|
Total Return on
Notes
|
150.00
|
190.00
|
|
50.00%
|
90.00%
|
|
50.00%
|
$1,525.00
|
52.50%
|
145.00
|
140.00
|
|
45.00%
|
40.00%
|
|
40.00%
|
$1,420.00
|
42.00%
|
130.00
|
150.00
|
|
30.00%
|
50.00%
|
|
30.00%
|
$1,315.00
|
31.50%
|
150.00
|
120.00
|
|
50.00%
|
20.00%
|
|
20.00%
|
$1,210.00
|
21.00%
|
140.00
|
110.00
|
|
40.00%
|
10.00%
|
|
10.00%
|
$1,105.00
|
10.50%
|
105.00
|
110.00
|
|
5.00%
|
10.00%
|
|
5.00%
|
$1,052.50
|
5.25%
|
110.00
|
100.00
|
|
10.00%
|
0.00%
|
|
0.00%
|
$1,000.00
|
0.00%
|
95.00
|
105.00
|
|
-5.00%
|
5.00%
|
|
-5.00%
|
$1,000.00
|
0.00%
|
90.00
|
102.50
|
|
-10.00%
|
2.50%
|
|
-10.00%
|
$1,000.00
|
0.00%
|
110.00
|
85.00
|
|
10.00%
|
-15.00%
|
|
-15.00%
|
$1,000.00
|
0.00%
|
130.00
|
81.00
|
|
30.00%
|
-19.00%
|
|
-19.00%
|
$960.00
|
-4.00%
|
80.00
|
120.00
|
|
-20.00%
|
20.00%
|
|
-20.00%
|
$950.00
|
-5.00%
|
95.00
|
70.00
|
|
-5.00%
|
-30.00%
|
|
-30.00%
|
$950.00
|
-5.00%
|
60.00
|
103.00
|
|
-40.00%
|
3.00%
|
|
-40.00%
|
$950.00
|
-5.00%
|
50.00
|
140.00
|
|
-50.00%
|
40.00%
|
|
-50.00%
|
$950.00
|
-5.00%
|
40.00
|
135.00
|
|
-60.00%
|
35.00%
|
|
-60.00%
|
$950.00
|
-5.00%
|
40.00
|
30.00
|
|
-60.00%
|
-70.00%
|
|
-70.00%
|
$950.00
|
-5.00%
|
40.00
|
20.00
|
|
-60.00%
|
-80.00%
|
|
-80.00%
|
$950.00
|
-5.00%
|
10.00
|
95.00
|
|
-90.00%
|
-5.00%
|
|
-90.00%
|
$950.00
|
-5.00%
|
102.00
|
0.00
|
|
2.00%
|
-100.00%
|
|
-100.00%
|
$950.00
|
-5.00%
|
**
per $1,000 principal amount Note
The following examples illustrate how the payments at maturity set forth in the table above are calculated:
Example 1
:
The Final Value of the Emerging Markets ETF is 140
.
00 and the Final Value of the EAFE ETF is 110
.
00
.
Because the EAFE ETF has the lowest Reference Asset Return, the EAFE ETF is the Least Performing Reference Asset. Because the Reference Asset Return of the Least Performing Reference Asset is greater than or equal to 0.00%, you will receive a payment at maturity of $
1,105.00 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 × Upside Leverage Factor]
$1,
000 + [$1,000 × 10.00% × 1.05] = $1,105.00
The total return on
investment of the Notes is 10.50%.
Example 2
:
The Final Value
of
the
Emerging Markets ETF
is 95.00 and the
Final Value
of the
EAFE ETF
is 105.00
.
Because the Emerging Markets ETF has the lowest Reference Asset Return, the Emerging Markets ETF is the Least Performing Reference Asset.
Because the Reference Asset Return of the Least Performing Reference Asset is less than 0.00% but is greater than or equal to -15.00%, you will receive a payment at maturity of $1,000 per $1,000 principal amount Note that you hold.
The total return on
investment of the Notes is 0.00%.
PS-
6
Example 3
:
The Final Value
of
the
Emerging Markets ETF
is 130.00 and the
Final Value
of the
EAFE ETF
is 81.00
.
Because the EAFE ETF has the lowest Reference Asset Return, the EAFE ETF is the Least Performing Reference Asset. Because the
Final Value of the Least Performing Reference Asset is less than -15.00% but greater than or equal to -20.00%,
you will receive a payment at maturity
of $960.00 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)]
$1,
000 + [$1,000 × (-19.00% + 15.00%)] = $960.00
The total return on investment of the Notes is -4.00%.
Example 4
:
The Final Value
of
the
Emerging Markets ETF
is 40
.
00 and the
Final Value
of the
EAFE ETF
is 30
.
00
.
Because the
EAFE ETF has the lowest Reference Asset Return, the EAFE ETF is the Least Performing Reference Asset. Because the Final Value of the Least Performing Reference Asset is less than or equal to -20.00%,
you will receive a payment at maturity of $950.00 per $1,000 principal amount Note that you hold, which is the Minimum Payment at Maturity.
The total return on
investment of the Notes is -5.00%, which reflects the Minimum Payment at Maturity.
PS-
7
SELECTED RISK CONSIDERATIONS
An investment in the Notes involves significant risks. Investing in the Notes is not equivalent to investing directly in the Indices 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:
·
You May Lose up to 5
.
00% of the Principal Amount of Your Notes
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 Reference Asset Return of the Least Performing Reference Asset is less than -15.00%, you will lose 1.00% of the principal amount of your Notes for every 1.00% that the Reference Asset Return of the Least Performing Reference Asset falls below -15.00%, subject to the Minimum Payment at Maturity of $950.00 per $1,000 principal amount Note.
You may lose up to 5
.
00% of the principal amount of your Notes
.
·
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 positive return on your Notes at maturity, the Reference Asset Return of
each
Reference Asset must be greater than 0.00%. Accordingly, your investment is subject to the market risk of each Reference Asset.
·
You Will Not Receive More than the Principal A
mount of Your Notes at Maturity Unless the Reference Asset Return of Each Reference Asset is
Greater Than 0.00%
;
Your Payment at Maturity Will be Calculated Solely Based Upon the Reference Asset Return of the Least Performing Reference Asset
The payment at maturity will not exceed the principal amount of your Notes unless the Reference Asset Return of
each
Reference Asset is greater than 0.00%. Even if the Reference Asset Return of each Reference Asset is greater than 0.00%, the payment at maturity will nonetheless be calculated
solely
based upon the Reference Asset Return of the Least Performing Reference Asset. You will not participate in any appreciation of any other Reference Asset being higher than the Reference Asset Return of the Least Performing Reference Asset, which may be significant.
Similarly, if each Reference Asset has a Reference Asset Return of less than 0.00%, any payment at maturity will depend
solely
on the Reference Asset Return of the Least Performing Reference Asset.
Any payment on the Notes is subject to the credit risk of Barclays Bank PLC.
·
The Payment at
Maturity
of Your Notes is Based Solely on the Closing Value of the Least Performing Reference Asset on the Final Valuation Date
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. Accordingly, if the value of the Least Performing Reference Asset drops on the Final Valuation Date, the payment at maturity on the Notes may be significantly less than it would have been had it been linked to the value of such Reference Asset at any time prior to such drop.
·
Credit of Issuer
The Notes are unsecured and unsubordinated 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 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-
8
·
Owning the Notes is Not the Same as Owning the Reference Assets, the Securities Composing the Underlying Indices of the Reference Assets or the Component Securities Held by the Reference Assets
The return on the Notes may not reflect the return you would realize if you actually owned the Reference Assets, the securities composing the underlying indices, which the Reference Assets are designed to track (Underlying Index), or the component securities held by 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 Reference Assets, the securities composing the Underlying Indices or the component securities held by 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 the Reference Assets.
·
Certain Features of Exchange-Traded Funds Will Impact the Value of the Reference Assets and the Value of the Notes
:
o
Management Risk
. This is the risk that the investment strategy for the Reference Assets, the implementation of which is subject to a number of constraints, may not produce the intended results. An investment in an exchange-traded fund involves risks similar to those of investing in any fund of equity securities traded on an exchange, such as market fluctuations caused by such factors as economic and political developments, changes in interest rates and perceived trends in security prices. Because, however, the Reference Assets are not actively managed, they generally do not take defensive positions in declining markets and generally will not sell a security if the issuer of such security was in financial trouble. Accordingly, the performance of the Reference Assets could be lower than other types of mutual funds that may actively shift their portfolio assets to take advantage of market opportunities or to lessen the impact of a market decline.
o
Derivatives Risk
. The Reference Assets may invest in futures contracts, options on futures contracts, other types of options and swaps and other derivatives. A derivative is a financial contract, the value of which depends on, or is derived from, the value of an underlying asset such as a security or an index. Compared to conventional securities, derivatives can be more sensitive to changes in interest rates or to sudden fluctuations in market prices, and thus the Reference Assets losses, and, as a consequence, the losses on your Notes, may be greater than if the Reference Assets invested only in conventional securities.
o
Tracking and Underperformance Risk
(
Particularly in Periods of Market Volatility
). The performance of a Reference Assets may not replicate the performance of, and may underperform, its Underlying Index. Each Reference Assets will reflect transaction costs and fees that will reduce its relative performance.
Moreover, it is also possible that a
Reference Assets may not fully replicate or may, in certain circumstances, diverge significantly from the performance of its Underlying Index due to differences in trading hours between the Reference Assets and its Underlying Index or due to other circumstances. During periods of market volatility, securities underlying a Reference Assets may be unavailable in the secondary market, market participants may be unable to calculate accurately the intraday net asset value per share of the Reference Assets and the liquidity of the Reference Assets may be adversely affected. This kind of market volatility may also disrupt the ability of market participants to create and redeem shares in a Reference Assets. Further, market volatility may adversely affect, sometimes materially, the prices at which market participants are willing to buy and sell shares of a Reference Assets. As a result, under these circumstances, the market value of a Reference Assets may vary substantially from the net asset value per share of the Reference Assets. This variation in performance is called tracking error and, at times, the tracking error may be significant.
·
The Notes Are Subject to Risks Associated with Non
-
U
.
S
.
Securities Markets
The equity securities held by the Reference Assets are issued by non-U.S. companies in non-U.S. securities markets. Investments in securities linked to the value of such non-U.S. equity securities, such as the Notes, involve risks associated with the securities markets in the home countries of the issuers of those non-U.S. equity securities, including risks of volatility in those markets, governmental intervention in those markets and cross shareholdings in companies in certain countries. Also, there is generally less publicly available information about companies in some of these jurisdictions than there is about U.S. companies that are subject to the reporting requirements of the SEC, and generally non-U.S. companies are subject to accounting, auditing and financial reporting standards and requirements and securities trading rules different from those applicable to U.S. reporting companies. The prices of securities in non-U.S. markets may be affected by political, economic, financial and social factors in those countries, or global regions, including changes in government, economic and fiscal policies and currency exchange laws.
PS-
9
·
The Notes Are Subject to Currency Exchange Risk
Because the values of the Reference Assets are related to the U.S. dollar value of the component securities held by the Reference Assets, the values of the Reference Assets will be exposed to the currency exchange rate risk with respect to each of the currencies in which the component securities held by the Reference Assets trade. An investors net exposure will depend on the extent to which each of those non-U.S. currencies strengthens or weakens against the U.S. dollar and the relative weight of the component securities denominated in those non-U.S. currencies. If, taking into account the relevant weighting, the U.S. dollar strengthens against those non-U.S. currencies, the values of the Reference Assets will be adversely affected and any payments on the Notes may be reduced.
Exchange rate movements for a particular currency are volatile and are the result of numerous factors, including the supply of, and the demand for, those currencies, as well as government policy, intervention or actions, but are also influenced significantly from time to time by political or economic developments, and by macroeconomic factors and speculative actions related to the relevant region. 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 between the countries represented in the Reference Assets and the United States; and
·
the extent of governmental surpluses or deficits in the countries represented in the Reference Assets and the United States.
All of these factors are in turn sensitive to the monetary, fiscal and trade policies pursued by the governments of the countries represented in the Reference Assets, the United States and other countries important to international trade and finance.
·
The Notes Are Subject to Risks Associated with Emerging Markets
The component securities held by the Emerging Markets ETF have been issued by non-U.S. companies located in emerging market countries. Emerging markets pose further risks in addition to the risks associated with investing in foreign equity markets generally, as described in the previous risk factor. Countries with emerging markets may have relatively unstable governments, may present the risks of nationalization of businesses, restrictions on foreign ownership and prohibitions on the repatriation of assets, and may have less protection of property rights than more developed countries. The economies of countries with emerging markets may be based on only a few industries, may be highly vulnerable to changes in local or global trade conditions, and may suffer from extreme and volatile debt burdens or inflation rates. Local securities markets may trade a small number of securities and may be unable to respond effectively to increases in trading volume, potentially making prompt liquidation of holdings difficult or impossible at times. Moreover, the economies in such countries may differ unfavorably from the economy in the United States in such respects as growth of gross national product, rate of inflation, capital reinvestment, resources, self-sufficiency and balance of payment positions.
Beginning in June 2018, the component securities held by the Emerging Markets ETF include equity securities that are traded on mainland Chinese exchanges (as distinct from exchanges in Hong Kong). Shares traded on mainland Chinese exchanges, referred to as A-shares, are subject to regulation by Chinese authorities, including regulations that limit the amount of shares of equity securities that may be held by foreign investors. These regulations may adversely affect the price of A-shares. Trading in A-shares may be less liquid and subject to greater volatility, including as a result of actions by the Chinese government, than trading on international exchanges outside of mainland China.
·
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 Initial Valuation 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.
·
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 values referenced above might be lower if such estimated values were based on the levels at which our benchmark debt securities trade in the secondary market.
·
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 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.
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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 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.
·
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 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 Initial Valuation 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.
·
We and Our Affiliates May Engage in Various Activities or Make Determinations That Could Materially Affect the Notes 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 financial 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. 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 and such compensation or financial benefit may serve as incentive to sell the Notes instead of other investments. For example, Barclays Capital Inc. or its representatives may derive 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 Asset and make any other determinations necessary to calculate any payments on the Notes. In making these determinations, we may be required to make discretionary judgments , including determining whether a market disruption event has occurred on any date that the value of the Reference Asset is to be determined; if the Reference Asset is discontinued or if the sponsor of a Reference Asset fails to publish the Reference Asset, selecting a successor reference asset or, if no successor reference asset is available, determining any value necessary to calculate any payments on the Notes; and calculating the value of the Reference Asset on any date of determination in the event of certain changes in or modifications to the Reference Asset. 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 T
reatment
As discussed further below under Tax Considerations and in the accompanying prospectus supplement, if you are a U.S. individual or taxable entity, you should be required to accrue interest on a current basis in respect of the Notes over their term based on the comparable yield for the Notes and pay tax accordingly, even though you will not receive any payments from us until maturity. This comparable yield is determined solely to calculate the amount on which you will be taxed prior to maturity and is neither a prediction nor a guarantee of what the actual yield will be.
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·
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 the 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
the exchange rates relative to the U.S. dollar with respect to the currency in which the components held by the Reference Assets trade;
o
supply and demand for the Notes; and
o
our creditworthiness, including actual or anticipated downgrades in our credit ratings.
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INFORMATION REGARDING THE REFERENCE ASSETS
iShares
®
MSCI Emerging Markets ETF
We have derived all information contained in this pricing supplement regarding the Emerging Markets ETF from publicly available information, without independent verification. This information reflects the policies of, and is subject to change by, iShares®, Inc., BlackRock Institutional Trust Company, N.A. (BTC) and BlackRock Fund Advisors (BFA). The EEM Fund is an investment portfolio maintained and managed by iShares
®
, Inc. BFA is currently the investment adviser to the EEM Fund. The EEM Fund is an exchange-traded fund that trades on the NYSE Arca, Inc. under the ticker symbol EEM.
The EEM Fund seeks to track investment results that correspond generally to the price and yield performance, before fees and expenses, of the MSCI Emerging Markets Index (the MXEF Index). The MXEF Index is a free float-adjusted market capitalization index that is designed to measure the equity market performance of global emerging markets. The MXEF Index currently consists of the following 24 emerging market country indices: Brazil, Chile, China, Colombia, Czech Republic, Egypt, Greece, Hungary, India, Indonesia, Malaysia, Mexico, Pakistan, Peru, Philippines, Poland, Qatar, Russia, South Africa, South Korea, Taiwan, Thailand, Turkey and the United Arab Emirates. For more information about the MXEF Index, see IndicesThe MSCI Indices in the accompanying index supplement, as supplemented by the following updated information. Beginning in June 2018, the MXEF Index includes shares traded on mainland Chinese exchanges, referred to as A-shares.
BFA pursues a representative sampling indexing strategy in attempting to track the performance of the MXEF Index, and may not hold all of the equity securities composing the MXEF Index. The EEM Fund invests in a representative sample of securities that collectively has an investment profile similar to the MXEF Index. Securities selected are expected to have, in the aggregate, investment characteristics (based on factors such as market capitalization and industry weightings), fundamental characteristics (such as return variability and yield) and liquidity measures similar to those of the MXEF Index.
The MXEF Index is a financial calculation, based on a grouping of financial instruments, and is not an investment product, while the EEM Fund is an actual investment portfolio. The performance of the EEM Fund and the MXEF Index may vary for a number of reasons, including transaction costs, non-U.S. currency valuations, asset valuations, corporate actions (such as mergers and spin-offs), timing variances and differences between the EEM Funds portfolio and the MXEF Index resulting from the EEM Funds use of representative sampling or from legal restrictions (such as diversification requirements) that apply to the EEM Fund but not to the MXEF Index. Tracking error is the divergence of the performance (return) of a funds portfolio from that of its underlying index. BFA expects that, over time, the EEM Funds tracking error will not exceed 5.00%. Because the EEM Fund uses a representative sampling indexing strategy, it can be expected to have a larger tracking error than if it used a replication indexing strategy. Replication is an indexing strategy in which a fund invests in substantially all of the securities in its underlying index in approximately the same proportions as in the underlying index.
iShares
®
, Inc. is a registered investment company that consists of numerous separate investment portfolios, including the EEM Fund. Information provided to or filed with the SEC by iShares
®
, Inc. pursuant to the Securities Act of 1933, as amended, and the Investment Company Act of 1940, as amended, can be located by reference to SEC file numbers 033-97598 and 811-09102, respectively, through the SECs website at http://www.sec.gov. For additional information regarding iShares
®
, Inc., BFA and the EEM Fund, please see the EEM Funds prospectus. In addition, information about iShares
®
, Inc. and the EEM Fund may be obtained from other sources including, but not limited to, press releases, newspaper articles and other publicly disseminated documents and the iShares
®
website at www.ishares.com. We have not independently verified the accuracy or completeness of such information. Information contained in the iShares
®
website and other publicly available information is not incorporated by reference in, and should not be considered a part of, this pricing supplement.
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Historical Performance of the Emerging Markets ETF
The graph below
sets forth the historical performance of the Emerging Markets ETF based on the daily Closing Values from January 1, 2014 through March 22, 2019. We obtained the Closing Values 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.
Historical Performance of the iShares
®
MSCI Emerging Markets ETF
PAST PERFORMANCE IS NOT INDICATIVE OF FUTURE RESULTS
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Russell 2000
®
Index
iShares
®
MSCI EAFE ETF
We have derived all information contained in this pricing supplement regarding the EAFE ETF from publicly available information, without independent verification. This information reflects the policies of, and is subject to change by, iShares
®
Trust, BlackRock Institutional Trust Company, N.A. (BTC) and BlackRock Fund Advisors (BFA). The EAFE ETF is an investment portfolio maintained and managed by iShares
®
Trust. BFA is currently the investment adviser to the EAFE ETF. The EAFE ETF is an exchange-traded fund that trades on the NYSE Arca, Inc. under the ticker symbol EFA.
The EAFE ETF seeks to track investment results that correspond generally to the price and yield performance, before fees and expenses, of the MSCI EAFE
®
Index (the EFA Index). The EFA Index is a free float-adjusted market capitalization index that is designed to measure the equity market performance of certain developed markets excluding the United States and Canada. The EFA Index currently consists of the following 21 developed market country indices: Australia, Austria, Belgium, Denmark, Finland, France, Germany, Hong Kong, Ireland, Israel, Italy, Japan, the Netherlands, New Zealand, Norway, Portugal, Singapore, Spain, Sweden, Switzerland and the United Kingdom. For more information about the EFA Index, see IndicesThe MSCI Indices in the accompanying index supplement.
BFA pursues a representative sampling indexing strategy in attempting to track the performance of the EFA Index, and may not hold all of the equity securities composing the EFA Index. The EAFE ETF invests in a representative sample of securities that collectively has an investment profile similar to the EFA Index. Securities selected are expected to have, in the aggregate, investment characteristics (based on factors such as market capitalization and industry weightings), fundamental characteristics (such as return variability and yield) and liquidity measures similar to those of the EFA Index.
The EFA Index is a financial calculation, based on a grouping of financial instruments, and is not an investment product, while the EAFE ETF is an actual investment portfolio. The performance of the EAFE ETF and the EFA Index may vary for a number of reasons, including transaction costs, non-U.S. currency valuations, asset valuations, corporate actions (such as mergers and spin-offs), timing variances and differences between the EAFE ETFs portfolio and the EFA Index resulting from the EAFE ETFs use of representative sampling or from legal restrictions (such as diversification requirements) that apply to the EAFE ETF but not to the EFA Index. Tracking error is the divergence of the performance (return) of a funds portfolio from that of its underlying index. BFA expects that, over time, the EAFE ETFs tracking error will not exceed 5.00%. Because the EAFE ETF uses a representative sampling indexing strategy, it can be expected to have a larger tracking error than if it used a replication indexing strategy. Replication is an indexing strategy in which a fund invests in substantially all of the securities in its underlying index in approximately the same proportions as in the underlying index.
iShares
®
Trust is a registered investment company that consists of numerous separate investment portfolios, including the EAFE ETF. Information provided to or filed with the SEC by iShares
®
Trust pursuant to the Securities Act of 1933, as amended, and the Investment Company Act of 1940, as amended, can be located by reference to SEC file numbers 333-92935 and 811-09729, respectively, through the SECs website at http://www.sec.gov. For additional information regarding iShares
®
Trust, BFA and the EAFE ETF, please see the EAFE ETFs prospectus. In addition, information about iShares
®
Trust and the EAFE ETF may be obtained from other sources including, but not limited to, press releases, newspaper articles and other publicly disseminated documents and the iShares
®
website at www.ishares.com. We have not independently verified the accuracy or completeness of such information. Information contained in the iShares
®
website and other publicly available information is not incorporated by reference in, and should not be considered a part of, this pricing supplement
.
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Historical Performance of the EAFE ETF
The graph below
sets forth the historical performance of the EAFE ETF based on the daily Closing Values from January 1, 2014 through March 22, 2019. We obtained the Closing Values shown in the graph below from Bloomberg. We have not independently verified the accuracy or completeness of the information obtained from Bloomberg.
Historical Performance of the
iShares
®
MSCI EAFE ETF
PAST PERFORMANCE IS NOT INDICATIVE OF FUTURE RESULTS
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TAX CONSIDERATIONS
You should review carefully the sections entitled Material U.S. Federal Income Tax ConsequencesTax Consequences to U.S. HoldersNotes Treated as Indebtedness for U.S. Federal Income Tax Purposes and, if you are a non-U.S. holder, Tax Consequences to Non-U.S. Holders, in the accompanying prospectus supplement. The discussion below applies to you only if you are an initial purchaser of the Notes; if you are a secondary purchaser of the Notes, the tax consequences to you may be different. Notwithstanding that the Notes do not provide for the full repayment of their principal amount at or prior to maturity, in the opinion of our special tax counsel, Davis Polk & Wardwell LLP, the Notes should be treated as debt instruments for U.S. federal income tax purposes. The remainder of this discussion assumes that this treatment is correct.
Assuming the treatment described above is correct, in the opinion of our special tax counsel, the Notes will be treated as contingent payment debt instruments for U.S. federal income tax purposes, as described under Contingent Payment Debt Instruments in the accompanying prospectus supplement. The remainder of this discussion assumes that this treatment is correct.
Regardless of your method of accounting for U.S. federal income tax purposes, you generally will be required to accrue taxable interest income in each year on a constant yield to maturity basis at the comparable yield, as determined by us, even though we will not be required to make any payment with respect to the Notes prior to maturity. Upon a sale or exchange (including redemption at maturity), you generally will recognize taxable income or loss equal to the difference between the amount received from the sale or exchange and your adjusted tax basis in the Notes. You generally must treat any income as interest income and any loss as ordinary loss to the extent of previous interest inclusions, and the balance as capital loss. The deductibility of capital losses is subject to limitations.
The discussions herein and in the accompanying prospectus supplement do not address the consequences to taxpayers subject to special tax accounting rules under Section 451(b).
After the original issue date, you may obtain the comparable yield and the projected payment schedule by requesting them from Barclays Cross Asset Sales Americas, at (212) 528-7198. Neither the comparable yield nor the projected payment schedule constitutes a representation by us regarding the actual cash settlement amount that we will pay on the Notes.
You should consult your tax advisor regarding the U.S. federal tax consequences of an investment in the Notes, as well as tax consequences arising under the laws of any state, local or non-U.S. taxing jurisdiction.
Non-U.S. Holders
. We do not believe that non-U.S. holders should be required to provide a Form W-8 in order to avoid 30% U.S. withholding tax with respect to the excess (if any) of the Payment at Maturity over the face amount of the Notes, although the Internal Revenue Service (the IRS) could challenge this position. 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, we expect that these regulations will 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. If necessary, further information regarding the potential application of Section 871(m) will be provided in the pricing supplement for the Notes. You should consult your tax advisor regarding the potential application of Section 871(m) to the Notes.
You should review the section entitled Material U.S. Federal Income Tax ConsequencesTax Consequences to Non-U.S. HoldersForeign Account Tax Compliance Withholding in the accompanying prospectus supplement. The discussion in that section is modified to reflect regulations proposed by the U.S. Treasury Department indicating an intent to eliminate the requirement under FATCA of withholding on gross proceeds (other than amounts treated as interest) of the disposition of financial instruments. The U.S. Treasury Department has indicated that taxpayers may rely on these proposed regulations pending their finalization.
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