ACGL Arch Capital Group Ltd

Investment Timeline

INVESTING IN THE SECURITIES INVOLVES SIGNIFICANT RISKS. YOU MAY LOSE SOME OR ALL OF YOUR PRINCIPAL AMOUNT. ANY PAYMENT ON THE SECURITIES, INCLUDING ANY REPAYMENT OF PRINCIPAL, IS SUBJECT TO THE CREDITWORTHINESS OF BARCLAYS BANK PLC. IF BARCLAYS BANK PLC WERE TO DEFAULT ON ITS PAYMENT OBLIGATIONS, YOU MAY NOT RECEIVE ANY AMOUNTS OWED TO YOU UNDER THE SECURITIES AND YOU COULD LOSE YOUR ENTIRE INVESTMENT.

Key Risks

An investment in the Securities involves significant risks. Some of the risks that apply to the Securities are summarized below, but we urge you to read the more detailed explanation of risks relating to the Securities generally in the “Risk Factors” section of the prospectus supplement. You should reach an investment decision only after you have carefully considered with your advisors the suitability of an investment in the Securities in light of your particular circumstances.

projects open with regard to the tax treatment of pre-paid forward contracts and contingent notional principal contracts. While it is impossible to anticipate how any ultimate guidance would affect the tax treatment of instruments such as the Securities (and while any such guidance may be issued on a prospective basis only), such guidance could be applied retroactively and could in any case increase the likelihood that you will be required to accrue income over the term of an instrument such as the Securities even though you will not receive any payments with respect to the Securities until maturity. The outcome of this process is uncertain. You should consult your tax advisor as to the possible alternative treatments in respect of the Securities.

The Underlying Equity intends to enter into forward currency contracts or futures contracts designed to offset the Underlying Equity’s exposure to the Japanese yen. A forward currency contract is a contract between two parties to buy or sell a specific currency in the future at an agreed upon exchange rate. The amount of forward contracts and futures contracts in the Underlying Equity is based on the aggregate exposure of the Underlying Equity and Underlying Index to the Japanese yen. While this approach is designed to minimize the impact of currency fluctuations on the Underlying Equity’s returns, it does not necessarily eliminate the Underlying Equity’s exposure to the yen. The return of the forward currency contracts and currency futures contracts may not perfectly offset the actual fluctuations between the yen and the U.S. dollar. In addition, the Underlying Equity may not be fully hedged at all times in order to minimize transaction costs or for other reasons. Therefore the value of the Underlying Equity and the value of your Securities are subject to currency exchange rate risk between the U.S. dollar and the Japanese yen.

Hypothetical Examples and Return Table of the Securities at Maturity

The examples and table below illustrate the payment at maturity for a hypothetical offering of Securities under various scenarios, assuming an Initial Price of $45.15, Trigger Price of $34.99 (77.50% of the hypothetical Initial Price, 77.50% being the midpoint of the range for the Trigger Price percentage of 75% to 80%), the Participation Rate of 103.50% and the Final Prices as set forth below. The actual Initial Price and Trigger Price will be determined on the Trade Date, and the actual Final Price will be determined on the Final Valuation Date. Numbers in the examples and table below have been rounded for ease of analysis. These examples and table below do not take into account any tax consequences from investing in the Securities. We cannot predict the closing price of the Underlying Equity on any day during the term of the Securities, including on the Final Valuation Date. You should not take these examples or the table below as an indication or assurance of the expected performance of the Securities.

Example 1 — The closing price of the Underlying Equity increases 10.00% from the Initial Price of $45.15 to a Final Price of $49.67, resulting in an Equity Return of 10.00%. Because the Equity Return of 10.00% is positive, the Issuer will pay a payment at maturity calculated as follows per $10 principal amount Security:

$10 + [$10 × Equity Return × Participation Rate]
$10 + [$10 × 10.00% × 103.50%] = $10 + $1.035 = $11.035

The payment at maturity of $11.035 per $10 principal amount Security represents a total return on the Securities of 10.035%.

Example 2 — The closing price of the Underlying Equity decreases 20.00% from the Initial Price of $45.15 to a Final Price of $36.12, resulting in an Equity Return of -20.00%. Because the Equity Return is equal to or less than 0% and the Final Price is equal to or greater than the Trigger Price, the Issuer will repay the principal amount of the Securities at maturity.

The payment at maturity of $10.00 per $10 principal amount Security represents a total return on the Securities of 0.00%.

Example 3 — The closing price of the Underlying Equity decreases 60.00% from the Initial Price of $45.15 to a Final Price of $18.06, resulting in an Equity Return of -60.00%. Because the Equity Return is less than 0% and the Final Price is less than the Trigger Price, the Issuer will pay a payment at maturity calculated as follows per $10 principal amount Security:

$10 + [$10 × Equity Return]
$10.00 + [$10.00 × -60.00%] = $4.00

The payment at maturity of $4.00 per $10 principal amount Security represents a loss on the Securities of 60%, which is equal to the Equity Return of -60.00%.

If the Equity Return is negative and the Final Price is less than the Trigger Price, at maturity the Issuer will pay less than the full principal amount resulting in a loss to investors that is equal to the depreciation of the Underlying Equity from the Trade Date to the Final Valuation Date.

What are the material tax consequences of the Securities?

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

In the opinion of our special tax counsel, Sullivan & Cromwell LLP, it would be reasonable to treat your Securities in the manner described below. This opinion assumes that the description of the terms of the Securities in this free writing prospectus is materially correct.

The U.S. federal income tax consequences of your investment in the Securities are uncertain and the Internal Revenue Service could assert that the Securities should be taxed in a manner that is different than described below. Pursuant to the terms of the Securities, Barclays Bank PLC and you agree, in the absence of a change in law or an administrative or judicial ruling to the contrary, to characterize your Securities as a pre-paid cash-settled derivative contract with respect to the Underlying Equity. Subject to the discussion of Section 1260 of the Internal Revenue Code of 1986, as amended, (the “Code”) below, if your Securities are so treated, you should generally recognize capital gain or loss upon the sale or maturity of your Securities in an amount equal to the difference between the amount you receive at such time and the amount you paid for your Securities. Such gain or loss should generally be long-term capital gain or loss if you have held your Securities for more than one year.

Although not entirely clear, it is possible that the purchase and ownership of the Securities could be treated as a “constructive ownership transaction” with respect to the Underlying Equity that is subject to the constructive ownership rules of Section 1260 of the Code. If your Securities were subject to the constructive ownership rules, then any long-term capital gain that you realize upon the sale or maturity of your Securities would be recharacterized as ordinary income to the extent that such long-term capital gain exceeds the amount of long-term capital gain that you would have realized had you purchased the actual number of shares of the Underlying Equity referenced by your Securities on the date that you purchased your Securities and sold those shares on the date of the sale or maturity of the Securities (the “Excess Gain Amount”), and you would be subject to an interest charge on the deferred tax liability with respect to such Excess Gain Amount. Because, in general, the maturity payment of the Securities will only reflect the appreciation or depreciation in the value of the shares of the Underlying Equity and will not be determined by reference to any short-term capital gains or ordinary income, if any, that is recognized by holders of shares of the Underlying Equity, we believe that it is more likely than not that the Excess Gain Amount should be equal to zero, and that the application of the constructive ownership rules should accordingly not have any adverse effects to you. However, it is possible that the Excess Gain Amount could be greater than zero if the Internal Revenue Service successfully asserts that the number of Underlying Equity shares used to determine the Excess Gain Amount should be calculated by dividing the amount you paid for your Securities by the Underlying Equity share price on the date you acquired your Securities, as opposed to making such determination based on the actual number of Underlying Equity shares that, after taking into account the Participation Rate, are effectively referenced in determining the actual return on your Securities. In addition, the Excess Gain Amount could be greater than zero if you purchase your Securities for an amount that is less than the principal amount of the Securities or if the return on the Securities is adjusted to take into account any extraordinary dividends that are paid on the shares of the Underlying Equity. Furthermore, if another exchange traded fund is substituted for the Underlying Equity, the Excess Gain Amount could be greater than zero if you would have recognized short-term capital gain if you had directly owned the Underlying Equity and sold the Underlying Equity to purchase its substitute. You should be aware that, if the Securities are subject to the constructive ownership rules, the Excess Gain Amount will be presumed to be equal to all of the gain that you recognize in respect of the Securities (in which case all of such gain would be recharacterized as ordinary income that is subject to an interest charge) unless you provide clear and convincing evidence to the contrary. Because the application of the constructive ownership rules to the Securities is unclear, you are strongly urged to consult your tax advisor with respect to the possible application of the constructive ownership rules to your investment in the Securities.

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

For a further discussion of the tax treatment of your Securities as well as other possible alternative characterizations, please see the discussion under the heading “Certain U.S. Federal Income Tax Considerations—Certain Securities Treated as Forward Contracts or Derivative Contracts” in the accompanying prospectus supplement. You should consult your tax advisor as to the possible alternative treatments in respect of the Securities. For additional, important considerations related to tax risks associated with investing in the Securities, you should also examine the discussion in “Selected Risk Considerations—Taxes”, in this free writing prospectus.

Description of the Underlying Equity

We have derived all information contained in this free writing prospectus regarding the WisdomTree Japan Hedged Equity Fund (referred to in this section as the “ETF”) including, without limitation, its make-up, method of calculation and changes in its components, from the ETF’s prospectus dated August 1, 2013 and other publicly available information. Such information reflects the policies of, and is subject to change by the issuer of the ETF, WisdomTree Trust (the “Trust”), and WisdomTree Asset Management, Inc., which has overall responsibility for the general management and administration of the Trust and the ETF. We have not independently verified such information.

The ETF seeks investment results that closely correspond to the price and yield performance, before fees and expenses, of the WisdomTree Japan Hedged Equity Index, the ETF’s “Underlying Index,” which is provided by WisdomTree Investments, Inc. The Underlying Index provides exposure to Japanese equity markets while at the same time seeking to neutralize exposure to fluctuations of the Japanese yen movements relative to the U.S. dollar. In this sense, the Underlying Index “hedges” against fluctuations in the relative value of the yen against the U.S. dollar. The Underlying Index is designed to have higher returns than an equivalent non-currency hedged investment when the yen is weakening relative to the U.S. dollar. Conversely, the Underlying Index is designed to have lower returns than an equivalent unhedged investment when the yen is rising relative to the U.S. dollar. The Underlying Index applies an applicable published WM/Reuters one-month currency forward rate to the total equity exposure to Japan to adjust the value of the Japanese yen against the U.S. dollar.

The Underlying Index consists of dividend-paying companies incorporated in Japan and traded on the Tokyo Stock Exchange that derive less than 80% of their revenue from sources in Japan. By excluding companies that derive 80% or more of their revenue from Japan, the Underlying Index is tilted towards companies with a more significant global revenue base. Eligibility requirements include: (i) payment of at least $5 million in cash dividends on common shares in the annual cycle prior to the annual Underlying Index rebalance; (ii) market capitalization of at least $100 million as of the Underlying Index rebalance; (iii) average daily trading volume of at least $100,000 for the three months preceding the Underlying Index rebalance; (iv) a calculated volume factor (the average daily trading volume for three months preceding the Underlying Index rebalance divided by the weight of the security in the Index) that is greater than $200 million; and (v) trading of at least 250,000 shares per month for each of the six months preceding the Underlying Index rebalance. Securities are weighted in the Underlying Index based on dividends paid over the prior annual cycle. Companies that pay more total dollar amount of dividends are more heavily weighted. At the time of the Underlying Index’s annual rebalance, the maximum weight of any single security in the Underlying Index is capped at 5% and the maximum weight of any one sector in the Underlying Index is capped at 25%. In response to market conditions, security and sector weights may fluctuate above the specified cap between annual Underlying Index rebalance dates. In the event that a company has a calculated volume factor that is less than $400 million as of the annual Underlying Index rebalance, its weight in the Underlying Index will be reduced such that its weight equals its weight prior to the adjustment multiplied by a fraction of its calculated volume factor divided by $400 million.

The ETF employs a “passive management” — or indexing — investment approach designed to track the performance of the Underlying Index. The ETF generally uses a representative sampling strategy to achieve its investment objective, meaning it generally will invest in a sample of securities whose risk, return and other characteristics closely resemble the risk, return and other characteristics of the Underlying Index as a whole. Under normal circumstances, at least 95% of the ETF’s total assets (exclusive of collateral held from securities lending) will be invested in component securities of the Underlying Index and investments that have economic characteristics that are substantially identical to the economic characteristics of such component securities. To the extent the Underlying Index concentrates (i.e., holds 25% or more of its total assets in the securities of a particular industry or group of industries), the Underlying Equity will concentrate its investments to approximately the same extent as its Underlying Index. As of July 31, 2013, the ETF held stocks of Japanese companies in the following industry sectors: Industrials (25.04%), Consumer Discretionary (23.77%), Information Technology (14.71%), Health Care (10.16%), Consumer Staples (9.20%), Materials (9.15%), and Financials (7.19%). The ETF also may invest its assets in cash and cash equivalents, as well as in shares of other investment companies, forward contracts, futures contracts, options on futures contracts, options, and swaps.

The ETF intends to enter into forward currency contracts or futures contracts designed to offset the ETF’s exposure to the Japanese yen. A forward currency contract is a contract between two parties to buy or sell a specific currency in the future at an agreed upon exchange rate. The amount of forward contracts and futures contracts in the ETF is based on the aggregate exposure of the ETF and Underlying Index to the Japanese yen. While this approach is designed to minimize the impact of currency fluctuations on the ETF’s returns, it does not necessarily eliminate the ETF’s exposure to the yen. The return of the forward currency contracts and currency futures contracts may not perfectly offset the actual fluctuations between the yen and the U.S. dollar.

As of August 1, 2013, the net expense ratio of the ETF is expected to accrue at an annual rate of 0.48% of the ETF’s daily net asset value. Expenses of the ETF reduce the net value of the assets held by the ETF and, therefore, reduce the value of the shares of the ETF.

Information filed by the Trust with the SEC under the Securities Act of 1933, the Investment Company Act of 1940 and, where applicable, the Securities Exchange Act of 1934 can be found by reference to its SEC file number: 333-132380 and 811-21864. The ETF’s website is http://www.wisdomtree.com/etfs/fund-details.aspx?etfid=18#overview. Shares of the ETF are listed on the NYSE Arca under ticker symbol “DXJ.” Information from outside sources is not incorporated by reference in, and should not be considered part of, this free writing prospectus or any accompanying prospectus.

The graph below illustrates the performance of the WisdomTree Japan Hedged Equity Fund from January 2, 2008 to July 31, 2013. The dotted line represents a hypothetical Trigger Price of $34.99, which is equal to 77.50% of the closing price on July 31, 2013 (77.50% is the midpoint of the range of 75.00% to 80.00% for the Trigger Price percentage). The actual Trigger Price percentage will be determined on the Trade Date, and the actual Trigger Price will be based on the closing price of the Underlying Equity on the Trade Date.

PAST PERFORMANCE IS NOT INDICATIVE OF FUTURE RESULTS.

The graph set forth above shows the historical performance of the Underlying Equity based on the daily closing price of the Underlying Equity. We obtained the Underlying Equity closing prices above from Bloomberg, L.P. We have not independently verified the accuracy or completeness of the information obtained from Bloomberg, L.P. Historical performance of the Underlying Equity

is not an indication of future performance. Future performance of the Underlying Equity may differ significantly from historical performance, either positively or negatively. We cannot give you assurance that the performance of the Underlying Equity will result in the return of any of your initial investment.

Supplemental Plan of Distribution

We will agree to sell to Barclays Capital Inc. and UBS Financial Services Inc., together the “Agents”, and the Agents will agree to purchase, all of the Securities at the price indicated on the cover of the pricing supplement, the document that will be filed pursuant to Rule 424(b)(2) and will contain the final pricing terms of the Securities. UBS Financial Services Inc. may allow a concession not in excess of the underwriting discount set forth on the cover of the pricing supplement to its affiliates.

We or our affiliates will enter into swap agreements or related hedge transactions with one of our other affiliates or unaffiliated counterparties in connection with the sale of the Securities and the Agents and/or an affiliate may earn additional income as a result of payments pursuant to the swap, or related hedge transactions.

We have agreed to indemnify the Agents against liabilities, including certain liabilities under the Securities Act of 1933, as amended, or to contribute to payments that the Agents may be required to make relating to these liabilities as described in the prospectus and the prospectus supplement. We have agreed that UBS Financial Services Inc. may sell all or a part of the Securities that it purchases from us to its affiliates at the price that will be indicated on the cover of the pricing supplement that will be available in connection with the sale of the Securities.

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