Free Writing Prospectus
Filed Pursuant to Rule 433
Registration No. 333-169119
January 10, 2012
iPath U.S. FEDERAL INCOME TAX CONSIDERATIONS iPath® Exchange Traded Notes iPath Exchange Traded Notes (ETNs) provide investors with cost-effective exposure to asset classes that have not always been easy to access. Here are answers to questions financial professionals and individuals often ask about the tax treatment of the iPath ETNs currently available. How are iPath ETNs treated for U.S. federal income tax purposes? Barclays and investors agree to treat all iPath ETNs, except certain currency ETNs, for all U.S. federal income tax purposes, as prepaid executory contracts with respect to the relevant index. If such iPath ETNs are so treated, investors should recognize gain or loss upon the sale, redemption or maturity of their iPath ETNs as the amount equal to the difference between the amount they receive at such time and their tax basis in the securities. Investors generally agree to treat such gain or loss as capital gain or loss, except with respect to iPath currency ETNs, for which investors agree to treat such gain or loss as ordinary, as detailed in the chart below. The following table summarizes certain U.S. federal tax consequences that holders of iPath ETNs and Barclays agree to be subject to pursuant to the terms of iPath ETNs. These tax consequences, however, are not certain and alternative treatments are possible. Please see the applicable prospectus for a more complete discussion of the primary tax treatment and alternative tax characterizations that are possible with respect to each iPath ETN. TREATMENT RECOGNITION OF TYPE AT MATURITY CURRENT INCOME Alternatives Capital Gains No Buy-Write Capital Gains No Commodities Capital Gains No Equity Capital Gains No Fixed Income Capital Gains No Leveraged Capital Gains No Currency Exchange Rate Ordinary Income Yes Global Emerging Markets Ordinary Income Yes Strategy (GEMS) Carry Trade Ordinary Income No What makes iPath ETNs an attractive investment option? Unlike mutual funds that may be required to make taxable distributions to shareholders, most iPath ETNs currently available will not make taxable distributions.1 Therefore, holders of iPath ETNs (other than certain currency ETNs) should, assuming they are treated as described earlier, generally not be required to include amounts in income prior to sale, redemption or maturity. This enables investors to control the timing of taxable events related to their investment in iPath ETNs. However, the IRS and U.S. Treasury are actively considering the tax treatment of instruments such as iPath ETNs, which could change. Is there an IRS or court ruling that governs the U.S. tax treatment of iPath ETNs? Yes, Revenue Ruling 2008-1 is relevant to the treatment of certain iPath ETNs. What is Revenue Ruling 2008-1? Revenue Ruling 2008-1, issued on December 7, 2007, holds that certain financial instruments linked directly to the value of a foreign currency—regardless of whether the instrument is privately offered, publicly offered or traded on an exchange—should be treated like debt for federal tax purposes. Revenue Ruling 2008-1 is relevant to iPath exchange rate and GEMS ETNs. What is Barclays’ reaction to Revenue Ruling 2008-1? The ruling provides investors clarity on the tax treatment of certain financial instruments linked directly to the value of a foreign currency— regardless of whether the instrument is privately offered, publicly offered or traded on an exchange. 1. Currently, three iPath ETNs are designed to make current interest payments, in the form of monthly coupons: the iPath® GEMS Index™ ETN (ticker symbol: JEM), the iPath® GEMS Asia 8 ETN (ticker symbol: AYT), and the iPath® Asian & Gulf Currency Revaluation ETN (ticker symbol: PGD). This information should not be considered tax advice. Investors are urged to consult their tax advisor with regard to their specific situation.
What does the ruling mean for iPath currency ETN investors? niPath exchange rate ETN investors. The ruling means that any interest accrued (net of fees) during the life of these ETNs will be taxed as ordinary income on a current basis, even though that interest is reinvested and not paid out until the holder redeems the ETN or the ETN matures. It also means that gain or loss from the sale, redemption or maturity of the ETNs will generally be ordinary. niPath GEMS ETN investors. The ruling means that interest on these ETNs should be taxed as ordinary income at the time it accrues or is received (iPath GEMS ETNs are designed to pay a monthly coupon). It also means that gain or loss from the sale, redemption or maturity of these ETNs should generally be ordinary. niPath Optimized Currency Carry ETN investors. The iPath Optimized Currency Carry ETN is different from the instruments described in Revenue Ruling 2008-1. However, due to rules under Section 988 of the Internal Revenue Code, gain or loss from the sale, redemption or maturity of this ETN should generally be ordinary. Do iPath exchange rate and GEMS ETN investors need to submit a form to the IRS requesting a certain tax treatment? No, it is not necessary to elect any specific treatment since the IRS has ruled how financial instruments linked directly to the value of a foreign currency should be treated from a tax perspective. Most custodians will provide Form 1099 OID for annual tax reporting purposes. What is the current tax status of equity, fixed income, leveraged, commodity and certain alternatives ETNs? Revenue Ruling 2008-1 likely does not apply to iPath ETNs other than iPath exchange rate and GEMS ETNs. However, on December 7, 2007, the IRS also issued notice 2008-2 asking for comments on the appropriate tax treatment of instruments such as the equity and commodity ETNs. The IRS has not issued additional guidance on this issue. What is Barclays’ position about the tax status of equity, fixed income, leveraged, commodity and certain alternatives ETNs? Barclays is aligned with the Securities Industry and Financial Markets Association (SIFMA). We believe that the tax treatment of an investment product should be driven by the product’s attributes. Mutual funds and ETNs are taxed differently because they are fundamentally different products. Investors who buy shares in a mutual fund own the underlying securities and receive dividend income from those securities annually, which is taxable. ETN investors do not own underlying securities and receive no dividends while holding an ETN. What is the tax treatment of iPath ETNs in the event of an automatic termination or issuer redemption (applicable to certain iPath ETNs)? Investors should generally recognize gain or loss upon the sale, early redemption or maturity of their ETNs in an amount equal to the difference between the amount they receive at such time and their tax basis in the ETNs. For the tax implications of purchasing replacement securities offering similar exposure, including the potential application of the wash sale rules, please consult a tax professional. An Selected investment Risk Considerations in the iPath ETNs described herein (the “ETNs”) involves risks. Selected detailed explanation risks are summarized of risks described here, under but we “Risk urge Factors” you to in read the applicable the more prospectus supplement and pricing supplement. change You May in Lose the level Some of the or underlying All of Your index Principal: between The the ETNs inception are exposed date and to any the insufficient applicable valuation to offset the date. negative Additionally, effect of if the the investor level of fee the and underlying other applicable index is costs, redemption, you will even lose if the some value or of all such of index your has investment increased at or maturity decreased, or as upon the applicable case may be. costs, Because the return the ETNs on the are ETNs subject will to always an investor be lower fee and than any the other total than return ordinary on a direct unsecured investment debt in securities the index and components. have no principal The ETNs protection. are riskier issuer, Credit Barclays of Barclays Bank Bank PLC, PLC: and The are not, ETNs either are unsecured directly or indirectly, debt obligations an obligation of the of including or guaranteed any payment by any at third maturity party. or upon Any payment redemption, to be depends made on on the the ability ETNs, actual of Barclays and Bank perceived PLC to creditworthiness satisfy its obligations of Barclays as they come Bank due. PLC As will a affect result, the the the market event value, Barclays if any, Bank of the PLC ETNs were prior to to default maturity on or its redemption. obligations, In you addition, may not in receive any amounts owed to you under the terms of the ETNs. NYSE A Trading Arca, Market a trading for the market ETNs for May the Not ETNs Develop: may not Although develop the and ETNs the are liquidity listed on of the ETNs may be limited, as we are not required to maintain any listing of the ETNs. No payments Interest on Payments the ETNs. from the ETNs: You may not receive any interest Redemptions: Restrictions on You the must Minimum redeem Number at least 25,000 of ETNs or and 50,000 Date (depending Restrictions on the for redeem series) ETNs your of ETNs the on same any series redemption at one date. time You in order may to only exercise redeem your your right ETNs to on dates a redemption and times as date set if forth we receive in the a pricing notice supplement. of redemption from you by certain uncertain. Uncertain You Tax Treatment: should consult Significant your own aspects tax advisor of the about tax treatment your own of tax the situation. ETNs are with Barclays the SEC Bank for PLC the has offering filed a to registration which this statement communication (including relates. a prospectus) Before you PLC invest, has you filed should with read the SEC the for prospectus more complete and other information documents about Barclays the issuer Bank and iPathETN. this offering. com or EDGAR You may on get the these SEC website documents at www. for sec. freegov. by visiting Alternatively, www. Barclays prospectus Bank if you PLC request will arrange it by calling for Barclays toll-free Capital 1-877-764-7284, Inc. to send or you you may the request a copy from any other dealer participating in the offering. BlackRock Investments, LLC, assists in the promotion of the iPath ETNs. The brokerage ETNs account. may be sold Commissions throughout may the apply day and on there the exchange are tax consequences through any in the event of sale, redemption or maturity of ETNs. Barclays affiliates Capital do not Inc. provide and its tax affiliates, advice and and nothing BlackRock contained Investments, herein LLC, should and be its construed matters contained to be tax herein advice. (including Please be any advised attachments) that any discussion (i) is not intended of U.S. tax or written tax-related to be penalties; used, and and cannot (ii) be was used, written by you to for support the purpose the of promotion avoiding U. or S. you marketing should of seek the transactions advice based or other on your matters particular addressed circumstances herein. Accordingly, from an independent tax advisor. iPath ©2006-2012 logo are Barclays registered Bank trademarks PLC. All rights of Barclays reserved. Bank iPath, PLC. All iPath other ETNs trademarks, and the permission, servicemarks of or their registered respective trademarks owners. 598-02-PRD_v01MW-1/12 are the property, and used with the iP-0506-0112 Not FDIC Insured • No Bank Guarantee • May Lose Value FIND YOUR iPATH 1– 877–764–7284 www.iPathETN.com iPath Barclays