ABN
AMRO has filed a registration statement (including a Prospectus and Prospectus
Supplement) with the SEC for the offering to which this communication relates.
Before you invest, you should read the Prospectus and Prospectus Supplement in
that registration statement and other documents ABN AMRO has filed with the SEC
for more complete information about ABN AMRO and the offering of the
Securities.
You
may get these documents for free by visiting EDGAR on the SEC website at
<www.sec.gov> or by visiting ABN AMRO Holding N.V. on the SEC website at
<http://www.sec.gov/cgi-bin/browse-edgar?company=&CIK=abn&filenum=&State=&SIC=&owner=include&action=get
company>. Alternatively, ABN AMRO, any underwriter or any dealer
participating in the offering will arrange to send you the Prospectus and
Prospectus Supplement if you request it by calling toll free (888)
644-2048.
These
Securities may not be offered or sold (i) to any person/entity listed on
sanctions lists of the European Union, United States or any other applicable
local competent authority; (ii) within the territory of Cuba, Sudan, Iran and
Myanmar; (iii) to residents in Cuba, Sudan, Iran or Myanmar; or (iv) to Cuban
Nationals, wherever located.
We
reserve the right to withdraw, cancel or modify any offering and to reject
orders in whole or in part.
*A
credit rating (1) is subject to revision, suspension or withdrawal at any time
by the assigning rating organization, (2) does not take into account market risk
or the performance related risks of investing in the Securities, and (3) is not
a recommendation to buy, sell or hold the Securities.
The
following summary does not contain all the information that may be important to
you. You should read this summary together with the more detailed information
that is contained in the related Pricing Supplement and in its accompanying
Prospectus and Prospectus Supplement. You should carefully consider, among other
things, the matters set forth in “Risk Factors” in the related Pricing
Supplement, which are summarized on page 5 of this document. In addition, we
urge you to consult with your investment, legal, accounting, tax and other
advisors with respect to any investment in the Securities.
What
are the Securities?
The Securities are
interest paying, non-principal protected securities issued by us, ABN AMRO Bank
N.V., and are fully and unconditionally guaranteed by our parent company, ABN
AMRO Holding N.V. The Securities are senior notes of ABN AMRO Bank N.V. These
Securities combine certain features of debt and equity by offering a fixed
interest rate on the principal amount while the payment at maturity is
determined based on the performance of the Underlying Fund to which it is
linked.
What
will I receive at maturity of the Securities?
The payment at
maturity of each Security will depend on (i) whether or not the closing price of
the Underlying Fund to which such Security is linked fell below the knock-in
level on any trading day during the Knock-in Period, and if so, (ii) the closing
price of the applicable Underlying Fund on the determination date. To determine
closing prices, we look at the prices quoted by the relevant
exchange.
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If the
closing price of the applicable Underlying Fund on the relevant exchange
has not fallen below the applicable knock-in level on any trading day
during the Knock-in Period, we will pay you the principal amount of each
Security in cash.
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If the
closing price of the applicable Underlying Fund on the relevant exchange
has fallen below the applicable knock-in level on any trading day during
the Knock-in Period, we will
either:
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deliver to
you the applicable redemption amount, in exchange for each Security, in
the event that the closing price of the applicable Underlying Fund is
below the applicable initial price on the determination date;
or
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pay you the
principal amount of each Security in cash, in the event that the closing
price of the applicable Underlying Fund is at or above the applicable
initial price on the determination
date.
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If due to events
beyond our reasonable control, as determined by us in our sole discretion,
shares of the Underlying Fund are not available for delivery at maturity we may
pay you, in lieu of the Redemption Amount, the cash value of the Redemption
Amount, determined by multiplying the Redemption Amount by the Closing Price of
the Underlying Fund on the Determination Date.
Why
is the interest rate on the Securities higher than the interest rate payable on
your conventional debt securities with the same maturity?
The Securities
offer a higher interest rate than the yield that would be payable on a
conventional debt security with the same maturity issued by us or an issuer with
a comparable credit rating. This is because you, the investor in the Securities,
indirectly sell a put option to us on the shares of the applicable Underlying
Fund. The premium due to you for this put option is combined with a market
interest rate on our senior debt to produce the higher interest rate on the
Securities. As explained below under "What are the consequences of the indirect
put option that I have sold you?" you are being paid the premium for taking the
risk that you may receive Underlying Fund with a market value less than the
principal amount of your Securities at maturity, which would mean that you would
lose some or all of your initial principal investment.
What
are the consequences of the indirect put option that I have sold
you?
The put option you
indirectly sell to us creates the feature of exchangeability. This feature could
result in the delivery of Underlying Stock to you, at maturity, with a market
value which is less than the principal amount of $1,000 per Security. If the
closing price of the applicable Underlying Fund on the relevant exchange falls
below the applicable Knock-In Level on any trading day during the Knock-In
Period, and on the Determination Date the closing price of the applicable
Underlying Fund is less than the applicable Initial Price, you will receive the
applicable Stock Redemption Amount. The market value of the shares of such Underlying Fund on the
Determination Date will be less than the principal amount of the Securities and
could be zero. Therefore you are not guaranteed to receive any return of
principal at maturity. If the price of the Underlying Fund rises above the
initial price you will not participate in any appreciation in the price of the
Underlying Fund.
How
is the Redemption Amount determined?
The Redemption
Amount for each $1,000 principal amount of the Securities is equal to $1,000
divided by the initial price. Since shares of the Underlying Fund are held in
book entry form, no stock certificates are issued. Accordingly, any shares of
the Underlying Fund which are delivered to you will be delivered in book entry
form and will include any fractional shares you are entitled to receive, after
aggregating your total holdings of the Securities based on the closing price of
the Underlying Fund on the determination date.
The interest rate
is fixed at issue and is payable in cash on each interest payment date,
irrespective of whether the Securities are redeemed at maturity for cash or
shares.
Can
you give me an example of the payment at maturity?
If, for example, in
a hypothetical offering, the interest rate was 10% per annum, the initial price
of the underlying fund was $145.00 per share and the knock-in level for such
offering was 80% then the knock-in level would be $116.00 per share or 80% of
the initial price and the redemption amount would be 6.897 shares of the
underlying fund, or $1,000 divided by $145.00.
If the hypothetical
closing price of that underlying fund had fallen below its knock-in level of
$116.00 on any trading day during the Knock-in Period, then payment at maturity
would depend on the closing price of the underlying fund on the determination
date. In this case, if the closing price of the underlying fund on the
determination date is $136.00 per share, which is below the initial price, you
would receive 6.897 shares of the underlying fund for each $1,000 principal
amount of the securities. Since shares of the underlying fund are held in book
entry form we would deliver shares of the underlying fund in book entry form
which allows us to deliver fractions of a share. You would receive on the
maturity date for each $1,000 principal amount of the securities 6.897 shares of
the underlying. In addition, over the life of the securities you would have
received interest payments at a rate of 10% per annum.
In
this hypothetical example, the market value of those 6.897 shares of the
underlying fund that we would deliver to you at maturity for each $1,000
principal amount of security would be $937.99, which is less than the principal
amount of $1,000, and you would have lost a portion of your initial
investment.
If, on the other
hand, the closing price of the underlying fund on the determination date is
$150.00 per share, which is above the initial price level, you will receive
$1,000 in cash for each $1,000 principal amount of the securities regardless of
the knock-in level having been
breached. In addition, over the life of the Securities you would have received
interest payments at a rate of 10% per annum.
Alternatively, if
the closing price of the underlying fund never falls below $116.00, which is the
knock-in price on any trading day during the Knock-in Period, at maturity you
would receive $1,000 in cash for each $1,000 principal amount of the Securities
you hold regardless of the closing price of the underlying fund on the
determination date. In addition, over the life of the Securities you would have
received interest payments of 10% per annum.
This example is for illustrative
purposes only and is based on a hypothetical offering. It is not possible to
predict the closing price of any of the Underlying Funds on the determination
date or at any time during the life of the Securities. For each offering, we will set
the Initial Price, Knock-In Level and Redemption Amount on the Pricing
Date.
Do
I benefit from any appreciation in the Underlying Fund over the life of the
Securities?
No. The amount paid
at maturity for each $1,000 principal amount of the Securities will not exceed
$1,000.
What
if I have more questions?
You should read
“Description of Securities” in the related Pricing Supplement for a detailed
description of the terms of the Securities. ABN AMRO has filed a registration
statement (including a Prospectus and Prospectus Supplement) with the SEC for
the offering to which this communication relates. Before you invest, you should
read the Prospectus and Prospectus Supplement in that registration statement and
other documents ABN AMRO has filed with the SEC for more complete information
about ABN AMRO and the offering of the Securities. You may get these documents
for free by visiting EDGAR on the SEC web site at www.sec.gov. Alternatively,
ABN AMRO, any underwriter or any dealer participating in the offering will
arrange to send you the Prospectus and Prospectus Supplement if you request it
by calling toll free (888) 644-2048.
Investors
should carefully consider the risks of the Securities to which this
communication relates and whether these Securities are suited to their
particular circumstances before deciding to purchase them. It is important that
prior to investing in these Securities investors read the Pricing Supplement
related to such Securities and the accompanying Prospectus and Prospectus
Supplement to understand the actual terms of and the risks associated with the
Securities. In addition, we urge investors to consult with their investment,
legal, accounting, tax and other advisors with respect to any investment in the
Securities.
Credit Risk
The
Securities are issued by ABN AMRO Bank N.V. and guaranteed by ABN AMRO Holding
N.V., ABN AMRO’s parent. As a result, investors assume the credit risk of ABN
AMRO Bank N.V. and that of ABN AMRO Holding N.V. in the event that ABN AMRO
defaults on its obligations under the Securities. Any obligations or Securities
sold, offered, or recommended are not deposits on ABN AMRO Bank N.V. and are not
endorsed or guaranteed by any bank or thrift, nor are they insured by the FDIC
or any governmental agency.
Principal Risk
The
Securities are not ordinary debt securities: they are not principal protected.
In addition, if the closing price of the Underlying Fund falls below the
Knock-In Level on any trading day during the Knock-In Period, investors in the
Securities will be exposed to any decline in the price of the Underlying Fund
below the closing price of such Underlying Fund on the date the Securities were
priced. Accordingly, investors
may lose some or all of their initial principal investment in the
Securities.
Limited Return
The
amount payable under the Securities will never exceed the original principal
amount of the Securities plus the aggregate fixed coupon payment investors earn
during the term of the Securities. This means that investors will not benefit
from any price appreciation in the Underlying Fund, nor will they receive
dividends paid on the Underlying Fund, if any. Accordingly, investors will never
receive at maturity an amount greater than a predetermined amount per Security,
regardless of how much the price of the Underlying Fund increases during the
term of the Securities or on the Determination Date. The return of a Security
may be significantly less than the return of a direct investment in the
Underlying Fund to which the Security is linked during the term of the
Security.
Liquidity Risk
The
Securities will not be listed on any securities exchange. Accordingly, there may
be little or no secondary market for the Securities and information regarding
independent market pricing of the Securities may be very limited or
non-existent. The value of the Securities in the secondary market, if any, will
be subject to many unpredictable factors, including then prevailing market
conditions.
It is important to note that many
factors will contribute to the secondary market value of the Securities, and
investors may not receive their full principal back if the Securities are sold
prior to maturity. Such factors include, but are not limited to, time to
maturity, the price of the Underlying Fund, volatility and
interest rates.
In
addition, the price, if any, at which we or another party are willing to
purchase Securities in secondary market transactions will likely be lower than
the issue price, since the issue price included, and secondary market prices are
likely to exclude, commissions, discounts or mark-ups paid with respect to the
Securities, as well as the cost of hedging our obligations under the
Securities.
Tax Risk
Pursuant
to the terms of the Knock-in Reverse Exchangeable Securities, we and every
investor agree to characterize the Securities as consisting of a Put Option and
a Deposit of cash with the issuer. Under this characterization, a portion of the
stated interest payments on each Security is treated as interest on the Deposit,
and the remainder is treated as attributable to a sale by the investor of the
Put Option to ABN AMRO (referred to as Put Premium). Receipt of the Put Premium
will not be taxable upon receipt.
If
the Put Option expires unexercised (i.e., a cash payment of the principal amount
of the Securities is made to the investor at maturity), the investor will
recognize short-term capital gain equal to the total Put Premium received. If
the Put Option is exercised (i.e., the final payment on the Securities is paid
in the Underlying Fund), the investor will not recognize any gain or loss in
respect of the Put Option, but the investor’s tax basis in the Underlying Fund
received will be reduced by the Put Premium received.
Significant
aspects of the U.S. federal income tax treatment of the Securities are
uncertain, and no assurance can be given that the Internal Revenue Service will
accept, or a court will uphold, the tax treatment described above.
This
summary is limited to the federal tax issues addressed herein. Additional issues
may exist that are not addressed in this summary and that could affect the
federal tax treatment of the transaction. This tax summary was written in
connection with the promotion or marketing by ABN AMRO Bank N.V. and the
placement agent of the Knock-in Reverse Exchangeable Securities, and it cannot
be used by any investor for the purpose of avoiding penalties that may be
asserted against the investor under the Internal Revenue Code.
Investors
should seek their own advice based on their particular circumstances from an
independent tax advisor.
On
December 7, 2007, the U.S. Treasury and the Internal Revenue Service released a
notice requesting comments on the U.S. federal income tax treatment of “prepaid
forward contracts” and similar instruments. While it is not entirely clear
whether the Securities are among the instruments described in the notice, it is
possible that any Treasury regulations or other guidance issued after
consideration of the issues raised in the notice could materially and adversely
affect the tax consequences of ownership and disposition of the Securities,
possibly on a retroactive basis.
The
notice indicates that it is possible the IRS may adopt a new position with
respect to how the IRS characterizes income or loss (including, for example,
whether the option premium might be currently included as ordinary income) on
the Securities for U.S. holders of the Securities.
You
should consult your tax advisor regarding the notice and its potential
implications for an investment in the Securities.
Reverse
Exchangeable is a Service Mark of ABN AMRO Bank N.V.